SCHEDULE 14A
Information Required in Proxy Statement
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the Securities Exchange Act of 1934
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[ ] Soliciting Material Pursuant to ss.240.14a-12
AAON, INC.
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(Name of Registrant as Specified in its Charter)
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(Name of Person(s) Filing Proxy Statement if other than the Registrant)
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AAON, INC.
Notice of
Annual Meeting
May 25, 2004,
and
Proxy Statement
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD ON MAY 25, 2004
Notice is hereby given that the Annual Meeting of Stockholders of AAON,
Inc. (the "Company"), will be held at 2440 South Yukon, Tulsa, Oklahoma, on
Tuesday, May 25, 2004, at 10:00 A.M. (Local Time), for the following purposes:
1. To elect two Class I Directors for terms ending in 2007; and
2. To transact such other business as may properly come before
the meeting or any adjournment thereof.
We hope that you will be able to attend this meeting, but if you do not
plan to do so, please date, sign and return the enclosed Proxy as promptly as
possible.
By Order of the Board of Directors
/s/ John B. Johnson, Jr.
-------------------------
John B. Johnson, Jr.
Secretary
April 12, 2004
AAON, INC.
2425 South Yukon
Tulsa, Oklahoma 74107
PROXY STATEMENT
This statement is furnished in connection with the solicitation by the
Board of Directors of AAON, Inc., for proxies to be used at the Annual Meeting
of Stockholders of the Company to be held on May 25, 2004, at the time and place
set forth in the Notice of Annual Meeting accompanying this Proxy Statement.
Pursuant to provisions of the Bylaws of the Company and action of its
Board of Directors, the close of business on March 29, 2004, has been
established as the time and record date for determining the stockholders
entitled to notice of and to vote at this annual meeting. The stock transfer
books will not be closed.
Directors are elected by a plurality vote and the two nominees who
receive the most votes will be elected.
Stockholders of record on the record date are entitled to cast their
votes in person or by properly executed proxy at the Annual Meeting. The
presence, in person or by proxies, of thirty-three and one-third percent
(33-1/3%) of the Common Stock outstanding on the record date is necessary to
constitute a quorum at the Annual Meeting. If a quorum is not present at the
time the Annual Meeting is convened, the Company may adjourn or postpone the
meeting.
The enclosed Proxy may be revoked at any time prior to the voting
thereof, either by giving notice to the Secretary of the Company or by personal
attendance at the meeting. All Proxies received in advance of the meeting may be
revoked prior to exercise.
This Proxy Statement, the Notice of Annual Meeting and accompanying
proxy card, as well as the Company's 2003 Annual Report (which includes the
Company's Annual Report on Form 10-K for the year ended December 31, 2003), will
be first mailed to stockholders approximately April 19, 2004.
VOTING SECURITIES AND PRINCIPAL HOLDERS THEREOF
As of March 29, 2004 (the record date), the Company had issued a total
of 12,574,658 shares of $.004 par value Common Stock, its only class of stock
outstanding. Each share is entitled to one vote on all matters submitted to a
vote by stockholders.
The following table sets forth as of March 29, 2004, the aggregate
number of shares of Common Stock of the Company owned by each person known by
the Company to be the beneficial owner of more than 5% of the Company's Common
Stock:
Percent
Name and address Number of shares of
of beneficial owner owned class
------------------- ---------------- -------
Norman H. Asbjornson 2,554,701 (1) 19.9
2425 South Yukon
Tulsa, Oklahoma 74107
Wellington Management Company, LLP 838,425 (2) 6.7
75 State Street
Boston, Massachusetts 02109
Kern Capital Management, LLC 806,000 (3) 6.4
114 West 47th Street, Suite 1926
New York, New York 10036
Royce & Associates, LLC 697,900 (4) 5.6
1414 Avenue of the Americas
New York, New York 10019
---------------
(1) Includes 295,875 shares held under presently exercisable stock options.
Mr. Asbjornson has sole voting and investment powers with respect to
all shares beneficially owned by him, except for 11,062 shares held by
his IRA account, 7,956 shares under the Company's 401(k) plan and 4,500
shares owned by The Asbjornson Foundation.
(2) This share ownership information was provided by a Schedule 13G dated
February 13, 2004, which discloses that Wellington Management Company,
LLP possesses shared power to vote or direct the vote of 433,400
shares, and shared power to dispose or direct the disposition of
838,425 shares.
(3) This share ownership information was provided by a representative of
Kern Capital Management, LLC. A Schedule 13G dated February 2, 2004,
discloses Kern Capital Management, LLC possesses shared power to vote
and shared power to dispose or direct the disposition of the 716,800
shares therein reported.
(4) This share ownership information was provided by a representative of
Royce & Associates, LLC. A schedule 13G dated January 27, 2004,
discloses that Royce & Associates, LLC, possesses the sole power to
vote and sole power to dispose or direct the disposition of the
reported shares.
(2)
The following table sets forth as of March 29, 2004, the aggregate number
of shares of Common Stock of the Company owned of record or beneficially by each
director of the Company, each person named in the Summary Compensation Table
(herein, "named executive officers") and all directors and named executive
officers as a group:
Number of Shares Percent
Name of Beneficial Owner Owned (1) of Class
----------------------------------- ---------------------- --------
Norman H. Asbjornson 2,554,701 (2) 19.9
William A. Bowen 263,284 (3) 2.1
John B. Johnson, Jr. 66,930 (4) *
Thomas E. Naugle 151,677 (5)(6) 1.2
Anthony Pantaleoni 178,579 (5) 1.4
Jerry E. Ryan 70,000 (5) *
Charles C. Stephenson, Jr. 507,248 (5) 4.0
Robert G. Fergus 126,500 (7) 1.0
David E. Knebel 30,001 (8) *
Stephen J. Pargeter 24,676 (8) *
Kathy I. Sheffield 30,407 (9) *
Directors and named executive 4,004,003 (10) 30.1
officers as a group (11 persons)
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(1) All shares are held beneficially and of record and the owner has sole
voting and investment power with respect thereto, except as otherwise
noted.
(2) Includes 295,875 shares issuable upon the exercise of stock options
that are exercisable within 60 days. Mr. Asbjornson has sole voting and
investment powers with respect to all shares beneficially owned by him,
except for 11,062 shares held by his IRA account, 7,956 shares under
the Company's 401(k) plan and 4,500 shares owned by his foundation.
(3) Includes 41,875 shares issuable upon exercise of stock options
exercisable within 60 days and 15,880 shares held by Mr. Bowen's IRA
account.
(4) Includes 39,875 shares issuable upon exercise of a stock option
exercisable within 60 days and 27,055 shares held for the account of
Mr. Johnson under a broker-administered retirement plan.
(5) Includes 61,875 shares issuable upon the exercise of stock options that
are exercisable within 60 days.
(6) Mr. Naugle has sole voting power with respect to all shares
beneficially owned by him, except for 2,000 shares owned of record by
his wife.
(7) Includes 3,000 shares issuable upon the exercise of a stock option
exercisable within 60 days and 6,283 shares under the Company's 401(k)
plan.
(8) Except for one share issued to all employees, all of the above shares
are issuable upon the exercise of stock options exercisable within 60
days.
(9) Includes 26,750 shares issuable upon the exercise of stock options
exercisable within 60 days and 3,657 shares under the Company's 401(k)
plan.
(10)Includes 709,550 shares issuable upon the exercise of stock options
that are exercisable within 60 days by all directors and named
executive officers.
* Less than 1%.
(3)
ELECTION OF DIRECTORS
General
The Board of Directors of the Company currently has seven members. The
Company's Bylaws (the "Bylaws") divide the Board of Directors into three classes
having staggered terms of three years each, with Classes I, II and III having
terms expiring at the Annual Meeting of Stockholders in 2004, 2005 and 2006,
respectively. The Bylaws provide that a stockholder may nominate a director for
election at an annual meeting if written notice is given to the Company not less
than 60 and not more than 90 days in advance of the anniversary date of the
immediately preceding annual meeting.
It is intended that the names of the nominees listed below will be
placed in nomination and that the persons named in the proxy will vote for their
election. Each nominee has consented to being named in this Proxy Statement and
to serve if elected. If any nominee becomes unavailable for any reason, the
shares represented by the proxies will be voted for such other person, if any,
as may be designated by the Board of Directors. However, management has no
reason to believe that any nominee will be unavailable.
Nominees:
Class I - For Term to Expire in 2007
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Name Age Current Position
---- --- ----------------
Thomas E. Naugle 65 Director
Jerry E. Ryan 61 Director
Directors Continuing in Office:
Class II - Terms Expires in 2005
--------------------------------
Name Age Current Position
---- --- ----------------
William A. Bowen 74 Director
Anthony Pantaleoni 64 Director
Class III - Term Expires in 2006
--------------------------------
Name Age Current Position
---- --- ----------------
Norman H. Asbjornson 68 President and Director
John B. Johnson, Jr. 70 Secretary and Director
Charles C. Stephenson, Jr. 67 Director
(4)
Biographical Information
Set forth below is a description of the background of each director and
executive officer of the Company. The term of office of each officer ends on the
date of the Annual Meeting, subject to extension upon reelection.
Norman H. Asbjornson has served as President and a director of the
Company since 1989 and currently serves in the class of directors whose terms
expire at the 2006 annual meeting of stockholders. Mr. Asbjornson also serves as
the President of AAON, Inc., an Oklahoma corporation and wholly-owned subsidiary
of the Company ("AAON-Oklahoma"), and AAON Coil Products, Inc., a wholly-owned
subsidiary of the Company ("ACP").
William A. Bowen served as Vice President-Finance of the Company from
1989 until 1999. He has served as a director of the Company since 1989 and
currently serves in the class of directors whose terms expire at the 2005 annual
meeting of stockholders.
Robert G. Fergus, age 63, has served as Vice President of the Company
since 1989. Mr. Fergus also serves as Vice President of AAON-Oklahoma.
John B. Johnson, Jr., has served as Secretary and a director of the
Company since 1989 and currently serves in the class of directors whose terms
expire at the 2006 annual meeting of stockholders. Mr. Johnson also serves as
the Secretary of AAON-Oklahoma and ACP. Mr. Johnson has been engaged in the
private practice of law in Tulsa, Oklahoma, since 1961, and is a member of the
firm of Johnson, Jones, Dornblaser, Coffman & Shorb, which serves as General
Counsel to the Company.
David E. Knebel, age 58, joined the Company in May 2001 as Manager of
Technology and Training, before becoming Director of Sales and Technology in
December 2002. He is responsible for management of AAON's sales force, parts and
service departments, and software development in support of product application
and selection. From January 2000 to May 2001, Mr. Knebel was Sales Manager for
Climatec - New Mexico, where he managed product application and sales for CES
Group products, AAON and additional product lines. From January 1995 to January
2000, Mr. Knebel was Vice President of Sales for the CES Group. His activities
there included sales management and market development for CES Group's complete
line of HVAC products.
Thomas E. Naugle has served as a director of the Company since 1998 and
currently serves in the class of directors whose terms expire at the 2004 annual
meeting of stockholders. He is Chairman of the Company's Audit Committee. From
1985 to present, Mr. Naugle has served as Chairman of the Board and/or President
of Naugle & Co., a company engaged in the business of investments. From 1984
until 1999, he served as Chairman of the Board of Barrett Trailers, Inc., a
manufacturer of trailers. Mr. Naugle serves on the Board of Directors of CIRCOR
International, Inc., a publicly held international manufacturer of valves.
Anthony Pantaleoni has served as a director of the Company since 1989
and currently serves in the class of directors whose terms expire at the 2005
annual meeting of stockholders. Mr. Pantaleoni has been a partner of Fulbright &
Jaworski L.L.P. or a predecessor firm in New York, New York since 1970 and is
currently of counsel to that firm. He serves on the Board of Directors of
Universal Health Services, Inc., a publicly held hospital chain, and on the
Board of Directors of American Gilsonite Company, a public company which mines
and processes gilsonite ore.
(5)
Stephen J. Pargeter, age 48, joined the Company in 1993 as its Chief
Engineer. He later served as Engineering Manager before becoming Director of
Engineering on September 1, 2003.
Jerry E. Ryan has served as a director of the Company since 2001. His
term will expire at the 2004 annual meeting of stockholders. He is Chairman of
the Company's Compensation Committee. From 1985 until January 2000, Mr. Ryan
served as Chairman of the Board and CEO of Fintube Limited Partnership, a
company based in Tulsa, Oklahoma, the business of which was manufacturing
fintubes and pressure parts for electric power generation boilers. The company
was sold to Lone Star Technologies of Dallas, Texas, in January 2000. Lone Star
is a leading producer of oil country tubular goods and cold drawn specialty
tubing. Mr. Ryan serves on the Board of Directors of Lone Star, a public
company, and on the Board of Global Energy Equipment Group, Tulsa, Oklahoma, a
publicly held global designer, engineer and fabricator of equipment for gas
turbine power plants.
Kathy I. Sheffield, age 51, became Treasurer of the Company in 1999 and
Vice President in 2002. Ms. Sheffield was the Accounting Supervisor of the
Company from 1989 to 1992, when she became Accounting Manager.
Charles C. Stephenson, Jr., has served as a director of the Company
since 1996 and currently serves in the class of directors whose terms expire at
the 2006 annual meeting of stockholders. Since 1987, Mr. Stephenson has served
as Chairman of the Board of Vintage Petroleum, Inc., a publicly held company
engaged in oil and gas production and exploration.
BOARD AND COMMITTEE MATTERS
The business of the Company is managed under the direction of its Board
of Directors. The Board of Directors met four times during 2003, and each
director participated in at least 75% of all Board and applicable committee
meetings held last year. Actions taken by the Board of Directors outside of
Board meetings were consented to in writing by a memorandum of action in lieu of
a meeting, to which all incumbent directors subscribed. Directors meet their
responsibilities not only by attending Board and committee meetings but also
through communication with members of management on matters affecting the
Company.
Directors of the Company are paid a fee of $2,500 per Board meeting
attended and they are reimbursed for out-of-pocket expenses incurred in
attending such meetings. Currently, directors are not paid additionally for
service on committees. The Company has granted persons who are newly elected
directors of the Company an option to purchase 61,875 shares (adjusted for stock
splits) of the Company's Common Stock, which options fully vest on the first
anniversary of the date of grant. Messrs. Asbjornson, Bowen, Johnson and
Pantaleoni were also granted 61,875 share options in 1997, five years after
their original grants.
Shareholders may communicate with the Board of Directors, including the
non-management directors, by sending a letter to the Board of Directors of AAON,
Inc., c/o Corporate Secretary, 2425 South Yukon, Tulsa, Oklahoma 74107. The
Corporate Secretary has the authority to disregard any inappropriate
communications. If deemed an appropriate communication, the Corporate Secretary
will submit your correspondence to the Board or to any specific director to whom
the correspondence is directed.
The Company strongly encourages its directors to attend AAON's annual
meetings of stockholders and six Board members attended the 2003 annual meeting.
(6)
The Board has an Audit Committee and a Compensation Committee, both
comprised of Messrs. Naugle, Pantaleoni, Ryan and Stephenson, each of whom is
"independent" as defined in Rule 4200(a)(15) of the National Association of
Securities Dealers listing standards. Mr. Naugle is Chairman of the Audit
Committee and Mr. Ryan is Chairman of the Compensation Committee. Each of these
committees met four times during 2003.
The primary responsibility of the Audit Committee is to oversee the
Company's financial reporting process on behalf of the Board and report the
results of its activities to the Board. The Audit Committee is governed by a
written charter, a copy of which was annexed as Appendix A to the Company's
proxy statement last year. Its "Audit Committee Report" for year 2003 is set
forth below.
The Audit Committee has not designated any of its members as a
"financial expert" as defined by the SEC rules adopted pursuant to the
Sarbanes-Oxley Act of 2002. However, it is believed that, because one of its
members is currently the CEO of a public company and two other members are
former CEO's of private companies, the Audit Committee possesses the attributes
needed to function properly.
During 2003 the Compensation Committee, with the assistance of a
consulting firm, made recommendations regarding the compensation for all
management personnel. Some of the recommendations were implemented in September
and October 2003 and others are expected to be acted upon in 2004. This
committee will review and make recommendations, periodically, as to salary
adjustments, bonuses and/or other forms of compensation for management in the
future. The Compensation Committee also made recommendations for changes as to
the compensation payable to Directors for their services as such and for service
on committees, which recommendations are expected to be acted upon during 2004.
The Company does not have a nominating committee or charter for such a
committee. Instead, the entire Board of Directors fulfills the role of a
nominating committee. Since its inception (in 1988), the Company has had only
nine directors, seven of whom continue to serve at this time. On the only
occasions when vacancies occurred, two following resignations and two resulting
from an increase of the size of the Board from five to seven members, the new
directors were unanimously approved by the then existing directors. The Board
has not felt it necessary to have a standing nominating committee to deal with
its infrequent changes in membership. If and when future vacancies occur, the
Board would consider director nominees recommended by shareholders, as well as
by any remaining directors. The Board does not have a formal policy regarding
the consideration of, procedures to be followed by, minimum qualifications of or
process for identifying or evaluating nominees recommended by security holders.
All director nominees will be approved by a majority of the whole Board and by a
majority of its independent directors.
(7)
Audit Committee Report
March 11, 2004
To the Board of Directors of AAON, Inc.:
We have reviewed and discussed with management the Company's audited
financial statements as of and for the year ended December 31, 2003.
We have discussed with the independent auditors the matters required to
be discussed by Statement on Auditing Standards No. 61, Communication with Audit
Committees, as amended, by the Auditing Standards Board of the American
Institute of Certified Public Accountants.
We have received and reviewed the written disclosures and the letter
from the independent auditors required by Independence Standards Board Standard
No. 1, Independence Discussions with Audit Committees, as amended, by the
Independence Standards Board, and have discussed with the auditors the auditors'
independence.
Based on the reviews and discussions referred to above, we recommend to
the Board of Directors that the financial statements referred to above be
included in the Company's Annual Report on Form 10-K for the year ended December
31, 2003.
Thomas E. Naugle, Chairman
Anthony Pantaleoni
Jerry E. Ryan
Charles C. Stephenson, Jr.
(8)
EXECUTIVE COMPENSATION
Compensation. The following table sets forth information regarding the
compensation of the named executive officers of the Company (the chief executive
officer and the four other most highly compensated executives of the Company).
Summary Compensation Table
Long-Term
Annual Compensation Compensation
----------------------------------------- ------------
Other Securities
Name and Annual Underlying All Other
Principal Position Year Salary Bonus Compensation(1) Options/SARs Compensation
----------------------- ---- ------ ----- --------------- ------------ ------------
Norman H. Asbjornson 2003 $175,000 $50,000 $3,220 -0- $ 10,666 (2)
President
2002 $150,000 $50,000 $3,120 -0- $ 7,245 (2)
2001 $150,000 $50,000 $3,613 -0- $ 41,170 (2)
Robert G. Fergus 2003 $123,269 $ 3,000 $3,220 -0- $ 10,162 (3)
Vice President
2002 $116,703 $16,000 $3,120 -0- $ 6,955 (3)
2001 $111,330 $17,000 $3,613 -0- $ 5,109 (3)
Stephen J. Pargeter 2003 $108,068 $ 2,000 $3,220 -0- $ 6,822 (4)
Director of Engineering
2002 $ 95,677 $ 8,000 $3,120 -0- $ 4,444 (4)
2001 $ 95,254 $ 9,000 $3,613 -0- $ 2,959 (4)
David E. Knebel 2003 $116,001 $ 8,000 $3,220 -0- $ 5,328 (4)
Director of Sales and
Technology (5) 2002 $ 96,433 $16,000 $3,120 -0- $ 1,717 (4)
Kathy I. Sheffield 2003 $ 99,336 $ 5,000 $3,220 -0- $ 10,597 (7)
Vice President/Treasurer (6)
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(1) A per capita share, the same as all other eligible employees, of 10% of the
pre-tax profit of AAON-Oklahoma.
(2) Includes (i) contributions to the Company's 401(k) plan by the Company in
the amounts of $10,666, $7,245 and $7,319 for years 2003, 2002 and 2001,
respectively, (ii) the estimated dollar value of the benefit from premiums
paid by the Company on a reverse split dollar insurance policy on the life
of the executive in the amount of $33,760 for 2001, and (iii) medical
reimbursement benefits of $91 in 2001.
(3) Includes (i) contributions of $7,760, $4,080 and $5,109 to the Company's
401(k) plan in 2003, 2002 and 2001, respectively, and (ii) medical
reimbursement benefits of $2,402 and $2,875 in 2003 and 2002, respectively.
(4) Consists of contributions to the Company's 401(k) plan by the Company.
(5) The total salary and bonus of this executive did not exceed $100,000 in
2001.
(6) The total salary and bonus of this executive did not exceed $100,000 in
2002 or 2001.
(7) Includes a contribution of $5,144 to the Company's 401(k) plan by the
Company and medical reimbursement benefits of $5,453.
(9)
Stock Options. The following table sets forth information concerning
stock options granted during 2003 by the Company to the named executive
officers. No stock options were "repriced" during the past year.
Options/SAR's Granted in Last Fiscal Year
-------------------------------------------------------------------------
% of Total
Securities Options/SARs
Underlying Granted to Exercise or Grant Date
Options/SARs Employees in Base Price Expiration Present
Granted Fiscal Year per Share Date Value (2)
----------------- ----------------- --------------- ------------ -------------
David K. Knebel 15,000 26.7% $14.52 (1) $97,050
Kathy I. Sheffield 10,000 17.8% $14.52 (1) $64,700
----------------
(1) Exercisable at the rate of 20%, cumulative, per year after February 21, 2004
(and until February 21, 2013).
(2) This amount was calculated using the Black-Scholes option pricing model, a
complex mathematical formula that uses a number of factors to estimate the
present value of stock options. The assumptions used in the valuation of the
options were: stock price volatility - 37.80%, expected life - 8 years, risk
free interest rate - 3.73% and dividend yield - 0%. The Black-Scholes model
generates an estimate of the value of the right to purchase a share of stock
at a fixed price over a fixed period. The actual value, if any, an executive
realizes will depend on whether the stock price at exercise is greater than
the grant price, as well as the executive's continued employment through the
vesting period and the option term.
The following table provides information on the number of shares
received upon exercise of options by the Company's named executive officers and
the aggregate dollar value realized upon such exercise during the last year, and
the value of each of the named executive officer's unexercised in-the-money
options to acquire common stock at December 31, 2003.
Aggregated Option/SAR Exercises in Last Fiscal Year and FY-End Option/SAR Values
Number of Securities Value of Unexercised
Underlying Unexercised In-the-Money
Options/ Options/SARs at
SARs at FY-End (#) FY-End ($)
Shares Acquired on Value Realized Exercisable/ Exercisable/
Name Exercise (#) ($) Unexercisable Unexercisable (1)
-------------------- ------------------ -------------- ------------------- -----------------
Norman H. Asbjornson -0- -0- 295,875/2,250 $4,733,708/$30,668
Robert G. Fergus -0- -0- 3,000/750 $40,890/$10,223
David E. Knebel -0- -0- 18,000/42,000 $169,740/$327,960
Stephen J. Pargeter -0- -0- 24,675/2,700 $369,898/$36,801
Kathy I. Sheffield 6,750 $106,020 22,500/21,250 $294,030/$183,270
--------------
(1) Calculated based on the difference between the Nasdaq National Market
closing price of the Common Stock on December 31, 2003 (the last trading day
of the year), $19.41, and the exercise price of the option.
The Company has no Long-Term Incentive Plan ("LTIP") or "defined
benefit" (pension) plan.
(10)
The Company has no employment contracts with any of its officers,
directors or employees, nor any compensatory plan or arrangement concerning any
person's termination of employment or respecting any "change in control".
Compensation Committee Report
General. The primary responsibility of the Compensation Committee is to
make recommendations to the Board of Directors regarding remuneration of the
Company's management personnel and to evaluate the design and competitiveness of
the Company's compensation plans. The Committee consists of four independent
directors.
Compensation Philosophy. The primary objective of the Company's
compensation program is to enhance the profitability of the Company, and thus
shareholder value, and to attract, motivate, reward and retain employees,
including executive personnel, who contribute to the long-term success of the
Company.
Executive Compensation Program. In furtherance of the above goals, the
Company's compensation program for its executive personnel consists of
appropriate salaries, discretionary annual bonuses, Company contributions to
AAON's 401(k) plan, "profit sharing" payments (made to all employees) and
discretionary stock option grants.
The Compensation Committee reviews executive compensation levels with
respect to corporate and individual performance, as well as competitive pay
practices. The Committee has retained the services of a third party compensation
consulting firm. It is the objective of the Committee to base salary and bonus
determinations on each executive's contribution to the overall profitability of
the Company.
The Committee will review periodically the base salaries of AAON's
executive management personnel and recommend any adjustments it may deem
appropriate, for approval by the Board of Directors. In its review, the
Committee will take into account individual factors such as: experience;
performance, both during the preceding 12 months and future potential; retention
considerations; and other issues particular to the executive and the Company.
Additionally, the Committee considers the growth and performance of the Company
as it assesses the market for executive salaries.
2003 CEO Compensation. The compensation package for the Company's CEO,
Norman H. Asbjornson, is consistent in all material respects with the program
for the other executives. His current annual base salary of $250,000 was
established effective October 1, 2003, which constituted a $100,000 increase.
Mr. Asbjornson's salary had been $150,000 since 2000 and $132,000 for 11 years
prior thereto. He has also been paid performance bonuses of $50,000 each in 2000
- 2003. The Compensation Committee found that Mr. Asbjornson had been underpaid
for many years, based on comparative compensation information provided by the
Company's consultant, particularly in light of financial results achieved over
the years.
In addition to being the Company's largest shareholder, Mr. Asbjornson
holds stock options for an aggregate of 298,125 shares exercisable currently and
through October 2009 at prices ranging from $2.33 to $5.78.
In evaluating the compensation package of the Company's CEO, the
Committee considered such factors as AAON's strategic and financial performance,
his compensation in relation to that of CEO's of other comparable companies, his
personal contribution to AAON's success and the Company's overall executive
compensation philosophy. The Company views Mr. Asbjornson as the driving force
behind the Company's historic and current performance and sees him as the
principal visionary for future growth of the Company.
(11)
Conclusion. The Compensation Committee believes the Company's executive
compensation program, as recently constituted, will be consistent with the
philosophy outlined in this report and will be effective in achieving its
overall objectives during fiscal 2004 and beyond. The Committee hereby submits
this report to AAON's Board of Directors for approval.
Jerry E. Ryan, Chairman
Thomas E. Naugle
Anthony Pantaleoni
Charles C. Stephenson, Jr.
COMPENSATION COMMITTEE INTERLOCKS
AND INSIDER PARTICIPATION
None of the members of the Compensation Committee was at any time an
officer or employee of the Company or had any relationship with the Company
requiring disclosure under the Securities and Exchange Commission regulations.
(12)
STOCK PERFORMANCE GRAPH
The following graph compares the cumulative total shareholder return of
the Company, NASDAQ US and its peer group named below. The graph assumes a $100
investment at the closing price on January 1, 1998, and reinvestment of
dividends on the date of payment without commissions. This table is not intended
to forecast future performance of the Company's common stock.
Comparison of Five-Year Cumulative Total Return
Among AAON, Inc., NASDAQ US and Peer Group*
1998 1999 2000 2001 2002 2003
AAON, INC. $100 $154.36 $189.94 $394.15 $445.29 $468.96
NASDAQ US $100 $185.46 $111.65 $ 88.58 $ 61.09 $ 92.16
PEER GROUP $100 $ 97.03 $102.77 $138.41 $136.48 $193.02
*The peer group consists of American Standard Companies, Fedders Corp.,
Lennox International, Inc., Mestek, Inc., Nortek, Inc., and York International
Corp., all of which are in the business of manufacturing air conditioning and
heat exchange equipment.
(13)
SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Based solely upon a review of Forms 4 furnished to the Company during
its most recent fiscal year, the Company knows of no director, officer or
beneficial owner of more than ten percent of the Company's Common Stock who
failed to file on a timely basis reports of beneficial ownership of the
Company's Common Stock as required by Section 16(a) of the Securities Exchange
Act of 1934, as amended.
INDEPENDENT PUBLIC ACCOUNTANTS
At a meeting held on June 20, 2002, the Audit Committee of the Board of
Directors of the Company approved the engagement of Ernst & Young LLP ("E&Y") as
its independent auditors for the fiscal year ending December 31, 2002, to
replace the firm of Arthur Andersen LLP ("AA") which was dismissed as auditors
of the Company effective June 20, 2002. E&Y has served as the Company's auditors
since that date. AA's reports on the Company's financial statements for fiscal
years 2000 and 2001 did not contain an adverse opinion or a disclaimer of
opinion and were not qualified or modified as to uncertainty, audit scope or
accounting principles. In connection with the audits of the Company's financial
statements for the fiscal years ended December 31, 2000 and 2001, and during the
subsequent period ended June 20, 2002, there were no disagreements with AA on
any matter of accounting principles or practices, financial statements
disclosure or auditing scope and procedures which, if not resolved to the
satisfaction of AA, would have caused AA to make reference to the matter in its
report. The Company requested AA to furnish a letter addressed to the Commission
stating whether it agreed with the above statements. A copy of AA's letter,
dated June 25, 2002, stating that it had no disagreements with such statements
was filed as Exhibit 1 to the Company' Form 8-K of the same date.
Representatives of E&Y are expected to be present at the Annual Meeting
with the opportunity to make a statement if they so desire and to be available
to respond to appropriate questions.
Fees and Independence
The Company's Audit Committee has adopted a policy that requires
advance approval of all audit, audit-related, tax services and other services
performed by the independent auditor; however, as shown below, since being hired
in June 2002, E&Y has performed only audit services for the Company and its fees
were set by engagement letters in 2002 and 2003.
Audit Fees. E&Y billed the Company an aggregate of $93,600 and $86,600
for professional services rendered for the audit of the Company's financial
statements for the years ended December 31, 2003 and 2002, respectively, and its
reviews of the Company's financial statements included in its Form 10-Q's for
the first three quarters of 2003 and the second and third quarters of 2002.
All Other Fees. No other fees were billed by E&Y to the Company during
2003 or 2002.
The Audit Committee of the Board of Directors has determined that the
provision of services by E&Y described above is compatible with maintaining
E&Y's independence as the Company's principal accountant.
(14)
STOCKHOLDER PROPOSALS FOR 2005 ANNUAL MEETING
Stockholder proposals intended to be presented at the 2005 Annual
Meeting and to be included in the Company's Proxy Statement must be received at
the Company's executive offices, 2425 South Yukon, Tulsa, Oklahoma 74107, no
later than December 13, 2004.
However, a stockholder who otherwise intends to present business at the
2005 Annual Meeting of stockholders, including nominations of persons to the
Company's Board of Directors, must also comply with the requirements set forth
in the Company's Bylaws. The Bylaws state, among other things, that to bring
business before an annual meeting or to nominate a person for the Company's
Board of Directors, a stockholder must give written notice that complies with
the Bylaws to the Secretary of the Company not less than 60 days nor more than
90 days in advance of the anniversary date of the immediately preceding Annual
Meeting. Thus, a notice of a stockholder proposal or nomination for the 2005
Annual Meeting of stockholders, submitted other than pursuant to Rule 14a-8 of
the Securities Exchange Act of 1934, as amended ("Exchange Act"), will be
untimely if given before February 23, 2005, or after March 25, 2005. As to any
such proposals, the proxies named in management's proxy for that meeting will be
entitled to exercise their discretionary authority on that proposal unless the
Company receives notice of the matter to be proposed between February 23, 2005,
and March 25, 2005. Even if proper notice is received on a timely basis, the
proxies named in management's proxy for that meeting may nevertheless exercise
their discretionary authority with respect to such matter by advising
stockholders of such proposal and how they intend to exercise their discretion
to vote on such matter to the extent permitted under Rule 14a-4(c)(2) of the
Exchange Act.
OTHER MATTERS
Management knows of no business which will be presented at the 2004
Annual Meeting other than to elect directors for the ensuing year.
The cost of preparing, assembling and mailing all proxy solicitation
materials will be paid by the Company. It is contemplated that the solicitation
will be conducted only by use of the mails. The Company will, upon request,
reimburse brokers for the costs incurred by them in forwarding solicitation
materials to such of their customers as are the beneficial holders of Common
Stock of the Company registered in the names of such brokers.
By Order of the Board of Directors
/s/ Norman H. Asbjornson
----------------------------
Norman H. Asbjornson
President
April 12, 2004
(15)
AAON, Inc. PROXY
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS.
2425 South Yukon
Tulsa, Oklahoma 74107 The undersigned stockholder of AAON, Inc., a Nevada corporation, hereby constitutes and appoints John B.
Johnson, Jr., and Anthony Pantaleoni, and each of them, with full power of substitution, as attorneys
and proxies to appear and vote all shares of stock of the Company standing in the name of the
undersigned, at the Annual Meeting of Stockholders of the Company to be held at 2440 South Yukon Avenue,
Tulsa, Oklahoma, on Tuesday, May 25, 2004, at 10:00 A.M. (Local Time), and at any adjournment thereof,
with all powers that the undersigned would possess if personally present, hereby revoking all previous
proxies.
1. Election of Directors: FOR each of the nominees listed below WITHHOLD AUTHORITY
(except as shown to the contrary below) |_| to vote for both nominees listed below |_|
Thomas E. Naugle and Jerry E. Ryan for terms ending in 2007.
(INSTRUCTION: To withhold authority to vote for any nominee, write that nominee's name on the space provided below.)
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2. In their discretion, upon any other matters as may properly come before the meeting.
(over)
This proxy when properly executed will be voted in the manner directed herein by the undersigned stockholder. If no direction is
made, this proxy will be voted FOR both of management's nominees for director.
The undersigned hereby acknowledge(s) receipt of the Notice of the aforesaid Annual Meeting and the Proxy Statement
accompanying the same, both dated April 12, 2004.
Dated: , 2004
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(Please sign exactly as your name appears at left. When shares are
held in the names of two or more persons, all should sign
individually. Executors, administrators, trustees, etc., should so
indicate when signing. When shares are held in the name of a
corporation, the name of the corporation should be written first and
then an authorized officer should sign on behalf of the corporation,
showing the office held.)
PLEASE COMPLETE, SIGN, DATE AND RETURN THIS
PROXY CARD PROMPTLY,
USING THE ENCLOSED ENVELOPE.
(over)