PATRIOT TRANSPORTATION HOLDING, INC.
1801 Art Museum Drive, Jacksonville, Florida 32207
_______________________________
NOTICE OF
ANNUAL MEETING OF SHAREHOLDERS
To the Shareholders:
The Annual Meeting of Shareholders of Patriot Transportation
Holding, Inc. will be held at 2 o'clock in the afternoon, local
time, on Wednesday, February 4, 2004 at 155 East 21st Street,
Jacksonville, Florida 32206, for the following purposes, as more
fully described in the attached proxy statement:
(1) To elect three directors to serve for a term of four
years and one (1) director to serve for a term of one
(1) year; and
(2) To transact such other business as may properly come
before the meeting or any adjournments thereof.
Shareholders of record at the close of business on December
8, 2003 are entitled to vote at the annual meeting or any
adjournment or adjournments thereof.
BY ORDER OF THE BOARD OF DIRECTORS
December 31, 2003 Dennis D. Frick
Secretary
TO ASSURE YOUR REPRESENTATION AT THE MEETING, PLEASE COMPLETE THE
ENCLOSED PROXY AND RETURN IT PROMPTLY IN THE ACCOMPANYING
ENVELOPE. IF YOU ATTEND THE MEETING, YOU MAY WITHDRAW YOUR PROXY
AND VOTE IN PERSON.
PATRIOT TRANSPORTATION HOLDING, INC.
1801 Art Museum Drive, Jacksonville, Florida 32207
PROXY STATEMENT
ANNUAL MEETING - FEBRUARY 4, 2004
The attached proxy is solicited from you by the Board of
Directors of Patriot Transportation Holding, Inc. ("we" or the
"Company") for use at the annual meeting of the shareholders to
be held on Wednesday, February 4, 2004 at 2 o'clock in the
afternoon, local time, and any adjournments thereof, at 155 East
21st Street, Jacksonville, Florida 32206. You may revoke the
proxy by written notice to the Secretary of the Company at any
time before its exercise.
Shares represented by properly executed and returned proxies
will be voted at the meeting in accordance with your directions
or, if no directions are indicated, will be voted (1) in favor of
the election of the four nominees as directors proposed in this
proxy statement and, (2) if any other matters properly come
before the meeting, in accordance with the best judgment of the
persons designated as proxies.
This proxy statement and the accompanying proxy are being
distributed to shareholders on or about December 31, 2003.
VOTING PROCEDURES
The holders of record of common stock at the close of
business on December 8, 2003, may vote at the meeting. On such
date there were outstanding 2,934,108 shares of common stock of
the Company. Under the Company's Articles of Incorporation and
Bylaws, each share of common stock is entitled to one vote.
Under the Company's Bylaws, the holders of a majority of the
outstanding shares entitled to vote shall constitute a quorum for
the transaction of business at the meeting.
Under the Florida Business Corporation Act ("FBCA"),
directors are elected by a plurality of the votes cast, and other
matters are approved if affirmative votes cast by the holders of
the shares represented at the meeting and entitled to vote on the
subject matter exceed the votes opposing the action, unless a
greater number of affirmative votes is required by the FBCA or
the Company's Articles of Incorporation. Abstentions and broker
non-votes will have no effect on the vote for election of
directors and most routine matters. A broker non-vote generally
occurs when a broker who holds shares in street name for a
customer does not have authority to vote on certain non-routine
matters because its customer has not provided any voting
instructions on the matter.
1. ELECTION OF DIRECTORS
Under our Articles of Incorporation, the Board of Directors
is divided into four classes. One class of directors is elected
at each annual meeting of shareholders for a four-year term of
office or until their successors are elected and qualified. We
have listed below three nominees in Class II to be re-elected,
and one nominee in Class III who was first appointed as a
director by the Board of Directors effective January 1, 2004 to
be elected. Class II directors will hold office
2
until the 2008 annual meeting, and Class III directors will hold
office until the 2005 annual meeting. Your proxy will be voted for
the election of the persons nominated unless you indicate otherwise.
If any of the nominees named should become unavailable for
election for any presently unforeseen reason, the persons named
in the proxy shall have the right to vote for a substitute as may
be designated by the Board of Directors to replace such nominee,
or the Board may reduce the number of directors accordingly.
The following table sets forth information with respect to
each nominee for election as a director and each director whose
term of office continues after this annual meeting of
shareholders. Reference is made to the sections entitled "Common
Stock Ownership of Certain Beneficial Owners" and "Common Stock
Ownership by Directors and Officers" for information concerning
stock ownership of the nominees and directors.
CLASS II - NOMINEES FOR TERMS EXPIRING IN 2008
______________________________________________
NAME AND PRINCIPAL DIRECTOR
OCCUPATION AGE SINCE OTHER DIRECTORSHIPS
__________ ___ _____ ___________________
John D. Baker II 55 1988 Florida Rock
President and Chief Industries, Inc.
Executive Officer of Hughes Supply, Inc.
Florida Rock Wachovia
Industries, Inc. Corporation
Luke E. Fichthorn III 62 1989 Florida Rock
Partner in Twain Industries, Inc.
Associates (a private Bairnco Corporation
investment banking
firm); Chairman of the
Board and Chief
Executive Officer of
Bairnco Corporation
(manufacturer)
H. Jay Skelton 65 2002 Consolidated -
President and Chief Tomoka Land Co.
Executive Officer of
DDI, Inc. (a
diversified family
investment company)
CLASS III - NOMINEE FOR A TERM EXPIRING IN 2005
_______________________________________________
NAME AND PRINCIPAL DIRECTOR
OCCUPATION AGE SINCE OTHER DIRECTORSHIPS
__________ ___ _____ ___________________
Charles E. Commander III 63 2003
Partner with Foley &
Lardner
(a law firm)
3
DIRECTORS CONTINUING IN OFFICE AFTER THE 2004 ANNUAL MEETING
CLASS III - TERMS EXPIRING IN 2005
__________________________________
NAME AND PRINCIPAL DIRECTOR
OCCUPATION AGE SINCE OTHER DIRECTORSHIPS
__________ ___ _____ ___________________
Edward L. Baker 68 1988 Florida Rock
Chairman of the Board of Industries, Inc.
the Company and of
Florida Rock
Industries, Inc.
CLASS IV - TERMS EXPIRING IN 2006
_________________________________
NAME AND PRINCIPAL DIRECTOR
OCCUPATION AGE SINCE OTHER DIRECTORSHIPS
__________ ___ _____ ___________________
Thompson S. Baker II 45 1994 Florida Rock
Vice President of Industries, Inc.
Florida Rock
Industries, Inc.
Martin E. Stein Jr. 51 1992 Regency Centers
Chairman and Chief Corporation
Executive Officer of Stein Mart, Inc.
Regency Centers Florida Rock
Corporation (a Industries, Inc.
commercial real estate
services firm)
CLASS I - TERMS EXPIRING IN 2007
________________________________
NAME AND PRINCIPAL DIRECTOR
OCCUPATION AGE SINCE OTHER DIRECTORSHIPS
__________ ___ _____ ___________________
James H. Winston 70 1992 Stein Mart, Inc.
President of LPMC of Winston Hotels,
Jax, Inc. (an Inc.
investment real estate
firm); President of
Omega Insurance
Company; President of
Citadel Life & Health
Insurance Co.
Robert H. Paul III 69 1992
Chairman of the Board of
Southeast-Atlantic
Beverage Corporation
(a manufacturer of
soft drink products)
4
All of the nominees and directors have been employed in
their respective positions for the past five years.
Edward L. Baker and John D. Baker II are brothers. Thompson
S. Baker II is the son of Edward L. Baker.
In order to assure that the Board of Directors has a
majority of independent directors in accordance with NASDAQ
standards, John E. Anderson, David H. deVilliers Jr. and Francis
X. Knott have notified the Company that they will resign from the
Board of Directors effective January 1, 2004. Mr. Anderson will
continue to serve the Company as President and Chief Executive
Officer, and Mr. deVilliers will continue to serve as Vice
President.
Due to the resignations of John E. Anderson and David H.
deVilliers Jr. from the Board of Directors, the Board of
Directors approved a proposal to shorten the term of office of
the Chairman of the Board, Edward L. Baker. Mr. Baker
(previously a Class IV director) will serve as a Class III
director until the 2005 annual meeting of shareholders.
Please see "Compensation Committee Interlocks and Insider
Participation" and "Certain Relationships and Related
Transactions" for a discussion of other transactions and
relationships between the Company and Florida Rock Industries,
Inc. ("FRI").
CORPORATE GOVERNANCE
The Board of Directors is committed to good business
practices, transparency in financial reporting, the highest level
of corporate governance and the highest ethical, moral and legal
standards in the conduct of its business and operations. In July
2002, Congress passed the Sarbanes-Oxley Act of 2002, which
provides the basis for a number of new corporate governance and
disclosure requirements. In addition, the National Association
of Securities Dealers, Inc. (the "NASD") has recently adopted
changes to its listing standards that relate to corporate
governance. Many of these requirements have not yet become
effective as of the date of this proxy statement. Nevertheless,
the Board of Directors has voluntarily implemented a number of
these new or proposed requirements, including the following:
BOARD COMPOSITION. The Board of Directors has reviewed the
composition of its Board of Directors and has determined that
effective January 1, 2004:
* a majority of the members of the Board of Directors will be
independent of management; and
* all of the members of the Audit Committee, the Compensation
Committee and the Nominating Committee will be independent
directors.
AUDIT COMMITTEE CHARTER. The Board of Directors has adopted an
amended Audit Committee Charter which, among other matters:
* Gives the Audit Committee the exclusive right to appoint,
determine funding for, review and assess the performance of our
independent auditor.
5
* Requires Audit Committee approval of all audit and non-audit
services to be provided by our independent auditors.
* Requires regular executive sessions between the Audit
Committee, the independent auditors and members of management to
review the scope and results of the annual audited financial
statements and quarterly reviewed financial statements, among
other matters.
* Requires the Audit Committee to establish procedures for the
receipt, retention and treatment of complaints received by the
Company regarding accounting, internal accounting controls or
auditing matters and the confidential, anonymous submission by
employees of concerns regarding questionable accounting or
auditing matters.
* Requires the Audit Committee to review all related party
transactions on an ongoing basis and to approve such
transactions.
* Requires the Audit Committee to review annually its own
performance.
NOMINATING COMMITTEE. The Board of Directors established a
Nominating Committee. The responsibilities of this committee
include:
* establishing criteria for membership on the Board of
Directors;
* considering, recommending and recruiting candidates for the
Board of Directors;
* reviewing director candidates recommended by shareholders;
and
* reviewing annually its own performance.
FINANCIAL CODE OF ETHICAL CONDUCT. The Board of Directors has
adopted a Financial Code of Ethical Conduct applicable to the
Company's senior executive and financial officers, which, among
other matters, promotes:
* Honest and ethical conduct, including the ethical handling
of actual or apparent conflicts of interest, and accountability
for adherence to the Financial Code of Ethical Conduct;
* Full, fair, accurate, timely and understandable disclosure
in all public communications;
* Compliance with all applicable laws, rules and regulations;
and
* Prompt internal reporting to the Secretary of the Company of
any violation of the Financial Code of Ethical Conduct.
OTHER INFORMATION ABOUT THE BOARD AND ITS COMMITTEES
MEETINGS. During the fiscal year ended September 30, 2003,
the Company's Board of Directors held five meetings.
6
DIRECTOR FEES. Directors who are not employees of the
Company or its subsidiaries are paid annual fees of $10,000 plus
$1,000 for each directors' meeting attended and are granted
options to purchase 1,000 shares of the Company's common stock
for each regularly scheduled directors' meeting attended. These
options have a term of ten years, have an exercise price equal to
the fair market value of the underlying shares on the date of
grant and are immediately exercisable. The Chairman of the Audit
Committee is paid an annual fee of $10,000, and the other members
of the Audit Committee are paid an annual fee of $5,000, but no
additional fees are paid for attendance at the four regularly
scheduled Audit Committee meetings. However, the Chairman is
paid $500 and the other members are paid $300 for each additional
Audit Committee meeting attended. Members of all other
committees are paid $300, and the Chairmen of all other
committees are paid $500 for each committee meeting attended.
Please see the information under the caption "Executive
Compensation" for information about the compensation of directors
who are also employees of the Company.
EXECUTIVE COMMITTEE. Edward L. Baker, John D. Baker II and
John E. Anderson comprise the Executive Committee. To the extent
permitted by law, the Executive Committee exercises the powers of
the Board between the meetings of the Board of Directors. During
the fiscal year ended 2003, the Executive Committee held one
formal meeting and acted on various resolutions by unanimous
written consents.
AUDIT COMMITTEE. H. Jay Skelton, Francis X. Knott and
Robert H. Paul III comprise the Audit Committee. Effective
January 1, 2004, Mr. Skelton, Mr. Paul and Mr. Stein will
comprise the Audit Committee. The principal function of the Audit
Committee is to assist Board oversight of (1) the integrity of
the financial statements of the Company, (2) the independent
auditor's qualifications, independence and performance, and (3)
compliance by the Company with legal and regulatory requirements.
The Audit Committee adopted an amended written charter
during the fiscal year ended 2003, which is attached as Appendix
A to this proxy statement. See "Corporate Governance, Audit
Committee Charter" for a description of the functions of the
Audit Committee under the amended Audit Committee Charter.
The Board of Directors has determined that each of the
members of the Audit Committee is independent as defined by the
listing standards of the NASD, Section 301 of the Sarbanes-Oxley
Act of 2002, and Rule 10A-3 under the Securities and Exchange Act
of 1934, as amended (the "Exchange Act"). The Board of Directors
also has determined that each of the members of the Audit
Committee is able to read and understand financial statements,
and that Mr. Skelton, who is the Chairman, has financial
management experience and is an audit committee financial expert,
as defined by the rules of the Securities and Exchange Commission
(the "SEC"). In reaching such determinations, the Board of
Directors considered the financial, accounting, business and
occupational experience, as well as the past services as a
director of each Audit Committee member. During the fiscal year
ended 2003, the Audit Committee held seven meetings.
COMPENSATION COMMITTEE. Luke E. Fichthorn III, Robert H.
Paul III and James H. Winston comprise the Compensation
Committee. Effective January 1, 2004, Mr. Paul, Mr. Winston and
Mr. Commander will comprise the Compensation Committee. The
Committee determines the compensation for the Chief Executive
Officer and reviews and approves
7
compensation for other executive officers and certain other
members of management. In addition, the Committee administers
the Company's stock option plans and the Management Incentive
Compensation program. During the fiscal year ended 2003, the
Compensation Committee held one meeting.
NOMINATING COMMITTEE. In December, 2003, the Board of
Directors appointed a Nominating Committee consisting of Francis
X. Knott, Robert H. Paul and H. Jay Skelton, each of whom are
independent directors as defined by the listing standards of the
NASD, Section 301 of the Sarbanes-Oxley Act of 2002 and Rule 10A-
3 under the Exchange Act. Effective January 1, 2004, Mr. Stein
will replace Mr. Knott in serving on the Nominating Committee.
Under its Charter, the principal functions of the Nominating
Committee are to (1) identify individuals who are qualified to
serve on the Company's Board of Directors and (2) recommend for
selection by the Board of Directors the director nominees for the
next annual meeting of the shareholders or at any such time that
there is a vacancy on the Board of Directors.
The Nominating Committee has the duty and responsibility to
establish the criteria for membership of the Board of Directors.
At this time, the Nominating Committee has not established any
specific criteria for board membership. At present, board
candidates are considered based on various criteria, such as
their business and professional skills and experience, concern
for the long-term interests of the shareholders, and personal
integrity and judgment. In addition, candidates must have time
available to devote to board activities.
In carrying out its responsibilities, the Nominating
Committee will consider candidates recommended by other
directors, employees and shareholders. Written suggestions for
nominees should be sent to the Secretary of the Company.
The Company's Articles of Incorporation provide that only
persons who are nominated in accordance with the procedures set
forth in the Articles of Incorporation shall be eligible for
election by the shareholders or directors. Under the Articles of
Incorporation, directors may be nominated, at a meeting of
shareholders at which directors are being elected, by (1) the
Board of Directors or any committee or person authorized or
appointed by the Board of Directors, or (2) by any shareholder
who is entitled to vote for the election of directors at the
meeting and who complied with certain notice procedures. These
notice procedures require that the nominating shareholder make
the nomination by timely notice in writing to the Secretary of
the Company. To be timely, the notice must be received at the
principal executive offices of the Company not less than forty
(40) days prior to the meeting except that, if less than fifty
(50) days' notice or prior public disclosure of the date of the
meeting is given to shareholders, the notice must be received no
later than ten (10) days after the notice of the date of the
meeting was mailed or such public disclosure was made. The
notice must contain certain prescribed information about the
proponent and each nominee, including such information about each
nominee as would have been required to be included in a proxy
statement filed pursuant to the rules of the Securities and
Exchange Commission had such nominee been nominated by the Board
of Directors.
During the last fiscal year, each of the directors attended
75% or more of all meetings of the Board and its Committees on
which the director served.
8
AUDIT COMMITTEE REPORT
With respect to the Company's fiscal year ended September
30, 2003, the Audit Committee of the Board of Directors (a) has
reviewed and amended the Audit Committee Charter, a copy of which
is attached as Appendix A to this proxy statement for the 2004
annual meeting of the shareholders; (b) has reviewed and
discussed the Company's audited financial statements for fiscal
2003 with management; (c) has discussed with
PricewaterhouseCoopers LLP any matters required of auditors to be
discussed with the Audit Committee by Statement on Auditing
Standards No. 61 (relating to additional information from the
auditor regarding the scope and results of the audit); (d) has
received the written disclosures and a letter from
PricewaterhouseCoopers LLP required by Independence Standards
Board Standard No. 1 (relating to independence discussions with
audit committees) and has discussed with representatives of
PricewaterhouseCoopers LLP their independence; and (e) has
recommended to the Board of Directors that the Company's fiscal
2003 audited financial statements be included in the Company's
annual report on Form 10-K.
Submitted by: H. Jay Skelton, Chairman
Francis X. Knott
Robert H. Paul III
Members of the Audit Committee
9
EXECUTIVE COMPENSATION
Edward L. Baker, who is Chairman of the Board of the
Company, receives his primary compensation from FRI which
provides administrative and other services to the Company under
an agreement.
Summary Compensation Table
The following table sets forth information concerning the
compensation of the Company's Chief Executive Officer and five
other most highly compensated executives who served in such
capacities during the fiscal year ended September 30, 2003.
ANNUAL LONG-TERM ALL OTHER
COMPENSATION COMPENSATION COMPENSATION
(1) ($)(3)
___ ____________ ______
AWARDS
______
NAME AND SALARY BONUS SECURITIES UNDER-
PRINCIPAL POSITION YEAR ($)(2) ($)(2) LYING OPTIONS
________________________________________________________________________
John E. Anderson 2003 322,667 -0- 15,000 6,000
President 2002 318,750 128,000 -0- 5,100
2001 314,250 -0- -0- 5,245
Rick J. Copley (4) 2003 127,500 -0- 8,000 3,824
President of 2002 111,119 -0- -0- 3,331
SunBelt
Transport, Inc.
David H.DeVilliers 2003 251,835 228,042 15,000 6,257
Jr.Vice President 2002 245,400 197,760 -0- 5,069
2001 237,500 240,000 -0- 4,880
John R. Mabbett III(5)2003 150,923 -0- 10,000 4,496
Chairman of 2002 169,575 52,200 -0- 5,289
Florida Rock & 2001 167,275 63,038 -0- 4,880
Tank Lines, Inc.
Robert E. Sandlin (6) 2003 149,752 -0- 10,000 5,421
Ray M. Van Landingham 2003 133,600 -0- 10,000 4,803
(7) 2002 129,425 26,500 -0- 4,303
Vice President 2001 116,241 14,000 -0- 4,314
Finance and
Administration
and Chief Financial
Officer
10
(1) Columns relating to "other annual compensation" and
"restricted stock awards" have been omitted because no
compensation required to be reported in such columns was
awarded to, earned by, or paid to the named executives
during the periods covered by such columns. Perquisites and
other personal benefits are not disclosed in this table
because the aggregate value does not exceed the lesser of
$50,000 or 10% of total annual salary and bonus of each
individual.
(2) The amounts in this column include (a) salary and bonus
deferred at the executive's election under the Company's
Profit Sharing and Deferred Earnings Plan and (b) bonuses
which are accrued in the year earned and paid in the
following year.
(3) Amounts shown in this column represent the Company's
contribution on behalf of the named executive officer to the
Company's Profit Sharing and Deferred Earnings Plan.
(4) Rick J. Copley was appointed President of Sunbelt effective
September 16, 2002. Prior to that date, he served as Vice
President of Sunbelt.
(5) John R. Mabbett III served as President of Florida Rock &
Tank Lines, Inc. until March 1, 2003, when he was appointed as
Chairman of Florida Rock & Tank Lines.
(6) Robert E. Sandlin was appointed President of Florida Rock &
Tank Lines, Inc. effective March 1, 2003. Prior to that
date, he served as Senior Vice President.
(7) Ray M. Van Landingham joined the Company in November 2000
and became Chief Financial Officer on January 1, 2001.
OPTION GRANTS IN LAST FISCAL YEAR
OPTION/SAR GRANTS IN LAST FISCAL YEAR
Potential Realizable Value at
Assured Annual Rates of Stock
Price appreciation for Options
Individual Grants Terms
_____________________________________ ______________________________
Percent of
Number of Total
Securities Options;
Underlying SARs Granted Exercise or
Option/SARs To Employees Base Price Expiration
Name Granted (#) In Fiscal Year ($/Sh) Date 5%($) 10%($)
(a) (b) (c) (d) (e) (f) (g)
_________________________________________________________________________________________________
John E. Anderson 15,000 10.7% $22.23 11/20/2012 92,130 203,580
Rick J. Copley 8,000 5.7% $22.23 11/20/2012 49,136 108,576
David H. deVilliers Jr. 15,000 10.7% $22.23 11/20/2012 92,130 203,580
John R. Mabbett III 10,000 7.1% $22.23 11/20/2012 61,420 135,720
Robert E. Sandlin 10,000 7.1% $22.23 11/20/2012 61,420 135,720
Ray M. Van Landingham 10,000 7.1% $22.23 11/20/2012 61,420 135,720
11
OPTION EXERCISES AND FISCAL YEAR-END VALUES
The following table shows information with respect to stock
options exercised during the fiscal year ended September 30, 2003
and the number and value of unexercised options held by each
executive officer named in the Summary Compensation Table who
holds options.
Number of Unexercised Value of Unexercised In-
Options at The-Money Options
September 30, 2003 At September 30, 2003(1)
__________________ ________________________
Shares
Acquired on Value Exercisable Unexercisable Exercisable Unexercisable
Name Exercise Realized($) # # $ $
____ ________ ___________ ___ ___ ___ ___
John E. Anderson -- -- 25,000 15,000 316,350 118,050
Rick J. Copley 1,600 8,400 9,760 65,400
David H. -- -- 15,000 15,000 185,250 118,050
deVilliers Jr.
John R. Mabbett 15,000 116,250 -0- 10,000 -0- 78,700
III
Robert E. Sandlin -- -- 1,600 10,400 9,760 81,140
Ray M. Van Landingham - 10,000 - 78,700
(1) The closing price of the Company's common stock as reported
on The NASDAQ Stock Market on September 30, 2003 (the last
trading day in fiscal 2003) of $30.10, less the exercise
price, was used in calculating the value of exercisable and
unexercisable options.
PENSION PLAN
The Company has a Management Security Plan (the "MSP Plan")
for certain officers. Benefit levels have been established on
the basis of base compensation at September 30, 2002, except with
respect to John R. Mabbett III, whose benefit level has been
established on the basis of base compensation as of March 1,
2003. The MSP Plan provides that in the event a participant dies
prior to his retirement, his beneficiary will receive twice the
amount of such participant's benefit level in monthly payments
for a period of 12 months and thereafter the benefit level in
monthly payments for the next 168 months or until such time as
such participant would have reached age 65, whichever is later.
Upon reaching normal retirement age, a participant is entitled to
receive twice the amount of his benefit level in equal monthly
payments for 12 months and thereafter the benefit level until his
death. If a participant dies after his retirement, his
beneficiary, if any, will receive such participant's benefit for
a period of 15 years from the date of the participant's
retirement or until the death of the beneficiary, whichever
occurs first.
The annual retirement benefit levels in effect at September
30, 2003 were:
12
John E. Anderson $160,000
David H. deVilliers Jr. $123,600
John R. Mabbett III $ 67,000
Other executives named in the Summary Compensation Table are not
eligible to participate in the MSP Plan.
COMPENSATION COMMITTEE REPORT
The Compensation Committee of the Board of Directors (the
"Committee") determines the compensation of the Chief Executive
Officer and reviews and approves compensation of certain other
officers and members of management. In addition, the Committee
administers the Company's stock option plans and the Management
Incentive Compensation program.
The Committee's goals are to develop and maintain executive
compensation programs that preserve and enhance shareholder
value. Under the direction of the Committee, management has
developed a compensation structure designed to compensate fairly
executives for their performance and contribution to the Company,
to attract and retain skilled and experienced personnel, to
reward superior performance and to align executive and
shareholder long-term interests.
Base salary levels for executives are established taking
into consideration business conditions, the Company's performance
and industry compensation levels. Effective July 1, 2003, the
Chief Executive Officer's salary was increased to $328,000 based
on these factors, with no particular weighting, and his
performance in leading the Company and its businesses.
Both of the Company's operating groups, transportation and
real estate, have Management Incentive Compensation ("MIC") plans
which provide an opportunity for additional compensation to
officers and key employees. The purpose of the plans is to
provide a direct financial incentive in the form of an annual
cash bonus to participants to achieve their business unit's and
the Company's goals and objectives. Awards to individuals are
based on their achieving annual predetermined objectives and the
importance of and degree of difficulty in achieving those
objectives. Goals for the transportation group for the fiscal
year ended 2003 focused on after-tax returns on total capital
employed. MIC-based objectives for real estate emphasized such
key performance indicators as operating profit from the developed
portfolio, lease-up periods for new buildings placed in service
during the fiscal year, growth-related new development and
average occupancy for the existing portfolios.
Mr. Anderson participates in a similar MIC Plan under which
the calculation, purpose and annual cash award eligibility for
performance against predetermined objectives are directly linked
to those utilized by the Company's transportation and real estate
groups. More specifically, these predetermined objectives are
expressed as the sum of the transportation and real estate
groups' net income excluding gains from property sales and net
income from royalties and rents. His maximum individual award
may not exceed 100% of base salary. Mr. Anderson
13
received no cash bonus under the MIC Plan for fiscal 2003 after
considering below-targeted transportation results and on-target
real estate profits.
During the fiscal year ended 2003, the Company granted
options to acquire 68,000 shares of the Company's common stock to
the named executive officers. See "Option/SAR Grants in Last
Fiscal Year." Under the stock option program, the vesting
periods associated with stock options encourage option recipients
to continue in the employ of the Company. All options granted
have been granted at an option price equal to the fair market
value of the Company's common stock on the date of grant. In
subjectively determining the number of options to be granted to
an individual, including the Chief Executive Officer, the
Committee takes into account the individual's relative base
salary, scope of responsibility and ability to affect both short
and long term profits and add value to the Company.
Submitted by: Robert H. Paul III, Chairman
Luke E. Fichthorn III
James H. Winston
Members of the Compensation Committee
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
Five directors of the Company, Edward L. Baker, John D.
Baker II, Thompson S. Baker II, Luke E. Fichthorn III and Martin
E. Stein Jr. are also directors of FRI. Martin E. Stein Jr. has
tendered his resignation from the Board of Directors of FRI
effective January 1, 2004. Effective January 1, 2004, Mr.
Fichthorn will no longer serve on the Company's Compensation
Committee, and Mr. Stein will no longer serve on the Compensation
Committee of FRI. The five directors own approximately 49.0% of
stock of the Company and 27.9% of the stock of FRI as of October
24, 2003. Accordingly, Edward L. Baker, John D. Baker II and
Thompson S. Baker II, who own approximately 46.0% of the stock of
the Company and 27.6% of the stock of FRI, may be considered to
be control persons of both the Company and FRI.
Mr. Fichthorn provided the Company with financial consulting
and other services during the fiscal year ended 2003 for which he
received $30,000.
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
The Company and FRI routinely are engaged in business
together through the hauling by the Company of construction
aggregates and other products for FRI and the leasing to FRI of
construction aggregates mining and other properties. The Company
has numerous aggregates hauling competitors at all terminal and
mine sites and the rates charged are, accordingly, established by
competitive conditions. Approximately 7.1% of the Company's
revenue was attributable to FRI during fiscal year ended 2003.
In addition, under an agreement, FRI provides certain management
and related services, including tax, legal, administrative, human
resources, health benefits, risk management and property
management services to the Company and its subsidiaries. FRI
charged the Company $440,000 for such services during the fiscal
year ended September 30, 2003.
14
In September 2003, a subsidiary of the Company sold 796
acres of land located in St. Mary's County, Maryland to FRI for
$1,836,000. The sale was approved by a committee of independent
directors of the Company after review of an appraisal and other
materials and consultation with management.
On May 7, 2003, the Company announced that a subsidiary
agreed to sell a 935 acre parcel of property in Miami, Florida to
FRI for $1,638,000. The property is principally composed of mined-
out lakes, mitigation areas, 145 acres of mineable land and 32
acres of roads and railroad track rights-of-way. The closing of
the sale is to occur no later than December 31, 2004. The terms
of the agreement were approved by the Company's Audit Committee,
which is comprised of independent directors, after considering,
among other factors, the terms of the existing lease agreement
and consultation with management.
In February 2002, a subsidiary of the Company signed an
Agreement to sell 108 acres of land located in the northwest
quadrant of I-395 and I-495 at Edsall Road in Springfield,
Virginia to FRI for $15,000,000. Closing is subject to a title
search and surveys and is to occur within 45 days of FRI's giving
notice to close. If FRI fails to close by December 31, 2004, at
no fault of the Company, then the Company may retain the $100,000
binder deposit and have no further obligation to close. The
Agreement was approved by a committee of independent directors of
the Company after review of a development feasibility study and
other materials, consultation with management and advice of
independent counsel.
On December 3, 2003, a subsidiary of the Company agreed to
sell a parcel of land containing approximately 6,321 acres in
Suwannee and Columbia Counties, near Lake City, Florida, to FRI
for $13,000,000 in cash. The sale is subject to a definitive
agreement, and the closing date is to be determined. The sales
price was approved by the Company's Audit Committee, which is
composed of independent directors of the Company, after
considering, among other factors, an independent appraisal, the
current use of the property and consultation with management.
In the opinion of the Company, the terms, conditions,
transactions and payments under the agreements with the persons
described above were not less favorable to the Company than those
which would have been available from unaffiliated persons.
SHAREHOLDER RETURN PERFORMANCE
The following graph compares the performance of the
Company's common stock to that of the Total Return Index for The
NASDAQ Stock Market-US Index and The NASDAQ Trucking and
Transportation Stock Index for the period commencing September
30, 1998 and ending on September 30, 2003. The graph assumes
that $100 was invested on September 30, 1998 in the Company's
common stock and in each of the indices and assumes the
reinvestment of dividends.
15
<GRAPH OMITTED>
PATRIOT TRANSPORTATION HOLDING, INC.
Cumulative Total Return
_______________________
9/98 9/99 9/00 9/01 9/02 9/03
PATRIOT TRANSPORTATION HOLDING, INC. 100.00 107.06 71.75 76.98 96.50 133.88
NASDAQ STOCK MARKET (U.S.) 100.00 163.12 217.03 88.74 69.90 106.49
NASDAQ TRUCKING & TRANSPORTATION 100.00 112.92 97.61 92.28 105.41 161.77
16
Notwithstanding anything to the contrary set forth in any of
the Company's previous filings under the Securities Act of 1933,
as amended, or the Securities Exchange Act of 1934, as amended,
that incorporate future filings, including this Proxy Statement,
in whole or in part, the Compensation Committee Report, the Audit
Committee Report and Shareholder Return Performance shall not be
incorporated by reference into any such filings.
COMMON STOCK OWNERSHIP OF CERTAIN BENEFICIAL OWNERS
The following table and notes set forth the beneficial
ownership of common stock of the Company by each person known by
the Company to own beneficially more than 5% of the common stock
of the Company. Percentage calculations are based on the
outstanding shares of the Company's common stock on December 8,
2003.
Title of Class Name and Address Amount and Nature of
of Beneficial Owner Beneficial Ownership Percentage of Class
______________ ___________________ ____________________ ___________________
Common Baker Holdings, LP 1,061,521 36.2%
Edward L. Baker 126,204(1) 4.3%
John D. Baker II 124,914(1) 4.3%
_________
P.O. Box 4667 1,312,639 44.7%
Jacksonville, FL 32201
Common Royce & Associates, Inc 359,700(2) 12.3%
1414 Avenue of the
Americas
New York, NY 10019
Common Eastabrook Capital 239,718(3) 8.2%
Management
430 Park Avenue
Suite 1810
New York, NY 10022
(1) Baker Holdings, LP is a limited partnership in which Edward
L. Baker and John D. Baker II are the sole shareholders of
its general partner and as such have shared voting power and
dispositive power over the shares owned by the partnership.
Through pass through entities, each of Edward L. Baker and
John D. Baker II has a pecuniary interest in 353,840 shares.
Ownership for Baker Holdings, LP is reported as of December
31, 2002. See "Common Stock Ownership by Directors and
Officers" including the notes thereunder for an aggregation
and identification of other shares beneficially owned by
Edward L. Baker and John D. Baker II.
(2) Royce & Associates, Inc. ("Royce") reported as of December
31, 2002 that pursuant to Securities and Exchange Commission
Rule 13d-(1)(b)(ii)(H) it has sole voting and investment
power as to the shares shown.
17
(3) Eastabrook Capital Management is an investment advisor and
reports, as of October 23, 2000, shared voting power and
sole investment power as to 239,718 shares.
COMMON STOCK OWNERSHIP BY DIRECTORS AND OFFICERS
The following table and notes set forth the beneficial
ownership of common stock of the Company by each director and
each non-director named in the Summary Compensation Table and by
all officers and directors of the Company as a group as of
October 24, 2003 and also includes shares held under options
which are exercisable within 60 days of October 24, 2003.
Name of Amount and Nature of Percentage of
Of Beneficial Owner Beneficial Ownership (1) Class
___________________ ________________________ _____
John E. Andern 48,806 1.7%
Edward L. Baker 833,885(2)(3) 28.4%
John D. Baker II 478,754(2)(4) 16.3%
Thompson S. Baker II 36,301 1.2%
Charles E. Commander III 2,000 *
Rick J. Copley 11,949 *
David H. deVilliers Jr. 20,887 *
Luke E. Fichthorn III 35,043(6) 1.2%
Francis X. Knott 16,120(7) *
John R. Mabbett III 6,849 *
Robert H. Paul III 16,800 *
Robert E. Sandlin 6,423 *
H. Jay Skelton 5,000 *
Martin E. Stein Jr. 53,300(8) 1.8%
Ray M. Van Landingham 2,000 *
James H. Winston 16,000 *
All Directors and
Officers as a group
(18 people) 1,591,884 54.3%
* Less than 1%
(1) The preceding table includes the following shares held under
the Company's Profit Sharing and Deferred Earnings Plan
which includes shares previously held under a Tax Reduction
Act Employee Stock Ownership Plan ("TRAESOP") previously
established by FRI as to which the named person has sole
voting power, and shares held under options which are
exercisable within 60 days of October 24, 2003.
Shares Under
Profit Sharing Plan Shares Under Option
___________________ ___________________
John E. Anderson -0- 28,000
Edward L. Baker 2,542 13,000
John D. Baker II 1,549 14,000
18
Thompson S. Baker II 7 14,000
Charles E. Commander III -0- -0-
Rick J. Copley -0- 3,600
David H. deVilliers Jr. 887 18,000
Luke E. Fichthorn III -0- 14,000
Francis X. Knott -0- 12,000
John R. Mabbett III 349 2,000
Robert H. Paul III -0- 11,000
H. Jay Skelton -0- 5,000
Robert E. Sandlin -0- 4,000
Martin E. Stein, Jr. -0- 11,000
Ray M. Van Landingham -0- 2,000
James H. Winston -0- 11,000
All directors and
officers as a 5,334 163,600
group (18 people)
(2) Includes out of the 1,061,521 shares owned by Baker
Holdings, LP, as to which Edward L. Baker and John D. Baker
II have shared voting and investment power, for Edward L.
Baker, 353,840 in which he has a beneficial interest and
353,841 shares in which another person has a beneficial
interest, which 707,681 shares are excluded from the amounts
shown for John D. Baker II; the remaining 353,840 shares in
which John D. Baker II has a pecuniary interest are included
in the number of shares shown for John D. Baker II.
(3) Includes 26,191 shares held by the Edward L. Baker Living
Trust as to which Edward L. Baker has sole voting power and
sole investment power; 83,639 shares held in trust for the
benefit of children of John D. Baker II as to which Edward
L. Baker has sole voting power and sole investment power but
as to which he disclaims beneficial ownership; 432 shares
held by a trust for which Edward L. Baker is a co-trustee
with SunTrust Bank and to which he has potential income
rights; and 400 shares directly owned by the spouse of
Edward L. Baker as to which he disclaims beneficial
ownership.
(4) Includes 107,402 shares held in the John D. Baker II Living
Trust as to which John D. Baker II has sole voting power and
sole investment power; and 1,963 shares directly owned by
the spouse of John D. Baker II as to which he disclaims
beneficial ownership.
(5) Includes 19,362 shares directly owned by Thompson S. Baker
II; 733 shares directly owned by Mr. Baker's spouse; and
2,199 shares held for the benefit of Mr. Baker's minor
children.
(6) Includes 100 shares owned by the spouse of Mr. Fichthorn as
to which he disclaims any beneficial interest and 4,000
shares directly owned by the M/B Disbro Trust, of which Mr.
Fichthorn is a co-trustee and beneficiary.
(7) Includes 3,490 shares held by Francis X. Knott as custodian
as to which Mr. Knott has sole voting and dispositive power
but as to which he disclaims any beneficial interest.
(8) Regency Square II, a Florida general partnership, owns
40,300 shares of the Company. Martin E. Stein Jr., as a
partner, holds a 2.5248% interest in the partnership. Trust
B
19
under the will of Martin E. Stein, deceased, as a partner,
holds a 46.21% interest in the Partnership. John D. Baker II
in a co-trustee of the trust of Martin E. Stein, deceased,
and as such has a one-third shared voting and dispositive
power as to the trust. Martin E. Stein Jr. has a beneficial
interest in the trust, and, together with his two brothers,
acting jointly as co-trustees, has a one-third shared voting
and dispositive power as to the trust. The partnership's
shares in the Company are excluded from the total shown for
John D. Baker II, who disclaims any pecuniary or beneficial
interest to such shares, but are included in the total shown
for Martin E. Stein Jr.
INDEPENDENT AUDITOR
As previously disclosed by the Company in a Current Report
on Form 8-K, on May 1, 2002, the Board of Directors, upon
recommendation of the Audit Committee, dismissed Deloitte &
Touche LLP as the Company's principal public accountants. On May
1, 2002, the Board of Directors engaged on the recommendation of
the Audit Committee engaged PricewaterhouseCoopers LLP to serve
as the Company's principal public accountants for a three year
term beginning with fiscal year 2002. Representatives of
PricewaterhouseCoopers LLP are expected to be present at the
shareholders' meeting with the opportunity to make a statement if
they so desire and will be available to respond to appropriate
questions.
The reports of Deloitte & Touche LLP on the consolidated
financial statements of the Company and its subsidiaries for the
two fiscal years ended September 30, 2000 and 2001 did not
contain any adverse opinion or disclaimer of opinion, nor were
they qualified or modified as to uncertainty, audit scope, or
accounting principles.
During the Company's two fiscal years ended September 30,
2000 and 2001 and the subsequent interim periods through the date
of cessation of the client-auditor relationship, there were no
disagreements between the Company and Deloitte & Touche LLP on
any matter of accounting principles or practices, financial
statement disclosure, or auditing scope or procedure, which
disagreements, if not resolved to the satisfaction of Delotte &
Touche LLP, would have caused them to make reference to the
subject matter of the disagreement in connection with their
reports; and there were no reportable events as described in Item
304(a)(1)(v) of Regulation S-K.
The Company provided Deloitte & Touche LLP with a copy of
the foregoing disclosures.
During the Company's two fiscal years ended September 30,
2000 and 2001 and the subsequent interim periods through April
30, 2002, the Company did not consult PricewaterhouseCoopers LLP
with respect to the application of accounting principles to a
specified transaction, either completed or proposed, or the type
of audit opinion that might be rendered on the Company's
consolidated financial statements, or any other matters or
reportable events as set forth in Items 304(a)(2)(i) of
Regulation S-K.
Audit Fees:
The aggregate fees billed by PricewaterhouseCoopers LLP for
professional services rendered for the audit of the Company's
annual financial statements for fiscal years 2003 and
20
2002 and review of the financial statements included in the Company's
Form 10-Q for the first three fiscal quarters in 2003 and the third
quarter of 2002 were $79,675 and $55,000, respectively.
Audit Related Fees:
The aggregate fees billed by PricewaterhouseCoopers LLP for
assurance and related services that were reasonably related to
the performance of the audit or review of the Company's financial
statements for the fiscal years 2003 and 2002 were $15,000 and $8,000,
respectively. These products and services related to audit services
provided by PricewaterhouseCoopers LLP for the Patriot Transportation
Holding, Inc. Profit Sharing and Deferred Savings Plan.
Tax Fees:
The aggregate fees billed (or to be billed in the case of
the fiscal year 2003) by PricewaterhouseCoopers LLP for
professional services for tax compliance, advice and planning
services for fiscal years 2003 and 2002 were $26,300 and $25,000,
respectively.
All Other Fees:
No fees were billed by PricewaterhouseCoopers LLP for
products and services other than those otherwise described above
during the fiscal years 2003 and 2002.
Pre-Approval of Audit and Non-Audit Services:
Under the Company's amended Audit Committee Charter which is
attached as Appendix A to this proxy statement for the 2004
annual meeting of the shareholders, the Audit Committee is
required to pre-approve all auditing services and permissible non-
audit services, including related fees and terms, to be performed
for the Company by its independent auditor, subject to the de
minimus exceptions for non-audit services described under the
Exchange Act which are approved by the Audit Committee prior to
the completion of the audit. The Audit Committee pre-approved
all audit services, audit-related services and tax review,
compliance and planning services performed for the Company by
PricewaterhouseCoopers during fiscal 2003.
SHAREHOLDER PROPOSALS
Proposals of shareholders intended to be included in the
Company's proxy statement and form of proxy relating to the
annual meeting of shareholders to be held in early 2005 must be
delivered in writing to the principal executive offices of the
Company no later than August 25, 2004. The inclusion of any
proposal will be subject to the applicable rules of the
Securities and Exchange Commission.
Except for shareholder proposals to be included in the
Company's proxy materials, the deadline for nominations for
director submitted by a shareholder is forty days before the next
annual meeting and for other shareholder proposals is November 8,
2004. Proposals must be sent to the Secretary of the Company at
our principal executive offices. Any notice from a
21
shareholder nominating a person as director must include certain
additional information as specified in our Articles of Incorporation.
The Company may solicit proxies in connection with next
year's annual meeting which confer discretionary authority to
vote on any shareholder proposals of which the Company does not
receive notice by November 8, 2004.
SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16(a) of the Securities Exchange Act of 1934
requires the Company's executive officers, directors and
beneficial owners of 10% or more of the Company's outstanding
common stock to file initial reports of ownership and reports of
changes in ownership with the Securities and Exchange Commission,
The NASDAQ Stock Market and the Company. Based solely on a
review of the copies of such forms furnished to the Company and
written representations from the Company's executive officers and
directors, the Company believes all persons subject to these
reporting requirements filed the required reports on a timely
basis, except as otherwise described below. John E. Anderson,
Rick J. Copley, David H. deVilliers, Jr., Gregory B. Lechwar,
John R. Mabbett III, and Ray M. Van Landingham each reported one
transaction late on one report. Edward L. Baker and Thompson S.
Baker II each reported five transactions late on one report.
COST OF SOLICITATION
The cost of solicitation of proxies will be borne by the
Company, including expenses in connection with the preparation
and mailing of this proxy statement. The Company will reimburse
brokers and nominees their reasonable expenses for sending proxy
material to principals and obtaining their proxies. In addition
to solicitation by mail, proxies may be solicited in person or by
telephone or other electronic means by directors, officers and
other employees of the Company.
OTHER MATTERS
The Board of Directors does not know of any other matters to
come before the meeting. However, if any other matters come
before the meeting, the persons named in the enclosed form of
proxy or their substitutes will vote said proxy in respect of any
such matters in accordance with their best judgment pursuant to
the discretionary authority conferred thereby.
DELIVERY OF DOCUMENTS TO SHAREHOLDERS SHARING AN ADDRESS
The Company may deliver only one annual report or proxy
statement to multiple shareholders sharing an address unless the
shareholder(s) have instructed the Company otherwise. Upon a
shareholder's written or oral request, the Company will deliver a
separate copy of the annual report or proxy statement at a shared
address to which a single copy was
22
delivered. Please write the Chief Financial Officer at 1801
Art Museum Drive, Jacksonville, Florida 32207 or call the Chief
Financial Officer at (904) 396-5733 if you wish to receive a
separate annual report or proxy statement in the future. You
may also write or call the Chief Financial Officer at that
address or telephone number to request delivery of a single copy
of the annual report or proxy statement if you are receiving
multiple copies of the annual report or proxy statement at a shared
address and would like only one copy.
BY ORDER OF THE BOARD OF DIRECTORS
December 31, 2003 Dennis D. Frick
Secretary
PLEASE RETURN THE ENCLOSED FORM OF PROXY,
DATED AND SIGNED, IN THE ENCLOSED ADDRESSED ENVELOPE,
WHICH REQUIRES NO POSTAGE.
SHAREHOLDERS MAY RECEIVE WITHOUT CHARGE A COPY OF PATRIOT
TRANSPORTATION HOLDING, INC.'S ANNUAL REPORT TO THE SECURITIES
AND EXCHANGE COMMISSION ON FORM 10-K INCLUDING THE FINANCIAL
STATEMENTS AND THE FINANCIAL STATEMENT SCHEDULES BY WRITING TO
THE CHIEF FINANCIAL OFFICER AT 1801 ART MUSEUM DRIVE,
JACKSONVILLE, FLORIDA 32207.
23
PATRIOT TRANSPORTATION HOLDING, INC.
PROXY SOLICITED BY BOARD OF DIRECTORS
FOR THE ANNUAL MEETING OF SHAREHOLDERS CALLED FOR FEBRUARY 4, 2004
The undersigned hereby appoints Edward L. Baker and John D.
Baker II, or either of them, the attorneys, agents and proxies of
the undersigned with full power of substitution to vote all the
shares of common stock of Patriot Transportation Holding, Inc.
which the undersigned is entitled to vote at the Annual Meeting
of Shareholders of the Company to be held at 155 East 21st
Street, Jacksonville, Florida on February 4, 2004, at 2 o'clock
in the afternoon, local time, and all adjournments thereof, with
all the powers the undersigned would possess if then and there
personally present. Without limiting the general authorization
and power hereby given, the above proxies are directed to vote as
instructed on the matters below:
1. The election of three directors to serve for a term of four
years and one director to serve for a term of one year.
/ / FOR the nominees listed / / WITHHOLD AUTHORITY
below (except as marked to vote for all nominees
to the contrary below) listed below
John D. Baker II, Luke E. Fichthorn III and H. Jay
Skelton are the nominees for a term of four years.
Charles E. Commander III is a nominee for a term of one
year.
To withhold authority to vote for any individual nominee, write
that nominee's name in the space provided.
__________________________________________________________
2. To transact such other business as may properly come
before the meeting or any adjournments thereof.
(Continued and to be signed on other side)
- - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - -
Shares represented by properly executed and returned proxies
will be voted at the meeting in accordance with the undersigned's
directions or, if no directions are indicated, will be voted in
favor of the election of the nominees proposed in this proxy
statement and, if any other matters properly come before the
meeting, in accordance with the best judgment of the persons
designated as proxies.
The undersigned hereby revokes any proxy heretofore given
with respect to said stock, acknowledges receipt of the Notice
and the Proxy Statement for the meeting accompanying this proxy,
each dated December 31, 2003, and authorizes and confirms all
that the said proxies or their substitutes, or any of them, may
do by virtue hereof.
Dated:___________________________
_________________________________
Signature
_________________________________
Signature, if held jointly
IMPORTANT: Please date this proxy
and sign exactly as your name or
names appear(s) hereon. If the
stock is held jointly, signatures
should include both names. Personal
representatives, trustees,
guardians and others signing in a
representative capacity should give
full title. If you attend the
meeting you may, if you wish,
withdraw your proxy and vote in
person.
PLEASE RETURN PROMPTLY IN THE ACCOMPANYING ENVELOPE.
Proxy Statement dated December 31, 2003
APPENDIX A
PATRIOT TRANSPORTATION HOLDING, INC.
AUDIT COMMITTEE CHARTER
PURPOSE
The Audit Committee is a committee of the Board of Directors that
is appointed by the Board to assist Board oversight of (1) the
integrity of the financial statements of the Company, (2) the
independent auditor's qualifications, independence and
performance, and (3) the compliance by the Company with certain
legal and regulatory requirements.
The Audit Committee shall prepare the report required by the
rules of the Securities and Exchange Commission (the
"Commission") to be included in the Company's annual proxy
statement.
COMMITTEE MEMBERSHIP
The Audit Committee shall consist of no fewer than three members.
The members of the Audit Committee shall meet the independence
and experience requirements of the listing standards of the
National Association of Securities Dealers, Section 10A(m)(3) of
the Securities Exchange Act of 1934 (the "Exchange Act") and the
rules and regulations of the Commission, as in effect from time
to time.
The members of the Audit Committee shall be appointed by the
Board on the recommendation of any Nominating Committee of the
Board in existence from time to time. Audit Committee members may
be replaced by the Board at any time.
MEETINGS
The Audit Committee shall meet as often as it determines, but not
less frequently than quarterly. The Audit Committee shall meet
periodically with management, any internal auditors, and the
independent auditor in separate executive sessions. The Audit
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 members of, or
consultants to, the Committee.
COMMITTEE AUTHORITY AND RESPONSIBILITIES
The Audit Committee shall have the sole authority to appoint
(subject, if applicable, to shareholder ratification), determine
funding for and oversee the independent auditor. The Audit
Committee shall be directly responsible for the compensation and
oversight of the work of the independent auditor (including
resolution of disagreements between management and the
independent auditor regarding financial reporting) for the
purpose of preparing or issuing an audit report or related work.
The independent auditor shall report directly to, and shall be
24
accountable to, the Audit Committee.
The Audit Committee shall preapprove all auditing services and
permissible non-audit services (including the fees and terms
thereof) to be performed for the Company by its independent
auditor, subject to the de minimus exceptions for non-audit
services described in Section 10A(i)(1)(B) of the Exchange Act
which are approved by the Audit Committee prior to the completion
of the audit. The Audit Committee may form and delegate
authority to subcommittees consisting of one or more members when
appropriate, including the authority to grant preapprovals of
audit and permitted non-audit services, provided that decisions
of such subcommittee to grant preapprovals shall be presented to
the full Audit Committee at its next scheduled meeting.
The Audit Committee shall have the authority, to the extent it
deems necessary or appropriate, to retain and determine funding
for independent legal, accounting or other advisors. The Company
shall provide for appropriate funding, as determined by the Audit
Committee, for payment of compensation to the independent auditor
for the purpose of rendering or issuing an audit report and to
any advisors employed by the Audit Committee.
The Audit Committee shall review and reassess the adequacy
of this Charter on an annual basis and recommend any proposed
changes to the Board for approval.
The Audit Committee, to the extent it deems necessary or
appropriate, shall:
Financial Statement and Disclosure Matters
__________________________________________
1. Review and discuss with management and the independent
auditor the annual audited financial statements, including
disclosures made in management's discussion and analysis, and
recommend to the Board whether the audited financial statements
should be included in the Company's Form 10-K.
2. Review and discuss with management and the independent
auditor the Company's quarterly financial statements prior to the
filing of its Form 10-Q, including the results of the independent
auditor's review of the quarterly financial statements.
3. 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, and major
issues as to the adequacy of the Company's internal controls and
any special steps adopted in light of material control
deficiencies.
4. Review and discuss quarterly reports from the independent
auditors on:
(a) All critical accounting policies and practices to be used.
25
(b) All alternative treatments of financial information within
generally accepted accounting principles that have been discussed
with management, ramifications 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
or schedule of unadjusted differences.
5. Discuss with the independent auditor the matters required to
be discussed by Statement on Auditing Standards No. 61 relating
to the conduct of the audit, including any difficulties
encountered in the course of the audit work, any restrictions on
the scope of activities or access to requested information, and
any significant disagreements with management.
6. Review disclosures made to the Audit 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 internal controls or material weakness
therein and any fraud involving management or other employees who
have a significant role in the Company's internal controls.
Oversight of the Company's Relationship with the Independent Auditor
____________________________________________________________________
7. Ensuring receipt by the Audit Committee from the independent
auditor of a formal written statement delineating all
relationships between the auditor and the Company, consistent
with Independence Standards Board Standard 1, actively engage in
a dialogue with the independent auditor with respect to any
disclosed relationships or services that may impact the
objectivity and independence of the independent auditor, and
taking, or recommending that the Board take, appropriate action
to oversee the independence of the outside auditor.
8. Consider whether the provision by the independent auditor of
permitted non-audit services is compatible with maintaining the
auditor's independence.
9. Ensure the rotation of the lead (or coordinating) audit
partner having primary responsibility for the audit and the audit
partner responsible for reviewing the audit as required by law.
Consider whether, in order to assure continuing auditor
independence, it is appropriate to adopt a policy of rotating the
independent auditing firm on a regular basis.
10. Recommend to the Board 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.
26
Compliance Oversight Responsibilities
_____________________________________
11. Obtain from the independent auditor assurance that Section
10A(b) of the Exchange Act has not been implicated.
12. Establish procedures for the receipt, retention and
treatment of complaints received by the Company regarding
accounting, internal accounting controls or auditing matters, and
the confidential, anonymous submission by employees of concerns
regarding questionable accounting or auditing matters.
13. Conduct an appropriate review of all party transactions on
an ongoing basis and approve all related party transactions.
LIMITATION OF AUDIT COMMITTEE'S ROLE
While the Audit Committee has the responsibilities and powers set
forth in this Charter, it is not the duty of the Audit Committee
to plan or conduct audits or to determine that the Company's
financial statements and disclosures are complete and accurate
and are in accordance with generally accepted accounting
principles and applicable rules and regulations. These are the
responsibilities of management and the independent auditor.
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