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 (Amendment No. )
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|_| Preliminary Proxy Statement
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|_| Soliciting Material Pursuant to ss.240.14a-11(c) or ss.240.14a-12
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
----------
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
To be held on January 17, 2001
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 17, 2001 for the following purposes:
(1) To elect three directors;
(2) 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, 2001; and
(3) To transact such other business, if any, as may properly come before
the Annual Meeting or any adjournments thereof.
The Board of Directors has fixed the close of business on November 30,
2000 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, 2000
Reading, Pennsylvania
<PAGE>
PROXY STATEMENT
2001 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 17, 2001, or any adjournments
thereof.
The Board of Directors has fixed the close of business on November 30,
2000 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
22,001,783 shares of Common Stock outstanding and entitled to vote at the Annual
Meeting. Each share of Common Stock is entitled to one vote. A majority of the
outstanding shares of Common Stock is required to establish a quorum at the
Annual Meeting. The affirmative vote of a plurality of the votes cast is
required for the election of directors. The affirmative vote of a majority of
the votes cast is required to ratify the appointment of independent accountants
for fiscal 2001. Shares represented by proxies will be voted in accordance with
the specifications made on the proxy card by the shareholder.
With regard to the election of directors, votes may be cast in favor or
withheld; votes that are withheld will be counted for purposes of determining
the presence or absence of a quorum for the transaction of business at the
Annual Meeting, but will be excluded entirely from the vote and will have no
effect on the outcome of the voting. With regard to the ratification of the
appointment of independent accountants, abstentions may be specified. Since the
affirmative vote of a majority of the votes cast is required to ratify the
appointment of independent accountants, an abstention with respect to such
proposal will have the same effect as a vote against such proposal. Any proxy
not specifying the contrary will be voted in the election of directors for each
of the Board of Directors' nominees and in favor of the proposal to ratify the
appointment of independent accountants. A shareholder giving a proxy has the
right to revoke it by a duly executed proxy bearing a later date, by attending
the Annual Meeting and voting in person, or by otherwise notifying the Company
prior to the Annual Meeting. Under applicable Pennsylvania law, broker non-votes
(that is, proxies from brokers or nominees indicating that such persons have not
received instructions from the beneficial owners or other persons entitled to
vote shares on a particular matter as to which the brokers or nominees do not
have discretionary power) may be counted as present or represented for purposes
of determining the presence or absence of a quorum for the transaction of
business, but will not be counted for purposes of determining whether any
non-discretionary proposals to be voted upon at the Annual Meeting have been
approved. The Company believes that the proposals to be considered at the Annual
Meeting are proposals in respect of which brokers and other nominees typically
have 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-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, 2000.
<PAGE>
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 Carl G. Anderson, Jr., John E. Gurski and
Marlin Miller, Jr., each of whom is currently a director, for election to the
Board of Directors. If elected, each of Messrs. Anderson, Gurski and Miller will
serve until the Annual Meeting of Shareholders to be held in 2005, 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 2005
Carl G. Anderson, Jr. 55 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 Corporation, the latest as Vice
President, Division General Manager, Confections.
Prior thereto, served in several marketing
capacities with Procter & Gamble.
John E. Gurski 59 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
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<PAGE>
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. 68 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 Arrow Precision Products, Inc.,
a corporation controlled by principal
shareholders of the Company ("Precision"), which
is in the process of being dissolved.
Directors Whose Terms Expire in 2002
Raymond Neag 69 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 Arrow Products Division of
Rockwell International Corporation, the Company's
predecessor (the "Rockwell Division"). From 1971
to 1973, President of Teledyne Dental Products, a
manufacturer of dental products and a division of
Teledyne, Inc. Prior to 1971, Vice President and
Director of Marketing of Sherwood Medical, Inc.,
a medical device company. Also, Secretary and a
director of Precision, pending its dissolution.
Richard T. Niner 61 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
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<PAGE>
Greenwich, Connecticut. Director of Hurco
Companies, Inc., a manufacturer and marketer of
computer numerical controls ("CNC") and CNC
machine tools. Also, a director of Precision,
pending its dissolution.
Directors Whose Terms Expire in 2003
John H. Broadbent, Jr. 62 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 since 1975. From 1966 to 1975, served in
several capacities with Carpenter Technology
Corporation, a specialty steel manufacturer, the
latest as Manager-Market Planning & Development.
From 1964 to 1966, consultant in the Management
Advisory Services Department of the international
accounting firm of Price Waterhouse & Co. Also,
Vice President-Finance, Treasurer and a director
of Precision, pending its dissolution.
George W. Ebright 62 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, pending its dissolution.
Directors Whose Terms Expire in 2004
T. Jerome Holleran 64 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 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
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<PAGE>
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
("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 Rockwell Division. From 1969 to 1971,
consultant with the management consulting firm of
Booz, Allen and Hamilton.
R. James Macaleer 66 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, pending its
dissolution.
Alan M. Sebulsky 41 Director of the Company since January 1997.
Managing Director since March 2000 and Executive
Vice President and principal from July 1994 to
March 2000 of Lincoln Capital Management, a
private investment management firm based in
Chicago, Illinois, 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.
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 four
meetings during fiscal 2000. All of the directors attended at least 75% of the
meetings of the Board and any committee on which they served during fiscal 2000.
Among the committees of the Board are the Audit Committee and the Human
Resources Committee.
The Audit Committee, among other things, reviews with management and
outside auditors the Company's audited financial statements to be included in
its Annual Report on Form 10-K and its interim financial results to be included
in its quarterly reports on Form
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<PAGE>
10-Q, assesses the effectiveness and adequacy of the Company's internal
accounting controls system and audit procedures, reviews corporate compliance
policies and has the ultimate authority and responsibility to select or nominate
for shareholder approval the firm to be appointed as independent accountants to
audit the Company's financial statements. 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 ended August 31, 2000.
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 1999 Stock Incentive Plan and 1992 Stock Incentive Plan. The Human
Resources Committee selects employees to whom awards will be made under the
Company's stock incentive plans, 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 2000.
Compensation of Directors
The Company's directors who are not officers or employees of the
Company received a quarterly fee of $4,000 for Board membership in 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 made to directors who are not
also employees or consultants of the Company. 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, and amendments to the plan were approved by the
Company's shareholders at the Company's Annual Meeting of Shareholders held on
January 19, 2000, on which date these amendments became effective. Upon an
eligible director's first election to the Board, such eligible director receives
options to purchase 5,000 shares of Common Stock. On the date each year when
directors are elected to the Board, eligible directors receive options to
purchase an additional 1,500 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.
The amendments to the Company's Directors Stock Incentive Plan
approved by the Company's shareholders at the Company's 2000 Annual Meeting of
Shareholders enabled non-employee directors who were shareholders of the Company
at the time of the Company's initial public offering on June 9, 1992 to be
eligible to receive stock awards under the plan, whereas previously such
directors were not so eligible. In addition, these amendments to the plan
enabled eligible directors to 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 previously provided for under the plan.
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<PAGE>
On January 19, 2000, the date of the Company's 2000 Annual Meeting
of Shareholders, in accordance with the amended terms of the plan, each of the
directors of the Company, with the exception of Marlin Miller, Jr., the Chairman
and Chief Executive Officer of the Company, was granted options to purchase
1,500 shares of Common Stock, in each case at an exercise price of $34.75, the
closing price per share of the Common Stock on such date as reported on The
Nasdaq Stock Market. 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 Mr. Miller, will receive options to purchase an additional 1,500
shares of Common Stock, in each case at an exercise price which is 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,
2000, are set forth below.
Name Office Age
---- ------ ---
Marlin Miller, Jr. Chairman and Chief Executive Officer 68
Philip B. Fleck President and Chief Operating Officer 56
Paul L. Frankhouser Executive Vice President 55
Frederick J. Hirt Vice President - Finance, Chief Financial Officer 53
and Treasurer
T. Jerome Holleran Secretary 64
Thomas D. Nickel Vice President - Regulatory Affairs and Quality 61
Assurance
Scott W. Hurley Controller 42
Marlin Miller, Jr. has served as Chairman of the Board of Directors
of the Company since January 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 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 also serves as President and a director of
Precision, pending its dissolution. See "Certain Transactions." He is a director
of Carpenter Technology Corporation, a manufacturer of specialty steel.
Philip B. Fleck has served as President and Chief Operating Officer
of the Company since January 1999, as Vice President-Research and Manufacturing
of the Company from June 1994 to January 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 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
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<PAGE>
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, 2000, the
beneficial ownership of Common Stock by (i) each director 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. ............................. 4,040,525(1) 18.4%
Richard T. Niner ............................... 3,149,085(2) 14.3
Raymond Neag ................................... 1,783,500(3) 8.1
John H. Broadbent, Jr. ......................... 921,090(4) 4.2
T. Jerome Holleran ............................. 525,065(5) 2.4
Philip B. Fleck ................................ 94,100(6) *
Paul L. Frankhouser ............................ 69,134(7) *
Frederick J. Hirt .............................. 10,000(8) *
Thomas D. Nickel ............................... 17,160(9) *
R. James Macaleer .............................. 13,915(10) *
Carl G. Anderson, Jr. .......................... 13,216(11) *
Alan M. Sebulsky ............................... 11,500(12) *
John E. Gurski ................................. 9,723(13) *
George W. Ebright .............................. 8,500(14) *
All directors and officers as a group (15
persons) .................................... 10,668,613(15) 48.1
Robert L. McNeil, Jr. .......................... 2,296,844(16) 10.4
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 10.5
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 9,000 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.
(footnotes continued on next page)
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<PAGE>
(footnotes continued from previous page)
(2) Shares beneficially owned include an aggregate of 6,923 shares owned by
Mr. Niner's wife and minor child, 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 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. Also includes 1,500 shares issuable upon the exercise of
options which are deemed to be presently exercisable.
(3) Includes 1,500 shares issuable upon the exercise of options which are
deemed to be presently exercisable.
(4) Includes 12,000 shares owned by Mr. Broadbent's wife, as to which Mr.
Broadbent disclaims beneficial ownership. Also includes 16,300 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, and 10,000 shares held by The Dana L. Bunting and
Robert L. Bunting Irrevocable Educational Trust, of which Mr. Broadbent is
sole trustee with power to vote and dispose of Common Stock held in such
Trust. Also includes 1,500 shares issuable upon the exercise of options
which are deemed to be presently exercisable.
(5) Includes 25,000 shares owned by Mr. Holleran's wife, as to which Mr.
Holleran disclaims beneficial ownership. Also includes 1,500 shares
issuable upon the exercise of options which are deemed to be presently
exercisable.
(6) Includes 10,000 shares owned by Mr. Fleck's wife, as to which Mr. Fleck
disclaims beneficial ownership. Also includes 57,000 shares issuable upon
the exercise of vested options and options which are deemed to be
presently exercisable. Does not include 68,000 shares issuable upon the
exercise of options which are not deemed to be presently exercisable.
(7) Includes 300 shares owned by Mr. Frankhouser's children, as to which Mr.
Frankhouser disclaims beneficial ownership. Also includes 47,000 shares
issuable upon the exercise of vested options and options which are deemed
to be presently exercisable. Does not include 53,000 shares issuable upon
the exercise of options which are not deemed to be presently exercisable.
(8) Includes 8,000 shares issuable upon the exercise of vested options and
options which are deemed to be presently exercisable. Does not include
22,000 shares issuable upon the exercise of options which are not deemed
to be presently exercisable.
(9) Includes 8,800 shares issuable upon the exercise of vested options and
options which are deemed to be presently exercisable. Does not include
5,200 share issuable upon the exercise of options which are not deemed to
be presently exercisable.
(10) Includes 1,500 shares issuable upon the exercise of options which are
deemed to be presently exercisable.
(footnotes continued on next page)
- 10 -
<PAGE>
(footnotes continued from previous page)
(11) Includes 7,000 shares issuable upon the exercise of vested options and
options which are deemed to be presently exercisable.
(12) Includes 7,500 shares issuable upon the exercise of vested options and
options which are deemed to be presently exercisable.
(13) Includes 7,500 shares issuable upon the exercise of vested options and
options which are deemed to be presently exercisable.
(14) Includes 8,000 shares issuable upon the exercise of vested options and
options which are deemed to be presently exercisable.
(15) See footnotes (1) through (14) above. Also includes 2,100 shares issuable
upon the exercise of vested options and options which are deemed to be
presently exercisable granted to one executive officer. Does not include
4,400 shares issuable upon the exercise of options granted to one
executive officer which are not deemed to be presently exercisable.
(16) Includes 65,000 shares held by a charitable foundation of which Mr.
McNeil, a former director of the Company, is the president and one of
eleven 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.
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 Company's fiscal
year ended August 31, 2000, and (ii) written representations from certain
reporting persons, that John E. Gurski, a director of the Company, was
inadvertently late in filing a Form 5 pursuant to SEC Rule 16a-6 under the
Exchange Act (1) with respect to the Company's fiscal year ended August 31,
1999, reporting the purchase of 4.5328 shares of Common Stock on June 15, 1999,
and (2) with respect to the Company's fiscal year ended August 31, 2000,
reporting the purchase of an aggregate of 15.8273 shares of Common Stock in four
separate transactions on September 15, 1999, December 15, 1999, March 15, 2000
and June 15, 2000.
- 11 -
<PAGE>
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, 2000 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. 2000 361,980 120,901 -0- -0- 200,752(3)
Chairman and Chief 1999 346,392 117,427 -0- -0- 198,298(3)
Executive Officer 1998 346,392(4) 106,931 -0- -0- 198,690(3)
Philip B. Fleck 2000 250,800 90,043 -0- -0- 4,657(5)
President and Chief 1999 219,997 75,850 -0- 105,000(6) 4,961(5)
Operating Officer 1998 190,092 61,664 -0- 10,000(7) 4,888(5)
Paul L. Frankhouser 2000 219,450 71,666 -0- -0- 17,283(8)
Executive Vice 1999 202,497 69,991 -0- 80,000(9) 15,529(8)
President 1998 190,092 61,664 -0- 10,000(10) 15,839(8)
Frederick J. Hirt(11) 2000 219,450 58,593 -0- -0- 4,631(12)
Vice President-Finance, 1999 206,667 71,501 -0- 20,000(13) 3,439(12)
Chief Financial Officer 1998 16,667(14) 3,430(14) -0- 10,000(15) -0-
and Treasurer
Thomas D. Nickel 2000 145,863 25,964 -0- -0- 3,276(16)
Vice-President- 1999 137,361 19,698 -0- 4,000(17) 2,953(16)
Regulatory Affairs and 1998 132,930 24,887 -0- 5,000(18) 2,396(16)
Quality Assurance
</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.
(2) Includes annual incentive and profit sharing bonuses earned with
respect to fiscal 1999, part of which were paid in fiscal 2000.
(3) Consists of (i) matching contributions in the amount of $4,826,
$5,000 and $4,790 made by the Company to Mr. Miller's account under
the Company's 401(k) Plan in fiscal 2000, 1999 and 1998,
respectively, and (ii) insurance premiums in the amount of $195,926,
$193,298 and $193,900 paid by the Company in fiscal 2000, 1999 and
1998, 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 as salary to Mr. Miller in fiscal
1998 in respect of Mr. Miller's devotion of approximately 1% of his
business time to Precision during fiscal
- 12 -
<PAGE>
1998. See "Certain Transactions."
(5) Represents matching contributions made by the Company to Mr. Fleck's
account under the Company's 401(k) Plan in fiscal 2000, 1999 and
1998, respectively.
(6) Represents an award to Mr. Fleck on (i) January 20, 1999 of options
to purchase 100,000 shares of Common Stock at an exercise price of
$25.125 per share under the Company's 1992 Stock Incentive Plan and
(ii) August 31, 1999 of options to purchase 5,000 shares of Common
Stock at an exercise price of $29.00 per share under the Company's
1999 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.
(7) Represents an award to Mr. Fleck on September 9, 1997 of 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.
(8) Consists of (i) matching contributions in the amount of $4,620,
$4,560 and $4,870 made by the Company to Mr. Frankhouser's account
under the Company's 401(k) Plan in fiscal 2000, 1999 and 1998,
respectively, and (ii) payments of $12,663, $10,969 and $10,969 made
to Mr. Frankhouser in fiscal 2000, 1999 and 1998, respectively, in
respect of his accrued but unused vacation allowance.
(9) Represents an award to Mr. Frankhouser on (i) January 20, 1999 of
options to purchase 75,000 shares of Common Stock at an exercise
price of $25.125 per share under the Company's 1992 Stock Incentive
Plan and (ii) August 31, 1999 of options to purchase 5,000 shares of
Common Stock at an exercise price of $29.00 per share under the
Company's 1999 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.
(10) Represents an award to Mr. Frankhouser on September 9, 1997 of
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 -
<PAGE>
(11) 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.
(12) Represents matching contributions made by the Company to Mr. Hirt's
account under the Company's 401(k) plan in fiscal 2000 and 1999,
respectively.
(13) Represents an award to Mr. Hirt on August 31, 1999 of options to
purchase 20,000 shares of Common Stock at an exercise price of
$29.00 per share under the Company's 1999 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.
(14) 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.
(15) Represents an award to Mr. Hirt on August 3, 1998 of 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.
(16) Represents matching contributions made by the Company to Mr.
Nickel's account under the Company's 401(k) plan in fiscal 2000,
1999 and 1998, respectively.
(17) Represents an award to Mr. Nickel on August 31, 1999 of options to
purchase 4,000 share of Common Stock at an exercise price of $29.00
per share under the Company's 1999 Stock Incentive Plan. Subject to
Mr. Nickel's continued employment with the Company, 20% (i.e., 800
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.
(18) Represents an award to Mr. Nickel on September 9, 1997 of options to
purchase 5,000 shares of Common Stock at an exercise price of
$31.875 per share under the Company's 1992 Stock Incentive Plan.
Subject to Mr. Nickel's continued employment with the Company, 20%
(i.e., 1,000 options) of such stock option award will vest on each
of the first through the fifth anniversary of the date of such award
(i.e., September 9). The options are subject to immediate vesting
upon the occurrence of certain change in control events.
Option Grants
There were no grants of stock options made during the fiscal year
ended August 31, 2000 to the persons named in the Summary Compensation Table
above or to any other employees of the Company.
- 14 -
<PAGE>
Aggregate Option Exercises in Fiscal 2000 and Fiscal Year-End Option Values
The following table provides information concerning stock options
exercised during fiscal 2000 and the number of unexercised options held by the
individuals named in the Summary Compensation Table as of August 31, 2000. Also
reported are the values for unexercised, "in the money" options, which represent
the positive spread between the respective exercise prices of such options and
the fair market value of the Common Stock as of August 31, 2000.
Aggregated Option Exercises in Fiscal 2000 and Fiscal Year-End Option Values
<TABLE>
<CAPTION>
Number of Securities
Underlying Unexercised Value of Unexercised
Options In-the-Money Options
August 31, 2000(#) at August 31, 2000 ($)(1)
------------------------------ ---------------------------
Shares
Acquired on
Name Exercise (#) Value Realized ($) Exercisable Unexercisable Exercisable Unexercisable
-------- -------------- ------------------ ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
Philip B. Fleck -- -- 33,000 92,000 $231,625 $889,000
Paul L. Frankhouser -- -- 28,000 72,000 $179,125 $679,000
Frederick J. Hirt -- -- 8,000 22,000 $ 58,000 $153,250
Thomas D. Nickel -- -- 6,800 7,200 $ 12,800 $ 32,450
</TABLE>
-----------------
(1) Based upon a closing price of the Common Stock of $35.625 per share on
August 31, 2000 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 2000, no more than $170,000 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 1998, 1999 and 2000 was $392,476, $1,341,588, and $1,220,044,
respectively, equivalent to approximately 1.6% for fiscal 1998, 5.6% for fiscal
1999 and 4.9% for fiscal 2000 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 25 years, Mr. Nickel has 13 years and
Mr. Hirt has two years. 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
Years of Service
---------------------------------------------------
Remuneration (1) 15 20 25 30 35
------------------------ ------- ------- ------- ------- -------
$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................ 31,875 42,500 53,125 63,750 74,375
250,000................ 31,875 42,500 53,125 63,750 74,375
300,000................ 31,875 42,500 53,125 63,750 74,375
350,000................ 31,875 42,500 53,125 63,750 74,375
400,000................ 31,875 42,500 53,125 63,750 74,375
450,000................ 31,875 42,500 53,125 63,750 74,375
500,000................ 31,875 42,500 53,125 63,750 74,375
550,000................ 31,875 42,500 53,125 63,750 74,375
--------------------
(1) Under current Internal Revenue Code provisions, no more than $170,000 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 1999 Stock Incentive Plan and 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 2000, in addition to consideration of industry
comparisons and individual performance, has taken particular note of the
Company's achievements in fiscal 2000 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 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. Mr. Miller
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, Fleck, Frankhouser, Hirt and Nickel
are eligible to receive annual incentive bonuses equal to 5.0, 4.5, 4.0, 4.0 and
2.0 times, respectively, the percentage growth in pretax income, exclusive of
extraordinary income and expense, of the Company over the previous year times
their respective base pay. For fiscal 2000, the Company's pre-tax income,
exclusive of extraordinary income and expense, increased 8.9% over fiscal 1999,
- 17 -
<PAGE>
resulting in an incentive bonus of 33.4% of base pay to Mr. Miller, 30.0% of
base pay to Mr. Fleck, 26.7% of base pay to each of Messrs. Frankhouser and
Hirt, and 17.8% of base pay to Mr. Nickel. Based upon the evaluation of other
objectives relating to the Company's performance in fiscal 2000, each of Messrs.
Miller, Fleck, Frankhouser and Hirt received 75% of the annual incentive bonuses
to which they otherwise would have been entitled in fiscal 2000 under the Income
Growth Bonus Plan. 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 2001 to the eligible senior
executive officers of the Company pursuant to the Income Growth Bonus Plan to
the extent that the Company in fiscal 2001 achieves an increase in pretax
income, exclusive of extraordinary income and expense, over fiscal 2000.
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 currently made pursuant to the Company's 1999
Stock Incentive Plan and its 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, Mr. Miller currently has
sufficient incentive to promote the long-term growth of the Company and,
therefore, such executive officer has, to date, not received any stock awards.
Stock awards are not granted each year. In selecting recipients and
the size of stock awards, the Human Resources Committee generally considers
various factors such as the overall job performance and potential of the
recipient, prior grants to and amount of Common Stock currently held by the
recipient, prior service to the Company, a comparison of awards made to
executives and key employees in comparable positions at similar companies, and
the Company's performance. No stock awards were made during fiscal 2000. As a
result of stock awards made prior to fiscal 2000, each of the Company's
executive officers who was not also a founder of the Company, as well as a
significant number of non-executive employees of the Company, have been afforded
the opportunity to enjoy an equity stake in the Company as part of their
long-term compensation.
Tax Deductibility of Executive Compensation. Section 162(m) of the
Internal Revenue Code of 1986, as amended (the "Code"), imposes limitations on
the federal income tax deductibility of compensation paid to the Company's chief
executive officer and to each of the other four most highly compensated
executive officers of the Company. Under these limitations, the Company may
deduct such compensation only to the extent that during any fiscal year the
compensation does not exceed $1,000,000 or meets certain specified conditions
- 18 -
<PAGE>
(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>
AUDIT COMMITTEE REPORT
In connection with the preparation and filing of the Company's
Annual Report on Form 10-K for the year ended August 31, 2000:
(1) The Audit Committee of the Board of Directors has reviewed and
discussed the audited financial statements with the Company's
management.
(2) The Audit Committee has discussed with PricewaterhouseCoopers
LLP, the Company's independent auditors, the matters required
to be discussed by Statement on Auditing Standards No. 61
(Codification of Statements on Auditing Standards, AU ss.
380), as may be modified or supplemented.
(3) The Audit Committee has also received the written disclosures
and the letter from PricewaterhouseCoopers LLP required by the
Independence Standards Board Standard No. 1 (Independent
Standards Board Standard No. 1, Independence Discussion with
Audit Committees), as may be modified or supplemented, and has
discussed with PricewaterhouseCoopers LLP the independence of
that firm as the Company's auditors.
(4) Based on the Audit Committee's review and discussions referred
to above, the Audit Committee recommended to the Board that
the Company's audited financial statements be included in the
Company's Annual Report on Form 10-K for the fiscal year ended
August 31, 2000 for filing with the Securities and Exchange
Commission.
In June 2000, the Board of Directors formally adopted a charter for
the Audit Committee. The Audit Committee Charter is attached as Annex A to this
Proxy Statement. Each of the Audit Committee members is independent, as defined
in Rule 4200(a) of the National Association of Securities Dealers' listing
standards.
AUDIT COMMITTEE
Richard T. Niner, Chairman
Carl G. Anderson, Jr.
Alan M. Sebulsky
- 20 -
<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, 1995 and ending on
August 31, 2000. The comparison assumes $100 was invested on August 31, 1995 in
the Common Stock and in each of the foregoing indices and also assumes
reinvestment of all dividends.
[LINE GRAPH OMITTED]
<TABLE>
<CAPTION>
-------------------------------------------------------------------------------------------------------------
August 31, August 31, August 31, August 31, August 31, August 31,
1995 1996 1997 1998 1999 2000
-------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Arrow International, Inc. $ 100.00 $ 65.52 $ 72.98 $ 67.21 $ 72.44 $ 89.60
-------------------------------------------------------------------------------------------------------------
S&P 500 Stock Index $ 100.00 $ 118.75 $ 166.95 $ 180.48 $ 252.33 $ 293.48
-------------------------------------------------------------------------------------------------------------
S&P Medical Products $ 100.00 $ 113.81 $ 162.92 $ 180.42 $ 244.29 $ 297.67
and Supplies Index
-------------------------------------------------------------------------------------------------------------
</TABLE>
Notwithstanding anything to the contrary set forth in any of the
Company's previous filings under the Securities Act of 1933, as amended, or the
Securities Exchange Act of 1934, as amended, that might incorporate future
filings made by the Company under those statutes, none of the preceding Human
Resources Committee Report on Executive Compensation, the Audit Committee Report
or the Company Stock Performance Graph will be incorporated by reference into
any of those prior filings, nor will any of such reports or graph be
incorporated by reference into any future filings made by the Company under
those statutes.
- 21 -
<PAGE>
HUMAN RESOURCES COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
During the fiscal year ended August 31, 2000, 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,
pending its dissolution. 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 dissolved
(substantially all of its assets have already been liquidated and distributed to
shareholders). Prior to the sale of its remaining operating subsidiary,
Precision Medical Products, Inc. ("PMP"), in August 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,
2000, pending the dissolution of Precision (which is awaiting formal notice of
dissolution from the appropriate governmental authorities, which is expected to
be received shortly), 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 2000, Messrs. Miller and Broadbent
served as the president and the vice president-finance and treasurer of
Precision, respectively. In fiscal 2000, due to the pending dissolution of
Precision, Mr. Miller provided no services to Precision and Mr. Broadbent
provided only minimal services to Precision and, accordingly, they served
without compensation. Prior to the sale of PMP, Mr. Holleran served as the vice
president and chief operating officer and a director of Precision. Mr. Holleran
has served as chairman of the board of PMP since October 1999, chief executive
officer of PMP since July 1999 and president of PMP from July 1996 to October
1999. Since the sale of PMP, Mr. Holleran has provided no services to Precision.
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.
Since the sale of PMP, the Company has not purchased any products
from Precision, has not provided any operating or administrative services to
Precision and has discontinued leasing any 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, in January 1998, the Company
assumed these obligations in exchange for the transfer by Precision to the
Company of appropriate assets to satisfy such obligations. In addition,
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<PAGE>
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 2000 amounted to $73,430) 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 fiscal 2000, the Company made purchases amounting to $138,000 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 fiscal 2000, the Company paid insurance premiums in the amount of
$107,814 and $65,697 in respect of term life insurance policies owned by certain
trusts established by Mr. Neag, the former Vice Chairman and a director of the
Company, and by Mr. Broadbent, the former Vice President-Finance, Chief
Financial Officer and Treasurer, and a director of the Company, respectively.
PROPOSAL 2 - 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
shareholders will consider and vote upon a proposal to ratify the appointment of
independent accountants for the Company's fiscal year ending August 31, 2001.
The Audit Committee of the Board of Directors has recommended that
PricewaterhouseCoopers L.L.P. be re-elected as independent accountants for the
2001 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 2002 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 20, 2001.
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,
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<PAGE>
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 2000 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, 2000
Reading, Pennsylvania
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<PAGE>
Annex A
CHARTER
AUDIT COMMITTEE OF THE BOARD OF DIRECTORS
ARROW INTERNATIONAL, INC.
Purpose
The primary purpose of the Audit Committee (the "Committee") is to assist the
Board of Directors (the "Board") in fulfilling its responsibility to oversee
management's conduct of the Company's financial reporting process by overviewing
the financial reports and other financial information provided by the Company to
any governmental or regulatory body, the public or other users thereof, the
Company's systems of internal accounting and financial controls and the annual
independent audit of the Company's financial statements.
In discharging its oversight role, the Committee is empowered to investigate any
matter brought to its attention with full access to all books, records,
facilities and personnel of the Company and the power to retain outside counsel,
auditors or other experts for this purpose. The Board and the Committee are in
place to represent the Company's shareholders; accordingly, the outside auditor
is ultimately accountable to the Board and the Committee.
The Committee shall review the adequacy of this Charter on an annual basis.
Membership
The Committee shall be comprised of not less than three members of the Board,
and the Committee's composition will meet the requirements of the Audit
Committee Policy of the NASD.
Accordingly, all of the members will be directors:
1. Who have no relationship to the Company that may interfere with the
exercise of their independence from management and the Company; and
2. Who are financially literate or who become financially literate within a
reasonable period of time after appointment to the Committee. In addition,
at least one member of the Committee will have accounting or related
financial management expertise.
Key Responsibilities
1. Financial Reporting and Accounting Practices
The Committee's job is one of oversight and it recognizes that the Company's
management is responsible for preparing the Company's financial statements and
that the outside auditors are responsible for auditing those financial
statements. Additionally, the Committee recognizes that financial management, as
well as the outside auditors, have more time, knowledge and more detailed
information on the Company than do Committee members; consequently, in carrying
out its oversight responsibilities, the Committee is not providing any expert or
special assurance as to the Company's financial statements or any professional
certification as to the outside auditor's work.
A-1
<PAGE>
The following functions shall be the common recurring activities of the
Committee in carrying out its oversight function. These functions are set forth
as a guide with the understanding that the Committee may diverge from this guide
as appropriate given the circumstances.
o The Committee shall review with management and the outside auditors the
audited financial statements to be included in the Company's Annual Report
on Form 10-K (or the Annual Report to Shareholders if distributed prior to
the filing of Form 10-K) and review and consider with the outside auditors
the matters required to be discussed by Statement of Auditing Standards
('SAS') No. 61.
o As a whole, or through the Committee chair, the Committee shall review
with the outside auditors the Company's interim financial results to be
included in the Company's quarterly reports to be filed with Securities
and Exchange Commission and the matters required to be discussed by SAS
No. 61; this review will occur prior to the Company's filing of the Form
10-Q.
2. Internal Control
The responsibility of the Committee in the area of internal controls is to
provide reasonable assurance that management is maintaining an effective system
of internal control, is in compliance with pertinent laws and regulations and is
conducting its affairs ethically. To accomplish this, the Committee will:
o Assess the extent to which the planned audit scope of the independent
public accountant can be relied on to detect fraud or weaknesses in
internal controls and assess management's response to reported weaknesses
or compliance deficiencies.
o Review corporate policies relating to compliance with laws and
regulations, ethics, conflict of interest and the investigation of
misconduct or fraud.
o Review significant cases of employee conflict of interest, misconduct or
fraud.
o Review different aspects of the Company's business on a planned basis to
ensure a general understanding of operations and functional areas.
o Meet privately with the independent accountants to discuss pertinent
matters, including whether any restrictions have been placed by management
on the scope of their examination.
o Discuss with management and the outside auditors the quality and adequacy
of the Company's internal controls.
3. Auditor Independence
The Committee shall:
o request from the outside auditors annually, a formal written statement
delineating all relationships between the auditor and the Company
consistent with Independence Standards Board Standard Number 1;
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<PAGE>
o discuss with the outside auditors any such disclosed relationships and
their impact on the outside auditor's independence; and
o recommend that the Board take appropriate action to oversee the
independence of the outside auditor.
4. Auditor Selection
The Committee, subject to any action that may be taken by the full Board, shall
have the ultimate authority and responsibility to select (or nominate for
shareholder approval), evaluate and, where appropriate, replace the outside
auditor.
Approved by Unanimous Consent of the Board of Directors of Arrow International,
Inc. on June 7, 2000.
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<PAGE>
Please mark your
X vote as in this 0395
example.
This proxy when properly executed will be voted in the manner directed therein.
If no direction is given with respect to a particular proposal, this proxy will
be voted FOR such proposal.
--------------------------------------------------------------------------------
The Board of Directors recommends a vote "FOR" proposal 2.
--------------------------------------------------------------------------------
FOR WITHHELD
1. Election of Directors (see reverse)
2. Ratification of appointment of FOR AGAINST ABSTAIN
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 17,2001
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 17,2001
P 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
R appoint his/her substitute, and hereby authorizes them to represent and to
vote, as designated hereon, all shares of common stock of ARROW
O INTERNATIONAL, INC. (the "Company") held of record by the undersigned on
November 30, 2000, at the Annual Meeting of Shareholders to be held on
X January 17, 2001 and any adjournments thereof, and hereby further
authorizes each of them, in their discretion, to vote upon any other
Y business that may properly come before the meeting.
(Change of address/Comments)
Election of Directors, Nominees: ________________________________
For terms expiring in 2005: ________________________________
Carl G.Anderson, Jr.
John E.Gurski ________________________________
Marlin Miller, Jr.
________________________________
(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
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^ FOLD AND DETACH HERE ^
