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
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Check the appropriate box:
[ ] Preliminary Proxy Statement
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[X] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to Section 240.14a-11c or Section 240.14a-12
GRAHAM CORPORATION
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(Name of Registrant as Specified In Its Charter)
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(Name of Person(s) Filing Proxy Statement)
Payment of Filing Fee (Check the appropriate box):
[X] No fee required.
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and 0-11.
(1) Title of each class of securities to which transaction applies:
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(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
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[ ] Fee paid previously with preliminary materials.
[ ] Check box if any part of the fee is offset as provided by Exchange Act Rule
0-11(a)(2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration statement number,
or the Form or Schedule and the date of its filing.
(1) Amount Previously Paid:
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(2) Form, Schedule or Registration Statement No.:
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(4) Date Filed:
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[GRAHAM ENGINEERING ANSWERS LOGO]
GRAHAM CORPORATION
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD JULY 22, 2003
The annual meeting of stockholders of Graham Corporation will be held at
the Rochester Business Alliance (formerly the Industrial Management Council),
930 East Avenue, Rochester, New York 14607-2296, on Tuesday, July 22, 2003, at
10:00 a.m., Eastern Time, for the following purposes, which are more fully
described in the accompanying proxy statement:
1. To elect two Directors.
2. To approve the selection of Deloitte & Touche LLP as our
independent auditors for the fiscal year ending March 31, 2004.
3. To transact such other business as may properly come before the
annual meeting or any adjournment of the annual meeting.
The Board of Directors has fixed the close of business on June 13, 2003 as
the record date for determining the stockholders who are entitled to receive
notice of and to vote at the annual meeting as well as at any adjournments of
the annual meeting.
Stockholders who do not expect to be present at the annual meeting should
complete, sign and date the enclosed proxy card and return it promptly in the
enclosed return envelope. No postage is required for the mailing of proxy cards
within the United States.
By Order of the Board of Directors
/s/ ALVARO CADENA
ALVARO CADENA
President & Chief Executive Officer
Dated: June 27, 2003
[GRAHAM ENGINEERING ANSWERS LOGO]
GRAHAM CORPORATION
20 FLORENCE AVENUE
BATAVIA, NEW YORK 14020
PROXY STATEMENT
We are furnishing this proxy statement to our stockholders in connection
with the solicitation by the Board of Directors of proxies for use at the annual
meeting of stockholders for our fiscal year ended March 31, 2003 ("Fiscal Year
2003"), as well as for use at any adjournment of the annual meeting, for the
following purposes:
- To elect two Directors.
- To approve the selection of Deloitte & Touche LLP as our independent
auditors for our fiscal year ending March 31, 2004 ("Fiscal Year
2004").
- To transact such other business as may properly come before the annual
meeting or any adjournment of the annual meeting.
The annual meeting will be held on Tuesday, July 22, 2003, at 10:00 a.m.,
Eastern Time, at the Rochester Business Alliance (formerly the Industrial
Management Council), which is located at 930 East Avenue, Rochester, New York
14607-2296. This proxy statement and the accompanying form of proxy are being
first mailed to our stockholders on or about June 27, 2003.
RECORD DATE AND SHARES OUTSTANDING
The record date for the annual meeting is June 13, 2003. Our records
indicate that as of June 13, 2003 there were 1,648,249 shares of our common
stock issued and outstanding. If you were a holder of our common stock on June
13, 2003, then you are entitled to one vote at the annual meeting for each share
of our common stock that you held on that date.
PROXY CARDS AND VOTING
If we receive the enclosed proxy, properly executed, in time to be voted at
the annual meeting, the Board of Directors will vote the shares represented by
it in accordance with the instructions marked on the proxy. Executed proxies
without instructions marked on them will be voted FOR each of the nominees for
election as Directors and FOR the ratification of the appointment of Deloitte &
Touche LLP as our independent auditors for Fiscal Year 2004.
Under our bylaws, Directors are elected by a plurality of the votes cast at
the annual meeting. The vote required for approval of any other matter before
the annual meeting is a majority of shares present in person or by proxy and
entitled to vote on the matter. Under Delaware law, the total votes received,
including abstentions and votes on routine matters by brokers holding shares in
"street name" or in some other fiduciary capacity, are counted in determining
the presence of a quorum at the annual meeting. With respect to the election of
Directors, votes may be cast for or withheld from voting for any or all Director
nominees. Votes that are withheld will have no effect on the election of
Directors. Abstentions may be specified on all proposals other than the election
of Directors and will be counted as present for purposes of the matter with
respect to which the abstention is noted. Therefore, under our bylaws and under
Delaware law, assuming the presence of a quorum at the annual meeting, non-votes
by brokers will have no effect on any proposal to be acted upon at the annual
meeting. However, abstentions would have the effect of "no" votes with respect
to ratifying the appointment of Deloitte & Touche LLP as our independent
auditors for Fiscal Year 2004.
1
REVOCABILITY OF PROXIES
Your presence at the annual meeting will not automatically revoke your
proxy. However, you can revoke your proxy at any time prior to its exercise at
the annual meeting by:
- delivering to our corporate secretary a written notice of revocation
prior to the annual meeting;
- delivering to our corporate secretary a duly executed proxy bearing a
later date; or
- attending the annual meeting, filing a written notice of revocation
with our corporate secretary, and voting in person.
Notices of revocation and revised proxies should be sent to our corporate
secretary at the following address: Graham Corporation, Attention: Corporate
Secretary, 20 Florence Avenue, Batavia, New York 14020. In addition, notices of
revocation and revised proxies can be delivered in person to our corporate
secretary or his agents at the annual meeting.
SOLICITATION OF PROXIES
This proxy solicitation is made by the Board of Directors on our behalf,
and we will bear the cost of soliciting proxies. In addition to solicitation by
mail, our Directors, officers and employees, as well as our subsidiaries, may
solicit proxies personally or by telephone or other telecommunication. We will
not compensate our Directors, officers or employees or those of our subsidiaries
for making proxy solicitations on our behalf. We will provide persons holding
shares in their names or in the names of nominees, which in either case are
beneficially owned by others, proxy materials for delivery to those beneficial
owners and will reimburse the record owners for their expenses in doing so.
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The table below sets forth the beneficial ownership of our common stock as
of June 13, 2003 by:
- each person who is known to us, based on reports filed with the
Securities and Exchange Commission, to own beneficially more than 5%
of our common stock;
- each of our "named executive officers" as of that date (See "Executive
Compensation" below);
- each of our Directors and Director nominees who beneficially owns
shares of our common stock; and
- all of our executive officers as of that date and Directors as a
group.
We have calculated beneficial ownership based upon the requirements
promulgated by the Securities and Exchange Commission. Unless otherwise
indicated below in the footnotes to the table, each stockholder named in the
table has sole voting and investment power with respect to all shares shown as
beneficially owned by that stockholder and the designated address of each
individual listed in the table is as follows: Graham Corporation, 20 Florence
Avenue, Batavia, New York 14020.
2
COMMON STOCK OWNERSHIP TABLE
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COMMON STOCK BENEFICIALLY OWNED
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NUMBER OF PERCENTAGE OF
NAME OF BENEFICIAL OWNER SHARES CLASS
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Employee Stock Ownership Plan of Graham Corporation 108,968(3) 6.6%
Dimensional Fund Advisors, Inc. 107,650(4) 6.5%
Helen H. Berkeley(1) 122,824(5) 7.4%
Jerald D. Bidlack (1) 40,500(6) 2.4%
Alvaro Cadena (1, 2) 77,144(7) 4.6%
William C. Denninger (1) 2,250(8) *
J. Ronald Hansen (2) 31,767(9) 1.9%
Philip S. Hill (1) 22,050(10) 1.3%
H. Russel Lemcke (1) 36,000(11) 2.2%
James R. Lines (2) 14,408(12) *
James J. Malvaso (1) 2,250(13) *
Stephen P. Northrup (2) 37,062(14) 2.2%
Cornelius S. Van Rees (1) 21,300(15) 1.3%
All executive officers and Directors as a group (11 persons) 407,555(16) 22.6%
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* Less than 1%.
(1) Director.
(2) Executive officer.
(3) The employee benefits committee of our Board of Directors administers the
Employee Stock Ownership Plan of Graham Corporation (the "ESOP"). The Board
of Directors has appointed an unrelated corporate trustee for the ESOP. The
employee benefits committee instructs the ESOP trustee regarding investment
of funds contributed to the ESOP. Each member of the employee benefits
committee disclaims beneficial ownership of the shares held in the ESOP.
The ESOP trustee must vote all allocated shares held in the ESOP in
accordance with the instructions of the participating employees.
Unallocated shares held in the suspense account are voted by the ESOP
trustee in a manner calculated to most accurately reflect the instructions
the ESOP trustee has received from participants regarding the allocated
stock, provided such instructions do not conflict with the ESOP trustee's
fiduciary obligations under ERISA. As of June 13, 2003, all 108,968 shares
were allocated to participants under the ESOP and no shares were
unallocated.
(4) Dimensional Fund Advisors, Inc.'s address is 1299 Ocean Avenue, 11th Floor,
Santa Monica, California 90401. Dimensional Fund Advisors, Inc., an
investment advisor registered under Section 203 of the Investment Advisors
Act of 1940, is deemed to have beneficial ownership of 107,650 shares of
our stock as of December 31, 2002, all of which shares are held in the
portfolios of four investment companies, each of which is registered under
the Investment Company Act of 1940. Dimensional Fund Advisors, Inc.
furnishes investment advice to each of the four investment companies but
disclaims beneficial ownership of all of the shares held by the investment
companies and reported in the table above.
(5) Includes 13,800 shares that Mrs. Berkeley may acquire within 60 days upon
exercise of stock options.
(6) Includes 12,250 shares that Mr. Bidlack may acquire within 60 days upon
exercise of stock options.
(7) Includes 38,515 shares that Mr. Cadena may acquire within 60 days upon
exercise of stock options and 1,687 shares held by the ESOP trustee and
allocated to Mr. Cadena's account, as to which Mr. Cadena has sole voting
power but no dispositive power, except in limited circumstances.
(8) Includes 2,250 shares that Mr. Denninger may acquire within 60 days upon
exercise of stock options.
(9) Includes 17,507 shares that Mr. Hansen may acquire within 60 days upon
exercise of stock options and 960 shares held by the ESOP trustee and
allocated to Mr. Hansen's account, as to which Mr. Hansen has sole voting
power but no dispositive power, except in limited circumstances.
(10) Includes 12,250 shares that Mr. Hill may acquire within 60 days upon
exercise of stock options.
(11) Includes 18,000 shares that Mr. Lemcke may acquire within 60 days upon
exercise of stock options.
3
(12) Includes 13,200 shares that Mr. Lines may acquire within 60 days upon
exercise of stock options and 1,114 shares held by the ESOP trustee and
allocated to Mr. Lines' account, as to which Mr. Lines has sole voting
power but no dispositive power, except in limited circumstances.
(13) Includes 2,250 shares that Mr. Malvaso may acquire within 60 days upon
exercise of stock options.
(14) Includes 19,707 shares that Mr. Northrup may acquire within 60 days upon
exercise of stock options and 1,355 shares held by the ESOP trustee and
allocated to Mr. Northrup's account, as to which Mr. Northrup has sole
voting power but no dispositive power, except in limited circumstances.
(15) Includes 12,250 shares that Mr. Van Rees may acquire within 60 days upon
exercise of stock options.
(16) Includes 155,229 shares that members of the group may acquire within 60
days upon exercise of stock options and 5,116 shares allocated to the
named executive officers under the ESOP, as to which the named executive
officers may exercise voting power, but not dispositive power, except in
limited circumstances.
4
PROPOSAL 1:
ELECTION OF DIRECTORS
We currently have eight Directors. Our bylaws provide for a classified
Board of Directors consisting of three classes of Directors, with each class
serving staggered three-year terms. As a result, only a portion of our Board of
Directors is elected each year.
Our bylaws require mandatory retirement at age 75 for directors who become
members of the board for the first time after October 2002. No retirements
pursuant to this provision have occurred during the last fiscal year.
Two of our eight Directors are to be elected by our stockholders at the
annual meeting, each to hold office for a three-year term expiring in 2006 or
until his successor is duly elected and qualified.
The Board of Directors recommends the election of Alvaro Cadena and Helen
H. Berkeley, each of whom is currently a member of the Board of Directors and
each of whom has been nominated by the nominating committee of the Board. Unless
authority to vote for either or both of the nominees is specifically withheld,
proxies in the enclosed form will be voted FOR the election of Mr. Cadena and
Mrs. Berkeley. The Board of Directors does not contemplate that either of the
nominees will be unable to serve as a Director, but if that contingency should
occur before the proxies are voted, the persons named in the enclosed proxy
reserve the right to vote for such substitute nominees as they, in their
discretion, determine.
The table below sets forth information concerning each of our Directors
whose term in office expires at the annual meeting.
NOMINEES PROPOSED FOR ELECTION AS DIRECTORS
FOR A THREE-YEAR TERM EXPIRING IN 2006
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NAME AND BACKGROUND DIRECTOR SINCE TERM EXPIRES
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ALVARO CADENA, age 59, is President and Chief Executive 1993 2003
Officer. Mr. Cadena became Chief Executive Officer on
April 1, 1998.
HELEN H. BERKELEY, age 74, is a private investor. 1998 2003
The table below sets forth information concerning each Director whose term
in office does not expire at the annual meeting.
DIRECTORS WHOSE TERMS DO NOT EXPIRE
AT THE ANNUAL MEETING
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NAME AND BACKGROUND DIRECTOR SINCE TERM EXPIRES
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JERALD D. BIDLACK, age 67, is the President of Griffin 1985 2004
Automation, Inc., a manufacturer of special automation
machinery and systems, which is located in West Seneca,
New York. Mr. Bidlack also serves on the Board of
Directors of Bush Industries, Inc., a public company
located in Jamestown, New York engaged in the manufacture
and sale of furniture products. He serves also as a
trustee of Keuka College, which is located in Penn Yan,
New York.
WILLIAM C. DENNINGER, age 52, is Senior Vice 2003 2005
President-Finance and Chief Financial Officer of Barnes
Group, Inc. in Bristol, Connecticut. Before joining Barnes
he served as Vice President-Finance and Chief Financial
Officer of BTR, Inc. in Stamford, Connecticut.
PHILIP S. HILL, age 81, was a partner in the New York City 1968 2004
law firm of Hill, Ullman & Erwin until his retirement
earlier this year. Mr. Hill received his law degree in
1951 from Cornell University.
H. RUSSEL LEMCKE, age 63, is President of H. Russel Lemcke 1996 2005
Group, Inc. which specializes in strategic business
development, including mergers, acquisitions and joint
ventures. Mr. Lemcke also serves on the Board of Directors
of Lincoln Industrial, Inc., a company located in
Boonville, Indiana engaged in the manufacture and sale of
injection-molded products. He is also a trustee of the New
York Chiropractic College in Seneca Falls, New York.
JAMES J. MALVASO, age 52, is President and Chief Executive 2003 2004
Officer of The Raymond Corporation in Greene, New York.
Previously he served as Chief Operating Officer and Vice
President-Operations of Raymond.
CORNELIUS S. VAN REES, age 74, was a partner in the New York 1969 2005
City law firm of Thacher Proffitt & Wood until his
retirement in 1994. Mr. Van Rees received his law degree
in 1954 from Columbia University.
5
BOARD MEETINGS AND COMMITTEES OF THE BOARD
During Fiscal Year 2003, the Board of Directors held a total of five Board
meetings. The Board of Directors has an executive committee, an audit committee,
an employee benefits committee, a compensation committee, and a nominating
committee. The function, composition, and number of meetings of each of these
five committees are described below.
EXECUTIVE COMMITTEE
Between meetings of the Board of Directors, the executive committee has the
authority to manage and direct all of our business and affairs, insofar as such
authority may be legally delegated and except as may be limited from time to
time by resolutions of the Board of Directors. The members of the executive
committee are Directors Bidlack (Chairman), Cadena, Hill and Van Rees. The
executive committee held three meetings during Fiscal Year 2003.
AUDIT COMMITTEE
The audit committee (a) is responsible for the appointment, compensation
and retention of our independent auditors and for oversight of their work; (b)
approves all audit engagement fees and terms, as well as significant non-audit
engagements; (c) meets and discusses directly with our independent auditors
their audit work and related matters and (d) oversees and performs such
investigations with respect to our internal and external auditing procedures and
affairs as the audit committee deems necessary or advisable and as may be
required by applicable law. The written charter for our audit committee, which
was adopted by the Board of Directors, more specifically sets forth the duties
and responsibilities of the audit committee and was attached as appendix A to
the proxy statement for the Company's 2002 Annual Meeting of Stockholders. The
members of the audit committee are Directors Hill (Chairman), Berkeley, Bidlack,
Denninger (from March 13, 2003), Lemcke and Van Rees. Each member of the audit
committee is "independent" in accordance with the current listing standards of
the American Stock Exchange. A rule recently adopted by the U.S. Securities and
Exchange Commission would change this standard for "independence" and, once it
becomes applicable to Graham Corporation, could result in changes in the
composition of our audit committee. The audit committee held four meetings
during Fiscal Year 2003. The audit committee's report relating to Fiscal Year
2003 appears on page 15 of this proxy statement.
EMPLOYEE BENEFITS COMMITTEE
The employee benefits committee reviews the performance of the plan
administrator of each of our Retirement Income Plan, Incentive Savings Plan,
Group Hospitalization Plan, Medical Plan, Major Medical Plan, Life Insurance
Plan, Long-Term Disability Plan, Employee Stock Ownership Plan and any other
employee benefit plan we maintain for which a named fiduciary is designated. The
employee benefits committee reviews and reports to the Board of Directors on the
performance of the Incentive Savings Plan trustee and the Retirement Income Plan
trustee in investing, managing and controlling plan assets. The employee
benefits committee has authority (a) to establish a funding policy and method
consistent with the objectives of the Retirement Income Plan, (b) to recommend
changes in the plans and changes in any plan trustee or administrator, and (c)
subject to the further action of the Board of Directors, to amend any of the
plans, other than the Retirement Income Plan, the Incentive Savings Plan and the
Employee Stock Ownership Plan. The members of the employee benefits committee
are Directors Van Rees (Chairman), Bidlack and Hill. The employee benefits
committee held two meetings during Fiscal Year 2003.
COMPENSATION COMMITTEE
The compensation committee (a) reviews and determines annually salaries,
bonuses and other forms of compensation paid to our executive officers and
management; (b) selects recipients of awards of incentive stock options and
non-qualified stock options and establishes the number of shares and other terms
applicable to such awards; and (c) construes the provisions of and generally
administer the 1995 Incentive Plan to Increase Shareholder Value and the 2000
Incentive Plan to Increase Shareholder Value. The members of the compensation
committee are Directors Lemcke (Chairman), Berkeley, Bidlack, Hill, Malvaso
(from March 13, 2003) and Van Rees. The compensation committee held two meetings
during Fiscal Year 2003. The compensation committee's report relating to Fiscal
Year 2003 appears on page 12 of this proxy statement.
6
NOMINATING COMMITTEE
The nominating committee has authority to review the qualifications of,
interview and nominate candidates for election to the Board of Directors. The
nominating committee held three meetings during Fiscal Year 2003. The members of
the nominating committee are Directors Van Rees (Chairman), Bidlack, Cadena and
Hill.
Pursuant to our bylaws, stockholders of record entitled to vote in the
election of Directors at any annual meeting may recommend individuals for
consideration by the nominating committee as potential nominees by submitting
written recommendations to our corporate secretary no later than (a) 60 days in
advance of the annual meeting, if the annual meeting is to be held within 30
days preceding the anniversary of the previous year's annual meeting, or (b) 90
days in advance of the annual meeting, if the annual meeting is to be held on or
after the anniversary of the previous year's annual meeting. For an annual
meeting of stockholders held at a time other than within this time period, or
for a special meeting of stockholders for the election of Directors, notice must
be submitted no later than the close of business on the 10th day following the
date on which notice of such meeting is first given to stockholders.
Stockholder recommendations must contain: (a) each nominee's name, age,
business and residence addresses; (b) principal occupation or employment; (c)
the nominee's written consent to serve as a Director; and (d) information that
would be required to be included in a proxy statement filed pursuant to
applicable rules of the Securities and Exchange Commission. In addition, any
stockholder submitting a recommendation must provide his or her own name and
address as well as the class and number of our shares owned of record and the
dates he or she acquired such shares. The stockholder also must describe all
arrangements or understandings between the stockholder and the nominee and any
other person or persons (naming such person or persons) pursuant to which the
nominations are made by the stockholder. Furthermore, the stockholder must
identify any person employed, retained, or to be compensated by the stockholder
submitting the nomination or by the person nominated, or any person acting on
his or her behalf, to make solicitations or recommendations to stockholders for
the purpose of assisting in the election of such nominee, and briefly describe
the terms of such employment, retainer or arrangement for compensation.
MEETING ATTENDANCE
Each Director attended at least 75% of the aggregate of (a) the total
number of meetings of the Board of Directors and (b) the total number of
meetings of all committees of the Board of Directors on which he or she served
(during the periods that he or she served).
COMPENSATION OF DIRECTORS
The Board has one employee-Director who does not receive any remuneration
for service on the Board of Directors or on any committee of the Board.
Each of our non-employee Directors receives an annual fee of $15,000 for
service on the Board of Directors. Additionally, each non-employee Director
receives a fee of $1,000 for each Board or committee meeting attended, except
that if such meeting is held by telephone conference call or by unanimous
written consent, the fee is reduced to $500. If a Board and/or one or more
committees meet on the same day, a full meeting fee is paid for one meeting and
one-half of the meeting fee is paid for each additional meeting attended that
day. Each non-employee Director who serves on the executive committee receives
an additional annual fee of $5,000 for such service. The chairman of the Board
of Directors receives an additional annual fee of $10,000 for such service, and
the chairman of each committee receives an additional annual fee of $2,000 for
such service.
Non-employee Directors participate in the Outside Directors' Long Term
Incentive Plan (the "LTIP"). Under the LTIP, for the first five fiscal years in
which we produce consolidated net income of at least $500,000, starting with
1996 for Directors in office at that time and starting with election to the
Board of Directors for new Directors, each non-employee Director will be
credited with share equivalent units ("SEUs"). Each SEU is valued at the market
value of one share of our common stock on the last day of trading of the first
quarter following a fiscal year for which SEUs are to be credited. The number of
SEUs to be credited is determined by dividing the value of one SEU into $10,000.
Upon termination of a Director's service on the Board of Directors, but not
before, SEUs become redeemable, at our option, for either (a) a commensurate
number of shares of our common stock or (b) subject to our consent, the cash
value of a commensurate number of shares of our common stock as of the
termination of service date.
7
Pursuant to the 1995 Graham Corporation Incentive Plan to Increase
Shareholder Value (the "Incentive Plan"), each of our non-employee Directors was
to be granted, annually for four years, an option to purchase 2,250 shares of
our common stock at its closing price on the American Stock Exchange on the date
of each grant, subject to availability under the Incentive Plan of unissued
options reserved for Directors. However, no shares reserved for any non-employee
Directors remain in the 1995 Incentive Plan and no grants from it were made to
any non-employee Director during Fiscal Year 2003.
During Fiscal Year 2003, each of our non-employee Directors as of October
31, 2002 was granted an option to purchase 1,000 shares of our common stock at
its closing price on the American Stock Exchange on the date of each grant
pursuant to the 2000 Graham Corporation Incentive Plan to Increase Shareholder
Value. Directors Denninger and Malvaso each were granted an option to purchase
2,250 shares, pursuant to the 2000 Incentive Plan to Increase Shareholder Value,
subsequent to becoming members of the Board in March 2003.
EXECUTIVE OFFICERS
Graham Corporation is currently served by the following executive officers,
who are elected by the Board of Directors and serve until their respective
successors are elected and qualified:
ALVARO CADENA, age 59, has been President and Chief Executive Officer since
1998 and has been employed with us since 1969. Further information about Mr.
Cadena is set forth above under "Election of Directors."
J. RONALD HANSEN, age 56, has been Vice President--Finance & Administration
and Chief Financial Officer since 1993. He has been employed with us since 1993.
JAMES R. LINES, age 42, is Vice President--Marketing and Sales. Previously
he served as Vice President-Engineering. He has been employed with us since
1984.
PHILIP MARKS, age 59, is Vice President--Manufacturing. Previously he
served as Plant Manager, Manager of Contract Engineering and Manager of Quality
Assurance and Quality Control. He has been employed with us since 1970.
STEPHEN P. NORTHRUP, age 51, is Vice President--Engineering. Previously he
served as Vice President-Power & Marine Products. He has been employed with us
since 1973.
8
EXECUTIVE COMPENSATION
The following table sets forth the annual compensation for services to us
in all capacities for the past three fiscal years for our Chief Executive
Officer and our four most highly compensated executive officers (other than our
Chief Executive Officer) who were serving as executive officers on March 31,
2003, the last day of Fiscal Year 2003 (collectively, the "named executive
officers").
SUMMARY COMPENSATION TABLE
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ANNUAL LONG-TERM
COMPENSATION COMPENSATION
SECURITIES
NAME AND FISCAL UNDERLYING ALL OTHER
PRINCIPAL POSITION YEAR SALARY ($)(1) OPTIONS/SARS (#) COMPENSATION ($)(2,3,4,5)
------------------------------------------------------------------------------------------------------------
ALVARO CADENA 2003 234,978 6,000 14,050
President and 2002 307,849 6,000 26,122
Chief Executive Officer 2001 221,478 6,000 14,663
JOSEPH P. GORMAN, JR.* 2003 137,966 3,000 14,050
Vice President--Sales 2002 163,977 3,000 18,813
2001 130,021 3,000 10,012
J. RONALD HANSEN 2003 146,931 3,000 14,050
Vice President--Finance & 2002 174,647 3,000 17,395
Administration and 2001 138,486 3,000 8,712
Chief Financial Officer
JAMES R. LINES 2003 137,966 3,000 7,442
Vice President--Marketing 2002 163,977 3,000 19,726
and Sales 2001 130,021 3,000 7,108
STEPHEN P. NORTHRUP 2003 137,966 3,000 6,054
Vice President--Engineering 2002 173,977 3,000 18,626
2001 130,021 3,000 7,244
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* Mr. Gorman retired at the end of Fiscal Year 2003.
(1) Includes payment of contingent salary amounts that are deferred to the
following fiscal year and are payable only upon attainment of predetermined
performance goals. No contingent compensation was paid to any named
executive officer with respect to Fiscal Years 2001 and 2003. The figures
shown also include amounts (if any) deferred by the named executive officers
pursuant to section 401(k) of the Internal Revenue Code and deferred
contingent salary. Amounts deferred under section 401(k) of the Internal
Revenue Code are deposited in the named executive officer's 401(k) account
for investment and payment according to the terms of our Incentive Savings
Plan.
(2) Includes premiums paid on insurance policies on each of the named executive
officers as follows: Mr. Cadena--$13,701 for Fiscal Year 2001, $14,050 for
Fiscal Year 2002 and $14,050 for Fiscal Year 2003; Mr. Gorman--$9,283 for
Fiscal Year 2001, $9,632 for Fiscal Year 2002, and $9,632 for Fiscal Year
2003; Mr. Hansen--$7,932 for Fiscal Year 2001, $8,032 for Fiscal Year 2002,
and $8,032 for Fiscal Year 2003; Mr. Lines--$4,317 for Fiscal Year 2001,
$6,577 for Fiscal Year 2002 and $4,417 for Fiscal Year 2003; Mr.
Northrup--$6,515 for Fiscal Year 2001, $6,654 for Fiscal Year 2002, and
$6,054 for Fiscal Year 2003.
(3) Includes the following amounts paid to the 401(k) accounts of the named
executive officers pursuant to our Incentive Savings Plan: Mr. Cadena--none
for Fiscal Years 2001 and 2003 and $10,385 for Fiscal Year 2002; Mr.
Gorman--none for Fiscal Years 2001 and 2003 and $7,889 for Fiscal Year 2002;
Mr. Hansen--none for Fiscal Years 2001 and 2003 and $8,403 for Fiscal Year
2002; Mr. Lines--none for Fiscal Years 2001 and 2003 and $10,385 for Fiscal
Year 2002; Mr. Northrup--none for Fiscal Years 2001 and 2003 and $8,042 for
Fiscal Year 2002.
(4) Includes the following amounts representing the value of shares allocated
pursuant to our ESOP to each named executive officer's account maintained
under the ESOP: Mr. Cadena--$962 for Fiscal Year 2001 and $146 for Fiscal
Year 2002; Mr. Gorman--$729 for Fiscal Year 2001 and $114 for Fiscal Year
2002; Mr. Hansen--$780 for Fiscal Year 2001 and $134 for Fiscal Year 2002;
Mr. Lines--$729 for Fiscal Year 2001 and $146 for Fiscal
9
Year 2002; Mr. Northrup--$729 for Fiscal Year 2001 and $116 for Fiscal Year
2002. None of the named executive officers received shares under the ESOP in
Fiscal Year 2003.
(5) Includes payment for published professional articles of $2,072 for Fiscal
Year 2001, $1,650 for Fiscal Year 2002 and $3,025 for Fiscal Year 2003 for
Mr. Lines. Includes payment in lieu of vacation of $2,576 for Fiscal Year
2002 for Mr. Northrup.
STOCK OPTIONS
The following table indicates the total number of stock options we granted
to each named executive officer during Fiscal Year 2003.
OPTION/SAR GRANTS DURING FISCAL YEAR 2003
--------------------------------------------------------------------------------
POTENTIAL REALIZABLE
INDIVIDUAL GRANTS VALUE AT ASSUMED
PERCENT OF ANNUAL RATES OF
NUMBER OF TOTAL STOCK PRICE
SECURITIES OPTIONS/SARS APPRECIATION FOR
UNDERLYING GRANTED TO EXERCISE OR OPTION TERM
OPTIONS/SARS EMPLOYEES IN BASE PRICE EXPIRATION
NAME GRANTED (#)(1) FISCAL YEAR (%) ($/SHARE) DATE 5% ($) 10% ($)
--------------------------------------------------------------------------------------------------------------
ALVARO CADENA 6,000 22.2% 7.50 10/31/12 28,300 71,718
JOSEPH P. GORMAN,
JR. 3,000 11.1% 7.50 10/31/12 14,150 35,859
J. RONALD HANSEN 3,000 11.1% 7.50 10/31/12 14,150 35,859
JAMES R. LINES 3,000 11.1% 7.50 10/31/12 14,150 35,859
STEPHEN P. NORTHRUP 3,000 11.1% 7.50 10/31/12 14,150 35,859
---------------
(1) All stock options are currently vested, non-qualified stock options.
The following table indicates the total number of exercisable and
unexercisable stock options held by each named executive officer on March 31,
2003, the last day Fiscal Year 2003, and the value.
AGGREGATED OPTION/SAR EXERCISES IN FISCAL YEAR 2003
AND FISCAL YEAR-END OPTION/SAR VALUES
--------------------------------------------------------------------------------
NUMBER OF SECURITIES
UNDERLYING UNEXERCISED
OPTIONS/SARS AT FISCAL VALUE OF UNEXERCISED IN-
YEAR-END (#) THE-MONEY OPTIONS/SARS
SHARES ACQUIRED VALUE AT FISCAL YEAR-END ($)(1)
NAME ON EXERCISE (#) REALIZED ($) EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
--------------------------------------------------------------------------------------------------------------------
ALVARO CADENA -0- -0- 38,515 -0- 600 -0-
JOSEPH P. GORMAN, JR. -0- -0- 22,407 -0- 300 -0-
J. RONALD HANSEN -0- -0- 17,507 -0- 260 -0-
JAMES R. LINES -0- -0- 13,200 -0- 150 -0-
STEPHEN P. NORTHRUP -0- -0- 19,707 -0- 300 -0-
---------------
(1) Based on the closing price of our common stock on March 26, 2003, which was
$7.55 per share.
10
PENSION PLANS
The following table sets forth straight-life annuity amounts without regard
to offsets for social security benefits. Benefits listed in the table are
subject to a deduction of an amount equal to 50% of an eligible employee's
estimated primary social security benefit.
PENSION PLAN TABLE
--------------------------------------------------------------------------------
YEARS OF SERVICE
REMUNERATION($) 15 20 25 30/35
---------------------------------------------------------
100,000 $25,000 $33,333 $ 41,670 $ 50,000
125,000 $31,250 $41,662 $ 52,088 $ 62,500
150,000 $37,500 $49,995 $ 62,505 $ 75,000
160,000 $40,000 $53,333 $ 67,667 $ 80,000
175,000(1) $43,750 $58,328 $ 72,922 $ 87,500
260,000(1) $65,000 $86,667 $108,334 $130,000
---------------
(1) For the U.S. Retirement Plan (as defined below), with respect to 2002,
$200,000 was the maximum amount of compensation that could be used as the
basis for determining benefits under applicable law. For the Supplemental
Plan (as defined below), with respect to 2002, only non-contingent
compensation over $200,000 was used as the basis for determining benefits.
Our Retirement Income Plan is a defined benefit pension plan for the
benefit of our eligible domestic employees and the eligible domestic employees
of our United States subsidiaries (the "U.S. Retirement Income Plan"). The U.S.
Retirement Income Plan takes income into account for future benefits on a
calendar year basis. The portion of Fiscal Year 2003 compensation that is taken
into account by the U.S. Retirement Income Plan for the purpose of calculating
future pension benefits is as follows: $200,000 for Mr. Cadena; $146,931 for Mr.
Hansen; $137,966 for Mr. Gorman; $137,966 for Mr. Lines; and $137,966 for Mr.
Northrup.
The approximate years of creditable service as of June 13, 2003 of each of
the named executive officers eligible to participate in the U.S. Retirement
Income Plan are as follows: 34 years for Mr. Cadena; 34 years for Mr. Gorman; 29
years for Mr. Northrup; 18 years for Mr. Lines; 10 years for Mr. Hansen.
In addition to the U.S. Retirement Income Plan, we maintain a Supplemental
Executive Retirement Plan (the "Supplemental Plan") that is intended to provide
eligible participants and their surviving spouses and beneficiaries with the
amount of employer-provided retirement benefits that the U.S. Retirement Income
Plan would provide but for the limitation on compensation that may be recognized
under tax-qualified plans imposed by section 401(a)(17) of the Internal Revenue
Code and the limitations on benefits imposed by sections 415(b) and (e) of the
Internal Revenue Code. Any of our officers whose non-contingent compensation
exceeded $170,000 in 2002, or will exceed $200,000 in 2003, are eligible to
participate in the Supplemental Plan. Currently Mr. Cadena is the only eligible
participant. The Supplemental Plan takes income into account for future benefits
on a calendar year basis. The amount of Fiscal Year 2003 compensation taken into
account by the Supplemental Plan for the purpose of calculating future benefits
for Mr. Cadena was $34,978.
EMPLOYMENT CONTRACTS
Each named executive officer has a one-year Employment Agreement with us
that is renewable upon the parties' mutual consent for additional periods. Each
Employment Agreement has a termination provision that, in certain circumstances,
entitles each named executive officer to a payment equal to 12 months' salary
(non-contingent salary only) upon the termination of his employment.
We have entered into Senior Executive Severance Agreements with Mr. Cadena
and Mr. Hansen. These agreements, as amended to date, provide that in the event
we experience a change in control (defined generally as an acquisition of 25% or
more of our outstanding voting shares, or a change in the majority of the Board
of Directors as the result of any tender offer or business combination) effected
by a third person, termination of the individual's employment within two years
of such a change of control entitles such person to one Dollar less than three
years' compensation, including bonuses, payable either in installments over a
period not to exceed three years or as a lump sum.
11
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
The members of our compensation committee during Fiscal Year 2003 were
Directors Berkeley, Bidlack, Hill, Lemcke, Malvaso (from March 13, 2003) and Van
Rees. Director Cornelius S. Van Rees is our corporate secretary but receives no
compensation for his service in such capacity. Mr. Van Rees participated in the
Board of Directors' deliberations regarding compensation of all of our
compensated officers.
COMPENSATION COMMITTEE REPORT ON EXECUTIVE COMPENSATION
Our compensation committee establishes levels of cash compensation and
forms and amounts of non-cash compensation for our executive officers and our
subsidiaries' executive officers. The guiding principles of our compensation
committee are as follows:
- To provide a reasonable level of compensation sufficient to attract
and retain executive personnel best suited by training, ability, and
other relevant criteria for the management requirements of our
company.
- To balance base compensation (non-contingent) and incentive
compensation (contingent upon performance) for the purpose of
motivating executive personnel.
- To determine the extent and method of aligning the financial interest
of our executive personnel with the interest of our stockholders in
the appreciation of their investment.
For Fiscal Year 2003, the compensation committee increased the
non-contingent salaries of our Chief Executive Officer and of our other
executive officers by 3% as part of a general salary increase for all of our
employees at the same percentage. Traditionally, compensation for our Chief
Executive Officer and executive officers has been below the mid-range of
competitive levels. We believe that compensation for our Chief Executive Officer
and other executive officers remains below the median compensation levels for
similarly situated executive officers of comparably-sized companies both in our
industry and our geographic region. We also believe that non-cash compensation,
in the form of stock options, is below that offered by comparably-sized
companies both in our industry and our geographic region.
Decisions regarding executive compensation made during Fiscal Year 2003
relied in part on guidance from a report prepared by an independent consulting
firm reviewing and comparing compensation levels of senior management personnel
in manufacturing industries in western New York. As it has in the past, the
compensation committee considered information as to compensation levels for
officers and senior managers of comparable scope and responsibility in an
industry group of comparably sized companies. In its decision to increase Chief
Executive Officer and other executive non-contingent salary by 3%, the
compensation committee considered the need to continue to provide incentives for
members of management.
In the interest of linking corporate performance to officer compensation
while maintaining competitive overall nominal salary rates, a portion of the
annual salary for each named executive officer is contingent. The contingent
portion is payable, on a deferred basis, only following the end of each fiscal
year, and payment is subject to attainment of performance-based goals for the
year by us and by each named executive officer individually. Under this
arrangement, a target performance-based amount for each eligible officer,
representing a percentage of non-contingent salary, is recommended to the
compensation committee annually by the Chief Executive Officer; a target
performance-based amount for the Chief Executive Officer is determined by the
compensation committee. We must meet a predetermined earnings threshold in order
for any eligible officer to receive performance-based pay. The actual amount of
performance-based pay earned, if any, depends upon the degree of attainment of
goals established by the compensation committee for each year in the following
areas: corporate and subsidiary return on capital employed and an individual
performance goal for each officer. These determinations were based on the
compensation committee's review of pertinent data with reference to literature
in the field and to industry practices for comparably-sized companies and
expectations of attainable results under existing market conditions.
No contingent compensation was paid to any officer for Fiscal Year 2003.
In Fiscal Year 2003, we granted stock options to the Chief Executive
Officer and other executive officers. These stock option grants were made
pursuant to our 1995 and 2000 Incentive Plans to Increase Shareholder
12
Value for the purpose of further increasing incentives for our officers to
increase shareholder value. No stock appreciation rights or other forms of
equity compensation were granted.
Compensation Committee:
H. Russel Lemcke, Chairman
Helen H. Berkeley
Jerald D. Bidlack
Philip S. Hill
James J. Malvaso
Cornelius S. Van Rees
13
SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
During Fiscal Year 2003, all of our Directors, executive officers and more
than 10% stockholders complied in a timely manner with the filing requirements
of Section 16(a) of the Securities Exchange Act of 1934. In making this
statement, we have relied on the written representations of our Directors,
executive officers and more than 10% stockholders and copies of the reports that
they have filed with the Securities and Exchange Commission.
STOCK PRICE PERFORMANCE GRAPH
Our common stock is traded on the American Stock Exchange under the symbol
"GHM." Set forth below is a line graph comparing, (a) the cumulative stockholder
return on our common stock for a five-year period beginning with the last trade
of our common stock on March 31, 1998, to (b) the cumulative total return of
companies on the American Stock Exchange Market Value Index (the "AMEX Index")
over the same period and (c) a selection of peer group public companies, each of
which shares a Standardized Industrial Classification code with us and each of
which either competes with us as to one or more product lines or one or more
market segments (the "Peer Group").
COMPARISON OF 5 YEAR CUMULATIVE TOTAL RETURN(1)
AMONG GRAHAM CORPORATION, THE AMEX COMPOSITE INDEX
AND A PEER GROUP
[LINE GRAPH]
CUMULATIVE TOTAL RETURN
---------------------------------------------------------------------------------
31-MARCH-98 31-MARCH-99 31-MARCH-00 31-MARCH-01 31-MARCH-02 31-MARCH-03
Graham Corporation............. $100.00 $49.04 $ 42.91 $ 54.87 $ 67.43 $47.10
Amex Market Value (U.S. &
Foreign)..................... $100.00 $94.99 $138.61 $109.78 $113.34 $92.66
Peer Group..................... $100.00 $50.64 $ 43.52 $ 71.75 $100.65 $38.59
---------------
(1) The Peer Group public companies selected by us for comparison in the line
graph consist of the following manufacturing companies: Flowserve Corp.,
Paul Mueller Co., and Selas Corp. of America.
This line graph assumes an investment of $100 on March 31, 1998 in (a) our
common stock, (b) the stocks comprising the AMEX Index and (c) the stocks of the
Peer Group public companies. Total returns assume the reinvestment of dividends.
14
Our stock performance may not continue into the future with the trends
similar to those depicted in the line graph above. We neither make nor endorse
any predictions as to our future stock performance.
REPORT OF THE AUDIT COMMITTEE TO STOCKHOLDERS
The audit committee has:
- reviewed and discussed our audited financial statements for Fiscal
Year 2003 with our management and with Deloitte & Touche LLP, our
independent auditors;
- discussed with our independent auditors the matters required to be
discussed by SAS 61 (Codification for Statements on Auditing
Standards); and
- received and discussed the written disclosures and the letter from our
independent auditors required by Independence Standards Board
Statement No. 1 (Independence Discussions with Audit Committees) and
has discussed with our independent auditor the independent auditor's
independence.
Based on such review and discussions with management and the independent
auditors, the audit committee recommended to the Board of Directors that the
audited financial statements be included in our Annual Report on Form 10-K for
Fiscal Year 2003 for filing with the Securities and Exchange Commission.
AUDITORS' FEES
AUDIT FEES. The aggregate fees billed to the Company by its principal
accountant, Deloitte & Touche LLP, for the audit of the Company's annual
financial statements and interim reviews of financial statements included in the
Company's Quarterly Reports on Form 10-Q were $74,375 for the Fiscal Year ended
March 31, 2003 and $70,720 for the Fiscal Year ended March 31, 2002.
AUDIT-RELATED FEES. The aggregate fees billed to the Company by its
principal accountant for services reasonably related to its audit were $18,741
for the Fiscal Year ended March 31, 2003 and $28,332 for the Fiscal Year ended
March 31, 2002.
TAX FEES. The aggregate fees billed to the Company by its principal
accountant for services related to tax compliance, tax advice and tax planning
were $40,024 for the Fiscal Year ended March 31, 2003 and $49,346 for the Fiscal
Year ended March 31, 2002.
ALL OTHER FEES. The Company paid no fees to its principal accountant for
each of the last two fiscal years other than as described above.
The Audit Committee has determined that the provision of non-audit services
described above has not compromised the independence of Deloitte & Touche LLP.
The Audit Committee has appointed Deloitte & Touche LLP to be the company's
independent auditors for the fiscal year ending in 2004.
Audit Committee:
Philip S. Hill, Chairman
Helen H. Berkeley
Jerald D. Bidlack
William C. Denninger
H. Russel Lemcke
Cornelius S. Van Rees
15
PROPOSAL 2:
SELECTION OF OUR INDEPENDENT AUDITORS
The firm of Deloitte & Touche LLP served as our independent auditors for
Fiscal Year 2003. The Audit Committee of the Board of Directors has selected
Deloitte & Touche LLP as our independent auditors for Fiscal Year 2004. This
selection will be presented to our stockholders for approval at the annual
meeting. The Board of Directors recommends a vote in favor of the proposal to
approve and ratify this selection, and, unless otherwise instructed in the
proxy, the persons named in the enclosed proxy will vote the proxies FOR this
proposal. If our stockholders do not approve this selection, the Audit Committee
will reconsider its choice.
We have been advised by Deloitte & Touche LLP that a representative will be
present at the annual meeting and will be available to respond to appropriate
questions. In addition, we intend to give that representative an opportunity to
make a statement if he or she should so desire.
For further information about our engagement of Deloitte & Touche LLP, see
"Report of the Audit Committee to Stockholders" above.
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
1. LONG-TERM STOCK OWNERSHIP PLAN
At our annual meeting for Fiscal Year 2000, our stockholders approved the
Long-Term Stock Ownership Plan of Graham Corporation. Certain of our Directors
and named executive officers are participants in this plan and are indebted to
us for a balance due on the purchase of shares of our common stock at the
closing price on the American Stock Exchange on the date of purchase, which was
April 5, 2001.
As of June 14, 2002, pursuant to the terms of both a stock subscription
agreement executed by each officer participating in this plan and a note
executed by each such person, Mr. Cadena is indebted to us in the amount of
$156,406 and Mr. Hansen and Mr. Northrup each are indebted to us in the amount
of $100,100. The largest aggregate amount of indebtedness to us by each
participant since the beginning of our last fiscal year is the amount stated in
the preceding sentence for each participant. Each subscription agreement states
that 18 months after purchasing the shares of common stock, a participant is
entitled to sell up to 50% of his shares and that the participant agrees to hold
the remainder of his shares until such time as he terminates employment with us.
The terms of each note provide that a participant will repay the balance of the
note in thirty-two equal consecutive quarterly installments beginning on June
30, 2002. The loans are interest-free during a participant's employment with the
company, with interest on each note imputed as income to each participant at the
applicable federal rate established by the Internal Revenue Service. Shares
remain in our custody until a participant's note is paid in full, unless the
participant sells his shares (when and to the extent permitted). Each note
provides that until it is paid in full, any shares sold will be sold through a
broker who will forward any proceeds, less expenses, to us to pay off all or a
portion of such note. Each note also contains provisions that grant a security
interest to us in the purchased shares and any proceeds from any subsequent sale
of the purchased shares. If a participant ceases to be an officer or Director
any time after 18 months after purchase, the participant may sell all or a
portion of his shares. However, because the subscription agreement states that
no participant may sell any shares prior to 18 months after purchase, if a
participant ceases to be an officer or Director prior to 18 months after
purchase, such participant has the discretion to retain or sell all or a portion
of his shares only if we waive our rights under that provision in such
participant's subscription agreement.
The Sarbanes -Oxley Act, which became law on July 30, 2002, prohibits any
further loans under the Long-Term Stock Ownership Plan. It also prohibits
renewal, or any material modification of the terms, of any of the loans
outstanding under the plan.
2. CONSULTATION AGREEMENTS
Director Cornelius S. Van Rees, Secretary to the Company, is party to a
consultation agreement with the Company whereby he is compensated $22,000
annually to consult with the Company regarding legal matters.
16
STOCKHOLDER PROPOSALS FOR 2004 ANNUAL MEETING
In order for any stockholder proposal to be included in our proxy statement
to be issued in connection with our annual meeting of stockholders for Fiscal
Year 2004, we must receive the proposal no later than February 27, 2004. If the
proposal is in compliance with all of the requirements set forth in Rule 14a-8
under the Securities Exchange Act of 1934, we will include the stockholder
proposal in our proxy statement and place it on the form of proxy issued for the
2004 annual meeting. Pursuant to our bylaws, stockholder proposals that are not
submitted for inclusion in our proxy materials pursuant to Rule 14a-8 may be
brought before the annual meeting of stockholders for Fiscal Year 2004 only if
written notice of the proposal is delivered to our corporate secretary by May
27, 2004, and if a stockholder complies with all of the other applicable
provisions of our bylaws. All such stockholder notices should be delivered to
the following address: Graham Corporation, Attention: Corporate Secretary, 20
Florence Avenue, Batavia, New York 14020.
ANNUAL REPORT
A copy of our annual report containing financial statements for Fiscal Year
2003, prepared in conformity with generally accepted accounting principles,
accompanies this proxy statement. To obtain a copy of our annual report on Form
10-K without charge, please address your request to Graham Corporation,
Attention: Annual Report Request, 20 Florence Avenue, Batavia, New York 14020.
OTHER MATTERS
The Board of Directors does not know of any other matters that may be
presented for action at the annual meeting. Should any other matters come before
the annual meeting, however, the persons named in the enclosed proxy will have
discretionary authority to vote all proxies with respect to such matters in
accordance with their judgment.
By Order of the Board of Directors
/s/ ALVARO CADENA
ALVARO CADENA
President & Chief Executive Officer
Dated: June 27, 2003
17
GRAHAM CORPORATION
20 FLORENCE AVENUE
BATAVIA, NEW YORK 14020
www.graham-mfg.com
PROXY 2003
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 Rochester Business Alliance, (formerly the Industrial Management Council),
930 East Avenue, Rochester, New York on Tuesday, July 22, 2003 at 10:00 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:
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR THE NOMINEES AND FOR RATIFICATION
OF THE APPOINTMENT OF INDEPENDENT AUDITORS.
1. Election of Directors FOR nominee(s) listed WITHHOLD
except as marked to AUTHORITY
the contrary for all nominees
01 Helen H. Berkeley to serve until 2006 [ ] [ ]
02 Alvaro Cadena to serve until 2006
Withheld for the nominee you list below:
(Write that nominee's name in the space
provided below.)
------------------------------------------------------------------
2. Ratification of the appointment of Deloitte & FOR AGAINST ABSTAIN
Touche LLP as independent accountants for [ ] [ ] [ ]
the fiscal year ending March 31, 2004.
In their discretion, to vote upon all other matters
3. as may be properly brought before the 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 AND FOR RATIFICATION OF THE APPOINTMENT OF
AUDITORS.
Date: _____________________________, 2003 _____________________________________
Please sign exactly as name (s) appears on
this proxy and return it promptly whether
you plan to attend the meeting or not. If
you do attend, you may, of course, vote
in person. The space below may be used
for any questions or comments you may have. _____________________________________
(Signature or Signatures)
[ ] To help our preparation for the meeting, please check here if you plan
to attend.
2
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 22, 2003
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 13, 2003
(the "Record Date") at the Annual Meeting of Stockholders of the Corporation
(the "Annual Meeting") to be held at the Rochester Business Alliance, (formerly
the Industrial Management Council), 930 East Avenue, Rochester, New York on July
22, 2003 at 10:00 a.m., or at any adjournment thereof.
As to the nominees and proposals listed on the reverse side
hereof and as more particularly described in the Corporation's Proxy Statement
dated June 27, 2003, 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 27, 2003.
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
14, 2003.
PLEASE MARK, SIGN AND DATE THIS VOTING INSTRUCTION CARD ON
THE REVERSE SIDE AND RETURN IT IN THE ENCLOSED ENVELOPE.
IF THIS VOTING INSTRUCTION IS SIGNED BUT NO DIRECTION IS GIVEN, THIS VOTING
INSTRUCTION CARD WILL BE DEEMED TO INSTRUCT VOTES "FOR" THE ELECTION OF THE
NOMINEES AND "FOR" PROPOSAL 2.
-------------------------------
ESOP COMMON (as of 6/13/03) PLEASE MARK YOUR CHOICE LIKE THIS : IN BLUE OR BLACK INK.
-----------------------------------------------------------------------------------------------------------------------------------
THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR" THE ELECTION OF NOMINEES AND "FOR" PROPOSAL 2.
-----------------------------------------------------------------------------------------------------------------------------------
1. Election of Directors 2. Ratification of the appointment of Deloitte & Touche
LLP as independent accountants for the period April
1, 2003 through March 31, 2004.
FOR WITHHOLD
FOR A THREE-YEAR TERM FOR AGAINST ABSTAIN*
Helen H. Berkeley [ ] [ ]
Alvaro Cadena [ ] [ ] [ ] [ ] [ ]
-----------------------------------------------------------------------------------------------------------------------------------
3. In their discretion, the proxies are authorized to vote upon such other business as may properly come before the Annual Meeting
or any adjournment thereof.
-----------------------------------------------------------------------------------------------------------------------------------
_
| _ The undersigned hereby instructs the Committee to
| direct the Trustee of the Plan to vote in accordance
with the voting instructions indicated above and
hereby acknowledges receipt of the letter from the
Committee dated June 27, 2003, 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.
IF THIS VOTING INSTRUCTION IS SIGNED BUT NO DIRECTION IS GIVEN, THIS VOTING
INSTRUCTION CARD WILL BE DEEMED TO INSTRUCT VOTES "FOR" THE ELECTION OF THE
NOMINEES AND "FOR" PROPOSAL 2.
-------------------------------
ESOP COMMON (as of 6/13/03) PLEASE MARK YOUR CHOICE LIKE THIS : IN BLUE OR BLACK INK.
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THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR" THE ELECTION OF NOMINEES AND "FOR" PROPOSAL 2.
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1. Election of Directors 2. Ratification of the appointment of Deloitte & Touche
LLP as independent accountants for the period April
1, 2003 through March 31, 2004.
FOR WITHHOLD
FOR A THREE-YEAR TERM FOR AGAINST ABSTAIN*
Helen H. Berkeley [ ] [ ]
Alvaro Cadena [ ] [ ] [ ] [ ] [ ]
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3. In their discretion, the proxies are authorized to vote upon such other business as may properly come before the Annual Meeting
or any adjournment thereof.
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_
| _ 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 27, 2003, a Notice of Annual
Meeting of Stockholders of Graham Corporation and a
Proxy Statement for the Annual Meeting.
Date
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Signature
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Signature
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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.
EMPLOYEE BENEFITS COMMITTEE
June 27, 2003
Dear Plan Accountholder:
The Employee Stock Ownership Plan of Graham Corporation ("ESOP") has a related
trust (the "ESOP Trust") which own common stock of Graham Corporation
("Graham"). JP Morgan Chase Bank, as trustee of the ESOP, is a stockholder of
Graham and may vote on matters presented for stockholder action at Graham's 2003
Annual Meeting of Stockholders scheduled to be held on July 22, 2003 ("Annual
Meeting").
The ESOP Trust provides that in casting its vote at the 2003 Annual Meeting, the
ESOP Trustee is 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 13, 2003.
The records for the ESOP 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 this plan. 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.
The voting of the common stock held by the ESOP 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 how to vote. The remainder of this letter describes the voting
procedures which the Committee expects to follow for the 2003 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; if you had an interest in the ESOP Trust on the proper date; and
how large your interest was, as follows:
-2-
ANTICIPATED PROPOSALS
If Graham Common Stock Was Allocated to Your Account Under the ESOP Trust as of
June 13, 2003:
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 13,
2003 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 13, 2003. If you do not file the
Instruction Card by July 14, 2003, you will be deemed to have instructed the
ESOP Trustee to ABSTAIN as to all proposals.
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 2003 Annual Meeting. If this should happen, the ESOP 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 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 2003
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.
If you have questions regarding the terms of the ESOP, or how to complete the
Instruction Card, please call J. Ronald Hansen, Vice President-Finance &
Administration at (585) 343-2216.
Sincerely,
EMPLOYEE BENEFITS COMMITTEE
OF GRAHAM CORPORATION
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Enclosures