SCHEDULE 14A
(RULE 14a-101)
INFORMATION REQUIRED IN PROXY STATEMENT
SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(a) OF THE SECURITIES
EXCHANGE ACT OF 1934
Filed by the Registrant [X]
Filed by a Party other than the Registrant [ ]
Check the appropriate box:
[ ] Preliminary Proxy Statement
[ ] Confidential, for Use of the Commission Only (as permitted by Rule 14a-6(e)(2))
[X] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to Section 240.14a-11c or Section 240.14a-12
GRAHAM CORPORATION
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(Name of Registrant as Specified In Its Charter)
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(Name of Person(s) Filing Proxy Statement)
Payment of Filing Fee (Check the appropriate box):
[X] No fee required.
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and 0-11.
(1) Title of each class of securities to which transaction applies:
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(2) Aggregate number of securities to which transaction applies:
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(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (set forth the amount on which the
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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 29, 2004
The annual meeting of stockholders of Graham Corporation will be held at
the RIT Inn & Conference Center, 5257 West Henrietta Road, Rochester, New York
14602, on Thursday, July 29, 2004, at 11:00 a.m., Eastern Time, for the
following purposes, which are more fully described in the accompanying proxy
statement:
1. To elect two Directors.
2. To ratify the selection of Deloitte & Touche LLP as our independent
auditors for the fiscal year ending March 31, 2005.
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 11, 2004 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 29, 2004
[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, 2004 ("Fiscal Year
2004"), 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, 2005 ("Fiscal Year
2005").
- To transact such other business as may properly come before the annual
meeting or any adjournment of the annual meeting.
The annual meeting will be held on Thursday, July 29, 2004, at 11:00 a.m.,
Eastern Time, at the RIT Inn & Conference Center, 5257 West Henrietta Road,
Rochester, New York 14602. This proxy statement and the accompanying form of
proxy are being first mailed to our stockholders on or about June 29, 2004.
RECORD DATE AND SHARES OUTSTANDING
The record date for the annual meeting is June 11, 2004. Our records
indicate that as of June 11, 2004 there were 1,658,327 shares of our common
stock issued and outstanding. If you were a holder of our common stock on June
11, 2004, 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 2005.
Under our By-Laws, 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 By-Laws 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 2005.
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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 on the next page sets forth the beneficial ownership of our
common stock as of June 11, 2004 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" on page 10);
- 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.
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COMMON STOCK OWNERSHIP TABLE
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COMMON STOCK BENEFICIALLY OWNED
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NUMBER OF PERCENTAGE OF
NAME OF BENEFICIAL OWNER SHARES CLASS
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Employee Stock Ownership Plan of Graham Corporation 100,242(3) 6.0%
Dimensional Fund Advisors, Inc. 94,468(4) 5.7%
Van Den Berg Management 89,335(5) 5.4%
Helen H. Berkeley(1) 123,307(6) 7.4%
Jerald D. Bidlack(1) 32,500(7) 1.9%
Alvaro Cadena(1,2) 70,644(8) 4.1%
William C. Denninger(1) 3,250(9) *
J. Ronald Hansen(2) 21,920(10) 1.3%
Philip S. Hill(1) 23,050(11) 1.4%
H. Russel Lemcke(1) 37,000(12) 2.2%
James R. Lines(2) 14,314(13) *
James J. Malvaso(1) 3,250(14) *
Philip Marks(2) 12,932(15) *
Stephen P. Northrup(2) 22,555(16) 1.3%
Cornelius S. Van Rees(1) 22,300(17) 1.4%
All executive officers and Directors as a group (12 persons) 387,022(18) 21.1%
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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 11, 2004, 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 94,468 shares of our
stock as of December 31, 2003, 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) Van Den Berg Management's address is 805 Las Cimas Parkway, Suite 430,
Austin, Texas 78746.
( 6) Includes 16,000 shares that Mrs. Berkeley may acquire within 60 days upon
exercise of stock options.
( 7) Includes 13,250 shares that Mr. Bidlack may acquire within 60 days upon
exercise of stock options.
( 8) Includes 44,515 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.
( 9) Includes 3,250 shares that Mr. Denninger may acquire within 60 days upon
exercise of stock options.
(10) Includes 13,200 shares that Mr. Hansen may acquire within 60 days upon
exercise of stock options and 720 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.
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(11) Includes 13,250 shares that Mr. Hill may acquire within 60 days upon
exercise of stock options.
(12) Includes 19,000 shares that Mr. Lemcke may acquire within 60 days upon
exercise of stock options.
(13) 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's account, as to which Mr. Lines has sole voting
power but no dispositive power, except in limited circumstances.
(14) Includes 3,250 shares that Mr. Malvaso may acquire within 60 days upon
exercise of stock options.
(15) Includes 12,340 shares that Mr. Marks may acquire within 60 days upon
exercise of stock options and 592 shares held by the ESOP trustee and
allocated to Mr. Marks's account, as to which Mr. Marks has sole voting
power but no dispositive power, except in limited circumstances.
(16) Includes 13,200 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.
(17) Includes 13,250 shares that Mr. Van Rees may acquire within 60 days upon
exercise of stock options.
(18) Includes 177,705 shares that members of the group may acquire within 60
days upon exercise of stock options and 5,468 shares allocated to the named
executive officers under the ESOP, as to which the named executive officers
may exercise voting power, but not dispositive power, except in limited
circumstances.
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PROPOSAL 1:
ELECTION OF DIRECTORS
We currently have eight Directors. Our By-Laws 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 By-Laws 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.
Director Philip S. Hill has indicated his intention to retire from the
Board following the expiration of his current term at this year's annual
meeting. Mr. Hill has served as a Director since 1968, ever since the Company
first became publicly traded. The entire Board of Directors thanks Mr. Hill for
his service to the Company and its shareholders and for his contributions over
the years.
The Board of Directors has reduced the size of the Board from eight to
seven, effective upon Mr. Hill's retirement.
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 2007 or
until his successor is duly elected and qualified.
THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS
THAT STOCKHOLDERS VOTE "FOR" THE ELECTION
OF THE NOMINEES TO SERVE AS DIRECTORS
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 the
nominees. 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 2007
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NAME AND BACKGROUND DIRECTOR SINCE TERM EXPIRES
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JERALD D. BIDLACK, age 68, 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.
JAMES J. MALVASO, age 53, 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.
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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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HELEN H. BERKELEY, age 75, is a private investor. 1998 2006
ALVARO CADENA, age 60, is President and Chief Executive 1993 2006
Officer. Mr. Cadena became Chief Executive Officer on
April 1, 1998.
WILLIAM C. DENNINGER, age 53, 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.
H. RUSSEL LEMCKE, age 64, 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, a company located in St. Louis,
Missouri engaged in the manufacture and sale of industrial
lubrication products and systems. He also serves as a
board member of Sensus Metering Systems, Inc., of Raleigh
North Carolina. Sensus is a global manufacturer of utility
metering products and systems.
CORNELIUS S. VAN REES, age 75, 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. Mr. Van Rees serves as
Secretary of the Company.
BOARD MEETINGS AND COMMITTEES OF THE BOARD
During Fiscal Year 2004, 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, Lemcke and Van Rees.
The Executive Committee did not meet during Fiscal Year 2004.
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 current charter for our Audit Committee sets
forth specifically the duties and responsibilities of the Committee and is
attached as Appendix A to this proxy statement. The members of the Audit
Committee are Directors Denninger (Chairman), Berkeley, Bidlack, Hill and
Lemcke. The Audit Committee held five meetings during Fiscal Year 2004.
The Board of Directors has determined that the Audit Committee has at least
one audit committee financial expert, Director William C. Denninger. Mr.
Denninger and each of the other members of the Audit Committee is "independent"
in accordance with the current listing standards of the American Stock Exchange.
The Audit Committee's report relating to Fiscal Year 2004 appears on page
16 of this proxy statement.
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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), Berkeley, Bidlack, Denninger and Hill. The
Employee Benefits Committee held two meetings during Fiscal Year 2004.
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 and
Van Rees. The Compensation Committee held two meetings during Fiscal Year 2004.
The Compensation Committee's report relating to Fiscal Year 2004 appears on page
13 of this proxy statement.
NOMINATING COMMITTEE
The Nominating Committee has authority to evaluate, interview and nominate
candidates for election to the Board of Directors. The Nominating Committee held
one meeting during Fiscal Year 2004. The members of the Nominating Committee are
Directors Van Rees (Chairman), Bidlack, Hill and Malvaso. All members of the
Nominating Committee are "independent" in accordance with the current listing
standards of the American Stock Exchange.
The charter of the Nominating Committee is attached as Appendix B to this
proxy statement.
In identifying and evaluating nominees for director, the Nominating
Committee seeks candidates possessing the highest standards of personal and
professional ethics and integrity; practical wisdom, independent thinking,
maturity and the ability to exercise sound business judgment; skills, experience
and demonstrated abilities that help meet the current needs of the Board; and a
firm commitment to the interests of stockholders.
In addition, the Nominating Committee will take into consideration such
other factors as it deems appropriate. These factors may include knowledge of
the Company's industry and markets, experience with businesses and other
organizations of comparable size, the interplay of the candidate's experience
with the experience of other Board members, and the extent to which the
candidate would be a desirable addition to the Board and any committees of the
Board. The Committee may consider, among other factors, experience or expertise
in some of the following areas: the heat-transfer industry, global business,
science and technology, competitive positioning, corporate governance, finance
or economics, public affairs.
Pursuant to our By-Laws, 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
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(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.
The Nominating Committee will evaluate nominees proposed by stockholders
using the same criteria, and in the same manner, as described above.
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). All Directors attended the Company's
2003 Annual Meeting of Stockholders.
COMMUNICATIONS FROM SECURITY HOLDERS
Stockholders may send communications to the Board, or to individual
directors, to the attention of: Cornelius S. Van Rees, Secretary, Graham
Corporation, 20 Florence Avenue, Batavia, New York 14020. The Secretary will
convey all such communications to the Board, or if addressed to an individual
member of the Board, to that director.
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. The
Chairman of the Audit Committee receives an additional annual fee of $5,000 and
the chairman of each other committee receives an additional annual fee of
$2,000.
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.
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 2004.
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During Fiscal Year 2004, each of our non-employee Directors on October 24,
2003 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 grant, pursuant to
the 2000 Graham Corporation Incentive Plan to Increase Shareholder Value.
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 60, 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 57, has been Vice President -- Finance &
Administration and Chief Financial Officer since 1993. He has been employed with
us since 1993.
JAMES R. LINES, age 43, is Vice President -- Marketing and Sales.
Previously he served as Vice President-Engineering. He has been employed with us
since 1984.
PHILIP MARKS, age 60, 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 52, is Vice President -- Engineering. Previously
he served as Vice President-Power & Marine Products. He has been employed with
us since 1973.
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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,
2004, the last day of Fiscal Year 2004 (collectively, the "named executive
officers").
- --------------------------------------------------------------------------------
ANNUAL LONG-TERM
COMPENSATION COMPENSATION
SECURITIES
NAME AND FISCAL UNDERLYING ALL OTHER
PRINCIPAL POSITION YEAR SALARY ($)(1) OPTIONS/SARS (#) COMPENSATION ($)(2,3,4,5,6)
- --------------------------------------------------------------------------------------------------------------
ALVARO CADENA 2004 234,978 6,000 113,160
President and 2003 234,978 6,000 14,050
Chief Executive Officer 2002 307,849 6,000 26,122
PHILIP MARKS 2004 120,922 3,000 4,010
Vice President -- 2003 118,456 3,000 7,540
Manufacturing 2002 128,547 3,000 7,541
J. RONALD HANSEN 2004 146,931 3,000 86,475
Vice President -- Finance & 2003 146,931 3,000 14,050
Administration and 2002 174,647 3,000 17,395
Chief Financial Officer
JAMES R. LINES 2004 137,966 3,000 43,132
Vice President -- Marketing 2003 137,966 3,000 7,442
and Sales 2002 163,977 3,000 19,726
STEPHEN P. NORTHRUP 2004 137,966 3,000 86,960
Vice President -- Engineering 2003 137,966 3,000 6,054
2002 173,977 3,000 18,626
- ---------------
(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 2003 and 2004. 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 -- $14,050 for Fiscal Year 2002 and $14,050
for Fiscal Year 2003; Mr. Marks -- $7,541 for Fiscal Year 2002 and $7,540
for Fiscal Year 2003; Mr. Hansen -- $8,032 for Fiscal Year 2002 and $8,032
for Fiscal Year 2003; Mr. Lines $6,577 for Fiscal Year 2002 and $4,417 for
Fiscal Year 2003; Mr. Northrup -- $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 2003 and 2004 and $10,385 for Fiscal Year
2002; Mr. Marks -- none for Fiscal Years 2003 and 2004 and $5,934 for Fiscal
Year 2002; Mr. Hansen -- none for Fiscal Years 2003 and 2004 and $8,403 for
Fiscal Year 2002; Mr. Lines -- none for Fiscal Years 2003 and 2004 and
$10,385 for Fiscal Year 2002; Mr. Northrup -- none for Fiscal Years 2003 and
2004 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 -- $146 for Fiscal Year 2002; Mr. Marks -- $86
for Fiscal Year 2002; Mr. Hansen -- $134 for Fiscal Year 2002; Mr. Lines --
$146 for Fiscal Year 2002; Mr. Northrup -- $116 for Fiscal Year 2002. None
of the named executive officers received shares under the ESOP in Fiscal
Years 2003 or 2004.
(5) Includes for Mr. Lines payment for published professional articles of $1,650
for Fiscal Year 2002, $3,025 for Fiscal Year 2003 and $1,375 for Fiscal Year
2004. Includes for Mr. Northrup payment in lieu of vacation of $2,576 for
Fiscal Year 2002 and a long-term service award of $5,306 for Fiscal Year
2004.
10
(6) Includes cash proceeds received in Fiscal Year 2004 upon termination of
split-dollar life insurance policies maintained by the Company as follows:
Mr. Cadena - $63,847, Mr. Hansen -- $86,475, Mr. Lines -- $41,757; Mr. Marks
-- $4,010; Mr. Northrup -- $81,654. Also includes the cash surrender value
of $49,313 for life insurance policies transferred by the Company to Mr.
Cadena as part of the Company's termination of its split-dollar insurance
benefit. The Company's termination of its split-dollar life insurance
program realized a tax benefit to the Company in Fiscal Year 2004 of
approximately $130,000 and brings an annual net cost saving of approximately
$48,000.
STOCK OPTIONS
The following table indicates the total number of stock options we granted
to each named executive officer during Fiscal Year 2004.
OPTION/SAR GRANTS DURING FISCAL YEAR 2004
- --------------------------------------------------------------------------------
POTENTIAL REALIZABLE
INDIVIDUAL GRANTS VALUE AT ASSUMED
PERCENT OF ANNUAL RATES OF
NUMBER OF TOTAL STOCK PRICE
SECURITIES OPTIONS/SARS EXERCISE APPRECIATION FOR
UNDERLYING GRANTED TO OR BASE OPTION TERM
OPTIONS/SARS EMPLOYEES IN PRICE EXPIRATION
NAME GRANTED (#)(1) FISCAL YEAR (%) ($/SHARE) DATE 5% ($) 10% ($)
- ----------------------------------------------------------------------------------------------------------------
ALVARO CADENA 6,000 20.7% 8.80 10/24/13 33,206 84,150
J. RONALD HANSEN 3,000 10.3% 8.80 10/24/13 16,603 42,075
JAMES R. LINES 3,000 10.3% 8.80 10/24/13 16,603 42,075
PHILIP MARKS 3,000 10.3% 8.80 10/24/13 16,603 42,075
STEPHEN P. NORTHRUP 3,000 10.3% 8.80 10/24/13 16,603 42,075
- ---------------
(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,
2004, the last day Fiscal Year 2004, and the value.
AGGREGATED OPTION/SAR EXERCISES IN FISCAL YEAR 2004
AND FISCAL YEAR-END OPTION/SAR VALUES
- --------------------------------------------------------------------------------
NUMBER OF SECURITIES VALUE OF UNEXERCISED
UNDERLYING UNEXERCISED IN-THE-MONEY
OPTIONS/SARS AT FISCAL OPTIONS/SARS
YEAR-END (#) AT FISCAL YEAR-END ($)(1)
SHARES ACQUIRED VALUE
NAME ON EXERCISE (#) REALIZED ($) EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
- -----------------------------------------------------------------------------------------------------------------
ALVARO CADENA -0- -0- 44,515 -0- 67,993 -0-
J. RONALD HANSEN 8,507 23,387 13,200 -0- 21,369 -0-
JAMES R. LINES 3,000 8,606 13,200 -0- 5,400 -0-
PHILIP MARKS -0- -0- 12,340 -0- 5,400 -0-
STEPHEN P. NORTHRUP 9,507 25,558 13,200 -0- 5,400 -0-
- ---------------
(1) Based on the closing price of our common stock on March 31, 2004, which was
$10.60 per share.
11
PENSION PLANS
The following table sets forth straight-life annuity amounts without regard
to offsets for social security benefits. Benefits listed in the table are
subject to a deduction of an amount equal to 50% of an eligible employee's
estimated primary social security benefit.
PENSION PLAN TABLE
- --------------------------------------------------------------------------------
YEARS OF SERVICE
REMUNERATION ($) 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 Fiscal Year
2003, $200,000 was the maximum amount of compensation that could be used as
the basis for determining benefits under applicable law; for Fiscal Year
2004 the amount was $205,000. For the Supplemental Plan (as defined below),
with respect to Fiscal Year 2003 only non-contingent compensation over
$200,000 was used as the basis for determining benefits and for Fiscal Year
2004 only non-continent compensation over $205,000.
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 2004 compensation that is taken
into account by the U.S. Retirement Income Plan for the purpose of calculating
future pension benefits is as follows: $205,000 for Mr. Cadena; $146,931 for Mr.
Hansen; $137,966 for Mr. Lines; $120,922 for Mr. Marks; and $137,966 for Mr.
Northrup.
The approximate years of creditable service as of June 11, 2004 of each of
the named executive officers eligible to participate in the U.S. Retirement
Income Plan are as follows: 35 years for Mr. Cadena; 11 years for Mr. Hansen; 20
years for Mr. Lines; 25 years for Mr. Marks; 30 years for Mr. Northrup.
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 $200,000 in 2003, or will exceed $200,000 in 2004, 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 2004 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.
Mr. Cadena and Mr. Hansen are each party to a Senior Executive Severance
Agreement with the Company. Each agreement provides that in the event of 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, Mr. Cadena and Mr. Hansen are each entitled to three years'
compensation, including bonuses, if his employment is terminated within two
years of such a change of control.
12
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
The members of our Compensation Committee during Fiscal Year 2004 were
Directors Lemcke (Chairman) Berkeley, Bidlack, Hill, Malvaso 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 2004, the Compensation Committee held the non-contingent
salaries of our Chief Executive Officer and of our other executive officers to
the level of the previous year. 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 2004
derived principally from the perceived need to limit increases in costs during a
period of difficult business conditions. The Compensation Committee considered
the need to continue to provide incentives for members of management and sought
to do so by granting stock options to the Chief Executive Officer and other
executive officers, as described below.
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 2004.
13
In Fiscal Year 2004, 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 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
14
SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
During Fiscal Year 2004, all of our Directors, executive officers and more
than 10% stockholders complied in a timely manner with the filing requirements
of Section 16(a) of the Securities Exchange Act of 1934, except for one late
report with respect to one transaction for each Director and executive officer.
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, 1999, to (b) the cumulative total return of
companies on the American Stock Exchange Market Value Index (the "AMEX Index")
over the same period and (c) a selection of peer group public companies, each of
which shares a Standardized Industrial Classification code with us and each of
which either competes with us as to one or more product lines or one or more
market segments (the "Peer Group").
COMPARISON OF 5 YEAR CUMULATIVE TOTAL RETURN
AMONG GRAHAM CORPORATION, THE AMEX MARKET VALUE (U.S. & FOREIGN) INDEX
AND A PEER GROUP(1)
[LINE GRAPH]
CUMULATIVE TOTAL RETURN
---------------------------------------------------------------------------------
31-MARCH-99 31-MARCH-00 31-MARCH-01 31-MARCH-02 31-MARCH-03 31-MARCH-04
Graham Corporation............. 100.00 87.50 111.88 137.50 96.05 137.72
Amex Market Value (U.S. &
Foreign)..................... 100.00 116.77 90.78 93.76 83.67 138.25
Peer Group..................... 100.00 85.94 141.69 198.76 76.21 135.62
- ---------------
(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.
15
This line graph assumes an investment of $100 on March 31, 1999 in (a) our
common stock, (b) the stocks comprising the AMEX Index and (c) the stocks of the
Peer Group public companies. Total returns assume the reinvestment of dividends.
Our stock performance may not continue into the future with the trends
similar to those depicted in the line graph above. We neither make nor endorse
any predictions as to our future stock performance.
REPORT OF THE AUDIT COMMITTEE
The Audit Committee oversees the Company's financial reporting process on
behalf of the Board of Directors and is directly responsible for the
compensation, appointment and oversight of the Company's independent auditors.
Management has the primary responsibility for the financial statements and the
reporting process. The Company's independent auditors, Deloitte & Touche LLP
("Deloitte & Touche"), are responsible for auditing the Company's financial
statements and expressing an opinion as to their conformity with accounting
principles generally accepted in the United States. Under its written charter,
the Audit Committee has the authority to conduct any inquiry appropriate to
fulfilling its responsibilities, has direct access to the independent auditors
as well as anyone in the Company, and has the ability to retain, at the
Company's expense, special legal, accounting, or other consultants or experts it
deems necessary in the performance of its duties.
The Audit Committee reviewed and discussed the audited financial statements
in the Annual Report with management and Deloitte & Touche. The Audit Committee
has also discussed and reviewed with Deloitte & Touche the matters required to
be discussed by Statements on Auditing Standards No. 61 -- "Communications with
Audit Committees", as amended. In addition, the Audit Committee obtained from
Deloitte & Touche the written disclosures and the letter required by
Independence Standard No. 1, "Independence Discussions with Audit Committees,"
as amended, by the Independence Standards Board and discussed with the auditors
any relationships that may impact their objectivity and independence. The Audit
Committee has also considered whether the provision of non-audit services by
Deloitte & Touche is compatible with maintaining their independence, and has
satisfied itself with respect to Deloitte & Touche's independence.
In reliance on the reviews and discussions referred to above, the Audit
Committee recommended to the Board of Directors (and the Board has approved)
that the audited financial statements be included in the Annual Report on Form
10-K for the year ended March 31, 2004 for filing with the Securities and
Exchange Commission.
Audit Committee:
William C. Denninger, Chairman
Helen H. Berkeley
Jerald D. Bidlack
Philip S. Hill
H. Russel Lemcke
16
PROPOSAL 2:
RATIFICATION OF INDEPENDENT AUDITORS
The Audit Committee of the Board of Directors has selected Deloitte &
Touche LLP as our independent auditors for Fiscal Year 2005. 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. The Company has
been advised by Deloitte & Touche LLP that they are independent auditors with
respect to the Company within the meaning of the Securities Exchange Act of
1934, as amended, and the rules and regulations promulgated under such act.
A representative from Deloitte & Touche LLP is expected to be at the annual
meeting, will have an opportunity to make a statement if he or she so desires
and will be available to respond to appropriate questions during the meeting.
FEES PAID TO DELOITTE & TOUCHE LLP
The Company paid the following fees to Deloitte & Touche LLP for fiscal
2004 and fiscal 2003:
- --------------------------------------------------------------------------------
FISCAL FISCAL
2004 2003
- ---------------------------------------------------------------------------------------
Audit Fees $ 84,030 $ 79,800
Audit-Related Fees 22,095 24,645
Tax Fees 44,453 58,118
All Other Fees 0 0
-------- --------
TOTAL $150,578 $162,563
======== ========
Audit fees include fees associated with the annual audit, reviews of the
Company's quarterly reports on Form 10-Q and reviews of the Company's
registration statements. Audit-related services generally include benefit plan
audits and review of accounting for benefit plan curtailment. Tax services
primarily include tax compliance and tax planning services. The Company did not
pay any fees to Deloitte & Touche LLP during the last two fiscal years for
financial system design and implementation.
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 adopted procedures for pre-approving all audit and
permitted non-audit services provided by the Company's independent auditor. The
Audit Committee annually pre-approves a list of specific services and categories
of services, subject to a specified cost level. Part of this approval process
includes making a determination on whether non-audit services are consistent
with the SEC's rules on auditor independence. The Audit Committee has delegated
pre-approval authority to the Chairman of the Audit Committee, subject to
reporting any such approvals at the next subsequent Audit Committee meeting. The
Audit Committee quarterly monitors the services rendered and actual fees paid to
the independent auditors to ensure such services are within the scope of
approval.
THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS THAT
STOCKHOLDERS VOTE "FOR" THE RATIFICATION OF THE APPOINTMENT
OF DELOITTE & TOUCHE LLP AS INDEPENDENT AUDITORS
17
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 11, 2004, pursuant to the terms of both a stock subscription
agreement executed by each participant in this plan and a note executed by each
such person, Mr. Cadena is indebted to us in the amount of $18,302, Mr. Hansen
is indebted to us in the amount of $13,063 and Mr. Northrup is indebted to us in
the amount of $12,466. Of the Director participants as of the same date, Mr.
Bidlack is indebted to us for $42,896, Mr. Hill for $25,736, Mr. Lemcke for
$44,684 and Mr. Van Rees for $ 42,896. The largest aggregate amount of
indebtedness to us by each participating officer since the beginning of our last
fiscal year was $156,406 for Mr. Cadena, $100,100 for Mr. Hansen and $100,100
for Mr. Northrup. The largest aggregate amount of indebtedness outstanding
during the fiscal year for each participating Director was $50,048 for Mr.
Bidlack, $30,028 for Mr. Hill, $51,836 for Mr. Lemcke and $50,048 for Mr. Van
Rees. 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 or his service as a Director ends.
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 or service as Director. Interest on each note is 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 that 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.
STOCKHOLDER PROPOSALS FOR 2005 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 2005, we must receive the proposal no later than March 1, 2005. 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
2005 annual meeting. Pursuant to our By-Laws, 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 2005 only if
written notice of the proposal is delivered to our corporate secretary by May
29, 2005, and if a stockholder complies with all of the other applicable
provisions of our By-Laws. All such stockholder notices should be delivered to
the following address: Graham Corporation, Attention: Corporate Secretary, 20
Florence Avenue, Batavia, New York 14020.
18
ANNUAL REPORT
A copy of our annual report containing financial statements for Fiscal Year
2004, 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 29, 2004
19
APPENDIX A
GRAHAM CORPORATION
CHARTER OF THE AUDIT COMMITTEE
OF THE BOARD OF DIRECTORS
MEMBERSHIP
Members of the Audit Committee shall be elected by the Board of Directors
and the Board of Directors shall elect the Committee Chair. The Audit Committee
shall consist of at least three directors, each of whom satisfies the
requirements of independence in accordance with applicable regulations of the
U.S. Securities and Exchange Commission and the rules of the American Stock
Exchange. Each member shall have the ability to read and understand the
Company's financial statements or shall be able to do so within a reasonable
time. At least one member of the Committee shall be an audit committee financial
expert in accordance with applicable regulations of the Securities and Exchange
Commission and at least one member (who may also serve as the audit committee
financial expert) shall have accounting or financial management experience, or
professional accounting certification, in accordance with the rules of the
American Stock Exchange.
PURPOSE
The Audit Committee shall represent and assist the Board of Directors in
overseeing: (a) the integrity of the Company's financial statements and internal
controls, (b) the Company's compliance with legal and regulatory requirements,
(c) the independent auditor's qualifications and independence, (d) performance
of the Company's independent auditor and (e) planning for the Company's internal
audit function as required by applicable law and subsequently the performance of
that function.
AUTHORITY AND RESPONSIBILITIES
The Audit Committee shall:
1. Have authority and direct responsibility to appoint, compensate, retain,
terminate and oversee the work of the public accounting firm engaged by the
Company to conduct the annual audit. This firm will report directly to the
Audit Committee.
2. Have authority and direct responsibility to resolve any disagreements
between management and the auditor regarding financial reporting.
3. Pre-approve all auditing services and permitted non-audit services to be
performed by the independent auditor and establish policies and procedures
for the engagement of the independent auditor to provide permitted
non-audit services. The Committee may delegate to one or more Committee
members the authority to pre-approve such non-audit services between
regularly scheduled meetings provided that such approvals are reported to
the full Committee at the next Committee meeting.
4. Obtain and review at least annually written periodic reports from the
independent auditor describing the auditing firm's internal quality-control
procedures.
5. At least annually, consider the independence of the independent auditor
and for this purpose (a) obtain from the Company's independent auditor a
formal written statement delineating all relationships between the auditor
and the Company, consistent with Independence Standards Board Standard 1;
(b) discuss with the auditor any disclosed relationships or services that,
in the Committee's judgment, may affect the objectivity or independence of
the auditor; and (c) as the Committee from time to time may determine to be
necessary or desirable, take or recommend to the Board of Directors to take
appropriate action to oversee the auditor's independence.
6. Review with the independent auditor: (a) the scope and results of the
audit; (b) any problems or difficulties that the auditor encountered in the
course of the audit work, and management's response; and (c) any questions,
comments or suggestions the auditor may have relating to the internal
controls, accounting practices or procedures of the Company or its
subsidiaries. Obtain and review timely reports from the independent auditor
on other material written communications between management and the
independent auditor such as any management letter or schedule of unadjusted
differences.
A-1
7. Review, prior to implementation, proposals by management of the Company
to comply with requirements for internal auditing and review any
significant matters contained in reports from Company personnel involved in
planning for such compliance.
8. Following adoption by the Company of procedures to comply with internal
auditing requirements, review at least annually with the independent
auditor, the Company's principal internal audit staff, and management: (a)
the adequacy and effectiveness of the systems of internal controls
(including any significant deficiencies and significant changes in internal
controls reported to the Audit Committee by the independent auditor or
management), accounting practices, and disclosure controls and procedures
(and management reports thereon), of the Company and its subsidiaries; and
(b) current accounting trends and developments, and take such action with
respect thereto as may be deemed appropriate.
9. Review with management and the independent auditor the annual and
quarterly financial statements of the Company, including: (a) the Company's
disclosures under "Management's Discussion and Analysis of Financial
Condition and Results of Operations"; (b) any material changes in
accounting principles or practices used in preparing the financial
statements prior to the filing of a report on Form 10-K or 10-Q with the
Securities and Exchange Commission; and (c) the items required by Statement
of Auditing Standards 61 as amended by Statements 89 and 90 and as in
effect at that time in the case of the annual statements and Statement of
Auditing Standards 71 as in effect at that time in the case of the
quarterly statements.
10. Recommend to the Board of Directors, based on the review described in
paragraphs 5 and 9 above, whether the financial statements should be
included in the annual report on Form 10-K.
11. Review earnings press releases, as well as Company policies with
respect to earnings press releases, financial information and earnings
guidance provided to analysts and rating agencies.
12. Discuss Company policies with respect to risk assessment and risk
management, and review contingent liabilities and risks that may be
material to the Company and major legislative and regulatory developments
which could materially affect the Company's contingent liabilities and
risks.
13. Review: (a) the status of compliance with laws, regulations, and
internal procedures including the Company's Code of Ethics; and (b) the
scope and status of systems designed to promote Company compliance with
laws, regulations and internal procedures, on the basis of reports from
management, legal counsel and third parties as determined by the Audit
Committee.
14. Discuss with the independent auditor the required communications with
audit committees as prescribed by the Auditing Standards Board.
15. Discuss with the independent auditor whether it has identified the
existence of any issues of the type described in Section 10A of the
Securities Exchange Act of 1934 (concerning detection of illegal acts).
16. Establish procedures for: (a) the receipt, retention, and treatment of
complaints received by the Company regarding accounting, internal
accounting controls, or auditing matters; and (b) the confidential,
anonymous submission by employees of the Company of concerns regarding
questionable accounting or auditing matters.
17. Have authority to engage and compensate independent counsel,
accountants and other advisers, as it deems necessary to carry out its
duties.
18. Have free and confidential access at any time to the management of the
Company, the controller, staff members involved in any internal auditing
process the Company may adopt and the Company's general counsel; and all
such individuals shall have free and confidential access to the Audit
Committee.
19. Review disclosures made by the chief executive officer and chief
financial officer in Forms 10-K and 10-Q certifications regarding
deficiencies in the design or operation of internal controls or any fraud
that involves management or other employees who have a significant role in
the Company's internal controls.
20. Review and oversee any related party transactions.
21. At least annually, review and assess the adequacy of this Charter and
conduct a performance evaluation of the Audit Committee.
22. Prepare the report required by the rules of the Securities and Exchange
Commission to be included in the Company's annual proxy statement.
23. Have all responsibilities and authority required by Rule 10A-3 under
the Securities Exchange Act of 1934, to the extent not otherwise explicitly
provided in this Charter.
A-2
MEETINGS AND PROCEDURES
The Audit Committee shall meet at least quarterly, and at such other times
as it deems necessary to fulfill its responsibilities. The Audit Committee
periodically shall meet separately, in executive session, with management, the
independent auditor and with such staff members as the Committee may deem
appropriate who are involved in any internal auditing processes the Company may
adopt.
The Audit Committee shall report regularly to the Board of Directors with
respect to its activities and make recommendations to the Board of Directors as
appropriate.
MATTERS OUTSIDE THE SCOPE OF COMMITTEE'S RESPONSIBILITY
It is not intended for the Audit Committee to be responsible for any of the
following matters, and no provision of this Charter should be so construed:
- planning, directing or conducting audits;
- determining whether the Corporation's financial statements are complete
and accurate and in accordance with generally accepted accounting
principles;
- ensuring compliance with laws and regulations or any business ethics
policies adopted by the Corporation.
A-3
APPENDIX B
GRAHAM CORPORATION
CHARTER OF THE NOMINATING COMMITTEE
OF THE BOARD OF DIRECTORS
MEMBERSHIP
Members of the Nominating Committee shall be designated by the Board of
Directors and the Board of Directors shall elect the Committee Chair. Election
of Committee members and election of the Chair in each case shall be by a vote
of at least seventy-five percent (75%) of the entire Board of Directors. The
Nominating Committee shall consist of at least three directors, but no more than
five, each of whom satisfies the requirements of independence in accordance with
applicable regulations of the U.S. Securities and Exchange Commission and the
rules of the American Stock Exchange. The Board may remove a member of the
Nominating Committee from the Committee, with or without cause, only by a vote
of at least seventy-five per cent (75%) of the entire Board at any regular or
special meeting of the Board called for that purpose.
PURPOSE
The purpose of the Nominating Committee is to select nominees for election
to the Board of Directors, in accordance with the provisions of the By-Laws of
the Corporation and of this Charter.
AUTHORITY, RESPONSIBILITIES AND PROCEDURES
1. The Nominating Committee shall interview candidates for the Board of
Directors and review their qualifications.
2. One-third of the members of the Committee, but in no event fewer than
two (2) members, shall constitute a quorum.
3. No member of the Nominating Committee shall vote on his or her own
nomination.
4. Each year the Committee shall deliver written nominations to the
Secretary of the Corporation at least sixty (60) days prior to the date of
the Corporation's annual meeting, except as otherwise provided herein.
5. Should a person nominated for election at an annual meeting become
unwilling or unable to stand for election to the Board prior to election,
the Nominating Committee may designate a substitute nominee upon delivery,
not fewer than five (5) days prior to the date of the meeting for the
election of such nominee, of a written notice to the Secretary of the
Corporation. Such notice shall include a written consent of any such
substitute nominee to serve as a director of the Corporation.
6. With respect to any vacancy on the Board of Directors that may occur
from time to time, the Nominating Committee shall interview and review the
qualifications of any candidate or candidates to fill the vacancy and shall
report the name of its nominee to the Secretary of the Corporation prior to
the Board vote to fill any such vacancy.
7. Upon request from the Board of Directors, with respect to any person it
nominates the Committee shall report to the Board: (i) the name, age,
business address and residence address of the nominee, (ii) the principal
occupation or employment of the nominee, (iii) the nominee's written
consent to serve as a director, if elected, and (iv) such other information
regarding the nominee as would be required to be included in a proxy
statement filed pursuant to the proxy rules of the Securities and Exchange
Commission.
8. No nominee other than a person nominated by the Committee shall be voted
upon at any annual meeting of shareholders, except for nominations by
shareholders that are made in accordance with the provisions for
shareholder nominations set forth in the By-Laws of the Corporation.
9. The Committee shall issue, for purposes of disclosure in the Company's
annual proxy statement, a policy statement describing the Committee's
process for evaluating and identifying nominees, including any specific,
minimum qualifications it may require of a nominee and any specific skills
or qualities it may require of a nominee. The Committee shall review this
statement annually and revise it as the Committee deems necessary or
desirable.
10. The Committee will review this Charter annually and recommend any
proposed changes to the Board for approval.
B-1
GRAHAM CORPORATION
20 FLORENCE AVENUE
P.O. BOX 719
BATAVIA, NEW YORK 14021-0719
www.graham-mfg.com
PROXY 2004
GRAHAM CORPORATION
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
The undersigned hereby appoints Helen H. Berkeley 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 RIT Inn &
Conference Center, 5257 West Henrietta Road, Rochester, New York on Thursday,
July 29, 2004 at 11:00 a.m., and any adjournment thereof, and to vote in
accordance with the following instructions the number of shares the undersigned
would be entitled to vote if personally present at such meeting:
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ADDRESS CHANGE/COMMENTS (Mark the corresponding box on the reverse side)
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THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR THE NOMINEES AND FOR RATIFICATION
OF THE APPOINTMENT OF INDEPENDENT AUDITORS.
Please Mark Here for / /
Address Change or
Comments
SEE REVERSE SIDE
1. Election of Directors FOR nominee(s) listed WITHHOLD
except as marked to AUTHORITY
the contrary for all nominees
01 Jerald D. Bidlack to serve until 2007 / / / /
02 James J. Malvaso to serve until 2007
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, 2005. / / / / / /
3. In their discretion, to vote upon all other
matters 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.
Please sign exactly as name(s) appears on this proxy and return it promptly
whether you plan to attend the meeting or not. If you do attend, you may, of
course, vote in person. The space below may be used for any questions or
comments you may have.
/ / To help our preparation for the meeting, please check here if you plan
to attend.
Signature _____________________ Signature _____________________ Date __________
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 29, 2004
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 11, 2004
(the "Record Date") at the Annual Meeting of Stockholders of the Corporation
(the "Annual Meeting") to be held at the RIT Inn & Conference Center, 5257 West
Henrietta Road, Rochester, New York on July 29, 2004 at 11:00 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
29, 2004, the Committee will give voting directions to the Trustee of the Plan.
Such directions will reflect the voting instructions filed by the Instructor on
this Confidential Voting Instruction, in the manner described in the
accompanying letter from the Committee dated June 29, 2004.
As to other matters which may properly come before the Annual Meeting,
the Trustee will be instructed to vote upon such matters in its discretion, or
cause such matters to be voted upon in the discretion of the individuals named
in any proxies executed by it.
The instructions set forth on the reverse side hereof will be taken
into account as described above in directing the Trustee of the Plan how to vote
the Shares of the Corporation held by it as of the Record Date in its capacity
as Trustee, provided this card is received by the Burke Group by July 16, 2004.
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 6/11/04) 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,
FOR WITHHOLD 2004 through March 31, 2005.
FOR A THREE-YEAR TERM
FOR AGAINST ABSTAIN*
Jerald D. Bidlack | | | |
James J. Malvaso | | | | | | | | | |
- -----------------------------------------------------------------------------------------------------------------------------------
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 29,
2004, 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.
EMPLOYEE BENEFITS COMMITTEE
June 29, 2004
Dear Plan Accountholder:
The Employee Stock Ownership Plan of Graham Corporation ("ESOP") has a related
trust (the "ESOP Trust") which owns common stock of Graham Corporation
("Graham"). GreatBanc Trust Company as trustee of the ESOP is a stockholder of
Graham and may vote on matters presented for stockholder action at Graham's 2004
Annual Meeting of Stockholders scheduled to be held on July 29, 2004 ("Annual
Meeting").
The ESOP Trust provides that in casting its vote at the 2004 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 11, 2004.
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 2004 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:
ANTICIPATED PROPOSALS
If Graham Common Stock Was Allocated to Your Account Under the ESOP Trust as of
June 11, 2004
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 11,
2004 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 11, 2004. If you do not file the
Instruction Card by July 16, 2004, you will be deemed to have instructed the
ESOP Trustee to ABSTAIN as to all proposals.
UNANTICIPATED PROPOSALS
- 2 -
It is possible, although very unlikely, that proposals other than those
specified on the Instruction Card will be presented for stockholder action at
the 2004 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 2004
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
ca
Enclosures