TOROTEL, INC.
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
To Be Held Monday, September 16, 1996
TO THE SHAREHOLDERS OF TOROTEL, INC.
PLEASE TAKE NOTICE that the Annual Meeting (the "Meeting") of the
Shareholders of Torotel, Inc. (the "Corporation") will be held on Monday,
September 16, 1996, in the Royal Ballroom at the Adam's Mark Hotel, I-70 and
the Truman Sports Complex, Kansas City, Missouri. The Meeting will convene
at 2:00 p.m., Central Daylight Time, to:
(1) Elect a Board of Directors;
(2) Transact such other business as may properly come before the
Meeting, or any postponement or adjournment thereof.
The Stock Transfer Books of the Corporation will not be closed, but only
shareholders of record at the close of business on August 2, 1996, will be
entitled to receive notice of and to vote at the Meeting.
The accompanying Form of Proxy is solicited by the Board of Directors of the
Corporation. Reference is made to the attached Proxy Statement for further
information with respect to the business to be transacted at the Meeting.
Shareholders are cordially invited to attend the Meeting in person. WHETHER
OR NOT YOU EXPECT TO ATTEND THE MEETING, PLEASE SIGN AND DATE THE
ACCOMPANYING PROXY AND RETURN IT PROMPTLY IN THE ENCLOSED POSTAGE PAID
ENVELOPE. IF YOU DECIDE TO ATTEND THE MEETING, YOU MAY REVOKE YOUR PROXY AND
VOTE YOUR SHARES IN PERSON.
BY ORDER OF THE
BOARD OF DIRECTORS
/s/ Donald H. Loudon
Donald H. Loudon
Secretary of Torotel, Inc.
Kansas City, Missouri
August 16, 1996
TOROTEL, INC.
13402 South 71 Highway
Grandview, Missouri 64030
PROXY STATEMENT
FOR THE ANNUAL MEETING OF SHAREHOLDERS
To Be Held Monday, September 16, 1996
Security Holders Entitled to Vote
Holders of shares of the Common Stock of Torotel, Inc. (the "Corporation")
of record at the close of business on August 2, 1996, will be entitled to
vote at the Annual Meeting of Shareholders (the "Meeting") to be held Monday,
September 16, 1996, at 2:00 p.m., Central Daylight Time, in the Royal
Ballroom at the Adam's Mark Hotel, I-70 and the Truman Sports Complex, Kansas
City, Missouri, and at any and all postponements or adjournments thereof.
This Proxy Statement, the enclosed Form of Proxy, the Notice of Annual
Meeting, and the accompanying 1996 Annual Report to Shareholders, were
initially distributed to shareholders on or about August 16, 1996.
If the enclosed Proxy is properly executed and returned prior to voting at
the Meeting, the shares represented thereby will be voted in accordance with
any specifications made therein. In the absence of instructions, the shares
will be voted "FOR" the nominees of the Board of Directors in the election of
directors.
Shareholders who execute Proxies retain the right to revoke them at any time
before they are voted by notifying the Secretary of the Corporation in
writing, by delivering a duly authorized Proxy bearing a later date, or by
attending the Meeting and declaring the intention of voting in person.
Persons Making the Solicitation
This Proxy is solicited on behalf of the Board of Directors of Torotel, Inc.
The solicitation is by mail. The total expense of such solicitation will
borne by the Corporation and will include reimbursement paid to brokerage
firms and others for their expenses in forwarding solicitation material
regarding the Meeting to beneficial owners. It may be that further
solicitation of Proxies will be made by telephone or oral communication with
some shareholders of the Corporation, following the original solicitation.
All such further solicitation will be made by regular employees of the
Corporation who will not be additionally compensated therefor, or by its
Transfer Agent, and the cost will be borne by the Corporation.
Voting Securities and Principal Holders Thereof
The voting securities entitled to vote at the Meeting consist of shares of
common stock of the Corporation. Each shareholder is entitled to one vote
for each of said shares and has the right to cumulate his votes for directors.
The number of issued and outstanding shares (exclusive of treasury shares) at
the close of business on August 2, 1996, was 2,790,366.
The close of business on August 2, 1996, has been fixed by the Board of
Directors as the record date for the determination of the shareholders who
will be entitled to vote at the Meeting.
The following persons beneficially owned more than 5% of the outstanding
voting securities of Torotel, Inc. at the close of business on August 2, 1996:
1
Name and Address
of Beneficial Title of Amount Beneficially Percent
Owner Class Owned of Class
Richard A. Sizemore Common 341,296 (a) 12.2%
8356 Hallet
Lenexa, KS 66215
Linda V. Sizemore Common 341,296 (b) 12.2%
8356 Hallet
Lenexa, KS 66215
Paulette A. Estes Common 328,943 (c) 11.8%
3917 N.E. 59th St.
Kansas City, MO 64119
Gregory M. Sizemore Common 345,938 (d) 12.4%
12735 Mohawk Circle
Leawood, KS 66209
Julie Sizemore Common 345,938 (e) 12.4%
12735 Mohawk Circle
Lenexa, KS 66209
Dale H. Sizemore, Jr. Common 332,429 (f) 11.9%
2705 W. 121st Terrace
Leawood, KS 66209
Carol J. Sizemore Common 332,429 (g) 11.9%
2705 W. 121st Terrace
Leawood, KS 66209
Pauline R. Sizemore Common 244,345 (h) 8.8%
10541 Askew
Kansas City, MO 64137
(a) Richard A. Sizemore's direct ownership is 121,256 shares. Mr.
Sizemore's indirect ownership is 220,040 shares. Of this amount,
6,666 shares are owned by Mr. Sizemore's wife, 12,868 shares are owned
by Mr. Sizemore as trustee for his children, and 200,506 shares are
owned by a General Partnership in which Mr. Sizemore is a general
partner.
(b) Linda V. Sizemore's direct ownership is 6,666 shares. Mrs. Sizemore's
indirect ownership is 334,630 shares. Of this amount, 121,256 shares
are owned by Mrs. Sizemore's husband, 12,868 shares are owned by Mrs.
Sizemore's husband as trustee for her children, and 200,506 shares are
owned by a General Partnership in which Mrs. Sizemore's husband is
a general partner.
(c) Paulette A. Estes' direct ownership is 112,749 shares. Ms. Estes'
indirect ownership is 216,194 shares. Of this amount, 15,688 shares
are owned by Ms. Estes as trustee for her children, and 200,506 shares
are owned by a General Partnership in which Ms. Estes is a general
partner.
(d) Gregory M. Sizemore's direct ownership is 118,654 shares. Mr.
Sizemore's indirect ownership is 227,284 shares. Of this amount, 6,666
shares are owned by Mr. Sizemore's wife, 20,112 shares are owned by Mr.
Sizemore as trustee for his children, and 200,506 shares are owned by a
General Partnership in which Mr. Sizemore is a general partner.
(e) Julie Sizemore's direct ownership is 6,666 shares. Mrs. Sizemore's
indirect ownership is 339,272 shares. Of this amount, 118,654 shares
are owned by Mrs. Sizemore's husband, 20,112 shares are owned by Mrs.
Sizemore's husband as trustee for her children, and 200,506 shares are
owned by a General Partnership in which Mrs. Sizemore's husband is a
general partner.
(f) Dale H. Sizemore, Jr.'s direct ownership is 111,964 shares. Mr.
Sizemore's indirect ownership is 220,465 shares. Of this amount,
5,351 shares are owned by Mr. Sizemore's wife, 14,608 shares are owned
by Mr. Sizemore as trustee for his children, and 200,506 shares are
owned by a General Partnership in which Mr. Sizemore is a general
partner.
(g) Carol J. Sizemore's direct ownership is 5,351 shares. Mrs. Sizemore's
indirect ownership is 327,078 shares. Of this amount, 111,964 shares
are owned by Mrs. Sizemore's husband, 14,608 shares are owned by Mrs.
Sizemore's husband as trustee for her children, and 200,506 shares are
owned by a General Partnership in which Mrs. Sizemore's husband is a
general partner.
(h) Pauline R. Sizemore's direct ownership is 244,345.
2
Directors and Committees
At the Meeting, five individuals will be Management's nominees for election
as members of the Board of Directors until the next Annual Meeting of
Shareholders, and until their successors have been elected. Torotel, Inc.'s
Articles of Incorporation authorize seven directors. Jack C. Beecroft, Vice
President of Torotel Products, Inc., and Victor K. Brewer, Jr., President of
Torotel Products, Inc., incumbent directors, are not standing for re-election.
This will leave two director positions open. Those shareholders present at
the Meeting may also nominate individuals for election to the Board of
Directors. If there are any nominees for the vacant positions at the Meeting,
the Proxies solicited hereby will not be voted for such nominees.
Management's nominees, all present members of the Board of Directors, are as
follows: Ronald L. Benjamin, Christian T. Hughes, Dr. Thomas L. Lyon, Jr.,
Dale H. Sizemore, Jr., and Richard A. Sizemore.
During the fiscal year ended April 30, 1996, the Board of Directors of the
Corporation held four meetings (including regularly scheduled and special
meetings). Each of the incumbent directors being nominated for re-election
attended 100% of the Board meetings held while he was a director. Christian
T. Hughes was compensated at the rate of $100 per Board meeting attended.
Ronald L. Benjamin, Dr. Thomas L. Lyon, Jr., Dale H. Sizemore, Jr., and
Richard A. Sizemore were compensated at the rate of $6,000 per fiscal year,
plus $600 per Board meeting attended, and $400 per Committee meeting attended.
If the enclosed Proxy is duly executed and received in time for the Meeting,
and if no contrary specification is made as provided herein, it is the
intention of the persons named therein to vote the shares represented thereby
"FOR" the five persons nominated by the Board for election as directors of
the Corporation. The Proxies cannot be voted for a greater number of persons
than the number of persons named herein. There will be cumulative voting for
the election of directors. In cumulative voting, each share carries as many
votes as there are vacancies to be filled, the shareholder being permitted to
distribute the votes for all his shares among the nominees in any way he
desires. Since five directors are nominated, each shareholder may cast that
number of votes which is equal to the number of shares owned by him multiplied
by five. If no choice is indicated on the enclosed Proxy, the persons named
in the Proxies will cumulate the votes and distribute them among the nominees
in their discretion. If a shareholder desires to cumulate his votes for the
Directors in a particular manner, he should indicate the number of votes to
be cast on the shareholder's behalf for each nominee immediately following
that nominee's name on the Proxy. If any nominee should refuse or be unable
to serve, the Proxy will be voted for such person as shall be designated by
the Board of Directors to replace any such nominee. Management presently
has no knowledge that any of the nominees will refuse or be unable to serve.
The Corporation does not have a nominating committee. Christian T. Hughes
and H. James Serrone are members of the Administrative Committee for the
Employee Stock Purchase Plan. Mr. Serrone is not a director but is an officer
of the Corporation. The Committee receives its authority from the Plan and
from the Board of Directors. This Committee administers and implements the
Employee Stock Purchase Plan and determines eligibility of employees to
participate therein. The Committee does not meet on a regular basis but
meets as required. The Committee did not meet during the last fiscal year.
Ronald L. Benjamin and Dr. Thomas L. Lyon, Jr. are members of the Audit
Committee. The Committee held one meeting during the last fiscal year. In
fulfilling its responsibilities, the Audit Committee's activities included,
but were not limited to, review of internal accounting controls, and review
of the financial activities, financial position and related consolidated
reports of the Corporation.
Ronald L. Benjamin, Dr. Thomas L. Lyon, Jr., and Dale H. Sizemore, Jr. are
members of the Compensation Committee. The Committee did not meet during the
last fiscal year. The function of the Strategic Planning Committee has been
assumed by the Board of Directors. The Board of Directors has no other
Committees performing similar functions.
Biographical summaries concerning individuals nominated by the Board of
Directors for election as directors, the Corporation's executive officers and
significant employees, and information with respect to the number of shares
of the Corporation's Common Stock beneficially owned by each of them directly
or indirectly, as of August 2, 1996, are shown below. The number of shares
beneficially owned by the following individuals includes shares, if any, held
in the name of the spouse, minor children, or other relative of the individual
living in his home, as well as shares, if any, held in the name of another
person under an arrangement whereby the individual enjoys the right to vote
or the use of the income, or whereby the individual can vest or revest title
in himself at once or at some future time.
3
Shares of Common Stock
Biographical Summaries of Nominees, Beneficially Owned at Percent
Executive Officers, and Significant Employees August 2, 1996 of Class
Dale H. Sizemore, Jr., age 44, Chairman of
the Board, President and Chief Executive
Officer of Torotel, Inc. 332,429 11.9%
Mr. Sizemore became a Director of the
Corporation in 1984. He has served as
Chairman and President since August 1995.
Mr. Sizemore was President of Kansas
Communications in Lenexa, Kansas from
1983 to 1995. Mr. Sizemore has been Chairman
of the Board and Treasurer of Kansas
Communications, Inc. since April 1995.
Christian T. Hughes, age 47, President of
OPT Industries, Inc. -0- 0.0%
Mr. Hughes became President of OPT Industries
in Phillipsburg, New Jersey, in August 1995.
He joined OPT in 1992 as Vice President of
Sales and Marketing, and became Executive
Vice President in 1993. Prior to joining OPT,
Mr. Hughes was Vice President of Sales for
Hitran Corporation in Flemington, New Jersey,
from 1987 to 1992.
Ronald L. Benjamin, age 51, President of
Resource and Development Group, Inc. -0- 0.0%
Mr. Benjamin became a Director of the
Corporation in 1993. He has been President
of Resource and Development Group in Lenexa,
Kansas, since 1985. Mr. Benjamin is also a
50% owner of Robinson Potato Supply. He
holds a B.S. degree in electrical engineering
from Bucknell University and received his
M.B.A. from Harvard University.
Dr. Thomas L. Lyon, Jr., age 52, Professor and
Academic Chair of the Executive Fellows Program
at Rockhurst College 210 0.0%
Dr. Lyon became a Director of the Corporation
in 1993. He is a professor and Academic Chair
of the Executive Fellows Program at Rockhurst
College in Kansas City, Missouri. Dr. Lyon is
a past director of the Graduate and
Undergraduate Business Division, has been Acting
Dean of the School of Management, and was the
first director of Rockhurst's M.B.A. Program.
He has been at Rockhurst since 1975. He
holds his B.A. in economics from Rockhurst, and
his M.A. in economics and Ph.D. in economics
and finance from the University of Missouri.
Richard A. Sizemore, age 36, President of
Interactive Design, Inc. 341,296 12.2%
Mr. Sizemore has been owner and President
of Interactive Design, Inc. in Lenexa,
Kansas, since 1987. He holds a B.S.
degree in electrical engineering and an
M.B.A. from the University of Kansas.
H. James Serrone, age 41, Vice President of
Finance and Chief Financial Officer of
Torotel, Inc., Torotel Products, Inc., and
OPT Industries, Inc. 7,843 (a) 0.3%
Mr. Serrone joined Torotel in 1979, became
Controller in 1982, and was named Vice
President in 1993. Mr. Serrone has served
as Vice President of Torotel Products since
1992, and became Vice President of OPT
Industries in 1993.
All Directors and Executive Officers as a Group
(6 persons) 681,778 (b) 24.4%
(a) H. James Serrone's beneficial ownership includes 4,927 shares which
are acquirable within 60 days pursuant to the exercise of outstanding
stock options.
(b) The beneficial ownership of all directors and executive officers as a
group includes 4,927 shares which are acquirable within 60 days
pursuant to the exercise of outstanding stock options.
4
Executive Compensation
The following table sets forth the compensation of the named executive
officers for each of the Corporation's last three completed fiscal years.
Summary Compensation Table
Annual Compensation Long-Term Compensation
Name and
Principal Position Year Salary Options Awarded
Dale H. Sizemore, Jr. (a) 1996 $ -0- -0-
President and
Chief Executive Officer
Alfred F. Marsh (b) 1996 $ 24,078 -0-
Former President and 1995 $ 16,785 -0-
Chief Executive Officer 1994 $ 73,642 -0-
(a) Dale H. Sizemore, Jr. became President and Chief Executive Officer
effective August 4, 1996.
(b) Alfred F. Marsh served as President and Chief Executive Officer during
all of fiscal years 1994 and 1995, and for the period of May 1 to
August 3 of fiscal 1996.
Option Grants Table
Shareholders approved the Incentive Compensation Plan on September 18, 1994.
However, there were no grants of stock options made during the last completed
fiscal year.
Aggregated Option Exercises and Fiscal Year-End Option Value Table
The following table sets forth the aggregate stock option exercises made
during the last completed fiscal year and the fiscal year-end option values
for each of the named executive officers.
Aggregated Option Exercises in Last Fiscal Year
and Fiscal Year-End Option Values
Value of
Number of Unexercised
Unexercised In-the-Money
Options at Options at
Shares Fiscal Year-End Fiscal Year-End
Acquired Value Exercisable/ Exercisable/
Name on Exercise Realized Unexercisable Unexercisable
Dale H. Sizemore, Jr. -0- $ -0- -0- $ -0-
Alfred F. Marsh -0- $ -0- -0- $ -0-
Certain Relationships and Related Transactions
Indebtedness to Former Officer
At April 30, 1996, the Corporation was indebted to Alfred F. Marsh, former
President of Torotel, Inc., for $250,000 in the form of a promissory note,
which was executed in April 1986. The face value of the note plus $179,000
of its accrued interest were subordinated to the Corporation's debt payable
to Mercantile Business Credit, Inc. ("MBCI") pursuant to a Subordination
Agreement between MBCI and Mr. Marsh. For the year ended April 30,1996, the
incurred $45,000 in interest on the note. Since the inception of the note,
the Corporation has accrued total interest of $338,000, of which $179,000
remains due and payable.
On July 5, 1996, the Corporation, through OPT Industries, its wholly-owned
subsidiary, signed a new credit agreement with Phillipsburg National Bank &
Trust Company ("PNBT"). In conjunction with the new credit agreement, on
July 10, 1996, the Corporation executed a new promissory note with Mr. Marsh
in the amount of $429,000, which consists of the original principal sum of
$250,000 plus the accrued unpaid interest of $179,000. The outstanding
balance of this unsecured note bears interest at a fixed rate of 10% per
annum. The note requires monthly principal and interest payments of $10,881,
and matures on July 1, 2000. Under the terms of the note, no payments shall
be made to Mr. Marsh as long as any default condition exists under the terms
of the Corporation's credit agreement with PNBT, unless the bank has waived
the default condition prior to any payment.
Certain Transactions
(a) Donald H. Loudon, secretary of the Corporation, is a director of the
law firm of Shughart, Thomson and Kilroy, a Professional Corporation,
which has provided legal services to the Corporation.
(b) As of the date of this Proxy Statement, all directors and officers
are in compliance with the reporting requirements of Section 16(a) of
the Securities Exchange Act of 1934. To the best of Management's
knowledge, all beneficial owners of more than 10% of the outstanding
common shares of the Corporation are in compliance as well.
Appointment of Auditors
The Board of Directors has appointed Grant Thornton LLP as the Corporation's
independent certified public accountants, to audit the financial statements
of the Corporation and its subsidiaries for the fiscal year ending April 30,
1997. Grant Thornton LLP has served as the Corporation's auditors since
September 1980.
A representative of Grant Thornton LLP will be present at the Meeting. An
opportunity will be provided for the representative to make a statement, if
so desired, and to respond to appropriate shareholder questions.
Other Matters
The Board of Directors know of no other matters that may properly be, or
which are likely to be, brought before the Meeting. However, if any other
matters are properly brought before the Meeting, the persons named in the
enclosed Proxy or their substitutes will vote in accordance with their best
judgment on such matters.
Shareholder Proposals
Any proposals which a shareholder intends to present at the Annual Meeting
of Shareholders to be held on Monday, September 15, 1997, must be received
by Torotel, Inc. on or before May 12, 1997, in order for such proposal to be
included in the Corporation's Proxy Statement and Form of Proxy.
BY ORDER OF THE
BOARD OF DIRECTORS
/s/ Donald H. Loudon
Donald H. Loudon
Secretary of Torotel, Inc.