TAYLOR DEVICES, INC. — Proxy Solicitation & Information Statement 2001

Sep 27, 2001

DEF 14A 1 proxy01.htm TAYLOR DEVICES, INC. 90 TAYLOR DRIVE NORTH TONAWANDA, NEW YORK 14120-0748 NOTICE OF ANNUAL MEETING OF SHAREHOLDERS NOTICE IS HEREBY GIVEN that the Annual Meeting of Shareholders of TAYLOR DEVICES, INC. ("Company") will be held at the University Inn & Conference Center, 2402 North Forest Road, Amherst, New York, on November 2, 2001, at 10:00 A.M. for the following purposes:

| 1. | To elect two Class 3 directors of the Company, each to serve a three year term expiring in
2004, or until the election and qualification of his successor. |
| --- | --- |
| 2. | To approve and adopt the 2001 Taylor Devices, Inc. Stock Option Plan and reserve
135,000 shares of the Company's common stock for grant of options under the Plan to
certain employees and directors of the Company. |
| 3. | To transact such other business as may properly come before the meeting or any
adjournment or adjournments thereof. |

The Board of Directors has fixed the close of business on September 21, 2001 as the record date for determining which shareholder shall be entitled to notice of and to vote at the Annual Meeting. SHAREHOLDERS WHO ARE UNABLE TO BE PRESENT PERSONALLY MAY ATTEND THE MEETING BY PROXY. SUCH SHAREHOLDERS ARE REQUESTED TO DATE, SIGN AND RETURN THE ENCLOSED PROXY. THE PROXY MAY BE REVOKED AT ANY TIME BEFORE IT IS VOTED.

/s/ Joseph P. Gastel
Joseph P. Gastel, Secretary
DATED: September 27, 2001
North Tonawanda, New York

PROXY STATEMENT FOR THE ANNUAL MEETING OF SHAREHOLDERS OF TAYLOR DEVICES, INC. _______ TO BE HELD AT THE UNIVERSITY INN & CONFERENCE CENTER, 2402 NORTH FOREST ROAD, AMHERST, NEW YORK NOVEMBER 2, 2001 This Proxy Statement is furnished to shareholders by the Board of Directors of Taylor Devices, Inc. in connection with the solicitation of proxies for use at the Annual Meeting of Shareholders to be held on November 2, 2001, at 10:00 A.M., and at any adjournments of the meeting, for the purposes set forth in the accompanying Notice of Annual Meeting of Shareholders. This Proxy Statement and the accompanying form of proxy are being mailed to Shareholders commencing on or about September 27, 2001. If the enclosed form of proxy is properly executed and returned, the shares represented by the proxy will be voted in accordance with the proxy's instructions. Any proxy given pursuant to this solicitation may be revoked by the shareholder at any time prior to its use by written notice to the Secretary of the Company. The Board of Directors has fixed the close of business on September 21, 2001, as the record date for determining the holders of common stock entitled to notice of and to vote at the meeting. On September 21, 2001, the Company had outstanding and entitled to vote a total of 2,805,140 shares of common stock. Each outstanding share of common stock is entitled to one vote on all matters to be brought before the meeting. CERTAIN BENEFICIAL OWNERS The following table sets forth information as to persons known by the Company to be the beneficial owners of more than 5% of the Company's common stock:

Name and Address of Beneficial Owner	Amount and Nature of Beneficial Ownership(1)	Percent of Class
Tayco Developments, Inc 100 Taylor Drive North Tonawanda, NY 14120	697,567	24.9%
The Cameron Baird Foundation 1350 One M&T Plaza Buffalo, NY 14203	340,400 (2)	12.1%

| (1) | In addition to shares that it owns in the Company, the Taylor family also owns shares in Developments.
Including shares beneficially owned by Messrs. Douglas P. Taylor and Richard G. Hill in either the
Company or Developments, the Taylor family owns or controls 88,266 shares or 3.1% of the Company's
stock and 169,317 shares or 17.1% of Developments' stock. Information presented has been supplied by
the Company as transfer agent. |
| --- | --- |
| (2) | Information regarding The Cameron Baird Foundation has been taken from its Form 3 report received by
the Company on August 23, 2001. Additional information is reported in Amendment No. 10 to Schedule
13D dated August 10, 1998 with respect to Company stock by the following persons: Aries Hill Corp.,
48,500 shares (1.7%); Brent D. Baird, 33,000 shares (1.2%), including 10,000 shares held in Trubee,
Collins & Co.'s pension plan for the benefit of Brent D. Baird; Bridget B. Baird, as Successor Trustee,
10,000 shares (.356%); Bridget B. Baird individually 10,000 (.356%); Bridget B. Baird as C/F Alexis B.
Baird 5,000 (.178%); Bridget B. Baird as C/F Cameron B. Blevins 5,000 (.178%); The Cameron Baird
Foundation, 337,900 shares (12.0%); Jane D. Baird, 61,500 shares (2.2%); Anne S. Baird, 5,000 shares
(.178%); David M. Stark, as Successor Trustee, 3,000 shares (.107%); and Brian D. Baird as successor
trustee 25,000 (.891%) total of filing persons, 543,900 shares (19.4%). According to an Amendment No.
4 to Schedule 13D filed June 5, 2001 with respect to Developments' stock, these entities in the aggregate
own 138,300 shares (13.966%) of the common stock of Developments. The persons filing such Schedule
13D, rather than the Company or Developments, are responsible for the accuracy and completeness of
such information. |

ELECTION OF DIRECTORS Each year, those directors comprising one of the three Classes of the Board of Directors of the Company are elected by the shareholders to serve a three year term. The term for two directors in Class 3, Douglas P. Taylor and Randall L. Clark, will expire at this Annual Meeting. Messrs. Taylor and Clark are management's nominees to be elected to Class 3 at this Annual Meeting, each to hold office until 2004 or the election and qualification of his successor. The persons named on the enclosed proxy will vote all shares present at the Annual Meeting for the election of the nominees, unless a shareholder, by his or her proxy, directs otherwise. In the event that either Mr. Taylor or Mr. Clark is unable to serve as a director, proxies will be voted in accordance with the best judgment of the person or persons acting under such authority. Management does not expect that either of the nominees will be unable to serve. Each of the nominees has previously served as a director, and has been elected as a director at prior annual meetings of shareholders. Nominees and Directors Certain information regarding Mr. Taylor and Mr. Clark, including their beneficial ownership of the Company's common stock, as well as information on those directors whose terms of office continue beyond the date of the 2001 Annual Meeting of Shareholders, is set forth below. Unless otherwise indicated, each person held the position indicated with either the Company or another organization for the past five years, and has sole voting and investment power with respect to the securities beneficially owned. Beneficial ownership includes securities which can be acquired pursuant to currently exercisable options, or options which become exercisable within 60 days of the date of this Proxy Statement. NOMINEES Nominees for Class 3 Directors

Name
Term expiring in 2004

Douglas P. Taylor (1)	53	President, CEO and Chairman of the Board of Directors of the Company	1976	67,925 (2)(4)	2.4
Randall L. Clark (5)	58	Chairman of the Board of Directors of Dunn Tire Corporation	1996	27,000 (4)	1.0

OTHER DIRECTORS Class 2 Directors Continuing in Office

Name	Age	Principal Occupation	First Elected Director	Number of Shares	% of Class
Term expiring in 2003
Donald B. Hofmar	71	President of Bel Mar, Inc.	1991	40,233 (4)	1.4
Richard G. Hill (1)	51	Executive Vice President of the
Company	1991	61,727 (3)(4)	2.2

Class 1 Director Continuing in Office

Name	Age	Principal Occupation	First Elected Director	Number of Shares	% of Class
Term expiring in 2002
Joseph P. Gastel (1)	76	Patent Attorney	1984	68,124 (4)	2.4
All directors and executive officers as a group (6 persons)				273,476	9.7

| (1) | Messrs. Taylor and Hill are brothers-in-law and both are directors of Tayco Realty Corporation
("Tayco Realty"). Both Mr. Taylor and Mr. Gastel are directors of Developments. |
| --- | --- |
| (2) | Includes 2,307 shares held beneficially and of record by Sandra Taylor, wife of Douglas P. Taylor,
and 7,042 shares held by her as custodian for their children. Also included are 38 shares held by
Mr. Taylor as custodian for their children. As to all such shares, Mr. Taylor disclaims any beneficial
ownership. These shares represent less than 1% of the Company's stock. |
| (3) | Includes 656 shares held by Joyce Taylor Hill, wife of Mr. Hill and sister of Douglas P. Taylor, as
custodian for their minor children. As to all such shares, Mr. Hill disclaims any beneficial
ownership. |

| (4) | Includes options granted to directors and officers and which have not been exercised, but which can
be exercised within 60 days. These options were granted pursuant to the 1998 Taylor Devices, Inc.
Stock Option Plan ("1998 Plan"), as well as the 1994 Taylor Devices, Inc. Stock Option Plan which
has expired. |
| --- | --- |
| (5) | Mr. Clark also serves on the board of directors of several other area corporations. |

BOARD OF DIRECTORS AND COMMITTEE MEETINGS In fiscal 2001, the Board of Directors met three times with 100% of the directors in attendance. The Executive Committee , between meetings of the Board of Directors and to the extent permitted by law, exercises all of the powers and authority of the Board in the management of the business of the Company. The Executive Committee, comprised of Messrs. Taylor, Hill, and Gastel, did not meet in fiscal 2001. The Audit Committee , comprised of the Company's three independent directors, Messrs. Clark, Gastel and Hofmar, functions in accordance with the terms of the Charter of the Audit Committee of the Board of Directors of the Company, adopted by the Board on April 4, 2000. See Audit Committee Report below. The Audit Committee met three times in fiscal 2001 with all members in attendance. The Compensation Committee , comprised of Messrs. Clark, Gastel and Hofmar, was formed to review the compensation of the Company's executive officers, and make recommendations in that regard to the Board, as a whole. The Compensation Committee met twice in fiscal 2001 with all members in attendance. The Stock Option Committee , comprised of Messrs. Clark, Gastel and Hofmar, administers the Company's Stock Option Plan. The Committee met twice in fiscal 2001 with all members in attendance. The Company does not have a standing nominating committee. The Audit Committee Report As required by the terms of the Audit Committee Charter, the undersigned members of the Audit Committee have:

• reviewed and discussed the Company's audited financial statements with management of the Company;

reviewed and discussed with the Company's independent auditors the matters required to be discussed by the Statement on Auditing Standards No. 61, as it may be amended or supplemented; and

received the written disclosures and the letter from the independent accountants, as required by Independence Standards Board Standard No. 1 ("Independence Discussions with Audit Committees") as may be modified or supplemented, and has discussed with the independent accountant, the independent accountants' independence;

Based on the foregoing, the Audit Committee has recommended to the Company's Board of Directors that the audited financial statements be included in the Company's Annual Report on Form 10-KSB for fiscal 2001 for filing with the Securities and Exchange Commission.

Respectfully submitted,
Randall L. Clark
Joseph P. Gastel
Donald B. Hofmar

Director Compensation Each director receives a fee of $2,000 for each meeting attended. Fees are paid either in cash or, if requested by the director, credited toward future exercise of stock options. The Secretary of the meeting receives an additional fee of $2,250 per meeting for secretarial services in addition to his fees as a director, for a total fee per meeting of $4,250. Pursuant to the formula set forth in the 1998 Plan, on April 18, 2001, the fixed date of the grant, each director was granted options to purchase 5,000 shares of the Company's stock. The closing price on April 18, 2001 was $3.25, which was the mean between the high and low prices for a share of common stock as quoted by NASDAQ on that date. If there is only one price quoted for the day of the grant, the fair market value shall be such price; and if no such price is quoted for the day of the grant, the fair market value shall be the previous closing price. In the event that no previous closing price is available, then the fair market value of one share of Common Stock on the day the option is granted shall be determined by the Committee or by the Board. The mean between the high and the low prices of the stock on August 21, 2001 was $3.865 per share. All directors may be considered to be "control persons" as that term is defined in the Securities Act of 1933. Current Directors and Officers For information concerning Messrs. Taylor, Hill, Gastel, Hofmar and Clark, see "Election of Directors- Nominees and Directors" above. KENNETH G. BERNSTEIN (54), Treasurer of the Company and Developments, has been with the Company since 1992. Section 16(a) Beneficial Ownership Reporting Compliance Based solely on the Company's review of Forms 4 and 5 and any written representations furnished by officers, directors and beneficial owners of 10% or more of the Company's stock during, or with respect to, the Company's most recent fiscal year, all reporting persons filed the required Forms on a timely basis, with the exception of a Form 3 report for March 19, 1998 by The Cameron Baird Foundation which was received by the Company on August 23, 2001. EXECUTIVE COMPENSATION The following table sets forth certain information concerning compensation of and stock options held by the Company's Chief Executive Officer, Executive Vice President and Treasurer. No other executive officer has compensation which exceeds $100,000 annually in salary and bonus. SUMMARY COMPENSATION TABLE

Annual Compensation Long-term Compensation Awards

Name/principal Position	Fiscal Year	(1) Salary ($)	Bonus ($)	(3) Other Annual Comp ($)	(2) Underlying Options Sars #
Douglas P. Taylor Chairman, President and Chief Executive Officer	2001	$157,741	$1,369	$29,529	5,000
	2000	$159,748	$ 786	$28,405	5,000
	1999	$148,857	$ 875	$36,079	5,000

Richard G. Hill Executive Vice President	2001	$125,454	$851	$26,098	5,000
	2000	$129,388	$480	$28,369	5,000
	1999	$116,409	$525	$28,123	5,000
Kenneth G. Bernstein Treasurer	2001	$ 97,603	$333	$12,275	1,000
	2000	$100,659	$175	$19,471	1,000
	1999	$ 93,937	$175	$18,684	1,000

| (1) | Automotive vehicles owned by the Company are made available to the President and Executive
Vice President named above and use of such vehicles is not limited to business purposes. The value
of any personal economic benefit associated with such use cannot reasonably be determined by the
Company |
| --- | --- |
| (2) | Incentive options were granted pursuant to the terms of the 1998 Plan on April 18, 2001 at an option
price of $3.25 per share, which is the mean between the high and low prices for a share of Common
Stock as quoted by NASDAQ on that date. On August 23, 2000, Kenneth G. Bernstein was granted
an option of 1,000 shares at $2.75 per share. |
| (3) | Other compensation, as paid and accrued to the above named executive officers, is as follows: |

	Director Fees	Director Bonus	Affiliate Mgm't Incentive	Auto Allowance	401(k) Stock Purchase Plan	Stock Options Exercised	Total
Douglas P. Taylor:
Fiscal 5/31/01	$6,000	$400	$17,458	$2,880	$2,791	$ -	$29,529
Fiscal 5/31/00	$7,250		$17,700	$2,790	$ 665	$ -	$28,405
Fiscal 5/31/99	$8,000		$17,750	$1,800	$ 650	$ 7,879	$36,079
Richard G. Hill:
Fiscal 5/31/01	$6,000	$400	$13,836	$2,880	$2,982	$ -	$26,098
Fiscal 5/31/00	$7,250		$17,700	$2,790	$ 629	$ -	$28,369
Fiscal 5/31/99	$8,000		$17,750	$1,800	$ 573	$ -	$28,123
Kenneth G. Bernstein:
Fiscal 5/31/01	$ -		$10,403	$ -	$1,872	$ -	$12,275
Fiscal 5/31/00	$ -		$18,050	$ -	$1,421	$ -	$19,471
Fiscal 5/31/99	$ -		$17,700	$ -	$ 984	$ -	$18,684

OPTION/SAR GRANTS IN FISCAL YEAR 5/31/01

Individual Grants Potential Realizable Value at Assumed Annual Rates of Stock Price Appreciation for Option Term

	Number of Securities Underlying Options Granted(#) (1)	% of Total Options Granted Employees In FY01	Exer/ Base Price	Expir- ation Date	5%	10%	Grant Date Present Value ($)(2)
NAME
Douglas P.
5,000 Taylor, Chairman, President and CEO		25%	$3.25	4/18/11	$10,220	$25,898	$14,250
Richard G. Hill, Vice President	5,000	25%	$3.25	4/18/11	$10,220	$25,898	$14,250
Kenneth G. Bernstein, Treasurer	1,000	5%	$2.75	8/23/10	$1,729	$4,383	$2,410

| (1) | Incentive stock options were granted to non-directors on August 23, 2000 pursuant to the 1998 Plan. The
options are not exercisable until a date six months after the date of grant. |
| --- | --- |
| (2) | The Black-Scholes option valuation model was used to estimate the grant date present value of each option
at August 23, 2000 at $2.41 and at April 18, 2001 at $2.85. |

AGGREGATED OPTION/SAR EXERCISES IN LAST FISCAL YEAR AND YEAR-END OPTION/SAR VALUES 5/31/01

Name	Shares Acquired On Exercise (#)	Value Realized	Number of Securities Underlying Unexercised Options At Fiscal Year End Exercisable (E) Unexercisable (U)	(1) Value of Unexercised In-the-Money Options At Fiscal Year End Exercisable (E) Unexercisable (U)
Douglas P. Taylor, Chairman, President, and CEO	- 0 -	- 0 -	20,000 (E) 5,000 (U)	$9,349 (E) $ 300 (U)
Richard G. Hill, Executive Vice President	- 0 -	- 0 -	20,000 (E) 5,000 (U)	$9,349 (E) $ 300 (U)
Kenneth G. Bernstein, Treasurer	- 0 -	- 0 -	4,000 (E) - 0 - (U)	$1,308 (E) $ - 0 - (U)

(1) Value is the difference between the market value of the Company's Common Stock on May 31, 2001 of $3.31, and the exercise price for the options.

Employment Agreements As of December 1, 2000, Messrs. Taylor and Hill (each, an "Executive") entered into Employment Agreements with the Company (together, the "Agreements"). The Agreements provide that, each year, the term will be for three years going forward (the "Term"). Under their respective Agreements, Messrs. Taylor and Hill are entitled to receive base salaries of not less than $174,000 per year and $138,000, respectively, together with such employee benefits and perquisites as were available to them immediately prior to December 1, 2000. Should the Executive voluntarily resign, the Company may, in the discretion of the Board, pay the Executive a severance payment which the Board may determine at the time. The Company retains the right to terminate each Executive for "Cause", without compensation. "Cause" is defined to include personal dishonesty, incompetence, willful misconduct, any breach of fiduciary duty involving personal profit, intentional failure to perform stated duties, willful violation of law, or willful material breach of the Agreement. If the Company terminates either Executive without cause, or if either Executive resigns because the Company has failed to appoint him to the office he currently holds, or makes any material change in his functions, duties, or responsibilities, then the terminated Executive is entitled to a payment equal to the greater of the payments due him for the remaining Term or 1.2 times the average of his three preceding years' cash compensation plus contributions to employee benefit plans. In the event of a "Change of Control," as defined in the Agreements, followed by termination of the Executive's employment, the Company has agreed to pay each Executive a sum equal to the greater of the payments due him for the remaining Term, or 2.99 times the average of the five preceding years' cash compensation plus contributions to employee benefit plans. If an Executive voluntary terminates his employment when there has not been a Change in Control, then the Agreements provide that the Executive will not compete with the Company for a period of one year in any city, town or county where the Company's principal office is located. Indemnification Insurance for Directors and Officers On July 24, 2001, the Company renewed a director and officer indemnification insurance policy written by Royal Indemnity. The renewal was for a one-year period at an annual premium of $20,475. The policy provides indemnification benefits and the payment of expenses in actions instituted against any director or officer of the Company for claimed liability arising out of his conduct in such capacities. No payments or claims for indemnification or expenses have been made under any directors and officers insurance policies purchased by the Company.

ITEM 2. APPROVAL OF 2001 TAYLOR DEVICES, INC. STOCK OPTION PLAN

The 2001 Taylor Devices, Inc. Stock Option Plan ("2001 Plan") provides for the grant of options to purchase common stock in the Company to certain employees of the Company and any subsidiary, the majority of the voting stock of which is owned, directly or indirectly, by the Company ("Subsidiary"), as well as to the Company's Directors. The employees will be selected by the Compensation Committee of the Board of Directors of the Company, which is comprised of two or more Directors, appointed by the Board, selected from those Directors who are not employees of the Company or any Subsidiary ("Committee"). The current Compensation Committee members are Messrs. Clark, Gastel and Hofmar. If the 2001 Plan is adopted by shareholders at the Annual Meeting, the Committee will remain the same. Committee members are eligible to participate in the 2001 Plan on a restricted basis pursuant to a predetermined formula. The Committee is authorized to designate an option as either an "Incentive Stock Option" or a "Non-Qualified Stock Option" under the provisions of the Internal Revenue Code of 1986, as amended ("Code"). Under the 2001 Plan, a maximum of 135,000 shares of common stock are reserved for the grant of options. Incentive Stock Options to purchase 5,000 shares of common stock will be granted annually to each employee-Director, and Non-Qualified Stock Options to purchase 5,000 shares of common stock will be granted annually to each non-employee Director, on April 18 of each year that the 2001 Plan is in effect, commencing April 18, 2002. No additional options may be granted to such individuals, absent an amendment to the 2001 Plan. If the President of the Company determines, in his sole discretion, that on such date that the Company is in possession of material non-public information concerning the Company's business, the grant shall be delayed until the third day following publication of such information, or the date of the event which renders such information immaterial. The option price shall be 100% of the fair market value of each share of common stock on the date the option is granted. If an Incentive Stock Option is granted to an individual owning (directly or indirectly) more than 10% of the total combined voting power of outstanding common stock of the Company or any subsidiary, the purchase price per share shall be 110% of the fair market value of the stock at the date of grant, and the option, by its terms, will not be exercisable more than five years from the date of grant. For purposes of the 2001 Plan, "fair market value" is the final closing price for one share of the Company's common stock, as quoted by the NASDAQ system for the date of grant. If no final closing price is quoted for such date, the fair market value shall be determined by reference to the next preceding day for which such price is quoted. In the event no closing price is available, then the fair market value of one share of common stock on the date the option is granted shall be determined by the Committee or by the Board of Directors. Options granted under the 2001 Plan shall terminate on the date determined by the Committee and specified in the option agreement which will accompany each grant of an option, but in any event not later than 10 years after the date of grant. An option held by an individual whose employment is terminated shall terminate (1) if the option holder's employment is terminated due to becoming permanently and totally disabled, one year after the date of termination of employment (in the case of Incentive Stock Options) and upon the expiration date (in the case of Non-Qualified Stock Options); (2) if the option holder's employment is terminated due to death or death occurs within three months after termination of employment (a) in the case of an Incentive Stock Option, one year after the date of termination of employment , and (b) in the case of a Non-Qualified Option, within one year from the date of the Optionee's death; (3) immediately, if employment is terminated for cause, unless some other expiration date is fixed by the Committee; or (4) three months after the date employment terminates for any other reason (in the case of Incentive Stock Options), or (in the case of Non-Qualified Stock Options) 18 months after employment terminates or such other date as the Committee may fix. Whether an authorized leave of absence for military or governmental service constitutes termination of employment for purposes of the 2001 Plan shall be determined by the Committee. In no event, however, shall any option be exercisable after its expiration date. No option granted under the 2001 Plan is assignable or transferable, other than by will or the laws of descent and distribution; during the lifetime of the optionee, the option shall be exercisable only by the optionee. The full text of the 2001 Plan is annexed as Exhibit "A". ACCOUNTING TREATMENT Under the 2001 Plan, neither the grant nor exercise of an option results in a charge against earnings. TAX TREATMENT The Company is advised by counsel that, under the present provisions of the Code and Code regulations, the federal income tax treatment of stock options under the 2001 Plan will depend upon whether the option is (1) an Incentive Stock Option intended to qualify under Section 422 of the Code or (2) a Non-Qualified Stock Option (all other options). The federal income tax consequences described in this section are based on laws and regulations in effect on July 20, 2001, and there is no assurance that the laws and regulations will not change in the future and affect the tax consequences of the matters discussed in this section. Optionees also may be subject to additional taxes under state tax laws which may differ from the applicable federal income tax laws described in this section. Incentive Stock Options. Generally, no taxable ordinary income is recognized by an employee upon the exercise of an Incentive Stock Option. If common stock acquired pursuant to the exercise of an Incentive Stock Option is held by the employee for at least two years from the date of grant and at least one year from the date the common stock is transferred to that employee, and, if that employee remains employed by the Company at all times from the date of grant of the option until three months before the date of exercise (or one year before the date of exercise in the case of a disabled employee or three months before death in the case of a deceased employee), the employee will not recognize income for regular tax purposes upon the exercise of the option. Exercise may result in recognition of income for alternative minimum tax purposes. Beginning January 1, 2003, upon the exercise of an Incentive Stock Option, the difference between the fair market value and the exercise price may constitute taxable wages under the Federal Insurance Contribution Act (FICA) and Federal Unemployment Tax Act (FUTA). Upon the later disposition of the common stock, the employee will recognize long-term capital gain or loss equal to the difference between the sales price and the purchase price. Under these circumstances, the Company will not receive a tax deduction at the time of either exercise or disposition. If the common stock acquired pursuant to the exercise of an Incentive Stock Option is not held by the employee for the time periods indicated above or otherwise fails to qualify, the option will be treated as a Non-Qualified Stock Option and the disposition will be subject to the income tax treatment described below under "Non-Qualified Stock Options". The Committee may, in its discretion, grant options that expire later than three months after termination of employment. Options exercised later than three months after termination of employment (except in the case of disability of the employee or death of the employee within three months of termination, in which case the applicable period is one year) will be treated for income tax purposes as Non-Qualified Stock Options. The amount by which the fair market value of the common stock on the exercise date of an Incentive Stock Option exceeds the purchase price will be an item of "tax preference" for purposes of the federal alternative minimum tax provisions of the Internal Revenue Code. Non-Qualified Stock Options. Unlike an Incentive Stock Option, the exercise of a Non-Qualified Stock Option results in the recognition of income for tax purposes which is subject to income tax withholding and may be subject to FICA tax withholding. However, the exercise of a Non-Qualified Stock Option does not result in an item of "tax preference" for purposes of the federal alternative minimum income tax. Upon exercise of a Non-Qualified Stock Option, an optionee, other than a person subject to Section 16(b) of the Securities Exchange Act of 1934 ("Reporting Person"), will recognize compensation, taxable as ordinary income, in an amount equal to the excess of the fair market value of the common stock over the purchase price on the date of exercise. An optionee's tax basis in common stock received upon exercise of options will generally be any purchase price paid plus the amount of taxable compensation recognized. To the Company. In general, the Company will be entitled to a deduction (subject to any general limitations) in connection with awards under the Plan only at such time, and in such amount, as optionees recognize ordinary income in connection with the awards. Thus, in the case of an Incentive Stock Option, assuming there is no disqualifying disposition, the Company will not be entitled to a deduction because the optionees will not recognize ordinary income. When exercise of a Non-Qualified Stock Option results in ordinary income to the optionee, the Company will be entitled to claim the available deduction. The Code requires satisfaction of the applicable reporting requirements as a condition to the Company's claiming its deduction. Gain and Loss. If common stock acquired through the exercise of a Non-Qualified Stock Option is sold, the optionee will generally recognize capital gain (or loss) equal to the amount by which the proceeds of sale exceed (or are less than) the optionee's basis in that common stock. The gain (or loss) will be long term if the common stock acquired under the 2001 Plan has been held for more than 12 months. If an optionee pays part or all of the exercise price of a Non-Qualified Stock Option by surrendering previously acquired Company common stock, then such optionee's tax basis (and capital gains holding period) in the surrendered shares carries over to an equivalent number of shares purchased by exercise of the Option. If the optionee uses stock previously acquired as Incentive Stock Option stock for purposes of paying for stock in a later exercise but prior to the expiration of the required holding period for the Incentive Stock Option stock, this will be treated as a disqualifying disposition for such stock. STOCK CHARACTERISTICS The common stock to be issued or transferred pursuant to the 2001 Plan will be stock which will be made available, at the discretion of the Board of Directors of the Company, either from authorized but unissued shares, or from shares reacquired by the Company, including shares purchased on the open market. Shares acquired pursuant to the exercise of options under the 2001 Plan by a Reporting Person shall not be sold or transferred for at least six months after the date of grant. No preemptive rights are applicable to the shares covered by the 2001 Plan. The cash proceeds to be received by the Company upon exercise of the options will be used for general corporate purposes. On August 22, 2001, there were 95,000 options issued to directors, officers, and key employees under the Taylor Devices, Inc. 1998 Stock Option Plan, no options had been exercised, and 30,000 options remained available for grant. The Company granted 13,000 of these available options to key employees by action of the Board of Directors, and plans to issue the final 17,000 options in partial satisfaction of the annual formula grant to Directors in April, 2002. RESOLUTION In order to adopt the 2001 Plan, shareholders are requested to approve and adopt the following resolution at the Annual Meeting of Shareholders: RESOLVED, that the 2001 Taylor Devices, Inc. Stock Option Plan, attached as Exhibit "A" to the Company's Proxy Statement and furnished to shareholders in connection with the Annual Meeting of Shareholders of the Company held on November 2, 2001, be, and hereby is, approved and adopted. If approved and adopted, the 2001 Plan will become effective on the date of adoption by shareholders. Approval and adoption of this Item 2 requires the affirmative vote of a majority of votes cast at the Annual Meeting by Shareholders who are entitled to vote. Management recommends a vote "FOR" Item 2. EMPLOYEE STOCK PURCHASE PLAN The Company offers an Employee Stock Purchase Plan generally to all its employees. As of September 21, 2001, there are 42,691 shares available for distribution to all qualified employees. In view of the popularity of the Employee Stock Purchase Plan with the Company's employees, the Board of Directors adopted a new Employee Stock Purchase Plan on August 22, 2001 having substantially the same terms as the existing Stock Purchase Plan, under which a total of 135,000 shares will be available for distribution. The Company also provides a 401(k) plan. TRANSACTIONS WITH MANAGEMENT AND OTHERS The Company leases a portion of the property where it does business from its affiliate, Tayco Realty, pursuant to the terms of a lease which will expire on October 31, 2005. Rental payments by the Company for fiscal 2001 totaled $159,600. The total rent paid by the Company is determined by a base rate of $10.64 per square foot, and is subject to adjustment for increases in taxes, maintenance costs and for utilization of additional space by the Company. The Company also pays for certain expenses incurred for the operation of the facilities. Developments owns approximately 42% of Tayco Realty, with 58% owned by the Company. Pursuant to the Lease Agreement dated July 1, 2000 between the Company and Developments, the Company leases approximately 800 square feet of office and research and development space to Developments at a base annual rental of $12,000. The rate of any rental increase may not exceed 10% annually and may be waived by both parties in writing. The lease automatically renews on each anniversary of its commencement date, unless either party gives three months' written notice to the other of termination. The lease provides that on April 1 of each year, management of both companies will review the agreement to determine possible increases for expenses due to increased taxes, maintenance costs, or for additional space utilized by Developments. In fiscal 2001, the Company received total rental payments of $12,000 from Developments. Under the License Agreement dated November 1, 1959 ("License Agreement"), Developments granted the Company certain preferential rights to market in the United States and Canada all existing and future inventions and patents owned by Developments. The term of the License Agreement is the life of the last-to-expire patent on which the Company is paying royalties, the date of which is March 28, 2018. The Company pays a 5% royalty to Developments on sales of items sold and shipped, which, in fiscal 2001, totaled $193,506 in royalties. Payments are required to be made quarterly, without interest, and are current. In addition, the License Agreement provides for Developments to pay the Company 10% of the gross royalties received from third parties who are permitted to make, use and sell machinery and equipment under patents not subject to the License Agreement. These royalties also apply to certain apparatus and equipment subject to the License Agreement which has been modified by the Company, with the rights to the modification assigned to Developments. No royalties were received by the Company in fiscal 2001. Royalties, if any, are paid quarterly. The Company, Developments, and Tayco Realty share common management and a close business relationship. Particularly as it may relate to the Company and Developments, as separate corporations responsible to their own shareholders, corporate interests may from time to time diverge regarding various aspects of their businesses, including the development of future inventions and patents by Developments which could be licensed to other licensees, rendering the present License Agreement only minimally beneficial. All transactions described above are on as favorable a basis to the Company, as if entered into with an unaffiliated party. INDEPENDENT AUDITORS A representative of Lumsden & McCormick, LLP, the Company's auditors for fiscal 2001, and the accounting firm recommended by the Audit Committee to serve as the Company's certified public accountants for fiscal 2002, will attend the Annual Meeting of Shareholders. This representative will be available to respond to questions raised orally, and will be given an opportunity to make a statement, if desired. PROPOSALS OF SHAREHOLDERS Proposals of shareholders intended to be presented to the year 2002 Annual Meeting of Shareholders must be received by the Secretary of the Company prior to June 1, 2002, for inclusion in the Proxy Statement and form of proxy. Shareholders wishing to propose a matter for consideration at the 2002 Annual Meeting of Shareholders must follow certain specified advance notice procedures set forth in the Company's By-Laws, a copy of which is available upon written request to: Joseph P. Gastel, Secretary, Taylor Devices, Inc., 90 Taylor Drive, P.O. Box 748, North Tonawanda, New York 14120-0748. The By-Laws designate procedures for the calling and conduct of a meeting of shareholders, including, but not limited to, specifying who may call the meeting, what business may be conducted, the procedures with respect to the making of shareholder proposals, and the procedures and requirements for shareholder nomination of directors. FINANCIAL STATEMENTS The financial statements of the Company are contained in the Company's 2001 Annual Report which accompanies this Proxy Statement. OTHER MATTERS Voting Under the Business Corporation Law of New York ("BCL") and the Company's By-Laws, the presence, in person or by proxy, of a majority of the outstanding common shares is necessary to constitute a quorum of the shareholders to take action at the Annual Meeting. The shares which are present or represented by a proxy will be counted for quorum purposes regardless of whether or not a broker with discretionary authority fails to exercise discretionary voting authority with respect to any particular matter. Directors standing for election must be elected by a plurality of votes cast at the Annual Meeting and elected to their class terms. Approval of the 2001 Taylor Devices, Inc. Stock Option Plan will require the affirmative vote of a majority of the votes cast at the Annual Meeting by the shareholders entitled to vote at the meeting. "Other business," if properly brought before the meeting, must be adopted by a majority of affirmative votes cast at the meeting. For voting purposes, all proxies marked "for", "against", "abstain", or "withhold authority" will be counted in accordance with such instruction as to each item. In no event will an abstention be counted as a vote cast. No broker non-votes will be counted for any item. Expenses The expenses of this solicitation, including the costs of preparing and mailing this Proxy Statement and accompanying material, will be borne by the Company. The Company has retained the services of Regan & Associates, Inc. to assist in the solicitation of proxies under a contract providing for payment of $2,500, plus reimbursement of reasonable out-of-pocket expenses. In addition to solicitations by mail, Regan & Associates, Inc. and regular employees of the Company may solicit proxies in person, by mail or by telephone, but no employee of the Company will receive any compensation for solicitation activities in addition to his or her regular compensation. Expenses may also include the charges and expenses of brokerage houses, nominees, custodians and fiduciaries for forwarding proxies and proxy materials to beneficial owners of shares. The Board of Directors knows of no other matters to be voted upon at the Annual Meeting. If any other matters properly come before the Annual Meeting, it is the intention of the persons named in the enclosed form of proxy to vote on such matters in accordance with their judgment.

By Order of the Board of Directors
/s/ Joseph P. Gastel Joseph P. Gastel Secretary

DATED:
North Tonawanda, New York

Exhibit A TAYLOR DEVICES, INC. TEXT OF THE 2001 TAYLOR DEVICES, INC. STOCK OPTION PLAN AS PROPOSED 1. PURPOSES OF THE PLAN

1. DEFINITIONS

2. ADMINISTRATION OF THE PLAN

3. STOCK SUBJECT TO THE PLAN

4. GRANT OF THE OPTIONS

5. OPTION PRICE

6. ELIGIBILITY OF OPTIONEES

7. NON-TRANSFERABILITY

8. TERM AND EXERCISE OF OPTIONS

9. TERMINATION OF EMPLOYMENT

10. MODIFICATION, EXTENSION, AND RENEWAL

11. PERIOD IN WHICH GRANTS MAY BE MADE

12. AMENDMENT OR TERMINATION OF THE PLAN

13. CHANGES IN CAPITALIZATION

14. LISTING AND REGISTRATION OF SHARES

15. TRANSFER OF OPTION SHARES

16. EFFECTIVE DATE OF PLAN

TAYLOR DEVICES, INC. PROXY SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS ANNUAL MEETING OF SHAREHOLDERS TO BE HELD NOVEMBER 2, 2001, AT 10:00 A.M. UNIVERSITY INN & CONFERENCE CENTER 2402 NORTH FOREST ROAD, AMHERST, NEW YORK The undersigned hereby appoints Douglas P. Taylor and Joseph P. Gastel, and each of them, with full power of substitution as proxies for the undersigned to attend the Annual Meeting of Shareholders of TAYLOR DEVICES, INC. to be held at the University Inn & Conference Center, 2402 North Forest Road, Amherst, New York at 10:00 A.M. on November 2, 2001, and at any adjournment thereof, to vote and act with respect to all Common Shares of the Company which the undersigned would be entitled to vote, with all the power the undersigned would possess if present in person, as follows:

	The Board of Directors recommends that you vote FOR :
1.	ELECTION OF DIRECTORS THE DIRECTORS TO BE ELECTED TO CLASS 3, A THREE YEAR TERM:
	Douglas P. Taylor				Randall L. Clark
	[ ]	FOR Nominee			[ ]	FOR Nominee
	[ ]	Withhold Authority for Nominee			[ ]	Withhold Authority for Nominee
2.	ADOPTION OF 2001 TAYLOR DEVICES, INC. STOCK OPTION PLAN:
	[ ]	FOR	[ ]	AGAINST	[ ]	ABSTAIN
3.	In their discretion, the proxies are authorized to vote on any other business that may properly come
before the meeting or any adjournment(s).

THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS This proxy will be voted as directed, but if no direction is indicated, it will be voted FOR the nominees described in Item 1, FOR adoption of the 2001 Taylor Devices, Inc. Stock Option Plan, and in the discretion of the proxies on such other matters as may properly come before the Annual Meeting or any adjournment or postponements thereof. Receipt of the Notice of Annual Meeting of Shareholders and accompanying Proxy Statement is hereby acknowledged.

[ ] Please check (X) this box if you plan to attend the Annual Meeting.

DATED: ____, 2001 _____ _____

Please sign exactly as your name appears on this proxy. Joint owners should each sign personally. If signing as attorney, executor, administrator, trustee or guardian, please include your full title. Corporate proxies should be signed by an authorized officer. PLEASE SIGN, DATE AND RETURN THIS CARD PROMPTLY USING THE ENCLOSED ENVELOPE.