<PAGE> 1
SCHEDULE 14A
INFORMATION REQUIRED IN PROXY STATEMENT
SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(A) OF THE SECURITIES
EXCHANGE ACT OF 1934 (AMENDMENT NO. )
Filed by the registrant /X/
Filed by a party other than the registrant / /
Check the appropriate box:
/ / Preliminary proxy statement
/X/ Definitive proxy statement
/ / Definitive additional materials
/ / Soliciting material pursuant to Rule 14a-11(c) or Rule 14a-12
Espey Mfg. & Electronics Corp.
-------------------------------------------------------------------------------
(Name of Registrant as Specified in Its Charter)
-------------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement)
Payment of filing fee (Check the appropriate box):
/X/ $125 per Exchange Act Rule 0-11(c)(1)(ii), 14a-6(i)(1), or 14a-6(j)(2).
/ / $500 per each party to the controversy pursuant to Exchange Act Rule
14a-6(i)(3).
/ / Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and
0-11.
(1) Title of each class of securities to which transaction applies:
-------------------------------------------------------------------------------
(2) Aggregate number of securities to which transactions applies:
-------------------------------------------------------------------------------
(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11:1
-------------------------------------------------------------------------------
(4) Proposed maximum aggregate value of transaction:
-------------------------------------------------------------------------------
Set forth the amount on which the filing fee is calculated and state how it
was determined.
/ / Check box if any part of the fee is offset as provided by Exchange Act
Rule 0-11(a)(2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration statement number, or
the form or schedule and the date of its filing.
(1) Amount previously paid:
-------------------------------------------------------------------------------
(2) Form, schedule or registration statement no.:
-------------------------------------------------------------------------------
(3) Filing party:
-------------------------------------------------------------------------------
(4) Date filed:
-------------------------------------------------------------------------------
<PAGE> 2
ESPEY MFG. & ELECTRONICS CORP.
NOTICE OF RESCHEDULED 1995 ANNUAL MEETING OF SHAREHOLDERS
March 28, 1996
To the Shareholders of
Espey Mfg. & Electronics Corp.:
The rescheduled 1995 Annual Meeting of Shareholders of Espey Mfg. &
Electronics Corp., will be held at the Holiday Inn, South Broadway and
Route 50, Saratoga Springs, New York, on March 28, 1996, at 9:00 a.m.,
E.S.T., for the following purposes:
1. To elect three Class B directors to serve for a three year term
or until their respective successors are elected and qualify;
2. To ratify the appointment of KPMG Peat Marwick LLP as the
Company's independent public auditors for the fiscal year ending
June 30, 1996;
3. To act upon a shareholder proposal, if presented at the Meeting,
to recommend redemption of the Shareholder Rights Plan;
4. To act upon a shareholder proposal, if presented at the Meeting,
to recommend elimination of the classified Board of Directors;
5. To act upon a shareholder proposal, if presented at the Meeting,
to recommend certain steps to enhance shareholder value; and
6. To transact such other business as may properly come before the
meeting or any adjournment thereof.
The Board of Directors has fixed the close of business on March 1,
1996, as the record date for the purpose of determining shareholders
entitled to notice of, and to vote at, said meeting or any adjournment
thereof. The books for transfer of the Company's capital stock will not
be closed.
Even if you expect to attend the meeting in person, it is urged by
the Company that you mark, sign, date and return the enclosed proxy. The
proxy may be revoked at any time before it is voted and shareholders who
execute proxies may nevertheless attend the meeting and vote their
shares in person. Every properly signed proxy will be voted as specified
unless previously revoked.
By order of the Board of Directors,
March 8, 1996
Reita Wojtowecz
Secretary
Please make your specifications and sign and date the enclosed proxy
and mail it promptly in the accompanying addressed and postage-free
envelope.
<PAGE> 3
ESPEY MFG. & ELECTRONICS CORP.
Congress and Ballston Avenues
Saratoga Springs, New York 12866
PROXY STATEMENT
MATTERS TO BE PRESENTED AT MEETING
The business which the board of directors intends to present at
the rescheduled 1995 Annual Meeting of Shareholders is (1) to
elect three Class B directors to serve until the third succeeding
Annual Meeting after such election or until their respective
successors are elected and qualify; and (2) a proposal to ratify
the appointment of KPMG Peat Marwick LLP as the independent
public auditors for the Company for the fiscal year ending June
30, 1996. In addition, three shareholder proposals will be
considered and voted upon if presented by the respective
proponent shareholder at the Annual Meeting. If any other matter
should properly come before the meeting, proxies in the enclosed
form will be voted in accordance with the judgment of the person
s named therein, unless otherwise directed by the shareholders
giving such proxies. Copies of this proxy material are being
mailed on or about March 8, 1996.
ELECTION OF DIRECTORS
The Company's Certificate of Incorporation, as amended, provides
that the board of directors shall consist of three classes of
directors (Class A, Class B and Class C) with overlapping
three-year terms. One class of directors is to be elected each
year for a term extending to the third succeeding Annual Meeting
after such election or until their respective successors are duly
elected and qualify. There is one vacancy in the Class A
directors' class. The terms of the three Class B directors expire
at the Annual Meeting.
The names and business experience for the past five years of the
three persons who have been nominated by the board of directors
to stand for election as Class B directors at the Annual Meeting
and the remaining directors whose terms are continuing until the
1996 or 1997 Annual Meeting appear below.
The votes will be cast pursuant to the enclosed proxy "For" the
election of each of the Class B nominees named below unless
specification is made withholding such authority. Each of the
nominees is presently a director of the Company and was
previously elected a director by the shareholders. Should any of
said nominees for Class B directors become unavailable, which is
not anticipated, the proxies named in the enclosed proxy will
vote for the election of such other persons as the board of
directors may recommend. Under New York Law and the Company's
Certificate of Incorporation and By-Laws, assuming a proper
quorum is present, directors are elected by a plurality of the
votes cast at the meeting by holders of shares entitled to vote
thereon. A majority of the outstanding shares constitute a
quorum. Shares represented by proxy abstaining or withholding
votes from nominees will be counted only for purposes of
determining a quorum. Cumulative voting is not permitted.
<TABLE>
<CAPTION>
NOMINEES FOR CLASS B DIRECTORS TO SERVE AS
DIRECTORS FOR THREE YEAR TERMS
EXPIRING AT THE 1998 ANNUAL MEETING
Period to
Offices and Date
Positions Held Principal Occupation Served as
Name Age with Company or Employment Director
<S> <C> <C> <C> <C>
Joseph Canterino 70 Vice President Prior to his election 1992
Manufacturing as Vice President Manufacturing
on April 3, 1992, he was for
more than the past five years
employed by the Company on
a full time basis as Plant
Manager
William P. Greene 66 _ Since November 1, 1994, Vice
President- Operations of Bulk
Materials International Co.,
Newtown, CT, which is principally
engaged in the sale of industrial
minerals to the cement producing
industry; Associate Professor of
Finance and International Business,
Pennsylvania State University in
Kutztown, PA from 1991 to June, 1994;
from 1985 to 1990, Associate Dean,
School of Business, United States
International University
<PAGE> 4
<CAPTION>
Period to
Offices and Date
Positions Held Principal Occupation Served as
Name Age with Company or Employment Director
<S> <C> <C> <C> <C>
Seymour Saslow 75 Vice President Prior to his election as Vice 1992
Engineering President-Engineering on April 3,
1992, he was for more than the
past five years employed by the
Company on a full time basis as
Director of Engineering
<CAPTION>
CLASS A DIRECTORS - SERVING AS DIRECTORS
FOR TERMS EXPIRING
AT THE 1997 ANNUAL MEETING
<S> <C> <C> <C> <C>
Howard Pinsley 56 Vice President Prior to his election as Vice 1992
Special Power President-Special Power Supplies
Supplies on April 3, 1992, he was for more
than the past five years employed
by the Company on a full time
basis as its Program Director.
Mr. Pinsley is the nephew of Sol
Pinsley
Sol Pinsley 82 President and President and Chief Executive 1950
Chief Officer of the Company for more
Executive than the past five Executive
Officer years, and Treasurer from August 4,
1988 to September 10, 1993
<CAPTION>
CLASS C DIRECTORS - SERVING AS DIRECTORS
FOR TERMS EXPIRING
AT THE 1996 ANNUAL MEETING
<S> <C> <C> <C> <C>
Paul J. Corr 51 _ Certified Public Accountant, who 1992
from 1982 to 1993 was the managing
partner of Corr & Company, a
diversified public accounting firm
in Latham, NY, and is currently the
senior partner of the firm; since
1981, Assistant Professor of
Business, Skidmore College, in
Saratoga Springs, NY
Barry Pinsley 54 Vice President Certified Public Accountant in 1994
Special Projects Saratoga Springs, NY, who prior to
his election as Vice President-
Special Projects of the Company on
March 25, 1994, acted as a
consultant to the Company for the
past five years. Mr. Pinsley is the
son of Sol Pinsley.
Michael W. Wool 49 _ Attorney engaged in private practice 1990
of law for more than the past five
years and partner of the law firm of
Langrock Sperry & Wool, in
Burlington, VT, which provided legal
services to the Company in fiscal
1995
</TABLE>
The only individuals currently considered Executive Officers of
the Company not identified above are:
Herbert Potoker, 66, Treasurer and Principal Financial Officer of
the Company since September 10, 1993. During the past five years
and before being elected to his present office, he was employed
by the Company on a full-time basis in a senior financial
management position. Mr. Potoker is a cousin of Howard Pinsley.
Garry M. Jones, 56, Assistant Treasurer and Principal Accounting
Officer since August 4, 1988. He was also the Principal Financial
Officer from August 4, 1988 to September 10, 1993. Prior to being
elected an officer of the Company, Mr. Jones was employed by the
Company on a full-time basis as a Senior Accountant.
<PAGE> 5
During the Company's fiscal year ended June 30, 1995, the Board
of Directors held a total of four meetings, and each director now
in office attended at least 75% of such meetings. The Company's
standard arrangement compensates each director of the Company a
fee in the amount of $500 for each meeting of the Board of
Directors and an additional $500 for each meeting of the Audit
Committee attended by such director as a member of the Audit
Committee. No amount in excess of such fee per meeting was paid
to any director for services as a director during the fiscal year
ended June 30, 1995. However, the Company paid Paul J. Corr $500
for consulting services, and it paid William P. Greene $1,000 as
an additional plan administrator of the Company's ESOP. Langrock,
Sperry & Wool, of which Michael W. Wool is a partner, was paid
$51,300 for legal services for the fiscal year ended June 30,
1995.
The Board has a standing Audit Committee whose members are
Paul J. Corr, Chairman, William P. Greene and Michael W. Wool.
The functions of this Committee include reviewing the engagement
of the independent accountants, the scope and timing of the audit
and any non-audit services to be rendered by the independent
accountants, reviewing with the independent accountants and
management the Company's policies and procedures with respect to
internal auditing, accounting and financial controls; and
reviewing the report of the independent accountants upon
completion of its audit. During the fiscal year ended June 30,
1995, the Committee held three meetings and each member attended
all such meetings.
There is no standing nominating or compensation committee of the
Board of Directors, or committees performing similar functions.
COMPENSATION OF EXECUTIVE OFFICERS
The following table summarizes the annual compensation of the
Company's Chief Executive Officer for fiscal years 1995, 1994 and
1993, and of the other four highest paid executive officers of
the Company who were such as of June 30, 1995, and whose annual
compensation exceeded $100,000, and for the 1995 fiscal year that
they were executive officers for any part of such year:
<TABLE>
<CAPTION>
SUMMARY COMPENSATION TABLE
Name and Fiscal Annual Compensation All Other
Principal Position Year Salary Bonus Compensation(l)
<S> <C> <C> <C> <C>
Sol Pinsley 1995 $189,000 $25,000 $ 9,968
President and 1994 $189,000 $25,000 $11,661
Chief Executive 1993 $192,100 $25,000 $10,416
Officer
Seymour Saslow 1995 $108,000 $25,000 $10,393
Vice President _ 1994 $108,000 $25,000 $12,553
Engineering 1993 $109,600 $25,000 $ 9,817
Joseph Canterino 1995 $ 98,280 $25,000 $11,320
Vice President _ 1994 $ 98,280 $25,000 $12,780
Manufacturing 1993 $ 99,700 $25,000 $ 9,945
Howard Pinsley 1995 $ 90,450 $12,000 $11,042
Vice President _ 1994 $ 90,450 $12,000 $12,544
Special Power 1993 $ 91,725 $10,000 $ 6,229
Supplies
Herbert Potoker 1995 $100,280 $25,000 $ 9,320
Treasurer and 1994 $101,280 $25,000 $10,280
Principal
Financial Officer
<FN>
<F1>
(1) Represents (a) the cash and market value of the shares
allocated for the respective fiscal years under the Company's
Employee Retirement Plan and Trust ("ESOP") to the extent to which
each named executive officer is vested, and (b) directors' fees
except for Mr. Potoker.
</FN>
</TABLE>
The executive officers of the Company are covered under group life
and medical and health plans which do not discriminate in favor of
the officers or directors of the Company and which are available
generally to all employees.
The Company maintains insurance coverage, as authorized by Section
727 of the New York Business Corporation Law, providing for (a)
reimbursement of the Company for payments it makes to indemnify
officers and directors of the Company and (b) payment on behalf of
officers and directors of the Company for losses, costs and
expenses incurred by them in actions
<PAGE> 6
brought against them in connection with their acts in those capacities.
The present insurance is for a period of 12 months, effective January 1,
1996 to January 1, 1997 at a premium of $70,789.
EMPLOYMENT AGREEMENT
There has been in effect, since July 1, 1973 full time employment
contract with Sol Pinsley, President, Chief Executive Officer and a
Director. The most recent employment contract was entered into by
the Company with Mr. Pinsley on June 12, 1995 pursuant to prior
authorization given by the Board of Directors on March 24, 1995.
This employment contract is dated and effective as of January 1,
1995 for a term expiring December 31, 1998 and covers Mr. Pinsley's
employment as President (or Chairman of the Board) and Chief
Executive Officer and also as a non-executive officer employee
should Mr. Pinsley elect to become a non-executive officer
employee. The agreement provides a minimum base annual compensation
of $182,000 for each calendar year commencing 1995 and the Board of
Directors in its discretion may increase such compensation for any
calendar year and/or award Mr. Pinsley a bonus for any calendar
year. The foregoing compensation is to be reduced by $40,000 per
annum in the event Mr. Pinsley elects to become a non-executive
officer employee. The employment agreement further provides that in
the event of his disability the foregoing compensation shall
continue to be paid to Mr. Pinsley until the expiration date of the
agreement, and, in the event of his death, such compensation shall
be paid to his estate until the expiration date of the agreement or
187 days after his death, whichever is later. The agreement
provides for (i) a restrictive covenant of non competition by Mr.
Pinsley and (ii) his covenant not to divulge or use other than for
the Company confidential information concerning the Company, during
and for 18 months after the expiration date of the agreement.
SECURITY OWNERSHIP OF CERTAIN
BENEFICIAL OWNERS AND MANAGEMENT
The following table furnishes information as of February 26, 1996
(unless otherwise indicated) with respect to (i) any person or
group who is known to the Company to be the beneficial owner
(as defined in Rule 13d-3 under the Securities Exchange Act of
1934) of more than 5% of the Company's outstanding common stock,
$.33-1/3 par value, which is the only class of voting securities of
the Company; and (ii) the beneficial ownership of such common stock
by each of the Class B nominees for directors and remaining
directors (eight persons), by the named executive officers (five
persons, four of whom are directors), and by all directors and
executive officers as a group (10 persons). The nominees, the
remaining directors and the executive officers individually
furnished the information to the Company of such beneficial
ownership of shares of common stock of the Company.
<TABLE>
<CAPTION>
Name and Address of Beneficial Owner, Amount and Nature Percent
Names of Nominees for Class B Director and Remaining Directors of Beneficial of
and Executive Officers or Identity of Group Ownership Class
<S> <C> <C>
The Entwistle Company(1) 151,400 _ Direct 11.309%
Bigelow Street
Hudson, MA 01749
Tweedy Browne Company L.P.(2) 75,400 _ Direct 5.635%
52 Vanderbilt Avenue
New York, NY 10017
Dimensional Fund Advisors Inc.(3) 75,100 _ Direct 5.609%
1299 Ocean Avenue, 11th Floor
Santa Monica, CA 90401
The Adirondack Trust Company 308,094 _ Direct 23.065%
as Trustee of the Company's Employee
Retirement Plan and Trust (4)
473 Broadway
Saratoga Springs, NY 12866
Sol Pinsley(5),(8) 80,261 _ Direct 5.995%
2,140.12 _ Indirect *
Howard Pinsley(8) 39,134 _ Direct 2.923%
3,526.14 _ Indirect *
Paul J. Corr 500 _ Direct *
<PAGE> 7
<CAPTION>
Name a nd Address of Beneficial Owner, Amount and Nature Percent
Names of Nominees for Class B Director and Remaining Directors of Beneficial of
and Executive Officers or Identity of Group Ownership Class
<S> <C> <C>
William P. Greene None _
Michael W. Wool 100 *
Seymour Saslow(8) 190 _ Direct *
3,655.12 _ Indirect *
Joseph Canterino(8) 7,500 - Direct *
3,845.12 - Indirect *
Herbert Potoker(6)(8) 6,190 - Direct *
3,845.12 - Indirect *
Barry Pinsley(5)(7)(8) 5,000 _ Direct *
467.94 _ Indirect *
All directors and executive officers as a group (5)(8) 139,065 _ Direct 10.398%
20,361.35 _ Indirect 1.521%
<FN>
* Less than one percent.
<F1>
(1) The information as to the number of shares of common stock of
the Company beneficially owned by The Entwistle Company is from
its Amendment No. 10 to Schedule 13D Report dated September 11,
1990 filed with the Securities and Exchange Commission. According
to Form 3 dated April 30, 1991 filed with the Securities and
Exchange Commission on behalf of Herbert I. Corkin, Mr. Corkin is
a controlling person of The Entwistle Company and thus indirectly
beneficially owns such 151,400 shares, and Mr. Corkin also owns
24% of the stock of Global Securities which owns 68,000 shares of
the Company, beneficial ownership of which is disclaimed by Mr.
Corkin.
<F2>
(2) The information as to the number of shares of common stock of
the Company that may be deemed beneficially owned by Tweedy
Browne Company L.P. ("TBC") is from Amendment No. 2, dated
January 17, 1996 to Schedule 13D Report dated March 14, 1995,
filed with the Securities and Exchange Commission. Such 75,400
shares include 100 shares beneficially owned by TBK Partners L.P.
("TBK"), which may be deemed a member of a group with TBC and,
thus, also may be deemed to be a beneficial owner of such 75,400
shares of common stock. TBC and TBK in said Amendment No. 2
disclaim beneficial ownership of 75,300 of such shares (i.e.,
those held in TBC's customer accounts) and they state that the
filing of Schedule 13D should not be deemed an admission that TBC
and TBK comprise a group within the meaning of Section 13(d)(3)
of the 1934 Act.
<F3>
(3) The information as to the number of shares of common stock of
the Company beneficially owned by Dimensional Fund Advisors Inc.
is from its Schedule 13G Report dated January 30, 1995 filed with
the Securities and Exchange Commission. By letter dated February
9, 1995, Dimensional Fund Advisors Inc. informed the Company that
it disclaims beneficial ownership of all such shares.
<F4>
(4) This information (other than the percentage of the class) is
from the Form 4 dated December 8, 1995, filed with the Securities
and Exchange Commission by said Trustee on behalf of the
Company's Employee Retirement Plan and Trust ("ESOP"). The ESOP
Trustee has sole voting power with respect to unallocated common
shares owned by the Trust, 189,108 shares as of December 31,
1995, as directed by the Plan Administrator appointed by the
Company's Board of Directors. As to the common shares allocated
to participants, 118,986 shares as of December 31, 1995, of which
20,361.35 shares were allocated to executive officers, two of
whom are director-nominees, it has the power to vote such shares
as directed by such Plan Administrator to the extent the
participants do not direct the manner in which such shares are to
be voted.
<F5>
(5) The shares listed in the table as beneficially owned by Barry
Pinsley include 4,200 shares of common stock of the Company owned
by the estate of Sol Pinsley's spouse, beneficial ownership of
which is disclaimed by Sol Pinsley. As sole executor of the
estate, Barry Pinsley is deemed the beneficial owner, as defined
in Rule 13d-3, of those shares of common stock.
<PAGE> 8
<F6>
(6) The shares listed in the table do not include 300 shares of
common stock of the Company owned by the spouse of Mr. Potoker,
beneficial ownership of which is disclaimed by Mr. Potoker.
<F7>
(7) The shares listed in the table do not include 1,300 shares of
common stock of the Company owned by the spouse of Barry Pinsley
or 300 shares owned by a minor child of Mr. Pinsley, beneficial
ownership of which is disclaimed by Mr. Pinsley.
<F8>
(8) The address of each of the directors is P.O. Box 422,
Saratoga Springs, NY 12866. The shares listed in the table as
owned indirect are the shares allocated as of December 31, 1995
to the named executive officers and all executive officers as a
group who are participants in the Company's ESOP, and as to which
each such participant has the power to direct the manner in which
such shares allocated to each are to be voted by the ESOP Trustee.
Indirectly owned shares are allocated shares held in the ESOP.
</TABLE>
BOARD OF DIRECTORS' PROPOSAL TO RATIFY
APPOINTMENT OF INDEPENDENT PUBLIC AUDITORS
Unless otherwise specified by the shareholders, the shares
represented by their properly executed proxies will be voted for
ratification of the appointment of KPMG Peat Marwick LLP as
independent auditors for the fiscal year ending June 30, 1996. The
Company is advised by said firm that neither KPMG Peat Marwick LLP
nor any of its partners now has, or during the past three years
had, any direct financial interest or material indirect financial
interest or any connection (other than as independent auditors)
with the Company.
A representative of KPMG Peat Marwick LLP is expected to be
present at the Annual Meeting with the opportunity to make a
statement if he desires to do so and to be available to respond to
appropriate questions from shareholders.
For the fiscal year ended June 30, 1995, the only professional
services provided by KPMG Peat Marwick LLP to the Company were
audit services and services in connection with the maintenance of
the ESOP. The only fees paid by the Company to KPMG Peat Marwick
LLP were for the foregoing services.
SHAREHOLDER PROPOSALS
There are three proposals submitted by shareholders, which if the
respective proponent presents at the Annual Meeting, will be acted
upon at the Annual Meeting THE BOARD OF DIRECTORS, FOR THE REASONS
STATED BELOW, RECOMMENDS A VOTE AGAINST EACH OF THESE PROPOSALS.
Each of the proposals is only in the form of a precatory
recommendation to the Board of Directors and, accordingly, if
adopted by shareholders would not result in any immediate
corporate action. Further action by the Board of Directors and, in
the case of Proposal No. 2, the shareholders would be required to
implement each proposal. Under New York Law and the Company's
By-Laws, assuming a quorum (a majority of the shares entitled to
vote at the Annual Meeting) is present, the affirmative vote of a
majority of the votes cast at the Annual Meeting and entitled to
vote thereon is required to approve each of the shareholder
proposals. Abstentions and "broker-non-votes" are not counted as
votes cast for these purposes. Abstentions are counted in
determining whether a quorum is present. Broker- non-votes,
non-routine matters, such as shareholder proposals, upon which
brokers holding shares in street name for their customers do not
have discretionary voting authority under applicable stock
exchange rules and as to which they have received no voting
instructions from their customers, will not be counted for the
purpose of determining whether a quorum is present.
Proposal No. 1
Proposal No. 1, submitted by W. Harold Poole, P.O. Box 35, East
Petersburg, PA 17520-0035, an owner of 200 shares of Common Stock,
together with Mr. Poole's supporting statement, is as follows:
PROPOSAL
RESOLVED, the shareholders of Espey Manufacturing and Electronics
hereby recommend to the Board of Directors that the 1989
Shareholder Rights Plan in its present form and with any
subsequent amendments be immediately redeemed.
SUPPORTING STATEMENT
This proposal is about one question. Who owns this company? Is it
the Board of Directors or the shareholders of Espey Manufacturing?
The Company's "poison pill" was unilaterally created by the Board
of Directors in March of 1989. I believe poison pills serve to
reduce shareholder value in the marketplace and entrench current
management by deterring stock acquisition offers that are not
favored by the Board.
<PAGE> 9
Management's typical argument in defense of the poison pill is:
(1) it encourages the bidder to negotiate with the Board and
(2) it is intended to give the Board sufficient time to evaluate
the offer.
If a hostile offer is put forth it is the shareholder's choice to
sell or retain his stock. A plan which stymies the maximization of
shareholder return on investment appears to breach fiduciary
duties to shareholders. The plan makes it prohibitively expensive
for a bidder to accumulate stock and put forth an offer. Legally,
shareholder votes for adoption of poison pills are not needed.
Management's failure to seek the input and approval of the
Company's owners on action of such critical importance indicates
that management is placing its interests above those of the
shareholders.
In responding to similar shareholder resolutions, the management
of certain companies has pointed to reports by Georgeson & Co.
which asserted that stockholders benefit from poison pills because
higher takeover premiums were received by companies with pills.
These results were questioned by independent financial economists
who noted that the reports failed to consider the effect of pills
where stock acquisition offers were not successful. One study by
Analysis Group Inc., concluded that poison pills tend to depress
the market price of adopting companies, discourage offers, and
reduce acquisition premiums on an aggregate basis.
The Securities and Exchange Commission, commenting on poison
pills, has stated "tender offers can benefit shareholders by
offering them an opportunity to sell the shares at a premium and
by guarding against management entrenchment. However, because
poison pills are intended to deter non-negotiated tender offers,
and because they gain this potential effect without shareholder
consent, the "pill" can effectively prevent shareholders from
even considering the merits of a takeover that is opposed by the
Board."
I strongly feel that adoption of the plan without a shareholder
vote was contrary to the long term interests of all stockholders
and offensive to the concepts of management accountability and
corporate democracy. In light of the buyout offer of $24.00 in
1989, the rebuke by the Board, the subsequent current depressed
stock price, and no recent offers, I ask: could this be
attributed to the poison pill in place. I urge you to vote FOR
this proposal which recommends that the Board redeem the plan.
****
The Board of Directors recommends a vote against Proposal No. 1.
The 1989 Shareholder Rights Plan is designed to enhance the
Board's ability to protect shareholders against, among other
things, unsolicited attempts to acquire control of the Company
(whether through open market purchases, tender offers or
otherwise) that do not offer an adequate price to all
shareholders or are otherwise not in the best interests of the
Company and its shareholders. Over 1,100 public companies,
including about 50% of the companies in the Fortune 500, have
adopted shareholder rights plans. While the Board is not aware of
any present takeover threat or effort to acquire control of the
Company, it believes that the Rights represent a sound and
reasonable means of safeguarding the interests of the
shareholders. In this regard, the Board considers the Rights to
be one of the best available means of protecting both the right
of the shareholders to retain their equity investment in the
Company and the full value of that investment, while not
foreclosing a fair acquisition bid for the Company. Moreover, the
Board is unaware that any acquisition bid was not presented
because of the existence since 1989 of the Shareholder Rights
Plan. The Rights do not in any way weaken the financial strength
of the Company or interfere with its business plans, have no
dilutive effective, do not affect reported earnings per share,
are not taxable to the Company or to shareholders, and do not
change the way in which shares of the Company presently can be
traded. The Rights are only exercisable if and when the situations
arise which they were created to deal with. They will then operate
to protect shareholders against being deprived of their right to
share in the full measure of the Company's long-term potential.
Proposal No. 2
Proposed No. 2, submitted by Lois H. Rodenburg, 132 N. Mulberry
Street, Lancaster, PA 17603, an owner of 300 shares of Common
Stock, together with Ms. Rodenburg's supporting statement, is as
follows:
PROPOSAL
RESOLVED, the Shareholders of Espey Manufacturing and Electronics
hereby recommend an amendment to the Certificate of Incorporation
which will declassify the Board of Directors. As amended, the
Certificate will provide that in future years, as directors' terms
expire, all directors will be elected each year at the Annual
Meeting of Stockholders. The amendment should read as follows:
"The entire Board of Directors shall consist of nine persons.
There shall be one class of directors and each director shall
stand for election at every annual meeting."
<PAGE> 10
SUPPORTING STATEMENT
In 1993, the Board of Directors through amendment and shareholder
approval has been divided into three classes serving staggered
three-year terms. It is my belief that the classification of the
Board is not in the best interests of the Company and its majority
shareholders. A three-year guaranteed seat promotes entrenchment
and complacency. The elimination of the staggered board would
require each director to stand for election annually. This
procedure would allow shareholders an opportunity to annually
register their views on the performance of the Board collectively
and each director individually.
A belief that the annual election of all directors would leave the
Company without experienced board members in the event that all
incumbents are voted out is unfounded. If the owners should choose
to replace the entire board, it would be obvious that the
incumbent directors' contributions were not valued.
The staggered board is an act of entrenchment and an antitakeover
defense. In conjunction with the ESOP plan, and the "poison pill"
the pattern speaks for itself. Management has chosen a path of
self-interest in lieu of representing all shareholders.
****
The Board of Directors recommends a vote against Proposal No. 2.
The classification of the Board of Directors, among other things,
serves a function similar to the Shareholder Rights Plan in that
it enhances the protection of the Company's shareholders against
unsolicited attempts to acquire control of the Company under
circumstances which may not be in the best interest of the Company
and its shareholders. This is because the ability of outsiders to
gain control of the Board of Directors is reduced since at least
two annual elections would be required to effect a change in the
majority of the Board. In addition, the classification of the
Board of Directors is designed to provide the Company with
continuity of management. The holdover directors afford this
continuity because they are acquainted with and experienced in the
business and affairs of the Company. This is especially important
in today's difficult environment for defense work in which the
Company is engaged. It is also noteworthy that only one annual
meeting has passed since shareholders approved a classified Board
by the votes of a substantial majority of the outstanding shares.
Moreover, the Board is not aware of any offer to acquire the
Company that would have been made had the Company not had a
classified Board.
Proposal No. 3
Proposal No. 3, submitted by John C. Rodenburg, 132 N. Mulberry
St., Lancaster, PA 17603, an owner of 200 shares of Common Stock,
together with Mr. Rodenburg's supporting statement, is as follows:
PROPOSAL
RESOLVED, that the shareholders of Espey Manufacturing and
Electronics present or voting by proxy at the 1995 Annual meeting
hereby recommend to the Board of Directors that such Board initiate
and complete the steps necessary to achieve a sale, merger or other
restructuring of Espey Manufacturing and Electronics on terms that
will maximize and realize shareholder value as promptly as
possible.
SUPPORTING STATEMENT
I believe the value that may be achieved for stockholders of Espey
Manufacturing and Electronics by a sale, liquidation or merger of
the entire company is significantly greater than the current market
price of our common stock.
Consider the following financials of our company keeping in mind
this proposal was submitted to management before July 18, 1995:
1. Tangible book value per share was $20.14 as of March 31, 1995.
That value consisted of cash, short and long term investments of
$12,715,302 or $9.46 per share. Current working capital was
$23,398,556 or $17.41 per share.
2. The market price of the common stock on June 30, 1995 was $13.00
per share.
I believe the Company's stock market record demonstrates
management's apathy toward shareholder need for a competitive
return on investment. In June 1989 the ESOP was formed and
purchased 331,224 shares of stock at a price of $26.50 per share.
In 1989 Espey traded up to 27-3/8 in response to an Entwistle
takeover bid at $24 per share. This offer was rejected by the
Board. The stock reached a high of 38 in 1984 when earnings peaked
at $3.16 per share. If present management cannot maximize the
return on stockholders' investment, the best interest of the
majority Espey shareholders will be served by the sale, merger or
restructuring of our company and I recommend that you vote "FOR"
this proposal.
<PAGE> 11
If management opposes this proposal and you want to vote in favor
of the recommendation, you must mark the "FOR" box on the proxy
card next to the proposal.
****
The Board of Directors recommends a vote against Proposal No. 3.
The Board believes that it has considered various means to maximize
and realize shareholder value, including the payment of cash
dividends, repurchase of a substantial number of shares in the open
market and investigating possible acquisitions. The members of the
Board of Directors and executive officers have a significant
personal financial interest in maximizing and realizing shareholder
value; the members of the Board and the executive officers
beneficially own approximately 12% of the outstanding shares of the
Company.
ANNUAL REPORT
The Annual Report of the Company to the shareholders for the fiscal
year ended June 30, 1995, including financial statements,
previously has been mailed to all shareholders of record on the
record date for this meeting. Such financial statements are not
incorporated herein by reference.
OUTSTANDING VOTING SECURITIES
Only holders of common stock of record on the books of the Company
at the close of business on March 1, 1996, will be entitled to vote
at the Annual Meeting. There were outstanding and entitled to vote
on March 1, 1996, 1,338,046 shares of common stock, par value
$.33-1/3 per share. The holders of the common stock are entitled to
one vote per share.
PROXY SOLICITATION AND REVOCATION
The solicitation of the enclosed proxy is being made on behalf of
the Board of Directors and the cost of preparing and mailing the
Notice of Meeting, Proxy Statement and form of proxy to
shareholders is to be borne by the Company.
Any shareholder giving the proxy has the power to revoke it at any
time prior to the voting thereof. Every properly signed proxy will
be voted as specified unless previously revoked. If no
specification is made, the shares represented by such proxy will be
voted (1) for the election of Class B directors nominated by the
board of directors; (2) for ratification of the appointment of the
independent public auditors; (3) against Shareholder Proposal
No. 1; (4) against shareholder proposal No. 2; and (5) against
Shareholder Proposal No. 3.
SHAREHOLDER PROPOSALS FOR 1996 ANNUAL MEETING
Any shareholder proposal which may be a proper subject for
inclusion in the proxy statement and for consideration at the
Company's regularly scheduled 1996 Annual Meeting must be received
by the Company at its principal executive office a reasonable time
before mailing of the 1996 proxy statement and proxy form, if it is
to be included in the Company's 1996 proxy statement and proxy form
for that meeting. The Company anticipates that the proxy statement
and form of proxy for that meeting will be mailed to shareholders
on or about the second week in November 1996 and shareholder
proposals received during last week of July 1996 would be
considered by the Company to have been received within a reasonable
time before that meeting.
OTHER MATTERS
The Company is unaware of any other matter that will be brought
before the meeting for action.
By order of the Board of Directors,
Sol Pinsley
President
<PAGE> 12
This proxy is solicited on behalf of the Board of Directors
ESPEY MFG. & ELECTRONICS CORP.
Proxy for THE RESCHEDULED 1995 ANNUAL Meeting of SHAREHOLDERS - March 28, 1996
The undersigned hereby appoints Sol Pinsley and Arthur Richenthal
as Proxies, each with the power to appoint his or her substitute,
and hereby authorizes them or any one of them to represent and to
vote, as designated below, all the shares of common stock of ESPEY
MFG. & ELECTRONICS CORP. which the undersigned would be entitled
to vote if personally present at the rescheduled 1995 Annual
Meeting of Shareholders to be held on March 28, 1996 or any
adjournment thereof.
1. ELECTION OF CLASS B DIRECTORS
o FOR all nominees listed below o WITHHOLD AUTHORITY
o (except as marked to the contrary below) o to vote for all nominees
listed below
JOSEPH CANTERINO WILLIAM P. GREENE SEYMOUR SASLOW
(INSTRUCTION: To withhold authority to vote for any individual
nominee, mark the "FOR" box above AND write the nominee's name
in the space provided below).
2. PROPOSAL TO APPROVE THE APPOINTMENT OF KPMG Peat Marwick LLP
as the independent public auditors of the Company.
o FOR o AGAINST o ABSTAIN
3. SHAREHOLDER PROPOSAL NO. 1 (Recommendation to redeem
Shareholder Rights Plan)
o FOR o AGAINST o ABSTAIN
4. SHAREHOLDER PROPOSAL NO. 2 (Recommendation to amend
Certificate of Incorporation to eliminate classified Board of
Directors)
o FOR o AGAINST o ABSTAIN
5. SHAREHOLDER PROPOSAL NO. 3 (Recommendation for the Board of
Directors to take certain steps to enhance shareholder value)
o FOR o AGAINST o ABSTAIN
6. In their discretion, the Proxies are authorized to vote upon
such other business as may properly come before the meeting.
<PAGE> 13
(Continued from other side)
THIS PROXY WHEN PROPERLY EXECUTED WILL BE VOTED IN THE MANNER
DIRECTED HEREIN BY THE UNDERSIGNED SHAREHOLDER.
IF NO DIRECTION IS MADE, THIS PROXY WILL BE VOTED FOR PROPOSALS 1
AND 2 AND AGAINST PROPOSALS 3, 4 AND 5.
Please sign exactly as name appears hereon. When shares are held
by joint tenants, both should sign. When signing as attorney,
executor, administrator, trustee or guardian, please give full
title as such. If a corporation, please sign in full corporation
name by President or other authorized officer. If a partnership,
please sign in partnership name by authorized person.
DATED: ________________________________ , 1996
Signature
Signature if held jointly.
PLEASE MARK, SIGN, DATE AND RETURN THE PROXY CARD PROMPTLY USING
THE ENCLOSED ENVELOPE.
