SCHEDULE 14A
Information Required in Proxy Statement
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the Securities Exchange Act of 1934
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AAON, INC.
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(Name of Registrant as Specified in its Charter)
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AAON, INC.
Notice of
Annual Meeting
May 20, 2008,
and
Proxy Statement
AAON, INC.
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD ON MAY 20, 2008
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 20,
2008, at 10:00 A.M. (Local Time), for the following purposes:
1. To elect two Class II Directors, for terms ending in 2011; and
2. To transact such other business as may properly come before the
meeting or any adjournment thereof.
We hope that you will be able to attend this meeting, but if you do not
plan to do so, please date, sign and return the enclosed Proxy as promptly as
possible.
By Order of the Board of Directors
/s/ John B. Johnson, Jr.
------------------------
John B. Johnson, Jr.
Secretary
April 15, 2008
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 20, 2008, 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 24, 2008, 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 Directors nominated for election will be approved if, assuming a
quorum is present either in person or by proxy, a majority of the shareholders
voting, vote in favor of each Director.
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 2007 Annual Report (which includes our Annual Report
on Form 10-K for the year ended December 31, 2007), will be first mailed to
stockholders approximately April 18, 2008.
VOTING SECURITIES AND PRINCIPAL HOLDERS THEREOF
As of March 24, 2008, (the record date), we had issued a total of
17,975,655 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 24, 2008, 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:
Number of shares Percent
Name and address of beneficial owner owned of class
----------------------------------------- ------------------ ----------
Norman H. Asbjornson 3,554,245 (1) 19.77
2425 South Yukon
Tulsa, Oklahoma 74107
Royce & Associates, LLC 1,340,521 (2) 7.46
1414 Avenue of the Americas
New York, New York 10019
Thompson, Horstmann & Bryant, Inc. 1,148,720 (3) 6.39
Park 80 West Plaza One, 5th Floor
Saddle Brook, New Jersey 07663
------------------
(1) Includes 193,625 shares held under stock options that are exercisable
currently or within 60 days of the annual meeting. Mr. Asbjornson has
sole voting and investment powers with respect to all shares
beneficially owned by him.
(2) This share ownership information was provided in a Schedule 13G dated
January 25, 2008, which discloses that Royce & Associates, LLC,
possesses the sole voting power and sole dispositive power of the
reported shares.
(3) This share information was provided in a Schedule 13G dated February 6,
2008, which discloses that Thompson, Horstmann & Bryant, Inc.,
possesses sole voting power of 750,038 shares and sole dispositive
power of 1,148,720 shares.
-2-
The following table sets forth as of March 24, 2008, the aggregate
number of shares of our Common Stock owned of record or beneficially by each
current director, nominee for director, each person named in the Summary
Compensation Table (herein, "named executive officers") and all directors,
nominees for director and named executive officers as a group:
Number of Shares Percent
Name of Beneficial Owner Owned (1) of Class
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Norman H. Asbjornson 3,554,245 (2) 19.77
John B. Johnson, Jr. 23,350 (3) *
Anthony Pantaleoni 87,785 (4) *
Jack E. Short 12,850 (5) *
Charles C. Stephenson, Jr. 769,222 (3) 4.28
Paul K. Lackey, Jr. 2,850 (6) *
A. H. McElroy II 2,850 (6) *
Jerry R. Levine 55,517 (7) *
Robert G. Fergus 4,463 (8) *
Kathy I. Sheffield 81,179 (9) *
David E. Knebel 105,003 (10) *
Scott M. Asbjornson 297,777 (11) 1.66
Directors, nominees and named 4,997,019 (12) 27.80
executive officers as a group
(12 persons)
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(1) All shares are held beneficially and of record and the owner has sole
voting and investment power with respect thereto, except as otherwise
noted.
(2) Includes 193,625 shares issuable upon exercise of stock options that
are exercisable currently or within 60 days of the annual meeting, 350
shares of restricted stock that will vest within 60 days of the annual
meeting, 523 shares under AAON's 401(k) plan and 49,150 shares owned by
his foundation.
(3) Includes 8,000 shares issuable upon exercise of stock options that are
exercisable currently or within 60 days of the annual meeting and 350
shares of restricted stock that will vest within 60 days of the annual
meeting.
(4) Includes 6,000 shares issuable upon exercise of stock options that are
exercisable currently or within 60 days of the annual meeting and 350
shares of restricted stock that will vest within 60 days of the annual
meeting.
(5) Includes 8,000 shares issuable upon exercise of stock options that are
exercisable currently or within 60 days of the annual meeting and 2,850
shares of restricted stock that will vest within 60 days of the annual
meeting.
(6) Includes 2,850 shares of restricted stock which will vest within 60
days of the annual meeting.
(7) Includes 1,500 shares held by Mr. Levine's IRA account, 750 shares held
jointly by Mr. Levine and his wife, and 2,400 shares issuable upon
exercise of stock options that are exercisable currently or within 60
days of the annual meeting.
(8) Includes 1,310 shares under AAON's 401(k) plan, and 300 shares of
restricted stock that will vest within 60 days of the annual meeting.
(9) Includes 56,625 shares issuable upon exercise of stock options
exercisable currently or within 60 days of the annual meeting and 7,254
shares under AAON's 401(k) plan, and 300 shares of restricted stock
that will vest within 60 days of the annual meeting.
(10) Includes 80,500 shares issuable upon exercise of stock options
exercisable currently or within 60 days of the annual meeting and 2,203
shares under AAON's 401(k) plan, and 300 shares of restricted stock
that will vest within 60 days of the annual meeting.
(11) Includes 54,375 shares issuable upon exercise of stock options
exercisable currently or within 60 days of the annual meeting and 6,643
shares under AAON's 401(k) plan, and 300 shares of restricted stock
that will vest within 60 days of the annual meeting.
(12) Includes 415,125 shares issuable upon the exercise of stock options
that are exercisable currently or within 60 days and 11,150 shares of
restricted stock that will vest within 60 days of the annual meeting by
all directors and named executive officers.
* Less than 1%.
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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 2010, 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.
Anthony Pantaleoni, one of our directors since 1989, informed us in
March of 2008 that he did not intend to stand for re-election at the annual
meeting. Jack E. Short, the current remaining Class II director, has been placed
in nomination, and the persons named in the proxy will vote for his election.
Mr. Short has consented to being named in this Proxy Statement.
The remaining members of the Board of Directors have nominated Mr.
Jerry R. Levine to stand for election as a Class II director this year in the
place of Mr. Pantaleoni. Mr. Levine has consented to being named in this Proxy
Statement. Mr. Levine has for the past several years acted as a consultant to
the Company, primarily serving in the capacity of providing advice on investor
and stockholder relations. Mr. Levine is intimately familiar with our business
and operations, and the Board of Directors believes Mr. Levine's knowledge of
the Company and his professional background will be of great benefit. The
persons named in the proxy will vote for Mr. Levine's election.
Nominees:
Class II -- For Term to Expire in 2011
--------------------------------------
Name Age Current Position
---- --- ----------------
Jack E. Short 67 Director
Jerry R. Levine 69 Director - Nominee
Directors Continuing in Office:
Class III - Terms Expire in 2009
--------------------------------
Name Age Current Position
---- --- ----------------
Norman H. Asbjornson 72 President and Director
John B. Johnson, Jr. 74 Secretary and Director
Charles C. Stephenson, Jr. 71 Director
Class I - Terms Expire in 2010
------------------------------
Name Age Current Position
---- --- ----------------
Paul K. Lackey, Jr. 64 Director
A. H. McElroy II 45 Director
-4-
Biographical Information
Set forth below is a description of the background of each of our
current directors, our nominees for director 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.
Anthony Pantaleoni has served as a director of AAON since 1989. Mr.
Pantaleoni's term will expire at the 2008 annual meeting of stockholders, and
Mr. Pantaleoni has indicated that he will not stand for re-election. 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.
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.
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.
Paul K. Lackey, Jr., was elected as a director of AAON in 2007, and
currently serves in the class of directors whose terms will expire at the 2010
annual meeting of stockholders. Between April 2002 and October 2005 Mr. Lackey
served as CEO and President of The NORDAM Group, a privately held company in
Tulsa, Oklahoma involved in the aerospace industry. Since October 2005 Mr.
Lackey has served as the Chairman and CEO of The NORDAM Group. Mr. Lackey also
serves on the board of directors of Matrix Service Company, a public company
involved in the construction services industry.
-5-
A. H. McElroy II was elected as a director of AAON in 2007, and
currently serves in the class of directors whose terms will expire at the 2010
annual meeting of stockholders. Since 1997 Mr. McElroy has served as President
and CEO of McElroy Manufacturing, Inc., a privately held manufacturing concern
based in Tulsa, Oklahoma.
Jerry R. Levine has been nominated by the Board of Directors to stand
for election in the place of Mr. Pantaleoni, whose term expires at the 2008
annual meeting. If elected, Mr. Levine will serve in the class of Directors
whose terms will expire at the 2011 annual meeting. For the last 38 years, Mr.
Levine has been a securities analyst. From 1980 to 1991 Mr. Levine served as a
member of the "Emerging Growth Group" of Merrill Lynch Capital Markets,
specializing in small and mid-sized companies. In 1999 Mr. Levine formed JRL
Advisors, which firm provides investor relations services. Mr. Levine, through
JRL Advisors, has provided investor and shareholder relations services and
advice to the Company since JRL Advisors' formation.
Robert G. Fergus, age 67, has served as Vice President of AAON since
1989. Mr. Fergus also serves as Vice President of AAON-Oklahoma, AAON Canada and
AAON Properties.
Kathy I. Sheffield, age 55, 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.
David E. Knebel, age 62, 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.
BOARD AND COMMITTEE MATTERS
The business of AAON is managed under the direction of our Board of
Directors ("Board"). The Board of Directors met four times during 2007, and each
director participated in every meeting during the respective time he held his
position on the Board. Mr. Jerry Ryan was a member of the Company's Board of
Directors until his resignation in April 2007, and Mr. Thomas Naugle was a
member of the Board of Directors until his resignation in July 2007. Prior to
their resignations, Messrs. Ryan and Naugle attended all meetings of the Board
held in 2007.
Following the resignations of Messrs. Ryan and Naugle, the Board of
Directors elected Messrs. Lackey and McElroy to fill the vacancies in the Board
of Directors, in July 2007. Subsequent to their election to the Board, Messrs.
Lackey and McElroy attended all meetings of the Board in 2007.
Each director participated in at least 75% of all applicable committee
meetings held last year during the time he served on the Board. 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.
-6-
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 2007 annual meeting.
The Board has an Audit Committee, currently comprised of Mr. Short, Mr.
Pantaleoni and (since his election to the Board in July 2007) Mr. Lackey. Prior
to his resignation in July 2007, Mr. Naugle was a member of the Audit Committee.
Mr. Short is Chairman of the Audit Committee and has been designated as its
"financial expert" as defined by SEC rules.
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. All of the members of the Board who have served on the Audit Committee
during 2007 have been determined by the Board to be "independent" as defined in
Rule 4200(a)(15) of the National Association of Securities Dealers listing
standards. The Audit Committee is governed by a written charter, a copy of which
is included as Appendix A to these proxy materials. The "Audit Committee Report"
for year 2007 is set forth below. The Audit Committee met four times during
2007.
The Board also has a Compensation Committee which is currently
comprised of Mr. Stephenson, Mr. Pantaleoni and (since his election to the Board
in July 2007) Mr. McElroy. Prior to his resignation in April 2007, Mr. Ryan had
served as the Chairman of the Compensation Committee, and its sole other member
was Mr. Stephenson. Mr. Stephenson is the current Chairman of the Compensation
Committee. All of the members of the Board who have served on the Compensation
Committee in 2007 have been determined by the Board to be "independent" as
defined in Rule 4200(a)(15) of the National Association of Securities Dealers
listing standards. The Compensation Committee met three times during 2007. 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 was attached to our 2006 proxy statement.
We do not have a nominating committee or charter for such a committee.
Our 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 the occasions when vacancies have occurred in the Board, the
new directors have been unanimously approved by the other directors.
-7-
If and when new vacancies occur in the future, the Board will consider
director nominees recommended by shareholders, in accordance with our Bylaws.
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.
Audit Committee Report
March 11, 2008
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, 2007.
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, 2007.
Audit Committee of the Board of Directors
Jack E. Short, Chairman
Anthony Pantaleoni
Paul K. Lackey, Jr.
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.
-8-
Transactions with Related Persons
In 2007, 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.
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 2007, the Board affirmatively determined that Messrs.
Naugle and Ryan (during the period they served before their respective
resignations) and Messrs. Lackey and McElroy (from the time of their election),
were and are each independent. In addition, the Board affirmatively determined
that Messrs Pantaleoni and Stephenson are independent. Mr. Asbjornson does not
qualify as independent under the standards set forth below. The Board has
determined that Mr. Johnson should not be deemed independent, because he is a
member of the law firm that serves as General Counsel to the Company.
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 $100,000 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.
-9-
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.
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.
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EXECUTIVE COMPENSATION
Compensation Discussion and 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.
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), discretionary stock
options and restricted stock awards.
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 compensate executives'
performance
Stay competitive in the marketplace
Profit sharing Motivate executives and all employees
equally
Perquisites and personal benefits Attract and retain qualified executives
Equity-based compensation - stock Enhance profitability of AAON and
options and restricted stock shareholder value by aligning long-term
awards incentives with shareholders'
long-term interests
Retirement benefits - 401(k) and Attract and retain qualified executives
health savings account Enhance profitability of AAON and
shareholder value by aligning long-term
incentives with shareholders'
long-term interests
-11-
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, e.g.,
base salary and perquisites, while retirement benefits are generally paid out on
a long-term basis.
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 to achieve specific strategies
and operating objectives, as well as improved financial 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
Long-Term Incentive Plan ("LTIP") 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, marketing, 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.
-12-
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, 2007, the
Compensation Committee increased salaries for Named Officers by an aggregate of
$20,404 resulting in the following individual base salaries: Norman H.
Asbjornson -- $285,016, Robert G. Fergus -- $156,017, Kathy I. Sheffield --
$156,017, David E. Knebel -- $153,920 and Scott M. Asbjornson -- $146,900 for
the year ended December 31, 2007. In approving these executives' salary
increases, the Committee took into account certain factors including,
recommendations of the principal executive officer (except for himself), each
executives' individual experience and increased responsibilities and improved
performance for the Company
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 2007 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.
In accordance with our 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.
-13-
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
our LTIP 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 and restricted stock award 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 and restricted stock awards
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). Stock option 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 2007 and 2006 with respect to
outstanding options and restricted stock awards granted to the Named Officers is
shown in the "Summary Compensation Table" below. The grant date fair value of
the options and restricted stock awards granted to the Named Officers in 2007
and 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 provides additional detail regarding
the options and restricted stock awards granted to Named Officers in 2007 and
2006, including the vesting and other terms that apply to the options and
restricted stock awards.
Retirement Benefits - 401(k) Plan and Health Savings Account
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 9% of
the employee's compensation. Prior to January 1, 2008, the Company matched 50%
of the employee's salary deferral up to the first 7% of compensation. AAON's
contribution is in the form of cash and directs the investment to acquire shares
of our common stock. We believe that our added contribution in AAON stock
encourages retention as well as increases value to the employee and shareholder
as our performance increases. 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. In
2007, we began to offer employees two options regarding health care coverage.
They can participate in a self-funded plan or a high-deductible heath plan
wherein they open a Health Savings Account. We provide a 1% match for employee
contributions to their Health Savings Account.
-14-
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. Since July 2007 the Compensation Committee has
been composed of the three non-employee directors named at the end of this
report each of whom is "independent" as defined by the NASDAQ listing standards.
March 11, 2008
The Compensation Committee has reviewed and discussed with management
the disclosures contained in the Compensation Discussion and Analysis section of
this proxy statement. 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
Charles C. Stephenson, Jr., Chairman
Anthony Pantaleoni
A.H. McElroy II
(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.
Compensation Committee's Interlocks and Insider Participation
Mr. Stephenson was a member of the Compensation Committee during all of
2007. Mr. Pantaleoni was appointed to the Compensation Committee upon the
resignation of Mr. Ryan in April 2007, and Mr. McElroy was appointed to the
Committee upon his election to the Board in July 2007. 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.
Compensation of Named Officers
The "Summary Compensation Table" set forth below 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 and restricted stock awards granted in 2007 and 2006 that
follows it, provide information regarding the long-term equity incentives
awarded to Named Officers in 2007 and 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" provide 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, written or unwritten constructive
termination or change in control arrangements for any of our Named Officers for
the year ended December 31, 2007.
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Summary Compensation Table
Restricted
Stock Option All Other
Name and Salary Bonus Awards (1) Awards (1) Compensation Total
Principal Position Year ($) ($) ($)* ($)* ($) ($)
Norman H. Asbjornson 2007 278,766 - 3,179 - 48,653 (2) 330,598
President and Board Chairman 2006 265,849 - - 3,886 45,200 (2) 314,935
Robert G. Fergus 2007 153,512 6,000 1,303 - 13,575 (3) 174,390
Vice President 2006 145,841 4,000 - - - 149,841
Kathy I. Sheffield 2007 153,512 9,000 1,303 - 12,622 (4) 176,437
Vice President/Treasurer 2006 145,841 6,000 - 14,444 - 166,285
David E. Knebel 2007 151,455 9,000 1,303 - 11,074 (5) 172,832
Vice President, Sales and 2006 143,837 8,000 - 14,444 - 166,281
Technology
Scott M. Asbjornson 2007 141,194 30,459 1,303 - 10,266 (6) 183,222
Vice President 2006 135,577 - - 14,444 - 150,021
AAON Coil Products, Inc.
-----------------------------
*Reflects three-for-two stock split effective August 21, 2007
(1) See discussion of assumptions made in valuing these awards in the notes to
our financial statements. Compensation costs are recognized for option and
restricted stock 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 $6,546 and $5,989 in 2007 and 2006,
respectively; (iii) director fees in the amount of $19,800 and $18,900 in 2007
and 2006, respectively; and (iv) payment of personal car lease in the amount of
$17,934 and $17,641 in 2007 and 2006, respectively. In 2007, the Company began
matching contributions to a Health Savings Account.
(3) 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 $6,504 in 2007; and (iii) executive
medical insurance. In 2007, the Company began matching contributions to a Health
Savings Account.
(4) 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 $7,774 in 2007; and (iii) executive
medical insurance. In 2007, the Company began matching contributions to a Health
Savings Account.
(5) Consists of (i) a per capita share, the same as all other eligible
employees, of 10% of the pre-tax profit of AAON-Oklahoma and (ii) contributions
to our 401(k) plan by AAON in the amount of $6,656 in 2007. In 2007, the Company
began matching contributions to a Health Savings Account.
(6) Consists of (i) a per capita share, the same as all other eligible
employees, of 10% of the pre-tax profit of AAON Coil Products and (ii)
contributions to our 401(k) plan by AAON in the amount of $7,332 in 2007. In
2007, the Company began matching contributions to a Health Savings Account.
-16-
We award stock incentives to key employees and the Named Officers
either on the initial date of employment or due to performance incentives
throughout the year. The 2007 grants to Named Officers are reported in the table
below.
Grants of Plan-Based Awards
All Other Grant Date
All Other Option Awards: Exercise or Fair Value
Stock Awards: Number of Securities Base Price of of
Grant Number of Shares Underlying Option Awards Stock/Option
Name Date of Stock or Units (1) Options(#)(1) ($/sh)(1) Awards (1)
Norman H. Asbjornson 8/22/07 2,000 - - 41,140 (2)
5/22/07 1,050 - - 20,202 (3)
5/31/06 - 3,000 15.55 19,980 (4)
Robert G. Fergus 7/12/07 1,500 - - 31,665 (5)
Kathy I. Sheffield 7/12/07 1,500 - 31,665 (5)
5/8/06 15,000 18.43 123,750 (6)
David E. Knebel 7/12/07 1,500 - 31,665 (5)
5/8/06 15,000 18.43 123,750 (6)
Scott M. Asbjornson 7/12/07 1,500 - 31,665 (5)
5/8/06 15,000 18.43 123,750 (6)
----------------------------
(1) All shares and prices have been adjusted to reflect stock splits.
(2) The fair value of these shares is $20.57 per share based on the
Black-Scholes pricing model. See discussion of assumptions made in valuing these
awards in the notes to our financial statements.
(3) The fair value of these shares is $19.24 per share based on the
Black-Scholes pricing model. See discussion of assumptions made in valuing these
awards in the notes to our financial statements.
(4) The fair value price of these options is $6.66 per share based on the
Black-Scholes pricing model. See discussion of assumptions made in valuing these
awards in the notes to our financial statements.
(5) The fair value of these shares is $21.11 per share based on the
Black-Scholes pricing model. See discussion of assumptions made in valuing these
awards in the notes to our financial statements.
(6) The fair value of these options is $8.25 per share based on the
Black-Scholes pricing model. See discussion of assumptions made in valuing these
awards in the notes to our financial statements.
Narrative Disclosure to Summary Compensation Table and Grants of Plan-Based
Awards Table
A discussion of 2007 salaries, bonuses and long-term incentive awards
is included in "Executive Compensation."
Named Officers are not separately entitled to receive dividend
equivalent rights with respect to each stock option, however dividends are paid
for restricted stock awards (retroactively upon vesting). Each nonqualified
stock option award described in the "Grants of Plan-Based Awards Table" above
expires on the tenth anniversary of its associated grant date and vests in equal
installments over the course of three years for Board members and five years for
executives. Norman H. Asbjornson's awards vest over a three-year period due to
his capacity as a director, excluding 2,000 restricted stock shares that were
granted to him in his capacity of an officer.
-17-
The following table presents information regarding outstanding equity
awards as of December 31, 2007. All share numbers and prices have been adjusted
to reflect stock splits.
Outstanding Equity Awards at Fiscal Year End
Option Awards Stock Awards
------------- ------------
Equity
Number of Number of Equity Incentive Plan
Securities Securities Incentive Plan Awards: Market
Underlying Underlying Awards: Number Value of Shares
Unexercised Unexercised\ Option of Unearned of Stock That
Options (#) Options (#) Exercise Expiration Shares That Have Not Vested
Name Exercisable Unexercisable Price ($) Grant Date Date Have Not Vested ($)
---- ----------- ------------- --------- ---------- ---- --------------- ---
Norman H. Asbjornson 168,750 2.67 12/28/98 12/28/08
16,875 3.85 10/13/99 10/13/09
3,000 13.60 5/25/04 5/25/14
2,000 1,000 12.00 5/24/05 5/24/15
1,000 2,000 15.55 5/31/06 5/31/16
5/22/07 N/A 1,050 (1) 20,811
8/22/07 N/A 2,000 (2) 39,640
Robert G. Fergus - - - 7/12/07 N/A 1,500 (3) 29,730
Kathy I. Sheffield 14,250 3.85 10/13/99 10/13/09
16,875 5.72 3/1/01 3/1/11
12,000 3,000 9.68 2/21/03 2/21/13
3,000 4,500 10.82 4/6/05 4/6/15
3,000 12,000 18.43 5/8/06 5/8/16
7/12/07 N/A 1,500 (3) 29,730
David E. Knebel 47,500 6.65 5/31/01 5/31/11
18,000 4,500 9.68 2/21/03 2/21/13
3,000 4,500 10.82 4/6/05 4/6/15
3,000 12,000 18.43 5/8/06 5/8/16
7/12/07 N/A 1,500 (3) 29,730
Scott M. Asbjornson 6,750 2.26 1/16/98 1/16/08
20,250 3.85 10/13/99 10/13/09
16,875 5.72 3/1/01 3/1/11
3,000 4,500 10.82 4/6/05 4/6/15
3,000 12,000 18.43 5/8/06 5/8/16
7/12/07 N/A 1,500 (3) 29,730
---------------------
(1) The restricted stock awards vest ratably over 3 years and will be fully
vested on May 22, 2010.
(2) The restricted stock awards vest ratably over 5 years and will be fully
vested on August 22, 2012.
(3) The restricted stock awards vest ratably over 3 years and will be fully
vested on July 12, 2012.
The following table presents information regarding the exercise of
stock options by Named Officers during 2007. All shares and prices have been
adjusted to reflect stock splits.
Option Exercises and Stock Vesting
Option Awards
Name Number of Shares Exercised (#) Valued Realized on Exercise ($)
Norman H. Asbjornson 129,375 2,678,456
Robert G. Fergus - -
Kathy I. Sheffield 12,000 202,968
David E. Knebel 20,000 280,720
Scott M. Asbjornson - -
-18-
The following table sets forth information concerning our equity
compensation plans as of December 31, 2007. All shares and prices have been
adjusted to reflect stock splits.
Equity Compensation Plan Information
Number of securities remaining
Number of securities to be Weighted-average available for future issuance
issued upon exercise of exercise price of under equity compensation plan
outstanding options, outstanding options, (excluding securities reflected
Plan Category warrants and rights warrants and rights in column (a))
----------------------------- -------------------------- -------------------- -------------------------------
(a) (b) (c)
Equity compensation plans 928,933 $ 9.47 744,406
approved by security holders (1)
Equity compensation plans not
approved by security holders (2) --- --- ---
Total 928,933 $ 9.47 744,406
----------------
(1) Consists of shares covered by the AAON 1992 Stock Option Plan, as amended,
and the 2007 LTIP.
(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
$1,200 if present in person at Board meetings or $750 if participating by
conference telephone call. Directors are paid attendance fees of $1,000 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 $750 per quarter. Prior to the adoption of our LTIP in 2007,
each director was granted 2,000 shares of non-qualified stock options each year.
In 2007, following the adoption of our LTIP, we adopted a policy of annually
granting each of our directors 700 shares of restricted stock (1,050 shares
following our 3 for 2 stock split in August 2007). We made our annual grants of
restricted stock awards in May 2007, at which time Messrs. Asbjornson, Johnson,
Naugle, Pantaleoni, Short and Stephenson received restricted stock awards for
700 shares (1,050 shares after the stock split) of stock, which vest ratably
over three years. At the time they were elected to the Board in July 2007, each
of Messrs. Lackey and McElroy also received restricted stock awards for 700
(1,050 shares after the stock split) shares of stock, which vest ratably over
three years, as well as restricted stock awards for an additional 5,000 shares
(7,500 shares after the stock split), which vest ratably over three years. Mr.
Short was granted an additional 5,000 shares (7,500 shares after the stock
split), which vest ratably over three years.
-19-
Director Compensation Table
Fees
Earned or Restricted
Paid in Stock All Other
Cash Awards (1) Comp. Total
Name ($) ($) ($) ($)
John B. Johnson, Jr. 19,800 1,975 (2) (3) - 21,775
Thomas E. Naugle 11,900 - (4) - 11,900
Anthony Pantaleoni 23,100 1,975 (2) (3) - 25,075
Jerry E. Ryan 6,250 - (5) - 6,250
Jack E. Short 30,800 16,079 (2) (6) - 46,879
Charles C. Stephenson, Jr. 22,050 1,975 (2) (3) - 24,025
Paul K. Lackey, Jr. 10,900 13,101 (7) (8) - 24,001
A.H. McElroy II 10,650 13,101 (7) (8) - 23,751
-----------------------
(1) See discussion of assumptions made in valuing these awards in the notes to
the Company's financial statements. All shares and prices were adjusted for
stock splits.
(2) Granted on May 22, 2007 with a grant date fair value of $19.24 per share.
Compensation costs are recognized over the requisite service period.
(3) As of December 31, 2007, 9,000 shares underlying non-qualified options were
outstanding, and 1,050 shares associated with restricted stock awards were
outstanding.
(4) As of December 31, 2007, there were no non-qualified options or restricted
stock awards outstanding following Mr. Naugle's resignation from the Board in
July 2007.
(5) As of December 31, 2007, there were no non-qualified options outstanding
following Mr. Ryan's resignation from the Board in April 2007. Mr. Ryan retired
before the May 2007 grant of restricted stock awards.
(6) As of December 31, 2007, 9,000 shares underlying non-qualified options were
outstanding, and 8,550 shares associated with restricted stock awards were
outstanding.
(7) Granted on July 18, 2007 with a grant date fair value of $22.08 per share.
Compensation costs are recognized over the requisite service period.
(8) As of December 31, 2007, 8,550 shares associated with restricted stock
awards were outstanding. Non-qualified options have not been not granted during
his term as a Board member.
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.
-20-
INDEPENDENT PUBLIC ACCOUNTANTS
The Audit Committee has selected Grant Thornton LLP ("GT") as our
independent auditors for the fiscal year ending December 31, 2008.
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.
Audit Fees. GT billed us an aggregate of $344,000 and $332,038 for
professional services rendered for the audits of our financial statements for
the years ended December 31, 2007 and 2006, respectively, and reviews of the
related quarterly financial statements.
All Other Fees. No other fees were billed by GT to us during 2007 or
2006.
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.
STOCKHOLDER PROPOSALS FOR 2009 ANNUAL MEETING
Stockholder proposals intended to be presented at the 2009 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 18, 2008.
However, a stockholder who otherwise intends to present business at the
2009 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 2009 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 20, 2009, or
after March 19, 2009. 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 20, 2009 and March 19, 2009. 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.
-21-
OTHER MATTERS
Management knows of no business which will be presented at the 2008
Annual Meeting other than to elect the directors for the ensuing year.
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/CEO
April 15, 2008
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Appendix A
AAON, INC.
AUDIT COMMITTEE CHARTER
Organization
This charter governs the operations of the Audit Committee. The
committee shall review and reassess the charter at least annually and obtain the
approval of the board of directors. The committee shall be members of, and
appointed by, the board of directors and shall comprise at least three
directors, each of whom is independent of management and the Company. Members of
the committee shall be considered independent as long as they do not accept any
consulting, advisory or other compensatory fee (exclusive of director fees) from
the Company, are not an affiliated person of the Company or its subsidiaries,
and meet the independence requirements of NASDAQ listing standards. All
committee members shall be financially literate. Members shall not serve on more
than three public company audit committees simultaneously.
Purpose
The Audit Committee shall provide assistance to the board of directors
in fulfilling its oversight responsibility to the shareholders, potential
shareholders, the investment community and others relating to: the integrity of
the Company's financial statements; the financial reporting process; the systems
of internal accounting and financial controls; the performance of Company's
independent auditors; the independent auditor's qualifications and independence;
and the Company's compliance with ethics policies and legal and regulatory
requirements. In doing so, it is the responsibility of the committee to maintain
free and open communications between the committee, independent auditors and
management of the Company.
In discharging its oversight role, the committee is empowered to
investigate any matter brought to its attention with full access to all books,
records, facilities and personnel of the Company and the authority to engage
independent counsel and other advisers as it determines necessary to carry out
its duties.
Duties and Responsibilities
The primary responsibility of the Audit Committee is to oversee the Company's
financial reporting process on behalf of the board and report the results of its
activities to the board. While the Audit Committee has the responsibilities and
powers set forth in this charter, it is not the duty of the Audit Committee to
plan or conduct audits or to determine that the Company's financial statements
are complete and accurate and are in accordance with generally accepted
accounting principles. Management is responsible for the preparation,
presentation and integrity of the Company's financial statements and for the
appropriateness of the accounting principles and reporting policies that are
used by the Company. The independent auditors are responsible for auditing the
Company's financial statements and for reviewing the Company's unaudited interim
financial statements. The committee, in carrying out its responsibilities,
believes its policies and procedures should remain flexible, in order to best
react to changing conditions and circumstances. The committee should take
appropriate actions to set the overall corporate tone for quality financial
reporting, sound business risk practices and ethical behavior.
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The following shall be the principal duties and responsibilities of the
Audit Committee. These are set forth as a guide with the understanding that the
committee may supplement them as appropriate.
The committee shall be directly responsible for the appointment and
termination, compensation and oversight of the work of the independent auditors,
including resolution of disagreements between management and the auditor
regarding financial reporting. The committee shall pre-approve all audit and
non-audit services provided by the independent auditors and shall not engage the
independent auditors to perform the specific non-audit services proscribed by
law or regulation. The committee may delegate pre-approval authority to a member
of the Audit Committee. The decisions of any Audit Committee member to whom
pre-approval authority is delegated must be presented to the full Audit
Committee at its next scheduled meeting.
At least annually, the committee shall obtain and review a report by
the independent auditors describing:
|_| The auditors' internal quality control procedures.
|_| Any material issues raised by the most recent internal quality control
review, or peer review, of the auditors or by any inquiry or
investigation by governmental or professional authorities, the
preceding five years, respecting one or more independent audits carried
out by the auditors, and any steps taken to deal with any such issues.
|_| All relationships between the auditors and the Company (to assess the
auditor's independence).
The committee shall determine that the independent auditors have a
process in place to address the rotation of the lead audit partner and other
partners serving the account as required under the SEC independence rules.
The committee shall discuss with the independent auditors the overall
scope and plans for its audit, including the adequacy of staffing and
compensation. Also, the committee shall discuss with management and the
independent auditors the adequacy and effectiveness of the accounting and
financial controls, including the Company's policies and procedures to assess,
monitor and manage business risks, and legal and ethical compliance programs.
The committee shall meet separately periodically with management and
the independent auditors to discuss issues and concerns warranting committee
attention. The committee shall provide sufficient opportunity for the
independent auditors to meet privately with the members of the committee. The
committee shall review with the independent auditor any audit problems or
difficulties and management's response.
The committee shall receive regular reports from the independent
auditor on the critical policies and practices of the Company, and all
alternative treatments of financial information within generally accepted
accounting principles that have been discussed with management.
The committee shall review management's assertion on its assessment of
the effectiveness of internal controls as of the end of the most recent fiscal
year and the independent auditors' report on management assertion.
The committee shall discuss with management and the independent
auditors the adequacy and effectiveness of internal control over financial
reporting, including any significant deficiencies or material weaknesses
identified by management of the Company in connection with its required
quarterly certifications under Section 302 of the Sarbanes-Oxley Act. In
addition, the committee shall discuss with management and the independent
auditors any significant changes in internal control over financial reporting
that are disclosed, or considered for disclosure, in the Company's periodic
filings with the SEC.
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The committee shall review and discuss earnings press releases, as well
as financial information and earnings guidance provided to analysts and rating
agencies.
The committee shall review the interim financial statements and
disclosures under Management's Discussion and Analysis of Financial Condition
and Results of Operations with management and the independent auditors prior to
the filing of the Company's Quarterly Report on Form 10-Q. Also, the committee
shall discuss the results of the quarterly review and any other matters required
to be communicated to the committee by the independent auditors under generally
accepted auditing standards. The chair of the committee may represent the entire
committee for the purposes of this review.
The committee shall review with management and the independent auditors
the financial statements and disclosures under Management's Discussion and
Analysis of Financial Condition and Results of Operations to be included in the
Company's Annual Report on Form 10-K (or the annual report to shareholders if
distributed prior to the filing of Form 10-K), including its judgment about the
quality, not just the acceptability, of accounting principles, the
reasonableness of significant judgments and the clarity of the disclosures in
the financial statements. Also the committee shall discuss the results of the
annual audit and any other matters required to be communicated by the committee
by the independent auditors under generally accepted auditing standards.
The committee shall establish procedures for the receipt, retention and
treatment of complaints received by the Company regarding accounting, internal
accounting controls or auditing matters, and the confidential, anonymous
submission by employees of the Company of concerns regarding questionable
accounting or auditing matters.
The committee shall receive reports of evidence of a material violation
of securities laws or breaches of fiduciary duty.
The committee also prepares its report to be included in the Company's
annual proxy statement, as required by SEC regulations.
The committee shall perform an evaluation of its performance at least
annually to determine whether it is functioning effectively.
-25-
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 Charles C. Stephenson, Jr.,
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 20, 2008, at 10:00
A.M. (Local Time), and at any adjournment thereof, with all powers that the
undersigned would possess if personally present, hereby revoking all previous
proxies.
1. Election of Directors:
FOR Jack E. Short for a term ending in 2011 [ ] WITHHOLD AUTHORITY to vote for the nominee, Jack E. Short [ ]
FOR Jerry R. Levine for a term ending in 2011 [ ] WITHHOLD AUTHORITY to vote for the nominee, Jerry R. Levine [ ]
2. In their discretion, upon any other matters as may properly come before the meeting.
(over)
THIS PROXY WHEN PROPERLY EXECUTED WILL BE VOTED IN THE MANNER DIRECTED HEREIN BY THE UNDERSIGNED STOCKHOLDER. IF NO DIRECTION IS
MADE, THIS PROXY WILL BE VOTED FOR BOTH OF MANAGEMENT'S NOMINEES FOR DIRECTORS.
The undersigned hereby acknowledge(s) receipt of the Notice of the aforesaid Annual Meeting and the Proxy Statement accompanying the
same, both dated April 15, 2008.
Dated: , 2008
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(Please sign exactly as your name appears at left. When shares
are held in the names of two or more persons, all should sign
individually. Executors, administrators, trustees, etc.,
should so indicate when signing. When shares are held in the
name of a corporation, the name of the corporation should be
written first and then an authorized officer should sign on
behalf of the corporation, showing the office held.)
PLEASE COMPLETE, SIGN, DATE AND RETURN THIS
PROXY CARD PROMPTLY,
USING THE ENCLOSED ENVELOPE.
(over)