SCHEDULE 14A
Information Required in Proxy Statement
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the Securities Exchange Act of 1934
Filed by the Registrant [ X ]
Filed by a Party other than the Registrant [ ]
Check the appropriate box:
[ ] Preliminary Proxy Statement
[ ] Confidential, for Use of the Commission Only (as permitted by
Rule 14a-6(e)(2))
[ X ] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] 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)
Payment of Filing Fee (Check the appropriate box):
[ X ] No fee required.
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AAON, INC.
Notice of
Annual Meeting
May 24, 2005,
and
Proxy Statement
AAON, INC.
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD ON MAY 24, 2005
Notice is hereby given that the Annual Meeting of Stockholders of AAON,
Inc., will be held at 2440 South Yukon, Tulsa, Oklahoma, on Tuesday, May 24,
2005, at 10:00 A.M. (Local Time), for the following purposes:
1. To elect two Class II Directors for terms ending in 2008; 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 11, 2005
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. (the "Company"), for proxies to be used at the
Annual Meeting of Stockholders of the Company to be held on May 24, 2005, 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 28, 2005, 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.
Proxies received in advance of the meeting 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.
The Company has adopted a procedure approved by the SEC called
"householding" pursuant to which shareholders of record who have the same
address and last name will receive only one copy of the Company's annual report
and proxy statement unless one or more of these shareholders notify the Company
that they wish to receive individual copies. Shareholders who participate in
householding will continue to receive separate proxy cards.
Shareholders currently receiving multiple copies of the Company's
annual report and proxy statement at their household can request householding by
contacting the Company's transfer agent at 1-801-277-1400 or write to
Progressive Transfer Company, 1981 East Murray-Holladay Road, Suite 200, Salt
Lake City, Utah 84117. Shareholders now participating in householding who wish
to receive a separate document in the future may do so in the same manner. Those
owning shares through a bank, broker or other nominee may request householding
by contacting the nominee.
This Proxy Statement, the Notice of Annual Meeting and accompanying
proxy card, as well as the Company's 2004 Annual Report (which includes the
Company's Annual Report on Form 10-K for the year ended December 31, 2004), will
be first mailed to stockholders approximately April 18, 2005.
-1-
VOTING SECURITIES AND PRINCIPAL HOLDERS THEREOF
As of March 28, 2005 (the record date), the Company had issued a total
of 12,396,733 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 28, 2005, 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 2,503,962 (1) 19.7
2425 South Yukon
Tulsa, Oklahoma 74107
Wellington Management Company, LLP 916,900 (2) 7.4
75 State Street
Boston, Massachusetts 02109
Kern Capital Management, LLC 898,800 (3) 7.3
114 West 47th Street, Suite 1926
New York, New York 10036
Royce & Associates, LLC 707,900 (4) 5.7
1414 Avenue of the Americas
New York, New York 10019
---------------
(1) Includes 298,791 shares held under presently exercisable stock options.
Mr. Asbjornson has sole voting and investment powers with respect to
all shares beneficially owned by him.
(2) This share ownership information was provided by a Schedule 13G dated
February 14, 2005, which discloses that Wellington Management Company,
LLP, possesses shared power to vote or direct the vote of 459,400
shares, and shared power to dispose or direct the disposition of
916,900 shares.
(3) This share ownership information was provided by a representative of
Kern Capital Management, LLC. A Schedule 13G dated February 14, 2005,
discloses Kern Capital Management, LLC, possesses shared voting power
to vote and shared dispositive power of the 898,800 shares therein
reported.
(4) This share ownership information was provided by a representative of
Royce & Associates, LLC. A Schedule 13G dated January 20, 2005,
discloses that Royce & Associates, LLC, possesses the sole voting power
and sole dispositive power of the reported shares.
-2-
The following table sets forth as of March 28, 2005, 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 2,503,962 (2) 19.7
William A. Bowen 253,950 (3) 2.0
John B. Johnson, Jr. 67,596 (4) *
Thomas E. Naugle 147,343 (5) 1.2
Anthony Pantaleoni 157,553 (5) 1.3
Jerry E. Ryan 70,666 (5) *
Jack E. Short -0- *
Charles C. Stephenson, Jr. 507,914 (5) 4.1
Robert G. Fergus 12,819 (6) *
David E. Knebel 33,702 (7) *
Stephen J. Pargeter 21,011 (8) *
Kathy I. Sheffield 39,457 (9) *
Directors and named executive 3,815,973 (10) 29.1
officers as a group (12 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 298,791 shares issuable upon the exercise of stock options
that are exercisable within 60 days, 11,062 shares held by Mr.
Asbjornson's IRA account, 8,381 shares under the Company's 401(k) plan
and 4,500 shares owned by his foundation.
(3) Includes 32,541 shares issuable upon exercise of stock options
exercisable within 60 days and 15,880 shares held by Mr. Bowen's IRA
account.
(4) Includes 40,541 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 62,541 shares issuable upon the exercise of stock options that
are exercisable within 60 days.
(6) Includes 3,750 shares issuable upon the exercise of a stock option
exercisable within 60 days and 6,544 shares under the Company's 401(k)
plan.
(7) Includes 33,000 shares issuable upon exercise of stock options
exercisable within 60 days and 701 shares under the Company's 401(k)
plan.
(8) Includes 17,550 shares issuable upon exercise of stock options
exercisable within 60 days and 3,460 shares under the Company's 401(k)
plan.
(9) Includes 35,500 shares issuable upon the exercise of stock options
exercisable within 60 days and 3,957 shares under the Company's 401(k)
plan.
(10) Includes 711,837 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 will be comprised of seven
members after the 2005 Annual Meeting. The Company's Bylaws (the "Bylaws")
divide the Board of Directors into three classes having staggered terms of three
years each, with Classes II, III and I having terms expiring at the Annual
Meeting of Stockholders in 2005, 2006 and 2007, 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 II - For Terms to Expire in 2008
Name Age Current Position
---- --- ----------------
Anthony Pantaleoni 65 Director
Jack E. Short 64 Director
Directors Continuing in Office:
Class III - Terms Expire in 2006
Name Age Current Position
---- --- ----------------
Norman H. Asbjornson 69 President and Director
John B. Johnson, Jr. 71 Secretary and Director
Charles C. Stephenson 68 Director
Class I - Terms Expire in 2007
Name Age Current Position
---- --- ----------------
Thomas E. Naugle 66 Director
Jerry E. Ryan 62 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
will expire at the 2006 annual meeting of stockholders. Mr. Asbjornson also
serves as the President of AAON, Inc., an Oklahoma corporation
("AAON-Oklahoma"), AAON Coil Products, Inc., ("ACP"), AAON Canada Inc. ("AAON
Canada") and AAON Properties Inc. ("AAON Properties"), all wholly-owned
subsidiaries of the Company.
William A. Bowen served as Vice President-Finance of the Company from
1989 until 1999. Mr. Bowen has served as a director of the Company since 1989
and currently serves in the class of directors whose terms will expire at the
2005 annual meeting of stockholders. He has declined to be nominated for
reelection.
Robert G. Fergus, age 64, has served as Vice President of the Company
since 1989. Mr. Fergus also serves as Vice President of AAON-Oklahoma, AAON
Canada and AAON Properties.
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
will expire at the 2006 annual meeting of stockholders. Mr. Johnson also serves
as the Secretary of AAON-Oklahoma, ACP, AAON Canada and AAON Properties. 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 59, 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.
Thomas E. Naugle has served as a director of the Company since 1998 and
currently serves in the class of directors whose terms will expire at the 2007
annual meeting of stockholders. 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. 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 will 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 49, 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 and
currently serves in the class of directors whose terms will expire at the 2007
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 52, became Treasurer of the Company in 1999 and
Vice President in 2002. She also serves as Vice President and Treasurer of
AAON-Oklahoma, AAON Canada and AAON Properties and as Treasurer of ACP. Ms.
Sheffield was the Accounting Supervisor of the Company from 1989 to 1992, when
she became Accounting Manager.
Jack E. Short was elected to the Board on July 28, 2004, and serves in
the class of directors whose terms will expire at the 2005 annual meeting of
stockholders. He is Chairman of the Company's Audit Committee. Mr. Short was
employed by PricewaterhouseCoopers (formerly Coopers & Lybrand) for 29 years and
retired as the managing partner of the Oklahoma practice (Tulsa and Oklahoma
City) of the firm in June 2001. He serves on the Board of Directors of Waste
Services, Inc., a public company which is engaged in the non-toxic waste
collection business.
Charles C. Stephenson, Jr., has served as a director of the Company
since 1996 and currently serves in the class of directors whose terms will
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 2004, 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.
Effective July 1, 2004, directors of the Company are paid quarterly
fees of $3,500 and attendance fees at Board meetings of $1,000 if present in
person or $750 if participating by conference telephone call. They are also
reimbursed for out-of-pocket expenses incurred in attending such meetings.
Previous thereto, directors were paid a fee of $2,500 per Board meeting
attended. Also effective July 1, 2004, directors are paid attendance fees of
$500 per meeting for service on the Company's Audit Committee and Compensation
Committee (up to a maximum of five meetings per committee per year) and the
Chairman of the Audit Committee is paid an additional fee of $750 per quarter
and the Chairman of the Compensation Committee is paid an additional fee of $500
per quarter; and each director is granted a 2,000 share non-qualified stock
option (under the Company's stock option plan) each year.
-6-
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 the correspondence to the Board or to any specific director to whom
the correspondence is directed.
The Company encourages its directors to attend AAON's annual meetings
of stockholders and all Board members attended the 2004 annual meeting.
The Board has an Audit Committee comprised of Messrs. Short, Naugle and
Pantaleoni and a Compensation Committee comprised of Messrs. 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. Short is
Chairman of the Audit Committee and has been designated as its "financial
expert" as defined by SEC rules. Mr. Ryan is Chairman of the Compensation
Committee. The Audit Committee met four times during 2004. The Compensation
Committee met once during 2004.
The Audit Committee assists the Board in fulfilling its responsibility
for oversight of the quality and integrity of the accounting, auditing and
financial reporting practices of the Company. Among other things, the Committee
is responsible for: selecting and retaining the Company's independent public
accountants; preapproving the engagement of the independent accountants for all
audit-related services and permissible, non-audit related services; reviewing in
advance the scope and focus of the annual audit; and reviewing and discussing
with management and the auditors the financial reports of the Company, the
audited financial statements, the auditor's report, the management letter and
the quality and adequacy of the Company's internal controls. The Audit Committee
is governed by a written charter, a copy of which is annexed as Appendix A
hereto. Its "Audit Committee Report" for year 2004 is set forth below.
During 2004 the Compensation Committee finalized recommendations for
changes of the compensation payable to Directors for their services as such and
for service on committees, which recommendations were adopted at last year's
annual meeting of the Board of Directors on May 25, 2004. While the Committee
made no recommendations for changes in the compensation of the named executive
officers during 2004, it will review and make recommendations, periodically, as
to salary adjustments, bonuses and/or other forms of compensation for management
in the future.
The Company does not have a nominating committee or charter for such a
committee. Since its inception (in 1988), the Company has had only 10 directors,
eight of whom continue to serve at this time. On the only occasions when
vacancies have occurred, two following resignations and three resulting from an
increase of the size of the Board, the new directors were unanimously approved
by the then existing directors. Mr. Bowen has declined to be nominated for
reelection and, as a result, the Company's Board of Directors will be reduced to
seven members after the 2005 annual meeting of stockholders. The Board has not
felt it necessary to have a standing nominating committee to deal with its
infrequent changes in membership.
-7-
If and when future vacancies occur, the Board would consider director
nominees recommended by shareholders. 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 must be recommended for the Board's
selection by a majority of its independent directors and approved by a majority
of the whole Board.
Audit Committee Report
March 15, 2005
To the Board of Directors of AAON, Inc.:
The Audit Committee oversees AAON's financial reporting process on
behalf of the Board of Directors. Management has the primary responsibility for
the financial statements and the reporting process including the systems of
internal controls. We have reviewed and discussed with management the Company's
audited financial statements as of and for the year ended December 31, 2004.
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, 2004.
Jack E. Short, Chairman
Thomas E. Naugle
Anthony Pantaleoni
-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 2004 $250,000 -0- $2,552 -0- $22,443 (2)
President
2003 $175,000 $50,000 $3,220 -0- $20,666 (2)
2002 $150,000 $50,000 $3,120 -0- $17,245 (2)
Robert G. Fergus 2004 $130,008 $ 3,000 $2,552 -0- $ 6,779 (3)
Vice President
2003 $123,269 $ 3,000 $3,220 -0- $10,162 (3)
2002 $116,703 $16,000 $3,120 -0- $ 6,955 (3)
Stephen J. Pargeter 2004 $128,004 $ 3,000 $2,552 -0- $ 4,005 (4)
Director of Engineering
2003 $108,068 $ 2,000 $3,220 -0- $ 6,822 (4)
2002 $ 95,677 $ 8,000 $3,120 -0- $ 4,444 (4)
David E. Knebel 2004 $128,004 $ 8,000 $2,552 -0- $ 4,659 (4)
Director of Sales and
Technology (5) 2003 $116,001 $ 8,000 $3,220 -0- $ 5,328 (4)
2002 $ 96,433 $16,000 $3,120 -0- $ 1,717 (4)
Kathy I. Sheffield 2004 $130,008 $ 5,000 $2,552 -0- $ 7,885 (6)
Vice President/Treasurer
(5)
2003 $ 99,336 $ 5,000 $3,220 -0- $10,597 (6)
--------------
(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 $8,443, $10,666 and $7,245 for years 2004, 2003 and 2002,
respectively, and (ii) and director fees of $14,000, $10,000 and $10,000
in 2004, 2003 and 2002, respectively.
(3) Includes (i) contributions of $4,652, $7,760 and $4,080 to the Company's
401(k) plan in 2004, 2003 and 2002, respectively, and (ii) medical
reimbursement benefits of $2,127, $2,402 and $2,875 in 2004, 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
2002.
(6) Includes contributions of: (i) $5,293 and $5,144 to the Company's 401(k)
plan in 2004 and 2003, respectively, and (ii) medical reimbursement
benefits of $2,592 and $5,453 in 2004 and 2003, respectively.
-9-
Stock Options. The following table sets forth information concerning
the only stock option granted during 2004 by the Company to a named executive
officer. 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)
----------------- ----------------- --------------- ------------ -------------
Norman H. Asbjornson 2,000 6.5% $20.40 (1) $20,381
----------------
(1) Exercisable at the rate of 33-1/3%, cumulative, per year after May 25, 2005
(and until May 25, 2014).
(2) This amount was calculated using the Black-Scholes option pricing model, a
complex mathematical formula that uses a number of factors to estimate the
present value of stock options. The assumptions used in the valuation of
the option were: stock price volatility - 36.7%, expected life - 8 years,
risk free interest rate - 4.24% and dividend yield - 0%. The Black-Scholes
model generates an estimate of the value of the right to purchase a share
of stock at a fixed price over a fixed period. The actual value, if any, an
executive realizes will depend on whether the stock price at exercise is
greater than the grant price, as well as the executive's continued
employment through the vesting period and the option term.
The following table provides information on the number of shares
received upon exercise of options by the Company's named executive officers and
the aggregate dollar value realized upon such exercise during the last year, and
the value of each of the named executive officer's unexercised in-the-money
options to acquire common stock at December 31, 2004.
Aggregated Option/SAR Exercises in Last Fiscal Year and FY-End Option/SAR Values
Number of Securities Value of Unexercised
Underlying Unexercised In-the-Money
Options/ Options/SARs at
SARs at FY-End (#) FY-End ($)
Shares Acquired on Value Realized Exercisable/ Exercisable/
Name Exercise (#) ($) Unexercisable Unexercisable (1)
-------------------- ------------------ -------------- ------------------- -----------------
Norman H. Asbjornson -0- -0- 298,125/2,000 $3,768,638/-0-
Robert G. Fergus -0- -0- 3,750/-0- $38,588/-0-
David E. Knebel -0- -0- 30,000/30,000 $169,080/$128,220
Stephen J. Pargeter 9,825 $137,196 17,550/-0- $190,269/-0-
Kathy I. Sheffield -0- -0- 31,250/12,500 $285,115/$46,060
--------------
(1) Calculated based on the difference between the Nasdaq National Market
closing price of the Common Stock on December 31, 2004 (the last trading
day of the year), $16.07, 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 two 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. 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 periodically reviews the base salaries of AAON's
executive management personnel and recommends 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 period since the last review and future potential;
retention considerations; and other issues specific 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.
2004 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. 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. No adjustment was made to
Mr. Asbjornson's salary and he received no bonus in 2004.
In addition to being the Company's largest shareholder, Mr. Asbjornson
holds stock options for an aggregate of 298,791 shares exercisable currently (or
within 60 days) and through May 2014 at prices ranging from $2.33 to $20.40 per
share.
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.
-11-
Conclusion. The Compensation Committee believes the Company's executive
compensation program has been consistent with the philosophy outlined in this
report and has been effective in achieving its overall objectives during fiscal
2005. The Committee hereby submits this report to AAON's Board of Directors for
approval.
Jerry E. Ryan, Chairman
Charles C. Stephenson, Jr.
COMPENSATION COMMITTEE INTERLOCKS
AND INSIDER PARTICIPATION
Neither member 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, the NASDAQ Composite and its peer group named below. The graph
assumes a $100 investment at the closing price on January 1, 1999, 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 Composite and Peer Group*
1999 2000 2001 2002 2003 2004
AAON, INC. $100 $123.05 $255.34 $288.47 $303.78 $251.51
NASDAQ COMPOSITE $100 $ 60.82 $ 48.18 $ 33.13 $ 49.95 $ 54.53
PEER GROUP $100 $105.55 $140.55 $137.94 $196.74 $230.58
*The peer group consists of American Standard Companies, Fedders Corp.,
Lennox International, Inc., Mestek, 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 22, 2004, the Audit Committee of the Board of
Directors of the Company approved the engagement of Grant Thornton LLP ("GT") as
its independent auditors for the fiscal year ending December 31, 2004, to
replace the firm of Ernst & Young LLP ("E&Y") which was dismissed as auditors of
the Company effective June 23, 2004. GT has served as the Company's auditors
since that date. E&Y's reports on the Company's financial statements for fiscal
years 2002 and 2003 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, 2002 and 2003, and in the
subsequent interim period, there were no disagreements with E&Y on any matter of
accounting principles or practices, financial statements disclosure or auditing
scope and procedures which, if not resolved to the satisfaction of E&Y, would
have caused E&Y to make reference to the matter in its report. The Company
requested E&Y to furnish a letter addressed to the Commission stating whether it
agreed with the above statements. A copy of E&Y's letter, dated June 25, 2004,
stating that it had no disagreements with such statements was filed as Exhibit 1
to the Company' Form 8-K of the same date.
The Board of Directors has selected GT as the independent auditors of
the Company for the fiscal year ending December 31, 2005. Representatives of GT
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 and other services performed
by the independent auditor. The following services were authorized by the Audit
Committee.
Audit Fees. GT billed the Company an aggregate of $77,520 for
professional services rendered for the audit of the Company's financial
statements for the year ended December 31, 2004, and E&Y billed an aggregate of
$35,912 for its review of the Company's financial statements included in its
Form 10-Q for the first quarter of 2004 and other audit services during the past
year. E&Y billed the Company an aggregate of $93,600 for audit of the Company's
financial statements for the year ended December 31, 2003.
Audit Related Fees. GT billed the Company an aggregate of $209,345 for
auditing the Company's controls and procedures as required by Section 404 of the
Sarbanes-Oxley Act for year 2004.
All Other Fees. No other fees were billed by GT or E&Y to the Company
during 2004.
-14-
The Audit Committee of the Board of Directors has determined that the
provision of services by GT described above is compatible with maintaining GT's
independence as the Company's principal accountant.
STOCKHOLDER PROPOSALS FOR 2006 ANNUAL MEETING
Stockholder proposals intended to be presented at the 2006 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 21, 2005.
However, a stockholder who otherwise intends to present business at the
2006 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 22, 2006, or after March 24, 2006. 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 22, 2006,
and March 24, 2006. 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 2005
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 11, 2005
-15-
Appendix A
AAON, INC.
AUDIT COMMITTEE CHARTER
Organization
This charter governs the operations of the Audit Committee. The committee shall
review and reassess the charter at least annually and obtain the approval of the
board of directors. The committee shall be members of, and appointed by, the
board of directors and shall comprise at least three directors, each of whom is
independent of management and the Company. Members of the committee shall be
considered independent as long as they do not accept any consulting, advisory or
other compensatory fee (exclusive of director fees) from the Company, are not an
affiliated person of the Company or its subsidiaries, and meet the independence
requirements of NASDAQ listing standards. All committee members shall be
financially literate. Members shall not serve on more than three public company
audit committees simultaneously.
Purpose
The Audit Committee shall provide assistance to the board of directors
in fulfilling its oversight responsibility to the shareholders, potential
shareholders, the investment community and others relating to: the integrity of
the Company's financial statements; the financial reporting process; the systems
of internal accounting and financial controls; the performance of Company's
independent auditors; the independent auditor's qualifications and independence;
and the Company's compliance with ethics policies and legal and regulatory
requirements. In doing so, it is the responsibility of the committee to maintain
free and open communications between the committee, independent auditors and
management of the Company.
In discharging its oversight role, the committee is empowered to investigate any
matter brought to its attention with full access to all books, records,
facilities and personnel of the Company and the authority to engage independent
counsel and other advisers as it determines necessary to carry out its duties.
Duties and Responsibilities
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. While the Audit Committee has the responsibilities and
powers set forth in this charter, it is not the duty of the Audit Committee to
plan or conduct audits or to determine that the Company's financial statements
are complete and accurate and are in accordance with generally accepted
accounting principles. Management is responsible for the preparation,
presentation and integrity of the Company's financial statements and for the
appropriateness of the accounting principles and reporting policies that are
used by the Company. The independent auditors are responsible for auditing the
Company's financial statements and for reviewing the Company's unaudited interim
financial statements.
-1-
The committee, in carryout out its responsibilities, believes its policies and
procedures should remain flexible, in order to best react to changing conditions
and circumstances. The committee should take appropriate actions to set the
overall corporate tone for quality financial reporting, sound business risk
practices and ethical behavior. The following shall be the principal duties and
responsibilities of the Audit Committee. These are set forth as a guide with the
understanding that the committee may supplement them as appropriate.
The committee shall be directly responsible for the appointment and termination,
compensation and oversight of the work of the independent auditors, including
resolution of disagreements between management and the auditor regarding
financial reporting. The committee shall preapprove all audit and non-audit
services provided by the independent auditors and shall not engage the
independent auditors to perform the specific non-audit services proscribed by
law or regulation. The committee may delegate pre-approval authority to a member
of the Audit Committee. The decisions of any Audit Committee member to whom
pre-approval authority is delegated must be presented to the full Audit
Committee at its next scheduled meeting.
At least annually, the committee shall obtain and review a report by the
independent auditors describing:
o The auditors' internal quality control procedures.
o Any material issues raised by the most recent internal quality
control review, or peer review, of the auditors or by any inquiry
or investigation by governmental or professional authorities,
within the preceding five years, respecting one or more
independent audits carried out by the auditors, and any steps
taken to deal with any such issues.
o All relationships between the auditors and the Company (to assess
the auditor's independence).
The committee shall determine that the independent auditors have a process in
place to address the rotation of the lead audit partner and other partners
serving the account as required under the SEC independence rules.
The committee shall discuss with the independent auditors the overall scope and
plans for its audit, including the adequacy of staffing and compensation. Also,
the committee shall discuss with management and the independent auditors the
adequacy and effectiveness of the accounting and financial controls, including
the Company's policies and procedures to assess, monitor and manage business
risks, and legal and ethical compliance programs.
The committee shall meet separately periodically with management and the
independent auditors to discuss issues and concerns warranting committee
attention. The committee shall provide sufficient opportunity for the
independent auditors to meet privately with the members of the committee. The
committee shall review with the independent auditor any audit problems or
difficulties and management's response.
The committee shall receive regular reports from the independent auditor on the
critical policies and practices of the Company, and all alternative treatments
of financial information within generally accepted accounting principles that
have been discussed with management.
The committee shall review management's assertion on its assessment of the
effectiveness of internal controls as of the end of the most recent fiscal year
and the independent auditors' report on management assertion.
-2-
The committee shall discuss with management and the independent auditors the
adequacy and effectiveness of internal control over financial reporting,
including any significant deficiencies or material weaknesses identified by
management of the Company in connection with its required quarterly
certifications under Section 302 of the Sarbanes-Oxley Act. In addition, the
committee shall discuss with management and the independent auditors any
significant changes in internal control over financial reporting that are
disclosed, or considered for disclosure, in the Company's periodic filings with
the SEC.
The committee shall review and discuss earnings press releases, as well as
financial information and earnings guidance provided to analysts and rating
agencies.
The committee shall review the interim financial statements and disclosures
under Management's Discussion and Analysis of Financial Condition and Results of
Operations with management and the independent auditors prior to the filing of
the Company's Quarterly Report on Form 10-Q. Also, the committee shall discuss
the results of the quarterly review and any other matters required to be
communicated to the committee by the independent auditors under generally
accepted auditing standards. The chair of the committee may represent the entire
committee for the purposes of this review.
The committee shall review with management and the independent auditors the
financial statements and disclosures under Management's Discussion and Analysis
of Financial Condition and Results of Operations to be included in the Company's
Annual Report on Form 10-K (or the annual report to shareholders if distributed
prior to the filing of Form 10-K), including its judgment about the quality, not
just the acceptability, of accounting principles, the reasonableness of
significant judgments and the clarity of the disclosures in the financial
statements. Also the committee shall discuss the results of the annual audit and
any other matters required to be communicated by the committee by the
independent auditors under generally accepted auditing standards.
The committee shall establish procedures for the receipt, retention and
treatment of complaints received by the Company regarding accounting, internal
accounting controls or auditing matters, and the confidential, anonymous
submission by employees of the Company of concerns regarding questionable
accounting or auditing matters.
The committee shall receive reports of evidence of a material violation of
securities laws or breaches of fiduciary duty.
The committee also prepares its report to be included in the Company's annual
proxy statement, as required by SEC regulations.
The committee shall perform an evaluation of its performance at least annually
to determine whether it is functioning effectively.
-3-
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 Thomas E. Naugle, 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 24, 2005, 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 |_|
Anthony Pantaleoni and Jack E. Short for terms ending in 2008.
(INSTRUCTION: To withhold authority to vote for any nominee, write that nominee's name on the space provided below.)
-----------------------------------------------------------------------------------------------------------------------------------
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 11, 2005.
Dated: , 2005
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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)