<PAGE> 1
================================================================================
SCHEDULE 14A
(RULE 14a)
INFORMATION REQUIRED IN PROXY STATEMENT
SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(a) OF THE SECURITIES
EXCHANGE ACT OF 1934
(AMENDMENT NO. )
Filed by the Registrant [X]
Filed by a Party other than the Registrant [ ]
Check the appropriate box:
<TABLE>
<S> <C>
[ ] Preliminary Proxy Statement [ ] CONFIDENTIAL, FOR USE OF THE COMMISSION
ONLY (AS PERMITTED BY RULE 14a-6(e)(2))
[X] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to sec.240.14a-11(c) or sec.240.14a-12
</TABLE>
GRAHAM CORPORATION
(NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
(NAME OF PERSON(S) FILING PROXY STATEMENT, IF OTHER THAN THE REGISTRANT)
Payment of Filing Fee (Check the appropriate box):
[X] No fee required.
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and 0-11.
(1) Title of each class of securities to which transaction applies: .......
(2) Aggregate number of securities to which transaction applies: ..........
(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (Set forth the amount on which the
filing fee is calculated and state how it was determined): ............
(4) Proposed maximum aggregate value of transaction: ......................
(5) Total fee paid: .......................................................
[ ] Fee paid previously with preliminary materials.
[ ] Check box if any part of the fee is offset as provided by Exchange Act Rule
0-11(a)(2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration statement number,
or the Form or Schedule and the date of its filing.
(1) Amount Previously Paid: ...............................................
(2) Form, Schedule or Registration Statement No.: .........................
(3) Filing Party: .........................................................
(4) Date Filed: ...........................................................
================================================================================
<PAGE> 2
GRAHAM CORPORATION
20 FLORENCE AVENUE
BATAVIA, NEW YORK 14020
------------------------------
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD JULY 30, 1998
------------------------------
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, July 30, 1998 at 11:00 a.m. for
the following purposes:
1. To elect two directors to hold office until the Annual Meeting of
Stockholders in 2001;
2. To ratify the appointment of Deloitte & Touche LLP as Graham's
independent accountants for the fiscal year ending March 31, 1999; and
3. To transact such other business as may properly come before the meeting.
Stockholders of record at the close of business on June 16, 1998 are
entitled to notice of and to vote at the Annual Meeting. Stockholders who do not
expect to be present at the meeting should fill in, sign and date the enclosed
Proxy Card and mail it promptly in the enclosed return envelope. No postage is
required for mailing in the United States.
By Order of the Board of Directors
/s/ ALVARO CADENA
ALVARO CADENA
President & Chief Executive Officer
July 1, 1998
<PAGE> 3
GRAHAM CORPORATION
20 FLORENCE AVENUE
BATAVIA, NEW YORK 14020
PROXY STATEMENT
------------------------------
ANNUAL MEETING OF STOCKHOLDERS
JULY 30, 1998
------------------------------
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, July 30, 1998 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 July 1, 1998.
RECORD DATE AND SHARES OUTSTANDING
On the record date for the meeting, June 16, 1998, there were 1,585,995
shares of Graham's common stock outstanding. Stockholders of record on June 16,
1998 will be entitled to one vote for each share held on the record date.
PROXY CARDS AND VOTING
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 be voted FOR each of the nominees for election
as directors 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 Bylaws, directors are
elected by a plurality of the votes cast at the Annual Meeting. The vote
required for approval of any other matter before the Annual Meeting is a
majority of the votes in person or by proxy, and entitled to vote. Under
Delaware law, the total votes received, including abstentions and votes by
brokers holding shares in "street name" or other fiduciary capacity on "routine"
matters, are counted in determining the presence of a quorum at the Annual
Meeting. With respect to the election of directors, votes may be cast for or
withheld from voting with respect to any or all of the directors. Votes that are
withheld will have no effect on the election of directors. Abstentions may be
specified on all proposals other than the election of directors and will be
counted as present for purposes of the matter with respect to which the
abstention is noted. Therefore, under the Company's Certificate of Incorporation
and Bylaws and under Delaware law, assuming the presence of a quorum at the
Annual Meeting, non-votes by brokers will have no effect on any proposal to be
acted upon at the Annual Meeting. However, abstentions would have the effect of
"no" votes with respect to ratifying the appointment of auditors.
REVOCABILITY OF PROXIES
The presence of a stockholder at this Annual Meeting will not automatically
revoke the 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.
1
<PAGE> 4
SOLICITATION OF PROXIES
In addition to solicitation by mail, directors, officers and employees of
Graham and its subsidiaries may solicit proxies 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.
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 June 16, 1998, 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>
Helen H. Berkeley(1) 127,932(2) 8.0%
Dimensional Fund Advisors, Inc.(3) 114,150 7.2%
Wilen Management Company, Inc.(4) 100,050 6.3%
Bentley Capital Management, Inc.(5) 91,100 5.7%
Employee Stock Ownership Plan of Graham Corporation(1,6) 128,504 8.1%
All directors and executive officers as a group (11 persons) 218,202(7) 13.1%
</TABLE>
- ---------------
(1) Address: c/o Graham Corporation, 20 Florence Avenue, Batavia, New York
14020. Mrs. Berkeley beneficially owns the shares of stock indicated as
executrix of the Estate of Frederick D. Berkeley III.
(2) Includes 10,950 shares which Mrs. Berkeley may acquire within 60 days upon
exercise of stock options and 1,575 shares held for her benefit by Chase
Manhattan Bank as trustee for the Company's Employee Stock Ownership Plan
("ESOP Trustee") as to which Mrs. Berkeley has sole voting power but no
dispositive power except in limited circumstances.
(3 )Address: 1299 Ocean Avenue, 11th Floor, Santa Monica, California 90401.
Dimensional Fund Advisors, Inc. ("Dimensional"), a registered investment
advisor, is deemed to have beneficial ownership of 114,150 shares of Graham
Corporation stock as of December 31, 1997, all of which shares are held in
portfolios of DFA Investment Dimensions Group, Inc., a registered open-end
investment company, or in series of the DFA Investment Trust Company, a
Delaware business trust, or the DFA Group Trust and DFA Participation Group
Trust, investment vehicles for qualified employee benefit plans, all of
which Dimensional Fund Advisors, Inc. serves as investment manager.
Dimensional disclaims beneficial ownership of all such shares.
(4 )Address: 2360 W. Joppa Road, Lutherville, Maryland 21093.
(5 )Address: 520 Madison Avenue, 41st Floor, New York, New York 10022.
(6 )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 June 16, 1998, 97,349 shares were allocated to participants
and 31,155 shares were unallocated.
(7 )Includes 81,900 shares which members of the group may acquire within 60 days
upon exercise of stock options and 5,985 shares allocated to executive
officers under the Company's Employee Stock Ownership Plan ("ESOP"), as to
which such officers may exercise voting power, but not dispositive power,
except in limited circumstances. Also includes unallocated shares held by
the ESOP Trustee over which directors who are members of the Company's
Employee Benefits Committee have dispositive power.
2
<PAGE> 5
PROPOSAL ONE
ELECTION OF DIRECTORS
At the Annual Meeting two directors will be elected, each to hold office
until the 2001 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 Nominating Committee of the Board of Directors in the event any
nominee is unable or unwilling to serve.
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
SHARES
YEARS OWNED
CURRENT SERVED BENEFICIALLY,
PRINCIPAL TERM AS A AS OF PERCENT OF
NAME AGE OCCUPATION(1) EXPIRES DIRECTOR(2) JUNE 16, 1998 OUTSTANDING
SHARES
- -----------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Jerald D. Bidlack(3) 62 President, Griffin 1998 13 17,000(4) 1.1%
Automation, Inc.
Philip S. Hill(5) 76 Partner, Hill, 1998 30 17,750(4) 1.1%
Ullman & Erwin,
Attorneys
</TABLE>
DIRECTORS WITH TERMS CONTINUING
AFTER THE 1998 ANNUAL MEETING:
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------
NUMBER OF
SHARES
YEARS OWNED
CURRENT SERVED BENEFICIALLY,
PRINCIPAL TERM AS A AS OF PERCENT OF
NAME AGE OCCUPATION(1) EXPIRES DIRECTOR(2) JUNE 16, 1998 OUTSTANDING
SHARES
- -----------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Alvaro Cadena 54 President and Chief 2000 5 15,478(6) *
Executive Officer of
Graham
Helen H. Berkeley(7) 68 Private Investor 2000 --(7) 127,932 8.0%
H. Russel Lemcke 58 President, H. Russel 2000 2 15,700(8) *
Lemcke Group, Inc.
Cornelius S. Van Rees 69 Of Counsel to 1999 29 13,800(4) *
Thacher Proffitt &
Wood, Attorneys;
previously partner
in Thacher Proffitt
& Wood
</TABLE>
- ---------------
* Less than 1% of the outstanding shares of common stock.
(1) In addition, Mr. Bidlack serves on the board of Bush Industries, Inc., Erdle
Perforating Company and is a trustee of Keuka College; Mr. Lemcke serves on
the board of Rochester Midland Corporation.
(2) Includes the number of years served as director of Graham Manufacturing Co.,
Inc., the predecessor of Graham.
(3) Chairman of the Board of Graham.
(4) Includes 12,750 shares which may be acquired within 60 days upon exercise of
stock options.
(5) Mr. Hill is Mrs. Berkeley's brother-in-law by marriage.
(6) Includes 7,500 shares that may be acquired within 60 days by exercising
stock options and 1,268 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.
(7) Refer to Footnote 2 on page 2. Mrs. Berkeley was elected by the Board of
Directors on May 28, 1998 to fill the vacancy on the Board of Directors
caused by the death of her husband, Frederick D. Berkeley.
(8) Includes 5,700 shares which may be acquired within 60 days upon exercise of
stock options.
3
<PAGE> 6
BOARD MEETINGS AND COMMITTEES OF THE BOARD
The Company changed its fiscal year in 1997. This resulted in a
transitional reporting period from January 1, 1997 -- March 31, 1997 (the
"Transition Period"). During the Transition Period, the Board of Directors of
Graham held one meeting. During the fiscal year ended March 31, 1998, the Board
of Directors of Graham held a total of five meetings. Graham's Board of
Directors had six committees during both periods.
The Board dissolved the Succession Committee at its May 28, 1998 meeting.
The Succession Committee's purpose was to provide for orderly succession in the
office of CEO and other offices. The Succession Committee held no meetings in
the Transition Period and four meetings in the most recent fiscal year. Members
of the Succession Committee during the most recent fiscal year were Messrs.
Bidlack, Hill, Lemcke, Van Rees, the late Frederick D. Berkeley and the late
Robert L. Tarnow.
Currently the Board 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. Bidlack (Chairman), Cadena (CEO), Hill and Van Rees. The
Executive Committee of Graham held one meeting during the Transition Period and
six meetings during the most recent fiscal year, one of which was by telephone
conference.
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, Lemcke, Van Rees and
Mrs. Berkeley. The Audit Committee of Graham held one meeting during the
Transition Period and no meetings during the most recent fiscal year.
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. The members of the
Compensation Committee are Messrs. Lemcke (Chairman), Bidlack, Hill, Van Rees
and Mrs. Berkeley. The Compensation Committee of Graham held one meeting during
the Transition Period and two meetings during the most recent fiscal year.
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 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. Van Rees
(Chairman), Bidlack and Hill. The Employee Benefits Committee of Graham held no
meetings in the Transition Period and one meeting in the most recent fiscal
year.
4
<PAGE> 7
5. NOMINATING COMMITTEE
The Nominating Committee has authority to review the qualifications of,
interview and nominate candidates for election to the Board of Directors.
Stockholders of record entitled to vote in the election of directors at any
annual meeting 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 sixty days
in advance of the annual meeting if the meeting is to be held within thirty (30)
days preceding the anniversary of the previous year's annual meeting, or ninety
(90) days in advance of the Annual meeting if it is to be held on or after the
anniversary of the previous year's annual meeting. For an annual meeting of
stockholders held at a time other than within this time period, or for a special
meeting of stockholders for the election of directors, notice must be submitted
no later than the close of business on the tenth (10th) day following the date
on which notice of such meeting is first given to stockholders. Notice must set
forth any nominee's name, age, business and residence addresses, principal
occupation or employment, the nominee's written consent to serve as a director
and information that would be required to be included in a proxy statement filed
pursuant to applicable SEC rules. The stockholder giving the notice must state
in it his or her own name and address, the class and number of shares owned of
record and the dates of acquiring such shares. The stockholder also must
describe all arrangements or understandings between the stockholder and nominee
and any other person or persons (naming such person or persons) pursuant to
which the nominations are to be made by the stockholder, and identify any person
employed, retained, or to be compensated by the stockholder submitting the
nomination or by the person nominated, or any person acting on his or her behalf
to make solicitations or recommendations to stockholders for the purpose of
assisting in the election of such director, and briefly describe the terms of
such employment, retainer or arrangement for compensation.
The Nominating Committee held one meeting in the Transition Period and no
meetings in the most recent fiscal year. The members of the Nominating Committee
are Messrs. Van Rees (Chairman), Bidlack, Cadena and Hill.
MEETING ATTENDANCE
A total of four meetings of the Board of Directors and of the Committees of
the Board were held on one date in the Transition Period. A total of sixteen
meetings of the Board of Directors of Graham and of the Committees of the Board
were held on eleven dates during the most recent fiscal year 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 committee meeting on one date.
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
On May 29, 1998, the Company purchased 100,000 shares of the Company's
common stock held by the estate of Frederick D. Berkeley. Helen H. Berkeley, a
director of the Company, is executrix of the estate and its principal
beneficiary. The shares were purchased at a price of $17.00, which was the
closing price of Graham common stock on the American Stock Exchange on the day
before the transaction, resulting in an aggregate purchase price of $1,700,000.
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 $10,000 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 fee is paid for each other
meeting. Each non-employee director who serves on the Executive Committee also
receives an annual fee of $10,000 for such service. The Chairman of the Board
receives an additional $10,000 annual fee and committee chairmen receive an
additional $2,000 per annum for each committee chairmanship they hold.
Non-employee directors participate in the Graham Corporation Outside
Directors' Long Term Incentive Plan ("LTIP"). Under the LTIP, for every fiscal
year starting with 1996 in which Graham Corporation produces consolidated net
income of at least $500,000, each non-employee director will be credited with
Share Equivalent Units (SEUs). Each SEU is valued at the market value of 1 share
of Graham common stock on the last day of
5
<PAGE> 8
trading of the first quarter following a fiscal year for which SEUs are to be
credited. The number of SEUs to be credited is determined by dividing the value
of 1 SEU into an amount equal to the basic annual director's fee. Upon
termination of a director's service on the Board, but not before, SEUs will be
redeemable, at the option of the Company, for either: (a) a commensurate number
of shares of Graham common stock; or (b) the cash value of a commensurate number
of shares of Graham common stock as of the termination of service date.
Pursuant to the 1989 Stock Option and Appreciation Rights Plan of Graham
Corporation ("Option Plan"), each non-employee director of Graham upon becoming
a member of the Board of Directors is granted an option to purchase 6,000 shares
of Graham's common stock at its closing price on the American Stock Exchange on
the date of the grant.
Pursuant to the 1995 Graham Corporation Incentive Plan to Increase
Shareholder Value ("Incentive Plan"), each non-employee director of Graham is
granted, annually for four years, an option to purchase 2,250 shares of Graham's
common stock at its closing price on the American Stock Exchange on the date of
each grant.
6
<PAGE> 9
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 June 16, 1998 and their beneficial ownership of Graham common stock.
<TABLE>
<CAPTION>
- --------------------------------------------------------------------- SHARES
OWNED
BENEFICIALLY
AS OF
YEARS OF JUNE 16, PERCENT OF
NAME AGE PRINCIPAL OCCUPATION SINCE 1993 SERVICE 1998(1) OUTSTANDING
- --------------------------------------------------------------------- SHARES
<S> <C> <C> <C> <C> <C>
Alvaro Cadena 54 President & Chief Executive Officer 29 15,478(2) *
J. Ronald Hansen 50 Vice President--Finance & 5 6,460(3) *
Administration and Chief Financial
Officer; previously Vice
President--Finance and Chief
Financial Officer of Al Tech
Specialty Steel Corporation
Joseph P. Gorman 55 Vice President--Sales of GMC 28 7,799(4) *
Stephen P. Northrup 46 Vice President--Engineering of GMC; 24 5,165(5) *
previously Vice President--Operations
of GMC
</TABLE>
- ---------------
* Less than 1% of the outstanding shares of common stock.
(1) Excluded from the shareholdings reported in this table are shares of common
stock held by the ESOP Trustee and not allocated to any individual's
account, as to which each person in the table shares voting power and
limited investment power with all other ESOP participants.
(2) Refer to Footnote 6 on page 3.
(3) Includes 4,200 shares that may be acquired within 60 days by exercising
stock options and 560 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 6,900 shares that may be acquired within 60 days by exercising
stock options and 899 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 4,200 shares that may be acquired within 60 days by exercising
stock options and 965 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.
SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
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"). All such reports required to be filed were
filed in a timely manner, except for one form for the late Robert L. Tarnow, who
died before it could be filed. In making this disclosure, the Company has relied
solely on written representations of its directors, executive officers and its
ten percent holders or copies of the reports that they have filed with the SEC.
7
<PAGE> 10
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
$100,000 and who were serving as executive officers at March 31, 1998 ("Named
Executive Officers"). Graham did not pay to any of the Named Executive Officers
in any time period included in the table compensation required to be disclosed
in columns (d), (e), (f) or (h) of the Summary Compensation Table pursuant to
Item 402 of SEC Regulation S-K. Consequently, those columns have been omitted.
The following table includes compensation information for the Transition
Period January 1, 1997 -- March 31, 1997 caused by the change in the Company's
fiscal year in 1997.
SUMMARY COMPENSATION TABLE
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
ANNUAL COMPENSATION
(a) (b) (c) (i)
NAME (g)
AND SECURITIES
PRINCIPAL FISCAL UNDERLYING ALL OTHER
POSITION YEAR SALARY ($)(1) OPTIONS/SARS (#) COMPENSATION($)(2,3,4)
- -----------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Alvaro Cadena(5) 1997-98 260,237 7,500 25,364
President & Chief Executive 1/1/97-3/31/97 62,225 -0- 8,514
Officer 1996 236,635 -0- 21,974
1995 186,461 3,200 17,309
J. Ronald Hansen 1997-98 181,052 4,200 18,477
Vice President-Finance & 1/1/97-3/31/97 44,829 -0- 5,533
Administration and Chief 1996 167,793 -0- 19,290
Financial Officer of Graham 1995 141,812 2,200 12,992
Joseph P. Gorman 1997-98 170,553 4,200 19,001
Vice President-Sales of GMC 1/1/97-3/31/97 41,752 -0- 4,465
1996 155,915 -0- 19,165
1995 118,345 2,200 13,936
Stephen P. Northrup 1997-98 171,540 4,200 16,236
Vice President-Engineering of 1/1/97-3/31/97 42,430 -0- 4,539
GMC 1996 158,593 -0- 15,917
1995 120,528 2,200 10,756
Frederick D. Berkeley(5) 1997-98 382,749 8,700 57,920
Chairman and Chief Executive 1/1/97-3/31/97 92,108 -0- 8,593
Officer 1996 366,265 -0- 72,750
1995 284,153 4,700 94,420(6)
</TABLE>
- ---------------
(1) Includes payment of contingent salary amounts which are deferred to the
following fiscal year and are payable only upon attainment of predetermined
performance goals. The figures shown also 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.
(2) Includes premiums paid on insurance policies on each of the Named Executive
Officers as follows: for Mr. Cadena in each of 1995, 1996 and 1997, $10,924;
for Mr. Hansen in each of 1995 and 1996, $8,240 and in FY 1997-98, $7,144;
for Mr. Gorman in each of 1995 and 1996, $9,600 and for FY 1997-98, $8,472;
for Mr. Northrup in each of 1995 and 1996, $6,346 and in FY 1997-98, $5,729;
and for Mr. Berkeley in 1995, $67,000, in 1996, $61,700 and in FY 1997-98,
$46,587. No premiums were paid in the Transition Period 1/1/97 -- 3/31/97.
(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.
Cadena's account for 1995, $4,763, for 1996, $9,500 and for FY 1997-98,
$9,000; to Mr. Hansen's account for 1995, $3,539, for 1996, $9,500, and for
FY 1997-98,
8
<PAGE> 11
$9,000; to Mr. Gorman's account for 1995, $3,233, for 1996, $8,196 and for
FY 1997-98, $9,000; to Mr. Northrup's account for 1995, $3,292, for 1996,
$8,174 and for FY 1997-98, $9,000; and to Mr. Berkeley's account for 1995,
$5,130, for 1996, $9,500 and for FY 1997-98, $9,000. For the Transition
Period 1/1/97 -- 3/31/97, amounts were paid to Named Executive Officers'
401(k) accounts as following: Mr. Cadena, $7,017; Mr. Hansen, $4,783; Mr.
Gorman, $4,465; Mr. Northrup, $4,539; and Mr. Berkeley, $7,843.
(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. Cadena shares worth $1,622 for 1995, $1,550 for 1996
and $2,333 for FY 1997-98; to Mr. Hansen shares worth $1,213 in 1995, $1,550
for 1996 and $2,333 for FY 1997-98; to Mr. Gorman shares worth $1,103 in
1995, $1,369 in 1996 and $2,333 for FY 1997-98; to Mr. Northrup shares worth
$1,118 in 1995, $1,397 in 1996 and $2,333 for FY 1997-98; and to Mr.
Berkeley shares worth $1,748 for 1995, $1,550 for 1996 and $2,333 for FY
1997-98. No ESOP share allocation was made for the Transition Period
1/1/97 -- 3/31/97.
(5) Mr. Cadena became Chief Executive Officer on April 1, 1998; Mr. Berkeley
retired on March 31, 1998, the last day of Fiscal Year 1997-98.
(6) Includes $19,392 paid as a 45-year long-term service award.
STOCK OPTIONS
OPTION/SAR GRANTS IN LAST FISCAL YEAR
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
POTENTIAL REALIZABLE
VALUE AT ASSUMED
ANNUAL RATES OF STOCK
PRICE APPRECIATION FOR
INDIVIDUAL GRANTS OPTION TERM
(a) (c) (e) (f) (g)
(b) % OF TOTAL (d)
NUMBER OF OPTIONS/SARS EXERCISE
SECURITIES GRANTED TO OR
UNDERLYING EMPLOYEES BASE
OPTIONS/SARS IN PRICE EXPIRATION
NAME GRANTED (#) FISCAL YEAR ($/SH) DATE 5% ($) 10% (4)
- -------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Alvaro Cadena 7,500 13.6% 21.4375 10/23/08 101,114 256,244
J. Ronald Hansen 4,200 7.6% 21.4375 10/23/08 56,624 143,497
Joseph P. Gorman 4,200 7.6% 21.4375 10/23/08 56,624 143,497
Stephen P. Northrup 4,200 7.6% 21.4375 10/23/08 56,624 143,497
Frederick D. Berkeley 8,700 15.8% 21.4375 3/31/00(1) 23,340 48,309
</TABLE>
- ---------------
(1) This option grant is exercisable by Mr. Berkeley's estate until such date.
9
<PAGE> 12
The following table indicates the total number of exercisable and
unexercisable stock options held by each executive officer listed below on March
31, 1998, the last day of the fiscal year. No executive officer exercised stock
options in the Transition Period 1/1/97 -- 3/31/97.
AGGREGATED OPTION/SAR EXERCISES IN LAST FISCAL YEAR AND
FY-END OPTION/SAR VALUES
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
(a) (b) (c) (d) (e)
NUMBER OF SECURITIES VALUE OF UNEXERCISED
UNDERLYING UNEXERCISED IN-THE-MONEY
OPTIONS/SARS AT OPTIONS/SARS AT
FY-END(#) FY-END(#)(1)
SHARES ACQUIRED VALUE EXERCISABLE/ EXERCISABLE/
NAME ON EXERCISE (#) REALIZED ($) UNEXERCISABLE UNEXERCISABLE
- -----------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Alvaro Cadena 14,700 112,947 7,500/-0- -0-/-0-
J. Ronald Hansen 8,290 83,478 4,200/1,200 -0-/8,600
Joseph P. Gorman 7,800 44,604 6,900 19,775/-0-
Stephen P. Northrup 10,500 77,266 4,200 -0-/-0-
Frederick D. Berkeley 23,250 153,439 8,700/-0- -0-/-0-
</TABLE>
- ---------------
(1) Based on the closing price of Graham common stock on March 31, 1998, which
was $16.3125.
PENSION PLANS
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 U.S. Retirement Plan
takes income into account for future benefits on a calendar year basis. The
portion of 1997 compensation that was taken into account by the U.S. Retirement
Plan for the purpose of calculating future pension benefits is as follows: for
Mr. Cadena, $160,000; for Mr. Hansen, $126,235; for Mr. Gorman, $118,269; for
Mr. Northrup, $118,269; and for the late Frederick D. Berkeley, $160,000.
The approximate years of creditable service as of March 31, 1998 of each of
the individuals named in the Summary Compensation Table who is eligible to
participate in the U.S. Retirement Plan are: Mr. Cadena, 29 years; Mr. Hansen, 5
years; Mr. Gorman, 28 years; and Mr. Northrup, 24 years.
In addition to the U.S. Retirement Plan, the Company maintains a
Supplemental Executive Retirement Plan (the "Supplemental Plan") which is
intended to provide eligible participants and their surviving spouses and
beneficiaries with the amount of Employer-provided retirement benefits that the
U.S. Retirement Plan would provide but for the limitation on compensation that
may be recognized under tax-qualified plans imposed by Section 401(a)(17) of the
Internal Revenue Code and the limitations on benefits imposed by Sections 415(b)
and (e) of the Internal Revenue Code. Officers of the Company whose
non-contingent compensation exceeded $160,000 in 1997, or will exceed $160,000
in 1998, are eligible to participate in the Supplemental Plan. Currently Mr.
Cadena is the only eligible participant. The Supplemental Plan takes income into
account for future benefits on a calendar year basis. The amount of 1997
compensation taken into account by the Supplemental Plan for the purpose of
calculating future benefits for Mr. Cadena was $20,003.
The Pension Table sets forth straight life annuity amounts without regard
to reduction for Social Security benefits; benefits listed in the Table are
subject to a deduction of 50% of the eligible employee's estimated primary
Social Security benefit.
10
<PAGE> 13
PENSION TABLE
- --------------------------------------------------------------------------------
YEARS OF SERVICE
<TABLE>
<CAPTION>
REMUNERATION ($) 15 20 25 30/35
- -----------------------------------------------------------
<S> <C> <C> <C> <C>
100,000 25,000 33,333 41,670 50,000
125,000 31,250 41,667 52,083 62,500
150,000 37,500 50,000 62,500 75,000
160,000 40,000 53,333 66,667 80,000
175,000(1) 43,750 58,333 72,917 87,500
270,000(1) 67,500 90,000 112,500 135,000
370,000 92,500 123,333 154,167 185,000
450,000 112,500 150,000 187,500 225,000
</TABLE>
- ---------------
(1) For the U.S. Retirement Plan, with respect to 1997, $160,000 was the maximum
amount of compensation that could be used as the basis for determining
benefits under applicable law. For the Supplemental Plan, with respect to
1997, only non-contingent compensation over $160,000 was used as the basis
for determining benefits.
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, a
portion of an individual's compensation may be payable after termination of
employment, depending on contract terms. During the Transition Period and the
Fiscal Year ended March 31, 1998, Mr. Gorman and the late Frederick D. Berkeley
accrued interest on deferred compensation payable after termination of
employment. At March 31, 1998, the amount of deferred compensation payable to
Mr. Gorman after termination of employment totaled $137,661 and the amount
payable to Mr. Berkeley upon termination of his employment on March 31, 1998
totaled $206,181.
SENIOR EXECUTIVE SEVERANCE AGREEMENTS
Graham has entered into Senior Executive Severance Agreements with certain
of its officers. Among them are Messrs. Cadena and Hansen. These agreements, as
amended to date, provide that in the event a third person effects a change in
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
Transition Period and the fiscal year ended March 31, 1998 were Directors
Bidlack, Hill, Lemcke, Van Rees and the late Robert L. Tarnow. 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 the fiscal
year ended March 31, 1998, Mr. Van Rees was Of Counsel to the law firm Thacher
Proffitt & Wood, which provided legal services to Graham. Mr. Hill and the late
Mr. Berkeley were brothers-in-law.
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. The guiding principles of the
Committee are:
- 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;
11
<PAGE> 14
- to balance base compensation (non-contingent) and incentive
compensation (contingent upon performance) for the purpose of
motivating executive personnel;
- 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.
In recognition of continued improvement in the Company's performance, the
Committee in the most recent fiscal year increased the non-contingent salary of
Frederick D. Berkeley as Graham's Chief Executive Officer by 10% and of its
other executive officers by 4%. These increases represented the second increases
in non-contingent compensation for the CEO and other executive officers
following three consecutive years with no increases. The Committee also
increased the compensation of Mr. Cadena by 7.4% upon Mr. Cadena's election as
President and Chief Operating Officer of the Company on July 27, 1997.
Traditionally, Graham's non-contingent salaries for the CEO and executive
officers have been set below the mid-range of competitive levels. Following the
increases made in the most recent fiscal year, such compensation for the CEO and
executive officers remains below the median compensation levels for similarly
situated executive officers of comparably-sized companies in the industry and
region. Non-cash compensation, in the form of stock options, is nominal as
compared to such other companies.
Decisions regarding executive compensation made during the past fiscal year
relied in part on guidance from a 1996 report prepared by an independent
consulting firm reviewing and comparing compensation levels of senior management
personnel in manufacturing industries in western New York. As it has in the
past, 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 13 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.
In addition to taking into account such factors as the Company's improved
financial performance and improved plant productivity in the last two years, the
Committee considered 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.
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 and 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.
Stock options were granted to the CEO and other executive officers in
October 1997 following two years since the last grant of stock options. No stock
appreciation rights or other forms of equity compensation were granted. The
October 1997 stock option grants were made pursuant to a shareholder approved
plan and for the purpose of further increasing incentives for the Company's
officers to increase shareholder value.
This report is furnished by the members of Graham's Compensation Committee:
H. Russel Lemcke, Chairman
Helen H. Berkeley
Jerald D. Bidlack
Philip S. Hill
Cornelius S. Van Rees
12
<PAGE> 15
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 March 31, 1993 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 MANUFACTURERS(1,2,3)
<TABLE>
<CAPTION>
Amex
Market
Measurement Period Graham Peer Value
(Fiscal Year Covered) Corporation Group Index
<S> <C> <C> <C>
31-March-93 100 100 100
31-March-94 104 114 105
31-March-95 75 131 110
31-March-96 108 176 135
31-March-97 158 163 134
31-March-98 185 226 175
</TABLE>
- ---------------
(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, Flowserve Corp.
(formerly Duriron Co., Inc.), Paul Mueller Co., and Selas Corp. of America.
13
<PAGE> 16
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 March 31, 1999. 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 1999 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 March 3, 1999.
ANNUAL REPORT
A copy of the Annual Report of Graham containing financial statements for
the fiscal year ended March 31, 1998, 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
/s/ ALVARO CADENA
ALVARO CADENA
President & Chief Executive Officer
14
<PAGE> 17
GRAHAM CORPORATION
20 FLORENCE AVENUE
BATAVIA, NEW YORK 14020
http://www.grahamcorp.com
<PAGE> 18
Employee Benefits Committee
June 30, 1998
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"). Chase 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 1998 Annual Meeting of Stockholders scheduled to
be held on July 30, 1998 ("Annual Meeting").
The ESOP Trust and the ISP Trust provide that in casting their votes at
the 1998 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 June 16,
1998 and the Company Stock Fund of the ISP ("Company Stock Fund") as of June 16,
1998.
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 the Burke
Group. The Instruction Card lets you give instructions for each matter expected
to be presented for stockholder action at the Annual Meeting. The Committee
expects the Burke Group 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 1998 Annual Meeting.
How your voting instructions count 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
If Graham Common Stock Was Allocated to Your Account Under the ESOP
Trust as of June 16, 1998:
(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 June 16, 1998 to
<PAGE> 19
-2-
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 June 16, 1998. If you do not file the Instruction
Card by July 9, 1998, 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 July 9, 1998, 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 June 16, 1998.
If You Had an Interest in the Company Stock Fund as of June 16, 1998:
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 June 16, 1998. 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 June 16, 1998. For purposes of the ISP,
if you do not file the Instruction Card by July 9, 1998, 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 1998 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 Card, enclosed is a copy of the Proxy
Statement that is being furnished to all holders of Graham common stock in
connection with the 1998 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
<PAGE> 20
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 JULY 30, 1998
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 June 16, 1998 (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 July 30, 1998 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 June 16, 1998, 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 June 30, 1998.
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
the Burke Group by July 9, 1998.
PLEASE MARK, SIGN AND DATE THIS VOTING INSTRUCTION CARD ON THE
REVERSE SIDE AND RETURN IT IN THE ENCLOSED ENVELOPE.
<PAGE> 21
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 AND "FOR" PROPOSAL 2.
<TABLE>
<S> <C> <C>
- --------------------------- --------------------------
ESOP COMMON (as of 6/16/98) ISP COMMON (as of 6/16/98) PLEASE MARK YOUR CHOICE LIKE THIS [X] IN BLUE OR BLACK INK.
===============================================================================================================================
THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR" THE ELECTION OF NOMINEES AND "FOR" PROPOSAL 2.
- -------------------------------------------------------------------------------------------------------------------------------
1. Election of Directors 2. Ratification of the appointment of Deloitte & Touche LLP as independent
accountants for the period April 1, 1998, through March 31, 1999.
FOR WITHHOLD FOR AGAINST ABSTAIN*
Jerald D. Bidlack [ ] [ ] [ ] [ ] [ ]
Philip S. Hill [ ] [ ]
- -------------------------------------------------------------------------------------------------------------------------------
3. 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.
===============================================================================================================================
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 June 16, 1998, 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> 22
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 JULY 30, 1998
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 June 16, 1998
(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 July 30, 1998 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
July 1,1998, 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 June 30, 1998.
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 the Burke Group by July 9, 1998.
PLEASE MARK, SIGN AND DATE THIS VOTING INSTRUCTION CARD ON THE REVERSE
SIDE AND RETURN IT IN THE ENCLOSED ENVELOPE.
<PAGE> 23
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 AND "FOR" PROPOSAL 2.
<TABLE>
<S> <C>
- ----------------------------
ESOP COMMON (as of 6/16/98) PLEASE MARK YOUR CHOICE LIKE THIS [X] IN BLUE OR BLACK INK.
====================================================================================================================================
THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR" THE ELECTION OF NOMINEES AND "FOR" PROPOSAL 2.
- ------------------------------------------------------------------------------------------------------------------------------------
1. Election of Directors 2. Ratification of the appointment of Deloitte & Touche LLP as independent
accountants for the period April 1, 1998 through March 31, 1999.
FOR WITHHOLD FOR AGAINST ABSTAIN*
Jerald D. Bidlack [ ] [ ] [ ] [ ] [ ]
Philip S. Hill [ ] [ ]
- ------------------------------------------------------------------------------------------------------------------------------------
3. 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.
====================================================================================================================================
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 June 16, 1998, 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> 24
EMPLOYEE STOCK OWNERSHIP PLAN
OF
GRAHAM CORPORATION
AN EMPLOYEE BENEFIT PLAN FOR EMPLOYEES OF GRAHAM CORPORATION
AND ITS AFFILIATES
This Certifies that
is the beneficial owner of
fully paid and non-assessable Shares, par value $.10 per share,
of the COMMON STOCK of
GRAHAM CORPORATION
A CORPORATION INCORPORATED UNDER THE LAWS OF THE
STATE OF DELAWARE
Issued in the name of the individual for the year 1996 and held for the named
individual's benefit by Chase Bank, as Trustee of the Employee Stock Ownership
Plan of Graham Corporation.
As of December 31, 1997
Cornelius S. Van Rees Frederick D. Berkeley, III
Secretary President
This Certificate is not a Certificate of Stock issued by Graham Corporation. A
Certificate of Stock representing the Shares described herein has been issued to
the Trustee. This Certificate and the interest in Shares represented hereby may
not be transferred or assigned by the named individual.
<PAGE> 25
PROXY 1998
GRAHAM CORPORATION
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
The undersigned hereby appoints Cornelius S. Van Rees and H.
Russel Lemcke, 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, July 30, 1998 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 WITHHOLD
Jerald D. Bidlack [ ] [ ]
to serve until 2001
Philip S. Hill
to serve until 2001 [ ] [ ]
2. Ratification of the appointment of Deloitte & Touche
LLP as independent accountants for the fiscal year ending March 31, 1999.
FOR AGAINST ABSTAIN
[ ] [ ] [ ]
3. In their discretion, to vote upon all other matters
as may be properly brought before the meeting.
<PAGE> 26
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR THE NOMINEES 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 AND FOR RATIFICATION OF THE
APPOINTMENT OF AUDITORS.
Date:_____________________, 1998 -----------------------------
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.
2
