EMPLOYMENT AGREEMENT

THIS EMPLOYMENT AGREEMENT, dated as of 01/06, 2015 (the “Agreement”), is entered
into by and between ESPEY MFG. & ELECTRONICS CORP., a New York corporation (the
“Company”), and PATRICK ENRIGHT, JR. (the “Executive”).

WHEREAS, the Company desires to enlist the services and employment of the
Executive on behalf of the Company as its President and Chief Executive Officer,
and the Executive is willing to render such services on the terms and conditions
set forth herein (“Employment”).

NOW, THEREFORE, in consideration of the mutual covenants contained herein, the
parties hereto agree as follows:

1.           Employment Term. Except for earlier termination as provided for in
Section 5 hereof, the Company hereby agrees to employ the Executive, and the
Executive hereby agrees to be employed by the Company, subject to the terms and
provisions of this Agreement, for the period commencing on or before February 1,
2015 (the “Effective Date”) and ending on the 3rd anniversary of such date (the
“Employment Term”); provided, however that the Employment Term shall be extended
for one additional year, unless either party gives prior written notice to the
other, at least sixty (60) days before the end of the then current term,
electing not to renew this Agreement. Executive shall be designated by the Board
to fill a vacancy on the Board without any additional compensation as a Class B
Director, and at the Company’s 2015 Annual Meeting shall stand for election as a
Class B Director for the remainder of the term expiring at the 2016 Annual
Meeting.

2.           Extent of Employment.

(a)           Duties. During the Employment Term, the Executive shall serve as
President and Chief Executive Officer of the Company. In his capacity as
President and Chief Executive Officer, the Executive shall report solely to the
Company’s Board of Directors (the “Board”) and shall perform such senior
executive duties, services, and responsibilities on behalf of the Company
consistent with such position as may be assigned to the Executive from time to
time by the Board. During the Employment Term Executive shall serve on the Board
without additional compensation and subject to paragraph 5(d) herein.

(b)           Exclusivity. During the Employment Term, the Executive shall
devote his full business time, attention, and skill to the performance of such
duties, services, and responsibilities, and shall use his best efforts to
promote the interests of the Company, and the Executive shall not engage in any
other business activity without the approval of the Board. The Board may grant
or withhold its approval in its exclusive discretion. The Executive shall be
permitted to serve on industry, trade, civic or charitable boards or committees,
and engage in charitable activities and community affairs to the extent such
service and activities do not interfere with his Employment.

(c)           Place of Employment. During the Employment Term, the Executive
shall perform his services hereunder in, and shall be headquartered at, the
principal offices of the Company in Saratoga Springs, New York, except for
business travel related to business and activities of the Company.

 

 

3.           Compensation and Benefits.

(a)           Base Salary. During the Employment Term, in full consideration of
the performance by the Executive of the Executive’s obligations hereunder
(including any services as an officer, employee, or member of any committee of
any affiliate of the Company, or otherwise on behalf of the Company), the
Executive shall receive from the Company a base salary (the “Base Salary”) at an
annual rate of $240,000 per year, payable in accordance with the normal payroll
practices of the Company then in effect. The Base Salary shall be subject to
annual review by the Board or the Compensation Committee of the Board. Pursuant
to such annual review the Base Salary, as then currently in effect, may be
adjusted (but not decreased), at the discretion of the Board.

(b)           Annual Bonus. During the Employment Term, the Executive shall also
receive, in respect of each fiscal year during which the Employment Term is in
effect, a performance-based cash bonus (the “CEO Annual Bonus”) as determined
and payable in accordance with Exhibit A hereto. The CEO Annual Bonus is in lieu
of any other bonus program which may be available to other management employees
of the Company. For fiscal year ending June 30, 2015, the CEO Annual Bonus will
be based only on Sections (a) Discretionary and (d) Miscellaneous of Exhibit A,
however for fiscal year ending June 30, 2015 the CEO Annual Bonus shall not be
less than $25,000. The fixing of a minimum CEO Annual Bonus for the fiscal year
ending June 30, 2015 shall not give rise to an implication that the Executive
has an entitlement to a minimum bonus for any future fiscal year.

(c)           Equity Compensation. The Executive shall be a participant in the
Company’s Employee Retirement Plan and Trust (“ESOP”) in accordance with the
terms and conditions of the ESOP. Beginning in fiscal year 2016, the Executive
shall be entitled to the award of stock options or other stock-based rights by
the Board from time to time in its discretion. As of the Effective Date the
Executive shall be granted options for 10,000 shares of the Company’s common
stock at the closing price as quoted on the NYSE Market on such date and subject
in all respects to the terms of the Company Stock Option Plan. For fiscal year
ending June 30, 2015 Executive shall not be entitled to receive any other Equity
Compensation.

(d)           Benefits. During the Employment Term, the Executive and his
eligible dependents shall be entitled to participate in the employee health and
benefit plans, policies, programs, and arrangements as may be amended from time
to time, on the same terms as senior executives of the Company to the extent the
Executive meets the eligibility requirements for any such plan, policy, program,
or arrangement.

(e)           401(k) Retirement. During the Employment Term, the Executive shall
be entitled to participate in the Company 401(k) retirement plan on the same
terms as all other Company employees.

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(f)           Vacation. During the Employment Term, four weeks of paid vacation
during each fiscal year to be used in accordance with the Company’s policies in
effect from time to time. For fiscal year ending June 30, 2015 the Executive’s
paid vacation shall be prorated (based on the number of days worked).
Executive’s right to carry forward vacation time from year to year and/or be
paid for unused vacation shall be in accordance with the Company’s policies in
effect from time to time.

(g)           Relocation Expenses Reimbursement and Signing Bonus. The Company
shall pay all of the Executive’s ordinary and necessary expenses incidental to
relocating from his current residence in Wisconsin, including but not limited to
(i) travel and lodging for Executive and his family to and from Executive’s
current residence to the locale of his proposed new residence in connection with
Executive’s search for a new residence, (ii) the payment of any brokerage
commissions in connection with the sale of Executive’s current residence and the
purchase of a new residence, (iii) all moving costs, including shipping of
household items and family vehicles, and all transportation costs, and
(iv) temporary lodging of up to six (6) months in connection with acquiring a
new residence (collectively, the “Relocation Benefit”). The foregoing shall not
exceed in the aggregate $100,000 and shall expire December 31, 2015. To the
extent the Relocation Expenses are less than $100,000 the Executive shall be
entitled to receive the difference as a Signing Bonus. In no event shall the
Relocation Expense Benefit/Reimbursement and Signing Bonus exceed $100,000 in
aggregate.

(h)           Expense Reimbursement. In addition to and not in lieu of any other
payments to be made to the Executive hereunder, the Company shall reimburse the
Executive for reasonable and documented business expenses incurred by the
Executive during the Employment Term in accordance with the Company’s expense
reimbursement policies then in effect, including but not limited to all travel,
lodging and meal expenses in connection with Executive’s travel in connection
with providing his services hereunder.

4.           Withholding. The Executive shall be solely responsible for taxes
imposed on the Executive by reason of any compensation and benefits provided
under this Agreement, during the Employment Term and thereafter, all such
compensation and benefits shall be subject to applicable withholding as
determined by the Company and the Executive shall cooperate with the Company, as
necessary, to enable the Company to discharge its withholding obligations.

5.           Termination.

(a)           Events of Termination. The Executive’s employment with the Company
and the Employment Term shall terminate upon the expiration of the Employment
Term or upon the earlier occurrence of any of the following events (the date of
termination, the “Termination Date”):

(i)           The termination of employment by reason of the Executive’s death.

(ii)           The termination of employment by the Company for Cause.

(iii)           The termination of employment by the Company for Disability.

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(iv)           The termination of employment by the Company other than for
Cause.

(v)           The termination of employment by the Executive.

(b)           Certain Definitions. For purposes of this Agreement:

(i)           “Disability” means: (A) the Executive’s disability as determined
under the long-term disability plan of the Company as in effect from time to
time; or (B) if no such plan is in effect, the inability of the Executive to
perform his duties, services, and responsibilities hereunder by reason of a
physical or mental infirmity, as reasonably determined by the Board, for a total
of 120 days in any twelve-month period during the Employment Term.

(ii)           “Cause” means: (A) the failure of the Executive to perform his
duties or his negligent performance of such duties (other than any such failure
due to the Executive’s physical or mental illness) that has caused or is
reasonably expected to result in injury to the Company or any of its affiliates;
(B) the Executive having engaged in misconduct that has caused or is reasonably
expected to result in injury to the Company or any of its affiliates; (C) a
violation by the Executive of a Company policy that has caused or is reasonably
expected to cause an injury to the Company; (D) the breach by the Executive of
any of his obligations under this Agreement; (E) failure by the Executive to
timely comply with a lawful and reasonable direction or instruction given to him
by the Board; or (F) Executive having been convicted of, or entering a plea of
guilty or nolo contendere to a crime; provided however, notwithstanding the
foregoing, that in the case of clauses (A)–(E), before the Company shall have
the right to terminate the Executive for Cause, (i) the Company shall first be
required to give the Executive 10 days’ prior written notice (the “Notice
Period”) of such action, which written notice (the “Breach Notice”) shall set
forth in the nature of Executive’s alleged breach, and, if such action is
capable of being cured, the Executive shall not have cured such action to the
satisfaction of the Company within the Notice Period; thereafter, the
termination shall take effect with no further action required of the Company.

(c)           Cooperation. In the event of termination of the Executive’s
employment for any reason (other than death), the Executive, at no cost to
Executive, shall cooperate with the Company and to be available to the Company
for a reasonable period of time thereafter with respect to matters arising out
of the Executive’s employment hereunder or any other relationship with the
Company, whether such matters are business-related, legal, or otherwise.

(d)           Resignation from All Positions. Upon termination of the
Executive’s employment for any reason, the Executive shall be deemed to have
resigned from all other positions with the Company including, without
limitation, as an officer and director, as applicable.

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6.           Termination Payments. The Executive shall be entitled to certain
payments upon termination of his employment as follows:

(a)           Termination for Cause; Voluntary Termination by Executive. In the
event that the Executive’s employment is terminated for Cause or the Executive
voluntarily terminates his employment, the Executive shall be entitled to
receive only: (i) any accrued and unpaid Base Salary as of the Termination Date;
and (ii) all accrued and unpaid benefits under any benefit plans, policies,
programs, or arrangements in which the Executive participated as of the
Termination Date in accordance with the applicable terms and conditions of such
plans, policies, programs, or arrangements (all of the foregoing, collectively,
the “Accrued Compensation”). In the event of termination for cause or voluntary
termination by Executive there shall be No CEO Annual Bonus.

(b)           Termination for Death or Disability. In the event that the
Executive’s employment is terminated pursuant to Section 5(a)(i) or 5(a)(iii)
hereof, the Executive shall be entitled to receive: (i) the Accrued
Compensation; and (ii) as provided in the CEO Annual Bonus.

(c)           Termination without Cause. In the event that the Executive’s
employment is terminated pursuant to Section 5(a)(iv) hereof, the Executive
shall be entitled to receive: (i) the Accrued Compensation; (ii) as provided in
the CEO Annual Bonus; (iii) severance pay (“Severance Pay”) equal to 6 months of
Base Salary at the rate in effect on the Termination Date. The severance pay
contemplated by clause (iii) of the immediately preceding sentence shall be paid
in equal installments in accordance with the Company’s regular payroll
practices, commencing on the first payroll period following the thirtieth day
after the Termination Date; (iv)to the extent available, continuation of medical
benefits for a period of 6 months (from Termination Date). Severance Pay shall
be paid only under this Section 6(c).

(d)           Release. Notwithstanding any other provision of this Agreement, no
Severance Pay or other benefits shall become payable under Section 6(c) of this
Agreement unless and until the Executive executes a general release of claims
substantially similar to the form of release annexed hereto as Exhibit B, and
such release has become irrevocable within 30 days following the Termination
Date, provided that the Executive shall not be required to release any
indemnification rights that he may have under the Company’s Certificate of
Incorporation or By-Laws.

(e)           Full Satisfaction. The payments to be provided to the Executive
pursuant to this Section 6 upon termination of the Executive’s employment shall
constitute the exclusive payments in the nature of severance or termination pay
or salary continuation that shall be due to the Executive upon a termination of
employment, and shall be in lieu of any other such payments under any plan,
program, policy, or other arrangement that has heretofore been or shall
hereafter be established by the Company.

7.           Executive Covenants.

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(a)           Confidentiality. The Executive agrees and understands that in the
Executive’s position with the Company, the Executive will be exposed to and will
receive information relating to the confidential affairs of the Company,
including but not limited to, information regarding the Company’s ownership,
technical information, intellectual property, business and marketing plans,
strategies, customer information, other information concerning the products,
promotions, development, financing, expansion plans, business policies and
practices of the Company, and other forms of information considered by the
Company reasonably and in good faith to be confidential and in the nature of
trade secrets (“Confidential Information”). Confidential Information does not
include information that is or becomes widely available in any industry in which
the Company does business other than as a result of any act or omission by the
Executive in violation of this Agreement or law. The Executive agrees that
during the Employment Term and thereafter, the Executive shall not, other than
on behalf of the Company, disclose such Confidential Information, either
directly or indirectly, to any third person or entity without the prior written
consent of the Company; provided that disclosure may be made to the extent
required by law, regulation, or order of a regulatory body, in each case so long
as the Executive gives the Company as much advance notice of the disclosure as
possible to enable the Company to seek a protective order, confidential
treatment, or other appropriate relief. This confidentiality covenant has no
temporal, geographical, or territorial restriction. Upon termination of the
Employment Term, the Executive shall promptly supply to the Company: (i) all
property of the Company; and (ii) all notes, memoranda, writings, lists, files,
reports, customer lists, correspondence, tapes, disks, cards, surveys, maps,
logs, machines, technical data, or any other tangible product or document
containing Confidential Information produced by, received by, or otherwise
submitted to the Executive during or prior to the Employment Term.

(b)           Noncompetition. By and in consideration of the Company entering
into this Agreement and the payments to be made and benefits to be provided by
the Company hereunder, and further in consideration of the Executive’s exposure
to Confidential Information, the Executive shall not, during the Noncompetition
Term (as defined below), directly or indirectly, own, manage, operate, join,
control, be employed by, or participate in the ownership, management, operation
or control of, or be connected in any manner with, including but not limited to
holding any position as a shareholder, director, officer, consultant,
independent contractor, employee, partner, or investor in, any Restricted
Enterprise (as defined below); provided that in no event shall ownership of less
than 1% of the outstanding equity securities of any issuer whose securities are
registered under the Securities and Exchange Act of 1934, as amended, standing
alone, be prohibited by this Section 7(b). Following termination of the
Employment Term, upon request of the Company during the Noncompetition Term, the
Executive shall notify the Company of the Executive’s then-current employment
status.

(c)           Nonsolicitation. During the Noncompetition Term, the Executive
shall not, and shall not cause any other person to: (i) interfere with or harm,
or attempt to interfere with or harm, the relationship of the Company with any
Restricted Person (as defined below); or (ii) endeavor to entice any Restricted
Person away from the Company.

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(d)           Nondisparagement. During the Employment Term and thereafter,
neither the Executive, on the one hand, and the Company, its directors,
officers, or employees, on the other hand (collectively, the “Company Parties”),
shall make or publish any disparaging statements (whether written or oral)
regarding the other, except as shall be necessary for the Executive or the
Company Parties to enforce any agreements between the parties or to comply with
any requirements or obligations under law.

(e)           Proprietary Rights. The Executive assigns all of the Executive’s
interest in any and all inventions, discoveries, improvements, and patentable or
copyrightable works initiated, conceived, or made by the Executive, either alone
or in conjunction with others, during the Employment Term and related to the
business or activities of the Company to the Company or its nominee. Whenever
requested to do so by the Company, the Executive shall execute any and all
applications, assignments, or other instruments that the Company in good faith
deems necessary to apply for and obtain trademarks, patents, or copyrights of
the United States or any foreign country or otherwise protect the interests of
the Company therein. These obligations shall continue beyond the conclusion of
the Employment Term and the Noncompetition Term with respect to inventions,
discoveries, improvements, or copyrightable works initiated, conceived, or made
by the Executive during the Employment Term.

(f)           Remedies. The Executive agrees that any breach of the terms of
this Section 7 would result in irreparable harm to the Company for which the
Company would have no adequate remedy at law; the Executive therefore also
agrees that in the event of such breach or any threat of breach, the Company
shall be entitled to seek equitable relief to prevent such breach, threatened
breach, or continued breach by the Executive and any and all persons or entities
acting for or with the Executive, in addition to any other remedies to which the
Company may be entitled at law or in equity including the recovery of reasonable
attorneys fees. The terms of this Section 7 shall not prevent the Company from
pursuing any other available remedies for any breach or threatened breach
hereof, including but not limited to, the recovery of damages from the Executive
including reasonable attorneys fees. The Executive and the Company further agree
that the provisions of the covenants contained in this Section 7 are reasonable
and necessary to protect the business of the Company because of the Executive’s
access to Confidential Information and his material participation in the
operation of such business. Should a court, arbitrator, or other similar
authority determine, however, that any provisions of the covenants contained in
this Section 7 are not reasonable or valid, either in period of time,
geographical area, or otherwise, the parties hereto agree that such covenants
are to be interpreted and enforced to the maximum extent to which such court or
arbitrator deems reasonable or valid. The existence of any claim or cause of
action by the Executive against the Company, whether predicated on this
Agreement or otherwise, shall not constitute a defense to the enforcement by the
Company of the covenants contained in this Section 7.

(g)           Certain Definitions. For purposes of this Agreement:

(i)           The “Noncompetition Term” means the period beginning on the date
of this Agreement and ending 12 months following the Termination Date, provided
that if the Executive’s employment is terminated under Section 5(a)(iv) and the
Executive delivers the release substantially in the form of Exhibit B, the
Noncompetition Term for purposes of Section 7(b) only shall end seven months
following the Termination Date.

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(ii)           “Restricted Enterprise” means: any person, corporation,
partnership, or other entity that is engaged in the Territory with a business or
product lines of the same or similar nature as those offered by the Company; For
purposes of this definition, “product lines of the same or similar nature as
those offered by the Company” shall also include, at any date, potential new
product lines the development of which the Company has, during the 12 months
preceding such date, devoted more than de minimis resources.

(iii)           “Restricted Person” means any person who at any time during the
two year period prior to the Termination Date, was an employee, independent
contractor or customer of the Company, or otherwise had a material business
relationship with the Company.

(iv)           The “Territory” means, the United States of America and other
areas of the world where the Company conducts business.

8.           Representations by the Executive. The Executive represents to the
Company that (i) his execution and performance of this Agreement does not
violate any agreement or obligation (whether or not written) that the Executive
has with or to any person or entity including, but not limited to, any prior
employer, (ii) he is not subject to the terms of any noncompetition,
non-solicitation or confidentiality agreement with any prior employer, and (iii)
he has not been convicted of, or entered a plea of guilty or nolo contendere to
a crime that constitutes a felony in any jurisdiction (or comparable crime in
any jurisdiction which uses a different nomenclature). In the event of a
determination by the Board that the Executive is in material breach of either of
these representations, the Company may terminate the Executive’s employment, and
any such termination shall be considered a termination for Cause under Section
5(a)(ii).

9.           No Waiver of Rights. The failure to enforce at any time the
provisions of this Agreement or to require at any time performance by any other
party of any of the provisions hereof shall in no way be construed to be a
waiver of such provisions or to affect either the validity of this Agreement or
any part hereof, or the right of any party to enforce each and every provision
in accordance with its terms.

10.           Notices. Every notice relating to this Agreement shall be in
writing and shall be given by personal delivery, by a reputable same-day or
overnight courier service (charges prepaid), by registered or certified mail,
postage prepaid, return receipt requested, or by facsimile to the recipient with
a confirmation copy to follow the next day to be delivered by personal delivery
or by a reputable same-day or overnight courier service to the appropriate
party’s address or fax number below (or such other address and fax number as a
party may designate by notice to the other party):

If to the Executive: To the Executive at the address most recently contained in
the Company’s records.

 

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If to the Company: Chairman of the Board   Espey Mfg. & Electronics Corp.   233
Ballston Avenue   Saratoga Springs, New York 12866    

11.           Binding Effect/Assignment. This Agreement shall inure to the
benefit of and be binding upon the parties hereto and their respective heirs,
executors, personal representatives, estates, successors (including, without
limitation, by way of merger), and permitted assigns. Notwithstanding the
provisions of the immediately preceding sentence, the Executive shall not assign
all or any portion of this Agreement without the prior written consent of the
Company.

12.           Entire Agreement. This Agreement sets forth the entire
understanding of the parties hereto with respect to the subject matter hereof
and supersedes all prior agreements, written or oral, between them as to such
subject matter, except that certain Confidentiality Agreement dated November 19,
2014 shall be deemed part of this Agreement

13.           Severability. If any provision of this Agreement, or any
application thereof to any circumstances, is invalid, in whole or in part, such
provision or application shall to that extent be severable and shall not affect
other provisions or applications of this Agreement.

14.           Governing Law; and Consent to Jurisdiction. This Agreement shall
be governed by and construed in accordance with the internal laws of the State
of New York, without reference to the principles of conflict of laws.

15.           Modifications and Waivers. No provision of this Agreement may be
modified, altered, or amended except by an instrument in writing executed by the
parties hereto. No waiver by any party hereto of any breach by any other party
hereto of any provision of this Agreement to be performed by such other party
shall be deemed a waiver of similar or dissimilar provisions at the time or at
any prior or subsequent time.

16.           Headings. The headings contained herein are solely for the
purposes of reference, are not part of this Agreement, and shall not in any way
affect the meaning or interpretation of this Agreement.

17.           Applicability of Section 409A of the Code.

(a)           Generally. This Agreement is intended to comply with Sections 409A
of the Internal Revenue Code of 1986, as amended and the Treasury Regulations
and IRS guidance thereunder (“Section 409A”). Notwithstanding anything to the
contrary, this Agreement shall, to the maximum extent possible, be administered,
interpreted, and construed in a manner consistent with Section 409A. If any
provision of this Agreement provides for payment within a time period, the
determination of when such payment shall be made within such time period shall
be solely in the discretion of the Company.

(b)           Reimbursements. To the extent that any reimbursement, fringe or
other in-kind benefit, or other, similar plan or arrangement in which the
Executive participates during the Employment Term or thereafter provides for a
“deferral of compensation” within the meaning of Section 409A: (i) the amount of
expenses eligible for reimbursement provided to the Executive during any
calendar year will not affect the amount of expenses eligible for reimbursement
or in-kind benefits provided to the Executive in any other calendar year; (ii)
the reimbursements for expenses for which the Executive is entitled to be
reimbursed shall be made as soon as practicable following the date on which such
expenses were incurred and documented to the Company, but in no event later than
the last day of the calendar year following the calendar year in which the
applicable expense is incurred; (iii) the right to payment or reimbursement or
in-kind benefits hereunder may not be liquidated or exchanged for any other
benefit; and (iv) the reimbursements shall be made pursuant to objectively
determinable and nondiscretionary Company policies and procedures regarding such
reimbursement of expenses.

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(c)           Termination Payments. If and to the extent required to comply with
Section 409A, no payment or benefit required to be paid under this Agreement on
account of termination of the Executive’s employment shall be made unless and
until the Executive incurs a “separation from service” within the meaning of
Section 409A. In addition, with respect to any payments or benefits subject to
Section 409A, reference to Executive’s “termination of employment” (and
corollary terms) from the Company shall be construed to refer to the Executive’s
“separation from service” (as determined under Treas. Reg. Section 1.409A-1(h),
as uniformly applied by the Company) from the Company and all entities
aggregated with the Company under Section 409A. Notwithstanding anything to the
contrary contained herein, if the Executive is a “specified employee” within the
meaning of Section 409A, and if any or all of the payments or the continued
provision of any benefits under Section 6 or any other provision of this
Agreement are subject to Section 409A and payable upon a separation from
service, then such payments or benefits that the Executive would otherwise be
entitled to receive during the first six months after termination of employment
shall be accumulated and paid or provided on the first business day after the
six-month anniversary of termination of employment (or within 30 days following
the Executive’s death, if earlier) in a single lump sum and any remaining
payments and benefits due under this Agreement shall be paid or provided in
accordance with the normal payment dates specified for them herein.

18.           Purchase of Company Stock. The Executive agrees to purchase on the
market 2,500 shares of Company stock within 24 months of the date of this
Agreement. Any equity compensation provided by the Company including stock
options and ESOP shall not be counted or considered in meeting the 2,500 shares
requirement.

19.           Counterparts. This Agreement may be executed in two or more
counterparts, each of which shall be deemed to be an original but all of which
together shall constitute one and the same instrument.

[Signature Page Follows]

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IN WITNESS WHEREOF, the Company and the Executive have caused this Agreement to
be duly executed effective as of the day and year first above written.

  ESPEY MFG.& ELECTRONICS CORP.           By:  /s/ Howard Pinsley   Name: Howard
Pinsley   Title: Chairman of the Board               EXECUTIVE           /s/
Patrick Enright Jr.   PATRICK ENRIGHT, JR.

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EXHIBIT A

CEO ANNUAL BONUS PLAN Compensation Committee Proposed
Espey Fiscal Year Performance Bonus Plan
Applies to:
President and Chief Executive Officer

Performance bonus determined by Board based on sum of three metrics A + B + C;
subject to maximum not to exceed annual base salary

(a)Discretionary as determined by the Espey Board of Directors ("Board")

·75,000 maximum bonus at discretion of Board

·Board to make performance assessment by Board meeting following end of fiscal
year

(b)Increase in Operating Earnings from prior fiscal year-end based on audited
Financial Statements

·$100,000 maximum bonus

·Increase % over prior fiscal year operating earnings x 2 x $100,000

·For example, if operating earnings increase 10% from prior fiscal year, this
category would earn 10% from prior fiscal year, this category would earn 10% x 2
x $100,000 = $20,000

(c)Increase in Sales plus Backlog from prior fiscal year-end

·$100,000 maximum bonus

·Increase % of the sum of prior fiscal year net sales and backlog compared with
sum of current fiscal year sales plus back log x 2 x $100,000

·For example, if the sum of prior fiscal year net sales and backlog increases
15% vs the prior year, the bonus earned would be; 15% x 2 x $100,000 = $30,000

·Assumes and requires normal gross profit consistent with past practices

(d)Miscellaneous Requirements

·Subject to full Board approval

·President and CEO must be employed on December 31 (following end of prior bonus
fiscal year) to be eligible to receive performance bonus for prior fiscal year

·This plan is subject to change and revisions as determined by Board

·The Board and CEO shall endeavor to renegotiate this plan and incorporate the
terms and provisions of a new plan beginning July 1, 2015.

 

 

EXHIBIT B

SEPARATION AGREEMENT AND GENERAL RELEASE

This “Separation Agreement and General Release” (hereinafter “Release”), signed
by PATRICK ENRIGHT, JR. (hereinafter “you” or “your”) and in favor of Espey Mfg.
& Electronics Corp. (hereinafter “the Company”) is for the purpose of amicably
and fully resolving any and all claims, disputes and issues arising out of your
employment at the Company and the termination of that employment.

As your employment with the Company terminated on _________________(“your
Termination Date”), and

As you have agreed to provide this Release to the Company in return for the
consideration set forth herein;

Therefore, in consideration of the mutual covenants and promises hereinafter
provided and of the actions to be taken pursuant thereto, you agree as follows:

1.           i)           You hereby accept the sums set forth in Section 1(b)
below. Except as provided in said Section 1(b) and in Section 5 below, you will
not be entitled to any other compensation or benefits from the Company.

(b)           (1)           The Company will make severance payments to you in
the gross aggregate amount of $_______________, (representing ___ months of your
base salary) less all withholdings and deductions required by law, to be paid
according to your regular payroll cycle until fully paid.

(ii)           The Company will commence making severance payments to you
beginning on the first regular payroll after the thirtieth day following your
Termination Date.

(iii)           To the extent any taxes may be due on the payments provided in
this Agreement, beyond any withheld by the Company, you shall pay them yourself
and shall indemnify and hold the Company harmless from any tax claims or
penalties resulting from such payments. You further agree to provide the Company
any and all information pertaining to you upon request as reasonably necessary
for the Company and other entities released herein to comply with applicable tax
laws. You hereby acknowledge that the Company has not made any representations
regarding the tax consequences of the payments provided in this Release and that
the Company has not provided you with any tax advice regarding the payments
provided in this Release, including without limitation advice on the treatment
of the payments under Section 409A of the Internal Revenue Code.

(c)                      You shall be entitled to any continuation of your
medical benefits until the end of the ___-month period during which severance
pay is payable pursuant to Section 1(b) above, at the same premium rate that
active employees of the Company pay for such medical benefits, with the Company
paying the difference between your premium rate and the cost of such medical
benefits, as permitted under Section 6(c) of the Employment Agreement dated
______, 201__. Nothing in this Release shall affect your entitlement to
continuation of your medical benefits under Section 4980B of the Internal
Revenue Code of 1986, as amended, or similar state law.

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OR (c)           If you elect to continue your medical benefits under COBRA, the
Company will pay your portion of the COBRA premium for the period during which
severance pay is payable pursuant to Section 1(b) above.

[If Applicable]           [(d)           You shall be entitled to the Pro Rata
Bonus in accordance with the terms of your Employment Agreement dated ______,
201__.]

[If Applicable]           [The Company will make a payment to you in the gross
amount of $__________ in accordance with Section 6(c) Termination without Cause
of the Employment Agreement dated ______, 201_.

2.           In exchange for the sums and benefits set forth above, you agree to
release the Company, its subsidiaries, its affiliated and related entities and
their current and former shareholders, officers, directors, agents, employees,
successors and assigns (hereinafter collectively the “Released Parties”) from
all claims, demands, actions, and liabilities, whether known or unknown (except
as expressly set forth in Section 4 below), you may have against them or any one
of them in any way related to your employment at the Company and/or the
termination of that employment. By way of example, the types of claims that are
covered under this Release include, but are not limited to:

(a)           all “wrongful discharge” claims, “constructive discharge” claims,
claims relating to any contracts of employment, expressed or implied, any
covenants of good faith and fair dealing, expressed or implied, any personal
wrongs or injuries and any claim for attorneys fees;

(b)           any claims that could be brought pursuant to Title VII of the
Civil Rights Act of 1964, 42 U.S.C. § 2000-1 et seq., the Age Discrimination in
Employment Act, 29 U.S.C. § 621 et seq., the Americans with Disabilities Act, 42
U.S.C. § 12101 et seq., the Employee Retirement Income Security Act, 29 U.S.C.
§ 1131 et seq., the Family and Medical Leave Act, 29 U.S.C. § 2601 et seq. the
Lilly Ledbetter Fair Pay Act of 2009, Pub. L. No. 111L-2; the New York Human
Rights Law, McKinney’s Executive Law §290, et seq., (all as may have been
amended);

(c)           any claims that could be brought under any other federal, state,
county or municipal statute or ordinance dealing with (i) discrimination in
employment on the basis of sex, race, national origin, religion, disability,
age, marital status, affectional or sexual orientation or other reason; (ii)
employee whistleblower protection; and (iii) employee family leave rights; and

(d)           all other claims including those of which you are not aware and
those not specifically mentioned in this Release.

3.             (a)           You agree that you will never sue or otherwise
institute a claim of any kind against the Released Parties or any one of them
for anything that has happened up to now, whether such claim is presently known
or unknown by you, in any way related to your employment at the Company and/or
the termination of that employment.

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(b)           If you breach the terms of this Release by suing the Company or
the Company’s personnel, you agree that you will pay all costs and expenses
incurred by the Company and the Company’s personnel in defending against the
suit, including reasonable attorneys’ fees.

(c)           Additionally, if you breach the terms of this Release, you agree
that the Company shall have the right to obtain, by way of counterclaim or other
lawful means, repayment of the full amount paid to you as consideration for this
Release.

4.           Notwithstanding anything in this Release to the contrary, this
Release does not include any claims you may have with respect to any medical,
prescription, dental, flexible spending account, life insurance, retirement and
savings or other benefits provided by plans maintained by the Company to which
you may be entitled, any rights that you may have under this Release, Company’s
Employee Stock Ownership Plan or outstanding stock options granted to you by the
Company, any rights to indemnification you may have under the Company’s
Certificate of Incorporation or By-Laws, or to any payments due you under this
Release.

5.           You agree that you have executed this Release on your own behalf
and also on behalf of any heirs, agents, representatives, successors and assigns
that you may have now or in the future.

6.           You acknowledge and agree that the benefits provided herein exceed
any amount to which you would otherwise be presently entitled under the
Company’s policies, procedures and benefit programs and/or under any applicable
law without providing this Release, and constitute valuable consideration for
this Release.

7.           You acknowledge that, by requesting this Release, the Company does
not admit, expressly or implicitly, that it has engaged in any wrongdoing
whatsoever.

8.           iii)           You hereby acknowledge and agree that Section
_______ of your Employment Agreement dated _______, 201__, which contains
various covenants as to Confidential Information, non-competition and
non-solicitation shall remain in full force and effect according to its terms.

(b)           You further acknowledge and represent that you have returned to
the Company all Confidential Information (including copies), all other
documents, and all tangible property of the Company, including, but not limited
to, keys, credit cards, cell phones, computers and other electronic equipment.

9.           You and the Company agree that neither you nor the Company will
make any statements, orally or in writing (including electronic communications),
that disparage the business reputation or good will of the Released Parties or
any one of them or of you.

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10.           You agree to keep both the existence and the terms of this Release
completely confidential, except that you may discuss this Release with your
attorney, accountant or other tax professional, and your spouse, and (b) to the
extent necessary to enforce your rights hereunder.

11.           You acknowledge that you have been advised of the following:

(a)           you have the right to and should consult with an attorney prior to
signing this Release;

(b)           you have 21 days to decide whether to sign this Release and
deliver it to ________________________, at the Company’s offices, 233 Ballston
Avenue, Saratoga Springs, New York 12866.

(c)           if you sign this Release, you have up to 7 days to revoke it and
the Release will not become effective until this 7-day period has expired;

12.           This Release is not effective or enforceable for 7 days after you
sign it and you may revoke it during that time. To revoke, a written notice of
revocation must be delivered to ____________________________, at the Company’s
offices at the above address, within 7 days after you sign this Release. The
revocation must be:

(a)           sent by certified mail within the 7-day period; and

(b)           properly addressed to ________________ at the above address.

If _______________ does not receive a written verification in accordance with
the foregoing terms, you will not be able to rescind this Release.

13.           You agree that this Release contains the entire agreement of the
parties and that this Release cannot be amended, modified, or supplemented in
any respect except by the written agreement of both parties.

14.           You agree that if any term or provision of this Release or the
application thereof to any alleged claim or party or circumstances, shall to any
extent be determined to be invalid, void, or unenforceable, the remaining
provisions and any application thereof shall nevertheless continue in full force
and effect without being impaired or invalidated in any way. The parties further
agree to replace any such void or unenforceable provision of this Release with a
valid and enforceable provision that will achieve, to the extent possible, the
economic, business or other purposes of the void or unenforceable provision.

15.           You agree that this Release shall be governed by the laws of the
State of New York without giving effect to any conflicts of law principles.
Disputes arising under this Release shall be subject to the dispute resolution
provisions of Section 14 of the Employment Agreement dated ______, 201__.

16.           This Agreement will not become effective until the expiration of
the 7-day revocation period set forth in paragraph 12 above.

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17.           You hereby acknowledge that you have read this Release in its
entirety, understand fully the meaning and significance of all its terms, and
hereby voluntarily and knowingly agree to accept all of its terms. You further
acknowledge that you have not relied on any representations, promises, or
agreements of any kind made to you in connection with your decision to sign this
Release except for the agreements set forth in the Release.

          Date:

 

 

 

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