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.
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and 0-11.
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[ ] Check box if any part of the fee is offset as provided by Exchange Act
Rule 0-11(a)(2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration statement number, or
the Form or Schedule and the date of its filing.
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AAON, INC.
Notice of
Annual Meeting
May 31, 2006,
and
Proxy Statement
AAON, INC.
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD ON MAY 31, 2006
Notice is hereby given that the Annual Meeting of Stockholders of AAON,
Inc., will be held at 2440 South Yukon, Tulsa, Oklahoma, on Wednesday, May 31,
2006, at 10:00 A.M. (Local Time), for the following purposes:
1. To elect three Class III Directors for terms ending in 2009; 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 20, 2006
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 31, 2006, 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 April 3, 2006, 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 three nominees who
receive the most votes will be elected.
Stockholders of record on the record date are entitled to cast their
votes at the Annual Meeting in person or by properly executed proxy. 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 writing 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 2005 Annual Report (which includes the
Company's Annual Report on Form 10-K for the year ended December 31, 2005), will
be first mailed to stockholders approximately April 27, 2006.
-1-
VOTING SECURITIES AND PRINCIPAL HOLDERS THEREOF
As of April 3, 2006, (the record date), the Company had issued a total
of 12,338,812 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 April 3, 2006, 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 2,488,299 (1) 19.7
2425 South Yukon
Tulsa, Oklahoma 74107
Wellington Management Company, LLP 1,222,955 (2) 9.9
75 State Street
Boston, Massachusetts 02109
Royce & Associates, LLC 925,200 (3) 7.5
1414 Avenue of the Americas
New York, New York 10019
Thompson, Horstmann & Bryant, Inc. 649,855 (4) 5.3
Park 80 West Plaza One, 5th Floor
Sandle Brook, New Jersey 07663
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(1) Includes 300,125 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, 2006, which discloses that Wellington Management Company, LLP,
possesses shared power to vote or direct the vote of 705,000 shares, and
shared power to dispose or direct the disposition of 1,222,955 shares.
(3) This share ownership information was provided by a Schedule 13G dated
January 10, 2006, which discloses that Royce & Associates, LLC, possesses
the sole voting power and sole dispositive power of the reported shares.
(4) This share information was provided by a Schedule 13G dated January 9,
2006, which discloses that Thompson, Horstmann & Bryant, Inc., possesses
sole voting power of 411,255 shares and sole dispositive power of 649,855
shares.
-2-
The following table sets forth as of April 3, 2006, 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 2,488,299 (2) 19.7
John B. Johnson, Jr. 68,930 (3) *
Thomas E. Naugle 138,677 (4) 1.1
Anthony Pantaleoni 116,387 (4) *
Jerry E. Ryan 72,000 (4) *
Jack E. Short 1,333 (5) *
Charles C. Stephenson, Jr. 509,248 (6) 4.1
Robert G. Fergus 5,210 (7) *
David E. Knebel 55,987 (8) *
Kathy I. Sheffield 44,991 (9) *
Scott M. Asbjornson 271,121 (10) 2.2
Directors and named executive 3,772,183 (11) 29.0
officers as a group (11 persons)
--------------------
(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 300,125 shares issuable upon exercise of stock options that are
exercisable currently or within 60 days, 11,062 shares held by Mr.
Asbjornson's IRA account, 8,732 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
currently or within 60 days and 27,055 shares held for the account of Mr.
Johnson under a broker-administered retirement plan.
(4) Includes 63,875 shares issuable upon exercise of stock options that are
exercisable currently or within 60 days.
(5) These shares are issuable upon exercise of stock options that are
exercisable currently or within 60 days.
(6) Includes 2,000 shares issuable upon exercise of stock options exercisable
currently or within 60 days.
(7) Includes 2,685 shares under the Company's 401(k) plan.
(8) Includes 55,000 shares issuable upon exercise of stock options exercisable
currently or within 60 days and 986 shares under the Company's 401(k) plan.
(9) Includes 40,750 shares issuable upon exercise of stock options exercisable
currently or within 60 days and 4,241 shares under the Company's 401(k)
plan.
(10) Includes 30,250 shares issuable upon exercise of stock options exercisable
currently or within 60 days and 4,412 shares under the Company's 401(k)
plan.
(11) Includes 662,958 shares issuable upon the exercise of stock options that
are exercisable currently or 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 is comprised of 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 III, I, and II
having terms expiring at the Annual Meeting of Stockholders in 2006, 2007 and
2008, 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 III - For Terms to Expire in 2009
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Name Age Current Position
---- --- ----------------
Norman H. Asbjornson 70 President and Director
John B. Johnson, Jr. 72 Secretary and Director
Charles C. Stephenson, Jr. 69 Director
Directors Continuing in Office:
Class I - Terms Expire in 2007
------------------------------
Name Age Current Position
---- --- ----------------
Thomas E. Naugle 67 Director
Jerry E. Ryan 63 Director
Class II - Terms Expire in 2008
-------------------------------
Name Age Current Position
---- --- ----------------
Anthony Pantaleoni 66 Director
Jack E. Short 65 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.
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.
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
2008 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.
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.
Jack E. Short has served as a director of the Company since 2004, and
currently serves in the class of directors whose terms will expire at the 2008
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.
-5-
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. From 1987 until January 2006,
Mr. Stephenson served as Chairman of the Board of Vintage Petroleum, Inc., a
publicly held company engaged in oil and gas production and exploration.
Robert G. Fergus, age 65, 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.
David E. Knebel, age 60, joined the Company in May 2001 as Manager of
Technology and Training, before becoming Director of Sales and Technology in
December 2002 and Vice President, Sales and Technology, in August 2005. 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.
Kathy I. Sheffield, age 53, 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.
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 2005, 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 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. 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.
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.
-6-
The Company encourages its directors to attend AAON's annual meetings
of stockholders and all Board members attended the 2005 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 eight times during 2005. The Compensation
Committee met twice during 2005.
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. Its "Audit Committee Report" for year 2005 is
set forth below.
Based on recommendations of the Compensation Committee, 5,000 share
stock options were granted to David E. Knebel, Kathy I. Sheffield and Scott M.
Asbjornson on April 6, 2005, at an option price of $16.23 per share, and the
Board of Directors raised the annual salaries of Norman H. Asbjornson, Robert G.
Fergus, David E. Knebel and Kathy I. Sheffield by $10,000 each effective June 1,
2005. The Committee 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,
seven of whom continue to serve at this time. On the only occasions when
vacancies have occurred, the new directors were unanimously approved by the
other 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 vacancies occur in the future, 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.
-7-
Audit Committee Report
March 24, 2006
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 and with the
independent auditors the Company's audited financial statements as of and for
the year ended December 31, 2005.
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, 2005.
Jack E. Short, Chairman
Thomas E. Naugle
Anthony Pantaleoni
-8-
EXECUTIVE COMPENSATION
Compensation. The following table sets forth information regarding the
compensation of the chief executive officer and the other (four most highly
compensated) named executive officers:
Summary Compensation Table
Long-Term
Annual Compensation Compensation
----------------------------------------- ------------
Other Securities
Name and Annual Underlying All Other
Principal Position Year Salary Bonus Compensation Options/SARs Compensation
----------------------- ---- ------ ----- --------------- ------------ ------------
Norman H. Asbjornson 2005 $255,833 -0- $2,913 (2) 2,000 $25,225 (4)
President
2004 $250,000 -0- $2,552 (2) 2,000 $22,443 (4)
2003 $175,000 $50,000 $3,220 (2) -0- $20,666 (4)
Robert G. Fergus 2005 $135,833 $ 4,000 $2,913 (2) -0- $ 5,244 (5)
Vice President
2004 $130,008 $ 3,000 $2,552 (2) -0- $ 6,779 (5)
2003 $123,269 $ 3,000 $3,220 (2) -0- $10,162 (5)
David E. Knebel 2005 $133,835 $ 8,000 $2,913 (2) 5,000 $ 4,898 (6)
Vice President, Sales and
Technology 2004 $128,004 $ 8,000 $2,552 (2) -0- $ 4,659 (6)
2003 $116,001 $ 8,000 $3,220 (2) 15,000 $ 5,328 (6)
Kathy I. Sheffield 2005 $135,833 $ 5,000 $2,913 (2) 5,000 $ 5,220 (7)
Vice President/Treasurer
2004 $130,008 $ 5,000 $2,552 (2) -0- $ 7,885 (7)
2003 $ 99,336 $ 5,000 $3,220 (2) 10,000 $10,597 (7)
Scott M. Asbjornson(1) 2005 $117,840 $ 1,382 $ 983 (3) 5,000 $ 4,255 (6)
Vice President
AAON Coil Products, Inc.
--------------
(1) The total salary and bonus of this executive did not exceed $100,000 in
2004 and 2003.
(2) A per capita share, the same as all other eligible employees, of 10% of the
pre-tax profit of AAON-Oklahoma.
(3) Profit sharing payment from ACP.
(4) Consists of (i) contributions to the Company's 401(k) plan by the Company
in the amounts of $7,225, $8,443 and $10,666 for years 2005, 2004 and 2003,
respectively, and (ii) and director fees of $18,000, $14,000, and $10,000
in 2005, 2004 and 2003, respectively.
(5) Consists of (i) contributions of $4,851, $4,652 and $7,760 to the Company's
401(k) plan in 2005, 2004 and 2003, respectively, and (ii) medical
reimbursement benefits of $393, $2,127 and $2,402 in 2005, 2004 and 2003,
respectively.
(6) Consists of contributions to the Company's 401(k) plan by the Company.
(7) Consists of (i) contributions of: $4,868, $5,293 and $5,144 to the
Company's 401(k) plan in 2005, 2004 and 2003, respectively, and (ii)
medical reimbursement benefits of $352, $2,592 and $5,453 in 2005, 2004 and
2003, respectively.
-9-
Stock Options. The following table sets forth information concerning
the stock options granted during 2005 by the Company to 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 Grant
Underlying Granted to Exercise or Date
Options/SARs Employees in Base Price Expiration Present
Granted Fiscal Year per Share Date Value (3)
------------------ --------------- ------------- ------------ ----------
Norman H. Asbjornson 2,000 1.5% $18.00 (1) $16,672
David E. Knebel 5,000 3.8% $16.23 (2) $37,580
Kathy I. Sheffield 5,000 3.8% $16.23 (2) $37,580
Scott M. Asbjornson 5,000 3.8% $16.23 (2) $37.580
----------------
(1) Exercisable at the rate of 33-1/3%, cumulative, per year after May 24, 2006
(and until May 25, 2015).
(2) Exercisable at the rate of 20%, cumulative, per year after April 6, 2006
(and until April 6, 2015).
(3) This amount was calculated using the Black-Scholes option pricing model, a
complex mathematical formula that uses a number of factors to estimate the
present value of stock options. The assumptions used in the valuation of
the option were: stock price volatility - 32.15%, expected life - 8 years,
risk free interest rate - 4.39% and dividend yield - 0%. The Black-Scholes
model generates an estimate of the value of the right to purchase a share
of stock at a fixed price over a fixed period. The actual value, if any, an
executive realizes will depend on whether the stock price at exercise is
greater than the grant price, as well as the executive's continued
employment through the vesting period and the option term.
The following table provides information on the number of shares
received upon exercise of options by the Company's named executive officers and
the aggregate dollar value realized upon such exercise during the last year, and
the value of each of the named executive officer's unexercised in-the-money
options to acquire common stock at December 31, 2005.
Aggregated Option/SAR Exercises in Last Fiscal Year and FY-End Option/SAR Values
Number of Securities Value of Unexercised
Underlying Unexercised In-the-Money
Options/ Options/SARs at
SARs at FY-End (#) FY-End ($)
Shares Acquired on Value Realized Exercisable/ Exercisable/
Name Exercise (#) ($) Unexercisable Unexercisable (1)
-------------------- ------------------ -------------- ------------------- -----------------
Norman H. Asbjornson -0- -0- 298,792/3,333 $4,306,563/-0-
Robert G. Fergus 3,750 $ 45,941 -0-/-0- -0-/-0-
David E. Knebel -0- -0- 42,000/23,000 $304,560/$109,590
Kathy I. Sheffield -0- -0- 35,500/13,250 $369,300/$49,313
Scott M. Asbjornson -0- -0- 27,000/7,250 $312,165/$29,153
--------------
(1) Calculated based on the difference between the Nasdaq National Market
closing price of the Common Stock on December 30, 2005 (the last trading
day of the year), $17.88, and the exercise price of the option.
-10-
The Company has no Long-Term Incentive Plan ("LTIP") or "defined
benefit" (pension) plan.
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.
During the past year, based on recommendations of the Compensation
Committee, 5,000 share stock options were granted to David E. Knebel, Kathy I.
Sheffield and Scott M. Asbjornson on April 6, 2005, at an option price of $16.23
per share, and the Board of Directors raised the annual salaries of Norman H.
Asbjornson, Robert G. Fergus, David E. Knebel and Kathy I. Sheffield by $10,000
each effective June 1, 2005.
2005 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 $260,000 was
established effective June 1, 2005. Mr. Asbjornson's salary had been $250,000
from October 1, 2003, to June 1, 2005, $150,000 since 2000 and $132,000 for 11
years prior thereto. He was paid performance bonuses of $50,000 each in 2000 -
2003. Mr. Asbjornson received no bonus in 2004 or 2005.
-11-
In addition to being the Company's largest shareholder, Mr. Asbjornson
holds stock options for an aggregate of 300,125 shares exercisable currently (or
within 60 days) and through May 2015 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.
Conclusion. The Compensation Committee believes the Company's executive
compensation program has been consistent with the philosophy outlined in this
report and was 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, 2000, 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*
2000 2001 2002 2003 2004 2005
---- ---- ---- ---- ---- ----
AAON, INC. 40.32 12.98 5.31 -17.21 11.25
$100 $140.32 $158.53 $166.94 $138.22 $153.76
NASDAQ Composite -20.79 -31.24 50.79 9.16 2.12
$100 $ 79.21 $ 54.46 $ 82.12 $ 89.65 $ 91.54
Peer Group 33.16 -1.85 42.62 17.20 7.18
$100 $133.16 $130.69 $186.40 $218.46 $234.16
NOTE: Data Complete through last fiscal year.
NOTE: Corporate Performance Graph with peer group uses peer group only
performance (excludes only company).
NOTE: Peer group indices use beginning of period market capitalization
weighting.
*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 report on the Company's financial statements for fiscal
year 2003 did not contain an adverse opinion or a disclaimer of opinion and was
not qualified or modified as to uncertainty, audit scope or accounting
principles. In connection with the audit of the Company's financial statements
for the fiscal year ended December 31, 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, 2006. 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 $338,964 and $311,865
for professional services rendered for the audits of the Company's financial
statements for the years ended December 31, 2005 and 2004, respectively. E&Y
billed an aggregate of $35,912 for its review of the Company's financial
statements included in the Form 10-Q for the first quarter of 2004 and other
audit services during 2004, and $11,700 for its review of the Company's Form
10-K for the year ended December 31, 2005.
All Other Fees. No other fees were billed by GT or E&Y to the Company
during 2005 or 2004.
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.
-14-
STOCKHOLDER PROPOSALS FOR 2007 ANNUAL MEETING
Stockholder proposals intended to be presented at the 2007 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 28, 2006.
However, a stockholder who otherwise intends to present business at the
2007 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 2007
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 March 2, 2007, or after April 1, 2007. 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 March 2, 2007, and
April 1, 2007. 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 2006
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 20, 2006
-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 Wednesday, May 31, 2006, 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 all nominees listed below |_|
Norman H. Asbjornson, John B. Johnson, Jr., and Charles C. Stephenson, Jr., for terms ending in 2009.
(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 all 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 20, 2006.
Dated: , 2006
------------------------------------- ---------------------------------------------------------------------
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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)