SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
F O R M 10-KSB
Annual Report Pursuant to Section 13 or 15(d)
of the Securities Exchange Act of 1934
For the fiscal year Commission file number 2-15966
ended June 30, 1997
TAYCO DEVELOPMENTS, INC.
(Exact name of registrant as specified in its charter)
New York 16-0835557
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
100 Taylor Drive, P.O. Box 748
North Tonawanda, New York 14120-0748
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, (716) 694-0877
Securities registered pursuant to Section 15(d) of the Act:
Common Stock, ($.05 par value)
(Title of class)
Indicate by check mark whether the registrant (1) has filed all
reports required to be filed by Section 13 or 15(d) of the
Securities Exchange Act of 1934 during the preceding twelve months
(or for such shorter period that the registrant was required to
file such reports), and (2) has been subject to such filing
requirements for the past 90 days.
Yes X No ________
Indicate by check mark if disclosure of delinquent filers pursuant
to Item 405 of Regulation S-B is not contained herein, and will not
be contained, to the best of registrant's knowledge, in definitive
proxy or information statements incorporated by reference in Part
III of this Form 10-KSB or any amendment to Form 10-KSB.
[ X ] N/A
The aggregate market value of the common stock held by
non-affiliates (as defined in Rule 405 of the Securities Act of
1933) of the registrant based upon average of the bid and asked
price on September 15, 1997, the latest practicable date, was:
$1,401,634.
The number of shares outstanding of each of the registrant's
classes of common stock, as of the latest practicable date.
Class Outstanding at September 15, 1997
Common Stock, $.05 par value 990,213
TAYCO DEVELOPMENTS, INC.
FORM 10-KSB INDEX
PAGE
PART I . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
ITEM 1. DESCRIPTION OF BUSINESS. . . . . . . . . . 3
ITEM 2. DESCRIPTION OF PROPERTY. . . . . . . . . . 6
ITEM 3. LEGAL PROCEEDINGS. . . . . . . . . . . . . 6
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY
HOLDERS . . . . . . . . . . . . . . . . . . 6
PART II. . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
ITEM 5. MARKET FOR COMMON EQUITY AND RELATED
STOCKHOLDER MATTERS. . . . . . . . . . . . 7
ITEM 6. MANAGEMENT'S DISCUSSION AND ANALYSIS OR
PLAN OF OPERATION. . . . . . . . . . . . . 7
ITEM 7. FINANCIAL STATEMENTS . . . . . . . . . . . .9
ITEM 8. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS
ON ACCOUNTING AND FINANCIAL DISCLOSURE . . .9
PART III . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
ITEM 9. DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS
AND CONTROL PERSONS.. . . . . . . . . . . . 10
ITEM 10. EXECUTIVE COMPENSATION . . . . . . . . . . 10
ITEM 11. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL
OWNERS AND MANAGEMENT . . . . . . . . . . 11
ITEM 12. CERTAIN RELATIONSHIPS AND RELATED
TRANSACTIONS . . . . . . . . . . . . . . . 13
ITEM 13. EXHIBITS AND REPORTS OF FORM 8-K . . . . . 14
PART I
ITEM 1. DESCRIPTION OF BUSINESS
Business Development
The Company was incorporated in the State of New York on
July 22, 1955, and is a patent holding company engaged in research,
development and licensing to manufacture shock and vibration
isolators, energy storage and shock absorption components for use
on various types of vehicles, machinery and equipment. The Company
sells research and development engineering services to its
affiliate, Taylor Devices, Inc. ("Devices"), and pursuant to a
certain License Agreement dated November 1, 1959("License
Agreement") has licensed Devices to manufacture and sell certain of
the Company's patented products. The products sold are used in the
defense, aerospace and commercial industries. See "Patents,
Trademarks and Licenses."
The Company continues to research and develop new and advanced
technology products.
Principal Products
The Company's primary products include a wide spectrum of
components utilized for the absorption and/or attenuation of
transient and/or steady state motion of mechanical elements.
Specific components include shock absorbers, vibration dampers,
seismic shock arresters, vehicle suspension devices and recoil
absorbers. These components may utilize either hydraulic,
elastomer, or electronic means to obtain their required output.
A correlative component of these products is the analysis and
development of design specifications for various types of energy
absorption devices. The Company maintains an extensive computer
data base of shock pulses, combined with its own proprietary
structural analysis computer codes. The Company markets analytical
services utilizing these assets.
Distribution
The Company has no need for sales representatives or
distributors because the major part of its work is performed under
contract with Devices.
Competition
The Company faces no significant competition due to the nature
of its patented products, and the subcontracting arrangement with
Devices.
Raw Materials and Supplies
Due to the nature of its business, the Company has no need for
raw materials and supplies which are considered scarce or in short
supply. The occasional purchase of supplies is made through local
suppliers which are readily available.
Patents, Trademarks and Licenses
Under the License Agreement, the Company granted Devices
preferential rights to market, in the United States and Canada, all
existing and future inventions and patents owned by the Company.
The term of the License Agreement is the life of the last-to-expire
patent on which Devices is paying royalties, which is December 1,
2014. Devices pays a 5% royalty to the Company on sales of items
sold and shipped. During fiscal 1997, Devices incurred royalties
to the Company of $167,810. Payments are required to be made
quarterly without interest; payments are current. No other
allocation of expenses is made from the Company to Devices.
The License Agreement also provides for the Company to pay
Devices 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 Devices,
with rights to such modification having been assigned to the
Company. No royalties were received in 1997. Royalties, if any,
are paid quarterly.
The Company holds approximately 41 patents expiring at
different times until the year 2014. With the Company's additions
to its engineering staff, and the research and development
activities ("R&D") for Devices, the importance of these patents has
somewhat diminished. In fiscal 1997, royalty income from the
patents accounted for 42.8% of the Company's income.
Although the Company and Devices share common management and
a close business relationship, as separate corporations responsible
to their own shareholders, interests may diverge regarding
development and licensing of future inventions and patents. In
that case, the Company would be permitted to license future
inventions and patents to licensees other than Devices, rendering
Devices' option on future inventions and patents under its License
Agreement minimally beneficial.
Dependence Upon Customers/Terms of Sale/Sales Backlog
The Company's current business is almost totally dependent on
Devices. In fiscal 1997, 100% of sales were to Devices in the form
of both direct and subcontracted project engineering. Terms of
sale are normally net 30 days, with purchase orders issued on a
"cost plus" basis. Work is subcontracted from Devices as needed,
and consequently there is no backlog. All contract arrangements
are at arm's length and are at terms no less favorable to the
Company than if made to an independent third party.
Government Contracts
The Company has proposals pending with the federal government,
but no assurances can be given that any contracts will be
forthcoming.
Research and Development
The Company engages in R&D in connection with the design of
products that are sold by Devices. "Patents, Trademarks and
Licenses." The Company's income from R&D was $223,507 and $249,227
for fiscal years 1997 and 1996, respectively.
Government Regulation
Compliance with federal, state and local provisions which have
been enacted or adopted regulating the discharge of materials into
the environment have had no material effect on the Company, and the
Company believes that it is in substantial compliance with such
provisions.
The Company is subject to the Occupational Safety and Health
Act, ("OSHA") and the rules and regulations promulgated thereunder,
which establishes strict standards for the protection of employees,
and imposes fines for violations of such standards. The Company
believes that it is in substantial compliance with OSHA provisions
and does not anticipate any material corrective expenditures in the
near future. There have been no significant costs or efforts in
conjunction with compliance with environmental standards.
Employees
As of June 30, 1997, the Company had three full time
employees, which does not include executive officers.
ITEM 2. DESCRIPTION OF PROPERTY
The Company leases approximately 800 square feet of office
space from Devices pursuant to a new three year Lease Agreement
between the Company and Devices entered into on July 1, 1997, at a
base rental of $10,000 per year, replacing a former lease
arrangement on virtually identical terms. The Lease Agreement can
be canceled by a 90 days' written notice to the other party.
Rental payments for fiscal 1997 totaled $10,000. The total rent
paid by the Company is determined in accordance with the base
rental, and is subject to adjustment for increases in taxes,
maintenance costs and for utilization of additional space by the
Company. The real property utilized by the Company is in good
condition, adequate for present operations and adequately covered
by insurance.
ITEM 3. LEGAL PROCEEDINGS
None
ITEM 4. SUBMISSION OF MATTERS TO VOTE OF SECURITY HOLDERS
None
PART II
ITEM 5. MARKET FOR COMMON EQUITY AND RELATED STOCKHOLDER MATTERS
Market Information
The Company's common stock is traded over the counter and is
listed by the National Quotation Bureau ("NQB").
The market prices noted below for fiscal years 1997 and 1996
were obtained from the NQB and represent estimated prices between
dealers, without retail mark-up, mark-down or commission. Prices
do not necessarily represent actual transactions because trades in
the Company's shares are sporadic.
Fiscal 1997 Fiscal 1996
High Low High Low
First Quarter 2.50 2.0625 4 2
Second Quarter 3.25 2.50 4 2.50
Third Quarter 4.25 3.25 3.25 1.75
Fourth Quarter 3.75 3.50 2.25 1.50
Holders
As of September 15, 1997, the approximate number of holders of
record of common stock of the Company was 897. Due to a
significant number of shares of the Company's common stock held in
street name, the Company believes that the total number of
beneficial owners of its common stock exceeds 1,000.
Dividends
There are no restrictions on the payment of either cash or
stock dividends, but no dividends were declared in fiscal years
1997 or 1996. It is highly unlikely that the Company will pay
dividends until its financial condition has significantly improved.
ITEM 6. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
The Private Securities Litigation Reform Act of 1995 provides
a "safe harbor" for forward-looking statements. Certain matters
discussed in this section and elsewhere in this report are forward-
looking statements. These forward-looking statements involve risks
and uncertainties including, but not limited to, economic
conditions, product demand and industry capacity, competition, and
other risks.
The Company experienced another strong year in fiscal year
1997 (FY97). Revenues of $391,317 were the highest in the six
years of reporting since the Company's restructuring. Income from
Operations was the second best, as was Equity Income from Devices.
Net Income for FY97 was $231,650, also second highest of the past
six year period, compared to $257,127, the record amount in FY96.
Revenue from Royalties rose to $167,810 in FY97 compared to
$129,325 in FY96 as Devices' product mix contained high levels of
defense and unishok shipments. Research and Development ("R&D")
Income declined from $249,227 in FY96 to $223,507 in FY97 as the
Company's Engineers shifted some of their efforts to in-house
development projects, which are discussed below. The combined
Revenue of Royalties and R&D Income were $391,317 in FY97, or
$12,765 higher than the previous high revenue figure of $378,552
established in FY96.
Operating expenses increased to $263,750 in FY96 from the
figure of $226,915 for FY96. This difference was generated
primarily by staff related matters, which were discussed in the
interim filings - internal royalties to staff members for revenue
producing patents and travel and training expense related to staff
development.
Income from Operations for FY97 was $127,567, the second best
of the six year period as compared with $151,637 for FY96.
Total Other Income for FY97 was $139,890 which is down from
the FY96 result of $151,017. The significant portion of this
change was due to reduced Equity Income from Devices. Although
Devices had another strong operational year, the full utilization
of its NOL in FY96 and significant adjustments for non-recurring
expenses impacted its bottom line and the Company's share of that
bottom line.
The FY97 Net Income of $231,650 was the second best of the
restructured era, as compared with the FY96 figure of $257,127, the
highest of the era.
The Company's Balance Sheet and general financial condition
remain stable and strong, with no significant changes since last
year. The Company's obligations with respect to the loans of its
former affiliate, Tayco Technology, Incorporated ("Tayco Tech")
terminated in FY97. There will be minor cash flow benefits
accruing to the Company with the conclusion of its six year
obligation.
As discussed above, there has been a moderate shift of staff
emphasis from support of Devices' projects to internal
opportunities. This shift has been, to some extent, generated by
customer requests for modifications and upgrades to existing,
royalty producing products. Two tangible examples are a gyroscope
strut and a Commercial Off The Shelf ("COTS") cabinet isolator.
Management believes these and similar projects offer the potential
for substantial and sustained royalty income for the Company in the
near future. Near the end of FY97, the Company was notified that
the joint development contract with a major defense contractor
which consumed a significant portion of its staff time in the
period FY94-96, was being reactivated. This project has produced
some revenue in FY98, but it is too early to predict whether and
when it may become significantly profitable. The staff continues
to allocate a portion of its time, as required, to Devices' seismic
related jobs.
For FY97, Management expected that FY97 would show stable
operating results and good, but reduced, income from Devices. For
FY98, a similar scenario exists, with the major unknown factor
being the joint development project. For FY98, Management is
anticipating a good financial performance, as well as some tangible
results from the Company's technological developments.
ITEM 7. FINANCIAL STATEMENTS
For information concerning this Item, see the Company's
balance sheet and related financial statements and notes at Item
13.
ITEM 8. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON
ACCOUNTING AND FINANCIAL DISCLOSURES
There have been no disagreements between the Company and its
accountants as to matters which require disclosure.
PART III
ITEM 9. DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS AND CONTROL
PERSONS
DOUGLAS P. TAYLOR, (49) President and Chief Executive Officer of
the Company since April 1991 was Executive Vice President since
1979, and a Director since 1972. Since 1976, and 1977, he has
served as Director of Devices and Tayco Realty, respectively. Mr.
Taylor is inventor/co-inventor on 21 U.S. Patents assigned to the
Company, and is widely published within the fluid power,
aerospace/defense, and structural engineering communities.
DAVID A. LEE, (66) has served as a Vice President of the Company
since April 1991, and a Director since November 1991. Dr. Lee has
served as a consultant to Devices since 1974. He has a Ph.D. and
M.E. degree in mechanical engineering from the University of
Southern California at Los Angeles, and a B.S. degree in
mechanical engineering from the California Institute of Technology.
JOSEPH P. GASTEL, (72) is a patent attorney and has served as a
Director and Secretary of the Company and Devices since 1984.
PAUL L. TUTTOBENE, JR., (34) President of PLT Associates, a
corporation which serves as a manufacturer's representative for the
Company, has been a Director of the Company since November 1991.
He has a B.S. degree in marketing from St. John Fisher College.
JANICE M. NICELY, (57) serves the Company and Devices as
Shareholder Relations Manager and has been with the Company since
1980. Ms. Nicely has been a Director since November 1992.
ITEM 10. EXECUTIVE COMPENSATION
The following table sets forth certain information concerning
compensation of the Company's Chief Executive Officer. No
executive officer in the Company receives a salary.
SUMMARY COMPENSATION TABLE
ANNUAL
COMPENSATION
All Other
Name and Principal Compensation
Position Year Salary Total(1)
Douglas P. Taylor 1997 $0 $ 18,000
Chairman, President and 1996 $0 $ 8,500
Chief Executive Officer 1995 $0 $ 8,000
(1) The following is a summary of all other compensation paid or
accrued:
Directors'
Fees Royalties Total
Fiscal Year Ended 6/30/97 (A)$3,000 $15,000 $18,000
Fiscal Year Ended 6/30/96 $3,500 $ 5,000 $ 8,500
Fiscal Year Ended 6/30/95 $3,000 $ 5,000 $ 8,000
(A) A Royalty Agreement with the Chief Executive Officer
beginning October 1, 1996. The new Agreement provides for a
monthly payment of $1,666.66 ($20,000 per year) beginning on
October 1 of each year. Fiscal 1997 royalties earned is for the 9
month period, October 1996 to June 30, 1997.
Directors' fees in fiscal 1997 were $1,000 per meeting, with
the Secretary receiving an additional $2,250 for preparing the
minutes of each meeting. The Board of Directors met three times in
fiscal 1997, with all directors present. The Company has no
nominating, audit or other standing committee of the Board.
ITEM 11. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND
MANAGEMENT
The following table sets forth information as of August 1,
1997, as to persons known by the Company to be the beneficial
owners of more than five percent (5%) of the Company's common
stock, as well as shares owned by the named Executive Officer, each
director and all directors and executive officers as a group:
Amount of
Name and Address Direct/Indirect Percent of
of Beneficial Owner Ownership Ownership (4)
Taylor Devices, Inc. 228,317 (1) 23%
90 Taylor Drive
North Tonawanda, NY 14120
Bruce Paul 139,400 14%
1 Hampton Road
Purchase, NY 10577
Paul H. Taylor 105,779 (2) 10%
3677 East River Road
Grand Island, NY 14072
Douglas P. Taylor 60,944 (3) 6.2%
90 Taylor Drive
North Tonawanda, NY 14120
Joseph P. Gastel 0 0
722 Ellicott Square Bldg.
Buffalo, NY 14203
David A. Lee 10,000 1%
1819 Wilshire Blvd.
Santa Monica, CA 90403
Paul L. Tuttobene, Jr. 1,000 *
84 Benedict Road
Pittsford, NY 14534
Janice M. Nicely 62 *
100 Taylor Drive
North Tonawanda, NY 14120
All Directors and 72,056 7.3%
officers as a group
* less than 1%
1. These shares were purchased in January 1992 in a private sale
at their fair market value, in consideration of Devices' partially
discharging certain of the Company's obligations as a guarantor of
the indebtedness of Tayco Tech. See Item 12. "Certain
Relationships and Related Transactions."
2. Mr. Paul Taylor is father of Douglas P. Taylor, and
father-in-law of Richard G. Hill, who are both executive officers
and directors of Devices. Including shares held by Messrs. Douglas
P. Taylor and his family, Paul H. Taylor and his wife, and the
family of Joyce Taylor Hill, daughter of Paul H. Taylor and wife of
Richard G. Hill, the Taylor family owns 203,686 shares, or
approximately 20.6% of the Company's common stock. Joyce Taylor
Hill, sister of Douglas P. Taylor, holds 22,674 shares as custodian
for her minor children, with 3,511 shares in her name and Richard
Hill beneficially owns 1,800 shares. Isabel B. Taylor, wife of
Paul H. Taylor, beneficially owns 8,928 shares. In fiscal 97 Paul
H. Taylor gifted a total of 31,628 shares of Company stock to his
family, gave 8,504 to charity and sold 9,902 shares on the open
market.
3. Includes 28,942 shares held beneficially and of record by
Sandra Taylor, wife of Mr. Douglas P. Taylor, as custodian for
their minor children, and as to which Mr. Taylor disclaims any
beneficial ownership.
4. Information presented in this table has been supplied by the
respective shareholders or by the Company, as transfer agent.
Other than for certain arrangements between the Company and its
affiliates, the Company knows of no contractual arrangement which
may result in a change in control of the Company at any subsequent
date. See Item 12. "Certain Relationships and Related
Transactions."
ITEM 12. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Just as Devices is the largest single shareholder of the
Company, similarly, the Company is the largest single shareholder
of Devices, owning approximately 25.4% of Devices' outstanding
common stock. See also Item 11. "Security Ownership of Certain
Beneficial Owners and Management." The Company owns approximately
42% of Tayco Realty, with the remaining 58% owned by Devices. The
Company rents space from Tayco Realty. See Item 2. "Description of
Property."
Under the License Agreement, the Company granted Devices
preferential rights to manufacture and sell in the United States
and Canada certain of the Company's patented products. The terms
of the License Agreement are more fully set forth in Item 1.
"Description of Business - Patents, Trademarks and Licenses."
The patents which are the subject of the License Agreement had
been assigned to Devices in connection with Devices' assumption of
the Company's portion of the indebtedness of Tayco Tech. For the
same reason, the Company also granted Devices an irrevocable proxy
to vote the 697,567 shares which the Company owns in Devices. With
the Company's payment in full to Devices of the Company's share of
the Tayco Tech debt on or about June 9, 1997, the assignment was
released and the patents returned and proxy terminated.
In 1997, the Company paid patent fees of $32,623 to Joseph P.
Gastel for his services as the Company's patent attorney.
All transactions described above are on as favorable a basis to
the Company as if entered into with an unaffiliated party. The
Company, Devices, and Tayco Realty share common management and a
close business relationship. Particularly as it relates to the
Company and Devices, as separate corporations responsible to their
own shareholders, corporate interests may from time to time diverge
regarding development and licensing of future inventions and
patents. In that case, the Company would be permitted to license
future patents and inventions to licensees other than Devices,
which may render Devices' present License Agreement only minimally
beneficial.
Pursuant to a settlement of litigation between the Company and
Devices commenced by Paul H. Taylor, whereby the arrangement
resulted in the dismissal of all claims between the parties, the
settlement included an annual payment of principal and interest in
the amount of $35,000 paid by the Company over a six year period
that commenced January 1, 1994. As a term of the settlement, Paul
H. Taylor agreed to neither manufacture, sell or distribute the
Company's products, nor interfere with the management of the
Company, Devices or any affiliate by way of soliciting proxies,
nominating opposing directors or, in general, attempt to regain
control of the companies.
ITEM 13. EXHIBITS AND REPORTS ON FORM 8-K
A. FILED AS PART OF THIS REPORT:
1. Financial Statements: See attached index.
Balance Sheet at June 30, 1997
Statements of Changes in
Stockholders' Equity for the
years ended June 30, 1997 and 1996
Statements of Income for the
years ended June 30, 1997 and 1996
Statements of Cash Flows for the
years ended June 30, 1997 and 1996
Notes to Financial Statements June 30, 1997
3. Exhibits
(3) Articles of Incorporation and By-laws.
(i)Certificate of Incorporation filed by the New York
State Department of State on July 22, 1955, incorporated
by reference to exhibit 1 of Report on Form 8-K, dated
September 30, 1992.
(ii) Amendment to Certificate of Incorporation filed by
the New York Department of State on October 23, 1959,
incorporated by reference to exhibit 2 of Report on
Form 8-K, dated September 30, 1992.
(iii) Amendment to Certificate of Incorporation filed
by the New York Department of State on September 5,
1961, incorporated by reference to exhibit 3 of Report
on Form 8-K, dated September 30, 1992.
(iv) Amendment of Certificate of Incorporation filed by
the New York Department of State on November 17, 1992,
incorporated by reference to the Annual Report on Form
10-KSB, dated September 30, 1992.
(v) By-laws of the Registrant, as revised and amended,
attached to and incorporated into this Annual Report on
Form 10-KSB.
(10) Material contracts
(i) License Agreement between the registrant and Taylor
Devices, Inc. dated November 1, 1959, incorporated by
reference to exhibit 5 of Report on Form 8-K, dated
September 30, 1992.
(ii) Rental Agreement dated July 1, 1997 between
registrant and Taylor Devices, Inc., attached to and
incorporated into this Annual Report on Form 10-KSB.
(11) Statement of Computation of Per Share Earnings
This computation appears in the Notes to Financial
Statements.
(21) Subsidiaries of the Registrant
Tayco Realty Corporation, organized in New York on
September 7, 1977. Tayco Realty Corporation is owned
42% by the registrant and 58% by Taylor Devices, Inc.
(23) Report and Consent of Independent Certified Public
Accountants Reports on Form 8-K:
Reports on Form 8-K:
None
Signatures
Pursuant to the requirements of Section 13 or 15(d) of the
Securities Exchange Act of 1934, the Registrant has duly caused
this report to be signed on its behalf by the undersigned,
thereunto duly authorized.
DATE: September 1, 1997
TAYCO DEVELOPMENTS, INC.
(Registrant)
By: /s/Douglas P. Taylor
Douglas P. Taylor,
President and Director
(Principal Executive Officer)
and
By: /s/Kenneth G. Bernstein
Kenneth G. Bernstein,
(Principal Financial and
Accounting Officer)
Pursuant to the requirements of the Securities Exchange Act of
1934, this report has been signed below by the following persons on
behalf of the Registrant and in the capacities and on the dates
indicated.
By: /s/Joseph P. Gastel By: /s/David A. Lee
Joseph P. Gastel, Director David A. Lee, Director
By: /s/Paul L. Tuttobene By: /s/Janice M. Nicely
Paul L. Tuttobene, Director Janice M. Nicely, Director
CONSENT OF INDEPENDENT AUDITORS
Board of Directors of Tayco Developments, Inc.
We consent to the incorporation by reference in this Annual
Report on Form 10-KSB (Commission File Number 2-15966) of Tayco
Developments, Inc. of our report dated July 14, 1997, included in
the June 30, 1997 Annual Report to Stockholders of Tayco
Developments, Inc.
/s/ J.D. Elliott & Co., P.C.
J.D. ELLIOTT & CO., P.C.
August 15, 1997
FINANCIAL STATEMENTS
TAYCO DEVELOPMENTS, INC.
June 30, 1997
INDEPENDENT AUDITOR'S REPORT
The Board of Directors and Stockholders
of Tayco Developments, Inc.
We have audited the accompanying balance sheets of Tayco
Developments, Inc. as of June 30, 1997 and 1996, and the related
statements of income, changes in stockholders' equity, and cash
flows for the years then ended. These financial statements are the
responsibility of the Company's management. Our responsibility is
to express an opinion on these financial statements based on our
audits.
We conducted our audits in accordance with generally accepted
auditing standards. Those standards require that we plan and
perform the audit to obtain reasonable assurance about whether the
financial statements are free of material misstatement. An audit
includes examining, on a test basis, evidence supporting the
amounts and disclosures in the financial statements. An audit also
includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audits
provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above
present fairly, in all material respects, the financial position of
Tayco Developments, Inc. as of June 30, 1997 and 1996, and the
results of its operations and its cash flows for the years then
ended in conformity with generally accepted accounting principles.
/s/J.D. Elliott & Co., P.C.
J. D. ELLIOTT & CO., P.C.
Buffalo, New York
August 15, 1997
TAYCO DEVELOPMENTS, INC.
BALANCE SHEETS
June 30, 1997 and 1996
ASSETS 1997 1996
Current
Cash $ 24,006 $ 23,473
Receivables - affiliates, 63,303 83,606
net (Note 6)
Prepaid income taxes 13,071 -
Prepaid expenses 7,037 3,231
Total current assets 107,417 110,310
Investments in Affiliates,
at Equity (Note 2) 1,389,971 1,242,524
Furniture and Equipment -
at Cost (Note 1) 71,771 61,821
Less: accumulated
depreciation 58,639 54,150
13,132 7,671
Other
Patents, net (Note 1) 114,400 97,927
Cash value - life insurance,
net 49,104 43,777
163,504 141,704
$ 1,674,024 $ 1,502,209
LIABILITIES AND STOCKHOLDERS' EQUITY
Current
Current portion of
long-term debt (Note 3) $ 29,163 $ 27,803
Accrued income taxes - 18,747
Accrued expenses 11,069 25,116
Total current liabilities 40,232 71,666
Noncurrent
Deferred tax liabilities
(Note 4) 3,350 -
Long-Term Debt (Note 3) 50,563 82,314
53,913 82,314
Total liabilities 94,145 153,980
Stockholders' Equity
Common stock, par value $.05 a
share, authorized 1,000,000
shares, issued 993,922 shares 49,696 49,696
Paid-in capital 670,605 670,605
Retained earnings 865,207 633,557
1,585,508 1,353,858
Less: Treasury stock, 3,709
shares at cost 5,629 5,629
1,579,879 1,348,229
$1,674,024 $1,502,209
TAYCO DEVELOPMENTS, INC.
STATEMENTS OF INCOME
For the years ended June 30, 1997 and 1996
1997 1996
Revenues (Note 6)
Royalties $ 167,810 $ 129,325
Research and development 223,507 249,227
Total revenues 391,317 378,552
Operating Expenses
Research and development 109,177 105,079
Selling, general and
administrative 139,569 111,146
Depreciation 4,489 1,623
Amortization, patents 10,515 9,067
Total operating expenses 263,750 226,915
Operating income 127,567 151,637
Other Expenses
Interest, net 7,557 9,052
Income before provision
for income taxes and
equity in net income
affiliates 120,010 142,585
Provision for Income Taxes
(Note 4) 35,807 45,527
Income before equity in
net income of affiliates 84,203 97,058
Equity in Net Income of
Affiliates (Note 2) 147,447 160,069
Net income $ 231,650 $ 257,127
Net Income Per Common Share
(Note 5) $ .23 $ .26
TAYCO DEVELOPMENTS, INC.
STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY
For the years ended June 30, 1997 and 1996
Common Paid-in Retained Treasury
Stock Capital Earnings Stock
Balance, July 1, 1995 $ 49,696 $ 670,605 $ 376,430 $ (5,629)
Net income for the
year ended June 30,
1996 - - 257,127 -
Balance, June 30, 1996 49,696 670,605 633,557 (5,629)
Net income for the
year ended June 30,
1997 - - 231,650 -
Balance, June 30,
1997 $ 49,696 $ 670,605 $ 865,207 $ (5,629)
TAYCO DEVELOPMENTS, INC.
STATEMENTS OF CASH FLOWS
For the years ended June 30, 1997 and 1996
1997 1996
Cash Flows From Operating Activities
Net income $ 231,650 $ 257,127
Adjustments to reconcile net income
to net cash provided by operating
activities:
Depreciation and amortization 15,004 10,690
Equity in net income of affiliates (147,447) (160,069)
Deferred income taxes 3,350 -
Changes in:
Receivables - affiliates, net 20,303 (38,401)
Prepaid income taxes (13,071) -
Prepaid expenses (3,806) (89)
Accounts payable - trade - (467)
Accrued income taxes (18,747) 1,979
Accrued expenses (14,047) (12,689)
Cash value - life insurance, net (5,327) (7,291)
Net cash provided by operating
activities 67,862 50,790
Cash Flows From Investing Activities
Acquisition of patents (26,988) (14,030)
Acquisition of furniture and equipment (9,950) (9,294)
Net cash used for investing
activities (36,938) (23,324)
Cash Flows Used For Financing Activities
Repayment of long-term debt (30,391) (28,974)
Net increase/(decrease) in cash 533 (1,508)
Cash Balance, Beginning of Year 23,473 24,981
Cash Balance, End of Year $ 24,006 $ 23,473
1997 1996
Cash paid during the year for:
Interest $ 8,658 $ 10,075
Income taxes $ 64,275 $ 43,548
TAYCO DEVELOPMENTS, INC.
NOTES TO FINANCIAL STATEMENTS
June 30, 1997
NOTE 1 - CORPORATE ACTIVITY AND SIGNIFICANT ACCOUNTING POLICIES
Corporate Activity - Tayco Developments, Inc. ("The Company") is
a patent holding company engaged in research, development and
licensing services for use in the manufacturing operation of its
affiliate, Taylor Devices, Inc. ("Devices"). The Company's
revenues are derived from services provided to Devices (see Note
6).
Investments in Affiliates - Investments in affiliates, where less
than 50% but more than 20% of the outstanding stock is owned by the
Company, are recorded on the equity method.
Research and Development - The cost of material and labor
incurred for research and development is expensed when incurred.
Patents - The cost of obtaining patents, which represent legal
expenditures incurred for patents and patent applications, is
capitalized and amortized over a 15 to 17 year life on a
straight-line basis.
Depreciation - The cost of furniture and equipment is depreciated
over the estimated useful life of 5 to 7 years using the straight
line and accelerated methods.
Income Taxes - Deferred income taxes are provided to reflect the
tax consequences on future years of temporary difference between
the tax bases of assets and liabilities and their financial
reporting amounts at each year-end using the enacted tax rates and
laws that will be in effect when the differences are expected to
reverse. The differences between assets and liabilities for
financial and tax reporting purposes is accumulated depreciation
resulting from use of accelerated methods for tax purposes.
Use of Estimates - The preparation of financial statements in
conformity with generally accepted accounting principles requires
management to make estimates and assumptions that affect the
reported amounts of assets and liabilities and disclosures of
contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenue and expenses during
the year. Actual results could differ from those estimates.
NOTE 2 - INVESTMENTS IN AFFILIATES
Investments in affiliates consisted of the following:
1997 1996
Investment, at cost
Taylor Devices, Inc. (26% ownership) $ 375,866 $ 375,866
Tayco Realty Corporation ("Realty")
(42% ownership) 102,400 102,400
478,266 478,266
Cumulative equity in net income of the
affiliates 911,705 764,258
$1,389,971 $1,242,524
NOTE 2 - (CONT'D)
Equity in net income of affiliates consisted of the following:
1997 1996
Taylor Devices, Inc. $ 125,381 $ 149,392
Tayco Realty Corporation 22,066 10,677
$ 147,447 $ 160,069
The cost of the investments in the affiliates exceeded the
Company's share of the underlying book value of net assets of these
affiliates by $143,667 at the various dates of acquisition, and
this excess ($69,207 balance at June 30, 1997) is being amortized
on a straight-line basis over 40 years, by reducing reported equity
in net income of affiliates. Amortization of this excess cost was
$2,912 for the years ended June 30, 1997 and 1996.
The common shares of Realty and approximately 57% of the common
shares of Devices owned by the Company are unregistered, and
therefore, their marketability is limited.
Following is a summary of the combined financial position and
results of operations of these affiliates:
Balance Sheet: 1997 1996
Current assets $ 5,612,622 $ 5,147,591
Property and equipment,
net 2,573,419 2,414,489
Other assets 877,520 837,841
$ 9,063,561 $ 8,399,921
Current liabilities $ 2,764,084 $ 2,567,978
Noncurrent liabilities 1,457,714 1,750,583
Stockholders' equity 4,841,763 4,081,360
$ 9,063,561 $ 8,399,921
Income Statement:
Sales, net $ 10,002,839 $ 8,916,836
Net income $ 580,376 $ 634,008
NOTE 3 - LONG-TERM DEBT
Long-term debt consisted of the following:
1997 1996
Six-year unsecured loan payable
to a former officer/stock-
holder of the Company, providing
for monthly principal and interest
installments of $2,917, with
interest at 4.8%, payable through
December 1999 (see Note 7) $ 79,726 $ 110,117
Less: Current portion 29,163 27,803
$ 50,563 $ 82,314
The aggregate maturities of long-term debt for each of the
following years are:
1998 $ 29,163
1999 33,305
2000 17,258
$ 79,726
NOTE 4 - PROVISION FOR INCOME TAXES
The provision for income taxes consisted of the following:
1997 1996
Current Tax Provision
Federal $ 23,287 $ 33,422
State 9,170 12,105
32,457 45,527
Deferred Tax Provision
Federal 2,667 -
State 683 -
3,350 -
$ 35,807 $ 45,527
A reconciliation of provision for income taxes at the statutory
rate to income tax provision at the Company's effective rate is as
follows:
1997 1996
Computed tax at the expected
statutory rate $ 40,803 $ 48,479
Increase/(decrease)
attributable to:
State tax net of Federal
tax benefit 6,503 7,989
Effect of graduated Federal
rates (11,617) (10,318)
Other, net 118 (623)
$ 35,807 $ 45,527
Deferred income tax liabilities arise from excess tax
depreciation taken on furniture and equipment.
NOTE 5 - EARNINGS PER COMMON SHARE
Earnings per common share have been computed based upon the
weighted average of common shares outstanding during the year. The
number of shares used in the computation of earnings per share was
990,213 for the years ended June 30, 1997 and 1996.
NOTE 6 - RELATED PARTY TRANSACTIONS
Royalties consisted of revenues earned from Devices for the use
of the Company's patents in their manufacturing operations.
Research and development consists of revenues earned for services
performed by the Company's research engineers for Devices.
The Company leases office and laboratory facilities from Devices
at a current annual rental of $10,000. Rental expense under the
lease was $10,000 for the years ended June 30, 1997 and 1996.
NOTE 7 - FAIR VALUE OF FINANCIAL INSTRUMENTS
The following methods and assumptions were used to estimate fair
value of each class of financial instruments for which it is
practicable to estimate that value.
The carrying amounts of cash, receivables, and other accrued
expenses approximate fair value because of the short maturity of
these instruments.
The fair value of the Company's long-term debt (including current
installments) is estimated to be $73,202 based on current market
interest rates offered to its affiliate, Taylor Devices, Inc., for
debt with similar terms and maturities.
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> JUN-30-1997
<PERIOD-END> JUN-30-1997
<CASH> 24,006
<SECURITIES> 0
<RECEIVABLES> 63,303
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 107,417
<PP&E> 71,771
<DEPRECIATION> 58,639
<TOTAL-ASSETS> 1,674,024
<CURRENT-LIABILITIES> 40,232
<BONDS> 0
0
0
<COMMON> 49,696
<OTHER-SE> 1,530,183
<TOTAL-LIABILITY-AND-EQUITY> 1,674,024
<SALES> 223,507
<TOTAL-REVENUES> 391,317
<CGS> 263,750
<TOTAL-COSTS> 263,750
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 7,557
<INCOME-PRETAX> 120,010
<INCOME-TAX> 35,807
<INCOME-CONTINUING> 84,203
<DISCONTINUED> 0
<EXTRAORDINARY> 147,447
<CHANGES> 0
<NET-INCOME> 231,650
<EPS-PRIMARY> .23
<EPS-DILUTED> .23
</TABLE>
Exhibit to 10-KSB (3)(v)
BY-LAWS OF
TAYCO DEVELOPMENTS, INC.
ARTICLE I. SHAREHOLDERS' MEETING
ANNUAL MEETING
Section 1. An annual meeting of the shareholders shall be
held for the election of directors and the transaction of such
other business as may properly come before the meeting which may be
held within or without the State of New York at any time within six
(6) months after the end of the fiscal year as shall be fixed by
the Board of Directors. Written notice of each annual meeting of
shareholders stating the time when and the place where it is to be
held shall be given, personally or by mail, not less than ten (10)
nor more than fifty (50) days before the date of the meeting, to
each shareholder entitled to vote at such meeting. If mailed, such
notice shall be directed to each such shareholder at his address,
as it appears on the records of the shareholders of the
Corporation, unless he shall previously have filed with the
Secretary of the Corporation a written request that notices
intended for him be mailed to some other address designated in such
request.
The order of business shall be as follows:
1. Roll call
2. Proof of notice of meeting or waiver of notice
3. Reading of minutes of preceding meeting
4. Reports of officers
5. Reports of committees
6. Election of inspectors of election
7. Election of Directors
8. Unfinished business
9. New business
SPECIAL MEETINGS
Section 2. Special meetings of shareholders may be called
at any time by the Board of Directors. The Board of Directors
shall also, in like manner, call a special meeting of the
shareholders at the written request of the holders of fifty-one
percent (51%) of the shares then outstanding and entitled to vote
thereat; however, the Board of Directors shall be entitled to
verify the accuracy of the supporting documentation calling for
said special meeting prior to issuing any written notice of
meeting. Written notice of each special meeting of shareholders
stating the time when and the place where it is to be held shall be
given, personally or by mail, not less than ten (10) nor more than
fifty (50) days before the date of the meeting, to each shareholder
entitled to vote at such meeting. Notice of a special meeting of
shareholders shall also state the purpose or purposes for which the
meeting is called, and shall indicate that it is being issued by,
or at the direction of, the person or persons calling the meeting.
At any such special meeting only such business may be transacted as
is specified in the notice of meeting. If mailed, such notice
shall be directed to each such shareholders at his address, as it
appears on the records of the shareholders of the Corporation,
unless he shall have previously filed with the Secretary of the
Corporation a written request that notices intended for him be
mailed to some other address, in which case, it shall be mailed to
the address designated in such request.
WAIVER
Section 3. Notwithstanding any provision of the foregoing
Sections, a meeting of the shareholders may be held at any time and
at any place within the State of New York, and any action may be
taken thereat, if notice and lapse of time be waived in writing by
every shareholder having the right to vote at such meeting.
QUORUM
Section 4. The presence, in person or by proxy, of the
holders of a majority of the outstanding stock entitled to vote
shall be necessary to constitute a quorum for the transaction of
business, except at special meetings held for the election of
directors, but a lesser number may adjourn to some future time not
less than six (6) nor more than twenty (20) days later, and the
Secretary shall thereupon mail notice of the adjournment at least
three (3) days before the adjourned day to each shareholder
entitled to vote who was absent from such meeting.
INSPECTORS OF ELECTION
Section 5. Three inspectors of election shall be elected
by a majority of shareholders entitled to vote at the first annual
shareholders' meeting and at each subsequent annual meeting, who
shall act as inspectors of election at the next succeeding annual
meeting and all special meetings held between the meeting at which
they are elected and the next annual meeting.
VOTING
Section 6. All voting at shareholders' meetings shall be
by ballot, each of which shall state the name of the shareholder
voting and the number of shares voted by him, and, if cast by
proxy, the name of the proxy.
ARTICLE II. DIRECTORS
QUALIFICATIONS
Section 1. The business of the Corporation shall be
managed by its Board of Directors, all of whom shall be of full age
and at least one of whom shall be a citizen of the United States
and a resident of the State of New York. Directors need not be
shareholders of the Corporation.
ELECTION AND TERM
Section 2. The Directors shall be chosen annually at the
annual shareholders' meeting by a plurality of the votes at such
election, and each of such directors shall serve for a term of one
year, or until his successor has been elected.
DUTIES
Section 3. The Directors, acting as a board regularly
convened shall manage and conduct the business of the Corporation,
and in the transaction of business the act of a majority of a
quorum present at a meeting duly assembled shall be the act of the
Board. The Directors may adopt rules and regulations for the
conduct of their meetings and the management of the business which
are not inconsistent with these By-laws or any provision of law.
MEETINGS OF THE BOARD
Section 4. (a) Regular Meetings: A regular meeting of
the Directors shall be held immediately following the annual
shareholders' meetings and no notice thereof need be given.
(b) Special Meetings: Special meetings of the
Directors may be called by the President at any time. Upon written
demand therefore by two Directors, the President or Secretary shall
immediately call a special meeting of the Directors. Notice of
special meetings stating the time and place of the meeting shall be
served not less than one (1) day nor more than ten (10) days prior
to said meeting.
Notice of a special meeting need not be given
to any Director who submits a signed waiver of notice whether
before or after a meeting, or who attends the meeting without
protesting, prior thereto or at its commencement, the lack of
notice to him.
A notice, or waiver of notice, need not
specify the purpose of any special meeting of the Board of
Directors.
(c) Quorum and Voting: A majority of the Board of
Directors at a meeting duly assembled shall be necessary to
constitute a quorum for the transaction of business. Each director
shall be entitled to only one vote.
(d) Any one or more members of the Board of
Directors or any committee thereof may participate in a meeting of
such Board or committee by means of a conference telephone or
similar equipment, which allows all persons participating in the
meeting to hear each other at the same time. Participation by such
persons shall constitute presence in person at such meeting.
(e) Order of Business: The business of meetings of
the Board shall be transacted in such order as the Board shall
determine by resolution.
COMPENSATION
Section 5. Each member of the Board of Directors shall be
compensated for his attendance at meetings of the Board of
Directors, or of any committee thereof, in the manner and to the
extent determined from time to time by action of the Board.
VACANCIES, RESIGNATIONS AND REMOVAL
Section 6. Directors may resign at any time, such
resignation to be effective immediately upon filing a written
resignation with the Secretary or Assistant-Secretary.
Any vacancy which occurs on the Board of Directors
by death, resignation, removal or otherwise, shall be filled by a
majority of Directors remaining at a special meeting of the
Directors to be called for that purpose within thirty (30) days
after such vacancy occurs. The Director thus chosen shall serve
until the next annual meeting of shareholders, or until his
successor shall be elected.
In the event that the entire Board shall die, resign
or otherwise cease to hold office, Directors may be elected to
succeed them until the next annual shareholders' meeting, at a
special meeting, called by any shareholder of record entitled to
vote, in the same manner that the annual shareholders' meeting is
called.
ARTICLE III. OFFICERS
ELECTION
Section 1. The Board of Directors, immediately after the
annual meeting of the Shareholders, shall elect a President,
Vice-President, Secretary and Treasurer. Any two (2) or more
offices may be held by the same person, except for the office of
President and Secretary. Directors may elect an Assistant
Treasurer, a General Manager, and such other officers as the needs
of the Corporation may, from time to time require. All officers
shall serve for one year or until the next annual election of
Directors, subject to the power of the Directors to remove any
officer, at pleasure, by majority vote.
PRESIDENT
Section 2. The President shall preside at all meetings of
the Board of Directors, and shall act as temporary chairman at, and
call to order, all meetings of the shareholders. He shall sign the
certificates of stock; sign and execute all contracts in the name
of the Corporation (except contracts to which he is individually a
party, which contracts shall be signed, in the name of the
Corporation, by the Vice-President); and, subject to the approval
of the Board of Directors, have general supervision of the affairs
of the Corporation.
VICE-PRESIDENT
Section 3. The Vice-President shall, in the absence or
incapacity of the President, perform the duties of that officer.
SECRETARY
Section 4. The Secretary shall keep the minutes of the
meetings of the Directors and shareholders; shall attend to the
serving of notices of meetings of the Directors and shareholders;
shall affix the seal to all certificates of stock, and to such
other papers as may require it. He shall sign all certificates of
stock and have charge of the certificate book, and of such other
books and papers as the Board may direct; shall attend to such
correspondence as may be assigned to him, and shall perform all the
duties incidental to his office.
TREASURER
Section 5. The Treasurer shall have the care and custody
of all the funds and securities of the Corporation and shall
deposit the same in the name of the Corporation in such bank or
banks as the Directors may designate. He shall sign all checks,
drafts, notes and orders for the payment of money. He shall at all
reasonable hours exhibit his books and accounts to any director
upon application at the office of the Corporation during business
hours. He shall render a statement of the condition of the
finances of the Corporation at each regular meeting of the Board of
Directors, and at such other times as shall be required of him and
a full financial report at the annual meeting of the Shareholders.
He may be required by the Board of Directors to give such bonds as
they shall determine for the faithful performance of his duties.
OTHER OFFICERS
Section 6. Other officers shall perform such duties and
have such powers as may be assigned to them by the Board of
Directors.
ARTICLE IV. CAPITAL STOCK
PAYMENTS
Section 1. All payments for stock in the Corporation shall
be received by the Treasurer.
CERTIFICATES
Section 2. Certificates of stock shall be bound in a book,
shall be numbered and issued in consecutive order, shall be signed
by the President or Vice President and the Secretary or Treasurer,
under the Corporate Seal, and in the stub of each certificate shall
be entered the name of the person owning the shares represented
thereby, the number of such shares and the date of issue. All
certificates exchanged or returned to the Corporation shall be
marked canceled, with the date of cancellation, by the Secretary,
and shall be immediately pasted to the stubs in the certificate
books from which they were detached when issued.
TRANSFERS
Section 3. Transfers of shares shall be made on the books
of the Corporation by the holder in person or by power of attorney
duly executed and witnessed and filed with the Secretary of the
Corporation and on surrender of the certificate of such shares.
DIVIDENDS
Section 4. Dividends shall be declared by the Board of
Directors from surplus profits, whenever in their discretion the
condition of the Corporation warrants the same.
Section 5. The Board of Directors shall have the power to
close the stock transfer books of the Corporation for a period of
not less than ten (10) nor more than fifty (50) days before any
shareholders' meeting, or the last day on which the consent or
dissent of shareholders may be effectively expressed for any
purpose without a meeting, or the date fixed for the payment of any
dividend or the making of any distribution, or for the delivery of
evidences of rights or evidences of interests arising out of any
change, conversion or exchange of capital stock. Provided,
however, that in lieu of closing the stock transfer books as
aforesaid the Board of Directors may in its discretion fix a time
not less than ten (10) nor more than fifty (50) days before the
date of any meeting of shareholders, or the last day on which the
consent or dissent of shareholders may be effectively expressed for
any purpose without a meeting, or the date fixed for the payment of
any dividend or for the delivery of evidences of rights or
evidences of interests arising out of any change, conversion or
exchange of capital stock, as the time as of which shareholders
entitled to notice of and to vote at such meeting or whose consent
or dissent is required or may be expressed for any purpose or
entitled to receive any such dividend, distribution, rights or
interests shall be determined; and all persons who are holders of
record of voting stock at such time and no others shall be entitled
to notice of and to vote at such meeting or to express their
consent or dissent, as the case may be, and only shareholders of
record at the time so fixed shall be entitled to receive such
dividend, distributions, rights or interests.
ARTICLE V. AMENDMENTS
Section 1. The By-laws of the Corporation may be amended,
added to, rescinded or repealed at any meeting of the shareholders,
provided notice of the proposed change is given in the notice of
the meeting. Subject to the power of the shareholders to alter,
amend or repeal any By-laws made by the Board of Directors, the
Board of Directors at any meeting thereof may make additional
By-laws for the Corporation and may from time to time amend, add
to, rescind or repeal these By-laws.
ARTICLE VI. SEAL
The Seal of the Corporation shall be as follows:
Impression of Seal
ARTICLE VII. INDEMNITY
Section 1. Any person made a party to any action, suit or
proceeding by reason of the fact that he, his testator or
intestate, is or was a director, officer or employee of the
Corporation or of any corporation which he served as such at the
request of the Corporation, shall be indemnified by the Corporation
against the reasonable expenses, including attorney's fees,
actually and necessarily incurred by him in connection with the
defense of such action, suit or proceeding, or in connection with
any appeal therein, except in relation to matters as to which it
shall be adjudged in such action, suit or proceeding that such
officer, director or employee is liable for negligence or
misconduct in the performance of his duties.
The foregoing right of indemnification shall not be
deemed exclusive of any other rights to which any officer or
director or employee may be entitled apart from the provisions of
this section.
Exhibit to 10-KSB (10)(iii)
LEASE AGREEMENT
THIS AGREEMENT made this 1st day of July, 1997.
BY AND BETWEEN Taylor Devices, Inc. known and referred to as the
Owner in this Lease, having its principle office located at 90
Taylor Drive, North Tonawanda, NY and Tayco Developments, Inc.,
known and referred to as the Tenant in this Lease.
LET IT BE WITNESSED, that the Owner has agreed to lease and by this
Lease does grant a lease to the Tenant, and the Tenant has agreed
to this Lease, and has leased the following described premises:
(Premises) Located at 100 Taylor Drive, North Tonawanda, NY to
include 800 square feet of office space on the second floor,
including use of the rest rooms and kitchen facilities. Conference
room use is available upon prior approval from Owner.
(Term) For the term of three years beginning on the 1st day of
July, 1997 and ending the last day of June, 2000 at 12:00 in the
forenoon. Subject to the Terms of this Agreement
(Terms) The terms of this Agreement can be reviewed by either
party for any changes, adjustments or extentions upon which a 90
day written notice will be given each to the other party of any
change, adjustment or extention.
Any change, adjustment or extention will become attached
to this Agreement as an addendum.
(Rental) The Tenant agrees to pay the Owner at 90 Taylor Drive,
North Tonawanda, NY the rent of Ten Thousand Dollars ($10,000.00)
annually in one (1) payment of Ten Thousand Dollars ($10,000.00)
by the 1st day of July, each year, for three (3) years (in full, no
later than 30 days from due date) during the term of this Lease.
Subject to the terms of this Agreement.
(Agreements) The Tenant agrees as follows:
(a) To punctually pay rent on above agreed day at above agreed
place.
(b) That no rental payment made to Owner will be returned or
rebated for any reason.
(c) To hold the Owner harmless from any expense, loss or damage by
reason of the violation of any laws, regulations, rules,
ordinances and requirements, or by reason of any damage that
might be sustained by reason of the Tenant's negligence.
(d) To hold the Owner harmless for any and all injury or liability
claims, including those from employees of the Tenant.
(e) To maintain the facility to be neat, clean and secure at all
times.
(f) The agreements and conditions contained in this Lease shall
apply to and bind and enure to the benefit of the personal
representatives and assigns of the Owner and the personal
representatives and licensed assigns of the Tenant.
(g) Immediate eviction can occur when a violation is committed to
any part of this agreement, and that it is at the discretion
of the Owner when a violation has been committed.
IN WITNESS WHEREOF the parties hereto have affixed their hands and
seals the day and year first above written.
Accepted by Taylor Devices, Inc. Accepted by Tayco Developments,
Inc.
/s/Douglas P. Taylor L.S. /s/Joseph P. Gastel L.S.
Douglas P. Taylor, President Joseph P. Gastel, Secretary
