TAYLOR DEVICES, INC.
90 Taylor Drive
North Tonawanda, New York 14120
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
TO THE SHAREHOLDERS OF TAYLOR DEVICES, INC.
NOTICE IS HEREBY GIVEN that the Annual Meeting of
Shareholders of TAYLOR DEVICES, INC. ("Company") will be held at
the University Inn & Conference Center, 2401 North Forest Road,
Amherst, New York, on November 8, 1996, at 10:00 A.M. for the
following purposes:
1. To elect five directors of the Company each to serve for
the ensuing year until the next annual meeting and the
election and qualification of his successor.
2. To approve and ratify an amendment to Article V,
Indemnity of the Company's By-laws to expand indemnification
protection to directors and officers of the Company.
3. To approve and ratify Indemnity Agreements entered into
between the Company and its directors and designated officer,
in substantially the form attached as Exhibit A, and as such
form may from time to time be amended.
4. To transact such other business as may properly come
before the meeting or any adjournment or adjournments thereof.
NOTICE IS HEREBY GIVEN that the stock transfer books of
the Company will not be closed, but only shareholders of record at
the close of business on September 20, 1996 will be entitled to
notice of the meeting and to vote at the meeting.
SHAREHOLDERS WHO WILL BE UNABLE TO BE PRESENT PERSONALLY
MAY ATTEND THE MEETING BY PROXY. SUCH SHAREHOLDERS ARE REQUESTED
TO DATE, SIGN AND RETURN THE ENCLOSED PROXY. THE PROXY MAY BE
REVOKED AT ANY TIME BEFORE IT IS VOTED.
BY ORDER OF THE BOARD OF DIRECTORS
/s/ Joseph P. Gastel
Joseph P. Gastel, Secretary
DATED: September 26, 1996
North Tonawanda, New York
PROXY STATEMENT
FOR THE
ANNUAL MEETING OF SHAREHOLDERS
OF
TAYLOR DEVICES, INC.
90 TAYLOR DRIVE
NORTH TONAWANDA, NEW YORK 14120
_________________________
TO BE HELD AT THE UNIVERSITY INN & CONFERENCE CENTER,
2401 NORTH FOREST ROAD, AMHERST, NEW YORK
NOVEMBER 8, 1996
This Proxy Statement is furnished to shareholders by the Board
of Directors of Taylor Devices, Inc. (the "Company") in connection
with the solicitation of proxies for use at the Annual Meeting of
Shareholders to be held on November 8, 1996, at 10:00 A.M., and at
any adjournments thereof, for the purposes set forth in the
accompanying Notice of Annual Meeting of Shareholders. It is
proposed first to give or mail this Proxy Statement and the
accompanying form of proxy to shareholders on or about September
26, 1996.
If the enclosed form of proxy is properly executed and
returned, the shares represented thereby will be voted in
accordance with the instructions contained therein. Any proxy
given pursuant to this solicitation may be revoked by the
shareholder at any time prior to its use by written notice to the
Secretary of the Company.
RECORD DATE AND VOTING SECURITIES
The Bylaws of the Company provide that the Annual Meeting of
Shareholders shall be held at any time within six (6) months after
the end of the fiscal year. In accordance with the Bylaws, the
Board of Directors has established November 8, 1996, as the date
for this year's Annual Meeting of Shareholders. The Board of
Directors has fixed the close of business on September 20, 1996, as
the record date for determining the holders of common stock
entitled to notice of and to vote at the meeting. On September 20,
1996, the Company had outstanding and entitled to vote a total of
2,687,424 shares of common stock. Each outstanding share of common
stock is entitled to one vote on all matters to be brought before
the meeting.
CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth information as of September 20,
1996, as to persons known by the Company to be the beneficial
owners of more than five percent of the Company's common stock, as
well as shares owned by named executive officers, each director and
all directors and executive officers of the Company as a group:
Name and Amount and
Address of Nature of
Beneficial Beneficial Percent (%)
Owner Ownership (5) of Class
Tayco Developments, Inc. 697,567(1) 26.1%
100 Taylor Drive
North Tonawanda, NY 14120
Douglas P. Taylor 54,826(2)(4) 2.%
90 Taylor Drive
North Tonawanda, NY 14120
Richard G. Hill 44,096(3)(4) 1.6%
90 Taylor Drive
North Tonawanda, NY 14120
Joseph P. Gastel 54,762(4) 2.%
722 Ellicott Square Bldg.
Buffalo, NY 14203
Donald B. Hofmar 17,233(4) *
365 Brantwood Drive
Amherst, NY 14226
Randall L. Clark -0-
3570 Broadway
Buffalo, NY 14227
All directors and officers
as a group (six) 243,703 9.1%
* less than 1%
(1) These shares are subject to an irrevocable proxy from Tayco
Developments, Inc. ("Developments") to the Company. The irrevocable
proxy and related documents will terminate by their terms on August
1, 1997 or at such time as Developments repays its portion of the
Tayco Technology, Inc. ("Tech") indebtedness, whichever event is
the earlier to occur. Tech was merged into the Company in 1994.
See "Transactions with Management and Others."
(2) Includes 2,307 shares held beneficially and of record by
Sandra Taylor, wife to Douglas Taylor, and 7,042 shares held by her
as custodian for their minor children. Also included are 38
shares held by Mr. Taylor as custodian for their minor children.
As to all such shares, Mr. Taylor disclaims any beneficial
ownership. Members of Douglas P. Taylor's immediate family own
9,387 shares, which represent less than 1% of the Company's stock,
as to which shares Mr. Taylor disclaims any beneficial ownership.
Paul H. Taylor, father of Douglas P. Taylor, and father-in-law
of Richard G. Hill, also owns 155,913 shares or 15.7% of the equity
securities of Developments, the Company's largest shareholder.
This ownership interest in Developments, together with 8,624 shares
of stock which Paul H. Taylor owns in the Company, results in
approximately 6.2% control in the Company attributable to Paul H.
Taylor. In fiscal year 1996, Paul H. Taylor gifted a total of
32,800 shares of stock in Developments to his family, as follows:
2,500 shares each to his wife, two daughters (including Joyce
Taylor Hill, wife of Richard G. Hill), a son-in-law, and to each of
his six grandchildren. Consequently, not including the ownership
interests of Messrs. Douglas P. Taylor and Richard G. Hill, shares
of Developments' stock which the Taylor family own, together with
the shares which they own in the Company, result in the family
owning or controlling 219,407 shares or 8.2% of the Company's
stock. As to all such shares, Douglas P. Taylor and Richard G.
Hill disclaim any beneficial interest.
(3) Includes 656 shares held by Joyce Taylor Hill, wife of Mr.
Hill and sister to Douglas P. Taylor, as custodian for their minor
children. As to all such shares, Mr. Hill disclaims any beneficial
ownership. See also note 2 above.
(4) Includes options granted to directors and officers and which
have not been exercised, but which can be exercised within 60 days.
These options were granted pursuant to the Company's 1994 Taylor
Devices, Inc. Stock Option Plan (the "1994 Stock Option Plan"), and
the 1982 Non-Statutory and Incentive Stock Option Plans, which have
expired (the "1982 Stock Option Plans"). See "Executive
Compensation."
(5) Information presented in this table has been supplied by the
respective shareholders or by the Company as transfer agent.
THE ELECTION OF DIRECTORS
Five directors of the Company are to be elected to hold office
until the election and qualification of their successors at the
next Annual Meeting of Shareholders. Unless the proxy directs
otherwise, the persons named in the enclosed form of proxy will
vote for the election of the five nominees named below. In the
event that any of the nominees should be unable to serve, or for
good reason will not serve, the proxy will be voted in accordance
with the best judgment of the person or persons acting under it.
It is not anticipated that any of the proposed nominees will be
unable to serve.
All nominees, with the exception of Mr. Randall L. Clark, have
been members of the Board of Directors since the dates indicated
and since their last election to the Board by the shareholders at
the Annual Meeting of Shareholders held November 10, 1995. Mr.
Clark was appointed to the Board to fill the vacancy left by the
resignation of Mr. O. Eugene Hilger.
Mr. Hilger, whose service to the Company has spanned 23
years, resigned from the Board of Directors in August 1996 for
reasons of health.
Nominees and Directors
The nominees for director, their ages, principal occupations,
positions with the Company, and the date each nominee was elected
a director of the Company are set forth below:
DOUGLAS P. TAYLOR (48), President of the Company since April 1991,
was Executive Vice President since 1979, and has served as a
Director since 1976. Since 1972 and 1977, he has also served as
Director of Developments and Tayco Realty Corporation ("Tayco
Realty"), respectively. Mr. Taylor became President of both
Companies in 1991 also. Mr. Taylor is the brother-in-law of
Richard G. Hill.
RICHARD G. HILL (46), has served as Vice President of the Company
since 1978, and as a Director and Executive Vice President since
1991. In 1991, Mr. Hill also became a Director and Executive Vice
President of Tayco Realty. Mr. Hill is the brother-in-law of
Douglas P. Taylor.
JOSEPH P. GASTEL (71), is a Patent Attorney and a Director and
Secretary of the Company and of Developments since 1984.
DONALD B. HOFMAR (67), who has served as a Director of the Company
since 1991, has been the President of Bell-Mar, Inc. since its
inception in 1962. Bell-Mar, Inc. a corporation which serves as a
sales contractor for Thomas Publishing Company, is a vendor to the
Company, but the business transacted is $27,000 or less per year.
RANDALL L. CLARK (53), was appointed to the Board of Directors of
the Company on August 22, 1996 to fill the vacancy left by O.
Eugene Hilger. As of 1996, Mr. Clark is a Director of Buffalo
Ventures, Inc., an investment banking firm, and he also serves as
Chairman of the Board of Directors of Dunn Tire Corporation of
Western New York. From 1992 until 1996, Mr. Clark was Executive
Vice President and Chief Operating Officer of Pratt & Lambert.
From 1980 to until 1992, Mr. Clark served in various executive
capacities at Dunlop Tire Corporation, including as its President
and Chief Executive Officer. He was appointed to its Board of
Directors in 1983. In 1984, Mr. Clark was appointed to the Group
Management Board of Dunlop Holdings, plc., and also served as
Chairman of the Board of Dunlop Tire Corp. in North America from
1985 to 1991.
Mr. Clark also serves on the board of directors of several
other area corporations, including, Acme Electric Corporation,
(listed on the New York Stock Exchange), Merchants Mutual Insurance
Company, Marine Midland Bank - Western Region, and Millard Fillmore
Hospital. He is Vice Chairman of the International Trade Council
of Western New York, and Chairman of the University of Buffalo's
Center for Industrial Effectiveness. Mr. Clark holds a B.A. degree
from the University of Pennsylvania and an M.B.A. degree from the
Wharton School of Finance and Commerce.
For each director or nominee for director's ownership of the
Company's common stock, see "Certain Beneficial Owners and
Management."
It is the intention of the persons named in the enclosed form
of proxy, unless otherwise directed, to vote FOR the election of
the nominees to serve on the Board of Directors until the next
Annual Meeting of Shareholders. Each nominee will be elected by a
plurality of affirmative votes cast by shareholders.
The Board of Directors recommends a vote FOR management's
slate of nominees to the Board of Directors, which is Item 1 on the
form of proxy.
Board of Directors and Committee Meetings
In fiscal 1996, the Board of Directors met three times with
100% of the directors in attendance.
The Executive Committee, between meetings of the Board of
Directors and to the extent permitted by law, exercises all of the
powers and authority of the Board in the management of the business
of the Company. The Executive Committee, comprised of Messrs.
Taylor, Hill, and Gastel, did not meet in fiscal 1996.
The Audit Committee is comprised of the Company's outside
directors, Messrs. Gastel and Hofmar, and has as its function, the
review and implementation of accounting and audit procedures
utilized by the Company internally, and as recommended by the
Company's certified public accountants. The Audit Committee also
makes recommendations to the Board regarding selection of the
Company's accountants for the forthcoming fiscal year. The Audit
Committee met once in fiscal 1996, with both members in attendance.
The Stock Option Committee, formed in December 1994 to
administer the Company's 1994 Stock Option Plan (the "1994 Plan"),
is comprised of Messrs. Gastel and Hofmar. The Committee met once
in fiscal 1996, with both members in attendance. The 1982 Stock
Option Plans are administered by Mesdames Janice Nicely and
Kathleen King, employees of the Company. No further stock options
may be granted under the 1982 Stock Option Plan.
The Company does not have a standing nominating or a
Compensation Committee of the Board of Directors.
In fiscal 1996, each member of the Board of Directors received
a fee of $1,250 for each Board meeting attended. The fee is paid
either in cash or, if requested by the director, credited toward
future exercise of options held by such director. In addition, the
Secretary of the meeting receives a $2,250 fee per meeting for
services rendered in that capacity.
In addition, and pursuant to the formula set forth in the 1994
Plan, each director received a grant of options for 5,000 shares of
common stock. The option price of the stock was $3.88, which
represents the mean of the bid/ask price of the Company's common
stock on the date of grant, April 18, 1996. The mean of the
bid/ask price at May 31, 1996 is $3.84.
All directors may be considered to be "control persons" as
that term is defined in the Securities Act of 1933, as amended.
Current Directors and Officers
For information on Messrs. Douglas P. Taylor, Richard G. Hill,
Joseph P. Gastel, Donald B. Hofmar and Randall L. Clark, see
"Nominees and Directors" above.
KENNETH G. BERNSTEIN (49), Controller of the Company since
November 1992, was appointed Treasurer of the Company in December
1994. From August 1981 to July 1992 he was employed as a
Management Accountant and Internal Auditor by British Petroleum.
EXECUTIVE COMPENSATION
The following table sets forth certain information concerning
compensation of and stock options held by the Company's Chief
Executive Officer and Vice President. No other current executive
officers earn more than $100,000 annually in salary and bonus.
SUMMARY COMPENSATION TABLE
ANNUAL COMPENSATION LONG-TERM COMPENSATION
AWARDS
(1) (2) (3) (4)
SECURITIES
NAME/ OTHER UNDERLYING ALL
PRINCIPAL FISCAL ANNUAL OPTIONS/ OTHER
POSITION YEAR SALARY($) BONUS($) COMP($) SARS(#) COMP($)
Douglas P. Taylor 1996 $127,727 $ 928 $ 6,623 5,000 $23,543
Chairman/President 1995 $107,620 $ - $18,715 5,000 $20,081
Chief Executive 1994 $ 94,710 $ - - - $16,653
Officer
Richard G. Hill 1996 $ 95,141 $1,272 $ 3,312 5,000 $23,394
Vice President 1995 $ 80,181 $ - $12,361 5,000 $19,948
1994 $ 68,585 $ - $ 9,062 - $16,535
(1) Automotive vehicles owned by the Company are made available to
its CEO and Vice President, and use of such vehicles is not limited
to business purposes. The value of any personal economic benefit
associated with such use cannot reasonably be determined by the
Company.
(2) Pursuant to the 1982 Stock Option Plans, on March 1, 1996, Mr.
Taylor exercised 1,205 non-qualified options to acquire 1,205
shares of common stock and 1,000 SARs accompanying non-qualified
options, for payment of personal income taxes, at a value per stock
appreciation right ("SAR") on the date of exercise of $2.77. On
March 1, 1996 Mr. Hill exercised 703 non-qualified options, to
acquire 703 shares of common stock and 400 SARs accompanying non-qualified
options for payment of personal income taxes, at a value per SAR on the date
of exercise of $2.77.
On November 18, 1994 during fiscal year 1995, Mr. Taylor
exercised 7,717 SARs accompanying non-qualified options, to acquire
3,187 shares of common stock and for payment of personal income
taxes, at a value per SAR on the date of exercise of $2.39. On
November 29, 1994 Mr. Hill exercised 5,512 SARs accompanying non-qualified
options to acquire 2,150 shares of common stock and for payment of personal
income taxes, at a value per SAR on the date of exercise of $2.21. On
December 8, 1993 during fiscal year 1994 Mr. Hill exercised 2,600 non-
qualified options to acquire 2,600 shares of common stock and 1,500 SARs
accompanying non-qualified options for payment of personal income taxes, at
a value per SAR on the date of exercise of $2.08.
The value of a SAR per share of common stock is the difference on the
date of exercise between the fair market value per share of common stock
and the option exercise price. Only non-qualified options are
accompanied by SARs.
(3) Incentive options were granted pursuant to the terms of the 1994
Plan on April 18 in 1996 and 1995, at option prices of $3.88 and $4.00
respectively, which is the mean of the bid/ask price of the Company's
common stock on the date of grant.
(4) Other compensation, as paid and accrued to the above named executive
officers, is as follows:
DIRECTOR'S MNGMNT AUTO 401K
FEES FEES ALLOWANCE CONTRIB. TOTAL
Douglas Taylor:
Fiscal Year Ended 5/31/96 $ 5,000 $16,150 $ 1,800 $ 593 $23,543
Fiscal Year Ended 5/31/95 $ 4,600 $13,283 $ 1,800 $ 398 $20,081
Fiscal Year Ended 5/31/94 $ 4,950 $ 9,550 $ 1,800 $ 353 $16,653
Richard Hill:
Fiscal Year Ended 5/31/96 $ 5,000 $16,150 $ 1,800 $ 444 $23,394
Fiscal Year Ended 5/31/95 $ 4,600 $13,283 $ 1,800 $ 265 $19,948
Fiscal Year Ended 5/31/94 $ 4,950 $ 9,550 $ 1,800 $ 235 $16,535
OPTION/SAR GRANTS
IN FISCAL YEAR 5/31/96
POTENTIAL REALIZ-
ABLE VALUE AT
ASSUMED ANNUAL
RATES OF STOCK
PRICE APPRECIATION
INDIVIDUAL GRANTS FOR OPTION TERM
NUMBER OF % OF
SECURITIES TOTAL
UNDERLYING OPTIONS
OPTIONS GRANTED TO EXERCISE EXPIR-
GRANTED(#) EMPLOYEES IN OR BASE ATION
NAME (1) FISCAL YEAR PRICE($ SH) DATE 5% 10%
Douglas P. Taylor 5,000 33.33% $3.88 4/18/06 $12,201 $30,919
Chairman,
President,
and CEO
Richard G. Hill 5,000 33.33% $3.88 4/18/06 $12,201 $30,919
Vice President
(1) The incentive options were granted on April 18, 1996 pursuant to the
1994 Stock Option Plan. No SARs can be granted with incentive options.
The options are not exercisable until the date six months after the date
of grant.
AGGREGATED OPTION/SAR EXERCISES
IN LAST FISCAL YEAR AND
YEAR-END OPTION/SAR VALUES
5/31/96
(2)
Number of
Securities (3)
Underlying Value of
Unexercised Unexercised In-The-
Options/SARs Money Options/SARs
Shares (1) At Fiscal Year At Fiscal Year
Acquired on Value End Exercisable(E)/ End Exercisable(E)/
Name Exercise(#) Realized Unexercisable(U) Unexercisable(U)
Douglas P. 1,205 $3,342 24,350 (E) $44,961 (E)
Taylor
Chairman,
President,
Chief Executive
Officer
Richard G. 703 $1,950 10,000 (E) -0-
Hill
Vice
President
(1) Value realized is the difference between the market value of
the Company's common stock on the dates of exercise (3/1/96) and
the exercise price for the options.
(2) The exercisable options include SARs granted in tandem with
14,350 options; the exercise of SARs reduces the number of shares
subject to the related option.
(3) Value is the difference between the market value of the
Company's common stock on May 31, 1996 of $3.84 and the exercise
price for the options.
Employee Stock Purchase Plan
The Company offers a Stock Purchase Plan generally to all its
employees. There is a total of 93,364 shares available for
distribution to all qualified employees at May 31, 1996. The
Company also provides a 401(k) plan for its employees.
INDEMNIFICATION
OF DIRECTORS AND OFFICERS OF THE COMPANY
The Board of Directors of the Company has approved, and
recommends to the shareholders for their approval and ratification,
two action items related to the indemnification of directors and
officers of the Company, namely, Item 2, the Amendment to the
Company's By-laws; and Item 3, the Company's entering into
indemnity agreements with its directors and certain designated
officer(s) (the "Indemnity Agreement or Agreements"), now and in
the future.
Reasons for the Proposals.
Today's legal environment often subjects directors and
officers of corporations to significant personal expense in
defending their conduct against litigation, regardless of the
merits of the claims against them. Exposure to personal liability
has made attraction and retention of qualified directors and
officers increasingly difficult for many companies.
Thus far, the Company has been able to attract directors and
officers whom it believes to be qualified. There is justifiable
concern, however, that the retention of existing directors,
officers and other personnel, and attraction of new personnel in
the future, will become increasingly more difficult unless these
qualified individuals are afforded the degree of protection which
they consider adequate. Equally important is the Company's desire
to protect, to the full extent permitted by law, individuals
working to increase the value of the shareholders' investment in
their Company.
In response to these concerns, in 1992 the Company amended its
Certificate of Incorporation to eliminate or limit the personal
liability of directors for breach of duty to the extent permitted
by law. The Company also carries directors' and officers'
liability insurance. See "Directors' and Officers' Indemnification
Insurance."
While Article V, Section 1, of the Company's By-laws
presently contains a provision to indemnify directors and officers,
the provision is ambiguous, and thus inadequate for today's needs.
The proposed Amendment to the By-laws (the "Amendment"), as
described below, clarifies the methods and the extent of protection
available.
In particular, the Amendment clarifies the right of the Board
to enter into binding indemnity agreements and to advance expenses
to indemnified persons. The Amendment also clarifies that the
indemnification coverage provided by the By-laws will remain in
effect, irrespective of any subsequent amendment of the By-laws
limiting or rescinding such indemnification, with respect to any
matter or cause of action accruing prior to the date of amendment
or rescission.
In coordination with the Amendment, the Company has entered
into Indemnity Agreements with each member of the Board of
Directors, and with the Company's Treasurer, Kenneth G. Bernstein.
Although the New York Business Corporation Law (the "BCL") and
the By-laws authorize the Company to indemnify directors and
officers, they do not require directors or officers to be
indemnified during the pendency of litigation (except that the BCL
permits interim indemnification upon a court determination). The
current By-laws also do not specify the times at which the Company
is obligated to reimburse an indemnified person for expenses. As
a result, a director or officer could be required to expend, from
personal resources, the full costs of defense without receiving
indemnification until the matter was fully resolved. Such an
expenditure can be substantial over a period of time.
The Indemnity Agreements provide that the Company will advance
litigation expenses to the indemnified director or designated
officer (the "Indemnitee") while the action is pending, upon the
Indemnitee's assurance (as required by the BCL) that the advance
will be returned if the Indemnitee is ultimately found not to be
entitled to expense indemnification.
In recent years, many public companies have adopted director
and officer indemnification programs similar to that being proposed
by the Company. Management believes that the Board's adoption of
both the Amendment and the Indemnity Agreements was not only
necessary, but timely. The nomination of a new candidate, Randall
L. Clark, to the Board, and his introduction to the Company and its
shareholders, is a particularly appropriate time to institute a
form of director and officer protection that has become
increasingly commonplace, and management urges shareholders to
ratify both the Amendment and the Indemnity Agreements.
BY-LAW AMENDMENT
Current By-law Provision
The By-laws at Article V, Section 1, "Indemnity" presently
provide:
Section 1. Indemnification of Officers and Directors.
To the full extent authorized by law, the Corporation shall
indemnify any person made, or threatened to be made, a party
to an action or proceeding, whether criminal or civil, by
reason of the fact that he, his testator or intestate is or
was a Director or officer of the Corporation or serves or
served any other corporation in any capacity at the request of
the Corporation. Nothing contained herein shall affect any
rights to indemnification to which corporate personnel other
than Directors and officers may be entitled by contract or
otherwise under law.
Proposed By-law Amendment
The Board of Directors has approved, and recommends for
approval and ratification by the shareholders, the following
Resolution and incorporated By-law Amendment:
RESOLVED, that in accordance with Article VIII, Section
1 of the Company's By-laws, such By-laws shall be and hereby
are amended to delete in its entirety the second sentence of
Section 1 of Article V; and to add an additional subsection to
the first sentence of the original Section 1, so that Article
V shall hereinafter read in its entirety, as follows:
Section 1. To the full extent authorized by law,
the Corporation shall indemnify any person made, or
threatened to be made, a party to an action or proceeding,
whether criminal or civil, by reason of the fact that he,
his testator or intestate is or was a Director or officer
of the Corporation or serves or served any other
corporation in any capacity at the request of the
Corporation.
Section 2. The Corporation shall have authority to
enter into agreements, from time to time and as amended,
with any Director or officer (each such person hereinafter
referred to as an "Indemnitee") to indemnify and advance
the expenses of any Indemnitee to the full extent
permitted by the New York Business Corporation Law, as the
same now exists or as may hereafter be amended ("Indemnity
Agreement").
The indemnification and advancement of expenses
granted to an Indemnitee pursuant to this Article shall
not be exclusive of or limiting as to any other rights to
which such Indemnitee may be entitled, when authorized by
(a) a resolution of shareholders or (b) a resolution of
directors, or (c) an Indemnity Agreement. No amendment,
modification, or rescission of these By-laws shall be
effective to limit any person's right to indemnification
with respect to any cause of action that accrues, or other
incident or matter that occurs, prior to the date on which
such modification, amendment or rescission is adopted.
The affirmative vote of the holders of a majority of the
shares present and voting at the Annual Meeting is required to
approve and ratify the foregoing Resolution and By-law Amendment.
Management recommends a vote FOR action Item 2 on the form of
proxy.
INDEMNITY AGREEMENTS
The Board of Directors has also approved, and recommends for
the approval and ratification by the shareholders, Indemnity
Agreements in substantially the form annexed to this Proxy
Statement as Exhibit A. Any description of the Indemnity Agreement
appearing below is qualified in its entirety by reference to
Exhibit A, and shareholders should carefully review Exhibit A
before casting their votes for this action Item 3.
DISCUSSION OF TERMS OF INDEMNITY AGREEMENT
Extent of Indemnification
Under Paragraph 4 ("Indemnity in Third Party Proceedings"),
the Company agrees to indemnify the Indemnitee against all Expenses
(as defined in the Agreement), liabilities, judgments, fines and
penalties actually and reasonably incurred by the Indemnitee in
connection with the defense or settlement of any Proceeding (as
defined), but only if he acted in good faith and in a manner which
he reasonably believed to be in, or not opposed to, the best
interests of the Company. In the event that the Proceeding is a
criminal action, the Indemnitee must have had no cause to believe
his conduct was unlawful.
The Indemnity Agreement broadly defines "Proceeding" as
including "any threatened, pending or completed action, suit, or
proceeding, whether brought in the right of the Corporation or
otherwise, and whether of a civil, criminal or administrative
nature," by reason of any action taken (or any inaction) by the
Indemnitee, while serving as a director or officer, or by reason of
the fact that he is or was serving at the request of the Company as
a director, officer, trustee, employee or agent of another
corporation, or other organization or enterprise. "Expenses"
includes expenses of any investigation, judicial or administrative
proceeding, or appeal, and any amounts paid in settlement by or on
behalf of the Indemnitee, his attorneys' fees and disbursements,
but does not include the amount of any judgments, fines or
penalties adjudicated against the Indemnitee.
In Paragraph 5 ("Indemnity in Proceeding By or In the Right of
the Corporation"), the Company agrees to indemnify the Indemnitee,
as in Paragraph 4, but with the additional proviso that no
indemnification can be made for judgments, fines, penalties or
amounts paid in settlement, or any Expenses in respect of claim,
issue, or matter where the Indemnitee was held liable, unless, and
only to the extent that, the court where the Proceeding was brought
determines, upon application that, despite an adjudication of
liability, in view of all circumstances, the Indemnitee is fairly
and reasonably entitled to indemnity to the extent that the court
deems proper.
The Indemnity Agreements apply to claims asserted after the
dates the Agreements are entered into, whether the acts or
omissions from which such claims arise occurred before or after
such date. Hence, by their terms, the Agreements function
retroactively. Management is not aware of any Proceedings pending
or threatened against any director or officer of the Company.
Possible Conflict
Paragraph 12 ("Corporation Participation in Litigation"),
allows the Company to participate in the Proceeding brought against
the Indemnitee and assume the defense of the action on behalf of
the Indemnitee. If so, the Company may not settle the action
without the Indemnitee's written consent. In any Proceeding, the
Indemnitee is entitled to his own legal representation, at his own
expense, unless (i) payment of such expense by the Company is
approved by a majority vote of disinterested directors; (ii) either
or both the Indemnitee and the Company determine that there is a
conflict of interest between the Company and the Indemnitee in
conducting the defense of the Proceeding; or (iii) the Company has
not assumed the defense of the action.
Shareholders are advised that in many Proceedings, and
especially in a Proceeding brought by or in the right of the
Company such as a shareholder derivative suit (see Paragraph 5), a
legal conflict of interest will likely exist, thereby necessitating
separate legal representation of both the Indemnitee and the
Company, at the Company's expense.
Exceptions to Indemnification
Under Paragraph 6 ("Exceptions to Indemnitee's Rights"), the
Company will not be responsible for making any payment with respect
to any claim made against the Indemnitee: (a) to the extent
payment is made under an insurance policy; (b) to the extent the
Indemnitee is paid otherwise than under the Indemnity Agreement;
(c) if a claim is proven by final judgment that the Indemnitee
gained a personal profit or advantage to which he was not entitled;
(d) for disgorgement of profits made under a "short-swing"
purchase and sale of the Company's securities covered by Section
16(b) of the Securities Exchange Act of 1934; or (e) brought about
or contributed to by the dishonesty of the Indemnitee.
Irrespective of any provision of the Indemnity Agreement, the
BCL limits the power of the Company to indemnify an Indemnitee if
a judgment or other final adjudication adverse to the Indemnitee
establishes that (i) his acts were committed in bad faith, or were
the result of active and deliberate dishonesty and were material to
the cause of action so adjudicated, or (ii) he personally gained,
in fact, a financial profit or other advantage to which he was not
legally entitled.
Advancement and Repayment of Expenses
Under Paragraph 8 ("Advancement of Expenses"), the Company
agrees to advance funds for Expenses incurred by the Indemnitee
within 20 days of any written request therefor. Should advances be
made by the Company for Expenses that are later determined to be
within the categories excepted from coverage under Paragraph 6, the
Indemnitee agrees to repay such amounts within 90 days of such
determination.
In the event that the Indemnitee is successful on the merits
or otherwise in defense of any action, he is to be indemnified
against all Expenses. See Paragraph 7 ("Indemnification of
Expenses of Successful Party"). If the Indemnitee is entitled to
indemnification for some portion of his Expenses, fines, or
penalties actually and reasonably incurred, but not all, he is to
be indemnified to the extent permissible under the terms of the
Indemnity Agreement. See Paragraph 15 ("Partial Indemnification").
Other Provisions
Paragraph 11 ("Indemnification Hereunder Not Exclusive"),
explicitly states that the indemnification to be provided under the
Agreement is not exclusive of any rights or remedies to which the
Indemnitee is entitled under the Company's Certificate of
Incorporation, By-laws, other agreement, vote of shareholders or
disinterested directors, or under the BCL.
Paragraph 11 also provides that if the Certificate of
Incorporation, By-laws or BCL are later amended after the date the
Indemnity Agreement is entered into, to limit or restrict the
indemnification permitted, then, with respect to matters arising
prior to the effective date of such amendment, the Company is
nevertheless bound to indemnify the Indemnitee to the full extent
permitted by the Indemnity Agreement, Certificate of Incorporation,
By-laws or BCL prior to such amendment.
Shareholder Approval
The BCL does not require the Company to obtain shareholder
approval of the Indemnity Agreements, but the Board of Directors
seeks such approval, because each director and any designated
officer may potentially benefit from the Agreement, and because
such approval should make any challenge as to the legality of the
Agreement more difficult. If shareholder approval is not obtained,
the Company will not enter into Indemnity Agreements with any
future Indemnitee, but the Indemnity Agreements entered into
between the Company and each current Indemnitee shall remain in
effect.
Accordingly, management proposes for approval and ratification
by shareholders, the following Resolution and related Indemnity
Agreements:
RESOLVED, that the indemnity agreements entered into
between the Company and each member of the Board of Directors
and its Treasurer in substantially the form attached to this
Proxy Statement as Exhibit A (the "Indemnity Agreement") be
and hereby are approved, ratified and confirmed; and it is
further
RESOLVED, that in the future, the Company be and hereby
is authorized to enter into one or more Indemnity Agreements
with directors and such officers of the Company as may be
approved by the Board of Directors, upon recommendation of the
President; and it is further
RESOLVED, that the Company be and hereby is authorized to
amend the Indemnity Agreement from time to time, as the Board
of Directors, in its sole discretion, deems appropriate and as
being in the best interests of the Company and its
shareholders, subject to such amendment or amendments being in
compliance with all applicable law.
The affirmative vote of the holders of the majority of the
shares present and voting at the Annual Meeting is required to
approve and ratify the foregoing Resolution and Indemnity
Agreements.
Management recommends a vote FOR Item 3 on the form of proxy.
Directors and Officers Indemnification Insurance
On August 22, 1996, the Company renewed its directors and
officers indemnification insurance policy written by the Royal
Indemnity Company. The renewal is for a one year period at an
annual premium of $19,800. The policy provides for indemnification
benefits and the payment of expenses in actions instituted against
any director or officer of the Company for claimed liability
arising out of his conduct in such capacity. No payments or claims
of indemnification or expenses have been made under any such
policy.
TRANSACTIONS WITH MANAGEMENT AND OTHERS
The Company leases a portion of both the building and the
property on which it is located from Tayco Realty, pursuant to the
terms of a lease which will expire on October 31, 2005. Rental
payments for fiscal 1996 totaled $125,600. The total rent paid by
the Company is determined by a base rate and is subject to
adjustment for increases in taxes, maintenance costs and for
utilization of additional space by the Company. The Company also
pays for certain expenses incurred for the operation of the
facilities.
Developments is the largest single shareholder of the
Company, owning approximately 26.1% of its outstanding common
stock. Paul H. Taylor, father to Douglas P. Taylor, owns
approximately 15.7% of the common stock of Developments, with the
Taylor family owning an additional 4.5%, as to which shares Paul
Taylor disclaims beneficial ownership. Developments owns
approximately 42% of Tayco Realty, an affiliate of both
corporations, with 58% owned by the Company.
Under a License Agreement ("License Agreement"), dated
November 1, 1959, Developments granted the Company certain
preferential rights to market in the United States and Canada all
existing and future inventions and patents owned by Developments.
Certain of these patents have been assigned to the Company in
connection with the Company's assumption of Developments' portion
of the indebtedness of Tech under certain guarantees to Tech's
lenders. The term of this License Agreement is the life of the
last-to-expire patent on which the Company is paying royalties,
which is December 1, 2014. The Company pays a five percent (5%)
royalty to Developments on sales of items sold and shipped. During
fiscal 1996, the Company accrued royalties to Developments of
$118,140, and all payments are current.
The License Agreement also provides for Developments to pay
the Company 10% of the gross royalties received from third parties
who are permitted to make, use and sell machinery and equipment
under patents not subject to the License Agreement, and apparatus
and equipment subject to the License Agreement, but modified by the
Company, the rights to such modification having been assigned to
Developments. No royalties were received in fiscal 1996.
In 1987, the Company guaranteed 40% and Developments 60% of
certain obligations of their former affiliate, Tech, in the
approximate amount of $850,000. In March 1991, certain of the
lenders called their loans. Since Tech was unable to repay the
loans and Developments was unable to assume its portion of the
obligations under the guaranties, the Company assumed all
obligations and continued to make all payments as they came due.
In January 1992, the Company acquired approximately 23% of the
restricted common stock of Developments at its fair market value in
consideration of the Company's discharging certain of Developments'
obligations as a guarantor on the Tech indebtedness. In addition,
Developments granted the Company an irrevocable proxy to vote the
697,567 shares which Developments owns in the Company. This proxy
and related documents were renewed until August 1, 1997, or until
the indebtedness is repaid in full, whichever is the earlier to
occur. See Note 1 to "Certain Beneficial Owners and Management."
In July 1994, Tech was merged into the Company and the Company
formally agreed to assume all its obligations, including the
obligations of Developments under its guarantee. As of July 31,
1996, approximately $23,424 remains outstanding on the Tech loans,
of which $14,054 is Developments' portion. The merger permitted
the Company to utilize approximately $876,000 of Tech's net loss
carryforward credits ("NOL") through fiscal 1996. See Item 6.
"Management's Discussion and Analysis or Plan of Operations" in the
Company's Annual Report on Form 10-KSB, accompanying this Proxy
Statement.
The Company, Developments, and Tayco Realty share common
management and a close business relationship. Particularly as it
relates to the Company and Developments, as separate corporations
responsible to their own shareholders, corporate interests may from
time to time diverge regarding various aspects of business,
including development and licensing of future inventions and
patents. In that case, Developments would be permitted to license
future patents and inventions to licensees other than the Company,
which may render the Company's present License Agreement only
minimally beneficial.
All transactions described above are on as favorable a basis
to the Company, as if entered into with an unaffiliated party.
INDEPENDENT AUDITORS
A representative of J.D. Elliott & Co., P.C., the Company's
auditors for fiscal 1996, and the accounting firm recommended by
the Audit Committee to serve as the Company's certified public
accountants for fiscal 1997, will attend the Annual Meeting of
Shareholders. This representative will be available to respond to
questions raised orally, and will be given the opportunity to make
a statement, if desired.
PROPOSALS OF SHAREHOLDERS
Proposals of shareholders intended to be presented to the 1997
Annual Meeting of Shareholders must be received by the Secretary of
the Company prior to June 2, 1997, for inclusion in the Proxy
Statement and form of proxy.
FINANCIAL STATEMENTS
This Proxy Statement incorporates by reference the financial
statements contained in the 1996 Annual Report on Form 10-KSB which
is being mailed to shareholders of record together with the proxy
materials.
OTHER MATTERS
Voting
Under the New York Business Corporation Law ("BCL") and the
Company's By-laws, the presence, in person or by proxy, of a
majority of the outstanding common shares is necessary to
constitute a quorum of the shareholders to take action at the
Annual Meeting. The shares which are present or represented by a
proxy will be counted for quorum purposes regardless of whether or
not a broker with discretionary authority fails to exercise
discretionary voting authority with respect to any particular
matter.
Once a quorum is established, under the BCL and the By-laws,
the directors standing for election must be elected by a plurality
of affirmative votes cast. Approval and ratification of Items 2
and 3 each requires the affirmative vote of the holders of a
majority of shares present and voting at the Annual Meeting. No
broker non-votes will be counted for any item. For voting
purposes, all votes cast "for", "against", "abstain", or "withhold
authority" will be counted in accordance with such instruction as
to each item.
The expenses of this solicitation, including the costs of
preparing and mailing this Proxy Statement and accompanying
material will be borne by the Company. The Company has retained
the services of Regan & Associates, Inc. to assist in the
solicitation of proxies under a contract providing for payment of
$3,000 plus reimbursement of reasonable out-of-pocket expenses. In
addition to solicitations by mail, Regan & Associates, Inc. and
regular employees of the Company may solicit proxies in person, by
mail or by telephone, but no employee of the Company will receive
any compensation for solicitation activities in addition to their
regular compensation. Expenses may also include the charges and
expenses of brokerage houses, nominees, custodians and fiduciaries
for forwarding proxies and proxy materials to beneficial owners of
shares.
The Board of Directors knows of no other matters to be voted
upon at the Annual Meeting. If any other matters properly come
before the Annual Meeting, it is the intention of the persons named
in the enclosed form of proxy to vote on such matters in accordance
with their judgment.
Annual Report
IN ADDITION TO THE 1996 ANNUAL REPORT TO SHAREHOLDERS, A COPY
OF THE COMPANY'S ANNUAL REPORT ON FORM 10-KSB FILED WITH THE
SECURITIES AND EXCHANGE COMMISSION, ON OR ABOUT AUGUST 26, 1996, IS
BEING FURNISHED WITHOUT CHARGE TO SHAREHOLDERS BENEFICIALLY OR OF
RECORD ON SEPTEMBER 20, 1996, AND ACCOMPANIES THIS PROXY MATERIAL.
Additional copies of the Company's Annual Report on Form 10-KSB may be
obtained from Joseph P. Gastel, Secretary, Taylor Devices, Inc.,
90 Taylor Drive, North Tonawanda, New York 14120-0748.
BY ORDER OF THE BOARD OF DIRECTORS
/s/ Joseph P. Gastel
Joseph P. Gastel, Secretary
DATED: September 26, 1996
North Tonawanda, New York
INDEMNITY AGREEMENT
This Agreement is made as of the _____ day of _______________,
1996, by and between TAYLOR DEVICES, INC., a New York corporation
having an office at 90 Taylor Drive, North Tonawanda, New York
14120-0748 (the "Corporation"), and _________________________, an
individual residing at ______________________________
("Indemnitee"), a director [and] [officer] of the Corporation.
WHEREAS, it is essential to the Corporation to retain and
attract as directors and officers the most capable persons
available; and
WHEREAS, it is the policy of the Corporation to indemnify its
directors and officers so as to provide them with the maximum
possible protection permitted by law; and
WHEREAS, Section 722 of the Business Corporation Law of New
York, under which the Corporation is organized, empowers
corporations to indemnify any person serving as a director,
officer, employee or agent of the corporation and any person who
serves at the request of the corporation as a director, officer,
employee or agent of another corporation, partnership, joint
venture, trust, or other enterprise, and such Section 722 specifies
that the indemnification set forth therein shall not be deemed
exclusive of any other rights to which those seeking
indemnification may be entitled under any by-law, agreement, vote
of shareholders or disinterested directors or otherwise; and
WHEREAS, in order to serve, Indemnitee desires indemnification
to the extent of the maximum protection permitted by law.
NOW, THEREFORE, in consideration of the mutual covenants set
forth herein, the Corporation and Indemnitee hereby agree as
follows:
1. Agreement to Serve. Indemnitee agrees to serve as a
director and/or officer of the Corporation for so long as he is
duly elected or appointed or until the effective date of his
written resignation. This Agreement does not constitute an
employment agreement or confer any employee or other compensation
rights other than the rights with respect to indemnification,
advancement or Expenses (as defined below) and, if any, maintenance
of directors and officers liability insurance specified herein.
2. Definitions. As used in this Agreement:
(a) The term "Proceeding" shall include any threatened,
pending or completed action, suit or proceeding, whether brought in
the right of the Corporation or otherwise and whether of a civil,
criminal, administrative or investigative nature, in which
Indemnitee may be or may have been involved as a party, a witness
or otherwise, by reason of the fact that Indemnitee is or was a
director or officer of the Corporation, by reason of any action
taken by him or of any inaction on his part while acting as such
director or officer, or by reason of the fact that he is or was
serving at the request of the Corporation as a director, officer,
trustee, employee or agent of another corporation, partnership,
joint venture, trust or other enterprise, whether or not he is
serving in such capacity at the time any liability or expense is
incurred for which indemnification or reimbursement may be provided
under this Agreement.
(b) The term "Expenses" includes, without limitation
thereto, expenses of investigations, judicial or administrative
proceedings or appeals, amounts paid in settlement by or on behalf
of Indemnitee, attorneys' fees and disbursements, but shall not
include the amount of judgments, fines or penalties against
Indemnitee.
(c) "Change in Control" means a change in control of the
Corporation occurring after the date of this Agreement of a nature
that would be required to be reported under the Securities Exchange
Act of 1934 or any regulation or rule thereunder (collectively the
"Act"), whether or not the Corporation is then subject to such
reporting requirement; provided, however, that, without limitation,
such a Change in Control shall be deemed to have occurred if after
the date of this Agreement (i) any "person" (as such term is used
in Sections 13(d) and 14(d) of the Act), other than a person who is
presently a member of the board of directors of the Corporation, is
or becomes the "beneficial owner" (as defined in Rule 13d-3 under
the Act), directly or indirectly, of securities of the Corporation
representing 20% or more of the combined voting power of the
Corporation's then outstanding securities; (ii) the Corporation is
a party to a merger, consolidation, sales of assets or other
reorganization, or a proxy contest, as a consequence of which
members of the board of directors of the Corporation in office
immediately prior to such transaction or event constitute less than
a majority of the board of directors thereafter; or (iii) during
any period of two consecutive years, individuals who at the
beginning of such period constituted the board of directors
(including for this purpose any new director whose election or
nomination for election by the Corporation's shareholders was
approved by a vote of at least two-thirds of the directors then
still in office who were directors at the beginning of such period)
cease for any reason to constitute a majority of the board of
directors.
(d) "Corporate Status" means and describes the status of
a person who is or was a director, officer, employee, agent or
fiduciary of the Corporation, or is or was serving at the request
of the Corporation as a director, officer, employee, agent or
fiduciary of any other "Other Enterprise".
(e) The term "Disinterested Director" means a director of
the Corporation who is not and was not a party to the Proceeding in
respect of which indemnification is sought by the Indemnitee.
(f) The term "Other Enterprise" shall include any wholly
or partly owned subsidiary of the Corporation, any employee
compensation or benefit plan of any one or more of the Corporation
and its subsidiaries and affiliates, and any other corporation,
partnership, joint venture, trust or enterprise of which the
Indemnitee is or was serving at the request of the Corporation as
a director, officer, employee, agent or otherwise.
(g) Reference to "fines" shall include, any excise tax
assessed with respect to any employee benefit plan; references to
"serving at the request of the Corporation" shall include any
service as a director, officer, employee or agent of the
Corporation which imposes duties on, or involves services by, such
director, officer, employee, or agent with respect to an employee
benefit plan, its participants, or beneficiaries; and a person who
acted in good faith and in a manner he reasonably believed to be in
the interest of the participants and beneficiaries of an employee
benefit plan shall be deemed to have acted in a manner "not opposed
to the best interests of the Corporation" as referred to in this
Agreement.
3. Indemnity and Advancement of Expenses to the Extent
Permitted by Law. Subject to the terms of Paragraph 8 of this
Agreement, the Corporation shall indemnify and advance Expenses to
the Indemnitee to the fullest extent permitted by applicable law
now in effect. Without limitation of the foregoing,
indemnification shall be deemed to be permitted by applicable law
for purposes of this Agreement if indemnification is required by
Paragraph 4 or 5 hereof, and advancement of expenses shall be
deemed permitted under applicable law, and as more particularly set
forth in Paragraph 8 hereof.
4. Indemnity in Third Party Proceedings. The Corporation
shall indemnify Indemnitee in accordance with the provisions of
this Paragraph 4 if Indemnitee is a party to or is threatened to be
made a party to or is otherwise involved in any Proceeding (other
than a Proceeding by or in the right of the Corporation to procure
a judgment in its favor) against all Expenses, liabilities,
judgments, fines and penalties actually and reasonably incurred by
Indemnitee in connection with the defense or settlement of such
Proceeding, but only if Indemnitee acted in good faith and in a
manner which he reasonably believed to be in or not opposed to the
best interests of the Corporation and, in the case of a criminal
Proceeding, in addition, had no reasonable cause to believe that
his conduct was unlawful.
5. Indemnity in Proceedings By or In the Right of the
Corporation. The Corporation shall indemnify Indemnitee in
accordance with the provisions of this Section if Indemnitee is a
party to or is threatened to be made a party to or is otherwise
involved in any Proceeding by or in the right of the Corporation to
procure a judgment in its favor (a "Corporation Claim") against all
Expenses actually and reasonably incurred by Indemnitee in
connection with the defense or settlement of such Proceeding, but
only if he acted in good faith and in a manner which he reasonably
believed to be in or not opposed to the best interests of the
Corporation; provided, however, that no indemnification shall be
made under this Paragraph 5 for (i) judgments, fines, penalties, or
amounts paid in settlement by or on behalf of Indemnitee; or
(ii) other Expenses in respect of any claim, issue or matter as to
which Indemnitee shall have been adjudged to be liable to the
Corporation, unless and only to the extent that any court in which
such Proceeding was brought shall determine upon application that,
despite any adjudication of liability but in view of all
circumstances of the case, Indemnitee is fairly and reasonably
entitled to indemnity for such judgments, fines, penalties, or
Expenses as such court shall deem proper.
6. Exceptions to Indemnitee's Rights. Notwithstanding any
other provisions of this Agreement, the Corporation shall not be
liable to make any payment in connection with any claim made
against the Indemnitee:
(a) to the extent that payment is actually made to
Indemnitee under any insurance policy;
(b) to the extent that Indemnitee is indemnified and
actually paid otherwise than pursuant to this Agreement;
(c) if such claim is proven by a final judgment in a
court of law or in other adjudication to have been based upon or
attributable to the Indemnitee's having gained any personal profit
or advantage to which he was not legally entitled;
(d) for disgorgement of profits, made from the purchase
and sale by the Indemnitee of securities, pursuant to Section 16(b)
of the Securities Exchange Act of 1934 and amendments thereto or
similar provisions of any state statutory law or common law; or
(e) brought about or contributed to by the dishonesty of
the Indemnitee seeking payment hereunder; provided, however, that
the Indemnitee shall be entitled to the benefit of this Agreement
as to any claim upon which suit may be brought against him by
reason of any alleged dishonesty on his part, unless a judgment or
other final adjudication thereof adverse to the Indemnitee shall
establish that he committed (i) acts of active and deliberate
dishonesty; (ii) with actual dishonest purpose and intent; (iii)
which acts were material to the cause of action so adjudicated.
7. Indemnification of Expenses of Successful Party. To the
extent that Indemnitee has been successful, on the merits or
otherwise, in defense of any Proceeding or in defense of any claim,
issue or matter therein, including the dismissal of an action
without prejudice, Indemnitee shall be indemnified against all
Expenses incurred in connection therewith.
8. Advancement of Expenses. The Expenses incurred by
Indemnitee with respect to any Proceeding governed by Paragraph 4
or 5 shall be paid by the Corporation at reasonable intervals in
advance of any final resolution of such Proceeding, in each case
within 20 days after the Corporation receives Indemnitee's written
request therefor; provided, however, that Indemnitee shall
undertake to repay such amounts to the Corporation to the extent
that it is ultimately determined that Indemnitee was not entitled
to indemnification of such Expense, as hereinafter provided.
In the event, and to the extent that, the Corporation has made
any advances to the Indemnitee for Expenses which are determined at
some later time to be within the category of exceptions to this
Agreement set forth in Paragraph 6, or to which Indemnitee is not
otherwise entitled, Indemnitee hereby agrees to reimburse the
Corporation in full for such Expenses, within 90 days after written
notice by the Corporation of such determination; and Indemnitee
further agrees that execution and delivery by him of this Agreement
shall constitute a valid and binding obligation on the part of
Indemnitee, and his successors and assigns, to repay such
obligation in full.
9. Rights of Indemnitee to Indemnification Upon Application;
Procedures Upon Application. Any indemnification under Paragraph 4
or 5 shall be made no later than 45 days after receipt of the
written request of Indemnitee for indemnification together with
documentation in support of such request, unless the Corporation
determines within such 45-day period that the Indemnitee has not
met the relevant standards for indemnification set forth in
Paragraph 4 or 5, as the case may be, and is not otherwise entitled
to indemnification under applicable law; provided, however, that
if, within such 45-day period, the Corporation has not reached any
determination hereunder, any payment made to Indemnitee pursuant to
this Paragraph 9 shall be made subject to and conditioned upon
Indemnitee's agreement to reimburse the Corporation within 20 days
of demand by the Corporation therefor, to the extent that the
Corporation subsequently determines that Indemnitee was not
entitled to receive such payment.
The determination as to entitlement shall be made as follows.
If there has been no Change in Control prior to the date of
determination of entitlement to indemnification, the determination
shall be made by (i) the Board of Directors of the Corporation by
a majority vote of a quorum consisting of Disinterested Directors;
or (ii) if a quorum of Disinterested Directors is not obtainable,
by independent legal counsel reasonably acceptable to the
Corporation, but retained by Indemnitee at his sole expense, in a
written opinion, in form and substance reasonably satisfactory to
the Corporation, that indemnification in the particular case is
permissible.
10. Presumptions as to the Indemnitee's Conduct. For the
purposes of this Agreement, the Indemnitee's conduct shall not be
deemed to have been knowingly fraudulent or deliberately dishonest,
the Indemnitee shall not be deemed to have had any reasonable cause
to believe the Indemnitee's conduct was unlawful, nor shall any
presumption arise that the Indemnitee did not meet any particular
standard of conduct or have any particular belief, if the
Indemnitee's conduct was based on (i) the records or books of
account of the Corporation or Other Enterprise; (ii) information
supplied to the Indemnitee by an officer or officers of the
Corporation or Other Enterprise in the course of such individual's
duties; (iii) the advice of legal counsel for the Corporation or
Other Enterprise; or (iv) information or records given or reports
made to the Corporation or Other Enterprise by an independent
public accountant, by an appraiser or by other experts selected by
the Corporation or Other Enterprise. The knowledge, actions or
failures to act of any director, officer, employee or agent of the
Corporation shall not be imputed to the Indemnitee for the purposes
of determining the right to indemnification under this Agreement.
An Indemnitee who acted in good faith and in a manner the
Indemnitee reasonably believed to be in the interest of the
participants and beneficiaries of an employee benefit or
compensation plan shall be deemed to have acted in a manner not
opposed to the best interests of the Corporation. The termination
of any Proceeding which is covered by this Agreement by judgment,
order, settlement (whether with or without court approval) or
conviction, or a plea of nolo contendere or its equivalent shall
not of itself create a presumption for the purposes of this
Agreement that the Indemnitee did not act in good faith and in a
manner which the Indemnitee reasonably believed to be in or not
opposed to the best interests of the Corporation and, with respect
to any criminal Proceeding, had reasonable cause to believe the
conduct of the Indemnitee was unlawful.
11. Indemnification Hereunder Not Exclusive. The
indemnification provided by this Agreement shall not be deemed
exclusive of any other rights to which Indemnitee may be entitled
under the Corporation's Certificate of Incorporation or By-Laws,
any agreement, any vote of shareholders or disinterested directors,
the Business Corporation Law of the State of New York, or
otherwise, both as to action in his official capacity and as to
action in another capacity while holding such office. If the New
York Business Corporation Law, or the Certificate of Incorporation
or By-laws of the Corporation is amended after the date of this
Agreement to limit or restrict indemnification permitted to the
Indemnitee, then with respect to all matters arising prior to the
effective date of such amendment the Corporation shall nevertheless
indemnify the Indemnitee to the fullest extent permitted by this
Agreement, the Certificate of Incorporation or By-laws, and such
law as in effect prior to such amendment.
12. Corporation Participation in Litigation. With respect to
any proceeding for which indemnification is requested, the
Corporation will be entitled to participate therein at its own
expense and, except as otherwise provided below, to the extent that
it may wish, the Corporation may assume the defense thereof, with
counsel satisfactory to the Indemnitee. After notice from the
Corporation to the Indemnitee of its election to assume the defense
of a Proceeding, the Corporation will not be liable to the
Indemnitee under this Agreement for any Expenses subsequently
incurred by the Indemnitee in connection with the defense thereof,
other than as provided below. The Corporation shall not settle any
Proceeding in any manner which would impose any penalty or
limitation on the Indemnitee without the Indemnitee's written
consent. The Indemnitee shall have the right to employ his own
counsel in any Proceeding, but the fees and expenses of such
counsel incurred after notice from the Corporation of its
assumption of the defense of the Proceeding shall be at the expense
of the Indemnitee, unless (i) the employment of counsel by the
Indemnitee has been approved by a majority vote of a quorum
consisting of Disinterested Directors; (ii) the Indemnitee or the
Corporation shall have reasonably concluded that there may be a
conflict of interest between the Corporation and the Indemnitee in
the conduct of the defense of a proceeding and shall have
communicated such conclusion, with a full statement of the reasons,
in writing to the Corporation; or (iii) the Corporation shall not
in fact have employed counsel to assume the defense of a
Proceeding, in each of which cases the fees and expenses of the
Indemnitee's counsel shall be advanced by the Corporation. The
Corporation shall not be entitled to assume the defense of any
Corporation Claim.
13. Continuation of Right of Indemnification and Advancement
of Expenses. The rights of the Indemnitee under this Agreement
shall continue as to the Indemnitee after termination for any
reason of Corporate Status, and shall inure to the benefit of the
heirs, personal representatives, successors and assigns of the
Indemnitee.
14. Maintenance of Directors and Officers Liability
Insurance. The Corporation agrees that, so long as the Indemnitee
shall have a Corporate Status and thereafter so long as the
Indemnitee shall be subject to any Proceeding, the Corporation
shall purchase and maintain in effect for the benefit of the
Indemnitee one or more valid, biding and enforceable policies of
directors and officers liability insurance. The Corporation shall
not be required to maintain any policies of directors and officers
liability insurance if, in the sole discretion and reasonable
business judgment of the directors of the Corporation, (i) such
insurance is not reasonably available; or (ii) the premium cost for
such insurance is substantially disproportionate to the amount of
coverage provided; or (iii) the coverage provided by such insurance
is so limited by exclusions that there would be insufficient
benefit from such insurance.
15. Partial Indemnification. If Indemnitee is entitled under
any provision of this Agreement to indemnification by the
Corporation for some or a portion of the expenses, judgments, fines
or penalties actually and reasonably incurred by him in the
investigation, defense, appeal or settlement of any Proceeding but
not for the total amount thereof, the Corporation shall
nevertheless provide indemnification to Indemnitee for that portion
of such Expenses, judgment, fines or penalties for which Indemnitee
is entitled to be indemnified hereunder.
16. Severability. If any provision of this Agreement or
application of any such provision to any person or circumstance is
held invalid, the remainder of this Agreement, and the application
of such provision other than to the extent it is held invalid, will
not be invalidated or affected thereby.
17. Notice. Indemnitee shall, as a condition precedent to
his right to be indemnified under this Agreement, give the
Corporation notice in writing as soon as practicable of any claim
made against him for which indemnity will or could be sought under
this Agreement. In addition, Indemnitee shall give the Corporation
such information and cooperation as it may reasonably require and
shall be within Indemnitee's power. Notice to the Corporation
shall be directed to TAYLOR DEVICES, INC., 90 Taylor Drive, North
Tonawanda, New York 14120-0748, Attention: President (or such other
address as the Corporation shall designate in writing to
Indemnitee). Notices to Indemnitee shall be directed to the
Indemnitee at the address of the Indemnitee as shown at the
beginning of this Agreement (or such other address as the
Indemnitee shall designate in writing to the Corporation). Notices
shall be deemed received three days after the date postmarked if
sent by prepaid mail, property addressed.
18. Counterparts. This Agreement may be executed in any
number of counterparts, each of which shall constitute one and the
same original.
19. Applicable Law. This Agreement shall be governed by and
construed in accordance with New York law, without regard to
conflict of laws.
20. Successors and Assigns. This Agreement shall be binding
upon the Corporation and its successors and assigns.
IN WITNESS WHEREOF, the parties hereto have caused this
Agreement to be duly executed and signed as of the day and year
first above written.
TAYLOR DEVICES, INC.
By:
Douglas P. Taylor, President
INDEMNITEE
By:
[Name]
TAYLOR DEVICES, INC.
PROXY SOLICITED ON BEHALF OF THE
BOARD OF DIRECTORS
ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD NOVEMBER 8, 1996, AT 10:00 A.M.
UNIVERSITY INN & CONFERENCE CENTER
2401 NORTH FOREST ROAD, AMHERST, NEW YORK
The undersigned hereby appoints Douglas P. Taylor and Joseph
P. Gastel, and each of them with full power of substitution as
proxies for the undersigned to attend the Annual Meeting of
Shareholders of TAYLOR DEVICES, INC. to be held at the University
Inn & Conference Center, 2401 North Forest Road, Amherst, New York
at 10:00 A.M. on November 8, 1996, and at any adjournment thereof,
to vote and act with respect to all common shares of the Company
which the undersigned would be entitled to vote, with all the power
the undersigned would possess if present in person, as follows:
The Board of Directors recommends that you vote FOR:
1. ELECTION OF DIRECTORS.
DIRECTORS
Douglas P. Taylor
Richard G. Hill
Withhold Withhold Joseph P. Gastel
FOR all Authority for all Authority Donald B. Hofmar
Nominees Nominees as indicated Randall L. Clark
[ ] [ ] [ ]
_____________________________________________________________
(Withhold authority for nominees whose names are written above)
2. RATIFICATION OF AMENDMENT TO BY-LAWS
FOR ABSTAIN AGAINST
3. RATIFICATION OF INDEMNITY AGREEMENTS AND ANY AMENDMENTS
FOR ABSTAIN AGAINST
4. In their discretion, the proxies ARE AUTHORIZED TO VOTE on any other
business that may properly come before the Meeting.
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
This proxy will be voted as directed, but if no direction is indicated,
it will be voted - FOR the nominees described in Item 1; FOR the
Amendment to the By-laws described in Item 2; FOR the Indemnity
Agreements and any amendments; and in the discretion of the proxies, on
such other matters as may properly come before the Annual Meeting of any
adjournment or postponements thereof.
Receipt of the Notice of Annual Meeting of Shareholders and accompanying
Proxy Statement is hereby acknowledged.
[ ] Please check ( ) this box if you plan to attend the Annual Meeting.
Dated _________________, 1996
_____________________________
_____________________________
_____________________________
Please sign exactly as your name appears on this
proxy. Joint owners should each sign personally.
If signing as attorney, executor, administrator,
trustee or guardian, please include your full
title. Corporate proxies should be signed by an
authorized officer.
PLEASE SIGN, DATE AND RETURN THIS CARD PROMPTLY
USING THE ENCLOSED ENVELOPE.
