TAYLOR DEVICES, INC.

 

EMPLOYMENT AGREEMENT

 

 

 

This AGREEMENT is made effective as of the 26th day of August, 2014 by and
between TAYLOR DEVICES, INC. (the “Company”), a New York corporation having an
office located at 90 Taylor Drive, North Tonawanda, New York 14120-0748 and MARK
V. MCDONOUGH, an individual residing at 71 Leicester Road, Kenmore, New York
14217-2111 (the “Executive”).

 

WHEREAS, the Company acknowledges that Executive is a highly competent and
experienced financial officer who contributes significantly to the profitability
and success of the Company; and

 

WHEREAS, the Company wishes to assure itself of the continuing services of
Executive for the term set forth in this Agreement; and

 

WHEREAS, Executive is willing to continue to serve in the employ of the Company
on a full-time basis for the term and pursuant to the provisions of this
Agreement as hereinafter set forth.

 

NOW, THEREFORE, in consideration of the mutual covenants herein contained, and
upon the other terms and conditions hereinafter provided, the parties hereby
agree as follows:

 

 

1. POSITION AND RESPONSIBILITIES.

During the period of Executive’s employment with the Company pursuant to this
Agreement (the “Term”), Executive agrees to serve as Chief Financial Officer and
Treasurer of the Company. During the Term, Executive also agrees to serve, if
elected, as an officer of any subsidiary or affiliate of the Company. Failure to
reelect Executive as Chief Financial Officer and Treasurer of the Company
without the consent of the Executive during the Term shall constitute a breach
of this Agreement.

 

 

2. TERM; TERMS AND DUTIES.

(a) Unless earlier terminated, as provided in this Agreement, the Term shall
commence on its effective date and shall expire on December 31, 2017 (the
“Expiration Date”); provided, however, that, upon written notice give by either
party to the other at least 30 days prior to the Expiration Date, this Agreement
may be renewed by mutual agreement of the parties. Prior to any renewal of this
Agreement, the Board of Directors of the Company (the “Board”), shall conduct a
comprehensive evaluation and review of the performance of the Executive for
purposes of determining whether to renew the Agreement and the results thereof
shall be included in the minutes of meeting for the Board. Henceforward, “Term”
shall include any and all extensions or renewals of this Agreement

 

(b) During the Term, except for periods of absence occasioned by illness,
reasonable vacation periods and reasonable leaves of absence, Executive shall
devote substantially all of his business time, attention, skill, and efforts to
the faithful performance of his duties as Chief Financial Officer and Treasurer
of the Company, including activities and services related to the organization,
operation and management of the Company and its affiliates; provided, however,
that, with the approval of the Board, as evidenced by a resolution of the Board,
from time to time Executive may serve or continue to serve on the boards of
directors of, and hold any other offices or positions in, companies or
organizations, which, in the Board’s judgment, will not present any conflict of
interest with the Company, or materially affect the performance of Executive’s
duties pursuant to this Agreement.

 

 

3. COMPENSATION AND REIMBURSEMENT.

(a) The compensation specified under this Agreement shall constitute the salary
and benefits paid for the duties described in Section 2(b). The Company shall
pay Executive as compensation a salary of not less than $144,941.00 per year
(“Base Salary”). The Base Salary shall be payable weekly. During the Term,
Executive’s Base Salary shall be reviewed at least annually; and the first such
review will be made not later than May 31, 2015. The review shall be conducted
by a Committee designated by the Board, and the Board may increase Executive’s
Base Salary. In addition to the Base Salary provided in this Section 3(a), the
Company shall provide Executive, at no cost to Executive, with all such other
benefits as are provided uniformly to permanent full-time employees of the
Company.

 

(b) The Company will provide Executive with employee benefit plans, arrangements
and perquisites substantially equivalent to those in which Executive was
participating or otherwise deriving benefit from immediately prior to the
beginning of the Term, and the Company will not, without prior notice to
Executive, make any changes in such plans, arrangements or perquisites which
would adversely affect Executive’s rights or benefits thereunder. Without
limiting the generality of the foregoing provisions of this Section 3(b),
Executive will be entitled to participate in or receive benefits under any
employee benefit plans including, but not limited to, retirement plans,
supplemental retirement plans, pension plans, profit-sharing plans,
health-and-accident plans, medical coverage or any other employee benefit plan
or arrangement made available by the Company in the future to its senior
executives and key management employees, subject to and on a basis consistent
with the terms, conditions and overall administration of such plans and
arrangements. Executive will be entitled to incentive compensation and bonuses
as provided in any plan of the Company in which Executive is eligible to
participate. Nothing paid to the Executive under any such plan or arrangement
will be deemed to be in lieu of other compensation to which the Executive is
entitled under this Agreement.

 

(c) In addition to the Base Salary provided for by Section 3(a), the Company
shall pay or reimburse Executive for all reasonable travel and other reasonable
expenses incurred by Executive in performing his obligations under this
Agreement and may provide such additional compensation and perquisites in such
form and such amounts as the Board may from time to time determine.

 

 

4. PAYMENTS UPON AN EVENT OF TERMINATION.

The provisions of this Section shall in all respects be subject to the terms and
conditions stated in Sections 8 and 10.

 

(a) The provisions of Section (b) shall apply upon the occurrence of an Event of
Termination during the Term. As used in this Agreement, an “Event of
Termination” shall mean and include any one or more of the following:

 

(i) the termination by the Company of Executive’s full-time employment hereunder
for any reason (including termination without cause) other than (A) Disability
or Retirement, as defined in Section 6 below, or (B) a Change in Control, as
defined in Section 5(a) below; or

 

(ii) Executive’s resignation from the Company’s employ upon any (A) failure to
elect or reelect or to appoint or reappoint Executive as Chief Financial Officer
and Treasurer, (B) material change in Executive’s function, duties, or
responsibilities, which change would cause Executive’s position to become one of
lesser responsibility, importance, or scope from the position and attributes
thereof described in Section 1 of this Agreement, (C) a relocation of
Executive’s principal place of employment by more than 30 miles from its
location at the effective date of this Agreement, or a material reduction in the
benefits and perquisites to the Executive from those being provided as of the
effective date of this Agreement, (D) liquidation or dissolution of the Company
other than liquidations or dissolutions that are caused by reorganizations that
do not affect the status of Executive, or (E) breach of this Agreement by the
Company.

 

Upon the occurrence of any event described in clauses (ii)(A), (B), (C), (D) or
(E), above, Executive shall have the right to elect to terminate his employment
under this Agreement by resignation upon 60 days’ prior written notice given
within four months after the initial event giving rise to said right to elect.
Notwithstanding the preceding sentence, in the event of a continuing breach of
this Agreement by the Company, the Executive, after giving due notice of an
initial event specified above, shall not waive any of his rights solely under
this Agreement and this Section 4 by virtue of the fact that Executive has
submitted his resignation, but has remained in the employment of the Company and
is engaged in good faith discussions to resolve any occurrence of an event
described in clauses (ii)(A), (B), (C), (D) and (E) above. An Event of
Termination shall not include Termination for Cause, as defined in Section 7.

 

(b) Upon the occurrence of an Event of Termination, on the Date of Termination,
as defined in Section 8 below, the Company shall pay Executive (or, in the event
of his subsequent death, his beneficiary or beneficiaries, or his estate, as the
case may be), as severance pay or liquidated damages, or both, a sum equal to
the greater of the payments due for the remaining term of the Agreement or 1.20
times the average of the three preceding years’ Base Salary, plus bonuses and
any other cash compensation paid to the Executive during such years, and the
amount of any contributions made pursuant to any employee benefit plans on
behalf of the Executive maintained by the Company during such years; provided,
however, that in no event shall total severance compensation from all sources
cause an “excess parachute payment” referred to at subsection 5(f) below. At the
election of the Executive, such payments shall be made in a lump sum or paid
monthly during the remaining term of the Agreement following the Termination
Date. In the event that no election is made, payment to the Executive will be
made on a monthly basis during the remaining term of the Agreement. Such
payments shall not be reduced in the event the Executive obtains other
employment following termination of employment.

 

(c) In the event that there has not been a Change in Control as defined in
Section 5(a), upon the voluntary termination by Executive (upon giving 60 days’
written notice to the Company and which shall not be deemed to constitute an
“Event of Termination” as defined herein), the Company, at the discretion of the
Board, shall pay Executive (or in the event of his subsequent death, his
beneficiary or beneficiaries, or his estate, as the case may be), a severance
payment in an amount to be determined by the Board at the time of such voluntary
termination by the Executive.

 

(d) Upon the occurrence of an Event of Termination, the Company will cause to be
continued, for a period of twelve calendar months thereafter, life, medical,
dental and disability coverage substantially identical to the coverage
maintained by the Company for Executive prior to the Event of Termination. Such
coverage shall cease upon the expiration of the remaining term of this
Agreement.

 

 

5. CHANGE IN CONTROL.

(a) No benefit shall be payable under this Section 5 unless there shall have
been a Change in Control of the Company, as set forth below. For purposes of
this Agreement, a “Change in Control” of the Company shall mean any of the
following:

 

(1) a reorganization, merger, merger conversion, consolidation or sale of all or
substantially all of the assets of the Company, or a similar transaction in
which the Company is not the resulting entity and that is not approved by a
majority of the Incumbent Board (as herein defined) of the Company; or

 

(2) individuals who constitute the Incumbent Board of the Company cease for any
reason to constitute a majority thereof; provided that any person becoming a
director subsequent to the date hereof whose election was approved by a vote of
at least 80% of the directors comprising the Incumbent Board, or whose
nomination for election by the Company’s shareholders was approved by the
nominating committee, if any, serving under the Incumbent Board, shall be, for
purposes of this Section 5, deemed to be a member of the Incumbent Board; or

 

(3) the occurrence of an event, the nature of which would be required to be
reported in response to Item 1 of the Current Report on Form 8-K, as such form
is in effect on the date hereof, pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934 (the “Exchange Act”); or

 

(4) any “person” (as the term is used in Section 13(d) and 14(d) of the Exchange
Act of 1934) is or becomes an Acquiring Person, as more particularly defined in
the Rights Agreement dated October 5, 2008 by and between the Company and Regan
& Associates, Inc., as Rights Agent; or

 

(5) a proxy statement soliciting proxies from shareholders of the Company, by
someone other than the current management of the Company, seeking shareholder
approval of a plan of reorganization, merger or consolidation of the Company or
similar transaction with one or more corporations, as a result of which the
outstanding shares of the class of securities then subject to the plan or
transaction are exchanged or converted into cash or property or securities not
issued by the Company; or

 

(6) a tender offer or exchange offer is made by any person which would result in
a person or group beneficially owning 10% or more of the voting securities of
the Company, and shareholders owning beneficially or of record 10% or more of
the outstanding securities of the Company have tendered or offered to sell their
shares pursuant to such tender offer.

 

“Incumbent Board” means the Board of the Company on the date hereof, provided
that any person becoming a director subsequent to the date hereof whose election
was approved by a vote of at least 80% of the directors comprising the Incumbent
Board, or whose nomination for election by shareholders was approved by the
nominating committee, if any, serving under an Incumbent Board, shall be
considered to be a member of the Incumbent Board.

 

(b) If any of the events described in Section 5(a) hereof constituting a Change
in Control have occurred, Executive shall be entitled to the benefits provided
in Sections 5(c), (d), (e) and (g) upon his subsequent termination of employment
at any time during the term of this Agreement, regardless of whether such
termination results from his resignation or his dismissal upon the Change in
Control.

 

(c) Upon the occurrence of a Change in Control followed by the Executive’s
termination of employment, the Company shall pay Executive (or in the event of
his subsequent death, his beneficiary or beneficiaries, or his estate, as the
case may be), as severance pay or liquidated damages or both, a sum equal to the
greater of the payments due for the remaining Term or 2.99 times the average of
the five preceding years’ Base Salary, plus bonuses and any other cash
compensation paid to the Executive during such years, and the amount of any
contributions made to any employee benefit plans, on behalf of the Executive,
maintained by the Company during such years. Such payment shall be made by the
Company on the Date of Termination. At the election of the Executive, which
election shall be made on an annual basis following the Annual Meeting of
Shareholders of the Company, and which election is irrevocable for the year in
which made, such payment may be made in a lump sum or paid in equal monthly
installments during the 36 months following the Executive’s termination. In the
event that no election is made, payment to the Executive will be made on a
monthly basis during the remaining term of the Agreement.

 

(d) Upon the occurrence of a Change in Control followed by the Executive’s
termination of employment, the Company will cause to be continued life, medical,
dental and disability coverage substantially identical to the coverage
maintained by the Company for Executive prior to his severance. Such coverage
and payments shall cease upon the expiration of 36 months.

 

(e) Upon the occurrence of a Change in Control, Executive will be entitled to
any benefits granted to him pursuant to any stock option plan of the Company.

 

(f) Notwithstanding the preceding paragraphs of this Section 5, in the event
that the aggregate payments or benefits to be made or afforded to Executive
under the preceding paragraphs (the “Termination Benefits”) would be deemed to
include an “excess parachute payment” under Section 280G of the Internal Revenue
Code of 1986, as amended and from time to time in effect (the “Code”), then the
Termination Benefits shall be reduced to an amount which would not be deemed to
include an “excess parachute payment” under Section 280G of the Code.

 

(g) If, during the Term, Executive is incapable of performing his duties
hereunder by reason of temporary disability, the Company shall not reduce the
compensation otherwise payable to Executive during the period of disability.

 

 

6. TERMINATION UPON RETIREMENT OR DISABILITY.

Termination by the Company of Executive’s employment based on “Retirement” shall
mean termination of employment in accordance with the Company’s retirement
policy or in accordance with any retirement arrangement established with
Executive’s consent with respect to him. Upon termination of employment of
Executive upon Retirement, Executive shall be entitled to all benefits under any
retirement plan of the Company and any other plans to which Executive is a
party. Termination by the Company of Executive’s employment based on
“Disability” shall mean termination due to any physical or mental impairment
which qualifies the Executive for disability benefits under the applicable
long-term disability plan maintained by the Company or, if no such plan exists
or applies, a disability which would qualify the Executive for disability
benefits under the federal social security system.

 

 

7. TERMINATION FOR CAUSE.

The Company retains the right to terminate the Executive for "Cause," without
compensation. “Termination for Cause” shall mean termination due to Executive’s
personal dishonesty, incompetence, willful misconduct, any breach of fiduciary
duty involving personal profit, intentional failure to perform stated duties,
willful violation of any law, rule, or regulation (other than traffic violations
or similar offenses), or final cease-and-desist order, or willful material
breach of any provision of this Agreement. For purposes of this paragraph 7, no
act or failure to act on the part of Executive shall be considered “willful”
unless done, or omitted to be done, by the Executive not in good faith and
without reasonable belief that the Executive’s action or omission was in the
best interest of the Company. Notwithstanding the foregoing, Executive shall not
be deemed to have been Terminated for Cause unless and until there shall have
been delivered to him a copy of a resolution duly adopted by the affirmative
vote of not less than 80% of the members of the Board at a meeting of the Board
called and held for that purpose (after reasonable notice to Executive and an
opportunity for him, together with counsel, to be heard before the Board),
finding that in the good faith opinion of the Board, Executive was guilty of
conduct justifying Termination for Cause and specifying the particulars thereof
in detail.

 

8. NOTICE.

(a) Any purported termination of this Agreement by the Company or by Executive
shall be communicated by Notice of Termination to the other party to this
Agreement at the addresses set forth above or from time to time, as provided by
one party to the other. For purposes of this Agreement, a “Notice of
Termination” shall mean a written notice which shall indicate the specific
termination provision in this Agreement relied upon, and shall set forth in
reasonable detail the facts and circumstances claimed to provide a basis for
termination of Executive’s employment under the provision so indicated.

 

(b) “Date of Termination” shall mean the date specified in the Notice of
Termination (which, in the case of a Termination for Cause, shall not be less
than 30 days from the date that the Notice of Termination is given).

 

(c) If, within 30 days after any Notice of Termination is given, the party
receiving the Notice of Termination notifies the other party that a dispute
exists concerning the termination (except upon the occurrence of a Change in
Control or voluntary termination by the Executive in which case the Date of
Termination shall be the date specified in the Notice), the Date of Termination
shall be the date on which the dispute is finally determined, either by mutual
written agreement of the parties, by a binding arbitration award, or by a final
judgment, order or decree of a court of competent jurisdiction (the time for
appeal having expired and no appeal having been perfected); and provided
further, that the Date of Termination shall be extended by a notice of dispute
only if such notice is given in good faith and the party giving the notice
pursues the resolution of such dispute with reasonable diligence.
Notwithstanding the pendency of any such dispute, the Company will continue to
pay Executive his full compensation in effect when the notice giving rise to the
dispute was given (including, but not limited to, Base Salary) and continue
Executive as a participant in all compensation, benefit and insurance plans in
which he was participating when the notice of dispute was given, until the
dispute is finally resolved in accordance with this Agreement, provided such
dispute is resolved within nine months after the Date of Termination specified
in the Notice of Termination; notwithstanding the foregoing, no compensation or
benefits shall be paid to Executive in the event the Executive is Terminated for
Cause. In the event that any Termination for Cause is found to have been
wrongful or any dispute in connection therewith is otherwise decided in
Executive’s favor, the Executive shall be entitled to receive all compensation
and benefits which accrued for up to a period of nine months after the
Termination for Cause. If such dispute is not resolved within the nine-month
period, the Company shall not be obligated, upon final resolution of such
dispute, to pay Executive compensation and other payments accruing more than
nine months from the Date of the Termination specified in the Notice of
Termination. Amounts paid under this Section are in addition to all other
amounts due under this Agreement and shall not be offset against or reduce any
other amounts due under this Agreement.

 

 

9. POST-TERMINATION OBLIGATIONS.

(a) All payments and benefits to Executive under this Agreement shall be subject
to Executive’s compliance with paragraph (b) of this Section 9 during the Term
and for one full year after the expiration or termination of this Agreement.

 

(b) Executive shall, upon reasonable notice, furnish such information and
assistance to the Company as may reasonably be required by the Company in
connection with any litigation in which it or any of its subsidiaries or
affiliates is, or may become, a party.

 

 

10. NON-COMPETITION.

(a) Upon any termination of Executive’s employment hereunder pursuant to
Section 4(c) above, Executive agrees not to compete with the Company for a
period of two years following such termination in any location where the Company
has made sales within the five years preceding such termination, except as
agreed to pursuant to a resolution duly adopted by the Board. Executive agrees
that during such period, Executive shall not work for or advise, consult or
otherwise serve with, directly or indirectly, any entity whose business
materially competes with the business activities of the Company. The parties
hereto, recognizing that irreparable injury will result to the Company, its
business and property in the event of Executive’s breach of this Section 10(a),
agree that in the event of any such breach by Executive, the Company will be
entitled, in addition to any other remedies and damages available, to an
injunction to restrain the violation hereof by Executive, Executive’s partners,
agents, servants, employers, employees and all persons acting for or with
Executive. Nothing herein will be construed as prohibiting the Company from
pursuing any other remedies available to the Company for such breach or
threatened breach, including the recovery of damages from Executive.

 

(b) Executive recognizes and acknowledges that the knowledge of the business
activities and plans for business activities of the Company and affiliates
thereof, as it may exist from time to time, is a valuable, special and unique
asset of the business of the Company. Executive will not, during or after the
term of his employment, disclose any knowledge of the past, present, planned or
considered business activities of the Company or affiliates thereof to any
person, firm, corporation, or other entity for any reason or purpose whatsoever.
Notwithstanding the foregoing, Executive may disclose any knowledge of financial
and/or economic principles, concepts or ideas which are not solely and
exclusively derived from the business plans and activities of the Company, and
Executive may disclose any information regarding the Company which is otherwise
publicly available. In the event of a breach or threatened breach by the
Executive of the Provisions of this Section 10, the Company will be entitled to
an injunction restraining Executive from disclosing, in whole or in part, the
knowledge of the past, present, planned or considered business activities of the
Company or affiliates thereof, or from rendering any services to any person,
firm, corporation, other entity to whom such knowledge, in whole or in part, has
been disclosed or is threatened to be disclosed. Nothing herein will be
construed as prohibiting the Company from pursuing any other remedies available
to the Company for such breach or threatened breach, including the recovery of
damages from Executive.

 

 

11.EFFECT ON PRIOR AGREEMENTS AND EXISTING BENEFITS PLANS.

This Agreement contains the entire understanding between the parties hereto
regarding its subject matter and supersedes any prior change in control
agreement between the Company and Executive, except that this Agreement shall
not affect or operate to reduce any benefit or compensation inuring to the
Executive of a kind elsewhere provided. No provision of this Agreement shall be
interpreted to mean that Executive is subject to receiving fewer benefits than
those available to him without reference to this Agreement.

 

 

12. NO ATTACHMENT.

(a) Except as required by law, no right to receive payments under this Agreement
shall be subject to anticipation, commutation, alienation, sale, assignment,
encumbrance, charge, pledge, or hypothecation, or to execution, attachment,
levy, or similar process or assignment by operation of law, and any attempt,
voluntary or involuntary, to affect any such action shall be null, void, and of
no effect.

 

(b) This Agreement shall be binding upon, and inure to the benefit of, Executive
and the Company and their respective successors and assigns.

 

 

13. MODIFICATION AND WAIVER.

(a) This Agreement may not be modified or amended except by an instrument in
writing signed by the parties hereto.

 

(b) No term or condition of this Agreement shall be deemed to have been waived,
nor shall there be any estoppel against the enforcement of any provision of this
Agreement, except by written instrument of the party charged with such waiver or
estoppel. No such written waiver shall be deemed a continuing waiver unless
specifically stated therein, and each such waiver shall operate only as to the
specific term or condition waived and shall not constitute a waiver of such term
or condition for the future as to any act other than that specifically waived.

 

 

14. SEVERABILITY.

If, for any reason, any provision of this Agreement, or any part of any
provision, is held invalid, such invalidity shall not affect any other provision
of this Agreement or any part of such provision not held so invalid, and each
such other provision and part thereof shall to the full extent consistent with
law continue in full force and effect.

 

 

15. HEADINGS FOR REFERENCE ONLY.

The headings of sections and paragraphs herein are included solely for
convenience of reference and shall not control the meaning or interpretation of
any of the provisions of this Agreement.

 

 

16. GOVERNING LAW.

This Agreement shall be governed by the laws of the State of New York, without
reference to conflict-of-law principles.

 

 

17. COUNTERPART COPIES.

This Agreement may be executed in one or more counterparts, each of which when
executed and delivered shall be an original, but such counterparts shall
together constitute one and the same instrument.

 

18. PAYMENT OF LEGAL FEES.

All reasonable legal fees paid or incurred by Executive pursuant to any dispute
or question of interpretation relating to this Agreement shall be paid or
reimbursed by the Company, provided that the dispute or interpretation has been
settled by Executive and the Company or resolved in the Executive’s favor.

 

 

19. INDEMNIFICATION.

The Company shall, at its expense (a) provide Executive (including his heirs,
executors and administrators) with coverage under a standard directors’ and
officers’ liability insurance policy; and (b) shall indemnify Executive (and his
heirs, executors and administrators) to the fullest extent permitted by law in
accordance with the terms of the Indemnity Agreement by and between the Company
and the Executive dated as of August 5, 2008 (a copy of which is attached hereto
as Exhibit A to this Agreement).

 

 

20. SUCCESSOR TO THE COMPANY.

The Company shall require any successor or assignee, whether direct or indirect,
by purchase, merger, consolidation or otherwise to all or substantially all the
business or assets of the Company, expressly and unconditionally to assume and
agree to perform the Company’s obligations under this Agreement, in the same
manner and to the same extent that the Company would be required to perform if
no such succession or assignment had taken place.

 

21. POSTPONEMENT OF CERTAIN PAYMENTS.

 

Notwithstanding any other provision of this Agreement, distributions to
Executive due to his “separation from service,” within the meaning of § 409A of
the Internal Revenue Code of 1986, as amended, and the Regulations of the
Internal Revenue Service thereunder, may not be made before the date that is six
months following the date of Executive’s “separation from service,” or, if
earlier, the date of death of Executive.

IN WITNESS WHEREOF, the Company has caused this Agreement to be executed and its
seal to be affixed hereunto by its duly authorized officer, and Executive has
signed this Agreement, on the day and date first above written.

 

 

 

TAYLOR DEVICES, INC.

 

 

By: ____________________________________

Name: Douglas P. Taylor,

Title: President and CEO

 

 

 

EXECUTIVE

 

 

__________________________________________

Mark V. McDonough

 

 

 

 

EXHIBIT A

 

Indemnity Agreement