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.
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.
<PAGE>
<TABLE>
<CAPTION>
NOMINEES FOR CLASS C DIRECTORS -- TO SERVE AS DIRECTORS FOR
A THREE YEAR TERM EXPIRING AT THE 2002 ANNUAL MEETING
Offices and Positions Period to Date Served
Name Age Held with Company Principal Occupation or Employment as 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
<PAGE>
<CAPTION>
CLASS A DIRECTORS -- SERVING FOR A
THREE YEAR TERM EXPIRING AT THE 2000 ANNUAL MEETING
Offices and Positions Period to Date Served
Name Age Held with Company Principal Occupation or Employment as Director
---- --- ----------------- ----------------------------------- -----------
<S> <C> <C> <C> <C>
Howard Pinsley (1) 59 President, Chief Howard Pinsley for more than the past five 1992
Executive Officer and years has been employed by the Company on
Treasurer 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.
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. from
1996 to 1999. Prior to that position, Mr.
Helmetag was Executive Vice President and
then President at Dynastar Inc. from 1978
to 1996. He is an MBA graduate from The
Wharton School of Business, University of
Pennsylvania.
<PAGE>
<CAPTION>
CLASS B DIRECTORS -- SERVING FOR A
THREE YEAR TERM EXPIRING AT THE 2001 ANNUAL MEETING
Offices and Positions Period to Date Served
Name Age Held with Company Principal Occupation or Employment as Director
---- --- ----------------- ----------------------------------- -----------
<S> <C> <C> <C> <C>
William P. Greene 69 Executive Vice Prior to his election as Executive Vice 1992
President of Operations President of Operations on March 1, 1999,
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 President Senior Vice President since December 6, 1992
1996. Prior to being elected to his
present position, Mr. Saslow served as
Vice President-Engineering
since April 3, 1992.
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.
<PAGE>
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 Peat Marwick LLP.
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 _ 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 standard arrangement compensated 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 served as a member of the Audit Committee
was 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.
<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:
<TABLE>
<CAPTION>
SUMMARY COMPENSATION TABLE
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.
<PAGE>
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.
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. 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.
<PAGE>
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.
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.
<PAGE>
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.
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>
Name of Amount and Nature Percent
Beneficial Owner of Beneficial Ownership of 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.
<PAGE>
(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.
(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 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.
<PAGE>
SECURITY OWNERSHIP OF MANAGEMENT
The following information is furnished as of November __ 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 Amount and Nature Percent
of 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.
(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.
<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 Peat Marwick 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 Peat Marwick 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.
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.
<PAGE>
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 _________ __, 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.
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.
<PAGE>
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 Ocotber 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.
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.
<PAGE>
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.
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.
<PAGE>
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. 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.
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.
<PAGE>
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 and schedules 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.
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
<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.
-1-
<PAGE>
(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.
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 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.
-2-
<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.
-3-
<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.
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.
-4-
<PAGE>
(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.
-5-
<PAGE>
(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.
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.
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.
-6-
<PAGE>
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.
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.
-7-
<PAGE>
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.
-8-
<PAGE>
This proxy is solicited on behalf of the Board of Directors
ESPEY MFG. & ELECTRONICS CORP.
Proxy for THE
1999 ANNUALMeeting 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.
- --------------------------------------------------------------------------------
2. Proposal to approve the appointment of PricewaterhouseCoopers LLPas 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
- --------------------------------------------------------------------------------
Detach here, sign, date and mailin postage paid envelope provided.
ESPEY MFG. & ELECTRONICS CORP.
- --------------------------------------------------------------------------------
| |
| 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. |
| |
- --------------------------------------------------------------------------------
