UNITED
STATES
SECURITIES
AND EXCHANGE COMMISSION
Washington,
D.C. 20549
SCHEDULE
14A
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 o
Check the
appropriate box:
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Preliminary
Proxy Statement
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Confidential,
for Use of the Commission Only (as permitted by Rule
14a-6(e)(2))
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x
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Definitive
Proxy Statement
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Definitive
Additional Materials
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o
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Soliciting
Material under §240.14a-12
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KNIGHT TRANSPORTATION,
INC.
(Name of
Registrant as Specified In Its Charter)
N/A
(Name of
Person(s) Filing Proxy Statement, if other than the Registrant)
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of Filing Fee (Check the appropriate box):
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KNIGHT
TRANSPORTATION, INC.
5601 West
Buckeye Road
Phoenix,
Arizona 85043
NOTICE
OF ANNUAL MEETING OF SHAREHOLDERS
TO
BE HELD ON MAY 21, 2009
To our
Shareholders:
You are
cordially invited to attend the 2009 Annual Meeting of Shareholders (the "Annual
Meeting") of KNIGHT TRANSPORTATION, INC. to be held at 8:30 A.M., Phoenix time,
on May 21, 2009, at our
corporate headquarters located at 5601 W. Buckeye Road, Phoenix, Arizona
85043. The purposes of the Annual Meeting are to:
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1.
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Elect
three Class II Directors, each director to serve a term of three
years;
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2.
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Approve
and ratify the Knight Transportation, Inc. Employee Stock Purchase
Plan;
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3.
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Approve
and ratify an amendment and restatement of the Knight Transportation, Inc.
2003 Stock Option Plan (the "2003 Stock Option Plan"), which among other
things (i) renames the plan the "Knight Transportation, Inc. Amended
and Restated 2003 Stock Option and Equity Compensation Plan,"
(ii) provides additional terms and administrative procedures
applicable to restricted stock grants, and (iii) authorizes the issuance
of stock appreciation rights;
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4.
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Approve
and ratify a one-time stock option exchange program for employees, along
with an accompanying amendment to the 2003 Stock Option Plan to permit
such exchange;
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5.
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Ratify
the appointment of Deloitte & Touche LLP as our independent registered
public accounting firm for fiscal year 2009;
and
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6.
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Transact
such other business as may properly come before the Annual
Meeting.
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The Board
of Directors has fixed the close of business on March 31, 2009, as the record
date for determining those shareholders who are entitled to receive notice of
and vote at the Annual Meeting or any adjournment(s) thereof. Shares
of our Common Stock can be voted at the Annual Meeting only if the holder is
present at the Annual Meeting in person or by valid proxy. A copy of
our 2008 Annual Report to Shareholders, which includes audited consolidated
financial statements, is enclosed. YOUR VOTE IS
IMPORTANT. TO ENSURE YOUR REPRESENTATION AT THE ANNUAL MEETING, YOU
ARE REQUESTED TO PROMPTLY DATE, SIGN, AND RETURN THE ACCOMPANYING PROXY IN THE
ENCLOSED ENVELOPE. You may also vote on the Internet by completing
the electronic voting instruction form found at www.proxyvote.com or by
telephone using a touch-tone telephone and calling
1-800-690-6903. The prompt return of your proxy may save us
additional expenses of solicitation.
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By
Order of the Board of Directors,
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/s/ David A. Jackson
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David
A. Jackson, Secretary
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Phoenix,
Arizona
April
10, 2009
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Page
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GENERAL
INFORMATION
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Voting
Rights
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Quorum
Requirement
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Required
Vote; Cumulative Voting
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Right
To Attend the Annual Meeting; Revocation of Proxy
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Costs
of Solicitation
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Annual
Report
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How
To Read this Proxy Statement
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PROPOSAL
NO. 1 – ELECTION OF DIRECTORS
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Class
II Director Nominees
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CONTINUING
DIRECTORS
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Class
I Directors
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Class
III Directors
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CORPORATE
GOVERNANCE
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Applicable
Corporate Governance Requirements
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Corporate
Governance Guidelines
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Code
of Ethics
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The
Board of Directors and Its Committees
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Board
of Directors
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Committees
of the Board of Directors
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The
Audit Committee
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Report
of the Audit Committee
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The
Nominating and Corporate Governance Committee
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The
Compensation Committee
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Compensation
Committee Report
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Compensation
Committee Interlocks and Insider Participation
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The
Executive Committee
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Other
Board and Corporate Governance Matters
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Our
Executive Officers and Certain Significant Employees
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Section
16(a) Beneficial Ownership Reporting Compliance
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EXECUTIVE
COMPENSATION
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Compensation
Discussion and Analysis
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Overview
and Philosophy of Compensation
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Elements
of Compensation
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Base
Salary
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Incentive
Compensation
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Performance-Based
Annual Cash Bonuses
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Long-Term
Incentives
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Other
Compensation
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Employee
Benefits
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Compensation
Paid to Our Named Executive Officers
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Compensation
Paid to Our Chief Executive Officer
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Compensation
Paid to Our Other Named Executive Officers
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Compensation
Decisions with Respect to 2009
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Employment
Agreements
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Summary
Compensation Table
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All
Other Compensation Table
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Narrative
to Summary Compensation Table
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Grants
of Plan-Based Awards
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Narrative
to Grants of Plan-Based Awards
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Outstanding
Equity Awards at Fiscal Year-End
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Vesting
Schedule Table
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Director
Compensation
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Narrative
to Director Compensation
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SECURITY
OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
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CERTAIN
RELATIONSHIPS AND RELATED TRANSACTIONS
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PROPOSAL
NO. 2 – APPROVAL AND RATIFICATION OF KNIGHT TRANSPORTATION, INC. EMPLOYEE
STOCK PURCHASE PLAN
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Introduction
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Description
of Employee Stock Purchase Plan
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PROPOSAL
NO. 3 – APPROVAL AND RATIFICATION OF THE AMENDMENT AND RESTATEMENT OF THE
KNIGHT TRANSPORTATION, INC. 2003 STOCK OPTION PLAN (THE "2003 STOCK OPTION
PLAN"), WHICH AMONG OTHER THINGS (I) RENAMES THE 2003 STOCK OPTION
PLAN THE "KNIGHT TRANSPORTATION, INC. AMENDED AND RESTATED 2003 STOCK
OPTION AND EQUITY COMPENSATION PLAN," (II) PROVIDES ADDITIONAL TERMS
AND ADMINISTRATIVE PROCEDURES APPLICABLE TO RESTRICTED STOCK GRANTS, AND
(III) AUTHORIZES THE ISSUANCE OF STOCK APPRECIATION
RIGHTS
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Introduction
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Reasons
for Seeking Shareholder Approval of the Amendment
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Description
of the 2003 Stock Option Plan
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Plan
Benefits Under the 2003 Stock Option Plan
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2003
Stock Option Plan Information
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PROPOSAL
NO. 4 – APPROVAL AND RATIFICATION OF A ONE-TIME STOCK OPTION EXCHANGE
PROGRAM FOR EMPLOYEES, ALONG WITH AN ACCOMPANYING AMENDMENT TO THE 2003
STOCK OPTION PLAN TO PERMIT SUCH EXCHANGE
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Introduction
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Reasons
for the Exchange Program
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Alternatives
Considered
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Description
of Material Terms of the Option Exchange Program
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Effect
on Shareholders
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Amendment
to the 2003 Stock Option Plan
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Vote
Required
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Summary
of the 2003 Stock Option Plan
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PROPOSAL
NO. 5 – RATIFICATION OF APPOINTMENT OF INDEPENDENT REGISTERED PUBLIC
ACCOUNTING FIRM
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PRINCIPAL
ACCOUNTING FEES AND SERVICES
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SHAREHOLDER
PROPOSALS
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OTHER
MATTERS
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APPENDIX
A
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APPENDIX
B
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KNIGHT
TRANSPORTATION, INC.
5601 West
Buckeye Road
Phoenix,
Arizona 85043
PROXY
STATEMENT
FOR
ANNUAL MEETING OF SHAREHOLDERS
TO
BE HELD ON MAY 21, 2009
This
Proxy Statement is furnished in connection with the solicitation of proxies from
the shareholders of Knight Transportation, Inc. to be voted at the Annual
Meeting of Shareholders (the "Annual Meeting") to be held at 8:30 A.M. Phoenix time, on May
21, 2009, at our corporate headquarters located at 5601 W.
Buckeye Road, Phoenix, Arizona 85043. THE ENCLOSED PROXY IS SOLICITED BY
OUR BOARD OF DIRECTORS. If not otherwise specified, all
proxies received pursuant to this solicitation will be voted (i) FOR the
director nominees named herein; (ii) FOR the approval and ratification of
the Knight Transportation, Inc. Employee Stock Purchase Plan; (iii) FOR the
approval and ratification of the amendment and restatement of the Knight
Transportation, Inc. 2003 Stock Option Plan ("the 2003 Stock Option Plan"),
which among other things (a) renames the plan the "Knight Transportation,
Inc. Amended and Restated 2003 Stock Option and Equity Compensation Plan," (b)
provides additional terms and administrative procedures applicable to restricted
stock grants, and (c) authorizes the issuance of stock appreciation rights; (iv)
FOR the approval and ratification of a one-time stock option exchange program
for employees, along with an accompanying amendment to the 2003 Stock Option
Plan to permit such exchange; (v) FOR ratification of the appointment of
Deloitte & Touche LLP as our independent registered public accounting firm
for fiscal year 2009; and (vi) with respect to any other matters properly
brought before the Annual Meeting, in accordance with the recommendations of the
Board of Directors, or, if no recommendations are given, in accordance with the
judgment of the proxy holders.
This
Proxy Statement, the proxy card, and our Annual Report were first mailed on or
about April 10, 2009, to shareholders of record at the close of business
on March 31, 2009 (the "Record
Date").
The
terms "we," "our," "us," or the "Company" refer to Knight Transportation, Inc.
and its subsidiaries.
Only
holders of record of our Common Stock, par value $0.01 per share ("Common
Stock"), at the close of business on the Record Date are entitled to vote at the
Annual Meeting, either in person or by valid proxy. Except in the
election of directors, shareholders are entitled to one vote for each share held
of record on each matter of business to be considered at the Annual
Meeting. In the election of directors, Arizona law requires
cumulative voting. See "Required Vote;
Cumulative Voting." As of the Record Date, there were issued and
outstanding approximately 83,067,002 shares of our Common Stock,
entitled to cast an aggregate
83,067,002
votes on all matters subject to a vote at the Annual Meeting, other than
in the election of the Class II directors, where the shares are entitled to
an aggregate 249,201,006 votes. Votes
cast at the Annual Meeting will be tabulated by the Inspector of Elections and
the results of all items voted upon will be announced at the Annual
Meeting.
In order
to transact business at the Annual Meeting, a quorum must be
present. A quorum is present if a majority of the issued and
outstanding shares of Common Stock as of the Record Date are represented at the
Annual Meeting in person or by proxy. Shares that are entitled to
vote but that are not voted at the direction of the holder (called
"abstentions") and shares that are not voted by a broker or other record holder
due to the absence of instructions from the beneficial owner (called "broker
non-votes") will be counted for the purpose of determining whether a quorum is
present.
Election of
Directors. Directors are elected by plurality of the votes
cast, which means that the director nominees receiving the highest number of
votes for their election will be elected as directors. Abstentions
and broker non-votes are not counted as votes for the election of any director
nominee. Under the Constitution of the State of Arizona, as well as
Section 10-728 of the Arizona Revised Statutes, shareholders have cumulative
voting rights in electing directors of an Arizona
corporation. Cumulative voting means that each shareholder, when
electing directors, has the right to cast as many votes in the aggregate as he,
she, or it has voting shares multiplied by the number of directors to be
elected. For example, this year three Class II directors will be
elected. If a shareholder has 100 shares of Common Stock, the
shareholder is entitled to cast a total of 300 votes in the election of the
Class II directors and may cast 300 votes for
a single director nominee or distribute those votes among the three
Class II director nominees.
Other
Matters. Approval of the other matters submitted to
shareholders for consideration and action at the Annual Meeting requires that
the number of votes cast for the matter exceeds the number of votes cast against
the matter. Abstentions and broker non-votes will be disregarded in determining
whether a matter has been approved. In other words, abstentions and
broker non-votes will be counted neither as votes for, nor as votes against, a
matter.
Returning
a proxy card now will not interfere with your right to attend the Annual Meeting
or to vote your shares personally at the Annual Meeting, if you wish to do
so. Shareholders who execute and return proxies may revoke them at
any time before they are exercised by giving written notice to our Secretary at
our address, by executing a subsequent proxy and delivering it to our Secretary,
or by attending the Annual Meeting and voting in person.
We will
bear the cost of solicitation of proxies, which we expect to be nominal, and we
will include reimbursements for the charges and expenses of brokerage firms and
others for forwarding solicitation material to beneficial owners of our
outstanding Common Stock. Proxies will be solicited by mail and may
be solicited personally by our directors, officers, or employees, who will not
receive any additional compensation for any such services.
The
information included in this Proxy Statement should be reviewed in conjunction
with the Consolidated Financial Statements, Notes to Consolidated Financial
Statements, Reports of our Independent Registered Public Accounting Firm, and
other information included in our 2008 Annual Report to Shareholders that was
mailed on or about April 10, 2009,
together with this Notice of Annual Meeting and Proxy Statement,
to all shareholders of record as of the Record Date. A copy of our
Annual Report is available free of charge on the Shareholder Relations section
of our corporate website at http://www.knighttrans.com. The Annual
Report is not incorporated into this Proxy Statement, and is not considered
proxy-soliciting material.
This
Proxy Statement contains the proposals to be considered by shareholders at the
Annual Meeting, as well as important information concerning, among other things:
our management and our Board of Directors; executive compensation; transactions
between us and our officers, directors, and affiliates; the stock ownership of
management and other large shareholders; the services provided to us by and fees
of Deloitte & Touche LLP, our independent registered public accounting firm;
and instructions for shareholders who want to make proposals at the 2010 Annual
Meeting of Shareholders. Each shareholder should read this
information before completing and returning the enclosed proxy
card.
Our Board
of Directors presently consists of eight members. The directors are
divided into three classes, with each class serving a three-year
term. The shareholders elect approximately one-third of the Board of
Directors each year. Three Class II directors will be elected at the Annual
Meeting.
Upon the
recommendation of the Nominating and Corporate Governance Committee, the Board
of Directors has nominated Gary J. Knight, G.D. Madden, and
Kathryn L. Munro for election as Class II directors at the Annual
Meeting.
Each
Class II director nominee will be elected to serve until the 2012 Annual
Meeting of Shareholders or until his or her successor shall have been duly
elected and qualified or his or her resignation or removal, whichever occurs
first. Each of the Class II director nominees has consented to
serve a three-year term.
If any of
the nominees named above should become unavailable to serve as a director, the
Board of Directors may designate a substitute nominee. In that case,
the proxy holders will vote for the substitute nominee designated by the
Board.
Information
concerning the nominees standing for election as Class II directors
follows:
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Gary
J. Knight, 57
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Director
Since 1990
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Gary J. Knight has served as a Vice
Chairman of our Board of Directors since January
2004. Mr. Knight served as our President from 1993 to January
2004, and has been one of our officers and a member of our Board of Directors
since 1990. From 1975 until 1990, Mr. Knight was employed by Swift
Transportation Co., Inc. ("Swift"), a long-haul truckload carrier, where he was
an Executive Vice President.
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G.D.
Madden, 69
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Director
Since 1997
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G.D. Madden has served as a member
of our Board of Directors since January 1997. Since 1996,
Mr. Madden has been President of Madden Partners, a consulting firm he
founded, which specializes in transportation technology and strategic
issues. Prior to founding Madden Partners, he was President and Chief
Executive Officer of Innovative Computing Corporation, a subsidiary of
Westinghouse Electric Corporation. Mr. Madden founded Innovative
Computing Corporation ("ICC"), a privately held company, which grew to be the
largest supplier of fully integrated management information systems to the
trucking industry. Mr. Madden sold ICC to Westinghouse in 1990
and continued to serve as its President and Chief Executive Officer until
1996.
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Kathryn
L. Munro, 60
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Director
Since 2005
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Kathryn L. Munro has served
as a member of our Board of Directors since April 2005. She is a
principal of BridgeWest, LLC, a private equity investment company specializing
in wireless technology companies. Ms. Munro was the Chairperson
of BridgeWest from February 1999 until July 2003. From 1996 to 1998,
Ms. Munro served as Chief Executive Officer of Bank of America's Southwest
Banking Group and was President of Bank of America Arizona from 1994 to
1996. Ms. Munro has served on the boards of directors of Flow
International Corporation, a Seattle-based manufacturer of industrial tools,
since 1996; and Pinnacle West Capital Corporation, the holding company of
Arizona Public Service and Pinnacle West Energy, since 2000. Ms. Munro served on
the board of Capitol Bancorp Limited, a Michigan-based multi-bank holding
company, from 2002 to 2006.
THE BOARD OF
DIRECTORS UNANIMOUSLY RECOMMENDS A VOTE "FOR" EACH OF THE DIRECTOR
NOMINEES.
Information
regarding our current Class I directors who were elected in 2008 for terms
expiring at our 2011 Annual Meeting of Shareholders follows:
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Donald
A. Bliss, 76
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Director
Since 1995
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Donald A. Bliss has served as a member
of our Board of Directors since February 1995. Until his retirement
in December 1994, Mr. Bliss was the Chief Executive Officer and Vice President
of U.S. West Communications, a U.S. West company. Mr. Bliss also is a
director of the Western and Southern Life Insurance Company and the Biltmore
Bank of Arizona. Mr. Bliss served as Chairman of the Western Region
Advisory Board of AON Risk Services of Arizona, Inc. from October 2001 to
February 2005.
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Richard
J. Lehmann, 65
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Director
Since 2006
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Richard J. Lehmann has served
as a member of our Board of Directors since February 2006. Mr.
Lehmann serves as the founding principal of the Biltmore Bank of Arizona and is
the Chairman of Bank Capital Corporation, the holding company for the Biltmore
Bank of Arizona. Until December 31, 1999, Mr. Lehmann served as Vice
Chairman of Bank One, when it acquired FCNBC, creating the fifth largest bank in
the United States, with responsibility for all consumer banking and credit card
operations. Mr. Lehmann's previous positions include Chairman and
Chief Executive Officer of Valley National Bank. Prior to that, Mr.
Lehmann spent 20 years with Citigroup in various positions, including 10 years
in the International Division, with more than three years as a Senior Corporate
Officer in Europe, the Middle East, and Africa. Mr. Lehmann is a
member of the board of directors of the TGen Foundation. He
also serves on the Mayo Advisory Board and serves on the Board of Trustees at
Thunderbird, The Garvin School of International Management.
Information
regarding our current Class III directors who were elected in 2007 for terms
expiring at our 2010 Annual Meeting of Shareholders follows:
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Kevin
P. Knight, 52
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Director
Since 1990
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Kevin P. Knight has served as
the Chairman of our Board of Directors since May 1999 and has served as our
Chief Executive Officer since 1993. He has been one of our officers
and directors since 1990. From 1975 to 1984 and again from 1986 to
1990, Mr. Knight was employed by Swift, where he served as Executive Vice
President and President of Cooper Motor Lines, Inc., a Swift
subsidiary. From February 2004 through February 2008, Mr. Knight
served on the Board of Directors of Universal Technical Institute, Inc., a
provider of post-secondary education. Mr. Knight currently serves on the Board
of Directors and Executive Committee of the American Trucking
Associations.
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Randy
Knight, 60
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Director
Since 1989
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Randy Knight rejoined our company as
an employee in January 2009 and was appointed as a Vice Chairman of the Board
effective February 27, 2009. Mr. Knight was a founder of our company
and served as an officer from 1989 until 1999 and as Chairman of the Board from
1993 until 1999. From 1999 until December 2008, Mr. Knight worked
outside of our company on a variety of personal investments, including Total
Warehousing, Inc., a commercial warehousing and local transportation business
that he sold in 2004. Mr. Knight has been a member of our Board of
Directors since 1989. He also serves as a director of Biltmore Bank
of Arizona. Mr. Knight was employed by Swift or related
companies from 1969 to 1985, where he was a Vice President.
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Michael
Garnreiter, 57
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Director
Since 2003
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Michael Garnreiter has served
as a member of our Board of Directors since September 2003. Mr.
Garnreiter currently is the managing member of Rising Sun Restaurant Group, LLC,
a restaurant operating company in the casual dining industry sector. Mr.
Garnreiter also is a director and member of the audit committees of Taser
International, Inc., a manufacturer of non-lethal protection devices, and Amtech
Systems, Inc., a supplier of horizontal diffusion furnace
systems. Mr. Garnreiter is the sole director of Syntax-Brillian
Corporation, a company in bankruptcy that designs, develops, and distributes
high-definition televisions. Mr. Garnreiter was formerly the
Executive Vice President, Treasurer, and Chief Financial Officer of Main Street
Restaurant Group, Inc., a publicly held restaurant operating
company. Prior to joining Main Street, Mr. Garnreiter served as a
general partner of Arthur Andersen LLP. Mr. Garnreiter began his
career with Arthur Andersen in 1974 after graduating with a Bachelor of Science
degree in accounting from California State University at Long
Beach. In 1986, he became the managing partner of Arthur Andersen's
Tucson, Arizona office. Mr. Garnreiter is a Certified Public
Accountant in California and Arizona.
Kevin
Knight, our Chairman and Chief Executive Officer, and Keith Knight, one of our
executive officers, are brothers and are cousins of Randy Knight and Gary
Knight, who also are brothers.
Our
Common Stock has been listed on the New York Stock Exchange (the "NYSE") since
December 30, 2004, and we are subject to the NYSE listing standards,
including those relating to corporate governance. Prior to listing on
the NYSE, our Common Stock was listed on what today is known as the Nasdaq
Global Select Market ("NASDAQ"), and we were subject to the NASDAQ listing
standards, including those related to corporate governance.
Our Board
of Directors has adopted corporate governance guidelines to further its goal of
providing effective governance of our business and affairs for the long-term
benefit of our shareholders. A copy of the corporate governance
guidelines is available free of charge on the Shareholder Relations section of
our website at http://www.knighttrans.com and is available in print to any
shareholder who requests it. The Nominating and Corporate Governance Committee
is responsible for periodically reviewing the corporate governance guidelines
and recommending changes as appropriate to ensure the effective functioning of
our Board of Directors and high quality corporate governance.
The Board
of Directors has adopted a Code of Ethical Conduct that applies to all of our
directors, officers, and employees. In addition, we maintain a Policy
Governing Responsibilities of Financial Managers and Senior Officers (the
"Financial Responsibilities Policy") that applies to our senior executive
officers (Executive Vice President or above), Chief Financial Officer, Chief
Accounting Officer, Controller, and any other employee who is responsible for
the management of our funds or for the operation and maintenance of our
financial accounting and reporting system. The Code of Ethical
Conduct and Financial Responsibilities Policy includes provisions applicable to
our principal executive officer, principal financial officer, principal
accounting officer or controller, or persons performing similar functions, which
constitute a "code of ethics" within the meaning of Item 406(b) of
Regulation S-K. Copies of the Code of Ethical Conduct and Financial
Responsibilities Policy are available free of charge on the Shareholder
Relations section of our website at http://www.knighttrans.com and are available in
print to any shareholder who requests them.
Meetings of the Board of
Directors. During the year ended December 31, 2008,
our Board of Directors met on four occasions. Each of the directors
attended 75% or more of the meetings of the Board of Directors and the meetings
held by all of the committees of the Board on which he or she
served. We encourage our directors to attend our Annual Meetings of
Shareholders. All of our directors attended the 2008 Annual Meeting
of Shareholders.
Independent
Directors. In accordance with NYSE Rule 303A.02(a), the Board
of Directors affirmatively determines the independence of each director after
reviewing the findings and recommendations of the Nominating and Corporate
Governance Committee. Upon the recommendation of the Nominating and
Corporate Governance Committee, the Board has determined that Donald A. Bliss,
G.D. Madden, Michael Garnreiter, Kathryn L. Munro, and Richard J. Lehmann
are independent (collectively, the "Independent Directors"). Except
in their capacities as directors or as holders of an immaterial amount of
securities of other entities, neither Mr. Bliss, Mr. Madden,
Mr. Garnreiter, nor Ms. Munro, either directly or in his or her capacity as
a partner, shareholder, officer, or similar position of another organization,
has or in the past three years had any business or financial relationship with
us or any of our subsidiaries. None of the Independent Directors or
any of their immediate family members has or had any of the disqualifying
relationships with us or our subsidiaries specified in NYSE Rule
303A.02(b).
Executive
Sessions. In 2008, pursuant to NYSE Rule 303A.03, our
Independent Directors held two meetings, referred to as "executive sessions," at
which only the Independent Directors were present. The Chairman of the
Nominating and Corporate Governance Committee acts as the presiding director for
all executive sessions. Mr. Bliss currently serves as the Chairman of
the Nominating and Corporate Governance Committee and will continue in that
capacity following the Annual Meeting. Our 2008 non-management directors, who
were comprised of the Independent Directors and Mr. Randy Knight did not
meet in 2008. Contemporaneously with Mr. Randy Knight's return to our
company as a Vice Chairman of the Board in February 2009, he ceased being a
non-management director. Our Independent Directors will continue to
hold at least one meeting annually at which only independent directors are
present.
Communication with
Directors. Our Board of Directors provides a process for
shareholders to send written communications to the entire Board or to individual
directors. To send a communication to the entire Board of Directors,
your communication should be addressed as follows: The Board of Directors,
Knight Transportation, Inc., c/o David A. Jackson – Secretary, 5601 West Buckeye
Road, Phoenix, Arizona 85043. Written communications addressed in
this manner will be copied and distributed to each director at or prior to the
next Board meeting. If you wish to communicate with an individual
director, your communication should be addressed as follows: Name – Director,
Knight Transportation, Inc., c/o David A. Jackson – Secretary, 5601 West Buckeye
Road, Phoenix, Arizona 85043. Written communications received in this
manner will not be opened, but rather delivered unopened to the director to whom
they are addressed at or prior to the next Board meeting, following clearance
through normal security procedures.
In
addition, we provide a method for concerned parties to communicate directly with
our non-management directors. Any person wishing to contact our
non-management directors may contact these directors through our presiding
non-management director, the Chairman of the Nominating and Corporate Governance
Committee, whose contact information may be obtained by writing our Secretary,
David A. Jackson, at the address set forth above or by calling our Investor
Relations Department at telephone number (602)
606-6224.
The Board
of Directors has standing Audit, Nominating and Corporate Governance,
Compensation, and Executive Committees. The Board does not maintain
any other standing committees. The following table sets forth the
membership of each of the standing committees of the Board of Directors as of
February 28, 2009.
|
Name
|
Audit
Committee
|
Nominating
and
Corporate
Governance
Committee
|
Compensation
Committee
|
Executive
Committee
|
|
Donald
A. Bliss
|
X
|
X
|
X
|
|
|
G.D.
Madden
|
X
|
X
|
||
|
Michael
Garnreiter
|
X
|
|||
|
Kevin
P. Knight
|
X
|
|||
|
Gary
J. Knight
|
X
|
|||
|
Kathryn
L. Munro
|
X
|
X
|
X
|
|
|
Richard
J. Lehmann
|
X
|
X
|
Purpose, Functions, Composition, and
Meetings. The primary purpose of the Audit Committee is to
assist the Board of Directors in its oversight of:
|
•
|
the
integrity of our financial statements;
|
|
•
|
the
qualifications, independence, and performance of our independent
registered public accounting firm; and
|
|
•
|
our
compliance with legal and regulatory requirements related to financial
reporting.
|
As more
fully outlined in the Audit Committee's charter, the primary functions of the
Audit Committee include:
|
•
|
making
determinations regarding the selection and retention of our independent
registered public accounting firm and reviewing and pre-approving such
firm's fees and the proposed scope of its services; and
|
|
•
|
reviewing,
and meeting with our management, internal auditors, and independent
registered public accounting firm, as applicable, to discuss, our
financial statements and financial and related disclosures, our accounting
policies and principles, and our internal financial controls and reporting
systems.
|
Messrs.
Bliss, Madden, and Garnreiter currently serve on the Audit Committee, and Mr.
Garnreiter serves as the Chairman. Each member of the Audit Committee
satisfies the independence and other audit committee membership criteria set
forth in NYSE Rule 303A.07. Specifically, each member of the Audit
Committee:
|
•
|
is
independent under NYSE Rule 303A.02;
|
|
•
|
meets
the criteria for independence set forth in Rule 10A-3(b)(1) under the
Securities Exchange Act of 1934, as amended (the "Exchange Act");
and
|
|
•
|
is
financially literate, as our Board of Directors has interpreted such
qualification in its business
judgment.
|
In addition, the Board has determined
that Mr. Garnreiter's service on the audit committee of more than three
public companies does not impair his ability to effectively serve on our Audit
Committee.
The Audit
Committee met five times during 2008. Each member of the Audit
Committee attended all of the Audit Committee meetings during 2008, except Mr.
Madden who was unable to attend one meeting.
Audit Committee Financial
Expert. The Board of Directors has determined that at least
one "audit committee financial expert," as defined under Item 407(d)(5) of
Regulation S-K, currently serves on the Audit Committee. The Board of
Directors has identified Mr. Garnreiter as an audit committee financial expert.
Mr. Garnreiter is independent, as independence for audit committee members is
defined under applicable NYSE rules.
Audit Committee
Charter. A copy of the Audit Committee's current charter is
available free of charge on the Shareholder Relations section of our website at
http://www.knighttrans.com and is available in print to any shareholder who
requests it.
Report of the Audit
Committee. In performing its duties, the Audit Committee, as
required by applicable rules and regulations promulgated by the SEC, issues a
report recommending to the Board of Directors that our audited financial
statements be included in our Annual Report on Form 10-K, and relating to
certain other matters, including the independence of our independent registered
public accounting firm. The Report of the Audit Committee
follows.
The Report of the Audit Committee
shall not be deemed to be incorporated by reference into any filing made by us
under the Securities Act of 1933 or the Exchange Act, notwithstanding any
general statement contained in any such filings incorporating this Proxy
Statement by reference, except to the extent we incorporate such report by
specific reference.
The Audit
Committee oversees the accounting and financial reporting processes of the
Company and the audit of the financial statements of the Company. Management of
the Company has primary responsibility for the Company's financial statements
and the overall reporting process, including maintenance of the Company's
systems of internal control. The Company retains an independent registered
public accounting firm that is responsible for conducting an independent audit
of the Company's financial statements in accordance with the standards of the
Public Company Accounting Oversight Board (United States), and issuing a report
thereon.
In
undertaking its responsibilities, the Audit Committee has discussed the
Company's financial statements with management and the Company's independent
registered public accounting firm and, in issuing this report, has relied upon
the responses and information provided to the Audit Committee by management and
the independent registered public accounting firm.
For the
fiscal year ended December 31, 2008, the Audit Committee has reviewed and
discussed the audited financial statements with management and Deloitte &
Touche LLP, the Company's independent registered public accounting
firm. Specifically, the Audit Committee has discussed with the
independent registered public accounting firm the matters required to be
discussed by Statement on Auditing Standards No. 114, as amended, "The Auditor's Communication with
those Charged with Governance" and Rule 2-07 of Regulation S-X "Communication With Audit
Committees,"
which include, among other things:
|
•
|
methods
used to account for significant unusual transactions;
|
|
•
|
the
effect of significant accounting policies in controversial or emerging
areas for which there is a lack of authoritative guidance or
consensus;
|
|
•
|
the
process used by management in formulating particularly sensitive
accounting estimates and the basis for the accounting firm's conclusions
regarding the reasonableness of those estimates; and
|
|
•
|
disagreements
with management over the application of accounting principles, the basis
for management's accounting estimates, and the disclosures in the
financial statements.
|
The Audit
Committee has received the written disclosures from the independent registered
public accounting firm required by Public Company Accounting Oversight Board
(United States) (PCAOB) Ethics and Independence Rule 3526, "Communication with Audit Committees
Concerning Independence" and discussed with the independent registered
public accounting firm its independence within the meaning of the rules and
standards of the PCAOB and the securities laws and regulations administered by
the SEC.
Based on
the foregoing reviews and discussions, the Audit Committee recommended to the
Board of Directors that the audited financial statements be included in the
Annual Report on Form 10-K for the year ended December 31, 2008, for filing
with the Securities and Exchange Commission.
Michael Garnreiter,
Chairman
G.D. Madden,
Member
Donald A. Bliss,
Member
Purpose, Functions, Composition,
and Meetings. The purposes of the Nominating and Corporate
Governance Committee are to assist the Board of Directors in improving our
corporate governance, to train members of the Board, to improve the Board's
governance functions, and to assist us in obtaining the highest quality
independent directors. As more fully detailed in the Nominating and
Governance Committee's charter, the primary functions of the committee
include:
|
•
|
evaluating
the composition of the Board and selecting and recommending nominees for
election or re-election to the Board or for appointment to fill Board
vacancies;
|
|
•
|
developing
and implementing regular and emergency succession plans for our senior
management positions; and
|
|
•
|
reviewing
and developing policies or making recommendations concerning other aspects
of our corporate governance, such as the Board's committee structure, our
corporate governance guidelines, director training and evaluation
programs, and potential conflicts of
interest.
|
Mr.
Lehmann, Ms. Munro, and Mr. Bliss currently serve on the Nominating and
Corporate Governance Committee, and Mr. Bliss serves as Chairman.
All
current members of the Nominating and Corporate Governance Committee are
independent, as independence for nominating committee members is defined under
applicable NYSE rules. In 2008, the Nominating and Corporate Governance
Committee held one meeting.
The
Nominating and Corporate Governance Committee met in March 2009 and approved the
nomination of Gary J. Knight, G.D. Madden, and Kathryn Munro as
Class II directors and recommended their election. Each nominee
is presently a director and has consented to stand for re-election.
Nominating and Corporate Governance
Committee Charter. A copy of the Nominating and Corporate
Governance Committee's current charter is available free of charge on the
Shareholder Relations section of our website at http://www.knighttrans.com and
is available in print to any shareholder who requests it.
Process for Identifying and
Evaluating Director Nominees. Director nominees are chosen by
the Nominating and Corporate Governance Committee. The Nominating and
Corporate Governance Committee reviews the qualifications of various persons to
determine whether they should be considered as candidates for membership on the
Board of Directors. The Nominating and Corporate Governance Committee also
accepts recommendations of director candidates from our other outside directors
and our executive officers, advisors, and shareholders. We do not pay
a fee to any third party to identify or evaluate or assist in identifying or
evaluating potential nominees.
The
Nominating and Corporate Governance Committee reviews all candidate
recommendations, including those properly submitted by shareholders, in
accordance with the mandate contained in its charter. The Nominating
and Corporate Governance Committee assesses a candidate's judgment, integrity,
independence, management or business skills and experience (particularly with
public companies and companies in our industry or other industries related to
our business), prominence and reputation in their profession, knowledge of
corporate governance issues and Board functions, commitment to attend and
actively participate in meetings and related Board activities, other commitments
and responsibilities, and such other factors as the Nominating and Corporate
Governance Committee determines are appropriate in light of our needs and the
needs of the Board. With regard to specific qualities and skills, the
Nominating and Corporate Governance Committee believes it is necessary that:
(i) at least a majority of the members of the Board of Directors qualify as
"independent" under NYSE Rule 303A.02; (ii) at least three members of the
Board of Directors satisfy the audit committee membership criteria specified in
NYSE Rule 303A.07; and (iii) at least one member of the Board of Directors
eligible to serve on the Audit Committee has sufficient knowledge, experience,
and training concerning accounting and financial matters so as to qualify as an
"audit committee financial expert" within the meaning of Item 407(d)(5) of
Regulation S-K.
In
addition to the qualifications and considerations described above, our corporate
governance guidelines contain the following director eligibility criteria that
impact the director nomination process:
|
•
|
a
mandatory retirement age of 82 for all directors, subject to waiver by a
majority of the Board;
|
|
•
|
director
term limits of 20 years, following March 2, 2005, for all directors,
subject to waiver by a majority of the Board;
|
|
•
|
no
director may serve on more than five public company boards of directors,
including our Board; and
|
|
•
|
our
Chief Executive Officer may not serve on more than two other public
company boards of directors in addition to our
Board.
|
Consideration of Director Candidates
Recommended by Shareholders. The Nominating and Corporate
Governance Committee will consider director candidates recommended by
shareholders, provided that the following procedural requirements are
satisfied. Candidate recommendations should be mailed via certified
mail, return receipt requested, and addressed to the Nominating and Corporate
Governance Committee, Knight Transportation, Inc., c/o David A. Jackson –
Secretary, 5601 West Buckeye Road, Phoenix, Arizona 85043. To be
considered, a shareholder recommendation must: (i) be received at least 120 days
prior to the first anniversary of the date of the proxy statement for the prior
year's Annual Meeting (by December 11, 2009 for director candidates to
be considered for nomination for election at the 2010 Annual Meeting of
Shareholders); (ii) contain sufficient background information, such as a resumé
and references, to enable the Nominating and Corporate Governance Committee to
make a proper judgment regarding the qualifications of the proposed nominee;
(iii) be accompanied by a signed consent of the proposed nominee to serve as a
director if elected and a representation that such proposed nominee
qualifies as "independent" under NYSE Rule 303A.02 or, if the proposed nominee
does not qualify, a description of the reason(s) he or she is not "independent";
(iv) state the name and address of the person submitting the recommendation
and the number of shares of our Common Stock owned of record or beneficially by
such person; and (v) if submitted by a beneficial shareholder, be accompanied by
evidence that the person making the recommendation beneficially owns shares of
our Common Stock.
Purpose, Functions, Composition, and
Meetings. The Compensation Committee reviews, analyzes,
recommends, and approves all aspects of executive compensation. As
more fully outlined in the Compensation Committee's charter, the primary
responsibilities of the Compensation Committee include:
|
•
|
reviewing
and approving corporate goals and objectives relating to the compensation
of the Chief Executive Officer, evaluating the Chief Executive Officer's
performance in light of those objectives, and determining and approving
the Chief Executive Officer's compensation based upon this
evaluation;
|
|
•
|
reviewing
and making recommendations to the Board regarding the compensation of our
other executive officers;
|
|
•
|
reviewing
and approving all forms of incentive compensation, including stock options
and other stock-based awards to our executive officers;
and
|
|
•
|
administering
our equity compensation plan, as in effect from
time-to-time.
|
During
2008, and as of the date hereof, Mr. Lehmann, Mr. Madden, and Ms. Munro, served
on the Compensation Committee, and Ms. Munro served as
Chairperson. The Compensation Committee met three times in
2008. See
"Executive Compensation – Compensation
Discussion and Analysis" for a discussion of, including the role the
Compensation Committee and our executive officers have in implementing, our
processes and procedures for recommending and setting executive and director
compensation.
Compensation Committee
Charter. A copy of the Compensation Committee's current
charter is available free of charge on the Shareholder Relations section of our
website at http://www.knighttrans.com and is available in print to any
shareholder who requests it.
Report of the Compensation
Committee. In performing its duties, the Compensation
Committee, as required by applicable rules and regulations promulgated by the
SEC, issues a report recommending to the Board of Directors that our
Compensation Discussion and Analysis be included in this Proxy Statement. The
Report of the Compensation
Committee follows.
The Report of the Compensation
Committee shall not be deemed to be incorporated by reference into any filing
made by us under the Securities Act of 1933 or the Exchange Act, notwithstanding
any general statement contained in any such filings incorporating this Proxy
Statement by reference, except to the extent we incorporate such report by
specific reference.
We have
reviewed and discussed the Compensation Discussion and Analysis contained in
this Proxy Statement with management. Based on that review and
discussion, we have recommended to the Board of Directors that the Compensation
Discussion and Analysis be included in this Proxy Statement.
Kathryn Munro,
Chairperson
G.D. Madden,
Member
Richard J. Lehmann,
Member
None of
the current members of the Compensation Committee have been, or are, one of our
officers or employees. During 2008, none of our executive officers
served as a member of the board of directors or compensation committee (or other
committee performing equivalent functions) of any entity that had one or more
executive officers serving as a member of our Board of
Directors. See "Certain Relationships
and Related Transactions" for a description of certain transactions between us
and our directors and executive officers, or their affiliates, and "Executive
Compensation – Director Compensation" for a description of the compensation of
the members of the Compensation Committee.
The
Executive Committee is authorized to act on behalf of the Board of Directors
when the Board of Directors is not in session. During 2008, and as of
the date hereof, the Executive Committee was comprised of Messrs. Kevin
Knight, Gary Knight, Bliss, and Ms. Munro. Ms. Munro became a member
of the Executive Committee in February 2008. The Executive Committee
did not meet during 2008.
Director Evaluation
Program. The Nominating and Corporate Governance Committee is
responsible for developing and implementing a director evaluation program to
measure the individual and collective performance of directors and the
fulfillment of their responsibilities to our shareholders, including an
assessment of the Board's compliance with applicable corporate governance
requirements and identification of areas in which the Board might improve its
performance. The Nominating and Corporate Governance Committee also
is responsible for developing and recommending to the Board of Directors for
approval an annual self-evaluation process for the Board designed to assure that
directors contribute to our corporate governance and to our
performance.
Director Orientation and
Training. The Nominating and Corporate Governance Committee is
responsible for developing and implementing an orientation program for new
directors. Under this program, we provide new, non-management
directors a variety of materials to assist them in familiarizing themselves with
our business, management structure, and operations and key legal, financial,
risk management, and operational issues, as well as the policies, procedures,
and responsibilities of the Board and its committees. New,
non-management directors also meet with members of our senior management and
other non-management directors as part of their orientation. We
periodically provide materials to directors on various subjects to assist them
in understanding our business and operations and in effectively discharging
their duties.
Authority to Engage
Advisors. Each of the Audit Committee, the Nominating and
Corporate Governance Committee, and the Compensation Committee is conferred by
its charter with explicit authority to engage its own independent advisors,
including legal counsel.
Management Succession
Planning. The Board of Directors has adopted a management
succession plan that identifies emergency and potential long-term successors to
our Chief Executive Officer, President, Chief Financial Officer, and certain
other key members of senior management. The Nominating and Corporate Governance
Committee, following consultation with our Chief Executive Officer, is
responsible for giving an annual report to the Board of Directors with regard to
management succession planning. After reviewing this report and
consulting with the members of the Nominating and Corporate Governance Committee
and the Chief Executive Officer, the Board of Directors makes any changes or
updates to the management succession plan that it determines are
appropriate.
The
following table sets forth, as of March 31, 2009, certain information regarding
our executive officers (Kevin P. Knight, Gary J. Knight, Randy Knight, Keith T.
Knight, David A. Jackson, and Casey Comen) and our significant employees
(Michael K. Liu, Erick Kutter, Greg Ritter, Larry V. Knight, Clark Jenkins, and
Bill Ramsey).
|
Name
|
Age
|
Position
|
||
|
Kevin
P. Knight
|
52
|
Chairman
of the Board and Chief Executive Officer
|
||
|
Gary
J. Knight
|
57
|
Vice
Chairman of the Board
|
||
|
Randy
Knight
|
60
|
Vice
Chairman of the Board
|
||
|
Keith
T. Knight
|
54
|
Chief
Operating Officer
|
||
|
David
A. Jackson
|
33
|
Chief
Financial Officer, Secretary, and Treasurer
|
||
|
Casey
Comen
|
55
|
Executive
Vice President of Sales
|
||
|
Michael
K. Liu
|
36
|
President
of Knight Transportation – Dry Van
|
||
|
Erick
Kutter
|
41
|
President
of Knight Refrigerated, LLC
|
||
|
Greg
Ritter
|
50
|
President
of Knight Brokerage, LLC
|
||
|
Larry
V. Knight
|
47
|
President
of Knight Intermodal, LLC
|
||
|
Clark
Jenkins
|
50
|
Executive
Vice President
|
||
|
Bill
Ramsey
|
49
|
Senior
Vice President of Business
Development
|
Keith T. Knight has served as our Chief
Operating Officer since May 2006. Prior to his appointment as Chief
Operating Officer, Mr. Knight served as our Executive Vice President from 1993
until May 2006, and has been one of our officers since 1990. He
served as a member of our Board of Directors from 1990 to 2004. From
1977 until 1990, Mr. Knight was employed by Swift, where he was a Vice
President and Manager of Swift's Los Angeles terminal.
David A. Jackson joined us in
April 2000. He has served as our Chief Financial Officer since
January 2004, as our Treasurer since May 2006, and as our Secretary since
November 2007. Mr. Jackson served as our Corporate Purchasing Manager
from April 2000 until July 2002, and as the Owner Operator Program Director from
July 2002 until January 2004.
Casey Comen has served as our
Executive Vice President of Sales since March 2004. Prior to joining
us, Mr. Comen was employed by Swift, where he most recently served as the Vice
President of Sales and Marketing from 1997 through January 2004.
Michael K. Liu was appointed
President of the Knight Transportation – Dry Van in April 2007. Prior
to his appointment as President of Knight Transportation – Dry Van, Mr. Liu
served as a division manager for our Southern California Division since December
2003. Mr. Liu also served as a training manager for our driver
development department from January 2000 to December 2003.
Erick Kutter joined us in
February 1993. He has served as the President of Knight Refrigerated,
LLC, our asset-based refrigerated business, since July 2004. Prior to
his appointment as President of Knight Refrigerated, Mr. Kutter was responsible
for opening our service centers in Katy, Texas, Kansas City, Kansas, and
Atlanta, Georgia. Mr. Kutter also served as the division manager of
our service center in Indianapolis, Indiana from July 1998 to April
2001.
Greg Ritter joined us in
2005. He has served as the President of Knight Brokerage, LLC, our
non-asset based brokerage business, since the opening of our brokerage business
in 2005. He began his career in 1979 with C.H. Robinson Worldwide, where he was
the branch manager for the Phoenix office for 18 years.
Larry V. Knight joined us in
1990. He has served as the
President of Knight Intermodal since February 2009. Mr. Knight also
serves as General Manager of the Southwestern United States - a position which
he has held since 2004. Mr. Knight served as an Area Manager from
1990 to 1994 and as Vice President of Driver Development from 1994 to
1998. Mr. Knight became Vice President of Operations in
1998. Mr. Knight’s extensive experience in the transportation
industry began in 1986 when he was employed by Swift as a Driver
Manager.
Clark Jenkins rejoined our
company in 2008 as an Executive Vice President. Mr. Jenkins served as
our Secretary and Chief Financial Officer and was a member of our Board of
Directors from 1991 to 2000. From 2004 to 2008 Mr. Jenkins was the
principal of CJC Transportation Specialists, a transportation consulting firm,
and from 2000 to 2004 was a partner with HCH Transportation Advisors, a
transportation consulting firm. From 1986 to 1990 Mr. Jenkins was
employed by Swift as a Vice President of Finance.
William "Bill" Ramsey joined
us in April 2000 as part of the acquisition of Fastway Systems and has served as
Senior Vice President of Business Development since October
2007. Prior to this assignment, he served as General Manger of the
South East from April 2007 thru October 2007. Mr. Ramsey also served
as our South West Regional Vice President from November 2006 to April 2007, and
as Divisional Sales Manger and Division Manger in our Gulfport Division from
April 2000 thru November 2006.
See "Proposal
No. 1 – Election of Directors" for information concerning the
business experience of Gary J. Knight and "Continuing Directors" for
information concerning the business experience of Kevin P. Knight and Randy
Knight.
Section
16(a) of the Exchange Act requires our directors and executive officers, and
persons who own more than 10% of a registered class of our equity securities, to
file with the SEC reports of ownership and changes in ownership of our Common
Stock and other equity securities. Our officers, directors, and
greater than 10% beneficial owners are required by SEC regulations to furnish us
with copies of all Section 16(a) forms they file. Based solely upon a
review of the copies of such reports furnished to us, or written representations
that no other reports were required, we believe that during the 2008 fiscal
year, all Section 16(a) filing requirements applicable to our directors,
executive officers, and greater than 10% beneficial owners were complied with,
except that G.D. Madden inadvertently failed to timely report on Form 4 the
purchase of shares, which occurred in October 2008. This transaction
was reported in a subsequent filing. Copies of Section 16(a) forms
that our directors and executive officers file with the SEC are accessible
through the Shareholder Relations section of our website at
http://www.knighttrans.com.
The
Compensation Committee oversees all of our executive officer compensation
arrangements. The Compensation Committee has the responsibility to
(i) review and approve corporate goals and objectives relevant to the
compensation of our Chief Executive Officer, (ii) evaluate the performance
of our CEO in light of those goals and objectives, and (iii) determine and
approve the compensation level of our CEO based upon that
evaluation. The Compensation Committee also has the responsibility to
review annually the compensation of our other executive officers and to
determine whether such compensation is reasonable under existing facts and
circumstances. In making such determinations, the Compensation
Committee seeks to ensure that the compensation of our executive officers aligns
the executives' interests with the interests of our shareholders. The
Compensation Committee also reviews and approves all forms of incentive
compensation, including stock option grants, stock grants, and other forms of
incentive compensation granted to our executive officers. The
Compensation Committee takes into account the recommendations of our CEO in
reviewing and approving the overall compensation of the other executive
officers.
We
believe that the quality, skills, and dedication of our executive officers are
critical factors affecting our long-term value and success. Our
primary executive compensation goals include attracting, motivating, and
retaining qualified executive officers who create long-term value for our
shareholders. We seek to accomplish these goals by rewarding past
performance, incentivizing future performance, and aligning our executive
officers' long-term interests with those of our shareholders. Our
compensation program is designed to reward our executive officers for individual
performance, years of experience, contributions to our financial success, and
creation of shareholder value. Our compensation philosophy is to
provide overall compensation levels that (i) attract and retain talented
executives and motivate those executives to achieve superior results, (ii) align
executives' interests with our corporate strategies, our business objectives,
and the long-term interests of our shareholders, and (iii) enhance executives'
incentives to increase our stock price and maximize shareholder
value. In addition, we strive to ensure that our compensation,
particularly salary compensation, is consistent with our constant focus on
controlling costs. Our primary strategy for building senior
management depth has been to develop personnel from within our company to ensure
that our executive team as a whole remains dedicated to our customs, practices,
and culture, recognizing, however, that we may gain talent and new perspectives
from external sources. Accordingly, in many instances we build our
compensation elements around long-term retention and development, together with
annual rewards based on specific focus areas.
Our
compensation program for senior executive officers has two major elements, fixed
and incentive compensation. The total compensation for senior
executive officers, including the amed Executive Officers (as defined below),
consists of one or more of the following components: (i) base salary, (ii)
incentive compensation, which may include a performance-based annual cash bonus,
a discretionary annual cash bonus, and long-term equity incentives in the form
of stock options and other stock-based awards or grants, (iii) other
compensation, including specified perquisites, and (iv) employee benefits,
which are generally available to all of our employees.
The Compensation Committee has the responsibility to make and approve changes in the total compensation of our executive officers, including the mix of compensation elements. In making decisions regarding an executive's total compensation, the Compensation Committee considers whether the total compensation is (i) fair and reasonable to us, (ii) internally appropriate based upon our culture, goals, initiatives, and the compensation of our other employees, and (iii) within a reasonable range of the compensation afforded by other opportunities, overall economic conditions, and our recent historical performance. The Compensation Committee also bases its decisions regarding compensation upon its assessment of factors such as the executive's leadership, integrity, individual performance, prospect for future performance, years of experience, skill set, level of commitment and responsibility required in the position, contributions to our financial results, the creation of shareholder value, and current and past compensation. In determining the mix of compensation elements, the Compensation Committee considers the effect of each element in relation to total compensation. Consistent with our need to control costs and our desire to recognize our executives' performance where such recognition is warranted, the Compensation Committee historically has attempted to keep base salaries relatively low and weight overall compensation toward incentive cash and equity-based compensation. The Compensation Committee specifically considers whether each particular element provides an appropriate incentive and reward for performance that sustains and enhances long-term shareholder value. The Compensation Committee also considers the tax consequences associated with each element of compensation, including whether the deductibility of compensation is expected to be limited under Section 162(m) of the Internal Revenue Code. In determining whether to increase or decrease an element of compensation, we rely upon the business experience of the members of the Compensation Committee, the Compensation Committee's general understanding of compensation levels at public companies, and the historical compensation levels of the executive officers, and, with respect to executives other than the CEO, we consider the recommendations of the CEO. We generally do not rely on rigid formulas (other than performance measures under our annual cash bonus program) or short-term changes in business performance when setting compensation.
The
following summarizes the compensation elements we used to motivate and retain
our Chief Executive Officer, Chief Financial Officer, and our three other most
highly compensated executive officers, for the fiscal year ended
December 31, 2008 (collectively, the "Named Executive
Officers").
We pay
base salaries at levels that reward executive officers for ongoing performance
and that enable us to attract and retain highly qualified executives, but not at
a level that allows the executives to achieve the overall compensation they
desire. Base pay is a critical element of our compensation program
because it provides our executive officers with
stability. Compensation stability allows our executives to focus
their attention and efforts on our business objectives, which includes creating
shareholder value. In determining base salaries, we consider the
executive's current salary and the executive's qualifications and experience,
including, but not limited to, the executive's length of service with us, the
executive's industry knowledge, and the executive's leadership, integrity, scope
of responsibilities, dedication to us and our shareholders, past performance,
and future potential of providing value to our shareholders. We do
not formally benchmark salary or total executive compensation against the
executive compensation of any other company or group of
companies. From time to time, the Compensation Committee has
considered the form and level of compensation disclosed by other publicly traded
truckload carriers, certain other transportation companies, and companies of
similar size and market capitalization in general in order to obtain a broad
understanding of such companies' compensation practices. We set our
base salaries at a level that allows us to pay a portion of an executive
officer's total compensation in the form of incentive compensation (including
annual cash bonuses and long-term incentives) and perquisites. We
believe this mix of compensation helps us incentivize our executives to maximize
shareholder value in the long run. We consider adjustments to base
salaries annually to reflect the foregoing factors but do not apply a specific
weighting to such factors.
On
December 21, 2005, our shareholders approved and ratified our 2005 Executive
Cash Bonus Plan ("Cash Bonus Plan"). We use our Cash Bonus Plan to
provide annual incentives to executive officers in a manner designed to
(i) link increases in compensation to increases in our income in order to
reinforce cost controls, (ii) reinforce our performance goals, and
(iii) link a significant portion of our executives' compensation to the
achievement of such goals. We also use the Cash Bonus Plan to
preserve for our benefit a federal tax deduction for payments of incentive
compensation to our executive officers. Cash bonuses are designed to
reward executive officers for their contributions to our financial and operating
performance and are based primarily upon our financial results and certain
operating statistics that the Compensation Committee identifies each year as
being important to our success.
Under the
Cash Bonus Plan, the Compensation Committee is required to set, for each
executive officer, one or more objective performance targets. The
annual cash bonus amount awarded to each executive officer is primarily
dependent upon us reaching or exceeding specified, objective performance
targets. Performance targets may be based on the attainment of
specified levels of one or any variation or combination of the factors listed in
the Cash Bonus Plan. Corporate performance targets typically have
related to profitability and growth to align cash compensation payments with our
performance and the creation of shareholder value. Additionally,
individual performance targets may be based on the successful implementation of
corporate policies, negotiation of significant corporate transactions,
development of long-term business goals or strategic plans, or the exercise of
specific areas of managerial responsibility. The Compensation
Committee sets the specific performance targets for each executive officer after
engaging in active dialog with our CEO concerning our strategic objectives and
performance and reviewing the appropriateness of the financial measures used in
the Cash Bonus Plan.
The
Compensation Committee also administers a discretionary cash bonus program
("Discretionary Cash Bonus Program") for achievements in leadership, innovation,
initiative, and other non-objective performance indicia outside the Cash Bonus
Plan. These awards are made on a discretionary basis and are
unrelated to the attainment of the Cash Bonus Plan's objective performance
criteria. An award under the Discretionary Cash Bonus Program may not
be used to make up an award that was not earned under the Cash Bonus Plan's
objective performance criteria.
Concurrently
with establishing the performance targets, the Compensation Committee also
establishes a maximum cash bonus award opportunity for each executive officer,
typically expressed as a percentage of salary. For 2008, the maximum
bonus target was 60% of salary for our CEO and ranged from 30% to 40% for our
other Named Executive Officers. Our Cash Bonus Plan contains an
annual maximum cash bonus limitation of $2.0 million for any participant,
but the maximum award approved for any executive has never exceeded
$354,000. In determining an executive officer's maximum cash bonus
opportunity, the Compensation Committee considers (i) the value that
achieving specific performance targets will add to our shareholders, (ii) the
degree of difficulty in achieving specific performance targets, and (iii) each
of the other elements comprising the executive's total
compensation. When calculating the cash bonus earned by an executive
officer under the Cash Bonus Plan, the Compensation Committee may, in its sole
discretion, exercise negative discretion to eliminate or reduce the size of a
bonus if the Compensation Committee determines such action is appropriate but
may not increase a bonus above the executive's maximum cash bonus
opportunity. Further, the Compensation Committee is required to
certify, prior to payment of a bonus under the Cash Bonus Plan, that the
executive officer achieved the respective performance targets underlying the
cash bonus. Under a policy adopted by the Compensation Committee in
2008, two-thirds of a Named Executive Officer's total cash bonus opportunity
will be determined under the Cash Bonus Plan and one-third is subject to
discretionary awards made by the Compensation Committee under the Discretionary
Cash Bonus Program, after taking into account the recommendations of the CEO
(except with respect to his own bonus) and such non-objective criteria described
above.
On
December 21, 2005, our shareholders approved and ratified our Amended and
Restated 2003 Stock Option Plan (as further amended by approval of our
shareholders, the "2003 Stock Option Plan"). The 2003 Stock Option
Plan is a broad-based equity compensation plan that we use to accomplish our
compensation goals by providing our executive officers with long-term
incentives. We also use the 2003 Stock Option Plan to align our
executives' and shareholders' long-term interests by creating a strong, direct
link between executive compensation and shareholder return.
The 2003
Stock Option Plan allows the Compensation Committee to link compensation to
performance over a period of time by using equity-based awards, which often
value a company's long-term prospects, requiring holding periods for equity
grants, and granting awards that have multiple-year vesting
schedules. Awards with multiple-year vesting schedules, such as stock
options or restricted stock grants, provide balance to the other elements of our
compensation program that otherwise link compensation to annual
performance. Awards with multiple-year vesting schedules create
incentive for executive officers to increase shareholder value over an extended
period of time because the value received from such awards is based on the
growth of the stock price above the grant price. Such awards also
incentivize executives to remain with us over an extended period of
time. Thus, we believe the 2003 Stock Option Plan is an effective way
of aligning the interests of our executive officers with those of our
shareholders.
Under the
2003 Stock Option Plan, the Compensation Committee may grant stock options or
award restricted stock as forms of executive officer compensation. To
date, the Compensation Committee has only awarded stock options to our Named
Executive Officers under the 2003 Stock Option Plan because the Committee
believes that stock options have historically been an effective means of
incentivizing our executive officers to work toward, and rewarding them for,
increasing shareholder value. Historically the Compensation Committee
has preferred stock options as a method of equity compensation, rather than
restricted stock, because we have over 900 participants in our stock option
program and the Compensation Committee believed there was value in maintaining a
consistent incentive throughout the organization. However, over the
past several years the Compensation Committee has noted a trend among public
companies toward some level of restricted stock grants. In addition,
the Compensation Committee believes that stock appreciation rights may have
advantages in some circumstances. In the future, the Compensation
Committee may draw upon all available types of awards in order to have a
balanced and effective incentive plan. Additional information
concerning the 2003 Stock Option Plan and our intentions to issue restricted
stock and stock appreciation rights is set forth below under Proposal No.
3.
The
Compensation Committee considers several factors when determining the number of
options to award to our executive officers, including (i) the
recommendations of our CEO (excepts as to his own awards); (ii) the value
of the grant in relation to other elements of total compensation; (iii) the
number and type of equity grants currently held by the executive; (iv) the
number and type of awards granted to the executive in prior years; and
(v) the executive's position, scope of responsibility, ability to affect
our profits, ability to create shareholder value, and historic and recent
performance. The Compensation Committee also has approved a policy
whereby the primary grant of equity awards to our Named Executive Officers will
be made on the date of the Annual Meeting of Shareholders.
We
provide our Named Executive Officers with certain other benefits that we believe
are reasonable, competitive, and consistent with our overall executive
compensation program. We believe that these benefits generally allow
our executives to work more efficiently. The costs of these benefits
generally constitute only a small percentage of each executive's total
compensation, with the exception being the air travel allowance for our CEO as
described below. In setting the amount of these benefits, the
Compensation Committee considers each executive's position and scope of
responsibilities and all other elements comprising the executive's
compensation.
Our Named
Executive Officers are eligible to participate in all of our employee benefit
plans, such as our 401(k) Plan and medical, dental, and group life insurance
plans, in each case on the same basis as our other employees.
Mr. Kevin
Knight has been our CEO since 1993 and has served as Chairman of the Board since
1999. Since Mr. Knight became our CEO, we have achieved considerable
growth in revenue, earnings, and market value. We have been named to Forbes Magazine's list of the
"200 Best Small Companies in America" for fourteen consecutive years and Mr.
Knight has managed our growth and development during that time. In
discussions with Mr. Knight, the Compensation Committee determined that the
following items were most important to motivating continued performance from Mr.
Knight, as the CEO: (i) a base salary that is commensurate with his level
of responsibility and commitment to us, but not so high that it would undermine
our cost-control culture; (ii) a significant amount of equity compensation
to align Mr. Knight's compensation with increasing shareholder value;
and (iii) a travel allowance that would permit use of private
aircraft at Mr. Knight's discretion to manage our expansive geographic presence
without unduly affecting his availability for business or his
lifestyle. Mr. Knight does not participate in the determination of
his own compensation. However, effective August 1, 2008, Mr. Knight
voluntarily reduced his salary by $300,000 annually from $590,000 to $290,000
based on the difficult operating environment in which we would be operating
during the remainder of 2008 and his commitment to our financial
performance.
For 2008, the
Compensation Committee also approved a maximum performance-based cash bonus
opportunity under which Mr. Kevin Knight was eligible to receive a cash bonus of
up to 60% of his base salary, two-thirds of which was to be paid under the Cash
Bonus Plan (the "Bonus Plan Compensation") and one-third of which was to be paid
under the Discretionary Cash Bonus Program based upon the Compensation
Committee's evaluation of Mr. Knight's performance (the "Discretionary Bonus
Compensation"). The percentage of salary assigned to Mr. Knight's potential
bonus was based on the Compensation Committee's evaluation of (i) the magnitude
of Mr. Knight's ability to impact corporate performance based on his
responsibilities, (ii) the composition of Mr. Knight's total compensation
package, including the fact that his salary remained constant for 2007 and was
set to remain constant for 2008 (however, Mr. Knight voluntarily reduced his
salary in August 2008), and (iii) our long-term profitability and earnings
goals. Mr. Knight's potential bonus as a percentage of his salary was
greater than the other Named Executive Officer's because the Compensation
Committee believed that, based upon his responsibilities, Mr. Knight had a
greater ability to impact corporate performance than the other Named Executive
Officers.
In
connection with the maximum performance-based cash bonus opportunity described
above, the Compensation Committee set performance targets related to earnings
growth compared with earnings in 2007 and annual consolidated operating ratio
(the "2008 Performance Targets"). One-third of the maximum bonus
opportunity was tied to earnings growth and one-third was tied to achieving the
target operating ratio. The 2008 Performance Target range for
earnings growth was from 20% target bonus achievement at zero earnings growth to
100% bonus target achievement at 10% earnings growth. The 2008
Performance Target for operating ratio was 86.5%. However, there was
an override feature such that 7.5% earnings per share growth (as opposed to
earnings growth) would result in 100% achievement of the 2008 Performance
Targets. Given the economic environment at the date the targets were
adopted, the Compensation Committee viewed the 2008 Performance Targets as
reflecting a range of performance that was achievable but uncertain, with the
upper end of the range reflecting a significant accomplishment. The 2008 Performance
Targets did not reflect any view of ours concerning earnings expectations for
the year. The 2008 Performance Targets were recommended by Mr. Knight
and approved by the Compensation Committee.
In
addition to the 2008 Performance Targets and pursuant to the Discretionary Cash
Bonus Program, the Compensation Committee also had the discretion to award Mr.
Kevin Knight up to one-third of the cash bonus opportunity based upon, among
other things, his leadership, ability to influence others, dedication,
integrity, creativity, and the promotion of our business.
The
Compensation Committee met in February 2009 to discuss and review the 2008
Performance Targets for Mr. Kevin Knight. The Committee reviewed the
foregoing policies, our financial and operating performance, and the 2008
Performance Targets with Mr. Knight and the Chief Financial
Officer. Due to the difficult economic and freight environment, the
Compensation Committee determined that the 2008 Performance Targets were only
partially achieved. Specifically, the Compensation Committee
determined that the operating ratio target was achieved but the earnings growth
target was not. Accordingly, the Compensation Committee awarded
Mr. Knight $118,000 as Bonus Plan Compensation. With respect to
Discretionary Bonus Compensation, Mr. Knight recommended to the
Compensation Committee that his Discretionary Bonus Compensation should be
nominal for 2008 based on the difficult operating conditions and sacrifices
being made by others at our company. The Compensation Committee
reviewed Mr. Knight's performance for the Discretionary Bonus Compensation
and concluded that Mr. Knight's performance was exemplary and above
expectations. However, based upon Mr. Knight's recommendation,
the Compensation Committee set Mr. Knight's Discretionary Bonus
Compensation at $8,000.
On May
20, 2008, after considering the number of options granted to Mr. Kevin Knight in
prior years and Mr. Knight's position, scope of responsibility, ability to
affect our profits, ability to create shareholder value, and historic and recent
performance, as described above, the Compensation Committee granted Mr. Knight
an option to purchase 75,000 shares our Common Stock, with an exercise price
equal to the fair market value of the underlying Common Stock on the date of the
grant.
During
2008, we also paid a pre-determined amount for the business-related air travel
of Mr. Kevin Knight, in his role as our CEO. Mr. Knight
used the allowance for all of his business-related air travel, whether
commercial or charter. With over 30 locations across the United
States and numerous acquisitions, investor, supplier, industry, and other
destinations, Mr. Knight was, and continues to be, required to travel by
air frequently to carry out his responsibilities. Some of this travel involved a
personal component, although we believe the personal component is immaterial
compared to the business-related travel. The Compensation Committee
believes that the air travel allowance was reasonable because it enhances Mr.
Knight's ability to carry out his responsibilities as CEO. The
Compensation Committee also desired to avoid the complications of allocating
business versus personal travel expenses on trips with more than one
function. Thus, Mr. Knight's entire air travel allowance was included
as compensation, with any excess being payable personally by him. In
May 2008, the Compensation Committee increased Mr. Knight's air travel
allowance from $200,000 per year to $250,000 per year. During 2008,
Mr. Knight also received a cash vehicle allowance of approximately
$17,000. Both the air travel allowance and the vehicle allowance are
included in the "All Other Compensation" column of the Summary Compensation
Table.
In 2008,
in addition to providing medical, dental, and group life insurance to Mr. Kevin
Knight, we also contributed $850, which represents our maximum matching
discretionary contribution per participant, to the 401(k) Plan of Mr.
Knight. We report the 401(k) contribution in the "All Other
Compensation" column in the Summary Compensation Table.
For all
Named Executive Officers, other than our CEO, the form and amount of
compensation was recommended by the CEO. As discussed above, the
Compensation Committee relied on the business experience of its members, the
historical compensation levels of the Named Executive Officers, and its general
understanding of compensation levels at public companies to determine that the
CEO's recommendations with respect to the compensation levels and forms were
appropriate for 2008. The form of compensation was consistent with
past years, with compensation consisting primarily of salary, cash bonus based
on the achievement of certain financial and operating goals established through
consultation with the Compensation Committee during the first quarter of the
year cash bonus based on certain subjective criteria, and equity compensation in
the form of stock options. For each of the Named Executive Officers, the
Compensation Committee considered, among other things, our financial and
operating results during 2007 and 2008, the duties and responsibilities of each
executive, and the length of time each executive has been with us as further
described in each executive's biography found herein.
In May
2008, after reviewing our financial performance for the fiscal year ended
December 31, 2007, considering our compensation philosophy and the
guidelines described above, recognizing the difficult economic environment that
the Compensation Committee believed we would be operating in throughout 2008,
and receiving the recommendation of the CEO, the Compensation Committee
determined not to increase the base salaries of our Named Executive Officers,
other than approving a $25,000 increase to Mr. Jackson's annual salary to
$180,000 annually. The Compensation Committee approved the salary
increase for Mr. Jackson based on the Compensation Committee's
determination that his salary was low compared to similarly situated executives
and in recognition of the time commitment and responsibilities attendant to the
position of Chief Financial Officer. The Compensation Committee also
believed that the relatively large percentage increase to Mr. Jackson's salary
was justified by a low salary in prior years.
Effective August 1,
2008, Messrs. Keith Knight and Gary Knight voluntarily reduced their salaries by
$100,000 annually from $350,000 to $250,000 and $227,500 to $127,500,
respectively, and Mr. Comen voluntarily reduced his salary by $25,000
annually from $265,000 to $240,000. The voluntary salary reductions
by these Named Executive Officers were based on the difficult operating
environment in which we would be operating during the remainder of 2008 and
their commitment to our financial performance.
For 2008,
the Compensation Committee also approved a maximum performance-based cash bonus
opportunity under which each of Messrs. Jackson, Gary Knight, and Comen was
eligible to receive a cash bonus of up to 30% of his base salary and
Mr. Keith Knight was eligible to receive a cash bonus of up to 40% of his
base salary. Two-thirds of each Named Executive Officer's cash bonus
was to be paid under the Cash Bonus Plan (the "Bonus Plan Compensation") and
one-third of each Named Executive Officer's cash bonus was to be paid under the
Discretionary Cash Bonus Program based upon the Compensation Committee's
evaluation of each Named Executive Officer's performance (the "Discretionary
Bonus Compensation"). The percentage of salary assigned to each Named Executive
Officer was based on the CEO's recommendation and the Compensation Committee's
evaluation of (i) the magnitude of each Named Executive Officer's ability to
impact corporate performance based on the Named Executive Officer's
responsibilities at the time, (ii) the composition of the respective Named
Executive Officer's total compensation package, and (iii) our long-term
profitability and earnings goals. Except for Mr. Keith Knight's cash
bonus opportunity, the cash bonus opportunity (as a percentage of base salary)
for each Named Executive Officer did not change from 2007 compared to
2008. The Compensation Committee increased Mr. Keith Knight's cash
bonus opportunity from 30% to 40% of his base salary for 2008 compared to 2007
in light of Mr. Keith Knight's expanding responsibilities as our Chief Operating
Officer and his increasing ability to affect our performance.
In
connection with the maximum performance-based cash bonus opportunities described
above, the Compensation Committee set performance targets related to earnings
growth compared with earnings in 2007 and annual consolidated operating
ratio. One-third of the maximum bonus opportunity was tied to
earnings growth and one-third was tied to achieving the target operating ratio.
The 2008 Performance Target range for earnings growth was from 20% target bonus
achievement at zero earnings growth to 100% bonus target achievement at 10%
earnings growth. The 2008 Performance Target for operating ratio
was 86.5%. However, there was an override feature such that 7.5%
earnings per share growth (as opposed to earnings growth) would result in 100%
achievement of the 2008 Performance Targets. Given the economic
environment at the date the targets were adopted, the Compensation Committee
viewed the 2008 Performance Targets as reflecting a range of performance that
was achievable but uncertain, with the upper end of the range reflecting a
significant accomplishment. The 2008 Performance
Targets did not reflect any view of ours concerning earnings expectations for
the year. The 2008 Performance Targets were recommended by the CEO
and approved by the Compensation Committee.
In
addition to the 2008 Performance Targets and pursuant to the Discretionary Cash
Bonus Program, the Compensation Committee also had the discretion to award each
Named Executive Officer, after taking into account the CEO's recommendations, up
to one-third of the cash bonus opportunity based upon, among other things, the
executive's leadership, ability to influence others, dedication, integrity,
creativity, and the promotion of our business.
The
Compensation Committee met in February 2009 to discuss and review the 2008
Performance Targets for the Named Executive Officers. The
Compensation Committee reviewed the foregoing policies, our financial and
operating performance, and the 2008 Performance Targets with the
CEO. Due to the difficult economic and freight environment, the
Compensation Committee determined the 2008 Performance Targets were only
partially achieved. Specifically, the Compensation Committee
determined that the operating ratio target was achieved but the earnings growth
target was not. Accordingly, the Compensation Committee awarded
Messrs. Keith Knight, Gary Knight, Jackson, and Comen $46,550, $22,750,
$18,000, $26,500, respectively, as Bonus Plan Compensation. Based
upon each Named Executive Officer's (other than the CEO's) performance and
ongoing commitment to our company, the CEO recommended that the Named Executive
Officers (other than the CEO) receive the full Discretionary Bonus
Compensation. Accordingly, the Compensation Committee also awarded an
amount equal to the Bonus Plan Compensation for each of them in Discretionary
Bonus Compensation, based upon the Compensation Committee's consideration of our
overall financial performance in the context of an extremely difficult operating
environment and the CEO's recommendation.
Additionally
and at the recommendation of the CEO, in March 2008 the Compensation Committee
made a special discretionary cash bonus of $9,700 and $2,750 and a special
option grant of 9,304 shares and 10,000 shares to Messrs. Jackson and Comen,
respectively. The bonuses and options were given in recognition of
the services Messrs. Jackson and Comen provided during the first quarter of 2008
and were paid outside of our Cash Bonus Plan. Particularly, the
bonuses and options were meant to recognize Messrs. Jackson and Comen for the
contributions each of them made during the first quarter of 2008 in helping us
respond to the recession in the freight market.
In May
2008, after considering the number of options granted to each of the Named
Executive Officers, other than the CEO, in prior years and each executive's
position, scope of responsibility, ability to affect our profits, ability to
create shareholder value, and historic and recent performance, the Compensation
Committee granted (i) Mr. Jackson an option to purchase 20,000 shares our
Common Stock, (ii) Mr. Keith Knight an option to purchase 40,000 shares our
Common Stock, (iii) Mr. Gary Knight an option to purchase 15,000 shares our
Common Stock, and (iv) Mr. Comen an option to purchase 15,000
shares our Common Stock. Each of the foregoing option grants has an
exercise price equal to the fair market value of the underlying Common Stock on
the date of the grant. Mr. Keith Knight's relatively higher
stock option grant was in recognition of his role as our Chief Operating Officer
and the responsibilities attendant with that position and as an additional
incentive for him to use his position to seek opportunities to create
shareholder value.
Except
for as described above with respect to the CEO, we did not pay for the personal
air travel of any of our other executive officers, including our other Named
Executive Officers. However, similar to our CEO, our other Named Executive
Officers receive a vehicle allowance. In 2008, in addition to
providing medical, dental, and group life insurance to our Named Executive
Officers, we also contributed $850, which represents our maximum matching
discretionary contribution per participant, to the 401(k) Plan of each Named
Executive Officer. We report the vehicle allowance and the 401(k)
contribution in the "All Other Compensation" column in the Summary Compensation
Table.
In January 2009, Mr. Kevin Knight
voluntarily reduced his annual air travel allowance by $100,000, from $250,000
to $150,000 in recognition of the difficult operating conditions we were
facing. Further, as of the date hereof Messrs. Kevin Knight, Keith
Knight, Gary Knight, and Comen have continued their voluntary salary reductions
which became effective in 2008.
For 2009, the
Compensation Committee also approved maximum performance-based cash bonus
opportunities under which (i) Mr. Kevin Knight is eligible to receive a
cash bonus of up to 60% of his base salary; (ii) Mr. Keith Knight is
eligible to receive a cash bonus of up to 40% of his base salary; and
(iii) each of Messrs. Gary Knight, Jackson, and Comen is eligible to
receive a cash bonus of up to 30% of his base salary. As in 2007 and
2008, the percentage of salary assigned to each Named Executive Officer is based
on the Compensation Committee's evaluation of (i) the magnitude of each Named
Executive Officer's ability to impact corporate performance based on the Named
Executive Officer's responsibilities at the time, (ii) the composition of
the respective Named Executive Officer's total compensation package, and (iii)
our long term profitability and earnings goals. As in 2008,
two-thirds of each Named Executive Officer's cash bonus will be paid under the
Cash Bonus Plan and one-third will be paid under the Discretionary Cash Bonus
Program, based upon the CEO's recommendations and upon, among other things, the
executive's leadership, ability to influence others, dedication, integrity,
creativity, and the promotion of our business.
In
connection with the maximum performance-based cash bonus opportunities described
above, the Compensation Committee set performance targets related to the change
in earnings compared with earnings in 2008 and annual consolidated
operating ratio (the "2009 Performance Targets"). One-third of the
maximum bonus opportunity is tied to the change in earnings and one-third is
tied to achieving the target operating ratio. The
2009 Performance Target range for earnings is from 20% target bonus
achievement at a negative 7.5% change in earnings to 100% bonus target
achievement at 2.5% earnings growth. The 2009 Performance Target for
consolidated operating ratio is 87.0%. However, there is an override
feature such that achievement of earnings per share growth for 2009 in excess of
earnings per share for 2008 (as opposed to earnings growth) will result in 100%
achievement of the 2009 Performance Targets. Given the economic and
freight environment at the date the targets were adopted, the Compensation
Committee viewed the 2009 Performance Targets as reflecting a range of
performance that is achievable but uncertain, with the upper end of the range
reflecting a significant accomplishment. The 2009 Performance
Targets do not reflect any view of ours concerning earnings expectations for the
year. The 2009 Performance Targets were recommended by the CEO and
approved by the Compensation Committee.
We currently do not have any employment
contracts, severance agreements, change-of-control agreements, or other
arrangements with our executive officers, including our Named Executive
Officers, that provide for payment or benefits to any executive officer at,
following, or in connection with a change in control, a change in an executive
officer's responsibilities, or an executive officer's termination of employment,
including resignation, severance, retirement, or constructive
termination.
The
following table sets forth information concerning the total compensation for
fiscal year 2008 awarded to, earned by, or paid to those persons who were, at
December 31, 2008, (i) our Chief Executive Officer, (ii) our Chief
Financial Officer, and (iii) our three other most highly compensated executive
officers with total compensation exceeding $100,000 for the fiscal year ended
December 31, 2008 (collectively, the "Named Executive Officers").
|
Name
and
Principal
Position
|
Year
|
Salary(1)
($)
|
Bonus
($)
|
Options
Awards(2)
($)
|
Non-Equity
Incentive
Plan
Compensation
($)
|
All
Other
Compensation(3)
($)
|
Total
($)
|
|
Kevin
P. Knight,
Chairman
and Chief Executive Officer
|
2008
2007
2006
|
463,077
590,000
568,462
|
8,000
-
-
|
392,385
286,247
210,482
|
118,000
45,000
354,000
|
246,175
218,840
196,833
|
1,227,637
1,140,087
1,329,777
|
|
David
A. Jackson,
Chief
Financial Officer
|
2008
2007
2006
|
169,135
145,221
118,500
|
27,700
-
-
|
110,952
90,006
68,393
|
18,000
10,292
39,750
|
850
850
850
|
326,637
246,369
227,493
|
|
Keith
T. Knight,
Chief
Operating Officer
|
2008
2007
2006
|
299,000
327,827
328,961
|
46,550
-
-
|
209,995
160,421
124,690
|
46,550
21,912
97,500
|
16,035
16,450
850
|
618,130
526,610
552,001
|
|
Gary
Knight,
Vice
Chairman(4)
|
2008
2007
2006
|
185,192
227,500
-
|
22,750
-
-
|
130,055
112,961
-
|
22,750
15,106
-
|
13,010
13,210
-
|
373,757
368,777
-
|
|
Casey
Comen,
Vice
President of Sales
|
2008
2007
2006
|
252,250
260,000
255,692
|
29,250
-
-
|
307,095
201,212
94,341
|
26,500
17,264
78,000
|
12,744
12,934
12,934
|
627,839
491,410
440,967
|
|
(1)
|
Effective
August 1, 2008, Messrs. Kevin Knight, Keith Knight, Gary Knight, and Comen
voluntarily reduced their salaries by $300,000, $100,000, $100,000, and
$25,000, respectively.
|
|
(2)
|
This
column represents the dollar amount recognized for financial statement
reporting purposes with respect to the 2008, 2007, and 2006 fiscal years
for the fair value of stock options granted in those years, as well as
prior fiscal years, in accordance with SFAS 123R. Pursuant to
SEC rules, the amounts shown exclude the impact of estimated forfeitures
related to service-based vesting conditions. For additional
information on the valuation assumptions with respect to the 2008 grants,
refer to note 8 of our financial statements as provided in the Form 10-K
for the year-ended December 31, 2008, as filed with the
SEC. For information on the valuation assumptions with respect
to grants made prior to 2008, refer to the notes of our financial
statements as provided in the Form 10-K for the respective
year-end. These amounts reflect our accounting expense for
these awards and do not correspond to the actual value that will be
recognized by the Named Executive Officers.
|
|
(3)
|
See
the All Other Compensation Table for additional
information.
|
|
(4)
|
Mr.
Gary Knight was not a Named Executive Officer during
2006.
|
The
following table describes, for 2008, each component of the "All Other
Compensation" column in the Summary Compensation Table.
|
Name
|
Year
|
Perquisites
and
Other
Personal
Benefits(1)
($)
|
Contributions
to
Retirement
and
401(k)
Plans
($)
|
Total
($)
|
|
Kevin
P. Knight
|
2008
|
245,325
|
850
|
246,175
|
|
David
A. Jackson
|
2008
|
-
|
850
|
850
|
|
Keith
T. Knight
|
2008
|
15,185
|
850
|
16,035
|
|
Gary
Knight
|
2008
|
12,160
|
850
|
13,010
|
|
Casey
Comen
|
2008
|
11,894
|
850
|
12,744
|
|
(1)
|
This
column represents the total amount of perquisites and other personal
benefits provided to the Named Executive Officer, if the aggregate of such
benefits were equal to or exceeded $10,000. For Mr. Kevin
Knight, $228,269 of this amount represents a cash air travel allowance and
the remainder represents a cash vehicle allowance. For each of
the other Named Executive Officers, this amount includes compensation for
a cash vehicle allowance.
|
See "Executive Compensation –
Compensation Discussion and Analysis" for a complete description of our
compensation plans pursuant to which the amounts listed under the Summary
Compensation Table were paid or awarded and the criteria for such award or
payment.
The
following table sets forth information concerning each grant of an award made to
our Named Executive Officers during 2008.
|
Name
|
Grant
Date
|
All
Other
Option
Awards:
Number
of
Securities
Underlying
Options
(#)
|
Exercise
or
Base
Price of
Option
Awards(4)
($/Sh)
|
Grant
Date Fair
Value
of Stock
and
Option
Awards(5)
($)
|
|
Kevin
P. Knight
|
05/22/2008
|
75,000(1)
|
17.29
|
464,250
|
|
David
A. Jackson
|
02/29/2008
05/22/2008
|
9,304(2)
20,000(1)
|
14.79
17.29
|
48,195
123,800
|
|
Keith
T. Knight
|
05/22/2008
|
40,000(1)
|
17.29
|
247,600
|
|
Gary
Knight
|
05/22/2008
|
15,000(1)
|
17.29
|
92,850
|
|
Casey
Comen
|
02/29/2008
05/22/2008
|
10,000(2)
15,000(3)
|
14.79
17.29
|
51,800
92,850
|
|
(1)
|
20%
of these options vested on December 31, 2008, with the remaining options
vesting 5% per calendar quarter thereafter and becoming fully vested on
December 31, 2012.
|
|
(2)
|
20%
of these options will vest on February 28, 2011, with the remaining
options vesting 20% per calendar year thereafter and becoming fully vested
on February 28, 2015.
|
|
(3)
|
These
options vested in full on March 1, 2009.
|
|
(4)
|
This
column represents the exercise price for the stock options granted, which
was the closing price of our stock on the grant date.
|
|
(5)
|
This
column represents the grant date fair value of the stock options under
SFAS 123R granted to the Named Executive Officers in 2008. The
fair value was calculated using the Black Scholes value of approximately
$5.18 for options granted on February 29, 2008, and $6.19 for options
granted on May 22, 2008. The fair value of the option awards
are accounted for in accordance with SFAS 123R. For additional
information on the valuation assumptions, refer to note 8 of our financial
statements in the Form 10-K for the year-ended December 31, 2008, as filed
with the SEC. These amounts reflect our accounting expense to
be recognized over the vesting period of the options awarded, and do not
correspond to the actual value that will be recognized by the Named
Executive Officers.
|
See "Executive Compensation –
Compensation Discussion and Analysis" for a complete description of (i) the
performance targets related to payment of annual incentives, and (ii) the
options that we awarded during the year.
The
following table sets forth information concerning all stock option grants held
by our Named Executive Officers as of December 31, 2008. All
outstanding equity awards are in shares of our Common Stock.
|
Option
Awards
|
|||||
|
Name
|
Option
Grant
Date
|
Number
of
Securities
Underlying
Unexercised
Options
(#)
Exercisable
|
Number
of
Securities
Underlying
Unexercised
Options
(#)
Unexercisable(1)
|
Option
Exercise
Price
($)
|
Option
Expiration
Date
|
|
Kevin
P. Knight
|
08/06/2004
08/19/2005
05/24/2006
05/24/2007
05/22/2008
|
67,500
750,000
45,000
18,000
15,000
|
-
-
30,000
27,000
60,000
|
12.57
15.68
18.44
18.23
17.29
|
08/05/2014
08/18/2015
05/23/2016
05/23/2017
05/21/2018
|
|
David
A. Jackson
|
03/01/2001
09/18/2001
06/05/2002
08/07/2003
08/06/2004
05/16/2005
05/24/2006
05/24/2007
02/29/2008
05/22/2008
|
5,063
3,375
3,375
2,363
7,500
12,000
9,000
5,000
-
4,000
|
-
-
-
1,575
-
3,000
6,000
7,500
9,304
16,000
|
4.40
4.89
8.44
11.44
12.57
15.53
18.44
18.23
14.79
17.29
|
02/28/2011
09/17/2011
06/04/2012
08/06/2013
08/05/2014
05/15/2015
05/23/2016
05/23/2017
02/27/2018
05/21/2018
|
|
Keith
T. Knight
|
08/06/2004
08/19/2005
05/24/2006
05/24/2007
05/22/2008
|
22,500
24,000
18,000
8,000
8,000
|
-
6,000
12,000
12,000
32,000
|
12.57
15.68
18.44
18.23
17.29
|
08/05/2014
08/18/2015
05/23/2016
05/23/2017
05/21/2018
|
|
Gary
Knight
|
08/06/2004
08/19/2005
05/24/2006
05/24/2007
05/22/2008
|
22,500
18,000
9,000
5,000
3,000
|
-
4,500
6,000
7,500
12,000
|
12.57
15.68
18.44
18.23
17.29
|
08/05/2014
08/18/2015
05/23/2016
05/23/2017
05/21/2018
|
|
Casey
Comen
|
03/01/2004
03/01/2005
05/16/2005
05/24/2006
05/24/2007
02/29/2008
05/22/2008
|
37,500
11,250
1,500
6,666
6,250
-
-
|
18,750
3,750
6,000
3,334
6,250
10,000
15,000
|
11.03
18.09
15.53
18.44
18.23
14.79
17.29
|
02/28/2014
02/28/2015
05/15/2015
05/23/2016
05/23/2017
02/27/2018
05/21/2018
|
|
(1)
|
See
the Vesting Schedule Table below for the vesting date of options held at
fiscal year end by the Named Executive
Officers.
|
The
following table describes the vesting schedule as of December 31, 2008, for each
unexercisable option listed in the Outstanding Equity Awards at Fiscal Year-End
Table.
|
Name
|
Option
Grant Date
|
Option
Awards Vesting Schedule
|
|
Kevin
P. Knight
|
05/24/2006
|
20%
vested December 31, 2006, and 5% vests at the end of each calendar quarter
beginning March 2007.
|
|
05/24/2007
|
20%
vested December 31, 2007, and 5% vests at the end of each calendar quarter
beginning March 2008.
|
|
|
05/22/2008
|
20%
vested December 31, 2008, and 5% vests at the end of each calendar quarter
beginning March 2009.
|
|
|
David
A. Jackson
|
08/07/2003
|
20%
vests each year beginning August 7, 2006.
|
|
05/16/2005
|
20%
vested December 31, 2005, and 5% vests at the end of each calendar quarter
beginning March 2006.
|
|
|
05/24/2006
|
20%
vested December 31, 2006, and 5% vests at the end of each calendar quarter
beginning March 2007.
|
|
|
05/24/2007
|
20%
vested December 31, 2007, and 5% vests at the end of each calendar quarter
beginning March 2008.
|
|
|
02/29/2008
|
20%
vests each year beginning February 28, 2011.
|
|
|
05/22/2008
|
20%
vested December 31, 2008, and 5% vests at the end of each calendar quarter
beginning March 2009.
|
|
|
Keith
T. Knight
|
08/19/2005
|
20%
vested December 31, 2005, and 5% vests at the end of each calendar quarter
beginning March 2006.
|
|
05/24/2006
|
20%
vested December 31, 2006, and 5% vests at the end of each calendar quarter
beginning March 2007.
|
|
|
05/24/2007
|
20%
vested December 31, 2007, and 5% vests at the end of each calendar quarter
beginning March 2008.
|
|
|
05/22/2008
|
20%
vested December 31, 2008, and 5% vests at the end of each calendar quarter
beginning March 2009.
|
|
|
Gary
Knight
|
08/19/2005
|
20%
vested December 31, 2005, and 5% vests at the end of each calendar quarter
beginning March 2006.
|
|
05/24/2006
|
20%
vested December 31, 2006, and 5% vests at the end of each calendar quarter
beginning March 2007.
|
|
|
05/24/2007
|
20%
vested December 31, 2007, and 5% vests at the end of each calendar quarter
beginning March 2008.
|
|
|
05/22/2008
|
20%
vested December 31, 2008, and 5% vests at the end of each calendar quarter
beginning March 2009.
|
|
|
Casey
Comen
|
03/01/2004
|
33%
vests each year beginning March 1, 2007.
|
|
03/01/2005
|
25%
vests each year beginning March 1, 2006.
|
|
|
05/16/2005
|
20%
vests each year beginning May 16, 2008.
|
|
|
05/24/2006
|
33%
vests each year beginning March 1, 2007.
|
|
|
05/24/2007
|
50%
vests each year beginning March 1, 2008.
|
|
|
02/29/2008
|
20%
vests each year beginning February 28, 2011.
|
|
|
05/22/2008
|
100%
vests on March 1,
2009.
|
The
following table sets forth information concerning the compensation of our
non-employee directors for fiscal 2008.
|
Name
|
Fees
Earned
or
Paid in
Cash(1)
($)
|
Stock
Awards(2)
($)
|
Total
($)
|
|
Donald
A. Bliss
|
25,000
|
22,494
|
47,494
|
|
Michael
Garnreiter
|
27,500
|
22,494
|
49,994
|
|
Randy
Knight
|
22,500
|
22,494
|
44,994
|
|
Richard
J. Lehmann
|
22,500
|
22,494
|
44,994
|
|
G.D.
Madden
|
22,500
|
22,494
|
44,994
|
|
Kathryn
L. Munro
|
25,500
|
22,494
|
47,994
|
|
(1)
|
This
column represents the amount of cash compensation paid in 2008 for Board
and committee service.
|
|
(2)
|
This
column represents the expense recognized for financial statement reporting
purposes with respect to the 2008 fiscal year for the fair value of stock
awards granted to each non-employee director in 2008, in accordance with
SFAS 123R. On May 22, 2008, each non-employee director
received 1,301 shares of our Common Stock, determined by dividing the
current year's director compensation subject to payment in Common Stock,
by the closing market price of our Common Stock on the date of grant, or
$17.29 per share. The shares awarded on May 22, 2008 are subject to
certain holding and other
restrictions.
|
The Board
of Directors, upon the recommendation of our Compensation Committee, establishes
the form and amount of compensation paid to our directors who are not 10%
shareholders or our officers or employees ("Outside Directors"). In
2008, our Outside Directors received annual compensation of $45,000 payable 50%
in cash and 50% in Common Stock. The number of shares issued on May
22, 2008, was determined by dividing the amount of the compensation subject to
payment in Common Stock by the closing market price of our Common Stock on the
date of the grant. The Common Stock was issued as stock grants under
the Independent Director provision of our 2003 Stock Option Plan, which reserved
200,000 shares of our Common Stock for compensatory stock grants to Outside
Directors, subject to certain adjustments.
The
Common Stock issued is also subject to certain holding and other restrictions,
including a requirement that each Outside Director must hold all Common Stock
granted as compensation until such director holds a minimum of $100,000 in
Common Stock.
No fees
were paid for attendance at meetings during 2008; however, in addition to the
$45,000 payable to the Outside Directors, the Chair of the Audit Committee
received an annual fee of $5,000, the Chair of the Compensation Committee
received an annual fee of $3,000, and the Chair of the Nominating and Corporate
Governance Committee received an annual fee of $2,500.
Directors
who are our employees or 10% shareholders do not receive compensation for Board
or committee service. During 2008, we did, however, reimburse all
directors for travel and other related expenses.
The
following table sets forth, as of February 28, 2009, the number and percentage
of outstanding shares of our Common Stock beneficially owned by each person
known by us to beneficially own more than 5% of such stock, by each Named
Executive Officer and our directors, and by all of our directors and executive
officers as a group. Share numbers and other information for FMR LLC
and Ruane, Cunniff & Goldfarb Inc. included in the following table and notes
are as of February 17, 2009, and based solely upon Schedules 13G/A filed with
the SEC by such date. We had outstanding 83,393,378 shares of Common
Stock as of February 28, 2009.
|
Name
and Address of Beneficial Owner(1)
|
Amount
and Nature of
Beneficial
Ownership(2)
|
Percent
of Class(2)
(%)
|
|
Kevin
P. Knight(3)
|
6,775,985
|
8.0
|
|
Gary
J. Knight(4)
|
6,311,086
|
7.6
|
|
Keith
T. Knight(5)
|
6,272,096
|
7.5
|
|
Randy
Knight(6)
|
6,261,090
|
7.5
|
|
Donald
A. Bliss(7)
|
17,040
|
*
|
|
G.D.
Madden(8)
|
45,450
|
*
|
|
Michael
Garnreiter(9)
|
12,241
|
*
|
|
Kathryn
L. Munro(10)
|
10,622
|
*
|
|
Richard
J. Lehmann(11)
|
6,748
|
*
|
|
David
A. Jackson(12)
|
54,800
|
*
|
|
Casey
Comen(13)
|
110,250
|
*
|
|
FMR
LLC(14)
|
4,682,139
|
5.6
|
|
Ruane,
Cunniff & Goldfarb Inc.(15)
|
4,994,281
|
6.0
|
|
All
directors and executive officers as a group (11 persons)
|
25,877,408
|
30.9
|
|
*
|
Represents
less than 1.0% of the outstanding Common Stock.
|
|
|
(1)
|
The
address of each Named Executive Officer and director is 5601 West Buckeye
Road, Phoenix, AZ 85043. The address of The address for FMR LLC is 82
Devonshire St., Boston, MA 02109. The address for
Ruane, Cunniff & Goldfarb Inc. is 767 Fifth Ave., New York,
NY 10153.
|
|
|
(2)
|
In
accordance with applicable rules under the Exchange Act, the number of
shares indicated as beneficially owned by a person includes shares of
Common Stock and underlying options that are currently exercisable or will
be exercisable within 60 days from February 28, 2009. Shares of
Common Stock underlying stock options that are currently exercisable or
will be exercisable within 60 days from February 28, 2009, are deemed to
be outstanding for purposes of computing the percentage ownership of the
person holding such options and the percentage ownership of any group of
which the holder is a member, but are not deemed outstanding for purposes
of computing the percentage ownership of any other
person.
|
|
|
(3)
|
Includes:
(a) 5,854,743 shares beneficially owned by Kevin P. Knight over which he
and his wife, Sydney Knight, exercise sole voting and investment power
pursuant to a revocable living trust; (b) 12,012 shares held by the Kevin
P. Knight and Sydney B. Knight Family Foundation over which Kevin P.
Knight and his wife, Sydney Knight, as officers of the Foundation,
exercise sole voting and investment power on behalf of the Foundation; (c)
3,979 shares owned by a minor child who shares the same household; and (d)
905,251 shares covered by stock options granted to Kevin P. Knight that
are currently exercisable or that will become exercisable within 60 days.
Kevin P. Knight has pledged as security approximately 1,554,000 of the
shares that he beneficially owns.
|
|
|
(4)
|
Includes:
(a) 6,250,336 shares beneficially owned by Gary J. Knight over which he
exercises sole voting and investment power as a trustee under a revocable
trust agreement; and (b) 60,750 shares covered by a stock option granted
to Gary J. Knight that is currently exercisable or that will become
exercisable within 60 days. Gary J. Knight has pledged as security
approximately 1,697,115 of the shares that he beneficially
owns.
|
|
|
(5)
|
Includes:
(a) 6,181,081 shares beneficially owned by Keith T. Knight over which he
and his wife, Fawna Knight, exercise sole voting and investment power as
trustees under a revocable trust agreement; (b) 1,119 shares beneficially
owned by Keith T. Knight; (c) 1,119 shares beneficially owned by Fawna
Knight; (d) 2,277 shares owned by minor children who share the same
household; and (e) 86,500 shares covered by a stock option granted to
Keith T. Knight that is currently exercisable or that will become
exercisable within 60 days. Keith T. Knight has pledged as security
approximately 2,657,830 of the shares that he beneficially
owns.
|
|
|
(6)
|
Includes:
(a) 4,596,267 shares beneficially owned by Randy Knight over which he
exercises sole voting and investment power as a trustee under a revocable
trust agreement; (b) 1,662,323 shares held by a limited liability company
for which Mr. Knight acts as manager and whose members include Mr.
Knight and trusts for the benefit of his four children; and (c) 2,500
covered by stock options granted to Mr. Randy Knight that are
currently exercisable or that will become exercisable within 60 days.
Randy Knight has pledged as security approximately 6,258,590 of the shares
that he beneficially owns.
|
|
|
(7)
|
Includes:
(a) 14,540 shares beneficially owned by Donald A. Bliss over which he
exercises sole voting and investment powers under a revocable trust
agreement; and (b) 2,500 shares covered by stock options granted to Mr.
Bliss that are currently exercisable or that will become exercisable
within 60 days.
|
|
|
(8)
|
Includes:
(a) 41,425 shares held directly by G.D. Madden; (b) 400 shares not held
directly by G.D. Madden, but for which he exercises voting control (these
shares were purchased and reported by G.D. Madden in 2008 for four
grandchildren (100 shares each), none of whom live with G.D. Madden); and
(c) 3,625shares covered by stock options granted to Mr. Madden that
are currently exercisable or that will become exercisable within 60
days.
|
|
|
(9)
|
Includes:
(a) 2,991 shares held directly by Michael Garnreiter; and (b) 9,250 shares
covered by stock options granted to Mr. Garnreiter that are currently
exercisable or that will become exercisable within 60
days.
|
|
|
(10)
|
Includes:
(a) 4,372 shares held directly by Kathryn L. Munro; and (b) 6,250 shares
covered by stock options granted to Ms. Munro that are currently
exercisable or that will become exercisable within 60
days.
|
|
|
(11)
|
Includes: (a) 3,248 shares held directly by
Richard J. Lehmann; and (b) 3,500 shares covered by stock options granted
to Mr. Lehmann that are currently exercisable or that will become
exercisable within 60 days.
|
|
|
(12)
|
Includes:
54,800 shares covered by stock options granted to David A. Jackson that
are currently exercisable or that will become exercisable within 60
days.
|
|
|
(13)
|
Includes:
110,250 shares covered by stock options granted to Casey Comen that are
currently exercisable or that will become exercisable within 60
days.
|
|
|
(14)
|
FMR
has sole voting power over 1,313,260 shares and sole dispositive power of
4,682,139 shares. It has shared voting power and shared
dispositive power over no shares.
|
|
|
(15)
|
Ruane,
Cunniff & Goldfarb Inc. has sole voting power over 3,838,922 shares
and sole dispositive power over 4,994,281 shares. It has shared
voting power and shared dispositive power over no
shares.
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Our Audit
Committee has established policies and procedures relating to the review and
approval or ratification of any transaction, or any proposed transaction, in
which we were or are to be a participant and the amount involved exceeds
$120,000, and in which any "related person" (as that term is defined in
Instruction 1 to Item 404(a) of Regulation S-K) had or will have a direct or
indirect material interest, referred to as an "interested transaction." Upon review of the
material facts of all interested transactions, the Audit Committee will either
approve, ratify, or disapprove the interested transactions, subject to certain
exceptions, by taking into account, among other factors it deems appropriate,
whether the terms are arm's length and the extent of the related person's
interest in the transaction. No director may participate in any
discussion or approval of an interested transaction for which he or she, or his
or her relative, is a related party. If an interested transaction
will be ongoing, the Audit Committee may establish guidelines for our management
to follow in its ongoing dealings with the related party and then at least
annually must review and assess ongoing relationships with the related
party. During 2008, the following interested transactions were
subject to such review and approval or ratification:
The
Knight family has been involved in the transportation business for a number of
years, and family members of Kevin Knight, Gary Knight, Keith Knight, and Randy
Knight have been employed by us since our inception. The Knight
family members are employed on the same terms and conditions as non-related
employees. During 2008, we employed two individuals who were
compensated in excess of $120,000 and are considered related persons under Item
404(a) of Regulation S-K. The aggregate total compensation paid to
these two individuals in 2008 was $ 339,869. Based on the fact that these two individuals are employed on the same terms and
conditions as non-related employees, the Audit Committee ratified these
transactions. We also employed eight other related persons
during 2008, none of whom received compensation in excess of
$120,000.
See "Corporate Governance –
The Board of Directors and Its Committees – Committees of the Board of Directors
– The Compensation Committee – Compensation Committee Interlocks and Insider
Participation" for a description of transactions between us and members of our
Compensation Committee or their affiliates.
KNIGHT
TRANSPORTATION, INC. EMPLOYEE STOCK PURCHASE PLAN
At the
Annual Meeting, our shareholders are being asked to approve the Knight
Transportation, Inc. Employee Stock Purchase Plan (the "Employee Stock Purchase
Plan"), which was adopted by our Board of Directors on February 11, 2009,
subject to shareholder approval. If approved by our shareholders, the
Employee Stock Purchase Plan will become effective as determined by the
Compensation Committee. The Employee Stock Purchase Plan is intended
to qualify as an "employee stock purchase plan" under Section 423 of the
Internal Revenue Code of 1986, as amended (the "Code"). We intend to
use the Employee Stock Purchase Plan to retain the services of our current and
new employees and to provide incentives for our employees to exert maximum
effort for the success of our company by giving our employees the opportunity to
purchase our Common Stock.
A summary
of the Employee Stock Purchase Plan appears below. The summary is
qualified in its entirety by reference to the text of the Employee Stock
Purchase Plan, a copy of which is included as Appendix A to this Proxy
Statement. You are urged to read the actual text of the Employee
Stock Purchase Plan in its entirety.
Administration. The
Employee Stock Purchase Plan is administered by the Compensation
Committee. As plan administrator, the Compensation Committee has full
authority to adopt such rules and procedures as it may deem necessary for the
proper administration and interpretation of the Employee Stock Purchase
Plan.
Share
Reserve. There will be 1,000,000 shares of our Common Stock,
as automatically adjusted to reflect changes in the capitalization of our
company, authorized to be sold under the Employee Stock Purchase
Plan.
Offering
Periods. The Compensation Committee may grant rights to
purchase shares of our Common Stock to eligible employees on February 1 of every
calendar year (beginning with calendar year 2009) and such rights shall expire
on each subsequent January 31 (an "Offering Period"). There shall be
two six-month purchase periods during each Offering Period, which shall commence
on February 1 and August 1 of each year and end on July 31 and January 31,
respectively. On the last day of each relevant Offering Period (or if
such date is not a business day, the first business day preceding such date),
each participant's accumulated payroll deduction will be applied to the purchase
of whole shares of our Common Stock, up to the maximum number of shares of
Common Stock permitted pursuant to the terms of the Employee Stock Purchase
Plan.
Eligibility. Any
individual who customarily works for at least twenty hours per week for at least
five months per calendar year in our employ is eligible to participate in one or
more Offering Periods. An eligible employee may only join an Offering
Period on the start date of the relevant Offering Period. As of
December 31, 2008, approximately 4,700 employees were eligible to participate in
the Employee Stock Purchase Plan.
Purchase
Provisions. Each eligible participant may authorize periodic
payroll deductions in a multiple of whole percentages between one percent and
ten percent of such participant's earnings. A participant may not
increase his or her rate of payroll deduction for an Offering Period after the
start of the relevant Offering Period, but he or she may decrease the rate once
per Offering Period.
Purchase
Price. The purchase price of Common Stock acquired pursuant to
rights granted under the Employee Stock Purchase Plan shall be determined by the
Compensation Committee, provided that the purchase price shall not be less than
the lesser of: (a) an amount equal to eighty-five percent (85%) of the fair
market value of the Common Stock on the offering date rounded up to the nearest
cent per share; or (b) an amount equal to eighty-five percent (85%) of the fair
market value of the Common Stock on the purchase date rounded up to the nearest
cent per share.
Valuation. The
fair market value per share of Common Stock on any relevant date will be the
closing selling price per share on such date on the New York Stock
Exchange.
Special
Limitations. The Employee Stock Purchase Plan imposes certain
limitations upon a participant's rights to acquire Common Stock, including the
following limitations:
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No
purchase right may be granted to any individual who owns stock (including
stock purchasable under any outstanding options or purchase rights)
possessing five percent or more of the total combined voting power or
value of all classes of our stock or any of our
affiliates.
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No
purchase right granted to a participant may permit such individual to
purchase Common Stock at a rate greater than $25,000 worth of such Common
Stock (valued at the time such purchase right is granted) for any calendar
year.
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No
participant may purchase more than 2,500 shares of Common Stock on any one
purchase date.
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The
maximum number of shares of Common Stock in the aggregate that all
participants purchase on any one purchase date may not exceed (a) 200,000
shares of Common Stock, less any shares of Common Stock previously
purchased on any purchase date during the offering or (b) the number of
shares of Common Stock remaining available for purchase under the Employee
Stock Purchase Plan.
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Termination of Purchase
Rights. A participant's purchase right will immediately
terminate upon such participant's loss of eligible employee status, and his or
her accumulated payroll deductions for the Offering Period in which the purchase
right terminates shall be promptly refunded. A participant may not withdraw
funds deposited during an Offering Period. However, at any time
during a purchase period a participant may terminate his or her payroll
deductions under the Employee Stock Purchase Plan.
Use of
Proceeds. Proceeds from the sale of Common Stock pursuant to
the rights granted under the Employee Stock Purchase Plan will constitute
general funds of our company and may be applied for general corporate
purposes.
Shareholder
Rights. No participant will have any shareholder rights with
respect to the shares of Common Stock covered by his or her purchase right until
the shares are actually purchased on the participant's behalf and such purchase
is recorded in our stock books.
Assignability. Purchase
rights will be exercisable only by the participant and will not be assignable or
transferable.
Designation of
Beneficiary. A participant may
designate the person or persons who are to receive shares of Common Stock, if
any, from the participant's account under the Employee Stock Purchase Plan in
the event of such participant's death subsequent to the end of an offering but
prior to delivery to the participant of such shares of Common
Stock.
Adjustments Upon Changes in
Capitalization. The aggregate number of shares of Common Stock
which may be issued pursuant to rights granted under any offering under the
Employee Stock Purchase Plan shall be automatically adjusted, without further
action by the Board or our shareholders, to reflect changes in the
capitalization of our company, such as stock dividends, stock splits, reverse
stock splits, subdivisions, exchange of shares, liquidating dividends,
reorganizations or reclassifications, or any similar recapitalization that
affects or modifies the number of shares of Common Stock issued and outstanding
at any time. In the event of: (i) a dissolution or liquidation of our
company; (ii) a merger or consolidation in which our company is not the
surviving corporation; (iii) a reverse merger in which our company is the
surviving corporation but the shares of our Common Stock outstanding immediately
preceding the merger are converted by virtue of the merger into other property,
whether in the form of securities, cash, or otherwise; or (iv) any other capital
reorganization in which more than fifty percent (50%) of our shares entitled to
vote are exchanged, then, as determined by the Compensation Committee in its
sole discretion, (A) any surviving corporation may assume outstanding rights or
substitute similar rights for those under the Employee Stock Purchase Plan, (B)
such rights may continue in full force and effect, or (C) participants'
accumulated payroll deductions may be used to purchase Common Stock immediately
prior to the transaction described above and the participants' rights under the
ongoing offering will terminate.
Amendment and
Termination. The Compensation Committee may terminate,
suspend, discontinue, modify, or amend the Employee Stock Purchase Plan in any respect,
except that, without the approval of our shareholders, no amendment or
modification may change the number of shares of Common Stock reserved and
available for issuance (other than the automatic adjustments described above) or
modify the Employee Stock Purchase Plan in such a way that shareholder approval
is required for the Employee Stock Purchase Plan to obtain "employee stock
purchase plan" treatment under Section 423 of the Code. The
Compensation Committee may, in its discretion, suspend or terminate the Employee
Stock Purchase Plan at any time. Unless sooner terminated, the
Employee Stock Purchase Plan will terminate on the earlier of
(i) February 10, 2019 or (ii) the date on which all shares
available under the Employee Stock Purchase Plan, as adjusted from time to time,
are exhausted.
Stock Purchases. No shares of Common
Stock shall be purchased pursuant to the Employee Stock Purchase Plan and no
rights granted under the Employee Stock Purchase Plan shall be exercised unless
and until the Employee Stock Purchase Plan has been approved by our
shareholders.
Effect on
Shareholders. We are unable to predict the precise effect of
the Employee Stock Purchase Program on our shareholders because we are unable to
predict how many eligible employees will participate in the Employee Stock
Purchase Plan.
Federal Income Tax
Consequences. The Employee Stock Purchase Plan is intended to
be an "employee stock purchase plan" within the meaning of Section 423 of
the Code. Under a plan which so qualifies, no taxable income will be
recognized by a participant, and no deductions will be allowable to us in
connection with the grant or exercise of an outstanding purchase
right. Taxable income will not be recognized until there is a
sale or other disposition of the shares acquired under the Employee Stock
Purchase Plan or in the event the participant should die while still owning the
purchased shares. Each participant shall deliver a commitment in writing to the
Compensation Committee that the participant understands that the special rules
of income tax treatment under Section 421(a) of the Code shall apply with
respect to the transfer of a share of Common Stock to the participant pursuant
to the participant's exercise of a right granted under the Employee Stock
Purchase Plan.
The
foregoing is only a summary of the affect of federal income taxation upon us and
the participants under the Employee Stock Purchase Plan. It does not purport to
be complete, and does not discuss all of the tax consequences of a participant's
death or the provisions of the income tax laws of any state, municipality, or
foreign country in which the participants may reside.
THE
BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS A VOTE "FOR" APPROVAL OF THE EMPLOYEE STOCK PURCHASE PLAN.
PROPOSAL NO. 3 – APPROVAL AND RATIFICATION OF THE AMENDMENT AND
RESTATEMENT OF THE KNIGHT TRANSPORTATION, INC. 2003 STOCK OPTION PLAN (THE
"2003 STOCK OPTION PLAN"), WHICH AMONG OTHER THINGS (I) RENAMES THE 2003
STOCK OPTION PLAN THE "KNIGHT TRANSPORTATION, INC. AMENDED AND RESTATED 2003
STOCK OPTION AND EQUITY COMPENSATION PLAN," (II) PROVIDES ADDITIONAL TERMS
AND ADMINISTRATIVE PROCEDURES APPLICABLE TO RESTRICTED STOCK GRANTS, AND
(III) AUTHORIZES THE ISSUANCE OF STOCK APPRECIATION RIGHTS.
In
February 2003, the Board of Directors adopted the 2003 Stock Option Plan, which
was approved by our shareholders in May 2003. At our annual meeting in May 2005,
our shareholders approved an amendment to the 2003 Stock Option Plan to increase
the number of shares of Common Stock available for issuance from 1,500,000
shares to 4,000,000 shares. By virtue of a stock split, effected in
the form of a 50% stock dividend in the fourth quarter of 2005, the total number
of shares of Common Stock available for issuance thereunder increased to
6,000,000 shares. At a special meeting in December 2005, our
shareholders approved an amendment to the 2003 Stock Option Plan limiting the
number of shares with respect to which options may be granted to any one plan
participant during a calendar year to 650,000 shares, subject to adjustment for
stock dividends, stock splits, reverse stock splits, and similar transactions,
and approved and ratified the amendment and restatement of the 2003 Stock Option
Plan to incorporate all prior amendments to the 2003 Stock Option
Plan. The 2003 Stock Option Plan was
further amended effective as of January 1, 2007, to eliminate the automatic
grant of stock options to independent directors, to provide that director's fees
due to any independent director may be paid in
Common Stock, and to require the
consent of the Compensation Committee prior
to the sale of any Common Stock obtained
through a stock grant made to an
independent director at any time while that individual is serving as a Director
of our company. The 2003 Stock Option Plan was further amended as of
June 1, 2008, to increase the number of
shares available for stock grants from
6,000,000 to 9,000,000 shares of Common Stock.
The 2003 Stock Option Plan was further amended as of
February 11, 2009, subject to shareholder approval, to provide additional terms
and administrative procedures applicable to restricted stock grants, to
authorize the issuance of stock appreciation rights, and to restate the
2003 Stock Option Plan in its entirety and
rename it the "Knight Transportation, Inc. Amended and Restated 2003 Stock
Option and Equity Compensation Plan."
The purposes of the
2003 Stock Option Plan are to: (a) provide
our employees with an opportunity to purchase Common Stock as an incentive to
continue employment with us and to work toward our long-term growth,
development, and financial success; and (b) attract, motivate, and retain the
services of our Outside Directors and employees and reward such directors and
employees by the issuance of equity grants so that these directors and employees
will contribute to and participate in our long-term performance. In furtherance
of these purposes, the 2003 Stock Option
Plan authorizes the grant of stock options and restricted stock, subject
to applicable law, to our directors, executive officers, certain other full-time
employees, certain part-time employees, and certain independent contractors,
consultants, or advisors of our company.
The Board
of Directors believes that our success in executing our strategy is largely due
to our talented and hard-working employees, including our drivers, and that our
future success will depend on our ability to continue to attract and retain high
caliber employees. We have maintained a stock option plan since 1994, and the
Board believes that stock option grants have historically served as a highly
effective recruiting and retention tool by allowing our employees to share in
the ownership of our company and have historically contributed to our revenue
and earnings growth by aligning the long-term interests of our management and
employees with those of our shareholders.
The
Compensation Committee, which administers the 2003
Stock Option Plan, believes that the additional terms and administrative procedures
applicable to restricted stock grants and the authorization for the issuance of
stock appreciation rights will be useful in continuing to offer our
employees, directors, independent contractors, consultants, and advisors an
effective and competitive equity incentive program. The Compensation Committee
believes that these changes will improve our current equity incentive program
and will have a positive impact on our ability to attract and retain employees
and directors.
The
Compensation Committee recognizes its responsibility to strike a balance between
shareholder concerns regarding the potential dilutive impact equity awards and
our ability to attract, retain, and reward officers and employees whose
contributions are critical to our long-term success. The total number
of shares of Common Stock underlying stock option grants made over the past
three fiscal years represented approximately 3.5% of the total number of shares
of Common Stock outstanding as of December 31, 2008.
The 2003 Stock Option Plan is currently our only
active equity compensation plan (see Proposal No. 2 for information with respect
to the proposed Employee Stock Purchase Plan). As of December 31,
2008, there were 4,993,691 shares of our Common Stock subject to outstanding
option grants under the 2003 Stock Option
Plan and our prior stock option plan, the 1994 Amended and Restated Stock
Option Plan (the "1994 Stock Option Plan"). The 1994 Stock Option
Plan was terminated effective as of May 31, 2003, and no additional awards may
be made under that plan. As of December 31, 2008, there were
4,076,969 shares of Common Stock available for future grants under the 2003 Stock Option Plan. Of the total
number of shares covered by outstanding options under the 2003 Stock Option Plan and the 1994 Stock Option
Plan, at December 31, 2008, 29.9% are issuable to the executive officers and
directors and 70.1% are issuable to other employees.
The
principal provisions of the 2003 Stock Option Plan, as amended and restated, are
summarized below. This summary is not a complete description of the 2003 Stock
Option Plan and is qualified by the full text of that plan.
General. The 2003
Stock Option Plan is a broad-based equity compensation plan that is designed to
attract and retain directors, officers, key employees (including drivers),
independent contractors, consultants, and advisors to provide them with
long-term incentives to help us achieve profitable growth, and to align their
interests with the interests of our shareholders. The 2003 Stock Option Plan is
effective, subject to the approval of our shareholders, as of February 11,
2009. The 2003 Stock Option Plan, if not terminated earlier, will
expire on February 5, 2013.
Administration. The 2003
Stock Option Plan is administered by the Compensation Committee.
Eligibility and Awards. The
following natural persons are eligible to participate in the 2003 Stock Option
Plan: (i) full-time and part-time employees of our company, who, in the sole
judgment of the Compensation Committee, are qualified by position, training,
ability, and responsibility to contribute substantially to the progress of our
company and have a material, positive effect on the results of the operations of
our company (we expect there will be approximately 4,800 employees who will
be eligible to participate); (ii) independent contractors, consultants, or advisors who
perform bona fide services for our company and such services are not in
connection with any offer or sale of securities in a capital raising transaction
and who do not directly or indirectly promote or maintain a market for our
company's stock (we expect there will be less than 100 independent
contractors, consultants, or advisors, in the aggregate, who will be
eligible to participate); and (iii) directors
of our company (all of the directors are
eligible to participate). At December 31, 2008, we had approximately
4,700 full-time employees, with more than 900 participants who have outstanding
options under the 2003 Stock Option Plan or the 1994 Stock Option
Plan. See Proposal No. 4 regarding a proposed stock option exchange
program in which certain option holders may elect to exchange certain options
for restricted stock.
Equity awards may be
made either as incentive stock options, as defined in Section 422 of the Code
("ISOs"), as nonqualified stock options ("NSOs"), as restricted stock, or as
stock appreciation rights. The 2003 Stock Option Plan provides that an equity
grant made under the Plan may not have an exercise price that is less than 100%
of the fair market value of the underlying Common Stock on the date of grant.
However, in the case of ISOs granted to a person who holds more than 10% of the
voting power of our outstanding capital stock, the 2003 Stock Option Plan
provides that the exercise price may not be less than 110% of the fair market
value of the underlying Common Stock and that the ISO may not be exercisable for
a term of more than 5 years from the date of grant.
The 2003 Stock Option Plan provides that ISOs may not
be granted for a term of more than ten (10) years after the date of the 2003
Stock Option Plan and NSOs may be granted for any reasonable term. Under the
2003 Stock Option Plan, the exercise price
of options may be paid in cash or immediately available funds or in Common Stock
valued at its then-current market value.
The
Compensation Committee, in its discretion, selects the persons to whom options
or restricted stock will be granted, the time or times at which such options or
restricted stock will be granted, and the number of shares subject to each such
grant. For this reason, it is not possible to determine the benefits or amounts
that will be received by any particular officer or employee, or group of
officers or employees, in the future. The 2003
Stock Option Plan provides, however, that the aggregate number of shares
with respect to which options may be granted to any one plan participant during
a calendar year shall not exceed 650,000 shares, subject to adjustment for stock
dividends, stock splits, reverse stock splits, and similar
transactions.
Since
February 2007, our Outside Directors have received annual compensation of
$45,000, one-half of which has been paid in cash and one-half of which has been
issued in Common Stock grants made under the 2003 Stock Option
Plan. The number of shares of Common Stock issued to a director is
determined by dividing the amount of the director's compensation subject to
payment in Common Stock by the closing market price of our Common Stock on the
date of the grant. Common Stock is issued to our Outside Directors
under the Independent Director provision of our 2003 Stock Option Plan, which
reserved 200,000 shares of our Common Stock for compensatory stock grants to
Outside Directors, subject to certain adjustments.
The 2003 Stock Option Plan provides
additional terms and administrative procedures
applicable to restricted stock grants. A restricted stock grant may
be subject to the vesting schedule and the other terms, conditions, and
restrictions established by the Compensation Committee and provided in the
Participant's stock grant agreement.
Common Stock issued to Participants under
the 2003 Stock Option Plan will be issued in electronic form and recorded on the
books of our company. Common Stock may not be issued in certificated
form while any restrictions are applicable to such Common
Stock.
Under the
2003 Stock Option Plan, the Compensation Committee
may award stock grants to a Participant in the form of stock appreciation rights
("SARs"). SARs shall be exercisable at such times as the Compensation
Committee specifies in the Participant's stock grant agreement. Each
SAR shall entitle the Participant, upon exercise, to an amount equal to the
appreciation in a stated number of shares of Common Stock from the fair market
value on the date the SAR was granted to the fair market value of the shares of
Common Stock on the date of exercise. A SAR must be granted at the
fair market value of a share of the Common Stock with which it is
associated. SARs may be settled in cash or in stock, or in both, as
the Compensation Committee may provide.
All
grants made under the 2003 Stock Option
Plan are evidenced by a written agreement between us and the Participant.
The Compensation Committee, subject to the limitations set forth in the 2003 Stock Option Plan, designates the terms and
conditions of any option, restricted stock grant, or stock appreciation right
including, without limitation, the exercise price, vesting schedule, exercise
rights, and termination or forfeiture provisions. The 2003 Stock Option Plan provides that stock grants
are non-transferable except pursuant to the laws of descent and distribution and
generally terminate upon termination of employment for reasons other than death,
disability, or early or normal retirement.
A
participant does not have any rights as a shareholder with respect to shares of
Common Stock subject to grants made under the 2003
Stock Option Plan until shares are issued to the
Participant.
Shares Available for
Issuance. There are presently 9,000,000 shares of Common Stock reserved
and available for issuance pursuant to the 2003
Stock Option Plan, of which 200,000 shares are reserved for issuance to
Outside Directors pursuant to the provisions described above. From the total
shares reserved for issuance of grants under the 2003 Stock Option Plan, as of February 28, 2009,
we had made award grants covering 4,911,671 shares, net of all shares that have
been canceled or forfeited. Any shares subject to outstanding stock grants are
counted against the shares reserved and available for issuance as one share for
every share subject thereto. If a stock grant expires, is terminated, or
canceled without having been exercised in full or is forfeited, the
unexercised or forfeited shares will become available for future grant under the
2003 Stock Option Plan.
The total
number of shares reserved and available for issuance under the 2003 Stock Option Plan is automatically adjusted,
without further action by the Board of Directors or shareholders, to reflect
stock dividends, stock splits, reverse stock splits, subdivisions,
reorganizations, reclassifications, or any similar recapitalizations that affect
or modify the number of shares of outstanding Common Stock.
Mergers or Consolidations. If
(i) our company dissolves or undergoes any reorganization, including, without
limitation, a merger or consolidation with any other organization, (ii) our
company is not the surviving entity in such reorganization, and (iii) the
surviving entity does not agree to assume the stock grants granted under the
2003 Stock Option Plan or to issue
substitute stock grants therefor, the stock grants granted under the 2003 Stock Option Plan may be terminated, so long
as each participant holding unexercised stock grants is notified of such
termination and provided a reasonable period of not less than 15 days to
exercise such awards to the extent such awards are then exercisable. In the
event of a merger or consolidation, the Compensation Committee may, in its sole
discretion, authorize the exercise of outstanding stock grants or accelerate the
vesting of such stock grants, or both. Any stock grant not exercised
in accordance with such prescribed terms and conditions shall terminate as of
the date specified by the Compensation Committee, and simultaneously, the 2003
Stock Option Plan itself shall be terminated without further action by us or our
Board of Directors.
Amendment and Termination.
The Board of Directors may terminate, suspend, discontinue, modify, or
amend the 2003 Stock Option Plan in any
respect, except that, without the approval of our shareholders, no amendment or
modification may change the number of shares of Common Stock reserved and
available for issuance (other than the automatic adjustments described above),
change the designation of the class of employees eligible to receive awards,
decrease the price at which options may be granted, or remove the administration
of the 2003 Stock Option Plan from the
Compensation Committee.
Stock Price. On February 27,
2009, the closing price of our Common Stock was 12.96 per share.
Federal Income Tax
Consequences.
ISOs. An optionee is not treated
as receiving taxable income upon either the grant of an ISO or upon the exercise
of an ISO. However, the difference between the exercise price and the fair
market value on the date of exercise is an item of tax preference at the time of
exercise in determining liability for the alternative minimum tax, assuming that
the Common Stock is either transferable or is not subject to a substantial risk
of forfeiture under Section 83 of the Code. If at the time of exercise, the
Common Stock is both nontransferable and is subject to a substantial risk of
forfeiture, the difference between the exercise price and the fair market value
of the Common Stock (determined at the time the Common Stock becomes either
transferable or not subject to a substantial risk of forfeiture) will be a tax
preference item in the year in which the Common Stock becomes either
transferable or not subject to a substantial risk of forfeiture.
If Common
Stock acquired by the exercise of an ISO is not sold or otherwise disposed of
within two years from the date of its grant and is held for at least one year
after the date such Common Stock is transferred to the optionee upon exercise,
any gain or loss resulting from its disposition is treated as long-term capital
gain or loss. If such Common Stock is disposed of before the expiration of the
above-mentioned holding periods, a "disqualifying disposition" occurs. Upon a
disqualifying disposition, the optionee realizes ordinary income in the year of
the disposition in an amount equal to the difference between the fair market
value of the Common Stock on the date of exercise and the exercise price, or the
selling price of the Common Stock and the exercise price, whichever is less. The
balance of the optionee's gain on a disqualifying disposition, if any, is taxed
as capital gain.
We are
not entitled to any tax deduction as a result of the grant or exercise of an
ISO, or on a later disposition of the Common Stock received, except that in the
event of a disqualifying disposition, we are entitled to a deduction equal to
the amount of ordinary income realized by the optionee.
NSOs. An optionee does not
recognize any taxable income upon the grant of an NSO, and we are not entitled
to a tax deduction by reason of such grant. Upon exercise of an NSO, the
optionee recognizes ordinary income generally measured by the excess of the then
fair market value of the shares over the exercise price, and we are entitled to
a corresponding tax deduction. Upon a disposition of shares acquired upon
exercise of an NSO by the optionee, any difference between the sale price and
the exercise price, to the extent not recognized as ordinary income as provided
above, is treated as long-term or short-term capital gain or loss, depending on
the holding period. Such subsequent disposition by the optionee has no tax
consequence to us.
Restricted
Stock. Unless
the recipient of a restricted stock grant elects to treat such grant as ordinary
income at the time the grant is made, the recipient does not recognize taxable
income upon the grant of restricted stock. Instead, the recipient will recognize
ordinary income at the time of vesting (i.e., when the shares are no
longer subject to a substantial risk of forfeiture) equal to the fair market
value of the restricted stock on the vesting date minus any amount paid for the
restricted stock. At the time that the recipient recognizes ordinary income in
respect of the restricted stock grant, we are entitled to a tax deduction for
compensation expense equal to the amount of ordinary income recognized by the
recipient.
Stock Appreciation Rights. Generally, there are no tax consequences
to our company or the Participant upon the grant of a SAR. Tax recognition by
the Participant is generally deferred until the Participant receives the value
of the award. At that time, the value of the SAR, measured as the excess in
value of a share of Common Stock as of the date of exercise over the value as of
the date of grant, would be taxed to a Participant as ordinary
income. We would then be entitled to a deduction in the same
amount.
The
foregoing is only a summary of the affect of federal income taxation upon us and
the Participants under the 2003 Stock Option
Plan. It does not purport to be complete, and does not discuss all of the
tax consequences of a Participant's death or the provisions of the income tax
laws of any state, municipality, or foreign country in which the Participants
may reside.
The
following table sets forth certain information regarding grants of stock options
and other equity grants made under the 2003 Stock
Option Plan during the year ended December 31, 2008, to: (i) each of the
Named Executive Officers; (ii) all current executive officers of our
company as a group; (iii) all current directors who are not executive officers
as a group; (iv) each nominee for election as a director; and (v) all
employees, including all current officers who are not executive officers, as a
group. Future awards, if any, that will be made to eligible
participants under the 2003 Stock Option
Plan are subject to the discretion of the Compensation Committee.
Accordingly, future grants under the 2003 Stock
Option Plan are not determinable.
|
Plan
Benefits
2003 Stock Option
Plan
|
|||||||||
|
Name
|
Number
of
Options
Granted
During
2008
|
Number
of
Shares
of
Common
Stock
Granted
During
2008
|
Dollar
Value of
Options
($)(1)
|
Dollar
Value
of
Shares
of
Common
Stock
($)(2)
|
|||||
|
Kevin
P. Knight,
Chairman and Chief
Executive
Officer
|
75,000
|
-
|
464,250
|
-
|
|||||
|
David
A. Jackson,
Chief Financial
Officer
|
29,304
|
-
|
171,995
|
-
|
|||||
|
Keith
T. Knight,
Chief Operating
Officer
|
40,000
|
-
|
247,600
|
-
|
|||||
|
Gary
Knight,
Vice
Chairman of the Board(3)
|
15,000
|
-
|
92,850
|
-
|
|||||
|
Casey
Comen,
Executive Vice President of
Sales
|
25,000
|
-
|
144,650
|
-
|
|||||
|
Executive
Group(4)
|
184,304
|
-
|
1,121,345
|
-
|
|||||
|
G.D.
Madden(3)
|
-
|
1,301
|
-
|
22,494
|
|||||
|
Kathryn
L. Munro(3)
|
-
|
1,301
|
-
|
22,494
|
|||||
|
Non-Executive
Director Group
(5)
|
-
|
7,806
|
-
|
134,966
|
|||||
|
Non-Executive
Officer Employee Group(6)
|
1,206,598
|
-
|
6,571,623
|
-
|
|||||
|
(1)
|
This
column represents stock compensation expense to be recognized for
financial reporting purposes with respect to options granted to our
executive officers in 2008, in accordance to SFAS 123R. These amounts
reflect our accounting expense to be recognized over the vesting period,
and they do not correspond to the actual value that will be recognized by
the recipients.
|
||||||
|
(2)
|
Represents
the grant date fair value of the stock awards under SFAS 123R granted
during fiscal 2008. The fair value was calculated using the
closing price of our Common Stock on the grant date. The fair
value of the stock awards are accounted for in accordance with SFAS
123R.
|
||||||
|
(3)
|
Our
director nominees are Messrs. Madden and Gary Knight and Ms. Munro,
however, Mr. Gary Knight is not a non-executive
director.
|
||||||
|
(4)
|
Our
Named Executive Officers and current executive officers consist of the
same group of individuals.
|
||||||
|
(5)
|
During
2008, our non-executive directors received an aggregate of 7,806 shares of
Common Stock in payment of directors' fees pursuant to the terms of the
2003 Stock Option Plan. These shares are
subject to certain holding restrictions.
|
||||||
|
(6)
|
In
addition to the stock options reflected in the table, on January 30, 2009,
and February 27, 2009, a limited number of employees were granted options
with respect to 12,500 shares, in the aggregate, at an exercise price
ranging from $12.96 to $13.34 per
share.
|
||||||
The
following table provides certain information, as of December 31, 2008, with
respect to our compensation plans under which shares of Common Stock were
authorized for issuance. The 2003 Stock
Option Plan is presently our only active equity compensation
plan. The number of shares of Common Stock reflected in column (a) of
the following table is comprised of 4,592,865 shares subject to outstanding
options granted under the 2003 Stock Option
Plan and 400,826 shares subject to outstanding options granted under the
1994 Stock Option Plan. The number of shares of Common Stock
reflected in column (c) of the following table is comprised entirely of shares
available for future grant under the 2003 Stock
Option Plan as of December 31, 2008, and neither takes into account the
options granted subsequent to December 31, 2008, as described below, or any
awards that may be made under the Employee Stock Purchase Plan, if it is
approved by our shareholders. Shares of Common Stock underlying
outstanding options granted under the 2003 Stock
Option Plan that are terminated or expire unexercised will be available
for future grant.
|
Number
of securities
to
be issued upon
exercise
of
outstanding
options,
warrants
and rights
|
Weighted
average
exercise
price of
outstanding
options
warrants
and rights
|
Number
of securities
remaining
eligible for
future
issuance under
equity
compensation
plans
(excluding
securities
reflected in
column
(a))
|
||||
|
Plan
category
|
(a)
|
(b)
|
(c)
|
|||
|
Equity
compensation plans approved by
security holders
|
4,993,691
|
$14.69
|
4,076,969
|
|||
|
Equity
compensation plans not approved
by security
holders
|
-
|
-
|
-
|
|||
|
Total
|
4,993,691
|
$14.69
|
4,076,969
|
Subsequent
to December 31, 2008, we granted options with respect to 12,500 shares, in the
aggregate, under the 2003 Stock Option
Plan. As of February 28, 2009, there were 4,087,329 shares
available for future grants, adjusted for the forfeiture of options since
December 31, 2008, under the 2003 Stock Option Plan, without regard to the amendment set forth
in Proposal No. 3.
THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS A VOTE "FOR" APPROVAL OF THE
AMENDMENT AND RESTATEMENT OF THE 2003 STOCK OPTION
PLAN.
PROPOSAL NO. 4 – APPROVAL AND RATIFICATION OF A ONE-TIME STOCK
OPTION EXCHANGE PROGRAM FOR EMPLOYEES, ALONG WITH AN ACCOMPANYING AMENDMENT
TO THE 2003 STOCK OPTION PLAN TO PERMIT SUCH EXCHANGE
The Board
of Directors has determined that it is in the best interests of our company and
our shareholders to implement a one-time stock option exchange program, as
described below in detail, subject to the approval of our shareholders (the
"Option Exchange Program"). In order to implement the Option Exchange
Program, we need to amend the 2003 Stock Option Plan as in effect as of the time
of the vote related to this Proposal No. 4. The Option Exchange
Program will permit Eligible Employees (as defined below) to exchange Eligible
Options (as defined below), at the option of each Eligible Employee and upon a
grant-by-grant basis, for either a lesser number of (i) new options
("Replacement Options") or (ii) restricted stock ("Restricted Stock" and
together with the Replacement Options, the "Replacement Equity
Grants"). The Replacement Equity Grants will be made pursuant to the
terms of the 2003 Stock Option Plan, and the number of Replacement Equity Grants
issuable upon exchange will be determined pursuant to the respective exchange
ratios described below. Shareholder approval of this proposal is required
pursuant to the 2003 Stock Option Plan and pursuant to the rules of the New York
Stock Exchange. If the amendment and restatement of the 2003 Stock
Option Plan (see Proposal No. 3) is approved by our shareholders, all references
in this Proposal No. 4 to the "2003 Stock Option Plan" refer to the 2003 Stock
Option Plan as amended and restated as provided for in Proposal No. 3; however,
if the amendment and restatement of the 2003 Stock Option Plan is not approved
by our shareholders, all references in this Proposal No. 4 to the "2003 Stock
Option Plan" refer to the 2003 Stock Option Plan without regard to the amendment
and restatement set forth in Proposal No. 3.
Our
compensation philosophy is focused on attracting, retaining, and motivating key
employees by using an appropriate mix and various levels of cash and long-term
equity compensation that is designed to control fixed, cash compensation, reward
performance, and align our employees' compensation with increases in shareholder
value. We believe stock options have historically helped us achieve
this objective by aligning the employees' interests with those of our
shareholders, by motivating employees' performance toward our long-term success,
and, through the use of options with multi-year vesting periods, by encouraging
our executives and employees who have received option grants to continue their
employment with us. Over the past several years, the Compensation
Committee has recognized a broad trend among public companies of making
restricted stock grants as opposed to making stock option
grants. Because a grant of restricted stock gives an employee actual
ownership of part of the company, the Board of Directors believes such grants
can be a powerful tool in helping us achieve our compensation philosophy as
described above. The Board believes that giving our Eligible
Employees the choice between receiving Replacement Options or Restricted Stock
in exchange for their Eligible Options, will make the Option Exchange Program
more effective than if we were to require Eligible Employees to exchange their
Eligible Options for a specific type of Replacement Equity Grant.
From 2003
to 2006, we achieved substantial revenue and income growth. In 2007
and 2008, our growth slowed as a result of economic conditions, and 2008 marked
the third consecutive year in which a strong "peak" shipping season did not
materialize. The industry-wide supply of truckload equipment continued to
outpace the freight demand during most of 2007 and throughout 2008, which
pressured pricing and resulted in lower equipment utilization. Based
on the foregoing, a downturn in general economic conditions, and an overall
stock market downturn, our stock price has declined, which has reduced the
incentive value of our outstanding stock options. As of March 24,
2009, approximately 3.4 million, or approximately 70%, of our outstanding stock
options have an exercise price that is higher than the current market price of
our Common Stock and over 900 of our employees hold such "underwater"
options. This means that the majority of our outstanding stock
options have little or no perceived subjective value to the employees who hold
them and are therefore not very effective as incentives to retain and motivate
these employees to increase long-term shareholder value.
In
addition to incentivizing our key employees, our Board of Directors believes
that it is important to our future success to revitalize the incentive value of
our equity compensation program to retain employees and create in them a
personal stake in the long-term financial success of our company. The
Board also recognizes the competition in our industry to attract and recruit top
talent. The Board believes that it has a responsibility to address these issues
and to maintain proper incentives to retain and motivate our key
employees.
Our Board
also believes that the Option Exchange Program will help us recapture value from
compensation costs that we already are incurring with respect to outstanding,
underwater stock options. These underwater options were granted at
the then fair market value of our Common Stock. As of December 31,
2008, there was approximately $15.9 million of unrecognized compensation expense
related to unvested share-based compensation awards granted under the 2003 Stock
Option Plan and our prior stock option plan, a substantial portion of which
expense relates to underwater options. Our Board believes it is not
an efficient use of our resources to recognize compensation expense on options
that are not perceived by our employees as providing value. By
replacing options that have little or no perceived value with equity grants that
will provide both retention and incentive value and that do not create
additional compensation expense (other than expense that might result from
fluctuations in our stock price after the exchange ratios have been set but
before the exchange actually occurs), the Board believes we will be making
efficient use of our resources.
The Board
believes that offering our key employees the choice between exchanging their
underwater options for either Replacement Options or Restricted Stock will
provide the desired incentive to our employees to remain with our company and to
seek to maximize long-term shareholder value. Providing this
alternative to our key employees, eliminates the negative aspects of granting
only Replacement Options or only Restricted Stock, as described below in
"Alternatives Considered." Consequently, the Board has proposed the
Option Exchange Program described herein and recommends that Proposal No. 4 be
approved.
When
considering how to best continue to incentivize and reward our key employees who
have underwater options, the Board of Directors considered the following
alternatives, in addition to the Option Exchange Program:
· Allow the existing stock options to
remain outstanding. The Board considered whether we needed to
take any steps at all with respect to the existing, underwater stock
options. Because so many of the stock options held by employees are
significantly underwater, the Board believes that it could be difficult to
retain employees with stock options that are significantly underwater and the
failure to retain these employees could negatively affect our
company.
· Increase cash compensation.
The Board also considered whether we could substantially increase
base and target bonus cash compensation. However, significant increases in cash
compensation would substantially increase our compensation expenses and reduce
our cash flow from operations, which could adversely affect our business and
operating results. This also would be a departure from our long-held
cost-control principles.
· Grant additional equity
awards. The Board also considered special grants of
additional stock options at current market prices or another form of equity
award such as restricted stock. However, these additional grants would
substantially increase the number of outstanding options, result in dilution to
our shareholders, and increase our compensation expense.
· Exchange options for cash.
The Board also considered implementing a program to exchange
underwater options for cash payments. However, an exchange program for cash
would increase our compensation expenses and reduce our cash flow from
operations, which could adversely affect our business and operating results. In
addition, we do not believe that such a program would provide the appropriate
long-term incentive and retention value.
· Exchange options for
options. The Board also considered implementing a program to
exchange underwater options for only Replacement Options. The Board
believes that granting Replacement Options to employees who have options that
are significantly underwater would provide renewed incentives and motivation for
our employees and would provide a strong retention element. However,
the Board also recognizes that there is a broad trend toward granting some level
of restricted stock and that there are additional incentives for employees who
receive restricted stock compared to stock options. In addition, an
option for option exchange would not reduce the total number of shares
outstanding to the same extent as an option for restricted stock exchange would
have. Thus, the Board believes that we could receive additional
benefits under the Option Exchange Program if we allowed underwater options to
be exchanged for either Replacement Options or Restricted Stock.
· Exchange options for restricted
stock. The Board also considered implementing a program to
exchange underwater options for only Restricted Stock. The Board believes that
one of the advantages restricted stock has (at least from a management
perspective) compared to stock options is that restricted stock is better at
motivating employees to think and act like owners at the time of granting and
vesting. When a restricted stock award vests, the employee who receives the
restricted stock becomes an owner of the company, without any further action by
the employee. On the other hand, when a stock option vests, the
employee must then determine whether he or she wants to exercise the option and
become an owner. The Board believes that actual ownership of part of
the company (i.e., making restricted stock grants) is a powerful, motivating
tool in incentivizing our employees to remain with us and to seek to maximize
long-term shareholder value. However, in order to ensure that the
Option Exchange Program is approximately expense-neutral to our company from an
accounting perspective, the exchange ratios for an option for restricted stock
exchange program would need to be substantially higher than for an option for
option exchange program (i.e., fewer replacement awards granted). Thus, the
Board believes that employee participation in an option for restricted stock
exchange program may be significantly lower than with an option for option
exchange program. Additionally, restricted stock would be a new form of equity
for our employees (since we have historically not made restricted stock grants)
and the Board believes that this lack of familiarity with restricted stock also
could negatively affect employee participation in the Option Exchange
Program. Low employee participation in a restricted stock for option
exchange would not allow us to receive the full benefits of implementing an
option exchange program. Thus, the Board believes that to maximize
the benefits of the Option Exchange Program, we should allow employees to choose
whether they want to exchange their underwater options for either Restricted
Stock or Replacement Options.
Implementation of the Option
Exchange Program. If our shareholders
approve this one-time offer to surrender underwater options in exchange for
Replacement Equity Grants under the Option Exchange Program, we anticipate that
the exchange will be completed shortly after such approval. If our
shareholders approve the Option Exchange Program, Eligible Employees will
receive written materials (the "Offer to Exchange Materials") explaining the
precise terms and timing of the Option Exchange Program, which will be
substantially in the form described herein. Eligible Employees will
be given at least 20 business days (or such longer period as we may elect to
keep the Option Exchange Program open) to elect to exchange all or none of their
Eligible Options, on a grant-by-grant basis, for Replacement Equity Grants.
After the offer to exchange is closed, the Eligible Options surrendered for
exchange will be canceled, and the Compensation Committee will approve
Replacement Equity Grants to the Eligible Employees who elected to participate
in accordance with the applicable exchange ratios. All such Replacement Equity
Grants will be granted under, and subject to the terms of, the 2003 Stock Option
Plan.
At or
before commencement of the Option Exchange Program, we will file the Offer to
Exchange Materials and other related documents with the Securities and Exchange
Commission ("SEC") as part of a tender offer statement on Schedule TO.
Eligible Employees, as well as shareholders and members of the public, will be
able to access the Offer to Exchange Materials and other documents we file with
the SEC free of charge from the SEC's web site at http://www.sec.gov or on our Shareholder
Relations web site at http://www.knighttrans.com.
If you are both a shareholder and an
Eligible Employee holding Eligible Options, please note that voting to authorize
the Option Exchange Program does not constitute an election to participate in
the Option Exchange Program.
Eligible Options.
To be eligible for exchange under the Option Exchange Program, an
option must have been granted on or after October 1, 2004 to an individual who
was an employee of our company at the time of grant and the option must have an
exercise price that is greater than the closing price of our Common Stock on the
date the offer commences (collectively, "Eligible Options"). The
majority of our stock option grants made since October 1, 2004 have an exercise
price that was above the closing price of our Common Stock on March 24,
2009.
Eligible Employees.
The Option Exchange Program will be open to all of our employees,
including our executive officers, who (a) hold Eligible Options, (b) are
employed by us on the date the offer to exchange commences, and (c) remain
employed by us through the date that the Replacement Equity Grants are made
(collectively, "Eligible Employees"). The Option Exchange Program
will not be open to non-employee, members of our Board of Directors. As of
February 28, 2009, there were over 900 employees who may become Eligible
Employees.
Exchange Ratios.
Exchange ratios will be designed to result, for accounting purposes,
in the Replacement Equity Grants having a fair value that is approximately equal
to the fair value of the Eligible Options that are surrendered in the exchange
(based on valuation assumptions made when the offer to exchange commences).
These ratios will be designed to make the grant of the Replacement Equity Grants
accounting expense neutral to our company. The actual exchange ratios will be
determined by the Compensation Committee shortly before the start of the Option
Exchange Program.
The exchange
ratios will be established by assigning an appropriate exchange ratio to each
Eligible Option. These exchange ratios will be based on the fair value of the
Eligible Options (calculated using a binomial lattice model). The calculation of
fair value using the binomial lattice model takes into account many variables,
such as the volatility of our stock, the remaining term of the option, and a
post vesting cancellation rate. As a result, the exchange ratios do
not necessarily increase as the exercise price of the option increases. Setting
the exchange ratios in this manner is intended to result in the issuance of
Replacement Equity Grants that have a fair value approximately equal to or less
than the fair value of the surrendered Eligible Options being
replaced. This will eliminate any additional compensation cost that we must
recognize on the Replacement Equity Grants, other than compensation expense that
might result from fluctuations in our stock price after the exchange ratios have
been set but before the exchange actually occurs.
The table
below reflects information, as of March 24, 2009, with respect to (i) the
exercise price, number, and remaining life of Eligible Options, (ii) the
exchange ratios for Replacement Options and Restricted Stock, respectively,
(iii) the number of Replacement Options that would be granted in the exchange
(assuming all Eligible Options were exchanged for Replacement Options), and
(iv) the number of Restricted Stock that would be granted in the exchange
(assuming all Eligible Options were exchanged for Restricted Stock). The
assumptions used to calculate the approximate values of the current "underwater"
options and the new "at-the-money" options (in order to calculate the estimated
exchange ratios shown below) are: a stock price of $14.59, an expected
volatility of 43.0%, a risk-free interest rate of 2.5%, an expected dividend
yield of 0.96%, a post-vesting cancellation rate of 10.0%, and a sub-optimal
exercise barrier of 2.5.
|
Exercise
Price
of
Eligible
Options
($)
|
Number
of
Shares
Underlying
Eligible
Options
|
Remaining
Life
of
Eligible
Options
(years)
|
Exchange
Ratio
for
Replacement
Options
(1)
|
Exchange
Ratio
for
Restricted
Stock
(2)
|
Number
of Replacement
Options
Issued
(3)
|
Number
of
Restricted
Stock
Issued
(4)
|
|||||||
|
14.79
|
3,000
|
5.45
|
1.01
|
3.10
|
2,970
|
968
|
|||||||
|
14.79
|
16,300
|
8.57
|
1.01
|
2.85
|
16,139
|
5,719
|
|||||||
|
14.79
|
835,685
|
8.83
|
1.01
|
2.83
|
827,411
|
295,295
|
|||||||
|
15.23
|
1,125
|
6.35
|
1.01
|
3.10
|
1,114
|
363
|
|||||||
|
15.30
|
3,750
|
6.11
|
1.05
|
3.15
|
3,571
|
1,190
|
|||||||
|
15.31
|
3,465
|
6.12
|
1.05
|
3.15
|
3,300
|
1,100
|
|||||||
|
15.49
|
300
|
5.49
|
1.05
|
3.15
|
286
|
95
|
|||||||
|
15.53
|
37,500
|
6.04
|
1.05
|
3.15
|
35,714
|
11,905
|
|||||||
|
15.68
|
802,501
|
6.30
|
1.05
|
3.15
|
764,287
|
254,762
|
|||||||
|
16.00
|
3,375
|
6.23
|
1.05
|
3.25
|
3,214
|
1,038
|
|||||||
|
16.23
|
4,500
|
7.35
|
1.05
|
3.15
|
4,286
|
1,429
|
|||||||
|
16.39
|
13,875
|
5.75
|
1.05
|
3.35
|
13,214
|
4,142
|
|||||||
|
16.54
|
3,750
|
5.92
|
1.05
|
3.35
|
3,571
|
1,119
|
|||||||
|
16.62
|
15,000
|
6.05
|
1.05
|
3.35
|
14,286
|
4,478
|
|||||||
|
16.81
|
3,750
|
6.08
|
1.05
|
3.35
|
3,571
|
1,119
|
|||||||
|
16.99
|
46,050
|
9.00
|
1.05
|
3.10
|
43,857
|
14,855
|
|||||||
|
17.29
|
412,500
|
9.06
|
1.15
|
3.15
|
358,696
|
130,952
|
|||||||
|
17.41
|
2,550
|
7.59
|
1.15
|
3.35
|
2,217
|
761
|
|||||||
|
17.59
|
53,250
|
6.48
|
1.15
|
3.45
|
46,304
|
15,435
|
|||||||
|
18.09
|
15,000
|
5.83
|
1.15
|
3.75
|
13,043
|
4,000
|
|||||||
|
18.20
|
370,585
|
8.07
|
1.15
|
3.45
|
322,248
|
107,416
|
|||||||
|
18.23
|
142,500
|
8.06
|
1.15
|
3.45
|
123,913
|
41,304
|
|||||||
|
18.36
|
13,700
|
8.32
|
1.15
|
3.35
|
11,913
|
4,090
|
|||||||
|
18.44
|
178,000
|
7.06
|
1.15
|
3.58
|
154,783
|
49,721
|
|||||||
|
18.75
|
342,300
|
7.05
|
1.26
|
3.65
|
271,667
|
93,781
|
|||||||
|
18.77
|
13,000
|
7.05
|
1.26
|
3.65
|
10,317
|
3,562
|
|||||||
|
18.92
|
5,000
|
9.25
|
1.15
|
3.35
|
4,348
|
1,493
|
|||||||
|
19.09
|
3,375
|
6.52
|
1.26
|
3.75
|
2,679
|
900
|
|||||||
|
19.61
|
6,000
|
7.09
|
1.26
|
3.75
|
4,762
|
1,600
|
|||||||
|
19.65
|
5,500
|
7.82
|
1.26
|
3.65
|
4,365
|
1,507
|
|||||||
|
19.90
|
2,500
|
6.77
|
1.26
|
3.92
|
1,984
|
638
|
|||||||
|
20.05
|
11,250
|
6.54
|
1.35
|
3.97
|
8,333
|
2,834
|
|||||||
|
20.05
|
500
|
6.83
|
1.26
|
3.92
|
397
|
128
|
|||||||
|
21.05
|
7,500
|
6.69
|
1.35
|
4.17
|
5,556
|
1,799
|
|||||||
|
(1)
|
The
approximate number of Eligible Options to be exchanged for the issuance of
one Replacement Option.
|
||||||||||||
|
(2)
|
The
approximate number of Eligible Options to be exchanged for the issuance of
one Restricted Stock.
|
||||||||||||
|
(3)
|
The
number of Replacement Options to be issued has been rounded down to the
nearest whole share.
|
||||||||||||
|
(4)
|
The
number of Restricted Stock to be issued has been rounded down to the
nearest whole
share.
|
||||||||||||
For
purposes of example only, if a participating Eligible Employee exchanged an
Eligible Option for 10 shares with an exercise price of $17.29 per share
and pursuant to the exchange ratios set forth above the exchange ratio was 1.0
share of a Replacement Option for every 1.15 surrendered Eligible Option shares,
the employee would receive a Replacement Option for 8.0 shares in exchange for
the surrendered Eligible Option (10 divided by 1.15, rounded down to the nearest
whole share). If the Eligible Employee also exchanged another Eligible Option
for 10 shares with an exercise price of $17.29 per share and the exchange
ratio was 1.0 share of a Restricted Stock for every 3.15 surrendered Eligible
Option shares, the employee would receive 3 shares of Restricted Stock in
exchange for the surrendered Eligible Option (10 divided by 3.15, rounded down
to the nearest whole share).
Election to Participate.
Participation in the Option Exchange Program will be voluntary.
Eligible Employees will be permitted to exchange all or none of the Eligible
Options for either Replacement Options or Restricted Stock on a grant-by-grant
basis.
Vesting of Replacement Equity
Grants. It is anticipated that the Equity Grants will vest
according to the vesting schedule of the underlying Eligible Option that was
exchanged, provided that no Replacement Equity Grant will vest within six months
of the exchange. However, the actual vesting schedule will be set
forth in the Offer to Exchange Materials.
Exercise Price of Replacement
Options. All Replacement Options will be granted with an
exercise price equal to the closing price of our Common Stock on the Replacement
Option grant date.
Term of the Replacement
Options. It is anticipated that the Replacement Options will
have the same term as the underlying Eligible Option that was exchanged.
However, the actual term will be set forth in the Offer to Exchange
Materials.
Return of Eligible Options
Surrendered. The Eligible Options surrendered for exchange
will be canceled and all shares of Common Stock that were subject to such
surrendered options will again become available for future awards under the 2003
Stock Option Plan.
Accounting Treatment.
Under SFAS 123R, the exchange of options under the Option
Exchange Program is treated as a modification of the existing options for
accounting purposes. Accordingly, we will recognize the unamortized compensation
cost of the surrendered options, as well as the incremental compensation cost of
the Replacement Equity Grants granted in the Option Exchange Program, ratably
over the vesting period of the Replacement Equity Grants. The incremental
compensation cost will be measured as the excess, if any, of the fair value of
each Replacement Equity Grant granted to Eligible Employees in exchange for
surrendered Eligible Options, measured as of the date the Replacement Equity
Grants are granted, over the fair value of the surrendered Eligible Options in
exchange for the Replacement Equity Grants, measured immediately prior to the
cancellation. Because the exchange ratios will be calculated to result in the
fair value of surrendered Eligible Options being equal to the fair value of the
Replacement Equity Grants replacing them, we do not expect to recognize any
significant incremental compensation expense for financial reporting purposes as
a result of the Option Exchange Program. If any of the Replacement Equity Grants
are forfeited prior to their vesting due to termination of service, the
incremental compensation cost, if any, for the forfeited Replacement Equity
Grants will not be recognized; however, we would recognize any unamortized
compensation expense from the surrendered options which would have been
recognized under the original vesting schedule.
U.S. Federal Income Tax
Consequences. The following is a summary of the anticipated
material U.S. federal income tax consequences of participating in the
Option Exchange Program. A more detailed summary of the applicable tax
considerations to Eligible Employees will be provided in the Offer to Exchange
Materials. We believe the exchange of Eligible Options for Replacement Equity
Grants pursuant to the Option Exchange Program should be treated as a
non-taxable exchange and neither our company nor any of our employees should
recognize any income for U.S. federal income tax purposes upon the
surrender of Eligible Options and the grant of Replacement Equity Grants.
However, the tax consequences of the Option Exchange Program are not entirely
certain, and the Internal Revenue Service is not precluded from adopting a
contrary position. The law and regulations themselves are also subject to
change. All holders of Eligible Options are urged to consult their own tax
advisors regarding the tax treatment of participating in the Option Exchange
Program under all applicable laws prior to participating in the Option Exchange
Program.
Potential Modification to Terms of
the Option Exchange Program to Comply with Governmental Requirements. The
terms of the Option Exchange Program will be described in the Offer to Exchange
Materials that will be filed with the SEC. Although we do not anticipate that
the SEC will require us to materially modify the terms of the Option Exchange
Program, it is possible that we will need to alter the terms of the Option Exchange Program to comply with comments from the SEC.
Changes in the terms of the Option Exchange Program may also be required for tax
purposes as the tax treatment of the Option Exchange Program is not entirely
certain. The Compensation Committee will retain the discretion to
make any such necessary or desirable changes to the terms of the Option Exchange
Program for purposes of complying with comments from the SEC or optimizing the
U.S. federal tax consequences.
We are unable to predict the precise
affect of the Option Exchange Program on our shareholders because we are unable
to predict how many or which Eligible Employees will elect to participate in the
Option Exchange Program and whether (and to what extent) Eligible Employees will
elect to exchange their options for Replacement Options or Restricted
Stock. Please see the discussion above with respect to the exchange
ratios for the approximate reduction of the number of shares underlying options
outstanding assuming that 100% of Eligible Options are exchanged and either
Replacement Options or Restricted Stock are granted in accordance with the
exchange ratios set forth above.
In order to implement the Option
Exchange Program in compliance with the terms of the 2003 Stock Option Plan and
applicable NYSE rules, our Board of Directors is proposing an amendment to the
2003 Stock Option Plan. If Proposal No. 3 is approved by our
shareholders, the Board proposes that a new Section 10.25 be added to the 2003
Stock Option Plan. If Proposal No. 3 is not approved by our
shareholders, the Board proposes that a new Section 5.5 be added to the 2003
Stock Option Plan. In any event, the Board proposes that the
following section be added to the 2003 Stock Option Plan that is in effect as of
the time of the vote related to this Proposal No. 4:
|
"Notwithstanding
any other provision of the Plan to the contrary (including any limitation
in the Plan with respect to repricing of Stock Grants), upon approval of
the Company's shareholders, the Committee may provide for, and the Company
may implement, a one-time-only option exchange offer, pursuant to which
certain outstanding Stock Options could, at the election of the
Participant (but excluding Independent Directors) holding such Stock
Options, be tendered to the Company for cancellation in exchange for the
issuance of an equal or lesser number of Stock Options or Restricted
Stock; provided, however, that such one-time-only option exchange offer
must be commenced within six months of the date of such shareholder
approval."
|
Under the terms of the 2003 Stock
Option Plan and pursuant to rules of the NYSE, the approval of this Proposal No.
4 requires the affirmative vote of the holders of a majority of the shares of
Common Stock of Knight Transportation, Inc. present, or represented, and
entitled to vote on the proposal at the Annual Meeting.
The material terms of the 2003 Stock
Option Plan are set forth in Proposal No. 3. To the extent Proposal
No. 3 is not approved by our shareholders, the information set forth in Proposal
No. 3 is still applicable to the 2003 Stock Option Plan (other than with respect
to the proposed amendments to such plan set forth in Proposal No.
3).
THE BOARD OF
DIRECTORS UNANIMOUSLY RECOMMENDS A VOTE "FOR" RATIFICATION AND APPROVAL OF A
ONE-TIME STOCK OPTION EXCHANGE PROGRAM FOR EMPLOYEES, ALONG WITH AN ACCOMPANYING
AMENDMENT TO THE 2003 STOCK OPTION PLAN TO PERMIT SUCH EXCHANGE.
OF
INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
Our Audit Committee has
appointed Deloitte & Touche LLP to serve as our principal independent
registered public accounting firm for fiscal 2009. Deloitte &
Touche also served as our principal independent registered public accounting
firm in fiscal 2008. At the Annual Meeting, our shareholders are
being asked to ratify the appointment of Deloitte & Touche as our
independent registered public accounting firm for fiscal 2009. A
representative of Deloitte & Touche is expected to be present at the Annual
Meeting and to be available to respond to appropriate questions, and such
representative will have an opportunity to make a statement at the Annual
Meeting if he or she desires to do so.
Approval
by our shareholders of the appointment of our independent registered public
accounting firm is not required by law, any applicable NYSE rule, or by our
organizational documents, but the Board of Directors is submitting this matter
to our shareholders for ratification as a corporate governance
practice. Ultimately, the Audit Committee retains full discretion and
will make all determinations with respect to the appointment and retention of
the independent registered public accounting firm.
THE
BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS A VOTE "FOR" RATIFICATION OF THE
APPOINTMENT OF DELOITTE & TOUCHE LLP AS OUR INDEPENDENT REGISTERED PUBLIC
ACCOUNTING FIRM.
Deloitte
& Touche billed us the following amounts for services provided in the
following categories during the fiscal years ended December 31, 2008 and
2007, respectively:
|
Fiscal
2008
|
Fiscal
2007
|
|||||||
|
Audit Fees(1)
|
$ | 589,173 | $ | 598,537 | ||||
|
Audit-Related Fees(2)
|
- | - | ||||||
|
Tax Fees(3)
|
- | - | ||||||
|
All Other Fees(4)
|
- | - | ||||||
|
Total
|
$ | 589,173 | $ | 598,537 | ||||
|
(1)
|
"Audit
Fees" represents the aggregate fees billed for professional services
rendered by Deloitte & Touche for the audit of our annual financial
statements and the review of financial statements included in our
quarterly reports on Form 10-Q, or services that are normally
provided by Deloitte & Touche in connection with statutory or
regulatory filings or engagements for those fiscal
years.
|
|
(2)
|
"Audit-Related
Fees" represents the aggregate fees billed, other than Audit Fees, for
assurance and related services by Deloitte & Touche that are
reasonably related to the performance of the audit or review of our
financial statements and internal control over financial
reporting. We were not billed for any Audit-Related Fees in
2008 or 2007.
|
|
(3)
|
"Tax
Fees" represents the aggregate fees billed for professional services
rendered by Deloitte & Touche for tax compliance, tax advice, and tax
planning. We were not billed for any Tax Fees in 2008 or
2007.
|
|
(4)
|
"All
Other Fees" represents the aggregate fees billed for products and services
provided by Deloitte & Touche, other than Audit Fees, Audit-Related
Fees, and Tax Fees. We were not billed for any Other Fees in
fiscal 2008 or 2007.
|
Our Audit
Committee maintains a policy pursuant to which it pre-approves all audit,
audit-related, tax, and other permissible non-audit services provided by our
principal independent registered public accounting firm in order to assure that
the provision of such services is compatible with maintaining the accounting
firm's independence. Under this policy, the Audit Committee
pre-approves, on an annual basis, specific types or categories of engagements
constituting audit, audit-related, tax, or other permissible non-audit services
to be provided by the principal independent registered public accounting
firm. Pre-approval of an engagement for a specific type or category
of services generally is provided for up to one year and typically is subject to
a budget comprised of a range of anticipated fee amounts for the
engagement. Management and the independent registered public
accounting firm are required to periodically report to the Audit Committee
regarding the extent of services provided by the accounting firm in accordance
with the annual pre-approval and the fees for the services performed to
date. If management believes that a new service, or the expansion of
a current service, provided by the principal independent registered public
accounting firm is necessary or desirable then such new or expanded services are
presented to the Audit Committee for its review and approval prior to the
engagement of the independent registered public accounting firm to render such
services. No audit-related, tax, or other non-audit services were
approved by the Audit Committee pursuant to the de minimus exception to the
pre-approval requirement under Rule 2-01(c)(7)(i)(C) of Regulation S-X during
the fiscal year ended December 31, 2008.
To be
eligible for inclusion in our proxy materials relating to the 2010 Annual
Meeting of Shareholders, shareholder proposals intended to be presented at that
meeting must be received in writing by us on or before December 11, 2009. However, if the
date of the 2010 Annual Meeting of Shareholders is more than thirty days before
or after May
21, 2010, then the deadline for submitting any such shareholder
proposal for inclusion in the proxy materials relating to the 2010 Annual
Meeting of Shareholders shall be a reasonable time before we begin to print or
mail such proxy materials. The inclusion of any such shareholder proposals in
such proxy materials will be subject to the requirements of the proxy rules
adopted under the Exchange Act, including Rule 14a-8.
We must receive in writing any
shareholder proposals intended to be considered at our 2010 Annual Meeting of
Shareholders, but not included in our proxy materials relating to that meeting,
by February 24, 2010. Pursuant to
Rule 14(a)-4(c)(1) under the Exchange Act, the proxy holders designated by
an executed proxy in the form accompanying our 2010 proxy statement will have
discretionary authority to vote on any shareholder proposal that is considered
at the Annual Meeting, but not received on or prior to the deadline described
above.
All
shareholder proposals should be sent via certified mail, return receipt
requested, and addressed to David A. Jackson, Secretary, Knight Transportation,
Inc., 5601 West Buckeye Road, Phoenix, Arizona 85043.
See "Corporate Governance –
The Board of Directors and Its Committees – Committees of the Board of Directors
– The Nominating and Corporate Governance Committee" for information regarding
how shareholders can recommend director candidates for consideration by the
Nominating and Corporate Governance Committee.
The Board
of Directors does not intend to present at the Annual Meeting any matters other
than those described herein and does not presently know of any matters that will
be presented by other parties. If any other matters are properly
brought before the Annual Meeting or any adjournment thereof, the proxy holders
named in the accompanying form of proxy will have discretionary authority to
vote proxies on such matters in accordance with the recommendations of the Board
of Directors, or, if no recommendations are given, in accordance with their
judgment, unless the person executing any such proxy indicates that such
authority is withheld.
|
Knight
Transportation, Inc.
|
|
| /s/Kevin P. Knight | |
|
Kevin
P. Knight
Chairman
of the Board and Chief Executive Officer
|
|
|
April 10,
2009
|
KNIGHT
TRANSPORTATION, INC.
EMPLOYEE
STOCK PURCHASE PLAN
February
11, 2009
1. Purpose
(a) The
purpose of the Knight Transportation, Inc. Employee Stock Purchase Plan (the
"Plan") is to provide employees of Knight Transportation, Inc., an Arizona
corporation (the "Company"), and its Adopting Affiliates, as defined below, an
opportunity to purchase stock of the Company.
(b) The
Company, through the Plan, seeks to retain the services of its employees, to
secure and retain the services of new employees, and to provide incentives for
Employees to exert maximum efforts for the success of the Company.
(c) The
Company intends that the rights to purchase its Common Stock granted under the
Plan be considered options issued under an "employee stock purchase plan" as
that term is defined in Section 423(b) of the Code, and that the Plan qualify
under the terms of Section 423(b) of the Code.
2. Definitions
The
capitalized terms set forth below shall have the meaning stated herein, unless
context requires otherwise.
(a) "Adopting
Affiliate" means an Affiliate that has been designated by the Committee to
participate in the Plan and which Affiliate has adopted the Plan.
(b) "Affiliate"
means any parent corporation or subsidiary corporation of the Company, as those
terms are defined in Sections 424(e) and (f), respectively, of the
Code.
(c) "Board"
means the Board of Directors of the Company.
(d) "Code"
means the Internal Revenue Code of 1986, as amended.
(e) "Committee"
means the Compensation Committee of the Board which has the authority to
administer the Plan.
(f) "Common
Stock" means shares of common stock of the Company.
(g) "Company"
has the meaning stated in Section 1(a).
(h) "HR
Director" means the director of human resources of the Company which is
delegated authority to administer the Plan.
(i) "Disposition"
has the meaning stated in Section 424(c) of the Code.
(j) "Earnings"
means the total compensation paid to an Employee, including all salary, wages
(including amounts elected to be deferred by the Employee, that would otherwise
have been paid, under any cash or deferred arrangement established by the
Company), overtime pay, commissions, bonuses, and other remuneration paid
directly to the Employee, but excluding profit sharing, the cost of Employee
benefits paid for by the Company, education or tuition reimbursements, imputed
income arising under any Company group insurance or benefit program, traveling
expenses, business and moving expense reimbursements, income received in
connection with stock options, contributions made by the Company under any
employee benefit plan, and similar items of compensation.
(k) "Employee"
means an employee of the Company or of an Adopting Affiliate.
(l) "Eligible
Employee" means an Employee who has been continuously employed by the Company or
by an Adopting Affiliate for at least six (6) months and otherwise meets the
requirements of Section 5(b).
(m) "Exchange
Act" means the Securities Exchange Act of 1934, as amended.
(n) "Independent
Director" means a director of the Company who is not an officer, employee or ten
percent (10%) stockholder of the Company.
(o) "Offering"
means the grant of rights from time to time to purchase Common Stock of the
Company made during an Offering Period under Section 6 of the Plan by the
Committee or HR Director.
(p) "Offering
Date" means the date on which Eligible Employees are given the right to purchase
Common Stock of the Company under the Plan, as described in
Section 6(b).
(q) "Offering
Period" means a period of time during which Eligible Employees have the right to
purchase Common Stock under this Plan.
(r) "Participant"
means an Eligible Employee who elects to participate in the Plan by authorizing
payroll deductions to purchase Common Stock made available through an
Offering.
(s) "Payroll
Reduction Agreement" means the agreement described in Section 7 pursuant to
which an Eligible Employee authorizes the Company to make payroll deductions to
purchase Common Stock during a Purchase Period.
(t) "Plan"
has the meaning stated in Section 1(a).
(u) "Purchase
Date" means the date on which each Participant's accumulated payroll deductions
and other additional payments specifically provided for in the Offering (without
any increase for interest) are applied to the purchase of whole shares of Common
Stock, up to the maximum number of shares permitted pursuant to the terms of
this Plan and the applicable Offering, at the purchase price specified in the
Offering during the Offering Period.
(v) "Purchase
Period" means the time designated by the Committee, the HR Director or by the
Plan for Eligible Employees to accumulate payroll deductions in order to
purchase Common Stock during or at the end of such Purchase Period under the
Plan. The Purchase Period may, but need not, commence on the Offering
Date.
(w) "Rule
16b-3" means Rule 16b-3 promulgated under the Exchange Act.
(x) "Securities
Act" means the Securities Act of 1933, as amended.
(y) "SEC"
means the Securities and Exchange Commission.
3. Administration
(a) The Plan
shall be administered by the Committee. The Committee shall serve at
the pleasure of the Board, and the Board may, from time to time, remove members
from, or add members to, the Committee. The Committee shall include a
minimum of two Independent Directors. Vacancies on the Committee,
however caused, shall be filled by the Board. No member of the
Committee may participate in the Plan. A majority of the Committee at
a meeting at which a quorum is present, or acts reduced to or approved in
writing by a majority of the members of the Committee, shall be the valid act of
the Committee. No member of the Committee shall be liable for any
action or determination made in good faith with respect to this Plan or any
right granted hereunder. The Committee may delegate certain
administrative duties to the HR Director, as provided in Section
3(c).
(b) The
Committee shall have the final authority to determine all questions that may
arise in the administration of the Plan, subject to, and within the limitations
of, the express provisions of the Plan, including, but not limited to, the
following powers:
(i) To
determine all terms and conditions of each Offering, including, without
limitation:
|
1.
|
The
number of shares of Common Stock for which an Offering is
made;
|
|
2.
|
The
price to be paid for Common Stock acquired pursuant to rights granted
under any Offering;
|
|
3.
|
The
terms and conditions of the exercise of rights granted under any
Offering;
|
|
4.
|
Any
conditions to which the grant of rights under any Offering may be
subject;
|
|
5.
|
Any
vesting or forfeiture provisions applicable to any grant of rights under
any Offering; and
|
|
6.
|
Any
restrictions or limitations placed on Common Stock issued pursuant to the
exercise of any rights granted under any
Offering.
|
(ii) To
designate from time to time which Affiliates of the Company are covered by the
Plan;
(iii) To
construe and interpret the Plan and all rights granted under it including any
Offering, and to establish, amend and revoke rules and regulations for its
administration. The Committee, in the exercise of this power, may
correct any defect, omission or inconsistency in the Plan, in a manner and to
the extent it shall deem necessary or expedient to make the Plan fully
effective;
(iv) To amend
the Plan as provided in Section 17; and
(v) To
generally exercise such other powers and to perform any other acts as the
Committee deems necessary or expedient to promote the best interests of the
Company.
(c) The
Committee may delegate administration of the Plan to the HR
Director. If administration is delegated to the HR Director, the HR
Director shall have, in connection with the administration of the Plan, the
powers theretofore possessed by the Committee, subject, however, to such
resolutions and other actions, not inconsistent with the provisions of the Plan,
as may be adopted from time to time by the Committee. The Committee
may abolish or restrict the authority of the HR Director at any time and revest
in the Committee the administration of the Plan.
4. Shares
Subject to the Plan
(a) The
number of shares of Common Stock initially reserved for issuance under the Plan
shall be one million (1,000,000) shares. The number of shares of
Common Stock available under the Plan shall be subject to adjustment as provided
under Section 16 of this Plan.
(b) The
Common Stock subject to the Plan may be unissued shares or reacquired shares,
bought on the market or otherwise.
5. Eligibility
(a) Rights
may be granted only to Employees of the Company or, as the Committee may
designate as provided in Section 2(b), to Employees of any Adopting Affiliate of
the Company. Except as provided in Section 5(b), an Employee of the
Company or any Adopting Affiliate shall not be eligible for any rights granted
under the Plan, unless, on the Offering Date, such Employee has been in the
employ of the Company or any Adopting Affiliate for such continuous period
preceding such Offering Date as the Committee may require, but in no event shall
the required period of continuous employment be less than six (6) months nor
greater than two (2) years. In addition, unless otherwise determined
by the Committee or the HR Director and set forth in the terms of the applicable
Offering, no Employee of the Company or any Adopting Affiliate shall be eligible
to be granted rights under the Plan, unless, on the Offering Date, such
Employee's customary employment with the Company or such Adopting Affiliate is
at least twenty (20) hours per week and at least five (5) months per calendar
year.
(b) The
Committee or the HR Director may provide that each person who, during the course
of an Offering, first becomes an Eligible Employee of the Company or Adopting
Affiliate will, on a date or dates specified in the Offering which coincides
with the day on which such person becomes an Eligible Employee or occurs
thereafter, receive a right under that Offering, which right shall thereafter be
deemed to be a part of that Offering. Such right shall have the same
characteristics as any rights originally granted under that Offering, as
described herein, except that:
(i) The date
on which such right is granted shall be the "Offering Date" of such right for
all purposes, including determination of the purchase price of Common Stock
under such right;
(ii) The
Purchase Period for such right shall begin on its Offering Date and end
coincident with the end of such Offering; and
(iii) The
Committee or the HR Director may provide that if such person first becomes an
Eligible Employee within a specified period of time before the end of the
Purchase Period for such Offering, he or she will not receive any right under
that Offering.
(c) No
Employee shall be eligible for the grant of any rights under the Plan if,
immediately after any such rights are granted, such employee owns stock
possessing five percent (5%) or more of the total combined voting power or value
of all classes of stock of the Company or of any Affiliate. For
purposes of this Section 5(c), the rules of Section 424(d) of the Code shall
apply in determining the Common Stock ownership of any Employee, and Common
Stock which such Employee may purchase under all outstanding rights and options
shall be treated as stock owned by such employee.
(d) An
Eligible Employee may be granted rights under the Plan only if such rights,
together with any other rights granted under "employee stock purchase plans" of
the Company and any Affiliates, as specified by Section 423(b)(8) of the Code,
do not permit such Employee's rights to purchase stock of the Company or any
Affiliate to accrue at a rate which exceeds twenty-five thousand dollars
($25,000) of fair market value of such stock (determined at the time such rights
are granted) for each calendar year in which such rights are outstanding at any
time.
(e) Officers
of the Company and any Adopting Affiliate shall be eligible to participate in
Offerings under the Plan, provided, however, that the Committee may provide in
an Offering that certain employees who are highly compensated employees, within
the meaning of Section 423(b)(4)(D) of the Code, are not eligible to
participate.
6. Grant
of Rights; Offering
(a) The
Committee may from time to time initiate an Offering, by which it grants rights
to purchase Common Stock of the Company under the Plan to Eligible Employees on
the Offering Date(s) selected by the Committee. Each Offering shall
be made only during the Offering Period and shall be in such form and shall
contain such terms and conditions as the Committee determines to be
appropriate. In no event will an Offering Period exceed twenty seven
(27) months. If an Employee has more than one Offering right
outstanding under the Plan, unless he otherwise indicates in agreements or
notices delivered hereunder: (i) each agreement or notice delivered by that
Employee will be deemed to apply to all of his rights under the Plan,
and (ii) a right with a lower purchase price (or an earlier-granted right, if
two rights have identical purchase prices), will be exercised to the fullest
possible extent before a right with a higher purchase price (or a later-granted
right, if two rights have identical purchase prices) will be
exercised. The provisions of separate Offerings need not be
identical, but each Offering shall conform to the Plan.
(b) Unless
the Committee determines otherwise, as provided in subparagraph 6(a), the
adoption of this Plan by the Committee and stockholders authorizes the Committee
to grant rights to purchase shares of the Common Stock to all Eligible Employees
on February 1 of every calendar year, beginning with calendar year 2010;
provided that for calendar year 2009, the first Offering Date shall be August 1,
2009 (the "Offering Dates"). Each Offering Period will begin on the
Offering Date and end on each subsequent January 31, unless otherwise adjusted
by the Committee. There shall be not more than two six-month Purchase
Periods, as defined above, during each Offering Period. The Purchase
Periods shall commence on February 1 and August 1 of each year and end on
January 31 and July 31, respectively, during each Offering Period, except for
the first Offering Period in 2009, which shall end on January 31,
2010. The Offering Period may be shortened at any time by the
Committee, if necessary to avoid the Plan being treated as compensatory for
accounting purposes. If an Offering Period is shortened for such
purpose, the corresponding Purchase Periods may also be shortened at the
Committee's discretion. Prior to the commencement of any Offering,
the Committee may change any or all terms of such Offering and any subsequent
Offerings. The granting of rights pursuant to each Offering hereunder
shall occur on each respective Offering Date unless, prior to such date (a) the
Committee determines that such Offering shall not occur, or (b) no shares of
Common Stock remain available for issuance under the Plan in connection with the
Offering. Shares of Common Stock will be purchased as provided in
Section 8. Except as the Committee may otherwise provide, a
Participant shall have no vested rights with respect to the term of any Offering
Period.
7. Participation
An
Eligible Employee may elect to participate in an Offering at the beginning of
the Offering or on the February 1st or
August 1st during
the Offering Period. An Eligible Employee shall become a participant
in an Offering by delivering a Payroll Deduction Agreement in the form approved
by the Company, authorizing payroll deductions during the Purchase Period for
which such authorization is effective. Deductions from Earnings may
be in whole percentages only, with a minimum percentage of one percent (1%), and
a maximum percentage specified by the Committee, but not more than ten percent
(10%). The payroll deductions made for each Participant shall be
credited to an account for such Participant under the Plan and shall be
deposited with the general funds of the Company, but shall not accrue
interest. A Participant may not make additional payments into his or
her account unless specifically provided for in the Offering and only if the
Participant has not had the maximum amount permitted by this Plan and the
Offering withheld during the Purchase Period. The Payroll Deduction
Agreement shall be in such form as the Company approves, and must be effective
prospectively and be delivered to the Company on or before the commencement of
the Purchase Period or the February 1st or
August 1st during
an Offering Period, as applicable, to be effective for the remaining portion of
that Offering. A Participant may not increase his withholding
percentage during the course of an Offering, except on each February 1st and
August 1st
of each calendar year. A Participant may reduce his
participation percentage only once during any Offering Period, except that a
Participant may subsequently terminate future payroll deductions during an
Offering Period after having previously decreased his or her participation
percentage during any such six (6) month period. A Participant may
reduce his or her withholding percentage during the course of an Offering Period
by delivering a written notice to the Company in such form as the Company
provides.
8. Purchase
(a) On each
Purchase Date during the relevant Offering, each Participant's accumulated
payroll deductions and other additional payments specifically provided for in
the Offering (without any increase for interest) will be applied to the purchase
of whole shares of the Common Stock of the Company, up to the maximum number of
shares of Common Stock permitted pursuant to the terms of the Plan and the
applicable Offering, at the purchase price specified in the
Offering. Unless the Committee or the Offering otherwise provides,
the Purchase Dates shall be each July 31st and January 31st (or if
such dates are not business days, the business day immediately preceding such
date). No fractional shares of Common Stock shall be issued upon the
exercise of rights granted under the Plan. The amount, if any, of
accumulated payroll deductions remaining in each Participant's account after the
purchase of shares which is less than the amount required to purchase one share
of Common Stock on the Purchase Date of an Offering shall be held in each such
participant's account for the purchase of shares on the next Purchase Date under
the Plan. The amount, if any, of accumulated payroll deductions
remaining in any participant's account after the purchase of shares which is
less than the amount required to purchase whole shares of stock on the final
Purchase Date of an Offering shall be rolled over to the next Offering unless a
participant delivers to the Company a written request for refund of accumulated
payroll deductions in such form as the Company provides. The Company
shall have a reasonable time to refund accumulated payroll
deductions. Any accumulated payroll deductions that are refunded to
Participants shall be refunded without interest.
(b) If a
Participant terminates payroll deductions during a Purchase Period, as provided
in Section 11(a), or is no longer eligible to be granted rights under the Plan,
as provided in Section 5, no shares of Common Stock shall be purchased and the
amount of accumulated payroll deductions shall be distributed to the participant
after the final Purchase Date of the Offering, without interest.
(c) No rights
granted under the Plan may be exercised to any extent unless the Plan (including
rights granted thereunder) is covered by a registration statement filed with the
SEC and effective pursuant to the Securities Act. If on a Purchase
Date of any Offering hereunder the Plan is not so registered, no rights granted
under the Plan or any Offering may be offered or exercised on any Purchase Date,
and the Purchase Date shall be delayed until the Plan is subject to such an
effective registration statement, except that the Purchase Date shall not be
delayed more than two (2) months and the Purchase Date shall in no event be more
than fourteen (14) months from the Offering Date. If on the Purchase
Date of any Offering hereunder, as delayed to the maximum extent permissible,
the Plan is not registered, no rights granted under the Plan or any Offering
shall be exercised and all payroll deductions accumulated during the purchase
period (reduced to the extent, if any, such deductions have been used to acquire
stock) shall be distributed to the participants, without interest.
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9.
|
Limitation
on Participation Rights; Maximum Number of Shares
Purchasable
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(a) Subject
to the limitations contained in the Plan, on each Offering Date each Eligible
Employee shall be granted the right to purchase the number of shares of Common
Stock purchasable with up to ten percent (10%) of such Employee's Earnings paid
during the Purchase Period for such Offering; provided, however, that no
Participant may purchase Common Stock in a particular year with more than ten
percent (10%) of such Participant's Earnings in such calendar year under all
outstanding Offerings under the Plan and all other Company plans intended to
qualify as "employee stock purchase plans" under Section 423 of the Internal
Revenue Code of 1986, as amended.
(b) No
Participant may purchase more than one thousand (1,000) shares of Common Stock
under an Offering. The maximum aggregate number of shares available
to be purchased by all Eligible Employees during an Offering shall be two
hundred thousand (200,000) shares of Common Stock, or, if less, the number of
shares remaining available under the Plan on the Offering Date. The
maximum aggregate number of shares available to be purchased by all Eligible
Employees on any Purchase Date during an Offering Period shall be the lesser of
(i) two hundred thousand (200,000) shares of Common Stock less any shares
of Common Stock previously purchased on any Purchase Date during the Offering,
or (ii) the number of shares of Common Stock remaining for purchase
available under the Plan. In no event shall more than 200,000 shares
of Common Stock be offered during any Offering Period. If the
aggregate purchase of shares of Common Stock upon exercise of rights granted
under the Offering would exceed the maximum aggregate number of shares of Common
Stock available, the Committee shall make a pro rata allocation of the shares
available in a uniform and equitable manner.
10. Purchase
Price
The
purchase price of Common Stock acquired pursuant to rights granted under the
Plan shall be determined by the Compensation Committee, provided that the
purchase price shall not be less than the lesser of:
(a) An
amount equal to eighty-five percent (85%) of the fair market value of the Common
Stock on the Offering Date rounded up to the nearest cent per share;
or
(b) An
amount equal to eighty-five percent (85%) of the fair market value of the Common
Stock on the Purchase Date rounded up to the nearest cent per
share.
11. Withdrawal;
Termination
(a) A
Participant may not withdraw funds deposited during an Offering
Period. However, at any time during a Purchase Period a Participant
may terminate his payroll deductions under the Plan by delivering to the Company
a notice of termination in such form as the Company
prescribes. Termination of payroll deductions may be elected at any
time prior to the end of a Purchase Period, except as provided by the Committee
or the HR Director in the Offering. Accumulated payroll deductions of
a terminated Participant, that are not applied under the Plan to purchase Common
Stock, will be distributed in full to the Participant following the final
Purchase Date of the Offering, without interest. A Participant's
termination of future payroll deductions during an Offering will have no effect
upon the Participant's eligibility to participate in any other Offerings under
the Plan, but the Participant will be required to deliver a new Payroll
Reduction Agreement in order to participate in subsequent Offerings under the
Plan.
(b) Rights
granted pursuant to any Offering under the Plan shall terminate immediately upon
cessation of any participating Employee's employment with the Company or any
Adopting Affiliate, for any reason, and the Company shall distribute to such
terminated Employee all of his or her accumulated payroll deductions (reduced to
the extent, if any, such deductions have been used to acquire stock for the
terminated Employee), under the Offering, without interest, within a reasonable
amount of time.
(c) A
Participant's rights under the Plan are not transferable or assignable other
than by will, the laws of descent and distribution, or a beneficiary designation
as provided in Section 15. During a Participant's lifetime, rights
under the Plan shall be exercisable only by the Participant to whom such rights
under any Offering is granted. Following a Participant's death, if
any rights under any Offering survive, they may be exercised by the
Participant's personal representative.
12. Covenants
of the Company
(a) During
the terms of any Offering made under the Plan, the Company shall reserve at all
times the number of shares of Common Stock required to satisfy any rights
granted to Participants under the Offering.
(b) The
Company shall seek to obtain from any agency exercising jurisdiction over the
Plan such approvals, if any, required by law to issue and sell shares of Common
Stock upon exercise of the rights under any Offering. If, after
reasonable efforts, the Company is unable to obtain from any such agency
approval which counsel for the Company determines necessary for the lawful
issuance and sale of Common Stock under the Plan, the Company shall be relieved
from any liability for failure to issue and sell Common Stock upon exercise of
rights granted hereunder unless and until such approval is
obtained.
13. Use
of Proceeds From Stock
Proceeds
from the sale of stock pursuant to rights granted under the Plan shall
constitute general funds of the Company, and may be applied for general
corporate purposes.
14. Rights
as a Stockholder
A
Participant shall not be deemed to be the holder of, or to have any of the
rights of a stockholder of the Company with respect to, any shares of Common
Stock subject to the Plan until the Participant exercises his rights hereunder
to purchase Common Stock and that purchase is recorded in the stock books of the
Company.
15. Designation
of Beneficiary.
(a) A
Participant may file with the HR Director a written designation of a beneficiary
in the form attached hereto as Exhibit A,
designating the person or persons who are to receive any shares of Common Stock,
if any, from the Participant's account under the Plan in the event of such
Participant's death subsequent to the end of an Offering but prior to delivery
to the Participant of such shares of Common Stock. In addition, a
Participant may file a written designation of a beneficiary designating the
person or persons who is to receive any cash from the Participant's account
under the Plan in the event of such Participant's death during an
Offering. Any such designation shall be on a form provided by or
otherwise acceptable to the Committee.
(b) The
Participant may change such designation of beneficiary at any time by written
notice to the Committee. In the event of the death of a Participant
and in the absence of a beneficiary validly designated under the Plan who is
living at the time of such Participant's death, the Committee shall deliver such
shares of Common Stock to the executor or administrator of the estate of the
Participant, or if no such executor or administrator has been appointed (to the
knowledge of the Company), the Committee, in its sole discretion, may deliver
such shares of Common Stock to the spouse or to any one or more dependents or
relatives of the Participant, or if no spouse, dependent or relative is known to
the Committee, then to such other person as the Committee may
designate.
16. Adjustments
Upon Changes in Stock
(a) The
aggregate number of shares of Common Stock which may be issued pursuant to
rights granted under any Offering under the Plan shall be automatically
adjusted, without further action by the Board or the stockholders of the
Company, to reflect changes in the capitalization of the Company, such as stock
dividends, stock splits, reverse stock splits, subdivisions, exchange of shares,
liquidating dividends, reorganizations or reclassifications, or any similar
recapitalization that affects or modifies the number of shares of Common Stock
issued and outstanding at any time.
(b) In the
event of: (i) a dissolution or liquidation of the Company; (ii) a merger or
consolidation in which the Company is not the surviving corporation; (iii) a
reverse merger in which the Company is the surviving corporation but the shares
of the Company's Common Stock outstanding immediately preceding the merger are
converted by virtue of the merger into other property, whether in the form of
securities, cash or otherwise; or (iv) any other capital reorganization in which
more than fifty percent (50%) of the shares of the Company entitled to vote are
exchanged, then, as determined by the Committee in its sole discretion (A) any
surviving corporation may assume outstanding rights or substitute similar rights
for those under the Plan, (B) such rights may continue in full force and effect,
or (C) Participants' accumulated payroll deductions may be used to purchase
Common Stock immediately prior to the transaction described above and the
Participants' rights under the ongoing Offering terminated.
17. Amendment
of the Plan
(a) The
Committee at any time, and from time to time, may amend the
Plan. However, except as provided in Section 16 relating to
adjustments upon changes in Common Stock, no amendment shall be effective unless
approved by those stockholders of a majority of the shares of the Company's
Common Stock, present at a meeting of the Company's shareholders at which a
quorum is present within twelve (12) months before or after the adoption of the
amendment, if the amendment:
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i.
|
Increases
the number of shares reserved for rights under the
Plan;
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A-8
ii. Modifies
the provisions as to eligibility for participation in the Plan (to the extent
such modification requires stockholder approval in order for the Plan to obtain
employee stock purchase plan treatment under Section 423 of the Code or to
comply with the requirements of Rule 16b-3); or
iii. Modifies
the Plan in any other way if such modification requires stockholder approval in
order for the Plan to obtain employee stock purchase plan treatment under
Section 423 of the Code or to comply with the requirements of Rule
16b-3.
It
is expressly contemplated that the Committee may amend the Plan in any respect
the Committee determines it to be necessary or advisable to provide Eligible
Employees with the maximum benefits provided or to be provided under the
provisions of the Code and the regulations promulgated thereunder relating to
employee stock purchase plans and/or to bring the Plan and/or rights granted
under it into compliance therewith.
(b) Rights
and obligations under any rights granted before the amendment of the Plan shall
not be altered or impaired by any amendment of the Plan, except with the consent
of the person to whom such rights were granted or except as necessary to comply
with any laws or governmental regulation.
18. Termination
or Suspension of the Plan
(a) The
Committee, in its discretion, may suspend or terminate the Plan at any
time. Unless sooner terminated, the Plan shall terminate on the
earlier of February 10, 2019, or the date on which the shares available under
the Plan, as adjusted from time to time, are exhausted. No rights may
be granted under the Plan while the Plan is suspended or after it is
terminated.
(b) Rights
and obligations under any rights granted while the Plan is in effect shall not
be altered or impaired by suspension or termination of the Plan, except with the
consent of the person to whom such rights were granted or except as necessary to
comply with any laws or governmental regulation.
19. Arbitration
of Disputes
The
Federal Arbitration Act shall apply to and govern all disputes arising under the
Plan or an Offering made pursuant to the Plan. Any disputes with
respect to the terms of this Plan or any rights granted hereunder, including,
without limitation, the scope of this arbitration, shall be subject to
arbitration pursuant to the laws of the State of Arizona governing commercial
disputes. Arbitration shall occur in Phoenix,
Arizona. Judgment on any arbitration award may be entered in any
court having jurisdiction. A single arbitrator shall have the power
to render a maximum award of $300,000. If any person asserts a claim
in excess of $300,000, any party to the arbitration proceeding may request that
the arbitration be heard by a panel of three (3) arbitrators and, if so
requested, the arbitration decision shall be made by a majority of
the three (3) arbitrators. By electing to participate in the Plan,
the Company and each Participant EXPRESSLY
AGREE TO ARBITRATION AND WAIVE ANY RIGHT TO TRIAL BY JURY. An
arbitrator shall have the same powers that a federal district judge setting in
the State of Arizona may exercise. Subject to such limitations as the
arbitrator may impose, discovery shall be available to all parties to an
arbitration to the same extent (including the imposition of sanctions) as
provided by the Federal Civil Rules of Procedure. Nothing in this
Plan shall limit or restrict any self-help remedy, including, without
limitation, any right of offset a party may have. The party
prevailing in any arbitration shall be entitled to payment of all legal fees and
costs and all costs of arbitration, regardless of whether such costs are
recoverable under any other applicable law. Any arbitrator, if a
lawyer, shall have at least ten (10) years experience in commercial law and be
rated "AV" by Martindale Hubble or, if the arbitrator is a former judicial
officer, the arbitrator shall have had at least ten (10) years experience on the
bench of a state or federal court.
20. Effective
Date of Plan
The Plan
shall become effective as of February 11, 2009, but no rights granted under the
Plan shall be exercised unless and until the Plan has been approved by a
majority of the Company's issued and outstanding shares and if for any reason
the Company's stockholders fail to approve this Plan any rights granted
hereunder shall be void, ab
initio.
21. Notices
and Agreements
Any
notices or agreements provided for in an Offering or the Plan shall be in
writing, in a form provided by the Company, and unless specifically provided for
in the Plan or the Offering shall be deemed effectively given upon receipt or,
in the case of notices and agreements delivered by the Company, five (5) days
after deposit in the United States mail, postage prepaid.
22. Exercise
Contingent on Stockholder Approval
The
rights granted under an Offering are subject to the approval of the Plan by the
stockholders as required for the Plan to obtain employee stock purchase plan
treatment under Section 423 of the Code or to comply with the requirements of
Rule 16b-3.
23. Statutory
Holding Period
Each
Participant shall deliver a commitment in writing to the Committee that the
Participant understands that the special rules of income tax treatment under
Section 421(a) of the Code shall apply with respect to the transfer of a share
of Common Stock to the Participant pursuant to the Participant's exercise of a
right granted under this Plan; provided that the Participant make no Disposition
of such share of Common Stock within two (2) years after the date of the
granting of the right, nor within one (1) year after the transfer of such share
to the Participant.
24. Offering
Subject to Plan
Each
Offering is subject to all the provisions of the Plan, and its provisions are
hereby made a part of the Offering, and is further subject to all
interpretations, amendments, rules and regulations which may from time to time
be promulgated and adopted pursuant to the Plan. In the event of any
conflict between the provisions of an Offering and those of the Plan (including
interpretations, amendments, rules and regulations which may from time to time
be promulgated and adopted pursuant to the Plan), the provisions of the Plan
shall control.
25. Registration
of Shares
The
shares offered pursuant to the Plan will be registered with the SEC on Form
S-8.
KNIGHT
TRANSPORTATION, INC.
AMENDED
AND RESTATED
2003
STOCK OPTION AND EQUITY COMPENSATION PLAN
Article
1
History and
Purpose
1.1 History. Knight
Transportation, Inc. (the "Company" or "Knight") has maintained a
stock option plan for the benefit of officers, employees and directors since
1994. Grants under all prior plans have been broad-based and have
been designed to align the interest of employees of the Company receiving grants
with those of the Company's shareholders. On February 6, 2003, the
Board of Directors of the Company (the "Board") approved the termination of all
further stock grants under the Company's Amended and Restated Stock Option Plan
adopted February 10, 1998 (the "1998 Plan"), effective as of May 31, 2003,
subject to the Company's shareholders approval of the 2003 Plan, as hereinafter
defined. As amended, the 1998 Plan permitted any issued and
outstanding option grants to continue in force and effect in accordance with
their terms, but no further options or stock grants were to be made under the
1998 Plan if the Company's shareholders approved the 2003 Plan. The
Board also adopted, effective as of June 1, 2003, the Knight Transportation,
Inc. 2003 Stock Option Plan (the "Plan" or the "2003 Plan"), subject to approval
by the Company's shareholders at its annual meeting held in May,
2003. The Plan was approved by the Company's shareholders on May 21,
2003. The Plan was subsequently amended on March 3, 2005, to
eliminate the grant of any NSO at less than fair market value and to include
arbitration provisions. The Plan was further amended as of May 26,
2005, to increase the number of shares available for Stock Grants from 1,500,000
to 4,000,000 shares of Stock. By virtue of a stock split on November
30, 2005, the total number of shares of Stock available under the Plan was
increased to 6,000,000. The Plan was further amended as of August 3,
2005, subject to shareholder approval, to limit to 650,000 the maximum number of
shares of Stock subject to Stock Grants to a single individual in a calendar
year, beginning with the calendar year ending December 31, 2005, to make certain
administrative changes, and to restate the Plan in its entirety. The
Plan was further amended effective as of January 1, 2007, to eliminate the
automatic grant of Stock Options to Independent Directors, to provide that
director's fees due to any Independent Director may be paid by Stock Grant, and
to provide for the consent of the Compensation Committee prior to the sale of
stock obtained through the exercise of certain Stock Grants while an individual
is surviving as a Director of the Company. The Plan was further
amended as of June 1, 2008, to increase the number of shares available for Stock
Grants from 6,000,000 to 9,000,000 shares of Stock of which 200,000 shares of
Stock are reserved for Stock Grants made to Independent
Directors. The Plan was further amended as of February 11, 2009,
subject to shareholder approval, to provide additional terms and administrative
procedures applicable to Restricted Stock Grants, to authorize the issuance of
Stock Appreciation Rights, and to restate the Plan in its entirety and rename
the Plan the Knight Transportation, Inc. Amended and Restated 2003 Stock Option
and Equity Compensation Plan.
This
document sets forth the terms of the Plan, including, without limitation, the
number of shares of Stock that are reserved for grants under the Plan and all
other terms and conditions applicable to the Plan. This Plan and any
options or rights granted hereunder are subject to approval by the Company's
shareholders. The Plan will be submitted to shareholders for approval
at the Annual Meeting of Shareholders to be held on May 21,
2009.
1.2 Purpose. The
Plan has been adopted to: (a) provide certain key employees of the Company (as
defined below) and selected independent contractors, consultants, and advisors
who are important to the Company with an opportunity to purchase the common
stock of Knight as an incentive to continue their employment or association with
the Company and to work for the long-term growth, development, and financial
success of the Company; and (b) attract, motivate, and retain the services of
Independent Directors and critical employees of the Company and its subsidiaries
and reward such employees by the issuance of Stock Grants so that these
employees will contribute to and participate in the long-term performance of the
Company.
Article
2
Definitions
2.1 Defined
Terms. The following terms shall have the meanings set forth
below, unless context otherwise requires:
"Appreciation
Value" has the meaning stated in Section 8.3.
"Beneficiary"
means the person or persons designated by a Participant as his
beneficiary.
"Board of
Directors" or "Board" means the Board of Directors of Knight.
"Code"
means the Internal Revenue Code of 1986, as amended from time to
time.
"Committee"
means the Compensation Committee of the Board of Directors, which shall be
appointed in accordance with the procedures described in
Article
9.
"Company"
means Knight and any subsidiary of Knight that is treated as a "subsidiary"
under section 425 of the Code.
"Effective
Date" means June 1, 2003, which shall be the date this Plan is effective,
subject only to Section 10.20.
"Fair
Market Value" has the meaning stated in Section 5.3(c).
"Knight"
means Knight Transportation, Inc., an Arizona corporation, and its successors in
interest.
"ISO"
means an incentive stock option granted a Participant under Article 5 of this
Plan and which qualifies as an incentive stock option under section 422 of the
Code. To the extent this Plan has authorized the Committee to grant
ISOs, this Plan shall be interpreted and construed so as to qualify as an
incentive stock option plan under Section 422 of the Code and the regulations
thereunder.
"Independent
Director" means a director of the Company who is not an officer, employee or 10%
shareholder of the Company.
"Independent
Directors Plan" means the provisions applicable to Stock Grants made to
Independent Directors set forth in Article 6.
"NSO"
means any option granted under this Plan that is not an ISO.
"Participant"
means any employee of the Company, any Independent Director, or any person who
is eligible under Section 4.2 to participate in this Plan and who is selected by
the Committee as a Participant in the Plan.
"Plan"
means the Knight Transportation, Inc. the Knight Transportation, Inc. Amended
and Restated 2003 Stock Option and Equity Compensation Plan, effective as of
June 1, 2003, as amended and restated hereby.
"Plan
Year" means the calendar year.
"Restricted
Stock Grant" means the right granted a Participant under Article 7 of this Plan
to purchase or receive Restricted Stock subject to such restrictions and
conditions as are specified by the Committee. Any Stock Grant shall
be evidenced by a writing executed by an authorized member of the
Committee.
"Restricted
Stock" means stock issued to a Participant pursuant to a Restricted Stock
Grant.
"Stock"
means the common stock of Knight, par value $0.01 per share.
"Stock
Appreciation Right" or "SAR" means the right granted to a Participant under
Article 8 of this Plan to receive an amount equal to the appreciation in a share
of Stock from the grant date to the exercise date, which is evidenced by a
writing executed by an authorized member of the Committee.
"Stock
Option" means any ISO or NSO granted to a Participant under Article 5 of this
Plan, which is evidenced by a writing executed by the Participant and by an
authorized member of the Committee.
"Stock
Grant" means the award of a Stock Option, a SAR, or a Restricted Stock Grant
made under Article 5, Article 6, Article 7, or Article 8 of this Plan, as may be
applicable.
"Stock
Grant Agreement" means the written Agreement between the Company and a
Participant evidencing a Stock Grant.
Article
3
Shares
Reserved for Grants; Adjustment to Shares
3.1 Shares
Reserved For Stock Grants. There are reserved and available
for the issuance and exercise of presently outstanding and future Stock Grants
made under this Plan, 9,000,000 shares of the Company's authorized but unissued
Stock, plus or minus any adjustments to such reserved shares authorized by this
Plan. Of the total number of shares reserved for Stock Grants under
this Plan, 200,000 shares of Stock are reserved for the issuance of presently
outstanding and future Stock Grants made under the Independent Directors Plan
set forth in Article 6 of the Plan. The balance of the shares are
reserved for Stock Grants awarded under any other provision of this Plan;
provided, however, that in no event shall the aggregate number of shares of
Stock subject to all Stock Grants made under this Plan since inception exceed
9,000,000 shares of Stock, adjusted as described in Section 3.2,
below.
3.2 Adjustment
to Shares. The aggregate number of shares of Stock which may
be issued pursuant to Stock Grants made under this Plan shall be automatically
adjusted, without further action by the Board or the shareholders of the
Company, to reflect changes in the capitalization of the Company, such as stock
dividends, stock splits, reverse stock splits, subdivisions, reorganizations or
reclassification, or any similar recapitalization that affects or modifies the
number of shares of Stock issued and outstanding at any time.
3.3 Number of
Stock Grants; Partial Exercise. More than one Stock Grant may
be made to the same Participant, and may be made in the form of Stock Options,
Restricted Stock Grants, SARs or any combination thereof. Stock
Grants may be subject to partial exercise, as the Committee may in its
discretion determine. If any Stock Grant made under this Plan
expires, is terminated, or canceled without being exercised, or after
being partially exercised, the shares of Stock allocated to the unexercised
portion of a Stock Grant shall revert to the pool of shares reserved in Section
3.1 and shall again be available for Stock Grants made under this
Plan.
Article
4
Plan
Eligibility
4.1 General. The
Committee, subject to the following limitations, shall from time to time
designate from among the Company's employees those persons who will be
Participants in this Plan, subject to the following rules:
4.2 Eligibility
for Participation in Plan. The following natural persons are
eligible to participate in the Plan: (i) full or part time employees of the
Company, who, in the sole judgment of the Committee, are qualified by position,
training, ability, and responsibility to contribute substantially to the
progress of the Company and have a material, positive effect on the results of
the operations of the Company; (ii) key independent contractors, consultants, or
advisors who perform bona fide services for the Company which are not in
connection with any offer or sale of securities in a capital raising transaction
and who do not directly or indirectly promote or maintain a market for the
Company's stock; and (iii) directors of the Company shall be eligible to
participate in the Plans described in Article 5, Article 6, Article 7 and
Article 8, as applicable.
4.3 Independent
Directors Plan. Independent Directors of the Company shall be
automatically eligible to receive Stock Grants under Article 5, Article 7, and
Article 8, subject to the provisions of the Independent Directors Plan described
in Article 6.
Article
5
Stock
Option Plan
5.1 Award
of Stock Option. The Committee may award Stock Grants to a
Participant in the form of Stock Options, including, without limitation, "ISOs"
or "NSOs," under this Article 5, or any combination thereof. At the
time a Stock Option is awarded under this Article 5, the Committee shall
designate the number of shares of Stock subject to
the grant and indicate whether such grant is an ISO or an NSO.
5.2 ISOs. The
following rules shall apply to any Stock Options granted as ISOs, in addition to
any other provisions of this Plan that may be applicable.
(a) Employees
Only. An ISO may only be awarded to a person who is an
employee of the Company.
(b) Fair
Market Value of ISO. The aggregate fair market value of Stock
subject to an ISO granted under this Article 5 (determined without regard to
this Section 5.2) exercisable for the first time by any Participant during any
calendar year (under all plans of the Company) shall not exceed
$100,000. The preceding sentence shall be applied by taking ISOs into
account in the order in which they were granted hereunder. If any ISO
is granted that exceeds the limitations of this Section 5.2 at the first time it
is exercisable, it shall not be invalid, but shall constitute, and be treated
as, an NSO to the extent of such excess. For purposes of this Plan,
the fair market value of the Stock subject to any ISO shall be determined by the
Committee without regard to any restriction other than a restriction which, by
its terms, will never lapse.
(c) Disposition
of ISO Stock. No Stock issued
in connection with a Participant's exercise of an ISO that is disposed of by the
Participant within two (2) years after the date the option is granted or within
one (1) year after the date such Stock is issued to the Participant will remain
eligible for treatment as an ISO; provided, however, unless otherwise provided
in the Stock Grant Agreement, these holding periods shall not apply if the Stock
Option is exercised after the death of a Participant by the estate of such
Participant, or by a person who acquired the right to exercise such option by
bequest or inheritance or by reason of the death of a deceased
Participant.
(d) Insolvent
Participants. A disposition of Stock described in Section
422(c)(3) of the Code, which was acquired pursuant to the exercise of an ISO,
shall not constitute a disposition of Stock in violation of Section
5.2(c).
(e) Construction. Any
ISO granted under this Plan shall be construed to meet the requirements of
Section 422 of the Code and the regulations thereunder.
5.3 Option
Price.
(a) A
Stock Option granting an ISO shall state the exercise price of the option, shall
not be less than 100% of the fair market value of the optioned Stock on the date
the ISO is granted, as provided below. In the case of a Participant
who, at the time the ISO is granted, owns shares of Stock possessing more than
10% of the total combined voting power of all classes of stock of the Company
(or any parent or subsidiary), the exercise price of such ISO shall be not less
than 110% of the fair market value of Stock on the date the option is granted,
and, in no event, shall such option be exercisable after the expiration of five
(5) years from the date such option is granted.
(b) The
exercise price of an NSO or any Stock Option granted to a director under Article
6 shall not be less than 100% of the fair market value of a share of the Stock
as of the date of grant.
(c) For
purposes of this Plan, the fair market value of a share of Stock (the "Fair
Market Value") shall equal the closing price of such Stock on the date the Stock
Grant is made, as reported by the New York Stock Exchange
("NYSE"). If for any reason the closing price is not available, then
the Fair Market Value of a share of Stock may be determined as the mean of the
highest and lowest quoted selling prices for such Stock on the date preceding
the date of grant, as reported by the NYSE. If for any reason the
Company's Stock is not publicly traded on a national securities market, or not
listed on the NYSE, the Committee shall evaluate all factors which the Committee
believes are relevant in determining the Fair Market Value of a share of Stock
and, the Committee, in good faith in exercising its business judgment, shall
establish the Fair Market Value of the Stock as of the date an option is
granted.
5.4 Limitation
on Period in Which to Grant or Exercise Options. No ISO shall
be granted under this Plan more than ten (10) years after the earlier of (i) the
date the Plan is initially adopted by the Board or (ii) the date the Plan is
approved by the shareholders of the Company. Any Option Grant, other
than an ISO, made under the Plan may be exercised within any reasonable term and
may be granted any time prior to the termination or expiration of the
Plan. In no event shall an ISO granted under this Plan be exercised
after the expiration of ten (10) years from the date such ISO is
granted. Any provision of this Plan to the contrary notwithstanding,
the Committee may, in its sole discretion, grant any Participant an NSO which,
if provided in the Stock Grant Agreement, may be exercised after the termination
of the Participant's employment with the Company.
Article
6
Independent
Directors Plan
6.1 Termination
of Independent Director Option. Except
as otherwise provided in any written agreement between the Company and the
Independent Director, any NSO granted to an Independent Director under this Plan
will expire on the earlier of (i) ten (10) years after the date of grant; (ii)
one (1) year after such Independent Director terminates his services as a
director of the Company; (iii) the expiration date stated in the Stock Grant
Agreement (as this term is defined in the Plan); or (iv) any earlier date
provided in this Article 6.
6.2 Holding
Period. The
Compensation Committee may require that restrictions be placed on the sale of
any Stock obtained through the exercise of a Stock Grant made to an Independent
Director.
6.3 Existing
Options. All Stock Grants made by the Company to Independent
Directors, including Stock Options issued prior to the date hereof, shall be
subject to the terms and conditions of this Article 6. All Stock
Grants made to an Independent Director shall be made at the Fair Market Value of
the Stock, as of the date of the grant.
6.4 Payment
of Director's Fees in Stock. The Company may issue, at the
discretion of the Board, Stock Grants to Independent Directors as compensation
to such Independent Directors for services, based on the Fair Market Value of
the Company's Stock, as provided in Section 5.3(c) above.
Article
7
Restricted
Stock
7.1 Award of
Restricted Stock. The Committee may award Stock Grants to a
Participant in the form of Restricted Stock, and shall designate the number of
shares of Restricted Stock subject to the grant. Stock Grants of
Restricted Stock may be made as either an outright grant of Stock for services
rendered or as the grant of a right to purchase Restricted Stock.
7.2 Price or
Valuation of Stock Subject to a Restricted Stock Grant. The
purchase price or value assigned to Restricted Stock issued under a Restricted
Stock Grant shall not be less than 100% of its Fair Market Value, as provided in
Section 5.3(c), as of the date of the Stock Grant.
7.3 Vesting. A
Restricted Stock Grant shall be subject to the vesting schedule established by
the Committee and specified in the Participant's Stock Grant
Agreement.
7.4 Restrictions. Each
share of Restricted Stock issued to a Participant under this Article 7 shall be
subject to such terms, conditions and restrictions as are established by the
Committee and provided in the Participant's Stock Grant Agreement, including,
without limitation, restrictions concerning voting rights, transferability,
forfeiture, vesting and restrictions applicable in the event of a Participant's
termination as an employee or Director of the Company. The Committee
may, in its sole discretion, remove or waive any or all of the restrictions
imposed by a Stock Grant Agreement if it determines such removal is
appropriate.
Article
8
Stock
Appreciation Right Plan
8.1 Award of
SAR. The Committee may award Stock Grants to a Participant in
the form of SARs. Any Stock Grant awarding SARs shall designate the
number of SARs subject to the grant.
8.2 Exercise
of SAR. SARs shall be exercisable, in whole or in part, at
such times as the Committee specifies in the Participant's Stock Grant
Agreement.
8.3 Appreciation. Each
SAR shall entitle the Participant, upon exercise, to an amount equal to the
greater of: (a) the Fair Market Value of a share of Stock, as provided in
Section 5.3(c), on the date of exercise; over (b) the Fair Market Value of a
share of Stock on the date the SAR is granted ("Appreciation
Value").
8.4 Form of
Settlement. The Appreciation Value Payable to a Participant
upon the exercise of one or more SARs may be paid to the Participant either in
cash or Stock, or any combination of cash and Stock, as the Stock Grant
Agreement may provide. If settled in cash, the amount paid to the
Participant shall be the Appreciation Value determined under Section
8.3. If settled in Stock, the Company shall issue to the Participant
the number of whole shares of Stock equal to (a) the Appreciation Value, divided
by (b) the Fair Market Value of a share of Stock on the exercise date; any
fractional shares shall be settled in cash. No dividend or other
distribution right shall attach to any SAR. The Company's settlement
in full of any SAR shall extinguish any further liability the Company has to a
Participant with respect to such SAR.
Article
9
Administration
9.1 Compensation
Committee. This Plan shall be administered by the
Committee. The Committee shall serve at the pleasure of the Board,
and the Board may, from time to time, remove members from, or add members to,
the Committee. The Committee shall include a minimum of two (2)
Independent Directors. Vacancies on the Committee, however caused,
shall be filled by the Board. No member of the Committee shall
participate in or take any action with respect to any Stock Grant made with
respect to such member, except as otherwise provided herein. The
Committee may appoint delegates to act for and on its behalf. The
Committee shall select one of its members as Chairman and shall hold meetings at
such times and places as the Committee may determine. A majority of
the Committee at a meeting at which a quorum is present, or acts reduced to or
approved in writing by a majority of the members of the Committee, shall be
valid acts of the Committee. No member of the Board or the Committee
shall be liable for any action or determination made in good faith with respect
to this Plan or any option granted hereunder.
9.2 Administration
of the Plan.
(a) The
Committee may adopt rules and procedures for administration of the Plan, to the
extent such rules and procedures are not inconsistent
herewith. Subject to the provisions of this Plan, the Committee shall
have the sole, final, and conclusive discretion and authority to construe and
interpret the Plan, including, without limitation, authority to
determine:
(1) Those
persons who will become Participants and the terms and conditions of their
eligibility;
(2) The
nature and amount of such Stock Grants;
B-6
(3) All
terms and conditions of each Stock Grant, including, without
limitation:
(i) The
number of shares of Stock for which a Stock Grant is made;
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(ii)
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Subject
to the limitations set forth in this Plan, the price to be paid for Stock
upon exercise of a Stock Grant;
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(iii) The
terms and conditions of the exercise;
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(iv)
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The
terms of payment of the exercise price or purchase of a Stock Grant;
provided that the exercise or purchase price of a
share
of Stock subject to a Stock Grant shall not be less than the Fair Market
Value of such shares as of the date of
grant;
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(v)
Any conditions to which the grant or its exercise may be subject;
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(vi)
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Any
vesting or forfeiture provisions applicable to any Stock Grant;
and
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(vii)
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Any
restrictions or limitations placed on Stock issued pursuant to the
exercise of a Stock Grant.
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(b) The
Committee may provide that any Stock Grant may be exercised as a "cashless"
Stock Grant, including any arrangement whereby any dealer associated with the
Financial Industry Regulatory Authority, upon an irrevocable election by a
Participant to exercise any Stock Grant, either (i) commits to loan the
Participant the exercise price of the stock and forwards it to the Company, or
(ii) establishes a margin commitment with the Participant to pay the exercise
price of the Stock Grant to the Company, except to the extent any such
arrangement is prohibited by the Sarbanes Oxley Act of 2002 and the Securities
and Exchange Act of 1934.
(c) Any
provision of this Plan to the contrary notwithstanding, subject to the overall
limitation of Section 3.1 on shares of Stock that are reserved for the issuance
of Stock Grants under the Plan, the maximum number of shares of Stock issuable
with respect to Stock Grants awarded to any Participant during any calendar
year, beginning with calendar year 2005, shall not exceed, in the aggregate,
650,000 shares of Stock. The maximum number of shares of Stock
issuable with respect to Stock Grants awarded to any Participant during any
calendar year under this Section 9.2(c) shall be subject to adjustment as
provided in Section 3.2 for stock dividends, stock splits, reserve stock splits
and similar transactions.
Article
10
General
Provisions
10.1 Grant
Agreement. Each Stock Grant made under this Plan shall be
evidenced by a Stock Grant Agreement and shall be executed by the Company and
the Participant. The Stock Grant Agreement shall contain any terms
and conditions required by this Plan and such other terms and conditions as the
Committee, in its sole discretion, may require, including, without limitation,
restrictions on the transferability of any Stock which are not inconsistent with
the Plan.
10.2 Option or
Purchase Price. Stock Grants, once made, shall not be
repriced.
10.3 Mergers
or Consolidations. If the Company at any time dissolves or
undergoes a reorganization, including, without limitation, a merger or
consolidation with any other organization, in any manner or form whatsoever, and
the Company is not the surviving organization and the surviving organization
does not agree to assume the Stock Grants granted pursuant to this Plan or to
substitute options in place thereof, the Stock Grants made under this Plan may
be terminated, subject to the procedures set forth in this Article
10. Prior to any termination of this Plan or the Stock Grants made
hereunder, each Participant holding an outstanding Stock Grant not yet exercised
shall be notified of such termination and shall be provided a reasonable period
of not less than fifteen (15) days in which to exercise such Stock Option prior
to its termination, to the extent such option is then exercisable. In
the event of a merger or consolidation, the Committee may, in its sole
discretion, authorize the exercise of such Stock Grants or accelerate the
vesting of such Stock Grant, or both. Any Stock Grant not exercised
in accordance with such prescribed terms and conditions shall terminate as of
the date specified by the Committee, and simultaneously, the Plan itself shall
be terminated without further order of the Company or the Board of
Directors.
10.4 Termination
of Employment. Except as provided in Sections 5.4, 6.2, or as
otherwise permitted by this Plan (or any Stock Grant Agreement), any Stock Grant
made pursuant to this Plan shall immediately terminate upon a Participant's
termination of employment with the Company, unless (i) such termination of
employment occurs by reason of the death or retirement (including early
retirement, if approved by the Committee) of the Participant, or (ii) on account
of the permanent and total disability of the Participant (as such term is
defined in Section 22(e)(3) of the Code and the regulations therein); or (iii)
with the approval of Committee. Upon retirement (including early
retirement), a Participant (or the administrator or conservator of the
Participant's estate) may, subject to Section 5.4 of the Plan, or the provisions
of the Stock Grant Agreement, exercise any Stock Grant in full within three (3)
months of retirement or, if the Participant retired or terminated employment on
account of "permanent and total disability" (as that term is defined in Section
22(e)(3) of the Code), within one (1) year of retirement. If a
Participant dies while in the employment of the Company or within three (3)
months after retirement, the Participant's personal representative or other
person who acquires the right to exercise such Stock Grant by bequest,
inheritance, or by reason of the death of the deceased Participant, may, subject
to Section 5.4 of the Plan or any contrary provision of the Stock Grant
Agreement, exercise the option in full within one (1) year from the date of the
Participant's death; provided that if such exercise period would disqualify an
ISO as an incentive stock option under Section 422 of the Code, the Stock Option
shall be treated as an NSO.
10.5
Payment
for Stock. The exercise price for any shares of Stock acquired
through the whole or partial exercise of any Stock Grant shall be paid in full
in cash or immediately available funds, or in Stock with a current market value
equal to all or a part of the exercise price, or both.
10.6
Compliance
With Applicable Laws and Regulations. Stock Grants made under
this Plan shall contain such provisions with respect to compliance with
applicable federal and state law as the Committee, with the advice of the
Company's counsel, may deem appropriate, including, without limitation, any
provision necessary to comply with state or federal securities
laws.
10.7
No
Right to Employment. Designation of an employee as a
Participant in this Plan for any purpose shall not confer on the employee the
right to continue in the employment of the Company or any right to receive a
Stock Grant for any Plan Year.
10.8
Taxes. A
Participant shall be responsible for paying any taxes with respect to a Stock
Grant. The Company is hereby authorized to deduct any taxes that may
be applicable from the dollar value of any Stock Grant to a Participant,
including, without limitation, FICA, FUTA, and any required income tax
withholding, and the Company may effect any such withholding by reducing the
number of shares of Stock acquired upon the issuance or exercise of any Stock
Grant by the amount of such FICA, FUTA, or other tax liability, or may make
other reasonable arrangements for the payment of any such tax
liability.
10.9
Expenses. All
expenses incurred in connection with the administration of this Plan shall be
borne by the Company, except as any Stock Grant Agreement may otherwise
provide.
10.10 Unfunded
Benefits. Nothing in this Plan shall be construed as requiring
the Company to establish a trust or to find this Plan, or to create a trust of
any kind or any fiduciary relationship between the Company and any Participant,
employee or Beneficiary.
10.11 Transferability. Except
as otherwise expressly permitted by this Plan, no Stock Grant made under this
Plan shall be transferable by the Participant other than by will or by the laws
of descent and distribution. During a Participant's lifetime, a Stock
Grant made hereunder shall be exercisable only by the Participant and only if at
all times during the period of time beginning on the date the Stock Grant is
made and ending on the day three months (or one year, in the case of an employee
or Independent Director who retires on account of becoming "permanently and
totally disabled" within the meaning of that term under section 22(e)(3) of the
Code) before the date of exercise of such Stock Grant, such Participant was an
employee or director of the Company (or a corporation or a parent corporation or
subsidiary corporation of a corporation assuming an option in a transaction to
which section 424(a) of the Code applies).
10.12 Expiration
Date of Plan. If not earlier terminated, this Plan shall
expire on February 5, 2013. In no event shall any Stock Option be
granted under this Plan after February 5, 2013. In no event shall any
ISO be granted under this Plan after February 5, 2013.
10.13 Corporate
Action. The issuance of a Stock Grant pursuant to this Plan
shall not affect in any way the right or power of the Company to make
adjustments, reclassifications, reorganizations, or changes of any kind to its
capital or business structure or to merge, consolidate, dissolve, liquidate,
sell or transfer all or any part of its business or assets.
10.14 Rights as
a Shareholder. A Participant shall have no rights as a
shareholder of the Company with respect to any shares of Stock subject to a
Stock Grant made hereunder until the date of the issuance of the Stock to the
Participant. Stock issued in connection with or as part of any Stock
Grant shall be considered issued, for the purposes of voting and dividend
rights, as of the date the Stock is reflected as issued on the Company’s stock
books. Except as provided in Section 3.2, no adjustment shall be made for
dividends (ordinary or extraordinary, whether in cash, securities, or other
property) or distributions or other rights for which the record date precedes
the date Stock is issued to a Participant.
10.15 Paperless
Grant. Each share of Stock issued pursuant to the exercise or
settlement of a Stock Grant may be issued only in paperless form and recorded on
the books of the Company (together with any restrictions applicable
thereto). In no event shall any physical stock certificates be issued
to a Participant, if the Participant is not fully vested in the Stock or if the
Stock Grant (or any underlying Stock) is subject to any
restrictions. In no event shall any SAR have any voting
rights.
10.16 Investment
Purpose. Unless the Stock received pursuant to a Stock Grant
issued under this Plan is registered with the Securities and Exchange
Commission, or an exemption from registration is available, each Stock Grant is
subject to the condition that the issuance of the Stock Grant and any Stock
issued upon exercise of the Stock Grant is for investment purposes only, and not
with a view to the subsequent resale or distribution of such Stock.
10.17 Investment
Letter. The Compensation Committee may require that any
Participant exercising a Stock Grant, as a condition to such exercise, execute
and deliver to the Company an investment letter in such form as the Committee,
may from time to time require.
10.18 Termination
or Amendment of the Plan. The Board may terminate, suspend,
discontinue, modify or amend this Plan in any respect whatsoever, except that,
without approval of the shareholders of the Company, no such revision or
amendment shall change the number of shares of Stock of the Company subject to
the Plan, change the designation of the class of employees eligible to receive
options, decrease the price at which options may be granted or remove the
administration of the Plan from the Committee.
10.19 Application
of Funds. The proceeds received by the Company from the sale
of shares of Stock pursuant to the exercise of Stock Grants shall be used for
general corporate purposes.
10.20 Obligation
to Exercise Grant. A Stock Grant made hereunder shall impose
no obligation on the Participant to exercise such grant.
10.21 Approval
of Shareholders: Termination of Plan. This Plan is effective
as of June 1, 2003. This Plan, as amended and restated hereby, is
effective as of February 11, 2009, subject to the approval of the Company's
shareholders prior to February 10, 2010. The Committee may cause
Stock Grants to be made under the Plan, subject to the Plan being approved by
the Company's shareholders within the period described above.
10.22 Registration
of Plan. No rights granted under the Plan may be exercised to
any extent unless the Plan (including Stock granted and Stock issued thereunder)
is covered by a registration statement filed with the Securities and Exchange
Commission that is effective pursuant to the Securities Act of
1933. No rights granted under the Plan may be offered or exercised
until the Plan is subject to such an effective registration
statement. Until the Plan is so registered, no rights granted under
the Plan shall be exercised.
10.23 Governing
Law. The Plan shall be governed by and construed under the
laws of the State of Arizona.
10.24 Arbitration
of Disputes. The Federal Arbitration Act applies and governs
the arbitration provisions of the Plan. Any disputes between or among
the Company (including its subsidiaries, affiliates, or successors) and
Participants (collectively, the "Parties") with respect to the terms of the
Plan, including, without limitation, the scope of this arbitration, shall be
subject to arbitration pursuant to the rules of the American Arbitration
Association governing commercial disputes. Arbitration shall occur in
Phoenix, Arizona. Judgment on any arbitration award may be entered in
any court having jurisdiction. If any person asserts a claim in
excess of $300,000, any party to the arbitration proceeding may request that the
arbitration be heard by a panel of three arbitrators and, if so requested, the
arbitration decision shall be made by a majority of the three
arbitrators. The Company shall pay the cost of arbitration, but if
the Company is the prevailing party in the arbitration, the Company shall have
the right to recover from the Participant all costs of arbitration. THE
PARTIES SHALL EXPRESSLY AGREE TO ARBITRATION AND WAIVE ANY RIGHT TO TRIAL BY
JURY EITHER PARTY MAY HAVE BY EXECUTING THE STOCK OPTION AGREEMENT. Nothing in the
Plan or any Stock Grant Agreement between the Company and any Participant shall
limit or restrict any self-help remedy, including, without limitation, any right
of offset a Party may have. The Party prevailing in any arbitration
shall be entitled to payment of all legal fees and costs (including court
costs), and all costs of arbitration, regardless of whether such costs are
recoverable under applicable law.
B-10
 ATTN:
PROXY DEPT.
5601
W. BUCKEYE RD.
PHOENIX,
AZ 85043
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VOTE
BY INTERNET - www.proxyvote.com
Use
the Internet to transmit your voting instructions and for electronic
delivery of information up until 11:59 P.M. Eastern Time the day before
the cut-off date or meeting date. Have your proxy card in hand when you
access the web site and follow the instructions to obtain your records and
to create an electronic voting instruction form.
ELECTRONIC
DELIVERY OF FUTURE SHAREHOLDER COMMUNICATIONS
If
you would like to reduce the costs incurred by Knight Transportation, Inc.
in mailing proxy materials, you can consent to receiving all future proxy
statements, proxy cards and annual reports electronically via e-mail or
the Internet. To sign up for electronic delivery, please follow the
instructions above to vote using the Internet and, when prompted, indicate
that you agree to receive or access shareholder communications
electronically in future years.
VOTE
BY PHONE - 1-800-690-6903
Use
any touch-tone telephone to transmit your voting instructions up until
11:59 P.M. Eastern Time the day before the cut-off date or meeting date.
Have your proxy card in hand when you call and then follow the
instructions.
VOTE
BY MAIL
Mark,
sign and date your proxy card and return it in the postage-paid envelope
we have provided or return it to Knight Transportation, Inc., c/o
Broadridge, 51 Mercedes Way, Edgewood, NY
11717.
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TO
VOTE, MARK BLOCKS BELOW IN BLUE OR BLACK INK AS FOLLOWS:
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M12630-P74274
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KEEP
THIS PORTION FOR YOUR RECORDS
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DETACH
AND RETURN THIS PORTION
ONLY
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THIS
PROXY CARD IS VALID ONLY WHEN SIGNED AND
DATED.
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KNIGHT
TRANSPORTATION, INC.
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For
All
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Withhold
All
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For
All
Except
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To
withhold authority to vote for any individual nominee(s), mark “For All
Except” and write the number(s) of the nominee(s) on the line
below.
________________________________
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Proposal No.
1:
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Election
of Class II Directors.
NOMINEES:
01 - Gary J.
Knight
02 - G.D.
Madden
03
- Kathryn L. Munro
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o
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o
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For
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Against
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Abstain
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CUMULATIVE VOTING - If you wish to
allocate your votes among the Class II Nominees using cumulative voting,
do not check any of the boxes
above, but instead, indicate in the space provided below the number of
votes you wish to cast for each Class II Nominee (the maximum number of
votes you may allocate is the number of shares owned multiplied by three,
the number of Class II Nominees).
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Proposal No.
2: Proposal to approve and ratify the Knight Transportation, Inc.
Employee Stock Purchase Plan.
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o
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o
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o
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Nominee
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Number
of Votes
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Proposal No.
3: Proposal to approve and ratify an amendment and restatement of
the Knight Transportation, Inc. 2003 Stock Option Plan (the "2003 Stock
Option Plan"), which among other things (i) renames the Plan the Knight
Transportation, Inc. Amended and Restated 2003 Stock Option and Equity
Compensation Plan," (ii) provides additional terms and administrative
procedures applicable to restricted stock grants, and (iii) authorizes the
issuance of stock appreciation rights.
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o
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o
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o
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Gary
J. Knight
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Proposal No.
4: Proposal to approve and ratify a one-time stock option exchange
program for employees, along with an accompanying amendment to the 2003
Stock Option Plan to permit such exchange.
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o
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o
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o
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G.D.
Madden
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Proposal No.
5: Proposal to ratify the appointment of Deloitte & Touche LLP
as the Company's Independent Registered Public Accounting Firm for Fiscal
2009.
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o
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o
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o
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Kathryn
L. Munro
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(If
you exercised cumulative voting above, please mark the corresponding box
below.)
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Other Action:
In their discretion, the proxies are also authorized to vote upon such
other matters as may properly come before the Annual Meeting or any
adjournments thereof.
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Check
the box to the right if you exercised cumulative voting
above.
Please
do not check the box unless you want to exercise cumulative
voting.
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o
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THIS PROXY CARD IS VALID ONLY WHEN SIGNED AND
DATED. Your signature below should conform to the name in which the
shares are held. When shares are held by joint tenants, both shall sign.
When signing as attorney, executor, administrator, trustee, or guardian,
please give full title as such. If a corporation, please sign in full
corporate name by president or other authorized officer. If a partnership,
please sign in partnership name by authorized person.
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Signature
[PLEASE
SIGN WITHIN BOX]
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Date
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Signature
(Joint Owners)
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Date
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As a
Knight Transportation, Inc. shareholder, you can view the shareholder account on
a secured Internet website.
By
accessing Investor Service DirectSM at www.bnymellon.com/shareowner/isd, you
can view the account profile, stock detail, and historical Knight
Transportation, Inc. stock price information. You can also change your
address.
In
addition, you can use this site to consent to future access of Knight's annual
reports and proxy materials electronically via the Internet.
Knight
also provides access to shareholder information, including its annual report and
proxy statement, through its website at www.knighttrans.com.
Important
Notice Regarding the Availability of Proxy Materials for the Annual
Meeting:
The
Notice and Proxy Statement and Annual Report are available at
www.proxyvote.com.
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Detach here from proxy voting card
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M12631-P74274
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PROXY
KNIGHT
TRANSPORTATION, INC.
5601
West Buckeye Road
Phoenix,
Arizona 85043
THIS
PROXY IS SOLICITED BY THE BOARD OF DIRECTORS
FOR
THE 2009 ANNUAL MEETING OF SHAREHOLDERS
TO
BE HELD
Thursday,
May 21, 2009, 8:30 A.M., Phoenix Time
By
executing this Proxy, the shareholder constitutes and appoints the Chairman and
Chief Executive Officer, Kevin P. Knight, and the Chief Financial Officer,
Secretary, and Treasurer, David A. Jackson, and each of them, as proxies for the
shareholder (or if only one proxy is present, that one shall have all power
granted herein), with full power of substitution, who may, and by a majority of
such proxies, represent the shareholder and vote all shares of Common Stock
which the shareholder is entitled to vote at the Annual Meeting of Shareholders
of Knight Transportation, Inc. to be held on May 21, 2009, at 8:30 A.M., Phoenix
Time, at the Company's headquarters at 5601 West Buckeye Road, Phoenix, Arizona
85043, or at any adjournment thereof, on all matters described in the Notice and
Proxy Statement for the Annual Meeting dated April 10, 2009, as set forth below.
Cumulative voting will be applied in the election of directors. See the Proxy
Statement furnished for an explanation of cumulative voting.
The
shareholder acknowledges receipt of the Notice and Proxy Statement dated April
10, 2009, grants authority to any of said proxies, or their substitutes, to act
in the absence of others, with all the powers which the shareholder would
possess if personally present at such meeting, and ratifies and confirms all
that said proxies, or their substitutes, may lawfully do in the shareholder's
name, place, and stead.
THIS
PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS OF KNIGHT TRANSPORTATION,
INC., AND THE SHARES REPRESENTED BY THIS PROXY WILL BE VOTED IN ACCORDANCE WITH
YOUR INSTRUCTIONS. THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR ELECTION OF THE
NOMINEES NAMED IN PROPOSAL NO. 1 AND FOR THE OTHER PROPOSALS LISTED HEREIN. IF
NO CHOICE IS SPECIFIED BY YOU, THIS PROXY WILL BE VOTED FOR ELECTION OF THE
NOMINEES NAMED IN PROPOSAL NO. 1 AND FOR THE OTHER PROPOSALS LISTED HEREIN. THE
PROXIES, IN THEIR DISCRETION, ARE AUTHORIZED TO VOTE UPON SUCH OTHER MATTERS AS
MAY PROPERLY COME BEFORE THE ANNUAL MEETING OR ANY ADJOURNMENTS
THEREOF.
Please
mark, sign, date, and return the Proxy Card promptly, using the enclosed
envelope, which requires no postage when mailed in the United
States.
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Address
Changes/Comments:
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SEE
REVERSE
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(If
you noted any Address Changes/Comments above, please mark corresponding
box on the reverse side.)
TO BE SIGNED ON THE
REVERSE SIDE
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SEE
REVERSE
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