-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, Ft+1NWj/w/9pS3d/xpd2lufjVxfX91Nfo1e7KaKTnivLd0wRkdJrTgGUO5QkWhGO ShzJZZQlj8b7et8IifrbkQ== 0000950152-01-001542.txt : 20010327 0000950152-01-001542.hdr.sgml : 20010327 ACCESSION NUMBER: 0000950152-01-001542 CONFORMED SUBMISSION TYPE: 10KSB40 PUBLIC DOCUMENT COUNT: 10 CONFORMED PERIOD OF REPORT: 20001231 FILED AS OF DATE: 20010326 FILER: COMPANY DATA: COMPANY CONFORMED NAME: SERVOTRONICS INC /DE/ CENTRAL INDEX KEY: 0000089140 STANDARD INDUSTRIAL CLASSIFICATION: CUTLERY, HANDTOOLS & GENERAL HARDWARE [3420] IRS NUMBER: 160837866 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10KSB40 SEC ACT: SEC FILE NUMBER: 001-07109 FILM NUMBER: 1579486 BUSINESS ADDRESS: STREET 1: 1110 MAPLE ST CITY: ELMA STATE: NY ZIP: 14059 BUSINESS PHONE: 7166335990 MAIL ADDRESS: STREET 1: P O BOX 300 STREET 2: ELMA STATE: NY ZIP: 14059-0300 10KSB40 1 l87159ae10ksb40.txt SERVOTRONICS, INC. FORM 10KSB40 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, 2000 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: $16,969,000. As of March 15, 2001 the aggregate market value of the voting common stock held by non-affiliates of the registrant was $3,502,413.63 based on the average of sales prices reported by the American Stock Exchange on that day. As of March 15, 2001 the number of $.20 par value common shares outstanding was 2,418,081. DOCUMENTS INCORPORATED BY REFERENCE Document Part of Form 10-KSB -------- ------------------- 2001 Proxy Statement Part III Transitional Small Business Disclosure Format. Yes . No x . --- --- 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 and various types of cutlery. 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 other types or orders. 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. 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. -2- 3 From time to time, the Registrant has also produced other products of its own and/or of a given design to meet customers' requirements. 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 12% of the Registrant's total revenues. If the Registrant were deemed to be unqualified by the United States Government as a contractor or subcontractor, it would lose approximately 21% of its revenue of advanced technology products. In 2000 and 1999 sales of advanced technology products to Honeywell and United Technologies (including their subsidiaries and/or divisions) individually exceeded 10% of Registrant's total revenues. No other single customer represented more than 10% of the Company's revenues 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 -3- 4 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's Consumer Products Group also sells its cutlery products (principally machetes, survival knives and kitchen knives) to various branches of the United States Government which accounted for 13% of the Registrant's total sales in 2000. 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. Intellectual Properties - ----------------------- The Company has rights under certain copyrights and registered domain names. In the view of management, the Registrant's competitive position is not dependent on patent protection. Research Activities - ------------------- The amount spent by the Registrant in research and development activities during its 2000 and 1999 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. -4- 5 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. 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, 2000 had approximately 211 employees of which approximately 198 are full time. In excess of 82% of its employees are engaged in production, inspection, packaging or shipping activities. The balance are engaged in executive, engineering, administrative, clerical or sales capacities. -5- 6 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:
Number of Principal buildings and Approx. Approx. product type of floor area Location acreage manufactured construction (sq. feet) - -------------------------------------------------------------------------------------------------------------- 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
In Elma, New York, 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 for a nominal amount. See the consolidated financial statements, including Note 10 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 advanced technology products. The Registrant designs and makes substantially all of the tools, dies, jigs and specialized testing equipment necessary for the production of the advanced technology products. The Registrant also possesses automatic and semi-automatic grinders, tumblers, presses and miscellaneous metal 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. -6- 7 Item 4. Submission of Matters to a Vote of Security Holders - ------ --------------------------------------------------- Not applicable. -7- 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 2000 and 1999.
High Low ---- --- 2000 Fourth Quarter $3.500 $2.500 Third Quarter 4.313 3.000 Second Quarter 5.125 3.750 First Quarter 5.375 4.625 1999 Fourth Quarter $6.125 $4.875 Third Quarter 7.375 4.750 Second Quarter 5.437 4.250 First Quarter 7.000 4.750
(b) Approximate number of holders of common stock ---------------------------------------------
Title Approximate number of of record holders (as of class December 31, 2000) ----- ------------------ Common Stock, $.20 par value 669
(c) Dividends on common stock ------------------------- No cash dividends were paid in 2000 or 1999. -8- 9 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 revenues and the percentage increase or decrease of such items as compared to the indicated prior period:
Period to Relationship to period net revenues year increase ended (decrease) December 31, year ended 2000 1999 2000-1999 ---- ---- --------- Net revenues: Advanced technology products 55.9% 60.6% (3.2)% Consumer products 44.1 39.4 17.5 ----- ----- ---- 100.0 100.0 5.0 Cost of goods sold 71.7 75.2 0.1 ----- ----- ---- Gross profit 28.3 24.8 19.8 ----- ----- ---- Selling, general and administrative 17.9 20.0 (5.8) Restructuring charge 0.0 5.3 -- Interest 2.3 2.1 13.4 Depreciation 3.8 4.2 (3.7) ----- ----- ---- 24.0 31.6 3.9 ----- ----- ---- Income (loss) before income taxes and cumulative change in accounting principle and after restructure charge 4.3 (6.7) N/A Income tax provision 1.9 (2.5) N/A ----- ----- ---- Income (loss) before cumulative effect of a change in accounting principle and after restructure charge 2.5 (4.2) N/A Cumulative effect of a change in accounting principle 0.0 (10.7) -- ----- ----- ---- Net income (loss) 2.5% (14.9)% N/A ===== ===== ====
-9- 10 Management Discussion - --------------------- During the year ended December 31, 2000 and for the comparable period ended December 31, 1999, approximately 25% and 21% respectively 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 and the difficulty in predicting defense appropriations (both actual and proposed) preclude any guarantees or even assurances that current government and/or commercial 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 2000 as Compared to 1999 - ----------------------------------------------------- The Company's consolidated results of operations for the year ended December 31, 2000 showed an approximate 5% increase in net revenues with an increase in gross profit of 19.8%. The increase in revenues is primarily attributable to proactive marketing and product development. The resultant increase in gross profit is both attributable to the Company's previously reported restructuring plan as identified during 1999 as well as continued efforts to control costs. Selling, general and administrative costs decreased for the year ended December 31, 2000 when compared to the same period in 1999 primarily as the result of fluctuations in selling compensation expenses dependent upon product mix. Interest expense increased by approximately 13% for the year ended December 31, 2000 when compared to the same period in 1999 due to market driven interest rate fluctuations notwithstanding the Company's decreased institutional debt by nearly $900,000. Depreciation expense decreased due to variable estimated useful lives of depreciable property as identified in Note 1 to the Consolidated Financial Statements. -10- 11 Results of Operations - Year 1999 as Compared to 1998 - ----------------------------------------------------- The Company's consolidated results of operations for the year ended December 31, 1999 showed an approximate 6.9% decrease in net revenues after excluding $210,000 of gross receipts recorded in 1998 on the settlement of disputes, as previously reported. This decrease is the result of stretch-outs of certain Advanced Technology Group's deliveries as well as the discontinuance of certain product lines in the Consumer Products Group (CPG). Operating income as a percentage of net revenues decreased from approximately 13.7% to 5% when compared to the same period in 1998 primarily due to write-off of costs incurred to start new programs at both the Advanced Technology and Consumer Products Groups. Selling, general and administrative costs increased by approximately 1% for the year ended December 31, 1999 when compared to the same period in 1998. This was primarily incurred to support certain new programs and contract commitments. Restructuring charges of $854,000 were recorded in 1999 in connection with the discontinuance of certain products in the CPG in an effort to restructure the overall business' strategic plan and to redirect the Company's efforts to target "niche" and core-products. (See also Note 2 to the consolidated financial statements.) No similar charges were incurred in 1998. Interest expense increased by approximately 10% for the year ended December 31, 1999 when compared to the same period in 1998 due to an increase in both institutional debt and fluctuations in interest rates on long-term debt. Depreciation expense increased due to an increase in capital expenditures. As the result of the early adoption of the newly enacted accounting pronouncements [Emerging Issues Task Force ("EITF") 99-5, "Accounting for Pre-Production Costs Related to Long-Term Supply Arrangements" and timely adoption of Statement of Position No. 98-5 "Reporting on the Cost of Start-Up Activities" (SoP 98-5)] the Company wrote-off $1,727,000 after tax which were previously appropriately capitalized. The early adoption of these pronouncements resulted in the recognition of the related tax benefit of $1,013,000 in the December 31, 1999 financial statements. These charges were recorded as a cumulative effect of a change in accounting principle in the December 31, 1999 Consolidated Statement of Income. (See Note 4 to the consolidated financial statements.) No similar charges were incurred in 1998. -11- 12 Liquidity and Capital Resources - ------------------------------- The Company's primary liquidity and capital requirements relate to the working capital needs; primarily inventory, accounts receivable, capital investments in facilities, machinery, tools/dies and equipment and principal/interest payments on indebtedness. The Company's primary sources of liquidity have been from positive cash flows and from bank financing. During the year ended December 31, 2000, the Company expended $858,000 on capital expenditures. During the year ended December 31, 1999, the Company expended $841,000. The Company also has a $1,000,000 line of credit at December 31, 2000 on which there is no balance outstanding at December 31, 2000. There are no material commitments for capital expenditures at December 31, 2000. Year 2000 - --------- The Company's year 2000 computer compliance efforts were successful. The Company moved into the year 2000 without impact or interruption to its business as a result of year 2000 computer problems. 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. Item 8. Changes in and Disagreements with Accountants on Accounting and - ------ --------------------------------------------------------------- Financial Disclosure -------------------- None. -12- 13 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 2000 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 2000 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 2000 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 2000 fiscal year or such information will be included by amendment. -13- 14 Item 13. Exhibits and Reports on Form 8-K - ------- -------------------------------- (a) Exhibits --------
Exhibit number Presentation Reference ------ ------------ --------- 3(A)(1) Certificate of Incorporation Exhibit 3(A)(1) to 1996 Form 10-KSB* 3(A)(2) Amendments to Certificate Exhibit 3(A)(2) to 1996 of Incorporation dated Form 10-KSB* August 27, 1984 3(A)(3) Certificate of designation Exhibit 4(A) to 1987 regarding Series I Form 10-K* preferred stock 3(A)(4) Amendments to Certificate Exhibit 3(A)(4) to 1998 of Incorporation dated Form 10-KSB* June 30, 1998 3(B) By-laws Exhibit 3(B) to 1986 Form 10-K* 4.1(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 4.1(B) Second amended and restated Exhibit 4.1(B) to 1999 term loan agreement with Form 10-KSB Fleet Bank of New York dated February 26, 1999 4.1(C) First amendment to second Exhibit 4.1(C) to 1999 amended and restated term Form 10-KSB loan agreement with Fleet Bank of New York dated December 17, 1999 4.2(A)(1) Letter of Credit Reimbursement Exhibit 4(B)(1) to Agreement with Fleet Bank 1994 10-KSB* dated December 1, 1994
- -------------------------------------------------------------- * Incorporated herein by reference (File No. 1-7109) ** Indicates management contract or compensatory plan or arrangement -14- 15
Exhibit number Presentation Reference ------ ------------ --------- 4.2(B) First Amendment and Exhibit 4.2(B) to 1999 Extension to Letter of Credit Form 10-KSB and Reimbursement Agreement with Fleet Bank of New York dated as of December 17, 1999 4.2(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 4.2(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 4.3 Shareholder Rights Plan Attachment B to Form dated as of August 13, 8-K filed August 17, 1992 1992* 10(A)(1) Employment contract** Exhibit 10(A) to 1986 Form 10-K* 10(A)(2) Amendment to employment Exhibit 10(A) to 1999 contract** Form 10-KSB 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
- -------------------------------------------------------------- * Incorporated herein by reference (File No. 1-7109) ** Indicates management contract or compensatory plan or arrangement -15- 16
Exhibit number Presentation Reference ------ ------------ --------- 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) 2000 Employees Stock Filed herewith Option Plan** 10(D)(2) Stock Option Agreement Exhibit 10(D)(2) to 1998 for Donald W. Hedges Form 10-KSB* dated March 24, 1998** 10(D)(2)(a) Stock Option Agreement Filed herewith for Donald W. Hedges dated July 7, 2000** 10(D)(3)(b) Stock Option Agreement Exhibit 10(D)(3)(b) to 1998 for Nicholas D. Form 10-KSB* Trbovich dated March 24, 1998** 10(D)(3)(c) Stock Option Agreement Filed herewith for Nicholas D. Trbovich dated July 7, 2000** 10(D)(4) Stock Option Agreement Exhibit 10(D)(4) to 1998 for William H. Duerig Form 10-KSB* dated March 24, 1998** 10(D)(4)(a) Stock Option Agreement Filed herewith for William H. Duerig dated July 7, 2000** 10(D)(5)(b) Stock Option Agreement Exhibit 10(D)(5)(b) to 1998 for Nicholas D. Form 10-KSB* Trbovich, Jr. dated March 24, 1998**
- -------------------------------------------------------------- * Incorporated herein by reference (File No. 1-7109) ** Indicates management contract or compensatory plan or arrangement -16- 17
Exhibit number Presentation Reference ------ ------------ --------- 10(D)(6)(a) Stock Option Agreement Exhibit 10(D)(6) to 1991 for Nicholas D. Form 10-K* Trbovich, Jr. dated October 17, 1991** 10(D)(6)(b) Stock Option Agreement Exhibit 10(D)(6)(b) to 1998 for Nicholas D. Form 10-KSB* Trbovich, Jr. dated March 24, 1998** 10(D)(6)(c) Stock Option Agreement Filed herewith for Nicholas D. Trbovich, Jr. dated July 7, 2000** 10(D)(7)(a) Stock Option Agreement Exhibit 10(D)(7) to 1991 for Lee D. Burns dated Form 10-K* October 17, 1991** 10(D)(7)(b) Stock Option Agreement Exhibit 10(D)(7)(b) to 1998 for Lee D. Burns dated Form 10-KSB* March 24, 1998** 10(D)(7)(c) Stock Option Agreement Filed herewith for Lee D. Burns dated July 7, 2000** 10(D)(8)(a) Stock Option Agreement Exhibit 10(D)(8) to 1991 for Raymond C. Zielinski Form 10-K* dated October 17, 1991** 10(D)(8)(b) Stock Option Agreement Exhibit 10(D)(8)(b) to 1998 for Raymond C. Zielinski Form 10-KSB* dated March 24, 1998** 10(D)(8)(c) Stock Option Agreement Filed herewith for Raymond C. Zielinski dated July 7, 2000**
- -------------------------------------------------------------- * Incorporated herein by reference (File No. 1-7109) ** Indicates management contract or compensatory plan or arrangement -17- 18
Exhibit number Presentation Reference ------ ------------ --------- 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 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 Filed herewith Registrant
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, 2000. - -------------------------------------------------------------- * Incorporated herein by reference (File No. 1-7109) ** Indicates management contract or compensatory plan or arrangement -18- 19 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 21E 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 a material portion 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, global competition, difficulty in predicting defense appropriations, 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 long-term purchase programs and market demand and acceptance both for the Company's products and its customers' products which incorporate Company-made components. The success of the Company also depends upon the trends of the economy, including interest rates, 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. -19- 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 15, 2001 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. /s/ Nicholas D. Trbovich President, Chief Executive March 15, 2001 - ------------------------ Officer, Chairman of the Nicholas D. Trbovich Board and Director /s/ Lee D. Burns Treasurer and Secretary March 15, 2001 - ---------------- (Chief Financial Officer) Lee D. Burns /s/ Donald W. Hedges Director March 15, 2001 - -------------------- Donald W. Hedges /s/ William H. Duerig Director March 15, 2001 - --------------------- William H. Duerig /s/ Nicholas D. Trbovich Jr. Director March 15, 2001 - ---------------------------- Nicholas D. Trbovich Jr.
-20- 21 SERVOTRONICS, INC. AND SUBSIDIARIES ----------------------------------- INDEX TO CONSOLIDATED FINANCIAL STATEMENTS ------------------------------------------
Page ---- Report of independent accountants F2 Consolidated balance sheet at December 31, 2000 F3 Consolidated statement of income for the years ended December 31, 2000 and 1999 F4 Consolidated statement of cash flows for the years ended December 31, 2000 and 1999 F5 Notes to consolidated financial statements F6-F20
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- 22 Report of Independent Accountants --------------------------------- To the Board of Directors and Shareholders of Servotronics, Inc. In our opinion, the accompanying consolidated balance sheets and the related consolidated statement of income and of cash flows present fairly, in all material respects, the financial position of Servotronics, Inc. and its subsidiaries at December 31, 2000 and the results of their operations and their cash flows for each of the two years in the period ended December 31, 2000 in conformity with accounting principles generally accepted in the United States of America. 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 auditing standards generally accepted in the United States of America, 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. PricewaterhouseCoopers LLP Buffalo, New York March 15, 2001 -F2- 23 SERVOTRONICS, INC. AND SUBSIDIARIES ----------------------------------- CONSOLIDATED BALANCE SHEET -------------------------- December 31, 2000 ----------------- ($000's omitted except per share data) Assets Current assets: Cash $ 659 Accounts receivable 2,479 Inventories 6,407 Prepaid income taxes 218 Deferred income taxes 867 Other 1,252 -------- Total current assets 11,882 Property, plant and equipment, net 7,340 Other assets 600 -------- $ 19,822 ======== Liabilities and Shareholders' Equity Current liabilities: Current portion of long-term debt $ 393 Accounts payable 564 Accrued employee compensation and benefit costs 770 Other accrued liabilities 166 -------- Total current liabilities 1,893 -------- Long-term debt 6,100 Deferred income taxes 455 Other non-current liability 215 Shareholders' equity: Common stock, par value $.20; authorized 4,000,000 shares; Issued 2,614,506 shares 523 Capital in excess of par value 13,361 Retained earnings 794 Accumulated other comprehensive income (25) -------- 14,653 Employee stock ownership trust commitment (2,539) Treasury stock, at cost 196,425 shares (955) -------- Total shareholders' equity 11,159 -------- $ 19,822 ========
See notes to consolidated financial statements -F3- 24 SERVOTRONICS, INC. AND SUBSIDIARIES ----------------------------------- CONSOLIDATED STATEMENT OF INCOME -------------------------------- ($000's omitted except per share data)
Year Ended December 31, 2000 1999 ------- -------- Net revenues $16,969 $ 16,165 Costs and expenses: Cost of goods sold 12,159 12,149 Selling, general and administrative 3,042 3,230 Restructuring charge 0 854 Interest 390 344 Depreciation and amortization 646 671 ------- -------- 16,237 17,248 ------- -------- Income (loss) before income taxes (benefit) and cumulative change in accounting principle 732 (1,083) Income taxes (benefit) 314 (401) ------- -------- Income (loss) before cumulative change in accounting principle 418 (682) Cumulative effect of a change in accounting principle, net of taxes (benefit) 0 (1,727) ------- -------- Net income (loss) $ 418 $ (2,409) ======= ======== Income (Loss) Per Share BASIC Income (loss) per share before cumulative effect of a change in accounting principle $ 0.23 $ (0.38) Cumulative effect per share of a change in accounting principle 0.00 (0.95) ------- -------- Net income (loss) per share $ 0.23 $ (1.33) ======= ======== DILUTED Income (loss) per share before cumulative effect of a change in accounting principle $ 0.21 $ (0.38) Cumulative effect per share of a change in accounting principle 0.00 (0.95) ------- -------- Net income (loss) per share $ 0.21 $ (1.33) ======= ========
See notes to consolidated financial statements -F4- 25 SERVOTRONICS, INC. AND SUBSIDIARIES ----------------------------------- CONSOLIDATED STATEMENT OF CASH FLOWS ------------------------------------ ($000's omitted)
Year Ended December 31, 2000 1999 ------- ------- Cash flows related to operating activities: Net income (loss) $ 418 $(2,409) Adjustments to reconcile net income to net cash provided by operating activities - Cumulative effect of change in accounting principle 0 2,740 Depreciation and amortization 646 921 Deferred income taxes 513 (892) Tax benefit from stock options 3 34 Change in assets and liabilities - Accounts receivable 328 (609) Inventories (239) 76 Prepaid income taxes 548 (751) Other current assets 44 80 Other assets 12 17 Accounts payable (582) 256 Accrued employee compensation & benefit costs (56) (104) Other accrued liabilities (139) 122 Other non-current liabilities (12) 0 Employee stock ownership trust payment 101 101 ------- ------- Net cash provided by (used in) operating activities 1,585 (418) ------- ------- Cash flows related to investing activities: Capital expenditures - property, plant & equipment (858) (841) ------- ------- Net cash used in investing activities (858) (841) ------- ------- Cash flows related to financing activities: Increase in demand loan 600 950 Payments on demand loan (1,050) (500) Acquisition of long-term debt 0 1,000 Principal payments on long-term debt (439) (461) Net cash proceeds from exercise of stock options 27 55 ------- ------- Net cash provided by (used in) financing activities (862) 1,044 ------- ------- Net decrease in cash (135) (215) Cash at beginning of period 794 1,009 ------- ------- Cash at end of period $ 659 $ 794 ======= ======= Supplemental disclosures: - ------------------------- Income taxes paid $ 68 $ 207 Interest paid $ 386 $ 334
See notes to consolidated financial statements -F5- 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. Cash and cash equivalents ------------------------- The Company considers cash and cash equivalents to include all cash accounts and short-term investments purchased with a maturity of three months or less. 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 $809,000 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. Inventories ----------- Inventories are stated generally at the lower of standard cost, which approximates actual cost (first-in, first-out), or market. Pre-production costs related to long-term supply arrangements are expensed as incurred. -F6- 27 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 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: Buildings and improvements 5-39 years Machinery and equipment 5-15 years Tooling 3-5 years 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 operating loss carryforwards and 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. -F7- 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. Actual results could differ from those estimates. 2. Restructuring Charges --------------------- In the fourth quarter of 1999, the Company recorded restructuring charges of $854,000 in connection with the discontinuance of various product lines of the CPG to restructure the overall business' strategic plan and to redirect the Company's efforts to target "niche" and core-products. The $854,000 includes write-downs of capital assets related to the discontinued product lines of $418,000, product line rationalizations including write offs of inventory related to the discontinued product lines of $336,000, and $100,000 exiting costs of discontinued product line contracts and related expenses. During 2000 the Company substantially completed its restructuring, the costs of which were consistent with those accrued during 1999. 3. Inventories December 31, 2000 ----------- ----------------- ($000's omitted) Raw materials and common parts $ 364 Work-in-process 5,583 Finished goods 696 ------ 6,643 Less common parts expected to be used after one year (236) ------- $6,407 ====== 4. Changes in Accounting Principles -------------------------------- On January 1, 1999, the Company elected early adoption of Emerging Issues Task Force ("EITF") 99-5, "Accounting for Pre-Production Costs Related to Long-Term Supply Arrangements". EITF 99-5 states that development and pre-production costs for products sold under long-term supply arrangements be expensed as incurred. On January 1, 1999, as required by the Accounting Standards Executive Committee, the Company also adopted the Statement of Position No. 98-5 "Reporting on the Cost of Start-Up Activities" (SoP 98-5). As a result of the early adoption of EITF 99-5 and adoption of SoP 98-5, the Company wrote off $1,727,000 of costs which were -F8- 29 appropriately capitalized in prior years. These charges were recorded net of taxes of $1,013,000 as a cumulative effect of a change in accounting principle in the December 31, 1999 Consolidated Statement of Income. Further, as a result of early adoption, costs incurred for development and pre-production during 1999 were expensed and reflected in 1999 as cost of goods sold. 5. Property, plant and equipment December 31, 2000 ----------------------------- ----------------- ($000's omitted) Land $ 11 Buildings and improvements 6,170 Machinery, equipment and tooling 9,894 ------- 16,075 Less accumulated depreciation (8,735) -------- $ 7,340 ======= Property, plant and equipment includes land and building under a $5,000,000 capital lease which can be purchased for a nominal amount at the end of the lease term. The Company believes that it maintains property and casualty insurance in amounts adequate for the risk and nature of its assets and operations and which are generally customary in its industry. 6. Long-term debt December 31, 2000 -------------- ----------------- ($000's omitted) Industrial Development Revenue Bonds; secured by a letter of credit from a bank with interest payable monthly at a floating rate (5.30% at December 31, 2000) $ 4,830 Term loan; payable to a financial institution with interest on $250,000 at LIBOR plus 2% (8.63% at December 31, 2000) and interest on the remaining $500,000 at a rate of 5.86% at December 31, 2000; quarterly principal payments of $35,714 through February 1, 2006 750 Various other secured term notes payable to government agencies 913 ------- 6,493 Less current portion (393) ------- $ 6,100 ======= 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 commenced December 1, 2000 and continue through 2013, with a final -F9- 30 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. On February 26, 1999, the Company received a $1,000,000 loan from a financial institution payable in equal quarterly installments, maturing in 2006. The proceeds were used to pay off an unsecured term note and to finance purchases of equipment and working capital. The loan is collaterallized by any and all equipment purchased with the proceeds of the term loan. The letter of credit reimbursement agreement, the unsecured term note agreement and the secured term notes 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: 2002 - $548,000; 2003 - $378,000; 2004 - $463,000, 2005 - $348,000, 2006 and thereafter $4,363,000. The Company also has a $1,000,000 line of credit on which there was no balance outstanding at December 31, 2000. 7. 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 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 341,000 shares have been allocated, exclusive of shares distributed to ESOP participants. At -F10- 31 December 31, 2000 and 1999, approximately 530,000 and 563,000 shares, respectively, purchased by the ESOP remain unallocated. 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 2000 and 1999. 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 and those allocated shares not voted by the employees. 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 $20,000 and $29,000 was recognized in 2000 and 1999, respectively, and was calculated using a weighted-average discount rate of 7.5% in both 2000 and 1999, and weighted-average expected rate of return on plan assets of 8.0% for both years. The projected benefit obligation under the plan at December 31, 2000 was $64,000, net of $190,000 of plan assets at fair value. Deferred compensation program ----------------------------- The Company maintains a deferred compensation program designed to achieve, among other things, benefit parity for an officer of the Company. During 2000 and 1999, no amount was accrued or expensed under this program. In 1999, $195,000 was paid from the amount previously accrued and expensed in prior periods which leaves a balance of $225,000 accrued in the December 31, 2000 consolidated balance sheet. -F11- 32 8. Income taxes ------------ The provision (benefit) for income taxes included in the consolidated statement of income consists of the following:
2000 1999 ---- ---- ($000's omitted) Current: Federal income tax (benefit) $ (213) $ (543) State income tax 14 21 ------- ------- (199) (522) ------- ------- Deferred: Federal income tax (benefit) 445 (683) State income tax (benefit) 68 (209) ------- ------- 513 (892) ------- ------- 314 (1,414) Tax benefit allocated to cumulative effect of a change in accounting principle (see Note 4) 0 1,013 ------- ------- $ 314 $ (401) ======= =======
The provision for income taxes does not include the tax benefit of $3,000 and $34,000 for 2000 and 1999, respectively, associated with the exercise of stock options which have been credited to capital in excess of par value. The reconciliation of the difference between the Company's effective tax rate based upon the total income tax provision (benefit) and the federal statutory income tax rate is as follows:
2000 1999 ---- ---- Statutory rate 34% 34% Increase resulting from: State income taxes (less federal effect) 7% 3% Other 2% --% --- --- 43% 37% === ===
-F12- 33 At December 31, 2000, the deferred tax assets (liabilities) were comprised of the following:
($000's omitted) Inventory $ 525 Accrued vacation 142 Federal and state net operating losses and credits 171 Accrued deferred compensation 75 Other 16 ----- Total deferred tax assets 929 Property, plant and equipment (455) Other liabilities (45) ----- Total deferred tax liabilities (500) ----- Net deferred tax asset $ 429 =====
Realization of the net deferred tax asset is dependent upon generating sufficient taxable income over the periods in which the temporary differences are anticipated to reverse. Although realization is not assured, management believes it is more likely than not that the net deferred tax asset will be realized. The amount of net deferred tax asset considered realizable, however, could be reduced in the near term if estimates of future taxable income are reduced. At December 31, 2000, the Company has a Federal net operating loss carryforward of approximately $88,000 (approximately a $30,000 tax benefit) that begins to expire in 2020. At December 31, 2000, the Company also has a New York State net operating loss carryforward of approximately $1,300,000 (approximately a $43,000 tax benefit) that begins to expire in 2019. The Company also has a State of Pennsylvania net operating loss carryforward of approximately $1,700,000 (approximately a $73,000 tax benefit) that begins to expire in 2006. -F13- 34 9. Common shareholders' equity ---------------------------
Common stock ------------ Accumulated Number Capital in other of shares excess of Retained Treasury Comprehensive comprehensive issued Amount par value earnings ESOP stock income income ---------------------------------------------------------------------------------------------- ($000's omitted) Balance December 31, 1998 2,614,506 $523 $ 13,324 $ 2,904 ($2,741) ($1,156) ($43) Comprehensive income Net loss -- -- -- $(2,409) -- -- $(2,409) -- Other comprehensive income, net of tax -- -- -- -- -- -- -- -- Minimum pension liability adjustment -- -- -- -- -- -- 19 19 ------- ---- Other comprehensive income -- -- -- -- -- -- 19 -- ------- ---- Comprehensive income -- -- -- -- -- -- $(2,390) -- ======= Issuance of common stock -- -- -- (84) -- -- -- Compensation expense -- -- -- -- 101 -- ---- Treasury stock -- -- -- -- -- 139 -- Exercise of stock options -- -- 34 -- -- -- -- --------- ---- -------- ------- ------- ------- ---- Balance December 31, 1999 2,614,506 $523 $ 13,358 $ 411 ($2,640) ($1,017) ($24) Comprehensive income Net income -- -- -- $ 418 -- -- $ 418 -- Other comprehensive income, net of tax -- -- -- -- -- -- -- -- Minimum pension liability adjustment -- -- -- -- -- -- (1) (1) ------- Other comprehensive income -- -- -- -- -- -- (1) -- ------- Comprehensive income -- -- -- -- -- -- $ 417 -- ======= Issuance of common stock -- -- -- (35) -- -- Compensation expense -- -- -- -- 101 -- Treasury stock -- -- -- -- -- 62 -- Exercise of stock options -- -- 3 -- -- -- -- --------- ---- -------- ------- ------- ------- ---- Balance December 31, 2000 2,614,506 $523 $ 13,361 $ 794 ($2,539) ( $955) ($25) ========= ==== ======== ======= ======= ======= ====
-F14- 35 Earnings per share ------------------ Basic earnings per share is computed by dividing net earnings by the weighted average number of shares outstanding during the period. Diluted earnings per share is computed by dividing net earnings by the weighted average number of shares outstanding during the period plus the number of shares of common stock that would be issued assuming all contingently issuable shares having a dilutive effect on earnings per share were outstanding for the period.
Year Ended December 31, 2000 1999 ---- ---- ($000's omitted except per share data) Income (loss) including restructuring charge and before cumulative effect of a change in accounting principle $ 418 $ (682) Cumulative effect of a change in accounting principle 0 (1,727) ------ ------- Net income (loss) $ 418 $(2,409) ====== ======= Weighted average common shares outstanding (basic) 1,848 1,809 Incremental shares from assumed conversions of stock options 111 5 Weighted average common shares outstanding (diluted) 1,959 1,814 BASIC Income (loss) per share including a 1999 restructuring charge of $854,000 pretax or ($0.28) after tax per share and before cumulative effect of a change in accounting principle $ 0.23 $ (0.38) Cumulative effect per share of a change in accounting principle 0.00 (0.95) ------ ------- Net income (loss) per share $ 0.23 $ (1.33) ====== ======= DILUTED Income (loss) per share including a 1999 restructuring charge of $854,000 pretax or ($0.28) after tax per share and before cumulative effect of a change in accounting principle $ 0.21 $ (0.38) Cumulative effect per share of a change in accounting principle 0.00 (0.95) ------ ------- Net income (loss) per share $ 0.21 $ (1.33) ====== =======
Comprehensive income -------------------- The minimum pension liability adjustment of $25,000, net of tax of $16,000, is the only component of other comprehensive income for 2000. -F15- 36 Stock options ------------- Under the Servotronics, Inc. 2000 Employees Stock Option Plan (the Option Plan) and other separate agreements authorized by the Board of Directors, the Company has granted non-qualified options to its Directors and Officers. The Company applies APB Opinion No. 25 and related interpretations in accounting for the Option Plan and the separate option agreements. Accordingly, no compensation expense has been charged to earnings in 2000 or prior years as stock options granted have an exercise price equal to the market price on the date of grant. At December 31, 2000, 76,600 shares of common stock were available under the Option Plan. Options granted under the Option Plan have durations of ten years. A summary of the status of options granted under all employee plans is presented below:
Weighted Average Options Exercise Outstanding Price ----------- ----- Outstanding as of December 31, 1998 160,543 6.34 Granted in 1999 -- -- Exercised in 1999 (37,778) 2.32 Forfeited in 1999 -- -- Outstanding as of December 31, 1999 122,765 7.48 Granted in 2000 101,200 3.875 Exercised in 2000 (12,593) 2.07 Forfeited in 2000 -- -- Outstanding as of December 31, 2000 211,372 6.06
The following tables summarize information about options outstanding at December 31, 2000:
Weighted- Average Remaining Exercise Number contractual Options Prices ($) Outstanding Life Exercisable --------------------------------------------------------------- 5.78 17,172 1 years 17,172 8.50 93,000 7 years 83,550 3.875 101,200 10 years 0 ------- ------- Total 211,372 100,722 ======= =======
-F16- 37 The Company has adopted the disclosure-only provisions of Statement of Financial Accounting Standards No. 123, "Accounting for Stock-Based Compensation" (FAS 123). If the compensation cost for these plans had been determined based on the Black-Scholes calculated values at the grant dates for awards consistent with the method prescribed by FAS 123, the pro forma effects on the years ended December 31, 2000 and 1999 are as follows:
2000 1999 ----------------------- Net income (loss): As reported 418,000 (2,409,000) Pro forma 387,000 (2,497,000) Earnings per common share: As reported - basic 0.23 (1.33) As reported - diluted 0.21 (1.33) Pro forma - basic 0.21 (1.30) Pro forma - diluted 0.20 (1.30)
There were 101,200 options granted in 2000. The Black-Scholes calculated estimated value of the options granted in 2000 was $2.69. The assumptions used to calculate this value include a risk-free interest rate of 6.03%, an expected term of 10 years, and an annual standard deviation (volatility) factor of 50.3%. The Black-Scholes option pricing model was developed for use in estimating values of traded options that have no vesting restrictions and are fully transferable. In addition, option pricing models require the use of highly subjective assumptions, including the expected stock price volatility. Because the Company's stock options are restricted and have characteristics significantly different from those of traded options, and because changes in the subjective assumptions can materially affect the calculated estimated values, in the Company's opinion the existing models do not necessarily provide a reliable measure of the value of the Company's stock options. The estimated value calculated by the Black-Scholes methodology is hypothetical and does not represent an actual tangible Company expense or an actual tangible monetary transfer to the optionee. Further, for the reasons stated above (among others) and especially because of the volatility factor used in the Black-Scholes calculations for the Company's 2000 options, the derived estimated value may be, in the Company's opinion, substantially higher than the value which may be realized in an arms-length transaction under the above stated and existing conditions. -F17- 38 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 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 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. 10. Commitments ----------- The Company leases certain equipment pursuant to operating lease arrangements. Total rental expense in 2000 and 1999 and future minimum payments under such leases are not significant. 11. 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. 12. Business segments ----------------- The Company operates in two business segments, Advanced Technology Products and Consumer Products. The Company's reportable segments are strategic business units that offer different products and services. The segments are separate corporations and are managed separately. 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 marketing of a variety of cutlery products for use by consumers and government agencies. The Company derives substantially all of its sales revenue from domestic customers. -F18- 39 Information regarding the Company's operations in these segments is summarized as follows:
Advanced Year ended Technology Consumer December 31, 2000 Products Products Consolidated ----------------- -------- -------- ------------ ($000's omitted) Revenues from unaffiliated customers $ 9,487 $ 7,482 $ 16,969 ======== ======= ======== Profit $ 2,087 $ 187 2,274 ======== ======= Depreciation expense $ (481) $ (165) (646) ======== ======= = Interest expense (390) General corporate expense (506) -------- Income before income taxes $ 732 ======== Identifiable assets $ 13,216 $ 4,915 $ 18,131 ======== ======= ======== Capital expenditures $ 797 $ 61 $ 858 ======== ======= ========
Advanced Year ended Technology Consumer December 31, 1999 Products Products Consolidated ----------------- -------- -------- ------------ ($000's omitted) Revenues from unaffiliated customers $ 9,800 $ 6,365 $ 16,165 ======== ======= ======== Restructuring charge $ (854) $ (854) ======= Profit $ 1,194 $ 25 1,219 ======== ======= Depreciation expense $ (395) $ (276) (671) ======== ======= Interest expense (344) General corporate expense (433) -------- Income (loss) including a restructuring charge and before income taxes and cumulative effect of a change in accounting principle $ (1,083) ======== Cumulative effect of a change in accounting principle, net of tax $ (1,727) ======== Identifiable assets $ 14,190 $ 5,134 $ 19,324 ======== ======= ======== Capital expenditures $ 586 $ 255 $ 841 ======== ======= ========
-F19- 40 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 $1,980,000 in 2000 and $2,940,000 in 1999. Similar contracts by the Consumer Products segment accounted for revenues of approximately $2,235,000 in 2000 and $467,000 in 1999. Sales of advanced technology products to one prime contractor, including various divisions and subsidiaries of a common parent company, amounted to approximately 20% and 17% of total revenues in 2000 and 1999, respectively. Sales to another customer amounted to approximately 20% of total revenues in 2000 and 19% of total 1999 revenues respectively. No other single customer represented more than 10% of the Company's revenues in any of these years. -F20- EX-10.A3 2 l87159aex10-a3.txt EXHIBIT 10(A)(3) 1 Exhibit 10(A)(3) Servotronics, Inc. and Subsidiaries As of May 1, 2000 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, May 1, 1996, May 1, 1997, March 9, 1998, May 1, 1998, October 6, 1998, April 28, 1999 and May 1, 1999 (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 July 7, 2000) to amend Paragraph 3 of the Agreement to delete "$325,000.00" and insert in its place "$331,500.00". 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 EX-10.D.1A 3 l87159aex10-d_1a.txt EXHIBIT 10(D)(1)(A) 1 Exhibit 10(D)(1)(a) Page 1 of 8 EXHIBIT A SERVOTRONICS, INC. 2000 EMPLOYEES STOCK OPTION PLAN 1. Purpose The purpose of the Servotronics, Inc 2000 Employees Stock Option Plan ("Plan") is to encourage ownership of the stock of Servotronics, Inc. (the "Company") by officers and other key employees of the Company and, by doing so, to increase the incentive for such employees to put forth maximum effort for the success of the Company's business. The Plan is intended to enhance the Company's ability to attract and retain highly qualified persons for the successful conduct of its business. 2. Definitions As used in this Plan: a. "Common Stock" means the common stock, $.20 par value, of the Company. b. "Key Employees" means officers and other key employees of the Company. c. "Fair Market Value" of a share of Common Stock on any date means the average of the highest and lowest quoted sales prices of a share of Common Stock if the Company's stock is listed on an exchange or the average between the bid and the asked price for that date if the shares are traded over-the-counter (or, if no such shares were publicly traded on that date, the next preceding date that such shares were so traded), all as published in The Wall Street Journal or in any other publication selected by the Committee; provided, however, that if shares of Common Stock shall not have been publicly traded for more than ten days immediately preceding such date, then the Fair Market value of a share of Common Stock shall be determined by the Committee in such manner as it may deem appropriate. 2 Exhibit 10(D)(1)(a) Page 2 of 8 d. "Option" means an option granted pursuant to the Plan to purchase shares of Common Stock and may refer to either an incentive stock option as defined in Section 422A of the Internal Revenue Code of 1954, as amended ("Code"), or a non-qualified stock option, that is, a stock option that is not an incentive stock option. e. "Committee" means a Committee of the Board of Directors of the Company or such other committee of the Board that the Board has appointed to administer the Plan. Members of the Committee shall be disinterested persons as defined in Rule 16b-3 promulgated under the Securities Exchange Act of 1934. 3. Administration The Plan shall be administered by the Committee. The Committee shall have all the powers vested in it by the terms of the Plan. The Committee shall be authorized to interpret the Plan and the Options granted under the Plan, to establish, amend, and rescind rules and regulations relating to the Plan, and to make any determinations it believes necessary or advisable for the administration of the Plan. The Committee may correct any defect or supply any omission or reconcile any inconsistency in the Plan or in any Option in the manner and to the extent the Committee deems desirable. Any decision of the Committee in the administration of the Plan shall be in its sole discretion and conclusive. The Committee may act only by a majority of its members in office, except that the members of the Committee may authorize any one or more of their number or any officer of the Company to execute and deliver documents on behalf of the Committee. 4. Shares Available A total of 110,000 shares of Common Stock of the Company shall be available for grant under the Plan. The aggregate number of shares that may be purchased pursuant to Option shall not exceed the available number of shares. Upon the expiration or termination in whole or part of any unexercised Option, the shares of Common Stock subject to such Option shall again be available for grant under the Plan. 3 Exhibit 10(D)(1)(a) Page 3 of 8 5. Grant of Options a. The Company may grant Options to Key Employees to purchase shares of Common Stock under the Plan. b. The Committee shall select the Key Employees to whom Options are to be granted and shall determine when Options are to be granted and the number of shares to be subject to each option. No incentive stock option shall be granted to any employee who, at the time the incentive stock option would be granted, owns stock possessing more than 10 percent of the combined voting power of all classes of stock of the Company. 6. Terms of Options Granted to Key Employees Each Option granted to a Key Employee under the Plan shall be evidenced by a written stock option agreement executed by the Company and the holder of the Option, in such form and upon such terms and conditions as the Committee shall determine and as are consistent with the provisions of the Plan, including the following: a. The purchase price of each share of Common Stock subject to an Option shall not be less than the Fair Market value of a share of Common Stock on the date the option is granted. b. An Option may be exercised in whole or in part from time to time during such periods as the Option shall specify, provided that no Option shall be exercisable within one year after, or more than ten years after, the date of the grant of the Option. c. An Option may require that the Optionee represent at the time of each exercise of the Option that the shares purchased are being acquired for investment and not-with a view to distribution. d. The purchase price of the shares with respect to which an Option is exercised shall be payable in full on the date the Option is exercised, in cash or, to the 4 Exhibit 10(D)(1)(a) Page 4 of 8 extent authorized by the Committee at the time the Option is granted, in shares of Common Stock or in a combination of cash and such shares. The value of a share of Common Stock delivered in payment of the purchase price shall be its Fair Market Value on the date the Option is exercised. e. An Option shall not be assignable or transferable by the Employee to whom granted except by will or the laws of descent and distribution and shall be exercisable, during the employee's lifetime, only by him. f. An Option may require that the Optionee sell back to the Company any shares acquired pursuant to the exercise of the Option upon the termination of the Optionee's employment with the Company at the then Fair Market Value of the share; as determined by the Committee, if such shares have not been registered under applicable securities laws or if there is no public market for such shares of the Company's Common Stock. g. The Committee shall specify the right of each optionee to exercise his Option to purchase the number of shares. h. Each agreement relating to an Option granted to a Key Employee shall state the extent to which such Option is intended to be either an incentive stock option or a non-qualified stock option. i. Any Option that has not already expired, shall expire upon the termination of the optionee's employment with the Company, whether by death or otherwise, and no shares of Common Stock may thereafter be purchased pursuant to such Option, except that: (1) An optionee may, within three months after the date of the termination of his employment, purchase any shares of Common Stock that the optionee was entitled to purchase under an Option on the date of the termination of his employment. If the optionee is disabled (within the meaning of Section 422A(c)(9) of 5 Exhibit 10(D)(1)(a) Page 5 of 8 the Code) upon the termination of his employment, the three-month period provided in this paragraph shall be extended to twelve months. (2) Upon the death of any optionee while employed with the Company or within the three-month period referred to in Section 6(g)(i) above (twelve months, in the case of a disabled optionee), the optionee's estate or the person to whom such optionee's rights under the Option are transferred by will or the laws of descent and distribution may, within one year after the date of the optionee's death, purchase any shares of Common Stock that the optionee was entitled to purchase under an Option on the date of his death. Nothing in this subsection shall authorize the exercise of an Option after the expiration of the exercise period provided in the Option, nor later than ten years after the date of the grant of the Option. 7. Additional Terms of Incentive Stock Option Each incentive stock option granted under the Plan shall be subject to the following terms and conditions in addition to the terms and conditions described in Section 6 above: If an optionee disposes of shares acquired pursuant to the exercise of an incentive stock option in a disqualifying disposition within the time periods identified in Section 422(a)(1) of the Code, the optionee shall be required to notify the Company of such disposition and provide the Company with information as to the date of disposition, sales price, and number of shares involved, and with any other information about such disposition that the Company may reasonably request. 8. Adjustment of Shares Available If there is any change in the number of outstanding shares of Common Stock of the Company through the declaration of stock dividends or through stock splits, then the number of shares available for Options and of shares subject to any Option and the purchase prices of any shares subject to any Option shall be 6 Exhibit 10(D)(1)(a) Page 6 of 8 automatically adjusted. If there is any change in the number of outstanding shares of Common Stock of the Company through any change in the capital account of the Company or through any other transaction referred to in section 425(a) of the Internal Revenue Code, then the, number of shares available for Options and of shares subject to any Option and the purchase price of any share subject to any Option shall be appropriately adjusted by the Committee, except to the extent the Committee takes other action pursuant to the following paragraph. Notwithstanding the provision of any other Section of this Plan, if the Company shall not be the surviving corporation in any merger or consolidation, or if the Company is to sell all or substantially all of its assets, or if the ownership of more than 25 percent of the outstanding shares of Common Stock shall change as the result of a concerted action by one or more persons or corporations or if an attempt is so made to effect such a change of ownership, or if the Company is to be dissolved and liquidated (each such event shall be referred to in this paragraph as a "Corporate Change"), then the Committee in its sole discretion may (i) accelerate the time at which Options then outstanding may be exercised so that such Options may be exercised in full on or before a date fixed by the Committee, (ii) provide for the purchases of each Option then outstanding for an amount of cash equal to the excess of the Fair Market Value of the shares subject to such Option (which in the event of a change in the ownership of more than 25 percent of the outstanding shares of Common Stock shall not be less than the amount of cash and the fair market value of other consideration tendered for such outstanding shares) over the aggregate purchase price of the shares subject to the Option, (iii) make such adjustments to Options then outstanding as the Committee finds appropriate to reflect such Corporate Change, or (iv) cause any surviving corporation in such Corporate Change to assume Options then outstanding or substitute new options for such outstanding Options. 7 Exhibit 10(D)(1)(a) Page 7 of 8 9. Amendment The Board of Directors of the Company may amend the Plan in any respect, provided, however, no amendment of the Plan shall adversely affect any right of any holder of an option already granted without such optionee's written consent. 10. Termination of Plan The Board of Directors may terminate the Plan at any time with respect to any shares of Common Stock that are not then subject to Options. Unless terminated earlier by the Board of Directors, the Plan shall terminate on July 6, 2010. 11. No Right to Continued Employment Nothing in the Plan or in any Option granted pursuant to the Plan shall confer upon any employee the right to continue in the employ of the Company or restrict the right of the Company to terminate the employment of any employee. 12. Rights as Stockholder No person shall have the rights of a stockholder with respect to shares of Common Stock subject to an Option until the date of issuance, if any, of a stock certificate pursuant to the exercise of an Option. 13. Regulatory Approvals and Listing The Company shall not be required to issue any certificate or certificates for shares of Common Stock upon the exercise of an option prior to (a) the obtaining of any approval from any government agency that the Company shall, in its sole discretion, determine to be necessary or advisable, (b) the admission of such shares to listing on any stock exchange on which the Common Stock may then be listed, and (c) the completion of any registration or other qualification of such shares under any state or Federal law or rulings or regulations of any governmental body that the Company shall, in its sole discretion, determine to be necessary or advisable. 8 Exhibit 10(D)(1)(a) Page 8 of 8 14. Construction The Plan shall be construed in accordance with the law of the State of Delaware. With respect to any Option; granted under the Plan that are intended to qualify as incentive stock options as defined in Section 422A of the Code, the terms of the Plan and of each incentive stock option granted pursuant to the Plan shall be construed to effectuate such intention. The Committee shall have the power to amend the Plan to conform with Section 422A of the Code or of any new revenue laws of the United States that accord similar tax treatment to stock option plans. 15. Satisfaction of Tax Liabilities Notwithstanding any other provision of this Plan, the Company shall not be required to issue any certificate for shares of Common Stock upon the exercise of an option unless any Federal, state, or local tax withholding obligation incurred by the Company in connection with the exercise of the Option has been provided for by the optionee through the delivery of a sufficient amount of cash to the Company or through the retention of shares of Common Stock otherwise issuable on the exercise of the Option or the delivery of Common Stock to the Company by the optionee, under such terms as the Committee finds appropriate. EX-10.D.2A 4 l87159aex10-d_2a.txt EXHIBIT 10(D)(2)(A) 1 Exhibit 10(D)(2)(a) Page 1 of 5 SERVOTRONICS, INC. STOCK OPTION AGREEMENT FOR DONALD W. HEDGES DATED JULY 7, 2000 1. Definitions. As used in this Agreement: (a) "Company" means Servotronics, Inc. (b) "Common Stock" means the common stock, $.20 par value, of the Company. (c) "Fair Market Value" of a share of Common Stock on a given date means the average of the highest and lowest quoted sales prices of a share of Common Stock on the American Stock Exchange on that date or, if no such shares were traded on the American Stock Exchange on that date, on the next preceding date on which such shares were so traded. However, if shares of Common Stock have not been traded on the American Stock exchange for more than ten days immediately preceding the given date, the Fair Market Value of a share of Common Stock shall be determined by the Committee in such manner as it may deem appropriate. (d) "Option" means the option granted pursuant to this Agreement to purchase 15,000 shares of Common Stock, which option is intended to be a non-qualified stock option. (e) "Committee" means the Board of Directors of the Company or any committee of the Board that the Board has appointed. (f) "Date of Grant" means July 7, 2000 (g) "Optionee" means Donald W. Hedges. 2 Exhibit 10(D)(2)(a) Page 2 of 5 2. Administration. The Committee shall have all the powers vested in it by the terms of this Agreement to administer this Agreement. The Committee is authorized to interpret this Agreement. 3. Grant of Option. The Company grants to Optionee an option to purchase 15,000 shares of Common Stock pursuant to this Agreement. 4. Terms of Option. (a) The purchase price of each share of Common Stock subject to the Option is the Fair Market Value of a share of Common Stock on the Date of Grant of the Option, which is $3.8125. (b) The Option may be exercised with respect to 3,750 shares of Common Stock on or after January 7, 2001, and with respect to an additional 3,750 shares of Common Stock on or after each of the first three anniversaries of the Date of Grant, on a cumulative basis, provided that the Option shall not be exercisable later than the day preceding the tenth anniversary of the Date of Grant. (c) By executing this Agreement, the Optionee agrees on behalf of himself, his executor, administrator, heirs and distributees that any shares of Common Stock purchased pursuant to the Option are being acquired for investment and not with a view to distribution. (d) To exercise the Option, written notice should be given to the Secretary of the Company in the form attached to this Agreement. (e) The purchase price of any shares with respect to which the Option is exercised is payable in full on the date the Option is exercised, in cash or in shares of Common Stock or in a combination of cash and such shares. The value of a share of Common Stock delivered in payment of the purchase price shall be its Fair Market Value on the date the Option is exercised. (f) Except as otherwise provided in this Section 4(f), no Option shall be transferable otherwise than by will or the laws of descent and distribution, and during an Optionee's lifetime an Option shall be exercisable only by the Optionee. Notwithstanding the foregoing, an Option shall be transferable pursuant to a "domestic relations order" as defined in the Section 414(p) Internal Revenue Code or Title 1 of the Employee Retirement Income Security Act, or the rules thereunder, and also shall be transferable, without payment of consideration, to (a) immediate family members of the holder (i.e., the Optionee's spouse or former spouse, parents, issue including adopted and "step" issue, or siblings), (b) trusts for the benefit of immediate family members, (c) partnerships whose only partners are such family members, and (d) to any transferee permitted by a rule adopted by the Committee in an individual case. Any transferee will be subject to all of the conditions set forth in the Option prior to its transfer. 3 Exhibit 10(D)(2)(a) Page 3 of 5 (g) If the Option has not already expired, it shall expire upon the termination of the Optionee's service as a director of the Company, whether by death or otherwise, and no shares of Common Stock may thereafter be purchased pursuant to the Option, except that: (1) The Optionee may, within three months after the date of the termination of his service as a director of the Company, purchase any shares of Common Stock that the Optionee was entitled to purchase under the Option on the date of the termination of his service as a director. (2) Upon the death of any Optionee while serving as a director of the Company or within the three-month period referred to in Section 4(g)(1) above, the Optionee's estate or the person to whom such Optionee's rights under the Option are transferred by will or the laws of descent and distribution may, within one year after the date of the Optionee's death, purchase any shares of Common Stock that the Optionee was entitled to purchase under the Option on the date of his death. Nothing in this subsection shall allow the exercise of the Option later than the day before the tenth anniversary of the Date of Grant of the Option. 5. Adjustment of Shares Available. If there is any change in the number of outstanding shares of Common Stock of the Company through the declaration of stock dividends or through stock splits, then the number of shares subject to the Option and the purchase price of the shares subject to the Option shall be automatically adjusted. If there is any change in the number of outstanding shares of Common Stock of the Company through any change in the capital account of the Company or through any other transaction referred to in section 424(a) of the Internal Revenue Code, then the number of shares subject to the Option and the purchase price of the shares subject to the Option shall be appropriately adjusted by the Committee, except to the extent the Committee takes other action pursuant to the following paragraph. Notwithstanding the provision of any other Section of this Agreement, if the Company shall not be the surviving corporation in any merger or consolidation, or if the Company is to sell all or substantially all of its assets, or if the ownership of more than 25 percent of the outstanding shares of Common Stock shall change as the result of a concerted action by one or more persons or corporations or if an attempt is so made to effect such a change of ownership, or if the Company is to be dissolved and liquidated (each such event shall be referred to in this paragraph as a "Corporate Change"), then the Option shall become exercisable in full as of the Change in Control, and the Committee may, subject to the agreement of the Optionee, (i) further accelerate the time at which the Option may be exercised so that the Option may be exercised in full on or before a date fixed by the Committee, (ii) provide for and offer the purchase of the Option to the extent then outstanding for an amount of cash equal to the excess of the Fair Market Value of the shares subject to the Option (which in the event of 4 Exhibit 10(D)(2)(a) Page 4 of 5 a change in the ownership of more than 25 percent of the outstanding shares of Common Stock shall not be less than the amount of cash and the fair market value of other consideration tendered for such outstanding shares) over the aggregate purchase price of the shares subject to the Option, (iii) make such adjustments to the Option as the Committee finds appropriate to reflect such Corporate Change, provided such adjustments are not to the disadvantage of the Optionee, or (iv) cause any surviving corporation in such Corporate Change to assume the Option or substitute a new option (of equal or greater value) for such Option. 6. No Right to Continue as Director. Nothing in this Agreement shall confer upon the Optionee the right to continue as a director of the Company. 7. Rights as Stockholder. No person shall have the rights of a stockholder with respect to shares of Common Stock subject to the Option until the date of issuance, if any, of a stock certificate pursuant to the exercise of the Option. 8. Regulatory Approvals and Listing. The Company shall not be required to issue any certificate or certificates for shares of Common Stock upon the exercise of the Option prior to (a) the obtaining of any approval from any government agency that the Company shall, in its sole discretion reasonably, determine to be necessary, (b) the admission of such shares to listing on any stock exchange on which the Common Stock may then be listed, and (c) the completion of any registration or other qualification of such shares under any state or Federal law or rulings or regulations of any governmental body that the Company shall, in its sole discretion, reasonably determine to be necessary or advisable. The Company agrees to use its best efforts to accomplish the above expeditiously and at no cost to the Optionee. 9. Satisfaction of Tax Liabilities. The Company shall not be required to issue any certificate for shares of Common Stock upon the exercise of the Option unless any Federal, state, or local tax withholding obligation incurred by the Company in connection with the exercise of the Option has been provided for by the Optionee through the Optionee's delivery of a sufficient amount of cash or shares of Common Stock to the Company or through the Company's retention of shares of Common Stock otherwise issuable on the exercise of the Option. The value of a share of Common Stock delivered or retained to provide for the tax withholding obligation incurred by the Company shall be its Fair Market Value on the date the Option is exercised. 5 Exhibit 10(D)(2)(a) Page 5 of 5 10. Amendment The Board of Directors of the Company may amend the Agreement in any respect, provided, however, no amendment of the Plan shall adversely affect any right of the holder of an option already granted without such optionee's written consent. 11. Construction. This Agreement shall be construed in accordance with the law of the State of Delaware. SERVOTRONICS, INC. By /s/ Lee D. Burns ----------------------------- Lee D. Burns Secretary and Treasurer /s/ Donald W. Hedges ----------------------------- Donald W. Hedges EX-10.D.3C 5 l87159aex10-d_3c.txt EXHIBIT 10(D)(3)(C) 1 Exhibit 10(D)(3)(c) Page 1 of 5 SERVOTRONICS, INC. STOCK OPTION AGREEMENT FOR NICHOLAS D. TRBOVICH DATED JULY 7, 2000 1. Definitions. As used in this Agreement: (a) "Company" means Servotronics, Inc. (b) "Common Stock" means the common stock, $.20 par value, of the Company. (c) "Fair Market Value" of a share of Common Stock on a given date means the average of the highest and lowest quoted sales prices of a share of Common Stock on the American Stock Exchange on that date or, if no such shares were traded on the American Stock Exchange on that date, on the next preceding date on which such shares were so traded. However, if shares of Common Stock have not been traded on the American Stock exchange for more than ten days immediately preceding the given date, the Fair Market Value of a share of Common Stock shall be determined by the Committee in such manner as it may deem appropriate. (d) "Option" means the option granted pursuant to this Agreement to purchase 37,800 shares of Common Stock, which option is intended to be a non-qualified stock option. (e) "Committee" means the Board of Directors of the Company or any committee of the Board that the Board has appointed. (f) "Date of Grant" means July 7, 2000. (g) "Optionee" means Nicholas D. Trbovich 2 Exhibit 10(D)(3)(c) Page 2 of 5 2. Administration. The Committee shall have all the powers vested in it by the terms of this Agreement to administer this Agreement. The Committee is authorized to interpret this Agreement. 3. Grant of Option. The Company grants to Optionee an option to purchase 37,800 shares of Common Stock pursuant to this Agreement. 4. Terms of Option. (a) The purchase price of each share of Common Stock subject to the Option is the Fair Market Value of a share of Common Stock on the Date of Grant of the Option, which is $3.8125. (b) The Option may be exercised in whole or in part from time to time on or after January 7, 2001 provided that the Option shall not be exercisable later than the day preceding the tenth anniversary of the Date of Grant. (c) By executing this Agreement, the Optionee agrees on behalf of himself, his executor, administrator, heirs, distributees, and transferees that any shares of Common Stock purchased pursuant to the Option are being acquired for investment and not with a view to distribution. (d) To exercise the Option, written notice should be given to the Secretary of the Company in the form attached to this Agreement. (e) The purchase price of any shares with respect to which the Option is exercised is payable in full on the date the Option is exercised, in cash or in shares of Common Stock or in a combination of cash and such shares. The value of a share of Common Stock delivered in payment of the purchase price shall be its Fair Market Value on the date the Option is exercised. (f) Except as otherwise provided in this Section 4(f), no Option shall be transferable otherwise than by will or the laws of descent and distribution, and during an Optionee's lifetime an Option shall be exercisable only by the Optionee. Notwithstanding the foregoing, an Option shall be transferable pursuant to a "domestic relations order" as defined in the Section 414(p) Internal Revenue Code or Title 1 of the Employee Retirement Income Security Act, or the rules thereunder, and also shall be transferable, without payment of consideration, to (a) immediate family members of the holder (i.e., the Optionee's spouse or former spouse, parents, issue including adopted and "step" issue, or siblings), (b) trusts for the benefit of immediate family members, (c) partnerships whose only partners are such family members, and (d) to any transferee permitted by a rule adopted by the Committee in an individual case. Any transferee will be subject to all of the conditions set forth in the Option prior to its transfer. (g) If the Option has not already expired, it shall expire upon the death of the Optionee, and no shares of Common Stock may thereafter be purchased pursuant to the Option, except that the Optionee's estate or the person to whom such Optionee's rights under the Option are transferred by will or the laws of descent and distribution or any person to whom the Optionee had transferred the Option before his death may, within one year after the date of the Optionee's death, purchase any shares of Common Stock that the Optionee was entitled to purchase under the Option on the date of his death. 3 Exhibit 10(D)(3)(c) Page 3 of 5 Nothing in this subsection shall allow the exercise of the Option later than the day before the tenth anniversary of the Date of Grant of the Option. (h) The Optionee agrees that from and after the Date of Grant of the Option and during the term of the Option he will not, unless acting as an officer or employee of the Company or with the prior written consent of the Company, directly or indirectly, engage or participate in, or own, manage, operate, join, or control, or be connected as an officer, director, employee, partner, investor, or otherwise with, any business manufacturing or selling products or services similar to or competing with products or services manufactured or sold by the Company or its subsidiaries or otherwise engage directly or indirectly in competition with the Company or its subsidiaries. The Optionee acknowledges that the remedy at law for any breach by him of the foregoing will be inadequate and that the Company shall be entitled to injunctive relief. Furthermore, the Option shall expire upon any breach by the Optionee of the foregoing. Nothing contained in this Agreement, however, shall prevent the Optionee from purchasing for investment 3 percent or less of any outstanding class of securities of any company whose securities are held by the general public. 5. Adjustment of Shares Available. If there is any change in the number of outstanding shares of Common Stock of the Company through the declaration of stock dividends or through stock splits, then the number of shares subject to the Option and the purchase price of the shares subject to the Option shall be automatically adjusted. If there is any change in the number of outstanding shares of Common Stock of the Company through any change in the capital account of the Company or through any other transaction referred to in section 424(a) of the Internal Revenue Code, then the number of shares subject to the Option and the purchase price of the shares subject to the Option shall be appropriately adjusted by the Committee, except to the extent the Committee takes other action pursuant to the following paragraph. Notwithstanding the provision of any other Section of this Agreement, if the Company shall not be the surviving corporation in any merger or consolidation, or if the Company is to sell all or substantially all of its assets, or if the ownership of more than 25 percent of the outstanding shares of Common Stock shall change as the result of a concerted action by one or more persons or corporations or if an attempt is so made to effect such a change of ownership, or if the Company is to be dissolved and liquidated (each such event shall be referred to in this paragraph as a "Corporate Change"), then the Option shall become 4 Exhibit 10(D)(3)(c) Page 4 of 5 exercisable in full as of the Change in Control, and the Committee may, subject to the agreement of the Optionee (i) further accelerate the time at which the Option may be exercised so that the Option may be exercised in full on or before a date fixed by the Committee, (ii) provide for and offer the purchase of the Option to the extent then outstanding for an amount of cash equal to the excess of the Fair Market Value of the shares subject to the Option (which in the event of a change in the ownership of more than 25 percent of the outstanding shares of Common Stock shall not be less than the amount of cash and the fair market value of other consideration tendered for such outstanding shares) over the aggregate purchase price of the shares subject to the Option, (iii) make such adjustments to the Option as the Committee finds appropriate to reflect such Corporate Change, providing such adjustments are not to the disadvantage of the Optionee, or (iv) cause any surviving corporation in such Corporate Change to assume the Option or substitute a new option (of equal or greater value) for such Option. 6. No Right to Continued Employment. Nothing in this Agreement is a conferral upon the Optionee of additional the rights to continue in the employ of the Company. It is recognized and agreed that the Company's and the Optionee's obligations with respect to the Optionee's continued employment with the Company are contained in a separate agreement dated August 8, 1986, as amended. 7. Rights as Stockholder. No person shall have the rights of a stockholder with respect to shares of Common Stock subject to the Option until the date of issuance, if any, of a stock certificate pursuant to the exercise of the Option. 8. Regulatory Approvals and Listing. The Company shall not be required to issue any certificate or certificates for shares of Common Stock upon the exercise of the Option prior to (a) the obtaining of any approval from any government agency that the Company shall, in its sole discretion, reasonably determine to be necessary, (b) the admission of such shares to listing on any stock exchange on which the Common Stock may then be listed, and (c) the completion of any registration or other qualification of such shares under any state or Federal law or rulings or regulations of any governmental body that the Company shall, in its sole discretion, reasonably determine to be necessary or advisable. The Company agrees to use its best efforts to accomplish the above expeditiously and at no cost to the Optionee. 5 Exhibit 10(D)(3)(c) Page 5 of 5 9. Satisfaction of Tax Liabilities. The Company shall not be required to issue any certificate for shares of Common Stock upon the exercise of the Option unless any Federal, state, or local tax withholding obligation incurred by the Company in connection with the exercise of the Option has been provided for by the Optionee through the Optionee's delivery of a sufficient amount of cash or shares of Common Stock to the Company or through the Company's retention of shares of Common Stock otherwise issuable on the exercise of the Option. The value of a share of Common Stock delivered or retained to provide for the tax withholding obligation incurred by the Company shall be its Fair Market Value on the date the Option is exercised. 10. Amendment The Board of Directors of the Company may amend the Agreement in any respect, provided, however, no amendment of the Plan shall adversely affect any right of the holder of an option already granted without such optionee's written consent. 11. Construction. This Agreement shall be construed in accordance with the law of the State of Delaware. SERVOTRONICS, INC. By /s/ Lee D. Burns -------------------------- Lee D. Burns Secretary and Treasurer /s/ Nicholas D. Trbovich -------------------------- Nicholas D. Trbovich EX-10.D.4A 6 l87159aex10-d_4a.txt EXHIBIT 10(D)(4)(A) 1 Exhibit 10(D)(4)(a) Page 1 of 5 SERVOTRONICS, INC. STOCK OPTION AGREEMENT FOR WILLIAM H. DUERIG DATED JULY 7, 2000 1. Definitions. As used in this Agreement: (a) "Company" means Servotronics, Inc. (b) "Common Stock" means the common stock, $.20 par value, of the Company. (c) "Fair Market Value" of a share of Common Stock on a given date means the average of the highest and lowest quoted sales prices of a share of Common Stock on the American Stock Exchange on that date or, if no such shares were traded on the American Stock Exchange on that date, on the next preceding date on which such shares were so traded. However, if shares of Common Stock have not been traded on the American Stock exchange for more than ten days immediately preceding the given date, the Fair Market Value of a share of Common Stock shall be determined by the Committee in such manner as it may deem appropriate. (d) "Option" means the option granted pursuant to this Agreement to purchase 15,000 shares of Common Stock, which option is intended to be a non-qualified stock option. (e) "Committee" means the Board of Directors of the Company or any committee of the Board that the Board has appointed. (f) "Date of Grant" means July 7, 2000 (g) "Optionee" means William H. Duerig. 2 Exhibit 10(D)(4)(a) Page 2 of 5 2. Administration. The Committee shall have all the powers vested in it by the terms of this Agreement to administer this Agreement. The Committee is authorized to interpret this Agreement. 3. Grant of Option. The Company grants to Optionee an option to purchase 15,000 shares of Common Stock pursuant to this Agreement. 4. Terms of Option. (a) The purchase price of each share of Common Stock subject to the Option is the Fair Market Value of a share of Common Stock on the Date of Grant of the Option, which is $3.8125. (b) The Option may be exercised with respect to 3,750 shares of Common Stock on or after January 7, 2001, and with respect to an additional 3,750 shares of Common Stock on or after each of the first three anniversaries of the Date of Grant, on a cumulative basis, provided that the Option shall not be exercisable later than the day preceding the tenth anniversary of the Date of Grant. (c) By executing this Agreement, the Optionee agrees on behalf of himself, his executor, administrator, heirs and distributees that any shares of Common Stock purchased pursuant to the Option are being acquired for investment and not with a view to distribution. (d) To exercise the Option, written notice should be given to the Secretary of the Company in the form attached to this Agreement. (e) The purchase price of any shares with respect to which the Option is exercised is payable in full on the date the Option is exercised, in cash or in shares of Common Stock or in a combination of cash and such shares. The value of a share of Common Stock delivered in payment of the purchase price shall be its Fair Market Value on the date the Option is exercised. (f) Except as otherwise provided in this Section 4(f), no Option shall be transferable otherwise than by will or the laws of descent and distribution, and during an Optionee's lifetime an Option shall be exercisable only by the Optionee. Notwithstanding the foregoing, an Option shall be transferable pursuant to a "domestic relations order" as defined in the Section 414(p) Internal Revenue Code or Title 1 of the Employee Retirement Income Security Act, or the rules thereunder, and also shall be transferable, without payment of consideration, to (a) immediate family members of the holder (i.e., the Optionee's spouse or former spouse, parents, issue including adopted and "step" issue, or siblings), (b) trusts for the benefit of immediate family members, (c) partnerships whose only partners are such family members, and (d) to any transferee permitted by a rule adopted by the Committee in an individual case. Any transferee will be subject to all of the conditions set forth in the Option prior to its transfer. 3 Exhibit 10(D)(4)(a) Page 3 of 5 (g) If the Option has not already expired, it shall expire upon the termination of the Optionee's service as a director of the Company, whether by death or otherwise, and no shares of Common Stock may thereafter be purchased pursuant to the Option, except that: (1) The Optionee may, within three months after the date of the termination of his service as a director of the Company, purchase any shares of Common Stock that the Optionee was entitled to purchase under the Option on the date of the termination of his service as a director. (2) Upon the death of any Optionee while serving as a director of the Company or within the three-month period referred to in Section 4(g)(1) above, the Optionee's estate or the person to whom such Optionee's rights under the Option are transferred by will or the laws of descent and distribution may, within one year after the date of the Optionee's death, purchase any shares of Common Stock that the Optionee was entitled to purchase under the Option on the date of his death. Nothing in this subsection shall allow the exercise of the Option later than the day before the tenth anniversary of the Date of Grant of the Option. 5. Adjustment of Shares Available. If there is any change in the number of outstanding shares of Common Stock of the Company through the declaration of stock dividends or through stock splits, then the number of shares subject to the Option and the purchase price of the shares subject to the Option shall be automatically adjusted. If there is any change in the number of outstanding shares of Common Stock of the Company through any change in the capital account of the Company or through any other transaction referred to in section 424(a) of the Internal Revenue Code, then the number of shares subject to the Option and the purchase price of the shares subject to the Option shall be appropriately adjusted by the Committee, except to the extent the Committee takes other action pursuant to the following paragraph. Notwithstanding the provision of any other Section of this Agreement, if the Company shall not be the surviving corporation in any merger or consolidation, or if the Company is to sell all or substantially all of its assets, or if the ownership of more than 25 percent of the outstanding shares of Common Stock shall change as the result of a concerted action by one or more persons or corporations or if an attempt is so made to effect such a change of ownership, or if the Company is to be dissolved and liquidated (each such event shall be referred to in this paragraph as a "Corporate Change"), then the Option shall become exercisable in full as of the Change in Control, and the Committee may, subject to the agreement of the Optionee, (i) further accelerate the time at which the Option may be exercised so that the Option may be exercised in full on or before a date fixed by the Committee, (ii) provide for and offer the purchase of the Option to the extent then outstanding for an amount of cash equal to the excess of the Fair Market Value of the shares subject to the Option (which in the event of 4 Exhibit 10(D)(4)(a) Page 4 of 5 a change in the ownership of more than 25 percent of the outstanding shares of Common Stock shall not be less than the amount of cash and the fair market value of other consideration tendered for such outstanding shares) over the aggregate purchase price of the shares subject to the Option, (iii) make such adjustments to the Option as the Committee finds appropriate to reflect such Corporate Change, provided such adjustments are not to the disadvantage of the Optionee, or (iv) cause any surviving corporation in such Corporate Change to assume the Option or substitute a new option (of equal or greater value) for such Option. 6. No Right to Continue as Director. Nothing in this Agreement shall confer upon the Optionee the right to continue as a director of the Company. 7. Rights as Stockholder. No person shall have the rights of a stockholder with respect to shares of Common Stock subject to the Option until the date of issuance, if any, of a stock certificate pursuant to the exercise of the Option. 8. Regulatory Approvals and Listing. The Company shall not be required to issue any certificate or certificates for shares of Common Stock upon the exercise of the Option prior to (a) the obtaining of any approval from any government agency that the Company shall, in its sole discretion reasonably, determine to be necessary, (b) the admission of such shares to listing on any stock exchange on which the Common Stock may then be listed, and (c) the completion of any registration or other qualification of such shares under any state or Federal law or rulings or regulations of any governmental body that the Company shall, in its sole discretion, reasonably determine to be necessary or advisable. The Company agrees to use its best efforts to accomplish the above expeditiously and at no cost to the Optionee. 9. Satisfaction of Tax Liabilities. The Company shall not be required to issue any certificate for shares of Common Stock upon the exercise of the Option unless any Federal, state, or local tax withholding obligation incurred by the Company in connection with the exercise of the Option has been provided for by the Optionee through the Optionee's delivery of a sufficient amount of cash or shares of Common Stock to the Company or through the Company's retention of shares of Common Stock otherwise issuable on the exercise of the Option. The value of a share of Common Stock delivered or retained to provide for the tax withholding obligation incurred by the Company shall be its Fair Market Value on the date the Option is exercised. 5 Exhibit 10(D)(4)(a) Page 5 of 5 10. Amendment The Board of Directors of the Company may amend the Agreement in any respect, provided, however, no amendment of the Plan shall adversely affect any right of the holder of an option already granted without such optionee's written consent. 11. Construction. This Agreement shall be construed in accordance with the law of the State of Delaware. SERVOTRONICS, INC. By /s/ Lee D. Burns ---------------------------------------- Lee D. Burns Secretary and Treasurer /s/ William H. Duerig ---------------------------------------- William H. Duerig EX-10.D.6C 7 l87159aex10-d_6c.txt EXHIBIT 10(D)(6)(C) 1 Exhibit 10(D)(6)(c) Page 1 of 5 SERVOTRONICS, INC. STOCK OPTION AGREEMENT FOR NICHOLAS D. TRBOVICH, JR. DATED JULY 7, 2000 1. Definitions. As used in this Agreement: (a) "Company" means Servotronics, Inc. (b) "Common Stock" means the common stock, $.20 par value, of the Company. (c) "Fair Market Value" of a share of Common Stock on a given date means the average of the highest and lowest quoted sales prices of a share of Common Stock on the American Stock Exchange on that date or, if no such shares were traded on the American Stock Exchange on that date, on the next preceding date on which such shares were so traded. However, if shares of Common Stock have not been traded on the American Stock exchange for more than ten days immediately preceding the given date, the Fair Market Value of a share of Common Stock shall be determined by the Committee in such manner as it may deem appropriate. (d) "Option" means the option granted pursuant to this Agreement to purchase 18,400 shares of Common Stock, which option is intended to be a non-qualified stock option. (e) "Committee" means the Board of Directors of the Company or any committee of the Board that the Board has appointed to administer the Plan. (f) "Date of Grant" means July 7, 2000 (g) "Optionee" means Nicholas D. Trbovich, Jr. (h) "Plan" means the Servotronics, Inc. 2000 Employees Stock Option Plan. 2 Exhibit 10(D)(6)(c) Page 2 of 5 2. Administration. The Committee shall have all the powers vested in it by the terms of the Plan to administer this Agreement. The Committee is authorized to interpret this Agreement and the Plan. 3. Grant of Option. The Committee grants to Optionee an option to purchase 18,400 shares of Common Stock pursuant to this Agreement and subject to and including the terms and conditions of the Plan which are incorporated herein by reference. 4. Terms of Option. (a) The purchase price of each share of Common Stock subject to the Option is the Fair Market Value of a share of Common Stock on the Date of Grant of the Option, which is $3.8125. (b) The Option may be exercised in whole or in part from time to time on or after July 7, 2001, provided that the Option shall not be exercisable later than the day preceding the tenth anniversary of the Date of Grant. (c) By executing this Agreement, the Optionee agrees on behalf of himself, his executor, administrator, heirs and distributees that any shares of Common Stock purchased pursuant to the Option are being acquired for investment and not with a view to distribution. (d) To exercise the Option, written notice should be given to the Secretary of the Company in the form attached to this Agreement. (e) The purchase price of any shares with respect to which the Option is exercised is payable in full on the date the Option is exercised, in cash or in shares of Common Stock or in a combination of cash and such shares. The value of a share of Common Stock delivered in payment of the purchase price shall be its Fair Market Value on the date the Option is exercised. (f) Except as otherwise provided in this Section 4(f), no Option shall be transferable otherwise than by will or the laws of descent and distribution, and during an Optionee's lifetime an Option shall be exercisable only by the Optionee. Notwithstanding the foregoing, an Option shall be transferable pursuant to a "domestic relations order" as defined in the Section 414(p) Internal Revenue Code or Title 1 of the Employee Retirement Income Security Act, or the rules thereunder, and also shall be transferable, without payment of consideration, to (a) immediate family members of the holder (i.e., the Optionee's spouse or former spouse, parents, issue including adopted and "step" issue, or siblings), (b) trusts for the benefit of immediate family members, (c) partnerships whose only partners are such family members, and (d) to any transferee permitted by a rule adopted by the Committee in an individual case. Any transferee will be subject to all of the conditions set forth in the Option prior to its transfer. 3 Exhibit 10(D)(6)(c) Page 3 of 5 (g) If the Option has not already expired, it shall expire upon the termination of the Optionee's employment with the Company, whether by death or otherwise, and no shares of Common Stock may thereafter be purchased pursuant to the Option, except that: (1) The Optionee may, within three months after the date of the termination of his employment, purchase any shares of Common Stock that the Optionee was entitled to purchase under the Option on the date of the termination of his employment. (2) Upon the death of any Optionee while employed by the Company or within the three-month period referred to in Section 4(g)(1) above, the Optionee's estate or the person to whom such Optionee's rights under the Option are transferred by will or the laws of descent and distribution may, within one year after the date of the Optionee's death, purchase any shares of Common Stock that the Optionee was entitled to purchase under the Option on the date of his death. Nothing in this subsection shall allow the exercise of the Option later than the day before the tenth anniversary of the Date of Grant of the Option. 5. Adjustment of Shares Available. If there is any change in the number of outstanding shares of Common Stock of the Company through the declaration of stock dividends or through stock splits, then the number of shares subject to the Option and the purchase price of the shares subject to the Option shall be automatically adjusted. If there is any change in the number of outstanding shares of Common Stock of the Company through any change in the capital account of the Company or through any other transaction referred to in section 424(a) of the Internal Revenue Code, then the number of shares subject to the Option and the purchase price of the shares subject to the Option shall be appropriately adjusted by the Committee, except to the extent the Committee takes other action pursuant to the following paragraph. Notwithstanding the provision of any other Section of this Agreement, if the Company shall not be the surviving corporation in any merger or consolidation, or if the Company is to sell all or substantially all of its assets, or if the ownership of more than 25 percent of the outstanding shares of Common Stock shall change as the result of a concerted action by one or more persons or corporations or if an attempt is so made to effect such a change of ownership, or if the Company is to be dissolved and liquidated (each such event shall be referred to in this paragraph as a "Corporate Change"), then the Option shall become exercisable in full as of the Change in Control, and the Committee in its sole discretion may, (i) further accelerate the time at which the Option may be exercised so that the Option may be exercised in full on or before a date fixed by the Committee, (ii) provide for the purchase of the Option to the extent then outstanding for an amount of cash equal to the excess of the Fair Market Value of the shares subject to the Option (which in the event of a change in the 4 Exhibit 10(D)(6)(c) Page 4 of 5 ownership of more than 25 percent of the outstanding shares of Common Stock shall not be less than the amount of cash and the fair market value of other consideration tendered for such outstanding shares) over the aggregate purchase price of the shares subject to the Option, (iii) make such adjustments to the Option as the Committee finds appropriate to reflect such Corporate Change, or (iv) cause any surviving corporation in such Corporate Change to assume the Option or substitute a new option for such Option. 6. No Right to Continue as Employee. Nothing in this Agreement shall confer upon the Optionee the right to continue in the employ of the Company. 7. Rights as Stockholder. No person shall have the rights of a stockholder with respect to shares of Common Stock subject to the Option until the date of issuance, if any, of a stock certificate pursuant to the exercise of the Option. 8. Regulatory Approvals and Listing. The Company shall not be required to issue any certificate or certificates for shares of Common Stock upon the exercise of the Option prior to (a) the obtaining of any approval from any government agency that the Company shall, in its sole discretion, determine to be necessary, (b) the completion of any registration or other qualification of such shares under any state or Federal law or rulings or regulations of any governmental body that the Company shall, in its sole discretion, determine to be necessary or advisable. 9. Satisfaction of Tax Liabilities. The Company shall not be required to issue any certificate for shares of Common Stock upon the exercise of the Option unless any Federal, state, or local tax withholding obligation incurred by the Company in connection with the exercise of the Option has been provided for by the Optionee through the Optionee's delivery of a sufficient amount of cash or shares of Common Stock to the Company or through the Company's retention of shares of Common Stock otherwise issuable on the exercise of the Option. The value of a share of Common Stock delivered or retained to provide for the tax withholding obligation incurred by the Company shall be its Fair Market Value on the date the Option is exercised. 5 Exhibit 10(D)(6)(c) Page 5 of 5 10. Agreement Subject to Plan. Notwithstanding any provision to the contrary herein, this Agreement is subject to the provisions of the Plan, and if there shall be any conflict between the provisions of the Agreement and the Plan, then the provisions of the Plan shall take precedence. 11. Construction. This Agreement shall be construed in accordance with the law of the State of Delaware. SERVOTRONICS, INC. By /s/ Lee D. Burns ------------------------------------------- Lee D. Burns Secretary and Treasurer /s/ Nicholas D. Trbovich, Jr. ------------------------------------------- Nicholas D. Trbovich, Jr. EX-10.D.7C 8 l87159aex10-d_7c.txt EXHIBIT 10(D)(7)(C) 1 Exhibit 10(D)(7)(c) Page 1 of 5 SERVOTRONICS, INC. STOCK OPTION AGREEMENT FOR LEE D. BURNS DATED JULY 7, 2000 1. Definitions. As used in this Agreement: (a) "Company" means Servotronics, Inc. (b) "Common Stock" means the common stock, $.20 par value, of the Company. (c) "Fair Market Value" of a share of Common Stock on a given date means the average of the highest and lowest quoted sales prices of a share of Common Stock on the American Stock Exchange on that date or, if no such shares were traded on the American Stock Exchange on that date, on the next preceding date on which such shares were so traded. However, if shares of Common Stock have not been traded on the American Stock exchange for more than ten days immediately preceding the given date, the Fair Market Value of a share of Common Stock shall be determined by the Committee in such manner as it may deem appropriate. (d) "Option" means the option granted pursuant to this Agreement to purchase 7,500 shares of Common Stock, which option is intended to be a non-qualified stock option. (e) "Committee" means the Board of Directors of the Company or any committee of the Board that the Board has appointed to administer the Plan. (f) "Date of Grant" means July 7, 2000 (g) "Optionee" means Lee D. Burns. (h) "Plan" means the Servotronics, Inc. 2000 Employees Stock Option Plan. 2 Exhibit 10(D)(7)(c) Page 2 of 5 2. Administration. The Committee shall have all the powers vested in it by the terms of this Agreement to administer this Agreement. The, Committee is authorized to interpret this Agreement and the Plan. 3. Grant of Option. The Committee grants to Optionee an option to purchase 7,500 shares of Common Stock pursuant to this Agreement and subject to and including the terms and conditions of the Plan which are incorporated herein by reference. 4. Terms of Option. (a) The purchase price of each share of Common Stock subject to the Option is the Fair Market Value of a share of Common Stock on the Date of Grant of the Option, which is $3.8125. (b) The Option may be exercised in whole or in part from time to time on or after July 7, 2001, provided that the Option shall not be exercisable later than the day preceding the tenth anniversary of the Date of Grant. (c) By executing this Agreement, the Optionee agrees on behalf of himself, his executor, administrator, heirs and distributees that any shares of Common Stock purchased pursuant to the Option are being acquired for investment and not with a view to distribution. (d) To exercise the Option, written notice should be given to the Secretary of the Company in the form attached to this Agreement. (e) The purchase price of any shares with respect to which the Option is exercised is payable in full on the date the Option is exercised, in cash or in shares of Common Stock or in a combination of cash and such shares. The value of a share of Common Stock delivered in payment of the purchase price shall be its Fair Market Value on the date the Option is exercised. (f) Except as otherwise provided in this Section 4(f), no Option shall be transferable otherwise than by will or the laws of descent and distribution, and during an Optionee's lifetime an Option shall be exercisable only by the Optionee. Notwithstanding the foregoing, an Option shall be transferable pursuant to a "domestic relations order" as defined in the Section 414(p) Internal Revenue Code or Title 1 of the Employee Retirement Income Security Act, or the rules thereunder, and also shall be transferable, without payment of consideration, to (a) immediate family members of the holder (i.e., the Optionee's spouse or former spouse, parents, issue including adopted and "step" issue, or siblings), (b) trusts for the benefit of immediate family members, (c) partnerships whose only partners are such family members, and (d) to any transferee permitted by a rule adopted by the Committee in an individual case. Any transferee will be subject to all of the conditions set forth in the Option prior to its transfer. 3 Exhibit 10(D)(7)(c) Page 3 of 5 (g) If the Option has not already expired, it shall expire upon the termination of the Optionee's employment with the Company, whether by death or otherwise, and no shares of Common Stock may thereafter be purchased pursuant to the Option, except that: (1) The Optionee may, within three months after the date of the termination of his employment, purchase any shares of Common Stock that the Optionee was entitled to purchase under the Option on the date of the termination of his employment. (2) Upon the death of any Optionee while employed by the Company or within the three-month period referred to in Section 4(g)(1) above, the Optionee's estate or the person to whom such Optionee's rights under the Option are transferred by will or the laws of descent and distribution may, within one year after the date of the Optionee's death, purchase any shares of Common Stock that the Optionee was entitled to purchase under the Option on the date of his death. Nothing in this subsection shall allow the exercise of the Option later than the day before the tenth anniversary of the Date of Grant of the Option. 5. Adjustment of Shares Available. If there is any change in the number of outstanding shares of Common Stock of the Company through the declaration of stock dividends or through stock splits, then the number of shares subject to the Option and the purchase price of the shares subject to the Option shall be automatically adjusted. If there is any change in the number of outstanding shares of Common Stock of the Company through any change in the capital account of the Company or through any other transaction referred to in section 424(a) of the Internal Revenue Code, then the number of shares subject to the Option and the purchase price of the shares subject to the Option shall be appropriately adjusted by the Committee, except to the extent the Committee takes other action pursuant to the following paragraph. Notwithstanding the provision of any other Section of this Agreement, if the Company shall not be the surviving corporation in any merger or consolidation, or if the Company is to sell all or substantially all of its assets, or if the ownership of more than 25 percent of the outstanding shares of Common Stock shall change as the result of a concerted action by one or more persons or corporations or if an attempt is so made to effect such a change of ownership, or if the Company is to be dissolved and liquidated (each such event shall be referred to in this paragraph as a "Corporate Change"), then the Option shall become exercisable in full as of the Change in Control, and the Committee in its sole discretion may, (i) further accelerate the time at which the Option may be exercised so that the Option may be exercised in full on or before a date fixed by the Committee, (ii) provide for the purchase of the Option to the extent then outstanding for an amount of cash equal to the excess of the Fair Market Value of the shares subject to the Option (which in the event of a change in the 4 Exhibit 10(D)(7)(c) Page 4 of 5 ownership of more than 25 percent of the outstanding shares of Common Stock shall not be less than the amount of cash and the fair market value of other consideration tendered for such outstanding shares) over the aggregate purchase price of the shares subject to the Option, (iii) make such adjustments to the Option as the Committee finds appropriate to reflect such Corporate Change, or (iv) cause any surviving corporation in such Corporate Change to assume the Option or substitute a new option for such Option. 6. No Right to Continue as Employee. Nothing in this Agreement shall confer upon the Optionee the right to continue in the employ of the Company. 7. Rights as Stockholder. No person shall have the rights of a stockholder with respect to shares of Common Stock subject to the Option until the date of issuance, if any, of a stock certificate pursuant to the exercise of the Option. 8. Regulatory Approvals and Listing. The Company shall not be required to issue any certificate or certificates for shares of Common Stock upon the exercise of the Option prior to (a) the obtaining of any approval from any government agency that the Company shall, in its sole discretion, determine to be necessary, (b) the completion of any registration or other qualification of such shares under any state or Federal law or rulings or regulations of any governmental body that the Company shall, in its sole discretion, determine to be necessary or advisable. 9. Satisfaction of Tax Liabilities. The Company shall not be required to issue any certificate for shares of Common Stock upon the exercise of the Option unless any Federal, state, or local tax withholding obligation incurred by the Company in connection with the exercise of the Option has been provided for by the Optionee through the Optionee's delivery of a sufficient amount of cash or shares of Common Stock to the Company or through the Company's retention of shares of Common Stock otherwise issuable on the exercise of the Option. The value of a share of Common Stock delivered or retained to provide for the tax withholding obligation incurred by the Company shall be its Fair Market Value on the date the Option is exercised. 5 Exhibit 10(D)(7)(c) Page 5 of 5 10. Agreement Subject to Plan. Notwithstanding any provision to the contrary herein, this Agreement is subject to the provisions of the Plan, and if there shall be any conflict between the provisions of the Agreement and the Plan, then the provisions of the Plan shall take precedence. 11. Construction. This Agreement shall be construed in accordance with the law of the State of Delaware. SERVOTRONICS, INC. By /s/ Nicholas D. Trbovich ------------------------------------- Nicholas D. Trbovich President /s/ Lee D. Burns ------------------------------------- Lee D. Burns EX-10.D.8C 9 l87159aex10-d_8c.txt EXHIBIT 10(D)(8)(C) 1 Exhibit 10(D)(8)(c) Page 1 of 5 SERVOTRONICS, INC. STOCK OPTION AGREEMENT FOR RAYMOND C. ZIELINSKI DATED JULY 7, 2000 1. Definitions. As used in this Agreement: (a) "Company" means Servotronics, Inc. (b) "Common Stock" means the common stock, $.20 par value, of the Company. (c) "Fair Market Value" of a share of Common Stock on a given date means the average of the highest and lowest quoted sales prices of a share of Common Stock on the American Stock Exchange on that date or, if no such shares were traded on the American Stock Exchange on that date, on the next preceding date on which such shares were so traded. However, if shares of Common Stock have not been traded on the American Stock exchange for more than ten days immediately preceding the given date, the Fair Market Value of a share of Common Stock shall be determined by the Committee in such manner as it may deem appropriate. (d) "Option" means the option granted pursuant to this Agreement to purchase 7,500 shares of Common Stock, which option is intended to be a non-qualified stock option. (e) "Committee" means the Board of Directors of the Company or any committee of the Board that the Board has appointed to administer the Plan. (f) "Date of Grant" means July 7, 2000 (g) "Optionee" means Raymond C. Zielinski. (h) "Plan" means the Servotronics, Inc. 2000 Employees Stock Option Plan. 2 Exhibit 10(D)(8)(c) Page 2 of 5 2. Administration. The Committee shall have all the powers vested in it by the terms of this Agreement to administer this Agreement. The, Committee is authorized to interpret this Agreement and the Plan. 3. Grant of Option. The Committee grants to Optionee an option to purchase 7,500 shares of Common Stock pursuant to this Agreement and subject to and including the terms and conditions of the Plan which are incorporated herein by reference. 4. Terms of Option. (a) The purchase price of each share of Common Stock subject to the Option is the Fair Market Value of a share of Common Stock on the Date of Grant of the Option, which is $3.8125. (b) The Option may be exercised in whole or in part from time to time on or after July 7, 2001, provided that the Option shall not be exercisable later than the day preceding the tenth anniversary of the Date of Grant. (c) By executing this Agreement, the Optionee agrees on behalf of himself, his executor, administrator, heirs and distributees that any shares of Common Stock purchased pursuant to the Option are being acquired for investment and not with a view to distribution. (d) To exercise the Option, written notice should be given to the Secretary of the Company in the form attached to this Agreement. (e) The purchase price of any shares with respect to which the Option is exercised is payable in full on the date the Option is exercised, in cash or in shares of Common Stock or in a combination of cash and such shares. The value of a share of Common Stock delivered in payment of the purchase price shall be its Fair Market Value on the date the Option is exercised. (f) Except as otherwise provided in this Section 4(f), no Option shall be transferable otherwise than by will or the laws of descent and distribution, and during an Optionee's lifetime an Option shall be exercisable only by the Optionee. Notwithstanding the foregoing, an Option shall be transferable pursuant to a "domestic relations order" as defined in the Section 414(p) Internal Revenue Code or Title 1 of the Employee Retirement Income Security Act, or the rules thereunder, and also shall be transferable, without payment of consideration, to (a) immediate family members of the holder (i.e., the Optionee's spouse or former spouse, parents, issue including adopted and "step" issue, or siblings), (b) trusts for the benefit of immediate family members, (c) partnerships whose only partners are such family members, and (d) to any transferee permitted by a rule adopted by the Committee in an individual case. Any transferee will be subject to all of the conditions set forth in the Option prior to its transfer. (g) If the Option has not already expired, it shall expire upon the termination of the Optionee's employment with the Company, whether by death or otherwise, and no shares of Common Stock may thereafter be purchased pursuant to the Option, except that: 3 Exhibit 10(D)(8)(c) Page 3 of 5 (1) The Optionee may, within three months after the date of the termination of his employment, purchase any shares of Common Stock that the Optionee was entitled to purchase under the Option on the date of the termination of his employment. (2) Upon the death of any Optionee while employed by the Company or within the three-month period referred to in Section 4(g)(1) above, the Optionee's estate or the person to whom such Optionee's rights under the Option are transferred by will or the laws of descent and distribution may, within one year after the date of the Optionee's death, purchase any shares of Common Stock that the Optionee was entitled to purchase under the Option on the date of his death. Nothing in this subsection shall allow the exercise of the Option later than the day before the tenth anniversary of the Date of Grant of the Option. 5. Adjustment of Shares Available. If there is any change in the number of outstanding shares of Common Stock of the Company through the declaration of stock dividends or through stock splits, then the number of shares subject to the Option and the purchase price of the shares subject to the Option shall be automatically adjusted. If there is any change in the number of outstanding shares of Common Stock of the Company through any change in the capital account of the Company or through any other transaction referred to in section 424(a) of the Internal Revenue Code, then the number of shares subject to the Option and the purchase price of the shares subject to the Option shall be appropriately adjusted by the Committee, except to the extent the Committee takes other action pursuant to the following paragraph. Notwithstanding the provision of any other Section of this Agreement, if the Company shall not be the surviving corporation in any merger or consolidation, or if the Company is to sell all or substantially all of its assets, or if the ownership of more than 25 percent of the outstanding shares of Common Stock shall change as the result of a concerted action by one or more persons or corporations or if an attempt is so made to effect such a change of ownership, or if the Company is to be dissolved and liquidated (each such event shall be referred to in this paragraph as a "Corporate Change"), then the Option shall become exercisable in full as of the Change in Control, and the Committee in its sole discretion may, (i) further accelerate the time at which the Option may be exercised so that the Option may be exercised in full on or before a date fixed by the Committee, (ii) provide for the purchase of the Option to the extent then outstanding for an amount of cash equal to the excess of the Fair Market Value of the shares subject to the Option (which in the event of a change in the ownership of more than 25 percent of the outstanding shares of Common Stock shall not be less than the amount of cash and the fair market value of other consideration tendered for such outstanding shares) over the aggregate purchase price of the shares subject to the Option, (iii) make such adjustments to the Option as the Committee finds appropriate to 4 Exhibit 10(D)(8)(c) Page 4 of 5 reflect such Corporate Change, or (iv) cause any surviving corporation in such Corporate Change to assume the Option or substitute a new option for such Option. 6. No Right to Continue as Employee. Nothing in this Agreement shall confer upon the Optionee the right to continue in the employ of the Company. 7. Rights as Stockholder. No person shall have the rights of a stockholder with respect to shares of Common Stock subject to the Option until the date of issuance, if any, of a stock certificate pursuant to the exercise of the Option. 8. Regulatory Approvals and Listing. The Company shall not be required to issue any certificate or certificates for shares of Common Stock upon the exercise of the Option prior to (a) the obtaining of any approval from any government agency that the Company shall, in its sole discretion, determine to be necessary, (b) the completion of any registration or other qualification of such shares under any state or Federal law or rulings or regulations of any governmental body that the Company shall, in its sole discretion, determine to be necessary or advisable. 9. Satisfaction of Tax Liabilities. The Company shall not be required to issue any certificate for shares of Common Stock upon the exercise of the Option unless any Federal, state, or local tax withholding obligation incurred by the Company in connection with the exercise of the Option has been provided for by the Optionee through the Optionee's delivery of a sufficient amount of cash or shares of Common Stock to the Company or through the Company's retention of shares of Common Stock otherwise issuable on the exercise of the Option. The value of a share of Common Stock delivered or retained to provide for the tax withholding obligation incurred by the Company shall be its Fair Market Value on the date the Option is exercised. 5 Exhibit 10(D)(8)(c) Page 5 of 5 10. Agreement Subject to Plan. Notwithstanding any provision to the contrary herein, this Agreement is subject to the provisions of the Plan, and if there shall be any conflict between the provisions of the Agreement and the Plan, then the provisions of the Plan shall take precedence. 11. Construction. This Agreement shall be construed in accordance with the law of the State of Delaware. SERVOTRONICS, INC. By /s/ Lee D. Burns -------------------------------- Lee D. Burns Secretary and Treasurer /s/ Raymond C. Zielinski -------------------------------- Raymond C. Zielinski EX-21 10 l87159aex21.txt EXHIBIT 21 1 Exhibit 21 SERVOTRONICS, INC. SUBSIDIARIES OF REGISTRANT Name and address of each member Employer ID No. Servotronics, Inc. 16-0837866 P.O. Box 300 Elma, New York 14059-0300 Ontario Knife Company 16-0578540 26 Empire Street Franklinville, New York 14737 Queen Cutlery Company 25-0743840 507 Chestnut Street Titusville, Pennsylvania 16354 G.N. Metal Products, Inc. 16-0964682 P.O. Box 300 Elma, New York 14059-0300 SVT Management, Inc. 16-1037766 P.O. Box 300 Elma, New York 14059-0300 MRO Corporation 16-1230799 P.O. Box 300 Elma, New York 14059-0300 TSV ELMA, Inc. 16-1415699 P.O. Box 300 Elma, New York 14059-0300 -----END PRIVACY-ENHANCED MESSAGE-----