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
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Filed by the Registrant |X|
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|_| Preliminary Proxy Statement |X| Definitive Proxy Statement
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Rule 14a-11(c) or Rule 14a- 12
|_| Confidential, for Use of the Commission Only
(as permitted by Rule 14a-6(e)(2))
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ARROW INTERNATIONAL, INC.
(Name of Registrant as Specified in Its Charter)
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<PAGE>
ARROW INTERNATIONAL, INC.
2400 Bernville Road
Reading, Pennsylvania 19605
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NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
To be held on January 19, 2000
To Our Shareholders:
The Annual Meeting of Shareholders of Arrow International, Inc. will be
held at the Sheraton Reading Hotel, 1741 Paper Mill Road, Wyomissing,
Pennsylvania at 4:00 p.m. on January 19, 2000 for the following purposes:
(1) To elect three directors;
(2) To approve amendments to the Company's Directors Stock Incentive
Plan to (a) increase the number of shares of Common Stock available
for awards under the plan from 100,000 to 150,000, (b) increase the
annual grant of options to purchase Common Stock made to eligible
directors under the plan from 500 to 1,500 shares, and (c) make
eligible for such annual option grants non-employee directors who
were shareholders of the Company at the time of its initial public
offering on June 9, 1992;
(3) To act upon a proposal to ratify the appointment of
PricewaterhouseCoopers L.L.P. as the Company's independent
accountants for the fiscal year ending August 31, 2000; and
(4) 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 30,
1999 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, 1999
Reading, Pennsylvania
<PAGE>
PROXY STATEMENT
2000 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 19, 2000, or any adjournments
thereof.
The Board of Directors has fixed the close of business on November 30,
1999 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
22,748,343 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 the holders of a
majority of the shares of Common Stock present in person or by proxy is required
to approve the proposed amendments to the Company's Directors Stock Incentive
Plan. The affirmative vote of a majority of the votes cast is required to ratify
the appointment of independent accountants for fiscal 2000. 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 each of the approval of the
proposed amendments to the Company's Directors Stock Incentive Plan and 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 each of such proposals, an abstention with respect to
either of such proposals 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 each of
the proposal to amend the Company's Directors Stock Incentive Plan and 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 discretionary power. 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-
<PAGE>
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.
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, 1999.
PROPOSAL I - ELECTION OF DIRECTORS
The Board of Directors of the Company is currently composed of ten
directors, although up to 12 directors are permitted by the Company's Restated
Articles of Incorporation and By-Laws. 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 T. Jerome Holleran, R. James Macaleer and
Alan M. Sebulsky, each of whom is currently a director, for election to the
Board of Directors. If elected, each of Messrs. Holleran, Macaleer and Sebulsky
will serve until the Annual Meeting of Shareholders to be held in 2004, or until
such time as their respective successors are elected. The remaining directors
will continue to serve as set forth below.
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:
Principal Occupation, Business
Name Age Experience and Directorship
- ---- --- ------------------------------
Nominees For Terms Expiring in 2004
T. Jerome Holleran 63 Secretary and a director of the
Company since it was founded in 1975
and, until September 1997, a Vice
President of the Company. Chairman of
the Board of Directors of Precision
Medical Products, Inc. ("PMP"), a
former subsidiary of Arrow Precision
Products, Inc., a corporation
controlled by principal shareholders
of the Company ("Precision"), since
October 1999, Chief Executive Officer
of PMP since July 1996 and President
of PMP from July 1996 to October
1999. PMP manufactures and markets
certain non-catheter medical products
and was sold in August 1997 to
certain management employees of
Precision (including Mr. Holleran).
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 that
manufactured and marketed certain
gastroenterological medical products
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<PAGE>
("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. From 1971 to 1975,
Director of Business Planning-Textile
Divisions of Rockwell International
Corporation and a Marketing Manager
of the Arrow Products Division of
Rockwell International Corporation,
the Company's predecessor (the
"Rockwell Division"). From 1969 to
1971, consultant with the management
consulting firm of Booz, Allen and
Hamilton.
R. James Macaleer 65 Director of the Company since January
1998. 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"),
from 1969 to November 1997, and Chief
Executive Officer of SMS from 1969 to
August 1995. Also, a director of
Precision.
Alan M. Sebulsky 40 Director of the Company since January
1997. Executive Vice President and
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
Carl G. Anderson, Jr. 54 Director of the Company since January
1998. 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
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<PAGE>
Corporation, the latest as Vice
President, Division General Manager,
Confections. Prior thereto, served in
several marketing capacities with
Procter & Gamble.
John E. Gurski 58 Director of the Company since January
1997. Corporate Vice President of AMP
Incorporated, a multinational company
engaged in the development,
manufacture and marketing of systems
for electrical and electronic
applications ("AMP") from 1989 until
January 1999. 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.
Marlin Miller, Jr. 67 Chairman of the Board of Directors of
the Company since January 20, 1999,
Chief Executive Officer and a
director of the Company since it was
founded in 1975, and President of the
Company from 1975 to January 1999.
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.
Also, President and a director of
Precision.
Directors Whose Terms Expire in 2002
Raymond Neag 68 Director of the Company since it was
founded in 1975 and, until his
retirement on October 31, 1999, Vice
Chairman of the Company since January
1999. Executive Vice President of the
Company from April 1992 to January
1999 and Senior Vice President of the
Company from 1975 to April 1992. From
1973 until joining the Company,
General Manager of 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 Precision.
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<PAGE>
Richard T. Niner 60 Director of the Company since 1982.
General partner since January 1999 of
Wind River Associates L.P., a private
investment partnership. General
partner since 1988 of Brynwood
Management II L.P., the general
partner of a private investment
partnership based in Greenwich,
Connecticut. Director of Air Express
International Corporation, an
international air freight forwarder,
and Hurco Companies, Inc., a
manufacturer and marketer of computer
numerical controls ("CNC") and CNC
machine tools. Also, a director of
Precision.
Directors Whose Terms Expire in 2003
John H. Broadbent, Jr. 61 Director of the Company since it was
founded in 1975 and, until his
retirement in August 1998, Vice
President - Finance and Treasurer of
the Company. 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 61 Director of the Company since October
1993. 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.
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<PAGE>
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
seven meetings during fiscal 1999. All of the directors attended at least 75% of
the meetings of the Board and any committee on which they served during fiscal
1999. Among the committees of the Board are the Audit Committee and the Human
Resources 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 Carl G. Anderson, Jr., Richard T. Niner,
who acts as Chairman of the Committee, 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, 1999.
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 George W. Ebright, who acts as Chairman of the
Committee, John E. Gurski and R. James Macaleer. The Human Resources Committee
met three times during fiscal 1999.
Compensation of Directors
The Company's directors who are not officers or employees of the
Company received a quarterly fee of $3,500 for Board membership in fiscal 1999,
which has been increased to $4,000 for fiscal 2000, 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 currently 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 currently 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.
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<PAGE>
If the proposed amendments to the Company's Directors Stock
Incentive Plan (Proposal 2) are approved by the Company's shareholders at the
Annual Meeting, non-employee directors who were shareholders of the Company at
the time of the Company's initial public offering on June 9, 1992 will be
eligible, effective as of the date of the Annual Meeting, to receive stock
awards under the plan. In addition, if the proposed amendments to the plan are
approved, effective as of the date of the Annual Meeting, eligible directors
will receive options to purchase 1,500 shares of Common Stock on the date each
year when directors are elected to the Board, instead of the 500 shares
currently provided for under the plan. See "Proposal 2 - Amendments to Directors
Stock Incentive Plan."
Messrs. Anderson, Ebright, Gurski and Sebulsky were the only
directors eligible to receive awards under the plan during fiscal 1999. On
January 20, 1999, the date of the Company's 1999 Annual Meeting of Shareholders,
each of Messrs. Anderson, Ebright, Gurski and Sebulsky was granted options
pursuant to the plan to purchase 500 shares of Common Stock at an exercise price
of $25.125. Messrs. Broadbent, Holleran, Macaleer and Niner did not receive any
stock awards under the plan on such date because each of them was a shareholder
of the Company at the time of its initial public offering on June 9, 1992. If
the proposed amendments to the plan are approved by the Company's shareholders
at the Annual Meeting, then, in accordance with the amended terms of the plan,
on the date of the Annual Meeting, each of the directors of the Company, with
the exception of Marlin Miller, Jr., the Chairman and Chief Executive Officer of
the Company, will receive options to purchase an additional 1,500 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 Stock Market.
Executive Officers
The executive officers of the Company, their positions with the
Company, business history and certain other information, as of November 30,
1999, are set forth below.
Name Office Age
- ---- ------ ---
Marlin Miller, Jr. Chairman and Chief Executive Officer 67
Philip B. Fleck President and Chief Operating Officer 55
Paul L. Frankhouser Executive Vice President 54
Frederick J. Hirt Vice President - Finance, Chief Financial Officer
and Treasurer 52
T. Jerome Holleran Secretary 63
Thomas D. Nickel Vice President - Regulatory Affairs and Quality
Assurance 60
Scott W. Hurley Controller 41
Marlin Miller, Jr. has served as Chairman of the Board of Directors
of the Company since January 20, 1999 and as Chief Executive Officer and a
director of the Company since it was founded in 1975. Mr. Miller served as
President of the Company from 1975 to January 20, 1999. 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.
See "Certain Transactions." He is a director of Carpenter Technology
Corporation, a manufacturer of specialty steel.
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<PAGE>
Philip B. Fleck has served as President and Chief Operating Officer
of the Company since January 20, 1999, as Vice President-Research and
Manufacturing of the Company from June 1994 to January 20, 1999 and as Vice
President-Research and Engineering of the Company from 1986 to June 1994. 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 Executive Vice President of the
Company since January 20, 1999 and as Vice President-Marketing of the Company
from 1986 to June 1994. From 1980 to 1986, Mr. Frankhouser served as Manager of
Marketing of the Company, from 1977 to 1980, as Product Manager-Medical Devices
and, from 1975 to 1977, 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.
Frederick J. Hirt has served as Vice President-Finance, Chief
Financial Officer and Treasurer of the Company since August 1998. Prior to
joining the Company, Mr. Hirt served in various capacities with Pharmacia &
Upjohn, Inc. from 1980 through June 1998, where he most recently served as Vice
President, Accounting and Reporting. From 1972 to 1980, Mr. Hirt was employed in
the Chicago office of Coopers & Lybrand.
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. Mr. Holleran has also served as Chairman of PMP,
a former subsidiary of Precision that manufactures and markets certain
non-catheter medical products that was sold in August 1997 to certain management
employees of Precision (including Mr. Holleran), since October 1999 and as Chief
Executive Officer of PMP since July 1996. Mr Holleran served as President of PMP
from July 1996 until October 1999. See "Certain Transactions." From February
1986 to September 1997, Mr. Holleran was also Vice President, Chief Operating
Officer and a director of Precision. 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. 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.
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.
Scott W. Hurley has served as Controller of the Company since April
1998. Prior to joining the Company, Mr. Hurley served in various capacities with
Rhone-Poulenc Rorer from 1990 to April 1998, where he most recently served as a
Director of Finance.
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<PAGE>
SECURITY OWNERSHIP OF CERTAIN
BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth, as of November 30, 1999, 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.
Amount Percent of
Name Beneficially Owned Class Owned
- ---- ------------------ -----------
Marlin Miller, Jr..................... 4,131,400(1) 18.2%
Richard T. Niner...................... 3,149,737(2) 13.8
Raymond Neag.......................... 1,992,000 8.8
John H. Broadbent, Jr................. 925,590(3) 4.1
T. Jerome Holleran.................... 665,983(4) 2.9
Philip B. Fleck....................... 69,100(5) *
Paul L. Frankhouser................... 67,234(6) *
Frederick J. Hirt..................... 4,000(7) *
R. James Macaleer..................... 39,375 *
Carl G. Anderson, Jr.................. 11,716(8) *
Alan M. Sebulsky...................... 9,000(9) *
John E. Gurski........................ 8,200(10) *
George W. Ebright..................... 7,000(11) *
All directors and officers as a group
(15 persons)....................... 11,095,495(12) 48.8
Robert L. McNeil, Jr.................. 2,305,244(13) 10.1
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 10.2
c/o The Bank of New York
P.O. Box 11203
New York, New York 10249
- ----------
* 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 84,000 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, 10,000 shares held by a charitable foundation of
which Mr. Niner is an officer and a director with power to
(footnotes continued on next page)
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<PAGE>
(footnotes continued from previous page)
vote and dispose of the shares of Common Stock held by such foundation, as
to which shares 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.
(3) Includes an aggregate of 15,000 shares owned by Mr. Broadbent's wife, as
to which Mr. Broadbent disclaims beneficial ownership. Also includes
26,300 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.
(4) Includes 25,000 shares owned by Mr. Holleran's wife, as to which Mr.
Holleran disclaims beneficial ownership.
(5) Includes 10,000 shares owned by Mr. Fleck's wife, as to which Mr. Fleck
disclaims beneficial ownership. Also includes 32,000 shares issuable upon
the exercise of vested options and options which are deemed to be
presently exercisable. Does not include 93,000 shares issuable upon the
exercise of options which are not deemed to be presently exercisable.
(6) Includes 300 shares owned by Mr. Frankhouser's children, as to which Mr.
Frankhouser disclaims beneficial ownership. Also includes 27,000 shares
issuable upon the exercise of vested options and options which are deemed
to be presently exercisable. Does not include 73,000 shares issuable upon
the exercise of options which are not deemed to be presently exercisable.
(7) Includes 2,000 shares issuable upon the exercise of vested options and
options which are deemed to be presently exercisable. Does not include
28,000 shares issuable upon the exercise of options which are not deemed
to be presently exercisable.
(8) Includes 5,500 shares issuable upon the exercise of vested options and
options which are deemed to be presently exercisable.
(9) Includes 6,000 shares issuable upon the exercise of vested options and
options which are deemed to be presently exercisable.
(10) Includes 6,000 shares issuable upon the exercise of vested options and
options which are deemed to be presently exercisable.
(11) Includes 6,500 shares issuable upon the exercise of vested options and
options which are deemed to be presently exercisable.
(12) See footnotes (1) through (11) above. Also includes 6,800 shares issuable
upon the exercise of vested options and options which are deemed to be
presently exercisable granted to two executive officers. Does not include
an aggregate of 13,700 shares issuable upon the exercise of options
granted to two executive officers which are not deemed to be presently
exercisable.
(13) Includes 73,400 shares held by a charitable foundation of which Mr.
McNeil, a former director of the Company, is the president and one of ten
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.
- 10 -
<PAGE>
Section 16(a) Beneficial Ownership Reporting Compliance
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
("SEC") 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, 1999, and (ii) written representations from certain reporting
persons, that John E. Gurski, a director of the Company, was inadvertently late
in filing a Form 4 reporting the purchase of 1,200 shares and 1,000 shares of
Common Stock on April 1, 1999 and April 8, 1999, respectively.
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 each
of the four most highly compensated other executive officers of the Company
other than the Chief Executive Officer as of August 31, 1999 for services
rendered to the Company in all capacities.
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
Annual Long-Term
Compensation(1) Compensation(1)
----------------------- ----------------------
Restricted Securities
Name and Fiscal Stock Underlying All Other
Principal Position Year Salary($) Bonus($)(2) Awards($) Options(#) Compensations($)
------------------ ---- --------- ----------- --------- ---------- ----------------
<S> <C> <C> <C> <C> <C> <C>
Marlin Miller, Jr. 1999 346,392 117,427 -0- -0- 198,298(3)
Chairman and Chief 1998 346,392(4) 106,931 -0- -0- 198,690(3)
Executive Officer 1997 313,397(4) 216,739 -0- -0- 198,674(3)
Raymond Neag(5) 1999 251,124 76,618 -0- -0- 109,340(6)
Vice Chariman and 1998 251,124 68,908 -0- -0- 119,842(6)
Executive Vice 1997 239,160 139,669 -0- -0- 110,382(6)
President
Philip B. Fleck 1999 219,997 75,850 -0- 105,000(7) 4,961(8)
President and Chief 1998 190,092 61,664 -0- 10,000(9) 4,888(8)
Operating Officer 1997 181,044 101,998 -0- -0- 3,000(8)
Paul L. Frankhouser 1999 202,497 69,991 -0- 80,000(10) 15,529(11)
Executive Vice 1998 190,092 61,664 -0- 10,000(12) 15,839(13)
President 1997 181,044 101,998 -0- -0- 3,009(14)
Frederick J. Hirt(15) 1999 206,667 71,501 -0- 20,000(16) 3,439(17)
Vice President-Finance, 1998 16,667(18) 3,430(18) -0- 10,000(19) -0-
Chief Financial
Officer and Treasurer
</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)
- 11 -
<PAGE>
(footnotes continued from previous page)
(2) Includes annual incentive and profit sharing bonuses earned with respect
to fiscal 1998, part of which were paid in fiscal 1999.
(3) Consists of (i) matching contributions in the amount of $5,000, $4,790 and
$3,000 made by the Company to Mr. Miller's account under the Company's
401(k) Plan in fiscal 1999, 1998 and 1997, respectively, and (ii)
insurance premiums in the amount of $193,298, $193,900 and $195,674 paid
by the Company in fiscal 1999, 1998 and 1997, 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.
(4) In addition, Precision paid $3,464 and $16,495 as salary to Mr. Miller in
fiscal 1998 and 1997, respectively, in respect of Mr. Miller's devotion of
approximately 1% and 5% of his business time to Precision during each of
fiscal 1998 and 1997, respectively. See "Certain Transactions."
(5) Mr. Neag retired as Vice Chairman of the Board of the Company on October
31, 1999 and as Executive Vice President of the Company on January 20,
1999.
(6) Consists of (i) matching contributions in the amount of $4,072, $4,910 and
$3,000 made by the Company to Mr. Neag's account under the Company's
401(k) Plan in fiscal 1999, 1998 and 1997, respectively, and (ii)
insurance premiums in the amount of $105,268, $114,932 and $107,382 paid
by the Company in fiscal 1999, 1998 and 1997, 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.
(7) Represents an award to Mr. Fleck on (i) January 20, 1999 of incentive
stock options to purchase 100,000 shares of Common Stock at an exercise
price of $25.125 per share and (ii) August 31, 1999 of incentive stock
options to purchase 5,000 shares of Common Stock at an exercise price of
$29.00 per share, in each case under the Company's 1992 Stock Incentive
Plan. Subject to Mr. Fleck's continued employment with the Company, 20%
(i.e., 20,000 and 1,000 options, respectively) of each of such stock
option awards will vest on each of the first through the fifth anniversary
of the date of such awards (i.e., January 20 and August 31, respectively).
The options are subject to immediate vesting upon the occurrence of
certain change in control events.
(8) Represents matching contributions made by the Company to Mr. Fleck's
account under the Company's 401(k) Plan in fiscal 1999, 1998 and 1997,
respectively.
(9) Represents an award to Mr. Fleck on September 9, 1997 of incentive stock
options to purchase 10,000 shares of Common Stock at an exercise price of
$31.875 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., September 9). The
options are subject to immediate vesting upon the occurrence of certain
change in control events.
(10) Represents an award to Mr. Frankhouser on (i) January 20, 1999 of
incentive stock options to purchase 75,000 shares of Common Stock at an
exercise price of $25.125 per
(footnotes continued on next page)
- 12 -
<PAGE>
(footnotes continued from previous page)
share and (ii) August 31, 1999 of incentive stock options to purchase
5,000 shares of Common Stock at an exercise price or $29.00 per share, in
each case under the Company's 1992 Stock Incentive Plan. Subject to Mr.
Frankhouser's continued employment with the Company, 20% (i.e., 15,000 and
1,000 options, respectively) of each of such stock option awards will vest
on each of the first through the fifth anniversary of the date of such
awards (i.e., January 20 and August 31, respectively). The options are
subject to immediate vesting upon the occurrence of certain change in
control events.
(11) Consists of a (i) matching contribution in the amount of $4,560 made by
the Company to Mr. Frankhouser's account under the Company's 401(k) Plan
in fiscal 1999 and (ii) a payment of $10,969 made to Mr. Frankhouser in
fiscal 1999 in respect of his accrued but unused vacation allowance.
(12) Represents an award to Mr. Frankhouser on September 9, 1997 of incentive
stock options to purchase 10,000 shares of Common Stock at an exercise
price of $31.875 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.,
September 9). The options are subject to immediate vesting upon the
occurrence of certain change in control events.
(13) Consists of (i) a matching contribution in the amount of $4,870 made by
the Company to Mr. Frankhouser's account under the Company's 401(k) Plan
in fiscal 1998 and (ii) a payment of $10,969 made to Mr. Frankhouser in
fiscal 1998 in respect of his accrued but unused vacation allowance.
(14) Represents a matching contribution made by the Company to Mr.
Frankhouser's account under the Company's 401(k) plan in fiscal 1997.
(15) Mr. Hirt joined the Company as Vice President-Finance, Chief Financial
Officer and Treasurer on August 3, 1998. Accordingly, no information is
provided for periods prior to such date with respect to Mr. Hirt.
(16) Represents an award to Mr. Hirt on August 31, 1999 of incentive stock
options to purchase 20,000 shares of Common Stock at an exercise price of
$29.00 per share under the Company's 1992 Stock Incentive Plan. Subject to
Mr. Hirt's continued employment with the Company, 20% (i.e., 4,000
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., August 31). The
options are subject to immediate vesting upon the occurrence of certain
change in control events.
(17) Represents a matching contribution made by the Company to Mr. Hirt's
account under the Company's 401(k) plan in fiscal 1999.
(18) Represents the pro rata portion of annual salary and bonus paid to Mr.
Hirt from August 3, 1998, the date he joined the Company, to and including
August 31, 1998.
(footnotes continued on next page)
- 13 -
<PAGE>
(footnotes continued from previous page)
(19) Represents an award to Mr. Hirt on August 3, 1998 of incentive stock
options to purchase 10,000 shares of Common Stock at an exercise price of
$27.75 per share under the Company's 1992 Stock Incentive Plan. Subject to
Mr. Hirt's continued employment with the Company, 20% (i.e., 2,000
options) of such stock option award will vest on each of the first through
the fifth anniversary of the date of such award (i.e., August 3). The
options are subject to immediate vesting upon the occurrence of certain
change in control events.
Option Grants
The following table sets forth certain information, as of August 31,
1999, concerning individual grants of stock options made during the fiscal year
ended August 31, 1999 to the persons named in the Summary Compensation Table
above.
Option Grants in Fiscal 1999
<TABLE>
<CAPTION>
Potential Realizable
Value at Assumed Annual
Rates of Stock Price
Appreciation for Option
Individual Grants Term
-------------------------------------------------------- -------------------------
Percent of
Total
Number of Options
Securities Granted to
Underlying Employees in Exercise
Options Granted Fiscal Year Price Expiration
Name (#) (1) ($/sh) Date 5% 10%
- ------------------- --------------- ------------ ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C>
Philip B. Fleck 100,000(2) 21.7% $25.125 01/20/09 $1,580,098 $4,004,278
5,000(3) 29.00 08/31/09 $91,190 $231,093
Paul L. Frankhouser 75,000(2) 16.5 $25.125 01/20/99 $1,185,073 $3,003,208
5,000(3) 29.00 08/31/09 $91,190 $231,093
Frederick J. Hirt 20,000(3) 4.1 $29.00 08/31/09 $364,759 $924,371
</TABLE>
- ----------
(1) Based upon total grants of options in respect of 483,500 shares of Common
Stock made during fiscal 1999.
(2) Granted pursuant to the Company's 1992 Stock Incentive Plan on January 20,
1999 Subject to continued employment by the Company, 20% (i.e., 20,000 in
the case of Mr. Fleck and 15,000 in the case of Mr. Frankhouser) of such
options will vest on each of the first through the fifth anniversary of
such date. The options are subject to immediate vesting upon the
occurrence of certain change in control events.
(3) Granted pursuant to the Company's 1992 Stock Incentive Plan on August 31,
1999. Subject to continued employment by the Company, 20% (i.e., 1,000 in
the case of each of Messrs. Fleck and Frankhouser and 4,000 in the case of
Mr. Hirt) of such options will vest on each of the first through the fifth
anniversary of such date. The options are subject to immediate vesting
upon the occurrence of certain change in control events.
- 14 -
<PAGE>
Aggregate Option Exercises in Fiscal 1999 and Fiscal Year-End Option Values
The following table provides information concerning stock options
exercised during fiscal 1999 and the number of unexercised options held by the
individuals named in the Summary Compensation Table as of August 31, 1999. Also
reported are the values for unexercised, "in the money" options, which represent
the positive spread between the respective exercise prices of such options and
the fair market value of the Common Stock as of August 31, 1999.
Aggregated Option Exercises in Fiscal 1999 and Fiscal Year-End Option Values
<TABLE>
<CAPTION>
Number of Securities
Underlying Unexercised Value of Unexercised
Options In-the-Money Options
August 31, 1999 at August 31,
(#) 1999($)(1)
----------------------- ---------------------------
Shares
Acquired on
Exercise Value Realized
Name (#) ($) Exercisable Unexercisable Exercisable Unexercisable
- ------------------- ----------- -------------- ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
Philip B. Fleck -- -- 20,000 80,000 $77,500 $310,000
Paul L. Frankhouser -- -- 15,000 60,000 58,125 232,500
Frederick J. Hirt -- -- 2,000 8,000 2,500 10,000
</TABLE>
- ----------
(1) Based upon a closing price of the Common Stock of $29.00 per share on
August 31, 1999 as reported on The Nasdaq Stock Market.
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. Benefits under the Retirement Plan are based on an annual rate
of 1.25% of a participant's final average earnings multiplied by such
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 1999, 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.
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
- 15 -
<PAGE>
fiscal 1997, 1998 and 1999 was $537,765, $392,476, and $1,341,588, respectively,
equivalent to approximately 2.8% for fiscal 1997, 1.6% for fiscal 1998 and 5.6%%
for fiscal 1999 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. The executive officers of the Company named in
the Summary Compensation Table currently have the following years of credited
service for purposes of the Pension Plan: each of Messrs. Miller, Neag, Fleck
and Frankhouser has 24 years and Mr. Hirt has one year. 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.
HUMAN RESOURCES 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 three 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
- 16 -
<PAGE>
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 similar companies. 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 1999, in addition to consideration of industry
comparisons and individual performance, has taken particular note of the
Company's achievements in fiscal 1999 in the following key areas: management
efficiency; the successful introduction of new products into the market and the
advancement of products 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 December 1st. For
purposes of determining the amounts available for distribution under the Profit
Sharing Plan, during each quarter of each plan year a fixed percentage of the
pre-tax income of the Company, excluding royalty revenue, profit sharing expense
and other extraordinary income and expense, is allocated to the Profit Sharing
Plan. The amount allocated to the Profit Sharing Plan is apportioned to each
participating employee on a monthly basis 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 and Neag 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 (prior to his resignation as an
executive officer of the Company in October 1999), Fleck, Frankhouser and Hirt
are eligible to receive annual incentive bonuses equal to 5.0, 4.5, 4.0, 4.0 and
4.0 times, respectively, the percentage growth in pretax income,
- 17 -
<PAGE>
exclusive of extraordinary income and expense, of the Company over the previous
year times their respective base pay. For fiscal 1999, the Company's pre-tax
income, exclusive of extraordinary income and expense, increased 6.8% over
fiscal 1998, resulting in an incentive bonus of 33.9% of base pay to Mr. Miller,
30.5% of base pay to Mr. Neag and 27.1% of base pay to each of Messrs. Fleck,
Frankhouser and Hirt. 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 2000 to the eligible senior
executive officers of the Company pursuant to the Income Growth Bonus Plan to
the extent that the Company in fiscal 2000 achieves an increase in pretax
income, exclusive of extraordinary income and expense, over fiscal 1999.
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.
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 and
Neag currently has 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. In fiscal 1999, each of Messrs. Fleck, Frankhouser
and Hirt were awarded incentive stock options to purchase 105,000, 80,000, and
20,000 shares of Common Stock, respectively, under the Company's 1992 Stock
Incentive Plan. Other executive officers of the Company were awarded incentive
stock options to purchase an aggregate of 6,500 shares of Common Stock under the
plan during fiscal 1999. The Company awarded to executive officers and other key
employees of the Company incentive stock options to purchase a total of 483,500
shares of Common Stock under the plan during fiscal 1999. In selecting the
recipients and size of these awards, the Human Resources Committee placed
particular emphasis on such executives' and key employees' overall job
performance, their potential for continued excellent service and significant
contribution to the Company's growth and profitability during fiscal 1999 and
awards to individuals who had previously not been selected due to insignificant
length of service to the Company. As a result of such awards and stock awards
made prior to fiscal 1999, 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,
- 18 -
<PAGE>
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
R. James Macaleer
- 19 -
<PAGE>
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, 1994 and ending on
August 31, 1999. The comparison assumes $100 was invested on August 31, 1994 in
the Common Stock and in each of the foregoing indices and also assumes
reinvestment of all dividends.
[GRAPHIC OMITTED]
<TABLE>
<CAPTION>
- ------------------------------ -------------- --------------- -------------- -------------- -------------- --------------
August 31, August 31, August 31, August 31, August 31, August 31,
1994 1995 1996 1997 1998 1999
- ------------------------------ -------------- --------------- -------------- -------------- -------------- --------------
<S> <C> <C> <C> <C> <C> <C>
Arrow International, Inc. $ 100.00 $ 166.28 $ 108.95 $ 121.34 $111.75 $ 120.45
- ------------------------------ -------------- --------------- -------------- -------------- -------------- --------------
S&P 500 Stock Index $ 100.00 $ 121.45 $ 144.19 $ 202.81 $ 219.22 $ 306.52
- ------------------------------ -------------- --------------- -------------- -------------- -------------- --------------
S&P Medical Products and
Supplies Index $ 100.00 $ 153.95 $ 175.16 $ 250.79 $ 277.83 $ 376.17
- ------------------------------ -------------- --------------- -------------- -------------- -------------- --------------
</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
Securities Exchange Act of 1934, as amended, 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.
- 20 -
<PAGE>
HUMAN RESOURCES COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
During the fiscal year ended August 31, 1999, the Human Resources
Committee of the Board of Directors consisted of Messrs. Ebright, Gurski and
Macaleer, none of whom is an officer or employee of the Company or any of its
subsidiaries. Each of Messrs. Ebright and Macaleer is a director of Precision.
See "Certain Transactions."
CERTAIN TRANSACTIONS
Arrow Precision Products, Inc. ("Precision") is a former subsidiary
of the Company which is currently in the process of being liquidated. Prior to
the sale of its remaining operating subsidiary, Precision Medical Products, Inc.
("PMP"), on August 29, 1997 to a company owned by certain management employees
of Precision (including Mr. Holleran), Precision 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 30, 1999, pending the liquidation of Precision (which
is expected to be completed during fiscal 2000), 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,
Ebright, Macaleer and Niner. During fiscal 1999, Messrs. Miller and Broadbent
served as the president and the vice president-finance and treasurer of
Precision, respectively. Prior to the sale of PMP, Mr. Holleran served as the
vice president and chief operating officer and a director of Precision. Since
October 1999, Mr. Holleran has served as chairman of PMP and as chief executive
officer of PMP since July 1996. From July 1996 until October 1999, Mr. Holleran
served as president of PMP. Following the sale of PMP, Mr. Holleran no longer
provides any services to Precision. In fiscal 1999, Messrs. Miller and Broadbent
provided only minimal services to Precision and, accordingly, they served
without compensation.
Prior to the sale of PMP, the Company (i) purchased certain
non-catheter medical products from Precision, for which the Company solicited
competitive quotations from unrelated suppliers, (ii) 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,
(iii) maintained employee benefit accounts, including medical benefits, for
Precision's employees, at Precision's expense, and (iv) leased to Precision, on
a net lease basis, office and manufacturing space at the Company's Wyomissing,
Pennsylvania facility at rates believed by the Company to represent then current
market rates.
Following the sale of PMP, in fiscal 1998 and fiscal 1999, the
Company no longer purchased any products from Precision, no longer provided any
operating or administrative services to Precision and discontinued leasing
office and manufacturing space to Precision.
Although no longer an operating company following the sale of PMP,
Precision remained responsible for certain employee benefits, including pension
and retirement health care, which were payable to individuals who are currently,
or previously had been, employees of the Company. To ensure that these benefit
obligations would be satisfied in the future, the Company agreed to assume these
obligations in exchange for the transfer by Precision to the Company of
appropriate assets to satisfy such obligations. Consequently, effective as of
January 26, 1998, Precision's two pension plans, both of which were overfunded
as of August 31, 1997, were merged with the Company's pension plans covering
comparable employees. In
- 21 -
<PAGE>
connection with this transaction, the Company paid Precision $2,975,000, the
amount by which the value of Precision's pension plan assets exceeded the
actuarially determined present value of Precision's pension plan obligations. In
addition, Precision transferred to the Company, with no payment by either party
to the other, its rights and obligations (including, without limitation, its
obligation to pay premiums, which in fiscal 1999 amounted to $74,210) in respect
of term life insurance policies owned by certain trusts established by Mr.
Holleran, the former vice president and chief operating officer of Precision and
the Secretary and a director of the Company, which premium payments must be
repaid from either (i) the cash surrender value of such policies or (ii) the
death benefits of such policies.
In January 1999, the Company received $362,417 from Precision in
full payment of previous charges by the Company to Precision for utilization by
Precision, as described above, of certain of the Company's facilities, personnel
and services prior to Precision's sale of PMP. The Company had no receivables
from Precision at August 31, 1999.
In fiscal 1999, the Company made purchases amounting to $31,000 of
products from PMP that it had formerly purchased from Precision. The Company
solicits competitive quotations from unrelated suppliers for products it
purchases from PMP. In the future, the Company may continue to purchase products
from PMP, 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. In
addition, in fiscal 1999, the Company provided certain computer-related services
to PMP for $3,000. In the future, the Company does not expect to provide any
services to PMP.
PROPOSAL 2 - AMENDMENTS TO DIRECTORS
STOCK INCENTIVE PLAN
The Board of Directors has unanimously adopted and recommends that
the shareholders approve amendments to the Directors Stock Incentive Plan to (a)
increase the number of shares of Common Stock available for awards under the
plan from a maximum of 100,000 shares (subject to adjustment in the event of any
stock dividend, stock split, recapitalization, reorganization or similar event)
to a maximum of 150,000 shares (subject to adjustment in the event of any stock
dividend, stock split, recapitalization, reorganization or similar event), (b)
increase the size of the annual grant of options to purchase Common Stock made
under the plan to eligible directors from 500 to 1,500 shares of Common Stock,
and (c) make eligible for such annual option grants non-employee directors who
were shareholders of the Company at the time of its initial public offering on
June 9, 1992. The Directors Stock Incentive Plan was adopted by the Board of
Directors in October 1995 and subsequently was approved by the Company's
shareholders at its Annual Meeting of Shareholders in January 1996.
The Board of Directors believes that the proposed amendments to the
plan are necessary to enable the Company to continue to attract and retain
qualified outside directors. The amendments are intended to further align the
interests of the Company's outside directors with those of its shareholders,
thereby increasing the directors' incentive to maintain and enhance the
Company's long-term performance.
The following is a summary of certain features of the Directors
Stock Incentive Plan. The summary is qualified in its entirety by reference to
the plan, a copy of which will be provided to the Company's shareholders upon
request. The plan has also been filed with the Securities and Exchange
Commission.
- 22 -
<PAGE>
General
The purpose of the Directors Stock Incentive Plan is to enable the
Company and its subsidiaries to attract and retain outside directors and provide
them with an incentive to maintain and enhance the Company's long-term
performance record by creating a long-term mutuality of interests between the
outside directors and the shareholders of the Company.
A total of 100,000 shares of Common Stock (subject to adjustment in
the event of any stock dividend, stock split, recapitalization, reorganization
or similar event) has been reserved for issuance under the plan. If the proposed
amendments to the plan are approved by the Company's shareholders at the Annual
Meeting, the total number of shares of Common Stock which are reserved for
issuance under the plan will be increased from a maximum of 100,000 shares
(subject to adjustment in the event of any stock dividend, stock split,
recapitalization, reorganization or similar event) to a maximum of 150,000
shares (subject to adjustment in the event of any stock dividend, stock split,
recapitalization, reorganization or similar event). Directors of the Company and
its subsidiaries who are not also employees or consultants of the Company or its
subsidiaries, who were not shareholders of the Company at the time of the
Company's initial public offering on June 9, 1992, and who do not serve on the
Board as representatives of the interests of shareholders who have made an
investment in the Company are currently eligible to receive awards under the
plan. There currently are four directors of the company, Messrs. Anderson,
Ebright, Gurski and Sebulsky, who have received and continue to be eligible for
awards under the plan. If the proposed amendments to the plan are approved by
the Company's shareholders at the Annual Meeting, directors of the Company who
are not employees or consultants of the Company but who were shareholders of the
Company at the time of the Company's initial public offering on June 9, 1992,
including Messrs. Broadbent, Holleran (who serves as Secretary of the Company
but is paid no compensation by the Company and is not considered an employee of
the Company), Macaleer, Neag and Niner, will also become eligible, effective as
of the date of the Annual Meeting, to receive awards under the plan. Awards
under the plan are in the form of non-qualified stock options. No awards may be
made under the plan after the tenth anniversary of the plan.
The plan may be amended by the Company's shareholders or the Board,
provided that the provisions relating to the amount, price and timing of awards
may not be amended more than once every six months and that the Board may not,
without shareholder approval, materially increase the benefits accruing to
participants under the plan, increase the maximum number of shares as to which
awards may be granted under the plan, change the minimum exercise price, change
the class of eligible persons, extend the period for which awards may be granted
or exercised, or withdraw the authority to administer the plan from the Board.
Administration
The plan is administered by the Board of Directors. The Board has
authority to interpret the plan and to prescribe rules, regulations and
procedures in connection with the operation of the plan, or as to options
granted under the plan. Determinations of the Board are conclusive and binding.
Notwithstanding the discretion to administer the plan granted to the
Board of Directors, the selection of the directors to whom options are to be
granted, the timing of grants, the number of shares subject to any option, the
exercise price of any options, the periods during which any options may be
granted and the term of any option are as set forth in the plan. The Board of
Directors has no discretion as to these matters.
- 23 -
<PAGE>
Awards
Awards granted under the plan are evidenced by agreements between
the individual director and the Company.
The plan is a formula plan which provides for an initial grant to
eligible directors of options to purchase 5,000 shares of Common Stock to be
made on the plan's effective date or upon an eligible director's first election
to the Board, whichever is later, and further provides that, subsequent to an
eligible director's initial election to the Board, on the date each year when
new directors are elected to the Board, such eligible director will be granted
options to purchase 500 shares of Common Stock. If the proposed amendments to
the plan are approved by the Company's shareholders at the Annual Meeting,
effective as of the date of the Annual Meeting, eligible directors will receive
options to purchase 1,500 shares of Common Stock on the date each year when
directors are elected to the Board, instead of the 500 shares currently provided
for under the plan.
Options under the plan are exercisable for ten years after the date
of grant. The exercise price for any option under the plan shall be equal to the
fair market value of the Common Stock at the time such option is granted.
Payment of an option's exercise price may be made in cash, by check or, in
certain circumstances, by delivery of shares of Common Stock assigned to the
Company, or by a combination of the foregoing. The plan provides that options
granted thereunder vest in full on the first anniversary of the grant date.
Options are not transferrable other than by will or by the laws of descent and
distribution and may be exercised only by the grantee, his guardian, legal
representative or beneficiary. If a participant terminates service as a director
for any reason, all unvested options shall be forfeited.
Upon the acquisition of beneficial ownership of 30% or more of the
outstanding Common Stock by any unaffiliated person, entity or group, all
options shall become fully exercisable.
The following table sets forth certain information concerning stock
options that would have been received by the following persons during the fiscal
year ended August 31, 1999 under the Company's Directors Stock Incentive Plan if
the proposed amendments to the plan had been in effect during fiscal 1999:
NEW PLAN BENEFITS
Directors Stock Incentive Plan
------------------------------
Number of Shares
Name and Position Dollar Value ($)(1) Optioned
----------------- ------------------- --------
Marlin Miller, Jr. (2)
Chief Executive Officer and
director -- --
Raymond Neag (2) (3)
Vice Chairman, Executive
Vice President and director -- --
- 24 -
<PAGE>
Directors Stock Incentive Plan
------------------------------
Number of Shares
Name and Position Dollar Value ($)(1) Optioned
----------------- ------------------- --------
Philip B. Fleck (2)
President and Chief Operating Officer -- --
Paul L. Frankhouser (2)
Executive Vice President -- --
Frederick J. Hirt (2)
Vice President-Finance,
Chief Financial Officer and
Treasurer -- --
All Current Executive Officers as a
Group (2) -- --
All Current Non-Executive Officer
Directors as a Group(4) $57,756.00 12,000
All Non-Executive Officer Employees as
a Group (2) -- --
- ----------
(1) Based upon the $29.938 per share closing market price of the Common
Stock on November 30, 1999 less the exercise price of $25.125 which
would have been applicable if the grants were made pursuant to the
proposed amended terms of the plan during the fiscal year ended
August 31, 1999.
(2) Not eligible to receive awards pursuant to the Directors Stock
Incentive Plan due to status as employee(s) of the Company.
(3) Effective as of October 31, 1999, Mr. Neag retired as an executive
officer of the Company. As a non-employee director of the Company,
Mr. Neag would currently be eligible to receive options to purchase
1,500 shares of Common Stock pursuant to the Directors Stock
Incentive Plan on the date of the Annual Meeting if the proposed
amendments to the plan are approved by the Company's shareholders at
the Annual Meeting.
(4) Each of Messrs. Anderson, Broadbent, Ebright, Gurski, Holleran,
Macaleer, Niner and Sebulsky would have been eligible to receive
options pursuant to the Directors Stock Incentive Plan if the
proposed amendments to the plan had been in effect during the fiscal
year ended August 31, 1999.
Other than as set forth above, no director, nominee for election as
a director or associate of any of the Company's current directors, executive
officers or nominees for election as a director would have received stock
options during the fiscal year ended August 31, 1999 under the Directors Stock
Incentive Plan if the proposed amendments to the plan had been in effect during
fiscal 1999.
- 25 -
<PAGE>
Certain Income Tax Consequences
A participant who is awarded a stock option will not realize any
income, nor will the Company be entitled to any deduction, at the time of grant.
A participant will recognize income on the date of exercise in an amount equal
to the excess of the fair market value of the shares on the date of exercise
over the option price. The holding period for capital gain or loss purposes will
commence on the date of exercise.
If the exercise price of an option is paid by surrendering stock of
the Company, the participant will recognize no gain or loss on the shares that
he or she surrenders to pay the option price (the "surrendered shares"). The
number of shares that the participant receives upon exercise of the option in
excess of the surrendered shares are considered "additional shares". The
participant will recognize ordinary income on the date of exercise equal to the
fair market value of the additional shares on the date of exercise, less any
cash paid towards the exercise price. The basis of the additional shares will be
equal to their fair market value on the date of exercise, and their holding
period will begin on that date. The shares that the participant receives upon
exercise equal to the surrendered shares will have a basis and holding period
equal to that of the surrendered shares.
The Company will be entitled to a deduction for federal tax purposes
at the same time and in the same amount as the participant is considered to have
realized ordinary income with respect to any option. When a participant disposes
of Common Stock acquired through the exercise of an option, any amount received
in excess of the fair market value of the shares on the date of exercise will be
subject to taxation at capital gains rates. If the amount received is less than
such fair market value of the shares, the difference will be treated as a
capital loss for tax purposes.
Effective Date of Proposed Amendments
The effective date of the proposed amendments to the Directors Stock
Incentive Plan will be the date on which such amendments are approved by the
Company's shareholders. This means that if the proposed amendments are approved
by the shareholders at the Annual Meeting, then each eligible non-employee
director, including those who were shareholders of the Company at the time of
its initial public offering on June 9, 1992, will be immediately eligible on the
date of the Annual Meeting for a grant of 1,500 options pursuant to the amended
terms of the plan.
Recommendation
The Board of Directors unanimously recommends a vote FOR the
approval of the proposed amendments to the Directors Stock Incentive Plan. The
affirmative vote of the holders of a majority of the shares of Common Stock
present in person or by proxy is necessary to approve the proposed amendments to
the plan. It is intended that, unless marked to the contrary, the shares
represented by proxy shall be voted FOR the approval of the proposed amendments
to the plan.
PROPOSAL 3 - RATIFICATION OF APPOINTMENT
OF INDEPENDENT ACCOUNTANTS
The Company's independent accountants and auditors are
Pricewaterhouse Coopers L.L.P., certified public accountants.
PricewaterhouseCoopers L.L.P. has served as the Company's independent
accountants and auditors since fiscal 1985. At the Annual Meeting, the
- 26 -
<PAGE>
shareholders will consider and vote upon a proposal to ratify the appointment of
independent accountants for the Company's fiscal year ending August 31, 2000.
The Audit Committee of the Board of Directors has recommended that
PricewaterhouseCoopers L.L.P. be re-elected as independent accountants for the
2000 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 PricewaterhouseCoopers L.L.P. will be present at
the Annual Meeting to make a statement, if desired, and to respond to
appropriate questions from shareholders.
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 2001 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 18, 2000.
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 1999 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, 1999
Reading, Pennsylvania
- 27 -
<PAGE>
ARROW INTERNATIONAL, INC.
DIRECTORS STOCK INCENTIVE PLAN
(As Amended on January 19, 2000)
Arrow International, Inc. (the "Company") hereby establishes the Arrow
International, Inc. Directors Stock Incentive Plan (the "Plan").
1. PURPOSE
The purpose of the Plan is to enable the Company and its subsidiaries to
attract and retain outside directors and provide them with an incentive to
maintain and enhance the Company's long-term performance record. It is intended
that this purpose will best be achieved by granting eligible directors
non-qualified stock options ("options") under this Plan pursuant to the rules
set forth in Section 83 of the Internal Revenue Code, as amended from time to
time.
2. ADMINISTRATION
The Plan shall be administered by the Company's Board of Directors (the
"Board"). Subject to the provisions of the Plan, the Board shall possess the
authority, in its discretion, (a) to prescribe the form of the stock option
agreements, including any appropriate terms and conditions applicable to these
options, and to make any amendments to such agreements or options; (b) to
interpret the Plan; (c) to make and amend rules and regulations relating to the
Plan; and (d) to make all other determinations necessary or advisable for the
administration of the Plan. The Board's determinations shall be conclusive and
binding. No member of the Board shall be liable for any action taken or decision
made in good faith relating to the Plan or any option granted hereunder.
3. ELIGIBLE DIRECTORS
Members of the Board of Directors of the Company and its subsidiaries are
eligible to participate in this Plan if they are not also employees or
consultants of the Company or its subsidiaries and do not serve on the Board as
representatives of the interests of shareholders who have made an investment in
the Company.
4. SHARES AVAILABLE
The total number of shares of the Company's Common Stock, no par value
(the "Common Stock"), available in the aggregate for options under this Plan
shall not exceed 150,000 (subject to substitution or adjustment as provided in
Section 8). Such shares may be authorized and unissued shares. If an option
expires, terminates or is cancelled without being exercised, new options may
thereafter be granted covering such shares. No option may be granted more than
ten years after the effective date of the Plan.
<PAGE>
- 2 -
5. TERMS AND CONDITIONS OF OPTIONS
Each option granted under the Plan shall be evidenced by an option
agreement in such form as the Board shall approve from time to time, which
agreement shall conform with this Plan and contain the following terms and
conditions:
(a) Number of Shares. On the date the Plan is first adopted by the
Company's shareholders or on the date on which an eligible director is
first elected to the Board, whichever is later, such eligible director
shall receive an option to purchase 5,000 shares of the Common Stock (each
such option grant is hereinafter referred to as an "Initial Option").
Subsequent to an eligible director's initial election to the Board and
provided that such eligible director has served on the Board for at least
twelve months, each year when new members are elected to the Board, each
eligible director who will be serving on the new Board shall receive an
option to purchase 1,500 shares of the Common Stock.
(b) Exercise Price. The exercise price under each option shall equal
the fair market value of the Common Stock at the time such option is
granted.
(c) Duration of Option. Each option by its terms shall not be
exercisable after the expiration of ten years from the date such option is
granted.
(d) Options Nontransferable. Each option by its terms shall not be
transferable by the participant otherwise than by will or the laws of
descent and distribution, and shall be exercisable, during the
participant's lifetime, only by the participant, the participant's
guardian or the participant's legal representative.
(e) Exercise Terms. Each option granted under the Plan shall become
fully exercisable with respect to the shares subject thereto on the first
anniversary of the date of grant. Options may be partially exercised from
time to time during the period extending from the time they first become
exercisable until the tenth anniversary of the date of grant.
(f) Payment of Exercise Price. An option shall be exercised upon
written notice to the Company accompanied by payment in full for the
shares being acquired. The payment shall be made in cash, by check or, if
the option agreement so permits, by delivery of shares of Common Stock of
the Company registered in the name of the participant, duly assigned to
the Company with the assignment guaranteed by a bank, trust company or
member firm of the New York Stock Exchange, or by a combination of the
foregoing. Any such shares so delivered shall be deemed to have a value
per share equal to the fair market value of the shares on such date. For
this purpose, fair market value shall equal the closing price of the
Common Stock on the Nasdaq National Market System on the date the option
is exercised, or, if there was no trading in such stock on the date of
such exercise, the closing date on the last preceding day on which there
was such trading.
6. GENERAL RESTRICTION ON ISSUANCE OF STOCK CERTIFICATES
The Company shall not be required to deliver any certificate upon the
exercise of an option until it has been furnished with such opinion,
representation or other document as it may
<PAGE>
- 3 -
reasonably deem necessary to insure compliance with any law or regulation of the
Securities and Exchange Commission or any other governmental authority having
jurisdiction under this Plan. Certificates delivered upon such exercise may bear
a legend restricting transfer absent such compliance. Each option shall be
subject to the requirement that, if at any time the Board shall determine, in
its discretion, that the listing, registration or qualification of the shares
subject to such option upon any securities exchange or under any state or
federal law, or the consent or approval of any governmental regulatory body, is
necessary or desirable as a condition of, or in connection with, the granting of
such option or the issue or purchase of shares thereunder, such option may not
be exercised in whole or in part unless such listing, registration,
qualification, consent or approval shall have been effected or obtained free of
any conditions not acceptable to the Board in the exercise of its reasonable
judgment.
7. TERMINATION OF DIRECTORSHIP
If a director's directorship terminates for any reason (including, without
limitation, resignation or removal), all nonvested options shall be forfeited.
Vested but unexercised options may be exercised by the director or, in the case
of death, by his or her legal representative or beneficiary in accordance with
the terms of the Plan and the option agreement.
8. ADJUSTMENT OF SHARES
In the event of any change in the Common Stock by reason of any stock
dividend, stock split, recapitalization, reorganization, merger, consolidation,
split-up, combination, or exchange of shares, or of any similar change affecting
the Common Stock, the number and kind of shares authorized under Section 4, the
number and kind of shares which thereafter are subject to an option under the
Plan and the number and kind of shares set forth in options under outstanding
agreements and the price per share shall be adjusted automatically consistent
with such change to prevent substantial dilution or enlargement of the rights
granted to, or available for, participants in the Plan.
9. NO EMPLOYMENT RIGHTS
The Plan and any awards granted under the Plan shall not confer upon any
director any right with respect to continuance as a director of the Company or
any subsidiary, nor shall they interfere in any way with any right the Company
or its subsidiaries may have to terminate the director's position as a director
at any time.
10. RIGHTS AS A SHAREHOLDER
The recipient of any option under the Plan shall have no rights as a
shareholder with respect thereto unless and until certificates for the
underlying shares of Common Stock are issued to the recipient.
11. AMENDMENT AND DISCONTINUANCE
This Plan may be amended, modified or terminated by the shareholders of
the Company or by the Board, provided that Plan provisions relating to the
amount, price and timing of options
<PAGE>
- 4 -
may not be amended more than once every six months other than to comport with
changes in the Internal Revenue Code or the regulations thereunder and provided
further that the Board may not, without approval of the shareholders, materially
increase the benefits accruing to participants under the Plan, increase the
maximum number of shares as to which options may be granted under the Plan,
change the minimum exercise price, change the class of eligible persons, extend
the period for which options may be granted or exercised, or withdraw the
authority to administer the Plan from the Board. Notwithstanding the foregoing,
to the extent permitted by law, the Board may amend the Plan without the
approval of shareholders, to the extent it deems necessary to cause the Plan to
comply with Securities and Exchange Commission Rule 16b-3 or any successor rule,
as it may be amended from time to time. Except as required by law, no amendment,
modification or termination of the Plan may, without the written consent of a
director to whom any option shall theretofore have been granted, adversely
affect the rights of such director under such option.
12. CHANGE IN CONTROL
For purposes of the Plan, a "change in control" shall be deemed to have
occurred upon the acquisition of thirty (30%) percent or more of the Company's
outstanding shares of capital stock having general voting rights by an
unaffiliated person, entity or group. The Board shall promptly notify, in
writing, each holder of an outstanding option of the occurrence of any such
change in control. Notwithstanding any other provision of the Plan or any option
agreement, all options shall become fully exercisable on receipt of such notice.
All outstanding options shall expire if not exercised within 30 days of receipt
of the notice of a change of control.
13. EFFECTIVE DATE
The effective date of this Plan is January 17, 1996, the date of adoption
of this Plan by the shareholders of the Company.
14. DEFINITIONS
Any terms or provisions used herein which are defined in Section 83 of the
Internal Revenue Code, as amended, or the regulations thereunder or
corresponding provisions of subsequent laws and regulations in effect at the
time options are made hereunder, shall have the meanings as therein defined.
15. GOVERNING LAW
To the extent not inconsistent with the provisions of the Internal Revenue
Code that relate to non-qualified stock options, this Plan and any option
agreement adopted pursuant to it shall be construed under the laws of the
Commonwealth of Pennsylvania.
Dated as of October 19, 1995 ARROW INTERNATIONAL, INC.
Amended as of January 19, 2000
<PAGE>
- 5 -
By: /s/ Marlin Miller, Jr.
-----------------------
Marlin Miller, Jr.
Chairman and Chief Executive
Officer
Date of Shareholder Approval of Plan: January 17, 1996
Date of Shareholder Approval of Amendments to Plan: January 19, 2000
<PAGE>
|X| Please mark your vote 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" proposals 2 and 3.
- --------------------------------------------------------------------------------
FOR WITHHELD
1. Election of |_| |_|
Directors.
(see reverse)
FOR AGAINST ABSTAIN
2. Approval of |_| |_| |_|
amendments to the
Directors Stock
Incentive Plan.
FOR AGAINST ABSTAIN
3. Ratification of appointment of |_| |_| |_|
PricewaterhouseCoopers
L.L.P. as independent
accountants.
For, except vote withheld from the following nominee(s):
- ---------------------------------- ----------------------------------------
- --------------------------------------------------------------------------------
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.
SIGNATURE(S)________________________ DATE________________
FOLD AND DETACH HERE
ARROW(R) INTERNATIONAL, INC.
Annual Meeting of Shareholders
January 19, 2000
4:00 p.m.
Sheraton Reading Hotel
1741 Paper Mill Road
Wyomissing, Pennsylvania
<PAGE>
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 19, 2000
PROXY
The undersigned hereby appoints Raymond Neag and John H. Broadbent, Jr., and
each or either 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 common stock of ARROW INTERNATIONAL, INC. (the "Company")
held of record by the undersigned on November 30, 1999, at the Annual Meeting of
Shareholders to be held on January 19, 2000 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.
(Change of address/Comments)
Election of Directors, Nominees: ________________________________________
For terms expiring in 2004: ________________________________________
T. Jerome Holleran ________________________________________
R. James Macaleer ________________________________________
Alan M. Sebulsky
(If you have written in the above space,
please mark the corresponding box on the
reverse side of this card)
You are encouraged to specify your choices by marking the appropiate 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
