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



    1  


     


    




.


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.


 



    2  


     


    




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]



    3  


     


    

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


 


 



    4