GRAHAM CORPORATION
20 FLORENCE AVENUE
BATAVIA, NEW YORK 14020
--------------------
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD MAY 9, 1996
--------------------
The Annual Meeting of Stockholders (the "Annual Meeting") of
Graham Corporation ("Graham") will be held at the Industrial Management Council,
930 East Avenue, Rochester, New York on Thursday, May 9, 1996 at 11:00 a.m. for
the following purposes:
1. To elect two directors to hold office until the Annual
Meeting of Stockholders in 1999;
2. To vote upon a proposal to approve the 1995 Graham
Corporation Incentive Plan to Increase Shareholder Value;
3. To ratify the appointment of Deloitte & Touche as Graham's
independent accountants for the fiscal year ending December 31, 1996; and
4. To transact such other business as may properly come before
the meeting.
Stockholders of record at the close of business on March 25,
1996 are entitled to notice of, and to vote at, the Annual Meeting.
A complete list of stockholders entitled to be present and to
vote at the Annual Meeting will be open for examination by any stockholder, for
any purpose germane to the Annual Meeting, for a period of ten days prior to the
Annual Meeting, during ordinary business hours, at Graham's offices at 20
Florence Avenue, Batavia, New York 14020.
By Order of the Board of Directors
CORNELIUS S. VAN REES
Secretary
April 5, 1996
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<PAGE>
You are cordially invited to attend the Annual Meeting, but,
whether you plan to attend the meeting or not, please date and sign the enclosed
Proxy Card and mail it promptly in the enclosed return envelope. No postage is
required for mailing in the United States. If you do attend, you may, of course,
vote in person.
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<PAGE>
GRAHAM CORPORATION
20 FLORENCE AVENUE
BATAVIA, NEW YORK 14020
PROXY STATEMENT
ANNUAL MEETING OF STOCKHOLDERS
MAY 9, 1996
GENERAL INFORMATION
GENERAL
This Proxy Statement and accompanying Proxy Card are furnished in
connection with the solicitation by the Board of Directors of Graham Corporation
("Graham" or the "Company") of proxies for use at the Annual Meeting of
Stockholders (the "Annual Meeting") to be held at the Industrial Management
Council, 930 East Avenue, Rochester, New York on Thursday, May 9, 1996 at 11:00
a.m., and at any adjournment thereof, for the purposes set forth in the
preceding Notice of Annual Meeting of Stockholders. The approximate date of the
initial mailing of this Proxy Statement is April 5, 1996.
RECORD DATE AND VOTING
At the close of business on March 25, 1996 there were 1,056,772 shares
of Graham's common stock outstanding. Stockholders of record at the close of
business on March 25, 1996 are entitled to notice of, and to vote at, the Annual
Meeting and at any adjournment or adjournments thereof. The holder of each share
of Graham's common stock outstanding at the close of business on March 25, 1996
will be entitled to one vote for each share held of record at the close of
business on March 25, 1996 on each matter properly submitted at the Annual
Meeting and at any adjournment thereof. The minimum vote required for election
of a nominee for director is a plurality of the votes cast by the holders of
shares entitled to vote at the meeting. The minimum vote required for approval
of any other matter before the meeting is a majority of the votes eligible to be
cast by the holders of shares present, in person or by proxy, and entitled to
vote.
PROXY CARDS
If Graham receives the enclosed Proxy Card, properly executed, in time
to be voted at the Annual Meeting, the shares represented thereby will be voted
in accordance with the instructions marked thereon. Executed Proxy Cards with no
instructions marked thereon will
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be voted FOR each of the nominees for election as directors, FOR approval of the
1995 Graham Corporation Incentive Plan to Increase Shareholder Value and FOR the
ratification of appointment of auditors set forth in the preceding Notice of
Annual Meeting. Under the Company's Certificate of Incorporation and By-laws,
unless otherwise required by law, matters such as the ratification of a stock
compensation plan, the ratification of independent auditors of the Company and
all other matters other than the election of directors shall be determined by a
majority of the votes eligible to be cast by the holders of outstanding shares
of the Company's common stock present and entitled to vote at the Annual Meeting
("Eligible Votes"), without regard to broker non-votes. Any proxies marked
"ABSTAIN" will not be treated as an affirmative or negative vote, but will be
used to determine the number which constitutes a majority of Eligible Votes.
REVOCABILITY OF PROXIES
The presence of a stockholder at this Annual Meeting will not
automatically revoke such stockholder's proxy. However, a stockholder may revoke
a Proxy at any time prior to its exercise by (1) delivering to the Secretary of
Graham a written notice of revocation prior to the Annual Meeting, (2)
delivering to the Secretary of Graham a duly executed Proxy bearing a later
date, or (3) attending this Annual Meeting, filing a written notice of
revocation with the Secretary of the Annual Meeting, and voting in person.
SOLICITATION OF PROXIES
In addition to solicitation by mail, directors, officers and employees
of Graham and its subsidiaries may solicit proxies for this Annual Meeting from
the stockholders of Graham personally or by telephone or telegram without
additional remuneration therefor. Graham will also provide persons holding
shares in their names or in the names of nominees, which in either case are
beneficially owned by others, proxy material for transmittal to such beneficial
owners and will reimburse such record owners for their expenses in doing so. The
cost of soliciting proxies for the Annual Meeting will be borne by Graham. No
funds will be paid to any professional solicitor in connection with this Annual
Meeting.
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<PAGE>
PRINCIPAL STOCKHOLDERS
The following table sets forth information as to the beneficial
ownership of Graham's common stock of each person or group who, as of March 25,
1996, to the knowledge of Graham based on reports filed with the Securities and
Exchange Commission, beneficially owned more than 5% of Graham's outstanding
common stock.
<TABLE>
<CAPTION>
Amount Percent of
Name and Address of Beneficially Outstanding
Beneficial Owner Owned Shares
<S> <C> <C>
Frederick D. Berkeley1........................................ 249,5683 23.3%
Frederick D. Berkeley and
Alvin L. Snyder, Trustees under
an agreement dated September 3,
1985 for the Graham Retirement
Income Plan1................................................ 68,2022 6.4%
Aries Hill Corp.
The Cameron Baird Foundation,
Anne S. Baird as Trustee4 . . . . . . . . . . . . ............ 56,950 5.4%
Wilen Management Corporation5. . . . . . . . . . . ..... 55,600 5.3%
Josephthal, Lyon & Ross Incorporated6. . . . . . . ..... 61,700 5.8%
Employee Stock Ownership Plan of
Graham Corporation1,7....................................... 87,454 8.3%
All directors and executive officers
as a group (11 persons)..................................... 359,6268 32.2%
</TABLE>
1 Address: c/o Graham Corporation, 20 Florence Avenue, Batavia, New York 14020.
2 Messrs. Berkeley and Snyder share voting powers with respect to these shares
with each other and share dispositive power with respect to these shares with
Graham's Board of Directors.
3 Includes the shares described in footnote 2. Also includes 15,500 shares which
Mr. Berkeley may acquire within 60 days upon exercise of stock options and 844
shares held by Chemical Bank as trustee for the Employee Stock Ownership Plan
Trust ("ESOP Trustee") and allocated to Mr. Berkeley's account as to which Mr.
Berkeley has sole voting power but no dispositive power except in limited
circumstances. Excluded from Mr. Berkeley's shareholdings as described in this
table are shares of Graham's common stock held by the ESOP Trustee and not
allocated to any individual's account, as to which Mr. Berkeley shares voting
power and limited dispositive power with all other ESOP participants.
4 Address: 1350 One M & T Plaza, Buffalo, New York 14203. The stockholders
indicated each have sole voting and sole dispositive power with respect to the
following numbers of shares: Aries Hill Corp., 7,100 shares; The Cameron Baird
Foundation, 49,800 shares; Anne S. Baird as Trustee, 50 shares.
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<PAGE>
5 Address: 2360 West Joppa Road, Lutherville, Maryland 21093. The stockholder
has sole voting and sole dispositive power with respect to all of these
shares.
6 Address: 30 Rowes Wharf, Boston, Massachusetts 02110. The stockholder has sole
voting and dispositive power with respect to 4,300 of the total number of
shares and shared dispositive power but no voting power with respect to the
remaining 57,400 shares.
7 The Employee Benefits Committee consisting of members of the Board of
Directors administers the ESOP. An unrelated corporate trustee for the ESOP
("ESOP Trustee") has been appointed by the Board of Directors. The Employee
Benefits Committee instructs the ESOP Trustee regarding investment of funds
contributed to the ESOP. Each member of the Employee Benefits Committee
disclaims beneficial ownership of the shares of Common Stock held in the ESOP.
The ESOP Trustee must vote all allocated shares held in the ESOP in accordance
with the instructions of the participating employees. Unallocated shares held
in the suspense account will be voted by the ESOP Trustee in a manner
calculated to most accurately reflect the instructions it has received from
participants regarding the allocated stock, provided such instructions do not
conflict with the ESOP Trustee's fiduciary obligations under ERISA. At March
25, 1996, 48,926 shares were allocated to participants and 38,528 shares were
unallocated.
8 Includes 59,727 shares which members of the group may acquire within 60 days
upon exercise of stock options. Includes 3,194 shares allocated to executive
officers under the ESOP, as to which such officers may exercise voting power,
but not dispositive power, except in limited circumstances. Also includes
unallocated shares held in the ESOP Trust of which the directors who are
members of the Company's Employee Benefits Committee have dispositive power.
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<PAGE>
PROPOSAL ONE
ELECTION OF DIRECTORS
At the Annual Meeting two directors will be elected, each to hold
office until the 1999 Annual Meeting and thereafter until the election and
qualification of his successor. Unless otherwise instructed as provided on the
accompanying Proxy Card, the persons named therein will vote the shares
represented by the proxies received by them for the nominees listed below,
reserving, however, discretion to vote for the election of any substitute
nominated by the Board of Directors in the event any nominee is unable or
unwilling to serve. There are no arrangements or understandings between the
Company and any director or nominee pursuant to which such person was elected or
nominated to be a director of the Company.
The following table sets forth information with respect to the
nominees and those directors whose terms will continue after the Annual Meeting.
NOMINEES:
<TABLE>
<CAPTION>
Number of
Years Shares Owned
Current Served Beneficially, Percent of
Principal Term as a as of Outstanding
Name Age Occupation Expires Director2 March 25, 1996 Shares
---- --- ---------- ------- -------- -------------- ------
<S> <C> <C> <C> <C> <C> <C>
Robert L. Tarnow 71 Former Chairman 1996 15 4,2003 *
of Goulds Pumps,
Inc.
Cornelius S. Van Rees 66 Of Counsel to 1996 27 4,7003 *
Thacher Proffitt &
Wood, Attorneys;
previously partner
in Thacher Proffitt
& Wood
</TABLE>
DIRECTORS WITH TERMS CONTINUING
AFTER THE 1996 ANNUAL MEETING
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<PAGE>
<TABLE>
<CAPTION>
Number of
Years Shares Owned
Current Served Beneficially, Percent of
Principal Term as a as of Outstanding
Name Age Occupation1 Expires Director2 March 25, 1996 Shares
---- --- ---------- ------- -------- -------------- ------
<S> <C> <C> <C> <C> <C> <C>
Frederick D. Berkeley4 67 Chairman, President 1997 41 249,5686 23.3%
and Chief Executive
Officer of Graham5
Jerald D. Bidlack 60 President, Griffin 1998 11 5,5003 *
Automation, Inc.;
previously Vice
Chairman, Moog Inc.
and President,
International Group
Alvaro Cadena 52 President and Chief 1997 3 11,8627 1.1%
Operating Officer,
Graham Manufacturing
Co., Inc.; Vice
President of Graham
Philip S. Hill4 74 Partner, Hill, Ullman 1998 28 23,5673 2.2%
& Erwin, Attorneys
All Directors and
executive officers
as a group (11 persons) 359,6268 32.2%
</TABLE>
* Less than 1% of the outstanding shares of common stock.
1 In addition, Mr. Bidlack presently serves on the board of Bush Industries,
Inc., which has securities registered under Section 12 of the Securities
Exchange Act of 1934.
2 Includes the number of years served as director of Graham Manufacturing Co.,
Inc., the predecessor of Graham.
3 Includes 4,000 shares which may be acquired within 60 days upon exercise of
stock options.
4 Messrs. Berkeley and Hill are brothers-in-law.
5 Mr. Berkeley served as Chairman, President and Chief Executive Officer of
Graham's predecessor, Graham Manufacturing Co., Inc., until 1983.
6 Refer to Footnote 3 on page 3.
7 Includes 9,800 shares that may be acquired within 60 days by exercising stock
options and 639 shares held by the ESOP Trustee and allocated to Mr. Cadena's
account as to which Mr. Cadena has sole voting power but no dispositive power
except in limited circumstances.
8 Includes 59,727 shares which may be acquired within 60 days upon exercise of
stock options and 3,194 shares held by Chemical Bank as trustee for the ESOP
Trust and allocated to each individual's account as to which each individual
has
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<PAGE>
sole voting power but no dispositive power except in limited circumstances.
Also includes unallocated shares of common stock held by the ESOP Trustee over
which the directors who are members of the Company's Employee Benefits
Committee have dispositive power.
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<PAGE>
BOARD MEETINGS AND COMMITTEES OF THE BOARD
During 1995, the Board of Directors of Graham held a total of four
meetings. Graham's Board of Directors has five committees, as follows:
1. EXECUTIVE COMMITTEE
Between meetings of the Board of Directors, the Executive
Committee has all of the powers of the Board to manage and direct all the
business and affairs of Graham, so far as such may be legally delegated and
except as may be limited from time to time by resolution of the Board. The
members of the Executive Committee are Messrs. Berkeley (Chairman), Hill and Van
Rees. The Executive Committee of Graham held five meetings during 1995.
2. AUDIT COMMITTEE
It is the duty of the Audit Committee to recommend the
auditors for Graham's annual audit to the full Board of Directors, to meet and
discuss directly with Graham's auditors their audit work and related matters and
to carry out such investigations and make such reports to the Board of Directors
with respect both to the external and internal auditing procedures and affairs
of Graham as the Audit Committee deems necessary or advisable. The members of
the Audit Committee are Messrs. Hill (Chairman), Bidlack, Tarnow and Van Rees.
The Audit Committee of Graham held one meeting during 1995.
3. COMPENSATION COMMITTEE
The Compensation Committee has authority to (a) review and
determine annually salaries, bonuses and other forms of compensation paid to the
Company's executive officers and management; (b) select recipients of awards of
incentive stock options and non-qualified stock options, establish the number of
shares and other terms applicable to such awards, and construe the provisions of
and generally administer the 1989 Stock Option and Appreciation Rights Plan and
the 1995 Incentive Plan to Increase Shareholder Value, subject to stockholder
approval of such plan. The members of the Compensation Committee are Messrs.
Bidlack (Chairman), Hill, Tarnow and Van Rees. The Compensation Committee of
Graham held four meetings during 1995.
4. EMPLOYEE BENEFITS COMMITTEE
The Employee Benefits Committee reviews the performance of the
Plan Administrator of Graham's Retirement Income Plan, Incentive Savings Plan,
Group Hospitalization Plan, Medical Plan, Major Medical Plan, Life Insurance
Plan, Long-Term Disability Plan, Employee Stock Ownership Plan and any other
employee benefit plan maintained by Graham for which a named fiduciary is
designated. The Committee reviews and reports to the Board on the performance of
the Incentive Savings Plan trustee and the Retirement Income Plan trustee in
investing, managing and controlling plan assets. It has authority to establish a
funding policy and method consistent with the objectives of the Retirement
Income Plan, to recommend changes in the plans, changes in any plan trustee or
administrator, and
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<PAGE>
subject to the further action of the Board, to amend any of the plans, other
than the Retirement Income Plan, the Incentive Savings Plan and the Employee
Stock Ownership Plan..
The members of the Employee Benefits Committee are Messrs.
Berkeley (Chairman), Hill and Van Rees. The Employee Benefits Committee of
Graham held no meetings in 1995.
5. NOMINATING COMMITTEE
Graham's Board of Directors established a Nominating Committee
in February 1996. Previously, the Board of Directors itself performed the
functions which would otherwise be performed by a nominating committee,
including nominations of directors for the 1996 Annual Meeting. The Nominating
Committee will make its first nominations thereafter. It has authority to review
the qualifications of, interview and nominate candidates for election to the
Board of Directors. Stockholders may recommend individuals for consideration by
the Nominating Committee as potential nominees by making any such recommendation
in writing to the Secretary of the Company, at the Company's address, no later
than February 1 preceding any year's Annual Meeting of Stockholders.
The members of the Nominating Committee are Messrs. Van Rees
(Chairman), Berkeley and Hill.
MEETING ATTENDANCE
A total of fourteen meetings of the Board of Directors of
Graham and of the Committees of the Board were held on nine dates during 1995
and all directors but one attended all meetings of the Board and of Committees
of which they were members. One director was absent from one Board meeting on
one date.
DIRECTORS' FEES
No director who is an employee of Graham or a Graham
subsidiary receives any remuneration for services as a director.
Non-employee directors receive an annual fee of $8,000 for
service on the Board. They also receive a fee of $1,000 for each meeting
attended of the Board or of any Committee of the Board except that, if the
meeting is held by telephone conference call or by unanimous written consent, a
$500 fee is paid, and if the Board and/or one or more Committees meet on the
same day, a full meeting fee is paid for one meeting and one-half the normal fee
is paid for each other meeting. Each of the two non-employee directors who are
members of the Executive Committee also received an annual fee of $8,000 for
such service.
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<PAGE>
Each director not residing within 50 miles of the place of any
meeting is entitled to receive reimbursement for reasonable expenses incurred in
attending a meeting.
Pursuant to the 1989 Stock Option and Appreciation Rights Plan
of Graham Corporation ("Option Plan"), each non-employee director of Graham is
granted an option to purchase 4,000 shares of Graham's common stock upon
becoming a member of the Board of Directors.
Subject to approval by Graham's shareholders of the 1995
Graham Corporation Incentive Plan to Increase Shareholder Value ("Incentive
Plan"), each non-employee director of Graham has been granted, annually for four
years, an option to purchase 1,500 shares of Graham's common stock.
EXECUTIVE OFFICERS
The following table sets forth information regarding Named Executive
Officers of Graham identified on the Summary Compensation Table on page 8 herein
as of March 25, 1996 and their beneficial ownership of Graham Common Stock.
<TABLE>
<CAPTION>
Shares Owned Percent of
Years of Beneficially As Of Outstanding
Name Age Principal Occupation Since 1991 Service March 25, 1996 Shares
---- --- ------------------------------- ------- -------------- ------
<S> <C> <C> <C> <C> <C>
Frederick D. Berkeley 67 Chairman, President and Chief 45 249,5681 23.3%
Executive Officer
Alvaro Cadena 52 President & Chief Operating 26 11,8622 1.1%
Officer, Graham Manufacturing
Co., Inc.("GMC"); Vice President
of Graham
J. Ronald Hansen 48 Vice President-Finance and 3 2,0953 *
Administration and Chief
Financial Officer; previously Vice
President-Finance and Chief
Financial Officer of Al Tech
Specialty Steel Corporation
Joseph P. Gorman 52 Vice President-Sales of GMC 26 6,6564 *
Stephen P. Northrup 44 Vice President-Engineering of 22 6,0435 *
GMC; previously Vice President-
Operations of GMC
</TABLE>
* Less than 1% of the outstanding shares of common stock.
1 Includes 15,500 shares which may be acquired within 60 days upon exercise of
stock options, 844 shares held by Chemical Bank as trustee for the Employee
Stock Ownership Plan Trust ("ESOP Trustee") and allocated to Mr. Berkeley's
account as to which Mr. Berkeley has sole voting power but no investment power
except in limited circumstances, and 68,202 shares owned jointly as co-trustee
of the Graham Retirement Income Plan Trust. Excluded from Mr. Berkeley's
shareholdings ar shares of common stock held by the ESOP Trustee and not
allocated to any individual's account, as to which Mr. Berkeley shares voting
power and limited investment power with all other ESOP participants. Mr.
Berkeley is a member of the Company's Employee Benefits Committee and shares
dispositive power over such unallocated stock with other members of that
Committee.
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<PAGE>
2 Includes 9,800 shares that may be acquired within 60 days by exercising stock
options and 639 shares held by the ESOP Trustee and allocated to Mr. Cadena's
account as to which Mr. Cadena has sole voting power but no investment power
except in limited circumstances.
3 Includes 1,727 shares that may be acquired within 60 days by exercising stock
options and 168 shares held by the ESOP Trustee and allocated to Mr. Hansen's
account as to which Mr. Hansen has sole voting power but no investment power
except in limited circumstances.
4 Includes 5,600 shares that may be acquired within 60 days by exercising stock
options and 400 shares held by the ESOP Trustee and allocated to Mr. Gorman's
account as to which Mr. Gorman has sole voting power but no investment power
except in limited circumstances.
5 Includes 5,600 shares that may be acquired within 60 days by exercising stock
options and 443 shares held by the ESOP Trustee and allocated to Mr.
Northrup's account as to which Mr. Northrup has sole voting power but no
investment power except in limited circumstances.
The Company's directors, certain of its officers, and any persons
holding more than ten percent of the Company's common stock are required to file
reports of their ownership of the Company's common stock with the Securities and
Exchange Commission (the "SEC"). One report for each of Mr. Berkeley and Mr.
Hansen relating to one event for each was filed after the date on which it was
due and two reports for Mr. Cadena relating to one event each were filed after
the respective dates on which they were due. In making this disclosure, the
Company has relied solely on written representations of its directors, executive
officers and its ten percent holders and copies of the reports that they have
filed with the SEC.
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<PAGE>
COMPENSATION OF EXECUTIVE OFFICERS
The following table (the "Summary Compensation Table") sets forth the
annual compensation for services to Graham in all capacities for the past three
years for Graham's Chief Executive Officer and the four most highly compensated
executive officers other than the CEO, whose total salary and bonus exceeded
$100,000 and who were serving as executive officers at December 31, 1995 ("Named
Executive Officers"). Graham did not pay to any of the Named Executive Officers
in 1993, 1994 or 1995 compensation required to be disclosed in columns (e), (f)
or (h) of the Summary Compensation Table pursuant to Item 402 of SEC Regulation
S-K. Consequently, those columns have been omitted.
<TABLE>
<CAPTION>
SUMMARY COMPENSATION TABLE
Annual Compensation
(a) (b) (c) (d) (g) (i)
Name Securities
and Underlying
Principal Options/ All Other
Position Year Salary ($)1 Bonus ($) Sars (#) Compensation($)2,3,4
-------- ---- ----------- --------- ---------- ---------------
<S> <C> <C> <C> <C> <C>
Frederick D. Berkeley 1995 284,153 -0- 4,700 94,4205
Chairman, President 1994 192,760 -0- -0- 68,245
and Chief Executive 1993 197,793 15,1846 1,800 78,656
Officer
Alvaro Cadena 1995 186,461 -0- 3,200 17,309
President & 1994 134,285 -0- -0- 14,7517
Chief Operating 1993 137,810 26,1186 1,100 19,878
Officer, Graham
Manufacturing Co., Inc.
("GMC"); Vice President
of Graham
J. Ronald Hansen 1995 141,812 -0- 2,200 12,992
Vice President-Finance & 1994 99,757 -0- -0- 9,218
Administration and Chief 1993 69,0418 17,7096 4,000 -0-
Financial Officer of Graham
Joseph P. Gorman 1995 118,345 -0- 2,200 13,936
Vice President-Sales of 1994 92,898 -0- -0- 10,514
GMC 1993 93,538 17,3536 800 14,160
Stephen P. Northrup 1995 120,528 -0- 2,200 10,756
Vice President-Engineering 1994 92,830 -0- -0- 7,260
of GMC 1993 95,264 17,6736 800 10,837
</TABLE>
1 The figures shown include amounts (if any) deferred by the named individual
pursuant to section 401(k) of the Internal Revenue Code and deferred
contingent salary. Amounts deferred under section 401(k) of the Internal
Revenue Code are deposited in the named individual's 401(k) account for
investment and payment according to the terms of Graham's Incentive Savings
Plan. Includes payment of contingent salary amounts which are deferred to the
following fiscal year and are payable only upon attainment of predetermined
performance goals. Figures for 1993 and 1994 do not include any contingent
salary amounts.
2 Includes premiums paid on insurance policies on each of the Named Executive
Officers as follows: for Mr. Berkeley in each of 1993, 1994 and 1995, $67,000;
for Mr. Cadena in each of 1993, 1994 and 1995, $10,924; for Mr. Hansen in each
of 1994
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<PAGE>
and 1995, $8,240; for Mr. Gorman in each of 1993, 1994 and 1995, $9,600; for
Mr. Northrup in each of 1993, 1994 and 1995, $6,346.
3 Includes amounts paid to the 401(k) accounts of the Named Executive Officers
pursuant to the Graham Corporation Incentive Savings Plan as follows: to Mr.
Berkeley's account for 1993 $5,756 and for 1995 $5,130; to Mr. Cadena's
account for 1993 $5,292 and for 1995 $4,763; to Mr. Hansen's account for 1995
$3,539; to Mr. Gorman's account for 1993 $3,592 and for 1995 $3,233; to Mr.
Northrup's account for 1993 $3,658 and for 1995 $3,292.
4 Includes amounts representing the value of shares allocated pursuant to
Graham's ESOP to each Named Executive Officer's account maintained under the
ESOP as follows: to Mr. Berkeley shares worth $5,900 for 1993, $1,245 for 1994
and $1,748 for 1995; to Mr. Cadena shares worth $3,662 for 1993, $1,245 for
1994 and $1,622 for 1995; to Mr. Hansen shares worth $978 in 1994 and $1,213
in 1995; to Mr. Gorman shares worth $968 in 1993, $914 in 1994 and $1,103 in
1995; and to Mr.
Northrup shares worth $833 in 1993, $914 in 1994 and $1,118 in 1995.
5 Includes $19,392 paid as a 45-year long-term service award.
6 Non-cash amounts: 1993 amounts in this column were paid to the Named Executive
Officers in Graham common stock, after deduction of the amount withheld for
tax, based on the closing price of the stock on the American Stock Exchange on
March 15, 1994.
7 Includes $2,582 paid as a 25-year long-term service award.
8 Reflects partial-year salary; Mr. Hansen began employment with Graham in May,
1993.
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<PAGE>
STOCK OPTIONS
<TABLE>
<CAPTION>
OPTION/SAR GRANTS IN LAST FISCAL YEAR
Potential Realizable Value at
Assumed Annual Rates of Stock
Individual Grants Price Appreciation for Option Term
- ----------------------------------------------------------------------------------------------------------------------------------
(a) (b) (c) (d) (e) (f) (g)
Number of % of Total
Securities Options/SARs
Underlying Granted to Exercise or
Options/SARs Employees in Base Price Expiration
Name Granted (#) Fiscal Year ($/Sh) Date 5% ($) 10%($)
- ---- ----------- ----------- ------ ---- ------ ------
<S> <C> <C> <C> <C> <C> <C>
Frederick D. 1,800 6.5% 9.875 2/23/05 11,179 28,392
Berkeley 2,900 10.5% 12.00 10/25/05 21,866 55,462
Alvaro Cadena 1,100 4.0% 9.875 2/23/05 6,831 17,312
2,100 7.6% 12.00 10/25/05 15,848 40,162
J. Ronald 800 2.9% 9.875 2/23/05 4,968 12,590
Hansen 1,4001 5.1% 12.00 10/25/05 10,565 26,775
Joseph P. 800 2.9% 9.875 2/23/05 4,968 12,590
Gorman 1,4001 5.1% 12.00 10/25/05 10,565 26,775
Stephen P. 800 2.9% 9.875 2/23/05 4,968 12,590
Northrup 1,4001 5.1% 12.00 10/25/05 10,565 26,775
</TABLE>
1 Such options were granted conditionally under the 1995 Graham Corporation
Incentive Plan to Increase Shareholder Value and are subject to stockholder
approval of such plan. Such options become exercisable on a date specified by
the Compensation Committee, but in no event later than October 25, 2005.
The following table indicates the total number of exercisable and
unexercisable stock options held by each executive officer listed below on
December 31, 1995, the last day of fiscal year 1995. No options to purchase
Graham's common stock were exercised during 1995 and no stock appreciation
rights were granted or outstanding during 1995.
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<PAGE>
<TABLE>
<CAPTION>
AGGREGATED OPTION/SAR EXERCISES IN LAST FISCAL YEAR AND FY-END OPTION/SAR VALUES
Number of Unexercised Options Value of Unexercised In-the-Money
at Year-End Options at Year End
Name Exercisable Unexercisable Exercisable Unexercisable
<S> <C> <C> <C> <C>
Frederick D. Berkeley 15,500 -0- $29,100 -0-
Alvaro Cadena 9,800 -0- $19,013 -0-
J. Ronald Hansen 3,200 3,800 $13,900 $13,950
Joseph P. Gorman 5,600 1,400 $ 8,100 $ 5,250
Stephen P. Northrup 5,600 1,400 $ 8,100 $ 5,250
</TABLE>
PENSION PLANS
<TABLE>
<CAPTION>
U.S. PENSION PLAN TABLE
Years of Service
Remuneration ($) 15 20 25 30 35
- ---------------- -- -- -- -- --
<S> <C> <C> <C> <C> <C>
75,000 18,750 24,998 31,253 37,500 37,500
100,000 25,000 33,333 41,670 50,000 50,000
125,000 31,250 41,662 52,088 62,500 62,500
150,0001 37,500 49,995 62,505 75,000 75,000
180,0001 45,000 60,000 75,000 90,000 90,000
</TABLE>
1 Under applicable law, $150,000 is the maximum amount of compensation that may
be used as the basis for determining pension benefits in calendar year 1995.
The Retirement Income Plan of Graham Corporation is a defined benefit
pension plan for the benefit of eligible domestic employees of Graham and its
United States subsidiaries ("U.S. Retirement Plan"). The portion of 1995
compensation shown in the Summary Compensation Table that is taken into account
by the U.S. Retirement Plan for the purpose of calculating future pension
benefits is as follows: for Mr. Berkeley $198,740; for Mr. Cadena $139,279; for
Mr. Hansen $103,470; for Mr. Gorman $94,534; and for Mr. Northrup $96,278.
The approximate years of creditable service as of December 31, 1995 of
each of the individuals named in the Summary Compensation Table who is eligible
to participate in the U.S. Retirement Plan are: Mr. Berkeley, 45 years; Mr.
Cadena, 26 years; Mr. Hansen, 3 years; Mr. Gorman, 26 years; and Mr. Northrup,
22 years.
The U.S. Pension Plan Table sets forth straight life annuity amounts
without regard to reduction for Social Security benefits; benefits listed in the
Table are subject to a deduction of 50% of the eligible employee's estimated
primary Social Security benefit.
-15-
<PAGE>
EMPLOYMENT CONTRACTS
The Named Executive Officers each have employment contracts with Graham
for three-year terms renewable by mutual consent for additional periods. The
contracts each have termination provisions which, in certain circumstances,
would entitle each of them to a payment equal to twelve months' salary
(non-contingent salary only) upon termination of employment. In some cases, all
or a portion of an individual's bonus is payable after termination of
employment, depending on contract terms. During 1995, Mr. Berkeley accrued
interest on deferred bonus amounts which are payable after termination of
employment. At December 31, 1995, the amount of deferred bonus payable to Mr.
Berkeley after termination of employment totaled $172,820 and the amount payable
to Mr. Gorman after termination of employment totalled $115,387.
SENIOR EXECUTIVE SEVERANCE AGREEMENTS
Graham has entered into Senior Executive Severance Agreements with
certain of its officers. Among them are Messrs. Berkeley, Cadena and Hansen.
These agreements, as amended to date, provide that in the event a third person
effects a change of control of Graham (defined generally as an acquisition of
25% or more of the outstanding voting shares, or a change in the majority of the
Board of Directors as the result of any tender offer or business combination),
termination of the individual's employment within two years of such a change of
control entitles the executive to one dollar less than three years' compensation
including bonuses, payable either in installments over a period not to exceed
three years or as a lump sum.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
The members of Graham's Compensation Committee who served during the
fiscal year ending December 31, 1995 were Richard M. Armstrong (who retired from
the Board effective May 11, 1995), and Directors Bidlack, Hill, Tarnow and Van
Rees. Director Cornelius S. Van Rees is Secretary of Graham but receives no
compensation for his service as Secretary; Mr. Van Rees participated in the
Board's deliberations regarding compensation of all compensated officers of
Graham. During fiscal year 1995, Mr. Van Rees was Of Counsel to the law firm
Thacher Proffitt & Wood, which provided legal services to Graham in 1995. Mr.
Berkeley and Mr. Hill are brothers-in-law.
-16-
<PAGE>
BOARD COMPENSATION COMMITTEE REPORT ON EXECUTIVE COMPENSATION
The duty of Graham's Compensation Committee is to establish levels of
cash compensation and forms and amounts of non-cash compensation for the
executive officers of Graham Corporation and subsidiaries. In exercising these
functions in 1995, the Committee has continued to follow the principles it
established in the first year of its operation:
o to provide a reasonable level of compensation
sufficient to attract and retain executive personnel
best suited by training, ability, and other relevant
criteria for the management requirements of the
Company;
o to balance base compensation (non-contingent) and
incentive compensation (contingent upon performance)
for the purpose of motivating executive personnel;
o to determine the extent and method of aligning the
financial interest of the Company's executive
personnel with the interest of the Company's
stockholders in the appreciation of their investment.
For the third consecutive year, the Committee in 1995 granted no
increases in noncontingent salary for Graham's Chief Executive Officer or other
executive officers. However, the Committee rescinded the temporary 5% wage
reduction that had been in effect for the CEO and other executive officers at
the same time the 5% wage reduction was rescinded for all other Graham U.S.
employees. In leaving non-contingent compensation for this group unchanged, the
factor weighted most heavily by the Committee was the desirability of holding
down operating costs in 1995.
Traditionally, Graham's non-contingent salaries for the CEO and
executive officers have been set somewhat below the mid-range of competitive
levels. After three years without noncontingent salary increases, such
compensation for the CEO and executive officers is now below the median
compensation levels for similarly situated executive officers in the industry
and region.
In reaching its decisions regarding executive compensation in 1995, the
Committee reviewed a report prepared by an independent consulting firm reviewing
and comparing compensation levels of senior management personnel in
manufacturing industries in western New York. In addition, the Committee
considered information as to compensation levels for officers and senior
managers of comparable scope and responsibility in an industry group of
comparably sized companies selected by Graham management. This industry group
included several of the companies in the peer group referred to in the
Performance Graph on page 16 of this proxy statement ("Performance Graph Peer
Group"). However, the Committee accorded no greater weight to compensation data
for Performance Graph Peer Group companies than to data for any other companies
in the industry group.
The Committee took into account the need for the Company to offer
compensation within a competitive range, the need to attract management level
recruits to the Batavia, New York area and to retain them, as well as
management's commitment to the long-term success of the Company. However, these
factors, which together with the information provided by the independent
consultant were accorded approximately comparable weight in evaluating executive
officer compensation, were considered by the Committee, for the third
consecutive year, to be outweighed by the immediate need to continue to hold
down operating costs.
-17-
<PAGE>
In the interest of linking corporate performance to officer
compensation while maintaining competitive overall nominal salary rates, a
portion of the annual salary for each Named Executive Officer is contingent. The
contingent portion is payable, on a deferred basis, only following the end of
each fiscal year, and payment is subject to attainment of performance-based
goals for the year by Graham Corporation and by each Named Executive Officer
individually. Under this arrangement, a target performance-based amount for each
eligible officer, representing a percentage of non-contingent salary, is
recommended to the Committee annually by the CEO; a target performance-based
amount for the CEO is determined by the Committee. The actual amount of
performance based pay earned, if any, depends upon the degree of attainment of
goals established by the Committee for each year in the following areas:
corporate earnings per share, subsidiary return on capital employed and an
individual performance goal for each officer. These determinations were based on
the Committee's review of pertinent data with reference to literature in the
field and to industry practices for comparably sized companies and expectations
of attainable results under existing market conditions.
The Committee encourages equity ownership of Graham by the Company's
officers. Toward that end, and for the purpose of increasing the incentives for
the Company's officers to increase shareholder value, the Committee granted
additional stock options to the executive officers of the Company in 1995. No
stock appreciation rights, or equity compensation other than these stock
options, were granted in 1995.
This report is furnished by the members of Graham's Compensation
Committee:
Jerald D. Bidlack, Chairman
Philip S. Hill
Robert L. Tarnow
Cornelius S. Van Rees
-18-
<PAGE>
PROPOSAL TWO
APPROVAL OF 1995 INCENTIVE PLAN TO INCREASE SHAREHOLDER VALUE
The Board of Directors of Graham has adopted the 1995 Graham
Corporation Incentive Plan to Increase Shareholder Value ("Incentive Plan")
subject to approval by the stockholders of Graham. The Incentive Plan will not
take effect, and no options granted under the Incentive Plan will be effective,
unless such approval is obtained. The principal provisions of the Incentive Plan
are summarized below. The full text of the Incentive Plan is set forth as
Appendix A to this Proxy Statement, to which reference is made, and the summary
provided below is qualified in its entirety by such reference.
The affirmative vote of a majority of the votes eligible to be cast by
the holders of shares of Graham common stock present, in person or by proxy, and
entitled to vote at the Annual Meeting is required to approve the Incentive
Plan.
PURPOSE OF THE PLAN
The purpose of the Incentive Plan is to increase shareholder value by
promoting the growth and profitability of Graham and its subsidiaries, to
attract and retain directors, officers and key management employees of
outstanding competence, to provide such directors, officers and key management
employees with an equity interest in Graham, and to provide certain directors
and key management employees of Graham and its subsidiaries, upon whose efforts
Graham is largely dependent for the successful conduct of its business, with an
incentive to achieve corporate objectives.
DESCRIPTION OF THE PLAN
As provided by the terms of the Incentive Plan, 100,000 shares of
authorized but unissued Graham common stock (equal to approximately 9.48% of the
total number of outstanding shares of Graham common stock) have been reserved
for issuance under the Incentive Plan to Eligible Individuals (as hereinafter
defined), and an additional 28,000 of such shares (equal to approximately 2.66%
of the total number of issued and outstanding shares) have been reserved for
issuance to Eligible Outside Directors (as hereinafter defined). The fair market
value of the total number of shares reserved under the plan is $1,856,000, based
on the closing price of the Company's common stock on March 25, 1996, which was
$14.50 per share. Persons eligible to participate include the officers and
employees of Graham and its wholly-owned subsidiaries and directors of such
subsidiaries who are not members of the Board of Directors of Graham (the
"Eligible Individuals"). Members of the Board of Directors of Graham and its
subsidiaries who are not Eligible Individuals (the "Eligible Outside Directors")
are also granted options as described below. The Incentive Plan will be
administered by the Compensation Committee of the Board of Directors (the
"Committee"). The Committee may, in its discretion, select from among the
individuals eligible to participate the persons to whom options will be granted.
It is anticipated that options will be granted primarily to officers and key
management employees who are in positions having a direct influence on the
establishment and achievement of corporate policies and objectives. The
Committee has identified 13 individuals whom it considers to be Eligible
Individuals, and there are currently 4 Eligible Outside Directors.
-19-
<PAGE>
In the case of Eligible Individuals, Incentive Stock Options ("ISOs")
may be granted at an exercise price per share determined by the Committee, which
shall not be less than the fair market value of a share of Graham common stock
on the date the option is granted and NonQualified Stock Options ("NQSOs") may
be granted at an exercise per share price determined by the Committee. However,
if an ISO is granted to a person who owns more than 10% of the total combined
voting power of all outstanding stock of all classes issued by Graham, or any
parent or subsidiary thereof ("10% Owner"), the exercise price shall not be less
than 110% of the fair market value at the date of the grant. Options
conditionally granted as of October 26, 1995 have an exercise price per share of
$12.00, which is equal to the final quoted sales price of a share of Graham
common stock on the consolidated reporting system of the American Stock Exchange
on October 26, 1995. An ISO may be exercised at any time during the option
period specified by the Committee. In the event of a Tender Offer or a Change in
Control, each as defined in the Incentive Plan, any options granted under the
Incentive Plan will become automatically exercisable on the date on which such
Tender Offer or Change in Control is deemed to have occurred. The expiration
date of an ISO may not be later than the earliest of: (1) a date specified by
the Committee; (2) the tenth anniversary of the date the option is granted; (3)
the last day of the one-year period following the option holder's death or
termination of employment with Graham or a subsidiary of Graham on account of
disability; (4) the last day of the three-month period following the option
holder's termination of employment for other reasons; or (5) in the case of an
ISO granted to a 10% Owner, the last day of the five-year period commencing on
the date the Option was granted. Without the approval of the Committee, no
option holder may dispose of shares acquired pursuant to the exercise of an ISO
until after the later of the second anniversary of the date of the grant of his
ISO or the first anniversary of the date on which the shares subject to the
option were acquired. A NQSO may be exercised at any time during the option
period specified by the Committee. The expiration date may not be later than the
tenth anniversary of the date the NQSO is granted. In the event of a tender
offer for, or a change of control of, Graham, all outstanding options become
exercisable as of the commencement of such tender offer or the effective date of
such change of control.
The Incentive Plan does not provide for Stock Appreciation Rights.
In the case of Eligible Outside Directors, the terms of the Incentive
Plan provide for four consecutive annual grants of NQSOs to purchase 1,500
shares of Graham common stock to each director. Thus, following the final annual
grant, each director will have been granted, in aggregate, options to purchase
6,000 shares under the Incentive Plan. In the case of individuals who were
Eligible Outside Directors on October 26, 1995, the first such options were
conditionally granted as of October 26, 1995 at an exercise price of $12.00 per
share, which was the final quoted sales price for a share of Graham common stock
on the consolidated reporting system of the American Stock Exchange on October
26, 1995; the second, third and fourth grants will be made, by operation of the
Incentive Plan, on the next three successive anniversaries of that date, at the
final quoted sales price for a share of Graham common stock on the consolidated
reporting system of the American Stock Exchange on each such date. With respect
to an individual elected as an Eligible Outside Director in the future, the
first of the four annual options will be granted on the first day of the month
after election to serve as an Eligible Outside Director, and the subsequent
three grants will be made on the three successive anniversaries of that date, at
an exercise price equal to the fair market value of a share of Graham common
stock on the date of each grant. Such options may be exercised at any time
during the option period that begins on the date each option is granted and
expires on the earliest of: (1) 10 years from the date of grant of each option;
(2) the last day of the three-year period commencing on the date the director
ceases to be a director in the case of death, disability or
-20-
<PAGE>
retirement from the Board after age 65; or (3) the last day of the one-year
period commencing on the date the director ceases to be a director for other
reasons.
The Board of Directors may amend or terminate the Incentive Plan at any
time; provided, however, that any amendment that would materially (1) increase
the number of shares that may be issued under the Incentive Plan; (2) increase
the benefits accruing under the Incentive Plan; or (3) modify the requirements
as to eligibility for options under the Incentive Plan will be subject to
approval by the stockholders of Graham. No options may be granted under the
Incentive Plan later than October 25, 2005.
The information set forth under the heading "Stock Options" in this
Proxy Statement includes information regarding options that have been granted
conditionally, as of October 26, 1995, subject to the approval of the
stockholders of Graham.
FEDERAL INCOME TAX CONSEQUENCES
There are no federal income tax consequences for Graham or the option
holder at the time an ISO is granted or upon the exercise of an ISO. If there is
no sale or other disposition of the shares acquired upon the exercise of an ISO
within two years after the date the ISO was granted, or within one year after
the exercise of the ISO, then at no time will any amount be deductible by Graham
with respect to the ISO. If the option holder exercises an ISO and sells or
otherwise disposes of the shares so acquired after satisfying the foregoing
holding period requirements, then he will realize a long-term capital gain or
loss on the sale or disposition. If the option holder exercises his ISO and
sells or disposes of his shares prior to satisfying the foregoing holding period
requirements, then an amount equal to the difference between the amount realized
upon the sale or other disposition of such shares and the price paid for such
shares upon the exercise of the ISO will be includible in the ordinary income of
such person, and such amount will ordinarily be deductible by Graham at the time
it is includible in such person's income.
With respect to the grant of NQSOs, there are no federal income tax
consequences for Graham or the option holder at the time of the grant. Upon the
exercise of a NQSO, an amount equal to the difference between the fair market
value of the shares to be purchased on the date of exercise and the aggregate
purchase price of such shares is generally includible in the ordinary income of
the person exercising such NQSO, although such inclusion may be at a later date
in the case of an option holder whose disposition of such shares could result in
liability under Section 16(b) of the Securities Exchange Act of 1934, as amended
("Section 16(b)"). Graham will ordinarily be entitled to a deduction for federal
income tax purposes at the time the option holder is taxed on the exercise of
the NQSO equal to the amount which the option holder is required to include as
ordinary income.
The foregoing statements are intended to summarize the general
principles of current federal income tax law applicable to ISOs and NQSOs that
may be granted under the Incentive Plan. However, state and local taxes may also
be significant. In addition, any change in applicable law, regulations or
policies may have a material effect on the above discussion. Individual tax
treatment depends on the particular circumstances of those individuals granted
options under the Incentive Plan and such individuals are advised to consult
with tax advisors for specific tax advice.
-21-
<PAGE>
The following table provides certain information with respect to the
stock options which have been granted under the Incentive Plan, subject to
stockholder approval. The table specifies the number of options granted to the
Named Executive Officers, the nominees for election as a director and any
individual who received five percent of the options granted since the Incentive
Plan was adopted by the Board of Directors. The options granted under the
Incentive Plan were conditionally granted on October 26, 1995 and will expire no
later than October 25, 2005.
<TABLE>
<CAPTION>
NEW PLAN BENEFITS
1995 Incentive Plan to Increase Shareholder Value
Name/Position Dollar Value ($)1 Number of Options2
<S> <C> <C>
Robert L. Tarnow - 1,500
Director
Cornelius S. Van Rees - 1,500
Director
J. Ronald Hansen - 1,400
Vice President-Finance &
Administration; Chief Financial
Officer
Joseph P. Gorman - 1,400
Vice President-Sales of Graham
Manufacturing Co., Inc. ("GMC")
Stephen P. Northrup - 1,400
Vice President-Engineering of GMC
All Executive Officers as a Group (5 - 7,000
persons)
All Non-Executive Officers as a - 4,500
Group (4 persons)
All Outside Directors as a Group (4 - 6,000
persons)
Individuals who received 5% of the - 16,800
options granted under the Incentive
Plan (12 persons)
</TABLE>
1 The options granted on October 26, 1995 bear an exercise price equal to the
fair market value of the Company's Common Stock on the date of grant. As such,
the options had no ascertainable value when granted.
-22-
<PAGE>
2 The options granted on October 26, 1995 were granted subject to shareholder
approval of the Incentive Plan. Such options were granted with an exercise
price of $12.00 per share, the closing market price of the Company's common
stock as of October 26, 1995. Such options will become exercisable on a date
determined by the Compensation Committee, but in no event later than October
25, 2005. The options which may be granted in 1996 and future years are
subject to satisfaction of certain service conditions (in the case of Outside
Directors) and the exercise of administrative discretion (in the case of
officers) and thus are not determinable at this time.
THE BOARD BELIEVES THAT APPROVAL OF THE INCENTIVE PLAN IS IN THE BEST
INTERESTS OF GRAHAM AND ITS STOCKHOLDERS AND RECOMMENDS THAT STOCKHOLDERS VOTE
FOR APPROVAL OF THE INCENTIVE PLAN. PROXIES SOLICITED WILL BE SO VOTED UNLESS
STOCKHOLDERS SPECIFY A CONTRARY CHOICE OR ABSTAIN.
-23-
<PAGE>
COMPARATIVE PERFORMANCE BY THE COMPANY
This section provides a comparison of the cumulative total stockholder
return on the Company's Common Stock with the cumulative total stockholder
return of (i) a broad equity market index and (ii) a published industry index or
peer group over five years. The following chart compares the Common Stock of
Graham with (i) the American Stock Exchange Market Value Index (the "AMEX
Index") and (ii) a group of public companies, each of which shares a
Standardized Industrial Classification code ("SIC Code") with Graham and each of
which either competes with Graham as to one or more product lines or one or more
market segments ("Selected Peer Group Manufacturers"). The chart assumes an
investment of $100 on December 31, 1990 in each of the Common Stock, the stocks
comprising the AMEX Index and the stocks of the Selected Peer Group
Manufacturers.
COMPARISON OF FIVE YEAR CUMULATIVE TOTAL RETURN AMONG GRAHAM CORPORATION
COMMON STOCK, AMEX MARKET VALUE INDEX AND SELECTED PEER GROUP
MANUFACTURERS1,2,3
[GRAPH]
1 The total return for each of the Company's Common Stock, the Index and the
Selected Peer Group Manufacturers assumes the reinvestment of dividends.
2 The AMEX Index tracks the aggregate price performance of equity securities of
companies traded on the American Stock Exchange. The Company's Common Stock is
traded on the AMEX.
3 The Selected Peer Group Manufacturers consists of the following manufacturing
companies: American Precision Industries, Duriron Co., Inc., Paul Mueller Co.,
and Selas Corp. of America.
-24-
<PAGE>
RATIFICATION OF APPOINTMENT
OF INDEPENDENT AUDITORS
The Board of Directors has appointed, subject to ratification by the
stockholders, Deloitte & Touche LLP as auditors of Graham for the fiscal year
ending December 31, 1996. The appointment was made upon the recommendation and
approval of the Audit Committee. The Board of Directors recommends that the
stockholders vote "FOR" such ratification.
A representative of Deloitte & Touche LLP is expected to attend the
meeting and be available to answer appropriate questions and will have an
opportunity to make a statement if he so desires.
OTHER MATTERS
Management does not intend to bring any business before the Meeting
other than those matters set forth in the preceding Notice of Annual Meeting of
Stockholders. Management knows of no other matters to be brought before the
Meeting. However, if any other matters should properly come before the Annual
Meeting, or at any adjournment thereof, it is the intention of the persons named
in the accompanying form of Proxy, as the Proxies for the shares represented
thereby, to vote on such matters as they, in their discretion, may determine.
STOCKHOLDER PROPOSALS
Any stockholder wishing to have a proposal considered for inclusion in
Graham's Proxy Statement and form of Proxy relating to the 1997 Annual Meeting
of Stockholders must, in addition to satisfying other applicable requirements,
set forth such proposal in writing and file it with the Secretary of Graham on
or before December 7, 1996.
ANNUAL REPORT
A copy of the Annual Report of Graham containing financial statements
for the year ended December 31, 1995, prepared in conformity with generally
accepted accounting principles, accompanies this Proxy Statement.
A copy of Graham's Annual Report on form 10-K is available upon request
to the company.
The executive offices of Graham are located at 20 Florence Avenue,
Batavia, New York 14020.
By Order of the Board of Directors
Cornelius S. Van Rees
Secretary
-25-
<PAGE>
APPENDIX A
1995 GRAHAM CORPORATION INCENTIVE PLAN TO
INCREASE SHAREHOLDER VALUE
<PAGE>
<TABLE>
<CAPTION>
TABLE OF CONTENTS
PAGE
ARTICLE I
PURPOSE
<S> <C> <C>
Section 1.1 General Purpose of the Plan.....................................................................1
<CAPTION>
ARTICLE II
DEFINITIONS
<S> <C> <C>
Section 2.1 Amendment.......................................................................................1
Section 2.2 Board...........................................................................................1
Section 2.3 Change in Control of Graham Corporation.........................................................1
Section 2.4 Code............................................................................................1
Section 2.5 Committee.......................................................................................1
Section 2.6 Corporation.....................................................................................1
Section 2.7 Disability......................................................................................2
Section 2.8 Disinterested Board Member......................................................................2
Section 2.9 Effective Date..................................................................................2
Section 2.10 Eligible Individual.............................................................................2
Section 2.11 Eligible Outside Director.......................................................................2
Section 2.12 Exercise Price..................................................................................2
Section 2.13 Fair Market Value...............................................................................2
Section 2.14 Graham Corporation..............................................................................2
Section 2.15 Incentive Stock Option..........................................................................2
Section 2.16 Non-Qualified Stock Option......................................................................2
Section 2.17 Option..........................................................................................2
Section 2.18 Option Period...................................................................................2
Section 2.19 Person..........................................................................................2
Section 2.20 Plan............................................................................................2
Section 2.21 Share...........................................................................................2
Section 2.22 Tender Offer....................................................................................2
<CAPTION>
ARTICLE III
ADMINISTRATION
<S> <C> <C>
Section 3.1 Committee.......................................................................................3
Section 3.2 Committee Action................................................................................3
Section 3.3 Committee Responsibilities......................................................................3
</TABLE>
ARTICLE IV
STOCK OPTIONS
<PAGE>
<TABLE>
<S> <C> <C>
Section 4.1 In General......................................................................................3
Section 4.2 Available Shares - Eligible Individuals.........................................................4
Section 4.3 Available Shares - Eligible Outside Directors...................................................4
Section 4.4 Size of Option..................................................................................4
Section 4.5 Exercise Price..................................................................................4
Section 4.6 Option Period...................................................................................4
Section 4.7 Options Granted to Eligible Outside Directors...................................................5
Section 4.8 Method of Exercise..............................................................................5
Section 4.9 Limitations on Options..........................................................................6
Section 4.10 Additional Restrictions on Incentive Stock Options..............................................6
<CAPTION>
ARTICLE V
NO APPRECIATION RIGHTS TO BE GRANTED
<S> <C> <C>
Section 5.1 In General......................................................................................7
<CAPTION>
ARTICLE VI
AMENDMENT AND TERMINATION
<S> <C> <C>
Section 6.1 Termination.....................................................................................7
Section 6.2 Amendment.......................................................................................7
Section 6.3 Adjustments in the Event of a Business Reorganization...........................................7
<CAPTION>
ARTICLE VII
MISCELLANEOUS
<S> <C> <C>
Section 7.1 Status as an Employee Benefit Plan..............................................................7
Section 7.2 No Right to a Continuation of Service...........................................................8
Section 7.3 Construction of Language........................................................................8
Section 7.4 Governing Law...................................................................................8
Section 7.5 Headings........................................................................................8
Section 7.6 Non-Alienation of Benefits......................................................................8
Section 7.7 Taxes...........................................................................................8
Section 7.8 Approval of Stockholders........................................................................8
Section 7.9 Notices.........................................................................................8
</TABLE>
<PAGE>
1995 GRAHAM CORPORATION INCENTIVE PLAN TO
INCREASE SHAREHOLDER VALUE
ARTICLE I
PURPOSE
Section 1.1 GENERAL PURPOSE OF THE PLAN.
The purpose of the Plan is to increase shareholder value by promoting
the growth and profitability of the Corporation; to provide certain directors
and key executives of the Corporation with an incentive to achieve corporate
objectives; to attract and retain directors and key executives of outstanding
competence; and to provide such directors and executives with an equity interest
in the Corporation.
ARTICLE II
DEFINITIONS
The following definitions shall apply for the purposes of this Plan,
unless a different meaning is plainly indicated by the context:
Section 2.1 AMENDMENT means amendment of this Plan pursuant to section
6.
Section 2.2 BOARD means the board of directors of Graham Corporation.
Section 2.3 CHANGE IN CONTROL OF GRAHAM CORPORATION means any of the
following events:
(a) the reorganization, merger or consolidation of Graham
Corporation with one or more other Persons, other than a transaction
following which at least 51% of the ownership interests of the
institution resulting from such transaction are owned by Persons who,
immediately prior to such transaction, owned at least 51% of the
outstanding voting shares of Graham Corporation;
(b) the acquisition of substantially all of the assets of
Graham Corporation or more than 25% of the voting shares of Graham
Corporation by any Person or by any Persons acting in concert; or
(c) the occurrence of any event if, immediately following such
event, at least 50% of the members of the Board do not belong to any of
the following groups:
(i) individuals who were members of the Board on the
Effective Date: or
(ii) individuals who first became members of the
Board after the Effective Date either:
(A) upon election to serve as a member of
the Board by affirmative vote of a majority of the members of
the Board, or a nominating committee thereof, in office at the
time of such first election; or
(B) upon election by the stockholders of
Graham Corporation to serve as a member of the Board, but only
if nominated for election by affirmative vote of a majority of
the members of the Board, or a nominating committee thereof,
in office at the time of such first nomination;
provided, however, that no benefit conferred under the Plan, or under the terms
of any Option granted under the Plan, solely as a result of the occurrence of a
Change in Control of Graham Corporation shall be conferred upon any Person, or
any member of the group of Persons, who makes an acquisition described in
section 2.3(b) and for purposes of this proviso, the term Change in Control of
Graham Corporation as applied to such a Person shall not include any acquisition
made by such Person or by any group of Persons of which he is a member.
Section 2.4 CODE means the Internal Revenue Code of 1986 (including the
corresponding provisions of any succeeding law).
Section 2.5 COMMITTEE means the Compensation Committee as described in,
and subject to the qualifications of, section 3.1.
Section 2.6 CORPORATION means Graham Corporation and any successor
thereto, and, with the prior approval of the Board and subject to such terms and
conditions as may be imposed by the Board, any other corporation or other
business organization.
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Section 2.7 DISABILITY means a condition of total incapacity, mental or
physical, for further performance of duty with the Corporation which the
Committee shall have determined, on the basis of competent medical evidence, is
likely to be permanent.
Section 2.8 DISINTERESTED BOARD MEMBER means a member of the Board who
is not currently and has not at any time during the immediately preceding
one-year period been an Eligible Individual.
Section 2.9 EFFECTIVE DATE means October 26, 1995.
Section 2.10 ELIGIBLE INDIVIDUAL means any individual whom the
Committee may determine to be a key employee or director of the Corporation and
selected to receive a grant of an Option pursuant to the Plan; provided,
however, that no Eligible Outside Director shall be identified as an Eligible
Individual.
Section 2.11 ELIGIBLE OUTSIDE DIRECTOR means a member of the board of
directors of the Corporation who is not an employee of the Corporation.
Section 2.12 EXERCISE PRICE means the price per Share at which Shares
subject to an Option may be purchased upon exercise of the Option, determined in
accordance with section 4.5 (in the case of Options granted to Eligible
Individuals) or section 4.7 (in the case of Options granted to Eligible Outside
Directors).
Section 2.13 FAIR MARKET VALUE means with respect to a Share on a
specified date:
(a) the final quoted sales price on the date in question (or,
if there is no reported sale on such date, on the last preceding date
on which any reported sale occurred) as reported in the principal
consolidated reporting system with respect to securities listed or
admitted to trading on the principal United States securities exchange
on which the Shares are listed or admitted to trading; or
(b) if the Shares are not listed or admitted to trading on any
such exchange, the closing bid quotation with respect to a Share on
such date on the National Association of Securities Dealers Automated
Quotations System, or, if no such quotation is provided, on another
similar system, selected by the Committee, then in use; or
(c) if sections 2.13(a) and (b) are not applicable, the fair
market value of a Share as the committee may determine.
Section 2.14 GRAHAM CORPORATION means Graham Corporation, a corporation
organized and existing under the laws of the State of Delaware, and any
successor thereto.
Section 2.15 INCENTIVE STOCK OPTION means a right to purchase Shares
that is granted pursuant to section 4.1, that is designated by the Committee to
be an Incentive Stock Option and that is intended to satisfy the requirements of
section 422 of the Code.
Section 2.16 NON-QUALIFIED STOCK OPTION means a right to purchase
Shares (a) that is granted pursuant to section 4.1, that is designated by the
Committee to be a Non-Qualified Stock Option and that is not intended to satisfy
the requirements of section 422 of the Code, or (b) that is granted pursuant to
section 4.7.
Section 2.17 OPTION means either an Incentive Stock Option or a
Non-Qualified Stock Option.
Section 2.18 OPTION PERIOD means the period during which an Option may
be exercised, determined in accordance with section 4.6 (in the case of Options
granted to Eligible Individuals) or section 4.7 (in the case of Options granted
to Eligible Outside Directors).
Section 2.19 PERSON means an individual, a corporation, a partnership,
an association, a joint-stock company, a trust, an estate, an unincorporated
organization and any other business organization.
Section 2.20 PLAN means the 1995 Graham Corporation Incentive Plan to
Increase Shareholder Value, as amended from time to time. The Plan may be
referred to as the "1995 Graham Corporation Incentive Plan to Increase
Shareholder Value."
Section 2.21 SHARE means a share of common stock of Graham Corporation.
Section 2.22 TENDER OFFER shall have the meaning given to such term
under section 14 of the Securities Exchange Act of 1934, as amended; provided,
however, that an offer to purchase Shares made directly to the holder of such
Shares by any Person, or by any Persons acting in concert, shall not constitute
a Tender Offer within the meaning of this section 2.22 unless such offer, if
successful, would result in a Change in Control of Graham Corporation; and
provided, further, that no benefit conferred under the Plan, or under the terms
of any Option granted under the Plan, solely as a result of the commencement of
a Tender Offer to purchase Shares shall be conferred upon any Person, or any
member of the group of Persons, who makes a Tender Offer to purchase Shares and
for purposes of the proviso, the term Tender Offer as applied to such a Person
shall not include any offer to purchase Shares made by such Person or by any
group of Persons of which he is a member.
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ARTICLE III
ADMINISTRATION
Section 3.1 COMMITTEE.
The Plan shall be administered by the Compensation Committee of the
Board (or any successor committee of the Board), provided that all of the
members of the Compensation Committee are Disinterested Board Members. No
members of the Compensation Committee other than Disinterested Board Members
shall participate in the administration of this Plan.
Section 3.2 COMMITTEE ACTION.
The Committee shall hold meetings, at least annually, and may make such
administrative rules and regulations as it may deem proper. A majority of the
members of the Committee shall constitute a quorum, and the action of a majority
of the members of the Committee present at a meeting at which a quorum is
present, as well as actions taken pursuant to the unanimous written consent of
all of the members of the Committee without holding a meeting, shall be deemed
to be actions of the Committee. All actions of the Committee shall be final and
conclusive and shall be binding upon the Corporation and all other interested
parties. Any Person dealing with the Committee shall be fully protected in
relying upon any written notice, instruction, direction or other communication
signed by the secretary of the Committee and one member of the Committee, by two
members of the Committee or by a representative of the Committee authorized to
sign the same in its behalf.
Section 3.3 COMMITTEE RESPONSIBILITIES.
Subject to the terms and conditions of the Plan and such limitations as
may be imposed from time to time by the Board, the Committee shall be
responsible for the overall management and administration of the Plan and shall
have such authority as shall be necessary or appropriate in order to carry out
its responsibilities, including, without limitation, the authority:
(a) to interpret and construe the Plan, and to determine all
questions that may arise under the Plan as to eligibility for
participation in the Plan, the number of Shares subject to the Options
to be granted, and the terms and conditions thereof;
(b) to adopt rules and regulations and to prescribe forms for
the operation and administration of the Plan; and
(c) to take any other action not inconsistent with the
provisions of the Plan that it may deem necessary or appropriate.
ARTICLE IV
STOCK OPTIONS
Section 4.1 IN GENERAL.
Subject to the limitations of the Plan, the Committee may, in its
discretion, grant to an Eligible Individual an Option to purchase Shares. Each
Eligible Outside Director shall be granted an Option to purchase Shares in
Accordance with section 4.7. Any such Option shall be evidenced by a written
document which shall:
(a) designate the Option as either an Incentive Stock Option
or a Non-Qualified Stock Option;
(b) specify the number of Shares subject to the Option;
(c) specify the Exercise Price, determined in accordance with
section 4.5 (in the case of Options granted to Eligible Individuals or
section 4.7 (in the case of Options granted to Eligible Outside
Directors), for the Shares subject to the Option;
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(d) specify the Option Period determined in accordance with
section 4.6 (in the case of Options granted to Eligible Individuals) or
section 4.7 (in the case of Options granted to Outside Directors);
(e) set forth specifically or incorporate by reference the
applicable provisions of the Plan; and
(f) contain such other terms and conditions not inconsistent
with the Plan as the Committee may, in its discretion, prescribe with
respect to an Option granted to an Eligible Individual.
Section 4.2 AVAILABLE SHARES - ELIGIBLE INDIVIDUALS
Subject to section 6.3, the maximum aggregate number of Shares with
respect to which Options may be granted to Eligible Individuals at any time
shall be equal to the excess of:
(a) 100,000 Shares; over
(b) the sum of:
(i) the number of Shares with respect to which
Options previously granted to Eligible Individuals under this
Plan may then or may in the future be exercised; plus
(ii) the number of Shares with respect to which
Options previously granted to Eligible Individuals under this
Plan have been exercised.
For purposes of this section 4.2, an Option shall not be considered as having
been exercised to the extent that such Option terminates by reason other than
the purchase of the related Shares. The Shares reserved under this section 4.2
shall be in addition to, and not inclusive of, the Shares reserved under section
4.3.
Section 4.3 AVAILABLE SHARES - ELIGIBLE OUTSIDE DIRECTORS.
Subject to section 6.3, the maximum aggregate number of Shares with
respect to which Options may be granted to Eligible Outside Directors at any
time shall be equal to the excess of:
(a) 28,000 Shares; over
(b) the sum of:
(i) the number of Shares with respect to which
Options previously granted to Eligible Outside Directors under
this Plan may then or may in the future be exercised; plus
(ii) the number of Shares with respect to which
Options previously granted to Eligible Outside Directors under
this Plan have been exercised.
For purposes of this section 4.3, an Option shall not be considered as having
been exercised to the extent that such Option terminates by reason other than
the purchase of the related Shares. The Shares reserved under this section 4.3
shall be in addition to, and not inclusive of, the Shares reserved under section
4.2.
Section 4.4 SIZE OF OPTION.
Subject to section 4.2 and such limitations as the Board may from time
to time impose, the number of Shares as to which an Eligible Individual may be
granted Options shall be determined by the Committee, in its discretion. The
number of Shares as to which an Eligible Outside Director will be granted
Options shall be determined in accordance with section 4.7.
Section 4.5 EXERCISE PRICE.
The price per Share at which an Option granted to an Eligible
Individual may be exercised shall be determined by the Committee, in its
discretion; provided, however, that in the case of an Incentive Stock Option,
the Exercise Price per Share shall in no event be less than:
(a) if, at the time an Incentive Stock Option is granted, the
Person to whom it is granted owns more than 10% of the total combined
voting power of all outstanding stock of all classes issued by Graham
Corporation or any parent or subsidiary thereof, 110% of the Fair
Market Value of a Share on the date the Option is granted, and
(b) in all other cases, 100% of the Fair Market Value of a
Share on the date the Option is granted. The price per share at which
an Option granted to an Eligible Outside Director may be exercised
shall be determined in accordance with section 4.7.
Section 4.6 OPTION PERIOD.
The Option Period during which an Option granted to an Eligible
Individual may be exercised shall commence on the date specified by the
Committee in the document evidencing the Option and shall expire on the earliest
of:
(a) the date specified by the Committee in the document
evidencing the Option;
(b) in the case of an Incentive Stock Option, the last day of
the three-month period commencing on the date of the Option holder's
termination of employment with the Corporation other than on account of
death or Disability;
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(c) in the case of an Incentive Stock Option, the last day of
the one-year period commencing on the date of the Option holder's death
or Disability;
(d) in the case of an Incentive Stock Option granted to a
Person who, on the date the Option was granted, owned more than 10% of
the total combined voting power of all outstanding stock of all classes
issued by Graham Corporation or any parent or subsidiary thereof, the
last day of the five-year period commencing on the date the Option was
granted; and
(e) the last day of the ten-year period commencing on the date
on which the Option was granted; provided, however, that in the event of a
tender Offer or a Change in Control of Graham Corporation while there is
outstanding any Option granted to an Eligible Individual with respect to which
an Option Period has not commenced, such Option Period shall automatically
commence on the earliest date on which the Tender Offer or Change in Control of
Graham Corporation is deemed to have occurred. The Option Period during which an
Option granted to an Eligible Outside Director may be exercised shall be
determined in accordance with section 4.7.
Section 4.7 OPTIONS GRANTED TO ELIGIBLE OUTSIDE DIRECTORS.
(a) As of the Effective Date and on each of the first, second
and third anniversaries of the Effective Date, each person who is then an
Eligible Outside Director of Graham Corporation shall be granted a NonQualified
Stock Option to purchase 1,500 Shares. As of the Effective Date, each person who
is then an Eligible Outside Director of a Corporation other than Graham
Corporation shall be granted a Non-Qualified Stock Option to purchase 1,000
Shares. An individual who becomes an Eligible Outside Director of Graham
Corporation subsequent to the Effective Date shall be granted, as of the first
day of the month following the month in which such individual becomes an
Eligible Outside Director and on each of the first, second and third
anniversaries of such date, a Non-Qualified Stock Option to purchase a number of
Shares equal to the excess, if any, of (i) 1,500 over (ii) the sum of (A) the
number of Shares with respect to which such individual had previously been
granted options to purchase Shares as an officer or employee of the Corporation,
plus (B) the number of Shares with respect to which such individual had
previously been granted options to purchase Shares as an Eligible Outside
Director. An individual who becomes an Eligible Outside Director of a
Corporation other than Graham Corporation subsequent to the Effective Date shall
be granted, as of the first day of the month following the month in which such
individual becomes an Eligible Outside Director, a Non-Qualified Stock Option to
purchase a number of Shares equal to the excess, if any, of (i) 1,000 over (ii)
the sum of (A) the number of Shares with respect to which such individual had
previously been granted options to purchase Shares as an officer or employee of
the Corporation, plus (B) the number of Shares with respect to which such
individual had previously been granted options to purchase Shares as an Eligible
Outside Director. No Option shall be granted under this section 4.7 at a time
when the number of Shares available under section 4.3 is less than the number of
Shares to be subject to the Option.
(b) The price per Share at which an Option granted to an
Eligible Outside Director under this section 4.7 may be exercised shall
be the Fair Market Value of a Share on the date on which the Option is
granted.
(c) The Option Period during which an Option granted to an
Eligible Outside Director under this section 4.7 may be exercised shall
commence on the date the Option was granted and shall expire on the
earliest of:
(i) the last day of the one-year period commencing on
the date the Eligible Outside Director ceases to be a member
of the Board for reasons other than on account of death,
Disability or retirement as a member of the Board after age
65;
(ii) the last day of the three-year period commencing
on the date the Eligible Outside Director ceases to be a
member of the Board on account of death, Disability or
retirement as a member of the Board after age 65; or
(iii) the last day of the ten-year period commencing
on the date on which the Option was granted.
Section 4.8 METHOD OF EXERCISE.
(a) Subject to the limitations of the Plan and the document
evidencing an Option, an Option holder may, at any time during the
Option Period, exercise his right to purchase all or any part of the
Shares to which the Option relates; provided, however, that the minimum
number of Shares which may be purchased shall be 100, or, if less, the
total number of Shares relating to the Options which remain
unpurchased. An Option holder shall exercise an Option to purchase
Shares by:
(i) giving written notice to the Committee, in such
form and manner as the Committee may prescribe, of his intent
to exercise the Option;
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(ii) delivering to the Committee full payment for the
Shares as to which the Option is to be exercised; and
(iii) satisfying such other conditions as may be
prescribed in the document evidencing the Option. Payment
shall be made in (A) United States dollars in cash or by
certified check, money order or bank draft drawn payable to
the order of Graham Corporation, (B) Shares duly endorsed for
transfer and with all necessary stock transfer tax stamps
attached, already owned by the Option holder and having a fair
market value equal to the Exercise Price, such fair market
value to be determined in such manner as may be provided by
the Committee or as may be required in order to comply with or
conform to the requirements of any applicable laws or
regulations, or (C) a combination of United States dollars and
such Shares. The date of exercise shall be the date specified
in the notice referred to in section 4.8(a)(i), or if no date
is specified, the date on which such notice is delivered to
the Committee.
(b) When the requirements of section 4.8(a) have been
satisfied, the Committee shall take such action as is necessary to
cause the issuance of a stock certificate evidencing the Option
holder's ownership of such Shares. The Person exercising the Option
shall have no right to vote or to receive dividends, nor have any other
rights with respect to the Shares, prior to the date as of which such
Shares are transferred to such Person on the stock transfer records of
Graham Corporation, and no adjustments shall be made for any dividends
or other rights for which the record date is prior to the date as of
which such transfer is effected, except as may be required under
section 6.3.
Section 4.9 LIMITATIONS ON OPTIONS.
(a) No Eligible Individual shall be granted an Option unless,
at the time the Option is granted, each member of the Committee is a
Disinterested Board Member.
(b) An Option by its terms shall not be transferable by the
Option holder other than by will or by the laws of descent and
distribution, and shall be exercisable, during the lifetime of the
Option holder, only by the Option holder.
(c) Graham Corporation's obligation to deliver Shares with
respect to an Option shall, if the committee so requests, be
conditioned upon the receipt of a representation as to the investment
intention of the Person to whom such Shares are to be delivered, in
such form as the Committee shall determine to be necessary or advisable
to comply with the provisions of applicable federal, state or local
law. It may be provided that any such representation shall become
inoperative upon a registration of the Shares or upon the occurrence of
any other event eliminating the necessity of such representation.
Graham Corporation shall not be required to deliver any Shares under
the Plan prior to (i) the admission of such Shares to listing on any
stock exchange on which Shares may then be listed, or (ii) the
completion of such registration or other qualification under any state
or federal law, rule or regulation as the Committee shall determine to
be necessary or advisable.
Section 4.10 ADDITIONAL RESTRICTIONS ON INCENTIVE STOCK OPTIONS.
In addition to the limitations of section 4.9, an Option designated by
the Committee to be an Incentive Stock Option shall be subject to the following
limitations:
(a) no Incentive Stock Option shall provide any individual
with a right to purchase Shares if that right first becomes exercisable
during a prescribed calendar year and if the sum of:
(i) The Fair Market Value (determined as of the date
of the grant) of the Shares subject to such Incentive Stock
Option which first becomes available for purchase during such
calendar year; plus
(ii) the Fair Market Value (determined as of the date
of grant) of all Shares subject to the Incentive Stock Options
previously granted to such individual which first become
available for purchase during such calendar year;
exceeds $100,000; and
(b) except with the prior written approval of the Committee,
no individual shall dispose of Shares acquired pursuant to the exercise
of an Incentive Stock Option until after the later of (i) the second
anniversary of the date on which the Incentive Stock Option was
granted, or (ii) the first anniversary of the date on which the Shares
were acquired.
ARTICLE V
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NO APPRECIATION RIGHTS TO BE GRANTED
Section 5.1 IN GENERAL.
No stock appreciation rights may be granted pursuant to this Plan.
ARTICLE VI
AMENDMENT AND TERMINATION
Section 6.1 TERMINATION.
The Board may suspend or terminate the Plan in whole or in part at any
time prior to the tenth anniversary of the Effective Date by giving written
notice of such suspension or termination to the Committee. Unless sooner
terminated, the Plan shall terminate automatically on the day preceding the
tenth anniversary of the Effective Date.
Section 6.2 AMENDMENT.
The Board may amend or revise the Plan in whole or in part at any time;
provided, however, that if and to the extent required by any law, rule or
regulation of any governmental unit having jurisdiction over Graham Corporation,
or by any private or quasi-governmental body to whose jurisdiction Graham
Corporation has chosen to subject itself, the effectiveness of any amendment or
revision shall be conditioned on the approval thereof by the stockholders of
Graham Corporation.
Section 6.3 ADJUSTMENTS IN THE EVENT OF A BUSINESS
REORGANIZATION.
(a) In the event of any merger, consolidation or other
business reorganization in which Graham Corporation is the surviving
entity, and in the event of any stock split, stock dividend or other
event generally affecting the number of Shares held by each Person who
is then a holder of record of Shares, the number of Shares covered by
each outstanding Option shall be adjusted to account for such event.
Such adjustment shall be effected by multiplying such number of Shares
by an amount equal to the number of Shares that would be owned after
such event by a Person who, immediately prior to such event, was the
holder of record of one Share, and the Exercise Price shall be adjusted
by dividing the Exercise Price by such number of Shares; provided,
however, that the Committee may, in its discretion, establish another
appropriate method of adjustment.
(b) In the event of any merger, consolidation, or other
business reorganization in which Graham Corporation is not the
surviving entity:
(i) any Options granted under the Plan which remain
outstanding may be cancelled as of the effective date of such
merger, consolidation, business reorganization, liquidation or
sale by the Board upon 30 days' written notice to each Option
holder in advance of the effective date of such event; and
(ii) any Option which is not cancelled pursuant to
section 6.3(b)(i) shall be adjusted in such manner as the
Committee shall deem appropriate to account for such merger,
consolidation or other business reorganization.
ARTICLE VII
MISCELLANEOUS
Section 7.1 STATUS AS AN EMPLOYEE BENEFIT PLAN.
This Plan is not intended to satisfy the requirements for qualification
under section 401(a) of the Code or to satisfy the definitional requirements for
an "employee benefit plan" under section 3(3) of the Employee Retirement Income
Security Act of 1974, as amended. It is intended to be a non-qualified incentive
compensation program that is exempt from the regulatory requirements of the
Employee Retirement Income Security Act of 1974, as amended. The Plan shall be
construed and administered so as to effectuate this intent.
Section 7.2 NO RIGHT TO A CONTINUATION OF SERVICE.
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Neither the establishment of the Plan nor any provisions of the Plan
nor any action of the Board or the Committee with respect to the Plan shall be
held or construed to confer upon any member of the Board any right to a
continuation of membership on the board of directors of the corporation or any
subsidiary or affiliate thereof or upon any employee any right to a continuation
of employment by the Corporation or any subsidiary or affiliate thereof. The
continuation of service of any member of the board of directors and the
continued employment of any employee shall be subject to the same terms and
conditions that would apply from time to time if the Plan had not been adopted.
Section 7.3 CONSTRUCTION OF LANGUAGE.
Whenever appropriate in the Plan, words used in the singular may be
read in the plural, words used in the plural may be read in the singular, and
words importing the masculine gender may be read as referring equally to the
feminine or the neuter. Any reference to an Article or section number shall
refer to an Article or section of this Plan unless otherwise indicated.
Section 7.4 GOVERNING LAW.
The Plan shall be construed, administered and enforced according to the
laws of the State of New York without giving effect to the conflict of laws
principles thereof, except to the extent that such laws are preempted by federal
law.
Section 7.5 HEADINGS.
The headings of Articles and sections are included solely for
convenience of reference. If there is any conflict between such headings and the
text of the Plan, the text shall control.
Section 7.6 NON-ALIENATION OF BENEFITS.
The right to receive a benefit under the Plan shall not be subject in
any manner to anticipation, alienation or assignment, nor shall such right be
liable for or subject to debts, contracts, liabilities, engagements or torts.
Section 7.7 TAXES.
The Corporation shall have the right to deduct from all amounts paid by
the Corporation in cash with respect to an Option under the Plan any taxes
required by law to be withheld with respect to such Option. Where any Person is
entitled to receive Shares pursuant to the exercise of an Option, the
Corporation shall have the right to require such Person to pay the Corporation
the amount of any tax which the Corporation is required to withhold with respect
to such Shares, or, in lieu thereof, to retain, or to sell without notice, a
sufficient number of Shares to cover the amount required to be withheld.
Section 7.8 APPROVAL OF STOCKHOLDERS.
All Options granted pursuant to Article IV of the Plan shall be
conditioned on the approval of the Plan by the stockholders of Graham
Corporation on or prior to the date of the first annual meeting of such
stockholders. No Option granted under the Plan shall be effective, nor shall any
such Option be exercised or any Shares issued or purchased upon exercise, prior
to such approval.
Section 7.9 NOTICES.
Any communication required or permitted to be given under the Plan,
including any notice, direction, designation, comment, instruction, objection or
waiver, shall be in writing and shall be deemed to have been given at such time
as it is delivered personally or five days after mailing if mailed, postage
prepaid, by registered or certified mail, return receipt requested, addressed to
such party at the address listed below, or at such other address as one such
party may by written notice specify to the other party:
(a) If to the Compensation Committee:
Graham Corporation
20 Florence Avenue
Batavia, New York 14020
Attention: GENERAL COUNSEL
(b) If to an Option holder, to the Option holder's
address as shown in the Corporation's personnel
records.
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PROXY 1996
GRAHAM CORPORATION
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
The undersigned hereby appoints Jerald D. Bidlack and Philip S. Hill,
or either of them, each with power of substitution, as proxies to attend the
Annual Meeting of Stockholders of Graham Corporation to be held at the
Industrial Management Council, 930 East Avenue, Rochester, New York on Thursday,
May 9, 1996 at 11:00 a.m., and any adjournment thereof, and to vote in
accordance with the following instructions the number of shares the undersigned
would be entitled to vote if personally present at such meeting:
1. Election of Directors from the nominees listed below.
FOR AGAINST
Robert L. Tarnow / / / /
to serve until 1999
Cornelius S. Van Rees / / / /
to serve until 1999
2. Approval of the 1995 Graham Corporation Incentive Plan to
Increase Shareholder Value.
FOR AGAINST ABSTAIN
/ / / / / /
3. Ratification of the appointment of Deloitte & Touche LLP as
independent accountants for the fiscal year ending December 31, 1996.
FOR AGAINST ABSTAIN
/ / / / / /
4. In their discretion, to vote upon all other matters as may
be properly brought before the meeting.
<PAGE>
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR THE NOMINEES, FOR APPROVAL OF THE
1995 INCENTIVE PLAN TO INCREASE SHAREHOLDER VALUE AND FOR RATIFICATION OF THE
APPOINTMENT OF INDEPENDENT AUDITORS
THIS PROXY WHEN PROPERLY EXECUTED WILL BE VOTED IN THE MANNER DIRECTED
HEREIN BY THE UNDERSIGNED STOCKHOLDER. IF NO DIRECTION IS MADE, THIS PROXY WILL
BE VOTED FOR THE ELECTION OF THE NOMINEES, FOR APPROVAL OF THE 1995 INCENTIVE
PLAN TO INCREASE SHAREHOLDER VALUE AND FOR RATIFICATION OF THE APPOINTMENT OF
AUDITORS.
Date:_____________________, 1996 _____________________________
Please sign exactly as name(s)
appears on this proxy and return
it promptly whether you plan to
attend the meeting or not. If you
do attend, you may, of course,
vote in person. The space below
may be used for any questions or ______________________________
comments you may have. (Signature or Signatures)
/ / To help our preparation for
the meeting, please check
here if you plan to attend.
<PAGE>
EMPLOYEE BENEFITS COMMITTEE
April 9, 1996
Dear Plan Accountholder:
The Employee Stock Ownership Plan of Graham Corporation ("ESOP") and
the Incentive Savings Plan of Graham Corporation ("ISP") have related trusts
(the "ESOP Trust" and the "ISP Trust," respectively) which own common stock of
Graham Corporation ("Graham"). Chemical Bank, as trustee of the ESOP ("ESOP
Trustee") and Manufacturers and Traders Trust Company, as trustee of the ISP
("ISP Trustee") are stockholders of Graham and may vote on matters presented for
stockholder action at Graham's 1996 Annual Meeting of Stockholders scheduled to
be held on May 9, 1996 ("Annual Meeting").
The ESOP Trust and the ISP Trust provide that in casting their votes at
the 1996 Annual Meeting, the ESOP Trustee and the ISP Trustee are to follow
directions given by Graham's Employee Benefits Committee ("Committee"). The
Committee in turn follows instructions provided by participants, former
participants and beneficiaries of deceased former participants with respect to
the Graham common stock allocated to their accounts in the ESOP as of March 25,
1996 and the Company Stock Fund of the ISP ("Company Stock Fund") as of March
31, 1996.
The records for the ESOP and the ISP indicate that you are among the
individuals who may give voting instructions. You may give your instructions by
completing and signing the enclosed Confidential Voting Instruction Card
("Instruction Card") and returning it in the envelope provided to William M.
Mercer, Inc. The Instruction Card lets you give instructions for each matter
expected to be presented for stockholder action at the Annual Meeting. The
Committee expects William M. Mercer, Inc. to tabulate the instructions given on
a confidential basis and to provide the Committee with only the final results of
the tabulation. The final results will be used in directing the ESOP Trustee and
the ISP Trustee.
The voting of the common stock held by the ESOP Trust and the ISP Trust
is subject to legal requirements under the Employee Retirement Income Security
Act of 1974, as amended. The Committee, in consultation with its legal advisors,
considers these requirements in establishing voting instruction procedures and
directing the ESOP Trustee and the ISP Trustee how to vote. The remainder of
this letter describes the voting procedures which the Committee expects to
follow for the 1996 Annual Meeting.
How your voting instructions counts depends on whether it was
anticipated that the matter being voted upon would be presented for stockholder
action at the Annual Meeting; whether you had an interest in the ESOP Trust or
the Company Stock Fund on the proper date; and how large your interest was, as
follows:
ANTICIPATED PROPOSALS
<PAGE>
-2-
IF GRAHAM COMMON STOCK WAS ALLOCATED TO YOUR ACCOUNT UNDER THE ESOP
TRUST AS OF MARCH 25, 1996:
(a) ALLOCATED COMMON STOCK. In general, the ESOP Trustee will be
directed to vote the number of shares of Graham common stock (if any) held by
the ESOP Trust and allocated as of March 25, 1996 to your individual account
under the ESOP according to the instructions specified on the reverse side of
the Instruction Card. The Instruction Card shows the number of shares of Graham
common stock allocated to your individual account under the ESOP Trust as of
March 25, 1996. If you do not file the Instruction Card by April 26, 1996 you
will be deemed to have instructed the ESOP Trustee to ABSTAIN as to all
proposals.
(b) UNALLOCATED COMMON STOCK. The ESOP Trust holds certain shares of
Graham common stock that are not allocated to any individual's account. In
general, the ESOP Trustee will be directed to vote the Graham common stock held
by the ESOP Trust and not allocated to any individual's account by casting votes
FOR or AGAINST each proposal identified on the reverse side of the Instruction
Card, in the same proportions as instructions to cast votes FOR or AGAINST such
proposal are given with respect to allocated Graham common stock. For purposes
of the ESOP, if you do not file the Instruction Card by April 26, 1996 or if you
ABSTAIN as to a proposal, your instructions will not count in voting unallocated
Graham common stock. Each individual's instructions are weighted according to
the number of shares of Graham common stock allocated to all individuals'
accounts as of March 25, 1996.
IF YOU HAD AN INTEREST IN THE COMPANY STOCK FUND AS OF MARCH 31, 1996:
In general, the ISP Trustee will be directed to vote the Graham common
stock held by the Company Stock Fund by casting votes FOR and AGAINST each
proposal specified on the reverse side of the Instruction Card in the same
proportions as instructions to cast votes FOR and AGAINST such proposal are
given by the individuals who are entitled, under the ISP, to give instructions.
The instructions given by each individual are weighted according to the value of
his respective interest in the Company Stock Fund as of March 31, 1996. The
Instruction Card shows the approximate number of shares of Graham common stock
(if any) -- and thus the approximate number of votes -- represented by your
interest in the Company Stock Fund as of March 31, 1996. For purposes of the
ISP, if you do not file the Instruction Card by April 26, 1996 or if you ABSTAIN
as to a proposal, your instructions will not count.
UNANTICIPATED PROPOSALS
It is possible, although very unlikely, that proposals other than those
specified on the Instruction Card will be presented for stockholder action at
the 1996 Annual Meeting. If this should happen, the ESOP Trustee and the ISP
Trustee will be instructed to vote upon such matters in their discretion, or to
cause such matters to be voted upon in the discretion of the individuals named
in any proxies executed by them.
Your interest in the ESOP Trust or in the ISP Trust offers you the
opportunity to participate, as do Graham's stockholders, in decisions that
affect Graham's future, and we encourage you to take advantage of it. To help
you decide how to complete the Instruction
<PAGE>
-3-
Card, enclosed is a copy of the Proxy Statement that is being furnished to all
holders of Graham common stock in connection with the 1996 Annual Meeting.
Please complete, sign and return your Instruction Card today. Your instructions
are important regardless of the size of your interest in the ESOP Trust or in
the Company Stock Fund.
If you have questions regarding the terms of the ESOP or the ISP, or
how to complete the Instruction Card, please call J. Ronald Hansen, Vice
President-Finance & Administration at (716) 343-2216.
Sincerely,
EMPLOYEE BENEFITS COMMITTEE
OF GRAHAM CORPORATION
Enclosure
NOTE: THE ENCLOSED CERTIFICATE INDICATES THE NUMBER OF SHARES AWARDED
TO YOU IN 1995, NOT YOUR TOTAL SHARES WHICH ARE SHOWN ON THE LABEL
OF THE ENCLOSED VOTING INSTRUCTION CARD.
<PAGE>
GRAHAM CORPORATION CONFIDENTIAL VOTING INSTRUCTION
THIS INSTRUCTION IS SOLICITED BY THE EMPLOYEE BENEFITS COMMITTEE
OF GRAHAM CORPORATION
AS A NAMED FIDUCIARY FOR THE
EMPLOYEE STOCK OWNERSHIP PLAN OF GRAHAM CORPORATION ("PLAN")
FOR THE ANNUAL MEETING OF STOCKHOLDERS TO BE HELD ON MAY 9, 1996
The undersigned Participant, Former Participant or Beneficiary
of a deceased Former Participant in the Plan (the "Instructor") hereby provides
the voting instructions hereinafter specified to the Employee Benefits Committee
of Graham Corporation (the "Committee"), which instructions shall be taken into
account in directing the Trustee of the Plan to vote, in person, by limited or
general power of attorney, or by proxy, the shares and fractional shares of
common stock (the "Shares") of Graham Corporation (the "Corporation") which are
held by the Trustee of the Plan, in its capacity as Trustee, as of March 25,
1996 (the "Record Date") at the Annual Meeting of Stockholders of the
Corporation (the "Annual Meeting") to be held at the Industrial Management
Council, 930 East Avenue, Rochester, New York on May 9, 1996 at 11:00 a.m., or
at any adjournment thereof.
As to the nominees and the proposals listed on the reverse
side hereof and as more particularly described in the Corporation's Proxy
Statement dated April 5, 1996, the Committee will give voting directions to the
Trustee of the Plan. Such directions will reflect the voting instructions filed
by the Instructor on this Confidential Voting Instruction, in the manner
described in the accompanying letter from the Committee dated April 9, 1996.
As to other matters which may properly come before the Annual
Meeting, the Trustee will be instructed to vote upon such matters in its
discretion, or cause such matters to be voted upon in the discretion of the
individuals named in any proxies executed by it.
The instructions set forth on the reverse side hereof will be
taken into account as described above in directing the Trustee of the Plan how
to vote the Shares of the Corporation held by it as of the Record Date in its
capacity as Trustee, provided this card is received by William M.
Mercer, Inc. by April 26, 1996.
PLEASE MARK, SIGN AND DATE THIS VOTING INSTRUCTION CARD ON THE REVERSE SIDE
AND RETURN IT IN THE ENCLOSED ENVELOPE.
<PAGE>
IF THIS VOTING INSTRUCTION IS SIGNED BUT NO DIRECTION IS GIVEN, THIS VOTING
INSTRUCTION CARD WILL BE DEEMED TO INSTRUCT VOTES "FOR" THE ELECTION OF THE
NOMINEES, "FOR" PROPOSAL 2 AND "FOR" PROPOSAL 3.
<TABLE>
<CAPTION>
ESOP COMMON (as of 3/25/96)
PLEASE MARK YOUR CHOICE LIKE THIS |X| IN BLUE OR BLACK INK.
======================================================================================================
THE BOARD OF DIRECTORS RECOMMENDS A VOTE
"FOR" THE ELECTION OF NOMINEES, "FOR" PROPOSAL 2 AND "FOR" PROPOSAL 3.
- ------------------------------------------------------------------------------------------------------
<S> <C>
1. Election of Directors 2. Approval of the 1995 Graham Corporation
Incentive Plan to Increase Shareholder Value.
FOR AGAINST FOR AGAINST ABSTAIN*
Robert L . Tarnow / / / / / / / / / /
Cornelius S. Van Rees / / / /
- ------------------------------------------------------------------------------------------------------
</TABLE>
===============================================================================
- -------------------------------------------------------------------------------
3. Ratification of the appointment of Deloitte & Touche LLP as independent
accountants for the fiscal year ending December 31, 1996.
FOR AGAINST ABSTAIN*
/ / / / / /
- -------------------------------------------------------------------------------
4. In their discretion, the proxies are authorized to vote upon such other
business as may properly come before the Annual Meeting or any adjournment
thereof.
================================================================================
<TABLE>
<S> <C>
- - The undersigned hereby instructs the Committee to
direct the Trustee of the Plan to vote in accordance
with the voting instructions indicated above and
hereby acknowledges receipt of the letter from the
Committee dated April 9, 1996, a Notice of Annual
Meeting of Stockholders of Graham Corporation and a
Proxy Statement for the Annual Meeting.
DATE
SIGNATURE
SIGNATURE
- - Please sign exactly as your name appears on this
instruction. Each owner of shares held jointly must
sign this voting instruction. If signing as
attorney, executor, administrator, trustee or
guardian, please include your full title. Corporate
proxies must be signed by an authorized officer.
* For purposes of the unallocated Shares held
by the Employee Stock Ownership Plan,
abstention is equivalent to not voting.
</TABLE>
<PAGE>
GRAHAM CORPORATION CONFIDENTIAL VOTING INSTRUCTION
THIS INSTRUCTION IS SOLICITED BY THE EMPLOYEE BENEFITS COMMITTEE
OF GRAHAM CORPORATION
AS A NAMED FIDUCIARY FOR EACH OF THE
EMPLOYEE STOCK OWNERSHIP PLAN OF GRAHAM CORPORATION
AND THE
INCENTIVE SAVINGS PLAN OF GRAHAM CORPORATION
(TOGETHER, THE "PLANS")
FOR THE ANNUAL MEETING OF STOCKHOLDERS TO BE HELD ON MAY 9, 1996
The undersigned Participant, Former Participant or Beneficiary
of a deceased Former Participant in one or both of the Plans (the "Instructor")
hereby provides the voting instructions hereinafter specified to the Employee
Benefits Committee of Graham Corporation (the "Committee"), which instructions
shall be taken into account in directing the respective Trustees of the Plans to
vote, in person, by limited or general power of attorney, or by proxy, the
shares and fractional shares of common stock (the "Shares") of Graham
Corporation (the "Corporation") which are held by the respective Trustees of the
Plans, in their capacities as Trustees, as of March 25, 1996 (the "Record Date")
at the Annual Meeting of Stockholders of the Corporation (the "Annual Meeting")
to be held at the Industrial Management Council, 930 East Avenue, Rochester, New
York on May 9, 1996 at 11:00 a.m., or at any adjournment thereof.
As to the nominees and the proposals listed on the reverse
side hereof and as more particularly described in the Corporation's Proxy
Statement dated April 5, 1996, the Committee will give voting directions to the
Trustees of the Plans. Such directions will reflect the voting instructions
filed by the Instructor on this Confidential Voting Instruction, in the manner
described in the accompanying letter from the Committee dated April 9, 1996.
As to other matters which may properly come before the Annual
Meeting, the Trustees will be instructed to vote upon such matters in its
discretion, or cause such matters to be voted upon in the discretion of the
individuals named in any proxies executed by it.
The instructions set forth on the reverse side hereof will be
taken into account as described above in directing the respective Trustees of
the Plans how to vote the Shares of the Corporation held by them as of the
Record Date in their capacities as Trustees, provided this card is received by
William M. Mercer, Inc. by April 26, 1996.
PLEASE MARK, SIGN AND DATE THIS VOTING INSTRUCTION CARD ON THE REVERSE SIDE
AND RETURN IT IN THE ENCLOSED ENVELOPE.
<PAGE>
IF THIS VOTING INSTRUCTION IS SIGNED BUT NO DIRECTION IS GIVEN, THIS VOTING
INSTRUCTION CARD WILL BE DEEMED TO INSTRUCT VOTES "FOR" THE ELECTION OF THE
NOMINEES, "FOR" PROPOSAL 2 AND "FOR" PROPOSAL 3.
<TABLE>
<CAPTION>
ESOP COMMON (as of 3/25/96) ISP COMMON (as of 3/31/96)
PLEASE MARK YOUR CHOICE LIKE THIS |X| IN BLUE OR BLACK INK.
========================================================================================================
THE BOARD OF DIRECTORS RECOMMENDS A VOTE
"FOR" THE ELECTION OF NOMINEES, "FOR" PROPOSAL 2 AND "FOR" PROPOSAL 3.
- --------------------------------------------------------------------------------------------------------
<S> <C>
1. Election of Directors 2. Approval of the 1995 Graham Corporation
Incentive Plan to Increase Shareholder Value.
FOR AGAINST FOR AGAINST ABSTAIN*
Robert L . Tarnow / / / / / / / / / /
Cornelius S. Van Rees / / / /
- --------------------------------------------------------------------------------------------------------
</TABLE>
================================================================================
- --------------------------------------------------------------------------------
3. Ratification of the appointment of Deloitte & Touche LLP as independent
accountants for the fiscal year ending December 31, 1996.
FOR AGAINST ABSTAIN*
/ / / / / /
- --------------------------------------------------------------------------------
4. In their discretion, the proxies are authorized to vote upon such other
business as may properly come before the Annual Meeting or any adjournment
thereof.
==========================================================================
<TABLE>
<S> <C>
- - The undersigned hereby instructs the Committee to
direct the Trustee of the Plan to vote in accordance
with the voting instructions indicated above and
hereby acknowledges receipt of the letter from the
Committee dated April 9, 1996, a Notice of Annual
Meeting of Stockholders of Graham Corporation and a
Proxy Statement for the Annual Meeting.
DATE
SIGNATURE
SIGNATURE
- - Please sign exactly as your name appears on this
instruction. Each owner of shares held jointly must
sign this voting instruction. If signing as
attorney, executor, administrator, trustee or
guardian, please include your full title. Corporate
proxies must be signed by an authorized officer.
* For purposes of the unallocated Shares held
by the Employee Stock Ownership Plan,
abstention is equivalent to not voting.
</TABLE>
