UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
SCHEDULE 14A
(RULE 14A-101)
INFORMATION REQUIRED IN PROXY STATEMENT
SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(A) OF THE
SECURITIES EXCHANGE ACT OF 1934
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ARROW INTERNATIONAL, INC.
(Name of Registrant as Specified in Its Charter)
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ARROW INTERNATIONAL, INC.
2400 BERNVILLE ROAD
READING, PENNSYLVANIA 19605
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NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD ON JANUARY 19, 2005
To Our Shareholders:
The Annual Meeting of Shareholders of Arrow International, Inc. (the
"Company") will be held at the Company's corporate headquarters at 2400
Bernville Road, Reading, Pennsylvania at 4:00 p.m. on January 19, 2005 for the
following purposes:
(1) To elect three directors;
(2) To act upon a proposal to ratify the appointment of
PricewaterhouseCoopers LLP as the Company's independent
accountants for the fiscal year ending August 31, 2005; and
(3) To transact such other business, if any, as may properly come
before the Annual Meeting or any adjournments thereof.
The Board of Directors has fixed the close of business on November 26,
2004 as the record date for the determination of shareholders entitled to notice
of, and to vote at, the Annual Meeting and any adjournments thereof.
YOUR VOTE IS IMPORTANT. PLEASE SIGN AND DATE THE ENCLOSED PROXY CARD AND
RETURN IT PROMPTLY IN THE ENCLOSED RETURN ENVELOPE, WHETHER OR NOT YOU EXPECT TO
ATTEND THE ANNUAL MEETING. YOU MAY REVOKE YOUR PROXY AND VOTE IN PERSON IF YOU
DECIDE TO ATTEND THE ANNUAL MEETING.
By Order of the Board of Directors,
John C. Long,
Secretary
December 17, 2004
Reading, Pennsylvania
PROXY STATEMENT
2005 ANNUAL MEETING OF SHAREHOLDERS
OF
ARROW INTERNATIONAL, INC.
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GENERAL INFORMATION
This Proxy Statement is furnished in connection with the solicitation of
proxies by the Board of Directors of Arrow International, Inc., a Pennsylvania
corporation (the "Company" or "Arrow"), for the Annual Meeting of Shareholders
to be held on January 19, 2005, at 4:00 p.m., local time, at the Company's
corporate headquarters at 2400 Bernville Road, Reading, Pennsylvania 19605, or
any adjournments thereof.
The Board of Directors has fixed the close of business on November 26,
2004 as the record date for the determination of the shareholders entitled to
notice of, and to vote at, the Annual Meeting. On that date there were
43,944,735 shares of common stock of the Company (the "Common Stock")
outstanding and entitled to vote at the Annual Meeting. Each share of Common
Stock is entitled to one vote at the Annual Meeting. A majority of the
outstanding shares of Common Stock is required to establish a quorum at the
Annual Meeting. The affirmative vote of a plurality of the votes cast is
required for Proposal 1 - the election of directors. The affirmative vote of a
majority of the votes cast is required for Proposal 2 - the ratification of the
appointment of independent accountants for fiscal 2005. Shares represented by
proxies will be voted in accordance with the specifications made on the proxy
card by the shareholder.
With regard to Proposal 1 - the election of directors, votes may be cast
in favor or withheld; votes that are withheld will be counted for purposes of
determining the presence or absence of a quorum for the transaction of business
at the Annual Meeting, but will be excluded entirely from the vote and will have
no effect on the outcome of the voting. With regard to Proposal 2 - the
ratification of the appointment of independent accountants, abstentions may be
specified. Since the affirmative vote of a majority of the votes cast is
required to ratify the appointment of independent accountants, an abstention
with respect to this proposal will have the same effect as a vote against the
proposal. Any proxy not specifying the contrary will be voted, with regard to
Proposal 1, FOR each of the Board of Directors' nominees and, with regard to
Proposal 2, FOR the ratification of the appointment of independent accountants.
A shareholder giving a proxy has the right to revoke it by a duly
executed proxy bearing a later date, by attending the Annual Meeting and voting
in person, or by otherwise notifying the Company prior to the Annual Meeting.
Shares of Common Stock held by T. Rowe Price Trust Company, as trustee
of the Company's 401(k) Plan, also are entitled to vote on all matters submitted
to shareholders at the Annual Meeting. Each of the Company's employees
participating in the 401(k) Plan may instruct the trustee how to vote the shares
of Common Stock allocated to that person's account in the 401(k) Plan by
signing, dating and returning the enclosed proxy card.
Under applicable Pennsylvania law, broker non-votes (that is, proxies
from brokers or nominees indicating that such persons have not received
instructions from the beneficial owners or other persons entitled to vote shares
on a particular matter as to which the brokers or nominees do not have
discretionary power) may be counted as present or represented for purposes of
determining the presence or absence of a quorum for the transaction of business,
but will not be counted for purposes of determining whether any
non-discretionary proposals to be voted upon at the Annual Meeting have been
approved. The Company believes that the proposals to be considered at the Annual
Meeting are proposals in respect of which brokers and other nominees typically
have discretionary power. Accordingly, unless one or more beneficial owners of
the Common Stock have withheld discretionary authority from their brokers or
nominees in respect of these types of proposals, the Company does not anticipate
that there will be any broker non-votes in respect of such proposals. If there
are any broker non-votes in respect of the proposals, however, the Company
intends to treat such broker non-votes as stated above.
The mailing address of the principal executive offices of the Company is
P.O. Box 12888, 2400 Bernville Road, Reading, Pennsylvania 19612. This Proxy
Statement and the enclosed proxy card are being furnished to shareholders on or
about December 17, 2004.
PROPOSAL I - ELECTION OF DIRECTORS
The Board of Directors of the Company is currently composed of ten
directors, although up to 12 directors are permitted by the Company's Restated
Articles of Incorporation and By-Laws. Under the Company's Restated Articles of
Incorporation and By-laws, the Board is divided into four classes, as nearly
equal in number as possible. At each Annual Meeting of Shareholders, directors
constituting one class are elected for a four-year term (or for such lesser term
as may be specified in the proxy statement furnished in connection therewith).
The Board of Directors has nominated Carl G. Anderson, Jr., John E. Gurski and
Marlin Miller, Jr., each of whom is currently a director, for election to the
Board of Directors. Each of the nominees for election to the Board has been
approved and recommended for nomination by the Nominating Subcommittee of the
Corporate Governance and Nominating Committee of the Board, which subcommittee
is comprised of directors of the Company who are "independent" within the
meaning of the Marketplace Rules of The Nasdaq Stock Market, Inc. (the
"Nasdaq").
If elected, each of Messrs. Anderson, Gurski and Miller will serve until
the Annual Meeting of Shareholders to be held in 2009, or until such time as
their respective successors are elected. The remaining directors will continue
to serve as set forth below.
The Board believes that each of the nominees will be available and able
to serve as a director. If a nominee is unable to serve, the shares of Common
Stock represented by all valid proxies will be voted for the election of such
substitute as the Board may recommend, the Board may reduce the number of
directors to eliminate the vacancy or the Board may fill the vacancy at a later
date after selecting an appropriate nominee.
THE BOARD OF DIRECTORS BELIEVES THAT APPROVAL OF THE ELECTION OF EACH OF
THE NOMINEES IS IN THE BEST INTEREST OF THE COMPANY AND ITS SHAREHOLDERS AND,
THEREFORE, RECOMMENDS THAT SHAREHOLDERS VOTE FOR THIS PROPOSAL. PROXIES
SOLICITED BY THE BOARD OF DIRECTORS WILL BE VOTED FOR THIS PROPOSAL UNLESS
OTHERWISE INDICATED.
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Certain information concerning the nominees and those directors whose
terms of office will continue following the Annual Meeting is set forth in the
following table:
PRINCIPAL OCCUPATION, BUSINESS
NAME AGE EXPERIENCE AND DIRECTORSHIP
- ---- --- ---------------------------
NOMINEES FOR TERMS EXPIRING IN 2009
Carl G. Anderson, Jr. 59 Chairman of the Board and Chief Executive Officer of the Company
since September 1, 2003, and a director of the Company since
January 1998. Vice Chairman of the Board and General Manager,
Critical Care Business of the Company from January 2002 to
August 31, 2003. President and Chief Executive Officer of ABC
School Supply, Inc., a manufacturer and marketer of materials
and equipment for public and private schools, from May 1997 to
December 2001. Consultant with the New England Consulting Group,
a general management and marketing consulting company, from May
1996 to May 1997. Vice President, General Manager, Retail
Consumer Products of James River Corporation, a multinational
company engaged in the development, manufacture and marketing of
paper-based consumer and commercial products ("James River"),
from August 1994 to March 1996, and Vice President, Marketing,
Consumer Brands of James River from May 1992 to August 1994.
From 1984 to May 1992, served in various capacities with Nestle
Foods Corporation, the latest as Vice President, Division
General Manager, Confections. Prior thereto, served in several
marketing capacities with Procter & Gamble. Director of
Carpenter Technology Corporation, a manufacturer of specialty
steel, and IWT Tesoro Corporation, a manufacturer and
distributor of building tile.
John E. Gurski 63 Director of the Company since January 1997. Corporate Vice
President of AMP Incorporated, a multinational company engaged
in the development, manufacture and marketing of systems for
electrical and electronic applications ("AMP"), from 1989 until
his retirement in January 1999. President, Europe, Middle East
and Africa of AMP from July 1995 to December 1996, President,
Global Operations of AMP from January 1997 to August 1998, and
Corporate Vice President, Administration of AMP from August 1998
to January 1999. Corporate Vice President, Europe of AMP from
September 1993 to July 1995 and Corporate Vice President,
Business & Operations Planning International of AMP from January
1992 to September 1993. Corporate Vice President, Capital Goods
Business Sector of AMP from 1989 to January 1992 and Divisional
Vice President, Operations of AMP from 1987
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to 1989. From 1972 to 1987, served in various manufacturing and
operating capacities with AMP. Prior thereto, was employed by
General Motors Corporation.
Marlin Miller, Jr. 72 Director of the Company since it was founded in 1975. Chairman
of the Board of Directors of the Company from January 1999 and
Chief Executive Officer of the Company from 1975 until his
retirement from the Company on August 31, 2003, and President of
the Company from 1975 to January 1999. From 1972 to 1975, Vice
President and a director of Connors Investor Services, a
research and investment management firm. From 1959 to 1972,
served in several capacities with Glen Gery Corporation, a
manufacturer of building products, the latest as Executive Vice
President and a director. Director of Carpenter Technology
Corporation, a manufacturer of specialty steel, until his
retirement from this position in October 2002.
DIRECTORS WHOSE TERMS EXPIRE IN 2006
Raymond Neag 73 Director of the Company since it was founded in 1975. Vice
Chairman of the Company from January 1999 until his retirement
in October 1999, Executive Vice President of the Company from
April 1992 to January 1999 and Senior Vice President of the
Company from 1975 to April 1992. From 1973 until joining the
Company, General Manager of the Arrow Products Division of
Rockwell International Corporation, the Company's predecessor
(the "Rockwell Division"). From 1971 to 1973, President of
Teledyne Dental Products, a manufacturer of dental products and
a division of Teledyne, Inc. Prior to 1971, Vice President and
Director of Marketing of Sherwood Medical, Inc., a medical
device company.
Richard T. Niner 65 Director of the Company since 1982. General partner since
January 1999 of Wind River Associates L.P., a private investment
partnership. General partner since 1988 of Brynwood Management
II L.P., the general partner of a private investment partnership
based in Greenwich, Connecticut. Director of Hurco Companies,
Inc., a manufacturer and marketer of computer numerical controls
and related machine tools.
DIRECTORS WHOSE TERMS EXPIRE IN 2007
John H. Broadbent, Jr. 66 Director of the Company since it was founded in 1975. Vice
President - Finance and Treasurer of the Company from 1975 until
his retirement in August 1998. From 1966 to 1975, served in
several capacities with Carpenter Technology Corporation, a
specialty steel manufacturer, the latest as Manager-Market
Planning &
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Development. From 1964 to 1966, consultant in the Management
Advisory Services Department of the international accounting
firm of Price Waterhouse & Co.
George W. Ebright 66 Director of the Company since October 1993. Director of Cytogen
Corporation, a biopharmaceutical company engaged in the
development of diagnostic and therapeutic substances for human
health care applications ("Cytogen"), from February 1989 until
May 1995. Chairman of the Board of Cytogen from February 1990
until January 1995 and President from February 1989 to August
1991. Prior thereto, President and Chief Operating Officer and a
director of SmithKline Beckman Corporation, a health care and
life services company engaged in the marketing of a broad line
of prescription and proprietary products for human and animal
health care, as well as diagnostic and analytical products and
services. From 1963 through 1987, held several senior management
positions with SmithKline & French Laboratories and two of its
divisions. Director of NABI, Inc., a biopharmaceutical company
which develops products for the prevention and treatment of
infectious diseases, and The West Company, a supplier of
specialized packaging systems to the health care and consumer
products industries.
DIRECTORS WHOSE TERMS EXPIRE IN 2008
T. Jerome Holleran 68 Director of the Company since it was founded in 1975. Secretary
of the Company from 1975 until April 2004 and a Vice President
of the Company from 1975 until September 1997. Chairman of the
Board of Directors of Precision Medical Products, Inc. ("PMP"),
a former subsidiary of Arrow Precision Products, Inc.
("Precision"), a corporation formerly controlled by principal
shareholders of the Company until its dissolution in May 2002,
since October 1999; Chief Executive Officer of PMP since July
1996 and President of PMP from July 1996 to October 1999. PMP
manufactures and markets certain non-catheter medical products
and was sold in August 1997 to a group of management employees
of Precision (including Mr. Holleran). From February 1986 to
September 1997, Vice President, Chief Operating Officer and a
director of Precision. President of Endovations, Inc., a former
subsidiary of Precision that manufactured and marketed certain
gastroenterological medical products ("Endovations"), from 1991
until the sale in June 1996 of a portion of Endovations'
business to the Company and the remainder to an unrelated third
party. From 1971 to 1975, Director of Business Planning-Textile
Divisions of Rockwell International Corporation and a Marketing
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Manager of the Rockwell Division. From 1969 to 1971, consultant
with the management consulting firm of Booz, Allen and Hamilton.
R. James Macaleer 70 Director of the Company since January 1998. Chairman of the
Board of Shared Medical Systems Corporation, a provider of
computer-based information systems and associated services to
the health industry in North America and Europe ("SMS"), from
1969 to November 1997, and Chief Executive Officer of SMS from
1969 to August 1995.
Alan M. Sebulsky 45 Director of the Company since January 1997. Managing Partner and
Portfolio Manager of Apothecary Capital LLC, an investment
advisory firm specializing in health care, since April 2003.
Independent investor and consultant from May 2002 to March 2003.
Managing Director from March 2000 to January 2002 and Executive
Vice President and principal from July 1994 to March 2000 of
Lincoln Capital Management, a private investment management firm
based in Chicago, Illinois, with responsibility for investments
in the health care industry. From 1988 to May 1994, Managing
Director at Morgan Stanley & Company, an international
investment banking and brokerage firm, with responsibility for
equity research in the pharmaceutical and medical device
industries. From 1982 to 1988, held various positions at T. Rowe
Price & Associates, an investment management firm, the latest as
Vice President, with responsibility for health care investment
analysis and portfolio management.
BOARD OF DIRECTORS AND COMMITTEES OF THE BOARD
The business of the Company is managed under the direction of its Board
of Directors. The Board has responsibility for establishing broad corporate
policies and for the Company's overall performance. It is not, however, involved
in operating details on a day-to-day basis. The Board is kept advised of the
Company's business through regular reports and analyses and discussions with its
Chief Executive Officer and other officers.
The Board of Directors has determined that each of the Company's
directors, other than Messrs. Anderson, Miller and Holleran, is an independent
director within the meaning of the Nasdaq rules. The Nasdaq definition of
independent director includes a series of objective tests, such as that the
director is not, and was not during the last three years, an employee of the
Company and has not received certain payments from, or engaged in various types
of business dealings with, the Company. In addition, as further required by the
Nasdaq rules, the Board has made a subjective determination as to each
independent director that no relationships exist which, in the opinion of the
Board, would interfere with such individual's exercise of independent judgment
in carrying out his responsibilities as a director. In making these
determinations, the Board reviewed and discussed information provided by the
directors and the Company with regard to each director's business and personal
activities as they may relate to the Company and its management.
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The Board of Directors conducts its business through meetings of the
Board and through activities of its committees. The Board of Directors held five
meetings during fiscal 2004. All of the directors attended at least 75% of the
meetings of the Board and any committee on which they served during fiscal 2004.
The committees of the Board currently are the Audit Committee, the Compensation
and Human Resources Committee, and the Corporate Governance and Nominating
Committee. Each of these committees has a written charter that may be found on
the Company's website at http://www.arrowintl.com.
AUDIT COMMITTEE. The primary function of the Audit Committee is to
assist the Company's Board of Directors in its oversight of the integrity of the
Company's financial statements and internal controls, the Company's compliance
with legal and regulatory requirements, the qualifications and independence of
the Company's independent auditors, and the performance of the Company's
internal audit function and its independent auditors. The Audit Committee, among
other things, reviews with the Company's management and the independent auditors
the Company's audited financial statements to be included in its Annual Report
on Form 10-K and its interim financial statements to be included in its
Quarterly Reports on Form 10-Q, assesses the adequacy and effectiveness of the
Company's internal accounting controls system and audit procedures, reviews the
Company's compliance policies, and evaluates the independence of, approves the
audit and non-audit services provided by, and has the ultimate authority and
responsibility for selecting and nominating for shareholder approval, the firm
to be appointed as independent accountants to audit the Company's financial
statements. The members of the Audit Committee currently are John H. Broadbent,
Jr., who acts as Chairman of the Committee, George W. Ebright and Alan M.
Sebulsky, each of whom the Board of Directors has determined is an independent
director qualified to serve on the Audit Committee in accordance with the
applicable rules and regulations of the Securities and Exchange Commission (the
"SEC") and the Nasdaq. In addition, the Board of Directors has determined that
Mr. Broadbent is qualified to serve as the "audit committee financial expert" of
the Company, as defined in applicable SEC rules. The Audit Committee met seven
times during the fiscal year ended August 31, 2004.
COMPENSATION AND HUMAN RESOURCES COMMITTEE. The Compensation and Human
Resources Committee reviews and recommends to the Company's Board of Directors
the compensation for the Company's Chief Executive Officer and all of its other
executive officers, including salaries, bonuses and grants of awards under, and
administration of, the Company's stock incentive plans. The Compensation and
Human Resources Committee, among other things, reviews and recommends to the
Board employees to whom awards will be made under the Company's stock incentive
plans, determines the number of shares to be optioned or awarded, and the time,
manner of exercise and other terms of the awards. The members of the
Compensation and Human Resources Committee currently are John E. Gurski, R.
James Macaleer, who acts as Chairman of the Committee, and Raymond Neag, each of
whom is an independent director, as defined in applicable Nasdaq rules. The
Compensation and Human Resources Committee met five times during the fiscal year
ended August 31, 2004.
CORPORATE GOVERNANCE AND NOMINATING COMMITTEE. The primary function of
the Corporate Governance and Nominating Committee is to oversee the Company's
corporate governance and make recommendations to the Company's Board of
Directors regarding the organization and procedures of the Board, including the
size and compensation of the Board and the structure and makeup of its
committees. The Corporate Governance and Nominating Committee, among other
things, evaluates the operations and performance of the Board and its
committees, devises and recommends to the Board additions and modifications to
the Company's Corporate Governance Principles, reviews and recommends to the
Board the compensation for directors, and identifies, approves and recommends
the nominees for election
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or re-election to the Board. The members of the Corporate Governance and
Nominating Committee currently are Marlin Miller, Jr., Raymond Neag, Richard T.
Niner, who acts as Chairman of the Committee, and Alan M. Sebulsky, each of
whom, other than Mr. Miller, is an independent director, as defined in
applicable Nasdaq rules. The Corporate Governance and Nominating Committee was
established in January 2004 and, therefore, met only one time during the fiscal
year ended August 31, 2004.
The Corporate Governance and Nominating Committee has also formed and
maintains a Nominating Subcommittee, which is comprised of Messrs. Neag, Niner
and Sebulsky, the independent members of the Corporate Governance and Nominating
Committee. The Nominating Subcommittee, among other things, establishes criteria
for Board membership and identifies, reviews and recommends individuals
qualified for membership on the Board. The Nominating Subcommittee of the
Corporate Governance and Nominating Committee was established in October 2004.
Therefore, there were no meetings of the Nominating Subcommittee during the
fiscal year ended August 31, 2004, although the Subcommittee did meet after the
Company's fiscal year-end to determine the nominees for election at the Annual
Meeting.
In determining whether to nominate a candidate for membership on the
Board, the Nominating Subcommittee will consider, among other criteria, relevant
experience, skills, diversity and the ability to act on behalf of the Company's
shareholders. Candidates may come to the attention of the Subcommittee from
current Board members, officers, shareholders or other sources. The Subcommittee
will review all candidates in the same manner regardless of the source of the
recommendation.
SHAREHOLDER NOMINEES FOR DIRECTOR. Any shareholder of the Company who
wants to nominate a candidate for election to the Board must deliver timely
written notice to the Company's Corporate Secretary at Arrow International,
Inc., P.O. Box 12888, 2400 Bernville Road, Reading, Pennsylvania 19612. In order
to be timely, the notice must be delivered:
o With respect to an annual meeting of shareholders, not less than
60 days prior to the anniversary date of the immediately
preceding annual meeting of shareholders; and
o With respect to a special meeting of shareholders called for the
purpose of electing directors, not less than ten days following
the date on which notice of such special meeting is first given
to shareholders.
The shareholders' notice to the Company's Corporate Secretary must set
forth as to each person whom the shareholder proposes to nominate for election
as a director (a) his name, age, business address and residence address, (b) his
principal occupation, employment and qualifications to serve as a director, (c)
the number of shares of Common Stock which are owned beneficially or of record
by him, and (d) any other information relating to the nominee that would be
required to be disclosed in a proxy statement or other filings required to be
made in connection with solicitations of proxies for election of directors
pursuant to Section 14 of the Securities Exchange Act of 1934, as amended, and
the rules and regulations promulgated thereunder (the "Exchange Act"). In
addition, the notice must include as to the shareholder giving the notice (a)
his name and record address, (b) the number of shares of Common Stock which are
owned beneficially or of record by him, (c) a description of all arrangements or
understandings between the shareholder and each proposed nominee and any other
person or persons (including their names) pursuant to which the nomination(s)
are to be made by the shareholder, and (d) any other information relating to the
shareholder that would be required to
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be disclosed in a proxy statement or other filings required to be made in
connection with solicitations of proxies for election of directors pursuant to
Section 14 of the Exchange Act. The notice delivered by such shareholder must be
accompanied by a written consent of each proposed nominee to being named as a
nominee to the Board and to serve as a director if elected. The shareholder must
represent that he is a shareholder of record on the date on which he gives the
notice described above and on the record date for the determination of
shareholders entitled to vote at the applicable meeting of shareholders. No
person may nominate himself for election as a director.
DIRECTOR ATTENDANCE AT ANNUAL MEETINGS. The Company requests that all of
its directors attend each annual meeting of the Company's shareholders. Each
member of the Board of Directors attended the Company's 2004 Annual Meeting of
Shareholders held on January 21, 2004.
COMPENSATION OF DIRECTORS
CASH COMPENSATION. The Company's directors who are not officers or
employees of the Company received a quarterly fee of $5,000 for Board membership
in fiscal 2004 and a fee of $1,000 for attendance in person and $500 for
attendance by telephone at each Board meeting and each committee meeting.
Directors are reimbursed for reasonable expenses incurred in connection with
attending Board and committee meetings. The Chairmen of the Audit Committee, the
Compensation and Human Resources Committee, and the Corporate Governance and
Nominating Committee each receive an additional fee of $2,000 per year.
STOCK-BASED COMPENSATION. To promote the Company's ability to attract
and retain outside directors and to provide them with an incentive to maintain
and enhance the Company's long-term performance, stock awards are made to
directors who are not also employees or consultants of the Company. The stock
awards are made pursuant to the Company's Directors Stock Incentive Plan in the
form of non-qualified stock options. The plan was approved by the Company's
shareholders at the Company's Annual Meeting of Shareholders held on January 17,
1996, on which date the plan became effective, and amendments to the plan were
approved by the Company's shareholders at the Company's Annual Meeting of
Shareholders held on January 19, 2000, on which date these amendments became
effective. Upon an eligible director's first election to the Board, such
eligible director receives options to purchase 10,000 shares of Common Stock
and, on the date each year when directors are elected to the Board, eligible
directors receive options to purchase an additional 3,000 shares of Common
Stock. The exercise price for each option is equal to the fair market value of
the Common Stock on the date of grant. Each option has a term of ten years from
the date of grant and vests on the first anniversary of the date of grant. The
numbers of shares underlying option awards under the plan and the exercise
prices applicable to such awards have in each case been adjusted to reflect the
two-for-one split of the Common Stock effected on August 15, 2003.
The amendments to the Company's Directors Stock Incentive Plan approved
by the Company's shareholders at its 2000 Annual Meeting of Shareholders enabled
non-employee directors who were shareholders of the Company at the time of the
Company's initial public offering on June 9, 1992 to be eligible to receive
stock awards under the plan, whereas previously such directors were not so
eligible. In addition, these amendments to the plan enabled eligible directors
to receive options to purchase 3,000 shares of Common Stock on the date each
year when directors are elected to the Board, instead of the 1,000 shares
previously provided for under the plan.
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On January 21, 2004, the date of the Company's 2004 Annual Meeting of
Shareholders, in accordance with the amended terms of the plan, each of the
directors of the Company, with the exception of Carl G. Anderson, Jr., the
Chairman and Chief Executive Officer of the Company, was granted options under
the plan to purchase 3,000 shares of Common Stock, in each case at an exercise
price of $26.42, the closing price per share of the Common Stock on such date as
reported on The Nasdaq Stock Market. In accordance with the amended terms of the
plan, on the date of the Annual Meeting, each of the directors of the Company,
with the exception of Mr. Anderson, will receive options to purchase an
additional 3,000 shares of Common Stock, in each case at an exercise price which
is equal to the closing price per share of the Common Stock on such date as
reported on The Nasdaq Stock Market.
CORPORATE GOVERNANCE
The Company has adopted corporate governance policies and practices to
address a number of key areas of importance to the Company's shareholders,
employees, customers, suppliers and community, including:
o A majority of the members of the Company's Board of Directors
are independent of the Company and its management within the
meaning of applicable rules and regulations of the SEC and
Nasdaq;
o All members of the Audit Committee, the Compensation and Human
Resources Committee, and the Nominating Subcommittee of the
Corporate Governance and Nominating Committee of the Board are
independent;
o The independent members of the Company's Board of Directors meet
regularly in executive session without the presence of
management. The presiding, or lead, director of these meetings
currently is Mr. Ebright;
o The Company has established a Corporate Governance and
Nominating Committee of the Board to oversee the Company's
corporate governance and make recommendations on all matters
relating to the Board's organization, practices and procedures,
and this committee is currently in the process of devising a set
of Corporate Governance Principles for the Company, which will
address, among other matters, procedures for annual evaluation
of the Board's and its committees' performance, director
retirement policy, changes in directors' primary
responsibilities and outside commitments (including service on
the boards of other public companies), CEO and senior management
succession planning and management development;
o The Company has adopted a code of business conduct that applies
to all of its directors, officers and other employees and is
monitored by its human resources department;
o The charters of the committees of the Board clearly establish
their respective roles and responsibilities, and each of these
charters are posted on the Company's website at
http://www.arrowintl.com;
o The Company's Audit Committee has implemented procedures for the
anonymous submission of employee complaints on accounting,
internal controls and auditing matters, which procedures have
been made available to all of the Company's employees;
10
o The Company has adopted a code of ethics that applies to all of
its directors, officers and other employees, including its
principal executive officer, principal financial officer,
principal accounting officer and other members of its management
performing similar functions, which is posted on the Company's
website at http://www.arrowintl.com;
o The Company has established a Disclosure Committee, comprised of
executive officers and other key employees who are actively
involved in the disclosure process, to specify, coordinate and
oversee the procedures that the Company uses each quarter and at
fiscal year end to prepare its periodic reports filed with the
SEC; and
o The Company has in each case obtained shareholder approval
before adopting or making material amendments to its stock
incentive plans.
EXECUTIVE OFFICERS
The executive officers of the Company and their ages and positions as of
November 1, 2004 are listed below. All executive officers are elected or
appointed annually and serve at the discretion of the Board of Directors. There
are no family relationships among the executive officers of the Company.
Name Office Age
---- ------ ---
Carl G. Anderson, Jr. Chairman and Chief Executive Officer 59
Philip B. Fleck President and Chief Operating Officer 60
Paul L. Frankhouser Executive Vice President - Global 59
Business Development
James T. Hatlan Senior Vice President - Manufacturing 57
Frederick J. Hirt Senior Vice President - Finance and 56
Chief Financial Officer
Carl W. Staples Senior Vice President - Human Resources 53
Philip M. Croxford Group Vice President - Critical Care and Cardiac 44
Assist
John C. Long Vice President, Secretary and Treasurer 39
Paul A. Cornelison Vice President - Regulatory Affairs 40
and Quality Assurance
Mr. Anderson has served as Chairman and Chief Executive Officer of the
Company since September 1, 2003. From January 2002 to August 31, 2003, Mr.
Anderson served as Vice Chairman of the Board and General Manager of the
Company's Critical Care Division with responsibility for worldwide sales,
marketing, research and development of the Company's critical care products. Mr.
Anderson has served as a director of Arrow since January 1998 and, prior to his
employment by the Company, served as President and Chief Executive Officer of
ABC School Supply, Inc., a producer of materials and equipment for public and
private schools, from May 1997 to December 2001. Mr. Anderson served as
Principal with the New England Consulting Group, a general management and
marketing consulting company, from May 1996
11
to May 1997, as Vice President, General Manager, Retail Consumer Products of
James River Corporation, a multinational company engaged in the development,
manufacture and marketing of paper-based consumer products ("James River"), from
August 1994 to March 1996, and as Vice President, Marketing, Consumer Brands of
James River from May 1992 to August 1994, and in various capacities with Nestle
Foods Corporation, the latest as Vice President, Division General Manager,
Confections, from 1984 to May 1992. Prior thereto, Mr. Anderson served in
several marketing and management capacities with Procter & Gamble from 1972 to
1984. Mr. Anderson also serves as a director of Carpenter Technology
Corporation, a manufacturer of specialty steel, and IWT Tesoro Corporation, a
manufacturer and distributor of building tile.
Mr. Fleck has served as President and Chief Operating Officer of the
Company since January 1999. Mr. Fleck recently announced his retirement from the
Company, effective December 31, 2004, after serving in management capacities
with the Company and its predecessor for more than 33 years and making a major
contribution to the Company's success. Upon his retirement, Mr. Fleck will
continue to serve the Company as a consultant. From June 1994 to January 1999,
he served as Vice President - Research and Manufacturing of the Company. From
1986 to June 1994, Mr. Fleck served as Vice President - Research and Engineering
of the Company. From 1975 to 1986, Mr. Fleck served as Engineering Manager of
the Company.
Mr. Frankhouser has served as Executive Vice President - Global Business
Development of the Company since January 2002, with responsibility for worldwide
evaluation and acquisition of new business opportunities. Mr. Frankhouser
recently announced his retirement from the Company, effective January 31, 2005,
after serving in management capacities with the Company and its predecessor for
more than 41 years and making a major contribution to the Company's success.
Upon his retirement, Mr. Frankhouser will continue to serve the Company as a
consultant. From January 1999 to January 2002, Mr. Frankhouser served as
Executive Vice President of the Company, with responsibility for worldwide sales
and marketing. He served as Vice President - Marketing of the Company from 1986
until January 1999. From 1980 to 1986, Mr. Frankhouser served as Manager of
Marketing of the Company.
Mr. Hatlan was elected Senior Vice President - Manufacturing effective
October 27, 2004 and served as Vice President - Strategic Planning of the
Company since September 2003. Prior to joining the Company, Mr. Hatlan served at
ABC School Supply, Inc., a producer of materials and equipment for public and
private schools, in several executive positions including Chairman, from 1997 to
2002, and held various senior management positions at James River Corporation,
Tambrands Inc. and Procter & Gamble from 1972 to 1996.
Mr. Hirt was elected Senior Vice President - Finance and Chief Financial
Officer effective October 27, 2004 and served as Vice President - Finance and
Chief Financial Officer of the Company since August 1998. From August 1998 until
January 2003, he also served as Treasurer of the Company. Prior to joining the
Company, from 1980 to 1998, Mr. Hirt served in various capacities with Pharmacia
& Upjohn, Inc., the latest as Vice President, Accounting and Reporting. From
1972 to 1980, Mr. Hirt served in several accounting positions at the
international accounting firm of Coopers & Lybrand, the latest as audit manager.
Mr. Staples was elected Senior Vice President - Human Resource effective
October 27, 2004 and served as Vice President - Human Resources of the Company
since September 2002. Prior to joining the Company, Mr. Staples served as Vice
President Human Resources and in various other human resources capacities with
CIBA Specialty Chemicals, a manufacturer of specialty chemicals, from 1989
through August 2002. From 1974 to 1989, Mr.
12
Staples served in various human resources-related positions with Sara Lee
Corporation, Bausch & Lomb Incorporated, Rockwell International and Union
Carbide Corporation.
Mr. Croxford was elected Group Vice President - Critical Care and
Cardiac Assist effective October 27, 2004, and served as Vice President and
General Manager since June 2004 and as Vice President - Sales and Global
Marketing Critical Care of the Company from August 2003 to June 2004. Prior to
joining the Company, Mr. Croxford served as U.S. Vice President Sales &
Marketing - Advanced Wound Care and Divisional Board Member at Johnson & Johnson
Ethicon from January 2000 to August 2003, and held positions as Worldwide Vice
President/General Manager - Wound Management Business Unit, Worldwide Director
of Marketing and Board Member at Johnson & Johnson Medical from March 1996 to
January 2000. From 1989 to March 1996, Mr. Croxford served as Business Unit
Director and in various other senior marketing sales positions at Smith & Nephew
Plc.
Mr. Long has served as Vice President and Treasurer of the Company since
January 2003 and was also elected Secretary effective April 15, 2004, and served
as Assistant Treasurer from 1995 to January 2003. Prior to joining the Company,
Mr. Long served as Controller for the Jaindl Companies, a group of privately
held companies involved in agribusiness and real estate development, from 1989
to 1995. From 1986 to 1989, Mr. Long was employed in the Allentown, Pennsylvania
office of the accounting firm, Concannon, Gallagher, Miller & Co. Mr. Long also
serves as a director of American Bank Incorporated, a regional commercial bank.
Mr. Cornelison was elected to the position of Vice President -
Regulatory Affairs and Quality Assurance effective April 14, 2004 and served as
Director of Regulatory Affairs and Quality Assurance of the Company since August
2001. Prior to joining the Company Mr. Cornelison served as Senior Regulatory
Project Director at the Regulatory & Clinical Research Institute, a company
offering specialized consulting services to the medical industry, from December
2000 to August 2001. Prior to December 2000, Mr. Cornelison held various
Regulatory and Quality positions at St. Jude Medical (Daig Division), Angeion
Corporation, Telectronics Pacing Systems, Aequitron Medical and Lake Region
Manufacturing.
SECURITY OWNERSHIP OF CERTAIN
BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth, as of November 26, 2004, the beneficial
ownership of Common Stock by (1) each director and nominee, (2) each of the
executive officers named in the Summary Compensation Table below (whose
beneficial ownership has been rounded up or down to the nearest whole share of
Common Stock), (3) all directors and officers as a group (including the named
individuals), and (4) each beneficial owner of more than 5% of the outstanding
Common Stock. Except as otherwise indicated in the notes immediately following
the table, the persons named in the table have sole voting and investment power
with respect to all shares of Common Stock shown as beneficially owned by them,
subject to community property laws where applicable.
AMOUNT PERCENT OF
NAME BENEFICIALLY OWNED CLASS OWNED
---- ------------------ -----------
Marlin Miller, Jr.............................. 6,760,835(1) 15.4%
Richard T. Niner............................... 6,312,670(2) 14.4%
Raymond Neag................................... 2,847,825(3) 6.5%
T. Jerome Holleran............................. 1,062,130(4) 2.4%
John H. Broadbent, Jr.......................... 929,361(5) 2.1%
13
AMOUNT PERCENT OF
NAME BENEFICIALLY OWNED CLASS OWNED
---- ------------------ -----------
Carl G. Anderson, Jr........................... 219,976(6) *
Philip B. Fleck................................ 323,874(7) *
Frederick J. Hirt.............................. 98,586(8) *
Paul L. Frankhouser............................ 63,290(9) *
Carl N. Botterbusch............................ 61,622(10) *
R. James Macaleer.............................. 39,830(11) *
Alan M. Sebulsky............................... 35,000(12) *
John E. Gurski................................. 31,455(13) *
George W. Ebright.............................. 29,000(14) *
All directors and officers as a group
(19 persons).............................. 18,869,962(15) 42.1%
Robert L. McNeil, Jr........................... 4,563,688(16) 10.4%
Richard T. Niner and Robert W.
Cruickshank, as Trustees of the Robert L.
McNeil, Jr. 1983 Intervivos Trust dated
November 30, 1983........................ 4,624,494 10.5%
c/o Wilmington Trust Company
1100 North Market Street
Wilmington, Delaware 19890
- -----------------------------------
* Less than one percent.
(1) Includes 3,000 shares issuable upon the exercise of options which are
deemed to be presently exercisable. Also includes 2,000 shares owned by
Mr. Miller's wife, as to which Mr. Miller disclaims beneficial
ownership.
(2) Includes an aggregate of 16,346 shares owned by Mr. Niner's wife, as to
which Mr. Niner disclaims beneficial ownership, 20,000 shares held by a
charitable foundation of which Mr. Niner is an officer and a director
with power to vote and dispose of the shares held by such foundation, as
to which Mr. Niner disclaims beneficial ownership, and 4,624,494 shares
held by Mertz & Moyer, as nominee for the Robert L. McNeil, Jr. 1983
Intervivos Trust (the "McNeil Trust"), of which Mr. Niner is one of two
trustees who have shared power to vote and dispose of the shares held in
such trust. Also includes 15,000 shares issuable upon the exercise of
vested options and options which are deemed to be presently exercisable.
(3) Includes 15,000 shares issuable upon the exercise of vested options and
options which are deemed to be presently exercisable. Also includes
3,000 shares owned by Mr. Neag's wife as to which Mr. Neag disclaims
beneficial ownership.
(4) Includes 50,000 shares owned by Mr. Holleran's wife, as to which Mr.
Holleran disclaims beneficial ownership. Also includes 797,130 shares
owned by the Thomas Jerome Holleran Revocable Trust, of which Mr.
Holleran is trustee with sole power to vote and dispose of the shares
held by such trust. In addition, includes 15,000 shares issuable upon
the exercise of vested options and options which are deemed to be
presently exercisable.
(footnotes continued on next page)
14
(footnotes continued from previous page)
(5) Includes 24,000 shares owned by Mr. Broadbent's wife and 500 shares
jointly owned by Mr. Broadbent's wife and her adult son, as to which Mr.
Broadbent disclaims beneficial ownership. Also includes 24,600 shares
held by a charitable foundation, of which Mr. Broadbent is one of three
trustees who have shared power to vote and dispose of the shares held by
such foundation, and 20,000 shares held by The Dana L. Bunting and
Robert L. Bunting Irrevocable Educational Trust, of which Mr. Broadbent
is sole trustee with power to vote and dispose of the shares held in
such trust. In addition, includes 15,000 shares issuable upon the
exercise of vested options and options which are deemed to be presently
exercisable. Excludes 52,869 shares held by the John H. Broadbent, Jr.
Charitable Remainder Unitrust, of which Mr. Broadbent was the grantor
but has no power to vote or dispose of such shares, and as to which Mr.
Broadbent disclaims beneficial ownership.
(6) Includes 207,000 shares issuable upon the exercise of vested options and
options which are deemed to be presently exercisable. Does not include
360,000 shares issuable upon the exercise of options which are not
deemed to be presently exercisable.
(7) Includes 10,000 shares owned by Mr. Fleck's wife, as to which Mr. Fleck
disclaims beneficial ownership. Also includes 286,464 shares issuable
upon the exercise of vested options and options which are deemed to be
presently exercisable, which include 57,750 shares issuable upon the
exercise of options that will become immediately exercisable as of
December 31, 2004, the effective date of Mr. Fleck's retirement from the
Company, pursuant to the Company's previously announced early retirement
program approved by the Company's Board of Directors on October 27, 2004
(the "Early Retirement Program").
(8) Includes 94,000 shares issuable upon the exercise of vested options and
options which are deemed to be presently exercisable. Does not include
46,000 shares issuable upon the exercise of options which are not deemed
to be presently exercisable.
(9) Includes 23,928 shares issuable upon the exercise of vested options and
options which are deemed to be presently exercisable. Does not include
42,250 shares issuable upon the exercise of options which are not deemed
to be presently exercisable, but which will become immediately
exercisable as of January 31, 2005, the effective date of Mr.
Frankhouser's retirement from the Company, pursuant to the Company's
Early Retirement Program.
(10) Includes 58,000 shares issuable upon the exercise of vested options and
options which are deemed to be presently exercisable. Does not include
39,000 shares issuable upon the exercise of options which are not deemed
to be presently exercisable. Mr. Botterbusch was elected Vice President
- Research and Development LVAD Program of the Company effective October
27, 2004.
(11) Includes 15,000 shares issuable upon the exercise of vested options and
options which are deemed to be presently exercisable.
(12) Includes 27,000 shares issuable upon the exercise of vested options and
options which are deemed to be presently exercisable.
(13) Includes 27,000 shares issuable upon the exercise of vested options and
options which are deemed to be presently exercisable.
(footnotes continued on next page)
15
(footnotes continued from previous page)
(14) Includes 28,000 shares issuable upon the exercise of vested options and
options which are deemed to be presently exercisable.
(15) See footnotes (1) through (14) above.
(16) Includes 100,000 shares held by a charitable foundation of which Mr.
McNeil, a former director of the Company, is the president and one of
twelve directors who have shared power to vote and dispose of the shares
held by such foundation. Excludes 4,624,494 shares held by Mertz &
Moyer, as nominee for the McNeil Trust, of which Mr. McNeil was the
grantor for the benefit of Mr. McNeil and his lineal descendants. Mr.
McNeil disclaims beneficial ownership of such shares held in the McNeil
Trust.
SECTION 16(A) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16(a) of the Exchange Act and the rules promulgated thereunder
require the Company's officers and directors and persons who beneficially own
more than ten percent of a registered class of the Company's equity securities
to file reports of ownership and changes in ownership with the SEC and to
furnish to the Company copies of all such filings. The Company has determined,
based solely upon a review of those reports and amendments thereto furnished to
the Company during and with respect to the Company's fiscal year ended August
31, 2004 and written representations from certain reporting persons, that (1)
Carl G. Anderson, Jr., the Company's Chairman and Chief Executive Officer, was
inadvertently late in filing a Form 4 reporting the Company's award to him of
options to purchase 400,000 shares of Common Stock on September 1, 2003 under
the Company's 1999 Stock Incentive Plan; (2) each of Philip B. Fleck, the
Company's President and Chief Operating Officer, Paul L. Frankhouser, the
Company's Executive Vice President, Frederick J. Hirt, then the Company's Vice
President - Finance and Chief Financial Officer, Carl N. Botterbusch, then the
Company's Vice President and General Manager of its Cardiac Assist Division,
Carl W. Staples, then the Company's Vice President - Human Resources, and John
C. Long, then the Company's Vice President and Treasurer, was inadvertently late
in filing a Form 4 reporting the Company's award to him of options to purchase
45,000, 35,000, 40,000, 20,000, 40,000 and 30,000 shares of Common Stock,
respectively, on October 14, 2003; (3) Mr. Frankhouser was inadvertently late in
filing a Form 4 reporting the exercise of options to purchase 5,000 shares of
Common Stock on October 31, 2003; and (4) John H. Broadbent, Jr., a director of
the Company, was inadvertently late in filing a Form 4 reporting the sale of
2,000 shares of Common Stock on May 21, 2004 by a charitable remainder unitrust
in which he has a pecuniary interest.
16
EXECUTIVE COMPENSATION
The following table summarizes, for the Company's past three fiscal
years, all compensation paid to the Company's Chief Executive Officer and each
of the four most highly compensated executive officers of the Company other than
the Chief Executive Officer as of August 31, 2004 for services rendered to the
Company in all capacities. On November 1, 2004, the Company announced the
promotion of several officers to new positions of responsibility in the Company
as well as other changes to its executive management organization. See
"Executive Officers" beginning on page 11 of this Proxy Statement for a complete
listing of the Company's current executive officers.
SUMMARY COMPENSATION TABLE
ANNUAL LONG-TERM
COMPENSATION(1) COMPENSATION(1)
-------------------------- -------------------------------------
SECURITIES
NAME AND FISCAL UNDERLYING ALL OTHER
PRINCIPAL POSITION YEAR SALARY($) BONUS($) OPTIONS(#)(2) COMPENSATION($)(2)
- ------------------ ---- --------- -------- ------------- ------------------
Carl G. Anderson, Jr.(3) 2004 364,587 300,003 400,000(4) 5,105(5)
Chairman and Chief 2003 294,784 145,918 -0- 110,401(5)
Executive Officer 2002 179,059(6) -0- 150,000(7) 33,942(5)
Philip B. Fleck 2004 306,576 220,735 45,000(8) 9,322(9)
President and Chief 2003 294,784 145,918 -0- 6,948(9)
Operating Officer 2002 286,198 -0- 60,000(10) 6,757(9)
Paul L. Frankhouser 2004 270,000 172,800 35,000(11) 23,690(12)
Executive Vice 2003 257,936 113,492 -0- 21,179(12)
President 2002 250,423 -0- 40,000(13) 19,911(12)
Frederick J. Hirt(14) 2004 268,253 171,682 40,000(15) 7,931(16)
Vice President - Finance 2003 257,936 113,492 -0- 6,579(16)
and Chief Financial Officer 2002 250,423 -0- 40,000(17) 6,290(16)
Carl N. Botterbusch(18) 2004 215,004 103,202 20,000(19) 7,023(20)
Vice President and 2003 194,016 64,025 -0- 5,712(20)
General Manager, Cardiac 2002 188,365 -0- 20,000(21) 5,542(20)
Assist Division
- -----------------------------------
(1) Column with respect to "Other Annual Compensation" has not been included
in this table because there has been no such Other Annual Compensation
awarded to, earned by or paid to any of the executive officers named
above for any fiscal year covered in the table.
(2) The numbers of shares underlying option awards, the exercise prices
applicable to such awards and the numbers of shares contributed by the
Company under its 401(k) Plan that are set forth in this table and in
the corresponding footnotes have in each case been adjusted to reflect
the two-for-one split of the Common Stock effected on August 15, 2003.
(footnotes continued on next page)
17
(footnotes continued from previous page)
(3) Mr. Anderson was elected as Chairman and Chief Executive Officer of the
Company effective September 1, 2003. From January 16, 2002 to August 31,
2003, Mr. Anderson served as Vice Chairman of the Board and General
Manager of the Company's Critical Care Division, and was not an employee
of the Company prior thereto. Accordingly, no information is provided
for periods prior to January 16, 2002 for Mr. Anderson.
(4) Represents an award to Mr. Anderson on September 1, 2003 of options to
purchase 400,000 shares of Common Stock at an exercise price of $25.80
per share under the Company's 1999 Stock Incentive Plan. Subject to Mr.
Anderson's continued employment with the Company, 25% of such stock
option award (i.e., 100,000 options) will vest on each of the first
through fourth anniversaries of the date of such award (i.e., September
1). The options are subject to immediate vesting upon the occurrence of
certain change in control events.
(5) Consists of (a) contributions made by the Company in fiscal 2004, 2003
and 2002 to Mr. Anderson's account under the Company's 401(k) Plan of
188.06, 76.79 and 85.50 shares of Common Stock having an aggregate fair
market value of $5,105, $2,948 and $1,791, respectively, and (b)
payments made by the Company in fiscal 2004, 2003 and 2002 to or on
behalf of Mr. Anderson in connection with his relocation, including
moving expenses and settlement and closing costs, of $0, $107,453 and
$32,151, respectively.
(6) Represents the pro rata portion of annual salary and bonus paid to Mr.
Anderson from January 16, 2002, the date he joined the Company as an
employee, to and including August 31, 2002.
(7) Represents an award to Mr. Anderson on January 16, 2002 of options to
purchase 150,000 shares of Common Stock at an exercise price of $20.62
per share under the Company's 1999 Stock Incentive Plan. Subject to Mr.
Anderson's continued employment with the Company, 20% of such stock
option award (i.e., 30,000 options) will vest on each of the first
through fifth anniversaries of the date of such award (i.e., January
16). The options are subject to immediate vesting upon the occurrence of
certain change in control events.
(8) Represents an award to Mr. Fleck on October 14, 2003 of options to
purchase 45,000 shares of Common Stock at an exercise price of $25.00
per share under the Company's 1999 Stock Incentive Plan. Subject to Mr.
Fleck's continued employment with the Company, 25% of such stock option
award (i.e., 11,250 options) will vest on each of the first through
fourth anniversaries of the date of such award (i.e., October 14).
However, the options are subject to immediate vesting on December 31,
2004, the effective date of Mr. Fleck's retirement from the Company,
pursuant to the Company's Early Retirement Program, as well as upon the
occurrence of certain change in control events.
(9) Consists of (a) matching contributions of $4,797, $4,000 and $3,400 made
by the Company to Mr. Fleck's account under the Company's 401(k) Plan in
fiscal 2004, 2003 and 2002, respectively, and (b) contributions made by
the Company in fiscal 2004, 2003 and 2002 to Mr. Fleck's account under
its 401(k) Plan of 167.17, 76.79 and 167.22 shares of Common Stock
having an aggregate fair market value of $4,525, $2,948 and $3,357,
respectively.
(footnotes continued on next page)
18
(footnotes continued from previous page)
(10) Represents an award to Mr. Fleck on September 10, 2001 of options to
purchase 60,000 shares of Common Stock at an exercise price of $18.37
per share under the Company's 1999 Stock Incentive Plan. Subject to Mr.
Fleck's continued employment with the Company, 20% of such stock option
award (i.e., 12,000 options) will vest on each of the first through
fifth anniversaries of the date of such award (i.e., September 10).
However, the options are subject to immediate vesting on December 31,
2004, the effective date of Mr. Fleck's retirement from the Company,
pursuant to the Company's Early Retirement Program, as well as upon the
occurrence of certain change in control events.
(11) Represents an award to Mr. Frankhouser on October 14, 2003 of options to
purchase 35,000 shares of Common Stock at an exercise price of $25.00
per share under the Company's 1999 Stock Incentive Plan. Subject to Mr.
Frankhouser's continued employment with the Company, 25% of such stock
option award (i.e., 8,750 options) will vest on each of the first
through fourth anniversaries of the date of such award (i.e., October
14). However, the options are subject to immediate vesting on January
31, 2005, the effective date of Mr. Frankhouser's retirement from the
Company, pursuant to the Company's Early Retirement Program, as well as
upon the occurrence of certain change in control events.
(12) Consists of (a) matching contributions of $4,122, $3,570 and $3,400 made
by the Company to Mr. Frankhouser's account under the Company's 401(k)
Plan in fiscal 2004, 2003 and 2002, respectively, (b) contributions made
by the Company in fiscal 2004, 2003 and 2002 to Mr. Frankhouser's
account under its 401(k) Plan of 147.76, 70.85 and 150.54 shares of
Common Stock having an aggregate fair market value of $3,991, $2,728 and
$3,024, respectively, and (c) payments of $15,577, $14,881 and $13,487
made to Mr. Frankhouser in fiscal 2004, 2003 and 2002, respectively, in
respect of his accrued but unused vacation allowance.
(13) Represents an award to Mr. Frankhouser on September 10, 2001 of options
to purchase 40,000 shares of Common Stock at an exercise price of $18.37
per share under the Company's 1999 Stock Incentive Plan. Subject to Mr.
Frankhouser's continued employment with the Company, 20% of such stock
option award (i.e., 8,000 options) will vest on each of the first
through fifth anniversaries of the date of such award (i.e., September
10). However, the options are subject to immediate vesting on January
31, 2005, the effective date of Mr. Frankhouser's retirement from the
Company, pursuant to the Company's Early Retirement Program, as well as
upon the occurrence of certain change in control events.
(14) Mr. Hirt was elected Senior Vice President - Finance and Chief Financial
Officer of the Company effective October 27, 2004.
(15) Represents an award to Mr. Hirt on October 14, 2003 of options to
purchase 40,000 shares of Common Stock at an exercise price of $25.00
per share under the Company's 1999 Stock Incentive Plan. Subject to Mr.
Hirt's continued employment with the Company, 25% of such stock option
award (i.e., 10,000 options) will vest on each of the first through
fourth anniversaries of the date of such award (i.e., October 14). The
options are subject to immediate vesting upon the occurrence of certain
change in control events.
(footnotes continued on next page)
19
(footnotes continued from previous page)
(16) Consists of (a) matching contributions in the amount of $4,114, $4,000
and $3,400 made by the Company to Mr. Hirt's account under the Company's
401(k) Plan in fiscal 2004, 2003 and 2002, respectively, and (b)
contributions made by the Company in fiscal 2004, 2003 and 2002 to Mr.
Hirt's account under its 401(k) Plan of 140.89, 67.19 and 143.78 shares
of Common Stock having an aggregate fair market value of $3,817, $2,579
and $2,890, respectively.
(17) Represents an award to Mr. Hirt on September 10, 2001 of options to
purchase 40,000 shares of Common Stock at an exercise price of $18.37
per share under the Company's 1999 Stock Incentive Plan. Subject to Mr.
Hirt's continued employment with the Company, 20% of such stock option
award (i.e., 8,000 options) will vest on each of the first through fifth
anniversaries of the date of such award (i.e., September 10). The
options are subject to immediate vesting upon the occurrence of certain
change in control events.
(18) Mr. Botterbusch was elected Vice President - Research and Development
LVAD Program of the Company effective October 27, 2004 and, although he
continues to serve as an officer of the Company, is no longer deemed to
be an executive officer.
(19) Represents an award to Mr. Botterbusch on October 14, 2003 of options to
purchase 20,000 shares of Common Stock at an exercise price of $25.00
per share under the Company's 1999 Stock Incentive Plan. Subject to Mr.
Botterbusch's continued employment with the Company, 25% of such stock
option award (i.e., 5,000 options) will vest on each of the first
through fourth anniversaries of the date of such award (i.e., October
14). The options are subject to immediate vesting upon the occurrence of
certain change in control events.
(20) Consists of (a) matching contributions in the amount of $4,200, $3,742
and $3,400 made by the Company to Mr. Botterbusch's account under the
Company's 401(k) Plan in fiscal 2004, 2003 and 2002, respectively, and
(b) contributions made by the Company in fiscal 2004, 2003 and 2002 to
Mr. Botterbusch's account under its 401(k) Plan of 104.03, 51.28 and
53.19 shares of Common Stock having an aggregate fair market value of
$2,823, $1,970 and $2,142, respectively.
(21) Represents an award to Mr. Botterbusch on September 10, 2001 of options
to purchase 20,000 shares of Common Stock at an exercise price of $18.37
per share under the Company's 1999 Stock Incentive Plan. Subject to Mr.
Botterbusch's continued employment with the Company, 20% of such stock
option award (i.e., 4,000 options) will vest on each of the first
through fifth anniversaries of the date of such award (i.e., September
10). The options are subject to immediate vesting upon the occurrence of
certain change in control events.
20
OPTION GRANTS
The following table sets forth certain information, as of August 31,
2004, concerning individual grants of stock options made during the fiscal year
ended August 31, 2004 to the executive officers named in the Summary
Compensation Table above.
OPTION GRANTS IN FISCAL 2004
POTENTIAL REALIZABLE
VALUE AT ASSUMED
ANNUAL RATES OF STOCK
PRICE APPRECIATION
INDIVIDUAL GRANTS FOR OPTION TERM
--------------------------------------------------------------------- --------------------------
PERCENT OF
TOTAL OPTIONS
NUMBER OF SECURITIES GRANTED TO
UNDERLYING OPTIONS EMPLOYEES IN EXERCISE EXPIRATION
NAME GRANTED (#) FISCAL YEAR(1) PRICE ($/SH) DATE 5% 10%
- ------------------------- -------------------- --------------- ------------- ------------ ------------ ------------
Carl G. Anderson, Jr. 400,000(2) 32.00% $25.80 09/01/13 6,490,193 16,447,422
Philip B. Fleck 45,000(3) 3.60% $25.00 10/14/13 707,506 1,792,960
Paul L. Frankhouser 35,000(4) 2.80% $25.00 10/14/13 550,283 1,394,525
Frederick J. Hirt 40,000(5) 3.20% $25.00 10/14/13 628,895 1,593,742
Carl N. Botterbusch 20,000(6) 1.60% $25.00 10/14/13 314,447 796,871
- -----------------------------------
(1) Based upon total grants of options in respect of 1,250,000 shares of
Common Stock during fiscal 2004.
(2) Granted under the Company's 1999 Stock Incentive Plan on September 1,
2003. Subject to continued employment by the Company, 25% of such
options (i.e., 100,000 options) will vest on each of the first through
fourth anniversaries of such date (i.e., September 1). The options are
subject to immediate vesting upon the occurrence of certain change in
control events.
(3) Granted under the Company's 1999 Stock Incentive Plan on October 14,
2003. Subject to continued employment with the Company, 25% of such
options (i.e., 11,250 options) will vest on each of the first through
fourth anniversaries of such date (i.e., October 14). However, the
options are subject to immediate vesting on December 31, 2004, the
effective date of Mr. Fleck's retirement from the Company, pursuant to
the Company's Early Retirement Program, as well as upon the occurrence
of certain change in control events.
(4) Granted under the Company's 1999 Stock Incentive Plan on October 14,
2003. Subject to continued employment with the Company, 25% of such
options (i.e., 8,750 options) will vest on each of the first through
fourth anniversaries of such date (i.e., October 14). However, the
options are subject to immediate vesting on January 31, 2005, the
effective date of Mr. Frankhouser's retirement from the Company,
pursuant to the Company's Early Retirement Program, as well as upon the
occurrence of certain change in control events.
(5) Granted under the Company's 1999 Stock Incentive Plan on October 14,
2003. Subject to continued employment with the Company, 25% of such
options (i.e., 10,000 options) will vest on each of the first through
fourth anniversaries of such date (i.e., October 14). The options are
subject to immediate vesting upon the occurrence of certain change in
control events.
(footnotes continued on next page)
21
(footnotes continued from previous page)
(6) Granted under the Company's 1999 Stock Incentive Plan on October 14,
2003. Subject to continued employment with the Company, 25% of such
options (i.e., 5,000 options) will vest on each of the first through
fourth anniversaries of such date (i.e., October 14). The options are
subject to immediate vesting upon the occurrence of certain change in
control events.
AGGREGATE OPTION EXERCISES IN FISCAL 2004 AND FISCAL YEAR-END OPTION VALUES
The following table provides information concerning stock options
exercised during fiscal 2004 and the number of unexercised options held by the
executive officers named in the Summary Compensation Table as of August 31,
2004. Also reported are the values for unexercised, "in the money" options,
which represent the positive spread between the respective exercise prices of
such options and the fair market value of the Common Stock as of August 31,
2004.
NUMBER OF SECURITIES
UNDERLYING UNEXERCISED VALUE OF UNEXERCISED
OPTIONS AT IN-THE-MONEY OPTIONS
SHARES AUGUST 31, 2004(#) AT AUGUST 31, 2004 ($)(1)
ACQUIRED ON ---------------------------- ----------------------------
NAME EXERCISE (#) VALUE REALIZED ($) EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
-------- -------------- ------------------ ----------- ------------- ----------- -------------
Carl G. Anderson, Jr. -- -- 77,000 490,000 $626,732 $1,666,700
Philip B. Fleck -- -- 274,000 81,000 $3,943,380 $502,110
Paul L. Frankhouser 168,822 $2,456,954 47,178 59,000 $505,001 $350,990
Frederick J. Hirt -- -- 76,000 64,000 $995,660 $367,240
Carl N. Botterbusch -- -- 49,000 48,000 $511,140 $335,620
- -----------------------------------
(1) Based upon a closing sale price of the Common Stock of $28.25 per share
on August 31, 2004 as reported on The Nasdaq Stock Market.
AMENDMENT TO 1999 STOCK INCENTIVE PLAN
On October 27, 2004, the Board of Directors approved certain
non-material amendments to the Company's 1999 Stock Incentive Plan to, among
other things, (1) require that the Committee of the Board responsible for
administering the plan (which is currently the Compensation and Human Resources
Committee) consist of directors who are "independent directors" and
"non-employee directors," as defined in applicable Nasdaq and SEC rules,
respectively, (2) provide for more flexible procedures for employees to exercise
their options granted under the plan, including through the services of an agent
designated by the Company, and (3) conform the provisions of the plan requiring
the approval of the Company's shareholders for any material amendment to the
plan to the applicable Nasdaq rules.
A copy of the Company's 1999 Stock Incentive Plan, as amended, has been
filed as Exhibit 10.32.1 to the Company's Annual Report on Form 10-K for the
fiscal year ended August 31, 2004.
RETIREMENT PLANS
RETIREMENT PLAN. The Retirement Plan for Salaried Employees of Arrow
International, Inc. became effective on September 1, 1978, and was amended and
restated as of September 1, 1984, September 1, 1989 and September 1, 1997 (the
"Retirement Plan"). The Retirement Plan is a non-contributory defined benefit
pension plan intended to be qualified under Section
22
401(a) of the Internal Revenue Code of 1986, as amended (the "Internal Revenue
Code"). The Retirement Plan covers salaried employees of the Company who have
attained age 21 and completed one year of service and provides benefits based
upon years of service and compensation. All of the executive officers of the
Company participate in the Retirement Plan. Benefits under the Retirement Plan
are based on an annual rate of 1.25% of a participant's final average earnings
multiplied by such participant's years of credited service with the Company
after September 1, 1975. Final average earnings are defined under the Retirement
Plan as the participant's average annual compensation, excluding discretionary
bonuses and subject to annual limitations on compensation under the Internal
Revenue Code, during the 60 consecutive months in the final 120 months of the
participant's employment which produce the highest average. Since 1989, Internal
Revenue Code provisions have limited the amount of annual compensation that can
be used for calculating pension benefits. In 2004, no more than $205,000 of
annual salary can be used to determine an employee's annual benefit accrual. The
Internal Revenue Service adjusts this figure annually. Benefits under the
Retirement Plan are payable upon normal retirement, which is the later of age 65
or the fifth anniversary of commencing plan participation, early retirement at
age 55 following ten years of service, death, disability or other termination of
employment following five years of vesting service, and may be paid under
various annuity forms of payment.
Contributions to the Retirement Plan for any year depend on the
assumptions used by the actuary for the Retirement Plan, historic investment
experience and the level of prior years' funding. The annual contributions made
by the Company to the Retirement Plan in respect of fiscal 2002, 2003 and 2004
were $3,477,612, $9,876,263 and $3,058,289, respectively, equivalent to
approximately 9.3%, 29.3% and 7.8% of the covered compensation of all
participants in the plan for fiscal 2002, 2003 and 2004, respectively. The
amount of the contribution, payment or account in respect of a specified person
is not and cannot readily be separately or individually calculated by the
actuary of the Retirement Plan. The executive officers of the Company named in
the Summary Compensation Table currently have the following years of credited
service for purposes of the Pension Plan: Mr. Anderson has three years, each of
Messrs. Fleck and Frankhouser has 29 years, Mr. Hirt has six years and Mr.
Botterbusch has 19 years. The following table shows the estimated annual
benefits payable upon retirement under the Retirement Plan at normal retirement
age for each level of remuneration specified at the listed years of service.
PENSION PLAN TABLE
YEARS OF SERVICE
REMUNERATION (1) 15 20 25 30 35
- --------------------------------- ----------- ----------- ----------- ----------- -----------
$100,000................... $18,750 $25,000 $31,250 $37,500 $43,750
150,000................... 28,125 37,500 46,875 56,250 65,625
200,000................... 37,500 50,000 62,500 75,000 87,500
250,000................... 38,438 51,250 64,063 76,875 89,688
300,000................... 38,438 51,250 64,063 76,875 89,688
350,000................... 38,438 51,250 64,063 76,875 89,688
400,000................... 38,438 51,250 64,063 76,875 89,688
450,000................... 38,438 51,250 64,063 76,875 89,688
500,000................... 38,438 51,250 64,063 76,875 89,688
550,000................... 38,438 51,250 64,063 76,875 89,688
- -----------------------------------
(1) Under current Internal Revenue Code provisions, no more than $205,000 of
annual salary can be used to determine an employee's annual benefit
accrual. The Internal Revenue Service adjusts this figure annually.
23
SUPPLEMENTAL EXECUTIVE RETIREMENT PLAN. The Company's Defined Benefit
Supplemental Executive Retirement Plan (the "SERP") was established by the
Company on September 1, 2000 to provide non-discretionary pension benefits to
selected executive officers and retired executive officers of the Company in
addition to those benefits payable to them under the Retirement Plan. The SERP
is an unfunded pension plan not intended to be qualified under the Internal
Revenue Code. The SERP was amended as of September 2, 2003 to permit selected
additional executive officers of the Company to receive benefits thereunder and
to clarify the benefits that are payable to spouses of eligible members if the
members die before or while receiving benefits under the SERP. Additionally, the
SERP, as amended, provides that benefits thereunder will be paid to members who
attain age 65 or have five or more years of vesting service under the Retirement
Plan. The benefits payable under the SERP are coordinated with benefits payable
under the Retirement Plan and are calculated in accordance with one of two
formulae. The first formula, which applies to Messrs. Miller, Neag and
Broadbent, provides for an annual benefit, payable for the lesser of 20 years or
the life of the member, equal to twelve times the difference between: (a) 50% of
the member's monthly average compensation (as defined under the Retirement Plan,
but disregarding annual limitations on compensation under the Internal Revenue
Code used for calculating benefits under a qualified retirement plan); and (b)
the member's monthly benefit payable under the Retirement Plan payable as a
single life annuity. The second formula, which applies to Messrs. Anderson,
Fleck, Frankhouser, Hirt and Botterbusch, provides for an annual benefit,
payable for the lesser of 20 years or the life of the member, equal to twelve
times the difference between: (a) the member's credited service under the
Retirement Plan (capped at 25 years) times 2% of the member's monthly average
compensation (as defined under the Retirement Plan, but disregarding annual
limitations on compensation under the Internal Revenue Code used for calculating
benefits under a qualified retirement plan); and (b) the member's monthly
benefit payable under the Retirement Plan payable as a single life annuity.
Generally, a member's benefits under the SERP commence at the same time as the
member's benefits under the Retirement Plan. In fiscal 2004, the Company paid
$108,445 to Mr. Neag, the former Vice Chairman and a director of the Company,
and $89,051 to Mr. Broadbent, the former Vice President - Finance and Treasurer
of the Company, pursuant to the SERP.
COMPENSATION AND HUMAN RESOURCES COMMITTEE
REPORT ON EXECUTIVE COMPENSATION
The Compensation and Human Resources Committee reviews and recommends to
the Board of Directors for approval the compensation arrangements for the Chief
Executive Officer of the Company and all of its other executive officers,
including salaries, bonuses and grants of awards under, and administration of,
the Company's stock incentive plans. The Compensation and Human Resources
Committee is currently composed of three directors of the Company, each of whom
is independent as defined in applicable Nasdaq rules.
COMPENSATION PHILOSOPHY
Arrow International's executive compensation program is designed to
attract, retain, motivate and reward effective executive officers and to link
executive compensation with the attainment of financial, operational and
strategic objectives. In establishing the program, the Compensation and Human
Resources Committee assesses the performance of individuals and the Company
relative to those objectives.
The Company's compensation program generally provides incentives to
achieve annual and long-term objectives. The principal components of the
compensation program are base salary, annual incentive bonuses and long-term
incentive awards in the form of stock options
24
and/or grants of restricted Common Stock. These elements generally are blended
in order to formulate compensation packages which provide competitive pay,
reward the achievement of financial, operational and strategic objectives, and
align the interests of the Company's executive officers and other higher level
personnel with those of the Company's shareholders.
COMPENSATION COMPONENTS
BASE SALARY. Base salary levels for executive officers are derived from
market comparisons with similarly-sized manufacturing companies, including those
engaged in the manufacture of medical products for the health care industry with
which the Company competes for executive talent. The Compensation and Human
Resources Committee believes that the Company's most direct competitors for this
purpose are not necessarily all of the companies that would be included in a
peer group established to compare shareholder returns. Therefore, the
compensation peer group is not the same as the peer group index set forth in the
Company Stock Performance Graph included in this Proxy Statement. Based on
information currently available to the Compensation and Human Resources
Committee, including publicly available compensation information relating to
direct competitors of the Company, the Compensation and Human Resources
Committee believes that base salary levels for executive officers, including the
Chief Executive Officer, are, on average, at or near the median of base salary
levels for executive officers of similar companies. In determining executive
officers' salaries, the Compensation and Human Resources Committee also
considers individual experience and prior service to the Company, overall job
performance and results, and level of responsibility. The Compensation and Human
Resources Committee does not assign weights to these factors nor necessarily
consider any one more important than the others.
The Compensation and Human Resources Committee annually reviews the
performance of the Chief Executive Officer, and, in determining Mr. Anderson's
level of compensation for fiscal 2004, in addition to consideration of industry
comparisons and individual performance, has taken particular note of the
Company's performance in fiscal 2004 in the following key areas: management
efficiency; the successful introduction of new products into the market and the
advancement of products under development; continued expansion of the Company's
international production and marketing presence; and the Company's overall
growth and profitability.
INCENTIVE BONUSES. Incentive bonuses during fiscal 2004 were based on
two plans: a stock contribution program in which all eligible employees of the
Company, including executive officers, are eligible to participate, and a
pre-tax income growth plan limited to executive officers and certain other
management-level employees of the Company.
Pursuant to the Company's stock contribution program, the Company
contributes to each participant's account under the Company's 401(k) Plan an
additional 1% of the participant's monthly base pay in the form of vested shares
of Common Stock. With this stock contribution program, employees have the
opportunity to benefit from the Company's potential future success and should be
additionally motivated to help the Company achieve long-term profitable growth.
Pursuant to the Company's income growth bonus plan, at the discretion of
the Compensation and Human Resources Committee, Messrs. Anderson, Fleck,
Frankhouser, Hirt and Botterbusch are eligible to receive annual incentive
bonuses equal to 5.0, 4.5, 4.0, 4.0 and 3.0 times, respectively, and other
executive officers and eligible management-level employees of the Company are
eligible to receive annual incentive bonuses ranging from 1.0 to 3.0 times the
percentage growth in the Company's pre-tax income, exclusive of extraordinary
income and
25
expense, over the previous fiscal year times their respective base pay; provided
that, in each case, such year-over-year percentage growth equals or exceeds 5%.
For fiscal 2004, the Company's pre-tax income, exclusive of extraordinary income
and expense, increased by 16.0% over fiscal 2003, resulting in incentive bonuses
of 80.0% of base pay to Mr. Anderson, 72.0% of base pay to Mr. Fleck, 64.0% of
base pay to each of Messrs. Frankhouser and Hirt, 48.0% of base pay to Mr.
Botterbusch and from 16% to 48% of base pay to the other executive officers and
eligible management-level employees of the Company. The Compensation and Human
Resources Committee continues to believe that payment of bonuses specifically
linked to the growth in profitability of the Company provides appropriate and
effective rewards for successful individual executive performances that
contribute directly to the overall success of the Company. Therefore, it is the
present intention of the Compensation and Human Resources Committee to approve
payment of incentive bonuses in fiscal 2005 to the executive officers and
certain other management-level employees of the Company pursuant to its income
growth bonus plan to the extent that the Company in fiscal 2005 achieves an
increase of at least 5% in pre-tax income, exclusive of extraordinary income and
expense, over fiscal 2004.
LONG-TERM INCENTIVE AWARDS. To promote the Company's long-term
objectives, stock awards are made to executive officers and other employees who
are in a position to make a significant contribution to the Company's long-term
success. In addition to the shares of Common Stock that the Company contributes
each month to the accounts of its employees under its 401(k) Plan pursuant to
its stock contribution program, as described above, stock awards are currently
made pursuant to the Company's 1999 Stock Incentive Plan in the form of stock
options.
Since the stock option awards vest and may grow in value over time, this
component of the Company's compensation plan is designed to reward performance
over a sustained period. The Company intends that these awards will strengthen
the focus of its executives and other key employees on managing the Company from
the perspective of a person with an equity stake in the Company.
Stock awards are not always granted each year. In selecting recipients
and the size of stock awards, the Compensation and Human Resources Committee
generally considers various factors such as the overall job performance and
potential of the recipient, prior grants to and amount of Common Stock currently
held by the recipient, prior service to the Company, a comparison of awards made
to executives and key employees in comparable positions at similar companies,
and the Company's performance. In fiscal 2004, each of Messrs. Anderson, Fleck,
Frankhouser, Hirt and Botterbusch were awarded options to purchase 400,000,
45,000, 35,000, 40,000 and 20,000 shares of Common Stock, respectively, under
the Company's 1999 Stock Incentive Plan. In selecting the size of the award to
Mr. Anderson, the Compensation and Human Resources Committee determined that it
was in the best interest of the Company and its shareholders for the Company's
newly elected Chairman and Chief Executive Officer to have a significant portion
of his overall compensation directly linked to the Company's long-term success
in enhancing shareholder value. Other executive officers and key employees of
the Company were awarded options to purchase a total of 85,000 and 625,000
shares of Common Stock, respectively, under the 1999 Stock Incentive Plan during
fiscal 2004, resulting in a total grant of options in respect of 1,250,000
shares of Common Stock under the plan during fiscal 2004. In selecting the
recipients and size of these awards, the Compensation and Human Resources
Committee placed particular emphasis on such executives' and key employees'
overall job performance, their potential for continued excellent service and
significant contribution to the Company's growth and profitability during fiscal
2004, and awards to individuals who had previously not been selected due to
insignificant length of service to the Company. As a result of these awards and
stock awards made prior to fiscal 2004, each of the
26
Company's executive officers, as well as a significant number of non-executive
employees of the Company, have been afforded the opportunity to enjoy an equity
stake in the Company as part of their long-term compensation.
TAX DEDUCTIBILITY OF EXECUTIVE COMPENSATION. Section 162(m) of the
Internal Revenue Code imposes limitations on the federal income tax
deductibility of compensation paid to the Company's chief executive officer and
to each of the other four most highly compensated executive officers of the
Company. Under these limitations, the Company may deduct such compensation only
to the extent that during any fiscal year the compensation does not exceed
$1,000,000 or meets certain specified conditions (such as certain
performance-based compensation that has been approved by the Company's
shareholders). Based on the Company's current compensation plans and policies
and the Section 162(m) rules, the Company and the Compensation and Human
Resources Committee believe that, for the near future, there is not a
significant risk that the Company will lose any significant tax deduction for
executive compensation. The Company's compensation plans and policies will be
modified to ensure full deductibility of executive compensation if the Company
and the Compensation and Human Resources Committee determine that such an action
is in the best interests of the Company.
COMPENSATION AND HUMAN RESOURCES
COMMITTEE
R. James Macaleer, Chairman
John E. Gurski
Raymond Neag
COMPENSATION AND HUMAN RESOURCES COMMITTEE
INTERLOCKS AND INSIDER PARTICIPATION
During the fiscal year ended August 31, 2004, the Compensation and Human
Resources Committee of the Board of Directors consisted of Messrs. Ebright,
Gurski and Macaleer until April 15, 2004. On such date, the Board changed the
name of the committee from the "Human Resources Committee" to the "Compensation
and Human Resources Committee" and also changed the composition of the Committee
to thereafter consist of Messrs. Gurski, Macaleer and Neag. No member of this
committee was at any time during fiscal 2004 or at any other time an officer or
employee of the Company, other than Mr. Neag, who served as an executive officer
of the Company prior to his retirement in October 1999, and no member had any
relationship with the Company requiring disclosure under SEC rules. No executive
officer of the Company has served on the board of directors or compensation
committee of any other entity that has or has had one or more executive officers
who served as a member of the Company's Board of Directors or the Compensation
and Human Resources Committee during fiscal 2004.
27
AUDIT COMMITTEE REPORT
The Audit Committee of the Board of Directors oversees the Company's
financial reporting process on behalf of the Board of Directors. The Company's
management has the primary responsibility for the Company's financial statements
and reporting process, including its systems of internal controls. In fulfilling
its responsibilities, the Audit Committee reviewed and discussed with management
the audited financial statements in the Company's Annual Report on Form 10-K for
the fiscal year ended August 31, 2004, including a discussion of the quality and
acceptability of the accounting principles, the reasonableness of significant
judgments and the clarity of disclosures in the financial statements.
The Audit Committee also met with the Company's independent auditors,
with and without management present, to discuss the overall scope of their
audit, the results of their examinations, the cooperation received by the
auditors during the audit examination, the auditor's evaluation of the Company's
internal controls and the overall quality of the Company's financial reporting.
The Company's independent auditors are responsible for expressing an
opinion on the conformity of the Company's audited financial statements with
generally accepted accounting principles. The Audit Committee reviewed and
discussed with the Company's independent auditors their judgments as to the
quality and acceptability of the Company's accounting principles and such other
matters as are required to be discussed under generally accepted auditing
standards pursuant to Statement of Auditing Standards No. 61, as amended. In
addition, the Audit Committee received from the Company's independent auditors
the written disclosure and letter regarding their independence as required by
the Independence Standards Board Standard No. 1. The Audit Committee also
discussed with the Company's independent auditors the auditors' independence
from management and the Company, and whether the non-audit services provided by
the independent auditors are compatible with maintaining the auditors'
independence.
Based on the reviews and discussions referred to above, the Audit
Committee recommended to the Board of Directors, and the Board of Directors
approved, that the Company's audited financial statements be included in the
Company's Annual Report on Form 10-K for the fiscal year ended August 31, 2004
for filing with the SEC.
In addition, the Audit Committee approved the appointment of
PricewaterhouseCoopers LLP as the Company's independent auditors for the fiscal
year ending August 31, 2005, and the Board of Directors concurred with such
selection. The Audit Committee has recommended to the shareholders that they
ratify the selection of PricewaterhouseCoopers LLP as the Company's independent
auditors for the fiscal year ending August 31, 2005.
Each of the Audit Committee members is independent as defined in rules
and regulations issued by the SEC and the Nasdaq, and, in particular, as defined
in Rules 5200(a) and 5350(d)(2) of the Nasdaq's Marketplace Rules.
AUDIT COMMITTEE
John H. Broadbent, Jr., Chairman
George W. Ebright
Alan M. Sebulsky
28
STOCK PRICE PERFORMANCE
Set forth below is a line graph comparing the yearly cumulative total
shareholder return on the Common Stock with the cumulative total return of the
Standard & Poor's 500 Stock Index and the Standard & Poor's 500 Health Care
Equipment Index for the period beginning on August 31, 1999 and ending on August
31, 2004. The comparison assumes $100 was invested on August 31, 1999 in the
Common Stock and in each of the foregoing indices and also assumes reinvestment
of all dividends. The Standard & Poor's Medical Products and Supplies Index,
which had previously been used for comparison purposes, was discontinued in
December 2001.
[PERFORMANCE GRAPH]
- ------------------------------ -------------- --------------- -------------- -------------- --------------- --------------
August 31, August 31, August 31, August 31, August 31, August 31,
1999 2000 2001 2002 2003 2004
- ------------------------------ -------------- --------------- -------------- -------------- --------------- --------------
Arrow International, Inc. $100.00 $123.78 $128.73 $123.23 $183.07 $202.93
- ------------------------------ -------------- --------------- -------------- -------------- --------------- --------------
S&P 500 Stock Index $100.00 $116.32 $87.94 $72.12 $80.83 $90.09
- ------------------------------ -------------- --------------- -------------- -------------- --------------- --------------
S&P 500 - Health Care $100.00 $123.81 $109.44 $102.53 $128.46 $149.15
Equipment Index
- ------------------------------ -------------- --------------- -------------- -------------- --------------- --------------
---------------------
Notwithstanding anything to the contrary set forth in any of the
Company's previous filings under the Securities Act of 1933, as amended, or the
Exchange Act that might
29
incorporate future filings made by the Company under those statutes, none of the
preceding Compensation and Human Resources Committee Report on Executive
Compensation, the Audit Committee Report or the Company Stock Performance Graph
will be incorporated by reference into any of those prior filings, nor will any
of such reports or graph be incorporated by reference into any future filings
made by the Company under those statutes.
CERTAIN TRANSACTIONS
Arrow Precision Products, Inc. ("Precision") was a former subsidiary of
the Company which was formally dissolved in May 2002 (all of its assets had
previously been liquidated and distributed to shareholders). Prior to the sale
of its remaining operating subsidiary, Precision Medical Products, Inc. ("PMP"),
in August 1997 to a company owned by certain management employees of Precision,
including Mr. Holleran, the former Vice President and Chief Operating Officer of
Precision and a director of the Company, Precision was engaged in the business
of manufacturing and marketing certain gastroenterological and other
non-catheter medical products, including ground needles and injection sites
primarily for use by the Company. Prior to Precision's dissolution in fiscal
2002, certain officers, directors and principal shareholders of the Company
owned substantially all of Precision's outstanding common stock. Mr. Holleran
has served as Chairman of the Board of PMP since October 1999, Chief Executive
Officer of PMP since July 1999 and President of PMP from July 1996 to October
1999.
In fiscal 2004, the Company made purchases amounting to $117,386 of
products from PMP that it had formerly purchased from Precision. The Company
solicits competitive quotations from unrelated suppliers for products it
purchases from PMP. In the future, the Company may continue to purchase products
from PMP, provided that the quotations the Company receives from PMP for such
products are competitive with those received from unrelated suppliers in terms
of product availability, price, quality and delivery considerations.
The Company reviews all related party transactions involving amounts in
excess of $60,000 for potential conflicts of interest on an ongoing basis and
all such transactions in which the Company is a party are approved by a majority
of the independent directors of the Company or the Audit Committee in accordance
with applicable Nasdaq rules.
PROPOSAL 2 - RATIFICATION OF APPOINTMENT
OF INDEPENDENT ACCOUNTANTS
The Company's independent accountants and auditors are Pricewaterhouse
Coopers LLP, a registered public accounting firm. PricewaterhouseCoopers LLP has
served as the Company's independent accountants and auditors since fiscal 1985.
At the Annual Meeting, the shareholders will consider and vote upon a proposal
to ratify the appointment of independent accountants for the Company's fiscal
year ending August 31, 2005. The Audit Committee of the Board of Directors has
recommended that PricewaterhouseCoopers LLP be re-elected as independent
accountants for the 2005 fiscal year.
Representatives of PricewaterhouseCoopers LLP will be present at the
Annual Meeting to make a statement, if desired, and to respond to appropriate
questions from shareholders.
AUDIT FEES
The aggregate fees for professional services rendered by
PricewaterhouseCoopers LLP in connection with its audit of the Company's annual
consolidated financial statements, statutory audit of the Company's foreign
subsidiaries, and reviews of the interim financial statements
30
included in the Company's quarterly reports on Form 10-Q were $815,165 and
$646,040 for the fiscal years ended August 31, 2004 and 2003, respectively.
AUDIT-RELATED FEES
In addition to fees disclosed under "Audit Fees" above, the aggregate
fees for professional services rendered by PricewaterhouseCoopers LLP for
assurance and related services that are reasonably related to the performance of
the audit and reviews of the Company's financial statements were $153,418 and
$69,400 for the fiscal years ended August 31, 2004 and 2003, respectively. Such
services included accounting consultations and audits in connection with
acquisitions, and additional assurance and related services for the Company's
foreign subsidiaries.
TAX FEES
TAX COMPLIANCE. The aggregate fees for professional services rendered by
PricewaterhouseCoopers LLP for tax compliance assistance in connection with the
tax preparation and tax computations for the Company's U.S. and foreign
subsidiaries were $210,000 and $314,654 for the fiscal years ended August 31,
2004 and 2003, respectively.
TAX AUDIT. The aggregate fees for professional services rendered by
PricewaterhouseCoopers LLP for tax audit assistance and defense, including
transfer pricing for the Company's U.S. and foreign subsidiaries, were $309,657
and $313,500 for the fiscal years ended August 31, 2004 and 2003, respectively.
TAX PLANNING. The aggregate fees for professional services rendered by
PricewaterhouseCoopers LLP for miscellaneous tax planning and advice, including
U.S., State and International, for the Company's U.S. and foreign subsidiaries
were $41,814 and $109,819 for the fiscal years ended August 31, 2004 and 2003,
respectively.
ALL OTHER FEES
The aggregate fees for professional services rendered by
PricewaterhouseCoopers LLP for other services for the Company's U.S. and foreign
subsidiaries, consisting of consulting services relating to the Company's
Retirement Plan, were $64,450 and $0 for the fiscal years ended August 31, 2004
and 2003, respectively.
AUDIT COMMITTEE PRE-APPROVAL POLICIES AND PROCEDURES
The Audit Committee of the Company's Board of Directors pre-approves on
an annual basis the audit, audit-related, tax and other non-audit services to be
rendered by the Company's accountants based on historical information and
anticipated requirements for the following fiscal year. The Audit Committee
pre-approves specific types or categories of engagements constituting audit,
audit-related, tax and other non-audit services as well as the range of fee
amounts corresponding to each such engagement. To the extent that the Company's
management believes that a new service or the expansion of a current service
provided by the Company's accountants is necessary or desirable, such new or
expanded services are presented to the Audit Committee for its review and
approval prior to the Company's engagement of its accountants to render such
services. No non-audit services were approved by the Audit Committee pursuant to
Rule 2-01, paragraph (c)(7)(i)(C) of SEC Regulation S-X during the fiscal year
ended August 31, 2004.
31
In making its recommendation to ratify the appointment of
PricewaterhouseCoopers LLP as the Company's independent accountants for the
fiscal year ending August 31, 2005, the Audit Committee considered whether the
non-audit services provided by PricewaterhouseCoopers LLP are compatible with
maintaining the independence of PricewaterhouseCoopers LLP.
THE BOARD OF DIRECTORS RECOMMENDS THAT SHAREHOLDERS VOTE FOR THIS
PROPOSAL. PROXIES SOLICITED BY THE BOARD OF DIRECTORS WILL BE VOTED FOR THIS
PROPOSAL UNLESS OTHERWISE INDICATED.
OTHER MATTERS
As of the date of this Proxy Statement, the Board of Directors knows of
no other matters which are likely to be brought before the Annual Meeting. If,
however, any other matters are properly brought before the Annual Meeting, the
persons named in the enclosed proxy or their substitutes shall vote thereon in
accordance with the recommendation of the Board of Directors or, in the absence
of such a recommendation, in accordance with their judgment pursuant to the
discretionary authority conferred by the form of proxy.
ADDITIONAL INFORMATION
"HOUSEHOLDING" OF PROXY MATERIALS. The SEC has adopted rules that permit
companies and intermediaries such as brokers to satisfy delivery requirements
for proxy statements with respect to two or more shareholders sharing the same
address by delivering a single proxy statement addressed to those shareholders.
This process, which is commonly referred to as "householding," potentially
provides extra convenience for shareholders and cost savings for companies. The
Company and some brokers household proxy materials, delivering a single proxy
statement or annual report to multiple shareholders sharing an address, unless
contrary instructions have been received from the affected shareholders. Once
you have received notice from your broker or the Company that they or it will be
householding materials to your address, householding will continue until you are
notified otherwise or until you revoke your consent. If, at any time, you no
longer wish to participate in householding and would prefer to receive a
separate proxy statement or annual report, please notify the Company by sending
a written request to Investor Relations, Arrow International, Inc., P.O. Box
12888, 2400 Bernville Road, Reading, Pennsylvania 19612 or by calling the
Company at 610-320-3917 or toll free at 1-877-639-6912.
LIST OF SHAREHOLDERS. The names of shareholders entitled to vote at the
Annual Meeting will be available at the Annual Meeting and for ten days prior to
the Annual Meeting for any purpose germane to the Annual Meeting, between the
hours of 9:00 a.m. and 4:30 p.m., at the Company's principal executive offices
at 2400 Bernville Road, Reading, Pennsylvania 19605 by contacting the Company's
Corporate Secretary.
SHAREHOLDER PROPOSALS FOR 2006 ANNUAL MEETING. Proposals of shareholders
intended to be presented at the Company's 2006 Annual Meeting of Shareholders
(1) must be received by the Company's Corporate Secretary at its principal
executive offices provided above no later than August 19, 2005, (2) may not
exceed 500 words, and (3) must otherwise satisfy the conditions established by
the SEC for shareholder proposals to be included in the Company's Proxy
Statement for that meeting.
COMMUNICATION WITH THE BOARD. Shareholders may communicate with the
Company's Board of Directors by sending a letter to the Arrow International,
Inc. Board of Directors, c/o Corporate Secretary, Arrow International, Inc.,
P.O. Box 12888, 2400 Bernville Road, Reading,
32
Pennsylvania 19612. The Secretary has the authority to disregard any
inappropriate communications or to take other appropriate actions with respect
to such inappropriate communication. If deemed appropriate, the Secretary will
submit your correspondence to the Chairman of the Board or as directed by such
correspondence.
PROXY SOLICITATION COSTS. The cost of the solicitation of proxies hereby
will be borne by the Company. In addition to the solicitation of proxies by
mail, certain of the officers and employees of the Company, without extra
compensation therefor, may solicit proxies personally or by telephone or
telecopy. The Company will also request brokers, banks and other nominees,
custodians and fiduciaries to forward soliciting materials to their principals
and to request authority for the execution of proxies and will reimburse such
persons for forwarding such materials.
ANNUAL REPORT. A copy of the Company's 2004 Annual Report accompanies
this Proxy Statement. Additional copies may be obtained from the Corporate
Secretary, Arrow International, Inc., P.O. Box 12888, 2400 Bernville Road,
Reading, Pennsylvania 19612.
By Order of the Board of Directors,
John C. Long,
Secretary
December 17, 2004
Reading, Pennsylvania
33
PLEASE MARK VOTES REVOCABLE PROXY
[X] AS IN THIS EXAMPLE ARROW INTERNATIONAL, INC.
WITH- FOR ALL
FOR HOLD EXCEPT
SOLICITED BY THE BOARD OF DIRECTORS FOR THE ANNUAL 1. Election of Directors, Nominees: [ ] [ ] [ ]
MEETING OF SHAREHOLDERS ON JANUARY 19, 2005. For terms expiring in 2009:
The undersigned hereby appoints John H. Broadbent, CARL G. ANDERSON, JR.
Jr., Raymond Neag and R. James Macaleer, and each or JOHN E. GURSKI
any of them, his/her Proxies, each with full power to MARLIN MILLER, JR.
appoint his/her substitute, and hereby authorizes them
to represent and to vote, as designated hereon, all INSTRUCTION: TO WITHHOLD AUTHORITY TO VOTE FOR ANY
shares of common stock of ARROW INTERNATIONAL, INC. INDIVIDUAL NOMINEE, MARK "FOR ALL EXCEPT" AND WRITE
(the "Company") held of record by the undersigned on THAT NOMINEE'S NAME IN THE SPACE PROVIDED BELOW.
November 26, 2004 at the Annual Meeting of
Shareholders to held on January 19, 2005, 4:00 p.m. at ------------------------------------------------------------
the Company's corporate headquarters at 2400 Bernville
Road, Reading, Pennsylvania and any adjournments FOR AGAINST ABSTAIN
thereof, and hereby further authorizes each of them, 2. Ratification of appointment of [ ] [ ] [ ]
in their discretion, to vote upon any other business PricewaterhouseCoopers L.L.P. as
that may properly come before the meeting. independent accountants.
PLEASE CHECK BOX IF YOU PLAN TO ATTEND THE
MEETING. [ ]
THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR" PROPOSAL 2.
YOU ARE ENCOURAGED TO SPECIFY YOUR CHOICES BY MARKING THE
APPROPRIATE BOXES ABOVE, BUT YOU NEED NOT MARK ANY BOX WITH
REGARD TO A PARTICULAR PROPOSAL IF YOU WISH TO VOTE FOR SUCH
PROPOSAL. THE PROXIES CANNOT VOTE YOUR SHARES UNLESS YOU SIGN
AND RETURN THIS CARD.
-------------------------- THIS PROXY WHEN PROPERLY EXECUTED WILL BE VOTED IN THE
Please be sure to sign and date MANNER DIRECTED THEREIN. IF NO DIRECTION IS GIVEN WITH RESPECT
this Proxy in the box below. TO A PARTICULAR PROPOSAL, THIS PROXY WILL BE VOTED FOR SUCH
- ------------------------------------------------------------- PROPOSAL.
The signer hereby revokes all proxies heretofore given by
the signer to vote at said meeting or any adjournments
thereof.
- -- Stockholder sign above-----Co-holder (if any) sign above--
- ------------------------------------------------------------------------------------------------------------------------------------
^ DETACH ABOVE CARD, SIGN, DATE AND MAIL IN POSTAGE PAID ENVELOPE PROVIDED. ^
ARROW INTERNATIONAL, INC.
P.O. BOX 12888, 2400 BERNVILLE ROAD, READING, PENNSYLVANIA 19612
Please sign exactly as name appears hereon. If shares are registered in more than one name, the signatures of all such persons
are required. A corporation should sign its full corporate name by a duly authorized officer stating his/her title. Trustees,
guardians, executors and administrators should sign in their official capacity giving their full title as such. If a partnership,
please sign in the partnership name by authorized persons.
PLEASE ACT PROMPTLY
SIGN, DATE & MAIL YOUR PROXY CARD TODAY
- ------------------------------------------------------------------------------------------------------------------------------------
IF YOUR ADDRESS HAS CHANGED, PLEASE CORRECT THE ADDRESS IN THE SPACE PROVIDED BELOW AND RETURN THIS PORTION WITH THE PROXY IN THE
ENVELOPE PROVIDED.
- ----------------------------------------------------
- ----------------------------------------------------
- ----------------------------------------------------
PLEASE MARK VOTES REVOCABLE PROXY
[X] AS IN THIS EXAMPLE ARROW INTERNATIONAL, INC.
WITH- FOR ALL
FOR HOLD EXCEPT
SOLICITED BY THE BOARD OF DIRECTORS FOR THE ANNUAL 1. Election of Directors, Nominees: [ ] [ ] [ ]
MEETING OF SHAREHOLDERS ON JANUARY 19, 2005. For terms expiring in 2009:
The undersigned hereby appoints John H. Broadbent, 4 CARL G. ANDERSON, JR.
Jr., Raymond Neag and R. James Macaleer, and each or JOHN E. GURSKI
any of them, his/her Proxies, each with full power to 0 MARLIN MILLER, JR.
appoint his/her substitute, and hereby authorizes them
to represent and to vote, as designated hereon, all 1 INSTRUCTION: TO WITHHOLD AUTHORITY TO VOTE FOR ANY
shares of common stock of ARROW INTERNATIONAL, INC. INDIVIDUAL NOMINEE, MARK "FOR ALL EXCEPT" AND WRITE
(the "Company") held of record by the undersigned on K THAT NOMINEE'S NAME IN THE SPACE PROVIDED BELOW.
November 26, 2004 at the Annual Meeting of
Shareholders to held on January 19, 2005, 4:00 p.m. at ------------------------------------------------------------
the Company's corporate headquarters at 2400 Bernville
Road, Reading, Pennsylvania and any adjournments FOR AGAINST ABSTAIN
thereof, and hereby further authorizes each of them, 2. Ratification of appointment of [ ] [ ] [ ]
in their discretion, to vote upon any other business PricewaterhouseCoopers L.L.P. as
that may properly come before the meeting. independent accountants.
PLEASE CHECK BOX IF YOU PLAN TO ATTEND THE
MEETING. [ ]
THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR" PROPOSAL 2.
YOU ARE ENCOURAGED TO SPECIFY YOUR CHOICES BY MARKING THE
APPROPRIATE BOXES ABOVE, BUT YOU NEED NOT MARK ANY BOX WITH
REGARD TO A PARTICULAR PROPOSAL IF YOU WISH TO VOTE FOR SUCH
PROPOSAL. THE PROXIES CANNOT VOTE YOUR SHARES UNLESS YOU SIGN
AND RETURN THIS CARD.
-------------------------- THIS PROXY WHEN PROPERLY EXECUTED WILL BE VOTED IN THE
Please be sure to sign and date MANNER DIRECTED THEREIN. IF NO DIRECTION IS GIVEN WITH RESPECT
this Proxy in the box below. TO A PARTICULAR PROPOSAL, THIS PROXY WILL BE VOTED FOR SUCH
- ------------------------------------------------------------- PROPOSAL.
The signer hereby revokes all proxies heretofore given by
the signer to vote at said meeting or any adjournments
thereof.
- -- Stockholder sign above-----Co-holder (if any) sign above--
- ------------------------------------------------------------------------------------------------------------------------------------
^ DETACH ABOVE CARD, SIGN, DATE AND MAIL IN POSTAGE PAID ENVELOPE PROVIDED. ^
ARROW INTERNATIONAL, INC.
P.O. BOX 12888, 2400 BERNVILLE ROAD, READING, PENNSYLVANIA 19612
Please sign exactly as name appears hereon. If shares are registered in more than one name, the signatures of all such persons
are required. A corporation should sign its full corporate name by a duly authorized officer stating his/her title. Trustees,
guardians, executors and administrators should sign in their official capacity giving their full title as such. If a partnership,
please sign in the partnership name by authorized persons.
PLEASE ACT PROMPTLY
SIGN, DATE & MAIL YOUR PROXY CARD TODAY
- ------------------------------------------------------------------------------------------------------------------------------------
IF YOUR ADDRESS HAS CHANGED, PLEASE CORRECT THE ADDRESS IN THE SPACE PROVIDED BELOW AND RETURN THIS PORTION WITH THE PROXY IN THE
ENVELOPE PROVIDED.
- ----------------------------------------------------
- ----------------------------------------------------
- ----------------------------------------------------