UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
SCHEDULE 14A
Proxy Statement Pursuant to Section 14(a) of the Securities
Exchange Act of 1934
Filed by the Registrant [X]
Filed by a Party other than the Registrant [ ]
Check the appropriate box:
[ ] Preliminary Proxy Statement
[ ] CONFIDENTIAL, FOR USE OF THE COMMISSION ONLY (AS PERMITTED BY
RULE 14A-6(3) (2))
[X] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to section 240.14a-11(c) or section 240.14a-12
SERVOTRONICS, INC.
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(Name of Registrant as Specified in its Charter)
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(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
[X] No fee required.
[ ] Fee computer on table below per Exchange Act Rules 14a-6(i) (4) and 0-11.
1) Title of each class of securities to which transaction applies:
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2) Aggregate number of securities to which transaction applies:
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3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (set forth the amount on which the
filing fee is calculated and state how it was determined):
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5) Total fee paid:
[ ] Fee paid previously with preliminary materials.
[ ] Check box if any part of the fee is offset as provided by Exchange
Act Rule 0-11(a) (2) and identify the filing for which the offsetting
fee was paid previously. Identify the previous filing by registration
statement number, or the Form or Schedule and the date of its filing.
1) Amount Previously Paid:
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2) Form, Schedule or Registration Statement No.:
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4) Date Filed:
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[HEADER OMMITTED]
1110 MAPLE STREET, P.O. BOX 300-ELMA, NEW YORK 14059-0300
716-655-5990 FAX 716-655-6012
DR. NICHOLAS D. TRBOVICH
Chairman and President
June 1, 2007
Dear Fellow Shareholder:
The Annual Meeting of Shareholders will take place on June 29, 2007 at 2:30
p.m. at the Hilton Garden Inn, 4201 Genesee Street, Buffalo, New York 14225. You
are cordially invited to attend.
The enclosed Notice of Annual Meeting and Proxy Statement describe the
matters to be acted upon during the meeting. The meeting will also include a
report on the state of Servotronics, Inc.'s business.
To ensure your representation at the meeting, even if you are unable to
attend, please sign the enclosed Proxy Card and return it in the postage paid
envelope.
If you have any questions in regard to completing your proxy, please call
our Corporate Secretary, Michael D. Trbovich at (716) 655-5990.
Your continued interest and support is very much appreciated.
Sincerely,
Dr. Nicholas D. Trbovich
SERVOTRONICS, INC.
1110 Maple Street
P.O. Box 300
Elma, New York 14059
NOTICE OF
2007 ANNUAL SHAREHOLDERS' MEETING
To the Shareholders:
Notice is hereby given that the 2007 Annual Meeting of the Shareholders of
Servotronics, Inc. (the "Company") will be held at the Hilton Garden Inn, 4201
Genesee Street, Buffalo, New York 14225, on Friday, June 29, 2007 at 2:30 p.m.,
Buffalo time, for the following purposes:
1. To elect four directors to serve until the next Annual Meeting of
Shareholders and until their successors are elected and qualified.
2. To transact such other business as may properly come before the
meeting or any adjournments thereof.
Only shareholders of record at the close of business on May 22, 2007 are
entitled to notice of and to vote at the meeting or any adjournments thereof.
Dr. Nicholas D. Trbovich
CHAIRMAN OF THE BOARD,
PRESIDENT AND CHIEF EXECUTIVE OFFICER
Dated: June 1, 2007
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SHAREHOLDERS ARE URGED TO VOTE BY SIGNING, DATING AND MAILING THE ENCLOSED PROXY
IN THE ENCLOSED ENVELOPE TO WHICH NO POSTAGE NEED BE AFFIXED IF MAILED IN THE
UNITED STATES.
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June 1, 2007
SERVOTRONICS, INC.
1110 Maple Street
P.O. Box 300
Elma, New York 14059
PROXY STATEMENT
FOR
ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD JUNE 29, 2007
The following information is furnished in connection with the Annual
Meeting of Shareholders of SERVOTRONICS, INC. (the "Company") to be held on June
29, 2007 at 2:30 p.m., Buffalo time, at the Hilton Garden Inn, 4201 Genesee
Street, Buffalo, New York 14225. A copy of the Company's Annual Report to
Shareholders for the fiscal year ended December 31, 2006 accompanies this Proxy
Statement. Additional copies of the Annual Report, Notice, Proxy Statement and
form of proxy may be obtained without charge from the Company's Corporate
Secretary, 1110 Maple Street, P.O. Box 300, Elma, New York 14059. This Proxy
Statement and proxy card are first being mailed to shareholders on or about June
1, 2007.
SOLICITATION AND REVOCABILITY OF PROXIES
The enclosed proxy for the Annual Meeting of Shareholders is being
solicited by the directors of the Company. The proxy may be revoked by a
shareholder at any time prior to the exercise thereof by filing with the
Corporate Secretary of the Company a written revocation or duly executed proxy
bearing a later date. The proxy may be revoked by a shareholder attending the
meeting, by withdrawing such proxy and voting in person. The cost of soliciting
the proxies on the enclosed form will be paid by the Company. In addition to the
use of mails, proxies may be solicited by employees of the Company (who will
receive no additional compensation therefore) personally or by telephone or
other electronic communications, and arrangements may be made with banks,
brokerage houses and other institutions, nominees and/or fiduciaries to forward
the soliciting material to their principals and to obtain authorization for the
execution of proxies. The Company may, upon request, reimburse banks, brokerage
houses and other institutions, nominees and fiduciaries for their expenses in
forwarding proxy material to their principals. The Company has retained the
services of InvestorCom, Inc. 100 Wall Street, 24th Floor, New York, New York
10005, to assist in the solicitation of proxies and will pay that firm a fee of
approximately $3,000 plus expenses.
VOTING INFORMATION
The record date for determining shares entitled to vote has been fixed at
the close of business on May 22, 2007. On such date there were outstanding
2,329,102 shares of common stock of the Company, $.20 par value ("Common
Stock"), entitled to one vote each.
The presence, in person or by properly executed proxy, of the holders of
shares of Common Stock entitled to cast a majority of the votes entitled to be
cast by the holders of all outstanding shares of Common Stock is necessary to
constitute a quorum. Pursuant to SEC rules, shareholder proposals must have been
received by April 23, 2007, which date is 45 days before the date (June 6) on
which the Company mailed its proxy materials for last year's annual meeting, to
be considered at the 2007 Annual Meeting. At April 23, 2007, the Company had not
received notice of any intention to submit any other matter; and, therefore, the
named proxies have discretion to vote on any other matter that comes before the
meeting.
1
Shares of Common Stock represented by a properly signed, dated and returned
proxy will be treated as present at the meeting for the purposes of determining
a quorum. Proxies relating to "street name" shares of Common Stock that are
voted by brokers will be counted as shares of Common Stock (1) present for
purposes of determining the presence of a quorum and (2) as having voted in
accordance with the directions and statements on the form of proxy.
PROPOSAL 1: ELECTION OF DIRECTORS
The By-Laws of the Company provide that there shall be not less than three
directors nor more than nine and that the number of directors to be elected at
the Annual Meeting of Shareholders shall be fixed by the Board of Directors. The
Board of Directors has fixed the number of directors to be elected at the
meeting at four. Each person so elected shall serve until the next Annual
Meeting of Shareholders and until his successor is elected and shall have
qualified.
Each nominee is currently serving as a director of the Company and was
elected at the Company's 2006 Annual Meeting of Shareholders.
The directors believe that all of the nominees are willing and able to
serve as directors of the Company. If any nominee at the time of election is
unable or unwilling to serve or is otherwise unavailable for election, the
enclosed proxy will be voted in accordance with the best judgment of the person
or persons voting the proxy. Each nominee, to be elected as a director, must
receive the affirmative vote of a plurality of the votes cast at the meeting.
The following table sets forth certain information regarding the nominees
for election to the Company's Board of Directors.
POSITION WITH THE COMPANY AND PRINCIPAL OCCUPATION
NAME AGE AND BUSINESS EXPERIENCE FOR PAST FIVE YEARS
---- --- --------------------------------------------------
Dr. William H. Duerig 85 Director of the Company since 1990; Physicist and
Senior Program Manager for Kearfott Guidance
& Navigation Corporation for more than five
years prior to retirement in 1993.
Donald W. Hedges 85 Director of the Company since 1967; self-employed
attorney since 1988.
Nicholas D. Trbovich, Jr. 47 Director of the Company since 1990; Executive Vice
President of the Company since 2006; Vice
President of the Company from 1990 to 2006.
Dr. Nicholas D. Trbovich 71 Chairman of the Board of Directors, President and
Chief Executive Officer of the Company since 1959.
2
The directors recommend a vote FOR the four nominees listed above. Unless
instructed otherwise, proxies will be voted FOR these nominees.
ADDITIONAL COMPANY INFORMATION
COMMITTEES AND MEETING DATA
The Board of Directors has an Audit Committee comprised of Dr. Duerig and
Mr. Hedges. The Audit Committee meets with the Company's independent auditors
and reviews with them matters relating to corporate financial reporting and
accounting procedures and policies, the adequacy of financial, accounting and
operating controls, the scope of the audit and the results of the audit. The
Audit Committee is also charged with the responsibility of submitting to the
Board of Directors any recommendations it may have from time to time with
respect to financial reporting and accounting practices, policies and financial
accounting and operation controls and safeguards.
The Board has (i) determined that Dr. Duerig and Mr. Hedges are independent
pursuant to Section 121A of the listing standards of the American Stock Exchange
("AMEX") and (ii) designated Dr. Duerig as the Company's "Audit Committee
financial expert."
The Audit Committee performs all the functions required to be performed by
the Company's independent directors. The Company's full Board of Directors
performs the functions of all other committees and in lieu thereof as permitted
by the Company's By-Laws and the current AMEX listing standards. The Board of
Directors does not have a standing nominating or compensation committee.
Pursuant to Board resolutions, the full Board of Directors approves/ratifies all
director nominees after they are determined by the independent Directors. See
"Director Nominating Process" on page 5. Additionally, the independent directors
determine the compensation of the Chief Executive Officer and
determine/recommend the compensation for all other Executive Officers and such
determinations/recommendations are then subsequently submitted to the full Board
of Directors for approval/ratification. During the fiscal year ended December
31, 2006, the Audit Committee met 7 times and the Board of Directors met 10
times. No Director attended less than 100% of the meetings held. Each Director
is expected to attend the Annual Meeting of Shareholders. In 2006, the Annual
Meeting of Shareholders was attended by all Directors.
REPORT OF THE AUDIT COMMITTEE OF THE BOARD OF DIRECTORS
The Audit Committee serves as the representative of the Board of Directors
for general oversight of the Company's financial accounting and reporting,
systems of internal control, audit process and monitoring compliance with
standards of business conduct. The Charter for the Audit Committee is available
on the Company's website at www.servotronics.com. Management of the Company has
primary responsibility for preparing financial statements of the Company as well
as the Company's financial reporting process. Freed Maxick & Battaglia, CPAs,
PC, ("FM&B") acting as independent auditors, is responsible for expressing an
opinion on the conformity of the Company's audited financial statements with
U.S. generally accepted accounting principles.
In this context, the Audit Committee hereby reports as follows:
1. The Audit Committee has reviewed and discussed the audited
financial statements for fiscal year 2006 with the Company's
management.
3
2. The Audit Committee has discussed with the independent auditors the
matters required to be discussed by Statement on Auditing Standards
No. 61, COMMUNICATIONS WITH AUDIT COMMITTEES.
3. The Audit Committee has received the written disclosures and the
letter from the independent auditors required by Independence
Standards Board No. 1, INDEPENDENCE DISCUSSIONS WITH AUDIT
COMMITTEES, and has discussed with FM&B the matter of that firm's
independence.
4. Based on the review and discussion referred to in paragraphs (1)
through (3) above, the Audit Committee recommended to the Board of
Directors of the Company, and the Board of Directors has approved,
that the audited financial statements be included in the Company's
Annual Report on Form 10-KSB for the year ended December 31, 2006,
for filing with the Securities and Exchange Commission.
Each member of the Audit Committee is independent as defined under the
listing standards of the American Stock Exchange.
AUDIT COMMITTEE
---------------
Dr. William H. Duerig, Chairman
Donald W. Hedges
DIRECTORS' COMPENSATION
Under the Company's compensation arrangements, non-employee directors are
paid a yearly director's fee of $10,000 plus a per meeting fee of $700 and
reimbursement of actual expenses for attendance at Board meetings. Directors who
are also employees do not receive the Director's and/or meeting fees. Members of
the Audit Committee of the Board are paid a yearly Audit Committee fee of $2,500
plus a per meeting fee of $500 and reimbursement of actual expenses for
attendance at Audit Committee meetings.
The following table contains information with respect to the compensation
paid to the non-employee directors for the year ended December 31, 2006.
Fees Earned or Option
Name Paid in Cash (1) Awards (2)
---- ---------------- ----------
William H. Duerig $25,500 --
Donald W. Hedges $25,500 --
(1) Includes cash compensation earned by the Directors during the fiscal year
2006.
(2) No options were awarded in 2006. As of December 31, 2006, each of Dr.
Duerig's and Mr. Hedges' stock option holdings in the Company consisted of:
12,600 options with an exercise price of $8.50 expiring on March 24, 2008;
15,000 options with an exercise price of $3.8125 expiring on July 7, 2010;
16,000 options with an exercise price of $4.38 expiring on September 6,
2011; 18,000 options with an exercise price of $2.045 expiring on April 11,
2013; and 7,500 options with an exercise price of $4.70 expiring on
December 30, 2015. All stock options are currently exercisable.
4
CODE OF ETHICS
The Company has adopted a Code of Ethics and Business Conduct that applies
to all directors, officers and employees of the Company as required by the
listing standards of the AMEX. The Code is available on the Company's website at
www.servotronics.com and the Company intends to disclose on this website any
amendment to the Code. Waivers under the Code, if any, will be disclosed under
the rules of the SEC and the AMEX.
DIRECTOR NOMINATING PROCESS
The determination of the individuals to be nominated for the Board of
Directors is made by the independent Directors. This determination is then
subsequently submitted to the full Board of Directors for approval/ratification.
The Board has determined that Dr. Duerig and Mr. Hedges are independent under
the AMEX listing standards.
The Board has not adopted specific minimum criteria for director nominees.
Nominees are identified by first evaluating the current members of the Board
willing to continue in service. Current members of the Board with skills and
experience that are relevant to the Company's business and who are willing to
continue in services are considered for re-nomination. If any member of the
Board does not wish to continue in service, the Board first considers the
appropriateness of the size of the Board and then considers factors that it
deems are in the best interests of the Company and its shareholders in
identifying and evaluating a new nominee.
The Board will consider director nominees from any reasonable source,
including nominees suggested by incumbent Board members and management as well
as shareholder recommendations tendered in accordance with the Company's advance
notice provisions. The Company does not currently employ an executive search
firm, or pay a fee to any other third party, to locate qualified candidates for
director positions.
SHAREHOLDER COMMUNICATIONS WITH THE BOARD OF DIRECTORS
Shareholders who wish to contact the Board of Directors or any of its
members may do so by addressing their written correspondence to Board of
Directors, 1110 Maple Street, P.O. Box 300, Elma, New York 14059. Correspondence
directed to an individual Board member will be referred, if appropriate, to that
member. Correspondence not directed to a particular Board member will be
referred, if appropriate, to the Chairman of the Audit Committee.
EXECUTIVE OFFICERS
The following is a listing of the Company's current executive officers:
POSITION WITH THE COMPANY AND PRINCIPAL OCCUPATION
NAME AGE AND BUSINESS EXPERIENCE FOR PAST FIVE YEARS
---- --- -------------------------------------------
Dr. Nicholas D. Trbovich 71 Chairman of the Board of Directors, President and Chief
Executive Officer of the Company since 1959.
Nicholas D. Trbovich, Jr. 47 Director of the Company since 1990; Executive Vice
President of the Company since 2006; Vice President
of the Company from 1990 to 2006.
5
Cari L. Jaroslawsky 38 Treasurer and Chief Financial Officer of the Company
since 2005; CPA Consultant/Controller for the
Company for more than five years prior to 2005.
Michael D. Trbovich 44 Corporate Secretary of the Company since 2005;
Corporate Administration and Liaison for the Company
for more than five years prior to 2005.
Nicholas D. Trbovich, Jr. and Michael D. Trbovich are the sons of Dr.
Nicholas D. Trbovich. There are no other family relationships between any of the
directors or executive officers of the Company.
SUMMARY COMPENSATION TABLE
The following table contains information with respect to the annual
compensation for the year ended December 31, 2006 for the Company's Chief
Executive Officer and the two most highly compensated Executive Officers who
were serving as Executive Officers at December 31, 2006 (the "Named Executive
Officers").
ALL OTHER
NAME AND COMPEN-
PRINCIPAL POSITION YEAR SALARY BONUS SATION (1) TOTAL
------------------ ---- ------ ----- ---------- -----
Dr. Nicholas D. Trbovich................. 2006 $407,333 $40,000 $39,765 $487,098
Chairman, President and CEO
Nicholas D. Trbovich, Jr................. 2006 $186,547 $25,000 $36,250 $247,797
Director, Executive Vice President
Raymond C. Zielinski..................... 2006 $151,800 $8,000 $20,510 $180,310
Vice President
(1) All Other Compensation for 2006 includes (i) an allocation of 1,180
shares, 1,180 shares, and 1,003 shares for Dr. Trbovich, Mr. Trbovich,
Jr. and Mr. Zielinski, respectively, of Common Stock under the
Servotronics, Inc. Employee Stock Ownership Plan valued as of November
30, 2006 (the date of the allocation) at the closing price on the AMEX
of $8.10 per share; (ii) $7,787, $387 and $1,481 to Dr. Trbovich, Mr.
Trbovich, Jr. and Mr. Zielinski, respectively, for life insurance;
(iii) $15,488, $23,818 and $10,903 paid for Dr. Trbovich, Mr.
Trbovich, Jr. and Mr. Zielinski, respectively, for health insurance
and medical related expenses, and $6,934 and $2,489 for personal use
of company cars to Dr. Trbovich and Mr. Trbovich, Jr., respectively.
EMPLOYMENT AGREEMENTS
Dr. Trbovich and Mr. Trbovich, Jr. have employment agreements with the
Company pursuant to which they are entitled to receive minimum salary
compensation of $412,300 and $188,820 per annum respectively, or such greater
amount as the Company's Board of Directors may determine, and individual and
spousal lifetime health and life insurance benefits. In the event of Dr.
Trbovich's or Mr. Trbovich, Jr.'s death or total disability during the term of
the employment agreement, they or their estate is entitled to receive 50% of the
compensation they are receiving from the Company at the time of their death or
disability during the remainder of the term of the employment agreement. Also,
in the event of (i) a breach of the agreement by the Company, (ii) a change in
6
control of the Company, as defined, or (iii) a change in the responsibilities,
positions or geographic office location of Dr. Trbovich or Mr. Trbovich, Jr.,
they are entitled to terminate the agreement and receive a payment of 2.99 times
their average annual compensation from the Company for the preceding five years.
If this provision is invoked by Dr. Trbovich or Mr. Trbovich, Jr. and the
Company makes the required payment, the Company will be relieved of any further
salary liability under the agreement notwithstanding the number of years covered
by the agreement prior to termination. The term of the agreement extends to and
includes July 1, 2010 for Dr. Trbovich and extends to and includes July 1, 2011
for Mr. Trbovich, Jr., provided, however the term of the agreement will be
automatically extended for one additional year beyond its then expiration date
unless either party has notified the other in writing that the term will not be
extended. If the Company elects not to extend the agreement, Dr. Trbovich and/or
Mr. Trbovich, Jr. will be entitled to a severance payment equal to nine months'
salary and benefits.
OUTSTANDING EQUITY AWARDS AT 2006 FISCAL YEAR END
The following table shows information with respect to the value of
unexercised options held by the Named Executive Officers as of December 31,
2006. All of the options granted to the Named Executive Officers are currently
exercisable.
OPTION AWARDS
----------------------------------------------------------
NUMBER OF
SECURITIES
UNDERLYING OPTION OPTION
UNEXERCISED EXERCISE EXPIRATION
NAME OF OFFICER OPTIONS (#) PRICE DATE
---------------------------------- ----------------------- ---------------- -----------------
Dr. Nicholas D. Trbovich 37,800 $8.50 03/24/2008
37,800 $3.8125 07/07/2010
45,000 $4.38 09/06/2011
50,000 $2.045 04/11/2013
25,000 $4.70 12/30/2015
Nicholas D. Trbovich Jr. 18,400 $8.50 03/24/2008
18,400 $3.8125 07/07/2010
24,000 $4.38 09/06/2011
27,000 $2.045 04/11/2013
15,000 $4.70 12/30/2015
Raymond C. Zielinski 5,800 $8.50 03/24/2008
7,500 $3.8125 07/07/2010
8,000 $4.38 09/06/2011
9,000 $2.045 04/11/2013
7,500 $4.70 12/30/2015
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR INDEPENDENCE
Nicholas D. Trbovich, Jr., Executive Vice President of the Company, is an
inventor or co-inventor of certain issued patents and patent pending
applications that are used in the business of a subsidiary of the Company. The
patents have been and are currently used by the subject subsidiary on a
royalty-free basis with Mr. Trbovich, Jr.'s consent.
7
The Board has determined that Dr. Duerig and Mr. Hedges are independent
pursuant to Section 121A of the listing standards of the AMEX. The Board of
Directors has an Audit Committee comprised of Dr. Duerig and Mr. Hedges. The
Board does not have a standing nominating or compensation committee. The Board
of Directors approves/ratifies all director nominees after they are determined
by the independent directors. Additionally, the independent directors determine
the compensation of the Chief Executive Officer and determine/recommend the
compensation for all other Executive Officers and such
determinations/recommendations are then subsequently submitted to the full Board
of Directors for approval/ratification.
OWNERSHIP OF COMPANY STOCK
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS
The following table lists the persons that owned beneficially, as of May
22, 2007, more than 5% of the outstanding shares of Common Stock of the Company,
based on the Company's records. Unless otherwise stated, each person has sole
voting and investment power with respect to the shares of Common Stock indicated
as beneficially owned by that person.
NAME AND ADDRESS OF AMOUNT AND NATURE OF PERCENT OF
BENEFICIAL OWNER BENEFICIAL OWNERSHIP CLASS (1)
---------------- -------------------- ---------
Servotronics, Inc. Employee
Stock Ownership Trust ("ESOT") (2) 783,630 (2) 33.6%
1110 Maple Street
P.O. Box 300 Elma, New York 14059
Dr. Nicholas D. Trbovich (3) 583,278 (3) 23.1%
1110 Maple Street
P.O. Box 300 Elma, New York 14059
Nicholas D. Trbovich, Jr. (4) 142,866 (4) 5.9%
1110 Maple Street
P.O. Box 300 Elma, New York 14059
Harvey Houtkin (5) 352,088 (5) 15.1%
160 Summit Avenue
Montvale, New Jersey 07645
--------------------
(1) Percent of class is based upon 2,329,102 shares of Common Stock
outstanding as of May 22, 2007 plus, in the case of Dr. Trbovich and
Nicholas D. Trbovich, Jr., the shares underlying their stock options,
all of which are presently exercisable.
8
(2) The trustees of the ESOT -- Dr. Nicholas D. Trbovich and Nicholas D.
Trbovich, Jr. -- direct the voting of unallocated shares. The
participants in the related plan have the right to direct the voting of
shares which have been allocated to their respective accounts; if a
participant does not direct the vote, the trustees may direct the vote
of that participant's shares. As of May 22, 2007, approximately 412,262
shares have been allocated to the accounts of participants and
approximately 371,368 shares remain unallocated.
(3) This amount includes (i) 32,309 shares held by a charitable foundation
for which Dr. Trbovich serves as a trustee; (ii) 195,600 shares which
Dr. Trbovich has the right to acquire under stock options which are
currently exercisable and (iii) approximately 44,983 shares allocated to
Dr. Trbovich's account under the Servotronics, Inc. Employee Stock
Ownership Plan. This amount does not include the shares beneficially
owned by certain of Dr. Trbovich's other relatives. Except as set forth
above, does not include shares held by the ESOT as to which Dr. Trbovich
serves as one of the two trustees. See note (2) above.
(4) This amount includes (i) 102,800 shares which Mr. Trbovich, Jr. has the
right to acquire under stock options which are currently exercisable and
(ii) approximately 24,252 shares allocated to Mr. Trbovich, Jr.'s
account under the Servotronics, Inc. Employee Stock Ownership Plan.
Except as set forth above, does not include shares held by the ESOT as
to which Mr. Trbovich, Jr. serves as one of two trustees. See note (2)
above.
(5) Based on a statement on Schedule 13D, as last amended on February 12,
2004, filed by Mr. Houtkin with the Securities and Exchange Commission.
According to Mr. Houtkin's statement, he has sole voting and investment
power with respect to 190,000 shares and shared voting and investment
power with respect to 162,088 shares. Mr. Houtkin disclaims beneficial
ownership in additional shares owned by other members of his family.
SECURITY OWNERSHIP OF MANAGEMENT
The following table sets forth, as of May 22, 2007, information as to the
beneficial ownership of shares of Common Stock of the Company held by each
director, Named Executive Officer, executive officer and by all directors and
officers as a group (each individual listed in the following table has sole
voting and investment power with respect to the shares of Common Stock indicated
as beneficially owned by that person, except as otherwise indicated):
NAME OF AMOUNT AND NATURE OF PERCENT OF
BENEFICIAL OWNER BENEFICIAL OWNERSHIP CLASS (1)
---------------- -------------------- ---------
Dr. Nicholas D. Trbovich 583,278 (2) 23.1%
Nicholas D. Trbovich, Jr. 142,866 (3) 5.9%
Donald W. Hedges 73,836 (4) 3.1%
Dr. William H. Duerig 72,693 (5) 3.0%
Raymond C. Zielinski 65,023 (6) 2.7%
Cari L. Jaroslawsky 7,500 (7) 0.3%
Michael D. Trbovich 34,120 (8) 1.4%
All directors and
officers as a group 1,350,684 (9) 47.6%
--------------------
9
(1) Percent of class is based upon 2,329,102 shares of Common Stock
outstanding as of May 22, 2007 plus the number of shares subject to
stock options held by the indicated person or group.
(2) See note (9) below and note (3) to the table in "Security Ownership of
Certain Beneficial Owners."
(3) See note (9) below and note (4) to the table in "Security Ownership of
Certain Beneficial Owners."
(4) This amount includes 69,100 shares which Mr. Hedges has the right to
acquire under stock options which are currently exercisable. Mr. Hedges
has sole voting and investment power with respect to 4,261 shares and
shared voting and investment power with respect to 475 shares.
(5) This amount includes 69,100 shares which Dr. Duerig has the right to
acquire under stock options which are currently exercisable.
(6) This amount includes (i) 37,800 shares which Mr. Zielinski has the right
to acquire under stock options which are currently exercisable and (ii)
approximately 13,199 shares allocated to Mr. Zielinski's account under
the Servotronics, Inc. Employee Stock Ownership Plan.
(7) This amount represents 7,500 shares which Mrs. Jaroslawsky has the right
to acquire under stock options which are currently exercisable.
(8) This amount includes (i) 24,500 shares which Mr. Trbovich has the right
to acquire under stock options which are currently exercisable and (ii)
approximately 8,084 shares allocated to Mr. Trbovich's account under the
Servotronics, Inc. Employee Stock Ownership Plan.
(9) See notes (2) through (8) above. Also includes unallocated shares held
by the ESOT over which certain officers, as trustees of the ESOT, may be
deemed to have voting power, as well as shares allocated to the accounts
of all officers as a group under the related plan. See the table in
"Security Ownership of Certain Beneficial Owners" and note (2) thereto.
SECTION 16(A) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Based solely on its review of reports filed pursuant to Section 16(a) of
the Securities Exchange Act or representations from directors and executive
officers required to file such reports, the Company believes that all such
filings required of its executive officers and directors and greater than 10%
beneficial owners were timely made.
INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
As previously disclosed on Form 8-K, on September 7, 2005, the Audit
Committee of the Company's Board of Directors terminated PricewaterhouseCoopers
LLP ("PWC") as the Company's independent registered public accounting firm. The
audit reports of PWC on the Company's consolidated financial statements as of
and for the two most recent fiscal years ended December 31, 2004 did not contain
any adverse opinion or disclaimer of opinion, nor were these opinions modified
as to uncertainty, audit scope or accounting principles. During the Company's
two fiscal years ended December 31, 2004 and through September 7, 2005, there
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were no disagreements between the Company and PWC on any matters of accounting
principles or practices, financial statement disclosure, or auditing scope or
procedure, which disagreements, if not resolved to the satisfaction of PWC,
would have caused it to make a reference to the subject matter of the
disagreement in connection with its audit report which did not occur.
The Company provided PWC with a copy of its Form 8-K disclosure and
requested that PWC furnish the Company with a letter addressed to the Securities
and Exchange Commission stating whether PWC agreed with the Company's
statements. PWC agreed that there were no disagreements, and issued the letter.
On September 7, 2005, the Audit Committee engaged FM&B, effective September
8, 2005, to serve as the Company's independent registered public accounting firm
for the fiscal year ending December 31, 2005. During the Company's two fiscal
years ended December 31, 2004, and subsequently through the effective date of
the engagement of FM&B, neither the Company nor any person acting on behalf of
the Company consulted with FM&B with respect to the application of accounting
principles to a specific completed or contemplated transaction, or the type of
audit opinion that might be rendered on the Company's consolidated financial
statements, or any other matters or reportable events listed in Item 304
(a)(1)(iv) of Regulation S-B.
From August 16, 2005 to October 20, 2005 RSM McGladrey, Inc., a business
services company, was retained by the Audit Committee of the Company's Board of
Directors to investigate and report to the Audit Committee with respect to
certain management-discovered unauthorized practices by a former financial
officer of the Company with respect to the Company's payroll accounts. The
Directors of FM&B are co-employed by RSM McGladrey, Inc.
FM&B has been selected by the Board of Directors as the independent public
accountants for the Company's current fiscal year. A representative of FM&B is
expected to be present at the meeting with the opportunity to make a statement
if he desires to do so and will be available to respond to appropriate questions
of shareholders.
The following table shows the fees paid or accrued by the Company for the
audit and other services provided by FM&B and RSM McGladrey, Inc. for fiscal
years 2006 and 2005.
2006 2005
-------- --------
Audit Fees (1)....................... $ 71,050 $ 63,000
Tax Fees (2)......................... 33,223 1,713
All Other Fees (3)................... 1,446 35,704
-------- --------
Total................................ $105,719 $100,417
======== ========
-------------------
(1) Audit fees represent fees for professional services provided in
connection with the audit of the Company's financial statements and
review of the Company's quarterly financial statements and audit
services provided in connection with other statutory or regulatory
filings.
(2) Tax fees principally included fees for tax preparation and tax
consulting services.
(3) Primarily for a forensic accounting report by RSM McGladrey, Inc.
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The Audit Committee pre-approves audit and non-audit services provided by
FM&B and RSM McGladrey, Inc.
The Audit Committee of the Board of Directors has considered whether
provision of the services described above is compatible with maintaining our
accountant's independence and has determined that such services have not
adversely affected FM&B'S independence.
SHAREHOLDER PROPOSALS FOR THE 2008 ANNUAL MEETING
PROPOSALS FOR THE COMPANY'S PROXY MATERIAL
Shareholder proposals must be received at the Company's offices no later
than February 4, 2008, in order to be considered for inclusion, if appropriate,
as a shareholder proposal in the Company's proxy materials for the 2008 Annual
Meeting. Such proposals must also meet the other requirements established by the
SEC for shareholder proposals.
PROPOSALS TO BE INTRODUCED AT THE ANNUAL MEETING BUT NOT INTENDED TO BE INCLUDED
IN THE COMPANY'S PROXY MATERIAL
For any shareholder proposal to be presented in connection with the 2008
Annual Meeting of Shareholders, a shareholder must give timely written notice
thereof to the Company in compliance with the advance notice provisions of the
federal securities laws. To be timely, a qualified shareholder must give written
notice to the Company at the Company's offices not later than April 17, 2008.
OTHER MATTERS
So far as the directors are aware, no matters other than the election of
directors will be presented to the meeting for action on the part of the
shareholders. If any other matters are properly brought before the meeting, it
is the intention of the persons named in the accompanying proxy to vote thereon
the shares to which the proxy relates in accordance with their best judgment.
By Order of the Directors
Dr. Nicholas D. Trbovich
CHAIRMAN OF THE BOARD,
PRESIDENT AND CHIEF EXECUTIVE OFFICER
Elma, New York
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