ARNOLD INDUSTRIES, INC.
AND SUBSIDIARIES
625 SOUTH FIFTH AVENUE
P. O. BOX 210
LEBANON, PENNSYLVANIA 17042-0210

NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD WEDNESDAY, MAY 7, 1997

TO THE SHAREHOLDERS:

The Annual Meeting of the Shareholders of Arnold Industries,
Inc. (herein called the "Company" or "Arnold Industries") will be
held at the Lebanon Country Club, 3375 West Oak Street, Lebanon,
Pennsylvania, on Wednesday, May 7, 1997, at 4:00 o'clock p.m.,
prevailing time, for the following purposes:

(1) To elect three (3) directors to serve until the Annual
Meeting of Shareholders in 1999;

(2) To consider and act upon a proposal to approve the
Company's 1997 Stock Option Plan; and

(3) To transact such other business as may properly come
before the meeting or any adjournment or adjournments thereof.

The Board of Directors has fixed the close of business on
March 28, 1997, as the record date for determination of
shareholders entitled to notice of and to vote at the Annual
Meeting. Accordingly, only shareholders of record at the close
of business on that date will be entitled to vote at the meeting.
Management of the Company extends a cordial invitation to all
shareholders to attend the meeting.

The Annual Report of the Company for 1996 is enclosed
herewith.

By Order of the Board of Directors,

HEATH L. ALLEN
Secretary

Lebanon, Pennsylvania
April 4, 1997

TO ASSURE YOUR REPRESENTATION AT THE MEETING, PLEASE FILL IN,
DATE, SIGN AND RETURN YOUR PROXY PROMPTLY IN THE POSTAGE-PAID,
PRE-ADDRESSED ENVELOPE ENCLOSED FOR THAT PURPOSE. IF YOU ATTEND
THE MEETING IN PERSON, YOU MAY WITHDRAW YOUR PROXY AND VOTE IN
PERSON.

ARNOLD INDUSTRIES, INC.

625 South Fifth Avenue
Lebanon, Pennsylvania 17042-0210

PROXY STATEMENT
FOR
ANNUAL MEETING OF SHAREHOLDERS TO BE HELD MAY 7, 1997

GENERAL

This proxy statement is furnished in connection with the
solicitation by the Board of Directors of Registrant, Arnold
Industries, Inc. (herein called the "Company" or "Arnold
Industries") of proxies for use at the Annual Meeting of
Shareholders to be held on Wednesday, May 7, 1997, at 4:00 p.m.
prevailing time, at the Lebanon Country Club, 3375 West Oak
Street, Lebanon, Pennsylvania, and at any adjournment or
adjournments thereof. This proxy statement and the accompanying
form of proxy are being mailed to shareholders on or about
April 4, 1997.

A form of proxy is enclosed for use at the Annual Meeting.
When the enclosed form of proxy is signed, dated and returned,
the shares represented thereby will be voted in accordance with
the instructions specified thereon. If no instructions are given,
the shares will be voted for the election of the nominees for
directors named below, for approval of the 1997 Stock Option Plan
as presented by the Board of Directors and, in the discretion of
the proxies, upon such other matters as may properly come before
the Annual Meeting. Any shareholder executing a form of proxy
may revoke that proxy at any time before it is voted at the
meeting.

The entire cost of soliciting proxies will be borne by the
Company, including postage, printing and handling.

The Company's Annual Report for 1996, including financial
statements, accompanies this meeting notice, proxy statement and
form of proxy.

VOTING SECURITIES AND RECORD DATE

The Board of Directors has fixed the close of business on
March 28, 1997, as the record date for the determination of the
shareholders entitled to notice of, and to vote at, the Annual
Meeting of Shareholders or any adjournment or adjournments
thereof. Shareholders as of that date will receive the Notice of
Annual Meeting of Shareholders, the Proxy Statement, and the
Annual Report of the Company. As of March 28, 1997, there were
26,673,080 shares of Common Stock issued and outstanding and
entitled to notice of, and to vote at, the Annual Meeting of
Shareholders. There are no other classes of stock outstanding.
Each share of Common Stock is entitled to one vote on each matter
properly submitted to the shareholders for action at the Annual
Meeting. Shareholders have cumulative voting rights with respect
to the election of directors. That is, every shareholder
entitled to vote shall have the right to multiply the number of
shares which the shareholder is entitled to vote by the total
number of directors to be elected and to cast the total number of
such votes for one candidate or distribute them among any two or
more candidates.

VOTE REQUIRED

The presence, in person or by properly executed proxy, of
the holders of a majority of the outstanding shares of stock
entitled to vote at the meeting is necessary to constitute a
quorum. The Company will treat shares of voting stock
represented by a properly signed, dated and returned proxy as
present at the meeting for purposes of determining a quorum,
without regard to whether the proxy is marked as casting a vote
or abstaining. Likewise, the Company will treat shares of voting
stock represented by "broker non-votes" (i.e., shares of voting
stock held in record name by brokers or nominees as to which
(i) instructions have not been received from the beneficial
owners or persons entitled to vote, (ii) the broker or nominee
does not have discretionary voting power, and (iii) the
recordholder has indicated on the proxy card or otherwise
notified the Company that it does not have authority to vote such
shares on that matter) as present for purposes of determining a
quorum.

The nominees for the Board of Directors receiving a
plurality of the votes cast will be elected as Directors.
Abstentions and broker non-votes do not have the effect of
negative votes in respect to the foregoing matters.

SECURITY OWNERSHIP OF DIRECTORS, OFFICERS AND CERTAIN BENEFICIAL
OWNERS

The following table sets forth certain information as of
March 3, 1997 (unless otherwise noted), with regard to persons
with beneficial ownership of five percent (5%) or more of Arnold
Industries' outstanding stock:

Amount Percent
Name and Address of Beneficially of
Title of Class Beneficial Owner Owned Class

Common Stock Edward H. Arnold
Lebanon, PA 5,963,596 (1) 22.4%

Common Stock Daniel R. Efroymson
Moriah Fund, Inc.
Real Silk Investments,
Inc.
Indianapolis, IN 1,749,906 (2) 6.6%

Common Stock FMR Corp.
Boston, MA 2,057,000 (3) 7.7%
_________________________

(1) The shares shown include 68,100 shares gifted by
Mr. Arnold's spouse, Suzanne H. Arnold, to Mr. Arnold during
1996. The shares shown also include 13,500 shares that are
owned by Mr. Arnold's spouse, the beneficial ownership of
which is disclaimed by Mr. Arnold.

(2) Based on information supplied pursuant to Form 13G for the
year ended 12/31/95 (with no change reported for 1996),
management is advised that Moriah Fund, Inc., Real Silk
Investments and Daniel R. Efroymson exercise sole
dispositive and voting power over 979,400, 600,000 and
36,130 shares, respectively, and that Daniel R. Efroymson
exercises shared voting and dispositive power over 134,376
shares.

(3) Based on information supplied pursuant to Form 13G for the
year ended 12/31/96, management is advised that Edward C.
Johnson 3d and Abigail P. Johnson, husband and wife, and
other Johnson family members may be deemed, under the
Investment Company Act of 1940, to form a controlling group
with respect to FMR Corp. Neither FMR Corp. nor Edward C.
Johnson 3d, Chairman of FMR Corp., has the sole power to
vote or direct the voting of the shares beneficially owned
by FMR Corp. Said power resides with the Board of Trustees
of various investment funds controlled by FMR Corp., and FMR
Corp. carries out the voting of the shares pursuant to
written guidelines provided by the funds' Boards of
Trustees.

The following table sets forth certain information as of March 3,
1997, with respect to the beneficial ownership of the outstanding
common stock of Arnold Industries by the persons named therein
who are board nominees or directors who will continue in office,
named executive officers and all directors and executive officers
as a group as reported by each person:

Amount Percent
Name and Address of Beneficially of
Title of Class Beneficial Owner Owned Class

Common Stock E.H. Arnold 5,963,596 (1) 22.4%
Common Stock Kenneth F. Leedy 327,100 (2) 1.2%
Common Stock Heath L. Allen 243,170 (3) *
Common Stock Ronald E. Walborn 285,340 (4) 1.1%
Common Stock Arthur L. Peterson 6,300 *
Common Stock Carlton E. Hughes 12,000 (5) *
Common Stock Directors and Officers as
a Group (6 in number) 6,820,606 (6) 24.6%
* less than 1.0%
_________________________

(1) See Note (1) of the immediately preceding table.

(2) The shares shown include 168,600 shares covered by incentive
and non-qualified stock option(s).

(3) The shares shown include 88,400 shares covered by incentive
and non-qualified stock option(s) and 109,870 shares held
jointly by Mr. Allen and his spouse.

(4) The shares shown include 88,400 shares covered by incentive
and non-qualified stock option(s) and shares held for
Mr. Walborn's segregated accounts by the Walborn Shambach
Associates Profit Sharing Trust and Janney Montgomery Scott,
Inc.

(5) The shares shown include 10,000 shares covered by non-
qualified stock option(s).

(6) The totals include the named individuals who exercise sole
voting and dispositive power over the shares shown unless
otherwise indicated. See also Notes (1) through (5) above.

DIRECTORS

The Board of Directors is the ultimate governing body of the
Company. As such, it has the responsibility for establishing
broad corporate policies and objectives and for the overall
performance of the Company. Management is accountable to the
Board of Directors for the satisfactory conduct of the Company's
day-to-day business. Members of the Board are kept informed of
the Company's principal activities and plans by various reports
and documents sent to them each month, as well as by operating
and financial reports and analyses.

The Bylaws of the Company provide that the Board of
Directors shall consist of not less than three (3) nor more than
seven (7) members, and that the directors shall be divided into
two classes as nearly equal in number as possible. The term of
office of each class of directors is two years, and the term of
office of the two classes overlap. Pursuant to the Company's
Bylaws, the Board of Directors has fixed its size at six (6). At
the Annual Meeting, three (3) directors are to be elected to hold
office until the 1999 Annual Meeting of Shareholders. After the
election of three (3) directors at the meeting, the Company will
have six (6) directors, including three (3) directors whose
present terms extend until the 1998 Annual Meeting of
Shareholders.

In the absence of instructions to the contrary, proxies
received pursuant to this solicitation will be voted for the
election of Kenneth F. Leedy, Heath L. Allen and Carlton E.
Hughes as directors to hold office until the 1999 Annual Meeting
of Shareholders and until their successors are duly elected and
qualified. Each nominee is presently a director and was elected
to his present term of office by the stockholders. There are no
arrangements or understandings between any director and any other
person pursuant to which he was selected as a director.

If anyone other than the nominees named below should be
nominated for election as a director, the proxies may be voted
cumulatively in accordance with the judgment of the persons named
therein, so as to elect as directors as many of the nominees
listed below as possible. In the event that any nominee declines
or is unable to serve as a director (which is not anticipated),
the persons named in the accompanying form of proxy shall have
full discretion and authority to vote or refrain from voting for
such substitute nominee, if any, as may be designated by the
Board of Directors.

Set forth below is information regarding the nominees and
the directors who will continue in office on the Company's Board.
Such information includes their names and ages, the principal
occupation or employment of each such person during the past five
years, including all positions and offices with the Company, and
directorships held by such persons in other public companies, if
any. Also shown is the year during which each incumbent began
continuous service as a director of Arnold Industries, Inc.
and/or its predecessor, New Penn Motor Express, Inc. (herein
called "New Penn"). On April 1, 1982, each person who was then a
director of New Penn also became a director of the Company as a
result of the plan of reorganization and merger approved by New
Penn's shareholders on March 24, 1982, pursuant to which New Penn
became a wholly-owned subsidiary of the Company.

The Board of Directors of the Company meets on a regularly
scheduled basis and, during 1996, met on five separate occasions.

To be Elected for a Two-Year Term

HEATH L. ALLEN: 69, Director since 1972
Partner of Keefer Wood Allen & Rahal, LLP (Attorneys);
Secretary (1982 to present) of Arnold Industries; Secretary
(1972 to present) of New Penn. Mr. Allen is also a director
of Canisco Resources, Inc.

KENNETH F. LEEDY: 55, Director since 1980
Executive Vice President (1986 to 1996) and Vice President-
Operations (1982 to 1986) of Arnold Industries; President
(1996 to present), Executive Vice President (1983 to 1996)
and Vice President-Operations (1975 to 1983) of New Penn.

CARLTON E. HUGHES: 65, Director since 1988
Chairman of Stewart-Amos Steel, Inc.; President and
Treasurer of Stewart-Amos Equipment Co. until 1993.
Mr. Hughes is also a director of CoreStates Financial Corp.
and IREX Corp.

To Continue in Office

EDWARD H. ARNOLD: 57, Director since 1969
President and Chairman of the Board (1982 to present) of
Arnold Industries; President (1974 to 1996) and Treasurer
(1974 to 1982) of New Penn. Mr. Arnold is also a director
of Hamburger Hamlet Restaurants, Inc.

RONALD E. WALBORN: 60, Director since 1972
President and Treasurer of Walborn Shambach Associates
(Accountants); Treasurer (1982 to present) of Arnold
Industries; Treasurer (1982 to 1996) and Assistant Treasurer
(1980 to 1982) of New Penn.

ARTHUR L. PETERSON: 70, Director since 1988
Executive Director of the Florida Association of Colleges
and Universities; Director of the Academy of Senior
Professionals, Eckerd College, St. Petersburg, Florida (1987
to 1994); President of Lebanon Valley College, Annville,
Pennsylvania (1983 to 1987).

The Board of Directors has established an Audit Committee.
The functions of the Audit Committee are to recommend the
engagement of the Company's independent auditors and to review
with them the plan and scope of their audit for each year, the
status of their audit during the year, the results of such audit
when completed, and their fees for services performed. The
Committee will also review with the Company's accountants the
plan, scope and results of their operations and discuss with each
group independently of the other any recommendations or matters
which either considers to be of significance. The present
members of the Audit Committee are Carlton E. Hughes (who is
Chairman), Arthur L. Peterson and Heath L. Allen. The Audit
Committee met once in 1996.

The Board has established a Compensation Committee. The
primary function of the Compensation Committee is to review and
to make recommendations on executive officer compensation. The
present members of the Compensation Committee are Carlton E.
Hughes and Arthur L. Peterson. The Compensation Committee met
one time in 1996. The Board does not have a standing Nominating
Committee.

Heath L. Allen who serves as Secretary and Director, and
Ronald E. Walborn who serves as Treasurer and Director for the
Company each received a flat fee of $10,000 for their services in
1996. Directors who are not also officers of the Company are
paid $5,000 per year and a fee of $500 for each meeting of the
Board of Directors attended, together with the expenses of
attendance.

EXECUTIVE OFFICERS

Executive officers are appointed by the Board of Directors
and serve at the pleasure of the Board. There are no
arrangements or understandings between any executive officer and
any other person pursuant to which the executive officers are
selected. Set forth below is information on the executive
officers of the Company, including age and principal occupation
or employment during the past five years and all positions with
the Company.

EDWARD H. ARNOLD: 57,
President and Chairman of the Board (1982 to present) of
Arnold Industries; President (1974 to 1996) and Treasurer
(1974 to 1982) of New Penn.

KENNETH F. LEEDY: 55,
Executive Vice President (1986 to 1996) and Vice President-
Operations (1982 to 1986) of Arnold Industries; President
(1996 to present), Executive Vice President (1983 to 1996)
and Vice President-Operations (1975 to 1983) of New Penn.

HEATH L. ALLEN: 69,
Partner of Keefer Wood Allen & Rahal, LLP (Attorneys);
Secretary (1982 to present) of Arnold Industries; Secretary
(1972 to present) of New Penn.

RONALD E. WALBORN: 60,
President and Treasurer of Walborn Shambach Associates
(Accountants); Treasurer (1982 to present) of Arnold
Industries; Treasurer (1982 to 1996) and Assistant Treasurer
(1980 to 1982) of New Penn.

EXECUTIVE COMPENSATION AND OTHER BENEFITS

The following table sets forth information concerning
compensation paid or accrued by the Company and its subsidiaries
during the fiscal year ended December 31, 1996, to or for the
chief executive officer and each of the executive officers of the
Company whose cash compensation exceeded $100,000:

SUMMARY COMPENSATION TABLE

Annual Compensation Long Term Compensation

Other Awards All other
Name and principal position Year Salary ($) Bonus ($) annual compensa-
compensa- Restricted Options tion <FN1>
tion(s) stock
awards ($)

EDWARD H. ARNOLD 1996 187,200 200,000 - - - 14,865
President and Chairman 1995 187,200 433,000 - - - 14,940
of the Board 1994 166,653 633,000 - - - 14,970

KENNETH F. LEEDY 1996 166,400 300,000 - - - 14,865
Executive Vice President 1995 166,400 253,000 - - - 14,940
1994 146,204 353,000 - - - 14,970

<FN>
<FN1>
(1) Represents amounts credited to the accounts of the named individuals
pursuant to their respective profit-sharing or retirement plan. The
amounts accrued under these plans are based on fair market value of
the assets of the trust as determined by the Trustee on December 31
of the respective years for which the information is supplied.
</FN>

Stock Options. At the 1987 Annual Meeting, the shareholders
approved the Arnold Industries, Inc. 1987 Stock Option Plan (the
"1987 Plan"), which was designed to promote continuity of
management and to increase incentive for those primarily
responsible for the Company's long-range financial success. The
1987 Plan expired March 31, 1997, and a proposal to replace the
1987 Plan with another ten (10) year Stock Option Plan is before
the shareholders for approval pursuant to other provisions of
this proxy solicitation.

The aggregate number of shares for which options could have
been granted under the 1987 Plan was 1,625,000. As of
December 31, 1996, options for 1,053,734 shares were outstanding
to approximately 120 employees and/or consultants.

The options may be incentive stock options, which qualify
for certain tax benefits (relating primarily to the deferral of
gain recognition until the underlying stock is sold and the
treatment of same as a capital gain as opposed to ordinary
income), or nonqualified options, which do not qualify as
incentive stock options. Incentive stock options must be granted
at not less than the fair market value of the stock on the date
granted, and nonqualified stock options must be granted at not
less than one-half of the fair market value of the stock on the
date granted. The Company may take a deduction for gain realized
by its employee upon the exercise of a nonqualified option.
Generally this is not so in the case of an incentive stock
option. Options generally are non-transferable, conditioned upon
continued employment with the Company and expire within 10 years
of grant or upon stated occurrences. Other option terms may vary
depending upon provisions of the specific option agreement. On
June 28, 1991, and on July 13, 1995, the Company filed S-8
Registration Statements for Company stock subject to the 1987
Plan.

There were no stock options granted to or exercised by the
Company's executive officers in fiscal year 1996. The tables on
the next page show information regarding stock options held by
the Company's executive officers.

AGGREGATED OPTION/SAR EXERCISES
IN LAST FISCAL YEAR AND FY-END OPTION/SAR VALUES

Number of Value of
unexercised unexercised
Options/SARs in-the-money
Shares Value realized at FY-End (#) Options/SARs
Name acquired on ($) exercisable/ at FY-End ($)
exercise (#) unexercisable exercisable/
<FN1> unexercisable

EDWARD H. ARNOLD - - - -

KENNETH F. LEEDY - - 86,342/82,258 702,206/245,411

HEATH L. ALLEN - - 88,400/0 695,000/0

RONALD E. WALBORN - - 88,400/0 695,000/0

<FN>
<FN1>
(1) Adjusted for stock splits.
</FN>

Supplemental Retirement Plan. In 1980, in order to
recognize past effort and to encourage future effort, New Penn
implemented a supplemental retirement plan. This plan provides
to 58 individuals certain retirement, disability and death
benefits, which are available only if the individual is working
for Arnold Industries or one of its subsidiaries at retirement,
disability or death. Retirement benefits would commence five
years after retirement, but not before age 65, and are
conditioned on an absence of competitive employment for two years
after retirement. Retirement benefits are payable monthly for
ten years. Monthly disability and pre-retirement death benefits
are one-half of retirement benefits, but are payable for twenty
years. The Company is responsible for the full cost of the plan,
with no contributions from the participants. The net pension
cost for this plan was $148,695 for 1996.

The monthly retirement benefits involve six different
categories: (1) $1,666.67, (2) $1,250.00, (3) $1,041.67,
(4) $833.33, (5) $625.00 and (6) $416.67. Category (1) covers
Messrs. Arnold and Leedy and 3 non-directors; category (2)
includes Messrs. Allen and Walborn and 9 non-directors;
category (3) covers 3 other individuals; and categories (4)
through (6) cover 39 individuals. The Board of Directors may
from time to time add additional individuals to the plan, and may
change the categories of participants to increase benefits.

PERFORMANCE GRAPH

The following graph compares the yearly percentage change in
the Company's cumulative total shareholder return on its common
stock with: (i) the cumulative total return of a broad market
index (i.e. NASDAQ MARKET INDEX) and (ii) the cumulative total
return of a published industry or line-of-business index weighted
for market capitalization (i.e., the SIC CODE 4213 INDUSTRY
GROUP - TRUCKING, EXCEPT LOCAL). This group is composed of the
following entities: Aasche Transport Service; Allied Holdings,
Inc.; American Freightways Corporation; Ampace Corporation;
Anuhco, Inc.; Arkansas Best Corporation; Arnold Industries, Inc.;
Arrow Transportation Company; Boyd Bros. Transport, Inc.;
Builders Transport, Inc.; Caliber Systems, Inc.; Cannon Express
CL B; Cannon Express, Inc. CL A; Celadon Group, Inc.;
Consolidated Freightways; Country Wide Transport; Covenant
Transport CL A; Frozen Food Express Industries; FRP Properties,
Inc.; Heartland Express, Inc.; J.B. Hunt Transportation Services,
Inc.; Intrenet, Inc.; Kenan Transport Company; KLLM Transport
Services, Inc.; Knight Transportation; Landstar Systems, Inc.;
Lynch Corporation; M.S. Carriers, Inc.; Mark VII, Inc.; Marten
Transport, Ltd.; Matlack Systems, Inc.; Morgan Group, Inc. CL A;
MTL, Inc.; Old Dominion Freight Line; OTR Express, Inc.; PAM
Transportation Services; Polar Express Corporation; PST Vans,
Inc.; Simon Transport Services CL A; Swift Transportation Co.;
TNT Freightways Corporation; Transport Corporation of America;
U.S. 1 Industries, Inc.; U.S. Xpress Enterprises CL A; USA Truck,
Inc.; Vitran Corporation; Werner Enterprises, Inc.; and Yellow
Corporation. Cumulative returns for the Company and both indices
were calculated assuming dividend reinvestment.

GRAPH AND POINT DATA
5-YEAR CUMULATIVE TOTAL RETURN AMONG ARNOLD INDUSTRIES, INC.
NASDAQ MARKET INDEX AND SIC CODE INDEX

-------------------FISCAL YEAR ENDING------------------
COMPANY 1991 1992 1993 1994 1995 1996

ARNOLD IND INC 100 118.94 152.14 153.36 131.58 123.72
INDUSTRY INDEX 100 122.28 138.51 133.17 112.89 106.65
BROAD MARKET 100 100.98 121.13 127.17 164.96 204.98

ASSUMES $100 INVESTED ON JAN. 1, 1991
ASSUMES DIVIDEND REINVESTED
FISCAL YEAR ENDING DEC. 31, 1996

REPORT ON EXECUTIVE COMPENSATION

The Compensation Committee's primary function is to review
and to make recommendations to the Board on executive officer
compensation. The present members of the Compensation Committee
are Carlton E. Hughes and Arthur L. Peterson, both of whom are
non-employee "independent" directors of the Company. The
Compensation Committee has reviewed the Company's policies on
executive officer compensation and the compensation paid to the
Company's executive officers for fiscal year 1996 and reports as
set forth below.

The Company's executive compensation policy is to provide
competitive levels of total compensation in order to attract,
motivate and retain skilled executive personnel, to recognize and
reward individual initiative and achievements and to promote
above average corporate performance. The Company also endorses
the proposition that stock ownership in the Company by its
employees and executive personnel and stock-based compensation
arrangements are extremely beneficial in aligning the interests
of its employees and management with its shareholders in
maximizing Company value.

The basic methods by which the Company compensates its
executive officers and implements the aforementioned policy are
those of annual salary, annual cash bonus and stock option grants
made pursuant to the Company's 1987 Stock Option Plan. The
Company also maintains a supplemental retirement plan for some 58
key employees (including its executive officers) to augment its
profit-sharing/retirement plan, generally available to all
eligible employees. Information on the Company's 1987 Stock
Option Plan can be found on page 5 of the proxy statement.
Further information on the supplemental retirement plan and its
benefits to the existing officers is found on page 6 of the
statement. The Company has not yet adopted a policy with respect
to the $1,000,000 limitation on deductibility of executive
compensation under Section 162(m) of the Internal Revenue Code of
1986, as amended.

The Committee believes that the base salaries of the
Company's principal executive officers are in the median range
for the trucking industry. The Company utilizes cash bonus and
stock option elements to reward superior performance. The
Company considers the desires of the executive and the needs of
the Company in determining the overall compensation package and
the executive's stock and option holdings in adjusting the
mixture between the cash bonus and stock option elements on a
yearly basis. In 1996, the Company utilized annual salary and
annual cash bonus awards but did not utilize stock options.

The Company looks to both quantitative and qualitative
factors in determining the job performance of all of its
employees, including executive officers. The primary
quantitative criteria applied to its executive officers are
Company return on shareholder investment, net earnings, revenue
and cost trends. Internal quantitative criteria such as
adherence to, or improvement on, operating budgets or Company
specific goals, including revenue and earnings targets and cost
or claims reduction projects are also considered, when
applicable. Qualitative factors such as the ability to motivate
others, to adapt and accomplish new tasks and to assist in both
short and long range strategic planning for the Company, as well
as the officer's internal performance history, are also
considered in arriving at appropriate overall compensation
levels. The Company has not established a specific mathematic
weighting or formula for application of these principles. These
criteria are applied on a subjective basis from year to year and
were given roughly equal weight in 1996's determinations.

Application of the foregoing criteria to Edward H. Arnold,
the Company's chief executive officer, continues to support
placing Mr. Arnold's total compensation package at the high end
of his counterparts in the trucking industry. Nevertheless,
because the Company did not generate net earnings increases in
1996 as in prior years, the Committee believes that Mr. Arnold's
compensation package for 1996 was appropriately lowered from the
prior year's total compensation. In terms of qualitative
factors, Mr. Arnold continues his leadership role in strategic
planning and remains an exceptional motivating force among the
Company's executive officers and personnel, emphasizing a
commitment to continuous improvement in customer service and cost
efficiency.

In quantitative terms, the Company again achieved new highs
in annual revenues in 1996 and remained a stand-out performer
among its trucking counterparts in return on shareholder
investment. However, due in part to intense competition and
price-cutting throughout the trucking industry in 1996, the
Company did not reach its own internal earnings targets this
year. Accordingly, Mr. Arnold's total compensation package, while
reflecting the Company's above average performance in the
trucking industry in 1996, was nonetheless reduced from 1994 and
1995 levels. Insofar as Mr. Arnold has foregone participation in
the Company's stock option program due to his already substantial
holdings of Company stock, his 1996 compensation package utilizes
only salary and cash bonus components.

The Compensation Committee
Carlton E. Hughes
Arthur L. Peterson

COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION

Mr. Hughes and Mr. Peterson are independent directors of the
Company. They are not, and have not been, officers or employees
of the Company or any of its subsidiaries.

APPROVAL OF THE 1997 STOCK OPTION PLAN

The Board of Directors has approved a stock option plan (the
"1997 Plan") for the benefit of persons serving as employees or
consultants of the Company. The 1997 Plan contains many of the
same terms and conditions as were contained in the 1987 Stock
Option Plan, which expired by its terms on March 31, 1997. The
1997 Plan is intended to continue the program of promoting
continuity of management and increased incentive for those
responsible for the long-range financial success of the Company.
These purposes are achieved under the 1997 Plan without depleting
cash resources of the Company. The following will summarize
briefly how the 1997 Plan will operate in practice if approved by
the shareholders. This summary is qualified in its entirety by
the actual provisions of the Plan, which is attached to this
proxy statement and incorporated herein by this reference.
Reference should be made to the Plan for answers to specific
questions concerning the Plan and its operation.

In general, the Plan provides that a Stock Option Committee
formed by the Board of Directors may extend rights to selected
employees or consultants to purchase shares of stock in the
Company at stated option prices. The Stock Option Committee
already exists under the 1987 Plan. The right to purchase shares
at a stated price constitutes a "stock option." If the fair
market value of the Company's stock rises to a level above the
option price stated in any Option, the Option has value to the
Optionee in that the stock can be purchased from the Company, for
the lower price. On the other hand, if the fair market value of
the Company's stock declines below the stated option price, the
option has little or no value to the recipient and is likely to
go unexercised.

Two types of stock options are provided for under the Plan.
One type is an Incentive Stock Option ("ISO"). ISO's may be
issued only to employees of the Company. ISO's are treated more
favorably for federal income tax purposes than are other types of
options. In addition to the employment requirement, numerous
other restrictions must be met in order the qualify for favorable
ISO tax treatment. For example, ISO's must reflect an option
price no less than the fair market value of the Company's stock
at the issuance of the option.

The second type of option provided for under the Plan is the
Non-Qualified Stock Option. This type of option permits greater
flexibility in the issuance of options but does not result in
favorable tax treatment to the recipient. It can be issued to
both employees and consultants of the Company. Under the Plan,
Non-Qualified Stock Options may be issued at an option price no
less than one-half of the fair market value of the Company's
stock upon issuance of the option.

The Plan, as approved by the Board, does not bind the
Company until approval by the shareholders, but will be
retroactively effective to April 1, 1997, once approved by the
shareholders.

The Board of Directors of the Company recommends a VOTE FOR
approval of the 1997 Stock Option Plan. Proxies solicited by the
Company will be so voted unless shareholders specify a contrary
choice in their proxies.

CERTAIN TRANSACTIONS

The firm of Keefer Wood Allen & Rahal, LLP, of which
Heath L. Allen, a director of the Company, is a partner, received
legal fees of approximately $261,070 for services performed in
1996 for the Company and its subsidiaries. It is anticipated
that the Company and its subsidiaries will make payments to
Keefer Wood Allen & Rahal, LLP through 1997 for legal services to
be performed.

The firm of Walborn Shambach Associates, of which Ronald E.
Walborn, a director of the Company, is President and Treasurer,
received fees for management and other accounting services of
approximately $485,000 for services performed in 1996 for the
Company and its subsidiaries. It is anticipated that the Company
and its subsidiaries will make payments to Walborn Shambach
Associates through 1997 for management and accounting services to
be performed.

INDEPENDENT ACCOUNTANTS

The firm of Coopers & Lybrand L.L.P. has served as
independent certified public accountants to audit the books,
records and accounts of the Company and its subsidiaries since
1991, the Company's last six fiscal years.

A representative of Coopers & Lybrand L.L.P. will be present
at the Annual Meeting, will be afforded an opportunity to make a
statement if he or she desires to do so and will be available to
respond to appropriate questions.

The Company presently intends to utilize Coopers & Lybrand
L.L.P. to serve as independent auditor for its 1997 fiscal year
but has opted not to submit ratification of same to a vote of
shareholders so as to maintain Board discretion in this matter.

SHAREHOLDER PROPOSALS FOR 1998 ANNUAL MEETING

The 1998 Annual Meeting of Shareholders will be held on or
about May 6, 1998. Proposals of shareholders intended to be
presented for action at that meeting must be submitted in writing
and received by the Company at its corporate headquarters,
625 South Fifth Avenue, P. O. Box 210, Lebanon, PA, 17042-0210,
Attn: Corporate Secretary, not later than December 22, 1997, in
order to be considered for inclusion in the Company's proxy
statement and form of proxy relating to that meeting, in
accordance with regulations governing the solicitation of
proxies. It is suggested that a shareholder making a proposal
submit the proposal by Certified Mail - Return Receipt Requested.

The Bylaws provide that nominations of candidates for
election to the Board at an annual meeting, other than those made
by or on behalf of existing management, must be made in writing
and delivered or mailed to the Corporate Secretary not less than
fifteen (15) nor more than fifty (50) days prior to that annual
meeting.

OTHER MATTERS

The Board of Directors does not intend to bring any matters
before the Annual Meeting other than those specifically set forth
in the notice of the Annual Meeting and knows of no matters to be
brought before the meeting by others. If any other matters
properly come before the meeting, it is the intention of the
persons named in the enclosed proxy, or their substitutes, to
vote said proxy in accordance with their best judgment on such
matters.

COPIES OF THE COMPANY'S ANNUAL REPORT ON FORM 10-K FILED
WITH THE SECURITIES AND EXCHANGE COMMISSION WILL BE AVAILABLE AT
THE ANNUAL MEETING. ANY SHAREHOLDER, UPON WRITTEN REQUEST TO THE
CORPORATE SECRETARY, MAY OBTAIN A COPY OF THE COMPANY'S 10-K
WITHOUT CHARGE.

By Order of the Board of Directors,

HEATH L. ALLEN
Secretary

Lebanon, Pennsylvania
April 4, 1997

APPENDIX 1

STOCK OPTION PLAN
FOR
ARNOLD INDUSTRIES, INC.

Effective date: April 1, 1997

Article I
Definitions

As used herein, the following terms have the meanings
hereinafter set forth unless the context clearly indicates to the
contrary:

(a) "Board" shall mean the Board of Directors of the
Company.

(b) "Committee" shall mean the Stock Option Committee
of the Board.

(d) "Fair Market Value" shall mean the average of the
closing bid and asked price per share at which the Stock is
sold in the regular way on the over-the-counter market on
any relevant day or, in the absence of any reported sales on
such day, the first preceding day on which there were sales.

(e) "Incentive Stock Option" shall mean an option
which complies with the requirements of Section 422A of the
Internal Revenue Code.

(f) "Non-Qualified Stock Option" shall mean a non-
statutory option which is taxable under applicable
provisions of Section 83 of the Internal Revenue Code.

(g) "Option" shall mean any option to purchase Stock
granted pursuant to the provisions hereof.

(h) "Optionee" shall mean any person who is granted an
Option under this Plan.

(i) "Plan" shall mean the Arnold Industries, Inc. 1997
Stock Option Plan, effective as of April 1, 1997, as amended
from time to time, the terms of which are set forth herein.

(j) "Stock" shall mean the Common Stock of the Company
or, in the event that the outstanding shares of Stock
are hereafter changed into or exchanged for shares of a
different stock or security of the Company or some other
corporation, such other stock or security.

(k) "Stock Option Agreement" shall mean the agreement
between the Company and the Optionee under which the
Optionee may purchase Stock hereunder.

(l) "Subsidiary" shall mean any corporation, the
majority of the outstanding capital stock of which is owned,
directly or indirectly, by the Company.

Article II
The Plan

2.1 Name. This Plan shall be known as the "Arnold Indus-
tries, Inc. 1997 Stock Option Plan."

2.2 Purpose. The purpose of the Plan is to promote conti-
nuity of management and increased incentive and personal interest
in the welfare of the Company by those responsible for shaping
and carrying out long-range plans and for securing continued
growth and financial success.

2.3 Term of the Plan. The Plan shall be effective as of
April 1, 1997, subject to approval by the holders of a majority
of the shares of stock of the Company entitled to vote at a
meeting of the shareholders, within twelve (12) months of the
effective date, and all Options granted prior to such approval
shall be subject to such approval. The Plan shall terminate on
March 31, 2007, or on such earlier date as may be determined by
the Board. Termination of the Plan, however, shall not affect
the rights of Optionees under Options theretofore granted to
them, and all unexpired Options shall continue in force and
operation after termination of the Plan except as they may lapse
or be terminated by their own terms and conditions.

Article III
Participants

Except with respect to Incentive Stock Options provided for
under Article VI hereof, options may be granted to such employees
and consultants (hereinafter "Participants") of the Company or
its Subsidiaries as the Committee shall select from time to time.
With respect to Incentive Stock Options, only employees of the
Company shall be entitled to participate. The Committee may
grant Options to any eligible participant in accordance with such
determination as the Committee, in its sole discretion, shall
make. Any eligible participant may hold more than one Option.

Article IV
Administration

4.1 Duties and Powers of Committee. The Plan shall be
administered by the Committee. Subject to the express provisions
of the Plan, the Committee shall have sole discretionary auth-
ority to determine from among eligible participants those to whom
and the time or times at which Options may be granted and the
number of shares of Stock to be subject to each Option. Subject
to the express provisions of the Plan, the Committee shall also
have complete authority to interpret the Plan, to prescribe,
amend and rescind rules and regulations relating to it, to
determine the details and provisions of each Stock Option Agree-
ment, and to make all other determinations necessary or advisable
in the administration of the Plan.

4.2 Majority Rule. A majority of the members of the
Committee shall constitute a quorum, and any action taken by a
majority present at a meeting at which a quorum is present or any
action taken without a meeting evidenced by a writing executed by
all of the members of the Committee shall constitute the action
of the Committee.

4.3 Company Assistance. The Company shall supply full and
timely information to the Committee on all matters relating to
eligible participants, including their death, retirement, dis-
ability or other termination of service to the Company, and such
other pertinent facts as the Committee may require. The Company
shall furnish the Committee with such clerical and other assis-
tance as is necessary in the performance of its duties.

Article V
Shares of Stock Subject to Plan

5.1 Shares Subject to Plan. The Stock to be subject to
Options under the Plan shall be shares of the Company's Common
Stock having a par value of $1.00 per share, either authorized
and unissued or treasury shares. The aggregate number of shares
of stock for which Options may be granted shall not exceed two
million (2,000,000) shares, subject to adjustment in accordance
with the terms of Article 5.3 hereof. The shares subject to the
unexercised portion of any terminated or expired Options under
the Plan may again be subjected to Options under the Plan.

5.2 Shares Subject to Incentive and Non-Qualified Stock
Options. It is intended that certain of the Options issued
pursuant to this Plan will constitute qualified Incentive Stock
Options within the meaning of Section 422A of the Internal
Revenue Code and that the remainder of the Options issued pursu-
ant to the Plan will constitute Non-Qualified Stock Options. The
Committee shall determine which Options are to be qualified stock
options and which are to be non-qualified stock options and shall
enter into Option Agreements with Optionees accordingly.

5.3 Adjustments. In the event that the outstanding shares
of Stock are hereafter changed into or exchanged for a different
number or kind of shares or other securities of the Company or of
another corporation by reason of merger, consolidation, other
reorganization, recapitalization, reclassification, combination
of shares, stock split-up or stock dividend:

(a) The aggregate number and kind of shares subject to
Options which may be granted hereunder shall be adjusted
appropriately;

(b) Rights under outstanding Options granted here-
under, both as to the number of subject shares and the
option price, shall be adjusted appropriately; and

(c) Where dissolution or liquidation of the Company or
any merger or combination in which the Company is not a
surviving corporation is involved, each outstanding Option
granted hereunder shall terminate, but the Optionee shall
have the right, immediately prior to such dissolution,
liquidation, merger or combination, to exercise his Option
in whole or in part, to the extent that it shall not have
been exercised, without regard to any installment exercise
provisions.

The foregoing adjustments and the manner of application of
the foregoing provisions shall be determined solely by the
Committee, and any such adjustment may provide for the elimina-
tion of fractional share interests.

Article VI
Incentive Stock Options

6.1 Option Grant and Agreement. Each Incentive Stock
Option granted hereunder shall be evidenced by minutes of a
meeting or the written consent of the Committee and by a written
Stock Option Agreement dated as of the date of grant and executed
by the Company and the Optionee, which Agreement shall set forth
such terms and conditions as may be determined by the Committee
to be consistent with the Plan. Incentive Stock Options may be
granted only to employees of the Company.

6.2 Participation Limitation. Except as hereinafter
provided, the Committee shall not grant an Incentive Stock Option
to any employee for such number of shares of Stock that, immedi-
ately after the grant, the total number of shares of Stock owned
or subject to Options exercisable by such employee (or by such
persons whose shares such employee is considered as owning
pursuant to the provisions of the next succeeding sentence)
exceed 10% of the total combined voting power of all classes of
stock of the Company or its Subsidiaries. For purposes of the
immediately preceding sentence, an employee shall be considered
as owning the stock owned, directly or indirectly, by or for his
brothers and sisters (whether by the whole or half blood),
spouse, ancestors and lineal descendants; and the stock owned,
directly or indirectly, by or for a corporation, partnership,
estate, or trust shall be considered as being owned proportion-
ately by or for its shareholders, partners or beneficiaries.
Incentive Stock Options may be granted to employees owning ten
percent (10%) or more of the Company if (1) the option price
equals one hundred ten percent (110%) of the Fair Market Value of
the Stock on the date the Option is granted, and (2) the Option,
by its terms, may not be exercisable more than five (5) years
after the date of grant. The aggregate Fair Market Value (deter-
mined at the time of grant) of Stock subject to an Incentive
Stock Option and exercisable for the first time by any one
Optionee during a calendar year shall not exceed $100,000 or any
other limitation established by the Internal Revenue Code or
regulations thereunder.

6.3 Option Price. The per share Option price of the Stock
subject to each Option shall be determined by the Committee, but
the per share price shall not be less than the Fair Market Value
of the Stock on the date the Option is granted.

6.4 Option Period. Each Incentive Stock Option granted
hereunder must be granted within ten (10) years from the effec-
tive date of the Plan. The period for the exercise of each
Incentive Stock Option shall be determined by the Committee,
subject to the provisions of Section 6.5 hereof, but in no
instance shall such period begin earlier than three (3) months
from the date of grant of the Incentive Stock Option nor exceed
ten (10) years from the date of grant, except as otherwise
provided in Section 6.7 hereof.

6.5 Incentive Stock Option Exercise.

(a) Incentive Stock Options granted hereunder may not
be exercised unless the Optionee (i) has been continuously
employed by the Company or its Subsidiaries for five (5)
years from the date of grant, or is fifty-five (55) years of
age or older upon exercise of the option, and (ii) is em-
ployed by the Company or its Subsidiaries on the date of
exercise, except as otherwise provided in Section 6.7.

(b) Incentive Stock Options may be exercised in whole
at any time, or in part from time to time with respect to
whole shares only, within the period permitted for the
exercise thereof under Section 6.4 and subsection (a) of
this Section 6.5. The Incentive Stock Option shall be
exercised by written notice of intent to exercise the Option
with respect to a specified number of shares delivered to
the Company at its principal office in Pennsylvania, and
payment in full to the Company at said office of the amount
of the Incentive Stock Option price for the number of shares
of Stock with respect to which the Incentive Stock Option is
then being exercised. Payment for the Stock subject to the
exercised Option shall be in cash. In addition to and at
the time of payment of the Incentive Stock Option price,
Optionee shall pay to the Company, in cash or other form
acceptable to the Company, upon the Company's request, the
full amount of any federal and state withholding or other
employment taxes applicable to the taxable income of such
Optionee resulting from such exercise.

6.6 Non-transferability of Option. No Incentive Stock
Option shall be transferred by the Optionee otherwise than by
will or the laws of descent and distribution. During the life-
time of an Optionee, the Option shall be exercisable only by him.

6.7 Effect of Death or Termination of Employment.

(a) If, prior to the commencement of the Option
period, the Optionee's employment with the Company or its
Subsidiaries shall be terminated for whatever reason, in-
cluding death, retirement or total and permanent disability,
and whether due to act of the Optionee or of the Company or
Subsidiary, the Optionee's right to exercise such Incentive
Stock Option shall cease and all rights thereunder shall be
forfeited.

(b) If, after commencement of the Option period, the
Optionee's employment with the Company or its Subsidiaries
shall be terminated by the Company or Subsidiary, with or
without cause, or by the act of the Optionee, the Optionee's
right to exercise such Incentive Stock Option shall cease
under terms set by the Committee, but in no event later than
three (3) months from the date of such termination and all
rights thereunder shall be forfeited; provided, however,
that if the Optionee shall die, retire or become permanently
and totally disabled, as determined in accordance with
applicable Company personnel policies, after commencement of
the Option period, such Option shall, nevertheless, be exer-
cisable in full by the Optionee or by his heirs, executors,
or personal representatives during the period commencing on
the date of such death, retirement or disability and ending
three (3) months thereafter with respect to retirement or
disability, and within one (1) year thereafter with respect
to death.

(c) No transfer of an Incentive Stock Option by the
Optionee by will or by the laws of descent and distribution
shall be effective to bind the Company unless the Company
shall have been furnished with written notice thereof and an
authenticated copy of the will and/or such other evidence as
the Committee may deem necessary to establish the validity
of the transfer and the acceptance by the transferee or
transferees of the terms and conditions of such Incentive
Stock Option.

6.8 Rights as Shareholder. An Optionee or a transferee of
an Incentive Stock Option shall have no rights as a shareholder
with respect to any shares subject to such Incentive Stock Option
prior to the purchase of such shares by exercise of such Incen-
tive Stock Option as provided herein.

Article VII
Non-Qualified Stock Options

7.1 Option Grant and Agreement. Each Non-Qualified Stock
Option granted hereunder shall be evidenced by minutes of a
meeting or the written consent of the Committee and by a written
Stock Option Agreement dated as of the date of grant and executed
by the Company and the Optionee, which Agreement shall set forth
such terms and conditions as may be determined by the Committee
to be consistent with the Plan. Non-Qualified Stock Options may
be granted to employees of and consultants to the Company.

7.2 Option Price. The Option Price per share of the Stock
subject to each Non-Qualified Stock Option shall be determined by
the Committee, but the per share price shall not be less than
one-half of the Fair Market Value of the Stock on the date the
Non-Qualified Stock Option is granted.

7.3 Option Period. Each Non-Qualified Stock Option must be
granted within ten (10) years from the effective date of the
Plan. The period for exercise of each Non-Qualified Stock Option
shall be determined by the Committee, subject to the provisions
of Section 7.4, but in no instance shall such period begin
earlier than three (3) months from the date of grant of the Non-
Qualified Stock Option nor exceed ten (10) years from the date of
grant, except as otherwise provided in Section 7.6 hereof.

7.4 Option Exercise.

(a) Non-Qualified Stock Options granted hereunder may
not be exercised unless and until the Optionee (i) has been
continuously employed by the Company or its Subsidiaries for
five (5) years from the date of grant, or is fifty-five (55)
years of age or older upon exercise of the option, and
(ii) is employed by the Company or its Subsidiaries on the
date of exercise, except as otherwise provided in Sec-
tion 7.6.

(b) Options may be exercised in whole at any time, or
in part from time to time with respect to whole shares only,
within the period permitted for the exercise thereof under
Section 7.3 and subsection (a) of this Section 7.4. The
Non-Qualified Stock Option shall be exercised by written
notice of intent to exercise the Option with respect to a
specified number of shares delivered to the Company at its
principal office in Pennsylvania, and payment in full to the
Company at said office of the amount of the Option price for
the number of shares of Stock with respect to which the
Option is then being exercised. Payment for the Stock
subject to the exercised Option shall be in cash. In addi-
tion to and at the time of payment of the Option price,
Optionee shall pay to the Company, in cash or other form
acceptable to the Company, upon the Company's request, the
full amount of any federal and state withholding or other
employment taxes applicable to the taxable income of such
Optionee resulting from such exercise.

7.5 Non-transferability of Option. No Non-Qualified Stock
Option shall be transferred by the Optionee otherwise than by
will or the laws of descent and distribution. During the life-
time of an Optionee, the Option shall be exercisable only by him.

7.6 Effect of Death or Termination of Employment.

(a) If, prior to a date three (3) months from the date
a Non-Qualified Stock Option shall have been granted, the
Optionee's employment or consulting arrangement with the
Company or its Subsidiaries shall be terminated for whatever
reason, including death, retirement or total and permanent
disability, and whether due to act of the Optionee or of the
Company or Subsidiary, the Optionee's right to exercise such
Non-Qualified Stock Option shall cease and all rights there-
under shall be forfeited.

(b) If, on or after three (3) months from the date a
Non-Qualified Stock Option shall have been granted, the
Optionee's employment or consulting arrangement with the
Company or its Subsidiary shall be terminated by the Company
or Subsidiary, with or without cause, or by act of the Op-
tionee, the Optionee's right to exercise such Non-Qualified
Stock Option shall cease under terms set by the Committee
within three (3) months of such termination and all rights
thereunder shall be forfeited; provided, however, that if
the Optionee shall die, retire or become permanently and
totally disabled, as determined in accordance with applica-
ble Company personnel policies, after a date three (3)
months from the date a Non-Qualified Stock Option shall have
been granted, such Option shall, nevertheless, be exercis-
able in full by the Optionee or by his heirs, executors or
personal representatives during the period commencing on the
date of such death, retirement or disability and ending
three (3) months thereafter with respect to retirement or
disability, and within one (1) year thereafter with respect
to death.

(c) No transfer of a Non-Qualified Stock Option by the
Optionee by will or by the laws of descent and distribution
shall be effective to bind the Company unless the Company
shall have been furnished with written notice thereof and an
authenticated copy of the will and/or such other evidence as
the Committee may deem necessary to establish the validity
of the transfer and the acceptance by the transferee or
transferees of the terms and conditions of such Option.

7.7 Rights as Shareholder. An Optionee or a transferee of
a Non-Qualified Stock Option shall have no rights as a share-
holder with respect to any shares subject to such Non-Qualified
Stock Option prior to the purchase of such shares by exercise of
such Non-Qualified Stock Option as provided herein.

Article VIII
Stock Certificates

The Company shall not be required to issue or deliver any
certificate for shares of Stock purchased upon the exercise of
any Option granted hereunder or any portion thereof, prior to
fulfillment of all of the following conditions:

(a) The admission of such shares to listing on all
stock exchanges on which the Stock is then listed;

(b) The completion of any registration or other quali-
fication of such shares under any federal or state law or
under the rulings or regulations of the Securities and
Exchange Commission or any other governmental regulatory
body, which the Committee shall in its sole discretion deem
necessary or advisable;

(c) The obtaining of any approval or other clearance
from any federal or state governmental agency which the
Committee shall in its sole discretion determine to be
necessary or advisable; and

(d) The lapse of such reasonable period of time fol-
lowing the exercise of the Option as the Committee from time
to time may establish for reasons of administrative conve-
nience.

Article IX
Securities Act Requirements

9.1 Registration or Exemption. Shares of Stock purchased
under the Plan and held by any person who is an officer, director
or affiliate of the Company may not be sold or otherwise disposed
of except (i) pursuant to an effective registration statement
under the Securities Act of 1933, as amended (the "Act"), or in a
transaction which, in the opinion of counsel for the Company, is
exempt from registration under the Act, and (ii) in compliance
with state securities laws. In the event that sales of
securities under this Plan are determined to be exempt from
registration under the Securities Act of 1933, any resale of such
securities by the Optionee shall be restricted in accordance with
the provisions of Rule 144 of the Securities and Exchange Commis-
sion, which Rule requires inter alia that such securities be held
for a period of two years prior to any resale by the Optionee.

9.2 Investor Representations. Upon issuance of Stock to an
Optionee, or to his heirs, the recipient of such stock shall
represent that the shares of stock are taken for investment
purposes and not resale, except in accordance with Rule 144 of
the Securities and Exchange Commission, and shall make such other
representations as may be necessary to qualify the issuance of
shares as exempt from the Securities Act of 1933. The Company
reserves the right to place a legend on any stock certificate
issued pursuant to the Plan to assure compliance with this
paragraph. No shares of Stock shall be required to be distribut-
ed until the Company shall have taken such action, if any, as is
then required to comply with the provisions of the Securities Act
of 1933 or any other then applicable securities law.

Article X
Termination, Amendment, and Modification of Plan

The Board may at any time, upon recommendation of the
Committee, terminate, and may at any time and from time to time
and in any respect amend or modify, the Plan; provided, however,
that no such action of the Board without approval of the share-
holders of the Company may:

(a) Increase the total number of shares of Stock
subject to the Plan except as contemplated in Section 5.3
hereof;

(b) Change the restricted Stock purchase price or the
manner of determining the Option price;

(d) Withdraw the administration of the Plan from the
Committee; and

provided further, that no termination, amendment or modification
of the Plan shall in any manner affect any Option theretofore
granted under the Plan without the consent of the Optionee or
transferee of the Option.

Article XI
Miscellaneous

11.1 Employment. Nothing in the Plan or in any Option
granted hereunder or in any Stock Option Agreement relating
thereto shall confer upon any employee the right to continue in
the employ of the Company or any Subsidiary.

11.2 Other Compensation Plans. The adoption of the Plan
shall not affect any other stock option or incentive or other
compensation plans in effect to the Company or any Subsidiary,
nor shall the Plan preclude the Company from establishing any
other forms of incentive or other compensation for employees of
the Company or any Subsidiary.

11.3 Plan Binding on Successors. The Plan shall be binding
upon the successors and assigns of the Company.

11.4 Singular, plural; gender. Whenever used herein, nouns
in the singular shall include the plural, and the masculine
pronoun shall include the feminine gender.

11.5 Headings, Etc., No Part of Plan. Headings of Articles
and Sections hereof are inserted for convenience and reference;
they constitute no part of the Plan.

APPENDIX 2
REVOCABLE PROXY
ARNOLD INDUSTRIES, INC.

X PLEASE MARK VOTES
AS IN THIS EXAMPLE

ANNUAL MEETING OF SHAREHOLDERS
MAY 7, 1997

The undersigned hereby acknowledges receipt of the Notice of
Annual Meeting of Shareholders of Arnold Industries, Inc., to be
held on Wednesday, May 7, 1997, at 4:00 p.m., at the Lebanon
Country Club, 3375 West Oak Street, Lebanon, Pennsylvania, and
the proxy statement for said meeting attached thereto, and hereby
appoints Kenneth F. Leedy or Heath L. Allen, or either of them,
proxies to vote and act at the 1997 Annual Meeting of Shareholders
or at any adjournment or adjournments thereof, on any business
that may properly come before such meeting, including taking action on
Items 1 through 3 set forth in the next column.

With- For All
1. Election of Directors For hold Except
of the Company: _____ _____ _____

Heath L. Allen, Kenneth F. Leedy and Carlton E. Hughes

INSTRUCTION: To withhold authority to vote for any nominee, mark
"For All Except" and write that nominee's name in the space
provided below.
________________________________________________________________

2. With respect to the approval For Against Abstain
of the 1997 Stock Option Plan. _____ _____ _____

3. With respect to the use For Against Abstain
of their discretion in _____ _____ _____
such other business as
may come before the
meeting or any adjourn-
ments thereof.

The stock covered by this proxy will be voted in accordance with
specifications made. IF NO SPECIFICATION IS MADE, THE PROXIES
ARE APPOINTED WITH AUTHORITY TO VOTE FOR THE ELECTION OF DIRECTORS
AND IN FAVOR OF PROPOSALS 2 and 3.

Please sign your proxy exactly as your name appears on the
certificate. When signing as attorney, executor, administrator,
trustee or guardian, give full title as such. If owner is a
corporation, sign full corporate name by a duly authorized officer.
If two or more persons are named as owners, both or all should
sign.

Please be sure to sign and date Date
this Proxy in the box below. ______________________

THIS PROXY IS SOLICITED ON BEHALF
OF THE REGISTRANT'S BOARD OF DIRECTORS.

__________________________________________________________
Shareholder sign above Co-holder (if any) sign above