Item 5.02 | Departure of Directors or Certain Officers; Election of Directors; Appointment of Certain Officers;
Compensatory Arrangements of Certain Officers. |
Chief Executive Officer Appointment
On April 21, 2022, Servotronics, Inc. (the “Company”)
announced that the Company’s board of directors (the “Board”) has appointed William F. Farrell, Jr. as its Chief Executive
Officer, effective April 25, 2022. Mr. Farrell is also expected to join the Board once he commences employment with the Company.
Mr. Farrell, age 55, served in various roles of
increasing responsibility at Moog, Inc., including, most recently, Site General Manager for Moog’s Aircraft Group, which supports
military and commercial aerospace applications from 2019 to 2021. Prior to that, he served five years as Site General Manager for its
Industrial Group, supporting markets including flight simulation, oil and gas exploration, power generation and industrials automation.
Mr. Farrell holds a B.S. degree in mechanical engineering from the University of Notre Dame and an M.B.A in manufacturing operations management
from the State University of New York at Buffalo.
Mr. Farrell will be paid an annual base salary
of $350,000 and his annual target cash bonus and annual target performance-based long-term equity award are each set at 40% of base salary.
Mr. Farrell will receive a one-time new hire equity award with a grant date value of $75,000. The equity award will vest in April 2023,
subject to Mr. Farrell’s continued employment with the Company.
In addition, Mr. Farrell received a participation
agreement under the Company’s Executive Change in Control Severance Plan (described more fully below) which provides that upon a
termination of his employment by the Company without Cause or by Mr. Farrell for Good Reason, in either case following a change in control,
Mr. Farrell will receive a lump sum amount equal to two times his annual total cash compensation, plus a prorated annual cash bonus at
the target level of performance. In addition, Mr. Farrell will receive certain COBRA premium payments during an 18-month benefit continuation
period.
Executive Change in Control Severance Plan
On April 19, 2022, the Compensation Committee
of the Board approved an Executive Change in Control Severance Plan (the “Executive Severance Plan”). The Compensation Committee
may designate certain key executives and employees of the Company (each a “Participant”) to be participants in the Executive
Severance Plan from time to time.
Participation in the Executive Severance Plan
is conditioned on a Participant’s execution of a release of claims as well as a Participation Agreement. Capitalized terms that
are used but not otherwise defined herein have the meanings given them in the Executive Severance Plan.
The Executive Severance Plan provides for certain
benefits to Participants upon a Participant’s termination (i) by the Company without Cause or (ii) by the Participant for Good Reason
within a specified period (each, a “Qualifying Termination”). In the event of a Qualifying Termination, such Participant will
be eligible for: (1) Severance payments in an aggregate amount equal to the product of (a) the Applicable Severance Multiplier set forth
in the applicable Participation Agreement and (b) the Participant’s annual base salary, to be paid in equal installments over 24
months in accordance with the Company’s normal payroll practices; (2) An annual bonus payment based on the actual amount that the
Participant would have been eligible for, pro-rated for the number of days actually served during the year; and (3) Certain COBRA premium
payments during the Benefit Continuation period set forth in the applicable Participation Agreement.
Severance benefits may be forfeited or reduced
in certain circumstances, including in connection with certain required accounting restatements, a Participant’s breach of the release
of claims, or a Participant’s breach of the restrictive covenants contained in the Participation Agreement. In the event that a
Participant would otherwise incur excise tax liability as a result of any payments or benefits provided to the Participant that classify
as excess parachute payments under Section 280G of the Internal Revenue Code of 1986, the Participant will either receive the payments
and benefits in full or will have such payments and benefits reduced to the minimum extent necessary to avoid such excise tax liability,
whichever of the foregoing results in the Participant’s receipt on an after-tax basis of the greatest amount of payments and benefits.
The Executive Severance Plan and form of Participation
Agreement will be filed as exhibits to the Company’s Quarterly Report on Form 10-Q for the period ending March 31, 2022, and the
description thereof set forth herein is qualified by and subject, in all respects, to the terms of the Executive Severance Plan and form
of Participation Agreement.