SCHEDULE 14A
(RULE 14a-101)
INFORMATION REQUIRED IN PROXY STATEMENT
SCHEDULE 14A INFORMATION
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Aftermarket Technology Corp.
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Dear Stockholders:
You are cordially invited to attend the Annual Meeting of Stockholders of
Aftermarket Technology Corp. on Wednesday, May 8, 2002, at 9:00 a.m. Central
time at the Hilton Lisle/Naperville, 3003 Corporate West Drive, Lisle, Illinois.
Your Board of Directors and management look forward to greeting those
stockholders who attend the meeting.
At this meeting you will be asked to elect directors and approve the adoption of
a new stock incentive plan. Your Board of Directors recommends a vote FOR these
proposals. The reasons for the Board's recommendation, as well as other
important information, are contained in the accompanying Proxy Statement. You
are urged to read the Proxy Statement carefully.
It is important that your shares be represented and voted at the meeting,
whether or not you plan to attend. Please sign, date and mail the enclosed proxy
card at your earliest convenience.
Your interest and participation in the affairs of Aftermarket Technology Corp.
are greatly appreciated.
/s/ Michael T. DuBose
Michael T. DuBose
CHAIRMAN OF THE BOARD,
PRESIDENT AND CHIEF EXECUTIVE OFFICER
April 1, 2002
AFTERMARKET TECHNOLOGY CORP.
ONE OAK HILL CENTER, SUITE 400
WESTMONT, ILLINOIS 60559
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NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
---------------------
To the Stockholders of
Aftermarket Technology Corp.:
NOTICE IS HEREBY GIVEN that the Annual Meeting of Stockholders of
Aftermarket Technology Corp. will be held at the Hilton Lisle/Naperville, 3003
Corporate West Drive, Lisle, Illinois on Wednesday, May 8, 2002, at 9:00 a.m.,
Central time, for the purposes of considering and acting upon the following:
1. election of nine directors to hold office until the 2003
Annual Meeting of Stockholders and thereafter until their
successors are elected and qualified;
2. approval of the adoption of the 2002 Stock Incentive Plan; and
3. transaction of such other business as may properly come before
the meeting or any adjournment thereof.
Only stockholders of record at the close of business on March 29, 2002
will be entitled to notice of, and to vote at, the meeting and any adjournments
thereof.
By Order of the Board of Directors,
/s/ Joseph Salamunovich
Joseph Salamunovich
Secretary
Dated: April 1, 2002
PLEASE MARK, DATE, SIGN AND RETURN THE ENCLOSED PROXY IN THE ACCOMPANYING
ENVELOPE WHETHER OR NOT YOU EXPECT TO ATTEND THE MEETING. NO POSTAGE IS REQUIRED
IF MAILED IN THE UNITED STATES.
AFTERMARKET TECHNOLOGY CORP.
ONE OAK HILL CENTER, SUITE 400
WESTMONT, ILLINOIS 60559
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PROXY STATEMENT
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ANNUAL MEETING OF STOCKHOLDERS
MAY 8, 2002
SOLICITATION OF PROXIES
This Proxy Statement is furnished in connection with the solicitation
of proxies by the Board of Directors of Aftermarket Technology Corp. for use at
its Annual Meeting of Stockholders to be held at the Hilton Lisle/Naperville,
3003 Corporate West Drive, Lisle, Illinois, on May 8, 2002 at 9:00 a.m., Central
time, and all adjournments thereof. This Proxy Statement and the accompanying
form of proxy are first being mailed to stockholders on or about April 3, 2002.
The cost of preparing, assembling and mailing the Notice of Annual
Meeting of Stockholders, Proxy Statement and form of proxy and the solicitation
of proxies will be paid by Aftermarket Technology Corp. Proxies may be solicited
by our directors, officers and employees, none of whom will receive any
additional compensation for such solicitation. Proxies may be solicited in
person or by telephone. We will pay brokers or other persons holding stock in
their names or the names of their nominees for the expenses of forwarding
soliciting material to their principals.
VOTING
The close of business on March 29, 2002 has been fixed as the record
date for the determination of stockholders entitled to notice of, and to vote
at, the annual meeting. On that date, there were 23,600,563 shares of our common
stock outstanding. A majority of the shares entitled to vote, present in person
or represented by proxy, will constitute a quorum at the annual meeting. Each
share of common stock is entitled to one vote on any matter that may be
presented for consideration and action by the stockholders at the annual
meeting. In all matters other than the election of directors, the affirmative
vote of a majority of the issued and outstanding shares of common stock will be
the act of stockholders. Directors will be elected by a plurality of the votes
of the shares of common stock present in person or represented by proxy and
entitled to vote on the election of directors. Abstentions will be treated as
the equivalent of a negative vote for the purpose of determining whether a
proposal has been adopted and will have no effect for the purpose of determining
whether a director has been elected. If a broker indicates on the proxy that
such broker does not have discretionary authority as to certain shares to vote
on a particular matter, those shares will be treated as present for purposes of
determining the existence of a quorum but will not be considered as present and
entitled to vote with respect to that matter.
Proxies will be voted in accordance with the instructions on the
proxies. In the absence of instructions, proxies will be voted FOR Aftermarket
Technology Corp.'s nominees for election as directors and in favor of the other
proposals specifically identified in the Notice of Meeting accompanying this
Proxy Statement. As April 1, 2002, the Board of Directors is not aware of any
matters to be presented for action at the annual meeting other than those
specifically identified in the Notice of Meeting. However, should any other
matters come before the annual meeting, proxies will be voted in the discretion
of the persons named as proxies thereon as to any other business that may
properly come before the annual meeting or any adjournment thereof.
Any stockholder has the power to revoke his or her proxy at any time
before it is voted at the annual meeting by submitting written notice of
revocation to our corporate secretary or by filing a duly executed proxy bearing
a later date. A proxy will not be voted if the stockholder who executed it is
present at the annual meeting and elects to vote the shares represented by the
proxy in person.
ELECTION OF DIRECTORS
Our directors are elected annually. The term of office of all present
directors expires on the date of the annual meeting, at which nine directors are
to be elected to serve for the ensuing year and until their successors are
elected and qualified. The nominees for election as directors are:
Robert Anderson Dr. Michael J. Hartnett
Richard R. Crowell Gerald L. Parsky
Michael T. DuBose Richard K. Roeder
Dale F. Frey J. Richard Stonesifer
Mark C. Hardy
All of the nominees currently serve as directors of Aftermarket
Technology Corp. For information regarding each nominee, see
"Management--Directors and Executive Officers."
Should any nominees become unavailable to serve as a director or should
any vacancy occur before the election (which events are not anticipated), the
proxies may be voted for a substitute nominee selected by the Board of Directors
or the authorized number of directors may be reduced. If for any reason the
authorized number of directors is reduced, the proxies will be voted, in the
absence of instructions to the contrary, for the election of the remaining
nominees named in this Proxy Statement. To the best of our knowledge, all
nominees are and will be available to serve.
MANAGEMENT
DIRECTORS AND EXECUTIVE OFFICERS
Our directors and executive officers are as follows:
NAME AGE POSITIONS
---- --- ---------
Michael T. DuBose 48 Chairman of the Board, President and Chief Executive Officer
Barry C. Kohn 46 Vice President and Chief Financial Officer
Lawrence W. Baker 59 Vice President, Automotive Sales and Marketing
John J. Machota 50 Vice President, Human Resources
Mary T. Ryan 48 Vice President, Communications and Investor Relations
Joseph Salamunovich 42 Vice President, General Counsel and Secretary
Paul J. Komaromy 52 President, Aaron's Automotive Products, Inc. and Component
Remanufacturing Specialists, Inc.
Matt J. Pieper 42 President, ATC Logistics
Robert Anderson 81 Director
Richard R. Crowell 47 Director
Dale F. Frey 69 Director
Mark C. Hardy 38 Director
Dr. Michael J. Hartnett 56 Director
Gerald L. Parsky 59 Director
Richard K. Roeder 53 Director
J. Richard Stonesifer 65 Director
MICHAEL T. DUBOSE joined us as Chairman of the Board, President and
Chief Executive Officer in 1998. Prior to that he served as a consultant to
Aurora Capital Group from 1997. From 1995 to 1997, Mr. DuBose was Chairman
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and Chief Executive Officer of Grimes Aerospace Company, an international
engineering, manufacturing and distribution company. From 1993 to 1995, he
served as Senior Vice President of SAI Corporation's computer equipment
manufacturing and systems sector. Prior to that, Mr. DuBose held various
positions at General Instrument and General Electric Company. Mr. DuBose holds
an M.S. in Management from the Stanford University Graduate School of Business.
BARRY C. KOHN joined us as Vice President and Chief Financial Officer
in January 1999. During 1998 he served as a self-employed financial consultant.
From 1995 to 1997, Mr. Kohn was Senior Vice President and Chief Financial
Officer of Grimes Aerospace Company. Between 1987 and 1995, he held increasingly
senior positions at Grimes including Treasurer, Controller and Manager of
Business Planning. Mr. Kohn holds a Masters of Accounting from The Ohio State
University and is a Certified Public Accountant (inactive).
LAWRENCE W. BAKER joined us as Vice President, Automotive Sales &
Marketing in January 2001. Prior to that, Mr. Baker was employed for 35 years
with DaimlerChrysler, most recently serving as Vice President of the Mopar Parts
division from 1999 to 2000, as General Manager of Mopar from 1994 to 1999, as
General Manager of the Jeep/Eagle division from 1990 to 1994 and as General
Manager of the Dodge Car & Truck division from 1989 to 1990. Mr. Baker holds a
B.S. in Marketing from The Ohio State University.
JOHN J. MACHOTA joined us as Vice President, Human Resources in 1997.
From 1996 to 1997, he was a self-employed human resources consultant. From 1995
to 1996, Mr. Machota was Vice President, Compensation for Waste Management, Inc.
and from 1993 to 1995, served as Waste Management's Vice President, Human
Resource Services. From 1986 to 1993, Mr. Machota was Vice President, Human
Resources for a subsidiary of Waste Management and prior to that held various
other positions in the human resources area. Mr. Machota holds an M.S. in
Industrial Relations from Loyola University.
MARY T. RYAN joined us as Vice President, Communications and Investor
Relations in April 1999. From 1996 to 1998, Ms. Ryan served as Vice President,
Corporate Affairs for American Disposal Services, Inc. From 1995 to 1996, she
was a self-employed public relations consultant. Prior to that, Ms. Ryan was
employed for more than ten years with Waste Management, Inc. Ms. Ryan holds an
M.B.A. from DePaul University.
JOSEPH SALAMUNOVICH joined us as Vice President, General Counsel and
Secretary in 1997. From 1995 to 1997, Mr. Salamunovich was a partner in the law
firm of Gibson, Dunn & Crutcher LLP, where he specialized in corporate and
securities law matters. Mr. Salamunovich holds a J.D. from Loyola Law School.
PAUL J. KOMAROMY joined us in February 2000 as President of our Aaron's
Automotive Products, Inc. subsidiary. He has also served as President of our
Component Remanufacturing Specialists, Inc. subsidiary since January 2001. From
1997 to 1999, Mr. Komaromy was Vice President and General Manager of the Engine
Systems and Accessories division of AlliedSignal, Inc. From 1987 to 1997, Mr.
Komaromy was employed with Grimes Aerospace, serving as Senior Vice President
and General Manager of the Vision Systems division from 1996 to 1997 and as
Senior Vice President, Operations and Engineering from 1991 to 1995. From 1978
to 1987, Mr. Komaromy was employed with the Power Systems division of Cooper
Industries. Mr. Komaromy holds an M.S. in Industrial Administration from the
Carnegie-Mellon University Graduate School of Industrial Administration.
MATTHEW J. PIEPER joined us as General Manager of the Logistics
Services business unit in October 1998 and served as Vice President of ATC
Logistics from June 2000 until November 2000 when he became President of ATC
Logistics. Prior to joining us, Mr. Pieper served as a Regional Distribution
Manager for the Perrier division of Nestle Foods from 1996 to 1998. Before that,
he served in various logistics and manufacturing positions for the Pepsi-Cola
Company from 1989 to 1996. Mr. Pieper holds a B.B.A. in Transportation/Logistics
from Iowa State University and an M.B.A. from Baylor University.
ROBERT ANDERSON became a director in 1997. Mr. Anderson has been
associated with Rockwell International Corporation since 1968, where he has been
Chairman Emeritus since 1990 and served previously as Chairman of the Executive
Committee from 1988 to 1990 and as Chairman of the Board and Chief Executive
Officer from 1979 to 1988.
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RICHARD R. CROWELL became a director in 1994. Mr. Crowell is President
and a founding partner of Aurora Capital Group and has been with Aurora Capital
Group since it was founded in 1991.
DALE F. FREY became a director in 1997. Prior to his retirement in
1997, Mr. Frey was Chairman of the Board, President and Chief Executive Officer
of General Electric Investment Corporation, a position he had held since 1984,
and was a Vice President of General Electric Company since 1980. Mr. Frey is a
director of Praxair, Inc., Roadway Express, Community Health Systems, Yankee
Candle and McLeod USA.
MARK C. HARDY became a director in 1994. Mr. Hardy is a Managing
Director and partner of Aurora Capital Group. Prior to joining Aurora Capital
Group in 1993, Mr. Hardy was an Associate and Consultant at Bain & Company, a
consulting firm.
DR. MICHAEL J. HARTNETT became a director in 1994. Since 1992, Dr.
Hartnett has been Chairman, President and Chief Executive Officer of Roller
Bearing Company of America, Inc., a manufacturer of ball and roller bearings.
Prior to joining Roller Bearing in 1990 as General Manager of its Industrial
Tectonics subsidiary, Dr. Hartnett spent 18 years with The Torrington Company, a
subsidiary of Ingersoll-Rand.
GERALD L. PARSKY became a director in 1997. Mr. Parsky is the Chairman
and a founding partner of Aurora Capital Group. Prior to forming Aurora Capital
Group in 1991, Mr. Parsky was a senior partner and a member of the Executive and
Management Committees of the law firm of Gibson, Dunn & Crutcher LLP. Prior to
that, he served as an official with the United States Treasury Department and
the Federal Energy Office, and as Assistant Secretary of the Treasury for
International Affairs.
RICHARD K. ROEDER became a director in 1994. Mr. Roeder is a founding
partner and Managing Director of Aurora Capital Group. Prior to forming Aurora
Capital Group in 1991, Mr. Roeder was a partner in the law firm of Paul,
Hastings, Janofsky & Walker, where he served as Chairman of the firm's Corporate
Law Department and a member of its National Management Committee.
J. RICHARD STONESIFER became a director in 1997. Prior to his
retirement in 1996, Mr. Stonesifer was employed with the General Electric
Company for 37 years, serving most recently as President and Chief Executive
Officer of GE Appliances, and was an executive officer and Senior Vice President
of the General Electric Company, from January 1992 until his retirement. Mr.
Stonesifer is a director of Polaris Industries, Inc.
COMMITTEES OF THE BOARD OF DIRECTORS AND BOARD MEETINGS
We have an Audit Committee and a Compensation and Human Resources
Committee. We do not have a nominating committee. Director nominations are made
by the full Board of Directors.
The Audit Committee provides assistance to the Board of Directors in
fulfilling its oversight role relating to our corporate accounting and reporting
practices and the quality and integrity of our financial reports. The Audit
Committee is governed by a written charter approved by the Board of Directors.
During the first four months of 2001 the Audit Committee was comprised of
Messrs. Anderson, Frey (Chairman) and Roeder. In May 2001, Mr. Roeder resigned
from the Audit Committee because his affiliation with Aurora Capital Group
prevented him from being independent for purposes of the Nasdaq listing
standards. Mr. Hartnett was appointed to take Mr. Roeder's place on the Audit
Committee. Messrs. Anderson, Frey and Hartnett are independent as defined by the
Nasdaq listing standards. The Audit Committee met eight times during 2001.
The Compensation and Human Resources Committee establishes our general
compensation policies, establishes the specific compensation programs that we
utilize with respect to our executive officers and makes recommendations to the
Board of Directors regarding the salaries of executive officers and the granting
of stock options to eligible employees. During 2001 the Compensation and Human
Resources Committee was comprised of Messrs. Crowell, Parsky and Stonesifer
(Chairman). The Compensation and Human Resources Committee met four times during
2001.
4
The Board of Directors held five meetings during 2001. Each director
attended at least 75% of the meetings of the Board of Directors and the
committees of the Board on which he served in 2001.
DIRECTOR COMPENSATION
Directors do not receive cash compensation for service on the Board of
Directors or its committees, and we do not expect to pay fees to our directors
in the foreseeable future. Directors are reimbursed for their expenses in
connection with attending Board and committee meetings.
At the time that Messrs. Anderson, Frey and Stonesifer joined the Board
of Directors in 1997, they were each granted options to purchase 12,000 shares
of our common stock at an exercise price of $15.25, $18.25 and $18.25 per share,
respectively. In May 1998 these three directors were each granted additional
options to purchase 24,000 shares of the common stock at an exercise price of
$18.125 per share. In November 1998 the 36,000 options previously granted to
each of Messrs. Anderson, Frey and Stonesifer were canceled and replaced with an
equal number of new options with an exercise price of $5.3125 per share. In 1999
these three directors were each granted additional options to purchase 14,000
shares of the common stock at an exercise price of $9.00 per share, in 2000 they
were each granted additional options to purchase 25,000 shares of the common
stock at an exercise price of $11.125 per share, and in 2001 they were each
granted additional options to purchase 30,000 shares of the common stock at an
exercise price of $5.06 per share. In 2001, Mr. Hartnett was also granted
options to purchase 30,000 shares of the common stock at an exercise price of
$5.06 per share. All of the currently outstanding options granted to Messrs.
Anderson, Frey, Hartnett and Stonesifer have an exercise price equal to the
closing price of a share of our common stock on the Nasdaq National Market
System on the date the options were granted.
COMPLIANCE WITH SECTION 16(a) OF THE EXCHANGE ACT
Section 16(a) of the Securities Exchange Act of 1934, as amended (the
"Exchange Act"), requires our officers, directors and persons who own more than
10% of our outstanding common stock to file reports of ownership and changes in
ownership with the Securities and Exchange Commission and to furnish copies of
these reports to us. Based solely on a review of the copies of the forms that we
received, we believe that all such forms required during 2001 were filed on a
timely basis, except for the Form 5 of Mr. Crowell for 2001, which was filed two
weeks late.
5
EXECUTIVE COMPENSATION
SUMMARY COMPENSATION TABLE
The following table sets forth, for the three most recently completed
fiscal years, the cash compensation, for services to us in all capacities, of
(i) our Chief Executive Officer and (ii) the persons who as of December 31, 2001
were the four other most highly compensated executive officers of Aftermarket
Technology Corp. and its subsidiaries:
ANNUAL LONG-TERM
COMPENSATION COMPENSATION AWARDS
---------------------- --------------------
NUMBER OF SECURITIES
UNDERLYING ALL OTHER
NAME AND PRINCIPAL POSITION YEAR SALARY BONUS (1) OPTIONS (#) (2) COMPENSATION
--------------------------- ---- ------ --------- --------------- ------------
Michael T. DuBose 2001 $474,615 $1,211,615 100,000 $ 22,139 (3)
Chairman, President and 2000 470,000 425,777 100,000 23,800 (3)
Chief Executive Officer 1999 400,000 319,500 -- 203,940 (4)
Lawrence W. Baker (5) 2001 $289,327 $ 221,587 75,000 $ 36,000 (6)
Vice President, Automotive Sale 2000 -- -- -- --
and Marketing 1999 -- -- -- --
Barry C. Kohn 2001 $271,731 $ 361,042 75,000 $ 12,548 (3)
Chief Financial Officer 2000 270,000 130,451 35,000 5,400 (7)
1999 226,154 110,000 90,000 36,963 (8)
Matt J. Pieper (9) 2001 $225,000 $ 228,244 37,000 $ 15,043 (3)
President, ATC Logistics 2000 161,904 210,000 35,000 10,576 (10)
1999 117,616 84,035 5,000 9,725 (10)
Joseph Salamunovich 2001 $201,154 $ 177,788 30,000 $ 12,256 (3)
Vice President, General Counsel 2000 197,308 96,630 20,000 2,599 (7)
and Secretary 1999 186,077 90,000 20,000 1,321 (7)
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(1) Bonuses for a particular year are generally paid during the first quarter
of the following year.
(2) Consists of options to purchase shares of our common stock, which options
were issued pursuant to our 1996 Stock Incentive Plan, 1998 Stock
Incentive Plan or 2000 Stock Incentive Plan. Pursuant to the Stock
Incentive Plans, the Compensation and Human Resources Committee of the
Board of Directors makes recommendations to the Board of Directors
regarding the amount, terms and conditions of each option to be granted.
(3) Consists of allowances for automobile, club dues and financial planning.
(4) Includes (i) $176,770 of relocation benefits (including $76,770 of income
tax "gross up") and (ii) $14,954 of automobile allowance.
(5) Mr. Baker joined us in January 2001.
(6) Consists of a hiring bonus and allowances for club dues and financial
planning.
(7) Consists of allowances for club dues and financial planning.
(8) Includes $31,750 of relocation benefits (including $11,750 of income tax
"gross up").
(9) Mr. Pieper joined us in October 1998 and became President of ATC
Logistics in November 2000. At that time his annual base salary was
increased to $225,000.
(10) Consists of an automobile allowance.
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Set forth below is the annual base salary for our Chief Executive
Officer and each of our four other most highly compensated executive officers as
of March 1, 2002:
ANNUAL
NAME BASE SALARY
----------------------------------------------------- -----------
Michael T. DuBose.................................... $550,000
Lawrence W. Baker.................................... 315,000
Barry C. Kohn........................................ 300,000
Paul J. Komaromy..................................... 270,000
Matt J. Pieper....................................... 225,000
OPTION GRANTS TABLE
Shown below is information concerning grants of options during 2001 to
our Chief Executive Officer and each of our four other most highly compensated
executive officers as of December 31, 2001:
INDIVIDUAL
GRANTS POTENTIAL REALIZABLE
------------------------------ VALUE AT ASSUMED
NUMBER OF % OF TOTAL ANNUAL RATES OF
SECURITIES OPTIONS STOCK PRICE
UNDERLYING GRANTED TO EXERCISE APPRECIATION
OPTIONS GRANTED EMPLOYEES IN PRICE EXPIRATION FOR OPTION TERM(1)
NAME (#) FISCAL YEAR ($/SHARE) DATE 5% ($) 10% ($)
---------------------- --------------- ------------ -------- ---------- -------- --------
Michael T. DuBose...... 100,000(2) 13.4 $5.060 5/9/11 $318,221 $806,434
Lawrence W. Baker...... 75,000(3) 10.1 $4.563 2/20/11 215,223 545,419
Barry C. Kohn.......... 75,000(2) 10.1 $5.060 5/9/11 238,666 604,825
Matt J. Pieper......... 37,000(2) 5.0 $5.060 5/9/11 117,742 298,380
Joseph Salamunovich.... 30,000(2) 4.0 $5.060 5/9/11 95,466 241,930
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(1) The potential gains shown are net of the option exercise price and do not
include the effect of any taxes associated with exercise. The amounts
shown are for the assumed rates of appreciation only, do not constitute
projections of future stock price performance, and may not necessarily be
realized. Actual gains, if any, on stock option exercises depend on the
future performance of the common stock, continued employment of the
optionee through the term of the options, and other factors.
(2) These options were granted under the 2000 Stock Incentive Plan. One third
of the options vest and become exercisable on each of May 9, 2002, 2003
and 2004.
(3) These options were granted under the 1996 Stock Incentive Plan. One third
of the options vest and become exercisable on each of February 20, 2002,
2004 and 2006.
AGGREGATED OPTION EXERCISES AND YEAR-END OPTION VALUE TABLE
Shown below is information relating to (i) the exercise of stock
options during 2001 by our Chief Executive Officer and each of our four other
most highly compensated executive officers as of December 31, 2001 and (ii) the
value of unexercised options for each of the CEO and such executive officers as
of December 31, 2001:
7
NUMBER OF SECURITIES VALUE OF UNEXERCISED
UNDERLYING UNEXERCISED IN-THE-MONEY OPTIONS
SHARES OPTIONS AT FISCAL YEAR-END AT FISCAL YEAR-END (1)
ACQUIRED ON VALUE ---------------------------- ---------------------------
NAME EXERCISE REALIZED EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
---------------------- ------------- ------------ ------------ ------------- ----------- -------------
Michael T. DuBose...... -- -- 533,334 166,666 $4,758,753 $1,431,497
Lawrence W. Baker...... -- -- -- 75,000 -- 872,775
Barry C. Kohn.......... -- -- 71,667 128,333 725,692 1,281,687
Matt J. Pieper......... -- -- 15,334 64,666 137,069 654,387
Joseph Salamunovich.... -- -- 43,393 71,695 115,756 514,822
---------------
(1) Based on the closing price of our common stock on the Nasdaq National
Market System on December 31, 2001, which was $16.20 per share.
EMPLOYMENT AGREEMENTS
In January 2002 we entered into a new two-year employment agreement
with Mr. DuBose, which includes a noncompetition provision for a period of 24
months from the termination of Mr. DuBose's employment and a nondisclosure
provision. The agreement also provides that if Mr. DuBose ceases to be employed
by us for any reason other than termination for cause or voluntary resignation,
he would receive severance payments equal to two times his base salary plus two
times his target bonus under our incentive compensation plan plus a pro rata
portion of his incentive compensation bonus for the year in which he ceases to
be employed. Mr. DuBose would also receive medical benefits for up to ten years
following the end of his employment.
We typically enter into an employment agreement with each of our other
executive officers that provides for a three-year term and is automatically
renewable thereafter on a year-to-year basis. The agreement includes a
noncompetition provision for a period of 18 months from the termination of the
executive officer's employment as well as a nondisclosure provision. The
executive officer is entitled to severance equal to his or her base salary for a
period of 12 months after termination if he or she is terminated without cause,
except in the cases of Mr. Kohn, whose severance period is 18 months.
STOCK INCENTIVE PLANS
Pursuant to our 1996, 1998 and 2000 Stock Incentive Plans, officers,
directors, employees and consultants of Aftermarket Technology Corp. and its
affiliates are eligible to receive options to purchase shares of our common
stock and other awards. Awards under the 1996 Plan are not restricted to any
specified form or structure and may include, without limitation, sales or
bonuses of stock, restricted stock, stock options, reload stock options, stock
purchase warrants, other rights to acquire stock, securities convertible into or
redeemable for stock, stock appreciation rights, phantom stock, dividend
equivalents, performance units or performance shares. Awards under the 1998 and
2000 Plans may take the form of stock options, incentive bonuses and incentive
stock.
The Stock Incentive Plans are administered by the Compensation and
Human Resources Committee of the Board of Directors, although the Board of
Directors may exercise any of the Committee's authority under the Plans in lieu
of the Committee's exercise thereof. While the Stock Incentive Plans permit the
Committee to grant awards, such grants are typically made by the Board of
Directors based on the Committee's recommendations regarding the recipients and
type and amount of awards. Subject to the express provisions of the Stock
Incentive Plans, the Compensation and Human Resources Committee has broad
authority in administering and interpreting the Plans. Options granted to
employees may be options intended to qualify as incentive stock options under
Section 422 of the Internal Revenue Code of 1986, as amended, or options not
intended to so qualify. Awards to employees may include a provision terminating
the award upon termination of employment under certain circumstances or
accelerating the receipt of benefits upon the occurrence of specified events.
The vesting of stock options will be accelerated in the event of a change of
control of Aftermarket Technology Corp.
The aggregate number of shares of our common stock that can be issued
under the Stock Incentive Plans may not exceed 4,350,000. As of March 1, 2002,
there were outstanding options to purchase an aggregate of 2,208,223 shares of
common stock granted to directors, officers, employees and certain independent
contractors
8
pursuant to the Plans, and the number of shares available for issuance pursuant
to options yet to be granted under the Plans was 167,811.
In most cases, outstanding options are subject to certain vesting
provisions and expire on the tenth anniversary of the date of grant. The
exercise prices of options outstanding under the Stock Incentive Plans as of
March 1, 2002 are as follows:
NUMBER OF OPTION
SHARES EXERCISE PRICE
---------------- --------------
20,000 $ 4.438
101,000 4.563
24,000 4.67
367,500 5.00
95,000 5.0312
550,000 5.06
90,000 5.3125
3,000 5.563
3,666 6.875
23,500 8.50
12,500 8.9375
106,326 9.00
15,000 9.125
200,000 10.00
272,643 11.125
162,000 11.4375
2,000 11.80
35,088 14.75
49,000 18.125
25,000 18.25
51,000 19.00
---------
2,208,223
For information regarding options granted to our directors and
officers, see "Security Ownership of Certain Beneficial Owners and Management."
REPORT OF THE COMPENSATION AND HUMAN RESOURCES COMMITTEE ON EXECUTIVE
COMPENSATION
Our executive compensation program is administered by the Compensation
and Human Resources Committee of the Board of Directors, which consists of three
non-employee directors: Messrs. Crowell, Parsky and Stonesifer.
COMPENSATION PHILOSOPHY
The goals of our executive compensation program are to align
compensation with business objectives and performance, and to ensure that we are
able to attract, retain and motivate high caliber executives whose contributions
are critical to our long-term success. A substantial portion of executive
compensation is to be linked to increased stockholder value and achievement of
financial results. The existing executive compensation program consists of three
elements: base salary, short-term incentives (annual bonus) and long-term
incentives (stock options). Each executive's compensation is linked to the
achievement of both our annual operating plan and specific individual goals. In
addition, we periodically review competitive pay levels for senior executives at
comparable companies.
Federal law generally disallows the corporate tax deduction for certain
compensation paid in excess of $1 million annually to each of the chief
executive officer and the four other most highly paid executive officers of
publicly held companies. There is an exception to this rule for
"performance-based compensation." The Compensation and Human Resources
Committee's objective is that our compensation programs conform with
9
federal law, to the extent possible, so that total compensation paid to any
employee will not exceed $1 million in any one year, except for compensation in
excess of $1 million that qualifies as "performance-based" or is otherwise
exempt. However, we have paid and may pay compensation that is not deductible in
limited circumstances when prudent management so requires.
BASE SALARY
The initial base salaries of our executive officers are set forth in
their employment agreements, which were negotiated between us and the officers
at the time the officers joined us. See "Executive Compensation-- Employment
Agreements." With respect to increases in base salary for any executive officers
other than the Chief Executive Officer, the Compensation and Human Resources
Committee receives recommendations from the Chief Executive Officer, which it
considers, modifies (if appropriate) and approves. The recommendations, as
approved by the Committee, are then submitted to the full Board of Directors for
its consideration and approval. The salary level for each person reflects, among
other things, the Committee's assessment of (i) the base salary necessary to
attract and retain a person with the skills and knowledge required by the
position, (ii) the position's accountability and impact on our results, and
(iii) external salary data for the similar position at comparable companies.
SHORT-TERM INCENTIVES - ANNUAL PERFORMANCE BONUS
With respect to annual performance bonuses for each of our executive
officers other than the Chief Executive Officer, the Chief Executive Officer
submits recommendations to the Compensation and Human Resources Committee at the
beginning of the year. The recommendations consist of target bonuses (stated as
a percentage of base salary) tied to specific levels of achievement of the
relevant operating plan for the year. Bonuses for executive officers at the
corporate headquarters (E.G., the Chief Financial Officer) are tied to our
overall operating plan while bonuses for executive officers at our various
business units are tied to both our overall operating plan and the relevant
business unit's operating plan. The Committee then considers, modifies (if
appropriate) and approves the Chief Executive Officer's recommendations, after
which they are submitted to the full Board of Directors for consideration and
approval. Following the end of the year, the bonuses are awarded by the
Compensation and Human Resources Committee based on the extent to which we and
the business units achieve our operating plans for the year, as well as the
Chief Executive Officer's and Committee's assessment of each executive officer's
individual performance during the year relative to the individual performance
criteria established by the Committee at the beginning of the year for each of
the executive officers.
The annual operating plans for us and for each of our business units
for a given year are recommended by the Chief Executive Officer to the Board of
Directors for its approval at the beginning of the year.
LONG-TERM INCENTIVES - STOCK OPTIONS
During 2001, we granted stock options to certain of our executive
officers under the 1996 and 2000 Stock Incentive Plans. As part of our
compensation program, the Chief Executive Officer annually submits to the
Compensation and Human Resources Committee for its approval a list of executive
officers who are being recommended for stock option awards, together with the
recommended sizes of their awards. In assessing these recommendations, the
Committee's primary considerations are the performance of each executive
officer, the grant value of the award and the number of options previously
granted. The recommendations, as approved by the Committee, are then submitted
to the full Board of Directors for its consideration and approval.
Each grant enables the officer to acquire, subject to the completion of
a vesting period, shares of our common stock at a fixed price per share (the
market price on the date of grant) over a ten-year period. The option grant
vests in periodic installments over a three- to five-year period, contingent
upon the executive officer's continued employment with us.
CHIEF EXECUTIVE OFFICER COMPENSATION
Mr. DuBose's base salary was increased from $470,000 to $550,000 in
December 2001 based upon the Compensation and Human Resources Committee's review
of external compensation data provided by an
10
independent compensation consulting firm, our performance in meeting our 2001
operational and financial targets, and our desire to enter into a new employment
agreement with Mr. DuBose.
At the beginning of 2001, the Compensation and Human Resources
Committee established Mr. DuBose's target bonus for the year at 75% of base
salary. In establishing this target bonus, the Committee took into consideration
the significant improvements that we would have to make during the year in order
to achieve our 2001 operating plan. The plan called for income from continuing
operations before special charges and non-recurring items to increase 29% over
2000, EBITDA to increase 14.8% over 2000, and debt to decrease by 6.8% over
2000. In establishing Mr. DuBose' actual bonus after the completion of the year,
the Committee took the following factors into consideration: (i) we achieved an
actual increase of 42% in income from continuing operations, an actual increase
of 17.1% in EBITDA, and debt actually decreased by 13.1%; (ii) the value of our
stock increased nearly 300% during 2001; and (iii) Mr. DuBose played an integral
part in the success of our public offering that was completed in early 2002.
Mr. DuBose was awarded a stock option grant of 100,000 shares during
2001. This grant vests over a three-year period and has an exercise price of
$5.06, which represented the fair market value of the common stock on the date
of grant.
SUMMARY
The Compensation and Human Resources Committee believes that the
current compensation arrangements provide the Chief Executive Officer and our
other executive officers with the incentive to perform at superior levels and in
a manner that is directly aligned with the economic interests of our
stockholders.
The Compensation and Human Resources Committee
J. Richard Stonesifer, Chairman
Richard R. Crowell
Gerald L. Parsky
The report of the Compensation and Human Resources Committee shall not
be deemed incorporated by reference by any general statement incorporating by
reference this Proxy Statement into any filing under the Securities Act of 1933,
as amended, or under the Exchange Act, except to the extent that we specifically
incorporate this information by reference, and shall not otherwise be deemed
filed under such Acts.
COMPENSATION AND HUMAN RESOURCES COMMITTEE INTERLOCKS AND
INSIDER PARTICIPATION IN COMPENSATION DECISIONS
The members of the Compensation and Human Resources Committee are
Messrs. Crowell, Parsky and Stonesifer. Messrs. Crowell and Parsky are (i) two
of the three stockholders and directors of Aurora Advisors, Inc., the general
partner of Aurora Capital Partners, which is the general partner of Aurora
Equity Partners, L.P., our largest stockholder, and (ii) two of the three
stockholders and directors of Aurora Overseas Advisors, Ltd., the general
partner of Aurora Overseas Capital Partners L.P., the general partner of Aurora
Overseas Equity Partners I, L.P., another of our significant stockholders. See
"Security Ownership of Certain Beneficial Owners and Management." In addition,
Messrs. Crowell and Parsky are the senior members of Aurora Capital Group (of
which Aurora Equity Partners and Aurora Overseas Equity Partners are a part),
which provides investment banking and management services to us pursuant to a
management services agreement. See "Certain Relationships and Related
Transactions."
11
PERFORMANCE GRAPH
The following graph shows the total return to our stockholders compared
to a Peer Group and the Nasdaq Market Index over the period from December 31,
1996 to December 31, 2001.
COMPARISON OF CUMULATIVE TOTAL RETURN AMONG
AFTERMARKET TECHNOLOGY CORP., PEER GROUP AND NASDAQ MARKET INDEX
[GRAPH]
ASSUMES $100 INVESTED ON DEC. 31, 1996
ASSUMES DIVIDEND REINVESTED
FISCAL YEAR ENDING DEC. 31, 2001
12/31/96 12/31/97 12/31/98 12/31/99 12/31/00 12/31/01
-------- -------- -------- -------- -------- --------
Aftermarket Technology Corp............. 100.00 105.07 45.65 69.20 12.68 93.91
Peer Group Index........................ 100.00 126.56 135.38 88.91 85.65 120.93
Nasdaq Market Index..................... 100.00 122.32 172.52 304.29 191.25 152.46
The Peer Group was originally comprised of seven publicly-traded
companies engaged primarily in businesses in the automotive aftermarket that are
comparable to ours and, in management's opinion, most closely represent our peer
group. Two of the Peer Group companies ceased to be publicly traded during 1998.
In 1999 another company was removed from the Peer Group because it was no longer
engaged primarily in automotive aftermarket businesses and we believed it was no
longer comparable to us. The current members of the Peer Group are Exide Corp.,
Federal-Mogul Corp., Genuine Parts Co. and Standard Motor Products.
Each line on the stock performance graph assumes that $100 was invested
in our common stock and the respective indices at the closing price on December
31, 1996. The graph then presents the value of these investments, assuming
reinvestment of dividends, through the close of trading on December 31, 2001. As
of March 11, 2002, the investments in Aftermarket Technology Corp., the Peer
Group and the Nasdaq Market Index would have been worth $106.96, $122.94 and
$135.61, respectively.
The cumulative total return shown on the stock performance graph
indicates historical results only and is not necessarily indicative of future
results.
12
SECURITY OWNERSHIP OF CERTAIN
BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth the beneficial ownership of our common
stock (the only class of issued and outstanding voting securities), as of March
1, 2002 by each of our directors, our Chief Executive Officer, each of our four
other most highly compensated executive officers as of December 31, 2001, our
directors and executive officers as a group, and each person who at March 1,
2002 was known to us to beneficially own more than 5% of the outstanding common
stock.
NUMBER OF VOTING
SHARES (1) PERCENTAGE
----------- ------------
Aurora Equity Partners L.P. (other beneficial owners: Richard R.
Crowell, Gerald L. Parsky and Richard K. Roeder) (2)(3)................. 12,324,746 59.1
Aurora Overseas Equity Partners I, L.P. (other beneficial owners:
Richard R. Crowell, Gerald L. Parsky and Richard K. Roeder) (4)(5)...... 5,250,960 25.2
General Electric Pension Trust (6)......................................... 2,479,539 11.9
Michael T. DuBose (7)...................................................... 588,737 2.8
Lawrence W. Baker (8)...................................................... 25,000 *
Barry C. Kohn (9).......................................................... 137,454 *
Matt J. Pieper (10)........................................................ 26,075 *
Joseph Salamunovich (11)................................................... 55,089 *
Robert Anderson (12)(13)................................................... 73,295 *
Richard R. Crowell (2)(3)(4)(5)(13)........................................ 13,668,592 65.6
Dale F. Frey (14).......................................................... 60,181 *
Mark C. Hardy (13)(15)..................................................... 26,059 *
Dr. Michael J. Hartnett (16)............................................... 93,966 *
Gerald L. Parsky (2)(3)(4)(5)(13)(17)...................................... 13,668,592 65.6
Richard K. Roeder (2)(3)(4)(5)(13)......................................... 13,668,592 65.6
J. Richard Stonesifer (18)................................................. 80,216 *
All directors and officers as a group (16 persons) (19).................... 14,872,134 67.9
---------------
* Less than 1%.
(1) The shares of common stock underlying options granted under the 1996,
1998 and 2000 Stock Incentive Plans that are exercisable as of March 1,
2002 or that will become exercisable within 60 days thereafter (such
options being referred to as "exercisable") are deemed to be
outstanding for the purpose of calculating the beneficial ownership of
the holder of such options, but are not deemed to be outstanding for
the purpose of computing the beneficial ownership of any other person.
(2) Aurora Equity Partners is a Delaware limited partnership, the general
partner of which is Aurora Capital Partners, a Delaware limited
partnership, whose general partner is Aurora Advisors, Inc. Messrs.
Crowell, Parsky and Roeder are the sole stockholders and directors of
Aurora Advisors, are limited partners of Aurora Capital Partners and
may be deemed to beneficially share ownership of the common stock
beneficially owned by Aurora Equity Partners and may be deemed to be
the organizers of Aftermarket Technology Corp. under regulations
promulgated under the Securities Act of 1933, as amended. Aurora Equity
Partners' address is 10877 Wilshire Boulevard, Suite 2100, Los Angeles,
CA 90024.
(3) Consists of (i) 8,417,632 shares owned by Aurora Equity Partners, (ii)
2,479,539 shares owned by the General Electric Pension Trust (see Note
6 below) and (iii) 1,427,575 shares that are subject to an irrevocable
proxy granted to the Aurora partnerships by some of the original
stockholders, including Messrs. Anderson, Crowell, Hardy, Parsky and
Roeder (the "Aurora Proxy"). The Aurora Proxy terminates upon the
earlier of the transfer of such shares or July 31, 2004.
(4) Aurora Overseas Equity Partners is a Cayman Islands limited partnership
the general partner of which is Aurora Overseas Capital Partners, L.P.,
a Cayman Islands limited partnership, whose general partner is Aurora
Overseas Advisors, Ltd. Messrs. Crowell, Parsky and Roeder are the sole
stockholders and directors
13
of Aurora Overseas Advisor, are limited partners of Aurora Overseas
Capital Partners and may be deemed to beneficially own the shares of
the common stock beneficially owned by Aurora Overseas Equity Partners.
Aurora Overseas Equity Partners' address is West Wind Building, P.O.
Box 1111, Georgetown, Grand Cayman, Cayman Islands, B.W.I.
(5) Consists of (i) 1,343,846 shares owned by Aurora Overseas Equity
Partners, (ii) 2,479,539 shares owned by the General Electric Pension
Trust (see Note 6 below) and (iii) 1,427,575 shares that are subject to
the Aurora Proxy.
(6) With limited exceptions, the General Electric Pension Trust has agreed
to vote these shares in the same manner as the Aurora partnerships vote
their respective shares of common stock. This provision terminates upon
the earlier of the transfer of such shares or July 31, 2004. The GE
Pension Trust's address is 3003 Summer Street, Stamford, CT 06905.
(7) Includes 566,667 shares subject to exercisable options. Excludes
133,333 shares subject to options that are not exercisable.
(8) Consists of shares subject to exercisable options. Excludes 50,000
shares subject to options that are not exercisable.
(9) Includes 113,333 shares subject to exercisable options. Excludes 86,667
shares subject to options that are not exercisable.
(10) Includes 15,334 shares subject to exercisable options. Excludes 64,666
shares subject to options that are not exercisable.
(11) Consists of shares subject to exercisable options. Excludes 59,999
shares subject to options that are not exercisable.
(12) Includes 53,667 shares subject to exercisable options. Excludes 51,333
shares subject to options that are not exercisable.
(13) The shares actually owned by this person (as distinguished from the
shares that this person is deemed to beneficially own) are subject to
the Aurora Proxy.
(14) Includes (i) 15,257 shares owned by a limited partnership of which Mr.
Frey is general partner, (ii) 4,000 shares held by him as trustee for
his grandchildren and (iii) 35,667 shares subject to exercisable
options. Excludes 51,333 shares subject to options that are not
exercisable. Mr. Frey disclaims beneficial ownership of 96% of the
shares owned by the limited partnership.
(15) Includes 12,000 shares subject to exercisable options.
(16) Includes 70,176 shares subject to exercisable warrants. Excludes 30,000
shares subject to options that are not exercisable.
(17) Includes 2,000 shares held by Mr. Parsky's wife, as to which Mr. Parsky
disclaims beneficial ownership.
(18) Includes 53,667 shares subject to exercisable options. Excludes 51,333
shares subject to options that are not exercisable.
(19) Includes 1,055,602 shares subject to exercisable options and warrants.
Excludes 753,662 shares subject to options that are not exercisable.
CERTAIN TRANSACTIONS
We believe the transactions described below were beneficial to us and
were on terms at least as favorable to us as could have been obtained from
unaffiliated third parties pursuant to arms-length negotiations.
RELATIONSHIP WITH AURORA CAPITAL GROUP
Aftermarket Technology Corp. was formed in 1994 at the direction of
Aurora Capital Group as a vehicle to acquire and consolidate companies in the
fragmented drivetrain remanufacturing industry. Aurora Capital Group is
14
controlled by three of our directors, Messrs. Crowell, Parsky and Roeder. A
fourth director, Mr. Hardy, is also a partner in Aurora Capital Group.
We pay to Aurora Management Partners, which is a part of Aurora Capital
Group, a base annual management fee for advisory and consulting services
pursuant to a written management services agreement. Aurora Management Partners
is also entitled to reimbursements from us for all of its reasonable
out-of-pocket costs and expenses incurred in connection with the performance of
its obligations under the management services agreement. The base annual
management fee is subject to increase, at the discretion of the disinterested
members of our Board of Directors, by up to an aggregate of $250,000 in the
event that we consummate one or more significant corporate transactions. The
base annual management fee has not been increased as a result of any of our
acquisitions. The base annual management fee is also subject to increase for
specified cost of living increases. The base annual management fee was most
recently increased in January 1999 from $540,000. If our EBITDA (earnings
before, interest, taxes, depreciation and amortization) in any year exceeds
management's budgeted EBITDA by 15.0% or more for that year, Aurora Management
Partners is entitled to receive an additional management fee equal to one half
of its base annual management fee for that year. Because our EBITDA did not
exceed management's budgeted EBITDA by 15.0% in 2001, Aurora Management Partners
did not receive this additional management fee in 2001. The base annual
management fee payable to Aurora Management Partners, which was $550,000 for
2001, will be reduced as the Aurora partnerships' collective beneficial
ownership of our common stock declines below 50%. If the Aurora partnerships'
collective beneficial ownership declines below 20%, the management services
agreement will terminate. Upon the completion of our recent public offering, the
Aurora partnerships' ownership decreased from approximately 66% to approximately
58%.
If we consummate any significant acquisitions, Aurora Management
Partners will be entitled to receive a fee from it for investment banking
services in connection with the acquisition. The fee is equal to 2.0% of the
first $75.0 million of the acquisition consideration (including debt assumed and
current assets retained) and 1.0% of acquisition consideration (including debt
assumed and current assets retained) in excess of $75.0 million. Since the
formation of Aftermarket Technology Corp., we have paid approximately $5.2
million of fees to Aurora Management Partners for investment banking services in
connection with our acquisitions. In January 2001, we paid Aurora Management
Partners a $750,000 fee for services in connection with the October 2000 sale of
our Distribution Group. We are not obligated to make any payment to Aurora
Management Partners at any time that we are in default under our senior
subordinated notes or senior bank credit facility.
In October 1996, we granted options to purchase an aggregate of 48,000
shares of our common stock to Mr. Hardy (a director), Kurt Larsen (a former
director) and two of our consultants, all four of whom were then employees of
Aurora Capital Group. These options, which have an exercise price of $4.67 per
share, become exercisable in one-third increments on each of the first three
anniversaries of the date of grant and expire in 2006. In 1997, 12,000 of these
options terminated when Mr. Larsen resigned from Aurora Capital Group and, in
2000, one of the consultants exercised 12,000 options.
INDEMNIFICATION AGREEMENTS
We have entered into separate but identical indemnification agreements
with each of our directors and executive officers. These agreements provide for,
among other things, indemnification to the fullest extent permitted by law and
advancement of expenses.
REGISTRATION RIGHTS
The holders of common stock outstanding before our initial public
offering in December 1996 have "demand" and "piggyback" registration rights
pursuant to a stockholders' agreement. In addition, General Electric Pension
Trust has "demand" and "piggyback" registration rights with respect to a portion
of the shares of our common stock that it owns.
15
APPROVAL OF ADOPTION OF
2002 STOCK INCENTIVE PLAN
At the annual meeting, stockholders will be asked to approve our 2002
Stock Incentive Plan (the "New Plan"), which was adopted by the Board of
Directors in February 2002 subject to approval by our stockholders. The New Plan
is intended to replace our 1996, 1998 and 2000 Stock Incentive Plans, under
which less than 170,000 shares of common stock were still available as of March
1, 2002 for issuance pursuant to options not yet granted.
SUMMARY OF THE NEW PLAN
The New Plan is substantially the same as our 2000 Stock Incentive Plan
except for the number of shares of common stock that are subject to the plan.
The following summary of the main features of the New Plan is qualified in its
entirety by reference to the complete text of the New Plan, which is set forth
as Appendix A to this Proxy Statement.
GENERAL
The New Plan is designed to enable us to attract, retain and motivate
our employees, non-employee directors and independent contractors, and to
further align their interests with those of our stockholders, by providing for
or increasing the proprietary interest of such employees, non-employee directors
and independent contractors in Aftermarket Technology Corp.
The New Plan authorizes the grant and issuance of awards that may take
the form of stock options, incentive bonuses and incentive stock (any such
arrangement, an "Award"). The New Plan has various provisions so that Awards
under it may, but need not, qualify for an exemption from the "short swing
liability" provisions of Section 16(b) of the Exchange Act pursuant to Rule
16b-3 and/or qualify as "performance-based compensation" that is exempt from the
$1 million limitation on the deductibility of compensation under Section 162(m)
of the Internal Revenue Code of 1986, as amended (the "Code"). Stockholder
approval of the New Plan is required in order for each of these exemptions to be
satisfied.
ADMINISTRATION
The New Plan will be administered by the Compensation and Human
Resources Committee, although the full Board of Directors may exercise any
authority of the Committee under the New Plan in lieu of the Committee's
exercise of such authority.
Subject to the express provisions of the New Plan, the Committee has
broad authority to administer and interpret the New Plan including, without
limitation, authority to (i) determine who is eligible to participate in the New
Plan and to which of such persons, and when, Awards are granted under the New
Plan, (ii) determine the number of shares of common stock subject to Awards and
the exercise or purchase price of such shares under an Award, (iii) establish
and verify the extent of satisfaction of any performance goals applicable to
Awards, (iv) prescribe and amend the terms of the agreements and other documents
evidencing Awards, and (v) make all other determinations deemed necessary or
advisable for the administration of the New Plan.
ELIGIBILITY
Any person who is a director, employee, prospective employee or
independent contractor of Aftermarket Technology Corp. or any of its affiliates
is eligible to be selected as a recipient of an Award (a "Participant") under
the New Plan. The Compensation and Human Resources Committee has not yet
determined how many individuals are ultimately to participate in the New Plan.
While it is generally expected that executives and senior middle managers will
be eligible to participate, Awards may from time to time be granted to employees
who are not in these groups but who have otherwise distinguished themselves for
their contributions to us.
16
STOCK SUBJECT TO THE NEW PLAN
The aggregate number of shares of our common stock that can be issued
under the New Plan may not exceed 1,000,000. The number of shares subject to the
New Plan and to outstanding Awards under the New Plan will be appropriately
adjusted by the Board of Directors if the common stock is affected through a
reorganization, merger, consolidation, recapitalization, restructuring,
reclassification, dividend (other than quarterly cash dividends) or other
distribution, stock split, spin-off or sale of substantially all of our assets.
For purposes of calculating the aggregate number of shares of common stock
issued under the New Plan, only the number of shares actually issued upon
exercise or settlement of an Award and not returned to us upon cancellation,
expiration or forfeiture of an Award or in payment or satisfaction of the
purchase price, exercise price or tax withholding obligation of an Award shall
be counted, provided that no more than 1,000,000 shares may be issued pursuant
to incentive stock options.
AWARDS
The New Plan authorizes the grant and issuance of the following types
of Awards: stock options, incentive bonuses and incentive stock:
STOCK OPTIONS. Subject to the express provisions of the New Plan and as
discussed in this paragraph, the Compensation and Human Resources Committee has
discretion to determine the vesting schedule of options, the events causing an
option to expire, the number of shares subject to any option, the restrictions
on transferability of an option and any other terms and conditions, in each case
not inconsistent with the New Plan, as may be determined from time to time by
the Committee. Options granted under the New Plan may be either incentive stock
options qualifying under Code Section 422 ("ISOs") or options not intended to
qualify as ISOs ("NQSOs"). The exercise price for options may not be less than
100% of the fair market value of our common stock on the date the option is
granted, except that (i) the exercise price of an option may be higher or lower
in the case of options granted to employees of a company acquired by us in
assumption and substitution of options held by such employees at the time such
company is acquired, (ii) in the event an employee is required to pay or forego
the receipt of any cash amount in consideration of receipt of an option, the
exercise price plus such cash amount shall equal or exceed 100% of the fair
market value of the common stock on the date the option is granted, and (iii)
the exercise price of an option granted to a non-employee director may be lower.
The exercise price of an option may be paid through various means specified by
the Committee, including in cash or check, by delivering shares of common stock
to us, by a reduction in the number of shares of common stock issuable pursuant
to such option, or by a promissory note or other commitment to pay (including
such a commitment by a stock broker). The Committee may, but need not, provide
that the holder of an Award has a right (such as a stock appreciation right) to
receive a number of shares or cash, or a combination thereof, the amount of
which is determined by reference to the value of the Award.
INCENTIVE BONUSES. The New Plan authorizes the grant of incentive
bonuses pursuant to which a Participant may become entitled to receive an amount
based on satisfaction of such performance criteria as are specified by the
Compensation and Human Resources Committee. Subject to the express provisions of
the New Plan and as discussed in this paragraph, the Committee has discretion to
determine the terms of any incentive bonus, including the target and maximum
amount payable to a Participant as an incentive bonus, the performance criteria
(which may be based on financial performance and/or personal performance
evaluations) and level of achievement versus these criteria that determines the
amount payable under an incentive bonus, the period as to which performance will
be measured for determining the amount of any payment, the timing of any payment
earned by virtue of performance, restrictions on the alienation or transfer of
an incentive bonus prior to actual payment, forfeiture provisions and any other
terms and conditions, in each case not inconsistent with the New Plan, as the
Committee may determine from time to time. All or any portion of an incentive
bonus may be designed to qualify as "performance-based compensation" that is
exempt from the $1 million limit on deductible compensation under Section 162(m)
of the Code. The performance criteria for any portion of an incentive bonus that
is intended to satisfy the requirements for "performance-based compensation"
will be a measure based on one or more Qualifying Performance Criteria (as
defined below). Notwithstanding satisfaction of any performance goals, the
amount paid under an incentive bonus may be reduced by the Committee on the
basis of any other considerations as the Committee in its sole discretion may
determine.
INCENTIVE STOCK. Incentive stock is an award or issuance of shares of
our common stock, the grant, issuance, retention, vesting and/or transferability
of which is subject during specified periods of time to such conditions
(including performance conditions) and terms as the Compensation and Human
Resources Committee
17
deems appropriate. Subject to the express provisions of the New Plan and as
discussed in this paragraph, the Committee has discretion to determine the terms
of any incentive stock Award, including the number of shares subject to an
incentive stock Award or a formula for determining such, the purchase price, if
any, for the shares (which may be below fair market value), the performance
criteria, if any, and level of achievement versus these criteria that determine
the number of shares granted, issued, retainable and/or vested, the period as to
which performance shall be measured for determining achievement of performance,
forfeiture provisions, the effect of termination of employment for various
reasons and any other terms and conditions, in each case not inconsistent with
the New Plan, as may be determined from time to time by the Committee. The
performance criteria upon which shares are granted, issued, retained and/or
vested may be based on financial performance and/or personal performance
evaluations, except that for any incentive stock that is intended by the
Committee to satisfy the requirements for "performance-based compensation" under
Code Section 162(m) the performance criteria shall be a measure based on one or
more Qualifying Performance Criteria. Notwithstanding satisfaction of any
performance goals, the number of shares granted, issued, retainable and/or
vested under an incentive stock Award may be reduced by the Committee on the
basis of any other considerations as the Committee in its sole discretion may
determine.
QUALIFYING PERFORMANCE CRITERIA AND SECTION 162(m) LIMITS
Subject to stockholder approval of the New Plan, the performance
criteria for any incentive bonus or any incentive stock that is intended to
satisfy the requirements for "performance-based compensation" under Code Section
162(m) shall be any one or more of the following performance criteria (either
individually, alternatively or in any combination) applied to either Aftermarket
Technology Corp. as a whole or to a business unit or subsidiary (either
individually, alternatively or in any combination) as specified by the
Compensation and Human Resources Committee in the Award: (a) cash flow, (b)
earnings per share, (c) earnings before interest, taxes, depreciation and
amortization, (d) earnings before interest, taxes and amortization, (e) earnings
before interest and taxes, (f) return on equity, (g) total stockholder return,
(h) return on capital, (i) return on assets or net assets, (j) revenue, (k)
income or net income, (l) operating income or net operating income, (m)
operating profit or net operating profit, (n) operating margin, (o) return on
operating revenue, (p) market share and (q) overhead or other expense reduction.
The Committee shall adjust appropriately any evaluation of performance under a
Qualifying Performance Criteria to exclude any of the following events that
occurs during a performance period: (i) asset write-downs, (ii) litigation or
claim judgments or settlements, (iii) the effect of changes in tax law,
accounting principles or other such laws or provisions affecting reported
results, (iv) accruals for reorganization and restructuring programs, (v)
divestitures, and (vi) any extraordinary non-recurring items as described in
Accounting Principles Board Opinion No. 30 and/or in management's discussion and
analysis of financial condition and results of operations appearing in our
annual report to stockholders for the applicable year.
The aggregate number of shares of our common stock subject to options
granted under the New Plan during any calendar year to any one Participant may
not exceed 400,000 unless such limitation is not required under Section 162(m)
of the Code. The aggregate number of shares issued or issuable under all Awards
granted under the New Plan (other than options) during any calendar year to any
one Participant shall not exceed 400,000. The maximum amount payable in cash
pursuant to that portion of an incentive bonus Award granted for any fiscal year
to any person that is intended to satisfy the requirements for
"performance-based compensation" under Code Section 162(m) shall not exceed
$1,000,000.
CHANGE OF CONTROL
The Compensation and Human Resources Committee may provide that in
connection with a Change of Control (as defined in the New Plan), Awards will
become exercisable, payable, vested, paid, or canceled, and may provide for an
absolute or conditional exercise, payment or lapse of conditions or restrictions
on an Award that would be effective only if, upon the announcement of a
transaction intended or reasonably expected to result in a Change of Control, no
provision is made under the terms of such transaction for the holder of an Award
to realize the full benefit of the Award.
TRANSFERABILITY OF AWARDS
Generally, Awards granted under the New Plan may not be sold, assigned,
conveyed, gifted, pledged, hypothecated or otherwise transferred in any manner
prior to the vesting or lapse of any and all restrictions
18
applicable thereto, other than by will or the laws of descent and distribution,
except that the Compensation and Human Resources Committee may permit an Award
to be transferable to a member or members of the Participant's family or to
entities owned or established for the benefit of a Participant's family.
AMENDMENTS AND TERMINATION
The Board of Directors may amend, alter or discontinue the New Plan or
any agreement or other document evidencing an Award made under the New Plan, but
no such amendment shall, without the approval of our stockholders: (a)
materially increase the maximum number of shares of common stock for which
Awards may be granted under the New Plan; (b) reduce the price at which options
may be granted below the price provided for in the New Plan; (c) reduce the
exercise price of outstanding options; (d) extend the term of the New Plan; or
(e) change the class of persons eligible to be Participants. Also, no amendment
may be made that would materially impair the rights of any Award holder unless
such Award holder consents to the amendment or is adequately compensated for the
impairment. No Awards may be granted under the New Plan after February 20, 2012
(I.E., 10 years after the date of the Board's adoption of the New Plan).
FEDERAL INCOME TAX CONSEQUENCES
The following discussion of the New Plan's federal income tax
consequences is intended to be a summary of applicable federal law as currently
in effect. State, local and foreign tax consequences may differ, and tax laws
may be amended or interpreted differently during the term of the New Plan or of
Awards under the New Plan. This discussion does not discuss all federal tax
provisions that may apply to a Participant's particular tax situation, including
federal gift tax, estate tax and alternative minimum tax issues. Because the
federal income tax rules governing Awards and related payments are complex,
subject to frequent change and depend on individual circumstances, Participants
should consult their tax advisor prior to exercising options or other Awards or
disposing of stock acquired pursuant to Awards.
ISOs
An optionee generally will not pay tax, and we will not receive a
deduction, on the grant or the exercise of an ISO if the optionee exercises the
option while one of our employees or within three months following termination
of employment (or one year, if termination was due to a permanent disability).
If an optionee sells the shares acquired upon the exercise of an ISO at
any time within one year after the exercise date or two years after the date of
grant of the ISO, then:
o if the optionee's sales price exceeds the exercise price of the
ISO, the optionee will recognize capital gain equal to the excess,
if any, of the sales price over the fair market value of the
shares on the date of exercise, and the optionee will recognize
ordinary income equal to the excess, if any, of the lesser of the
sales price or the fair market value of the shares on the date of
exercise over the exercise price of the ISO; or
o if the optionee's sales price is less than the exercise price of
the ISO, the optionee will recognize a capital loss equal to the
excess of the exercise price of the ISO over the sales price of
the shares.
In this event, we will generally be entitled to a deduction equal to the
ordinary income the optionee recognizes. The ordinary income the optionee
recognizes generally will be subject to employment and income withholding taxes
in addition to any other taxes that might apply.
If the optionee sells shares acquired upon exercise of an ISO at any
time after the optionee has held the shares for at least one year after the
exercise of the ISO and at least two years after the date we granted the ISO,
then the optionee will recognize capital gain or loss equal to the difference
between the sales price and the exercise price of the ISO, and we will not be
entitled to any deduction. If the optionee is an "insider", the optionee should
consult his or her tax advisor about the possibility of making an election under
Section 83(b) of the Code upon the optionee's exercise of an ISO.
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NQSOs
The grant of a NQSO to an optionee is generally not a taxable event for
the optionee. Upon the optionee's exercise of a NQSO, the optionee will
generally recognize ordinary income equal to the excess of the fair market value
of the shares the optionee acquired upon exercise (determined as of the date of
exercise) over the exercise price of the NQSO. We will be entitled to a tax
deduction for the same amount. The ordinary income the optionee recognizes upon
exercise may be subject to employment and income withholding taxes or
self-employment taxes in addition to any other taxes that might apply. The
subsequent sale of the shares generally will give rise to capital gain or loss
equal to the difference between the sale price and the sum of the exercise price
paid for the shares plus the ordinary income recognized with respect to the
shares, and these capital gains will be taxable as long term capital gains if
the optionee held the shares for more than one year.
INCENTIVE STOCK
Incentive stock Awards under the New Plan may be subject to provisions
for the delayed vesting of the Participant's rights to the shares. Unless the
Participant makes a proper election under Section 83(b) of the Code within 30
days after receipt of the incentive stock (or if the incentive stock is not
subject to delayed vesting provisions), the Participant generally will not be
taxed on his or her receipt of incentive stock until the restrictions on the
incentive stock expire or we removes them. When the vesting provisions expire or
we removes them, the Participant will generally recognize ordinary income in an
amount equal to the excess of the fair market value of the shares at that time
over the purchase price, if any, of the incentive stock. We will be entitled to
a tax deduction for the same amount.
If the Participant makes a valid Section 83(b) election (or if the
Participant's incentive stock is not subject to delayed vesting provisions), he
or she will generally recognize ordinary income in an amount equal to the excess
of the fair market value of the shares on the date of receipt over the purchase
price, if any, of the incentive stock. We will be entitled to a tax deduction
for the same amount. Participants should consult their tax advisor to determine
the tax consequences of making a Section 83(b) election.
The ordinary income a Participant recognizes in connection with
incentive stock may be subject to employment and income withholding taxes or
self-employment taxes in addition to any other taxes that might apply. A
subsequent sale of the shares generally will give rise to capital gain or loss
equal to the difference between the sale price and the sum of the exercise price
the Participant paid for the shares plus the ordinary income he or she
recognized with respect to the shares. The capital gains will be taxable as
long-term capital gains if the Participant has held the shares for more than one
year.
INCENTIVE BONUSES
Upon our payment of an incentive bonus, the Participant will generally
recognize ordinary income in an amount equal to the Award, and we will be
entitled to a tax deduction for the same amount. The ordinary income the
Participant recognizes may be subject to employment and income withholding taxes
or self-employment taxes in addition to any other taxes that might apply.
SPECIAL RULES FOR AWARDS GRANTED TO INSIDERS
If the Participant is an "insider" (a director, officer or other
individual subject to Section 16 of the Exchange Act), he or she may be required
to defer his or her determination of the amount of income and the timing of
income recognition in connection with an Award under the New Plan, and the
beginning of the holding period for any shares the Participant receives, until
the expiration of any period during which he or she would be restricted from
disposing of any shares he or she received. The Participant will not be required
to defer these determinations if he or she makes a valid Section 83(b) election.
Participants who are insiders should consult their tax advisor to determine the
tax consequences of exercising options granted under the New Plan.
20
OTHER TAX ISSUES
A Participant generally may not deduct investment-related interest to
the extent that this interest exceeds his or her net investment income for any
year. Investment interest generally includes interest the Participant pays on
indebtedness he or she incurs to purchase shares of common stock. A Participant
may deduct any interest disallowed under this rule in later years, subject to
the same limitation.
Special rules will apply to a Participant if he or she pays for the
exercise or purchase of an Award, or any applicable withholding tax obligations
under the New Plan, by delivering previously owned shares of common stock or by
reducing the amount of common stock otherwise issuable under the Award. This
surrender or withholding of shares will in some circumstances cause the
Participant to recognize income with respect to such shares or take a carryover
basis in the shares that he or she acquires. Participants should consult their
tax advisor to determine the tax consequences of surrendering or withholding
shares.
We generally will be entitled to withhold any required taxes in
connection with the exercise or payment of an Award, and we may require the
Participant to pay these taxes as a condition to exercise of an Award.
The terms of the agreements or other documents pursuant to which we
makes specific Awards under the New Plan may provide for accelerated vesting or
payment of an Award in connection with a Change of Control of Aftermarket
Technology Corp. In that event and depending upon the Participant's individual
circumstances, certain amounts with respect to such Awards may constitute
"excess parachute payments" under the "golden parachute" provisions of the Code.
Under these provisions, the Participant would be subject to a 20% excise tax on
any "excess parachute payments" and we would be denied any deduction with
respect to these payments. Participants should consult their tax advisor as to
whether accelerated vesting of an Award in connection with a Change of Control
would give rise to an "excess parachute payment."
As described above, Awards under the New Plan may qualify as
"performance-based compensation" under Section 162(m) of the Code in order to
preserve our federal income tax deductions with respect to any compensation we
must take into account under Section 162 that is in excess of $1,000,000 and
paid to a "covered employee" (as defined in Section 162). We may not be able to
deduct any compensation for any year that is attributable to an Award granted to
a covered employee and that does not so qualify to the extent this compensation,
when combined with other compensation paid to the employee for the year, exceeds
$1,000,000. The Compensation and Human Resources Committee currently includes
members who are not "outside directors" within the meaning of Section 162(m).
Therefore, we anticipate that compensation payable pursuant to Awards under the
New Plan will not qualify as performance-based compensation unless we change the
Committee to satisfy Section 162(m).
INITIAL GRANTS
The Compensation and Human Resources Committee has full discretion to
determine the timing and recipients of any Awards under the New Plan and the
number of shares subject to any such Awards, subject to any limitations
contained in the New Plan. Therefore, the benefits and amounts that will be
received by each of the Chief Executive Officer, our four other most highly
compensated executive officers, our executive officers as a group, our
non-employee directors and all other key employees under the New Plan are not
presently determinable.
THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS A VOTE IN FAVOR OF THE NEW PLAN.
PROXIES SOLICITED BY THE BOARD OF DIRECTORS WILL BE VOTED FOR THIS PROPOSAL
UNLESS STOCKHOLDERS SPECIFY OTHERWISE IN THEIR PROXIES.
21
AUDIT MATTERS
INDEPENDENT AUDITORS
Ernst & Young LLP was our independent auditor for the year ended
December 31, 2001. The appointment of independent auditors is approved annually
by the Board of Directors, based in part on the recommendation of the Audit
Committee. The Board of Directors has not taken action yet regarding the
appointment of our auditors for fiscal 2002. Stockholder approval is not sought
in connection with the selection of auditors.
Representatives of Ernst & Young will be present at the annual meeting
and will be given an opportunity to make a statement if they desire to do so and
will respond to appropriate questions from stockholders.
Set forth below are the fees billed to us by Ernst & Young for (i)
professional services rendered for the audit of our financial statements for the
year ended December 31, 2001 and the review of the quarterly financial
statements for 2001 and (ii) all other professional services:
Audit Fees.................................. $396,000
Financial Information Systems Design and
Implementation Fees...................... --
All Other Fees.............................. $423,000
--------
Total Fees............................. $819,000
AUDIT COMMITTEE REPORT
The Audit Committee reviews our financial reporting process on behalf
of the Board of Directors. Management has the primary responsibility for the
financial statements and the reporting process. Our independent auditors are
responsible for expressing an opinion on the conformity of our audited financial
statements to generally accepted accounting principles.
In this context, the Audit Committee has reviewed and discussed with
management and the independent auditors the audited financial statements. The
Audit Committee has discussed with the independent auditors the matters required
to be discussed by Statement on Auditing Standards No. 61 (Communication with
Audit Committees). In addition, the Audit Committee has received from the
independent auditors the written disclosures required by Independence Standards
Board No. 1 (Independence Discussions with Audit Committees) and discussed with
them their independence from us and our management. And, the Audit Committee has
considered whether the independent auditors provision of non-audit services to
us is compatible with the auditor's independence.
In reliance on the reviews and discussions referred to above, the Audit
Committee recommended to the Board of Directors, and the Board has approved,
that the audited financial statements be included in our Annual Report on Form
10-K for the year ended December 31, 2001, for filing with the Securities and
Exchange Commission.
The Audit Committee
Dale F. Frey, Chairman
Robert Anderson
Michael Hartnett
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ANNUAL REPORT
Our 2001 Annual Report to Stockholders is being mailed to all
stockholders. Any stockholder who has not received a copy may obtain one by
writing to us at One Oak Hill Center, Suite 400, Westmont, Illinois 60559. In
addition, any person wishing to receive a copy of our Annual Report on Form 10-K
for the year ended December 31, 2001 (excluding the exhibits thereto) may obtain
a copy by sending a written request to us at the same address.
STOCKHOLDER PROPOSALS
FOR THE 2003 ANNUAL MEETING OF STOCKHOLDERS
Stockholder proposals submitted pursuant to Rule 14a-8 under the
Exchange Act must be received by us on or before December 2, 2002 to be
considered for inclusion in the proxy statement for our 2003 Annual Meeting of
Stockholders, which is expected to be held on or about May 7, 2003. Generally, a
stockholder is eligible to present proposals under Rule 14a-8 if he or she has
been for at least one year the record or beneficial owner of at least 1% or
$2,000 in market value of securities entitled to be voted at the 2003 Annual
Meeting and he or she continues to own such securities through the date on which
the meeting is held. Our management may exercise discretionary voting authority
with respect to any stockholder proposal that is not submitted for inclusion
pursuant to Rule 14a-8 in the proxy statement for the 2003 Annual Meeting if
such proposal is received by us after February 18, 2003.
By Order of the Board of Directors,
/s/ Joseph Salamunovich
Joseph Salamunovich
Secretary
April 1, 2002
23
APPENDIX A
AFTERMARKET TECHNOLOGY CORP.
2002 STOCK INCENTIVE PLAN
SECTION 1. PURPOSE OF PLAN
The purpose of this 2002 Stock Incentive Plan (this "Plan") of
Aftermarket Technology Corp., a Delaware corporation (the "Company"), is to
enable the Company to attract, retain and motivate its employees, non-employee
directors and independent contractors, and to further align the interests of
such employees, non-employee directors and independent contractors with those of
the stockholders of the Company by providing for or increasing the proprietary
interest of such employees, non-employee directors and independent contractors
in the Company.
SECTION 2. ADMINISTRATION OF PLAN
2.1. COMPOSITION OF COMMITTEE. Subject to Section 2.04, this Plan
shall be administered by the Compensation and Human Resources Committee of the
Board of Directors (the "Committee"), as appointed from time to time by the
Board of Directors, PROVIDED, HOWEVER, that with respect to any Award (as
defined in Section 5.1) intended to qualify as "performance-based compensation"
within the meaning of Section 162(m) of the Internal Revenue Code of 1986, as
amended (the "Code"), the term "Committee" shall refer to a committee of two or
more "outside directors" as determined for purposes of applying Code Section
162(m). The Board of Directors shall fill vacancies on, and from time to time
may remove or add members to, the Committee. The Committee shall act pursuant to
a majority vote or unanimous written consent. The Committee may designate the
Secretary of the Company or other Company employees to assist the Committee in
the administration of this Plan and may grant authority to such persons to
execute agreements or other documents evidencing Awards made under this Plan or
other documents entered into under this Plan on behalf of the Committee or the
Company.
2.2. POWERS OF THE COMMITTEE. Subject to the express provisions of
this Plan, the Committee shall be authorized and empowered to do all things
necessary or desirable, in its sole discretion, in connection with the
administration of this Plan, including, without limitation, the following:
(a) to prescribe, amend and rescind rules and regulations
relating to this Plan and to define terms not otherwise defined herein;
PROVIDED that, unless the Committee shall specify otherwise, for
purposes of this Plan (i) the term "fair market value" shall mean, as
of any date, the closing price for a Share (as defined in Section 3.1)
reported for that date by the Nasdaq National Market System (or such
other stock exchange or quotation system on which Shares are then
listed or quoted) or, if no Shares are traded on the Nasdaq National
Market System (or such other stock exchange or quotation system) on the
date in question, then for the next preceding date for which Shares are
traded on the Nasdaq National Market System (or such other stock
exchange or quotation system); and (ii) the term "Company" shall mean
the Company and its subsidiaries and affiliates unless the context
otherwise requires;
(b) to determine which persons are Eligible Persons (as
defined in Section 4), to which of Eligible Persons, if any, Awards
shall be granted hereunder and the timing of any such Awards;
(c) to determine the number of Shares subject to Awards and
the exercise or purchase price of such Shares;
(d) to establish and verify the extent of satisfaction of any
performance goals applicable to Awards;
A-1
(e) to prescribe and amend the terms of the agreements or
other documents evidencing Awards made under this
Plan (which need not be identical);
(f) to determine whether, and the extent to which, adjustments
are required pursuant to Section 10;
(g) to interpret and construe this Plan, any rules and
regulations under this Plan and the terms and conditions of any Award
granted hereunder and to make exceptions to any such provisions in good
faith and for the benefit of the Company; and
(h) to make all other determinations deemed necessary or
advisable for the administration of this Plan.
2.3. DETERMINATIONS OF THE COMMITTEE. All decisions, determinations
and interpretations by the Committee regarding this Plan shall be final and
binding on all Eligible Persons and Participants (as defined in Section 4). The
Committee shall consider such factors as it deems relevant to making such
decisions, determinations and interpretations including, without limitation, the
recommendations or advice of any director, officer or employee of the Company
and such attorneys, consultants and accountants as it may select.
2.4. AUTHORITY OF THE BOARD OF DIRECTORS. The Board of Directors,
in its sole discretion, may exercise any authority of the Committee under this
Plan in lieu of the Committee's exercise thereof.
SECTION 3. STOCK SUBJECT TO PLAN
3.1. AGGREGATE LIMITS. At any time, the aggregate number of shares
of the Company's Common Stock, $.01 par value ("Shares"), issued and issuable
pursuant to all Awards (including all ISOs (as defined in Section 5.1)) granted
under this Plan shall not exceed 1,000,000; PROVIDED that, notwithstanding
Section 3.3, the aggregate number of Shares that may be issued pursuant to the
exercise of ISOs (as defined in Section 5.1(a)) granted under this Plan shall
not exceed 1,000,000. The Shares subject to this Plan may be either Shares
reacquired by the Company, including Shares purchased in the open market, or
authorized but unissued Shares. Such limits shall be subject to adjustment as
provided in Section 10.
3.2. CODE SECTION 162(m) LIMITS. The aggregate number of Shares
subject to Options (as defined in Section 5.1(a)) granted under this Plan during
any calendar year to any one employee of the Company (an "Employee)" shall not
exceed 400,000. The aggregate number of Shares issued or issuable under all
Awards granted under this Plan, other than Options, during any calendar year to
any one Employee shall not exceed 400,000. Notwithstanding anything to the
contrary in this Plan, the foregoing limitations shall be subject to adjustment
under Section 10 only to the extent that such adjustment will not affect the
status of any Award intended to qualify as "performance-based compensation"
under Code Section 162(m).
3.3. ISSUANCE OF SHARES. For purposes of Section 3.1, the aggregate
number of Shares issued under this Plan at any time shall equal only the number
of Shares actually issued upon exercise or settlement of an Award and not
returned to the Company upon cancellation, expiration or forfeiture of an Award
or in payment or satisfaction of the purchase price, exercise price or tax
withholding obligation of an Award.
SECTION 4. PERSONS ELIGIBLE UNDER PLAN
Any person who is an employee, prospective employee, consultant,
director or advisor of the Company (an "Eligible Person") shall be eligible to
be considered for the grant of Awards hereunder. A "Participant" is any current
or former Eligible Person to whom an Award has been made and any person
(including any estate) to whom an Award has been assigned or transferred
pursuant to Section 9.1.
A-2
SECTION 5. PLAN AWARDS
5.1. AWARD TYPES. The Committee, on behalf of the Company, is
authorized under this Plan to grant certain types of arrangements to Eligible
Persons and to confer certain benefits on them. The following arrangements or
benefits are authorized under this Plan if their terms and conditions are not
inconsistent with the provisions of this Plan: Options, Incentive Bonuses and
Incentive Stock. Such arrangements and benefits are sometimes referred to herein
as "Awards." The authorized types of arrangements and benefits for which Awards
may be granted are defined as follows:
(a) OPTIONS: An Option is a right granted under Section 6 to
purchase a number of Shares at such exercise price, at such times and
on such other terms and conditions as are specified in the agreement or
other document evidencing the Award (the "Option Document "). Options
intended to qualify as Incentive Stock Options ("ISOs") pursuant to
Code Section 422 and Options not intended to qualify as ISOs
("Nonqualified Options") may be granted under Section 6.
(b) INCENTIVE BONUS: An Incentive Bonus is a bonus opportunity
awarded under Section 7 pursuant to which a Participant may become
entitled to receive an amount based on satisfaction of such performance
criteria as are specified in the agreement or other document evidencing
the Award (the "Incentive Bonus Document").
(c) INCENTIVE STOCK: Incentive Stock is an award or issuance
of Shares made under Section 8, the grant, issuance, retention, vesting
and/or transferability of which is subject during specified periods of
time to such conditions (including performance conditions) and terms as
are expressed in the agreement or other document evidencing the Award
(the "Incentive Stock Document").
5.2. GRANTS OF AWARDS. An Award may consist of one such arrangement
or benefit or two or more of them in tandem or in the alternative.
SECTION 6. OPTIONS
The Committee may grant an Option or provide for the grant of an
Option, either from time to time in the discretion of the Committee or
automatically upon the occurrence of specified events, including, without
limitation, the achievement of performance goals, the satisfaction of an event
or condition within the control of the recipient of the Award or within the
control of others.
6.1. OPTION DOCUMENT. Each Option Document shall contain provisions
regarding (a) the number of Shares that may be issued upon exercise of the
Option, (b) the purchase price of the Shares and the means of payment for the
Shares, (c) the term of the Option, (d) such terms and conditions of
exercisability as may be determined from time to time by the Committee, (e)
restrictions on the transfer of the Option and forfeiture provisions, and (f)
such further terms and conditions, in each case not inconsistent with this Plan,
as may be determined from time to time by the Committee. Option Documents
evidencing ISOs shall contain such terms and conditions as may be necessary to
comply with the applicable provisions of Section 422 of the Code.
6.2. OPTION PRICE. The purchase price per share of the Shares
subject to each Option granted under this Plan shall equal or exceed 100% of the
fair market value of such Shares on the date the Option is granted except that
(i) the exercise price of an Option may be higher or lower in the case of
Options granted to employees of a company acquired by the Company in assumption
and substitution of options held by such employees at the time such company is
acquired, (ii) in the event an Employee is required to pay or forego the receipt
of any cash amount in consideration of receipt of an Option, the exercise price
plus such cash amount shall equal or exceed 100% of the fair market value of
such Stock on the date the Option is granted, and (iii) the exercise price of an
Option granted to a director who is not an Employee may be lower.
A-3
6.3. OPTION TERM. The "Term" of each Option granted under this
Plan, including any ISOs, shall be ten (10) years from the date of its grant
unless the Committee shall provide otherwise.
6.4. OPTION VESTING. Options granted under this Plan shall be
exercisable at such time and in such installments during the period prior to the
expiration of the Option's Term as determined by the Committee. The Committee
shall have the right to make the timing of the ability to exercise any Option
granted under this Plan subject to such performance requirements as deemed
appropriate by the Committee. At any time after the grant of an Option the
Committee may reduce or eliminate any restrictions surrounding any Participant's
right to exercise all or part of the Option.
6.5. TERMINATION OF EMPLOYMENT. Subject to Section 11, upon a
termination of employment by a Participant prior to the full exercise of an
Option, the unexercised portion of the Option shall be subject to such
procedures as the Committee may establish except, in the case of an ISO, if and
to the extent that other procedures are necessary to comply with the provisions
of Section 421, 422 or 424 of the Code.
6.6. PAYMENT OF EXERCISE PRICE. The exercise price of an Option
shall be paid in the form of one of more of the following, as the Committee
shall specify, either through the terms of the Option Document or at the time of
exercise of an Option: (a) cash or certified or cashiers' check, (b) shares of
capital stock of the Company that have been held by the Participant for such
period of time as the Committee may specify, (c) other property deemed
acceptable by the Committee, (d) a reduction in the number of Shares or other
property otherwise issuable pursuant to such Option, (e) a promissory note of or
other commitment to pay by the Participant or of a third party, the terms and
conditions of which shall be determined by the Committee, or (f) any combination
of (a) through (e).
SECTION 7. INCENTIVE BONUSES
Each Incentive Bonus Award will confer upon the Employee the
opportunity to earn a future payment tied to the level of achievement with
respect to one or more performance criteria established for a performance
period.
7.1. INCENTIVE BONUS DOCUMENT. Each Incentive Bonus Document shall
contain provisions regarding (a) the target and maximum amount payable to the
Participant as an Incentive Bonus, (b) the performance criteria and level of
achievement versus these criteria that shall determine the amount of such
payment, (c) the term of the performance period as to which performance shall be
measured for determining the amount of any payment, (d) the timing of any
payment earned by virtue of performance, (e) restrictions on the alienation or
transfer of the Incentive Bonus prior to actual payment, (f) forfeiture
provisions, and (g) such further terms and conditions, in each case not
inconsistent with this Plan as may be determined from time to time by the
Committee. The maximum amount payable as an Incentive Bonus may be a multiple of
the target amount payable, but the maximum amount payable pursuant to that
portion of an Incentive Bonus Award granted under this Plan for any fiscal year
to any Participant that is intended to satisfy the requirements for
"performance-based compensation" under Code Section 162(m) shall not exceed
$3,000,000 in the case of any Award payable in cash.
7.2. PERFORMANCE CRITERIA. The Committee shall establish the
performance criteria and level of achievement versus these criteria that shall
determine the target and maximum amount payable under an Incentive Bonus Award,
which criteria may be based on financial performance and/or personal performance
evaluations. The Committee may specify the percentage of the target Incentive
Bonus that is intended to satisfy the requirements for "performance-based
compensation" under Code Section 162(m). Notwithstanding anything to the
contrary herein, the performance criteria for any portion of an Incentive Bonus
that is intended by the Committee to satisfy the requirements for
"performance-based compensation" under Code Section 162(m) shall be a measure
based on one or more Qualifying Performance Criteria (as defined in Section 9.2)
selected by the Committee and specified within the time period required under
Code Section 162(m). The Committee shall certify the extent to which any
Qualifying Performance Criteria has been satisfied and the amount payable as a
result thereof prior to payment of any Incentive Bonus that is intended to
satisfy the requirements for "performance-based compensation" under Code Section
162(m).
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7.3. TIMING AND FORM OF PAYMENT. The Committee shall determine the
timing of payment of any Incentive Bonus. The Committee may provide for or,
subject to such terms and conditions as the Committee may specify, may permit a
Participant to elect the payment of any Incentive Bonus to be deferred to a
specified date or event.
7.4. DISCRETIONARY ADJUSTMENTS. Notwithstanding satisfaction of any
performance goals, the amount paid under an Incentive Bonus Award on account of
either financial performance or personal performance evaluations may be reduced
by the Committee on the basis of such further considerations as the Committee
shall determine.
SECTION 8. INCENTIVE STOCK
Incentive Stock is an award or issuance of Shares the grant, issuance,
retention, vesting and/or transferability of which is subject during specified
periods of time to such conditions (including performance conditions) and terms
as the Committee deems appropriate.
8.1. INCENTIVE STOCK DOCUMENT. Each Incentive Stock Document shall
contain provisions regarding (a) the number of Shares subject to such Award or a
formula for determining such, (b) the performance criteria, if any, and level of
achievement versus these criteria that shall determine the number of Shares
granted, issued, retainable and/or vested, (c) the period, if any, as to which
performance shall be measured for determining achievement of performance, (d)
forfeiture, (e) transferability and (f) such further terms and conditions, not
inconsistent with this Plan as may be determined from time to time by the
Committee.
8.2. SALE PRICE. Subject to the requirements of applicable law, the
Committee shall determine the price, if any, at which Shares of Incentive Stock
shall be sold or awarded to an Eligible Person, which may vary from time to time
and among Eligible Persons and which may be below the fair market value of such
Shares at the date of grant or issuance.
8.3. PERFORMANCE CRITERIA. The grant, issuance, retention and/or
vesting of Incentive Stock may but need not be subject to such performance
criteria and level of achievement versus these criteria as the Committee shall
determine, which criteria may be based on financial performance and/or personal
performance evaluations. Notwithstanding anything to the contrary herein, the
performance criteria for any Incentive Stock that is intended to satisfy the
requirements for "performance-based compensation" under Code Section 162(m)
shall be a measure based on one or more Qualifying Performance Criteria selected
by the Committee and specified within the time period required under Code
Section 162(m).
8.4. DISCRETIONARY ADJUSTMENTS. Notwithstanding satisfaction of any
performance goals, the number of Shares granted, issued, retainable and/or
vested under an Incentive Stock Award on account of either financial performance
or personal performance evaluations may be reduced by the Committee on the basis
of such further considerations as the Committee shall determine.
8.5. TERMINATION OF EMPLOYMENT. Subject to Section 11, upon a
termination of employment by a Participant prior to the vesting of or the
lapsing of restrictions on Incentive Stock, the Incentive Stock Awards granted
to such Participant shall be subject to such procedures as determined by the
Committee.
SECTION 9. OTHER PROVISIONS APPLICABLE TO AWARDS
9.1. TRANSFERABILITY. Unless the agreement or other document
evidencing an Award (or an amendment thereto authorized by the Committee)
expressly states that the Award is transferable as provided hereunder, no Award
granted under this Plan (nor any interest in such Award) may be sold, assigned,
conveyed, gifted, pledged, hypothecated or otherwise transferred in any manner
prior to the vesting or lapse of any and all restrictions applicable thereto,
other than by will or the laws of descent and distribution. The Committee may
grant an Award or amend an outstanding Award to provide that the Award is
transferable or assignable to a member or members of the Participant's
"immediate family," as
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such term is defined in Rule 16a-1(e) under the Securities Exchange Act of 1934,
as amended (the "Exchange Act"), or to a trust for the benefit solely of a
member or members of the Participant's immediate family or to a partnership or
other entity whose only owners are members of the Participant's immediate
family, PROVIDED that (i) no consideration is given in connection with the
transfer of such Award, and (ii) following any such transfer or assignment the
Award will remain subject to substantially the same terms applicable to the
Award while held by the Participant, as modified as the Committee shall deem
appropriate, and the transferee shall execute an agreement agreeing to be bound
by such terms.
9.2. QUALIFYING PERFORMANCE CRITERIA. For purposes of this Plan,
the term "Qualifying Performance Criteria" shall mean any one or more of the
following performance criteria, either individually, alternatively or in any
combination, applied to either the Company as a whole or to a business unit or
subsidiary, either individually, alternatively or in any combination, and
measured either annually or cumulatively over a period of years, on an absolute
basis or relative to a pre-established target, previous years' results or a
designated comparison group, in each case as specified by the Committee in the
Award: (a) cash flow, (b) earnings per share, (c) earnings before interest,
taxes, depreciation and amortization, (d) earnings before interest, taxes and
amortization, (e) earnings before interest and taxes, (f) return on equity, (g)
total stockholder return, (h) return on capital, (i) return on assets or net
assets, (j) revenue, (k) income or net income, (l) operating income or net
operating income, (m) operating profit or net operating profit, (n) operating
margin, (o) return on operating revenue, (p) market share, and (q) overhead or
other expense reduction. The Committee shall appropriately adjust any evaluation
of performance under a Qualifying Performance Criteria to exclude any of the
following events that occurs during a performance period: (i) asset write-downs,
(ii) litigation or claim judgments or settlements, (iii) the effect of changes
in tax law, accounting principles or other such laws or provisions affecting
reported results, (iv) accruals for reorganization and restructuring programs,
(v) divestitures, and (vi) any extraordinary non-recurring items as described in
Accounting Principles Board Opinion No. 30 and/or in management's discussion and
analysis of financial condition and results of operations appearing in the
Company's annual report to stockholders for the applicable year.
9.3. DIVIDENDS. Unless otherwise provided by the Committee, no
adjustment shall be made in Shares issuable under Awards on account of cash
dividends that may be paid or other rights that may be issued to the holders of
Shares prior to their issuance under any Award. The Committee shall specify
whether dividends or dividend equivalent amounts shall be paid to any
Participant with respect to the Shares subject to any Award that have not vested
or been issued or that are subject to any restrictions or conditions on the
record date for dividends.
9.4. DOCUMENTS EVIDENCING AWARDS. The Committee shall, subject to
applicable law, determine the date an Award is deemed to be granted, which, for
purposes of this Plan, shall not be affected by the fact that an Award is
contingent on subsequent approval of this Plan. The Committee or, except to the
extent prohibited under applicable law, its delegate(s) may establish the terms
of agreements or other documents evidencing Awards under this Plan and may, but
need not, require as a condition to any such agreement's or document's
effectiveness that such agreement or document be executed by the Participant and
that such Participant agree to such further terms and conditions as specified in
such agreement or document. The grant of an Award under this Plan shall not
confer any rights upon the Participant holding such Award other than such terms,
and subject to such conditions, as are specified in this Plan as being
applicable to such type of Award (or to all Awards) or as are expressly set
forth in the agreement or other document evidencing such Award.
9.5. TANDEM STOCK OR CASH RIGHTS. Either at the time an Award is
granted or by subsequent action, the Committee may, but need not, provide that
an Award shall contain as a term thereof, a right, either in tandem with the
other rights under the Award or as an alternative thereto, of the Participant to
receive, without payment to the Company, a number of Shares, cash or a
combination thereof, the amount of which is determined by reference to the value
of the Award.
9.6. FINANCING. The Committee may provide financing to a
Participant in a principal amount sufficient to pay the purchase price of any
Award and/or to pay the amount of taxes required by law to be withheld with
respect to any Award. Any such loan shall be subject to all applicable legal
requirements
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and restrictions pertinent thereto, including Regulation U promulgated by the
Federal Reserve Board. The grant of an Award shall in no way obligate the
Company or the Committee to provide any financing whatsoever in connection
therewith.
SECTION 10. CHANGES IN CAPITAL STRUCTURE
If the outstanding securities of the class then subject to this Plan
are increased, decreased or exchanged for or converted into cash, property or a
different number or kind of shares or securities, or if cash, property or shares
or securities are distributed in respect of such outstanding securities, in
either case as a result of a reorganization, merger, consolidation,
recapitalization, restructuring, reclassification, dividend (other than a
regular, quarterly cash dividend) or other distribution, stock split, reverse
stock split, spin-off or the like, or if substantially all of the property and
assets of the Company are sold, then, unless the terms of such transaction shall
provide otherwise, the Committee shall make appropriate and proportionate
adjustments in (i) the number and type of shares or other securities or cash or
other property that may be acquired pursuant to Awards theretofore granted under
this Plan and the exercise or settlement price of such Awards, PROVIDED,
HOWEVER, that such adjustment shall be made in such a manner that will not
affect the status of any Award intended to qualify as an ISO under Code Section
422 or as "performance-based compensation" under Code Section 162(m), and (ii)
the maximum number and type of shares or other securities that may be issued
pursuant to such Awards thereafter granted under this Plan.
SECTION 11. CHANGE OF CONTROL
11.1. EFFECT OF CHANGE OF CONTROL. The Committee may, through the
terms of the Award or otherwise, provide that any or all of the following shall
occur in connection with a Change of Control or a Change of Control Transaction
(as those terms are defined in Section 11.2) or upon termination of the
Participant's employment following a Change of Control or a Change of Control
Transaction: (a) in the case of an Option, the acceleration of the Participant's
ability to exercise any portion of the Option not previously exercisable, (b) in
the case of an Incentive Bonus, the acceleration of the Participant's right to
receive a payment equal to the target amount payable or, if greater, a payment
based on performance through a date determined by the Committee prior to the
Change of Control, and (c) in the case of Shares issued in payment of any
Incentive Bonus and/or in the case of Incentive Stock, the lapse and expiration
of any conditions to the grant, issuance, retention, vesting or transferability
of, or any other restrictions applicable to, such Award. The Committee also may,
through the terms of the Award or otherwise, provide for an absolute or
conditional exercise, payment or lapse of conditions or restrictions on an Award
that shall only be effective if, upon the announcement of a Change of Control
Transaction, no provision is made in such Change of Control Transaction for the
exercise, payment or lapse of conditions or restrictions on the Award or other
procedure whereby the Participant may realize the full benefit of the Award.
11.2. DEFINITIONS. Unless the Committee shall provide otherwise,
"Change of Control" shall mean an occurrence of any of the following
events:
(a) an acquisition (other than directly from the Company) of
any voting securities of the Company (the "Voting Securities") by any
"person or group" (within the meaning of Section 13(d)(3) or 14(d)(2)
of the Exchange Act) immediately after which such person or group has
"Beneficial Ownership" (within the meaning of Rule 13d-3 under the
Exchange Act) of more than 50% of the combined voting power of the
Company's then outstanding Voting Securities, except in the case of an
acquisition by any person or group that immediately prior to such
acquisition already had Beneficial Ownership of more than 50% of the
combined voting power of the Company's then outstanding Voting
Securities;
(b) consummation of (i) a merger, consolidation or
reorganization involving the Company unless the company resulting from
such merger, consolidation or reorganization (the "Surviving
Corporation") shall adopt or assume this Plan and all Participants'
Awards under this Plan and either (A) the stockholders of the Company
immediately before such merger, consolidation or reorganization own,
directly or indirectly immediately following such merger,
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consolidation or reorganization, more than 50% of the combined voting
power of the Surviving Corporation in substantially the same proportion
as their ownership immediately before such merger, consolidation or
reorganization, or (B) at least a majority of the members of the Board
of Directors of the Surviving Corporation were directors of the Company
immediately prior to the execution of the agreement providing for such
merger, consolidation or reorganization, or (ii) a complete liquidation
or dissolution of the Company; or
(c) such other events as the Committee from time to time may
specify.
"Change of Control Transaction" shall mean any tender offer, offer,
exchange offer, solicitation, merger, consolidation, reorganization or other
transaction that is intended to or reasonably expected to result in a Change of
Control.
SECTION 12. TAXES
12.1. WITHHOLDING REQUIREMENTS. The Committee may make such
provisions or impose such conditions as it may deem appropriate for the
withholding or payment by a Participant of any taxes that the Committee
determines are required in connection with any Award granted under this Plan,
and a Participant's rights in any Award are subject to satisfaction of such
conditions.
12.2. PAYMENT OF WITHHOLDING TAXES. Notwithstanding the terms of
Section 12.1, the Committee may provide in the agreement or other document
evidencing an Award or otherwise that all or any portion of the taxes required
to be withheld by the Company or, if permitted by the Committee, desired to be
paid by the Participant, in connection with the exercise of a Nonqualified
Option or the exercise, vesting, settlement or transfer of any other Award shall
be paid or, at the election of the Participant, may be paid by the Company by
withholding shares of the Company's capital stock otherwise issuable or subject
to such Award or by the Participant delivering previously owned shares of the
Company's capital stock, in each case having a fair market value equal to the
amount required or elected to be withheld or paid. Any such election is subject
to such conditions or procedures as may be established by the Committee and may
be subject to disapproval by the Committee.
SECTION 13. AMENDMENTS OR TERMINATION
The Board may amend, alter or discontinue this Plan or any agreement or
other document evidencing an Award made under this Plan, but no such amendment
shall be made which (i) would materially impair the rights of any Award holder,
without such holder's consent, under any Award theretofore granted, provided
that no such consent shall be required if the Committee determines in its sole
discretion and prior to the date of any Change of Control that such amendment or
alteration is not reasonably likely to significantly diminish the benefits
provided under such Award, or that any such diminution has been adequately
compensated, or (ii) would have any of the following effects, unless approved by
the stockholders of the Company:
(a) materially increase the maximum number of Shares for
which Awards may be granted under this Plan;
(b) reduce the price at which Options may be granted
below the price provided for in Section 6.2;
(c) reduce the exercise price of outstanding Options;
(d) extend the term of this Plan; or
(e) change the class of persons eligible to be
Participants.
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SECTION 14. COMPLIANCE WITH OTHER LAWS AND REGULATIONS.
This Plan, the grant and exercise of Awards thereunder, and the
obligation of the Company to sell, issue or deliver Shares under such Awards,
shall be subject to all applicable federal, state and foreign laws, rules and
regulations and to such approvals by any governmental or regulatory agency as
may be required. The Company shall not be required to register in a
Participant's name or deliver any Shares prior to the completion of any
registration or qualification of such Shares under any federal, state or foreign
law or any ruling or regulation of any government body which the Committee shall
determine to be necessary or advisable. This Plan is intended to constitute an
unfunded arrangement for a select group of management or other key employees,
directors and consultants.
No Option shall be exercisable unless a registration statement with
respect to the Option is effective or the Company has determined that such
registration is unnecessary. Unless the Awards and Shares covered by this Plan
have been registered under the Securities Act of 1933, as amended, or the
Company has determined that such registration is unnecessary, each person
receiving an Award and/or Shares pursuant to any Award may be required by the
Company to give a representation in writing that such person is acquiring such
Shares for his or her own account for investment and not with a view to, or for
sale in connection with, the distribution of any part thereof.
SECTION 15. OPTION GRANTS BY SUBSIDIARIES
In the case of a grant of an option to any Eligible Person employed by
a subsidiary of the Company, such grant may, if the Committee so directs, be
implemented by the Company issuing any subject shares to the subsidiary for such
lawful consideration as the Committee may determine, upon the condition or
understanding that the subsidiary will transfer the shares to the optionholder
in accordance with the terms of the option specified by the Committee pursuant
to the provisions of this Plan. Notwithstanding any other provision hereof, such
option may be issued by and in the name of the subsidiary and shall be deemed
granted on such date as the Committee shall determine.
SECTION 16. NO RIGHT TO COMPANY EMPLOYMENT
Nothing in this Plan or as a result of any Award granted pursuant to
this Plan shall confer on any individual any right to continue in the employ of
the Company or interfere in any way with the right of the Company to terminate
an individual's employment at any time. The agreements or other documents
evidencing Awards may contain such provisions as the Committee may approve with
reference to the effect of approved leaves of absence.
SECTION 17. EFFECTIVENESS AND EXPIRATION OF PLAN
This Plan shall be effective on the date the Board adopts this Plan.
All Awards granted under this Plan are subject to, and may not be exercised
before, the approval of this Plan by the stockholders prior to the first
anniversary date of the effective date of this Plan, by the affirmative vote of
the holders of a majority of the outstanding shares of the Company present, or
represented by proxy, and entitled to vote at a meeting of the Company's
stockholders or by written consent in accordance with the laws of the State of
Delaware; PROVIDED that if such approval by the stockholders of the Company is
not forthcoming, all Awards previously granted under this Plan shall be void. No
Awards shall be granted pursuant to this Plan more than ten (10) years after the
effective date of this Plan.
SECTION 18. NON-EXCLUSIVITY OF PLAN
Neither the adoption of this Plan by the Board nor the submission of
this Plan to the stockholders of the Company for approval shall be construed as
creating any limitations on the power of the Board or the Committee to adopt
such other incentive arrangements as either may deem desirable, including
without limitation, the granting of restricted stock or stock options otherwise
than under this Plan, and such arrangements may be either generally applicable
or applicable only in specific cases.
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SECTION 19. GOVERNING LAW
This Plan and any agreements or other documents hereunder shall be
interpreted and construed in accordance with the laws of the State of Delaware
and applicable federal law. The Committee may provide that any dispute as to any
Award shall be presented and determined in such forum as the Committee may
specify, including through binding arbitration. Any reference in this Plan or in
the agreement or other document evidencing any Award to a provision of law or to
a rule or regulation shall be deemed to include any successor law, rule or
regulation of similar effect or applicability.
SECTION 20. SUCCESSORS
Upon a reorganization, merger or consolidation of the Company as a
result of which the outstanding securities of the class then subject to Awards
hereunder are changed into or exchanged for securities issued by an entity (a
"Surviving Corporation") other than the Company or as a result of which the
Company becomes a direct or indirect subsidiary of another entity whose equity
securities are publicly traded (similarly, a "Surviving Corporation") and the
class of securities subject to Awards under this Plan cease to be publicly
traded, then unless the Company specifies otherwise in the agreement providing
for such transaction, either (a) this Plan and the Awards then outstanding under
this Plan shall be assumed by the Surviving Corporation and the equity
securities of the Surviving Corporation substituted for Shares issuable under
this Plan and such Awards, provided that the number of shares subject to the
Plan and such Awards and the terms of such Awards shall be adjusted in
accordance with Section 10 hereof, or (b) the Surviving Corporation shall
substitute equivalent awards for the Awards then outstanding under this Plan,
provided that the number of shares subject to and the terms of such Awards shall
be adjusted in accordance with Section 10 hereof, or shall provide substantially
similar consideration to Participants for their Awards as was provided to
stockholders of the Company (after taking into account the existing provisions
of the Awards).
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APPENDIX B
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS OF
AFTERMARKET TECHNOLOGY CORP.
FOR ANNUAL MEETING OF STOCKHOLDERS
MAY 8, 2002
The undersigned stockholder of Aftermarket Technology Corp. (the "Company")
acknowledges receipt of the Notice of Annual Meeting of Stockholders of the
Company and the accompanying Proxy Statement, each dated April 1, 2002, and the
undersigned hereby revokes all prior proxies and hereby constitutes and appoints
Michael T. DuBose, Barry C. Kohn and Joseph Salamunovich, and each of them (each
with full power of substitution and with full power to act without the others),
the proxies of the undersigned, to represent the undersigned and to vote all the
shares of common stock of the Company that the undersigned would be entitled to
vote at the Annual Meeting of Stockholders of the Company to be held on May 8,
2002 at 9:00 a.m., Central time, at the Hilton Lisle/Naperville Hotel, 3003
Corporate West Drive, Lisle, Illinois, and at any adjournment thereof.
PLEASE SIGN AND DATE THIS PROXY ON THE REVERSE SIDE AND
RETURN IT IN THE ENCLOSED ENVELOPE.
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THIS PROXY WILL BE VOTED AS DIRECTED BY THE UNDERSIGNED BELOW; WHERE NO CHOICE IS SPECIFIED, IT WILL Please /X/
BE VOTED FOR PROPOSALS 1 AND 2 AND IN THE DISCRETION OF THE PROXIES WITH RESPECT TO MATTERS DESCRIBED mark your
IN PROPOSAL 3. vote as
indicated
in this
example
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR PROPOSALS 1 AND 2.
1. Election of Directors:
FOR all nominees listed to WITHHOLD INSTRUCTION: To vote against any nominee, strike a line through the
the right AUTHORITY nominee's name in the list below:
(except as marked to the to vote for all
contrary) nominees
listed to the right
/ /
/ / Robert Anderson Dale F. Frey Gerald L. Parsky
Richard R. Crowell Mark C. Hardy Richard K. Roeder
Michael T. DuBose Dr. Michael J. Hartnett J. Richard Stonesifer
2. Approval of 2002 Stock Incentive Plan: 3. To vote upon such other business as may properly come before the meeting
or any adjournment thereof.
FOR AGAINST ABSTAIN
/ / / / / /
DATED: _____________________________, 2002
___________________________________________
___________________________________________
(Please sign exactly as your name appears
hereon. If the stock is registered in the
name of two or more persons, each should
sign. When signing as an executor,
administrator, trustee, guardian, attorney,
or corporate officer, please add your full
title as such.)
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