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 5, 1999
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 5, 1999, at 10:00 o'clock a.m.,
prevailing time, for the following purposes:
(1) To elect three (3) directors to serve until the Annual
Meeting of Shareholders in 2001;
(2) To consider and act upon a proposal to amend and restate the
Company's Bylaws in accordance with the form of Bylaws
attached hereto as Appendix 1; 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 26, 1999, 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 1998 is enclosed
herewith.
By Order of the Board of Directors,
HEATH L. ALLEN
Secretary
Lebanon, Pennsylvania
April 2, 1999
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
P.O. Box 210
Lebanon, Pennsylvania 17042-0210
PROXY STATEMENT
FOR
ANNUAL MEETING OF SHAREHOLDERS TO BE HELD MAY 5, 1999
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 5, 1999, at 10:00 a.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 2, 1999.
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 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 1998, 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 26, 1999, 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 26, 1999, there were
24,830,126 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 1, 1999 (unless otherwise noted), with regard to persons
with beneficial ownership of five percent (5%) or more of Arnold
Industries' outstanding stock:
Title of Name and Address of Beneficially Percent of
Class Beneficial Owner Owned Class
Common Stock Edward H. Arnold
Lebanon, PA 4,471,846 <FN1> 17.9%
Common Stock FMR Corp.
Boston, MA 2,343,500 <FN2> 9.4%
Common Stock Royce & Associates, Inc.
Royce Management Company
New York, NY 1,473,696 <FN3> 5.9%
Common Stock Moriah Fund, Inc.
Real Silk Investments, Inc.
Daniel R. Efroymson
Mary Ann Stein
Indianapolis, IN 1,405,389 <FN4> 5.6%
Percent
_________________________
<FN1> The shares shown include 175,000 non-qualified stock options
held by Mr. Arnold.
<FN2> Based on information supplied pursuant to Form 13G for the
year ended 12/31/98, management is advised that Edward C.
Johnson 3rd 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 3rd, 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.
<FN3> Based on information supplied pursuant to Form 13G for the
year ended 12/31/98, management is advised that Royce &
Associates, Inc. exercises sole dispositive and voting power
over 1,443,696 shares, and that Royce Management Company
exercises sole dispositive and voting power over 30,000
shares. Management is further advised that Charles M. Royce
may be deemed to beneficially own the shares of stock in the
Company owned by Royce & Associates, Inc. and Royce
Management Company as the controlling person of said
entities.
<FN4> Based on information supplied pursuant to separately filed
Forms 13-G for the year ended 12/31/98, management is
advised that Moriah Fund, Inc., Real Silk Investments, Inc.,
Daniel R. Efroymson and Mary Ann Stein exercise sole
dispositive and voting power over 632,933, 600,000, 36,130
and 10,648 shares, respectively, and that Daniel R.
Efroymson exercises shared voting and dispositive power with
Real Silk Investments, Inc. over 113,530 shares, and that
Mary Ann Stein exercises shared voting and dispositive power
with Moriah Fund, Inc. over 12,148 shares. The separately
filed Forms 13-G state that the four (4) parties in
interest, though filing as two (2) subgroups, may be deemed
to be part of the combined group for reporting greater than
5% ownership of the Company.
</FN>
The following table sets forth certain information as of
March 1, 1999, 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
Title of Name and Address Beneficially of
Class of Beneficial Owner Owned Class
Common Stock E.H. Arnold 4,471,846 <FN1> 17.90%
Common Stock Kenneth F. Leedy 417,100 <FN2> 1.60%
Common Stock Heath L. Allen 284,470 <FN3> 1.10%
Common Stock Ronald E. Walborn 322,840 <FN4> 1.25%
Common Stock Arthur L. Peterson 6,300 *
Common Stock Carlton E. Hughes 12,000 <FN5> *
Common Stock Donald G. Johnson 83,900 <FN6> *
Common Stock Directors and
Officers as a Group
(7 in number) 5,598,456 <FN7> 21.90%
* less than 1.0%
____________________
<FN1> See Note (1) of the immediately preceding table.
<FN2> The shares shown include 251,200 shares covered by incentive
and non-qualified stock option(s).
<FN3> The shares shown include 108,400 shares covered by incentive
and non-qualified stock option(s) and 109,870 shares held
jointly by Mr. Allen and his spouse.
<FN4> The shares shown include 108,400 shares covered by incentive
and non-qualified stock option(s) and 6,140 shares held for
Mr. Walborn's segregated account of Walborn Shambach
Associates Profit Sharing Trust.
<FN5> The shares shown include 2,000 shares covered by non-
qualified stock option(s) and 5,000 shares held jointly by
Mr. Hughes and his spouse.
<FN6> The shares shown include 78,200 shares covered by incentive
stock options.
<FN7> 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 (6) above.
</FN>
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 2001 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 2000 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 2001 Annual Meeting
of Shareholders and until their successors are duly elected and
qualified. Carlton E. Hughes has advised the Company that he is
unlikely to serve as a director for another full two (2) year
term, and the Company is now considering suitable candidates to
fill the vacancy should Mr. Hughes elect to resign from the Board
during the course of his term. 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 1998, met on six separate occasions.
TO BE ELECTED FOR A TWO-YEAR TERM
HEATH L. ALLEN: 71, 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.
KENNETH F. LEEDY: 57, 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: 67, 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 IREX Corp.
TO CONTINUE IN OFFICE
EDWARD H. ARNOLD: 59, Director since 1969
President and Chairman of the Board (1982 to present) of
Arnold Industries; President (1974 to 1997) and Treasurer
(1974 to 1982) of New Penn.
RONALD E. WALBORN: 62, Director since 1972
President and Treasurer of Walborn Shambach Associates
(Accountants); CFO (1997 to present); Treasurer (1982 to
present) of Arnold Industries; Treasurer (1982 to 1997) and
Assistant Treasurer (1980 to 1982) of New Penn; Secretary
and Treasurer of Arnold Transportation Services, Inc. (1997
to present).
ARTHUR L. PETERSON: 72, Director since 1988
Scott Professor of Leadership Studies, Rocky Mountain
College, Billings, Montana (1998 to present); President of
Center for the Study of the Presidency, New York, New York
(1997 to 1998); Executive Director of the Florida
Association of Colleges and Universities (1994 to 1997);
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 1998.
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 1998. 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 CFO, Treasurer and Director for
the Company each received a flat fee of $10,000 for their
services in 1998. 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: 59,
President and Chairman of the Board (1982 to present) of
Arnold Industries; President (1974 to 1998) and Treasurer
(1974 to 1982) of New Penn.
KENNETH F. LEEDY: 57,
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.
DONALD G. JOHNSON: 44,
Senior Vice President (1998 to present) of Arnold
Industries, Inc.
HEATH L. ALLEN: 71,
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: 62,
President and Treasurer of Walborn Shambach Associates
(Accountants); CFO (1998 to present); Treasurer (1982 to
present) of Arnold Industries; Treasurer (1982 to 1998) and
Assistant Treasurer (1980 to 1982) of New Penn.; Secretary
and Treasurer of Arnold Transportation Services, Inc. (1998
to present).
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, 1998, to or for the
chief executive officer and each of the executive officers of the
Company whose cash compensation exceeded $100,000:
SUMMARY COMPENSATION TABLE
Annual Compensation Long Term Compensation
Other Awards All other
Name and Year Salary ($) Bonus($) annual compensa-
Principal Position compensa- Restricted Options tion <FN1>
stock awards
($)
EDWARD H. ARNOLD 1998 187,200 500,000 - - - 15,780
President and Chairman 1997 190,804 500,000 - - 175,000 15,930
of the Board 1996 187,200 200,000 - - - 14,865
KENNETH F. LEEDY 1998 166,400 400,000 - - - 15,780
Executive Vice President 1997 169,600 400,000 - - 100,000 15,930
1996 166,400 300,000 - - - 14,865
DONALD G. JOHNSON 1998 108,890 71,276 - - 6,000 15,780
Senior Vice President 1997 108,091 82,341 - - 25,000 15,930
<FN1> 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. The Arnold Industries, Inc. 1997 Stock
Option Plan (the "1997 Plan"), is designed to promote continuity
of management and to increase incentive for those primarily
responsible for the Company's long-range financial success. The
aggregate number of shares for which options may be granted under
the 1997 Plan is 2,000,000. As of December 31, 1998, options for
840,000 shares were outstanding to approximately 275 employees
under the 1997 Stock Option Plan. Options for 818,100 shares
remain outstanding under the 1987 Stock Option Plan and are held
by 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 non-qualified options, which do not qualify as
incentive stock options. Both incentive stock options and non-
qualified stock options must be granted at not less than 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 non-qualified 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.
Stock options were granted to and exercised by several of
the Company's executive officers in fiscal year 1998. 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
Shares unexercised unexercised
Name acquired on Value realized Options/SARs in-the-money
exercise (#) ($) at FY-End (#) Options/SARs
exercisable/ at FY-End ($)
unexercisable exercisable/
<FN1> unexercisable
EDWARD H. ARNOLD - - 175,000/0 -
KENNETH F. LEEDY - - 125,676/125,524 513,289/428,846
HEATH L. ALLEN 19,140 225,692 58,400/50,000 234,500/196,875
RONALD E. WALBORN 30,000 353,750 58,400/50,000 234,500/196,875
DONALD G. JOHNSON 2,400 27,700 16,756/61,444 47,040/191,373
<FN1> 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 62 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 $155,495 for 1998.
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 5 non-directors; category (3) covers 3 other
individuals; and categories (4) through (6) cover 47
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;
Arkansas Best Corporation; Arnold Industries, Inc.; Boyd Bros.
Transport, Inc.; Builders Transport, Inc.; Cannon Express Inc.
CL A; CNF Transportation, Inc.; Consol Delivery & Logistics;
Consolidated Freight Corporation; Covenant Transport CL A;
Forward Air Corporation; Frozen Food Express Industries; FRP
Properties, Inc.; Heartland Express, Inc.; Intrenet, Inc.; J.B.
Hunt Transport Services, Inc.; Jevic Transportation; Kenan
Transport Company; KLLM Transport Services, Inc.; Knight
Transportation; Landair Corporation; Landstar System, Inc.; Lynch
Corporation; M.S. Carriers, Inc.; Mark VII, Inc.; Marten
Transport, Ltd.; Matlack Systems, Inc.; Morgan Group, Inc. CL A;
Motor Cargo Industries, Inc.; MTL, Inc.; Old Dominion Freight
Line; OTR Express, Inc.; PAM Transportation Services; Polar
Express Corporation; Roadway Express, Inc.; Simon Transport
Services CL A; Smith Motor Xpress A; Swift Transportation Co.;
Trailer Bridge, Inc.; Transfinancial Holdings, Inc.; Transport
Corporation of America; Trism, Inc.; U.S. Xpress Enterprises CL
A; USA Truck, Inc.; US Freightways Corporation; 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 1993 1994 1995 1996 1997 1998
ARNOLD IND INC 100.00 100.80 86.49 81.32 90.68 87.31
TRUCKING, EXCEPT LOCAL 100.00 96.14 81.51 76.99 111.25 107.04
NASDAQ MARKET INDEX 100.00 104.99 136.18 169.23 207.00 291.96
ASSUMES $100 INVESTED ON JAN. 1, 1993
ASSUMES DIVIDEND REINVESTED
FISCAL YEAR ENDING DEC. 31, 1998
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 1998 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 1997 Stock Option Plan. The
Company also maintains a supplemental retirement plan for some 62
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 and
1997 Stock Option Plans can be found on page 6 of the proxy
statement. Further information on the supplemental retirement
plan and its benefits to the existing officers is found on page 7
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 1998, the Company utilized annual salary,
annual cash bonus awards and 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 1998's determinations.
Application of the foregoing criteria to Edward H. Arnold,
the Company's chief executive officer, supports placing Mr.
Arnold's total compensation package in the median range of
compensation in comparison to amounts paid to his counterparts in
the trucking industry. Because the Company generated net
earnings increases in 1998 as compared to prior years, the
Committee believes that Mr. Arnold's compensation package for
1998 was appropriately maintained at the median level of
compensation, albeit slightly lower than the level of
compensation paid during 1997. 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 1998. New Penn and Arnold Logistics are
performing to management's expectations, and Arnold
Transportation's performance improved during the year. Arnold
Transportation has been positioned to improve its performance
even more during 1999 and beyond. Accordingly, reflecting the
Company's positive outlook for the future, Mr. Arnold's total
compensation package was maintained near the positive level
reflected by the 1997 compensation amount.
The Compensation Committee
Carlton E. Hughes
Arthur L. Peterson
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
Mr. Hughes and Dr. 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.
AMENDMENT AND RESTATEMENT OF THE COMPANY'S BYLAWS
The Company's Board of Directors has recommended that the
Bylaws of the Company be amended and restated in their entirety.
The Bylaws establish procedural rules for the conduct of
shareholders and board meetings, provide a general outline of the
responsibilities of corporate officers, and set forth various
other procedures and safeguards, including officer and director
indemnification, etc. Over the years, the legislature of
Pennsylvania, the Company's state of domicile, has enacted
reforms to permit Pennsylvania corporations to operate with the
same procedures and safeguards available to corporations
incorporated under the laws of other states. The Company, when
appropriate from time to time, has amended the Bylaws on a
piecemeal basis to incorporate these reforms. The purpose of the
current proposal to the shareholders is to consolidate all of the
existing Bylaw provisions into a comprehensive set of bylaws, as
well as to make minor additional reforms in compliance with
current Pennsylvania law.
The Board of Directors recommends a VOTE FOR approval of the
proposal to amend and restate the Company's Bylaws in accordance
with the form of Bylaws appended hereto as Appendix 1.
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 $253,678 for services performed in
1998 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 1999 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 $523,950 for services performed in 1998 for the
Company and its subsidiaries. It is anticipated that the Company
and its subsidiaries will make payments to Walborn Shambach
Associates through 1999 for management and accounting services to
be performed.
INDEPENDENT ACCOUNTANTS
The firm of PricewaterhouseCoopers LLP 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 eight fiscal years.
A representative of PricewaterhouseCoopers LLP 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 Pricewaterhouse-
Coopers LLP to serve as independent auditor for its 1999 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 2000 ANNUAL MEETING
The 2000 Annual Meeting of Shareholders will be held on or
about May 3, 2000. 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, 1999, 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 unamended 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.
FORWARD-LOOKING STATEMENTS RISK FACTORS
The nature of the Company's operations subject it to
changing economic, competitive, regulatory and technological
conditions, risks and uncertainties. In accordance with the
"safe harbor" provisions of the Private Securities Litigation
Reform Act of 1995, the Company provides the following cautionary
remarks regarding important factors which, among others, could
cause future results to differ materially from the forward-
looking statements, expectations and assumptions expressed or
implied herein. Those include statements about our management
confidence and strategies for performance; expectations for new
and existing technologies and opportunities; and expectations for
market segment and industry growth.
These factors include, but are not limited to: (1) changes
in the business environment in which the Company operates,
including licensing restrictions, interest rates and capital
costs; (2) changes in governmental laws and regulations,
including taxes; (3) market and competitive changes, including
market demand and acceptance for new services and technologies;
and (4) other risk factors listed from time to time in the
Company's SEC reports. The Company does not intend to update
this information and disclaims any legal liability to the
contrary.
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 10K 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 2, 1999
APPENDIX 1
AMENDED AND RESTATED BYLAWS OF
ARNOLD INDUSTRIES, INC.
(May 5, 1999)
ARTICLE I - OFFICES
1. The registered office of the corporation shall be at
625 South Fifth Avenue, Lebanon, Pennsylvania 17042.
2. The corporation may also have offices at such other places
as the Board of Directors may from time to time appoint or
the business of the corporation may require.
ARTICLE II - SEAL
1. The corporation seal shall have inscribed thereon the name
of the corporation, the year of its organization and the
words "Corporate Seal, Pennsylvania".
ARTICLE III - SHAREHOLDERS' MEETINGS
1. Annual meetings of the shareholders shall be held at the
Lebanon Country Club, Lebanon, Pennsylvania, or such other
places, either within or without the Commonwealth of
Pennsylvania, as may from time to time be designated by the
Board of Directors.
2. The annual meetings of the shareholders shall be held on the
first Wednesday of May in each year if not a legal holiday,
and if a legal holiday, then on the next business day
following, at the time designated by the Board of Directors,
when the shareholders shall transact such business as may
properly be brought before the meeting. If the annual
meeting shall not be called and held within six months after
the designated time, any shareholder may call such meeting.
3. Written notice of the annual meeting shall be mailed to
each shareholder entitled to vote at such address as appears
on the books of the corporation, at least ten (10) days
prior to any meeting to consider a fundamental change or
five (5) days prior to the meeting for any other purpose.
4. Special meetings of the shareholders may be called at any
time by the President, or the Board of Directors, or
shareholders entitled to cast at least one fifth of the
votes which all shareholders are entitled to cast at the
particular meeting. At any time, upon written request of
any person or persons who have duly called a special
meeting, it shall be the duty of the Secretary to fix the
time of the meeting which shall not be less than ten (10)
nor more than sixty (60) days after receipt of the request.
If the Secretary fails to fix such meeting date and give due
notice thereof, the person or persons requesting the special
meeting may do so.
5. Business transacted at all special meetings shall be
confined to the objects stated in the call and matters
germane thereto.
6. Written notice of a special meeting of the shareholders
stating the time and place and object thereof, shall be
mailed, postage prepaid, to each shareholder entitled to
vote thereat at such address as appears on the books of the
corporation, at least ten days before such meeting, unless a
greater period of notice is required by statute in a
particular case.
7. The presence, in person or by proxy, of the holders of a
majority of the outstanding shares entitled to vote shall
constitute a quorum at all meetings of the shareholders for
the transaction of business except as otherwise provided by
law, by Articles of Incorporation or by these Bylaws. If,
however, such quorum shall not be present or represented at
any meeting of the shareholders, those entitled to vote
thereat, present in person or represented by proxy, shall
have power to adjourn the meeting from time to time, without
notice other than announcement at the meeting, until the
requisite number of shares shall be present. In the case of
any meeting called for the election of directors,
adjournment or adjournments may be taken only from day to
day until such directors have been elected, and those
shareholders who attend the second of such adjourned
meetings, although less than a quorum, shall nevertheless
constitute a quorum for the purpose of electing directors.
8. Only persons who are nominated in accordance with the
following procedures shall be eligible for election as
directors by the shareholders at any meeting called for that
purpose. Nominations of persons for election to the Board
may be made by the Board, by any nominating committee or
person(s) appointed by the Board, by the persons named as
proxies in the proxy card in the event an unexpected vacancy
arises in the original slate of nominees and the Board
neither designates a replacement nominee nor amends these
Bylaws to eliminate that office of director for which the
vacancy arose, or by any shareholder of the corporation
entitled to vote for the election of directors at the
meeting who complies with the notice procedures set forth in
this Paragraph 8. Such nominations, other than those made
by or at the direction of the Board or by the persons named
as proxies in the proxy card, shall be made pursuant to
timely notice in writing to the Secretary of the
corporation. To be timely, a shareholder's notice must be
delivered to or mailed to and received by the Secretary at
the principal executive office of the corporation with
respect to (i) an election to be held at an annual meeting
of shareholders, at least 45 days in advance of the date in
the then-current year that corresponds to the date on which
the corporation first mailed its Notice of Annual Meeting,
Proxy Statement and proxy card for the prior year's annual
meeting; provided, however, that if the Annual Meeting in
then-current year is held more than 30 days before or after
the date on which the previous year's annual meeting was
held, then such notice shall be delivered to or mailed to
and received by the Secretary at least 90 days in advance of
the actual date of the Annual Meeting in the then-current
year, or (ii) an election to be held at a special meeting of
shareholders for the election of directors, the close of
business on the 10th day following the day on which notice
of the date of the meeting was mailed to
shareholders or public disclosure was made, whichever first
occurs. Such shareholder's notice to the Secretary shall set
forth (a) as to each person whom the shareholder proposes to
nominate for election or re-election as a director, (i) the name,
age, business address and residence address of the person,
(ii) the principal occupation or employment of the person,
(iii) the class and number of shares of capital stock of the
corporation which are beneficially owned by the person,
(iv) a description of all arrangements or understandings between
the shareholder and the person pursuant to which the
nomination is proposed to be made, and (v) any other
information relating to the person that is required to be
disclosed in solicitations for proxies for election of
directors pursuant to Regulation 14A under the Securities
Exchange Act of 1934, as amended (or any successor act or
regulation); and (b) as to the shareholder giving the
notice, (i) the name and record address of such shareholder,
(ii) the class and number of shares of capital stock of the
corporation which are beneficially owned by such
shareholder, and (iii) a representation that the shareholder
intends to appear in person or by proxy at the meeting to
nominate the person. The corporation may require any
proposed nominee to furnish such other information as may
reasonably be required by the corporation to determine the
eligibility of such proposed nominee to serve as a director
of the corporation. No person shall be eligible for
election as a director of the corporation unless nominated
in accordance with the procedures set forth herein. The
chairman of the meeting shall, if the facts warrant,
determine and declare to the meeting that a nomination was
not made in accordance with the foregoing procedure, and if
he should so determine, he shall so declare to the meeting
and the defective nomination shall be disregarded.
9. At each meeting of the shareholders, every shareholder
having the right to vote shall be entitled to vote in person
or by proxy appointed by a written instrument or by
telephonic or electronic ballot, subscribed to such
shareholder and available to the Secretary at the meeting.
No unrevoked proxy shall be valid after three years from the
date of its execution, unless a longer time is expressly
provided therein. In all elections for directors cumulative
voting shall be allowed. Upon the affirmative vote of a
majority of shareholders entitled to vote thereat before the
voting begins, any such election for directors shall be by
ballot. No share shall be voted at any meeting upon which
any installment payment is due and unpaid. The original
share ledger or transfer book or a duplicate thereof kept in
this Commonwealth, shall be prima facie evidence of the
right of the person named therein to vote thereon.
10. In advance of any meeting of shareholders, the Board of
Directors may appoint judges of election, who need not be
shareholders, to act at such meeting or any adjournment
thereof. If judges of election be not so appointed, the
chairman of any such meeting may, and on the request of any
shareholder or his proxy shall, make such appointment at any
meeting. The number of judges shall be one or three. If
appointed at a meeting on the request of one or more
shareholders or proxies, the majority of shares present and
entitled to vote shall determine whether one or three judges
are to be appointed. On request of the chairman of the
meeting, or any shareholder or his proxy, the judges shall
make a report in writing of any challenge or question or
matter determined by them, and execute a certificate of any
fact found by them. No person who is a candidate for office
shall act as judge.
11. The officer or agent having charge of the transfer books
shall make a complete list of the shareholders entitled to
vote at each meeting of shareholders, arranged in
alphabetical order, with the address of and the number of
shares held by each. The list shall be produced and kept
open at the time and place of the meeting, and shall be
subject to the inspection of any shareholder during the
whole time of the meeting. The original share ledger or
transfer book, or duplicate thereof kept in this
Commonwealth, shall be prima facie evidence as to who are
the shareholders entitled to examine such list or share
ledger or transfer book, or to vote in person or by proxy at
any meeting of shareholders. Notwithstanding the provisions
of this paragraph, if the corporation has 5,000 or more
shareholders, the corporation need not provide a voting list
but may instead make the same information available to
shareholders by any other means.
ARTICLE IV - DIRECTORS
1. The business of the corporation shall be managed by its
Board of Directors, not less than three (3) nor more than
ten (10) in number, who need not be residents of this
Commonwealth or shareholders in the corporation. The
directors shall be classified into two (2) classes with
respect to their terms of office. Each class shall be as
nearly equal in number as possible. The term of office of
at least one class of directors shall expire in each year.
Upon initial classification, the directors in the first
class shall be elected for a term of one year; the directors
in the second class, for a term of two years. At each
succeeding annual meeting for the election of directors, the
successors to the directors whose terms expire in that year
shall be elected for terms of two (2) years. Each class
shall hold office until its successors are duly elected and
qualified. Action to decrease the number of directors shall
not have the effect of shortening the term of any incumbent
director.
2. In addition to the powers and authorities by these Bylaws
expressly conferred upon them, the Board may exercise all
such powers of the corporation and do all such lawful acts
and things as are not by statute or by the Articles of
Incorporation or by these Bylaws directed or required to be
exercised or done by the shareholders.
3. The meetings of the Board of Directors may be held at such
time and place within this Commonwealth, or elsewhere, as a
majority of the directors may from time to time appoint, or
as may be designated in the notice calling the meeting.
4. Special meetings of the Board may be called by the President
on five days notice to each director, either personally, by
mail or by facsimile; special meetings shall be called by
the President or Secretary in like manner and on like notice
on the written request of two directors.
5. A majority of the directors in office shall be necessary to
constitute a quorum for the transaction of business, and the
acts of a majority of the directors present at a meeting at
which a quorum is present shall be the acts of the Board of
Directors. If all the
Directors shall severally or collectively consent in writing
to any action to be taken by the corporation, such action
shall be a valid corporate action as though it had been
authorized at a meeting of the Board of Directors.
6. Any contract or other transaction between the corporation
and one or more of its directors or between the corporation
and any other corporation, firm or association of any type
or kind in which one or more of its directors are directors
or are otherwise interested, shall not be void or voidable
solely by reason of such common directorship or interest, or
solely because such director or directors are present at or
participate in the meeting of the Board or a committee
thereof which authorizes or approves the contract or
transaction, or solely because his or their votes are
counted for such purpose, if (a) the contract or other
transaction is fair as to this corporation at the time it is
authorized, approved or ratified, or (b) the material facts
as to the common directorship or interest as to the contract
or transaction are disclosed to or known by the Board of
Directors or committee and the Board of Directors or
committee authorizes, approves or ratifies the contract or
transaction by affirmative vote of a majority of the
disinterested directors, even though the disinterested
directors be less than a quorum, or (c) the material facts
as to the common directorship or interest and as to the
contract or transaction are disclosed to or known by the
shareholders and they authorize, approve or ratify the
contract or transaction in good faith.
7. Directors shall be compensated for their services, and
reimbursed for their expenses. The Board of Directors shall
periodically determine a reasonable basis for compensation,
and a majority of the Board of Directors must adopt any
resolution determining compensation. The Board of Directors
may, if it deems it appropriate, provide for reduced or no
additional compensation for directors who are compensated
employees of the corporation.
8. No person who is or was a director of this corporation shall
be personally liable for monetary damages for any action
taken, or any failure to take any action, as a director,
unless: (a) the director has breached or failed to perform
the duties of his office; and (b) the director's breach or
failure to perform constitutes self-dealing, willful
misconduct or recklessness. This provision of the Bylaws
shall not apply to: (a) the responsibility or liability of
a director pursuant to any criminal statute; or (b) the
liability of a director for the payment of taxes pursuant to
local, state or federal law. If Pennsylvania law hereafter
is amended to authorize the further elimination or
limitation of the liability of directors, then the liability
of a director of the corporation, in addition to the
limitation on personal liability provided herein, shall be
limited to the fullest extent permitted by the amended
Pennsylvania law.
ARTICLE V - OFFICERS
1. The executive officers of the corporation shall be chosen by
the directors and shall be a President, Secretary and
Treasurer. The Board of Directors may also choose Vice
Presidents, and such other officers and agents as it shall
deem necessary, who shall hold their offices for such terms
and shall have such authority and shall perform such duties
as from time to time shall be prescribed by the Board. Any
two or more offices may be held by the same person, except
the offices of President and Secretary. It shall not be
necessary for the officers to be directors.
2. The salaries of all executive officers of the corporation
shall be fixed by the Board of Directors or by a
compensation committee comprised of members of the Board.
3. The officers of the corporation shall hold office for one
year and until their successors are chosen and have
qualified. Any elected officer may resign at any time by
giving written notice of such resignation to the Board or to
the officer to whom he reports. Unless otherwise specified
in such written notice, the resignation shall take effect
upon receipt and shall not require acceptance in order to be
effective. Any officer or agent elected or appointed by the
Board if Directors may be removed by the Board of Directors
whenever in its judgment the best interests of the
corporation will be served thereby. The Board of Directors
may permit any office of the corporation to remain unfilled,
except as otherwise required by law, or the Board may fill
any vacancy in such office.
4. The President shall be the chief executive officer of the
corporation. He shall preside at all meetings of the
shareholders and directors; he shall have general and active
management of the business of the corporation, and shall see
that all orders and resolutions of the Board are carried
into effect, subject, however, to the right of the directors
to delegate any specific powers, except such as may be by
statute exclusively conferred on the President, or to any
other officer or officers of the corporation. He may
execute bonds, mortgages and other contracts requiring a
seal, under the seal of the corporation. He shall be EX-
OFFICIO a member of all committees, and shall have the
general powers and duties of supervision and management
usually vested in the office of the President of a
corporation.
5. The Secretary shall attend all sessions of the Board and all
meetings of the shareholders and act as clerk thereof, and
record all the votes of the corporation and the minutes of
all its transactions in a book to be kept for that purpose;
and shall perform like duties for all committees of the
Board of Directors when required. He shall give, or cause
to be given, notice of all meetings of the shareholders and
of the Board of Directors. He shall keep in safe custody
the corporate seal of the corporation, and when authorized
by the Board, affix the same to any instrument requiring it.
6. The Treasurer shall have custody of the corporate funds and
securities and shall keep full and accurate accounts of
receipts and disbursements in books belonging to the
corporation, and shall keep the moneys of the corporation in
separate accounts to the credit of the corporation. He
shall disburse the funds of the corporation as may be
ordered by the Board or officers of the corporation, taking
proper vouchers for such disbursements, and shall render to
the President and directors, at the regular meetings of the
Board, or whenever they may require it, an account of all
his transactions as Treasurer and of the financial condition
of the corporation.
ARTICLE VI - EXECUTIVE COMMITTEE AND OTHER COMMITTEES
1. The Board of Directors, by resolution adopted by a majority
of the entire Board of Directors, may appoint from among its
members an Executive Committee and one or more other
committees, each of which shall have one or more members.
The Board may fill any vacancy in any committee; abolish any
committee at its pleasure; and remove any director from
membership on any committee at any time, with or without
cause.
2. Any committee of the Board of Directors shall not have
authority to make, alter or repeal any bylaw of the
corporation; create or fill vacancies in the Board; submit
to shareholders any action that requires shareholders'
approval; act on matters committed by the Bylaws or
resolution of the Board to another committee of the Board;
or amend or repeal any resolution theretofore adopted by the
Board that by its terms is amendable or repealable only by
the Board.
3. Subject to the foregoing, the Executive Committee shall,
during the intervals between meetings of the Board of
Directors, have and may exercise all of the powers and
authority of the Board of Directors, and any other committee
of the Board of Directors shall have authority to the extent
provided in the resolution adopted by the Board of
Directors.
4. The Executive Committee of the Board of Directors shall
consist of at least three directors, including the
President, the Treasurer, the Secretary and such other
number of directors as the Board may appoint.
5. Actions taken at a meeting of any committee or by written
consent shall be reported to the Board at its next regular
meeting following such committee meeting.
6. The Board may designate one or more directors as alternate
members of any committee who may replace any absent or
disqualified member at any meeting of the committee or for
the purposes of any written action by the committee.
ARTICLE VII - REMOVAL OF DIRECTORS
1. A director of the corporation may be removed only for cause
by the shareholders by the affirmative vote of the
shareholders entitled to cast at least a majority of the
votes which all shareholders would be entitled to cast at
any annual election of directors. The Board of Directors
may be removed at any time with or without cause by the
unanimous vote or consent of shareholders entitled to vote
thereon.
2. The Board by the affirmative vote of a majority of the
directors in office may remove a director if he be declared
of unsound mind by an order of court, or convicted of
felony, or for any other proper cause, or if, withing 60
days after notice of his election, he does not accept such
office either in writing or by attending a meeting of the
Board of Directors and fulfill such other requirements as
the Bylaws may specify.
ARTICLE VIII - VACANCIES
1. If the office of any officer or agent, one or more, becomes
vacant for any reason, the Board of Directors may choose a
successor or successors, who shall hold office for the
unexpired term in respect of which such vacancy occurred.
2. Vacancies in the Board of Directors, including vacancies
resulting from an increase in the number of directors, shall
be filled by a majority of the remaining members of the
Board though less than a quorum, and each person so elected
shall be a director until his successor is elected by the
shareholders, who may make such election at the next annual
meeting of the shareholders or at any special meeting duly
called for that purpose and held prior thereto.
ARTICLE IX - CORPORATE RECORDS
1. There shall be kept at the registered office or principal
place of business of the corporation an original or
duplicate record of the proceedings of the shareholders and
of the directors, and the original or a copy of its Bylaws,
including all amendments or alterations thereto to date,
certified by the Secretary of the corporation. An original
or duplicate share register shall also be kept at the
registered office or principal place of business or at the
office of a transfer agent or registrar, giving the names of
the shareholders, their respective addresses and the number
and classes of shares held by each, the number and date of
certificates issued for the shares, and the number and date
of certificates issued for the shares, and the number and
date of cancellation of every certificate surrendered for
cancellation.
2. Every shareholder shall, upon written verified demand, have
a right to examine, in person or by agent or attorney, at
any reasonable time or times, for any reasonable purpose,
the share register, books or records of account, and records
of the proceedings of the shareholders and directors, and
make extracts therefrom.
ARTICLE X - CAPITAL STOCK
1. The shares of the corporation shall be represented by
certificates or shall be uncertificated. Each registered
holder of shares, upon request to the corporation, shall be
provided a certificate of stock, representing the number of
shares owned by such holder. Absent a specific request for
such a certificate by the registered owner or transferee
thereof, all shares shall be uncertificated upon the
original issuance thereof by the corporation or upon the
surrender of the certificate representing such shares to the
corporation. Certificates for shares of the capital stock
of the corporation shall be in such form as shall be
approved by the Board of Directors. They shall be signed by
or have engraved thereon a facsimile signature of the
President and the Secretary or an Assistant Secretary,
certifying the number and class of the corporation's shares
held by such stockholder.
2. The Board of Directors may, in its discretion, appoint
responsible banks or trust companies or other appropriately
qualified institutions to act as transfer agents and
registrars of the stock of the corporation; and, upon such
appointments being made, no stock certificate shall be valid
until countersigned by one of such transfer agents and
registered by one of such registrars. Where any such
certificate is registered with the manual signature of a
registrar, the countersignature of a transfer agent may
be a facsimile or engraved, stamped or printed. The Board
of Directors may also make such additional rules and
regulations as it may deem expedient concerning the issue,
transfer and registration of uncertificated shares or
certificates for shares of the capital stock of the
corporation.
3. Shares of stock may be transferred by delivery of the
certificates therefor, accompanied by an assignment in
writing on the back of the certificates or by written power
of attorney to sell, assign and transfer the same, signed by
the record holder thereof, upon receipt of proper transfer
instructions from the owner of uncertificated shares, or
upon the escheat of said shares under the laws of any state
of the United States. In no event shall a transfer of
shares affect the right of the corporation to pay any
dividend upon the stock to the holder of record thereof for
all purposes, and no transfer shall be valid, except between
the parties thereto, until such transfer shall have been
made upon the books of the corporation.
4. The Board of Directors may fix a time, not more than ninety
(90) days, prior to the date of any meeting of shareholders,
or the date fixed for the payment of any dividend or
distribution, or the date for the allotment of rights, or
the date when any change or conversion or exchange of shares
will be made or go into effect, as a record date for the
determination of the shareholders entitled to notice of, or
to vote at, any such meeting, or entitled to receive payment
of any such dividend or distribution, or to receive any such
allotment of rights, or to exercise the rights in respect to
any such change, conversion, or exchange of shares. In such
case, only such shareholders as shall be shareholders of
record on the date so fixed shall be entitled to notice of,
or to vote at, such meeting or to receive payment of each
dividend, or to receive such allotment of rights, or to
exercise such rights, as the case may be, notwithstanding
any transfer of any shares on the books of the corporation
after any record date fixed as aforesaid. If a record date
is not fixed:
(i) The record date for determining shareholders entitled
to notice of or to vote at a meeting of shareholders
shall be at the close of business on the day next
preceding the day on which notice is given or, if
notice is waived, at the close of business on the day
immediately preceding the day on which the meeting is
held;
(ii) The record date for determining shareholders entitled
to express consent or dissent to corporate action in
writing without a meeting, or to call a special meeting
of the shareholders, or to propose an amendment to the
articles shall be at the close of the business day on
which the written request or petition is filed with the
Secretary; and
(iii) The record date for all other purposes shall be at the
close of business on the day on which the Board of
Directors adopts the resolution relating thereto.
5. Shares standing in the name of another corporation may be
voted by any officer or agent or by proxy appointed by any
officer or agent of such other corporation unless the
Secretary of the corporation is furnished with a certified
copy of a resolution of the corporation's board of directors
or of a provision of its Articles or bylaws, designating
another person to vote, and then the shares shall be voted
only by that designated person.
6. Shares standing in the name of a trustee or other fiduciary,
and shares held by an assignee for the benefit of creditors
or by a receiver, may be voted by the trustee, fiduciary,
assignee or receiver.
7. Where shares are held jointly or as tenants in common by two
or more persons, as fiduciaries or otherwise, if only one or
more of such persons is present in person or by proxy, all
of the shares standing in the names of such persons shall be
deemed to be represented for the purpose of determining a
quorum and the corporation shall accept as the vote of all
the shares the vote cast by him or a majority of them; and
if such persons are equally divided upon whether to vote the
shares or upon the manner of voting, the voting of the
shares shall be divided equally among them; provided, that
if there has been filed with the Secretary of the
corporation a copy, certified by an attorney to be correct,
of the relevant portions of the agreement under which the
shares are held, or the instrument by which the trust or
estate was created, or an Order of Court, the person or
persons specified as having such voting power in the latest
document so filed shall be entitled to vote the shares but
only in accordance therewith.
8. A shareholder whose shares are pledged shall be entitled to
vote such shares until the shares have been transferred into
the name of the pledgee or a nominee of the pledgee.
9. Any person claiming a share certificate to be lost or
destroyed shall make an affidavit or affirmation of that
fact and advertise the same in such manner as the Board of
Directors may require, and shall give the corporation a bond
of indemnity with sufficient surety to protect the
corporation or any person injured by the issue of a new
certificate from any liability or expense which it or they
may incur by reason of the original certificate remaining
outstanding, whereupon a new certificate may be issued for
the same tenor and for the same number of shares as the one
alleged to be lost or destroyed, but always subject to the
approval of the Board of Directors.
10. Subject to the provisions of applicable statutes, the Board
of Directors may declare and pay dividends upon the
outstanding shares of the corporation out of its surplus
from time to time and to such extent as the Board of
Directors may deem advisable, in cash, property or shares of
the corporation.
11. If the corporation acquires in any manner shares of its
stock, such shares shall not vote or participate in
dividends while held by the corporation, and shall be
subject to disposition as authorized by the Board of
Directors.
ARTICLE XI - STANDARD OF CARE AND JUSTIFIABLE RELIANCE
Directors and members of any committee of the Board of
Directors shall stand in a fiduciary relationship to the
corporation and shall perform their duties in good faith, in a
manner they reasonably believe to be in the best interests of the
corporation, and with such care, including reasonable inquiry,
skill and diligence, as a person of ordinary prudence would use
under similar circumstances. In performing their duties,
directors and members of any such committee shall be entitled to
rely in good faith on
information, opinions, reports or statements, including financial
statements and other financial data, in each case prepared or
presented by any of the following:
(a) One or more officers or employees of the corporation
whom the directors or members reasonably believe to be
reliable and competent in the matters presented.
(b) Counsel, public accountants or other persons as to
matters which the directors or members reasonably
believe to be within the professional or expert
competence of such person.
(c) A committee of the Board upon which they do not serve,
duly designated in accordance with law, as to matters
within its designated authority, which committee the
directors or members reasonably believe to merit
confidence.
Directors or members shall not be considered to be acting in
good faith if they have knowledge concerning the matter in
question that would cause their reliance to be unwarranted.
In discharging the duties of their respective positions, the
Board of Directors, committees of the Board of Directors, and
individual directors and members may, in considering the best
interests of the corporation, consider to the extent they deem
appropriate: (1) the effects of any action upon any and all
groups affected by such action, including shareholders,
employees, suppliers, customers and creditors of the corporation
and upon communities in which offices or other establishments of
the corporation are located; (2) the short-term and long-term
interests of the corporation, including benefits that may accrue
to the corporation from its long-term plans and the possibility
that these interests may be best served by the continued
independence of the corporation; (3) the resources, intent and
conduct (past, stated and potential) of any person seeking to
acquire control of the corporation; and (4) all other pertinent
factors. The consideration of those factors shall not constitute
a violation of the standard of care provided above. The Board of
Directors, committees of the Board of Directors, and individual
directors and members shall not be required, in considering the
best interests of the corporation or the effects of any action,
to regard any corporate interest or the interests of any
particular group affected by such action as a dominant or
controlling interest or factor.
Absent breach of fiduciary duty, lack of good faith or self-
dealing, actions taken as a director or member of a committee of
the Board of Directors or any failure to take any action shall be
presumed to be in the best interest of the corporation.
Nothing in Article XI shall be deemed to limit the rights
accorded to the Corporation and the Board of Directors under
Section 1715 of the Pennsylvania Business Corporation Law or any
successor provision thereto.
ARTICLE XII - INDEMNITY
1. The corporation shall indemnify, to the extent permitted
under these Bylaws, any person who was or is a party (other
than a party plaintiff suing on his own behalf or in the
right of the corporation), or who is threatened to be made
such a party, to any threatened, pending or completed
action, suit or proceeding, whether civil, criminal,
administrative or investigative (including, but not limited
to, an action by or in the right of the corporation) by
reason of the fact that he is or was a director, officer or
employee of the corporation, or is or was serving at the
request of the corporation as a director, officer or
employee of another corporation, partnership, joint venture,
trust or other enterprise (such person being herein called
an "Indemnified Person"), against expenses (including
attorneys' fees), judgments, fines and amounts paid in
settlement actually and reasonably incurred by him in
connection with such action, suit or proceeding (herein
called collectively the "Indemnified Liabilities"), unless
the act or failure to act giving rise to the claim for
indemnification is determined by a court to have constituted
self-dealing, willful misconduct or recklessness. In
addition, the corporation shall indemnify any Indemnified
Person against the Indemnified Liabilities to the full
extent otherwise authorized by Pennsylvania law, including,
without limitation, the indemnification permitted by
Sections 1741, et seq. of the Business Corporation Law.
2. The corporation shall have power to indemnify any person who
is or was an agent of the corporation, or is or was serving at
the request of the corporation as an agent of another
corporation, partnership, joint venture, trust or other
enterprise, against expenses (including attorneys' fees),
judgments, fines and amounts paid in settlement actually and
reasonably incurred by him by reason of his services on behalf of
the corporation, except as prohibited by law.
3. Expenses incurred by an officer, director, employee or agent
in defending a civil or criminal action, suit or proceeding may
be paid by the corporation in advance of the final disposition of
such action, suit or proceeding, as authorized in the manner
provided in Paragraph 4 of this Article XII, upon receipt of an
undertaking by or on behalf of such person to repay such amount
if it shall ultimately be determined that he is not entitled to
be indemnified by the corporation as authorized in this
Article XII.
4. (a) Any indemnification under Paragraph 1 of this Article
(unless ordered by a court) shall be made by the
corporation unless a determination is reasonably and
promptly made that indemnification of the director,
officer or employee is not proper in the circumstances
because he has not satisfied the terms set forth in
Paragraph 1.
(b) Expenses shall be advanced by the corporation to a
director, officer or employee upon a determination that
such person is an Indemnified Person as defined in
Paragraph 1 of this Article XII and has satisfied the
terms set forth in Paragraph 3 of this Article XII.
(c) Any indemnification under Paragraph 2 of this
Article XII or advancement of expenses to an agent
under Paragraph 3 of this Article XII (unless ordered
by a court) may be made upon a determination that the
agent has satisfied the terms of Paragraphs 2 or 3, as
applicable, and in view of all the circumstances of the
case, such person is fairly and reasonably entitled to
indemnity or advancement of expenses.
(d) All determinations under this Paragraph 4 shall be
made: (1) by the Board of Directors by a majority vote
of a quorum consisting of directors who were not
parties to such action, suit or proceeding, or (2) if
such a quorum is not obtainable, or, even if
obtainable, if a majority vote of a quorum of
disinterested directors so directs, by independent
legal counsel in a written opinion, or (3) by the
shareholders.
(e) In the event the determination of entitlement to
indemnification is to be made by independent legal
counsel pursuant to Section 4(d) of this Article, a
majority of such disinterested directors or, if the
disinterested directors do not constitute a quorum of
the Board of Directors, a majority of the Board of
Directors shall select the independent legal counsel,
but only independent legal counsel to which the
Indemnified Person does not reasonably object;
provided, however, that if a change in control shall
have occurred, the Indemnified Person shall select such
independent legal counsel to which a majority of the
disinterested directors or, if the disinterested
directors do not constitute a quorum of the Board of
Directors, a majority of the Board of Directors does
not reasonably object.
5. The indemnification provided by this Article XII shall not
be deemed exclusive of any other rights to which those
seeking indemnification may be entitled under any agreement,
vote of shareholders or disinterested directors or
otherwise, both as to action in their official capacity and
as to action in another capacity while holding such office,
and shall continue as to a person who has ceased to be a
director, officer, employee or agent and shall inure to the
benefit of the heirs, executors and administrators of such a
person.
6. The corporation shall have power to purchase and maintain
insurance on behalf of any person who is or was a director,
officer, employee or agent of the corporation, or is or was
serving at the request of the corporation as a director,
officer, employee or agent of another corporation,
partnership, joint venture, trust or other enterprise
against any liability asserted against him and incurred by
him in any such capacity, or arising out of his status as
such, whether or not the corporation would have the power to
indemnify him against such liability under the provisions of
this Article XII.
ARTICLE XIII - MISCELLANEOUS PROVISIONS
1. All checks or demands for money and notes of the corporation
shall be signed by such officer or officers as the Board of
Directors may from time to time designate.
2. The fiscal year of the corporation shall begin on the first
day of January each year.
3. Whenever written notice is required to be given to any
person, it may be given to such person, either personally or
by sending a copy thereof through the mail, or by facsimile,
charges prepaid, to his address appearing on the books of
the corporation, or supplied by him to the corporation for
the purpose of notice. If the notice is sent by mail or by
facsimile, it shall be deemed to have been given to the
person entitled thereto when deposited in the United States
mail or when transmitted to such person by facsimile. Such
notice shall specify the place, day and hour of the meeting
and, in the case of a special meeting of shareholders, the
general nature of the business to be transacted.
4. Whenever any written notice is required by statute, or by
the Articles or Bylaws of this corporation, a waiver thereof
in writing, signed by the person or persons entitled to such
notice, whether before or after the time stated therein,
shall be deemed equivalent to the giving of such notice.
Except in the case of a special meeting of shareholders,
neither the business to be transacted at nor the purpose of
the meeting need be specified in the waiver of notice of
such meeting. Attendance of a person, either in person or
by proxy, at any meeting shall constitute a waiver of notice
of such meeting, except where a person attends a meeting for
the express purpose of objecting to the transaction of any
business because the meeting was not lawfully called or
convened.
5. One or more directors or shareholders may participate in a
meeting of the shareholders, the Board of Directors or of a
committee of the Board of Directors by means of conference
telephone, video conference or similar communications
equipment by means of which all persons participating in the
meeting can hear each other. Participants in a meeting
pursuant to this Paragraph 5 shall constitute presence in
person at such meeting.
6. Any provision of these Bylaws granting authority to the
Board of Directors shall not be construed as indicating that
such authority may not be delegated by the Board of
Directors to a committee to the extent authorized by the
Pennsylvania Business Corporation Law, or any successor
statute thereto, and these Bylaws.
7. References in these Bylaws to the masculine shall be deemed
to include the feminine.
ARTICLE XIV - ANNUAL STATEMENT
1. The President and Board of Directors shall present at each
annual meeting of shareholders a full and complete statement
of the business and affairs of the corporation for the
preceding year. Such statement shall be prepared and
presented in whatever manner the Board of Directors shall
deem advisable.
ARTICLE XV - AMENDMENTS
1. These Bylaws may be altered, amended or repealed by the
affirmative vote of two-thirds of the Board of Directors
entitled to vote thereat at any regular or special meeting
of the Board of Directors, if notice of the proposed
alteration, amendment, or repeal be contained in the notice
of the meeting, unless the subject matter of a particular
Bylaw is expressly reserved by statute for the shareholders.
Any Bylaw altered, amended or repealed by the Board of
Directors may be reversed, repealed or amended by the
affirmative vote of a majority of shareholders entitled to
vote thereat at any regular or special meeting of the
shareholders, if notice of the proposed reversal, repeal or
amendment be contained in the notice of the meeting.
APPENDIX 2
REVOCABLE PROXY
ARNOLD INDUSTRIES, INC.
X PLEASE MARK VOTES
AS IN THIS EXAMPLE
ANNUAL MEETING OF SHAREHOLDERS
May 5, 1999
The undersigned hereby acknowledges receipt of the Notice of
Annual Meeting of Shareholders of Arnold Industries, Inc., to be
held on Wednesday, May 5, 1999, at 10:00 a.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 1999 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 and 2 set forth in the next column.
With- For All
1. Election of Directors For hold Except
of the Company: _____ _____ _____
Kenneth F. Leedy, Heath L. Allen 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 For Against Abstain
amendment and restatement _____ _____ _____
of the Company's Bylaws
3. With respect to the use of For Against Abstain
their discretion in such _____ _____ _____
other business as may come
before the meeting or any
adjournments 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