FORM 10-Q
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
[X] Quarterly Report Pursuant to Section 13 or 15(d) of
the Securities Exchange Act of 1934
For the quarterly period ended MARCH 29, 1997
or
[ ] Transition Report Pursuant to Section 13 or 15(d) of
the Securities Exchange Act of 1934
For the transition period from
to
Commission file number 1-7737
ARROW AUTOMOTIVE INDUSTRIES, INC.
(Exact name of registrant as specified in its charter)
MASSACHUSETTS
04-1449115
(State or other jurisdiction of incorporation or organization)
(I.R.S. Employer I.D. No.)
3 SPEEN STREET, FRAMINGHAM, MASSACHUSETTS 01701
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code (508) 872-3711
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days.
Yes X No
Indicate the number of shares outstanding of each of the issuer's classes of
common stock, as of the latest practicable date: 2,873,083 shares of the
Company's Common Stock ($.10 par value) were outstanding as of May 9, 1997.
ARROW AUTOMOTIVE INDUSTRIES, INC.
INDEX
<TABLE>
<CAPTION>
Page NUMBER
<S> <C> <C>
PART I FINANCIAL INFORMATION
ITEM 1. Financial Statements (Unaudited):
Condensed Balance Sheets -
March 29, 1997 and June 29, 3
1996..........................................
Condensed Statements of Operations - Three Months Ended
March 29, 1997 and March 30, 4
1996........................................
Condensed Statement of Operations - Nine Months Ended
March 29, 1997 and March 30, 5
1996.......................................
Condensed Statements of Cash Flows - Nine Months Ended
March 29, 1997 and March 30, 6
1996........................................
Notes to Condensed Financial 7 - 8
Statements.................................
ITEM 2. Management's Discussion and Analysis of the Financial
Condition and Results of 9 - 14
Operations.......................................
PART II OTHER INFORMATION
ITEM 1. Legal 15
Proceedings......................................................................
ITEM 2. Changes in 15
Securities.................................................................
ITEM 3. Default upon Senior 15
Securities...................................................
ITEM 4. Submission of Matters to a Vote of Security 15
Holders..................
ITEM 5. Other 15
Information........................................................................
ITEM 6. Exhibits and Reports on Form 8- 15
K..............................................
SIGNATURES .................................................................................................... 16
</TABLE>
1
<PAGE>
PART I - ITEM 1 -- FINANCIAL INFORMATION
ARROW AUTOMOTIVE INDUSTRIES, INC.
CONDENSED BALANCE SHEETS
(UNAUDITED)
<TABLE>
<CAPTION>
ASSETS March 29, 1997 June 29,
1996
<S> <C> <C> <C> <C>
CURRENT ASSETS
Cash and equivalents $ 380,415 $ 850,537
Accounts receivable, less allowances 13,532,212 16,468,224
Inventories - Note B 31,977,195 37,312,671
Deferred income tax - Note D 1,740,000 2,291,000
Prepaid expenses and other current assets 1,539,483 873,661
TOTAL CURRENT ASSETS 49,169,305 57,796,093
PROPERTY, PLANT AND EQUIPMENT 36,222,452 35,727,256
Less allowances for depreciation 23,849,134 22,912,356
12,373,318 12,814,900
OTHER ASSETS 2,354,816 2,500,718
TOTAL ASSETS $ 63,897,439 $ 73,111,711
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES
Current portion of advances under revolving
line of credit $ 2,932,033 $ 5,104,715
Accounts payable 8,354,456 6,647,237
Cash overdrafts 1,729,358 1,260,165
Other current liabilities - Note C 4,600,213 5,272,737
Current portion of long-term debt 1,376,274 1,385,672
TOTAL CURRENT LIABILITIES 18,992,334 19,670,526
LONG-TERM DEBT 16,944,353 17,969,339
DEFERRED INCOME TAXES - Note D 1,740,000 1,748,000
ACCRUED RETIREMENT BENEFITS 2,648,749 2,428,226
STOCKHOLDERS' EQUITY
Common stock 296,887 296,887
Other stockholders' equity 23,724,440 31,448,057
Less cost of common stock in treasury 449,324 449,324
TOTAL STOCKHOLDERS' EQUITY 23,572,003 31,295,620
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY
$ 63,897,439 $ 73,111,711
</TABLE>
See accompanying notes to the condensed financial statements.
2
<PAGE>
ARROW AUTOMOTIVE INDUSTRIES, INC.
CONDENSED STATEMENTS OF OPERATIONS
(UNAUDITED)
<TABLE>
<CAPTION>
THREE MONTHS ENDED
March 29, 1997 March 30, 1996
(13 Weeks) (13 Weeks)
<S> <C> <C> <C> <C>
Net sales $ 22,480,645 $ 26,226,073
Cost and expenses:
Cost of products sold 22,517,273 20,742,553
Selling, administrative and general 5,396,339 5,486,176
Restructuring charge - Note C (100,000)
Interest 618,317 532,587
28,431,929 26,761,316
Loss before income taxes (5,951,284) (535,243)
Provision (benefit) for income taxes - Note D 169,000 (176,000)
NET LOSS $ (6,120,284) $ (359,243)
Weighted average number of shares
outstanding 2,873,083 2,873,083
NET LOSS PER SHARE $ (2.13) $ (0.13)
</TABLE>
See accompanying notes to the condensed financial statements.
ARROW AUTOMOTIVE INDUSTRIES, INC.
CONDENSED STATEMENTS OF OPERATIONS
(UNAUDITED)
<TABLE>
<CAPTION>
NINE MONTHS ENDED
March 29, 1997 March 30, 1996
(39 Weeks) (40 Weeks)
<S> <C> <C> <C> <C>
Net sales $ 68,191,970 $ 79,101,309
Cost and expenses:
Cost of products sold 58,563,196 62,842,821
Selling, administrative and general 15,110,583 15,971,539
Restructuring charge - Note C 1,100,000
Interest 1,726,808 1,567,500
76,500,587 80,381,860
Loss before income taxes (8,308,617) (1,280,551)
Benefit from income taxes - Note D (585,000) (460,000)
NET LOSS $ (7,723,617) $ (820,551)
Weighted average number of shares
outstanding 2,873,083 2,873,083
NET LOSS PER SHARE $ (2.69) $ (0.29)
</TABLE>
See accompanying notes to the condensed financial statements.
ARROW AUTOMOTIVE INDUSTRIES, INC.
CONDENSED STATEMENTS OF CASH FLOWS
(UNAUDITED)
<TABLE>
<CAPTION>
NINE MONTHS ENDED
March 29, 1997 March 30, 1996
(39 Weeks) (40 Weeks)
<S> <C> <C> <C> <C>
OPERATING ACTIVITIES
Net cash provided by
operating activities $ 3,106,638 $ 2,618,020
INVESTING ACTIVITIES
Purchase of property, plant and (495,196) (502,409)
equipment
Other 125,503 (174,081)
Net cash used in investing activities (369,693) (676,490)
FINANCING ACTIVITIES
Payment of long-term debt and capital
lease obligations (1,034,385) (1,037,697)
Decrease in advances under
revolving line of credit (2,172,682) (1,210,823)
Proceeds from exercise of stock options 0 332
Net cash provided by financing
activities (3,207,067) (2,248,188)
DECREASE IN CASH AND EQUIVALENTS (470,122) (306,658)
CASH AND EQUIVALENTS AT BEGINNING OF PERIOD
850,537 753,010
CASH AND EQUIVALENTS AT END OF PERIOD $ 380,415 $ 446,352
</TABLE>
See accompanying notes to the condensed financial statements.
3
<PAGE>
ARROW AUTOMOTIVE INDUSTRIES, INC.
NOTES TO CONDENSED FINANCIAL STATEMENTS
(UNAUDITED)
NOTE A -- BASIS OF PRESENTATION
The accompanying unaudited condensed financial statements have been prepared in
accordance with generally accepted accounting principles for interim financial
information and with the instructions to Form 10-Q and Rule 10-01 of Regulation
S-X. Accordingly, they do not include all of the information and footnotes
required by generally accepted accounting principles for complete financial
statements. In the opinion of management, all adjustments (consisting of
normal recurring accruals) considered necessary for the fair presentation have
been included. Operating results for the nine month period ended March 29,
1997 are not necessarily indicative of the results that may be expected for the
year ending June 28, 1997. For further information, refer to the financial
statements and footnotes thereto included in the Company's Annual Report on
Form 10-K for the year ended June 29, 1996. The balance sheet at June 29, 1996
has been derived from the audited financial statements at that date.
NOTE B -- INVENTORIES
The components of inventory consist of the following:
<TABLE>
<CAPTION>
March 29, 1997 June 29,
1996
<S> <C> <C> <C> <C>
Stated at cost on the first-in, first-out
(FIFO)
method:
Finished goods $ 11,605,000 $ 11,522,643
Work in process and materials 26,713,974 32,260,028
38,318,974 43,782,671
Less reserve required to state inventory on
the
last-in, first-out (LIFO) method (6,341,779) (6,470,000)
$ 31,977,195 $ 37,312,671
</TABLE>
The Company continually reviews the net realizable value of its inventory. The
Company's analyses in the third quarter of fiscal 1997 identified certain
inventory items for which quantities on hand exceed forecasted needs. The
combined effect on the Company's inventory requirements due to the continued
decline in unit sales through the third quarter of fiscal 1997 and the
consolidation of manufacturing facilities and product line production
resulted in excess inventory levels. As a result, the Company recorded a
non-cash charge in the third quarter of $4,000,000 to write down certain
inventories to net realizable value.
4
<PAGE>
NOTE C -- RESTRUCTURING CHARGE
In September, 1996, the Board of Directors of the Company approved a plan to
restructure its operations by closing its Santa Maria, California production
facility and transferring its manufacturing operations to the Company's
Morrilton, Arkansas plant. The action was taken to enhance profit margins by
streamlining the Company's productive capacity to better match its production
requirements. As a result, a $1.2 million restructuring charge was recorded in
the first quarter of fiscal 1997. Of the total charge, $625,000 related to the
disposal of the facility, $360,000 related to termination benefits for
displacement of its 350-employee workforce, $150,000 related to the write-off
of machinery and equipment, and $65,000 to other closing expenses. The Company
has paid $380,000 in termination benefits to its displaced employees, and in
the third quarter of fiscal 1997, the Company reversed $100,000 of the
restructuring charge relating to the write-off of machinery and equipment.
NOTE D -- INCOME TAXES
As a result of the losses sustained through the third quarter, the Company
exceeded the amount of taxable income available for carryback and, as a result,
the Company recorded a tax provision of $543,000 to establish a valuation
allowance against net deferred tax assets. This tax provision was offset by a
tax benefit of $1,128,000 recorded for the nine months ended March 29, 1997.
5
<PAGE>
PART I
ITEM 2 -- MANAGEMENT'S DISCUSSION AND ANALYSIS OF THE FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
The following discussion and analysis should be read in conjunction with the
financial statements and notes thereto. All forward looking statements
contained in the following discussion and analysis and elsewhere in this report
are qualified in their entirety by the cautionary statement appearing at the
end of the discussion and analysis.
RESTRUCTURING PLAN
The Board of Directors of the Company approved a plan in September, 1996, to
restructure its operations by closing its Santa Maria, California production
facility and transferring its manufacturing operations to its Morrilton,
Arkansas plant. Production at the Santa Maria, California facility ceased in
early December, 1996. As a result of this plan, the Company accrued a $1.2
million restructuring reserve in the first quarter of fiscal 1997, related to
termination benefits for displacement of its workforce and to the disposition
of its plant facility and certain equipment. In the third quarter, the Company
reversed $100,000 of the restructuring charge relating to the write off of
machinery and equipment. The outstanding balance of this reserve at March 29,
1997 was $720,000 and relates primarily to the disposition of the facility, if
and when such disposition occurs.
In addition to the restructuring charge, the Company incurred one time period
costs relating to the restructuring in the three quarters of fiscal 1997 of
$10,000, $880,000 and $952,000, respectively. These costs relate to ongoing
operations and include such costs as the shipment of inventory and equipment,
employee relocation costs and initial labor and production inefficiencies
resulting from the consolidation of production facilities from three to two
plants. The Company anticipates that approximately $200,000 of additional
costs relating to the restructuring will be incurred in the fourth quarter of
fiscal 1997.
INVENTORY PROVISION
The Company continually reviews the net realizable value of its inventory. The
Company's analyses in the third quarter of fiscal 1997 identified certain
inventory items for which quantities on hand exceed forecasted needs. The
combined effect on the Company's inventory requirements due to the continued
decline in unit sales through the third quarter of fiscal 1997 and the
consolidation of manufacturing facilities and product line production
resulted in excess inventory levels. As a result, the Company recorded a
non-cash charge in the third quarter of $4,000,000 to write down certain
inventories to net realizable value.
NET LOSS
The third quarter of fiscal 1997 resulted in a net loss of $6,120,000 compared
to a net loss of $359,000 for the third quarter of fiscal 1996. For the nine
months ended March 29, 1997, the Company incurred a net loss of $7,724,000
compared to a net loss of $821,000 for the comparable period in fiscal 1996.
The year to date operating loss before income taxes for fiscal 1997 includes
the previously discussed restructuring charge of $1,100,000, the third quarter
inventory provision of $4,000,000, and other non-recurring costs related to the
California plant closing totaling $1,842,000.
6
<PAGE>
NET SALES
Net sales for the third quarter of fiscal 1997 of $22,481,000 were down 14.3%
compared to net sales for the comparable period in fiscal 1996. Unit sales for
the third quarter in the current fiscal year were down 15.9%, compared to the
third quarter of the prior fiscal year. For the nine months ended March 29,
1997 (39 weeks), net sales of $68,192,000 were down 13.8% (11.6% adjusted for
the number of weeks differential) from net sales of the first nine months in
the prior fiscal year (40 weeks). Unit sales for the first nine months in the
current fiscal year are down 14.1% (11.9% adjusted for the number of weeks
differential) from unit sales of the same period in fiscal 1996.
As in the previous two quarters, the Company experienced overall lower customer
demand during the third quarter of fiscal 1997 in comparison with the same
period in fiscal 1996. Also, approximately one half of the $3,745,000 sales
decline in the third quarter of fiscal 1997, was due to the loss of one
specific customer in fiscal 1996. The net sales attributable to this customer
in the third quarter of fiscal 1996 approximated $2 million and in the first
nine months in fiscal 1996 net sales to this customer approximated $4 million.
Net sales declined $10,909,000 in the first nine months of fiscal 1997 compared
to the same period in fiscal 1996. Approximately $4,000,000 of this decline
was due to the loss of one specific customer, as mentioned above. $1.9 million
of the decline in net sales was due to the number of weeks differential (39
weeks in fiscal 1997, 40 weeks in fiscal 1996) in the two periods.
Approximately $1,400,000 of the decline in net sales is attributable to the
adverse impact of higher levels of customer returns (which are deductions in
calculating net sales). The remaining decrease in net sales was due to lower
customer demand and the mix of products sold to customers.
The Company has experienced a decline in demand from warehouse distributor
customers in fiscal 1997 compared to the prior fiscal year. Unit sales to
warehouse distributors have declined approximately 20 percent in the first
nine months of fiscal 1997 compared to the same period last year. The Company
believes that the aggressive consolidation and merger activity that has been
occurring within this distribution sector of the industry is related to the
overcapacity that has existed in the automotive aftermarket. The Company
anticipates that this consolidation activity will continue. Mitigating the
declining sales from warehouse distributors has been an increase in unit sales
to the Company's retail customers. Much of the growth of our national retail
customers is attributable to the expansion of their distribution through the
opening of new retail outlets.
In the first nine months of fiscal 1997, the Company's mix of product sold
reflects a higher level of mechanical product sales with a decline in
electrical product sales compared to the same period in fiscal 1996. Net sales
in the current fiscal year have been adversely impacted by this product mix
because mechanical products have a lower average sales price than electrical
products.
During the current fiscal year, the Company experienced a higher level of
customer returns compared to the prior fiscal year. Customer returns are for
re-usable "cores" (our basic raw material), warranty and stock adjustments
received in the normal course of business. The Company believes that it has
experienced a greater level of returns as many distributors have excess
inventories due to increased consolidation and merger activity. The Company
believes that to help rectify surplus inventory issues, distributors return as
much of their excess inventory as permissible within our policies.
7
<PAGE>
GROSS MARGINS
The Company experienced a negative gross margin for the third quarter of fiscal
1997 compared to a gross margin of 20.9% for the same period in fiscal 1996.
The cost of goods sold in the third quarter of the current fiscal year included
one-time period costs of $498,000 related to the closing of the California
manufacturing facility and the one time $4,000,000 charge to provide a reserve
for excess inventory as discussed earlier. For the nine months ended March 29,
1997, the gross margin percentage was 14.1%, compared to the gross margin
percentage for the comparable period in the prior year of 20.6%. The gross
margin percentage before the impact of the inventory reserve adjustment and the
costs related to the closing of the facility would have been 19.9% and 21.5%,
for the third quarter and the first nine months of fiscal 1997, respectively.
The cost of goods sold in the current year included one-time period costs of
$1,054,000 related to the closing of the California manufacturing facility and
the $4,000,000 charge to increase reserves for excess inventory. The costs
related to the closing of the California facility included underabsorbed
overhead, additional overtime and inefficient labor costs as the production of
the California plant was shifted to the Company's remaining manufacturing
plants.
SELLING, GENERAL AND ADMINISTRATIVE EXPENSES
Selling, general and administrative expenses in the third quarter of fiscal
1997 of $5,396,000 were down 1.6% or $90,000 from the same period in fiscal
1996. For the nine months ended March 29, 1997, selling, general and
administrative expenses of $15,111,000 declined 5.4% or $861,000 compared to
the first nine months of the prior fiscal year. Selling, general and
administrative expenses included non-recurring period costs in the third
quarter and first nine months of fiscal 1997 of $454,000 and $788,000,
respectively. These costs relate to the closing of the California facility and
include shipping costs to transport inventory and equipment, personnel
relocation costs, public relations and legal costs. The Company expects that
it will continue to incur non-recurring period expenses related to the closing
of the plant in the fourth quarter of fiscal 1997 but to a lesser extent.
INTEREST EXPENSE
Interest expense increased 16.1% and 10.1% in the third quarter and the first
nine months of the current fiscal year, respectively, over the comparable
periods of the last fiscal year. The increases are due primarily to the higher
interest rates in the current year compared to the prior year.
TAX PROVISION
As a result of the losses sustained through the third quarter, the Company
exceeded the amount of taxable income available for carryback and, as a result,
the Company recorded a tax provision of $543,000 to establish a valuation
allowance against net deferred tax assets. This tax provision was offset by a
tax benefit of $1,128,000 recorded for the nine months ended March 29, 1997.
LIQUIDITY AND SOURCES OF CAPITAL
Net cash of $3,107,000 was provided by operating activities for the nine months
ended March 29, 1997. The nine months ended March 30, 1996, provided net cash
from operating activities of $2,618,000. In the current fiscal year, cash was
provided from several areas. Inventory decreased slightly due to the effect of
reducing the level of on-hand inventories as a result of the consolidation of
the California facility's inventory to the Company's remaining manufacturing
facilities. Cash was provided by a decline in accounts receivable of
approximately $3 million, which is consistent with the lower sales volume in
the third quarter of the current fiscal year. Additional cash was provided by
a net increase in accounts payable, cash overdrafts and accrued liabilities of
$1,500,000. These balances have increased primarily due to the lengthening of
payment terms with our vendors during this period to fund the additional one-
time cash requirements that were the result of the consolidation of the
California manufacturing facility to the two remaining facilities. The
Company's loss from operations, which included a non-cash inventory adjustment
of $4,000,000 and the non-cash restructuring charge of $720,000, decreased the
cash provided from operating activities.
Cash of $370,000 was used in investing activities, primarily for property,
plant and equipment in the first nine months of the current fiscal year
compared to $676,000 used in the comparable period in the prior fiscal year.
Cash of $3,207,000 was also used in the first nine months of the current fiscal
year to reduce debt and advances under the Company's revolving line of credit
compared to $2,248,000 used for that purpose in the comparable period of the
prior fiscal year.
The Company's financing agreements consist of a $20 million revolving line of
credit and a $9 million term loan. The Company's primary lender was joined by
a second commercial lender in the second quarter of fiscal 1997 to the extent
of a one-third participation in the Company's line of credit and term loan.
The Company's revolving line of credit enables the Company to borrow up to $20
million based on a formula applied to the balances of the Company's inventory
and accounts receivable. The term loan, which had outstanding borrowings as of
March 29, 1997, of $5,143,000 is payable in equal quarterly installments which
are intended to extinguish the debt by December 31, 2000. During the third
quarter of the current fiscal year compliance with tangible net worth,
liabilities to worth, debt service, capital expenditures and operating
performance covenants were waived such that the loss sustained by the Company
did not result in a default under its financing agreement. Also, the Company's
revolving line of credit has been extended to March 31, 1998. The Company's
obligations under these agreements are secured by substantially all of its
assets.
Based on the Company's current operating forecast, it believes that its
existing cash balance and cash generated from operations combined with its
borrowing ability under its financing agreements will provide sufficient funds
to meet the Company's cash requirements for operations for the next twelve
months.
OUTLOOK
Consolidations and mergers have been frequent recently within the automotive
aftermarket. The Company, too, has mirrored the industry dynamics by
consolidating its own production facilities. The restructuring plan announced
by the Company in the first quarter of fiscal 1997 called for the closure of
the Company's California plant in December of 1996. This consolidation was
aimed at streamlining the Company's productive capacity to better match its
production requirements. Improved manufacturing efficiencies and profit
margins are expected to result from the restructuring. However, as
anticipated, the Company has incurred significant non-recurring period costs in
connection with the restructuring that were expensed as incurred in the first
nine months of fiscal 1997. The Company anticipates that there remains
approximately $200,000 of additional one-time period costs, to be incurred in
the last quarter of fiscal 1997, primarily related to costs to transfer certain
machinery and equipment.
The Company has experienced declining sales over the past two years and the
decline has worsened in the first nine months of the current year. During this
period the aftermarket has experienced significant consolidation within the
traditional warehouse distributor sector as smaller operations are replaced by
the more favorable economics of large-scale distribution. These consolidations
and mergers often result in excess inventory as warehouses are closed and
inventories consolidated. Following these consolidations, orders by
distributors often decline for a period of time as inventory levels are
adjusted. Also, these consolidations may result in large product returns as
distributors streamline newly combined operations.
The emergence of retail chains as major distributors of automotive aftermarket
products has also impacted the Company. A number of large retail chains have
evolved over the last ten years making successful inroads into product
distribution previously dominated by smaller independent warehouses. In fact,
the Company's business with retail chains has grown from a negligible
percentage ten years ago to 22% for its last fiscal year ending in June 1996.
While the retail business does present the Company with opportunities for
significant growth, it also presents unique challenges. Inventory management
practices by retailers can frequently result in large returns as the stock
keeping units and quantities maintained in a store's inventory plan are
constantly challenged and revised. In addition, retailers, accustomed to
higher inventory turnovers on lower gross margins, are extremely price
sensitive and exert considerable pressure on vendors for competitive pricing.
These practices have resulted in similar pricing pressures in the traditional
channels of distribution as warehouse distributors devise strategies to compete
with retailers.
Finally, while over longer periods of time the relationship of returns to sales
remains relatively constant, the timing of customer returns has been
unpredictable and inconsistent in relation to the orders received from
customers in a given time frame. Fluctuations in channel mix (retail versus
traditional warehouse distributors, for example) and product mix in product
sales can also be significant. All of these factors can have a significant
impact on the level of revenues and earnings. However, management believes
that the streamlining of its manufacturing operations will position the Company
competitively in the marketplace and make the Company an attractive supplier to
all distributors in the aftermarket.
During the month of April, 1997, the Company experienced a 9% decline in net
sales compared to the same period in fiscal 1996. However, it is uncertain at
this time if the lower unit sales in the month of April will be indicative of
the Company's performance for its fourth quarter.
CAUTIONARY STATEMENT
All statements in the foregoing discussion and analysis which are not
historical fact are forward looking statements. In connection with the "Safe
Harbor" provision of the Private Securities Litigation Reform Act of 1995, the
Company is providing the following cautionary statement to identify some (but
not necessarily all) of the important factors that could cause its actual
results to differ materially from those anticipated in any forward looking
statements made in this report or otherwise by or on behalf of the Company.
Actual results of the Company may differ from those anticipated in any forward
looking statement made by or on behalf of the Company due to the following
factors, among other risks and uncertainties affecting the Company's business:
lack of availability to the Company of adequate funding sources and cash from
operations, reduced product demand and industry over-capacity, the loss of or a
material reduction in orders from the Company's largest customer or other
material loss of business, the inability to realize the cost savings as
estimated in the Company's plan to restructure its operations, new business
acquisition costs, the impact of inflation and various other factors identified
in the discussion appearing under the heading "Outlook" above and elsewhere in
this report.
8
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ARROW AUTOMOTIVE INDUSTRIES, INC.
<TABLE>
<CAPTION>
PART II OTHER INFORMATION
<S> <C> <C> <C>
ITEM 1. Legal Proceedings.
None.
ITEM 2. Changes in Securities.
None.
ITEM 3. Default upon Senior
Securities.
None.
ITEM 4. Submission of Matters to a
Vote of Security Holders.
None.
ITEM 5. Other Information.
None.
ITEM 6. Exhibits and Reports on Form 8-K.
A. Exhibits
Exhibit 10.1 Waiver and Second Amendment to
Amended and Restated Revolving
Credit and Term Loan Agreement with
BankBoston, N.A. and BTM Capital
Corporation dated as of March 29, 1997. 16
Exhibit 10.2 Director and Officer Liability
Insurance Policy and Excess Policy 21
Exhibit 27. Financial Data Schedule
</TABLE>
9
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ARROW AUTOMOTIVE INDUSTRIES, INC.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
<TABLE>
<CAPTION>
ARROW AUTOMOTIVE INDUSTRIES, INC.
(Registrant)
<S> <C>
May 16, 1997 /s/ Jim L. Osment
Jim L. Osment
President and Chief Executive Officer
May 16, 1997 /s/ James F. Fagan
James F. Fagan
Executive Vice President, Treasurer
and Chief Financial Officer
</TABLE>
10
ARROW AUTOMOTIVE INDUSTRIES, INC.
WAIVER AND SECOND AMENDMENT TO AMENDED AND RESTATED REVOLVING
CREDIT AND TERM LOAN AGREEMENT
THIS WAIVER AND SECOND AMENDMENT (this "Amendment"), dated as of March
29, 1997, by and among Arrow Automotive Industries, Inc. (the "Borrower"),
BankBoston, N.A., f/k/a The First National Bank of Boston, a national banking
association ("BKB"), the other lending institutions listed on SCHEDULE 1 to the
Credit Agreement (together with BKB, the "Banks"), and BankBoston, N./A., f/k/a
The First National Bank of Boston as agent for the Banks (the "Agent"), as
parties to a certain Amended and Restated Revolving Credit and Term Loan
Agreement, dated as of December 3, 1996 (as amended by the Waiver and First
Amendment to Amended and Restated Revolving Credit and Term Loan Agreement,
dated as of December 28, 1996, the "Credit Agreement"). Capitalized terms not
otherwise defined herein shall have the same meanings ascribed thereto in the
Credit Agreement.
WHEREAS, the Borrower has requested the Banks to make certain amendments
to, and waive certain provisions of, the Credit Agreement; and
WHEREAS, the Banks are willing to make such amendments to, and waive
certain provisions of, the Credit Agreement subject to the terms and conditions
set forth herein.
NOW THEREFORE, the Borrower and the Agent and the Banks hereby covenant
and agree as follows:
1. AMENDMENT TO CREDIT AGREEMENT.
(a) The definition of Borrowing Base contained in Section
1.1 of the Credit Agreement is amended by deleting the amount
"$13,500,000" set forth in the proviso contained in such
definition and substituting $13,000,000" therefor.
(b) The definition of Revolving Credit Loan Maturity Date
contained in Section 1.1 of the Credit Agreement is amended
by deleting the date "December 31, 1997" contained in such
definition and substituting the date "March 31, 1998" therefor.
(c) Section 6 of the Credit Agreement is amended by adding
the following new Section 6.10:
6.10 Prepayment and Termination. If the Borrower prepays all of
the Obligations and terminates each Bank's Commitment in full prior to
the Revolving Credit Loan Maturity Date or Term Loan Maturity Date, the
Borrower shall pay a premium equal to one percent (1%) of the sum of (i)
the Total Commitment with respect to the Revolving Credit Loans PLUS
(ii) the outstanding amount of the Term Loan, on the date immediately
prior to the date of prepayment (the "Total Prepayment Amount")'
PROVIDED, HOWEVER, in the event that the Banks request the Borrower to
refinance with a third party and repay all of the Obligations and all of
the Obligations are repaid in full in cash within ninety (90) days of
such request, the premium to be paid by the Borrower shall be equal to
one-half percent (0.5%) of the Total Repayment Amount.
<PAGE>
(d) Section 11.1 of the Credit Agreement is amended by
deleting such Section 11.1 and restating it in its entirety as
follows:
11.1 Capital Expenditures. The Borrower will not make Capital
Expenditures that exceed in the aggregate (a) $575,000 during the 1997
fiscal year (excluding amounts capitalized in connection with the closing
of the Borrower's manufacturing facility located in Santa Maria,
California up to an aggregate amount of $250,000) and (b) $500,000 during
any fiscal year thereafter.
(e) Section 11.2 of the Credit Agreement is amended by deleting
such Section 11.2 and restating it in its entirety as follows:
11.2 Debt Service. The Borrower will not permit, as at the end of each
fiscal quarter (commencing with the fiscal quarter ending on September
27, 1997), the ratio of (a) the sum of (i) Net Income plus (ii) Total
Interest Expense, plus (iii) depreciation, plus (iv) amortization to (b)
Total Debt Service to be less than 1.0:1.0.
(f) Section 11.3 of the Credit Agreement is amended by deleting
such Section 11.3 and restating it in its entirety as follows:
11.3 Liabilities to Worth Ratio. The Borrower will not permit the ratio
of Total Liabilities to Tangible Net Worth to exceed (a) 1.50:1.100 as at
the end of each of fiscal quarter Q1, 1997 and Q2, 1997 and (b) 2.00:1.00
as at the end of each fiscal quarter ending thereafter.
(g) Section 11.4 of the Credit Agreement is amended by deleting
such Section 11.4 and restating it in its entirety as follows:
11.4 Tangible Net Worth. The Borrower will not permit Tangible Net
Worth to be less than $22,250,000 at any time.
(h) Section 11.5 of the Credit Agreement is amended by deleting
such Section 11.5 and restating it in its entirety as follows:
11.5 Minimum Profitability. The Borrower will not permit, as at the end of
each fiscal quarter described in the table set forth below, its Net Income to
be less than the amount set forth opposite such quarter in such table:
FISCAL QUARTER AMOUNT
Q4, 1997 -$750,000
Each fiscal quarter thereafter, $1.00
commencing with the fiscal quarter
ending on the last day of Q1, 1998.
<PAGE>
2. WAIVER. The Banks hereby waive the provisions of Sections 11.2 and
11.5 of the Credit Agreement solely to the extent necessary to permit non-
compliance with such Sections 11.2 and 11.5, and only for the fiscal quarter
ended March 31, 1997.
3. AMENDMENT FEE. The Borrower shall pay to the Agent for the PRO
RATA accounts of the Banks on or prior to May 12, 1997 an amendment fee of
$25,000.
4. CONDITIONS TO EFFECTIVENESS. This Amendment shall be effective
upon satisfaction of the following condition:
(a) this Amendment shall have been duly and properly executed and
delivered to the Agent by the Borrower, the Banks and the Agent;
(b) all corporate action necessary for the valid execution,
delivery and performance by the Borrower of this Amendment and the Credit
Agreement as amended hereby shall have been duly and effectively taken,
and evidence thereof satisfactorily to the Agent shall have been provided
to the Agent; and
(c) the Borrower shall have paid to the Agent, for the benefit of
the Banks, the Amendment Fee.
5. REPRESENTATIONS AND WARRANTIES. The Borrower, hereby represents
and warrants to the Bank and the Agent as follows:
(a) REPRESENTATIONS AND WARRANTIES IN CREDIT AGREEMENT. The
representations and warranties of the Borrower contained in the Credit
Agreement (i) were true and correct in all material respects when made, and
(ii) except to the extent such representations and warranties by their terms
are made solely as of a prior date, continue to be true and correct in all
material respects on the date hereof.
(b) RATIFICATION, ETC. Except as expressly provided by this
Amendment, the Credit Agreement and all documents, instruments and agreements
related thereto, including, but not limited to the Security Documents, are
hereby ratified and confirmed in all respects and shall continue in full force
and effect. The Credit Agreement and this Amendment shall be read and
construed as a single agreement. All references in the Credit Agreement or any
related agreement or instrument to the Credit Agreement shall hereafter refer
to the Credit Agreement as amended hereby.
(c) AUTHORITY, ETC. The execution and delivery by the Borrower
of this Amendment and the performance by the Borrower of all of its agreements
and obligations under the Credit Agreement as amended hereby are within the
corporate authority of the Borrower and have been duly authorized by all
necessary corporate action on the part of the Borrower.
(d) ENFORCEABILITY OF OBLIGATIONS. This Amendment and the Credit
Agreement as amended hereby constitute the legal, valid and binding obligations
of the Borrower, enforceable against the Borrower in accordance with their
terms.
<PAGE>
(e) NO DEFAULT. After giving effect to this Amendment, no
Default or Event of Default has occurred and is continuing.
6. NO OTHER AMENDMENTS OR WAIVERS. Except as expressly provided in
this Amendment, all of the terms and conditions of the Credit Agreement and the
other Loan Documents remain in full force and effect.
7. EXPENSES. Pursuant to Section 17 of the Credit Agreement, all
costs and expenses incurred or sustained by the Agent in connection with this
Amendment, including the fees and disbursements of legal counsel for the Agent
in producing, reproducing and negotiating the Amendment, will be for the
account of the Borrower whether or not the transactions contemplated by this
Amendment are consummated.
8. EXECUTION IN COUNTERPARTS. This Amendment may be executed in any
number of counterparts, each of which shall be deemed an original, but which
together shall constitute one instrument.
9. MISCELLANEOUS. THIS AMENDMENT SHALL BE DEEMED TO BE A CONTRACT
UNDER THE LAWS OF THE COMMONWEALTH OF MASSACHUSETTS AND SHALL FOR ALL PURPOSES
BE CONSTRUED IN ACCORDANCE WITH AND GOVERNED BY THE LAWS OF THE COMMONWEALTH OF
MASSACHUSETTS (EXCLUDING THE LAWS APPLICABLE TO CONFLICTS OR CHOICE OF LAW).
The captions in this Amendment are for the convenience of reference only and
shall not define or limit the provisions hereof.
(THE REMAINDER OF THIS PAGE IS LEFT INTENTIONALLY BLANK)
<PAGE>
IN WITNESS WHEREOF, the parties hereto have duly executed this Amendment
under seal as of the date first set forth above.
ARROW AUTOMOTIVE INDUSTRIES, INC.
By: /S/ JAMES F. FAGAN
Name: James F. Fagan
Title: Executive Vice President
BANKBOSTON, N.A., f/k/a THE FIRST NATIONAL
BANK OF BOSTON, individually and as Agent
By: /S/ MATTHEW A. ROSS
Name: Matthew A. Ross
Title: Vice President
BTM CAPITAL CORPORATION
By: /S/ THOMAS F. LEE
Name: Thomas F. Lee
Title: Assistant Managing Director
ROYAL INSURANCE
Executive Offices: 9300 Arrowpoint Blvd.
Charlotte, NC 28217
DIRECTORS AND OFFICERS LIABILITY AND
COMPANY REIMBURSEMENT COVERAGE
NOTICE: THIS IS A CLAIMS MADE INDEMNITY POLICY WHICH APPLIES
ONLY TO CLAIMS FIRST MADE, AND REPORTED TO ROYAL
DURING THE POLICY PERIOD (AGAINST THE INSURED
PERSONS FOR A WRONGFUL ACT).
NOTICE: THE LIMIT OF LIABILITY IS DEPLETED BY AMOUNTS
INCURRED FOR DEFENSE FEES AND EXPENSES. AMOUNTS
INCURRED FOR DEFENSE EXPENSES SHALL BE APPLIED
FIRST AGAINST THE RETENTION AMOUNT.
NOTICE: INSURER HAS NO DUTY TO PROVIDE A DEFENSE FOR ANY
INSURED PERSON OR THE INSURED ORGANIZATION.
PLEASE READ CAREFULLY
CLAIM NOTICE
Please notify Royal Specialty Underwriting, Inc.
of all claims.
Royal Specialty Underwritings, Inc.
945 East Paces Ferry Road
Suite 1890
Atlanta, GA 30326
Attention: Claims Department
RSUIFP-RI-00001 (Ed. 4/93)
<PAGE>
IN CONSIDERATION of the payment of premium and in reliance upon all statements
made and information furnished to the Royal Indemnity Company, (a stock
insurance company, hereinafter called the Insurer) including the statements
made in the Application attached hereto and made a part hereof, and subject to
the terms, conditions, definitions, exclusions and limitations hereinafter
provided, the Insurer agrees:
SECTION 1. INSURING CLAUSE
(A) with the Insured Persons of the Insured Organization that if during
the Policy Period, any Claim or Claims are first made against the
Insured Persons and reported in accordance with Section 4,
Condition (G) of this policy, jointly or severally, for a Wrongful
Act, the Insurer will pay on behalf of such Insured Persons all
Loss which such Insured Persons shall become legally obligated to
pay.
(B) with the Insured Organization that if during the Policy Period,
any Claim or Claims are first made against the Insured Persons
and reported in accordance with Section 4. Condition (G) of this
policy, jointly or severally, for a Wrongful Act, the Insurer will
pay on behalf of the Insured Organization, all Loss for which the
Insured Organization is required or permitted to indemnify the
Insured Persons pursuant to law, common or statutory, or the
Charter or By-laws of the Insured Organization duly effective
under such laws which determines and defines such rights to
indemnify.
SECTION 2. DEFINITIONS
(A) "Application" means the Application attached to and forming part
of this policy, including any materials submitted as part of the
Application process which are on file with the Insurer and which
form part of the policy, whether physically attached or not.
(B) "Claim" means written or oral demand for money or services received
by an Insured Person that any person or entity intends to hold any
Insured Person responsible for a Wrongful Act.
(C) "Defense Expenses" means reasonable legal fees and expenses
incurred, with the written consent of the Insurer, by an Insured
Person in defense of a Claim, including appeal, except that
Defense Expenses shall not include: (1) remuneration, overhead
or benefit expenses associated with any Insured Person; and
(2) any amounts incurred in defense of any Claim including appeal
for which any other insurer has a duty to defend, regardless of
whether or not such other insurer undertakes such duty; and
(3) any obligation to apply for, procure or provide security
for any appellate or similar bond.
<PAGE>
(D) "Insured Organization" means the organization named in Item 1
of the Declarations and any Subsidiary existing prior to or at
the inception date of this policy and listed on the Named Insured
Endorsement attached to this policy. In addition, Insured
Organization shall mean any Subsidiary created or acquired after
the inception date of the policy subject to Section 4. Condition
(H) Merger, Consolidation or Acquisition.
(E) "Insured Person" means any past, present or future director or
officer, and in the event of the death, incapacity or bankruptcy
of an Insured Person, the estate, heirs, legal representatives
or assigns of such individual.
(F) "Loss" means any amount for settlement, damages or judgment,
including Defense Expenses, in excess of the applicable retention
and not exceeding the limit of liability, as listed on the
Declarations Page, which an Insured Person is legally obligated
to pay as a result of a Claim. Loss does not include sanctions,
punitive or exemplary damages, the multiplied portion of any
multiplied damage award, matters which are uninsurable under the
law pursuant to which this policy shall be construed, fines,
taxes or penalties.
(G) "Policy Period" means the period from the inception date to the
expiration date in Item 2 of the Declarations Page or to any
earlier cancellation or termination date. Any extension of
coverage under Section 4. Condition (E) will be part of and not
in addition to the Policy Period.
(H) "Subsidiary" means a corporation of which the Insured Organization
owns more than fifty percent (50%) of the voting stock.
(I) "Wrongful Act" means any actual or alleged error, omission,
misstatement, misleading statement, neglect or breach of duty by
an Insured Person solely in their capacity as an Insured Person
acting on behalf of the Insured Organization.
SECTION 3. EXCLUSIONS
(A) Except for Loss for which the Insured Organization is required
to indemnify the Insured Persons, or for which the Insured
Organization has, to the extent permitted by law, indemnified the
Insured Persons, the Insurer shall not be liable to make any
payment for Loss in connection with any Claim made against the
Insured Persons:
(1) based upon or attributable to any Insured Person gaining in
fact of any personal profit or advantage to which such Insured
Person was not legally entitled;
<PAGE>
(2) for return by the Insured Persons of any remuneration paid
to the Insured Persons without the previous approval of the
governing bodies of the Insured Organization, which payment,
without such previous approval, shall be held by the Courts
to be in violation of law;
(3) based upon, arising out of or attributable to profits in fact
made from the purchase and sale or sale and purchase by the
Insured Persons of securities of the Insured Organization
within the meaning of Section 16(b) of the Securities Exchange
Act of 1934 and amendments thereto or similar provisions of
any state statutory law or common law;
(4) brought about or contributed to by the dishonesty of the
Insured Persons. However, notwithstanding the foregoing, the
Insured Persons shall be protected under the terms of this
policy as to any Claims upon which suit may be brought against
them, by reason of any alleged dishonesty on the part of the
Insured Persons unless a judgment or other final adjudication
thereof adverse to the Insured Persons shall establish that
acts of active and deliberate dishonesty committed by the
Insured Persons with actual dishonest purpose and intent were
material to the cause of action so adjudicated.
NOTE: The Wrongful Act of any Insured Person shall not be imputed
to any other Insured Person for the purpose of determining
the applicability of the exclusions enumerated in Section
3. Exclusions (A).
(B) The Insurer shall not be liable to make any payment for Loss in
connection with any Claim made against the Insured Persons:
(1) for any actual or alleged (a) bodily injury, sickness,
disease, or death of any person, assault, battery, mental
anguish, or emotional distress; or (b) damage to or
destruction of any tangible property including loss of use
thereof; or (c) invasion of privacy, wrongful entry, eviction,
false arrest, false imprisonment or malicious prosecution;
(2) for libel, slander or defamation in any form;
(3) for any actual or alleged violations of the Employee
Retirement Income Security Act of 1974 or any regulations
promulgated thereunder, or of any similar provisions of any
federal, state or local law or regulation;
(4) alleging, arising out of, based upon, attributable to, or in
any way involving, directly or indirectly:
(a) the actual, alleged or threatened discharge, dispersal,
release or escape of pollutants, or
<PAGE>
(b) any direction or request to test for, monitor, clean up,
remove, contain, treat, detoxify or neutralize
pollutants,
Including but not limited to Claims alleging damage to the
Insured Organization;
Pollutants includes (but is not limited to) any solid, liquid,
gaseous or thermal irritant or contaminant, including smoke,
vapor, soot, fumes, acids, alkalis, chemicals and waste.
Waste includes (but is not limited to) materials to be
recycled, reconditioned or reclaimed;
(5) by an Insured Person or Insured Organization, as defined in
this policy, except:
(a) for stockholder's derivative actions brought by a
shareholder of the Insured Organization other than an
Insured Person;
(b) a Claim brought by an officer who is not a Director for
their alleged wrongful termination;
(6) based upon or attributable to, or arising out of, or in any
way involving:
(a) payments, commissions, gratuities, benefits or any other
favors to or for the benefit of any full or part-time
domestic or foreign governmental or armed services
officials, agents, representatives, employees or any
members of their family or any entity with which they
are affiliated; or
(b) payments, commissions, gratuities, benefits or any other
favors to or for the benefit of any full or part-time
officials, directors, agents, partners, representatives,
principal shareholders, or owners or employees, or
affiliates (as that term is defined in the Securities
Exchange Act of 1934, including any of their officers,
directors, agents, owners, partners, representatives,
principal shareholders or employees) of any customers
of the Insured Organization or any members of their
family or any entity with which they are affiliated; or
(c) Political Contributions, whether domestic or foreign;
(7) based upon or attributable to any failure or omission on the
part of the Insured Person to effect and maintain adequate
insurance;
<PAGE>
(8) based upon or attributable to the essential fact underlying
or alleged in any matter which prior to the inception date
of this policy has been the subject of notice to any Insurer
of a Claim, or a threat of Claim, or an occurrence which might
give rise to a Claim under any policy of which this insurance
is a renewal or replacement or which it may succeed in time;
(9) based upon, arising out of directly or indirectly resulting
from, in consequence of, or in any way involving service by
an Insured Person as a director or officer of any entity other
than the Insured Organization even if such service is directed
or requested by the Insured Organization;
(10) alleging, arising out of, based upon or attributable to the
ownership, management, maintenance and/or control by the
Insured Organization of any captive insurance company or
entity including but not limited to Claims alleging the
insolvency or bankruptcy of the Insured Organization named
in Item 1 of the Declarations as a result of such ownership,
operation, management and control;
(11) based upon or in any way involving any offer to purchase, or
purchase of, securities of the Insured Organization at a
premium over their then current market value; made by the
Insured Organization or by any of the Insured Persons, except
where such offer or purchase extends to all security holders
of the Insured Organization;
(12) based upon or any way involving actual or alleged:
(1) attempts whether successful or unsuccessful, by any
person or entity to acquire securities of the Insured
Organization, in opposition to the Board of Directors of the
Insured Organization, or (2) efforts, whether successful or
unsuccessful, by the Insured Organization or any of its
Insured Persons to resist such attempts;
SECTION 4. CONDITIONS
(A) INDEMNITY PAYMENT FOR DEFENSE EXPENSES; INSURER HAS NO DUTY TO
PROVIDE DEFENSE
(1) It is the duty of the Insured Person and not the duty of the
Insurer to provide for a defense of Claims against them. The
Insurer shall indemnify the Insured Person or Insured
Organization for Defense Expenses after final disposition of
a covered Claim. No Defense Expenses shall be incurred and no
settlement of any Claim shall be made without the Insurer's
written consent; such consent not to be unreasonably withheld.
Any Defense Expenses incurred or settlements made without the
written consent of the Insurer will not be covered under this
policy.
<PAGE>
(2) Under Section 1. Insuring Clause (A), (B), the Insurer may,
upon written request by an Insured Person, pay on a current
basis Defense Expenses which are otherwise payable under this
policy except to the extent that the Insured Organization is
required or permitted to indemnify the Insured Person for such
Defense Expenses.
(3) Under Section 1. Insuring Clause (B), The Insurer may, upon
written request by the Insured Organization, reimburse on a
current basis Defense Expenses which are otherwise payable
under this policy.
(4) Any Insured Person or the Insured Organization requesting that
the Insurer pay on a current basis Defense Expenses for a
claim hereunder must agree in writing, prior to any payment
of Defense Expenses by the Insurer, that upon demand the
Insured Person or the Insured Organization or both will repay
the Insurer all Defense Expenses paid to or on behalf of such
Insured Person in connection with such Claim if the Insurer
determines that there is no coverage under Insuring Clause
(A) or (B).
(5) The Insured Organization and the Insured Persons shall give
the Insurer the right to associate itself in the defense and
settlement of any Claim that appears reasonably likely to
involve the Insurer.
(B) OTHER INSURANCE; OTHER INDEMNIFICATION
In the event that:
(1) there is any other insurance, whether prior or subsequent
to this policy, directly or indirectly covering or insuring
any Wrongful Act by an Insured Person otherwise covered by
this policy, or
(2) there is indemnification to which an Insured Person is
entitled from any entity other than the Insured Organization,
then all other insurance or indemnification shall apply first to
the noticed Claim and this policy shall not be considered
contributing but will indemnify only the difference between all
amounts recoverable under all other insurance or indemnification
and the amounts of any Loss otherwise covered under this policy,
not exceeding the limit of liability shown on the Declarations
Page and subject to all policy provisions. In the event there is
other insurance or indemnity available to the Insured Person or
Insured Organization, then this insurance shall provide specific
excess coverage only and shall not be subject to the terms of any
other insurance or indemnity.
<PAGE>
(C) LIMIT OF LIABILITY; RETENTION; PAYMENT OF LOSS
(1) The amount stated in Item 3 of the Declaration is the maximum
aggregate limit of liability under the policy and the total
amount the Insurer shall be obligated to indemnify under the
policy whether under Section 1. Insuring Agreements (A) or
(B) or both, regardless of the time of payment by the Insurer.
Defense Expenses shall be part of and not in addition to the
limit of liability, and payment of Defense Expenses by the
Insurer will deplete the limit of liability.
(2) All Claims based on, arising out of, directly or indirectly
resulting from, in consequence of, or in any way involving
the same or related facts, circumstances, situations,
transactions or events, or the same or related series of
facts, circumstances, situations, transactions or events,
shall be deemed to be a single Claim.
(3) If Loss from a Claim is covered under more than one Insuring
Clause, the application retention stated in Item 4 of the
Declarations Page shall be applied separately to that part of
the Loss covered by each Insuring Clause, and the sum of such
retentions shall be the retention applicable to such Claim.
However, the total retention shall not exceed the largest
retention stated in Item 4 of the Declarations Page.
(4) The company reimbursement RETENTION and SECTION 1 INSURING
CLAUSE (B) shall be applicable to all Claims whenever
indemnification by the Insured Organization is legally
permissible or statutorily required, whether or not the
Insured Organization has agreed to indemnify its Insured
Persons or not, except where actual indemnification cannot
be made by the Insured Organization to its Insured Persons
solely by reason of the Insured Organization's financial
insolvency.
(5) Except for the payment of Defense Expenses as provided in
Section 4. Conditions (A), (2) and (3), the Insurer shall
indemnify for Loss only upon the final disposition of any
Claim.
(D) COOPERATION; SUBROGATION
In the event of a Claim or notice of circumstances under Section
4. Conditions (G), (1), (2), the Insured Person will provide the
Insurer with all information, assistance and cooperation that the
Insurer reasonably requests, and will take no action that may
prejudice the Insured Persons or Insurer's position or potential
or actual rights or defense under the policy without the Insurer's
consent. In the event of payment by the Insurer, it shall be
subrogated to all of the rights of recovery of the Insured Persons,
who shall execute all papers and take all necessary actions to
secure such rights, including the execution of any documents
necessary to enable the Insurer effectively to bring suit in the
Insured Persons name.
<PAGE>
Any amount so recovered shall be apportioned for the repayment
of; first, the Insurer's subrogation expenses, legal fees and
costs; second, payments by the Insured Person or Insured
Organization in excess of the retention and applicable insurance;
third, payments by an excess insurer; fourth, payments by the
Insurer; and last, reimbursement of the retention.
(E) DISCOVERY PERIOD
If the Insurer shall cancel or refuse to renew this policy the
Insured Organization shall have the right, upon payment of an
additional premium of fifty percent (50%) of the Full Annual
Premium, to a period of ninety (90) days following the effective
date of such cancellation or nonrenewal (herein referred to as the
Discovery Period) in which to give written notice to the Insurer
of claims first made against the Insured Persons during said
ninety (90) day period for any Wrongful Act occurring prior to the
end of the Policy Period and otherwise covered by this policy.
As used herein, Full Annual Premium means the premium level in
effect immediately prior to the end of the Policy Period.
The rights contained in this clause shall terminate unless written
notice of such election, together with the additional premium,
is received by Royal Specialty Underwriting, Inc. at the address
shown on the Declarations Page within ten (10) days of the
effective date of cancellation or nonrenewal. The full additional
premium for the Discovery Period shall be fully earned at the
inception of the Discovery Period. The Discovery Period is not
cancellable. This clause and the rights contained herein shall
not apply to any cancellation resulting from non-payment of
premium.
(F) RENEWAL PROVISION
The offer by the Insurer of renewal terms, conditions, limits of
liability and/or premiums varying from those of the expiring policy
shall not constitute a refusal to renew.
(G) NOTICE OF CLAIM OR CIRCUMSTANCE
(1) If during the Policy Period any Claim is first made, as a
condition precedent to indemnity, the Insured Organization
must give written notice to Royal Specialty Underwriting, Inc.
on behalf of the Insurer by certified mail and properly
addressed to the address shown on the Declarations Page, of
such Claim as soon as practicable after such Claim is first
made and in no event later than the expiration date or any
earlier cancellation date of this policy.
<PAGE>
(2) If during the Policy Period, an Insured Person or the Insured
Organization first becomes aware of any circumstance which may
reasonably be expected to give rise to a Claim against any
Insured Person and, as soon as practicable thereafter, before
the expiration date or any earlier cancellation date of the
policy, gives to Royal Specialty Underwriting, Inc. on behalf
of the Insurer written notice via certified mail at the
address shown on the Declarations Page of such circumstance
along with full particulars of the specific alleged Wrongful
Act, then any Claim subsequently made against an Insured
Person arising out of such circumstance will be deemed first
made during the Policy Period.
(H) MERGER, CONSOLIDATION OR ACQUISITION
(1) If after the inception date, the Insured Organization creates
or acquires a Subsidiary, that Subsidiary will be deemed to
qualify as an Insured Organization but only for a Wrongful
Act on or after the effective date of such creation or
acquisition, for the first ninety (90) days after the date of
the creation or acquisition. After this ninety (90) day
period the created or acquired Subsidiary will no longer be
deemed an Insured Organization unless:
(a) written notice of the creation of acquisition is given
to the Insurer by the Insured Organization within sixty
(60) days of the date of the creation or acquisition.
Such written notice shall include: (i) a copy of the
most recent audited Financial Statements of the
Subsidiary; (ii) a copy of the creation or acquisition
documents; and (iii) a new completed Royal Directors
and Officers application giving full particulars of the
new subsidiary, which is acceptable to the Insurer;
(b) the Insured Organization provides the Insurer with any
additional information the Insurer may request;
(c) the Insured Organization agrees to the terms, conditions,
exclusions and additional premium charge as may be
required by the Insurer; and
(d) the Insurer, at its sole discretion, agrees in writing to
extend the coverage of the policy to the created or
acquired Subsidiary. If the information in (H) 1(a),
(b), and (c) is received within the sixty (60) day period
and the Insurer does not expressly accept or decline to
extend coverage within the initial ninety (90) day
period, then such ninety (90) day period will be extended
until the Insurer expressly accepts or declines such
extension of coverage.
<PAGE>
(2) If after the inception date, the Insured Organization is
acquired by, merged with or consolidated into any entity such
that the Insured Organization is not the surviving entity,
then coverage under this policy shall cease immediately upon
the date of such acquisition, merger or consolidation. For
the purpose of Section 3. Definitions (G), the date of such
acquisition, merger or consolidation shall be deemed the
expiration date.
(I) SALE OR DISSOLUTION OF SUBSIDIARY
If, after the inception date, any Subsidiary is sold or dissolved,
this policy, subject to its terms, shall apply only to persons who
were Insured Persons prior to the sale or dissolution and only with
respect to Claims first made during the Policy Period or Discovery
Period for Wrongful Acts alleged to have been committed prior to
the date of sale or dissolution. No coverage will be afforded for
any person who becomes an Insured Person after the date of sale
or dissolution.
(J) REPRESENTATIONS
The Insured Organization, through its authorized representative,
represents that as of the inception date of this policy the
particulars and statements contained in the Application are
complete, true and correct and agree that (1) those particulars
and statements are the basis of this policy and are to be
considered as incorporated into and constituting a part of this
policy; (2) those particulars and statements are material to the
acceptance of the risk assumed by the Insurer; and (3) this policy
is issued in reliance upon the truthfulness and completeness of
such representations. Except for material facts or circumstances
known to the person or persons who signed the Application, no
statement in the Application or knowledge or information possessed
by an Insured Person will be imputed to any other Insured Person
for the purpose of determining the availability of coverage.
(K) NO ACTION AGAINST THE INSURER
(1) No action may be taken against the Insurer unless, as a
condition precedent thereto, there has been full compliance
with all of the terms of this policy and until the amount
of the Insured Person's obligation to pay Loss has been
finally determined either by judgment against the Insured
Persons after adjudicatory proceedings, or by written
agreement of the Insured Persons, the claimant and the
Insurer.
(2) No Insured Person or Insured Organization has any right
under this policy to join the Insurer as a party to any
Claim against an Insured Person to determine the liability
of such Insured Persons; nor shall the Insurer be impleaded
by an Insured Person or his, her or its legal representative
in any such Claim.
<PAGE>
(L) AUTHORIZATION AND NOTICES
The Insured Persons agree that the Insured Organization acts on
their behalf with respect to giving and receiving all notices and
return of premium from the Insurer.
(M) CHANGES
Notice to any agent or knowledge possessed by any agent or
representations by persons acting on behalf of the Insurer does
not effect a waiver or change in any part of this policy or estop
the Insurer from asserting any right under the terms, conditions
and limititations of this policy. The terms, conditions and
limitations of this policy can only be waivered or changed by
written endorsement.
(N) ASSIGNMENT
Assignment of interest under this policy does not bind the Insurer
without its written consent.
(O) CANCELLATION
This policy may be canceled by the Insured Organization at any time
by written notice or by surrender of this policy at any time to
Royal Specialty Underwriting, Inc. at the address shown in the
Declarations Page.
The policy may also be canceled at any time by Royal Specialty
Underwriting, Inc. on behalf of the Insurer by delivery to the
Insured Organization or by mailing to the Insured Organization
by registered, certified or other first class mail, to the address
shown in this policy, written notice stating when, not less than
sixty (60) days thereafter, the cancellation will become effective.
The mailing of such notice will be sufficient proof of notice and
this policy will terminate at the date and hour specified in the
notice.
If this policy is canceled by the Insured Organization, the Insurer
will retain the customary short rate proportion of the premium
hereon.
If this policy is canceled by the Insurer, the Insurer will retain
the pro rata proportion of the premium hereon. Payment or tender
of any unearned premium by the Insurer is not a condition precedent
to the effectiveness of cancellation but such payment will be made
a soon as practicable after the cancellation date is effective.
If the period of limitation relating to the giving of notice is
prohibited or made void by any law controlling the construction
thereof, such period will be deemed to be amended so as to be
equal to the minimum period of limitation permitted by such law.
<PAGE>
If the Insured Organization fails to pay any premium when due, the
Insurer may cancel the policy upon ten (10) days written notice.
The Insurer shall not be required to renew this policy upon its
expiration.
(P) EXHAUSTION
When the limit of liability is exhausted by the indemnification
for Loss, including Defense Expenses, all obligations of the
Insurer under this policy will be fulfilled and extinguished, and
the Insurer will have no further obligations of any kind or nature
whatsoever under this policy.
(Q) ACCEPTANCE
The Insured Organization and Insured Persons agree that this
policy, including the Application and any endorsements, constitute
the entire agreement between them and the Insurer relating to this
insurance policy.
(R) HEADINGS
The description in the headings and sub-headings of the policy
are solely for convenience, and form no part of the terms and
conditions of coverage.
(S) GOVERNING LAW CLAUSE
This policy shall, to the extent permitted by applicable law, be
construed in accordance with the laws of the state or jurisdiction
of incorporation or organization of the Insured Organization or in
the case of matters pertaining to a Subsidiary, the laws of the
state or jurisdiction of incorporation or organization thereof.
In Witness Whereof, the Insurer has caused this policy to be executed and
attested, but this policy shall not be valid unless countersigned on the
Declarations Page by a duly authorized agent of the Insurer.
Joyce W. Wheeler William E. Buckley
Corporate Secretary President
<PAGE>
DIRECTORS AND OFFICERS
LIABILITY AND COMPANY
REIMBURSEMENT DECLARATIONS
Company Policy Symbol & Number Royal Insurance
Symbol Executive Offices
9300 Arrowpoint Blvd.
R HP 605193 Charlotte, NC 28217
Renewal of
Number RHP604261
THIS POLICY IS ISSUED BY THE COMPANY NAMED BELOW:
COMPANY NAME: ROYAL INDEMNITY COMPANY
PRODUCER'S NAME AND ADDRESS
ROYAL SPECIALTY UNDERWRITING, INC.
Resurgens Plaza, Suite 1890
945 East Paces Ferry Road
Atlanta, GA 30326
Tel: 404-231-2366
ITEM 1. INSURED'S NAME AND MAILING ADDRESS
ARROW AUTOMOTIVE INDUSTRIES, INC.
3 SPEEN STREET
FRAMINGHAM, MA 01701
ITEM 2. POLICY PERIOD:
FROM June 1, 1996 TO June 1, 1997
(12:01 AM Standard Time at the address of the Insured)
ITEM 3. LIMIT OF LIABILITY:
$ 5,000,000 aggregate limit of liability each policy year.
ITEM 4. RETENTION:
$ 0 each Director or Officer each loss but in no event
exceeding
$ 0 in the aggregate subject to
$ 75,000 company reimbursement.
ITEM 5. PREMIUM:
$ 55,000 "TERM" Prepaid Premium
<PAGE>
ITEM 6. POLICY FORM NUMBER AND ENDORSEMENTS ATTACHED AT ISSUANCE
RSUIFP-RI-00001, (SEE ATTACHED SCHEDULE OF ENDORSEMENTS)
These Declarations along with the completed and signed Application and the
Directors and Officers Liability Insurance Policy, shall constitute the
contract between the Directors and Officers, the Company and Royal Indemnity
Company.
Countersigned: August 6, 1996 SPW James A. Dixon
Date Authorized Representative
RSUI-DOP-0500 (07/92)
Insureds Copy
<PAGE>
Royal Insurance
THIS ENDORSEMENT CHANGES THE POLICY. PLEASE READ IT CAREFULLY.
SCHEDULE OF ENDORSEMENTS
1. NUCLEAR ENERGY LIABILITY EXCLUSION 00041
2. COVERAGE EXTENSION TO SUBSIDIARIES
3. PRIOR/PENDING LITIGATION EXCLUSION
4. DELETED EXCLUSIONS
5. ALLOCATION ENDORSEMENT
6. DISCOVERY ENDORSEMENT 00046
7. EMPLOYMENT PRACTICE LIABILITY
8. MARITAL ESTATE EXTENSION
The above Schedule of Endorsements is for illustrative and convenience purposes
only and forms no part of the terms and conditions of coverage.
All other terms, conditions and warranties remaining unchanged.
Attached to and forming part of the Policy No.
Issued to
If this endorsement is listed in the policy declarations, it is in effect from
the time coverage under this policy commences. Otherwise, the effective date
of this endorsement is as shown below at the same time or hour of the day as
the policy became effective.
Effective Date: Endorsement No.
Countersigned By:
Authorized Representative Date
<PAGE>
Royal Insurance
THIS ENDORSEMENT CHANGES THE POLICY. PLEASE READ IT CAREFULLY.
DIRECTORS AND OFFICERS LIABILITY POLICY
NUCLEAR ENERGY LIABILITY EXCLUSION
It is agreed that the policy does not apply:
I. Under any Liability Coverage, to injury, disease, death or
destruction
(a) with respect to which an insured under the policy is also an
insured under a nuclear energy liability policy issued by
Nuclear Energy Liability Insurance Association, Mutual
Atomic Energy Liability Underwriters or Nuclear Insurance
Association of Canada, or would be an insured under any such
policy but for its termination upon exhaustion of its limit
of liability;
or
(b) resulting from the hazardous properties of nuclear material
and with respect to which (1) any person or organization is
required to maintain financial protection pursuant to the
Atomic Energy Act of 1954, or any law amendatory thereof,
or (2) the insured is, or had this policy not been issued
would be, entitled to indemnity from the United States of
America, or any agency thereof, with any person or
organization.
II. Under any Medical Payments Coverage, or under any Supplementary
Payments provision relating to immediate medical or surgical
relief, to expenses incurred with respect to bodily injury,
sickness, disease or death resulting from the hazardous properties
of nuclear facility by any person or organization.
III. Under any Liability Coverage, to injury, sickness, disease,
death or destruction resulting from the hazardous properties
of nuclear material, if
(a) the nuclear material (1) is at any nuclear facility owned
by, or operated by on behalf of, an insured or (2) has been
discharged or dispersed therefrom;
(b) the nuclear material is contained in spent fuel or waste at
any time possessed, handled, used, processed, stored,
transported or disposed of by or on behalf of an insured; or
(c) the injury, sickness, disease, death or destruction arises
out of the furnishing by an insured or services, materials,
parts or equipment in connection with the planning,
construction, maintenance, operation or use of any nuclear
facility, but if such facility is located within the United
States of America, its territories or possessions or Canada,
this exclusion (c) applies only to injury to or destruction
of property at such nuclear facility.
<PAGE>
Royal Insurance
THIS ENDORSEMENT CHANGES THE POLICY. PLEASE READ IT CAREFULLY.
IV. As used in this endorsement
"hazardous properties" include radioactive, toxic or explosive
properties; "nuclear material" means source material, special
material or byproduct material;
"source material", "special nuclear material", and "byproduct
material" have the meanings given them in the Atomic Energy Act
of 1954 or in any law amendatory thereof;
"spent fuel" means any fuel element or fuel component, solid or
liquid, which has been used or exposed to radiation in a nuclear
reactor;
"waste" means any waste material (1) containing byproduct material
and (2) resulting from the operation by any person or organization
of any nuclear facility included within the definition of nuclear
facility under paragraph (a) or (b) thereof;
"nuclear facility" means
(a) any nuclear reactor
(b) any equipment or device designed or used for (1) separating
the isotopes of uranium or plutonium, (2) processing or
utilizing spent fuel, or (3) handling, processing or packaging
waste,
(c) any equipment or device used for the processing, fabricating
or alloying of special nuclear material if any time the total
amount of such material in the custody of the insured at the
premises where such equipment or device is located consists of
or contains more than 25 grams of plutonium or uranium 233 or
any combination thereof, or more than 250 grams of uranium
235,
(d) any structure, basin, excavation, premises or place prepared
or used for the storage or disposal of waste,
and includes the site on which any of the foregoing is located, all
operations conducted on such site and all premises used for such
operations;
"nuclear reactor" means any apparatus designed or used to sustain
nuclear fission in a self-supporting chain reaction or to contain
a critical mass of fissionable material;
With respect to injury to or destruction of property, the word
"injury" or "destruction" includes all forms of radioactive
contamination of property.
Nothing herein contained shall be held to vary, alter, waive or
extend any of the terms, conditions, provisions, agreements or
limitations of the above mentioned Policy other than as above
stated.
All other terms, conditions and warranties remaining unchanged.
<PAGE>
Royal Insurance
THIS ENDORSEMENT CHANGES THE POLICY. PLEASE READ IT CAREFULLY.
Attached to and forming part of the Policy No.
Issued to
If this endorsement is listed in the policy declarations, it is in effect from
the time coverage under this policy commences. Otherwise, the effective date
of this endorsement is as shown below at the same time or hour of the day as
the policy became effective.
Effective Date: Endorsement No. 1
Countersigned By:
Authorized Respresentative Date
RSUI-00041
<PAGE>
Royal Insurance
THIS ENDORSEMENT CHANGES THE POLICY. PLEASE READ IT CAREFULLY.
In consideration of the premium charged, it is understood and agreed that the
coverage afforded by this policy is extended to include the following
subsidiaries:
Carbco, Inc.
Icepac, Inc.
It is further understood and agreed that this policy provides coverage (as
herein defined) for loss from claims by reason of Wrongful Acts occurring
subsequest to the date of acquisition.
It is further understood and agreed that the above addition shall not serve to
increase the Limit of Liability as set forth in Item 3 of the Policy
Declaration.
Nothing herein contained shall be held to vary, alter, waive or extend any of
the terms, conditions, provisions, agreements or limitations of the above
mentioned Policy other than as above stated.
All other terms, conditions and warranties remaining unchanged.
Attached to and forming part of the Policy No.
Issued to
If this endorsement is listed in the policy declarations, it is in effect from
the time coverage under this policy commences. Otherwise, the effective date
of this endorsement is as shown below at the same time or hour of the day as
the policy became effective.
Effective Date: Endorsement No. 2
Countersigned By:
Authorized Representative Dated
<PAGE>
Royal Insurance
THIS ENDORSEMENT CHANGES THE POLICY. PLEASE READ IT CAREFULLY.
DIRECTORS AND OFFICERS LIABILITY POLICY
PRIOR AND/OR PENDING LITIGATION EXCLUSION BACKDATED
IN CONSIDERATION of the premium charged, it is hereby understood and agreed
that the Insurer shall not be liable to make any payment for Loss in connection
with any Claim made against the Insured Persons based upon or attributable to
litigation prior to or pending at the inception date of this policy involving
the Insured Organization and/or Insured Persons or arising out of the facts or
circumstances underlying or alleged in any such prior or pending litigation.
It is further agreed that the above shall apply to prior and/or pending
litigation prior to October 18, 1984.
Nothing herein contained shall be held to vary, alter, waive or extend any of
the terms, conditions, provisions, agreements or limitations of the above
mentioned policy other than as above stated.
All other terms, conditions and warranties remaining unchanged.
Attached to and forming part of the Policy No.
Issued to
If this endorsement is listed in the policy declarations, it is in effect from
the time coverage under this policy commences. Otherwise, the effective date
of this endorsement is as shown below at the same time or hour of the day as
the policy became effective.
Effective Date: Endorsement No. 3
Countersigned By:
Authorized Representative Dated
<PAGE>
Royal Insurance
THIS ENDORSEMENT CHANGES THE POLICY. PLEASE READ IT CAREFULLY.
In consideration of the premium charged, it is hereby understood and agreed
that Section 3 (B) Exclusions (6), (7), (11) and (12) are deleted in their
entirety from this policy.
Nothing herein contained shall be held to vary, alter, waive or extend any of
the terms, conditions, provisions, agreements or limitations of the above
mentioned policy other than as above stated.
All other terms, conditions and warranties remaining unchanged.
Attached to and forming part of the Policy No.
Issued to
If this endorsement is listed in the policy declarations, it is in effect from
the time coverage under this policy commences. Otherwise, the effective date
of this endorsement is as shown below at the same time or hour of the day as
the policy became effective.
Effective Date: Endorsement No. 4
Countersigned By:
Authorized Representative Dated
<PAGE>
Royal Insurance
THIS ENDORSEMENT CHANGES THE POLICY. PLEASE READ IT CAREFULLY.
ALLOCATION ENDORSEMENT
In consideration of the premium charged, it is hereby understood and agreed
that:
1) With respect to any Claim under this Policy made against a
Director or Officer which is also made against the Company,
including but not limited to Claims for Securities Activity
Wrongful Acts (as defined below), the Company, the Directors
and Officers and the Underwriter agree to use their best efforts
to determine a fair and proper allocation, as between the Company
and the Directors and Officers, of all amounts, including Defense
Expenses, that the Directors and Officers and/or the Company
become obligated to pay in connection with such Claim. In
making such determination, the parties shall take into account
the relative legal and financial exposures of, and relative
benefits obtained in connection with the defense and/or settlement
of the Claim by, the Directors and Officers and the Company.
In the event that an allocation cannot be agreed to, then the
Underwriter shall be obligated to make an Interim payment of the
amount of Loss, including Defense Expenses, which the parties
agree is not in dispute (which, with respect to any Claim for
Securities Activity Wrongful Acts, will be no less than the
Minimum Securities Allocation Amount, as defined below) until a
final amount is agreed upon or determined pursuant to the
provisions of this Policy and applicable law.
2) Notwithstanding anything to the contrary contained in paragraph
(1) above, with respect soley to Claims for Securities Activity
Wrongful Acts, the portion of Loss allocated to Directors and
Officers under this Policy shall in no event be less than 70%
(seventy percent) (the "Minimum Securities Allocation Amount").
3) "Securities Activity Wrongful Acts" means any actual or alleged
act, error, omission, statement, misstatement, misleading
statement or breach of duty by a Director or Officer in his or
her capacity as a Director or Officer of the Company, or any
matter asserted against a Director or Officer soley by reason of
his or her status as a Director or Officer of the Company, but
only in connection with a purchase or sale, or an offer to
purchase or sell, securities issued at any time by the Company.
Nothing herein contained shall be held to vary, alter, waive or extend any of
the terms, conditions, provisions, agreements or limitations of the below
mentioned policy other than as above stated.
Attached to and forming part of the Policy No.
Issued to
If this endorsement is listed in the policy declarations, it is in effect from
the time coverage under this policy commences. Otherwise, the effective date
of this endorsement is as shown below at the same time or hour of the day as
the policy became effective.
Effective Date: Endorsement No. 5
Countersigned By:
Authorized Representative Dated
<PAGE>
Royal Insurance
THIS ENDORSEMENT CHANGES THE POLICY. PLEASE READ IT CAREFULLY.
DISCOVERY ENDORSEMENT
IN CONSIDERATION of the premium charged, it is hereby understood and agreed
that Section 4 Conditions (E) Discovery Period: is deleted and replaced by the
following:
If the Insurer shall cancel or refuse to renew this policy the Insured
Organization shall have the right, upon payment of an additional premium of 75%
of the Full Annual Premium, to a period of 1 YEAR following the effective date
of such cancellation or nonrenewal (herein referred to as the Discovery Period)
in which to give written notice to the Insurer of claims first made against the
Insured Persons during said 1 Year period for any Wrongful Act occurring prior
to the end of the Policy Period and otherwise covered by this policy. As used
herein, Full Annual Premium means the premium level in effect immediately prior
to the end of the Policy Period.
The rights contained in this clause shall terminate, however, unless written
notice of such election together with the additional premium due is received by
Royal Specialty Underwriting, Inc. at the address shown on the Declarations
Page within ten (10) days of the effective date of cancellation or nonrenewal.
The full additional premium for the Discovery Period shall be fully earned at
the inception of the Discovery Period. The Discovery Period is not
cancellable. This clause and the rights contained herein shall not apply to
any cancellation resulting from non-payment of premium.
All other terms, conditions and warranties remaining unchanged.
Attached to and forming part of the Policy No.
Issued to
If this endorsement is listed in the policy declarations, it is in effect from
the time coverage under this policy commences. Otherwise, the effective date
of this endorsement is as shown below at the same time or hour of the day as
the policy became effective.
Effective Date: Endorsement No. 6
Countersigned By:
Authorized Representative Dated
<PAGE>
Royal Insurance
THIS ENDORSEMENT CHANGES THE POLICY. PLEASE READ IT CAREFULLY.
EMPLOYMENT PRACTICE LIABILITY
In consideration of the premium charged it is hereby understood and agreed that
coverage afforded by this policy is extended to cover Loss from Employment
Practices Claims against an Insured Person subject to all terms of this
endorsement and all other terms, conditions and exclusions of the policy.
DEFINITIONS
It is futher understood and agreed that for the purpose of this endorsement
only the following definitions shall apply:
1) "Employment Practices Claims" shall mean any Claim relating to a
past, present or prospective employee of the Insured Organization
for or arising out of any actual, constructive or alleged wrongful
dismissal, discharge or termination of employment; wrongful failure
to employ or promote; wrongful disciplinary action; wrongful
employee evaluation; any manner of sexual or workplace harassment;
any manner of unlawful discrimination or wrongful failure to provide
adequate employee policies and procedures.
Employment Practices Claims shall include Claims brought under
local, state or federal law (whether common or statutory) and
includes but are not limited to allegations of violations of the
following federal laws (as amended) including all regulations
promulgated thereunder.
1. Family and Medical Leave Act of 1993.
2. Americans with Disabilities Act of 1992 (ADA).
3. Civil Rights Act of 1991.
4. Age Discrimination in Employment Act of 1967 (ADEA), including
the Older Workers Benefit Protection Act of 1990.
5. Title VII of the Civil Rights Law of 1964, as amended (1983)
including Pregnancy Discrimination Act of 1978.
6. Civil Rights Act of 1866, Section 1981 and
7. Fifth and Fourteenth Amendments of the U.S. Constitution.
2) "Insured Person" shall include, for the purposes of Employment
Practices Claims only, any Director, Officer or Employee of the
Company whether such individual is in a supervisory, co-worker or
subordinate position to the claimant(s) or otherwise. Coverage
shall apply to all new Directors, Officers or Employees elected,
appointed or hired after the inception date of the policy.
<PAGE>
Royal Insurance
THIS ENDORSEMENT CHANGES THE POLICY. PLEASE READ IT CAREFULLY.
It is further understood and agreed that exclusions 3(B)(1), 3(B)(5)(b) are
amended as they relate to Employment Practices Claims only as follows:
A) Exclusion 3(B)(1) is deleted in its entirety and replaced as
follows:
3 (B) The Insurer shall not be liable to make any payment for
Loss in connection with any Claim made against the
Insured Persons:
(1) for any actual or alleged (a) bodily injury, sickness,
disease or death of any person, assualt, battery or
(b) damage to or destruction of any tangible property
including loss of use thereof; or (c) invasion of
privacy, wrongful entry, eviction, false arrest, false
imprisonment or malicious prosecution.
B) Exclusion 3(B)(5)(b) is deleted in its entirety and replaced as
follows:
3 (B) The Insurer shall not be liable to make any payment for Loss
in connection with any Claim made against the Insured
Persons:
(5) by an Insured Person or Insured Organization, as
defined in this policy, except:
(b) a Claim brought by an Insured Person other than
an Insured Person who is or was a Director of the
Company for their alleged Employment Practices
Claims.
Nothing herein contained shall be held to vary, alter, waive or extend any of
the terms, conditions, provisions, agreements or limitations of the below
mentioned policy other than as above stated.
All other terms, conditions and warranties remaining unchanged.
Attached to and forming part of the Policy No.
Issued to
If this endorsement is listed in the policy declarations, it is in effect from
the time coverage under this policy commences. Otherwise, the effective date
of this endorsement is as shown below at the same time or hour of the day as
the policy became effective.
Effective Date: Endorsement No. 7
Countersigned By:
Authorized Representative Dated
<PAGE>
Royal Insurance
THIS ENDORSEMENT CHANGES THE POLICY. PLEASE READ IT CAREFULLY.
MARITAL ESTATE EXTENSION
In consideration of the premium charged, it is hereby understood and agreed
that subject otherwise to the terms hereof, this policy may cover Loss arising
from any claims made against the lawful spouse (where such status is derived by
reason of statutory law or common law) of a Director or Officer for claims
arising solely out of his or her status as the spouse of a Director or Officer;
including such claims that seek damages recoverable from marital community
property, property jointly held by the Director or Officer and the spouse, or
property transferred from the Director or Officer to the spouse; provided,
however, that this extension shall not afford any coverage for any claim for
any actual or alleged Wrongful Act of the spouse and that this policy shall
apply only to actual or alleged Wrongful Acts of a Director of Officer subject
to the full policy's terms and conditions.
Nothing herein contained shall be held to vary, alter, waive or extend any of
the terms, conditions, provisions, agreements or limitations of the below
mentioned policy other than as above stated.
All other terms, conditions and warranties remaining unchanged.
Attached to and forming part of the Policy No.
Issued to
If this endorsement is listed in the policy declarations, it is in effect from
the time coverage under this policy commences. Otherwise, the effective date
of this endorsement is as shown below at the same time or hour of the day as
the policy became effective.
Effective Date: Endorsement No. 8
Countersigned By:
Authorized Representative Dated
<PAGE>
Royal Insurance
DIRECTORS AND OFFICERS LIABILITY
AND COMPANY REIMBURSEMENT APPLICATION
THIS FORM IS FOR PROFIT CORPORATIONS (RENEWAL ONLY)
1. (a) Name of Company
Arrow Automotive Industries, Inc.
(b) Address (City, State, Zip Code)
3 Speen Street
Framingham, MA 01701
2. The Officer of the Entity designated to receive notice from the
Insurer concerning this Insurance is:
James F. Fagan Executive Vice President
Name Title
3. Date since which the Company has continuously carried on business:
1929
4. Nature of operations (if Sales or Manufacturing, please detail
accordingly):
Remanufacture of automotive parts
5. Stock Ownership
(a) Number of common shares outstanding
2,873,083
(b) Number of common stock shareholders
322
(c) Number of shares of the Company's common stock owned directly
or beneficially by its Directors and Officers:
1,742,663
(d) Does any shareholder own directly or beneficially 10 percent
or more of the common shares?
X Yes No (If "Yes", please give details): Lawrence M.
Levinson 48.98%; Mary S. Holzwasser, Joseph Segal and Lawrence
Levinson as Trustees of the Trust u/w/o Albert S. Holzwasser 18.33%.
<PAGE>
(e) Are the common shares publicly traded?
X Yes No (If "Yes", please specify the exchange(s) listing
the Applicant's stock and the stock symbol.) AI
American Stock Exchange
(f) Provide the price range per share for the applicant's Common
Stock for each of the last three (3) years
Year 52 Week High 52 Week Low
1995 8 3/8 5 1/2
1994 10 6
1993 7 5/8 5 3/8
6. List the names, titles and affiliations of all Directors and
Officers of the Entity and its Subsidiary companies:
See attached.
7. Complete list of subsidiary companies:
Name Type of Operation Percentage Date Domestic
of Ownership Acquired or Foreign
N/A
8. Have any plans for merger, acquisition or consolidation been
approved by the Board of Directors?
Yes X No (If "Yes", please give details):
9. Has the corporation or any subsidiary filled or contemplated filing
any new public offering of securities either pursuant to the
Securities Act of 1933 or exempt from registration under regulation
A within the past 18 months or within the next 12 months?
Yes X No (If "Yes", attach a statement of full details
including the prospectus.)
10. Please indicate various Limit(s) of Liability and Retentions for
which quotations are desired:
LIMIT RETENTION
$1,000,000 each loss $2,500 each person
$1,000,000 each loss $5,000 all persons
$10,000 organization
<PAGE>
The undersigned authorized Officer of the Company, on behalf of the Directors
and Officers and the Company, warrant that to the best of his/her knowledge and
belief the statements set forth herein are true and he/she agrees that this
Renewal Application is a supplement to the application completed for the
issuance of the first policy, and that application together with this Renewal
Application and information furnished pursuant hereto shall be the basis of the
contract should a policy be issued and such applications will be attached and
become part of the policy. The Insurer is hereby authorized to make any
investigation and inquiry it deems necessary in connection with this
application.
NOTICE TO NEW YORK APPLICANTS
Your state insurance department requires applicants to be informed that any
person who knowingly and with intent to defraud any insurance company or other
person files an application for insurance containing any false information, or
conceals for the purpose of misleading, information concerning any fact
material thereto, commits a fraudulent insurance act, which is a crime.
NOTE: This application must be signed by the Chairman of the Board or the
President and dated within 30 days of binding should an order be given.
Signature Harry A. Holzwasser Title Chairman of the Board
(Chairman of the Board or President)
Date May 18, 1996 Company Arrow Automtive Industries, Inc.
RSUFPR-00007 (Ed. 6/92)
<PAGE>
One copy of each of the following documents is attached and made a part of this
proposal:
(a) AUDITED ANNUAL REPORT (complete financial statements for the most
recent three (3) years)
(b) LATEST INTERIM FINANCIAL STATEMENT
(c) MOST RECENT FORM 10K FILED WITH THE SECURITIES AND EXCHANGE
COMMISSION SUBSEQUENT TO THE FILING THE ANNUAL 10K (if the Entity
is publicly traded)
(d) LATEST PROXY STATEMENT
(e) COPY OF CURRENT SCHEDULE OF INSURANCE
Submitted By Johnson & Higgins, Boston Date 5/11/94
Producer
NOTE: This Application and all exhibits shall be treated in the
strictest confidence.
85431 (e.d. 10/83)
<PAGE>
CNA FINANCIAL INSURANCE GROUP
One Continental Drive, Cranbury, New Jersey 08570
CNA
For All the Commitments You Make
CNA INSURANCE COMPANIES DECLARATIONS
CNA PLAZA EXCESS INSURANCE POLICY
CHICAGO, IL 60685
NOTICE
THIS IS A "CLAIMS MADE" POLICY AND, SUBJECT TO ITS PROVISIONS, APPLIES ONLY TO
ANY CLAIM FIRST MADE AGAINST THE INSUREDS DURING THE POLICY PERIOD. NO
COVERAGE EXISTS FOR ANY CLAIM FIRST MADE AFTER THE END OF THE POLICY PERIOD
UNLESS, AND TO THE EXTENT, THE EXTENDED REPORTING PERIOD APPLIES. THE LIMIT OF
LIABILITY SHALL BE REDUCED BY AMOUNTS INCURRED AS DEFENSE COSTS.
ACCOUNT NUMBER COVERAGE PROVIDED BY
201028
POLICY NUMBER Continental Casualty Company AGENCY
DOX 132022777 910 792169
NAMES ENTITY AND PRINCIPAL ADDRESS AGENT
Item Arrow Automotive Industries, Inc. Johnson & Higgins Of
Massachusetts, Inc.
1. 3 Speen Street Ms. Suzanne Hoppenstedt
Framingham, MA 01701 Three Center Plaza
Boston, MA 02108
Attn: Mr. James F. Fagan
Item Policy Period:
2. 06/01/96 To 06/01/97
12:01 A.M. Standard Time at the Principal Address stated in
Item 1.
Item Limited of Liability (inclusive of Defense Costs):
3.
$ 5,000,000 Maximum aggregate
Limit of Liability each
Policy Period.
Item Schedule of Underlying Insurance:
4. A. Primary Policy
Name of Carrier Policy No. Limits Deductible/
Retention Amount
Royal Indemnity Company HP 605193 $5,000,000 0/0/$75,000
B. Underlying Excess Policy(ies):
Name of Carrier Policy No. Limits Deductible/
N/A Retention Amount
<PAGE>
Item Policy Premium
5.
$ 35,000
Item Forms and Endorsements forming a part of this policy at
inception:
6. FIG-1006-A
These Declarations along with the completed and signed Application and the
Excess Insurance Policy, shall constitute the contract between the Insureds,
the Named Entity, and the Insurer.
Date 10/09/96
Chairman of the Board Secretary Authorized Representative
Johnson & Higgins of
Massachusetts, Inc.
G-17728-A
(ED 04/92)
<PAGE>
EXCESS INSURANCE POLICY
In consideration of the payment of the premium and in reliance on all
statements made and information furnished to Continental Casualty Company
(hereinafter called the "Insurer"), and/or to the Insurers of the Underlying
Insurance, including the statements made in the Application made a part hereof
and subject to all of the provisions of this Policy, the Insurer and the
Insureds agree as follows:
I. INSURING AGREEMENT
The Insurer shall provide the Insureds with excess coverage over the Underlying
Insurance as set forth in Item 4 of the Declarations during the policy Period
set forth in Item 2 of Declarations. Coverage hereunder shall attach only
after all such Underlying Insurance has been exhausted by payments for losses
and shall then apply in conformance with the same provisions of the Primary
Policy at its inception, except for premium, limit of liability and as
otherwise specifically set forth in the provisions of this Policy.
II. POLICY DEFINITIONS
Application shall mean the written application for this Policy, including any
materials submitted therewith, which together shall be on file with the Insurer
and deemed a part of and attached hereto as if physically attached to this
Policy.
Named Entity means the organization named in Item 1 of the Declarations.
Insureds means those persons or organization(s) insured under the Primary
Policy, at its inception.
Policy Period means the period from the effective date and hour of this Policy
as set forth in Item 2 of the Declarations, to the Policy expiration date and
hour set forth in Item 2 of the Declarations, or its earlier cancellation date
or termination date, if any.
Primary Policy means the Policy scheduled in Item 4 (a) of the Declarations.
Underlying Insurance means all those Policies scheduled in Item 4 of the
Declarations and any Policies replacing them.
III. MAINTENANCE OF UNDERLYING INSURANCE
All of the Underlying Insurance scheduled in Item 4 of the Declarations shall
be maintained during the Policy Period in full effect, except for any reduction
of the aggregate limit(s) of liability available under the Underlying Insurance
solely by reason of payment of losses thereunder. Failure to comply with the
foregoing shall not invalidate this Policy but the Insurer shall not be liable
to a greater extent than if this condition had been complied with. To the
extent that any Underlying Insurance is not maintained in full effect during
the currency of this
<PAGE>
Policy Period, then the Insureds shall be deemed to have retained any loss for
the amount of the limit of liability of any Underlying Insurance which is not
maintained as set forth above.
In the event of any actual or alledged (a) failure by the Insureds to give
notice or to exercise any extensions under any Underlying Insurance or (b)
misrepresentation or breach of warranties by any of the Insured with respect to
any Underlying Insurance, the Insurer shall not be liable hereunder to a
greater extent than it would have been in the absence of such actual or alleged
failure, misrepresentation or breach.
It is further a condition of this Policy that the Insurer shall be notified in
writing, as soon as practicable of cancellation and/or alteration of any
provisions of any of the policies of Underlying Insurance.
IV. LIMIT OF LIABILITY
The amount set forth in Item 3 of the Declarations shall be the maximum
aggregate Limit of Liability of the Insurer for the Policy Period.
Costs of defense shall be part of and not in addition to the Limit of Liability
in Item 3 of the Declarations, and such costs of defense shall reduce the Limit
of Liability stated in Item 3 of the Declarations.
V. DEPLETION OF UNDERLYING LIMIT(S)
In the event of the depletion of the limit(s) of liability of the Underlying
Insurance solely as the result of the actual payment of losses thereunder by
the applicable insurers, this Policy shall, subject to the Insurer's Limit of
Liability and to the other terms of this Policy, continue to apply to losses as
Excess Insurance over the amount of Insurance remaining under such Underlying
Insurance. In the event of the exhaustion of all of the limit(s) of liability
of such Underlying Insurance solely as a result of payment of losses
thereunder, the remaining limits available under this Policy shall, subject to
the Insurer's Limit of Liability and to the other provisions of this Policy,
continue for subsequent losses as primary insurance and any retention specified
in the Primary Policy shall be imposed under this Policy as to each claim made;
otherwise no retention shall be imposed under this policy.
This Policy only provides coverage excess of the Underlying Insurance. This
Policy does not provide coverage for any loss not covered by the Underlying
Insurance except and to the extent that such loss is not paid under the
Underlying Insurance solely by reason of the reduction or exhaustion of the
available Underlying Insurance through payments of loss thereunder. In the
event the insurer of one or more of the Underlying Insurance polices fails to
pay loss in connection with any claim covered under the Underlying Insurance as
a result of the insolvency, bankruptcy, or liquidation of said insurer, then
the Insureds hereunder shall be deemed to have retained any loss for the amount
of limit of liability of said Insurer which is not paid as the result of such
insolvency, bankruptcy or liquidation.
<PAGE>
If any Underlying Insurance bears an effective date which is prior to the
effective date of this Policy and if any such insurance becomes exhuasted or
impaired by payment of loss with respect to any claim which, shall be deemed to
be made prior to the effective date of this Policy, then with respect to any
claim made after the the effective date of this Policy, the Insureds shall be
deemed to have retained any loss for the amount of any such Underlying
Insurance which is exhausted or impaired by payment of loss with respect to
such claim made prior to the effective date of this Policy.
VI. CLAIM PARTICIPATION
The Insured shall not admit liability, consent to any judgment against them, or
agree to any settlement which is reasonably likely to involve the Limit of
Liability of this Policy without the Insurer's consent, such consent not to be
unreasonably withheld.
The Insurer may, at its sole discretion, elect to participate in the
investigation, settlement or defense of any claim against any of the Insureds
for matters covered by this Policy even if the Underlying Insurance has not
been exhausted.
All provisions of the Underlying Insurance are considered as part of this
Policy except that it shall be the duty of the Insureds and not the duty of the
Insurer to defend any claims against any of the Insureds.
VII. SUBROGATION - RECOVERIES
In that this Policy is "Excess Coverage", the Insureds and the Insurer's right
of recovery against any person or other entity may not be exclusively
subrogated. Despite the foregoing, in the event of any payment under this
Policy, the Insurer shall be subrogated to all the Insured's rights of recovery
against any person or organization, and the Insureds shall execute and deliver
instruments and papers and do whatever else is necessary to secure such rights.
Any amounts recovered after payment of loss hereunder shall be apportioned in
the inverse order of payment to the extent of actual payment. The expenses of
all such recovery proceedings shall be apportioned in the ratio of respective
recoveries.
VIII. NOTICE
The Insurer shall be given notice in writing as soon as is practicable in the
event (a) the cancellation of any Underlying Insurance and (b) any additional
or return premiums charged or allowed in connection with any Underlying
Insurance. Notice regarding (a) and (b) above shall be given to Manager,
Directors and Officers Liability Underwriting, CNA Insurance Companies, CNA
Plaza, Chicago, Illinois 60685.
The Insurer shall be given notice as soon as practicable of any notice of claim
or any situation that could give rise to a claim under any Underlying
Insurance. Notice of any claim to the Insurer shall be given in writing to
Manager, Professional Liability Claims, CNA Insurance Companies, CNA Plaza,
Chicago, Illinois 60685.
<PAGE>
IX. COMPANY AUTHORIZATION CLAUSE
By acceptance of this Policy, the Named Entity named in Item 1 of the
Declarations agrees to act on behalf of all the Insureds with respect to the
giving and receiving of notice of claim or cancellations, the payment of
premiums and the receiving of any return premiums that may become due under
this Policy; and the Insureds agree that the Named Entity shall in all cases be
authorized to act on their behalf.
X. ALTERATION
No change in or modification of this Policy shall be effective except when made
by endorsement signed by an authorized employee of the Insurer or any of its
agents relating to this Policy.
XI. POLICY CANCELLATION
This Policy may be cancelled by the Named Entity at any time by written notice
or by surrender of this Policy to the Insurer. This Policy may also be
cancelled by or on behalf of the Insurer by delivery to the Named Entity or by
mailing to the Named Entity, by registered, certified or other first class
mail, at the address shown in Item 1 of the Declarations, written notice
stating when, not less than thirty (30) days thereafter, the cancellation shall
become effective. The mailing of such notice as aforesaid shall be sufficient
proof of notice and this Policy shall cancel at the date and hour specified in
such notice.
If the period of limitation relating to the giving of notice is prohibited or
made void by any law controlling the construction thereof, such period shall be
deemed to be amended so as to be equal to the minimum period of limitation
permitted by such law.
The Insurer shall refund the unearned premium computed at less than pro-rata if
the Policy is canceled in its entirety by the Named Entity. Under any other
circumstances the refund shall be computed pro-rata.
XII. EXCLUSIONS
Nothwithstnading any provisions of the Underlying Insurance, the Insurer shall
not be liable to make payment for loss in connection with any claim based upon,
arising out of, relating to, directly or indirectly resulting from, or in
consequence of, or in any way involving:
1. nuclear reaction, radiation, or contamination regardless of
causes;
2. pollutants, including but not limited to loss arising out of any:
a. request, demand or order that any of the Insureds or others
test for, monitor, clean up, remove, contain, treat, detoxify
or neutralize, or in any way respond to, or assess the
effects of pollutants, or
<PAGE>
b. claim by or on behalf of a governmental authority for damages
because of testing for, monitoring, cleaning up, removing,
containing, treating, detoxifying or neutralizing or in any
way responding to or assessing the effects of pollutants.
Pollutants means any solid, liquid, gaseous or thermal irritant or contaminant,
including smoke, vapor, soot, fumes, acids, alkalis, chemicals and waste.
Waste includes materials to be recycled, reconditioned or reclaimed.
XIII. CONDITIONS
No action shall be taken against the Insurer unless, as a condition precedent,
there shall have been full compliance with all the provisions of this Policy,
nor until the amount of the Insureds obligation to pay shall have been finally
determined either by final and nonappealable judgment against the Insureds
after trial, or by written agreement of the Insureds, the claimant and the
Insurer.
Secretary Chairman of the Board
<PAGE>
Prior or Pending Litigation Exclusion
In consideration of the premium paid for this policy, it is agreed that Section
XII. is amended with the addition of the following:
3 Any fact, circumstance, situation, transaction or event
underlying or alleged in any prior and/or pending litigation
as of 06/01/96, regardless of the legal theory upon which such
litigation is predicated.
All other provisions of the policy remain unchanged.
This endorsement, which forms a part of and is for attachment to the following
described Policy issued by the designated Insurers takes effect on the
effective date of said Policy, unless another effective date is shown below, at
the hour stated in said Policy and expires concurrently with said Policy.
Must be Completed Complete Only When This Endorsement is
Not Prepared with the Policy or is
Not to be Effective with the Policy
ENDT.No. POLICY NO. ISSUED TO EFFECTIVE DATE OF
THIS ENDORSEMENT
01
,132022777 Arrow Automotive 09/27/96
Industries, Inc.
Countersigned by Johnson & Higgins of
Massachusetts, Inc.
Authorized Representative
CNA Insurance Companies
FIG-1006-A
(ED. 07/94)
<PAGE>
RENEWAL APPLICATION FOR
DIRECTORS AND OFFICERS LIABILITY INSURANCE
NOTICE
THIS IS AN APPLICATION FOR A CLAIMS-MADE POLICY WHICH, SUBJECT TO ITS
PROVISIONS, APPLIES ONLY TO ANY CLAIM FIRST MADE AGAINST THE DIRECTORS AND
OFFICERS DURING THE POLICY PERIOD. NO COVERAGE EXISTS FOR CLAIMS FIRST MADE
AFTER THE END OF THE POLICY PERIOD UNLESS, AND TO THE EXTENT, THE EXTENDED
REPORTING PERIOD APPLIES. THE LIMIT OF LIABILITY SHALL BE REDUCED BY AMOUNTS
INCURRED AS DEFENSE COSTS. DEFENSE COSTS SHALL BE SUBJECT TO THE RETENTION
AMOUNTS. PLEASE REVIEW THE POLICY CAREFULLY AND DISCUSS THE COVERAGE WITH YOUR
INSURANCE AGENT OR BROKER.
Instructions For Completing This Application
Please read the instructions carefully, and complete and submit all requested
information and required attachments. Please note that terms appearing in bold
face in the above Notice and in any Application Question below are defined in
the Policy and shall have the same meaning in this Application as in the
Policy. This Application and all materials submitted or required shall be held
in confidence. Questions 3 and 4 need not be answered if the information
requested is contained-in any required attachments.
Required Attachments:
1. All proxy statements and Notices of Annual Meeting to
Stockholders within the last twelve months
2. Audited financial statements for the most recent three
fiscal years
3. The latest interim financial statements
4. The indemnification provisions of the charter and bylaws
5. Any filings made to the SEC within the last 12 months
Please submit this Application to:
CNA Insurance Companies
Financial Insurance Division - 20 South
CNA Plaza
Chicago, Illinois 60685
(800) 221-8201
ANY PERSON WHO, WITH INTENT TO DEFRAUD OR KNOWING THAT (S)HE IS
FACILITATING A FRAUD AGAINST AN INSURER, SUBMITS AN APPLICATION OR
FILES A CLAIM CONTAINING A FALSE OR DECEPTIVE STATEMENT MAY BE
GUILTY OF INSURANCE FRAUD.
<PAGE>
1. Named Entity: Arrow Automotive Industries, Inc.
Street Address: 3 Speen Street
City: Framingham State: MA Zip Code: 01701
Telephone: (508) 872-3711
2. The Officer designated by the Entity to receive notices from the
Insurer concerning this insurance is:
Kathaleen M. Carroll-Coelho Vice President and Controller
Name of Officer Title
Questions 3 and 4 Need Not Be Answered if the Information Requested is
Contained in the Required Attachments
3. Has there been any material change in the nature of the
operations within the last 12 months? Yes No X
If yes, provide details:
4. Stock Ownership of Named Entity
a. Total number of common shares outstanding: 2,873,083
b. Total number of common shareholders: 322
c. Total number of common shares owned directly
or beneficially by Directors: 1,700,004
d. Total number of common shares owned directly
or beneficially by Officers who are not Directors
e. Does any shareholder own directly or beneficially
five percent or more of the common shares? Yes X No
If "Yes", designate name and percentage of holdings: Lawrence M.
Levinson, 48.98%; Mary S. Holzwasser, Joseph Segal and Larry Levinson as
Trustees of the Trust U/W/O Albert Holzwasser 18.33%.
Include by attachment the information above (items a-e) for any
additional classes of voting stock.
f. Are there any other securities convertible to
voting stock? Yes No X
If "Yes", provide details:
5. Have there been any changes in senior management
(Board Chairman, President, Executive Vice
President, etc.) in the last 12 months? Yes No X
If "Yes", provide details:
<PAGE>
6. By attachment to this Application, provide the
following information for any Subsidiary acquired
or created after the effective date of the current
Policy: Not applicable
a. Name d. Nature of business
b. Date of acquisition e. Domestic or foreign
c. Percent of ownership f. Name of parent entity
7. During the last 12 months, has the Entity been involved
in, or is it presently considering, any merger,
consolidation, acquisition, tender offer, or divestment
or sale of its stock in excess of 10% of the total
stock outstanding? Yes No X
If "Yes", provide details:
8. Has the Entity filed, or contemplated filing, a
registration statement with the Securities and
Exchange Commission:
a. within the past 12 months? Yes No X
b. within the next 12 months? Yes No X
If "Yes", to either of the above, provide details and
furnish a copy of such registration statement if
available. N/A
9. a. Within the last 12 months has the Named Entity
or any Subsidiary made or joined in a Schedule
13-D filing with the Securities and Exchange
Commission with respect to ownership to the
securities of another corporation? Yes No
If "Yes", provide details. N/A
b. Within the last 12 months, has the Named Entity
or any Subsidiary become aware that any person,
corporation or other entity has made a Schedule
13-D filing with respect to the ownership of the
securities of the Named Entity or any Subsidiary? Yes X No
If "Yes", provide details. Dimensional Fund Advisors, Inc.,
1229 Ocean Avenue, Santa Monica,
California 166,300 shares
Amendment 13D - Lawrence M. Levinson - See Exhibit A
10. Please provide the following insurance information:
a. Pension/Fiduciary Liability Limit: 1,000,000
Carrier: Federal (Chubb) Expir Date: 6/1/96
b. Commercial Crime/Fidelity Limit: 500,000
Carrier: Liberty Mutual Expir Date: 6/1/96
c. General Liability Limit: 1,000,000
Carrier: Liberty Mutual Expir Date: 6/1/96
<PAGE>
11. During the last 12 months has the Entity or any of the
Directors and Officers been involved in any of the
following:
a. any anti-trust, copyright or patent litigation? Yes No X
b. any civil or criminal action or administrative
proceeding charging a violation of any federal
or state security law or regulation? Yes No X
c. any representative actions, class actions or
derivative suits? Yes No X
d. other material litigation? Yes No X
If "Yes", to any of the above, please attach full details.
12. The undersigned declares that to the best of his/her knowledge
the statements set forth herein are true and correct and that
reasonable efforts have been made to obtain sufficient
information from all of the Directors and Officers to facilitate
the proper and accurate completion of this Application for the
proposed Policy. Signing of this Application does not bind
the undersigned to complete the insurance, but it is agreed that
this Application shall be the basis of the contract should a
Policy be issued, and this Application will be attached to and
become part of such Policy. The undersigned agrees that if after
the date of this Application and prior to the effective date
of the Policy, any occurrence, event or other circumstance should
render any of the information contained in this Application
inaccurate or incomplete, then the undersigned shall notify the
Insurer of such occurrence, event or circumstance and shall
provide the Insurer with information that would complete, update
or correct the information contained in this Application. Any
outstanding quotations may be modified or withdrawn at the sole
discretion of the Insurer.
13. It is agreed that this Renewal Application and all Application(s)
for all policies issued by the Insurer of which the proposed
Policy would be a direct or indirect renewal or replacement,
copies of which will be attached to the proposed Policy, and any
materials submitted or required (which shall be maintained on
file by the Insurer and be deemed attached as if physically
attached to the proposed Policy), are true and are the basis of
the proposed Policy and are to be considered as incorporated into
and constituting a part of the proposed Policy.
14. The information requested in this Application is for underwriting
purposes only and does not constitute notice to the Insurer under
any Policy of a Claim or potential claim. All such notices must
be submitted to the Insurer pursuant to Section VII of the
Policy.
<PAGE>
The undersigned acknowledges that he or she is aware that Defense Costs reduce
and may exhaust the Limit of Liability. The Insurer is not liable for any Loss
(which includes Defense Costs) in excess of the Limit of Liability.
This Application must be signed by the Chairman of the Board or President.
Signed Harry A. Holzwasser
Title Chairman of the Board
Corporation Arrow Automotive Industries Inc.
Date 05/15/96
A POLICY CANNOT BE ISSUED UNLESS THE APPLICATION IS PROPERLY SIGNED AND DATED
FOR NEW YORK RESIDENTS ONLY:
This Application must be signed by the Chairman of the Board or President:
WARNING
ANY PERSON WHO KNOWINGLY AND WITH INTENT TO DEFRAUD ANY INSURANCE COMPANY OR
OTHER PERSON FILES AN APPLICATION FOR INSURANCE CONTAINING ANY FALSE
INFORMATION, OR CONCEALS, FOR THE PURPOSE OF MISLEADING, INFORMATION CONCERNING
ANY FACT THERETO, COMMITS A FRAUDULENT INSURANCE ACT, WHICH IS A CRIME.
Signed
Title
Corporation
Date
A POLICY CANNOT BE ISSUED UNLESS THE APPLICATION IS PROPERLY SIGNED AND DATED
G-19906-A
(ED. 07/93)
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
BALANCE SHEET AND STATEMENT OF OPERATIONS, AND IS QUALIFIED IN ITS
ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> JUN-28-1997
<PERIOD-END> MAR-29-1997
<CASH> 380
<SECURITIES> 0
<RECEIVABLES> 14,075
<ALLOWANCES> 543
<INVENTORY> 31,977
<CURRENT-ASSETS> 49,169
<PP&E> 36,222
<DEPRECIATION> 23,849
<TOTAL-ASSETS> 63,897
<CURRENT-LIABILITIES> 18,992
<BONDS> 16,944
0
0
<COMMON> 297
<OTHER-SE> 23,275
<TOTAL-LIABILITY-AND-EQUITY> 63,897
<SALES> 68,192
<TOTAL-REVENUES> 68,192
<CGS> 58,563
<TOTAL-COSTS> 58,563
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 1,727
<INCOME-PRETAX> (8,309)
<INCOME-TAX> (585)
<INCOME-CONTINUING> (7,724)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (7,724)
<EPS-PRIMARY> (2.69)
<EPS-DILUTED> (2.69)
</TABLE>