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
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 Pursuant to Section 240.14a-11c or Section 240.14a-12
GRAHAM CORPORATION
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(Name of Registrant as Specified In Its Charter)
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(Name of Person(s) Filing Proxy Statement)
Payment of Filing Fee (Check the appropriate box):
[X] No fee required.
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and 0-11.
(1) Title of each class of securities to which transaction applies:
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(2) Aggregate number of securities to which transaction applies:
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(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (set forth the amount on which the
filing fee is calculated and state how it was determined):
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[ ] Fee paid previously with preliminary materials.
[ ] Check box if any part of the fee is offset as provided by Exchange Act Rule
0-11(a)(2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration statement number,
or the Form or Schedule and the date of its filing.
(1) Amount Previously Paid:
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(2) Form, Schedule or Registration Statement No.:
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(4) Date Filed:
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[GRAHAM ENGINEERING ANSWERS LOGO]
GRAHAM CORPORATION
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD JULY 25, 2002
The annual meeting of stockholders of Graham Corporation will be held at
the Industrial Management Council, 930 East Avenue, Rochester, New York
14607-2296, on Thursday, July 25, 2002, at 11:00 a.m., Eastern Time, for the
following purposes, which are more fully described in the accompanying proxy
statement:
1. To elect two Directors.
2. To approve the selection of Deloitte & Touche LLP as our
independent auditors for the fiscal year ending March 31, 2003.
3. To transact such other business as may properly come before the
annual meeting or any adjournment of the annual meeting.
The Board of Directors has fixed the close of business on June 14, 2002 as
the record date for determining the stockholders who are entitled to receive
notice of and to vote at the annual meeting as well as at any adjournments of
the annual meeting.
Stockholders who do not expect to be present at the annual meeting should
complete, sign and date the enclosed proxy card and return it promptly in the
enclosed return envelope. No postage is required for the mailing of proxy cards
within the United States.
By Order of the Board of Directors
/s/ ALVARO CADENA
ALVARO CADENA
President & Chief Executive Officer
Dated: June 28, 2002
[GRAHAM ENGINEERING ANSWERS LOGO]
GRAHAM CORPORATION
20 FLORENCE AVENUE
BATAVIA, NEW YORK 14020
PROXY STATEMENT
We are furnishing this proxy statement to our stockholders in connection
with the solicitation by the Board of Directors of proxies for use at the annual
meeting of stockholders for our fiscal year ended March 31, 2002 ("Fiscal Year
2002"), as well as for use at any adjournment of the annual meeting, for the
following purposes:
- To elect two Directors.
- To approve the selection of Deloitte & Touche LLP as our independent
auditors for our fiscal year ending March 31, 2003 ("Fiscal Year
2003").
- To transact such other business as may properly come before the
annual meeting or any adjournment of the annual meeting.
The annual meeting will be held on Thursday, July 25, 2002, at 11:00 a.m.,
Eastern Time, at the Industrial Management Council, which is located at 930 East
Avenue, Rochester, New York 14607-2296. This proxy statement and the
accompanying form of proxy are being first mailed to our stockholders on or
about June 28, 2002.
RECORD DATE AND SHARES OUTSTANDING
The record date for the annual meeting is June 14, 2002. Our records
indicate that as of June 14, 2002 there were 1,648,249 shares of our common
stock issued and outstanding. If you were a holder of our common stock on June
14, 2002, then you are entitled to one vote at the annual meeting for each share
of our common stock that you held on the that date.
PROXY CARDS AND VOTING
If we receive the enclosed proxy, properly executed, in time to be voted at
the annual meeting, the Board of Directors will vote the shares represented by
it in accordance with the instructions marked on the proxy. Executed proxies
without instructions marked on them will be voted FOR each of the nominees for
election as Directors and FOR the ratification of the appointment of Deloitte &
Touche LLP as our independent auditors for Fiscal Year 2003.
Under our bylaws, Directors are elected by a plurality of the votes cast at
the annual meeting. The vote required for approval of any other matter before
the annual meeting is a majority of shares present in person or by proxy and
entitled to vote on the matter. Under Delaware law, the total votes received,
including abstentions and votes on routine matters by brokers holding shares in
"street name" or in some other fiduciary capacity, are counted in determining
the presence of a quorum at the annual meeting. With respect to the election of
Directors, votes may be cast for or withheld from voting for any or all Director
nominees. Votes that are withheld will have no effect on the election of
Directors. Abstentions may be specified on all proposals other than the election
of Directors and will be counted as present for purposes of the matter with
respect to which the abstention is noted. Therefore, under our bylaws and under
Delaware law, assuming the presence of a quorum at the annual meeting, non-votes
by brokers will have no effect on any proposal to be acted upon at the annual
meeting. However, abstentions would have the effect of "no" votes with respect
to ratifying the appointment of Deloitte & Touche LLP as our independent
auditors for Fiscal Year 2003.
1
REVOCABILITY OF PROXIES
Your presence at the annual meeting will not automatically revoke your
proxy. However, you can revoke your proxy at any time prior to its exercise at
the annual meeting by:
- delivering to our corporate secretary a written notice of revocation
prior to the annual meeting;
- delivering to our corporate secretary a duly executed proxy bearing
a later date; or
- attending the annual meeting, filing a written notice of revocation
with our corporate secretary, and voting in person.
Notices of revocation and revised proxies should be sent to our corporate
secretary at the following address: Graham Corporation, Attention: Corporate
Secretary, 20 Florence Avenue, Batavia, New York 14020. In addition, notices of
revocation and revised proxies can be delivered in person to our corporate
secretary or his agents at the annual meeting.
SOLICITATION OF PROXIES
This proxy solicitation is made by the Board of Directors on our behalf,
and we will bear the cost of soliciting proxies. In addition to solicitation by
mail, our Directors, officers and employees, as well as our subsidiaries, may
solicit proxies personally or by telephone or other telecommunication. We will
not compensate our Directors, officers or employees or those of our subsidiaries
for making proxy solicitations on our behalf. We will provide persons holding
shares in their names or in the names of nominees, which in either case are
beneficially owned by others, proxy materials for delivery to those beneficial
owners and will reimburse the record owners for their expenses in doing so.
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The table below sets forth the beneficial ownership of our common stock as
of June 14, 2002 by:
- each person who is known to us, based on reports filed with the
Securities and Exchange Commission, to own beneficially more than 5%
of our common stock;
- each of our "named executive officers" (See "Executive Compensation"
below);
- each of our Directors and Director nominees who beneficially owns
shares of our common stock; and
- all of our executive officers and Directors as a group.
We have calculated beneficial ownership based upon the requirements
promulgated by the Securities and Exchange Commission. Unless otherwise
indicated below in the footnotes to the table, each stockholder named in the
table has sole voting and investment power with respect to all shares shown as
beneficially owned by that stockholder and the designated address of each
individual listed in the table is as follows: Graham Corporation, 20 Florence
Avenue, Batavia, New York 14020.
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COMMON STOCK OWNERSHIP TABLE
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COMMON STOCK BENEFICIALLY OWNED
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NUMBER OF PERCENTAGE OF
NAME OF BENEFICIAL OWNER SHARES CLASS
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Employee Stock Ownership Plan of Graham Corporation 111,837(3) 6.8%
Dimensional Fund Advisors, Inc. 110,750(4) 6.7%
Helen H. Berkeley(1) 117,074(5) 7.1%
Jerald D. Bidlack(1) 38,250(6) 2.3%
Alvaro Cadena(1,2) 71,144(7) 4.2%
Joseph P. Gorman, Jr.(2) 36,699(8) 2.2%
J. Ronald Hansen(2) 28,767(9) 1.7%
Philip S. Hill (1) 19,800(10) 1.2%
H. Russel Lemcke(1) 31,750(11) 1.9%
James R. Lines(2) 11,408(12) *
Stephen P. Northrup(2) 34,062(13) 2.0%
William A. Smith, Jr.(2) 34,988(14) 2.1%
Cornelius S. Van Rees(1) 21,159(15) 1.3%
All executive officers and Directors as a group (12 persons) 452,231(16) 24.9%
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* Less than 1%
( 1) Director.
( 2) Executive officer.
( 3) Our employee benefits committee, which consists of members of the Board of
Directors, administers the Employee Stock Ownership Plan of Graham
Corporation (the "ESOP"). The Board of Directors has appointed an unrelated
corporate trustee for the ESOP. The employee benefits committee instructs
the ESOP trustee regarding investment of funds contributed to the ESOP.
Each member of the employee benefits committee disclaims beneficial
ownership of the shares held in the ESOP. The ESOP trustee must vote all
allocated shares held in the ESOP in accordance with the instructions of
the participating employees. Unallocated shares held in the suspense
account are voted by the ESOP trustee in a manner calculated to most
accurately reflect the instructions the ESOP trustee has received from
participants regarding the allocated stock, provided such instructions do
not conflict with the ESOP trustee's fiduciary obligations under ERISA. As
of June 14, 2002, all 111,837 shares were allocated to participants under
the ESOP and no shares were unallocated.
( 4) Dimensional Fund Advisors, Inc.'s address is 1299 Ocean Avenue, 11th Floor,
Santa Monica, California 90401. Dimensional Fund Advisors, Inc., an
investment advisor registered under Section 203 of the Investment Advisors
Act of 1940, is deemed to have beneficial ownership of 110,750 shares of
our stock as of January 30, 2002, all of which shares are held in the
portfolios of four investment companies, each of which is registered under
the Investment Company Act of 1940. Dimensional Fund Advisors, Inc.
furnishes investment advice to each of the four investment companies but
disclaims beneficial ownership of all of the shares held by the investment
companies and reported in the table above.
( 5) Includes 8,050 shares that Mrs. Berkeley may acquire within 60 days upon
exercise of stock options.
( 6) Includes 10,000 shares that Mr. Bidlack may acquire within 60 days upon
exercise of stock options.
( 7) Includes 32,515 shares that Mr. Cadena may acquire within 60 days upon
exercise of stock options and 1,687 shares held by the ESOP trustee and
allocated to Mr. Cadena's account, as to which Mr. Cadena has sole voting
power but no dispositive power, except in limited circumstances.
( 8) Includes 19,407 shares that Mr. Gorman may acquire within 60 days upon
exercise of stock options and 1,292 shares held by the ESOP trustee and
allocated to Mr. Gorman's account, as to which Mr. Gorman has sole voting
power but no dispositive power, except in limited circumstances.
( 9) Includes 14,507 shares that Mr. Hansen may acquire within 60 days upon
exercise of stock options and 960 shares held by the ESOP trustee and
allocated to Mr. Hansen's account, as to which Mr. Hansen has sole voting
power but no dispositive power, except in limited circumstances.
(10) Includes 10,000 shares that Mr. Hill may acquire within 60 days upon
exercise of stock options.
(11) Includes 13,750 shares that Mr. Lemcke may acquire within 60 days upon
exercise of stock options.
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(12) Includes 10,200 shares that Mr. Lines may acquire within 60 days upon
exercise of stock options and 1,042 shares held by the ESOP trustee and
allocated to Mr. Lines' account, as to which Mr. Lines has sole voting
power but no dispositive power, except in limited circumstances.
(13) Includes 16,707 shares that Mr. Northrup may acquire within 60 days upon
exercise of stock options and 1,355 shares held by the ESOP trustee and
allocated to Mr. Northrup's account, as to which Mr. Northrup has sole
voting power but no dispositive power, except in limited circumstances.
(14) Includes 16,707 shares that Mr. Smith may acquire within 60 days upon
exercise of stock options and 1,031 shares held by the ESOP trustee and
allocated to Mr. Smith's account, as to which Mr. Smith has sole voting
power but no dispositive power, except in limited circumstances.
(15) Includes 10,750 shares that Mr. Van Rees may acquire within 60 days upon
exercise of stock options.
(16 )Includes 168,933 shares that members of the group may acquire within 60
days upon exercise of stock options and 8,229 shares allocated to the named
executive officers under the ESOP, as to which the named executive officers
may exercise voting power, but not dispositive power, except in limited
circumstances.
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PROPOSAL 1:
ELECTION OF DIRECTORS
We currently have six Directors. Our bylaws provide for a classified Board
of Directors consisting of three classes of Directors, with each class serving
staggered three-year terms. As a result, only a portion of our Board of
Directors is elected each year.
Two of our six Directors are to be elected by our stockholders at the
annual meeting, each to hold office for a three-year term expiring in 2005 or
until his successor is duly elected and qualified.
The Board of Directors recommends the election of the H. Russel Lemcke and
Cornelius S. Van Rees, each of whom is currently a member of the Board of
Directors and each of whom has been nominated by the nominating committee of the
Board. Unless authority to vote for either or both of the nominees is
specifically withheld, proxies in the enclosed form will be voted FOR the
election of Messrs. Lemcke and Van Rees. The Board of Directors does not
contemplate that either of the nominees will be unable to serve as a director,
but if that contingency should occur before the proxies are voted, the persons
named in the enclosed proxy reserve the right to vote for such substitute
nominees as they, in their discretion, determine.
The table below sets forth information concerning each of our Directors
whose term in office expires at the annual meeting.
NOMINEES PROPOSED FOR ELECTION AS DIRECTORS
FOR A THREE-YEAR TERM EXPIRING IN 2005:
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NAME AND BACKGROUND DIRECTOR SINCE TERM EXPIRES
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H. RUSSEL LEMCKE, age 62, is President of H. Russel Lemcke 1996 2002
Group, Inc. which specializes in strategic business
development, including mergers, acquisitions and joint
ventures.
CORNELIUS S. VAN REES, age 73, was a partner in the New York 1969 2002
City law firm of Thacher Proffitt & Wood until his
retirement in 1994. Mr. Van Rees received his law degree
in 1954 from Columbia University.
The table below sets forth information concerning each Director whose term
in office does not expire at the annual meeting.
DIRECTORS WHOSE TERMS DO NOT EXPIRE
AT THE ANNUAL MEETING:
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NAME AND BACKGROUND DIRECTOR SINCE TERM EXPIRES
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ALVARO CADENA, age 58, is President and Chief Executive 1993 2003
Officer. Mr. Cadena became Chief Executive Officer on
April 1, 1998. Previously Mr. Cadena served as President
and Chief Operating Officer.
HELEN H. BERKELEY, age 73, is a private investor. 1998 2003
JERALD D. BIDLACK, age 66, is the President of Griffin 1985 2004
Automation, Inc., a manufacturer of special automation
machinery and systems, which is located in West Seneca,
New York. Mr. Bidlack also serves on the Board of
Directors of Bush Industries, Inc., a public company
located in Jamestown, New York engaged in the manufacture
and sale of furniture products. He serves also as a
trustee of Keuka College, which is located in Penn Yan,
New York.
PHILIP S. HILL, age 80, is a partner in the New York City 1968 2004
law firm of Hill, Ullman & Erwin. Mr. Hill received his
law degree in 1951 from Cornell University.
BOARD MEETINGS AND COMMITTEES OF THE BOARD
During Fiscal Year 2002, the Board of Directors held a total of four Board
meetings. The Board of Directors has an executive committee, an audit committee,
an employee benefits committee, a compensation committee, and a nominating
committee. The function, composition, and number of meetings of each of these
five committees are described below.
5
EXECUTIVE COMMITTEE
Between meetings of the Board of Directors, the executive committee has the
authority to manage and direct all of our business and affairs, insofar as such
authority may be legally delegated and except as may be limited from time to
time by resolutions of the Board of Directors. The members of the executive
committee are Directors Bidlack (Chairman), Cadena, Hill and Van Rees. The
executive committee held three meetings during Fiscal Year 2002.
AUDIT COMMITTEE
The audit committee (a) makes recommendations to the Board of Directors
regarding the selection of our independent auditors; (b) meets and discusses
directly with our independent auditors their audit work and related matters and
(c) performs such investigations and makes such reports to the Board of
Directors with respect to our external auditing procedures and affairs as the
audit committee deems necessary or advisable. The written charter for our audit
committee, which was adopted by the Board of Directors, more specifically sets
forth the duties and responsibilities of the audit committee and is attached as
appendix A to this proxy statement. The members of the audit committee are
Directors Hill (Chairman), Berkeley, Bidlack, Lemcke and Van Rees, each of whom
is "independent" in accordance with the listing standards of the American Stock
Exchange. The audit committee held one meeting during Fiscal Year 2002. The
audit committee's report relating to Fiscal Year 2002 appears on page 15 of this
proxy statement.
EMPLOYEE BENEFITS COMMITTEE
The employee benefits committee reviews the performance of the plan
administrator of each of our Retirement Income Plan, Incentive Savings Plan,
Group Hospitalization Plan, Medical Plan, Major Medical Plan, Life Insurance
Plan, Long-Term Disability Plan, Employee Stock Ownership Plan and any other
employee benefit plan we maintain for which a named fiduciary is designated. The
employee benefits committee reviews and reports to the Board of Directors on the
performance of the Incentive Savings Plan trustee and the Retirement Income Plan
trustee in investing, managing and controlling plan assets. The employee
benefits committee has authority (a) to establish a funding policy and method
consistent with the objectives of the Retirement Income Plan, (b) to recommend
changes in the plans and changes in any plan trustee or administrator, and (c)
subject to the further action of the Board of Directors, to amend any of the
plans, other than the Retirement Income Plan, the Incentive Savings Plan and the
Employee Stock Ownership Plan. The members of the employee benefits committee
are Directors Van Rees (Chairman), Bidlack and Hill. The employee benefits
committee held one meeting during Fiscal Year 2002.
COMPENSATION COMMITTEE
The compensation committee (a) reviews and determines annually salaries,
bonuses and other forms of compensation paid to our executive officers and
management; (b) selects recipients of awards of incentive stock options and
non-qualified stock options and establishes the number of shares and other terms
applicable to such awards; and (c) construes the provisions of and generally
administer the 1995 Incentive Plan to Increase Shareholder Value and the 2000
Incentive Plan to Increase Shareholder Value. The members of the compensation
committee are Directors Lemcke (Chairman), Berkeley, Bidlack, Hill and Van Rees.
The compensation committee held two meetings during Fiscal Year 2002. The
compensation committee's report relating to Fiscal Year 2002 appears on page 12
of this proxy statement.
NOMINATING COMMITTEE
The nominating committee has authority to review the qualifications of,
interview and nominate candidates for election to the Board of Directors. The
nominating committee held one meeting during Fiscal Year 2002. The members of
the nominating committee are Directors Van Rees (Chairman), Bidlack, Cadena and
Hill.
Pursuant to our bylaws, stockholders of record entitled to vote in the
election of Directors at any annual meeting may recommend individuals for
consideration by the nominating committee as potential nominees by submitting
written recommendations to our corporate secretary no later than (a) 60 days in
advance of the annual meeting, if the annual meeting is to be held within 30
days preceding the anniversary of the previous year's annual meeting, or (b) 90
days in advance of the annual meeting, if the annual meeting is to be held on or
after the anniversary of the previous year's annual meeting. For an annual
meeting of stockholders held at a time other than within this time period, or
for a special meeting of stockholders for the election of Directors, notice must
be
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submitted no later than the close of business on the 10(th) day following the
date on which notice of such meeting is first given to stockholders.
Stockholder recommendations must contain: (a) each nominee's name, age,
business and residence addresses; (b) principal occupation or employment; (c)
the nominee's written consent to serve as a Director; and (d) information that
would be required to be included in a proxy statement filed pursuant to
applicable rules of the Securities and Exchange Commission. In addition, any
stockholder submitting a recommendation must provide his or her own name and
address as well as the class and number of our shares owned of record and the
dates he or she acquired such shares. The stockholder also must describe all
arrangements or understandings between the stockholder and the nominee and any
other person or persons (naming such person or persons) pursuant to which the
nominations are made by the stockholder. Furthermore, the stockholder must
identify any person employed, retained, or to be compensated by the stockholder
submitting the nomination or by the person nominated, or any person acting on
his or her behalf, to make solicitations or recommendations to stockholders for
the purpose of assisting in the election of such nominee, and briefly describe
the terms of such employment, retainer or arrangement for compensation.
MEETING ATTENDANCE
Each Director attended at least 75% of the aggregate of (a) the total
number of meetings of the Board of Directors and (b) the total number of
meetings of all committees of the Board of Directors on which he or she served
(during the periods that he or she served).
COMPENSATION OF DIRECTORS
The Board has one employee-director who does not receive any remuneration
for service on the Board of Directors or on any committee of the Board.
Each of our non-employee Directors receives an annual fee of $10,000 for
service on the Board of Directors. Additionally, each non-employee Director
receives a fee of $1,000 for each Board or committee meeting attended, except
that if such meeting is held by telephone conference call or by unanimous
written consent, the fee is reduced to $500. If a Board and/or one or more
committees meet on the same day, a full meeting fee is paid for one meeting and
one-half of the meeting fee is paid for each additional meeting attended that
day. Each non-employee Director who serves on the executive committee receives
an additional annual fee of $10,000 for such service. The chairman of the Board
of Directors receives an additional annual fee of $10,000 for such service, and
the chairman of each committee receives an additional annual fee of $2,000 for
such service.
Non-employee Directors participate in the Outside Directors' Long Term
Incentive Plan (the "LTIP"). Under the LTIP, for the first five fiscal years in
which we produce consolidated net income of at least $500,000, starting with
1996 for Directors in office at that time and starting with election to the
Board of Directors for new Directors, each non-employee director will be
credited with share equivalent units ("SEUs"). Each SEU is valued at the market
value of one share of our common stock on the last day of trading of the first
quarter following a fiscal year for which SEUs are to be credited. The number of
SEUs to be credited is determined by dividing the value of one SEU into an
amount equal to the basic annual Director's fee of $10,000. Upon termination of
a Director's service on the Board of Directors, but not before, SEUs become
redeemable, at our option, for either (a) a commensurate number of shares of our
common stock or (b) subject to our consent, the cash value of a commensurate
number of shares of our common stock as of the termination of service date.
Pursuant to the 1995 Graham Corporation Incentive Plan to Increase
Shareholder Value (the "Incentive Plan"), each of our non-employee Directors was
to be granted, annually for four years, an option to purchase 2,250 shares of
our common stock at its closing price on the American Stock Exchange on the date
of each grant, subject to availability under the Incentive Plan of unissued
options reserved for Directors. However, no shares reserved for non-employee
Directors remain in the Incentive Plan and no grants from it were made to any
non-employee Directors during Fiscal Year 2002.
During Fiscal Year 2002, each of our non-employee Directors was granted an
option to purchase 1,000 shares of our common stock at its closing price on the
American Stock Exchange on the date of each grant pursuant to the 2000 Graham
Corporation Incentive Plan to Increase Shareholder Value.
7
EXECUTIVE OFFICERS
Graham Corporation is currently served by the following executive officers,
who are elected by the Board of Directors and serve until their respective
successors are elected and qualified:
ALVARO CADENA, age 58, has been President and Chief Executive Officer since
1998 and has been employed with us since 1969. Further information about Mr.
Cadena is set forth above under "Election of Directors."
JOSEPH P. GORMAN, JR., age 59, is Vice President--Sales and has been
employed with us since 1969.
J. RONALD HANSEN, age 55, has been Vice President--Finance & Administration
and Chief Financial Officer since 1993. He has been employed with us since 1993.
JAMES R. LINES, age 41, is Vice President--Marketing. Previously he served
as Vice President-Engineering. He has been employed with us since 1984.
PHILIP MARKS, age 58, is Vice President--Manufacturing. Previously he
served as Plant Manager, Manager of Contract Engineering and Manager of Quality
Assurance and Quality Control. He has been employed with us since 1970.
STEPHEN P. NORTHRUP, age 50, is Vice President--Engineering. Previously he
served as Vice President-Power & Marine Products. He has been employed with us
since 1973.
WILLIAM A. SMITH, JR., age 47, is Vice President and General Counsel of
Graham. He has been employed with us since 1992.
EXECUTIVE COMPENSATION
The following table sets forth the annual compensation for services to us
in all capacities for the past three fiscal years for our Chief Executive
Officer and our five most highly compensated executive officers (other than our
Chief Executive Officer) who were serving as executive officers on March 31,
2002, the last day of Fiscal Year 2002 (collectively, the "named executive
officers").
SUMMARY COMPENSATION TABLE
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ANNUAL LONG-TERM
COMPENSATION COMPENSATION
SECURITIES
NAME AND FISCAL UNDERLYING ALL OTHER
PRINCIPAL POSITION YEAR SALARY ($)(1) OPTIONS/SARS (#) COMPENSATION ($)(2,3,4,5)
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ALVARO CADENA 2002 307,849 6,000 26,122
President and 2001 221,478 6,000 14,663
Chief Executive Officer 2000 215,010 7,015 24,165
JOSEPH P. GORMAN, JR. 2002 163,977 3,000 18,813
Vice President--Sales 2001 130,021 3,000 10,012
2000 126,235 3,507 16,351
J. RONALD HANSEN 2002 174,647 3,000 17,395
Vice President--Finance & 2001 138,486 3,000 8,712
Administration and 2000 134,451 3,507 10,238
Chief Financial Officer
JAMES R. LINES 2002 163,977 3,000 19,726
Vice President--Marketing 2001 130,021 3,000 7,108
2000 126,235 3,507 10,266
STEPHEN P. NORTHRUP 2002 173,977 3,000 18,626
Vice President--Engineering 2001 130,021 3,000 7,244
2000 126,235 3,507 8,681
WILLIAM A. SMITH, JR. 2002 164,968 3,000 14,873
Vice President and 2001 130,728 3,000 6,487
General Counsel 2000 126,922 3,507 7,980
8
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(1) Includes payment of contingent salary amounts that are deferred to the
following fiscal year and are payable only upon attainment of predetermined
performance goals. The figures shown also include amounts (if any) deferred
by the named executive officers pursuant to section 401(k) of the Internal
Revenue Code and deferred contingent salary. Amounts deferred under section
401(k) of the Internal Revenue Code are deposited in the named executive
officer's 401(k) account for investment and payment according to the terms
of our Incentive Savings Plan.
(2) Includes premiums paid on insurance policies on each of the named executive
officers as follows: $13,375 for Mr. Cadena for the fiscal year ended March
31, 2000 ("Fiscal Year 2000"), $13,701 for Fiscal Year 2001, and $14,050 for
Fiscal Year 2002; $9,029 for Mr. Gorman for Fiscal Year 2000, $9,283 for
Fiscal Year 2001, and $9,632 for Fiscal Year 2002; $7,718 for Mr. Hansen for
Fiscal Year 2000, $7,932 for Fiscal Year 2001, and $8,032 for Fiscal Year
2002; $4,207 for Mr. Lines for Fiscal Year 2000, $4,317 for Fiscal Year
2001, and $6,577 for Fiscal Year 2002; $5,558 for Mr. Smith for Fiscal Year
2000, $5,758 for Fiscal Year 2001, and $5,873 for Fiscal Year 2002; $6,286
for Mr. Northrup for Fiscal Year 2000, $6,515 for Fiscal Year 2001, and
$6,654 for Fiscal Year 2002.
(3) Includes the following amounts paid to the 401(k) accounts of the named
executive officers pursuant to our Incentive Savings Plan: $1,400 to Mr.
Cadena's account for Fiscal Year 2000, none for Fiscal Year 2001, and
$10,385 for Fiscal Year 2002; $1,347 to Mr. Gorman's account for Fiscal Year
2000, none for Fiscal Year 2001, and $7,889 for Fiscal Year 2002; $1,400 to
Mr. Hansen's account for Fiscal Year 2000, none for Fiscal Year 2001, and
$8,403 for Fiscal Year 2002; $1,364 to Mr. Lines's account for Fiscal Year
2000, none for Fiscal Year 2001, and $10,385 for Fiscal Year 2002; $1,322 to
Mr. Smith's account for Fiscal Year 2000, none for Fiscal Year 2001, and
$7,968 for Fiscal Year 2002; $1,308 to Mr. Northrup's account for Fiscal
Year 2000, none for Fiscal Year 2001, and $8,042 for Fiscal Year 2002.
(4) Includes the following amounts representing the value of shares allocated
pursuant to our ESOP to each named executive officer's account maintained
under the ESOP: shares worth $1,120 to Mr. Cadena for Fiscal Year 2000, $962
for Fiscal Year 2001, and $1,687 for Fiscal Year 2002; shares worth $1,120
to Mr. Gorman for Fiscal Year 2000, $729 for Fiscal Year 2001, and $1,292
for Fiscal Year 2002; shares worth $1,120 to Mr. Hansen for Fiscal Year
2000, $780 for Fiscal Year 2001, and $960 for Fiscal Year 2002; shares worth
$1,120 to Mr. Lines for Fiscal Year 2000, $729 for Fiscal Year 2001, and
$1,114 for Fiscal Year 2002; shares worth $1,100 to Mr. Smith for Fiscal
Year 2000, $729 for Fiscal Year 2001, and $1,032 for Fiscal Year 2002;
shares worth $1,087 to Mr. Northrup for Fiscal Year 2000, $729 for Fiscal
Year 2001, and $1,354 for Fiscal Year 2002.
(5) Includes a long-term service award of $8,270 in Fiscal Year 2000 for Mr.
Cadena. Includes a long-term service award of $4,855 for Fiscal Year 2000
for Mr. Gorman. Includes payment for published professional articles of
$3,575 for Fiscal Year 2000, $2,072 for Fiscal Year 2001, and $1,650 for
Fiscal Year 2002 for Mr. Lines. Includes payment in lieu of vacation of
$2,576 for Fiscal Year 2002 for Mr. Northrup.
9
STOCK OPTIONS
The following table indicates the total number of stock options we granted
to each named executive officer during Fiscal Year 2002.
OPTION/SAR GRANTS DURING FISCAL YEAR 2002
--------------------------------------------------------------------------------
INDIVIDUAL GRANTS POTENTIAL REALIZABLE
PERCENT OF VALUE AT ASSUMED
NUMBER OF TOTAL ANNUAL RATES OF STOCK
SECURITIES OPTIONS/SARS PRICE APPRECIATION FOR
UNDERLYING GRANTED TO EXERCISE OR OPTION TERM
OPTIONS/SARS EMPLOYEES IN BASE PRICE EXPIRATION
NAME GRANTED (#)(1) FISCAL YEAR (%) ($/SHARE) DATE 5% ($) 10% ($)
----------------------------------------------------------------------------------------------------------------
ALVARO CADENA 6,000 22.2% 11.70 07/26/11 44,148 111,881
JOSEPH P. GORMAN, JR. 3,000 11.1% 11.70 07/26/11 22,074 55,940
J. RONALD HANSEN 3,000 11.1% 11.70 07/26/11 22,074 55,940
JAMES R. LINES 3,000 11.1% 11.70 07/26/11 22,074 55,940
STEPHEN P. NORTHRUP 3,000 11.1% 11.70 07/26/11 22,074 55,940
WILLIAM A. SMITH, JR. 3,000 11.1% 11.70 07/26/11 22,074 55,940
---------------
(1) All stock options are currently vested, non-qualified stock options.
The following table indicates the total number of exercisable and
unexercisable stock options held by each named executive officer on March 31,
2002, the last day Fiscal Year 2002, and the value.
AGGREGATED OPTION/SAR EXERCISES IN FISCAL YEAR 2002
AND FISCAL YEAR-END OPTION/SAR VALUES
--------------------------------------------------------------------------------
NUMBER OF SECURITIES
UNDERLYING UNEXERCISED VALUE OF UNEXERCISED IN-
OPTIONS/SARS AT THE-MONEY OPTIONS/SARS
FISCAL YEAR-END (#) AT FISCAL YEAR-END ($)(1)
SHARES ACQUIRED VALUE
NAME ON EXERCISE (#) REALIZED ($) EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
--------------------------------------------------------------------------------------------------------------------
ALVARO CADENA -0- -0- 32,515 -0- 43,799 -0-
JOSEPH P. GORMAN, JR. -0- -0- 19,407 -0- 30,198 -0-
J. RONALD HANSEN 2,200 14,650 14,507 -0- 18,398 -0-
JAMES R. LINES 8,907 58,720 10,200 -0- -0- -0-
STEPHEN P. NORTHRUP -0- -0- 16,707 -0- 21,898 -0-
WILLIAM A. SMITH, JR. 2,000 14,000 16,707 -0- 20,126 -0-
---------------
(1) Based on the closing price of our common stock on March 28, 2002, which was
$11.00 per share.
10
PENSION PLANS
The following table sets forth straight-life annuity amounts without regard
to offsets for social security benefits. Benefits listed in the table are
subject to a deduction of an amount equal to 50% of an eligible employee's
estimated primary social security benefit.
PENSION PLAN TABLE
--------------------------------------------------------------------------------
YEARS OF SERVICE
REMUNERATION($) 15 20 25 30/35
---------------------------------------------------------
100,000 $25,000 $33,333 $ 41,670 $ 50,000
125,000 $31,250 $41,662 $ 52,088 $ 62,500
150,000 $37,500 $49,995 $ 62,505 $ 75,000
160,000 $40,000 $53,333 $ 67,667 $ 80,000
175,000(1) $43,750 $58,328 $ 72,922 $ 87,500
260,000(1) $65,000 $86,667 $108,334 $130,000
---------------
(1) For the U.S. Retirement Plan (as defined below), with respect to 2001,
$170,000 was the maximum amount of compensation that could be used as the
basis for determining benefits under applicable law. For the Supplemental
Plan (as defined below), with respect to 2001, only non-contingent
compensation over $170,000 was used as the basis for determining benefits.
Our Retirement Income Plan is a defined benefit pension plan for the
benefit of our eligible domestic employees and the eligible domestic employees
of our United States subsidiaries (the "U.S. Retirement Income Plan"). The U.S.
Retirement Income Plan takes income into account for future benefits on a
calendar year basis. The portion of Fiscal Year 2002 compensation that is taken
into account by the U.S. Retirement Income Plan for the purpose of calculating
future pension benefits is as follows: $170,000 for Mr. Cadena; $142,646 for Mr.
Hansen; $134,659 for Mr. Smith; $133,931 for Mr. Gorman; $133,931 for Mr. Lines;
and $133,931 for Mr. Northrup.
The approximate years of creditable service as of June 14, 2002 of each of
the named executive officers eligible to participate in the U.S. Retirement
Income Plan are as follows: 33 years for Mr. Cadena; 33 years for Mr. Gorman; 28
years for Mr. Northrup; 17 years for Mr. Lines; 9 years for Mr. Hansen; and 9
years for Mr. Smith.
In addition to the U.S. Retirement Income Plan, we maintain a Supplemental
Executive Retirement Plan (the "Supplemental Plan") that is intended to provide
eligible participants and their surviving spouses and beneficiaries with the
amount of employer-provided retirement benefits that the U.S. Retirement Income
Plan would provide but for the limitation on compensation that may be recognized
under tax-qualified plans imposed by section 401(a)(17) of the Internal Revenue
Code and the limitations on benefits imposed by sections 415(b) and (e) of the
Internal Revenue Code. Any of our officers whose non-contingent compensation
exceeded $170,000 in 2001, or will exceed $170,000 in 2002, are eligible to
participate in the Supplemental Plan. Currently Mr. Cadena is the only eligible
participant. The Supplemental Plan takes income into account for future benefits
on a calendar year basis. The amount of Fiscal Year 2002 compensation taken into
account by the Supplemental Plan for the purpose of calculating future benefits
for Mr. Cadena was $58,134.
EMPLOYMENT CONTRACTS
Each named executive officer has a one-year Employment Agreement with us
that is renewable upon the parties' mutual consent for additional periods. Each
Employment Agreement has a termination provision that, in certain circumstances,
entitles each named executive officer to a payment equal to 12 months' salary
(non-contingent salary only) upon the termination of his employment.
We have entered into Senior Executive Severance Agreements with certain of
our named executive officers. These agreements, as amended to date, provide that
in the event we experience a change in control (defined generally as an
acquisition of 25% or more of our outstanding voting shares, or a change in the
majority of the Board of Directors as the result of any tender offer or business
combination) effected by a third person, termination of the individual's
employment within two years of such a change of control entitles such person to
one Dollar
11
less than three years' compensation, including bonuses, payable either in
installments over a period not to exceed three years or as a lump sum.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
The members of our compensation committee during Fiscal Year 2002 were
Directors Berkeley, Bidlack, Hill, Lemcke and Van Rees. Director Cornelius S.
Van Rees is our corporate secretary but receives no compensation for his service
in such capacity. Mr. Van Rees participated in the Board of Directors'
deliberations regarding compensation of all of our compensated officers.
COMPENSATION COMMITTEE REPORT ON EXECUTIVE COMPENSATION
Our compensation committee establishes levels of cash compensation and
forms and amounts of non-cash compensation for our executive officers and our
subsidiaries' executive officers. The guiding principles of our compensation
committee are as follows:
- To provide a reasonable level of compensation sufficient to attract and
retain executive personnel best suited by training, ability, and other
relevant criteria for the management requirements of our company.
- To balance base compensation (non-contingent) and incentive compensation
(contingent upon performance) for the purpose of motivating executive
personnel.
- To determine the extent and method of aligning the financial interest of
our executive personnel with the interest of our stockholders in the
appreciation of their investment.
For Fiscal Year 2002, the compensation committee increased the
non-contingent salaries of our Chief Executive Officer and of our other
executive officers by 3% as part of a general salary increase for all of our
employees at the same percentage. Traditionally, our non-contingent salaries for
our Chief Executive Officer and executive officers have been set below the
mid-range of competitive levels. We believe that compensation for our Chief
Executive Officer and other executive officers remains below the median
compensation levels for similarly situated executive officers of
comparably-sized companies both in our industry and our geographic region. We
also believe that non-cash compensation, in the form of stock options, is
nominal as compared to that offered by comparably-sized companies both in our
industry and our geographic region.
Decisions regarding executive compensation made during Fiscal Year 2002
relied in part on guidance from a report prepared by an independent consulting
firm reviewing and comparing compensation levels of senior management personnel
in manufacturing industries in western New York. As it has in the past, the
compensation committee considered information as to compensation levels for
officers and senior managers of comparable scope and responsibility in an
industry group of comparably sized companies. In its decision to increase Chief
Executive Officer and other executive non-contingent salary by 3%, the
compensation committee considered the need to continue to provide incentives for
members of management.
In the interest of linking corporate performance to officer compensation
while maintaining competitive overall nominal salary rates, a portion of the
annual salary for each named executive officer is contingent. The contingent
portion is payable, on a deferred basis, only following the end of each fiscal
year, and payment is subject to attainment of performance-based goals for the
year by us and by each named executive officer individually. Under this
arrangement, a target performance-based amount for each eligible officer,
representing a percentage of non-contingent salary, is recommended to the
compensation committee annually by the Chief Executive Officer; a target
performance-based amount for the Chief Executive Officer is determined by the
compensation committee. We must meet a predetermined earnings threshold in order
for any eligible officer to receive performance-based pay. The actual amount of
performance-based pay earned, if any, depends upon the degree of attainment of
goals established by the compensation committee for each year in the following
areas: corporate and subsidiary return on capital employed and an individual
performance goal for each officer. These determinations were based on the
compensation committee's review of pertinent data with reference to literature
in the field and to industry practices for comparably-sized companies and
expectations of attainable results under existing market conditions.
12
In Fiscal Year 2002, we granted stock options to the Chief Executive
Officer and other executive officers. These stock option grants were made
pursuant to our 1995 Stock Option and Appreciation Rights Plan for the purpose
of further increasing incentives for our officers to increase shareholder value.
No stock appreciation rights or other forms of equity compensation were granted.
Compensation Committee:
H. Russel Lemcke, Chairman
Helen H. Berkeley
Jerald D. Bidlack
Philip S. Hill
Cornelius S. Van Rees
13
SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
During Fiscal Year 2002, all of our Directors, executive officers and more
than 10% stockholders complied in a timely manner with the filing requirements
of Section 16(a) of the Securities Exchange Act of 1934 except that a Form 5 for
Director Helen H. Berkeley was filed nine days late. In making this statement,
we have relied on the written representations of our Directors, executive
officers and more than 10% stockholders and copies of the reports that they have
filed with the Securities and Exchange Commission.
STOCK PRICE PERFORMANCE GRAPH
Our common stock is traded on the American Stock Exchange under the symbol
"GHM." Set forth below is a line graph comparing, (a) the cumulative stockholder
return on our common stock for a five-year period beginning with the last trade
of our common stock on March 31, 1997, to (b) the cumulative total return of
companies on the American Stock Exchange Market Value Index (the "AMEX Index")
over the same period and (c) a selection of peer group public companies, each of
which shares a Standardized Industrial Classification code with us and each of
which either competes with us as to one or more product lines or one or more
market segments (the "Peer Group").
COMPARISON OF 5 YEAR CUMULATIVE TOTAL RETURN AMONG GRAHAM CORPORATION,
THE AMEX COMPOSITE INDEX AND A PEER GROUP
[LINE GRAPH]
CUMULATIVE TOTAL RETURN
---------------------------------------------------------------------------------
31-MARCH-97 31-MARCH-98 31-MARCH-99 31-MARCH-00 31-MARCH-01 31-MARCH-02
Graham Corporation............. 100.00 116.52 57.14 50.00 63.93 78.57
Amex Composite................. 100.00 139.46 138.74 196.73 156.84 163.69
Peer Group..................... 100.00 143.05 72.44 62.25 102.64 143.96
---------------
(1) The Peer Group public companies selected by us for comparison in the line
graph consist of the following manufacturing companies: Flowserve Corp.,
Paul Mueller Co., and Selas Corp. of America.
This line graph assumes an investment of $100 on March 31, 1997 in (a) our
common stock, (b) the stocks comprising the AMEX Index and (c) the stocks of the
Peer Group public companies. Total returns assume the reinvestment of dividends.
Our stock performance may not continue into the future with the trends
similar to those depicted in the line graph above. We neither make nor endorse
any predictions as to our future stock performance.
14
REPORT OF THE AUDIT COMMITTEE TO STOCKHOLDERS
The audit committee has:
- reviewed and discussed our audited financial statements for Fiscal Year
2002 with our management and with Deloitte & Touche LLP, our independent
auditors;
- discussed with our independent auditors the matters required to be
discussed by SAS 61 (Codification for Statements on Auditing Standards);
and
- received and discussed the written disclosures and the letter from our
independent auditors required by Independence Standards Board Statement
No. 1 (Independence Discussions with Audit Committees) and has discussed
with our independent auditor the independent auditor's independence.
Based on such review and discussions with management and the independent
auditors, the audit committee recommended to the Board of Directors that the
audited financial statements be included in our Annual Report on Form 10-K for
Fiscal Year 2002 for filing with the Securities and Exchange Commission.
AUDITORS' FEES
AUDIT FEES: For professional services rendered by it for the audit of our
annual financial statements for Fiscal Year 2002, and reviews of the financial
statements included in our Quarterly Reports on Form 10-Q for Fiscal Year 2002,
Deloitte & Touche LLP billed us audit fees in the aggregate amount of $81,000.
FINANCIAL INFORMATION SYSTEMS DESIGN AND IMPLEMENTATION FEES: Deloitte &
Touche LLP rendered no professional services and billed us no fees for
professional services rendered by them for Fiscal Year 2002 in connection with
financial information systems design and implementation.
ALL OTHER FEES: For professional services other than those described above
rendered by it for Fiscal Year 2002, Deloitte & Touche LLP billed us fees in the
aggregate amount of $31,641.
The audit committee has considered whether the provision of services
described above under "Financial Information Systems Design and Implementation
Fees" and "All Other Fees" is compatible with maintaining the independence of
Deloitte & Touche LLP.
Audit Committee:
Philip S. Hill, Chairman
Helen H. Berkeley
Jerald D. Bidlack
H. Russel Lemcke
Cornelius S. Van Rees
15
PROPOSAL 2:
SELECTION OF OUR INDEPENDENT AUDITORS
The firm of Deloitte & Touche LLP served as our independent auditors for
Fiscal Year 2002. On the recommendation of the audit committee, the Board of
Directors has selected Deloitte & Touche LLP as our independent auditors for
Fiscal Year 2003. This selection will be presented to our stockholders for
approval at the annual meeting. The Board of Directors recommends a vote in
favor of the proposal to approve and ratify this selection, and, unless
otherwise instructed in the proxy, the persons named in the enclosed proxy will
vote the proxies FOR this proposal. If our stockholders do not approve this
selection, the Board of Directors will reconsider its choice.
We have been advised by Deloitte & Touche LLP that a representative will be
present at the annual meeting and will be available to respond to appropriate
questions. In addition, we intend to give that representative an opportunity to
make a statement if he or she should so desire.
For further information about our engagement of Deloitte & Touche LLP, see
"Report of the Audit Committee to Stockholders" above.
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
At our annual meeting for Fiscal Year 2000, our stockholders approved the
Long-Term Stock Ownership Plan of Graham Corporation. Certain of our Directors
and named executive officers are participants in the this plan and are indebted
to us for a balance due on the purchase of shares of our common stock at the
closing price on the American Stock Exchange on the date of purchase. As of June
14, 2002, pursuant to the terms of both a stock subscription agreement executed
by each officer participating in this plan and a note executed by each such
person, Mr. Cadena is indebted to us in the amount of $178,750 and each of Mr.
Gorman, Mr. Hansen, Mr. Northrup and Mr. Smith is indebted to us in the amount
of $114,400. The largest aggregate amount of indebtedness to us by each
participant since the beginning of our last fiscal year is the amount stated in
the preceding sentence for each participant. Each subscription agreement states
that 18 months after purchase of the shares our common stock, a participant is
entitled to sell 50% of his shares and that the participant agrees to hold the
remainder of his shares until such time as he terminates employment with us. The
terms of each note provide that a participant will repay the balance of the note
in thirty-two equal consecutive quarterly installments beginning on June 30,
2002. The interest on each note will be imputed at the applicable federal rate
established by the Internal Revenue Service. Shares remain in our custody until
a participant's note is paid in full, unless the participant sells his shares
(when and to the extent permitted). Each note provides that until it is paid in
full, any shares sold will be sold through a broker who will forward any
proceeds, less expenses, to us to pay off all or a portion of such note. Each
note also contains provisions that grant a security interest to us in the
purchased shares and any proceeds from any subsequent sale of the purchased
shares. If a participant ceases to be an officer or director any time after 18
months after purchase, the participant may sell all or a portion of his shares.
However, because the subscription agreement states that no participant may sell
any shares prior to 18 months after purchase, if a participant ceases to be an
officer or director prior to 18 months after purchase, such participant has the
discretion to retain or sell all or a portion of his shares only if we waive our
rights under that provision in such participant's subscription agreement.
STOCKHOLDER PROPOSALS FOR 2003 ANNUAL MEETING
In order for any stockholder proposal to be included in our proxy statement
to be issued in connection with our annual meeting of stockholders for Fiscal
Year 2003, we must receive the proposal no later than February 28, 2003. If the
proposal is in compliance with all of the requirements set forth in Rule 14a-8
under the Securities Exchange Act of 1934, we will include the stockholder
proposal in our proxy statement and place it on the form of proxy issued for the
2003 annual meeting. Pursuant to our bylaws, stockholder proposals that are not
submitted for inclusion in our proxy materials pursuant to Rule 14a-8 may be
brought before the annual meeting of stockholders for Fiscal Year 2003 only if
written notice of the proposal is delivered to our corporate secretary by May
27, 2003, and if a stockholder complies with all of the other applicable
provisions of our bylaws. All such stockholder notices should be delivered to
the following address: Graham Corporation, Attention: Corporate Secretary, 20
Florence Avenue, Batavia, New York 14020.
16
ANNUAL REPORT
A copy of our annual report containing financial statements for Fiscal Year
2002, prepared in conformity with generally accepted accounting principles,
accompanies this proxy statement. To obtain a copy of our annual report on Form
10-K without charge, please address your request to Graham Corporation,
Attention: Annual Report Request, 20 Florence Avenue, Batavia, New York 14020.
OTHER MATTERS
The Board of Directors does not know of any other matters that may be
presented for action at the annual meeting. Should any other matters come before
the annual meeting, however, the persons named in the enclosed proxy will have
discretionary authority to vote all proxies with respect to such matters in
accordance with their judgment.
By Order of the Board of Directors
/s/ ALVARO CADENA
ALVARO CADENA
President & Chief Executive Officer
Dated: June 28, 2002
17
APPENDIX A
GRAHAM CORPORATION
AUDIT COMMITTEE CHARTER
ROLE AND INDEPENDENCE
The Audit Committee of the Board of Directors assists the Board in
fulfilling its responsibility for oversight of the quality and integrity of the
accounting, auditing and reporting practices of the Corporation and other such
duties as directed by the Board. The membership of the Committee shall consist
of at least three Directors who are generally knowledgeable in financial and
auditing matters, including at least one member with accounting or related
financial management expertise. Each member shall be free of any relationship
that, in the opinion of the Board, would interfere with his or her individual
exercise of independent judgment, and shall meet Director independence
requirements for serving on audit committees as set forth in the corporate
governance standards of the American Stock Exchange. The Committee is expected
to maintain free and open communication (including private executive sessions at
least annually) with the independent accountants and the management of the
Corporation. In discharging this oversight role, the Committee is empowered to
investigate any matter brought to its attention, with full power to retain
outside counsel or other experts for this purpose.
The Board of Directors shall appoint one member of the Audit Committee as
chairman. He or she shall be responsible for leadership of the Committee,
including preparing the agenda, presiding over the meetings, making committee
assignments and reporting to the Board of Directors. The chairman will also
maintain regular liaison with the CEO, CFO and the lead independent audit
partner.
RESPONSIBILITIES
The Audit Committee's primary responsibilities include:
- Recommending to the Board the independent accountant to be selected
or retained to audit the financial statements of the Corporation. In
so doing, the Committee will request from the auditor a written
affirmation that the auditor is in fact independent, discuss with
the auditor any relationships that may affect the auditor's
independence, and recommend to the Board any actions necessary to
oversee the auditor's independence.
- Overseeing the independent auditor relationship by discussing with
the auditor the nature and rigor of the audit process, receiving and
reviewing audit reports, and providing the auditor full access to
the Committee (and the Board) to report on any and all appropriate
matters.
- Reviewing the audited financial statements and discussing them with
management and the independent auditor. These discussions shall
include consideration of the quality of the Corporation's accounting
principles as applied in its financial reporting, including review
of estimates, reserves and accruals, review of judgmental areas,
review of audit adjustments whether or not recorded and such other
inquiries as may be appropriate. Based on the review, the Committee
shall make its recommendation to the Board as to the inclusion of
the Corporation's audited financial statements in the Corporation's
annual report on Form 10-K.
- Reviewing with management and the independent auditor the quarterly
financial information prior to the Corporation's filing on Form
10-Q. This review may be performed by the Committee or its chairman.
- Discussing with management and the independent auditor the quality
and adequacy of the Corporation's internal controls.
- Discussing with management the status of pending litigation,
taxation matters and other areas of oversight to the legal and
compliance area as may be appropriate.
- Reporting Audit Committee activities to the full Board and issuing
annually a report to be included in the proxy statement (including
appropriate oversight conclusions) for submission to the
shareholders.
A-1
MATTERS OUTSIDE THE SCOPE OF COMMITTEE'S RESPONSIBILITY
It is not intended for the Audit Committee to be responsible for any of the
following matters, and no provision of this charter should be so construed:
- planning, directing or conducting audits;
- determining whether the Corporation's financial statements are
complete and accurate and in accordance with generally accepted
accounting principles;
- resolving disagreements between management and the independent
auditors; or
- ensuring compliance with laws and regulations or any business ethics
policies adopted by the Corporation.
A-2
GRAHAM CORPORATION
20 FLORENCE AVENUE
BATAVIA, NEW YORK 14020
www.grahamcorp.com
PROXY 2002
GRAHAM CORPORATION
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
The undersigned hereby appoints Helen H. Berkeley and Philip S. Hill,
or either of them, each with power of substitution, as proxies to attend the
Annual Meeting of Stockholders of Graham Corporation to be held at the
Industrial Management Council, 930 East Avenue, Rochester, New York on Thursday,
July 25, 2002 at 11:00 a.m., and any adjournment thereof, and to vote in
accordance with the following instructions the number of shares the undersigned
would be entitled to vote if personally present at such meeting:
1. Election of Directors
FOR WITHHOLD
H. Russel Lemcke [ ] [ ]
to serve until 2005
Cornelius S. Van Rees [ ] [ ]
to serve until 2005
2. Ratification of the appointment of Deloitte & Touche LLP
as independent accountants for the fiscal year ending March 31, 2003.
FOR AGAINST ABSTAIN
[ ] [ ] [ ]
3. In their discretion, to vote upon all other matters as
may be properly brought before the meeting.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR THE NOMINEES AND FOR RATIFICATION
OF THE APPOINTMENT OF INDEPENDENT AUDITORS.
THIS PROXY WHEN PROPERLY EXECUTED WILL BE VOTED IN THE MANNER DIRECTED
HEREIN BY THE UNDERSIGNED STOCKHOLDER. IF NO DIRECTION IS MADE, THIS PROXY WILL
BE VOTED FOR THE ELECTION OF THE NOMINEES AND FOR RATIFICATION OF THE
APPOINTMENT OF AUDITORS.
Date: ______________________________, 2002 ____________________________________
Please sign exactly as name (s) appears on
this proxy and return it promptly whether
you plan to attend the meeting or not. If
you do attend, you may, of course, vote in
person. The space below may be used for
any questions or comments you may have. ____________________________________
(Signature or Signatures)
[ ] To help our preparation for the meeting, please check here if you
plan to attend.
2
EMPLOYEE BENEFITS COMMITTEE
June 28, 2002
Dear Plan Accountholder:
The Employee Stock Ownership Plan of Graham Corporation ("ESOP") and the
Incentive Savings Plan of Graham Corporation ("ISP") have related trusts (the
"ESOP Trust" and the "ISP Trust," respectively) which own common stock of Graham
Corporation ("Graham"). Chase Bank, as trustee of the ESOP ("ESOP Trustee") and
Manufacturers and Traders Trust Company, as trustee of the ISP ("ISP Trustee")
are stockholders of Graham and may vote on matters presented for stockholder
action at Graham's 2002 Annual Meeting of Stockholders scheduled to be held on
July 25, 2002 ("Annual Meeting").
The ESOP Trust and the ISP Trust provide that in casting their votes at the
2002 Annual Meeting, the ESOP Trustee and the ISP Trustee are to follow
directions given by Graham's Employee Benefits Committee ("Committee"). The
Committee in turn follows instructions provided by participants, former
participants and beneficiaries of deceased former participants with respect to
the Graham common stock allocated to their accounts in the ESOP as of June 14,
2002 and the Company Stock Fund of the ISP ("Company Stock Fund") as of June 14,
2002.
The records for the ESOP and the ISP indicate that you are among the
individuals who may give voting instructions. You may give your instructions by
completing and signing the enclosed Confidential Voting Instruction Card
("Instruction Card") and returning it in the envelope provided to the Burke
Group, which maintains the records for these plans. The Instruction Card lets
you give instructions for each matter expected to be presented for stockholder
action at the Annual Meeting. The Committee expects the Burke Group to tabulate
the instructions given on a confidential basis and to provide the Committee with
only the final results of the tabulation. The final results will be used in
directing the ESOP Trustee and the ISP Trustee.
The voting of the common stock held by the ESOP Trust and the ISP Trust is
subject to legal requirements under the Employee Retirement Income Security Act
of 1974, as amended. The Committee, in consultation with its legal advisors,
considers these requirements in establishing voting instruction procedures and
directing the ESOP Trustee and the ISP Trustee how to vote. The remainder of
this letter describes the voting procedures which the Committee expects to
follow for the 2002 Annual Meeting.
How your voting instructions count depends on whether it was anticipated
that the matter being voted upon would be presented for stockholder action at
the Annual Meeting; whether you had an interest in the ESOP Trust or the Company
Stock Fund on the proper date; and how large your interest was, as follows:
-2-
ANTICIPATED PROPOSALS
If Graham Common Stock Was Allocated to Your Account Under the ESOP Trust
as of June 14, 2002:
In general, the ESOP Trustee will be directed to vote the number of shares
of Graham common stock (if any) held by the ESOP Trust and allocated as of June
14, 2002 to your individual account under the ESOP according to the instructions
specified on the reverse side of the Instruction Card. The Instruction Card
shows the number of shares of Graham common stock allocated to your individual
account under the ESOP Trust as of June 14, 2002. If you do not file the
Instruction Card by July 17, 2001, you will be deemed to have instructed the
ESOP Trustee to ABSTAIN as to all proposals.
If You Had an Interest in the Company Stock Fund as of June 14, 2002:
In general, the ISP Trustee will be directed to vote the Graham common
stock held by the Company Stock Fund by casting votes FOR and AGAINST each
proposal specified on the reverse side of the Instruction Card in the same
proportions as instructions to cast votes FOR and AGAINST such proposal are
given by the individuals who are entitled, under the ISP, to give instructions.
The instructions given by each individual are weighted according to the value of
his respective interest in the Company Stock Fund as of June 14, 2002. The
Instruction Card shows the approximate number of shares of Graham common stock
(if any) -- and thus the approximate number of votes -- represented by your
interest in the Company Stock Fund as of June 14, 2002. For purposes of the ISP,
if you do not file the Instruction Card by July 17, 2002, or if you ABSTAIN as
to a proposal, your instructions will not count.
UNANTICIPATED PROPOSALS
It is possible, although very unlikely, that proposals other than those
specified on the Instruction Card will be presented for stockholder action at
the 2002 Annual Meeting. If this should happen, the ESOP Trustee and the ISP
Trustee will be instructed to vote upon such matters in their discretion, or to
cause such matters to be voted upon in the discretion of the individuals named
in any proxies executed by them.
Your interest in the ESOP Trust or in the ISP Trust offers you the
opportunity to participate, as do Graham's stockholders, in decisions that
affect Graham's future, and we encourage you to take advantage of it. To help
you decide how to complete the Instruction Card, enclosed is a copy of the Proxy
Statement that is being furnished to all holders of Graham common stock in
connection with the 2002 Annual Meeting. Please complete, sign and return your
Instruction Card today. Your instructions are important regardless of the size
of your interest in the ESOP Trust or in the Company Stock Fund.
If you have questions regarding the terms of the ESOP or the ISP, or how to
complete the Instruction Card, please call J. Ronald Hansen, Vice
President-Finance & Administration at (585) 343-2216.
Sincerely,
EMPLOYEE BENEFITS COMMITTEE
OF GRAHAM CORPORATION
Enclosure
GRAHAM CORPORATION CONFIDENTIAL VOTING INSTRUCTION
THIS INSTRUCTION IS SOLICITED BY THE EMPLOYEE BENEFITS COMMITTEE
OF GRAHAM CORPORATION
AS A NAMED FIDUCIARY FOR EACH OF THE
EMPLOYEE STOCK OWNERSHIP PLAN OF GRAHAM CORPORATION
AND THE
INCENTIVE SAVINGS PLAN OF GRAHAM CORPORATION
(TOGETHER, THE "PLANS")
FOR THE ANNUAL MEETING OF STOCKHOLDERS TO BE HELD ON JULY 25, 2002
The undersigned Participant, Former Participant or Beneficiary of a
deceased Former Participant in one or both of the Plans (the "Instructor")
hereby provides the voting instructions hereinafter specified to the Employee
Benefits Committee of Graham Corporation (the "Committee"), which instructions
shall be taken into account in directing the respective Trustees of the Plans to
vote, in person, by limited or general power of attorney, or by proxy, the
shares and fractional shares of common stock (the "Shares") of Graham
Corporation (the "Corporation") which are held by the respective Trustees of the
Plans, in their capacities as Trustees, as of June 14, 2002 (the "Record Date")
at the Annual Meeting of Stockholders of the Corporation (the "Annual Meeting")
to be held at the Industrial Management Council, 930 East Avenue, Rochester, New
York on July 25, 2002 at 11:00 a.m., or at any adjournment thereof.
As to the nominee and the proposals listed on the reverse side hereof
and as more particularly described in the Corporation's Proxy Statement dated
June 28, 2002, the Committee will give voting directions to the Trustees of the
Plans. Such directions will reflect the voting instructions filed by the
Instructor on this Confidential Voting Instruction, in the manner described in
the accompanying letter from the Committee dated June 28, 2002.
As to other matters which may properly come before the Annual Meeting,
the Trustees will be instructed to vote upon such matters in its discretion, or
cause such matters to be voted upon in the discretion of the individuals named
in any proxies executed by it.
The instructions set forth on the reverse side hereof will be taken
into account as described above in directing the respective Trustees of the
Plans how to vote the Shares of the Corporation held by them as of the Record
Date in their capacities as Trustees, provided this card is received by the
Burke Group by July 17, 2002.
PLEASE MARK, SIGN AND DATE THIS VOTING INSTRUCTION CARD ON THE REVERSE
SIDE AND RETURN IT IN THE ENCLOSED ENVELOPE.
IF THIS VOTING INSTRUCTION IS SIGNED BUT NO DIRECTION IS GIVEN, THIS VOTING
INSTRUCTION CARD WILL BE DEEMED TO INSTRUCT VOTES "FOR" THE ELECTION OF THE
NOMINEES AND "FOR" PROPOSAL 2.
------------------------------- ----------------------------
ESOP COMMON (as of 6/14/02) ISP COMMON (as of 6/14/02) PLEASE MARK YOUR CHOICE LIKE THIS : IN BLUE
OR BLACK INK.
------------------------------------------------------------------------------------------------------------------------------------
THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR" THE ELECTION OF NOMINEES AND "FOR" PROPOSAL 2.
------------------------------------------------------------------------------------------------------------------------------------
1. Election of Directors 2. Ratification of the appointment of Deloitte & Touche LLP as independent
accountants for the period April 1, 2002 through March 31, 2003.
FOR A THREE-YEAR TERM FOR WITHHOLD
FOR AGAINST ABSTAIN*
H. Russel Lemcke |_| |_|
|_| |_| |_|
Cornelius S. Van Rees |_| |_|
------------------------------------------------------------------------------------------------------------------------------------
3. In their discretion, the proxies are authorized to vote upon such other business as may properly come before the Annual Meeting
or any adjournment thereof.
------------------------------------------------------------------------------------------------------------------------------------
+ + The undersigned hereby instructs the Committee to
direct the Trustee of the Plan to vote in accordance
with the voting instructions indicated above and
hereby acknowledges receipt of the letter from the
Committee dated June 28, 2002, a Notice of Annual
Meeting of Stockholders of Graham Corporation and a
Proxy Statement for the Annual Meeting.
Date
----------------------------------------------------
Signature
----------------------------------------------------
Signature
----------------------------------------------------
+ + Please sign exactly as your name appears on this
instruction. Each owner of shares held jointly must
sign this voting instruction. If signing as
attorney, executor, administrator, trustee or
guardian, please include your full title. Corporate
proxies must be signed by an authorized officer.
* For purposes of the unallocated Shares held by the
Employee Stock Ownership Plan, abstention is
equivalent to not voting.
GRAHAM CORPORATION CONFIDENTIAL VOTING INSTRUCTION
THIS INSTRUCTION IS SOLICITED BY THE EMPLOYEE BENEFITS COMMITTEE
OF GRAHAM CORPORATION
AS A NAMED FIDUCIARY FOR THE
EMPLOYEE STOCK OWNERSHIP PLAN OF GRAHAM CORPORATION ("PLAN")
FOR THE ANNUAL MEETING OF STOCKHOLDERS TO BE HELD ON JULY 25, 2002
The undersigned Participant, Former Participant or Beneficiary of a
deceased Former Participant in the Plan (the "Instructor") hereby provides the
voting instructions hereinafter specified to the Employee Benefits Committee of
Graham Corporation (the "Committee"), which instructions shall be taken into
account in directing the Trustee of the Plan to vote, in person, by limited or
general power of attorney, or by proxy, the shares and fractional shares of
common stock (the "Shares") of Graham Corporation (the "Corporation") which are
held by the Trustee of the Plan, in its capacity as Trustee, as of June 14, 2002
(the "Record Date") at the Annual Meeting of Stockholders of the Corporation
(the "Annual Meeting") to be held at the Industrial Management Council, 930 East
Avenue, Rochester, New York on July 25, 2002 at 11:00 a.m., or at any
adjournment thereof.
As to the nominee and the proposals listed on the reverse side hereof
and as more particularly described in the Corporation's Proxy Statement dated
June 28, 2002, the Committee will give voting directions to the Trustee of the
Plan. Such directions will reflect the voting instructions filed by the
Instructor on this Confidential Voting Instruction, in the manner described in
the accompanying letter from the Committee dated June 28, 2002.
As to other matters which may properly come before the Annual Meeting,
the Trustee will be instructed to vote upon such matters in its discretion, or
cause such matters to be voted upon in the discretion of the individuals named
in any proxies executed by it.
The instructions set forth on the reverse side hereof will be taken
into account as described above in directing the Trustee of the Plan how to vote
the Shares of the Corporation held by it as of the Record Date in its capacity
as Trustee, provided this card is received by the Burke Group by July 17, 2002.
PLEASE MARK, SIGN AND DATE THIS VOTING INSTRUCTION CARD ON THE REVERSE
SIDE AND RETURN IT IN THE ENCLOSED ENVELOPE.
IF THIS VOTING INSTRUCTION IS SIGNED BUT NO DIRECTION IS GIVEN, THIS VOTING
INSTRUCTION CARD WILL BE DEEMED TO INSTRUCT VOTES "FOR" THE ELECTION OF THE
NOMINEES AND "FOR" PROPOSAL 2.
-------------------------------
ESOP COMMON (as of 6/14/02) PLEASE MARK YOUR CHOICE LIKE THIS : IN BLUE OR BLACK INK.
------------------------------------------------------------------------------------------------------------------------------------
THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR" THE ELECTION OF NOMINEES AND "FOR" PROPOSAL 2.
------------------------------------------------------------------------------------------------------------------------------------
1. Election of Directors 2. Ratification of the appointment of Deloitte & Touche LLP as independent
accountants for the period April 1, 2002 through March 31, 2003.
FOR A THREE-YEAR TERM FOR WITHHOLD
FOR AGAINST ABSTAIN*
H. Russel Lemcke |_| |_|
|_| |_| |_|
Cornelius S. Van Rees |_| |_|
------------------------------------------------------------------------------------------------------------------------------------
3. In their discretion, the proxies are authorized to vote upon such other business as may properly come before the Annual
Meeting or any adjournment thereof.
------------------------------------------------------------------------------------------------------------------------------------
+ + The undersigned hereby instructs the Committee to
direct the Trustee of the Plan to vote in accordance
with the voting instructions indicated above and
hereby acknowledges receipt of the letter from the
Committee dated June 28, 2002, a Notice of Annual
Meeting of Stockholders of Graham Corporation and a
Proxy Statement for the Annual Meeting.
Date
----------------------------------------------------
Signature
----------------------------------------------------
Signature
----------------------------------------------------
+ + Please sign exactly as your name appears on this
instruction. Each owner of shares held jointly must
sign this voting instruction. If signing as
attorney, executor, administrator, trustee or
guardian, please include your full title. Corporate
proxies must be signed by an authorized officer.
* For purposes of the unallocated Shares held by the
Employee Stock Ownership Plan, abstention is
equivalent to not voting.