<PAGE> 1
U.S. SECURITIES AND EXCHANGE COMMISSION
Washington, D. C. 20549
FORM 10-KSB
X ANNUAL REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF
1934 For the fiscal year ended December 31, 1996
[ ] TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
For the transition period from to .
---------------- --------------
Commission File No. 1-7109
SERVOTRONICS, INC.
----------------------------------------------
(Name of small business issuer as specified in its charter)
Delaware 16-0837866
- ------------------------------- -------------------
(State or other jurisdiction of (I. R. S. Employer
incorporation or organization) Identification No.)
1110 Maple Street, Elma, New York 14059
- ------------------------------- ----------
(Address of principal executive offices) (Zip Code)
Issuer's telephone number: 716-655-5990
--------------
Securities registered pursuant to Section 12(b) of the Act:
Name of each exchange on
Title of each class which registered
------------------- ----------------
Common Stock, $.20 par value American Stock Exchange
Securities registered pursuant to Section 12(g) of the Act: None
Check whether the issuer (1) filed all reports required to be filed by
Section 13 or 15(d) of the Exchange Act during the past 12 months (or for such
shorter period that the registrant was required to file such reports), and (2)
has been subject to such filing requirements for the past 90 days. Yes x No .
--- ---
Check if disclosure of delinquent filers in response to Item 405 of
Regulation S-B is not contained in this form, and no disclosure will be
contained, to the best of the registrant's knowledge, in definitive proxy or
information statements incorporated by reference in Part III of this Form 10-KSB
or any amendment to this Form 10-KSB. [X]
Issuer's revenues for its most recent fiscal year: $15,600,000.
As of February 28, 1997 the aggregate market value of the voting common
stock held by non-affiliates of the registrant was $7,957,123 based on the
average of sales prices reported by the American Stock Exchange on that day.
As of February 28, 1997 the number of $.20 par value common shares
outstanding was 2,355,478.
DOCUMENTS INCORPORATED BY REFERENCE
Document Part of Form 10-KSB
-------- -------------------
1997 Proxy Statement Part III
Transitional Small Business Disclosure Format. Yes . No x .
--- ---
<PAGE> 2
PART I
Item 1. Description of Business
- ------- -----------------------
General
- -------
Servotronics, Inc. and its subsidiaries (collectively the "Registrant" or
the "Company") design, manufacture and market advanced technology products
consisting primarily of control components and consumer products consisting of
knives, various types of cutlery and small household tools.
The Registrant was incorporated in New York in 1959. In 1972, the
Registrant was merged into a wholly-owned subsidiary organized under the laws of
the State of Delaware, thereby changing the Registrant's state of incorporation
from New York to Delaware.
Products
- --------
Advanced Technology Products
----------------------------
The Registrant designs, manufactures and markets a variety of
servo-control components which convert an electrical current into a mechanical
force or movement and other related products. The principal servo-control
components produced include torque motors, electromagnetic actuators,
proportional solenoids, hydraulic valves, pneumatic valves and similar devices,
all of which perform the same general function. These are sold principally to
the commercial, aerospace, missile, aircraft and government related industries.
To fill most of its orders for components, the Registrant must either
modify a catalog model or design a new item in order to satisfy the customer's
particular requirements. The Registrant also produces unique products based on
specifications provided by its' customers. The Registrant produces under
long-term contracts and otherwise.
The Registrant also produces metallic seals of various cross-sectional
configurations. These seals fit between two surfaces, usually metal, to produce
a more secure and leak-proof joint. They are generally designed for use under
circumstances in which more conventional seals and gaskets do not perform
adequately, such as exposure to extremes of temperature, high pressures,
vacuums, radiation or corrosive atmospheres. The Registrant manufactures these
seals to close tolerances from standard and special alloy steels. Ductile
coatings are often applied to the seals in order to increase their
effectiveness.
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From time to time, the Registrant has also produced other products of its
own and/or of a given design to meet customers' requirements.
The Registrant also designs and/or manufactures for its own use custom
precision metal stampings. These stampings are produced from precision single
stage and/or progressive dies which are also designed and manufactured by the
Registrant. The progressive die performs, in a series of stages in one die, the
stamping of a metal piece which could otherwise require stamping by a number of
separate dies.
Consumer Products
-----------------
The Registrant designs, manufactures and sells a variety of cutlery
products. These products include a wide range of knives such as steak, carving,
bread, butcher and paring knives for household use and for use in restaurants,
government installations, institutions and private industry and pocket and other
types of knives for hunting, fishing and camping. The Registrant also produces
and markets other cutlery items such as carving forks, sharpeners and various
specialty tools such as putty knives, linoleum sheet cutters and field knives.
The Registrant manufactures its cutlery products from stainless or high carbon
steel in numerous styles, designs, models and sizes. Substantially all of the
Registrant's cutlery and cutlery related products are intended for the medium to
premium priced markets.
The Registrant sells many of its cutlery products under its own brand
names including "Old Hickory" and "Queen."
Sales, Marketing and Distribution
- ---------------------------------
Advanced Technology Products
----------------------------
The Registrant's advanced technology products are marketed throughout the
United States and are essentially nonseasonal in nature. These products are sold
to the United States Government, government prime contractors and commercial
manufacturers and end users. Sales are made primarily by the Registrant's
professional staff.
During the Registrant's last fiscal year, sales of advanced technology
products pursuant to subcontracts with prime or subcontractors for various
branches of the United States Government or pursuant to prime contracts directly
with the government accounted for approximately 18% of the
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Registrant's total sales. If the Registrant were deemed to be unqualified by the
United States Government as a contractor or subcontractor, it would lose
approximately 34% of its sales of advanced technology products. In 1996 and 1995
sales of advanced technology products to the AlliedSignal Corporation and United
Technologies, through several of their subsidiaries and/or divisions,
respectively, exceeded 10% of Registrant's total sales. No other single customer
represented more than 10% of the Company's sales in any of these years.
The Registrant's prime contracts and subcontracts with the Government are
subject to termination for the convenience of the Government. In the event of
such termination, the Registrant is ordinarily entitled to receive payment for
its costs and profits on work done prior to termination. Since the inception of
the Registrant's business, less than 1% of its government contracts have been
terminated for convenience.
Consumer Products
-----------------
The Registrant's consumer products are marketed throughout the United
States. Consumer sales are moderately seasonal. Sales are to hardware,
supermarket, variety, department, discount, gift and drug stores. The Registrant
also sells its cutlery products (principally machetes, survival knives and
kitchen knives) to various branches of the United States Government. The
Registrant sells its products through its own sales personnel and through
independent manufacturers' representatives.
Business Segments
- -----------------
Business segment information is presented in Note 12 of the accompanying
consolidated financial statements.
Patents
- -------
In the view of management, the Registrant's competitive position is not
dependent on patent protection. The Registrant has rights under a number of
patents.
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Research Activities
- -------------------
The amount spent by the Registrant in research and development activities
during its 1996 and 1995 fiscal years was not significant.
Environmental Compliance
- ------------------------
The Registrant does not anticipate that the cost of compliance with
current environmental laws will be material.
Manufacturing
- -------------
The Registrant manufactures its consumer products in Franklinville, New
York and Titusville, Pennsylvania and its advanced technology products in Elma,
New York.
Raw Materials and Other Supplies
- --------------------------------
The Registrant purchases raw materials and certain components for its
products from outside vendors. The Registrant is not generally dependent upon a
single source of supply for any raw material or component used in its
operations.
Competition
- -----------
Although no reliable industry statistics are available to enable the
Registrant to determine accurately its relative competitive position with
respect to any of its products, the Registrant believes that it is a significant
factor with respect to certain of its servo-control components. The Registrant's
share of the overall cutlery market is not significant.
The Registrant encounters active competition with respect to its products
from numerous companies, many of which are larger than it in terms of
manufacturing capacity, financial resources and marketing organization. Its
principal competitors vary depending upon the customer and/or the products
involved. The Registrant believes that it competes primarily with more than 20
companies with respect to its consumer products, in addition to foreign imports.
To the Registrant's knowledge, its principal competitors with regard to cutlery
include ECKO Housewares, Inc., Russell Harrington Cutlery, Inc., W. R. Case &
Sons Cutlery Company, Imperial Schrade Corporation and Camillus Cutlery Company.
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The Registrant has many different competitors with respect to
servo-control components because of the nature of that business and the fact
that these products also face competition from other types of control components
which, at times, can accomplish the desired result.
The Registrant markets most of its products throughout the United States.
The Registrant believes that it competes in marketing its consumer products
primarily on the basis of price, quality and delivery, and its control products
primarily on the basis of operating performance, adherence to rigid
specifications, quality, price and delivery.
Employees
- ---------
The Registrant at December 31, 1996 had approximately 238 employees of
which approximately 219 are full time. In excess of 83% of its employees are
engaged in production, inspection, packaging or shipping activities. The balance
are engaged in executive, engineering, administrative, clerical or sales
capacities.
The Registrant considers its relationship with its employees to be good
and the Registrant has never experienced a significant labor work stoppage.
Item 2. Description of Properties
- ------- -------------------------
The Registrant's executive offices are located on premises leased by the
Registrant at 1110 Maple Street, Elma, a suburb of Buffalo, New York. The
Registrant owns and/or leases real property as set forth in the following table:
<TABLE>
<CAPTION>
Number of
Principal buildings and Approx.
Approx. product type of floor area
Location acreage manufactured construction (sq. feet)
- ----------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Elma, New York 38.4 Advanced 1-concrete block 82,000
technology and steel
products
Franklinville, 7.7 Cutlery products 1-tile and
New York wood 85,000
Titusville,
Pennsylvania .4 Cutlery products 2-brick 25,000
</TABLE>
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The Registrant leases approximately 38.4 acres of land and a facility
from a local industrial development agency. The lease is accounted for as a
capital lease and entitles the Registrant to purchase the property at a nominal
amount at the end of the lease term.
See the consolidated financial statements, including Note 8 thereto, for
further information with respect to the Registrant's lease commitments.
The Registrant possesses modern precision manufacturing and testing
equipment suitable for the development, manufacture, assembly and testing of its
high technology products. The Registrant designs and makes substantially all of
the tools, dies, jigs and specialized testing equipment necessary for the
production of the high technology products. The Registrant also possesses
automatic and semi-automatic grinders, tumblers, presses and miscellaneous metal
and wood finishing machinery and equipment for use in the manufacture of
consumer products.
Item 3. Legal Proceedings
- ------- -----------------
There are no legal proceedings which are material to the Company
currently pending by or against the Company other than ordinary routine
litigation incidental to the business which is not expected to materially
adversely affect the business or earnings of the Company.
Item 4. Submission of Matters to a Vote of Security Holders
- ------- ---------------------------------------------------
Not applicable.
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<PAGE> 8
PART II
Item 5. Market for Common Equity and Related Stockholder Matters
- ------- --------------------------------------------------------
(a) Price range of common stock
---------------------------
The following table shows the range of high and low prices for
the Registrant's common stock as reported by the American
Stock Exchange for 1996 and 1995, adjusted to reflect the 8%
stock dividend declared in 1996.
<TABLE>
<CAPTION>
High Low
---- ---
1996
<S> <C> <C>
Fourth Quarter $ 5-7/8 $ 4
Third Quarter 4-3/4 4-1/8
Second Quarter 5-1/2 3-13/16
First Quarter 4-7/8 4
1995
Fourth Quarter $ 4-5/8 $ 3-3/4
Third Quarter 5-3/8 3-7/8
Second Quarter 4-1/4 3-1/2
First Quarter 4-3/8 3-1/4
(b) Approximate number of holders of common stock
---------------------------------------------
Title Approximate number of
of record holders (as of
class December 31, 1996)
----- ----------------------
Common Stock, $.20 par value 725
</TABLE>
(c) Dividends on common stock
-------------------------
No cash dividends were paid in 1996 or 1995.
-8-
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Item 6. Management's Discussion and Analysis or Plan of Operation
- ------- ---------------------------------------------------------
Summary
- -------
The following table sets forth for the periods indicated the percentage
relationship of certain items in the consolidated statement of income to net
sales and the percentage increase or decrease of such items as compared to the
indicated prior period:
<TABLE>
<CAPTION>
Period to
Relationship to period
net sales year increase
ended (decrease)
December 31, year ended
1996 1995 1996-95
---- ---- -------
<S> <C> <C> <C>
Net sales:
Advanced technology products 52.5% 51.2% -2.2%
Consumer products 47.5 48.8 -7.2
----- ----- -----
100.0 100.0 -4.6
Cost of goods sold 69.2 73.0 -9.6
----- ----- -----
Gross profit 30.8 27.0 8.6
----- ----- -----
Selling, general and administrative 19.3 18.5 -0.5
Interest 2.1 2.3 -11.4
Depreciation 4.1 4.2 -7.8
Gain on sale of assets -7.2 -- --
Charges related to sale of assets 3.1 -- --
----- ----- -----
21.4 25.0 -19.7
----- ----- -----
Income before income taxes 9.4 2.0 345.4
Income tax provision 3.8 0.8 362.2
----- ----- -----
Net income 5.6% 1.2% 334.8%
===== ===== =====
</TABLE>
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<PAGE> 10
Management Discussion
- ---------------------
During the year ended December 31, 1996 and for the comparable period
ended December 31, 1995, approximately 22% of the Company's revenues were
derived from contracts with agencies of the U.S. Government or their prime
contractors. The Company's business is performed under fixed price contracts. It
is noted that the many uncertainties in today's global economy, the growth of
the national deficit and difficulty in predicting defense appropriations (both
actual and proposed) preclude any guarantees or even assurances that current
programs will be continued or that programs in the prototype stages will
ultimately result in production applications. It is because of such volatile
uncertainties and because such adverse occurrences may not be counterbalanced
with new programs or otherwise that cyclical downturns in operational
performances are realistic expectations.
See also Note 12 to the consolidated financial statements for information
concerning business segment operating results.
Results of Operations - Year 1996 as Compared to 1995
- -----------------------------------------------------
The Company's consolidated results of operations for the year ended
December 31, 1996 showed an approximate 4.6% decrease in net sales with an
increase in operating income as a percentage of net sales from approximately
8.5% to 11.5% when compared to the same year ended December 31, 1995. The
decrease in sales is primarily attributable to a decrease in sales at the
Consumer Products Group's operations due to a decrease in customer demands while
the increase in operating profit as a percentage of net sales is a result of
differences in product mix.
The respective amounts of the funded and unfunded sales backlog at
December 31, 1996 and 1995 for the Advanced Technology Group (ATG) were
approximately $46,462,000 and $31,628,000 of which $38,075,000 and $25,809,000
was unfunded in the respective comparable periods. Approximately $30,000,000 of
the December 31, 1996 unfunded backlog is for product deliveries beyond 1999.
The unfunded portion of the backlog is based on the Company's customers'
estimated quantities for multi-year agreements for which the Company has not
received firm orders.
Income before income taxes exclusive of $639,000 gain on sale of assets
net of related charges for the year ended December 31, 1996 increased 150.7%
when compared to the same year ended December 31, 1995. The gain of sale of
assets was for the previously reported sale of the former headquarters which was
located at 3901 Union Road, Buffalo, New York. This sale was completed in the
third quarter of 1996 and is reflected in the accompanying financial
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<PAGE> 11
statements as a gain on sale of assets and related charges, which include
certain environmental and compensation costs.
Selling, general and administrative costs remained relatively consistent
for the year ended December 31, 1996 when compared to the same year ended
December 31, 1995. Interest expense decreased because of lower long-term debt
and lower interest rates. Depreciation expense for the period decreased
primarily as a result of the sale of the former headquarters.
Income taxes for the year ended December 31, 1996, as a percentage of
income before taxes, remained consistent when compared to the year ended
December 31, 1995.
Results of Operations - Year 1995 as Compared to 1994
- -----------------------------------------------------
The Company's consolidated results of operations for the year ended
December 31, 1995 showed an approximate 3.5% increase in net sales and a
decrease in net income of approximately 55.8% when compared to the year ended
December 31, 1994. The overall increase in sales is due to increased shipments
at the Advanced Technology operations partially offset by a decrease in sales at
the Consumer Products operations because of a decrease in customer demands. The
decrease in profit is primarily attributable to lower margins, due to expensing
of certain start-up costs, and product mix.
The respective amounts of funded and unfunded sales backlog at December
31, 1995 and 1994 for the Advanced Technology Group (ATG) were approximately
$31,628,000 and $23,126,000 of which $25,809,000 and $16,487,000 were unfunded
in the respective comparable periods. Approximately $13,100,000 of the December
31, 1995 unfunded backlog is for product deliveries beyond 1999. The unfunded
portion of the backlog is based on the Company's customers' estimated quantities
for multi-year agreements for which the Company has not received firm orders.
Operating profit as a percentage of net sales for the year ended December
31, 1995 decreased to 8.5% from 9.9% as reported for the year ended December 31,
1994. The decrease in operating profit as a percentage of net sales is as
described above. During the fourth quarter of 1994, the Company suffered damages
caused by a fire at one of its subsidiaries. The Company maintained property and
business interruption insurance and during 1995 has recognized approximately
$130,000 as miscellaneous income and $150,000 as reduction of expenses incurred
for losses due to business interruption.
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<PAGE> 12
Selling, general and administrative costs decreased for the year ended
December 31, 1995 primarily because of moving costs incurred and expensed in
1994 which were not applicable in 1995. Interest expense decreased because of
obtaining long-term financing at lower interest rates. Depreciation expense for
the period primarily increased as a result of the move to the Company's new
corporate headquarters/Advanced Technology facility (see discussion under
Liquidity and Capital Resources.)
Income taxes in the year ended December 31, 1995 decreased as a
percentage of income before taxes when compared to the year ended December 31,
1994 due primarily to variable state income tax rates and changes made by the
Omnibus Budget Reconciliation Act of 1994.
Liquidity and Capital Resources
- -------------------------------
Certain contracts of the Advanced Technology Group require development
and engineering costs in addition to hardware and the maintenance of inventory
for replacement and/or overhaul. The replacement and/or overhaul units are
billed at the time of shipment. The inventories at December 31, 1996, include
costs associated with the initiation and maintenance of certain programs and
costs in anticipation of increased demands upon the Company to support new
programs and the request of customers' for shorter production lead time.
During the year ended December 31, 1996, the Company expended $422,000 on
capital expenditures. During the year ended December 31, 1995, the Company
expended $126,000. The Company also has a $1,000,000 line of credit at December
31, 1996 on which no amount is outstanding at December 31, 1996.
There are no material commitments for capital expenditures at December
31, 1996.
In 1991, the Company's Board of Directors authorized the purchase by the
Company of up to 250,000 additional shares of its common stock in open and
privately negotiated transactions for a total authorized purchase of up to
350,000 shares, of which 254,424 shares have been purchased.
Item 7. Financial Statements
- ------- --------------------
The financial statements of the Registrant which are included in this
Form 10-KSB Annual Report are described in the accompanying Index to
Consolidated Financial Statements on Page F1.
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Item 8. Changes in and Disagreements with Accountants on Accounting
- ------- -----------------------------------------------------------
and Financial Disclosure
------------------------
None.
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<PAGE> 14
PART III
--------
Item 9. Directors, Executive Officers, Promoters and Control Persons;
- ------- -------------------------------------------------------------
Compliance with Section 16(a) of the Exchange Act
-------------------------------------------------
Information regarding directors and executive officers of the Registrant
is incorporated herein by reference to the information included in the
Registrant's definitive proxy statement if it is filed with the Commission
within 120 days after the end of the Registrant's 1996 fiscal year or such
information will be included by amendment.
Item 10. Executive Compensation
- -------- ----------------------
Information regarding executive compensation is incorporated herein by
reference to the information included in the Registrant's definitive proxy
statement if it is filed with the Commission within 120 days after the end of
the Registrant's 1996 fiscal year or such information will be included by
amendment.
Item 11. Security Ownership of Certain Beneficial Owners and Management
- -------- --------------------------------------------------------------
Information regarding security ownership of certain beneficial owners and
management is incorporated herein by reference to the information included in
the Registrant's definitive proxy statement if it is filed with the Commission
within 120 days after the end of the Registrant's 1996 fiscal year or such
information will be included by amendment.
Item 12. Certain Relationships and Related Transactions
- -------- ----------------------------------------------
Information regarding certain relationships and related transactions is
incorporated herein by reference to the information included in the Registrant's
definitive proxy statement if it is filed with the Commission within 120 days
after the end of the Registrant's 1996 fiscal year or such information will be
included by amendment.
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<PAGE> 15
Item 13. Exhibits and Reports on Form 8-K
- -------- --------------------------------
(a) Exhibits
--------
<TABLE>
<CAPTION>
Exhibit
number Presentation Reference
------ ------------ ---------
<S> <C> <C>
3(A)(1) Certificate of Incorporation Filed herewith
3(A)(2) Amendments to Certificate Filed herewith
of Incorporation dated
August 27, 1984
3(A)(3) Certificate of designation Exhibit 4(A) to 1987
regarding Series I Form 10-K*
preferred stock
3(B) By-laws Exhibit 3(B) to 1986
Form 10-K*
4(A) First amended and restated Exhibit 4(A) to 1993
term loan agreement with Form 10-KSB*
Fleet Bank of New York
dated October 4, 1993
4(B)(1) Letter of Credit Reimbursement Exhibit 4(B)(1) to
Agreement with Fleet Bank 1994 10-KSB*
dated as of December 1, 1994
4(B)(2) Agency Mortgage and Security Exhibit 4(B)(2) to
Agreement dated as of 1994 10-KSB*
December 1, 1994 from the
Registrant and its subsidiaries
4(B)(3) Guaranty Agreement dated as Exhibit 4(B)(3) to
of December 1, 1994 from the 1994 10-KSB*
Registrant and its subsidiaries
to the Erie County Industrial
Development Agency ("ECIDA"),
Norwest Bank Minnesota, N.A.,
as Trustee, and Fleet Bank
4(C) Shareholder Rights Plan Attachment B to Form
dated as of August 13, 8-K filed August 17,
1992 1992*
--------------------------------------------------------------
*Incorporated herein by reference (File No. 1-7109)
**Indicates management contract or compensatory plan or arrangement
</TABLE>
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<PAGE> 16
<TABLE>
<CAPTION>
Exhibit
number Presentation Reference
------ ------------ ---------
<S> <C> <C>
10(A)(1) Employment contract** Exhibit 10(A) to 1986
Form 10-K*
10(A)(2) Amendment to employment Filed herewith
contract**
10(A)(3) Amendment to employment Filed herewith
contract**
10(B) Form of Indemnification Exhibit 10(E) to 1986
Agreement between the Form 10-K*
Registrant and each of
its Directors and Officers**
10(C)(1) Loan agreement between Exhibit 10(C)(1)
the Company and its to 1991 Form 10-K*
employee stock ownership
trust, as amended
10(C)(2) Stock purchase agreement Exhibit 10(D)(2) to
between the Company 1988 Form 10-K*
and its employee
stock ownership trust
10(D)(1)(a) 1989 Employees Stock Exhibit A to Form
Option Plan** 8: Amendment
No. 1 to 1988
Form 10-K*
10(D)(1)(b) Amendment to 1989 Exhibit 10(D)(1)(b)
Employees Stock Option to 1990 Form 10-K*
Plan**
10(D)(1)(c) Amendment No. 2 to Exhibit 10(D)(1)(d) to
1989 Employees Stock 1991 Form 10-K*
Option Plan**
10(D)(2) Stock Option Agreement Exhibit B to Form
for Donald W. Hedges 8: Amendment
dated April 28, 1989** No. 1 to 1988
Form 10-K*
--------------------------------------------------------------
*Incorporated herein by reference (File No. 1-7109)
**Indicates management contract or compensatory plan or arrangement
</TABLE>
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<PAGE> 17
<TABLE>
<CAPTION>
Exhibit
number Presentation Reference
------ ------------ ---------
<S> <C> <C>
10(D)(3) Stock Option Agreement Exhibit D to Form
for Nicholas D. 8: Amendment
Trbovich, Sr. dated No. 1 to 1988
March 29, 1989** Form 10-K*
10(D)(4) Stock Option Agreement Exhibit 10(D)(4) to 1990
for William H. Duerig Form 10-K*
dated December 21,
1990**
10(D)(5) Stock Option Agreement Exhibit 10(D)(5) to 1990
for Nicholas D. Form 10-K*
Trbovich, Jr. dated
December 21, 1990**
10(D)(6) Stock Option Agreement
for Nicholas D.
Trbovich, Jr. dated Exhibit 10(D)(6) to 1991
October 17, 1991** Form 10-K*
10(D)(7) Stock Option Agreement Exhibit 10(D)(7) to 1991
for Lee D. Burns dated Form 10-K*
October 17, 1991**
10(D)(8) Stock Option Agreement Exhibit 10(D)(8) to 1991
for Raymond C. Zielinski Form 10-K*
dated October 17, 1991**
10(D)(9) Land Lease Agreement between Exhibit 10(D)(9) to 1992
TSV, Inc. (wholly-owned Form 10-KSB*
subsidiary of the Registrant)
and the ECIDA
dated as of May 1, 1992, and
Corporate Guaranty of the
Registrant dated as of May 1,
1992
10(D)(10) Amendment to Land Lease Exhibit 10(D) (11) to 1993
Agreement and Interim Form 10-KSB*
Lease Agreement dated
November 19, 1992
--------------------------------------------------------------
*Incorporated herein by reference (File No. 1-7109)
**Indicates management contract or compensatory plan or arrangement
</TABLE>
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<TABLE>
<CAPTION>
Exhibit
number Presentation Reference
------ ------------ ---------
<S> <C> <C>
10(D)(11) Lease Agreement dated as of Exhibit 10(D)(11) to
December 1, 1994 between 1994 10-KSB*
the Erie County Industrial
Development Agency
("ECIDA") and TSV, Inc.
10(D)(12) Sublease Agreement dated as Exhibit 10(D)(12) to
of December 1, 1994 between 1994 10-KSB*
TSV, Inc. and the Registrant
21 Subsidiaries of the Exhibit 22 to 1992
Registrant Form 10-KSB*
27 Financial Data Schedule Filed Herewith
</TABLE>
The Registrant hereby agrees that it will furnish to the
Securities and Exchange Commission upon request a copy of any
instrument defining the rights of holders of long-term debt
not filed herewith.
(b) Reports on Form 8-K
-------------------
No reports on Form 8-K were filed during the fourth
quarter of the year ended December 31, 1996.
FORWARD-LOOKING STATEMENTS
In addition to historical information, certain sections of this Form 10-KSB
contain forward-looking statements within the meaning of Section 27A of the
Securities Act of 1933 and Section 21 E of the Securities Exchange Act of 1934,
such as those pertaining to the Company's capital resources and profitability.
Forward-looking statements involve numerous risks and uncertainties. The Company
derives approximately 22% of its revenues from contracts with agencies of the
U.S. Government or their prime contractors. The Company's business is performed
under fixed price contracts and the following factors, among others discussed
herein, could cause actual results and future events to differ materially from
those set forth or contemplated in the forward-looking statements: uncertainties
in today's global economy, the growth of the national deficit and difficulty in
predicting defense appropriations, the discontinuance of current defense
programs, the vitality of the commercial aviation industry and its ability to
purchase new aircraft, the willingness and ability of the Company's customers to
fund and issue substantial follow-on orders to the Company for long-term
programs, competitive products and pricing, difficulties in the development or
commercialization of products, product demand and market acceptance, both for
the company's products and its customers' products which incorporate components
supplied by the Company, enforceability of intellectual property rights,
capacity and supply, the effects of foreign competition, and the Company's
future accounting policies. The success of the Company also depends upon the
trends of the economy, including interest rates,
--------------------------------------------------------------
*Incorporated herein by reference (File No. 1-7109)
**Indicates management contract or compensatory plan or arrangement
-18-
<PAGE> 19
income tax laws, governmental regulation, legislation, population changes and
those risk factors discussed elsewhere in this Form 10-KSB. Readers are
cautioned not to place undue reliance on forward-looking statements, which
reflect management's analysis only as the date hereof. The Company assumes no
obligation to update forward-looking statements.
--------------------------------------------------------------
*Incorporated herein by reference (File No. 1-7109)
**Indicates management contract or compensatory plan or arrangement
-19-
<PAGE> 20
SIGNATURES
----------
In accordance with of Section 13 or 15(d) of the Securities Exchange Act
of 1934, the Registrant has duly caused this report to be signed on its behalf
by the undersigned, thereunto duly authorized.
SERVOTRONICS, INC.
March 20, 1997 By /s/ Nicholas D. Trbovich, President
-----------------------------------
Nicholas D. Trbovich
President, Chief Executive Officer
and Chairman of the Board
In accordance with the Securities Exchange Act of 1934, this report has
been signed below by the following persons on behalf of the Registrant and in
the capacities and on the dates indicated.
<TABLE>
<S> <C> <C>
/s/ Nicholas D. Trbovich President, Chief Executive March 20, 1997
- -------------------------- Officer, Chairman of the
Nicholas D. Trbovich Board and Director
/s/ Lee D. Burns Treasurer and Secretary March 20, 1997
- -------------------------- (Chief Financial Officer)
Lee D. Burns
/s/ Donald W. Hedges Director March 20, 1997
- --------------------------
Donald W. Hedges
/s/ William H. Duerig Director March 20, 1997
- --------------------------
William H. Duerig
/s/ Nicholas D. Trbovich Jr. Director March 20, 1997
- --------------------------
Nicholas D. Trbovich Jr.
</TABLE>
-20-
<PAGE> 21
SERVOTRONICS, INC. AND SUBSIDIARIES
-----------------------------------
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
------------------------------------------
<TABLE>
<CAPTION>
Page
----
<S> <C>
Report of independent accountants F2
Consolidated balance sheet at December 31, 1996 F3
Consolidated statement of income for the years ended
December 31, 1996 and 1995 F4
Consolidated statement of cash flows for the
years ended December 31, 1996 and 1995 F5
Notes to consolidated financial statements F6-F18
</TABLE>
Financial statement schedules are omitted because they are not applicable or the
required information is shown in the financial statements or the notes thereto.
F1
<PAGE> 22
Report of Independent Accountants
---------------------------------
To the Board of Directors and Shareholders of
Servotronics, Inc.
In our opinion, the consolidated financial statements listed in the accompanying
index on page F1 present fairly, in all material respects, the financial
position of Servotronics, Inc. and its subsidiaries at December 31, 1996 and the
results of their operations and their cash flows for each of the two years in
the period ended December 31, 1996, in conformity with generally accepted
accounting principles. These financial statements are the responsibility of the
Company's management; our responsibility is to express an opinion on these
financial statements based on our audits. We conducted our audits of these
statements in accordance with generally accepted auditing standards which
require that we plan and perform the audit to obtain reasonable assurance about
whether the financial statements are free of material misstatement. An audit
includes examining, on a test basis, evidence supporting the amounts and
disclosures in the financial statements, assessing the accounting principles
used and significant estimates made by management, and evaluating the overall
financial statement presentation. We believe that our audits provide a
reasonable basis for the opinion expressed above.
PRICE WATERHOUSE LLP
Buffalo, New York
March 20, 1997
F2
<PAGE> 23
SERVOTRONICS, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEET
DECEMBER 31, 1996
($000'S OMITTED EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
<S> <C>
Assets
Current assets:
Cash $ 1,389
Accounts receivable 2,714
Inventories 7,207
Deferred tax asset 564
Other 1,129
--------
Total current assets 13,003
Property, plant and equipment, net 7,352
Other assets 455
--------
$ 20,810
========
Liabilities and Shareholders' Equity
Current liabilities:
Current portion of long-term debt $ 243
Accounts payable 991
Accrued employee compensation and benefit costs 874
Accrued income taxes 200
Other accrued liabilities 220
--------
Total current liabilities 2,528
--------
Long-term debt 6,645
Non-current deferred tax liability 543
Shareholders' equity:
Common stock, par value $.20; authorized
4,000,000 shares; Issued 2,614,506 shares 523
Capital in excess of par value 13,269
Retained earnings 1,485
--------
15,277
Employee stock ownership trust commitment (2,943)
Treasury stock, at cost, 259,028 shares (1,240)
--------
Total shareholders' equity 11,094
--------
$ 20,810
========
</TABLE>
See notes to consolidated financial statements
F3
<PAGE> 24
SERVOTRONICS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF INCOME
($000's OMITTED EXCEPT PER SHARE DATA)
<TABLE>
<Captiion>
Year Ended
December 31,
1996 1995
---- ----
<S> <C> <C>
Net sales $ 15,600 $ 16,359
Costs and expenses:
Cost of goods sold 10,796 11,936
Selling, general and administrative 3,010 3,026
Interest 335 378
Depreciation and amortization 637 691
Gain on sale of assets (1,116) 0
Charges related to sale of assets 477 0
-------- -------
14,139 16,031
-------- -------
Income before income taxes 1,461 328
Income tax provision 587 127
-------- -------
Net income $ 874 $ 201
======== =======
Net income per share $ 0.52 $ 0.12 *
======== =======
*Restated to give effect for shares issued in conjunction with the 8% stock
dividend declared in May 1996 (See Note 7 to Consolidated Financial
Statements).
</TABLE>
See notes to consolidated financial statements
F4
<PAGE> 25
SERVOTRONICS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF CASH FLOWS
($000'S OMITTED)
<TABLE>
<CAPTION>
Year Ended
December 31,
1996 1995
-------- ------
<S> <C> <C>
Cash flows related to operating activities:
Net income $ 874 $ 201
Adjustments to reconcile net income to net
cash provided by (used in) operating activities --
Depreciation and amortization 637 691
Deferred taxes (155) (6)
Gain on sale of assets (exclusive of related charges) (1,116) 0
Change in assets and liabilities --
Accounts receivable (219) 566
Inventories (539) (358)
Prepaid income taxes 261 23
Other current assets (179) 159
Other assets 15 (181)
Accounts payable 93 (892)
Accrued employee compensation & benefit costs 187 19
Accrued income tax 200 0
Other accrued liabilities 12 (172)
Employee stock ownership trust payment 101 101
------- -------
Net cash provided by operating activities 172 151
------- -------
Cash flows related to investing activities:
Sale of assets 1,255 0
Capital expenditures -- property, plant & equipment (422) (126)
------- -------
Net cash provided by (used in) investing activities 833 (126)
------- -------
Cash flows related to financing activities:
Increase in demand loan 100 667
Increase in long-term debt 0 575
Principal payments on long-term debt (228) (170)
Payments on demand loan (100) (975)
------- -------
Net cash (used in) provided by financing activities (228) 97
------- -------
Net increase in cash 777 122
Cash at beginning of period 612 490
------- -------
Cash at end of period $ 1,389 $ 612
======= =======
Supplemental disclosures:
Income taxes paid $ 294 $ 298
Interest paid $ 339 $ 335
</TABLE>
See notes to consolidated financial statements
F5
<PAGE> 26
SERVOTRONICS, INC. AND SUBSIDIARIES
-----------------------------------
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
------------------------------------------
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
The principal accounting policies of Servotronics, Inc. (the Company) and
subsidiaries are as follows:
PRINCIPLES OF CONSOLIDATION
---------------------------
The consolidated financial statements include the accounts of
Servotronics, Inc. and its wholly-owned subsidiaries.
REVENUE RECOGNITION
-------------------
The Company incurred costs for certain contracts which are long term.
These contracts are accounted for under the percentage of completion
method (cost-to-cost) which recognizes revenue as the work progresses
towards completion. Revenues on the remaining contracts are recognized
when the terms of purchase orders are met.
Included in other current assets is $187,000 of unbilled revenues which
represents revenue earned under the percentage of completion method
(cost-to-cost) not yet billable under the terms of the contracts.
Included in other accrued liabilities is $80,000 of deferred revenue
which represents billings under the terms of the contracts in excess of
revenues earned under the percentage of completion method.
INVENTORIES
-----------
Inventories are stated generally at the lower of standard cost, which
approximates actual cost (first-in, first-out), or market.
PROPERTY, PLANT AND EQUIPMENT
-----------------------------
Property, plant and equipment is carried at cost; expenditures for new
facilities and equipment and expenditures which substantially increase
the useful lives of existing plant and equipment are capitalized;
expenditures for maintenance and repairs are charged directly to cost or
F6
<PAGE> 27
expenses as incurred. Upon retirement or disposal of properties, the
related cost and accumulated depreciation are removed from the respective
accounts and any profit or loss on disposition is included in income.
Depreciation is provided on the basis of estimated useful lives of
depreciable properties, primarily by the straight-line method for
financial statement purposes and by accelerated methods for tax purposes.
Depreciation expense includes the amortization of capital lease assets.
The estimated useful lives of depreciable properties are generally as
follows:
<TABLE>
<CAPTION>
<S> <C>
Buildings and improvements 5-39 years
Machinery and equipment 5-15 years
Tooling 3-5 years
</TABLE>
INCOME TAXES
------------
The Company and its subsidiaries file a consolidated federal income tax
return and separate state income tax returns.
The Company follows the asset and liability approach to account for
income taxes. This approach requires the recognition of deferred tax
liabilities and assets for the expected future tax consequences of
temporary differences between the carrying amounts and the tax bases of
assets and liabilities.
EMPLOYEE STOCK OWNERSHIP PLAN
-----------------------------
Contributions to the employee stock ownership plan are determined
annually by the Company according to plan formula.
INCOME PER SHARE
----------------
Income per share is based on weighted average outstanding shares of
1,665,727 for 1996 and 1,632,690 in 1995. All shares owned by the
Employee Stock Ownership Plan (ESOP) which are unallocated are not deemed
to be outstanding for purposes of calculating income per share.
F7
<PAGE> 28
USE OF ESTIMATES
----------------
The preparation of the consolidated financial statements in conformity
with generally accepted accounting principles requires management to make
estimates and assumptions that affect the reported amounts of assets and
liabilities and disclosure of contingent assets and liabilities at the
date of the financial statements and the reported amounts of revenues and
expenses during the reporting period. Significant estimates employed by
management include those used in revenue recognition, amortization of
engineering and other support costs included in inventory (See Note 2)
and calculating amounts receivable under an insurance claim (See Note
11). Actual results could differ from those estimates.
2. INVENTORIES
<TABLE>
<CAPTION>
DECEMBER 31, 1996
-----------------
($000's omitted)
<S> <C>
Raw materials and common parts $ 1,107
Work-in-process (including engineering
and other support costs of $2,428,000) 6,034
Finished goods 302
----------
7,443
Less common parts expected to be used
after one year (236)
----------
$ 7,207
==========
</TABLE>
Engineering and other support costs are incurred in fulfilling certain
contracts which have a production cycle longer than one year. A portion
of these costs will therefore not be realized within one year.
F8
<PAGE> 29
3. PROPERTY, PLANT AND EQUIPMENT
<TABLE>
<CAPTION>
DECEMBER 31, 1996
-----------------
($000's omitted)
<S> <C>
Land $ 11
Buildings and improvements 6,063
Machinery, equipment and tooling 7,396
----------
13,470
Less accumulated depreciation (6,118)
----------
$ 7,352
==========
</TABLE>
4. LONG-TERM DEBT
<TABLE>
<CAPTION>
DECEMBER 31, 1996
-----------------
($000's omitted)
<S> <C>
Industrial Development Revenue Bonds; secured by a
letter of credit from a bank with interest payable monthly
at a floating rate (4.50% at December 31, 1996 and an
average rate for the year of 3.80%) $ 5,000
Unsecured term note; payable to a bank with
interest at prime plus 1/4% (8 1/2% at
December 31, 1996); quarterly principal
payments of $34,439 through November 1, 2000 517
Secured term note; payable to a government agency
with interest at 6%; monthly principal payments of
$2,778 commencing on July 1, 1995 through May 1, 2004,
with a final principal payment of $102,754 due June 1, 2004 350
Various other secured term notes payable to government agencies 1,021
----------
6,888
Less current portion 243
----------
$ 6,645
==========
</TABLE>
F9
<PAGE> 30
Industrial Development Revenue Bonds were issued by a government agency
to finance the construction of the Company's new headquarters/Advanced
Technology facility. Annual sinking fund payments of $170,000 commence
December 1, 2000 and continue through 2013, with a final payment of
$2,620,000 due December 1, 2014. The Company has agreed to reimburse the
issuer of the letter of credit if there are draws on that letter of
credit. The Company pays the letter of credit bank an annual fee of 1% of
the amount secured thereby and pays the remarketing agent for the bonds
an annual fee of .25% of the principal amount outstanding. The Company's
interest under the facility capital lease has been pledged to secure its
obligations to the government agency, the bank and the bondholders.
The letter of credit reimbursement agreement, the unsecured term note
agreement and the secured term note contain, among other things,
covenants relative to maintenance of working capital and tangible net
worth and restrictions on capital expenditures, leases and additional
borrowings.
Principal maturities of long-term debt are as follows: 1998 - $248,000;
1999 - $249,000; 2000 - $404,000; 2001 - $250,000; 2002 and thereafter
$5,494,000.
The Company also has a $1,000,000 line of credit on which there was no
amount outstanding at December 31, 1996.
5. EMPLOYEE BENEFIT PLANS
----------------------
EMPLOYEE STOCK OWNERSHIP PLAN (ESOP)
------------------------------------
Under the Company's ESOP adopted in 1985, participating employees are
awarded shares of the Company's common stock based upon salary levels and
minimum service requirements. Upon inception of the ESOP, the Company
borrowed $2,000,000 from a bank and lent the proceeds to the trust
established under the ESOP to purchase shares of the Company's common
stock. The Company's loan to the trust is at an interest rate
approximating the prime rate and is repayable to the Company over a
40-year term ending in December 2024. During 1987 and 1988, the Company
loaned an additional $1,942,000 to the trust under terms similar to the
F10
<PAGE> 31
Company's original loan. Each year the Company makes contributions to the
trust which the plan's trustees use to repay the principal and interest
due the Company under the trust loan agreement. Shares held by the trust
are allocated in the aggregate to participating employees in proportion
to the amount of the loan repayment made by the trust to the Company.
Since inception of the ESOP, approximately 281,000 shares have been
allocated, exclusive of shares distributed to ESOP participants. At
December 31, 1996 and 1995, approximately 662,000 and 696,000 shares,
respectively, purchased by the ESOP remain unallocated, after adjustment
for the 8% stock dividend declared in 1996.
Related compensation expense associated with the Company's ESOP, which is
equal to the principal reduction on the loans receivable from the trust,
amounted to $101,000 in 1996 and 1995. Included as a reduction to
shareholders' equity is the employee stock ownership trust commitment
which represents the remaining indebtedness of the trust to the Company.
Employees are entitled to vote allocated shares and the ESOP trustees are
entitled to vote unallocated shares.
DEFINED BENEFIT PLAN
--------------------
A Consumer Products division subsidiary of the Company maintains a
noncontributory defined benefit pension plan covering substantially all
its employees. Plan benefits are based on stated amounts for each year of
service; funding is in accordance with statutory requirements. Pension
cost of $31,000 and $36,000 was recognized in 1996 and 1995,
respectively, calculated using a weighted-average discount rate and
weighted-average expected rate of return on plan assets of 8%. The
projected benefit obligation under the plan at December 31, 1996 was
$124,000, net of $99,000 of plan assets at fair value. Included in the
December 31, 1996 consolidated balance sheet is $37,000 of prepaid
pension cost related to the plan.
DEFERRED COMPENSATION PLAN
--------------------------
The Company maintains a deferred compensation program designed to
achieve, among other things, benefit parity for an officer of the
Company. During 1996, $165,000 was accrued under this program. No amount
was accrued under this program in 1995. No amounts under this plan have
been paid since its inception and accrued in the December 31, 1996
consolidated balance sheet is $420,000.
F11
<PAGE> 32
6. INCOME TAXES
------------
The provision for income taxes included in the consolidated statement of
income consists of the following:
<TABLE>
<CAPTION>
1996 1995
---- ----
($000's omitted)
<S> <C> <C>
Current:
Federal income tax $ 611 $ 111
State income tax 131 22
------- -------
742 133
------- -------
Deferred:
Federal income tax (benefit) (131) (4)
State income tax (benefit) (24) (2)
-------- --------
(155) (6)
------- -------
$ 587 $ 127
======= =======
</TABLE>
The reconciliation of the difference between the Company's effective tax
rate based upon the total income tax provision and the federal statutory
income tax rate is as follows:
<TABLE>
<CAPTION>
1996 1995
---- ----
<S> <C> <C>
Statutory rate 34% 34%
Increase resulting from:
State tax (net of federal benefit) 5% 4%
Other 1% 1%
-- --
40% 39%
== ==
</TABLE>
F12
<PAGE> 33
At December 31, 1996, the deferred tax assets (liabilities) were
comprised of the following:
<TABLE>
<CAPTION>
($000's omitted)
<S> <C>
Inventory $ 228
Accrued pension 172
Accrued vacation 106
Other 58
--------
Gross deferred tax assets 564
Property, plant and equipment (519)
Other (24)
Gross deferred tax liabilities (543)
--------
Net deferred tax asset $ 21
========
</TABLE>
7. COMMON SHAREHOLDERS' EQUITY
<TABLE>
<CAPTION>
COMMON STOCK
------------
NUMBER CAPITAL IN
OF SHARES EXCESS OF RETAINED TREASURY
ISSUED AMOUNT PAR VALUE EARNINGS ESOP STOCK
----------------------------------------------------------------------------------
($000's omitted)
<S> <C> <C> <C> <C> <C> <C>
Balance December
31, 1994 2,317,248 $ 463 $ 11,982 $ 1,762 ($ 3,145) ($ 1,240)
Compensation expense -- -- -- -- 101 --
Stock dividend paid 123,160 25 513 (541) -- --
Net income -- -- -- 201 -- --
--------- --------- --------- --------- --------- ---------
Balance December
31, 1995 2,440,408 $ 448 $ 12,495 $ 1,422 ($ 3,044) ($ 1,240)
Compensation expense -- -- -- -- 101 --
Stock dividend paid 174,098 35 774 (811) -- --
Net income -- -- -- 874 -- --
--------- --------- --------- --------- --------- ---------
Balance December
31, 1996 2,614,506 $ 523 $ 13,269 $ 1,485 ($ 2,943) ($ 1,240)
========= ========= ========= ========= ========= =========
</TABLE>
STOCK DIVIDEND
- --------------
On May 3, 1996, the Board of Directors declared an 8% stock dividend to
shareholders of record on May 31, 1996, payable July 1, 1996.
F13
<PAGE> 34
STOCK OPTIONS
-------------
Under the Servotronics, Inc. 1989 Employees Stock Option Plan (the Option
Plan) and other separate agreements authorized by the Board of Directors,
the Company has granted options to its Chairman, directors and/or
officers. The Company applies APB Opinion No. 25 and related
interpretations in accounting for the Option Plan and the separate option
agreements. Accordingly, no compensation expense has been recognized as
stock options granted have an exercise price equal to the market price on
the date of grant. The Company did not grant options under the Option
Plan or through separate agreements in either 1996 or 1995. At December
31, 1996, 33,200 shares of common stock were available under the Option
Plan. Options granted under the Option Plan have durations of ten years.
At December 31, 1996, the number of shares subject to and the exercise
price of options granted to its Chairman, directors and/or officers, as
adjusted for the 1996 stock dividend, are 37,778 at approximately $2.63
per share, 12,593 at approximately $2.56 per share, 25,186 at
approximately $2.07 per share and 17,172 at approximately $5.95 per
share. At December 31, 1996, all of the 92,729 shares granted under
the Option Plan and through the separate agreements are exercisable and
have a weighted average remaining contractual life of 4 years.
SHAREHOLDERS' RIGHTS PLAN
-------------------------
During 1992, the Company's Board of Directors adopted a shareholders'
rights plan (the "Rights Plan") and simultaneously declared a dividend of
one Right for each outstanding share of the Company's common stock
outstanding at August 28, 1992. The Rights do not become exercisable
until the earlier of (i) the date of the Company's public announcement
that a person or affiliated group other than Dr. Nicholas D. Trbovich or
the ESOP trust (an "Acquiring Person") has acquired, or obtained the
right to acquire, beneficial ownership of 25% or more of the Company's
common stock (excluding shares held by the ESOP trust) or (ii) ten
business days following the commencement of a tender offer that would
result in a person or affiliated group becoming an Acquiring Person.
The exercise price of a Right has been established at $30.00. Once
exercisable, each Right would entitle the holder to purchase one
one-hundredth of a share of Series A Junior Participating Preferred
Stock. In the event that any person becomes an Acquiring Person, each
F14
<PAGE> 35
Right would entitle any holder other than the Acquiring Person to
purchase common stock or other securities of the Company having a value
equal to three times the exercise price. The Board of Directors has the
discretion in such event to exchange two shares of common stock or two
one-hundredths of a share of preferred for each Right held by any holder
other than the Acquiring Person.
8. COMMITMENTS
-----------
The Company leases certain equipment pursuant to operating lease
arrangements. Total rental expense in 1996 and 1995 and future minimum
payments under such leases are not significant.
9. LITIGATION
----------
There are no legal proceedings which are material to the Company
currently pending by or against the Company other than ordinary routine
litigation incidental to the business which is not expected to materially
adversely affect the business or earnings of the Company.
10. GAIN ON SALE OF ASSETS
----------------------
Included in 1996 income before taxes is $639,000 realized from the sale
of the Company's former headquarters, net of charges related to the sale
including certain environmental and compensation costs.
11. INVOLUNTARY CONVERSION
----------------------
During the fourth quarter of 1994, the Company suffered damages caused by
a fire at one of its subsidiaries. The Company maintained property and
business interruption insurance and during 1995 recognized
approximately $130,000 as miscellaneous income and $150,000 as reductions
of expenses incurred for losses due to business interruption. Included in
other current assets at December 31, 1996 is a $441,000 receivable for
the business interruption claim, of which $101,000 has been collected
subsequent to year end. Insurance proceeds from property damage claims
were collected during 1995.
12. BUSINESS SEGMENTS
-----------------
The Company operates in two business segments, Advanced Technology
Products and Consumer Products. Operations in Advanced Technology
Products involve the design, manufacture, and marketing of servo-control
components for government and commercial industrial applications.
Consumer Products operations involve the design, manufacture and
F15
<PAGE> 36
marketing of a variety of cutlery products for use by consumers and
government agencies. Information regarding the Company's operations in
these segments is summarized as follows:
F16
<PAGE> 37
<TABLE>
<CAPTION>
Advanced
Year ended Technology Consumer
December 31, 1996 Products Products Consolidated
----------------- -------- -------- ------------
($000's omitted)
<S> <C> <C> <C>
Sales to unaffiliated customers $ 8,197 $ 7,403 $ 15,600
============= =========== =================
Operating profit $ 2,703 $ (493) $ 2,210 *
============= ============
Interest expense (335)
General corporate expense (414)
-----------------
Income before income taxes $ 1,461
=================
Identifiable assets $ 14,339 $ 5,862 $ 20,201
============= =========== =================
Depreciation expense $ 336 $ 301 $ 637
============= =========== =================
Capital expenditures $ 193 $ 229 $ 422
============= =========== =================
</TABLE>
<TABLE>
<CAPTION>
Advanced
Year ended Technology Consumer
December 31, 1995 Products Products Consolidated
----------------- -------- -------- ------------
($000's omitted)
<S> <C> <C> <C>
Sales to unaffiliated customers $ 8,382 $ 7,977 $ 16,359
============== =========== =================
Operating profit $ 943 $ 148 $ 1,091 **
============== ===========
Interest expense (378)
General corporate expense (385)
-----------------
Income before income taxes $ 328
=================
Identifiable assets $ 13,388 $ 6,318 $ 19,706
============== =========== =================
Depreciation expense $ 358 $ 333 $ 691
============== =========== =================
Capital expenditures ($ 122) $ 248 $ 126
=============== =========== =================
* Includes $639,000 as a net gain from sale of former headquarters. - See Note 10.
** Includes $280,000 as miscellaneous income and reductions of
expenses from business interruption insurance proceeds.
</TABLE>
F17
<PAGE> 38
The Company engages in a significant amount of business with the United
States Government through sales to its prime contractors and otherwise.
Such contracts by the Advanced Technology segment accounted for
revenues of approximately $2,795,000 in 1996 and $3,258,000 in 1995.
Similar contracts by the Consumer Products segment accounted for
revenues of approximately $646,000 in 1996 and $568,000 in 1995. Sales
of advanced technology products to one prime contractor, including
various divisions and subsidiaries of a common parent company, amounted
to approximately 15% and 10% of total sales in 1996 and 1995,
respectively, another customer amounted to approximately 13% of total
sales in 1996 and 1995. No other single customer represented more than
10% of the Company's sales in any of these years.
F18
<PAGE> 1
EXHIBIT 3(A)(i)
CERTIFICATE OF INCORPORATION
OF
SERVOTRONICS, INC.
FIRST: The name of the Corporation is Servotronics, Inc.
SECOND: The address of its registered office in the State of Delaware is
100 West Tenth Street, in the City of Wilmington, County of New Castle. The name
of its registered agent at such address is The Corporation Trust Company.
THIRD: The nature of the business or purposes to be conducted or promoted
is to engage in any lawful act or activity for which corporations may be
organized under the General Corporation Law of Delaware.
FOURTH: The total number of shares of stock which the Corporation shall
have authority to issue is Four Million (4,000,000) shares of Common Stock with
a par value of $.20 per share and Four Million (4,000,000) shares of Preferred
Stock with a par value of $.20 per share.
The Board of Directors of the Corporation is hereby expressly vested with
authority to authorize the issuance of the preferred stock in any class or
classes or any series of any class, and which classes or series may have such
voting powers, full or limited, or non voting powers, and such designations,
preferences and relative, participating, optional or other special rights and
qualifications, limitations or restrictions
<PAGE> 2
thereof, as shall be stated and expressed in the resolution or resolutions
providing for the issue of such stock adopted by the Board of Directors pursuant
to authority expressly vested in it by the provisions of this Certificate of
Incorporation.
FIFTH: The name and mailing address of the incorporator is as follows:
NAME ADDRESS
Robert S. Kant 12th Floor Packard Building
15th and Chestnut Streets
Philadelphia, Pennsylvania 19102
SIXTH: The Corporation shall have perpetual existence.
SEVENTH: In furtherance and not in limitation of the powers conferred by
statute, the Board of Directors is expressly authorized to make, alter or repeal
the By-Laws of the Corporation.
EIGHTH: Meetings of stockholders may be held within or without the State of
Delaware, as the By-Laws may provide. The books of the Corporation may be kept
(subject to any provision contained in the statutes) outside the State of
Delaware at such place or places as may be designated from time to time by the
Board of Directors or in the By-Laws of the Corporation. Election of directors
need not be by written ballot unless the By-Laws of the Corporation shall so
provide.
-2-
<PAGE> 3
NINTH: The Corporation reserves the right to amend, alter, change or repeal
any provision contained in this Certificate of Incorporation, in the manner now
or hereafter prescribed by statute, and all rights conferred upon stockholders
herein are granted subject to this reservation.
IN WITNESS WHEREOF, I have hereunder set my hand and seal this 6th day of
September 1972.
/s/ Robert S. Kant
--------------------------------
Robert S. Kant
-3-
<PAGE> 1
Exhibit 3(A)(2)
CERTIFICATE OF AMENDMENT
OF
CERTIFICATE OF INCORPORATION
OF
SERVOTRONICS, INC.
Servotronics, Inc., a corporation organized and existing under and by
virtue of the General Corporation Law of the State of Delaware, DOES HEREBY
CERTIFY:
FIRST: That, at a meeting duly called and held on April 24, 1984, the Board
of Directors of said corporation adopted a resolution proposing and declaring
advisable an amendment to the Certificate of Incorporation of said corporation
consisting of the addition thereto of the following new articles "TENTH" and
"ELEVENTH":
"TENTH: Notwithstanding any other provision of this
Certificate of Incorporation or the By-Laws of the Corporation
to the contrary, no action required to be taken or which may
be taken at any annual or special meeting of stockholders of
the Corporation may be taken by written consent without a
meeting except action taken upon the signing of a consent in
writing, setting forth the action so taken, by holders of all
the outstanding capital stock of the Corporation entitled to
vote thereon.
ELEVENTH:
1. The affirmative vote of the holders of not less
than seventy-five percent (75%) of the outstanding shares of
"Common Stock" (all terms in this Article ELEVENTH identified
by quotation marks on first use
<PAGE> 2
are hereinafter defined) shall be required for the approval or
authorization of any "Business Combination" of the Corporation
or any "Subsidiary" with any "Related Person", or any
"Affiliate" or "Associate" of any Related Person,
notwithstanding the fact that the law or any agreement between
the Corporation and a national securities exchange or any
other agreement or authority may otherwise require or specify
a lesser percentage, PROVIDED, HOWEVER, that the seventy-five
percent (75%) voting requirement shall not be applicable, and
such Business Combination shall require only such affirmative
vote as is otherwise required by law, any agreement between
the Corporation and a national securities exchange, or any
other agreement or authority if:
(a) such Business Combination shall have
been approved by a resolution adopted by seventy-five percent
(75%) of those members of the Board of Directors of the
Corporation holding office at the time such resolution is
adopted who are not "Related Person Directors"; or
(b) all of the following conditions are met:
(1) the cash or "Fair Market
Value" of the property, securities or other consideration to
be received per share by the holders of Common Stock of the
Corporation is not less than the highest of:
(A) the highest per
share price (including brokerage commissions, transfer taxes
and soliciting dealers' fees) paid by or on behalf of the
Related Person to become the "Beneficial Owner" of any share
of Common Stock of the Corporation (i) within the period
beginning two (2) years prior to the "Announcement Date" and
ending on the later of the "Announcement Date" or the date ten
(10) calendar days before the "Combination Date" or (ii) in
the transaction or series of transactions in which the Related
Person became a Related Person, whichever is higher; or
-2-
<PAGE> 3
(B) the Fair Market Value
per share of the shares of Common Stock of the Corporation
being acquired in the Business Combination as of (i) the
Announcement Date or (ii) the tenth calendar day prior to the
Combination Date or (iii) the date on which the Related Person
became a Related Person, whichever is highest; or
(C) the Fair Market Value
per share of Common Stock as determined pursuant to
subparagraph (B) of this Section 1(b)(1) multiplied by a
fraction, the numerator of which is the highest price per
share (including any brokerage commission, transfer taxes and
soliciting dealers' fees) paid by or on behalf of the Related
Person for any shares of Common Stock of which it acquired
Beneficial Ownership within the two-year period immediately
prior to the date used to determine the Fair Market Value
pursuant to subparagraph (B) of this Section 1(b)(1) and the
denominator of which is the Fair Market Value per share of
Common Stock of the Corporation on the first day in such
two-year period on which the Related Person became the
Beneficial Owner of any shares of Common Stock; and
(2) the consideration to be
received by holders of Common Stock of the Corporation shall
be in cash or in the same form as previously has been paid by
or on behalf of the Related Person in connection with its
acquisition of Beneficial Ownership of shares of Common Stock
of the Corporation. If the consideration so paid for any such
share varied in form, the form of consideration shall be
either cash or the form used to acquire Beneficial Ownership
of the largest number of shares of Common Stock of the
Corporation previously Beneficially Owned by such Related
Person.
2. For purposes of this Article ELEVENTH:
(a) The term "Business Combination" shall
mean:
-3-
<PAGE> 4
(1) any merger or consolidation of the Corporation or
a Subsidiary with any Person which is, or after such merger or
consolidation would be, a Related Person or an Affiliate or
Associate of a Related Person;
(2) any sale, lease, exchange, mortgage, pledge,
transfer or other disposition (in one transaction or a series
of transactions) with any Related Person or any Affiliate or
Associate of any Related Person, of all or any "Substantial
Part" of the assets of the Corporation or of a Subsidiary to a
Related Person or any Affiliate or Associate of any Related
Person;
(3) the adoption of any plan or proposal for the
liquidation or dissolution of the Corporation proposed by or
on behalf of a Related Person or any Affiliate or Associate of
any Related Person;
(4) the issuance or transfer to any Related Person or
any Affiliate or Associate of any Related Person, in exchange
for cash, securities or other property, of
(A) shares of Common Stock equivalent to ten
percent (10%) or more of the shares of Common Stock
outstanding immediately after such issuance or transfer or
(B) other securities of the Corporation or
securities of a Subsidiary having an aggregate Fair Market
Value on the date of such issuance or transfer equivalent to
fifteen percent (15%) of the Corporation's total assets as
shown on its most recent audited consolidated balance sheet or
more; PROVIDED HOWEVER, that this subparagraph (4) of Section
2(a) shall not apply to the issuance or transfer of securities
pursuant to the conversion of convertible securities or the
exercise of rights, warrants or options to acquire securities
if the convertible securities, rights, warrants or options
were outstanding on July 26, 1984 or were authorized by a
resolution adopted by seventy-five percent (75%) of those
members of the Board of Directors holding office at
-4-
<PAGE> 5
the time such resolution is adopted who are not Related
Person Directors;
(5) any reclassification of securities (including any
reverse stock split) or recapitalization of the Corporation or
any other transaction that would have the effect, either
directly or indirectly, of increasing the proportionate share
of the Common Stock of the Corporation or the equity
securities of any Subsidiary which is Beneficially Owned by
any Related Person; and
(6) any agreement, contract or other arrangement
providing for any of the transactions described in this
definition of Business Combination.
(b) Notwithstanding subparagraph (a) of this Section 2,
the term "Business Combination" shall not include a
transaction which would otherwise be a Business Combination if
such transaction involves solely the Corporation and a
Subsidiary none of whose stock is Beneficially Owned by a
Related Person (other than Beneficial Ownership arising solely
because of "Control" of the Corporation); PROVIDED, HOWEVER,
that if the Corporation is not the surviving company or if the
Business Combination will cause the shareholders of the
Corporation to receive consideration in addition to or in
total or partial exchange for their Common Stock of the
Corporation:
(1) each holder of Common Stock of the Corporation
receives the same type of consideration in such transaction in
proportion to such holder's stockholdings;
(2) the provisions of Articles TENTH and ELEVENTH of
the Corporation's Certificate of Incorporation are continued
in effect or adopted by the surviving company as part of its
articles of incorporation and such articles have no provisions
inconsistent with Articles TENTH and ELEVENTH; and
(3) the provisions of the Corporation's By-Laws are
continued in effect or adopted by the surviving company.
-5-
<PAGE> 6
(c) The term "Person" shall mean any individual, firm,
corporation or other entity and shall include any group
comprised of any Person and any other Person or Persons with
whom such Person or any Affiliate or Associate of such Person
has any agreement, arrangement or understanding, directly or
indirectly, for the purpose of acquiring, holding, voting or
disposing of Common Stock of the Corporation.
(d) The term "Related Person" shall mean any Person (other
than the Corporation) who or which:
(1) is the Beneficial Owner of over twenty percent
(20%) of the Common Stock of the Corporation; or
(2) is an Affiliate or Associate of the Corporation
and at any time within the five-year period immediately prior
to the date in question was the Beneficial Owner of over
twenty percent (20%) of the Common Stock of the Corporation.
(e) A Person shall be a "Beneficial Owner" and shall be
deemed to have "Beneficial Ownership" of any shares of Common
Stock of the Corporation (whether or not owned of record):
(1) with respect to which such Person or any
Affiliate or Associate of such Person directly or indirectly
has or shares (A) voting power, including the power to vote or
to direct the voting of such shares of Common Stock, or (B)
investment power, including the power to dispose of or to
direct the disposition of such shares of Common Stock; or
(2) which such Person or any of its Affiliates or
Associates has, directly or indirectly, (A) the right to
acquire (whether such right is exercisable immediately or only
after the passage of time), pursuant to any agreement,
arrangement or understanding or upon the exercise of
conversion rights, exchange rights, warrants or options, or
otherwise, or (B) the right to vote pursuant to any agreement,
arrangement
-6-
<PAGE> 7
or understanding (whether such right is exercisable
immediately or only after the passage of time); or
(3) which are Beneficially Owned, within the meaning
of subparagraphs (1) and (2) of this Section 2(e), by any
other Person with which such Person or any of its Affiliates
or Associates has any agreement, arrangement or understanding
for the purpose of acquiring, holding, voting or disposing of
any shares of Common Stock of the Corporation or acquiring,
holding or disposing of all or substantially all, or any
Substantial Part, of the assets of the Corporation or a
Subsidiary.
(f) For the purposes of determining whether a Person is a
Related Person pursuant to subparagraph (d) of this Section 2,
(1) the number of shares of Common Stock of the
Corporation deemed to be outstanding shall include shares
deemed Beneficially Owned by such Person through application
of subparagraph (2) of Section 2(e) above, but shall not
include any other shares of Common Stock of the Corporation
which may be issuable pursuant to any agreement, arrangement
or understanding, or upon exercise of conversion rights,
warrants or options, or otherwise, and
(2) the number of shares of Common Stock of the
Corporation deemed Beneficially Owned by such Person shall not
include any shares:
(A) held by any trust for
the benefit of an "Employee" or group or class of Employees
described in Section 401(a) of the "Code" that is exempt from
tax under Section 501(a) of the Code or any other compensation
plan of the Corporation or a Subsidiary for the benefit of an
Employee or group or class of Employees, or
(B) acquired by any means
other than purchase from any trust or plan described in
subparagraph (A) above and held by an Employee, the personal
-7-
<PAGE> 8
representative of a deceased Employee or a distributee by
reason of the death of an Employee, or
(C) acquired upon exercise
of any option or right issued by the Corporation or any
Subsidiary for the benefit of an Employee or Employees,
whether or not the option or right is described in Sections
422, 422A, 423 or 424 of the Code, and held by an Employee,
the personal representative of a deceased Employee or a
distributee by reason of the death of an Employee.
(g) An "Affiliate" of a Related Person is a Person
that directly, or indirectly through one or more
intermediaries, Controls or is Controlled by, or is under
common Control with, such Related Person, but no person shall
be an Affiliate of a Related Person if the affiliation results
solely because of service by both the person and the Related
Person as one or more of the following: Directors of the
Corporation or any Subsidiary or Employees.
(h) An "Associate" of a Related Person is any:
(1) corporation or organization (other than the
Corporation or a Subsidiary) of which such Related Person is
an officer or partner or is the Beneficial Owner of ten
percent (10%) or more of any class of equity securities; or
(2) trust or other estate in which such Related
Person has a five percent or larger beneficial interest of any
nature or as to which such Related Person serves as a trustee
or in a similar fiduciary capacity; or
(3) member of such Related Person's immediate family,
which includes such Related Person's spouse, parents,
children, siblings, mothers and fathers-in-law, sons and
daughters-in-law and brothers and sisters-in-law; PROVIDED,
HOWEVER, that no person shall be an Associate of a Related
Person if the association results solely because of service by
both the
-8-
<PAGE> 9
person or the Related Person as one or more of the following:
Directors of the Corporation or any Subsidiary or Employees.
(i) The term "Subsidiary" means any corporation of
which a majority of any class of equity securities is owned,
directly or indirectly, by the Corporation.
(j) The term "Substantial Part" shall mean more than
twenty percent (20%) of the Fair Market Value, as determined
by a majority of the Directors who are not Related Person
Directors, of the total consolidated assets of the Corporation
and its Subsidiaries taken as a whole as of the end of its
most recent fiscal year ended prior to the time the
determination is being made.
(k) In the event of any Business Combination in which
the Corporation survives, the phrase "other consideration to
be received" as used in Section 1(b)(1) of this Article
ELEVENTH shall include the shares of Common Stock retained by
the holders of such shares.
(l) The term "Fair Market Value" means: (1) in the case
of stock, the highest closing sale price during the 30-day
period immediately preceding the date in question of a share
of such stock on the Composite Tape for the New York Stock
Exchange--Listed Stocks, or, if such stock is not quoted on
the Composite Tape for the New York Stock Exchange or listed
on the New York Stock Exchange, the highest closing sale price
during the 30-day period immediately preceding the date in
question of a share of such stock on the principal United
States securities exchange registered under the Securities
Exchange Act of 1934 on which such stock is listed, or, if
such stock is not listed on any such stock exchange, the
highest closing bid quotation with respect to a share of such
stock during the 30-day period preceding the date in question
on the National Association of Securities Dealers, Inc.
Automated Quotation System or any successor system then in
use, or, if no such quotations are available, the fair market
value on the date in question of a share of
-9-
<PAGE> 10
such stock as determined in good faith by a majority of the
Directors who are not Related Person Directors; and (2) in the
case of property other than cash or stock, the fair market
value of such property on the date in question as determined
in good faith by a majority of the Directors who are not
Related Person Directors.
(m) The term "Related Person Director" means any member
of the Board of Directors of the Corporation who concurrently
is a Related Person or an Affiliate or Associate of a Related
Person or an officer, director or employee of a Related Person
or of an Affiliate or Associate of a Related Person.
(n) A Related Person shall be deemed to have acquired a
share of the Common Stock of the Corporation at the time when
such Related Person became the Beneficial Owner thereof. If a
majority of the Directors who are not Related Person Directors
is not able to determine the price at which a Related Person
has acquired a share of Common Stock of the Corporation, such
price shall be deemed to be the Fair Market Value of the
shares in question at the time when the Related Person became
the Beneficial Owner thereof. With respect to shares
Beneficially Owned by Affiliates, Associates or other Persons
whose Beneficial Ownership is attributed to a Related Person
under the foregoing definition of Related Person, the price
deemed to be paid therefor by such Related Person shall be the
price paid upon the acquisition thereof by such Affiliate,
Associate or other Person, or, if such price is not
determinable by a majority of the Directors who are not
Related Person Directors, the Fair Market Value of the shares
in question at the time when the Affiliate, Associate or other
such Person became the Beneficial Owner thereof.
(o) The term "Announcement Date" shall mean the date
upon which any information with respect to a Business
Combination is publicly announced which discloses:
-10-
<PAGE> 11
(1) the identity of the Corporation or a Subsidiary
as a participant or proposed participant in any Business
Combination;
(2) the identity of the Related Person or any
Affiliate or Associate of such Related Person as a
participant or proposed participant in any Business
Combination (unless the Business Combination is one of the
transactions described in subparagraph (5) of Section 2(a)
above, in which case the information specified in this
subparagraph (2) need not be publicly announced in order for
an Announcement Date to have occurred); and
(3) the amount of consideration to be received by the
stockholders of the Corporation or a Subsidiary in exchange
for their stock in or as a result of such Business
Combination, or the amount of consideration to be received by
the Corporation or a Subsidiary in or as a result of such
Business Combination, or the basic terms of any such Business
Combination that is one of the transactions described in
subparagraph (5) of Section 2(a) above.
(p) The term "Combination Date" shall mean the date
upon which any Business Combination is consummated; if the
tenth calendar day prior to any Combination Date is not a
business day, then any reference thereto in this Article
ELEVENTH shall mean the next succeeding business day.
(q) The term "Common Stock" shall mean the Common Stock
of the Corporation.
(r) The term "Control" (used as a noun or in various
verb forms) shall mean the direct or indirect possession of
the power to direct or cause the direction of the management
and policies of a Person, whether through the ownership
of voting securities, by contract or otherwise.
(s) The term "Code" shall mean the Internal Revenue
Code of 1954, as amended, and each reference to any section
of the Code
-11-
<PAGE> 12
shall include reference to any successor section.
(t) The term "Employee" or "Employees" shall mean an
employee or employees of the Corporation or any Subsidiary.
3. On the basis of information known to them, the Board
of Directors of the Corporation, acting by resolutions
adopted by a majority of those members of the Board of
Directors who are not Related Person Directors, shall make
all determinations to be made under this Article ELEVENTH,
including:
(a) the Announcement Date and Combination Date of a
Business Combination;
(b) the number of shares of Common Stock of which a
Person is the Beneficial Owner;
(c) whether a Person is an Affiliate or Associate of
another Person;
(d) whether a Person has an agreement, arrangement or
understanding with another Person as to the matters
specified in Section 2(e) of this Article ELEVENTH;
(e) the date upon which a Person became the
Beneficial Owner of any share or shares of Common Stock;
(f) the price paid by a Person to acquire Beneficial
Ownership of any share or shares of Common Stock; and
(g) the resolution of any ambiguity or conflict
arising in connection with the interpretation or application
of this Article ELEVENTH.
4. The fact that any Business Combination complies with
the provisions of Section 1(b) of this Article ELEVENTH shall
not be construed to impose any fiduciary duty, obligation or
responsibility on the Board of Directors, or any member
thereof, to approve such Business Combination or
-12-
<PAGE> 13
recommend its adoption or approval to the shareholders of the
Corporation, nor shall such compliance limit, prohibit or otherwise
restrict in any manner the Board of Directors, or any member thereof,
with respect to evaluations of or actions and responses taken with
respect to such Business Combination.
5. This Article ELEVENTH shall not be altered, amended or
repealed except by a vote of the holders of eighty percent (80%) of
the issued and outstanding Common Stock of the Corporation."
SECOND: That thereafter a meeting of the stockholders of said
corporation was duly called and held, upon written notice, at which meeting a
majority of the shares entitled to vote on said amendment voted in favor of the
adoption thereof, such vote being sufficient under the General Corporation Law
of Delaware and said corporation's Certificate of Incorporation to adopt said
amendment.
THIRD: That the aforesaid amendment was duly adopted in accordance
with the applicable provisions of Section 242 of the General Corporation Law of
Delaware.
- 13 -
<PAGE> 14
IN WITNESS WHEREOF, Servotronice, Inc. has caused its corporate seal to be
hereunto affixed and this Certificate to be signed by its President and attested
by its Assistant Secretary this 27th day of August, 1984.
SERVOTRONICS, INC.
By /s/ Nicholas D. Trbovich
----------------------------
Nicholas D. Trbovich
President
ATTEST:
/s/ Bernadine E. Kucinski
- ----------------------------
Bernadine E. Kucinski
Assistant Secretary
- 14 -
<PAGE> 1
Servotronics, Inc. and Subsidiaries
Exhibit 10(A)(1)
July 11, 1996
Dr. Nicholas D. Trbovich
1110 Maple Street
Elma, NY 14059
Dear Dr. Trbovich:
You and Servotronics, Inc. (the "Company") are parties to an employment
agreement, as amended and restated on August 8, 1986 and as subsequently amended
as of October 1, 1986, October 1, 1987, July 20, 1988, October 1, 1988, October
1, 1989, May 1, 1990, May 1, 1991, May 1, 1992, May 1, 1993, March 28, 1994, May
1, 1994, May 1, 1995 and May 1, 1996 (the "Agreement"), pursuant to which you
are employed by the Company.
This will confirm your agreement and that of the Company (pursuant to a
resolution of the Board of Directors passed at a meeting held on June 28, 1996)
to amend Paragraph 1 of the Agreement to delete "September 30, 1999" and insert
in its place "September 30, 2001".
Except as specifically provided herein, all of the other terms and conditions of
the Agreement shall remain in full force and effect.
If the foregoing meets with your approval and you are willing to become bound
hereby, will you please sign and return to the undersigned the enclosed copy of
this letter.
Very truly yours,
SERVOTRONICS, INC.
/s/ Lee D. Burns
Lee D. Burns,
Treasurer/Secretary
ACCEPTED AND AGREED
/s/ Dr. Nicholas D. Trbovich
- ----------------------------
Dr. Nicholas D. Trbovich
<PAGE> 1
Servotronics, Inc. and Subsidiaries
Exhibit 10(A)(2)
As of May 1, 1996
Dr. Nicholas D. Trbovich
1110 Maple Street
Elma, NY 14059
Dear Dr. Trbovich:
You and Servotronics, Inc. (the "Company") are parties to an employment
agreement, as amended and restated on August 8, 1986 and as subsequently amended
as of October 1, 1986, October 1, 1987, July 20, 1988, October 1, 1988, October
1, 1989, May 1, 1990, May 1, 1991, May 1, 1992, May 1, 1993, March 28, 1994, May
1, 1994 and May 1, 1995 (the "Agreement"), pursuant to which you are employed by
the Company.
This will confirm your agreement and that of the Company (pursuant to a
resolution of the Board of Directors passed at a meeting held on June 28, 1996)
to amend Paragraph 3 of the Agreement to delete "$264,000.00" and insert in its
place "$271,920.00".
Except as specifically provided herein, all of the other terms and conditions of
the Agreement shall remain in full force and effect.
If the foregoing meets with your approval and you are willing to become bound
hereby, will you please sign and return to the undersigned the enclosed copy of
this letter.
Very truly yours,
SERVOTRONICS, INC.
/s/ Lee D. Burns
Lee D. Burns,
Treasurer/Secretary
ACCEPTED AND AGREED
/s/ Dr. Nicholas D. Trbovich
- ----------------------------
Dr. Nicholas D. Trbovich
<TABLE> <S> <C>
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<NAME> SERVOTRONICS, INC.
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-START> JAN-1-1996
<PERIOD-END> DEC-31-1996
<CASH> 1,389
<SECURITIES> 0
<RECEIVABLES> 2,714
<ALLOWANCES> 0
<INVENTORY> 7,207
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<PP&E> 7,352
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<TOTAL-ASSETS> 20,810
<CURRENT-LIABILITIES> 2,528
<BONDS> 6,645
<COMMON> 523
0
0
<OTHER-SE> 10,571
<TOTAL-LIABILITY-AND-EQUITY> 20,810
<SALES> 15,600
<TOTAL-REVENUES> 15,600
<CGS> 10,796
<TOTAL-COSTS> 14,139
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 335
<INCOME-PRETAX> 1,461
<INCOME-TAX> 587
<INCOME-CONTINUING> 874
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