<PAGE>
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of
the Securities Exchange Act of 1934 (Amendment No. )
Filed by the Registrant /X/
Filed by a party other than the Registrant / /
Check the appropriate box:
/ / Preliminary Proxy Statement
/ / Confidential, for Use of the Commission Only (as permitted by Rule
14a-6(e)(2))
/X/ Definitive Proxy Statement
/ / Definitive Additional Materials
/ / Soliciting Material Pursuant to Section 240.14a-11(c) or Section
240.14a-12
Aftermarket Technology Corp.
- --------------------------------------------------------------------------------
(Name of Registrant as Specified In Its Charter)
Not Applicable
- --------------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
/X/ No fee required
/ / Fee computed on table below per Exchange Act Rules 14a-6(i)(1)
and 0-11
(1) Title of each class of securities to which transaction applies:
------------------------------------------------------------------------
(2) Aggregate number of securities to which transaction applies:
------------------------------------------------------------------------
(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (set forth the amount on which the
filing fee is calculated and state how it was determined):
------------------------------------------------------------------------
(4) Proposed maximum aggregate value of transaction:
------------------------------------------------------------------------
(5) Total fee paid:
------------------------------------------------------------------------
/ / Fee paid previously with preliminary materials.
/ / Check box if any part of the fee is offset as provided by Exchange Act Rule
0-11(a)(2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration statement number,
or the Form or Schedule and the date of its filing.
(1) Amount Previously Paid:
------------------------------------------------------------------------
(2) Form, Schedule or Registration Statement No.:
------------------------------------------------------------------------
(3) Filing Party:
------------------------------------------------------------------------
(4) Date Filed:
------------------------------------------------------------------------
<PAGE>
[ATC LOGO]
Dear Stockholders:
Your are cordially invited to attend the Annual Meeting of Stockholders of
Aftermarket Technology Corp. on Wednesday, May 5, 1999 at 9:00 a.m., Central
time, at the Drake Hotel, 2301 South York Road, Oak Brook, 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 of the Company. Your Board
of Directors recommends a vote FOR each nominee.
Important information regarding the Company is 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 the Company are greatly
appreciated.
/s/Michael T. DuBose
Michael T. DuBose
CHAIRMAN OF THE BOARD,
PRESIDENT AND CHIEF EXECUTIVE OFFICER
April 5, 1999
<PAGE>
AFTERMARKET TECHNOLOGY CORP.
ONE OAK HILL CENTER, SUITE 400
WESTMONT, ILLINOIS 60559
---------------------
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., a Delaware corporation (the "Company"), will be
held at the Drake Hotel, 2301 South York Road, Oak Brook, Illinois, on
Wednesday, May 5, 1999, at 9:00 a.m., Central time, for the purposes of
considering and acting upon the following:
1. election of ten directors to hold office until the 2000 Annual Meeting
of Stockholders and thereafter until their successors are elected and
qualified; and
2. 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 24, 1999 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 5, 1999
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.
<PAGE>
AFTERMARKET TECHNOLOGY CORP.
ONE OAK HILL CENTER, SUITE 400
WESTMONT, ILLINOIS 60559
---------------------
PROXY STATEMENT
---------------------
ANNUAL MEETING OF STOCKHOLDERS
MAY 5, 1999
SOLICITATION OF PROXIES
This Proxy Statement is furnished in connection with the solicitation of
proxies by the Board of Directors of Aftermarket Technology Corp., a Delaware
corporation (the "Company"), for use at the Annual Meeting of Stockholders of
the Company (the "Meeting") to be held at the Drake Hotel, 2301 South York Road,
Oak Brook, Illinois, on May 5, 1999 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 7, 1999.
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 the Company. Proxies may be solicited by directors,
officers and other regular employees of the Company, none of whom will receive
any additional compensation for such solicitation. Proxies may be solicited in
person or by telephone. The Company 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 24, 1999 has been fixed as the record date
for the determination of stockholders entitled to notice of and to vote at the
Meeting. On that date, there were outstanding 20,263,172 shares of the Company's
Common Stock, $.01 par value ("Common Stock"). A majority of the shares entitled
to vote, present in person or represented by proxy, will constitute a quorum at
the 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
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 thereon. In the
absence of such instructions, proxies will be voted FOR the Company's nominees
for election as directors. As of the date hereof, the Board of Directors is not
aware of any matters to be presented for action at the Meeting other than the
election of directors. However, should any other matters come before the
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 Meeting or
any adjournment thereof.
<PAGE>
Any stockholder has the power to revoke his or her proxy at any time before
it is voted at the Meeting by submitting written notice of revocation to the
Secretary of the Company, 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 Meeting and elects to vote the shares represented thereby in person.
ELECTION OF DIRECTORS
The directors of the Company are elected annually. The term of office of all
present directors expires on the date of the Meeting, at which ten 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 William A. Smith
Mark C. Hardy J. Richard Stonesifer
All of the nominees currently serve as directors of the Company. For
information regarding each nominee, see "Management--Directors and Executive
Officers."
The Board of Directors was composed of eleven directors prior to March 30,
1999, at which time Fred J. Hall resigned as a director. The vacancy on the
Board that resulted from Mr. Hall's resignation was eliminated when the
remaining directors voted to reduce the authorized number of directors from
eleven to ten.
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 the Company's knowledge,
all nominees are and will be available to serve.
2
<PAGE>
MANAGEMENT
DIRECTORS AND EXECUTIVE OFFICERS
The directors and executive officers of the Company are as follows:
<TABLE>
<CAPTION>
NAME AGE POSITIONS
- ---- --- ---------
<S> <C> <C>
Michael T. DuBose 45 Chairman of the Board, President and Chief Executive Officer
Ronald E. Bradshaw 54 Executive Vice President and President, Autocraft Electronics
Barry C. Kohn 43 Vice President and Chief Financial Officer
John J. Machota 47 Vice President--Human Resources
Joseph Salamunovich 39 Vice President, General Counsel and Secretary
Kenneth A. Bear 47 President, Aaron's Automotive Products, Inc.
Thomas R. Kawsky 50 President, Autocraft Industries, Inc.
Michael L. LePore 45 President, Component Remanufacturing Specialists, Inc.
Robert Anderson 78 Director
Richard R. Crowell 44 Director
Dale F. Frey 66 Director
Mark C. Hardy 35 Director
Dr. Michael J. Hartnett 53 Director
Gerald L. Parsky 56 Director
Richard K. Roeder 50 Director
William A. Smith 53 Director
J. Richard Stonesifer 62 Director
</TABLE>
MICHAEL T. DUBOSE joined the Company as Chairman of the Board of Directors,
President and Chief Executive Officer on December 15, 1998. Prior to that he
served as a consultant to Aurora Capital Partners ("ACP") from December 1997.
From 1995 to 1997 Mr. DuBose was Chairman 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.
RONALD E. BRADSHAW has served as Executive Vice President of the Company
since March 1998 and as President of the Company's Autocraft Electronics
subsidiary since March 1, 1999. Mr. Bradshaw joined the Company following its
March 1998 acquisition of the OEM division ("Autocraft") of The Fred Jones
Companies, Inc. Prior to that, Mr. Bradshaw served as President and Chief
Operating Officer of The Fred Jones Companies since October 1997 and as Senior
Vice President and Chief Financial Officer from 1994 to 1997 and as Treasurer
from 1990 to 1994. Autocraft Electronics remanufactures engine control modules,
radios, instrument and display clusters, and certain other electronic components
for General Motors, Ford and certain other OEMs.
BARRY C. KOHN joined the Company as Vice President and Chief Financial
Officer on January 25, 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, an international engineering,
manufacturing and distribution company. Between 1987 and 1995 he held
increasingly senior positions at Grimes including Treasurer, Controller and
Manager of Business Planning. Mr. Kohn is a Certified Public Accountant.
JOHN J. MACHOTA has served as Vice President--Human Resources of the Company
since June 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.
JOSEPH SALAMUNOVICH joined the Company as Vice President, General Counsel
and Secretary in March 1997. From 1995 to March 1997, Mr. Salamunovich was a
partner in the law firm of Gibson, Dunn & Crutcher
3
<PAGE>
LLP, where he specialized in corporate and securities law matters. From 1986 to
1995, Mr. Salamunovich was an associate of the same firm.
KENNETH A. BEAR became President of the Company's Aaron's Automotive
Products, Inc. ("Aaron's") subsidiary in February 1998. Prior to that he held
various other positions with Aaron's, including Executive Vice President since
1989. Mr. Bear joined Aaron's in 1983. Aaron's remanufactures transmissions and
engines for Chrysler and engines for sale to independent aftermarket customers.
THOMAS R. KAWSKY became President of the Company's Autocraft Industries,
Inc. subsidiary in March 1998 following the Autocraft acquisition. Prior to that
he served as Vice President and General Manager of the OEM Division of The Fred
Jones Companies, Inc. since October 1997 and before joining Fred Jones he served
as Vice President--Manufacturing for the G&O Division of TransPro, Inc. since
March 1997. Prior to that, Mr. Kawsky was employed by Cummins Engine Company for
26 years, where he served most recently as General Manager--Engines for the
Cummins Diesel ReCon Division. Autocraft Industries remanufactures transmissions
for Ford.
MICHAEL L. LEPORE has been President of the Company's Component
Remanufacturing Specialists, Inc. ("CRS") subsidiary since 1984. From 1976 to
1984 Mr. LePore was manager of U.S. Operations for Borg Warner Parts and Service
Division, a subsidiary of Borg Warner LTD U.K. CRS remanufactures transmissions
for General Motors, Isuzu, Hyundai and certain other OEMs.
ROBERT ANDERSON became a director of the Company in March 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. Mr. Anderson is a director of Gulfstream
Aerospace Corporation, Motor Cargo Industries, Inc. and Optical Data Systems
Company.
RICHARD R. CROWELL became a director of the Company in July 1994. Mr.
Crowell is President and a founding partner of ACP. Prior to forming ACP in
1991, Mr. Crowell was a Managing Director of Rosecliff, Inc., the management
company for Acadia Partners L.P. since its inception in 1987.
DALE F. FREY became a director of the Company in August 1997. Prior to his
retirement in early 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 USF&G Corporation, Praxair, Inc., First
American Financial Corporation (until April 1999), Roadway Express and Promus
Hotel Corp.
MARK C. HARDY became a director of the Company in July 1994. Mr. Hardy is a
Principal of ACP and joined ACP in June 1993. Prior to joining ACP, Mr. Hardy
was an Associate at Bain & Company, a consulting firm.
DR. MICHAEL J. HARTNETT became a director of the Company in July 1994. Since
March 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 bearing manufacturer.
GERALD L. PARSKY became a director of the Company in March 1997. Mr. Parsky
is the Chairman and a founding partner of ACP. Prior to forming ACP 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 of the Company in July 1994. Mr. Roeder
is a founding partner and Managing Director of ACP. Prior to forming ACP 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.
4
<PAGE>
WILLIAM A. SMITH has been a director of the Company since July 1994. He
served as Chairman Emeritus of the Board of Directors from August 1997 to
December 1998 and prior to that served as Chairman of the Board since July 1994.
Mr. Smith was President and Chief Executive Officer of the Company from July
1994 until October 1996. From March 1993 to July 1994, Mr. Smith served as a
consultant to ACP in connection with the formation of the Company and its
initial acquisitions. From March 1992 to March 1993, Mr. Smith was President of
the Rucker Fluid Power Division of Lucas Industries, plc. Prior to that, Mr.
Smith held various positions with Navistar International Transportation
Corporation, Labinal, Inc. (a French automotive and aerospace equipment
manufacturer) and Cummins Engine Company.
J. RICHARD STONESIFER became a director of the Company in August 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 an executive officer and Senior Vice President of
the General Electric Company, from January 1992 until his retirement.
Effective March 30, 1999, Mr. Fred J. Hall resigned as a director of the
Company. Mr. Hall, who became a director of the Company in May 1998, is Chairman
of the Board, President and Chief Executive Officer of The Fred Jones Companies,
Inc. The Fred Jones Companies has a line of business that is competitive with a
line of business recently commenced by the Company. In light of this, Mr. Hall
decided to resign from the Company's Board in order to avoid any potential
conflicts of interest.
COMMITTEES OF THE BOARD OF DIRECTORS AND BOARD MEETINGS
The Company maintains an Audit Committee and a Compensation and Human
Resources Committee. It does not have a nominating committee.
The Audit Committee is charged with establishing the scope of the Company's
audit procedures, negotiating with and retaining the Company's independent
auditors, reviewing and presenting to the Board of Directors for approval the
audit reports rendered to the Audit Committee and initiating any other such
audit procedures that it may deem necessary or advisable with respect to the
financial control of the Company's operations. During 1998, the Audit Committee
was comprised of Messrs. Anderson, Frey (Chairman) and Roeder. The Audit
Committee met two times during 1998.
The Compensation and Human Resources Committee establishes the general
compensation policies of the Company, establishes the specific compensation
programs utilized by the Company with respect to the executive officers of the
Company and makes recommendations to the Board of Directors regarding the
salaries of executive officers and the granting of stock options to eligible
employees. During 1998, 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 1998.
The Board of Directors held eight meetings during 1998. 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 1998.
DIRECTOR COMPENSATION
Directors do not receive cash compensation for service on the Board of
Directors or its committees, and the Company does not expect to pay fees to its
directors for the foreseeable future. The Company reimburses directors 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
the Common Stock at an exercise price of $15.25, $18.25 and $18.25 per share,
respectively. At the time Mr. Hall joined the Board of Directors in May 1998, he
was granted options to purchase 12,000 shares of the Common stock at an exercise
price of $18.125 per share. At the same time, Messrs. Anderson, Frey and
Stonesifer were each granted additional options to purchase 24,000 shares of the
Common Stock on the same terms as Mr. Hall. In November 1998, all of the options
previously granted to Messrs. Anderson,
6
<PAGE>
Frey, Hall and Stonesifer were canceled and replaced with an equal number of new
options with an exercise price of $5.3125 per share.
In each case that options were granted to directors, the option exercise
price was equal to the closing price of a share the Common Stock on the Nasdaq
National Market System on the date the options were granted, except in the case
of the initial options to Messrs. Anderson, Frey and Stonesifer, which were
granted at an exercise price equal to such closing price less $3.00.
During 1998, Mr. Smith receives $126,224 to serve as Chairman Emeritus of
the Board of Directors pursuant to an employment agreement that expired on
December 31, 1998.
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 the Company's officers, directors and persons who own
more than 10% of any equity security of the Company to file reports of ownership
and changes in ownership with the Securities and Exchange Commission and to
furnish copies of these reports to the Company. Based solely on a review of the
copies of the forms that the Company received, the Company believes that the
following forms were not filed on timely basis: a Form 3 for Mr. DuBose that was
due in December 1998; Form 4s for James R. Wehr (former President of Aaron's)
that were due in June and July 1998 to report the disposition of 31,000 and
45,000 shares of Common Stock, respectively; a Form 4 for Mr. Kawsky that was
due in October 1998 to report the grant of options to purchase 15,000 shares of
Common Stock; and a Form 4 for Mr. LePore that was due in July 1998 to report
the exercise of options to purchase 11,696 shares of Common Stock and the grant
of options to purchase 15,000 shares of Common Stock. These oversights were
subsequently corrected when Mr. DuBose filed a Form 3 in February 1999, Mr. Wehr
filed Form 4s in August 1998, and Messrs. Kawsky and LePore filed Form 5s in
February 1999.
6
<PAGE>
EXECUTIVE COMPENSATION
SUMMARY COMPENSATION TABLE
The following table sets forth, for the three most recently completed fiscal
years, the cash compensation for services in all capacities to the Company of
those persons who were, as of December 31, 1998, (i) the Company's current Chief
Executive Officer, (ii) the Company's former Chief Executive Officer, and (iii)
the four other most highly compensated executive officers of the Company and its
subsidiaries during the last fiscal year (collectively, the "Named Executive
Officers"):
<TABLE>
<CAPTION>
Annual Long-term
Compensation Compensation Awards
------------------------ -----------------------
Number Of Securities
Underlying All Other
Name And Principal Position Year Salary (1) Bonus (2) Options (#) (3) Compensation
- --------------------------- ---- ---------- --------- --------------- ------------
<S> <C> <C> <C> <C> <C>
Michael T. DuBose (4) 1998 $ 17,534 -- 500,000 --
Chairman, President and 1997 -- -- -- --
Chief Executive Officer 1996 -- -- -- --
Stephen J. Perkins (5) 1998 335,000 -- 332,000(6) --
Former Chairman, President 1997 300,000 $ 225,000 -- --
and Chief Executive Officer 1996 70,385 125,000 498,000(6) --
Ronald E. Bradshaw (7) 1998 227,417 157,552 45,000 --
Executive Vice President and 1997 -- -- -- --
President, Autocraft Electronics 1996 -- -- -- --
Michael L. LePore 1998 236,376 23,637 15,000 --
President, CRS 1997 232,425 71,377 -- --
1996 226,520 181,745 -- --
Wesley N. Dearbaugh (8) 1998 215,000 -- -- 94,734(9)
Former President, ATC 1997 200,000 47,400 -- --
Distribution Group 1996 116,457 50,000 140,352 --
Kenneth A. Bear (10) 1998 176,538 18,000 20,000 --
President, Aaron's 1997 120,368 52,662 -- --
1996 104,000 80,000 -- --
</TABLE>
(1) For information regarding the base salary of each Named Executive Officer
in 1999 see "Executive Compensation--Employment Agreements."
(2) Bonuses for a particular year are paid during the first quarter of the
following year.
(3) Consists of options to purchase securities of the Company, which options
were issued pursuant to the Company's 1996 Stock Incentive Plan (the "1996
Plan") or its 1998 Stock Incentive Plan (the "1998 Plan"). Pursuant to the
1996 and 1998 Plans, the Compensation and Human Resources Committee of the
Board of Directors makes recommendations to the Board of Directors
regarding the terms and conditions of each option to be granted.
(4) Mr. DuBose became Chairman, President and Chief Executive Officer in
December 1998.
(5) Mr. Perkins became Chairman, President and Chief Executive Officer in
October 1996 and ceased to hold such positions in December 1998.
(6) The options granted in 1998 replaced the options granted in 1996. See
"Executive Compensation--Option Repricing Table."
(7) Mr. Bradshaw became Executive Vice President in March 1998.
(8) Mr. Dearbaugh became President of the Company's Distribution Group in June
1996 and ceased to hold such position in March 1999.
7
<PAGE>
(9) Consists of (i) a one-time bonus paid in connection with Mr. Dearbaugh's
relocation from Arizona to Illinois and (ii) reimbursement of certain real
estate costs incurred by Mr. Dearbaugh in such relocation, grossed up for
tax effect.
(10) Mr. Bear became President of Aaron's in February 1998. Prior to that he
served as Executive Vice President of Aaron's.
OPTION GRANTS TABLE
Shown below is information concerning grants of options issued by the
Company to the Named Executive Officers during 1998:
<TABLE>
<CAPTION>
Individual Potential Realizable
Grants Value At Assumed
------------------------------ Annual Rates Of
Number Of % Of Total Stock Price
Securities Options Appreciation
Underlying Granted To Exercise For Option Term(1)
Options Granted Employees In Price Expiration ---------------------
Name (#) Fiscal Year ($/Share) Date 5% ($) 10% ($)
- -------------------------- --------------- ------------ --------- ---------- -------- ----------
<S> <C> <C> <C> <C> <C> <C>
Michael T. DuBose...... 300,000 (2) 26.5 $ 5.00 12/15/08 $943,342 $2,390,614
200,000 (3) 17.7 10.00 12/15/08 -- 593,742
Stephen J. Perkins..... 332,000 (4) 29.3 5.00 12/31/02 357,740 770,406
Michael L. LePore...... 15,000 (5) 1.3 18.125 5/12/08 174,035 438,162
Ronald E. Bradshaw..... 30,000 (6) 2.7 20.25 4/1/08 382,053 968,199
15,000 (5) 1.3 18.125 5/12/08 174,035 438,162
Wesley N. Dearbaugh.... -- -- -- -- -- --
Kenneth A. Bear........ 20,000 (5) 1.8 18.125 5/12/08 232,047 584,216
</TABLE>
- ----------
(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 1998 Plan and vest and become
exercisable as follows: 166,667 on December 15, 1999 and 133,333 on
December 15, 2000.
(3) These options were granted under the 1998 Plan and vest and become
exercisable as follows: 33,334 on December 15, 2000 and 166,666 on December
15, 2001.
(4) These options were granted under the 1996 Plan and are fully vested and
exercisable. These options were granted in replacement of a like number of
fully vested and exercisable options that were granted in October 1996
having an exercise price of $4.67 per share that would have terminated on
January 30, 1999. See "Executive Compensation--Option Repricing Table."
(5) These options were granted under the 1998 Plan. One third of the options
vest and become exercisable on each of May 12, 1999, 2001 and 2003.
(6) These options were granted under the 1996 Plan. One third of the options
vest and become exercisable on each of April 1, 1999, 2001 and 2003.
AGGREGATED OPTION EXERCISES AND YEAR-END OPTION VALUE TABLE
Shown below is information relating to the exercise of stock options during
1998 by the Named Executive Officers and the value of unexercised options for
each of the Named Executive Officers as of December 31, 1998:
8
<PAGE>
<TABLE>
<CAPTION>
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
- -------------------------- ----------- --------- ------------ ------------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
Michael T. DuBose...... -- -- -- 500,000 -- $862,500
Stephen J. Perkins..... -- -- 332,000 -- $954,500 --
Michael L. LePore...... 11,696 $180,762 11,696 26,696 72,574 72,574
Ronald E. Bradshaw..... -- -- -- 45,000 -- --
Wesley N. Dearbaugh.... -- -- 35,088 105,264 112,457 337,371
Kenneth A. Bear........ -- -- 46,784 43,392 290,295 145,147
</TABLE>
- ----------
(1) Calculated using the closing price of the Common Stock on the Nasdaq
National Market System on December 31, 1998, which was $7.875 per share.
OPTION REPRICING TABLE
<TABLE>
<CAPTION>
Length Of
Number Of Original
Securities Market Price Option Term
Underlying Of Stock At Exercise Remaining At
Options Time Of Price At Time Date Of
Repriced Or Repricing Or Of Repricing New Exercise Repricing Or
Name Date Amended Amendment Or Amendment Price Amendment
- ----------------------- -------- ------------ ------------ ------------ ------------ ------------
<S> <C> <C> <C> <C> <C> <C>
Stephen J. Perkins..... 12/15/98 498,000 (1) $5.00 $4.67 $5.00 46 days (2)
</TABLE>
(1) These options were replaced with new options to purchase 332,000 shares of
Common Stock.
(2) The replaced options by their terms were to expire on October 1, 2007
unless Mr. Perkins ceased to be employed by the Company prior to then, in
which case they would have terminated 30 days after he ceased to be so
employed. Mr. Perkins' employment with the Company ended December 31, 1998.
REPORT OF THE COMPENSATION & HUMAN RESOURCES COMMITTEE ON REPRICING OF OPTIONS
Mr. Perkins joined the Company in October 1996, at which time he was granted
options to purchase 498,000 shares of the Common Stock at $4.67 per share. These
options were to vest over three years and would expire ten years after the date
of grant unless Mr. Perkins ceased to be an employee of the Company before then,
in which case the options would terminated 30 days after he ceased to be
employed. At the time that Mr. Perkins resigned as Chief Executive Officer of
the Company, 332,000 of the options had vested and were exercisable. As a result
of Mr. Perkins' resignation, these vested options would have expired at the end
of January 1999.
The Compensation and Human Resources Committee concluded that, in
recognition of Mr. Perkins' many contributions to the growth of the Company, it
was appropriate to permit Mr. Perkins an additional four years in which to
exercise his vested options. Therefore, the Company cancelled the 332,000 vested
options and replaced them with an equal number of fully vested new options that
will expire on December 31, 2002 and have an exercise price equal to the fair
market value of the Common Stock on the date of grant of the new options
($5.00). The new exercise price represents a 7% increase over the old exercise
price. By increasing the exercise price to fair market value, the Company is not
required to recognize any compensation expense in connection with the grant of
the new options. The 166,000 old options that were not vested as of the time Mr.
Perkins resigned were terminated according to their terms.
The Compensation and Human Resources Committee
J. Richard Stonesifer, Chairman
Richard R. Crowell
Gerald L. Parsky
9
<PAGE>
EMPLOYMENT AGREEMENTS
The Company typically enters into an employment agreement with each of its
executive officers (including the Named 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 with the
Company (except in the case of Mr. LePore, whose noncompetition provision
expires June 1, 2002) and a nondisclosure provision which is effective for the
term of the employment agreement and indefinitely thereafter. The executive
officer is entitled to severance equal to his base salary for a period of 12
months after termination if he is terminated without cause (as defined in the
employment agreement), except in the cases of (i) Mr. DuBose, whose severance
period is the longer of 24 months or the balance of the initial contract term,
and (ii) Messrs. Perkins and LePore, whose severance period is 18 months. Set
forth below is the current annual base salary for each of the Named Executive
Officers:
<TABLE>
<CAPTION>
Annual End Of Initial
Name Base Salary Contract Term
------------------------------- ------------ ---------------
<S> <C> <C>
Michael T. DuBose.............. $400,000 12/15/02
Stephen J. Perkins............. 335,000(1) (2)
Ronald E. Bradshaw............. 275,000 3/6/01
Michael L. LePore.............. 240,158 6/1/00
Wesley N. Dearbaugh............ 215,000(3) (4)
Kenneth A. Bear................ 200,000 year-to-year
</TABLE>
- ----------
(1) Mr. Perkins is receiving severance payments at this rate through June 30,
2000.
(2) Mr. Perkins ceased to be an employee of the Company on December 31, 1998.
(3) Mr. Dearbaugh is receiving severance payments at this rate through August
18, 2000.
(4) Mr. Dearbaugh ceased to be an employee of the Company on March 31, 1999.
1996 AND 1998 STOCK INCENTIVE PLANS
Pursuant to the 1996 and 1998 Plans, officers, directors, employees and
consultants of the Company and its affiliates are eligible to receive options to
purchase 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 Plan may take the form of stock options, annual incentive
bonuses and incentive stock.
The Plans are administered by the Compensation and Human Resources Committee
of the Board of Directors (the "Committee"), although the Board of Directors may
exercise any authority of the Committee under the Plans in lieu of the
Committee's exercise thereof. While the 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 Plans, the 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,
including, at the discretion of the Committee, any change of control of the
Company.
The aggregate number of shares of Common Stock that can be issued under the
1996 Plan may not exceed 2,400,000. As of February 4, 1999, there were
outstanding options to purchase an aggregate of 922,332 shares of Common Stock
granted to officers and employees of the Company and its subsidiaries and
certain independent contractors pursuant to the 1996 Plan, and the number of
shares available for issuance pursuant to options yet to be granted under the
1996 Plan was 240,694.
10
<PAGE>
The aggregate number of shares of Common Stock that can be issued under the
1998 Plan may not exceed 1,200,000. As of February 4, 1999, there were
outstanding options to purchase an aggregate of 880,500 shares of Common Stock
granted to directors, officers and employees of the Company and its subsidiaries
pursuant to the 1998 Plan, and the number of shares available for issuance
pursuant to options yet to be granted under the 1998 Plan was 319,500.
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 1996 and 1998 Plans as of February 4, 1999 are as
follows:
<TABLE>
<CAPTION>
Number Of Option Shares Exercise Price
----------------------- --------------
<S> <C>
289,804 $ 1.67
235,440 4.67
632,000 5.00
120,000 5.3125
3,000 5.5625
200,000 10.00
6,000 10.938
35,088 14.75
1,500 18.00
250,000 18.125
30,000 20.25
</TABLE>
For information regarding options granted to directors and officers of the
Company, see "Security Ownership of Certain Beneficial Owners and Management."
REPORT OF THE COMPENSATION AND HUMAN RESOURCES COMMITTEE ON EXECUTIVE
COMPENSATION
The 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 the executive compensation program are to align compensation
with business objectives and performance, and to enable the Company to attract,
retain and motivate high caliber executives whose contributions are critical to
its long-term success. A substantial portion of executive compensation should 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 specific
individual goals and the Company's annual operating plan.
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." To qualify as "performance-based
compensation," payments must be made from a plan that is administered by a
committee of independent directors. In addition, the material terms of the plan
must be disclosed to and approved by stockholders, and the Committee must
certify that the performance goals have been achieved before payments can be
awarded. The Committee intends to design the Company's compensation programs to
conform with federal law 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,
the Company may pay compensation that is not deductible in limited circumstances
when prudent management of the Company so requires.
11
<PAGE>
BASE SALARY
The initial base salaries of several of the Company's executive officers are
set forth in their employment agreements, which in most cases were negotiated
between the Company and the officers at the time the officers joined the
Company. See "Executive Compensation--Employment Agreements." With respect to
those executive officers who do not have employment agreements and with respect
to increases in base salary for any executive officers other than the Chief
Executive Officer, the 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
salary necessary to attract and retain a person with the skills and knowledge
required by the position, (ii) the accountability of the person and his impact
on the results of the Company, 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 the Company's
executive officers other than the Chief Executive Officer, the Chief Executive
Officer submits recommendations to the 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 the Company's overall operating
plan while bonuses for executive officers at the various subsidiaries are tied
to the relevant subsidiary 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 based on the extent to which the Company and the subsidiaries achieve
their 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.
The employment agreements for specific executive officers set out the
maximum bonus that can be awarded to such officers, which is stated as a
percentage of base salary.
The annual operating plans for the Company and for each of its subsidiaries
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 1998, the Company made stock option grants to certain of the
Company's executive officers under the 1998 Plan. As part of the Company's
compensation program, the Chief Executive Officer annually submits to the
Committee 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 the 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 the Company.
CHIEF EXECUTIVE OFFICER COMPENSATION
Mr. Perkins' base salary was increased from $300,000 to $335,000 at the
beginning of 1998 based upon the Committee's review of external survey data of
CEO compensation and the Company's performance in 1997. Mr. Perkins left the
Company in December 1998. For 1998, Mr. Perkins did not receive an annual bonus
award nor was he awarded any stock options under the Company's annual grant. Mr.
Perkins' previously granted stock
12
<PAGE>
options were adjusted in December 1998. See "Executive Compensation--Option
Repricing Table."
Mr. DuBose's 1998 base salary of $400,000 was established through arm's
length negotiations between Mr. DuBose and members of the Committee prior to his
joining the Company. The Committee determined that such base salary is within
the salary range previously utilized by the Committee for the position of Chief
Executive Officer, as well as in line with the salaries paid to the Company's
other executive officers. As part of his employment agreement, Mr. DuBose was
also granted a stock option award of 500,000 shares, which will vest over a
three-year period. A portion of this award was granted with an exercise price of
$5.00 per share (the fair market value of the Common Stock on the date of Mr.
DuBose's hire), while the remainder of the award was granted with an exercise
price of $10.00 per share.
SUMMARY
The Committee believes that the current compensation arrangements provide
the Chief Executive Officer and the other executive officers with the incentive
to perform at superior levels and in a manner that is directly aligned with the
economic interests of the Company's 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 (the "Securities Act"), or under the Exchange Act, except to the
extent that the Company specifically incorporates 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 ACP, which is the general partner of Aurora Equity Partners, L.P. ("AEP"), a
significant stockholder of the Company, 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. ("AOEP" and, together with AEP, the "Aurora Partnerships"),
also a significant stockholder of the Company. See "Security Ownership of
Certain Beneficial Owners and Management." In addition, Messrs. Crowell and
Parsky are two of the three managing directors of ACP, which provides management
services to the Company pursuant to a management services agreement. See
"Certain Transactions."
13
<PAGE>
PERFORMANCE GRAPH
The following graph shows the Company's total return to stockholders
compared to a Peer Group Index and the Nasdaq Market Index over the period from
December 17, 1996 (the initial day of trading of the Company's Common Stock on
the Nasdaq National Market) to December 31, 1998 (the final day of the most
recently completed fiscal year).
COMPARISON OF CUMULATIVE TOTAL RETURN AMONG
AFTERMARKET TECHNOLOGY CORP., PEER GROUP INDEX AND NASDAQ MARKET INDEX
[STOCK PERFORMANCE CHART]
DECEMBER 17, 1996 - DECEMBER 31, 1998
<TABLE>
<CAPTION>
12/17/96 12/31/96 12/31/97 12/31/98
-------- -------- -------- --------
<S> <C> <C> <C> <C>
Aftermarket Technology Corp (1)........... $100.00 $100.73 $105.84 $ 45.99
Peer Group Index.......................... 100.00 101.01 126.85 139.69
Nasdaq Market Index....................... 100.00 100.00 122.32 172.52
</TABLE>
- ----------
(1) Based on the investment being made at $17.125 per share (the closing price
on December 17, 1996). If the investment had been made at $13.50 (the
initial public offering price), the value of the investment as of December
31, 1996, 1997 and 1998 would have been $127.78, $134.30 and $58.33,
respectively.
The Peer Group Index was originally comprised of seven publicly-traded
companies engaged in businesses in the automotive aftermarket that are
comparable to that of the Company and, in management's opinion, most closely
represent the Company's peer group. Two of the Peer Group companies ceased to be
publicly traded during 1998 Copies of the Peer Group Index can be obtained by
mail from the Company.
Each line on the stock performance graph assumes that $100 was invested in
the Company's Common Stock and the respective indices at the closing price on
December 17, 1996 (the initial day of trading of the Company's Common Stock).
The graph then presents the value of these investments, assuming reinvestment of
dividends, through the close of trading on December 31, 1998.
14
<PAGE>
The cumulative total return shown on the stock performance graph indicates
historical results only and is not necessarily indicative of future results.
The stock performance graph shall not be deemed incorporated by reference by
any general statement incorporating by reference this Proxy Statement into any
filing under the Securities Act or the Exchange Act, except to the extent that
the Company specifically incorporates this information by reference, and shall
not otherwise be deemed filed under such Acts.
SECURITY OWNERSHIP OF CERTAIN
BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth the beneficial ownership of the Common Stock
(the only class of issued and outstanding voting securities of the Company), as
of February 4, 1999, by each director of the Company, each of the Named
Executive Officers, the directors and executive officers of the Company as a
group and each person who at such time was known by the Company to beneficially
own more than 5% of the outstanding shares of any class of voting securities of
the Company.
<TABLE>
<CAPTION>
Number Of Voting
Shares (1) Percentage
---------- ----------
<S> <C> <C>
Aurora Equity Partners L.P. (other beneficial owners: Richard R.
Crowell, Gerald L. Parsky and Richard K. Roeder) (2)(3)................. 9,927,536 49.0
Aurora Overseas Equity Partners I, L.P. (other beneficial owners:
Richard R. Crowell, Gerald L. Parsky and Richard K. Roeder) (4)......... 4,069,392 20.1
General Electric Pension Trust (5)......................................... 2,038,152 10.1
Investment Advisors, Inc (6)............................................... 1,141,400 5.6
Michael T. DuBose (7)...................................................... 5,000 *
Stephen J. Perkins (8)..................................................... 335,000 1.6
Ronald E. Bradshaw (9)..................................................... 11,000 *
Michael L. LePore (10)..................................................... 60,080 *
Wesley N. Dearbaugh (11)................................................... 36,088 *
Kenneth A. Bear (12)....................................................... 47,084 *
Robert Anderson (13)(14)................................................... 36,918 *
Richard R. Crowell (2)(3)(4)(14)........................................... 11,040,453 54.5
Dale F. Frey (15).......................................................... 22,000 *
Fred J. Hall (16).......................................................... 25,600 *
Mark C. Hardy (3)(14)(17).................................................. 16,460 *
Dr. Michael J. Hartnett (18)............................................... 80,176 *
Gerald L. Parsky (2)(3)(4)(14)(19)......................................... 11,040,453 54.5
Richard K. Roeder (2)(3)(4)(14)............................................ 11,040,453 54.5
J. Richard Stonesifer (20)................................................. 17,000 *
William A. Smith (21)...................................................... 545,984 2.7
All directors and officers as a group (18 persons) (22).................... 11,870,063 58.1
</TABLE>
- ----------
* Less than 1%.
(1) The shares of Common Stock underlying options or warrants that are
exercisable as of February 4, 1999 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 or warrants, but are not deemed to
be outstanding for the purpose of computing the beneficial ownership of any
other person.
(2) Consists of (i) 6,971,061 shares owned by AEP (one of the Aurora
Partnerships), (ii) 2,038,152 shares owned by the General Electric Pension
Trust ("GEPT") (see Note 5 below) and (iii) 918,323 shares that are subject
to an irrevocable proxy granted to the Aurora Partnerships by certain
holders of Common Stock, including
15
<PAGE>
Messrs. Anderson, Crowell, Hardy, Parsky and Roeder, certain other limited
partners of AEP and certain affiliates of a limited partner of AOEP (the
other Aurora Partnership). The proxy terminates upon the earlier of the
transfer of such shares or July 31, 2004. AEP is a Delaware limited
partnership the general partner of which is ACP, 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 ACP and may be deemed to beneficially
share ownership of the Common Stock beneficially owned by AEP and may be
deemed to be the organizers of the Company under regulations promulgated
under the Securities Act.
(3) The address of this stockholder is 10877 Wilshire Boulevard, Suite 2100,
Los Angeles, CA 90024.
(4) Consists of (i) 1,112,917 shares owned by AOEP, (ii) 2,038,152 shares owned
by GEPT (see Note 5 below) and (iii) 918,323 shares that are subject to an
irrevocable proxy granted to the Aurora Partnerships by certain holders of
Common Stock, including Messrs. Anderson, Crowell, Hardy, Parsky and
Roeder, certain other limited partners of AEP and certain affiliates of a
limited partner of AOEP. The proxy terminates upon the earlier of the
transfer of such shares or July 31, 2004. AOEP 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 of Aurora Overseas Advisor,, are
limited partners of Aurora Overseas Capital Partners and may be deemed to
beneficially own the shares of the Company's Common Stock beneficially
owned by AOEP. AOEP's address is West Wind Building, P.O. Box 1111,
Georgetown, Grand Cayman, Cayman Islands, B.W.I.
(5) With limited exceptions, GEPT 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. GEPT's address is 3003 Summer Street, Stamford, CT
06905.
(6) Based on a Schedule 13G filed with the Securities and Exchange Commission
on January 29, 1999. The address of Investment Advisors, Inc., is 3700
First Bank Place, Box 357, Minneapolis, MN 55440.
(7) Excludes 500,000 shares subject to options granted under the 1998 Plan that
are not Exercisable. Mr. DuBose's address is One Oak Hill Center, Suite
400, Westmont, IL 60559.
(8) Includes 322,000 shares subject to options granted under the 1996 Plan that
are Exercisable. Mr. Perkins' address is 14735 Pine Tree Road, Orland Park,
IL 60462.
(9) Includes 10,000 shares subject to options granted under the 1996 Plan that
are Exercisable. Excludes 35,000 shares subject to options granted under
the 1996 and 1998 Plans that are not Exercisable. Mr. Bradshaw's address is
201 Robert S. Kerr, Suite 201, Oklahoma City, OK 73102.
(10) Includes 11,696 shares subject to options granted under the 1996 Plan that
are Exercisable. Excludes 26,696 shares subject to options granted under
the 1996 and 1998 Plans that are not Exercisable. Mr. LePore's address is
400 Corporate Drive, Mahwah, NJ 07430.
(11) Includes 35,088 shares subject to options granted under the 1996 Plan that
are Exercisable. Excludes 105,264 shares subject to options granted under
the 1996 Plan that are not Exercisable. Mr. Dearbaugh's address is 2318
Brookwood Court, Aurora, IL 60504.
(12) Includes 46,784 shares subject to options granted under the 1996 Plan that
are Exercisable. Excludes 43,392 shares subject to options granted under
the 1996 and 1998 Plans that are not Exercisable. Mr. Bear's address is
2699 North Westgate, Springfield, MO 65803.
(13) Includes (i) 4,290 shares held by Mr. Anderson's wife (including 2,790
shares held by her as trustee for her relatives), as to which Mr. Anderson
disclaims beneficial ownership, and (ii) 12,000 shares subject to options
granted under the 1998 Plan that are Exercisable. Excludes 24,000 shares
subject to options granted under the 1998 Plan that are not Exercisable.
Mr. Anderson's address is 10877 Wilshire Boulevard, Suite 1405, Los
Angeles, CA 90024-4341.
(14) The shares actually owned by this person (as distinguished from the shares
that this person is deemed to beneficially own) are subject to an
irrevocable proxy granted to the Aurora Partnerships.
16
<PAGE>
(15) Includes 12,000 shares subject to options granted under the 1998 Plan that
are Exercisable. Excludes 24,000 shares subject to options granted under
the 1998 Plan that are not Exercisable. Mr. Frey's address is One Gorham
Island, Westport, CT 06880.
(16) Consists of (i) 4,000 shares subject to options granted under the 1998 Plan
that are Exercisable, and (ii) 21,600 shares owned by Fred Jones Industries
A Limited Partnership, a Texas limited partnership ("Fred Jones
Industries"), which is a significant stockholder of The Fred Jones
Companies, Inc. The general partner of Fred Jones Industries is a
corporation of which Mr. Hall is a director, officer and significant
stockholder. Mr. Hall is also a limited partner of Fred Jones Industries.
Excludes 8,000 shares subject to options granted under the 1998 Plan that
are not Exercisable. Mr. Hall disclaims beneficial ownership of the shares
owned by Fred Jones Industries. Mr. Hall resigned as a director of the
Company effective March 30, 1999. Mr. Hall's address is 123 South Hudson
Avenue, Oklahoma City, OK 73102
(17) Includes 8,000 shares subject to options granted under the 1996 Plan that
are Exercisable. Excludes 4,000 shares subject to options granted under the
1996 Plan that are not Exercisable.
(18) Includes 70,176 shares subject to exercisable warrants. Mr. Hartnett's
address is 60 Round Hill Road, Fairfield, CT 06430.
(19) Includes 2,000 shares held by Mr. Parsky's wife, as to which Mr. Parsky
disclaims beneficial ownership.
(20) Includes 12,000 shares subject to options granted under the 1998 Plan that
are Exercisable. Excludes 24,000 shares subject to options granted under
the 1998 Plan that are not Exercisable. Mr. Stonesifer's address is 8473
Bay Colony Drive, Naples, FL 34108.
(21) Mr. Smith's address is 629 SW 293rd Street, Federal Way, WA 98023.
(22) Excludes shares held by (i) Named Executive Officers who are no longer
officers of the Company and (ii) Mr. Hall. Includes 194,352 shares subject
to warrants and options that are Exercisable. Excludes 244,480 shares
subject to options granted under the 1996 and 1998 Plans that are not
Exercisable.
CERTAIN TRANSACTIONS
The Company believes the transactions described below were beneficial to the
Company and were on terms at least as favorable to the Company as could have
been obtained from unaffiliated third parties pursuant to arms-length
negotiations.
RELATIONSHIP WITH ACP
The Company was formed in 1994 at the direction of ACP, which is affiliated
with the Aurora Partnerships. ACP is controlled by Messrs. Crowell, Parsky and
Roeder, who are directors of the Company. See "Security Ownership of Certain
Beneficial Owners and Management." As of March 1, 1999, the Company had paid ACP
aggregate fees of approximately $4.4 million for investment banking services
provided by ACP in connection with the Company's acquisitions in 1995-1998.
The Company also pays to ACP a base annual management fee of $550,000 for
advisory and consulting services pursuant to a written management services
agreement (the "Management Services Agreement"). ACP is also entitled to
reimbursements from the Company 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 the
Company's Board of Directors, by up to an aggregate of $250,000 in the event the
Company consummates one or more significant corporate transactions. The base
annual management fee has not been increased as a result of any of the Company's
acquisitions. The base annual management fee is also subject to increase for
specified cost of living increases pursuant to which the base annual management
fee was most recently increased in January 1999 from $540,000. If the Company's
EBITDA in any year exceeds management's budgeted EBITDA by 15.0% or more for
that year, ACP will be entitled to receive an additional management fee equal to
one half of its base annual management fee for such year. Because the Company's
EBITDA did not exceed management's budgeted EBITDA by 15.0% in 1998, ACP did not
receive this additional management fee in 1998. In the event the Company
consummates any significant acquisitions or
17
<PAGE>
dispositions, ACP will be entitled to receive a closing fee from the Company
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. Notwithstanding the foregoing, no payment will be made to ACP
pursuant to the Management Services Agreement at any time that certain events of
default shall have occurred and be then continuing under any of the Indentures
governing the Senior Notes or the Company's bank credit facility. The Management
Services Agreement also provides that the Company shall provide ACP and its
directors, employees, partners and affiliates with customary indemnification
against all actions not involving gross negligence or willful misconduct.
The base annual management fee payable to ACP will be reduced as the
collective beneficial ownership of Common Stock by the Aurora Partnerships
declines below 50% as follows: for any period during which the collective
beneficial ownership of the Aurora Partnerships is less than 50% but at least
40%, the base annual management fee payable for the period will be 80% of the
original base annual management fee (as such original base annual management fee
may previously have been adjusted due to discretionary increases by the Board of
Directors or cost of living increases as described above, the "Original Fee");
for any period during which the Aurora Partnerships' collective beneficial
ownership is less than 40% but at least 30%, the base annual management fee
payable for the period will be 60% of the Original Fee; and for any period
during which the collective beneficial ownership of the Aurora Partnerships is
less than 30% but at least 20%, the base annual management fee payable for the
period will be 40% of the Original Fee. If the Aurora Partnerships' collective
beneficial ownership declines below 20%, the Management Services Agreement will
terminate. As of February 4, 1999, the collective beneficial ownership of the
Aurora Partnerships for purposes of the Management Services Agreement was
approximately 55%. See "Security Ownership of Certain Beneficial Owners and
Management."
In October 1996, the Company granted options for an aggregate of 48,000
shares of Common Stock to Mark C. Hardy (a director of the Company), Kurt Larsen
(a former director of the Company) and two consultants of the Company, all four
of whom were then employees of ACP. 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 ACP.
RELATIONSHIP WITH THE FRED JONES COMPANIES
In March 1998 the Company purchased of Autocraft from The Fred Jones
Companies, Inc. for $112.5 million in cash plus up to an additional $12.5
million to be paid in 1999 based on the performance of Autocraft's European
operations during 1998. Of the $112.5 million, $1.25 million was paid to Fred
Jones Industries in exchange for an agreement from Fred Jones Industries to
cooperate with the Company and not compete against it for a specified period of
time following the Autocraft acquisition.
In connection with the Autocraft acquisition, the Company entered into a
lease with The Fred Jones Companies pursuant to which the Company leases a
manufacturing facility in Oklahoma City at a base rental rate of $26,500 per
month. The lease may be terminated by either party on six months' written
notice.
As part of the Autocraft acquisition, the Company purchased substantially
all of The Fred Jones Companies' computer business systems equipment and related
software and support capabilities. The parties entered into an agreement under
which the Company provides computer systems support to The Fred Jones Companies
for a monthly fee plus the Company's cost to provide any specialized services
required by The Fred Jones Companies. Through March 31, 1999 the monthly fee is
$108,300, and thereafter it will be $102,500. The agreement will expire on March
31, 2000.
The Company sells certain electronic components to automobile dealerships
that are owned by a limited liability company in which The Fred Jones Companies
has a significant equity interest. Sales to these dealerships totaled $95,000
during 1998.
Fred J. Hall, who was a director of the Company prior to March 30, 1999, is
(i) the Chairman of the Board, President and Chief Executive Officer and a
significant stockholder of The Fred Jones Companies, and (ii) a
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director, officer and significant stockholder of the corporation that is the
general partner of Fred Jones Industries, which is also a significant
stockholder of The Fred Jones Companies. Mr. Hall is also a limited partner of
Fred Jones Industries.
INDEMNIFICATION AGREEMENTS
The Company has entered into separate but identical indemnification
agreements (the "Indemnification Agreements") with each director and executive
officer of the Company. The Indemnification Agreements provide for, among other
things, the following: (i) indemnification to the fullest extent permitted by
law against any and all expenses (including attorneys' fees and all other costs
and obligations of any nature whatever), judgments, fines, penalties and amounts
paid in settlement (including all interest, assessments and other charges paid
or payable in connection therewith) of any claim, unless the Company determines
that such indemnification is not permitted under applicable law; (ii) the prompt
advancement of expenses to the director or officer, including attorneys' fees
and all other costs, fees, expenses and obligations paid or incurred in
connection with investigating or defending any threatened, pending or completed
action, suit or proceeding related to the fact that such director or officer is
or was a director or officer of the Company or is or was serving at the request
of the Company as a director, officer, employee, trustee, agent or fiduciary of
another corporation, partnership, joint venture, employee benefit plan, trust or
other enterprise, and for repayment to the Company if it is found that such
director or officer is not entitled to such indemnification under applicable
law; (iii) a mechanism through which the director or officer may seek court
relief in the event the Company determines that the director or officer is not
permitted to be indemnified under applicable law (and therefore is not entitled
to indemnification under the Indemnification Agreement); and (iv)
indemnification against expenses (including attorneys' fees) incurred in seeking
to collect from the Company an indemnity claim or advancement of expenses to the
extent successful.
REGISTRATION RIGHTS
The holders of the Common Stock outstanding before the Company's initial
public offering in December 1996 have certain "demand" and "piggyback"
registration rights pursuant to a stockholders agreement. In addition, GEPT has
certain "demand" and "piggyback" registration rights with respect to a portion
of the shares of Common Stock owned by it.
ANNUAL REPORT
The Company's 1998 Annual Report to Stockholders is being mailed to all
stockholders. Any stockholder who has not received a copy may obtain one by
writing to the Company at One Oak Hill Center, Suite 400, Westmont, Illinois
60559. In addition, any person wishing to receive a copy of the Company's Annual
Report on Form 10-K for the year ended December 31, 1998 (excluding the exhibits
thereto) may obtain a copy by sending a written request to the Company at the
same address.
INDEPENDENT AUDITORS
Ernst & Young LLP was the Company's independent auditors for the year ended
December 31, 1998. 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 the Company's auditors for fiscal 1999. Stockholder approval is
not sought in connection with the selection of auditors.
Representatives of Ernst & Young LLP will be present at the 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.
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STOCKHOLDER PROPOSALS
FOR THE 1999 ANNUAL MEETING OF STOCKHOLDERS
Any eligible stockholder of the Company wishing to have a proposal
considered for inclusion in the Company's 2000 proxy solicitation materials must
set forth such proposal in writing and file it with the Secretary of the Company
on or before December 6, 1999. The Board of Directors will review new proposals
received from eligible stockholders by that date and will determine whether such
proposals will be included in its 2000 proxy solicitation materials. Generally,
a stockholder is eligible to present proposals if he or she has been for at
least one year the record or beneficial owner of at least 1% or $1,000 in market
value of securities entitled to be voted at the 2000 annual meeting and he or
she continues to own such securities through the date on which the meeting is
held.
By Order of the Board of Directors
/s/ Joseph Salamunovich
Joseph Salamunovich,
Secretary
April 5, 1999
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THIS PROXY IS SOLICITED ON BEHALF OF THE DIRECTORS OF
AFTERMARKET TECHNOLOGY CORP.
FOR ANNUAL MEETING OF STOCKHOLDERS
MAY 5, 1999
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 5, 1999, and the
undersigned hereby revokes all prior proxies and hereby constitutes and appoints
Michael DuBose, Barry 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 5,
1999 at 9 a.m., Central time, at the Drake Hotel, 2301 South York Road, Oak
Brook, Illinois, and at any adjournment or postponement thereof.
PLEASE SIGN AND DATE THIS PROXY ON THE REVERSE SIDE AND RETURN IT IN
THE ENCLOSED ENVELOPE.
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/FOLD AND DETACH HERE/
<PAGE>
THIS PROXY WILL BE VOTED AS DIRECTED BY THE UNDERSIGNED BELOW; WHERE NO
CHOICE IS SPECIFIED, IT WILL BE VOTED FOR PROPOSAL 1 AND IN THE DISCRETION OF
THE PROXIES WITH RESPECT TO MATTERS DESCRIBED IN PROPOSAL 2.
The Board of Directors recommends a vote FOR Proposal 1.
1. ELECTION OF DIRECTORS:
/ / FOR all nominees listed below / / WITHHOLD AUTHORITY to vote for
(except as marked to the contrary all nominees listed below
below)
INSTRUCTION: TO WITHHOLD AUTHORITY TO VOTE FOR ANY NOMINEE, STRIKE A LINE
THROUGH THE NOMINEE'S NAME IN THE LIST BELOW:
Robert Anderson Mark C. Hardy William A. Smith
Richard R. Crowell Dr. Michael J. Hartnett J. Richard Stonesifer
Michael T. DuBose Gerald L. Parsky
Dale F. Frey Richard K. Roeder
2. TO VOTE UPON SUCH OTHER BUSINESS AS MAY PROPERLY COME BEFORE THE MEETING OR
ANY ADJOURNMENT THEREOF.
DATED: __________________________, 1999
_______________________________________
_______________________________________
(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 you full
title as such.)
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/FOLD AND DETACH HERE/
