TOROTEL, INC.
13402 South 71 Highway
Grandview, Missouri 64030
August 15, 1997
Dear Shareholder:
You are cordially invited to attend the Annual Meeting
(the "Meeting") of the Shareholders of Torotel, Inc. (the
"Corporation") to be held at 2:00 p.m. local time on Monday,
September 15, 1997, in the Royal Ballroom of the Adam's Mark
Hotel, I-70 and the Truman Sports Complex, Kansas City,
Missouri, to elect the Board of Directors of the Corporation and
transact business as set forth in the formal notice that follows.
YOUR VOTE IS IMPORTANT. Whether or not you
expect to attend the meeting, please sign and date the
accompanying proxy and return it promptly in the enclosed
postage paid envelope. If you decide to attend the meeting, you
may revoke your proxy and vote your shares in person.
As always, we appreciate your loyalty and support as a
shareholder of the Corporation.
Sincerely,
/s/ Dale H. Sizemore, Jr.
DALE H. SIZEMORE, JR.
Chairman and Chief Executive Officer
TOROTEL, INC.
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
To Be Held Monday, September 15, 1997
TO THE SHAREHOLDERS OF TOROTEL, INC.
NOTICE is hereby given that the Annual Meeting (the
"Meeting") of the Shareholders of Torotel, Inc., a Missouri
corporation (the "Corporation"), will be held on Monday,
September 15, 1997, at 2:00 p.m. local time in the Royal
Ballroom of the Adam's Mark Hotel, I-70 and the Truman Sports
Complex, Kansas City, Missouri, to:
(1) Elect a Board of Directors;
(2) Transact such other business as may properly come
before the Meeting, or any postponement or
adjournment thereof.
Shareholders of record at the close of business on August
1, 1997, will be entitled to receive notice of and to vote at the
Meeting.
The accompanying Form of Proxy is solicited by the
Board of Directors of the Corporation. Reference is made to the
attached Proxy Statement for further information with respect to
the business to be transacted at the Meeting.
Shareholders are cordially invited to attend the Meeting
in person. WHETHER OR NOT YOU EXPECT TO
ATTEND THE MEETING, PLEASE SIGN AND DATE THE
ACCOMPANYING PROXY AND RETURN IT PROMPTLY
IN THE ENCLOSED POSTAGE PAID ENVELOPE. IF
YOU DECIDE TO ATTEND THE MEETING, YOU MAY
REVOKE YOUR PROXY AND VOTE YOUR SHARES IN
PERSON.
BY ORDER OF THE
BOARD OF DIRECTORS
/s/ H. James Serrone
H. James Serrone
Secretary of Torotel, Inc.
Kansas City, Missouri
August 15, 1997
TOROTEL, INC.
13402 South 71 Highway
Grandview, Missouri 64030
PROXY STATEMENT
FOR THE ANNUAL MEETING OF SHAREHOLDERS
To Be Held Monday, September 15, 1997
INFORMATION CONCERNING
VOTING AND PROXY SOLICITATION
Security Holders Entitled to Vote
Holders of shares of the Common Stock of Torotel, Inc.,
a Missouri corporation (the "Corporation"), of record at the close
of business on August 1, 1997, will be entitled to vote at the
Annual Meeting of Shareholders (the "Meeting") to be held
Monday, September 15, 1997, at 2:00 p.m. local time, in the
Royal Ballroom at the Adam's Mark Hotel, I-70 and the Truman
Sports Complex, Kansas City, Missouri, and any postponement or
adjournment thereof.
This Proxy Statement, the enclosed Form of Proxy, the
Notice of Annual Meeting, and the accompanying 1997 Annual
Report to Shareholders, were initially distributed to shareholders
on or about August 15, 1997.
If the enclosed Proxy is properly executed and returned
prior to voting at the Meeting, the shares represented thereby will
be voted in accordance with any specifications made therein. In
the absence of instructions, the shares will be voted "FOR" the
nominees of the Board of Directors in the election of directors. A
majority of the outstanding shares entitled to vote, represented in
person or by proxy, is necessary to constitute a quorum to transact
business at the Meeting. If a quorum is present, then the five
nominees for Director receiving the greatest number of votes at
the meeting will be elected Directors. Any shares not voted
(whether by abstention, broker non-vote, or otherwise) will have
no impact in the election of directors except to the extent the
failure to vote for an individual results in another individual
receiving a larger proportion of the total votes. The Corporation's
shareholders will not have dissenters' rights of appraisal with
respect to any of the actions to be taken at the Meeting.
Shareholders who execute Proxies retain the right to
revoke them at any time before they are voted by notifying the
Secretary of the Corporation in writing, by delivering a duly
authorized Proxy bearing a later date, or by attending the Meeting
and declaring the intention of voting in person.
Cost of Solicitation
The entire cost of this solicitation will paid by the
Corporation. In addition, the Corporation may reimburse
brokerage firms and others for their expenses in forwarding
solicitation material regarding the Meeting to beneficial owners.
In addition to solicitation by mail, officers and regular employees
of the Corporation may solicit proxies from shareholders by
telephone, telegram or personal interview. Such persons will
receive no additional compensation for such services.
Voting Securities and Principal Holders Thereof
The voting securities entitled to vote at the Meeting
consist of shares of Common Stock of the Corporation. Each
shareholder is entitled to one vote for each share of Common
Stock. The number of issued and outstanding shares of Common
Stock (exclusive of treasury shares) at the close of business on
August 1, 1997, was 2,808,749. The close of business on August
1, 1997, has been fixed by the Board of Directors as the record
date for the determination of the shareholders who will be entitled
to vote at the Meeting.
The following persons beneficially owned more than 5%
of the outstanding voting securities of the Corporation at the close
of business on August 1, 1997:
<TABLE>
<S> <C> <C> <C>
Name and Address
of Beneficial Title of Amount Beneficially Percent
Owner Class Owned of Class
Richard A. Sizemore Common 386,296 (a) 13.8%
8356 Hallet
Lenexa, KS 66215
Linda V. Sizemore Common 386,296 (b) 13.8%
8356 Hallet
Lenexa, KS 66215
Paulette A. Durso Common 355,943 (c) 12.7%
3917 N.E. 59th St.
Kansas City, MO 64119
Gregory M. Sizemore Common 390,938 (d) 13.9%
12735 Mohawk Circle
Leawood, KS 66209
Julie Sizemore Common 390,938 (e) 13.9%
12735 Mohawk Circle
Lenexa, KS 66209
Dale H. Sizemore, Jr. Common 368,429 (f) 13.1%
2705 W. 121st Terrace
Leawood, KS 66209
Carol J. Sizemore Common 368,429 (g) 13.1%
2705 W. 121st Terrace
Leawood, KS 66209
Peter B. Caloyeras Common 191,000 (h) 6.8%
2041 W. 139th Street
Gardena, CA 90249
Thomas E. Foster Common 176,600 (i) 6.3%
5506 Brite Drive
Bethesda, MD 20817
</TABLE>
(a) Richard A. Sizemore's direct ownership is 130,256 shares. Mr.
Sizemore's indirect ownership is 256,040 shares. Of
this amount, 15,666 shares are owned by Mr. Sizemore's wife,
39,868 shares are owned by Mr. Sizemore as trustee for
his children, and 200,506 shares are owned by a General Partnership
in which Mr. Sizemore is a general partner.
(b) Linda V. Sizemore's direct ownership is 15,666 shares. Mrs.
Sizemore's indirect ownership is 370,630 shares. Of this
amount, 130,256 shares are owned by Mrs. Sizemore's husband,
39,868 shares are owned by Mrs. Sizemore's husband
as trustee for her children, and 200,506 shares are owned by a
General Partnership in which Mrs. Sizemore's husband is
a general partner.
(c) Paulette A. Durso's direct ownership is 121,749 shares. Ms. Durso's
indirect ownership is 234,194 shares. Of this
amount, 33,688 shares are owned by Ms. Durso as trustee for her
children, and 200,506 shares are owned by a General
Partnership in which Mrs. Durso is a general partner.
(d) Gregory M. Sizemore's direct ownership is 127,654 shares. Mr.
Sizemore's indirect ownership is 263,284 shares. Of
this amount, 15,666 shares are owned by Mr. Sizemore's wife,
47,112 shares are owned by Mr. Sizemore as trustee for
his children, and 200,506 shares are owned by a General Partnership
in which Mr. Sizemore is a general partner.
(e) Julie Sizemore's direct ownership is 15,666 shares. Mrs. Sizemore's
indirect ownership is 375,272 shares. Of this
amount, 127,654 shares are owned by Mrs. Sizemore's husband,
47,112 shares are owned by Mrs. Sizemore's husband
as trustee for her children, and 200,506 shares are owned by a
General Partnership in which Mrs. Sizemore's husband
is a general partner.
(f) Dale H. Sizemore, Jr.'s direct ownership is 120,964 shares. Mr.
Sizemore's indirect ownership is 247,465 shares. Of
this amount, 14,351 shares are owned by Mr. Sizemore's wife,
32,608 shares are owned by Mr. Sizemore as trustee for
his children, and 200,506 shares are owned by a General Partnership
in which Mr. Sizemore is a general partner.
(g) Carol J. Sizemore's direct ownership is 14,351 shares. Mrs.
Sizemore's indirect ownership is 354,078 shares. Of this
amount, 120,964 shares are owned by Mrs. Sizemore's husband,
32,608 shares are owned by Mrs. Sizemore's husband
as trustee for her children, and 200,506 shares are owned by a
General Partnership in which Mrs. Sizemore's husband
is a general partner.
(h) Mr. Caloyeras' direct ownership is 13,000 shares. Mr. Caloyeras'
indirect ownership is 178,000 shares. Of this
amount, 109,900 shares are owned by Mr. Caloyeras as sole trustee of
the Caloyeras 1982 Revocable Trust, and
68,100 shares are owned by the Caloyeras Family Partnership, a
California limited partnership, the sole limited partners
of which are the children of Mr. Caloyeras and the sole general
partner of which is PBC, Inc., a California corporation,
of which Mr. Caloyeras is the sole shareholder, director and officer.
(i) Mr. Foster's direct ownership is 176,600.
Directors and Committees
At the Meeting, five individuals will be Management's
nominees for election as members of the Board of Directors until
the next Annual Meeting of Shareholders, and until their
successors have been elected. The Corporation's Articles of
Incorporation authorize seven directors, which leaves two director
positions vacant. The Proxies cannot be voted for a greater
number of persons than the number of persons named herein.
Management's nominees, all present members of the
Board of Directors, are as follows: Ronald L. Benjamin, Christian
T. Hughes, Dr. Thomas L. Lyon, Jr., Dale H. Sizemore, Jr., and
Richard A. Sizemore.
During the fiscal year ended April 30, 1997, the Board of
Directors of the Corporation held seven meetings (including
regularly scheduled and special meetings). Each of the incumbent
directors being nominated for re-election attended 100% of the
Board meetings held while he was a director. Christian T.
Hughes was compensated at the rate of $100 per Board meeting
attended. Ronald L. Benjamin, Dr. Thomas L. Lyon, Jr., Dale H.
Sizemore, Jr., and Richard A. Sizemore were compensated at the
rate of $6,000 per fiscal year, plus $600 per Board meeting
attended, and $400 per Committee meeting attended.
If the enclosed Proxy is duly executed and received in
time for the Meeting, and if no contrary specification is made as
provided herein, it is the intention of the persons named therein to
vote the shares represented thereby "FOR" the five persons
nominated by the Board for election as directors of the
Corporation. There will be cumulative voting for the election of
directors. In cumulative voting, each share carries as many votes
as there are vacancies to be filled, the shareholder being permitted
to distribute the votes for all his shares among the nominees in
any way he desires. Since five directors are nominated, each
shareholder may cast that number of votes which is equal to the
number of shares owned by him multiplied by five. If no choice is
indicated on the enclosed Proxy, the persons named in the Proxies
will cumulate the votes and distribute them among the nominees
in their discretion. If a shareholder desires to cumulate his votes
for the Directors in a particular manner, he should indicate the
number of votes to be cast on the shareholder's behalf for each
nominee immediately following that nominee's name on the
Proxy. If any nominee should be unable to serve, the Proxy will
be voted for such person as shall be designated by the Board of
Directors to replace any such nominee. Management presently
has no knowledge that any of the nominees will be unable to
serve.
The Corporation does not have a nominating committee.
Christian T. Hughes and H. James Serrone are members of the
Administrative Committee for the Employee Stock Purchase Plan.
Mr. Serrone is not a director but is an officer of the Corporation.
The Committee receives its authority from the Plan and from the
Board of Directors. This Committee administers and implements
the Employee Stock Purchase Plan and determines eligibility of
employees to participate therein. The Committee does not meet
on a regular basis but meets as required. The Committee did not
meet during the last fiscal year.
Ronald L. Benjamin and Dr. Thomas L. Lyon, Jr. are
members of the Audit Committee. The Committee held one
meeting during the last fiscal year. In fulfilling its
responsibilities, the Audit Committee's activities included, but
were not limited to, review of internal accounting controls, and
review of the financial activities, financial position and related
consolidated reports of the Corporation.
Ronald L. Benjamin, Dr. Thomas L. Lyon, Jr., and Dale
H. Sizemore, Jr. are members of the Compensation Committee.
The Committee held one meeting during the last fiscal year. The
function of the
Strategic Planning Committee has been assumed by the Board of
Directors. The Board of Directors has no other Committees
performing similar functions.
Biographical summaries concerning individuals
nominated by the Board of Directors for election as directors, the
Corporation's executive officers and significant employees, and
information with respect to the number of shares of the
Corporation's Common Stock beneficially owned by each of them
directly or indirectly, as of August 1, 1997, are shown below. The
number of shares beneficially owned by the following individuals
includes shares, if any, held in the name of the spouse, minor
children, or other relative of the individual living in his home, as
well as shares, if any, held in the name of another person under an
arrangement whereby the individual enjoys the right to vote or the
use of the income, or whereby the individual can vest or revest
title in himself at once or at some future time. The business
address of each person listed below is 13402 South 71 Highway,
Grandview, Missouri 64030. Dale H. Sizemore, Jr., both a
Director and executive officer, and Richard A. Sizemore, a
Director, are brothers.
<TABLE>
<S> <C> <C>
Shares of Common Stock
Biographical Summaries of Nominees, Beneficially Owned at Percent
Executive Officers, and Significant
Employees August 1, 1997 of Class
Dale H. Sizemore, Jr., age 45, Chairman
of the Board and Chief
Executive Officer of Torotel, Inc. 368,429 13.1%
Mr. Sizemore became a Director of the
Corporation in 1984. He has
served as Chairman since 1995, and served
as President from 1995 to
1996. Mr. Sizemore was President of Kansas
Communications in
Lenexa, Kansas from 1983 to 1995. Mr.
Sizemore has been Chairman
of the Board and Treasurer of Kansas
Communications, Inc. since
April 1995.
Christian T. Hughes, age 48, President
and Chief Operating Officer
of Torotel, Inc., President of Torotel
Products, Inc., and
OPT Industries, Inc. -0- 0.0%
Mr. Hughes became a Director of the
Corporation in 1995. He became
President and Chief Operating Officer
in 1996. He became President
of Torotel Products in 1996, and President
of OPT Industries in 1995.
He joined OPT in 1992 as Vice President of
Sales and Marketing, and
became Executive Vice President in 1993.
Prior to joining OPT,
Mr. Hughes was Vice President of Sales for
Hitran Corporation in
Flemington, New Jersey, from 1987 to 1992.
Ronald L. Benjamin, age 52, President
of Resource and
Development Group, Inc. -0- 0.0%
Mr. Benjamin became a Director of the
Corporation in 1993. He has
been President of Resource and Development
Group in Lenexa, Kansas,
since 1985. Mr. Benjamin is also a 50%
owner of Robinson Potato
Supply. He holds a B.S. degree in electrical
engineering from Bucknell
University and received his M.B.A. from
Harvard University.
Dr. Thomas L. Lyon, Jr., age 53,
Professor and Academic Chair
of the Executive Fellows Program at
Rockhurst College 210 0.0%
Dr. Lyon became a Director of the
Corporation in 1993. He is a
professor and Academic Chair of the
Executive Fellows Program at
Rockhurst College in Kansas City, Missouri.
Dr. Lyon is a past director
of the Graduate and Undergraduate Business
Division, has been Acting
Dean of the School of Management, and was
the first director of
Rockhurst's M.B.A. Program. He has been
at Rockhurst since 1975. He
holds his B.A. in economics from Rockhurst,
and his M.A. in economics
and Ph.D. in economics and finance from
the University of Missouri.
Richard A. Sizemore, age 37, President
of Interactive Design, Inc. 386,296 13.8%
Mr. Sizemore became a Director of the
Corporation in 1995. He has
been owner and President of Interactive
Design, Inc. in Lenexa, Kansas,
since 1987. He holds a B.S. degree in
electrical engineering and an
M.B.A. from the University of Kansas.
</TABLE>
<TABLE>
<S> <C> <C>
Shares of Common Stock
Biographical Summaries of Nominees, Beneficially Owned at Percent
Executive Officers, and Significant
Employees August 1, 1997 of Class
H. James Serrone, age 42, Vice President
of Finance and Chief
Financial Officer of Torotel, Inc.,
Torotel Products, Inc., and
OPT Industries, Inc., and Acting General
Manager of Torotel Products, Inc. 7,843 (a) 0.3%
Mr. Serrone joined Torotel in 1979,
became Controller in 1982,
and was named Vice President in 1993.
Mr. Serrone has served
as Vice President of Torotel Products
since 1992, and became
Vice President of OPT Industries in 1993.
He has been Acting
General Manager of Torotel Products since
August 1996.
All Directors and Executive Officers as
a Group (6 persons) 762,778 (b) 27.2%
</TABLE>
(a) H. James Serrone's beneficial ownership includes 4,927 shares which
are acquirable within 60 days pursuant to the exercise
of outstanding stock options.
(b) The beneficial ownership of all directors and executive officers as a
group includes 4,927 shares which are acquirable within
60 days pursuant to the exercise of outstanding stock options.
Executive Compensation
The following table sets forth the compensation of the
named executive officers for each of the Corporation's last three
completed fiscal years.
Summary Compensation Table
<TABLE>
<S> <C> <C> <C> <C> <C>
Annual Compensation Long-Term Compensation All
Name and Other
Principal Position Year Salary Bonus Options Awarded Compensation
Dale H. Sizemore, Jr. (a) 1997 $ -0- $ -0- -0- $ -0-
Chief Executive Officer 1996 $ -0- $ -0- -0- $ -0-
Christian T. Hughes (b) 1997 $126,676 $36,000 37,500 $ 7,500
President and
Chief Operating Officer
Alfred F. Marsh (c) 1996 $ 24,078 $ -0- -0- $ -0-
Former President and 1995 $ 16,785 $ -0- -0- $ -0-
Chief Executive Officer
</TABLE>
(a) Dale H. Sizemore, Jr. became Chief Executive Officer effective
August 4, 1996.
(b) Christian T. Hughes became President and Chief Operating Officer
effective September 16, 1996.
(c) Alfred F. Marsh served as President and Chief Executive Officer
during all of fiscal year 1995, and for the period of
May 1 to August 3 of fiscal 1996.
Option Grants Table
The following table sets forth the grants of stock options
made to each of the named executive officers for the Corporation's
last completed fiscal year.
Option Grants in Last Fiscal Year
<TABLE>
<S> <C> <C> <C> <C> <C> <C>
Potential Realizable
Value at Assumed
Annual Rates of
Number of % of Total Stock Price
Shares Options Appreciation
Underlying Granted to Exercise for Option Term
Options Employees Price Date of
Name Granted in Fiscal Year Per Share Expiration 5% ($) 10% ($)
Dale H.
Sizemore,Jr. -0- 0.0% $ -0- - $ -0- $ -0-
Christian T.
Hughes 30,000 20.0% $ 1.00 12/4/06 $48,867 $77,811
7,500 5.0% $ 1.00 12/4/01 $ 9,572 $12,079
</TABLE>
Aggregated Option Exercises and Fiscal Year-End Option
Value Table
The following table sets forth the aggregate stock option
exercises made during the last completed fiscal year and the fiscal
year-end option values for each of the named executive officers.
Aggregated Option Exercises in Last Fiscal Year
and Fiscal Year-End Option Values
<TABLE>
<S> <C> <C> <C> <C>
Value of
Number of Unexercised
Unexercised In-the-Money
Options at Options at
Shares Fiscal Year-End Fiscal Year-End
Acquired Value Exercisable/ Exercisable/
Name on Exercise Realized Unexercisable Unexercisable
Dale H. Sizemore, Jr. -0- $ -0- -0- $ -0-
-0- $ -0-
Christian T. Hughes -0- $ -0- -0- $ -0-
37,500 $ 42,188
</TABLE>
Certain Relationships and Related Transactions
Indebtedness to Former Officer
The Corporation has a $429,000 promissory note with
Alfred F. Marsh, former President of Torotel, Inc., dated July 10,
1996. The amount of this note consists of the principal sum of
$250,000 from a note executed in April 1986, plus $179,000 of
accrued unpaid interest. For the year ended April 30, 1997, the
Corporation incurred $41,000 in interest on the note. The
outstanding balance of this unsecured note bears interest at a fixed
rate of 10% per annum. The note requires monthly principal and
interest payments of $10,881, and matures on July 1, 2000. Under
the terms of the note, no payments shall be made to Mr. Marsh as
long as any default condition exists under the terms of the
Corporation's credit agreement with Phillipsburg National Bank
& Trust Company, unless the bank has waived the default
condition prior to any payment. As of April 30, 1997, the
outstanding balance of the note was $384,000. The company has
suspended all payments under the note due to the reasons
discussed below in Item (a) under "Certain Transactions".
Certain Transactions
On May 6, 1997, Torotel Products, Inc., one of the
Corporation's operating subsidiaries, was accepted into the
Voluntary Disclosure Program of the United States Department of
Defense, resulting from its failure to perform some required
"thermal shock" testing as frequently as required, and
inaccurately certifying that all required testing had been
performed. As a result of the Corporation's investigation into the
testing deficiencies,
which was first reported in November 1996, the Corporation
recorded an estimated charge of $416,000 against earnings in its
fiscal fourth quarter ended April 30, 1997. This amount is still
subject to fluctuation as further evidence is investigated. The
Corporation continues to cooperate as the government conducts its
investigation and continues to pursue the existence of other
damages. At this time, the Corporation is not certain when
payment of the damage amount will be required; however, the
Corporation does not anticipate making any payments during the
fiscal year ending April 30, 1998. For the year ended April 30,
1997, the Corporation incurred legal costs of $203,000 for this
investigation. The Corporation believes that certain of its former
officers may have been responsible for the misconduct related to
the test failures, and is evaluating ways of recovering the
damages. In the meantime, the Corporation has suspended all
payments under a note payable to a former officer.
Section 16(a) Beneficial Ownership Reporting Compliance
As of the date of this Proxy Statement, all directors and
officers are in compliance with the reporting requirements of
Section 16(a) of the Securities Exchange Act of 1934. To the best
of Management's knowledge, all beneficial owners of more than
10% of the outstanding common shares of the Corporation are in
compliance as well.
Appointment of Auditors
The Board of Directors has appointed Grant Thornton
LLP as the Corporation's independent certified public accountants,
to audit the financial statements of the Corporation and its
subsidiaries for the fiscal year ending April 30, 1998. Grant
Thornton LLP has served as the Corporation's auditors since
September 1980. A representative of Grant Thornton LLP will be
present at the Meeting. An opportunity will be provided for the
representative to make a statement, if so desired, and to respond to
appropriate shareholder questions.
Other Matters
The Board of Directors knows of no other matters that
may properly be, or which are likely to be, brought before the
Meeting. However, if any other matters are properly brought
before the Meeting, the persons named in the enclosed Proxy or
their substitutes will vote in accordance with their best judgment
on such matters.
Shareholder Proposals
Any proposals which a shareholder intends to present at
the Annual Meeting of Shareholders to be held on Monday,
September 21, 1998, must be received by Torotel, Inc. on or
before May 15, 1998, in order for such proposal to be included in
the Corporation's Proxy Statement and Form of Proxy.
BY ORDER OF THE
BOARD OF DIRECTORS
/s/ H. James Serrone
H. James Serrone
Secretary of Torotel, Inc.
