SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(a) OF THE SECURITIES
EXCHANGE ACT OF 1934
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 Rule 14a-12
HEICO CORPORATION
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(Name of Registrant As Specified In Its Charter)
N/A
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(Name of Person(s) Filing Proxy Statement if other than the Registrant)
Payment of filing fee (Check the appropriate box):
[X] No fee required.
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and 0-11.
(1) Title of each class of securities to which transaction applies:
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(2) Aggregate number of securities to which transaction applies:
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(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):
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(4) Proposed maximum aggregate value of transaction:
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(5) Total fee paid:
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[ ] Fee paid previously with preliminary materials.
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[ ] 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.
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(1) Amount Previously Paid:
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(2) Form, Schedule or Registration Statement No.:
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(3) Filing Party:
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(4) Date Filed:
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HEICO CORPORATION
3000 TAFT STREET, HOLLYWOOD, FLORIDA 33021
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NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD MARCH 16, 2004
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The Annual Meeting of Shareholders of HEICO Corporation, a Florida
corporation ("HEICO" or the "Company"), will be held on March 16, 2004, at 10:00
a.m., Eastern Standard Time, at the Sheraton Fort Lauderdale Airport Hotel, 1825
Griffin Road, Dania Beach, Florida, for the following purposes:
1. To elect a Board of Directors for the ensuing year; and
2. To transact such other business as may properly come before the
meeting or any adjournments thereof.
Only holders of record of HEICO Common Stock and Class A Common Stock at
the close of business on January 20, 2004 will be entitled to vote at the
Meeting.
You are requested, regardless of the number of shares owned, to sign and
date the enclosed proxy and to mail it promptly, or to use the telephone or
Internet voting systems set forth in the proxy. You may revoke your proxy either
by a written notice to HEICO or in person at the meeting (without affecting any
vote previously taken).
BY ORDER OF THE BOARD OF DIRECTORS
Laurans A. Mendelson
Chairman of the Board
President and Chief Executive Office
February 13, 2004
HEICO CORPORATION
3000 TAFT STREET, HOLLYWOOD, FLORIDA 33021
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PROXY STATEMENT
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This Proxy Statement is furnished to the shareholders of HEICO
Corporation ("HEICO" or the "Company") in connection with the solicitation of
proxies by HEICO's Board of Directors for use at the Annual Meeting of
Shareholders of HEICO to be held at the Sheraton Fort Lauderdale Airport Hotel,
1825 Griffin Road, Dania Beach, Florida 33004 on Tuesday, March 16, 2004 at
10:00 a.m., Eastern Standard Time. This Proxy Statement is first being mailed to
shareholders on or about February 19, 2004.
At the annual meeting, the shareholders will be asked to elect a Board
of Directors (Board) and to vote on any other business which properly comes
before the meeting.
The Board of Directors of HEICO urges you to promptly date, sign and
mail your proxy, or to use the telephone or Internet voting systems set forth in
the proxy, in the form enclosed with this Proxy Statement, to make certain that
your shares are voted at the meeting. Proxies in the enclosed or other
acceptable form that are received in time for the meeting will be voted.
However, you may revoke your proxy at any time by a revocation in writing or a
later dated proxy that is received by HEICO; and, if you attend the meeting, you
may vote your shares in person.
If your proxy is received in time for the meeting, it will be voted in
the manner specified by you in the proxy. If you do not specify a choice, the
proxy will be voted as indicated in the form of proxy.
HEICO will bear the expense of soliciting proxies in the accompanying
form. Solicitations will be by mail, and directors, officers and regular
employees of HEICO may solicit proxies personally or by telephone, telegram or
special letter. HEICO will also employ D. F. King & Co., 48 Wall Street, New
York, New York 10005, to assist in soliciting proxies for a fee of $5,000 plus
related out-of-pocket expenses.
Only holders of record of HEICO Common Stock, $0.01 par value per share
(the "Common Stock"), and Class A Common Stock, $0.01 par value per share (the
"Class A Common Stock"), at the close of business on January 20, 2004 will be
entitled to vote at the meeting. On that date there were outstanding 9,691,095
shares of Common Stock, each entitled to one vote, and 14,154,973 shares of
Class A Common Stock, each entitled to 1/10th vote per share.
VOTING REQUIREMENTS
The presence, in person or by proxy, of the holders of a majority of the
voting power of the shares of all classes of the Company's common stock entitled
to vote shall constitute a quorum at the annual meeting of shareholders. If a
quorum is present, the affirmative vote of a majority of the voting power of the
shares of all classes of the Company's common stock represented in person or by
proxy at the annual meeting and entitled to vote on the subject matter at the
annual meeting shall be required to elect members of the Board of Directors.
A proxy submitted by a shareholder may indicate that all or a portion of
the shares represented by such proxy are not being voted by such shareholder
with respect to a particular matter ("non-voted shares"). This could occur, for
example, when a broker is not permitted to vote shares held in "street name" on
certain matters in the absence of instructions from the beneficial owner of the
shares. Non-voted shares with respect to a particular matter will be counted for
purposes of determining the presence of a quorum but will not be counted as
shares present and entitled to vote on such matter for purposes of voting, and
therefore, will have no effect on matters brought to a vote
1
at the annual meeting. Shares voted to abstain as to a particular matter and
directions to "withhold authority" to vote for directors, will be counted for
purposes of determining the presence of a quorum and will be counted as present
and entitled to vote with respect to such matter for purposes of voting, and
therefore, will have the effect of votes against the matters brought to a vote
at the annual meeting.
Under the terms of the HEICO Savings and Investment Plan (the Plan), all
shares allocated to the accounts of participating employees will be voted or not
voted by the trustee of the Plan as directed by written instructions from the
participating employees, and allocated shares for which no instructions are
received and all unallocated shares will be voted by the trustee of the Plan in
the same proportion as the shares for which instructions are received. Voting
instruction cards are being mailed to all participants in the Plan. If a
participant also owns shares outside the Plan, the participant must return both
the proxy card and the voting instruction card as indicated on those cards in
order to cause all of their shares to be voted in accordance with their
instructions. To be assured that the trustee will receive voting instruction
cards on a timely basis, voting instruction cards for shares in the Plan must be
duly signed and received no later than March 12, 2004. The total number of
shares in the Plan as of the record date represents approximately 10.55% of the
voting power of all classes of common stock outstanding as of the record date
and entitled to vote at the annual meeting.
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VOTING SECURITIES OF PRINCIPAL SHAREHOLDERS AND MANAGEMENT
The following table sets forth information regarding the beneficial
ownership of HEICO Common Stock and Class A Common Stock as of January 20, 2004
by (i) each person who is known to the Company to be the beneficial owner of
more than 5% of the outstanding Common Stock or Class A Common Stock, (ii) the
Chief Executive Officer and the other four most highly compensated executive
officers, (iii) each of the directors of the Company, and (iv) all directors and
executive officers of the Company as a group. Except as set forth below, the
shareholders named below have sole voting and investment power with respect to
all shares of Common Stock and Class A Common Stock shown as being beneficially
owned by them.
SHARES BENEFICIALLY OWNED /(2)/
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CLASS A
COMMON STOCK COMMON STOCK
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NAME AND ADDRESS OF BENEFICIAL OWNER /(1)/ NUMBER PERCENT NUMBER PERCENT
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(a) Certain beneficial owners:
Mendelson Reporting Group /(3)/ ....................................... 2,234,452 21.25% 1,368,847 9.28%
Dr. Herbert A. Wertheim /(4)/ ......................................... 1,136,176 11.72% 1,132,196 8.00%
Wasatch Advisors, Inc. /(5)/ .......................................... -- -- 1,316,099 9.30%
Investment Counselors of Maryland, LLC /(6)/ .......................... -- -- 1,237,004 8.74%
Susquehanna Investment Group and SIG Specialists, Inc. /(7)/ .......... -- -- 836,478 5.91%
Dimensional Fund Advisors Inc. /(8)/ .................................. 590,463 6.09% -- --
Rene Plessner Reporting Group /(9)/ .................................. 540,497 5.58% -- --
(b) Directors:
Samuel L. Higginbottom /(10)/ ......................................... 7,749 * 6,609 *
Wolfgang Mayrhuber /(11)/ ............................................. 19,000 * 19,382 *
Eric A. Mendelson /(12)/ .............................................. 590,914 5.92% 356,770 2.49%
Laurans A. Mendelson /(13)/ ........................................... 1,379,982 13.94% 923,705 6.43%
Victor H. Mendelson /(14)/ ............................................ 578,120 5.77% 383,196 2.67%
Albert Morrison, Jr. /(15)/ ........................................... 13,332 * 13,606 *
Dr. Alan Schriesheim /(16)/ ........................................... 117,705 1.20% 118,494 *
(c)Executive officers listed in Summary Compensation Table who are
not directors:
Thomas S. Irwin /(17)/................................................. 433,278 4.38% 249,221 1.75%
James L. Reum ......................................................... 10,454 * 10,455 *
All directors and executive officers as a group (9 persons)/(18)/...... 2,835,970 26.13% 1,786,614 11.92%
All directors, executive officers, the HEICO Savings and Investment
Plan and the Mendelson Reporting Group as a group /(19)/ ............ 3,815,896 35.16% 2,690,047 17.95%
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* Represents ownership of less than 1%.
(1) Unless otherwise indicated, the address of each beneficial owner
identified is c/o HEICO Corporation, 3000 Taft Street, Hollywood, Florida
33021.
(2) The number of shares of Common Stock and Class A Common Stock deemed
outstanding includes (i) 9,691,095 shares of Common Stock outstanding as
of January 20, 2004, (ii) 14,154,973 shares of Class A Common Stock
outstanding as of January 20, 2004, and (iii) shares issuable upon
exercise of stock options held by the respective person or group which are
presently exercisable or which may be exercised within 60 days after
January 20, 2004 as set forth below. Pursuant to the rules of the
Securities and Exchange Commission, presently exercisable stock options
and stock options that become exercisable within 60 days are deemed to be
outstanding and to be beneficially owned by the person or group for the
purpose of computing the percentage ownership of such person or group, but
are not treated as outstanding for the purpose of computing the percentage
ownership of any other person or group.
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(3) The Mendelson Reporting Group consists of Laurans A. Mendelson; Eric A.
Mendelson; Victor H. Mendelson; Mendelson International Corporation (MIC),
a corporation whose stock is owned solely by Eric and Victor Mendelson and
whose Chairman of the Board is Laurans A. Mendelson; LAM Limited Partners,
a partnership whose sole general partner is a corporation controlled by
Arlene Mendelson, the wife of Laurans A. Mendelson; LAM Alpha Limited
Partners, a partnership whose sole general partner is a corporation
controlled by Laurans A. Mendelson; EAM Management Limited Partners, a
partnership whose sole general partner is a corporation controlled by Eric
A. Mendelson; VHM Management Limited Partners, a partnership whose sole
general partner is a corporation controlled by Victor H. Mendelson; and
the Victor H. Mendelson Revocable Investment Trust, whose grantor, sole
presently vested beneficiary and trustee is Victor H. Mendelson. Includes
825,010 shares of Common Stock and 590,070 shares of Class A Common Stock
subject to stock options that are presently exercisable or exercisable
within 60 days after January 20, 2004. See Notes (12), (13) and (14)
below. The address of the Mendelson Reporting Group is 825 Brickell Bay
Drive, 16th Floor, Miami, Florida 33131.
(4) The address of Dr. Wertheim is 191 Leucadendra Drive, Coral Gables,
Florida 33156.
(5) Based on information in a Schedule 13G filed on January 9, 2004, all
shares are held in portfolios of advisory clients of Wasatch Advisors,
Inc., a registered investment advisor. The address of Wasatch Advisors,
Inc. is 150 Social Hall Avenue, Salt Lake City, Utah 84111.
(6) Based on information in a Schedule 13G filed on February 10, 2004, all
shares are held in portfolios of advisory clients of Investment Counselors
of Maryland, LLC, a registered investment advisor. The address of
Investment Counselors of Maryland, LLC is 803 Cathedral Street, Baltimore,
Maryland 21201.
(7) Based on information in a Schedule 13G filed on February 5, 2004, all
shares are held by Susquehanna Investment Group (Susquehanna) or SIG
Specialists, Inc. (SIG), registered brokers or dealers. The address of
Susquehanna and SIG is 401 City Avenue, S-220, Bala Cynwyd, Pennsylvania
19004.
(8) Based on information in a Schedule 13G filed on February 6, 2004, all
shares are held in managed accounts of Dimensional Fund Advisors Inc., a
registered investment advisor. The address of Dimensional Fund Advisors
Inc. is 1299 Ocean Avenue, 11th Floor, Santa Monica, California 90401.
(9) Based on information in a Schedule 13D dated February 24, 2002 filed by
Mr. Plessner individually and as sole Trustee for the Rene Plessner
Associates, Inc. Profit Sharing Plan. Reflects 107,127 shares of Common
Stock held by Mr. Plessner and 433,370 shares of Common Stock held by the
Rene Plessner Associates, Inc. Profit Sharing Plan, an employee profit
sharing plan of Rene Plessner Associates, Inc., an executive search
company. The address of Rene Plessner Reporting Group is 200 East 74th
Street, Penthouse A, New York, New York 10021.
(10) Includes 4,000 shares of Common Stock and 400 shares of Class A Common
Stock subject to stock options that are presently exercisable or
exercisable within 60 days after January 20, 2004.
(11) Includes 19,000 shares of Common Stock and 18,675 shares of Class A Common
Stock subject to stock options that are presently exercisable or
exercisable within 60 days after January 20, 2004.
(12) Includes 157,282 shares of Common Stock and 147,412 shares of Class A
Common Stock held by MIC; 82,360 shares of Common Stock and 8,236 shares
of Class A Common Stock held by EAM Management Limited Partners; 293,490
shares of Common Stock and 176,434 shares of Class A Common Stock subject
to stock options that are presently exercisable or exercisable within 60
days after January 20, 2004; 19,147 shares of Common Stock and 18,495
shares of Class A Common Stock held by the HEICO Savings and Investment
Plan and allocated to Eric A. Mendelson's account; and 850 shares of
Common Stock and 995 shares of Class A Common Stock owned by Eric
Mendelson's children. See Note (3) above.
4
(13) Laurans A. Mendelson disclaims beneficial ownership with respect to
157,282 shares of Common Stock and 147,412 shares of Class A Common Stock,
respectively, of these shares, which are held in the name of MIC and
45,441 shares of Common Stock and 20,392 shares of Class A Common Stock
which were donated to and are presently held by the Laurans A. and Arlene
H. Mendelson Charitable Foundation, Inc., of which Mr. Mendelson is
President. Includes 947,327 shares of Common Stock and 527,437 shares of
Class A Common Stock held solely by Mr. Mendelson or LAM Limited Partners
or LAM Alpha Limited Partners. Also includes 205,085 shares of Common
Stock and 204,369 shares of Class A Common Stock subject to stock options
that are presently exercisable or exercisable within 60 days after January
20, 2004 and 24,847 shares of Common Stock and 24,095 shares of Class A
Common Stock held by the HEICO Savings and Investment Plan and allocated
to Mr. Mendelson's account. See Notes (3), (12) and (14).
(14) Includes 157,282 shares of Common Stock and 147,412 shares of Class A
Common Stock held by MIC; 36,180 shares of Common Stock and 3,618 shares
of Class A Common Stock held by VHM Management Limited Partners; 326,435
shares of Common Stock and 209,267 shares of Class A Common Stock subject
to stock options that are presently exercisable or exercisable within 60
days after January 20, 2004, of which 25,000 shares of Common Stock and
25,000 shares of Class A Common Stock are held by the Victor H. Mendelson
Revocable Investment Trust; 15,548 shares of Common Stock and 14,945
shares of Class A Common Stock held by the HEICO Savings and Investment
Plan and allocated to Victor H. Mendelson's account; and 800 shares of
Common Stock and 1,010 shares of Class A Common Stock owned by Victor
Mendelson's children. See Note (3) above.
(15) Includes 4,000 shares of Common Stock and 400 shares of Class A Common
Stock subject to stock options that are presently exercisable or
exercisable within 60 days after January 20, 2004. Albert Morrison Jr.'s
voting and dispositive power with respect to 7,740 and 9,143 shares of
Common Stock and Class A Common Stock, respectively, is held indirectly
through Sheridan Ventures, Inc., a corporation of which Mr. Morrison is
the President, but not a shareholder.
(16) Includes 111,182 shares of Common Stock and 110,795 shares of Class A
Common Stock subject to stock options that are presently exercisable or
exercisable within 60 days after January 20, 2004 and 5,433 shares of
Common Stock and 5,411 shares of Class A Common Stock owned by the estate
of Dr. Schriesheim's wife.
(17) Includes 198,805 shares of Common Stock and 111,836 shares of Class A
Common Stock subject to stock options that are presently exercisable or
exercisable within 60 days after January 20, 2004 and 32,877 shares of
Common Stock and 32,092 shares of Class A Common Stock held by the HEICO
Savings and Investment Plan and allocated to Thomas S. Irwin's account.
(18) Includes 1,161,997 shares of Common Stock and 832,176 shares of Class A
Common Stock subject to stock options that are presently exercisable or
exercisable within 60 days after January 20, 2004. The total for all
directors and executive officers as a group (9 persons) also includes
92,419 shares of Common Stock and 89,628 shares of Class A Common Stock
held by the HEICO Savings and Investment Plan and allocated to accounts of
executive officers pursuant to the plan.
(19) Includes 2,234,452 shares of Common Stock and 1,368,847 shares of Class A
Common Stock owned by the Mendelson Reporting Group and 1,072,345 shares
of Common Stock and 993,061 shares of Class A Common Stock held by the
HEICO Savings and Investment Plan (the Plan) of which 761,287 shares of
Common Stock and 692,864 shares of Class A Common Stock are allocated to
participants in the Plan, including 92,419 shares of Common Stock and
89,628 shares of Class A Common Stock allocated to the directors,
executive officers and members of the Mendelson Reporting Group, and of
which 311,058 shares of Common Stock and 300,197 shares of Class A Common
Stock are unallocated as of January 20, 2004.
5
PROPOSAL TO ELECT DIRECTORS
(Proposal No. 1)
Each of the seven individuals named in the table below has been
nominated by the Board of Directors of the Company for election to the Board of
Directors at the annual meeting to serve until the next annual meeting or until
his successor is elected and qualified. All of the nominees are currently
serving on the Board of Directors. The Board of Directors has no reason to
believe that any of the nominees will not be a candidate or will be unable to
serve.
NAME AGE CORPORATE OFFICE OR POSITION DIRECTOR SINCE
- ---- --- ---------------------------- --------------
Samuel L. Higginbottom 82 Director 1989
Wolfgang Mayrhuber 56 Director 2001
Eric A. Mendelson 38 President - Flight Support Group; 1992
President and Chief Executive Officer of HEICO
Aerospace Holdings Corp. and Director
Laurans A. Mendelson 65 Chairman of the Board, President and Chief Executive 1989
Officer, Director
Victor H. Mendelson 36 President - Electronic Technologies Group 1996
and General Counsel of the Company; President
and Chief Executive Officer of HEICO Electronic
Technologies Corp. and Director
Albert Morrison, Jr. 67 Director 1989
Dr. Alan Schriesheim 73 Director 1984
BUSINESS EXPERIENCE OF NOMINEES
Samuel L. Higginbottom is a retired executive officer of Rolls Royce,
Inc. (an aircraft engine manufacturer), where he served as Chairman, President
and Chief Executive Officer from 1974 to 1986. He was the Chairman of the
Columbia University Board of Trustees from 1982 until September 1989. He was
President, Chief Operating Officer and a director of Eastern Airlines, Inc.,
from 1970 to 1973 and served in various other executive capacities with that
company from 1964 to 1969. Mr. Higginbottom was a director of British Aerospace
Holdings, Inc., an aircraft manufacturer, from 1986 to 1999 and was a director
of AmeriFirst Bank from 1986 to 1991. He is a Trustee Emeritus of St. Thomas
University, Miami, Florida.
Wolfgang Mayrhuber has served as Advisor to the Board of Directors of
the Company since 1997 and was elected to the Board of Directors in 2001. Mr.
Mayrhuber has served as Chairman of the Executive Board and Chief Executive
Officer of Deutsche Lufthansa AG ("Lufthansa") since June 2003. He has served
with Lufthansa since 1970, and has held various senior management positions for
the maintenance and overhaul of aircraft, components and engines. In 1992, Mr.
Mayrhuber was appointed Executive Vice President and Chief Operating Officer
Technical at Lufthansa. In 1994, he became Chairman of the Executive Board of
Lufthansa Technik AG. In 2001, Mr. Mayrhuber was appointed to the Executive
Board of Deutsche Lufthansa AG.
Eric A. Mendelson has been an employee of the Company since 1990,
serving in various capacities. Mr. Mendelson has served as Executive Vice
President of the Company since 2001, President and Chief Executive Officer of
HEICO Aerospace Holdings Corp. (HEICO Aerospace), a subsidiary of HEICO, since
its formation in 1997 and President of HEICO Aerospace Corporation since 1993.
Mr. Mendelson is a co-founder, and, since 1987, has been Managing Director of
Mendelson International Corporation (MIC), a private investment company which is
a shareholder of HEICO. Eric Mendelson is the son of Laurans Mendelson and the
brother of Victor Mendelson.
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Laurans A. Mendelson has served as Chairman of the Board of the Company
since December 1990. He has also served as Chief Executive Officer of the
Company since February 1990 and President of the Company since September 1991.
HEICO Corporation is a member of the Aerospace Industries Association (AIA) in
Washington D.C., and Mr. Mendelson has frequently served on the Board of
Governors of AIA. Mr. Mendelson is a Director of Hawker Pacific Aerospace and
Chairman of the Audit Committee. He is also Vice-Chairman of the Board of
Trustees, member of the Executive Committee and member of the Society of Mt.
Sinai Founders of Mt. Sinai Medical Center in Miami Beach, Florida. In addition,
Mr. Mendelson served as a Trustee of Columbia University in The City of New York
from 1995 to 2001, as well as Chairman of the Trustees' Audit Committee. Mr.
Mendelson currently serves as Trustee Emeritus of Columbia University and is a
member of the Trustees' Audit Committee. Mr. Mendelson is a Certified Public
Accountant. Laurans A. Mendelson is the father of Eric Mendelson and Victor
Mendelson.
Victor H. Mendelson has been associated with the Company since 1990,
serving in various capacities. Mr. Mendelson has served as Executive Vice
President of the Company since 2001, President and Chief Executive Officer of
HEICO Electronic Technologies Corp., a subsidiary of HEICO, since September 1996
and as General Counsel of the Company since 1993. He was the Chief Operating
Officer of the Company's former MediTek Health Corp. subsidiary from 1995 until
its profitable sale in 1996. Mr. Mendelson is a co-founder, and, since 1987, has
been President of MIC, a private investment company, which is a shareholder of
HEICO. He is a Trustee of the Greater Miami Chamber of Commerce and a Director
of the Florida Grand Opera. Victor Mendelson is the son of Laurans Mendelson and
the brother of Eric Mendelson.
Albert Morrison, Jr. is a retired executive officer of Morrison, Brown,
Argiz & Company, a certified public accounting firm located in Miami, Florida,
where he served as Chairman from 1971 - January 2003. He serves as the Chairman
of the Miami-Dade County Industrial Development Authority. Mr. Morrison also
serves as a director of Logic Devices, Inc., a computer electronics company, and
as a member of the Board of Directors of the Florida International University
Foundation.
Dr. Alan Schriesheim is retired from the Argonne National Laboratory,
where he served as Director from 1984 to 1996. From 1983 to 1984, he served as
Senior Deputy Director and Chief Operating Officer of Argonne. From 1956 to
1983, Dr. Schriesheim served in a number of capacities with Exxon Corporation in
research and administration, including positions as General Manager of the
Engineering Technology Department for Exxon Research and Engineering Co. and
Director of Exxon's Corporate Research Laboratories. Dr. Schriesheim is also a
member of the Board of the Children's Memorial Hospital of Chicago, Illinois.
CORPORATE GOVERNANCE, BOARD COMMITTEES AND MEETINGS
During the fiscal year ended October 31, 2003, the Board of Directors
held four meetings. At its December 2003 meeting, the Board of Directors
approved Corporate Governance Guidelines. The Corporate Governance Guidelines
set forth the role and functions of the Board of Directors, director
qualifications and guidelines with respect to Board of Director meetings and
committees of the Board, among other things. The Corporate Governance Guidelines
are included herein as Appendix A. The Board of Directors has determined that
Mr. Higginbottom, Mr. Mayrhuber, Mr. Morrison and Dr. Schriesheim have met the
standards of independence as set forth in the Company's Corporate Governance
Guidelines, which are consistent with the standards established by the New York
Stock Exchange.
The Board of Directors currently has an Executive Committee, a
Nominating and Executive Compensation Committee, a Finance/Audit Committee, an
Environmental, Safety and Health Committee and a Stock Option Plan Committee.
Committee member appointments are re-evaluated annually and approved by the
Board of Directors at its next regularly scheduled meeting that follows the
annual meeting of shareholders. Information regarding each of the current
committees is as follows:
7
The Executive Committee has such powers as are delegated by the Board of
Directors, which may be exercised while the Board of Directors is not in
session, provided such powers are not in conflict with specific powers conferred
to other committees or are otherwise contrary to law. The Executive Committee
did not meet in fiscal 2003 and its members consist of Mr. Laurans Mendelson
(Committee Chairman), Mr. Higginbottom and Dr. Schriesheim.
The Nominating and Executive Compensation Committee determines the
Company's director and officer requirements and recommends to the full Board of
Directors nominees for election. The Nominating and Executive Compensation
Committee also reviews and approves compensation of the Company's officers, key
employees and directors. The Nominating and Executive Compensation Committee met
three times in fiscal 2003 and its members consist of Mr. Higginbottom
(Committee Chairman) and Mr. Morrison. The Board of Directors has determined
that each member of the Nominating and Executive Compensation Committee is
independent in accordance with the New York Stock Exchange's listing standards.
The annual report of the Nominating and Executive Compensation Committee is
contained herein.
The Finance/Audit Committee oversees the quality and integrity of the
accounting, auditing, internal control and financial reporting practices of the
Company including the appointment, compensation, retention and oversight of the
work of the Company's independent auditor. The Finance/Audit Committee's charter
is included herein as Appendix B. The Finance/Audit Committee met five times in
fiscal 2003 and its members consist of Mr. Morrison (Committee Chairman), Mr.
Higginbottom and Dr. Schriesheim. The Board of Directors has determined that
each member of the Finance/Audit Committee is financially literate and
independent in accordance with the New York Stock Exchange's listing standards
and that Mr. Morrison is an "audit committee financial expert", as defined by
the Securities and Exchange Commission (SEC). The annual report of the
Finance/Audit Committee is contained herein.
The Environmental, Safety and Health Committee meets with the Company's
senior management and oversees compliance in all matters relating to federal and
state environmental, safety and health regulations. The Environmental, Safety
and Health Committee met four times in fiscal 2003 and its members consist of
Dr. Schriesheim (Committee Chairman), Mr. Mayrhuber and Mr. Victor Mendelson.
The Environmental, Safety and Health Committee also visits Company operating
locations on a periodic basis.
The Stock Option Plan Committee administers the Company's stock option
plans and has authority to grant options, to determine the persons to whom and
the times at which options are granted, and to determine the terms and
provisions of each grant. The Stock Option Plan Committee met three times in
fiscal 2003 and its members consist of Mr. Morrison (Committee Chairman) and Mr.
Higginbottom.
As previously indicated, nominating functions are handled by the
Nominating and Executive Compensation Committee. At its next meeting scheduled
immediately following the March 2004 annual meeting of shareholders, the Board
of Directors plans to divide the functions of the Nominating and Executive
Compensation Committee into two committees, namely, the Nominating and Corporate
Governance Committee and the Compensation Committee, and will appoint committee
members. The full responsibilities of the Nominating and Corporate Governance
Committee are summarized below and detailed in its charter attached herein as
Appendix C. The full responsibilities of the Compensation Committee are detailed
in its charter attached herein as Appendix D.
The Nominating and Corporate Governance Committee will be appointed by
the Board of Directors to assist the Board in identifying and recommending to
the Board qualified individuals to be nominated as director; make
recommendations concerning committee membership, appointments and director
compensation; periodically review and recommend to the Board of Directors
updates to the Company's Corporate Governance Guidelines; assist the Board and
the Company in interpreting and applying the Company's Corporate Governance
Guidelines and Code of Business Conduct; and to oversee the annual evaluation of
management and of the Board of Directors.
8
Prior to nominating an existing director for re-election to the Board of
Directors, the Nominating and Corporate Governance Committee will consider the
existing director's independence, if required, skills, performance and Board and
committee meeting attendance. The Nominating and Corporate Governance Committee
will consider candidates recommended by shareholders (see the caption
"Shareholder Proposals and Nominations" contained herein). In evaluating
candidates for potential director nomination, the Nominating and Corporate
Governance Committee will consider, among other things, candidates that are
independent, if required; who possess personal and professional integrity; have
good business judgment, relevant experience and skills; and who would be
effective as a director in conjunction with the full Board in collectively
serving the long-term interests of the Company's shareholders. All candidates
will be reviewed in the same manner, regardless of the source of recommendation.
Each of the directors attended 75% or more of the meetings of the Board
of Directors and committees on which he served in fiscal 2003. The Company does
not have a formal policy regarding attendance by members of the Board of
Directors at the annual meeting of shareholders, but it encourages directors to
attend and historically, most have done so. Six of the seven members of the
Board of Directors attended the 2003 annual shareholder meeting.
The non-management directors shall meet at least once per year in an
executive session. The non-management directors shall elect a presiding director
for each executive session among the chairs of Board committees on a rotating
basis.
COMPENSATION OF DIRECTORS
Directors of the Company are required to purchase shares of HEICO common
stock equivalent to one-third of their annual retainer ($7,333). The Company
accrues one-third of each directors' annual retainer and periodically purchases
HEICO common stock on behalf of directors.
Directors receive director's fees of $1,200 for each regular Board
meeting attended and an annual retainer of $22,000. Members of committees of the
Board of Directors are paid a $4,800 annual retainer for each committee served
and $800 for attendance at each committee meeting. In addition, committee
chairmen are paid an annual retainer of $1,800 for each committee chaired.
During fiscal 2003, an aggregate of $176,933 was paid or accrued to directors
under the compensation arrangements described above (including $49,551 to Samuel
Higginbottom, $33,695 to Wolfgang Mayrhuber, $47,230 to Albert Morrison, Jr.,
and $46,457 to Dr. Alan Schriesheim), excluding amounts to Laurans A. Mendelson,
Eric A. Mendelson and Victor H. Mendelson, which are reported in the Summary
Compensation Table. Per diem fees for other consulting services are paid to
individual directors, as assigned by the Chairman of the Board, in the amount of
$600 per day. During fiscal 2003, $78,000 was paid to Samuel Higginbottom for
consulting services.
The Company's Directors' Retirement Plan, adopted in 1991 in order to
facilitate Director retirements, covers the then current directors of the
Company. Four of the current seven Directors are covered under the Directors'
Retirement Plan. Under the Directors' Retirement Plan, participants will, upon
retirement from the Board, receive annually the average retainer such Director
was paid during his service as a member of the Board payable in quarterly
installments. Such quarterly payments are not to be less than $4,500. Subject to
the terms of the Directors' Retirement Plan, these quarterly payments will
continue for the same period of time that the participant served on the Board,
not to exceed ten years. During fiscal 2003, $34,000 was accrued, while amounts
totaling $36,000 were paid pursuant to the Directors' Retirement Plan.
RECOMMENDATION
THE BOARD OF DIRECTORS RECOMMENDS THAT THE SHAREHOLDERS VOTE FOR EACH OF THE
BOARD'S NOMINEES.
9
EXECUTIVE COMPENSATION
SUMMARY COMPENSATION TABLE
The following table provides the compensation earned by the Company's
Chief Executive Officer and each of the four other most highly compensated
executive officers of the Company or its subsidiaries (collectively, the "Named
Executive Officers") during each of the past three fiscal years ended October
31:
LONG-TERM
COMPENSATION
--------------------
ANNUAL COMPENSATION /(1)/ NUMBER OF
FISCAL ------------------------------------------ SECURITIES UNDERLYING ALL OTHER
NAME AND PRINCIPAL POSITION YEAR SALARY /(2)/ BONUS OTHER /(3)/ OPTIONS GRANTED /(4)/ COMPENSATION
- --------------------------- ------ ----------- -------- ----------- --------------------- -------------
Laurans A. Mendelson 2003 $ 595,000 -- $ 32,269 -- $ 41,790/(7)/
Chairman of the Board, 2002 595,000 $ 90,000/(5)/ 30,401 110,000/(6)/ 41,140/(7)/
President and Chief 2001 570,000 -- 33,751 133,100/(6)/ 40,890/(7)/
Executive Officer
Thomas S. Irwin 2003 299,000 -- -- 55,000 7,000/(8)/
Executive Vice President 2002 299,000 50,000/(5)/ -- 55,000 6,350/(8)/
and Chief Financial Officer 2001 287,000 -- -- 96,800 5,950/(8)/
Eric A. Mendelson 2003 299,000 -- 26,801 137,500 17,650/(9)/
President - Flight Support Group; 2002 299,000 50,000/(5)/ 26,801 55,000 15,935/(9)/
President and Chief Executive Officer 2001 287,000 -- 28,001 163,350 5,950/(8)/
of HEICO Aerospace Holdings Corp.
Victor H. Mendelson 2003 299,000 -- 33,695 137,500 16,250/(10)/
President - Electronic Technologies 2002 299,000 50,000/(5)/ 30,401 55,000 14,675/(10)/
Group and General Counsel of the 2001 287,000 -- 32,001 163,350 5,950/(8)/
Company; President and Chief
Executive Officer of HEICO
Electronic Technologies Corp.
James L. Reum 2003 68,555/(11)/ -- -- -- --
Executive Vice President of 2002 50,185/(11)/ -- -- -- --
HEICO Aerospace Holdings Corp. 2001 136,000/(11)/ -- -- -- 3,011/(8)/
- ----------
(1) Salary and bonus amounts include amounts deferred by executive officers
pursuant to a non-qualified deferred compensation plan available to
selected employees. Under such deferred compensation plan, selected
employees may elect to defer a portion of their compensation. Amounts
deferred are immediately vested and invested in individually directed
investment accounts. Earnings on such investment accounts, which are
maintained by a trustee, accrue to the benefit of the individual.
(2) Salaries for these executive officers, excluding Mr. Reum, were established
in January 2001 and have not been increased since then.
(3) Represents directors' fees.
(4) Information has been adjusted retroactively to give effect to a 10% stock
dividend paid in shares of Class A Common Stock in January 2004.
(5) Represents a special bonus related to the additional gain on the sale of
Trilectron Industries, Inc. In fiscal 2000, the Company sold Trilectron for
a substantial gain. In fiscal 2000, the Company paid cash bonuses to the
executive officers contingent upon Trilectron's successful and profitable
sale, but refrained from paying all of the amounts it reserved for these
bonuses until such time as it could finally calculate the total sale gain
due to expiration of certain contractual contingencies related to the sale.
In fiscal 2002, when the gain became fully calculable, the Compensation
Committee paid the balance of these bonus funds to several Company
employees, including its executive officers.
10
(6) These options were voluntarily cancelled by Mr. Laurans A. Mendelson during
fiscal 2003.
(7) Includes annual life insurance premiums paid by the Company of $34,790 in
fiscal 2003, fiscal 2002 and fiscal 2001. Amounts also include Company
contributions to Mr. Laurans A. Mendelson's HEICO Savings and Investment
Plan account of $7,000 in fiscal 2003, $6,350 in fiscal 2002, and $6,100 in
fiscal 2001. Prior to receiving a portion of the Company contributions
under such Plan, Mr. Mendelson contributed, in cash, twice the amount that
he received in stock. Participation in the HEICO Savings and Investment
Plan is available to nearly all employees of the Company.
(8) Represents Company contributions to the HEICO Savings and Investment Plan
account of the named executive officer. Prior to receiving a portion of the
Company contributions under such plan, each named executive officer
contributed, in cash, twice the amount that he received in HEICO stock.
Participation in the HEICO Savings and Investment Plan is available to
nearly all employees of the Company.
(9) Includes annual life insurance premiums paid by the Company of $10,650 in
fiscal 2003 and $9,585 in fiscal 2002. Amounts also include Company
contributions to Mr. Eric A. Mendelson's HEICO Savings and Investment Plan
account of $7,000 in fiscal 2003 and $6,350 in fiscal 2002. Prior to
receiving a portion of the Company contributions under such Plan,
Mr. Mendelson contributed, in cash, twice the amount that he received in
stock. Participation in the HEICO Savings and Investment Plan is available
to nearly all employees of the Company.
(10) Includes annual life insurance premiums paid by the Company of $9,250 in
fiscal 2003 and $8,325 in fiscal 2002. Amounts also include Company
contributions to Mr. Victor H. Mendelson's HEICO Savings and Investment
Plan account of $7,000 in fiscal 2003 and $6,350 in fiscal 2002. Prior to
receiving a portion of the Company contributions under such Plan, Mr.
Mendelson contributed, in cash, twice the amount that he received in stock.
Participation in the HEICO Savings and Investment Plan is available to
nearly all employees of the Company.
(11) Mr. Reum retired from full-time service to HEICO Aerospace Holdings Corp.
in August 2001 and remains active on a part-time basis.
11
STOCK OPTION GRANTS IN LAST FISCAL YEAR
The following table provides information concerning individual grants of
stock options pursuant to the Company's stock option plans made during the
fiscal year ended October 31, 2003 to the Named Executive Officers. Information
has been adjusted retroactively to give effect to a 10% stock dividend paid in
shares of Class A Common Stock in January 2004. In addition, the table shows the
potential realizable values of the grants assuming annual compounded common
stock price appreciation rates of five and ten percent per annum over the
maximum option term. The five and ten percent rates of appreciation are set by
the rules of the Securities and Exchange Commission and are not intended to
forecast possible future appreciation, if any, of the Company's common stock.
NUMBER OF % OF TOTAL POTENTIAL REALIZABLE VALUE AT
SECURITIES OPTIONS ASSUMED ANNUAL RATES OF STOCK PRICE
UNDERLYING GRANTED TO EXERCISE APPRECIATION FOR OPTION TERM /(2)/
OPTIONS EMPLOYEES IN PRICE EXPIRATION ------------------------------------
NAME GRANTED /(1)/ FISCAL YEAR PER SHARE DATE 5% 10%
- ----- ------------- ------------ --------- ---------- --------- -----------
Laurans A. Mendelson -- -- -- -- -- --
Thomas S. Irwin 49,500 10% $ 7.84 3/17/2013 $ 227,070 $ 591,414
5,500 1% 5.51 3/17/2013 19,058 48,297
Eric A. Mendelson 129,250 26% 7.86 3/17/2013 594,670 1,548,341
8,250 2% 5.60 3/17/2013 29,055 73,631
Victor H. Mendelson 129,250 26% 7.86 3/17/2013 594,670 1,548,341
8,250 2% 5.60 3/17/2013 29,055 73,631
James L. Reum -- -- -- -- -- --
- ----------
(1) Options granted vest 20% each year over five years.
(2) The potential realizable values (gains) do not consider the impact of
income taxes to the option holder. Actual gains, if any, are dependent on
the future performance of the Company's common stock, overall market
conditions and the option holder's continued employment through the vesting
period. The amounts in this table may not necessarily be achieved.
12
AGGREGATE OPTION EXERCISES AND FISCAL YEAR-END OPTION VALUES
The following table provides information concerning stock option
exercises during fiscal 2003 and stock option holdings as of the fiscal year
ended October 31, 2003 for each of the Named Executive Officers. Information has
been adjusted as necessary for all stock dividends and stock splits.
NUMBER OF SECURITIES
UNDERLYING UNEXERCISED VALUE OF UNEXERCISED
OPTIONS AT FISCAL IN-THE-MONEY OPTIONS
SHARES YEAR-END AT FISCAL YEAR-END /(1)/
ACQUIRED VALUE -------------------------- ----------------------------
NAME ON EXERCISE REALIZED EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
- ---- --------------- ----------- ----------- ------------- ----------- -------------
Laurans A. Mendelson 131,541/(2)/ $ 1,066,492 409,454 -- $ 3,649,637 --
Thomas S. Irwin 129,646/(3)/ 892,780 299,643 113,080 1,605,374 $ 316,243
Eric A. Mendelson 54,770/(4)/ 387,740 442,424 235,510 2,382,159 789,991
Victor H. Mendelson 122,335/(5)/ 1,009,290 508,202 235,510 2,996,351 789,991
James L. Reum -- -- -- -- -- --
- ----------
(1) Represents the closing price per share of the underlying common stock as
reported on the New York Stock Exchange on October 31, 2003 less the option
exercise price (if a positive spread) multiplied by the number of
unexercised stock option grants.
(2) Represents 65,885 shares of Common Stock and 65,656 shares of Class A
Common Stock acquired upon the exercise of options granted in fiscal 1994.
(3) Represents 64,937 shares of Common Stock and 64,709 shares of Class A
Common Stock acquired upon the exercise of options granted in fiscal 1993
and in fiscal 1994.
(4) Represents 32,943 shares of Common Stock and 21,827 shares of Class A
Common Stock acquired upon the exercise of options granted in fiscal 1994.
(5) Represents 77,360 shares of Common Stock and 44,975 shares of Class A
Common Stock acquired upon the exercise of options granted in fiscal 1993
and in fiscal 1994, including options to purchase 36,180 shares of Common
Stock and 3,618 shares of Class A Common Stock, which were exercised by VHM
Management Limited Partners and options to purchase 2,961 shares of Class A
Common Stock, which were donated to a charity and subsequently exercised by
the donee.
13
FINANCE/AUDIT COMMITTEE REPORT
The Finance/Audit Committee (the "Audit Committee") of the Board of
Directors is composed entirely of three non-employee directors. The Board of
Directors has determined that each member of the Audit Committee is financially
literate and independent in accordance with the New York Stock Exchange's
listing standards and that Mr. Morrison is an "audit committee financial
expert", as defined by the Securities and Exchange Commission.
The purpose of the Audit Committee is to assist the Board of Directors
in fulfilling its responsibility for the oversight of the quality and integrity
of the accounting, auditing, internal control and financial reporting practices
of the Company and such other duties as directed by the Board. The full
responsibilities of the Audit Committee are set forth in its formal written
charter, which was adopted by the full Board of Directors in 1999 and most
recently amended in its entirety in December 2003 and included herein as
Appendix B.
Management is responsible for the Company's financial reporting process,
including its system of internal control, and for the preparation of
consolidated financial statements in accordance with accounting principles
generally accepted in the United States of America. The Company's independent
auditor, Deloitte & Touche LLP, is responsible for auditing those financial
statements and for issuing an opinion as to whether those financial statements
are, in all material respects, presented fairly in conformity with accounting
principles generally accepted in the United States of America. The Audit
Committee is responsible for monitoring and reviewing these processes, acting in
an oversight capacity relying on the information provided to it and on the
representations made by management and the independent auditor.
As part of fulfilling its responsibilities, the Audit Committee reviewed
and discussed with management the Company's audited financial statements as of
and for the year ended October 31, 2003 and discussed with Deloitte & Touche LLP
the matters required to be discussed by Statement on Auditing Standards No. 61,
"Communication with Audit Committees". The Audit Committee received the written
disclosures and the letter from Deloitte & Touche LLP required by Independence
Standards Board Standard No. 1, "Independence Discussions with Audit
Committees". The Audit Committee discussed and considered the independence of
Deloitte & Touche LLP with representatives of Deloitte & Touche LLP, reviewing
as necessary all relationships and services which might bear on the objectivity
of Deloitte & Touche LLP. Deloitte & Touche LLP was provided with full access to
the Audit Committee to meet privately and was encouraged to discuss any matter
it desired with the Audit Committee or the full Board of Directors.
Based upon the review and discussions referred to above, the Audit
Committee recommended to the Board of Directors that the Company's audited
financial statements be included in its Annual Report on Form 10-K for the year
ended October 31, 2003, for filing with the Securities and Exchange Commission.
Respectfully Submitted by the Finance/Audit Committee of the Company's Board of
Directors: Samuel L. Higginbottom, Albert Morrison, Jr. and Dr. Alan
Schriesheim.
14
NOMINATING AND EXECUTIVE COMPENSATION COMMITTEE REPORT
THE COMMITTEE
The Nominating and Executive Compensation Committee (the "Compensation
Committee" or "Committee") consists entirely of independent Directors who are
not current or former employees or officers of the Company or any of its'
affiliates. The Compensation Committee generally makes all decisions concerning
the Company's executive officers' compensation and all such decisions are
reviewed by the full Board, except that decisions about awards under the
Company's 1993 and 2002 Stock Option Plans are made by the Stock Option Plan
Committee (the "SOC") and are further ratified by the Committee and the Board.
COMPENSATION PHILOSOPHY
The Compensation Committee has for many years used the following targets
in setting compensation: (i) increases in both the Company's income and
shareholder value; (ii) alignment of stockholder and management interests to the
greatest extent reasonable; (iii) management focus on the Company's long-term
growth, while considering the Company's short-term interests; (iv) attracting
and retaining a high quality management team; (v) stimulation of both
entrepreneurial and team objectives; and (vi) recruiting and retaining top
managers in a continuing competitive compensation market. The Compensation
Committee believes that these objectives are all crucial in building and growing
the Company and that the Company has been well served over the long term by
ensuring that these objectives are met. In reviewing these objectives in 2003,
the Compensation Committee again concluded that the objectives are sound and
time-tested.
Historically, the Company has refrained from paying large base cash
compensation and has paid cash bonuses when the Company recognized quantitative
earnings improvements. It has also been the Compensation Committee's practice to
accept executive officers' recommendation that they not receive base salary
increases in weaker financial years for the Company. Accordingly, all of the
base salaries paid to executive officers remain at the levels set in January
2001 and have not increased since then. The executive officers requested, and
the Compensation Committee agreed, that in 2003 and 2002, no regular cash
bonuses be paid to them because some of the Company's businesses suffered
following the external effects like the Iraq War, SARS and the September 11th
attacks which harmed the Company's income.
The Compensation Committee accepted this recommendation in 2003 and paid
no bonuses to executive management. In 2002, the Committee did not award regular
cash bonuses to executive officers. As noted in last year's report, in 2002 the
Committee awarded the remaining bonuses from the gain on the sale of its former
Trilectron Industries, Inc. (Trilectron) subsidiary (discussed in the next
paragraph) that were not paid in 2000. The Compensation Committee and the
executive officers followed a similar approach in 2001 and in 1999 when, despite
continuing record financial performance in 1999 by the Company, no cash bonuses
were paid to any of the Company's executive officers. In 2000, the Company sold
Trilectron for a substantial gain. In 2000, the Company paid cash bonuses to the
executive officers contingent upon Trilectron's successful and profitable sale,
but refrained from paying all of the amounts it reserved for these bonuses until
such time as it could finally calculate the total sale gain due to expiration of
certain contractual contingencies related to the sale. In the second quarter of
fiscal 2002, when the gain became fully calculable, the Compensation Committee
paid the balance of these bonus funds to several Company employees, including
its executive officers.
As was the case with other Company employees, certain executive officers
received stock options in 2003. The Compensation Committee firmly believes that
stock options encourage managers to maximize the Company's stock price by
working diligently to increase earnings in order to increase shareholder value.
The Compensation Committee also believes that a company's stock price is usually
driven by strong earnings and earnings growth and that this philosophy has led
to a 535% increase in the Company's Common Stock price from 1993 to 2003, and
net income improved from $984,000 to $12,222,000 over the same period. In
addition, stock options limit the Company's cash outlay because the Company may
pay less cash compensation to grantees when they receive some of their
compensation in options to purchase Company stock. Also, stock options yield
profit for officers only when other shareholders benefit. Numerous publicly-held
corporations issue stock options to their employees and the
15
Compensation Committee believes that the Company should do so in order to remain
competitive in retaining and attracting employees.
Stock option holders do not receive any income or other benefit from
their stock options unless all of the Company's shareholders gain from an
increase in the Company's stock price above the option exercise price since
options are granted at fair market value of the stock on the grant date. If
management's efforts do not result in a share price increase, management will
not earn potentially sizeable financial gains, and those gains typically
represent a substantial income expectation for them.
RELATIONSHIP TO PERFORMANCE UNDER COMPENSATION PLANS
Compensation paid to the Company's executive officers in 2003, as
reflected in the foregoing tables, consisted primarily of base salary, which has
not increased since January 2001 and Company contributions to the HEICO Savings
and Investment Plan (the "Savings and Investment Plan"). All employees of the
Company and certain subsidiaries are eligible to participate in the Savings and
Investment Plan, but, under federal regulations, certain employees of the
Company (including Laurans A. Mendelson, Thomas S. Irwin, Eric A. Mendelson and
Victor H. Mendelson) are limited in their participation. Further, all officers
listed herein who are eligible to participate in the Savings and Investment Plan
contributed a portion of their compensation to the Savings and Investment Plan
in order to receive the maximum of the Company's contribution.
The executive officers' base salaries have not been increased since
January 2001, or approximately 3 years. The Compensation Committee determines
executive officers' base salaries through a variety of means, including by using
comparative industry data and evaluating earnings growth.
In paying the remaining bonuses related to the Trilectron sale, the
Compensation Committee wished to adhere to its commitments to pay the full
bonuses it planned to pay prior to when the sale occurred, as the Company
completely earned the gain from Trilectron's sale and it was not reduced due to
current business conditions. The Company sold Trilectron for a substantial gain
after having grown the business to approximately four times the size it was when
HEICO acquired it in 1996. The strategy and its execution for acquiring, growing
and selling Trilectron were devised entirely by the executive officers. By
sending a clear message to the executive officers that they would receive
bonuses upon realizing large gains for the Company, the Compensation Committee
believes that it demonstrated to the executive officers that they will be
rewarded for making good financial decisions.
In leaving the base salaries of the Company's executive officers
unchanged in 2003, the Compensation Committee accepted the executive officers'
recommendation that they not receive increases due to conditions in the airline
industry. The Compensation Committee typically considers the following in
establishing compensation: prevailing executive compensation trends;
compensation analysis reports from Watson Wyatt & Company, an independent
consulting firm; consultation with executives; known industry standards; local
and national compensation practices; alternative employment opportunities
available to executives; industry knowledge and experience; complexity and
difficulty of responsibilities; special gains upon asset sales and past and
expected future contributions to the Company's development.
The Compensation Committee has observed the current management team for
more than a decade and has concluded that its compensation policies have
appropriately rewarded and incentivized management for its successes and
efforts. Although this is the case, the Compensation Committee will review
compensation practices during the year and may, depending upon conditions in its
businesses and other factors, alter its policies.
CHIEF EXECUTIVE OFFICER
The Compensation Committee considers the Chief Executive Officer's
compensation each year. The principal standards which the Compensation Committee
considers for the Chief Executive Officer's compensation are essentially the
same as those described for the executive officers in general. Also, the
Compensation Committee evaluates past performance, the Chief Executive Officer's
ability to deliver anticipated results and expected future contributions to the
Company's growth. The Committee also accepted Mr. Mendelson's request, made in
part as an example of leadership to the Company's Team Members following the
downturn in the Company's business during
16
the Iraq War and the SARS crisis, that he receive no regular cash bonus in 2003
and that he receive no increase in his base compensation. This followed the same
recommendation from Mr. Mendelson in 2002 due to the effects on the Company of
the September 11, 2001 tragedies. The Committee continues to take note of the
fact that the Company has grown dramatically under Mr. Mendelson's leadership;
as noted above, the Company's sales increased from $25,882,000 in fiscal 1993 to
$176,453,000 in fiscal 2003, while net income improved from $984,000 to
$12,222,000 during the same period.
The Company has prospered substantially under Mr. Mendelson's
leadership. Specifically, the Company has expanded its aerospace product line
following a restructuring of its aerospace operations, and it has successfully
entered and sold two new, profitable lines of business, which grew substantially
after their acquisitions by HEICO. Under Mr. Mendelson's leadership, the Company
has completed key strategic alliances with five major airlines and twenty-two
important strategic acquisitions, has completed a follow-on stock offering which
raised $56 million in equity for the Company and has successfully negotiated a
$120 million credit facility with a syndicate of banks.
The Compensation Committee believes it is important to continue to
induce Mr. Mendelson to devote substantially all of his professional time and
effort to the Company and to forego other potentially lucrative business
transactions. In doing so, the Committee has considered Mr. Mendelson's other
successful business activities unrelated to the Company and has provided him
incentives to devote attention to HEICO.
Further, the Company's commercial bank has required that the Company
retain Mr. Mendelson's services in order to obtain and retain its revolving
credit facility. The Company's lender has also required that Mr. Mendelson and
his family maintain substantially all of their present ownership position in the
Company in order to retain the revolving credit facility. These requirements
were made at the lender's sole request as part of the Company's loan agreement
with the lender. Accordingly, the Board believes that it is essential to ensure
Mr. Mendelson's continued management of the Company by providing him with
sufficient incentive to remain as the Company's Chief Executive Officer and to
induce him to maintain his significant investment in the Company.
The Committee believes that equity ownership by management is essential
because it ensures that management will understand shareholder interests. Mr.
Mendelson has made a substantial equity commitment to the Company and the
Committee considers this factor in establishing Mr. Mendelson's compensation
level.
2003 STOCK OPTION GRANTS
As it has consistently stated for many years, the Compensation Committee
believes that stock options are an important way to align shareholder and
management interests because such options will cause managers to reap economic
reward only if other shareholders gain. Further, in order to compete with other,
larger corporations and with technology businesses for high-quality acquisitions
and management talent, the Compensation Committee understands that the Company
must supply its managers with the opportunity to realize large financial gains
upon the successful implementation of their goals and objectives. Therefore, the
Compensation Committee awarded stock options to certain executive officers, as
described in the foregoing tables.
Submitted by the Compensation Committee of the Company's Board of Directors:
Samuel L. Higginbottom and Albert Morrison, Jr.
EMPLOYMENT AGREEMENTS
Thomas S. Irwin and the Company are parties to a key employee
termination agreement which provides a lump sum severance payment equal to two
years' compensation if his employment is terminated within three years after a
change in control of the Company (as defined in the key employee termination
agreement).
17
PERFORMANCE GRAPH
The following graph and table compare the total return on $100 invested
in HEICO Class A Common Stock and HEICO Common Stock with the total return of
$100 invested in the New York Stock Exchange (NYSE) Composite Index and the Dow
Jones U.S. Aerospace Index for the five-year period from October 31, 1998
through October 31, 2003. The NYSE Composite Index measures all common stocks
listed on the NYSE and four subgroup indexes - Industrial, Transportation,
Utility and Finance. The Dow Jones U.S. Aerospace Index is comprised of large
companies which make aircraft, major weapons, radar and other defense equipment
and systems as well as providers of satellites used for defense purposes. The
total returns include the reinvestment of cash dividends.
[CHART APPEARS HERE]
1998 1999 2000 2001 2002 2003
---- ---- ---- ---- ---- ----
HEICO Class A Common Stock /(1)/ $ 100.00 $ 77.31 $ 61.80 $ 73.75 $ 47.02 $ 74.66
HEICO Common Stock /(1)/ $ 100.00 $ 70.60 $ 53.44 $ 71.61 $ 46.09 $ 73.64
NYSE Composite Index $ 100.00 $ 115.11 $ 122.58 $ 100.55 $ 87.03 $ 103.72
Dow Jones U.S. Aerospace Index $ 100.00 $ 78.17 $ 110.47 $ 88.03 $ 90.82 $ 103.84
- ----------
(1) Information has been adjusted retroactively to give effect to 10% stock
dividends paid in shares of Class A Common Stock in July 2000 and August
2001.
18
SELECTION OF INDEPENDENT AUDITOR
The Finance/Audit Committee is responsible for selecting the Company's
independent auditor and expects to finalize its decision in its next regularly
scheduled meeting following the annual meeting of shareholders, which is
currently scheduled in May 2004. While the Finance/Audit Committee cannot be
certain that it will again select Deloitte & Touche LLP, the firm has served as
the Company's independent auditor since fiscal 1990.
One or more representatives of Deloitte & Touche LLP are expected to be
present at the annual meeting on March 16, 2004. The representatives will have
the opportunity to make a statement, if they desire to do so, and will be
available to respond to appropriate questions from shareholders.
PRINCIPAL ACCOUNTING FIRM FEES
The following table presents the aggregate fees billed to the Company by
Deloitte & Touche LLP, the member firm of Deloitte Touche Tohmatsu, and their
respective affiliates (collectively, "Deloitte & Touche") for the audit of the
Company's annual financial statements for the fiscal years ended October 31,
2003 and 2002 and other services provided during those periods:
2003 2002
---------- ----------
Audit Fees /(1)/ $ 256,000 $ 267,000
Audit-Related Fees /(2)/ 26,000 9,000
Tax Fees /(3)/ 145,000 246,000
All Other Fees /(4)/ 4,000 78,000
---------- ----------
Total Fees $ 431,000 $ 600,000
========== ==========
- ----------
(1) Audit Fees consist of fees billed for services rendered for the annual
audit of the Company's consolidated financial statements, the review of
condensed consolidated financial statements included in the Company's
quarterly reports on Form 10-Q, and services that are normally provided in
connection with statutory and regulatory filings or engagements.
(2) Audit-Related Fees consist of fees billed for assurance and related
services that are reasonably related to the performance of the audit or
review of the Company's consolidated financial statements that are not
reported under the caption "Audit Fees". The category includes fees related
to audit of the HEICO Savings and Investment Plan and consultation related
to acquisitions or other business transactions.
(3) Tax Fees consist of fees billed for services rendered for tax compliance,
tax advice and tax planning. The fiscal 2002 fees include approximately
$75,000 pursuant to a contingency fee structure with Deloitte & Touche who
was engaged to represent the Company in a tax audit with the Internal
Revenue Service that resulted in the recovery of $2.5 million of income
taxes paid in prior years.
(4) All Other Fees consist of fees billed for products and services other than
fees as reported in the above three categories. These fees principally
relate to consulting services in connection with the HEICO Savings and
Investment Plan.
PRE-APPROVAL OF SERVICES PROVIDED BY THE INDEPENDENT AUDITOR
The Finance/Audit Committee (the "Audit Committee") has adopted a policy
to pre-approve all audit and permissible non-audit services provided by the
independent auditor. The Audit Committee will consider annually and, if
appropriate, approve the scope of the audit services to be performed during the
fiscal year as outlined in an engagement letter proposed by the independent
auditor. For permissible non-audit services, the Company will submit to the
Audit Committee, at least annually, a list of services and a corresponding
budget estimate that it
19
recommends the Audit Committee engage the independent auditor to provide. To
facilitate the prompt handling of certain unexpected matters, the Audit
Committee delegates to its Chairman the authority to approve in advance all
audit and non-audit services below $10,000 to be provided by the independent
auditor if presented to the full Audit Committee at the next regularly scheduled
meeting. The Company will routinely inform the Audit Committee as to the extent
of services provided by the independent auditor in accordance with this
pre-approval policy and the fees incurred for the services performed to date.
SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Based solely upon a review of reports of ownership, reports of changes
of ownership and written representations under Section 16(a) of the Securities
Exchange Act of 1934, which were furnished to the Company during or with respect
to fiscal 2003 by persons who were, at any time during fiscal 2003, directors or
officers of the Company or beneficial owners of more than 10% of the outstanding
shares of Common Stock or Class A Common Stock, no such person failed to file on
a timely basis any report required by such section during fiscal 2003.
SHAREHOLDER PROPOSALS AND NOMINATIONS
Any shareholder of the Company who wishes to present a proposal for
action at the Company's next annual meeting of shareholders presently scheduled
for March 15, 2005, or to nominate a director candidate for the Company's Board
of Directors, must submit such proposal or nomination in writing to the
Corporate Secretary at HEICO Corporation, 3000 Taft Street, Hollywood, Florida
33021. The proposal or nomination should comply with the time period and
information requirements as set forth in the Company's By-laws relating to
shareholder business or shareholder nominations, respectively. Shareholders
interested in submitting a proposal for inclusion in the Proxy Statement for the
2005 annual meeting of shareholders may do so by following the procedures
prescribed in SEC Rule 14a-8. To be eligible for inclusion, shareholder
proposals must be received by the Company's Corporate Secretary at the herein
above address no later than October 31, 2004.
SHAREHOLDER COMMUNICATION WITH THE BOARD OF DIRECTORS
Any shareholder of the Company who wishes to communicate with the Board
of Directors, a committee of the Board, the non-management directors as a group
or any individual member of the Board, may send correspondence to the Corporate
Secretary at HEICO Corporation, 3000 Taft Street, Hollywood, Florida 33021. The
Corporate Secretary will compile and submit on a periodic basis all shareholder
correspondence to the entire Board of Directors, or, if and as designated in the
communication, to a committee of the Board, the non-management directors as a
group or an individual Board member.
SHAREHOLDERS SHARING THE SAME ADDRESS
The Company has adopted a procedure called "householding", which has
been approved by the Securities and Exchange Commission. Under this procedure, a
single copy of the annual report and proxy statement will be sent to any
household at which two or more shareholders reside if they appear to be members
of the same family, unless one of the shareholders at that address notifies us
that they wish to receive individual copies. Shareholders who participate in
householding will continue to receive separate proxy cards. Householding will
not affect dividend mailings in any way. This procedure reduces the Company's
printing costs and mailing fees.
If a single copy of the annual report and proxy statement was delivered
to an address that you share with another shareholder and you wish to receive a
separate copy of the 2003 annual report or this proxy statement, or if you do
not wish to participate in householding and prefer to receive separate copies of
future materials, or if you are sharing an address with another shareholder and
are receiving multiple copies of annual reports or proxy statements and would
like to request delivery of a single copy of annual reports or proxy statements,
please call the Company
20
at (954)-987-4000 or write to the Corporate Secretary at HEICO Corporation, 3000
Taft Street, Hollywood, Florida 33021.
GENERAL AND OTHER MATTERS
Neither HEICO nor the members of its Board of Directors intend to bring
before the meeting any matters other than those referred to in the accompanying
Notice of Meeting. They have no present knowledge that any other matters will be
presented to be acted on pursuant to your proxy. However, if any other matters
properly come before the meeting, the persons whose names appear in the enclosed
form of proxy will have the discretionary authority to vote the proxy in
accordance with their judgment.
BY ORDER OF THE BOARD OF DIRECTORS,
Laurans A. Mendelson
Chairman of the Board, President
and Chief Executive Officer
21
APPENDIX A
HEICO CORPORATION
CORPORATE GOVERNANCE GUIDELINES
ROLE AND FUNCTIONS OF THE BOARD OF DIRECTORS
The role of the Board of Directors (the "Board") with respect to corporate
governance is to oversee and monitor the Company's management in the interest
and for the benefit of the Company's shareholders. To fulfill this role, the
Board or a Board committee must perform the following primary functions:
1. oversee the conduct of the Company's business to evaluate whether the
business is being properly managed;
2. review and, where appropriate, approve the Company's major financial
objectives, plans and actions;
3. review and, where appropriate, approve major changes in, and
determinations of other major issues respecting the appropriate
auditing and accounting principles and practices to be used in the
preparation of the Company's financial statements;
4. assess major risk factors relating to the Company and its performance,
and review measures to address and mitigate such risks;
5. evaluate regularly the performance and approve the compensation of the
CEO and, with the advice of the CEO, evaluate regularly the
performance of the Company's principal senior executives; and
6. plan for succession of the CEO and monitor management's succession
planning for other key executives.
In discharging these obligations, directors should be entitled to rely
reasonably on the honesty and integrity of their fellow directors and the
Company's executives and its outside advisors and auditors. The directors shall
be entitled to (i) reasonable directors' and officers' liability insurance on
their behalf; (ii) the benefits of indemnification to the fullest extent
permitted by law under the Company's charter, by-laws and any indemnification
agreements; and (iii) exculpation as provided by state law and the Company's
charter.
The Board may discharge its responsibilities either directly or by
delegating them to its committees, except that the Board may not delegate any of
its responsibilities which, under applicable law or the Company's restated
certificate of incorporation, may not be delegated to a committee of the Board.
The Board and each Board committee shall have the full power and authority to
hire, at the expense of the Company, independent financial, accounting, legal or
other advisors, as necessary to fulfill their duties, without consulting or
obtaining the approval of any officer of the Company.
The Board should promote policies within the Company that encourage a
corporate culture of openness, honesty, fairness and accountability. These
policies also should apply to the Board and to relationships among and between
the Board, stockholders and employees. The Board should periodically review and
amend these policies if needed.
The Board should recognize that the actual management of the business and
affairs of the Company should be conducted by the CEO and other senior managers
under his or her supervision and that, in performing the management function,
the CEO and other senior managers are obliged to act in a manner that is
consistent with the oversight functions and powers of the Board and the
standards of the Company and to execute any specific plans, instructions or
directions of the Board.
A - 1
DIRECTOR QUALIFICATIONS
Independence: The Board shall have a majority of directors who meet the
independence criteria adopted by the Board. The independence criteria are
discussed below under "Director Independence."
Qualifications: A director should possess personal and professional
integrity, have good business judgment, relevant experience and skills and be an
effective director in conjunction with the full Board in collectively serving
the long-term interests of the Company's stockholders. Directors should be
committed to devoting sufficient time and energy to diligently performing their
duties as directors.
Size of Board: The Board shall determine the appropriate size of the Board
within the requirements of the Company's Charter and Bylaws.
Selection Process: In accordance with the policies and principles in its
charter, the Nominating and Corporate Governance Committee is responsible for
identifying and recommending potential director nominees to the Board for its
approval. The Chairman of the Nominating and Corporate Governance Committee and
the Chairman of the Board shall extend an invitation to a new potential director
nominee to join the Board.
Annual Review of Independence and Qualifications: The Nominating and
Corporate Governance Committee shall distribute annually a self-evaluation to
the Board that includes an assessment of the directors' independence and
qualifications.
Resignation from the Board: A director should tender a resignation in the
event there is a substantial conflict of interest between the director and the
Company or the Board and such conflict cannot be resolved to the satisfaction of
the Board.
Refusal when Conflict of Interest: Prior to any Board discussion or
decision related to any matter that potentially affects a director's personal,
business or professional interests, that director should (i) disclose the
existence of the potential conflict of interest to the Chairman of the Board and
(ii) if the Chairman of the Board. (in consultation with legal counsel)
determines a conflict exists or the perception of a conflict is likely to be
significant, refuse himself or herself from any discussion or vote related to
the matter.
Term Limits: The Board does not believe it should establish term limits.
The Company and its stockholders both benefit from Board continuity and
stability and by allowing directors to focus on long-term business strategies
and results.
A - 2
DIRECTOR INDEPENDENCE
A majority of the Board and all members of the Finance/Audit Committee,
Compensation Committee, and the Nominating and Corporate Governance Committee
shall be independent. The Board must make an affirmative determination whether
or not a director is independent and disclose this determination in the annual
proxy statement.
The term independent is defined in accordance with the New York Stock
Exchange ("NYSE") independence requirements, the Sarbanes-Oxley Act and the
Board's business judgment. A director is deemed to be independent if he or she
does not have a direct or indirect material relationship with the Company or any
of its affiliates or with any senior management member of the Company or any of
its affiliates. In determining the materiality of a relationship and the
director's independence, the Board shall be guided by the following independence
standards:
A director shall be deemed to have a material relationship with the Company
and/or its affiliates and thus shall not be deemed independent if, within the
past three years:
. The director is or has been employed by the Company or its affiliates;
. An immediate family member (defined below) of the director is or has
been employed by the Company or any of its affiliates as an officer;
. The director is or has been affiliated with or employed by the
Company's or any of its affiliate's present or former independent
auditor;
. An immediate family member of the director is or has been employed by
the Company's or any of its affiliate's present or former independent
auditor as a partner, principal or manager; or
. An executive officer of the Company serves on the compensation
committee of a company which employs the director, or which employs an
immediate family member of the director as an officer.
Other material relationships in which the director shall not be deemed to
be independent are:
. The director or an immediate family of the director is a director,
officer, general partner or large equity holder of a significant (as
defined below) customer of or supplier to the Company and/or its
affiliates of nonprofessional services and goods;
. The director or an immediate family member of the director is a
director, officer, general partner or large equity holder of a
significant (as defined below) paid adviser, paid consultant or other
paid provider of professional services to the Company or its
affiliates, or to any senior management member of the Company; or
. The director or an immediate family member of the director is a
director, officer or trustee of a charitable or tax-exempt
organization to whom the Company, one of its affiliates or any senior
management member of the Company or its affiliates makes substantial
charitable contributions.
In the following circumstances, the material relationships shall be deemed
immaterial and thus the director shall remain independent:
. A director who serves as an Interim Chairman or Interim CEO of the
Company shall not be deemed a former employee for the purpose of
determining independence and as such, the director shall retain his
independent status when his service as Interim Chairman or Interim CEO
ends;
. The material relationship that is based on having an immediate family
member of the director serving as an officer of the Company or an
officer of a Company affiliate shall be deemed immaterial upon the
death or incapacitation of that immediate family member; or
. The material relationship that is based on the director's or the
director's immediate family member's connection to a significant
customer, supplier or provider of the Company or its affiliates shall
be deemed immaterial, if the Board in its business judgment determines
that the commercial transactions between the Company or one of its
affiliates and the significant customer, supplier or provider were
conducted at arm's length in the ordinary course of business and that
such a relationship is immaterial in light of all circumstances.
A - 3
For any relationships not covered above, the determination of whether these
relationships are material or not and whether the director would be independent
or not, shall be made by the directors who satisfy the independence standards
set forth in this section. In making these determinations, the Board shall
examine all factors that may appear to affect independence, including
commercial, industrial, financial, banking, legal, accounting, charitable,
familial relationships and long-standing friendships.
The Company and its affiliates shall not make any personal loans or
extensions of credit to directors or executive officers. The payment of
consulting, advisory or other compensatory fees (except for fees paid to
directors as their compensation for Board and/or Committee service, pension or
other forms of deferred compensation for prior service) above $100,000 to a
director or immediate family member from the Company or one of its affiliates
shall negate the director's independence until three years after receipt of such
compensation has ceased.
Each director has an affirmative obligation to inform the Board of any
material changes in his or her circumstances or relationships that may impact
his or her designation by the Board as "independent."
In addition to the foregoing provisions, members of the Finance/Audit
Committee must satisfy additional requirements to be considered independent as
provided for by the SEC and NYSE rules.
For the purposes of these independence standards guidelines, the terms:
. Affiliate means any corporation or other entity that controls, is
controlled by or is under common control with the Company, as
evidenced by the power to elect a majority of the Board or comparable
governing body of such entity;
. Immediate Family Member includes a person's spouse, parents, children,
siblings, mothers and fathers- in-law, sons and daughters in-law,
brothers and sisters in-law, and anyone (other than domestic
employees) who shares such person's home; and
. Significant means payments to or from an entity where the payments
exceed the greater of $1 million, or two percent of the entity's
annual consolidated gross revenues.
Under Section 162(m) of the Internal Revenue Code, as amended, a director
is an outside director if the director
. is not a current employee of the Company;
. is not a former employee of the Company who receives compensation for
prior services (other than benefits under a tax-qualified retirement
plan) during the taxable year;
. has not been an officer of the Company; and
. does not receive remuneration from the Company, either directly or
indirectly, in any capacity other than as a director.
A - 4
BOARD MEETINGS
The Board expects to have four regularly scheduled meetings each year. Upon
adequate notice, unscheduled meetings may be called throughout the year as the
need arises. The Chairman of the Board shall consult with other Board members in
determining the times and duration of the Board meetings.
Meeting Attendance: Directors are expected to attend meetings of the Board
and of the committees on which they serve. Directors also are expected to devote
an adequate amount of time and effort to discharge properly their
responsibilities.
Board Materials: Information and data that are important to the Board's
understanding of the business to be conducted at a Board or committee meeting
should be distributed to the directors sufficiently in advance of the meeting to
permit their review. A director may request that the CEO or appropriate member
of senior management present to the Board specific information as it relates to
the Company and its operations.
Non-Management Executive Session of Directors: The non-management directors
shall meet at least once per year in executive session at regularly scheduled
meetings. The non-management directors shall elect a presiding director for each
executive session among the chairs of board committees. The procedure for
selecting a presiding director shall be disclosed in the annual proxy statement,
together with a system for interested parties to communicate directly with the
non-management group.
BOARD COMMITTEES
The Board shall have at all times a Finance/Audit Committee, a Compensation
Committee and a Nominating and Corporate Governance Committee. All members of
these Committees shall be independent directors as determined by the Board in
accordance with the aforementioned independence criteria. Committee members
shall be appointed by the Board upon recommendation (after consultation with the
Chairman) of the Nominating and Corporate Governance Committee.
The Finance/Audit Committee, Compensation Committee and the Nominating and
Corporate Governance Committee each shall have a written charter that sets forth
the committee's structure, membership qualifications, purposes,
responsibilities, and procedures for appointing and removing committee members.
The charters also shall provide that each committee annually evaluates its
performance. The Board may, from time to time, establish or maintain additional
committees of the Board, including an Executive Committee. An Executive
Committee will have the powers and authority as specified in the Company's
by-laws.
Any director may attend any committee meetings, whether or not he or she is
a member of that committee, providing that he or she has obtained pre-approval
to attend from the committee chair or a majority of the committee.
CHAIRMAN OF THE BOARD
The Board will appoint the Chairman of the Board who can be an employee of
the Company. The Chairman will chair all regular sessions of the Board and set
the agenda for Board meetings, subject to the right of each Board member to
suggest the inclusion of item(s) on any agenda.
DIRECTOR COMPENSATION
All directors shall receive directors' fees as compensation for Board
and/or Board committee service. Directors' fees shall be in the form of cash,
company stock, including options and restricted stock, or combination thereof,
as well as any additional benefits regularly given to all directors. The exact
amount and form of director compensation shall be determined and reviewed
annually by the Compensation Committee in accordance with the policies and
principles set forth in its charter.
A - 5
DIRECTOR ORIENTATION AND CONTINUING EDUCATION
All new directors shall receive an orientation package. The package will
include a copy of the Company's by-laws and charter, the Code of Business
Conduct, the Corporate Governance Guidelines, all SEC filings for the current
fiscal year and last preceding fiscal year, press releases issued during the
current fiscal year and any other pertinent information. The new director will
attend a meeting with the CEO and CFO to be briefed on the Company's strategic
plans, its significant financial, accounting and risk management issues and
current significant projects.
All directors must receive annual director education in subjects relevant
to the duties of a director including the study of corporate governance best
practices or ethics.
CEO EVALUATION AND MANAGEMENT SUCCESSION
The Compensation Committee shall conduct an annual review of the CEO's
performance and compensation, as set forth in its charter. The executive session
of the Board shall review the Compensation Committee's report in order to ensure
that the CEO is providing the best long and short-term leadership for the
Company.
The Nominating and Corporate Governance Committee shall make an annual
report to the Board on emergency as well as expected CEO succession planning.
The entire Board shall work with the Nominating and Corporate Governance
Committee to nominate and evaluate potential successors to the CEO. The CEO
shall provide the Committee with his or her recommendations and evaluations of
potential successors, along with a review of any development plans recommended
for such individuals.
ANNUAL SELF-EVALUATIONS
The Nominating and Corporate Governance Committee shall have responsibility
for conducting and overseeing the annual self-evaluations for the Board and its
members and reporting the results to the Board following the end of each fiscal
year. The evaluations will be based on such objective and subjective criteria,
as the Board deems appropriate.
CODE OF BUSINESS CONDUCT
The Board shall adopt and maintain the Code of Business Conduct (the
"Code") for the directors, officers and employees of the Company in compliance
with the NYSE requirements. The Code shall be posted on the Company's website.
The purpose of the Code shall be to focus the directors, officers and employees
on areas of ethical risk, provide guidance in recognizing and dealing with
ethical issues, provide mechanisms to report unethical conduct, and help foster
a culture of honesty and accountability.
Each director shall act at all times in accordance with the requirements of
the Code. Waivers of the Code for any officer or director may only be made by
the Board of the Company or by a Board committee composed of independent
directors. Any waiver for an officer or director must be posted on the Company
website and otherwise disclosed as required by law.
REPORTS OF IRREGULARITIES
Any reports of concerns regarding accounting, internal auditing controls,
or other irregularities or concerns whether financial or otherwise shall be
brought to the attention of the Chairman of the Finance/Audit Committee. These
reports are confidential and may be anonymous if made using the anonymous
reporting hotline maintained by the Finance/Audit Committee. The Board shall be
notified of these reports at every quarterly Board meeting or sooner, if
necessary.
A - 6
APPENDIX B
HEICO CORPORATION
FINANCE/AUDIT COMMITTEE CHARTER
COMMITTEE'S PURPOSE
The Finance/Audit Committee (Committee) is appointed by the Board of
Directors (Board) to assist the Board in its oversight of (1) the quality and
integrity of the financial statements of the Company, (2) compliance by the
Company with legal and regulatory requirements, (3) the independent auditor's
qualifications and independence, (4) performance of the Company's internal and
independent auditors, (5) the business practices and ethical standards of the
Company and (6) the financial affairs of the Company. The Committee shall also
serve as the Qualified Legal Compliance Committee (see separate Charter). The
Committee is also directly responsible for the appointment, compensation,
retention and oversight of the work of the Company's independent auditors for
purposes of preparing or issuing an audit report and performing all other audit,
review and attest services for the Company. While the Committee has the
responsibilities and powers set forth in this Charter, it is not the duty of the
Committee to plan or conduct audits or to determine that the Company's financial
statements and disclosures are presented fairly in all material respects in
accordance with generally accepted accounting principles. These are the
responsibility of management and the independent auditor.
COMMITTEE MEMBERSHIP
Independence. The Committee shall consist of three or more members of the
Board of Directors, each of whom shall be independent. Independence shall be
determined as to each member by the full Board. To be considered independent,
each Committee member must meet the independence requirements of the New York
Stock Exchange (NYSE), the Sarbanes-Oxley Act of 2002 (SOX) and the rules and
regulations of the Securities and Exchange Commission (Commission).
Financial Literacy. All members of the Committee shall be financially
literate, as defined by the Commission, or must become financially literate
within a reasonable period of time after their appointment to the Committee, and
at least one member of the Committee shall be an audit committee financial
expert, as determined in the judgment of the Board with reference to applicable
law and NYSE rules.
COMMITTEE COMPOSITION
The members of the Committee shall be nominated by the Nominating and
Corporate Governance Committee and elected by the Board at the annual
organizational meeting of the Board and shall serve until their Successors shall
be duly elected and qualified.
Chairman. Unless a Chairman is elected by the full Board, the members of
the Committee shall designate a Chair by majority vote of all the Committee
members.
MEETINGS
The Committee shall meet at least four times annually or more frequently as
circumstances dictate. Meetings may be in person or by telephone as needed to
conduct the business of the Committee. The Committee may take action by the
unanimous written consent of the members in the absence of a meeting. The
Committee shall meet periodically with management, the internal auditors and the
independent auditor in separate executive sessions.
B - 1
AUTHORITY AND RESPONSIBILTY OF THE COMMITTEE
The Committee shall have the authority (1) to exercise all powers with
respect to the appointment, compensation, retention and oversight of the work of
the independent auditor for the Company and its subsidiaries, (2) to retain
special legal, accounting or other consultants to advise the Committee as it
determines necessary to carry out its duties and to pay the fees of such
advisors and (3) to determine the amount of funds it needs to operate and for
compensation to the independent auditors, and to direct the CFO make such funds
available. As part of its oversight role, the Committee may investigate any
matter brought to its attention, with the full power to retain outside counsel
or other experts for this purpose. The Committee may request any officer or
employee of the Company or the Company's outside counsel or independent auditor
to attend a meeting of the Committee or to meet with any member of, or
consultant to, the Committee. Without limiting the generality of the foregoing,
the Committee shall:
Financial Statement and Disclosure Matters
1. Review and discuss prior to public dissemination the annual audited
and quarterly unaudited financial statements with management and the
independent auditor, including major issues regarding accounting,
disclosure and auditing procedures and practices as well as the
adequacy of internal controls that could materially affect the
Company's financial statements. In addition, the review shall include
the Company's disclosures under "Management's Discussion and Analysis
of Financial Condition and Results of Operations." Based on the annual
review, the Committee shall recommend inclusion of the audited
financial statements in the Company's Annual Report on Form 10-K to
the Board.
2. Discuss with management and the independent auditor significant
financial reporting issues and judgments made in connection with the
preparation of the Company's financial statements, including any
significant changes in the Company's selection or application of
accounting principles, any major issues as to the adequacy of the
Company's internal controls and any special steps adopted in light of
material control deficiencies.
3. Review and discuss reports from the independent auditors and
management on:
A. All critical accounting policies and practices to be used.
B. All alternative treatments of financial information within
generally accepted accounting principles that have been discussed
with management, ramification of the use of such alternative
disclosures and treatments, and the treatment preferred by the
independent auditor.
C. Other material written communications between the independent
auditor and management, such as any management letter.
4. Discuss with management the Company's earnings press releases as well
as financial information and earnings guidance provided to analysts
and rating agencies. Such discussion may be done generally consisting
of discussing the types of information to be disclosed and the types
of presentations to be made.
5. Discuss with management and the independent auditor the effect on the
Company's financial statements of significant regulatory and
accounting initiatives as well as off-balance sheet structures.
6. Discuss with management the Company's major financial risk exposures
and the steps management has taken to monitor and control such
exposures, including the Company's risk assessment and risk management
policies.
7. Review with the independent auditors any audit problems or
difficulties and management's response, including, but not limited to
(1) any restrictions on the scope of the auditor's activities, (2) any
restriction on the access of the independent auditors to requested
materials, (3) any significant disagreements with management and (4)
any audit differences that were noted or proposed by the auditor but
for which the Company's financial statements were not adjusted (as
immaterial or otherwise). The Committee will resolve any disagreements
between the auditors and management regarding financial reporting.
8. Review disclosures made to the Committee by the Company's CEO and CFO
during their certification process for the Form 10-K and Form 10-Q
about any significant deficiencies in the design or operation of
disclosure controls and procedures and any fraud involving management
or other employees who have a significant role in the Company's
internal controls.
B - 2
9. Discuss at least annually with the independent auditors the matters
required to be discussed by Statement of Auditing Standards No.
61--Communication with Audit Committees.
10. Prepare the Committee report that the Commission requires to be
included in the Company's annual proxy statement and review the
matters described in such report.
11. Obtain quarterly assurances from the senior internal auditing
executive and management that the system of internal controls is
adequate and effective. Obtain annually a report from the independent
auditor, with attestation, regarding management's assessment of the
effectiveness of the internal control structure and procedures for
financial reporting.
Responsibility for the Company's Relationship With the Independent Auditors
12. Be solely responsible for the appointment, compensation, retention and
oversight of the work of the independent auditors employed by the
Company. The independent auditor shall report directly to the
Committee. If the appointment of the independent auditors is submitted
for any ratification by stockholders, the Committee shall be
responsible for making the recommendation of the independent auditors.
13. Review, at least annually, the qualifications, performance and
independence of the independent auditor. In conducting such review,
the Committee shall obtain and review a report by the independent
auditor describing (1) the firm's internal quality-control procedures,
(2) any material issues raised by the most recent internal
quality-control review, or peer review, of the firm or by any inquiry
or investigation by governmental or professional authorities regarding
services provided by the independent auditing firm, and any steps
taken to deal with any such issues, and (3) all relationships between
the independent auditor and the Company that could be considered to
bear on the auditor's independence. This evaluation shall include the
review and evaluation of the lead partner of the independent auditor
and shall ensure the rotation of partners in accordance with
Commission rules and the securities laws.
14. Approve in advance any audit, audit-related, tax or other permissible
non-audit engagement or relationship between the Company and the
independent auditors. The Committee shall establish guidelines for the
retention of the independent auditor for any such permissible
services. The Committee hereby delegates to the Chairman of the
Committee the authority to approve in advance (below specified limits)
all audit, audit-related, tax or other non-audit services to be
provided by the independent auditor if presented to the full Committee
at the next regularly scheduled meeting.
15. Meet with the independent auditor prior to the audit to review the
planning and staffing of the audit including the responsibilities and
staffing of the Company's personnel who will assist in the audit.
16. Set policies for the Company's hiring of employees or former employees
of the independent auditor who participated in any capacity in the
audit of the Company.
Oversight Of the Company's Internal Audit Function
17. Review the appointment, evaluation, and where appropriate, the
termination of the Company's senior internal auditing executive.
18. Review the activities and organizational structure of the internal
auditing department and the significant reports to management prepared
by the internal auditing department and management's responses.
19. Discuss with the independent auditor and management the internal audit
department's responsibilities, budget, staffing, audit plan and any
recommended changes in the planned scope of the internal audit
department.
B - 3
Compliance Oversight Responsibility
20. Obtain from the independent auditor assurance that Section 10A(b) of
the Securities Exchange Act of 1934, as amended, has not been
implicated.
21. Obtain reports from management and the Company's senior internal
auditing executive that the Company is in conformity with applicable
legal requirements and the Company's Code of Business Conduct. Review
disclosures required to be made under the securities laws of insider
and affiliated party transactions. Advise the Board with respect to
the Company's policies and procedures regarding compliance with
applicable laws and regulations and with the Company's Code of
Business Conduct.
22. Establish and maintain procedures for the receipt, retention and
treatment of complaints received by the Company regarding accounting,
internal controls or auditing matters. Also, the Committee shall
maintain a reporting hotline for the confidential, anonymous
submission by employees of the Company of concerns regarding
questionable accounting, internal control or auditing matters.
23. Discuss with management and the independent auditor any correspondence
with regulators or governmental agencies and any published reports
that raise material issues regarding the Company's financial
statements or accounting policies.
24. Review at least annually legal matters with the Company's General
Counsel that may have a material impact on the financial statements,
the Company's compliance policies, and any material reports or
inquiries received from regulators or governmental agencies.
Other
25. Report regularly to the Board with respect to any issues that arise
with respect to the quality or integrity of the Company's financial
statements, the Company's compliance with legal or regulatory
requirements, the Committee's conclusions as to the performance and
independence of the Company's independent auditors or the performance
of the internal audit function.
26. Review and reassess the adequacy of this Charter annually and
recommend any proposed changes to the Board for approval. Revised
charters should be disclosed periodically in accordance with
applicable rules and regulations.
27. Perform an annual performance self-evaluation of the Committee and
report findings to the Board.
B - 4
APPENDIX C
HEICO CORPORATION
NOMINATING AND CORPORATE
GOVERNANCE COMMITTEE CHARTER
COMMITTEE'S PURPOSE
The Nominating and Corporate Governance Committee (the "Committee") is
appointed by the Board of Directors (the "Board") to assist the Board in
identifying qualified individuals to become members of the Board, consistent
with criteria approved by the Board, recommend to the Board qualified director
nominees for election at the stockholders' annual meeting, determine membership
on the Board's committees, periodically review and recommend to the Board
updates to the Company's Corporate Governance Guidelines, assist the Board and
the Company in interpreting and applying the Company's Corporate Governance
Guidelines and Code of Business Conduct, oversee an annual self-evaluation of
the Board and its members, and oversee an annual evaluation of management.
COMMITTEE MEMBERSHIP
The Committee members, including a Committee Chairman, shall be appointed,
and may be replaced, by the Board. The Committee shall consist of no fewer than
two directors. All members of the Committee shall meet the independence
standards as specified in the Company's Corporate Governance Guidelines, which
have been adopted by the Board with reference to the rules of the New York Stock
Exchange and the Securities and Exchange Commission.
MEETINGS
The Committee shall meet as often as necessary to carry out its
responsibilities. Any Committee member may request the Chairman of the Committee
to call a meeting. The Chairman of the Committee shall report on any Committee
meeting held at the next regularly scheduled Board meeting following a Committee
meeting.
COMMITTEE GOALS AND RESPONSIBILITIES
1. The Committee shall recommend to the Board director nominees for
election at the shareholders' annual meeting.
2. Prior to nominating an existing director for re-election to the Board,
the Committee shall consider and review the existing director's:
a) Board and committee meeting attendance and performance;
b) length of Board service;
c) experience, skills and contributions that the existing director
brings to the Board; and
d) independence.
3. In the event that a director vacancy arises, the Committee shall seek
and identify a qualified director nominee to be recommended to the
Board for either appointment by the Board to serve the remainder of
the term of the director position that is vacant or election at the
stockholders' annual meeting.
4. A director nominee shall meet the director qualifications specified in
the Company's Corporate Governance Guidelines, including that the
director nominee possesses personal and professional integrity, has
good business judgment, relevant experience and skills and will be an
effective director in conjunction with the full Board in collectively
serving the long-term interests of the Company's stockholders.
C - 1
5. The Committee shall have the sole discretion and authority to retain
any search firm to assist in identifying director candidates, retain
outside counsel and/or any other internal or external advisors and
approve all related fees and retention terms.
6. The Committee shall review the Board's committee structure and
recommend to the Board for its approval directors to be appointed as
members on each Board committee. Prior to recommending the
re-appointment of a director to a Board committee, the Committee shall
review the existing director's independence, if required, skills,
Board committee meeting attendance, performance and contribution, and
his or her fulfillment of committee responsibilities. If a vacancy on
a Board committee occurs, the Committee shall recommend a director
with relevant experience and skills, and who is independent, if
required by the committee charter, to be appointed to fill the
vacancy.
7. The Committee shall recommend to the Board for its approval the
Corporate Governance Guidelines (Appendix A). The Committee will
review annually the Corporate Governance Guidelines and recommend any
proposed changes to the Board for approval.
8. The Committee shall develop and recommend to the Board for its
approval an annual evaluation process for the full Board and
management that will be conducted and overseen by the Committee. The
Committee shall report to the full Board, following the end of each
fiscal year, the results of the annual evaluation, including any
comments from the evaluations. However, any comments from the
evaluations regarding individual directors shall be reported to the
Chairman, and CEO and if necessary, to the relevant committee
chairman.
9. The Committee shall perform an annual performance self-evaluation and
report annually to the Board on the CEO succession plan.
10. The Committee shall review and reassess the adequacy of this Charter
annually and recommend any proposed changes to the Board for approval.
C - 2
APPENDIX D
HEICO CORPORATION
COMPENSATION COMMITTEE CHARTER
COMMITTEE'S PURPOSE
The Compensation Committee (Committee) is appointed by the Board of
Directors (Board) to discharge the Board's responsibilities relating to
compensation of the Company's directors and officers. The Committee has direct
responsibility for approving and evaluating the director and officer
compensation plans, policies and programs of the Company. The Committee is also
responsible for producing an annual report on executive compensation for
inclusion in the Company's proxy statement or report on Form 10-K filed with the
Securities and Exchange Commission (Commission).
COMMITTEE MEMBERSHIP
The Committee shall consist of no fewer than two members. The members of
the Committee shall meet the independence requirements adopted by the Board with
reference to the requirements of the New York Stock Exchange and the Commission
and shall be outside directors within the meaning of Section 162(m) of the
Internal Revenue Code of 1986.
The members of the Committee shall be directors of the Company and shall be
nominated by the Nominating and Corporate Governance Committee and elected by
the Board. Committee members shall serve until a member resigns or is replaced
by the Board and their successor appointed. Committee members may be removed by
a majority vote of the full Board.
MEETINGS
The Committee shall meet as often as necessary to carry out its
responsibilities. Meetings can be called by any member of the Committee.
COMMITTEE AUTHORITY AND RESPONSIBILITIES
1. Consultants. The Committee shall have the sole authority to retain and
terminate any legal counsel or compensation or other consultant to be used
to assist in the evaluation of director or executive compensation and shall
have sole authority to approve the consultant's fees and other retention
terms. The Committee shall also have authority to obtain advice and
assistance from internal or external legal, accounting or other advisors
and the sole authority to approve the payment of the advisor's fees and
other retention items. All fees and other retention items for compensation
consultants, internal or external legal, accounting or other advisors shall
be paid by the Company.
2. Chairman and Chief Executive Officer. The Committee shall set corporate
goals and objectives relevant to the Chairman's and Chief Executive
Officer's compensation. In determining the long-term incentive component of
the Chairman and Chief Executive Officer's compensation, the Committee
should consider the Company's performance and relative stockholder return,
the value of similar incentive awards to chairmen and/or the chief
executive officers at comparable companies, and the awards given to the
Company's Chairman and Chief Executive Officer in past years. The Committee
shall annually review and approve corporate goals and objectives relevant
to the Chairman's and Chief Executive Officer's compensation, and evaluate
the Chairman's and Chief Executive Officer's performance in light of those
goals and objectives. Subject to contractual obligations previously
approved by the Board or Committee, the Committee shall have the sole
authority to approve, amend or terminate for the Chairman and Chief
Executive Officer of the Company the following compensation levels based on
this evaluation: (a) annual base salary level, (b) annual incentive
opportunity level, (c) long-term incentive opportunity level, (d)
employment agreements or severance arrangements, and (e) any special or
supplemental benefits except as provided in Paragraph 5 of this Charter.
D - 1
3. Other Executives. The Committee shall annually review and recommend to the
Board the approval of, amendment to or termination of for the executives of
the Company, other than the Chairman and Chief Executive Officer, (a) the
annual base salary level, (b) the annual incentive opportunity level, (c)
the long-term incentive opportunity level, (d) employment agreements or
severance arrangements, and (e) any special or supplemental benefits except
as provided in Paragraph 5 below.
4. Directors. The Committee shall have the sole authority to approve, amend or
terminate for directors (a) the annual compensation, and (b) any additional
compensation for service on committees of the Board, service as a committee
chairman, service as presiding director of the executive sessions of the
Board, meeting fees or any other benefit payable by virtue of the
director's position as a member of the Board of Directors, except as
provided in Paragraph 5 below.
5. Ratification Required by the Board. The following shall be presented as a
recommendation to the full Board and approved by the full Board: (i) any
action, including, but not limited to, the adoption or amendment of any
non-qualified equity compensation plan, that is required by law or
regulation to be submitted to the stockholders of the Company for approval,
and (ii) any approval, amendment or termination of change in control
agreements/provisions related to the directors or officers of the Company.
In the event the recommendation of the Committee is not approved by the
Board, the recommended action must be returned to the Committee for further
consideration. Any future Committee recommendation regarding such item
must, again, be presented to the Board for its approval.
For the purpose of this Charter, a "non-qualified equity compensation plan"
shall mean any plan that does not meet the requirements of Section 401 (a)
or 423 of the Internal Revenue Code, as amended or the definition of an
"excess benefit plan" within the meaning of Section 3(36) of the Employee
Retirement Income Security Act.
6. Annual Report. The Committee shall produce an annual report on executive
compensation for inclusion in the Company's proxy statement in accordance
with applicable rules and regulations.
7. Executive Session. The Committee shall determine which officers of the
Company or other visitors to invite to the Committee's meetings. At the
sole discretion of the Committee, the Committee may meet in executive
session at any time.
8. Report to the Board. Following each action by the Committee, the Committee
shall make a report to the full Board at the next regularly scheduled
meeting of the full Board.
9. Charter Review. The Committee shall review and reassess the adequacy of
this Charter annually and recommend any proposed changes to the Board for
approval. The Committee shall perform an annual performance self-evaluation
and report findings to the Board.
10. Delegation/Written Consent. The Committee may form and delegate authority
to subcommittees when it determines that such action is appropriate under
the circumstances; and the Committee may take action in the absence of a
meeting by unanimous written consent of all members.
11. Additional Activities. The Committee shall perform any other activities
consistent with this Charter, the Company's By-laws and applicable law, as
the Committee deems appropriate to carry out its assigned duties or as
requested by the Board.
D - 2
HEICO CORPORATION
ANNUAL MEETING OF SHAREHOLDERS, MARCH 16, 2004
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
The undersigned shareholder of HEICO CORPORATION hereby appoints Laurans A.
Mendelson and Thomas S. Irwin, or either of them, the true and lawful attorney
or attorneys and proxy or proxies of the undersigned with full power of
substitution and revocation to each of them, to vote all the shares of stock
which the undersigned would be entitled to vote, if there personally present, at
the Annual Meeting of Shareholders of HEICO CORPORATION called to be held at the
Sheraton Fort Lauderdale Airport Hotel, 1825 Griffin Road, Dania Beach, Florida
at 10:00 a.m. Eastern Standard Time on March 16, 2004 (notice of such meeting
has been received), and at any adjournments thereof, with all powers which the
undersigned would possess if personally present. Without limiting the generality
of the foregoing, said attorneys and proxies are authorized to vote as indicated
below.
1. ELECTION OF DIRECTORS
[ ] FOR all nominees listed below [ ] WITHHOLD AUTHORITY
(except as marked to the to vote for all nominees
contrary) listed below
NOMINEES: 01 Samuel L. Higginbottom, 02 Wolfgang Mayrhuber,
03 Laurans A. Mendelson, 04 Eric A. Mendelson, 05 Victor H. Mendelson,
06 Albert Morrison, Jr., 07 Dr. Alan Schriesheim
INSTRUCTION: To withhold authority to vote for an individual nominee, write that
nominee's name in the space provided below.
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(Continued, and to be dated and signed on the reverse side)
2. In their discretion, upon such other matters which may properly come before
the meeting or any adjournments.
THIS PROXY WILL BE VOTED AS DIRECTED, BUT WHERE NO DIRECTION IS GIVEN, IT WILL
BE VOTED FOR THE ELECTION OF ALL DIRECTORS.
PLEASE SIGN, DATE AND MAIL THIS PROXY PROMPTLY IN THE ENVELOPE PROVIDED, SO THAT
YOUR SHARES CAN BE VOTED AT THE MEETING.
Dated :_____________, 2004
Signature
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Signature if held jointly
-------------------------
(Please sign exactly as name appears hereon. If Executor,
Trustee, etc., give full title. If Stock is held in the name
of more than one person, each should sign.)