<PAGE> 1
SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(a) OF THE SECURITIES
EXCHANGE ACT OF 1934 (AMENDMENT NO. )
Filed by the Registrant /X/
Filed by a Party other than the Registrant / /
Check the appropriate box:
<TABLE>
<S> <C>
/ / Preliminary Proxy Statement / / Confidential, for Use of the Commission
Only
/X/ Definitive Proxy Statement (as permitted by Rule 14a-6(e)(2))
/ / Definitive Additional Materials
/ / Soliciting Material Pursuant to sec. 240.14a-11(c) or sec. 240.14a-12
</TABLE>
ARROW AUTOMOTIVE INDUSTRIES, INC.
(Name of Registrant as Specified In Its Charter)
Payment of Filing Fee (Check the appropriate box):
/X/ $125 per Exchange Act Rules 0-11(c)(1)(ii), or 14a-6(i)(1), or 14a-6(i)(2),
or Item 22(a)(2) of Schedule 14A.
/ / $500 per each party to the controversy pursuant to Exchange Act Rule
14a-6(i)(3).
/ / Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and 0-11.
(1) Title of each class of securities to which transaction applies:
(2) Aggregate number of securities to which transaction applies:
(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11:
(4) Proposed maximum aggregate value of transaction:
(5) Total fee paid:
/ / Fee paid previously with preliminary materials.
/ / 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.
(1) Amount Previously Paid:
(2) Form, Schedule or Registration Statement No.:
(3) Filing Party:
(4) Date Filed:
<PAGE> 2
ARROW AUTOMOTIVE INDUSTRIES, INC.
3 SPEEN STREET
FRAMINGHAM, MASSACHUSETTS 01701
NOTICE OF 1995 ANNUAL MEETING OF STOCKHOLDERS
Framingham, Massachusetts
October 19, 1995
The 1995 Annual Meeting of Stockholders of Arrow Automotive Industries,
Inc. (the "Company") will be held at the offices of Burns & Levinson, 125 Summer
Street, Boston, Massachusetts 02110, on Wednesday November 8, 1995 at 10:00 a.m.
for the following purposes:
1. To elect directors of the Company;
2. To approve the selection of the accounting firm of Ernst & Young
LLP as auditors of the Company for the current fiscal year; and
3. To consider and act upon any matters incidental to the foregoing,
and to transact such other business as may properly come before the
meeting.
The Board of Directors has designated the close of business on October 6,
1995, as the record date for the determination of stockholders entitled to
receive notice of and to vote at the meeting.
LAWRENCE M. LEVINSON
Clerk
- - --------------------------------------------------------------------------------
A copy of the Annual Report of the Company for the fiscal year ended June
24, 1995, is being mailed to stockholders herewith. The Annual Report should not
be considered a part of the attached proxy materials.
- - --------------------------------------------------------------------------------
<PAGE> 3
ARROW AUTOMOTIVE INDUSTRIES, INC.
PROXY STATEMENT
FOR THE 1995 ANNUAL MEETING OF STOCKHOLDERS
This statement is furnished to the stockholders of Arrow Automotive
Industries, Inc. (hereinafter, the "Company") in connection with the
solicitation of proxies by the Board of Directors of the Company to be used at
the 1995 Annual Meeting of Stockholders, and any adjournment of that meeting.
The Annual Meeting of Stockholders will be held at the offices of Burns &
Levinson, 125 Summer Street, Boston, Massachusetts 02110, on Wednesday, November
8, 1995, at 10:00 a.m. Each proxy delivered pursuant to this solicitation is
revocable at any time before it is voted, at the option of the person executing
such proxy, by notifying the Company in writing, by submitting a later dated
proxy or by personal vote at the meeting. This proxy statement is being mailed
to stockholders on or about October 19, 1995.
At the close of business on October 6, 1995, the Company had 2,873,083
outstanding shares of Common Stock. Each share of outstanding Common Stock is
entitled to one vote. Only holders of Common Stock of record on the books of the
Company at the close of business on October 6, 1995, are entitled to receive
notice of and to vote at the meeting. The Company's by-laws require that the
holders of a majority of the shares of the Company's Common Stock then
outstanding and entitled to vote be present in person or represented by proxy at
the meeting in order to constitute a quorum for the transaction of business.
Each nominee for director receiving a plurality of votes will be elected as a
director. Abstentions from voting on a matter by a stockholder present in person
or by proxy and broker "non-votes" will not be counted in determining the number
of shares voted for the election of directors or any other matter, but will be
counted for purposes of attaining a quorum.
PART I: MATTERS TO BE SUBMITTED FOR STOCKHOLDER CONSIDERATION
ELECTION OF DIRECTORS
(NOTICE ITEM NO. 1)
The Board of Directors has fixed the total number of directors at nine,
consisting of three classes of three directors each. Each director of the
Company is elected for a term of three years, with the terms of office of each
class ending in successive years. The terms of office of Mary S. Holzwasser,
Harry A. Holzwasser and Lawrence M. Levinson expire effective as of the date of
the 1995 Annual Meeting of Stockholders. At the meeting, the persons named in
the accompanying proxy intend to vote for the re-election of Mrs. Holzwasser and
Messrs. Holzwasser and Levinson for a three-year term expiring on the date of
the 1998 Annual Meeting of Stockholders, unless authority to do so is withheld.
All of the nominees are presently members of the Board of Directors. Each of the
aforesaid nominees has communicated to the Company his or her consent to being
named in this proxy statement and to serve as a director if elected. Although
the Board of Directors has no reason to believe that any of the nominees will be
unable to serve as a director if elected, in the event of such inability, the
proxy holders shall have the right to either vote for such substitute, if any,
as the present Board of Directors may designate, or to fix the number of
directors at such lesser number as will equal the number of nominees that are
able to serve.
The Board of Directors recommends that the stockholders vote for the
election of all nominees for directors.
<PAGE> 4
SELECTION OF AUDITORS
(NOTICE ITEM NO. 2)
The accounting firm of Ernst & Young LLP has been selected by the Board of
Directors to audit the books, records and accounts of the Company for the
current fiscal year, and the stockholders will be asked at the meeting to
approve this selection. A representative of Ernst & Young LLP is expected to be
present at the Annual Meeting of Stockholders. The Ernst & Young LLP
representative will be provided an opportunity to make a statement if he or she
so desires, and will be available to respond to appropriate questions.
The Board of Directors recommends that the stockholders vote to approve the
selection of this firm.
PART II: ADDITIONAL INFORMATION
<TABLE>
PRINCIPAL STOCKHOLDERS AND STOCKHOLDINGS OF MANAGEMENT
The following chart shows, as of October 6, 1995, (i) those stockholders
who each owned beneficially more than five (5%) percent of the outstanding
Common Stock of the Company (the one class of the Company's voting securities),
(ii) the beneficial ownership of each such principal stockholder, each director,
each nominee for director, the chief executive officer and each of the other
four most highly compensated executive officers of the Company (each a "Named
Executive Officer"), and (iii) the beneficial ownership of all directors and
executive officers of the Company as a group (which group consisted of 15
members as of October 6, 1995):
<CAPTION>
AMOUNT AND
NAME OF BENEFICIAL OWNER NATURE OF PERCENTAGE
(ADDRESS IS SHOWN ONLY FOR BENEFICIAL BENEFICIALLY
PRINCIPAL STOCKHOLDERS) OWNERSHIP(1) OWNED
-------------------------- ------------ ------------
<S> <C> <C>
Lawrence M. Levinson............................................ 1,409,605(2) 48.98%
c/o Burns & Levinson
125 Summer Street
Boston, Massachusetts
(Director)
Mary S. Holzwasser, Joseph Segal and Lawrence M. Levinson,
as Trustees of the Trust u/w/o Albert S. Holzwasser........... 526,567(3)(4) 18.33%
c/o Arrow Automotive Industries, Inc.
3 Speen Street
Framingham, Massachusetts
Harry A. Holzwasser............................................. 184,979 6.44%
6961 Lake Estates Court
Boca Raton, Florida
(Director and Named Executive Officer)
Dimensional Fund Advisors Inc. ................................. 166,300(5) 5.79%
1229 Ocean Avenue
Santa Monica, California
Jim L. Osment................................................... 45,000(6) 1.56%
(Director and Named Executive Officer)
Joel D. Holzwasser.............................................. 21,810(7) *
(Director)
</TABLE>
2
<PAGE> 5
<TABLE>
<CAPTION>
AMOUNT AND
NAME OF BENEFICIAL OWNER NATURE OF PERCENTAGE
(ADDRESS IS SHOWN ONLY FOR BENEFICIAL BENEFICIALLY
PRINCIPAL STOCKHOLDERS) OWNERSHIP(1) OWNED
-------------------------- ------------ ------------
<S> <C> <C>
Robert A. Holzwasser............................................ 21,810(7) *
(Director and Named Executive Officer)
William J. Ledbetter............................................ 18,253(8) *
(Named Executive Officer)
James F. Fagan.................................................. 10,500(9) *
(Director and Named Executive Officer)
Alan Steinert, Jr. ............................................. 5,100(10) *
(Director)
Winthrop P. Rockefeller......................................... 0 *
(Director)
------------ ------------
All directors and executive officers of the Company as a group
(15 persons).................................................. 1,742,663(11) 59.30%
<FN>
- - ---------------
* Represents beneficial ownership of less than one percent of the Company's
outstanding shares of Common Stock.
</TABLE>
(1) Shares are considered beneficially owned, for purposes of this table
only, if held by the person indicated as beneficial owner, or if such person,
directly or indirectly, through any contract, arrangement, understanding,
relationship or otherwise, has or shares the power to vote, to direct the voting
and/or to dispose or direct the disposition of such security, or if the person
has the right to acquire beneficial ownership within sixty (60) days, unless
otherwise indicated in the following footnotes. All shares listed in the above
table represent shares owned directly, unless otherwise stated in a footnote.
(2) Includes the following:
(a) 870,038 shares held as Trustee under the Arrow Automotive
Industries, Inc. Voting Trust Agreement dated March 28, 1990, as amended,
between Mary S. Holzwasser and Mr. Levinson (the "Voting Trust Agreement"),
pursuant to which the Trustee has sole voting and dispositive power with
respect to all shares subject thereto. The term of the Voting Trust
Agreement expires on March 28, 1998, subject to earlier termination by the
Trustee in his sole discretion.
(b) 526,567 shares held by the Trust u/w/o Albert S. Holzwasser (see
Note 4 below), of which Mr. Levinson is one of three Trustees. The
Trustees, acting by majority vote, have voting and dispositive power with
respect to the shares held by the Trust.
(c) Presently exercisable options to purchase 5,000 shares under the
Company's Stock Option Plan for Non-Employee Directors.
(3) Mary S. Holzwasser (a) is the sole beneficiary of the Voting Trust
Agreement described in Note 2(a) above, and upon expiration of said Voting Trust
Agreement on March 28, 1998 (assuming no extension) she would obtain voting and
dispositive power with respect to the shares subject thereto; and (b) has
entered into a Pledge Agreement with Harry A. Holzwasser, pursuant to which she
received a pledge of and security interest in 100,000 shares of the common stock
of the Company held by Mr. Holzwasser to secure certain indebtedness of Mr.
Holzwasser to Mrs. Holzwasser. If the Voting Trust Agreement were to expire and
an event of default were to occur under the Pledge Agreement at a time when Mrs.
Holzwasser was living and still a Trustee under the Trust u/w/o Albert S.
Holzwasser, Mrs. Holzwasser could, by exercise of her
3
<PAGE> 6
rights under the Pledge Agreement, acquire beneficial ownership of up to
1,496,605 shares of the common stock of the Company, representing approximately
52.09% of the presently issued and outstanding common stock of the Company.
(4) The principal beneficial interest in the Trust u/w/o Albert S.
Holzwasser is held by Mary S. Holzwasser during her lifetime, and thereafter by
Harry A. Holzwasser, Mary Sue Rosenthal and Jo-Ann Cohn. Mary Sue Rosenthal and
Jo-Ann Cohn are the adult daughters of Mary S. Holzwasser. The trustees, acting
by majority vote, have voting and dispositive power with respect to the subject
shares.
(5) As reported in the Schedule 13G filed with the Securities and Exchange
Commission by Dimensional Fund Advisors Inc. ("Dimensional") on February 13,
1995. Dimensional, a registered investment advisor, holds these shares in the
portfolios of DFA Investment Dimensions Group, Inc., a registered open-end
investment company, or in series of the DFA Investment Trust Company, a Delaware
business trust, or the DFA Group Trust and DFA Participation Group Trust,
investment vehicles for qualified employee benefit plans, all of which
Dimensional serves as investment manager. Dimensional has advised the Company
that it disclaims beneficial ownership of such shares.
(6) Includes presently exercisable options to purchase 15,000 shares under
the Company's 1993 Incentive Stock Option Plan.
(7) Includes presently exercisable options to purchase 5,100 shares under
the Company's 1993 Incentive Stock Option Plan.
(8) Includes (a) 10,725 shares held as custodian for his four children; and
(b) presently exercisable options to purchase 7,500 shares under the Company's
1993 Incentive Stock Option Plan.
(9) Includes presently exercisable options to purchase 7,500 shares under
the Company's 1993 Incentive Stock Option Plan.
(10) Includes presently exercisable options to purchase 5,000 shares under
the Company's Stock Option Plan for Non-Employee Directors.
(11) Includes: (a) presently exercisable options to purchase a total of
55,500 shares under the Company's 1993 Incentive Stock Option Plan and (b)
presently exercisable options to purchase a total of 10,000 shares under the
Company's Stock Option Plan for Non-Employee Directors.
4
<PAGE> 7
BOARD OF DIRECTORS
<TABLE>
The following table sets forth certain information concerning each director
whose term is continuing and each director nominated for election or
re-election. The principal occupation of each director, except as otherwise
indicated in the table, has remained unchanged during the past five years.
<CAPTION>
YEAR FIRST
DIRECTORS CONTINUING FOR TERMS ELECTED TERM
EXPIRING IN 1996 OR 1997 AGE DIRECTOR EXPIRING
------------------------------ --- ---------- --------
<S> <C> <C> <C>
Alan Steinert, Jr.(1)............................................. 59 1983 1996
Under Secretary, Executive Office of Environmental Affairs of
the Commonwealth of Massachusetts (May 1993 -- present);
President, The Eastern Company (1986 -- November, 1991)
Robert A. Holzwasser(2)........................................... 41 1983 1996
Vice President -- Engineering Operations and Product
Development of the Company
Joel D. Holzwasser(2)............................................. 39 1984 1996
Vice President -- Advertising and Public Relations of the
Company
(September, 1995 - present); formerly Vice President --
Marketing of the Company
Jim L. Osment..................................................... 56 1989 1997
President and Chief Executive Officer of the Company
James F. Fagan.................................................... 47 1989 1997
Executive Vice President, Treasurer and Chief Financial
Officer of the Company
Winthrop P. Rockefeller........................................... 47 1993 1997
Chairman of the Board and Chief Executive Officer of Winrock
Farms, Inc.
NOMINEES FOR TERM
EXPIRING IN 1998
-----------------
Mary S. Holzwasser(3)............................................. 83 1945 1995
Investor; Formerly an Officer of the Company
Harry A. Holzwasser(2)............................................ 71 1948 1995
Chairman of the Board of the Company
Lawrence M. Levinson(4)........................................... 77 1971 1995
Clerk of the Company; Partner at Burns & Levinson, Attorneys,
Boston, Massachusetts
</TABLE>
- - ---------------
(1) An involuntary petition under Chapter 7 of the Bankruptcy Code, 11
U.S.C. sec. 101, et. seq., was filed against The Eastern Company on November 7,
1991. Alan Steinert, Jr. is also a director of Iona Appliances, Inc.
(2) Harry A. Holzwasser is the father of Robert A. Holzwasser and Joel D.
Holzwasser, and the son of the late Albert S. Holzwasser, the founder of the
Company.
(3) Mary S. Holzwasser is the widow of Albert S. Holzwasser, the founder of
the Company.
5
<PAGE> 8
(4) Lawrence M. Levinson is also a director of Independent Bank Corp. and
Sonesta International Hotels Corporation.
Committees and Meetings of the Board of Directors
The Company has a standing Executive Committee, Audit Committee and
Compensation, Bonus and Stock Option Plan Committee of the Board of Directors.
There are no nominating or similar committees of the Board of Directors.
The Executive Committee is comprised of Lawrence M. Levinson (Chairman),
Harry A. Holzwasser and Jim L. Osment. The Executive Committee possesses, with
certain exceptions, all of the power and authority of the Board of Directors in
the management and direction of the business, property and affairs of the
Company. During fiscal 1995, the Executive Committee took three actions by
unanimous written consent.
The Audit Committee consists of Alan Steinert, Jr. (Chairman), Lawrence M.
Levinson and Winthrop P. Rockefeller. The function of the Audit Committee is to
make recommendations to the Board regarding the engagement of independent public
accountants, to review and approve the scope of the audit and the fees and other
arrangements with respect to such services, to review with the independent
public accountants the results of the audit engagement, and to generally review
the adequacy of the Company's accounting systems and internal controls. There
were four meetings of the Audit Committee during the 1995 fiscal year.
The Compensation, Bonus and Stock Option Plan Committee consists of
Lawrence M. Levinson (Chairman), Winthrop P. Rockefeller and Alan Steinert, Jr.
Its function is to review and make recommendations to the Board with respect to
compensation and bonuses for officers of the Company, and to administer the
Company's 1993 Incentive Stock Option Plan. The Compensation, Bonus and Stock
Option Plan Committee held one meeting during the 1995 fiscal year.
The Board of Directors held four meetings during the 1995 fiscal year. Each
of the directors attended at least 75% of the total number of meetings of the
Board of Directors and the committees on which he or she served during fiscal
1995.
6
<PAGE> 9
<TABLE>
EXECUTIVE OFFICERS OF THE COMPANY
The following table sets forth certain information concerning each
executive officer of the Company. The term of office of each executive officer
extends until the first meeting of the Board of Directors following the Annual
Meeting of Stockholders and thereafter until the executive officer's successor
is duly chosen and qualified, or until the executive officer's earlier
resignation, death, removal from office or disqualification.
<CAPTION>
NAME OF EXECUTIVE OFFICER EXECUTIVE OFFICE HELD AGE
------------------------------------------ --------------------------------- ---
<S> <C> <C>
Harry A. Holzwasser(1).................... Chairman of the Board 71
Jim L. Osment(1).......................... President and Chief Executive 56
Officer
James F. Fagan(1)......................... Executive Vice President, 47
Treasurer and Chief Financial
Officer
William J. Ledbetter(2)................... Vice President -- Marketing 45
Robert A. Holzwasser(1)................... Vice President -- Engineering 41
Operations and Product
Development
Joel D. Holzwasser(1)..................... Vice President -- Advertising and 39
Public Relations
Charles W. DeVore(3)...................... Vice President -- Corporate 54
Administration
Kathaleen M. Carroll-Coelho(4)............ Vice President and Controller 40
W. Harold Henderson(5).................... Vice President -- Manufacturing 55
Terry Reynolds(6)......................... Vice President -- Human Resources 50
Stephen D. Hoane(7)....................... Vice President -- Sales 45
<FN>
- - ---------------
(1) Harry A. Holzwasser, Robert A. Holzwasser, Joel D. Holzwasser, Jim L.
Osment and James F. Fagan are also directors of the Company. Reference is made
to the section entitled "Board of Directors" for further information concerning
their background.
(2) Mr. Ledbetter was elected a vice president of the Company in September,
1991, after serving as Customer Service Manager of the Company from 1986 to
September, 1991.
(3) Mr. DeVore was elected a vice president of the Company in April, 1989.
(4) Mrs. Carroll-Coelho was elected a vice president of the Company in
June, 1990.
(5) Mr. Henderson was elected a vice president of the Company in July,
1990.
(6) Mr. Reynolds was elected a vice president of the Company in December,
1993, after serving as Director of Human Resources for Manufacturing Operations
of the Company from December, 1990 to December, 1993, and Director of Human
Resources for Western Operations of the Company from June, 1990 to December,
1990.
(7) Mr. Hoane was elected a vice president of the Company in September,
1995. Prior to September, 1995, Mr. Hoane served as Corporate Director of Sales
for Crane Technologies from February, 1995 to September, 1995, and as the
National Sales Manager of the Company from May, 1991 to July, 1994, and District
Sales Manager of the Company from 1983 to May, 1991.
</TABLE>
7
<PAGE> 10
<TABLE>
EXECUTIVE COMPENSATION
The following table sets forth the compensation paid by the Company for the
1993-1995 fiscal years to the Company's Chief Executive Officer and each of the
other four most highly paid executive officers of the Company (each a "named
executive officer").
SUMMARY COMPENSATION TABLE
<CAPTION>
LONG TERM COMPENSATION
-----------------------------------
ANNUAL COMPENSATION
------------------------------- AWARDS
OTHER ------------------------ PAYOUTS
ANNUAL RESTRICTED SECURITIES --------
COMPEN- STOCK UNDERLYING LTIP ALL OTHER
NAME AND SALARY BONUS SATION AWARD(S) OPTIONS/ PAYOUTS COMPENSA-
PRINCIPAL POSITION YEAR ($) ($)(1) ($) ($) SARS(#)(3) ($) TION($)(2)
- - ------------------------ ----- -------- ------ ------- ---------- ---------- -------- ---------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Jim L. Osment........... 1995 $247,116 -- $ 619 (2) -- -- -- $ 1,565(4)
Chief Executive Officer 1994 $208,029 $4,161 $3,613 (1)(2) -- -- -- $ 775
and President 1993 $200,000 -- $ 449 (2) -- 25,000 -- $ 733
Harry A. Holzwasser..... 1995 $400,836 -- $3,055 (2) -- -- -- $ 4,583
Chairman of the Board 1994 $405,515 $4,717 $5,004 (1)(2) -- -- -- $ 4,140
1993 $405,000 -- $1,661 (2) -- -- -- $ 3,697
James F. Fagan.......... 1995 $177,924 -- $ 121 (2) -- -- -- $ 704(4)
Executive Vice 1994 $155,051 $3,101 $2,339 (1) (2) -- -- -- $ 158
President,
Treasurer and Chief 1993 $150,000 -- $ 85 (2) -- 12,500 -- $ 144
Financial Officer
William J. Ledbetter.... 1995 $118,616 -- -- -- -- -- $ 355
Vice President -- 1994 $120,000 $2,400 $1,471 (1) -- -- -- --
Marketing 1993 $ 96,246 -- -- -- 12,500 -- --
Robert A. Holzwasser.... 1995 $118,372 -- $ 84 (2) -- -- -- $ 498(4)
Vice President -- 1994 $116,016 $2,320 $1,442 (1)(2) -- -- -- $ 135
Engineering Operations 1993 $115,500 -- $ 75 (2) -- 8,500 -- $ 128
and Product Development
</TABLE>
- - ---------------
(1) The Company amended its profit sharing plan for salaried and clerical
employees to eliminate all executive officers from plan eligibility effective in
fiscal 1994 in order to preserve the tax-qualified status of said plan. In lieu
of the benefits provided to participants under the profit sharing plan in fiscal
1994, the Company approved the payment to each executive of a bonus equal to 2%
of his or her base compensation for fiscal 1994 (up to a maximum base salary of
$235,840), grossed-up to cover the executive's tax liability with respect to
such bonus. Included in the Summary Compensation Table under the heading "Bonus"
for fiscal 1994 are the amounts paid to each named executive officer as a bonus
and included in said table for fiscal 1994 under "Other Annual Compensation" are
the amounts paid to each named executive officer to cover his tax liability in
connection with this bonus.
(2) The Company has Executive Life Insurance Agreements with certain of the
named executive officers, which agreements are funded by so-called
"split-dollar" life insurance policies on the lives of the participating
executive officers. These agreements, in conjunction with the Company's group
life insurance plan, provide the named executives with the same life insurance
benefit currently provided to all executive employees of the Company (i.e. three
times salary, not to exceed $625,000). The Company is the sole owner of the life
insurance policies funding these agreements, and all proceeds therefrom in
excess of the executive's death benefit are payable to the Company. The death
benefit payable with respect to each executive is limited in all events to that
portion of the proceeds of the life insurance policy payable to his
beneficiaries by the insurance company under the terms of the policy, and the
Company is under no obligation to maintain these policies in effect or to
purchase replacement policies in the event of their cancellation. The Executive
Life Insurance Agreements require that the executive pay that portion of the
premiums on the underlying insurance policies which is equal to the cost of
one-year term insurance of an equivalent amount, and that the
8
<PAGE> 11
Company pay the balance of such premiums. During each of the last three fiscal
years, the Company has reimbursed each of the participating executives for that
portion of the premium required to be paid by them, grossed-up to cover the
executive's tax liability for such reimbursement. Included in the Summary
Compensation Table under the heading "All Other Compensation" are the amounts
reimbursed to certain of the named executive officers for their portion of the
premiums, and included in said table under the heading "Other Annual
Compensation" are the amounts of the gross-ups paid to certain of the named
executive officers to cover their tax liability in respect of such
reimbursements.
(3) Awards in 1993 represent the granting of stock options under the
Company's 1993 Incentive Stock Option Plan (the "1993 Plan"). The options
granted under the 1993 Plan expire five (5) years from the date of grant,
subject always to earlier termination in the event of the death, retirement or
other termination of employment of the option holder. Options granted pursuant
to the 1993 Plan are exercisable during the first year from the date of grant as
to twenty (20%) percent of the total number of shares subject thereto, become
exercisable as to an additional twenty (20%) percent of the total number of
shares subject thereto on each of the first, second and third anniversaries of
the date of the granting thereof, and are fully exercisable from the date of the
fourth anniversary of the date of the granting thereof until the expiration or
termination of the option in accordance with its terms. The exercise price of
options granted under the 1993 Plan is equal to the fair market value of the
Company's Common Stock at the time of grant.
(4) The Company maintains a 401(k) plan for its employees, including the
named executives. Under the plan, the Company makes matching contributions on
behalf of the employees in an amount equal to 10% of elective deferrals that an
employee makes, provided that no match exceeds 4% of the employee's compensation
and further that all matching contributions meet a certain non-discrimination
test. Included in the Summary Compensation Table under the heading "All Other
Compensation" are the amounts of the Company's matching contributions made under
the plan for the 1995 fiscal year on behalf of certain of the named executive
officers.
Compensation of Directors
Lawrence M. Levinson, Winthrop P. Rockefeller and Alan Steinert, Jr. each
received $10,000 as a director's fee for fiscal 1995. Neither Mrs. Holzwasser
nor any director who is also an employee of the Company is paid any fees or
other remuneration for service on the Board of Directors or any board committee.
Employment Contracts
In May, 1991, the Company entered into five-year employment agreements with
Jim L. Osment and James F. Fagan. In May, 1994, these agreements were amended to
extend the term until June, 1999, and to increase their respective minimum
annual salaries from $200,000 to $250,000 for Mr. Osment and from $150,000 to
$180,000 for Mr. Fagan. Upon termination of either Mr. Osment's or Mr. Fagan's
employment due to mental or physical disability or illness, the Company is
obligated to continue to pay them their respective base salaries until they
become eligible to receive benefits under a Company maintained disability
insurance plan, or if they are not participants in or otherwise not eligible to
receive benefits under a Company maintained disability insurance plan, for a
period of three (3) months following the date of such termination. Upon
termination of either Mr. Osment's or Mr. Fagan's employment agreement as a
result of a change of control which is not approved by the Board of Directors,
the Company is obligated to (i) continue any fringe benefits for the remainder
of the term of the employment agreement, which include pension or profit sharing
plans and any accident or health insurance plans; and (ii) pay the employee an
amount equal to three times the average annual compensation paid to him for the
previous five taxable years of the Company, less the sum of the present value of
any fringe benefits provided pursuant to the foregoing clause (i) plus one
dollar. The Company has a right to terminate these agreements for "proper
cause," as defined in the agreements, in which
9
<PAGE> 12
event the employee would not be entitled to receive any further compensation or
benefits under the agreement, except for compensation then due and payable but
remaining unpaid. These agreements also contain non-competition and
confidentiality commitments.
In April, 1993, the Company entered into an employment agreement with
William J. Ledbetter, Vice President of Marketing, for a term ending on July 1,
1996 providing for a salary to Mr. Ledbetter at the rate of $120,000 per year.
Upon termination of Mr. Ledbetter's employment due to mental or physical
disability or illness, the Company is obligated to continue to pay him his base
salary for a period of 3 months, or until he becomes eligible to receive
benefits under any Company maintained disability insurance plan (if earlier).
Upon termination of Mr. Ledbetter's employment as a result of the change of
control which is not approved by the Board of Directors, Mr. Ledbetter would be
entitled under the agreement to receive benefits and payments calculated in the
same manner as those payable to Messrs. Osment and Fagan in such an event under
their respective employment agreements, as described in the foregoing paragraph.
The Company has the right to terminate this agreement for "proper cause," as
defined in the agreement, in which event Mr. Ledbetter would not be entitled to
receive any further compensation or benefits under the agreement, except for
compensation then due and payable but remaining unpaid. This agreement also
contains non-competition and confidentiality commitments.
In February, 1994, the Company entered into an employment agreement with
Harry A. Holzwasser for an initial term ending in June, 1998, which term was to
be automatically extended for an unlimited number of successive terms of one
year each unless and until terminated by the Company by giving written notice
not less than 6 months prior to the end of the initial term or any one year
continuation. The agreement was amended in August, 1995 to limit the number of
successive one-year terms following the initial term for which the agreement may
be extended to two, and to require that Mr. Holzwasser serve in a consulting
capacity to the Company from time to time at the Company's request for a period
of five (5) years following the expiration of the term of his employment with
the Company. This agreement, as amended, provides for a minimum annual salary of
$405,000 throughout the term of his employment, and an annual amount equal to
50% of this minimum annual salary for a period of five years following the
expiration of the term of his employment. The Company has a right to terminate
this agreement for "proper cause," as defined in the agreement, in which event
Mr. Holzwasser would not be entitled to receive any further compensation or
benefits under the agreement, except for compensation then due and payable but
remaining unpaid. In the event of his total disability during the initial term
or any continuation of the term of his employment under the agreement, the
Company is obligated to pay Mr. Holzwasser an annual amount equal to 50% of his
minimum annual salary (less the amount of any proceeds received by him under any
disability insurance policy maintained by the Company) commencing on the date of
total disability and continuing for the duration of such total disability but
not for more than five years. In the event of Mr. Holzwasser's death during the
initial term or any continuation of the term of his employment under this
agreement, the Company is obligated to pay to Carole Holzwasser, Mr.
Holzwasser's wife, an annual amount equal to 50% of his minimum annual salary
commencing on the date of his death and continuing for a period of five years,
less the time, if any, Mr. Holzwasser was disabled. This agreement also contains
non-competition and confidentiality commitments.
Pension Plans
The Company has Supplemental Benefit Agreements with two named executive
officers, Messrs. Osment and Fagan. These agreements provide that in the event
of the death, retirement, termination of employment following a change of
control or other termination of the executive's employment by the executive or
by the Company for any reason (with or without cause), except by reason of
criminal or dishonest acts or acts of moral turpitude by the executive, the
Company shall pay to the executive officer or his beneficiaries until his
10
<PAGE> 13
death or for a period of ten years, whichever is longer, an annual amount equal
to 50% of the executive officer's average annual base salary (exclusive of
bonuses and other benefits) during the last 36 months of his employment with the
Company. No termination or retirement benefits are payable to the executive
officer under the agreement unless his retirement or termination of employment
occurs after the later of the executive officer's 55th birthday or the date on
which the executive officer has been continuously employed by the Company for a
period of 15 years, except in the event of the executive's death or a change of
control of the Company. The Supplemental Benefit Agreements also contain
non-competition and confidentiality commitments by the executive officer. The
Company's obligations under the Supplemental Benefit Agreements are limited in
all events to an amount not greater than the benefits available to the Company
under life insurance policies carried by the Company on the life of such
executive officer to fund such obligations, less the aggregate net outlay by the
Company on such policies. The estimated annual benefits payable under the
Supplemental Benefit Agreements are illustrated in the table below, assuming the
stated compensation levels.
<TABLE>
PENSION PLAN TABLE
<CAPTION>
FINAL 3-YEAR AVERAGE ESTIMATED
BASE SALARY ANNUAL BENEFIT
-------------------- --------------
<S> <C>
$150,000............................................ $ 75,000
175,000............................................ 87,500
200,000............................................ 100,000
225,000............................................ 112,500
250,000............................................ 125,000
275,000............................................ 137,500
300,000............................................ 150,000
</TABLE>
The compensation on which the benefits under the Supplemental Benefit
Agreements are based is the amount reported in the salary column of the Summary
Compensation Table. Mr. Osment is 56 years old and has been an employee of the
Company for more than fifteen years, and therefore has met the service and age
requirements under his Supplemental Benefit Agreement. Mr. Fagan is 47 years old
and has been an employee of the Company for approximately twelve years.
11
<PAGE> 14
Stock Options
During the 1995 fiscal year, no stock options were granted to or exercised
by any of the named executive officers. The following table provides information
as to the value of unexercised options held as of June 24, 1995 by named
executives.
<TABLE>
AGGREGATED OPTION/SAR EXERCISES IN LAST FISCAL YEAR
AND FISCAL YEAR END OPTION/SAR VALUES
<CAPTION>
NUMBER OF
SECURITIES VALUE OF
UNDERLYING UNEXERCISED
UNEXERCISED IN-THE-MONEY
OPTIONS/SARS OPTIONS/SARS
AT FY-END (#) AT FY-END ($)
----------------- -----------------
SHARES ACQUIRED VALUE EXERCISABLE/ EXERCISABLE/
NAME ON EXERCISE (#) REALIZED($) UNEXERCISABLE UNEXERCISABLE(1)
---- ------------------ ------------ ----------------- -----------------
<S> <C> <C> <C> <C>
Jim L. Osment................. -- -- 15,000/10,000 --
Harry A. Holzwasser........... -- -- -- --
James F. Fagan................ -- -- 7,500/5,000 --
William J. Ledbetter.......... -- -- 7,500/5,000 --
Robert A. Holzwasser.......... -- -- 5,100/3,400 --
<FN>
- - ---------------
(1) The exercise price of the options was greater than the closing price of
the Company's common stock on June 23, 1995.
</TABLE>
Compensation Committee Interlocks and Insider Participation
The following non-employee directors served on the Compensation, Bonus and
Stock Option Plan Committee (the "Committee") of the Company during fiscal 1995:
Lawrence M. Levinson, Alan Steinert, Jr. and Winthrop P. Rockefeller.
Mr. Levinson, a director and the Clerk of the Company, is a partner of the
law firm of Burns & Levinson, counsel for the Company. During the 1995 fiscal
year, Burns & Levinson received legal fees from the Company not exceeding five
(5%) percent of the firm's gross revenues.
Report of the Compensation, Bonus and Stock Option Plan Committee of the Board
of Directors Regarding Executive Compensation
The compensation policies and practices of the Company applicable to its
executive officers (including the Chief Executive Officer) are established by
the Compensation, Bonus and Stock Option Plan Committee of the Board of
Directors (the "Committee"), working in conjunction with senior management and
the full Board of Directors. The Committee is composed entirely of individuals
who are outside directors.
Compensation Philosophy
The Committee periodically reviews and approves, with any modifications it
deems appropriate, recommendations developed and submitted by senior management
regarding the salaries and other compensation to be paid to all executive
officers. In making decisions regarding the compensation of executive officers,
the Committee strives to create compensation packages that will attract and
retain qualified executives and motivate those individuals to perform to the
full extent of their abilities, while at the same time recognizing and promoting
the financial interests of the Company's stockholders.
12
<PAGE> 15
The Company's executive compensation packages generally consist of base
salary, long-term incentive compensation in the form of stock options granted
under the Company's incentive stock option plan, and participation in various
Company sponsored benefit plans including the Supplemental Benefit Plan,
Executive Life Insurance Plan, 401k Plan and medical insurance plan. The Company
has entered into employment contracts with certain of its executive officers
(including the Chief Executive Officer) which the Committee and the Board of
Directors feel are particularly key to the success of the Company going forward
(as described above under the caption "Employment Contracts").
Salaries and Bonuses
In determining whether the base salary of any executive officer should be
adjusted in any fiscal year or whether any executive should receive a bonus or
bonuses in any fiscal year, and the amounts of such adjustments or bonuses, if
any, the Committee considers all relevant information, including both objective
and subjective factors. The factors typically considered include the individual
performance of the executive relative to specific goals established by senior
management for that executive, the Chief Executive Officer's and other senior
management's perception and evaluation of such individual's performance, any
changes or increases in the responsibilities assigned to the individual, the
performance of the operations directed by such individual (both operationally
and financially), increases in cost of living, and the financial performance of
the Company as a whole.
None of the executive officers received any bonuses or any increases in
their respective base salaries since those reported in the Company's proxy
statement for its 1994 annual meeting of stockholders. In May, 1995, all of the
executives (including those with employment contracts) agreed to a ten percent
reduction in their base salaries pending improvement of the Company's operating
results as part of a Company-wide cost reduction program implemented in the
fourth quarter of the 1995 fiscal year to mitigate the effects of the decline in
sales experienced by the Company in the third and fourth quarters of the year.
Incentive Compensation
Most of the executives hold stock options granted under the Company's
incentive stock option plan. Stock options are intended to serve as long-term
incentive compensation. The value of compensation provided to executive officers
of the Company in the form of stock options granted under the Company's
stockholder approved incentive stock option plans is directly tied to the future
performance of the Company's stock. Options granted under these plans have an
exercise price equal to the market price of the Company's stock on the date of
grant. Accordingly, these options have no value unless subsequent to the date of
grant there is appreciation in the market price of the Company's stock. Because
of the direct relationship between the value of these options to their
recipients and the Company's stock price, the granting of stock options has the
effect of aligning the interests of the Company's executives with those of its
stockholders. No new stock options were granted to executives during the 1995
fiscal year.
Compensation of the Chief Executive Officer
In May, 1994, the Company agreed to an amendment of its employment
agreement with Jim L. Osment, President and Chief Executive Officer of the
Company, extending the term of the agreement until June 26, 1999, and increasing
his base salary from $200,000 per annum to $250,000 per annum. Prior to May,
1994, Mr. Osment had not received an increase in his base salary since the date
of his election as President and Chief Executive officer in June, 1990. The
Committee approved this amendment and salary increase based on Mr. Osment's
contributions and leadership role in the restructuring and turn-around of the
Company implemented since his election in 1990, as well as his consistent
commitment to and continuing development of programs for the long-term success
of the Company. Since Mr. Osment assumed the position of President
13
<PAGE> 16
and Chief Executive Officer of the Company, he has overseen and directed the
development and implementation of innovative programs in the areas of
purchasing, manufacturing, customer service, sales and marketing. During the
period from June, 1990 through the end of fiscal 1994, the Company increased
sales levels, returned to profitability and increased stockholders' equity.
These results were achieved during a period of difficult economic conditions in
the automotive aftermarket and in the United States generally, and led to a
substantial increase in stockholder value.
Mr. Osment did not receive any bonuses or any increases in his base salary
during fiscal 1995. In May, 1995, Mr. Osment voluntarily reduced his base salary
by ten percent pending improvement of the Company's operating results as part of
the Company-wide cost reduction program implemented in the fourth quarter
described above.
In January, 1993, Mr. Osment was granted an option to purchase 25,000
shares under the Company's 1993 Incentive Stock Option Plan in recognition of
his continued importance to the success of the Company and his accomplishments
to date in reducing operating expenses, reorganizing the Company's sales force
and returning the Company to profitability. As noted above, the value of this
option to Mr. Osment is completely dependent on the performance of the Company's
stock price subsequent to the date of grant. Mr. Osment did not receive any
additional stock options during the 1994 or 1995 fiscal years.
COMPENSATION, BONUS AND STOCK
OPTION PLAN COMMITTEE
Lawrence M. Levinson, Chairman
Alan Steinert, Jr.
Winthrop P. Rockefeller
14
<PAGE> 17
Stock Performance Graph
The following graph sets forth the cumulative total return to the Company's
stockholders during the five-year period ended June 24, 1995, compared to an
overall stock market index (Dow Jones Equity Market Index) and the Company's
peer group index (Dow Jones Automobile Parts and Equipment excluding Tire and
Rubber Makers Index) during the same period, in each case assuming reinvestment
of dividends.
COMPARISON OF FIVE YEAR CUMULATIVE TOTAL RETURN
FOR THE YEAR ENDED JUNE 24, 1995
<TABLE>
<CAPTION>
MEASUREMENT PERIOD STOCK MARKET PEER GROUP
(FISCAL YEAR COVERED) COMPANY INDEX INDEX
<S> <C> <C> <C>
6/30/90 100.00 100.00 100.00
6/29/91 82.50 107.70 99.22
6/27/92 137.50 121.61 122.91
6/26/93 125.00 140.09 157.75
6/25/94 140.00 141.99 160.71
6/24/95 117.50 181.06 178.91
</TABLE>
The stock performance graph assumes $100 was invested on June 30, 1990.
CERTAIN RELATIONSHIPS AND RELATED PARTY TRANSACTIONS
During the 1995 fiscal year, Burns & Levinson, counsel for the Company, of
which firm Lawrence M. Levinson, a director and the Clerk of the Company, is a
partner, received legal fees from the Company not exceeding five (5%) percent of
the firm's gross revenues.
The Company formerly leased property in Hudson, Massachusetts, from the
Holzwasser Realty Trust, a beneficial interest in which is owned by Harry A.
Holzwasser, the children of Harry A. Holzwasser and the children and
grandchildren of Mary S. Holzwasser. This property was vacated in 1981 following
the shutdown of the plant. It appears that the Company may have been responsible
for the release of hazardous waste at the Hudson site. Under the terms of the
lease between the Company and the Holzwasser Realty Trust, the Company is
responsible for all clean-up costs and other liabilities incurred as a result of
the introduction of hazardous waste at said property. To date, the Company has
incurred expenses of approximately $914,000 in connection with the Hudson site
for environmental testing and remedial measures for the clean-up of the site. A
groundwater treatment system has been installed at this site. It is anticipated
that the operating costs of the groundwater treatment system will be between
$40,000 and $45,000 per year. Treatment or removal of
15
<PAGE> 18
contaminated soil may also be required. Because environmental testing is still
being conducted at this site, as well as on adjacent properties to determine the
extent (if any) of off-site contamination, the exact scope of the final remedial
measures that must be undertaken cannot yet be determined.
During fiscal 1983, Harry A. Holzwasser, Chairman of the Board and a
director of the Company, borrowed $58,800 from the Company pursuant to a
non-interest bearing demand promissory note, which (as of October 3, 1995) had
an outstanding balance of $53,800. During fiscal 1985, Mr. Holzwasser borrowed
$450,000 from the Company under a demand promissory note bearing interest at a
rate equal to the Company's average borrowing rate, which (as of October 3,
1995) had an outstanding principal balance of $310,000, with accrued interest of
$6,920. The largest aggregate amount outstanding under these two loans at any
time during the 1995 fiscal year (including all principal and accrued interest)
was $637,537.
During the period from fiscal 1985 through fiscal 1990, James F. Fagan,
Executive Vice President, Treasurer, Chief Financial Officer and a director of
the Company, borrowed a total of $57,500 from the Company under a series of
demand promissory notes bearing interest at a rate equal to the Company's
average borrowing rate. As of October 3, 1995, these notes had an aggregate
principal balance of $41,180 and accrued interest of approximately $32,948. The
largest aggregate amount outstanding under these loans at any time during the
1995 fiscal year (including all principal and accrued interest) was $75,973.
COMPLIANCE WITH SECTION 16(A) OF THE SECURITIES EXCHANGE ACT OF 1934
Section 16(a) of the Securities Exchange Act of 1934 requires officers and
directors of the Company and persons who own more than ten percent of a
registered class of the Company's equity securities (collectively, "Reporting
Persons") to file reports of ownership and changes in ownership of the Company's
Common Stock with the Securities and Exchange Commission, and to furnish the
Company with copies of all such reports. Based solely on its review of the
copies of such reports furnished to the Company by such Reporting Persons or on
the written representations of such Reporting Persons that no reports were
required, the Company believes that during the fiscal year ended June 24, 1995,
all of the Reporting Persons complied with their Section 16(a) filing
requirements with respect to their ownership of the Company's Common Stock,
except as follows: Charles W. DeVore (Vice President -- Corporate
Administration) failed to file reports on Form 4 with respect to transactions
which occurred in May and June, 1995. These transactions were subsequently
reported on a Form 5 filed by Mr. DeVore on September 5, 1995.
STOCKHOLDER PROPOSALS
Proposals of stockholders intended to be presented at the 1996 Annual
Meeting of Stockholders must comply with Rule 14a-8 of the Securities and
Exchange Commission issued under the Securities and Exchange Act of 1934, and
must be received at the corporate headquarters of the Company not later than
June 21, 1996.
OTHER MATTERS
The Board of Directors knows of no matters, other than those discussed in
Part I above, which are to be brought before this meeting. However, if any
matter not now known is presented at the meeting, it is the intention of the
persons named in the accompanying form of proxy to vote said proxy in accordance
with their judgment on such matter.
16
<PAGE> 19
The Company will bear the cost of solicitation of proxies. Solicitation of
proxies by mail may be followed by telephone or other personal solicitation of
certain stockholders by officers or other employees of the Company.
By order of the Board of Directors
LAWRENCE M. LEVINSON,
Clerk
October 19, 1995.
If you do not expect to be present at this meeting and wish your stock to
be voted, you are requested to date, sign and mail promptly the enclosed proxy
which is being solicited on behalf of the Board of Directors. A return envelope,
which requires no postage, is enclosed for this purpose.
ANY STOCKHOLDER MAY REVOKE HIS OR HER PROXY AT ANY TIME
BEFORE IT HAS BEEN EXERCISED
17
<PAGE> 20
ARROW AUTOMOTIVE INDUSTRIES, INC.
Proxy for 1995 Annual Meeting of Stockholders
to be held November 8, 1995
THIS PROXY IS BEING SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
The undersigned, having received notice of meeting and proxy statement
of the Board of Directors, hereby appoint(s) Jim L. Osment and James F. Fagan,
and each of them acting singly, attorneys or attorney of the undersigned (with
full power of substitution in them and in each of them) for and in the name(s)
of the undersigned to attend the 1995 Annual Meeting of Stockholders of Arrow
Automotive Industries, Inc. to be held at the offices of Burns & Levinson, 125
Summer Street, Boston, Massachusetts 02110, on Wednesday, Novemeber 8, 1995, at
10:00 a.m., and any adjournment or adjournments thereof, and there to vote and
act in regard to all matters which may properly come before said meeting
(except those matters as to which authority is hereinafter withheld) upon and
in respect to all shares of Common Stock of said corporation upon or in respect
of which the undersigned would be entitled to vote or act, and with all powers
the undersigned would possess if personally present, and especially (but
without limiting the general authorization and power hereby given) to vote and
act as directed by the undersigned on the reverse side of this proxy card. THE
BOARD OF DIRECTORS FAVORS THE PROPOSALS SET FORTH ON THE REVERSE. IF NO
INSTRUCTIONS ARE INDICATED, THE UNDERSIGNED'S VOTE WILL BE CAST IN THE ELECTION
OF DIRECTORS FOR THE NOMINEES LISTED IN THE PROXY STATEMENT AND WILL BE CAST FOR
PROPOSAL (2) ON THE REVERSE. Attendance of the undersigned at said meeting or
at any adjournment or adjournments thereof will not be deemed to revoke this
proxy unless the undersigned shall affirmatively indicate thereat his intention
to vote said shares in person.
(TO BE SIGNED ON REVERSE SIDE)
/ X / PLEASE MARK YOUR
VOTES AS IN THIS
EXAMPLE.
FOR WITHHELD
all from all Nominees: Lawrence M. Levinson
nominees nominees Mary S. Holzwasser
Harry A. Holzwasser
1. ELECTION / / / /
OF
DIRECTORS
/ / For, except vote withheld from the following nominee(s)
__________________________________________________
__________________________________________________
FOR AGAINST ABSTAIN
2. Proposal to ratify and approve the selection / / / / / /
of the firm of Ernst & Young LLP as auditors
of the Corporation.
The undersigned hereby confer(s) upon said attorneys and proxies, and each of
them, discretionary authority to vote (a) upon any other matters or proposals
not known at the time of the solicitation of this proxy which may properly come
before the meeting, and (b) with respect to the selection of directors in the
event of any unforeseen emergency.
Mark here for address change and note at left / /
Please mark, sign, date and return this proxy card promptly using the enclosed
envelope.
SIGNATURE(S)___________________________________________ DATE____________,1995
Note: In signing, please write name exactly as appearing on imprint. For stock
held jointly, each owner should personally sign. For stock held by a
corporation, affix corporate seal. If a fiduciary capacity is attributed to the
undersigned in the imprint hereon, this proxy is signed by the undersigned in
that capacity.
