tenksb

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, 2004

__	TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from _________________ to _________________.

Commission File No. 1-07109

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: $22,113,000

As of March 14, 2005 the aggregate market value of the voting common stock held by non-affiliates of the registrant was $7,503,970.275 based on the average of sales prices reported by the American Stock Exchange on that day.

As of March 14, 2005 the number of $.20 par value common shares outstanding was 2,492,901.

DOCUMENTS INCORPORATED BY REFERENCE

Document Part of Form 10-KSB

2004 Proxy Statement Part III

Transitional Small Business Disclosure Format. Yes __ . No _x_

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 standard 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 of 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.


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From time to time, the Registrant has also produced other products of its own and/or of a given design to meet customers’ requirements.

Consumer Products

The Registrant designs, manufactures and sells a variety of cutlery products. These products include a wide range of kitchen knives such as steak, carving, bread, butcher and paring knives for household use and for use in restaurants, institutions and private industry, and pocket and other types of knives for hunting, fishing and camping. The Registrant sells cutlery products to the U.S. Government and related agencies. These products include machetes, bayonets and other types of knives that are primarily for military use. The Registrant also produces and markets other cutlery items such as carving forks and various specialty tools such as putty knives, linoleum sheet cutters and field knives. The Registrant manufactures its cutlery products from stainless or high c arbon steel in numerous styles, designs, models and sizes. Substantially all of the Registrant’s commercial 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 non-seasonal in nature. These products are sold to the United States Government, government prime contractors, government subcontractors, commercial manufacturers and end users. Sales are made primarily by the Registrant’s professional staff and commissioned field engineering representatives.

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 22% of the Registrant’s total revenues as compared to 30% in 2003. In 2004, sales of advanced technology products to each of Honeywell and United Technologies (including their respective subsidiaries and/or divisions) exceeded 10% of Registrant’s total revenues. In 2003, sales of advanced technology products to each of Honeywell, Raytheon and United Technologies (including their respective subsidiaries and/or divisions) exceeded 10% of Registrant’s total revenues. No other sin gle customer represented more than 10% of the Company’s revenues in 2004 or 2003.


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The Registrant’s prime contracts and subcontracts with the United States Government are subject to termination for the convenience of the Government. In the event of such termination, the Registrant is ordinarily entitled to receive payment for its costs and profits on work done prior to termination. Since the inception of the Registrant’s business, less than 1% of its Government contracts have been terminated for convenience.

Consumer Products

The Registrant’s consumer products are marketed throughout the United States. Consumer sales are moderately seasonal. Sales are to hardware, supermarket, variety, department, discount, gift and drug stores. The Registrant’s Consumer Products Group also sells its cutlery products (principally machetes, bayonets, survival knives and kitchen knives) to various branches of the United States Government which accounted for approximately 23% of the Registrant’s total sales in 2004 and approximately 12% of total sales in 2003. No other single customer represented more than 10% of the Company’s revenues in 2004. The Registrant sells its products through its own sales personnel and through independent manufacturers’ representatives.

Business Segments

Business segment information is presented in Note 10 of the accompanying consolidated financial statements.

Intellectual Properties

The Company has rights under certain copyrights, trademarks, patents, 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 2004 and 2003 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.


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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 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 World Kitchen, Inc., Tramontina, Inc., Dexter-Russell Inc., W. R. Case & Sons Cutlery Company, Lifetime Hoan Corp. 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, 2004, had approximately 226 employees of which approximately 212 are full time. In excess of 81% of its employees are engaged in production, inspection, packaging or shipping activities. The balance are engaged in executive, engineering, administrative, clerical or sales capacities.


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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:

Location	Approx. Acreage	Principal Product manufactured	Number of buildings and type of construction	Approx. floor area (sq. feet)
Elma, New York	38.4	Advanced Technology Products	1-concrete block/ Steel	82,000


Franklinville,
New York	11.7	Cutlery products	1-tile/wood and	149,000
			1-concrete/metal
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 8 thereto, for further information with respect to the Registrant’s lease commitments.

The Registrant possesses modern precision manufacturing and testing equipment suitable for the development, manufacture, assembly and testing of its 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.


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Item 4. Submission of Matters to a Vote of Security Holders

Not applicable.


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PART II

Item 5. Market for Common Equity, Related Stockholder Matters and Small Business Issuer

Purchases of Equity Securities

(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 2004 and 2003.

High Low

2004

Fourth Quarter	$ 4.99	$ 3.70
Third Quarter	5.90	3.50
Second Quarter	4.98	2.72
First Quarter	3.54	2.75

2003

Fourth Quarter	$ 3.55	$ 2.00
Third Quarter	2.45	2.10
Second Quarter	2.28	1.85
First Quarter	3.75	2.25

(b) Approximate number of holders of common stock

Title Approximate number of

of ; record holders (as of

class December 31, 2004)

Common Stock, $.20 par value per share 567

No cash dividends were paid in 2004 or 2003.


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(d) Securities Authorized for Issuance Under Equity Compensation Plans

			Number of securities
	Number of securities		remaining available for
	to be issued upon	Weighted-average	future issuance under
	exercise of outstanding	exercise price of	equity compensation
	options, warrants	outstanding options,	plans (excluding securities
	and rights	warrants and rights	reflected in column (a))
Plan category	(a)	(b)	(c)

Equity compensation plans approved by security holders	270,000	$3.126	80,000

Equity compensation plans not approved by security holders	194,200	$6.057	76,600

Total	464,200	$4.352	156,600

(e) Company Re-purchases of Equity Securities

None.

Item 6. Management’s Discussion and Analysis or Plan of Operation

The following table sets forth for the period indicated the percentage relationship of certain items in the consolidated statement of operations to net revenues and the percentage increase or decrease of such items as compared to the indicated prior period.


	Relationship to net revenues year ended December 31,					Period to period increase (decrease) year ended
		2004		2003			2004-2003
Net revenues:
Advanced technology products		51.3	%	58.5	%		10.4	%
Consumer products		48.7		41.5			47.7
		100.0		100.0			25.8
Cost of goods sold, exclusive of depreciation		73.9		74.4			25.1
Gross profit		26.1		25.6			28.0
Selling, general and administrative		17.1		18.6			15.8
Interest		0.7		0.9			0.6
Depreciation and amortization		3.0		3.8			(2.1	)
		20.8		23.3			14.3
Income before income taxes		5.3		2.3			186.5
Income tax provision		2.0		0.9			182.2
Net income		3.3	%	1.4	%		189.0	%


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Management Discussion

During the year ended December 31, 2004 and for the comparable period ended December 31, 2003, approximately 45% and 42% respectively of the Company’s revenues were derived from contracts with agencies of the U.S. Government or their prime contractors and their subcontractors. Continued government involvement in military operations overseas has had a direct impact on the financial results in both the Advanced Technology and Consumer Product’s markets. Sales of products sold for government applications have increased approximately $2,700,000 over 2003. While the Company remains optimistic in relation to these opportunities, it recognizes that sales to the government are affected by defense budgets, U.S. and foreign policy and the level of military operations and as such, it is difficult to predict the impact on future financial results.

See also Note 10 to the consolidated financial statements for information concerning business segment operating results.

Results of Operations - Year 2004 as Compared to 2003

The Company’s consolidated results of operations for the year ended December 31, 2004 showed an approximate $4,539,000 or 25.8% increase in net revenues with an increase in income before taxes of approximately $757,000. The increase in revenues is primarily attributed to increased government shipments.

Gross profit increased 28.0% for the twelve month period ended December 31, 2004. The variation in gross profit can be attributed to several factors including year-to-year variations in the previously discussed front-end costs associated with new products and changes in design on existing products. The timing of such costs directly contributes to the fluctuation in gross profit from period to period as these costs are expensed as they occur and, as such, are not matched to their future revenues and benefits. As previously reported, while 2004 revenues from Consumer Produc ts Group’s combination combat knife and bayonet increased, a substantial amount of front-end costs associated with these revenues were expensed in prior periods. The Company continues to incur such costs on an ongoing basis associated with products for both the Advanced Technology Group (ATG) and Consumer Products Group (CPG). Another factor contributing to the increase in gross profit for the reported period is product mix.

Selling, general and administrative (SG&A) costs increased approximately 15.8% when compared to the same period in 2003. The increase in SG&A costs is attributed to increased marketing of the expanded sales effort of the ATG and CPG, however, the most significant impact has been increased costs for professional services and corporate governance necessitated by the Sarbanes-Oxley Act. The Company estimates that it has incurred in excess of $200,000 on related expenses in 2004 and expects to continue to incur significant expenses in the future.


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Interest expense remained consistent for the year ended December 31, 2004 when compared to the same period in 2003. Despite the decrease in the average outstanding balances on institutional debt, average market driven interest rates increased when comparing the twelve month period ending December 31, 2004 to the same period of 2003. See also Note 4 to the consolidated financial statements for information on long-term debt.

Depreciation and amortization expense decreased approximately 2.1% for the year ended December 31, 2004 when compared to the same period in 2003 due to variable estimated useful lives of depreciable property as identified in Note 1 to the consolidated financial statements.

The Company’s effective tax rate was 37% in 2004 and 2003. The effective tax rate in both years reflects state income taxes, permanent non-deductible expenditures and the tax benefit on certain foreign sales. See also Note 6 to the consolidated financial statements for information concerning income tax rates.

Results of Operations - Year 2003 as Compared to 2002

The Company’s consolidated results of operations for the year ended December 31, 2003 showed an approximate $2,000,000 or 12.6% increase in net revenues with a turnaround in income before taxes of approximately $728,000. The increase in revenues is primarily attributed to increased government shipments.

Gross profit increased 28.4% for the twelve month period ended December 31, 2003. During 2002, the Company incurred significant front-end costs associated with prototype, preproduction and start-up activities for Consumer Products Group’s combination combat knife and bayonet. The majority of such up-front costs were incurred and expensed in 2002 and early 2003. While the Company continues to incur such costs on an ongoing basis associated with products for both the Advanced Technology Group (ATG) and Consumer Products Group (CPG), the timing of such costs directly contributes to the fluctuation in gross profit from period to period as these costs are expensed as they occur and, as such, are not matched to their future revenues and benefits. Another factor contr ibuting to the increase in gross profit for the reported period is product mix.

Selling, general and administrative (SG&A) costs increased approximately 10% when compared to the same period in 2002. The increase in SG&A costs is primarily attributed to increased marketing of the expanded sales effort of the ATG and CPG and the increased costs for professional services and corporate governance necessitated by the Sarbanes-Oxley Act and related regulations that are expected to continue to be significant expense factors.


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Interest expense decreased for the year ended December 31, 2003 when compared to the same period in 2002 due to market driven interest rate fluctuations and the decrease of institutional debt.

Depreciation and amortization expense increased approximately 1.4% for the year ended December 31, 2003 when compared to the same period in 2002 due to variable estimated useful lives of depreciable property as identified in Note 1 to the consolidated financial statements.

The Company’s effective tax rate (benefit) was 37% in 2003 compared to (29%) in 2002. The variance in the effective tax rate is primarily attributable to state income taxes, permanent non-deductible expenditures and the tax benefit on certain foreign sales.

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, 2004, the Company expended $622,000 on capital expenditures as compared to $148,000 in 2003.

At December 31, 2004, the Company has commitments for approximately $70,000 in capital expenditures.

The Company also has a $1,000,000 line of credit on which there is no balance outstanding at December 31, 2004.

Principal maturities of long-term debt are as follows: 2005 - $381,000; 2006 - $384,000, 2007 - $386,000; 2008 - $387,000, 2009 and thereafter - $4,243,000.

Off Balance Sheet Arrangements

None.

Critical Accounting Policies

The Company prepares its consolidated financial statements in accordance with accounting principles generally accepted in the United States of America. As such, we are required to make certain estimates, judgments and assumptions that the Company believes are reasonable based upon the information available. These estimates and assumptions affect the reported amounts of assets and liabilities as of the date of the consolidated financial statements and the reported amounts of revenues and expenses during the periods presented. Actual results could differ significantly from those estimates under different assumptions and


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conditions. The Company believes that the following discussion addresses our most critical accounting policies, which are those that are most important to the portrayal of our financial condition and results of operations and which require our most difficult and subjective judgments, often as a result of the need to make estimates about the effect of matters that are inherently uncertain. Note 1 to the accompanying consolidated financial statements includes a summary of the significant accounting policies used in the preparation of the consolidated financial statements.

New Accounting Pronouncements

Management reviewed recent accounting pronouncements and has not determined the effect these pronouncements will have on Financial Statement results. See Note 1 to the accompanying consolidated financial statements for further discussion of new accounting pronouncements.

Revenue Recognition

The Company’s revenues are principally recognized as units are shipped and as terms and conditions of purchase orders are met.

Inventories

Inventories are stated at the lower of standard cost or net realizable value. Cost includes all cost incurred to bring each product to its present location and condition, which approximates actual cost (first-in, first-out). Market provisions in respect of net realizable value and obsolescence are applied to the gross value of the inventory. Pre-production and start-up costs are expensed as incurred.

Use of Estimates

The preparation of the consolidated financial statements in conformity with accounting principles generally accepted in the United States of America 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. Such estimates include, but are not limited to, reserves and allowances for inventories and trade receivables. Actual results could differ from those estimates.


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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.

Item 8A. Controls and Procedures

Our management has reviewed our disclosure controls and procedures (as defined in Exchange Act Rules 13a-15 and 15d-15). Our management believes that as of the end of the Company’s most recent fiscal year such disclosure controls and procedures are adequate to ensure that material information relating to the Company is made known to management by others within the Company.

In addition, our management reviewed our internal controls and, to management’s knowledge, during the quarter ended December 31, 2004 there has been no change that has materially affected, or is reasonably likely to materially affect, the Company’s internal control over financial reporting.

Item 8B. Other Information

None.


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PART III

Item 9. Directors and Executive Officers of the Registrant

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 2004 fiscal year or such information will be included by amendment.

Code of Ethics

The Company has adopted a Code of Ethics and Business Conduct that applies to all directors, officers and employees of the Company as required by the listing standards of the American Stock Exchange. The Code is available on the Company’s website at www.servotronics.com and the Company intends to disclose on this website any amendment to the Code. Waivers under the Code, if any, will be disclosed under the rules of the SEC and the American Stock Exchange.

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 2004 fiscal year or such information will be included by amendment.

Item 11. Security Ownership of Certain Beneficial Owners and Management and Related

Stockholder Matters

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 2004 fiscal year or such information will be included by amendment.

Also incorporated by reference is the information in the table under the heading “Securities Authorized for Issuance Under Equity Compensation Plans” included in Item 5 of this Form 10KSB.

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 2004 fiscal year or such information will be included by amendment.


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Item 13. Exhibits

(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

4.1(D)	Second amendment to a second	Filed herewith
	amended and restated term
	loan agreement with
	Fleet National Bank
	dated December 20, 2004

_______________________________________________________________________________________________________

*Incorporated herein by reference (File No. 1-07109)

**Indicates management contract or compensatory plan or arrangement


	-16-

Exhibit

number Presentation Reference

4.2(A)	Letter of Credit Reimbursement	Exhibit 4(B)(1) to
	Agreement with Fleet Bank	1994 10-KSB*
	dated December 1, 1994

4.2(B)	First Amendment and	Exhibit 4.2(B) to 1999
	Extension to Letter of	Form 10-KSB*
	Credit and Reimbursement
	Agreement with Fleet Bank
	of New York dated as of
	December 17, 1999

4.2(C)	Second Amendment and	Filed herewith
	Extension to Letter of
	Credit and Reimbursement
	Agreement originally dated
	December 1, 1994, with
	Fleet National Bank, dated as
	of December 20, 2004

4.3	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

4.4	Guaranty Agreement dated as	Exhibit 4(B)(3) to
	of December 1, 1994 from	1994 10-KSB*
	the Registrant and its
	subsidiaries to the Erie
	County Industrial
	Development Agency
	(“ECIDA”), Norwest Bank
	Minnesota, N.A., as Trustee,
	and Fleet Bank

4.5	Shareholder Rights Plan	Exhibit 4 to Form
	dated as of August 27,	8-K filed August 27,
	2002	2002*

10(A)(1)	Employment contract for	Exhibit 10(A) to 1986
	Dr. Nicholas D. Trbovich,	Form 10-K*
	Chief Executive Officer**

_______________________________________________________________________________________________________

*Incorporated herein by reference (File No. 1-07109)

**Indicates management contract or compensatory plan or arrangement


	-17-

Exhibit

number Presentation Reference


10(A)(2)	Amendment to employment	Filed herewith
	contract for Dr. Nicholas D.
	Trbovich, Chief Executive
	Officer**

10(A)(3)	Amendment to employment	Filed herewith
	contract for Dr. Nicholas D.
	Trbovich, Chief Executive
	Officer**

10(A)(4)	Employment contract for	Filed herewith
	Nicholas D. Trbovich, Jr.
	Vice President**

10(B)	Form of Indemnification	Exhibit 10(E) to 1986
	Agreement between the	Form 10-K*
	Registrant and each of
	its Directors and Officers**

10(C)(1)	Loan agreement between	Exhibit 10(C)(1)
	the Company and its	to 1991 Form 10-K*
	employee stock ownership
	trust, as amended

10(C)(2)	Stock purchase agreement	Exhibit 10(D)(2) to
	between the Company	1988 Form 10-K*
	and its employee
	stock ownership trust

10(D)(1)(a)	1989 Employees Stock	Exhibit A to Form 8:
	Option Plan**	Amendment No. 1 to
		1988 Form 10-K*

10(D)(1)(b)	Amendment to 1989	Exhibit 10(D)(1)(b) to 1990
	Employees Stock Option	Form 10-K*
	Plan**

10(D)(1)(c)	Amendment No. 2 to 1989	Exhibit 10(D)(1)(d) to 1991
	Employees Stock Option	Form 10-K*
	Plan**

10(D)(1)(d)	2000 Employees Stock	Exhibit 10(D)(1)(a) to 2000
	Option Plan**	Form 10-KSB*

_______________________________________________________________________________________________________

*Incorporated herein by reference (File No. 1-07109)

**Indicates management contract or compensatory plan or arrangement


	-18-

Exhibit

number Presentation Reference


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	Exhibit 10(D)(2)(a) to 2000
	for Donald W. Hedges	Form 10-KSB*
	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	Exhibit 10(D)(3)(c) to 2000
	for Nicholas D.	Form 10-KSB*
	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	Exhibit 10(D)(4)(a) to 2000
	for William H. Duerig	Form 10-KSB*
	dated July 7, 2000**

10(D)(9)	Land Lease Agreement	Exhibit 10(D)(9) to 1992
	between TSV, Inc.	Form 10-KSB*
	(wholly-owned subsidiary
	of the Registrant) and the
	ECIDA dated as of May 1,
	1992, and Corporate
	Guaranty of the Registrant
	dated as of May 1, 1992

10(D)(10)	Amendment to Land Lease	Exhibit 10(D) (11) to 1993
	Agreement and Interim	Form 10-KSB*
	Lease Agreement dated
	November 19, 1992

_______________________________________________________________________________________________________

*Incorporated herein by reference (File No. 1-07109)

**Indicates management contract or compensatory plan or arrangement


	-19-

Exhibit

number Presentation Reference


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	Exhibit 10(D)(12) to
	as of December 1, 1994	1994 10-KSB*
	between TSV, Inc. and
	the Registrant

10(D)(13)	2001 Long-Term Stock	Appendix A to 2001
	Incentive Plan	Proxy**

21	Subsidiaries of the	Exhibit 21 to 2001
	Registrant	10-KSB*

23	Consent of Independent	Filed herewith
	Accountants Consent on
	Form S-8 dated March 31,
	2005

31.1	Certification of Chief Financial	Filed herewith
	Officer pursuant to
	Rule 13a-14 or 15d-14 of the
	Securities Exchange act of
	1934, as adopted pursuant to
	Section 302 of the Sarbanes-
	Oxley Act of 2002.

31.2	Certification of Chief Executive	Filed herewith
	Officer pursuant to
	Rule 13a-14 or 15d-14 of the
	Securities Exchange act of
	1934, as adopted pursuant to
	Section 302 of the Sarbanes-
	Oxley Act of 2002.

32.1	Certification of Chief Financial	Filed herewith
	Officer pursuant to 18 U.S.C.
	1350 as adopted pursuant to
	Section 906 of the Sarbanes-
	Oxley Act of 2002.

_______________________________________________________________________________________________________

*Incorporated herein by reference (File No. 1-07109)

**Indicates management contract or compensatory plan or arrangement


	-20-

Exhibit

number Presentation Reference


32.2	Certification of Chief Executive	Filed herewith
	Officer pursuant to 18 U.S.C.
	1350 as adopted pursuant to
	Section 906 of the Sarbanes-
	Oxley Act of 2002.

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.


	-21-

Item 14. Principal Accountant Fees and Services

Information regarding principal accountant fees and services 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 2004 fiscal year or such information will be included by amendment.

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 ec onomy, 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.


	-22-

SIGNATURES

In accordance with 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 31, 2005 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 31, 2005

Nicholas D. Trbovich Officer, Chairman of the

Board and Director

/s/ Lee D. Burns Treasurer and Secretary ; March 31, 2005

Lee D. Burns (Chief Financial Officer)

/s/ Donald W. Hedges Director March 31, 2005

Donald W. Hedges

/s/ William H. Duerig Director March 31, 2005

William H. Duerig

/s/ Nicholas D. Trbovich Jr. Director & nbsp; March 31, 2005

Nicholas D. Trbovich Jr.


	-23-

SERVOTRONICS, INC. AND SUBSIDIARIES

INDEX TO CONSOLIDATED FINANCIAL STATEMENTS

Page

Report of Independent Registered Public Accounting Firm F2

Consolidated balance sheet at December 31, 2004 F3

Consolidated statement of operations for the years ended

December 31, 2004 and 2003 F4

Consolidated statement of cash flows for the years ended

December 31, 2004 and 2003 F5

Notes to consolidated financial statements &nb sp; F6 - F21

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-

Report of Independent Registered Public Accounting Firm

To the Board of Directors and Shareholders of

Servotronics, Inc. and Subsidiaries

In our opinion, the accompanying consolidated balance sheet and the related consolidated statements of operations and cash flows present fairly, in all material respects, the financial position of Servotronics, Inc. (the “Company”) and its subsidiaries at December 31, 2004, and the results of their operations and their cash flows for the years ended December 31, 2004 and 2003 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 the standards of the Public Company Accounting Oversight Board (United States). Those standards 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 our opinion

PricewaterhouseCoopers LLP

Buffalo, New York

March 31, 2005


	-F2-

SERVOTRONICS, INC. AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEET

($000’s omitted except share and per share data)

	December 31,
Assets		2004
Current assets:
Cash	$	2,106
Accounts receivable		3,334
Inventories		6,841
Deferred income taxes		471
Other assets		1,544
Total current assets		14,296
Property, plant and equipment, net		6,527
Other non-current assets		537
	$	21,360
Liabilities and Shareholders’ Equity
Current liabilities:
Current portion of long-term debt	$	381
Accounts payable		795
Accrued employee compensation and benefit costs		805
Accrued income taxes		67
Other accrued liabilities		152
Total current liabilities		2,200
Long-term debt		5,400
Deferred income taxes		434
Other non-current liabilities		304
Shareholders’ equity:
Common stock, par value $.20; authorized
4,000,000 shares; issued 2,614,506 shares		523
Capital in excess of par value		13,033
Retained earnings		2,246
Accumulated other comprehensive loss		(125	)
		15,677
Employee stock ownership trust commitment		(2,135	)
Treasury stock, at cost 121,605 shares		(520	)
Total shareholders’ equity		13,022
	$	21,360

See notes to consolidated financial statements


	-F3-

SERVOTRONICS, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENT OF OPERATIONS

($000’s omitted except per share data)


	Year Ended December 31,
		2004		2003
Net revenues	$	22,113	$	17,574
Costs and expenses:
Cost of goods sold, exclusive of depreciation		16,344		13,067
Selling, general and administrative		3,790		3,272
Interest		161		160
Depreciation and amortization		655		669
		20,950		17,168
Income before income taxes		1,163		406
Income tax provision		429		152
Net income	$	734	$	254
Income Per Share:
Basic
Net income per share	$	0.36	$	0.13

Diluted
Net income per share	$	0.35	$	0.13

See notes to consolidated financial statements


	-F4-

SERVOTRONICS, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENT OF CASH FLOWS

($000’s omitted)


	Year Ended December 31,
		2004			2003
Cash flows related to operating activities:
Net income	$	734		$	254
Adjustments to reconcile net income to net
cash provided by operating activities -
Depreciation and amortization		655			669
Deferred income taxes		(16	)		184
Change in assets and liabilities -
Accounts receivable		(846	)		145
Inventories		(31	)		(47	)
Prepaid income taxes		73			72
Other assets		42			(125	)
Other non-current assets		13			24
Accounts payable		246			131
Accrued employee compensation and benefit costs		73			(57	)
Other accrued liabilities		(23	)		66
Other non-current liabilities		27			(64	)
Accrued income tax		67			-
Employee stock ownership trust payment		101			101
Net cash provided by operating activities		1,115			1,353
Cash flows related to investing activities:
Capital expenditures - property, plant &
equipment		(622	)		(148	)
Net cash used in investing activities		(622	)		(148	)
Cash flows related to financing activities:
Proceeds from demand loan		572			250
Proceeds from long-term debt issuance		750			-
Payments on demand loan		(572	)		(250	)
Principal payments on long-term debt		(643	)		(378	)
Net cash provided by (used) in financing activities		107			(378	)
Net increase in cash		600			827
Cash at beginning of period		1,506			679
Cash at end of period	$	2,106		$	1,506

Supplemental disclosures:
====================

Income taxes (received) paid			$	306			($131	)
Interest paid			$	153		$	154

See notes to consolidated financial statements


	-F5-

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’s revenues are principally recognized as units are shipped and as terms and conditions of purchase orders are met.

Inventories

Inventories are stated generally at the lower of standard cost or net realizable value. Cost includes all cost incurred to bring each product to its present location and condition, which approximates actual cost (first-in, first-out), and market provisions in respect of net realizable value and obsolescence are applied to the gross value of the inventory. Pre-production and start-up costs are expensed as incurred.

Shipping and handling costs

Shipping and handling costs are classified as a component of cost of goods sold.


	-F6-

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 expensed as incurred. Upon 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 yea rs

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 and credit 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.

Use of estimates


	-F7-

New accounting pronouncements

In May 2003, the FASB issued SFAS No. 150, “Accounting for Certain Financial Instruments with Characteristics of Both Liabilities and Equity.” SFAS 150 changes the accounting guidance for certain financial instruments that, under previous guidance, could be classified as equity or “mezzanine” equity by now requiring those instruments to be classified as liabilities (or assets in some circumstances) on the balance sheet. Further, SFAS 150 requires disclosure regarding the terms of those instruments and settlement alternatives. SFAS is generally effective for all financial instruments entered into or modified after May 31, 2003, and is otherwise effective at the beginning of the first interim period beginning after June 15, 2003. The adoption of SFAS 150 did not have any material impact on the Company’s financial position, results of operations or cash flows.

In December 2003, the FASB issued a revision to SFAS No. 132 (SFAS 132), “Employers’ Disclosure about Pensions and Other Postretirement Benefits.” This Statement retains the disclosures previously required by SFAS 132 but adds additional disclosure requirements about the assets, obligations, cash flows and net periodic benefit cost of defined benefit pension plans and other defined benefit postretirement plans. It also calls for the required information to be provided separately for pension plans and for other postretirement benefit plans. The disclosures required by this Statement are included in Note 5 to the Financial Statements.

In November 2004, the FASB issued SFAS No. 151, “Inventory Costs, an amendment of ARB No. 43, Chapter 4,” (“SFAS 151”) which clarifies the types of costs that should be expensed rather than capitalized as inventory. This statement also clarifies the circumstances under which fixed overhead costs associated with operating facilities involved in inventory processing should be capitalized. The provisions of SFAS No. 151 are effective for fiscal years beginning after June 15, 2005 and the Company will adopt this standard in its third quarter of fiscal 2005. We do not expect implementation of this statement to have a material effect on our consolidated financial position or results of operations.

The FASB issued Statement of Financial Accounting Standard (SFAS) No. 123 (Revised 2004) (SFAS No. 123R), “Share-Based Payment,” in December 2004. SFAS No. 123R is a revision of FASB Statement 123, “Accounting for Stock-Based Compensation” and supersedes APB Opinion No. 25, “Accounting for Stock Issued to Employees,” and its related implementation guidance. The Statement focuses primarily on accounting for transactions in which an entity obtains employee services in share-based payment transactions. SFAS No. 123R requires a public entity to measure the cost of employee services received in exchange for an award of equity instruments based on the grant-date fair value of the award (with limited exceptions). That cost will be recognized over the period during which an employee is required to provide service in exchange for the award. This statement is effective as of the beginning of the first interim or annual reporting period that begins after June 15, 2005, which will require the expensing of any stock options issued in the future.


	-F8-

Risk Factors

The aviation and aerospace industries as well as markets for the Company’s consumer products are facing new and different challenges on a global basis. The success of the Company depends upon the trends of the economy, including interest rates, income tax laws, governmental regulation, legislation, and other risk factors. In addition, uncertainties in today’s global economy, global competition, the effect of terrorism, difficulty in predicting defense and other government 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, volatile market demand and the continued market acceptance of the Company’s advanced technology and cutlery products make it d ifficult to predict the impact on future financial results.

2. Inventories December 31, 2004

($000’s omitted)

Raw materials and common parts	$ 3,181
Work-in-process	3,268
Finished goods	640
	7,089
Less: common parts expected to be used
after one year	(248)
	$ 6,841


	-F9-

3. Property, plant and equipment December 31, 2004

($000’s omitted)

Land	$ 25
Buildings	6,484
Machinery, equipment and tooling	10,349
	16,858
Less accumulated depreciation and amortization	(10,331)
	$ 6,527

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. As of December 31, 2004, accumulated amortization on the building amounted to approximately $1,400,000. The associated current and long-term liabilities are discussed in footnote 4 to the consolidated financial statements. 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.

4. Long-term debt &n bsp; December 31, 2004

($000’s omitted)

Industrial Development Revenue Bonds; secured by a
letter of credit from a bank with interest payable monthly
at a floating rate (2.12% at December 31, 2004)	$ 4,150

Term loan payable to a financial institution
interest at LIBOR plus 2% (4.00% at
December 31, 2004); quarterly principal payments of
$17,500 commencing January 1, 2005; payable in full
in the fourth quarter of 2009	500

Term loan payable to a financial institution
interest at a rate of 5.25% at December 31, 2004,
changing to LIBOR plus 2% (4.56% at January 4, 2005);
quarterly principal payments of $26,786 through the
fourth quarter of 2011	750

Secured term loan payable to a government agency,
monthly payments of approximately $1,455 with
interest waived payable through second quarter of 2012	163

Secured term loan payable to a government agency
monthly payments of $1,950 including interest
fixed at 3% payable through fourth quarter of 2015	218
	5,781
Less current portion	(381)
	$ 5,400


	-F10-

Industrial Development Revenue Bonds were issued by a government agency to finance the construction of the Company’s headquarters/Advanced Technology facility. Annual sinking fund payments of $170,000 commenced December 1, 2000 and continue through 2013, with a final payment of $2,620,000 due December 1, 2014. The Company has agreed to reimburse the issuer of the letter of credit if there are draws on that letter of credit. The Company pays the letter of credit bank an annual fee of 1% of the amount secured thereby and pays the remarketing agent for the bonds an annual fee of .25% of the principal amount outstanding. The Company’s interest under the facility capital lease has been pledged to secure its obligations to the government agency, the bank and the bondholders.

Principal maturities of long-term debt are as follows: 2005 - $381,000; 2006 - $384,000, 2007 - $386,000; 2008 - $387,000, 2009 and thereafter - $4,243,000.

The Company also has a $1,000,000 line of credit on which there is no balance outstanding at December 31, 2004. The average interest rate on draw-downs for 2004 was 5%.

Certain lenders require the Company to comply with debt covenants as described in the specific loan documents, including the debt service ratio. At December 31, 2004, the Company was in compliance with all of its debt covenants.

5. Employee benefit plans

Employee stock ownership plan (ESOP)

Under the Company’s ESOP adopted in 1985, participating employees are awarded shares of the Company’s common stock based upon eligible compensation 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 Co mpany 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 405,000 shares have been allocated, exclusive of shares distributed to ESOP participants. At December 31, 2004 and 2003, approximately 422,000 and 445,000 shares, respectively, purchased by the ESOP remain unallocated.


	-F11-

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 2004 and 2003. 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

The Company has noncontributory defined benefit pension plans. Plan benefits are based on stated amounts for each year of service and funding is in accordance with statutory requirements. The Company uses a measurement date of December 1 for its pension plans. The plan assets consist of cash and cash equivalents.

Narrative description of development of long-term rate of return

The Company uses historical performance in the market blended with consideration for inflation, risk-free rate of return.

Narrative description of investment policy strategies

The Company seeks to maximize income, growth of income, and long-term appreciation and preservation of capital. The assets must be invested with care and diligence with the overriding prudent man rule as a guide to investment management. The Company will, as a general guideline, make occasional disbursements and care should be taken to ensure available funds.

Weighted - Average Assumptions

December 1,

2004

2003

Discount rate for benefit obligations

5.75%

6.0%

Discount rate for net periodic pension cost

6.0%

6.5%

Rate of compensation increase

N/A

N/A

Long-term rate of return and expected

     long-term return on plan assets

8.0%

8.0%

Accumulated benefit obligation

December 1,

2004

2003

Accumulated benefit obligations (ABO)

$437,926

$429,351

Projected benefit obligations (PBO)

$437,926

$429,351

Plan assets

$364,636

$345,256

Excess of ABO over plan assets

$73,290

$84,095

-F12-

Pension cost and employer contributions

December 1,

          2004

         2003

Net periodic pension cost

$

29,036

$

25,101

Anticipated employer contributions

$

50,491

$

51,364

Estimated future benefit payments

         2004

        2003

Plan year 2005

$

24,430

$

22,157

Plan year 2006

$

25,569

$

23,607

Plan year 2007

$

27,164

$

24,791

Plan year 2008

$

27,824

$

26,077

Plan year 2009

$

28,702

$

26,837

Plan years 2010 through 2014

$

147,998

$

141,434

6. Income tax provision

The provision (benefit) for income taxes included in the consolidated statement of operations consists of the following:

		2004			2003
	($000’s omitted)
Current:
Federal income tax (benefit)	$	388			($37	)
State income tax		57			5
		445			(32	)
Deferred:
Federal income tax (benefit)		(13	)		(177	)
State income tax		(3	)		7

		(16	)		184
	$	429		$	152

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:

	2004		2003
Statutory rate	34	%	34	%
Increase resulting from:
State income taxes (less federal effect)	3	%	2	%
Extraterritorial income exclusion	(2	%)	(3	%)
Nondeductible expenses	1	%	3	%
Other	1	%	1	%
	37	%	37	%


	-F13-

At December 31, 2004, the deferred tax assets (liabilities) were comprised of the following:

($000’s omitted)

Inventories	$	247
Accrued employee compensation and benefit costs		222
Operating loss and credit carryforwards		62
Minimum pension liability		64
Other		10
Total deferred tax assets		605
Property, plant and equipment		(558	)
Other liabilities		(10	)
Total deferred tax liabilities		(568	)
Net deferred tax asset	$	37

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. However, the amount of net deferred tax asset considered realizable could be reduced in the near term if estimates of future taxable income are reduced.

At December 31, 2004, the Company also has New York State net operating loss carryforwards of approximately $556,000 (approximately a $18,000 net tax benefit) that begin to expire in 2019. The Company also has a State of Pennsylvania net operating loss carryforward of approximately $1,312,000 (approximately a $43,000 net tax benefit) that begins to expire in 2006.

On October 22, 2004, the President of the United States signed the American Jobs Creation Act of 2004 (the “Act”). The Act provides a deduction for income from qualified domestic production activities, which will be phased in from 2005 through 2010. In return, the Act also provides for a two-year phase-out of the existing extra-territorial income exclusion (ETI) for foreign sales that was viewed to be inconsistent with international trade protocols by the European Union. The Company has not determined the effect this Act will have on future effective tax rates.


	-F14-

7. 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 (loss)
	($000’s omitted except share amounts)

Balance December
31, 2002	2,614,506	$523	$13,361	$1,262	($2,337)	($1,054)		($82)
Comprehensive income:
Net income	-	-	-	254	-	-	$254	-
Other comprehensive
loss, net of tax:
Minimum pension
liability adjustment	-	-	-	-	-	-	(25)	(25)
Other comprehensive
loss	-	-	-	-	-	-	(25)	-
Comprehensive income	-	-	-	-	-	-	$229	-
Compensation expense	-	-	-	-	101	-		-
Treasury shares issued for
deferred compensation
obligation	-	-	(328)	-	-	534		-
Balance December
31, 2003	2,614,506	$523	$13,033	$1,516	($2,236)	($520)		($107)
Comprehensive income:
Net income	-	-	-	734	-	-	$734	-
Other comprehensive
loss, net of tax:
Minimum pension
liability adjustment	-	-	-	-	-	-	(18)	(18)
Other comprehensive
loss	-	-	-	-	-	-	(18)	-
Comprehensive income	-	-	-	-	-	-	$716	-
Compensation expense	-	-	-	-	101	-	-
Treasury shares issued for
deferred compensation
obligation	-	-		-	-			-
Other	-	-	-	(4)	-	-		-
Balance December
31, 2004	2,614,506	$523	$13,033	$2,246	($2,135)	($520)		($125)


	-F15-

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,

		2004		2003
	($000’s omitted except per share data)

Net income	$	734	$	254

Weighted average common shares
outstanding (basic)		2,052		2001

Incremental shares from assumed
conversions of stock options		46		10

Weighted average common
shares outstanding (diluted)		2,098		2,011

Basic
Net income per share	$	0.36	$	0.13

Diluted
Net income per share	$	0.35	$	0.13

Other comprehensive loss

The minimum pension liability adjustment of $125,000 ($107,000 - 2003), which is net of taxes amounting to $73,000 ($63,000 - 2003), is the only component of other comprehensive loss for 2004.


	-F16-

Stock options

Under the Servotronics, Inc. 2000 Employee Stock Option Plan authorized by the Board of Directors and the 2001 Long-Term Stock Incentive Plan authorized by the Board of Directors and the Shareholders, and other separate agreements authorized by the Board of Directors, the Company has granted non-qualified options to certain Directors and Officers. The Company applies APB Opinion No. 25 and related interpretations in accounting for these Plans and the separate option agreements. Accordingly, no compensation expense has been charged to earnings in 2004 or prior years as stock options granted have an exercise pric e equal to the market price on the date of grant. At December 31, 2004, 156,600 shares of common stock were available under these plans. Options granted under these plans have durations of ten years and vesting periods ranging from six (6) months to four (4) 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, 2002	319,200	5.37
Granted in 2003	145,000	2.045
Exercised in 2003	-	-
Forfeited in 2003	-	-

Outstanding as of December 31, 2003	464,200	4.01
Granted in 2004	-	-
Exercised in 2004	-	-
Forfeited in 2004	-	-

Outstanding as of December 31, 2004	464,200	4.01

The following tables summarize information about options outstanding at December 31, 2004:

			Remaining
	Exercise	Number	Contractual	Options
	Prices ($)	Outstanding	Life	Exercisable
	8.50	93,000	3 years	93,000
	3.8125	101,200	6 years	101,200
	4.38	125,000	7 years	125,000
	2.045	145,000	9 years	141,000
Total		464,200		460,200


	-F17-

The Company has adopted the disclosure-only provisions of SFAS No. 123, “Accounting for Stock-Based Compensation”. 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 SFAS No. 123, the pro forma effects on the years ended December 31, 2004 and 2003 are as follows:

2004 2003

Net income:

As reported $734,000 $254,000

Pro forma $703,781 $128,000

Earnings per common share:

As reported - basic $0.36 & nbsp; $0.13

As reported - diluted $0.35 $0.13

Pro forma - basic $0.34 &nb sp; $0.06

Pro forma - diluted $0.34 & nbsp; $0.06

There were no options granted in 2004. There were 145,000 options granted in 2003. The Black-Scholes calculated estimated value of the options granted in 2003 was $1.277. The assumptions used to calculate this value include a risk-free interest rate of 3.83%, an expected term of 10 years, and an annual standard deviation (volatility) factor of 46.6%. 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 as sumptions 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 2003 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.


	-F18-

Shareholders’ rights plan

During 2002, the Company’s Board of Directors adopted a shareholders’ rights plan (the “Rights Plan”) and simultaneously declared a dividend distribution of one Right for each outstanding share of the Company’s common stock outstanding at August 28, 2002. The Rights Plan replaced a previous shareholder right plan that was adopted in 1992 and expired on August 28, 2002. The Rights do not become exercisable until the earlier of (i) the date of the Company’s public announcement that a person or affiliated group other than Dr. Nicholas D. Trbovich or the ESOP trust (an “Acquiring Person”) has acquired, or obtained the right to acquire, beneficial ownership of 25% or more of the Company’s common stock (excluding shares held by the ESOP trust) or (ii) ten business days fol lowing 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 $32.00. 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 stock for each Right held by any holder other than the Acquiring Person.

8. Commitments

The Company leases certain equipment pursuant to operating lease arrangements. Total rental expense in 2004 and 2003 and future minimum payments under such leases are not significant.

9. Litigation

10. Business segments

The Company operates in two business segments, the Advanced Technology Group and the Consumer Products Group. The Company’s reportable segments are strategic business units that offer different products and services. The segments are composed of separate corporations and are managed separately. Operations in the Advanced Technology Group involve the design, manufacture, and marketing of servo-control components for government and commercial applications. The Consumer Products Group’s operations involve the design, manufacture and marketing of a variety of cutlery products for use by consumers and government agencies. The Company derives its primary sales revenue from domestic customers, although a portion of finished products are for fo reign use.


	-F19-

Information regarding the Company’s operations in these segments is summarized as follows:

Year ended		Advanced			Consumer
December 31, 2004		Technology			Products
		Group			Group			Consolidated
	($000's omitted)
Revenues from unaffiliated customers	$	11,354		$	10,759		$	22,113
Profit	$	1,844		$	871			2,715
Depreciation and amortization	$	(506	)	$	(149	)		(655	)
Interest expense								(161	)
General corporate expense								(736	)
Income before income taxes							$	1,163
Identifiable assets	$	14,519		$	6,841		$	21,360
Capital expenditures	$	302		$	320		$	622

Year ended		Advanced			Consumer
December 31, 2003		Technology			Products
		Group			Group			Consolidated
	($000's omitted)
Revenues from unaffiliated customers	$	10,289		$	7,285		$	17,574
Profit	$	1,561		$	203			1,764
Depreciation and amortization	$	(522	)	$	(147	)		(669	)
Interest expense								(160	)
General corporate expense								(529	)
Income before income taxes							$	406
Identifiable assets	$	13,920		$	6,021		$	19,941
Capital expenditures	$	53		$	95		$	148


	-F20-

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 Group accounted for revenues of approximately $4,800,000 in 2004 and $5,200,000 in 2003. Similar contracts by the Consumer Products Group accounted for revenues of approximately $5,100,000 in 2004 and $2,100,000 in 2003. Sales of advanced technology products to one prime contractor, including various divisions and subsidiaries of a common parent company, amounted to approximately 14% in 2004 and 2003. The Company also had sales to another customer that amounted to approximately 17% of total revenues in 2004 and 2003. Another prime contractor provided sales of approximately 8% and 13% of total revenues in 2004 and 2003. No other single customer represented more than 10% of the Company’s revenues in any of these years.

-F21-

EX-4.1.D 2 exhibit41d.htm EX 4.1.D Second Amendment

Exhibit 4.1(D)

SECOND AMENDMENT

SECOND AMENDED AND RESTATED

TERM LOAN AGREEMENT

This Second Amendment (“Second Amendment”), dated as of December 20, 2004 is made by and between SERVOTRONICS, INC. (“Borrower”), a Delaware corporation having its principal office at 1110 Maple Street, P.O. Box 300, Elma, New York 14059 and FLEET NATIONAL BANK, a Bank of America company which is a national banking association and successor to Fleet Bank, with an office at Bank of America Building, Ten Fountain Plaza, Buffalo, New York 14202 (“Bank”).

Statement of the Premises

Borrower and Bank have previously entered into a Second Amended and Restated Term Loan Agreement dated February 26, 1999, as amended by First Amendment to Second Amended and Restated Term Loan Agreement dated as of December 17, 1999 (as amended, the “Loan Agreement”).

Borrower and Bank have agreed that Bank will extend to Borrower and Borrower will borrow from Bank a term loan to be used to refinance the outstanding indebtedness under the Loan Agreement and the Term Notes, as defined therein, and certain other indebtedness of Borrower to Bank, and have agreed to amend the Loan Agreement to set forth the terms and conditions of such term loan, to amend certain financial covenants in the Loan Agreement and to make certain other changes, all upon the terms and conditions set forth herein.

Statement of Consideration

Accordingly, in consideration of the premises and under the authority of Section 5-1103 of the New York General Obligations Law, Borrower and Bank agree as follows:

Agreement

1. Amendment. Effective upon the satisfaction of all conditions specified in Section 3 hereof, the Loan Agreement is hereby amended as follows:

A. Sections 1.8 and 1.9 of the Loan Agreement are hereby amended and restated in their entirety to read as follows:

1.8 “Debt Service Coverage Ratio” shall refer to the sum of Borrower’s and Borrower’s consolidated subsidiaries’ (i) net profits, (ii) depreciation and amortization, (iii) interest expense, and (iv) non-cash expense for such period, compared to the sum of Borrower’s and Borrower’s consolidated subsidiaries’ (v) current maturities of long-term debt (including capit alized leases), (vi) interest expense, and (vii) capital expenditures not funded by debt.

1.9 “Default Interest Rate” means the Stated Prime Rate, as the same may change from time to time, plus four percent (4%) per annum, provided, however, that if any portion of the principal of the Term Note bears interest calculated by reference to a LIBOR Based Rate at the time of maturity or acceleration, Borrower’s right to select pricing options shall cease and such principal shall bea r interest at four percent (4%) over such rate until the end of the LIBOR Period then in effect and shall thereafter bear interest at the Stated Prime Rate plus four percent (4%) until paid.

B. Sections 1.12, 1.13, 1.14 and 1.15 of the Loan Agreement are hereby amended and restated in their entirety to read as follows:

1.12 Intentionally omitted.

1.13 Intentionally omitted.

1.14 Intentionally omitted.

1.15 “GAAP” means generally accepted accounting principles in the United States of America.

C. Section 1.17 of the Loan Agreement is hereby amended and restated in its entirety to read as follows:

1.17 “LIBOR” means, the rate per annum as determined on the basis of the offered rates for deposits in U.S. dollars, for a period of time comparable to the corresponding LIBOR Period which appears on the Telerate page 3750 as of 11:00 a.m. London time on the day that is two London Banking Days preceding the first day of such LIBOR Period; provided, however, if the rate described above does not appear on the Telerate System on any applicable interest determination date, the LIBOR rate shall be the rate (rounded upwards, if necessary to the nearest one hundred-thousandth of a percentage point), determined on the basis of the offered rates for deposits in U.S. dollars for a period of time comparable to such LIBOR Period which are offered by four major banks in the London interbank market at approximately 11:00 a.m. London time, on the day that is two (2) London Banking Days preceding the first day of such LIBOR Period as selected by the Bank. The principal London office of each of the four major London banks will be requested to provide a quotation of its U.S. dollar deposit offered rate. If at least two such quotations are provided, the rate for that date will be the arithmetic mean of the quotations. If fewer tha n two quotations are provided as requested, the rate for that date will be determined on the basis of the rates quoted for loans in U.S. dollars to leading European banks for a period of time comparable to such LIBOR Period offered by major banks in New York City at approximately 11:00 a.m. New York City time, on the day that is two London Banking Days preceding the first day of such LIBOR Period. In the event that Bank is unable to obtain any such quotation as provided above, it will be deemed that LIBOR cannot be determined and the outstanding principal amount of the Term Loan shall bear interest at the Stated Prime Rate commencing on the day on which any current LIBOR Period then in effect shall expire and continuing until the Bank using commercially reasonable efforts is able to obtain such a quotation as provided above and Borrower again requests a LIBOR Based Rate. As used in this Agreement, “Banking Day” shall mean, in respect of any city, any date on which commercial banks are open for business in that city.

In the event that the Board of Governors of the Federal Reserve System shall impose a Reserve Percentage with respect to LIBOR deposits of Bank then for any period during which such Reserve Percentage shall apply, LIBOR shall be equal to the amount determined above divided by an amount equal to 1 minus the Reserve Percentage.

D. Section 1.19 of the Loan Agreement is hereby amended to delete the word “corresponding” from such Section.

E. Section 1.24 of the Loan Agreement is hereby amended and restated in its entirety to read as follows:


	- 2 -

1.24. “Obligations” means all debts, liabilities and obligations of Borrower to Bank now existing or hereafter arising or created (including but not limited to all obligations of Borrower under this Agreement and the Term Note), without limitation as to amount, and including without limitation all debts, liabilities and obligations which are direct or indirect, absolute or contingent, and any sums which Bank receives in payment of Obligations and is obligated by a Bankruptcy Court or other legal a uthority to repay and does so repay. Without limitation of the foregoing, Obligations includes all obligations of the Borrower under any interest rate or currency protection agreement, interest rate or currency future, interest rate or currency option, interest rate or currency swap or cap or other interest rate or currency hedge agreement with the Bank or its Affiliate relating to the Term Loan.

F. Section 1.31 of the Loan Agreement is hereby amended and restated in its entirety to read as follows:

1.31. “Term Note” means the Term Note in substantially the form of Exhibit A hereto.

G. Section 1.32 of the Loan Agreement is hereby amended and restated in its entirety to read as follows:

1.32 Intentionally omitted.

H. Section 2 of the Loan Agreement is hereby amended and restated in its entirety to read as follows:

2. Term Loan Facility

2.1. Term Loan. Subject to the terms and conditions of this Agreement, on the date hereof the Bank shall lend and the Borrower shall borrow the principal amount of $750,000. The Term Loan shall be evidenced by the Term Note in the original principal amount of $750,000.

2.2. Rates and Payment of Interest.

(i) Interest will be charged on the principal amount outstanding from time to time under the Term Note, from the date hereof until paid in full, at a per annum rate which shall be, at Borrower’s election, from time to time, either (A) the Stated Prime Rate or (B) the applicable LIBOR Based Rate.

(ii) All interest accrued on the Term Loan shall be payable on the first day of each month after the date hereof.

(iii) All interest shall be computed on the basis of a year of 360 days and the actual number of days elapsed and charged for each day on which principal is outstanding at the close of business of such day, including any days for which the payment of principal is extended by reason of Sundays and holidays.

2.3. LIBOR Based Rate Elections. Borrower shall give Bank two (2) Business Days notice prior to electing a LIBOR Based Rate and corresponding LIBOR Period. If Borrower does not elect a new LIBOR Period at least two Business Days prior to the expiration of any LIBOR Period, the interest rate for the Term Loan may be set by the Bank at the Stated Prime Rate or the LIBOR Based Rate for a 1 month LIBOR Period. Not more than one LIBOR Period may be in effect at one time.

Borrower will have the right to change from a Stated Prime Based Rate to a LIBOR Based Rate at any time with respect to the Term Loan but may change from a LIBOR Based Rate to a Stated Prime Rate only at the end of the applicable LIBOR Period.


	- 3 -

2.4. Payment of Principal. The principal of the Term Loan shall be payable in twenty-eight substantially equal, consecutive quarterly installments, commencing January 1, 2005 and continuing on the first day of each January, April, July and October thereafter as follows: twenty-seven installments in the amount of $26,785.71 each and a twenty-eighth and final installment due October 1, 2011 in the amount of $26,785.83, at which time all outstanding principal and accrued interest shall be p aid in full.

2.5. Voluntary Prepayment of Principal.

(i) Except as otherwise provided in this Section 2.5, Borrower shall have the right at any time to terminate this Agreement, and the Term Loan hereunder, by payment in full of the then outstanding aggregate principal and accrued interest of the Term Note.

(ii) All or any portion of the Term Loan bearing interest at a Stated Prime Based Rate may be repaid at any time without penalty.

(iii) Borrower may repay all or any portion of the Term Loan bearing interest at a LIBOR Based Rate only on the last day of the applicable LIBOR Period.

(iv) Borrower shall pay to Bank, upon request of Bank, such amount or amounts as shall be sufficient (in the reasonable opinion of Bank) to compensate it for any loss, cost, or expense incurred as a result of: (i) any repayment of the Term Loan then bearing interest at a LIBOR Based Rate on a date other than the last day of the applicable LIBOR Period (which shall be considered a prepayment); and (ii) any failure by Borrower to pay any portion of the Term Loan then bearing interest at a LIBOR Based Rate on the date for payment specified in Borrower’s written notice. Without limiting the foregoing, Borrower shall pay to Bank a “yield maintenance fee” in an amount computed as follows: The current rate for United States Treasury securities (bills on a discounted basis shall be converted to a bond equivalent) with a maturity date closest to the last day of the term chosen pursuant to the LIBOR Rate Election as to which the prepayment is made, shall be subtracted from the LIBOR Based Rate in effect at the time of prepayment. If the result is zero or a negative number, there shall be no yield maintenance fee. If the result is a positive number, then the resulting percentage shall be multiplied by the amount of the principal balance being prepaid. The resulting amount shall be divided by 360 and multiplied by the number of days remaining in the term chosen pursuant to the LIBOR Rate Election as to which the prepayment is made. Said amount shall be reduced to present value calculated by using the above referenced United States Treasury security rate and the number of days remaining in the term chosen pursuant to the LIBOR Rate Election as to which prepayment is made. The resulting amount shall be the yield maintenance fee due to Bank upon the prepayment of a LIBOR Loan. Each reference in this paragraph to “LIBOR Rate Election” shall mean the election by Borrower of a LIBOR Based Rate. If by reason of an Event of Default, Bank elects to declare the Term Note to be immediately due and payable, then any yield maintenance fee with respect to the Term Loan shall become due and payable in the same manner as though Borrower had exercised such right of prepayment.

2.6. Payments Generally. All payments shall be made by Borrower to Bank at Ten Fountain Plaza, Buffalo, New York or such other place as Bank may from time to time specify in writing in lawful currency of the United States of America and in immediately available funds, without counterclaim or setoff and free and clear of, and without any deduction or withholding for, any taxes or other payments. Whenever any payment (including principal, interest or any fees or other amounts) hereunder shall b ecome due, or otherwise would occur, on a day that is not a Business Day, the due date of such payment shall be extended to the next succeeding Business Day, and such extension of time shall in such case be included in the computation of interest or fees. All payments shall be applied first to the payment of all fees, expenses and other amounts due to the Bank (excluding principal and interest), then to accrued interest, and the balance on account of outstanding principal; provided, however, that after an Event of Default, payments will be applied to the obligations of Borrower to Bank as Bank determines in its sole discretion.

2.7. Use of Proceeds. The proceeds of the Term Loan shall be used by Borrower to refinance certain indebtedness of Borrower to Bank.


	- 4 -

I. Sections 4.2 and 4.3 of the Loan Agreement are hereby amended and restated in their entirety to read as follows:

4.2 Intentionally omitted.

4.3 Intentionally omitted.

J. Section 4.6 of the Loan Agreement is hereby amended and restated in its entirety to read as follows:

4.6 Will furnish to Bank: (i) within forty-five (45) days after the end of each of its fiscal quarters other than year end, an internally prepared consolidated and consolidating balance sheet, operating statement and statement of changes in shareholders’ equity (if such changes result from other than income) of Borrower at and as of the end of such quarter, together with copies of Borrower’s SEC Form 10-Q SB or equivalent filing; (ii) within one hundred twenty (120) days after the end of each of its fiscal years: a copy of SEC Form 10-K SB or equivalent filing, and con solidated and consolidating financial statements of Borrower as of the end of each such year audited by PricewaterhouseCoopers, LLP or any other independent certified public accountants reasonably satisfactory to Bank; (iii) together with each quarterly financial statement a certificate of the Chairman or Treasurer of Borrower certifying, to his best knowledge and belief, that (a) no Event of Default under the terms of this Agreement has occurred, and (b) no event which would constitute an Event of Default under this Agreement but for the requirement that notice be given or time elapse, or both, has occurred or, if any such event has occurred or then exists, stating the nature thereof and the steps being taken by Borrower to cure same; (iv) as soon as they are available, copies of all proxy statements, annual reports made available to its security holders and annual reports filed by Borrower with th e Securities and Exchange Commission; and (v) as soon as they are available, copies of any management letters prepared by Borrower’s accountants.

K. Section 5.5 of the Loan Agreement is hereby amended and restated in its entirety to read as follows:

5.5 Mortgage, pledge or otherwise encumber any of its assets, except for (i) liens granted to Bank; and (ii) “purchase money security interests in goods” as described in Section 9.103 of the New York Uniform Commercial Code.

L. Section 6.2 of the Loan Agreement is hereby amended to delete the last sentence thereof.

M. Section 8.3 of the Loan Agreement is hereby amended to change the words “Gerald A. Lee Vice President” to “Colleen M. O’Brien Vice President.”

N. Section 8.5 of the Loan Agreement is hereby amended to change the words “any of the Term Notes” to “the Term Note.”

O. Section 8.7 of the Loan Agreement is hereby amended to change the word “Company” therein to “Borrower” and the words “Term Notes” therein to “Term Note.”

P. Sections 8.8 and 8.10 of the Loan Agreement are each amended to change the words “either of the Term Notes” therein to “the Term Note.”

Q. All references to the “Term Notes” in any Section of the Loan Agreement which is not amended above shall be amended to change the words “Term Notes” to the words “Term Note.”


	- 5 -

R. Exhibit A to the Loan Agreement is hereby amended and restated to read as Exhibit A to this Second Amendment.

2. Representations and Warranties. Borrower makes the following representations and warranties to Bank which shall be deemed to be continuing representations and warranties so long as any obligations, including indebtedness of Borrower to Bank arising under the Loan Agreement or any note delivered pursuant thereto remain unpaid:

A. Authorization. Borrower has full power and authority to borrow under the Loan Agreement, as amended hereby, and to execute, deliver and perform this Second Amendment and any documents delivered in connection with it and all other related documents and transactions, all of which have been duly authorized by all proper and necessary corporate action. The execution and delivery of this Second Amendment by Borrower will not violate the provisions of, or cause a default under, Borrower’s C ertificate of Incorporation or By-Laws or any agreement to which the Borrower is a party or by which it or its assets are bound.

B. Binding Effect. This Second Amendment has been duly executed and delivered by Borrower and constitutes the legal, valid and binding obligation of Borrower enforceable in accordance with its terms.

C. Consents; Governmental Approvals. To the best of the Company’s knowledge, no consent, approval or authorization of, or registration, declaration or filing with, any governmental body or authority or any other party is required in connection with the valid execution, delivery or performance of this Second Amendment or any other document executed and delivered therewith or in connection with any other transactions contemplated hereby.

D. No Events of Default. There is, on the date hereof, no event or condition which constitutes an Event of Default under any of the Loan Documents or which, with notice and/or the passage of time, would constitute an Event of Default.

E. No Material Misstatements. Neither this Second Amendment nor any document delivered to Bank by or on behalf of Borrower to induce Bank to enter into this Second Amendment contains any untrue statement of a material fact or omits to state a material fact necessary to make the statements herein or therein not misleading in light of the circumstances in which they were made.

3. Conditions of Effectiveness. This Second Amendment shall become effective when and only when Bank shall have received counterparts of this Second Amendment executed by Borrower and Bank and the following conditions shall have been fulfilled:

A. Documents. All instruments, certificates and agreements to be furnished to the Bank hereunder shall be of such form and content as the Bank shall reasonably require, and the Borrower shall furnish such consents, authorizations and other instruments and agreements as the Bank may reasonably deem necessary to effectuate the intent of this Second Amendment.


	- 6 -

B. Opinion of Counsel. Counsel to Borrower shall have delivered to the Bank an opinion in form and substance satisfactory to the Bank.

C. Authorization. The Borrower shall have taken appropriate corporate action to authorize, and the Borrower’s Board of Directors shall have adopted resolutions authorizing the execution and delivery of this Second Amendment and the taking of all action called for by this Second Amendment, and the Borrower shall have furnished to Bank certified copies of all such corporate action and Board resolutions and such other certified corporate documents as the Bank may request.

D. Costs and Expenses. Borrower shall have complied with Section 5 of this Second Amendment.

E. Acknowledgment. G. N. Metals Products, Inc., The Ontario Knife Company and Queen Cutlery Company, Inc. shall each have delivered to Bank an Acknowledgment in form and substance satisfactory to Bank and such additional documents as Bank or its counsel may reasonably require and all documents, instruments and other legal matters in connection with this Second Amendment shall be satisfactory in form and substance to Bank and its counsel.

4. Reference to and Effect on Loan Documents.

A. Upon the effectiveness hereof, each reference in the Loan Agreement to “this Agreement,” “hereunder,” “hereof,” “herein,” or words of like import, and each reference in the Loan Documents to the Loan Agreement shall mean and be a reference to the Loan Agreement as amended by this Second Amendment.

B. The Loan Agreement, as amended by this Second Amendment, represents the entire understanding and agreement between the parties hereto with respect to the subject matter hereof. This Second Amendment supersedes all prior negotiations and any course of dealing between the parties with respect to the subject matter hereof. This Second Amendment shall be binding upon Borrower and its successors and assigns, and shall inure to the benefit of, and be enforceable by, Bank and each of its successors and assigns. The Loan Agreement, as amended hereby, is in full force and effect and, as so amen ded, is hereby ratified and reaffirmed in its entirety. The Borrower acknowledges and agrees on the date hereof that the Loan Agreement (as amended by this Second Amendment) and each other Borrower Document, as defined in the Loan Agreement, to which Borrower is a party is in full force and effect, that its obligations thereunder and under this Second Amendment are its legal valid and binding obligations enforceable against it in accordance with the terms thereof and hereof, subject to bankruptcy, insolvency, and other similar laws affecting creditors’ rights generally, and it has no defense, whether legal or equitable, setoff or counterclaim to the payment and performance of such obligations.


	- 7 -

C. The execution, delivery and effectiveness of this Second Amendment shall not operate as a waiver of any right, power or remedy of Bank under the Loan Agreement, nor constitute a waiver of any provision of the Loan Agreement.

5. Costs and Expenses. Borrower agrees to pay on demand all costs and expenses of Bank in connection with the preparation, negotiation, administration, execution and delivery of this Second Amendment and the other documents related hereto, including the reasonable fees, charges and disbursements of counsel for Bank.

6. Governing Law. Pursuant to Section 5-1401 of the New York General Obligations Law, the laws of the State of New York shall govern the validity, construction, enforcement and interpretation of this Second Amendment in whole without regard to any rules of conflicts-of-laws that would require the application of the laws of any jurisdiction other than the State of New York.

7. Headings. Section headings in this Second Amendment are included herein for convenience of reference only and shall not limit or otherwise affect the meanings of this Second Amendment or be used to construe its provisions.

8. Execution in Counterparts. This Second Amendment may be executed in any number of counterparts and by the different parties hereto on separate counterparts, each of which shall be deemed to be an original, and all of which taken together shall constitute one and the same Second Amendment, regardless of whether or not the execution by all parties shall appear on any single counterpart. Delivery of an executed counterpart of a signature page to this Second Amendment by telec opier shall be effective as delivery of a manually executed counterpart of this Second Amendment.


	- 8 -

IN WITNESS WHEREOF, the parties hereto have each caused a counterpart of this Second Amendment to be executed by their respective representatives thereunto duly authorized, as of the date first above written.

SERVOTRONICS, INC.

By: /s/Lee D. Burns
Lee D. Burns
Treasurer and Chief Financial
Officer

FLEET NATIONAL BANK,

A Bank of America company

By: /s/Colleen M. O’Brien

Colleen M. O’Brien

Vice President


	- 9 -

STATE OF NEW YORK	)
	) SS.:
COUNTY OF ERIE	)

On the 20th day of December, in the year 2004, before me, the undersigned, personally appeared LEE D. BURNS, personally known to me or proved to me on the basis of satisfactory evidence to be the individual(s) whose name(s) is (are) subscribed to the within instrument and acknowledged to me that he/she/they executed the same in his/her/their capacity(ies), and that by his/her/their signature(s) on the instrument, the individual(s), or the person upon behalf of which the individual(s) acted, executed the instrument.

	/s/George F. Bellows
	Notary Public
	George F. Bellows
	Notary Public, State of New York
	Qualified in Erie County
	My Commission Expires 04/14/2006

STATE OF NEW YORK	)
	) SS.:
COUNTY OF ERIE	)

On the 20th day of December, in the year 2004, before me, the undersigned, personally appeared COLLEEN M. O’BRIEN, personally known to me or proved to me on the basis of satisfactory evidence to be the individual(s) whose name(s) is (are) subscribed to the within instrument and acknowledged to me that he/she/they executed the same in his/her/their capacity(ies), and that by his/her/their signature(s) on the instrument, the individual(s), or the person upon behalf of which the individual(s) acted, executed the instrument.

	/s/Lynn M. Kisker
	Notary Public
	Lynn M. Kisker
	Notary Public, State of New York
	Qualified in Erie County
	My Commission Expires 04/11/2006

- 10 -

EX-4.2.C 3 exhibit42c.htm EX 4.2C Second Amendment

Exhibit 4.2(C)

SECOND AMENDMENT AND EXTENSION

LETTER OF CREDIT AND REIMBURSEMENT AGREEMENT

This Second Amendment and Extension (“Second Amendment”), dated and effective as of December 20, 2004 (the “Replacement Date”) is made by and among SERVOTRONICS, INC. (“Servo”) and TSV ELMA, INC. formerly known as TSV, Inc. (“TSV”), Delaware corporations having their principal offices at 1110 Maple Street, P.O. Box 300, Elma, New York 14059 (Servo and TSV are sometimes collectively and severally referred to herein as the “Company”) and FLEET NATIONAL BANK, a Bank of America company which is a national banking association and successor to Fleet Bank, with an office at Bank of America Building, Ten Fountain Plaza, Buffalo, New York 14202 (“Bank”).

Statement of the Premises

The Company and Fleet Bank have previously entered into a Letter of Credit and Reimbursement Agreement dated as of December 1, 1994, as amended by First Amendment and Extension to Letter of Credit and Reimbursement Agreement dated as of December 17, 1999 (“First Amendment”) between the Company and Fleet National Bank (as amended, the “Reimbursement Agreement”); and

The Erie County Industrial Development Agency (the “Agency”) issued its Industrial Development Revenue Bonds (1994 Servotronics, Inc. Project) in the aggregate principal amount of $5,000,000 (the “Bonds”) for the purpose of assisting in financing the Project, as defined in the Reimbursement Agreement; and

The Bank issued its irrevocable Letter of Credit, as renewed and extended pursuant to the First Amendment (the “Original Letter of Credit”) to facilitate the issuance and sale of the Bonds, all in accordance with the terms and conditions of the Reimbursement Agreement; and

The Original Letter of Credit will expire on December 21, 2004 and the Company has requested that Bank renew and extend the Original Letter of Credit for a second five-year period; and

Bank has agreed to renew and extend such Original Letter of Credit, provided that the Company agrees to the modification of certain financial covenants in the Reimbursement Agreement and certain other changes to the Reimbursement Agreement and the Company has agreed thereto, all upon the terms and conditions set forth herein.

Statement of Consideration

Accordingly, in consideration of the premises and under the authority of Section 5-1103 of the New York General Obligations Law, the Company and Bank agree as follows:

Agreement

1. Amendment. Effective upon the satisfaction of all conditions specified in Section 4 hereof, the Reimbursement Agreement is hereby amended as follows:

A. Section 1.01 of the Reimbursement Agreement is hereby amended by amending and restating the following definitions in their entirety to read as follows:

“Bank” shall mean Fleet National Bank, a Bank of America company which is a national banking corporation having an office at Bank of America Building, 10 Fountain Plaza, Buffalo, New York 14202.

“Debt Service Coverage Ratio” shall refer to the sum of Company’s and Company’s consolidated subsidiaries’ (i) net profits, (ii) depreciation and amortization, (iii) interest expense, and (iv) non-cash expense for such period, compared to the sum of Company’s and Company’s consolidated subsidiaries’ (v) current maturities of long-term debt (including capitalized leases), (vi) interest expense, and (vii) capital expenditures not funded by debt.

B. Section 11.02 of the Reimbursement Agreement is hereby amended and restated to read in its entirety as follows:

11.02 Net Working Capital. Intentionally omitted.

C. Section 11.03 of the Reimbursement Agreement is hereby amended and restated to read in its entirety as follows:

11.03 Tangible Net Worth. Intentionally omitted.

D. Section 11.06 of the Reimbursement Agreement is hereby amended and restated in its entirety to read as follows:

11.06 Financial Statements. Will furnish to Bank: (i) within forty-five (45) days after the end of each of its fiscal quarters other than year end, an internally prepared consolidated and consolidating balance sheet, operating statement and statement of changes in shareholders’ equity (if such changes result from other than income) of Company at and as of the end of such quarter, together with copies of Company’s SEC Form 10-Q SB or equivalent filing; (ii) within one hundred twenty (120) days after the end of each of its fiscal years: a copy of SEC Form 10-K SB or equivalent filing, and consolidated and consolidating financial statements of Company as of the end of each such year audited by PricewaterhouseCoopers, LLP or any other independent certified public accountants reasonably satisfactory to Bank; (iii) together with each quarterly financial statement a certificate of the Chairman or Treasurer of Company certifying, to his best knowledge and belief, that (a) no Event of Default under the terms of this Agreement has occurred, and (b) no event which would constitute an Event of Default under this Agreement but for the requirement that notice be given or time elapse, or both, has occurred or, if any such event has occurred or then exists, stating the nature thereof and the steps being taken by Company to cure same; (iv) as soon as they are available, copies of all proxy statements, annual reports made available to its security holders and annual reports filed by Company wit h the Securities and Exchange Commission; and (v) as soon as they are available, copies of any management letters prepared by Company’s accountants.

E. Effective on the Replacement Date, Exhibit A of the Reimbursement Agreement is hereby amended by the attachment thereto of the amendment attached hereto as Exhibit A.

2. Extensions. Effective as of the Replacement Date, the Letter of Credit shall be extended for an additional five-year period which extension shall be effected by the issuance of an amendment to letter of credit in the form attached to this Amendment and Extension as Exhibit A.


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3. Representations and Warranties. The Company makes the following representations and warranties to Bank which shall be deemed to be continuing representations and warranties so long as any obligations, including indebtedness of the Company to Bank arising under the Reimbursement Agreement or any note delivered pursuant thereto remain unpaid:

A. Authorization. The Company has full power and authority to borrow under the Reimbursement Agreement, as amended hereby, and to execute, deliver and perform this Second Amendment and any documents delivered in connection with it and all other related documents and transactions, all of which have been duly authorized by all proper and necessary corporate action. The execution and delivery of this Second Amendment by the Company will not violate the provisions of, or cause a default under, th e Company’s Certificate of Incorporation or By-Laws or any agreement to which the Company is a party or by which it or its assets are bound.

B. Binding Effect. This Second Amendment has been duly executed and delivered by the Company and constitutes the legal, valid and binding obligation of the Company enforceable in accordance with its terms.

D. No Events of Default. There is, on the date hereof, no event or condition which constitutes an Event of Default by the Company under any of the Financing Documents or which, with notice and/or the passage of time, would constitute an Event of Default.

E. No Material Misstatements. Neither this Second Amendment nor any document delivered to Bank by or on behalf of the Company to induce Bank to enter into this Second Amendment contains any untrue statement of a material fact or omits to state a material fact necessary to make the statements herein or therein not misleading in light of the circumstances in which they were made.

4. Conditions of Effectiveness. This Second Amendment shall become effective when and only when Bank shall have received counterparts of this Second Amendment executed by the Company and Bank and the following conditions shall have been fulfilled:

A. Documents. All instruments, certificates and agreements to be furnished to the Bank hereunder shall be of such form and content as the Bank shall reasonably require, and the Company shall furnish such consents, authorizations and other instruments and agreements as the Bank may reasonably deem necessary to effectuate the intent of this Second Amendment.


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B. Opinion of Counsel. Counsel to the Company shall have delivered to the Bank an opinion in form and substance satisfactory to the Bank.

C. Authorization. The Company shall have taken appropriate corporate action to authorize, and the Company’s Board of Directors shall have adopted resolutions authorizing the execution and delivery of this Second Amendment and the taking of all action called for by this Second Amendment, and the Company shall have furnished to Bank certified copies of all such corporate action and Board resolutions and such other certified corporate documents as the Bank may request.

D. Costs and Expenses. The Company shall have complied with Section 6 of this Second Amendment.

F. Appraisal. Bank shall have received a limited appraisal of the Company’s real estate at 1110 Maple Street in Elma, New York, which shall be performed by an appraiser satisfactory to Bank, shall be in form and substance satisfactory to Bank in its sole discretion.

G. Environmental Questionnaire. Bank shall have received an environmental questionnaire completed and executed by the Company and the form and substance thereof shall be satisfactory to the Bank in its sole discretion.

H. Renewal Request. Bank shall have received a letter, executed by the Company, requesting renewal of the Original Letter of Credit and the form and substance thereof shall be satisfactory to the Bank in its sole discretion.

5. Reference to and Effect on Financing Documents.

A. Upon the effectiveness hereof, each reference in the Reimbursement Agreement to “this Agreement,” “hereunder,” “hereof,” “herein,” or words of like import, and each reference in the Financing Documents to the Reimbursement Agreement shall mean and be a reference to the Reimbursement Agreement as amended by this Second Amendment.

B. The Reimbursement Agreement, as amended by this Second Amendment, represents the entire understanding and agreement between the parties hereto with respect to the subject matter hereof. This Second Amendment supersedes all prior negotiations and any course of dealing between the parties with respect to the subject matter hereof. This Second Amendment shall be binding upon the Company and its successors and assigns, and shall inure to the benefit of, and be enforceable by, Bank and each of its successors and assigns. The Reimbursement Agreement, as amended hereby, is in full force and e ffect and, as so amended, is hereby ratified and reaffirmed in its entirety. The Company acknowledges and agrees on the date hereof that the Reimbursement Agreement (as amended by this Second Amendment), the Collateral Lease Assignment, the Pledge Agreement, the Agency Mortgage and all other Financing Documents to which the Company is a party are in full force and effect, that the Company’s obligations thereunder and under this Second Amendment are its legal valid and binding obligations enforceable against it in accordance with the terms thereof and hereof, subject to bankruptcy, insolvency, and other similar laws affecting creditors’ rights generally, and it has no defense, whether legal or equitable, setoff or counterclaim to the payment and performance of such obligations.


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C. The execution, delivery and effectiveness of this Second Amendment shall not operate as a waiver of any right, power or remedy of Bank under the Reimbursement Agreement, nor constitute a waiver of any provision of the Reimbursement Agreement.

6. Costs and Expenses. The Company agrees to pay on demand all costs and expenses of Bank in connection with the preparation, negotiation, administration, execution and delivery of this Second Amendment and the other documents related hereto, including the reasonable fees, charges and disbursements of counsel for Bank.

7. Governing Law. Pursuant to Section 5-1401 of the New York General Obligations Law, the laws of the State of New York shall govern the validity, construction, enforcement and interpretation of this Second Amendment in whole without regard to any rules of conflicts-of-laws that would require the application of the laws of any jurisdiction other than the State of New York.

8. Headings. Section headings in this Second Amendment are included herein for convenience of reference only and shall not limit or otherwise affect the meanings of this Second Amendment or be used to construe its provisions.

9. Execution in Counterparts. This Second Amendment may be executed in any number of counterparts and by the different parties hereto on separate counterparts, each of which shall be deemed to be an original, and all of which taken together shall constitute one and the same Second Amendment, regardless of whether or not the execution by all parties shall appear on any single counterpart. Delivery of an executed counterpart of a signature page to this Second Amendment by telec opier shall be effective as delivery of a manually executed counterpart of this Second Amendment.


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SERVOTRONICS, INC.

By: /s/ Lee D. Burns

Lee D. Burns

Treasurer and Chief Financial

Officer

TSV ELMA, INC.

By: /s/ Lee D. Burns

Lee D. Burns

Treasurer and Chief Financial

Officer

FLEET NATIONAL BANK,

A Bank of America company

By: /s/ Colleen M. O’Brien

Colleen M. O’Brien

Vice President


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Exhibit 4.2(C)

STATE OF NEW YORK	)
	) SS.:
COUNTY OF ERIE	)

		/s/George F. Bellows
		Notary Public
		George F. Bellows
		Notary Public, State of New York
		Qualified in Erie County
		My Commission Expires 04/14/2006
STATE OF NEW YORK	)
	) SS.:
COUNTY OF ERIE	)

	/s/Lynn M. Kisker
	Notary Public
	Lynn M. Kisker
	Notary Public, State of New York
	Qualified in Erie County
	My Commission Expires 04/11/2006

- 7 -

EX-10.A.2 4 extenarwo.htm EX10A2 Agreement

Exhibit 10(A)(2)

Servotronics, Inc. and Subsidiaries

August 3, 2004

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, May 1, 1999, May 1, 2000, May 1, 2001, July 3, 2001, May 1, 2002, July 3, 2002, May 1, 2003, July 3, 2003 and May 1, 2004 (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 2, 2004) to amend Paragraph 1 of the Agreement to delete “September 30, 2008” and insert in its place “September 30, 2009”.

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.A.3 5 extenathree.htm EX10.A.3 agreement

Exhibit 10(A)(3)

Servotronics, Inc. and Subsidiaries

As of May 1, 2004

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, May 1, 1999, May 1, 2000, May 1, 2001 July 3, 2001, May 1, 2002, July 3, 2002, May 1, 2003 and July 3, 2003 (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 2, 2004) to amend Paragraph 3 of the Agreement to delete “$363,995.00” and insert in its place “$382,194.00”.

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-23 6 extwentythree.htm EX 23 Exhibit 23

Exhibit 23

CONSENT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

We hereby consent to the incorporation by reference in the Registration Statement (No. 333-104464) of Servotronics, Inc. on Form S-8 of our report dated March 31, 2005 relating to the consolidated balance sheet of Servotronics, Inc. and Subsidiaries as of December 31, 2004, and the related consolidated statements of operations and cash flows for the years ended December 31, 2004 and 2003, which report appears in the December 31, 2004 annual report on Form 10-KSB of Servotronics, Inc.

PricewaterhouseCoopers LLP

Buffalo, New York

March 31, 2005

EX-31.1 7 certification.htm EX 31.1 Exhibit 31.1

Exhibit 31.1

CERTIFICATION

I, Lee D. Burns, certify that:

I have reviewed this annual report on Form 10-KSB of Servotronics, Inc.;

Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the small business issuer as of, and for, the periods presented in this report;

The small business issuer’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) for the small business issuer and have:

Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the small business issuer, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

Evaluated the effectiveness of the small business issuer’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

Disclosed in this report any change in the small business issuer’s internal control over financial reporting that occurred during the small business issuer’s most recent fiscal quarter (the small business issuer’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the small business issuer’s internal control over financial reporting; and

The small business issuer’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the small business issuer’s auditors and the audit committee of the small business issuer’s board of directors (or persons performing the equivalent functions):

All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the small business issuer’s ability to record, process, summarize and report financial information; and

Any fraud, whether or not material, that involves management or other employees who have a significant role in the small business issuer’s internal control over financial reporting.

Date: March 31, 2005

/s/ Lee D. Burns, Chief Financial Officer

Lee D. Burns

Chief Financial Officer

EX-31.2 8 exhibitthirtyonetwo.htm EX 31.2 Exhibit 31.2

Exhibit 31.2

CERTIFICATION

I, Nicholas D. Trbovich, certify that:

I have reviewed this annual report on Form 10-KSB of Servotronics, Inc.;

Any fraud, whether or not material, that involves management or other employees who have a significant role in the small business issuer’s internal control over financial reporting.

Date: March 31, 2005

/s/Nicholas D. Trbovich, Chief Executive Officer

Nicholas D. Trbovich

Chief Executive Officer

EX-10.A.4 9 extenafour.htm EX 10A4 Employmenbt Agreement

Exhibit 10(A)(4)

EMPLOYMENT AGREEMENT

THIS AGREEMENT (“Agreement”) dated December 8, 2004 is made by and between SERVOTRONICS, INC. (“Employer”) and NICHOLAS D. TRBOVICH, JR. (“Employee”) .

W I T N E S S E T H

WHEREAS, the Board of Directors of Employer believes it to be in the best interests of Employer and its shareholders to assure the Employee’s continued service to Employer, and Employee agrees to continue in the service of Employer under the terms set forth below;

NOW, THEREFORE, in consideration of his continued employment by Employer and other good and valuable consideration and intending to be legally bound, Employee hereby agrees to be employed by Employer, upon the following terms and conditions:

1. Employer hereby employs Employee and Employee hereby accepts such employment for a four year term extending to and including December 7, 2008, on the terms and conditions hereinafter set forth. When one year remains on the original or any extended term of this Agreement, the term of this Agreement will be automatically extended for one additional year beyond its then expiration date unless either party previously has notified the other in writing that the term will not be extended beyond that expiration date. If Employer elects pursuant to this para-graph not to extend this Agreement, Employee shall be entitled to a severance payment in an amount equivalent to n ine (9) months' salary and benefits at the rate in effect at the time of termination. Such amount shall be paid within 30 days following the date of expiration of this Agreement under this paragraph.

2. Employee shall perform the duties and functions of Vice President of Employer, which duties and functions will be similar to and generally consistent with those Employee is performing for Employer at the date of this Agreement.

3. Subject to the provisions of paragraphs 5, 6 and 12 of this Agreement, Employer shall pay and Employee shall accept as full compensation for all services rendered hereunder a minimum annual salary of $175,000.00, or such greater amount as may be hereafter fixed by the Board, payable in equal installments every two weeks.

4. Employer will reimburse Employee for all reasonable expenses incurred in the performance of his services hereunder.

5. In addition to the compensation provided to Employee under paragraph 3 of this Agreement, Employee shall be entitled to participate in all employee benefit plans, including without limitation stock options, profit sharing, pension, bonus, participation, extra compensation, disability or deferred compensation plans, group insurance or other benefits or arrangements, to at least the same extent as do Employer's other senior executive officers, except as to any plan as to which Employee has specifically consented in writing to his exclusion therefrom. In its discretion the Board may grant Employee benefits in addition to or greater than those enumerated above.

6. Employment under this Agreement shall terminate prior to the expiration of its term or any extended term upon the death or total disability of Employee.

“Total disability” is Employee's inability to substantially perform his duties and obligations under this Agreement for a consecutive period of four months by reason of illness or physical or mental impairment. If either party asserts that total disability has occurred and the other party disputes that assertion, Employer and Employee shall submit the dispute (for a written decision as described below) to a physician jointly selected by them who (i) is licensed to practice in New York, (ii) has professional experience in the area or branch of medicine related to the cause of the claimed disability, (iii) has rendered no professional services to or on behalf of either party within the two prior years and (iv) is not a shareholder, officer, director or employee of, or in a business relationship with, Em ployer or Employee. Employer shall pay all expenses incurred by both parties to resolve the dispute in this manner. After making such examinations and investigations as he shall deem necessary, that physician shall make his decision in writing, and the decision shall be given to both Employer and Employee in accordance with paragraph 18. Neither party shall contest the physician's decision, which shall be final and conclusive, except for fraud. If the physician decides that total disability has not occurred, this Agreement and Employee's employment hereunder shall continue as if no dispute had occurred.

Termination of employment shall be effective upon Employee's death. Termination of Employment for total disability shall be effective five business days after either party has given written notice to the other of the existence of total disability unless, before the expiration of that five-day period, the party receiving notice shall give the other party written notice that he or it disputes the existence of total disability; if the notice of dispute is so given, termination of employment will occur when the physician gives notice to both parties of his decision in accordance with paragraph 18.

In the event of termination of employment due to Employee's total disability or death, Employer shall pay to the Employee, or in the event of Employee's death, to Employee's designated beneficiary, or if none, to his estate, compensation during the remainder of the term or extended term of this Agreement at the rate of 50% of the total compensation in effect under paragraphs 3 and 5 of this Agreement immediately prior to the termination. The foregoing payment shall be in lieu of the 9-month severance payment required by reason of termination of employment pursuant to paragraph 1 of this Agreement.

7. Nothing contained herein shall deprive Employee of, or limit his entitlement to, any rights to pensions or other retirement payments, to stock options or other rights with respect to Employer's securities or to any other benefits granted or to be granted to Employee by Employer, whether or not such payments, options, rights or benefits are referred to in this Agreement, except that the disability payment provided in paragraph 6 and the severance payment in paragraph 13 shall be in lieu of the 9 month severance payment provided in paragraph 1.


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8. Employee agrees that from and after the date of this Agreement and during the term hereof he will not, unless acting as an officer or employee of Employer or with the prior written consent of Employer, 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 Employer or otherwise engage directly or indirectly in competition with Employer. Employee acknowledges that the remedy at law for any breach by him of the foregoing will be inadequate and that Employer shall be entitled to injunctive relief. Nothing herein contained, however, shall prevent Employee from purchasing for investment 3% or less of any outstanding class of securities of any company whose securities are held by the general public.

9. In consideration of past and future services performed by Employee on behalf of Employer, Employer agrees that it shall have no right to terminate this Agreement, or to terminate any obligation of Employer hereunder, prior to the end of the term or any extension hereof, except for the willful malfeasance of Employee in the performance of his duties hereunder. Any such termination shall be determined by Employer's Board of Directors at a meeting validly held and conducted as provided by Employer's Bylaws and applicable law and shall be subject to Employee's rights set forth in paragraph 5. Employee will be entitled to be heard by the Board of Directors prior to a ny determination under this paragraph, to be advised during the hearing by an attorney of his choice and, if he chooses, to have his attorney be heard by the Board of Directors; Employer will pay the fees and disbursements of Employee's attorney for services rendered in this dispute if the Employee shall be the prevailing party. A decision by the Board of Directors hereunder is not final, but is subject to arbitration under paragraph 17.

10. Employee may terminate his employment hereunder for any one or more of the following reasons: (A) a change in control of Employer (as defined below), (B) a change in the responsibilities, titles or offices of Employee as currently in effect, without the express written consent of Employee, except in connection with the termination of Employee's employment for disability, retirement or pursuant to paragraph 8 above, (C) a relocation of Employee's office or principal place of work without his express written consent to a location more than 50 miles from 1110 Maple Street, P.O. Box 300, Elma, New York, except for required travel on Employer's business to an extent substantially consistent with Employee's business travel practices as currently in effect, or (D) a failure by Employer to comply with any provision of this Agreement which has not been cured within five days after notice of such noncompliance has been given by Employee to Employer. For purposes of this Agreement, a “change in control of Employer” shall mean a change in control of a nature that would be required to be reported in response to Item 5.01 of Form 8-K promulgated under the Securities Exchange Act of 1934, as amended (the “Exchange Act”), or any similar successor provision; provided that, without limitation, such a change in control shall be deemed to have occurred if (X) any “person” (as such term is used in Sections 13(d) and 14(d) of the Exchange Act or any similar successor provision), other than Employee, is or becomes the “beneficial owner” (as defined in Rule 13d-3 under the Exchange Act or any similar successor provision), directly or indirectly, of securities of Employer representing 22% or more of the combined voting power of Employer's then outstanding securities, or (Y) Employee, while living, shall cease to be a director of Employer, unless Employee shall have voluntarily resigned his position on the Board in writing or consented in writing to not be included in the slate of nominees for director proposed by the Board for election at any meeting of the shareholders of Employer at which directors are to be elected, or (Z) if at any time more than one-third of the members of the Board shall be persons who shall have been elected by the shareholders of Employer or appointed by the Board in opposition to Employee’s recommendation and without having received the affirmative vote of Employee either as a shareholder or as a Director.


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11. Any termination of Employee's employment by Employee shall be communicated by written Notice of Termination to Employer. For purposes of this Agreement, a “Notice of Termination” shall mean a notice which shall indicate the specific termination provision or provisions in this Agreement relied upon (although the failure to include in such notice any other termination provision shall not be deemed to be a waiver of such provision). No failure of Employee to exercise his right to terminate this Agreement shall, by reason of lapse of time or otherwise, be deemed to constitute a waiver of such right; and no Notice of Termination in which Employee notifies Employer that he is terminating this Agreement because of a breach of this Agreement by Employer shall be deemed to constitute a waiver by Employee of his right to terminate the Agreement because of a change in control of Employer, notwithstanding that a change in control may have occurred prior to Employee's Notice of Termination.

12. “Date of Termination” shall mean, if Employee's employment is terminated pursuant to paragraph 10 above, the date on which a Notice of Termination is given. The date on which a Notice of Termination is given shall be the date when hand delivered in person to any officer of Employer except Employee or the next business day after deposit thereof in the U.S. mail, postage prepaid, for delivery as registered or certified mail, return receipt requested, addressed to the corporate headquarters of Employer.

13. If (A) Employer shall terminate Employee's employment in breach of this Agreement (it being understood that, without limitation, a breach shall have occurred if a termination pursuant to paragraph 9 hereof is thereafter found upon arbitration pursuant to paragraph 17 to be not justifiable or otherwise improper) or (B) Employee shall terminate his employment for any reason specified in paragraph 10, then

(i) Employer shall pay Employee his full salary and benefits through the Date of Termination at the rate in effect at the time Notice of Termination is given;

(ii) in lieu of any salary payments to Employee for periods subsequent to the Date of Termination and in lieu of the 9 month severance pay provided in paragraph 1, Employer shall pay as severance pay to Employee an amount equal to the product of 2.99 multiplied by a base amount equal to the average annual compensation paid by Employer to Employee which was includible in Employee's gross income for federal income tax purposes for the most recent five taxable years ending before the date on which the change in control of Employer occurs;

(iii) the parties intend that the base amount in the preceding subparagraph (ii) shall be the highest base amount permitted by Section 280G of the Internal Revenue Code of 1986, as amended, or any successor provisions without causing any portion of the severance pay to constitute an “excess parachute payment” thereunder, and if any amendment of Section 280G or any successor provision defines such a base amount so as to permit a greater amount than defined in the preceding sentence, the greater base amount permitted by the amended provision shall be applicable, provided, however, that (1) nothing contained herein shall reduce the severance payment below th e amount resulting from applying the base amount set forth in subparagraph (ii) and (2) this subparagraph (iii) shall not be applicable after September 29, 2008 unless the parties hereto expressly agree in writing to the extension of the applicability of this subparagraph;


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(iv) if termination of Employee's employment arises out of a breach by Employer of this Agreement, Employer shall pay all other damages to which Employee may be entitled as a result of such breach, including but not limited to damages for any and all loss of benefits to Employee under Employer's employee benefit plans which Employee would have received if Employer had not breached this Agreement and had Employee's employment continued for the full term of this Agreement and including all legal fees and expenses incurred by him as a result of such termination.

14. Any payment of Employer to Employee required by paragraph 13 above shall be made in full no later than the next business day following the date on which Notice of Termination is given as determined in paragraph 12 above (the “Payment Date”). Any failure by Employer to make payment in full to Employee on or before the Payment Date of all amounts required to be paid to Employee pursuant to this Agreement shall entitle Employee, in addition to such amounts, to liquidated damages equivalent to the amount of salary and benefits to which Employee would have been entitled pursuant to paragraph 3 of this Agreement (as such paragraph may hereafter be amended) if this Agreement had not been terminated during the period beginning with and including the Payment Date and ending on and including the date on which Employer pays to Employee all sums owing to Employee pursuant to this Agreement.

15. Employee shall not be required to mitigate the amount of any payment provided for in this Agreement by seeking other employment or otherwise.

16. After termination of Employee’s employment hereunder for any reason, Employer shall provide and pay for, at a minimum, the Employee’s Post Employment disability, medical, hospital and other health care benefits and life insurance benefits that are no less than the maximum benefits which were provided to Employee during the term of Employee’s employment and which do not require Employee to assume copay or employee contribution costs greater than he had been required to assume (if any) during that period of his employment when maximum benefits were provided to him. Employer shall pay the cost of all Post Employment Benefits. If Employer is unable t o provide the Post Employment Benefits as part of the plan or plans which provide benefits to other employees of the Employer, it shall create a special or individual plan or plans to provide the benefits to Employee; and if Employer is unable to provide such benefits through a special or individual plan, it shall pay Employee monthly an amount, which will equal the sum of the cost to Employee of his obtaining benefits equivalent to the Post Employment Benefits plus any additional federal and state income tax cost, to Employee of receiving such payments in lieu of Post Employment Benefits.

17. If, by reason of any amendment to the Internal Revenue Code of 1986, as amended, subsequent to December 8, 2004, there may be imposed upon Employee any federal tax in excess of the amount of federal income tax that would otherwise be imposed upon Employee upon the recognition by Employee of any payment by Employer to Employee pursuant to paragraph 13 above as ordinary income of Employee for federal income tax purposes, then Employee, at his sole option, may elect to receive from Employer such lesser amount of severance pay as Employee shall designate in his sole discretion. Such election shall be deemed to have been properly made by Employee if set forth in Emp loyee's Notice of Termination provided to Employer in accordance with paragraph 11 above.


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18. Any controversy, claim or dispute arising out of or relating to this Agreement, including, without limitation, any claim for breach of this Agreement, shall be settled by arbitration in accordance with the Rules of the American Arbitration Association except as otherwise specifically provided in this paragraph. Judgment upon any award rendered by the arbitrators pursuant hereto may be entered in any court having jurisdiction thereof. Either party shall have the right to initiate arbitration proceedings except that (i) no arbitration shall be commenced on a controversy arising under paragraph 9 until a decision has been made by the Board of Directors as provided therein, but Employee may initiate arbitration prior to such a decision if he shall have been terminated without that decision having occurred or if Employer shall have refused to pay the fees and disbursements of Employee's counsel; (ii) paragraph 6 provides the exclusive method of determining a dispute as to whether Employee has total disability, and (iii) Employer must apply to a court having proper jurisdiction to obtain the injunctive relief referred to in paragraph 8. Any arbitration shall take place in the County of Erie, State of New York, unless both parties shall consent to another location. Employer shall pay the costs of the arbitration.

19. Subject to the provisions of paragraph 12 of this Agreement, a notice to a party shall be effectively given to the Employee when hand delivered to the Employee and to the Employer when hand delivered to any officer of Employer except Employee. Notice may also be effectively given on the next business day after deposit in the U.S. mail, postage prepaid, for delivery as registered or certified mail, return receipt requested, addressed as follows:

To Employee, at 28 Tanglewood Drive West, Orchard Park, New York 14127, unless Employee notifies Employer in writing of a new address.

To Employer, at its corporate headquarters. For all purposes of this paragraph and paragraph 11, Employee may assume that the Employer's corporate headquarters is 1110 Maple Street, P.O. Box 300, Elma, New York 14059, unless Employer notifies Employee in writing of a new address.


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20. This Agreement constitutes the entire agreement between the parties with respect to the subject matter hereof and any amendment or modification of this Agreement is without effect unless it is in a writing duly executed by both parties hereto.

21. This Agreement is made in the State of New York and shall be interpreted under the laws of that State.

22. If any term or provision of this Agreement shall be held to be invalid or unenforceable for any reason, such term or provison shall be ineffective to the extent of such invalidity or unenforceability without invalidating the remaining terms and provisions hereof, and this Agreement shall be construed as if such invalid or unenforceable term or provision had not been contained herein.

23. This Agreement shall be binding upon the parties hereto, their successors and assigns; provided, however, neither party shall assign any of its rights hereunder without the prior written consent of the other party hereto. Employer may not transfer, convey or otherwise dispose of all or any substantial part of its assets or business (whether directly or indirectly, by sale, merger, consolidation or otherwise) unless the transferee assumes in writing the obligations of Employer hereunder or Employee in his sole discretion waives in writing compliance with this provision.


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IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of the day and year first above written.

SERVOTRONICS, INC.

[SEAL] By /s/Lee Burns, Secretary and Treasurer__

Lee Burns

Secretary and Treasurer

ATTEST:

/s/ Bernadine E. Kucinski________

/s/ Nicholas D. Trbovich, Jr._______

NICHOLAS D. TRBOVICH, JR.

EX-32.2 10 exhibitthirtytwotwo.htm EX 32.2 Exhibit 32.2

Exhibit 32.2

CERTIFICATION PURSUANT TO

18. U.S.C. SECTION 1350,

AS ADOPTED PURSUANT TO

SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

In connection with the Annual Report of Servotronics, Inc. (the “Company”) on Form 10-KSB for the period ended December 31, 2004 as filed with the Securities and Exchange Commission on the date hereof (the “Report”), I, Nicholas D. Trbovich, Chief Executive Officer of the Company, certify, pursuant to 18 U.S.C. 1350, as adopted pursuant to 906 of the Sarbanes-Oxley Act of 2002, that, to my knowledge:

(1) The Report fully complies with the requirements of section 13(a) or 15(d) of the Securities Exchange Act of 1934; and

(2) The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

/s/Nicholas D. Trbovich, Chief Executive Officer

Nicholas D. Trbovich

Chief Executive Officer

March 31, 2005

EX-32.1 11 exhibitthirtytwoone.htm EX32.1 Exhibit 32.1

Exhibit 32.1

CERTIFICATION PURSUANT TO

18. U.S.C. SECTION 1350,

AS ADOPTED PURSUANT TO

SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

In connection with the Annual Report of Servotronics, Inc. (the “Company”) on Form 10-KSB for the period ended December 31, 2004 as filed with the Securities and Exchange Commission on the date hereof (the “Report”), I, Lee D. Burns, Chief Financial Officer of the Company, certify, pursuant to 18 U.S.C. 1350, as adopted pursuant to 906 of the Sarbanes-Oxley Act of 2002, that, to my knowledge:

(1) The Report fully complies with the requirements of section 13(a) or 15(d) of the Securities Exchange Act of 1934; and

(2) The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

/s/ Lee D. Burns, Chief Financial Officer

Lee D. Burns

Chief Financial Officer

March 31, 2005

-----END PRIVACY-ENHANCED MESSAGE-----

Weighted - Average Assumptions
	December 1,
	2004	2003
Discount rate for benefit obligations	5.75%	6.0%
Discount rate for net periodic pension cost	6.0%	6.5%
Rate of compensation increase	N/A	N/A
Long-term rate of return and expected
long-term return on plan assets	8.0%	8.0%

Accumulated benefit obligation
	December 1,
	2004	2003
Accumulated benefit obligations (ABO)	$437,926	$429,351
Projected benefit obligations (PBO)	$437,926	$429,351
Plan assets	$364,636	$345,256
Excess of ABO over plan assets	$73,290	$84,095


Pension cost and employer contributions
	December 1,
		2004		2003
Net periodic pension cost	$	29,036	$	25,101
Anticipated employer contributions	$	50,491	$	51,364

Estimated future benefit payments
		2004		2003
Plan year 2005	$	24,430	$	22,157
Plan year 2006	$	25,569	$	23,607
Plan year 2007	$	27,164	$	24,791
Plan year 2008	$	27,824	$	26,077
Plan year 2009	$	28,702	$	26,837
Plan years 2010 through 2014	$	147,998	$	141,434