SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(A) OF THE SECURITIES
EXCHANGE ACT OF 1934 (AMENDMENT NO. )
Filed by the Registrant [X]
Filed by a Party other than the Registrant [ ]
Check the appropriate box:
[ ] Preliminary Proxy Statement
[ ] Confidential, for Use of the Commission Only
(as permitted by Rule 14a-6(e)(2))
[X] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to Section 240.14a-12
ARVINMERITOR, INC.
--------------------------------------------------------------------------------
(Name of Registrant as Specified In Its Charter)
--------------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement, if other than Registrant)
Payment of Filing Fee (Check the appropriate box):
[X] No fee required.
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and 0-11.
(1) Title of each class of securities to which transaction applies:
------------------------------------------------------------------------
(2) Aggregate number of securities to which transaction applies:
------------------------------------------------------------------------
(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (Set forth the amount on which the
filing fee is calculated and state how it was determined):
------------------------------------------------------------------------
(4) Proposed maximum aggregate value of transaction:
------------------------------------------------------------------------
(5) Total fee paid:
------------------------------------------------------------------------
[ ] Fee paid previously with preliminary materials.
[ ] Check box if any part of the fee is offset as provided by Exchange Act Rule
0-11(a)(2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration statement number,
or the Form or Schedule and the date of its filing.
(1) Amount Previously Paid:
------------------------------------------------------------------------
(2) Form, Schedule or Registration Statement No.:
------------------------------------------------------------------------
(3) Filing Party:
------------------------------------------------------------------------
(4) Date Filed:
------------------------------------------------------------------------
[ArvinMeritor Logo]
LETTER TO
SHAREOWNERS
NOTICE OF 2003
ANNUAL MEETING
AND
PROXY STATEMENT
[ArvinMeritor Logo]
January 3, 2003
Dear Shareowner:
You are cordially invited to attend the 2003 annual meeting of shareowners of
ArvinMeritor, Inc.
The meeting will be held at the Company's World Headquarters, 2135 West Maple
Road, Troy, Michigan, on Wednesday, February 19, 2003, 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 or
direction card, or indicate your intention to attend when voting by telephone or
Internet.
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 2003 ANNUAL MEETING OF SHAREOWNERS
TO THE SHAREOWNERS OF
ARVINMERITOR, INC.:
NOTICE IS HEREBY GIVEN that the 2003 Annual Meeting of Shareowners of
ArvinMeritor, Inc. (the "Company") will be held at the Company's World
Headquarters, 2135 West Maple Road, Troy, Michigan, on Wednesday, February 19,
2003, 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 2006;
(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; and
(3) to transact such other business as may properly come before the
meeting.
Only shareowners of record at the close of business on December 13, 2002 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 3, 2003
NOTE: THE BOARD OF DIRECTORS SOLICITS THE EXECUTION AND PROMPT RETURN OF THE
ACCOMPANYING PROXY. A RETURN ENVELOPE IS ENCLOSED.
PROXY STATEMENT
The 2003 Annual Meeting of Shareowners of ArvinMeritor, Inc. (the "Company"
or "ArvinMeritor") will be held on February 19, 2003, for the purposes set forth
in the accompanying Notice of 2003 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 3, 2003.
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.
ArvinMeritor was incorporated in Indiana in March 2000 in connection with
the merger (the "Merger") of Meritor Automotive, Inc. ("Meritor") and Arvin
Industries, Inc. ("Arvin") on July 7, 2000. Following the Merger, shareowners of
Arvin and Meritor were entitled to exchange their common stock for shares of
Common Stock, par value $1 per share, of ArvinMeritor ("Common Stock"), at
specified exchange ratios.
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 13, 2002
are entitled to receive notice of, and to vote at, the meeting. On December 13,
2002, we had outstanding 68,515,266 shares of Common Stock. Each holder of
Common Stock is entitled to one vote for each share held.
As of December 13, 2002, T. Rowe Price Trust Company, 4555 Painters Mill
Road, Owings Mills, Maryland 21117, as trustee under the ArvinMeritor savings
plans for its participating employees, and Wells Fargo Bank, N.A., 707 Wilshire
Boulevard, Los Angeles, California 90017, 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") and Rockwell Collins, Inc., owned the following shares of Company
Common Stock:
PERCENT OF OUTSTANDING
NAME NUMBER OF SHARES COMMON STOCK
---- ---------------- ----------------------
T. Rowe Price Trust Company...................... 3,503,252 5.11
Wells Fargo Bank, N.A............................ 2,609,872 3.81
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
1
(either in writing or by means of telephone or Internet voting procedures).
Where no instructions are received, shares held in the Rockwell and Rockwell
Collins plans will be voted as the trustee deems proper, and shares held in the
ArvinMeritor plans will be voted by the 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, 2001:
- Barclays Global Investors N.A., and Barclays Global Fund Advisors, 45
Fremont Street, San Francisco, California 94105; and Barclays Global
Investors, Ltd., Murray House, 1 Royal Mint Court, London, England EC3
NHH, reported beneficial ownership of 4,011,720 shares, representing
approximately 6.03% of the outstanding shares, of ArvinMeritor Common
Stock as of December 31, 2001. This information is based on Schedule 13G
dated February 11, 2002, which was delivered to the Company.
- FMR Corp., Edward C. Johnson 3d, Abigail P. Johnson, Fidelity Management
& Research Company and Fidelity Low Priced Stock Fund, 82 Devonshire
Street, Boston, Massachusetts 02109, reported beneficial ownership of up
to 4,639,560 shares, representing up to 6.977%, of ArvinMeritor Common
Stock outstanding as of December 31, 2001. This information is based on
Schedule 13G, dated February 14, 2002, which was delivered to the Company
and filed with the Securities and Exchange Commission ("SEC").
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 and, after the Annual Meeting, will consist of
twelve members.
Four directors are standing for re-election at the 2003 Annual Meeting as
Class III directors, for terms expiring at the Annual Meeting in 2006. One
director is standing for re-election as a Class II director with a term expiring
at the Annual Meeting in 2005. The four directors in Class I and the remaining
three directors in Class II are serving terms expiring at the Annual Meeting of
Shareowners in 2004 and 2005, respectively.
Steven C. Beering, currently a Class III director, will retire as of the
date of the 2003 Annual Meeting and will not stand for re-election. In November
2002, the Board redesignated certain directors into different classes to realign
the classes and make them equal in number. Joseph B. Anderson, Jr. (formerly a
Class I director) is standing for reelection at the 2003 Annual Meeting as a
Class III director for a term expiring at the Annual Meeting in 2006, and
William D. George, Jr. (formerly a Class I director) is standing for re-
election as a Class II director for a two-year term expiring at the Annual
Meeting in 2005. Rhonda L. Brooks (formerly a Class II director) was
redesignated, with her consent, as a Class I director with a term ending at the
Annual Meeting in 2004.
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
III -- Nominees for Director with a Term Expiring in 2006 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 DIRECTORS AND CONTINUING DIRECTORS
The following information, as reported to us, 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; 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.
2
CLASS III -- NOMINEES FOR DIRECTOR WITH A TERM EXPIRING IN 2006
JOSEPH B. ANDERSON, JR.
Chairman of the Board and Chief Executive Officer, Vibration Control
Technologies, LLC (Automotive Components)
Age 59
[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 June 2002. He was
Chairman of the Board and Chief Executive Officer of Chivas
Industries LLC (and its predecessor, Chivas Products, Ltd.) from
October 1994 until June 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. (Jewelry)
Age 47
[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 fine jewelry design and marketing firm. 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 PepsiAmericas, Inc. 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 67
[JAMES E. MARLEY PHOTO]
Mr. Marley, a director since July 2000 and a director of Meritor
from April 1999 until the Merger, is a member of the Audit
Committee and the Environmental and Social Responsibility
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.
3
JAMES E. PERRELLA
Retired Chairman of the Board, President and Chief Executive Officer,
Ingersoll-Rand Company (Industrial Components)
Age 67
[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 Corporate
Governance and Nominating Committee and the Compensation and
Management Development 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.
CLASS II -- NOMINEE FOR DIRECTOR WITH A TERM EXPIRING IN 2005
WILLIAM D. GEORGE, JR.
Retired President and Chief Executive Officer, S.C. Johnson Wax (Chemical
Specialty Products)
Age 70
[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 Nobex Corporation, and is a member of the Board of
Trustees of Carthage College.
THE BOARD OF DIRECTORS RECOMMENDS THAT YOU VOTE "FOR" THE ELECTION OF THESE
NOMINEES, WHICH IS PRESENTED AS ITEM (1).
CLASS I -- CONTINUING DIRECTORS WITH TERMS EXPIRING IN 2004
RHONDA L. BROOKS
Business Consultant
Age 50
[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 a consultant for start-up firms and serves as an
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 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.
4
RICHARD W. HANSELMAN
Chairman of the Board, Health Net, Inc. (Managed Care Provider)
Age 75
[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 is the Chairman of the
Board of Health Net, Inc., a position he has held (including
with its predecessor, Foundation Health Corporation) since 1999.
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 a director of Brass Eagle, Inc. He also
serves on the boards of two privately held companies and is
Chairman of one, and is an Honorary Trustee of the Committee for
Economic Development.
TERRENCE E. O'ROURKE
President and Chief Operating Officer of ArvinMeritor
Age 55
[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.
LARRY D. YOST
Chairman of the Board and Chief Executive Officer of ArvinMeritor
Age 64
[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. and is a trustee of Kettering
University.
5
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 for Tire Manufacturer)
Age 70
[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 K-Mart Corp., Newmont Mining Corporation and The
Scotts Company.
CHARLES H. HARFF
Retired Senior Vice President, General Counsel and Secretary of Rockwell
(Electronic Controls and Communications)
Age 73
[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 a 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 70
[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
Comerica, Inc., Goodyear Tire and Rubber Co., Lexmark
International Group, Textron, Inc. and The Timken Company.
6
BOARD OF DIRECTORS AND COMMITTEES
The Board of Directors manages or directs the management of the business of
ArvinMeritor. The Board has established four standing committees the principal
functions of which are briefly described below. In fiscal year 2002, the Board
of Directors held eight regularly scheduled and special meetings and acted by
unanimous written consent three times. Each director attended at least 75% of
the aggregate number of meetings of the Board and the committees on which he or
she served in fiscal year 2002, except Dr. Beering, who attended 12 of 17
meetings, or 71%, and Mr. Perrella, who attended 14 of 19 meetings, or 74%.
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. The Audit Committee has a written charter, which it reviews and
reassesses annually for compliance with rules of the New York Stock Exchange.
Among its current functions, the Audit Committee selects and recommends the
employment of independent public accountants for the Company, subject to
approval of the shareowners; reviews the scope of and procedures used in audits
and reviews of the Company's financial statements by the independent public
accountants; reviews the Company's annual and quarterly financial statements
before their release; reviews and approves the fees charged by the independent
public accountants and the scope and extent of any non-audit services they
perform for the Company; receives and evaluates a report from the independent
public accountants as to their independence; reviews the adequacy of the
Company's systems of internal controls and recommendations of the independent
public accountants with respect to internal controls; reviews the scope and
results of internal audits; reviews and acts on comments and suggestions by the
independent public accountants and by the Company's internal auditors with
respect to their audit activities; monitors compliance by employees with the
Company's standards of business conduct policies; monitors risk exposures and
initiatives to control such exposures; and reviews all of the foregoing with
management. The Audit Committee meets regularly in executive session with the
independent public accountants, the internal auditors and senior management. The
Audit Committee held six meetings in fiscal year 2002.
The Board Composition Committee's charter was amended on September 18, 2002
to expand the Committee's responsibilities and change its name to the Corporate
Governance and Nominating Committee. This 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. 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 to the Board improvements in
governance processes and changes in the Guidelines on Corporate Governance;
review periodically the Company's charter and by-laws in light of statutory
changes and current best practices; review 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 against its
charter. The Corporate Governance and Nominating Committee held five meetings in
fiscal year 2002.
Shareowners may recommend candidates for consideration by the Committee by
writing to the Secretary of the Company at its World 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.
The five members of the Compensation and Management Development Committee
(the "Compensation Committee"), Martin D. Walker (chairman), Steven C. Beering,
Joseph P. Flannery, Charles H. Harff and James E. Perrella, are non-employee
directors and are not eligible to participate in any of the plans or programs
that are administered by the Committee (except the Directors Stock Plan). The
principal functions of the Compensation Committee are to evaluate the
performance of the Company's senior executives and plans for management
succession and development, to consider the design and competitiveness of the
Company's compensation plans, to review and approve senior executive
compensation and to administer the
7
Company's incentive, deferred compensation, stock option and long-term
incentives plans. The Compensation Committee held six meetings and acted by
unanimous written consent once in fiscal year 2002.
The Environmental and Social Responsibility Committee, which is composed of
five non-employee directors, Steven C. Beering (chairman), Joseph B. Anderson,
Jr., Rhonda L. Brooks, William D. George, Jr. and James E. Marley, 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 three meetings in fiscal year 2002.
COMPENSATION OF DIRECTORS
Non-employee directors of ArvinMeritor receive a retainer at the rate of
$35,000 per year for Board service. After each Annual Meeting of Shareowners,
each non-employee director receives the following grants. A non-employee
director who is elected to the Board during the fiscal year receives a pro rata
portion of these grants:
- 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 director may elect to defer payment of all or part of the cash retainer
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 all of the
annual grant of shares and all or any portion of the cash retainer 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 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
payment would otherwise be made in cash.
Beginning with fiscal year 2003, the Chairman of the Audit Committee will
receive an additional retainer of $5,000 per year, and the Chairmen of the
Compensation Committee, the Corporate Governance and Nominating Committee and
the Environmental and Social Responsibility Committee will each receive an
additional retainer of $3,000 per year. Also beginning in fiscal year 2003,
non-employee directors will receive fees for attendance at committee meetings in
the amount of $1,500 for each meeting of the Audit Committee ($750 per meeting
for attendance by telephone) and $1,000 for each meeting of other Board
committees ($500 per meeting for attendance by telephone). The changes effective
beginning in 2003 were made to compensate directors fairly for the added
responsibility and time commitment that current governance standards involve.
Directors who are also employees of ArvinMeritor or a subsidiary of
ArvinMeritor do not receive compensation for serving as directors.
INVOLVEMENT IN CERTAIN LEGAL PROCEEDINGS
On October 5, 2000, Owens Corning, Inc. 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.
In October 1997, Chivas Products, Ltd., of which Joseph B. Anderson, Jr., a
director of the Company, was Chairman of the Board and Chief Executive Officer,
filed a petition for reorganization under Chapter 11 of the Bankruptcy Code in
U.S. Bankruptcy Court in the Eastern District of Michigan. On March 4, 1998, the
court approved a restructuring plan, pursuant to which the assets of Chivas
Products, Ltd. were sold on
8
March 17, 1998 to Chivas Industries LLC, a joint venture between Mr. Anderson
and Continental Plastics Co. Mr. Anderson was Chairman of the Board and Chief
Executive Officer of the joint venture until June 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 were modeled on Meritor's
guidelines and were adopted by the Board after the Merger. Our guidelines are
periodically reviewed and will be modified or supplemented when and as
appropriate. Our current guidelines and practices are summarized below:
Board Composition and Independence
- A substantial majority of the Board must be independent directors. A
director is not "independent" if he is a current or former employee or
executive officer of the Company, is related to an executive officer of
the Company, or has a connection with a supplier or customer of the
Company or with a tax exempt entity to which the Company makes material
contributions. Currently, eleven of the thirteen directors are
independent.
- Only independent directors can serve on Board committees.
- All decisions on matters of corporate governance are made by independent
directors.
- Committee membership and chairmanships are reviewed periodically to
assure that each committee has the benefit of both experience and fresh
perspectives.
- Board nominees are selected and recommended by the Corporate Governance
and Nominating Committee and approved by the full Board. In identifying
candidates, the Committee looks for a variety of experience and diversity
of gender, ethic background, age and geographic location.
- 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, or if their principal employment or affiliation changes
significantly during their term as director. The Corporate Governance and
Nominating Committee decides whether continued Board service is
appropriate.
Board Performance and Operations
- 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 sent to Board and committee members for review in advance
of each meeting.
- Information and data important to understanding of the business,
including financial and operating information, is distributed regularly
to the Board.
- Each Board committee has a detailed charter outlining its
responsibilities.
- Minutes of all committee meetings are provided to each Board member, and
a full report of each committee meeting is given to the full Board.
- The Board reviews and discusses in depth the Company's long-term
strategic goals and plans at least annually.
- A detailed discussion of an individual business segment is held at each
meeting, including business environment and outlook, performance compared
to competitors, action plans for the future and other key issues.
- Management development and succession plans are reviewed annually.
9
- The Board's committees have the authority to hire outside advisors and
consultants as they deem necessary.
- Executive sessions are required to be held at least annually and in
practice are held at each Board meeting.
- The Board self-assesses its performance annually and develops action
plans to address areas that need improvement.
- The Corporate Governance and Nominating Committee is responsible for
corporate governance and Board practices, and formally evaluates these
areas periodically.
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 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).
10
OWNERSHIP BY MANAGEMENT OF EQUITY SECURITIES
The following table shows the beneficial ownership, reported to us as of
November 30, 2002, of ArvinMeritor Common Stock of (a) each director, (b) each
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, 2002
COMMON STOCK
-------------------------------------------
NAME SHARES(1)(2) PERCENT OF CLASS(3)
---- ------------ -------------------
Joseph B. Anderson, Jr. ............................... 7,250(4) *
Steven C. Beering...................................... 9,850(4) *
Rhonda L. Brooks....................................... 7,500(5) *
Joseph P. Flannery..................................... 9,750 *
William D. George, Jr. ................................ 11,250(4) *
Richard W. Hanselman................................... 10,750 *
Charles H. Harff....................................... 28,297(6) *
Victoria B. Jackson.................................... 7,500(4) *
James E. Marley........................................ 16,316(4) *
James E. Perrella...................................... 15,398(4) *
Martin D. Walker....................................... 17,930(4)(7) *
Larry D. Yost.......................................... 636,474(4)(8)(9)(10) .93
Terrence E. O'Rourke................................... 157,481(4)(8)(9) .23
Craig M. Stinson....................................... 115,643(4)(8) .17
S. Carl Soderstrom, Jr. ............................... 102,117(4)(8) .15
Thomas A. Gosnell...................................... 96,375(4)(8)(10) .14
All of the above and other executive officers as a
group (26 persons)................................... 1,697,540(4)(8)(10) 2.45
---------------
* Less than 0.1%
(1) Each person has sole voting and investment power with respect to the shares
listed unless otherwise indicated.
(2) 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: 4,062 shares for Mr. Anderson; 5,500 shares for
each of Messrs. Beering, Flannery, George and Hanselman; 4,188 shares for
each of Ms. Brooks and Ms. Jackson; 8,125 shares for Mr. Harff; 4,750
shares for Mr. Marley; 3,500 shares for Mr. Perrella; 2,500 shares for Mr.
Walker; 239,334; 82,500; 62,001; 40,334; and 51,000 shares for Messrs.
Yost, O'Rourke, Stinson, Soderstrom and Gosnell, respectively; and 745,101
shares for all directors and executive officers as a group.
(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 3,312 shares held as trustee of a revocable trust.
11
(6) Includes 2,332 shares held by the Charles H. and Marion M. Harff Charitable
Remainder Trust and 17,840 shares held by the Charles H. Harff Revocable
Living Trust. Mr. Harff is co-trustee of each such trust.
(7) Includes 2,133 shares held in the Martin D. Walker Charitable Remainder
Trust, 3,750 shares held in the Mary J. Walker Trust, and 7,298 shares held
in the Martin D. Walker Trust, of which Mr. Walker is trustee, and 2,249
shares held in the Walker Charitable Foundation.
(8) 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 supplemental
savings plans of Rockwell and the Company on November 30, 2002: 19,386;
5,101; 340; 3,686; and 4,849 shares for Messrs. Yost, O'Rourke, Stinson,
Soderstrom and Gosnell, respectively, and 46,947 shares for all directors
and executive officers as a group.
(9) Includes deferred awards of Common Stock.
(10) Includes shares held jointly or in other capacities or held by a spouse, as
to which, in some cases, beneficial ownership is disclaimed.
12
EXECUTIVE COMPENSATION
The information shown below reflects the annual and long-term compensation,
from all sources, of our chief executive officer and the other four most highly
compensated executive officers of the Company for the fiscal year ended
September 30, 2002 (the "Named Executive Officers"). We began operation as a
combined company on July 7, 2000. The compensation reported below for periods
after July 7, 2000 is for services rendered in all capacities to ArvinMeritor
and its subsidiaries. The compensation reported below for the period on or
before July 7, 2000 is for services rendered in all capacities to Meritor or
Arvin and their respective subsidiaries, as applicable.
SUMMARY COMPENSATION TABLE
LONG-TERM COMPENSATION
ANNUAL COMPENSATION ---------------------------------------
---------------------------------- STOCK
OTHER RESTRICTED UNDERLYING ALL
ANNUAL STOCK OPTIONS LONG-TERM OTHER
NAME AND PRINCIPAL POSITION COMPEN- AWARDS (# OF INCENTIVE COMPENSA-
WITH THE COMPANY(1) YEAR SALARY BONUS(2) SATION(3) ($)(4) SHARES)(6) PAYMENTS(8) TION(9)
--------------------------- ---- -------- ---------- --------- ---------- ---------- ------------ ----------
Larry D. Yost 2002 $892,500 $1,531,352 $21,015 $ 0 302,000 $ 0 $ 109,073
Chairman of the Board 2001 840,000 0 13,457 2,234,271(5) 208,000 257,088 40,425
and Chief Executive 2000 700,000 500,000 27,881 0 (7) 300,382 741,375
Officer
Terrence E. O'Rourke 2002 432,917 708,075 15,417 0 90,000 0 51,345
President and Chief 2001 370,000 0 17,501 214,442(5) 63,000 80,640 18,013
Operating Officer 2000 336,000 195,100 24,476 0 (7) 0 310,080
Craig M. Stinson 2002 345,417 527,262 33,544 0 90,000 0 16,818
Senior Vice President 2001 300,000 0 7,016 58,949(5) 63,000 20,544 53,652
and President, Light 2000 208,500 147,874 0 0 4,250 0 99,203
Vehicle Systems
S. Carl Soderstrom, Jr. 2002 360,417 450,000 25,631 0 90,000 0 36,469
Senior Vice President 2001 295,458 0 13,282 371,456(5) 31,000 51,936 31,782
and Chief Financial 2000 239,250 115,000 16,895 0 (7) 60,682 267,045
Officer
Thomas A. Gosnell 2002 349,583 394,322 31,613 0 90,000 0 33,476
Senior Vice President 2001 335,000 0 12,112 267,579(5) 63,000 41,040 16,103
and President, Commercial 2000 210,000 150,000 11,868 0 (7) 47,951 12,607
Vehicle Systems
---------------
(1) The table reflects the positions held with ArvinMeritor at September 30,
2002. 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) and as Executive Vice President,
Exhaust Systems (July 2000-September 2000); 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). Each of the Named Executive Officers served either
Meritor and its subsidiaries or Arvin and its subsidiaries in various
executive capacities prior to July 7, 2000, the date of the Merger.
(2) Reflects amount awarded, even if deferred for future payment.
(3) This column consists of amounts reimbursed for the payment of taxes.
(4) The Named Executive Officers held the following aggregate numbers of
restricted shares of Common Stock at September 30, 2002, with an aggregate
value (based on the closing price of ArvinMeritor Common Stock, $18.70 per
share, on the New York Stock Exchange -- Composite Transactions reporting
system on September 30, 2002) as follows: Mr. Yost -- 164,125 shares,
$3,069,138; Mr. O'Rourke -- 11,252 shares, $210,412; Mr. Stinson -- 3,093
shares, $57,839; Mr. Soderstrom -- 19,490 shares, $364,463; and Mr.
Gosnell -- 14,040 shares, $262,548. Cash dividends on the restricted shares
granted to the Named Executive Officers in fiscal year 2001 (see note 5)
that are paid prior to
13
vesting are reinvested in additional restricted shares of Common Stock. Cash
dividends on all other restricted shares, granted prior to 2000, are accrued and
paid in cash at the time of vesting.
(5) 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).
(6) All options issued prior to July 7, 2000 were originally issued as options
to purchase Arvin or Meritor common stock, as applicable, and were converted
to options to purchase ArvinMeritor Common Stock at the time of the Merger.
All options issued after the date of the Merger were issued as options to
purchase ArvinMeritor Common Stock.
(7) The following numbers of stock options granted to the Named Executive
Officers in fiscal year 2000 were surrendered in fiscal year 2001 in
exchange for issuance of restricted shares of Common Stock (as described in
note 5): Mr. Yost -- 80,250; Mr. O'Rourke -- 37,500; Mr.
Soderstrom -- 16,500; and Mr. Gosnell -- 16,500.
(8) Long-term incentive payments for Messrs. Yost, O'Rourke, Soderstrom and
Gosnell in fiscal years 2001 and 2000 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 those years. Long-term
incentive payments for Mr. 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 plan that ended in 2002. See Long-Term Incentive Plan
Awards below.
(9) This column includes (a) amounts contributed or accrued for fiscal years
2002, 2001 and 2000 for the Named Executive Officers under employee savings
plans and related supplemental savings plans of the Company for the periods
after July 7, 2000, and of Arvin and Meritor, as applicable, for the period
on and prior to July 7, 2000; (b) bonuses paid in fiscal year 2000 in
connection with the Merger, in the following amounts: Mr. Yost -- $700,000;
Mr. O'Rourke -- $300,000; and Mr. Soderstrom -- $242,000; (c) $40,902 and
$85,305 paid to Mr. Stinson in 2001 and 2000, respectively, as additional
compensation for overseas assignments; and (d) $4,444 in interest paid by
the Company in fiscal year 2002 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. When his
prior home is sold, the net proceeds of sale will be applied to repayment of the
borrowings outstanding under the line of credit. The Company makes 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% and is obligated to repay the principal that is not repaid from the sale
proceeds or by Mr. Stinson. At September 30, 2002, borrowings of approximately
$416,276 were outstanding under this line of credit.
14
OPTION GRANTS
The following table shows option grants to the Named Executive Officers
made during the fiscal year ended September 30, 2002 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) 2002(2) SHARE)(3) DATE VALUE(4)
---- ---------------- ------------------- ----------- ---------- ----------
Larry D. Yost.................. 302,000 19.9% $19.85 1/21/12 $2,229,062
Terrence E. O'Rourke........... 90,000 5.9 19.85 1/21/12 664,290
Craig M. Stinson............... 90,000 5.9 19.85 1/21/12 664,290
S. Carl Soderstrom, Jr......... 90,000 5.9 19.85 1/21/12 664,290
Thomas A. Gosnell.............. 90,000 5.9 19.85 1/21/12 664,290
---------------
(1) These grants were made under the ArvinMeritor 1997 Long-Term Incentives
Plan on January 21, 2002. The options will become exercisable in three
approximately equal installments on January 21, 2003, January 21, 2004 and
January 21, 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 $7.381, using
the following assumptions and inputs: options exercised after 7 1/2 years;
weighted one-year stock price volatility and dividend yield of 31.93% and
1.70%, respectively; and an interest rate of 5.12%, 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 following table shows the number of options exercised and the value
realized by the Named Executive Officers during the fiscal year ended September
30, 2002, 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, 2002.
NUMBER OF SHARES
UNDERLYING UNEXERCISED VALUE OF UNEXERCISED
OPTIONS HELD AT IN-THE-MONEY OPTIONS AT
SHARES SEPTEMBER 30, 2002 SEPTEMBER 30, 2002(2)
ACQUIRED VALUE --------------------------- ---------------------------
NAME ON EXERCISE REALIZED(1) EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
---- ----------- ----------- ----------- ------------- ----------- -------------
Larry D. Yost........... 0 $ 0 69,333 440,667 $269,705 $539,415
Terrence E. O'Rourke.... 15,000 222,063 31,500 132,000 23,340 163,380
Craig M. Stinson........ 14,249 159,411 11,001 132,000 26,261 163,380
S. Carl Soderstrom,
Jr.................... 10,333 156,932 0 110,667 0 80,395
Thomas A. Gosnell....... 21,000 182,438 0 132,000 0 163,380
---------------
(1) Based on the actual sale price of the shares minus the exercise price.
(2) Based on the difference between the exercise price of the options and the
closing price of ArvinMeritor Common Stock ($18.70) on the New York Stock
Exchange -- Composite Transactions reporting system on September 30, 2002.
15
LONG-TERM INCENTIVE PLAN AWARDS
The following table shows information with respect to awards made during
fiscal year 2002 to the Named Executive Officers under the 1997 Long-Term
Incentives Plan.
NUMBER OF PERFORMANCE OR ESTIMATED FUTURE PAYMENT UNDER NON-
SHARES, UNITS OTHER PERIOD UNTIL STOCK PRICE-BASED PLANS
OR OTHER MATURATION -------------------------------------
NAME RIGHTS(1)(2) OR PAYMENT THRESHOLD TARGET(2) MAXIMUM(2)
---- -------------- ------------------ ---------- ---------- -----------
Larry D. Yost................ $990,000 10/1/01-9/30/04 $0 $990,000 $2,970,000
Terrence E. O'Rourke......... 297,000 10/1/01-9/30/04 0 297,000 891,000
Craig M. Stinson............. 297,000 10/1/01-9/30/04 0 297,000 891,000
S. Carl Soderstrom, Jr....... 297,000 10/1/01-9/30/04 0 297,000 891,000
Thomas A. Gosnell............ 297,000 10/1/01-9/30/04 0 297,000 891,000
---------------
(1) Potential awards for target performance are expressed as cash amounts.
(2) Amounts are stated before application of stock price change modifier,
described below.
In connection with the Merger, we adopted the Meritor 1997 Long-Term
Incentives Plan. Under this 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, as measured by earnings per share growth and cash
flow/return on investment, against target levels established by the Compensation
Committee. However, awards are subject to achieving minimum threshold levels
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 plans, 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 2002. Long-term incentive
payments in 2001 and 2000 were made in cash.
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.
16
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, 2002, the
chief executive officer, president, senior vice presidents and other executive
officers owned an aggregate of approximately 910,000 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 other major 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 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 2002, 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 comparable industrial
companies in determining executive compensation for the year. The data reviewed
included data from nine 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 Named Executive Officers, 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 Sec-
17
tion 162(m), except where it determines that exceeding these limitations is in
the best interests of ArvinMeritor and its shareowners.
Mr. Yost's non-performance-based compensation in fiscal year 2002 exceeded
the $1 million limit in Section 162(m). Of the excess, $100,000 was paid to Mr.
Yost in cash and will not be deductible, and the balance of the excess was paid
in the form of a deferred award of Common Stock. Mr. O'Rourke's non-
performance-based compensation in fiscal year 2002 also exceeded $1 million, and
all of the excess was paid in the form of a deferred award of Common Stock. Each
deferred Common Stock award will be delivered the year after the respective
retirement of Mr. Yost and Mr. O'Rourke and will be deductible by ArvinMeritor
for the year of delivery.
COMPONENTS OF ARVINMERITOR'S COMPENSATION
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 2002, the Compensation
Committee established the base salaries of the Company's senior executives,
including Messrs. O'Rourke, Stinson, Soderstrom and Gosnell. 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, 2002 base
salary adjustments, which would normally have been effective November 1, 2001,
were postponed until May 1, 2002. Salary adjustments for executive officers who
changed positions during the year (including Messrs. O'Rourke and Stinson) were
implemented at the time of promotion.
- Annual Incentives -- Near the beginning of fiscal year 2002, 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 goals that require more subjective assessments. The financial
objectives for fiscal year 2002 included earnings per share growth and
improvement in the ratio of non-cash working capital to sales. ArvinMeritor's
strategic objectives related to creating shareowner value, 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 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 determining the incentive compensation for fiscal year 2002 for the
Named Executive Officers (see the column headed "Bonus" in the table under
Executive Compensation -- Summary Compensation Table above) and other key
employees of the Company, the Compensation Committee focused on the level of
achievement of the measurable financial objectives for the year. Earnings per
share increased 27.1% compared to fiscal year 2001 and non-cash working capital
as a percent of sales improved by 2.2%, each of which exceeded targets set for
the fiscal year.
- 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.
18
In fiscal year 2002, the Compensation Committee provided long-term
incentives to executive officers two-thirds through stock option grants and
one-third through awards under long-term performance plans. Other executives'
long-term incentives were provided one-quarter each through grants of restricted
shares and stock options and one-half through awards under long-term performance
plans. Other key employees' long-term incentives were provided solely through
grants of restricted shares. The Compensation Committee believes that this
allocation provides an appropriate incentive for achievement of the Company's
goals, aligns the interests of executives with the interests of shareowners and
provides 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 2002. 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 and the consultants' reports and
the anticipated future contributions of the individual executive officers.
Performance Awards. In fiscal year 2002, the Compensation Committee
established a performance plan with a three-year performance period ending
September 30, 2004, 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 2000, the Compensation and Management Development Committee
of Meritor Automotive, Inc. 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 were not achieved, the
Compensation Committee made no long-term incentive payments under this
performance plan.
COMPENSATION OF THE CHIEF EXECUTIVE OFFICER
For the period from October 1, 2001 to April 30, 2002 Mr. Yost's base
salary remained at the 2001 level of $840,000. Effective May 1, 2002, his base
salary was increased to $966,000. 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 Compensation Plans -- Annual Incentives), Mr. Yost received
annual incentive compensation of $1,531,352 for fiscal year 2002.
The Compensation Committee granted stock options to Mr. Yost in fiscal year
2002 as long-term incentives. (See Executive Compensation -- Option Grants
above.) In determining the number of options granted, the Compensation Committee
considered the consultants' advice and the value of long-term incentives
provided by other comparable 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 2002 for the
three-year performance period ending September 30, 2004. (See Executive
Compensation -- Long-Term Incentive Plan Awards above.)
As with respect to other executives, the Compensation Committee did not
make a long-term incentive payment to Mr. Yost in fiscal year 2002 (see
Components of ArvinMeritor's Compensation Plans -- Long-Term Incentives 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 2002 fiscal year. The Board also reviewed the
Compensation Committee's decision to make an annual incentive award to Mr. Yost
for that
19
year, and the long-term incentives granted to Mr. Yost in the form of stock
options 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 necessary and appropriate to achieve their stated
objectives. 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
Steven C. Beering
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
offer letter at or after the time of the Merger. 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 12 to 36 months (depending on years of service), pro rata annual bonus
participation through the date of termination, continuation of benefits
throughout the severance period, full vesting of all stock options, extension of
exercise period for stock options for three years after termination (but not
beyond the original option expiration date), payment of all vested benefits and
outplacement services. The executives also agreed to an 18-month
non-solicitation provision, perpetual non-disclosure and confidentiality, and
mandatory arbitration of disputes. The Compensation Committee has approved
amending these agreements to provide for severance pay for a period of 18 to 36
months (depending on years of service) and gross-up for any excise tax imposed.
20
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. 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, 1997 to
September 30, 2002, 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 and 2002 reflect the
exchange of each share of Meritor common stock for .75 of a share of
ArvinMeritor Common Stock on 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
------------------ -------------------- ----------------
10/01/97 100.00 100.00 100.00
9/30/98 64.20 109.05 76.35
9/30/99 90.84 139.37 89.79
9/29/00 49.60 157.88 68.31
9/28/01 52.61 115.85 65.78
9/30/02 70.01 92.12 66.69
---------------
(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, Eaton Corporation, Johnson Controls, Inc., Lear Corporation,
Superior Industries International, Tenneco Automotive, Inc., Tower
Automotive, Inc. and Visteon Corporation. This differs from the peer group
in last year's proxy statement in that Federal Mogul Corporation, which
filed for restructuring under the U.S. bankruptcy laws in October 2001, is
no longer included.
RETIREMENT BENEFITS
Arvin and Meritor had separate retirement plans covering their respective
employees, and we assumed these plans at the time of the Merger. These separate
retirement plans were superseded by an integrated ArvinMeritor plan, effective
January 1, 2001.
21
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 integrated
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 ................ $ 73,123 $109,684 $146,246 $ 182,807 $ 219,369 $ 255,930
1,000,000 ................ 148,123 222,184 296,246 370,307 444,369 518,430
1,500,000 ................ 223,123 334,684 446,246 557,807 669,369 780,930
2,000,000 ................ 298,123 447,184 596,246 745,307 894,369 1,043,430
2,500,000 ................ 373,123 559,684 746,246 932,807 1,119,369 1,305,930
3,000,000 ................ 448,123 672,184 896,246 1,120,307 1,344,369 1,568,430
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, Stinson, Soderstrom and Gosnell are 31, 3, 19, 16 and 23,
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 of ArvinMeritor's Board of Directors is currently
comprised of four directors who are not officers or employees of ArvinMeritor.
All members meet the criteria for independence as defined in the current listing
standards adopted by the New York Stock Exchange. The Board of Directors has
adopted a written charter for the Audit Committee, a copy of which was included
as an appendix to the proxy statement for ArvinMeritor's 2001 Annual Meeting of
Shareowners. The charter complies with the current requirements of the New York
Stock Exchange.
In accordance with its written charter, the Audit Committee assists the
Board in fulfilling its responsibility for monitoring the integrity of the
accounting, auditing and financial reporting practices of ArvinMeritor. In
addition, for each fiscal year, the Audit Committee selects independent public
accountants to audit the financial statements of the Company and its
subsidiaries, subject to approval of ArvinMeritor's shareowners.
Management is responsible for the financial reporting process, including
the system of internal 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, and the Audit Committee
does not certify the financial statements or guarantee the independent auditor's
report. The Audit
22
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 held six meetings in fiscal year 2002. During these
meetings, the Audit Committee discussed with management, the internal auditors
and Deloitte & Touche LLP ("Deloitte"), independent auditors, the quality and
adequacy of the Company's internal controls and the internal audit function's
organization, responsibilities, budget and staffing and the results of internal
audit examinations. The Audit Committee also reviewed with both Deloitte and the
internal auditors their audit plans, audit scope and identification of audit
risks, and met separately with Deloitte and with the internal auditors, without
management present, to discuss the results of their examinations, their
evaluations of ArvinMeritor's internal controls and the overall quality of
ArvinMeritor's financial reporting. The Audit Committee reviewed the fees
proposed by Deloitte for its services. The Audit Committee reviewed the interim
financial information contained in each quarterly earnings announcement in
fiscal year 2002 and discussed this information with Deloitte and with
ArvinMeritor's chief financial officer and controller prior to release.
The discussions with Deloitte included the matters required by generally
accepted auditing standards, including those described in Statement on Auditing
Standards No. 61, as amended, relating to communication with audit committees.
The Audit Committee received from Deloitte written disclosures and the letter
regarding its independence as required by Independence Standards Board Standard
No. 1, describing all relationships between the auditors and ArvinMeritor that
might bear on the auditors' independence, and discussed this information with
Deloitte. The Audit Committee also considered whether the provision of the
non-audit services described below by Deloitte is compatible with maintaining
their independence and approved all non-audit services of Deloitte that were
estimated to cost over $250,000.
The Audit Committee has reviewed the audited financial statements of
ArvinMeritor and its consolidated subsidiaries as of and for the fiscal year
ended September 30, 2002, and has discussed the audited financial statements
with management and with Deloitte. Based on all of 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 year ended September 30, 2002, 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 fiscal year 2002, Deloitte & Touche LLP billed ArvinMeritor and its
subsidiaries the following fees for its services:
Audit fees.................................................. $2,400,000
Financial information systems design and implementation
fees...................................................... --
All other fees.............................................. 3,200,000(a)
----------
TOTAL.................................................. $5,600,000
---------------
(a) Includes fees for tax consulting and compliance ($2,500,000), merger and
acquisition services ($100,000), statutory audit services ($400,000) and
other non-audit services ($200,000).
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
23
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 2003 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).
VOTE REQUIRED
At the 2003 Annual Meeting, the four nominees who receive the greatest
number of votes for election as Class III directors, and the nominee who
receives the greatest number of votes for election as a Class II director, 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, 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 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 and the approval of the selection of
auditors (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) and (2) of the accompanying Notice of 2003 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 furnished by these parties, 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 2002.
24
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, 2002, was
mailed to shareowners with this proxy statement.
SHAREOWNER PROPOSALS FOR 2004 ANNUAL MEETING
Under the rules and regulations of the SEC, shareowner proposals for the
2004 Annual Meeting of Shareowners must be received on or before September 5,
2003, at the Office of the Secretary at our headquarters, 2135 West Maple Road,
Troy, Michigan 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 2004 Annual Meeting of Shareowners to notify our
Secretary in writing at the above address on or after October 22, 2003 and on or
before November 22, 2003.
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 communication by our
directors, officers and employees without additional compensation. We do not
expect to pay any compensation for the solicitation of proxies but will
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.
January 3, 2003
If your ArvinMeritor shares are registered in your name and you plan to attend
the Annual Meeting of Shareowners to be held in Troy, Michigan on February 19,
2003, 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.
25
ARVINMERITOR, INC.
PROXY CARD SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
DIRECTION CARD TO T. ROWE PRICE TRUST COMPANY, 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 capital 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 Company's World Headquarters, 2135
West Maple Road, Troy, Michigan, on February 19, 2003, 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,
Trustee, and Wells Fargo Bank, N.A., Trustee, to vote shares of capital stock
of the Company allocated, respectively, to accounts of the undersigned under
the ArvinMeritor, Inc. Savings Plan, the ArvinMeritor, Inc. Hourly Employees
Savings Plan, the various Rockwell Automation, Inc. and Rockwell Collins, 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, Rockwell Automation Retirement Savings Plan for Certain Employees,
Rockwell Collins Retirement Savings Plan for Salaries Employees, Rockwell
Collins Retirement Savings Plan for Hourly Employees and Rockwell Collins
Retirement Savings Plan for Bargaining Unit 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 and Rockwell Collins
Savings Plan accounts of the undersigned as it deems proper on such other
matters as may properly come before the meeting.
IF NO SPECIFICATION IS MADE ON THE REVERSE SIDE OF THIS CARD:
- ALL SUCH SHARES OWNED OF RECORD WILL BE VOTED FOR THE ELECTION OF THE
NOMINEES PROPOSED FOR ELECTION AS DIRECTORS AND FOR PROPOSAL (2);
- ALL SUCH SHARES ALLOCATED TO THE ROCKWELL AUTOMATION AND ROCKWELL
COLLINS SAVINGS PLAN ACCOUNTS OF THE UNDERSIGNED WILL BE VOTED AS
WELLS FARGO AS TRUSTEE DEEMS PROPER;
- ALL SUCH SHARES ALLOCATED TO THE ARVINMERITOR SAVINGS PLAN AND HOURLY
EMPLOYEES SAVINGS PLAN ACCOUNTS OF THE UNDERSIGNED WILL BE VOTED ON
PROPOSALS (1) AND (2) IN THE SAME PROPORTION AS SHARES FOR WHICH
VOTING INSTRUCTIONS ARE RECEIVED.
--------------------------------------------------------------------------------
TO PARTICIPANTS IN THE ROCKWELL AUTOMATION
AND ROCKWELL COLLINS SAVINGS PLANS
Please vote in accordance with the instructions on the reverse side of this
card by February 14, 2003. If you do not properly vote by that date, Wells
Fargo Bank, N.A., as Trustee for the Rockwell Automation and Rockwell Collins
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
[ARVIN MERITOR LOGO]
TWO ALTERNATE WAYS TO VOTE YOUR PROXY
VOTE BY TELEPHONE OR INTERNET
24 HOURS A DAY - 7 DAYS A WEEK
SAVE YOUR COMPANY MONEY - IT'S FAST AND CONVENIENT
TELEPHONE
---------
866-209-1708
- Use any touch-tone telephone.
- Have your Proxy Form in hand.
- Enter the Control Number located in the box below.
- Follow the simple recorded instructions.
OR
INTERNET
--------
https://www.proxyvotenow.com/ARM
- Go to the website address listed above.
- Have your Proxy Form in hand.
- Enter the Control Number located in the box below.
- Follow the simple instructions.
OR
MAIL
----
- Mark, sign and date your Proxy Card.
- Detach card from Proxy Form.
- Return the 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.
CONTROL NUMBER FOR
TELEPHONE OR INTERNET VOTING
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 [X]
THE PROXY CARD PROMPTLY VOTES MUST BE INDICATED
USING THE ENCLOSED ENVELOPE. (X) IN BLACK OR BLUE INK.
THE BOARD OF DIRECTORS RECOMMENDS VOTES FOR (1) AND (2).
(1) The election of directors
FOR all [ ] WITHHOLD AUTHORITY [ ] *EXCEPTIONS [ ]
nominees to vote
listed for all nominees
below listed below
Nominees for a term expiring in 2006: 01 - Joseph B. Anderson, Jr.,
02 - Victoria B. Jackson,
03 - James E. Marley,
04 - James E. Perrella
Nominee for a term expiring in 2005: 05 - William D. George, Jr.
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 [ ] [ ] [ ]
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 than one person,
each should sign the proxy.
Date Share Owner sign here Co-Owner sign here