SCHEDULE 14A
(Rule 14a-101)
INFORMATION REQUIRED IN PROXY STATEMENT
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the
Securities Exchange Act of 1934 (Amendment No. )
Filed by the Registrant [X]
Filed by a Party other than the Registrant [_]
Check the appropriate box:
[_] Preliminary Proxy Statement
[_] Confidential, For Use of the
Commission Only (as permitted by Rule 14a-6(e)(2))
[X] Definitive Proxy Statement
[_] Definitive Additional Materials
[_] Soliciting Material Under Rule 14a-12
Espey Mfg. & Electronics Corp.
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(Name of Registrant as Specified In Its Charter)
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(Name of Person(s) Filing Proxy Statement, if Other Than the Registrant)
Payment of Filing Fee (Check the appropriate box):
[X] No fee required.
[_] Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and 0-11.
1) Title of each class of securities to which transaction applies:
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2) Aggregate number of securities to which transaction applies:
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3) Per unit price or other underlying value of transaction computed pursuant
to Exchange Act Rule 0-11 (set forth the amount on which the filing fee is
calculated and state how it was determined):
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5) Total fee paid:
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[_] Fee paid previously with preliminary materials:
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[_] Check box if any part of the fee is offset as provided by Exchange Act Rule
0-11(a)(2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration statement number,
or the form or schedule and the date of its filing.
1) Amount previously paid:
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2) Form, Schedule or Registration Statement No.:
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4) Date Filed:
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ESPEY MFG. & ELECTRONICS CORP.
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NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD NOVEMBER 18, 2005
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October 24, 2005
To the Shareholders of
ESPEY MFG. & ELECTRONICS CORP.:
You are cordially invited to attend the Annual Meeting of Shareholders of
Espey Mfg. & Electronics Corp., which will be held at the Courtyard by Marriott,
11 Excelsior Avenue, Saratoga Springs, New York, on November 18, 2005, at 10:00
a.m., Eastern Standard Time, for the following purposes:
1. To elect one Class B Director to serve for a two year term expiring
at the 2007 Annual Meeting or until his successor is duly elected
and qualifies; and
2. To elect two Class C Directors to serve for a three year term
expiring at the 2008 Annual Meeting or until their respective
successors are duly elected and qualify; and
3. To ratify the appointment of Rotenberg & Company, LLP as the
Company's independent public accountants for the fiscal year ending
June 30, 2006.
No other business may be transacted at the meeting.
The Board of Directors has fixed the close of business on October 3, 2005,
as the record date for the purpose of determining shareholders entitled to
notice of, and to vote at, said meeting or any adjournment thereof. The books
for transfer of the Company's capital stock will not be closed.
Even if you expect to attend the meeting in person, it is urged by the
Company that you mark, sign, date and return the enclosed proxy. The proxy may
be revoked at any time before it is voted and shareholders who execute proxies
may nevertheless attend the meeting and vote their shares in person. Every
properly signed proxy will be voted as specified unless previously revoked.
By Order of the Board of Directors,
/s/ Peggy A. Murphy
PEGGY A. MURPHY
Corporate Secretary
Please make your specification and sign and date the enclosed proxy and
mail it promptly in the accompanying pre-addressed, postage-free envelope.
ESPEY MFG. & ELECTRONICS CORP.
233 Ballston Avenue
Saratoga Springs, New York 12866
PROXY STATEMENT
The enclosed proxy is solicited by the Board of Directors of Espey Mfg. &
Electronics Corp. (the "Company") for use in voting at the Annual Meeting of the
Shareholders of the Company to be held at the Courtyard by Marriott, 11
Excelsior Avenue, Saratoga Springs, New York, on November 18, 2005, at 10:00
a.m., Eastern Standard Time, and at any postponement or adjournment thereof, for
the purposes set forth in the attached Notice of Meeting. It is anticipated that
the Notice of Annual Meeting of Shareholders, this Proxy Statement and the form
of proxy will be mailed on or about October 24, 2005.
VOTING AND REVOCABILITY OF PROXIES
Every properly dated, executed and returned proxy will be voted at the
Annual Meeting in accordance with the instructions of the shareholder. If no
specific instructions are given, the shares represented by such proxy will be
voted for the election of the Class B Director and the Class C Directors
nominated by the Board of Directors. Any shareholder giving a proxy has the
power to revoke it at any time prior to the voting thereof by voting in person
at the Annual Meeting, by giving written notice to the Secretary prior to the
Annual Meeting, or by signing and delivering a new proxy card bearing a later
date.
The Company's only class of voting securities is its Common Stock, par
value $.33-1/3 per share (the "Common Stock"). Each share of Common Stock
outstanding on the record date will be entitled to one vote on all matters. In
accordance with the Company's By-Laws and applicable state law, the election of
directors will be determined by a plurality of the votes cast by the holders of
shares of Common Stock present and entitled to vote thereon, in person or by
proxy, at the Annual Meeting. Shares present which are properly withheld as to
voting with respect to any one or more nominees, and shares present with respect
to which a broker indicates that it does not have authority to vote ("broker
non-vote") will not be counted. Cumulative voting in connection with the
election of directors is not permitted. The affirmative vote of shares
representing a majority of the votes cast by the holders of shares present and
entitled to vote is required to approve the other matters to be voted on at the
Annual Meeting. Shares, which are voted to abstain and broker non-votes, are not
counted as votes cast on any matter to which they relate.
The By-Laws of the Company provide that the majority of the shares of the
Common Stock of the Company issued and outstanding and entitled to vote, present
in person or by proxy, shall constitute a quorum at the Annual Meeting. Shares,
which are voted to abstain, are considered as present at the Annual Meeting for
the purposes of determining a quorum. Broker non-votes are considered as not
present at the Annual Meeting for the purposes of determining a quorum.
RECORD DATE AND SHARE OWNERSHIP
Only holders of Common Stock of record on the books of the Company at the
close of business on October 3, 2005 will be entitled to vote at the meeting.
There were outstanding and entitled to vote on October 3, 2005, 1,151,212 shares
of Common Stock.
ELECTION OF DIRECTORS
The Company's Certificate of Incorporation, as amended, provides that the
Board of Directors shall consist of not less than three nor more than nine
persons with the actual number determined in accordance with the Company's
bylaws. The Certificate of Incorporation further provides that there shall be
three classes of directors (Class A, Class B and Class C) with overlapping
three-year terms and that all classes shall be as nearly equal in number as
possible.
Following the death in November 2004 of director William P. Greene, the
Board of Directors fixed the present number of directors at seven. The terms of
three Class C Directors expire at the Annual Meeting. There are presently three
Class A Directors, whose terms expire at the 2006 Annual Meeting, and only one
Class B Director, whose term expires at the 2007 Annual Meeting. In order to
comply with the provisions of the Company's governing documents requiring the
Classes to be as nearly equal in number as possible, the Board of Directors has
reclassified one Class C Director as a Class B Director.
Accordingly, the Board of Directors has nominated one person to stand for
election as a Class B Director and has nominated two persons to stand for
election as a Class C Director.
The votes will be cast pursuant to the enclosed proxy for the election of
each of the Class B and Class C nominees named below unless specification is
made withholding such authority. Each of the nominees is presently a director of
the Company.
1
Should any of said nominees for Class B and Class C Directors become
unavailable, which is not anticipated, the proxies named in the enclosed proxy
will vote for the election of such other persons as the Board of Directors may
recommend. Proxies may not be voted for a greater number of persons than the
nominees named.
The names and business experience for the past five years of the three
persons who have been nominated by the Board of Directors to stand for election
as Class B and Class C Directors at the Annual Meeting and the remaining
directors whose terms are continuing until the 2006 or 2007 Annual Meeting
appear below.
The Board has determined that the Board members with the exception of
Howard Pinsley and Barry Pinsley are independent in accordance with the listing
standards of the American Stock Exchange.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR THE ELECTION OF THE FOLLOWING
NOMINEES FOR CLASS B DIRECTOR AND CLASS C DIRECTORS.
NOMINEE FOR CLASS B DIRECTOR -- SERVING FOR
A TWO YEAR TERM EXPIRING AT THE 2007 ANNUAL MEETING
Period to
Offices and Date
Positions Held Served as
Name Age with Company Principal Occupation or Employment Director
---- --- ------------ ---------------------------------- --------
Barry Pinsley (1)........... 63 Non-Executive Officer Certified Public Accountant who for five 1994
years acted as a consultant to the Company
prior to his election as a Vice President-
Special Projects on March 25, 1994. On
December 6, 1997, Mr. Pinsley was elected
to the position of Vice President-Investor
Relations and Human Resources, from which
he resigned on June 9, 1998. Mr. Pinsley
has been a practicing Certified Public
Accountant in Saratoga Springs, New York
since 1975, and is currently semi-retired.
NOMINEES FOR CLASS C DIRECTORS -- SERVING FOR A
THREE YEAR TERM EXPIRING AT THE 2008 ANNUAL MEETING
Period to
Offices and Date
Positions Held Served as
Name Age with Company Principal Occupation or Employment Director
---- --- ------------ ---------------------------------- --------
Paul J. Corr................ 61 -- Certified Public Accountant and a Professor 1992
of Business, Skidmore College, in Saratoga
Springs, NY, since 1981, currently holding
the position of Associate Professor; Mr. Corr
is also a shareholder in the Latham, New York
accounting firm of Rutnik, Matt & Corr, P.C. and
a principal in Capital Financial Advisors, LLC
since 2003.
Michael W. Wool (2)......... 59 -- Attorney engaged in private practice 1990
of law and Senior Partner since 1982 in
the law firm of Langrock, Sperry & Wool,
with offices in Burlington, VT and
Middlebury, VT. Mr. Wool also serves on
the board of the New England Board of
Higher Education and the Burlington Boys
and Girls Club.
2
CLASS A DIRECTORS -- SERVING FOR A
THREE YEAR TERM EXPIRING AT THE 2006 ANNUAL MEETING
Period to
Offices and Date
Positions Held Served as
Name Age with Company Principal Occupation or Employment Director
---- --- ------------ ---------------------------------- --------
Howard Pinsley (1).......... 65 President, Chief Howard Pinsley for more than the past five 1992
Executive Officer years has been employed by the Company
and Chairman of on a full-time basis as Program Director
the Board prior to being elected Vice President-
Special Power Supplies on April 3, 1992.
On December 6, 1996, Mr. Pinsley was
elected to the position of Executive Vice
President. On June 9,1998 he was elected
to the positions of President and Chief
Operating Officer. Subsequently he became
Chief Executive Officer and Chairman of
the Board.
Alvin O. Sabo............... 62 -- Attorney engaged in private practice of law 1999
and Senior Partner of the law firm of
Donohue, Sabo, Varley & Armstrong, P.C.
in Albany, NY since 1980. Prior to that
position, he was Assistant Attorney General,
State of New York, Department of Law
for eleven years.
Carl Helmetag............... 57 -- President and CEO of UVEX Inc. in 1999
Providence, RI. From 1996 to 1999, he was
President and CEO of HEAD USA Inc.
Prior to that position, Mr. Helmetag was
Executive Vice President and then President
at Dynastar Inc. from 1978 to 1996. He is
an MBA graduate from The Wharton School
of Business, University of Pennsylvania.
CONTINUING CLASS B DIRECTOR -- SERVING FOR A
THREE YEAR TERM EXPIRING AT THE 2007 ANNUAL MEETING
Period to
Offices and Date
Positions Held Served as
Name Age with Company Principal Occupation or Employment Director
---- --- ------------ ---------------------------------- --------
Seymour Saslow.............. 84 -- Mr. Saslow was Senior Vice President from 1992
1992 until December 31, 1999. From 1973
until being elected Senior Vice President, he
served as Vice President. He joined the company
on July 22, 1952. Mr. Saslow graduated from the
City College of New York in 1944 with a degree
in electrical engineering and is a senior member
of the Institute of Electrical and Electronics
Engineers Inc. He holds many patents and serves
on the board of several charitable organizations.
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(1) Barry Pinsley and Howard Pinsley are cousins.
(2) Mr. Wool's law firm performed legal services for the Company during the
fiscal year ended June 30, 2005 and may perform additional services during
the current fiscal year in connection with the Company's ESOP. See
"Certain Relationships and Related Transactions."
Howard Pinsley serves as a director of All American Semiconductor, Inc.
None of the other directors holds a directorship in any other company with a
class of securities registered pursuant to Section 12 of the Securities Exchange
Act of 1934 or subject to the requirements of Section 15(d) of the Securities
Act of 1933 or any company registered as an Investment Company under the
Investment Company Act of 1940.
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The only individuals currently considered executive officers of the
Company not identified above are:
Katrina L. Sparano, 34, Assistant Treasurer and Principal Accounting
Officer of the Company since November 12, 2004. Ms. Sparano is a Certified
Public Accountant. Prior to joining the Company on July 29, 2004, she was the
Assistant Controller for Cambridge Heart, Inc.
Peggy A. Murphy, 47, Secretary of the Company since December 11, 1998. She
has been employed by the Company as Director of Human Resources since October
1998.
David A. O'Neil, 40, Treasurer and Principal Financial Officer since
January 4, 2000. Mr. O'Neil is a Certified Public Accountant who, prior to
joining the Company, was a Senior Manager at the accounting firm of KPMG LLP.
The terms of office of Mrs. Peggy A. Murphy, Mr. David A. O'Neil, and Mrs.
Katrina Sparano are until the next annual meeting of the Board of Directors
unless successors are sooner appointed by the Board of Directors. The term of
office of Mr. Howard Pinsley is subject to his employment agreement with the
Company. See "Employment Contracts and Termination of Employment."
BOARD OF DIRECTORS MEETINGS AND COMMITTEES
During the Company's fiscal year ended June 30, 2005, the Board of
Directors held a total of seven meetings, and each director then in office
attended at least 75% of such meetings. Under the policies of the Board,
Directors are expected to attend regular Board meetings, Board committee
meetings, as applicable, and the annual stockholder meeting. All of the
Company's directors attended the 2004 Annual Meeting.
The Board has a standing Audit Committee whose members are Paul J. Corr,
Chairman, Alvin O. Sabo and Carl Helmetag. The functions of this Committee
include reviewing the engagement of the independent accountants, the scope and
timing of the audit and any non-audit services to be rendered by the independent
accountants, reviewing with the independent accountants and management the
Company's policies and procedures with respect to internal auditing, accounting
and financial controls, and reviewing the report of the independent accountants
upon completion of its audit. During the fiscal year ended June 30, 2005, the
Audit Committee held five meetings, and each Committee member attended at least
75% of such meetings.
The Board has a standing Nominating Committee whose members are Carl
Helmetag, Chairman, Michael Wool, and Paul J.Corr. The function of this
Committee is to identify and recommend to the Board individuals for nomination
to fill vacancies in, and for renomination to, positions as Directors of the
Corporation. During fiscal year ended June 30, 2005, the Nominating Committee
held one meeting and each committee member attended the meeting.
The Board has determined that all of the members of the Audit Committee
and the Nominating Committee meet the independence criteria for audit committee
and nominating committee members as set forth in the listing standards of the
American Stock Exchange. The Board has further determined that Mr. Corr
qualifies as an audit committee financial expert in accordance with the rules of
the United States Securities and Exchange Commission ("SEC").
The Board has a standing Stock Option Committee whose current members are
Paul Corr, Chairman, Howard Pinsley, and Barry Pinsley. The functions of this
Committee include determining to whom, and the time or times at which, options
will be granted, the number of shares of common stock that underly each option
and the exercise price and vesting schedule for options granted pursuant to the
Company's 2000 Stock Option Plan. During the fiscal year ended June 30, 2005,
the Stock Option Committee held two meetings and each committee member attended
such meetings.
COMPENSATION OF DIRECTORS
Directors of the Company receive an annual fee in the amount of $15,000
for being a member of the Board of Directors. Each Director who also serves as a
member of the Audit Committee is compensated an additional annual fee of $5,000.
Each director who serves as a member of the Succession Committee or the Mergers
and Acquisition Committee is compensated an additional $2,500 for each
committee. These fees are paid monthly to the Directors. Executive officers who
also serve on the Company's Board of Directors do not receive director's fees.
4
Directors are also eligible to receive stock options under the 2000 Stock
Option Plan at the discretion of the Stock Option Committee. The Stock Option
Committee consists of three appointed board members. At June 30, 2005, members
of the Board of Directors held the following number of unexercised options
granted under the Plan:
Name Number of Options Exercise Price Range
---- ----------------- --------------------
Seymour Saslow 2,000 $17.95 - 22.50
Barry Pinsley 2,000 17.95 - 22.50
Michael W. Wool 2,000 17.95 - 22.50
Paul J. Corr 600 22.50
Alvin O. Sabo 1,900 17.95 - 22.50
Carl Helmetag 1,200 18.50 - 22.50
Howard Pinsley 8,000 17.95 - 22.50
The above options have exercise dates ranging from March 1, 2003 and expiring on
August 20, 2014.
COMPENSATION OF EXECUTIVE OFFICERS
The following table summarizes the annual compensation for each of the
fiscal years ended June 30, 2005, June 30, 2004, and June 30, 2003 received by
the Company's Chief Executive Officer (or acting in a similar capacity) and the
other highest paid executive officers of the Company that received over $100,000
in total compensation as of June 30, 2005.
SUMMARY COMPENSATION TABLE
Long Term
Compensation
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Securities
Name and Annual Compensation Underlying All Other
Principal Position Fiscal Year Salary Bonus Options (#) Compensation(1)
------------------ ----------- ------ ----- ----------- ---------------
Howard Pinsley 2005 $191,976 $20,000 2,000 $ 7,681
President and 2004 $190,120 $20,000 0 $34,826
Chief Executive Officer 2003 $180,404 $12,500 2,000 $19,109
David A. O'Neil 2005 $113,830 $12,500 800 $ 2,932
Treasurer and Principal 2004 $112,250 $12,500 0 $13,101
Financial Officer 2003 $105,490 $10,000 800 $10,738
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(1) Represents (a) the cash and market value of the shares allocated for the
respective fiscal years under the Company's ESOP to the extent to which
each named executive officer is vested, and the Company's matching
contribution under the 401K plan.
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OPTION GRANTS IN LAST FISCAL YEAR
The following table sets forth information concerning the grant of stock
options to the named executive officers during the year ended on June 30, 2005.
Potential
Realizable
Value at
Assumed Annual
Number of Percent of Rates of Stock
Securities Total Options Price Appreciation
Underlying Granted to Exercise for Option Term (1)
Options Employees in Price Expiration -----------------------
Name Granted Fiscal Year ($/SH) Date 5% ($) 10% ($)
---- ------- ----------- ------ ---- -----------------------
Howard Pinsley 2,000 12.9% $22.50 2014 73,300 116,718
David A. O'Neil 800 5.2% $22.50 2014 29,320 46,687
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(1) Amounts reflect certain assumed rates of appreciation set forth in the
Commission's executive compensation disclosure rules. Actual gains, if
any, on stock option exercises will depend on future performance of the
Common Stock. No assurance can be made that the amounts reflected in these
columns will be achieved. The values in these columns assume that the fair
market value on the date of grant of each option was equal to the exercise
price thereof.
The following table sets forth information concerning unexercised options
held on June 30, 2005 by the named executive officers:
AGGREGATED OPTIONS AT FISCAL YEAR-END AND FISCAL YEAR-END OPTION VALUES
Number of Securities Value of Unexercised
Shares Underlying Unexercised In-the-Money
Acquired Options at Options at
On Value Fiscal Year-End (#) Fiscal Year-End ($)
Name Exercise Realized Exercisable/Unexercisable Exercisable/Unexercisable
---- -------- -------- ------------------------- -------------------------
Howard Pinsley 0 0 6,000/2,000 72,200/16,600
David A. O'Neil 0 0 1,600/800 18,600/6,640
In accordance with the 2000 Stock Option Plan the above options have exercise
dates that range from March 1, 2003 through and expiring on August 20, 2014.
INSURANCE
The executive officers and directors of the Company can elect to be
covered under the company-sponsored health plans, which do not discriminate in
favor of the officers, or directors of the Company and which are available
generally to all employees. In addition, the executive officers are covered
under a group life plan, which does not discriminate, and is available to all
employees.
The Company maintains insurance coverage, as authorized by Section 726 of
the New York Business Corporation Law, providing for (a) reimbursement of the
Company for payments it makes to indemnify officers and directors of the
Company, and (b) payment on behalf of officers and directors of the Company for
losses, costs and expenses incurred by such individuals in any actions.
EMPLOYEE RETIREMENT PLAN AND TRUST
Under the Company's ESOP, approved by the Board of Directors on June 2,
1989, effective July 1, 1988, all non-union employees of the Company, including
the Company's executive and non-executive officers are eligible to participate.
The ESOP is a non-contributory plan, which is designed to invest primarily in
shares of common stock of the Company. Certain technical amendments not
considered material were adopted effective as of June 10, 1994, July 1, 2003,
and July 1, 2005.
Of the 230,120 shares of common stock of the Company allocated to
participants of the ESOP as of June 30, 2005, 10,883 shares were allocated to
Howard Pinsley, 2,418 shares were allocated to David A. O'Neil and 2,582 shares
were allocated to Barry Pinsley.
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EMPLOYMENT CONTRACTS AND TERMINATION OF EMPLOYMENT
The Company entered into an agreement with Howard Pinsley, President and
CEO effective July 1, 2002. The contract allows Mr. Pinsley upon his resignation
or termination to become a non-executive officer of the Company for a period of
thirty-six months. In consideration for services to be provided by Mr. Pinsley
for the equivalent of two days a month after his resignation or termination, and
to perform duties as reasonably requested by the Company, he will receive full
benefits plus $15,000 per month for the first three months, and $4,333 per month
for the next thirty-three consecutive months. This agreement expires on December
31, 2005.
AUDIT COMMITTEE REPORT
The Audit Committee of the Board of Directors (the "Committee") is
comprised of three independent directors and operates under a written charter,
adopted by the Board on May 13, 2005, which is attached as Exhibit A to this
Proxy Statement.
In fulfilling its responsibilities, the Committee has reviewed and
discussed the Company's audited consolidated financial statements for the fiscal
year ended June 30, 2005 with management and the independent auditors.
The Committee has discussed with the independent auditors the matters
required to be discussed by Statement on Auditing Standards No. 61,
Communication with Audit Committees. In addition, the Committee has received and
reviewed the written disclosures and the letter from the independent auditors
required by Independence Standard No.1, Independence Discussions with Audit
Committees, and has discussed with the auditors the auditors' independence.
The Committee considered and concluded that the provision of non-audit
services by the independent auditors was compatible with maintaining their
independence.
In reliance on the reviews and discussions referred to above, the
Committee recommended to the Board of Directors that the audited consolidated
financial statements referred to above be included in the Company's Annual
Report on Form 10-K for the fiscal year ended June 30, 2005.
Audit Committee:
Paul J. Corr, Chairman
Carl Helmetag
Alvin O. Sabo
NOMINATING COMMITTEE
The Nominating Committee of the Board of Directors (the "Nominating
Committee") is comprised of three independent directors and operates under a
written charter, which was most recently filed with the SEC as Exhibit B to the
Company's Proxy Statement for its Annual Meeting held on November 12, 2004. A
copy of the charter is available on the Company's website, www.espey.com, under
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the tab "Investors" by requesting a copy of an SEC report and then clicking on
the Definitive Proxy Statement filed October 12, 2004.
The Nominating Committee will review the present needs of the Board and
establish criteria as to particular qualifications in terms of background and
experience that could meet such needs. At a minimum, the Nominating Committee
believes that nominees for Directors should have either experience in the
industry in which the Company engages or professional, business or academic
qualifications that differ from existing members of the Board and could augment
the aggregate expertise possessed by Board members. The Company further believes
that all nominees should be able to make a contribution to the Board that will
enhance the development and growth of the Company business and shareholder
value; devote adequate time to service as a Director; and work well with other
Board members in a collegial manner.
The Nominating Committee evaluates prospective nominees identified on its
own initiative or referred to it by other Board members, management,
shareholders or external sources and all self nominated candidates. The
Nominating Committee uses the same criteria for evaluating candidates nominated
by shareholders and self nominated as it does for those proposed by other Board
members, management and search companies.
The Nominating Committee will consider bona fide recommendations by
shareholders as to potential Director nominees, who meet the above standards. A
shareholders wishing to submit such a recommendation should send a letter,
postmarked no later than 120 days prior to the date on which the Company annual
meeting was held during the prior year, to the Secretary of the Company. The
letter must identify its writer as a shareholders of the Company, provide
evidence of the writer's stock ownership and provide:
o The name, address, telephone number and social security number of
the candidate to be considered;
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o A description of understandings, contractual, business or familial
relationships between the shareholders and the candidate, if any,
and an unexecuted written consent of the candidate to serve as a
director of the Company, if nominated and elected;
o The candidate's resume and at least three references;
o A statement of the candidate's qualifications to serve on the Board
of Directors and specified Board committees which shall include an
explanation as to how elements of the candidate's background and
experience would be a benefit to the Company and its business.
All candidates recommended to the Nominating Committee must meet the
independence standards of the American Stock Exchange and the definition of
"independent director" in the Company by-laws.
All nominees for election at this Annual Meeting were previously elected
by the shareholders and are standing for re-election.
SHAREHOLDER COMMUNICATIONS WITH THE BOARD
Mail can be addressed to Directors in care of the Office of the Secretary,
Espey Mfg. & Electronics Corp. 233 Ballston Avenue, Saratoga Springs, New York
12866. At the direction of the Board of Directors, all mail received will be
opened and screened for security purposes. The mail will then be logged in. All
mail, other than trivial or obscene items, will be forwarded. Trivial items will
be delivered to the Directors at the next scheduled Board meeting. Mail
addressed to a particular Director will be forwarded or delivered to that
Director. Mail addressed to "Outside Directors" or "Non-Management Directors"
will be forwarded or delivered to the Chairman of the Audit Committee. Mail
addressed to the "Board of Directors" will be forwarded or delivered to the
Chairman of the Board.
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS
The following table sets forth information regarding ownership of the
Company's outstanding Common Stock as of September 30, 2005, by each person or
group who is known to the Company to be the beneficial owner of more than five
percent of the outstanding shares of Common Stock.
Title Name and Address of Amount and Nature Percent
Class Beneficial Owner of Beneficial Ownership of Class
----- ---------------- ----------------------- --------
Common Stock Franklin Advisory Services, LLC 78,000 - Direct (1) 6.77%
777 Mariners Island Blvd
P.O. Box 7777 San Mateo, CA 94403-7777
Common Stock Espey Mfg. & Electronics Corp. 369,738 - Direct (2) 32.11%
Employee Retirement Plan and Trust
233 Ballston Ave
Saratoga Springs, NY 12866
Common Stock Advisory Research, Inc. 81,100 - Direct (3) 8.02%
180 North Stetson St.
Suite 5780
Chicago, IL 60601
Common Stock Howard Pinsley, 48,634-Direct (4) 5.14%
233 Ballston Avenue 10,883-Indirect (4)
Saratoga Springs, NY 12866
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(1) The information as to the number of shares of Common Stock and the percent
of class ownership of the Company that may be deemed beneficially owned by
Franklin Advisory Services, LLC ("Franklin") is from the Schedule 13G,
dated February 4, 2004 filed with the Securities and Exchange
Commission(the "SEC"). The Franklin statement indicated that Franklin's
investment "advisory subsidiaries," have sole voting and dispositive power
with respect to all of the shares of Common Stock shown in the table above
for Franklin. The Franklin statement indicates that the Common Stock set
forth in the table is beneficially owned by one or more open or closed-end
investment companies or other managed accounts which are advised by direct
and indirect Franklin investment advisory subsidiaries. The statement also
indicated that it filed the Schedule 13G on behalf of itself and
Franklin's principal shareholders, Charles B. Johnson and Rupert H.
8
Johnson, Jr. (the "Principal Shareholders"), all of which are deemed
beneficial owners of the shares of Common Stock shown in the above table
for Franklin. Franklin and the Principal Shareholders disclaim any
economic interest or beneficial ownership in any of the Common Stock shown
in the table for Franklin.
(2) The shares of common stock owned by the ESOP Trust are voted by the
Trustees in the manner directed by the ESOP Committee. The Trustees,
Howard Pinsley and Peggy A. Murphy, are the Chairman of the Board, Chief
Executive Officer and President of the Company and Secretary of the
Company, respectfully. The ESOP Committee, which is appointed by the Board
of Directors, is comprised of Mr. Pinsley, Ms. Murphy, Director Barry
Pinsley, Director Michael W. Wool and David A. O'Neil, the Treasurer and
Principal Financial Officer of the Company. As to shares that have been
allocated to the accounts of participants in the ESOP, the Trustees are
directed by the Committee to vote such shares in accordance with
instructions of the participants. As to unallocated shares and allocated
shares for which voting instructions have not been received from
participants, the Committee instructs the Trustee to vote such votes
proportionately to the shares as to which voting instructions have been
received. As of September 30, 2005, 219,738 shares were allocated to the
accounts of participants and 150,000 shares were unallocated.
(3) The information as to the number of shares of Common Stock and the percent
of class ownership of the Company that may be deemed beneficially owned by
advisory clients of Advisory Research, Inc. ("Advisory") is from the
Schedule 13G dated February 10, 2005 filed with the SEC. Advisory, a
registered investment advisor, is deemed to have beneficial ownership of
81,100 shares of the Company's Common Stock as of February 10, 2005, all
of which shares are held in Advisory investment companies, trusts and
accounts. Advisory, in its role as investment advisor and/or manager,
reported sole voting power with respect to 81,100 shares.
(4) This information is from Form 4 dated August 11, 2005. Indirect shares
represent stock being held in the Company ESOP. Direct shares include
options to acquire 6,000 shares of Common Stock which are exercisable
within 60 days.
SECURITY OWNERSHIP OF MANAGEMENT
The following information is furnished as of September 30, 2005 (unless
otherwise indicated), as to each class of equity securities of the Company
beneficially owned by all Directors and Executive Officers and by Directors and
Executive Officers of the Company as a Group:
Title Name and Address of Amount and Nature Percent
Class Beneficial Owner of Beneficial Ownership of Class
----- ---------------- ----------------------- --------
Common Stock Paul J. Corr ................ 2,600-Direct (1) *
Common Stock Carl Helmetag ............... 4,050-Direct (1) *
Common Stock Peggy A. Murphy ............. 1,200-Direct (1) *
3,702-Indirect (2)
Common Stock David A. O'Neil ............. 4,000-Direct (1) *
2,418-Indirect (2)
Common Stock Barry Pinsley ............... 31,230-Direct (1) 2.94%
2,582-Indirect (2,3)
Common Stock Howard Pinsley .............. 48,634-Direct (1) 5.14%
10,883-Indirect (2)
Common Stock Alvin O. Sabo ............... 1,600-Direct (1) *
Common Stock Seymour Saslow............... 9,059-Direct (1) *
Common Stock Michael W. Wool.............. 1,600-Direct (1) *
Common Stock Officers and Directors....... 103,973-Direct (1) 10.60%
as a Group (13 persons) 19,585-Indirect (2,3)
----------
* Less than one percent
(1) Direct shares include options to acquire shares which are exercisable
within 60 days as follows:
9
Name of Exercisable Name of Exercisable
Beneficial Owner Options Beneficial Owner Options
---------------- ------- ---------------- -------
Carl Helmetag 800 Alvin O. Sabo 1,400
Peggy A. Murphy 1,200 Seymour Saslow 1,500
David A. O'Neil 1,600 Michael W. Wool 1,500
Howard Pinsley 6,000
(2) Includes shares allocated to named director or officer as of June 30, 2005
as a participant in the Company's ESOP. Each such person has the right to
direct the manner in which such shares allocated to him or her are to be
voted by the ESOP Trustee.
(3) Excludes 2,000 shares owned by the spouse of Barry Pinsley. Beneficial
ownership of the shares is disclaimed by Mr. Pinsley.
There are no arrangements known to the Company, the operation of which may
at a subsequent date, result in change of control of the Company.
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
The Company's ESOP Trust owns 369,738 shares of the Company's common stock
as of September 30, 2005, of which 219,738 were allocated to participants in the
ESOP. On July 15, 2005, the Company sold an additional 150,000 shares of its
common stock to the ESOP Trust for an aggregate purchase price of $4,335,000, or
$28.90, per share. The ESOP borrowed from the Company an amount equal to the
purchase price. The loan will be repaid in fifteen (15) equal annual
installments of principal and the unpaid balance will bear interest at a fixed
rate of 6.25% per annum, the "prime rate" as quoted in The Wall Street Journal
on the date of closing. The Board of Directors of the Company had approved a
purchase price per share equal to a 5% discount on the average trading price of
the common stock on the American Stock Exchange on the date before closing, but
in no event greater than the fair market value of the stock as determined by the
ESOP trustees, in reliance upon a "fairness opinion" from an independent
valuation firm retained by the ESOP.
Each year, the Company makes contributions to the ESOP which are used to
make loan interest and principal payments to the Company. Following each payment
of principal on the loan, a portion of the unallocated shares held by the ESOP
are allocated to participants. Officers of the Company, including Howard Pinsley
who is also Chairman of the Board, are eligible to participate in the ESOP and
to have shares and cash allocated to their accounts and distributed to them in
accordance with the terms of the ESOP.
The Company paid the law firm of Langrock, Sperry & Wool, of which Michael
W. Wool, a director of the Company, is a partner, a total of $72,979 for legal
services during the fiscal year ended June 30, 2005. $23,750 of the payment of
$72,979 was held in trust by Mr. Wool's firm and subsequently paid to other
service providers relating to the ESOP transaction described above.
CODE OF ETHICS
The Company has adopted a Code of Ethics which is available on our website
at www.espey.com.
-------------
BOARD OF DIRECTORS' PROPOSAL TO RATIFY
APPOINTMENT OF INDEPENDENT PUBLIC ACCOUNTANTS
The Audit Committee has selected Rotenberg & Company, LLP as the company's
independent public accountants for the fiscal year ending June 30, 2006. The
Audit Committee determined not to re-engage KPMG LLP, which served as the
Company's independent accountants for the fiscal years ending June 30, 2004 and
June 30, 2005. There were no disagreements with KPMG LLP on any matter of
accounting principles or practices, financial statement disclosure, or auditing
scope or procedure. Rather, the Audit Committee determined that it was in the
Company's best interest to seek audit services from a regional, as opposed to
one of the "big four" accounting firms.
Unless otherwise specified by the shareholders, the shares represented by
their properly executed proxies will be voted for ratification of the
appointment of Rotenberg & Company, LLP as independent accountants for the
fiscal year ending June 30, 2006. The Company is advised by said firm that
neither the firm nor any of its partners now has, or during the past three years
had, any direct financial interest or material indirect financial interest or
any connection with the Company.
10
A representative of Rotenberg & Company, LLP is expected to be present at
the Annual Meeting with the opportunity to make a statement if he or she desires
to do so and to be available to respond to appropriate questions from the
shareholders. KPMG LLP has been invited to send a representative to the Annual
Meeting.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR RATIFICATION OF THE
APPOINTMENT OF ROTENBERG & COMPANY, LLP AS INDEPENDENT PUBLIC ACCOUNTANTS FOR
THE COMPANY FOR FISCAL YEAR ENDING JUNE 30, 2006.
The Company's Audit Committee has had policies and procedures for
pre-approving all audit and non-audit work performed by KPMG LLP for the fiscal
year ended June 30, 2004 and 2005. Specifically, the Audit Committee has
pre-approved the use of KPMG LLP for performance of audit services and detailed,
specific types of services within the following categories of audit-related and
tax services. In each other case, the Audit Committee requires management to
obtain specific pre-approval from the Audit Committee for any other work to be
performed by its outside auditors.
The aggregate fees billed for professional services by KPMG LLP in the
fiscal years ended June 30, 2004 and 2005, respectively, for these various
services were:
TYPES OF FEES 2005 2004
---- ----
Amount Billed Amount Billed
------------- -------------
(1) Audit Fees $ 79,850 $ 97,515
(2) Audit Related Fees None 6,100
(3) Tax Fees 13,450 12,580
(4) All Other Fees None None
-------- --------
Total $ 93,300 $116,195
======== ========
In the above table, in accordance with the Securities and Exchange
Commission's definitions and rules, "audit fees" are fees the Company paid for
professional services for the audit of the Company's financial statements
included in Form 10-K and review of financial statements included in Form 10-Qs,
and for services that are normally provided by the accountant in connection with
statutory and regulatory filings or engagements; "audit-related fees" are fees
for assurance and related services that are related to the performance of the
audit of the Company's employee benefit plan financial statements; "tax fees"
are fees for tax compliance, tax advice and tax planning; and "all other fees"
are fees for any services not included in the first three categories. 100% of
the services set forth in sections (1) through (3) above were approved by the
Audit Committee in accordance with its charter.
COMPLIANCE WITH SECTION 16(a) OF THE SECURITIES EXCHANGE ACT
Section 16(a) of the Securities Exchange Act of 1934, as amended,
generally requires the Company's directors, executive officers, and persons who
own more than ten percent of a registered class of the Company's equity
securities, to file reports of beneficial ownership and changes in beneficial
ownership with the Securities and Exchange Commission. Based solely upon its
review of copies of such reports received by it, or upon written representations
obtained from certain reporting persons, the Company believes that its officers,
directors, and stockholders who own more than ten percent of the Company's
equity securities have complied with all Section 16(a) filing requirements,
except that Director Carl Helmetag did not file on a timely basis Forms 4 with
respect to each of the following transactions: (i) the sale of 500 shares of
common stock on December 2, 2003, ultimately reported on Form 4 filed July 12,
2005; (ii) the purchase of 200 shares on May 18, 2005, the purchase of 300
shares on May 18, 2005 and the purchase of 250 shares on June 6, 2005, all
ultimately reported on Form 4 filed July 11, 2005.
ANNUAL REPORTS
The Annual Report of the Company to the shareholders for the fiscal year
ended June 30, 2005, including financial statements, accompanies this Proxy
Statement. Such financial statements are not incorporated herein by reference.
A copy of the Company's Annual Report on Form 10-K (including financial
statements and schedules thereto) for the fiscal year ended June 30, 2005 filed
with the Securities and Exchange Commission will be provided without charge upon
the written request of shareholders to Espey Mfg. & Electronics Corp.,
attention: Investor Relations, 233 Ballston Avenue, Saratoga Springs, New York
12866. The Company's Form 10-K for the fiscal year ended June 30, 2005 can also
be viewed electronically through a link at the Company's website at
www.espey.com.
-------------
11
SHAREHOLDER PROPOSALS
Any shareholder proposal which may be a proper subject for inclusion in
the proxy statement and for consideration at the 2006 Annual Meeting must be
received by the Company at its principal executive office no later than June 17,
2006, if it is to be included in the Company's 2006 proxy statement and proxy
form. In addition, the Company's bylaws outline procedures that a shareholder
must follow to nominate directors or to bring other business before
shareholders' meetings.
PROXY SOLICITATION
The solicitation of the enclosed proxy is being made on behalf of the
Board of Directors and the cost of preparing and mailing the Notice of Meeting,
Proxy Statement and form of proxy to shareholders is to be borne by the Company.
By Order of the Board of Directors,
/s/ Howard Pinsley
HOWARD PINSLEY
President, Chief Executive Officer
and Chairman of the Board
October 24, 2005
Saratoga Springs, New York
12
APPENDIX A Exhibit A
ESPEY MFG. & ELECTRONICS CORP.
AUDIT COMMITTEE CHARTER
-----------------------
Purpose
The primary purpose of the Audit Committee (the "Committee") is to assist
the Board of Directors (the "Board") of Espey Mfg. & Electronics Corp. (the
"Company") in fulfilling its oversight responsibilities by
o Overseeing management's conduct of the Company's financial reporting
process and systems of internal accounting and financial controls;
o Monitoring the independence and performance of the Company's outside
auditors; and
o Providing an avenue of communication among the outside auditors,
management and the Board.
In discharging its oversight role, the Committee is empowered to
investigate any related matter brought to its attention with full access to all
books, records, facilities and personnel of the Company and the power to retain
outside counsel, auditors or other experts for this purpose.
The Committee shall review the adequacy of this Charter on an annual
basis, and recommend to the Board any necessary amendments.
Membership and Meetings
The Committee is appointed by the Board and shall be comprised of not less
than three members at all times, each of whom must be independent of management
and the Company and otherwise meet the requirements of applicable American Stock
Exchange rules and regulations.
Accordingly, all of the members will be directors:
1. Who have no material relationship to the Company that may interfere
with the exercise of their independence from management and the
Company; and
2. Who are financially literate or who become financially literate
within a reasonable period of time after appointment to the
Committee. In addition, at least one member of the Committee will
have such accounting or related financial management expertise in
order to qualify as an "audit committee financial expert" in
compliance with the criteria established by the SEC.
The Board shall name a chair of the Committee, who shall be responsible
for preparing an agenda in advance of each meeting. A majority of the members of
the Committee shall constitute a quorum. The Committee shall maintain minutes or
other records of its activities, and shall report to the full Board concerning
its activities.
The Committee shall meet as frequently as circumstances dictate, but no
less than four times annually. As part of its job to foster open communication,
the Committee should meet at least annually separately with each of management
and the outside auditors to discuss any matters that the Committee believes
should be discussed privately.
Key Responsibilities
The Committee's job is one of oversight and it recognizes that the
Company's management is responsible for preparing the Company's financial
statements and that the outside auditors are responsible for auditing those
financial statements. Additionally, the Committee recognizes that financial
management, including the internal accounting and audit staff, as well as the
outside auditors, have more time, knowledge and more detailed information on the
Company than do Committee members; consequently, in carrying out its oversight
responsibilities, the Committee is not providing any expert or special assurance
as to the Company's financial statements or any professional certification as to
the outside auditor's work.
The following functions shall be the common recurring activities of the
Committee in carrying out its oversight function. The Committee shall:
o Review with management and the outside auditors the Company's
audited financial statements, review and consider with the outside
auditors the matters required to be discussed by Statement of
Auditing Standards ("SAS") No. 61, and determine whether to
recommend to the Board that the financial statements be included in
the Company's Annual Report on Form 10-K to be filed with the SEC
(or the Annual Report to Shareholders if distributed prior to the
filing of Form 10-K).
A-1
o Review with management and the outside auditors the Company's
interim financial results to be included in the Company's quarterly
reports on Form 10-Q, prior to their filing with the SEC, and the
matters required to be discussed by SAS No. 61.
o Review the independence of the outside auditors and in connection
therewith:
(i) request from the outside auditors annually, a formal written
statement delineating all relationships between the auditor
and the Company consistent with Independence Standards Board
Standard Number 1;
(ii) discuss with the outside auditors any such disclosed
relationships and their impact on the outside auditors
independence; and
(iii) recommend that the Board take appropriate action, if
necessary, to oversee the independence of the outside
auditors.
o Review and evaluate the proposals submitted by prospective auditors
and recommend appointment of the Company's outside auditors and the
Board's submission of their appointment to the shareholders for
ratification.
o Oversee the work performed by the Company's outside auditors,
evaluate the performance of such auditors and discharge such
auditors if circumstances warrant.
o Review and pre-approve any non-audit services to be performed by the
independent outside auditors.
o In consultation with management and the outside auditors, review the
integrity of the Company's financial reporting processes and the
internal control structure (including disclosure controls and
internal control over financial reporting).
o Review potential conflicts of interest involving members of the
Board and management and review and approve all related-party
transactions, defined as those transactions required to be disclosed
under Item 404 of Regulation S-K.
o Establish procedures for the receipt, retention and treatment of
complaints regarding accounting, internal accounting controls or
auditing matters and procedures for the confidential, anonymous
submission by Company employees of any concerns related to the
Company's ethics policies, legal issues and accounting or audit
matters.
o Prepare an annual report containing the information prescribed by
the SEC for inclusion in the Company's proxy statement in connection
with the annual meeting of shareholders.
A-2
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
ESPEY MFG. & ELECTRONICS CORP.
PROXY FOR THE
2005 ANNUAL MEETING OF SHAREHOLDERS
November 18, 2005
COMMON
The undersigned hereby appoints Carl Helmetag and Alvin Sabo as Proxies, each
with the power to appoint his substitute, and hereby authorizes them or any one
of them to represent and to vote, as designated below, all the shares of common
stock of ESPEY MFG. & ELECTRONICS CORP. which the undersigned would be entitled
to vote if personally present at the 2005 Annual Meeting of Shareholders to be
held on November 18, 2005 or any adjournment thereof.
1. TO ELECT ONE CLASS B DIRECTOR TO SERVE FOR A TWO YEAR TERM EXPIRING AT THE
2007 ANNUAL MEETING OR UNTIL HIS SUCCESSOR IS DULY ELECTED AND QUALIFIES.
[_] FOR the nominee listed below [_] WITHHOLD AUTHORITY
(except as marked to the contrary below) to vote for the nominee listed below
BARRY PINSLEY
The Board of Directors recommends a vote FOR this nominee.
2. TO ELECT TWO CLASS C DIRECTORS TO SERVE FOR A THREE YEAR TERM EXPIRING AT
THE 2008 ANNUAL MEETING OR UNTIL THEIR RESPECTIVE SUCCESSORS ARE DULY
ELECTED AND QUALIFY.
[_] FOR the nominee listed below [_] WITHHOLD AUTHORITY
(except as marked to the contrary below) to vote for the nominee listed below
PAUL J. CORR MICHAEL W. WOOL
The Board of Directors recommends a vote FOR these nominees.
INSTRUCTION: To withhold authority to vote for any individual nominee,
mark the "FOR" box above AND write the nominee's name in the space provided
below.
3. TO RATIFY the appointment of Rotenberg & Company, LLP as the independent
public accountants of the Company for fiscal year ending June 30, 2006.
[_] FOR [_] AGAINST [_] ABSTAIN
The Board of Directors recommends a vote FOR this proposal.
No other business may be transacted at the meeting.
------------------------
Please be sure to sign and date | Date |
this Proxy in the box below. | |
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| |
| |
-----------Shareholder sign above----------Co-holder (if any) sign above-------
--------------------------------------------------------------------------------
^ Detach here, sign, date and mail in postage paid envelope provided. ^
ESPEY MFG. & ELECTRONICS CORP.
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THIS PROXY WHEN PROPERLY EXECUTED WILL BE VOTED IN THE MANNER DIRECTED HEREIN BY
THE ABOVE SIGNED SHAREHOLDER.
IF NO DIRECTION IS MADE, THIS PROXY WILL BE VOTED FOR PROPOSALS 1, 2 AND 3.
---
Please sign exactly as name appears hereon. When shares are held by joint
tenants, both should sign. When signing as attorney, executor, administrator,
trustee or guardian, please give full title as such. If a corporation, please
sign in full corporation name by President or other authorized officer. If a
partnership, please sign in partnership name by authorized person.
PLEASE MARK, SIGN, DATE AND RETURN THE PROXY CARD PROMPTLY USING THE ENCLOSED
ENVELOPE.
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IF YOUR ADDRESS HAS CHANGED, PLEASE CORRECT THE ADDRESS IN THE SPACE PROVIDED
BELOW AND RETURN THIS PORTION WITH THE PROXY IN THE ENVELOPE PROVIDED.
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