SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a)
of the Securities Exchange Act of 1934
[ X ] Filed by the registrant
[ ] Filed by a party other than the registrant
Check the appropriate box:
[ ] 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 ss. 240.14a-11(c) or ss. 240.14a-12
ESPEY MFG. & ELECTRONICS CORP.
- --------------------------------------------------------------------------------
(Name of Registrant as Specified in Its Charter)
ESPEY MFG. & ELECTRONICS CORP.
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
DECEMBER 5, 1997
November 5, 1997
To the Shareholders of
ESPEY MFG. & ELECTRONICS CORP.:
The Annual Meeting of Shareholders of Espey Mfg. & Electronics Corp., will
be held at the Holiday Inn, South Broadway and Route 50, Saratoga Springs, New
York, on December 5, 1997, at 9:30 a.m., Eastern Standard Time, for the
following purposes:
1. To elect two Class A directors to serve for a three year term or
until their respective successors are elected and qualify;
2. To ratify the appointment of KPMG Peat Marwick LLP as the Company's
independent public auditors for the fiscal year ending June 30, 1998;
3. To act upon a shareholder proposal, if presented at the Meeting,
concerning the Shareholder Rights Plan;
4. To act upon a shareholder proposal, if presented at the Meeting,
concerning the qualifications of directors;
5. To act upon a shareholder proposal, if presented at the Meeting,
concerning the classification of the Board of Directors; and
6. To transact such other business as may properly come before the
Meeting or any adjournment thereof.
The Board of Directors has fixed the close of business on October 24,
1997, as the record date for the purpose of determining shareholders entitled to
notice of, and to vote at, said meeting or any adjournment thereof. The books
for transfer of the Company's capital stock will not be closed.
Even if you expect to attend the meeting in person, it is urged by the
Company that you mark, sign, date and return the enclosed proxy. The proxy may
be revoked at any time before it is voted and shareholders who execute proxies
may nevertheless attend the meeting and vote their shares in person. Every
properly signed proxy will be voted as specified unless previously revoked.
By Order of the Board of Directors,
/s/REITA WOJTOWECZ
------------------
REITA WOJTOWECZ
Secretary
Please make your specifications and sign and date the enclosed proxy and
mail it promptly in the accompanying addressed and postage-free envelope.
ESPEY MFG. & ELECTRONICS CORP.
233 Ballston Avenue
Saratoga Springs, New York 12866
PROXY STATEMENT
The enclosed proxy is solicited by the Board of Directors of Espey Mfg.
& Electronics Corp. (the "Company") for use in voting at the Annual Meeting of
the Shareholders of the Company to be held at the Holiday Inn, South Broadway
and Route 50, Saratoga Springs, New York, on December 5, 1997, at 9:30 a.m.,
Eastern Standard Time, and at any postponement or adjournment thereof, for the
purposes set forth in the attached Notice of Meeting. It is anticipated that
this Proxy Statement and the form of proxy will be mailed on or about November
5, 1997.
Voting and Revocability of Proxies
Every properly dated, executed and returned proxy will be voted at the
Annual Meeting in accordance with the instructions of the shareholder. If no
specific instructions are given, the shares represented by such proxy will be
voted: (i) for the election of Class A directors nominated by the Board of
Directors; (ii) for ratification of the appointment of KPMG Peat Marwick LLP as
independent public auditors of the Company for the fiscal year ending June 30,
1998; (iii) against Shareholder Proposal No. 1 concerning the Shareholder Rights
Plan; (iv) against Shareholder Proposal No. 2 concerning qualifications of
directors; and (v) against Shareholder Proposal No. 3 concerning the
classification of the Board of Directors. Any shareholder giving a proxy has the
power to revoke it at any time prior to the voting thereof by voting in person
at the Annual Meeting, by giving written notice to the Secretary prior to the
Annual Meeting, or by signing and delivering a new proxy card bearing a later
date.
The Company has only one class of voting securities, its Common Stock,
par value $.33-1/3 per share (the "Common Stock"). Each share of Common Stock
outstanding on the record date will be entitled to one vote on all matters. In
accordance with the Company's By-Laws and applicable state law, the election of
directors will be determined by a plurality of the votes cast by the holders of
shares of Common Stock present and entitled to vote thereon, in person or by
proxy, at the Annual Meeting. Shares present which are properly withheld as to
voting with respect to any one or more nominees, and shares present with respect
to which a broker indicates that it does not have authority to vote ("broker
non-vote") will not be counted. Cumulative voting in connection with the
election of directors is not permitted. In accordance with the Company's By-Laws
and applicable state law, the affirmative vote of shares representing a majority
of the votes cast by the holders of shares present and entitled to vote is
required to approve the other matters to be voted on at the Annual Meeting.
Shares which are voted to abstain and broker non-votes are not counted as votes
cast on any matter to which they relate.
The By-Laws of the Company provide that the majority of the shares of
the Common Stock of the Company issued and outstanding and entitled to vote,
present in person or by proxy, shall constitute a quorum at the Annual Meeting.
Shares which are voted to abstain are considered as present at the Annual
Meeting for the purposes of determining a quorum. Broker non-votes are
considered as not present at the Annual Meeting for the purposes of determining
a quorum.
Record Date and Share Ownership
Only holders of Common Stock of record on the books of the Company at
the close of business on October 24, 1997, will be entitled to vote at the
meeting. There were outstanding and entitled to vote on October 24, 1997,
1,111,220 shares of Common Stock, par value $.33-1/3 per share.
ELECTION OF DIRECTORS
The Company's Certificate of Incorporation, as amended, provides that
the Board of Directors shall consist of three classes of directors (Class A,
Class B and Class C) with overlapping three-year terms. One class of directors
is to be elected each year for a term extending to the third succeeding Annual
Meeting after such election or until their respective successors are duly
elected and qualify. The term of the two Class A directors expire at the current
Annual Meeting.
The votes will be cast pursuant to the enclosed proxy "For" the
election of each of the Class A nominees named below unless specification is
made withholding such authority. Each of the nominees is presently a director of
the Company and was previously elected a director by the shareholders. Should
any of said nominees for Class A directors become unavailable, which is not
anticipated, the proxies named in the enclosed proxy will vote for the election
of such other persons as the Board of Directors may recommend.
The names and business experience for the past five years of the two
persons who have been nominated by the Board of Directors to stand for election
as Class A directors at the Annual Meeting and the remaining directors whose
terms are continuing until the 1998 or 1999 Annual Meeting appear below.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR THE ELECTION OF THE
FOLLOWING NOMINEES FOR CLASS A DIRECTOR.
NOMINEES FOR CLASS A DIRECTORS -- TO SERVE AS DIRECTORS FOR
A THREE YEAR TERM EXPIRING AT THE 2000 ANNUAL MEETING
Offices and Period to
Position Held Principal Occupation Date Served
Name Age with Company or Employment as Director
- ---- --- ------------ ------------- -----------
Howard Pinsley (1) 57 Executive Vice Prior to his election as Executive 1992
President Vice President on December 6,
1996, he was Vice President-Special
Power Supplies from April 3, 1992
Sol Pinsley (1) 84 Chairman of the President and Chief Executive 1950
Board Officer of the Company for more
than the past five years; Treasurer
from August 4, 1988 to September
10, 1993. Mr. Pinsley retired from
his position as the President and Chief
Executive Officer effective August 1,
1996. He has remained as Chairman of
the Board.
CLASS B DIRECTORS - SERVING A THREE YEAR TERM EXPIRING
AT THE 1998 ANNUAL MEETING
Offices and Period to
Position Held Principal Occupation Date Served
Name Age with Company or Employment as Director
- ---- --- ------------ ------------- -----------
Joseph Canterino 72 President and Prior to his election as President 1992
Chief Executive and Chief Executive Officer
Officer on August 1, 1996, Mr. Canterino
served as Vice President-Manufacturing
from April 3, 1992
William P. Greene 67 -- Since August, 1997, Vice President of 1992
Operations for National Library of
Music, which is a corporation engaged in
the development of computer software.
Prior to his present position, he was
Vice President-Operations of Bulk
Materials International Co., Newton, CT,
which is principally engaged in the sale of
industrial minerals to the cement
producing industry; Associate Professor
of Finance and International Business,
Pennsylvania State University in
Kutztown, PA from 1991 to June, 1994;
from 1985 to 1990, Associate Dean,
School of Business, United States
International University
Seymour Saslow 76 Senior Vice President Prior to his election as Senior Vice 1992
President on December 6, 1996, he
was Vice President-Engineering from
April 3, 1992
CLASS C DIRECTORS -- SERVING FOR A
THREE YEAR TERM EXPIRING AT THE 1999 ANNUAL MEETING
Offices and Period to
Position Held Principal Occupation Date Served
Name Age with Company or Employment as Director
- ---- --- ------------ ------------- -----------
Paul J. Corr 53 -- Certified Public Accountant, 1992
who from 1982 to 1993 was
the managing partner of Corr &
Company, a public accounting
firm in Latham, NY, and is
currently a partner of Richter &
Company, a public accounting
firm in Latham, NY; Since 1981,
Professor of Business, Skidmore
College, in Saratoga Springs,
NY, currently holding the position
of Associate Professor
CLASS C DIRECTORS -- SERVING FOR A
THREE YEAR TERM EXPIRING AT THE 1999 ANNUAL MEETING
Offices and Period to
Position Held Principal Occupation Date Served
Name Age with Company or Employment as Director
- ---- --- ------------ ------------- -----------
Barry Pinsley (1) 55 Vice President- Certified Public Accountant in 1994
Investor Relations Saratoga Springs, NY, who prior
and Human Resources to his election as Vice President-
Investor Relations and Human
Resources on December 6, 1996,
was Vice President-Special
Projects from March 25, 1994,
and acted as a consultant to
the Company for more than the
the past five years.
Michael W. Wool 51 -- Attorney engaged in private 1990
practice of law and partner of
the law firm of Langrock,
Sperry & Wool, in Burlington,
VT for more than the past five years
- ------------------
(1) Sol Pinsley is the father of Barry Pinsley and the uncle of Howard
Pinsley. Barry Pinsley and Howard Pinsley are cousins. Howard Pinsley
and Herbert Potoker, Treasurer and Principal Financial Officer of the
Company, are cousins.
None of the directors holds a directorship in any other company with a
class of securities registered pursuant to Section 12 of the Securities Exchange
Act of 1934 or subject to the requirements of Section 15(d) of the Securities
Act of 1933 or any company registered as an Investment Company under the
Investment Company Act of 1940.
The only individuals currently considered executive officers of the
Company not identified above are:
Herbert Potoker, 68, Treasurer and Principal Financial Officer of the
Company since September 10, 1993. During the past five years and before being
elected to his present office, he was employed by the Company on a full-time
basis in a senior financial management position.
Garry M. Jones, 57, Assistant Treasurer and Principal Accounting
Officer of the Company since August 4, 1988. He was also the Principal Financial
Officer from August 4, 1988 to September 10, 1993. Prior to being elected an
officer of the Company, Mr. Jones was employed by the Company on a full-time
basis as a Senior Accountant.
Reita Wojtowecz, 68, Secretary of the Company since June 27, 1994. She
has been employed by the Company as Director of Human Resources for more than
the past five years.
John J. Pompay, Jr., 62, Vice President-Marketing and Sales since
December 6, 1996. During the past five years and before being elected to his
present position, Mr. Pompay was employed by the Company on a full-time basis as
Director of Marketing and Sales.
BOARD OF DIRECTORS MEETINGS AND COMMITTEES
During the Company's fiscal year ended June 30, 1997, the Board of
Directors held a total of seven meetings, and each director then in office
attended at least 75% of such meetings. The Company's standard arrangement
compensates each director of the Company a fee in the amount of $500 for each
meeting of the Board of Directors and an additional $500 for each meeting of the
Audit Committee attended by such director as a member of the Audit Committee.
Paul J. Corr, William P. Greene and Michael W. Wool were paid $3,170, $3,600 and
$1,000, respectively, for additional services in connection with their duties as
directors for the fiscal year ended June 30, 1997.
The Board has a standing Audit Committee whose members are Paul J.
Corr, Chairman, William P. Greene and Michael W. Wool. The functions of this
Committee include reviewing the engagement of the independent accountants, the
scope and timing of the audit and any non-audit services to be rendered by the
independent accountants, reviewing with the independent accountants and
management the Company's policies and procedures with respect to internal
auditing, accounting and financial controls, and reviewing the report of the
independent accountants upon completion of its audit. During the fiscal year
ended June 30, 1997, the Committee held five meetings.
There is no standing nominating or compensation committee of the Board
of Directors, or committees performing similar functions.
COMPENSATION OF EXECUTIVE OFFICERS
The following table summarizes the annual compensation for each of the
fiscal years ended June 30, 1997, June 30, 1996 and June 30, 1995 received by
the Company's Chief Executive Officer, the other five highest paid executive
officers of the Company who were such as of June 30, 1997, and Sol Pinsley, for
whom disclosure would have been required but for the fact Mr. Pinsley resigned
as President and Chief Executive Officer on August 1, 1996:
SUMMARY COMPENSATION TABLE
Name and Fiscal Annual All Other
Principal Position Year Salary Bonus Compensation(1)
- ------------------ ---- ------ ----- ---------------
Sol Pinsley (2)(3) 1997 $156,670 $25,000 $14,969
Chairman of 1996 $193,900 $25,000 $14,129
the Board 1995 $189,000 $25,000 $ 9,968
Seymour Saslow 1997 $117,075 $25,000 $15,353
Senior Vice President 1996 $112,900 $25,000 $15,063
1995 $108,000 $25,000 $10,393
Joseph Canterino (4) 1997 $133,880 $25,000 $16,536
President and Chief 1996 $103,180 $25,000 $15,819
Executive Officer 1995 $ 98,280 $25,000 $11,320
Howard Pinsley 1997 $109,600 $25,000 $16,455
Executive Vice 1996 $ 93,350 $20,000 $15,567
President 1995 $ 90,450 $12,000 $11,042
Herbert Potoker 1997 $109,855 $25,000 $13,289
Treasurer and 1996 $107,680 $25,000 $11,892
Principal Financial Officer 1995 $101,280 $25,000 $ 9,320
Barry Pinsley 1997 $ 85,050 $12,000 $13,338
Vice President- 1996 $ 84,675 $10,000 $12,389
Investor Relations and 1995 $ 79,500 $10,000 $ 8,083
Human Resources
John J. Pompay, Jr. (3) 1997 $172,963 $ 0 $13,289
Vice President-Sales
- ---------------
(1) Represents (a) the cash and market value of the shares allocated for the
respective fiscal years under the Company's Employee Retirement Plan and
Trust ("ESOP") to the extent to which each named executive officer is
vested, and (b) directors' fees except for Mr. Potoker and Mr. Pompay.
(2) Effective August 1, 1996, Mr. Pinsley retired from the positions of
President and Chief Executive Officer. In accordance with the terms of his
Employment Agreement, Mr. Pinsley has remained as Chairman of the Board and
as a non-executive officer of the Company at a reduced salary. See
"Executive Compensation - Employment Contracts and Termination of
Employment and Change in Control Agreements."
(3) Represents wages as an executive officer and non-executive officer during
fiscal year ending June 30, 1997.
(4) Represents wages as Vice President-Manufacturing and President and Chief
Executive Officer.
The executive officers of the Company are covered under group life and
medical and health plans which do not discriminate in favor of the officers or
directors of the Company and which are available generally to all employees.
The Company maintains insurance coverage, as authorized by Section 727
of the New York Business Corporation Law, providing for (a) reimbursement of the
Company for payment it makes to indemnify officers and directors of the Company,
and (b) payment on behalf of officers and directors of the Company for losses,
costs and expenses incurred by them in actions brought against them in
connection with their acts in those capacities.
EMPLOYMENT CONTRACTS
There has been in effect since July 1, 1973 a full-time employment
contract with Sol Pinsley, who was President, Chief Executive Officer and a
director of the Company until August 1, 1996. The most recent employment
contract was entered into by the Company with Mr. Pinsley on June 12, 1995
pursuant to prior authorization given by the Board of Directors on March 24,
1995. This employment contract, which was approved and ratified by the Board of
Directors on June 17, 1995, is dated and effective as of January 1, 1995 for a
term expiring December 31, 1998, and covers Mr. Pinsley's employment as
President (or Chairman of the Board) and Chief Executive Officer and also as a
non-executive officer employee should Mr. Pinsley elect to become a
non-executive officer employee. The agreement provided a minimum base annual
compensation of $182,000 for each calendar year commencing 1995 and the Board of
Directors in its discretion may increase such compensation for any calendar year
and/or award Mr. Pinsley a bonus for any calendar year. The foregoing
compensation is to be reduced by $40,000 per annum in the event Mr. Pinsley
elected to become a non-executive officer employee. The employment agreement
further provides that in the event of his disability the foregoing compensation
shall continue to be paid to Mr. Pinsley until the expiration date of the
agreement, and, in the event of his death, such compensation shall be paid to
his estate until the expiration date of the agreement or 187 days after his
death, whichever is later. The agreement provides for (i) a restrictive covenant
of non-competition by Mr. Pinsley, and (ii) his covenant not to divulge or use,
other than for the registrant, confidential information concerning the
registrant during and for 18 months after the expiration date of the agreement.
Effective August 1, 1996, Mr. Pinsley retired from the positions of
President and Chief Executive Officer. In accordance with the terms of the above
agreement, Mr. Pinsley has remained as Chairman of the Board and as a
non-executive officer of the Company at a reduced salary.
The Company has entered into an employment contract with John J.
Pompay, Jr. in connection with his duties as Vice President-Marketing and Sales.
The contract is dated and effective as of December 6, 1996 and terminates on
December 31, 1998. The contract provides for a minimum base annual salary of
$10,400 plus commissions at the rate of 3% on all payments received by the
Company against Mr. Pompay's open orders as of the date of the contract and
those orders booked up to and including December 31, 1996, and 1% on all
payments received against orders booked by the Company between January 1, 1997
and December 31, 1998. The contract further provides that if Mr. Pompay's
employment is terminated by the Company prior to the expiration date, other than
for cause, he will continue to receive his full salary for one year after the
termination date and the Company will pay him commissions on all orders received
during the year after termination whenever shipped and paid. The contract also
provides for a restrictive covenant of non-competition by Mr. Pompay for a
period of two years upon termination for cause or termination of the contract by
Mr. Pompay.
EMPLOYEE STOCK OWNERSHIP PLAN
The Board of Directors of the Company adopted on June 2, 1989
effective as of July 1, 1988, and thereafter amended and restated on June 30,
1994, an Employee Retirement Plan and Trust (the "ESOP") to provide retirement
benefits to eligible employees of the Company including officers and to enable
such employees to share in the ownership of the Company. The ESOP used the
proceeds of a loan from the Company to purchase on June 5, 1989 from the Company
316,224 shares of the Company's Common Stock for approximately $8.4 million and
the Company on the same date contributed $397,500 to the ESOP which was used by
the ESOP to purchase from the Company 15,000 shares of the Company's Common
Stock. The loan from the Company to the ESOP is repayable in annual installments
of $1,039,065 including interest at the rate of 9% per annum through June 30,
2004.
The assets of the ESOP are intended to be invested primarily in Common
Stock of the Company and it is intended that at all times the ESOP will
constitute a qualified plan under the Internal Revenue Code. By providing its
employees with a convenient vehicle for accumulating capital for their future
economic security, the Company believes that the ESOP will assist it in
attracting and retaining capable personnel.
All employees of the Company, other than those covered under a
collective bargaining agreement, who have completed one year of service and are
21 years or older, are eligible to participate in the ESOP. For each plan year
the Company's contributions may be paid to the trustee of the ESOP in such
amount as may be determined by the Board of Directors, provided, however, that
the Company has agreed to make contributions sufficient to discharge the ESOP's
loan obligations with respect to its aforementioned purchase of the Company's
Common Stock. Contributions by the Company may be paid in cash or in shares of
Common Stock of the Company. No participant is required or permitted to make
contributions to the ESOP.
With each principal and interest payment made by the ESOP on the loan
obligation, a portion of the Company's Common Stock purchased with such loan
proceeds will be allocated to participating employees. The allocation of the
Company stock for any plan year will be credited to each participant's account
on the basis of the ratio of such participant's compensation (up to a maximum of
$100,000) to the aggregate compensation of all participants in the ESOP for such
plan year; provided, however, that for each plan year the annual allocation with
respect to any participant may not exceed the lesser of 25% of compensation or
$30,000. In addition, a participant's account will be credited annually with a
share of the investment earnings and losses of the ESOP, allocated in a manner
similar to the above. Forfeitures will likewise be allocated among the remaining
participants in a similar manner.
As of June 30, 1997, there were 152,451 shares of the Company's Common
Stock in the ESOP allocated to participants, of which 2,816.19 shares were
allocated to Sol Pinsley, 4,921.19 shares each were allocated to Joseph
Canterino, Herbert Potoker and John J. Pompay, and 4,602.21 shares were
allocated to Howard Pinsley, 4,620.19 shares were allocated to Seymour Saslow,
and 1,499.21 shares were allocated to Barry Pinsley.
The trustee for the ESOP will vote the shares of the Company's Common
Stock in accordance with instructions received from participants with respect to
shares allocated to their respective accounts, and in accordance with
instructions received from the plan administrator appointed by the Company with
respect to shares not allocated to participants and with respect to shares
allocated to participants for which voting instructions are not received from
participants.
Generally, no benefits are vested until the completion of three
continuous years of service with the Company, as defined by the plan. At that
time a participant's interest will be 20% vested; such vested interest will
increase by 20% for each additional year of continuous service and will reach
100% after seven years. Upon death or upon attaining Normal Retirement Age, a
participant will become 100% vested.
At retirement, termination, death or permanent disability, a
participant will be entitled to his or her vested benefit. Distribution of
vested benefits will be made in accordance with the terms of the plan and in
accordance with the Internal Revenue Code. Subject to certain exceptions,
distributions must begin no later than April 1 following the calendar year in
which the participant reaches age 70-1/2, even if the participant does not
retire.
SECURITY OWNERSHIP OF CERTAIN
BENEFICIAL OWNERS
The following table sets forth information regarding ownership of the
Company's outstanding Common Stock as of October 24, 1997 by each person or
group who is known to the Company to be the beneficial owner of more than five
percent of the outstanding shares of Common Stock.
Name and Address Amount and Nature of Percent of
of Beneficial Owner Beneficial Ownership Class
------------------- -------------------- -----
Sol Pinsley 80,261.00 -Direct 7.4762%
P.O. Box 422 2,816.19 -Indirect (1)
Saratoga Springs,
NY 12866
Dimensional Fund 74,400.00 -Direct (2) 6.6953%
Advisors Inc.
1299 Ocean Avenue
11th Floor
Santa Monica, CA 90401
Franklin Resources, Inc. 96,300.00 -Direct (3) 8.6662%
777 Mariners Island Blvd.
P.O. Box 7777
San Mateo, CA 94403-7777
The Adirondack Trust 299,297.00 -Direct (4) 26.9340%
Company, as Trustee of
the Company's Employee
Retirement Plan and Trust
473 Broadway
Saratoga Springs,
NY 12866
- -----------
(1) Does not include 4,200 shares of Common Stock of the Company owned by the
testamentary trust of the deceased spouse of Sol Pinsley, Ruth Pinsley,
beneficial ownership of which is disclaimed by Mr. Pinsley. The shares
listed as indirectly owned by Sol Pinsley are the shares allocated to him
as of June 30, 1997 as a participant in the Company's ESOP. Mr. Pinsley has
the right under the ESOP to direct the manner in which such shares
allocated to him are to be voted by the ESOP Trustee.
(2) The information as to the number of shares of Common Stock of the Company
that may be deemed beneficially owned by Dimensional Fund Advisors Inc.
("Dimensional") is from the Schedule 13G dated February 5, 1997 filed with
the Securities and Exchange Commission. Dimensional, a registered
investment advisor, is deemed to have beneficial ownership of 74,400 shares
of Espey Mfg. & Electronics Corp. stock as of December 31, 1996, all of
which shares are held in portfolios of DFA Investment Dimensions Group,
Inc., a registered open-end investment company, or in series of the DFA
Investment Trust Company, a Delaware business trust, or the DFA Group Trust
and DFA Participation Group Trust, investment vehicles for qualified
employee benefit plans, all of which Dimensional Fund Advisors Inc. serves
as investment manager. Dimensional disclaims beneficial ownership of all
such shares. Dimensional reported sole voting power with respect to 49,500
shares.
(3) The information as to the number of shares of Common Stock of the Company
that may be deemed beneficially owned by Franklin Resources, Inc.
("Franklin") is from the Schedule 13G, dated February 12, 1997 filed with
the Securities and Exchange Commission. The Franklin statement indicated
that Franklin's investment advisory subsidiary, Franklin Advisory Services,
Inc. ("Franklin Advisory") has sole voting and dispositive power with
respect to all of the shares of Common Stock shown in the table above for
Franklin. The Franklin statement indicates that the Common Stock set forth
in the table is beneficially owned by one or more open or closed-end
investment companies or other managed accounts which are advised by direct
and indirect Franklin investment advisory subsidiaries, including Franklin
Advisory. The statement also indicated that it filed the Schedule 13G on
behalf of itself, Franklin Advisory, and Franklin's principal shareholders,
Charles B. Johnson and Rupert H. Johnson, Jr. (the "Principal
Shareholders"), all of which are deemed beneficial owners of the shares of
Common Stock shown in the above table for Franklin. Franklin, the Principal
Shareholders and Franklin Advisory disclaim any economic interest or
beneficial ownership in any of the Common Stock shown in the table for
Franklin.
(4) This information is from the Form 4 dated August 29, 1997, filed with the
Securities and Exchange Commission by the Trustee on behalf of the
Company's Employee Retirement Plan and Trust ("ESOP"). The ESOP Trustee has
sole voting power with respect to unallocated common shares owned by the
Trust, 147,083 shares as of August 28, 1997, as directed by the Plan
Administrator appointed by the Company's Board of Directors. As to the
shares of Common Stock allocated to participants, 152,214 shares as of
August 28, 1997, the ESOP Trustee has the power to vote such shares as
directed by such Plan Administrator to the extent the participants do not
direct the manner in which such shares are to be voted.
SECURITY OWNERSHIP OF MANAGEMENT
The following table sets forth information regarding ownership of the
Company's outstanding Common Stock as of October 24, 1997, by (i) the Class A
nominees for director, (ii) the remaining directors, (iii) executive officers,
and (iv) the nominees, remaining directors and executive officers as a group.
Name of Amount and Nature of Percent of
Beneficial Owner Beneficial Ownership Class
---------------- -------------------- -----
Paul J. Corr 500.00 -Direct .0450%
William P. Greene 100.00 -Direct .0090%
Michael W. Wool 100.00 -Direct .0090%
Sol Pinsley 80,261.00 -Direct 7.4762%
2,816.19 -Indirect (1)(2)
Seymour Saslow 301.00 -Direct .4429%
. 4,620.19 -Indirect (2)
Joseph Canterino 7,500.00 -Direct 1.1178%
4,921.19 -Indirect (2)
John J. Pompay, Jr. 4,921.19 -Indirect (2) .4429%
Howard Pinsley 39,134.00 -Direct 3.9359%
4,602.21 -Indirect (2)
Barry Pinsley 1,000.00 -Direct .7199%
6,999.21 -Indirect (2)(3)(4)
Herbert Potoker 6,190.00 -Direct 1.0269%
5,221.19 -Indirect (2)(5)
Garry M. Jones 2,279.94 -Indirect (2) .2052%
Reita Wojtowecz 1,558.97 -Indirect (2) .1403%
Officers and Directors 135,386.00 -Direct 15.5618%
as a Group 37,640.28 -Indirect (6)
- -------------
(1) Excludes 4,200 shares owned by a testamentary trust of Ruth Pinsley, the
deceased spouse of Sol Pinsley. Beneficial ownership of the shares owned by
the trust is disclaimed by Mr. Pinsley.
(2) Shares allocated to named officer as of June 30, 1997 as a participant in
the Company's ESOP. Each such person has the right to direct the manner in
which such shares allocated to him or her are to be voted by the ESOP
Trustee.
(3) Includes 1,300 shares owned by Barry Pinsley's spouse, as to which
beneficial ownership is disclaimed by Mr. Pinsley.
(4) Includes 4,200 shares owned by a testamentary trust of Ruth Pinsley, the
deceased spouse of Sol Pinsley. As trustee of the trust, Barry Pinsley is
deemed the beneficial owner, as defined in Rule 13d-3, of the shares held
by the trust.
(5) Includes 300 shares owned by Herbert Potoker's spouse, as to which
beneficial ownership is disclaimed by Mr. Potoker.
(6) Shares allocated to all officers as a group as of June 30, 1997 who
participate in the Company's ESOP. Each such person has the right to direct
the manner in which such shares allocated to him or her are to be voted by
the ESOP Trustee.
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
For the fiscal year ended June 30, 1997, Christopher Canterino, who is
a full time employee of the Company and the son of Joseph Canterino, President
and Chief Executive Officer of the Company, received compensation as such
employee of $84,650.00, as well as an ESOP allocation of Company Stock and
dividends thereon totalling $10,626.00.
The Company paid the law firm of Langrock, Sperry & Wool, of which
Michael W. Wool, a director of the Company, is a partner, a total of $42,000 for
legal services during the fiscal year ended June 30, 1997. The Company also paid
directors Paul J. Corr, William P. Greene and Michael W. Wool $3,170, $3,600 and
$1,000, respectively, for additional services in connection with their duties as
directors for the fiscal year ended June 30, 1997. The Company believes that the
above services were provided to it at a cost comparable to that which the
Company would have been required to pay for comparable services from an
unaffiliated third party.
BOARD OF DIRECTORS' PROPOSAL TO RATIFY
APPOINTMENT OF INDEPENDENT PUBLIC AUDITORS
Unless otherwise specified by the shareholders, the shares represented
by their properly executed proxies will be voted for ratification of the
appointment of KPMG Peat Marwick LLP as independent auditors for the fiscal year
ending June 30, 1998. The Company is advised by said firm that neither KPMG Peat
Marwick LLP nor any of its partners now has, or during the past three years had,
any direct financial interest or material indirect financial interest or any
connection (other than as independent auditors) with the Company.
A representative of KPMG Peat Marwick LLP is expected to be present at
the Annual Meeting with the opportunity to make a statement if he desires to do
so and to be available to respond to appropriate questions from shareholders.
For the fiscal year ended June 30, 1997, the only professional services
provided by KPMG Peat Marwick LLP to the Company were audit services, tax
services and services in connection with the maintenance of the ESOP. The only
fees paid by the Company to KPMG Peat Marwick LLP were for the foregoing
services.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR RATIFICATION OF THE
APPOINTMENT OF KPMG PEAT MARWICK LLP AS INDEPENDENT AUDITORS FOR THE COMPANY FOR
FISCAL YEAR ENDING JUNE 30, 1998.
SHAREHOLDER PROPOSALS
There are three proposals submitted by shareholders, which if the
respective proponent presents at the Annual Meeting, will be acted upon at the
Annual Meeting. THE BOARD OF DIRECTORS, FOR THE REASONS STATED BELOW, RECOMMENDS
A VOTE AGAINST EACH OF THESE PROPOSALS.
PROPOSAL NO. 1
Proposal No. 1, submitted by Bismoline Manufacturing Company, 411 S.
Queen Street, Lancaster, PA 17603-5617, as owner of 300 shares of Common Stock,
together with its supporting statement, is as follows:
Proposal
RESOLVED, the shareholders of Espey Manufacturing and Electronics
Corporation hereby recommend to the Board of Directors that the 1989 Shareholder
Rights Plan and subsequent amendments to that plan be immediately redeemed.
Proponent's Supporting Statement
The Shareholder Rights Plan is a euphemism for "poison pill". The plan
does not protect shareholder rights, it only entrenches management by possibly
preventing unsolicited takeover offers.
Espey Manufacturing and Electronics Corporation's 1989 Shareholder
Rights Plan was created by the Board of Directors. The plan was adopted without
a vote of the shareholders. Legally, shareholder approval was not needed for the
adoption of the Shareholder Rights Plan. However, the Board's (a majority of the
Directors is management) failure to seek the approval of all the shareholders
indicates that management is placing its interests above those of non-management
shareholders.
The Securities and Exchange Commission, commenting on poison pills, has
stated "tender offers can benefit shareholders by offering them an opportunity
to sell the shares at a premium and by guarding against management entrenchment.
However, because poison pills are intended to deter non-negotiated tender
offers, and because they gain this potential effect without shareholder consent,
the "pill" can effectively prevent shareholders from even considering the merits
of a takeover that is opposed by the Board."
A shareholder rights plans can have the effect of reducing the price of
the stock because it may remove the threat of a hostile takeover.
The best protection against a takeover is a well run company with a
high per share price relative to book value and sales. The stock of Espey
Manufacturing & Electronics Corp. has traded substantially below book value for
a number of years. The Shareholder Rights Plan may have had the effect of
reducing the price of the stock. Could the removal of the Shareholder Rights
Plan boost the price of the stock?
Bismoline Manufacturing Company urges you to vote FOR this proposal
which recommends that the Board redeem the Shareholder Rights Plan.
Management Statement on Proposal
THE BOARD OF DIRECTORS RECOMMENDS A VOTE AGAINST PROPOSAL NO. 1 FOR THE
FOLLOWING REASONS:
Shareholder proposals to redeem the Shareholder Rights Plan were
defeated by the shareholders at the last two annual meetings. The Board of
Directors has no evidence that the Shareholder Rights Plan has decreased the
price of the Company's stock. Similar plans have been adopted by many public
companies, and the Board believes the Plan is a responsible and important
measure which, in the appropriate case, still allows the Board and shareholders
to carefully examine and evaluate any bona fide offers to acquire the stock of
the Company.
PROPOSAL NO. 2
Proposal No. 2, submitted by Arthur H. Keen, 317 College Avenue,
Lancaster, PA 17603, as owner of 1,000 shares of Common Stock, together with his
supporting statement, is as follows:
Proposal
RESOLVED, the shareholders of Espey Manufacturing and Electronics
Corporation hereby amend (authorized by Article 10, Section 1) the corporate
bylaws Article II Section 2 (Directors' Qualifications) to read: The entire
Board of Directors shall consist of a majority of independent directors. A
Director will be a shareholder of the Corporation.
Proponent's Supporting Statement
The Board of Directors currently consists of nine individuals, six of
whom are employees of the Corporation. Since a majority of the shares are held
by individuals and groups not associated with the Corporation, the majority of
the directors should be independent.
The independent or "outside" director:
1. is not a current employee of the Corporation,
2. is not a former employee who is currently receiving
compensation for prior services (other than benefits under a
tax-qualified retirement plan) during the current calendar
year,
3. has not been an officer of the Corporation, and
4. does not receive remuneration, either directly or indirectly,
in any capacity other than as a director.
Directors face a possible conflict of interest when asked to act on the
behalf of the shareholders' best interests if they are employed in any capacity
by the Corporation.
The three non-employee directors own amongst themselves 600 shares of
the Corporation's Common Stock. A director's substantial interest in a
corporation enhances his or her ability to properly represent the shareholders.
An outside director should own a minimum of 1,000 shares at the completion of
his or her second year of service.
Management Statement on the Proposal
THE BOARD OF DIRECTORS RECOMMENDS A VOTE AGAINST PROPOSAL NO. 2 FOR THE
FOLLOWING REASONS:
The Company must have Directors that are familiar with its unique
products, customers, operations and technology. The officers of the Company fit
those qualifications. To limit the number of such people who can serve on the
Board would be to deprive the Company of a valuable and unique resource. Also,
the Company currently has a number of independent or outside Directors, and the
Company plans to continue that practice.
PROPOSAL NO. 3
Proposal No. 3, submitted by Gary L. Sample, 224 N. Duke St.,
Lancaster, PA 17602, as owner of 100 shares of Common Stock, together with his
supporting statement, is as follows:
Proposal
RESOLVED: The stockholders of Espey Manufacturing and Electronics
("Espey") or the ("Company") assembled at the annual meeting in person and by
proxy, hereby request that the Board of Directors amend the Certificate of
Incorporation to provide that at future elections new directors be elected
annually and not by class, as is now provided, and that on expiration of present
terms of directors their subsequent election shall be on an annual basis.
Proponent's Supporting Statement
It is my belief that the classification of the Board is not in the best
interest of the Company and the majority shareholders. A three-year guaranteed
seat promotes entrenchment and complacency. The elimination of the staggered
board would require each director to stand for election annually. This procedure
would allow shareholders an opportunity to annually register their views on the
performance of the Board collectively and each director individually.
The Board purports:
1. Outsiders currently need two elections to gain control of the
Board. This is beneficial if a takeover attempt is not in the
best interest of the Company and its shareholders.
2. Classification is designed to provide continuity of management.
If the majority shareholders oust one class of directors, they should
not need to wait one year and incur the expense of another election. If a
takeover attempt is not in the best interest of the majority shareholder, he
will accept or decline with his vote or tender of shares. There is no need for
the Board to speak on his behalf.
Secondly, continuity of management involving the daily operations of
the Company is important. Classification is created to provide for extended
placement of Board members not continuity of corporate management.
According to Investor Responsibility Research Center (IRRC) studies,
the classified board is considered an antitakeover device. In conjunction with
the ESOP and the "poison pill" the pattern speaks for itself.
I urge you to vote in favor of this proposal.
Management Statement on the Proposal
THE BOARD OF DIRECTORS RECOMMENDS A VOTE AGAINST PROPOSAL NO. 3 FOR THE
FOLLOWING REASONS:
Similar proposals have been defeated by the shareholders at the last
two annual meetings. The current Board term structure (voted in by the
shareholders only four years ago) provides the Company with stability and
continuity by ensuring that there will always be a number of experienced
Directors at the Company's service.
COMPLIANCE WITH SECTION 16(A) OF THE
SECURITIES EXCHANGE ACT
Section 16(a) of the Securities Exchange Act of 1934, as amended,
generally requires the Company's directors, executive officers, and persons who
own more than ten percent of a registered class of the Company's equity
securities, to file reports of beneficial ownership and changes in beneficial
ownership with the Securities and Exchange Commission. Based solely upon its
review of copies of such reports received by it, or upon written representations
obtained from certain reporting persons, the Company believes that its officers,
directors, and stockholders who own more than ten percent of the Company's
equity securities have complied with all Section 16(a) filing requirements.
ANNUAL REPORTS
The Annual Report of the Company to the shareholders for the fiscal
year ended June 30, 1997, including financial statements, accompanies this Proxy
Statement. Such financial statements are not incorporated herein by reference.
A copy of the Company's Annual Report on Form 10-K (including financial
statements and schedules thereto) for the fiscal year ended June 30, 1997 filed
with the Securities and Exchange Commission will be provided without charge upon
the written request of shareholders to Espey Mfg. & Electronics Corp.,
attention: Treasurer, 233 Ballston Avenue, Saratoga Springs, New York 12866.
Copies of Exhibits to Form 10-K for the fiscal year ended June 30, 1997 will be
provided upon request upon payment of a reasonable fee.
SHAREHOLDER PROPOSALS FOR 1998
ANNUAL MEETING
Any shareholder proposal which may be a proper subject for inclusion in
the proxy statement and for consideration at the 1998 Annual Meeting must be
received by the Company at its principal executive office no later than July 8,
1997, if it is to be included in the Company's 1998 proxy statement and proxy
form.
OTHER MATTERS
Proxy Solicitation
The solicitation of the enclosed proxy is being made on behalf of the
Board of Directors and the cost of preparing and mailing the Notice of Meeting,
Proxy Statement and form of proxy to shareholders is to be borne by the Company.
Other Matters
The Company is unaware of any other matter that will be brought before
the meeting for action. If other matters should come before the meeting which
require a shareholder vote, it is intended that the proxy holders will use their
own discretion in voting on such other matters.
By Order of the Board of Directors,
/s/JOSEPH CANTERINO
-------------------
JOSEPH CANTERINO
President and Chief
Executive Officer
November 5, 1997
Saratoga Springs, New York
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
ESPEY MFG. & ELECTRONICS CORP.
PROXY FOR THE
1997 ANNUAL MEETING OF SHAREHOLDERS
December 5, 1997
The undersigned hereby appoints Joseph Canterino and Howard Pinsley as Proxies,
each with the power to appoint his substitute, and hereby authorizes them or any
one of them to represent and to vote, as designated below, all the shares of
common stock of ESPEY MFG. & ELECTRONICS CORP. which the undersigned would be
entitled to vote if personally present at the 1997 Annual Meeting of
Shareholders to be held on December 5, 1997 or any adjournment thereof.
1. ELECTION OF CLASS A DIRECTORS
o FOR all nominees listed below (except as marked to the contrary below)
o WITHHOLD AUTHORITY to vote for all nominees listed below
HOWARD PINSLEY SOL PINSLEY
Management recommends a vote FOR these nominees.
INSTRUCTION: To withhold authority to vote for any individual nominee, mark the
"FOR" box above AND write the nominee's name in the space provided below.
- --------------------------------------------------------------------------------
2. PROPOSAL TO APPROVE THE APPOINTMENT OF KPMG Peat Marwick LLP as the
independent public auditors of the Company.
o FOR o AGAINST o ABSTAIN
Management recommends a vote FOR this proposal.
3. SHAREHOLDER PROPOSAL NO. 1 concerning the Shareholder Rights Plan.
o FOR o AGAINST o ABSTAIN
Management recommends a vote AGAINST this proposal.
4. SHAREHOLDER PROPOSAL NO. 2 concerning the qualifications
of directors.
o FOR o AGAINST o ABSTAIN
Management recommends a vote AGAINST this proposal.
5. SHAREHOLDER PROPOSAL NO. 3 concerning the classification
of the Board of Directors.
o FOR o AGAINST o ABSTAIN
Management recommends a vote AGAINST this proposal.
6. In their discretion, the Proxies are authorized to vote upon such other
business as may properly come before the meeting.
Please be sure to sign and date this Proxy in the box below.
_________________________________________
Date
_________________________________________
Stockholder sign above
_________________________________________
Co-holder (if any) sign above
Fold card here, sign, date and mail in postage paid envelope provided.
ESPEY MFG. & ELECTRONICS CORP.
THIS PROXY WHEN PROPERLY EXECUTED WILL BE VOTED IN THE MANNER DIRECTED HEREIN BY
THE ABOVE SIGNED SHAREHOLDER.
IF NO DIRECTION IS MADE, THIS PROXY WILL BE VOTED FOR PROPOSALS 1 AND
2 AND AGAINST PROPOSALS 3, 4 AND 5.
Please sign exactly as name appears hereon. When shares are held by joint
tenants, both should sign. When signing as attorney, executor, administrator,
trustee or guardian, please give full title as such. If a corporation, please
sign in full corporation name by President or other authorized officer. If a
partnership, please sign in partnership name by authorized person.
PLEASE MARK, SIGN, DATE AND RETURN THE PROXY CARD PROMPTLY USING THE ENCLOSED
ENVELOPE.