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 6, 1998, at 10:00 A.M. for the
following purposes:
1. To approve and adopt a change to the By-Laws of the
Company, eliminating the requirement to annually elect
directors and substituting in its stead, creation of a
classified Board of Directors, permitting the sequential
election of nominees to each class of directors every
three years on a rotating basis.
2. (a) If item 1 above is adopted:
To elect five directors of the Company, one of whom
shall serve a one year term expiring in 1999; two
of whom shall each serve a two year term expiring
in 2000; and two of whom shall each serve a three
year term expiring in 2001, or until the election
and qualification of their successors;
or
(b) If item 1 above is not adopted:
To elect five directors of the Company, each to
serve for the ensuing year until the next annual
meeting or until the election and qualification of
his successor.
3. To approve and adopt the 1998 Taylor Devices, Inc. Stock
Option Plan, and reserve 125,000 shares of the Company's
common stock for grant of options under the Plan to
certain employees and directors of the Company.
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 23, 1998 will be entitled to
notice of and to vote at the meeting.
SHAREHOLDERS WHO ARE 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 28, 1998
North Tonawanda, New York
<PAGE>
PROXY STATEMENT
FOR 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
NOVEMBER 6, 1998
This Proxy Statement is furnished to Shareholders by the
Board of Directors of Taylor Devices, Inc. in connection with the
solicitation of proxies for use at the Annual Meeting of
Shareholders to be held on November 6, 1998, at 10:00 A.M., and at
any adjournments of the meeting, for the purposes set forth in the
accompanying Notice of Annual Meeting of Shareholders. This Proxy
Statement and the accompanying form of proxy are being mailed to
Shareholders commencing on or about September 28, 1998.
If the enclosed form of proxy is properly executed and
returned, the shares represented by the proxy will be voted in
accordance with the proxy's instructions. 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 By-Laws 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
By-Laws, the Board of Directors has established November 6, 1998,
as the date for this year's Annual Meeting of Shareholders. The
Board of Directors has fixed the close of business on September 23,
1998, as the record date for determining the holders of common
stock entitled to notice of and to vote at the meeting. On
September 23, 1998, the Company had outstanding and entitled to
vote a total of 2,771,925 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
The following table sets forth information as to persons
known by the Company to be the beneficial owners of more than 5% of
the Company's common stock:
Name and Address Amount and Nature of
of Beneficial Owner Beneficial Ownership Percent of Class
Tayco Developments, Inc. 697,567 25.2%
100 Taylor Drive
North Tonawanda, NY 14120
The Cameron Baird Foundation 337,900 12.242%
1350 One M&T Plaza
Buffalo, NY 14203
(1) In addition to shares owned in the Company, the Taylor family
also owns shares in Developments. Mr. Paul H. Taylor, the father
of Douglas P. Taylor and the father-in-law of Richard G. Hill, owns
31,188 shares or 3% of Developments's stock (for an attributed
control of 1.4% in the Company). Including Paul H. Taylor's
beneficial ownership interests in the Company and Developments, but
excluding shares beneficially owned by Messrs. Douglas P. Taylor
and Richard G. Hill in either the Company or Developments, the
Taylor family owns or controls 18,657 shares or .06% of the
Company's stock and 133,263 shares or 13.4% of Developments' stock.
As to all such shares, Messrs. Taylor and Hill disclaim any
beneficial interest. Information presented has been supplied by
the Company as transfer agent.
(2) Information regarding The Cameron Baird Foundation has been
taken from Amendment No. 10 to Schedule 13D filed August 10, 1998
with respect to Company stock by the following persons: Aries Hill
Corp., 48,500 shares 1.757%); Brent D. Baird, 33,000 shares
(1.196%), including 10,000 shares held in Trubee, Collins & Co.'s
pension plan for the benefit of Brent D. Baird; Bridget B. Baird,
as Successor Trustee, 10,000 shares (.362%); Bridget B. Baird
Individually 10,000 (.362%); Bridget B. Baird as C/F Alexis B.
Baird 5,000 (.181%); Bridget B. Baird as C/F Cameron B. Blevins
5,000 (.181%); The Cameron Baird Foundation, 337,900 shares
(12.242%); Jane D. Baird, 61,500 shares (2.228%); Anne S. Baird,
5,000 shares (.181%); David M. Stark, as Successor Trustee, 3,000
shares (.109%); and Brian D. Baird as successor trustee 25,000
(.906%) total of filing persons, 503,900 shares (19.705%).
According to the Schedule 13D filed August 12, 1998, these entities
in the aggregate own 49,700 shares (5.019%) of the Common Stock of
Developments. The persons filing such Schedule 13D, rather than
the Company or Developments, are responsible for the accuracy and
completeness of such information.
PROPOSAL TO AMEND BY-LAWS
TO CREATE AND ELECT A CLASSIFIED BOARD OF DIRECTORS
In connection with the election of nominees to the
Company's Board of Directors, the Board has approved and recommends
for approval by the Shareholders an amendment to the Company's
By-Laws (the "By-Law Amendment"), creating a classified board of
directors ("Classified Board"). If the By-Law Amendment is
approved, commencing with the election held this Annual Meeting of
Shareholders, each director will be elected to one of three classes
for a term of years. The Board will be divided into three Classes.
Under the Business Corporation Law of New York (the
"BCL"), the proposed Classified Board must have as nearly equal a
number of directors in each Class as possible, based upon the total
number of directors constituting the entire Board. Assuming
adoption of the proposal, the initial term of office of the
directors in the first Class will expire at the next succeeding
annual meeting of shareholders following adoption of the By-Law
Amendment. The terms of office of the second and third Classes
will expire at the second and third annual meetings of shareholders
following the date of adoption of the By-Law Amendment,
respectively. Commencing next year and each successive year, as
the terms of office of the directors of each Class expire,
successors to directors of each Class will be elected to serve for
three-year terms, or until their successors are elected and
qualified. A director elected by the Board to fill a vacancy or a
newly created directorship will not be classified, but will be
elected and hold office until the next annual meeting of
shareholders.
Under the current By-Laws, all of the directors are
elected at each annual meeting of shareholders. As a result, the
holders of a majority of the Company's shares could replace a
majority, or all, of the directors at one annual meeting.
Classification will have the effect of slowing changes in the
composition of the Board because, absent vacancies in the Board due
to directors' retirement, resignation, illness and the like, fewer
than half of the Board positions will be subject to election each
year. Thus, classification of the Board helps contribute to
continuity and stability in management of the Company.
If the By-Law Amendment is adopted, at least two annual
meetings of shareholders, instead of one, will generally be
required to effect a change in a majority of the Board. Such a
delay may help ensure that the Company's directors, if confronted
by a third party attempting to force a proxy contest, a tender or
exchange offer, or other extraordinary corporate transaction, will
have sufficient time to review the proposal, as well as any
available alternatives, and act in a manner that management
believes to be the best interests of the Shareholders.
Classification provisions could also have the effect of
discouraging a third party from initiating a proxy contest, making
a tender offer, or otherwise attempting to obtain control of the
Company, even though such an attempt might be result in a
short-term financial benefit for the Company and its Shareholders.
Classification of the Board could also increase the possibility
that incumbent directors will retain their positions, if they so
desired.
The Board of Directors recommends that the Shareholders
approve the By-Law Amendment, because the Board wishes to increase
the stability of the Company in the event that the Board receives
any unsolicited proposal for a business combination or change in
control. Should that occur, the Board believes that the By-Law
Amendment will maximize its ability to make a reasoned and informed
decision concerning the alternatives which are in the best
interests of the Shareholders.
Item 1. APPROVAL OF BY-LAW AMENDMENT
Shareholders are requested to approve and adopt the
following resolution:
RESOLVED, that in accordance with Article VIII, Section
1 of the Company's By-Laws, Sections 3 and 6 are hereby amended, as
follows:
Section 3 of the By-Laws is hereby deleted in its
entirety and the following substituted in its place:
Section 3. The Board of Directors shall be
comprised of three Classes, each such Class to
be as nearly equal in number as possible. At
each annual meeting of shareholders, each
Director shall be elected to hold office until
expiration of the term of that Director's
Class, which shall in each instance be three
years, or until such Director's successor is
elected and qualified; provided however, that
the terms of office of Directors initially
classified and elected shall be as follows:
the term of the first Class shall expire at
the next annual meeting of shareholders
following approval of classification; the term
of the second Class at the second succeeding
annual meeting following approval of
classification; and the term of the third
Class at the third succeeding annual meeting
following approval of classification.
Section 6 of the By-Laws is hereby amended to delete the
sentence which appears in brackets, and add the sentences which
appear in italics:
Section 6. Newly created Directorships
resulting from an increase in the number of
Directors and vacancies occurring in the Board
of Directors for any reason whatsoever shall
be filled by a vote of a majority of the
Directors then in office, although less than a
quorum exists. [A Director elected to fill a
vacancy or a newly created Directorship shall
be elected to hold office until the next
annual meeting of shareholders, and until his
successor has been elected and qualified, or
until such time as may be otherwise provided
in Sections 4 and 5 herein.] A Director
elected to fill a vacancy or a newly created
Directorship shall not be classified, but
shall be elected and hold office until the
next annual meeting of shareholders, or until
such time as may be otherwise provided for in
Sections 4 and 5 herein. Any newly created
Directorships, or any decrease in
Directorships, shall be so apportioned among
the Classes as to make all Classes as nearly
equal as possible.
The affirmative vote of a majority of all shares
outstanding and entitled to vote are required for adoption of Item
1, approval of the By-Law Amendment.
Management recommends a vote "FOR" Item 1.
Item 2. ELECTION OF DIRECTORS
Each person nominated for election at this annual meeting
of shareholders has held various positions for the past five years
with either the Company or another organization, as specified in
the table below, and has sole voting power with respect to the
securities beneficially owned. Beneficial ownership includes
securities which could become exercisable within 60 days of the
date of this Proxy Statement. In the event that any of the
nominees are unable to 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 nominees will be unable to
serve. All nominees have previously served as directors and were
elected at the annual meeting of shareholders held on October 30,
1997.
If elected, each nominee has agreed to serve as a
director, whether the By-Law Amendment (Item 1) is approved or not.
If Shareholders approve the By-Law Amendment, the five
nominees will stand for election to a Classified Board, and each
will initially hold office for the term specified for the
designated Class, or until the election and qualification of his
successor:
Nominees and Directors
Name Age Principal Elected Number % of
Occupation Director of Shares Class
_________________________________________________________________
Class 1
Term expiring in 1999
Joseph P. Gastel 73 Patent 1984 63,124 2.3
(1) Attorney (4)
Class 2
Term expiring in 2000
Donald B. Hofmar 69 President of 1991 27,233 1.0
Bel Mar, Inc. (4)
Richard G. Hill 48 Executive Vice 1991 54,096 2.0
(1) President of (3)(4)
Company
Class 3
Term expiring in 2001
Douglas P. Taylor 50 President and 1976 60,568 2.2
(1) Chairman of the (2)(4)
Board of the Company
Randall L. Clark 55 Chairman of the 1996 12,000 .4
(5) Board of Dunn Tire (4)
Corporation
All directors and 219,384 7.9
executive officers (4)
as a group (6 persons)
(1) Messrs. Taylor and Hill are brothers-in-law, and both are
directors of Tayco Realty Corporation ("Tayco Realty"). Mr.
Taylor, together with Mr. Gastel, are directors in Developments.
(2) Includes 2,307 shares held beneficially and of record by
Sandra Taylor, wife of Douglas P. 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.
These shares represent less than 1% of the Company's stock.
(3) Includes 656 shares held by Joyce Taylor Hill, wife of Mr.
Hill and sister of Douglas P. Taylor, as custodian for their minor
children. As to all such shares, Mr. Hill disclaims any beneficial
ownership.
(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 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." No
further options may be granted under the 1994 Plan after November
15, 1998. Management has proposed a new stock option plan for
adoption by Shareholders. See "Approval of 1998 Taylor Devices,
Inc. Stock Option Plan."
(5) Mr. Clark serves as Chairman of the Board of Dunlop Tire
Corporation, and served as its Chief Executive Officer from 1985 to
1991. Mr. Clark also serves on the board of directors of several
other area corporations, including, Acme Electric Corporation, a
reporting company (NYSE).
If Shareholders do not approve Item 1, the By-Law
Amendment, and a Classified Board is not created, each of the named
nominees, if elected, will only hold office until the next annual
meeting of shareholders or until the election and qualification of
his successor.
Nominees to the Board of Directors must be elected by a
plurality of affirmative votes cast by Shareholders.
Management recommends a vote "FOR" Item 2.
BOARD OF DIRECTORS AND COMMITTEE MEETINGS
In fiscal 1998, the Board of Directors met four 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, met once in fiscal 1998 with all members
in attendance.
The Audit Committee is comprised of three of the
Company's outside directors, Messrs. Clark, 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 three times in fiscal 1998, with all
members in attendance.
The Compensation Committee, comprised of Messrs. Clark,
Gastel and Hofmar, was formed to review the compensation of the
Company's executive officers, and make recommendations in that
regard to the Board, as a whole. The Compensation Committee did
not meet in fiscal 1998.
The Stock Option Committee, formed in December 1994
to administer the Company's 1994 Stock Option Plan (the "1994
Plan"), is comprised of Messrs. Clark, Gastel and Hofmar. The 1994
Plan will expire on November 15, 1998. The Committee met once in
fiscal 1998, with all members in attendance. If the 1998 Taylor
Devices, Inc. Stock Option Plan (the "1998 Plan") is adopted at
this Annual Meeting of Shareholders, the composition of the
Committee will remain the same. See "Approval of 1998 Taylor
Devices, Inc. Stock Option Plan".
The Company does not have a standing nominating
committee.
In fiscal 1998, each member of the Board of Directors
received a fee of $1,500 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. The
Secretary of the meeting receives an additional $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 $4.28
which represents the closing price of the Company's common stock on
the fixed date of grant, April 18, 1998. The mean of the closing
price at September 18, 1998 was $3.25 per share.
All directors may be considered to be "control persons"
as that term is defined in the Securities Act of 1933.
CURRENT DIRECTORS AND OFFICERS
For information on Messrs. Taylor, Hill, Gastel, Hofmar
and Clark, see "Nominees and Directors" above.
KENNETH G. BERNSTEIN (51), Treasurer of the Company and Controller
of Developments. Mr. Bernstein joined the Company as controller in
1992. He is also Director and Secretary of Tayco Realty. From
August 1981 to July 1992, he was employed as a management
accountant and internal auditor by British Petroleum.
SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Based solely on the Company's review of copies of forms
received, or the written representations from reporting persons to
the Company that no Forms 5 were required, the Company believes
that all directors, officers and beneficial owners of more than 10%
of the securities of the Company have timely filed all reports of
ownership and changes in ownership in the Company's stock with the
Securities and Exchange Commission, and that these reporting
persons have been in compliance with reporting requirements for
fiscal 1998, as required by Section 16(a) of the Securities
Exchange Act of 1934.
EXECUTIVE COMPENSATION
The following table sets forth certain information
concerning compensation of and stock options held by the Company's
Chief Executive Officer, Executive Vice President and Treasurer. No
other current executive officers earn more than $100,000 annually
in salary and bonus.
SUMMARY COMPENSATION TABLE
LONG-TERM
ANNUAL COMPENSATION COMPENSATION AWARDS
OTHER UNDERLYING ALL
NAME/PRINCI- FISCAL ANNUAL OPTIONS OTHER
PAL POSITION YEAR SALARY($) BONUS($) COMP($) SARS# COMP($)
Douglas P. 1998 $ 142,637 $ 816 $ - 5,000 $26,288
Taylor 1997 $ 130,173 $ 792 $ - 5,000 $24,501
Chairman 1996 $ 127,727 $ 928 $ 6,623 5,000 $23,543
President Chief
Executive Officer
Richard G. 1998 $112,429 $ 630 $ - 5,000 $26,130
Hill 1997 $101,169 $ 906 $ - 5,000 $23,436
Executive 1996 $95,141 $1,272 $ 3,312 5,000 $23,294
Vice Pesident
Kenneth G. 1998 $ 88,029 $ 144 $ - - $19,100
Bernstein 1997 $ 79,507 $ 120 $ - 1,000 $17,534
Treasurer 1996 $ 74,596 $ 116 $ - 1,000 $18,498
(1) Automotive vehicles owned by the Company are made available to
the named President 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) One of the named executive officers exercised options for
fiscal 1998.
(3) Incentive options were granted pursuant to the terms of the
1994 Plan on April 18, 1998 at an option price of $4.28125, 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:
401K/
DIRECTORS MGM'T AUTO STOCK PUR. TOTAL
FEES FEES ALLOWANCE PLAN
Douglas P. Taylor:
Fiscal 5/31/98 $ 6,750 $17,100 $ 1,800 $ 638 $ 26,288
Fiscal 5/31/97 $ 5,950 $16,042 $ 1,800 $ 709 $ 24,501
Fiscal 5/31/96 $ 5,000 $16,150 $ 1,800 $ 593 $ 23,543
Richard G. Hill:
Fiscal 5/31/98 $ 6,750 $17,100 $ 1,800 $ 480 $ 26,130
Fiscal 5/31/97 $ 5,950 $16,042 $ 1,800 $ 644 $ 24,436
Fiscal 5/31/96 $ 5,000 $16,150 $ 1,800 $ 444 $ 23,394
Kenneth G. Bernstein:
Fiscal 5/31/98 $ 950 $17,100 $ - $1,050 $ 19,100
Fiscal 5/31/97 $ 850 $15,700 $ - $ 984 $ 17,534
Fiscal 5/31/96 $ 850 $16,750 $ - $ 898 $ 18,498
OPTION/SAR GRANTS
IN FISCAL YEAR 5/31/98
POTENTIAL REAL-
IZABLE VALUE AT
ASSUMED ANNUAL
RATES OF STOCK
PRICE APPRECIA-
TION FOR OPTION
INDIVIDUAL GRANTS TERM
NUMBER OF %OF
SECURITIES TOTAL GRANT
UNDERLYING OPTIONS DATE
OPTIONS GRANTED EXER/ EXPIR- PRESENT
GRANTED(#) EMPL'EES BASE ATION VALUE
NAME (1) IN F/Y PRICE DATE 5% 10% ($)(2)
Douglas 5,000 20% $4.28 4/18/03 $5,912 $13,065 $12,100
Taylor,
Chairman,
President and CEO
Richard 5,000 20% $4.28 4/18/03 $5,912 $13,065 $12,100
Hill, Vice
President
(1) Incentive options were granted on April 18, 1998 pursuant to
the 1994 Plan. No SARs can be granted with incentive options. The
options are not exercisable until the date six months after the
date of grant.
(2) The Black-Scholes option valuation model was used to estimate
the grant date present value of each option at April 18, 1998 at
$2.42.
AGGREGATED OPTION/SAR EXERCISES
IN LAST FISCAL YEAR AND
YEAR-END OPTION/SAR VALUES
5/31/98
(1)
Number of (2)
Securities Value of
Underlying Unexercised
Unexercised In-the-Money
Options/SARs Options/SARs
Shares At Fiscal At Fiscal
Acquired Year End Year End
On Value Exercisable(E) Exercisable(E)
Name Exercise(#) Realized Unexercisable(U) Unexercisable(U)
Douglas P. 7,350 $23,886 22,000 (E) $24,308 (E)
Taylor, 5,000 (U) $ - (U)
Chairman, President
CEO
Richard G. -0- -0- 15,000 (E) $ 445 (E)
Hill, 5,000 (U) $ - (U)
Executive Vice
President
(1) Exercisable options that include SARs granted in tandem with
that option, the exercise of SARs reduces the number of shares
subject to the related option.
(2) Value is the difference between the market value of the
Company's common stock on May 31, 1998 or $3.969, and the exercise
price for the options.
Item 3. APPROVAL OF 1998 TAYLOR DEVICES, INC.
STOCK OPTION PLAN
The 1998 Taylor Devices, Inc. Stock Option Plan ("1998
Plan") provides for the grant of options to purchase common stock
in the Company to certain employees of the Company and any
subsidiary, the majority of the voting stock of which is owned,
directly or indirectly, by the Company ("Subsidiary"), as well as
to the Company's Directors. The employees will be selected by the
Compensation Committee of the Board of Directors of the Company,
which is comprised of two or more Directors, appointed by the
Board, selected from those Directors who are not employees of the
Company or any Subsidiary ("Committee"). The current Compensation
Committee members are Messrs. Clark, Gastel and Hofmar. If the
1998 Plan is adopted by Shareholders at the Annual Meeting, the
Committee will remain the same. Committee members are eligible to
participate in the 1998 Plan on a restricted basis pursuant to a
predetermined formula.
The Committee is authorized to designate an option as
either an "Incentive Stock Option" or a "Non-Qualified Stock
Option" under the provisions of the Internal Revenue Code of 1986,
as amended ("Code"). Under the 1998 Plan, a maximum of 125,000
shares of common stock are reserved for the grant of options.
Incentive Stock Options to purchase 5,000 shares of
common stock will be granted annually to each employee-Director,
and Non-Qualified Stock Options to purchase 5,000 shares of common
stock will be granted annually to each non-employee Director, on
April 18 of each year that the 1998 Plan is in effect, commencing
April 18, 1999. No additional options may be granted to such
individuals, absent an amendment to the 1998 Plan. If the
President of the Company determines, in his sole discretion, that
on such date that the Company is in possession of material
non-public information concerning the Company's business, the grant
shall be delayed until the third day following publication of such
information, or the date of the event which renders such
information immaterial.
The option price shall be 100% of the fair market value
of each share of common stock on the date the option is granted.
If an Incentive Stock Option is granted to an individual owning
(directly or indirectly) more than 10% of the total combined voting
power of outstanding common stock of the Company or any Subsidiary,
the purchase price per share shall be 110% of the fair market value
of the stock at the date of grant, and the option, by its terms,
will not be exercisable more than five years from the date of
grant.
For purposes of the 1998 Plan, "fair market value" is the
final closing price for one share of the Company's common stock, as
quoted by the NASDAQ system for the date of grant. If no final
closing price is quoted for such date, the fair market value shall
be determined by reference to the next preceding day for which such
price is quoted. In the event no closing price is available, then
the fair market value of one share of common stock on the date the
option is granted shall be determined by the Committee or by the
Board of Directors.
Options granted under the 1998 Plan shall terminate on
the date determined by the Committee and specified in the option
agreement which will accompany each grant of an option, but, in
any event, not later than 10 years after the date of grant. An
option held by an individual whose employment is terminated shall
terminate (1) if the option holder is permanently and totally
disabled, one year after the date of termination of employment (in
the case of Incentive Stock Options) and upon the expiration date
(in the case of Non-Qualified Stock Options); (2) in the case of a
Non-Qualified Option held by an individual who dies, within one
year from the date of death of such individual; (3) immediately, if
employment is terminated for cause, unless some other expiration
date is fixed by the Committee; or (4) three months after the date
employment terminates for any other reason (in the case of
Incentive Stock Options), or (in the case of Non-Qualified Stock
Options) 18 months after employment terminates or such other date
as the Committee may fix. Whether an authorized leave of absence
for military or governmental service constitutes termination of
employment for purposes of the 1998 Plan shall be determined by the
Committee. In no event, however, shall any option be exercisable
after its expiration date.
No option granted under the 1998 Plan is assignable or
transferable, other than by will or the laws of descent and
distribution; during the lifetime of the optionee, the option shall
be exercisable only by the optionee.
The full text of the 1998 Plan is annexed as Exhibit
"A".
ACCOUNTING TREATMENT
Under the 1998 Plan, neither the grant nor exercise of
an option results in a charge against earnings.
TAX TREATMENT
The Company is advised by counsel that, under the present
provisions of the Code and Code regulations, the federal income tax
treatment of stock options under the 1998 Plan will depend upon
whether the option is (1) an Incentive Stock Option intended to
qualify under Section 422 of the Code or (2) a Non-Qualified Stock
Option (all other options).
The federal income tax consequences described in this
section are based on laws and regulations in effect on August 3,
1998, and there is no assurance that the laws and regulations will
not change in the future and affect the tax consequences of the
matters discussed in this section. Optionees also may be subject
to additional taxes under state tax laws which may differ from the
applicable federal income tax laws described in this section.
Incentive Stock Options. Generally, no taxable ordinary
income is recognized by an employee upon the exercise of an
Incentive Stock Option.
If common stock acquired pursuant to the exercise of an
Incentive Stock Option is held by the employee for at least two
years from the date of grant and at least one year from the date
the common stock is transferred to that employee, and, if that
employee remains employed by the Company at all times from the date
of grant of the option until three months before the date of
exercise (or one year before the date of exercise in the case of a
disabled employee or three months before death in the case of a
deceased employee), the employee will not recognize income for
regular tax purposes upon the exercise of the option. Exercise may
result in recognition of income for alternative minimum tax
purposes. Upon the later disposition of the common stock, the
employee will recognize long-term capital gain or loss equal to the
difference between the sales price and the purchase price. Under
these circumstances, the Company will not receive a tax deduction
at the time of either exercise or disposition. If the common stock
acquired pursuant to the exercise of an Incentive Stock Option is
not held by the employee for the time periods indicated above or
otherwise fails to qualify, the option will be treated as a
Non-Qualified Stock Option and the disposition will be subject to
the income tax treatment described below under "Non-Qualified Stock
Options".
The Committee may, in its discretion, grant options that
expire later than three months after termination of employment.
Options exercised later than three months after termination of
employment (except in the case of disability of the employee or
death of the employee within three months of termination, in which
case the applicable period is one year) will be treated for income
tax purposes as Non-Qualified Stock Options.
The amount by which the fair market value of the common
stock on the exercise date of an Incentive Stock Option exceeds the
purchase price will be an item of "tax preference" for purposes of
the federal alternative minimum tax provisions of the Internal
Revenue Code.
Non-Qualified Stock Options. Unlike an Incentive Stock
Option, the exercise of a Non-Qualified Stock Option results in the
recognition of income for tax purposes which is subject to income
tax withholding and may be subject to FICA tax withholding.
However, the exercise of a Non-Qualified Stock Option does not
result in an item of "tax preference" for purposes of the federal
alternative minimum income tax.
Upon exercise of a Non-Qualified Stock Option, an
optionee, other than a person subject to Section 16(b) of the
Securities Exchange Act of 1934 ("Reporting Person"), will
recognize compensation, taxable as ordinary income, in an amount
equal to the excess of the fair market value of the common stock
over the purchase price on the date of exercise.
If, during the six months preceding the exercise of a
Non-Qualified Stock Option, a Reporting Person has had a
transaction in common stock which is treated as a purchase under
Section 16(b) of the Securities Exchange Act of 1934, then the
Reporting Person will not recognize compensation from the exercise
of such option until the expiration of six months following the
date of the purchase transaction. At the expiration of that six
month period, the Reporting Person will recognize compensation
equal to the excess of the then fair market value of the common
stock over any purchase price paid. However, a Reporting Person
may make an election under Section 83(b) of the Internal Revenue
Code within 30 days after the date of exercise, to be taxed at the
time of exercise upon the excess, if any, of the fair market value
of the common stock on the date of exercise over the purchase price
paid.
An optionee's tax basis in common stock received upon
exercise of options will generally be any purchase price paid plus
the amount of taxable compensation recognized.
To the Company. In general, the Company will be entitled to
a deduction (subject to any general limitations) in connection with
awards under the Plan only at such time, and in such amount, as
optionees recognize ordinary income in connection with the awards.
Thus, in the case of an Incentive Stock Option, assuming there is
no disqualifying disposition, the Company will not be entitled to
a deduction because the optionees will not recognize ordinary
income. When exercise of a Non-Qualified Stock Option results in
ordinary income to the optionee, the Company will be entitled to
claim the available deduction. The Code requires satisfaction of
the applicable reporting requirements as a condition to the
Company's claiming its deduction.
Gain and Loss. If common stock acquired through the exercise
of a Non-Qualified Stock Option is sold, the optionee will
generally recognize capital gain (or loss) equal to the amount by
which the proceeds of sale exceed (or are less than) the optionee's
basis in that common stock. The gain (or loss) will be long term
if the common stock acquired under the 1998 Plan has been held for
more than 18 months. If an optionee pays part or all of the
exercise price of a Non-Qualified Stock Option by surrendering
previously acquired Company common stock, then such optionee's tax
basis (and capital gains holding period) in the surrendered shares
carries over to an equivalent number of shares purchased by
exercise of the Option. If the optionee uses stock previously
acquired as Incentive Stock Option stock for purposes of paying for
stock in a later exercise but prior to the expiration of the
required holding period for the Incentive Stock Option stock, this
will be treated as a disqualifying disposition for such stock.
General. The common stock to be issued or transferred
pursuant to the 1998 Plan will be stock which will be
madeavailable, at the discretion of the Board of Directors of the
Company, either from authorized but unissued shares, or from shares
reacquired by the Company, including shares purchased on the open
market. Shares acquired pursuant to the exercise of options under
the 1998 Plan by a Reporting Person shall not be sold or
transferred for at least six months after the date of grant.
No preemptive rights are applicable to the shares covered
by the 1998 Plan. The cash proceeds to be received by the Company
upon exercise of the options will be used for general corporate
purposes.
Resolution. In order to adopt the 1998 Plan,
Shareholders are requested to approve and adopt the following
resolution at the Annual Meeting of Shareholders:
RESOLVED, that the 1998 Taylor Devices, Inc.
Stock Option Plan, attached as Exhibit "A" to
the Company's Proxy Statement and furnished to
Shareholders in connection with the Annual
Meeting of Shareholders of the Company held on
November 6, 1998, be, and hereby is, approved
and adopted.
If approved and adopted, the 1998 Plan will become
effective on the date of adoption by Shareholders. Approval and
adoption of this Item 3 requires the affirmative vote of a majority
of votes cast at the Annual Meeting by Shareholders who are
entitled to vote.
Management recommends a vote "FOR" Item 3.
EMPLOYEE STOCK PURCHASE PLAN
The Company offers a Stock Purchase Plan generally to all
its employees. There is a total of 48,789 shares available for
distribution to all qualified employees at September 23,1998. The
Company also provides a 401(k) plan for its employees.
INDEMNIFICATION INSURANCE FOR DIRECTORS AND OFFICERS
On July 24, 1998, the Company renewed a director and
officer indemnification insurance policy written by Royal
Indemnity. The renewal was for a one-year period at an annual
premium of $17,870. The policy provides 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 capacities. No payments or claims for
indemnification or expenses have been made under any directors and
officers insurance policies purchased by the Company.
TRANSACTIONS WITH MANAGEMENT AND OTHERS
The Company leases a portion of the property where it
does business from its affiliate, Tayco Realty, pursuant to the
terms of a lease which will expire on October 31, 2005. Rental
payments by the Company for fiscal 1998 totaled $164,827. The
total rent paid by the Company is determined by a base rate of
$10.64 per square foot, 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 owns
approximately 42% of Tayco Realty, with 58% owned by the Company.
Under the 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.
The term of the 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 5% royalty to Developments on sales
of items sold and shipped. 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 1998.
Developments and Tayco Tech (now the Company) entered
into a patent license ("Patent License") in 1987, amended in 1994,
granting the Company the right to manufacture and sell, in the
United States and Canada, products relating to plastic, composite
cylindrical products, such as Liquid Springs, Spring Shoks and
Actuators, Accumulators and Pneumatic Shocks, which are covered by
certain of Developments' patents. The term of the Patent License
is the life of the last-to-expire patent, which is 2014.
Developments earns royalties a rate of 5% of sales price.
Royalties, if any, are paid quarterly. No royalties were received
in fiscal 1998. During fiscal 1998, however, the Company accrued
royalties to Developments under the License Agreement and the
Patent License of $138,368. Payments are current.
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
The Board of Directors approved a change of auditors in
fiscal 1998. The change was for economic reasons and not the
result of any disagreement with, or adverse opinion or disclaimer
of opinion of, the Company's former accountants, J.D. Elliott &
Co., Inc. See Current Report on 8-K dated and filed with the
Securities and Exchange Commission on April 14, 1998. A
representative of Lumsden & McCormick, LLP, the Company's auditors
for fiscal 1998 and the accounting firm recommended by the Audit
Committee to serve as the Company's certified public accountants
for fiscal 1999, 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
1999 Annual Meeting of Shareholders must be received by the
Secretary of the Company prior to June 1, 1999, for inclusion in
the Proxy Statement and form of proxy. Shareholders wishing to
propose matter for consideration at the 1999 annual meeting must
follow certain specified advance notice procedures set forth in the
Company's By-Laws, a copy of which is available upon written
request to:
Joseph P. Gastel, Secretary
Taylor Devices, Inc.
90 Taylor Drive
P.O. Box 748
North Tonawanda, New York 14120-0748
The By-Laws designate procedures for the calling and
conduct of a meeting of shareholders, including, but not limited
to, specifying who may call the meeting, what business may be
conducted, the procedures with respect to the making of shareholder
proposals, and the procedures and requirements for shareholder
nomination of directors.
FINANCIAL STATEMENTS
The financial statements of the Company are contained in
the Company's 1998 Annual Report which accompany's this Proxy
Statement.
OTHER MATTERS
Voting
Under the 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, adoption of Item 1 to create a classified Board of
Directors requires the affirmative vote of a majority of all shares
outstanding and entitled to vote. Directors standing for election
must be elected by a plurality of votes cast, at the meetings,
regardless of whether Item 1 is adopted or whether directors are
elected to their respective class terms or for only the ensuing
year. Item 3, adoption of the 1998 Plan, requires the affirmative
vote of a majority of votes cast at the meeting. "Other business,"
if properly brought before the meeting, may be adopted by a
majority of votes cast at the meeting.
For voting purposes, all proxies marked "for", "against",
"abstain", or "withhold authority" will be counted in accordance
with such instruction as to each item. In no event will an
abstention be counted as a vote cast. No broker non-votes will be
counted for any 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 his or
her 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.
BY ORDER OF THE BOARD OF DIRECTORS
/S/ Joseph P. Gastel
Joseph P. Gastel, Secretary
DATED: September 28, 1998
North Tonawanda, New York
TAYLOR DEVICES, INC.
PROXY SOLICITED ON BEHALF OF THE
BOARD OF DIRECTORS
ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD NOVEMBER 6, 1998, 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 6, 1998, 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. AMENDMENT TO BY-LAWS TO CREATE CLASSIFIED BOARD
[ ] FOR [ ] AGAINST [ ] ABSTAIN
2. ELECTION OF DIRECTORS
IF ITEM 1 IS ADOPTED, DIRECTORS WILL BE ELECTED TO THE CLASS AND
TERMS SHOWN IN THE PROXY STATEMENT; IF ITEM 1 IS NOT ADOPTED,
DIRECTORS WILL BE ELECTED TO AN ANNUAL TERM.
DIRECTORS
Douglas P. Taylor
Richard G. Hill
Joseph P. Gastel
Donald B. Hofmar
Randall L. Clark
FOR Withhold Authority Withhold Authority
All Nominees for All Nominees as Indicated
[ ] [ ] [ ]
_____________________________
(Withhold authority for any nominee whose name(s) is written above)
3. ADOPTION OF 1998 TAYLOR DEVICES, INC. STOCK OPTION PLAN
[ ] FOR [ ] AGAINST [ ] ABSTAIN
4. In their discretion, the proxies are authorized to vote on
any other business that may properly come before the meeting or any
adjournment(s).
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 Amendment to By-Laws in Item
1; FOR the nominees described in Item 2; FOR the 1998 Plan
described in Item 3; 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: ________________, 1998
________________________________________
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.
Exhibit A
TAYLOR DEVICES, INC.
TEXT OF THE 1998 TAYLOR DEVICES, INC.
STOCK OPTION PLAN AS PROPOSED
1. PURPOSES OF THE PLAN
The purpose of the Taylor Devices, Inc. 1998 Stock Option
Planis to provide a method by which those employees of the Company
and itsSubsidiaries who are largely responsible for the management,
growth, andprotection of the business, and who are making and can
continue to makesubstantial contributions to the success of the
business,may beencouraged to acquire a larger stock ownership in
the Company thusincreasing their proprietary interest in the
business, providing themwith greater incentive for their continued
employment, and promoting theinterests of the Company and all its
shareholders. Accordingly, theCompany will, from time to time
during the term of the Plan, grant tosuch employees as may be
selected in the manner provided in thePlan,options to purchase
shares of Common Stock of the Company subjectto the conditions
provided in the Plan.
2. DEFINITIONS
Unless the context clearly indicates otherwise, the
followingterms have the meanings set forth below.
(a) "Board of Directors" or "Board" means the Board of
Directors of the Company.
(b) "Code" means the Internal Revenue Code of 1986, as
amended.
(c) "Committee" means the Compensation Committee of the
Company as described in Section 3 of the Plan.
(d) "Common Stock" means the common stock of the Company,
$0.025 par value.
(e) "Company" means Taylor Devices, Inc., a New York
corporation with its principal place of business at 90 Taylor
Drive, North Tonawanda, New York.
(f) "Grant Date" as used with respect to a particular Option,
means the date as of which such Option is granted by the Board or
Committee pursuant to the Plan.
(g) "Incentive Stock Option" means an Option that qualifies as
an Incentive Stock Option as described in Section 422 of the Code.
(h) "Non-Qualified Stock Option" means any Option granted
under the Plan other than an Incentive Stock Option.
(i) "Option" means an option granted pursuant to Section 5 of
the Plan to purchase shares of Common Stock and which shall be
designated as either an Incentive Stock Option or a Non-Qualified
Stock Option.
(j) "Optionee" means an individual to whom an Incentive Stock
Option or a Non-Qualified Stock Option is granted pursuant to the
Plan.
(k) "Permanent and Total Disability," as applied to an
Optionee, means that the Optionee has (1) established to the
satisfaction of the Company that the Optionee is unable to engage
in any substantial gainful activity by reason of any medically
determinable physical or mental impairment which can be expected to
result in death or which has lasted or can be expected to last for
a continuous period of not less than twelve months, all within the
meaning of Section 22(e)(3) of the Code, and (2) satisfied any
requirement imposed by the Committee.
(l) "Plan" means the Taylor Devices, Inc. 1998 Stock Option
Plan as set forth herein and as may be amended from time to time.
(m) "Subsidiary" means any stock corporation of which a
majority of the voting common or capital stock is owned, directly
or indirectly, by the Company and any company designated as such by
the Committee, but only during the period of such ownership or
designation.
3. ADMINISTRATION OF THE PLAN
(a) The Plan shall be administered by the Committee, which
shall be composed of two or more Directors who are appointed by the
Board of Directors and selected from those Directors who are not
employees of the Company or a Subsidiary. The Board may from time
to time remove members from or add members to the Committee.
Vacancies on the Committee, howsoever caused, shall be filled by
the Board. The Board shall select one of the Committee's members
as Chairman. The Committee shall hold meetings at such times and
places as it may determine, subject to such rules as to procedures
not inconsistent with the provisions of the Plan as are prescribed
by the Board, set forth in the Company's By-Laws as applicable to
the Executive Committee, and as prescribed by the Committee itself.
A majority of the authorized number of members of the Committee
shall constitute a quorum for the transaction of business. Acts
reduced to or approved in writing by a majority of the members of
the Committee then serving shall be valid acts of the Committee.
(b) The Committee shall be vested with full authority to make
such rules and regulations as it deems necessary or desirable to
administer the Plan and to interpret the provisions of the Plan.
Any determination, decision, or action of the Committee in
connection with the construction, interpretation, administration,or
application of the Plan shall be final, conclusive, and binding
upon all Optionees and any person claiming under or through an
Optionee unless otherwise determined by the Board.
(c) Any determination, decision, or action of the Committee
provided for in the Plan may be made or taken by action of the
Board, if it so determines, with the same force and effect as if
such determination, decision, or action had been made or taken by
the Committee. No member of the Committee or of the Board shall be
liable for any determination, decision, or action made in good
faith with respect to the Plan or any Option granted under the
Plan. The fact thata member of the Board who is not then a member
of the Committee shall at the time be, or shall theretofore have
been, or thereafter may be a person who has received or is eligible
to receive an Option shall not disqualify him or her from taking
part in and voting at any time as a member of the Board in favor or
against any amendment or repeal of the Plan, provided that such
vote shall be in accordance with the recommendations of the
Committee.
4. STOCK SUBJECT TO THE PLAN
(a) The Common Stock to be issued or transferred under the
Plan will be the Company's Common Stock which will be made
available, at the discretion of the Board, either from authorized
but unissued Common Stock or from Common Stock reacquired by the
Company, including shares purchased in the open market. The
aggregate number of shares of Common Stock which may be issued
under the Plan shall not exceed 125,000 shares.
(b) In the event that any outstanding Option under the Plan
for any reason expires or is terminated, the shares of Common Stock
allocable to the unexercised portion of such Option may again be
made subject to Option under the Plan.
5. GRANT OF THE OPTIONS
(a) Key Employees Who Are Not Directors
The Committee may from time to time, subject to the
provisions of the Plan, grant Options to key employees of the
Company or of a Subsidiary who are not Directors to purchase shares
of Common Stock allotted in accordance with Section 4 of the Plan.
The Committee may designate any Option granted as either an
Incentive Stock Option or a Non-Qualified Stock Option, or the
Committee may designate a portion of the Option as an Incentive
Stock Option and the remaining portion as a Non-Qualified Stock
Option.
(b) Directors
Incentive Stock Options to purchase 5,000 shares of
Common Stock shall be granted annually to each of those persons who
are then employee Directors of the Company, and Non-Qualified Stock
Options to purchase 5,000 shares of Common Stock shall be granted
annually to each of those persons who are then non-employee
Directors of the Company, on April 18 of each year, commencing
April 18, 1999. Each such option shall vest and be exerciseable
immediately upon grant and shall expire upon the date 10 years
thereafter. Notwithstanding any of the provisions of the Plan to
the contrary, no additional Options may be granted to Directors
absent an amendment to the Plan in accordance with Section 13. If
the President of the Company determines in his or her sole
discretion that on such date the Company is in possession of
material non-public information concerning its business, such grant
shall be delayed until the third day following publication of such
information or the date of an event which renders such information
immaterial.
6. OPTION PRICE
The purchase price per share of any Option granted under
the Plan shall be 100 percent of the fair market value of one share
of Common Stock on the date the Option is granted, except that the
purchase price per share shall be 110 percent of the fair market
value in the case of an Incentive Stock Option granted to an
individual described in subsection 7(b) of the Plan. For purposes
of the Plan, the fair market value of a share of Common Stock shall
be the mean between the high and low prices for a share of Common
Stock as quoted by the National Association of Securities Dealers
Automated Quotation System for the day of the grant; if there is
only one price quoted for the day of grant, then the fair market
value shall be such price; and if no such price is quoted for the
day of the grant, the fair market value shall be the previous
closing price. In the event that no previous closing price is
available, then the fair market value of oneshare of Common Stock
on the day the Option is granted shall be determined by the
Committee or by the Board. The purchase price shall be subject to
adjustment only as provided in Section 14 of the Plan.
7. ELIGIBILITY OF OPTIONEES
(a) Options shall be granted only to persons who either are
key employees or non-employee Directors of the Company or of a
Subsidiary as determined by the Committee at the time of the grant.
The term "employees" shall include persons who are Directors or
Officers who are also employees of the Company or of any
Subsidiary.
(b) Any other provision of the Plan notwithstanding, an
individual who owns more than ten percent of the total combined
voting power of outstanding Common Stock of the Company or any
Subsidiary shall not be eligible for the grant of an Incentive
Stock Option unless the special requirements set forth in sections
6 and 9(a) of the Plan are satisfied. For purposes of this
subsection (b), in determining stock ownership, an individual shall
be considered as owning the stock owned, directly or indirectly, by
or for his or her brothers and sisters, spouse, ancestors, and
lineal descendants. Stock owned, directly or indirectly, by or for
a corporation, partnership, estate, or trust shall be considered as
being owned proportionately by or for its shareholders, partners,
or beneficiaries. Stock with respect to which such individual
holds an Option shall not be counted. Outstanding stock shall
include all stock actually issued and outstanding immediately after
the grant of the option. Outstanding stock shall not include
shares authorized for issue under outstanding Options held by the
Optionee or by another person.
(c) Subject to the terms, provisions, and conditions of the
Plan and subject to review by the Board, the Committee shall have
exclusive jurisdiction to (1) select the key employees to be
granted Options (it being understood that more than one Option may
be granted to the same person), (2) determine the number of shares
subject to each Option, (3) determine the date or dates when
Options will be granted, (4) determine the purchase price of the
shares subject to each Option in accordance with Section 6 of the
Plan, (5) determine the date or dates when each Option may be
exercised within the term of the Option specified pursuant to
Section 9 of the Plan, (6) determine whether or not an option
constitutes an Incentive Stock Option, and (7) prescribe the
form, which will be consistent with the Plan, of the documents
evidencing any Options granted under the Plan.
(d) Neither anything contained in the Plan or in any document
under the Plan nor the grant of any Option under the Plan shall
confer upon any Optionee any right to continue in the employ of the
Company or of any Subsidiary or limit in any respect the right of
the Company or any Subsidiary to terminate the Optionee's
employment at any time and for any reason.
8. NON-TRANSFERABILITY
No Option granted under the Plan shall be assignable or
transferable by the Optionee other than by will or the laws of
descent and distribution, and during the lifetime of an Optionee,
the Option shall be exercisable only by such Optionee.
9. TERM AND EXERCISE OF OPTIONS
(a) Each Option granted under the Plan shall terminate on the
date determined by the Committee and specified in the Option
Agreement, provided that each Option shall terminate not later than
ten years after the Grant Date. However, any Option designated as
an Incentive Stock Option granted to a more than ten percent
shareholder shall terminate not later than five years after the
Grant Date. The Committee, at its discretion, may provide further
limitations on the exercisability of Options granted under the
Plan. An Option may be exercised only during the continuance of
the Optionee's employment, except as provided in Section 10 of the
Plan.
(b) A person electing to exercise an Option shall give
written notice to the Company, in such form as the Committee shall
have prescribed or approved, of such election and of the number of
shares he or she has elected to purchase and shall at the time of
exercise tender the full purchase price of any shares he or she has
elected to purchase. The purchase price upon the exercise of an
Option shall be paid in full in cash; provided, however, that in
lieu of cash, with the approval of the Committee at or prior to
exercise, an Optionee may exercise his or her Option by tendering
to the Company shares of Common Stock owned by him or her and
having a fair market value equal to the cash exercise price
applicable to his or her Option, with the then fair market value of
such stock to be determined in the manner provided in Section 6 of
the Plan (with respect to the determination of the fair market
value of Common Stock on the date an Option is granted). However,
if an Optionee pays the Option exercise price of a Non-Qualified
Stock Option in whole or in part in the form of unrestricted Common
Stock already owned by the Optionee, the Company may require that
the Optionee have owned the stock for a period of time that would
not cause the exercise to create a charge to the Company earnings.
Such provisions may be used by the Company to prevent a pyramid
exercise. As conditions to exercising an Option, the holder must
(1) arrange to pay the Company any amount required to be withheld
under any tax law on the account of the exercise, and (2) in the
case of an Incentive Stock Option, agree to notify the Company of
any disqualifying disposition (as defined in Section 421 of the
Code) of the Common Stock acquired upon the exercise and agree to
pay the Company any amount required to be withheld under any tax
law on account of the disposition. Any payment on account of
withholding taxes shall be made in a form acceptable to the
Committee.
(c) An Optionee or a transferee of an Option shall have no
rights as a shareholder with respect to any shares covered by his
or her Option until the date the Stock Certificate is issued
evidencing ownership of the shares. No adjustment shall be made
for dividends (ordinary or extraordinary) whether in cash,
securities, or other property, or distributions or other rights for
which the record date is prior to the date such Stock Certificate
is issued, except as provided in Section 14 of the Plan.
(d) A person may, in accordance with other provisions of the
Plan, elect to exercise Options in any order, notwithstanding the
fact that Options granted to him or her prior to the grant of the
Options selected for exercise are unexpired.
10. TERMINATION OF EMPLOYMENT
If an Optionee severs from all employment with the
Company and/or its Subsidiaries, any Option granted to him or her
under the Plan shall terminate as follows:
(a) An Option held by an Optionee who is Permanently and
Totally Disabled shall terminate (i) in the case of an Incentive
Stock Option, one year after the date of termination of employment,
and (ii) in the case of a Non-Qualified Stock Option, upon its
expiration date;
(b) A Non-Qualified Stock Option held by an Optionee shall be
exercisable within a period of one year from the date the
Optionee's death by the executor or administrator of the Optionee's
estate or by the person to whom the Optionee shall have transferred
such right by last will and testament or by the laws of descent or
distribution;
(c) An Incentive Stock Option or a Non-Qualified Stock Option
held by an Optionee whose employment terminates for cause, as
determined by the Committee, shall expire immediately upon the date
of termination unless some other expiration date is fixed by the
Committee; and
(d) An Option held by an Optionee whose employment terminates
for any reason other than those specified in subsection (a), (b),
or (c) above shall expire (i) in the case of an Incentive Stock
Option, three months after the date of termination of employment,
and (ii) in the case of a Non-Qualified Stock Option, unless
another date is fixed by the Committee, eighteen months after the
date of termination.
The foregoing notwithstanding, no Option shall be
exercisable after its expiration date.
Whether an authorized leave of absence or an absence for
military or governmental service shall constitute termination of
employment for purposes of the Plan shall be determined by the
Committee, which determination shall be final, conclusive, and
binding upon the affected Optionee and any person claiming under or
through such Optionee. Termination of employment with any
Subsidiary in order to accept employment with another Subsidiary or
while remaining an employee of the Company or of any of its
Subsidiaries shall not be a termination of employment for the
purposes of this Section 10.
11. MODIFICATION, EXTENSION, AND RENEWAL
Subject to the terms and conditions and within the
limitations of the Plan, the Committee may modify, extend, or renew
outstanding Options (to the extent not theretofore exercised) and
authorize the granting of new Options in substitution therefor.
Without in any way limiting the generality of the foregoing, the
Committee may grant to an Optionee, if he or she is otherwise
eligible and consents thereto, a new or modified Option in lieu of
an outstanding Option for a number of shares at an exercise price
and for a term which are greater or less than under the earlier
Option or may do so by cancellation and re-grant, amendment,
substitution, or otherwise, subject only to the general limitations
and conditions of the Plan. The foregoing notwithstanding, no
modification of an Option shall, without consent of the Optionee,
alter or impair any rights or obligations under any Option
theretofore granted under the Plan.
12. PERIOD IN WHICH GRANTS MAY BE MADE
Options may be granted pursuant to the Plan and at any
time on or before November 6, 2003.
13. AMENDMENT OR TERMINATION OF THE PLAN
The Board may at any time terminate, modify, or suspend
the Plan, provided that, without the approval of the shareholders
of the Company, no amendment or modification shall be made by the
Board which (a) increases the maximum number of shares as to which
Options may be granted under the Plan; (b) alters the method by
which the Option price is determined; (c) extends any Option for a
period of longer than ten years after the date of the grant; (d)
materially modifies the requirements as to eligibility for
participation in the Plan; or (e) alters this Section 13 so as to
defeat its purpose. Further, no amendment, modification, or
suspension, or termination of the Plan shall in any manner affect
any Option theretofore granted under the Plan without the consent
of the Optionee or any person validly claiming under or through the
Optionee.
14. CHANGES IN CAPITALIZATION
(a) In the event that the Common Stock, as presently
constituted, shall be changed into or exchanged for a different
number or kind or shares of stock or other securities of the
Company or of another corporation (whether by reason of merger,
consolidation, recapitalization, reclassification, split-up,
combination of shares, or otherwise), or if the number of shares of
Common Stock shall be increased through the payment of a stock
dividend, then subject to the provisions of the subsection (c)
below, there shall be substituted for or added to each share of
Common Stock which was theretofore appropriated or which thereafter
may become subject to an Option under the Plan the number and kind
of shares of stock or other securities into which each outstanding
share of Common Stock shall be so changed, or for which each such
share shall be exchanged, or to which each such share shall be
entitled, as the case may be. Outstanding Options shall also be
appropriately amended as to the price and other terms as may be
necessary to reflect the foregoing events. The maximum number of
shares of Common Stock upon which Options and Incentive Stock
Options may be granted, as provided in Section 4(a) of the Plan,
shall be adjusted proportionately to reflect any of the foregoing
events.
(b) If there shall be any other change in the number or kind
of outstanding shares of stock of the Company, or any stock or
other securities into which such stock shall have been changed, or
for which it shall be exchanged, and if the Board or the Committee,
as the case may be, shall, in its sole discretion, determine that
such change equitably requires an adjustment in any Option which
was theretofore granted, or which may thereafter be granted under
the Plan, then such adjustment shall be made in accordance with
such determination.
(c) Fractional shares resulting from any adjustment in
Options pursuant to this Section 14 may be settled as the Board or
the Committee, as the case may be, shall determine.
(d) To the extent that the foregoing adjustments relate to
stock or securities of the Company, such adjustments shall be made
by the Committee, whose determination in that respect shall be
final, binding, and conclusive. Notice of any adjustment shall be
given by the Company to each holder of an Option which shall have
been so adjusted.
(e) The grant of an Option pursuant to the Plan shall not
affect in any way the right or power of the Company to make
adjustments, reclassification, reorganizations, or changes of its
capital or business structure or to merge, consolidate, dissolve,
liquidate, sell or transfer all or any part of its business assets.
15. LISTING AND REGISTRATION OF SHARES
(a) No Option granted pursuant to the Plan shall be
exercisable in whole or in part if at any time the Board or the
Committee, as the case may be, shall determine, in its discretion,
that the listing, registration, or qualification of the shares of
Common Stock subject to such Option on any securities exchange or
under any applicable law, or the consent or approval of any
government regulatory body, is necessary or desirable as a
condition of or in connection with the granting of such Option or
the issue of shares thereunder unless such listing, registration,
qualification, consent, or approval shall have been affected or
obtained free of any conditions not acceptable to the Board.
(b) If a registration statement under the Securities Act of
1933 with respect to shares issuable upon exercise of any Option
granted under the Plan is not in effect at the time of exercise,
the person exercising such Option shall give the Committee a
written statement, satisfactory in form and substance to the
Committee, that he or she is acquiring the shares for his or her
own account for investment and not with a view to their
disposition, the Company may place upon any stock certificate for
shares issuable upon exercise of such Option such legend as the
Committee may prescribe to prevent disposition of the shares in
violation of the Securities Act of 1933 or any other applicable
law.
16. TRANSFER OF OPTION SHARES
Shares acquired by persons subject to Section 16 of the
Securities Exchange Act of 1934, pursuant to the exercise of
Options or a portion thereof, shall not be sold or transferred for
at least six months after the date of grant.
17. EFFECTIVE DATE OF PLAN
Subject to the approval of the shareholders of the Company at
the 1998 Annual Meeting of Shareholders, the Plan shall be
effective as of November 6, 1998.
