UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
SCHEDULE 14A
Proxy Statement Pursuant to Section 14(a)
of
the Securities Exchange Act of 1934
Filed by the Registrant x
Filed by a Party other than the Registrant ¨
Check the appropriate box:
| ¨ | Preliminary Proxy Statement |
| ¨ | Confidential, for Use of the Commission Only (as permitted by Rule 14a-6(3) (2)) |
| x | Definitive Proxy Statement |
| ¨ | Definitive Additional Materials |
| ¨ | Soliciting Material Pursuant to §240.14a-11(c) or §240.14a-12 |
SERVOTRONICS, INC.
(Name of Registrant as Specified in its Charter)
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
| x | No fee required. |
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| ¨ | Check box if any part of the fee is offset as provided by Exchange Act Rule 0-11(a) (2) and identify the filing for which the offsetting fee was paid previously. Identify the previous filing by registration statement number, or the Form or Schedule and the date of its filing. | |
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1110 Maple Street, P.O. Box 300 – Elma, New York 14059-0300 716-655-5990 Fax 716-655-6012
Kenneth D. Trbovich
Chairman of the Board of Directors and
Chief Executive Officer
April 23, 2018
Dear Fellow Shareholder:
The Annual Meeting of Shareholders will take place on Friday, May 25, 2018 at 2:00 p.m., EDT, at the offices of Bond, Schoeneck & King, PLLC, Avant Building - Suite 900, 200 Delaware Avenue, Buffalo, NY 14202. You are cordially invited to attend. If you wish to attend the meeting in person, you will need to register with us in advance. Please follow the advance registration instructions described on page 1 of the Proxy Statement.
The enclosed Notice of Annual Meeting and Proxy Statement describe the matters to be acted upon during the meeting. To ensure your representation at the meeting, even if you are unable to attend, please sign the enclosed Proxy Card and return it in the postage paid envelope.
If you have any questions in regard to completing your proxy, please call our Corporate Secretary, Bernadine E. Kucinski (716) 655-5990.
Your continued interest and support is very much appreciated.
| Sincerely, | |
 | |
| Kenneth D. Trbovich |
SERVOTRONICS, INC.
1110 Maple Street
P.O. Box 300
Elma, New York 14059
NOTICE OF
2018 ANNUAL SHAREHOLDERS’ MEETING
To the Shareholders:
Notice is hereby given that the 2018 Annual Meeting of the Shareholders of Servotronics, Inc. (the “Company”) will be held at the offices of Bond, Schoeneck & King, PLLC, Avant Building -Suite 900, 200 Delaware Avenue, Buffalo, NY 14202, on Friday, May 25, 2018 at 2:00 p.m., EDT, for the following purposes:
| 1. | To re-elect five Directors to serve until the next Annual Meeting of Shareholders; |
| 2. | To consider and ratify the appointment of Freed Maxick CPAs, P.C. as the Company’s independent registered public accounting firm for the 2018 fiscal year; |
| 3. | To transact such other business as may properly come before the meeting or any adjournments thereof. |
Only shareholders of record at the close of business on March 23, 2018 are entitled to notice of and to vote at the meeting or any adjournments thereof.
 | |
| Kenneth D. Trbovich | |
| Chairman of the Board of Directors and | |
| Chief Executive Officer |
Dated: April 23, 2018
Important notice regarding the availability of Proxy materials for the Annual Meeting of Shareholders to be held on May 25, 2018.
This Proxy statement, form of proxy and the Company’s 2017 Annual Report are available at www.servotronics.com.
| SHAREHOLDERS ARE URGED TO VOTE BY SIGNING, DATING AND MAILING THE ENCLOSED PROXY IN THE ENCLOSED ENVELOPE TO WHICH NO POSTAGE NEED BE AFFIXED IF MAILED IN THE UNITED STATES. |
SERVOTRONICS, INC.
1110 Maple Street
P.O. Box 300
Elma, New York 14059
PROXY STATEMENT
FOR
ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD May 25, 2018
The following information is furnished in connection with the Annual Meeting of Shareholders of Servotronics, Inc. (the “Company”) to be held on May 25, 2018 at 2:00 p.m., EDT, at the offices of Bond, Schoeneck & King, PLLC, Avant Building - Suite 900, 200 Delaware Avenue, Buffalo, NY 14202.
If you would like to attend the Annual Meeting, please pre-register by 11:59 p.m. EDT on Monday, May 21, 2018. You must present valid government-issued photographic identification, such as a driver’s license, to be admitted into the Annual Meeting. If you are a registered shareholder, please indicate that you intend to attend the Annual Meeting by checking the appropriate box on your proxy card. If you hold your shares beneficially, please notify us in writing that you will attend. In your written notification, please include a proof of ownership of our common stock (such as a letter from your broker, bank or other nominee, a photocopy of your current account statement or a copy of your voting card). Please also provide contact information where we can reach you if we have a question about your notification. Send your notification by mail to the Company’s Corporate Secretary, 1110 Maple Street, P.O. Box 300, Elma, New York 14059.
A copy of the Company’s Annual Report to Shareholders for the fiscal year ended December 31, 2017 accompanies this Proxy Statement. Additional copies of the Annual Report, Notice, Proxy Statement and form of proxy may be obtained without charge from the Company’s Corporate Secretary, 1110 Maple Street, P.O. Box 300, Elma, New York 14059. This Proxy Statement and proxy card are first being mailed to shareholders on or about April 23, 2018.
SOLICITATION AND REVOCABILITY OF PROXIES
The enclosed proxy for the Annual Meeting of Shareholders is being solicited by the Directors of the Company. The proxy may be revoked by a shareholder at any time prior to the exercise thereof by filing with the Corporate Secretary of the Company a written revocation or duly executed proxy bearing a later date. The proxy may be revoked by a shareholder attending the meeting, by withdrawing such proxy and voting in person. The cost of soliciting the proxies on the enclosed form will be paid by the Company. In addition to the use of mailings, proxies may be solicited by employees of the Company (who will receive no additional compensation therefor) personally or by telephone or other electronic communications and arrangements may be made with banks, brokerage houses and other institutions, nominees and/or fiduciaries to forward the soliciting material to their principals and to obtain authorization for the execution of proxies. The Company may, upon request, reimburse banks, brokerage houses and other institutions, nominees and fiduciaries for their expenses in forwarding proxy material to their principals.
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VOTING INFORMATION
The record date for determining shares entitled to vote has been fixed at the close of business on March 23, 2018. On such date there were outstanding 2,484,735 shares of common stock of the Company, $.20 par value (“Common Stock”), entitled to one vote each.
In order to conduct the Annual Meeting, the presence, in person or by properly executed proxy, of the holders of a majority (i.e., greater than 50%) of all the votes entitled to be cast at the Annual Meeting is necessary to constitute a quorum. Directors will be elected by a plurality of all the votes cast at the 2018 Annual Meeting with each share being voted for as many individuals as there are Directors to be elected. Ratification of the appointment of Freed Maxick CPAs, P.C. as the Company’s independent registered public accounting firm for the 2018 fiscal year requires the affirmative vote of a majority of the votes cast. Pursuant to SEC rules, shareholder proposals must have been received by February 19, 2018, which date is 45 days before the date (April 5) on which the Company mailed its proxy materials for last year’s annual meeting, to be considered at the 2018 Annual Meeting. At February 19, 2018 the Company had not received notice of any intention to submit any other matter; and, therefore, the named proxies have discretion to vote on any other matter that comes before the meeting.
Shares of Common Stock represented by a properly signed, dated and returned proxy will be treated as present at the meeting for the purposes of determining a quorum. Proxies relating to “street name” shares of Common Stock that are voted by brokers will be counted as shares of Common Stock (i) present for purposes of determining the presence of a quorum and (ii) as having voted in accordance with the directions and statements on the form of proxy.
PROPOSAL 1: ELECTION OF DIRECTORS
The By-Laws of the Company provide that there shall not be less than three Directors not more than nine and that the number of Directors to be elected at the Annual Meeting of Shareholders shall be fixed by the Board of Directors. As of March 22, 2018, the Board of Directors has fixed the number of Directors to be elected at the meeting at five. Each person so elected shall serve until the next Annual Meeting of Shareholders and until his successor is elected and shall have qualified.
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Each nominee is currently serving as a Director of the Company. The Directors believe that all of the nominees are willing and able to serve as Directors of the Company. If any nominee at the time of election is unable or unwilling to serve or is otherwise unavailable for election, the enclosed proxy will be voted in accordance with the best judgment of the person or persons voting the proxy.
The following paragraphs set forth certain information regarding the nominees for election to the Company’s Board of Directors, including the specific experience, qualifications, attributes or skills that led to the conclusion by the Board of Directors that such person should serve as a Director of the Company. The nominees for election to the Company’s Board of Directors are Jason T. Bear, age 36, Edward C. Cosgrove, Esq., age 83, Lucion P. Gygax, age 47, Christopher M. Marks, age 53, and Kenneth D. Trbovich, age 43.
The Board would like to acknowledge the contributions of Dr. Nicholas D. Trbovich to the Board and the Company. Dr. Trbovich died unexpectedly on August 8, 2017. He founded the Company in 1959 and led the Company as its Chairman and CEO for almost 58 years.
Jason T. Bear has served as a Director since 2017 and is a member of the Independent Directors Committee. Mr. Bear is the Founder, President, and CEO of Full-Throttle Communications, Inc., a marketing and public relations firm that represents a wide variety of national manufacturing brands. His experience ranges from aerospace and tactical manufacturers that service military government entities to outdoor sporting brands. Prior to founding Full Throttle Communications in 2007, Mr. Bear held the position of Marketing Director at Bear Enthusiast Marketing Group and also served as an account manager at Kodiak Communications, Inc. where he oversaw a number of client accounts providing strategic marketing direction. Mr. Bear’s marketing experience includes the support of signature brands such as Wiley X, John Deere, Harley-Davidson, and Remington. His leadership skills, marketing acumen, and aptitude for negotiation qualify him to be a Company Director.
Edward C. Cosgrove, Esq. has served as Director since 2012. Mr. Cosgrove is a prominent long-term member of the Western New York jurisprudence community. He earned a Bachelor of Arts Degree from the University of Notre Dame in 1956 and a Doctor of Laws Degree from Georgetown University Law School in 1959. His wide range of experience has included years as a Special Agent, Federal Bureau of Investigation (1960 – 1962), Attorney at Law (1963 – 1973) and District Attorney of Erie County, NY (1974 – 1981). From 1982 to the present his practice includes Civil and Criminal Litigation, management of legal crises and representation of local, national and international corporations, insurance companies and professionals before State Licensing Boards with the Cosgrove Law Firm. Mr. Cosgrove brings extensive experience as an active member of professional and charitable organizations. Mr. Cosgrove is eminently qualified to be a Director of Servotronics, Inc. because of his wide range of experience, excellent reputation and demonstrated competency in addressing complex challenges leading to significant opportunities and conclusions.
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Lucion P. Gygax, an author, entrepreneur and Major in the Army National Guard, was appointed to the Board of Directors in July 2015 and serves as Chairman of the Company’s Independent Directors Committee and a member of the Company’s Audit Committee. A decorated military officer, Mr. Gygax is the recipient of the Bronze Star and the Meritorious Service Medal, among other awards, and is a veteran of the Gulf War and the Iraq War. Mr. Gygax brings a diverse background to the board with experience in supply chain management, budget management, human resources and executive leadership. Mr. Gygax is the principal owner and managing partner of an event management company and is the Executive Officer of the Army National Guard’s 749th Combat Sustainment Support Battalion where he serves as chief of staff for a battalion of 600 personnel. He has over 25 years of experience in the United States Armed Forces, including prior leadership assignments as a Non-commissioned Officer, Battalion Support Operations Officer, Battalion Human Resources Officer, Battalion Operations Officer, Brigade Transportation Officer, Armor Company Commander and Recruiting Company Commander. Mr. Gygax’s leadership experience and achievements qualify him as a Company Director.
Christopher M. Marks was appointed to the Board of Directors in July 2016 and serves as Chairman of the Company’s Audit Committee and member of the Independent Directors Committee. Mr. Marks brings over 25 years of financial planning and analysis experience to the Company as well as a background in corporate law and governance. He holds a Bachelor’s Degree in Business from Villanova University, a Master of Business Administration from St. Bonaventure University, and a Juris Doctorate with honors from the State University of New York at Buffalo. His extensive experience includes practicing commercial and corporate law at Phillips Lytle, LLP in Buffalo, NY and several years working for the auditing and accounting firm Price Waterhouse in New York City. Mr. Marks is a partner in the financial planning company Jensen, Marks, Langer & Vance (formerly Buffalo Financial Associates), where he provides financial planning advice and investment management services. Additionally, Mr. Marks is a member of the New York State and Erie County Bar Associations, is a past president of the Buffalo Chapter of the Society of Financial Service Professionals, and served on various boards and advisory committees for privately held companies, charities, and educational institutions. Mr. Marks’ experience, accomplishments, and financial specialization qualifies him as a Company Director.
Kenneth D. Trbovich has been Chairman of the Board and Chief Executive Officer since November 2017 and President of the Company since 2012. Mr. Trbovich has served as a Director since 2012. Mr. Trbovich is also President and CEO of the Company’s subsidiary, The Ontario Knife Company (OKC). Mr. Trbovich initially joined the Company in 1993 and held positions of increasing responsibilities that led to his current roles. He is listed as co-inventor on multiple patents or patents-pending used by the Company and has extensive project management and business development experience, coordinating Company business in the United States, Taiwan, Singapore, Australia, Germany, England, and other locations around the world. In addition to his positions within the Company, Mr. Trbovich represents OKC on the Board of Regents of the American Knife and Tool Institute, serves on the Board of Trustees for Medaille College, and is a trustee for a private charitable foundation. Mr. Trbovich is a member of the National Association of Corporate Directors and he also maintains Company relationships with industry associations including the Buffalo Niagara Partnership, the National Association of Manufacturers, and the Aerospace Industry Association. He holds undergraduate degrees from Medaille College and Skidmore College in addition to certificates from the State University of New York at Buffalo’s School of Management and the University of Rochester’s Simon School of Business. Mr. Trbovich’s achievements, executive experience, established industry associations, and long tenure with the Company highly qualifies him as a Company Director.
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The Directors recommend a vote FOR the five nominees listed above. Unless instructed otherwise, proxies will be voted FOR these nominees.
CORPORATE GOVERNANCE AND BOARD MATTERS
Independent Directors
Under the NYSE MKT listing standards, at least 50% of the Company’s directors must meet the test of “independence” as defined by the NYSE MKT. The NYSE MKT standards provide that, to qualify as an “independent” director, in addition to satisfying certain bright-line criteria, the Board of Directors must affirmatively determine that a director has no relationship with the Company that would interfere with such person’s ability to exercise independent judgment as a member of the Company’s Board.
The Board of Directors has determined that each current director and nominee is independent other than Kenneth D. Trbovich, the Company’s Chairman of the Board and Chief Executive Officer, and Mr. Edward C. Cosgrove, whose firm has provided legal services to the Company and its subsidiaries. In determining that Mr. Bear was “independent”, the Board considered the fact that the Company and its subsidiaries paid approximately $33,100 and $70,600 to Full-Throttle Communications, Inc. in 2017 and 2016, respectively.
Committees and Meeting Data
The Board of Directors has a standing Audit Committee and Independent Directors Committee. Each member of each of these committees is “independent” as that term is defined in the NYSE MKT listing standards. The Audit Committee consists of Messrs. Gygax and Marks with Mr. Marks chairing the Committee and being designated as the Company’s “Audit Committee financial expert”. The Audit Committee meets with the Company’s Independent Auditors and reviews with them matters relating to corporate financial reporting and accounting procedures and policies, the adequacy of financial, accounting and operating controls, the scope of the audit and the results of the audit. The Audit Committee is also charged with the responsibility of submitting to the Board of Directors any recommendations it may have from time to time with respect to financial reporting and accounting practices, policies and financial accounting and operation controls and safeguards.
The Independent Directors Committee consists of Messrs. Gygax, Bear and Marks with Mr. Gygax chairing the Committee. The Independent Directors Committee is responsible for reviewing and recommending appropriate executive compensation policy and determining the compensation of the Company’s Directors and Executive Officers. The responsibilities of the Independent Directors Committee also include assessing Board membership needs and identifying, screening, recruiting, presenting director candidates to the Board, implementing policies regarding corporate governance matters and making recommendations regarding committee memberships.
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Pursuant to Board resolutions, the full Board of Directors approves/ratifies all Director nominees after they are determined by the Independent Directors Committee. See “Director Nominating Process” below. Additionally, Director and Executive Officer compensation determinations are subsequently submitted to the full Board of Directors for approval/ ratification.
During the fiscal year ended December 31, 2017, the Audit Committee met 4 times, the Independent Directors Committee met 4 times and the Board of Directors met 4 times. No Director attended less than 100% of the meetings held during the period that each individual served as a Director. Each Director is encouraged to attend the Annual Meeting of Shareholders. In 2017, the Annual Meeting of Shareholders was attended by five of the six Directors then in or elected to office.
Code of Ethics
The Company has adopted a Code of Ethics and Business Conduct (the “Code”) that applies to all Directors, Officers and employees of the Company as required by the listing standards of the NYSE MKT. 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 NYSE MKT.
The Company also has a Whistleblower Policy, which is incorporated into the Code of Ethics and Business Conduct that requires Directors, Executive Officers and employees to comply with appropriate accounting and internal controls and establishes procedures to report any perceived wrongdoing, questionable accounting or auditing matters in a confidential and anonymous manner.
Report of the Audit Committee of the Board of Directors
The following Report of the Audit Committee does not constitute soliciting material and should not be deemed filed or incorporated by reference into any other filing by the Company under the Securities Act of 1933 or the Securities Exchange Act of 1934 except to the extent the Company specifically incorporates this Report by reference therein.
The Audit Committee serves as the representative of the Board of Directors for general oversight of the Company’s financial accounting and reporting, systems of internal control, audit process and monitoring compliance with standards of business conduct. The Audit Committee operates under a written charter which is available on the Company’s website at www.servotronics.com. Management of the Company has primary responsibility for preparing financial statements of the Company as well as the Company’s financial reporting process. Freed Maxick CPAs, P.C. (“Freed Maxick”), acting as Independent Auditors, is responsible for expressing an opinion on the conformity of the Company’s audited financial statements with U.S.generally accepted accounting principles.
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In this context, the Audit Committee hereby reports as follows:
| 1. | The Audit Committee has reviewed and discussed the audited financial statements for fiscal year 2017 with the Company’s Management. |
| 2. | The Audit Committee has discussed with the Independent Auditors the matters required to be discussed by Auditing Standard No. 1301 Communications with Audit Committees, as adopted by the Public Company Accounting Oversight Board (PCAOB) and other matters required by the Charter of the Audit Committee. |
| 3. | The Audit Committee has received the written disclosures and the letter from the Independent Auditors required by PCAOB Ethics and Independence Rule 3526, Communication with Audit Committees Concerning Independence, and has discussed with Freed Maxick the matter of that firm’s independence. |
| 4. | Based on the review and discussion referred to in paragraphs (1) through (3) above, the Audit Committee approved that the audited financial statements be included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2017, for filing with the Securities and Exchange Commission. |
Each member of the Audit Committee is independent as defined under the listing standards of the NYSE MKT.
| AUDIT COMMITTEE | |
| Christopher M. Marks, Chairman | |
| Lucion P. Gygax |
Leadership Structure
Kenneth D. Trbovich is the Company’s Chairman of the Board and Chief Executive Officer. The Company believes that having one person hold the roles of Chairman of the Board and Chief Executive Officer is the most effective way at this time to organize the leadership structure of the Board of Directors. Having one person hold the roles of Chairman of the Board and Chief Executive Officer promotes unified leadership and direction for the Board and executive management and it allows for a single and clear focus for the chain of command to execute the Company’s strategic initiatives and business plans. Because Mr. Trbovich is primarily responsible for managing the Company’s day-to-day operations and strategic plan implementations, he is in the best position to chair meetings of the Board of Directors where key business and strategic issues are discussed.
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Another component of our leadership structure is the active role played by non- management and independent Directors in overseeing the Company’s business, both at the Board and Committee level. The Board believes that the combined role of Chairman of the Board and Chief Executive Officer coupled with the existence of the independent Directors is the appropriate leadership structure for the Board of Directors at this time. This structure provides sufficient independent oversight while avoiding unnecessary confusion regarding the Board’s oversight responsibilities and the day-to-day management of the Company’s business operations and strategic plan implementations. The Independent Directors Committee periodically reviews this structure to assess its effectiveness on a continuing basis.
Board Oversight of Risk Management
The Board of Directors oversees the Company’s risk management process. This oversight is primarily accomplished through the Board’s committees and management’s reporting processes. The Company does not have a formal risk committee; however, the Audit Committee focuses on risk related to accounting, internal controls and financial and tax reporting. The Audit Committee also assesses economic and business risks and monitors compliance with ethical standards. The Independent Directors Committee identifies and oversees risks associated with the Company’s executive compensation policies and practices, Director independence, related party transactions and the implementation of corporate governance policies.
Director Nominating Process
The determination of the individuals to be nominated for the Board of Directors is made by the Independent Directors Committee. This determination is then subsequently submitted to the full Board of Directors for approval/ratification.
The Board has not adopted specific minimum criteria for director nominees. Nominees are identified by first evaluating the current members of the Board willing to continue in service. Current members of the Board with skills and experience that are relevant to the Company’s business and who are willing to continue in service are considered for re-nomination. If any member of the Board does not wish to continue in service, the Board first considers the appropriateness of the size of the Board and then considers factors that it deems are in the best interests of the Company and its shareholders in identifying and evaluating a new nominee. Consistent with the concept of diversity, the Company recognizes the value of having a Board that encompasses a broad range of skills, expertise, contacts, industry knowledge and diversity of opinion.
The Board will consider director nominees from any reasonable source, including nominees suggested by incumbent Board Members and Management as well as Shareholder recommendations tendered in accordance with the Company’s advance notice provisions. The Company does not currently employ an executive search firm, or pay a fee to any other third party, to locate qualified candidates for director positions.
Directors’ Compensation
The Company’s Non-employee Director Compensation Policy was revised effective October 1, 2015. The Board amended and restated the policy on June 10, 2016. Under that policy, Non-employee Directors are paid an annual cash retainer of $50,000, payable in twelve monthly installments, plus reimbursement of actual expenses for attendance at Board or Committee meetings. The Chairperson of the Audit Committee and the Independent Directors Committee are also paid a $10,000 annual cash retainer, payable in twelve monthly installments.
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The following table contains information with respect to the total compensation paid to the Non-employee Directors for the year ended December 31, 2017.
| Fees Earned or | ||||
| Name | Paid in Cash | |||
| Edward C. Cosgrove | $ | 54,167 | ||
| Lucion P. Gygax | $ | 65,000 | ||
| Christopher M. Marks | $ | 63,750 | ||
| Jason T. Bear | $ | 29,167 | ||
Shareholder Communications with the Board of Directors
Shareholders who wish to contact the Board of Directors or any of its members may do so by addressing their written correspondence to Board of Directors, 1110 Maple Street, P.O. Box 300, Elma, New York 14059. Correspondence directed to an individual Board member will be referred, if appropriate, to that member. Correspondence not directed to a particular Board member will be referred, if appropriate, to the Chairman of the Independent Directors Committee.
EXECUTIVE OFFICERS
The following is a listing of the Company’s current Executive Officers:
| Position with the Company and | ||||
| Principal Occupation | ||||
| Name | Age | and Business Experience for Past Five Years | ||
| Kenneth D. Trbovich | 43 |
Chairman of the Board of Directors and Chief Executive Officer of the Company since November 2017; President of the Company since September 2012; Director of the Company since November 2012. | ||
| Lisa F. Bencel | 60 | Chief Financial Officer since January 2017; Global Controller and Treasurer with kgb, a privately held information services company. | ||
| Salvatore SanFilippo | 69 | Senior Vice President of the Company since 2010. | ||
| James C. Takacs | 52 | Senior Vice President of the Company since September 21, 2016; Vice President of the Company for more than five years prior to September 2016. |
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EXECUTIVE COMPENSATION
The Summary Compensation Table quantifies the amount or value of the different forms of compensation earned by or awarded to the Company’s current Chief Executive Officer, the next two most highly compensated officers of the Company and the Company’s former Chief Executive Officer who died in August 2017 (the “Named Officers”) in fiscal 2017 and 2016 and provides a dollar amount for total compensation. Descriptions of the material terms of the employment agreements with certain Named Officers are provided under “Employment Agreements” below.
The Compensation Process Overview
The Independent Directors Committee functions as the compensation committee of the Board and determines the compensation of the Company’s Executive Officers in accordance with the NYSE MKT listing standards. Compensation of the Company’s Executive Officers is recommended to the Board for determination by the Independent Directors Committee with the Chief Executive Officer and President playing a supporting role in the compensation-setting process for the Company’s other Executive Officers. The most significant aspects of management’s role are evaluating employee performance, recommending business performance targets and objectives, and recommending salary levels and other compensation awards, however final compensation determinations for all Executive Officers are approved by the Board upon the recommendation of the Independent Directors Committee.
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2017 Base Salary
The Independent Directors Committee seeks to provide the Company’s Executive Officers with a level of assured cash compensation in the form of base salary that is commensurate with their professional status, accomplishments and geographic location. The base salaries are reviewed annually by the Independent Directors Committee and are adjusted from time to time to recognize competitive market data, the officer’s level of responsibility, outstanding individual performance, promotions and internal equity considerations. For the year ended December 31, 2017, base salary paid to each Named Officer is as set forth in the Summary Compensation Table. Mr. Trbovich’s base salary was adjusted in August 2017 to reflect his increased responsibilities resulting from the death of the Company’s founder, Chairman and Chief Executive Officer, Dr. Nicholas D. Trbovich.
2017 Bonus
The Company also made cash awards to the Executive Officers and other employees that are not part of any pre-established, performance-based criteria. Awards of this type are completely discretionary and subjectively determined by the Board upon the recommendation of the Independent Directors Committee at the time they are awarded. In the event this type of cash award is made, it is reflected in the “Summary Compensation Table” under a separate column entitled “Bonus”.
Equity Awards
Pursuant to the 2012 Long-Term Incentive Plan, as approved by the Company’s shareholders, the Independent Directors Committee may grant equity awards, the vesting of which may be based on the passage of time, achievement of performance conditions or vesting conditions otherwise determined by the Independent Directors Committee. No equity awards were granted to the Executive Officers in 2017.
Summary Compensation Table
The following table contains information with respect to the annual compensation for the years ended December 31, 2017 and 2016 for the Named Officers.
| All Other | ||||||||||||||||||||
| Name and Principle Position | Year | Salary | Bonus | Compensation (1) | Total | |||||||||||||||
| Kenneth D. Trbovich | 2017 | $ | 449,943 | $ | 110,000 | $ | 44,330 | $ | 604,273 | |||||||||||
| Chairman and CEO | 2016 | $ | 382,011 | $ | 61,000 | $ | 30,953 | $ | 473,964 | |||||||||||
| Lisa F. Bencel | 2017 | $ | 180,289 | $ | 40,000 | $ | 27,881 | $ | 248,170 | |||||||||||
| CFO and Treasurer (2) | ||||||||||||||||||||
| Salvatore SanFilippo | 2017 | $ | 199,472 | $ | 35,000 | $ | 36,361 | $ | 270,833 | |||||||||||
| Senior Vice President | 2016 | $ | 190,045 | $ | 27,000 | $ | 27,675 | $ | 244,720 | |||||||||||
| Dr. Nicholas D. Trbovich | 2017 | $ | 517,545 | - | $ | 547,781 | $ | 1,065,327 | ||||||||||||
| Former Chairman and CEO (3) | 2016 | $ | 580,786 | $ | 73,000 | $ | 146,096 | $ | 799,882 | |||||||||||
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| (1) | All Other Compensation for 2017 includes (i) $5,795 for Mr. Trbovich and $5,785 for Mr. SanFilippo in connection with the allocation of shares of Common Stock under the Servotronics Inc. Employee Stock Ownership Plan (“ESOP”) valued as of the closing price on November 30, 2017 (the date of allocation); (ii) $2,040, $1,230, $1,469 and $5,491 for Mr. Trbovich, Ms. Bencel, Mr. SanFilippo and Dr. Trbovich, respectively, for life insurance; (iii) $29,962, $26,651, $28,544 and $16,803 for Mr. Trbovich, Ms. Bencel, Mr. SanFilippo and Dr. Trbovich, respectively, for health, dental and vision insurance premiums and the reimbursement of medical/ health related expenses not covered under the Company’s health insurance plans; (iv) $4,283 for personal use of a company car for Mr. Trbovich; (v) $2,250 Mr. Trbovich, and $563 for Mr. SanFilippo in dividends on unvested restricted stock awards that were previously granted in 2016. |
| (2) | Ms. Bencel was hired as Chief Financial Officer of the Company on January 16, 2017 and was not a Named Officer for the year ended December 31, 2016. |
| (3) | On August 8, 2017, Dr. Trbovich died unexpectedly. The amount included in the “All Other Compensation” column for 2017 includes the full amount of the death benefit that is owed to his Estate pursuant to the terms of Dr. Trbovich’s employment agreement. $121,477 was paid in 2017 and the remainder of $330,256 will be paid in 2018. |
Employment Agreements
Mr. Trbovich has an employment agreement with the Company pursuant to which he is entitled to receive minimum salary compensation as set forth in the agreement, or such greater amount as the Company’s Board of Directors may approve/ratify. On May 12, 2017 the Board of Directors approved a base salary for Mr. Trbovich of $524,412, per annum. In the event of death or total disability during the term of the employment agreement, he or his estate is entitled to receive 50% of the compensation he is receiving from the Company at the time of his death or disability during the remainder of the term of the employment agreement. Also, in the event of (i) a breach of the agreement by the Company, (ii) a change in control of the Company, as defined, or (iii) a change in the responsibilities, positions or geographic office location, he is entitled to terminate the agreement and receive a payment of 2.99 times their average annual compensation from the Company for the preceding five years. If this provision is invoked and the Company makes the required payment, the Company will be relieved of any further salary liability under the agreement notwithstanding the number of years covered by the agreement prior to termination. The term of the agreement extends to and includes December 31, 2019 provided however, the term of the agreement will be automatically extended for one additional year beyond its then expiration date unless either party has notified the other in writing that the term will not be extended. If the Company elects not to extend the agreement, he will be entitled to a severance payment equal to nine months’ salary and benefits.
The Company provides certain individual and spousal post-retirement health and life insurance benefits for Kenneth Trbovich. Upon retirement and after attaining at least the age of 65, the Company will pay for the retired executives’ and dependents’ health benefits and will continue the Company-provided life insurance offered at the time of retirement. The retiree’s health insurance benefits ceases upon the death of the retired executive. The actuarially calculated future obligation of the benefits at December 31, 2017 and 2016 for Kenneth Trbovich is $434,669 and $208,561 respectively.
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Dr.
Trbovich had an employment agreement with the Company at the time of his death. His estate will receive 50% of the compensation
he was receiving at the time of his death through December 31, 2018. Additionally all unvested time-based restricted stock awards
vested upon his death.
Outstanding Equity Awards at 2017 Fiscal Year End
The following table shows all outstanding equity awards held by the Named Officers as of December 31, 2017.
| Stock Awards | ||||||||
| Named Officer | Number of shares or units that have not vested (#) | Market value of shares or units of stock that have not vested($)(1) | ||||||
| Kenneth D. Trbovich | 15,000 | (2) | $ | 156,000 | ||||
| Salvatore SanFilippo | 3,750 | (3) | $ | 39,000 | ||||
| Lisa F. Bencel | - | - | ||||||
| Dr. Nicholas D. Trbovich | - | - | ||||||
| (1) | Value is based on the December 29, 2017 average price of the Company’s common stock of $10.40, as reported on the NYSE MKT. |
| (2) | Mr. Trbovich’s restricted stock holdings as of December 31, 2017 vested January 1, 2018. |
| (3) | Mr. SanFilippo’s restricted stock holdings as of December 31, 2017 vested January 1, 2018. |
Certain Relationships and Related Transactions
Kenneth D. Trbovich, Chairman of the Board and Chief Executive Officer, is an inventor or co-inventor of certain issued patents and patent pending applications that are used in the business of a subsidiary of the Company. The patents have been and are currently used by the subject subsidiary on a royalty-free basis with Mr. Trbovich’s consent.
The Company incurred legal fees and disbursements of approximately $205,000 in 2017 for services provided by a law firm that is owned by Edward C. Cosgrove, Director of the Company.
| -13- |
Proposed transactions between the Company and a related person are submitted to the Independent Directors Committee for their determinations. In making its determinations, the Independent Directors Committee consider, among other factors, whether the proposed transaction is in the Company’s best interest and is on terms no less favorable to the Company than terms generally available from an unaffiliated third-party under the same or similar circumstances and the extent of the related person’s interest in the transaction. Also, the Independent Directors Committee may, at its discretion, request an independent appraisal if an independent appraisal has not already been provided. A related party is excluded from participating in the determinations of the Independent Directors Committee.
OWNERSHIP OF COMPANY STOCK
Security Ownership of Certain Beneficial Owners
The following table lists the persons that owned beneficially, as of March 23, 2018, more than 5% of the outstanding shares of Common Stock of the Company, based on the Company’s records. Unless otherwise stated, each person has sole voting and investment power with respect to the shares of Common Stock indicated as beneficially owned by that person.
| Name and Address of Beneficial Owner | Amount and Nature of Beneficial Ownership | Percent of Class (1) | ||||||
| Servotronics, Inc. Employee Stock Ownership Trust (2) | 530,955 | (2) | 21.37 | % | ||||
| 1110 Maple Street | ||||||||
| P.O. Box 300 | ||||||||
| Elma, New York 14059 | ||||||||
| Estate of Dr. Nicholas D. Trbovich (3) | 430,016 | (3) | 17.31 | % | ||||
| 1110 Maple Street | ||||||||
| P.O. Box 300 | ||||||||
| Elma, New York 14059 | ||||||||
| Harvey Houtkin (4) | 352,088 | (4) | 14.17 | % | ||||
| 160 Summit Avenue | ||||||||
| Montvale, New Jersey 07645 | ||||||||
| FMR LLC (5) | 145,907 | (5) | 5.87 | % | ||||
| 245 Summer Street Boston, Massachusetts 02210 |
||||||||
| (1) | Percent of class is based upon 2,484,735 shares of Common Stock outstanding as of March 23, 2018. |
| -14- |
| (2) | The Trustees of the Servotronics, Inc. Employee Stock Ownership Trust (the “ESOT”) - Kenneth D. Trbovich and Bernadine Kucinski - direct the voting of unallocated shares. The participants in the related plan have the right to direct the voting of shares which have been allocated to their respective accounts; if a participant does not direct the vote, the Trustees may direct the vote of that participant’s shares. As of March 23, 2018, approximately 408,747 shares are allocated to the accounts of participants and approximately 122,208 shares remain unallocated. |
| (3) | Kenneth D. Trbovich and Michael Trbovich are co-executors under the Estate and share voting and investment power with respect to these shares. This amount includes approximately 36,198 shares allocated to Dr. Trbovich’s account under the ESOT. These amounts do not include the shares beneficially owned by certain of Dr. Trbovich’s other relatives. |
| (4) | This information is based on a statement on Schedule 13D, as last amended on February 12, 2004, filed by Mr. Houtkin with the Securities and Exchange Commission. According to Mr. Houtkin’s statement, he had sole voting and investment power with respect to 190,000 shares and shared voting and investment power with respect to 162,088 shares. Mr. Houtkin disclaimed beneficial ownership in additional shares owned by other members of his family. The Company has received no further information from Mr. Houtkin or on his behalf. |
| (5) | According to an amended Schedule 13G filed by FMR LLC with the SEC on February 13, 2018, Fidelity Management & Research Company, a wholly- owned subsidiary of FMR LLC, is the beneficial owner of 145,907 shares of our common stock, as a result of acting as an investment adviser to various investment companies registered under the Investment Company Act of 1940. Abigail P. Johnson, Director, Chairman and Chief Executive Officer of FMR LLC and FMR LLC, through its control of Fidelity Management & Research Company and the funds, each has sole power to dispose of the 145,907 shares of our common stock owned by such funds. Neither FMR LLC nor Abigail P. Johnson has the sole power to vote or direct the voting of the shares owned directly by such funds, which power resides with the funds’ Boards of Trustees. Fidelity Management & Research Company carries out the voting of the shares under written guidelines established by the funds’ Boards of Trustees. |
| -15- |
Security Ownership of Management
The following table sets forth, as of March 23, 2018 information as to the beneficial ownership of shares of Common Stock of the Company held by each Director, Named Officer and by all Directors and Officers as a group:
| Name of Beneficial Owner | Amount and Nature of Beneficial Ownership | Percent of Class (1) | ||||||
| Kenneth D. Trbovich | 516,214 | (2) | 20.78 | % | ||||
| Salvatore SanFilippo | 22,550 | (3) | 0.91 | % | ||||
| James C. Takacs | 33,381 | (4) | 1.34 | % | ||||
| Edward C. Cosgrove, Esq. | - | - | ||||||
| Lucion P. Gygax | - | - | ||||||
| Christopher M. Marks | - | - | ||||||
| Jason T. Bear | - | - | ||||||
| Lisa F. Bencel | - | - | ||||||
| All Directors and Officers as a group | 694,353 | (5) | 27.95 | % | ||||
| (1) | Percent of class is based upon 2,484,735 shares of Common Stock outstanding as of March 23, 2018. |
| (2) | This amount includes (i) 430,016 shares held by the Estate of Dr. Trbovich for which Mr. Trbovich is the co-executor and shares voting and investment control over those shares; (ii) 18,809 shares held by a charitable foundation for which Mr. Trbovich serves as the Trustee; (iii) 5,477 shares allocated to Mr. Trbovich’s account under the ESOT. Except as set forth in the preceding sentence, does not include shares held by the ESOT as to which Mr. Trbovich serves as the Trustee. See Note (5) below. |
| (3) | This amount includes 7,701 shares allocated to Mr. SanFilippo’s account under the ESOT. |
| (4) | This amount includes 18,799 shares allocated to Mr. Takac’s account under the ESOT. |
| (5) | See notes (2) through (4) above. Also includes unallocated shares held by the ESOT over which Mr. Trbovich, as a Trustee of the ESOT, may be deemed to have voting power, as well as shares allocated to the accounts of all Officers as a group under the related plan. See the table in “Security Ownership of Certain Beneficial Owners” and note (2) thereto. |
| -16- |
Section 16(a) Beneficial Ownership Reporting Compliance
Based solely on its review of reports filed pursuant to Section 16(a) of the Securities Exchange Act or representations from Directors and Executive Officers required to file such reports, the Company believes that all such filings required of its Executive Officers and Directors and greater than 10% beneficial owners (subject to the qualifications in the following sentence) were timely made for 2017. The Company does not have information with respect to the reporting compliance of Mr. Houtkin or on his behalf.
PROPOSAL 2:
RATIFICATION OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
Freed Maxick CPAs, P.C. (“Freed Maxick”) has been selected by the Board of Directors as the independent public accountants for the Company’s current fiscal year. A representative of Freed Maxick is expected to be present at the meeting with the opportunity to make a statement if he desires to do so and will be available to respond to appropriate questions of shareholders.
At the Annual Meeting, the shareholders will be asked to ratify the selection of Freed Maxick as the Company’s independent registered public accounting firm. Pursuant to the rules and regulations of the Securities and Exchange Commission, the Audit Committee has the direct responsibility to appoint, retain, fix the compensation and oversee the work of the Company’s independent registered public accounting firm. In the event that the shareholders fail to ratify the selection, it will be considered as a direction to the Board of Directors and the Audit Committee to consider the selection of a different firm. Even if the selection is ratified, the Audit Committee in its discretion may select a different independent registered public accounting firm at any time during the year if it determines that such a change would be in the best interests of the Company and our shareholders.
The affirmative vote of a majority of the votes cast on the proposal, assuming a quorum is present at the Annual Meeting, is required to ratify the appointment of Freed Maxick. The Directors of the Company unanimously recommend a vote “FOR” the ratification of Freed Maxick as the Company’s independent registered public accounting firm for 2018. Unless otherwise instructed, proxies will be voted “FOR” ratification of the appointment of Freed Maxick.
The following table shows the fees paid or accrued by the Company for the audit and other services provided by Freed Maxick CPAs, P.C. for fiscal years 2017 and 2016.
| 2017 | 2016 | |||||||
| Audit Fees (1) | $ | 107,000 | $ | 103,250 | ||||
| Tax Service Fees (2) | 40,850 | 39,500 | ||||||
| Total | $ | 147,850 | $ | 142,750 | ||||
| (1) | Audit fees represent fees for professional services provided in connection with the audit of the Company’s financial statements and review of the Company’s quarterly financial statements. |
| -17- |
| (2) | Tax service fees principally included fees for tax preparation and tax consulting services. |
The Audit Committee pre-approves audit and non-audit services provided by Freed Maxick. The Audit Committee has considered whether provision of the services described above is compatible with maintaining our accountant’s independence and has determined that such services have not adversely affected Freed Maxick’s independence.
SHAREHOLDER PROPOSALS FOR 2019
Shareholder proposals must be received at the Company’s offices no later than December 24, 2018, 120 days prior to the anniversary of the 2018 mailing date (April 23), in order to be considered for inclusion, if appropriate, as a shareholder proposal in the Company’s proxy materials for the 2019 Annual Meeting. Such proposals must also meet the other requirements established by the SEC for shareholder proposals.
Proposals to be introduced at the Annual Meeting, but not intended to be included in the Company’s Proxy Material
For any shareholder proposal to be presented in connection with the 2019 Annual Meeting of Shareholders, a shareholder must give timely written notice thereof to the Company in compliance with the advance notice provisions of the federal securities laws. To be timely, a qualified shareholder must give written notice to the Company at the Company’s offices no later than March 9, 2019.
OTHER MATTERS
So far as the Directors are aware, no matters other than the election of Directors and ratification of the engagement of Independent Auditors will be presented to the meeting for action on the part of the shareholders. If any other matters are properly brought before the meeting, it is the intention of the persons named in the accompanying proxy to vote thereon the shares to which the proxy relates in accordance with their best judgment.
| By Order of the Directors | |
 | |
| Kenneth D. Trbovich | |
| Chairman of the Board of Directors and | |
| Chief Executive Office |
Elma, New York
| -18- |
| SERVOTRONICS, INC. | PROXY |
| 1110 Maple Street | THIS PROXY IS SOLICITED ON |
| P.O. Box 300 | BEHALF OF THE BOARD OF DIRECTORS |
Elma, New York 14059
The undersigned hereby appoints Kenneth D. Trbovich and Bernadine E. Kucinski or either of them, as Proxies, each with full power of substitution, and hereby authorizes them to represent and to vote as indicated below all shares of Servotronics, Inc. that the undersigned is entitled to vote at the Annual Meeting of Shareholders to be held on May 25, 2018 at the offices of Bond, Schoeneck & King, PLLC, Avant Building - Suite 900, 200 Delaware Avenue, Buffalo, NY 14202, or any adjournments thereof:
| 1. | Election of Directors | |||||
| Nominees: | ¨ For All | ¨ Withhold All | ¨ For All Except | |||
| 01) Jason T. Bear. | 04) Christopher M. Marks | To withhold authority to vote for any individual | ||||
| 02) Edward C. Cosgrove, Esq. | 05) Kenneth D. Trbovich | nominee(s), mark "For All Except" and strike a | ||||
| 03) Lucion P. Gygax | line through his name: | |||||
| 2. | Ratification of the appointment of the Company’s independent | ||||
| registered accounting firm for the 2018 fiscal year. | ¨ For | ¨ Against | ¨Abstain |
Meeting Attendance
Check this box to pre-register to attend the Annual Meeting. ¨
(Continued and to be signed on the reverse side)
(Continued from other side)
The shares represented by this Proxy will be voted as directed by the shareholder. The Board of Directors favors a vote FOR the nominees named in Proposal 1 and FOR Proposal 2. If no direction is made, the Proxy will be voted with the Board's recommendations. In their discretion, the Proxies are authorized to vote upon such other business as may properly come before the Annual Meeting or any adjournment thereof.
Please date and sign your name exactly as it appears below and return this Proxy promptly in the enclosed envelope, which requires no postage if mailed in the United States.
| Dated | , 2018 |
| Signature | |
| Signature | |
| Joint owners should each sign. Executors, administrators, trustees, guardians and corporate officers should indicate their title. |