SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(A) OF THE SECURITIES
EXCHANGE ACT OF 1934 (AMENDMENT NO. )
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ArvinMeritor, Inc.
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[ArvinMeritor Logo]
LETTER TO
SHAREOWNERS
NOTICE OF 2004
ANNUAL MEETING
AND
PROXY STATEMENT
[ArvinMeritor Logo]
January 5, 2004
Dear Shareowner:
You are cordially invited to attend the 2004 annual meeting of shareowners of
ArvinMeritor, Inc.
The meeting will be held at the Hyatt Regency Tampa Hotel in Tampa, Florida, on
Wednesday, February 18, 2004, at 2 p.m. At the meeting there will be a current
report on the activities of the Company followed by discussion and action on the
matters described in the Proxy Statement. Shareowners will have an opportunity
to comment on or to inquire about the affairs of the Company that may be of
interest to shareowners generally.
If you plan to attend the meeting, please mark the box on your proxy card or
indicate your intention to attend when voting by telephone or Internet, and an
admittance card will be forwarded to you as promptly as possible.
We hope that as many shareowners as can conveniently attend will do so.
Sincerely yours,
/s/ Larry D. Yost
Larry D. Yost
Chairman of the Board
and Chief Executive Officer
/s/ Terrence E. O'Rourke
Terrence E. O'Rourke
President and
Chief Operating Officer
ARVINMERITOR, INC.
2135 WEST MAPLE ROAD
TROY, MICHIGAN 48084-7186
NOTICE OF 2004 ANNUAL MEETING OF SHAREOWNERS
TO THE SHAREOWNERS OF ARVINMERITOR, INC.:
NOTICE IS HEREBY GIVEN that the 2004 Annual Meeting of Shareowners of
ArvinMeritor, Inc. (the "Company") will be held at the Hyatt Regency Tampa
Hotel, Two Tampa City Center, 211 North Tampa Street, Tampa, Florida 33602, on
Wednesday, February 18, 2004, at 2 p.m. (Eastern Standard Time) for the
following purposes:
(1)(a) to elect four members of the Board of Directors of the Company with
terms expiring at the Annual Meeting in 2007;
(b) to elect one member of the Board of Directors of the Company with a
term expiring at the Annual Meeting in 2005;
(2) to consider and vote upon a proposal to approve the selection by the
Audit Committee of the Board of Directors of the firm of Deloitte &
Touche LLP as auditors of the Company;
(3) to consider and vote upon a proposal to approve the adoption by the
Board of Directors of the 2004 Directors Stock Plan; and
(4) to transact such other business as may properly come before the
meeting.
Only shareowners of record at the close of business on December 12, 2003 will be
entitled to notice of, and to vote at, the meeting.
By order of the Board of Directors.
[/s/ Bonnie Wilkinson]
Bonnie Wilkinson
Secretary
January 5, 2004
NOTE: THE BOARD OF DIRECTORS SOLICITS THE EXECUTION AND PROMPT RETURN OF THE
ACCOMPANYING PROXY. A RETURN ENVELOPE IS ENCLOSED.
PROXY STATEMENT
The 2004 Annual Meeting of Shareowners of ArvinMeritor, Inc. (the "Company"
or "ArvinMeritor") will be held on February 18, 2004, for the purposes set forth
in the accompanying Notice of 2004 Annual Meeting of Shareowners. The Board of
Directors of ArvinMeritor is soliciting proxies to be used at the Annual Meeting
and any adjournment, and is furnishing this statement and the accompanying proxy
in connection with its solicitation. We are first sending this statement and the
proxy to shareowners on or about January 5, 2004.
Shareowners of record may vote by (a) executing and returning a proxy in
the accompanying form; (b) calling a toll-free telephone number; or (c) voting
via the Internet. Specific instructions for telephone and Internet voting are
included on the enclosed proxy card. If you vote by telephone or Internet, it is
not necessary to return a proxy card. If you properly give a proxy (including a
written proxy or a proxy via telephone or Internet), your shares will be voted
as you specify in the proxy. If no specification is made, the shares will be
voted in accordance with the recommendations of the Board of Directors. You may
revoke your proxy prior to its exercise by delivering written notice of
revocation to the Secretary of the Company, by giving a valid, later dated
proxy, by voting via telephone or Internet at a later date than the date of the
proxy, or by attending the meeting and voting in person.
If your shares are held in "street name" by a bank, broker or other nominee
holder on your behalf, you must follow the directions that you receive from your
bank, broker or other nominee holder in order to direct the vote or change the
vote of your shares. If you wish to vote in person at the meeting, you must
obtain a legal proxy from the nominee holding your ArvinMeritor shares.
Our policy is to keep confidential proxy cards, ballots and voting
tabulations that identify individual shareowners. However, exceptions to this
policy may be necessary in some instances to comply with legal requirements and,
in the case of any contested proxy solicitation, to verify the validity of
proxies presented by any person and the results of the voting. Inspectors of
election and any employees associated with processing proxy cards or ballots and
tabulating the vote must acknowledge their responsibility to comply with this
policy of confidentiality.
VOTING SECURITIES
Only shareowners of record at the close of business on December 12, 2003
are entitled to receive notice of, and to vote at, the meeting. On December 12,
2003, we had outstanding 68,497,409 shares of Common Stock, par value $1 per
share, of ArvinMeritor ("Common Stock"). Each holder of Common Stock is entitled
to one vote for each share held.
As of December 12, 2003, T. Rowe Price Trust Company, as directed trustee
under the ArvinMeritor savings plans for its participating employees, and Wells
Fargo Bank, N.A., as trustee under the savings plans for participating employees
of Rockwell Automation, Inc. (formerly Rockwell International Corporation, and
referred to in this proxy statement as "Rockwell"), owned the following shares
of Company Common Stock:
PERCENT OF OUTSTANDING
NAME AND ADDRESS NUMBER OF SHARES COMMON STOCK
---------------- ---------------- ----------------------
T. Rowe Price Trust Company...................... 4,319,219 6.31
4555 Painters Mill Road
Owings Mills, MD 21117
Wells Fargo Bank, N.A. .......................... 2,286,538 3.34
707 Wilshire Boulevard
Los Angeles, CA 90017
If you are a participant in any of these plans, your proxy card will also
serve as a voting instruction card for the trustee of that plan with respect to
shares held in your account. Shares held on account of participants in these
plans will be voted by the respective trustees in accordance with instructions
from the participants (either in writing or by means of telephone or Internet
voting procedures). Where no instructions are received, shares held in the
Rockwell plans will be voted as the trustee deems proper, and shares held in the
1
ArvinMeritor plans will be voted by the directed trustee in the same manner and
proportion as shares for which instructions are received.
In addition, the following entities reported beneficial ownership of more
than 5% of the outstanding shares of ArvinMeritor Common Stock as of December
31, 2002. This information is based on a Schedule 13G dated February 14, 2003,
which was filed with the Securities and Exchange Commission ("SEC").
PERCENT OF OUTSTANDING
NAME AND ADDRESS NUMBER OF SHARES COMMON STOCK AT 12/31/02
---------------- ---------------- ------------------------
FMR Corp., Edward C. Johnson 3d, Abigail P.
Johnson, Fidelity Management & Research
Company and Fidelity Low Priced Stock Fund 6,122,851 9.012
82 Devonshire Street, Boston, MA 02109
ELECTION OF DIRECTORS
Our Restated Articles of Incorporation provide that the Board of Directors
consists of three classes of directors with overlapping three-year terms, and
that the three classes should be as nearly equal in number as possible. One
class of directors is elected each year with terms extending to the Annual
Meeting held three years later. The Company's Board of Directors currently
consists of thirteen members.
Four directors are standing for re-election at the 2004 Annual Meeting as
Class I directors, for terms expiring at the Annual Meeting in 2007. Richard W.
Hanselman (formerly a Class I director) is standing for re-election as a Class
II director for a term expiring at the Annual Meeting in 2005. The four other
directors currently in Class II and the four directors in Class III are serving
terms expiring at the Annual Meeting of Shareowners in 2005 and 2006,
respectively.
Proxies will be voted at the meeting (unless authority to do so is
withheld) for the election as directors of the nominees specified in Class
I -- Nominees for Director with Terms Expiring in 2007 and Class II -- Nominee
for Director with a Term Expiring in 2005 below. If for any reason any of the
nominees is not a candidate (which is not expected) when the election occurs, it
is likely that either (a) proxies would be voted for the election of the other
nominees and of a substitute nominee, or (b) the Board of Directors would reduce
the number of directors.
INFORMATION AS TO NOMINEES FOR DIRECTOR AND CONTINUING DIRECTORS
The following information, as reported to us as of the date of this proxy
statement, is shown below for each nominee for director and each continuing
director: name, age and principal occupation; period during which he or she has
served as a director of ArvinMeritor and its predecessors, Meritor Automotive,
Inc. ("Meritor") and Arvin Industries, Inc. ("Arvin"), which merged into
ArvinMeritor on July 7, 2000 (the "merger"); position, if any, with
ArvinMeritor; business experience; other directorships held; and the committees
of the Board of Directors on which the nominee or continuing director serves.
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CLASS I -- NOMINEES FOR DIRECTOR WITH TERMS EXPIRING IN 2007
RHONDA L. BROOKS
President, R. Brooks Advisors, Inc. (Business Consultant)
Age 51
[RHONDA L. BROOKS PHOTO]
Ms. Brooks, a director since July 2000 and a director of Meritor
from July 1999 until the merger, is a member of the
Environmental and Social Responsibility Committee. She is
currently the President of R. Brooks Advisors, Inc., a
consultant for start-up firms and advisor for a private equity
company. She served Owens Corning (building materials and
fiberglass composites) as President of the Exterior Systems
Business from June 2000 to July 2002; as President of the
Roofing Systems Business from December 1997 to June 2000; as
Vice President, Investor Relations from January to December
1997; and as Vice President-Marketing of the Composites Division
from 1995 to 1996. She served as Senior Vice President and
General Manager of PlyGem Industries, Inc. (building and
remodeling products) from 1994 to 1995, and as Vice
President -- Oral Care and New Product Strategies, and Vice
President -- Marketing and Sales of Warner Lambert Company
(pharmaceuticals and consumer products) from 1990 to 1994. She
was with General Electric Company from 1976 to 1990. She is a
director of Central Vermont Public Service Corporation.
WILLIAM R. NEWLIN
Executive Vice President and Chief Administrative Officer of Dick's Sporting
Goods, Inc. (Sporting Goods)
Age 63
[WILLIAM R. NEWLIN PHOTO]
Mr. Newlin, a director since July 2003, has served as Executive
Vice President and Chief Administrative Officer of Dick's
Sporting Goods, Inc. since October 2003 and Managing General
Partner of CEO Venture Fund since 1985. He served as Chairman
and CEO of Buchanan Ingersoll Professional Corporation (law
firm) from 1980 to October 2003. Mr. Newlin is the lead director
of Kennametal Inc. and a director of Black Box Corporation and
Parker/Hunter Incorporated.
TERRENCE E. O'ROURKE
President and Chief Operating Officer of ArvinMeritor
Age 56
[TERRENCE E. O'ROURKE PHOTO]
Mr. O'Rourke has been a director and has served as President and
Chief Operating Officer of the Company since June 2002. He was
Senior Vice President and President, Light Vehicle Systems, of
the Company (and of Meritor, prior to the merger) from March
1999 to May 2002. Before joining the Company, he served as Group
Vice President and President-Ford Division of Lear Corporation
(automotive component supplier) from January 1996 to January
1999, and as President-Chrysler Division of Lear from October
1994 to January 1996. From 1973 to 1994 he held a number of
management positions with Ford Motor Company (automotive),
including supply manager for the Climate Control Division of
North American Automotive Operations (NAAO) and manager of
Procurement Operations for NAAO.
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LARRY D. YOST
Chairman of the Board and Chief Executive Officer of ArvinMeritor
Age 65
[LARRY D. YOST PHOTO]
Mr. Yost has been a director since March 2000, when he was
elected to his present position, and was a director of Meritor
from May 1997 until the merger. Mr. Yost joined Allen-Bradley
Company, LLC (automation), a subsidiary of Rockwell, as a
manager in 1971 and, after serving in a number of increasingly
responsible management positions, served as Senior Vice
President, Operations, of Allen-Bradley from July 1992 until
November 1994. He served as President, Heavy Vehicle Systems of
Rockwell from November 1994 until March 1997 and was Senior Vice
President and President, Automotive and Acting President, Heavy
Vehicle Systems of Rockwell from March 1997 to September 1997.
He served as Chairman of the Board and Chief Executive Officer
of Meritor from May 1997 until July 2000. Mr. Yost is a director
of Kennametal Inc. and UNOVA, Inc.
CLASS II -- NOMINEE FOR DIRECTOR WITH A TERM EXPIRING IN 2005
RICHARD W. HANSELMAN
Former Chairman of the Board, Health Net, Inc. (Managed Care Provider)
Age 76
[RICHARD W. HANSELMAN PHOTO]
Mr. Hanselman, a director since July 2000 and a director of
Arvin from 1983 until the merger, is a member of the Corporate
Governance and Nominating Committee. He was Chairman of the
Board of Health Net, Inc. (including with its predecessor,
Foundation Health Corporation) from 1999 until December 2003,
and he continues to serve as a director. Earlier, Mr. Hanselman
joined Genesco, Inc. (footwear and apparel) in 1980 and was
named Chief Executive Officer in 1981, serving in that capacity
and as Chairman of the Board until 1986. Mr. Hanselman is an
Honorary Trustee of the Committee for Economic Development.
THE BOARD RECOMMENDS THAT YOU VOTE "FOR" THE ELECTION OF THESE NOMINEES, WHICH
IS PRESENTED AS ITEM (1).
CLASS II -- CONTINUING DIRECTORS WITH TERMS EXPIRING IN 2005
JOSEPH P. FLANNERY
Chairman of the Board, President and Chief Executive Officer, Uniroyal Holding,
Inc. (Holding Company)
Age 71
[JOSEPH P. FLANNERY PHOTO]
Mr. Flannery, a director since July 2000 and a director of Arvin
from 1991 until the merger, is a member of the Corporate
Governance and Nominating Committee and the Compensation and
Management Development Committee. He is the Chairman of the
Board, President and Chief Executive Officer of Uniroyal
Holding, Inc., positions he has held since 1987. Mr. Flannery is
a director of Newmont Mining Corporation and The Scotts Company.
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WILLIAM D. GEORGE, JR.
Retired President and Chief Executive Officer, S.C. Johnson Wax (Chemical
Specialty Products)
Age 71
[WILLIAM D. GEORGE, JR. PHOTO]
Mr. George, a director since July 2000 and a director of Arvin
from 1994 until the merger, is Chairman of the Audit Committee
and a member of the Environmental and Social Responsibility
Committee. Since 1981, he served in a variety of positions with
S.C. Johnson Wax, until he became Executive Vice President and
Chief Operating Officer, Worldwide Consumer Products from 1988
to 1990, and President, Worldwide Consumer Products from 1990 to
1993. Mr. George was elected President and Chief Executive
Officer of S.C. Johnson Wax in 1993, positions he held until
retirement in 1997. He is also a director of Reilly Industries,
Inc. and is a member of the Board of Trustees of Carthage
College.
CHARLES H. HARFF
Retired Senior Vice President, General Counsel and Secretary of Rockwell
(Electronic Controls and Communications)
Age 74
[CHARLES H. HARFF PHOTO]
Mr. Harff, a director since July 2000 and a director of Meritor
from May 1997 until the merger, is a member of the Audit
Committee and the Compensation and Management Development
Committee. From June 1984, when he joined Rockwell, until
November 1994, Mr. Harff served as Senior Vice President,
General Counsel and Secretary of Rockwell. From November 1994 to
February 1996, Mr. Harff served as Senior Vice President and
Special Counsel of Rockwell, and he served as a consultant to
Rockwell from February 1996 to July 2001. He is a retired
president and director of the Fulbright Association and a
director of several charitable and civic organizations.
MARTIN D. WALKER
Retired Chairman of the Board and Chief Executive Officer, M.A. Hanna Company
(Specialty Chemicals, Plastics and Rubber Products)
Age 71
[MARTIN D. WALKER PHOTO]
Mr. Walker, a director since July 2000, is the Chairman of the
Compensation and Management Development Committee and a member
of the Corporate Governance and Nominating Committee. He is a
principal of MORWAL Investments. Mr. Walker served M.A. Hanna
Company as Chief Executive Officer from October 1998 until June
1999 and as Chairman of the Board from October 1998 until
December 1999. He had previously served M.A. Hanna as Chief
Executive Officer from 1986 until December 1996 and as Chairman
of the Board from 1986 until June 1997. He is a director of
Graphics Packaging International, Inc., Lexmark International
Group, Textron, Inc. and The Timken Company.
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CLASS III -- CONTINUING DIRECTORS WITH TERMS EXPIRING IN 2006
JOSEPH B. ANDERSON, JR.
Chairman of the Board and Chief Executive Officer, Vibration Control
Technologies, LLC and A and D Technologies LLC (Automotive Components)
Age 60
[JOSEPH B. ANDERSON, JR. PHOTO]
Mr. Anderson, a director since July 2000 and a director of
Meritor from September 1997 until the merger, is Chairman of the
Corporate Governance and Nominating Committee and a member of
the Environmental and Social Responsibility Committee. He has
served as Chairman of the Board and Chief Executive Officer of
Vibration Control Technologies, LLC since January 2002 and of A
and D Technologies LLC since 2003. He was Chairman of the Board
and Chief Executive Officer of Chivas Industries LLC (and its
predecessor, Chivas Products, Ltd.) (automotive components) from
October 1994 until March 2002. From December 1992 to July 1993,
Mr. Anderson was President and Chief Executive Officer of
Composite Energy Management Systems, Inc. (automotive
components). Mr. Anderson served in a variety of positions,
primarily in manufacturing, with General Motors Corporation
(automotive) from 1979 until December 1992. He also served as an
assistant to the U.S. Secretary of Commerce from 1977 to 1979.
Mr. Anderson is a director of Quaker Chemical Corporation and R.
R. Donnelley & Sons Co. and is a trustee of Kettering
University. He is also a director, trustee or member of a number
of business, educational and civic organizations.
VICTORIA B. JACKSON
President, Victoria Belle, Inc. (Design, Manufacturing and Marketing of
Specialty Retail Products)
Age 48
[VICTORIA B. JACKSON PHOTO]
Ms. Jackson, a director since July 2000 and a director of
Meritor from July 1999 until the merger, is a member of the
Audit Committee. She currently serves as President of Victoria
Belle, Inc., a designer, manufacturer and marketer of specialty
retail products. She was President and Chief Executive Officer
of DSS/Prodiesel, Inc. (transportation components) from 1979
until 1998, when the company was sold to TransCom USA. She
served as a consultant to TransCom USA from 1998 to February
2000. Ms. Jackson is a director of AmSouth Bancorporation and is
a member of various business, educational and civic
organizations.
JAMES E. MARLEY
Retired Chairman of the Board, AMP Inc. (Electrical and Electronics Components
and Cabling Products)
Age 68
[JAMES E. MARLEY PHOTO]
Mr. Marley, a director since July 2000 and a director of Meritor
from April 1999 until the merger, is Chairman of the
Environmental and Social Responsibility Committee and a member
of the Audit Committee. He is the retired Chairman of the Board
of AMP Inc., serving in that position from 1993 to 1998. He
served AMP as President and Chief Operating Officer from 1990 to
1992, as President from 1986 to 1990, and in a variety of
engineering and executive positions from 1963, when he joined
AMP, until 1986. He is also a director of Armstrong Holdings,
Inc. and a number of business, educational and civic
organizations, and is a member of a number of engineering and
management professional associations.
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JAMES E. PERRELLA
Retired Chairman of the Board, President and Chief Executive Officer,
Ingersoll-Rand Company (Industrial Components)
Age 68
[JAMES E. PERRELLA PHOTO]
Mr. Perrella, a director since July 2000 and a director of Arvin
from 1999 until the merger, is a member of the Compensation and
Management Development Committee and the Corporate Governance
and Nominating Committee. Mr. Perrella served as Chairman of the
Board of Ingersoll-Rand Company from 1993 until his retirement
in 2000. Between 1993 and October 1999, he also served as
President and Chief Executive Officer of Ingersoll-Rand. Mr.
Perrella is also a director of Becton Dickinson and Company,
Bombardier Inc. and Milacron Inc.
BOARD OF DIRECTORS AND COMMITTEES
The Board of Directors manages or directs the management of the business of
ArvinMeritor. In fiscal year 2003, the Board of Directors held eleven regularly
scheduled and special meetings. Each director attended more than 75% of the
aggregate number of meetings of the Board and the committees on which he or she
served in fiscal year 2003. ArvinMeritor encourages each director to attend the
Annual Meeting of Shareowners. Eleven of the thirteen directors (including one
director who retired from Board service effective immediately after the meeting)
attended the 2003 Annual Meeting.
The Board has established four standing committees the principal functions
of which are briefly described below. The charters of these committees are
posted on our website, www.arvinmeritor.com, in the investor information section
and paper copies will be provided upon request to the Office of the Secretary,
ArvinMeritor, Inc., 2135 West Maple Road, Troy, MI 48084.
Audit Committee. ArvinMeritor has a separately designated standing audit
committee established in compliance with applicable provisions of the Securities
Exchange Act of 1934, as amended. The Audit Committee is currently composed of
four non-employee directors, William D. George, Jr. (chairman), Charles H.
Harff, Victoria B. Jackson and James E. Marley, each of whom meets the criteria
for independence specified in the listing standards of the New York Stock
Exchange. The Board of Directors has determined that ArvinMeritor has at least
one "audit committee financial expert" (as defined in Section 401(h) of
Regulation S-K) serving on the Audit Committee. The Board has adopted a written
charter for the Audit Committee, which is reviewed and reassessed annually for
compliance with rules of the New York Stock Exchange. The Audit Committee
charter is attached to this proxy statement as Appendix A.
The Audit Committee is charged with monitoring the integrity of the
Company's financial statements, compliance with legal and regulatory
requirements, and the independence, qualifications and performance of the
Company's internal audit function and independent accountants. The Audit
Committee has sole authority to select and employ (subject to approval of the
shareowners), and to terminate and replace where appropriate, the independent
public accountants for the Company and also has authority to:
- approve and cause the Company to pay all audit engagement fees;
- review the scope of and procedures used in audits and reviews of the
Company's financial statements by the independent public accountants;
- review the Company's annual and quarterly financial statements before
their release;
- oversee the resolution of any disagreements between the independent
public accountants and management;
- review at least annually a report from the independent public accountants
describing the firm's internal quality control procedures;
7
- review and approve in advance the scope and extent of any non-audit
services performed by the independent public accountants and the fees
charged for these services, and receive and evaluate at least annually a
report from the independent public accountants as to their independence;
- review the adequacy of the Company's systems of internal controls and
recommendations of the independent public accountants with respect to
internal controls;
- review the internal audit charter, the scope of the annual internal audit
plan, the results of internal audits and significant internal control
issues;
- consult with management as to the appointment and removal of the general
auditor charged with auditing and evaluating the Company's system of
internal controls;
- monitor compliance by employees with the Company's standards of business
conduct policies;
- monitor policies with respect to risk assessment and risk management and
initiatives to control risk exposures;
- investigate matters brought to its attention within the scope of its
duties;
- engage outside consultants, independent counsel or other advisors as it
deems appropriate to perform its duties;
- establish procedures for the receipt, retention and handling of
complaints regarding accounting, internal controls or auditing matters,
including procedures for the confidential and anonymous submission by
employees of concerns regarding accounting or auditing matters; and
- set the Company's policies with respect to hiring former employees of the
independent public accountants.
As part of each regularly scheduled meeting, the Audit Committee meets in
separate executive sessions with the independent public accountants, the
internal auditors and senior management, and as a Committee without members of
management. The Audit Committee held six meetings in fiscal year 2003.
Compensation and Management Development Committee. The four members of the
Compensation and Management Development Committee (the "Compensation
Committee"), Martin D. Walker (chairman), Joseph P. Flannery, Charles H. Harff
and James E. Perrella, are non-employee directors who meet the criteria for
independence specified in the listing standards of the New York Stock Exchange
and are not eligible to participate in any of the plans or programs that are
administered by the Committee. Under the terms of its charter, the principal
functions of the Compensation Committee are to:
- review and approve the goals and objectives relevant to the Chief
Executive Officer's compensation, evaluate his performance against these
goals and objectives, and set his compensation accordingly;
- fix salaries of all of the Company's other officers and review the salary
plan for other Company executives;
- evaluate the performance of the Company's senior executives and plans for
management succession and development;
- review the design and competitiveness of the Company's compensation plans
and medical benefit plans, and make recommendations to the Board of
Directors;
- administer the Company's incentive, deferred compensation, stock option
and long-term incentives plans; and
- review all material amendments to the Company's pension plans and make
recommendations to the Board concerning these amendments.
The Compensation Committee has the authority to hire outside consultants
and approve their fees, and is required to assess the Committee's performance at
least annually. The Compensation Committee held three meetings and acted by
unanimous written consent three times in fiscal year 2003.
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Corporate Governance and Nominating Committee. The Corporate Governance
and Nominating Committee is currently composed of five non-employee directors,
Joseph B. Anderson, Jr. (chairman), Joseph P. Flannery, Richard W. Hanselman,
James E. Perrella and Martin D. Walker, all of whom meet the criteria for
independence specified in the listing standards of the New York Stock Exchange.
The principal functions of the Corporate Governance and Nominating Committee are
to:
- consider and recommend to the Board qualified candidates for election as
directors of the Company;
- periodically prepare and submit to the Board for adoption the Committee's
selection criteria for director nominees;
- recommend to the Board and management a process for new Board member
orientation;
- periodically assess the performance of the Board;
- consider matters of corporate governance and Board practices and
recommend improvements to the Board;
- review periodically the Company's charter and by-laws in light of
statutory changes and current best practices;
- review periodically the charter, responsibilities, membership and
chairmanship of each committee of the Board and recommend appropriate
changes;
- review Director independence, conflicts of interest, qualifications and
conduct and recommend to the Board removal of a Director when
appropriate; and
- annually assess the Committee's performance.
The Corporate Governance and Nominating Committee held five meetings in
fiscal year 2003. See "Nominating Procedures" below for further information on
the nominating process.
Environmental and Social Responsibility Committee. The Environmental and
Social Responsibility Committee is composed of four non-employee directors,
James E. Marley (chairman), Joseph B. Anderson, Jr., Rhonda L. Brooks and
William D. George, Jr. Under the terms of its charter, the Committee reviews and
assesses the Company's policies and practices in the following areas and
recommends revisions as appropriate: employee relations, with emphasis on equal
employment opportunity and advancement; the protection and enhancement of the
environment and energy resources; product integrity and safety; employee health
and safety; and community and civic relations, including programs for and
contributions to health, educational, cultural and other social institutions.
This Committee held two meetings in fiscal year 2003.
NOMINATING PROCEDURES
As described above, ArvinMeritor has a standing nominating committee, the
Corporate Governance and Nominating Committee, currently composed of five
outside directors who meet the criteria for independence in the listing
standards of the New York Stock Exchange. The Corporate Governance and
Nominating Committee's charter is posted on our website, www.arvinmeritor.com,
in the investor information section.
The Board has adopted membership guidelines that outline the desired
composition of the Board and the criteria to be used in selecting directors.
These guidelines provide that the Board should be composed of directors with a
variety of experience and backgrounds who have high-level managerial experience
in a complex organization and who represent the balanced interests of
shareowners as a whole rather than those of special interest groups. Other
important factors in Board composition include diversity, age, international
background and experience and specialized expertise. A significant majority of
the Board should be directors who are not past or present employees of the
Company or of a significant shareowner, customer or supplier.
In considering candidates for the Board, the Corporate Governance and
Nominating Committee considers the entirety of each candidate's credentials and
does not have any specific minimum qualifications that must be met by a Board
nominee. The Committee is guided by the composition guidelines set forth above,
and by the following basic selection criteria: highest character and integrity;
experience and
9
understanding of strategy and policy-setting; reputation for working
constructively with others; sufficient time to devote to Board matters; and no
conflict of interest that would interfere with performance as a director. With
respect to nomination of continuing directors for re-election, the individual's
contributions to the Board, as reflected in results of the most recent peer
review of individual director performance, are also considered.
The Committee has the authority under its charter to hire and pay a fee to
consultants or search firms to assist in the process of identifying and
evaluating candidates. No such consultants or search firms have been used and no
fees have been paid in the past fiscal year.
Shareowners may recommend candidates for consideration by the Committee by
writing to the Secretary of the Company at its headquarters in Troy, Michigan,
giving the candidate's name, biographical data and qualifications. A written
statement from the candidate, consenting to be named as a candidate and, if
nominated and elected, to serve as a director, should accompany any such
recommendation. No candidates for Board membership have been put forward by
large long-term security holders or groups of security holders for election at
the 2004 Annual Meeting.
COMPENSATION OF DIRECTORS
Only non-employee directors receive compensation for Board service.
Directors who are also employees of ArvinMeritor or a subsidiary do not receive
compensation for serving as directors.
Retainer Fees. In fiscal year 2003, non-employee directors of ArvinMeritor
received a retainer at the rate of $35,000 per year for Board service. The
Chairman of the Audit Committee received an additional retainer of $5,000 per
year, and the Chairmen of the other three standing Board committees each
received an additional retainer of $3,000 per year. No additional retainer was
paid for service as committee members.
Committee Meeting Fees. Non-employee directors receive fees of $1,500 for
attendance at each Audit Committee meeting ($750 for each telephone meeting),
and $1,000 for attendance at each meeting of other Board committees ($500 for
each telephone meeting).
Equity-Based Awards. In fiscal year 2003, immediately after the Annual
Meeting of Shareowners, each non-employee director received grants of 1,000
shares of Common Stock and options to purchase 3,000 shares of Common Stock at
the closing price of the Common Stock on the New York Stock
Exchange -- Composite Transactions reporting system on the date of the grant. A
non-employee director elected to the Board during the fiscal year received a pro
rata portion of these grants.
Deferrals. A director may elect to defer payment of all or part of the
cash retainer and meeting fees to a later date, with interest on deferred
amounts accruing quarterly at a rate equal to 120% of the Federal long-term rate
set each month by the Secretary of the Treasury. Each director also has the
option each year to defer the entire annual grant of shares and all or any
portion of the cash retainer and meeting fees by electing to receive restricted
shares that could be forfeited if certain conditions are not satisfied. The
restricted shares in lieu of the cash retainer and meeting fees are valued at
the closing price of the Common Stock on the New York Stock
Exchange -- Composite Transactions reporting system on the date each retainer
and meeting fee payment would otherwise be made in cash.
Changes in Director Compensation. Beginning with fiscal year 2004, the
annual retainer for Board service was increased to $45,000, the additional
annual retainer for the Chairman of the Audit Committee was increased to
$10,000, and the additional annual retainer for the Chairman of the Compensation
Committee was increased to $7,000. These increases were implemented to reflect
the additional responsibilities and time commitments related to Board service
and chairmanship of these committees.
In addition, the Board has adopted and recommended to the shareowners for
approval a new Directors Stock Plan that will provide flexibility to make annual
equity-based grants to non-employee directors in the form of restricted stock or
restricted stock units, as well as Common Stock and options. It is expected that
the annual equity-based grant to each non-employee director following the 2004
Annual Meeting of Shareowners will be in the form of 2,400 restricted stock
units. See "Proposal to Approve the 2004 Directors Stock Plan" below for further
information on the proposed new plan.
10
INVOLVEMENT IN CERTAIN LEGAL PROCEEDINGS
On October 5, 2000, Owens Corning filed a petition for reorganization under
Chapter 11 of the Bankruptcy Code in the U.S. Bankruptcy Court in Wilmington,
Delaware. Owens Corning stated that it took the action to address demands on its
cash flow resulting from asbestos-related liability. Rhonda L. Brooks, a
director of the Company, was President of Owens Corning's Roofing Systems
Business from December 1997 to June 2000, and President of its Exterior Systems
Business from June 2000 to July 2002.
CORPORATE GOVERNANCE AT ARVINMERITOR
ArvinMeritor is committed to good corporate governance. The foundation of
our corporate governance principles and practices is the independent nature of
our Board of Directors and its primary responsibility to ArvinMeritor's
shareowners. Our corporate governance guidelines have been in place since the
Company's creation in 1997 and were derived from the principles that had been in
place for many years at Rockwell. The guidelines are reviewed periodically by
the Corporate Governance and Nominating Committee and changes are recommended to
the Board for approval as appropriate. We will continue to monitor developments
and review our guidelines periodically, and will modify or supplement them when
and as appropriate. Our current Corporate Governance Guidelines are posted on
our website, www.arvinmeritor.com, in the investor information section, and
paper copies will be provided upon request to the Office of the Secretary,
ArvinMeritor, Inc., 2135 West Maple Road, Troy, MI 48084. Our policies and
practices are summarized below.
Board Independence
- Independent directors must comprise at least a majority of the Board and,
as a matter of policy, a substantial majority of the Board should be
independent directors. The Board has adopted criteria for independence
based on the definition used in the listing requirements of the New York
Stock Exchange.
- The Corporate Governance and Nominating Committee reviews the
independence of each director annually. Currently, all of our
non-management directors are independent.
- Only independent directors can serve on the Board's standing committees.
Board Composition
- Board nominees are screened and recommended by the Corporate Governance
and Nominating Committee and approved by the full Board (see "Nominating
Procedures" above for information on Board selection criteria).
- Committee membership is reviewed periodically to assure that each
committee has the benefit of both experience and fresh perspectives.
- Committee chairmanships are normally rotated at least once every four
years, with the chair of one standing committee changing each year. A
director usually serves on a committee at least 12 months before becoming
its chair, and a former chair normally serves on a committee for at least
12 months after retiring as chair.
- The Board has established term limits that provide that each director
shall serve no more than 12 consecutive years, beginning the later of his
initial election to the Board or the date of adoption of the provision
(November 12, 2003). The Board, by affirmative vote of at least 2/3 of
the directors, may make exceptions to this provision in appropriate
cases.
- The Guidelines on Corporate Governance establish the following
expectations regarding director tenure:
- Non-employee directors are required to offer not to stand for reelection
if they are age 70 at the time of re-election or will reach age 70
during their new term. The Corporate Governance and
11
Nominating Committee decides whether continued Board service is
appropriate and, if so, the length of the next term.
- Directors whose job responsibilities change significantly during their
Board service are required to offer to resign or not to stand for
reelection. The Corporate Governance and Nominating Committee reviews
the appropriateness of continued Board membership.
- When the Chief Executive Officer retires or resigns from that position,
he is expected to offer his resignation from the Board. The Board and
the successor Chief Executive Officer determine whether continued Board
service is desirable and appropriate.
Key Responsibilities of the Board
- The Company's long-term strategic goals and plans are discussed in depth
by the Board at least annually.
- The non-management directors select the Chief Executive Officer of the
Company and meet at least annually to evaluate the Chief Executive
Officer's performance against long-term goals and objectives established
by the Compensation Committee.
- Management development and succession plans are reviewed annually,
including CEO succession plans.
Board and Committee Meetings
- Board and committee agendas are developed through discussions with
management and Board members, and are focused on business performance and
strategic issues, leadership, and recent developments.
- Presentation materials are generally sent to Board and committee members
for review in advance of each meeting.
- Directors are expected to attend, prepare for and participate in
meetings. The Corporate Governance and Nominating Committee monitors each
director's attendance and addresses issues when appropriate.
- Non-management directors meet in private executive sessions at the end of
each regular Board meeting. The chair of each of the four standing
committees, on a rotating basis, chairs these meetings.
- Information and data important to understanding of the business,
including financial and operating information, are distributed regularly
to the Board.
Board Performance and Operations
- The Corporate Governance and Nominating Committee, which is composed
solely of independent directors, is responsible for corporate governance
and Board practices, and formally evaluates these areas periodically.
- Each Board committee has a detailed charter outlining its
responsibilities, as described above under the heading "Board of
Directors and Committees."
- The Board and its committees have the authority to hire such outside
counsel, advisors and consultants as they choose with respect to any
issue related to Board activities. Directors also have full access to
Company officers and employees.
- To enhance Board effectiveness, the Corporate Governance and Nominating
Committee conducts annual self-evaluations of the Board's performance.
These assessments are made of either the Board as a whole or each
individual director. Results are shared with the Board, and action plans
are formulated to address any deficiencies.
12
Director Education
- Each new director is provided a full-day program of orientation to the
Company's business, which includes discussions with each business and
functional head, background materials on the Company's financial
condition and business, and a facility tour.
- The continuing education process for Board members includes extensive
informational materials, meetings with key management and visits to
Company facilities.
- Meeting agenda regularly include discussions of business environment,
outlook, performance and action plans for the various business segments.
- Board and committee meeting agenda regularly include topics of director
education, including updates on corporate governance developments.
- Board members may request presentations on particular topics and specific
facility visits to educate them and update their knowledge as to the
Company, its industry and markets, the responsibilities of directorship,
and other topics of interest.
- Each director is encouraged to visit at least two Company plants each
year, and, at least once each year, a Board meeting is held at a plant
location.
- Each director is encouraged to attend educational seminars and
conferences to enhance his or her knowledge of the role and
responsibilities of directors.
- In each fiscal year, at least one director is required to attend a
director education seminar accredited by Institutional Shareholder
Services. In fiscal year 2003, three directors attended such accredited
seminars.
Alignment with Shareowner Interests
- A large portion of director compensation is equity-based and therefore
tied to the Company's stock performance. Directors can also elect to
receive their cash retainer fees in the form of Common Stock.
- The Board has adopted stock ownership guidelines that require each
non-employee director to own Common Stock with a market value equal to at
least five times the annual cash retainer, effective on the later of five
years after the director's initial election to the Board or three years
after adoption of the guidelines (November 12, 2006).
- The Compensation Committee and the Board oversee employee compensation
programs to assure that they are linked to performance and increasing
shareowner value. The Compensation Committee also monitors compliance by
Company executives with stock ownership guidelines (see Compensation
Committee Report on Executive Compensation below).
- Senior management meets regularly with major institutional investors and
shareholders and reports to the Board on analyst and shareholder views of
the Company.
CODE OF ETHICS
All ArvinMeritor employees, including our chief executive officer, chief
financial officer, controller and other executive officers, are required to
comply with our corporate policies regarding Standards of Business Conduct and
Conflicts of Interest. These policies have been in place since the Company was
formed in a spin-off from Rockwell in 1997 and were derived from similar
policies in place at Rockwell. The purpose of these corporate policies is to
ensure to the greatest possible extent that our business is conducted in a
consistently legal and ethical manner, and the Audit Committee has oversight
responsibility with respect to compliance. Employees may submit concerns or
complaints regarding ethical issues on a confidential basis to our Ethics
Helpline, by means of a toll-free telephone call or e-mail. All concerns and
complaints are investigated by the Office of the General Counsel.
13
ArvinMeritor's ethics manual, including the text of the policies on
Standards of Business Conduct and Conflicts of Interest, is posted in the
investor information section on our website (www.arvinmeritor.com). We will also
post on our website any amendment to, or waiver from, a provision of our
policies that applies to our chief executive officer, chief financial officer or
controller, and that relates to any of the following elements of these policies:
honest and ethical conduct; disclosure in reports or documents filed by the
Company with the SEC and in other public communications; compliance with
applicable laws, rules and regulations; prompt internal reporting of code
violations; and accountability for adherence to the policies.
OWNERSHIP BY MANAGEMENT OF EQUITY SECURITIES
The following table shows the beneficial ownership, reported to us as of
November 30, 2003, of ArvinMeritor Common Stock of (a) each director, (b) each
executive officer or former executive officer listed in the Summary Compensation
Table under the heading Executive Compensation below and (c) such persons and
other executive officers as a group. See Voting Securities above for information
on beneficial holders of more than 5% of outstanding ArvinMeritor Common Stock.
BENEFICIAL OWNERSHIP AS OF NOVEMBER 30, 2003
COMMON STOCK
-------------------------------------------
NAME SHARES(1)(2) PERCENT OF CLASS(3)
---- ------------ -------------------
Joseph B. Anderson, Jr................................. 10,125(4) *
Rhonda L. Brooks....................................... 11,250(5) *
Joseph P. Flannery..................................... 13,706 *
William D. George, Jr.................................. 15,000(4) *
Richard W. Hanselman................................... 14,500 *
Charles H. Harff....................................... 32,047(6) *
Victoria B. Jackson.................................... 11,250(4) *
James E. Marley........................................ 20,066(4) *
William R. Newlin...................................... 11,866(4)(7)(11) *
James E. Perrella...................................... 21,742(4) *
Martin D. Walker....................................... 24,507(4)(8) *
Larry D. Yost.......................................... 863,013(4)(9)(10)(11) 1.25
Terrence E. O'Rourke................................... 235,480(4)(9)(10) .34
S. Carl Soderstrom, Jr................................. 159,126(4)(9) .23
Thomas A. Gosnell...................................... 164,557(4)(9)(11) .24
William K. Daniel...................................... 155,453(4)(9)(11) .23
Craig M. Stinson....................................... 184,792(4)(9) .27
All of the above and other executive officers as a
group (26 persons)................................... 2,419,456(4)(9)(11) 3.46
---------------
* Less than 0.1%
(1) Each person has sole voting and investment power with respect to the shares
listed unless otherwise indicated.
(2) In accordance with Rule 13d-3(d)(1) under the Securities Exchange Act of
1934, as amended, the number of shares owned includes the following numbers
of shares of Common Stock which may be acquired upon exercise of options
that were exercisable or would become exercisable within 60 days: 5,937
shares for Mr. Anderson; 6,938 shares for each of Ms. Brooks and Ms.
Jackson; 8,250 shares for each of Messrs. Flannery, George and Hanselman;
10,875 shares for Mr. Harff; 7,500 shares for Mr. Marley; 0 shares for Mr.
Newlin; 6,250 shares for Mr. Perrella; 5,250 shares for Mr. Walker;
459,668; 154,500; 95,667; 117,000; 112,250; and 129,668 shares for Messrs.
Yost, O'Rourke, Soderstrom, Gosnell, Daniel and Stinson, respectively; and
1,436,965 shares for all directors and executive officers as a group.
14
(3) For purposes of computing the percentage of outstanding shares beneficially
owned by each person, the number of shares owned by that person and the
number of shares outstanding include shares as to which such person has a
right to acquire beneficial ownership within 60 days (for example, through
the exercise of stock options, conversions of securities or through various
trust arrangements), in accordance with Rule 13d-3(d)(1) under the
Securities Exchange Act of 1934, as amended.
(4) Includes restricted shares of Common Stock awarded under the Directors
Stock Plan or the Company's long-term incentive plans, as applicable.
Restricted shares are held by the Company until certain conditions are
satisfied.
(5) Includes 4,312 shares held as trustee of a revocable trust.
(6) Includes 2,332 shares held by the Charles H. and Marion M. Harff Charitable
Remainder Trust and 18,840 shares held by the Charles H. Harff Revocable
Living Trust. Mr. Harff is co-trustee of each such trust.
(7) Includes 6,860 shares held by a trust of which Mr. Newlin's spouse is
beneficiary.
(8) Includes 2,133 shares held in the Martin D. Walker Charitable Remainder
Trust, 3,750 shares held in the Mary J. Walker Trust, and 11,125 shares
held in the Martin D. Walker Trust, of which Mr. Walker is trustee, and
2,249 shares held in the Walker Charitable Foundation.
(9) Includes shares beneficially owned under the Company's and Rockwell's
Savings Plans and the Company's Deferred Compensation and Equity Plans.
Does not include the following share equivalents held under the Company's
supplemental savings plan on November 30, 2003: 29,996; 13,827; 7,575;
10,709; 348; and 348 shares for Messrs. Yost, O'Rourke, Soderstrom,
Gosnell, Daniel and Stinson, respectively, and 91,294 shares for all
directors and executive officers as a group.
(10) Includes deferred awards of Common Stock.
(11) Includes shares held jointly or in other capacities or held by a spouse.
15
EXECUTIVE COMPENSATION
The information shown below reflects the annual and long-term compensation,
from all sources, of our chief executive officer, the other four most highly
compensated executive officers of the Company for the fiscal year ended
September 30, 2003, and one additional individual who would have been included
in this group if he had been an executive officer at the end of the fiscal year
(the "Named Executive Officers"). The compensation reported below is for
services rendered in all capacities to ArvinMeritor and its subsidiaries.
SUMMARY COMPENSATION TABLE
LONG-TERM COMPENSATION
-----------------------------------------
ANNUAL COMPENSATION AWARDS PAYOUTS
--------------------------------- --------------------------- -----------
OTHER RESTRICTED STOCK
ANNUAL STOCK UNDERLYING LONG-TERM ALL OTHER
NAME AND PRINCIPAL POSITION COMPEN- AWARDS OPTIONS INCENTIVE COMPENSA-
WITH THE COMPANY(1) YEAR SALARY BONUS(3) SATION(4) ($)(5) (# OF SHARES) PAYMENTS(8) TION(9)
--------------------------- ---- -------- ---------- --------- ---------- ------------- ----------- ---------
Larry D. Yost............ 2003 $988,667 $ 0 $12,225 $1,164,320(6) 151,000 $ 0 $113,401
Chairman of the Board 2002 892,500 1,531,352 21,015 0 302,000 0 109,073
and Chief Executive 2001 840,000 0 13,457 2,234,271(7) 208,000 257,088 40,425
Officer
Terrence E. O'Rourke..... 2003 586,667 0 23,352 490,240(6) 63,000 0 58,263
President and Chief 2002 432,917 708,075 15,417 0 90,000 0 51,345
Operating Officer 2001 370,000 0 17,501 214,442(7) 63,000 80,640 18,013
S. Carl Soderstrom, Jr.... 2003 378,333 0 73,020 352,360(6) 45,000 0 37,275
Senior Vice President 2002 360,417 450,000 25,631 0 90,000 0 36,469
and Chief Financial 2001 295,458 0 13,282 371,456(7) 31,000 51,936 31,782
Officer
Thomas A. Gosnell........ 2003 374,583 0 74,144 352,360(6) 45,000 0 34,601
Senior Vice President 2002 349,583 394,322 31,613 0 90,000 0 33,476
and President, 2001 335,000 0 12,112 267,579(7) 63,000 41,040 16,103
Commercial Vehicle
Systems
William K. Daniel........ 2003 330,000 0 18,419 229,800(6) 30,000 0 9,094
Senior Vice President 2002 312,500 400,000 12,973 0 60,000 0 8,263
and President, Light 2001 300,000 0 8,887 77,493(7) 42,000 22,144 12,750
Vehicle Aftermarket
Craig M. Stinson......... 2003(2) 425,000 0 22,156 383,000(6) 50,000 0 29,237
Former Senior Vice 2002 345,417 527,262 33,544 0 90,000 0 16,818
President and President, 2001 300,000 0 7,016 58,949(7) 63,000 20,544 53,652
Light Vehicle Systems
---------------
(1) Except with respect to Mr. Stinson, who resigned effective August 26, 2003,
the table reflects the positions held with ArvinMeritor at September 30,
2003. Mr. O'Rourke previously served ArvinMeritor as Senior Vice President
and President, Light Vehicle Systems (July 2000-May 2002); Mr. Stinson
previously served as Senior Vice President and President, Air & Emissions
Technologies (September 2000-May 2002); Mr. Soderstrom previously served as
Senior Vice President, Engineering, Quality and Procurement (July 2000-July
2001); and Mr. Gosnell previously served as Senior Vice President and
President, Heavy Vehicle Systems Aftermarket Products (July 2000-November
2000).
(2) Mr. Stinson resigned from his position with the Company effective August 26,
2003. His 2003 compensation includes compensation paid to him for the
balance of the fiscal year pursuant to an agreement with the Company. See
Agreements with Named Executive Officers below.
(3) This column reflects amounts awarded, even if deferred for future payment.
(4) This column includes (a) amounts reimbursed to the Named Executive Officers
for the payment of income taxes on the value of perquisites; and (b) the
following perquisites for fiscal year 2003: Mr. Soderstrom -- use of company
automobile, $10,255; club dues, $12,856; reimbursement for cost of financial
services, $6,500; and benefit related to lease car purchase, $11,945; and
Mr. Gosnell -- use of company automobile, $11,922; club dues, $8,415;
reimbursement for cost of financial services, $5,850; and benefit related to
lease car purchase, $16,435. Perquisites for Messrs. Soderstrom and Gosnell
in
16
fiscal years 2002 and 2001, and for each of the other Named Executive
Officers in each fiscal year, did not exceed the lesser of $50,000 or 10% of
salary and bonus.
(5) The Named Executive Officers held the following aggregate numbers of
restricted shares of Common Stock at September 30, 2003, with an aggregate
value (based on the closing price of ArvinMeritor Common Stock, $17.81 per
share, on the New York Stock Exchange -- Composite Transactions reporting
system on September 30, 2003) as follows: Mr. Yost -- 244,801 shares,
$4,359,906; Mr. O'Rourke -- 44,298 shares, $788,947; Mr.
Soderstrom -- 43,518 shares, $775,056; Mr. Gosnell -- 37,936 shares,
$675,640; Mr. Daniel -- 19,527 shares, $347,776; and Mr. Stinson -- 28,773
shares, $512,447. Cash dividends are paid on the restricted shares granted
to the Named Executive Officers in fiscal years 2003 and 2001 and, prior to
vesting, these dividends are reinvested in additional restricted shares of
Common Stock.
(6) Performance-based restricted shares of Common Stock were granted to the
Named Executive Officers on November 22, 2002. The amount in the table is
based on the number of shares granted multiplied by the closing price of
ArvinMeritor Common Stock on the New York Stock Exchange -- Composite
Transactions reporting system on the date of grant ($15.32 per share). The
portion of the restricted shares that will vest at the end of the three-year
restricted period depends on achieving the same levels of earnings per share
growth and cash flow/return on investment that determine payouts of
performance awards under the 1997 Long-Term Incentives Plan for the
three-year performance period ending September 30, 2005. See Long-Term
Incentive Plan Awards below.
(7) Restricted shares of Common Stock were issued to the Named Executive
Officers on July 16, 2001 in exchange for cancellation of outstanding stock
options. The reported dollar value of the 2001 grants represents the number
of restricted shares issued, multiplied by the closing price of ArvinMeritor
Common Stock on the New York Stock Exchange -- Composite Transactions
reporting system on the date of grant ($19.50 per share).
(8) Long-term incentive payments for Messrs. Yost, O'Rourke, Soderstrom and
Gosnell in fiscal year 2001 consist of cash paid by the Company with respect
to three-year performance plans, established under the Meritor 1997
Long-Term Incentives Plan, that ended in that year. Long-term incentive
payments for Messrs. Daniel and Stinson in fiscal year 2001 consist of cash
paid by the Company with respect to pro rata awards under the performance
plan that ended in 2001. No long-term incentive payments were made with
respect to the performance plans that ended in 2002 or 2003. See Long-Term
Incentive Plan Awards below.
(9) This column includes (a) amounts contributed or accrued for the Named
Executive Officers under the Company's employee savings plan and the related
supplemental savings plan; (b) $40,902 paid to Mr. Stinson in 2001 as
additional compensation for overseas assignments; and (c) $20,159 and $4,444
in interest paid by the Company in fiscal years 2003 and 2002, respectively,
on a relocation bridge loan made to Mr. Stinson by a third-party lender.
In connection with a job-related relocation, in June 2002 the Company
arranged a 12-month $1.5 million line of credit for Craig Stinson from GMAC
Global Relocation Services, Inc. to finance the building of a new home. The
Company made periodic interest payments, which are treated as compensation to
Mr. Stinson (see note 9 to the table above), at a rate equal to the prime
commercial lending rate plus 1%. Mr. Stinson repaid the loan in full on July 18,
2003, and this line of credit was terminated.
17
OPTION GRANTS
The following table shows option grants to the Named Executive Officers
made during the fiscal year ended September 30, 2003 pursuant to the Company's
long-term incentives plans. These options are reflected in the Summary
Compensation Table above.
GRANT DATE
OPTION GRANTS VALUE
---------------------------------------------------------------- ----------
PERCENTAGE OF TOTAL
NUMBER OF OPTIONS GRANTED
SECURITIES TO COMPANY EXERCISE
UNDERLYING EMPLOYEES OR BASE GRANT DATE
OPTIONS GRANTED IN FISCAL PRICE (PER EXPIRATION PRESENT
NAME (# OF SHARES)(1) 2003(2) SHARE)(3) DATE VALUE(4)
---- ---------------- ------------------- ---------- ---------- ----------
Larry D. Yost.................... 151,000 13.79% $15.32 11/22/12 $892,410
Terrence E. O'Rourke............. 63,000 5.76 15.32 11/22/12 372,330
S. Carl Soderstrom, Jr. ......... 45,000 4.11 15.32 11/22/12 265,950
Thomas A. Gosnell................ 45,000 4.11 15.32 11/22/12 265,950
William K. Daniel................ 30,000 2.74 15.32 11/22/12 177,300
Craig M. Stinson................. 50,000 4.57 15.32 11/22/12 295,500
---------------
(1) These grants were made under ArvinMeritor's 1997 Long-Term Incentives Plan
on November 22, 2002. The options become exercisable in three approximately
equal installments on November 22, 2003, November 22, 2004 and November 22,
2005.
(2) Based on the total number of options to purchase ArvinMeritor Common Stock
issued to employees during the fiscal year.
(3) Exercise price reflects market value per share (as defined in the 1997
Long-Term Incentives Plan) of ArvinMeritor Common Stock on the date of
grant.
(4) These values are based on the Black-Scholes option pricing model, which
attempts to portray the value of an option at the date of grant. The actual
value, if any, that may be realized from these options by the officer will
depend solely on the gain in stock price over the exercise price when the
options are exercised. Based on a per option share value of $5.91, using the
following assumptions and inputs: options exercised after 7 1/2 years;
weighted one-year stock price volatility and dividend yield of 36.58% and
1.67%, respectively; and an interest rate of 3.99%, which was the zero
coupon 7 1/2-year Treasury bond rate at the date of grant.
AGGREGATED OPTION EXERCISES AND FISCAL YEAR-END VALUES
The Named Executive Officers did not exercise any options to purchase
ArvinMeritor Common Stock in the fiscal year ended September 30, 2003. The
following table shows the number of shares of Common Stock underlying
unexercised options, and the value of unexercised in-the-money options, held by
the Named Executive Officers as of September 30, 2003.
NUMBER OF SHARES
UNDERLYING UNEXERCISED VALUE OF UNEXERCISED
OPTIONS HELD AT IN-THE-MONEY OPTIONS AT
SHARES SEPTEMBER 30, 2003 SEPTEMBER 30, 2003(1)
ACQUIRED VALUE --------------------------- ---------------------------
NAME ON EXERCISE REALIZED EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
---- ----------- -------- ----------- ------------- ----------- -------------
Larry D. Yost............. 0 $0 239,334 421,666 $416,001 $583,989
Terrence E. O'Rourke...... 0 0 87,500 139,000 96,000 204,870
S. Carl Soderstrom,
Jr. .................... 0 0 43,778 111,889 41,334 132,717
Thomas A. Gosnell......... 0 0 58,000 119,000 84,000 154,050
William K. Daniel......... 0 0 68,250 84,000 84,438 116,700
Craig M. Stinson.......... 0 0 66,751 126,250 97,503 173,250
---------------
(1) Based on the difference between the exercise price of the options and the
closing price of ArvinMeritor Common Stock ($17.81 per share) on the New
York Stock Exchange -- Composite Transactions reporting system on September
30, 2003.
18
LONG-TERM INCENTIVE PLAN AWARDS
The following table shows information with respect to awards made during
fiscal year 2003 to the Named Executive Officers under the 1997 Long-Term
Incentives Plan.
NUMBER OF PERFORMANCE OR ESTIMATED FUTURE PAYMENT UNDER
SHARES, UNITS OTHER PERIOD UNTIL NON-STOCK PRICE-BASED PLANS
OR OTHER MATURATION ----------------------------------
NAME RIGHTS(1)(2) OR PAYMENT THRESHOLD TARGET(2) MAXIMUM(2)
---- -------------- ------------------ --------- --------- ----------
Larry D. Yost................ $990,000 10/1/02-9/30/05 $0 $990,000 $2,970,000
Terrence E. O'Rourke......... 412,500 10/1/02-9/30/05 0 412,500 1,237,500
S. Carl Soderstrom, Jr. ..... 297,000 10/1/02-9/30/05 0 297,000 891,000
Thomas A. Gosnell............ 297,000 10/1/02-9/30/05 0 297,000 891,000
William K. Daniel............ 198,000 10/1/02-9/30/05 0 198,000 594,000
Craig M. Stinson............. 330,000 10/1/02-9/30/05 0 330,000 990,000
---------------
(1) Potential awards for target performance are expressed as cash amounts.
(2) Amounts are stated before application of stock price change modifier,
described below.
Under the 1997 Long-Term Incentives Plan, the Compensation Committee of the
Board of Directors establishes performance periods of at least three fiscal
years duration and performance objectives for those periods, and grants
potential awards expressed as cash payments to key employees of the Company and
its subsidiaries. Participants earn awards upon conclusion of the applicable
performance period (which may vary from 0% to 300% of the target award) based on
actual performance against target levels established by the Compensation
Committee. (For purposes of the performance plan established and the awards made
in fiscal year 2003, performance is measured by earnings per share growth and
cash flow/return on investment.) However, awards are subject to achieving
minimum threshold levels (5% earnings per share growth and 15% cash flow/return
on investment) established by the Compensation Committee. The award payments are
further modified by the percentage change in the price of ArvinMeritor Common
Stock over the three-year period of the performance plan, which may increase or
decrease the payment finally awarded. At the discretion of the Compensation
Committee, payments may be made wholly or partly by delivering shares of
ArvinMeritor Common Stock valued at the fair market value on the payment date.
There were no long-term incentive payments in 2003 or 2002. Long-term
incentive payments in 2001 were made in cash.
19
COMPENSATION COMMITTEE REPORT ON EXECUTIVE COMPENSATION
The Compensation and Management Development Committee of the Board of
Directors, which consists entirely of non-employee directors (see Board of
Directors and Committees above), has responsibility for reviewing all aspects of
ArvinMeritor's executive compensation and has furnished the following report.
COMPENSATION PHILOSOPHY AND OBJECTIVES
The Compensation Committee has adopted compensation policies for
ArvinMeritor intended to "pay for performance" through meeting three fundamental
objectives:
- foster the creation of shareowner value through close alignment of the
financial interests of executives with those of ArvinMeritor's
shareowners,
- recognize individual and team performance through evaluation of each
executive's effectiveness in meeting strategic and operating plan goals,
and
- create compensation systems to attract, retain and motivate the high
caliber of executives necessary for ArvinMeritor's leadership and growth.
EMPLOYEE STOCK OWNERSHIP
The Compensation Committee believes the focus on "pay for performance" can
best be achieved by aligning the financial interests of ArvinMeritor's key
executives with those of its shareowners. Accordingly, it has set the following
minimum Ownership Guidelines (multiple of base salary) to be achieved and
maintained:
COMMON STOCK
MARKET VALUE
------------
- Chief Executive Officer................................... 5
- President................................................. 5
- Senior Vice Presidents.................................... 3
- Other Executive Officers.................................. 2
- Other Vice Presidents..................................... 1.5
- Other Executives subject to the guidelines................ 1
Non-U.S. based executives in each category listed above are subject to the
same Ownership Guidelines, except that "Other Vice Presidents" are subject to a
multiple of 1, and "Other Executives subject to the guidelines" are subject to a
multiple of 0.5.
Shares owned directly (including restricted shares of Common Stock) or
through savings plans of ArvinMeritor or Rockwell are considered for determining
whether an executive meets the Ownership Guidelines. Shares subject to
unexercised stock options are not considered. The Ownership Guidelines provide a
transition period during which executives may achieve compliance. In general,
this period ends five years after the date the Ownership Guidelines become
applicable to them. All ArvinMeritor executives are within the five-year
transition period for satisfying the Guidelines. As of November 30, 2003, the
chief executive officer, president, senior vice presidents and other executive
officers owned an aggregate of approximately 953,000 shares of ArvinMeritor
Common Stock.
COMPENSATION STRATEGY
The Compensation Committee carries out its "pay for performance" philosophy
by tying each executive's total compensation to the performance of both the
Company and the individual. Base salaries are set at a level that is competitive
with major durable goods manufacturers as well as other automotive suppliers,
commensurate with responsibilities and experience. However, executives have an
opportunity to earn above-median compensation through ArvinMeritor's annual and
long-term incentive plans, which provide rewards for
20
superior performance by the individual and the Company. The Compensation
Committee considers the total compensation potentially available to each
executive in establishing each element of compensation.
At the beginning of fiscal year 2003, the Compensation Committee reviewed
data compiled by Towers Perrin, independent compensation consultants retained to
advise the Committee and management (the "consultants"), from competing
companies and reference data for a broader group of industrial companies with
which the Company competes for talented executives, in determining executive
compensation for the year. The data reviewed included data from ten of the
eleven companies included in the peer group of companies used to compare
ArvinMeritor's shareowner return (see Shareowner Return Performance Presentation
below).
Section 162(m) of the Internal Revenue Code provides that the Company may
not deduct compensation in excess of $1 million paid in any taxable year to the
Chief Executive Officer or any of the other four most highly compensated
individuals who were executive officers as of the end of the fiscal year, unless
the compensation is "performance based." Awards under the 1997 Long-Term
Incentives Plan, the 1998 Stock Benefit Plan and the Employee Stock Benefit
Plan, each as amended ("long-term incentive plans") are designed to be
"performance based" for purposes of Section 162(m) and are not subject to the
limit on deductibility. However, base salaries and awards under the Incentive
Compensation Plan do not qualify as "performance based" compensation for this
purpose, because the Compensation Committee retains discretion with respect to
these payments. The Compensation Committee's policy is to structure compensation
arrangements in a manner that will avoid the deduction limitations of Section
162(m), except where it determines that exceeding these limitations is in the
best interests of ArvinMeritor and its shareowners. None of the ArvinMeritor
executive officers to whom this limitation applies earned in excess of $1
million of non-performance based compensation in fiscal year 2003.
COMPONENTS OF ARVINMERITOR'S COMPENSATION PLANS
The primary components of ArvinMeritor's executive compensation are base
salary, annual incentives and long-term incentives. Each of these components is
discussed below.
- Base Salary -- In the early part of fiscal year 2003, the Compensation
Committee established the base salaries of the Company's senior executives,
including Messrs. O'Rourke, Soderstrom, Gosnell, Daniel and Stinson. The
Compensation Committee separately determined the salary for the Chief Executive
Officer (as discussed below), and established the base salaries of other senior
executives upon recommendations of the Chief Executive Officer and
ArvinMeritor's senior human resources executives. The recommended base salaries
were developed based on survey data and the consultants' reports, on individual
performance and on judgments as to the expected future contributions of the
individual senior executives. Base salaries also reflect the number of years of
experience that each executive had in his or her current position.
Because of industry downturns and cost reduction initiatives, 2003 base
salary adjustments for officers were made only in cases where salary levels were
significantly below market averages. Of the Named Executive Officers, Mr. Yost
and Mr. O'Rourke received salary adjustments effective as of February 1, 2003,
and Mr. Soderstrom and Mr. Gosnell received salary adjustments effective as of
September 1, 2003. Salary adjustments for executive officers who changed
positions during the year were implemented at the time of promotion.
- Annual Incentives -- Near the beginning of fiscal year 2003, the
Compensation Committee and the Board of Directors reviewed with the Chief
Executive Officer the corporate goals and objectives for that year. These goals
and objectives were focused on objectives tied to creating shareowner value,
which included measurable financial goals for the fiscal year, as well as
strategic objectives that require more subjective assessments. The financial
goals for fiscal year 2003 included earnings per share growth and improvement in
the ratio of non-cash working capital to sales. ArvinMeritor's strategic
objectives related to exceeding customer expectations, out-performing the
competition, developing an employee-valued culture, building supplier
relationships and enhancing social responsibility. In addition, separate goals
and objectives were developed for each of the business units, tailored to its
particular operations, and for each individual. When corporate, business unit
and individual goals and objectives are achieved, incentive compensation is
intended
21
to be awarded at or above 100% of stated target levels. These target levels were
established based on broad industry surveys, with significant upward and
downward leverage dependent on performance.
In assessing performance for fiscal year 2003, the Compensation Committee
focused solely on earnings per share growth and did not consider the attainment
of remaining corporate and individual goals. Since the Company did not achieve
minimum required thresholds for earnings growth in fiscal year 2003, no
incentive compensation awards were made to ArvinMeritor's executives or key
employees.
- Long-Term Incentives -- ArvinMeritor's long-term incentive plans provide
the flexibility to grant long-term incentives in a variety of forms, including
target performance awards, stock options, stock appreciation rights and
restricted shares of Common Stock. Annually, the Compensation Committee
evaluates the types of long-term incentives it believes are most likely to
achieve ArvinMeritor's total compensation objectives.
In fiscal year 2003, the Compensation Committee provided long-term
incentives to executive officers one-third each through stock option grants,
grants of performance-based restricted shares, and awards under long-term
performance plans. In recognition of fundamental changes in stock option award
practices, the Committee changed in 2003 from the prior practice of awarding
two-thirds stock options and one-third performance awards. As in prior years,
other executives' and key employees' long-term incentives were provided through
a combination of grants of non-performance based restricted shares, stock
options and/or awards under long-term performance plans. The Compensation
Committee believes that these allocations provide appropriate incentives for
achievement of the Company's goals, align the interests of executives with the
interests of shareowners and provide a means of increasing ownership of Common
Stock.
Stock Options. In accordance with these practices, the Compensation
Committee granted stock options to executive officers, including the Named
Executive Officers (see the table under Executive Compensation -- Option Grants
above), in fiscal year 2003. The Compensation Committee determined the
individual award of stock options to the Chief Executive Officer (as discussed
below), and reviewed the Chief Executive Officer's recommendations for
individual awards of stock options to other key executives. The Compensation
Committee also considered relevant survey data, the consultants' reports and the
anticipated future contributions of the individual executive officers.
Performance Awards. In fiscal year 2003, the Compensation Committee
established a performance plan with a three-year performance period ending
September 30, 2005, and set target performance awards thereunder for executives,
including the Named Executive Officers (see Executive Compensation -- Long-Term
Incentive Plan Awards above). Under the performance plan, potential compensation
depends on achieving levels of earnings per share growth and cash flow/return on
investment, as modified by the change in the price of ArvinMeritor Common Stock
during the term of the performance period.
In fiscal year 2001, the Compensation Committee granted key executives
long-term incentives under the 1997 Long-Term Incentives Plan. Since minimum
target goals based on earnings per share growth and cash flow/return on
investment for the three-year performance period ended September 30, 2003 were
not achieved, the Compensation Committee made no long-term incentive awards
under this performance plan.
Performance-Based Restricted Shares. In fiscal year 2003, the Compensation
Committee granted performance-based restricted shares of Common Stock to
executive officers, including the Named Executive Officers (see the column
headed Restricted Stock Awards in the table under Executive Compensation --
Summary Compensation Table above.) The portion of the restricted shares that
will vest at the end of the three-year restricted period is dependent on
achieving the same levels of earnings per share growth and cash flow/return on
investment that determine payouts of the performance awards described above.
COMPENSATION OF THE CHIEF EXECUTIVE OFFICER
For the period from October 1, 2002 to January 31, 2003, Mr. Yost's base
salary was $966,000. Effective February 1, 2003, his base salary increased to
$1,000,000. The Compensation Committee believes his base salary is in line with
its compensation philosophy and appropriately reflects Mr. Yost's
responsibilities as Chief Executive Officer. In accordance with the Compensation
Committee's assessment of the Company's financial performance in the past year
(described above in this report under the heading Components of ArvinMeritor's
22
Compensation Plans -- Annual Incentives), Mr. Yost did not receive any annual
incentive compensation for fiscal year 2003.
The Compensation Committee granted stock options and performance-based
restricted shares to Mr. Yost in fiscal year 2003 as long-term incentives. (See
Executive Compensation -- Option Grants and the column headed Restricted Stock
Awards in the table under Executive Compensation -- Summary Compensation Table
above.) In determining the number of options and restricted shares granted, the
Compensation Committee considered the consultants' advice and the value of
long-term incentives provided by other companies, as reported in surveys. The
Compensation Committee also considered Mr. Yost's total compensation, as well as
his past and expected future contributions to the achievement of ArvinMeritor's
long-term performance goals. The Compensation Committee also granted Mr. Yost
target performance awards under the performance plan established in fiscal 2003
for the three-year performance period ending September 30, 2005. (See Executive
Compensation -- Long-Term Incentive Plan Awards above.)
The Compensation Committee did not make a long-term incentive award to Mr.
Yost under the three-year performance plan that ended in fiscal year 2003 (see
Components of ArvinMeritor's Compensation Plans -- Long-Term
Incentives -- Performance Awards above in this report).
The Board in executive session (when Mr. Yost was not present) received and
discussed the Compensation Committee's evaluation of the Company's and Mr.
Yost's performance in the 2003 fiscal year. The Board also reviewed the
Compensation Committee's decision not to make any annual incentive award to Mr.
Yost for that year, and the long-term incentives granted to Mr. Yost in the form
of stock options, restricted shares and target performance awards.
SUMMARY
The Committee believes that ArvinMeritor's compensation plans are
consistent with the Company's strategic objectives and are properly aligned with
shareowners' best interests. The programs enable the Company to attract, retain
and motivate highly qualified individuals and provide appropriate incentives to
reward them for achieving and surpassing corporate and personal goals. The
Compensation Committee periodically re-assesses these programs to assure that
they emphasize performance and reward the enhancement of shareowner value, and
modifies the programs as deemed necessary and appropriate to achieve their
stated objectives, as well as to take into account systemic changes in leading
compensation practices. It also monitors these programs and changes them in
recognition of the dynamic, global marketplace in which ArvinMeritor competes
for talent.
Compensation and Management
Development Committee
Martin D. Walker, Chairman
Joseph P. Flannery
Charles H. Harff
James E. Perrella
AGREEMENTS WITH NAMED EXECUTIVE OFFICERS
Each of the Named Executive Officers received and accepted an employment
letter during fiscal year 2003. Under the terms of these letters, if we
terminate the executive's employment without cause, the executive will receive
any accrued and unpaid compensation; monthly severance pay for a period of 18 to
36 months (depending on years of service); pro rata participation in the current
year annual bonus and in the cash portion of existing long-term incentive
cycles; continuation of benefits (other than long-term and short-term disability
coverage) and savings plan participation throughout the severance period; full
vesting of all stock options at the end of the severance period; extension of
exercise period for stock options for three months after the end of the
severance period (but not beyond the original option expiration date); pro rata
vesting of restricted stock based on the portion of the restricted period that
has elapsed as of the end of the severance period; outplacement services; and
gross-up for any excise tax imposed. The executives also agreed to an
23
18-month non-solicitation provision, perpetual non-disclosure and
confidentiality, and mandatory arbitration of disputes.
The Company entered into an agreement with Craig M. Stinson in connection
with his resignation from the position of Senior Vice President and President,
Light Vehicle Systems, on August 26, 2003. Under this agreement, Mr. Stinson is
entitled to 36 months of severance pay (based on his 20 years of service); pro
rata participation in the performance plans under the 1997 Long-Term Incentives
Plan for the performance periods ending September 30, 2004 and 2005; and other
terms consistent with his employment letter (described above). In addition, the
Company agreed to pay Mr. Stinson a lump sum of $350,000 in 2004 to reimburse
him for expenses in connection with a job-related relocation and the building of
a new home, and Mr. Stinson agreed to 12-month non-compete and non-solicitation
provisions.
SHAREOWNER RETURN PERFORMANCE PRESENTATION
ArvinMeritor Common Stock began trading on the New York Stock Exchange on
July 10, 2000, following the merger of Meritor and Arvin into ArvinMeritor. As a
result, the cumulative total shareowner return on the Common Stock of the merged
entity cannot be provided for any period before that date.
The line graph below compares the cumulative total shareowner return on an
investment in Meritor's common stock against the cumulative total return of the
S&P 500 and a peer group of companies for the period from October 1, 1998 to
September 30, 2003, assuming a fixed investment of $100 at the respective
closing prices on the last day of each fiscal year and reinvestment of all cash
dividends. The fiscal years ended September 30, 2000, 2001, 2002 and 2003
reflect the exchange of each share of Meritor common stock for .75 of a share of
ArvinMeritor Common Stock on July 7, 2000, the effective date of the merger.
COMPARISON OF TOTAL RETURN
COMMON STOCK, S&P 500 INDEX(1) AND PEER GROUP INDEX(2)
[LINE GRAPH]
ARVINMERITOR, INC. S&P 500 MARKET INDEX PEER GROUP INDEX
------------------ -------------------- ----------------
9/30/98 100 100 100
9/30/99 141.5 127.81 103.98
9/30/00 77.26 144.78 79.11
9/30/01 81.95 106.24 76.18
9/30/02 109.05 84.48 77.23
9/30/03 106.37 105.09 95.17
---------------
(1) Standard & Poor's 500 Market Index.
(2) We believe that a peer group of representative independent automotive
suppliers of comparable size and products to ArvinMeritor is appropriate for
comparing shareowner return. The peer group consists of Borg-Warner
Automotive, Inc., Cummins Engine, Inc., Dana Corporation, Delphi Automotive
Systems,
24
Eaton Corporation, Johnson Controls, Inc., Lear Corporation, Superior
Industries International, Tenneco Automotive, Inc., Tower Automotive, Inc.
and Visteon Corporation. This peer group is the same as the group utilized
in the performance chart in last year's proxy statement.
RETIREMENT BENEFITS
Arvin and Meritor had separate retirement plans covering their respective
employees, and we assumed these plans at the time of the merger of the two
companies into ArvinMeritor. These separate retirement plans were superseded by
an integrated ArvinMeritor plan, effective January 1, 2001.
The following table shows the estimated aggregate annual retirement
benefits payable on a straight life annuity basis to participating employees in
the earnings and years of service classifications indicated under our retirement
plan, which covers most of our officers and other salaried employees on a
noncontributory basis. These benefits reflect a reduction to recognize in part
the cost of Social Security benefits related to service with the Company. The
plans also provide for the payment of benefits to an employee's surviving spouse
or other beneficiary.
ESTIMATED ANNUAL RETIREMENT BENEFITS FOR YEARS OF SERVICE INDICATED
---------------------------------------------------------------------
AVERAGE ANNUAL EARNINGS 10 YEARS 15 YEARS 20 YEARS 25 YEARS 30 YEARS 35 YEARS
----------------------- -------- -------- -------- ---------- ---------- ----------
$ 500,000 ................. $73,020 $109,531 $146,041 $ 182,551 $ 219,061 $ 255,571
1,000,000 ................. 148,020 222,031 296,041 370,051 444,061 518,071
1,500,000 ................. 223,020 334,531 446,041 557,551 669,061 780,571
2,000,000 ................. 298,020 447,031 596,041 745,051 894,061 1,043,071
2,500,000 ................. 373,020 559,531 746,041 932,551 1,119,061 1,305,571
3,000,000 ................. 448,020 672,031 896,041 1,120,051 1,344,061 1,568,071
Covered compensation includes salary and annual bonus. The calculation of
retirement benefits under the new plan generally is based upon average earnings
for the highest five consecutive years of the ten years preceding retirement.
Our new plan credits participants for service earned with ArvinMeritor, Arvin,
Meritor and Rockwell, as applicable. The credited years of service of Messrs.
Yost, O'Rourke, Soderstrom, Gosnell, Daniel and Stinson are 32, 4, 17, 24, 16
and 20, respectively.
The new plan includes "grandfathering" provisions under which the
retirement benefits payable to certain long-term employees will be adjusted in
some cases to reflect differences between the benefits earned under the new plan
and those earned under the predecessor plans prior to January 1, 2001.
Sections 401(a)(17) and 415 of the Internal Revenue Code limit the annual
benefits that may be paid from a tax-qualified retirement plan. As permitted by
the Employee Retirement Income Security Act of 1974, we have established a
supplemental plan that authorizes the payment out of the Company's general funds
of any benefits calculated under provisions of the applicable retirement plan
that may be above the limits under these sections. Effective January 1, 2001,
this new supplemental plan replaced separate supplemental plans of Arvin and
Meritor.
AUDIT COMMITTEE REPORT
The Audit Committee, in accordance with its written charter, assists the
Board in fulfilling its responsibility for monitoring the integrity of the
accounting, auditing and financial reporting practices of ArvinMeritor. The
Audit Committee's function is more fully described in its charter, which is
included as Appendix A to this proxy statement.
Management is responsible for the financial reporting process, including
the system of internal controls and disclosure controls, and for the preparation
of consolidated financial statements in accordance with accounting principles
generally accepted in the United States ("GAAP"). The independent auditors are
responsible for auditing these financial statements and expressing an opinion as
to their conformity to GAAP. The Audit Committee's responsibility is to monitor
and review these processes, acting in an oversight capacity. The Audit Committee
does not certify the financial statements or guarantee the independent auditor's
report.
25
The Audit Committee relies, without independent verification, on the information
provided to it, the representations made by management and the independent
auditors and the report of the independent auditors.
The Audit Committee has reviewed and discussed the audited financial
statements of the Company for the fiscal year ended September 30, 2003 with the
Company's management and has discussed with Deloitte & Touche LLP ("Deloitte"),
independent auditors, the matters required to be discussed by Statement on
Auditing Standards Standard No. 61, as amended, "Communication with Audit
Committees." In addition, Deloitte has provided the Audit Committee with the
written disclosures and the letter required by Independence Standards Board
Standard No. 1, "Independence Discussions with Audit Committees," and the Audit
Committee has discussed with Deloitte their independence.
Based on the foregoing reviews and discussions, the Audit Committee
recommended to the Board of Directors that the audited financial statements be
included in ArvinMeritor's Annual Report on Form 10-K for the fiscal year ended
September 30, 2003, to be filed with the SEC.
Audit Committee
William D. George, Jr., Chairman
Charles H. Harff
Victoria B. Jackson
James E. Marley
INDEPENDENT ACCOUNTANTS' FEES
During the last two fiscal years, Deloitte & Touche LLP billed ArvinMeritor
and its subsidiaries the following fees for its services:
FISCAL YEAR ENDING
SEPTEMBER 30,
-----------------------
2002 2003
---------- ----------
Audit fees.................................................. $2,860,000 $3,585,000
Audit-related fees(a)....................................... 190,000 255,000
Tax fees(b)................................................. 2,300,000 2,240,000
All other fees(c)........................................... 250,000 85,000
---------- ----------
TOTAL.................................................. $5,600,000 $6,165,000
---------------
(a) Includes fees for employee benefit plan audits, due diligence services and
internal control-related services.
(b) Includes fees for tax consulting, compliance and co-sourcing.
(c) Includes fees for human resources consulting and compilation services.
Pursuant to its charter, the Audit Committee is responsible for selection,
approving compensation and overseeing the independence, qualifications and
performance of the independent accountants. The Audit Committee's policy is to
pre-approve all audit and permissible non-audit services provided by the
independent accountants. Pre-approval is generally provided for up to one year,
is detailed as to the particular service or category of services and is
generally subject to a specific budget. The Audit Committee may also pre-approve
particular services on a case-by-case basis. In assessing requests for services
by the independent accountants, the Audit Committee considers whether such
services are consistent with the auditor's independence; whether the independent
accountants are likely to provide the most effective and efficient service based
upon their familiarity with the Company; and whether the service could enhance
the Company's ability to manage or control risk or improve audit quality.
All of the audit-related, tax and other services provided by Deloitte in
fiscal year 2003 (described in the footnotes to the table above) and related
fees were approved in advance by the Audit Committee.
26
PROPOSAL TO APPROVE THE SELECTION OF AUDITORS
The Audit Committee of the Board of Directors of ArvinMeritor has selected
the firm of Deloitte & Touche LLP as the auditors of the Company, subject to the
approval of the shareowners. Deloitte & Touche LLP have acted as auditors for
ArvinMeritor since the merger and acted as auditors for Meritor from its
inception.
Before the Audit Committee appointed Deloitte & Touche LLP, it carefully
considered the qualifications of that firm, including its performance for
ArvinMeritor and for Meritor prior to the merger and its reputation for
integrity and for competence in the fields of accounting and auditing.
Representatives of Deloitte & Touche LLP are expected to attend the 2004 Annual
Meeting to respond to appropriate questions and to make a statement if they
desire to do so.
THE BOARD OF DIRECTORS RECOMMENDS THAT YOU VOTE "FOR" THE PROPOSAL TO
APPROVE THE SELECTION OF DELOITTE & TOUCHE LLP TO ACT AS AUDITORS FOR
ARVINMERITOR, WHICH IS PRESENTED AS ITEM (2).
PROPOSAL TO APPROVE THE 2004 DIRECTORS STOCK PLAN
A proposal will be presented to the meeting to approve the 2004 Directors
Stock Plan (the "2004 Directors Plan"), which was adopted by the Board of
Directors on November 12, 2003, subject to approval of the shareowners. The
complete text of the 2004 Directors Plan is set forth in Appendix B to this
proxy statement, and shareowners are urged to review it together with the
following information, which is qualified in its entirety by reference to
Appendix B.
DESCRIPTION OF NEW DIRECTORS STOCK PLAN
The purpose of the 2004 Directors Plan is to link compensation of
non-employee directors of the Company directly with the interests of the
Company's shareowners. If approved by shareowners, the 2004 Directors Plan will
become effective and supersede a similar plan previously adopted by the Board
and approved by shareowners, and the first awards will be made immediately
following the meeting.
Participation. Participation in the 2004 Directors Plan will be limited to
directors who are not employees of the Company or any of its subsidiaries. There
are currently 11 non-employee directors. An aggregate of 275,000 shares of
Common Stock of the Company may be delivered under the 2004 Directors Plan,
subject to appropriate adjustment in the event of any change in or affecting
shares of Common Stock, including but not limited to stock dividends, stock
splits and recapitalizations.
Restricted Share Units. Under the 2004 Directors Plan, each non-employee
director may be awarded restricted share units immediately after each annual
meeting of shareowners, with the number of restricted share units (the "Annual
RSU Amount") to be fixed from time to time by the Board. The Board may also at
any time award non-employee directors such additional restricted share units
under the 2004 Directors Plan as it may determine in its sole discretion. Unless
otherwise provided in the applicable award agreement, (i) each restricted share
unit will be paid or settled by the issuance of one Share after the earliest of
(A) six years from the date of the award, (B) ten days after the non-employee
director retires from the Board after reaching age 72 and having served at least
three years as a director, or (C) the date the non-employee director resigns
from the Board or ceases to be a director by reason of the antitrust laws,
compliance with the Company's conflict of interest policies, death, disability
or other circumstances the Board determines not to be adverse to the best
interests of the Company, and (ii) if the non-employee director ceases to be a
director prior to six years from the date of the award for any other reason, the
restricted share unit will terminate and all right, title and interest of the
non-employee director therein will be forfeited. A recipient of restricted share
units may also be entitled to receive dividend equivalents in an amount equal to
the amount or value of any cash or other dividends or distributions payable on
an equivalent number of shares of Common Stock. If provided for in the
applicable award agreement, a non-employee director also may from time to time
elect in advance to defer the issuance and delivery of shares otherwise issuable
in respect of restricted share units held by the non-employee director.
27
Shares. Each non-employee director may be awarded shares of Common Stock
immediately after each annual meeting of shareowners, with the number of shares
(the "Annual Share Amount") to be fixed from time to time by the Board. The
Board may also at any time award non-employee directors such additional shares
of Common Stock under the 2004 Directors Plan as it may determine in its sole
discretion.
Restricted Shares. Each non-employee director may be awarded restricted
shares of Common Stock immediately after each annual meeting of shareowners,
with the number of shares (the "Annual Restricted Share Amount") to be fixed
from time to time by the Board. The Board may also at any time award non-
employee directors such additional restricted shares under the 2004 Directors
Plan as it may determine in its sole discretion. Restricted shares will have all
the attributes of outstanding shares, including the right to vote and to receive
dividends, except that restricted shares will be held by the Company. Unless
otherwise provided in the applicable award agreement, (i) the restricted shares
so held will be delivered to the non-employee director and cease to be
restricted shares upon the earliest of (A) the date the restrictions set forth
in the applicable award agreement lapse, (B) ten days after the non-employee
director retires from the Board after reaching age 72 and having served at least
three years as a director, or (C) the date the non-employee director resigns
from the Board or ceases to be a director by reason of the antitrust laws,
compliance with the Company's conflict of interest policies, death, disability
or other circumstances the Board determines not to be adverse to the Company's
best interests, and (ii) if the non-employee director ceases to be a director
for any other reason prior to the date the restrictions set forth in the
applicable award agreement lapse, all right, title and interest of the
non-employee director in the restricted shares will be forfeited.
Stock Options. Each non-employee director may be granted options to
purchase shares of Common Stock immediately after each annual meeting of
shareowners, with the number of shares subject to options to be fixed from time
to time by the Board (the "Annual Option Amount"). The Board may also at any
time grant non-employee directors options for such additional number of shares
under the 2004 Directors Plan as it may determine in its sole discretion. The
purchase price of the shares subject to each option granted will be 100% of the
fair market value of the shares on the date the option is granted. Upon exercise
of an option, the option price must be paid in full in cash, shares valued at
their fair market value on the date of exercise, or a combination of both.
Unless otherwise provided in the applicable award agreement, options
granted under the 2004 Directors Plan may not be exercised prior to one year or
after ten years from the date of grant and will become exercisable in three
approximately equal installments on the first, second and third anniversaries of
the date of grant, provided, however, that
- if an optionee who holds outstanding stock options dies, all options then
held will be exercisable even if they were not exercisable at the date of
death, but the options will expire at the earlier of three years after
the date of death or the expiration date specified in the options;
- if an optionee who holds outstanding stock options retires from the Board
after reaching age 72 and has served at least three years as a director,
all options then held will be exercisable even if they were not
exercisable at the retirement date, but the options will expire at the
earlier of five years after the date of retirement or the expiration date
specified in the options;
- if an optionee ceases to be a director by reason of disability or
resignation from the Board for reasons of the antitrust laws, compliance
with the Company's conflict of interest policies or other circumstances
that the Board determines not to be adverse to the Company's best
interests, all options then held by the optionee will be exercisable,
even if they were not exercisable at the termination date, from and after
the termination date, but the options will expire at the earlier of one
year after the termination date or the expiration date specified in the
options, unless the Board determines otherwise; and
- if an optionee ceases to be a director while holding unexercised options
for any other reason, the options will then be void.
Options granted under the 2004 Directors Plan are not transferable other
than by will or by the laws of descent and distribution or by gift to the
optionee's immediate family members, affiliated trusts or family charitable
trusts.
28
Stock Appreciation Rights. Each non-employee director may be granted stock
appreciation rights ("SARs") immediately after each annual meeting of
shareowners, with the number of SARs (the "Annual SAR Amount") to be fixed from
time to time by the Board. The Board may also at any time grant non-employee
directors such additional number of SARs under the 2004 Directors Plan as it may
determine in its sole discretion. SARs may be tandem SARs, which are SARs
related to a stock option, or freestanding SARs, which are SARs separate and
apart from the grant of an option. Tandem SARs permit an optionee, upon exercise
of such rights and surrender of the related option to the extent of an
equivalent number of shares, to receive a payment equal to the excess of the
fair market value (on the date of exercise) of the portion of the option so
surrendered over the option price of such shares. Freestanding SARs entitle the
grantee, upon exercise of such rights, to receive a payment equal to the excess
of the fair market value (on the date of exercise) of all or part of a
designated number of shares over the fair market value of such shares on the
date the SARs were granted. Such payment may be made in shares (valued on the
basis of the fair market value of the shares on the date of exercise of the
SARs) or in cash, or partly in shares and partly in cash, as the Corporate
Governance and Nominating Committee may determine. Unless otherwise provided in
the applicable award agreement, SARs granted under the 2004 Directors Plan will
be exercisable at the same times and under the same circumstances as described
above for options granted under the 2004 Directors Plan.
Pro Rata Awards. Each non-employee director elected at any meeting of the
Board will receive an award of 100% of the Annual RSU Amount, the Annual Share
Amount, the Annual Restricted Share Amount, the Annual Option Amount and the
Annual SAR Amount (the "Annual Grant Amount") if elected after an annual meeting
and prior to May 1, 75% of the Annual Grant Amount if elected between May 1 and
July 31, 50% of the Annual Grant Amount if elected between August 1 and October
31, and 25% of the Annual Grant Amount if elected between November 1 and the
next annual meeting.
Restricted Share Units or Restricted Shares in Lieu of Cash Compensation or
Shares. Each non-employee director may elect to receive all or any portion of
the cash retainer to be paid for Board or other service related to Board
activities in the form of restricted share units or restricted shares of Common
Stock. Each non-employee director may also elect to receive an annual award of
shares, if any, in the form of restricted share units or restricted shares of
Common Stock.
Administration and Amendment. The Corporate Governance and Nominating
Committee will administer the 2004 Directors Plan. The Board of Directors may
amend the 2004 Directors Plan in any respect, provided that without shareowner
approval no amendment will materially increase the number of shares of Common
Stock available under the 2004 Directors Plan (other than adjustments to reflect
changes in or affecting shares of Common Stock), expand the type of awards
available under the 2004 Directors Plan, materially expand the class of
directors eligible to participate in the 2004 Directors Plan, materially change
the method of determining the exercise price of options under the 2004 Directors
Plan or otherwise be effective to the extent that shareowner approval is
necessary to comply with applicable requirements of the New York Stock Exchange.
The Board of Directors also has authority to terminate the 2004 Directors
Plan at any time.
Change of Control. In order to maintain the rights of participants in the
2004 Directors Plan in the event of a change of control (as defined in Section
8.10 of the Company's By-Laws) of the Company, the 2004 Directors Plan provides
that upon the occurrence of a change of control, unless the Board of Directors
determines otherwise, all outstanding stock options and stock appreciation
rights shall become fully exercisable whether or not then exercisable, the
restrictions on all restricted shares shall lapse and all outstanding restricted
stock units will be paid or settled by the issuance of shares of Common Stock.
New Plan Benefits. Only non-employee directors are eligible to participate
in the 2004 Directors Plan, and no awards will be made under the Plan to
executive officers or employees, including the Named Executive Officers. Since
awards under the 2004 Directors Plan are made in the discretion of the Board,
the amounts to be awarded in any year are not determinable. It is currently
expected that the annual equity-based grant to each non-employee director
following the 2004 Annual Meeting of Shareowners will be in the form of 2,400
restricted stock units.
29
Tax Matters. The following is a brief summary of the material United
States federal income tax consequences of benefits under the 2004 Directors Plan
under present law and regulations:
- Restricted Share Units. The grant of a restricted share unit will not
result in any immediate tax consequences to the non-employee director or
the Company. Upon payment or settlement of a restricted share unit award
in shares or payment of any dividend equivalents, the non-employee
director will recognize taxable ordinary income, and the Company will be
entitled to a deduction, equal to the fair market value of the shares or
the dividend equivalents on the date received.
- Shares. A non-employee director will recognize taxable ordinary income
at the time of the award of unrestricted shares, and the Company will be
entitled to a deduction, equal to the fair market value of the shares at
that time.
- Restricted Shares. A non-employee director normally will not recognize
taxable income in connection with an award of restricted shares, and the
Company will not be entitled to a deduction, until the termination of the
restrictions. Upon such termination, the non-employee director will
recognize taxable ordinary income in an amount equal to the fair market
value of the shares at that time. However, a non-employee director may
elect to recognize taxable ordinary income in the year the restricted
shares are awarded in an amount equal to their fair market value at that
time, determined without regard to the restrictions. The Company will be
entitled to a deduction in the same amount and at the same time as the
non-employee director realizes income. To the extent dividends are paid
currently, a non-employee director will realize taxable ordinary
compensation income at the time such dividends are received and the
Company will be entitled to an equal deduction at that time.
- Stock Options. The grant of an option will not result in any immediate
tax consequences to the Company or the non-employee director. Upon the
exercise of an option, the non-employee director will recognize taxable
ordinary income, and the Company will be entitled to a deduction, equal
to the excess of the fair market value of the shares acquired at the time
of exercise over the option exercise price.
- Stock Appreciation Rights. The grant of either a tandem SAR or a
freestanding SAR will not result in any immediate tax consequences to the
Company or the non-employee director. Upon the exercise of either a
tandem SAR or a freestanding SAR, any cash received and the fair market
value on the exercise date of any shares received will constitute
ordinary income to the non-employee director. The Company will be
entitled to a deduction in the same amount and at the same time.
- Restricted Share Units or Restricted Shares in Lieu of Cash Compensation
or Shares. The value of restricted share units or restricted shares
awarded in lieu of cash retainers or an award of shares, if any, is not
taxable to the non-employee director, and the Company will not be
entitled to a deduction, until (i) in the case of restricted share units,
the payment or settlement of the restricted share units (at the value of
the shares on the date of payment or settlement) or (ii) in the case of
restricted shares, the lapse of the restrictions (at the value of the
shares on the date the restrictions lapse).
30
SECURITIES AUTHORIZED FOR ISSUANCE UNDER OTHER EQUITY COMPENSATION PLANS
The number of stock options outstanding under our other equity compensation
plans, the weighted average exercise price of outstanding options, and the
number of securities remaining available for issuance, as of September 30, 2003,
were as follows:
(COLUMN A) (COLUMN B) (COLUMN C)
NUMBER OF SECURITIES WEIGHTED AVERAGE NUMBER OF SECURITIES REMAINING
TO BE ISSUED UPON EXERCISE PRICE OF AVAILABLE FOR FUTURE ISSUANCE
EXERCISE OF OUTSTANDING OUTSTANDING UNDER EQUITY COMPENSATION
OPTIONS, WARRANTS AND OPTIONS, WARRANTS PLANS (EXCLUDING SECURITIES
PLAN CATEGORY RIGHTS(1) AND RIGHTS REFLECTED IN COLUMN A)
------------- ----------------------- ------------------- ----------------------------------
Equity compensation plans
approved by security
holders....................... 4,450,658 $20.59 4,214,754
Equity compensation plans not
approved by security
holders(2).................... 1,041,066 24.28 132,100
Total........................... 5,491,724(3) 21.29(3) 4,346,854(4)
---------------
(1) In addition to stock options, shares of Common Stock, restricted Common
Stock, and deferred Common Stock have been awarded under the Company's
equity compensation plans and were outstanding at September 30, 2003.
(2) All of our equity compensation plans except the 1998 Employee Stock Benefit
Plan were approved by the shareholders of either Arvin or Meritor prior to
the merger of the two companies into ArvinMeritor. The Employee Stock
Benefit Plan was adopted by the Arvin board of directors in 1998 and expires
in 2008. It is intended to provide compensation arrangements that will
attract, retain and reward key non-officer employees and to provide these
employees with a proprietary interest in the Company. The Plan provides for
the issuance of incentive awards to non-officer employees in the form of
stock options, tandem or non-tandem stock appreciation rights, restricted
stock, performance shares or performance units. For further information, see
the Plan document, which is filed as Exhibit 10-i to the Company's Annual
Report on Form 10-K for the fiscal year ended September 28, 2003 (File No.
1-15983).
(3) The table includes options granted under Arvin's 1988 Stock Benefit Plan,
1998 Stock Benefit Plan and Employee Stock Benefit Plan, which we assumed in
connection with the merger of Arvin and Meritor. A total of 3,118,255
options issued under these plans, with a weighted average exercise price of
$28.10, were assumed at the time of the merger.
(4) The following number of shares remained available for issuance under each of
our equity compensation plans at September 30, 2003. Grants under these
plans may be in the form of any of the listed types of awards:
NUMBER OF
PLAN SHARES TYPE OF AWARD
---- --------- ----------------------------------------
1997 Long-Term Incentives Plan.......... 3,934,381 Stock options, restricted stock,
non-tandem stock appreciation rights,
common stock
Incentive Compensation Plan............. 194,071 Common stock, restricted stock
Directors Stock Plan*................... 19,354 Stock options, common stock, restricted
stock
1998 Stock Benefit Plan................. 66,948 Stock options, restricted stock,
non-tandem stock appreciation rights,
performance shares, performance units
Employee Stock Benefit Plan............. 132,100 Stock options, restricted stock,
non-tandem stock appreciation rights,
performance shares, performance units
* The Directors Stock Plan will be terminated, and no further grants will be
made under that Plan, upon approval by shareowners of the adoption of the 2004
Directors Plan.
31
THE BOARD OF DIRECTORS RECOMMENDS THAT YOU VOTE "FOR" THE PROPOSAL TO
APPROVE THE ADOPTION BY THE BOARD OF DIRECTORS OF THE 2004 DIRECTORS PLAN, WHICH
IS PRESENTED AS ITEM (3).
VOTE REQUIRED
At the 2004 Annual Meeting, the four nominees who receive the greatest
number of votes for election as Class I directors, and the nominee who receives
the greatest number of votes for election as a Class II director, in each case
cast by the holders of ArvinMeritor Common Stock entitled to vote at the
meeting, a quorum being present, will become directors at the conclusion of the
tabulation of votes. To approve the selection of auditors and the approval of
the 2004 Directors Plan, more votes must be cast in favor of the proposal than
are cast against it, a quorum being present. The presence, in person or by
proxy, of the holders of at least a majority of the shares of ArvinMeritor
Common Stock issued and outstanding on the record date set for the meeting is
necessary to have a quorum.
Under Indiana law and our Restated Articles of Incorporation and By-Laws,
the aggregate number of votes cast "for" and "against" by all shareowners
present in person or represented by proxy at the meeting will be counted for
purposes of determining the minimum number of affirmative votes required for
approval of the selection of auditors and approval of the 2004 Directors Plan,
and the total number of votes cast "for" such matter will be counted for
purposes of determining whether sufficient affirmative votes have been cast. The
shares of a shareowner who abstains from voting on a matter or whose shares are
not voted by reason of a broker non-vote on a particular matter will be counted
for purposes of determining whether a quorum is present at the meeting so long
as the shareowner is present in person or represented by proxy. An abstention
from voting or a broker non-vote on a matter by a shareowner present in person
or represented by proxy at the meeting has no effect in the election of
directors, the approval of the selection of auditors or the approval of the 2004
Directors Plan (assuming a quorum is present).
OTHER MATTERS
The Board of Directors does not know of any other matters that may be
presented at the meeting. In the event of a vote on any matters other than those
referred to in items (1), (2) and (3) of the accompanying Notice of 2004 Annual
Meeting of Shareowners, it is intended that properly given proxies will be voted
on the additional matters in accordance with the judgment of the person or
persons voting such proxies.
COMPLIANCE WITH SECTION 16(A) OF THE EXCHANGE ACT
Section 16(a) of the Securities Exchange Act of 1934, as amended, requires
our officers and directors, and persons who own more than ten percent of a
registered class of ArvinMeritor equity securities, to file reports of ownership
and changes in ownership on Forms 3, 4 and 5 with the SEC and the New York Stock
Exchange. Officers, directors and greater than ten percent shareowners are
required by SEC regulation to furnish us with copies of all Forms 3, 4 and 5
they file.
Based solely on our review of the copies of such forms we have received and
information and representations furnished by our officers and directors, we
believe that all our officers, directors and greater than ten percent beneficial
owners have filed with the SEC on a timely basis all required forms with respect
to transactions in ArvinMeritor securities in fiscal year 2003.
ANNUAL REPORTS
Our Annual Report to Shareowners, including the Annual Report on Form 10-K
and financial statements, for the fiscal year ended September 30, 2003, was
mailed to shareowners with this proxy statement.
EXPENSES OF SOLICITATION
The cost of the solicitation of proxies will be borne by ArvinMeritor. In
addition to the use of the mails, proxies may be solicited personally, or by
telephone, telegraph, telecopy, Internet or other means of
32
communication by our directors, officers and employees without additional
compensation. We have engaged Georgeson Shareholder Communications Inc. to
assist in the solicitation of proxies for a base fee of $10,000, plus expenses.
We will also reimburse brokers and other persons holding stock in their names,
or in the names of nominees, for their expenses of resending proxy materials to
principals and obtaining their proxies.
SHAREOWNER PROPOSALS FOR 2005 ANNUAL MEETING
Under the rules and regulations of the SEC, shareowner proposals for the
2005 Annual Meeting of Shareowners must be received on or before September 7,
2004, at the Office of the Secretary at our headquarters, 2135 West Maple Road,
Troy, MI 48084-7186, in order to be eligible for inclusion in our proxy
materials. In addition, our By-Laws require a shareowner desiring to propose any
matter for consideration at the 2005 Annual Meeting of Shareowners to notify our
Secretary in writing at the above address on or after October 21, 2004 and on or
before November 20, 2004.
COMMUNICATIONS WITH THE BOARD OF DIRECTORS
We have established procedures for shareowners to communicate directly with
the Board of Directors on a confidential basis. If you are a shareowner, you can
contact the Board by mail at: ArvinMeritor Board of Directors, 330 East Maple
Road, PMB 335, Birmingham, MI 48009. All communications made by this means will
be received directly by the Chairman of the Corporate Governance and Nominating
Committee and will not be screened or reviewed by any ArvinMeritor personnel.
If you have concerns involving internal controls, accounting or auditing,
you can contact the Audit Committee directly, on a confidential basis, by mail
at: ArvinMeritor Audit Committee, 330 East Maple Road, PMB 315, Birmingham, MI
48009, or by e-mail at "audit.committee@arvinmeritor.com." All communications
made by these means will be received directly by the Chairman of the Audit
Committee and will not be screened or reviewed by any ArvinMeritor personnel.
January 5, 2004
If your ArvinMeritor shares are registered in your name and you plan to attend
the Annual Meeting of Shareowners to be held in Tampa, Florida on February 18,
2004, please be sure to request an admittance card by:
- marking the appropriate box on the proxy card and mailing the card using
the enclosed envelope; or
- indicating your desire to attend the meeting when you grant your proxy
via our telephone or Internet voting procedures; or
- writing to us at the following address:
ArvinMeritor, Inc.
2135 West Maple Road
Troy, Michigan 48084
Attention: Secretary
If your shares are not registered in your own name and you would like to attend
the meeting, please bring evidence of your ArvinMeritor share ownership with you
to the meeting. You should be able to obtain evidence of your ArvinMeritor share
ownership from the broker, trustee, bank or other nominee who holds your shares
on your behalf.
33
APPENDIX A
ARVINMERITOR, INC.
AUDIT COMMITTEE CHARTER
The Audit Committee of ArvinMeritor, Inc. (the "Corporation") is
established by the Board of Directors and shall be charged with:
- monitoring, or assisting the Board of Directors in monitoring, (i) the
integrity of the financial statements of the Corporation, (ii) the
compliance by the Corporation with legal and regulatory requirements, and
(iii) the independence, qualifications and performance of the
Corporation's internal audit function and independent accountants, and
- preparing the report to be included in the Corporation's annual proxy
statement.
The Audit Committee shall consist of at least three and not more than six
members of the Board of Directors.
Each member of the Audit Committee shall meet the independence and
experience requirements of the New York Stock Exchange, as they may be revised
from time to time.
The Audit Committee shall have the following powers and duties and report
thereon to the Board of Directors and the shareholders:
- To review and reassess its charter annually and submit any changes to the
Board of Directors for approval;
- Sole authority, for each fiscal year, to select and employ, subject to
approval of the shareholders (and to terminate and replace, where
appropriate), independent accountants to audit the books, records,
accounts and financial statements of the Corporation and its
subsidiaries, and to approve and cause the Corporation to pay all audit
engagement fees;
- To consult with management as to the appointment and removal of the
General Auditor, who is charged with auditing and evaluating the
Corporation's system of internal controls;
- To review with the independent accountants, who shall be accountable to
the Audit Committee:
- the scope of and the audit procedures utilized in their annual audit and
quarterly reviews of the Corporation's financial statements;
- the Corporation's annual and quarterly financial statements (including
the Management's Discussion and Analysis of Financial Condition and
Results of Operations) before their release, including critical
accounting policies and practices, significant financial reporting
issues and judgments made in connection therewith, new accounting
pronouncements, as well as changes to the Corporation's accounting
principles and the schedule of unadjusted differences;
- any recommendations of the independent accountants with respect to the
adequacy of the Corporation's system of internal controls, including
their attestation and report on management's report on internal
controls;
- any significant issues related to their audit activities and
management's response, restrictions, if any, imposed on their work or
access to requested information, the cooperation they received during
the audit and any significant disagreements with management, resolution
of which disagreements the Audit Committee shall have sole authority to
oversee; and
- a report to be provided by the Corporation's independent public
accountants at least annually, describing the firm's internal quality
control procedures, any material issues raised by the most recent
internal quality control review or peer review of the firm or by any
inquiry or investigation by governmental or professional authorities
within the preceding five years respecting one or more
A-1
audits carried out by the firm, and steps taken to deal with any such
issues, and all relationships between the firm and the Corporation;
- To review and approve in advance the fees charged, and the scope and
extent of any non-audit services to be performed, by the independent
accountants and to receive and evaluate at least annually a report from
such accountants as to their independence, and to report to the Board of
Directors the results of its evaluation;
- To review with the Corporation's General Auditor:
- the internal audit charter;
- the scope of the annual internal audit plan, including proposed
staffing, budget and other resources necessary for its accomplishment;
- the results of completed internal audits and management's response to
audit reports; and
- any comments the General Auditor may have on significant issues related
to the internal audit activities or restrictions, if any, imposed
thereon;
- To review with the Corporation's Chief Executive Officer, Chief Financial
Officer, Controller and other management personnel:
- the Corporation's annual and quarterly financial statements (including
Management's Discussion and Analysis of Financial Condition and Results
of Operations) before their release, including critical accounting
policies and practices, significant financial reporting issues and
judgments made in connection therewith, new accounting pronouncements,
as well as changes to the Corporation's accounting principles, and the
annual and quarterly earnings press release;
- significant internal control matters, including incidents of fraud and
financial misreporting, and management's annual report on internal
controls;
- standards of business conduct policies, compliance by the employees of
the Corporation with the Corporation's standards of business conduct
policies and other related matters;
- the appointment of the Corporation's General Auditor;
- policies with respect to risk assessment and risk management, including
financial and accounting risk exposures and management's initiatives to
monitor and control such exposures; and
- other matters within the scope of the Committee's duties;
- To meet, in separate executive sessions as part of each regularly
scheduled Audit Committee meeting:
- with the Corporation's Chief Executive Officer, Chief Financial Officer
and Controller;
- with the Corporation's General Auditor;
- with the independent accountants; and
- as a Committee without members of management;
- To investigate any matter brought to its attention within the scope of
its duties;
- To engage outside consultants, independent counsel or other advisors as
the Committee deems appropriate to perform its duties and
responsibilities;
- To establish procedures for the receipt, retention and treatment of
complaints regarding accounting, internal accounting controls or auditing
matters, including procedures for the confidential, anonymous submission
by employees of concerns regarding accounting or auditing matters;
- To set the Corporation's policies with respect to hiring employees or
former employees of the Corporation's independent accountants; and
A-2
- To perform any other activities consistent with this Charter, the
Corporation's By-laws, and applicable laws and regulations, as the Audit
Committee or the Board deems appropriate.
The Corporation shall provide appropriate funding, as determined by the
Audit Committee, for compensation to the independent auditor and any advisors
that the Audit Committee chooses to engage.
A-3
APPENDIX B
ARVINMERITOR, INC.
2004 DIRECTORS STOCK PLAN
1. PURPOSE OF THE PLAN.
The purpose of the 2004 Directors Stock Plan (the Plan) is to link the
compensation of non-employee directors of ArvinMeritor, Inc. (ArvinMeritor)
directly with the interests of the ArvinMeritor shareowners.
2. PARTICIPANTS.
Participants in the Plan shall consist of directors of ArvinMeritor who are
not employees of ArvinMeritor or any of its subsidiaries (Non-Employee
Directors). The term "subsidiary" as used in the Plan means a corporation more
than 50% of the voting stock of which, or an unincorporated business entity more
than 50% of the equity interest in which, shall at the time be owned directly or
indirectly by ArvinMeritor.
3. SHARES RESERVED UNDER THE PLAN.
Subject to the provisions of Section 14, there shall be reserved for
delivery under the Plan 275,000 shares of Common Stock, par value $1.00 per
share, of ArvinMeritor (Shares). Shares to be delivered under the Plan may be
authorized and unissued Shares, Shares held in treasury or any combination
thereof. Shares with respect to the unexercised, undistributed or unearned
portion of any terminated or forfeited award or grant made pursuant to the Plan
shall be available for further awards or grants.
4. ADMINISTRATION OF THE PLAN.
The Plan shall be administered by the Corporate Governance and Nominating
Committee (the Committee) of the Board of Directors of ArvinMeritor (the Board),
subject to the right of the Board, in its sole discretion, to exercise or
authorize another committee or person to exercise some or all of the
responsibilities, powers and authority vested in the Committee under the Plan.
The Committee (or the Board or any other committee or person authorized by the
Board) shall have authority to interpret the Plan, and to prescribe, amend and
rescind rules and regulations relating to the administration of the Plan, and
all such interpretations, rules and regulations shall be conclusive and binding
on all persons.
5. EFFECTIVE DATE OF THE PLAN.
The Plan has been approved by the Board and shall be submitted to the
shareowners of ArvinMeritor for approval at the Annual Meeting of Shareowners to
be held in 2004 and, if approved by the shareowners, shall become effective on
the date and at the time of such approval.
6. RESTRICTED SHARE UNITS.
(a) Annual Awards. Immediately following each Annual Meeting of
Shareowners of ArvinMeritor, each Non-Employee Director who is elected a
director at, or who was previously elected and continues as a director after,
that Annual Meeting may be awarded a right to receive Shares (Restricted Share
Units) upon the terms and conditions set forth in the Plan and the applicable
award agreement. The number of Restricted Share Units, if any, so awarded (the
Annual RSU Amount) shall be fixed from time to time by the Board. Unless
otherwise provided in the applicable award agreement, (i) each Restricted Share
Unit shall be paid or settled by the issuance of one Share after the earliest of
(A) six (6) years from the date of the award, (B) ten days after the
Non-Employee Director retires from the Board after reaching age 72 and having
served at least three years as a director or (C) the date the Non-Employee
Director resigns from the Board or ceases to be a director by reason of the
antitrust laws, compliance with ArvinMeritor's conflict of interest policies,
death, disability or other circumstances that the Board determines not to be
adverse to the best interests of ArvinMeritor and (ii) if the Non-Employee
Director ceases to be a director prior to six years from the date of
B-1
the award of the Restricted Share Unit for any reason other than as described in
clause (i)(B) or clause (i)(C) above, such Restricted Share Unit will terminate
and all right, title and interest of the Non-Employee Director thereunder will
be forfeited. A participant shall not be required to make any payment for any
Restricted Share Units or Shares delivered under this Section 6. Upon the
delivery of Shares under this Section 6, the recipient shall have the entire
beneficial ownership interest in, and all rights and privileges of a shareowner
as to those Shares, including the right to vote the Shares and to receive
dividends thereon.
(b) Discretionary Awards. At such times as the Board may determine, the
Board may award to each Non-Employee Director, or to one or more designated
Non-Employee Directors, such additional number of Restricted Share Units as the
Board in its sole discretion shall determine.
(c) Dividend Equivalents. If and to the extent provided for in the
applicable award agreement, a recipient of Restricted Share Units shall be
entitled, during the period after the Restricted Share Units are awarded and
until the termination and forfeiture or payment and settlement thereof, to
receive dividend equivalents in respect of such Restricted Share Units equal to
the amount or value of any cash or other dividends or distributions payable on
an equivalent number of Shares. Any such dividend equivalents shall be paid,
with or without interest, as and when provided for in the applicable award
agreement.
(d) Deferrals. If and to the extent provided for in the applicable award
agreement and on such terms and conditions as may be set forth therein, a
Non-Employee Director may from time to time elect in advance to defer the
issuance and delivery of Shares otherwise issuable in respect of Restricted
Share Units held by the Non-Employee Director.
7. SHARES.
(a) Annual Awards. Immediately following each Annual Meeting of
Shareowners of ArvinMeritor, each Non-Employee Director who is elected a
director at, or who was previously elected and continues as a director after,
that Annual Meeting may receive an award of Shares. The number of Shares, if
any, so awarded (the Annual Share Amount) shall be fixed from time to time by
the Board. A participant shall not be required to make any payment for any
Shares delivered under this Section 7. Upon the delivery of Shares under this
Section 7, the recipient shall have the entire beneficial ownership interest in,
and all rights and privileges of a shareowner as to those Shares, including the
right to vote the Shares and to receive dividends thereon.
(b) Discretionary Awards. At such times as the Board may determine, the
Board may award to each Non-Employee Director, or to one or more designated
Non-Employee Directors, such additional number of Shares as the Board in its
sole discretion shall determine.
8. RESTRICTED SHARES.
(a) Annual Awards. Immediately following each Annual Meeting of
Shareowners of ArvinMeritor, each Non-Employee Director who is elected a
director at, or who was previously elected and continues as a director after,
that Annual Meeting may receive an award of restricted Shares (Restricted
Shares). The number of Restricted Shares, if any, so awarded (the Annual
Restricted Share Amount) shall be fixed from time to time by the Board. A
participant shall not be required to make any payment for any Restricted Shares
delivered under this Section 8. Upon receipt of an award of Restricted Shares,
the recipient shall have the right to vote the Restricted Shares and to receive
dividends thereon, and the Restricted Shares shall have all the attributes of
outstanding Shares, except that the Restricted Shares shall be held in
book-entry accounts subject to the direction of ArvinMeritor (or if ArvinMeritor
elects, certificates therefor may be issued in the recipient's name but
delivered to and held by ArvinMeritor). Unless otherwise provided in the
applicable award agreement, (i) the Restricted Shares so held shall be delivered
to the Non-Employee Director and cease to be Restricted Shares upon the earliest
of (A) the date the restrictions set forth in the applicable award agreement
lapse, (B) ten days after the Non-Employee Director retires from the Board after
reaching age 72 and having served at least three years as a director or (C) the
date the Non-Employee Director resigns from the Board or ceases to be a director
by reason of the antitrust laws, compliance with ArvinMeritor's conflict of
interest policies, death, disability or other circumstances the Board determines
not to be adverse to the best interests of ArvinMeritor and (ii) if the
Non-Employee Director ceases to be a director for any reason
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other than as described in clause (i)(B) or clause (i)(C) above prior to the
date the restrictions set forth in the applicable award agreement lapse, all
right, title and interest of the Non-Employee Director in such Restricted Shares
shall be forfeited and such Restricted Shares shall be transferred to
ArvinMeritor.
(b) Discretionary Awards. At such times as the Board may determine, the
Board may award to each Non-Employee Director, or to one or more designated
Non-Employee Directors, such additional number of Restricted Shares as the Board
in its sole discretion shall determine.
9. STOCK OPTIONS.
(a) Annual Grants. Immediately following each Annual Meeting of
Shareowners of ArvinMeritor, each Non-Employee Director who is elected a
director at, or was previously elected and continues as a director after, that
Annual Meeting may be granted an option (Option) to purchase Shares. The number
of Shares subject to Options, if any, so granted (the Annual Option Amount)
shall be fixed from time to time by the Board.
(b) Discretionary Grants. At such times as the Board may determine, the
Board may grant to each Non-Employee Director, or to one or more designated
Non-Employee Directors, Options for such additional number of Shares as the
Board in its sole discretion shall determine.
(c) Exercise Price. The exercise price per Share for each Option granted
under this Section 9 shall be one-hundred percent (100%) of the Fair Market
Value (as defined below) of the Shares on the date of grant.
(d) Exercise and Termination. The purchase price of the Shares with
respect to which an Option or portion thereof is exercised shall be payable in
full in cash, Shares valued at their Fair Market Value on the date of exercise,
or a combination thereof. Unless otherwise provided in the applicable award
agreement: (i) each Option may be exercised in whole or in part at any time
after it becomes exercisable, (ii) each Option shall become exercisable in three
approximately equal installments on each of the first, second and third
anniversaries of the date the Option is granted and (iii) no Option shall be
exercisable prior to one year or after ten years from the date of the grant
thereof; provided, however, that (A) if the holder of an Option dies, the Option
may be exercised from and after the date of the optionee's death for a period of
three years (or until the expiration date specified in the Option if earlier)
even if it was not exercisable at the date of death; (B) if an optionee retires
after reaching age 72 and having served at least three years as a director, all
Options then held by that optionee shall be exercisable even if they were not
exercisable at the optionee's retirement date, provided, however, that each such
Option shall expire at the earlier of five years after the date of the
optionee's retirement or the expiration date specified in the Option; (C) if an
optionee ceases to be a director by reason of disability or resignation from the
Board for reasons of the antitrust laws, compliance with ArvinMeritor's conflict
of interest policies or other circumstances that the Board determines not to be
adverse to the best interests of ArvinMeritor, all Options then held by such
optionee may be exercised from and after such termination date for a period of
one year (or until the expiration date specified in the Option, if earlier),
even if they were not exercisable at such termination date, unless otherwise
determined by the Board; and (D) if an optionee ceases to be a director while
holding unexercised Options for any reason not specified above, such Options are
then void.
(e) Nonassignability. Except as otherwise provided in an applicable award
agreement, Options granted under the Plan are not transferable other than (i) by
will or by the laws of descent and distribution or (ii) by gift to the grantee's
spouse or natural, adopted or step-children or grandchildren (Immediate Family
Members) or to a trust for the benefit of one or more of the grantee's Immediate
Family Members or to a family charitable trust established by the grantee or a
member of the grantee's family.
10. STOCK APPRECIATION RIGHTS.
(a) Annual Grants. Immediately following each Annual Meeting of
Shareowners of ArvinMeritor, each Non-Employee Director who is elected a
director at, or was previously elected and continues as a director after, that
Annual Meeting may be granted Stock Appreciation Rights (as defined below). The
number of Stock Appreciation Rights, if any, so granted (the Annual SAR Amount)
shall be fixed from time to time by
B-3
the Board. Tandem SARs (as defined below) may be granted at the time of grant of
an Option or at any time thereafter during the term of an Option.
(b) Discretionary Grants. At such times as the Board may determine, the
Board may grant to each Non-Employee Director, or to one or more designated
Non-Employee Directors, awards of such additional number of Stock Appreciation
Rights as the Board in its sole discretion shall determine.
(c) Exercise and Other Terms. A Tandem SAR shall be exercisable only when
and to the extent that the related Option is exercisable and in lieu thereof.
Freestanding SARs (as defined below) may be granted on terms and conditions
determined by the Committee, consistent with the provisions of the Plan. The
payment to which the grantee of a Stock Appreciation Right is entitled upon
exercise thereof may be made in Shares valued at their Fair Market Value on the
date of exercise, or in cash or partly in cash and partly in Shares, as the
Committee may determine. Upon exercise of a Tandem SAR and surrender of the
related Option or part thereof, such Option, to the extent surrendered, shall
not thereafter be exercisable, and the Shares covered by the surrendered Option
shall not again be available for grants pursuant to the Plan. Upon exercise of a
Freestanding SAR, any Shares delivered in payment thereof shall not again be
available for grants pursuant to the Plan. Unless otherwise provided in the
applicable award agreement: (i) each Freestanding SAR may be exercised in whole
or in part at any time after it becomes exercisable, (ii) each Freestanding SAR
shall become exercisable in three approximately equal installments on each of
the first, second and third anniversaries of the date the Freestanding SAR is
granted and (iii) no Freestanding SAR shall be exercisable prior to one year or
after ten years from the date of the grant thereof; provided, however, that (A)
if the holder of a Freestanding SAR dies, the Freestanding SAR may be exercised
from and after the date of the Non-Employee Director's death for a period of
three years (or until the expiration date specified in the Freestanding SAR if
earlier) even if it was not exercisable at the date of death; (B) if a
Non-Employee Director retires after reaching age 72 and having served at least
three years as a director, all Freestanding SARs then held by that Non-Employee
Director shall be exercisable even if they were not exercisable at the
Non-Employee Director's retirement date, provided, however, that each such
Freestanding SAR shall expire at the earlier of five years after the date of the
Non-Employee Director's retirement or the expiration date specified in the
Freestanding SAR; (C) if a Non-Employee Director ceases to be a director by
reason of disability or resignation from the Board for reasons of the antitrust
laws, compliance with ArvinMeritor's conflict of interest policies or other
circumstances that the Board determines not to be adverse to the best interests
of ArvinMeritor, all Freestanding SARs then held by such Non-Employee Director
may be exercised from and after such termination date for a period of one year
(or until the expiration date specified in the Freestanding SAR, if earlier),
even if they were not exercisable at such termination date, unless otherwise
determined by the Board; and (D) if a Non-Employee Director ceases to be a
director while holding unexercised Freestanding SARs for any reason not
specified above, such Freestanding SARs are then void.
(d) Definitions. For purposes of the Plan, "Stock Appreciation Right" or
"SAR" means a right granted to a Non-Employee Director (i) in conjunction with
all or any part of any Option, which entitles the Non-Employee Director, upon
exercise of such right, to surrender such Option, or any part thereof, and to
receive a payment equal to the excess of the Fair Market Value on the date of
such exercise of the Shares covered by such Option, or part thereof, over the
purchase price of such Shares pursuant to the Option (a Tandem SAR) or (ii)
separate and apart from any Option, which entitles the Non-Employee Director,
upon exercise of such right, to receive a payment measured by the increase in
the Fair Market Value of a number of Shares designated by such right from the
date of grant of such right to the date on which the Non-Employee Director
exercises such right (a Freestanding SAR).
11. PRO RATA AWARDS.
Each Non-Employee Director who is elected a director at any meeting of the
Board shall receive effective immediately after that meeting an award of one
hundred percent (100%) of the Annual RSU Amount, the Annual Share Amount, the
Annual Restricted Share Amount, the Annual Option Amount and the Annual SAR
Amount (the "Annual Grant Amount") if elected after an Annual Meeting of
Shareowners and prior to May 1; an award of seventy-five percent (75%) of the
Annual Grant Amount if elected between May 1 and July 31; an award of fifty
percent (50%) of the Annual Grant Amount if elected between August 1 and
B-4
October 31; and an award of twenty-five percent (25%) of the Annual Grant Amount
if elected between November 1 and the next Annual Meeting of Shareowners.
12. RESTRICTED SHARE UNITS OR RESTRICTED SHARES IN LIEU OF CASH COMPENSATION OR
SHARES.
(a) Each Non-Employee Director may elect each year, not later than
December 31 of the year preceding the year as to which deferral of fees is to be
applicable, to defer all or any portion of the cash retainer to be paid for
Board or other service related to Board activities in the following calendar
year through the issuance or transfer of Restricted Share Units or Restricted
Shares, valued at the Fair Market Value of the Shares on the date when each
payment of such retainer amount would otherwise be made in cash. Such Restricted
Share Units or Restricted Shares shall be the same as and subject to the same
provisions as are applicable to Restricted Share Units and Restricted Shares
that may be awarded pursuant to Sections 6 and 8, respectively.
(b) Each Non-Employee Director may elect each year, not later than
December 31 of the year preceding the year in which an annual award of Shares is
to be made pursuant to Section 7(a), to receive the annual award in the form of
Restricted Share Units or Restricted Shares. Such Restricted Share Units or
Restricted Shares shall be the same as and subject to the same provisions as are
applicable to Restricted Share Units and Restricted Shares that may be awarded
pursuant to Sections 6 and 8, respectively.
13. AWARD AGREEMENTS.
Each award or grant under the Plan may be evidenced by an award agreement
setting forth such terms and conditions of the award or grant, not inconsistent
with the terms of the Plan, as the Committee shall determine. In the event of
any conflict between an award agreement and the Plan, the terms of the Plan
shall govern.
14. ADJUSTMENTS UPON CHANGES IN CAPITALIZATION.
If there shall be any change in or affecting Shares on account of any
merger, consolidation, reorganization, recapitalization, reclassification, stock
dividend, stock split or combination, or other distribution to holders of Shares
(other than a cash dividend), there shall be made or taken such amendments to
the Plan and outstanding awards or grants and award agreements and such
adjustments and actions thereunder as the Board may deem appropriate under the
circumstances.
15. GOVERNMENT AND OTHER REGULATIONS.
The obligations of ArvinMeritor to issue or deliver Shares under the Plan
or upon exercise of Options granted under the Plan shall be subject to (a) all
applicable laws, rules and regulations and such approvals by any governmental
agencies as may be required, including, without limitation, compliance with the
Securities Act of 1933, as amended, and (b) the condition that such Shares shall
have been duly listed on the New York Stock Exchange.
16. AMENDMENT AND TERMINATION OF THE PLAN.
The Plan may be amended by the Board in any respect, provided that, without
shareowner approval, no amendment shall (a) materially increase the number of
Shares available under the Plan (other than adjustments pursuant to Section 14),
(b) expand the types of awards available under the Plan, (c) materially expand
the class of directors eligible to participate in the Plan, (d) materially
change the method of determining the exercise price of Options under the Plan or
(e) otherwise be effective to the extent that shareowner approval is necessary
to comply with applicable requirements of the New York Stock Exchange. The Plan
may also be terminated at any time by the Board. Termination of the Plan shall
not affect the rights of Non-Employee Directors with respect to awards
previously granted to them and all unexpired awards shall continue in force and
effect after termination of the Plan except as they may lapse or be terminated
by their own terms and conditions.
B-5
17. MISCELLANEOUS.
(a) Nothing contained in the Plan shall be deemed to confer upon any
person any right to continue as a director of or to be associated in any other
way with ArvinMeritor.
(b) For purposes of the Plan, the "Fair Market Value" of Shares means the
closing sale price of the Shares as reported in the New York Stock
Exchange -- Composite Transactions on the date of a determination (or on the
next preceding day that Shares were traded if they were not traded on the date
of a determination).
(c) Notwithstanding any other provision of the Plan, if a Change of
Control as defined in Section 8.10 of ArvinMeritor's Amended By-Laws shall
occur, then, unless prior to the occurrence thereof the Board of Directors shall
determine otherwise by vote of at least two-thirds of its members, (i) all
Options and Stock Appreciation Rights then outstanding pursuant to the Plan
shall forthwith become fully exercisable whether or not then exercisable, (ii)
the restrictions on all Restricted Shares awarded under the Plan shall forthwith
lapse and (iii) all outstanding Restricted Share Units shall forthwith be paid
or settled by the issuance of Shares thereunder.
(d) To the extent that Federal laws do not otherwise control, the Plan and
all determinations made and actions taken pursuant hereto shall be governed by
the laws of the State of Delaware.
B-6
[ARVINMERITOR LOGO] YOUR VOTE IS IMPORTANT
VOTE BY INTERNET / TELEPHONE
24 HOURS A DAY, 7 DAYS A WEEK
INTERNET
HTTPS://WWW.PROXYVOTENOW.COM/ARM
- Go to the website address listed above.
- HAVE YOUR PROXY CARD READY.
- Follow the simple instructions that appear on your computer screen.
OR
TELEPHONE
1-866-209-1708
- Use any touch-tone telephone.
- HAVE YOUR PROXY CARD READY.
- Follow the simple recorded instructions.
OR
MAIL
- Mark, sign and date your proxy card.
- Detach your proxy card.
- Return your proxy card in the postage-paid envelope provided.
Your telephone or internet vote authorizes the named proxies to vote your shares
in the same manner as if you marked, signed and returned the proxy card. IF YOU
HAVE SUBMITTED YOUR PROXY BY TELEPHONE OR THE INTERNET THERE IS NO NEED FOR YOU
TO MAIL BACK YOUR PROXY.
1-866-209-1708
CALL TOLL-FREE TO VOTE
* DETACH PROXY CARD HERE IF YOU ARE NOT VOTING BY TELEPHONE OR INTERNET *
MARK, SIGN, DATE AND
RETURN THE PROXY
CARD PROMPTLY USING
THE ENCLOSED
ENVELOPE. [X]
VOTES MUST BE
INDICATED (X) IN
BLACK OR BLUE INK.
THE BOARD OF DIRECTORS RECOMMENDS VOTES FOR (1), (2) AND (3).
(1) The election of directors
FOR all nominees [ ] WITHHOLD AUTHORITY to vote [ ] *EXCEPTIONS [ ]
listed below for all nominees listed below
Nominees for a term expiring in 2007: 01 - Rhonda L. Brooks,
02 - William R. Newlin,
03 - Terrence E. O'Rourke,
04 - Larry D. Yost
Nominee for a term expiring in 2005: 05 - Richard W. Hanselman
(INSTRUCTIONS: TO WITHHOLD AUTHORITY TO VOTE FOR ANY INDIVIDUAL NOMINEE, MARK
THE "EXCEPTIONS" BOX AND WRITE THAT NOMINEE'S NAME IN THE SPACE PROVIDED BELOW).
*Exceptions ______________________________________________________________
FOR AGAINST ABSTAIN
2. The selection of auditors [ ] [ ] [ ]
3. Approval of the 2004 Directors Stock Plan [ ] [ ] [ ]
To change your address, please mark
this box. [ ]
Annual Report - Mark here to
discontinue mailing of annual
report to shareowners for this
account (for multiple account
holders only). [ ]
I will attend the annual meeting. [ ]
S C A N L I N E
NOTE: Please sign, date and return the proxy card promptly using the enclosed
envelope. When signing as attorney, executor, administrator, trustee or
guardian, please give full title as such, and if signing for a corporation,
please give your title. When shares are in the name of more then one person,
each should sign the proxy.
Date _______ Share Owner sign here ____________ Co-Owner sign here _____________
ARVINMERITOR, INC.
PROXY CARD SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
DIRECTION CARD TO T. ROWE PRICE TRUST COMPANY, DIRECTED TRUSTEE,
AND/ OR WELLS FARGO BANK, N.A., TRUSTEE
The undersigned hereby appoints William D. George, Jr. Charles H. Harff, and
Larry D. Yost, jointly and severally, proxies, with full power of substitution,
to vote shares of common stock of the Company owned of record by the undersigned
and which the undersigned is entitled to vote, at the Annual Meeting of
Shareowners to be held at the Hyatt Regency Tampa Hotel, Two Tampa City Center,
211 North Tampa Street, Tampa, Florida 33602, on February 18, 2004, or any
adjournment thereof, as specified on the reverse side of this card, and to vote
in accordance with their discretion on such other matters as may properly come
before the meeting.
The undersigned also provides directions to T. Rowe Price Trust Company,
Directed Trustee, to vote shares of common stock of the Company allocated to
accounts of the undersigned under the ArvinMeritor, Inc. Savings Plan and the
ArvinMeritor, Inc. Employees Savings Plan, and provides directions to Wells
Fargo Bank, N.A., Trustee, to vote shares of common stock of the Company
allocated to accounts of the undersigned under the various Rockwell Automation,
Inc. Savings Plans (Rockwell Automation Retirement Savings Plan for Salaried
Employees, Rockwell Automation Retirement Savings Plan for Hourly Employees,
Rockwell Automation Savings and Investment Plan for Represented Hourly
Employees, Rockwell Automation Retirement Savings Plan for Represented Hourly
Employees, and Rockwell Automation Retirement Savings Plan for Certain
Employees), and which are entitled to be voted, at the aforesaid Annual Meeting
or any adjournment thereof, as specified on the reverse side of this card.
The undersigned also provides directions to Wells Fargo Bank, N.A., Trustee, to
vote all such shares allocated to Rockwell Automation Savings Plan accounts of
the undersigned as it deems proper on such other matters as may properly come
before the meeting.
WHERE A VOTE IS NOT SPECIFIED:
- THE PROXIES WILL VOTE ALL SUCH SHARES OWNED OF RECORD FOR THE
ELECTION OF DIRECTORS AND FOR PROPOSALS (2) AND (3) AND WILL VOTE AS
THEY DEEM PROPER ON SUCH OTHER MATTERS AS MAY PROPERLY COME BEFORE
THE MEETING;
- WELLS FARGO, AS TRUSTEE, WILL VOTE ALL SUCH SHARES ALLOCATED TO THE
ROCKWELL AUTOMATION SAVINGS PLAN ACCOUNTS OF THE UNDERSIGNED AS IT
DEEMS PROPER ON PROPOSALS (1), (2) AND (3) AND ON SUCH OTHER MATTERS
AS MAY PROPERLY COME BEFORE THE MEETING; AND
- T. ROWE PRICE, AS DIRECTED TRUSTEE, WILL VOTE ALL SUCH SHARES
ALLOCATED TO THE ARVINMERITOR SAVINGS PLAN AND EMPLOYEES SAVINGS
PLAN ACCOUNTS OF THE UNDERSIGNED ON PROPOSALS (1), (2) AND (3) IN
THE SAME MANNER AND PROPORTION AS SHARES FOR WHICH VOTING
INSTRUCTIONS ARE RECEIVED.
TO PARTICIPANTS IN THE ROCKWELL AUTOMATION
SAVINGS PLANS
Please vote in accordance with the instructions on the reverse side of this card
by February 11, 2004. If you do not properly vote by that date, Wells Fargo
Bank, N.A., as Trustee for the Rockwell Automation Savings Plans, will vote the
shares allocated to your Savings Plan accounts as it deems proper.
ARVINMERITOR, INC.
P.O. BOX 11012
NEW YORK, N.Y. 10203-0012