<PAGE>
SCHEDULE 14A
INFORMATION REQUIRED IN PROXY STATEMENT
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the Securities Exchange Act of 1934
(Amendment No. __)
Filed by the Registrant :
Filed by a Party other than the Registrant [ ]
Check the appropriate box:
[X] Preliminary Proxy Statement
[ ] Confidential, for Use of the Commission Only (as permitted by
Rule 14a-6(e)(2))
[ ] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to (section)240.14a-11(c) or
(section)240.14a-12
DUALSTAR TECHNOLOGIES CORPORATION
(Name of Registrant as Specified In Its Charter)
(Name of Person(s) Filing Proxy Statement if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
[X] No fee required
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and 0-11.
1) Title of each class of securities to which transaction applies:
-------------------------------------------------------------------
2) Aggregate number of securities to which transaction applies:
-------------------------------------------------------------------
3) Per unit price or other underlying value of transaction computed pursuant
to Exchange Act Rule 0-11 (Set forth the amount on which the filing fee is
calculated and state how it was determined):
-------------------------------------------------------------------
4) Proposed maximum aggregate value of transaction:
-------------------------------------------------------------------
5) Total fee paid:
-------------------------------------------------------------------
[ ] Fee paid previously with preliminary materials.
[ ] Check box if any part of the fee is offset as provided by Exchange Act Rule
0-11(a)(2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration statement number, or
the Form or Schedule and the date of its filing.
1) Amount Previously Paid:
---------------------------------------
2) Form, Schedule or Registration Statement No.:
---------------------------------------
3) Filing Party:
---------------------------------------
4) Date Filed:
---------------------------------------
<PAGE>
DUALSTAR TECHNOLOGIES CORPORATION
11-30 47th Avenue
Long Island City, New York 11101
October 20, 1999
To the Holders of Common Stock:
The annual meeting of shareholders will be held at 10:30 a.m. (New York time)
at the Sheraton New York Hotel & Towers, 811 Seventh Avenue, New York, New
York, on Wednesday, December 8, 1999. A Notice of the Annual Meeting and Proxy
Statement are attached hereto.
Shareholders are urged to attend the meeting but may vote by proxy in lieu
thereof. Accordingly, whether or not you plan to attend the meeting, please
complete, sign and date the accompanying proxy and return it in the enclosed
envelope.
Prompt return of your voted proxy will reduce the cost of further mailings and
contacts. You may revoke your voted proxy at any time prior to the meeting or
vote in person if you attend the meeting.
I look forward to greeting as many of you as possible at the meeting.
Gregory Cuneo
Chairman, President and
Chief Executive Officer
<PAGE>
DUALSTAR TECHNOLOGIES CORPORATION
11-30 47th Avenue
Long Island City, New York 11101
Notice of Annual Meeting
October 20, 1999
To the Holders of Common Stock:
NOTICE IS HEREBY GIVEN that the annual meeting of the shareholders of DualStar
Technologies Corporation (the "Corporation") will be held at the Sheraton New
York Hotel & Towers, 811 Seventh Avenue, New York, New York, on Wednesday,
December 8, 1999 at 10:30 a.m. (New York time), for the following purposes:
1) To elect directors for the ensuing year;
2) To consider and act upon a transaction between the Corporation
and Blackacre Capital Management, L.L.C. as described in the
proxy statement;
3) To ratify the appointment of Grant Thornton LLP as independent
certified public accountants for the 2000 fiscal year; and
4) To take action upon any other matters that may properly come
before the meeting.
Only shareholders of record at the close of business on October 19, 1999 are
entitled to notice of and to vote at the meeting or any adjournments thereof.
By Order of the Board of Directors,
Stephen J. Yager
Secretary
<PAGE>
PROXY STATEMENT
The enclosed proxy is being solicited by the Board of Directors of DualStar
Technologies Corporation (the "Corporation" or "DualStar") for use in
connection with the 1999 annual meeting of shareholders to be held on December
8, 1999. This proxy statement and enclosed proxy are first being sent to the
shareholders on or about October 20, 1999. The mailing address of the principal
executive office of the Corporation is 11-30 47th Avenue, Long Island City, New
York 11101. The cost of preparing, printing and mailing the notice of meeting,
proxy statement, proxy and annual report will be borne by the Corporation.
Proxy solicitation other than by use of the mail may be made by regular
employees of the Corporation by telephone and personal solicitation. Banks,
brokerage houses, custodians, nominees and fiduciaries are being requested to
forward the soliciting material to their principals and to obtain authorization
for the execution of proxies, and may be reimbursed for their reasonable
out-of-pocket expenses incurred in that connection. Any shareholder giving the
enclosed proxy has the right to revoke it at any time before it is voted. To
revoke a proxy, the shareholder must file with the Secretary of the Corporation
either a written revocation or a duly executed proxy bearing a later date, or
must vote in person at the meeting.
The record date for shareholders entitled to notice of, and to vote at, the
annual meeting is the close of business on October 19, 1999. At that date, the
Corporation had outstanding 10,791,000 shares of Common Stock ($.01 par value)
("Common Stock"). Each share of Common Stock is entitled to one vote. No other
class of securities is entitled to vote at this meeting.
The proxies given pursuant to this solicitation will be voted at the meeting or
any adjournment thereof. Abstentions and broker non-votes are voted neither
"for" nor "against," and have no effect on the vote, but are counted in the
determination of a quorum.
2
<PAGE>
ELECTION OF DIRECTORS
Nine (9) directors are to be elected by a plurality of the votes cast at the
annual meeting of shareholders by holders of shares entitled to vote. Such
directors shall hold office until the next annual meeting of shareholders or
until their successors are duly elected and qualify. The Board of Directors
proposes the following nominees, and recommends a vote in favor thereof:
<TABLE>
<CAPTION>
NAME AND AGE PRINCIPAL OCCUPATION AND BUSINESS DIRECTOR
- ------------ EXPERIENCE FOR PAST FIVE YEARS SINCE
(WITH THE CORPORATION UNLESS OTHERWISE NOTED) -----------------
-------------------------------------------------
<S> <C> <C>
Gregory Cuneo Chairman (since December 1998), President and Chief August 1994
Executive Officer (since August 1994). Chairman of
40 Starrett Corporation (since August 1999).
Stephen J. Yager Executive Vice President and Secretary (since August August 1994
1994), and Chief Financial Officer (from August 1994
47 until November 1996).
Ronald Fregara Executive Vice President (since December 1996), Vice August 1994
President (from August 1994 until December 1996).
50
Robert J. Birnbach Executive Vice President (since July 1999), Chief September 1999
Financial Officer (since December 1996), Vice
34 President (from December 1996 until July 1999) and
Director of Corporate Development (from August 1994
until December 1996).
Michael J. Abatemarco Practicing certified public accountant (since 1983) October 1997
and attorney (since 1982) specializing in the areas of
43 real estate, taxation and business counseling;
associate professor of taxation, accounting and law at
Long Island University/C.W. Post campus (since 1985).
Jared E. Abbruzzese Chairman, Chief Executive Officer, and Founder of CAI September 1999
Wireless Systems, Inc. ("CAI") (from August 1991 until
44 August 1999) (CAI was acquired by MCI WorldCom in
August 1999). Co-founder of Crest Communications,
LLC, a private communications fund; member of the
governing board of Veninfotel LLC, a Venezuelan
telephone and cable TV company. CAI, of which Mr.
Abbruzzese was Chairman and Chief Executive Officer,
voluntarily filed a petition under Chapter 11 of the
U.S. Bankruptcy Code in July 1998 and emerged from
bankruptcy in October 1998.
3
<PAGE>
NAME AND AGE PRINCIPAL OCCUPATION AND BUSINESS DIRECTOR
- ------------ EXPERIENCE FOR PAST FIVE YEARS SINCE
(WITH THE CORPORATION UNLESS OTHERWISE NOTED) -----------------
-------------------------------------------------
Lloyd I. Miller, III Registered investment advisor; member of Technology February 1999
Investors Group, LLC; member of the Chicago Board of
45 Trade, the Chicago Stock Exchange and the COMEX
Division of the New York Mercantile Exchange.
Director of Porta Systems Corp.
Raymond L. Steele Retired. Executive Vice President of Pacholder December 1998
Associates, Inc. (from August 1990 until September
64 1993); Executive Advisor at the Nickert Group (from
1989 through 1990); Vice President, Trust Officer and
Chief Investment Officer of the Provident Bank (from
1984 through 1988). Director of I.C.H. Corporation
and Video Services Corp.
Michael F. Whalen, Jr. Vice President, Finance and Acquisitions (from 1994 September 1999
through 1999), of People's Choice TV Corp., a wireless
33 broadband data and video services company (which
recently agreed to be acquired by Sprint Corporation).
</TABLE>
Mr. Miller is the nominee of Technology Investors Group, L.L.C. pursuant to a
stockholders agreement with the Corporation and certain shareholders. Mr.
Whalen is the nominee of Blackacre Capital Management, L.L.C. (see Proposal No.
1).
IT IS THE INTENTION OF THE PERSONS NAMED IN THE PROXY FORM TO VOTE SUCH PROXIES
FOR THE ELECTION AS DIRECTORS OF THE NOMINEES NAMED ABOVE. ALTHOUGH THE BOARD
OF DIRECTORS DOES NOT CONTEMPLATE THAT ANY OF THE NOMINEES WILL BE UNABLE TO
SERVE, SHOULD SUCH A SITUATION ARISE PRIOR TO THE MEETING, THE PROXIES WILL BE
VOTED IN ACCORDANCE WITH THE BEST JUDGMENT OF THE PERSONS ACTING THEREUNDER.
4
<PAGE>
SECURITY OWNERSHIP
The following table lists as of October 19, 1999, the number of shares of the
Corporation's Common Stock beneficially owned by each of the directors,
nominees for election as directors, each executive officer listed in the table
under the caption "Executive Compensation", each person who is known by the
Corporation to own beneficially more than five percent of the Corporation's
Common Stock and by all directors and executive officers of the Corporation as
a group. The following calculations were based upon 10,791,000 shares of the
Corporation's Common Stock issued and outstanding as of October 19, 1999.
Name and Address(1) No. of Shares % of Class
- ------------------- ------------- ----------
Gregory Cuneo 435,000(2) 4.03
Stephen J. Yager 435,000(2) 4.03
Ronald Fregara 435,000(2) 4.03
Michael J. Abatemarco 69,400(3) *
Raymond L. Steele 15,000(4) *
Lloyd I. Miller, III 1,806,000(5) 16.74
Jared E. Abbruzzese -- --
Robert J. Birnbach 646,000(6) 5.98
Michael F. Whalen, Jr. 9,500(7) *
Technology Investors
Group, LLC 1,791,000 16.59
All Officers and
Directors as a
Group (10 persons)(8) 4,140,900 38.37
- -----------
(1) The address of each shareholder listed is in care of DualStar Technologies
Corporation, 11-30 47th Avenue, Long Island City, New York 11101.
(2) The director also has currently unvested stock options to acquire 200,000
shares.
(3) Includes options to 30,000 shares which Mr. Abatemarco has the right to
acquire upon exercise of vested stock options and includes, respectively,
21,200 and 18,200 shares owned as Co-Trustee of the following two trusts:
(i) F/B/O Joseph T. Spaziani et al.; (ii) F/B/O Anthony T. Spaziani et al.
(4) Includes options to 15,000 shares which Mr. Steele has the right to
acquire upon exercise of vested stock options.
(5) Includes options to 15,000 shares which Mr. Miller has the right to
acquire upon exercise of vested stock options and 1,791,000 shares owned by
Technology Investors Group, LLC ("TIG"), of which Mr. Miller is a member.
Mr. Miller disclaims beneficial ownership of the TIG shares.
(6) Includes options to 641,000 shares which Mr. Birnbach has the right to
acquire upon exercise of vested stock options and 2,000 shares Mr. Birnbach
has the right to acquire upon exercise of Class A warrants.
(7) Includes 5,000 shares Mr. Whalen has the right to acquire upon exercise of
Class A warrants.
(8) Includes options to acquire 250,000 shares upon exercise of vested stock
options and 40,000 shares upon exercise of Class A warrants.
* indicates less than 1%.
Section 16(a) Beneficial Ownership Reporting Compliance
- -------------------------------------------------------
Section 16(a) of the Securities Exchange Act of 1934 requires the Corporation's
officers and directors to file initial reports of ownership and reports of
changes in ownership with the Securities and Exchange Commission ("SEC").
Officers and directors are required by SEC regulations to furnish the
Corporation with copies of all Section 16(a) forms they file. Based solely on a
review of the copies of such forms furnished to the Corporation and written
representations from the Corporation's officers and directors, and without
making any inquiry or investigation regarding delinquent Section 16(a) filings,
the Corporation believes that, during the fiscal year ended June
5
<PAGE>
30, 1999, all such reports were filed on a timely basis, except for a late
Form 3 by Mr. Steele.
6
<PAGE>
BOARD OF DIRECTORS AND COMMITTEES
Meetings and Attendance
During the fiscal year ended June 30, 1999, there were three meetings of the
Board of Directors. The Board of Directors during such fiscal year acted by
unanimous written consent one time.
Compensation Committee
The members of the Compensation Committee are Messrs. Abatemarco, Miller,
Steele and Yager. The Compensation Committee met once with respect to the
fiscal year ended June 30, 1999. The Committee makes bonus compensation
determinations under the Employment Agreements described below under the
caption "Employment Agreements" for the key executives of the Corporation.
Stock Award Committee
The members of the Stock Award Committee are Messrs. Abatemarco, Fregara,
Miller and Steele. The Committee did not meet during the fiscal year. The
Committee administers the Corporation's 1994 Stock Option Plan, as amended
("1994 Plan"). Under the 1994 Plan, the Committee has the authority to grant
"Awards" (as such term is defined in the 1994 Plan) to officers, employees,
directors and consultants of the Corporation or an "Affiliate" (as such term is
defined in the 1994 Plan), and to determine the various terms and conditions of
such Awards. The Committee also has the authority to adopt, alter and repeal
such administrative rules, guidelines and practices governing the 1994 Plan as
it shall, from time to time, deem advisable to interpret the terms and
provisions of the 1994 Plan and any Award issued under the 1994 Plan (and any
agreement relating thereto) and to otherwise supervise the administration of
the 1994 Plan.
Audit Committee
The members of the Audit Committee are Messrs. Abatemarco, Miller and Steele.
The Committee met once during the fiscal year. The Committee is responsible for
considering management's recommendation of independent certified public
accountants for each fiscal year, recommending the appointment or discharge of
independent accountants to the Board of Directors and confirming the
independence of the accountants. It is also responsible for reviewing and
approving the scope of the planned audit, the results of the audit and the
accountants' compensation for performing such audit; reviewing the
Corporation's audited financial statements; and reviewing and approving the
Corporation's internal accounting controls and discussing such controls with
the independent accountants.
Nominating Committee
The members of the Nominating Committee are Messrs. Abatemarco, Cuneo, Fregara,
Miller and Yager. The Nominating Committee is responsible for soliciting
recommendations for candidates for the Board of Directors; developing and
reviewing background information for candidates; and making recommendations to
the Board regarding such candidates. The Nominating Committee, which was formed
on February 11, 1999, did not meet in fiscal 1999.
7
<PAGE>
Remuneration of Directors
Each member of the Board of Directors is entitled to receive reasonable
expenses incurred in attending meetings of the Board of Directors of the
Corporation. Mr. Abatemarco received $20,000 in directors' fees in fiscal 1999.
8
<PAGE>
EXECUTIVE COMPENSATION
The Summary Compensation Table set forth below for the fiscal years ended June
30, 1999, 1998 and 1997 includes compensation information with respect to the
Chief Executive Officer of the Corporation and each of the Corporation's four
most highly compensated executive officers whose salary in the last fiscal year
exceeded $100,000.
<TABLE>
<CAPTION>
Summary Compensation Table
- -------------------------- Annual Compensation
-------------------
Other
Name and Principal Position Year Salary Bonus Annual Compensation(1)
- --------------------------- ---- ------ ----- ----------------------
<S> <C> <C> <C> <C>
Gregory Cuneo, Chairman of the 1999 $150,000 $67,500 $5,794
Board, President and Chief Executive 1998 150,000 0 5,901
Officer(2) 1997 150,000 0 7,187
Stephen J. Yager, Executive 1999 $150,000 $67,500 $6,655
Vice President and 1998 150,000 0 5,453
Secretary 1997 150,000 0 8,761
Ronald Fregara, 1999 $150,000 $67,500 $5,991
Executive Vice President 1998 150,000 0 6,017
1997 150,000 0 7,443
Armando Spaziani, Executive Vice 1999 $144,231 $0 $210,288
President and Chief 1998 150,000 0 51,993
Operating Officer(3) 1997 150,000 0 51,854
Elven M. Tangel, Chairman of
the Board, executive 1999 $118,272 $0 $119,124
officer (4) 1998 150,000 0 3,165
1997 150,000 0 15,639
</TABLE>
- ---------
(1) Includes the value of personal benefits, such as life insurance,
disability insurance and automobile expenses, pursuant to each officer's
employment agreement. Includes buyout consideration for Messrs. Tangel and
Spaziani. See "Employment Agreements."
(2) Mr. Cuneo became Chairman of the Board on December 16, 1999.
(3) Mr. Spaziani retired on June 15, 1999. See "Employment Agreements."
(4) Mr. Tangel was Chairman of the Board in fiscal 1997, fiscal 1998, and
until December 16, 1998. Thereafter, until his retirement on June 1, 1999,
Mr. Tangel remained with the Corporation as an executive officer. See
"Employment Agreements."
Employment Agreements
Effective August 1994, the Corporation entered into employment agreements
("Agreements") with Messrs. Tangel, Cuneo, Yager, Spaziani and Fregara. The
Agreements expired in August 1997 and were renewed for an additional three
years through August 2000. On June 1, 1999, Mr. Tangel retired and received
$116,000 in consideration of the buyout of his employment agreement.
9
<PAGE>
On June 15, 1999, Mr. Spaziani retired and received $206,000 in consideration
of the buyout of his employment agreement. Effective as of July 1, 1999, the
Board and the Compensation Committee increased the salary and bonuses for
Messrs. Cuneo, Fregara and Yager. (Each had received a salary of $150,000 with
eligibility to receive an annual bonus of up to 45% of the salary provided
under their respective Agreements as determined by the Corporation's
Compensation Committee.) Mr. Cuneo's current salary is $275,000, with a
guaranteed minimum bonus of $25,000, up to a maximum of $100,000 based on
certain performance objectives which are to be determined by the Board and the
Compensation Committee. Messrs. Fregara and Yager's current salaries are each
$235,000, with a guaranteed minimum bonus of $25,000, up to a maximum of
$100,000 based on certain performance objectives which are to be determined by
the Board and the Compensation Committee. The salaries under the Agreements, as
amended, may be increased to reflect annual cost of living increases and may be
supplemented by discretionary merit and performance increases as determined by
the Compensation Committee of the Corporation.
The Agreements provide, among other things, for participation in an equitable
manner in any profit-sharing or retirement plan for employees or executives and
for participation in other employee benefits applicable to employees and
executives of the Corporation. The Agreements provide that the Corporation will
establish a performance incentive bonus plan providing each executive the
opportunity to earn an annual bonus of up to five percent of the increase, if
any, in the Corporation's pretax income, based upon the attainment of
performance goals to be established by the Compensation Committee of the
Corporation. The Agreements further provide for the use of an automobile and
other fringe benefits commensurate with their duties and responsibilities. The
Agreements also provide for benefits in the event of disability.
Pursuant to the Agreements, employment may be terminated by the Corporation
with cause or by the executive with or without good reason. Termination by the
Corporation without cause, or by the executive for good reason, would subject
the Corporation to liability for liquidated damages in an amount equal to the
terminated executive's current salary for the remainder of the scheduled term
of employment and bonuses for the remainder of the scheduled term of employment
based upon the prior year's annual bonus and the maximum incentive bonus
payable. Such amounts shall be payable in equal monthly installments, without
any set-off for compensation received from any new employment. In addition, the
terminated executive would be entitled to continue to participate in and accrue
benefits under all employee benefit plans and to receive supplemental
retirement benefits to replace benefits under any qualified plan for the
remaining term of the Agreements to the extent permitted by law.
The Agreements provide for the purchase by the Corporation of insurance
policies in the amount of $1,000,000 on the lives of each of Messrs. Cuneo,
Yager and Fregara, respectively. The Corporation will pay the premiums under
these policies, and a portion of the payment will be treated as taxable income
to the insured executive. Upon the death of any of the insureds, the
Corporation would be paid from the insurance proceeds an amount equal to the
total premiums it paid under the policy, with the remaining proceeds to be paid
to the deceased executive's designated beneficiary. To date, Messrs. Cuneo,
Yager and Fregara, respectively, have declined to have the Corporation purchase
such insurance.
10
<PAGE>
The 1994 Stock Option Plan
On October 17, 1994, the Board of Directors adopted, and the shareholders
subsequently approved and amended, the 1994 Stock Option Plan (as amended, the
"1994 Plan") pursuant to which officers, directors, employees and consultants
of the Corporation and its affiliates are eligible to be granted stock option
awards ("Awards"). Shareholders approved the amendments to the 1994 Plan at the
1998 Annual Meeting of Shareholders. The 1994 Plan is currently being
administered by the Stock Award Committee, which has the authority to grant
awards, including Stock Options, Stock Appreciation Rights, Restricted Stock,
or any combination of the foregoing, and to determine the terms and conditions
of the Awards.
Options under the 1994 Plan generally shall be exercisable for a term fixed by
the Committee, not to exceed 10 years from date of grant, unless any such
options are terminated earlier pursuant to the terms of the 1994 Plan. The
total number of shares of Common Stock presently reserved for such Awards and
available for distribution under the 1994 Plan is 3,500,000. As of October 19,
1999, 2,505,000 options are outstanding under the 1994 Plan and have exercise
prices ranging from $0.75 to $4.00 per share. No stock options were exercised
by any executive officer during fiscal 1999.
Compensation Committee Interlocks
No Compensation Committee interlock relationships existed during the fiscal
year ended June 30, 1999.
Board of Directors Report on Executive Compensation
Except as noted below, the Corporation's compensation policies are determined
by its Board of Directors. The Corporation's executive compensation practices
are designed to support its business goals of fostering profitable growth and
increasing shareholder value. The Corporation seeks to align the interests of
its executives and its stockholders through the use of stock-based compensation
plans. To this end, the Corporation has adopted the 1994 Stock Option Plan.
The compensation of Messrs. Cuneo, Yager and Fregara is governed by their
employment agreements, as amended. (See "Employment Agreements," above.) The
Board of Directors' determination as to the level of compensation under the
Agreements, as amended, was based upon the prior levels of compensation of the
key executives and the Board's judgment.
Under the Agreements as amended, determination as to the amounts of bonus
compensation to be awarded to the key executives has been delegated to the
Compensation Committee of the Board of Directors. For the fiscal year ended
June 30, 1999, the Agreements as amended provided that each of the key
executives was eligible to receive an annual bonus of up to 45% of his annual
salary ($150,000 in each case) or $67,500, as determined by the Compensation
Committee. Messrs. Cuneo, Fregara and Yager each received an annual bonus of
$67,500 in fiscal 1999.
The Agreements also provide that the Corporation will establish a performance
incentive bonus plan which will provide each executive the opportunity to earn
an annual bonus of up to five percent of the increase in the Corporation's
pretax income, if any, based upon the attainment of performance goals to be
established by the Compensation Committee. Such an incentive bonus plan has not
yet been adopted by the Board of Directors.
Gregory Cuneo
Stephen J. Yager
Ronald Fregara
Robert J. Birnbach
11
<PAGE>
Michael J. Abatemarco
Jared E. Abbruzzese
Lloyd I. Miller, III
Raymond L. Steele
Michael F. Whalen, Jr.
12
<PAGE>
PERFORMANCE GRAPH
The line graph set forth below provides a comparison of the Corporation's
cumulative total shareholder return on its Common Stock with the Russell 2000
Index and with the Nasdaq Non-Financial Index. Such shareholder return is the
sum of any dividends paid and the change in the market price of the stock.
[Chart to be provided]
13
<PAGE>
CERTAIN TRANSACTIONS
A subsidiary of the Corporation leases shop and office space on a
month-to-month basis from a company in which Messrs. Spaziani, Fregara and
Cuneo each own a 20 percent interest. Rent expense for the year ended June 30,
1999 was $46,000.
In October 1997, Mr. Tangel loaned a subsidiary of the Corporation $185,000.
The principal and interest on the loan were repaid in full in June 1999.
BOARD OF DIRECTORS PROPOSALS
PROPOSAL NO. 1
APPROVAL OF CONVERTIBLE NOTE TRANSACTION WITH BLACKACRE CAPITAL MANAGEMENT,
L.L.C.
The shareholders of the Corporation are being asked to approve a proposed
transaction between Blackacre Capital Management, L.L.C. and certain of its
affiliates (collectively, "Blackacre") and the Corporation, under which
Blackacre will invest $10 million in DualStar through the purchase of a
convertible note (the "Convertible Note"). Under the Convertible Note, Blackacre
will lend DualStar $10 million for ten (10) years, at an annual interest rate of
3%, subject to certain conditions and secured by certain assets of the
Corporation and/or its affiliates. The loan shall be convertible, at the option
of Blackacre, into DualStar Common Stock at a conversion price of $5.15 per
share. DualStar expects to use the net proceeds from the Convertible Note sale
to expand its communications and related businesses and for general corporate
purposes. If Blackacre converts the principal amount of the Convertible Note
into Common Stock, and assuming Blackacre exercises the New Class B Warrants
(identified below) and holds the New Common Stock (identified below), Blackacre
will then own approximately 26.76% of the Corporation's then-outstanding Common
Stock (based on 14,732,748 shares outstanding at that time), or 36.53% of the
Corporation's outstanding Common Stock (based on 10,791,000 shares outstanding
as of October 19, 1999).
In a related transaction among the Corporation and Blackacre, for which
shareholder approval is neither required nor sought, in exchange for the New
Class B Warrants, Blackacre will grant DualStar residential, commercial and
hotel access rights nationwide. Under such grant, DualStar will have the right
to sell communications and related services to over 100,000 multiple dwelling
units ("MDUs"), 2,000,000 square feet of commercial space, and 1,000 hotel rooms
owned or controlled by Blackacre. The services to be provided by DualStar
include Internet access, cable and satellite television, telephone, and related
services. In exchange for such access rights, Blackacre will receive warrants to
purchase 1,000,000 shares of DualStar Common Stock at an exercise price of $0.10
per share (the "New Class B Warrants"). Blackacre also has agreed to purchase
1,000,000 shares of DualStar's Common Stock at a price of $5.30 per share (the
"New Common Stock"). That agreement also provides for the designation by
Blackacre of one member to DualStar's Board of Directors, a stockholders
agreement and certain registration rights. (The stockholders agreement and
registration rights would likewise be applicable to the shares that would be
issued to Blackacre should it convert the Convertible Note, if the issuance of
the Convertible Note is approved by the Corporation's shareholders.)
Upon Blackacre's purchase of the 1,000,000 shares of New Common Stock, Blackacre
will own approximately 8.48% of the Corporation's then-outstanding Common Stock
(based on 11,791,000 shares outstanding at that time), or 9.27% of the
Corporation's outstanding Common Stock (based on 10,791,000 shares outstanding
as of October 19, 1999).
If Blackacre then also exercises the New Class B Warrants, Blackacre will own
approximately 15.64% of the Corporation's then-outstanding Common Stock (based
on 12,791,000 shares outstanding at that time), or 18.53% of the Corporation's
outstanding Common Stock (based on 10,791,000 shares outstanding as of October
19, 1999).
As indicated above, if the issuance of the Convertible Note is approved by the
Corporation's shareholders, and Blackacre thereafter converts the principal
amount of the Convertible Note into Common Stock, Blackacre would then own
approximately 26.76% of the Corporation's then-outstanding Common Stock (based
on 14,732,748 shares outstanding at that time), or 36.53% of the Corporation's
outstanding Common Stock (based on 10,791,000 shares outstanding as of October
19, 1999).
14
<PAGE>
Michael F. Whalen, Jr., who is a nominee for director at the 1999 Annual
Meeting, is Blackacre's designee for nomination to the Board of Directors. In a
related matter, Gregory Cuneo, DualStar's Chairman, President and Chief
Executive Officer, has agreed to serve as Chairman of Starrett Corporation, an
affiliate of a portfolio company owned by Blackacre. DualStar anticipates that
Mr. Cuneo's current positions and role as DualStar's Chairman, President and
CEO will not be affected and that DualStar will benefit by his new position at
Starrett.
The Board of Directors of the Corporation has entered into an agreement with
Blackacre with respect to each of the foregoing transactions, which is subject
to the execution of a definitive agreement and certain conditions, including,
with respect to the Convertible Note, approval by the Corporation's
shareholders. The Corporation will proceed with transactions involving the sale
by the Corporation, and the purchase by Blackacre, of the New Common Stock and
the issuance of the New Class B Warrants in exchange for the access rights
described above, regardless of whether the Corporation's shareholders approve
the proposed Convertible Note transaction.
Approval of the foregoing Convertible Note proposal requires the affirmative
vote of a majority of the shares of the Corporation's Common Stock entitled to
vote and represented at the Annual Meeting.
THE BOARD OF DIRECTORS RECOMMENDS THAT THE STOCKHOLDERS VOTE "FOR" THE
FOREGOING CONVERTIBLE NOTE PROPOSAL.
The unaudited condensed consolidated pro forma financial statements give effect
to the proposed Consolidated Note transaction between DualStar and Blackacre, as
discussed above.
The pro forma financial statements include adjustments to reflect (i) the
issuance of one million shares of common stock at $5.30 per share, (ii) the
issuance of one million warrants, exercisable for one million shares of common
stock at $0.10 per share in exchange for access rights, (iii) the issuance of a
$10 million convertible note, (iv) the amortization of the access rights, and
(v) the interest on the convertible note.
The pro forma adjustments are based on estimates, available information and
certain assumptions and may be revised as additional information becomes
available. The pro forma financial data do not purport to represent what the
Corporation's financial position or results of operations would actually have
been if such transactions, in fact, had occurred on those dates and are not
necessarily representative of the Corporation's financial position or results of
operations for any future periods.
15
<PAGE>
DUALSTAR TECHNOLOGIES CORPORATION AND SUBSIDIARIES
UNAUDITED CONDENSED CONSOLIDATED PRO FORMA STATEMENT OF INCOME
FOR THE YEAR ENDED JUNE 30, 1999
<TABLE>
<CAPTION>
PRO FORMA PRO FORMA
HISTORICAL ADJUSTMENTS ADJUSTED
---------- ----------- --------
<S> <C> <C> <C>
Contract revenues earned $ 82,649,578 $ 92,649,578
Cost of revenues earned 82,281,340 $ 347,000 a 82,628,340
------------ ------------
Gross profit 10,368,238 10,021,238
General and administrative expenses 9,664,990 300,000 b 9,964,990
------------ ------------
Income before benefit for income taxes 703,248 56,248
Benefit for income taxes (619,000) (619,000)
------------ ------------
Net income $ 1,322,248 $ 675,248
============ ============
Pro forma basic net income per share:
Net income per share $0.07
Shares used in computing pro forma net income per share 10,000,000
Pro forma diluted net income per share:
Net income per share $0.07
Shares used in computing pro forma net income per share 14,935,608
</TABLE>
(a) Records the amortization of the access rights over fifteen years.
(b) Records the interest on the convertible note.
16
<PAGE>
DUALSTAR TECHNOLOGIES CORPORATION AND SUBSIDIARIES
UNAUDITED CONDENSED CONSOLIDATED PRO FORMA BALANCE SHEET
JUNE 30, 1999
<TABLE>
<CAPTION>
PRO FORMA PRO FORMA
HISTORICAL ADJUSTMENTS ADJUSTED
---------- ----------- --------
<S> <C> <C> <C>
ASSETS
Current Assets:
Cash $ 583,995 $ 6,300,000 a $ 15,883,995
10,000,000 c
Contracts receivable - net of allowance for
doubtful accounts 23,653,712 23,653,712
Retainage receivable 6,213,201 6,213,201
Other current assets 1,842,125 1,842,125
------------ ------------
Total current assets 32,293,033 47,593,033
Property and equipment - net of accumulated
depreciation 3,147,068 3,147,068
Other Assets:
Access rights - 5,200,000 b 5,200,000
Other 3,154,486 3,154,486
------------ ------------
Total assets $ 38,594,587 $ 59,094,587
============ ============
LIABILITIES AND SHAREHOLDERS' EQUITY
Current Liabilities:
Accounts payable $ 21,053,418 $ 21,053,418
Other current liabilities 7,421,504 7,421,504
------------ ------------
Total current liabilities 28,474,922 28,474,922
Convertible note - $10,000,000 c 10,000,000
Subordinated convertible note 2,500,000 2,500,000
Other liabilities 930,248 930,248
------------ ------------
Total liabilities 31,905,170 41,905,170
------------ ------------
Shareholders' Equity:
Common stock - par value, $.01 per share 90,000 10,000 a 100,000
Additional paid-in capital 14,995,836 5,290,000 a 25,485,836
5,200,000 b
Deficit (8,396,419) (8,396,419)
------------ ------------
Total shareholders' equity 6,689,417 17,189,417
------------ ------------
Total liabilities and shareholders' equity $ 38,594,587 $ 59,094,587
============ ============
</TABLE>
(a) Records the issuance of 1 million shares of common stock at $5.30 per share.
(b) Records the issuance of 1 million warrants in exchange for access rights.
The warrants are exercisable for 1 million share of common stock at $0.10
per share.
(c) Records the issuance of a $10 million convertible note.
17
<PAGE>
PROPOSAL NO. 2
RATIFICATION OF APPOINTMENT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
The Board of Directors has appointed the firm of Grant Thornton LLP ("Grant
Thornton") as independent certified public accountants for the 2000 fiscal year
and recommends to shareholders ratification of such appointment. Grant Thornton
served as principal accountant for the fiscal year most recently completed.
The appointment of the independent public accountants is approved annually by
the Board of Directors, which reviews the qualifications of independent
accountants and which reviews the audit scope, reasonableness of fees and also
the types of nonaudit services for the coming year.
Although not required to do so, the Board of Directors is submitting the
appointment of Grant Thornton for ratification by the shareholders. If this
action is not ratified, the Board of Directors will reconsider its appointment.
The affirmative vote of a majority of the shares of the Corporation's Common
Stock represented at the annual meeting is required to ratify this appointment.
Representatives of Grant Thornton will be present at the annual meeting of
shareholders and will have an opportunity to make a statement if they desire to
do so. They will be available to respond to appropriate questions.
DEADLINE FOR SHAREHOLDER PROPOSALS
Proposals of shareholders intended to be presented at the 2000 annual meeting
to be included in the proxy material relating to that meeting must be received
by the Corporation at its principal executive office by June 22, 2000.
ANNUAL REPORT TO THE SEC; FORM 10-K
Shareholders may obtain, without charge, a copy of the Corporation's annual
report on Form 10-K, filed with the Securities and Exchange Commission, by
writing to DualStar Technologies Corporation, 11-30 47th Avenue, Long Island
City, NY 11101, Attn: Investor Relations, or by visiting the Corporation's Web
site (http://www.dualstar.com). Copies of exhibits to such annual report may be
obtained upon payment.
18
<PAGE>
OTHER MATTERS
The Board of Directors does not know of any matters to be brought before the
meeting other than those referred to in the notice hereof. If any other matters
properly come before the meeting, it is the intention of the persons named in
the form of proxy to vote such proxy in their discretion in accordance with
their judgment on such matters.
By Order of the Board of Directors,
Stephen J. Yager
Secretary
October 20, 1999
WHETHER OR NOT YOU EXPECT TO ATTEND THE MEETING, PLEASE FILL IN, SIGN AND DATE
THE PROXY SUBMITTED HEREWITH AND RETURN IT IN THE ENCLOSED STAMPED ENVELOPE.
THE GIVING OF SUCH PROXY WILL NOT AFFECT YOUR RIGHT TO REVOKE SUCH PROXY OR TO
VOTE IN PERSON SHOULD YOU LATER DECIDE TO ATTEND THE MEETING. THE ENCLOSED
PROXY IS BEING SOLICITED BY THE BOARD OF DIRECTORS.
<PAGE>
DUALSTAR TECHNOLOGIES CORPORATION
PROXY FOR 1999 ANNUAL MEETING OF SHAREHOLDERS
The undersigned hereby appoints Gregory Cuneo and Stephen J. Yager as Proxies,
each with the full power of substitution, and hereby authorizes each of them to
represent and vote, as designated on the reverse hereof, all shares of Common
Stock of DualStar Technologies Corporation (the "Company") held of record by the
undersigned on October 19, 1999, at the Annual Meeting of Shareholders to be
held on December 8, 1999, or any adjournment thereof, upon all such matters as
may properly come before the Meeting.
(THE PROXY CONTINUES AND MUST BE SIGNED ON THE REVERSE SIDE.)
<PAGE>
PLEASE DATE, SIGN AND MAIL YOUR
PROXY CARD BACK AS SOON AS POSSIBLE!
ANNUAL MEETING OF SHAREHOLDERS
DUALSTAR TECHNOLOGIES CORPORATION
DECEMBER 8, 1999
<PAGE>
(Please detach and mail in the envelope provided)
[ ] Please mark your votes
as in this example
FOR WITHHOLD AUTHORITY
all nominees to vote for all
listed (except as nominees
marked to the listed at left
contrary below)
1. ELECTION OF DIRECTORS
Instruction: To withhold authority to Nominees:
vote for any individual nominee, write that Michael J. Abatemarco
nominee's name in the space provided. Jared E. Abbruzzese
Robert J. Birnbach
Gregory Cuneo
Ronald Fregara
- ------------------------------------ Lloyd I. Miller, III
Raymond L. Steele
Stephen J. Yager
Michael F. Whalen, Jr.
2. Proposal to approve the Convertible Note Transaction with Blackacre Capital
Management, L.L.C.
FOR AGAINST ABSTAIN
[ ] [ ] [ ]
(The Board of Directors recommends a vote "FOR" approval.)
3. Ratification of appointment of Grant Thornton LLP as the Company's
independent public accountants for the fiscal year ending June 30, 2000.
FOR AGAINST ABSTAIN
[ ] [ ] [ ]
(The Board of Directors recommends a vote "FOR" approval.)
4. In their discretion upon such other business as may properly come before the
Annual Meeting or any postponement or adjournment thereof.
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS. THIS PROXY WILL BE
VOTED AS DIRECTED. IN THE ABSENCE OF DIRECTION, THIS PROXY WILL BE VOTED "FOR"
ITEMS 1, 2 AND 3.
Shareholders are urged to date, mark, sign and return this proxy promptly in the
envelope provided, which requires no postage if mailed within the United States.
[ ] If you plan to attend the Annual Meeting, place an X in this box.
SIGNATURE: DATE:
------------------------------------- --------------------
SIGNATURE: DATE:
------------------------------------- --------------------
<PAGE>
(Signature if jointly held)
NOTE: Please sign exactly as name or names appear on stock certificate as
indicated hereon. Joint owners each should sign. When signing as an
attorney, executor, administrator or guardian, please give full title
as such.
