<PAGE>
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(a) OF THE
SECURITIES EXCHANGE ACT OF 1934
------------------------------------
Filed by the Registrant [X]
Filed by a party other than the Registrant [_]
------------------------------------
Check the appropriate box:
[_] Preliminary Proxy Statement [X] Definitive Proxy Statement
[_] Definitive Additional Materials [_] Soliciting Material Pursuant
to (S)240.14a-11(c) or
(S)240.14a-12
[_] Confidential, for Use of the Commission Only (as permitted by
Rule 14a-6(e)(2)
------------------------------------
ARROW INTERNATIONAL, INC.
(Name of Registrant as Specified in Its Charter)
------------------------------------
Payment of Filing Fee (Check the appropriate box):
[X] No fee required.
[_] Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and
0-11.
(1) Title of each class of securities to which transaction
applies: N/A
(2) Aggregate number of securities to which transaction applies: N/A
(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11:/1/ N/A
(4) Proposed maximum aggregate value of transaction: N/A
(5) Total fees paid: N/A
/1/ Set forth the amount on which the filing fee is calculated
and state how it was determined.
[_] Fee paid previously with preliminary materials.
[_] Check box if any part of the fee is offset as provided by Exchange Act
Rule 0-11(a)(2) and identify the filing for which the offsetting fee
was paid previously. Identify the previous filing by registration
statement number, or the Form or Schedule and the date of its filing.
(1) Amount Previously Paid:
(2) Form, Schedule or Registration Statement No.:
(3) Filing Party:
(4) Date Filed:
<PAGE>
ARROW INTERNATIONAL, INC.
2400 Bernville Road
Reading, Pennsylvania 19605
--------------------
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
To be held on January 21, 1998
To Our Shareholders:
The Annual Meeting of Shareholders of Arrow International, Inc. will be
held at the Sheraton Berkshire Inn, Route 422 West and Papermill Road Exit,
Wyomissing, Pennsylvania at 4:00 p.m. on January 21, 1998 for the following
purposes:
(1) To elect four directors;
(2) To act upon a proposal to ratify the appointment of Coopers & Lybrand
L.L.P. as the Company's independent accountants for the fiscal year
ending August 31, 1998; and
(3) To transact such other business, if any, as may properly come before
the Annual Meeting or any adjournments thereof.
The Board of Directors has fixed the close of business on November 28, 1997
as the record date for the determination of shareholders entitled to notice of
and to vote at the Annual Meeting and any adjournments thereof.
YOUR VOTE IS IMPORTANT. PLEASE SIGN AND DATE THE ENCLOSED PROXY CARD AND
RETURN IT PROMPTLY IN THE ENCLOSED RETURN ENVELOPE, WHETHER OR NOT YOU EXPECT TO
ATTEND THE ANNUAL MEETING. YOU MAY REVOKE YOUR PROXY AND VOTE IN PERSON IF YOU
DECIDE TO ATTEND THE ANNUAL MEETING.
By Order of the Board of Directors,
T. Jerome Holleran,
Secretary
December 15, 1997
Reading, Pennsylvania
<PAGE>
PROXY STATEMENT
1998 ANNUAL MEETING OF SHAREHOLDERS
OF
ARROW INTERNATIONAL, INC.
This Proxy Statement is furnished in connection with the solicitation of
proxies by the Board of Directors of Arrow International, Inc. for the Annual
Meeting of Shareholders to be held on January 21, 1998, or any adjournments
thereof.
The Board of Directors has fixed the close of business on November 28, 1997
as the record date for the determination of the shareholders entitled to notice
of, and to vote at, the Annual Meeting. On that date there were 23,225,726
shares of Common Stock outstanding and entitled to vote at the Annual Meeting.
Each share of Common Stock is entitled to one vote. A majority of the
outstanding shares of Common Stock is required to establish a quorum at the
Annual Meeting. The affirmative vote of a plurality of the votes cast is
required for the election of directors. The affirmative vote of a majority of
the votes cast is required to ratify the appointment of independent accountants
for fiscal 1998. Shares represented by proxies will be voted in accordance with
the specifications made on the proxy card by the shareholder.
With regard to the election of directors, votes may be cast in favor or
withheld; votes that are withheld will be counted for purposes of determining
the presence or absence of a quorum for the transaction of business at the
Annual Meeting, but will be excluded entirely from the vote and will have no
effect on the outcome of the voting. With regard to the ratification of the
appointment of independent accountants, abstentions may be specified. Since the
affirmative vote of a majority of the votes cast is required in respect of such
proposal, an abstention with respect to such proposal will have the same effect
as a vote against such proposal. Any proxy not specifying the contrary will be
voted in the election of directors for each of the Board of Directors' nominees
and in favor of the proposal to ratify the appointment of independent
accountants. A shareholder giving a proxy has the right to revoke it by a duly
executed proxy bearing a later date, by attending the Annual Meeting and voting
in person, or by otherwise notifying the Company prior to the Annual Meeting.
Under applicable Pennsylvania law, broker non-votes (that is, proxies from
brokers or nominees indicating that such persons have not received instructions
from the beneficial owners or other persons entitled to vote shares on a
particular matter as to which the brokers or nominees do not have discretionary
power) may be counted as present or represented for purposes of determining the
presence or absence of a quorum for the transaction of business, but will not be
counted for purposes of determining whether any non-discretionary proposals to
be voted upon at the Annual Meeting have been approved. The Company believes
that the proposals to be considered at the Annual Meeting are proposals in
respect of which brokers and other nominees typically have discretion.
Accordingly, unless one or more beneficial owners of the Common Stock have
withheld discretionary authority from their brokers or nominees in respect of
these types of proposals, the Company does not anticipate that there will be any
broker non-votes in respect of such proposals. If there are any broker non-
votes in respect of the proposals, however, the Company intends to treat such
broker non-votes as stated above.
<PAGE>
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The mailing address of the principal executive offices of the Company is
P.O. Box 12888, 2400 Bernville Road, Reading, Pennsylvania 19612. This Proxy
Statement and the enclosed proxy card are being furnished to shareholders on or
about December 15, 1997.
PROPOSAL 1 - ELECTION OF DIRECTORS
The Board of Directors of the Company is currently composed of nine
directors, although up to 12 directors are permitted by the Company's Restated
Articles of Incorporation and By-Laws. If all of the persons currently
nominated for election to the Board are elected (after giving effect to the
retirement of a current member of the Board as described below), the composition
of the Board of Directors will be increased to ten directors. Under the
Company's Restated Articles of Incorporation and By-laws, the Board is divided
into four classes, as nearly equal in number as possible. At each Annual
Meeting of Shareholders, directors constituting one class are elected for a
four-year term (or for such lesser term as may be specified in the proxy
statement furnished in connection therewith). The Board of Directors has
nominated Raymond Neag and Richard T. Niner, each of whom is currently a
director, and Carl G. Anderson, Jr. and R. James Macaleer, neither of whom has
previously served as a director, for election to the Board of Directors. If
elected, Mr. Anderson will serve until the Annual Meeting of Shareholders to be
held in 2001 and Mr. Macaleer will serve until the Annual Meeting of
Shareholders to be held in 2000, or until such time as their respective
successors are elected, and each of Messrs. Neag and Niner will serve until the
Annual Meeting of Shareholders to be held in 2002, or until such time as their
respective successors are elected. The remaining directors will continue to
serve as set forth below, with the exception of Robert L. McNeil, Jr., who after
serving with distinction as a director of the Company since 1982, will retire
from the Board of Directors effective as of January 20, 1998.
The Board believes that each of the nominees will be available and able to
serve as a director. If a nominee is unable to serve, the shares of Common
Stock represented by all valid proxies will be voted for the election of such
substitute as the Board may recommend, the Board may reduce the number of
directors to eliminate the vacancy or the Board may fill the vacancy at a later
date after selecting an appropriate nominee.
Certain information concerning the nominees and those directors whose terms
of office will continue following the Annual Meeting is set forth in the
following table:
<TABLE>
<CAPTION>
Principal Occupation, Business
Name Age Experience and Directorship
---- --- ------------------------------
Nominee For Term Expiring in 2000
<S> <C> <C>
R. James Macaleer 63 Chairman of the Board of Shared Medical
Systems Corporation, a provider of
computer-based information systems and
associated services to the health
industry in North America and Europe
("SMS"), since 1969, and Chief Executive
Officer of SMS from 1969 to August 1995.
</TABLE>
<PAGE>
-3-
<TABLE>
<CAPTION>
Nominee For Term Expiring in 2001
<S> <C> <C>
Carl G. Anderson, Jr. 52 President and Chief Executive Officer of
ABC School Supply, Inc., a manufacturer
and marketer of materials and equipment
for public and private schools, since
May 1997. Consultant with the New
England Consulting Group, a general
management and marketing consulting
company, from May 1996 to May 1997. Vice
President, General Manager, Retail
Consumer Products of James River
Corporation, a multinational company
engaged in the development, manufacture
and marketing of paper-based consumer
and commercial products ("James River"),
from August 1994 to March 1996, and Vice
President, Marketing, Consumer Brands of
James River from May 1992 to August
1994. From 1984 to May 1992, served in
various capacities with Nestle Foods
Corporation, the latest as Vice
President, Division General Manager,
Confections. Prior thereto, served in
several marketing and manufacturing
capacities with Procter & Gamble.
Nominees For Terms Expiring in 2002
Raymond Neag 66 Executive Vice President since April
1992 and prior thereto Senior Vice
President of the Company. Officer and a
director of the Company since it was
founded in 1975. From 1973 until joining
the Company, General Manager of the
Arrow Products Division of Rockwell
International Corporation, the Company's
predecessor (the "Rockwell Division").
From 1971 to 1973, President of Teledyne
Dental Products, a manufacturer of
dental products and a division of
Teledyne, Inc. Prior to 1971, Vice
President and Director of Marketing of
Sherwood Medical, Inc., a medical device
company. Also, Secretary and a director
of Arrow Precision Products, Inc., a
corporation controlled by principal
shareholders of the Company
("Precision").
Richard T. Niner 58 Director of the Company since 1982.
General partner since 1985 of Brynwood
Management and since 1988 of Brynwood
Management II L.P., entities that serve
as general partners of two private
investment partnerships based in
Greenwich, Connecticut. Director of Air
Express International Corporation, an
international air freight forwarder, and
Hurco Companies, Inc., a manufacturer of
computer
</TABLE>
<PAGE>
-4-
<TABLE>
<CAPTION>
<S> <C> <C>
numerical controls ("CNC") and
CNC metal working machines. Also, a
director of Precision.
Directors Whose Terms Expire in 1999
John H. Broadbent, Jr. 59 Vice President-Finance, Treasurer and a
director of the Company since it was
founded in 1975. From 1966 to 1975,
served in several capacities with
Carpenter Technology Corporation, a
specialty steel manufacturer, the latest
as Manager-Market Planning &
Development. From 1964 to 1966,
consultant in the Management Advisory
Services Department of the international
accounting firm of Price Waterhouse &
Co. Also, Vice President-Finance,
Treasurer and a director of Precision.
George W. Ebright 59 Director of the Company since October
1993. Currently retired. Director of
Cytogen Corporation, a biopharmaceutical
company engaged in the development of
diagnostic and therapeutic substances
for human health care applications
("Cytogen"), from February 1989 until
May 1995. Chairman of the Board of
Cytogen from February 1990 until January
1995 and President from February 1989 to
August 1991. Prior thereto, President
and Chief Operating Officer and a
director of SmithKline Beckman
Corporation, a health care and life
services company engaged in the
marketing of a broad line of
prescription and proprietary products
for human and animal health care, as
well as diagnostic and analytical
products and services. From 1963 through
1987, held several senior management
positions with SmithKline & French
Laboratories and two of its divisions.
Director of NABI, Inc., a
biopharmaceutical company which develops
products for the prevention and
treatment of infectious diseases, and
The West Company, a supplier of
specialized packaging systems to the
health care and consumer products
industries. Also, a director of
Precision.
Directors Whose Terms Expire in 2000
T. Jerome Holleran 61 Secretary and a director of the Company
since it was founded in 1975 and, until
September 1997, a Vice President of the
Company. From February 1986 to September
1997, Vice President, Chief Operating
Officer and a director of Precision.
President of Endovations, Inc., a former
subsidiary of Precision
</TABLE>
<PAGE>
-5-
<TABLE>
<CAPTION>
<S> <C> <C>
that manufactured and marketed certain
gastroenterological medical products
("Endovations"), from 1991 until the
sale in June 1996 of a portion of
Endovations' business to the Company and
the remainder to an unrelated third
party. Since July 1996, President of
Precision Medical Products, Inc., a
former subsidiary of Precision, which
was acquired effective August 29, 1997
by certain employees of Precision,
including Mr. Holleran. From 1971 to
1975, Director of Business Planning-
Textile Divisions of Rockwell
International Corporation and a
Marketing Manager of the Rockwell
Division. From 1969 to 1971, consultant
with the management consulting firm of
Booz, Allen and Hamilton.
Alan M. Sebulsky 38 Director of the Company since January
1997. Principal of Lincoln Capital
Management, a private investment
management firm based in Chicago,
Illinois, since July 1994, with
responsibility for investments in the
health care industry. Also serves on
Lincoln Capital Management's equity
investment committee. From 1988 to May
1994, Managing Director at Morgan
Stanley & Company, an international
investment banking and brokerage firm,
with responsibility for equity research
in the pharmaceutical and medical device
industries. From 1982 to 1988, held
various positions at T. Rowe Price &
Associates, an investment management
firm, the latest as Vice President, with
responsibility for health care
investment analysis and portfolio
management.
Directors Whose Terms Expire in 2001
Marlin Miller, Jr. 65 President and Chief Executive Officer
and a director of the Company since it
was founded in 1975. From 1972 to 1975,
Vice President and a director of Connors
Investor Services, a research and
investment management firm. From 1959 to
1972, served in several capacities with
Glen Gery Corporation, a manufacturer of
building products, the latest as
Executive Vice President and a director.
Director of Carpenter Technology
Corporation, a manufacturer of specialty
steel, and CoreStates Financial Corp., a
financial institution. Also, President
and a director of Precision.
John E. Gurski 56 Director of the Company since January
1997. Corporate Vice President of AMP
Incorporated, a
</TABLE>
<PAGE>
-6-
<TABLE>
<CAPTION>
<S> <C> <C>
multinational company engaged in the
development, manufacture and marketing
of systems for electrical and electronic
applications ("AMP"), since 1989.
President, Europe, Middle East and
Africa, of AMP since July 1995 and
beginning January 1, 1997, President,
Global Operations, of AMP. Corporate
Vice President, Europe, of AMP from
September 1993 to July 1995 and
Corporate Vice President, Business &
Operations Planning International, of
AMP from January 1992 to September 1993.
Corporate Vice President, Capital Goods
Business Sector, of AMP from 1989 to
January 1992 and Divisional Vice
President, Operations, of AMP from 1987
to 1989. From 1972 to 1987, served in
various manufacturing and operating
capacities with AMP. Prior thereto, was
employed by General Motors Corporation.
</TABLE>
Board of Directors and Committees of the Board
The Board of Directors conducts its business through meetings of the Board
and through activities of its committees. The Board of Directors held five
meetings during fiscal 1997. All of the directors attended at least 75% of the
meetings of the Board and any committee on which they served during fiscal 1997.
Among the committees of the Board are the Audit Committee and the Human
Resources Committee (formerly designated as the Compensation Committee).
The Audit Committee, among other things, recommends the firm to be
appointed as independent accountants to audit the Company's financial
statements, discusses the scope and results of the audit with the independent
accountants, reviews with management and the independent accountants the
Company's interim and year-end operating results, considers the adequacy of the
internal accounting controls and audit procedures of the Company and reviews the
non-audit services to be performed by the independent accountants. The members
of the Audit Committee currently are Richard T. Niner, who acts as Chairman of
the Committee, George W. Ebright, Robert L. McNeil, Jr. (who is retiring as a
director of the Company effective January 20, 1998) and Alan M. Sebulsky, none
of whom are employees of the Company. The Audit Committee met two times during
the fiscal year ending August 31, 1997.
The Human Resources Committee reviews and recommends the compensation
arrangements for executive management of the Company, including salaries,
bonuses and grants of awards under, and administration of, the Company's 1992
Stock Incentive Plan. The Human Resources Committee selects employees to whom
awards will be made under the 1992 Stock Incentive Plan, determines the number
of shares to be optioned or awarded, and the time, manner of exercise and other
terms of the awards. The members of the Human Resources Committee currently are
John E. Gurski, Mr. McNeil (who is retiring as a director of the Company
effective January 20, 1998) Mr. Niner and Mr. Ebright, who acts as Chairman of
the Committee. The Human Resources Committee met one time during fiscal 1997.
<PAGE>
-7-
Compensation of Directors
The Company's directors who are not officers or employees of the Company
receive a quarterly fee of $3,500 for Board membership, a fee of $1,000 for
attendance at each Board meeting and a fee of $500 for attendance at each
Committee meeting. Directors are reimbursed for reasonable expenses incurred in
connection with attending Board and Committee meetings. The Chairmen of the
Audit Committee and the Human Resources Committee each receive an additional fee
of $2,000 per year.
To promote the Company's ability to attract and retain outside directors
and to provide them with an incentive to maintain and enhance the Company's
long-term performance, stock awards are made to directors who are not also
employees or consultants of the Company and who were not shareholders of the
Company at the time of the Company's initial public offering on June 9, 1992.
The stock awards are made pursuant to the Company's Directors Stock Incentive
Plan in the form of non-qualified stock options. The plan was approved by the
Company's shareholders at the Company's Annual Meeting of Shareholders held on
January 17, 1996, on which date the plan became effective (the "Effective
Date"). On the later of the Effective Date or upon an eligible director's first
election to the Board, such eligible director receives options to purchase 5,000
shares of Common Stock. On the date each year when directors are elected to the
Board, eligible directors receive options to purchase an additional 500 shares
of Common Stock. The exercise price for each option is equal to the fair market
value of the Common Stock on the date of grant. Each option has a term of ten
years from the date of grant and vests on the first anniversary of the date of
grant.
Messrs. Ebright, Gurski and Sebulsky were the only directors eligible to
receive awards under the plan during fiscal 1997. After being elected to the
Company's Board of Directors at the Company's Annual Meeting of Shareholders
held on January 15, 1997, each of Messrs. Gurski and Sebulsky were granted
options pursuant to the plan to purchase 5,000 shares of Common Stock at an
exercise price of $29.25. In addition, on such date, Mr. Ebright was granted
options pursuant to the plan to purchase 500 shares of Common Stock at such
exercise price. In accordance with the terms of the plan, on the date of the
Annual Meeting, Mr. Anderson, if elected to the Board at the Annual Meeting,
will be granted options to purchase 5,000 shares of Common Stock and each of
Messrs. Ebright, Gurski and Sebulsky will receive options to purchase an
additional 500 shares of Common Stock, in each case at an exercise price equal
to the closing price per share of the Common Stock on such date as reported on
the Nasdaq National Market System. Mr. Macaleer will not receive any stock
awards under the plan because he was a shareholder of the Company at the time of
its initial public offering on June 9, 1992.
<PAGE>
-8-
Executive Officers
The executive officers of the Company, their positions with the Company,
business history and certain other information, as of November 28, 1997, are set
forth below.
<TABLE>
<CAPTION>
Name Office Age
- ---- ------ ---
<S> <C> <C>
Marlin Miller, Jr. President and Chief Executive Officer 65
Raymond Neag Executive Vice President 66
John H. Broadbent, Jr. Vice President-Finance and Treasurer 59
T. Jerome Holleran Secretary 61
Philip B. Fleck Vice President-Research and Manufacturing 53
Paul L. Frankhouser Vice President-Marketing 52
Thomas D. Nickel Vice President-Regulatory Affairs and Quality 58
Assurance
</TABLE>
Marlin Miller, Jr. has served as President and Chief Executive Officer and
a director of the Company since it was founded in 1975. From 1972 to 1975, Mr.
Miller served as Vice President and a director of Connors Investor Services, a
research and investment management firm. From 1959 to 1972, Mr. Miller served
as Executive Vice President and a director of Glen Gery Corporation, a
manufacturer of building products. Mr. Miller is also President and a director
of Precision, and during fiscal 1997 devoted approximately 5% of his business
time to Precision. See "Certain Transactions." He is a director of Carpenter
Technology Corporation, a manufacturer of specialty steel, and CoreStates
Financial Corp., a financial institution.
Raymond Neag has served as Executive Vice President since 1992 and prior
thereto served as Senior Vice President of the Company. Mr. Neag has been an
officer and a director of the Company since it was founded in 1975. From 1973
until joining the Company, Mr. Neag served as General Manager of the Rockwell
Division. From 1971 to 1973, Mr. Neag was President of Teledyne Dental
Products, a manufacturer of dental products, which was a division of Teledyne,
Inc. Prior to 1971, Mr. Neag was Vice President and Director of Marketing of
Sherwood Medical, Inc., a medical device company. Mr. Neag also serves as
Secretary and a director of Precision.
John H. Broadbent, Jr. has served as Vice President-Finance, Treasurer and
a director of the Company since it was founded in 1975. From 1966 to 1975, Mr.
Broadbent served in several capacities with Carpenter Technology Corporation, a
specialty steel manufacturer, the latest as Manager-Market Planning &
Development. From 1964 to 1966, Mr. Broadbent was employed as a consultant in
the Management Advisory Services Department of Price Waterhouse & Co. Mr.
Broadbent also serves as Vice President-Finance, Treasurer and a director of
Precision, and during fiscal 1997 devoted approximately 5% of his business time
to Precision. See "Certain Transactions."
T. Jerome Holleran has served as Secretary and a director of the Company
since it was founded in 1975 and, until September 1997, also served as a Vice
President of the Company. From February 1986 to September 1997, Mr. Holleran
was also Vice President, Chief Operating Officer and a director of Precision.
During fiscal 1997, Mr. Holleran devoted
<PAGE>
-9-
approximately 95% of his business time to Precision and approximately 5% of his
business time to Arrow. Mr. Holleran also served as President of Endovations,
Inc., a former subsidiary of Precision that manufactured and marketed certain
gastroenterological medical products, from 1991 until the sale in June 1996 of a
portion of the Endovations business to the Company and the remainder to an
unrelated third party. Since July 1996, Mr. Holleran has also served as
President of Precision Medical Products, Inc., a former subsidiary of Precision,
which was acquired effective August 29, 1997 by certain employees of Precision,
including Mr. Holleran. See "Certain Transactions." From 1971 to 1975, Mr.
Holleran served as Director of Business Planning-Textile Divisions of Rockwell
International Corporation and as a Marketing Manager of the Rockwell Division.
From 1969 to 1971, Mr. Holleran was employed as a consultant by Booz, Allen and
Hamilton.
Philip B. Fleck has served as Vice President-Research and Manufacturing
since June 1994 and prior thereto served as Vice President-Research and
Engineering of the Company since 1986. From 1975 to 1986, Mr. Fleck served as
Engineering Manager of the Company. From 1971 to 1975, Mr. Fleck served as
Equipment Design Manager and Engineering Manager of the Rockwell Division. From
1967 to 1971, Mr. Fleck served as Manufacturing Development Engineer of Atlas
Chemical Industries, a manufacturer of aerospace components.
Paul L. Frankhouser has served as Vice President-Marketing of the Company
since 1986. From 1980 to 1986, Mr. Frankhouser served as Manager of Marketing
of the Company. From 1977 to 1980, Mr. Frankhouser served as Product
Manager-Medical Devices of the Company. From 1975 to 1977, Mr. Frankhouser
served as Manager of Medical Products and Process Development of the Company.
Prior to 1975, Mr. Frankhouser served as a Project Engineer of the Rockwell
Division.
Thomas D. Nickel has served as Vice President-Regulatory Affairs and
Quality Assurance of the Company since 1991. From 1986 to 1991, Mr. Nickel
served as Director of Regulatory Affairs and Quality Assurance of the Company.
Prior to joining the Company, Mr. Nickel served as Director of Regulatory
Affairs and Quality Assurance of Omnis Surgical, Inc., a former subsidiary of
Baxter International, Inc. that manufactured anesthesiological and other related
products.
SECURITY OWNERSHIP OF CERTAIN
BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth, as of November 28, 1997, the beneficial
ownership of Common Stock by (i) each director and director nominee who is a
shareholder, (ii) each of the executive officers named in the Summary
Compensation Table below, (iii) all directors and officers as a group (including
the named individuals), and (iv) each beneficial owner of more than 5% of the
outstanding Common Stock. Except as otherwise indicated in the notes
immediately following the table, the persons named in the table have sole voting
and investment power with respect to all shares of Common Stock shown as
beneficially owned by them, subject to community property laws where applicable.
<PAGE>
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<TABLE>
<CAPTION> Percent of
Amount Class
Name Beneficially Owned Owned
- ------------------------ ---------------------- ----------
<S> <C> <C>
Marlin Miller, Jr..................... 4,202,300(1) 18.1%
Richard T. Niner...................... 3,039,737(2) 13.1
Robert L. McNeil, Jr.................. 2,349,644(3) 10.1
Raymond Neag.......................... 1,992,000(4) 8.6
John H. Broadbent, Jr................. 946,840(5) 4.1
T. Jerome Holleran ................... 761,132(6) 3.3
Paul L. Frankhouser................... 50,500(7) *
Philip B. Fleck....................... 41,500(8) *
R. James Macaleer..................... 39,375 *
George W. Ebright..................... 6,000(9) *
Alan M. Sebulsky ..................... 6,000(10) *
John E. Gurski ....................... 5,000(11) *
All directors and officers as a
group (12 persons).................... 13,411,147(12) 57.7
Richard T. Niner and
Robert W. Cruickshank,
as Trustees of the Robert L.
McNeil, Jr. 1983 Intervivos Trust
dated November 30, 1983............ 2,312,247 10.0
c/o Morgan Guaranty Trust
Company of New York
9 West 57th Street
New York, New York 10019
Attention: Mr. Eugene Wilks
</TABLE>
- -------------------------
* Less than one percent.
(1) Includes 1,000 shares owned by Mr. Miller's wife, as to which Mr. Miller
disclaims beneficial ownership. Also includes 100,000 shares held by a
charitable foundation of which Mr. Miller is one of five trustees who have
shared power to vote and dispose of the shares of Common Stock held by such
foundation.
(2) Shares beneficially owned include an aggregate of 9,075 shares owned by Mr.
Niner's wife and two children, as to which Mr. Niner disclaims beneficial
ownership, and 2,312,247 shares held by Hare & Co., as nominee for the
Robert L. McNeil, Jr. 1983 Intervivos Trust (the "McNeil Trust"), of which
Mr. Niner is one of two trustees who have shared power to vote and dispose
of the shares of Common Stock held in such trust.
(footnotes continued on next page)
<PAGE>
-11-
(3) Includes 117,800 shares held by a charitable foundation of which Mr. McNeil
is the president and one of four directors who have shared power to vote
and dispose of the shares of Common stock held by such foundation. Excludes
2,312,247 shares held by Hare & Co., as nominee for the McNeil Trust, of
which Mr. McNeil was the grantor for the benefit of Mr. McNeil and his
lineal descendants. Mr. McNeil disclaims beneficial ownership of such
shares held in the McNeil Trust.
(4) Includes 200,000 shares owned by the estate of Evelyn J. Neag (who was Mr.
Neag's wife), of which Mr. Neag is the administrator.
(5) Includes an aggregate of 16,050 shares owned by Mr. Broadbent's wife and
stepchild, as to which Mr. Broadbent disclaims beneficial ownership. Also
includes 31,300 shares held by a charitable foundation of which Mr.
Broadbent is one of three trustees who have shared power to vote and
dispose of the shares of Common Stock held by such foundation.
(6) Includes 25,000 shares owned by Mr. Holleran's wife, as to which Mr.
Holleran disclaims beneficial ownership. Also includes an aggregate of
70,000 shares held by certain charitable trusts of which Mr. Holleran is
the trustee with the sole power to vote and dispose of the shares of Common
Stock held in such trusts.
(7) Includes 300 shares owned by Mr. Frankhouser's children, as to which Mr.
Frankhouser disclaims beneficial ownership. Also includes 4,000 shares
issuable upon the exercise of vested options and options which are deemed
to be presently exercisable. Does not include 6,000 shares issuable upon
the exercise of options which are not deemed to be presently exercisable.
(8) Includes 10,000 shares owned by Mr. Fleck's wife, as to which Mr. Fleck
disclaims beneficial ownership. Also includes 4,000 shares issuable upon
the exercise of vested options and options which are deemed to be presently
exercisable. Does not include 6,000 shares issuable upon the exercise of
options which are not deemed to be presently exercisable.
(9) Includes 5,500 shares issuable upon the exercise of vested options and
options which are deemed to be presently exercisable.
(10) Includes 5,000 shares issuable upon the exercise of options which are
deemed to be presently exercisable.
(11) Consists solely of shares issuable upon the exercise of options which are
deemed to be presently exercisable.
(12) See footnotes (1) through (11) above. Also includes 2,000 shares issuable
upon the exercise of vested options and options which are deemed to be
presently exercisable granted to an executive officer. Does not include
3,000 shares issuable upon the exercise of options granted to such
executive officer which are not deemed to be presently exercisable.
<PAGE>
-12-
Section 16(a) of the Securities Exchange Act of 1934, as amended (the
"Exchange Act"), and the rules promulgated thereunder require the Company's
officers and directors and persons who beneficially own more than ten percent of
a registered class of the Company's equity securities to file reports of
ownership and changes in ownership with the Securities and Exchange Commission
and to furnish to the Company copies of all such filings. The Company has
determined, based solely upon a review of (i) those reports and amendments
thereto furnished to the Company during and with respect to the year ended
August 31, 1997, and (ii) written representations from certain reporting
persons, that there has been compliance with all Section 16(a) filing
requirements applicable to such officers, directors and ten percent beneficial
owners for such fiscal year.
EXECUTIVE COMPENSATION
The following table summarizes, for the Company's past three fiscal years,
all compensation paid to the Company's Chief Executive Officer and the four most
highly compensated other executive officers of the Company whose salary and
bonus exceed $100,000 for the fiscal year ended August 31, 1997.
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
Annual
Compensation(1) Long-Term Compensation(1)
------------------------ ------------------------------
Restricted Securities
Name and Fiscal Stock Underlying All Other
Principal Position Year Salary($) Bonus($)(2) Awards($) Options (#) Compensation($)
- ------------------------- ------ ----------- ----------- ------------- --------------- -----------------
<S> <C> <C> <C> <C> <C> <C>
Marlin Miller, Jr. 1997 313,397(3) 216,739 -0- -0- 198,674(4)
President and Chief 1996 284,116(3) -0- -0- -0- 197,355(4)
Executive Officer 1995 270,583(3) 262,466 -0- -0- 199,716(4)
Raymond Neag 1997 239,160 139,669 -0- -0- 110,382(5)
Executive Vice 1996 228,864 -0- -0- -0- 113,327(5)
President 1995 217,968 169,143 -0- -0- 113,981(5)
John H. Broadbent, Jr. 1997 195,875(6) 120,411 -0- -0- 68,714(7)
Vice President-Finance 1996 177,574(6) -0- -0- -0- 70,734(7)
and Treasurer 1995 169,117(6) 145,817 -0- -0- 70,953(7)
Philip B. Fleck 1997 181,044 101,998 -0- -0- 3,000(9)
Vice President-Research 1996 173,250 24,272 -0- 10,000(8) 4,733(9)
and Manufacturing 1995 165,000 88,062 -0- -0- 4,794(9)
Paul L. Frankhouser 1997 181,044 101,998 -0- -0- 3,000(9)
Vice President- 1996 173,250 24,272 -0- 10,000(10) 4,556(9)
Marketing 1995 165,000 88,062 -0- -0- 4,881(9)
- -----------------------------
</TABLE>
(1) Column with respect to "Other Annual Compensation" has not been included in
this table because there has been no such Other Annual Compensation awarded
to, earned by or paid to any of the executive officers named above for any
fiscal year covered in the table.
(footnotes continued on next page)
<PAGE>
-13-
(2) Includes annual incentive and profit sharing bonuses earned with respect to
fiscal 1997, part of which were paid in fiscal 1998.
(3) In addition, Precision paid $16,495, $31,568 and $30,065 as salary to Mr.
Miller in fiscal 1997, 1996 and 1995, respectively, in respect of Mr.
Miller's devotion of approximately 5% of his business time during fiscal
1997 and approximately 10% of his business time during each of fiscal 1996
and 1995 to Precision. See "Certain Transactions."
(4) Consists of (i) matching contributions in the amount of $3,000, $4,294 and
$4,903 made by the Company to Mr. Miller's account under the Company's
401(k) Plan in fiscal 1997, 1996 and 1995, respectively, and (ii) insurance
premiums in the amount of $195,674, $193,061 and $194,813 paid by the
Company in fiscal 1997, 1996 and 1995, respectively, in respect of term
life insurance policies owned by certain trusts established by Mr. Miller,
which premium payments must be repaid to the Company from either (a) the
cash surrender value of such policies or (b) the death benefits of such
policies.
(5) Consists of (i) matching contributions in the amount of $3,000, $4,765 and
$4,719 made by the Company to Mr. Neag's account under the Company's 401(k)
Plan in fiscal 1997, 1996 and 1995, respectively, and (ii) insurance
premiums in the amount of $107,382, $108,562 and $109,262 paid by the
Company in fiscal 1997, 1996 and 1995, respectively, in respect of the term
life insurance policies owned by certain trusts established by Mr. Neag,
which premium payments must be repaid to the Company from either (a) the
cash surrender value of such policies or (b) the death benefit of such
policies.
(6) In addition, Precision paid $10,309, $19,730 and $18,791 as salary to Mr.
Broadbent in fiscal 1997, 1996 and 1995, respectively, in respect of Mr.
Broadbent's devotion of approximately 5% of his business time during fiscal
1997 and approximately 10% of his business time during each of fiscal 1996
and 1995 to Precision. See "Certain Transactions."
(7) Consists of (i) matching contributions in the amount of $3,000, $4,745 and
$4,653 made by the Company to Mr. Broadbent's account under the Company's
401(k) Plan in fiscal 1997, 1996 and 1995, respectively, and (ii) insurance
premiums in the amount of $65,714, $65,989 and $66,300 paid by the Company
in fiscal 1997, 1996 and 1995, respectively, in respect of term life
insurance policies owned by a certain trust established by Mr. Broadbent,
which premium payments must be repaid to the Company from either (a) the
cash surrender value of such policies or (b) the death benefits of such
policies.
(8) Represents an award to Mr. Fleck on January 17, 1996 of incentive stock
options to purchase 10,000 shares of Common Stock at an exercise price of
$38.00 per share under the Company's 1992 Stock Incentive Plan. Subject to
Mr. Fleck's continued employment with the Company, 20% (i.e., 2,000
----
options) of such stock option award will vest on each of the first through
the fifth anniversary of the date of such award (i.e., January 17). The
----
options are subject to immediate vesting upon the occurrence of certain
change in control events.
(9) Represents matching contributions made by the Company to the account of
each of Messrs. Fleck and Frankhouser under the Company's 401(k) Plan in
fiscal 1997, 1996 and 1995, respectively.
(footnotes continued on next page)
<PAGE>
-14-
(10) Represents an award to Mr. Frankhouser on January 17, 1996 of incentive
stock options to purchase 10,000 shares of Common Stock at an exercise
price of $38.00 per share under the Company's 1992 Stock Incentive Plan.
Subject to Mr. Frankhouser's continued employment with the Company, 20%
(i.e., 2,000 options) of such stock option award will vest on each of the
----
first through the fifth anniversary of the date of such award (i.e.,
----
January 17). The options are subject to immediate vesting upon the
occurrence of certain change in control events.
Option Grants
There were no grants of stock options made during the fiscal year ended
August 31, 1997 to the persons named in the Summary Compensation Table above or
to any other employees of the Company.
Aggregate Year-End Option Values
The following table provides information concerning stock options exercised
during fiscal 1997 and the number of unexercised options held by the individuals
named in the Summary Compensation Table as of August 31, 1997. As of August 31,
1997, there were no unexercised, "in the money" options because the exercise
price of such options exceeded the fair market value of the Common Stock as of
such date.
Aggregated Option Exercises in Fiscal 1997 and Year-End Option Values
<TABLE>
<CAPTION>
Number of Securities
Underlying Unexercised Value of Unexercised
Options at In-the-Money Options at
August 31, 1997 (#) August 31, 1997 ($)(1)
Shares Acquired Value -------------------------- --------------------------
Name On Exercise (#) Realized ($) Exercisable Unexercisable Exercisable Unexercisable
- --------------------- --------------- ------------ ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
Philip B. Fleck -- -- -- 10,000 -- --
Paul L. Frankhouser -- -- -- 10,000 -- --
- ----------------------
</TABLE>
(1) Based upon a closing price of the Common Stock of $29.625 per share on
August 29, 1997 as reported on the Nasdaq National Market System and an
option exercise price of $38.00, none of the options are currently "in the
money."
Retirement Plan
The Retirement Plan for Salaried Employees of Arrow International, Inc.
became effective on September 1, 1978, and was amended and restated as of
September 1, 1984 and September 1, 1989 (the "Retirement Plan"). The Retirement
Plan is a non-contributory defined benefit pension plan intended to be qualified
under Section 401(a) of the Internal Revenue Code. The Retirement Plan covers
salaried employees of the Company who have attained age 21 and completed one
year of service and provides benefits based upon years of service and
compensation. All of the executive officers of the Company participate in the
Retirement Plan. Annual benefits payable at normal retirement age under the
Retirement Plan are based on the formula of 1.25% of a participant's final
average earnings multiplied by such
<PAGE>
-15-
participant's years of credited service with the Company after September 1,
1975. Final average earnings are defined under the Retirement Plan as the
participant's average annual compensation, excluding discretionary bonuses and
subject to annual limitations on compensation under the Internal Revenue Code,
during the 60 consecutive months in the final 120 months of the participant's
employment which produce the highest average. Since 1989, Internal Revenue Code
provisions have limited the amount of annual compensation that can be used for
calculating pension benefits. In 1997, no more than $160,000 of annual salary
can be used to determine an employee's annual benefit accrual. The Internal
Revenue Service adjusts this figure annually. Benefits under the Retirement Plan
are payable upon normal retirement, which is the later of age 65 or the fifth
anniversary of commencing plan participation, early retirement at age 55
following ten years of service, death, disability or other termination of
employment following five years of vesting service, and may be paid under
various annuity forms of payment. Benefits payable under the Retirement Plan are
not offset by any Social Security or other benefits.
Contributions to the Retirement Plan for any year depend on the assumptions
used by the actuary for the Retirement Plan, historic investment experience and
the level of prior years' funding. The annual contribution made by the Company
to the Retirement Plan for fiscal 1995, 1996 and 1997 was $35,202, $549,199 and
$537,765, respectively, equivalent to approximately 0.2% for fiscal 1995, 3.1%
for fiscal 1996 and 2.8% for fiscal 1997 of the covered compensation of all
participants in the plan. The amount of the contribution, payment or account in
respect of a specified person is not and cannot readily be separately or
individually calculated by the actuary of the Retirement Plan. Each of Messrs.
Miller, Neag, Broadbent, Fleck and Frankhouser have 22 years of credited service
for purposes of the Pension Plan. The following table shows the estimated annual
benefits payable upon retirement at normal retirement age for each level of
remuneration specified at the listed years of service.
PENSION PLAN TABLE
<TABLE>
<CAPTION>
Years of Service
-------------------------------------------
Remuneration(1) 15 20 25 30 35
- --------------- ------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C>
$100,000 ...... $18,750 $25,000 $31,250 $37,500 $43,750
150,000 ...... 28,125 37,500 46,875 56,250 65,625
200,000 ...... 30,000 40,000 50,000 60,000 70,000
250,000 ...... 30,000 40,000 50,000 60,000 70,000
300,000 ...... 30,000 40,000 50,000 60,000 70,000
350,000 ...... 30,000 40,000 50,000 60,000 70,000
400,000 ...... 30,000 40,000 50,000 60,000 70,000
450,000 ...... 30,000 40,000 50,000 60,000 70,000
500,000 ...... 30,000 40,000 50,000 60,000 70,000
550,000 ...... 30,000 40,000 50,000 60,000 70,000
- ----------
</TABLE>
(1) Under current Internal Revenue Code provisions, no more than $160,000 of
annual salary can be used to determine an employee's annual benefit
accrual. The Internal Revenue Service adjusts this figure annually.
<PAGE>
-16-
COMPENSATION COMMITTEE REPORT ON EXECUTIVE COMPENSATION
The Human Resources Committee reviews and establishes, subject to approval
of the Board of Directors, the compensation arrangements for executive
management of the Company, including salaries, bonuses and grants of awards
under, and administration of, the Company's 1992 Stock Incentive Plan. The
Human Resources Committee is currently composed of four non-employee directors
of the Company.
Compensation Philosophy
Arrow International's executive compensation program is designed to
attract, retain, motivate and reward effective executive officers and to link
executive compensation with the attainment of financial, operational and
strategic objectives. In establishing the program, the Human Resources
Committee assesses the performance of individuals and the Company relative to
those objectives.
The Company's compensation program generally provides incentives to achieve
annual and long-term objectives. The principal elements of the compensation
program are base salary, annual incentive bonuses and long-term incentive awards
in the form of stock options, stock appreciation rights and/or grants of
restricted Common Stock. These elements generally are blended in order to
formulate compensation packages which provide competitive pay, reward the
achievement of financial, operational and strategic objectives and align the
interests of the Company's executive officers and other higher level personnel
with those of the Company's shareholders.
Compensation Components
Base Salary. Base salary levels for executive officers are derived from
market comparisons with similarly-sized companies engaged in the manufacture of
medical products for the health care industry with which the Company competes
for executive talent. The Human Resources Committee believes that the Company's
most direct competitors for this purpose are not necessarily all of the
companies that would be included in a peer group established to compare
shareholder returns. Therefore, the compensation peer group is not the same as
the peer group index set forth in the Company Stock Performance Graph included
in this Proxy Statement. Based on information currently available to the Human
Resources Committee, the Human Resources Committee believes that base salary
levels for executive officers, including the Chief Executive Officer, are, on
average, at or near the median of base salary levels for executive officers of
companies included in the Company's compensation peer group. In determining
executive officers' salaries, the Human Resources Committee also considers
individual experience and prior service to the Company, level of responsibility
and overall job performance. The Human Resources Committee does not assign
weights to these factors nor necessarily consider any one more important than
the others. The Human Resources Committee reviews the performance of the Chief
Executive Officer and, in determining his level of compensation for fiscal 1997,
in addition to consideration of industry comparisons and individual performance,
has taken particular note of the Company's achievements in fiscal 1997 in the
following key areas: management efficiency; the successful introduction of new
products into the market and the advancement of products
<PAGE>
-17-
under development; continued expansion of the Company's international production
and marketing presence; and the Company's overall growth and profitability.
Annual Incentive Bonuses. Annual incentive bonuses are based on two plans:
a Company-wide corporate profit sharing plan (the "Profit Sharing Plan") and a
pretax income growth plan limited to certain executive officers (the "Income
Growth Bonus Plan").
Each year of the Profit Sharing Plan begins on November 1st. For purposes
of determining the amounts available for distribution under the Profit Sharing
Plan, during each month of each plan year the pre-tax income of the Company,
excluding royalty revenue, profit sharing expense and other extraordinary income
and expense, for the current and two immediately preceding months is averaged,
and a fixed percentage of this average is allocated to the Profit Sharing Plan.
The amount allocated to the Profit Sharing Plan is apportioned to each
participating employee in proportion to the fraction that such employee's
compensation for that month represents of the total monthly compensation for all
plan participants. Each month the Company distributes to each plan participant
75% of the plan proceeds allocable to such participant, while the remainder of
such amount is accumulated for the benefit of such participant and paid out on
an annual basis in December of the immediately following plan year. Messrs.
Miller, Neag, Broadbent and Holleran and the Company's field sales
representatives do not participate in the Profit Sharing Plan.
Pursuant to the Income Growth Bonus Plan, at the discretion of the Human
Resources Committee, Messrs. Miller, Neag, Broadbent, Fleck and Frankhouser are
eligible to receive annual incentive bonuses equal to 4.5, 4.0, 4.0, 3.0 and 3.0
times, respectively, the percentage growth in pretax income, adjusted for
extraordinary income and expense, of the Company over the previous year times
their respective base pay. For fiscal 1997, the Company's pre-tax income,
adjusted for extraordinary income and expense, increased 14.6% over fiscal 1996,
resulting in an incentive bonus of 65.7% of base pay to Mr. Miller, 58.4% of
base pay to each of Messrs. Neag and Broadbent and 43.8% of base pay to each of
Messrs. Fleck and Frankhouser. The Human Resources Committee believes that
payment of such bonuses specifically linked to the growth in profitability of
the Company provides appropriate and effective rewards for successful individual
performances that contribute directly to the overall success of the Company.
Therefore, it is the present intention of the Human Resources Committee to
approve payment of incentive bonuses in fiscal 1998 to the eligible senior
executive officers of the Company pursuant to the Income Growth Bonus Plan to
the extent that the Company in fiscal 1998 achieves an increase in pretax
income, adjusted for extraordinary income and expense, over fiscal 1997.
Long-Term Incentive Awards. To promote the Company's long-term objectives,
stock awards are made to executive officers and other employees who are in a
position to make a significant contribution to the Company's long-term success.
The stock awards are made pursuant to the Arrow International, Inc. 1992 Stock
Incentive Plan in the form of stock options, stock appreciation rights ("SARs")
and grants of restricted Common Stock. Up until May 31, 1992 when such plan
terminated, grants of restricted shares of the Company's previously outstanding
Class A Common Stock were made pursuant to the Company's Restricted Stock Bonus
Plan. Executive officers of the Company who were shareholders of the Company
other than through participation in the Restricted Stock Bonus Plan, including
Messrs. Miller, Neag, Broadbent and Holleran, were ineligible to receive awards
of restricted stock under this plan.
<PAGE>
-18-
Since the stock options, SARs and restricted stock awards vest and may grow
in value over time, these components of the Company's compensation plan are
designed to reward performance over a sustained period. The Company intends
that these awards will strengthen the focus of its executives and other key
employees on managing the Company from the perspective of a person with an
equity stake in the Company. The Human Resources Committee believes that, as a
founder and principal shareholder of the Company, each of Messrs. Miller, Neag
and Broadbent currently have sufficient incentive to promote the long-term
growth of the Company and, therefore, none of such executive officers has, to
date, received any stock awards.
Stock awards are not granted each year. In selecting recipients and the
size of stock awards, the Human Resources Committee generally considers various
factors such as the overall job performance and potential of the recipient,
prior grants to and amount of Common Stock currently held by the recipient,
prior service to the Company, a comparison of awards made to executives and key
employees in comparable positions at similar companies, and the Company's
performance. No stock awards were made during fiscal 1997. As a result of stock
awards made prior to fiscal 1997, each of the Company's executive officers who
were not also founders of the Company, as well as a significant number of non-
executive employees of the Company, have been afforded the opportunity to enjoy
an equity stake in the Company as part of their long-term compensation.
Tax Deductibility of Executive Compensation. Section 162(m) of the
Internal Revenue Code of 1986, as amended (the "Code"), imposes limitations on
the federal income tax deductibility of compensation paid to the Company's chief
executive officer and to each of the other four most highly compensated
executive officers of the Company. Under these limitations, the Company may
deduct such compensation only to the extent that during any fiscal year the
compensation does not exceed $1,000,000 or meets certain specified conditions
(such as certain performance-based compensation that has been approved by the
Company's shareholders). Based on the Company's current compensation plans and
policies and proposed regulations interpreting the Code, the Company and the
Human Resources Committee believe that, for the near future, there is not a
significant risk that the Company will lose any significant tax deduction for
executive compensation. The Company's compensation plans and policies will be
modified to ensure full deductibility of executive compensation if the Company
and the Human Resources Committee determine that such an action is in the best
interests of the Company.
HUMAN RESOURCES COMMITTEE
George W. Ebright, Chairman
John E. Gurski
Robert L. McNeil, Jr.
Richard T. Niner
<PAGE>
-19-
STOCK PRICE PERFORMANCE
Set forth below is a line graph comparing the yearly cumulative total
shareholder return on the Common Stock with the cumulative total return of the
Standard & Poor's 500 Stock Index and the Standard & Poor's Medical Products and
Supplies Index for the period beginning on August 31, 1992 and ending on August
31, 1997. The comparison assumes $100 was invested on August 31, 1992 in the
Common Stock and in each of the foregoing indices and also assumes reinvestment
of all dividends.
[LINE GRAPH APPEARS HERE]
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------
August 31, August 31, August 31, August 31, August 31, August 31,
1992 1993 1994 1995 1996 1997
- ------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Arrow International, Inc. $100.00 $ 96.27 $103.02 $171.29 $112.23 $125.00
- ------------------------------------------------------------------------------------------------------
S&P 500 Stock Index $100.00 $115.21 $121.52 $147.58 $175.22 $246.44
- ------------------------------------------------------------------------------------------------------
S&P Medical Products and $100.00 $ 76.73 $ 89.69 $138.08 $157.11 $224.95
Supplies Index
- ------------------------------------------------------------------------------------------------------
</TABLE>
Notwithstanding anything to the contrary set forth in any of the Company's
previous filings under the Securities Act of 1933, as amended, or the Exchange
Act that might incorporate future filings made by the Company under those
statutes, the preceding Human Resources Committee Report on Executive
Compensation and the Company Stock Performance Graph will not be incorporated by
reference into any of those prior filings, nor will such report or graph be
incorporated by reference into any future filings made by the Company under
those statutes.
<PAGE>
-20-
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
During the fiscal year ended August 31, 1997, the Human Resources Committee
of the Board of Directors consisted of Messrs. Ebright, Gurski, McNeil and
Niner, none of whom is an officer or employee of the Company or any of its
subsidiaries. Each of Messrs. Ebright, McNeil and Mr. Niner is a director of
Precision. See "Certain Transactions."
CERTAIN TRANSACTIONS
Arrow Precision Products, Inc. ("Precision") is a former subsidiary of the
Company which, prior to the sale of Precision Medical Products, Inc., the
remaining operating subsidiary of Precision ("PMP"), on August 29, 1997 to a
company owned by certain management employees of Precision (including Mr.
Holleran), was engaged in the business of manufacturing and marketing certain
gastroenterological and other non-catheter medical products. Prior to the sale
of PMP, Precision also manufactured certain other products, such as ground
needles and injection sites, primarily for use by the Company. At November 28,
1997, certain officers, directors and principal shareholders of the Company
continued to own substantially all of Precision's outstanding common stock.
The directors of Precision include Messrs. Miller, Neag, Broadbent, McNeil,
Niner and Ebright. Messrs. Miller and Broadbent are the president and the vice
president-finance and treasurer of Precision, respectively. Prior to the sale
of PMP, Mr. Holleran was the vice president and chief operating officer and a
director of Precision. In fiscal 1997, Mr. Holleran devoted approximately 95%
of his business time to Precision, which paid 95% of his salary and bonus, and
devoted approximately 5% of his business time to the Company, which paid 5% of
his salary and bonus. In fiscal 1997, Mr. Holleran received salary and bonus
amounts of $181,436, of which amount Precision paid $172,364 and the Company
paid $9,072. In fiscal 1997, Precision also reimbursed the Company for 5% of
the salary of Messrs. Miller and Broadbent, each of whom devoted approximately
5% of his business time to Precision. In fiscal 1997, reimbursement payments
for the services of Messrs. Miller and Broadbent amounted to $16,495 and
$10,309, respectively.
Sales of products by Precision to the Company in fiscal 1997 amounted to
$1,198,895. Although prior to the sale of PMP, the Company had made
substantially all of its purchases of such products from Precision, the Company
solicited competitive quotations from unrelated suppliers and purchased such
products from Precision only when justified by product availability, price,
quality and delivery considerations. Prior to the sale of PMP, the Company
provided certain operating and administrative services to Precision, at rates
which the Company believed to be comparable to those which would have been
charged by unrelated third parties. In fiscal 1997, the Company charged
Precision $177,932 for such services. Historically, the Company also has
maintained employee benefit accounts, including medical benefits, for
Precision's employees, at Precision's expense. In fiscal 1997, Precision
reimbursed the Company $320,722 for such expenses. In fiscal 1997, Precision
leased on a net lease basis approximately 34,000 square feet of office and
manufacturing space at the Company's Wyomissing, Pennsylvania facility at a rate
believed by the Company to represent current market rates. In fiscal 1997, the
Company charged Precision rent of $201,092 for such space at this facility.
<PAGE>
-21-
The Board of Directors of the Company has completed a thorough review of
the business and operations of Precision and concluded that Precision's business
and operations in fiscal 1997 were complementary to and not in competition with
the business and operations of the Company. In addition, Precision and the
Company have agreed that the Company shall have a right of first refusal to
pursue for the Company's own benefit any business opportunity presented to
Precision, or of which it has knowledge, that is within the scope of the
Company's current or anticipated lines of business.
Although no longer an operating company following the sale of PMP,
Precision continues to bear responsibility for certain employee benefits,
including pension and retirement health care, which are payable to individuals
who are now, or previously have been, employees of the Company. The Company
believes that to ensure that these benefit obligations will be satisfied in the
future, the Company should assume these obligations in exchange for the transfer
by Precision to the Company of appropriate assets to satisfy such obligations.
Consequently, it is contemplated that Precision's two pension plans, both of
which were overfunded as of August 31, 1997, will be merged with the Company's
pension plans covering comparable employees. The Company anticipates making a
payment to Precision in an amount by which the value of Precision's pension plan
assets exceeds the actuarially determined present value of Precision's pension
plan obligations. In addition, in consideration for the payment by Precision to
the Company of sufficient funds to cover the present value of retirement health
care and other future obligations to former Precision employees (who previously
were also employees of the Company), the Company will assume such obligations.
In the future, the Company may purchase certain products from PMP that it
had formerly purchased from Precision provided that the quotations the Company
receives from PMP for such products are competitive with those received from
unrelated suppliers in terms of product availability, price, quality and
delivery considerations.
PROPOSAL 2 - RATIFICATION OF APPOINTMENT
OF INDEPENDENT ACCOUNTANTS
The Company's independent accountants and auditors are Coopers & Lybrand
L.L.P., certified public accountants. Coopers & Lybrand L.L.P. has served as
the Company's independent accountants and auditors since fiscal 1985. At the
Annual Meeting, the shareholders will consider and vote upon a proposal to
ratify the appointment of independent accountants for the Company's fiscal year
ending August 31, 1998. The Audit Committee of the Board of Directors has
recommended that Coopers & Lybrand L.L.P. be re-elected as independent
accountants for the 1998 fiscal year. The Board of Directors unanimously
recommends that shareholders vote FOR this proposal. Proxies solicited by the
Board of Directors will be voted FOR the foregoing proposal unless otherwise
indicated.
Representatives of Coopers & Lybrand L.L.P. will be present at the Annual
Meeting to make a statement, if desired, and to respond to appropriate questions
from shareholders.
<PAGE>
-22-
OTHER MATTERS
As of the date of this Proxy Statement, the Board of Directors does not
intend to present any matter for action at the Annual Meeting other than as set
forth in the Notice of Annual Meeting. If any other matters properly come
before the Annual Meeting, it is intended that the holders of the proxies will
act in accordance with their judgment on such matters.
In order to be eligible for inclusion in the proxy materials for the
Company's 1999 Annual Meeting of Shareholders, any shareholder proposal to take
action at such meeting must be received at the Company's principal executive
offices by August 17, 1998. Proposals should be directed to the Secretary of
the Company at the principal executive offices of the Company.
The cost of the solicitation of proxies will be borne by the Company. In
addition to the solicitation of proxies by mail, certain of the officers and
employees of the Company, without extra compensation therefor, may solicit
proxies personally or by telephone or telegraph. The Company will also request
brokers, banks and other nominees, custodians and fiduciaries to forward
soliciting materials to their principals and to request authority for the
execution of proxies and will reimburse such persons for forwarding such
materials.
A copy of the 1997 Annual Report accompanies this Proxy Statement.
Additional copies may be obtained from the Secretary, Arrow International, Inc.,
P.O. Box 12888, 2400 Bernville Road, Reading, Pennsylvania 19612.
By Order of the Board of Directors,
T. Jerome Holleran,
Secretary
December 15, 1997
Reading, Pennsylvania
<PAGE>
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ARROW INTERNATIONAL, INC.
P.O. Box 12888, 2400 Bernville Road, Reading, Pennsylvania 19612
SOLICITED BY THE BOARD OF DIRECTORS FOR THE
ANNUAL MEETING OF SHAREHOLDERS ON JANUARY 21, 1998
P R O X Y
The undersigned hereby appoints John H. Broadbent, Jr. and T. Jerome Holleran,
and each of them, his/her Proxies, each with full power to appoint his/her
substitute, and hereby authorizes them to represent and to vote, as designated
hereon, all shares of capital stock of ARROW INTERNATIONAL, INC. (the "Company")
held of record by the undersigned on November 28, 1997, at the Annual Meeting of
Shareholders to be held on January 21, 1998 and any adjournments thereof, and
hereby further authorizes each of them, in their discretion, to vote upon any
other business that may properly come before the meeting.
Election of Directors, Nominees: (change of address/comments)
For term expiring in 2000: -------------------------------
R. James Macaleer
-------------------------------
For term expiring in 2001: -------------------------------
Carl G. Anderson, Jr.
-------------------------------
For terms expiring in 2002: (If you have written in the
Raymond Neag above space, please mark the
Richard T. Niner corresponding box on the
reverse side of this card)
You are encouraged to specify your choices by marking the appropriate boxes, SEE
REVERSE SIDE, but you need not mark any box with regard to a particular proposal
if you wish to vote FOR such proposal. The proxies cannot vote your shares
unless you sign and return this card.
---------------
SEE REVERSE
SIDE
---------------
- --------------------------------------------------------------------------------
FOLD AND DETACH HERE
<PAGE>
- --------------------------------------------------------------------------------
[X] Please mark your
votes as in this
example.
This Proxy, when properly executed, will be voted in the manner directed
therein. If no direction is given with respect to a particular proposal, this
proxy will be voted FOR such proposal.
- --------------------------------------------------------------------------------
The Board of Directors recommends a vote FOR proposal 2.
- --------------------------------------------------------------------------------
FOR WITHHELD
1. Election of [_] [_]
Directors.
(see reverse)
FOR AGAINST ABSTAIN
2. Ratification of appointment [_] [_] [_]
of Coopers & Lybrand
L.L.P. as independent
accountants.
For, except vote withheld from the following nominee(s):
- -------------------------------- --------------------------------
- --------------------------------------------------------------------------------
SIGNATURE(S) DATE
--------------------------------- -----------
Change of [_]
Address/Comments
on Reverse Side
The signer hereby revokes all proxies heretofore given by the signer to vote at
said meeting or any adjournments thereof.
NOTE: Please sign exactly as name appears hereon. If shares are registered in
more than one name, the signatures of all such persons are required. A
corporation should sign its full corporate name by a duly authorized officer,
stating his/her title. Trustees, guardians, executors and administrators should
sign in their official capacity giving their full title as such. If a
partnership, please sign in the partnership name by authorized persons.
- --------------------------------------------------------------------------------
FOLD AND DETACH HERE
ARROW(R)
INTERNATIONAL, INC.
Annual Meeting of Shareholders
January 21, 1998
4:00 p.m.
Sheraton Berkshire Inn
Route 422 West and Papermill Road Exit
Wyomissing, Pennsylvania
