Document:

AGREEMENT

      This Agreement made and entered into as of the 7th day of August, 2000
between ARROW INTERNATIONAL, INC., Reading, PA, hereinafter called the Company,
and the UNITED STEELWORKERS OF AMERICA, AFL-CIO, CLC, hereinafter called the
Union.

      The combination of the Company and the Union shall be known as the
Parties.

                         ARTICLE 1 - INTENT AND PURPOSE

Section 1. Intent and Purpose

      It is the intent and purpose of the Parties hereto that this Agreement
shall govern, promote, and improve the industrial and economic relationships
between the Parties and to secure and sustain maximum productivity per employee
during the term of the Agreement and to set forth herein the agreements covering
wages, hours of work, and other conditions of employment of the employees of the
Company to be observed between the Parties hereto.

      The Parties may meet during the term of this Agreement to discuss any
changes that may be necessary. It is understood that any changes made must be
agreed to by both parties and reduced to writing.

Section 2. Successor Clause

      In the event that at any time during the term of this Agreement the assets
and business of the Reading, PA plants of the Company are sold to a purchaser
who on and after the date of such sale will take over and continue the said
business and the manufacturing and sale of the products then produced at said
plants, the Company will require the purchaser to agree in the agreement for
such sale to recognize the Union as the exclusive bargaining agent for the
employees at said plants and assume and perform all of the terms and conditions
of this Agreement as amended and supplemented.

                   ARTICLE II - RECOGNITION AND UNION SECURITY

Section 1. The Bargaining Unit

      The Company recognizes the Union as the exclusive collective bargaining
representative with respect to rates of pay, wages, hours of work and other
conditions of employment of all production and maintenance employees in its
Reading, Pennsylvania plants; but excluding all plant and office clerical
employees, executive office janitorial workers, guards, technical employees,
supervisory employees and all other employees not required to receive premium
payment pursuant to the Federal Fair Labor Standards Act.

      It is hereby agreed that the terms and provisions of this Agreement shall
also apply to any newly established plant, department or unit located in Berks
County, state of Pennsylvania.

Section 2. Union Membership

      As a condition of employment, all employees covered by this Agreement
after completing seventy (70) calendar days, shall become members of the Union
and shall maintain their

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membership in the Union to the extent of paying the periodic dues and the
initiation fee uniformly required of all Union members, for the duration of this
Agreement.

Section 3. Union Good Standing

      For the purpose of this Article, an employee shall not be deemed to have
lost his membership in the Union in good standing until the International
Secretary/Treasurer of the Union shall have given the Company a notice in
writing of that fact. The foregoing provision shall be effective in accordance
and consistent with applicable provisions of federal and state law.

Section 4. Affirmative Action

      The provisions of this Agreement shall be applied to all employees without
discrimination on account of race, creed, color, age, sex, national origin,
sexual orientation, and where possible with reasonable accommodation to those
physically or mentally handicapped. It is further agreed that affirmative action
will be taken to insure that employees are treated without discrimination in
wages, hours, or other conditions of employment except as imposed by federal,
state or local law.

      The Parties agree to the establishment of a joint Committee on Civil
Rights. The representation on this joint Committee shall be an equal number of
members from both Parties, not to exceed three (3) Union members and three (3)
Company members. The joint Committee shall review and investigate complaints
involving civil rights and attempt to resolve same. In the event that a civil
rights complaint reviewed by this joint Committee is not resolved, it may be
processed by the Chairperson of the grievance Committee directly into the third
step of the grievance procedure.

      The Company and Union members of the joint Committee shall meet at
mutually agreeable times as required.

      Whenever the masculine form of the pronoun "he" is used, it shall include
the feminine pronoun.

                             ARTICLE III - CHECK OFF

Section 1. Company Responsibility

      The Company will deduct and remit to the Union monthly dues, assessments,
and initiation fees each as designated by the International Secretary/Treasurer
of the Union, as membership dues in the Union, on the basis of individually
signed voluntary check-off authorization cards.

      All new employees coming within the jurisdiction of the bargaining unit
shall, as a condition of employment, become members of the Union at the end of
their probationary periods. At the time new employees are hired, they will be
furnished Union membership cards for their signatures. These cards will be given
to the Local Unit President.

Section 2. Authorization Cards

      Voluntary authorization cards signed by the employees and duplicate lists
of its members shall be furnished to the Company by the Union, and additional
supplementary lists showing

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employees who have become members since the submission of the previous list
shall be submitted to the Company by the Union monthly thereafter.

Section 3. Supplemental Lists

      One of each set of such lists shall be returned to the Union by the
Company monthly and shall contain thereon any corrections which may be required.

      A supplemental list including names of employees who have completed their
probationary periods will be provided for the Union by the Company.

Section 4. Additional Assessments

      The Company shall, in like manner, after being notified by the
International Secretary/Treasurer of the Union, also deduct such assessments as
may be specified in the aforementioned Constitution.

Section 5. Forwarding of Deductions to International

      The Company shall forward deductions made each month to the International
Secretary/Treasurer of the Union at the address which he authorized in the form
of a check made payable to his name.

Section 6. Monthly Membership Reports

      For the purpose of maintaining local Union records, the Company shall
furnish to the Financial Secretary of the local Union and to the local office of
the International Union, a monthly report showing the membership total, new
employees hired in the preceding month, and the name of members for whom no
deductions were made and the reasons therefore.

Section 7. USWA Political Action Fund

      The Company agrees that it will check off and transmit to the
Secretary/Treasurer of the United Steelworkers of America Political Action
Committee (USWA PAC) voluntary contributions to the USWA Political Action Fund
from the earnings of those employees who voluntarily authorize such
contributions on forms provided for that purpose by the USWA PAC. The amount and
timing of such check off deductions and the transmittal of such voluntary
contributions shall be as specified in such forms and in conformance with any
applicable state or federal statute.

      The signing of such USWA PAC check off form and the making of such
voluntary annual contributions are not conditions of membership in the Union or
of employment with the Company.

      The Union shall indemnify and save the Company harmless against any and
all claims, demands, suits or other forms of liability that shall arise out of
or by reason of action taken or not taken by the Company for the purpose of
complying with any of the provisions of this Section.

      The United Steelworkers of America Political Action Committee supports
various candidates for federal and other elective office, is connected with the
United Steelworkers of America, a labor organization and solicits and accepts
only voluntary contributions, which are deposited in an account separate and
segregated from the dues fund of the Union, in its own

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fundraising efforts and in joint fundraising efforts with the AFL-CIO and its
Committee on Political Education.

                               ARTICLE IV - WAGES

Section 1. Wage Guarantee

      During the term of this Agreement, each employee shall be guaranteed and
shall receive for each day's work an amount not less than the applicable hourly
rate for his job as set forth in Exhibit A multiplied by the number of hours
worked except as provided for in Section 9.

Section 2. Establishment of Labor Grades

      The applicable hourly rates set forth in Exhibit A shall be applied to the
existing job classifications in accordance with the labor grades established by
the CWS Job Evaluation Program.

Section 3. New or Changed Jobs

      New or changed jobs shall be paid at the applicable hourly rate
appropriate for the labor grade developed and established in accordance with the
CWS Job Evaluation Program.

Section 4. Minimum Rate Guarantee

      (a) The minimum guarantee for all hours worked shall be the base rate or
Red Circle Rate, if applicable, of the classification and labor grade.

Section 5. Evaluation/Classification of Jobs

      (a) The CWS Job Evaluation Program and the provisions of the CWS Manual
will continue in effect.

      (b) When the Company establishes a new job or changes an existing job,
such job will be evaluated and classified in accordance with the provisions of
the CWS Manual.

      (c) The Company shall submit copies of job descriptions and factor sheets
for all new or changed jobs to the Chairman of the CWS Committee and the
Chairman of the Grievance Committee not later than the end of the week in which
such jobs are installed and operating. The Union will submit its evaluation
within ten (10) working days of the date of receipt of such job descriptions and
factor sheets. Failure to observe time limits in the evaluation of new or
changed jobs will resolve the evaluation in the favor of the other party unless
time limits are extended by mutual agreement.

      (d) In the event the Parties cannot agree that a job description as
submitted accurately describes the job, or are unable to agree on the
classification, the differences shall be stipulated, setting forth any factors
or factor codings in dispute. Such stipulated differences shall be submitted to
the grievance procedure beginning at the Third Step.

      (e) Any disputed classifications will be installed at the classification
submitted by the Company. Any wage adjustments made necessary as a result of the
final resolution of the grievance will be retroactive to the effective date of
the installation or change.

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      (f) Whenever the primary functions of the jobs as described under the
existing job descriptions and CWS Manual have been combined, the grade for the
combined job shall be determined by the use of selective factoring and the job
reclassified according to the point total of the combined job with such
factoring.

Section 6. Labor Grade Inequity Grievances

      No basis shall exist for an employee to allege that a labor grade inequity
exists and no grievance on behalf of an employee alleging a labor grade inequity
shall be filed or processed during the term of this Agreement for any job that
has been classified by the Joint Job Evaluation Committee or has otherwise been
classified in accordance with the procedures established for classifying new or
changed jobs under the CWS Manual.

Section 7. General Wage Increases

      General wage increases will be granted to all employees in accordance with
the following schedule:

      (a) Employees with Red Circle Rates will be granted general wage increases
of thirty-eight cents ($.38) per hour effective August 7, 2000; thirty cents
($.30) per hour effective August 6, 2001; and twenty-six cents ($.26) per hour
effective August 5, 2002.

      (b) All other employees will be granted general wage increases of fifty
cents ($.50) per hour effective August 7, 2000; forty cents ($.40) per hour
effective August 6, 2001; and thirty-five cents ($.35) per hour effective August
5, 2002.

Section 8. Red Circle Rates

      (a) A Red Circle Rate is a rate which has been established for an employee
in a job classification by agreement of the Parties at a level higher than that
indicated in Exhibit A.

      (b) Employees with Red Circle Rates will be eligible for COLA increases as
provided for in Section 9. of this Article.

      (c) The following practices will apply to employees with Red Circle Rates:

      1.    If a job is changed so that the provisions of Article XVII, Section
            9., regarding Formality Bidding apply, any employee exercising such
            a bid will retain his Red Circle Rate.

      2.    Any employee who bumps into, bids into, displaces an employee
            within, or requests a job within his own job classification as
            provided under Article XVII, Sections 3., 7., and 8. shall retain
            his own Red Circle Rate.

      3.    Temporary layoffs or recalls will not terminate Red Circle Rates.

      4.    The Company agrees that it will not recall, layoff, or otherwise
            change the status of an employee for the purpose of eliminating a
            Red Circle Rate exclusively.

      5.    The applicable hourly rate shall include the Red Circle Rate.

Section 9 Cost-of-Living Adjustments

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      (a) A cost-of-living adjustment (COLA) shall be made to the applicable
hourly rates and Red Circle rates. The amount of the COLA shall be determined
and redetermined in accordance with changes in the Consumer Price Index for
Urban Wage Earners and Clerical Workers. All items, published by the Bureau of
Labor Statistics, United States Department of Labor (1982-84 equals 100) herein
referred to as the BLS Consumer Price Index.

      (b) Effective August 7, 2000, the allowance shall be one (1) cent for each
 .5 point increase above an eight (8) percent annual increase in the BLS Consumer
Price Index, using the July, 1999 index as a base.

      (c) Effective August 6, 2001, the allowance shall be one (1) cent for each
 .5 point increase above an eight (8) percent annual increase in the BLS Consumer
Price Index, using the July, 2000 index as a base.

      (d) Effective August 5, 2002, the allowance shall be one (1) cent for each
 .5 point increase above an eight (8) percent annual increase in the BLS Consumer
Price Index, using the July, 2001 index as a base.

      (e) The cost-of-living allowance will be computed on the basis of hours
worked multiplied by the amount allowable by the change in the Index.

      (f) No adjustments, retroactive or otherwise, shall be made due to any
revision which may later be made in the published figures for the BLS Consumer
Price Index for the base months referred to above.

Section 10. Average Hourly Rate

      (a) The average hourly rate based on a calculation one (1) month prior to
the month of the occurrence is used for time for the Grievance Committee and
President, holiday pay, jury and witness pay, funeral pay, Company convenience
transfers, and calculation of vacation pay following extended illnesses and
layoff due to temporary lack of work.

                           ARTICLE V - SHIFT PREMIUMS

Section 1. Shift Time Designations

      For the purpose of this Article:

      (a) All shifts beginning between 5:00 a.m. and 9:00 a.m., inclusive, shall
be considered day shifts.

      (b) All shifts beginning between 1:00 p.m. and 5:00 p.m., inclusive, shall
be considered middle shifts.

      (c) All shifts beginning between 9:00 p.m. and 1:00 a.m., inclusive, shall
be considered as night shifts.

      Where operations are required to support major operations of a group,
individuals may be assigned an earlier or later starting time without being
transferred to another shift.

Section 2. Shift Premiums

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      (a) Each employee scheduled to work on the middle shift or night shift
shall be paid a shift premium of thirty cents ($.30) per hour for all work done
by him on either of these shifts.

                     ARTICLE VI - HOURS OF WORK AND OVERTIME

Section 1. Normal Daily Working Hours

      The normal work day shall consist of eight (8) consecutive hours of work,
exclusive of unpaid lunch periods, and shall begin at the starting time of the
employee's shift. The normal hours for all day shift employees are 7:00 a.m. to
3:00 p.m. The normal hours for all middle shift employees are 3:00 p.m. to 11:00
p.m. The normal hours for all night shift employees are 11:00 p.m. to 7:00 a.m.
Employees who refuse the daily overtime schedule shall work the otherwise normal
schedule.

      Any employee who is unable to work must report his absence in the
designated manner prior to the start of his shift. Any report off after the
start of his shift will result in one (1) occurrence under the Conduct category
of the Behavior Improvement Program and one (1) occurrence (if applicable )
under the Absence category of the Behavior Improvement Program. Failure to
report off before or during the shift will result in a step of discipline in the
Conduct category of the Behavior Improvement Program.

      Individual hardship cases may be brought to the attention of the Company
by the Union.

      If an employee is absent due to personal health reasons, the employee is
required to report his absence in the designated manner until such time as his
absence is medically certified. If the employee continues to be absent beyond
the certification period, the employee is required to report off in the
designated manner prior to the shift until recertified.

Section 2. Normal Work Week

      The normal work week shall be five (5) consecutive work days beginning at
12:01 a.m. Monday or at the shift changing hour nearest that time.

Section 3. Eligibility for Overtime

      One and one-half times the applicable hourly rate shall be paid for the
following conditions:

      (a) All time worked in excess of forty (40) hours within the work week.

      (b) All time worked in excess of eight (8) hours within a twenty-four (24)
hour period beginning with the time the employee commences work but not
extending beyond the work week.

      (c) All work performed on days when serving as a juror or as a subpoenaed
witness, when receiving funeral pay, or on any holidays designated in Article
VII, Section 1.

      (d) All work performed on Saturday, provided the employee worked the full
five (5) preceding days in the work week. Absences due to the following reasons
will be considered as days worked when determining the eligibility of an
employee for overtime pay:

1.    Jury Duty.
2.    Meeting requirements of the Selective Service System.

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3.    Occupational injury or illness suffered within the plant including
      follow-up visits to Workers Compensation physicians approved in advance by
      the Company.
4.    Death in the employee's immediate family. (See Article XVI, Section 8.,
      Funeral Pay).
5.    Layoff due to lack of work.
6.    Bona fide illness not caused or contributed to by the employee.
7.    Subpoenaed as a witness.
8.    Emergencies such as lack of power, gas, water, fire, Acts of God, or other
      emergencies causing the plant to be closed.
9.    Any approved leave of absence.

      It is understood that reasonable proof, in the form of physicians'
certificates, legal documents, letters on formal stationery, newspaper reports
or other mutually agreeable items, must be presented to the Company in the event
of such absences.

      Individual hardship cases not provided for above may be brought to the
attention of the Company by the Union. Decisions regarding hardship cases will
be made on a timely basis whenever possible.

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Section 4. Eligibility for Double Time

      Two (2) times the applicable hourly rate shall be paid for the following
conditions:

      (a) All work performed in excess of twelve (12) hours within a twenty-four
(24) hour period, beginning with the time the employee commences work, but not
extending beyond the work week.

      (b) All work performed on Sunday provided the employee worked the full
five (5) preceding days in the work week and the approved schedule on Saturday,
unless his failure to do so was attributable to the reasons and verified by the
proof listed in Section 3. of this Article.

            If the employee is scheduled to work on Sunday but not Saturday, all
hours worked on Sunday shall be paid at double time. If an employee is scheduled
to work Saturday and Sunday and pre-schedules a vacation day on Saturday, he
will be paid for Sunday's hours at one and one half times the hourly rate.

Section 5. Holiday or Vacation Day

      For purposes of determining the eligibility of an employee for overtime
pay, a paid holiday or vacation day falling within the work week shall be
considered a day worked.

Section 6. Non-Duplication of Overtime Payments

      Overtime payments shall not be duplicated for the same hours worked under
any of the terms of this Agreement and, to the extent that hours are compensated
for at overtime rates under one provision, they shall not be counted as hours
worked in determining overtime under the same or any other provision.

Section 7. Miscellaneous Provisions

      (a) An employee who reports for work, not having previously been notified
not to report, and who, for reasons solely attributable to the Company, is sent
home without being put to work, shall receive four (4) hours pay at his
applicable hourly rate.

      (b) If the Company has none of his regular work for him, it may use the
employee's services in other capacities where he is able to perform for such
four (4) hours or longer, and he shall receive his applicable hourly rate of pay
or the rate of pay for the job performed, whichever is higher.

      In the event the Company has none of his regular work for him, such
employee may elect to decline an assignment to another classification for up to
four (4) hours or longer. It is expressly understood that such refusal would
relieve the Company of any obligation for reporting pay.

      (c) Notification of employees who are not to report to work shall be made
in inverse seniority order. In the event the Company cannot notify all employees
affected and the chain of seniority is broken, such employees will be identified
to appropriate Union representatives. Upon reporting such employees will not be
allowed to work and will not receive report-in pay.

      Failure to attempt to contact all employees causing the chain of seniority
to be broken, will result in the remaining employees to be allowed to work or
receive report-in pay as provided in (a) and (b) of this Section.

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Section 8. Conditions Beyond Company Control

      The provisions of Section 7. shall not apply if an employee is prevented
from starting after reporting, or is prevented from continuing to work after
starting because of conditions beyond the control of the Company. In such cases,
each employee shall be paid at his applicable hourly rate for all time actually
worked or one (1) hour, whichever is greater.

Section 9. Equalization of Overtime

      It is the intention of the Parties to establish herein, as far as is
practical, the basic principles for equitable rotation of such overtime work as
may be required. To this end, the following rules are agreed to and shall
prevail:

      (a)   Within the affected job classification, shift, job assignment (home
            base) and department, overtime work shall be distributed as equally
            as practicable among all employees who are qualified to perform the
            available work. However, the foregoing is not intended to interfere
            with established past practice as to cross shift equalization.
      (b)   It is the responsibility of the employee to request training in all
            areas of their job classification. If an employee is not trained in
            an area, he/she will be charged with any available overtime.
      (c)   If an employee has requested training and is awaiting training,
            he/she will not be charged with overtime in that area.
      (d)   In all other cases, overtime should be offered to the most senior
            employee with the least amount of overtime.
      (e)   If you work the overtime, you will be charged.
      (f)   If you don't work, you will be charged for the overtime for the
            following reasons:
            1.    You are absent when overtime is worked (i.e., sick, vacation,
                  leave of absence, etc.)
            2.    You refuse the offer of overtime.
            3.    You have not requested to share in overtime in other home
                  bases or areas within your department and job assignment.
      (g)   Employees will only be charged for refusing daily overtime, if they
            are asked the day before, unless it is an emergency (call off, sick
            or vacation) or there are other "unforeseen contingencies."
      (h)   Employees moving into a new department, job assignment, shift or job
            classification will be charged with hours equal to employees in that
            job with the highest number of overtime hours worked.
      (i)   An employee removed (temporary or otherwise) out of his/her job
            classification will maintain his/her position in the overtime log
            within that job classification upon return.

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Section 10. Administration of Overtime

      (a) If an insufficient number of employees within a job classification and
within a department accept the opportunity to work overtime, the Company shall
fill such overtime opportunities in the following order of preference:

            1. A job offer to qualified employees within the department but
regularly assigned to other job classifications.

            2. Overtime pool of qualified employees. In the event that an
employee declines such offer for two (2) consecutive occasions, the Company is
not required to consider him for further overtime vacancies until the
commencement of the third calendar week following the week in which the employee
notifies his supervisor in writing of his availability and willingness to accept
overtime opportunities. The following procedure will be utilized in the
administration of the overtime pool:

            i.    Initially all employees will be placed in the pool by job
                  classification and shift in seniority order. As additional
                  employees sign up they will be placed at the bottom of the
                  rotation.

            ii.   If the employee declines two consecutive offers, he will be
                  notified that he has been removed from the pool. If that
                  employee subsequently re-enters the pool, he will be placed at
                  the bottom of the rotation.

            iii.  Employees who are absent for any reason will be considered to
                  have worked in the overtime pool and they will be placed at
                  the bottom of the rotation but not charged with a refusal.

            iv.   Employees who have overtime available in their own department
                  will not be eligible for work in the overtime pool. Their name
                  will remain in the existing overtime pool rotation.

            v.    Overtime assignments which require extensive training and/or
                  experience (such as setup jobs) will only be offered to those
                  employees with actual experience on that assignment.
                  Qualification of an employee for these assignments will be
                  made by the supervisor.

      3.    Inverse order of seniority and rotated from one overtime day to the
            next among employees hired on or after January 1, 1992. As new
            employees are hired on or after September 8, 1997, the most senior
            employee will be dropped from the list. It is the Company's intent
            to utilize the provisions of this paragraph 3. only to the extent
            that the needs of the operation require.
      4.    In the event there are no employees available as described above,
            and all employees within a job classification within a department
            refuse the opportunity to work overtime, the Company shall schedule
            and rotate the overtime work in the inverse order of seniority for
            such employees.

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      Failure to work overtime as described in this Section 10. (a) 3. and 4.
above, will be considered a step of discipline for the purpose of Article IX,
Section 2.

      Each employee so scheduled shall be required to work unless he is
prevented from doing so for reasonable cause.

      (b) Any employee who, upon proper request from his Supervisor accepts an
overtime assignment, shall work such overtime and failure to do so shall cause
him to be treated as an absentee.

      (c) The Company may designate in certain job classifications or home bases
where operations are continuous, that 0.3 hours of daily overtime be required.
For the purpose of this paragraph (c) only, a continuous operation is defined as
any plastic molding machine operation which works for two (2) or more
consecutive eight (8) hour shifts within a twenty-four (24) hour period. For the
purpose of overtime equalization, overtime that is generated as a result of the
mandatory overlap for the continuity of molding operations in job classification
0692, Department 357, will not be counted.

Section 11. Weekend Overtime

      (a) Employees required to work weekend overtime shall be notified as early
as possible but not later than five (5) hours following the beginning of the
third (3rd) day of the work week except for unforeseen emergencies.

      Employees must declare their intentions to accept such weekend overtime on
the sign-up sheet posted for this purpose not later than two (2) hours following
the beginning of the fourth (4th) day of the work week.

      (b) Employees required to work daily overtime shall be notified as early
as possible but not later than the end of their preceding shifts except for
unforeseen contingencies.

      (c) Notification of overtime schedules shall be by bulletin board notice
in all affected departments.

      Sign-up sheets for employees who accept overtime will be placed on
bulletin boards along with the overtime notice. Any employee who does not sign
the acceptance sign-up sheet will be considered to have refused the overtime
assignment.

Section 12. Provision of Overtime Rosters

      Overtime rosters pertaining to the equal rotation of overtime will be made
available to each department steward and general grievance committeeman.

<PAGE>

                             ARTICLE VII - HOLIDAYS

Section 1. Holiday Designations

      (a) The following days are recognized as paid holidays:

            New Year's Day
            Good Friday
            Memorial Day
            Independence Day
            Labor Day
            Thanksgiving Day
            Day after Thanksgiving Day
            December 24th
            Christmas Day
            December 31st
            Paid Personal Day (3)

      (b) The Paid Personal Day must be requested and approved by the Company at
least five (5) days in advance.

Section 2. Rate of Holiday Pay

      Eligible employees shall be paid eight (8) times their average hourly rate
for each of the holidays mentioned above. Such rate will be calculated based on
the available average from the month prior.

Section 3. Holiday Hours

      Each of the aforementioned holidays shall begin at 12:01 a.m. or the shift
changing time nearest thereto and shall continue for twenty-four (24) hours
thereafter. The parties may mutually agree to observe any one of the
aforementioned holidays on a date or at a time other than that designated.

Section 4. Saturday/Sunday Holidays

      Any of the above designated holidays occurring on Saturday shall be
celebrated on the previous Friday. In the event that Friday is also a holiday,
the previous Thursday shall be considered a holiday.

      Any of the above designated holidays occurring on Sunday shall be
celebrated on the following Monday. In the event that Monday is also a holiday,
the following Tuesday shall be considered a holiday.

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Section 5. Holiday Pay Eligibility

      In order to be eligible for holiday pay, an employee must have worked the
scheduled work day immediately before and after the holiday in question.

      The following reasons are acceptable for absence during the week in which
the holiday occurs and on qualifying days:

      1.    Jury Duty.
      2.    Meeting requirements of the Selective Service System.
      3.    Occupational injury or illness suffered within the plant (this
            excludes employees who are being compensated through Workers
            Compensation insurance covering the same holiday).
      4.    Death in the employee's immediate family provided he is eligible for
            and receives Funeral Pay. (See Article XVI, Section 8.).
      5.    Layoff due to lack of work provided the employee works the week
            immediately preceding the week in which the holiday occurs.

            Layoff due to lack of work provided the employee is recalled and
            reports to work on the first work day immediately following the
            holiday. If the recalled employee is bumped before starting to work,
            the employee who bumps onto the job and begins working on the first
            day immediately following the holiday, will receive the holiday pay.

      6.    Subpoenaed as a witness.
      7.    Emergencies such as lack of power, gas, water, fire, Acts of God, or
            other emergencies causing the plant to be closed.
      8.    Approved leave of absence, i.e., emergency leaves, personal leaves,
            and mini-leaves. This excludes employees who are already being
            compensated for time out that encompasses the holiday under Sickness
            & Accident benefits or Workers Compensation insurance.
      9.    Any granted weather amnesty.

      The eligibility provisions of this Section are not applicable to the Paid
Personal Days specified in Section 1. of this Article.

      It is understood that reasonable proof in the form of physicians'
certificates, legal documents, letters on formal stationery, newspaper reports,
or other mutually agreeable items, must be presented to the Company in the event
of such absences.

      Individual hardship cases not provided for above may be brought to the
attention of the Company by the Union.

Section 6. Work on a Holiday

      If an eligible employee is scheduled to work on any such holiday, but
fails to perform his assigned work, he shall not be paid for the unworked
holiday, unless he has failed to perform such work because of sickness, or
similar good cause. An employee is also ineligible for holiday pay if he fails
to properly report such absence according to the provisions of Article VI,
Section 1. of the Agreement and the Company's Employee Responsibilities Policy.

Section 7. Holidays Falling During Vacations

<PAGE>

      When a holiday falls during an employee's vacation scheduled on a weekly
basis, such employee may:

      (a) receive in addition to his vacation period, an additional day off
either the Friday immediately before or the Monday immediately after his
vacation; or

      (b) elect to waive an additional day off and receive pay in lieu of such
day off.

                            ARTICLE VIII - VACATIONS

Section 1. Vacation Schedule

      Employees who complete one (1) or more years of continuous service on the
anniversary date of their date of hire shall be entitled to vacation pay in
accordance with the following schedule:

      YEARS OF CONTINUOUS SERVICE                 VACATION
      ---------------------------                 --------

                  1 to  3 years                     7 days
                  3 to  9 years                    13 days
                  9 to 18 years                    19 days
                 18 to 25 years                    25 days
                 25 to 30 years                    28 days
                 30 to 35 years                    29 days
                 35 years and over                 30 days

Section 2. Vacation Pay

      Vacation pay shall be paid to each employee on the regular pay day
immediately prior to the start of his weekly vacation.

      Vacation pay shall be paid to each employee taking daily vacation on the
regular pay day for all work performed in the week in which the vacation days
are taken.

Section 3. Shut-Down

      It is expressly understood that the Company reserves the right to close
the plant for purposes of scheduling simultaneous vacations. Such shut-down
period for vacation purposes shall not exceed five (5) consecutive working days
and shall be during the month of July. The shut-down dates will be announced not
later than September 1 of the preceding year. Employees who are regularly
assigned to maintenance jobs will be required to work during the shutdown, if
scheduled.

<PAGE>

Section 4. Allocation of Vacation

      It is expressly understood that the final allocation of vacation is
reserved exclusively by the Company in order to preserve the orderly operation
of the plant. The vacation to which each employee is entitled must be taken
between his anniversary dates.

Section 5. Distribution of Vacation Entitlement

      Employees having more than one (1) week of vacation entitlement shall be
permitted to take such additional vacation time on a weekly or daily basis.

      Vacation taken on a weekly basis must be requested and approved by the
Company at least one (1) month in advance. Vacation taken on a daily basis must
be requested and approved by the Company at least one (1) day in advance
whenever possible.

      Employees placed in monitoring status as defined under the provisions of
Article IX, Section 2 of the Agreement will not be permitted to utilize same day
report offs for vacation. It is also understood that same day report offs for
vacation will not be permitted by any employee who is scheduled to work on
Saturday or Sunday.

Section 6. Pay in Lieu of Time

      Except for those days necessary to cover the annual shutdown week,
employees who do not use their full vacation entitlement may elect to receive
pay in lieu of vacation not taken. Such employees will receive pay for unused
vacation days within two (2) weeks of the date the election is made.

Section 7. Vacation Pay Computation

      Vacation pays shall be computed utilizing total wages earned during the
twelve (12) month period preceding January 1 of the current year. Each week of
vacation pay entitlement shall be based upon two percent (2%) of the total wages
earned during the twelve (12) month period preceding January 1 of the current
year.

      Each employee having worked during the twelve (12) month period preceding
January 1 of the current year will receive thirty ($30.00) dollars in addition
to his regular vacation pay for each full week of vacation or six ($6.00)
dollars per day of vacation.

Section 8. Vacation Pay and Separation

      (a) Eligible employees who for any reason separate themselves from the
Company after attainment of their anniversary dates shall receive the vacation
pay to which attainment of such date entitles them or any balance of such
vacation pay which they have not received prior to separation. In addition, they
shall receive one-twelfth (1/12) of their earned vacation pay for each month
completed after attainment of their anniversary date and prior to their
separation date.

      (b) Vacation monies due discharged employees may be used to offset proven
Company losses in cases of theft or willful damage to property.

<PAGE>

Section 9. Calculation of Vacation Pay Exceptions

      (a) A calculation of vacation pay based on the greater of two percent (2%)
of the total wages earned during the twelve (12) month period preceding January
1 of the current year or forty (40) hours times the average hourly rate for the
hours worked during the prior calendar year for each week of vacation
entitlement will apply to the following conditions:

      1.    Employees who are absent due to illness for more than two (2)
            consecutive weeks provided they have worked at least one (1) hour in
            the prior calendar year.

      2.    Employees whose only layoff was due to temporary lack of work in the
            prior calendar year as provided for in Article XVII, Section 6.

      (b) Employees who are absent due to illness for more than two (2)
consecutive weeks and who are on permanent layoff at different periods of time
during the prior calendar year shall receive pro-rata vacation pay for both
those months worked and those months during which they were on medical leave
during the prior calendar year.

Section 10. Veteran Service and Vacation Entitlement

      Returning veterans, who were employed by the Company at the time they
entered the Service, shall be considered to have been continuously employed by
the employer for their entire length of such service for the purpose of
determining vacation entitlement.

                        ARTICLE IX - BEHAVIOR IMPROVEMENT

Section 1.

      The Parties affirm their commitment to the philosophy of constructive
discipline in which the goal is to bring about a change in behavior for the
better. Recognizing that not all employees will be positively motivated to bring
about such change, this Article encompasses both the procedure to be followed by
the Parties and employees to achieve positive behavior change as well as the
consequences for failure.

      To that end, the Company's code of behavior has been divided into two (2)
groups - those relating to absence from work and those relating to behavior when
at work.

Section 2.

      The following steps will be followed in the case of absence problems
including absence without report, absence without a reasonable cause, falsifying
the reason for absence, and chronic or pattern absence . Excessive absence is
defined as any combination of three (3) occurrences in a six (6) month rolling
period. An occurrence is any of the following:

      (a) A single day of absence.

      (b) Two (2) or more consecutive days of absence for the same reason
provided the subsequent absences are for reasonable cause. (If you are confined
to a hospital, your absence will not be considered an occurrence.)

<PAGE>

      (c) Any combination of two (2) latenesses or early departures within a six
(6) month rolling period.

      Each consecutive period of absence of more than three (3) working days,
not approved for sickness and accident benefits, family/medical leave or
personal leave of absence, will be considered just cause for discipline. If an
employee exhibits an absence pattern or chronic absence, the employee will be
placed in monitoring status and will be subject to discipline for just cause. A
pattern of absence or chronic absence will include (i) absences recurring at a
particular time (e.g., immediately before or after a weekend or other
prescheduled time off), and (ii) an employee repeatedly reaching Step 3.

      STEP 1. The supervisor will discuss the incident with the employee on the
job within ten (l0) working days of the incident date. Such discussion will be
directed toward an explanation of why the incident is a problem and developing
with the employee a constructive plan to prevent the incident or other incidents
from occurring again.

      STEP 2. Should the same or other incidents related to absence occur, the
supervisor will again bring the matter to the employee's attention on the job,
with his steward, for a serious discussion of the matter within fifteen (15)
working days of the incident date. In addition to the steward and the
supervisor, the appropriate Manufacturing Manager or the Director of Human
Resources or his designee, and the employee's Grievance Committeeperson shall
participate in the discussion. The intent of the discussion will be to identify
changes the employee should consider in order to bring about improvement in
attendance and punctuality. The major points of the meeting will be confirmed in
a letter to the employee.

      STEP 3. If further incidents occur, the procedure outlined in Step 2 will
be repeated, within twenty (20) working days of the incident date with the
participation of the Director of Human Resources or his designee, and the
employee's Grievance Committeeperson. The intent of this discussion at this Step
will be to identify changes the employee should consider to bring about an
improvement in attendance and punctuality, to review the employee's absence
history and to make the employee aware of the gravity of his position in the
behavior improvement procedure. To emphasize the seriousness, the employee will
be suspended without pay for the remainder of the shift during which time he
should consider seriously whether he intends to abide by the Company's
standards. He will also be informed that another incident will result in
termination.

      STEP 4. In the event of another incident, the employee will be discharged.

Section 3.

      If no further incidents related to absence occur within six (6) months of
Step 1, six (6) months of Step 2, or twelve (12) months of Step 3, such Step
will be cleared from the employee's record.

<PAGE>

Section 4.

      In the case of unsatisfactory work performance, such as carelessness in
handling machinery or materials, unsafe work practices, insufficient attention
to work, or a breach of discipline, such as failure to carry out a supervisor's
instructions, improper handling of time reporting procedures or parking
violations, the following steps will be followed:

      STEP l. The supervisor will discuss the incident with the employee on the
job within ten (l0) working days of the incident. Such discussion will be
directed toward an explanation of why the incident is a problem and developing
with the employee a constructive plan to prevent the incident or other incidents
from occurring again.

      STEP 2. Should the same or other incidents occur related to behavior in
and about the workplace, the supervisor will again bring the matter to the
employee's attention on the job, along with his steward for a serious discussion
of the matter within fifteen (15) working days of the incident date. In addition
to the steward and the supervisor, the appropriate Manufacturing Manager or the
Director of Human Resources or his designee and the employees' Grievance
Committeeperson shall participate in the discussion. The intent of this
discussion will be to resolve the employee's difficulty in abiding by normal
standards of performance and discipline. The major points of the meeting will be
confirmed in a letter to the employee.

      STEP 3. If further incidents occur, the procedure outlined in STEP 2 will
be repeated within twenty (20) working days of the incident date with the
participation of the Director of Human Resources or his designee and the
employee's Grievance Committeeperson. The employee will be suspended without pay
for the remainder of the shift during which time he should consider seriously
whether he intends to abide by the Company's standards. He will also be informed
that another incident will result in termination.

      STEP 4. In the event of another incident, the employee will be discharged.

      For the purpose of this Section 4, any combination of three (3)
occurrences of late report offs or failure to swipe in or out at the beginning
or end of the shift will also be considered as just cause for discipline.

Section 5.

      If no further incidents related to behavior in and about the workplace
occur within three (3) months of Step 1, six (6) months of Step 2, and nine (9)
months of Step 3, such Step will be cleared from the employee's record.

Section 6.

      In the case of criminal behavior, the use of, or possession of alcoholic
beverages or drugs on the Company property, or unauthorized work stoppages,
termination is immediate without recourse to the Steps outlined in Sections 2.
and 4.

      Any serious offense as listed in the Company's "Employee Responsibilities"
policy will also subject the employee to immediate disciplinary action up to and
including suspension and/or discharge.

Section 7.

<PAGE>

      In the case of insufficient attention to work resulting in scrap being
made, the ten (10) working day time limit will commence at the time it came to
the supervisor's attention.

Section 8.

      Any difference or dispute concerning a disciplinary action shall be
adjusted in accordance with the grievance and arbitration procedures herein set
forth.

Section 9.

      Any difference or dispute concerning a discharge shall be submitted to the
Third Step of the Grievance Procedure within five (5) working days following
such discharge. Such time limit may be extended by mutual agreement of the
Parties.

Section 10.

      Should the Company fail to observe the time limits as outlined in Sections
2. and 4. of this Article, the immediate incident will be dropped from the
employee's record. Such time limits may be extended by mutual agreement of the
Parties.

                         ARTICLE X - MANAGEMENT'S RIGHTS

      The Union recognizes that the Company retains the exclusive right to
direct the working force and to manage its business in a safe, economical, and
effective manner except as such right is limited by the terms of this Agreement.

      Among the rights and responsibilities which shall continue to be vested in
the Company, which is not intended as a wholly inclusive list shall be: to
introduce new and improved production methods and facilities; to decide the
number and location of its plants, including the number of its employees, the
products to be manufactured, the schedules of production, the methods, processes
and means of manufacturing; to increase or change production equipment; to
regulate the quality or quantity of work; to hire, discipline, suspend or
discharge for just cause; to promote, transfer and relieve employees from duty
because of lack of work or other legitimate reasons; to subcontract, transfer or
assign any or all of the Company's operations; and to take such other actions as
the efficient operation of the plant and the necessities of the business shall
require, provided, however, that such rights shall not be used so as to
discriminate against any employee because of membership in the Union or in a
manner inconsistent with the provisions of this Agreement.

                         ARTICLE XI - SAFETY AND HEALTH

Section 1. Dedication to OSHA Standards

      The Company will make every reasonable effort to provide safe and
healthful conditions of work for employees at the plants. Such provisions will
be maintained within the framework of the regulations of the Commonwealth of
Pennsylvania, Department of Labor and Industry, Harrisburg and the Federal
Occupational Safety and Health Act.

Section 2. Provision of Protective Devices

<PAGE>

      The Company's present practice of providing protective devices necessary
for the safety and health of its employees will be continued during the period
of this Agreement.

Section 3. Joint Safety Committee

      The Joint Safety Committee will be responsible for reviewing unsafe
conditions. Such committee will be composed of ten (10) members: Six (6) members
appointed by the Company; four (4) members appointed by the Union.

      Meetings will be conducted during the third (3rd) week of each month to
review committee functions and make recommendations to the Company.

Section 4. Inspection Tours

      Department inspection tours will be conducted monthly. The members of the
Joint Safety Committee along with the department supervisor and steward will
participate in the tour. Copies of all reports relating to such inspection tours
will be given to all personnel on the Joint Safety Committee.

Section 5. Accident Investigation

      In the event of a serious accident the Human Resources Department will
notify the designated Union member of the Joint Safety Committee in order to
make a joint accident investigation. The parties agree to implement a joint
accident investigation team as soon as practical. The team will be responsible
for joint investigation of all lost time accidents.

      Reports of such investigations shall have joint approval and copies of
such reports will be given to the appropriate members of the Joint Safety
Committee.

Section 6. Rate of Pay When Injured

      When an employee who is injured while working in the plant is taken to a
physician or hospital and returns to his job during the shift, he will be paid
at his applicable hourly rate for the period of his absence for medical
attention.

      If, following an accident, the attending physician substantiates that the
employee involved is unable to return to work on the date of the initial visit,
he will be paid for the balance of his shift, including scheduled overtime,
provided the accident was reported to management on the day it happened and the
initial visit is within one week of the accident, in accordance with the above.

Section 7. Rest Periods

      (a) A ten (10) minute rest period shall be allowed two (2) hours following
the start of each shift. A twenty (20) minute lunch period shall be allowed
during the mid point of each shift and an additional ten (10) minute rest period
shall be allowed during the second half of each shift. Management may assign a
different break schedule as deemed appropriate by specific operational needs,
which will amount to the same total break time.

      It is understood that the above schedule applies to an eight (8) hour day.
If an employee works two (2) hours after having worked the regular eight (8)
hour shift, he will be allowed a ten (10) minute rest period before the end of
the eight (8) hour shift. If an employee works four (4) hours after having
worked the regular eight (8) hour shift, he will be allowed a ten (10) minute
rest period before the end of the eight (8) hour shift, and an additional ten
(10) minute rest

<PAGE>

period two hours later. Management may assign a different break schedule as
deemed appropriate by specific operational needs, which will amount to the same
total break time.

Section 8. Non-Abuse of Privileges

      The Union agrees that the employees shall not abuse these privileges. Such
abuses will be brought to the Union's attention through the provisions of
Article XVIII, Section 3(h).

Section 9. First Aid Team

      The Company agrees to continue the First Aid Team.

Section 10. Illegal Use of Drugs and Alcohol

      (a) The Parties recognize that the use of illegal drugs and alcohol poses
a serious threat to both the Company and its employees. Moreover, the Company
and its employees have the responsibility to maintain a safe, healthful and
efficient working environment. To meet these objectives, the Parties agree to
the following procedure:

      1.    Any employee who is guilty of possession, use or sale of alcohol or
            illegal drugs on Company property will be terminated without
            recourse to the procedure outlined in Article IX, Behavior
            Improvement.

      2.    Any employee who exhibits unusual behavior such as excessive
            absence, being disruptive, abusing other employees or exhibiting
            work habits other than those normally exhibited will be subject to
            alcohol and drug screening by an independent laboratory designated
            by the Company. Such laboratory must be properly licensed, use
            accepted scientific methods of testing, meet all pertinent
            proficiency standards and be capable of defending its position and
            analysis with expert testimony.

      3.    Specimens obtained for drug and alcohol screening will be retained
            for thirty (30)days in the event further analysis is deemed
            necessary. During retention of such specimens as well as during all
            phases of the specimen gathering and screening process, specimen
            security will be maintained so that tampering cannot occur.

      4.    In the event such screening produces positive results, the employee
            will be immediately suspended for thirty (30) days and must submit
            to counseling and rehabilitation therapy as approved by the Employee
            Assistance Program (EAP). The employee will not be permitted to
            return to work until he tests negative after the thirty (30) days
            suspension. The rehabilitation program will be approved by the
            Company and the employee must complete the prescribed program. An
            employee who refuses testing, or as a result of a positive test
            refuses to cooperate with the EAP, refuses treatment or continued
            aftercare, or engages in specimen tampering will be subject to
            discharge.

      5.    An employee who tests positive will also be subject to random
            testing three (3) times for a period of one (1) year from the date
            the employee returns to work. Any positive result from random
            testing will be grounds for discharge.

      6.    Any employee who becomes involved in a second incident resulting in
            a positive drug or alcohol test may be subject to discharge.

                          ARTICLE XII - ACCESS TO PLANT

<PAGE>

      The duly authorized International Representative of the Union shall be
permitted to visit the plant during working hours for the purpose of adjusting
complaints or ascertaining whether this Agreement is being complied with. Such
visits to the plant are to be conducted so as to avoid interference with the
operation of the plant and shall be made only after notification to a member of
the Human Resources staff.

      General Grievance Committeepersons and the Unit President will be allowed
entrance to the plant to serve their respective departments on all shifts,
provided they notify the foreman of the Department of their presence.

                        ARTICLE XIII - LEAVES OF ABSENCE

Section l. Family and Medical Leave Act (FMLA)

      Leaves of Absence will be granted to employees for those reasons which are
consistent with the requirements of the Family and Medical Leave Act (FMLA). In
conjunction with the FMLA, a "serious health condition" is defined by the
existing regulations as set forth by the Department of Labor. An employee who
utilizes all available vacation within a calendar year for reasons which are
attributable to FMLA may be granted an unpaid Leave of Absence for up to five
(5) working days for vacation purposes

Section 2. Preapproved Leaves of Absence

      Leaves of Absence for compelling personal reasons may be granted for one
full day or more by the Company. Mini-leaves of absence (four hour maximum) will
be limited to four (4) per contract year (none on Saturday or Sunday), except as
required for an employee with a serious health condition covered under the FMLA.

      In considering requests for Leaves of Absence the Company will give
consideration to the reason for the Leave, the length of the Leave requested,
the effects of the lost time on production requirements, the employee's
disciplinary record and length of service.

      Approved Leaves of Absence shall be reduced to writing and copies of such
Leaves shall be given to the employee and appropriate Union officials.

      All paid personal days and vacation entitlement except that which must be
applied to the vacation shutdown period must have been used before a Leave of
Absence will be considered for approval.

Section 3. Emergency Leave Days

      Employees who are not in Step 2 or above in the disciplinary procedure
will be eligible for two (2) emergency leave days within each contract year.

      An Emergency Leave must be for a legitimate and unforeseen emergency
situation which prevents the employee from coming to work. It is understood and
agreed that the Company reserves the right to require reasonable evidence for
the Emergency Leave.

      An Emergency Leave may be granted after the employee has begun working for
the day provided reasonable evidence to support the emergency is supplied to the
Company upon request. If the employee leaves work after the commencement of the
shift, the employee is charged with a full day of Emergency Leave. An Emergency
Leave will not be granted for an employee's personal illness unless it involves
an emergency condition for which medical

<PAGE>

certification can be provided. An Emergency Leave may be granted without having
used available vacation or personal days.

Section 4. Employment While on Leave of Absence

      No employee shall engage in any form of employment including self
employment while on such Leave of Absence.

Section 5. Leave of Absence for Union Business

      A Leave of Absence for Union business, not to exceed three (3) years,
shall be granted to any employee who is elected to or appointed to a position
within the United Steelworkers of America (or the AFL-CIO) upon receipt of a
written request from the District Director. Such Leave shall be without pay or
other economic benefits provided by this Agreement.

      A Leave of Absence shall be granted to any employee who is elected or
appointed to a public office. Such Leave shall not exceed one (1) term in office
and shall be without pay or other economic benefits provided by this Agreement.

      Approved Leaves of Absence shall be reduced to writing and copies of such
Leaves shall be furnished to the employee and the Union.

Section 6. Establishment of Seniority

      Employees returning from an approved Leave of Absence shall be restored to
full seniority.

Section 7. Disputes Regarding Disapproval of Leave

      Disputes regarding the disapproval of a Leave of Absence shall become the
subject of a grievance at the second step of the grievance procedure.

                         ARTICLE XIV - MILITARY SERVICE

      An employee who enters the Military Service of the United States shall
retain his seniority and his right to reemployment or reinstatement on the basis
of such seniority in accordance with existing law.

                        ARTICLE XV - STRIKES OR LOCKOUTS

      There shall be no slowdowns, strikes, work stoppages, or other
interference with or limitations of production by the Union or the employees.

      In the event that the foregoing provision is violated, the Company
reserves the right to take such disciplinary action, including discharge, as it
deems necessary.

      There shall be no lockouts by the Company during the term of this
Agreement.

                     ARTICLE XVI - MISCELLANEOUS PROVISIONS

Section l. Posting Notices

<PAGE>

      The Company agrees to permit the Union to post notices on the Company's
bulletin boards. Such notices may be on sections of boards or complete boards
depending on the volume of notices. Before notices are posted they must first be
submitted to the Company, be signed by an Officer of the Union and deal with
Union meetings, elections, appointment of committees or other non-controversial
matters concerning affairs of the Union.

Section 2. Non-Coercion of Union Members

      The Company will not interfere with, restrain, or coerce any member of the
Union because of his membership in the Union or activity on behalf of the Union.
The Union agrees that neither it nor its members shall transact any Union
business on the Company's time except such matters as are specifically
authorized by the terms of this Agreement.

      The Company agrees not to deny any Officer, Steward, or Grievance
Committee member any job because of lost time for Union business.

      Any employee who has been authorized by the Unit President and gives
sufficient advance notice to the Company shall be granted leave for legitimate
Union activities, except where it causes undue hardship to the Company.

Section 3. Fair Employment Practices

      The Company and the Union recognize that they are bound by the statutes of
the Commonwealth of Pennsylvania and the United States relating to fair
employment practices.

Section 4. Emergency Plant Shut-Down Notification

      In the event the Company cannot operate the plant due to emergencies
beyond its control such as snow storms, fire, flood, etc., it will attempt to
notify all employees not to report for work due to the emergency through the
facilities of WEEU-AM, WRAW-AM, WIOV-AM, and WRFY-FM, Reading; WIOV-FM, Ephrata;
and WPPA-AM/FM, Pottsville, PA.

Section 5. Promotions Outside of Bargaining Unit

      Employees who may be promoted to positions outside the bargaining unit
shall, as a condition of employment, be reinstated into the Union immediately
upon returning to the bargaining unit. Such employee's seniority will not
continue to accrue for the purposes of the provisions of Article XVII,
Seniority, only during his absence from the bargaining unit. Such employee's
seniority accrued prior to said transfer will be reinstated providing he does
not spend a period of thirty (30) days outside of the bargaining unit. Such
transfers shall also be limited to one (1) per lifetime for each employee so
promoted.

Section 6. Definition of "Working Days"

      The term "working days" as used in the various Articles in this Agreement
is defined to be Monday through Friday.

Section 7. Jury Pay and Subpoenaed as a Witness

      An employee who has successfully completed his probationary period who is
summoned and reports for jury duty or is subpoenaed as a witness, as prescribed
by applicable law, shall be paid by the Company an amount equal to the
difference between the amount of the average hourly rate and the daily fee paid
by the court (not including travel allowances or reimbursement
<PAGE>

of expenses) for each day on which he reports for or performs as a juror or
witness and on which he otherwise would have been scheduled to work for the
Company, including daily overtime. Third shift employees may choose the jury
service day or the following day to be excused.

      The Company's obligation to pay an employee for these benefits shall be
the length of time serving as a juror or witness.

      In order to receive payment, an employee must give the Company prior
notice that he has been summoned as a juror or subpoenaed as a witness and must
furnish satisfactory evidence that he reported for or performed on the days for
which he claims such payment. The provisions of this Section are not applicable
to an employee who, without being summoned or subpoenaed, volunteers as a juror
or witness.

Section 8. Funeral Pay

      (a) An employee shall be eligible to receive Funeral Pay for death in his
immediate family, including the family of the deceased spouse, i.e. spouse,
parent, or step-parent; parent or step-parent of current spouse; grandparent or
step-grandparent, child or step-child, brother, step-brother, son-in-law,
daughter-in-law, grandchildren, half-brother, sister, step-sister, half sister,
brother-in-law and sister-in-law. The employee will be excused for any three (3)
normally scheduled working days (excluding Saturday, Sunday and Holidays) during
the period commencing with the date of death and ending seven (7) calendar days
thereafter. An employee excused from work under this Section shall receive not
more than twenty-four (24) hours of pay at his average hourly rate.

      (b) It is the responsibility of the employee to furnish the Human
Resources Department with adequate proof substantiating his absence because of a
funeral.

      (c) An employee shall be eligible to receive Funeral Attendance Pay for
the death of the grandparent or step-grandparent of the current spouse, and the
current spouse of the employee's brother-in-law and sister-in-law. The employee
will be excused for the day of the funeral provided such day is a working day,
including Saturday and Sunday, and will provide the Human Resources Department
with adequate proof substantiating attendance at the funeral. An employee
excused from work under this provision shall receive not more than eight (8)
hours of pay at his average hourly rate.

      (d) Common law marriages will only be recognized if the employee has
completed an Affidavit of Common Law Marriage and submitted it to the Human
Resources Department before the date of death of the relative.

Section 9. Office Space

      The Company will provide office space for Union records and business
relating to the Company for use during regular working hours. Maintenance of the
office is the Company's responsibility.

                            ARTICLE XVII - SENIORITY

Section l. Basis of Seniority

<PAGE>

      (a) Plant Seniority is defined as the length of continuous service with
the Company and shall continue until terminated for reasons as set forth under
paragraph (b) of this Section. The Company will maintain seniority records by
department and will make them available to appropriate Union officials upon
reasonable request.

      (b) Plant Seniority shall be terminated for the following reasons:

            1.    Voluntary quitting.

            2.    Discharge for just cause.

            3.    Being absent due to layoff or disability for a continuous
                  period of more than two (2) years, except that absence due
                  entirely to compensable injury received in the course of any
                  employee's employment by the Company shall not, to the extent
                  of the period for which statutory compensation is payable, be
                  included in the computation of said two (2) year period. Such
                  two (2) year period may be extended provided that the employee
                  notifies the Company by letter annually of his current address
                  and of his desire to continue as an employee of the Company.
                  In no case can an employee be granted an extension of more
                  than three (3) years or a period equal to his consecutive
                  service, whichever is smaller. Eligibility for such extensions
                  is limited to employees whose dates of employment precede
                  September 11, 1978.

            4.    Failure to return to work within five (5) working days after
                  delivery date of certified letter notifying him of primary or
                  secondary recall. Failure to return to work after recall or
                  failure to exercise his bumping rights after being bumped or
                  laid off due to lack of work.

            5.    Three (3) consecutive working days unreported absence.

            6.    Absence in excess of leave. The Company will give
                  consideration in Items 4, 5, and 6 where employee's failure is
                  due to extenuating circumstances.

            7.    Engaging in any form of employment including self employment
                  while on an approved leave of absence.

      (c) In recalling employees the Company will rely on the last address shown
on the employees' records. Employees who do not receive a certified letter of
recall due to failure to advise the Company of their last address shall be
considered as voluntarily quitting the employ of the Company.

      (d) New employees shall be required to serve a probationary period of 70
calendar days. During this time the Company shall judge the fitness of such
employees and will be free to discharge or layoff such employees without regard
to date of hire.

      After completion of the probationary period, the employees' plant
seniority shall start from the original date of hire. Additionally, employees
will become eligible for enrollment in the Company-provided health and welfare
benefits.

Section 2. Reducing Work Forces

      When it becomes necessary to reduce the work force, employees to be laid
off shall be notified by the Company as far in advance as practicable, but not
later than four (4) hours

<PAGE>

before the end of the shift on the day of layoff (except in case of equipment
failure) and the following procedures and conditions will apply:

      (a) The Company will determine the manning requirements by plant
department, shift, and classification. All layoffs will become effective at the
end of the workweek.

      (b) Probationary employees in the affected department, classification, and
shift shall be the first to be laid off.

      (c) If additional layoffs are necessary, the least senior employees
involved in the affected department, shift and classification will be laid off
and the remaining employees will perform the available work.

      (d) When reducing the forces in a department, a general grievance
committeeperson will be provided with a current seniority listing in order that
the accuracy of the listing can be checked. In the event an error is detected
and called to the attention of the Company, immediate correction shall be made.
The Company will not be liable in the event such general grievance
committeepersons fail to protest within a twenty-four (24) hour period following
the end of the shift on which the seniority listing was provided, excluding
unscheduled working days.

Section 3. Bumping

      (a) When an employee is permanently laid off or bumped he may bump any
less senior employee on any job and in any classification. Such bumps may be
into any department and on any shift.

            An employee exercising his bumping rights, after having notified
management of his intentions as to department, shift, job class, and the
employee being bumped, may not make any change in his election after signing the
appropriate request form. In the event that the employee disqualifies himself in
accordance with the provisions of Article XVII, Section 13(a), the
disqualification will be made part of the employee's permanent record and the
employee will not be allowed to bump into that job classification in the future.

            The Company has the right to temporarily retain a bumped employee
for training purposes only up to a maximum of 20 days worked.

      (b) All employees exercising their seniority to bump less senior employees
must meet the requirements of the jobs to which they bump according to the
following provisions:

            l.    If training is not allowed, such requirements must be met
                  within ten (10) days worked.

            2.    If training is allowed:

                  i)    such requirements must be met within twenty (20) days
                        worked.

                  ii)   bumping employees will be taught or shown everything
                        possible about the job during the twenty (20) days
                        worked.

                  iii)  the bumping period must be equal to or exceed twenty
                        (20) days worked.

                  iv)   bumping employees must accept such training on shifts
                        and by employees most convenient to the Company.

<PAGE>

            3.    Training will be allowed for all bumps into job
                  classifications graded 4-9 by the CWS job evaluation program.
                  Training may or may not be permitted for bumps into job
                  classifications graded 10-20 by the CWS job evaluation
                  program. The decision regarding the allowance of training will
                  be made by the Company on the basis of a review of personnel
                  records.

      (c) For the purpose of this Section, meeting the requirements of the job
on operations for which Red Circle Rates apply is defined as achieving at least
one hundred percent (100%) performance.

      Meeting the requirements of the job on non-incentive operations is defined
as achieving the minimum level of performance of those permanently assigned to
the job.

      (d) Failure to meet the requirements of the job or a self-disqualification
as defined in (c) above will result in the employee being required to bump a
second time into a job classification for which he is qualified.

      (e) An employee who, upon being placed in layoff status, cannot
immediately make the transition to a different shift, shall be afforded an
opportunity to make the transition at a later date without penalty. The length
of time needed by the employee to make the transition shall be discussed and
agreed upon by the parties, but in no event will exceed 20 working days. At the
end of 20 working days, the employee's seniority will be terminated.

      (f) The Union will be given copies of Company records maintained for the
above purposes.

Section 4. Bumping Procedure

      Application to replace another employee must be made immediately upon
notification of layoff due to bumping or lack of work. Such application must be
made to the Human Resources Department. The Union will be given copies of all
such movements.

Section 5. Recall in Working Forces

      (a) When necessary to increase the working forces, the most senior
employee in layoff status from the department, job classification and shift
affected shall be first to be recalled.

      (b) Remaining vacancies shall be filled by the procedure outlined in
Section 8 of this Article.

      (c) In case of recall to their original job classifications and shifts,
employees shall be notified by certified mail and failure to return to work
within five (5) working days from the delivery date of certified mail, shall
cause them to be deemed a voluntary quit.

      In case of recall to their original job classifications, but not their
original home bases within such classifications, employees on layoff may elect
to bump any less senior employee in such classifications within the five (5)
working days period.

      (d) When changes occur in the work force, appropriate Union
representatives will be provided with weekly listings concerning additions,
separations, disqualifications and transfers of employees giving names and other
pertinent information. The Company will not be liable where a general grievance
committeeman has received such notice and no protest has been

<PAGE>

filed within a twenty-four (24) hour period from the end of the shift on which
the listings were received excluding unscheduled work days.

      (e) In recalling employees, the Company shall rely on the last address
shown on the employee's personnel record. Employees will use the form Employee
Record Reports, available in the departments to notify the Company of changes of
address or personal status. A weekly list of all such changes shall be furnished
to the Union Unit President. Employees who do not receive certified mail
notifying them of recall as a result of failure to advise the Company of last
address shall be considered as voluntarily quitting the employ of the Company.

      (f) When an employee is to be recalled on a temporary basis (twenty (20)
working days or less), the following conditions will apply:

            1.    If the employee is working on the same shift to which he has
                  recall, he shall return to his department and job
                  classification at the rate of pay of his job or the job on
                  which he is working, whichever is higher.

            2.    If the employee is on layoff or working on a shift other than
                  the shift to which he has recall, he shall have the option of
                  accepting or rejecting such temporary recall. The rate of pay
                  shall be the rate of the job to which recalled.

            3.    At the completion of the temporary recall, the employee shall
                  be returned to the status he held prior to the temporary
                  recall.

            4.    In instances where such temporary recall is for one (1) shift
                  or less, the Company may elect to fill the vacancy with
                  temporary transfer.

            5.    The appropriate grievance committeeperson will be informed of
                  all temporary recalls and the disposition of such recalls.

      (g) In the event a temporary vacancy occurs in a department, job
classification, and shift to which no employee has recall rights, such temporary
vacancy shall be offered to laid off employees not working for the Company who
have recall rights to the department, and job classification, but to shifts
other than that on which the temporary vacancy has occurred.

Section 6. Temporary Lack of Work

      If unforeseen business conditions result in the creation of a temporary
lack of work situation, any combination of the following actions may be followed
wherever practical:

      (a) Any employee in the affected department, classification and shift may
be transferred under the provisions of Section 11. (d) of this Article. It is
understood that senior employees who express a desire to do the work shall be
limited to the affected classification. These transfers will not exceed five (5)
consecutive working days and will be limited to seventy-five (75) per plant per
contract year.

      In the event such temporary transfer is to a shift other than his regular
shift, the affected employee may request and receive a layoff for a period of
time equal to the duration of the lack of work situation.

      (b) The affected job assignments within the department, classification and
shift may be scheduled for not less than four (4) days per week and not more
than four (4) weeks. It is understood that such schedules include no guarantee
of hours per day or week.

<PAGE>

      If the affected job assignment is also the job classification, the
provisions of Section 2. of this Article will apply.

      (c) The affected employees may be temporarily laid off according to the
following procedure:

            1.    The Company has the right to retain the particular skills
                  necessary to produce the available work or man particular
                  equipment.

            2.    Layoffs will be made within the job classification, so that
                  employees with the least seniority shall be affected first.

            3.    Layoffs will be made for a period not to exceed five (5)
                  consecutive days and rotated among the employees for like
                  periods for the duration of the temporary lack of work.

            4.    In the event an employee is laid off temporarily who does not
                  have recall rights to such job, he shall have the option to
                  return to the subject job at the conclusion of the temporary
                  lack of work.

      (d) Short work weeks shall be effective for a period of not more than
twenty (20) working days within a six (6) month period except by mutual
agreement of the Parties. Temporary layoffs shall not exceed fifteen (l5)
working days within a six (6) month period.

      (e) An employee who is scheduled to work according to (b) shall have the
opportunity to displace any less senior employee in his job classification,
department, and shift for the duration of the temporary lack of work situation.

      (f) Employees who have been affected by temporary actions outlined in (b)
or (c) above, shall have the right to displace any less senior employee who is
currently:

            1.    A probationary employee.
            2.    Working on a temporary job offer.
            3.    Working on a Company convenience transfer.

      (g) An employee who displaces another employee as in (f) 2. or 3. above,
shall return to the department, job classification, and shift which was affected
following the completion of the original temporary lack of work condition. In no
case shall such displacement exceed the time remaining on the original temporary
job offer or transfer.

      Such displacement can be made in any department and on any shift provided
the displacing employee can perform the work without training. The provision of
Section 16., Paragraph (c) of this Article will apply.

      (h) The bumping provisions of this Article shall not apply.

      (i) The Parties will as a result of changing conditions meet to discuss
selection of an alternate course of action prior to the expiration of the
specified period.

<PAGE>

Section 7. Requesting Home Bases

      (a) If a home base within a department and shift and within a
classification becomes vacant, consideration in seniority order will be given by
the supervisor to the requests of the individual employee for assignment to that
home base. Not more than one (1) request of this nature will be honored within
any six (6) month period.

      (b) Requests supersede recalls except as limited by Section 18. (i) below.

      (c) If an employee requests a home base, is moved to such home base, and
is subsequently bumped, he may request again within six (6) months.

      (d) Laid off employees may request vacancies in home bases.

      (e) No request will be honored except by the department supervisor.

      (f) The details to request a home base shall be obtained from the "Job
Posting and Bidding" notice which shall contain all the necessary information as
per Section 8(a) of this Article.

Section 8. Job Posting and Bidding

      (a) In the event a new job is opened or a vacancy occurs in an existing
job, the available jobs shall be posted within both Reading plants for two (2)
working days and bids must be entered within said posting period. Openings will
be filled from this bidder list for twenty-five (25) working days unless the
vacancy must be filled with a new hire in which case, the opening will be filled
within fifty (50) calendar days. The notice will be used for both Home Base
Requesting and Job Bidding and must contain the following information:

            1.    Date of posting of notice
            2.    Plant location
            3.    Number of vacancies
            4.    Department
            5.    Shift
            6.    Job classification
            7.    Rate of pay
            8     Place to file bid
            9.    Date and hour of posting notice
            10.   Shift where training will be conducted, if other than the
                  shift of the posted vacancy.

            If the most senior bidder is already assigned to the posted vacancy,
the Company will also assign the next most senior qualified bidder.

      (b) The general grievance committee person(s) will receive a copy of the
notice when it is posted. The successful bidders will be notified to sign the
bid within five (5) working days. The Company may request an extension of this
notification period. Such extensions will not be arbitrarily or unreasonably
denied.

      (c) The employee bidding on the job with the most Plant Seniority shall be
given preference provided he is potentially qualified and is physically capable
of performing the work involved.

<PAGE>

      When an employee is prevented from bidding for any reason for six (6)
months, he shall be eligible to bid on a posted job prior to the Company filling
the vacancy from outside the bargaining unit.

      (d) An employee who bids and accepts the job shall not be permitted to bid
again for a period of six (6) months from the date he signs the bid. It is
understood that the successful bidder may request another home base within the
classification within six (6) months from the date he signs the bid. An employee
who bids on a job from which he is subsequently displaced prior to the
expiration of the six (6) month period by reasons of reduction in force or
medical bump, may bid again.

      (e) An employee who bids and accepts the job, but withdraws his bid before
being transferred to the job on which he bid, shall not be permitted to bid
again for a period of twelve (12) months from the date of withdrawal.

      (f) An employee who is accepted shall be transferred to the posted job
within fifteen (15) working days and shall be paid the rate of pay of the job.
In the event the Company fails to release the bidder within the fifteen (15)
working day period, beginning with the sixteenth (16th) working day, he shall be
paid at his average hourly rate or the rate of the job, whichever is higher. If
an employee fails to perform satisfactorily after having worked on the posted
job for ten (10) days he shall be returned to his former job. The trial period
may be extended by mutual agreement between the Company and the General
Grievance Committee. It is understood that the employee may request and shall be
returned to his former job during any trial period. An employee who requests to
return to his former job within the trial period or who fails to perform
satisfactorily and is returned to his former job by the Company will not be
permitted to bid for a period of six (6) months from the date he returns to the
job from which he bid. An employee who bids and accepts a job classification
which he held previously, but requests to return to his former job
classification, will not be permitted to bid again for a period of twelve (12)
months from the date he returns to the job classification from which he bid.

      (g) In cases where it becomes apparent prior to the expiration of the ten
(10) days trial period that the employee is not qualified the Company may return
the employee to his former job prior to the expiration of the ten (10) days
period. Such employee will not be permitted to bid for a period of six (6)
months from the date he is returned to the job from which he bid.

      (h) If an employee fails to qualify on the job which has been posted, or
requests that he be returned to his former job, the Company shall not be
required to post the job again, but may fill the job opening in the following
order of preference provided 25 working days have not elapsed from the time the
bidding period ended:

            1.    From the original bidders' list.
            2.    From the sources outside of the bargaining unit.

      (i) In the event the Company cannot fill a job vacancy with a qualified
employee from within the bargaining unit, or a qualified individual from outside
the bargaining unit, it may elect to fill such a vacancy with the most senior
bidder although such employee may not be fully qualified to fill the posted job.

      (j) In the event the Company elects to fill a vacancy in the manner set
forth in (i), it will provide normal on-the-job training and instruction to
assist the employee to qualify for the vacancy.

<PAGE>

      (k) An employee who cannot fully satisfy the requirements of the job
vacancy will maintain his original labor grade but not less than three (3)
grades below the posted job. Such employee will be advanced one (1) labor grade
according to the following training schedule:

            Labor Grade           Training Period for Advancement
            -----------           -------------------------------

             10                    60 days worked
             11 and 12             90 days worked
             13 to 15              120 days worked

      (l) An employee who is accepted under the provisions of (i) through (k)
and who fails to perform satisfactorily during any training and instruction
period shall be returned to his former job. It is understood that the employee
may request and shall be returned to his former job during such period. An
employee who requests to return to his former job during any training and
instruction period or who fails to perform satisfactorily and is returned to his
former job by the Company will not be permitted to bid into any job involving
training for a period of twelve (12) months from the date he returns to the job
from which he bid. Such period will be reduced to six (6) months for any job for
which he qualifies.

      (m) In cases where it becomes apparent prior to the completion of any
training and instruction period that the employee cannot achieve the expected
progress, the Company may return the employee to his former job prior to the
completion of the training and instruction period. Such employee will not be
permitted to bid into any job involving training for a period of twelve (12)
months from the date he is returned to the job from which he bid. Such period
will be reduced to six (6) months for any job for which he qualifies.

      (n) Any employee who bids on a job and is transferred to such job will
receive the necessary information required to perform the job.

      (o) The Company will make available to the Union copies of bid slips and
disposition of bids.

      (p) The Company will refrain from posting jobs during the scheduled
vacation periods except in extreme emergencies.

Section 9. Formality Bidding

      (a) In the event a permanent job is changed by the Company so as to affect
the method of pay, department, classification, plant, or otherwise affect the
status of employees assigned to such jobs, the affected employees will be given
an opportunity to exercise a formality bid to the new or changed job, except if
the parties agree that the change is minor and will not significantly affect the
employees, the provisions of this Section will not apply. In cases where a
mutual agreement cannot be reached, a formality bid must be implemented. The
most senior employees exercising formality bids will be given preference.

      (b) The provisions of Section 8. of this Article will not apply for
formality bids.

      (c) In the event that all positions within a classification are eliminated
by a change, employees electing not to exercise a formality bid will be
considered to be in layoff status.

      (d) If an employee fails to perform satisfactorily after having worked on
the job for ten (10) days he shall be returned to his former job. The trial
period may be extended by mutual

<PAGE>

agreement between Company and General Grievance Committee. It is understood that
the employee may request and shall be returned to his former job during any
trial period.

      (e) Employees who sign and accept a formality bid but have insufficient
seniority to move into the new position will not have the right to bump other
employees unless their present position is eliminated. These employees will
remain in their present job classification and will retain recall rights to the
formality bid.

      It is understood that an employee who has bumped into the affected
classification shall retain recall rights to his permanent job.

      It is also understood that any employee accepting a formality bid must
move into this position within six (6) months from signing the bid. If this
timeframe is exceeded, the formality bid will be cancelled and no recalls will
be charged. All existing formality bids will expire six (6) months from August
7, 2000.

Section l0. Job Offers

      (a) A job offer is a vacancy which results from a plant-wide posting for
which there are no requests and no successful bidders and for which posting
notices have been sent to all employees on layoff.

      (b) In the event the Company elects to fill the vacancy by a job offer,
the Company shall offer the job to the most senior interested employee who can
perform the available work without training.

      (c) If the Company decides to train a laid off employee due to the
unavailability of an employee as described in (b) above, the Parties shall meet
to discuss the selection of the employee to be trained.

      (d) An employee who accepts a job offer and is subsequently bumped or laid
off will assume the status he had prior to accepting the job offer.

Section 11. Company Convenience Transfers

      (a) A temporary vacancy is defined as a vacancy existing for fifty (50)
days worked or less. Pending the filling of a temporary or permanent vacancy,
the Company shall have the right to fill such vacancy by a temporary transfer.
Temporary vacancies caused by routine absences such as illness, leaves of
absence, vacations, etc. will not be counted toward the fifty (50) day transfer
limit.

      (b) Such transfers shall involve any qualified employees unless more
senior qualified employees are available and have expressed desires to do the
work. In the event there are no qualified employees available, there shall be
mutual agreement of the Parties as to the selection of the employee to be
transferred.

      (c) No employee shall be permitted to accept such transfers for more than
fifty (50) days worked in a calendar year. The Parties will review the status of
the transfer after twenty-five (25) days worked. If a determination is made that
a permanent vacancy exists, the permanent vacancy will be posted in accordance
with the provisions of Article XVII, Section 8.

<PAGE>

      (d) Employees transferred under the foregoing provisions shall be paid the
greater of their earnings on the job to which transferred or their prior average
hourly rate based on the month preceding the month in which the transfer occurs.

      (e) Employees transferred under the foregoing provision shall receive in
addition to their average hourly rate, any general wage increase on the date
such increase becomes effective.

      (f) Whenever an employee is involved in the development of a new or
revised manufacturing process under the guidance of an engineering group, such
employee shall be paid his average hourly rate for all hours spent in the
development of such process.

      (g) The fifty (50) day limit in (a) and (c) above may be extended by
mutual agreement of the parties.

Section 12. Temporary Job Offers

      (a) In the event the Company elects to fill a temporary vacancy by a
temporary job offer, the most senior interested employee on layoff who can
perform the job without training shall be offered the vacancy.

      (b) If the Company decides to train a laid off employee due to the
unavailability of an employee as described in (a) above, the Parties shall meet
to discuss the selection of the employee to be trained.

      (c) An employee who accepts a temporary job offer and is subsequently
bumped or laid off will assume the status he had prior to accepting the
temporary job offer.

Section 13. Disqualifications for Incapacitation and Ability Limitations

      (a) Any employee who disqualifies himself from any portion of a job
classification for medical reasons must leave the classification and shall be
afforded the opportunity to bump under the provisions of Section 3.

      Any employee who disqualifies himself from any portion of any job
classification for limitations of ability shall be afforded an opportunity to
bump under the provisions of Section 3. Such employee will not be allowed to
bump, or have recall rights into said classification on any shift, for the
duration of his employment.

      (b) In the event such disqualification is for medical reasons, the
disability must be certified by a physician of the employee's choice and
verified by a physician of the Company's choice. In the event of conflicting
opinions, a third physician, recommended by the employee's and Company's
physicians, will render an opinion which will supersede all other opinions.

      (c) An employee who bumps under this Section will establish recall rights
to the department, job classification, and shift to which he successfully bumps.

      If the Company, in an effort to comply with the requirements of the
Americans with Disabilities Act in making reasonable accommodations to a
qualified employee, would affect the contractual rights of other bargaining unit
employees, they shall first meet with the Union to negotiate a mutual agreement
in order to minimize those effects.

      Should the parties fail to agree as to the reasonableness of the Company's
action, the dispute shall be subject to the grievance procedure in the third
step.

<PAGE>

Section 14. Temporary Job Posting

      (a) In the event an employee is absent due to an illness, accident, leave
of absence, grand jury duty, vacations, or other agreed upon reasons for an
extended period, the Company may elect to fill such vacancy by posting as
provided for in Section 8. An employee who bids and is accepted to fill such
vacancy will do so for the duration of the extended absence of the permanent
employee only. Upon the return of the permanent employee, the temporary employee
will return to the department, job classification, and shift from which he bid.

      Temporary bidders are also subject to the following:

            1.    Temporary bidders have recall rights to their temporary job
                  for the duration of their temporary job only, at which time
                  they must be recalled to their former (incumbent)job.

            2.    Temporary bidders must return to their former (incumbent) jobs
                  if laid off from their temporary job.

            3.    In the event that recalls are necessary, employees with
                  permanent recall rights are recalled in seniority order before
                  temporary employees. In the event of layoffs, temporary
                  bidders are laid off before permanent employees.

            4.    The acceptance of a temporary bid cannot be withdrawn.

            5.    Bidding rights for temporary bidders are frozen for the
                  duration of the temporary bid or for six (6) months, whichever
                  is shorter.

      (b) The jobs of employees who bid on temporary vacancies may also be
posted on a temporary basis.

      (c) In the event a permanent vacancy occurs within this classification,
the vacancy shall be posted. If the successful temporary bidder is still working
in the classification he shall be permitted to bid on the permanent posting.

      (d) There is no intent on the part of either of the Parties to impose
temporary job posting as the primary or exclusive procedure for filling jobs of
incapacitated employees. Such decision is the exclusive right of the Company.

Section 15. Exceptions

      (a) In determining the status of two (2) or more employees who have equal
seniority, a one-time drawing of lots shall be the determining factor. This
drawing shall take place in the Human Resources Office on the date of hire.

      (b) In case of emergency such as lack of power, gas, water, fire, acts of
God, or other emergency conditions, the Company will be granted an exception to
the seniority provisions of this Agreement for the duration of the emergency.

      (c)   1.    The Grievance Committee members shall have seniority over all
                  employees.

            2.    The Unit President and Shop Stewards shall have seniority over
                  all other employees.

<PAGE>

            3.    It is agreed that in the application of the above, seniority
                  provisions, Union officials shall retain their regular shift.

            4.    It is also agreed that the application of the above seniority
                  provisions are contingent upon the Union officials being able
                  to perform the requirements of the job.

      (d) In the event a Shop Steward serves more than one (1) department he
shall have seniority only in the department to which he is permanently assigned.

Section 16. Miscellaneous Seniority Provisions

      (a) In the matter of layoffs, recalls, or bumping a general grievance
committeeperson will be called to the department involved for the purpose of
discussing employee movements. If disagreement occurs, such disagreement will
become the subject of a grievance at the Second Step. However, if after an
agreement has been reached on the basis of seniority records being correct, they
are found to be in error, causing a mistake to be made, the Company will be
liable for retroactive pay.

      (b) If work is available, employees, with advance notice of at least one
(1) day where possible, may perform such work on a shift other than their
regular shift, without penalty of additional overtime premium to the Company.
Such shift change requests will be limited to three (3) per contract year.
Employees will acknowledge the granting of this variation by signing an
appropriate waiver slip, a copy of which shall be made available to the
appropriate general grievance committeeperson.

      (c) It is understood that when the status of an employee is changed, such
as shift or job, due to the application of seniority as a result of layoff
within a department, such employees must be returned to their original status
and the provisions of Article VI shall not apply.

      (d) All employees must follow the official policies and procedures in
conformance with the Reading Facilities Quality System and the U.S. Food and
Drug Administration's Good Manufacturing Practice for Medical Devices
(21CFR820).

      (e) The Company will provide the Union with copies of temporary transfers.

      (f) Job offers for non-production work will be rotated by seniority.

Section 17. Secondary Recall

      (a) Any employee who is laid off due to lack of work or who is bumped by
another employee may be recalled to any job classification on any shift where
such job opening has been posted and has not been filled by a potentially
qualified bidder.

      (b) Such recall may be effective not sooner than five (5) working days
following the date of layoff or bump.

      (c) Recall to the original department, job classification and shift
supersedes all other recalls.

<PAGE>

      (d) In the event an employee is recalled on a secondary basis to a shift
which creates an individual hardship, such hardship may be brought to the
attention of the Company by the Union.

      (e) An employee who refuses a secondary recall, or does not exercise his
right to bump within five (5) working days after receiving a certified letter
notifying him of a secondary recall, will have his seniority terminated in
accordance with the provisions of Section 1. (b) 4. of this Article.

      (f) The Company will provide to the Union copies of all secondary recall
job postings and the names of the affected employees.

Section 18. Home Bases

      (a) The Company has the right to establish or discontinue home bases in a
department and job classification. Home bases are specific job assignments in a
department and job classification to which employees are assigned on a
continuing basis.

      (b) In a department and job classification the Company has the right to
determine the number and work content of home bases and may combine and separate
home bases as is deemed necessary to meet the requirements of changing business
conditions and production requirements.

      (c) Whenever the Company initiates home bases within a department and job
classification, consideration in seniority order will be given by the supervisor
to the requests of individual employees for assignment to the designated home
bases. The time limitations referred to in Section 7. (a) of this Article will
not apply to initial home base selections.

      (d) Subsequent openings in home bases will be filled by:

            1.    Requests as provided in Section 7. of this Article.

            2.    Job posting and bidding as provided in Section 8. of this
                  Article.

            3.    Hiring, job offers, secondary recall, Company convenience
                  transfers and temporary procedures such as job offers and job
                  posting.

      (e) Entitlement to the work in a home base is based on seniority and
employees are moved in and out of home bases in seniority order. No employee may
be assigned to a home base by the Company unless all regularly assigned
employees are working in the home base with the exception of those employees on
a Company convenience transfer.

      (f) An employee who reports to work on the sixth (6th) consecutive day and
cannot be assigned to his regular home base, shall have the right to displace
any less senior employee in any other home base in his job classification,
department and shift.

      (g) Overtime is scheduled and equalized by home base in job
classifications where home bases are officially recognized by the Parties.

      (h) The number of employees required in a home base is determined by the
Company on a day-to-day basis.

<PAGE>

      (i) Upon recall, an employee will be returned to his home base regardless
of the seniority of the employee working on that home base unless the
permanently assigned employee bumped into the home base and is more senior than
the recalled employee.

                       ARTICLE XVIII - GRIEVANCE PROCEDURE

Section 1. Statement of Intent

      The practice of discussion between employee and foreman concerning
operational problems arising in the plant will continue.

Section 2. Determination of Steps

      Should any difference arise between the Parties as to the meaning and
application of any of the provisions of this Agreement relating to rates of pay,
wages, hours, and other conditions of employment for employees bound by this
Agreement, there shall be no suspension of work or interference with production
because of such differences but an earnest effort shall be made to settle such
differences immediately in the following manner:

      STEP 1. The aggrieved employee, with his steward, shall within five (5)
working days from the day he knew or could have known of the occurrence of the
problem to present his grievance to his supervisor orally, and receive an answer
to said grievance not later than three (3) working days following the end of the
shift during which the grievance was presented.

      STEP 2. Grievances not disposed of under Step 1 shall be reduced to
writing and appealed to Step 2 within ten (10) working days of the receipt of
the Step 1 response. The Second Step meeting shall be held within ten (10)
working days of the request for such meeting and shall be between the
Chairperson of the Grievance Committee and such other members of the bargaining
unit as he may deem necessary, and representatives of the Company who have
authority to make final decisions on grievances. It is required that the Company
furnish a written answer under this Step within ten (10) working days after the
date of the Second Step Meeting. The Union must within ten (10) working days
after receipt of the Company's answer notify the Company in writing whether or
not the grievance will be processed to Step 3.

      STEP 3. The Third Step Meeting shall be between an International Union
Representative, the Chairperson of the Grievance Committee and such other
members of the bargaining unit as they may deem necessary and representatives of
the Company who have authority to make final decisions on grievances. This
meeting shall be held within ten (10) working days after the date the Company is
notified of the Union's intention to proceed to Step 3 or is extended by mutual
agreement.

      The Company is required to furnish a written answer under this Step within
ten (10) working days after the date of the meeting.

      The Union must then, within ten (10) working days from receipt of the
Company's answer, notify the Company in writing whether or not the grievance
will be processed through Arbitration.

      STEP 4. Any difference, disputes, claims or grievance cases arising out of
or relating to this Agreement which have not been satisfactorily settled in
accordance with the foregoing procedure shall be submitted to Arbitration.

<PAGE>

      The Parties shall attempt to select a mutually satisfactory Arbitrator. If
unable to do so, the Arbitrator shall be selected by the Parties from a list
submitted by the American Arbitration Association in accordance with its rules;
provided that, in any case involving an industrial engineering question, or
similar technical differences, the list submitted by the American Arbitration
Association shall be limited to qualified industrial engineers or qualified
technical personnel.

      The salary and expenses incidental to the services of the Arbitrator shall
be divided between the Parties.

      The Arbitrator shall not have jurisdiction or authority to add to or to
detract from or alter in any way the provisions of this Agreement or any written
amendments thereto.

      The award of the Arbitrator on any matter which shall have been submitted
in accordance with the provisions of this Agreement shall be final and binding
upon the Company and the Union.

      When the awards are made on any matter submitted, the Party against whom
the award is rendered shall furnish to the other Party within fifteen (15)
working days after the award has been made, proof of its intention to comply.

Section 3. Stewards and General Grievance Committeepersons

      (a) Stewards shall be designated by the Union Unit. The total number shall
not exceed one (1) steward per fifty (50) actively employed bargaining unit
members. The steward employee ratio will be reviewed quarterly and adjusted and
reapportioned within one (1) month thereafter in accordance with the ratio
herein above set forth.

      (b) The Union will designate five (5) general grievance committeepersons
including one (1) grievance committee chairperson.

      (c) All stewards and general grievance committeepersons will be permitted
such time off from their jobs as required to perform appropriate Union
activities. Stewards and general grievance committeepersons must notify their
supervisors when leaving their jobs when engaged in Union business both within
and without the department.

      (d) The Company shall pay all departmental stewards and the CWS Job
Evaluation Chairperson up to five (5) hours per month for time lost in the
performance of appropriate Union activities.

      (e) The Company shall pay one (1) safety steward up to five (5) hours per
month for time lost in the performance of safety and health related activities.

      (f) The Company shall pay the President, the Chairperson of the Grievance
Committee, and four (4) General Grievance Committeepersons up to fifty (50)
individual hours each per month at their individual average hourly rate for time
lost from their jobs in the performance of appropriate Union activities. Any
unused monthly Union time up to 10 hours per month may be used by the
Chairperson of the Grievance Committee in the performance of appropriate Union
activities.

      All time that exceeds fifty (50) hours per month for an individual shall
be reimbursed to the Company by the Union at that individual's average hourly
rate.

<PAGE>

      The Company agrees that all unused monthly Union time hours during the
term of this Agreement may be accumulated and applied to the 2003 negotiations.
Such accumulation of hours will be reviewed by the Parties from time to time to
ensure agreement on the total to be applied.

      (g) The Union shall notify the Company of its respective officers and
stewards.

      (h) The procedure under this Article is available to the International
Union and the Company for the presentation and settlement of grievances arising
under the terms of this Agreement. Such cases shall be presented under Step 3 of
the grievance procedure.

      (i) In the event two (2) or more employees are involved in a single
difference or dispute, the steward of the department may file a grievance on
behalf of such employees.

      (j) Failure to observe time limits in the handling of a grievance will
resolve the grievance in favor of the other party unless such time limits are
extended by mutual agreement.

          ARTICLE XIX - WORK BY PERSONS OUTSIDE OF THE BARGAINING UNIT

      Persons who are employees of the Company and whose regular jobs are not in
the bargaining unit will not work on any jobs covered by the provisions of this
Agreement except:

      (a) For purposes of instruction.

      (b) Performing experimental work of a duration necessary for developing
products and/or processes for release to production of a significant volume.
Such duration may be for an unspecified but not for an unlimited period of time.

            The Company agrees to provide periodic updates to the Union on the
status of active developmental programs.

      (c) In emergencies when regular employees are not available.

      (d) Correcting situations that are beyond the capabilities of employees in
the unit such as operating and processing problems, quality problems, correcting
malfunctions, and the like.

      (e) After making conscientious efforts to replace absent employees with
employees from the bargaining unit in accordance with the transfer provisions of
this Agreement, performing the work of such absent employees.

                         ARTICLE XX - HEALTH AND WELFARE

Section 1. Health and Welfare Benefits

      The Company agrees to provide for the duration of this Agreement the
following health and welfare benefits, to become effective on the day following
the date on which the probationary period is completed:

      (a) Effective August 7, 2000, each employee will receive an additional one
thousand dollars ($1,000.00) of life insurance on a non-contributory basis for a
total of twenty-six

<PAGE>

thousand five hundred dollars ($26,500.00). Effective August 6, 2001, each
employee will receive an additional one thousand dollars ($1,000.00) of life
insurance on a non-contributory basis for a total of twenty-seven thousand five
hundred dollars ($27,500.00). Effective August 5, 2002, each employee will
receive an additional one thousand dollars ($1,000.00) of life insurance on a
non-contributory basis for a total of twenty-eight thousand five hundred dollars
($28,500.00).

      (b) Weekly indemnification, hospital, surgical, major medical and dental
coverage as outlined in EXHIBIT B.

      (c) An individual on Disability Retirement may draw from his life
insurance an amount not to exceed two hundred twenty-five dollars ($225.00) per
month to a maximum of ten thousand dollars ($10,000.00) with the balance left as
a death benefit.

Section 2. Carrier Selection

      It is expressly understood that the Company reserves the right to select
the carrier(s) to provide the above benefits.

Section 3. Agreement to Provide Pension Benefits

      The Company agrees to provide those pension benefits outlined in EXHIBIT
C.

                         ARTICLE XXI - TERM OF AGREEMENT

      This Agreement shall be effective as of August 7, 2000. This Agreement
shall continue in full force and effect from the date of its execution to August
3, 2003, thereafter from year to year unless prior to the expiration of the
original term, or any subsequent yearly term, sixty (60) days written notice is
given by one party to the other of a desire to modify or amend, or cancel the
same.

      If neither party gives notice of a desire to terminate this Agreement, but
either party gives notice of an intention to modify or change the terms of this
Agreement, this Agreement shall remain in full force and effect during the
negotiation of such changes or until terminated.

      IN WITNESS WHEREOF, the Parties hereto have caused this Agreement to be
executed by their proper representatives thereunto duly authorized, the day and
year first written above.

      UNITED STEELWORKERS OF AMERICA, AFL-CIO, CLC
            George Becker, International President
            Leo Gerard, International Secretary/Treasurer
            Richard Davis, International Vice President, Administration
            Leon Lynch, International Vice President, Human Affairs
            Andrew V. Palm, Director, District 10
            Terry L. Rarick, Sub-District Director
            William D. Simms, President, Local 6996-21
            Judith B. Lloyd, Chairperson, Grievance Committee
            John A. Morganti, Grievance Committeeperson
            Troy A. Henne, Grievance Committeeperson
            Frances A. Wright, Grievance Committeeperson
            Thomas R. Seitzinger, Jr., Grievance Committeeperson

<PAGE>

      ARROW INTERNATIONAL, INC.
            Philip Fleck, President
            James R. Elmer, Vice President of Manufacturing
            Robert E. Roman, Plant Manager
            Scott A. McKently, Manufacturing Manager
            David T. Silfies, Manufacturing Manager
            Philip R. Jacobelli, Director, Human Resources
            Paul F. Walter, Jr. Assistant Director, Human Resources
            Sophia B. Roth, Administrator, Human Resources

<PAGE>

                                LETTERS OF INTENT

I. In deciding to sub-contract work normally and traditionally done by employees
within the bargaining unit, it is the intention of the Company to give due
consideration to available skills, available equipment and tooling, schedules
and cost of performance.

II. The standards of apprenticeship for each trade incorporated in the Company's
Apprentice Training Program shall be considered a part of this Agreement and
subject to all the provisions thereof.

III. The Parties agree that it is in their mutual interest to insure that only
employees with the demonstrated potential be selected for key mechanical
positions. Accordingly, it is the intent of the Parties to install the
"Minimizer" or similar agreed testing program. The test would be used in
determining an applicant's/employee's mechanical aptitude and consequently
potential for success in key mechanical positions. Both job bidders and
employees bumping into any set-up, apprentice or skilled trades position who
have not had previous experience in the mechanical position they are bidding or
bumping into which can be verified or documented by the Company's records will
be tested. A minimum acceptable score will be determined and anyone scoring at
or above this minimum acceptable level will be eligible for consideration. The
most senior bidder or bumping employee will be offered the position.

      Existing set-up persons, apprentices, etc. will be exempt from testing for
their present positions or for the purpose of bidding or bumping into similar
job classifications. Incumbents may volunteer to be tested in order to determine
"baseline data" which will be used in establishing minimum acceptable scores.
All tests will be validated through professional job analysis to insure that
each test is job specific and relates to objective job performance expectations
for each position.

IV. Employees who work in classifications that are split between the plants
shall have the right to request a posted vacancy within their department, shift,
and classification in the other plant. The remaining vacancy shall be filled by
the senior bidder.

      The affected classifications are:
            2012  -  Tool and Die, Dept. 312
            0940  -  Material Handler, Shipping & Receiving , Dept. 369
            1081  -  Final Inspector, Medical Products, Dept. 388
            2016  -  Electrician, Dept. 326
            2014  -  Maintenance Mechanic, Dept. 326
            0494  -  Janitor, Dept. 326
            0917  -  Maintenance Utility, Dept. 326

V. Training & Reassignment Opportunities

      The Parties recognize that it is in the long term interest of the Company
to provide employees with opportunities to be trained on their job functions to
the fullest extent that is consistent with the needs of the business and the
efficiency of the operation. In view of that interest the Parties have reached
the following understandings:

      (1) These opportunities will be afforded to only those employees working
in "non-home base" job classes as defined in the provisions of Article XVII,
Section 18. of the Labor Agreement.

<PAGE>

      (2) In each of these "non-home base" job classes the Company has
designated the following jobs to be available for training and reassignment
opportunities:

DEPT.       JOB TITLE                                                  JOB
                                                                       CLASS
357         Component Parts Assembler                                  0692
357         Setup and Operate Medical Devices                          1392
357         Setup and Operate Extruder                                 1440
360         Multiple Machine Tender                                    0670
360         Utility and Stockperson                                    0690
360         Operator - Welding, Hand, Autogrind and Flat Press         0754
360         Operator Springwire Guide Coiling Machine                  0951
360         Setup Operator Springwire Guides Manufacturing             1349
369         Material Handler, Shipping & Receiving                     0940
388         Inspector                                                  1081

      (3) Employees working in home bases will not be afforded these training
and reassignment opportunities. These home bases are:

DEPT.       JOB TITLE                                                  JOB
                                                                       CLASS
357         Utility and Stockperson - Component Parts Washer           0792

      (4) The following job assignments within "non-home base" job classes will
be excluded from training and reassignment opportunities:

DEPT.       JOB TITLE                                                  JOB
                                                                       CLASS

312         All job classes and job titles
326         All job classes and job titles
357         Component Parts Assembler                                  0693
357         Helper - Extruder Machines                                 0740
360         Components Parts Washer                                    0589
362         Valve Polisher/Fitter                                      1066
362         Final Inspector, LVAD                                      1181

      Training and reassignment opportunities as described in (2) above will be
subject to the following conditions:

            a)    In order to be eligible, an employee must have a minimum of
                  six (6) months service.
            b)    All requests will be limited to employee's current job class.
            c)    All requests for training and reassignment must be submitted
                  in writing on a form supplied by the Company.
            d)    An employee can request a reassignment/training opportunity
                  once every six (6) months.
            e)    The Company will reassign or begin training the employee as
                  soon as practical.
            f)    An employee will be required to remain in new job duties until
                  reassigned by the supervisor. Nothing in this understanding
                  should be construed as restricting the supervisor's right of
                  assignment.

<PAGE>

            g)    The Company reserves the right to move an employee out of a
                  new assignment at any time. If this happens, the employee will
                  be permitted to apply for another assignment within the same
                  six (6) month period.

      (6) Due to changing business conditions or unforeseen circumstances the
Company may decide to move a "non-home base" assignment from category ("2") to
category ("4") as stated above.

      (7) This Letter of Intent will be renewed effective August 7, 2000 and
will be considered as an addendum to the existing Collective Bargaining
Agreement which expires on August 3, 2003.

      (8) In those cases where more than one (1) employee is working on the same
assignment within the same job class, seniority will be given consideration in
determining which employee will be moved out of that assignment.

VI. Class III Medical Device Manufacturing

      At some time during the term of this Agreement, the Company intends to
engage in the manufacturing of Class III medical devices at either or both of
the Reading facilities. The jobs will require extensive training and the success
of this effort will require the retention of employees in this work for an
extended period. The Parties recognize the special manufacturing and quality
criteria as they pertain to standards of performance. Therefore, the Company
will establish some jobs during the life of this Agreement which will be
exempted from the bumping provisions for a period of 24 months. Furthermore, the
incumbents in these jobs will not be permitted to bid on any other jobs for a
period of 12 months unless a promotion is involved (i.e., a higher job class).
There will also be a qualification period of thirty (30) days worked for any
employee who is a successful bidder on one of these jobs. During this
qualification period, the Company maintains the right to disqualify any employee
who fails to successfully meet the requirements for the job. For the initial
bidding period only, all employees, regardless of bidding status, will be
allowed to bid. It is understood that an employee may request and shall be
returned to his former job during the qualification period.

<PAGE>

                                    EXHIBIT A

                    APPLICABLE HOURLY RATES (EXCLUDING COLA)

         Labor Grade         8/7/00           8/6/01           8/5/02
     ----------------------------------------------------------------------
              1               15.38            15.78            16.13
              2               15.53            15.93            16.28
              3               15.68            16.08            16.43
              4               15.82            16.22            16.57
              5               15.97            16.37            16.72
              6               16.12            16.52            16.87
              7               16.26            16.66            17.01
              8               16.41            16.81            17.16
              9               16.56            16.96            17.31
             10               16.71            17.11            17.46
             11               16.90            17.30            17.65
             12               17.10            17.50            17.85
             13               17.30            17.70            18.05
             14               17.58            17.98            18.33
             15               17.85            18.25            18.60
             16               18.12            18.52            18.87
             17               18.40            18.80            19.15
             18               18.67            19.07            19.42
             19               18.94            19.34            19.69
             20               19.21            19.61            19.96

                             APPRENTICE HOURLY RATES

                       8/7/00                8/6/01                8/5/02
--------------------------------------------------------------------------------

                New Hires  Transfers  New Hires  Transfers  New Hires  Transfers
                ---------  ---------  ---------  ---------  ---------  ---------
Start               13.23     15.38      13.63      15.78      13.98     16.33
1,000 Hours         13.68     15.68      14.08      16.08      14.43     16.43
2,000 Hours         14.13     15.97      14.53      16.37      14.88     16.70
3,000 Hours         14.58     16.26      14.98      16.66      15.33     17.01
4,000 Hours         15.04     16.56      15.44      16.96      15.79     17.31
5,000 Hours         15.54     16.90      15.94      17.30      16.29     17.65
6,000 Hours         16.10     17.30      16.50      17.77      16.85     18.12
7,000 Hours         17.24     17.85      17.64      18.25      17.99     18.60
8,000 Hours         18.67     18.67      19.07      19.07      19.42     19.42
10,000 Hours        19.21     19.21      19.61      19.61      19.96     19.96

<PAGE>

                                    EXHIBIT B

1.    WEEKLY DISABILITY

      $330.00 per week for claims incurred on or after August 7, 2000. $340.00
per week for claims incurred on or after August 6, 2001. $350.00 per week for
claims incurred on or after August 5, 2002 for a maximum period of fifty-two
(52) weeks.

      Duration of Benefits. Benefits will commence on: (a) the first (1st) day
of disability caused by an accident; (b) the fourth (4th) day of illness or on
the first (1st) day following the first doctor's visit, whichever time is later;
(c) the first (1st) day of admittance to the hospital or certain outpatient
surgeries.

      You will be entitled to these benefits for each separate period of
disability due to different and unrelated non-occupational injuries or
sicknesses so long as you return to work between disabilities. Periods of
disability separated by two (2) weeks or more of active work will be considered
as due to different and unrelated injuries or sicknesses.

2.    HEALTH CARE PLAN

                                   EXHIBIT B1

      a.    The Health Care Plan permits Members to receive services by, or
            through, their Network. This program also allows for Members to
            receive services from providers who may, or may not, be
            participating providers. The Member's copayment responsibility
            varies depending upon how the Member accesses his/her medical care.
            Two tiers of benefits are available as follows:

      In Network -      Tier A copayments are assessed when a Member accesses
                        services performed by a Participating Provider. Access
                        of some services requires Prior Authorization from the
                        Plan.

      Out of Network -  Tier B copayments are assessed when a Member accesses
                        services performed by a Non-participating Provider.
                        Access of some services requires Prior Authorization
                        from the Plan.

      The Health Care Plan also contains exclusions, limitations, coordination
      of benefit provisions, benefit maximums, and precertification requirements
      contained in the Enrollment Package provided to you.

      b.    HOSPITAL COVERAGE FOR EMPLOYEES AND COVERED DEPENDENTS

      Medical/Surgical - Semi-Private accommodations including all hospital
      charges for intensive and coronary care.

      Length of Stay - Must be medically necessary. In Network and Out of
      Network require prior authorization.

      Mental Health and Substance Abuse benefit are only available from In
      Network providers. Services provided must be prior authorized.

      Mental Health Services - Maximum 30 days per year.

<PAGE>

      Non-Hospital Residential Substance Abuse Services - Maximum 30 days per
      year and 90 days per lifetime.

      Inpatient Detoxification - Maximum 7 days per admission. Lifetime limit of
      four admissions.

      Skilled Nursing Facility of Rehabilitation Hospital - 60 days per
      condition per lifetime.

      Emergency Room - If Medical Emergency $25 copayment applies. Waived if
      admitted to the hospital.

      Outpatient Surgery - Facility charge at a short procedure unit, outpatient
      clinic or other authorized outpatient facility.

                  In Network          100%
                  Out of Network      80% Coverage after Deductible

      c.    SURGICAL BENEFITS FOR EMPLOYEES AND COVERED DEPENDENTS

      Extent of Coverage - All operative procedures for treatment of diseases,
      injuries, fractures or dislocations performed by a licensed physician.

       Reimbursement of Primary Surgeon as follows:

                  Inpatient
                  ---------

                  In Network          100%
                  Out of Network      80% Coverage after Deductible

                  Outpatient
                  ----------

                  In Network          100%
                  Out of Network      80% Coverage after Deductible

      d.    PRIOR AUTHORIZATION

      Care provided under Tier A and B may require prior authorization. Contact
      the Plan at the telephone number contained on your identification card to
      determine if prior authorization is required.

      e.    DIAGNOSTIC EXPENSE BENEFITS FOR EMPLOYEES AND COVERED DEPENDENTS

      Diagnostic Services - The cost of certain laboratory procedures, special
      tests including mammography as well as x-rays.

                  In Network          100%
                  Out of Network      80% Subject to Deductible

      f.    PRESCRIPTION DRUG COVERAGE FOR EMPLOYEES AND COVERED DEPENDENTS

<PAGE>

      Prescriptions dispensed by either a participating retail or participating
      mail order pharmacy.

      Copayment: Retail:   $5 Generic       Mail Order:   $12 Generic
                           $12 Brand                      $30 Brand

      g.    PHYSICIAN OFFICE VISITS FOR EMPLOYEES AND COVERED DEPENDENTS

                      Well Care (Adult & Child)               Copayment
                      ---------                               ---------
                        In Network                               $10
                        Out of Network                           Not Covered

                      Annual Gynecological Exam               Copayment
                      -------------------------               ---------
                        In Network                               $10
                        Out of Network                           Not Covered

                           Illness                  Copayment
                           -------                  ---------
                            In Network                 $10
                            Out of Network             80% after Deductible

      h.    DEDUCTIBLE AND OUT-OF-POCKET LIMITATIONS

      Applies only to Out of Network.

            Deductible:                        $250 per person
                                               $500 per family

            Out-of-Pocket Maximum              $2,000 per person
            (Does not include deductible)      $4,000 per family

      All Out of Network benefits are eligible only up to the reasonable and
      customary limitation determined by the Plan.

      i.    VISION BENEFITS FOR EMPLOYEES AND COVERED DEPENDENTS

      As a supplement to your health care plan, coverage for routine eye exams
      by a vision care provider will be covered to a maximum of $50. Frequency
      of eye exam limited to once every 24 months (limited to once every 12
      months for enrolled dependents 18 years of age or younger).

      j.    ELIGIBLE DEPENDENT COVERAGE

      The Company agrees to provide coverage for the Employee's lawful spouse
      unmarried children nineteen (19) years of age but under twenty-five (25)
      years of age, who have their legal residence with the Employee, who are
      wholly dependent upon the Employee for maintenance and support and who are
      registered students in regular, full-time attendance in an accredited
      secondary school, college or university, or institution for the training
      of nurses subject to any required contributions.

                                   EXHIBIT B2

<PAGE>

      a.    The Health Care Plan permits Members to receive services by, or
            through, their Network. This program also allows for Members to
            receive services from providers who may, or may not, be
            participating providers. The Member's copayment responsibility
            varies depending upon how the Member accesses his/her medical care.
            Two tiers of benefits are available as follows:

      In Network -      Tier A copayments are assessed when a Member accesses
                        services performed by a Participating Provider. Access
                        of some services requires Prior Authorization from the
                        Plan.

      Out of Network -  Tier B copayments are assessed when a Member accesses
                        services performed by a Non-participating Provider.
                        Access of some services requires Prior Authorization
                        from the Plan.

      The Health Care Plan also contains exclusions, limitations, coordination
      of benefit provisions, benefit maximums, and precertification requirements
      contained in the Enrollment Package provided to you.

      b.    HOSPITAL COVERAGE FOR EMPLOYEES AND COVERED DEPENDENTS

      Medical/Surgical - Semi-Private accommodations including all hospital
      charges for intensive and coronary care.

      Length of Stay - Must be medically necessary. In Network and Out of
      Network require prior authorization.

      Mental Health and Substance Abuse benefit are only available from In
      Network providers. Services provided must be prior authorized.

      Mental Health Services - Maximum 30 days per year.

      Non-Hospital Residential Substance Abuse Services - Maximum 30 days per
      year and 90 days per lifetime.

      Inpatient Detoxification - Maximum 7 days per admission. Lifetime limit of
      four admissions.

      Skilled Nursing Facility of Rehabilitation Hospital - 60 days per
      condition per lifetime.

      Emergency Room - If Medical Emergency $50 copayment applies. Waived if
      admitted to the hospital.

      Outpatient Surgery - Facility charge at a short procedure unit, outpatient
      clinic or other authorized outpatient facility.

                  In Network          80%
                  Out of Network      60% Coverage after Deductible

      c.    SURGICAL BENEFITS FOR EMPLOYEES AND COVERED DEPENDENTS

      Extent of Coverage - All operative procedures for treatment of diseases,
      injuries, fractures or dislocations performed by a licensed physician.

<PAGE>

      Reimbursement of Primary Surgeon as follows:

                  Inpatient
                  ---------

                  In Network          80%
                  Out of Network      60% Coverage after Deductible

                  Outpatient
                  ----------

                  In Network          80%
                  Out of Network      60% Coverage after Deductible

      d.    PRIOR AUTHORIZATION

      Care provided under Tier A and B may require prior authorization. Contact
      the Plan at the telephone number contained on your identification card to
      determine if prior authorization is required.

      e.    DIAGNOSTIC EXPENSE BENEFITS FOR EMPLOYEES AND COVERED DEPENDENTS

      Diagnostic Services - The cost of certain laboratory procedures, special
      tests including mammography as well as x-rays.

                  In Network          80%
                  Out of Network      60% Coverage after Deductible

      f.    PRESCRIPTION DRUG COVERAGE FOR EMPLOYEES AND COVERED DEPENDENTS

      Prescriptions dispensed by either a participating retail or participating
      mail order pharmacy.

      Copayment: Retail: $ 5 Generic             Mail Order: $12 Generic
                         $15 Preferred Brand                 $30 Preferred Brand
                         $25 Non-Preferred Brand             $60 Non-Preferred
                                                               Brand

      g.    PHYSICIAN OFFICE VISITS FOR EMPLOYEES AND COVERED DEPENDENTS

                      Well Care (Adult & Child)               Copayment
                      ---------                               ---------
                        In Network                               $15
                        Out of Network                           Not Covered

                      Annual Gynecological Exam               Copayment
                      -------------------------               ---------
                        In Network                               $15
                        Out of Network                           Not Covered

                           Illness                  Copayment
                           -------                  ---------
                            In Network                 $15
                            Out of Network             60% after Deductible

      h.    DEDUCTIBLE AND OUT-OF-POCKET LIMITATIONS

<PAGE>

      In Network Out-of-Pocket:   $1,000 per person
                                  $2,000 per family

      Out of Network Deductible:  $300 per person
                                  $600 per family

            Out of Network Out-of-Pocket Maximum    $4,000 per person
            (Does not include deductible)           $8,000 per family

      All Out of Network benefits are eligible only up to the reasonable and
      customary limitation determined by the Plan.

      i.    VISION BENEFITS FOR EMPLOYEES AND COVERED DEPENDENTS

      As a supplement to your health care plan, coverage for routine eye exams
      by a vision care provider will be covered to a maximum of $50. Frequency
      of eye exam limited to once every 24 months (limited to once every 12
      months for enrolled dependents 18 years of age or younger).

      j.    ELIGIBLE DEPENDENT COVERAGE

      The Company agrees to provide coverage for the Employee's lawful spouse
      and unmarried children nineteen (19) years of age but under twenty-five
      (25) years of age, who have their legal residence with the Employee, who
      are wholly dependent upon the Employee for maintenance and support and who
      are registered students in regular, full-time attendance in an accredited
      secondary school, college or university, or institution for the training
      of nurses subject to any required contributions.

3. RETIRED EMPLOYEES

      Medicare. The Company will pay twenty-three dollars ($23.00) per month
(paid quarterly) of the retiree's contribution to Medicare Part B. When
hospitalized the Company will pay seventy-five dollars ($75.00) towards the
Medicare Part A deductible.

      Medical Expense Benefits for Early Retirees. Employees who retire early
may carry medical expense coverage for themselves or their eligible dependents
on a contributory basis.

<PAGE>

                           HEALTH CARE CONTRIBUTIONS(1)

Plan 1

<TABLE>
<CAPTION>
                                                      Monthly Effective                       Weekly Effective
                                     Monthly          Cost with Pre-tax      Weekly           Cost with Pre-tax
Level of Coverage                    Contribution     Deduction(2)           Contribution     Deduction(2)
<S>                                  <C>              <C>                    <C>              <C>
  Single                             $10.00(3)        $ 6.96                 $ 2.31           $ 1.61
  Employee & Spouse                  $20.00(3)        $13.91                 $ 4.62           $ 3.21
  Employee & Child(ren)              $15.00(3)        $10.43                 $ 3.46           $ 2.41
  Family                             $25.00(3)        $17.39                 $ 5.77           $ 4.01
</TABLE>

Plan 2(4)

<TABLE>
<CAPTION>
                                                      Monthly Effective                       Weekly Effective
                                     Monthly          Cost with Pre-tax      Weekly           Cost with Pre-tax
Level of Coverage                    Contribution     Deduction(2)           Contribution     Deduction(2)
<S>                                  <C>              <C>                    <C>              <C>
  Single                             $ 0.00(3)        $ 0.00                 $ 0.00           $ 0.00
  Employee & Spouse                  $ 5.00(3)        $ 3.48                 $ 1.15           $ 0.80
  Employee & Child(ren)              $ 0.00(3)        $ 0.00                 $ 0.00           $ 0.00
  Family                             $10.00(3)        $ 6.96                 $ 2.31           $ 1.61
</TABLE>

(1) All contributions will be made on a pre-tax basis through Section 125 of the
Internal Revenue Code (I.R.C.).

(2) Assumes the following tax rates: 20% Federal Income, 7.65% Social Security
and Medicare and 2.8% State.

(3) If the spouse of the Arrow employee works outside of the home and has an
employer sponsored medical plan available, the spouse must elect their
employer's plan as their primary medical coverage. If the spouse is eligible but
does not elect coverage through their employer's health care plan, the Arrow
plan will assume that all expenses would have been reimbursed at 80% and will
coordinate benefits only on the 20% coinsurance amount.

(4) Employees electing Plan 2 or Exhibit B2 will also be provided a $250
employer funded Medical Spending Account under Section 125 of the I.R.C.

                           FLEXIBLE SPENDING ACCOUNTS

All employees will have available the option to contribute money on a pre-tax
basis to both a Medical Spending Account and/or a Dependent Care Spending
Account. These accounts are offered under Section 125 of the Internal Revenue
Code (I.R.C.)

4. DENTAL BENEFITS

ELIGIBLE DEPENDENT COVERAGE

The Company agrees to provide coverage for the Employee's lawful spouse
unmarried children nineteen (19) years of age but under twenty-five (25) years
of age, who have their legal residence with the Employee, who are wholly
dependent upon the Employee for maintenance and support and who are registered
students in regular, full-time attendance in an accredited secondary school,
college or university, or institution for the training of nurses subject to any
required contributions.

      Covered Dental Expenses. The Dental Expense Benefit includes Basic and
Supplemental services. The Basic Program pays 100% of the usual, customary, and
reasonable fees

<PAGE>

charged by your dentist. The supplemental Program pays 80% of the usual,
customary and reasonable fees charged by your dentist. These benefits are
described in a summary plan description.

      Maximum Benefits. During any one calendar year the maximum benefits
payable for covered dental expenses, except for orthodontic treatment, is
$1,000.00 for each person.

      Covered dental expenses in connection with orthodontic treatment will be a
lifetime maximum of $1,500.00 for each dependent child under nineteen (19) years
of age.

      Covered Dental Services. The benefit covers the dental services when they
are performed by a licensed dentist and when they are determined necessary and
customary in accordance with standards of accepted dental practice.

                                    EXHIBIT C

                                PENSION AGREEMENT

      This Pension Agreement is made with the understanding that it will become
effective as of August 7, 2000 except as may be specifically otherwise provided
herein. It will be considered a part of the Labor Agreement and shall remain in
effect until the termination of the Labor Agreement.

      The Parties agree that the provisions of Section 2, Membership; Section 4,
Benefits; and Section 5, Form of Benefit Payment, of the Pension Plan approved
by the Internal Revenue Service shall become a part of this Agreement with the
following revisions:

      1. Retirement Allowance. Effective September 1, 2000, $25.00 per month for
each year of continuous service. Effective September 1, 2001, $26.00 per month
for each year of continuous service. Effective September 1, 2002, $27.00 per
month for each year of continuous service. Employees with ten (10) or more years
of service may retire at the age of sixty (60) or older without incurring an
actuarial reduction to their pension. In addition, those employees age sixty
(60) and sixty-one (61) with ten (10) or more years of service will receive a
$750.00 monthly supplement until reaching age sixty-two (62).

      2. First and second year retirees will have pensions increased at the
start of the first and second years of the Agreement where applicable.

      3. Pension benefits will continue to accrue during the first twelve (12)
months of layoff only.

      4. The Pension Plan will be amended when necessary to comply with the
provisions of the Employees Retirement Income and Security Act of 1974 and the
Retirement Equity Act of 1984.

<PAGE>

      5. Actuarial Table for Early Retirement. The Actuarial Table for
determining early retirement benefits is as follows:

    Age at Start of Pension                  Actuarial Table
    -----------------------                  ---------------

        65                                        100.0%
        64                                        100.0%
        63                                        100.0%
        62                                        100.0%
        61                                        100.0%
        60                                        100.0%
        59                                         79.0%
        58                                         75.0%
        57                                         71.0%
        56                                         67.0%
        55                                         63.0%

6. Sickness and Accident Benefits for Disability Retirement. An employee who has
become permanently disabled and who is eligible under the law to receive Social
Security benefits after twenty-six (26) weeks of permanent disability, shall
receive a reduced Sickness and Accident benefit for up to twenty-six (26)
additional weeks while receiving the Social Security benefit. Such reduced
Sickness and Accident benefit when combined with the Social Security benefit
shall provide an amount equal to the full Sickness and Accident benefit.

      The total period of full and reduced Sickness and Accident benefits shall
not exceed fifty-two (52) weeks.

      If any difference shall arise between the Company and any participant's
right to a pension or the amount of such pension, the dispute shall be subject
to the provisions of Article XVIII, Grievance Procedure, beginning with Step 2.

      If any difference shall arise between the Company and any person who shall
be or claim to be a co-pensioner or a surviving spouse, as to such person's
right to a benefit under this Agreement or the amount of such benefit, such
dispute shall be subject to the provisions of Article XVIII, Grievance
Procedure, beginning with Step 2.

      The Company will supply each employee with a Summary Plan Description of
the pension benefits within ninety (90) days of the signing of the Agreement.

      The Company will supply an annual actuary report to the Staff
Representative and a copy to the Local Union along with a list of the employees
who have retired, the type of benefit and the amount of the benefit.

7. Retired Employees. All existing retirees will receive an additional
twenty-five cents ($.25) to their respective pension multiplier.ARROW INTERNATIONAL, INC.

                         DIRECTORS STOCK INCENTIVE PLAN

                        (As Amended on January 19, 2000)

      Arrow International, Inc. (the "Company") hereby establishes the Arrow
International, Inc. Directors Stock Incentive Plan (the "Plan").

1.    PURPOSE

      The purpose of the Plan is to enable the Company and its subsidiaries to
attract and retain outside directors and provide them with an incentive to
maintain and enhance the Company's long-term performance record. It is intended
that this purpose will best be achieved by granting eligible directors
non-qualified stock options ("options") under this Plan pursuant to the rules
set forth in Section 83 of the Internal Revenue Code, as amended from time to
time.

2.    ADMINISTRATION

      The Plan shall be administered by the Company's Board of Directors (the
"Board"). Subject to the provisions of the Plan, the Board shall possess the
authority, in its discretion, (a) to prescribe the form of the stock option
agreements, including any appropriate terms and conditions applicable to these
options, and to make any amendments to such agreements or options; (b) to
interpret the Plan; (c) to make and amend rules and regulations relating to the
Plan; and (d) to make all other determinations necessary or advisable for the
administration of the Plan. The Board's determinations shall be conclusive and
binding. No member of the Board shall be liable for any action taken or decision
made in good faith relating to the Plan or any option granted hereunder.

3.    ELIGIBLE DIRECTORS

      Members of the Board of Directors of the Company and its subsidiaries are
eligible to participate in this Plan if they are not also employees or
consultants of the Company or its subsidiaries and do not serve on the Board as
representatives of the interests of shareholders who have made an investment in
the Company.

4.    SHARES AVAILABLE

      The total number of shares of the Company's Common Stock, no par value
(the "Common Stock"), available in the aggregate for options under this Plan
shall not exceed 150,000 (subject to substitution or adjustment as provided in
Section 8). Such shares may be authorized and unissued shares. If an option
expires, terminates or is cancelled without being exercised, new options may
thereafter be granted covering such shares. No option may be granted more than
ten years after the effective date of the Plan.

<PAGE>
                                     - 2 -

5.    TERMS AND CONDITIONS OF OPTIONS

      Each option granted under the Plan shall be evidenced by an option
agreement in such form as the Board shall approve from time to time, which
agreement shall conform with this Plan and contain the following terms and
conditions:

            (a) Number of Shares. On the date the Plan is first adopted by the
      Company's shareholders or on the date on which an eligible director is
      first elected to the Board, whichever is later, such eligible director
      shall receive an option to purchase 5,000 shares of the Common Stock (each
      such option grant is hereinafter referred to as an "Initial Option").
      Subsequent to an eligible director's initial election to the Board and
      provided that such eligible director has served on the Board for at least
      twelve months, each year when new members are elected to the Board, each
      eligible director who will be serving on the new Board shall receive an
      option to purchase 1,500 shares of the Common Stock.

            (b) Exercise Price. The exercise price under each option shall equal
      the fair market value of the Common Stock at the time such option is
      granted.

            (c) Duration of Option. Each option by its terms shall not be
      exercisable after the expiration of ten years from the date such option is
      granted.

            (d) Options Nontransferable. Each option by its terms shall not be
      transferable by the participant otherwise than by will or the laws of
      descent and distribution, and shall be exercisable, during the
      participant's lifetime, only by the participant, the participant's
      guardian or the participant's legal representative.

            (e) Exercise Terms. Each option granted under the Plan shall become
      fully exercisable with respect to the shares subject thereto on the first
      anniversary of the date of grant. Options may be partially exercised from
      time to time during the period extending from the time they first become
      exercisable until the tenth anniversary of the date of grant.

            (f) Payment of Exercise Price. An option shall be exercised upon
      written notice to the Company accompanied by payment in full for the
      shares being acquired. The payment shall be made in cash, by check or, if
      the option agreement so permits, by delivery of shares of Common Stock of
      the Company registered in the name of the participant, duly assigned to
      the Company with the assignment guaranteed by a bank, trust company or
      member firm of the New York Stock Exchange, or by a combination of the
      foregoing. Any such shares so delivered shall be deemed to have a value
      per share equal to the fair market value of the shares on such date. For
      this purpose, fair market value shall equal the closing price of the
      Common Stock on the Nasdaq National Market System on the date the option
      is exercised, or, if there was no trading in such stock on the date of
      such exercise, the closing date on the last preceding day on which there
      was such trading.

6.    GENERAL RESTRICTION ON ISSUANCE OF STOCK CERTIFICATES

      The Company shall not be required to deliver any certificate upon the
exercise of an option until it has been furnished with such opinion,
representation or other document as it may

<PAGE>
                                     - 3 -

reasonably deem necessary to insure compliance with any law or regulation of the
Securities and Exchange Commission or any other governmental authority having
jurisdiction under this Plan. Certificates delivered upon such exercise may bear
a legend restricting transfer absent such compliance. Each option shall be
subject to the requirement that, if at any time the Board shall determine, in
its discretion, that the listing, registration or qualification of the shares
subject to such option upon any securities exchange or under any state or
federal law, or the consent or approval of any governmental regulatory body, is
necessary or desirable as a condition of, or in connection with, the granting of
such option or the issue or purchase of shares thereunder, such option may not
be exercised in whole or in part unless such listing, registration,
qualification, consent or approval shall have been effected or obtained free of
any conditions not acceptable to the Board in the exercise of its reasonable
judgment.

7.    TERMINATION OF DIRECTORSHIP

      If a director's directorship terminates for any reason (including, without
limitation, resignation or removal), all nonvested options shall be forfeited.
Vested but unexercised options may be exercised by the director or, in the case
of death, by his or her legal representative or beneficiary in accordance with
the terms of the Plan and the option agreement.

8.    ADJUSTMENT OF SHARES

      In the event of any change in the Common Stock by reason of any stock
dividend, stock split, recapitalization, reorganization, merger, consolidation,
split-up, combination, or exchange of shares, or of any similar change affecting
the Common Stock, the number and kind of shares authorized under Section 4, the
number and kind of shares which thereafter are subject to an option under the
Plan and the number and kind of shares set forth in options under outstanding
agreements and the price per share shall be adjusted automatically consistent
with such change to prevent substantial dilution or enlargement of the rights
granted to, or available for, participants in the Plan.

9.    NO EMPLOYMENT RIGHTS

      The Plan and any awards granted under the Plan shall not confer upon any
director any right with respect to continuance as a director of the Company or
any subsidiary, nor shall they interfere in any way with any right the Company
or its subsidiaries may have to terminate the director's position as a director
at any time.

10.   RIGHTS AS A SHAREHOLDER

      The recipient of any option under the Plan shall have no rights as a
shareholder with respect thereto unless and until certificates for the
underlying shares of Common Stock are issued to the recipient.

11.   AMENDMENT AND DISCONTINUANCE

      This Plan may be amended, modified or terminated by the shareholders of
the Company or by the Board, provided that Plan provisions relating to the
amount, price and timing of options may not be amended more than once every six
months other than to comport with changes in the Internal Revenue Code or the
regulations thereunder and provided further that the Board may not,

<PAGE>
                                     - 4 -

without approval of the shareholders, materially increase the benefits accruing
to participants under the Plan, increase the maximum number of shares as to
which options may be granted under the Plan, change the minimum exercise price,
change the class of eligible persons, extend the period for which options may be
granted or exercised, or withdraw the authority to administer the Plan from the
Board. Notwithstanding the foregoing, to the extent permitted by law, the Board
may amend the Plan without the approval of shareholders, to the extent it deems
necessary to cause the Plan to comply with Securities and Exchange Commission
Rule 16b-3 or any successor rule, as it may be amended from time to time. Except
as required by law, no amendment, modification or termination of the Plan may,
without the written consent of a director to whom any option shall theretofore
have been granted, adversely affect the rights of such director under such
option.

12.   CHANGE IN CONTROL

      For purposes of the Plan, a "change in control" shall be deemed to have
occurred upon the acquisition of thirty (30%) percent or more of the Company's
outstanding shares of capital stock having general voting rights by an
unaffiliated person, entity or group. The Board shall promptly notify, in
writing, each holder of an outstanding option of the occurrence of any such
change in control. Notwithstanding any other provision of the Plan or any option
agreement, all options shall become fully exercisable on receipt of such notice.
All outstanding options shall expire if not exercised within 30 days of receipt
of the notice of a change of control.

13.   EFFECTIVE DATE

      The effective date of this Plan is January 17, 1996, the date of adoption
of this Plan by the shareholders of the Company.

14.   DEFINITIONS

      Any terms or provisions used herein which are defined in Section 83 of the
Internal Revenue Code, as amended, or the regulations thereunder or
corresponding provisions of subsequent laws and regulations in effect at the
time options are made hereunder, shall have the meanings as therein defined.

15.   GOVERNING LAW

      To the extent not inconsistent with the provisions of the Internal Revenue
Code that relate to non-qualified stock options, this Plan and any option
agreement adopted pursuant to it shall be construed under the laws of the
Commonwealth of Pennsylvania.

Dated as of October 19, 1995        ARROW INTERNATIONAL, INC.

Amended as of January 19, 2000

                                    By:   _______________________________
                                          Marlin Miller, Jr.
                                          Chairman, and Chief Executive Officer

<PAGE>
                                     - 5 -

Date of Shareholder Approval of Plan: January 17, 1996

Date of Shareholder Approval of Amendments to Plan: January 19, 2000

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