SCHEDULE 14A
(Rule 14a-101)
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:
[_] 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 Under Rule 14a-12
Espey Mfg. & Electronics Corp.
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(Name of Registrant as Specified In Its Charter)
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(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.
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previously. Identify the previous filing by registration statement number,
or the form or schedule and the date of its filing.
1) Amount previously paid:
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ESPEY MFG. & ELECTRONICS CORP.
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS TO
BE HELD NOVEMBER 21, 2008
October 20, 2008
To the Shareholders of
ESPEY MFG. & ELECTRONICS CORP.:
You are cordially invited to attend the Annual Meeting of Shareholders
of Espey Mfg. & Electronics Corp., which will be held at the Courtyard Marriot,
11 Excelsior Ave., Saratoga Springs, New York, on November 21, 2008, at 9:00
a.m., Eastern Standard Time, for the following purposes:
1. To elect two Class C Directors to serve for a three
year term expiring at the 2011 Annual Meeting or
until their respective successors are duly elected
and qualify; and
2. To ratify the appointment of Rotenberg & Company, LLP
as the Company's independent public accountants for
the fiscal year ending June 30, 2009.
No other business may be transacted at the meeting.
The Board of Directors has fixed the close of business on October 8,
2008, 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 Ordcr of the Board of Directors,
Peggy A. Murphy
Corporate Secretary
Please make your specification and sign and date the enclosed proxy and mail it
promptly in the accompanying pre-addressed, postage-free envelope.
1
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 Courtyard Marriott, 11
Excelsior Ave., Saratoga Springs, New York, on November 21, 2008, at 9:00 a.m.,
Eastern Standard Time, and at any postponement or adjournment thereof, for the
purposes set forth in the attached Notice of Meeting. It is anticipated that the
Notice of Annual Meeting of Shareholders, this Proxy Statement and the form of
proxy will be mailed on or about October 20, 2008.
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 the Class C Directors nominated by the Board of
Directors, and (ii) For ratification of the appointment of Rotenberg & Company,
LLP as the Company's independent public accountants for the fiscal year ending
June 30, 2009. Any shareholder giving a proxy has the power to revoke it at any
time prior to the voting thereof by voting in person at the Annual Meeting, by
giving written notice to the Secretary prior to the Annual Meeting, or by
signing and delivering a new proxy card bearing a later date.
The Company's only class of voting securities is its Common Stock, par
value $.33-1/3 per share (the "Common Stock"). Each share of Common Stock
outstanding on the record date will be entitled to one vote on all matters. In
accordance with the Company's By-Laws and applicable state law, the election of
directors will be determined by a plurality of the votes cast by the holders of
shares of Common Stock present and entitled to vote thereon, in person or by
proxy, at the Annual Meeting. Shares present which are properly withheld as to
voting with respect to any one or more nominees, and shares present with respect
to which a broker indicates that it does not have authority to vote ("broker
non-vote") will not be counted. Cumulative voting in connection with the
election of directors is not permitted. 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 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 8, 2008, will be entitled to vote at the
meeting. There were outstanding and entitled to vote on October 8, 2008,
2,326,796 shares of Common Stock.
PROPOSAL NO.1
ELECTION OF DIRECTORS
The Company's Certificate of Incorporation, as amended, provides that
the Board of Directors shall consist of not less than three nor more than nine
persons with the actual number determined in accordance with the Company's
bylaws. The Certificate of Incorporation further provides that there shall be
three classes of directors (Class A, Class B and Class C) with overlapping
three-year terms and that all classes shall be as nearly equal in number as
possible.
The Board of Directors fixed the present number of directors at seven.
The terms of two Class C Directors expire at the Annual Meeting. There are
presently Three Class A Directors, whose terms expire at the 2009 Annual
Meeting, and two Class B Directors, whose terms expire at the 2010 Annual
Meeting.
The Board of Directors has nominated two persons to stand for election
as Class C Directors.
The votes will be cast pursuant to the enclosed proxy for the election
of each of the Class C nominees named unless specification is made withholding
such authority. Each of the nominees is presently a director of the Company.
Should any of said nominees for Class C Directors become unavailable, which is
not anticipated, the proxies named in the enclosed proxy will vote for
2
the election of such other persons as the Board of Directors may recommend.
Proxies may not be voted for a greater number of persons than the nominees
named.
The names and business experience for the past five years of the two
persons who have been nominated by the Board of Directors to stand for election
as Class C Directors at the Annual Meeting and the remaining directors whose
terms are continuing until the 2009 or 2010 Annual Meeting appear below.
The Board has determined that the Board members with the exception of
Howard Pinsley and Barry Pinsley are independent in accordance with the listing
standards of the American Stock Exchange and the Bylaws of the Company.
The Board determined that the payments for miscellaneous legal services
that have been made from time to time to the law firm Langrock, Sperry & Wool,
of which Michael W. Wool is a Senior Partner, did not prevent it from concluding
that Mr. Wool is independent, because the amount of the payments constituting
legal fees have not exceeded $60,000 during any of the four previous years.
The independent members of the Board met twice during the fiscal year
ended June 30, 2008, with no members of management present.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR THE ELECTION OF THE FOLLOWING
NOMINEES FOR CLASS C DIRECTORS.
NOMINEES FOR CLASS C DIRECTORS - SERVING FOR A THREE YEAR TERM
EXPIRING AT THE 2011 ANNUAL MEETING
Period to
Offices and Date
Positions Held Served as
Name Age with Company Principal Occupation orEmployment Director
---- --- ------------ --------------------------------- --------
Paul J. Corr 64 Certified Public Accountant who has been a Principal. at Capital 1992
Financial Advisors of New York. LLC, Clifton Park, NY, since 2003.
Mr. Corr is also a shareholder in the Clifton Park, NY accounting firm
of Rutnik & Corr. P.C. In May 2007 he retired from Skidmore College
where he had been a Professor of Management and Business since 1981.
Michael W. Wool 62 Attorney engaged in private practice of law and Senior Partner since 1990
1982 in the law firm of Langrock, Sperry &, Wool, with offices in
Burlinglton, VT and Middlebury, VT. Mr. Wool also serves on the
board of the New England Board of Higher Education and the
Burlington Boys and Girls Club.
CONTINUING CLASS A DIRECTORS - SERVING FOR A THREE YEAR TERM
EXPIRING AT THE 2009 ANNUAL MEETING
Period to
Offices and Date
Positions Held Served as
Name Age with Company Principal Occupation orEmployment Director
---- --- ------------ --------------------------------- --------
Howard Pinsley (1) 68 President, Howard Pinsley has spent his entire career with the Company. He 1992
Chief served as Program Director prior to being elected Vice President-
Executive Special Power Supplies on April 3, 1992. On December 6, 1996, Mr.
Officer and Pinsley was elected to the position of Executive Vice President. On
Chairman of June 9, 1998 he was elected to the positions of President and Chief
the Board Operating Officer, Subsequently he became Chief Executive Officer and
Chairman of the Board.
3
CONTINUING CLASS A DIRECTORS - SERVING FOR A THREE YEAR TERM
EXPIRING AT THE 2009 ANNUAL MEETING
Period to
Offices and Date
Positions Held Served as
Name Age with Company Principal Occupation orEmployment Director
---- --- ------------ --------------------------------- --------
Alvin O. Sabo 65 Attorney engaged in private practice of law and Of Counsel to the law 1999
firm of Donohue, Sabo, Varley & Huttner, LLP in Albany, NY. He was
a partner with a predecessor firm beginning in 1980. Prior to that
position, he was Assistant Attorney General, State of New York,
Department of Law for eleven years.
Carl Helmetag 60 President and CEO of UVEX Sports Inc. in Cranston R.I. From 1996 1999
1999, he was President and CEO of HEAD USA Inc. Prior to that
position, Mr. Helmetag was Executive Vice President and then
President at Dynastar Inc. from 1978 to 1996. He is a MBA graduate
from The Wharton School of Business, University of Pennsylvania.
CONTINUING CLASS B DIRECTORS - SERVING FOR A THREE YEAR
TERM EXPIRING AT THE 2010 ANNUAL MEETING
Period to
Offices and Date
Positions Held Served as
Name Age with Company Principal Occupation orEmployment Director
---- --- ------------ --------------------------------- --------
Barry Pinsley (1) 67 Certified Public Accountant who for five years acted as a 1994
consultant to theCompany prior to his election as a Vice President
Special projects onMarch 25, 1994. On December 6, 1997 Mr. Pinsley was
elected to theposition of Vice President-Investor Relations and Human
Resources, fromwhich he resigned on June 9, 1998. He continued as a
non-executive officer through December 31, 2005. Mr. Pinsley was a
practicing Certified Public Accountant in Saratoga Springs, New York
since 1975, and is currently semi-retired.
Seymour Saslow 87 Mr. Saslow was Senior Vice President from 1992 until December 31, 1992
1999. From 1973 until being elected Senior Vice President, he served
as Vice President. He joined the Company on July 22, 1952. Mr.
Saslow graduated from the City College of New York in 1944 with a
degree in electrical engineering and is a senior member of the
Institute of Electrical and Electronics Engineers Inc. He holds many
patents and serves on the board of several charitable organizations.
(1) Barry Pinsley and Howard Pinsley 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.
4
The only individuals currently considered executive officers of the Company not
identified previously are:
James Clemens, 59, Vice President of Sales and Marketing of the Company
since March 1, 2004. He was elected as an executive officer on May 19, 2006. Mr.
Clemens held various positions in the power systems industry for seven years
prior to joining the Company. From 1997 to 1999, he was President and Chief
Executive Officer of Ling Electronics, Inc., which was acquired by SatCon Power
Systems. He then served as Transition Manager and consultant to SatCon until
2003.
Katrina L. Sparano, 37, Assistant Treasurer and Principal Accounting
Officer of the Company since November 12, 2004. Ms. Sparano is a Certified
Public Accountant. Prior to joining the Company on July 29, 2004, she was the
Assistant Controller for Cambridge Heart, Inc.
Peggy A. Murphy, 50, Secretary of the Company since December 11, 1998.
She has been employed by the Company as Director of Human Resources since
October 1998.
David A. O'Neil, 43, Treasurer and Principal Financial Officer since
January 4, 2000. Mr. O'Neil is a Certified Public Accountant who, prior to
joining the Company, was a Senior Manager at the accounting firm of KPMG LLP.
The terms of office of all executive officers are until the next annual
meeting of the Board of Directors unless successors are sooner appointed by the
Board of Directors.
BOARD OF DIRECTORS MEETINGS AND COMMITTEES
During the Company's fiscal year ended June 30, 2008, the Board of
Directors held a total of four meetings, and each director then in office
attended at least 75% of such meetings. Under the policies of the Board,
Directors are expected to attend regular Board meetings, Board committee
meetings, as applicable, and the annual stockholder meeting. All of the
Company's directors attended the 2007 Annual Meeting.
The Board has a standing Audit Committee whose members are Paul J.
Corr, Chairman, Alvin O. Sabo and Carl Helmetag. 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, 2008, the
Audit Committee held four meetings, and each Committee member attended at least
75% of such meetings.
The Board has a standing Nominating Committee whose members are Carl
Helmetag, Chairman, Michael Wool, and Paul J. Corr. The function of this
Committee is to identify and recommend to the Board individuals for nomination
to fill vacancies in, and for renomination to, positions as Directors of the
Corporation. During fiscal year ended June 30, 2008, the Nominating Committee
held one meeting and each Committee member attended the meeting.
The Board has determined that all of the members of the Audit Committee
and the Nominating Committee meet the independence criteria for audit committee
and nominating committee members as set forth in the listing standards of the
American Stock Exchange. The Board has further determined that Mr. Corr
qualifies as an audit committee financial expert in accordance with the rules of
the United States Securities and Exchange Commission ('"SEC").
The Board of Directors does not have a standing compensation committee
and believes that it is not necessary to have such a committee because all
directors participate in the consideration of executive officer and director
compensation. Howard Pinsley, President and Chief Executive Officer, makes
recommendations to the full Board as to salary increases and bonuses for the
other executive officers and also advises the other directors as to salary
increases and bonuses to which he believes he is entitled based upon
performance. Mr. Pinsley does not participate in the Board's deliberations
regarding his own compensation.
The Board has a standing Stock Option Committee whose current members
are Paul J. Corr, Chairman, Howard Pinsley, and Barry Pinsley. The functions of
this Committee include recommending to the full Board to whom, and the time or
times at which, options will be granted, the number of shares of common stock
that underlie each option and the exercise price and vesting schedule for
options granted pursuant to the Company's 2007 Stock Option Plan. During the
fiscal year ended June 30, 2008, the Stock Option Committee held one meeting and
each Committee member attended such meeting.
5
The Board also has a Succession Committee, members of which are Paul J.
Corr, Howard Pinsley, Alvin O. Sabo and Michael Wool and a Mergers and
Acquisition Committee, members of which are Howard Pinsley, Barry Pinsley and
Michael Wool.
NON-EMPLOYEE DIRECTOR COMPENSATION
Company employees who also serve on the Company's Board of Directors do
not receive director's fees. The non-employee Directors receive an annual fee of
$24,000 for being a member of the Board of Directors. Each Director who also
serves as a member of the Audit Committee is compensated an additional annual
fee of $5,000. Each Director who serves as a member of the Succession Committee
or the Mergers and Acquisition Committee is compensated an additional $2,500 for
each committee. These fees are paid in monthly installments to the Directors.
The following table sets forth the compensation of the Company's
non-employee Directors for the fiscal year ending June 30, 2008:
Fees Earned or Option All Other
Name and Paid in Cash Awards (1)(3) Compensation (2) Total
Principal Position $ $ $ $
-----------------------------------------------------------------------------------------------------------
Seymour Saslow $22,750 $3,784 $5,223 $31,757
Barry Pinsley $25,250 $5,298 $2,674 $33,222
Michael Wool $27,750 $6,055 $5,481 $39,286
Paul Corr $31,250 $7,568 $0 $38,818
Alvin O. Sabo $31,250 $5,496 $0 $36,746
Carl Helmetag $27,750 $5,298 $0 $33,048
(1) Represents the dollar amount recognized for financial statement reporting
purposes with respect to the fiscal year ended June 30, 2008 in accordance
with FAS 123R. For Information concerning the assumptions made in the
valuation of awards, see Note 11 of our financial statements for fiscal
year ended June 30, 2008.
(2) Represents the dollar amount contributed for Director's health insurance
for fiscal year ended June 30, 2008.
(3) The non-employee Directors held the following unexercised options at fiscal
year end 2008;
Number of Securities Option Option
Underlying Unexercised Exercise Expiration
Options Price $ Date
Name Exercisable Unexercisable (a)
--------------------------------------------------------------------------------
Paul Corr 2000 $17.80 5/19/2016
2000 $18.29 2/21/2017
2000 $21.54 5/23/2018
Carl Helmetag 1400 $17.80 5/19/2016
1400 $18.29 2/21/2017
1400 $21.54 5/23/2018
Barry Pinsley 1400 $17.80 5/19/2016
1400 $18.29 2/21/2017
1400 $21.54 5/23/2018
Alvin O. Sabo 1800 $17.36 10/13/2015
1400 $17.80 5/19/2016
1400 $18.29 2/21/2017
1400 $21.54 5/23/2018
Seymour Saslow 500 $17.36 10/13/2015
1000 $17.80 5/19/2016
1000 $18.29 2/21/2017
1000 $21.54 5/23/2018
Michael Wool 1600 $17.80 5/19/2016
1600 $18.29 2/21/2017
1600 $21.54 5/23/2018
6
(a) Unexercisable options vest as follows: (i) options with an expiration date
of 2/21/2017 vest on 2/21/2009; (ii) Options with an expiration date of
5/23/2018 vest on 5/23/2010.
COMPENSATION OF EXECUTIVE OFFICERS
The following table summarizes the annual compensation for each of the
fiscal years ended June 30, 2008 and June 30, 2007 received by the Company's
principal executive officer and the Company's two most highly compensated
executive officers other than the principal executive officer who received over
$100,000 in total compensation for the fiscal year ended June 30, 2008
(collectively, the "Named Executive Officers"):
SUMMARY COMPENSATION TABLE
Option All Other
Name and Salary Bonus Awards (1) Compensation (2) Total
Principal Position Year $ $ $ $ $
------------------------------ ------ -------------- -------------- ---------------- ----------------- ----------
Howard Pinsley 2008 $214,865 $60,000 $15,056 $30,985 $320,906
President, Chief Executive 2007 $206,048 $40,000 $18,007 $40,175 $304,230
Officer and Chairman of
the Board
David O'Neil 2008 $129,260 $25,000 $7,330 $14,838 $176,428
Treasurer and Principal 2007 $123,924 $20,000 $8,179 $22,869 $174,972
Financial Officer
James Clemens 2008 $143,789 $10,000 $7,330 $5,300 $166,419
Vice President of 2007 $139,897 $10,000 $8,118 $3,834 $161,849
Sales and Marketing
(1) Represents the dollar amount recognized for financial statement reporting
purposes with respect to the fiscal year ended June 30, 2008 in accordance with
FAS 123R. For Information concerning the assumptions made in the valuation of
awards, see Note 11 of our financial statements for fiscal year ended June 30,
2008.
(2) All other compensation for fiscal years 2008 and 2007 was represented by the
value of shares of the Company's common stock allocated to the Named Executive
Officers' accounts in the Company ESOP and Company matching contributions to the
Company 401(k) Plan for the benefit of the Named Executive Officers, as set
forth below. Dividends are paid on allocated shares in the Company ESOP at the
same time and rate and in the same form as dividends paid on common shares
generally.
Value of
allocated Company
vested shares Contributions
in Company to 401(k)
Name Year ESOP ($) Plan ($) Total
--------------------------------------------------------------------------------
Howard Pinsley 2008 $28,609 $2,376 $30,985
2007 $38,907 $1,268 $40,175
David O'Neil 2008 $13,218 $1,620 $14,838
2007 $21,347 $1,522 $22,869
James Clemens 2008 $5,300 - $5,300
2007 $3,834 - $3,834
7
OUTSTANDING EQUITY AWARDS AT FISCAL YEAR END
The following table sets forth information concerning outstanding equity awards
held by the Company's Named Executive Officers at fiscal year end:
Number of Number of
Securities Securities
Underlying Underlying Option Option
Unexercised Unexercised Exercise Expiration
Options Options Price Date
# # $
Name Exercisable Unexercisable (a)
Howard Pinsley 2000 $11.25 8/20/2014
4000 $17.36 10/13/2015
4000 $17.80 5/19/2016
4000 $18.29 2/21/2017
4000 $21.54 5/23/2018
David O'Neil 1600 $17.36 10/13/2015
2000 $17.80 5/19/2016
2000 $18.29 2/21/2017
2000 $21.54 5/23/2018
James Clemens 2000 $18.29 2/21/2017
2000 $21.54 5/23/2018
(a) Unexercisable options vest as follows: (i) options with an expiration date
of 2/21/2017 vest on 2/21/2009; (ii) Options with an expiration date of
5/23/2018 vest on 5/23/2010.
SECURITIES AUTHORIZED FOR ISSUANCE UNDER EQUITY COMPENSATION PLANS
The following table sets forth information as of June 30, 2008 with respect to
compensation plans under which equity securities of the Company may be issued.
Equity Compensation Plan Information
Number of securities to Weighted-average Number of Securities remaining
be issued upon exercise exercise price of available for future issuance under
of outstanding options, outstanding options, equity compensation plan (excluding
Plan Category warrants and rights warrants and rights securities reflected in column (a))
----------------------------------------------------------------------------------------------------------------------
(a) (b) (c)
----------------------------------------------------------------------------------------------------------------------
Equity compensation
plans approved by
security holders 126,500 $18.40 365,600
Equity compensation
plans not approved
by security holders
--------- ---------
Total 126,500 365,600
8
INSURANCE
The executive officers and directors of the Company can elect to be
covered under the company-sponsored health plans, which do not discriminate in
favor of the officers, or directors of the Company and which are available
generally to all employees. In addition, the executive officers are covered
under a group life plan, which does not discriminate, and is available to all
employees.
The Company maintains insurance coverage, as authorized by Section 726
of the New York Business Corporation Law, providing for (a) reimbursement of the
Company for payments it makes to indemnify officers and directors of the
Company, and (b) payment on behalf of officers and directors of the Company for
losses, costs and expenses incurred by such individuals in any actions.
EMPLOYEE RETIREMENT PLAN AND TRUST
Under the Company's ESOP, approved by the Board of Directors on June 2,
1989, effective July I, 1988, all non-union employees of the Company, including
the Company's executive and non-executive officers are eligible to participate.
The ESOP is a non-contributory plan, which is designed to invest primarily in
shares of common stock of the Company. Certain technical amendments not
considered material were adopted effective as of June 10, 1994, July 1, 2003,
and July 1, 2005.
Of the 442,243 shares of common stock of the Company allocated to
participants of the ESOP as of June 30, 2008, 26,435 shares were al1ocated to
Howard Pinsley, 7,235 shares were al1ocated to David A. O'Neil, and 2,246 shares
were al1ocated to James Clemens.
The ESOP's purchase of common stock from the Company has been financed
by loans from the Company to the ESOP. Each year the Company makes contributions
to the ESOP, which are used to make loan interest and principal payments to the
Company. Fol1owing each payment of principal on the loan, a portion of the
unal1ocated shares held by the ESOP is al1ocated to participants
EMPLOYMENT CONTRACTS AND TERMINATION OF EMPLOYMENT
None of the Company's executive officers has a written employment
agreement. The Company has an agreement with Howard Pinsley, President and Chief
Executive Officer, most recently amended and restated as of August 17, 2007,
under which upon Mr. Pinsley's termination or resignation as chief executive
officer, he becomes a non-executive officer of the Company for a period of 36
months. In consideration for the performance of services to be provided by Mr.
Pinsley for the equivalent of nine days per month, he wil1 receive full benefits
plus $15,000 per month for the first three months and $4,333 per month for the
next 33 months. The agreement expires on December 31, 2009
AUDIT COMMITTEE REPORT
The Audit Committee of the Board of Directors (the "Committee") is
comprised of three independent directors and operates under a written charter,
revised most recently by the Board on February 16, 2007.
In fulfilling its responsibilities, the Committee has reviewed and
discussed the Company's audited consolidated financial statements for the fiscal
year ended June 30, 2008 with management and the independent auditors.
The Committee has discussed with the independent auditors the matters
required to be discussed by Statement on Auditing Standards No. 61, as amended
(Communication with Audit Committees). In addition, the Committee has received
and reviewed the written disclosures and the letter from the independent
auditors required by Independence Standard No.1, (Independence Discussions with
Audit Committees), and has discussed with the auditors the auditors'
independence.
The Committee considered and concluded that the provision of non-audit
services by the independent auditors was compatible with maintaining their
independence.
In reliance on the reviews and discussions referred to above, the
Committee recommended to the Board of Directors that the audited consolidated
financial statements referred to above be included in the Company's Annual
Report on Form 10-KSB for the fiscal year ended June 30, 2008.
The Audit Committee Charter is available on our website at
www.espey.com under the tab "Investors".
-------------
Audit Committee:
Paul J. Corr, Chairman
Carl Helmetag
Alvin O. Sabo
9
CORPORATE GOVERNANCE AND NOMINATING COMMITTEE
The Nominating Committee of the Board of Directors (the "Nominating
Committee") is comprised of three independent directors and operates under a
written charter. A copy of the charter is available on the Company's website,
www.espey.com, under the tab "Investors".
-------------
The Nominating Committee will review the present needs of the Board and
establish criteria as to particular qualifications in terms of background and
experience that could meet such needs. At a minimum, the Nominating Committee
believes that nominees for Directors should have either experience in the
industry in which the Company engages or professional, business or academic
qualifications that differ from existing members of the Board and could augment
the aggregate expertise possessed by Board members. The Company further believes
that all nominees should be able to make a contribution to the Board that will
enhance the development and growth of the Company business and shareholder
value; devote adequate time to service as a Director; and work well with other
Board members in a collegial manner.
The Nominating Committee evaluates prospective nominees identified on
its own initiative or referred to it by other Board members, management,
shareholders or external sources and all self-nominated candidates. The
Nominating Committee uses the same criteria for evaluating candidates nominated
by shareholders and self nominated as it does for those proposed by other Board
members, management and search companies.
The Nominating Committee will consider bona fide recommendations by
shareholders as to potential Director nominees, who meet the above standards. A
shareholder wishing to submit such a recommendation should send a letter,
postmarked no later than 120 days prior to the date on which the Company's
annual meeting was held during the prior year, to the Secretary of the Company.
The letter must identify its writer as a shareholder of the Company, provide
evidence of the writer's stock ownership and provide:
o The name, address, telephone number and social security number
of the candidate to be considered;
o A description of understandings, contractual, business or
familial relationships between the shareholder and the
candidate, if any, and an unexecuted written consent of the
candidate to serve as a director of the Company, if nominated
and elected;
o The candidate's resume and at least three references;
o A statement of the candidate's qualifications to serve on the
Board of Directors and specified Board committees which shall
include an explanation as to how elements of the candidate's
background and experience would be a benefit to the Company
and its business.
All candidates recommended to the Nominating Committee must meet the
independence standards of the American Stock Exchange and the definition of
"independent director" in the Company by-laws.
All nominees for election at this Annual Meeting were previously
elected by the shareholders and are standing for re-election
SHAREHOLDER COMMUNICATIONS WITH THE BOARD
Mail can be addressed to Directors in care of the Office of the
Secretary, Espey Mfg. & Electronics Corp. 233 Ballston Avenue, Saratoga Springs,
New York 12866. At the direction of the Board of Directors, all mail received
will be opened and screened for security purposes. The mail will then be logged
in. All mail, other than trivial or obscene items, will be forwarded. Trivial
items will be delivered to the Directors at the next scheduled Board meeting.
Mail addressed to a particular Director will be forwarded or delivered to that
Director. Mail addressed to "Outside Directors" or "Non-Management Directors"
will be forwarded or delivered to the Chairman of the Audit Committee. Mail
addressed to the "Board of Directors" will be forwarded or delivered to the
Chairman of the Board.
10
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS
The following table sets forth information regarding ownership of the
Company's outstanding Common Stock as of October 8, 2008, 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.
Title Name and Address of Amount and Nature Percent
Class Beneficial Owner 0f Beneficial Ownership of Class
----- ---------------- ----------------------- --------
Common Stock Franklin Resources. Inc. 156,000 - Direct (1) 6.7%
One Franklin Parkway
San Mateo, CA 94403-1906
Common Stock Espey Mfg. & Electronics Corp. 667,886 - Direct (2) 28.7%
Employee Retirement Plan and Trust
233 Ballston Ave
Saratoga Springs. NY 12866
Common Stock Advisory Research, Inc. 272,840 - Direct (3) 11.7%
180 North Stetson St.
Suite 5500
Chicago, IL 6060 I
1) The information as to the number of shares of Common Stock and
the percent of class ownership of the Company that may be
deemed beneficially owned by Franklin Advisory Services, LLC
("Franklin") is from the Schedule 13G, dated October 12, 2006,
filed with the Securities and Exchange Commission (the "SEC").
The Franklin statement indicated that Franklin's investment
"management subsidiaries;" have 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 management
subsidiaries. The statement also indicated that it filed the
Schedule 13G on behalf of itself 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 and the Principal
Shareholders disclaim any economic interest or beneficial
ownership in any of the Common Stock shown in the table for
Franklin.
2) The administration of the shares of common stock held by the
ESOP Trust is subject to the Second Amended and Restated Plan,
effective as of July 1, 2002, creating the Trust, and a Trust
Agreement dated July 15, 2005. The Trustees' rights with
respect to the disposition of shares are governed by the terms
of the Plan and the Trust Agreement. As to shares that have
been allocated to the accounts of participants in the ESOP,
the Plan provides that the Trustees are required to vote such
shares in accordance with instructions received from the
participants. As to unallocated shares and allocated shares
for which voting instructions have not been received from
participants, the Plan provides that the Trustees are required
to vote such shares in accordance with the direction of a
Committee, appointed by the Board of Directors of the Company
under the terms of the Plan and Trust agreement. The Trustees,
Howard Pinsley and Peggy A. Murphy, are the Chairman of the
Board, Chief Executive Officer, President, and Secretary of
the Company, respectively. The ESOP Committee is comprised of
Mr. Pinsley, Ms. Murphy, Director Michael W. Wool and David A.
O'Neil, the Treasurer and Principal Financial Officer of the
Company. As of October 8, 2008, 442,886 shares were allocated
to the accounts of participants and 225,000 shares were
unallocated.
3) The information as to the number of shares of Common Stock and
the percent of class ownership of the Company that may be
deemed beneficially owned by advisory clients of Advisory
Research, Inc. ("Advisory") is from the Schedule 13G dated
August 31, 2008 filed with the SEC. Advisory, a registered
investment advisor, is deemed to have beneficial ownership of
272,840 shares of the Company's Common Stock as of August 31,
2008, all of which shares are held in Advisory investment
companies, trusts and accounts. Advisory, in its role as
investment advisor and/or manager, reported sole voting power
with respect to 272,840 shares.
11
SECURITY OWNERSHIP OF MANAGEMENT
The following information is furnished as of October 8, 2008 (unless
otherwise indicated), as to each class of equity securities of the Company
beneficially owned by all Directors and Executive Officers and by Directors and
Executive Officers of the Company as a Group:
Name and Address of Amount and Nature Percent
Title Class Beneficial Owner of Beneficial Ownership of Class
----------- ---------------- ----------------------- --------
Common Stock James Clemens 2,246-Indirect (2) *
Common Stock Paul Corr 10,439-Direct (1) *
Common Stock Carl Helmetag 14,504-Direct (1) *
Common Stock Peggy Murphy 2,400-Direct (1) *
8,865-Indirect (2)
Common Stock David O'Neil 13,200-Direct (1) *
7,235-Indirect (2)
Common Stock Barry Pinsley 57,660-Direct(1) 2.5%
Common Stock Howard Pinsley 84,543-Direct(1) 4.7%
26,435-Indirect (2)
Common Stock Alvin Sabo 10,700-Direct (1) *
Common Stock Seymour Saslow 13,016-Direct (1) *
Common Stock Katrina Sparano 1,360-Direct (1) *
1,207-Indirect (2)
Common Stock Michael Wool 7,900-Direct (1) *
1,500-Indirect (3)
Officers and Directors 215,722-Direct (1) 11.2%
as a Group (11 persons) 46,988-Indirect (2) (3)
* Less than one percent
1) Direct shares include options to acquire shares which are exercisable
within 60 days as follows:
Name of Exercisable Name of Exercisable
Beneficial Options Beneficial Options
Owner Owner
-------------------- --------------- ------------------- ---------------
Paul Corr 2,000 Howard Pinsley 10,000
Peggy Murphy 2,400 Alvin Sabo 3,200
David O'Neil 3,600 Seymour Saslow 1,500
Barry Pinsley 1,400 Katrina Sparano 1,200
2) Includes shares allocated to named director or officer as of June 30,
2008, 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 1,500 shares owned by the spouse of Michael Wool. Beneficial
ownership of these shares is disclaimed by Mr. Wool.
There are no arrangements known to the Company, the operation of which
may at a subsequent date, result in change of control of the Company.
12
CODE OF ETHICS
The Company has adopted a Code of Ethics which is available on our
website at www.espey.com. under the tab "Investors".
-------------
PROPOSAL NO.2
RATIFICATION OF APPOINTMENT OF INDEPENDENT PUBLIC ACCOUNTANTS
The Audit Committee has selected Rotenberg & Company, LLP as the
Company's independent public accountants for the fiscal year ending June 30,
2009. Rotenberg & Company, LLP was first selected by the Audit Committee as the
Company's independent public accountants for the fiscal year ending June 30,
2006.
Unless otherwise specified by the shareholders, the shares represented
by their properly executed proxies will be voted for ratification of the
appointment of Rotenberg & Company, LLP as independent accountants for the
fiscal year ending June 30, 2009. The Company is advised by said firm that
neither the firm nor any of its partners now has, or during the past three years
had, any direct financial interest or material indirect financial interest or
any connection with the Company.
A representative of Rotenberg & Company, LLP is expected to be present
at the Annual Meeting with the opportunity to make a statement if he or she
desires to do so and to be available to respond to appropriate questions from
the shareholders.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR RATIFICATION OF THE
APPOINTMENT OF ROTENBERG & COMPANY, LLP AS INDEPENDENT PUBLIC ACCOUNTANTS FOR
THE COMPANY FOR FISCAL YEAR ENDING JUNE 30, 2009.
The Company's Audit Committee has had policies and procedures for
pre-approving all audit and non-audit work performed by Rotenberg & Company LLP
for the fiscal year ended June 30, 2007, and 2008 respectively. Specifically,
the Audit Committee has pre-approved the use of Rotenberg & Company LLP for
performance of audit services and detailed, specific types of services within
the following categories of audit-related and tax services. In each other case,
the Audit Committee requires management to obtain specific pre-approval from the
Audit Committee for any other work to be performed by its outside auditors.
The aggregate fees billed for professional services by Rotenberg &
Company LLP in the fiscal years ended June 30, 2007, and 2008, respectively, for
these various services were:
-----------------------------------------------------------------------
TYPE OF FEES 2008 2007
---- ----
-----------------------------------------------------------------------
Amount Billed Amount Billed
-----------------------------------------------------------------------
(1) Audit Fees $ 67,500 $ 52,500
-----------------------------------------------------------------------
(2) Audit Related Fees None None
-----------------------------------------------------------------------
(3) Tax Fees 8,000 8,000
-----------------------------------------------------------------------
(4) All Other Fees None None
-----------------------------------------------------------------------
Total $ 75,500 $ 60,500
-------- --------
-----------------------------------------------------------------------
In the above table, in accordance with the Securities and Exchange Commission's
definitions and rules, "audit fees" are fees the Company paid for professional
services rendered by the principal accountant for the audit of the Company's
annual financial statements included in Form 10-KSB and review of financial
statements included in Form 10-QSBs, and for services that are normally provided
by the principal accountant in connection with statutory and regulatory filings
or engagements; "audit-related fees" are fees for assurance and related services
by the principal accountant that are reasonably related to the performance of
the audit or review of the Company's financial statements; "tax fees" are fees
for tax compliance, tax advice and tax planning rendered by the principal
accountant. 100% of the services set forth in sections (1) through (3) above
were approved by the Audit Committee in accordance with its charter.
13
COMPLIANCE WITH SECTION 16(a) OF THE SECURITIES EXCHANGE ACT
Section 16(a) of the Securities Exchange Act of 1934, as amended,
requires the Company's directors, executive officers and persons who own more
than ten percent of a registered class or 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 complied with all Section 16(a) filing requirements for the fiscal
year ended June 30, 2008.
ANNUAL REPORTS
The Company's Annual Report on Form 10-KSB for the fiscal year ended
June 30, 2008, including financial statements as filed with the Securities and
Exchange Commission, accompanies this Proxy Statement. Such financial statements
are not incorporated herein by reference.
A copy of the Company's Annual Report on Form 10-KSB (including
financial statements and schedules thereto) for the fiscal year ended June 30,
2008, filed with the Securities and Exchange Commission will be provided without
charge upon the written request of shareholders to Espey Mfg. & Electronics
Corp., attention: Investor Relations, 233 Ballston Avenue, Saratoga Springs, New
York 12866. The Company's Form 10-KSB for the fiscal year ended June 30, 2008
can also be viewed electronically through a link at the Company's website at
www.espey.com.
-------------
SHAREHOLDER PROPOSALS
Any shareholder proposal which may be a proper subject for inclusion in
the proxy statement and for consideration at the 2009 Annual Meeting must be
received by the Company at its principal executive office no later than June 18,
2009, if it is to be included in the Company's 2009 proxy statement and proxy
form. In addition, the Company's bylaws outline procedures that a shareholder
must follow to nominate directors or to bring other business before
shareholders' meetings.
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.
By Order of the Board of Directors,
Howard Pinsley
President, Chief Executive Officer
and Chairman of the Board
October 20, 2008
Saratoga Springs, New York
14
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
ESPEY MFG. & ELECTRONICS CORP.
PROXY FOR THE
2008 ANNUAL MEETING OF SHAREHOLDERS
November 21, 2008
COMMON
The undersigned hereby appoints Alvin O. Sabo and Carl Helmetag 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 2008 Annual Meeting of Shareholders to be
held on November 21, 2008 or any adjournment thereof.
1. TO ELECT: two Class C Directors Paul J. Corr and Michael W. Wool to serve
for a three year term expiring at the 2011 annual meeting or until his
successor is duly elected and qualifies.
PAUL J. CORR [_] FOR [_] WITHHOLD AUTHORITY
MICHAEL W. WOOL [_] FOR [_] WITHHOLD AUTHORITY
The Board of Directors recommends a vote FOR these nominees.
---
2. TO RATIFY the appointment of Rotenberg & Company, LLP as the independent
public accountants of the Company for fiscal year ending June 30, 2009.
[_] FOR [_] AGAINST [_] ABSTAIN
The Board of Directors recommends a vote FOR this proposal.
---
No other business may be transacted at the meeting.
------------------------
Please be sure to sign and date | Date |
this Proxy in the box below. | |
--------------------------------------------------------------------------------
| |
| |
-----------Shareholder sign above----------Co-holder (if any) sign above-------
--------------------------------------------------------------------------------
^ Detach 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.
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.
--------------------------------------------------------------------------------
IF YOUR ADDRESS HAS CHANGED, PLEASE CORRECT THE ADDRESS IN THE SPACE PROVIDED
BELOW AND RETURN THIS PORTION WITH THE PROXY IN THE ENVELOPE PROVIDED.
---------------------------------------
---------------------------------------
---------------------------------------
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
ESPEY MFG. & ELECTRONICS CORP.
PROXY FOR THE
2008 ANNUAL MEETING OF SHAREHOLDERS
November 21, 2008
ESOP
The undersigned hereby appoints Alvin O. Sabo and Carl Helmetag 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 2008 Annual Meeting of Shareholders to be
held on November 21, 2008 or any adjournment thereof.
1. TO ELECT: two Class C Directors Paul J. Corr and Michael W. Wool to serve
for a three year term expiring at the 2011 annual meeting or until his
successor is duly elected and qualifies.
PAUL J. CORR [_] FOR [_] WITHHOLD AUTHORITY
MICHAEL W. WOOL [_] FOR [_] WITHHOLD AUTHORITY
The Board of Directors recommends a vote FOR these nominees.
---
2. TO RATIFY the appointment of Rotenberg & Company, LLP as the independent
public accountants of the Company for fiscal year ending June 30, 2009.
[_] FOR [_] AGAINST [_] ABSTAIN
The Board of Directors recommends a vote FOR this proposal.
---
No other business may be transacted at the meeting.
------------------------
Please be sure to sign and date | Date |
this Proxy in the box below. | |
--------------------------------------------------------------------------------
| |
| |
-----------Shareholder sign above----------Co-holder (if any) sign above-------
--------------------------------------------------------------------------------
^ Detach 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.
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.
--------------------------------------------------------------------------------
IF YOUR ADDRESS HAS CHANGED, PLEASE CORRECT THE ADDRESS IN THE SPACE PROVIDED
BELOW AND RETURN THIS PORTION WITH THE PROXY IN THE ENVELOPE PROVIDED.
---------------------------------------
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