SECURITIES AND EXCHANGE COMMISSION WASHINGTON, DC 20549
FORM 10-QSB
QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For quarter ended February 28, 1997
Commission File Number 0-3498
TAYLOR DEVICES, INC.
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
NEW YORK 16-0797789
(State or other Jurisdiction of (I.R.S. Employer
incorporation or organization) Identification Number)
90 TAYLOR DRIVE, NORTH TONAWANDA, NEW YORK 14120-0748
Address of principal executive offices Zip Code
Registrant's telephone number, including area code - 716-694-0800
Indicate by check mark whether the registrant (1) has filed all
annual, quarterly, and other reports required to be filed with all
the Commission and (2) has been subject to the filing requirements
for at least the past 90 days.
Yes X No
Indicate the number of shares outstanding, of each of the Issuer's
classes of common stock as of the close of the period covered by
this report.
CLASS Outstanding at February 28, 1997
Common Stock 2,705,643
(2-1/2 cents par value)
FORM 10-QSB
TAYLOR DEVICES, INC. - INDEX
PART I - FINANCIAL INFORMATION
Item 1. Financial Statements 3
Consolidated Condensed Balance Sheets
February 28, 1997, and May 31, 1996.
Consolidated Condensed Statements of Income 4
for nine months ended February 28, 1997 and
February 29, 1996, and three months ended
February 28, 1997 and February 29, 1996.
Consolidated Condensed Statement of 5
Cash Flows - nine months ended
February 28, 1997 and February 29, 1996.
Notes to Consolidated Condensed Financial 6
Statements.
Item 2. Management's Discussion and Analysis of the 7
Financial Condition and Results of Operations
PART II - OTHER INFORMATION
Item 1. Legal Proceedings 11
Item 2. Changes in Securities 11
Item 3. Defaults upon Senior Securities 11
Item 4. Submission of Matters to Vote of Security 11
Holders
Item 5. Other Information 11
Item 6. Exhibits and Report on Form 8-K 11
SIGNATURES
FORM 10-QSB TAYLOR DEVICES, INC. - CONSOLIDATED BALANCE SHEET
ASSETS 2/28/97 5/31/96
Current
Cash $ 811,031 $ 913,284
Funds Held By Trustee - 0 - 106,639
Trade Accounts Receivable 1,513,202 1,210,435
Inventories 2,308,017 2,408,763
Prepaid and Refundable Income Taxes (52,364) 63,312
Prepaid Expenses 86,864 130,843
Total Current Assets $4,666,750 $4,833,276
Investments - Affiliate, at equity 183,453 168,451
Property and Equipment - Net 2,543,040 2,403,480
Other Assets
Other 519,289 370,370
Total Other Assets $ 519,289 $ 370,370
TOTAL ASSETS $7,912,532 $7,775,577
LIABILITIES AND STOCKHOLDERS' EQUITY
Current
Current Portion of Long Term Debt $ 401,526 $ 366,003
Payables - Trade 890,723 961,010
Affiliate-Current 105,469 67,740
Construction-in-Progress - 0 - - 0 -
Accrued Income Tax 31,646 62,582
Accrued Expenses 269,831 340,337
Advanced Payments - Customers 454,781 455,991
Total Current Liabilities $2,153,976 $2,253,663
Non Current
Long Term Debt $1,534,899 $1,750,583
Deferred Income Tax - 0 - - 0 -
Total Non Current Liabilities $1,534,899 $1,750,583
Minority Stockholders' Interest $ 240,549 $ 224,505
STOCKHOLDERS' EQUITY
Common Stock, par value $.025 a
share, authorized 8,000,000 shares $ 67,832 $ 66,924
Paid - In Capital 2,364,156 2,258,725
Retained Earnings 1,625,089 1,269,521
Less: Cost of Treasury Stock:
26,733 shares 73,969 48,344
TOTAL STOCKHOLDERS' EQUITY $3,983,108 $3,546,826
TOTAL LIABILITIES & STOCKHOLDERS'
EQUITY $7,912,532 $7,775,577
FORM 10-QSB
TAYLOR DEVICES, INC.
CONSOLIDATED CONDENSED STATEMENT OF INCOME
NINE MONTHS THREE MONTHS
ENDED FEBRUARY 28/29 ENDED FEBRUARY 28/29
1997 1996 1997 1996
NET SALES $7,341,336 $6,561,047 $2,731,734 $2,325,387
COST OF PRODUCT SOLD 4,729,463 4,261,244 1,697,989 1,467,605
Gross Profit 2,611,873 2,299,803 1,033,745 857,782
EXPENSES
Selling and Administrative 2,029,006 1,678,299 752,050 585,745
Profit(loss)from Operations 582,867 621,504 281,695 272,037
OTHER INCOME/(EXPENSE)
Rental - Affiliates 7,500 9,347 2,500 2,513
Miscellaneous 23,104 31,281 5,345 24,181
Interest (106,861) (115,970) (34,286) (37,619)
NET OTHER (76,257) (75,342) (26,441) (10,925)
NET INCOME BEFORE
PROVISION FOR TAXES 506,610 546,162 255,254 261,112
Provision for Income Taxes 150,000 118,100 71,000 58,360
INCOME BEFORE EQUITY IN
EARNINGS OF AFFILIATES 356,610 428,062 184,254 202,752
EQUITY IN EARNINGS OF
AFFILIATES 15,002 16,081 4,847 6,977
NET INCOME BEFORE MINORITY
STOCKHOLDERS' INTEREST 371,612 444,143 189,101 209,729
Minority Stockholders'
Interest 16,044 - 0 - 5,628 - 0 -
NET INCOME $ 355,568 $ 444,143 $ 183,473 $ 209,729
Earnings Per Share $ .131 $ .17 $ .068 $ .08
FORM 10-QSB
TAYLOR DEVICES, INC.
STATEMENT OF CHANGES IN FINANCIAL POSITION
NINE MONTHS ENDED FEBRUARY 28/29
1997 1996
FUNDS PROVIDED
From Operations $ 355,568 $ 444,143
Depreciation and Amort. 145,542 136,800
Fixed Assets - 0 - - 0 -
Sales of Stock 80,714 65,602
Minority Shareholders' Interest 16,044 - 0 -
Decrease Other Assets - 0 - - 0 -
Increase Other Liabilities - 0 - - 0 -
Increase Long Term Debt - 0 - - 0 -
Total Funds Provided $ 597,868 $ 646,545
FUNDS APPLIED
Loss on Operations $ - 0 - $ - 0 -
Fixed Assets 285,102 479,863
Decrease Other Liabilities 99,687 164,387
Increase Other Assets 84,646 552,513
Minority Shareholders' Interest - 0 - - 0 -
Investments - Affiliates 15,002 16,081
Decrease Long Term Debt 215,684 173,397
Total Funds Applied $ 700,121 $ 1,386,241
INCREASE (DECREASE) IN CASH ($ 102,253) ($ 739,696)
FORM 10-QSB
TAYLOR DEVICES, INC.
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENT
1. In the opinion of the Company, the accompanying unaudited
consolidated condensed financial statements contain all
adjustments necessary to present fairly the financial position
as of February 28, 1997 and May 31, 1996 and the results of
operations for the three months and nine months ended February
28, 1997 and February 29, 1996 and changes in financial
position for the nine months then ended.
2. There is no provision nor shall there be any provisions for
profit sharing, dividends, or any other benefits of any nature
at any time for this fiscal year.
3. To calculate the earnings per share for the nine month period
ended February 28, 1997, the profit was divided by 2,705,643
less Treasury Shares of 26,733. For the nine month period
ended February 29, 1996, the profit was divided by 2,668,986
less the Treasury Shares of 21,990 to calculate the earnings
per share.
4. The results of operations for the nine month period ended
February 28, 1997 are not necessarily indicative of the
results to be expected for the full year.
FORM 10-QSB
TAYLOR DEVICES, INC.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF THE
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
The following is Management's discussion and analysis of
certain significant factors which have affected the Company's
earnings during the periods included in the accompanying
consolidated condensed statements of income.
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.
A summary of the period to period changes in the principal
items included in the consolidated statements of income is shown
below:
Comparisons of nine months ended
February 28, 1997 - February 29, 1996
Increase (decrease)
Net Sales $ 780,289
Cost of Sales 468,219
Selling, General and
Administrative Expenses 350,707
Other Expenses - 0 -
Other Income (10,024)
Interest Expense (9,109)
Net Profit Before Tax and
Minority Shareholders' Interest 39,552
Provision for Income Tax 31,900
Net Profit Before Equity in
Earnings of Affiliates (71,452)
Equity in Earnings of Affiliates (1,079)
Minority Stockholders' Interest (16,044)
Net Income $ (88,575)
FORM 10-QSB
TAYLOR DEVICES, INC.
MANAGEMENT'S DISCUSSION (CON'T)
Shipments for the nine months year-to-date and three months
ending February 28, 1997 achieved record levels. Net income in
both periods reflected continuing intense efforts by the Company in
market penetration, sales promotion and internal information
control.
RESULTS FOR THE THIRD QUARTER
For the third quarter of Fiscal Year 1997 ("Q397"), shipments
totaled $2,731,734, $406,347 and 17% better than shipments in the
third quarter of Fiscal Year 1996 ("Q396"). As in the previous
quarter, the product mix contained substantial amounts of defense
billings against long term contracts and progress billings towards
seismic product projects.
Gross margin was $1,033,745 and 37.8% of sales compared to
$857,782 and 36.9% in Q396. Q397 SGA expenses increased to
$752,050 and 27.5% of sales from $585,745 and 25.2% in Q396. The
product mix, with greater proportions of seismic and defense sales
generated higher commission and royalty expenses in Q397 than in
Q396. The Company's increased sales and marketing efforts
continued in Q397 as did the effort to complete the installation of
the new EDP system and to obtain and upgrade the equipment needed
to run the system. Net Income before Provision for Taxes was
255,254 (9.3%) in Q397 versus 261,112 (11.2%) in Q397. After
adjustments for Equity in the Earnings of Affiliates and Minority
Shareholder Interest, Net Income for Q397 was $183,473 - 6.7% of
net sales and an earnings per share of $.068.
RESULTS FOR NINE MONTHS YEAR-TO-DATE
Shipments for the period (97YTD) totaled $7,341,336, $780,000
better than the same period in the previous year (96YTD). The
increase continues to be attributable primarily to higher levels of
defense and seismic shipments. The Gross Margin for 97YTD was
$2,611,873 and 35.6% of sales compared to $2,299,803 and 34.1% for
96YTD. For 97YTD, SGA amounted to $2,029,006 and 27.6% versus
$1,678,299 and 25.6% for 96YTD. The Company's year-to-date SGA
expenses continue to show the effects of the efforts referenced in
the above paragraph - EDP start-up expenses, increased royalty and
commission expense levels and travel/promotional expenses related
FORM 10-QSB
TAYLOR DEVICES, INC.
MANAGEMENT'S DISCUSSION (CON'T)
primarily to expanding the seismic products market. Net Income
Before Provision for Taxes was $506,610 (6.9%) compared to $546,162
(8.3%) in the previous year. After provisions for the Equity in
the Earnings of Affiliates and Minority Shareholder Interest, Net
Income for 97YTD is $355,568 - 4.8% of net sales and an earnings
per share of $.131.
The Company continues to operate in a condition of financial
stability and strength as evidenced by the cash balance and current
ratio. The cash position, in particular, manifested itself in the
recently announced Los Angeles City Hall contract. This order,
worth $1,000,000, is the first large seismic order which did not
include progress payment terms. The Company was able to pursue and
accept this order knowing that it could accept the cash flow
implications. In the period since the previous 10-QSB report, the
Company has also obtained other seismic related orders of some
value. They include the Ohio River Bridge at Maysville, Kentucky
and the Rio Vista Bridge in Rio Vista, California.
As the Company expands its presence in the seismic/civil
engineering market, it has learned that many potential applications
require more than the simple damping required of the early seismic
units. In response, the Company is currently directing its
Research and Development efforts towards the development of
analytical software which will address these more complex
requirements. Sales and marketing efforts over the past few months
have proven the value of the Company's new Test Facility. The
Company has generated some revenue by leasing the facility, for
limited periods of time, to customers. In addition, Management
believes the existence of the facility has been a factor in several
successful bid awards.
The Company remains very active in its three principal markets
- - industrial, defense and seismic - and continues to see good
opportunities in all three. Nevertheless, the ultimate timing of
the placement of large orders, particularly in the defense and
seismic segments, is beyond the control of the Company's
Management. These often hinge on budgetary or political issues and
take months, and even years, longer to reach fruition than
anticipated by any of the parties involved. Although this tends to
smooth itself out over a period of a few years, any one year in
that period may have significantly higher or lower activity than
FORM 10-QSB
TAYLOR DEVICES, INC.
MANAGEMENT'S DISCUSSION (CON'T)
the other years. At this time, Management knows of no factors
which will cause any significant delays in the influx of orders.
At the end of three quarters of Fiscal Year 1997, Management
believes that, for the full year, revenues will be at a record
level. Due in part to the loss of the tax benefits enjoyed last
year and to the increased SGA expenses directed at positioning the
Company for further growth, Net Income may approach, but most
likely not exceed that of the previous year.
FORM 10-QSB
TAYLOR DEVICES, INC.
PART II - OTHER INFORMATION
ITEM 1 Legal Proceedings
- The Company is not currently engaged in
any litigation.
ITEM 2 Changes in Securities
- None
ITEM 3 Defaults Upon Senior Securities
- None
ITEM 4 Submission of Matters to Vote of Securities
Holders
- None
ITEM 5 Other Information
- In the period of 6/1/96 to 2/28/97, the
Company's reported total of outstanding shares
increased by 27,549, as itemized below:
1. Employee Stock Ownership Plan 13,318
2. Director Stock Option Plan 14,231
27,549
ITEM 6 Exhibits and Reports of Form 8-K
- Documents filed as part of this report:
Form of Indemnity Agreement between the Company
and certain officers and directors, approved and
ratified by shareholders at the Annual Meeting of
Shareholders held on November 8, 1996.
FORM 10-QSB
TAYLOR DEVICES, INC.
SIGNATURES
Pursuant to the requirements 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.
TAYLOR DEVICES, INC.
(Registrant)
By /S/ Douglas P. Taylor Date: 4/9/97
Douglas P. Taylor
Chairman of the Board of Directors
President
(Principal Executive Officer)
AND
By /S/ Kenneth G. Bernstein Date: 4/9/97
Kenneth G. Bernstein
Chief Accounting Officer
Treasurer
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> MAY-31-1997
<PERIOD-END> FEB-28-1997
<CASH> 811,031
<SECURITIES> 0
<RECEIVABLES> 1,553,702
<ALLOWANCES> 40,500
<INVENTORY> 2,308,017
<CURRENT-ASSETS> 4,666,750
<PP&E> 5,384,613
<DEPRECIATION> 2,804,362
<TOTAL-ASSETS> 7,912,532
<CURRENT-LIABILITIES> 2,088,729
<BONDS> 1,211,870
67,832
0
<COMMON> 0
<OTHER-SE> 3,912,576
<TOTAL-LIABILITY-AND-EQUITY> 7,912,532
<SALES> 7,431,336
<TOTAL-REVENUES> 7,431,336
<CGS> 4,729,463
<TOTAL-COSTS> 6,758,469
<OTHER-EXPENSES> (30,604)
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 106,861
<INCOME-PRETAX> 506,610
<INCOME-TAX> 150,000
<INCOME-CONTINUING> 356,610
<DISCONTINUED> 0
<EXTRAORDINARY> (1,042)
<CHANGES> 0
<NET-INCOME> 355,568
<EPS-PRIMARY> .131
<EPS-DILUTED> .126
</TABLE>
Exhibit (10) (x) INDEMNITY AGREEMENT
This Agreement is made as of the _____ day of
_______________, 1996, by and between TAYLOR DEVICES, INC., a
New York corporation having an office at 90 Taylor Drive,
North Tonawanda, New York 14120-0748 (the ``Corporation''),
and _________________________, an individual residing at
______________________________ (``Indemnitee''), a director
[and] [officer] of the Corporation.
WHEREAS, it is essential to the Corporation to
retain and attract as directors and officers the most capable
persons available; and
WHEREAS, it is the policy of the Corporation to
indemnify its directors and officers so as to provide them
with the maximum possible protection permitted by law; and
WHEREAS, Section 722 of the Business Corporation Law
of New York, under which the Corporation is organized,
empowers corporations to indemnify any person serving as a
director, officer, employee or agent of the corporation and
any person who serves at the request of the corporation as a
director, officer, employee or agent of another corporation,
partnership, joint venture, trust, or other enterprise, and
such Section 722 specifies that the indemnification set forth
therein shall not be deemed exclusive of any other rights to
which those seeking indemnification may be entitled under any
by-law, agreement, vote of shareholders or disinterested
directors or otherwise; and
WHEREAS, in order to serve, Indemnitee desires
indemnification to the extent of the maximum protection
permitted by law.
NOW, THEREFORE, in consideration of the mutual
covenants set forth herein, the Corporation and Indemnitee
hereby agree as follows:
1. Agreement to Serve. Indemnitee agrees to serve
as a director and/or officer of the Corporation for so long as
he is duly elected or appointed or until the effective date of
his written resignation. This Agreement does not constitute
an employment agreement or confer any employee or other
compensation rights other than the rights with respect to
indemnification, advancement or Expenses (as defined below)
and, if any, maintenance of directors and officers liability
insurance specified herein.
2. Definitions. As used in this Agreement:
(a) The term ``Proceeding'' shall include any
threatened, pending or completed action, suit or proceeding,
whether brought in the right of the Corporation or otherwise
and whether of a civil, criminal, administrative or
investigative nature, in which Indemnitee may be or may have
been involved as a party, a witness or otherwise, by reason of
the fact that Indemnitee is or was a director or officer of
the Corporation, by reason of any action taken by him or of
any inaction on his part while acting as such director or
officer, or by reason of the fact that he is or was serving at
the request of the Corporation as a director, officer,
trustee, employee or agent of another corporation,
partnership, joint venture, trust or other enterprise, whether
or not he is serving in such capacity at the time any
liability or expense is incurred for which indemnification or
reimbursement may be provided under this Agreement.
(b) The term ``Expenses'' includes, without
limitation thereto, expenses of investigations, judicial or
administrative proceedings or appeals, amounts paid in
settlement by or on behalf of Indemnitee, attorneys' fees and
disbursements, but shall not include the amount of judgments,
fines or penalties against Indemnitee.
(c) ``Change in Control'' means a change in
control of the Corporation occurring after the date of this
Agreement of a nature that would be required to be reported
under the Securities Exchange Act of 1934 or any regulation or
rule thereunder (collectively the ``Act''), whether or not the
Corporation is then subject to such reporting requirement;
provided, however, that, without limitation, such a Change in
Control shall be deemed to have occurred if after the date of
this Agreement (i) any ``person'' (as such term is used in
Sections 13(d) and 14(d) of the Act), other than a person who
is presently a member of the board of directors of the
Corporation, is or becomes the ``beneficial owner'' (as
defined in Rule 13d-3 under the Act), directly or indirectly,
of securities of the Corporation representing 20% or more of
the combined voting power of the Corporation's then
outstanding securities; (ii) the Corporation is a party to a
merger, consolidation, sales of assets or other
reorganization, or a proxy contest, as a consequence of which
members of the board of directors of the Corporation in office
immediately prior to such transaction or event constitute less
than a majority of the board of directors thereafter; or
(iii) during any period of two consecutive years, individuals
who at the beginning of such period constituted the board of
directors (including for this purpose any new director whose
election or nomination for election by the Corporation's
shareholders was approved by a vote of at least two-thirds of
the directors then still in office who were directors at the
beginning of such period) cease for any reason to constitute a
majority of the board of directors.
(d) ``Corporate Status'' means and describes
the status of a person who is or was a director, officer,
employee, agent or fiduciary of the Corporation, or is or was
serving at the request of the Corporation as a director,
officer, employee, agent or fiduciary of any other ``Other
Enterprise''.
(e) The term ``Disinterested Director'' means
a director of the Corporation who is not and was not a party
to the Proceeding in respect of which indemnification is
sought by the Indemnitee.
(f) The term ``Other Enterprise'' shall
include any wholly or partly owned subsidiary of the
Corporation, any employee compensation or benefit plan of any
one or more of the Corporation and its subsidiaries and
affiliates, and any other corporation, partnership, joint
venture, trust or enterprise of which the Indemnitee is or was
serving at the request of the Corporation as a director,
officer, employee, agent or otherwise.
(g) Reference to ``fines'' shall include, any
excise tax assessed with respect to any employee benefit plan;
references to ``serving at the request of the Corporation''
shall include any service as a director, officer, employee or
agent of the Corporation which imposes duties on, or involves
services by, such director, officer, employee, or agent with
respect to an employee benefit plan, its participants, or
beneficiaries; and a person who acted in good faith and in a
manner he reasonably believed to be in the interest of the
participants and beneficiaries of an employee benefit plan
shall be deemed to have acted in a manner ``not opposed to the
best interests of the Corporation'' as referred to in this
Agreement.
3. Indemnity and Advancement of Expenses to the
Extent Permitted by Law. Subject to the terms of Paragraph 8
of this Agreement, the Corporation shall indemnify and advance
Expenses to the Indemnitee to the fullest extent permitted by
applicable law now in effect. Without limitation of the
foregoing, indemnification shall be deemed to be permitted by
applicable law for purposes of this Agreement if
indemnification is required by Paragraph 4 or 5 hereof, and
advancement of expenses shall be deemed permitted under
applicable law, and as more particularly set forth in
Paragraph 8 hereof.
4. Indemnity in Third Party Proceedings. The
Corporation shall indemnify Indemnitee in accordance with the
provisions of this Paragraph 4 if Indemnitee is a party to or
is threatened to be made a party to or is otherwise involved
in any Proceeding (other than a Proceeding by or in the right
of the Corporation to procure a judgment in its favor) against
all Expenses, liabilities, judgments, fines and penalties
actually and reasonably incurred by Indemnitee in connection
with the defense or settlement of such Proceeding, but only if
Indemnitee acted in good faith and in a manner which he
reasonably believed to be in or not opposed to the best
interests of the Corporation and, in the case of a criminal
Proceeding, in addition, had no reasonable cause to believe
that his conduct was unlawful.
5. Indemnity in Proceedings By or In the Right of
the Corporation. The Corporation shall indemnify Indemnitee
in accordance with the provisions of this Section if
Indemnitee is a party to or is threatened to be made a party
to or is otherwise involved in any Proceeding by or in the
right of the Corporation to procure a judgment in its favor (a
``Corporation Claim'') against all Expenses actually and
reasonably incurred by Indemnitee in connection with the
defense or settlement of such Proceeding, but only if he acted
in good faith and in a manner which he reasonably believed to
be in or not opposed to the best interests of the Corporation;
provided, however, that no indemnification shall be made under
this Paragraph 5 for (i) judgments, fines, penalties, or
amounts paid in settlement by or on behalf of Indemnitee; or
(ii) other Expenses in respect of any claim, issue or matter
as to which Indemnitee shall have been adjudged to be liable
to the Corporation, unless and only to the extent that any
court in which such Proceeding was brought shall determine
upon application that, despite any adjudication of liability
but in view of all circumstances of the case, Indemnitee is
fairly and reasonably entitled to indemnity for such
judgments, fines, penalties, or Expenses as such court shall
deem proper.
6. Exceptions to Indemnitee's Rights.
Notwithstanding any other provisions of this Agreement, the
Corporation shall not be liable to make any payment in
connection with any claim made against the Indemnitee:
(a) to the extent that payment is actually
made to Indemnitee under any insurance policy;
(b) to the extent that Indemnitee is
indemnified and actually paid otherwise than pursuant to this
Agreement;
(c) if such claim is proven by a final
judgment in a court of law or in other adjudication to have
been based upon or attributable to the Indemnitee's having
gained any personal profit or advantage to which he was not
legally entitled;
(d) for disgorgement of profits, made from the
purchase and sale by the Indemnitee of securities, pursuant to
Section 16(b) of the Securities Exchange Act of 1934 and
amendments thereto or similar provisions of any state
statutory law or common law; or
(e) brought about or contributed to by the
dishonesty of the Indemnitee seeking payment hereunder;
provided, however, that the Indemnitee shall be entitled to
the benefit of this Agreement as to any claim upon which suit
may be brought against him by reason of any alleged dishonesty
on his part, unless a judgment or other final adjudication
thereof adverse to the Indemnitee shall establish that he
committed (i) acts of active and deliberate dishonesty;
(ii) with actual dishonest purpose and intent; (iii) which
acts were material to the cause of action so adjudicated.
7. Indemnification of Expenses of Successful
Party. To the extent that Indemnitee has been successful, on
the merits or otherwise, in defense of any Proceeding or in
defense of any claim, issue or matter therein, including the
dismissal of an action without prejudice, Indemnitee shall be
indemnified against all Expenses incurred in connection
therewith.
8. Advancement of Expenses. The Expenses incurred
by Indemnitee with respect to any Proceeding governed by
Paragraph 4 or 5 shall be paid by the Corporation at
reasonable intervals in advance of any final resolution of
such Proceeding, in each case within 20 days after the
Corporation receives Indemnitee's written request therefor;
provided, however, that Indemnitee shall undertake to repay
such amounts to the Corporation to the extent that it is
ultimately determined that Indemnitee was not entitled to
indemnification of such Expense, as hereinafter provided.
In the event, and to the extent that, the Corporation has
made any advances to the Indemnitee for Expenses which are
determined at some later time to be within the category of
exceptions to this Agreement set forth in Paragraph 6, or to
which Indemnitee is not otherwise entitled, Indemnitee hereby
agrees to reimburse the Corporation in full for such Expenses,
within 90 days after written notice by the Corporation of such
determination; and Indemnitee further agrees that execution
and delivery by him of this Agreement shall constitute a valid
and binding obligation on the part of Indemnitee, and his
successors and assigns, to repay such obligation in full.
9. Rights of Indemnitee to Indemnification Upon
Application; Procedures Upon Application. Any indemnification
under Paragraph 4 or 5 shall be made no later than 45 days
after receipt of the written request of Indemnitee for
indemnification together with documentation in support of such
request, unless the Corporation determines within such 45-day
period that the Indemnitee has not met the relevant standards
for indemnification set forth in Paragraph 4 or 5, as the case
may be, and is not otherwise entitled to indemnification under
applicable law; provided, however, that if, within such 45-day
period, the Corporation has not reached any determination
hereunder, any payment made to Indemnitee pursuant to this
Paragraph 9 shall be made subject to and conditioned upon
Indemnitee's agreement to reimburse the Corporation within 20
days of demand by the Corporation therefor, to the extent that
the Corporation subsequently determines that Indemnitee was
not entitled to receive such payment.
The determination as to entitlement shall be
made as follows. If there has been no Change in Control prior
to the date of determination of entitlement to
indemnification, the determination shall be made by (i) the
Board of Directors of the Corporation by a majority vote of a
quorum consisting of Disinterested Directors; or (ii) if a
quorum of Disinterested Directors is not obtainable, by
independent legal counsel reasonably acceptable to the
Corporation, but retained by Indemnitee at his sole expense,
in a written opinion, in form and substance reasonably
satisfactory to the Corporation, that indemnification in the
particular case is permissible.
10. Presumptions as to the Indemnitee's Conduct.
For the purposes of this Agreement, the Indemnitee's conduct
shall not be deemed to have been knowingly fraudulent or
deliberately dishonest, the Indemnitee shall not be deemed to
have had any reasonable cause to believe the Indemnitee's
conduct was unlawful, nor shall any presumption arise that the
Indemnitee did not meet any particular standard of conduct or
have any particular belief, if the Indemnitee's conduct was
based on (i) the records or books of account of the
Corporation or Other Enterprise; (ii) information supplied to
the Indemnitee by an officer or officers of the Corporation or
Other Enterprise in the course of such individual's duties;
(iii) the advice of legal counsel for the Corporation or Other
Enterprise; or (iv) information or records given or reports
made to the Corporation or Other Enterprise by an independent
public accountant, by an appraiser or by other experts
selected by the Corporation or Other Enterprise. The
knowledge, actions or failures to act of any director,
officer, employee or agent of the Corporation shall not be
imputed to the Indemnitee for the purposes of determining the
right to indemnification under this Agreement. An Indemnitee
who acted in good faith and in a manner the Indemnitee
reasonably believed to be in the interest of the participants
and beneficiaries of an employee benefit or compensation plan
shall be deemed to have acted in a manner not opposed to the
best interests of the Corporation. The termination of any
Proceeding which is covered by this Agreement by judgment,
order, settlement (whether with or without court approval) or
conviction, or a plea of nolo contendere or its equivalent
shall not of itself create a presumption for the purposes of
this Agreement that the Indemnitee did not act in good faith
and in a manner which the Indemnitee reasonably believed to be
in or not opposed to the best interests of the Corporation
and, with respect to any criminal Proceeding, had reasonable
cause to believe the conduct of the Indemnitee was unlawful.
11. Indemnification Hereunder Not Exclusive. The
indemnification provided by this Agreement shall not be deemed
exclusive of any other rights to which Indemnitee may be
entitled under the Corporation's Certificate of Incorporation
or By-Laws, any agreement, any vote of shareholders or
disinterested directors, the Business Corporation Law of the
State of New York, or otherwise, both as to action in his
official capacity and as to action in another capacity while
holding such office. If the New York Business Corporation
Law, or the Certificate of Incorporation or By-laws of the
Corporation is amended after the date of this Agreement to
limit or restrict indemnification permitted to the Indemnitee,
then with respect to all matters arising prior to the
effective date of such amendment the Corporation shall
nevertheless indemnify the Indemnitee to the fullest extent
permitted by this Agreement, the Certificate of Incorporation
or By-laws, and such law as in effect prior to such amendment.
12. Corporation Participation in Litigation. With
respect to any proceeding for which indemnification is
requested, the Corporation will be entitled to participate
therein at its own expense and, except as otherwise provided
below, to the extent that it may wish, the Corporation may
assume the defense thereof, with counsel satisfactory to the
Indemnitee. After notice from the Corporation to the
Indemnitee of its election to assume the defense of a
Proceeding, the Corporation will not be liable to the
Indemnitee under this Agreement for any Expenses subsequently
incurred by the Indemnitee in connection with the defense
thereof, other than as provided below. The Corporation shall
not settle any Proceeding in any manner which would impose any
penalty or limitation on the Indemnitee without the
Indemnitee's written consent. The Indemnitee shall have the
right to employ his own counsel in any Proceeding, but the
fees and expenses of such counsel incurred after notice from
the Corporation of its assumption of the defense of the
Proceeding shall be at the expense of the Indemnitee, unless
(i) the employment of counsel by the Indemnitee has been
approved by a majority vote of a quorum consisting of
Disinterested Directors; (ii) the Indemnitee or the
Corporation shall have reasonably concluded that there may be
a conflict of interest between the Corporation and the
Indemnitee in the conduct of the defense of a proceeding and
shall have communicated such conclusion, with a full statement
of the reasons, in writing to the Corporation; or (iii) the
Corporation shall not in fact have employed counsel to assume
the defense of a Proceeding, in each of which cases the fees
and expenses of the Indemnitee's counsel shall be advanced by
the Corporation. The Corporation shall not be entitled to
assume the defense of any Corporation Claim.
13. Continuation of Right of Indemnification and
Advancement of Expenses. The rights of the Indemnitee under
this Agreement shall continue as to the Indemnitee after
termination for any reason of Corporate Status, and shall
inure to the benefit of the heirs, personal representatives,
successors and assigns of the Indemnitee.
14. Maintenance of Directors and Officers Liability
Insurance. The Corporation agrees that, so long as the
Indemnitee shall have a Corporate Status and thereafter so
long as the Indemnitee shall be subject to any Proceeding, the
Corporation shall purchase and maintain in effect for the
benefit of the Indemnitee one or more valid, biding and
enforceable policies of directors and officers liability
insurance. The Corporation shall not be required to maintain
any policies of directors and officers liability insurance if,
in the sole discretion and reasonable business judgment of the
directors of the Corporation, (i) such insurance is not
reasonably available; or (ii) the premium cost for such
insurance is substantially disproportionate to the amount of
coverage provided; or (iii) the coverage provided by such
insurance is so limited by exclusions that there would be
insufficient benefit from such insurance.
15. Partial Indemnification. If Indemnitee is
entitled under any provision of this Agreement to
indemnification by the Corporation for some or a portion of
the Expenses, judgments, fines or penalties actually and
reasonably incurred by him in the investigation, defense,
appeal or settlement of any Proceeding but not for the total
amount thereof, the Corporation shall nevertheless provide
indemnification to Indemnitee for that portion of such
Expenses, judgment, fines or penalties for which Indemnitee is
entitled to be indemnified hereunder.
16. Severability. If any provision of this
Agreement or application of any such provision to any person
or circumstance is held invalid, the remainder of this
Agreement, and the application of such provision other than to
the extent it is held invalid, will not be invalidated or
affected thereby.
17. Notice. Indemnitee shall, as a condition
precedent to his right to be indemnified under this Agreement,
give the Corporation notice in writing as soon as practicable
of any claim made against him for which indemnity will or
could be sought under this Agreement. In addition, Indemnitee
shall give the Corporation such information and cooperation as
it may reasonably require and shall be within Indemnitee's
power. Notice to the Corporation shall be directed to TAYLOR
DEVICES, INC., 90 Taylor Drive, North Tonawanda, New York
14120-0748, Attention: President (or such other address as the
Corporation shall designate in writing to Indemnitee).
Notices to Indemnitee shall be directed to the Indemnitee at
the address of the Indemnitee as shown at the beginning of
this Agreement (or such other address as the Indemnitee shall
designate in writing to the Corporation). Notices shall be
deemed received three days after the date postmarked if sent
by prepaid mail, property addressed.
18. Counterparts. This Agreement may be executed
in any number of counterparts, each of which shall constitute
one and the same original.
19. Applicable Law. This Agreement shall be
governed by and construed in accordance with New York law,
without regard to conflict of laws.
20. Successors and Assigns. This Agreement shall
be binding upon the Corporation and its successors and
assigns.
IN WITNESS WHEREOF, the parties hereto have caused
this Agreement to be duly executed and signed as of the day
and year first above written.
TAYLOR DEVICES, INC.
By: /s/ Douglas P. Taylor
Douglas P. Taylor,
President
INDEMNITEE
By: /s/
[Name]
