EMPLOYMENT AGREEMENT

      AGREEMENT,  made  as of the  1st  day of  June,  1999  between  Karl H.
Kostusiak  ("Executive") and Detection Systems,  Inc., a New York corporation
("Company").

                                 WITNESSETH:

      In  consideration  of  the  mutual  covenants   contained  herein,  the
parties agree as follows:

      1.    Offer of  Employment  and  Term.  The  Company  agrees  to employ
Executive in the  capacities  of  Chairman,  President,  and Chief  Executive
Officer  for  the  Term  of  Employment  commencing  as of the  date  of this
Agreement  (the   "Commencement   Date").   The  Company  agrees  to  provide
Executive with such office and such  operational and  administrative  support
as is  consistent  with  his  position.  Executive's  employment  under  this
Agreement  will  be  in  the  vicinity  of  Rochester,  New  York.  "Term  of
Employment"  as  used  herein  shall  mean  the  period   commencing  on  the
Commencement  Date and  continuing  thereafter  for a period  of five  years,
unless  the  Company  and  Executive  agree in  writing to extend the Term of
Employment,  in which case the Term of  Employment  shall have the meaning as
determined at that time; provided,  however, that Executive's  employment may
be earlier  terminated as hereinafter  set forth,  in which event the Term of
Employment  shall mean the period  from the  Commencement  Date  through  the
date of such  earlier  termination.  Except as  provided  in Section 4 below,
upon  the  end of the  Term of  Employment  hereunder,  the  Non-Competition,
Disability,  and Retirement  Agreement attached as Exhibit A (hereinafter the
"N-CDR  Agreement")  shall become  effective as provided in Sections 1 and 19
thereof.  Whenever the N-CDR  Agreement  becomes  effective,  this  Agreement
shall terminate, except for any accrued liabilities hereunder.

      Notwithstanding   any  of  the  other  provisions  of  this  Agreement,
however,  this Agreement will automatically  terminate upon Executive's death
and thereupon all payments and non-vested  benefits  payable  hereunder shall
cease,  except for any death  benefits and  survivor  benefits for his spouse
which  are  provided  under  the  Company's   employee  plans  or  the  N-CDR
Agreement,  which shall upon the death become effective  pursuant to Sections
1 and 19 thereof.

      The Company may terminate this  Agreement due to Executive's  permanent
disability,  as  determined  by the Board of Directors in good faith based on
the  certification  of an  independent  M.D.,  and in any such case the N-CDR
Agreement  shall  thereupon  become  effective  pursuant to Sections 1 and 19
thereof.

      2.    Executive's  Acceptance.  Executive  hereby accepts the executive
employment  described in this  Agreement.  Executive  further  agrees that he
will devote  himself during  reasonable  business hours to performance of the
duties  and  responsibilities  of his office  during the Term of  Employment.
Executive  also agrees not to disclose  trade  secrets of the Company,  or to
engage in any other  activity  which is  detrimental  to the interests of the
Company, during the Term of Employment.

      3.    Compensation  and Benefits.  The  compensation and benefits which
the Company  shall  provide  Executive  for his  services  during the Term of
Employment shall include but not be limited to:

      (a)   Base salary equal to or greater than $335,486 per year.

      (b)   Participation  in all Company  executive  incentive  compensation
plans.  Such  incentive  compensation  plans  shall  include  an annual  cash
bonus  equal  to an  amount  not less  than 5% of the  amount  by  which  the
Company's  pre-tax  profits exceed 4% of net sales.  If Executive is employed
by the  Company  for  only  part of a year or his  employment  is  terminated
before  year end,  the  bonus  for that  year will be pro rated  based on the
portion  of the  year  Executive  was  employed  by the  Company  (except  as
otherwise provided in Section 4 below).

      (c)   Grants of options under any Company  employee  stock option plan,
where  permitted by the Plan, in such amounts as are  determined by the Board
of Directors or the Committee of the Board administering such plan;

      (d)   Participation  in all  Company  pension,  deferred  compensation,
insurance,  health and welfare or other  benefit plans in which the Company's
senior executives are entitled to participate; and

      (e)   Continuation  of all plans in which the  Executive  participates,
including  existing  fringe  benefits  and  executive  perquisites  to  which
Executive is entitled as of the date of this Agreement.

      4.    Termination    Without   Cause.   The   Company   may   terminate
Executive's  employment  without  Cause as  hereinafter  defined  and for any
reason.  If Executive is terminated  without Cause,  Company will continue to
compensate  and provide  benefits to Executive as if he had  continued in the
Company's  employment under this Agreement for the then remaining  balance of
the Term of  Employment  or for a period of three (3) years  from the date of
termination,  whichever  is  longer.  So  long as  Executive  is  being  paid
currently  under this  Section 4,  Executive  shall  comply with Section 2 of
the  N-CDR  Agreement.  At the end of the  period  set  forth  above  in this
Section 4 (during  which  period the Company  shall  continue  to  compensate
Executive  pursuant to this  Agreement),  the N-CDR  Agreement  shall  become
effective in accordance with Sections 1 and 19 thereof.

      5.    Termination  for Cause.  The  Company may  terminate  Executive's
employment  immediately  and  without  prior  notice  to  the  Executive  for
"Cause" as defined  below.  The  existence  of Cause shall be  determined  by
the  Company's  Board of  Directors  (other  than  Executive)  acting in good
faith.   "Cause"  is  defined,   and  shall  be  limited  to,  a  good  faith
determination  by the  Board  of  Directors  that  any of the  following  has
occurred:

      (a)   Executive  has  knowingly   misappropriated  for  his  benefit  a
material amount of funds or property of the Company;

      (b)   Executive  has  obtained  a  material  personal  profit  from any
illegal Company transaction with a third party;

      (c)   Executive  has obtained a material  personal  profit from the use
of the Company's trade secrets other than on its behalf;

      (d)   The Company has suffered  material  financial harm from knowingly
illegal  action by Executive,  other than on the Company's  behalf or for its
benefit; or

      (e)   Willful and  prolonged  absence from work by Executive or willful
refusal by  Executive  to  perform  his  duties  and  responsibilities  under
circumstances which, in either case,  constitute a substantial  abdication of
Executive's  duties  and  responsibilities  of  his  office,   provided  that
Executive  has been given  written  notice of that  absence  or  refusal  and
Executive  has not  substantially  cured  the  stated  Cause  within  60 days
thereafter  (but action taken by  Executive in reliance  upon Section 7 below
shall not be deemed an absence or refusal for purposes of this Section 5).

      If  Executive's  employment is terminated by the Company for Cause,  he
shall continue to be paid  compensation  and provided  benefits in accordance
with the  provisions  of  Section 4 above and the N-CDR  Agreement,  provided
that his cash  compensation  shall be reduced  by the amount of any  monetary
damage  suffered by the Company due to the Cause,  as  determined  by a court
of competent  jurisdiction,  prorated over the actuarially determined term of
such  payments  and based on a final court  determination;  and at the end of
the  period  specified  in  Section  4,  the  N-CDR  Agreement  shall  become
effective in accordance with Sections 1 and 19 thereof.

      6.    Resignation.  Executive  may  voluntarily  resign  from full time
employment  with the  Company,  effective  no earlier  than 90 days after the
Executive has given  written  notice  thereof to the  Company's  Secretary or
the Chairman of the  Compensation  Committee  of the Board of  Directors  and
the Term of Employment  shall  terminate on the  effective  date set forth in
the  notice.  If  Executive  resigns  or  otherwise  voluntarily  leaves  the
Company's  employment  prior to a Change in  Control,  he shall  forfeit  all
compensation  and non-vested  benefits,  from and after the effective date of
such  resignation,  except that upon that effective date the N-CDR  Agreement
shall become effective in accordance with Sections 1 and 19 thereof.

      7.    Change in Control.

      (a)   A "Change  in  Control"  of the  Company  shall be deemed to have
occurred if:
                  (1)   any  "person,"  as such  term  is  used  in  Sections
            13(d)  and  14(d) of the  Securities  Exchange  Act of  1934,  as
            amended  (the  "Exchange  Act")  (other  than the  Company or any
            corporation  owned,  directly or indirectly,  by the shareholders
            of the Company in  substantially  the same  proportions  as their
            ownership   of  stock  of  the   Company),   is  or  becomes  the
            "beneficial  owner" (as defined in Rule 13d-3 under the  Exchange
            Act),  directly  or  indirectly,  of  securities  of the  Company
            representing  25% or more of the  combined  voting  power  of the
            Company's then outstanding securities;

                  (2)   there is  elected  35% or more of the  members of the
            Board of  Directors  of the Company  without the  approval of the
            nomination  of such  members by a majority  of the Board  serving
            prior to such election;

                  (3)   the  shareholders  of the Company approve a merger or
            consolidation  of the Company with any other  corporation,  other
            than (i) a merger  or  consolidation  which  would  result in the
            voting  securities of the Company  outstanding  immediately prior
            thereto  continuing  to  represent  more than 75% of the combined
            voting power of the voting  securities  of the  Company,  or such
            surviving  entity,  outstanding  immediately after such merger or
            consolidation;  or (ii) a merger  or  consolidation  effected  to
            implement   a   recapitalization   of  the  Company  (or  similar
            transaction)  in which no "person"  (as defined  above)  acquires
            more  than 25% of the  combined  voting  power  of the  Company's
            then-outstanding securities; or

                  (4)   The   shareholders   of  the   Company   approve   an
            agreement  for the sale or  disposition  by the Company of all or
            substantially all of the Company's assets.

            (b)   If:
                    (i)   any Change in Control of the Company  occurs  while
                  this  Agreement  is effective, and

                    (ii)  Executive  gives  notice to the Company or the Company
                  (acting upon a  determination  of its Board of Directors)
                  gives notice to Executive, in either case to the effect that
                  the six month period called for by this Section 7(b) shall
                  begin to run, and

                    (iii)  Executive's  employment  is  terminated by Executive
                  or by the Company (other  than for  Executive's death or
                  disability) within six months after the date the notice
                  provided for in (ii) above is received (in Executive's case
                  the  termination  being effected by Executive  giving  notice
                  within that six month  period,  effective within 30 days
                  after the notice is given,  that his employment is
                  terminated), regardless the reason, if any, and regardless
                  which  party gave the notice provided for in (ii) above,

     then the Company shall,  upon receipt of said notice,  immediately pay,
     transfer,  and provide to Executive  the following  amounts,  benefits,
     and assets:

                  (1)   The  Company  shall  pay  to  Executive  the  sum  of
            Executive's  full  base  salary  through  the  effective  date of
            termination  of his  employment at the rate in effect at the time
            of  termination  or at the time the  Change  in  Control  occurs,
            whichever  is  higher,  and an amount  equal to the amount of any
            bonus  which  has  been  earned  by him but not yet  paid to him.
            These  two  amounts  shall  be paid to  Executive  in a lump  sum
            within five days  following  the effective  date of  termination,
            or in the case of a bonus  which  is not  readily  calculable  at
            that time, within five days after the bonus can be calculated.

                  (2)   The Company  shall pay to  Executive  an amount equal
            to three times the  highest  total cash  compensation  (including
            base salary and bonuses)  paid  Executive in any of the Company's
            last three  fiscal  years  completed  prior to such  termination.
            This amount  shall be paid to  Executive  as provided in the last
            sentence of subsection (1) above.

                  (3)   The Company  shall pay to  Executive  an amount equal
            to the total  amounts  that would be expended for the benefits to
            be provided  Executive  under  Section 3 above if  Executive  had
            continued  to be an  employee  of the Company for three (3) years
            after the  termination  (such as, but not  limited  to, the life,
            accident,  disability,  health  and travel  insurance,  and other
            benefits  in  effect  for   Executive   at  the  time  notice  of
            termination  is  given  or at the  time  the  Change  in  Control
            occurs,  whichever  may be higher  in the case of each  benefit).
            This amount  shall be paid to  Executive  as provided in the last
            sentence of  subsection  (1) above  either in cash or in the form
            of  an  annuity  contract  issued  by  an  independent  insurance
            company  licensed to do  business  in New York that will  provide
            payment of all such total amounts.

                  (4)   All  options  and other  rights  that  Executive  may
            hold  to  purchase  or  otherwise  acquire  Common  Stock  of the
            Company  shall  immediately  become  exercisable  in full for the
            total  number  of  shares  that are or might  become  purchasable
            thereunder,   in  each  case   without   further   condition   or
            limitation  except  the  giving  of notice  of  exercise  and the
            payment of the purchase price  thereunder (but without  amendment
            of the plan under  which they were  issued).  At his  discretion,
            Executive  may elect to  surrender  to the  Company his rights in
            any  such  options  and  rights  held  by  him  and,   upon  that
            surrender,  the Company  shall pay him an amount in cash equal to
            the  aggregate  spread  between the exercise  prices of all those
            options   and  rights   and  the  value  of  the   Common   Stock
            purchasable  thereunder  (or of any other security into which the
            Common Stock has been  exchanged or  converted) as of the date of
            the  termination  of  employment,  the value to be  determined by
            the  reported  last sale price of the Common  Stock or that other
            security  (or the mean  between the  reported  last bid and asked
            prices)  on that  date on NASDAQ  (or,  if it is not  NASDAQ,  on
            whatever may then be the principal  exchange or quotation  system
            on which the  Company's  Common  Stock or that other  security is
            traded at that time).

                  (5)   The Company  shall repay any policy loans  previously
            taken on the Company's  insurance  policies on  Executive's  life
            (provided  that the  directors of the Company were given  written
            notice  promptly  after the making of any such  loans  which were
            made  while  Executive  was the chief  executive  officer  of the
            Company),  and then shall  transfer to  Executive  any and all of
            its  right,  title,  and  interest  in and to  all  Company  life
            insurance  policies on Executive's  life (and upon that transfer,
            Executive  shall be deemed to have  released the Company from any
            and all  obligations  it then  owes  to him to  maintain  and pay
            premiums  on  those  policies,   all  other   provisions  of  any
            agreements   under  which  those   policies  were  agreed  to  be
            maintained, however, to remain in effect).

                  (6)   In addition to the amounts  specified  in clauses (1)
            through  (5) of this  paragraph  (b),  the  Company  shall pay to
            Executive,  at the  same  time as  those  amounts  are  paid,  an
            additional  amount which,  after taking into account all federal,
            state,  and local  income and  excise  taxes  that  Executive  is
            required  to pay  with  respect  to  receipt  of  the  additional
            amount  under this  clause  (6),  will  render the net  after-tax
            payment to Executive under this clause (6) equal to the sum of:

                        (A)   all  federal,  state,  and local  excise  taxes
                  that  Executive  is  required  to pay with  respect  to the
                  payments  made  pursuant  to clauses (1) through (5) above;
                  and

                        (B)   all  federal,   state,  and  local  income  and
                  excise  taxes  that  Executive  is  required  to  pay  with
                  respect to the payment made pursuant to this clause (6).

            The  foregoing  amounts of federal,  state,  and local income and
            excise  taxes  shall  be  determined  initially  by a  nationally
            recognized  firm of independent  public  accountants  retained by
            Executive  at  his  expense  or,  at   Executive's   option,   by
            independent  public  accountants  at the Company's  expense,  and
            such  determination  and the basis therefor shall be furnished in
            writing to Executive  and the Company.  Payment  shall be made by
            the  Company  in  accordance  with  that  initial   determination
            regardless   whether   there  is  a  dispute  over  the  accuracy
            thereof.  If either party  disputes  that  initial  determination
            the  matter   shall   promptly  be   referred  to  a   nationally
            recognized  firm of independent  public  accountants  selected by
            the  Executive  (which  firm shall not have been  involved in the
            initial  determination),  and  Executive  and the  Company  shall
            promptly  furnish to that firm such  information as it reasonably
            requests.  The  Company  shall  make such  additional  payment to
            Executive or Executive  shall refund to the Company,  as the case
            may be,  in  accordance  with the  latter  firm's  determination.
            The  fees  and  expenses  of that  firm  shall  be  borne  by the
            Company.

      (c)   The Company  may  withhold  from any  payments  due to  Executive
under  paragraph (b) such amounts as its independent  public  accountants may
determine are required to be withheld under  applicable  federal,  state, and
local tax laws.

      (d)   If  applicable,  the  provisions  of Section  7(b) shall  control
over the  provisions  of  Sections 4 and/or 5. In the event that  Executive's
employment is not  terminated by the Company or the Executive  within the six
month period  specified in Section 7(b),  the  provisions of Sections 4 and 5
once again shall be applicable thereafter.

      (e) In  addition,  if any  Change  in  Control  of the  Company  occurs
while this  Agreement is effective,  the Company shall purchase and fully pay
for an annuity policy  sufficient to pay the retirement  benefits  called for
by Section 9 of the N-CDR Agreement and shall transfer  ownership  thereof to
a "rabbi"  trust for the benefit of  Executive  (but subject to the claims of
Company  creditors to the extent  required under  applicable tax laws so that
the  transfer  to the trust will not itself be an event upon which  Executive
recognizes  income for  federal or state  income  tax  purposes).  In lieu of
purchasing  the annuity  policy,  the  Company  may deposit  cash into such a
trust  sufficient to provide,  based on  assumptions  believed  reasonable in
the  written   opinion  of  a   nationally   recognized   employee   benefits
organization,   for  assuring  payment  of  those   retirement   benefits  to
Executive and his spouse.

      (f)   In addition  to payment of the amounts set forth in Section  7(b)
above and the  funding of the  "rabbi"  trust as  provided  in  Section  7(e)
above,  beginning on the  effectiveness  of any  termination of employment to
which Section 7(b) applies,  the Company  shall  compensate  and pay benefits
to and may retain the  consulting  services of Executive in  accordance  with
the  N-CDR  Agreement,  which  shall  become  effective  in  accordance  with
Sections 1 and 19 thereof.

      8.    Retirement.   The  Company  and   Executive   hereby  agree  that
Executive shall retire from full-time  employment with the Company  effective
with the close of  business  on  December  31 of the year in which  Executive
attains  the age of 69, and  beginning  on  January 1 of the next  year,  the
Company will pay Executive  retirement  benefits for his lifetime and for his
spouse's  lifetime,  if his  spouse  survives  him,  in  accordance  with the
applicable  provisions of the N-CDR  Agreement,  which shall become effective
in accordance with Sections 1 and 19 thereof.

      9.    Change in  Employment  Status.  If approved by the  Executive and
the Board of Directors  during the Term of  Employment,  Executive may become
an  independent  consultant  with terms and  conditions of that  relationship
substantially  equal  in all  respects  to  those  set  forth  in  the  N-CDR
Agreement,  which in that event shall  become  effective in  accordance  with
Sections 1 and 19 thereof.
 .
      10.   Expenses  and  Interest.  If the  Company  is found by a court of
competent  jurisdiction  to have breached this  Agreement,  the Company shall
pay the costs and expenses (including  reasonable  attorneys fees and related
expenses)  incurred  by  Executive  in  any  litigation  seeking  damages  in
respect of such breach or to enforce the  performance  of this  Agreement  by
the  Company,  together  with  interest  on  each  installment  of  wages  or
benefits paid late by the Company  calculated  to the date of actual  payment
at an  annual  rate  equal  to 3% over  the  highest  rate  then  paid by the
Company  under its short  term  borrowing  arrangements  with an  independent
institutional  lender  (and if there  is no such  lender,  then 4% above  the
prevailing prime rate as reported in the Wall Street Journal).
 .
      11.   Notices.   Any  notice   required  or   permitted   to  be  given
hereunder  shall be in writing and may be  delivered  personally  or given by
prepaid, certified, return receipt requested, first class mail addressed:

      (a)   if to the  Company,  to at  least  two  members  of the  Board of
Directors at the  addresses  to which the Company  then sends  correspondence
to them;

      (b)   if to  Executive,  at his home  mailing  address on file with the
Company; and

      (c)   to such other  address  as the party to which  such  notice is to
be given shall have  notified  (in  accordance  with the  provisions  of this
Section 11) as its substitute address for the purpose of this Agreement.

      Any notice  given as  aforesaid  shall be deemed  conclusively  to have
been received on the fifth business day after such mailing.

      12.   Amendment.  It is agreed that no change or  modification  of this
Agreement shall be made except in a writing signed by both parties.

      13.   Severability.   In  the  event  that  any  one  or  more  of  the
provisions  of  this  Agreement  shall  be or  become  invalid,  illegal,  or
unenforceable in any respect, the validity,  legality,  and enforceability of
the remaining provisions shall not be affected thereby.

      14.   Law  Governing.  The  validity,  interpretation,  and  effect  of
this Agreement shall be governed by the laws of the State of New York.

      15.   Entire   Agreement.   This   Agreement,   including   the   N-CDR
Agreement,  which is being  executed  simultaneously  herewith,  contains the
entire  understanding  of the  parties  with  respect  to the  employment  of
Executive by the Company.  There are no restrictions,  agreements,  promises,
warranties,  covenants,  or undertakings other than those expressly set forth
herein.  This Agreement  supersedes all prior agreements,  arrangements,  and
understandings  between the parties,  whether  oral or written,  with respect
to the employment of Executive.

      16.   Successors  and  Assigns.  This  Agreement  shall  inure  to  the
benefit  of  and  be  binding  upon  the  heirs,  legatees,   administrators,
successors, and assigns of the respective parties.

      IN  WITNESS  WHEREOF,  Executive,  for  himself,  and  the  undersigned
director  of the  Company,  acting on behalf of the Company by  authority  of
its Board of Directors,  have executed this  Agreement as of the day and year
first above written.


                                          /s/ Karl H. Kostusiak
                                          Karl H. Kostusiak, Executive


                                          DETECTION SYSTEMS, INC.


                                          By: /s/ Donald R. Adair
                                          Donald  R.  Adair, Chairman of the
                                          Compensation Committee of the
                                          Board of Directors

Attachment:
Exhibit  A  -   Non-Competition,   Disability,   and   Retirement
Agreement



                                    EXHIBIT A

            NON-COMPETITION, DISABILITY, AND RETIREMENT AGREEMENT

      AGREEMENT  made  as of the  1st  day of  June,  1999  between  Karl  H.
Kostusiak  ("Executive") and Detection Systems,  Inc., a New York corporation
("Company").  It is  the  intent  that  this  Agreement  will  supersede  the
Employment  Agreement,  dated concurrently  herewith,  upon the occurrence of
one of the contingencies set forth in Section 19 below.

                                 WITNESSETH:

      In  consideration  of  the  mutual  covenants   contained  herein,  the
parties agree as follows:

      1.    Effectiveness  and  Terms.  This  Agreement  shall be  binding on
the parties upon its  execution,  which is  concurrent  with  execution of an
Employment  Agreement  between  the  parties  bearing  the same  date as this
Agreement  (the  "Employment  Agreement"),  and this  Agreement  shall become
effective  when any one of the  contingencies  set forth in Section 19 occurs
(the  "Commencement  Date"  herein).  "Term of  Consulting  Service"  as used
herein  shall  mean  the  period  commencing  on the  Commencement  Date  and
continuing  thereafter  through December 31 of the year in which  Executive's
69th birthday  occurs,  unless the Company and Executive  agree in writing to
extend the Term of Consulting  Service,  in which case the Term of Consulting
Service  shall  have  the  meaning  as  determined  at that  time;  provided,
however,  that Executive's  consulting  services may be earlier terminated as
hereinafter  expressly  set  forth,  in which  event  the Term of  Consulting
Service  shall mean the period from the  Commencement  Date  through the date
of  such  earlier   termination.   Except  as  expressly   provided  in  this
Agreement,  terms defined in that  Employment  Agreement are used herein with
the same meanings.

      2.    Non-Competition.  During  any period  (a) in which  Executive  is
being paid currently the  compensation  called for by Section 3 below, (b) in
which  Executive is being paid currently for disability  benefits as provided
under  Section 11 below,  or (c) in which  Executive is being paid  currently
for retirement  benefits as provided  under Section 9 or 10 below,  Executive
shall not,  without the prior  written  consent of the Board of  Directors of
the  Company,  engage,  as  an  employee,  partner,   consultant,   venturer,
entrepreneur,  or  otherwise,  in the  development  or sale of any product or
service  which is  competitive  with any  product  or  service  sold or under
active development by the Company during the Term of Consulting Service.

      3.    Compensation   for   Non-Competition.    In   consideration   for
Executive's  non-competition  as  provided  in Section 2 above,  the  Company
shall pay and provide to Executive  the following  compensation  and benefits
through December 31 of the year in which Executive attains the age of 69:

      (a)   An  annual   non-competition   fee  equal  to  or  greater   than
$154,500,  that fee to be  increased  each year if and to the  extent the CPI
(defined  below)  has  increased  during  the  preceding  year  (and any fees
earned as a director  of the Company  shall be  credited to that fee),  which
fee shall be paid in full on January 2 of each year;

      (b)   The  Executive  will  not  participate  in any  of the  Company's
executive  incentive  compensation  plans  except  for any such plan or plans
which expressly refer to this Agreement;

      (c)   Grants  of  options  under any  Company  stock  option  plan that
permits  such  options,  in such  amounts as are  determined  by the Board of
Directors or the Committee of the Board administering the plan;

      (d)   Participation   in  Company   pension,   deferred   compensation,
insurance,  health and welfare and other  benefit plans in effect on the date
of this Agreement; and

      (e)   Continuation  of all plans in which the  Executive  participates,
including  existing  fringe  benefits  and  executive  perquisites  to  which
Executive is entitled as of the date  immediately  prior to the  Commencement
Date under this Agreement.

      Beginning  on the January 1 after the year in which  Executive  attains
the age of 69, the  retirement  benefits set forth in Sections 9 and 10 below
shall  be  the  full   consideration   to  be  paid  to  Executive   for  his
non-competition.

      4.    Consulting  Services.  If this Agreement  becomes  effective upon
the  occurrence  of any  contingency  set  forth in  Section  19  other  than
subsection  19(b)  or  (c),  beginning  upon  the  date  of  that  occurrence
Executive  shall  hold  himself   available  to  the  Company  for  providing
consulting   services  to  it  as  an  independent   contractor  at  mutually
agreeable  times and  places;  and the  Company  shall have the right to call
upon  Executive,  so  long  as  Executive  is  able,  for  up  to 8  days  of
consulting services per year to provide  information  concerning matters that
occurred,   were  developed,   or  were  determined  while  Executive  was  a
full-time or  part-time  employee of the Company.  Unless  otherwise  agreed,
those  consulting  services  shall be rendered  at a place and time  mutually
agreed (but within 25 miles of  Executive's  residence at the time) and shall
be paid at the  rate of  $1,500  per day (or up to 100  hours  of  consulting
services  per  year  at  an  hourly  rate  to  be  agreed  upon).  Any  other
consulting  services  shall be  provided  if,  as, and when the  parties  may
agree.

      Notwithstanding  any of the other  provisions  of this  Agreement,  the
Term of Consulting  Services will  automatically  terminate upon  Executive's
death and thereupon all payments and non-vested  benefits  payable  hereunder
and under  Section 3 above shall  cease,  except for any death  benefits  and
any survivor  benefits for his spouse which are provided  under the Company's
employee  plans and except for the  retirement  benefits set forth in Section
9  for  any  surviving  spouse.  Those  retirement  benefits  shall  be  paid
pursuant to Section 9 commencing  after  Executive's 69th birthday would have
occurred,  except  that the  surviving  spouse may elect,  by written  notice
given to the Company's  President or Secretary,  to receive early  retirement
benefits  as provided in Section 10 below,  in which case the  provisions  of
Section  9 below  shall  apply,  except  that  the  initial  retirement  wage
benefit shall be calculated as provided in Section 10.

      The  Company  may  terminate  Executive's  consulting  services  due to
Executive's  permanent  disability,  as  determined by the Board of Directors
in  good  faith  based  on the  certification  of an  independent  M.D.,  and
thereupon  all  payments  and  non-vested  benefits  under this Section 4 and
under  Section  3 shall  cease  except  that the  disability  and  retirement
benefits  shall be paid in accordance  with the provisions of Sections 9, 10,
and 11 below.

      5.    Executive's   Acceptance.   Executive   agrees  to  provide   the
consulting  services  described in this Agreement.  Executive  further agrees
that he will devote his reasonable  efforts during reasonable  business hours
to performance  of the  consulting  services set forth herein during the Term
of Consulting Service.

      6.    [Intentionally left blank]

      7.    Termination  for Cause.  The  Company may  terminate  Executive's
consulting  services  immediately  and without  prior notice to Executive for
"Cause" as defined  below.  The  existence  of Cause shall be  determined  by
the  Company's  Board of  Directors  (other  than  Executive)  acting in good
faith.   "Cause"  is  defined,   and  shall  be  limited  to,  a  good  faith
determination  by the  Board  of  Directors  that  any of the  following  has
occurred:

      (a)   Executive  has  knowingly   misappropriated  for  his  benefit  a
material amount of funds or property of the Company;

      (b)   Executive  has  obtained  a  material  personal  profit  from any
illegal Company transaction with a third party;

      (c)   Executive  has obtained a material  personal  profit from the use
of the Company's trade secrets other than on its behalf; or

      (d)   The Company has suffered  material  financial harm from knowingly
illegal  action by Executive  other than on the  Company's  behalf or for its
benefit.

      If  Executive's  consulting  services are terminated by the Company for
Cause,  he  shall  continue  to be paid  compensation  and  benefits  for his
non-competition  in  accordance  with the  provisions  of Section 3 above and
retirement  benefits in  accordance  with Section 9 and, if elected,  Section
10 below,  provided that his cash compensation  (including retirement benefit
payments  to be  provided  under  this  Agreement)  shall be  reduced  by the
amount of any monetary  damage  suffered by the Company due to the Cause,  as
determined  by  a  court  of  competent   jurisdiction,   prorated  over  the
actuarially   determined  term  of  all  such  payments   beginning  on  such
determination.

      8.    Resignation.   Executive   may   voluntarily   resign   from  his
consulting  services  with the Company by giving  written  notice  thereof to
the  Company's  President  or  Secretary,  but no  resignation  shall  affect
Executive's  obligation to provide the minimum  consulting  services provided
for in the second sentence of Section 4 above.

      9.    Retirement.  The Company hereby agrees that, if not ended
sooner, the Term of Service as used in the Employment Agreement shall end
at the close of business on December 31 of the year in which Executive
attains the age of 69, and beginning on the opening of business on January
1 of the next year (and regardless whether the Term of Service ended prior
to that December 31), the Company will pay Executive retirement benefits
for his lifetime and for his spouse's lifetime, if his spouse survives him,
as follows:

      (a)   a  retirement  wage  benefit  initially  equal to 30% of the base
salary rate being paid to  Executive  at the end of his full time  employment
with the  Company,  increased  for each  year  after the end of his full time
employment  by any  increase in the CPI (as defined  below),  except that the
retirement  wage  benefit  shall be equal to 60% of that base  salary rate at
the end of  Executive's  full  time  employment  with the  Company,  plus CPI
increases,  effective for any  retirement  year after a Change in Control and
after either  Executive  is no longer a full time  employee of the Company or
Executive  or the  Company  has  given the  notice  provided  for in  Section
20(b)(ii)  below,  and except that the retirement wage benefit for his spouse
shall be 75% of the amount  thus  calculated  for each year after the year of
Executive's death;

      (b)   continuation  of Executive's  participation  (for himself and his
spouse)  in the  health  program  in  effect  on the  date of this  Agreement
(including   for  dental   and  eye  care   coverage,   an  annual   physical
examination, and similar benefits); and

      (c)   continuation   of  all  other   benefits   provided  at  time  of
retirement,  such continuation  limited in individual  benefit cost to 60% of
the  maximum  annual  cost of such  benefit in any year prior to  retirement,
plus CPI increases,

      For these purposes:

            (1)   unless  otherwise  agreed  or  directed  by law or a court,
"spouse"  shall mean the person to whom  Executive is married at the time any
benefit  is to be paid,  or,  after  Executive's  death,  the  person to whom
Executive was married at the time of his death;

            (2)   "CPI" shall mean the Consumer  Price Index,  all Urban Wage
Earners as  determined by the United  States  Department of Labor,  Bureau of
Labor Statistics,  or any successor  governmental agency or, lacking any such
successor,  any other  authoritative  source  designated in good faith by the
Board of  Directors;  and the wage benefit shall be increased as of January 1
each year by  multiplying  the wage benefit paid during the previous  year by
any fraction  greater than one  calculated  by dividing the CPI most recently
computed  and  available  at the end of that  previous  year by the CPI  most
recently  computed  and  available  at the end of the year  previous to that;
the CPI shall not be used to decrease the wage benefit.

      The parties agree:  (x) that the foregoing  retirement  benefits are in
addition  to  any  other  retirement   benefits  that  may  be  available  to
Executive  (such as the Company's  401(k) savings plan),  (y) that payment of
these  retirement  benefits may be  terminated  if a court of law  determines
that Executive has violated the  provisions of Section 2 above,  and (z) that
the Company will  purchase and maintain  life  insurance  sufficient  to fund
the  estimated  benefits  for  Executive's  spouse  (estimated  no later than
Executive's  retirement date; any excess policy proceeds to be available,  if
agreed,   to  purchase   shares  of  the  Company's   Common  Stock  held  in
Executive's  estate) and the policy or policies  of such  insurance  shall be
held in trust designated for this purpose.

      (d)   The  retirement  benefits  provided under this Section 9 (and, if
applicable,  Section 10) shall be paid as provided herein regardless  whether
the  Company  has  any  claims  against  Executive  for  default  under  this
Agreement  or for any  other  breach  of duty or  otherwise,  and,  except as
otherwise   provided  in  Section  7  above,  the  Company  shall  pay  those
retirement  benefits  as  provided  and  must  pursue  remedies  for any such
default or other breach of duty or other claim separately and independently.

      10.  Early  Retirement  Benefits.   The  parties  agree  that,  in  the
circumstances   expressly  provided  in  this  Agreement,   Executive  and/or
Executive's  spouse  shall be paid early  retirement  benefits in  accordance
with the following:

      (a) The  provisions  of Section 9 shall  apply to  Executive's  and the
spouse's  retirement  benefits  as  provided  therein,  except  as  expressly
modified  by this  Section  10,  and  shall  be paid  beginning  at the  time
payment of the early retirement  benefits  actually  commences as provided in
this Agreement;

      (b) The initial  retirement  wage  benefit  shall not be the amount set
forth in Section 9(a) above,  but shall be  calculated  as follows:  multiply
the initial  retirement  wage benefit  (calculated in accordance with Section
9(a) above) by the  actuarially  determined  number of years it would be paid
during  Executive's  then  actuarially  determined  remaining  lifespan as if
Executive's  69th birthday had just occurred;  then divide that amount by the
number  of  years  then  actuarially  determined  to  be  Executive's  actual
expected  remaining  lifespan  based  on his  actual  age at that  time.  The
amount thus  calculated  shall be the initial annual  retirement wage benefit
for purposes of Section 9(a) above.

      11.   Disability.   If  Executive  is  determined  to  be   permanently
disabled  in  accordance  with  the  provisions  of  Section  4 above  or the
provisions  of  Section 1 of the  Employment  Agreement,  Executive  shall be
paid  disability  benefits from that date through  December 31 of the year in
which  Executive  attains the age of 69, which  disability  benefits shall be
equal  to the  non-competition  compensation  and  benefits  and the  minimum
consulting  fees that would have been paid to Executive  pursuant to Sections
3 and 4 above if he had not become  disabled,  provided  that,  to the extent
the disability  wage benefits are not taxable  income to Executive  under the
U.S.  Internal  Revenue  Code of 1986,  as amended,  the  disability  benefit
amount  shall  equal 60% of the  compensation  and fees that  would have been
paid pursuant to Sections 3 and 4 above.

      12.  Stock  Transfers by Executive  and  Executive's  Estate and Heirs.
So long as this Agreement is in effect,  Executive  shall not sell any shares
of Company  Common  Stock except (a) in  transactions  approved in advance by
the  Company's  Board of Directors or (b) pursuant to all the  conditions  of
Rule 144  promulgated  by the Securities  and Exchange  Commission  under the
Securities Act of 1933, as amended (or any rule thus  promulgated  which is a
successor to Rule 144); provided,  however,  that no such sales shall be made
in any block trade or when there is any tender  offer  pending  with  respect
to any  securities  issued by the Company or there is any  program  announced
by any person  other than the  Company  to  acquire  shares of the  Company's
Common Stock.  Executive  agrees that  restrictive  legends  referring to the
provisions  of  this  Section  12  shall  be  placed  upon  all  certificates
representing  shares to which this  Section 12  applies.  The  provisions  of
this  Section 12 shall  terminate  upon any Change in Control or  Executive's
death, whichever may first occur and shall not apply thereafter.

      13.   Expenses  and  Interest.  If the  Company  is found by a court of
competent  jurisdiction  to have breached this  Agreement,  the Company shall
pay the costs and expenses (including  reasonable  attorneys fees and related
expenses)  incurred  by  Executive  in  any  litigation  seeking  damages  in
respect of such breach or to enforce the  performance  of this  Agreement  by
Company,  together  with  interest on each  installment  of wages or benefits
paid  late by the  Company  calculated  to the date of actual  payment  at an
annual  rate  equal to 3% over the  highest  rate  then  paid by the  Company
under  its   short   term   borrowing   arrangements   with  an   independent
institutional  lender  (and if there  is no such  lender,  then 4% above  the
prevailing prime rate as reported in the Wall Street Journal).

      14.   Notices.   Any  notice   required  or   permitted   to  be  given
hereunder  shall be in writing and may be  delivered  personally  or given by
prepaid, certified, return receipt requested, first class mail addressed:

      (a)   if to the  Company,  to at  least  two  members  of the  Board of
Directors,  c/o the  Company's  Secretary  at the  address  of the  Company's
principal office;

      (b)   if to  Executive,  at his home  mailing  address on file with the
Company; and

      (c)   to such other  address  as the party to which  such  notice is to
be given shall have  notified  (in  accordance  with the  provisions  of this
Section 14) as its substitute address for the purpose of this Agreement.

      Any notice  given as  aforesaid  shall be deemed  conclusively  to have
been received on the fifth business day after such mailing.

      15.   Amendment.  It is agreed that no change or  modification  of this
Agreement shall be made except in a writing signed by both parties.

      16.   Severability.   In  the  event  that  any  one  or  more  of  the
provisions  of  this  Agreement  shall  be or  become  invalid,  illegal,  or
unenforceable in any respect, the validity,  legality,  and enforceability of
the remaining provisions shall not be affected thereby.

      17.   Law  Governing.  The  validity,  interpretation,  and  effect  of
this Agreement shall be governed by the laws of the State of New York.

      18.   Entire   Agreement.    This   Agreement   contains   the   entire
understanding  of the  parties  with  respect to the  consulting  services of
Executive  by the  Company  during the Term of  Consulting  Service  and with
respect to non-competition  and disability and retirement  benefits (but does
not  affect  pension  and  other  benefit  plans  and  arrangements  in which
Executive  participates).  There are no restrictions,  agreements,  promises,
warranties,  covenants,  or undertakings other than those expressly set forth
herein with respect to the Term of Consulting  Service.  Upon the  occurrence
of one of  the  contingencies  set  forth  in  Section  19  below,  as of the
Commencement   Date  this   Agreement   supersedes   all  prior   agreements,
arrangements,  and  understandings  between  the  parties,  whether  oral  or
written,  with respect to employment  or consulting  services of Executive on
and after the  Commencement  Date.  Thus,  whenever  this  Agreement  becomes
effective,  the  provisions of the  Employment  Agreement  shall no longer be
effective except for any claims that may have accrued thereunder.

      19.   Contingencies.    (a)   This   Agreement   shall   be   effective
immediately upon the occurrence of any one of the following:

      (a)   Upon the end of the five  year Term of  Service  as  provided  in
Section 1 of the Employment Agreement;

      (b)   Upon   Executive's   death  as  provided  in  Section  1  of  the
Employment Agreement;

      (c)   Upon  Executive's  permanent  disability as provided in Section 1
of the Employment Agreement;

      (d)   At  the  end  of  the  period  specified  in  Section  4  of  the
Employment  Agreement  after  termination of Executive's  employment  without
Cause;

      (e)   At  the  end  of  the  period  specified  in  Section  5  of  the
Employment Agreement after termination of Executive's employment for Cause;

      (f)   Upon any  voluntary  resignation  by  Executive  from  full  time
employment  with the  Company  prior to a Change in  Control as  provided  in
Section 6 of the Employment Agreement;

      (g)   Upon  the   effectiveness   of  any  termination  of  Executive's
employment  after a  Change  in  Control  as  provided  in  Section  7 of the
Employment Agreement;

      (h)   Upon  Executive's  retirement  as  provided  in  Section 8 of the
Employment Agreement; or

      (i)   Upon any  change  of  Executive's  employment  status  to that of
independent consultant as provided in Section 9 of the Employment Agreement.

      20.   Change in Control.

      (a)   A "Change  in  Control"  of the  Company  shall be deemed to have
      occurred if:

                  (1)   any  "person,"  as such  term  is  used  in  Sections
            13(d)  and  14(d) of the  Securities  Exchange  Act of  1934,  as
            amended  (the  "Exchange  Act")  (other  than the  Company or any
            corporation  owned,  directly or indirectly,  by the shareholders
            of the Company in  substantially  the same  proportions  as their
            ownership   of  stock  of  the   Company),   is  or  becomes  the
            "beneficial  owner" (as defined in Rule 13d-3 under the  Exchange
            Act),  directly  or  indirectly,  of  securities  of the  Company
            representing  25% or more of the  combined  voting  power  of the
            Company's then outstanding securities;

                  (2)   there is  elected  35% or more of the  members of the
            Board of  Directors  of the Company  without the  approval of the
            nomination  of such  members by a majority  of the Board  serving
            prior to such election;

                  (3)   the  shareholders  of the Company approve a merger or
            consolidation  of the Company with any other  corporation,  other
            than (i) a merger  or  consolidation  which  would  result in the
            voting  securities of the Company  outstanding  immediately prior
            thereto  continuing  to  represent  more than 75% of the combined
            voting power of the voting  securities  of the  Company,  or such
            surviving  entity,  outstanding  immediately after such merger or
            consolidation;  or (ii) a merger  or  consolidation  effected  to
            implement   a   recapitalization   of  the  Company  (or  similar
            transaction)  in which no "person"  (as defined  above)  acquires
            more  than 25% of the  combined  voting  power  of the  Company's
            then-outstanding securities; or

                  (4)   The   shareholders   of  the   Company   approve   an
            agreement for the sale or  disposition  by the Company and all or
            substantially all of the Company's assets.

            (b)   If:

                    (i)   any Change in Control of the Company  occurs  while
                  this  Agreement  is effective, and

                    (ii)  Executive  gives  notice to the Company or the Company
                  (acting  upon a determination  of its Board of  Directors)
                  gives notice to Executive,  in  either  case  to the  effect
                  that  the six month period  called for by this Section  20(b)
                  shall begin to run, and

                    (iii)  Executive's  consulting  services  are  terminated
                  by Executive or by the Company (other  than  for Executive's
                  death or disability)  within  six  months after the date the
                  notice provided for in (ii) above is  received (in Executive's
                  case the  termination  being  effected by Executive  giving
                  notice  within that six month period,  effective  within 30
                  days  after  the  notice  is  given,  that  his  consulting
                  services  are  terminated  to the  extent  permitted  under
                  Section  4  above),  regardless  the  reason,  if any,  and
                  regardless  which  party  gave the notice  provided  for in
                  (ii) above,

then the  Company  shall,  upon  receipt  of said  notice,  immediately  pay,
transfer,  and provide to Executive  the  following  amounts,  benefits,  and
assets:

                  (1)   The  Company  shall  pay  to  Executive  the  sum  of
            Executive's   full   non-competition   compensation  and  minimum
            consulting  fees through the  effective  date of  termination  of
            his  consulting  services  at the rate in  effect  at the time of
            termination  or  at  the  time  the  Change  in  Control  occurs,
            whichever  is  higher,  and an amount  equal to the amount of any
            bonus  which  has  been  earned  by him but not yet  paid to him.
            These  two  amounts  shall  be paid to  Executive  in a lump  sum
            within five days  following  the effective  date of  termination,
            or in the case of a bonus  which  is not  readily  calculable  at
            that time, within five days after the bonus can be calculated.

                  (2)   The Company  shall pay to  Executive  an amount equal
            to three times the  highest  total cash  compensation  (including
            any  base  salary,  non-competition  compensation,  bonuses,  and
            consulting  fees) paid  Executive  in any of the  Company's  last
            three  fiscal years  completed  prior to such  termination.  This
            amount  shall  be paid  to  Executive  as  provided  in the  last
            sentence of subsection (1) above.

                  (3)   The Company  shall pay to  Executive  an amount equal
            to the total  amounts  that would be expended for the benefits to
            be provided  Executive  under  Section 3 above on the  assumption
            that   Executive   will   continue   to   be   compensated    for
            non-competition  for  three  years  after the  termination.  This
            amount  shall  be paid  to  Executive  as  provided  in the  last
            sentence of  subsection  (1) above  either in cash or in the form
            of  an  annuity  contract  issued  by  an  independent  insurance
            company  licensed to do  business  in New York that will  provide
            payment of all such total amounts.

                  (4)   All  options  and other  rights  that  Executive  may
            hold  to  purchase  or  otherwise  acquire  Common  Stock  of the
            Company  shall  immediately  become  exercisable  in full for the
            total  number  of  shares  that are or might  become  purchasable
            thereunder,   in  each  case   without   further   condition   or
            limitation  except  the  giving  of notice  of  exercise  and the
            payment of the purchase price  thereunder (but without  amendment
            of the plan under  which they were  issued).  At his  discretion,
            Executive  may elect to  surrender  to the  Company his rights in
            any  such  options  and  rights  held  by  him  and,   upon  that
            surrender,  the Company  shall pay him an amount in cash equal to
            the  aggregate  spread  between the exercise  prices of all those
            options   and  rights   and  the  value  of  the   Common   Stock
            purchasable  thereunder  (or of any other security into which the
            Common Stock has been  exchanged or  converted) as of the date of
            the  termination  of  consulting   services,   the  value  to  be
            determined  by the  reported  last sale price of the Common Stock
            or that other  security (or the mean  between the  reported  last
            bid and asked  prices) on that date on NASDAQ  (or,  if it is not
            NASDAQ,  on  whatever  may  then  be the  principal  exchange  or
            quotation  system on which  the  Company's  Common  Stock or that
            other security is traded at that time).

                  (5)   The Company  shall repay any policy loans  previously
            taken on the life insurance  policies on Executive's  life listed
            on  Exhibit A  attached  to the  Employment  Agreement  (provided
            that the  directors  of the  Company  were given  written  notice
            promptly  after the  making  of any such  loans  which  were made
            while   Executive  was  the  chief   executive   officer  of  the
            Company),  and then shall  transfer to  Executive  any and all of
            its right,  title,  and  interest in and to those  policies  (and
            upon that  transfer,  Executive  shall be deemed to have released
            the Company from any and all  obligations  it then owes to him to
            maintain   and  pay  premiums  on  those   policies,   all  other
            provisions  of any  agreements  under which those  policies  were
            agreed to be maintained, however, to remain in effect).

                  (6)   In addition to the amounts  specified  in clauses (1)
            through  (5) of this  paragraph  (b),  the  Company  shall pay to
            Executive,  at the  same  time as  those  amounts  are  paid,  an
            additional  amount which,  after taking into account all federal,
            state,  and local  income and  excise  taxes  that  Executive  is
            required  to pay  with  respect  to  receipt  of  the  additional
            amount  under this  clause  (6),  will  render the net  after-tax
            payment to Executive under this clause (6) equal to the sum of:

                        (A)   all  federal,  state,  and local  excise  taxes
                  that  Executive  is  required  to pay with  respect  to the
                  payments  made  pursuant  to clauses (1) through (5) above;
                  and

                        (B)   all  federal,   state,  and  local  income  and
                  excise  taxes  that  Executive  is  required  to  pay  with
                  respect to the payment made pursuant to this clause (6).

            The  foregoing  amounts of federal,  state,  and local income and
            excise  taxes  shall  be  determined  initially  by a  nationally
            recognized  firm of independent  public  accountants  retained by
            Executive  at  his  expense  or,  at   Executive's   option,   by
            independent  public  accountants  at the Company's  expense,  and
            such  determination  and the basis therefor shall be furnished in
            writing to Executive  and the Company.  Payment  shall be made by
            the  Company  in  accordance  with  that  initial   determination
            regardless   whether   there  is  a  dispute  over  the  accuracy
            thereof.  If either party  disputes  that  initial  determination
            the  matter   shall   promptly  be   referred  to  a   nationally
            recognized  firm of independent  public  accountants  selected by
            the  Executive  (which  firm shall not have been  involved in the
            initial  determination),  and  Executive  and the  Company  shall
            promptly  furnish to that firm such  information as it reasonably
            requests.  The  Company  shall  make such  additional  payment to
            Executive or Executive  shall refund to the Company,  as the case
            may be,  in  accordance  with the  latter  firm's  determination.
            The  fees  and  expenses  of that  firm  shall  be  borne  by the
            Company.

            (c)   The  Company  may   withhold   from  any  payments  due  to
Executive  under  paragraph  (b)  such  amounts  as  its  independent  public
accountants  may  determine  are  required  to be withheld  under  applicable
federal, state, and local tax laws.

            (d)   If  applicable,  the  provisions  of this  Section 20 shall
control  over the  provisions  of Section  7. In the event  that  Executive's
consulting  services  are not  terminated  by the  Company  or the  Executive
within the six month period  specified in Section  20(b),  the  provisions of
Section 7 once again shall be applicable thereafter.

            (e) In  addition,  if  any  Change  in  Control  of  the  Company
occurs while this  Agreement is  effective,  the Company  shall  purchase and
fully pay for an annuity  policy  sufficient to pay the  retirement  benefits
called  for by  Section  9 of this  Agreement  and shall  transfer  ownership
thereof to a "rabbi"  trust for the benefit of Executive  (but subject to the
claims of Company  creditors  to the extent  required  under  applicable  tax
laws so that the  transfer  to the trust  will not  itself  be an event  upon
which   Executive   recognizes   income  for  federal  or  state  income  tax
purposes).  In lieu  of  purchasing  the  annuity  policy,  the  Company  may
deposit cash into such a trust  sufficient to provide,  based on  assumptions
believed  reasonable  in  the  written  opinion  of a  nationally  recognized
employee  benefits  organization,  for assuring  payment of those  retirement
benefits to Executive and his spouse.

      (f)   Payment of the  amounts  called for by this  Section 20 shall not
affect the  Company's  obligation  to pay  non-competition  compensation  and
benefits  under Section 3 above or retirement  benefits  under Section 9 and,
if elected by Executive, Section 10 above.

      21.   Successors  and  Assigns.  This  Agreement  shall  inure  to  the
benefit  of  and  be  binding  upon  the  heirs,  legatees,   administrators,
successors, and assigns of the respective parties.

      IN  WITNESS  WHEREOF,   Executive  for  himself,  and  the  undersigned
director  of the  Company,  acting on behalf of the Company by  authority  of
its Board of Directors,  have executed this  Agreement as of the day and year
first above written.

                                          /s/ Karl H. Kostusiak
                                          Karl H. Kostusiak, Executive


                                          DETECTION SYSTEMS, INC.

                                          By:  /s/ Donald R. Adair
                                          Donald R. Adair, Chairman of the
                                          Compensation Committee of the
                                          Board of Directors