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.
---------------------------------------------------------
(Name of Registrant as Specified in its Charter)
---------------------------------------------------------
(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.
1) Title of each class of securities to which transaction applies:
----------------------------------------------------------------
2) Aggregate number of securities to which transaction applies:
----------------------------------------------------------------
3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (Set forth the amount on which
the filing fee is calculated and state how it was determined):
----------------------------------------------------------------
4) Proposed maximum aggregate value of transaction:
----------------------------------------------------------------
5) Total fee paid:
----------------------------------------------------------------
[ ] Fee paid previously with preliminary materials.
[ ] 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.
1) Amount Previously Paid:
----------------------------------------------------------------
2) Form, Schedule or Registration Statement No.:
----------------------------------------------------------------
3) Filing party:
----------------------------------------------------------------
4) Date Filed:
----------------------------------------------------------------
AAON, INC.
Notice of
Annual Meeting
May 22, 2007,
and
Proxy Statement
AAON, INC.
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD ON MAY 22, 2007
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 22,
2007, at 10:00 A.M. (Local Time), for the following purposes:
1. To elect one Class I Director, and leave the position of the
other Class I director vacant, for terms ending in 2010;
2. To adopt the AAON, Inc. Long-Term Incentive Plan; and
3. 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, 2007
AAON, INC.
2425 South Yukon
Tulsa, Oklahoma 74107
PROXY STATEMENT
This statement is furnished in connection with the solicitation by the
Board of Directors of AAON, Inc., for proxies to be used at our Annual Meeting
of Stockholders to be held on May 22, 2007, at the time and place set forth in
the Notice of Annual Meeting accompanying this Proxy Statement. Unless the
context otherwise requires, references herein to "AAON", "we", "us", "our" or
"ours" refers to AAON, Inc.
Pursuant to provisions of our Bylaws and action of our Board of
Directors, the close of business on March 26, 2007, 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.
The Director nominated for election and the creation of a vacancy in
the Board of Directors will be approved if, assuming a quorum is present either
in person or by proxy, a majority of the shareholders voting on each such
proposal vote in favor of such matter.
Our Long-Term Incentive Plan will be approved if, assuming a quorum is
present either in person or by proxy, a majority of the shareholders voting on
such proposal vote in favor of adoption of the Long-Term Incentive Plan.
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, we may adjourn or postpone the meeting.
Abstentions and broker non-votes are counted as shares present in
determining whether the quorum requirement is satisfied. Abstentions are also
counted in the total number of votes cast with respect to a proposal and thus
have the same effect as a vote against the matter. Broker non-votes are not
counted as votes cast in the tabulation of votes on any matter brought before
the Annual 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 AAON or
by personal attendance at the meeting.
We have 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 our annual report and proxy statement unless one
or more of these shareholders notify us 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 our annual report
and proxy statement at their household can request householding by contacting
our 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.
-1-
This Proxy Statement, the Notice of Annual Meeting and accompanying
proxy card, as well as our 2006 Annual Report (which includes our Annual Report
on Form 10-K for the year ended December 31, 2006), will be first mailed to
stockholders approximately April 17, 2006.
VOTING SECURITIES AND PRINCIPAL HOLDERS THEREOF
As of March 26, 2007, (the record date), we had issued a total of
12,456,455 shares of $.004 par value Common Stock, our 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 26, 2007, the aggregate
number of our shares of Common Stock owned by each person known by us to be the
beneficial owner of more than 5% of our Common Stock:
Percent
Name and address Number of shares of
of beneficial owner owned class
------------------- ---------------- -------
Norman H. Asbjornson 2,437,338 (1) 19.6
2425 South Yukon
Tulsa, Oklahoma 74107
Wellington Management Company, LLP 1,067,055 (2) 8.6
75 State Street
Boston, Massachusetts 02109
Royce & Associates, LLC 932,800 (3) 7.5
1414 Avenue of the Americas
New York, New York 10019
Thompson, Horstmann & Bryant, Inc. 764,904 (4) 6.1
Park 80 West Plaza One, 5th Floor
Sandle Brook, New Jersey 07663
---------------
(1) Includes 172,083 shares held under stock options that are exercisable
currently or within 60 days. 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, 2007, which discloses that Wellington Management Company,
LLP, possesses shared power to vote or direct the vote of 583,000
shares, and shared power to dispose or direct the disposition of
1,067,055 shares.
(3) This share ownership information was provided by a Schedule 13G dated
January 17, 2007, 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 29,
2007, which discloses that Thompson, Horstmann & Bryant, Inc.,
possesses sole voting power of 503,516 shares and sole dispositive
power of 764,904 shares.
-2-
The following table sets forth as of March 26, 2007, the aggregate
number of shares of our Common Stock owned of record or beneficially by each
director, 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 2,437,338 (2) 19.6
John B. Johnson, Jr. 33,333 (3) *
Thomas E. Naugle 102,510 (3) *
Anthony Pantaleoni 73,420 (3) *
Jerry E. Ryan 44,583 (4) *
Jack E. Short 2,666 (4) *
Charles C. Stephenson, Jr. 510,581 (3) 4.1
Robert G. Fergus 5,210 (5) *
David E. Knebel 62,258 (6) *
Kathy I. Sheffield 50,628 (7) *
Scott M. Asbjornson 269,945 (8) 2.2
Directors and named executive 3,592,472 (9) 28.8
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 172,083 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, 154 shares under AAON's 401(k) plan and 34,500
shares owned by his foundation.
(3) Includes 3,333 shares issuable upon exercise of stock options that are
exercisable currently or within 60 days.
(4) These shares are issuable upon exercise of stock options that are
exercisable currently or within 60 days.
(5) Includes 2,348 shares under AAON's 401(k) plan.
(6) Includes 61,000 shares issuable upon exercise of stock options exercisable
currently or within 60 days and 1,258 shares under AAON's 401(k) plan.
(7) Includes 40,750 shares issuable upon exercise of stock options exercisable
currently or within 60 days and 4,580 shares under AAON's 401(k) plan.
(8) Includes 33,250 shares issuable upon exercise of stock options exercisable
currently or within 60 days and 236 shares under AAON's 401(k) plan.
(9) Includes 367,664 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
Our Board of Directors is comprised of seven members. Our Bylaws (the
"Bylaws") divide the Board of Directors into three classes having staggered
terms of three years each, with Classes I, II and III having terms expiring at
the Annual Meeting of Stockholders in 2007, 2008 and 2009, respectively. The
Bylaws provide that a stockholder may nominate a director for election at an
annual meeting if written notice is given to us not less than 60 and not more
than 90 days in advance of the anniversary date of the immediately preceding
annual meeting.
On April 10, 2007, Jerry E. Ryan, one of our directors who would have
stood for re-election this year, informed us that he was tendering his
resignation as a director, effective immediately, due to family and personal
health reasons. Because of the close proximity in time between the date of his
resignation and our annual meeting, the Board of Directors deemed it in the best
interest of AAON and its stockholders to not attempt to identify a replacement
candidate to fill the vacancy in the Board left by Mr. Ryan's resignation.
Instead, the Board of Directors is asking that the stockholders vote to maintain
the position formerly held by Mr. Ryan as a "vacancy" on the Board, that
subsequently can be filled, in accordance with our Bylaws, by the Board when a
suitable replacement has been selected.
It is intended that Thomas E. Naugle, the remaining Class I director,
will be placed in nomination and that the persons named in the proxy will vote
for his election. Mr. Naugle has consented to being named in this Proxy
Statement; however, Mr. Naugle had, prior to the resignation of Mr. Ryan,
indicated his desire to resign from the Board of Directors upon the
identification and election of a qualified replacement. Mr. Naugle has agreed to
continue to serve, assuming his re-election, until his successor has been
selected.
Nominees:
Class I -- For Term to Expire in 2010
-------------------------------------
Name Age Current Position
---- --- ----------------
Thomas E. Naugle 68 Director
Directors Continuing in Office:
Class II - Terms Expire in 2008
-------------------------------
Name Age Current Position
---- --- ----------------
Anthony Pantaleoni 67 Director
Jack E. Short 66 Director
Class III - Terms Expire in 2009
--------------------------------
Name Age Current Position
---- --- ----------------
Norman H. Asbjornson 71 President and Director
John B. Johnson, Jr. 73 Secretary and Director
Charles C. Stephenson, Jr. 70 Director
-4-
Biographical Information
Set forth below is a description of the background of each of our
directors and executive officers. 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 AAON
since 1989 and currently serves in the class of directors whose terms will
expire at the 2009 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 our wholly-owned subsidiaries.
John B. Johnson, Jr., has served as Secretary and a director of AAON
since 1989 and currently serves in the class of directors whose terms will
expire at the 2009 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 our General Counsel.
Thomas E. Naugle has served as a director of AAON 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 AAON 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 served as a director of AAON since 2001 until his
resignation effective April 10, 2007. Until his resignation, he served as
Chairman of our 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 AAON 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 our 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 AAON since 1996
and currently serves in the class of directors whose terms will expire at the
2009 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 66, has served as Vice President of AAON since
1989. Mr. Fergus also serves as Vice President of AAON-Oklahoma, AAON Canada and
AAON Properties.
David E. Knebel, age 61, joined AAON 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 54, became Treasurer of AAON 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 our Accounting Supervisor from 1989 to 1992, when she became
Accounting Manager.
BOARD AND COMMITTEE MATTERS
The business of AAON is managed under the direction of our Board of
Directors. The Board of Directors met four times during 2006, 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 us.
A description of the fees paid to the directors and members of the
Audit Committee and Compensation Committee can be found under "Executive
Compensation - Director Compensation", herein.
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.
We encourage our directors to attend AAON's annual meetings of
stockholders and all Board members attended the 2006 annual meeting.
-6-
The Board has an Audit Committee comprised of Messrs. Short, Naugle and
Pantaleoni and a Compensation Committee which has been 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 served as Chairman of the Compensation
Committee in 2006. The Audit Committee met six times during 2006. The
Compensation Committee met twice during 2006.
The Audit Committee assists the Board in fulfilling its responsibility
for oversight of the quality and integrity of our accounting, auditing and
financial reporting practices. Among other things, the Committee is responsible
for: selecting and retaining our 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 our financial reports, the audited financial statements, the auditor's
report, the management letter and the quality and adequacy of our internal
controls. The Audit Committee is governed by a written charter. A copy of this
charter was included as an appendix to our 2005 proxy statement mailed to
shareholders. The "Audit Committee Report" for year 2006 is set forth below.
We also have a Compensation Committee, composed of Messrs. Ryan and
Stephenson (until Mr. Ryan's resignation on April 10, 2007), each of whom is
"independent" as defined in Rule 4200(a)(15) of the National Association of
Securities Dealers listing standards. The responsibilities of the Compensation
Committee are set out more fully under "Executive Compensation", below. The
Compensation Committee is governed by a written charter, a copy of which
attached to this proxy statement as Appendix A.
We do not have a nominating committee or charter for such a committee.
Since our inception (in 1988), we have had only 10 directors, six of whom
continue to serve. 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.
With respect to the current vacancy, and if and when new vacancies
occur in the future, the Board will 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 shareholders. 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 13, 2007
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, 2006.
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, 2006.
Jack E. Short, Chairman
Thomas E. Naugle
Anthony Pantaleoni
Code of Ethics
We have adopted a code of ethics that applies to our principal
executive officer, principal financial officer and principal accounting officer
or persons performing similar functions, as well as our other employees and
directors. We undertake to provide any person without charge, upon request, a
copy of such code of ethics. Requests may be directed to AAON, 2425 South Yukon
Avenue, Tulsa, Oklahoma 74107, attention Kathy I. Sheffield, or by calling (918)
382-6204.
Transactions with Related Persons
In 2006, we did not enter into any new related party transactions and
we do not have any preexisting related party transactions.
Our Code of Conduct guides the Board of Directors in its actions and
deliberations with respect to related party transactions. Under the Code,
conflicts of interest, including any involving the directors or any Named
Officers, are prohibited except under any guidelines approved by the Board of
Directors. Only the Board of Directors may waive a provision of the Code of
Conduct for a director or a Named Officer, and only then in compliance with all
applicable laws and rules and regulations. In 2006, we did not enter into any
new related party transactions and have no preexisting related party
transactions.
-8-
Director Independence
The Board has adopted director independence standards that meet and/or
exceed listing standards set by NASDAQ. NASDAQ has set forth six applicable
tests and requires that a director who fails any of the tests be deemed not
independent. In 2006, the Board affirmatively determined that Messrs. Naugle,
Pantaleoni, Ryan, Short and Stephenson are independent. As an employee, Mr.
Asbjornson is not independent, and because he is a member of the law firm that
serves as our General Counsel, the Board has determined that Mr. Johnson should
not be deemed independent. In addition, each member of the Audit Committee and
the Compensation Committee is independent.
Our director independence standards are as follows:
It is the policy of the Board of Directors that a majority of the
members of the Board consist of directors independent of AAON and our
management. For a director to be deemed "independent," the Board shall
affirmatively determine that the director has no material relationship with AAON
or its affiliates or any member of the senior management of AAON or his or her
affiliates. In making this determination, the Board applies, at a minimum and in
addition to any other standards for independence established under applicable
statutes and regulations as outlined by the NASDAQ listing standards, the
following standards, which it may amend or supplement from time to time:
o A director who is, or has been within the last three years, one of our
employees, or whose immediate family member is, or has been within the last
three years a Named Officer, can not be deemed independent. Employment as
an interim Chairman or Chief Executive Officer will not disqualify a
director from being considered independent following that employment.
o A director who has received, or who has an immediate family member who has
received, during any twelve-month period within the last three years, more
than $60,000 in direct compensation from us, other than director and
committee fees and benefits under a tax-qualified retirement plan, or
non-discretionary compensation for prior service (provided such
compensation is not contingent in any way on continued service), can not be
deemed independent. Compensation received by a director for former service
as an interim Chairman or Chief Executive Officer and compensation received
by an immediate family member for service as a non-executive employee will
not be considered in determining independence under this test.
o A director who (A) is, or whose immediate family member is, a current
partner of a firm that is our external auditor; (B) is a current employee
of such a firm; or (C) was, or whose immediate family member was, within
the last three years (but is no longer) a partner or employee of such a
firm and personally worked on our audit within that time can not be deemed
independent.
o A director who is, or whose immediate family member is, or has been within
the last three years, employed as an executive officer of another company
where any of our present Named Officers at the time serves or served on
that company's compensation committee can not be deemed independent.
-9-
o A director who is a current employee or general partner, or whose immediate
family member is a current executive officer or general partner, of an
entity that has made payments to, or received payments from us for property
or services in an amount which, in any of the last three fiscal years,
exceeds the greater of $200,000 or 5% of such other entity's consolidated
gross revenues, other than payments arising solely from investments in
AAON's securities or payments under non-discretionary charitable
contribution matching programs, can not be deemed independent.
For purposes of the independence standards set forth above, the terms:
o "affiliate" means any consolidated subsidiary of AAON and any other
company or entity that controls, is controlled by or is under common
control with AAON;
o "executive officer" means an "officer" within the meaning of Rule
16a-1(f) under the Securities Exchange Act of 1934, as amended; and
o "immediate family" means spouse, parents, children, siblings, mothers-
and fathers-in-law, sons- and daughters-in-law, brothers- and
sisters-in-law and anyone (other than employees) sharing a person's
home, but excluding any person who is no longer an immediate family
member as a result of legal separation or divorce, death or
incapacitation.
The Board undertakes an annual review of the independence of all
non-employee directors. In advance of the meeting at which this review occurs,
each non-employee director is asked to provide the Board with full information
regarding the director's business and other relationships with us and our
affiliates and with senior management and their affiliates to enable the Board
to evaluate the director's independence.
Directors have an affirmative obligation to inform the Board of any
material changes in their circumstances or relationships that may impact their
designation by the Board as "independent." This obligation includes all business
relationships between, on the one hand, Directors or members of their immediate
family, and, on the other hand, AAON and our affiliates or members of senior
management and their affiliates, whether or not such business relationships are
subject to any other approval requirements by us.
EXECUTIVE COMPENSATION
Compensation Discussion & Analysis
The following discusses the material elements of compensation awarded
to, earned by or paid to our principal executive and principal financial
officers, and our other three most highly compensated executive officers. These
individuals are referred to as the ("Named Officers") in this proxy statement.
Our current executive compensation programs are determined and approved
by our Compensation Committee, after consideration of recommendations by the
principal executive officer, as to the other Named Officers. None of the Named
Officers are members of the Compensation Committee. The Compensation Committee
has the direct responsibility and authority to review and approve our goals and
objectives relative to the compensation of the Named Officers, and to determine
and approve (either as a committee or with the other members of the our Board of
Directors who qualify as "independent" directors under applicable guidelines
adopted by NASDAQ) the compensation levels of the Named Officers.
-10-
Our current executive compensation programs are intended to achieve two
objectives. The primary objective is to enhance our profitability, and thus
shareholder value. The second objective is to attract, motivate, reward and
retain employees, including executive personnel, who contribute to our long-term
success. As described in more detail below, the material elements of our current
executive compensation program for Named Officers include a base salary,
discretionary annual bonuses, perquisites, our contributions to AAON's 401(k)
plan, "profit sharing" payments (made to all employees) and discretionary stock
options grants.
We believe that each element of the executive compensation program
helps to achieve one or both of the compensation objectives outlined above. The
table below lists each material element of our executive compensation program
and the compensation objective or objectives that it is designed to achieve.
Compensation Objectives
Compensation Element Attempted to be Achieved
---------------------------------- ----------------------------------------
Base Salary Attract and retain qualified executives
Motivate and reward executives performance
Bonus Compensation Motivate and reward executives performance
Enhance profitability of AAON and
shareholder value
Profit Sharing Motivate and reward executives performance
Enhance profitability of AAON and
shareholder value
Perquisites and Personal Benefits Attract and retain qualified executives
Equity-Based Compensation - Stock Enhance profitability of AAON and
Options shareholder value by aligning long-term
incentives with shareholders' long-term
interests
Retirement Benefits - 401(k) Attract and retain qualified executives
Enhance profitability of AAON and
shareholder value by aligning long-term
incentives with shareholders' long-term
interests
As illustrated by the table above, base salary, perquisites and
retirement benefits are all primarily intended to attract and retain qualified
executives. These are the elements of our current executive compensation program
where the value of the benefit in any given year is not wholly dependent on
performance. Base salaries are intended to attract and retain qualified
executives as well as being linked to performance by rewarding and/or motivating
executives. Base salaries are reviewed annually and take into account:
experience and retention considerations; past performance; improvement in
historical performance; anticipated future potential performance; and other
issues specific to the individual executive. In an effort to attract and retain
qualified executives, we emphasize the need to provide executives with
predictable benefit amounts that reward the executive's continued service. Some
of the elements are generally paid out on a short-term or current basis, base
salary and perquisites, while retirement benefits are generally paid out on a
long-term basis.
-11-
There are specific elements of the current executive compensation
program that are designed to reward performance and enhance profitability and
shareholder value, and therefore the value of these benefits is based on
performance. Our discretionary annual bonus plan is primarily intended to
motivate and reward Named Officers' performance. Other elements that satisfy the
primary objective of executive compensation to enhance profitability and
shareholder value are through a mix of short-term or current basis and long-term
basis. Profit sharing, which is divided equally among all employees, provides a
short-term cash reward for quarterly profits, while the stock option plan and
401(k) savings and investment plan align performance to profitability and
shareholder value over a longer term. This proper mix of short-term and
longer-term elements allows us to achieve dual goals of attracting and retaining
executives, while motivating and rewarding executives to enhance profitability
and shareholder value.
The Compensation Committee sets fixed-amount base salaries and believes
that bonuses and equity compensation should fluctuate with AAON's success in
achieving financial, operating and strategic goals. The Committee's philosophy
is that we should continue to use long-term compensation to align shareholder
and executives' interests and should allocate a portion of long-term
compensation to the entire executive compensation package.
We have, from time to time, at the request and for the benefit of the
Compensation Committee, retained an independent third-party executive
compensation consulting company (which provides no other services to us) to
provide general compensation expertise. We have previously utilized this
consulting firm for a comprehensive analysis of compensation for all executive,
engineering, sales and marketing and general and administrative positions. The
consultant generally gathers peer group information and provides the information
to the Compensation Committee, which is then used for proper benchmarking of our
compensation programs for executives and other employees.
Current Executive Compensation Program Elements
Base Salaries
Similar to most companies within the industry, our policy is to pay
Named Officers' base salaries in cash. A significant portion of the executive
compensation package is through base salaries. Effective June 1, 2006, the
Compensation Committee increased salaries for Named Officers by an aggregate of
$10,000 resulting in the following individual base salaries for the Named
Officers: Norm Asbjornson -- $270,000, Robert Fergus -- $150,008, Kathy
Sheffield -- $150,008, David Knebel -- $148,004 and Scott Asbjornson --
$140,000. In approving these executives' salary increases, the Committee took
into account recommendations of the principal executive officer (except for
himself), as well as each executives' individual experience and responsibilities
and performance.
Annual Bonuses
Our policy is to pay any discretionary annual bonuses to Named Officers
in cash. Annual discretionary bonuses provided to the Named Officers are largely
based on the recommendation of the principal executive officer. The Compensation
Committee may reduce or increase the size of the payout for each individual
Named Officer at its discretion. Cash bonuses were declared and paid out in
December 2006 for all Named Officers except for Norman H. Asbjornson, the
principal executive officer. Cash bonuses are not a significant portion of the
executive compensation package. The annual discretionary bonus is reported in
the "Bonus" column of the "Summary Compensation Table" for each Named Officer.
-12-
In accordance with our discretionary profit sharing plan under which
10% of pre-tax profit at each subsidiary is paid to all eligible employees on a
quarterly basis, Named Officers receive their proportionate amount of the
profit-sharing bonus in cash. The profit-sharing bonus is solely based on our
profit and divided among all employees equally. The profit sharing is reported
in the "All Other Compensation" column of the "Summary Compensation Table" for
each Named Officer if threshold reporting requirements were met (i.e. generally,
if the total value of all perquisites and personal benefits received by the
Named Officer not reported under any other column in the table exceed $10,000 in
the aggregate).
Perquisites
We provide some Named Officers with certain perquisites and personal
benefits, including automobile - related expenses. We utilize certain tax
advantages associated with perquisites and personal benefits as a way to provide
additional annual compensation that supplements base salaries and bonus
opportunities granted to Named Officers. Perquisites are reported in the "All
Other Compensation" column of the "Summary Compensation Table" for each Named
Officer if applicable and if reporting threshold requirements were met.
Equity-Based Compensation
Our policy is that the Named Officers' long-term compensation should be
directly linked to enhancing profitability and value provided to our
shareholders. Accordingly, the Compensation Committee grants equity awards under
the our stock option plan designed to link an increase in shareholder value to
compensation; such grants are largely based upon the recommendation of the
principal executive officer (except as to himself) based on the Named Officers'
performance in the prior year and his or her expected future contribution to our
performance. Stock option grants are valued using the Black-Scholes Model in
accordance with SFAS 123(R) and are calculated as a part of the executive
compensation package for the year based on the amount of requisite service
period served. Non-qualified stock options for Named Officers and other key
employees generally vest ratably over 5 years. The Compensation Committee
believes that these awards encourage Named Officers to continue to use their
best professional skills and to retain Named Officers for longer terms.
Awards are granted to new key employees on their hire date. Other grant
date determinations are made by the Compensation Committee, which are based upon
the date the Committee met and proper communication was made to the Named
Officer or key employee as defined in the definition of grant date by SFAS
123(R). Exercise prices are equal to the value of AAON stock on the close of
business on the determined grant date. We have no program or practice to
coordinate timing of grants with release of material, nonpublic information.
The aggregate amount as determined under SFAS 123(R) recognized for
purposes of our financial statements for 2006 with respect to outstanding
options granted to the Named Officers is shown in the "Summary Compensation
Table" below. The grant date fair value of the option awarded to the Named
Officers in 2006 as determined under SFAS 123(R) for purposes of our financial
statements is shown in the "Grants of Plan-Based Awards Table" below. The
"Grants of Plan-Based Awards Table" below provide additional detail regarding
the options granted to Named Officers in 2006, including the vesting and other
terms that apply to the options.
-13-
Retirement Benefits - 401(k) Plan
We provide a 401(k) Plan for all eligible employees. We provide an
employer match of 50% of the employee's salary deferral up to the first 7% of
the employee's compensation. AAON's contribution is in the form of cash and
directs the investment to acquire shares of our common stock. The match by us
vests over six years for each eligible employee. We believe that our added
contribution in AAON stock encourages retention as well as increases value to
the employee and shareholder as our performance. We maintain a stock repurchase
arrangement by which employee-participants in our 401(k) savings and investment
plan are entitled to have shares of AAON stock in their accounts sold to us to
provide diversification of their investments. The amounts contributed by us to
each Named Officer under the 401(k) savings and investment plan are based on
actual contributions and the base salary of the employee, and are reported in
the "All Other Compensation" column of the "Summary Compensation Table" for each
Named Officer, if applicable, and if the threshold reporting requirements were
met.
Compensation Committee's Report on Executive Compensation (1)
Among the duties imposed on our Compensation Committee under its
charter, is the direct responsibility and authority to review and approve our
goals and objectives relevant to the compensation of our Chief Executive Officer
and other executive officers, to evaluate the performance of such officers in
accordance with the policies and principles established by the Compensation
Committee and to determine and approve, either as a Committee, or (as directed
by the Board) with the other "independent" Board members (as defined by the
NASDAQ listing standards), the compensation level of the Chief Executive Officer
and the other executive officers. The Compensation Committee has been composed
of the two non-employee Directors named at the end of this report each of whom
is "independent" as defined by the NASDAQ Exchange listing standards. Mr. Ryan's
replacement on the Compensation Committee will be an independent Board member.
March 14, 2007
The Compensation Committee has reviewed and discussed with management
the disclosures contained in the Compensation Discussion and Analysis section of
this Item 11. Based upon this review and discussions, the AAON Compensation
Committee recommended to its Board of Directors that the Compensation Discussion
and Analysis section be included in this proxy statement.
Compensation Committee of the Board of Directors
Jerry E. Ryan (Chair)
Charles C. Stephenson, Jr.
(1) SEC filings sometimes "incorporate information by reference." This means we
are referring you to information that has previously been filed with the SEC,
and that this information should be considered as part of the filing you are
reading. Unless we specifically state otherwise, this Compensation Committee
Report shall not be deemed to be incorporated by reference and shall not
constitute soliciting material or otherwise be considered filed under the
Securities Act of 1933 as amended, or the Securities Exchange act of 1934, as
amended.
-14-
Compensation Committee's Interlocks and Insider Participation
The Compensation Committee members whose names appear above were
committee members during all of 2006. No member of the Compensation Committee is
or has been a former or current Named Officer of AAON or had any relationships
requiring disclosure by us under the SEC's rules requiring disclosure of certain
relationships and related-party transactions. None of our Named Officers
identified herein served as a director or a member of a compensation committee
(or other committee serving an equivalent function) of any other entity.
Summary Compensation Table
Option All Other
Name and Salary Bonus Awards (1) Compensation Total
Principal Position Year ($) ($) ($) ($) ($)
Norman H. Asbjornson
President and
Board Chairman 2006 265,849 - 3,730 45,200 (2) 314,779
Robert G. Fergus
Vice President 2006 145,841 4,000 - - 149,841
David E. Knebel
Vice President, Sales
and Technology 2006 143,837 8,000 13,803 - 165,640
Kathy I. Sheffield
Vice President/Treasurer 2006 145,841 6,000 13,803 - 165,644
Scott M. Asbjornson
Vice President
AAON Coil Products, Inc. 2006 135,577 - 13,803 - 149,380
(1) See discussion of assumptions made in valuing these awards in the notes to
our financial statements. Compensation costs are recognized for option awards
over their requisite service period.
(2) Consists of (i) a per capita share, the same as all other eligible
employees, of 10% of the pre-tax profit of AAON-Oklahoma; (ii) contributions to
our 401(k) plan by AAON in the amount of $5,989; (iii) director fees in the
amount of $18,900; (iv) payment of personal car lease in the amount of $17,641.
-15-
Compensation of Named Officers
The "Summary Compensation Table" should be read in connection with the
tables and narrative descriptions that follow. The "Grants of Plan-Based Awards
Table", and the description of the material terms of the nonqualified options
granted in 2006 that follows it, provide information regarding the long-term
equity incentives awarded to Named Officers in 2006 that are also reported in
the "Summary Compensation Table". The "Outstanding Equity Awards at Fiscal Year
End Table" and "Option Exercises and Stock Vested Table" provides further
information on the Named Officers' potential realizable value and actual value
realized with respect to their equity awards.
We did not have any pension plans, non-qualified deferred compensation
plans or severance, retirement, termination, constructive termination or change
in control arrangements for any of its Named Officers for the year ended
December 31, 2006.
We award stock incentives to key employees and the Named Officers
either on the initial date of employment or due to performance incentives
throughout the year. The 2006 grants to Named Officers are reported in the table
below.
Grants of Plan-Based Awards
All Other Option
Awards:
Grant Number of Securities Exercise or Base Price Fair Value on
Name Date Underlying Options(#) of Option Awards ($/sh) Grant Date
Norman H. Asbjornson 5/31/06 2,000 23.32 19,180 (1)
Robert G. Fergus - - - -
David E. Knebel 5/8/06 10,000 27.65 118,300 (2)
Kathy I. Sheffield 5/8/06 10,000 27.65 118,300 (2)
Scott M. Asbjornson 5/8/06 10,000 27.65 118,300 (2)
(1) The fair value price of these options is $9.59 per share based on the
Black-Scholes option-pricing model. See discussion of assumptions made in
valuing these awards in the notes to our financial statements.
(2) The fair value of these options is $11.83 per share based on the
Black-Scholes option-pricing model. See discussion of assumptions made in
valuing these awards in the notes to our financial statements.
Named Officers are not separately entitled to receive dividend
equivalent rights with respect to each stock option. Each nonqualified stock
option award described in the "Grants of Plan-Based Awards Table" above expires
on the tenth anniversary of its associated grant date and vests in equal
installments over the course of three years for Board members and five years for
executives.
-16-
The following table presents information regarding outstanding equity
awards as of December 31, 2006.
Outstanding Equity Awards
Option Awards
Number of
Securities
Underlying Number of Securities
Unexercised Underlying Unexercised \ Option Option
Options (#) Options (#) Exercise Expiration
Name Exercisable Unexercisable Price ($) Date
Norman H. Asbjornson 61,875 3.19 (1) 3/11/07
45,000 3.39 (1) 1/16/08
112,500 4.00 (1) 12/28/08
11,250 5.78 (1) 10/13/09
1,333 667 20.40 5/25/14
667 1,333 18.00 5/24/15
- 2,000 23.32 5/31/16
Robert G. Fergus
David E. Knebel 45,000 9.98 (1) 5/31/11
9,000 6,000 14.52 2/21/13
1,000 4,000 16.23 4/6/15
- 10,000 27.65 5/8/16
Kathy I. Sheffield 17,500 5.78 (1) 10/13/09
11,250 8.59 (1) 3/1/11
6,000 4,000 14.52 2/21/13
1,000 4,000 16.23 4/6/15
- 10,000 27.65 5/8/16
Scott M. Asbjornson 4,500 3.39 (1) 1/16/08
13,500 5.78 (1) 10/13/09
11,250 8.59 (1) 3/1/11
1,000 4,000 16.23 4/6/15
- 10,000 27.65 5/8/16
(1) Number of Shares and Price after stock splits.
The following table presents information regarding the exercise of
stock options by Named Officers during 2006.
Option Exercises and Stock Vesting
Option Awards
Number of Shares Valued Realized on
Acquired on Exercise Exercise
Name (#) ($)
Norman H. Asbjornson 67,500 1,586,009
Robert G. Fergus - -
David E. Knebel - -
Kathy I. Sheffield 5,000 109,902
Scott M. Asbjornson - -
-17-
The following table sets forth information concerning the our equity
compensation plans as of December 31, 2006.
Equity Compensation Plan Information
Number of securities remaining
Number of securities to be Weighted-average available for future issuance
Plan Category issued upon exercise of exercise price of under equity compensation plan
outstanding options, outstanding options, (excluding securities reflected
warrants and rights warrants and rights in column (a))
(a) (b) (c)
Equity compensation plans
approved by security holders (1) 974,330 $11.00 48,711
Equity compensation plans not
approved by security holders (2) -- -- --
Total 974,330 $11.00 48,711
-------------------
(1) Consists of shares covered by the AAON 1992 Stock Option Plan, as amended
(2) We do not maintain any equity compensation plans that have not been
approved by the stockholders.
Director Compensation
Our directors are paid quarterly fees of $3,750 and attendance fees of
$1,000 if present in person or $750 if participating by conference telephone
call. Directors are paid attendance fees of $1,200 per meeting for service on
our Audit Committee and $750 per meeting for service on the 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 $1,750 per quarter
and the Chairman of the Compensation Committee is paid an additional fee of $750
per quarter. Each director is also granted a 2,000 share non-qualified stock
option each year. We made our annual grants of options in May 2006, at which
time Messrs. Asbjornson, Johnson, Naugle, Pantaleoni, Short, Ryan and Stephenson
received 2,000 non-qualified stock options that vest ratably over three years.
-18-
Director Compensation Table
Fees
Earned or
Paid in Option All Other
Cash Awards (1) Comp. Total
Name ($) ($) ($) ($)
John B. Johnson, Jr. 18,900 3,730 (2)(3) - 22,630
Thomas E. Naugle 22,400 3,730 (2)(4) - 26,130
Anthony Pantaleoni 22,400 3,730 (2)(5) - 26,130
Jerry E. Ryan 20,750 3,730 (2)(6) - 24,480
Jack E. Short 27,400 3,730 (2)(7) - 31,130
Charles C.
Stephenson, Jr. 19,650 3,730 (2)(8) - 23,380
(1) See discussion of assumptions made in valuing these awards in the notes to
our financial statements.
(2) Fair value as of grant date is 9.59 per share. 2,000 shares granted.
Compensation costs are recognized over the requisite service period.
(3) As of December 31, 2006, 45,875 of non-qualified options were outstanding.
(4) As of December 31, 2006, 6,000 of non-qualified options were outstanding.
(5) As of December 31, 2006, 67,875 of non-qualified options were outstanding.
(6) As of December 31, 2006, 47,250 of non-qualified options were outstanding.
(7) As of December 31, 2006, 6,000 of non-qualified options were outstanding.
(8) As of December 31, 2006, 6,000 of non-qualified options were outstanding.
SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Based solely upon a review of Forms 4 furnished to us during our most
recent fiscal year, we know of no director, officer or beneficial owner of more
than ten percent of our Common Stock who failed to file on a timely basis
reports of beneficial ownership of our Common Stock as required by Section 16(a)
of the Securities Exchange Act of 1934, as amended.
INDEPENDENT PUBLIC ACCOUNTANTS
The Audit Committee has selected Grant Thornton LLP ("GT") as our
independent auditors for the fiscal year ending December 31, 2007.
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
Our 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.
-19-
Audit Fees. GT billed us an aggregate of $332,038 and $338,964 for
professional services rendered for the audits of our financial statements for
the years ended December 31, 2006 and 2005, respectively, and reviews of the
related quarterly financial statements. Additional fees in the amount of $22,500
were incurred in 2006 for other audit services provided by GT.
All Other Fees. No other fees were billed by GT to us during 2006 or
2005.
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 our principal accountant.
ADOPTION THE LONG-TERM INCENTIVE PLAN
The Board of Directors is proposing that stockholders adopt the AAON,
Inc. Long-Term Incentive Plan (the "Plan"). If the stockholders vote to adopt
the Plan we will have the ability to broaden the category of "awards" granted to
the eligible participants of such Plan beyond the grant of stock options
currently allowed under our existing Stock Option Plan
A summary description of the Plan is set forth below. You are being
asked to vote in favor of adopting the Plan as it has been approved by the Board
of Directors. The full text of the Plan is set forth in Appendix B to this Proxy
Statement.
Our 1992 Stock Option Plan which is currently in effect provides for
2,925,000 shares that may be issued pursuant to its terms. Of those shares,
options have previously been issued and exercised covering 2,058,686 shares, and
options entitling the holders thereof to an additional 831,253 shares upon
exercise are currently outstanding. These options shall remain outstanding.
If the stockholders do not vote to adopt the Long-Term Incentive Plan,
the currently existing Stock Option Plan will remain in effect.
THE BOARD OF DIRECTORS RECOMMENDS THAT THE STOCKHOLDERS VOTE "FOR" THE
ADOPTION OF THE LONG-TERM INCENTIVE PLAN.
New Plan Benefits
The future awards that will be made to eligible participants under the
Plan are subject to the discretion of the Compensation Committee of the Board of
Directors and, therefore, cannot be determined with certainty at this time.
Summary Description of AAON, Inc. Long-Term Incentive Plan
----------------------------------------------------------
General
The Plan is named the "AAON, Inc. Long-Term Incentive Plan." The
purpose of the Plan is to provide an incentive for employees, directors and
certain consultants and advisors of AAON or our subsidiaries to remain in our
service, to extend to them the opportunity to acquire a proprietary interest in
us so that they will apply their best efforts for our benefit and to aid us in
attracting able persons to enter our service or the service of our subsidiaries.
To accomplish this purpose, the Plan offers an ownership interest in us through
the distribution of awards ("Awards") including (i) incentive stock options
qualified as such under U.S. federal income tax laws ("Incentive Options"), (ii)
stock options that do not qualify as incentive stock options ("Nonstatutory
Options"), (iii) stock appreciation rights ("SARs"), (iv) restricted stock
awards ("Restricted Stock Awards"), and (v) performance units ("Performance
Units"). See "--Types of Awards."
-20-
No awards may be made under the Plan after the date that is ten years
from the date of stockholder approval of the last amendment to the Plan which
involved an increase in authorized shares of Common Stock subject to the Plan.
The Plan, in part, is intended to qualify under the provisions of
Section 422 of the Internal Revenue Code of 1986, as amended (the "Code"). The
Plan is not subject to the provisions of the Employee Retirement Income Security
Act of 1974, as amended ("ERISA").
Administration of the Plan
The Board of Directors has appointed the Compensation Committee (the
"Committee") to administer the Plan. The Committee has broad discretion to
administer the Plan, interpret its provisions, and adopt policies for
implementing the Plan. This discretion includes the ability to select the
recipient of an Award, determine the type and amount of each Award, establish
the terms of each Award, accelerate vesting or exercisability of an Award,
extend the exercise period for an Award, determine whether performance
conditions have been satisfied, waive conditions and provisions of an Award,
permit the transfer of an Award to family trusts and other persons and otherwise
modify or amend any Award under the Plan.
Persons Who May Participate in the Plan
Any person (a "Participant") may participate in the Plan if he or she
is (i) an employee of AAON or any of our subsidiaries, including officers and
directors who are also employees of AAON or of any of our subsidiaries, (ii) a
non-employee director, or (iii) any other person that the Committee designates
as eligible for an Award (other than Incentive Options) because the person
performs bona fide consulting or advisory services for us or any of our
subsidiaries (other than services in connection with the offer and sale of
securities in a capital-raising transaction).
A Participant under the Plan will be eligible to receive Nonstatutory
Options, SARs, Restricted Stock Awards and Performance Units. A Participant may
also be eligible to receive an Incentive Option if the Participant (i) is our
employee or an employee of one of our subsidiaries and (ii) immediately before
the time the Incentive Option is granted, the Participant does not own stock
possessing more than ten percent of the total combined voting power or value of
all classes of our stock or a subsidiary unless, at the time the Incentive
Option is granted, the exercise price of the Incentive Option is at least 110%
of the fair market value of the Common Stock underlying the Incentive Option and
the Incentive Option is not, by its terms, exercisable after the fifth
anniversary of the date of grant.
-21-
Types of Awards
Shares Subject to the Plan. The maximum aggregate number of shares of
Common Stock in respect of which awards may be granted for all purposes under
the Plan is 500,000. As of March 26, 2007, there were outstanding options to
acquire an aggregate of 831,253 shares of Common Stock under the our existing
1992 Stock Option Plan. The exercise prices for such stock options range from
$3.39 to $26.63. These options shall remain outstanding.
If Common Stock subject to any Award is not issued or transferred, or
ceases to be issuable or transferable for any reason, including (but not
exclusively) because an Award is forfeited, terminated, expires unexercised, is
settled in cash in lieu of Common Stock or is exchanged for other Awards, the
shares of Common Stock that were subject to that Award will again be available
for issue, transfer or exercise pursuant to Awards under the Plan to the extent
of such forfeiture, termination, expiration, settlement or exchange. The Common
Stock issued under the Plan may be shares originally issued by us, shares held
by us in treasury, shares which have been reacquired by us or shares which have
been bought on the market for the purposes of the Plan. There are no fees,
commissions or other charges applicable to the receipt of Common Stock under the
Plan.
Stock Options. We may grant to Participants (i) Incentive Options (only
to eligible Participants) and (ii) Nonstatutory Options. The Committee
determines the exercise price of each option granted under the Plan. The
exercise price for an Incentive Option must not be less than the fair market
value of the Common Stock on the date of grant, and the exercise price of
Nonstatutory Options must not be less than 85% of the fair market value of the
Common Stock on the date of grant. Stock options may be exercised as the
Committee determines, but not later than ten years from the date of grant in the
case of Incentive Options except as provided above with respect to a Participant
that owns stock possessing more than ten percent of the total combined voting
power or value of all classes of our stock or the stock of a subsidiary. At the
discretion of the Committee, holders may use shares of Common Stock to pay the
exercise price, including shares issuable upon exercise of the option. All
options issued under the Plan on or prior to the Record Date have an exercise
price equal to the fair market value of Common Stock as of the date of grant for
such options.
SARs. An SAR may be awarded in connection with or separate from a stock
option. An SAR is the right to receive an amount in cash or stock equal to the
excess of the fair market value of a share of the Common Stock on the date of
exercise over the exercise price specified in the agreement governing the SAR
(for SARs not granted in connection with a stock option) or the exercise price
of the related stock option (for SARs granted in connection with a stock
option). An SAR granted in connection with a stock option will entitle the
holder, upon exercise, to surrender the related stock option or portion thereof
relating to the number of shares for which the SAR is exercised. The surrendered
stock option or portion will then cease to be exercisable. Such an SAR is
exercisable only to the extent that the related stock option is exercisable. An
SAR granted independently of a stock option will be exercisable as the Committee
determines. The Committee may limit the amount payable upon exercise of any SAR.
SARs may be paid in cash, stock or a combination of cash and stock, as the
Committee provides in the agreement governing the SAR.
Restricted Stock. A Restricted Stock Award is a grant of shares of
Common Stock that are nontransferable and subject to risk of forfeiture until
specific conditions are met. The restrictions will lapse in accordance with a
schedule or other conditions as the Committee determines. During the restriction
period, the holder of a Restricted Stock Award may, in the Committee's
discretion, have certain rights as a stockholder, including the right to vote
the stock subject to the award or receive dividends on that stock. Restricted
stock may also be issued upon exercise or settlement of options, SARs or
Performance Units.
-22-
Performance Units. Performance Units are performance-based awards
payable in cash, stock or a combination of both. The basis for payment of
Performance Units for a given performance period is the achievement of
performance objectives determined by the Committee at the beginning of the
performance period. At or before the beginning of each performance period, the
Committee will establish the contingent value of each Performance Unit, for that
performance period, which may vary depending on the degree to which performance
objectives are met. Performance objectives may be based on any performance
measure or combination of measures as selected by the Committee. A performance
period is any period, as selected by the Committee, of up to ten fiscal years.
Performance Awards. We may grant awards subject to performance goals
that consist of one or more business criteria and a targeted level or levels of
performance with respect to such criteria. Performance awards to Covered
Employees are intended to constitute performance-based compensation within the
meaning of Section 162(m) of the Code and to comply with the exemption from the
deduction prohibitions of Section 162(m) of the Code. During any calendar year
in which the Plan is in effect, we may not grant performance awards in the form
of stock options, stock appreciation rights or restricted stock relating to more
than 20,000 shares of Common Stock to any one participant in the Plan, subject
to certain customary adjustments.
The business criteria that the we will use in establishing performance
goals for awards intended to comply with the exemption from the deduction
prohibitions of Section 162(m) of the Code will include one or more of the
following: (1) earnings per share; (2) revenue targets; (3) cash flow targets;
(4) cash flow return targets; (5) return on net assets, return on assets, return
on investment, return on capital, or return on equity; (6) an economic value
added formula; (7) operating margin or contribution margin; (8) net income,
pretax earnings, pretax earnings before interest, depreciation and amortization;
pretax operating earnings after interest expense and before incentives, service
fees, and extraordinary or special items; operating income; pretax earnings
before interest depreciation and/or amortization; (9) total shareholder return;
(10) debt reduction; and (11) any of the above goals determined on an absolute
or relative basis or as compared to the performance of a published or special
index deemed applicable by the Compensation Committee including, but not limited
to, the Standard & Poor's 500 Stock Index or a group of competitor companies,
including the group selected by us for purposes of the stock performance graph
contained in our Annual Report on Form 10-K or the proxy statement for our
annual meeting of stockholders.
Other Provisions
Tax Withholding. At the Committee's discretion and subject to
conditions that the Committee may impose, a participant's tax withholding with
respect to an award may be satisfied by the withholding of shares of Common
Stock issuable pursuant to the award or the delivery of previously owned shares
of Common Stock in either case based on the fair market value of the shares.
-23-
Merger, Recapitalization or Change of Control. If any change is made to
our capitalization, such as a stock split, stock combination, stock dividend,
exchange of shares or other recapitalization, merger or otherwise, which results
in an increase or decrease in the number of outstanding shares of Common Stock,
appropriate adjustments will be made by the Committee in the shares subject to
an Award under the Plan. In general, upon a change in control of AAON, if
approved by the Compensation Committee of the Board of Directors, (a) all
outstanding stock options and stock appreciation rights will immediately vest
and become exercisable by the holder, (b) the restriction period on all awards
of restricted stock will immediately be accelerated and the restrictions will
expire, (c) the target payout opportunity attainable under all performance units
will be deemed to be fully earned for all performance periods and the holder
will be paid (in cash within 30 days after the change in control for cash-based
performance units and in stock upon the change in control for stock-based
performance units) a pro rata portion of all associated targeted payout
opportunities based on the number of complete and partial calendar months
elapsed as of the date of the change in control. In the event that a change in
control involves a merger or consolidation in which AAON is not the surviving
entity or in which all of our outstanding shares of capital stock are exchanged
for shares of capital stock in another entity, or in the event a change in
control involves a sale of substantially all of our assets, and in connection
with the change in control securities, cash or property are issuable or
deliverable in exchange for our capital stock, then the holders of awards
granted under the Plan will be entitled to receive (in a form appropriate for
each particular form of award) the amount of securities, cash or property to
which they would be entitled as if their particular award were in the form of
our capital stock. The Committee has discretion to determine whether an Award
under the Plan will have change-of-control features. The Committee also has
discretion to vary the change-of-control features as it deems appropriate.
Amendment. The Board of Directors may (insofar as permitted by law and
applicable regulations of any exchange or inter-dealer quotation system on which
our stock may be listed) with respect to any shares which, at the time, are not
subject to Awards, suspend, discontinue, revise, or amend the Plan in any
respect whatsoever, and may amend any provision of the Plan or any Award
Agreement to make the Plan or the Award Agreement, or both, comply with Section
16(b) of the Exchange Act of 1934 (the "Exchange Act") and the exemptions
therefrom, the Code, ERISA, or any other law, rule or regulation that may affect
the Plan. The Board of Directors may also amend, modify, suspend or terminate
the Plan for the purpose of meeting or addressing any changes in other legal
requirements applicable to AAON or the Plan or for any other purpose permitted
by law. However, the Plan may not be amended without stockholder approval to
increase materially the aggregate number of shares of Common Stock that may be
issued under the Plan.
STOCKHOLDER PROPOSALS FOR 2007 ANNUAL MEETING
Stockholder proposals intended to be presented at the 2008 Annual
Meeting and to be included in our Proxy Statement must be received at the our
executive offices, 2425 South Yukon, Tulsa, Oklahoma 74107, no later than
December 20, 2007.
-24-
However, a stockholder who otherwise intends to present business at the
2008 Annual Meeting of stockholders, including nominations of persons to our
Board of Directors, must also comply with the requirements set forth in our
Bylaws. The Bylaws state, among other things, that to bring business before an
annual meeting or to nominate a person for our Board of Directors, a stockholder
must give written notice that complies with the Bylaws to the Secretary of AAON
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 2008 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, 2008, or
after March 21, 2008. 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 we receive notice of the matter
to be proposed between February 22, 2008 and March 21, 2008. 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 2007
Annual Meeting other than to elect the director for the ensuing year, approve
the vacancy on the Board of Directors and to vote on the Long-Term Incentive
Plan.
The cost of preparing, assembling and mailing all proxy solicitation
materials will be paid by us. It is contemplated that the solicitation will be
conducted only by use of the mails. We 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 our Common Stock registered in the
names of such brokers.
By Order of the Board of Directors
/s/ Norman H. Asbjornson
------------------------
Norman H. Asbjornson
President
April 11, 2007
-25-
Appendix A
Compensation Committee Charter
AAON, INC.
COMPENSATION COMMITTEE
CHARTER*
The Board of Directors (the "Board") of AAON, Inc. (the "Company") has
established a Compensation Committee (the "Committee") for the purpose of
carrying out the duties and responsibilities listed herein.
Compensation and Meetings
-------------------------
The Committee shall consist of at least two members of the Board, each
of whom shall satisfy the independence requirements under the listing standards
of NASDAQ.
Committee members shall be designated by resolution adopted by a
majority of the whole Board and may be removed by the Board in its discretion.
The Board may appoint additional or replacement members of the Committee from
time to time. The Board may appoint one member of the Committee to act as
Chairman of the Committee.
The Chairman will preside at each meeting of the Committee, and, in
consultation with the other members of the Committee, shall set the frequency of
meetings and the agenda of items to be addressed at each meeting. Minutes shall
be prepared for each meeting of the Committee, which minutes shall be submitted
to the Committee for approval at a later meeting.
The Committee may request any officer or employee of the Company or any
subsidiary thereof, or any representative of outside legal, accounting or other
advisors, to attend any meeting of the Committee.
Duties and Responsibilities
---------------------------
The Committee shall have the direct responsibility and authority of the
Board to perform the following duties:
1. Review and approve the Company's goals and objectives
relevant to the compensation of the Chief Executive Officer ("CEO") and
the Company's other executive officers;
2. Evaluate the performance of the CEO and of the Company's
other executive officers in accordance with policies and principles
established by the Committee from time to time, including the Company's
goals and objectives relevant to the compensation of the CEO and the
other executive officers;
-------------------
* No provision of this Charter is intended to create any right in favor of
any third party, including any stockholder, officer, director or employee
of the Company, in the event of a failure to comply with any provision
hereof.
-26-
3. Determine and approve, either as a Committee or (as
directed by the Board) together with other Board members who satisfy
the applicable independence requirements under the listing standards of
NASDAQ, the compensation level of the CEO and the other executive
officers based on the Committee's evaluation of the performance of the
CEO and the other executive officers, using those criteria deemed
appropriate by the Committee from time to time, including, with respect
to the long-term incentive component of the CEO's compensation, the
Company's performance and relative shareholder return, the value of
incentive awards granted to principal executive officers of comparable
companies and awards granted to the CEO of the Company in past years;
4. Review and determine the form and amount of compensation
of the non-management members of the Board, including cash, equity
based awards and other compensation, in accordance with guidelines and
general principles established by the Committee from time to time;
5. Administer, and make recommendations to the Board with
respect to, incentive-compensation plans and equity-based plans,
establish and verify annual performance targets and criteria for the
granting of options to the Company's officers and other employees,
review and approve the granting of options in accordance with such
criteria and determine potential bonus amounts;
6. Recommend from time to time such voluntary contributions
to the AAON, Inc. Savings and Investment Plan [401(k) plan] as the
Committee determines to be appropriate based on the Company's operating
results;
7. Produce an annual report on executive compensation, as
required by the Securities and Exchange Commission (the "SEC") for
inclusion in the Company's annual proxy statement filed with the SEC;
8. Report periodically to the Board on the actions and
deliberations of the Committee;
9. Review and reassess the adequacy of this Charter as
appropriate, and recommend changes to the Board as and where
appropriate;
10. Conduct an annual performance evaluation of the
Committee's performance and report the results of such evaluation to
the Board; and
11. Perform such other responsibilities as the Board may
from time to time direct.
Committee Resources
-------------------
The Committee shall also have the sole authority to retain and
terminate compensation consultants to assist it in evaluating the Company's
compensation plans, particularly those pertaining to its Board members, CEO and
other executive officers of the Company, and to approve the fees and other terms
relating to the provision of those services. In addition, the Committee shall
have the authority, without seeking prior Board approval, to retain outside
legal, accounting and other advisors, as the Committee determines necessary or
appropriate to assist it in carrying out its duties. The Company shall provide
appropriate funding, as determined by the Committee, for payment of compensation
to any advisors retained by the Committee.
-27-
Amendment
---------
This Charter may be amended from time to time by the Board, and any
amendment must be reported and disclosed as required by and in accordance with
applicable laws, rules and regulations.
-28-
Appendix B
AAON, INC.
LONG-TERM INCENTIVE PLAN
Scope and Purpose of the Plan
AAON, Inc., a Nevada, corporation (the "Corporation"), has adopted this
Long-Term Incentive Plan (the "Plan") to provide for the granting of:
(a) Incentive Options to certain Employees (Section 6);
(b) Nonstatutory Options to certain Employees, Non-employee
Directors and other persons (Section 6);
(c) Stock Appreciation Rights to certain Employees and other persons
(Section 7);
(d) Restricted Stock Awards to certain Employees and other persons
(Section 8); and
(e) Performance Units to certain Employees and other persons
(Section 9).
The purpose of the Plan is to provide an incentive for Employees,
directors and certain consultants and advisors of the Corporation or its
Subsidiaries to remain in the service of the Corporation or its Subsidiaries, to
extend to them the opportunity to acquire a proprietary interest in the
Corporation so that they will apply their best efforts for the benefit of the
Corporation, and to aid the Corporation in attracting able persons to enter the
service of the Corporation and its Subsidiaries.
SECTION 1. DEFINITIONS
As used in this Plan, the following terms have the meanings set forth
below:
1.1 "Award" means the grant of any form of Option, Performance Unit,
Reload Option, Restricted Stock Award or Stock Appreciation Right under the
Plan, whether granted singly, in combination, or in tandem, to a Holder pursuant
to the terms, conditions, and limitations that the Committee may establish in
order to fulfill the objectives of the Plan.
1.2 "Award Agreement" means the written document or agreement
delivered to Holder evidencing the terms, conditions and limitations of an Award
that the Corporation granted to that Holder.
1.3 "Board of Directors" means the board of directors of the
Corporation.
1.4 "Business Day" means any day other than a Saturday, a Sunday or
a day on which banking institutions in the State of Oklahoma are authorized or
obligated by law or executive order to close.
1.5 "Cause," with respect to any Holder that is an Employee, means
termination of the Holder's employment by the Corporation because of: (a) the
Holder's conviction of, or plea of nolo contendere to, a felony or crime
involving moral turpitude; (b) the Holder's personal dishonesty, incompetence,
willful misconduct, willful violation of any law, rule or regulation (other than
minor traffic violations or similar offenses) or breach of fiduciary duty which
involves personal profit; (c) the Holder's commission of material mismanagement
in the conduct of the Holder's duties as assigned to him or her by the Board of
Directors or the Holder's supervising officer or officers of the Corporation or
any Subsidiary; (d) the Holder's willful failure to execute or comply with the
policy of the Corporation or any of its Subsidiaries or the Holder's stated
duties as established by the Board of Directors or the Holder's supervising
officer or officers of the Corporation or any Subsidiary or the Holder's
intentional failure to perform the Holder's stated duties; or (e) substance
abuse or addiction on the part of the Holder. Notwithstanding the foregoing, in
the case of any Holder who, subsequent to the effective date of this Plan,
enters into an employment agreement with the Corporation or any Subsidiary that
contains the definition of "cause" (or any similar definition), then during the
term of such employment agreement the definition contained in such Employment
Agreement shall be the applicable definition of "cause" under the Plan as to
such Holder if such Employment Agreement expressly so provides.
1.6 "Change in Control" means the occurrence of any of the following
events:
-29-
(i) The acquisition by any individual, entity or group
(within the meaning of Section 13(d)(3) or 14(d)(2) of the Exchange
Act) (a "Person") of beneficial ownership (within the meaning of
Rule 13d-3 promulgated under the Exchange Act) of 50% or more of
either (x) the then outstanding shares of Common Stock of the
Corporation (the "Outstanding Corporation Common Stock") or (y) the
combined voting power of the then outstanding voting securities of
the Corporation entitled to vote generally in the election of
directors (the "Outstanding Corporation Voting Securities");
provided, however, that for purposes of this subsection (i), the
following acquisitions shall not constitute a Change of Control:
(A) any acquisition directly from the Corporation, (B) any
acquisition by the Corporation, (C) any acquisition by any employee
benefit plan (or related trust) sponsored or maintained by the
Corporation or any corporation controlled by the Corporation or (D)
any acquisition by any corporation pursuant to a transaction which
complies with clauses (A), (B) and (C) of paragraph (iii) below; or
(ii) Individuals who constitute the Incumbent Board
cease for any reason to constitute at least a majority of the Board
of Directors; or
(iii) Consummation of a reorganization, merger or
consolidation or sale or other disposition of all or substantially
all of the assets of the Corporation or an acquisition of assets of
another corporation (a "Business Combination"), in each case,
unless, following such Business Combination, (A) all or
substantially all of the individuals and entities who were the
beneficial owners, respectively, of the Outstanding Corporation
Common Stock and Outstanding Corporation Voting Securities
immediately prior to such Business Combination beneficially own,
directly or indirectly, more than 50% of, respectively, the then
outstanding shares of common stock and the combined voting power of
the then outstanding voting securities entitled to vote generally
in the election of directors, as the case may be, of the
corporation resulting from such Business Combination (including,
without limitation, a corporation which as a result of such
transaction owns the Corporation, or all or substantially all of
the Corporation's assets either directly or through one or more
subsidiaries) in substantially the same proportions as their
ownership, immediately prior to such Business Combination, of the
Outstanding Corporation Common Stock and Outstanding Corporation
Voting Securities, as the case may be, (B) no Person (excluding any
employee benefit plan (or related trust) of the Corporation or the
corporation resulting from such Business Combination) beneficially
owns, directly or indirectly, 20% or more of, respectively, the
then outstanding shares of common stock of the corporation
resulting from such Business Combination or the combined voting
power of the then outstanding voting securities of such corporation
except to the extent that such ownership of the Corporation existed
prior to the Business Combination and (C) at least a majority of
the members of the board of directors of the corporation resulting
from such Business Combination were members of the Incumbent Board
at the time of the execution of the initial agreement, or of the
action of the Board, providing for such Business Combination; or
(iv) Approval by the stockholders of the Corporation
of a complete liquidation or dissolution of the Corporation.
1.7 "Code" means the Internal Revenue Code of 1986, as amended.
1.8 "Committee" means the Compensation Committee of the Corporation
or a subcommittee appointed pursuant to Section 3 by either the Compensation
Committee or by the Board of Directors to administer this Plan.
1.9 "Common Stock" means the authorized common stock, par value
$.004 per share, as described in the Corporation's Articles of Incorporation.
1.10 "Common Stock Equivalent" means (without duplication with any
other Common Stock or Common Stock Equivalents) rights, warrants, options,
convertible securities, exchangeable securities or indebtedness, or other
rights, exercisable for or convertible or exchangeable into, directly or
indirectly, Common Stock or securities convertible or exchangeable into Common
Stock, whether at the time (or within sixty days of that date) the number of
shares of Common Stock Equivalents are determined, and that are traded or are of
the same class as securities that are traded on a national securities exchange
or quoted on the NASDAQ National Market System, NASDAQ, or National Quotation
Bureau Incorporated. The number of shares of Common Stock Equivalents
outstanding shall equal the number of shares of Common Stock plus the number of
shares of Common Stock issuable upon exercise, conversion or exchange of all
other Common Stock Equivalents.
1.11 "Corporation" means AAON, Inc., a Nevada corporation.
1.12 "Date of Grant" has the meaning given it in Paragraph 4.3.
1.13 "Disability" has the meaning given it in Paragraph 11.5.
-30-
1.14 "Effective Date" means the date upon which this Plan shall be
approved by the Board of Directors and shareholders of the Corporation. The Plan
will be deemed to be approved by the stockholders if it receives the affirmative
vote of the holders of a majority of the shares of stock of the Corporation
present or represented and entitled to vote at a meeting at which a quorum
representing a majority of all outstanding voting stock is, either in person or
by proxy, present and voting and duly held in accordance with the applicable
provisions of the Corporation's Bylaws
1.15 "Eligible Individuals" means (a) Employees, (b) Non employee
Directors and (c) any other Person that the Committee designates as eligible for
an Award (other than for Incentive Options) because the Person performs bona
fide consulting or advisory services for the Corporation or any of its
Subsidiaries (other than services in connection with the offer or sale of
securities in a capital raising transaction).
1.16 "Employee" means any employee of the Corporation or of any of
its Subsidiaries, including officers and directors of the Corporation who are
also employees of the Corporation or of any of its Subsidiaries.
1.17 "Exchange Act" means the Securities Exchange Act of 1934, as
amended.
1.18 "Exercise Notice" has the meaning given it in Paragraph 6.5.
1.19 "Exercise Price" has the meaning given it in Paragraph 6.4.
1.20 "Fair Market Value" means, for a particular day:
(a) If shares of Stock of the same class are listed or
admitted to unlisted trading privileges on any national or regional
securities exchange at the date of determining the Fair Market Value,
then the last reported sale price, regular way, on the composite tape
of that exchange on the last Business Day before the date in question
or, if no such sale takes place on that Business Day, the average of
the closing bid and asked prices, regular way, in either case as
reported in the principal consolidated transaction reporting system
with respect to securities listed or admitted to unlisted trading
privileges on that securities exchange; or
(b) If shares of Stock of the same class are not listed or
admitted to unlisted trading privileges as provided in Subparagraph
1.20(a) and if sales prices for shares of Stock of the same class in
the over-the-counter market are reported by the NASDAQ National Market
System (or a similar system then in use) at the date of determining the
Fair Market Value, then the last reported sales price so reported on
the last Business Day before the date in question or, if no such sale
takes place on that Business Day, the average of the high bid and low
asked prices so reported; or
(c) If shares of Stock of the same class are not listed or
admitted to unlisted trading privileges as provided in Subparagraph
1.20(a) and sales prices for shares of Stock of the same class are not
reported by the NASDAQ National Market System (or a similar system then
in use) as provided in Subparagraph 1.20(b), and if bid and asked
prices for shares of Stock of the same class in the over-the-counter
market are reported by NASDAQ (or, if not so reported, by the National
Quotation Bureau Incorporated) at the date of determining the Fair
Market Value, then the average of the high bid and low asked prices on
the last Business Day before the date in question; or
(d) If shares of Stock of the same class are not listed or
admitted to unlisted trading privileges as provided in Subparagraph
1.20(a) and sales prices or bid and asked prices therefor are not
reported by NASDAQ (or the National Quotation Bureau Incorporated) as
provided in Subparagraph 1.20(b) or Subparagraph 1.20(c) at the date of
determining the Fair Market Value, then the value determined in good
faith by the Committee, which determination shall be conclusive for all
purposes; or
(e) If shares of Stock of the same class are listed or
admitted to unlisted trading privileges as provided in Subparagraph
1.20(a) or sales prices or bid and asked prices therefor are reported
by NASDAQ (or the National Quotation Bureau Incorporated) as provided
in Subparagraph 1.20(b), Subparagraph 1.20(c) or Subparagraph 1.20(d)
at the date of determining the Fair Market Value, but the volume of
trading is so low that the Board of Directors determines in good faith
that such prices are not indicative of the fair value of the Stock,
then the value determined in good faith by the Committee, which
determination shall be conclusive for all purposes notwithstanding the
provisions of Subparagraphs 1.20(a), (b), (c) or (d).
For purposes of valuing Incentive Options, the Fair Market Value of Stock shall
be determined without regard to any restriction other than one that, by its
terms, will never lapse and will be determined on the date in question instead
of the last Business Day before the date in question.
-31-
1.21 "Holder" means an Eligible Individual to whom an Award has been
granted.
1.22 "Incentive Option" means an incentive stock option as defined
under Section 422 of the Code and regulations thereunder.
1.23 "Incumbent Board" means the individuals who, as of the Effective
Date, constitute the Board of Directors and any other individual who becomes a
director of the Corporation after that date and whose election was approved by
stockholders holding a majority of the Voting Securities or (in the case of a
vacancy in the board) by appointment by the Board of Directors, but excluding,
for this purpose, any such individual whose initial assumption of office occurs
as a result of an actual or threatened election contest with respect to the
election or removal of directors or other actual or threatened solicitation of
proxies or consents by or on behalf of a Person other than the Incumbent Board.
1.24 "NASDAQ" means the National Association of Securities Dealers,
Inc. Automated Quotations, Inc.
1.25 "Non-employee Director" means a director of the Corporation who
while a director is not an Employee.
1.26 "Nonstatutory Option" means a stock option that does not satisfy
the requirements of Section 422 of the Code or that is designated at the Date of
Grant or in the applicable Option Agreement to be an option other than an
Incentive Option.
1.27 "Non-Surviving Event" means an event of Restructure as described
in either subparagraph (b) or (c) of Paragraph 1.36.
1.28 "Option Agreement" means an Award Agreement for an Incentive
Option or a Nonstatutory Option.
1.29 "Option" means either an Incentive Option or a Nonstatutory
Option, or both.
1.30 "Performance Period" means a period of up to ten fiscal years of
the Corporation, as determined by the Committee with respect to any Performance
Unit, and over which performance is measured for the purpose of determining the
payment value of Performance Units.
1.31 "Performance Unit" means a unit representing a contingent right
to receive a specified amount of cash or shares of Stock at the end of a
Performance Period.
1.32 "Person" means any person or entity of any nature whatsoever,
specifically including (but not limited to) an individual, a firm, a company, a
corporation, a limited liability company, a partnership, a trust or other
entity. A Person, together with that Person's affiliates and associates (as
those terms are defined in Rule 12b-2 under the Exchange Act for purposes of
this definition only), and any Persons acting as a partnership, limited
partnership, joint venture, association, syndicate or other group (whether or
not formally organized), or otherwise acting jointly or in concert or in a
coordinated or consciously parallel manner (whether or not pursuant to any
express agreement), for the purpose of acquiring, holding, voting or disposing
of securities of the Corporation with that Person, shall be deemed a single
"Person."
1.33 "Plan" means the AAON, Inc. Long-Term Incentive Plan, as it may
be amended from time to time.
1.34 "Reload Option" has the meaning given it in Paragraph 6.9.
1.35 "Restricted Stock Award" means the grant or purchase, on the
terms and conditions that the Committee determines or on the terms and
conditions of Section 8, of Stock that is nontransferable or subject to
substantial risk of forfeiture until specific conditions are met.
1.36 "Restructure" means the occurrence of any one or more of the
following:
(a) The merger or consolidation of the Corporation with any
Person, whether effected as a single transaction or a series of related
transactions, with the Corporation remaining the continuing or
surviving entity of that merger or consolidation and the Stock
remaining outstanding and not changed into or exchanged for stock or
other securities of any other Person or of the Corporation, cash or
other property;
(b) The merger or consolidation of the Corporation with any
Person, whether effected as a single transaction or a series of related
transactions, with (i) the Corporation not being the continuing or
surviving entity of that merger or consolidation or (ii) the
Corporation remaining the continuing or surviving entity of that merger
or consolidation but all or a part of the outstanding shares of Stock
are changed into or exchanged for stock or other securities of any
other Person or the Corporation, cash, or other property; or
-32-
(c) The transfer, directly or indirectly, of all or
substantially all of the assets of the Corporation (whether by sale,
merger, consolidation, liquidation or otherwise) to any Person whether
effected as a single transaction or a series of related transactions.
1.37 "Retirement" means the separation of the Holder from employment
with the Corporation and its Subsidiaries on account of retirement.
1.38 "Rule 16b-3" means Rule 16b-3 under Section 16(b) of the
Exchange Act, or any successor rule, as it may be amended from time to time.
1.39 "SAR Exercise Price" has the meaning given it in Paragraph 1.44.
1.40 "Section 162(m)" means Section 162(m) of the Code and the rules
and regulations adopted from time to time thereunder, or any successor law or
rule as it may be amended from time to time.
1.41 "Section 409A" means Section 409A of the Code and the rules and
regulations adopted from time to time thereunder, or any successor law or rule
as it may be amended from time to time.
1.42 "Securities Act" means the Securities Act of 1933, as amended.
1.43 "Stock" means Common Stock, or any other securities that are
substituted for Stock as provided in Section 10.
1.44 "Stock Appreciation Right" means the right to receive an amount
equal to the excess of the Fair Market Value of a share of Stock (as determined
on the date of exercise) over, as appropriate, the Exercise Price of a related
Option or over a price specified in the related Award Agreement (the "SAR
Exercise Price") that is not less than eighty-five percent of the Fair Market
Value of the Stock on the Date of Grant of the Stock Appreciation Right.
1.45 "Subsidiary" means, with respect to any Person, any corporation,
limited partnership, limited liability company or other entity of which a
majority of the voting power of the voting equity securities or equity interest
is owned, directly or indirectly, by that Person.
1.46 "Total Shares" has the meaning given it in Paragraph 10.2.
1.47 "Voting Securities" means any securities that are entitled to
vote generally in the election of directors, in the admission of general
partners, or in the selection of any other similar governing body.
SECTION 2. SHARES OF STOCK SUBJECT TO THE PLAN
2.1 Maximum Number of Shares. Subject to the provisions of Section
10 of the Plan, the maximum aggregate number of shares of Stock in respect of
which Awards may be granted for all purposes under the Plan each year shall be
ten percent (10%) of the total outstanding shares of Stock as of the first day
of such year for which the Plan is in effect; [provided that such number shall
be increased in any year by the number of shares of Stock available for grant
hereunder in previous years but not covered by Awards granted hereunder in such
years]; and provided, further, that if any shares of Stock subject to an Award
are forfeited or if any Award based on shares of Stock is otherwise terminated
without issuance of such shares of Stock or other consideration in lieu of such
shares of Stock, the shares of Stock subject to such Award shall to the extent
of such forfeiture or termination, again be available for Awards under the Plan
if no participant shall have received any benefits of ownership in respect
thereof.
2.2 Description of Shares. The shares to be delivered under the Plan
shall be made available from (a) authorized but unissued shares of Stock, (b)
Stock held in the treasury of the Corporation, or (c) previously issued shares
of Stock reacquired by the Corporation, including shares purchased on the open
market, in each situation as the Board of Directors or the Committee may
determine from time to time at its sole option.
2.3 Registration and Listing of Shares. From time to time, the Board
of Directors and appropriate officers of the Corporation shall be, and are,
authorized to take whatever actions are necessary to file required documents
with governmental authorities, stock exchanges and other appropriate Persons to
make shares of Stock available for issuance pursuant to Awards.
-33-
SECTION 3. ADMINISTRATION OF THE PLAN
3.1 Committee. The Committee shall administer the Plan with respect
to all Eligible Individuals or may delegate all or part of its duties under this
Plan to a subcommittee or any executive officer of the Corporation, subject in
each case to such conditions and limitations as the Board of Directors may
establish, the Committee's Charter and subject to the following additional
requirements: (a) the Committee shall be constituted in a manner that satisfies
the requirements of Rule 16b-3.1, (i.e., composed solely of "non-employee
directors" as defined in such Rule) and shall administer the Plan with respect
to all Eligible Individuals who are subject to the "short-swing profits"
provisions of Section 16 of the Exchange Act in a manner that satisfies the
exemption from Section 16 pursuant to the requirements of Rule 16b-3; and (b)
the Committee shall be constituted in a manner that satisfies the requirements
of Section 162(m) (i.e., composed of two or more "outside directors"), which
Committee shall administer the Plan with respect to "performance-based
compensation" for all Eligible Individuals who are reasonably expected to be
"covered employees" as those terms are defined in Section 162(m), in order to
insure the deductibility of compensation paid as provided in such Section.
3.2 Committee's Powers. Subject to the Charter of the Compensation
Committee, the rules and regulations of NASDAQ or any exchange on which the
Corporation's stock may be listed from time to time (including, without
limitation, rules requiring the approval of the stockholders with respect to any
material amendment to the Plan), and subject also to the express provisions of
the Plan and any applicable law with which the Corporation intends the Plan to
comply, the Committee shall have the authority, in its sole and absolute
discretion, (a) to adopt, amend and rescind administrative and interpretive
rules and regulations relating to the Plan, including without limitation to
adopt and observe such procedures concerning the counting of Awards against the
Plan and individual maximums as it may deem appropriate from time to time; (b)
to determine the Eligible Individuals to whom, and the time or times at which,
Awards shall be granted; (c) to determine the amount of cash and the number of
shares of Stock, Stock Appreciation Rights, Restricted Stock Awards or
Performance Units, or any combination thereof, that shall be the subject of each
Award; (d) to determine the terms and provisions of each Award Agreement (which
need not be identical), including provisions defining or otherwise relating to
(i) the term and the period or periods and extent of exercisability of the
Options, (ii) the extent to which the transferability of shares of Stock issued
or transferred pursuant to any Award is restricted, (iii) the effect of
termination of employment on the Award, and (iv) the effect of approved leaves
of absence (consistent with any applicable regulations of the Internal Revenue
Service); (e) to accelerate, pursuant to Section 10, the time of exercisability
of any Option that has been granted or the time of vesting or settlement of any
Restricted Stock Award or Performance Unit; (f) to construe the respective Award
Agreements and the Plan; (g) to make determinations of the Fair Market Value of
the Stock pursuant to the Plan; (h) to delegate its duties under the Plan to
such agents as it may appoint from time to time, subject to Paragraph 3.1; and
(i) to make all other determinations, perform all other acts, and exercise all
other powers and authority necessary or advisable for administering the Plan,
including the delegation of those ministerial acts and responsibilities as the
Committee deems appropriate subject in all respects to the last two sentences of
Paragraph 6.12. The Committee may correct any defect, supply any omission or
reconcile any inconsistency in the Plan, in any Award, or in any Award Agreement
in the manner and to the extent it deems necessary or desirable to carry the
Plan into effect, and the Committee shall be the sole and final judge of that
necessity or desirability. The determinations of the Committee on the matters
referred to in this Paragraph 3.2 shall be final and conclusive. The Committee
shall not have the power to terminate or materially modify or materially amend
the Plan. Those powers are vested in the Board of Directors, subject to
requisite approval of the stockholders of the Corporation.
3.3 Transferability of Awards. Notwithstanding any limitation on a
Holder's right to transfer an Award, the Committee may (in its sole discretion)
permit a Holder to transfer an Award, or may cause the Corporation to grant an
Award that otherwise would be granted to an Eligible Individual, in any of the
following circumstances: (a) pursuant to a qualified domestic relations order,
(b) to a trust established for the benefit of the Eligible Individual or one or
more of the children, grandchildren or spouse of the Eligible Individual; (c) to
a limited partnership in which all the interests are held by the Eligible
Individual and that Person's children, grandchildren or spouse; or (d) to
another Person in circumstances that the Committee believes will result in the
Award continuing to provide an incentive for the Eligible Individual to remain
in the service of the Corporation or its Subsidiaries and apply his or her best
efforts for the benefit of the Corporation or its Subsidiaries. If the Committee
determines to allow such transfers or issuances of Awards, any Holder or
Eligible Individual desiring such transfers or issuances shall make application
therefor in the manner and time that the Committee specifies and shall comply
with such other requirements as the Committee may require to assure compliance
with all applicable laws, including securities laws, and to assure fulfillment
of the purposes of this Plan. The Committee shall not authorize any such
transfer or issuance if it may not be made in compliance with all applicable
federal, state and foreign securities laws. The granting of permission for such
an issuance or transfer shall not obligate the Corporation to register the
shares of Stock to be issued under the applicable Award.
SECTION 4. ELIGIBILITY AND PARTICIPATION
4.1 Eligible Individuals. Awards may be granted pursuant to the Plan
only to persons who are Eligible Individuals at the time of the grant thereof or
in connection with the severance or retirement of Eligible Individuals.
-34-
4.2 Grant of Awards. Subject to the express provisions of the Plan,
the Committee shall determine which Eligible Individuals shall be granted Awards
from time to time. In making grants, the Committee shall take into consideration
the contribution the potential Holder has made or may make to the success of the
Corporation or its Subsidiaries and such other considerations as the Board of
Directors may from time to time specify. The Committee shall also determine the
number of shares or cash amounts subject to each of the Awards and shall
authorize and cause the Corporation to grant Awards in accordance with those
determinations.
4.3 Date of Grant. The date on which an Award is granted (the "Date
of Grant") shall be the date specified by the Committee as the effective date or
date of grant of an Award or, if the Committee does not so specify, shall be the
date as of which the Committee adopts the resolution approving the offer of an
Award to an individual, including the specification of the number (or method of
determining the number) of shares of Stock and the amount (or method of
determining the amount) of cash to be subject to the Award, even though certain
terms of the Award Agreement may not be determined at that time and even though
the Award Agreement may not be executed or delivered until a later time. In no
event shall a Holder gain any rights in addition to those specified by the
Committee in its grant, regardless of the time that may pass between the grant
of the Award and the actual execution or delivery of the Award Agreement by the
Corporation or the Holder. The Committee may invalidate an Award at any time
before the Award Agreement is signed by the Holder (if signature is required) or
is delivered to the Holder (if signature is not required), and such Award shall
be treated as never having been granted.
4.4 Award Agreements. Each Award granted under the Plan shall be
evidenced by an Award Agreement that incorporates those terms that the Committee
shall deem necessary or desirable. More than one Award may be granted under the
Plan to the same Eligible Individual and be outstanding concurrently. If an
Eligible Individual is granted both one or more Incentive Options and one or
more Nonstatutory Options, those grants shall be evidenced by separate Award
Agreements, one for each of the Incentive Option grants and one for each of the
Nonstatutory Option grants.
4.5 Limitation for Incentive Options. Notwithstanding any provision
contained herein to the contrary, (a) a person shall not be eligible to receive
an Incentive Option unless he or she is an Employee of the Corporation or a
corporate Subsidiary (but not a partnership or other non-corporate Subsidiary),
and (b) a person shall not be eligible to receive an Incentive Option if,
immediately before the time the Incentive Option is granted, that person owns
(within the meaning of Sections 422 and 424 of the Code) stock possessing more
than ten percent of the total combined voting power or value of all classes of
stock of the Corporation or a Subsidiary. Nevertheless, this Subparagraph 4.5(b)
shall not apply if, at the time the Incentive Option is granted, the Exercise
Price of the Incentive Option is at least one hundred and ten percent of the
Fair Market Value of the Stock underlying the Incentive Option and the Incentive
Option is not, by its terms, exercisable after the expiration of five years from
the Date of Grant.
4.6 No Right to Award. The adoption of the Plan shall not be deemed
to give any person a right to be granted an Award.
SECTION 5. PERFORMANCE AWARDS
5.1 Covered Employee. For purposes of this Section 5 "Covered
Employee" shall have the meaning given to such term under Section 162(m), which
section generally limits the amount that can be deducted by a public company for
compensation paid to a "covered employee". The foregoing notwithstanding,
because the Committee cannot determine with certainty whether a given individual
will be a Covered Employee with respect to a fiscal year that has not yet been
completed, the term Covered Employee as used herein shall mean only a person
designated by the Committee, at the time of grant of Performance Awards, who is
likely to be a Covered Employee with respect to that fiscal year.
5.2 Performance Award. For purposes of this Section 5 "Performance
Award" shall mean any Award the grant, exercise or settlement of which is
subject to one or more of the performance standards set forth in this Section 5.
5.3 Qualified Member. For purposes of this Section 5 "Qualified
Member" means a member of the Committee who is an "outside" director within the
meaning of Section 162(m).
5.4 Manner of Exercise of Committee Authority. At any time that a
member of the Committee is not a Qualified Member, any action of the Committee
relating to an Award intended by the Committee to qualify as "performance-based
compensation" within the meaning of Section 162(m), may be taken either (i) by a
subcommittee, designated by the Committee, composed solely of two or more
Qualified Members, or (ii) by the Committee but with each such member who is not
a Qualified Member abstaining or recusing himself or herself from such action;
provided, however, that, upon such abstention or recusal, the Committee remains
composed solely of two or more Qualified Members. Such action, authorized by
such a subcommittee or by the Committee upon the abstention or recusal of such
non-Qualified Member(s), shall be the action of the Committee for purposes of
the Plan. Any action of the Committee shall be final, conclusive and binding on
all persons, including the Corporation, its subsidiaries, Eligible Individuals,
beneficiaries, transferees or other persons claiming rights from or through an
Eligible Individual, and shareholders.
-35-
5.5 Individual Award Limitations. In each calendar year during any
part of which the Plan is in effect, a Participant may not be granted
Performance Awards relating to more than 20,000 shares of Common Stock (subject
to adjustment in a manner consistent with any adjustment made pursuant to
Section 10) under each of Sections 6, 7 and 8 with a maximum limitation of
50,000 shares of Common Stock in the aggregate. If an Option is canceled, the
canceled Option continues to be counted against the maximum number of shares for
which Options may be granted to the Participant under the Plan, as set forth in
this Section 5.5. If, after grant, the exercise price of an Option is reduced,
the transaction is treated as a cancellation of the Option and a grant of a new
Option for purposes of this Section 5.5. In such a case, both the Option that is
deemed to be canceled and the Option that is deemed to be granted reduce the
maximum number of shares for which Options may be granted to the Covered
Employee under the Plan, as set forth in this Section 5.5. Such cancellation
will likewise occur in the case of a Stock Appreciation Right where, after the
Award is made, the base amount on which stock appreciation is calculated is
reduced.
5.6 General. The Committee shall retain full power and discretion to
accelerate, waive or modify, at any time, any term or condition of a Performance
Award that is not mandatory under the Plan; provided, however, that
notwithstanding any other provision of the Plan the Committee shall not have any
discretion to accelerate, waive or modify any term or condition of an Award that
is intended to qualify as "performance-based compensation" that is deductible
for purposes of Section 162(m) if such discretion would cause the Performance
Award not to so qualify. In addition, with respect to Performance Awards that
are subject to the potential additional excise tax on certain deferred
compensation arrangements covered by Section 409A, the Committee shall not have
the authority to accelerate or postpone the timing or settlement of a
Performance Award in a manner that would cause such award to become subject to
the such additional excise tax (or interest and penalty related thereto) under
Section 409A.
5.7 Performance Conditions. The right of an Eligible Individual to
exercise or receive a grant or settlement of any Award, and the timing thereof,
may be subject to such performance conditions as may be specified by the
Committee. The Committee may use such business criteria and other measures of
performance as it may deem appropriate in establishing any performance
conditions.
5.8 Performance Awards Granted to Designated Covered Employees. If
the Committee determines that a Performance Award to be granted to an Eligible
Individual who is designated by the Committee as likely to be a Covered Employee
should qualify as "performance-based compensation" for purposes of Section
162(m), the grant, exercise and/or settlement of such Performance Award shall be
contingent upon achievement of preestablished performance goals and other terms
set forth in this Section 5.8.
(a) Performance Goals Generally. The performance goals for
such Performance Awards shall consist of one or more business criteria and a
targeted level or levels of performance with respect to each of such criteria,
as specified by the Committee consistent with this Section 5.8. Performance
goals shall be objective and shall otherwise meet the requirements of Section
162(m), including the requirement that the level or levels of performance
targeted by the Committee result in the achievement of performance goals being
"substantially uncertain." The Committee may determine that such Performance
Awards shall be granted, exercised and/or settled upon achievement of any one
performance goal or that two or more of the performance goals must be achieved
as a condition to grant, exercise and/or settlement of such Performance Awards.
Performance goals may differ for Performance Awards granted to any one Eligible
Individual or to different Eligible Individuals.
(b) Business Criteria. One or more of the following business
criteria for the Corporation, on a consolidated basis, and/or for specified
subsidiaries or business or geographical units of the Corporation (except with
respect to the total shareholder return and earnings per share criteria), shall
be used by the Committee in establishing performance goals for such Performance
Awards: (i) earnings per share; (ii) revenue targets; (iii) cash flow targets;
(iv) cash flow return targets; (v) return on net assets, return on assets,
return on investment, return on capital, return on equity; (vi) an economic
value added formula; (vii) operating margin or contribution margin; (viii) net
income; pretax earnings; pretax earnings before interest, depreciation and
amortization; pretax operating earnings after interest expense and before
incentives, service fees, and extraordinary or special items; operating income;
pretax earnings before interest depreciation and/or amortization; (ix) total
shareholder return; (x) debt reduction; and (xi) any of the above goals
determined on an absolute or relative basis or as compared to the performance of
a published or special index deemed applicable by the Committee including, but
not limited to, the Standard & Poor's 500 Stock Index or a group of peer
competitor companies, including the group selected by the Corporation for
purposes of the stock performance graph contained in the proxy statement for the
Corporation's annual meetings of stockholders.
(c) Performance Period; Timing for Establishing Performance
Goals. Achievement of performance goals in respect of such Performance Awards
shall be measured over a performance period of up to ten years, as specified by
the Committee. Performance goals shall be established not later than 90 days
after the beginning of any performance period applicable to such Performance
Awards, or at such other date as may be required or permitted for
"performance-based compensation" under Section 162(m).
-36-
(d) Settlement of Performance Awards; Other Terms. After the
end of each performance period, the Committee shall determine the amount, if
any, of the Performance Award payable to each Covered Employee. Settlement of
such Performance Awards shall be in cash, Common Stock, other Awards or other
property, as determined in the sole discretion of the Committee. The Committee
may, in its discretion, reduce the amount of a settlement otherwise to be made
in connection with such Performance Awards, but may not exercise discretion to
increase any such amount payable to a Covered Employee in respect of a
Performance Award.
5.9 Written Determinations. All determinations by the Committee as
to the establishment of performance goals, the amount of any potential
individual Performance Awards, and the achievement of performance goals relating
to Performance Awards, shall be made in writing in the case of any Award
intended to qualify under Section 162(m). The Committee may not delegate any
responsibility relating to such Performance Awards. The determination as to
whether any performance goal, with respect to any Award, has been satisfied
shall be made prior to the payment of any compensation relating to an Award.
5.10 Performance Awards under Code Section 162(m) of the Code. It is
the intent of the Corporation that Performance Awards granted to persons who are
designated by the Committee as likely to be Covered Employees within the meaning
of Section 162(m) shall, if so designated by the Committee, constitute
"performance-based compensation", and therefore qualify as a deductible expense
within the provisions of Section 162(m). Accordingly, the terms of this Section
5, including the definitions of Covered Employee and other terms used herein,
shall be interpreted in a manner consistent with Section 162(m). If any
provision of the Plan as in effect on the date of adoption or any agreements
relating to Performance Awards that are designated as intended to comply with
Section 162(m) does not comply or is inconsistent with the requirements of
Section 162(m), such provision shall be construed or deemed amended to the
extent necessary to conform to such requirements.
SECTION 6. TERMS AND CONDITIONS OF OPTIONS
All Options granted under the Plan shall comply with, and the related
Option Agreements shall be deemed to include and be subject to, the terms and
conditions set forth in this Section 6 (to the extent each term and condition
applies to the form of Option) and also to the terms and conditions set forth in
Paragraph 10.1 and Section 11; provided, however, that the Committee may
authorize an Option Agreement that expressly contains terms and provisions that
differ from the terms and provisions of Section 11. The Committee may also
authorize an Option Agreement that contains any or all of the terms and
provisions of Paragraphs 10.2 and 10.3 or that contains terms and provisions
dealing with similar subject matter differently than do those Paragraphs;
nevertheless, no term or provision of Paragraph 10.2 or 10.3 (or any such
differing term or provision) shall apply to an Option Agreement unless the
Option Agreement expressly states that such term or provision applies.
6.1 Number of Shares. Each Option Agreement shall state the total
number of shares of Stock to which it relates.
6.2 Vesting. Each Option Agreement shall state the time, periods or
other conditions on which the right to exercise the Option or a portion thereof
shall vest and the number (or method of determining the number) of shares of
Stock for which the right to exercise the Option shall vest at each such time,
period or satisfaction of condition.
6.3 Expiration of Options. Nonstatutory Options and Incentive
Options may be exercised during the term determined by the Committee and set
forth in the Option Agreement; provided that no Incentive Option shall be
exercised after the expiration of a period of ten years commencing on the Date
of Grant of the Incentive Option.
6.4 Exercise Price. Each Option Agreement shall state the exercise
price per share of Stock (the "Exercise Price"). The exercise price per share of
Stock subject to an Incentive Option shall not be less than the greater of (a)
the par value per share of the Stock or (b) 100% of the Fair Market Value per
share of the Stock on the Date of Grant of the Option. The exercise price per
share of Stock subject to a Nonstatutory Option shall not be less than the
greater of (a) the par value per share of the Stock or (b) eighty-five percent
of the Fair Market Value per share of the Stock on the Date of Grant of the
Option.
6.5 Method of Exercise. Each Option shall be exercisable only by
written, recorded electronic or other notice of exercise in the manner specified
by the Committee from time to time (the "Exercise Notice") delivered to the
Corporation or to the Person designated by the Committee during the term of the
Option, which notice shall (a) state the number of shares of Stock with respect
to which the Option is being exercised, (b) be signed or otherwise given by the
Holder of the Option or by the person authorized to exercise the Option in the
event of the Holder's death or disability, (c) be accompanied by the Exercise
Price for all shares of Stock for which the Option is exercised, unless
provision for the payment of the Exercise Price has been made pursuant to
Paragraph 6.7 or 6.8 or in another manner permitted by law and approved in
advance by the Committee, and (d) include such other information, instruments,
and documents as may be required to satisfy any other condition to exercise
contained in the Option Agreement. The Option shall not be deemed to have been
exercised unless all of the requirements of the preceding provisions of this
Paragraph 6.5 have been satisfied.
-37-
6.6 Incentive Option Exercises. During the Holder's lifetime, only
the Holder may exercise an Incentive Option. The Holder of an Incentive Option
shall immediately notify the Corporation in writing of any disposition of the
Stock acquired pursuant to the Incentive Option that would disqualify the
Incentive Option from the incentive option tax treatment afforded by Section 422
of the Code. The notice shall state the number of shares disposed of, the dates
of acquisition and disposition of the shares, and the consideration received
upon that disposition.
6.7 Medium and Time of Payment. The Exercise Price of an Option
shall be payable in full upon the exercise of the Option (a) in cash or by an
equivalent means (such as that specified in Paragraph 6.8) acceptable to the
Committee, (b) on the Committee's prior consent, with shares of Stock owned by
the Holder (including shares received upon exercise of the Option or restricted
shares already held by the Holder) and having a Fair Market Value at least equal
to the aggregate Exercise Price payable in connection with such exercise, or (c)
by any combination of clauses (a) and (b). If the Committee chooses to accept
shares of Stock in payment of all or any portion of the Exercise Price, then
(for purposes of payment of the Exercise Price) those shares of Stock shall be
deemed to have a cash value equal to their aggregate Fair Market Value
determined as of the date of the delivery of the Exercise Notice. If the
Committee elects to accept shares of restricted Stock in payment of all or any
portion of the Exercise Price, then an equal number of shares issued pursuant to
the exercise shall be restricted on the same terms and for the restriction
period remaining on the shares used for payment.
6.8 Payment with Sale Proceeds. In addition, at the request of the
Holder and to the extent permitted by applicable law, the Committee may (but
shall not be required to) approve arrangements with a brokerage firm under which
that brokerage firm, on behalf of the Holder, shall pay to the Corporation the
Exercise Price of the Option being exercised (either as a loan to the Holder or
from the proceeds of the sale of Stock issued pursuant to that exercise of the
Option), and the Corporation shall promptly cause the exercised shares to be
delivered to the brokerage firm. Such transactions shall be effected in
accordance with the procedures that the Committee may establish from time to
time.
6.9 Reload Provisions. Options may contain a provision pursuant to
which a Holder who pays all or a portion of the Exercise Price of an Option or
the tax required to be withheld pursuant to the exercise of an Option by
surrendering shares of Stock shall automatically be granted an Option for the
purchase of the number of shares of Stock equal to the number of shares
surrendered (a "Reload Option"). The Date of Grant of the Reload Option shall be
the date on which the Holder surrenders the shares of Stock in respect of which
the Reload Option is granted. The Reload Option shall have an Exercise Price
equal to the Fair Market Value of a share of Stock on the Date of Grant of the
Reload Option and shall have a term that is no longer than the original term of
the underlying Option.
6.10 Limitation on Aggregate Value of Shares That May Become First
Exercisable During any Calendar Year Under an Incentive Option. With respect to
any Incentive Option granted under this Plan, the aggregate Fair Market Value of
shares of Stock subject to an Incentive Option and the aggregate Fair Market
Value of shares of Stock or stock of any Subsidiary (or a predecessor of the
Corporation or a Subsidiary) subject to any other incentive stock option (within
the meaning of Section 422 of the Code) of the Corporation or its Subsidiaries
(or a predecessor corporation of any such corporation) that first become
purchasable by a Holder in any calendar year may not (with respect to that
Holder) exceed $100,000, or such other amount as may be prescribed under Section
422 of the Code or applicable regulations or rulings from time to time. As used
in the previous sentence, Fair Market Value shall be determined as of the date
the Incentive Option is granted. For purposes of this Paragraph 6.10
"predecessor corporation" means (a) a corporation that was a party to a
transaction described in Section 424(a) of the Code (or which would be so
described if a substitution or assumption under that Section had been effected)
with the Corporation, (b) a corporation which, at the time the new incentive
stock option (within the meaning of Section 422 of the Code) is granted, is a
Subsidiary of the Corporation or a predecessor corporation of any such
corporations, or (c) a predecessor corporation of any such corporations. Failure
to comply with this provision shall not impair the enforceability or
exercisability of any Option, but shall cause the excess amount of shares to be
reclassified in accordance with the Code.
6.11 No Fractional Shares. The Corporation shall not in any case be
required to sell, issue, or deliver a fractional share with respect to any
Option. In lieu of the issuance of any fractional share of Stock, the
Corporation shall pay to the Holder an amount in cash equal to the same fraction
(as the fractional Stock) of the Fair Market Value of a share of Stock
determined as of the date of the applicable Exercise Notice.
-38-
6.12 Modification, Extension and Renewal of Options. Subject to the
terms and conditions of and within the limitations of the Plan and any
applicable law, and any consent required by the last two sentences of this
Paragraph 6.12, the Committee may (a) modify, extend or renew outstanding
Options granted under the Plan, (b) accept the surrender of Options outstanding
hereunder (to the extent not previously exercised) and authorize the granting of
new Options in substitution for outstanding Options (to the extent not
previously exercised), and (c) amend the terms of an Incentive Option at any
time to include provisions that have the effect of changing the Incentive Option
to a Nonstatutory Option. Notwithstanding anything herein, the Committee may not
"reprice" any Option. "Reprice" means any of the following or any other action
that has the same effect: (i) amending an Option to reduce its exercise price,
(ii) canceling an Option at a time when its exercise price exceeds the Fair
Market Value of a share of Stock in exchange for an Option, Restricted Stock
Award or other equity award unless the cancellation and exchange occurs in
connection with a merger, acquisition, spin-off or other similar corporate
transaction, or (iii) taking any other action that is treated as a repricing
under generally accepted accounting principles, provided that nothing in this
Paragraph 6.12 shall prevent the Committee from making adjustments pursuant to
Section 10. Without the consent of the Holder, the Committee may not modify any
outstanding Options so as to specify a higher Exercise Price or accept the
surrender of outstanding Incentive Options and authorize the granting of new
Options in substitution therefor specifying a higher Exercise Price. In
addition, no modification of an Option granted hereunder shall, without the
consent of the Holder, materially alter or impair any rights of the Holder or
materially increase the obligations of a Holder under any Option theretofore
granted to that Holder under the Plan except, with respect to Incentive Options,
as may be necessary to satisfy the requirements of Section 422 of the Code or as
permitted in clause (c) of this Paragraph 6.12.
6.13 Other Agreement Provisions. The Option Agreements authorized
under the Plan shall contain such provisions in addition to those required by
the Plan (including, without limitation, restrictions or the removal of
restrictions upon the exercise of the Option and the retention or transfer of
shares thereby acquired) as the Committee may deem advisable. Each Option
Agreement shall identify the Option evidenced thereby as an Incentive Option or
Nonstatutory Option, as the case may be, and no Option Agreement shall cover
both an Incentive Option and a Nonstatutory Option. Each Agreement relating to
an Incentive Option granted hereunder shall contain such limitations and
restrictions upon the exercise of the Incentive Option to which it relates as
shall be necessary for the Incentive Option to which such Agreement relates to
constitute an incentive stock option, as defined in Section 422 of the Code.
SECTION 7. STOCK APPRECIATION RIGHTS
All Stock Appreciation Rights granted under the Plan shall comply with,
and the related Award Agreements shall be deemed to include and be subject to,
the terms and conditions set forth in this Section 7 (to the extent each term
and condition applies to the form of Stock Appreciation Right) and also to the
terms and conditions set forth in Paragraph 10.1 and Section 11; provided,
however, that the Committee may authorize an Award Agreement relating to a Stock
Appreciation Right that expressly contains terms and provisions that differ from
the terms and provisions of Section 11. The Committee may also authorize an
Award Agreement relating to a Stock Appreciation Right that contains any or all
of the terms and provisions of Paragraphs 10.2 and 10.3 or that contains terms
and provisions dealing with similar subject matter differently than do those
Paragraphs; nevertheless, no term or provision of Paragraph 10.2 or 10.3 (or any
such differing term or provision) shall apply to an Award Agreement relating to
a Stock Appreciation Right unless the Award Agreement expressly states that such
term or provision applies.
7.1 Form of Right. A Stock Appreciation Right may be granted to an
Eligible Individual (a) in connection with an Option, either at the time of
grant or at any time during the term of the Option, or (b) without relation to
an Option.
7.2 Rights Related to Options. A Stock Appreciation Right granted
pursuant to an Option shall entitle the Holder, upon exercise, to surrender that
Option or any portion thereof, to the extent unexercised, and to receive payment
of an amount computed pursuant to Subparagraph 7.2(b). That Option shall then
cease to be exercisable to the extent surrendered. Stock Appreciation Rights
granted in connection with an Option shall be subject to the terms of the Award
Agreement governing the Option, which shall comply with the following provisions
in addition to those applicable to Options:
(a) Exercise and Transfer. Subject to Paragraph 11.10, a
Stock Appreciation Right granted in connection with an Option shall be
exercisable only at such time or times and only to the extent that the
related Option is exercisable and shall not be transferable except to
the extent that the related Option is transferable. To the extent that
an Option has been exercised, the Stock Appreciation Rights granted in
connection with that Option shall terminate.
(b) Value of Right. Upon the exercise of a Stock Appreciation
Right related to an Option, the Holder shall be entitled to receive
payment from the Corporation of an amount determined by multiplying:
(i) The difference obtained by subtracting the
Exercise Price of a share of Stock specified in the related
Option from the Fair Market Value of a share of Stock on the
date of exercise of the Stock Appreciation Right, by
(ii) The number of shares as to which that Stock
Appreciation Right has been exercised.
7.3 Right Without Option. A Stock Appreciation Right granted without
relationship to an Option shall be exercisable as determined by the Committee
and set forth in the Award Agreement governing the Stock Appreciation Right,
which Award Agreement shall comply with the following provisions:
-39-
(a) Number of Shares. Each Award Agreement shall state the
total number of shares of Stock to which the Stock Appreciation Right
relates.
(b) Vesting. Each Award Agreement shall state the time,
periods or other conditions on which the right to exercise the Stock
Appreciation Right or a portion thereof shall vest and the number of
shares of Stock for which the right to exercise the Stock Appreciation
Right shall vest at each such time, period or satisfaction of
condition.
(c) Expiration of Rights. Each Award Agreement shall state
the date at which the Stock Appreciation Rights shall expire if not
previously exercised.
(d) Value of Right. A Stock Appreciation Right granted
without relationship to an Option shall entitle the Holder, upon
exercise of the Stock Appreciation Right, to receive payment of an
amount determined by multiplying:
(i) The difference obtained by subtracting the SAR
Exercise Price from the Fair Market Value of a share of Stock
on the date of exercise of that Stock Appreciation Right, by
(ii) The number of rights as to which the Stock
Appreciation Right has been exercised.
7.4 Limitations on Rights. Notwithstanding Subparagraph 7.2(b) and
Subparagraph 7.3(d), the Committee may limit the amount payable upon exercise of
a Stock Appreciation Right. Any such limitation must be determined as of the
Date of Grant and be noted on the instrument evidencing the Stock Appreciation
Right.
7.5 Payment of Rights. Payment of the amount determined under
Subparagraph 7.2(b) or Subparagraph 7.3(d) and Paragraph 7.4 may, in the sole
discretion of the Committee, be made solely in whole shares of Stock valued at
Fair Market Value on the date of exercise of the Stock Appreciation Right or, in
the sole discretion of the Committee, solely in cash or a combination of cash
and Stock. If the Committee decides to make full payment in shares of Stock and
the amount payable results in a fractional share, payment for the fractional
share shall be made in cash.
7.6 Other Agreement Provisions. The Award Agreements authorized
relating to Stock Appreciation Rights shall contain such provisions in addition
to those required by the Plan (including, without limitation, restrictions or
the removal of restrictions upon the exercise of the Stock Appreciation Right
and the retention or transfer of shares thereby acquired) as the Committee may
deem advisable.
SECTION 8. RESTRICTED STOCK AWARDS
All Restricted Stock Awards granted under the Plan shall comply with,
and the related Award Agreements shall be deemed to include, and be subject to
the terms and conditions set forth in this Section 8 and also to the terms and
conditions set forth in Paragraph 10.1 and Section 11; provided, however, that
the Committee may authorize an Award Agreement relating to a Restricted Stock
Award that expressly contains terms and provisions that differ from the terms
and provisions of Section 11. The Committee may also authorize an Award
Agreement relating to a Restricted Stock Award that contains any or all of the
terms and provisions of Paragraphs 10.2 and 10.3 or that contains terms and
provisions dealing with similar subject matter differently than do those
Paragraphs; nevertheless, no term or provision of Paragraph 10.2 or 10.3 (or any
such differing term or provision) shall apply to an Award Agreement relating to
a Restricted Stock Award unless the Award Agreement expressly states that such
term or provision applies.
8.1 Restrictions. All shares of Restricted Stock Awards granted or
sold pursuant to the Plan shall be subject to the following conditions:
(a) Transferability. The shares may not be sold, transferred
or otherwise alienated or hypothecated until the restrictions are
removed or expire.
(b) Conditions to Removal of Restrictions. Conditions to
removal or expiration of the restrictions may include, but are not
required to be limited to, continuing employment or service as a
director, officer, consultant or advisor or achievement of performance
objectives described in the Award Agreement.
(c) Legend. Each certificate representing Restricted Stock
Awards granted pursuant to the Plan shall bear a legend making
appropriate reference to the restrictions imposed.
-40-
(d) Possession. At its sole discretion, the Committee may (i)
authorize issuance of a certificate for shares in the Holder's name
only upon lapse of the applicable restrictions, (ii) require the
Corporation, transfer agent or other custodian to retain physical
custody of the certificates representing Restricted Stock Awards during
the restriction period and may require the Holder of the Award to
execute stock powers, endorsed or in blank, for those certificates and
deliver those stock powers to the Corporation, transfer agent or
custodian, or (iii) may require the Holder to enter into an escrow
agreement providing that the certificates representing Restricted Stock
Awards granted or sold pursuant to the Plan shall remain in the
physical custody of an escrow holder until all restrictions are removed
or expire. The Corporation may issue shares subject to stop-transfer
restrictions or may issue such shares subject only to the restrictive
legend described in subparagraph 8.1(c).
(e) Other Conditions. The Committee may impose other
conditions on any shares granted or sold as Restricted Stock Awards
pursuant to the Plan as it may deem advisable, including, without
limitation, (i) restrictions under the Securities Act or Exchange Act,
(ii) the requirements of any securities exchange upon which the shares
or shares of the same class are then listed, and (iii) any state
securities law applicable to the shares.
8.2 Expiration of Restrictions. The restrictions imposed in
Paragraph 8.1 on Restricted Stock Awards shall lapse as determined by the
Committee and set forth in the applicable Award Agreement, and the Corporation
shall promptly cause to be delivered to the Holder of the Restricted Stock Award
a certificate representing the number of shares for which restrictions have
lapsed, free of any restrictive legend relating to the lapsed restrictions. Each
Restricted Stock Award may have a different restriction period, in the
discretion of the Committee. The Committee may, in its discretion, prospectively
reduce the restriction period applicable to a particular Restricted Stock Award.
The foregoing notwithstanding, no restriction not required by law shall remain
in effect for more than ten years after the date of the Award.
8.3 Changes in Accounting Rules. Notwithstanding any other provision
of the Plan to the contrary, if, during the term of the Plan, any changes in the
financial or tax accounting rules applicable to Restricted Stock Awards shall
occur that, in the sole judgment of the Board of Directors, may have a material
adverse effect on the reported earnings, assets, or liabilities of the
Corporation, the Committee shall have the right and power to modify as necessary
any then outstanding Restricted Stock Awards as to which the applicable
restrictions have not been satisfied.
8.4 Rights as Stockholder. Subject to the provisions of Paragraphs
8.1 and 11.11, the Committee may, in its discretion, determine what rights, if
any, the Holder shall have with respect to the Restricted Stock Awards granted
or sold, including the right to vote the shares and receive all dividends and
other distributions paid or made with respect thereto.
8.5 Other Agreement Provisions. The Award Agreements relating to
Restricted Stock Awards shall contain such provisions in addition to those
required by the Plan as the Committee may deem advisable.
SECTION 9. PERFORMANCE UNITS
All Performance Units granted under the Plan shall comply with, and the
related Award Agreements shall be deemed to include and be subject to, the terms
and conditions set forth in this Section 9 (to the extent each term and
condition applies to the form of Performance Unit) and also to the terms and
conditions set forth in Paragraph 10.1 and Section 11; provided, however, that
the Committee may authorize an Award Agreement related to a Performance Unit
that expressly contains terms and provisions that differ from the terms and
provisions of Section 11. The Committee may also authorize an Award Agreement
related to a Performance Unit that contains any or all of the terms and
provisions of Paragraphs 10.2 and 10.3 or that contains terms and provisions
dealing with similar subject matter differently than do those Paragraphs;
nevertheless, no term or provision of Paragraph 10.2 or 10.3 (or any such
differing term or provision) shall apply to an Award Agreement related to a
Performance Unit unless the Award Agreement expressly states that such term or
provision applies.
9.1 Multiple Grants. The Committee may make grants of Performance
Units in such a manner that more than one Performance Period is in progress
simultaneously. At or before the beginning of each Performance Period, the
Committee will establish the contingent value of each Performance Unit, if any,
for that Performance Period, which may vary depending on the degree to which
performance objectives established by the Committee are met.
9.2 Performance Standards. At or before the beginning of each
Performance Period, the Committee will (a) establish the beginning and ending
dates of the Performance Period, (b) establish for that Performance Period
specific performance objectives as the Committee (in its sole discretion)
believes are relevant to the Corporation's overall business objectives, (c)
determine the minimum and maximum value of a Performance Unit and the value of a
Performance Unit based on the degree to which performance objectives are
achieved, exceeded or not achieved, (d) determine a minimum performance level
below which Performance Units will be assigned a value of zero, and a maximum
performance level above which the value of Performance Units will not increase,
and (e) notify each Holder of a Performance Unit for that Performance Period in
writing of the established performance objectives and minimum, target and
maximum Performance Unit value for that Performance Period.
-41-
9.3 Modification of Standards. If the Committee determines in its
sole discretion that the established performance measures or objectives are no
longer suitable to the Corporation's objectives because of a change in the
Corporation's business, operations, corporate structure, capital structure or
other conditions the Committee deems to be material, the Committee may modify
the performance measures and objectives as it considers appropriate and
equitable.
9.4 Payment. The basis for payment of Performance Units for a given
Performance Period will be the achievement of those performance objectives
determined by the Committee at the beginning of the Performance Period. If
minimum performance is not achieved or exceeded for a Performance Period, no
payment will be made and all contingent rights will cease. If minimum
performance is achieved or exceeded, the value of a Performance Unit will be
based on the degree to which actual performance exceeded the pre-established
minimum performance standards. The amount of payment will be determined by
multiplying the number of Performance Units granted at the beginning of the
Performance Period by the final Performance Unit value. Payments will be made in
cash or Stock as soon as administratively possible following the close of the
applicable Performance Period.
9.5 Other Agreement Provisions. The Award Agreements, if any,
authorized relating to Performance Units shall contain such provisions in
addition to those required by the Plan (including, without limitation,
restrictions or the removal of restrictions upon the transfer of shares thereby
acquired) as the Committee may deem advisable.
SECTION 10. ADJUSTMENT PROVISIONS
The Committee may authorize an Award that contains any or all of the
terms and provisions of this Section 10 or, with respect to Paragraphs 10.2 and
10.3, that contains terms and provisions dealing with similar subject matter
differently than do those Paragraphs; nevertheless, no term or provision of
Paragraph 10.2 or 10.3 (or any such differing term or provision) shall apply to
an Award Agreement unless the Award Agreement expressly states that such term or
provision applies.
10.1 Adjustment of Awards and Authorized Stock. The terms of an Award
and the number of shares of Stock authorized pursuant to Paragraph 2.1 for
issuance under the Plan shall be subject to adjustment, from time to time, in
accordance with the following provisions:
(a) If at any time or from time to time, the Corporation
shall subdivide as a whole (by reclassification, by a Stock split, by
the issuance of a distribution on Stock payable in Stock or otherwise)
the number of shares of Stock then outstanding into a greater number of
shares of Stock, then (i) the maximum number of shares of Stock
available for the Plan as provided in Paragraph 2.1 shall be increased
proportionately, and the kind of shares or other securities available
for the Plan shall be appropriately adjusted, (ii) the number of shares
of Stock (or other kind of shares or securities) that may be acquired
under any Award shall be increased proportionately, and (iii) the price
(including Exercise Price) for each share of Stock (or other kind of
shares or unit of other securities) subject to then outstanding Awards
shall be reduced proportionately, without changing the aggregate
purchase price or value as to which outstanding Awards remain
exercisable or subject to restrictions.
(b) If at any time or from time to time the Corporation shall
consolidate as a whole (by reclassification, reverse Stock split, or
otherwise) the number of shares of Stock then outstanding into a lesser
number of shares of Stock, (i) the maximum number of shares of Stock
available for the Plan as provided in Paragraph 2.1 shall be decreased
proportionately, and the kind of shares or other securities available
for the Plan shall be appropriately adjusted, (ii) the number of shares
of Stock (or other kind of shares or securities) that may be acquired
under any Award shall be decreased proportionately, and (iii) the price
(including Exercise Price) for each share of Stock (or other kind of
shares or unit of other securities) subject to then outstanding Awards
shall be increased proportionately, without changing the aggregate
purchase price or value as to which outstanding Awards remain
exercisable or subject to restrictions.
(c) Whenever the number of shares of Stock subject to
outstanding Awards and the price for each share of Stock subject to
outstanding Awards are required to be adjusted as provided in this
Paragraph 10.1, the Committee shall promptly prepare a notice setting
forth, in reasonable detail, the event requiring adjustment, the amount
of the adjustment, the method by which such adjustment was calculated,
and the change in price and the number of shares of Stock, other
securities, cash or property purchasable subject to each Award after
giving effect to the adjustments. The Committee shall promptly give
each Holder such a notice.
(d) Adjustments under Paragraph 10(a) and (b) shall be made
by the Committee, and its determination as to what adjustments shall be
made and the extent thereof shall be final, binding and conclusive. No
fractional interest shall be issued under the Plan on account of any
such adjustments.
-42-
10.2 Changes in Control. Upon the occurrence of a Change in Control,
but only if approved by the Committee, for Awards held by Participants who are
employees or directors of the Corporation (and their permitted transferees
pursuant to Paragraph 3.5), (a) all outstanding Stock Appreciation Rights and
Options shall immediately become fully vested and exercisable in full, including
that portion of any Stock Appreciation Right or Option that pursuant to the
terms and provisions of the applicable Award Agreement had not yet become
exercisable (the total number of shares of Stock as to which a Stock
Appreciation Right or Option is exercisable upon the occurrence of a Change in
Control is referred to herein as the "Total Shares"); (b) the restriction period
of any Restricted Stock Award shall immediately be accelerated and the
restrictions shall expire; and (c) the target payout opportunity attainable
under the Performance Units will be deemed to have been fully earned for all
Performance Periods upon the occurrence of the Change in Control and the Holder
will be paid a pro rata portion of all associated targeted payout opportunities
(based on the number of complete and partial calendar months elapsed as of the
occurrence of the Change in Control) in cash within thirty days following the
Change in Control or in Stock effective as of the Change in Control, for cash
and stock-based Performance Units, respectively. If a Change in Control involves
a Restructure or occurs in connection with a series of related transactions
involving a Restructure and if such Restructure is in the form of a
Non-Surviving Event and as a part of such Restructure shares of stock, other
securities, cash or property shall be issuable or deliverable in exchange for
Stock, then the Holder of an Award shall be entitled to purchase or receive (in
lieu of the Total Shares that the Holder would otherwise be entitled to purchase
or receive), as appropriate for the form of Award, the number of shares of
stock, other securities, cash or property to which that number of Total Shares
would have been entitled in connection with such Restructure (and, for Options,
at an aggregate exercise price equal to the Exercise Price that would have been
payable if that number of Total Shares had been purchased on the exercise of the
Option immediately before the consummation of the Restructure). Nothing in this
Paragraph 10.2 shall impose on a Holder the obligation to exercise any Award
immediately before or upon the Change of Control, and, unless otherwise provided
in the Award Agreement relating to the Award, no Holder shall forfeit the right
to exercise the Award during the remainder of the original term of the Award
because of a Change in Control or because the Holder's employment is terminated
for any reason following a Change in Control.
10.3 Restructure and No Change in Control. In the event a Restructure
should occur at any time while there is any outstanding Award hereunder and that
Restructure does not occur in connection with a Change in Control or in
connection with a series of related transactions involving a Change in Control,
then:
(a) no Holder of an Option shall automatically be granted
corresponding Stock Appreciation Rights;
(b) neither any outstanding Stock Appreciation Rights nor any
outstanding Options shall immediately become fully vested and
exercisable in full merely because of the occurrence of the
Restructure;
(c) the restriction period of any Restricted Stock Award
shall not immediately be accelerated nor shall the restrictions expire
merely because of the occurrence of the Restructure; and
(d) the target payout opportunity attainable under the
Performance Units will not be deemed to have been fully earned for all
Performance Periods merely because of the occurrence of the
Restructure.
The Corporation shall promptly notify each Holder of any election or action
taken by the Corporation under this Paragraph 10.3. In the event of any election
or action taken by the Corporation pursuant to this Paragraph 10.3 that requires
the amendment or cancellation of any Award Agreement as may be specified in any
notice to the Holder thereof, that Holder shall promptly deliver that Award
Agreement to the Corporation in order for that amendment or cancellation to be
implemented by the Corporation and the Committee. The failure of the Holder to
deliver any such Award Agreement to the Corporation as provided in the preceding
sentence shall not in any manner affect the validity or enforceability of any
action taken by the Corporation and the Committee under this Paragraph 10.3,
including, without limitation, any redemption of an Award as of the consummation
of a Restructure. Any cash payment to be made by the Corporation pursuant to
this Paragraph 10.3 in connection with the redemption of any outstanding Awards
shall be paid to the Holder thereof currently with the delivery to the
Corporation of the Award Agreement evidencing that Award; provided, however,
that any such redemption shall be effective upon the consummation of the
Restructure notwithstanding that the payment of the redemption price may occur
subsequent to the consummation. If all or any portion of an outstanding Award is
to be exercised or accelerated upon or after the consummation of a Restructure
that is in the form of a Non-Surviving Event and as a part of that Restructure
shares of stock, other securities, cash or property shall be issuable or
deliverable in exchange for Stock, then the Holder of the Award shall thereafter
be entitled to purchase or receive (in lieu of the number of shares of Stock
that the Holder would otherwise be entitled to purchase or receive) the number
of shares of stock, other securities, cash or property to which such number of
shares of Stock would have been entitled in connection with the Restructure
(and, for Options, at an aggregate exercise price equal to the Exercise Price
that would have been payable if that number of Total Shares had been purchased
on the exercise of the Option immediately before the consummation of the
Restructure).
-43-
10.4 Notice of Change in Control or Restructure. The Corporation
shall attempt to keep all Holders informed with respect to any Change in Control
or Restructure or of any potential Change in Control or Restructure to the same
extent that the Corporation's stockholders are informed by the Corporation of
any such event or potential event.
SECTION 11. ADDITIONAL PROVISIONS
11.1 Termination of Employment. Subject to the last sentence of
Paragraph 10.2, if a Holder is an Eligible Individual because the Holder is an
Employee and if that employment relationship is terminated for any reason other
than Retirement or that Holder's death or Disability, then the following
provisions shall apply to all Awards held by that Holder that were granted
because that Holder was an Employee:
(a) If the termination is by the Holder's employer, then the
following provisions shall apply: (i) if the termination is for Cause,
then that portion, if any, of any and all Awards held by that Holder
that are not yet exercisable (or for which restrictions have not
lapsed) as of the date of termination shall become null and void;
provided, however, that the portion, if any, of any and all Awards held
by that Holder which are exercisable (or for which restrictions have
lapsed) as of the date of such termination shall survive such
termination and shall be exercisable by such Holder for a period of the
lesser of (A) the remainder of the term of the Award or (B) three (3)
days following the date of such termination; or (ii) if the termination
is not for Cause, then that portion, if any, of any and all Awards held
by that Holder that are not yet exercisable (or for which restrictions
have not lapsed) as of the date of the termination shall become null
and void as of the date of the termination; provided, however, that the
portion, if any, of any and all Awards held by that Holder which are
exercisable (or for which restrictions have lapsed) as of the date of
such termination shall survive such termination and shall be
exercisable by such Holder for a period of the lesser of (A) the
remainder of the term of the Award or (B) 180 days following the date
of such termination.
(b) If such termination is by the Holder, then, unless
otherwise agreed to by the Corporation, any and all Awards held by that
Holder, whether or not then exercisable and whether or not restrictions
thereon have lapsed (except in full), shall become null and void as of
the date of the termination.
11.2 Other Loss of Eligibility. If a Holder is an Eligible Individual
because the Holder is serving in a capacity other than as an Employee and if
that capacity is terminated for any reason other than the Holder's death, then
that portion, if any, of any and all Awards held by the Holder that were granted
because of that capacity which are not yet exercisable (or for which
restrictions have not lapsed) as of the date of the termination shall become
null and void as of the date of the termination; provided, however, that the
portion, if any, of any and all of the Awards held by the Holder that are
exercisable (or for which restrictions have lapsed) as of the date of the
termination shall survive the termination and shall be exercisable by such
Holder for a period of the lesser of (a) the remainder of the term of the Award
or (b) 180 days following the date of such termination.
11.3 Death. Upon the death of a Holder, then any and all Awards held
by the Holder, including those portions of the Awards that pursuant to the terms
and provisions of the applicable Award Agreement had not yet become exercisable,
shall immediately become fully vested and exercisable in full by the Holder, his
guardians or his legal representatives, legatees or distributees for a period of
the lesser of (a) the remainder of the term of the Award or (b) one year
following the date of the Holder's death. Any portion of an Award not exercised
upon the expiration of the periods specified in (a) or (b) shall be null and
void. Except as expressly provided in this Paragraph 11.3, all Awards held by a
Holder shall not be exercisable after the death of that Holder.
11.4 Retirement. If a Holder is an Eligible Individual because the
Holder is an Employee and if that employment relationship is terminated by
reason of the Holder's Retirement, then the portion, if any, of any and all
Awards held by the Holder that are not yet exercisable (or for which
restrictions have not lapsed) as of the date of that retirement shall become
null and void as of the date of retirement; provided, however, that the portion,
if any, of any and all Awards held by the Holder that are exercisable as of the
date of that Retirement shall survive the Retirement and shall be exercisable by
such Holder for a period of the lesser of (a) the remainder of the terms of the
Award or (b) 180 days following the date of retirement.
11.5 Disability. If a Holder is an Eligible Individual because the
Holder is an Employee and if that employment relationship is terminated by
reason of the Holder's Disability, then any and all Awards held by the Holder,
including those portions of the Awards that pursuant to the terms and provisions
of the applicable Award Agreement had not yet become exercisable (or for which
restrictions had not lapsed), shall immediately become fully vested and
exercisable in full by the Holder, his guardians or his legal representatives
for a period of the lesser of (a) the remainder of the term of the Award or (b)
one year following the date on which the Holder's employment is terminated due
to such Holder's Disability. "Disability" shall have the meaning given it in the
employment agreement of the Holder; provided, however, that if that Holder has
no employment agreement, "Disability" shall mean a physical or mental impairment
of sufficient severity that, in the opinion of the Corporation, either the
Holder is unable to continue performing the duties he performed before such
impairment or the Holder's condition entitles him to disability benefits under
any insurance or employee benefit plan of the Corporation or its Subsidiaries
and that impairment or condition is cited by the Corporation as the reason for
termination of the Holder's employment.
-44-
11.6 Leave of Absence. With respect to an Award, the Committee may,
in its sole discretion, determine that any Holder who is on leave of absence for
any reason will be considered to still be in the employ of the Corporation,
provided that rights to that Award during a leave of absence will be limited to
the extent to which those rights were earned or vested when the leave of absence
began.
11.7 Transferability of Awards. In addition to such other terms and
conditions as may be included in a particular Award Agreement, an Award
requiring exercise shall be exercisable during a Holder's lifetime only by that
Holder or by that Holder's guardian or legal representative. An Award requiring
exercise shall not be transferrable other than by will or the laws of descent
and distribution, except as permitted in accordance with Paragraph 3.5.
11.8 Forfeiture and Restrictions on Transfer. Each Award Agreement
may contain or otherwise provide for conditions giving rise to the forfeiture of
the Stock acquired pursuant to an Award or otherwise and may also provide for
those restrictions on the transferability of shares of the Stock acquired
pursuant to an Award or otherwise that the Committee in its sole and absolute
discretion may deem proper or advisable. The conditions giving rise to
forfeiture may include, but need not be limited to, the requirement that the
Holder render substantial services to the Corporation or its Subsidiaries for a
specified period of time. The restrictions on transferability may include, but
need not be limited to, options and rights of first refusal in favor of the
Corporation and stockholders of the Corporation other than the Holder of such
shares of Stock who is a party to the particular Award Agreement or a subsequent
holder of the shares of Stock who is bound by that Award Agreement.
11.9 Delivery of Certificates of Stock. Subject to Paragraph 11.10,
the Corporation shall promptly issue and deliver a certificate representing the
number of shares of Stock as to which (a) an Option has been exercised after the
Corporation receives an Exercise Notice and upon receipt by the Corporation of
the Exercise Price and any tax withholding as may be requested; (b) a Stock
Appreciation Right has been exercised and upon receipt by the Corporation of any
tax withholding as may be requested; (c) restrictions have lapsed with respect
to a Restricted Stock Award and upon receipt by the Corporation of any tax
withholding as may be requested; and (d) performance objectives have been
achieved during a Performance Period relating to a Performance Unit for Stock.
The value of the shares of Stock, cash or notes transferable because of an Award
under the Plan shall not bear any interest owing to the passage of time, except
as may be otherwise provided in an Award Agreement. If a Holder is entitled to
receive certificates representing Stock received for more than one form of Award
under the Plan, separate Stock certificates shall be issued with respect to each
such Award and for Incentive Options and Nonstatutory Stock Options separately.
11.10 Conditions to Delivery of Stock. Nothing herein or in any Award
granted hereunder or any Award Agreement shall require the Corporation to issue
any shares with respect to any Award if that issuance would, in the opinion of
counsel for the Corporation, constitute a violation of the Securities Act or any
similar or superseding statute or statutes, any other applicable statute or
regulation, or the rules of any applicable securities exchange or securities
association, as then in effect. At the time of any exercise of an Option or
Stock Appreciation Right, or at the time of any grant of a Restricted Stock
Award or Performance Unit, the Corporation may, as a condition precedent to the
exercise of such Option or Stock Appreciation Right or vesting of any Restricted
Stock Award or Performance Unit, require from the Holder of the Award (or in the
event of his or her death, his or her legal representatives, heirs, legatees, or
distributees) such written representations, if any, concerning the Holder's
intentions with regard to the retention or disposition of the shares of Stock
being acquired pursuant to the Award and such written covenants and agreements,
if any, as to the manner of disposal of such shares as, in the opinion of
counsel to the Corporation, may be necessary to ensure that any disposition by
that Holder (or in the event of the Holder's death, his legal representatives,
heirs, legatees, or distributees) will not involve a violation of the Securities
Act or any similar or superseding statute or statutes, any other applicable
state or federal statute or regulation, or any rule of any applicable securities
exchange or securities association, as then in effect.
11.11 Certain Directors and Officers. With respect to Awards granted
to Holders who are directors or officers of the Corporation or any Subsidiary
and who are subject to potential liability for "short-swing profits" under
Section 16(b) of the Exchange Act, Awards shall contain such other terms and
conditions as may be required by Rule 16b-3 unless the majority of the Board of
Directors or the Holder has determined not to have the Award comply with the
potential exemption from the provisions of 16(b) provided by Rule 16b-3.
11.12 Securities Act Legend. Certificates for shares of Stock, when
issued, may have the following legend, or statements of other applicable
restrictions endorsed thereon and may not be immediately transferable:
-45-
THE SHARES OF STOCK REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933 OR ANY STATE SECURITIES
LAWS. THE SHARES MAY NOT BE OFFERED FOR SALE, SOLD, PLEDGED,
TRANSFERRED, OR OTHERWISE DISPOSED OF UNTIL THE HOLDER HEREOF PROVIDES
EVIDENCE SATISFACTORY TO THE ISSUER (WHICH, IN THE DISCRETION OF THE
ISSUER, MAY INCLUDE AN OPINION OF COUNSEL SATISFACTORY TO THE ISSUER)
THAT SUCH OFFER, SALE, PLEDGE, TRANSFER, OR OTHER DISPOSITION WILL NOT
VIOLATE APPLICABLE FEDERAL OR STATE LAWS.
This legend shall not be required for shares of Stock issued pursuant to an
effective registration statement under the Securities Act.
11.13 Legend for Restrictions on Transfer. Each certificate
representing shares issued to a Holder pursuant to an Award granted under the
Plan shall, if such shares are subject to any transfer restriction, including a
right of first refusal, provided for under this Plan or an Award Agreement, bear
a legend that complies with applicable law with respect to the restrictions on
transferability contained in this Paragraph 11.13, such as:
THE SHARES OF STOCK REPRESENTED BY THIS CERTIFICATE ARE SUBJECT TO
RESTRICTIONS ON TRANSFERABILITY IMPOSED BY THAT CERTAIN INSTRUMENT
ENTITLED "AAON, INC. LONG-TERM INCENTIVE PLAN" AS ADOPTED BY AAON, INC.
(THE "CORPORATION") ON ______________, 2007, AND AN AGREEMENT
THEREUNDER BETWEEN THE CORPORATION AND [HOLDER] DATED ___________,
______, AND MAY NOT BE TRANSFERRED, SOLD, OR OTHERWISE DISPOSED OF
EXCEPT AS THEREIN PROVIDED. THE CORPORATION WILL FURNISH A COPY OF SUCH
INSTRUMENT AND AGREEMENT TO THE RECORD HOLDER OF THIS CERTIFICATE
WITHOUT CHARGE ON REQUEST TO THE CORPORATION AT ITS PRINCIPAL PLACE OF
BUSINESS OR REGISTERED OFFICE.
11.14 Rights as a Stockholder. A Holder shall have no right as a
stockholder with respect to any shares covered by his or her Award until a
certificate representing those shares is issued in his or her name. No
adjustment shall be made for dividends (ordinary or extraordinary, whether in
cash or other property) or distributions or other rights for which the record
date is before the date that certificate is issued, except as contemplated by
Section 10. Nevertheless, dividends and dividend equivalent rights may be
extended to and made part of any Award denominated in Stock or units of Stock,
subject to such terms, conditions, and restrictions as the Committee may
establish. The Committee may also establish rules and procedures for the
crediting of interest on deferred cash payments and dividend equivalents for
deferred payment denominated in Stock or units of Stock.
11.15 Information. Each Holder shall furnish to the Corporation all
information requested by the Corporation to enable it to comply with any
reporting or other requirement imposed upon the Corporation by or under any
applicable statute or regulation.
11.16 Obligation to Exercise. The granting of an Award hereunder shall
impose no obligation upon the Holder to exercise the same or any part thereof.
11.17 Adjustments to Awards. Subject to applicable law and the general
limitations set forth in Sections 6, 7 and 10, the Committee may make any
adjustment to or the terms of a Nonstatutory Option or Stock Appreciation Right
by canceling an outstanding Nonstatutory Option or Stock Appreciation Right and
regranting a Nonstatutory Option or Stock Appreciation Right. Such adjustment
shall be made by amending, substituting or regranting an outstanding
Nonstatutory Option or Stock Appreciation Right. Such amendment, substitution or
regrant may result in terms and conditions that differ from the terms and
conditions of the original Nonstatutory Option or Stock Appreciation Right.
Notwithstanding anything herein, the Committee may not "reprice" any Option.
"Reprice" means any of the following or any other action that has the same
effect: (i) amending an Option to reduce its exercise price, (ii) canceling an
Option at a time when its exercise price exceeds the Fair Market Value of a
share of Stock in exchange for an Option, Restricted Stock Award or other equity
award unless the cancellation and exchange occurs in connection with a merger,
acquisition, spin-off or other similar corporate transaction, or (iii) taking
any other action that is treated as a repricing under generally accepted
accounting principles. In addition, the Committee may not impair the rights of
any Holder to previously granted Nonstatutory Options or Stock Appreciation
Rights without that Holder's consent If such action is effected by amendment,
the effective date of such amendment shall be the date of the original grant.
Notwithstanding the above, with respect to Performance Awards that are subject
to Section 409A, the Committee shall not have the authority to accelerate or
postpone the timing or settlement of a Performance Award in a manner that would
cause such award to become subject to the interest and penalty provisions under
Section 409A.
11.18 Remedies. The Corporation shall be entitled to recover from a
Holder reasonable attorneys' fees incurred in connection with the enforcement of
the terms and provisions of the Plan and any Award Agreement whether by an
action to enforce specific performance or for damages for its breach or
otherwise.
-46-
11.19 Information Confidential. As partial consideration for the
granting of each Award hereunder, the Holder shall agree with the Corporation
that the Holder will keep confidential all information and knowledge that the
Holder has relating to the manner and amount of his or her participation in the
Plan; provided, however, that such information may be disclosed as required by
law and may be given in confidence to the Holder's spouse, tax and financial
advisors, or to a financial institution to the extent that such information is
necessary to secure a loan. In the event any breach of this promise comes to the
attention of the Committee, it shall take into consideration that breach in
determining whether to recommend the grant of any future Award to that Holder,
as a factor militating against the advisability of granting any such future
Award to that individual.
11.20 Consideration. No Option or Stock Appreciation Right shall be
exercisable, no restriction on any Restricted Stock Award shall lapse, and no
Performance Unit shall be settled in Stock with respect to a Holder unless and
until the Holder shall have paid cash or property to, or performed services for,
the Corporation or any of its Subsidiaries that the Committee believes is equal
to or greater in value then the par value of the Stock subject to such Award.
11.21 Payment of Taxes. The Committee may, in its discretion, require
a Holder to pay to the Corporation (or the Corporation's Subsidiary if the
Holder is an employee of a Subsidiary of the Corporation), at the time of the
exercise of an Award, the amount that the Committee deems necessary to satisfy
the Corporation's or its Subsidiary's current or future obligation to withhold
federal, state or local income or other taxes that the Holder incurs by
exercising an Award. Upon the exercise of an Award requiring tax withholding, a
Holder may (a) direct the Corporation to withhold from the shares of Stock to be
issued to the Holder the number of shares necessary to satisfy the Corporation's
obligation to withhold taxes, that determination to be based on the shares' Fair
Market Value as of the date of exercise; (b) deliver to the Corporation
sufficient shares of Stock (based upon the Fair Market Value at date of
exercise) to satisfy the Corporation's tax withholding obligations, based on the
shares' Fair Market Value as of the date of exercise; or (c) deliver sufficient
cash to the Corporation to satisfy its tax withholding obligations. Holders who
elect to use such a stock withholding feature must make the election at the time
and in the manner that the Committee prescribes. The Committee may, at its sole
option, deny any Holder's request to satisfy withholding obligations through
Stock instead of cash. In the event the Committee subsequently determines that
the aggregate Fair Market Value (as determined above) of any shares of Stock
withheld as payment of any tax withholding obligation is insufficient to
discharge that tax withholding obligation, then the Holder shall pay to the
Corporation, immediately upon the Committee's request, the amount of that
deficiency.
SECTION 12. DURATION AND AMENDMENT OF PLAN
12.1 Duration. No Awards may be granted hereunder after the date that
is ten (10) years from the date the last amendment to this Plan involving an
increase in authorized shares is approved by the stockholders of the
Corporation.
12.2 Amendment. The Board of Directors may (insofar as permitted by
law and applicable regulations of any exchange or inter-dealer quotation system
on which the Company's stock may be listed), with respect to any shares which,
at the time, are not subject to Awards, suspend or discontinue the Plan or
revise or amend it in any respect whatsoever, and may amend any provision of the
Plan or any Award Agreement to make the Plan or the Award Agreement, or both,
comply with Section 16(b) of the Exchange Act and the exemptions therefrom, the
Code, the Employee Retirement Income Security Act of 1974, as amended ("ERISA"),
the regulations promulgated under the Code or ERISA, or any other law, rule or
regulation that may affect the Plan. The Board of Directors may also amend,
modify, suspend or terminate the Plan for the purpose of meeting or addressing
any changes in other legal requirements applicable to the Corporation or the
Plan or for any other purpose permitted by law. The Plan may not be amended
without the consent of the holders of a majority of the shares of Stock then
outstanding to increase materially the aggregate number of shares of Stock that
may be issued under the Plan (except for adjustments pursuant to Section 10 of
the Plan).
SECTION 13. GENERAL
13.1 Application of Funds. The proceeds received by the Corporation
from the sale of shares pursuant to Awards shall be used for general corporate
purposes.
13.2 Right of the Corporation and Subsidiaries to Terminate
Employment. Nothing contained in the Plan or in any Award Agreement shall confer
upon any Holder the right to continue in the employ of the Corporation or any
Subsidiary, or interfere in any way with the rights of the Corporation or any
Subsidiary to terminate his or her employment at any time.
13.3 No Liability for Good Faith Determinations. Neither the members
of the Board of Directors nor any member of the Committee shall be liable for
any act, omission or determination taken or made in good faith with respect to
the Plan or any Award granted under it, and members of the Board of Directors
and the Committee shall be entitled to indemnification and reimbursement by the
Corporation in respect of any claim, loss, damage or expense (including
attorneys' fees, the costs of settling any suit, provided such settlement is
approved by independent legal counsel selected by the Corporation, and amounts
paid in satisfaction of a judgment, except a judgment based on a finding of bad
faith) arising therefrom to the full extent permitted by law and under any
directors and officers liability or similar insurance coverage that may from
time to time be in effect. This right to indemnification shall be in addition
to, and not a limitation on, any other indemnification rights any member of the
Board of Directors or the Committee may have.
-47-
13.4 Other Benefits. Participation in the Plan shall not preclude the
Holder from eligibility in any other stock or stock option plan of the
Corporation or any Subsidiary or any old age benefit, insurance, pension, profit
sharing, retirement, bonus or other extra compensation plans that the
Corporation or any Subsidiary has adopted or may, at any time, adopt for the
benefit of its Employees. Neither the adoption of the Plan by the Board of
Directors nor the submission of the Plan to the stockholders of the Corporation
for approval shall be construed as creating any limitations on the power of the
Board of Directors to adopt such other incentive arrangements as it may deem
desirable, including, without limitation, the granting of stock options and the
awarding of stock and cash otherwise than under the Plan, and such arrangements
may be either generally applicable or applicable only in specific cases.
13.5 Exclusion from Pension and Profit-Sharing Compensation. By
acceptance of an Award (whether in Stock or cash), as applicable, each Holder
shall be deemed to have agreed that the Award is special incentive compensation
that will not be taken into account in any manner as salary, compensation or
bonus in determining the amount of any payment under any pension, retirement or
other employee benefit plan of the Corporation or any Subsidiary. In addition,
each beneficiary of a deceased Holder shall be deemed to have agreed that the
Award will not affect the amount of any life insurance coverage, if any,
provided by the Corporation or a Subsidiary on the life of the Holder that is
payable to the beneficiary under any life insurance plan covering employees of
the Corporation or any Subsidiary.
13.6 Execution of Receipts and Releases. Any payment of cash or any
issuance or transfer of shares of Stock or other property to the Holder, or to
his legal representative, heir, legatee or distributee, in accordance with the
provisions hereof, shall, to the extent thereof, be in full satisfaction of all
claims of such persons hereunder. The Committee may require any Holder, legal
representative, heir, legatee or distributee, as a condition precedent to such
payment, to execute a release and receipt therefor in such form as it shall
determine.
13.7 Unfunded Plan. Insofar as it provides for Awards of cash and
Stock, the Plan shall be unfunded. Although bookkeeping accounts may be
established with respect to Holders who are entitled to cash, Stock, other
property or rights thereto under the Plan, any such accounts shall be used
merely as a bookkeeping convenience. The Corporation shall not be required to
segregate any assets that may at any time be represented by cash, Stock, other
property or rights thereto, nor shall the Plan be construed as providing for
such segregation, nor shall the Corporation nor the Board of Directors nor the
Committee be deemed to be a trustee of any cash, Stock, other property or rights
thereto to be granted under the Plan. Any liability of the Corporation to any
Holder with respect to a grant of cash, Stock, other property or rights thereto
under the Plan shall be based solely upon any contractual obligations that may
be created by the Plan and any Award Agreement; no such obligation of the
Corporation shall be deemed to be secured by any pledge or other encumbrance on
any property of the Corporation. Neither the Corporation nor the Board of
Directors nor the Committee shall be required to give any security or bond for
the performance of any obligation that may be created by the Plan.
13.8 No Guarantee of Interests. The Board of Directors, the Committee
and the Corporation do not guarantee the Stock of the Corporation from loss or
depreciation.
13.9 Payment of Expenses. All expenses incident to the
administration, termination or protection of the Plan, including, but not
limited to, legal and accounting fees, shall be paid by the Corporation or its
Subsidiaries; provided, however, the Corporation or a Subsidiary may recover any
and all damages, fees, expenses and costs arising out of any actions taken by
the Corporation to enforce its right to purchase Stock under this Plan.
13.10 Corporation Records. Records of the Corporation or its
Subsidiaries regarding the Holder's period of employment, termination of
employment and the reason therefor, leaves of absence, re-employment, and other
matters shall be conclusive for all purposes hereunder, unless determined by the
Committee to be incorrect.
13.11 Information. The Corporation and its Subsidiaries shall, upon
request or as may be specifically required hereunder, furnish or cause to be
furnished, all of the information or documentation which is necessary or
required by the Committee to perform its duties and functions under the Plan.
13.12 Corporation Action. Any action required of the Corporation shall
be by resolution of its Board of Directors or by a person authorized to act by
resolution of the Board of Directors.
-48-
13.13 Severability. If any provision of this Plan is held to be
illegal or invalid for any reason, the illegality or invalidity shall not affect
the remaining provisions hereof, but such provision shall be fully severable and
the Plan shall be construed and enforced as if the illegal or invalid provision
had never been included herein. If any of the terms or provisions of this Plan
conflict with the requirements of Rule 16b-3 (as those terms or provisions are
applied to Eligible Individuals who are subject to Section 16(b) of the Exchange
Act) or Section 422 of the Code (with respect to Incentive Options), then those
conflicting terms or provisions shall be deemed inoperative to the extent they
so conflict with the requirements of Rule 16b-3 or Section 422 of the Code
unless the Committee has determined that the Plan should not comply with such
requirements. With respect to Incentive Options, if this Plan does not contain
any provision required to be included herein under Section 422 of the Code, that
provision shall be deemed to be incorporated herein with the same force and
effect as if that provision had been set out at length herein; provided,
further, that, to the extent any Option that is intended to qualify as an
Incentive Option cannot so qualify, that Option (to that extent) shall be deemed
a Nonstatutory Option for all purposes of the Plan.
13.14 Notices. Whenever any notice is required or permitted hereunder
other than any Exercise Notice or notice to exercise an Stock Appreciation
Right, such notice must be in writing and personally delivered or sent by mail.
Any such notice required or permitted to be delivered hereunder shall be deemed
to be delivered on the date on which it is personally delivered, or, whether
actually received or not, on the third Business Day after it is deposited in the
United States mail, certified or registered, postage prepaid, addressed to the
person who is to receive it at the address which such person has theretofore
specified by written notice delivered in accordance herewith. The Corporation or
a Holder may change, at any time and from time to time, by written notice to the
other, the address which it or he had previously specified for receiving
notices. Until changed in accordance herewith, the Corporation and each Holder
shall specify as its and his address for receiving notices the address set forth
in the Award Agreement pertaining to the shares to which such notice relates.
Any Exercise Notice or notice to exercise a Stock Appreciation Right shall be
valid only when it is in fact received by the Corporation or the Person it
designates in accordance with procedures that the Committee may adopt from time
to time.
13.15 Waiver of Notice. Any person entitled to notice hereunder may
waive such notice.
13.16 Successors. The Plan shall be binding upon the Holder, his legal
representatives, heirs, legatees and distributees, upon the Corporation, its
successors and assigns, and upon the Committee and its successors.
13.17 Headings. The titles and headings of Sections and Paragraphs are
included for convenience of reference only and are not to be considered in
construction of the provisions hereof.
13.18 Governing Law. All questions arising with respect to the
provisions of the Plan shall be determined by application of the laws of the
State of Nevada except to the extent Nevada law is preempted by federal law.
Questions arising with respect to the provisions of an Award Agreement that are
matters of contract law shall be governed by the laws of the state specified in
the Award Agreement, except to the extent Nevada corporate law conflicts with
the contract law of such state, in which event Nevada corporate law shall
govern. The obligation of the Corporation to sell and deliver Stock hereunder is
subject to applicable laws and to the approval of any governmental authority
required in connection with the authorization, issuance, sale, or delivery of
such Stock.
13.19 Word Usage. Words used in the masculine shall apply to the
feminine where applicable, and wherever the context of this Plan dictates, the
plural shall be read as the singular and the singular as the plural.
IN WITNESS WHEREOF, AAON, Inc., acting by and through its officer
hereunto duly authorized, has executed this AAON, Inc. Long-term Incentive Plan
this _____ day of ________, 2007.
AAON, INC.
By: /s/ Norman H. Asbjornson
------------------------
Norman H. Asbjornson
President and Chief Executive Officer
-49-
AAON, Inc. PROXY
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS.
2425 South Yukon
Tulsa, Oklahoma 74107 The undersigned stockholder of AAON, Inc., a Nevada corporation, hereby constitutes and appoints
John B. Johnson, Jr., and Anthony Pantaleoni, and each of them, with full power of substitution,
as attorneys and proxies to appear and vote all shares of stock of the Company standing in the
name of the undersigned, at the Annual Meeting of Stockholders of the Company to be held at 2440
South Yukon Avenue, Tulsa, Oklahoma, on Tuesday, May 22, 2007, 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 Director and Vacancy:
FOR Thomas E. Naugle for a term ending in 2010 [ ] WITHHOLD AUTHORITY to vote for the nominee,
Thomas E. Naugle [ ]
FOR leaving the position of the other Class I director vacant [ ] WITHHOLD AUTHORITY to leave the position of the
other Class I director vacant [ ]
2. Adoption of Long-Term Incentive Plan:
FOR adoption of the Plan [ ]
AGAINST adoption of the Plan [ ]
3. 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 MANAGEMENT'S NOMINEE FOR DIRECTOR, FOR CREATION OF A VACANCY ON THE BOARD AND FOR ADOPTION
OF THE PLAN.
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, 2007.
Dated: , 2007
-------------------------------------
----------------------------------------------------------
----------------------------------------------------------
(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)