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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 Pursuant to Rule 14a-11(c) or Rule 14a-12
GRAHAM CORPORATION
(NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
(NAME OF PERSON(S) FILING PROXY STATEMENT, IF OTHER THAN THE REGISTRANT)
Payment of Filing Fee (Check the appropriate box):
[X] No fee required.
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and 0-11.
(1) Title of each class of securities to which transaction applies: .......
(2) Aggregate number of securities to which transaction applies: ..........
(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (Set forth the amount on which the
filing fee is calculated and state how it was determined): ............
(4) Proposed maximum aggregate value of transaction: ......................
(5) Total fee paid: .......................................................
[ ] Fee paid previously with preliminary materials.
[ ] Check box if any part of the fee is offset as provided by Exchange Act Rule
0-11(a)(2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration statement number,
or the Form or Schedule and the date of its filing.
(1) Amount Previously Paid: ...............................................
(2) Form, Schedule or Registration Statement No.: .........................
(3) Filing Party: .........................................................
(4) Date Filed: ...........................................................
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GRAHAM CORPORATION
20 FLORENCE AVENUE
BATAVIA, NEW YORK 14020
------------------------------
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD JULY 26, 2001
------------------------------
The Annual Meeting of Stockholders (the "Annual Meeting") of Graham
Corporation ("Graham") will be held at the Industrial Management Council, 930
East Avenue, Rochester, New York on Thursday, July 26, 2001 at 11:00 a.m. for
the following purposes:
1. To elect two directors to hold office until the Annual Meeting of
Stockholders in 2004;
2. To vote upon a proposal to approve the 2000 Graham Corporation Incentive
Plan to Increase Shareholder Value;
3. To ratify the appointment of Deloitte & Touche LLP as Graham's
independent accountant for the fiscal year ending March 31, 2002; and
4. To transact such other business as may properly come before the meeting.
Stockholders of record at the close of business on June 15, 2001 are
entitled to notice of and to vote at the Annual Meeting. Stockholders who do not
expect to be present at the meeting should fill in, sign and date the enclosed
Proxy Card and mail it promptly in the enclosed return envelope. No postage is
required for mailing in the United States.
By Order of the Board of Directors
/s/ ALVARO CADENA
ALVARO CADENA
President & Chief Executive Officer
June 29, 2001
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GRAHAM CORPORATION
20 FLORENCE AVENUE
BATAVIA, NEW YORK 14020
PROXY STATEMENT
------------------------------
ANNUAL MEETING OF STOCKHOLDERS
JULY 26, 2001
------------------------------
GENERAL INFORMATION
GENERAL
This Proxy Statement and accompanying Proxy Card are furnished in
connection with the solicitation by the Board of Directors of Graham Corporation
("Graham" or the "Company") of proxies for use at the Annual Meeting of
Stockholders (the "Annual Meeting") to be held at the Industrial Management
Council, 930 East Avenue, Rochester, New York on Thursday, July 26, 2001 at
11:00 a.m., and at any adjournment thereof, for the purposes set forth in the
preceding Notice of Annual Meeting of Stockholders. The approximate date of the
initial mailing of this Proxy Statement is June 29, 2001.
RECORD DATE AND SHARES OUTSTANDING
On the record date for the meeting, June 15, 2001, there were 1,635,142
shares of Graham's common stock outstanding. Stockholders of record on June 15,
2001 will be entitled to one vote for each share held on the record date.
PROXY CARDS AND VOTING
If Graham receives the enclosed Proxy Card, properly executed, in time to
be voted at the Annual Meeting, the shares represented thereby will be voted in
accordance with the instructions marked thereon. Executed Proxy Cards with no
instructions marked thereon will be voted FOR each of the nominees for election
as directors, FOR approval of the 2000 Graham Corporation Incentive Plan to
Increase Shareholder Value and FOR the ratification of appointment of auditors
set forth in the preceding Notice of Annual Meeting.
Under the Company's Certificate of Incorporation and 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 by brokers holding shares in "street name" or other fiduciary capacity on
"routine" matters, are counted in determining the presence of a quorum at the
Annual Meeting. With respect to the election of directors, votes may be cast for
or withheld from voting with respect to any or all 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 the Company's Certificate of Incorporation
and Bylaws and under Delaware law, assuming the presence of a quorum at the
Annual Meeting, non-votes by brokers will have no effect on any proposal to be
acted upon at the Annual Meeting. However, abstentions would have the effect of
"no" votes with respect to ratifying the appointment of auditors and approving
the 2000 Graham Corporation Incentive Plan to Increase Shareholder Value.
REVOCABILITY OF PROXIES
The presence of a stockholder at this Annual Meeting will not automatically
revoke the stockholder's proxy. However, a stockholder may revoke a proxy at any
time prior to its exercise by (1) delivering to the Secretary of Graham a
written notice of revocation prior to the Annual Meeting, (2) delivering to the
Secretary of Graham a duly executed proxy bearing a later date, or (3) attending
the Annual Meeting, filing a written notice of revocation with the Secretary of
the Annual Meeting, and voting in person.
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SOLICITATION OF PROXIES
In addition to solicitation by mail, directors, officers and employees of
Graham and its subsidiaries may solicit proxies personally or by telephone or
telegram without additional remuneration therefor. Graham will also provide
persons holding shares in their names or in the names of nominees, which in
either case are beneficially owned by others, proxy material for transmittal to
such beneficial owners and will reimburse such record owners for their expenses
in doing so. The cost of soliciting proxies for the Annual Meeting will be borne
by Graham.
PRINCIPAL STOCKHOLDERS
The following table sets forth information as to the beneficial ownership
of Graham's common stock of each person or group who, as of June 15, 2001, to
the knowledge of Graham based on reports filed with the Securities and Exchange
Commission, beneficially owned more than 5% of Graham's outstanding common
stock.
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AMOUNT PERCENT OF
NAME AND ADDRESS OF BENEFICIALLY OUTSTANDING
BENEFICIAL OWNER OWNED SHARES
-----------------------------------------------------------------------------------------
Helen H. Berkeley(1) 114,874(2) 6.3%
Dimensional Fund Advisors, Inc.(3) 110,650 6.8%
Employee Stock Ownership Plan of Graham Corporation(1,4) 117,391 7.2%
---------------
(1) Address: c/o Graham Corporation, 20 Florence Avenue, Batavia, New York
14020.
(2) Includes 5,850 shares which Mrs. Berkeley may acquire within 60 days upon
exercise of stock options.
(3) Address: 1299 Ocean Avenue, 11th Floor, Santa Monica, California 90401.
Dimensional Fund Advisors, Inc. ("Dimensional"), a registered investment
advisor, is deemed to have beneficial ownership of 110,650 shares of Graham
Corporation stock as of December 31, 2000, all of which shares are held in
portfolios of DFA Investment Dimensions Group, Inc., a registered open-end
investment company, or in series of the DFA Investment Trust Company, a
Delaware business trust, or the DFA Group Trust and DFA Participation Group
Trust, investment vehicles for qualified employee benefit plans, all of
which Dimensional Fund Advisors, Inc. serves as investment manager.
Dimensional disclaims beneficial ownership of all such shares.
(4) The Employee Benefits Committee consisting of members of the Board of
Directors administers the ESOP. An unrelated corporate trustee for the ESOP
("ESOP Trustee") has been appointed by the Board of Directors. The Employee
Benefits Committee instructs the ESOP Trustee regarding investment of funds
contributed to the ESOP. Each member of the Employee Benefits Committee
disclaims beneficial ownership of the shares of Common Stock held in the
ESOP. The ESOP Trustee must vote all allocated shares held in the ESOP in
accordance with the instructions of the participating employees. Unallocated
shares held in the suspense account will be voted by the ESOP Trustee in a
manner calculated to most accurately reflect the instructions it has
received from participants regarding the allocated stock, provided such
instructions do not conflict with the ESOP Trustee's fiduciary obligations
under ERISA. At June 15, 2001, all 117,391 shares were allocated to
participants and no shares were unallocated.
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PROPOSAL ONE
ELECTION OF TWO DIRECTORS
At the Annual Meeting two directors will be elected to hold office until
the 2004 Annual Meeting, each to hold office after his term until the election
and qualification of his successor. Unless otherwise instructed as provided on
the accompanying Proxy Card, the persons named therein will vote the shares
represented by the proxies received by them for the nominees shown below,
reserving, however, discretion to vote for the election of any substitute
nominated by the Nominating Committee of the Board of Directors in the event the
nominees are unable or unwilling to serve.
The following table sets forth information with respect to the nominees and
those directors whose terms will continue after the Annual Meeting.
NOMINEES:
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NUMBER OF
SHARES
YEARS OWNED
CURRENT SERVED BENEFICIALLY, PERCENT OF
PRINCIPAL TERM AS A AS OF OUTSTANDING
NAME AGE OCCUPATION(1) EXPIRES DIRECTOR(2) JUNE 15, 2001 SHARES
--------------------------------------------------------------------------------------------------------------
Jerald D. Bidlack(6) 65 President, Griffin 2001 16 36,250(7) 2.0%
Automation, Inc.
Philip S. Hill 79 Partner, Hill, Ullman & 2001 33 18,800(7) 1.0%
Erwin, Attorneys
DIRECTORS WITH TERMS CONTINUING
AFTER THE 2001 ANNUAL MEETING:
--------------------------------------------------------------------------------------------------------------
NUMBER OF
SHARES
PRINCIPAL YEARS OWNED
OCCUPATION CURRENT SERVED BENEFICIALLY, PERCENT OF
FOR LAST TERM AS A AS OF OUTSTANDING
NAME AGE FIVE YEARS(1) EXPIRES DIRECTOR(2) JUNE 15, 2001 SHARES
--------------------------------------------------------------------------------------------------------------
H. Russel Lemcke 61 President, H. Russel 2002 5 29,550(5) 1.6%
Lemcke Group, Inc.
Cornelius S. Van Rees 72 Retired partner in 2002 32 18,050(7) 1.0%
Thacher Proffitt & Wood,
Attorneys
Alvaro Cadena 57 President and Chief 2003 8 65,132(3) 3.6%
Executive Officer of
Graham; previously Chief
Operating Officer
Helen H. Berkeley(4) 70 Private Investor 2003 3 114,874 6.3%
---------------
(1) In addition, Mr. Bidlack serves on the board of Bush Industries, Inc. and is
a trustee of Keuka College.
(2) Includes the number of years served as director of Graham Manufacturing Co.,
Inc., the predecessor of Graham.
(3) Includes 26,515 shares that may be acquired within 60 days by exercising
stock options and 1,675 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.
(4) Refer to Footnote 2 on page 2.
(5) Includes 11,550 shares which may be acquired within 60 days upon exercise of
stock options.
(6) Chairman of the Board of Graham.
(7) Includes 9,000 shares which may be acquired within 60 days upon exercise of
stock options.
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BOARD MEETINGS AND COMMITTEES OF THE BOARD
During the fiscal year ended March 31, 2001, the Board of Directors of
Graham held a total of five meetings, one of which was by telephone conference.
Graham's Board of Directors has five committees, as follows:
1. EXECUTIVE COMMITTEE
Between meetings of the Board of Directors, the Executive Committee has all
of the powers of the Board to manage and direct all the business and affairs of
Graham, so far as such may be legally delegated and except as may be limited
from time to time by resolution of the Board. The members of the Executive
Committee are Directors Bidlack (Chairman), Cadena, Hill and Van Rees. The
Executive Committee of Graham held three meetings during the most recent fiscal
year.
2. AUDIT COMMITTEE
It is the duty of the Audit Committee to recommend the auditors for
Graham's annual audit to the full Board of Directors, to meet and discuss
directly with Graham's auditors their audit work and related matters and to
carry out such investigations and make such reports to the Board of Directors
with respect both to the external and internal auditing procedures and affairs
of Graham as the Audit Committee deems necessary or advisable. A copy of the
Audit Committee's charter is attached as Appendix B 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
standards imposed by the American Stock Exchange. The Audit Committee of Graham
held one meeting during the most recent fiscal year.
Report of the Audit Committee
In connection with the March 31, 2001 financial statements, the Audit
Committee (1) reviewed and discussed the audited financial statements with
management, (2) discussed with the auditors the matters required by Statement on
Auditing Standards No. 61 and (3) received and discussed with the auditors the
matters required by Independence Standards Board Standard No. 1. Based upon
these reviews and discussions, the Audit Committee recommended to the Board of
Directors that the audited financial statements be included in the Annual Report
on Form 10-K filed with the SEC.
This report is furnished by the members of Graham's Audit Committee:
Philip S. Hill, Chairman
Helen H. Berkeley
Jerald D. Bidlack
H. Russel Lemcke
Cornelius S. Van Rees
3. COMPENSATION COMMITTEE
The Compensation Committee has authority to (a) review and determine
annually salaries, bonuses and other forms of compensation paid to the Company's
executive officers and management; (b) select recipients of awards of incentive
stock options and non-qualified stock options, establish the number of shares
and other terms applicable to such awards, and construe the provisions of and
generally administer the 1995 Incentive Plan to Increase Shareholder Value and
(subject to approval of such plan by Graham's stockholders at the 2001 Annual
Meeting) 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 of Graham held three meetings
during the most recent fiscal year.
4. EMPLOYEE BENEFITS COMMITTEE
The Employee Benefits Committee reviews the performance of the Plan
Administrator of Graham's Retirement Income Plan, Incentive Savings Plan, Group
Hospitalization Plan, Medical Plan, Major Medical Plan, Life Insurance Plan,
Long-Term Disability Plan, Employee Stock Ownership Plan and any other employee
benefit plan maintained by Graham for which a named fiduciary is designated. The
Committee reviews and reports to the Board on the performance of the Incentive
Savings Plan trustee and the Retirement Income Plan trustee in investing,
managing and controlling plan assets. It has authority to establish a funding
policy and method
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consistent with the objectives of the Retirement Income Plan, to recommend
changes in the plans, changes in any plan trustee or administrator, and subject
to the further action of the Board, to amend any of the plans, other than the
Retirement Income Plan, the Incentive Savings Plan and the Employee Stock
Ownership Plan.
The members of the Employee Benefits Committee are Directors Van Rees
(Chairman), Bidlack and Hill. The Employee Benefits Committee of Graham held one
meeting in the most recent fiscal year.
5. NOMINATING COMMITTEE
The Nominating Committee has authority to review the qualifications of,
interview and nominate candidates for election to the Board of Directors.
Stockholders of record entitled to vote in the election of directors at any
annual meeting may recommend individuals for consideration by the Nominating
Committee as potential nominees by making any such recommendation in writing to
the Secretary of the Company, at the Company's address, no later than sixty days
in advance of the annual meeting if the meeting is to be held within thirty (30)
days preceding the anniversary of the previous year's annual meeting, or ninety
(90) days in advance of the annual meeting if it is to be held on or after the
anniversary of the previous year's annual meeting. For an annual meeting of
stockholders held at a time other than within this time period, or for a special
meeting of stockholders for the election of directors, notice must be submitted
no later than the close of business on the tenth (10th) day following the date
on which notice of such meeting is first given to stockholders. Notice must set
forth any nominee's name, age, business and residence addresses, principal
occupation or employment, the nominee's written consent to serve as a director
and information that would be required to be included in a proxy statement filed
pursuant to applicable rules of the U.S. Securities and Exchange Commission. The
stockholder giving the notice must state in it his or her own name and address,
the class and number of shares owned of record and the dates of acquiring such
shares. The stockholder also must describe all arrangements or understandings
between the stockholder and nominee and any other person or persons (naming such
person or persons) pursuant to which the nominations are to be made by the
stockholder, and identify any person employed, retained, or to be compensated by
the stockholder submitting the nomination or by the person nominated, or any
person acting on his or her behalf to make solicitations or recommendations to
stockholders for the purpose of assisting in the election of such director, and
briefly describe the terms of such employment, retainer or arrangement for
compensation.
The Nominating Committee held two meetings in the most recent fiscal year.
The members of the Nominating Committee are Directors Van Rees (Chairman),
Bidlack, Cadena and Hill.
MEETING ATTENDANCE
A total of fourteen meetings of the Board of Directors of Graham and of the
Committees of the Board were held on six dates during the most recent fiscal
year and all directors attended all meetings of the Board and of Committees of
which they were members.
DIRECTORS' FEES
No director who is an employee of Graham or a Graham subsidiary receives
any remuneration for services as a director.
Non-employee directors receive an annual fee of $10,000 for service on the
Board. They also receive a fee of $1,000 for each meeting attended of the Board
or of any Committee of the Board except that, if the meeting is held by
telephone conference call or by unanimous written consent, a $500 fee is paid,
and if the Board and/or one or more Committees meet on the same day, a full
meeting fee is paid for one meeting and one-half the fee is paid for each other
meeting. Each non-employee director who serves on the Executive Committee also
receives an annual fee of $10,000 for such service. The Chairman of the Board
receives an additional $10,000 annual fee and committee chairmen receive an
additional $2,000 per annum for each committee chairmanship they hold.
Non-employee directors participate in the Graham Corporation Outside
Directors' Long Term Incentive Plan ("LTIP"). Under the LTIP, for the first five
fiscal years in which Graham Corporation produces 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 for new directors, each non-employee
director will be credited with Share Equivalent Units (SEUs). Each SEU is valued
at the market value of 1 share of Graham Common Stock on the last day of trading
of the first quarter following a fiscal year for which SEUs are to be credited.
The number of SEUs to be credited is determined by dividing the value of 1 SEU
into an amount equal to the basic annual Director's fee. Upon termination of a
Director's service on the Board, but not before, SEUs will be redeemable, at the
option of the Company, for either:
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(a) a commensurate number of shares of Graham common stock; or (b) subject to
the consent of the Company, the cash value of a commensurate number of shares of
Graham common stock as of the termination of service date.
Pursuant to the 1995 Graham Corporation Incentive Plan to Increase
Shareholder Value ("Incentive Plan"), each non-employee director of Graham was
to be granted, annually for four years, an option to purchase 2,250 shares of
Graham's common stock at its closing price on the American Stock Exchange on the
date of each grant, subject to availability in the Incentive Plan of unissued
options reserved for directors. However, no shares reserved for non-employee
directors remain in the Plan and no grants from it were made to any non-employee
directors in the most recent fiscal year.
EXECUTIVE OFFICERS
The following table sets forth information regarding Named Executive
Officers of Graham identified on the Summary Compensation Table on page 8 herein
as of June 15, 2001 and their beneficial ownership of Graham Common Stock.
-----------------------------------------------------------------------------------------------------------
SHARES
OWNED
BENEFICIALLY
AS OF PERCENT OF
YEARS OF JUNE 15, OUTSTANDING
NAME AGE PRINCIPAL OCCUPATION SERVICE 2001 SHARES
-----------------------------------------------------------------------------------------------------------
Alvaro Cadena 57 President & Chief Executive 32 65,132(1) 3.6%
Officer
Joseph P. Gorman 58 Vice President--Sales 32 30,990(2) 1.7%
J. Ronald Hansen 53 Vice President--Finance & 8 34,571(3) 1.9%
Administration and Chief
Financial Officer
James R. Lines 40 Vice President--Marketing 17 14,903(4) *
Stephen P. Northrup 49 Vice President--Engineering 27 30,980(5) 1.7%
William A. Smith, Jr. 46 Vice President and General 8 33,978(6) 1.9%
Counsel
All directors and executive 428,078(7) 23.4%
officers as a group (12
persons)
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* Less than 1% of the outstanding shares of common stock.
(1) Refer to Footnote 3 on page 3.
(2) Includes 13,707 shares that may be acquired within 60 days by exercising
stock options and 1,283 shares held by the ESOP Trustee and allocated to Mr.
Gorman's account as to which Mr. Gorman has sole voting power but no
investment power except in limited circumstances.
(3) Includes 13,707 shares that may be acquired within 60 days by exercising
stock options and 949 shares held by the ESOP Trustee and allocated to Mr.
Hansen's account as to which Mr. Hansen has sole voting power but no
investment power except in limited circumstances.
(4) Includes 13,707 shares that may be acquired within 60 days by exercising
stock options and 1,102 shares held by the ESOP Trustee and allocated to Mr.
Lines's account as to which Mr. Lines has sole voting power but no
investment power except in limited circumstances.
(5) Includes 13,707 shares that may be acquired within 60 days by exercising
stock options and 1,345 shares held by the ESOP Trustee and allocated to Mr.
Northrup's account as to which Mr. Northrup has sole voting power but no
investment power except in limited circumstances.
(6) Includes 15,707 shares that may be acquired within 60 days by exercising
stock options and 1,021 shares held by the ESOP Trustee and allocated to Mr.
Smith's account as to which Mr. Smith has sole voting power but no
investment power except in limited circumstances.
(7) Includes 140,250 shares which members of the group may acquire within 60
days upon exercise of stock options and 7,375 shares allocated to executive
officers under the Company's Employee Stock Ownership Plan ("ESOP"), as to
which such officers may exercise voting power, but not dispositive power,
except in limited circumstances.
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SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
The Company's directors, certain of its officers, and any persons holding
more than ten percent of the Company's common stock are required to file reports
of their ownership of the Company's common stock with the Securities and
Exchange Commission (the "SEC"). Based solely on a review of Forms 3, 4 and 5
and amendments thereto furnished to the Company during its most recent fiscal
year, the Company believes that Form 5 was filed late for each executive officer
and each Director and that all other such reports required to be filed were
filed in a timely manner.
COMPENSATION OF EXECUTIVE OFFICERS
The following table (the "Summary Compensation Table") sets forth the
annual compensation for services to Graham in all capacities for the past three
years for Graham's Chief Executive Officer and the five most highly compensated
executive officers other than the CEO who were serving as executive officers at
March 31, 2001 ("Named Executive Officers"). Graham did not pay to any of the
Named Executive Officers in any time period included in the table compensation
required to be disclosed in columns (d), (e), (f) or (h) of the Summary
Compensation Table pursuant to Item 402 of SEC Regulation S-K. Consequently,
those columns have been omitted.
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SUMMARY COMPENSATION TABLE
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ANNUAL COMPENSATION
(C) (G)
(A) (B) SECURITIES (I)
NAME AND FISCAL UNDERLYING ALL OTHER
PRINCIPAL POSITION YEAR SALARY ($)(1) OPTIONS/SARS (#) COMPENSATION ($)(2,3,4,5)
------------------------------------------------------------------------------------------------------------
Alvaro Cadena(6) 2000-01 221,478 6,000 14,663
President & Chief 1999-00 215,010 7,015 24,165
Executive Officer 1998-99 286,939 6,000 22,678
Joseph P. Gorman 2000-01 130,021 3,000 10,012
Vice President--Sales 1999-00 126,235 3,507 16,351
1998-99 155,556 3,000 14,937
J. Ronald Hansen 2000-01 138,486 3,000 8,712
Vice President--Finance & 1999-00 134,451 3,507 10,238
Administration and 1998-99 166,690 3,000 16,302
Chief Financial Officer
James R. Lines 2000-01 130,021 3,000 7,108
Vice President-- 1999-00 126,235 3,507 10,266
Marketing 1998-99 155,556 3,000 13,379
Stephen P. Northrup 2000-01 130,021 3,000 7,244
Vice President-- 1999-00 126,235 3,507 8,681
Engineering 1998-99 155,747 3,000 17,244
William A. Smith, Jr. 2000-01 130,728 3,000 6,487
Vice President and 1999-00 126,922 3,507 7,980
General Counsel 1998-99 157,355 3,000 14,158
---------------
(1) Includes payment of contingent salary amounts which are deferred to the
following fiscal year and are payable only upon attainment of predetermined
performance goals. The figures shown also include amounts (if any) deferred
by the named individual pursuant to section 401(k) of the Internal Revenue
Code and deferred contingent salary. Amounts deferred under section 401(k)
of the Internal Revenue Code are deposited in the named individual's 401(k)
account for investment and payment according to the terms of Graham's
Incentive Savings Plan.
(2) Includes premiums paid on insurance policies on each of the Named Executive
Officers as follows: for Mr. Cadena in FY 1998-99 $10,924, in FY 1999-00,
$13,375 and in FY 2000-01 $13,701; for Mr. Gorman in each of FY 1998-99 and
FY 1999-2000, $9,029 and in FY 2000-01, $9,283; for Mr. Hansen in FY
1998-99, $7,144, in FY 1999-00, $7,718 and in FY 2000-01 $7,932; for Mr.
Lines in FY 1998-99, $4,207, in FY 1999-00, $4,207 and in FY 2000-01,
$4,317; for Mr. Smith in FY 1998-99, $5,000, in FY 1999-00, $5,558 and in FY
2000-01 $5,758; for Mr. Northrup in FY 1998-99, $5,729, in FY 1999-00,
$6,286 and in FY 2000-01 $6,515.
(3) Includes amounts paid to the 401(k) accounts of the Named Executive Officers
pursuant to the Graham Corporation Incentive Savings Plan as follows: to Mr.
Cadena's account for FY 1998-99, $8,050, for FY 1999-00, $1,400 and none for
FY 2000-01; to Mr. Gorman's account for FY 1998-99, $4,800, for FY 1999-00,
$1,347 and none for FY 2000-01; to Mr. Hansen's account for FY 1998-99,
$8,050, for FY 1999-00, $1,400 and none for FY 2000-01; to Mr. Lines's
account for FY 1998-99, $4,764, for FY 1999-00, $1,364 and none for FY
2000-01; to Mr. Smith's account for FY 1998-99, $8,050, for FY 1999-00,
$1,322 and none for FY 2000-01; to Mr. Northrup's account for FY 1998-99,
$8,050, for FY 1999-00, $1,308 and none for FY 2000-01.
(4) Includes amounts representing the value of shares allocated pursuant to
Graham's ESOP to each Named Executive Officer's account maintained under the
ESOP as follows: to Mr. Cadena shares worth $1,108 for FY 1998-99, $1,120
for FY 1999-00 and $962 for FY 2000-01; to Mr. Gorman shares worth $1,108
for FY 1998-99, $1,120 for FY 1999-00 and $729 for FY 2000-01; to Mr. Hansen
shares worth $1,108 for FY 1998-99, $1,120 for FY 1999-00 and $780 for FY
2000-01; to Mr. Lines shares worth $1,108 for FY 1998-99, $1,120 for FY
1999-00 and $729 for FY 2000-01; to Mr. Smith shares worth $1,108 for FY
1998-99, $1,100 for FY 1999-00 and $729 for FY 2000-01; to Mr. Northrup
shares worth $1,108 for FY 1998-99, $1,087 for FY 1999-00 and $729 for FY
2000-01.
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(5) Includes for Mr. Cadena payment in lieu of vacation of $3,106 in FY 1998-99
and a long-term service award of $8,270 in FY 1999-00. Includes for Mr.
Gorman a long-term service award of $4,855 in FY 1999-00. Includes for Mr.
Northrup in FY 1998-99, $2,357 for a long-term service award. Includes for
Mr. Lines payment for published professional articles of $3,300 in FY
1998-99, $3,575 in FY 1999-00 and $2,072 in FY 2000-01.
(6) Mr. Cadena became Chief Executive Officer on April 1, 1998. Previously he
served as President and Chief Operating Officer.
STOCK OPTIONS
The following table indicates the total number of stock options granted to
each Named Executive Officer during the last fiscal year.
OPTION/SAR GRANTS IN LAST FISCAL YEAR
--------------------------------------------------------------------------------
POTENTIAL REALIZABLE
VALUE AT ASSUMED
ANNUAL RATES OF
STOCK PRICE
APPRECIATION FOR
INDIVIDUAL GRANTS OPTION TERM
(a) (b) (c) (d) (e) (f) (g)
NUMBER OF % OF TOTAL
SECURITIES OPTIONS/SARS
UNDERLYING GRANTED TO EXERCISE OR
OPTIONS/SARS EMPLOYEES IN BASE PRICE EXPIRATION
NAME GRANTED (#)(1) FISCAL YEAR ($/SH) DATE 5% ($) 10% ($)
------------------------------------------------------------------------------------------------------------
Alvaro Cadena 6,000 23.1% 11.00 11/2/10 41,507 105,187
Joseph P. Gorman 3,000 11.5% 11.00 11/2/10 20,754 52,594
J. Ronald Hansen 3,000 11.5% 11.00 11/2/10 20,754 52,594
James R. Lines 3,000 11.5% 11.00 11/2/10 20,754 52,594
Stephen P. Northrup 3,000 11.5% 11.00 11/2/10 20,754 52,594
William A. Smith, Jr. 3,000 11.5% 11.00 11/2/10 20,754 52,594
---------------
(1) All 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,
2001, the last day of the fiscal year. No executive officer exercised stock
options in the last fiscal year.
AGGREGATED OPTION/SAR EXERCISES IN LAST FISCAL YEAR AND
FY-END OPTION/SAR VALUES
--------------------------------------------------------------------------------
(a) (b) (c) (d) (e)
NUMBER OF SECURITIES VALUE OF UNEXERCISED
UNDERLYING UNEXERCISED IN-THE-MONEY
OPTIONS/SARS AT OPTIONS/SARS AT
FY-END (#) FY-END ($)(1)
SHARES ACQUIRED VALUE EXERCISABLE/ EXERCISABLE/
NAME ON EXERCISE (#) REALIZED ($) UNEXERCISABLE UNEXERCISABLE
----------------------------------------------------------------------------------------------------------
Alvaro Cadena -0- -0- 26,515/-0- $17,118/-0-
Joseph P. Gorman -0- -0- 13,707/-0- $10,553/-0-
J. Ronald Hansen -0- -0- 13,707/-0- $ 8,558/-0-
James R. Lines -0- -0- 13,707/-0- $ 8,558/-0-
Stephen P. Northrup -0- -0- 13,707/-0- $ 8,558/-0-
William A. Smith, Jr. -0- -0- 15,707/-0- $ 9,624/-0-
---------------
(1) Based on the closing price of Graham common stock on March 31, 2001, which
was $8.95.
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PENSION PLANS
The Retirement Income Plan of Graham Corporation is a defined benefit
pension plan for the benefit of eligible domestic employees of Graham and its
United States subsidiaries ("U.S. Retirement Plan"). The U.S. Retirement Plan
takes income into account for future benefits on a calendar year basis. The
portion of FY 2000-01 compensation that is taken into account by the U.S.
Retirement Plan for the purpose of calculating future pension benefits is as
follows: for Mr. Cadena, $170,000; for Mr. Gorman $130,021; for Mr. Hansen,
$138,486; for Mr. Smith, $130,728; for Mr. Lines, 130,021; for Mr. Northrup,
$130,021.
The approximate years of creditable service as of June 15, 2001 of each of
the individuals named in the Summary Compensation Table who is eligible to
participate in the U.S. Retirement Plan are: Mr. Cadena, 32 years; Mr. Gorman 32
years; Mr. Hansen, 8 years; Mr. Smith, 8 years; Mr. Lines, 16 years; and Mr.
Northrup, 27 years.
In addition to the U.S. Retirement Plan, the Company maintains a
Supplemental Executive Retirement Plan (the "Supplemental Plan") which is
intended to provide eligible participants and their surviving spouses and
beneficiaries with the amount of Employer-provided retirement benefits that the
U.S. Retirement Plan would provide but for the limitation on compensation that
may be recognized under tax-qualified plans imposed by Section 401(a)(17) of the
Internal Revenue Code and the limitations on benefits imposed by Sections 415(b)
and (e) of the Internal Revenue Code. Officers of the Company whose
non-contingent compensation exceeded $170,000 in 2000, or will exceed $170,000
in 2001, 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 FY 2000-01
compensation taken into account by the Supplemental Plan for the purpose of
calculating future benefits for Mr. Cadena was $51,478.
The Pension Plan Table sets forth straight life annuity amounts without
regard to offsets for Social Security benefits. Benefits listed in the Pension
Plan Table are subject to a deduction of an amount equal to 50% of an eligible
employee's estimated primary Social Security benefit.
PENSION PLAN TABLE
--------------------------------------------------------------------------------
YEARS OF SERVICE
REMUNERATION($) 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 66,667 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, with respect to 2000, $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, with respect to
2000, only non-contingent compensation over $170,000 was used as the basis
for determining benefits.
EMPLOYMENT CONTRACTS
The Named Executive Officers each have employment contracts with Graham for
one year terms renewable by mutual consent for additional periods. The contracts
each have termination provisions which, in certain circumstances, would entitle
each of them to a payment equal to twelve months' salary (non-contingent salary
only) upon termination of employment.
Graham has entered into Senior Executive Severance Agreements with certain
of its officers. These agreements, as amended to date, provide that in the event
a third person effects a change in control of Graham (defined generally as an
acquisition of 25% or more of the outstanding voting shares, or a change in the
majority of the Board of Directors as the result of any tender offer or business
combination), termination of the individual's employment within two years of
such a change of control entitles the executive to one dollar less than three
years' compensation including bonuses, payable either in installments over a
period not to exceed three years or as a lump sum.
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COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
The members of Graham's Compensation Committee who served during the fiscal
year ended March 31, 2001 were Directors Berkeley, Bidlack, Hill, Lemcke and Van
Rees. Director Cornelius S. Van Rees is Secretary of Graham but receives no
compensation for his service as Secretary; Mr. Van Rees participated in the
Board's deliberations regarding compensation of all compensated officers of
Graham.
BOARD COMPENSATION COMMITTEE REPORT ON EXECUTIVE COMPENSATION
The duty of Graham's Compensation Committee is to establish levels of cash
compensation and forms and amounts of non-cash compensation for the executive
officers of Graham Corporation and subsidiaries. The guiding principles of the
Committee are:
- to provide a reasonable level of compensation sufficient to attract
and retain executive personnel best suited by training, ability, and
other relevant criteria for the management requirements of the
Company;
- to balance base compensation (non-contingent) and incentive
compensation (contingent upon performance) for the purpose of
motivating executive personnel;
- to determine the extent and method of aligning the financial
interest of the Company's executive personnel with the interest of
the Company's stockholders in the appreciation of their investment.
For Fiscal Year 2001 -- 2002 the Committee increased the non-contingent
salaries of Graham's Chief Executive Officer and of its other executive officers
by 3%, as part of a general increase for all employees at the same percentage.
Traditionally, Graham's non-contingent salaries for the CEO and executive
officers have been set below the mid-range of competitive levels. Such
compensation for the CEO and executive officers remains below the median
compensation levels for similarly situated executive officers of
comparably-sized companies in the industry and region. Non-cash compensation, in
the form of stock options, is nominal as compared to such other companies.
Decisions regarding executive compensation made during the past fiscal year
relied in part on guidance from a report prepared by an independent consulting
firm reviewing and comparing compensation levels of senior management personnel
in manufacturing industries in western New York. As it has in the past, the
Committee considered information as to compensation levels for officers and
senior managers of comparable scope and responsibility in an industry group of
comparably sized companies.
In its decision to increase CEO and other executive non-contingent salary
by 3%, the Committee considered the fact that no such increase had been made
since 1999, as well as the need to continue incentivizing members of management
during a period when increasing opportunities in the Company's principal markets
appear to be forthcoming.
In the interest of linking corporate performance to officer compensation
while maintaining competitive overall nominal salary rates, a portion of the
annual salary for each Named Executive Officer is contingent. The contingent
portion is payable, on a deferred basis, only following the end of each fiscal
year, and payment is subject to attainment of performance-based goals for the
year by Graham Corporation and by each Named Executive Officer individually.
Under this arrangement, a target performance-based amount for each eligible
officer, representing a percentage of non-contingent salary, is recommended to
the Committee annually by the CEO; a target performance-based amount for the CEO
is determined by the Committee. The Company 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 Committee for each year in the
following areas: corporate and subsidiary return on capital employed and an
individual performance goal for each officer. These determinations were based on
the Committee's review of pertinent data with reference to literature in the
field and to industry practices for comparably sized companies and expectations
of attainable results under existing market conditions. No contingent salary was
paid for Fiscal Years 1999-00 or 2000-01 because the Company did not attain the
predetermined earnings threshold in either year.
Stock options were granted to the CEO and other executive officers in
November 2000. No stock appreciation rights or other forms of equity
compensation were granted. These stock option grants were made pursuant to the
1995 Stock Option and Appreciation Rights Plan of Graham Corporation for the
purpose of further increasing incentives for the Company's officers to increase
shareholder value.
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14
This report is furnished by the members of Graham's Compensation Committee:
H. Russel Lemcke, Chairman
Helen H. Berkeley
Jerald D. Bidlack
Philip S. Hill
Cornelius S. Van Rees
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Director H. Russel Lemcke is President of the H. Russel Lemcke Group, Inc.,
which the Company engaged to assist it in evaluating various options in
fulfillment of its strategic plan. Pursuant to this engagement, which ran from
May 1999 through May 2000, the Company paid to Mr. Lemcke a retainer of $2,500
per month and reimbursed him for out of pocket expenses. In the event that the
Company were to acquire another business entity as a result of such assistance,
Mr. Lemcke would be paid a fee of $100,000 plus 1% of the purchase price of the
acquired entity.
At the Company's 2000 Annual Meeting, the Stockholders approved the
Long-Term Stock Ownership Plan of Graham Corporation ("LTSOP"). Certain of the
Named Executive Officers are participants in the LTSOP and are indebted to the
Company for a balance due on the purchase of shares of Graham common stock at
the closing price on the American Stock Exchange on the date of purchase. As of
June 18, 2001, pursuant to the terms of a Stock Subscription Agreement between
each of the participating officers and the Company and a Note executed by each
such person, Mr. Cadena is indebted to the Company in the amount of $178,750 and
each of Mr. Gorman, Mr. Hansen, Mr. Northrup and Mr. Smith is indebted to the
Company in the amount of $114,400. The largest aggregate amount of indebtedness
to the Company by each Participant since the beginning of the Company's last
fiscal year is the amount stated in the preceding sentence for each. The
Subscription Agreement states that eighteen (18) months after purchase of the
Shares, a Participant is entitled to sell 50% of his Shares and that the
Participant agrees to hold the remainder of the Shares until such time as he
terminates employment with the Company. The Note provides that a Participant
will repay the balance of the Note in thirty-two (32) equal consecutive
quarterly installments beginning at the end of the quarter two years from the
date of issuance, or June 30, 2002. The interest on the Note will be imputed at
the applicable federal rate established by the Internal Revenue Service. Shares
will remain in the custody of the Company until the note is paid in full, unless
the Participant sells his Shares (when and to the extent permitted). The Note
provides that until the Note is paid in full, any Shares sold will be sold
through a broker who will forward any proceeds, less expenses, to the Company to
pay off all or a portion of the Note. The Note also contains provisions which
grant a security interest to the Company in the Shares and any proceeds from the
sale of the Shares. If a Participant ceases to be an officer or director any
time after eighteen (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 eighteen (18) months after purchase,
if a Participant ceases to be an officer or director prior to eighteen (18)
months after purchase, such Participant has the discretion to retain or sell all
or a portion of his Shares only if the Company waives its rights under that
provision in the Subscription Agreement.
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PROPOSAL TWO
APPROVAL OF 2000 GRAHAM CORPORATION INCENTIVE PLAN
TO INCREASE SHAREHOLDER VALUE
The Board of Directors of Graham has adopted the 2000 Graham Corporation
Incentive Plan to Increase Shareholder Value ("Incentive Plan") subject to
approval by the stockholders of Graham. The Incentive Plan will not take effect,
and no options granted under the Incentive Plan will be effective, unless such
approval is obtained. The principal provisions of the Incentive Plan are
summarized below. The full text of the Incentive Plan is set forth as Appendix A
to this Proxy Statement, to which reference is made, and the summary provided
below is qualified in its entirety by such reference.
The affirmative vote of a majority of the votes eligible to be cast by the
holders of shares of Graham common stock present, in person or by proxy, and
entitled to vote at the Annual Meeting is required to approve the Incentive
Plan.
PURPOSE OF THE PLAN
The purpose of the Incentive Plan is to increase shareholder value by
promoting the growth and profitability of Graham and its subsidiaries, to
attract and retain directors, officers and key management employees of
outstanding competence, to provide such directors, officers and key management
employees with an equity interest in Graham, and to provide certain directors
and key management employees of Graham and its subsidiaries, upon whose efforts
Graham is largely dependent for the successful conduct of its business, with an
incentive to achieve corporate objectives.
DESCRIPTION OF THE PLAN
As provided by the terms of the Incentive Plan, 150,000 shares of
authorized but unissued Graham common stock (equal to approximately 10% of the
total number of outstanding shares of Graham common stock) have been reserved
for issuance under the Incentive Plan to Eligible Individuals (as hereinafter
defined). The fair market value of the total number of shares reserved under the
plan is $1,875,000, based on the closing price of the Company's common stock on
June 15, 2001, which was $12.50 per share. Persons eligible to participate
include the officers, employees and non-employee directors of Graham and its
wholly-owned subsidiaries (the "Eligible Individuals"). The Incentive Plan will
be administered by the Compensation Committee of the Board of Directors (the
"Committee"). The Committee may, in its discretion, select from among the
individuals eligible to participate the persons to whom options will be granted.
It is anticipated that options will be granted primarily to officers and key
management employees who are in positions having a direct influence on
establishing and achieving corporate policies and objectives. The Committee has
identified 13 individuals whom it considers to be Eligible Individuals, which
includes 5 non-employee directors and the 6 named executive officers.
Incentive Stock Options ("ISOs") may be granted at an exercise price per
share determined by the Committee, which shall not be less than the fair market
value of a share of Graham common stock on the date the option is granted and
Non-Qualified Stock Options ("NQSOs") may be granted at an exercise per share
price determined by the Committee. However, if an ISO is granted to a person who
owns more than 10% of the total combined voting power of all outstanding stock
of all classes issued by Graham, or any parent or subsidiary thereof ("10%
Owner"), the exercise price shall not be less than 110% of the fair market value
at the date of the grant. Non-Qualified Stock Options conditionally granted on
November 2, 2000 have an exercise price per share of $11.00, which is equal to
the final quoted sales price of a share of Graham common stock on the
consolidated reporting system of the American Stock Exchange on November 2,
2000. An ISO may be exercised at any time during the option period specified by
the Committee. In the event of a Tender Offer or a Change in Control, each as
defined in the Incentive Plan, any options granted under the Incentive Plan will
become automatically exercisable on the date on which such Tender Offer or
Change in Control is deemed to have occurred. The expiration date of an ISO may
not be later than the earliest of: (1) a date specified by the Committee; (2)
the tenth anniversary of the date the option is granted; (3) the last day of the
one-year period following the option holder's death or termination of employment
with Graham or a subsidiary of Graham on account of disability; (4) the last day
of the three-month period following the option holder's termination of
employment for other reasons; or (5) in the case of an ISO granted to a 10%
Owner, the last day of the five-year period commencing on the date the Option
was granted. Without the approval of the Committee, no option holder may dispose
of shares acquired pursuant to the exercise of an ISO until after the later of
the second anniversary of the date of the grant of his ISO or the first
anniversary of the date on which the shares subject to the option were acquired.
A NQSO may be exercised at any time during
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the option period specified by the Committee. The expiration date may not be
later than the tenth anniversary of the date the NQSO is granted. In the event
of a tender offer for, or a change of control of, Graham, all outstanding
options become exercisable as of the commencement of such tender offer or the
effective date of such change of control.
The Incentive Plan does not provide for Stock Appreciation Rights.
Non-Qualified Stock Options granted to non-employee directors may be
exercised at any time during the option period that begins on the date each
option is granted and expires on the earliest of: (1) 10 years from the date of
grant of each option; (2) the last day of the three-year period commencing on
the date the director ceases to be a director in the case of death, disability
or retirement from the Board after age 65; or (3) the last day of the one-year
period commencing on the date the director ceases to be a director for other
reasons.
The Board of Directors may amend or terminate the Incentive Plan at any
time; provided, however, that any amendment that would materially (1) increase
the number of shares that may be issued under the Incentive Plan; (2) increase
the benefits accruing under the Incentive Plan; or (3) modify the requirements
as to eligibility for options under the Incentive Plan will be subject to
approval by the stockholders of Graham. No options may be granted under the
Incentive Plan later than November 2, 2010.
The information set forth under the heading "Stock Options" in this Proxy
Statement includes information regarding options that have been granted
conditionally, as of November 2, 2000, subject to the approval of the
stockholders of Graham.
FEDERAL INCOME TAX CONSEQUENCES
There are no federal income tax consequences for Graham or the option
holder at the time an ISO is granted or upon the exercise of an ISO. If there is
no sale or other disposition of the shares acquired upon the exercise of an ISO
within two years after the date the ISO was granted, or within one year after
the exercise of the ISO, then at no time will any amount be deductible by Graham
with respect to the ISO. If the option holder exercises an ISO and sells or
otherwise disposes of the shares so acquired after satisfying the foregoing
holding period requirements, then he will realize a long-term capital gain or
loss on the sale or disposition. If the option holder exercises his ISO and
sells or disposes of his shares prior to satisfying the foregoing holding period
requirements, then an amount equal to the difference between the amount realized
upon the sale or other disposition of such shares and the price paid for such
shares upon the exercise of the ISO will be includible in the ordinary income of
such person, and such amount will ordinarily be deductible by Graham at the time
it is includible in such person's income.
With respect to the grant of NQSOs, there are no federal income tax
consequences for Graham or the option holder at the time of the grant. Upon the
exercise of a NQSO, an amount equal to the difference between the fair market
value of the shares to be purchased on the date of exercise and the aggregate
purchase price of such shares is generally includible in the ordinary income of
the person exercising such NQSO, although such inclusion may be at a later date
in the case of an option holder whose disposition of such shares could result in
liability under Section 16(b) of the Securities Exchange Act of 1934, as amended
("Section 16(b)"). Graham will ordinarily be entitled to a deduction for federal
income tax purposes at the time the option holder is taxed on the exercise of
the NQSO equal to the amount which the option holder is required to include as
ordinary income.
The foregoing statements are intended to summarize the general principles
of current federal income tax law applicable to ISOs and NQSOs that may be
granted under the Incentive Plan. However, state and local taxes may also be
significant. In addition, any change in applicable law, regulations or policies
may have a material effect on the above discussion. Individual tax treatment
depends on the particular circumstances of those individuals granted options
under the Incentive Plan and such individuals are advised to consult with tax
advisors for specific tax advice.
The following table provides certain information with respect to the stock
options which have been granted under the Incentive Plan, subject to stockholder
approval. The table specifies the number of options granted to the Named
Executive Officers, the nominees for election as a director and any individual
who received five percent of
14
17
the options granted since the Incentive Plan was adopted by the Board of
Directors. The options granted under the Incentive Plan were granted
conditionally on November 2, 2000 and will expire no later than November 2,
2010.
NEW PLAN BENEFITS
2000 GRAHAM CORPORATION INCENTIVE PLAN TO INCREASE SHAREHOLDER VALUE
--------------------------------------------------------------------------------
DOLLAR NUMBER OF
NAME/POSITION VALUE ($)(1) OPTIONS(2)
--------------------------------------------------------------------------------------------------
Alvaro Cadena, President & CEO $ 9,000 6,000
Josh Bowmaker, Managing Director, Graham Precision Pumps
Limited $ 4,500 3,000
Joseph P. Gorman, VP - Sales $ 4,500 3,000
J. Ronald Hansen, VP - Finance & Administration; CFO $ 4,500 3,000
James R. Lines, VP - Marketing $ 4,500 3,000
Stephen P. Northup, VP - Engineering $ 4,500 3,000
William A. Smith, Jr., VP - General Counsel $ 4,500 3,000
All Executive Officers as a Group $31,500 24,000(3)
All Non-Executive Officer Employees
as a Group $ 3,000 2,000
All Non-Employee Directors
as a Group $ 7,500 5,000
---------------
(1) Representing the excess of the market value of the Company's Common Stock on
June 15, 2001 ($12.50) over the exercise price of each option ($11.00).
(2) The options granted on November 2, 2000 were granted subject to stockholder
approval of the Incentive Plan. Such options were granted with an exercise
price of $11.00 per share, the closing market price of the Company's common
stock as of November 2, 2000. Such options will become exercisable upon
approval of the Incentive Plan by the Company's shareholders. The options
which may be granted in 2001 and future years are subject to the exercise of
administrative discretion and thus are not determinable at this time.
(3) Options granted to Officers in 2000 were granted under a previously approved
plan.
THE BOARD BELIEVES THAT APPROVAL OF THE INCENTIVE PLAN IS IN THE BEST
INTERESTS OF GRAHAM AND ITS STOCKHOLDERS AND RECOMMENDS THAT STOCKHOLDERS VOTE
FOR APPROVAL OF THE INCENTIVE PLAN. PROXIES SOLICITED WILL BE SO VOTED UNLESS
STOCKHOLDERS SPECIFY A CONTRARY CHOICE OR ABSTAIN.
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COMPARATIVE PERFORMANCE BY THE COMPANY
This section provides a comparison of the cumulative total stockholder
return on the Company's Common Stock with the cumulative total stockholder
return of (i) a broad equity market index and (ii) a published industry index or
peer group over five years. The following chart compares the Common Stock of
Graham with (i) the American Stock Exchange Market Value Index (the "AMEX
Index") and (ii) a group of public companies, each of which shares a
Standardized Industrial Classification code ("SIC Code") with Graham and each of
which either competes with Graham as to one or more product lines or one or more
market segments ("Selected Peer Group Manufacturers"). The chart assumes an
investment of $100 on March 31, 1996 in each of the Common Stock, the stocks
comprising the AMEX Index and the stocks of the Selected Peer Group
Manufacturers.
COMPARISON OF FIVE YEAR CUMULATIVE TOTAL RETURN AMONG GRAHAM CORPORATION COMMON
STOCK, AMEX MARKET VALUE INDEX AND SELECTED PEER GROUP MANUFACTURERS(1,2,3)
[LINE GRAPH]
GRAHAM CORPORATION PEER GROUP AMEX COMPOSITE
------------------ ---------- --------------
31-March-96 100 100 100
31-March-97 147.37 87.65 98.06
31-March-98 171.71 125.39 136.7
31-March-99 84.21 63.5 135.64
31-March-00 73.68 54.57 194.96
31-March-01 94.21 89.97 170.61
CUMULATIVE TOTAL RETURN
---------------------------------------------------------------------------------
31-MARCH-96 31-MARCH-97 31-MARCH-98 31-MARCH-99 31-MARCH-00 31-MARCH-01
Graham Corporation............. 100.00 147.37 171.71 84.21 73.68 94.21
Amex Composite................. 100.00 98.06 136.70 135.64 194.96 170.61
Peer Group..................... 100.00 87.65 125.39 63.50 54.57 89.97
---------------
(1) The total return for each of the Company's Common Stock, the Index and the
Selected Peer Group Manufacturers assumes the reinvestment of dividends.
(2) The AMEX Index tracks the aggregate price performance of equity securities
of companies traded on the American Stock Exchange. The Company's Common
Stock is traded on the AMEX.
(3) The Selected Peer Group Manufacturers consists of the following
manufacturing companies: Flowserve Corp. (formerly Duriron Co., Inc.), Paul
Mueller Co., and Selas Corp. of America.
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RATIFICATION OF APPOINTMENT
OF INDEPENDENT AUDITORS
The Board of Directors has appointed, subject to ratification by the
stockholders, Deloitte & Touche LLP as auditors of Graham for the fiscal year
ending March 31, 2002. The appointment was made upon the recommendation and
approval of the Audit Committee. The Board of Directors recommends that the
stockholders vote "FOR" such ratification.
A representative of Deloitte & Touche LLP is expected to attend the meeting
and be available to answer appropriate questions and will have an opportunity to
make a statement if he so desires.
AUDIT FEES
Deloitte & Touche LLP billed $53,435 in aggregate fees for professional
services rendered for the audit of the Company's annual financial statements for
the most recent fiscal year and the reviews of the financial statements included
in the registrant's Forms 10-Q for that fiscal year.
FINANCIAL INFORMATION SYSTEMS
DESIGN AND IMPLEMENTATION FEES
For the most recent fiscal year, Deloitte & Touche LLP billed for no
services described in Paragraph (c) (4) (ii) of Rule 2-01 of Regulation S-X.
ALL OTHER FEES
Aggregate fees billed by Deloitte & Touche LLP for services other than
audit fees for the most recent fiscal year were $31,921.
The Audit Committee of the Board of Directors has considered whether the
provision of the services described above is compatible with maintaining the
principal accountant's independence and is satisfied that it is.
OTHER MATTERS
Management does not intend to bring any business before the Meeting other
than those matters set forth in the preceding Notice of Annual Meeting of
Stockholders. Management knows of no other matters to be brought before the
Meeting. However, if any other matters should properly come before the Annual
Meeting, or at any adjournment thereof, it is the intention of the persons named
in the accompanying form of Proxy, as the Proxies for the shares represented
thereby, to vote on such matters as they, in their discretion, may determine.
STOCKHOLDER PROPOSALS
FOR NEXT YEAR'S ANNUAL MEETING
Any stockholder wishing to have a proposal considered for inclusion in next
year's Proxy Statement should send such proposal in writing to the Secretary of
Graham at 20 Florence Avenue, Batavia, New York 14020 on or before March 1,
2002. Any such proposal must comply with Rule 14a-8 promulgated by the
Securities and Exchange Commission pursuant to the Securities Exchange Act of
1934, as amended. Any stockholder who intends to propose any other matter to be
acted upon at the 2002 Annual Meeting of Stockholders must inform the Company no
later than May 24, 2002. If notice is not provided by that date, the persons
named on the Company's Proxy for the 2002 Annual Meeting will be allowed to
exercise their discretion to vote upon any such proposal without the matter
having been discussed in the Proxy Statement for the 2002 Annual Meeting.
17
20
ANNUAL REPORT
A copy of the Annual Report of Graham containing financial statements for
the fiscal year ended March 31, 2001, prepared in conformity with generally
accepted accounting principles, accompanies this Proxy Statement.
A copy of Graham's Annual Report on form 10-K is available upon request to
the Company.
The executive offices of Graham are located at 20 Florence Avenue, Batavia,
New York 14020.
By Order of the Board of Directors
/s/ ALVARO CADENA
ALVARO CADENA
President & Chief Executive Officer
18
21
APPENDIX A
2000 GRAHAM CORPORATION INCENTIVE PLAN
TO
INCREASE SHAREHOLDER VALUE
EFFECTIVE AS OF NOVEMBER 2, 2000
22
TABLE OF CONTENTS
PAGE
----
ARTICLE I
PURPOSE
SECTION 1.1 GENERAL PURPOSE OF THE PLAN................................. A-1
ARTICLE II
DEFINITIONS
SECTION 2.1 AMENDMENT................................................... A-1
SECTION 2.2 BOARD....................................................... A-1
SECTION 2.3 CHANGE IN CONTROL OF GRAHAM CORPORATION..................... A-1
SECTION 2.4 CODE........................................................ A-1
SECTION 2.5 COMMITTEE................................................... A-1
SECTION 2.6 CORPORATION................................................. A-1
SECTION 2.7 DISABILITY.................................................. A-2
SECTION 2.8 EFFECTIVE DATE.............................................. A-2
SECTION 2.9 ELIGIBLE INDIVIDUAL......................................... A-2
SECTION 2.10 EXERCISE PRICE.............................................. A-2
SECTION 2.11 FAIR MARKET VALUE........................................... A-2
SECTION 2.12 GRAHAM CORPORATION.......................................... A-2
SECTION 2.13 INCENTIVE STOCK OPTION...................................... A-2
SECTION 2.14 NON-QUALIFIED STOCK OPTION.................................. A-2
SECTION 2.15 OPTION...................................................... A-2
SECTION 2.16 OPTION PERIOD............................................... A-2
SECTION 2.17 PERSON...................................................... A-2
SECTION 2.18 PLAN........................................................ A-2
SECTION 2.19 SHARE....................................................... A-2
SECTION 2.20 TENDER OFFER................................................ A-2
ARTICLE III
ADMINISTRATION
SECTION 3.1 COMMITTEE................................................... A-3
SECTION 3.2 COMMITTEE ACTION............................................ A-3
SECTION 3.3 COMMITTEE RESPONSIBILITIES.................................. A-3
ARTICLE IV
STOCK OPTIONS
SECTION 4.1 IN GENERAL.................................................. A-3
SECTION 4.2 AVAILABLE SHARES............................................ A-4
SECTION 4.3 EFFECT OF TERMINATION WITHOUT PURCHASE...................... A-4
SECTION 4.4 SIZE OF OPTION.............................................. A-4
SECTION 4.5 EXERCISE PRICE.............................................. A-4
SECTION 4.6 OPTION PERIOD FOR EMPLOYEES................................. A-4
SECTION 4.7 OPTION PERIOD FOR NON-EMPLOYEE DIRECTORS.................... A-5
SECTION 4.8 METHOD OF EXERCISE.......................................... A-5
SECTION 4.9 LIMITATIONS ON OPTIONS...................................... A-5
SECTION 4.10 ADDITIONAL RESTRICTIONS ON INCENTIVE STOCK OPTIONS.......... A-6
23
PAGE
----
ARTICLE V
NO APPRECIATION RIGHTS TO BE GRANTED
SECTION 5.1 IN GENERAL.................................................. A-6
ARTICLE VI
AMENDMENT AND TERMINATION
SECTION 6.1 TERMINATION................................................. A-6
SECTION 6.2 AMENDMENT................................................... A-6
SECTION 6.3 ADJUSTMENTS IN THE EVENT OF A BUSINESS REORGANIZATION....... A-6
ARTICLE VII
MISCELLANEOUS
SECTION 7.1 STATUS AS AN EMPLOYEE BENEFIT PLAN.......................... A-7
SECTION 7.2 NO RIGHT TO A CONTINUATION OF SERVICE....................... A-7
SECTION 7.3 CONSTRUCTION OF LANGUAGE.................................... A-7
SECTION 7.4 GOVERNING LAW............................................... A-7
SECTION 7.5 HEADINGS.................................................... A-7
SECTION 7.6 NON-ALIENATION OF BENEFITS.................................. A-7
SECTION 7.7 TAXES....................................................... A-7
SECTION 7.8 APPROVAL OF STOCKHOLDERS.................................... A-7
SECTION 7.9 NOTICES..................................................... A-8
24
2000 GRAHAM CORPORATION INCENTIVE PLAN TO
INCREASE SHAREHOLDER VALUE
ARTICLE I
PURPOSE
SECTION 1.1 GENERAL PURPOSE OF THE PLAN.
The purpose of the Plan is to increase shareholder value by promoting the
growth and profitability of the Corporation; to provide certain directors and
key executives of the Corporation with an incentive to achieve corporate
objectives; to attract and retain directors and key executives of outstanding
competence; and to provide such directors and executives with an equity interest
in the Corporation.
ARTICLE II
DEFINITIONS
The following definitions shall apply for the purposes of this Plan, unless
a different meaning is plainly indicated by the context:
SECTION 2.1 AMENDMENT means amendment of this Plan pursuant to section 6.
SECTION 2.2 BOARD means the board of directors of Graham Corporation.
SECTION 2.3 CHANGE IN CONTROL OF GRAHAM CORPORATION means any of the
following events:
(a) the reorganization, merger or consolidation of Graham Corporation
with one or more other Persons, other than a transaction following which at
least 51% of the ownership interests of the institution resulting from such
transaction are owned by Persons who, immediately prior to such
transaction, owned at least 51% of the outstanding voting shares of Graham
Corporation;
(b) the acquisition of substantially all of the assets of Graham
Corporation or more than 25% of the voting shares of Graham Corporation by
any Person or by any Persons acting in concert; or
(c) the occurrence of any event if, immediately following such event,
at least 50% of the members of the Board do not belong to any of the
following groups:
(i) individuals who were members of the Board on the Effective
Date: or
(ii) individuals who first became members of the Board after the
Effective Date either:
(A) upon election to serve as a member of the Board by
affirmative vote of a majority of the members of the Board, or a
nominating committee thereof, in office at the time of such first
election; or
(B) upon election by the stockholders of Graham Corporation to
serve as a member of the Board, but only if nominated for election by
affirmative vote of a majority of the members of the Board, or a
nominating committee thereof, in office at the time of such first
nomination; provided, however, that no benefit conferred under the
Plan, or under the terms of any Option granted under the Plan, solely
as a result of the occurrence of a Change in Control of Graham
Corporation shall be conferred upon any Person, or any member of the
group of Persons, who makes an acquisition described in section 2.3(b)
and for purposes of this proviso, the term Change in Control of Graham
Corporation as applied to such a Person shall not include any
acquisition made by such Person or by any group of Persons of which he
is a member.
SECTION 2.4 CODE means the Internal Revenue Code of 1986 (including the
corresponding provisions of any succeeding law).
SECTION 2.5 COMMITTEE means the Compensation Committee as described in, and
subject to the qualifications of, section 3.1.
SECTION 2.6 CORPORATION means Graham Corporation and any successor thereto,
and, with the prior approval of the Board and subject to such terms and
conditions as may be imposed by the Board, any other corporation or other
business organization.
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25
SECTION 2.7 DISABILITY means a condition of total incapacity, mental or
physical, for further performance of duty with the Corporation which the
Committee shall have determined, on the basis of competent medical evidence, is
likely to be permanent.
SECTION 2.8 EFFECTIVE DATE means November 2, 2000.
SECTION 2.9 ELIGIBLE INDIVIDUAL means any individual whom the Committee may
determine to be a key employee, or non-employee director, of the Corporation and
selected to receive a grant of an Option pursuant to the Plan.
SECTION 2.10 EXERCISE PRICE means the price per Share at which Shares
subject to an Option may be purchased upon exercise of the Option, determined in
accordance with section 4.5.
SECTION 2.11 FAIR MARKET VALUE means with respect to a Share on a specified
date:
(a) the final quoted sales price on the date in question (or, if there
is no reported sale on such date, on the last preceding date on which any
reported sale occurred) as reported in the principal consolidated reporting
system with respect to securities listed or admitted to trading on the
principal United States securities exchange on which the Shares are listed
or admitted to trading; or
(b) if the Shares are not listed or admitted to trading on any such
exchange, the closing bid quotation with respect to a Share on such date on
the National Association of Securities Dealers Automated Quotations System,
or, if no such quotation is provided, on another similar system, selected
by the Committee, then in use; or
(c) if sections 2.13(a) and (b) are not applicable, the fair market
value of a Share as the committee may determine.
SECTION 2.12 GRAHAM CORPORATION means Graham Corporation, a corporation
organized and existing under the laws of the State of Delaware, and any
successor thereto.
SECTION 2.13 INCENTIVE STOCK OPTION means a right to purchase Shares that
is granted pursuant to section 4.1, that is designated by the Committee to be an
Incentive Stock Option and that is intended to satisfy the requirements of
section 422 of the Code.
SECTION 2.14 NON-QUALIFIED STOCK OPTION means a right to purchase Shares
(a) that is granted pursuant to section 4.1, that is designated by the Committee
to be a Non-Qualified Stock Option and that is not intended to satisfy the
requirements of section 422 of the Code or (b) that is granted to a non-employee
director.
SECTION 2.15 OPTION means either an Incentive Stock Option or a
Non-Qualified Stock Option.
SECTION 2.16 OPTION PERIOD means the period during which an Option may be
exercised, determined in accordance with section 4.6.
SECTION 2.17 PERSON means an individual, a corporation, a partnership, an
association, a joint-stock company, a trust, an estate, an unincorporated
organization and any other business organization.
SECTION 2.18 PLAN means the 2000 Graham Corporation Incentive Plan to
Increase Shareholder Value, as amended from time to time. The Plan may be
referred to as the "1999 Graham Corporation Incentive Plan to Increase
Shareholder Value."
SECTION 2.19 SHARE means a share of common stock of Graham Corporation.
SECTION 2.20 TENDER OFFER shall have the meaning given to such term under
section 14 of the Securities Exchange Act of 1934, as amended; provided,
however, that an offer to purchase Shares made directly to the holder of such
Shares by any Person, or by any Persons acting in concert, shall not constitute
a Tender Offer within the meaning of this section 2.22 unless such offer, if
successful, would result in a Change in Control of Graham Corporation; and
provided, further, that no benefit conferred under the Plan, or under the terms
of any Option granted under the Plan, solely as a result of the commencement of
a Tender Offer to purchase Shares shall be conferred upon any Person, or any
member of the group of Persons, who makes a Tender Offer to purchase Shares and
for purposes of the proviso, the term Tender Offer as applied to such a Person
shall not include any offer to purchase Shares made by such Person or by any
group of Persons of which he is a member.
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ARTICLE III
ADMINISTRATION
SECTION 3.1 COMMITTEE.
The Plan shall be administered by the Compensation Committee of the Board
(or any successor committee of the Board).
SECTION 3.2 COMMITTEE ACTION.
The Committee shall hold meetings, at least annually, and may make such
administrative rules and regulations as it may deem proper. A majority of the
members of the Committee shall constitute a quorum, and the action of a majority
of the members of the Committee present at a meeting at which a quorum is
present, as well as actions taken pursuant to the unanimous written consent of
all of the members of the Committee without holding a meeting, shall be deemed
to be actions of the Committee. All actions of the Committee shall be final and
conclusive and shall be binding upon the Corporation and all other interested
parties. Any Person dealing with the Committee shall be fully protected in
relying upon any written notice, instruction, direction or other communication
signed by the secretary of the Committee and one member of the Committee, by two
members of the Committee or by a representative of the Committee authorized to
sign the same in its behalf.
SECTION 3.3 COMMITTEE RESPONSIBILITIES.
Subject to the terms and conditions of the Plan and such limitations as may
be imposed from time to time by the Board, the Committee shall be responsible
for the overall management and administration of the Plan and shall have such
authority as shall be necessary or appropriate in order to carry out its
responsibilities, including, without limitation, the authority:
(a) to interpret and construe the Plan, and to determine all questions
that may arise under the Plan as to eligibility for participation in the
Plan, the number of Shares subject to the Options to be granted, and the
terms and conditions thereof;
(b) to adopt rules and regulations and to prescribe forms for the
operation and administration of the Plan; and
(c) to take any other action not inconsistent with the provisions of
the Plan that it may deem necessary or appropriate.
ARTICLE IV
STOCK OPTIONS
SECTION 4.1 IN GENERAL.
Subject to the limitations of the Plan, the Committee may, in its
discretion, grant to an Eligible Individual an Option to purchase Shares. Any
such Option shall be evidenced by a written document which shall:
(a) designate the Option as either an Incentive Stock Option or a
Non-Qualified Stock Option;
(b) specify the number of Shares subject to the Option;
(c) specify the Exercise Price, determined in accordance with section
4.5;
(d) specify the Option Period determined in accordance with section
4.6;
(e) set forth specifically or incorporate by reference the applicable
provisions of the Plan; and
(f) contain such other terms and conditions not inconsistent with the
Plan as the Committee may, in its discretion, prescribe with respect to an
Option granted to an Eligible Individual.
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27
SECTION 4.2 AVAILABLE SHARES.
Subject to section 6.3, the maximum aggregate number of Shares with respect
to which Options may be granted to Eligible Individuals at any time shall be
equal to the excess of:
(a) 150,000 Shares; over
(b) the sum of:
(i) the number of Shares with respect to which Options previously
granted to Eligible Individuals under this Plan may then or may in the
future be exercised; plus
(ii) the number of Shares with respect to which Options previously
granted to Eligible Individuals under this Plan have been exercised.
SECTION 4.3 TERMINATION WITHOUT PURCHASE.
For purposes of section 4.2, an Option shall not be considered as having
been exercised to the extent that such Option terminates by reason other than
the purchase of the related Shares.
SECTION 4.4 SIZE OF OPTION.
Subject to section 4.2, 4.3 and such limitations as the Board may from time
to time impose, the number of Shares as to which an Eligible Individual may be
granted Options shall be determined by the Committee, in its discretion.
SECTION 4.5 EXERCISE PRICE.
The price per Share at which an Option granted to an Eligible Individual
may be exercised shall be determined by the Committee, in its discretion;
provided, however, that in the case of an Incentive Stock Option, the Exercise
Price per Share shall in no event be less than:
(a) if, at the time an Incentive Stock Option is granted, the Person
to whom it is granted owns more than 10% of the total combined voting power
of all outstanding stock of all classes issued by Graham Corporation or any
parent or subsidiary thereof, 110% of the Fair Market Value of a Share on
the date the Option is granted, and
(b) in all other cases, 100% of the Fair Market Value of a Share on
the date the Option is granted.
SECTION 4.6 OPTION PERIOD FOR EMPLOYEES.
The Option Period during which an Option granted to an Eligible Individual
may be exercised shall commence on the date specified by the Committee in the
document evidencing the Option and shall expire on the earliest of:
(a) the date specified by the Committee in the document evidencing the
Option;
(b) in the case of an Incentive Stock Option, the last day of the
three-month period commencing on the date of the Option holder's
termination of employment with the Corporation other than on account of
death or Disability;
(c) in the case of an Incentive Stock Option, the last day of the
one-year period commencing on the date of the Option holder's death or
Disability;
(d) in the case of an Incentive Stock Option granted to a Person who,
on the date the Option was granted, owned more than 10% of the total
combined voting power of all outstanding stock of all classes issued by
Graham Corporation or any parent or subsidiary thereof, the last day of the
five-year period commencing on the date the Option was granted; and
(e) the last day of the ten-year period commencing on the date on
which the Option was granted; provided, however, that in the event of a
tender Offer or a Change in Control of Graham Corporation while there is
outstanding any Option granted to an Eligible Individual with respect to
which an Option Period has not commenced, such Option Period shall
automatically commence on the earliest date on which the Tender Offer or
Change in Control of Graham Corporation is deemed to have occurred. The
Option Period during which an Option granted to a non-employee director may
be exercised shall be determined in accordance with section 4.7.
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28
SECTION 4.7 OPTION PERIOD FOR NON-EMPLOYEE DIRECTORS.
The Option Period during which an Option granted to a non-employee director
under this section 4.7 may be exercised shall commence on the date specified by
the Committee in the document evidencing the Option and shall expire on the
earliest of:
(a) the last day of the one-year period commencing on the date the
non-employee director ceases to be a member of the Board for reasons other
than on account of death, Disability or retirement as a member of the Board
after age 65;
(b) the last day of the three-year period commencing on the date the
non-employee director ceases to be a member of the Board on account of
death, Disability or retirement as a member of the Board after age 65; or
(c) the last day of the ten-year period commencing on the date on
which the Option was granted.
SECTION 4.8 METHOD OF EXERCISE.
(a) Subject to the limitations of the Plan and the document evidencing an
Option, an Option holder may, at any time during the Option Period, exercise his
right to purchase all or any part of the Shares to which the Option relates;
provided, however, that the minimum number of Shares which may be purchased
shall be 100, or, if less, the total number of Shares relating to the Options
which remain unpurchased. An Option holder shall exercise an Option to purchase
Shares by:
(i) giving written notice to the Committee, in such form and manner as
the Committee may prescribe, of his intent to exercise the Option;
(ii) delivering to the Committee full payment for the Shares as to
which the Option is to be exercised; and
(iii) satisfying such other conditions as may be prescribed in the
document evidencing the Option. Payment shall be made in (A) United States
dollars in cash or by certified check, money order or bank draft drawn
payable to the order of Graham Corporation, (B) Shares duly endorsed for
transfer and with all necessary stock transfer tax stamps attached, already
owned by the Option holder and having a fair market value equal to the
Exercise Price, such fair market value to be determined in such manner as
may be provided by the Committee or as may be required in order to comply
with or conform to the requirements of any applicable laws or regulations,
or (C) a combination of United States dollars and such Shares. The date of
exercise shall be the date specified in the notice referred to in section
4.8(a)(i), or if no date is specified, the date on which such notice is
delivered to the Committee.
(b) When the requirements of section 4.8(a) have been satisfied, the
Committee shall take such action as is necessary to cause the issuance of a
stock certificate evidencing the Option holder's ownership of such Shares. The
Person exercising the Option shall have no right to vote or to receive
dividends, nor have any other rights with respect to the Shares, prior to the
date as of which such Shares are transferred to such Person on the stock
transfer records of Graham Corporation, and no adjustments shall be made for any
dividends or other rights for which the record date is prior to the date as of
which such transfer is effected, except as may be required under section 6.3.
SECTION 4.9 LIMITATIONS ON OPTIONS.
(a) An Option by its terms shall not be transferable by the Option holder
other than by will or by the laws of descent and distribution, and shall be
exercisable, during the lifetime of the Option holder, only by the Option
holder.
(b) Graham Corporation's obligation to deliver Shares with respect to an
Option shall, if the Committee so requests, be conditioned upon the receipt of a
representation as to the investment intention of the Person to whom such Shares
are to be delivered, in such form as the Committee shall determine to be
necessary or advisable to comply with the provisions of applicable federal,
state or local law. It may be provided that any such representation shall become
inoperative upon a registration of the Shares or upon the occurrence of any
other event eliminating the necessity of such representation. Graham Corporation
shall not be required to deliver any Shares under the Plan prior to (i) the
admission of such Shares to listing on any stock exchange on which Shares may
then be listed, or (ii) the completion of such registration or other
qualification under any state or federal law, rule or regulation as the
Committee shall determine to be necessary or advisable.
A-5
29
SECTION 4.10 ADDITIONAL RESTRICTIONS ON INCENTIVE STOCK OPTIONS.
In addition to the limitations of section 4.9, an Option designated by the
Committee to be an Incentive Stock Option shall be subject to the following
limitations:
(a) no Incentive Stock Option shall provide any individual with a
right to purchase Shares if that right first becomes exercisable during a
prescribed calendar year and if the sum of:
(i) The Fair Market Value (determined as of the date of the grant)
of the Shares subject to such Incentive Stock Option which first becomes
available for purchase during such calendar year; plus
(ii) the Fair Market Value (determined as of the date of grant) of
all Shares subject to the Incentive Stock Options previously granted to
such individual which first become available for purchase during such
calendar year; exceeds $100,000; and
(b) except with the prior written approval of the Committee, no
individual shall dispose of Shares acquired pursuant to the exercise of an
Incentive Stock Option until after the later of (i) the second anniversary
of the date on which the Incentive Stock Option was granted, or (ii) the
first anniversary of the date on which the Shares were acquired.
ARTICLE V
NO APPRECIATION RIGHTS TO BE GRANTED
SECTION 5.1 IN GENERAL.
No stock appreciation rights may be granted pursuant to this Plan.
ARTICLE VI
AMENDMENT AND TERMINATION
SECTION 6.1 TERMINATION.
The Board may suspend or terminate the Plan in whole or in part at any time
prior to the tenth anniversary of the Effective Date by giving written notice of
such suspension or termination to the Committee. Unless sooner terminated, the
Plan shall terminate automatically on the day preceding the tenth anniversary of
the Effective Date.
SECTION 6.2 AMENDMENT.
The Board may amend or revise the Plan in whole or in part at any time;
provided, however, that if and to the extent required by any law, rule or
regulation of any governmental unit having jurisdiction over Graham Corporation,
or by any private or quasi-governmental body to whose jurisdiction Graham
Corporation has chosen to subject itself, the effectiveness of any amendment or
revision shall be conditioned on the approval thereof by the stockholders of
Graham Corporation.
SECTION 6.3 ADJUSTMENTS IN THE EVENT OF A BUSINESS REORGANIZATION.
(a) In the event of any merger, consolidation or other business
reorganization in which Graham Corporation is the surviving entity, and in the
event of any stock split, stock dividend or other event generally affecting the
number of Shares held by each Person who is then a holder of record of Shares,
the number of Shares covered by each outstanding Option shall be adjusted to
account for such event. Such adjustment shall be effected by multiplying such
number of Shares by an amount equal to the number of Shares that would be owned
after such event by a Person who, immediately prior to such event, was the
holder of record of one Share, and the Exercise Price shall be adjusted by
dividing the Exercise Price by such number of Shares; provided, however, that
the Committee may, in its discretion, establish another appropriate method of
adjustment.
(b) In the event of any merger, consolidation, or other business
reorganization in which Graham Corporation is not the surviving entity:
(i) any Options granted under the Plan which remain outstanding may be
canceled as of the effective date of such merger, consolidation, business
reorganization, liquidation or sale by the Board upon 30 days' written
notice to each Option holder in advance of the effective date of such
event; and
A-6
30
(ii) any Option which is not canceled pursuant to section 6.3(b)(i)
shall be adjusted in such manner as the Committee shall deem appropriate to
account for such merger, consolidation or other business reorganization.
ARTICLE VII
MISCELLANEOUS
SECTION 7.1 STATUS AS AN EMPLOYEE BENEFIT PLAN.
This Plan is not intended to satisfy the requirements for qualification
under section 401(a) of the Code or to satisfy the definitional requirements for
an "employee benefit plan" under section 3(3) of the Employee Retirement Income
Security Act of 1974, as amended. It is intended to be a non-qualified incentive
compensation program that is exempt from the regulatory requirements of the
Employee Retirement Income Security Act of 1974, as amended. The Plan shall be
construed and administered so as to effectuate this intent.
SECTION 7.2 NO RIGHT TO A CONTINUATION OF SERVICE.
Neither the establishment of the Plan nor any provisions of the Plan nor
any action of the Board or the Committee with respect to the Plan shall be held
or construed to confer upon any member of the Board any right to a continuation
of membership on the board of directors of the corporation or any subsidiary or
affiliate thereof or upon any employee any right to a continuation of employment
by the Corporation or any subsidiary or affiliate thereof. The continuation of
service of any member of the board of directors and the continued employment of
any employee shall be subject to the same terms and conditions that would apply
from time to time if the Plan had not been adopted.
SECTION 7.3 CONSTRUCTION OF LANGUAGE.
Whenever appropriate in the Plan, words used in the singular may be read in
the plural, words used in the plural may be read in the singular, and words
importing the masculine gender may be read as referring equally to the feminine
or the neuter. Any reference to an Article or section number shall refer to an
Article or section of this Plan unless otherwise indicated.
SECTION 7.4 GOVERNING LAW.
The Plan shall be construed, administered and enforced according to the
laws of the State of New York without giving effect to the conflict of laws
principles thereof, except to the extent that such laws are preempted by federal
law.
SECTION 7.5 HEADINGS.
The headings of Articles and sections are included solely for convenience
of reference. If there is any conflict between such headings and the text of the
Plan, the text shall control.
SECTION 7.6 NON-ALIENATION OF BENEFITS.
The right to receive a benefit under the Plan shall not be subject in any
manner to anticipation, alienation or assignment, nor shall such right be liable
for or subject to debts, contracts, liabilities, engagements or torts.
SECTION 7.7 TAXES.
The Corporation shall have the right to deduct from all amounts paid by the
Corporation in cash with respect to an Option under the Plan any taxes required
by law to be withheld with respect to such Option. Where any Person is entitled
to receive Shares pursuant to the exercise of an Option, the Corporation shall
have the right to require such Person to pay the Corporation the amount of any
tax which the Corporation is required to withhold with respect to such Shares,
or, in lieu thereof, to retain, or to sell without notice, a sufficient number
of Shares to cover the amount required to be withheld.
SECTION 7.8 APPROVAL OF STOCKHOLDERS.
All Options granted pursuant to Article IV of the Plan shall be conditioned
on the approval of the Plan by the stockholders of Graham Corporation on or
prior to the date of the first annual meeting of such stockholders. No Option
granted under the Plan shall be effective, nor shall any such Option be
exercised or any Shares issued or purchased upon exercise, prior to such
approval.
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31
SECTION 7.9 NOTICES.
Any communication required or permitted to be given under the Plan,
including any notice, direction, designation, comment, instruction, objection or
waiver, shall be in writing and shall be deemed to have been given at such time
as it is delivered personally or five days after mailing if mailed, postage
prepaid, by registered or certified mail, return receipt requested, addressed to
such party at the address listed below, or at such other address as one such
party may by written notice specify to the other party:
(a) If to the Compensation Committee:
Graham Corporation
20 Florence Avenue
Batavia, New York 14020
Attention: GENERAL COUNSEL
(b) If to an Option holder, to the Option holder's address as shown in
the Corporation's personnel records.
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APPENDIX B
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, the internal auditors 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, the lead independent audit partner
and the director of internal audit.
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.
- Providing guidance and oversight to the internal audit activities of
the Corporation including reviewing the organization, plans and
results of such activity.
- Reviewing the audited financial statements and discussing them with
management and the independent auditor. These discussions shall
include consideration of the quality of the company'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 company's audited financial statements in the company's annual
report on Form 10-K.
- Reviewing with management and the independent auditor the quarterly
financial information prior to the company's filing on Form 10-Q.
This review may be performed by the Committee or its chairman.
- Discussing with management, the internal auditors and the external
auditors the quality and adequacy of the company'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.
B-1
33
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 company'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 company.
B-2
34
GRAHAM CORPORATION
20 FLORENCE AVENUE
BATAVIA, NEW YORK 14020
www.grahamcorp.com
35
EMPLOYEE BENEFITS COMMITTEE
June 29, 2001
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 2001 Annual Meeting of
Stockholders scheduled to be held on July 26, 2001 ("Annual Meeting").
The ESOP Trust and the ISP Trust provide that in casting their
votes at the 2001 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 15, 2001 and the Company Stock Fund of the
ISP ("Company Stock Fund") as of June 15, 2001.
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 2001 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:
36
ANTICIPATED PROPOSALS
If Graham Common Stock Was Allocated to Your Account Under the ESOP
Trust as of June 15, 2001:
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 15, 2001 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 15, 2001. If you
do not file the Instruction Card by July 16, 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 15,
2001:
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 15, 2001. 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
15, 2001. For purposes of the ISP, if you do not file the Instruction Card
by July 16, 2001, 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 2001 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 2001 Annual Meeting. Please complete, sign and
return your Instruction Card today. Your instructions are important
regardless of the size of your interest in the ESOP Trust or in the Company
Stock Fund.
If you have questions regarding the terms of the ESOP or the ISP,
or how to complete the Instruction Card, please call J. Ronald Hansen, Vice
President-Finance & Administration at (716) 343-2216.
Sincerely,
EMPLOYEE BENEFITS COMMITTEE
OF GRAHAM CORPORATION
Enclosure
37
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 26, 2001
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 15, 2001 (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 26, 2001 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 29, 2001, 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 29, 2001.
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 16, 2001.
PLEASE MARK, SIGN AND DATE THIS VOTING INSTRUCTION CARD ON THE
REVERSE SIDE AND RETURN IT IN THE ENCLOSED ENVELOPE.
38
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" PROPOSALS 2 AND 3.
--------------------------- --------------------------
ESOP COMMON (as of 6/15/01) ISP COMMON (as of 6/15/01) PLEASE MARK YOUR CHOICE LIKE THIS [ X ]: IN BLUE OR BLACK INK.
====================================================================================================================================
THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR" THE ELECTION OF NOMINEES AND "FOR" PROPOSALS 2 AND 3.
-----------------------------------------------------------------------------------------------------------------------------------
1. Election of Directors 2. Approval of the 2000 Graham 3. Ratification of the appointment
Corporation Incentive Plan to of Deloitte & Touche LLP as
FOR A THREE-YEAR TERM FOR WITHHOLD Increase Shareholder Value. independent accountants for the
period April 1, 2001 through
Jerald D. Bidlack [ ] [ ] March 31, 2002.
Philip S. Hill [ ] [ ]
FOR AGAINST ABSTAIN* FOR AGAINST ABSTAIN*
[ ] [ ] [ ] [ ] [ ] [ ]
-----------------------------------------------------------------------------------------------------------------------------------
4. In their discretion, the proxies are authorized to vote upon such other business as may properly come before the Annual
Meeting or any adjournment thereof.
===================================================================================================================================
[ ] 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 29, 2001, 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.
39
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 26, 2001
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 15, 2001
(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 26, 2001 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 29,2001, 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 29, 2001.
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
16, 2001.
PLEASE MARK, SIGN AND DATE THIS VOTING INSTRUCTION CARD ON
THE REVERSE SIDE AND RETURN IT IN THE ENCLOSED ENVELOPE.
40
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" PROPOSALS 2 AND 3.
--------------------------
ESOP COMMON (as of 6/15/01) PLEASE MARK YOUR CHOICE LIKE THIS [X] IN BLUE OR BLACK INK.
====================================================================================================================================
THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR" THE ELECTION OF NOMINEES AND "FOR" PROPOSALS 2 AND 3.
------------------------------------------------------------------------------------------------------------------------------------
1. Election of Directors 2. Approval of the 2000 Graham 3. Ratification of the appointment of
Corporation Incentive Plan to Deloitte & Touche LLP as
Increase Shareholder Value. independent accountants for the
period April 1, 2001 through March
31, 2002.
FOR A THREE-YEAR TERM FOR WITHHOLD
Jerald D. Bidlack [ ] [ ]
Philip S. Hill [ ] [ ]
FOR AGAINST ABSTAIN* FOR AGAINST ABSTAIN*
[ ] [ ] [ ] [ ] [ ] [ ]
[ ] [ ] [ ] [ ] [ ] [ ]
4. In their discretion, the proxies are authorized to vote upon such other business as may properly come before the Annual Meeting
or any adjournment thereof.
====================================================================================================================================
[ ] 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 29, 2001, 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.
41
PROXY 2001
GRAHAM CORPORATION
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
The undersigned hereby appoints H. Russel Lemcke and Cornelius S. Van Rees,
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 26, 2001 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:
This Proxy when properly executed will be voted in the manner directed
herein by the undersigned stockholder. If no direction is made, this Proxy will
be voted FOR the election of the nominees, FOR the approval of the 2000 Graham
Corporation Incentive Plan to Increase Shareholder Value and FOR ratification of
the appointment of auditors.
*FOLD AND DETACH HERE *
42
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR THE NOMINEES, FOR THE APPROVAL OF Please mark
THE 2000 GRAHAM CORPORATION INCENTIVE PLAN TO INCREASE SHAREHOLDER your votes as
VALUE AND FOR RATIFICATION OF THE APPOINTMENT OF INDEPENDENT AUDITORS. indicated in [X]
this example
1. Election of Directors Jerald D. Bidlack to serve until 2004
FOR all nominees WITHHOLD Philip S. Hill to serve until 2004
listed to the right AUTHORITY
(except as marked to vote for all nominees (Instruction: To withhold authority to vote for any individual nominee,
to the contrary) listed to the right write that nominee's name on the space provided below.)
[ ] [ ]
2. Approval of the 2000 Graham 3. Ratification of the appointment 4. In their discretion, to vote upon
Corporation Incentive Plan of Deloitte & Touche LLP as all other matters as may be properly
to Increase Shareholder Value. independent accountants for the brought before the meeting.
fiscal year ending March 31, 2002.
FOR AGAINST ABSTAIN FOR AGAINST ABSTAIN
[ ] [ ] [ ] [ ] [ ] [ ]
Date:________________________________________, 2001
___________________________________________________
___________________________________________________
(Signature or Signatures)
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.
*To help our preparation for the meeting,
please check here if you plan to attend.
*FOLD AND DETACH HERE *