Exhibit 10.16

SETTLEMENT AGREEMENT

 

This SETTLEMENT AGREEMENT (the “Agreement”) is made as of July 31, 2018 by and
among ESPEY MFG. & ELECTRONICS CORP., a New York corporation (“Espey”), THE
ARTICLE 6 MARITAL TRUST UNDER THE FIRST AMENDED AND RESTATED JERRY ZUCKER
REVOCABLE TRUST DATED APRIL 2, 2007 (the “Zucker Trust”), and PAUL J. CORR,
MICHAEL WOOL, BARRY PINSLEY, CARL HELMETAG, HOWARD PINSLEY, and ALVIN O. SABO,
in their individual capacities (each, a “Director” and collectively, the
“Directors”). All of the foregoing are each, a “Party” and collectively, the
“Parties.”

 

Recitals:

 

A.       Espey is a corporation whose common stock is publicly traded on the
NYSE American market.

 

B.       The Zucker Trust is a shareholder of Espey, beneficially owning 93,000
shares of the Espey common stock as of the date hereof.

 

C.       The Directors are members of the Board of Directors of Espey.

 

D.       The Zucker Trust has asserted various claims against Espey and the
Directors pertaining to matters of corporate governance and director
compensation.

 

E.       The Parties have agreed to settle such claims in accordance with the
terms and conditions of this Agreement.

 

NOW, THEREFORE, in consideration of the foregoing, the Parties hereby agree as
follows:

 

1.       Confirmation by Espey. Espey confirms the prior action of its Board of
Directors resolving that subsequent to January 31, 2019, non-employee directors
shall no longer be eligible to participate in company-sponsored medical health
insurance programs, thereby eliminating contributions by Espey for health
insurance for the benefit of non-employee directors.

 

2.       Additional Agreements by Espey.

 

(a)       Effective upon the execution and delivery of this Agreement by all of
the Parties:

 

(i)       The Retired Director Compensation Program, as most recently amended
effective June 2, 2017, in effect for director Barry Pinsley, is terminated;

 

(ii)       The Director Contingent Severance Compensation Program, adopted March
2, 2018, is terminated;

 

(iii)       Espey shall pay to the attorney trust account of Kohrman Jackson
Krantz, on account of attorneys’ fees incurred by the Zucker Trust in connection
with the subject matter of this Agreement, $5,000; and

 

(iv)       Espey shall, within the applicable time limit, file with the United
States Securities and Exchange Commission (“SEC”), a report on Form 8-K
reporting the Parties’ entry into this Agreement.

 

(b)       Espey shall not implement any increase to the compensation paid to
non-employee members of its Board of Directors at any time effective from
December 31, 2017 through December 31, 2022, except for a single increase in
directors’ fees which may be implemented during such period in an amount
consistent with past practice

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3.       Agreement by the Directors. By the execution of this Agreement:

 

(i)       Barry Pinsley hereby agrees to the termination of his Retired Director
Compensation Program and Mandatory Retirement Agreement dated May 10, 2011 with
Espey; and

 

(ii)       Each of the other Directors hereby agree to the termination of their
respective Director Contingent Severance Compensation Agreements dated March 2,
2018 with Espey.

 

4.       Agreements by the Zucker Trust. The Zucker Trust:

 

(i)       Confirms the withdrawal of a shareholder proposal submitted to Espey
under cover of a letter dated May 16, 2018 and the filing with the SEC of a
notification of such withdrawal; and

 

(ii)       Agrees that it will neither personally, nor encourage any other
shareholder of Espey to, submit a shareholder proposal concerning any matter
pertaining to Espey director compensation or director term of service for any
meeting of Espey shareholders to be held through the year 2022.

 

5.       Representations and Warranties. Each of Espey and the Zucker Trust
represents and warrants that this Agreement has been authorized by all requisite
corporate or trust action, as applicable, and has been duly executed and
delivered by an authorized person.

 

6.       Release. As used herein “Claims” means the allegations made against
Espey and the Directors under cover of a letter of the law firm Kohrman Jackson
Krantz dated June 22, 2018 arising from actions taken by Espey and/or the
Directors before that date. The Zucker Trust on behalf of itself and its
beneficial owners, hereby releases and forever discharges and holds harmless
Espey, the Directors, and each of Espey’s past, present and future employees,
stockholders, officers, directors, agents, representatives, and their respective
successors and assigns (collectively, the “Released Parties”), jointly and
severally, from any and all claims, causes of action, remedies, damages,
liabilities, debts, suits, demands, actions, costs, expenses, fees,
controversies, set-offs, third party actions or proceedings of whatever kind or
nature, whether at law, equity, administrative, arbitration or otherwise,
whether known or unknown, foreseen or unforeseen, accrued or unaccrued,
suspected or unsuspected, which it may now have, has ever had, or in the future
has, against any and each of the Released Parties arising directly or indirectly
from or in any way related to the Claims. In furtherance, but not in limitation
of the foregoing, the Zucker Trust covenants that it will not file a lawsuit
against Espey, the Directors, or any of Espey’s other directors, officers,
employees, attorneys or other representatives, asserting claims based upon the
same or similar allegations to the Claims.

 

7.       No Admission of Liability. The execution of this Agreement by Espey and
the Directors shall not be construed as an admission of any allegation of
liability or wrongdoing by any of them.

 

8.       Confidentiality. Except for the filing by Espey of a report on Form 8-K
as contemplated by this Agreement, unless written consent is granted, no Party,
nor any of their respective attorneys, agents or representatives shall disclose
this Agreement or discuss the terms hereof with any third party. However, the
information in this Agreement may be communicated to the Parties’ attorneys, and
other professional advisors.

 

9.       Knowing and Voluntary Agreement. The Parties represent and acknowledge
that they have had a reasonable amount of time to consider this Agreement, have
had the opportunity to consult with counsel, and that in executing this
Agreement rely entirely upon their own judgment, beliefs and interests and the
advice of their counsel, and they do not rely and have not relied upon any
representation or statement made by the other Parties, or by any agents,
representatives or attorneys of the other Parties, with regard to the subject
matter, basis or effect of this Agreement or otherwise, other than as
specifically stated in this Agreement. The Parties specifically acknowledge that
all agreements and releases contained herein are knowing and voluntary.

 

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10.       Miscellaneous.

(a)       This Agreement shall be binding upon and inure to the benefit of the
Parties and their respective legal representatives, agents, successors, assigns,
heirs, and executors.

 

(b)       This Agreement contains the entire agreement between the Parties with
respect to the subject matter, and supersedes all prior agreements or
understandings dealing with the same subject matter.

 

(c)       The validity, effect and performance of this Agreement and the
obligations and rights of the Parties shall be determined and governed by the
laws of the State of New York.

 

(d)       No modification or amendment of this Agreement will be enforceable
unless it is in writing and signed by the Party to be charged.

 

(e)       Any dispute under this Agreement that cannot be resolved by the
Parties through good faith negotiations within thirty (30) days of notification
by one Party of the commencement of the dispute resolution procedures under this
paragraph will, upon the written request of any Party, be exclusively resolved
by final and binding arbitration, before a single arbitrator, in accordance with
the rules of the American Arbitration Association for commercial disputes. The
arbitration shall be conducted in New York, New York, or such other location as
shall be agreed upon by the Parties. Judgment upon the award rendered by the
arbitrators may be entered by any court having jurisdiction. The Parties to the
arbitration proceeding shall share the costs of the arbitration.

 

(f)       This Agreement may be executed in counterparts, all of which together
shall constitute a fully-signed agreement.

 

[Signatures contained on the next page]

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IN WITNESS WHEREOF,      the Parties have executed this Agreement as of the date
first above written.

 

  ESPEY MFG. & ELECTRONICS CORP.       By: /s/ Patrick T. Enright, Jr.     Name
Patrick T. Enright, Jr.     Title: President and Chief Executive Officer        
  THE ARTICLE 6 MARITAL TRUST UNDER THE FIRST AMENDED AND RESTATED JERRY ZUCKER
REVOCABLE TRUST DATED APRIL 2, 2007       By: /s/ Anita G. Zuker     Name:  
Anita G. Zucker     Title:    Trustee           /s/ Paul J. Corr   Paul J. Corr,
Individually       /s/ Michael W. Wood   Michael W. Wool, Individually          
/s/ Barry Pinsley   Barry Pinsley, Individually           /s/ Howard Pinsley  
Howard Pinsley, Individually           /s/ Carl Helmetag   Carl Helmetag,
Individually           /s/ Alvin O. Sabo   Alvin O. Sabo, Individually

 

 

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