UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
SCHEDULE 14A
Proxy Statement Pursuant to Section 14(a) of the
Securities Exchange Act of 1934
Filed by the Registrant [X]
Filed by a Party other than the Registrant [_]
Check the appropriate box:
[_] Preliminary Proxy Statement [_] Soliciting Material Pursuant to
[_] Confidential, For Use of the SS.240.14a-11(c) or SS.240.14a-12
Commission Only (as permitted
by Rule 14a-6(e)(2))
[X] Definitive Proxy Statement
[_] Definitive Additional Materials
ESPEY MFG. & ELECTRONICS CORP.
- --------------------------------------------------------------------------------
(Name of Registrant as Specified In Its Charter)
- --------------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement, if Other Than the Registrant)
Payment of Filing Fee (Check the appropriate box):
[X] No fee required.
[_] 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 transaction applies:
________________________________________________________________________________
3) Per unit price or other underlying value of transaction computed pursuant
to Exchange Act Rule 0-11 (set forth the amount on which the filing fee is
calculated and state how it was determined):
________________________________________________________________________________
4) Proposed maximum aggregate value of transaction:
________________________________________________________________________________
5) Total fee paid:
________________________________________________________________________________
[_] Fee paid previously with preliminary materials.
[_] 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>
ESPEY MFG. & ELECTRONICS CORP.
-----------------------------------
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD JANUARY 4, 2000
-----------------------------------
December 6, 1999,
To the Shareholders of
ESPEY MFG. & ELECTRONICS CORP.:
You are cordially invited to attend the Annual Meeting of Shareholders of
Espey Mfg. & Electronics Corp., which will be held at the Holiday Inn, South
Broadway and Route 50, Saratoga Springs, New York, on January 4, 2000, at 9:30
a.m., Eastern Standard Time, for the following purposes:
1. To elect three Class C directors to serve for a three year term or
until their respective successors are duly elected and qualify;
2. To ratify the appointment of PricewaterhouseCoopers LLP as the
Company's independent public accountants for the fiscal year ending
June 30, 2000;
3. To consider and vote upon a proposal to amend the Company's
Certificate of Incorporation to increase the number of shares of
Common Stock that the Company is authorized to issue from 2,250,000
shares to 10,000,000 shares;
4. To consider and vote upon a proposal to adopt the Company's 2000 Stock
Option Plan; and
5. To transact such other business as may properly come before the
meeting or any adjournment or postponement thereof.
The Board of Directors has fixed the close of business on November 26,
1999, 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,
PEGGY A. MURPHY
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>
ESPEY MFG. & ELECTRONICS CORP.
233 Ballston Avenue
Saratoga Springs, New York 12866
PROXY STATEMENT
The enclosed proxy is solicited by the Board of Directors of Espey Mfg. &
Electronics Corp. (the "Company") for use in voting at the Annual Meeting of the
Shareholders of the Company to be held at the Holiday Inn, South Broadway and
Route 50, Saratoga Springs, New York, on January 4, 2000, at 9:30 a.m., Eastern
Standard Time, and at any postponement or adjournment thereof, for the purposes
set forth in the attached Notice of Meeting. It is anticipated that the Notice
of Annual Meeting of Shareholders, this Proxy Statement and the form of proxy
will be mailed on or about December 6, 1999.
Voting and Revocability of Proxies
Every properly dated, executed and returned proxy will be voted at the
Annual Meeting in accordance with the instructions of the shareholder. If no
specific instructions are given, the shares represented by such proxy will be
voted: (i) for the election of Class C directors nominated by the Board of
Directors, (ii) for ratification of the appointment of PricewaterhouseCoopers
LLP as independent public accountants of the Company for the fiscal year ending
June 30, 2000, (iii) for the proposal to amend to the Company's Certificate of
Incorporation to increase the number of shares of Common Stock that the Company
is authorized to issue from 2,250,000 shares to 10,000,000 shares and (iv) for
the proposal to adopt the Company's 2000 Stock Option Plan. Any shareholder
giving a proxy has the power to revoke it at any time prior to the voting
thereof by voting in person at the Annual Meeting, by giving written notice to
the Secretary prior to the Annual Meeting, or by signing and delivering a new
proxy card bearing a later date.
The Company's only class of voting securities is its Common Stock, par
value $.33-1/3 per share (the "Common Stock"). Each share of Common Stock
outstanding on the record date will be entitled to one vote on all matters. In
accordance with the Company's By-Laws and applicable state law, the election of
directors will be determined by a plurality of the votes cast by the holders of
shares of Common Stock present and entitled to vote thereon, in person or by
proxy, at the Annual Meeting. Shares present which are properly withheld as to
voting with respect to any one or more nominees, and shares present with respect
to which a broker indicates that it does not have authority to vote ("broker
non-vote") will not be counted. Cumulative voting in connection with the
election of directors is not permitted. In accordance with the Company's By-Laws
and applicable state law, the affirmative vote of shares representing a majority
of the votes cast by the holders of shares present and entitled to vote is
required to approve the other matters to be voted on at the Annual Meeting.
Shares which are voted to abstain and broker non-votes are not counted as votes
cast on any matter to which they relate.
The By-Laws of the Company provide that the majority of the shares of the
Common Stock of the Company issued and outstanding and entitled to vote, present
in person or by proxy, shall constitute a quorum at the Annual Meeting. Shares
which are voted to abstain are considered as present at the Annual Meeting for
the purposes of determining a quorum. Broker non-votes are considered as not
present at the Annual Meeting for the purposes of determining a quorum.
<PAGE>
Record Date and Share Ownership
Only holders of Common Stock of record on the books of the Company at the
close of business on November 26, 1999 will be entitled to vote at the meeting.
There were outstanding and entitled to vote on November 26, 1999, 1,048,631
shares of Common Stock.
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. The term of the three Class C directors expire at the current Annual
Meeting. The Board of Directors has nominated three persons to stand for
election as Class C directors.
The votes will be cast pursuant to the enclosed proxy for the election of
each of the Class C 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 C 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. Proxies may not
be voted for a greater number of persons than the nominees named.
1
<PAGE>
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 C directors at the Annual Meeting and the remaining directors whose
terms are continuing until the 2000 or 2001 Annual Meeting appear below.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR THE ELECTION OF THE FOLLOWING
NOMINEES FOR CLASS C DIRECTOR.
NOMINEES FOR CLASS C DIRECTORS -- TO SERVE AS DIRECTORS FOR
A THREE YEAR TERM EXPIRING AT THE 2002 ANNUAL MEETING
<TABLE>
<CAPTION>
Period to
Offices and Date
Positions Held Principal Occupation Served as
Name Age with Company or Employment Director
- --------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Paul J. Corr 55 -- Certified Public Accountant and a 1992
Professor of Business, Skidmore College,
in Saratoga Springs, NY, since 1981, currently
holding the position of Associate Professor;
Mr. Corr is also a shareholder in the Latham,
New York accounting firm of Rutnik, Matt &
Corr, P.C.
Barry Pinsley (1) 57 Non-Executive Officer Certified Public Accountant who for five 1994
years acted as a consultant to the Company
prior to his election as a Vice President-
Special Projects on March 25, 1994.
On December 6, 1997, Mr. Pinsley was
elected to the position of Vice President-
Investor Relations and Human Resources,
from which he resigned on June 9, 1998.
Mr. Pinsley has been a practicing
Certified Public Accountant in Saratoga
Springs, New York since 1975.
Michael W. Wool 53 -- Attorney engaged in private practice of 1990
law and partner of the law firm of
Langrock, Sperry & Wool, in Burlington, VT
for more than the past five years
</TABLE>
<PAGE>
CLASS A DIRECTORS -- SERVING FOR A
THREE YEAR TERM EXPIRING AT THE 2000 ANNUAL MEETING
<TABLE>
<CAPTION>
Period to
Offices and Date
Positions Held Principal Occupation Served as
Name Age with Company or Employment Director
- ---------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Howard Pinsley (1) 59 President, Chief Howard Pinsley for more than the past five 1992
Executive Officer years has been employed by the Company
and Treasurer on a full-time basis as Program Director
prior to being elected Vice President-
Special Power Supplies on April 3, 1992.
On December 6, 1996, Mr. Pinsley was elected
to the position of Executive Vice President.
On June 9,1998 he was elected to the positions
of President and Chief Operating Officer.
Subsequently he was also elected Treasurer
and became the Chief Executive Officer.
</TABLE>
2
<PAGE>
CLASS A DIRECTORS -- SERVING FOR A
THREE YEAR TERM EXPIRING AT THE 2000 ANNUAL MEETING
<TABLE>
<CAPTION>
Period to
Offices and Date
Positions Held Principal Occupation Served as
Name Age with Company or Employment Director
- ---------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Alvin O. Sabo 56 -- Attorney engaged in private practice of 1999
law and Senior Partner of the law firm
of Donohue, Sabo, Varley & Armstrong,
P.C. in Albany, NY since 1980. Prior to
that position, he was Assistant Attorney
General, State of New York, Department of
Law for eleven years.
Carl Helmetag 51 -- President and CEO of UVEX Inc. in 1999
Providence, RI. From 1996 to 1999, he was
President and CEO of HEAD USA Inc.
Prior to that position, Mr. Helmetag was
and then Executive Vice President
President at Dynastar Inc. from
1978 to 1996. He is an MBA graduate
from The Wharton School of Business,
University of Pennsylvania.
</TABLE>
<PAGE>
CLASS B DIRECTORS -- SERVING FOR A
THREE YEAR TERM EXPIRING AT THE 2001 ANNUAL MEETING
<TABLE>
<CAPTION>
Period to
Offices and Date
Positions Held Principal Occupation Served as
Name Age with Company or Employment Director
- ------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
William P. Greene 69 Executive Vice Prior to his election as Executive Vice 1992
President of President of Operations on March 1, 1999,
Operations he was Vice President of Finance for
ComCierge, LLC, San Diego, CA, since August
1997. Prior to that position, he was
Vice President of Operations for Bulk Materials
International Co., Newton, CT, from 1993 to July
1997. From 1991 to 1993, Dr. Greene was Associate
Professor of Finance and International Business,
Pennsylvania State University in Kutztown,
PA. From 1985 to 1990, he was Associate Dean of
the School of Business, United States
International University, San Diego, CA.
From 1992 to 1995, he was Chairman of the
Department of Business, Skidmore College,
Saratoga Springs, NY. Prior to that he had
been employed as an officer for several
financial institutions.
Seymour Saslow 78 Senior Vice Senior Vice President since December 6, 1992
President 1996. Prior to being elected to his present
position, Mr. Saslow served as Vice
President-Engineering since April 3, 1992.
</TABLE>
3
<PAGE>
CLASS B DIRECTORS -- SERVING FOR A
THREE YEAR TERM EXPIRING AT THE 2001 ANNUAL MEETING
<TABLE>
<CAPTION>
Period to
Offices and Date
Positions Held Principal Occupation Served as
Name Age with Company or Employment Director
- ----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Gerald B.H. Solomon 69 -- President and Chief Executive Officer of 1999
The Solomon Group, an international
consulting firm providing strategic advice
and counsel to corporations worldwide.
Prior to becoming President of the
Solomon Group, he retired from the
United States Congress where he served
as a congressman from New York State
for twenty years.
- ----------------------------------------------------------------------------------------------------------------------------
</TABLE>
(1) Barry Pinsley and Howard Pinsley are cousins. Howard Pinsley and Herbert
Potoker, former Treasurer and Principal Financial Officer of the Company,
are cousins.
None of the directors holds a directorship in any other company with a
class of securities registered pursuant to Section 12 of the Securities Exchange
Act of 1934 or subject to the requirements of Section 15(d) of the Securities
Act of 1933 or any company registered as an Investment Company under the
Investment Company Act of 1940.
The only individuals currently considered executive officers of the Company
not identified above are:
Garry M. Jones, 59, Assistant Treasurer and Principal Accounting Officer of
the Company 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.
John J. Pompay, Jr., 64, Vice President-Marketing and Sales since December
6, 1996. During the past five years and before being elected to his present
position, Mr. Pompay was employed by the Company on a full-time basis as
Director of Marketing and Sales.
Peggy Murphy, 41, Secretary of the Company since December 11, 1998. She has
been employed by the Company as Director of Human Resources since October 1998.
David A. O'Neil, 34, Controller and Assistant Treasurer since November 16,
1998. Mr. O'Neil is a Certified Public Accountant who, prior to joining the
Company, was a Senior Manager at the accounting firm of KPMG LLP.
<PAGE>
BOARD OF DIRECTORS MEETINGS AND COMMITTEES
During the Company's fiscal year ended June 30, 1999, the Board of
Directors held a total of 11 meetings, and each director then in office attended
at least 75% of such meetings.
The Board has a standing Audit Committee whose members are Paul J. Corr,
Chairman, Barry Pinsley 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, 1999, the
Committee held 11 meetings, and each Committee member attended at least 75% of
such meetings.
There is no standing nominating or compensation committee of the Board of
Directors, or committees performing similar functions.
COMPENSATION OF DIRECTORS
The Company's current arrangement compensates each director of the Company
an annual fee in the amount of $10,000 for being a member of the Board of
Directors. Each Director that also serves as a member of the Audit Committee is
compensated an additional annual fee of $5,000. These fees are paid monthly to
the Directors. Paul J. Corr and Barry Pinsley were paid $3,774, and $28,456,
respectively, for additional services in connection with their duties as
directors for the fiscal year ended June 30, 1999. Effective April 1, 1999
employees of the Company that also serve on the Company's Board of Directors or
any committee thereof do not receive director's fees.
4
<PAGE>
COMPENSATION OF EXECUTIVE OFFICERS
The following table summarizes the annual compensation for each of the
fiscal years ended June 30, 1999, June 30, 1998 and June 30, 1997 received by
(i) all persons serving as the Company's Chief Executive Officer (or acting in a
similar capacity) and (ii) the other three highest paid executive officers of
the Company who were such as of June 30, 1999:
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
Name and Annual Compensation All Other
Principal Position Fiscal Year Salary Bonus Compensation(1)
- -----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Howard Pinsley 1999 $127,700 $ 0 $11,492
President, Chief Executive 1998 $120,125 $25,000 $15,961
Officer and Treasurer 1997 $109,600 $25,000 $16,455
Seymour Saslow 1999 $124,625 $ 0 $10,568
Senior Vice President 1998 $119,625 $25,000 $15,024
1997 $117,075 $25,000 $15,353
Herbert Potoker (2) 1999 $ 98,475 $ 0 $ 8,612
Former Treasurer and 1998 $113,226 $25,000 $12,314
Principal Financial 1997 $109,855 $25,000 $13,289
Officer
John J. Pompay, Jr. 1999 $189,399 $ 0 $ 8,679
Vice President-Sales 1998 $176,297 $ 0 $12,314
and Marketing 1997 $172,963 $ 0 $13,289
- -----------------------------------------------------------------------------------------------------------------------
</TABLE>
(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 (the "ESOP") to the extent to which each named executive officer is
vested, and (b) directors' fees except for Mr. Potoker and Mr. Pompay.
Effective April 1, 1999 employees of the Company that also serve on the
Company's Board of Directors or any committee thereof do not receive
director's fees.
(2) Represents wages as both an executive officer and non-executive officer.
Mr. Potoker resigned as Treasurer and Principal Financial Officer on
December 31, 1998.
Insurance
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 salaried
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 any actions.
<PAGE>
EMPLOYMENT CONTRACTS
The Company has entered into an employment contract with John J. Pompay Jr.
in connection with his duties as Vice President-Marketing and Sales. The
contract is effective as of January 4, 1999 and terminates on December 31, 1999
subject to a one year option. The contract provides for a minimum base annual
salary of $117,000 plus commissions at the rate of 3% on all payments received
by the Company against Mr. Pompay's open orders booked up to and including
December 31, 1996, and 1% on all payments received against orders booked by the
Company between January 1, 1997 and December 31, 1998. The contract further
provides that if Mr. Pompay's employment is terminated by the Company prior to
the expiration date, other than for cause, he will continue to receive his full
salary for six months after the termination date and the Company will pay him
commissions due on all orders when payment is received. The contract also
provides for a restrictive covenant of non-competition by Mr. Pompay for a
period of two years upon termination for cause or termination of the contract by
Mr. Pompay.
As part of a management succession plan as implemented by the Board of
Directors in June 1998, the Company entered into agreements with the following
then named executive officers: Joseph Canterino, Barry Pinsley, Seymour Saslow
and Herbert Potoker. The contracts provide for the resignation of the above
officers from their positions as executive officers and for them to be
compensated in accordance with their respective agreements. The effective date
of the resignations of Mr.
5
<PAGE>
Canterino and Mr. Barry Pinsley as executive officers was June 9, 1998. The
effective date of the resignation of Mr. Potoker as an executive officer was
December 31, 1998. The effective date of the resignation of Mr. Saslow as an
executive officer is December 31, 1999. The compensation to be paid under the
agreements is $1,000 per week for Messrs. Canterino, Saslow and Potoker and $500
per week for Mr. Pinsley during such two year period. In the event of a named
executive officer's death, the Company is obligated to continue the payments as
scheduled under the terms of the agreements.
All of the named executive officers' contracts contain a restrictive
covenant regarding non-competition with the Company during the term of the
agreement and for a period of five years after the termination of the agreement
and an agreement regarding the treatment of confidential information.
EMPLOYEE STOCK OWNERSHIP PLAN
The Board of Directors of the Company adopted on June 2, 1989 effective as
of July 1, 1988, and thereafter amended and restated on June 30, 1994, an
Employee Retirement Plan and Trust (the "ESOP") to provide retirement benefits
to eligible employees of the Company including officers and to enable such
employees to share in the ownership of the Company. The ESOP used the proceeds
of a loan from the Company to purchase on June 5, 1989 from the Company 316,224
shares of the Company's Common Stock for approximately $8.4 million and the
Company on the same date contributed $397,500 to the ESOP which was used by the
ESOP to purchase from the Company 15,000 shares of the Company's Common Stock.
The loan from the Company to the ESOP is repayable in annual installments of
$1,039,065 including interest at the rate of 9% per annum through June 30, 2004.
The assets of the ESOP are intended to be invested primarily in Common
Stock of the Company and it is intended that at all times the ESOP will
constitute a qualified plan under the Internal Revenue Code. By providing its
employees with a convenient vehicle for accumulating capital for their future
economic security, the Company believes that the ESOP will assist it in
attracting and retaining capable personnel.
All employees of the Company, other than those covered under a collective
bargaining agreement, who have completed one year of service and are 21 years or
older, are eligible to participate in the ESOP. For each plan year the Company's
contributions may be paid to the trustee of the ESOP in such amount as may be
determined by the Board of Directors, provided, however, that the Company has
agreed to make contributions sufficient to discharge the ESOP's loan obligations
with respect to its aforementioned purchase of the Company's Common Stock.
Contributions by the Company may be paid in cash or in shares of Common Stock of
the Company.
No participant is required or permitted to make contributions to the ESOP.
With each principal and interest payment made by the ESOP on the loan
obligation, a portion of the Company's Common Stock purchased with such loan
proceeds will be allocated to participating employees. The allocation of the
Company stock for any plan year will be credited to each participant's account
on the basis of the ratio of such participant's compensation (up to a maximum of
$100,000) to the aggregate compensation of all participants in the ESOP for such
plan year; provided, however, that for each plan year the annual allocation with
respect to any participant may not exceed the lesser of 25% of compensation or
$30,000. In addition, a participant's account will be credited annually with a
share of the investment earnings and losses of the ESOP, allocated in a manner
similar to the above. Forfeitures will likewise be allocated among the remaining
participants in a similar manner.
<PAGE>
As of June 30, 1999, there were 167,632 shares of the Company's Common
Stock in the ESOP allocated to participants, of which 6,000 shares were
allocated to Herbert Potoker, 6,006 shares were allocated to John J. Pompay,
Jr., 5,687 shares were allocated to Howard Pinsley, 5,655 shares were allocated
to Seymour Saslow and 2,404 shares were allocated to Barry Pinsley.
The trustee for the ESOP will vote the shares of the Company's Common Stock
in accordance with instructions received from participants with respect to
shares allocated to their respective accounts, and in accordance with
instructions received from the plan administrator appointed by the Company with
respect to shares not allocated to participants and with respect to shares
allocated to participants for which voting instructions are not received from
participants.
Generally, no benefits are vested until the completion of three continuous
years of service with the Company, as defined by the plan. At that time a
participant's interest will be 20% vested; such vested interest will increase by
20% for each additional year of continuous service and will reach 100% after
seven years. Upon death or upon attaining Normal Retirement Age, a participant
will become 100% vested.
At retirement, termination, death or permanent disability, a participant
will be entitled to his or her vested benefit. Distribution of vested benefits
will be made in accordance with the terms of the plan and in accordance with the
Internal Revenue Code. Subject to certain exceptions, distributions must begin
no later than April 1 following the calendar year in which the participant
reaches age 70-1/2, even if the participant does not retire.
6
<PAGE>
SECURITY OWNERSHIP OF CERTAIN
BENEFICIAL OWNERS
The following table sets forth information regarding ownership of the
Company's outstanding Common Stock as of November 15, 1999 by each person or
group who is known to the Company to be the beneficial owner of more than five
percent of the outstanding shares of Common Stock.
<TABLE>
<CAPTION>
Amount and Percent
Name of Nature of of
Beneficial Owner Beneficial Ownership Class
- ---------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Barry Pinsley 2,600.00 -Direct 7.8641%
58 Washington Avenue 79,865.00 -Indirect(1)
Saratoga Springs, NY 12866
Dimensional Fund Advisors Inc. 74,100.00 -Direct(2) 7.0664%
1299 Ocean Avenue
11th Floor
Santa Monica, CA 90401
Franklin Resources, Inc. 108,000.00 -Direct(3) 10.2991%
777 Mariners Island Blvd.
P.O. Box 7777
San Mateo, CA 94403-7777
The Adirondack Trust Company, 267,565.00 -Direct(4) 25.5156%
as Trustee of the Company's Employee
Retirement Plan and Trust
473 Broadway
Saratoga Springs, NY 12866
</TABLE>
- ----------
(1) Does not include 2,000 shares of common stock of the Company owned by the
spouse of Barry Pinsley, beneficial ownership of which is disclaimed by Mr.
Pinsley. The shares listed as indirectly owned by Barry Pinsley are 2,404
shares allocated to him as of June 30, 1999 as a participant in the
Company's ESOP and 77,461 shares owned by the trust under the will of Ruth
Pinsley of which Mr. Pinsley is trustee. Mr. Pinsley has the right to
direct the manner in which such shares are to be voted.
(2) The information as to the number of shares of common stock of the Company
that may be deemed beneficially owned by Dimensional Fund Advisors Inc.
("Dimensional") is from the Schedule 13G dated February 11, 1999 filed with
the Securities and Exchange Commission (the "SEC"). Dimensional, a
registered investment advisor, is deemed to have beneficial ownership of
74,100 shares of Espey Mfg. & Electronics Corp. stock as of December 31,
1998, all of which shares are held in portfolios of DFA Investment
Dimensions Group, Inc., a registered open-end investment company, or in
series of the DFA Investment Trust Company, a Delaware business trust, or
the DFA Group Trust and DFA Participation Group Trust, investment vehicles
for qualified employee benefit plans, all of which Dimensional Fund
Advisors Inc. serves as investment manager. Dimensional disclaims
beneficial ownership of all such shares. Dimensional reported sole voting
power with respect to 74,100 shares.
<PAGE>
(3) The information as to the number of shares of common stock of the Company
that may be deemed beneficially owned by Franklin Resources, Inc.
("Franklin") is from the Schedule 13G, dated January 16,1998 filed with the
SEC. The Franklin statement indicated that Franklin's investment advisory
subsidiary, Franklin Advisory Services, Inc. ("Franklin Advisory") has sole
voting and dispositive power with respect to all of the shares of common
stock shown in the table above for Franklin. The Franklin statement
indicates that the common stock set forth in the table is beneficially
owned by one or more open or closed-end investment companies or other
managed accounts which are advised by direct and indirect Franklin
investment advisory subsidiaries, including Franklin Advisory. The
statement also indicated that it filed the Schedule 13G on behalf of
itself, Franklin Advisory, and Franklin's principal shareholders, Charles
B. Johnson and Rupert H. Johnson, Jr. (the "Principal Shareholders"), all
of which are deemed beneficial owners of the shares of common stock shown
in the above table for Franklin. Franklin, the Principal Shareholders and
Franklin Advisory disclaim any economic interest or beneficial ownership in
any of the common stock shown in the table for Franklin.
(4) This information is from the Form 4 dated September 8, 1999 filed with the
SEC by the Trustee on behalf of the Company's ESOP. The ESOP Trustee has
sole voting power with respect to unallocated common shares owned by the
Trust, 105,060 shares as of August 28, 1999, as directed by the Plan
Administrator appointed by the Company's Board of
7
<PAGE>
Directors. As to the common shares allocated to participants, 162,505
shares as of August 28, 1999, the ESOP Trustee 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.
SECURITY OWNERSHIP OF MANAGEMENT
The following information is furnished as of December 1, 1999, as to each
class of equity securities of the Company beneficially owned by all the
Directors and by Directors and Officers of the Company as a Group:
<TABLE>
<CAPTION>
Name of Amount and Nature Percent
Beneficial Owner of Beneficial Ownership of Class
- ----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Paul J. Corr 2,500.00 -Direct .2384%
William P. Greene 100.00 -Direct .0095%
Michael W. Wool 100.00 -Direct .0095%
Barry Pinsley 2,600.00 -Direct 7.8641%
79,865.00 -Indirect(1)(2)(3)
Seymour Saslow 351.00 -Direct .5727%
5,655.00 -Indirect(1)
John J. Pompay, Jr. 6,006.00 -Indirect(1) .5727%
Howard Pinsley 42,134.00 -Direct 4.5603%
5,687.00 -Indirect(1)
Gerald B.H. Solomon 0.00 - (4) .0000%
Alvin O. Sabo 0.00 - (5) .0000%
Carl Helmetag 1,800.00 -Direct .2193%
500.00 -Indirect(6)
Garry M. Jones 2,838.00 -Indirect(1) .2706%
Peggy Murphy 1,662.00 -Indirect(1) .1585%
Officers and Directors as a Group 49,585.00 -Direct 14.4758%
102,213.00 -Indirect(7)
- ----------------------------------------------------------------------------------------------------------------------------
</TABLE>
(1) Includes shares allocated to named director or executive officer as of June
30, 1999 as a participant in the Company's ESOP. Each such person has the
right to direct the manner in which such shares allocated to him or her are
to be voted by the ESOP Trustee.
(2) Excludes 2,000 shares owned by the spouse of Barry Pinsley. Beneficial
ownership of the shares is disclaimed by Mr. Pinsley.
<PAGE>
(3) Includes 77,461 shares owned by a testamentary trust of Ruth Pinsley, the
deceased spouse of Sol Pinsley, former Chairman, President and Chief
Executive Officer. As trustee of the trust, Barry Pinsley may be deemed the
beneficial owner, as defined in Rule 13d-3, of the shares held by the
trust.
(4) Excludes 400 shares owned by the spouse of Gerald B.H. Solomon. Beneficial
ownership of the shares is disclaimed by Mr. Solomon.
(5) Excludes 800 shares owned by the spouse of Alvin O. Sabo. Beneficial
ownership of the shares is disclaimed by Mr. Sabo.
(6) Includes 500 shares owned by the Molly K. Helmetag Trust. As trustee of the
trust, Carl Helmetag may be deemed the beneficial owner, as defined in Rule
13d-3, of the shares held by the trust. Beneficial ownership of the shares
held by the trust is disclaimed by Mr. Helmetag.
(7) Includes shares allocated to all directors and executive officers as a
group as of June 30, 1999 who participate in the Company's ESOP. Each such
person has the right to direct the manner in which such shares allocated to
him or her are to be voted by the ESOP Trustee.
8
<PAGE>
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
As previously reported, the Company established and sold to the ESOP Trust
on June 5, 1989, 331,224 shares of the Company's treasury stock at a price of
$26.50 per share, which purchase price was funded by the Company making a cash
contribution and loan. Each year, the Company makes contributions to the ESOP
which are used to make loan interest and principal payments to the Company. With
each such payment, a portion of the common stock held by the ESOP is allocated
to participating employees. As of June 30, 1999, there were 167,632 shares
allocated to participants. The loan from the Company to the ESOP is repayable in
annual installments of $1,039,605, including interest, through June 30, 2004.
Officers of the Company, including those who are also directors, are eligible to
participate in the ESOP and to have shares and cash allocated to their accounts
and distributed to them in accordance with the terms of the ESOP.
The Company paid the law firm of Langrock, Sperry & Wool, of which Michael
W. Wool, a director of the Company, is a partner, a total of $42,000 for legal
services during the fiscal year ended June 30, 1999.
BOARD OF DIRECTORS' PROPOSAL TO RATIFY
APPOINTMENT OF INDEPENDENT PUBLIC ACCOUNTANTS
The Board of Directors, upon the recommendation of the Audit Committee, has
appointed the firm of PricewaterhouseCoopers LLP as the Company's independent
accountants for the fiscal year ending June 30, 2000. PricewaterhouseCoopers LLP
was engaged by the Company on October 23, 1998. Also upon the recommendation of
the Audit Committee, on October 23, 1998, the Board notified KPMG LLP, the
Company's independent accountants for the fiscal year ended June 30, 1998, that
the Company would not engage them as independent accountants for the fiscal year
ended June 30, 1999. During the Company's 1997 and 1998 fiscal years and the
subsequent interim period preceding such dismissal, there were no disagreements
with KPMG LLP regarding any matters of accounting principles or practices,
financial statement disclosure, or auditing scope or procedure.
Unless otherwise specified by the shareholders, the shares represented by
their properly executed proxies will be voted for ratification of the
appointment of PricewaterhouseCoopers LLP as independent accountants for the
fiscal year ending June 30, 2000. The Company is advised by said firm that
neither PricewaterhouseCoopers 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 with the Company.
A representative of PricewaterhouseCoopers LLP is expected to be present at
the Annual Meeting with the opportunity to make a statement if he or she desires
to do so and to be available to respond to appropriate questions from
shareholders.
The Audit Committee approved this change of the Company's independent
accountants. If the stockholders do not ratify the appointment of
PricewaterhouseCoopers LLP, the Board will consider other independent
accountants upon recommendation of the Audit Committee.
<PAGE>
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR RATIFICATION OF THE
APPOINTMENT OF PricewaterhouseCoopers LLP AS INDEPENDENT ACCOUNTANTS FOR THE
COMPANY FOR FISCAL YEAR ENDING JUNE 30, 2000.
BOARD OF DIRECTORS' PROPOSAL TO AMEND THE COMPANY'S
CERTIFICATE OF INCORPORATION TO INCREASE THE COMPANY'S
AUTHORIZED COMMON STOCK FROM 2,250,000 SHARES TO 10,000,000 SHARES
The Company's Certificate of Incorporation presently authorizes the
issuance of 2,250,000 shares of common stock, par value $.33-1/3 per share. As
of December 1, 1999, 1,514,937 shares of Common Stock were issued (of which
1,048,631 are outstanding and 466,306 are held by the Company as treasury
stock).
Because of the limited number of shares of Common Stock remaining to be
issued, on October 29, 1999, the Board of Directors declared it advisable that
the Certificate of Incorporation of Espey Mfg. & Electronics Corp., as amended,
be further amended, subject to approval by the shareholders, to increase the
number of shares of Common Stock that the Company is authorized to issue from
2,250,000 to 10,000,000 shares. The Board recommends that the shareholders
approve the amendment of Paragraph "THIRD" of the Company's Certificate of
Incorporation so that, as amended, it shall read as follows:
"The total number of shares which the Company is authorized to issue is
10,000,000 shares of common stock, par value $.33-1/3 per share."
The affirmative vote of a majority of the outstanding shares of Common
Stock is needed to approve the proposed amendment of the Company's Certificate
of Incorporation. The shares held in the Company's treasury cannot be voted.
9
<PAGE>
The Board of Directors believes it is desirable to have the additional
shares of Common Stock that would be authorized by the proposed amendment
available for issuance in connection with possible future financing
transactions, acquisitions of other companies or business properties, stock
dividends or splits, employee benefit plans and other proper corporate purposes.
Having such authorized shares available will give the Company greater
flexibility by permitting such shares to be issued without the expense and delay
of a special meeting of shareholders. Such a delay might deprive the Company of
the flexibility the Board views as important in facilitating the effective use
of the Company's shares.
The issuance of additional shares of Common Stock could be used to make a
change in control of the Company more difficult if the Board caused such shares
to be issued to holders who might side with the Board in opposing a takeover bid
that the Board determines is not in the best interests of the Company and its
shareholders. In addition, the availability of the additional shares might
discourage an attempt by another person or entity to acquire control of the
Company through the acquisition of a substantial number of shares of Common
Stock, since the issuance of such shares could dilute the stock ownership of
such person or entity.
The additional shares of Common Stock would be issuable, in the discretion
of the Board of Directors, under circumstances the Board believes to be in the
best interests of the Company and without further action by the shareholders,
unless such action is required by the Certificate of Incorporation or By-Laws of
the Company or by applicable law or the rules of any stock exchange on which the
Company's securities are listed. The Board does not have any current plans to
issue any of the additional shares for any specific purpose.
The additional shares of Common Stock would become part of the existing
class of Common Stock, and the additional shares, when issued, would have the
same rights and privileges as the shares of Common Stock now issued. The holders
of Common Stock do not presently have pre-emptive rights to subscribe for any of
the Corporation's securities and will not have any such rights to subscribe for
the additional Common Stock proposed to be authorized.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR THE AMENDMENT TO THE COMPANY'S
CERTIFICATE OF INCORPORATION TO INCREASE THE COMPANY'S AUTHORIZED COMMON STOCK
FROM 2,250,000 SHARES TO 10,000,000 SHARES.
BOARD OF DIRECTORS' PROPOSAL TO ADOPT THE COMPANY'S 2000 STOCK OPTION PLAN
On October 29, 1999, the Board of Directors of the Company adopted, subject
to stockholder approval, the 2000 Stock Option Plan of Espey Mfg. & Electronics
Corp. (the "2000 Plan"), and reserved 150,000 shares for issuance under the 2000
Plan. A copy of the 2000 Plan is attached hereto as Exhibit A. The Board adopted
the 2000 Plan to ensure that the Company can provide equity incentives to
employees, directors and other participants at levels determined appropriate by
the Board. No stock options have been granted or issued under the 2000 Plan. The
size of future awards and the identity of the recipients cannot be determined at
this time. It is expected that such determination will be made primarily upon
the recommendation of the Chief Executive Officer on the basis of an
individual's performance, responsibility, his or her other compensation, his or
her retention value to the Company and applicable legal requirements.
<PAGE>
Stockholders are requested in this Proposal to approve the 2000 Plan and to
reserve for issuance 150,000 shares. The affirmative vote of the holders of a
majority of the shares present in person or represented by proxy and entitled to
vote at the Meeting will be required to approve the 2000 Plan. The essential
features of the 2000 Plan are outlined below:
The 2000 Plan provides for the grant of options to officers, directors, key
employees and consultants of the Company and its subsidiaries. Currently, all of
the Company's employees (approximately 205), directors (9 members) and
consultants (if any) are eligible to participate in the 2000 Plan. The 2000 Plan
will be administered by the Board of Directors unless and until the Board
delegates administration to a committee (the "Option Committee") of three or
more Board members. It is expected that an Option Committee will administer the
2000 Plan. The Board or Option Committee has the authority to determine to whom,
and the time or times at which options will be granted, the number of shares of
Common Stock that comprise each option, whether to amend or reduce the exercise
price of outstanding options, and the time or times at which each option granted
under the 2000 Plan may be exercised; provided, however, that no option may be
exercised later than 10 years after the date of grant.
The 2000 Plan provides for the grant of both "incentive stock options" or
"ISOs" and "non-qualified stock options" to acquire the Company's Common Stock.
ISOs may only be issued to the Company's employees and non-qualified stock
options may be issued to the Company's employees as well as its consultants and
directors. ISO's must be granted with an exercise price of no less than the fair
market value of Common Stock at the time of grant, but if granted to
stockholders owning at least 10% of the Common Stock outstanding, such options
will be granted at a price of at least 110% of the fair market value of such
Common Stock at the time of grant. When the stock option committee grants an
option, it will specify the number of shares subject to the option, the exercise
price, the manner of exercise and any vesting or other restrictions. The option
exercise price must be paid in full or by exchanging shares of our common stock
with a fair market value equal to or less than the total option price plus cash
for any difference.
10
<PAGE>
Consideration for the options to be granted under the Plan is provided by
the recipient's past, present and expected future contributions to the Company.
No monetary consideration is provided by the recipient with respect to the grant
of options.
Except as may otherwise be provided by the Board or Option Committee as to
non-qualified stock options, no option granted under the 2000 Plan is
transferable, except in the event of a recipient's death or permanent
disability. ISOs may be exercised by the holder (a) while he is an employee of
the Company or (b) at such time as designated in the individual option agreement
but in no event later than three months after termination of his employment,
other than owing to death or permanent disability. In the event of a recipient's
death or permanent disability, the recipient's ISOs may be exercised at any time
prior to expiration of the ISOs, but in any event no later than one year after
the date of his death or permanent disability. In the event of the recipient's
death, the ISOs may be exercised by the person entitled to do so under the
recipient's will or by the recipient's legal representative. Termination of
employment or other relationship with the Company by a holder of non-qualified
stock options will have the effect specified in the individual option agreement.
The 2000 Plan is not subject to the Employee Retirement Income Security Act of
1974. The 2000 Plan is not qualified under Section 401(a) of the Internal
Revenue Code of 1986, as amended.
The Board of Directors or the Option Committee may at any time suspend or
terminate the 2000 Plan except that (i) no such action may impair the rights of
optionees under any option previously granted pursuant to the 2000 Plan and (ii)
shareholder approval is required to effect any amendment to or change in the
2000 Plan that would: (a) increase the maximum number of shares which may be
acquired pursuant to options granted under the 2000 Plan (except as to
adjustments for stock splits through a reorganization, recapitalization, stock
dividend, stock split, reverse stock split or other similar transaction as
provided in the 2000 Plan); (b) change the minimum exercise price of an option;
or (c) increase the maximum number of options issuable under the 2000 Plan.
FEDERAL INCOME TAX CONSIDERATIONS
The discussion which follows is a summary, based on current law, of some of
the significant federal income tax considerations relating to options under the
2000 Plan. The following is based upon federal tax laws and regulations as
presently in effect and does not purport to be a complete description of the
federal income tax aspects of the 2000 Plan.
INCENTIVE STOCK OPTIONS
No taxable income is recognized by the optionee upon the grant of an
incentive stock option under the 2000 Plan. Further, no taxable income will be
recognized by the optionee upon exercise of an incentive stock option and no
expense deduction will be available to the Company, provided the optionee holds
the shares acquired upon such exercise for at least two years from the date of
grant of the option and for at least one year from the date of exercise. Any
gain on the subsequent sale of the shares will be considered long-term capital
gain provided the two-year and one-year holding periods are met. The gain
recognized upon the sale of the shares is equal to the excess of the amount
realized upon the sale (usually the selling price of the shares) over the
exercise price.
<PAGE>
Therefore, the net federal income tax effect on an optionee fulfilling the
foregoing holding requirements is to defer, until the shares are sold, taxation
of any increase in the value of the shares from the exercise price and to treat
such gain, at the time of sale, as capital gain rather than ordinary income.
However, in general, if the optionee sells the shares within two years from the
date of the option grant or within one year from the date of exercise (referred
to as a "disqualifying disposition,") the optionee will recognize taxable income
at ordinary tax rates in an amount equal to the lesser of (i) the value of the
shares on the date of exercise, less the exercise price, and the Company will
receive a corresponding business expense deduction. The balance of any gain
recognized on a disqualifying disposition will be long-term or short-term
capital gain depending upon the holding period of the optioned shares. The
special two-year and one-year holding periods for incentive options do not apply
to option shares which are disposed of by the optionee's estate or a person who
acquired such shares by reason of the death of optionee.
An employee may be subject to an alternative minimum tax upon exercise of
an incentive stock option since the excess of the fair market value of the
shares purchased at the date of exercise over the exercise price must be
included in alternative minimum taxable income, unless the shares are disposed
of in the same year that the option was exercised.
NON-INCENTIVE STOCK OPTIONS
As in the case of incentive stock options, the grant of a non-incentive
stock option will not result in any taxable income to the optionee. However, the
tax treatment upon exercise of non-incentive stock options is different.
Generally, the optionee will recognize ordinary income when the option is
exercised in the amount by which the fair market value of the shares acquired
upon exercise of the option on the date of exercise exceeds the exercise price
and the Company will be entitled to a corresponding business expense deduction.
The income recognized by the optionee is compensation income subject to income
tax withholding by the Company.
11
<PAGE>
The fair market value of the shares on the date of exercise will constitute
the tax basis of the shares for computing gain or loss on any subsequent sale.
Any gain or loss recognized by the optionee upon the subsequent disposition of
the shares will be treated as capital gain or loss and will qualify as long-term
capital gain or loss if the shares have been held for the requisite holding
period.
SECTION 162(m) OF THE CODE
Under Section 162(m) of the Internal Revenue Code, certain compensation
payments in excess of $1 million are subject to a limitation on deductibility
for the Company. The limitation on deductibility applies with respect to that
portion of a compensation payment for a taxable year in excess of $1 million to
either the Company's Chief Executive Officer or any one of its four other most
highly compensated executive officers. Certain performance-based compensation is
not subject to the limitation on deductibility. Options can qualify for this
performance-based exception, but only if they are granted at fair market value,
the total number of shares that can be granted to an executive for a specified
period is stated, and shareholder and Board approval of the plan is obtained.
Non-qualified stock options granted with an exercise price less than the fair
market value of common stock on the date of grant will not meet such
performance-based criteria and, accordingly, the compensation attributable to
such options will be subject to the deductibility limitations contained in
Section 162(m) of the Code.
Under New York's Business Corporation Law, the affirmative vote of the
holders of at least a majority of the votes present and entitled to vote at the
annual meeting at which a quorum is present is required to approve the Plan. If
approved by stockholders, the Plan will take effect on the date of the annual
meeting.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR THE ADOPTION OF THE COMPANY'S
2000 STOCK OPTION PLAN.
COMPLIANCE WITH SECTION 16(a) OF THE
SECURITIES EXCHANGE ACT
Section 16(a) of the Securities Exchange Act of 1934, as amended, generally
requires the Company's directors, executive officers, and persons who own more
than ten percent of a registered class of the Company's equity securities, to
file reports of beneficial ownership and changes in beneficial ownership with
the Securities and Exchange Commission. Based solely upon its review of copies
of such reports received by it, or upon written representations obtained from
certain reporting persons, the Company believes that its officers, directors,
and stockholders who own more than ten percent of the Company's equity
securities have complied with all Section 16(a) filing requirements.
ANNUAL REPORTS
The Annual Report of the Company to the shareholders for the fiscal year
ended June 30, 1999, including financial statements, accompanies this Proxy
Statement. Such financial statements are not incorporated herein by reference.
A copy of the Company's Annual Report on Form 10-K (including financial
statements thereto) for the fiscal year ended June 30, 1999 filed with the
Securities and Exchange Commission will be provided without charge upon the
written request of shareholders to Espey Mfg. & Electronics Corp., attention:
Investor Relations, 233 Ballston Avenue, Saratoga Springs, New York 12866.
Copies of Exhibits to Form 10-K for the fiscal year ended June 30, 1999 will be
provided upon request upon payment of a reasonable fee.
<PAGE>
SHAREHOLDER PROPOSALS FOR 2000
ANNUAL MEETING
Any shareholder proposal which may be a proper subject for inclusion in the
proxy statement and for consideration at the 2000 Annual Meeting must be
received by the Company at its principal executive office no later than August
8, 2000, if it is to be included in the Company's 2000 proxy statement and proxy
form.
12
<PAGE>
OTHER MATTERS
Proxy Solicitation
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.
Other Matters
The Company is unaware of any other matter that will be brought before the
meeting for action. If other matters should come before the meeting which
require a shareholder vote, it is intended that the proxy holders will use their
own discretion in voting on such other matters.
By Order of the Board of Directors,
HOWARD PINSLEY
President, Chief Executive Officer
and Treasurer
December 6, 1999
Saratoga Springs, New York
13
<PAGE>
EXHIBIT A
ESPEY MFG. & ELECTRONICS CORP.
2000 STOCK OPTION PLAN
---------------------
1. Definitions. As used herein:
(a) The word "Advisors" means advisors, consultants and other individual
rendering or performing advisory, consulting or similar services to,
on behalf of or for the benefit of the Corporation.
(b) The word "Committee" means the stock option committee described in
Section 3 hereof.
(c) The word "Corporation" means Espey Mfg. & Electronics Corp., a New
York corporation.
(d) The word "Directors" means the board of directors of the Corporation.
(e) The words "Fair Market Value" mean the value of the Shares as
determined by the Committee on the date on which an Option is granted;
provided, however, that if the Shares are listed or have trading
privileges on a national securities exchange, the Fair Market Value
shall be the mean between the high and low selling prices of the
Shares on the last trading day before the date on which the Option is
granted, or, if there are no sales on that date, the mean between the
high and low selling prices on the next previous day on which sales
were made.
(f) The words "Incentive Stock Option" mean an Option granted to an
Optionee under the Plan which is intended to qualify as an "incentive
stock option" under Section 422 of the Internal Revenue Code.
(g) The words "Internal Revenue Code" mean the Internal Revenue Code of
1986, as amended.
(h) The words "Key Employees" mean any Key Employees of the Corporation or
any parent or subsidiary of the Corporation who are selected by the
Committee to receive Options as provided in Section 3 hereof.
(i) The words "Non-Qualified Stock Option" mean an Option granted.
(j) The word "Option" means an Incentive Stock Option or a Non-Qualified
Stock Option.
(k) The words "Option Agreement" mean the Option Agreement an Optionee
must sign upon receiving an Option under the Plan.
(l) The word "Optionee" means a Key Employee, Director or other person
holding an Option under the Plan.
(m) The word "Plan" means the Espey Mfg. & Electronics Corp. 2000 Stock
Option Plan, as herein set forth.
(n) The word "Shares" means shares of the Corporation's common stock
having a par value of $.33-1/3 per share.
<PAGE>
2. Purposes. The purposes of the Plan are:
(a) To encourage a sense of proprietorship on the part of those Key
Employees, Directors, Advisors and other individuals who will be
largely responsible for the continued growth of the Corporation;
(b) To furnish Key Employees, Directors, Advisors and other individuals
with further incentive to develop and promote the business and
financial success of the Corporation; and
(c) To induce Key Employees, Directors, Advisors and other individuals to
continue in the service of or doing business with the Corporation, by
providing a means whereby they may purchase stock in the Corporation
under Options granted to them under the Plan.
3. Administration.
(a) The Plan shall be administered by the Board of Directors or by a stock
option Committee (the "Committee") consisting of not less than three
(3) persons as the Directors shall select and whom the Directors may
appoint and remove from time to time, and who shall serve at the
pleasure of the Directors. The Directors may, from time to time,
appoint members of the Committee in substitution for members
previously appointed and fill vacancies, however caused, in the
Committee. A majority of the Committee shall constitute a quorum. All
determinations of the Committee shall be made by a majority of the
Committee members present at a meeting of the Committee at which a
quorum is present.
A-1
<PAGE>
(b) Subject to the express provisions of the Plan and any other
restrictions on shares subject to the Plan incorporated in any
agreement to which the Company is a party, the Committee shall have
full power and authority, in its discretion, to determine initially
and from time to time when and to whom Options shall be granted and
the number of Shares to be covered by each Option. Accomplishments of
individuals in furthering the interests of the Corporation shall be
the primary guide of the Committee in apportioning the number of
Shares to be optioned pursuant to the Plan, but the Committee may take
into consideration any position held by an Optionee, his or her
compensation, and any other factors that the Committee may deem
pertinent.
(c) The Committee shall also have the power and authority to construe and
interpret the Plan and the respective Option Agreements entered into
hereunder, and to make all other determinations necessary or advisable
for administering the Plan (subject, however, with respect to
Incentive Stock Options, to the provisions of the Internal Revenue
Code and the regulations issued thereunder). Without limiting the
generality of the foregoing, subject to the limitations otherwise
provided herein, the Committee shall have full and complete authority
and discretion to prescribe the following terms and conditions with
respect to Non-Qualified Stock Options which are granted under the
Plan (which terms and conditions need not be identical among
Optionees): (i) the number of Shares subject to, and the expiration
date of, each Non-Qualified Stock Option; (ii) the purchase price of
the Shares under each Non-Qualified Stock Option; (iii) the manner,
time and rate of exercise of each Non-Qualified Stock Option; and (iv)
the restrictions, if any, to be placed upon each Non-Qualified Stock
Option or upon the Shares which may be issued upon the exercise of
such Non-Qualified Stock Option. The determination of the Committee on
all matters referred to in this section shall be final and conclusive.
(d) The Corporation shall pay all of the expenses reasonably incurred by
the Committee in the administration of the Plan, including
professional fees.
4. Eligibility.
Incentive Stock Options may be granted only to persons who qualify for
"incentive stock options" under applicable provisions of the Internal Revenue
Code and the regulations promulgated thereunder. Subject to the foregoing,
persons eligible to receive Stock Options under the Plan shall include all such
Key Employees, Directors, Advisors and other individuals who are designated by
the Committee.
5. Shares Subject to the Plan.
(a) Overall Limits. The stock to be issued pursuant to Options granted
under the Plan may be either the Corporation's authorized and unissued
unregistered Shares or issued unregistered Shares heretofore or
hereafter reacquired by the Corporation and held as treasury shares.
Subject to adjustment made in accordance with Section 13 hereof, the
total number of Shares which may be issued during the existence of the
Plan shall not exceed One Hundred Fifty Thousand Shares (150,000). In
the event any unexercised Options lapse or terminate for any reason,
the Shares covered thereby may be optioned to other persons, and such
lapsed or terminated Options shall not be considered in computing the
maximum number of Shares that may be optioned in computing the maximum
allowance for any individual.
<PAGE>
(b) Individual Limits. The aggregate Fair Market Value (determined at the
time an Incentive Stock Option is granted) of Shares with respect to
which Incentive Stock Options are exercisable for the first time by an
Optionee during any calendar year under the Plan and all other
incentive stock option plans maintained by the Corporation and any
parent or subsidiary shall not exceed $100,000.
(c) Stock Reserve. The Corporation shall at all times during the duration
of the Plan reserve and keep available such number of Shares as will
be sufficient to satisfy the requirements of the Plan.
6. Exercise Price of Incentive Stock Options.
The purchase price of the Shares under each Incentive Stock Option granted
under the Plan shall be set by the Committee at the time the Incentive Stock
Option is granted, but such price shall not be set at less than the Fair Market
Value of the Shares which are purchasable under such Incentive Stock Option
(determined in accordance with the applicable provisions of the Internal Revenue
Code, including Section 422) at the time such Incentive Stock Option is granted.
In the case of any individual who, at the time an Incentive Stock Option is
granted, owns stock possessing more than ten percent (10%) of the total combined
voting power of all classes of stock of the Corporation (or more than 10% of
such stock and/or the stock of any parent or subsidiary of the Corporation), the
exercise price shall be set at not less than one hundred ten percent (110%) of
the Fair Market Value of the Shares which are purchasable under such Incentive
Stock Option, and such Option shall not be exercisable after the expiration of
five (5) years from the date such Option is granted.
A-2
<PAGE>
7. Duration of Options.
Each Option granted hereunder shall continue for such period as the
Committee may determine, not to exceed ten (10) years from the date of its grant
or issuance, unless sooner terminated under the provisions of Section 8 hereof.
In the case of individuals accumulating more than 10% of the combined voting
power of all classes of stock of the Corporation (or more than 10% of such stock
and/or the stock of any parent or subsidiary of the Corporation), Incentive
Stock Options shall continue for such period as the Committee may determine, not
to exceed five (5) years from the date of their grant.
8. Termination of Incentive Stock Options.
(a) Except as provided in subparagraphs 8(b), (c) and (d) (concerning
death, disability and retirement), in the event of termination of the
employment of an Optionee for any cause, whether by reason of
resignation or discharge and regardless of whether such termination is
with or without cause, each Incentive Stock Option previously granted
such Optionee pursuant to the Plan shall terminate three (3) months
after the date on which such employment terminated.
(b) If any Optionee dies while employed by the Corporation, its parent or
subsidiary, or within three (3) months thereafter, the duly appointed
legal representative of such Optionee's estate may exercise any
Incentive Stock Options granted under the Plan within three (3) months
from the date that the Optionee was last employed.
(c) If any Optionee becomes permanently and totally disabled (within the
meaning as referenced in Section 422 of the Internal Revenue Code)
while employed by the Corporation, its parent or subsidiary, such
disabled Optionee may exercise all Incentive Stock Options granted to
such Optionee under the Plan within twelve (12) months after the date
that the Optionee was last employed.
(d) If any Optionee shall retire at or after the normal retirement age, as
the same may be established from time to time by the Directors, such
retired Optionee may exercise all vested Incentive Stock Options
granted to him or her under the Plan within three (3) months from the
date that the Optionee was last employed.
9. Exercise of Options.
(a) Subject to the following terms and conditions, Options may be
exercised by written notice to the Corporation at its principal office
(as of the date of this Plan, 233 Ballston Avenue, Saratoga Springs,
New York 12866) and addressed to the attention of the President. Such
notice shall specify the number of Shares to be purchased, and shall
contain such further information as may be required by the terms of
the Option Agreement entered into between the Corporation and the
Optionee.
(b) No Incentive Stock Option may be exercised by an Optionee unless at
all times during the period beginning on the date of the granting of
such Option and ending on the day not less than three (3) months
before the date of such exercise the Optionee was an employee of the
Corporation or a parent or subsidiary of the Corporation.
(c) An Option may be exercised either at one time as to the total number
of Shares covered thereby, or from time to time as to any portion
thereof in units of twenty five (25) Shares or multiples thereof.
(d) On the exercise of an Option, the Optionee shall make payment for the
full purchase price of all Shares being purchased. Within thirty (30)
days thereafter, the Corporation shall issue or cause to be issued a
certificate or certificates evidencing the purchased Shares, which
certificate(s) shall be delivered to the Optionee.
(e) Subject to the limitations imposed by Sections 7 and 8 hereof, in the
event of the death of an Optionee, any Incentive Stock Option or
Options theretofore granted to such deceased Optionee may be exercised
by the legal representatives of the estate of the Optionee or by the
person or persons to whom the deceased Optionee's rights under any
Incentive Stock Option or Options shall pass by will or the laws of
descent and distribution.
<PAGE>
10. Payment.
Payment of the purchase price for Shares purchased under Options granted
under the Plan shall be made in full in cash at the time of the exercise of the
Option in the manner provided in Section 9 hereof. The Committee, in its
discretion, may, with respect to any Options granted pursuant to the Plan,
permit payment of the purchase price of the optioned stock by having the
Corporation automatically apply the Share or Shares received upon the exercise
of a portion of the Option to satisfy the exercise price for additional portions
of the Option.
11. Incentive Stock Options Not Transferable.
Incentive Stock Options granted under the Plan may not be transferred
except by will or the laws of descent and distribution and, during the lifetime
of the Optionee, may be exercised only by the Optionee.
A-3
<PAGE>
12. Purchase of Shares for Investment; Additional Restrictions.
(a) Investment Intent. Each Optionee and each other person who shall
exercise an Option shall represent and agree in writing that all
Shares purchased pursuant to such Option will be purchased for
investment and not with a view to the distribution or resale thereof.
(b) Limitations on Resale. Any Shares purchased upon exercise of an
Incentive Stock Option granted under the Plan may not be sold or
otherwise disposed of within two (2) years after the Incentive Stock
Option was granted nor within one (1) year from the date Shares were
issued and transferred to the Optionee pursuant to his or her exercise
of the Incentive Stock Option, as provided in subparagraph 9(d)
hereof.
13. Adjustment of Shares.
In the event of a merger, consolidation, reorganization, recapitalization,
reclassification of stock, stock divided, split-up or other change in the
Corporation structure or capitalization of the Corporation affecting the
Corporation's common stock as presently constituted, appropriate adjustments
shall be made by the Directors in the aggregate number and kind of Shares
subject to the Plan, the maximum number and kind of Shares for which Incentive
Stock Options may be granted to any one employee and the price per Share for
Shares subject to outstanding Options.
14. Registration or Qualification of Shares.
Notwithstanding Section 5(a), each Option shall be subject to the condition
that, if at any time the Committee shall determine in its discretion that the
registration or qualification of the Shares covered thereby under any state or
federal law is necessary or desirable as a condition of or in connection with
the granting of such Option or the delivery of Shares on the exercise thereof,
no such Option may be granted or, if granted, delivery of Shares on the exercise
thereof shall be deferred, until such registration or qualification shall have
been effected.
15. Time of Granting Options.
Neither anything contained in the Plan or in any resolution adopted or to
be adopted by the Directors or the shareholders of the Corporation nor any
action taken by the Committee shall constitute the granting of an Option. The
granting of an Option shall take place only when a written Option Agreement
shall have been duly executed and delivered by or on behalf of the Corporation
and the Optionee.
16. Form of Option.
The form of any Option Agreement granted pursuant to the Plan shall contain
such terms and provisions (not inconsistent with the terms of the Plan or, in
the case of Incentive Stock Options, with the provisions of Section 422 of the
Internal Revenue Code and the regulations promulgated thereunder) as may be
approved by the Committee.
<PAGE>
17. Suspension, Amendment or Termination of Plan.
(a) The Directors shall have the right, at any time, to suspend, amend or
terminate the Plan.
(b) Notwithstanding the foregoing, no amendment shall increase the total
number of Shares that shall be the subject of the Plan or change the
formula for determining the purchase price for the Shares subject to
Option, unless duly approved by the holders of a majority of the
issued and outstanding common stock of the Corporation.
(c) No amendment shall be adopted which would cause Incentive Stock
Options granted under the Plan to cease to qualify as "incentive stock
options" under Section 422 of the Internal Revenue Code.
(d) No termination of the Plan or action by the Directors in amending or
suspending the Plan shall affect or impair the rights of an Optionee
under any Option previously granted under the Plan.
(e) No Option may be granted under the Plan during any written suspension
thereof or after the termination thereof.
18. Effective Date and Term of Plan.
The Plan shall become effective at such time as it shall have been approved
by a majority vote of both the Directors and the shareholders of the
Corporation. The Plan shall continue in effect for a term of ten (10) years
following such approval unless sooner terminated under Section 17 hereof.
A-4
<PAGE>
This proxy is solicited on behalf of the Board of Directors
ESPEY MFG. & ELECTRONICS CORP.
Proxy for THE
1999 ANNUAL Meeting of SHAREHOLDERS
January 4, 2000
The undersigned hereby appoints Howard Pinsley and Barry Pinsley as Proxies,
each with the power to appoint his 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 1999 Annual Meeting of
Shareholders to be held on January 4, 2000 or any adjournment thereof.
1. Election of Class C Directors
[ ] FOR all nominees listed below [ ] WITHHOLD AUTHORITY
(except as marked to the to vote for all nominees
contrary below) listed below
Paul J. Corr Barry Pinsley Michael W. Wool
Management recommends a vote FOR these nominees.
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.
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2. Proposal to approve the appointment of PricewaterhouseCoopers LLP as the
independent public accountants of the Company.
[ ] FOR [ ] AGAINST [ ] ABSTAIN
Management recommends a vote FOR this proposal.
3. Proposal to amend the Company's Certificate of Incorporation to increase
the number of shares of Common Stock that the Company is authorized to
issue from 2,250,000 shares to 10,000,000 shares.
[ ] FOR [ ] AGAINST [ ] ABSTAIN
Management recommends a vote FOR this proposal.
4. Proposal to adopt the Company's 2000 Stock Option Plan
[ ] FOR [ ] AGAINST [ ] ABSTAIN
Management recommends a vote FOR this proposal.
5. In their discretion, the Proxies are authorized to vote upon such other
business as may properly come before the meeting.
<PAGE>
Please be sure to sign and date
this Proxy in the box below.
________________________________________
Date
_________________________________________
Stockholder sign above
_________________________________________
Co-holder (if any) sign above
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Detach here, sign, date and mail in postage paid envelope provided.
ESPEY MFG. & ELECTRONICS CORP.
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| |
| THIS PROXY WHEN PROPERLY EXECUTED WILL BE VOTED IN THE MANNER DIRECTED |
| HEREIN BY THE ABOVESIGNED SHAREHOLDER. IF NO DIRECTION IS MADE, THIS |
| PROXY WILL BE VOTED FOR PROPOSALS 1, 2, 3 AND 4. |
| |
| 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. |
| |
| PLEASE MARK, SIGN, DATE AND RETURN THE PROXY CARD PROMPTLY USING THE |
| ENCLOSED ENVELOPE. |
| |
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