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
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by
the Registrant [X]
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by
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Preliminary
Proxy Statement
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Confidential,
for Use of the Commission Only (as permitted by Rule
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[X]
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Definitive
Proxy Statement
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Definitive
Additional Materials
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[ ]
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Soliciting
Material Pursuant to
§ 240.14a-12
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Covenant
Transport, 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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to Exchange Act Rule 0-11 (set forth the amount on
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COVENANT
TRANSPORT, INC.
400
Birmingham Highway
Chattanooga,
Tennessee 37419
___________________________________________
NOTICE
AND PROXY STATEMENT
FOR
ANNUAL MEETING OF STOCKHOLDERS
TO
BE HELD ON TUESDAY, MAY 22, 2007
___________________________________________
To
Our
Stockholders:
You
are
cordially invited to attend the 2007 annual meeting of stockholders of Covenant
Transport, Inc., a Nevada corporation, to be held at our principal
executive offices, 400 Birmingham Highway, Chattanooga, Tennessee 37419, at
10:00 a.m. local time, on Tuesday, May 22, 2007, for the following
purposes:
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1.
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To
consider and act upon a proposal to elect seven (7) directors;
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2.
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To
consider and act upon an amendment and restatement of the Restated
Articles of Incorporation of the Company in order to change the name
from
Covenant Transport, Inc. to Covenant Transportation Group, Inc.;
and
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3.
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To
consider and act upon such other matters as may properly come before
the
meeting and any adjournment
thereof.
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The
foregoing matters are more fully described in the accompanying proxy
statement.
The
Board
of Directors has fixed the close of business on Wednesday, March 26, 2007,
as
the record date for the determination of stockholders entitled to receive notice
of and to vote at the annual meeting or any adjournment thereof. Shares of
Class A and Class B common stock may be voted at the annual meeting
only if the holder is present at the annual meeting in person or by valid proxy.
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.cesvote.com
or by telephone using a touch-tone telephone and calling 1-888-693-8683.
Returning
your proxy 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.
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 R. Parker | |
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David
R. Parker
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Chairman
of the Board of Directors
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Chattanooga,
Tennessee
April
20,
2007
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GENERAL
INFORMATION
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Voting
Rights
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Quorum
Requirement
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Required
Vote
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Right
to Attend 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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How
to Vote - Proxy Instructions
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PROPOSAL
1 ELECTION OF DIRECTORS
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Nominees
for Directorships
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CORPORATE
GOVERNANCE
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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
Compensation Committee
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Compensation
Committee Interlocks and Insider Participation
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Report
of the Compensation Committee
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The
Nominating and Corporate Governance Committee
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Our
Executive Officers
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Compliance
with Section 16(a) of the Exchange Act
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Code
of Conduct and Ethics
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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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Summary
Compensation Table
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All
Other Compensation Table
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Grants
of Plan-Based Awards
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Outstanding
Equity Awards at Fiscal Year-End
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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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RELATIONSHIPS
WITH INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
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Principal
Accountant Fees and Services
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PROPOSAL
2 APPROVAL OF AMENDMENT AND RESTATEMENT OF THE COMPANY'S RESTATED
ARTICLES
OF INCORPORATION CHANGING NAME TO COVENANT TRANSPORTATION GROUP,
INC.
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STOCKHOLDER
PROPOSALS
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OTHER
MATTERS
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| A-1 |
400
Birmingham Highway
Chattanooga,
Tennessee 37419
__________________________________________
NOTICE
AND PROXY STATEMENT
FOR
ANNUAL MEETING OF STOCKHOLDERS
TO
BE HELD ON TUESDAY, MAY 22, 2007
__________________________________________
GENERAL
INFORMATION
This
proxy statement is furnished in connection with the solicitation of proxies
from
the stockholders of Covenant Transport, Inc., a Nevada corporation, to be
voted at the annual meeting of stockholders, which will be held at our principal
executive offices, 400 Birmingham Highway, Chattanooga, Tennessee 37419, at
10:00 a.m. local time, on Tuesday, May 22, 2007, and any adjournment
thereof. 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 below; (ii) FOR the approval of the
name change and the accompanying amendment and restatement of the Articles
of
Incorporation; and (iii) in accordance with the judgment of the proxy holders,
with respect to any other matters properly brought before the annual
meeting.
The
proxy
statement, proxy card, and our annual report on Form 10-K for the fiscal
year ended December 31, 2006, was first mailed on or about April 20,
2007, to stockholders of record at the close of business on our record date
of
March 26, 2007. Except
to the extent it is incorporated by specific reference, the enclosed copy of
our
2006 annual report is not incorporated into this proxy statement and is not
to
be deemed a part of the proxy solicitation material.
The
terms "Company," "we," "us," and "our" refer to Covenant Transport, Inc. and
its
consolidated subsidiaries.
Only
stockholders of record at the close of business on the record date are entitled
to vote at the annual meeting, either in person or by valid proxy. Holders
of
Class A common stock are entitled to one vote for each share held. Holders
of Class B common stock are entitled to two votes for each share held so
long as such shares are owned by David R. Parker or certain members of his
immediate family. In the event that any shares of our Class B common stock
cease
to be owned by Mr. Parker or certain of his family members, such shares
will be automatically converted into shares of our Class A common stock. All
of
the issued and outstanding shares of our Class B common stock are currently
owned by Mr. and Mrs. Parker as joint tenants with rights of
survivorship. Unless otherwise required by Nevada law, the Class A common stock
and Class B common stock vote together as a single class. On March 26, 2007,
the
record date, there were issued and outstanding 12,119,404 shares of
Class A common stock, par value one cent ($0.01) per share (including
shares of restricted Class A common stock subject to certain performance vesting
and holding provisions), entitled to cast an aggregate 12,119,404 votes
on all matters subject to a vote at the annual meeting, and 2,350,000 shares
of
Class B common stock, par value one cent ($0.01) per share, entitled to
cast an aggregate 4,700,000 votes on all matters subject to a vote at the annual
meeting. The total number of shares of our common stock issued and outstanding
on the record date was approximately 14,469,404, which is entitled to cast
an
aggregate of 16,819,404 votes on all matters subject to a vote at the annual
meeting. The total number of issued and outstanding shares excludes
approximately 2,095,648 shares of Class A common stock reserved for
issuance upon the exercise of outstanding stock options granted under our
incentive stock plans and other arrangements. Holders of unexercised options
are
not entitled to vote at the annual meeting. We have no other class of stock
outstanding. Stockholders are not entitled to cumulative voting in the election
of directors. 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 the holders of a majority of the total number of shares of
Class A and Class B common stock issued and outstanding 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.
Directors
are elected by an affirmative vote of a plurality of the total votes cast by
stockholders entitled to vote and represented in person or by proxy at the
annual meeting, which means that the seven director nominees receiving the
highest number of votes for their election will be elected. Approval of any
other matter submitted to stockholders requires the affirmative vote of a
majority of the votes cast by stockholders entitled to vote and represented
in
person or by proxy at the annual meeting. Abstentions and broker non-votes
are
not considered affirmative votes and thus will have no effect on the election
of
directors by a plurality vote, but will have the same effect as negative votes
with respect to the approval of any other matter submitted to
stockholders.
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.
Stockholders 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
will
include reimbursements for the charges and expenses of brokerage firms and
others for forwarding solicitation materials to beneficial owners of our
outstanding Class A common stock. Proxies will be solicited by mail, and may
be
solicited personally by directors, officers, or our regular 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 Independent Registered Public Accounting Firm, and other
information included in our 2006 annual report that was mailed on or about
April
20, 2007, together with this notice and proxy statement, to all stockholders
of
record as of the record date.
Set
forth
below are the proposals to be considered by stockholders 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 certain
beneficial owners and management; the services provided to us by and fees of
KPMG, LLP, our independent registered public accounting firm; and how
stockholders may make proposals at our next annual meeting. EACH STOCKHOLDER
SHOULD READ THIS INFORMATION BEFORE VOTING.
If
you
are a holder of record of Covenant Transport, Inc. of Class A or Class B common
stock, you may vote your shares either (i) over the telephone by calling a
toll-free number, (ii) by using the Internet, or (iii) by mailing in your proxy
card. Owners who hold their shares in street name will need to obtain a voting
instruction form from the institution that holds their stock and must follow
the
voting instructions given by that institution.
For
2007,
we have arranged for telephone and Internet-voting procedures to be used. These
procedures have been designed to authenticate your identity, to allow you to
give instructions, and to confirm that those instructions have been recorded
properly. If you choose to vote by telephone or by using the Internet, please
refer to the specific instructions on the proxy card. The deadline for voting
by
telephone or the internet is 11:59 p.m. Eastern Standard Time on Monday, May
21,
2007. If you wish to vote using the proxy card, complete, sign, and date your
proxy card and return it to us before the meeting.
At
the
annual meeting, the stockholders will elect seven directors to serve as the
Board of Directors until our 2008 annual meeting of stockholders or until their
successors are duly elected and qualified. Upon the recommendation of the
Nominating and Corporate Governance Committee, our Board of Directors has
nominated for election as directors David R. Parker,
William T. Alt, Robert E. Bosworth,
Hugh O. Maclellan, Jr., Bradley A. Moline, Niel B.
Nielson, and Mark A. Scudder, each of whom is presently serving as a
director. In the absence of contrary instructions, each proxy will be voted
for
the election of all the proposed directors.
THE
BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS A VOTE "FOR" EACH OF THE DIRECTOR
NOMINEES.
Information
concerning the names, ages, positions with us, tenure as a director, and
business experience of the nominees standing for election as directors at the
annual meeting is set forth below. All references to experience with us include
positions with our operating subsidiary, Covenant Transport, Inc., a
Tennessee corporation.
David R. Parker,
49, has
served as President since our founding in 1985 and as Chairman of the Board
and
Chief Executive Officer since 1994. Mr. Parker was elected to the Board of
Directors of the Truckload Carriers' Association in 1994 and also serves on
the
Board of Directors of the American Trucking Associations.
William T. Alt,
70, has
served as a director since 1994. Mr. Alt has engaged in the private
practice of law since 1962 and has served as outside counsel to the Company
since 1986.
Robert E. Bosworth,
59, has
served as a director since 1998. Since September 19, 2005, Mr. Bosworth has
served as the President and Chief Operating Officer of Chattem, Inc., a publicly
traded consumer products company. Prior to such position, Mr. Bosworth
served as Chief Financial Officer for the Livingston Company, a merchant bank
located in Chattanooga, Tennessee, since 2004, and as Livingston's Vice
President of Corporate Finance since 2001. From 1998 until 2001,
Mr. Bosworth was a business and management consultant to various
corporations in the Chattanooga area. Prior to 1998, Mr. Bosworth served
for more than five years as Executive Vice President and Chief Financial Officer
of Chattem, Inc.,. Mr. Bosworth is a director of Chattem, Inc.
Hugh O. Maclellan, Jr., 67,
has
served as a director since 1994. Mr. Maclellan is President of the
Maclellan Foundation, Inc. and serves on the Boards of UnumProvident Corporation
and SunTrust Bank, Chattanooga, N.A.
Bradley A. Moline,
40, has
served as a director since 2003. Mr. Moline has been President
and Chief Executive Officer of Allo Communications, LLC, a competitive local
telephone company, since October 2002. Mr. Moline also has been the owner
and President of Imperial Super Foods, a grocery store in Imperial, Nebraska,
since February 2002. Mr. Moline was the President of Forte Technologies, a
contract manufacturer of high precision parts, from February 2001 until February
2002. From 1997 to May 2001, Mr. Moline was the Senior Vice President of
Finance and Chief Financial Officer of Birch Telecom, Inc., an integrated
communications provider. Mr. Moline resigned from his position at Birch
Telecom, Inc. to take the position with Forte Technologies more than sixteen
months prior to Birch Telecom, Inc.'s filing of a petition under the federal
bankruptcy laws in September 2002. From 1994 to 1997, Mr. Moline was our
Treasurer and Chief Financial Officer.
Niel B. Nielson,
53, has
served as a director since 2003. Dr. Nielson has been President of Covenant
College since 2002. From 1997 until 2002, Dr. Nielson was the Associate
Pastor of Outreach for College Church in Wheaton, Illinois. Dr. Nielson was
a partner and trader for Ritchie Capital Markets Group, LLC from 1996 to
1997. Prior to 1996, Dr. Nielson served as an executive officer in various
companies, including serving for two years as Senior Vice President of Chicago
Research and Trading Group, Ltd., a company at which he was employed for nine
years. Dr. Nielson holds twenty-four investment company directorships in
the First Trust Fund Complex.
Mark A. Scudder,
44, has
served as a director since 1994. Mr. Scudder has been an attorney for more
than ten years with Scudder Law Firm, P.C., L.L.O., Lincoln, Nebraska, and
has been President of the firm since January 1, 2003. The firm is our
outside corporate and securities counsel. Mr. Scudder is a director of
Knight Transportation, Inc., a publicly traded truckload carrier, and
Genesee & Wyoming Inc., a publicly traded, international
short-line railroad.
Meetings.
Our
Board
of Directors held four regularly scheduled meetings and three special meetings
during the fiscal year ended December 31, 2006. All of our directors
attended at least 75% of the regularly scheduled board meetings of the Board
of
Directors and each committee on which he served. Mr. Maclellan missed one
regularly scheduled meeting. We encourage the members of our Board of Directors
to attend our annual meetings of stockholders. All seven of our then-current
directors attended the 2006 annual meeting of stockholders.
Director
Independence. Our
Class
A common stock is listed on the Nasdaq National Market. Therefore, it is subject
to the listing standards, including standards relating to corporate governance,
embodied in applicable rules promulgated by the National Association of
Securities Dealers, Inc. (the "NASD"). Pursuant to NASD Rule 4350(c)(1),
the Board of Directors has determined that the following directors and nominees
are "independent" under NASD Rule 4200(a)(15): Robert E. Bosworth,
Hugh O. Maclellan, Jr., Bradley A. Moline, and Niel B.
Nielson. In accordance with NASD Rule 4350(c)(2), our independent directors
held meetings, referred to as "executive sessions," at which only the
independent directors were present, either before or following each regularly
scheduled meeting of the full Board of Directors.
Communications
with the Board of Directors. Our
Board
of Directors has adopted procedures by which our stockholders may communicate
with our Board regarding matters of substantial importance to us. Information
concerning the manner in which stockholders can communicate with the Board
is
available on our website at http://www.covenanttransport.com.
Functions,
Composition, and Meetings of the Audit Committee. Our
Audit
Committee operates pursuant to a written charter detailing its purpose, powers,
and duties. In February 2007, the charter of the Audit Committee was amended
and
restated to comply with Securities and Exchange Commission (the "SEC") Release
Nos. 33-8732 and 34-54302. The charter is available free of charge on our
website at http://www.covenanttransport.com.
The
primary responsibilities of the Audit Committee are set forth in the Audit
Committee Report, which appears below. The Audit Committee met eight times
during 2006. Messrs. Bosworth and Moline have served on the Audit Committee
since 2003, while Dr. Nielson has served on the Audit Committee since 2004.
Mr. Bosworth serves as Chairman of the Audit Committee.
Each
member of the Audit Committee satisfies the independence and audit committee
membership criteria set forth in NASD Rule 4350(d)(2). Specifically, each
member of the Audit Committee:
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is
independent under NASD Rule 4200(a)(15);
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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");
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did
not participate in the preparation of our financial statements or
the
financial statement of any of our current subsidiaries at any time
during
the past three years; and
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is
able to read and understand fundamental financial statements, including
our balance sheet, statement of operations, and cash flows
statement.
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Audit
Committee Financial Expert. The
Board
of Directors has determined that at least one "audit committee financial
expert," as defined under Item 401(h) of Regulation S-K and NASD
Rule 4350(d)(2)(A), currently serves on the Audit Committee. The Board of
Directors has identified Mr. Bosworth as an audit committee financial
expert. Mr. Bosworth is independent, as independence for audit committee
members is defined under applicable NASD rules.
Audit
Committee Report. In
performing its duties, the Audit Committee, as required by applicable rules
of
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
determines certain other matters, including the independence of our independent
registered public accounting firm. The Audit Committee Report for 2006 is set
forth below.
The
Audit Committee Report shall not be deemed to be incorporated by reference
into
any filing made by us under the Securities Act of 1933, as amended (the
"Securities Act"), 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
primary purpose of the Audit Committee is to assist the Board of Directors
in
fulfilling its oversight responsibilities relating to the quality and integrity
of the Company's financial reports and financial reporting processes and systems
of internal control over financial reporting. The Company's management has
primary responsibility for the Company's financial statements and the overall
reporting process, including maintenance of the Company's system of internal
control. The Company retains an independent registered public accounting firm,
which is responsible for conducting an independent audit of the Company's
financial statements, the effectiveness of management's assessment of internal
control over financial reporting, and the effectiveness of internal control
over
financial reporting in accordance with the standards of the Public Company
Accounting Oversight Board (United States) and issuing reports
thereon.
In
performing its duties, the Audit Committee has discussed the Company's financial
statements, management's assessment of internal control over financial
reporting, and the effectiveness of internal control over financial reporting
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 such accounting firm. For
the
fiscal year ended December 31, 2006, the Audit Committee (i) reviewed and
discussed the audited financial statements, management's assessment of internal
control over financial reporting, and the effectiveness of internal control
over
financial reporting with management and KPMG LLP, the Company's independent
registered public accounting firm; (ii) discussed with the independent
registered public accounting firm the matters required to be disclosed by
Statement on Auditing Standards No. 61, Communication
with Audit Committees,
as
amended; (iii) received and discussed with the independent registered public
accounting firm the written disclosures and the letter from such accounting
firm
required by Independence Standards Board Statement No. 1, Independence
Discussions with Audit Committees,
as
amended; and (iv) has discussed with the independent registered public
accounting firm its independence. The Audit Committee met with representatives
of the independent registered public accounting firm without management or
other
persons present once during 2006.
Based
on
the foregoing reviews and meetings, 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 fiscal year ended December 31, 2006, for filing
with
the SEC.
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Audit
Committee:
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Robert
E. Bosworth, Chairman
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Bradley
A. Moline
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Niel
B. Nielson
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Functions,
Composition, and Meetings of the Compensation Committee.
As more
fully outlined in the Compensation Committee Charter, the primary functions
of
the Compensation Committee are to aid our Board in discharging its
responsibilities relating to the compensation of our executive officers,
including the chief executive officer; to evaluate and approve our compensation
plans, policies, and programs; to produce an annual report on executive
compensation; and to perform such other duties as may be assigned to it by
our
Board or imposed by applicable laws or regulations. In furtherance of its
duties, the Compensation Committee reviews and approves certain aspects of
compensation of our executive officers and makes recommendations on other
compensation matters to the full Board of Directors. During 2006, Mr. Maclellan
and Dr. Nielson served as the members of the Compensation Committee, with
Dr. Nielson serving as Chairman. The Compensation Committee held a total of
two meetings in 2006, all of which were regular meetings.
Compensation
Committee Charter. In
February 2007, the charter of the Compensation Committee was amended and
restated to comply with SEC Release Nos. 33-8732 and 34-54302. The charter
is
available free of charge on our website at http://www.covenanttransport.com.
During
2006, Mr. Maclellan and Dr. Nielson served as the members of the Compensation
Committee, with Dr. Nielson serving as Chairman. None of such individuals
has been an officer or employee of the Company.
During
2006, 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, our executive officers, and their affiliates.
See
"Certain
Relationships and Related Transactions" for a description of certain
transactions between us and our other directors, executive officers, or their
affiliates, and "Executive Compensation - Director Compensation" for a
description of compensation of the members 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 and in our Annual Report on Form 10-K. 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.
Report
of the Compensation Committee
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 and in Covenant Transport, Inc.'s
Annual Report on Form 10-K for the year ended December 31, 2006.
|
Compensation
Committee:
|
|
|
Niel
B. Nielson, Chairman
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|
|
Hugh
O. Maclellan, Jr.
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Functions,
Composition, and Meetings of the Nominating and Corporate Governance Committee.
In
April
2004, the Board of Directors established a Nominating and Corporate Governance
Committee to recommend to the Board of Directors potential candidates for
election to the Board of Directors and to make recommendations to the Board
concerning issues related to corporate governance, as more specifically detailed
in the written charter discussed below. During part of 2006, Mr. Maclellan
and Dr. Nielson served as the Nominating and Corporate Governance
Committee, with Mr. Maclellan serving as Chairman. The Board of Directors
appointed Mr. Moline to the Committee in place of Dr. Nielson in May 2006.
All
current members of the Nominating and Corporate Governance Committee are
independent, as independence for nominating committee members is defined under
applicable NASD rules. The Committee met three times in 2006. The Nominating
and
Corporate Governance Committee has recommended that the Board of Directors
nominate David R. Parker, William T. Alt, Robert E.
Bosworth, Hugh O. Maclellan, Jr., Bradley A. Moline,
Niel B. Nielson, and Mark A. Scudder for election at the annual
meeting, each of whom is currently serving as a director.
Nominating
and Corporate Governance Committee Charter. A
written
charter for the Nominating and Corporate Governance Committee was adopted in
April 2004. A copy of the charter is available on our website at http://www.covenanttransport.com.
Process
for Identifying and Evaluating Director Nominees. Director
nominees are chosen by the entire Board of Directors, after considering the
recommendations of the Nominating and Corporate Governance Committee. The
members of the Nominating and Corporate Governance Committee review the
qualifications of various persons to determine whether they are qualified
candidates for membership on the Board of Directors. The Nominating and
Corporate Governance Committee will review all candidate recommendations,
including those properly submitted by stockholders, in accordance with the
requirements of its charter. With regard to specific qualities and skills,
the
Nominating and Corporate Governance Committee believes it necessary that:
(i) at least a majority of the members of the Board of Directors qualify as
"independent" under NASD Rule 4200(a)(15); (ii) at least three members
of the Board of Directors satisfy the audit committee membership criteria
specified in NASD Rule 4350(d)(2); 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 401(h) of Regulation S-K. In addition to these specific
requirements, the Nominating and Corporate Governance Committee takes into
account all factors it considers appropriate, which may include experience,
accomplishments, education, understanding of our business and the industry
in
which we operate, specific skills, general business acumen, and personal and
professional integrity. Generally, the Nominating and Corporate Governance
Committee will first consider current Board members because they meet the
criteria listed above and possess knowledge of our history, strengths,
weaknesses, goals, and objectives. We do not pay a fee to any third party to
identify or evaluate or assist in identifying or evaluating potential nominees.
Stockholder
Director Nominee Recommendations.
It is
generally the policy of the Nominating and Corporate Governance Committee to
consider stockholder recommendations of proposed director nominees if such
recommendations are serious and timely received. To be timely, recommendations
must be received in writing at our principal executive offices, 400 Birmingham
Highway, Chattanooga, Tennessee 37419, at least 120 days prior to the
anniversary date of mailing of our proxy statement for the prior year's annual
meeting. For the 2008 annual meeting, the deadline for receiving stockholder
recommendations of proposed director nominees will be December 22, 2007. In
addition, any stockholder director nominee recommendation must include the
following information:
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•
|
the
proposed nominee's name and qualifications and the reason for such
recommendation;
|
|
•
|
the
name and record address of the stockholder(s) proposing such
nominee;
|
|
•
|
the
number of shares of our Class A and/or Class B common stock that
are
beneficially owned by such stockholder(s); and
|
|
•
|
a
description of any financial or other relationship between the
stockholder(s) and such nominee or between the nominee and us or
any of
our subsidiaries.
|
In
order
to be considered by the Board, any candidate proposed by one or more
stockholders will be required to submit appropriate biographical and other
information equivalent to that required of all other director candidates.
Set
forth
below is certain information regarding our current executive officers (other
than our CEO, David R. Parker, for whom information is set forth above under
"Proposal No. 1 - Election of Directors - Nominees for Directorships"). All
executive officers are elected annually by the Board of Directors.
Michael W. Miller,
49, has
served as our Executive Vice President of Procurement and Corporate Operations
Manager since August 22, 2006. Between 1997 and such date, Mr. Miller was our
Chief Operating Officer. He previously served as our Vice President of
Operations from 1993 to 1997 and in various other positions from 1987 to 1993.
Mr. Miller has over 25 years of experience in the transportation industry.
Mr. Miller also served as a director until the May 2004 annual
meeting.
Joey
B. Hogan,
45, has
served as our Chief Financial Officer since 1997. Mr. Hogan has been an
Executive Vice President since May 2003 and was a Senior Vice President from
December 2001 to May 2003. From joining us in August 1997 through December
2001,
Mr. Hogan also served as our Treasurer. In 1996 and 1997, Mr. Hogan
served as Chief Financial Officer of The McKenzie Companies in Cleveland,
Tennessee, a group of privately owned companies. From 1986 to 1996,
Mr. Hogan served in various capacities, including three years as Director
of Finance, with Chattem, Inc.
L. D. "Micky"
Miller, III,
54, has
served as our Executive Vice President - Sales and Marketing since joining
us in
December 2002. Mr. Miller has over 25 years of sales and operations
experience in the trucking industry. From January 1998 to November 2002,
Mr. Miller was co-owner of, but was not involved in the day-to-day
management of, two privately owned trucking companies, one of which was a
truckload carrier and the other of which was a less-than-truckload carrier.
From
1985 to 1995, Mr. Miller served as President and Chief Executive Officer of
Crown Transport Systems Inc., a division of U.S. Xpress Enterprises, Inc.
From 1995 to 1997, Mr. Miller served as Chairman of the CSI/Crown division
of U.S. Xpress Enterprises, Inc. In March 2003, Ida-Tran Freight Systems, of
which Mr. Miller was an officer and co-owner, voluntarily filed a
bankruptcy petition in the United States District Court for the District of
Idaho. In October 2003, a petition was filed against Mr. Miller in the
United States Bankruptcy Court for the Northern District of Georgia.
R.H. Lovin,
Jr.,
55 has
served in several senior management positions since joining us in 1986.
Mr. Lovin has been our Senior Vice President - Administration since
February 2003, and Corporate Secretary since August 1995.
Mr. Lovin previously served as our Chief Financial Officer from 1986 to
1994, as Vice President of Administration from May 1994 to May 2003, and as
director from May 1994 to May 2003.
Tony
Smith,
59, has
served as President of Southern Refrigerated Transport, Inc., one of our
subsidiaries, since 1998. Mr. Smith also served as President of Tony Smith
Trucking, Inc., a former subsidiary, from October 1998 to December 2004.
James
"Jim" Brower, 50,
has
served as President of Star Transportation, Inc., one of our subsidiaries,
since
1986.
Jeffery
Acuff, 44,
has
served in several management positions since joining us in 1987. Currently,
Mr.
Acuff serves as Vice President and General Manager of our Expedited service
offering and has done so since August 2005. Previously, Mr. Acuff served as
our Vice President of Customer Service from July 2000 to August 2005.
Jeffrey
Paulsen,
41, has
served as our Senior Vice President and General Manager of our Regional service
offering since joining us in November 2005. Mr. Paulsen joined us with over
fifteen (15) years of experience in the transportation industry obtained with
Werner Enterprises, Inc. While at Werner, Mr. Paulsen served as Vice President
Field Sales from July 2004 to November 2005, and Associate Vice President Field
Sales from July 2002 to July 2004, where he managed Werner's outside sales
force. Prior to that, Mr. Paulsen served as the Senior Sales
Director-West/Southwest, Western Canada, and Mexico from July 2001 to July
2002,
where he oversaw Werner's international business, including border crossing
procedures and Mexican carrier relationships. From June 1999 to July 2001 Mr.
Paulsen served as Werner's Sales Director of the West/Southwest where he was
responsible for coordinating the sales of various service offerings and
directing rate and fuel surcharge initiatives.
Jeffrey
Taylor,
40,
served as our Vice President and General Manager of our Refrigerated service
offering from September 2005 until December 31, 2006. In 2007, Mr. Taylor became
the Co-Manager of our Expedited service offering when a portion of our
refrigerated service was combined into the Expedited service offering. Prior
to
joining us, Mr. Taylor served as the Director of Air Cargo Executive Support
for
Xpress Global Systems from September 2004 to February 2005, where he was
responsible for managing the sales team, forecasting developed sales, and
developing capacity for the linehaul division. Prior to his employment at Xpress
Global Systems, Mr. Taylor served as the Vice President of Operations and Sales
of Jim Palmer Trucking from January 2000 to September 2004.
Charles
"Jerry" Eddy,
53, has
served as our Vice President and General Manager of our Covenant
Dedicated service offering since joining us in July 2006. Mr. Eddy served
as Vice President of Sales and Customer Service with Coastal Transport from
2005
to July 2006, served as President of Paper Transport from 2002 to 2005, and
served in various capacities with Schneider National from 1991 to 2002,
including Vice President and General Manager of Dedicated and Expedited
Services.
See
"Nominees
for Directorships" above for information concerning the business experience
of
David R. Parker.
Section 16(a)
of the Exchange Act requires our officers and directors, and persons who own
more than 10% of a registered class of our equity securities, to file reports
of
ownership and changes in ownership with the SEC. Officers, directors, and
greater than 10% stockholders 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 forms furnished to us, we believe that our officers,
directors, and greater than 10% beneficial owners complied with all
Section 16(a) filing requirements applicable to them during the fiscal year
ended December 31, 2006, except that Charles Eddy inadvertently failed to
timely report on Form 4 the July 31, 2006 award of 1,000 shares of restricted
Class A common stock. This transaction has been reported in subsequent filings.
We make available copies of Section 16(a) forms that our directors and
executive officers file with the SEC through our website at http://www.covenanttransport.com.
Our
Board
of Directors has adopted a Code of Conduct and Ethics that applies to all
directors, officers, and employees, whether with us or one of our subsidiaries.
The Code of Conduct and Ethics includes provisions applicable to our principal
executive officer, principal financial officer, principal accounting officer
or
controller, or persons performing similar functions that constitute a "code
of
ethics" within the meaning of Item 406(b) of Regulation S-K. A copy of
the Code of Conduct and Ethics is available to stockholders on our website
at
http://www.covenanttransport.com.
The
Compensation Committee of our Board of Directors ("Compensation Committee")
has
the responsibility to review, analyze, recommend, and approve executive officer
compensation arrangements. The Compensation Committee has the specific
responsibility to (i) review and approve corporate goals and objectives
relevant to the compensation of our Chief Executive Officer ("CEO"),
(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 annually review 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 stockholders. The
Compensation Committee must also review and approve all forms of deferred
compensation and 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.
One
of
our primary business strategies has been to divide our businesses into defined
service offerings, each of which operates as a semi-autonomous business unit.
Accordingly, at the most senior level, including our Chief Executive Officer,
Chief Financial Officer, Executive Vice President of Sales and Marketing, Senior
Vice President of Administration, and Executive Vice President of Procurement,
we seek executives who are capable of evaluating, building, and managing
multiple businesses. In addition, we seek qualified executives to manage each
business unit. Thus, one of our primary executive compensation goals is to
attract, motivate, and retain qualified executive officers who possess the
requisite abilities to serve in these roles. In this regard, we use a mix of
compensation designed to provide overall compensation levels that (i) are
sufficient to attract and retain talented executives and to motivate those
executives to achieve superior results, (ii) align executives' interests with
our corporate strategies, our business objectives, and the performance of
specific business units to the extent applicable, (iii) enhance executives'
incentives to increase our stock price and focus on the long-term interests
of
our stockholders, and (iv) are consistent with our constant focus on
controlling costs. 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. Our compensation program also consists of providing our senior
executive officers with specified perquisites and with employee benefits that
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 and
the compensation of our other employees, and (iii) within a reasonable range
of
the compensation afforded by other opportunities. The Compensation Committee
also bases its decisions regarding compensation upon its assessment of the
executive's leadership, individual performance, years of experience, skill
set,
level of commitment and responsibility required in the position, contributions
to our financial success, the creation of stockholder 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 culture of cost control and high level of
performance, 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 stockholder value. The
Compensation Committee also considers the tax consequences associated with
each
element of compensation. In determining whether to increase or decrease an
element of compensation, we rely upon the Compensation Committee's judgment
of
each executive and not on rigid formulas or short-term changes in business
performance.
The
following is a discussion of each element of our compensation program, including
(i) why we choose to pay each element, (ii) how we determine the specific
amount to pay for each element, and (iii) how each element, and our
decisions regarding each element, fit into our overall compensation objectives
and affect decisions regarding other elements. We also discuss the specific
decisions we made with respect to the fiscal year 2006 compensation of the
Named
Executive Officers. We made all such decisions in the context of increasing
our
total revenue by 6.3% in 2006 when compared to 2005, making material progress
toward our business realignment, consummating a major acquisition, but failing
to reach our earnings-per-share target.
Base
Salary
We
pay
base salaries at levels that reward executive officers for ongoing performance
and that enable us to attract, motivate, and retain highly qualified executives.
Base pay is a critical element of our compensation program because it provides
our executive officers with stability. Such stability allows our executives
to
focus their attention and efforts on creating stockholder value and on our
other
business objectives. In determining base salaries, we consider an executive's
qualifications and experience, including, but not limited to, the executive's
industry knowledge and the quality and effectiveness of the executive's
leadership, scope of responsibilities, past performance, and future potential
of
providing value to our stockholders. Although we do not believe it is
appropriate to establish compensation levels based solely on benchmarking
because of geographic and incentive compensation differences, we consider base
salaries of executives having similar qualifications and holding comparable
positions in companies similarly situated to ours. 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 perquisites, cash bonuses, and long term incentives.
We believe that such a mix of compensation helps us incentivize our executives
to maximize stockholder value. We adjust base salaries annually to reflect
the
foregoing factors but do not apply a specific weighting to such factors.
Base
Salary of Our Chief Executive Officer. At
the
request and recommendation of David R. Parker, our Chairman of the Board,
President, and Chief Executive Officer, the Compensation Committee did not
consider an increase to Mr. Parker's base salary during 2006.
Base
Salary of Our Other Named Executive Officers.
After
reviewing our financial performance for the fiscal year ended December 31,
2005,
considering our compensation philosophy and the guidelines described above,
and
upon the request and recommendation of our CEO, the Compensation Committee
approved the following changes to the annual base salaries of our Named
Executive Officers, other than our CEO: (i) an $8,600 increase for Joey B.
Hogan, our Chief Financial Officer and Executive Vice President, in recognition
of his expanded responsibilities and role in our business realignment,
(ii) no change for Michael W. Miller, our Vice President of Procurement and
Corporate Operations Manager, (iii) a $19,205 decrease for L.D. Miller, our
Executive Vice President of Sales and Marketing, due to the termination of
his
responsibilities over certain brokerage services, and (iii) a $10,147 increase
for Tony Smith, the President of Southern Refrigerated Transport, Inc., ("SRT")
one of our subsidiaries, in recognition of the growing responsibilities
attendant to such position and continued strong performance of the SRT
subsidiary.
The
following table reflects the adjustments we made from 2005 to 2006 to the base
salaries of our Named Executive Officers:
|
Named
Executive Officer and Principal Position
|
2005
Base Salary ($)
|
2006
Base Salary ($)
|
|
David
R. Parker, Chairman, President, and CEO
|
535,500
|
535,500
|
|
Joey
B. Hogan, Chief Financial Officer
|
215,018
|
223,618
|
|
Michael
W. Miller, Executive Vice President - Procurement and Corporate
Operations
Manager
|
285,825
|
285,825
|
|
L.D.
“Micky” Miller, Executive Vice President - Sales and
Marketing
|
231,205
|
212,000
|
|
Tony
Smith, President of SRT
|
202,939
|
213,086
|
|
TOTAL
|
1,471,992
|
1,472,036
|
Incentive
Compensation
On
May
23, 2006, our stockholders approved our 2006 Omnibus Incentive Plan ("Incentive
Plan"). We use our incentive plan to, among other things, (i) provide annual
incentives to executive officers in a manner designed to reinforce our
performance goals, (ii) attract, motivate, and retain qualified executive
officers by providing them with long-term incentives, and (iii) align our
executives' and stockholders' long-term interests by creating a strong and
direct link between executive pay and stockholder return. The Incentive Plan
allows the Compensation Committee to link compensation to performance over
a
period of time by granting awards that have multiple-year vesting schedules.
Awards with multiple-year vesting schedules, such as 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 stockholder value
over an extended period of time because the value received from such awards
is
based on the growth of the stock price. Such awards also incentivize executives
to remain with us over an extended period of time. Thus, we believe our
Incentive Plan is an effective way of aligning the interests of our executive
officers with those of our stockholders.
Awards
under our Incentive Plan may be paid in cash, shares of Class A common stock,
a
combination of cash and shares of Class A common stock, or in any other
permissible form, as the Compensation Committee determines. All awards granted
under the Incentive Plan are evidenced by an award notice that specifies the
type of award granted, the number of shares of Class A common stock underlying
the award, if applicable, and all terms governing the award. Payment of awards
may include such terms, conditions, restrictions, and/or limitations, if any,
as
the Compensation Committee deems appropriate, including, in the case of awards
paid in shares of Class A common stock, restrictions on transfer of such shares
and provisions regarding the forfeiture of such shares under certain
circumstances. The Incentive Plan authorizes the grant of stock options, stock
appreciation rights, stock awards, restricted stock unit awards, performance
units, performance awards, and any other form of award established by the
Compensation Committee that is consistent with the Incentive Plan's purpose,
or
any combination of the foregoing. We describe each type of award below.
Stock
Options.
The
Compensation Committee may grant awards in the form of stock options to purchase
shares of Class A common stock, which stock options may be non-qualified or
incentive stock options for federal income tax purposes. Stock options granted
under the Incentive Plan vest and become exercisable at such times and upon
such
terms and conditions as may be determined by the Compensation Committee. Any
stock option granted in the form of an incentive stock option must satisfy
the
requirements of
Section 422 of the Internal Revenue Code (the "Code"). The exercise price
per share of Class A common stock for any stock option can not be less than
100%
of the fair market value of a share of Class A common stock on the day that
the
stock option is granted. In addition, the term of the stock option may not
exceed ten years. In the case of an incentive stock option granted to an
executive officer who owns, directly or indirectly (as determined by reference
to Section 424(d) of the Code), at the time the option is granted, stock
possessing more than 10 percent of the total combined voting power of all
classes of our stock, the exercise price per share of Class A common stock
for
any stock option can not be less than 110% of the fair market value of a share
of Class A common stock on the day that the stock option is granted, and the
term of the stock option may not exceed five years. The exercise price of any
stock option granted pursuant to the Incentive Plan may not be subsequently
reduced by amendment or cancellation and substitution of such stock option
or
any other action of the Compensation Committee without stockholder approval,
subject to the Compensation Committee's authority to adjust awards upon certain
events as set forth in the Incentive Plan. The type (incentive or
non-qualified), vesting, exercise price, and other terms of each stock option
is
set forth in the award notice for such stock option.
A
stock
option may be exercised by paying the exercise price in cash or its equivalent
and/or, to the extent permitted by the Compensation Committee and applicable
law, shares of Class A common stock, a combination of cash and shares of Class
A
common stock, or through the delivery of irrevocable instruments to a broker
to
sell the shares obtained upon the exercise of the stock option and to deliver
to
us an amount equal to the exercise price.
Stock
Appreciation Rights.
The
Compensation Committee may grant awards in the form of stock appreciation
rights, either in tandem with a stock option ("Tandem SARs") or independent
of a
stock option ("Freestanding SARs"). The exercise price of a stock appreciation
right is an amount determined by the Compensation Committee, but in no event
is
such amount less than 100% of the fair market value of a share of Class A common
stock on the date that the stock appreciation right was granted or, in the
case
of a Tandem SAR, the exercise price of the related stock option.
A
Tandem
SAR may be granted either at the time of grant of the related stock option
or at
any time thereafter during the term of the related stock option. A Tandem SAR
is
exercisable to the extent its related stock option is exercisable. Each Tandem
SAR entitles the holder of such stock appreciation right to surrender the
related stock option and to receive an amount equal to (i) the excess of
(A) the fair market value on the exercise date of one share of Class A
common stock over (B) the stock option price per share of Class A common
stock, times (ii) the number of shares of Class A common stock covered by
the stock option which is surrendered. Upon the exercise of a stock option
as to
some or all of the shares of Class A common stock covered by such stock option,
the related Tandem SAR is automatically canceled to the extent of the number
of
shares of Class A common stock covered by the exercise of the stock
option.
Each
Freestanding SAR entitles the holder of such stock appreciation right upon
exercise to an amount equal to (i) the excess of (A) the fair market
value on the exercise date of one share of Class A common stock over
(B) the exercise price, times (ii) the number of shares of Class A
common stock covered by the Freestanding SAR and as to which the stock
appreciation right was exercised. The type (Tandem SAR or Freestanding SAR),
exercise price, vesting, and other terms of each stock appreciation right is
set
forth in the award notice for such stock appreciation rights. Payment of stock
appreciation rights may be made in shares of Class A common stock or in cash,
or
partly in shares of Class A common stock and partly in cash, as determined
by
the Compensation Committee.
Other
Stock-Based Awards.
The
Compensation Committee may grant awards in the form of stock awards (for either
unrestricted or restricted shares of Class A common stock), restricted stock
unit awards, and other awards that are valued in whole or in part by reference
to, or are otherwise based on the fair market value of, Class A common stock.
Such other stock-based awards are in such form, and dependent on such
conditions, as the Compensation Committee determines, including, without
limitation, the right to receive, or vest with respect to, one or more shares
of
Class A common stock (or the equivalent cash value of such shares of Class
A
common stock) upon the completion of a specified period of service, the
occurrence of an event, and/or the attainment of performance objectives. In
addition, the Compensation Committee may choose, at the time of grant of a
stock-based award, or any time thereafter up to the time of the payment of
such
award, to include as part of such award an entitlement to receive dividends
or
dividend equivalents on the shares of Class A common stock underlying such
award, subject to such terms, conditions, restrictions, and/or limitations,
if
any, as the Compensation Committee may establish. The restrictions, conditions,
and other terms of each stock-based award are set forth in the award notice
for
such award.
Performance
Awards.
Performance awards 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.
Performance awards are awards structured to qualify as deductible
"performance-based" compensation for purposes of Section 162(m) of the
Code. Performance awards may take the form of cash, stock awards, restricted
stock unit awards, or performance units that are conditioned upon the
satisfaction of enumerated performance criteria during a stated performance
period, which awards, in addition to satisfying the requirements otherwise
applicable to that type of award generally, also satisfy the requirements of
performance awards under the Incentive Plan.
Performance
awards must be based upon one or more of the following performance criteria:
(a) revenues (including without limitation, measures such as revenue per
mile (loaded or total) or revenue per tractor), (b) net revenues, (c) fuel
surcharges, (d) accounts receivable collection or days sales outstanding,
(e) cost reductions and savings (or limits on cost increases), (f) safety and
claims (including, without limitation, measures such as accidents per million
miles and number of significant accidents), (g) operating income, (h)
operating ratio, (i) income before taxes, (j) net income, (k) earnings
before interest and taxes (EBIT), (l) earnings before interest, taxes,
depreciation, and amortization (EBITDA), (m) adjusted net income,
(n) earnings per share, (o) adjusted earnings per share,
(p) stock price, (q) working capital measures, (r) return on
assets, (s) return on revenues, (t) debt-to-equity or
debt-to-capitalization (in each case with or without lease adjustment), (u)
productivity and efficiency measures (including, without limitation measures
such as driver turnover, trailer to tractor ratio, and tractor to non-driver
ratio), (v) cash position, (w) return on stockholders' equity,
(x) return on invested capital, (y) cash flow measures (including,
without limitation, free cash flow), (z) market share,
(aa) stockholder return, (bb) economic value added, or
(cc) completion of acquisitions (either with or without specified size). In
addition, the Compensation Committee may establish, as an additional performance
measure, the attainment by a participant of one or more personal objectives
and/or goals that the Compensation Committee deems appropriate, including but
not limited to implementation of Company 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
performance goals set by the Compensation Committee may be expressed on an
absolute and/or relative basis, and may include comparisons with our past
performance (including the performance of one or more of our divisions) and/or
the current or past performance of other peer group companies or
indices.
For
each
performance period, the Compensation Committee designates, in its sole
discretion, within the initial period allowed under Section 162(m) of the
Code which persons are eligible for performance awards for such period, the
length of the performance period, the types of performance awards to be issued,
the performance criteria that are to be used to establish performance goals,
the
kind or level of performance goals, and other relevant matters.
After
the
close of each performance period, the Compensation Committee determines whether
the performance goals for the cycle have been achieved. In determining the
actual award to be paid to a participant, the Compensation Committee has the
authority to reduce or eliminate any performance award earned by the
participant, based upon any objective or subjective criteria it deems
appropriate. The award notice for each performance award sets forth or makes
reference to the performance period, performance criteria, performance goals,
performance formula, performance pool, and other terms applicable to such
performance award.
Incentive
Compensation of Our Named Executive Officers. On
May
23, 2006, the Compensation Committee, upon receiving stockholder approval of
the
Incentive Plan, granted thereunder annual and special awards of restricted
shares of our Class A common stock to our Named Executive Officers in the
following amounts:
|
Named
Executive Officer
|
Annual
Award
of
Restricted
Stock
(#)
|
Special
Award
of
Restricted
Stock
(#)
|
|
David
R. Parker
|
4,000
|
50,000
|
|
Joey
B. Hogan
|
4,000
|
33,333
|
|
Michael
W. Miller
|
4,000
|
33,333
|
|
L.D.
“Micky” Miller
|
3,000
|
33,333
|
|
Tony
Smith
|
3,000
|
25,000
|
The
restricted shares under the annual grant vest in equal increments over the
four-year period beginning on the first anniversary of the award date, subject
to us reaching earnings-per-share targets of $0.75 in 2006, $1.05 in 2007,
$1.35
in 2008, and $1.55 in 2009. Any percentage that fails to vest as a result of
failure to reach a particular target will vest if we meet a subsequent target.
As a condition to selling any vested shares of restricted Class A common stock,
the Named Executive Officers are required to maintain an equivalent of 200%
of
their respective annual salaries on the date of the proposed sale in the
combination of (i) Class A common stock, and (ii) 50% of the value of (a)
unexercised options to purchase Class A common stock, and (b) restricted Class
A
common stock; provided that the officers may sell such portion of the restricted
shares that is necessary to cover the federal and state taxes the officer incurs
upon vesting of the shares. Based upon us not reaching our earnings-per-share
target of $0.75 for 2006, shares of the annual restricted stock grant did not
vest on the one year anniversary of the grant.
The
grant
of the special award of restricted stock is conditioned upon us achieving an
earnings-per-share target of $2.00 by 2010. Such shares vest completely in
any
year between 2007 and 2010 in which we reach the target. The $2.00
earnings-per-share target excludes the effect of the vesting of the awards
on
earnings per share as well as extraordinary gains. The Named Executive Officers
must hold the shares for one year after vesting; provided that the officers
may
sell such portion of the restricted shares that is necessary to cover the
federal and state taxes the officer incurs upon vesting of the
shares.
In
May
2006, we also adopted an annual cash bonus program primarily based on an
earnings per share target for 2006. The incentive program for Mr. Smith,
however, was based on the performance of the subsidiary he manages - SRT. Except
for Tony Smith, none of the Named Executive Officers received annual cash
incentive compensation during 2006, including cash bonuses, because we failed
to
achieve our earning targets. Tony Smith participates in the SRT Management
Bonus
Plan. Under this program, Mr. Smith is awarded a cash bonus if SRT achieves
certain net profit goals. On February 28, 2006, the Compensation Committee
determined that Mr. Smith had met the target goals and awarded Mr. Smith a
cash
bonus of $90,561.
Other
Compensation
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 constitute
only
a small percentage of each executive's total compensation. In setting the amount
of these benefits, the Compensation Committee considers (i) each executive's
position and scope of responsibilities, and (ii) all other elements comprising
the executive's compensation. In 2006, we provided the following additional
compensation to our Named Executive Officers: (i) cash vehicle allowance, and
(ii) use of our corporate travel agency to arrange personal travel. During
2006,
we also allowed Messrs. Parker and Hogan to use our administrative personnel
for
personal services and allowed Mr. Parker to use our corporate airplane for
personal travel, paid certain of his life insurance premiums, paid certain
of
his club initiation fees and dues, and provided him with tax equalization
payments and tax gross ups. With the exception of payment of the life insurance
premiums, tax equalization payments, and tax gross ups provided to Mr. Parker,
each perquisite is designed to help our Named Executive Officers more
effectively carry out their responsibilities. See
"Executive Compensation - All Other Compensation Table" below for the aggregate
dollar amount of all perquisites provided to each of our Named Executive
Officers.
Employee
Benefits
Our
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.
Employee
Benefits Paid to Our Named Executive Officers.
In
2006, in addition to providing medical, dental, and group life insurance
to our
Named Executive Officers, we also contributed to the 401(k) Plan accounts
of each of our Named Executive Officers.
Employment
Agreements
We
currently do not have any employment contracts, severance agreements, or
change-of-control agreements with any of our Named Executive Officers. However,
under certain circumstances in which there is a change of control, holders,
including any Named Executive Officer, of outstanding stock options granted
under our 2003 Incentive Stock Plan may be entitled to exercise such options
notwithstanding that such options may otherwise not have been fully exercisable.
The
following table sets forth information concerning the total compensation for
the
fiscal year 2006 awarded to, earned by, or paid to those persons who were,
at
December 31, 2006, (i) our Chief Executive Officer, (ii) was our Chief
Financial Officer, and (iii) our three other most highly compensated executive
officers whose total compensation was $100,000 or more for the fiscal year
ended
December 31, 2006 (collectively, the "Named Executive Officers").
|
Name
and
Principal
Position
|
Year
|
Salary
($)
|
Stock
Awards(1)
($)
|
Non-Equity
Incentive
Plan
Compensation(2)
($)
|
All
Other
Compensation(3)
($)
|
Total
($)
|
|
David
R. Parker, Chief
Executive
Officer, Chairman,
and
President
|
2006
|
535,500
|
9,593
|
-
|
135,232
|
680,325
|
|
Joey
B. Hogan, Chief
Financial
Officer and
Executive
Vice President
|
2006
|
219,815
|
9,593
|
-
|
20,191
|
249,599
|
|
Michael
W. Miller,
Executive
Vice
President -
Procurement
and
Corporate
Operations
Manager
|
2006
|
285,825
|
9,593
|
-
|
35,194
|
330,612
|
|
L.D.
"Micky" Miller
Executive
Vice President of
Sales
and Marketing
|
2006
|
224,557
|
7,194
|
-
|
13,549
|
245,300
|
|
Tony
Smith, President of
Southern
Refrigerated
Transport,
Inc.
|
2006
|
208,793
|
9,654
|
90,561
|
17,631
|
326,639
|
|
(1)
|
This
column represents the dollar amount recognized for financial statement
reporting purposes with respect to the 2006 fiscal year for the fair
value
of stock awards granted to each Named Executive Officer 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 2006 grants, refer to note 2 of our consolidated financial
statements as provided in the Form 10-K for the year-ended December
31,
2006, as filed with the SEC. See the Grants of Plan-Based Awards
Table for information on awards made in 2006. 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.
|
|
(2)
|
See
the Grants of Plan-Based Awards Table for additional
information.
|
|
(3)
|
See
the All Other Compensation Table for additional
information.
|
The
following table describes each component of the "All Other Compensation" column
in the Summary Compensation Table.
|
Name
|
Year
|
Perquisites
and
Other
Personal
Benefits
($)
|
Tax
Reimburse-
ments
|
Insurance
Premiums
($)
|
Contributions
to
Retirement
and
401(k)
Plans(8)
($)
|
Total
($)
|
|
David
R. Parker
|
2006
|
47,330
(1)
|
$5,894
(6)
|
69,106
(7)
|
12,902
|
135,232
|
|
Joey
B. Hogan
|
2006
|
13,201
(2)
|
-
|
-
|
6,990
|
20,191
|
|
Michael
W. Miller
|
2006
|
27,600 (3)
|
-
|
-
|
7,594
|
35,194
|
|
L.D.
"Micky" Miller
|
2006
|
12,000 (4)
|
-
|
-
|
1,549
|
13,549
|
|
Tony
Smith
|
2006
|
12,000
(5)
|
-
|
-
|
5,631
|
17,631
|
|
(1)
|
During
2006, we provided Mr. Parker with certain other benefits in addition
to
his salary, including, a $33,600 cash vehicle allowance, use of our
corporate travel agency to arrange personal travel, and use of our
administrative personnel for personal services. During 2006, we also
paid
for certain of Mr. Parker's club initiation fees and dues and allowed
Mr.
Parker to use our corporate airplane for personal travel. Although
Mr.
Parker used our corporate airplane for personal travel, we did not
incur
any incremental costs for such use. Mr. Parker reimburses us for
all of
the variable costs associated with his personal use of our airplane,
including the costs incurred as a result of personal flight activity,
such
as, fuel, travel expenses for the flight crew, and any hanger or
other
storage fees. Mr. Parker also pays a portion of ongoing maintenance
and
repairs associated with operating the airplane.
|
|
(2)
|
During
2006, we provided Mr. Hogan with certain other benefits in addition
to his
salary, including, a cash vehicle allowance, use of our corporate
travel
agency to arrange personal travel, and use of our administrative
personnel
for personal services. None of the personal benefits provided to
Mr. Hogan
exceeded the greater of $25,000 or 10% of the total amount of the
personal
benefits he received during 2006.
|
|
(3)
|
During
2006, we provided Mr. Michael Miller with certain other benefits
in
addition to his salary, including, a $27,600 cash vehicle allowance
and
use of our corporate travel agency to arrange personal travel. With
the
exception of the cash vehicle allowance, none of the personal benefits
provided to Mr. Miller exceeded the greater of $25,000 or 10% of
the total
amount of the personal benefits he received during
2006.
|
|
(4)
|
During
2006, we provided Mr. L.D. "Micky" Miller with certain other benefits
in
addition to his salary, including, a cash vehicle allowance and use
of our
corporate travel agency to arrange personal travel. None of the personal
benefits provided to Mr. Miller exceeded the greater of $25,000 or
10% of
the total amount of the personal benefits he received during
2006.
|
|
(5)
|
During
2006, we provided Mr. Smith with certain other benefits in addition
to his
salary, including, a cash vehicle allowance and use of our corporate
travel agency to arrange personal travel. None of the personal benefits
provided to Mr. Smith exceeded the greater of $25,000 or 10% of the
total
amount of the personal benefits he received during
2006.
|
|
(6)
|
We
provide Mr. Parker with certain tax equalization payments and tax
gross
ups to provide a neutral economic effect of switching the former
split-dollar insurance policy to a term life insurance policy funded
by
us. The Compensation Committee did not believe Mr. Parker should
suffer a
negative tax event because we changed policies to comply with new
legislation.
|
|
(7)
|
During
2006, we paid certain life insurance premiums on behalf of Mr. Parker,
as
a result of arrangements entered into during a time when split-dollar
insurance policies were common. Subsequent to adoption of the
Sarbanes-Oxley Act of 2002, we converted the policy to a company-paid
policy to honor the pre-existing obligation to Mr.
Parker.
|
|
(8)
|
The
differences in contribution amounts among the Named Executive Officers
is
based upon a combination of the differences among the officers' salary
and
the extent to which each officer chooses to make personal contributions
to
his 401(k) account.
|
Narrative
to the Summary Compensation Table
See
"Executive Compensation - Compensation Discussion and Analysis" for a complete
description of our compensation plans pursuant to which the amounts listed
under
the Summary Compensation Table were paid or awarded and the criteria for such
award or payment.
The
following table sets forth information concerning each grant of an award made
to
our Named Executive Officers during the fiscal year 2006.
|
Estimated
Future Payouts
Under
Non-Equity Incentive
Plan
Awards(1)
|
Estimated
Future Payouts Under
Equity
Incentive Plan Awards(2)
|
|||||||
|
Name
|
Grant
Date
|
Threshold
($)
|
Target
($)
|
Maximum
($)
|
Threshold
(#)
|
Target
(#)
|
Maximum
(#)
|
Grant
Date
Fair
Value
of
Stock
and
Option
Awards(3)
($)
|
|
David
R. Parker
|
5/23/06
5/23/06
|
-
-
|
-
-
|
-
-
|
-
-
|
4,000
50,000
|
-
-
|
51,160
639,500
|
|
Joey
B. Hogan
|
5/23/06
5/23/06
|
-
-
|
-
-
|
-
-
|
-
-
|
4,000
33,333
|
-
-
|
51,160
426,329
|
|
Michael
W. Miller
|
5/23/06
5/23/06
|
-
-
|
-
-
|
-
-
|
-
-
|
4,000
33,333
|
-
-
|
51,160
426,329
|
|
L.D.
"Micky" Miller
|
5/23/06
5/23/06
|
-
-
|
-
-
|
-
-
|
-
-
|
3,000
33,333
|
-
-
|
38,370
426,329
|
|
Tony
Smith
|
03/06
5/23/06
5/23/06
7/31/06
|
53,267
-
-
-
|
90,561
-
-
-
|
117,186
-
-
-
|
-
-
-
-
|
-
3,000
25,000
1,000
|
-
-
-
-
|
-
38,370
319,750
13,120
|
|
(1)
|
These
columns represent the potential value of the payout to Mr. Smith
based
upon the attainment of specified performance targets related to the
performance of SRT, including the threshold, minimum, and maximum
targets,
that were established by David Parker, in his role as our Chief Executive
Officer, and as discussed in more detail in the Compensation Discussion
and Analysis. The potential payouts are performance-driven and therefore
completely at risk. As reflected in the Summary Compensation Table
and as
discussed in the Compensation Discussion and Analysis, Mr. Smith
was the
only Named Executive Officer that received non-equity incentive
compensation for 2006.
|
|
(2)
|
This
column represents the potential number of shares to be awarded to
each
Named Executive Officer based upon the attainment of specified performance
targets that were established by the Compensation Committee and as
discussed in more detail in the Compensation Discussion and
Analysis.
|
|
(3)
|
This
column represents the full grant date fair value of the stock awards
under
SFAS 123R granted to the Named Executive Officers in 2006. 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. For additional information on the valuation assumptions,
refer to note 2 of our consolidated financial statements in the Form
10-K
for the year-ended December 31, 2006, as filed with the SEC. These
amounts
reflect our accounting expense, and do not correspond to the actual
value
that will be recognized by the Named Executive Officers.
|
Narrative
to Grants of Plan-Based Awards
See
"Executive Compensation - Compensation Discussion and Analysis" for a complete
description of the performance targets for payment of incentive
awards.
The
following table sets forth information concerning all stock option grants and
stock awards held by our Named Executive Officers as of December 31, 2006.
All
outstanding equity awards are in shares of our Class A Common Stock.
|
Option
Awards
|
Stock
Awards
|
|||||
|
Name
|
Grant
Date
|
Number
of
Securities
Underlying
Unexercised
Options
(#)
Exercisable
|
Option
Exercise
Price
($)
|
Option
Expiration
Date
|
Equity
Incentive
Plan
Awards:
Number
of
Unearned
Shares,
Units
or Other
Rights
That
Have Not
Vested
(#)
|
Equity
Incentive
Plan
Awards:
Market
or Payout
Value
of
Unearned
Shares,
Units
or
Other
Rights
That
Have Not
Vested(3)
($)
|
|
David
R. Parker
|
8/31/98
5/20/99
5/20/99
2/29/00
5/18/00
5/18/00
7/27/00
7/27/00
5/17/01
5/17/01
5/16/02
5/16/02
2/20/03
2/20/03
5/22/03
5/22/03
5/27/04
2/16/05
5/10/05
5/23/06
5/23/06
|
18,250
3,333
6,667
7,206
6,666
3,334
9,429
100,571
3,333
6,667
6,194
3,806
5,780
1,111
6,095
3,905
10,000
5,690
10,000
-
-
|
12.38
13.00
13.00
13.13
12.19
12.19
8.00
8.00
16.79
16.79
15.39
15.39
17.30
17.30
17.63
17.63
15.71
21.43
13.64
-
-
|
8/31/08
5/20/09
5/20/09
3/31/10
5/18/10
5/18/10
7/27/10
7/27/10
5/17/11
5/17/11
5/16/12
5/16/12
2/20/13
2/20/13
5/22/13
5/22/13
5/27/14
2/16/15
5/10/15
-
-
|
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
50,000(1)
4,000(2)
|
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
570,000
45,600
|
|
Joey
B. Hogan
|
8/7/97
2/29/00
8/31/98
8/31/98
5/20/99
5/20/99
5/18/00
5/18/00
7/27/00
7/27/00
5/17/01
5/17/01
5/16/02
5/16/02
2/20/03
2/16/05
5/10/05
5/22/03
5/22/03
5/27/04
5/23/06
5/23/06
|
25,000
2,272
1,515
8,485
480
9,520
3,333
6,667
2,423
27,577
3,333
6,667
6,194
3,806
2,612
2,285
10,000
2,762
7,238
10,000
-
-
|
18.75
13.13
12.38
12.38
13.00
13.00
12.19
12.19
8.00
8.00
16.79
16.79
15.39
15.39
17.30
21.43
13.64
17.63
17.63
15.71
-
-
|
8/7/07
3/1/10
8/31/08
8/31/08
5/20/09
5/20/09
5/18/10
5/18/10
7/27/10
7/27/10
5/17/11
5/17/11
5/16/12
5/16/12
2/20/13
2/16/15
5/10/15
5/22/13
5/22/13
5/27/14
-
-
|
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
33,333(1)
4,000(2)
|
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
379,996
45,600
|
|
Option
Awards
|
Stock
Awards
|
|||||
|
Name
|
Grant
Date
|
Number
of Securities Underlying Unexercised Options
(#)
Exercisable
|
Option
Exercise
Price
($)
|
Option
Expiration Date
|
Equity
Incentive Plan Awards: Number of Unearned Shares, Units or Other
Rights
That
Have Not
Vested
(#)
|
Equity
Incentive Plan Awards: Market or Payout Value of Unearned Shares,
Units or
Other Rights
That
Have Not Vested(3)
($)
|
|
Michael
W. Miller
|
8/31/98
8/31/98
2/29/00
5/20/99
5/20/99
5/18/00
5/18/00
7/27/00
7/27/00
5/17/01
5/17/01
5/16/02
5/16/02
2/20/03
2/16/05
5/10/05
5/22/03
5/22/03
5/27/04
5/27/04
5/23/06
5/23/06
|
3,637
6,363
3,298
3,333
6,667
6,666
3,334
7,422
22,578
3,333
6,667
6,194
3,806
3,537
3,037
10,000
2,762
7,238
3,333
6,667
-
-
|
12.38
12.38
13.13
13.00
13.00
12.19
12.19
8.00
8.00
16.79
16.79
15.39
15.39
17.3
21.43
13.64
17.63
17.63
15.71
15.71
-
-
|
8/31/08
8/31/08
3/1/10
5/20/09
5/20/09
5/18/10
5/18/10
7/27/10
7/27/10
5/17/11
5/17/11
5/16/12
5/16/12
2/20/13
2/16/15
5/10/15
5/22/13
5/22/13
5/27/14
5/27/14
-
-
|
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
33,333(1)
4,000(2)
|
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
379,996
45,600
|
|
L.D.
"Micky" Miller
|
12/9/02
2/19/05
5/10/05
5/22/03
5/22/03
5/27/04
5/23/06
5/23/06
|
15,000
1,987
7,500
1,048
6,452
7,500
-
-
|
18.15
21.43
13.64
17.63
17.63
15.71
-
-
|
12/9/12
2/16/15
5/10/15
5/22/13
5/22/13
5/27/14
-
-
|
-
-
-
-
-
-
33,333(1)
3,000(2)
|
-
-
-
-
-
-
379,996
34,200
|
|
Tony
Smith
|
5/20/99
7/27/00
7/27/00
5/17/01
5/17/01
5/16/02
5/16/02
10/5/98
2/16/05
5/10/05
8/28/03
8/28/03
5/27/04
5/27/04
5/23/06
5/23/06
|
5,000
4,062
938
4,613
387
3,652
348
20,000
2,076
10,000
5,000
2,500
2,354
5,146
-
-
|
13.00
8.00
8.00
16.79
16.79
15.39
15.39
10.88
21.43
13.64
17.00
17.00
15.71
15.71
-
-
|
5/20/09
7/27/10
7/27/10
5/17/11
5/17/11
5/16/12
5/16/12
10/5/08
2/16/15
5/10/15
8/28/13
8/28/13
5/27/14
5/27/14
-
-
|
-
-
-
-
-
-
-
-
-
-
-
-
-
-
25,000(1)
4,000(2)
|
-
-
-
-
-
-
-
-
-
-
-
-
-
-
285,000
45,600
|
|
(1)
|
Subject
to the terms of the award notice, the restricted shares will vest
completely in any year between 2007 and 2010 in which we reach an
earnings-per-share target of $2.00. The earnings-per-share target
excludes
the effect of the vesting of the awards on earnings per share as
well as
extraordinary gains. The executive must hold the shares for one year
after
vesting; provided that the executive may sell such portion of the
restricted shares that is necessary to cover the federal and state
taxes
he incurs upon vesting of the
shares.
|
|
(2)
|
Subject
to the terms of the award notice, the restricted shares will vest
in equal
increments over the four-year period beginning on the first anniversary
of
the award date, subject to us reaching earnings-per-share targets
of $0.75
in 2006, $1.05 in 2007, $1.35 in 2008, and $1.55 in 2009. Any percentage
that fails to vest as a result of failure to reach a particular target
will vest if we meet a subsequent target. As a condition to selling
any
vested shares of restricted Class A common stock, the executive is
required to maintain an equivalent of 200% of his annual salary on
the
date of the proposed sale in the combination of (i) Class A common
stock
and (ii) 50% of the value of (a) unexercised options to purchase
Class A
common stock, and (b) restricted Class A common stock; provided that
the
executive may sell such portion of the restricted shares that is
necessary
to cover the federal and state taxes he incurs upon vesting of the
shares.
|
|
(3)
|
The
market value was calculated by multiplying the closing market price
of our
stock on December 31, 2006, by the number of shares that have not
vested.
|
The
following table sets forth information concerning the compensation of our
non-employee directors for the fiscal year 2006.
|
Name
|
Fees
Earned
or
Paid in
Cash(1)
($)
|
Stock
Awards(2)(3)
($)
|
Total
($)
|
|
William
T. Alt
|
26,750
|
25,004
|
51,754
|
|
Robert
E. Bosworth
|
34,000
|
25,004
|
59,004
|
|
Hugh
O. Maclellan, Jr.
|
26,000
|
25,004
|
51,004
|
|
Bradley
A. Moline
|
31,500
|
25,004
|
56,504
|
|
Niel
B. Nielson
|
29,750
|
25,004
|
54,754
|
|
Mark
A. Scudder
|
26,750
|
25,004
|
51,754
|
|
(1)
|
This
column represents the amount of cash compensation earned in 2006
for Board
and committee service.
|
|
(2)
|
This
column represents the dollar amount recognized for financial statement
reporting purposes with respect to the 2006 fiscal year for the fair
value
of stock awards granted to each director in 2006 in accordance with
SFAS
123R. During 2006, we did not recognize a dollar amount for financial
statement reporting purposes with respect to grants made in years
prior to
2006 because such grants did not exist. As such, this amount is also
equal
to the grant date fair value which was calculated using the closing
price
of our stock on the date of grant.
|
|
(3)
|
As
at December 31, 2006, each of our non-employee directors had 1,955
outstanding stock awards.
|
Narrative
to the Director Compensation Table
Directors
who are not our employees or employees of one of our subsidiaries currently
receive a $25,000 annual retainer and no meeting attendance fees. An additional
annual retainer of $7,500 is paid to the Audit Committee Chairman; $5,000 to
the
Compensation Committee Chairman; and, $3,000 to the Nominating and Corporate
Governance Committee Chairman. For the additional time related to attending
committee meetings, Audit Committee members also receive an annual fee of
$5,000; Compensation Committee members also receive an annual fee of $4,000;
and, Nominating and Corporate Governance Committee members also receive an
annual fee of $2,500. In lieu of stock options that had previously been a part
of outside director compensation, directors who are not our employees or
employees of one of our subsidiaries received a grant of Class A common stock
equivalent to $25,000 at the time of our annual meeting. The directors can
only
sell these shares if, after the sale, they maintain a minimum of $100,000 in
value of Class A common stock.
Directors
who are our employees or employees of one of our subsidiaries do not receive
compensation for board or committee service.
AND
MANAGEMENT
The
following table shows, as of March 26, 2007, the number of shares and percentage
of outstanding shares of our Class A and Class B common stock
beneficially owned by:
|
•
|
Each
of our directors and named executive officers;
|
|
•
|
All
of our executive officers and directors as a group; and
|
|
•
|
Each
person known to us to beneficially own 5% or more of any class of
our
common stock.
|
The
percentages shown are based on 12,119,404 shares of Class A common stock
(including shares of restricted Class A common stock subject to certain
performance vesting and holding provisions) and 2,350,000 shares of Class B
common stock outstanding at March 26, 2007. The shares of Class B common stock
owned by Mr. and Mrs. Parker are convertible into the same number of shares
of
Class A common stock at any time and convert automatically if beneficially
owned
by anyone other than Mr. or Mrs. Parker or certain members of their family.
The
Class B common stock has two votes per share but otherwise is substantially
identical to the Class A common stock, which has one vote per share.
|
Title
of Class
|
Name
and Address of Beneficial Owner(1)
|
Amount
and Nature of
Beneficial
Ownership(2)
|
Percent
of Class(3)
|
|
Class
A & Class B
Common
|
David
R. Parker & Jacqueline F. Parker
|
5,423,154
(4)
|
24.9%
of Class A
100%
of Class B
36.9%
of Total(5)
|
|
Class
A Common
|
Michael
W. Miller
|
193,305
|
1.6%
of Class A
1.3%
of Total
|
|
Class
A Common
|
Joey
B. Hogan
|
190,090
(6)
|
1.6%
of Class A
1.3%
of Total
|
|
Class
A Common
|
L. D. "Micky"
Miller
|
75,820
|
*
|
|
Class A
Common
|
Tony
Smith
|
95,076
|
*
|
|
Class
A Common
|
William
T. Alt
|
16,955
|
*
|
|
Class
A Common
|
Robert
E. Bosworth
|
27,455
(7)
|
*
|
|
Class
A Common
|
Hugh
O. Maclellan, Jr.
|
31,955
|
*
|
|
Class
A Common
|
Bradley
A. Moline
|
10,455
(8)
|
*
|
|
Class
A Common
|
Niel
B. Nielson
|
9,455
|
*
|
|
Class
A Common
|
Mark
A. Scudder
|
29,105
(9)
|
*
|
|
Class
A Common
|
Barrow,
Hanley, Mewhinney & Strauss, Inc.
|
791,600
(10)
|
6.5%
of Class A
5.5%
of Total
|
|
Class
A Common
|
Dimensional
Fund Advisors Inc.
|
1,068,558
(11)
|
8.8%
of Class A
7.4%
of Total
|
|
Class
A Common
|
Wells
Fargo & Company
|
1,268,640
(12)
|
10.5%
of Class A
8.8%
of Total
|
|
Class
A & Class B
Common
|
All
directors and executive officers as a group
(18
persons)
|
6,395,064
(13)
|
41.8%
of Total
|
|
*
|
Less
than one percent (1%).
|
|
(1)
|
The
business address of Mr. and Mrs. Parker and the other directors
and named executive officers is 400 Birmingham Highway, Chattanooga,
TN 37419. The business addresses of the remaining entities listed in
the table above are: Barrow, Hanley, Mewhinney & Strauss, Inc., One
McKinney Plaza, 3232 McKinney Avenue, 15th Floor,
Dallas, TX 75204-2429; Dimensional Fund Advisors Inc.,
1299 Ocean Avenue, 11th Floor,
Santa Monica, CA 90401; and Wells Fargo & Company,
420 Montgomery Street, San Francisco,
CA 94104.
|
|
(2)
|
Beneficial
ownership includes sole voting power and sole investment power with
respect to such shares unless otherwise noted and subject to community
property laws where applicable. In accordance with Rule 13d-3(d)(1)
under the Exchange Act, the number of shares indicated as beneficially
owned by a person includes shares of Class A common stock underlying
options that are currently exercisable held by the following individuals:
Mr. Parker-218,037; Mr. Michael Miller-144,872; Mr. Joey
Hogan-142,169; Mr. L.D. "Micky" Miller-39,487;
Mr. Smith-66,076; Mr. Alt-7,500; Mr. Bosworth-22,500;
Mr. Maclellan-22,500; Mr. Moline-7,500; Dr. Nielson-7,500;
and Mr. Scudder-22,500. In addition, beneficial ownership includes
shares of restricted Class A common stock subject to certain performance
vesting and holding provisions held by the following individuals:
Mr.
Parker-54,000; Mr. Michael Miller-37,333; Mr. Joey Hogan-37,333;
Mr. L.D.
"Micky" Miller-36,333; and Mr. Smith-29,000. The beneficial ownership
also includes the following shares of Class A common stock allocated
to the accounts of the following individuals under our 401(k) plan:
Mr. Parker-13,550; Mr. Michael Miller-11,100;
Mr. Hogan-7,188; Mr. L.D. "Micky" Miller-0; and Mr.
Smith-0.
|
|
(3)
|
Shares
of Class A common stock underlying stock options that are currently
exercisable or will be exercisable within 60 days following March
26, 2007
are deemed to be outstanding for purposes of computing the percentage
ownership of the person holding such options and the percentage ownership
of all executive officers and directors as a group, but are not deemed
outstanding for purposes of computing the percentage ownership of
any
other person or entity. There are no stock options that will become
exercisable within 60 days following March 26, 2007, for any executive
officer or director of the Company.
|
|
(4)
|
Comprised
of 2,687,567 shares of Class A common stock and 2,350,000 shares of
Class B common stock owned by Mr. and Mrs. Parker as joint
tenants with rights of survivorship; 100,000 shares of Class A common
stock owned by the Parker Family Limited Partnership, of which
Mr. and Mrs. Parker are the two general partners and
possess sole voting and investment control; 218,037 shares of Class A
common stock underlying Mr. Parker's stock options that are currently
exercisable; 54,000 shares of restricted Class A common stock; and
13,550
shares allocated to the account of Mr. Parker under our 401(k) plan.
The restricted Class A common stock is subject to certain performance
vesting and holding provisions.
|
|
(5)
|
Based
on the aggregate number of shares of Class A and Class B common
stock held by Mr. and Mrs. Parker.
Mr. and Mrs. Parker hold 24.9% of shares of Class A
and 100% of shares of Class B common stock. The Class A common
stock is entitled to one vote per share, and the Class B common stock
is entitled to two votes per share. Mr. and Mrs. Parker
beneficially own shares of Class A and Class B common stock with
45.6% of the voting power of all outstanding voting shares.
|
|
(6)
|
Comprised
of 3,400 shares of Class A common stock owned by Mr. Hogan and
Melinda J. Hogan as joint tenants, 142,169 shares of Class A common
stock underlying stock options, 37,333 shares of restricted Class
A common
stock, and 7,188 shares held by Mr. Hogan in our 401(k) plan. The
restricted Class A common stock is subject to certain performance
vesting
and holding provisions.
|
|
(7)
|
Comprised
of 3,955 shares of Class A common stock owned directly, 1,000 shares
of
Class A common stock held in an individual retirement account, and
22,500 shares of Class A common stock underlying stock
options.
|
|
(8)
|
Comprised
of 2,955 shares of Class A common stock owned directly and 7,500
shares of
Class A common stock underlying stock options.
|
|
(9)
|
Comprised
of 2,055 shares of Class A common stock held directly, 4,350 shares
of
Class A common stock held in an individual retirement account, 22,500
shares of Class A common stock underlying stock options, and 200
shares of
Class A common stock held as custodian for a minor child, as to which
Mr. Scudder disclaims beneficial ownership.
|
|
(10)
|
As
reported on Schedule 13G/A filed with the SEC on February 1, 2007.
Information is as of December 31, 2006.
|
|
(11)
|
As
reported on Schedule 13G/A filed with the SEC on February 9, 2007.
Information is as of December 31, 2006.
|
|
(12)
|
As
reported on Schedule 13G/A filed with the SEC on February 7, 2007.
Represents aggregate beneficial ownership on a consolidated basis
reported
by Wells Fargo & Company and includes shares of Class A
common stock beneficially owned by subsidiaries. Information is as
of
December 31, 2006.
|
|
(13)
|
The
other executive officers are Jeffery Acuff, James Brower, Charles
Eddy,
R.H. Lovin, Jr., Jeffrey Paulsen, Jeffrey Taylor, and Richard L.
Towe. Mr.
Acuff beneficially owns 49,131 shares of Class A common stock, which
are
comprised of 15,500 shares of Class A common stock underlying Mr.
Acuff's
stock options that are currently exercisable, 28,000 shares of restricted
Class A common stock and 5,631 shares allocated to the account of
Mr.
Acuff under our 401(k) plan. Mr. Brower does not beneficially own
any shares of Class A common stock nor does he have any stock options
underlying shares of Class A common stock which are currently exercisable
or will become exercisable within 60 days of March 26, 2007. Mr.
Brower
does beneficially own 29,000 shares of restricted Class A common
stock. Mr. Eddy does not beneficially own any shares of Class A
common stock nor does he have any stock options underlying shares
of Class
A common stock which are currently exercisable or will become exercisable
within 60 days of March 26, 2007. Mr. Eddy does beneficially own
1,000
shares of restricted Class A common stock. Mr. Lovin beneficially
owns
107,391 shares of Class A common stock, which are comprised of 72,932
shares of Class A common stock underlying Mr. Lovin's stock options
that
are currently exercisable, 28,000 shares of restricted Class A common
stock, and 6,459 shares allocated to the account of Mr. Lovin under
our
401(k) plan. Mr. Paulsen does not beneficially own any shares of
Class A
common stock nor does he have any stock options underlying shares
of Class
A common stock which are currently exercisable or will become exercisable
within 60 days of March 26, 2007. Mr. Paulsen does beneficially own
28,000
shares of restricted Class A common stock. Mr. Taylor beneficially
owns
30,500 shares of Class A common stock, which are comprised of 2,500
shares
underlying Mr. Taylor's stock options that are currently exercisable
and
28,000 shares of restricted Class A common stock. Mr. Towe beneficially
owns 47,217 shares of Class A common stock, which are comprised of
35,616
shares of Class A common stock underlying Mr. Towe's stock options
that are currently exercisable, 11,333 shares of restricted Class
A common
stock, and 268 shares allocated to the account of Mr. Towe under
our
401(k) plan. The restricted Class A common stock is subject to certain
performance vesting and holding provisions. The shares detailed in
this footnote are included in the calculation of all directors and
executive officers as a group.
|
Pursuant
to our Audit Committee Charter, all transactions with affiliated persons or
entities must be reviewed and pre-approved by our Audit Committee.
The
information set forth herein briefly describes certain transactions between
us
and certain affiliated parties. We believe that the terms of these transactions
are comparable to the terms that could be obtained from unaffiliated
parties.
Company
Store.
A
company wholly owned by Nancy Landreth operates a store that sells branded
apparel and personal items on a rent-free basis in our headquarters building,
and uses our service marks on its products at no cost. We made purchases from
this store totaling approximately $373,000 in 2005. Ms. Landreth is
Mr. Parker's step-sister. The Audit Committee has approved a continuation
of this relationship and annually pre-approves purchase limits.
Certain
Business Relationships. Mr. Scudder's
law firm serves as our corporate and securities counsel and earned
approximately $597,000
in fees for legal services during 2006.
The
principal independent registered public accounting firm utilized by us during
fiscal 2006 was KPMG LLP. KPMG has served as our independent registered public
accounting firm since September 2001. A representative of KPMG is expected
to be present at the annual meeting of stockholders and to be available to
respond to appropriate questions. KPMG’s representative will have an opportunity
to make a statement at the annual meeting should he or she desire to do
so.
KPMG
billed us the following amounts for services provided in the following
categories during the fiscal years ended December 31, 2006 and 2005:
|
Fiscal
2006
|
Fiscal
2005
|
||||||
|
Audit
Fees(1)
|
$
|
622,500
|
$
|
625,000
|
|||
|
Audit-Related
Fees(2)
|
0
|
42,000
|
|||||
|
Tax
Fees(3)
|
160,182
|
165,224
|
|||||
|
All
Other Fees(4)
|
0
|
0
|
|||||
|
Total
|
$
|
782,682
|
$
|
832,224
|
|||
|
(1)
|
Represents
the aggregate fees billed for professional services rendered by
KPMG for
the audit of our annual financial statements and review of financial
statements included in our quarterly reports on Form 10-Q, and
services that are normally provided by an independent registered
public
accounting firm in connection with statutory or regulatory filings
or
engagements for those fiscal years. For fiscal 2006, audit fees
were
comprised of $332,500 in fees for the audit of our annual financial
statements and review of financial statements included in our quarterly
reports on Form 10-Q, $250,000 in fees for the audit of our
assessment of internal control over financial reporting, $25,000
for the
statutory audit of our Volunteer Insurance Limited subsidiary’s annual
financial statements, and $15,000 in fees for agreed upon procedures
related to our securitization facility. For fiscal 2005, audit
fees were
comprised of $260,000 in fees for the audit of our annual consolidated
financial statements and review of our consolidated financial statements
included in our quarterly reports on Form 10-Q, $328,000 in fees for
the audit of our assessment of internal control over financial
reporting,
$25,000 for the statutory audit of our Volunteer Insurance Limited
subsidiary’s annual financial statements, and $12,000 in fees for agreed
upon procedures related to our securitization facility.
|
|
(2)
|
Represents
the aggregate fees billed for assurance and related services by
KPMG that
are reasonably related to the performance of the audit or review
of our
financial statements and are not reported under "audit fees." There
were
no such fees for fiscal 2006. For fiscal 2005, audit-related fees
were
comprised of fees for employee benefit plans.
|
|
(3)
|
Represents
the aggregate fees billed for professional services rendered by
KPMG for
tax compliance, tax advice, and tax planning. For fiscal 2006,
tax fees
were comprised of $149,500 in fees for tax compliance and $10,682
in fees
for tax planning and advice. For fiscal 2005, tax fees were comprised
of
$156,074 in fees for tax compliance and $9,150 in fees for tax
planning
and advice.
|
|
(4)
|
Represents
the aggregate fees billed for products and services provided by
KPMG,
other than audit fees, audit-related fees, and tax fees. There
were no
such fees for fiscal 2006 or fiscal
2005.
|
Our
Audit
Committee maintains a policy pursuant to which it pre-approves all audit
services and permitted non-audit services to be performed by our independent
registered public accounting firm in order to assure that the provision of
such
services is compatible with maintaining the firm's independence. Under this
policy, the Audit Committee pre-approves specific types or categories of
engagements constituting audit, audit-related, tax, or other permissible
non-audit services to be provided by our 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 principal independent registered public accounting firm
are
required to periodically report to the Audit Committee regarding the extent
of
services provided by the principal independent registered public accounting
firm
in accordance with the annual pre-approval, and the fees for the services
performed to date. To the extent that 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, such new or
expanded services are presented to the Audit Committee for its review and
approval prior to the engagement of the principal 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
minimis
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,
2006.
APPROVAL
OF AMENDMENT AND RESTATEMENT OF THE COMPANY'S RESTATED ARTICLES
OF
INCORPORATION CHANGING NAME TO COVENANT TRANSPORTATION GROUP,
INC.
The
Company seeks stockholder approval to amend and restate its Restated Articles
of
Incorporation to change its name from Covenant Transport, Inc. to Covenant
Transportation Group, Inc. Through 2006, we continued the formal realignment
of
our business into defined service offerings. Generally, we manage and operate
these separately under the authority of a general manager.
The
business realignment has involved significant changes, including selecting
and
installing new leadership over each service offering, reassigning personnel,
allocating tractors and trailers to each service offering, migrating operations
to preferred traffic lanes for each service offering, acquainting drivers and
customers to new lanes, contacts, and procedures, developing and approving
business plans, developing systems to support, measure, and hold accountable
each service offering, including budgets, incentive targets, and individual
income statements. In conjunction with and to more accurately reflect the
realities of our business following the realignment, our Board of Directors
has
decided to change the name of the Company from Covenant Transport, Inc. to
Covenant Transportation Group, Inc.
The
name
change will require an amendment and restatement of the Restated Articles of
Incorporation of the Company. Under Nevada law, such an amendment requires
the
affirmative vote of a majority of the votes cast by stockholders entitled to
vote and represented in person or by proxy at the annual meeting. In
the
absence of contrary instructions, each proxy will be voted for the approval
of
the amendment and restatement. A
copy of
the proposed amendment and restatement of the Restated Articles of Incorporation
is attached as Appendix A to this proxy statement.
THE
BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS A VOTE "FOR" THE APPROVAL OF THE
AMENDMENT AND RESTATEMENT OF THE COMPANY'S RESTATED ARTICLES OF INCORPORATION
TO
CHANGE ITS NAME TO COVENANT TRANSPORTATION GROUP, INC.
To
be
eligible for inclusion in our proxy materials relating to our 2008 annual
meeting of stockholders, stockholder proposals intended to be presented at
that
meeting must be received by us in writing on or before December 22, 2007.
However, if the date of the 2008 annual meeting of stockholders is more than
thirty days before or after May 22, 2008, then the deadline for submitting
any such stockholder proposal for inclusion in the proxy materials relating
to
the 2008 annual meeting of stockholders will be a reasonable time before we
begin to print or mail such proxy materials. The inclusion of any such
stockholder 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 stockholder proposals to be considered at our 2008 annual
meeting, but not included in our proxy materials relating to that meeting
pursuant to Rule 14a-8 under the Exchange Act, by March 6, 2007.
However, if the date of the 2008 annual meeting of stockholders is more than
thirty days before or after May 22, 2008, then the deadline for submitting
any such stockholder proposal will be a reasonable time before we mail the
proxy
materials relating to such meeting. Under Rule 14(a)-4(c)(1) of the
Exchange Act, the proxy holders designated by an executed proxy in the form
accompanying our 2008 proxy statement will have discretionary authority to
vote
on any stockholder proposal that is not received on or prior to the deadline
described above.
Written
copies of all stockholder proposals should be sent to our principal executive
offices at 400 Birmingham Highway, Chattanooga, Tennessee 37419, to the
attention of Joey B. Hogan, our Executive Vice President, Chief Financial
Officer, and Assistant Secretary. Stockholder proposals must comply with the
rules and regulations of the SEC.
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.
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Covenant
Transport, Inc.
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| /s/ David R. Parker | |
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David
R. Parker
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Chairman
of the Board of Directors
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April
20, 2007
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AMENDED
AND RESTATED ARTICLES OF INCORPORATION
OF
COVENANT
TRANSPORTATION GROUP, INC.
(formerly
Covenant Transport, Inc.)
(Pursuant
to Nevada General Corporation Law '78.403)
ARTICLE
I. NAME
The
name
of the corporation is Covenant Transportation Group, Inc.
ARTICLE
II. RESIDENT AGENT
The
name
and street address of the corporation's initial resident agent is The
Corporation Trust Company of Nevada, One East First Street, Reno, Washoe County,
Nevada 89501.
ARTICLE
III. PURPOSE
The
purpose of the corporation is to engage in, promote, conduct and carry on any
lawful acts or activities for which corporations may be organized under the
Nevada General Corporation Law.
ARTICLE
IV. AUTHORIZED SHARES
The
total
number of shares of capital stock of all classes which the corporation shall
have authority to issue is thirty million (30,000,000) shares, all having a
par
value of One Cent ($0.01) per share, consisting of the following: twenty million
(20,000,000) Class A Common Shares; five million (5,000,000) Class B Common
Shares; and five million (5,000,000) Preferred Shares.
The
voting powers, designations, preferences, limitations, restrictions, and special
or relative rights with respect to each class of stock are or shall be fixed
as
follows:
A. Common
Shares.
Except
as otherwise stated herein, the holders of Class A Common Shares and Class
B
Common Shares shall have all of the rights afforded holders of common stock
under the Nevada corporation law, including the right to vote on all matters
submitted to a vote of the common stockholders, and, subject to the rights,
if
any, of holders of the Preferred Shares, the right to receive the net assets
of
the Corporation upon dissolution. The Class A Common Shares and Class B Common
Shares shall vote together as a single class and shall receive any dividends
and
distributions payable to holders of common stock on a pro rata basis; provided,
that: (i) holders of Class A Common Shares shall be entitled to one
(1) vote per share on all matters submitted to a vote of the common
stockholders; (ii) holders of Class B Common Shares shall be entitled to
two (2) votes per share on all matters submitted to a vote of the common
stockholders so long as the holders are David R. Parker, Jacqueline Parker,
Rachel Parker, Jonathan Parker (the "Founders"), any trust for the benefit
of
one or more of Founders or any other entity which is 100% owned by the Founders,
and (iii) holders of Class B Common Shares may receive dividends payable in
the Corporation's common stock in Class A Common Shares or Class B Common
Shares, as designated by the board of directors when declaring any such
dividend. Holders of Class B Common Shares may convert such shares into Class
A
Common
Shares, at any time and from time to time, on the basis of one Class A Common
Share for each Class B Common Share. If any Class B Common Shares cease to
be
owned by the Founders, or any trust for the benefit of one or more of the
Founders or by any other entity which is 100% owned by one or more of the
Founders, such shares that are no longer so owned shall be converted
automatically into Class A Common Shares and shall be entitled to one
(1) vote per share. In any merger, consolidation, reorganization, or other
business combination, the consideration to be received per share by holders
of
the Class A Common Shares and Class B Common Shares shall be identical; provided
that if, after such business combination, the Founders, any trust or trusts
for
the benefit of one or more of Founders or any other entity which is 100% owned
by the Founders, jointly own more than one-third (1/3) of the surviving entity,
any securities received may differ to the extent that the voting rights differ
between Class A Common Shares and Class B Common Shares. Holders of Class A
Common Shares and Class B Common Shares shall not be entitled to cumulative
voting in the election of directors.
B. Preferred
Shares.
The
Board of Directors is expressly authorized to issue the Preferred Shares from
time to time, in one or more series, provided that the aggregate number of
shares issued and outstanding at any time of all such series shall not exceed
five million (5,000,000). The Board of Directors is further authorized to fix
or
alter, in respect to each such series, the following terms and provisions of
any
authorized and unissued shares of such stock:
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(i)
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the
distinctive serial designation;
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(ii)
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the
number of shares of the series, which number may at any time or from
time
to time be increased or decreased (but not below the number of shares
of
such series then outstanding) by the Board of Directors;
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(iii)
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the
voting powers, if any, and, if voting powers are granted, the extent
of
such voting powers including whether cumulative voting is allowed
and the
right, if any, to elect a director or directors;
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(iv)
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the
election, term of office, filling of vacancies, and other terms of
the
directorship of directors, if any, to be elected by the holders of
any one
or more classes or series of such stock;
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(v)
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the
dividend rights, if any, including, without limitation, the dividend
rates, dividend preferences with respect to other series or classes
of
stock, the dates on which any dividends shall be payable, and whether
dividends shall be cumulative;
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(vi)
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the
date from which dividends on shares issued prior to the date for
payment
of the first dividend thereon shall be cumulative, if any;
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(vii)
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the
redemption price, terms of redemption, and the amount of and provisions
regarding any sinking fund for the purchase or redemption
thereof;
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(viii)
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the
liquidation preferences and the amounts payable on dissolution or
liquidation;
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(ix)
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the
terms and conditions under which shares of the series may or shall
be
converted into any other series or class of stock or debt of the
corporation; and
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(x)
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any
other terms or provisions which the Board of Directors by law may
be
authorized to fix or alter.
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C. Provisions
Applicable to Common and Preferred Shares.
No
holder of shares of the corporation of any class, now or hereafter authorized,
shall have any preferential or preemptive right to subscribe for, purchase
or
receive any shares of stock of the corporation of any class, now or hereafter
authorized, or any options or warrants for such shares, or any rights to
subscribe to or purchase such shares, or any securities convertible into
or
exchangeable for such shares, which may at any time or from time to time
be
issued, sold or offered for sale by the corporation.
ARTICLE
V. DIRECTORS
The
governing board of this corporation shall be known as directors. Initially,
the
number of directors of the corporation shall be two, however the number of
directors may from time to time be increased or decreased in such manner as
shall be provided by the bylaws of this corporation.
ARTICLE
VI. LIMITATION OF LIABILITY
To
the
fullest extent permitted by the laws of the State of Nevada, as the same exist
or may hereafter be amended, any director or officer of the Corporation shall
not be liable to the Corporation or its stockholders for monetary or other
damages for breach of fiduciary duties as a director or officer. No repeal,
amendment, or modification of this Article VI, whether direct or indirect,
shall
eliminate or reduce its effect with respect to any act or omission of a director
or officer of the Corporation occurring prior to such repeal, amendment, or
modification.
ARTICLE
VII. INDEMNIFICATION
To
the
fullest extent allowable by law, the corporation shall indemnify those persons
determined to be entitled to indemnification, as hereinafter provided, in the
manner and under the circumstances described in this Article VII.
A. General
Indemnification.
(1) Subject
to the case by case determination required to be made under paragraph A(3)
hereof, the corporation shall indemnify any person who was or is a party or
is
threatened to be made a party to any threatened, pending or completed action,
suit or proceeding, whether civil, criminal, administrative or investigative,
except an action by or in the right of the corporation, by reason of the fact
that he is or was a director, officer, employee or agent of the corporation,
or
is or was serving at the request of the corporation as a director, officer,
employee or agent of another corporation, partnership, joint venture, trust
or
other enterprise, against expenses, including attorneys' fees, judgments, fines
and amounts paid in settlement actually and reasonably incurred by him in
connection with such action, suit or proceeding if he acted in good faith and
in
a manner which he reasonably believed to be in or not opposed to the best
interests of the corporation, and, with respect to any criminal action or
proceeding, had no reasonable cause to believe his conduct was unlawful.
(2) Subject
to
the case by case determination required to be made under paragraph A(3) hereof,
the corporation shall indemnify any person who was or is a party or is
threatened to be made a party to any threatened, pending or completed action
or
suit by or in the right of the corporation to procure a judgment in its favor
by
reason of the fact that he is or was a director, officer, employee or agent
of
the corporation, or is or was serving at the request of the corporation as
a
director, officer, employee or agent of another corporation, partnership, joint
venture, trust or other enterprise, against expenses, including amounts paid
in
settlement and attorneys' fees actually and reasonably incurred by him in
connection with the defense or settlement of such action or suit if he acted
in
good faith and in a manner which he reasonably believed to be in or not opposed
to the best interests of the corporation, but no indemnification shall be made
under this paragraph A(2) in respect to any claim, issue or matter as to
which such person has been adjudged to be liable for negligence or misconduct
in
the performance of his duty to the corporation unless and only to the extent
that the court in which such action or suit was brought determines upon
application that, despite the adjudication
of liability but in view of all the circumstances of the case, such person
is
fairly and reasonably entitled to indemnity for such expenses as the court
deems
proper.
(3) Any
indemnification under paragraphs A(1) and A(2), unless ordered by a court,
shall
be made by the corporation only as authorized in the specific case upon a
determination that indemnification of the director, officer, employee or
agent
is proper in the circumstances because he has met the applicable standard
of
conduct set forth in paragraphs A(1) and A(2). Such determination shall be
made:
(i) by the stockholders; (ii) by the Board of Directors by majority
vote of a quorum consisting of directors who were not parties to such act,
suit
or proceeding; (iii) if such a quorum of disinterested directors so orders,
by independent legal counsel in a written opinion; or (iv) if such a quorum
of disinterested directors cannot be obtained, by independent legal counsel
in a
written opinion.
The
termination of any action, suit or proceeding by judgment, order, settlement,
conviction, or upon a plea of nolo contendere or its equivalent, shall not,
of
itself, create a presumption that the person did not act in good faith and
in a
manner which he reasonably believed to be in or not opposed to the best
interests of the corporation, and that, with respect to any criminal action
or
proceeding, he had reasonable cause to believe that his conduct was unlawful.
B. Mandatory
Indemnification.
To the
extent that a director, officer, employee or agent of the corporation has been
successful on the merits or otherwise in defense of any action, suit or
proceeding referred to in paragraphs A(1) and A(2), or in defense of any claim,
issue or matter therein, he shall be indemnified by the corporation against
expenses, including attorneys' fees, actually and reasonably incurred by him
in
connection with such defense.
C. Advancement
of
Expenses.
Expenses incurred in defending a civil or criminal action, suit or proceeding
may be paid by the corporation in advance of the final disposition of such
action, suit or proceeding as authorized by the Board of Directors in the
specific case upon receipt of an undertaking by or on behalf of the director,
officer, employee or agent to repay such amount unless it is ultimately
determined that he is entitled to be indemnified by the corporation as
authorized in this Article VII.
D. Other
Rights.
The
indemnification provided by this Article VII does not exclude any other rights
to which a person seeking indemnification may be entitled under any law, bylaw,
agreement, vote of stockholders or disinterested directors or otherwise, both
as
to action in his official capacity and as to action in another capacity while
holding such office. The indemnification provided by this Article VII shall
continue as to a person who has ceased to be a director, officer, employee
or
agent and shall inure to the benefit of the heirs, executors and administrators
of such a person. No amendment to repeal of this Article VII shall apply to
or
have any effect on, the rights of any director, officer, employee or agent
under
this Article VII which rights come into existence by virtue of acts or omissions
of such director, officer, employee or agent occurring prior to such amendment
or repeal.
E. Insurance.
The
corporation may purchase and maintain insurance on behalf of any person who
is
or was a director, officer, employee or agent of the corporation, or is or
was
serving at the request of the corporation as a director, officer, employee
or
agent of another corporation, partnership, joint venture, trust or other
enterprise against any liability asserted against him and incurred by him in
any
such capacity, or arising out of his status as such, whether or not the
corporation would have the power to indemnify him against such liability under
the provisions of this Article VII.
F. Definition
of Corporation.
For the
purposes of this Article VII, references to "the Corporation" include, in
addition to the resulting corporation, all constituent corporations (including
any constituent of a constituent) absorbed in consolidation or merger which,
if
its separate existence had continued, would have had power and authority to
indemnify its directors, officer, employees and agents so that any person who
is
or was a director, officer, employee or agent of such constituent corporation,
or is or was serving at the request of such constituent corporation as a
director, officer, employee or agent of another corporation, partnership, joint
venture, trust or other enterprise, shall stand in the same
position under the provisions of this Article VII with respect to the resulting
or surviving corporation as he or she would have with respect to such
constituent corporation if its separate existence had continued.
G. Other
Definitions.
For
purposes of this Article VII, references to "other enterprise" shall included
employee benefit plans; references to "fine" shall include any excise tax
assessed on a person with respect to an employee benefit plan; and references
to
"serving at the request of the Corporation" shall include any service as
a
director, officer, employee or agent of the Corporation which imposes duties
on,
or involves services by, such director, officer, employee, or agent with
respect
to an employee benefit plan, its participants, or beneficiaries; and a person
who acted in good faith and in a manner he or she reasonably believed to
be in
the interest of the participants and beneficiaries of an employee benefit
plan
shall be deemed to have acted in a manner "not opposed to the best interests
of
the Corporation" as referred to in this Article VII.
ARTICLE
VIII. DURATION
The
corporation shall have perpetual existence.
