PRELIMINARY COPY
CONFIDENTIAL, FOR USE OF THE SEC COMMISSION ONLY
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
Joseph P. Gastel, Secretary
DATED: September 28, 1998
North Tonawanda, New York
<PAGE>
PRELIMINARY PROXY
CONFIDENTIAL, FOR USE OF THE SEC COMMISSION ONLY
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.<PAGE>
PRELIMINARY COPY
CONFIDENTIAL, FOR USE OF THE SEC COMMISSION ONLY
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
Class 1
Term expiring in 1999
Name Age Principal Elected Number % of
Occupation Director of Shares Class
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 23, 1998 was $ _____________.
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- DATE
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 made
available, 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
This Proxy Statement incorporates by reference the
financial statements contained in the Company's 1998 Annual
Report on Form 10-KSB.
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.
Annual Report
Copies of the 1998 Annual Report of the Company, are being
mailed to Shareholders, together with this Proxy Statement, form
of proxy, and Notice of Annual Meeting of Shareholders. A copy
of the Company's Annual Report on Form 10-KSB, as filed with the
Securities and Exchange Commission on or about August 27, 1998,
will be furnished to Shareholders, without charge, upon written
request to the Secretary of the Company, North Tonawanda, New
York 14120-0748.
BY ORDER OF THE BOARD OF DIRECTORS
Joseph P. Gastel, Secretary
DATED: September 28, 1998
North Tonawanda, New York<PAGE>
PRELIMINARY COPY
CONFIDENTIAL, FOR USE OF THE SEC COMMISSION ONLY
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 nominees whose names are 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.
