SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the Securities and Exchange Act of
1934
Filed by Registrant [X]
Filed by a Party other than the Registrant [ ]
Check the Appropriate Box:
[ ] Preliminary Proxy Statement
[ ] Confidential, for Use of the Commission Only (as permitted by Rule
14-6(e)(2))
[X] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Materials Pursuant to Section 240.14a-11(c) or Section 240.14a-12
COVENANT TRANSPORT, INC.
(Name of Registrant as Specified in its Charter)
The Covenant Transport, Inc. Board of Directors
(Name of Person(s) Filing Proxy Statement)
Payment of Filing Fee (Check the Appropriate Box):
[X] No fee required
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and 0-11.
(1) Title of each class of securities to which transaction applies: N/A
(2) Aggregate number of securities to which transaction applies: N/A
(3) Price per unit or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11: N/A
(4) Proposed maximum aggregate value of transaction: N/A
(5) Total Fee paid: N/A
[ ] Fee paid previously with preliminary materials. N/A
[ ] Check box if any part of the fee is offset as provided by Exchange Act Rule
0-11(a)(2) and identify the filing for which the offsetting fee was
paid previously. Identify the previous filing by registration statement
number, or the Form or Schedule and the date of its filing.
(1) Amount previously paid: N/A
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(4) Date Filed: N/A
COVENANT TRANSPORT, INC.
400 Birmingham Highway
Chattanooga, Tennessee 37419
NOTICE AND PROXY STATEMENT
FOR ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD ON MAY 17, 2001
To Our Stockholders:
The 2001 Annual Meeting of Stockholders (the "Annual Meeting") of
Covenant Transport, Inc., a Nevada corporation (the "Company"), will be held at
the Company, 400 Birmingham Highway, Chattanooga, Tennessee 37419, at 10:00 a.m.
Eastern Time, on Thursday, May 17, 2001, for the following purposes:
1. To consider and act upon a proposal to elect seven (7) directors of
the Company;
2. To consider and act upon a proposal to ratify the selection of
PricewaterhouseCoopers LLP as independent public accountants for the
Company for 2001;
3. To consider and act upon a proposal to reserve an additional
1,003,034 shares of the Company's Class A Common Stock for issuance
under the Company's Incentive Stock Plan, and adopt an amended and
restated plan; and
4. To consider and act upon such other matters as may properly come
before the meeting and any adjournment thereof.
The foregoing matters are more fully described in the accompanying
Proxy Statement.
The Board of Directors has fixed the close of business on March 26,
2001, 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 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. 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 the
Company additional expenses of solicitation.
All Stockholders are cordially invited to attend the Annual Meeting.
By Order of the Board of Directors
/s/ David R. Parker
David R. Parker
Chairman of the Board
Chattanooga, Tennessee 37419
April 9, 2001
COVENANT TRANSPORT, INC.
400 Birmingham Highway
Chattanooga, Tennessee 37419
PROXY STATEMENT
FOR ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD MAY 17, 2001
This Proxy Statement is furnished in connection with the solicitation
of proxies by the Board of Directors of Covenant Transport, Inc., a Nevada
corporation (the "Company"), to be used at the 2001 Annual Meeting of
Stockholders of the Company (the "Annual Meeting"), which will be held at the
Company, 400 Birmingham Highway, Chattanooga, Tennessee 37419 on Thursday, May
17, 2001, at 10:00 a.m. Eastern Time, and any adjournment thereof. All costs of
the solicitation will be borne by the Company. The approximate date of mailing
this Proxy Statement and the enclosed form of proxy is April 9, 2001.
The enclosed copy of the Company's annual report for the fiscal year
ended December 31, 2000, is not incorporated into this Proxy Statement and is
not to be deemed a part of the proxy solicitation material.
PROXIES AND VOTING
Only stockholders of record at the close of business on March 26, 2001
("Stockholders"), are entitled to vote, either in person or by valid proxy, at
the Annual Meeting. 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. On March 26, 2001, there were issued and outstanding 11,600,166
shares of Class A Common Stock, par value one cent ($.01), entitled to cast an
aggregate 11,600,166 votes on all matters subject to a vote at the Annual
Meeting, and 2,350,000 shares of Class B Common Stock, par value one cent
($.01), entitled to cast an aggregate 4,700,000 votes on all matters subject to
a vote at the Annual Meeting. The Company has a total of 13,950,166 shares of
Common Stock outstanding, entitled to cast an aggregate 16,300,166 votes on all
matters subject to a vote at the Annual Meeting. The number of issued and
outstanding shares excludes approximately 1,589,884 shares of Class A Common
Stock reserved for issuance under the Company's incentive stock plans, and other
arrangements. Holders of unexercised options are not entitled to vote at the
Annual Meeting. The Company has no other class of stock outstanding.
Stockholders are not entitled to cumulative voting in the election of directors.
All proxies that are properly executed and received by the Company
prior to the Annual Meeting will be voted in accordance with the choices
indicated. Any Stockholder may be represented and may vote at the Annual Meeting
by a proxy or proxies appointed by an instrument in writing. In the event that
any such instrument in writing shall designate two (2) or more persons to act as
proxies, a majority of such persons present at the meeting, or, if only one
shall be present, then that one shall have and may exercise all of the powers
conferred by such written instrument upon all of the persons so designated
unless the instrument shall otherwise provide. No such proxy shall be valid
after the expiration of six (6) months from the date of its execution, unless
coupled with an interest or unless the person executing it specifies therein the
length of time for which it is to continue in force, which in no case shall
exceed seven (7) years from the date of its execution. Any Stockholder giving a
proxy may revoke it at any time prior to its use at the Annual Meeting by filing
with the Secretary of the Company a revocation of the proxy, by delivering to
the Company a duly executed proxy bearing a later date, or by attending the
meeting and voting in person.
Other than the election of Directors, which requires a plurality of the
votes cast, each matter to be submitted to the Stockholders requires the
affirmative vote of a majority of the votes cast at the meeting. For purposes of
determining the number of votes cast with respect to a particular matter, only
those cast "For" or "Against" are included. Proxies marked "Abstain" and broker
non-votes are counted only for purposes of determining whether a quorum is
present at the meeting. If no direction is specified by the Stockholder, the
proxy will be voted "For" the proposals as specified in this notice and, at the
discretion of the proxy holder, upon such other matters as may properly come
before the meeting or any adjournment thereof.
PROPOSAL 1
ELECTION OF DIRECTORS
At the Annual Meeting, the Stockholders will elect seven directors to
serve as the Board of Directors until the 2002 Annual Meeting of the
Stockholders of the Company or until their successors are elected and qualified.
The Company currently has seven directors: David R. Parker, Michael W. Miller,
R.H. Lovin, Jr., William T. Alt, Robert E. Bosworth, Hugh O. Maclellan, Jr., and
Mark A. Scudder. In the absence of contrary instructions, each proxy will be
voted for the election of the existing directors.
Information Concerning Directors and Executive Officers
Information concerning the names, ages, positions with the Company,
tenure as a director, and business experience of the Company's current directors
and other executive officers is set forth below. All references to experience
with the Company include positions with the Company's operating subsidiary,
Covenant Transport, Inc., a Tennessee corporation. All executive officers are
elected annually by the Board of Directors.
------------------------------------- ------- -------------------------------------------- -------------------------
NAME AGE POSITION DIRECTOR SINCE
------------------------------------- ------- -------------------------------------------- -------------------------
David R. Parker 43 Chairman of the Board, President, Chief 1985
Executive Officer
------------------------------------- ------- -------------------------------------------- -------------------------
Michael W. Miller 43 Executive Vice President, Chief Operating
Officer, Director 1995
------------------------------------- ------- -------------------------------------------- -------------------------
R. H. Lovin, Jr. 49 Vice President - Administration, Secretary,
Director 1994
------------------------------------- ------- -------------------------------------------- -------------------------
Joey B. Hogan 39 Treasurer and Chief Financial Officer NA
------------------------------------- ------- -------------------------------------------- -------------------------
Ronald B. Pope 56 Senior Vice President - Sales and
Marketing NA
------------------------------------- ------- -------------------------------------------- -------------------------
William T. Alt(1)(2) 64 Director 1994
------------------------------------- ------- -------------------------------------------- -------------------------
Robert E. Bosworth(1)(2) 53 Director 1998
------------------------------------- ------- -------------------------------------------- -------------------------
Hugh O. Maclellan, Jr.(1)(2) 61 Director 1994
------------------------------------- ------- -------------------------------------------- -------------------------
Mark A. Scudder(2) 38 Director 1994
------------------------------------- ------- -------------------------------------------- -------------------------
-----------------------------
(1) Member of the Audit Committee.
(2) Member of the Compensation Committee.
David R. Parker has served as President since founding the Company in
1985 and as Chairman of the Board and Chief Executive Officer since 1994. He has
guided the Company's growth from $7.7 million in 1986 to over $552 million in
2000. Mr. Parker was elected to the Board of Directors of the Truckload
Carriers' Association in 1994.
Michael W. Miller has served as the Company's Executive Vice President
and Chief Operating Officer since 1997. He previously served as the Company's
Vice President - Operations from 1993 to 1997 and in various other positions
with the Company from 1987 to 1993. Prior to joining the Company, Mr. Miller
operated his own cartage company from 1982 to 1986, served as a terminal manager
for Interstate Systems from 1979 to 1982, and held the position of traffic
manager for Jackson Manufacturing from 1975 to 1979.
R. H. Lovin, Jr. has served as the Company's Vice President -
Administration since May 1994 and Corporate Secretary since August 1995. Mr.
Lovin previously served as the Company's Chief Financial Officer from 1986 to
1994. Before joining the Company, Mr. Lovin served as a comptroller/accountant
for Perry Smith Company and Olin Chemical Co.
Joey B. Hogan, the Company's Treasurer and Chief Financial Officer,
joined Covenant in those capacities in August 1997. Prior to joining the
Company, 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., a publicly-held company, headquartered in
Chattanooga, Tennessee, involved in the manufacturing and marketing of
over-the-counter pharmaceuticals and toiletries products.
Ronald B. Pope has served as Covenant's Senior Vice President - Sales
and Marketing since 1998 and was the Company's Vice President - Sales and
Marketing since 1993, having previously served as Covenant's sales manager for
the western region since December 1990. Mr. Pope has over 25 years of sales and
marketing experience in the trucking industry.
William T. 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 has served as a director of the Company since 1998.
He is the Vice President of Corporate Finance for the Livingston Company, a
merchant bank. From February 1998 until February 2001, Mr. Bosworth was a
business and management consultant to various corporations in the Chattanooga
area. Prior to February 1998, Mr. Bosworth served for more than five years as
Executive Vice President and Chief Financial Officer of Chattem, Inc., a
publicly-held
2
company, headquartered in Chattanooga, Tennessee, involved in the manufacturing
and marketing of over-the-counter pharmaceuticals and toiletries products. Mr.
Bosworth is a director of Chattem, Inc.
Hugh O. Maclellan, Jr. is President of the Maclellan Foundation, Inc.
and serves on the Boards of UnumProvident Corporation and SunTrust Bank,
Chattanooga, N.A.
Mark A. Scudder has been an attorney for more than seven years with
Scudder Law Firm, P.C., L.L.O., Lincoln, Nebraska, the Company's outside
corporate and securities counsel. Mr. Scudder is a director of UMB Bank
Nebraska, N.A., a national bank subsidiary of UMB Financial Corporation, a
publicly-traded bank holding company. Mr. Scudder is also a director of Knight
Transportation, Inc., a truckload carrier with common stock traded on the Nasdaq
National Market. Another principal of Scudder Law Firm, P.C., L.L.O. serves as a
director of Swift Transportation Co., Inc., a nationwide truckload carrier with
common stock traded on the Nasdaq National Market.
Meetings and Compensation
Board of Directors. The Board of Directors of the Company held four
regularly scheduled meetings and three special meetings during the fiscal year
ended December 31, 2000. With the exception of Mr. Maclellan, who missed one
regularly scheduled meeting and one special meeting of the Board, one meeting of
the Audit Committee, and one meeting of the Compensation Committee, each of the
directors attended all meetings held by committees of the Board on which they
served, and each of the directors attended all meetings of the Board of
Directors. Directors who are not employees of the Company received an annual
retainer of $10,000 plus $1,000 per Board of Directors meeting attended in
person, $500 per Board of Directors meeting attended by telephone, and
reimbursement of expenses incurred in attending such Board meetings.
Compensation for each of the non-employee directors in 2000 was $15,500 for each
of Messrs. Alt, Bosworth and Mr. Scudder, and $14,000 for Mr. Maclellan. In May
2000, the Board of Directors granted each non-employee director an option to
purchase 2,500 shares of the Company's Class A Common Stock, under the Outside
Director Stock Option Plan, at $12.1875 per share, the fair market value on the
date of the grant. The options immediately vested and must be exercised within
ten (10) years of the date of the grant. The option grant was in lieu of an
increase in cash compensation.
Compensation Committee. The Compensation Committee of the Board of
Directors met twice during 2000. This committee reviews all aspects of
compensation of the Company's executive officers and makes recommendations on
such matters to the full Board of Directors. The Compensation Committee Report
on Executive Compensation for 2000 is set forth below. See "Compensation
Committee Report on Executive Compensation."
Audit Committee and Audit Committee Report. The Audit Committee met
twice during 2000. Messrs. Alt, Bosworth, Maclellan, and Scudder served as the
Audit Committee until May 18, 2000, at which time Mr. Scudder resigned from the
Audit Committee. For the balance of 2000, Messrs. Alt, Bosworth, and Maclellan
served as the Audit Committee. The responsibilities of the Audit Committee are
set forth in the Audit Committee Report, which appears below. All of the members
of the Audit Committee are independent directors, as defined in the NASDAQ Stock
Market's Listing Rule 4200. The Audit Committee has been operated pursuant to a
written charter detailing its duties since May 18, 2000. The written charter is
included as Appendix A to the Proxy Statement. In performing its duties, the
Audit Committee, as required by applicable Securities and Exchange Commission
rules, issues a report recommending to the Board of Directors that the Company's
audited financial statements be included in the Company's Annual Report on Form
10-K, and certain other matters, including the interpretation of the Company' s
outside public accountants. The 2000 Report of the Audit Committee is set forth
below.
The Audit Committee Report shall not be deemed to be incorporated by
reference into any filing made by the Company under the Securities Act of 1933
or the Securities Exchange Act of 1934, notwithstanding any general statement
contained in any such filings incorporating this Proxy Statement by reference,
except to the extent the Company incorporates such report by specific reference.
Audit Committee Report for 2000
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 controls. Management of the Company has
primary responsibility for the Company's financial statements and the overall
reporting process, including maintenance of the Company's system of internal
controls. The Company retains independent public accountants who are responsible
for conducting an independent audit of the Company's financial statements, in
accordance with generally accepted accounting principles, and issuing a report
thereon. In performing its duties, the Audit Committee has discussed the
Company's financial statements with management and the Company's
3
independent auditors and, in issuing this report, has relied upon the responses
and information provided to the Audit Committee by management and the
independent public accountants. For the fiscal year ended December 31, 2000, the
Audit Committee (1) reviewed and discussed the audited financial statements with
management and PricewaterhouseCoopers LLP, the Company's independent auditors;
(2) discussed with the auditors the matters required to be disclosed by
Statement on Auditing Standards No. 61; and (3) received and discussed with the
independent auditors the written disclosures and the letter from the independent
auditors required by Independence Standards Board Statement No. 1. 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 year ended December 31, 2000, for filing with the
Securities and Exchange Commission. The Audit Committee also recommended the
appointment of PricewaterhouseCoopers LLP as the Company's independent auditors
for the fiscal year ending December 31, 2001.
Audit Committee:
William T. Alt
Robert E. Bosworth
Hugh O. Maclellan, Jr.
Nominating Committee. The Board does not maintain a standing nominating
committee or other committee performing similar functions.
Compensation Committee Interlocks and Insider Participation. Messrs.
Alt, Bosworth, Maclellan, and Scudder served as the Compensation Committee in
2000. None of such individuals has been an officer or employee of the Company.
Mr. Scudder's law firm serves as the Company's corporate and securities counsel
and earned approximately $261,756 in fees for legal services during 2000.
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
In 2000, the Company engaged in several transactions with Clyde M.
Fuller, a holder of approximately 11.5% of the Company's outstanding Common
Stock. He is the stepfather of David R. Parker and is employed by the Company at
a nominal salary. The terms of all transactions were negotiated by Mr. Fuller
and Mr. Parker. Tenn-Ga Truck Sales, Inc., a corporation wholly owned by Mr.
Fuller, purchased used tractors from the Company for approximately $2.0 million
during 2000, and leased revenue equipment to the Company for approximately
$700,000. The price paid for the used tractors was the same offer the Company
had received from the equipment manufacturer and the Company believes it
represented fair market value. J-Mar Truck Lines, Inc. ("J-Mar"), a corporation
wholly owned by Mr. Fuller, purchased used trailers from the Company for
approximately $1.4 million in March of 2000, in exchange for an interest-bearing
promissory note which was repaid in full in November 2000. The purchase price
was higher than the offer received from the equipment manufacturer, and the
Company believes it represented fair market value. In June 2000, the Company
elected to lease the trailers from J-Mar in the amount of approximately
$227,200. In November 2000, due to an increased operational need arising from
the CTS acquisition, the Company elected to repurchase the trailers from J-Mar
in the amount of approximately $1.3 million. In February 2000, the Company sold
approximately 2.5 acres of land to Mr. Fuller for $88,000 in the form of a
non-interest-bearing promissory note with an 18-month term. The Company also
paid a bonus of approximately $500,000 to Mr. Fuller for his services in
negotiating a favorable tractor purchase and trade package during 2000.
THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS THAT STOCKHOLDERS VOTE
"FOR" THE NOMINEES FOR DIRECTOR PRESENTED IN PROPOSAL 1.
4
EXECUTIVE COMPENSATION
The following table sets forth information concerning the annual and
long-term compensation paid to the chief executive officer and the four other
named executive officers of the Company (the "Named Officers"), for services in
all capacities to the Company for the fiscal years ended December 31, 2000,
1999, and 1998.
Summary Compensation Table
-------------------------- ------ ------------------------------------------ ------------------------------------ ------------------
Long Term Compensation
------------------------------------
Annual Compensation Awards Payouts
------------------------------------------ ----------------------- ------------
Securities
Restricted Underlying
Name and Principal Other Annual Stock Options LTIP All Other
Position Year Salary Bonus(1) Compensation(2) Award(s) (#)(1) Payouts Compensation(3)
-------------------------- ------ ------------ ----------- ----------------- ----------- ----------- ------------ ------------------
David R. Parker 2000 $509,135 - - - 120,000 - $5,407
Chairman, President, and 1999 $496,875 $216,176 - - 17,206 - $9,376
Chief Executive Officer 1998 $487,500 $172,813 - - 18,250 - $8,828
-------------------------- ------ ------------ ----------- ----------------- ----------- ----------- ------------ ------------------
Michael W. Miller
Executive Vice President 2000 $241,250 - $27,600 - 60,000 - -
and Chief Operating 1999 $226,912 $98,938 - - 13,298 - -
Officer 1998 $179,210 $86,000 - - 10,000 - -
-------------------------- ------ ------------ ----------- ----------------- ----------- ----------- ------------ ------------------
Ronald B. Pope 2000 $145,193 - - - 30,000 - -
Senior Vice 1999 $124,016 $54,656 - - 9,322 - -
President-Sales/Marketing 1998 $108,323 $39,926 - - 10,000 - -
-------------------------- ------ ------------ ----------- ----------------- ----------- ----------- ------------ ------------------
R. H. Lovin, Jr. 2000 $113,879 - $13,200 - 40,000 - -
Vice President- 1999 $106,732 $47,336 - - 9,078 - -
Administration 1998 $102,891 $39,414 - - 7,500 - -
-------------------------- ------ ------------ ----------- ----------------- ----------- ----------- ------------ ------------------
Joey B. Hogan 2000 $166,539 - - - 50,000 - -
Chief Financial Officer 1999 $155,770 $68,157 - - 12,272 - -
and Treasurer 1998 $136,732 $56,250 - - 10,000 - -
-------------------------- ------ ------------ ----------- ----------------- ----------- ----------- ------------ ------------------
-----------------------------------
(1) No bonus was paid in 2000. For prior years, amount reflects cash
portion of bonus earned by the Named Officer during the fiscal year
covered. In 1999, the cash portion is equal to 75% of the bonus earned
under the Named Officers' bonus program. In accordance with the
program, the remaining 25% was paid through issuance of immediately
exercisable stock options at the rate of an option on 100 shares for
each $1,000 of bonus payment foregone. For 1999, the Named Officers
received options under the bonus program, with no market value at
February 29, 2000 (the date of the grant), to purchase the following
number of shares of Class A Common Stock: David Parker - 7,206; Michael
Miller - 3,298; Joey Hogan - 2,272; Ronald Pope - 1,822; and R.H.
Lovin, Jr. - 1,578.
(2) For all Named Officers other than Michael W. Miller and R.H. Lovin,
Jr., other annual compensation did not exceed 10% of such Named
Officer's total salary for any reported year. The amounts listed
for Messrs. Miller and Lovin reflect the amount of the Company car
allowance for each.
(3) Reportable portion of premiums paid on split-dollar life insurance
policies.
5
The following table lists stock options granted to the Named Officers during the
fiscal year ended December 31, 2000. The Company has not granted any stock
appreciation rights ("SARs").
---------------------------------------------------------------------------------------------------------------------------
Option/SAR Grants in Last Fiscal Year
---------------------------------------------------------------------------------------------------------------------------
Potential realizable
value at assumed annual
rates of stock price
appreciation for option
Individual Grants term
----------------------------------------------------------------------------------------------- ---------------------------
Number of Exercise
securities Percent of total or base Expiration
Name underlying options/SARs granted to price Date 5% ($) 10% ($)
options employees in fiscal year ($/Sh)
granted (#)
------------------------- -------------- --------------------------- ------------ ------------- ------------ --------------
David R. Parker 7,206 13.125 02/29/2010 59,478 150,735
10,000 20.7% 12.1875 05/18/2010 76,650 194,245
110,000 8.00 07/27/2010 553,410 1,402,500
------------------------- -------------- --------------------------- ------------ ------------- ------------ --------------
Michael W. Miller 3,298 13.125 02/29/2010 27,222 68,988
10,000 10.3% 12.1875 05/18/2010 76,650 194,245
50,000 8.00 07/27/2010 251,550 637,500
------------------------- -------------- --------------------------- ------------ ------------- ------------ --------------
Ronald B. Pope 1,822 13.125 02/29/2010 15,039 38,113
7,500 5.2% 12.1875 05/18/2010 57,487 145,684
22,500 8.00 07/27/2010 113,198 286,875
------------------------- -------------- --------------------------- ------------ ------------- ------------ --------------
R.H. Lovin, Jr. 1,578 13.125 02/29/2010 13,025 33,009
7,500 6.8% 12.1875 05/18/2010 57,487 145,684
32,500 8.00 07/27/2010 163,508 414,375
------------------------- -------------- --------------------------- ------------ ------------- ------------ --------------
Joey B. Hogan 2,272 13.125 02/29/2010 18,753 47,526
10,000 8.5% 12.1875 05/18/2010 76,650 194,245
40,000 8.00 07/27/2010 201,240 510,000
------------------------- -------------- --------------------------- ------------ ------------- ------------ --------------
The following table demonstrates that no options under the Plan were
exercised during the fiscal year ended December 31, 2000, by the Named Officers.
--------------------------------------------------------------------------------------------------------------------------
Aggregated Option Exercises in Last Fiscal Year and FY-End Option Values
--------------------------------------------------------------------------------------------------------------------------
Number of Securities
Shares Underlying Unexercised Options Value of Unexercised
Acquired at Fiscal Year End In-the-Money
on Value (#) Options at Fiscal Year End(1) ($)
Exercise Realized ---------------------------------- ----------------------------------
Name (#) ($) Exercisable Unexercisable Exercisable Unexercisable
-------------------------- ------------ ------------ --------------- ------------------ ---------------- -----------------
David R. Parker -0- -0- 129,705 159,501 0 302,500
-------------------------- ------------ ------------ --------------- ------------------ ---------------- -----------------
Michael W. Miller -0- -0- 57,297 75,001 0 137,500
-------------------------- ------------ ------------ --------------- ------------------ ---------------- -----------------
Ronald B. Pope -0- -0- 28,988 40,334 0 61,875
-------------------------- ------------ ------------ --------------- ------------------ ---------------- -----------------
R. H. Lovin, Jr. -0- -0- 45,078 50,500 0 89,375
-------------------------- ------------ ------------ --------------- ------------------ ---------------- -----------------
Joey B. Hogan -0- -0- 27,271 70,001 0 110,000
-------------------------- ------------ ------------ --------------- ------------------ ---------------- -----------------
(1) Based on the $10.75 closing price of the Company's Class A Common Stock
on December 29, 2000.
6
The Company does not have a long-term incentive plan or a defined
benefit or actuarial plan and has never issued any stock appreciation rights.
Employment Agreements
The Company currently does not have any employment, severance, or
change-in-control agreements with any of its executive officers. However, under
certain circumstances in which there is a change of control, holders of
outstanding stock options granted under the Plan may be entitled to exercise
such options notwithstanding that such options may otherwise not have been fully
exercisable. The Board of Directors has the authority to extend similar rights
to holders of additional awards under the Plan.
Compensation Committee Report on Executive Compensation
The Compensation Committee of the Board of Directors prepared the
following report on executive compensation.
The approach to determining executive compensation generally consists
of three elements: base salary, annual stock option grants, and an annual bonus.
For 2000, the Chief Executive Officer participated in the same program as the
other executive officers and was evaluated on the same basis as the other
executive officers. The Compensation Committee believes that the annual bonus
program directly links corporate performance to executive compensation. The
Compensation Committee also believes that the annual stock option grants and the
stock-based component of the annual bonus indirectly link executive compensation
to corporate performance to the extent corporate performance is reflected in the
Company's stock price.
The Compensation Committee has reviewed the base salaries of its
executive officers and believes such salaries are nearly comparable to those
earned by similarly-situated executives. Under the executive compensation
program, increases in base salaries are intended to slow after executives reach
target salaries identified by the Compensation Committee. The Compensation
Committee may adjust the targets as executives assume additional
responsibilities. In 2000, the Company continued to move Mr. Miller and Mr.
Hogan toward their target salaries. Mr. Parker's salary, which had essentially
remained the same since the Company's initial public offering in 1994, was
increased to $525,000 in May of 2000.
The annual stock option element of the compensation program provides
that each executive will be granted an annual stock option to purchase up to
10,000 shares of the Company's Class A Common Stock at the market price on the
date of the annual meeting under the Company's incentive stock plan for key
employees. In July 2000, the Board of Directors accelerated the vesting schedule
of certain stock options granted in years 1998, 1999, and 2000 to vest ratably
over three years and expire ten years from the date of grant. Certain options
granted prior to 1998 vest ratably over five years and expire ten years from the
date of grant. The Compensation Committee believes that a multi-year granting
and vesting schedule will encourage the executives to remain with the Company.
During 2000, the Compensation Committee accelerated the vesting
schedule for stock options granted in 1998, 1999, and 2000, and awarded a one
time stock option grant as an incentive for senior management. This action was
in addition to the usual compensation formula utilized by the Compensation
Committee, to acknowledge that the trucking industry's current difficult
operating climate has not resulted in adequate reward for sustained effort.
The annual bonus element of the compensation program permits the
executives to earn a percentage of their salary based upon the achievement of
individual and corporate goals for that year. For senior management, 60% to 75%
of the bonus is based upon attaining or exceeding the earnings per share target
established at the beginning of the year. The remainder of the bonus is based
upon achieving certain individual goals that are established at the beginning of
each year. The Board of Directors establishes the goals for the Chief Executive
Officer, and the Chief Executive Officer establishes the goals for the rest of
the executives.
The initial bonus amounts for the executives are adjusted up or down
based upon the Company's ranking among its peer group of companies in the
following performance measures: revenue growth, earnings per share growth,
pretax margin, and return on average equity. The peer group identified by the
Compensation Committee consists of Swift Transportation, Werner Enterprises,
M.S. Carriers, U.S. Xpress Enterprises, and Transport Corp. of America. The
annual bonus for senior management is limited to 75% of the executive's base
salary. The Company must achieve its earnings per share goal for any individual
bonus to be paid. There is an exception for individual goal bonuses to be paid
if the Company achieves at least a threshold percentage of the earnings per
share goal and ranks first or second in its peer group.
The executives currently must accept at least 25% of their annual bonus
in the form of stock-based compensation and may choose to receive up to 100% of
the bonus in the form of stock-based compensation. The Compensation Committee
believes that this bonus program provides incentives to grow earnings per share,
achieve individual goals, and perform at or above the level of peer companies.
For 2000, the Company was ranked third of six by the Compensation Committee
among
7
its peer group in the designated performance measures and each of the Named
Officer executives met at least 75% of his established personal goals. However,
the Company did not achieve the designated percentage of its earnings per share
goal. Accordingly, no bonuses were earned for 2000.
Compensation Committee
William T. Alt
Robert E. Bosworth
Hugh O. Maclellan, Jr.
Mark A. Scudder
8
SECURITY OWNERSHIP OF PRINCIPAL STOCKHOLDERS
AND MANAGEMENT
The following table sets forth, as of March 20, 2001, the number and
percentage of outstanding shares of Common Stock beneficially owned by each
person known by the Company to beneficially own more than 5% of such stock, by
each director and Named Officer of the Company, and by all directors and
executive officers of the Company as a group.
SECURITY OWNERSHIP OF PRINCIPAL STOCKHOLDERS AND MANAGEMENT
------------------------------------------------------------------------------------------------------------------------------
Amount & Nature of
Beneficial
Title of Class Name of Beneficial Owner(1) Ownership(2) Percent of Class
----------------------- ------------------------------------------------------ -------------------- --------------------------
36.17% of Class A
Class A & Class B David R. Parker & 100.0% of Class B
Common Jacqueline F. Parker 6,545,758(3) 46.92% of Total
----------------------- ------------------------------------------------------ -------------------- --------------------------
Class A Common Michael W. Miller 65,924 *
----------------------- ------------------------------------------------------ -------------------- --------------------------
Class A Common R. H. Lovin, Jr. 49,250 *
----------------------- ------------------------------------------------------ -------------------- --------------------------
Class A Common Joey B. Hogan 40,949 *
----------------------- ------------------------------------------------------ -------------------- --------------------------
Class A Common Ronald B. Pope 37,778 *
----------------------- ------------------------------------------------------ -------------------- --------------------------
William T. Alt
300 Forest Avenue
Class A Common Chattanooga, TN 37405 7,000 *
----------------------- ------------------------------------------------------ -------------------- --------------------------
Hugh O. Maclellan, Jr.
501 Provident Building
Class A Common Chattanooga, TN 37402 28,200 *
----------------------- ------------------------------------------------------ -------------------- --------------------------
Class A Common Mark A. Scudder(4) 11,650 *
----------------------- ------------------------------------------------------ -------------------- --------------------------
Robert E. Bosworth(5)
174 Meadow Pond Run
Class A Common Lookout Mountain, GA 30750 29,700 *
----------------------- ------------------------------------------------------ -------------------- --------------------------
13.86% of Class A
Class A Common Clyde M. Fuller(6) 1,607,500 11.52% of Total
----------------------- ------------------------------------------------------ -------------------- --------------------------
9.03% of Class A
Class A Common Dimensional Fund Advisors Inc.(7) 1,047,200 7.51% of Total
----------------------- ------------------------------------------------------ -------------------- --------------------------
9.43% of Class A
Class A Common FMR Corp.(8) 1,094,200 7.84% of Total
----------------------- ------------------------------------------------------ -------------------- --------------------------
Class A & Class B All directors and executive officers as a group
Common (9 persons) 6,816,209 48.86% of Total
----------------------- ------------------------------------------------------ -------------------- --------------------------
---------------------
* Less than one percent (1%).
(1) The business address of Mr. and Mrs. Parker, Mr. Lovin, Mr. Hogan, Mr.
Pope, Mr. Miller, and Mr. Fuller is 400 Birmingham Highway,
Chattanooga, TN 37419.
(2) In accordance with applicable rules under the Securities Exchange
Act of 1934, as amended, the number of shares of Class A Common Stock
beneficially owned includes the following shares underlying stock
options that are exercisable or will become exercisable within 60 days
following March 20, 2001: Mr .Parker - 133,038; Mr. Miller - 60,630;
Mr. Lovin - 47,578; Mr. Pope - 31,488; Mr. Hogan - 35,604; Mr. Alt -
7,000; Mr. Maclellan - 7,000; Mr. Scudder - 7,000; and Mr. Bosworth -
7,000. The beneficial ownership also
9
includes the following shares held by the Named Officer in the
Company's 401(k) Plan: Mr. Parker - 7,720; Mr. Miller - 5,294; Mr.
Lovin - 1,672; Mr. Hogan 1,945; and Mr. Pope - 6,190.
(3) Includes 4,055,000 shares of Class A Common Stock and 2,350,000 shares
of Class B Common Stock, of which are all owned by Mr. and Mrs. Parker
as Joint Tenants with Rights of Survivorship, except 200,000 shares of
Class A Common Stock owned by the Parker Family Limited Partnership, of
which Mr. and Mrs. Parker are general partners. Also includes 133,038
shares of Class A Common Stock underlying stock options granted to Mr.
Parker that are exercisable or will become exercisable within 60 days
following March 20, 2001, and 7,720 shares held by Mr. Parker in the
Company's 401(k) Plan.
(4) Mr. Scudder's business address is 411 S. 13th Street, Suite 200,
Lincoln, NE 68508. His holdings include 200 shares of Class A Common
Stock held as custodian for a minor child under the Uniform Gifts to
Minors Act, as to which beneficial ownership is disclaimed. Also
includes 7,000 shares of Class A Common Stock underlying stock options
granted to Mr. Scudder that are exercisable or will become exercisable
within 60 days of March 20, 2001.
(5) Mr. Bosworth's holdings include 22,700 shares of Class A Common Stock
held by Hamico, Inc., a charitable foundation for which Mr. Bosworth
serves as director and executive officer. Mr. Bosworth disclaims
beneficial ownership of all such shares held by Hamico, Inc. Also
includes 7,000 shares of Class A Common Stock underlying stock options
granted to Mr. Bosworth that are exercisable or will become exercisable
within 60 days of March 20, 2001.
(6) Includes 1,575,000 shares of Class A Common Stock and 32,500 shares
of Class A Common Stock underlying exercisable stock options.
(7) As reported on Form 13G filed with the SEC February 2, 2001. The
business address of Dimensional Fund Advisors Inc., a Delaware
corporation, is 1299 Ocean Avenue, 11th Floor, Santa Monica, CA 90401.
(8) As reported on Form 13G filed with the SEC February 13, 2001. The
business address of FMR Corp. is 82 Devonshire Street, Boston, MA
02109. Includes 361,000 shares beneficially owned by Fidelity
Management Trust Company, and 733,200 shares beneficially owned by
Fidelity Management & Research Company.
10
STOCK PERFORMANCE GRAPH
COMPARISON OF FIVE-YEAR CUMULATIVE TOTAL RETURNS
PERFORMANCE GRAPH FOR COVENANT TRANSPORT, INC.
The following graph compares the cumulative total stockholder return of
the Company's Class A Common Stock with the cumulative total stockholder return
of the Nasdaq Stock Market (U.S. Companies) and the Nasdaq Trucking &
Transportation Stocks commencing December 29, 1995, and ending December 29,
2000.
GRAPH WAS CENTERED HERE
IN PRINTED FORM
Legend
Symbol CRSP Total Returns Index for: 12/1995 12/1996 12/1997 12/1998 12/1999 12/2000
------ ----------------------------- ------- ------- ------- ------- ------- -------
--------- # Covenant Transport, Inc. 100.0 119.8 127.1 149.0 144.8 89.6
--- - --- * Nasdaq Stock Market (US Companies) 100.0 128.0 150.7 212.5 394.9 237.6
- - - - - ^ Nasdaq Trucking & Transportation Stocks 100.0 110.4 141.3 127.1 122.8 111.7
SIC 3700-3799, 4200-4299, 4400-4599, 4700-4799 US & Foreign
Notes:
A. The lines represent monthly index levels derived from compounded daily
returns that include all dividends.
B. The indexes are reweighted daily, using the market capitalization on the
previous trading day.
C. If the monthly interval, based on the fiscal year-end, is not a trading
day, the preceding trading day is used.
D. The index level for all serives was set to $100.0 on 12/29/1995.
Prepared by CRSP (www.crsp.uchicago.edu), Center for Research in Security
Prices, Graduate School of Business, The University of Chicago. Used with
permission. All rights reserved.
The stock performance graph assumes $100 was invested on December 29, 1995.
There can be no assurance that the Company's stock performance will continue
into the future with the same or similar trends depicted in the graph above. The
Company will not make or endorse any predictions as to future stock performance.
The CRSP Index for Nasdaq Trucking & Transportation Stocks includes all publicly
held truckload motor carriers traded on the Nasdaq Stock Market, as well as all
Nasdaq companies within the Standard Industrial Code Classifications 3700-3799,
4200-4299, 4400-4599, and 4700-4799 US & Foreign. The Company will provide the
names of all companies in such index upon request.
11
COMPLIANCE WITH SECTION 16(a) OF THE SECURITIES EXCHANGE ACT OF 1934
Section 16(a) of the Securities Exchange Act of 1934 requires the
Company's officers and directors, and persons who own more than 10% of a
registered class of the Company's 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 regulation to furnish the
Company with copies of all Section 16(a) forms they file. Based solely upon a
review of the copies of such forms furnished to the Company, or written
representations that no Forms 5 were required, the Company believes that its
officers, directors, and greater than 10% beneficial owners complied with all
Section 16(a) filing requirements applicable to them during the Company's
preceding fiscal year, except that a Form 5 for Clyde Fuller with respect to a
grant of stock options which occurred in July 2000, was not filed until March of
2001.
PROPOSAL 2
RATIFICATION OF SELECTION OF INDEPENDENT
PUBLIC ACCOUNTANTS
The Board of Directors has selected PricewaterhouseCoopers LLP as
independent public accountants for the Company for the fiscal year ending
December 31, 2001. PricewaterhouseCoopers LLP has served as independent public
accountants for the Company since 1992. Representatives of
PricewaterhouseCoopers LLP are expected to be present at the Annual Meeting and
will have an opportunity to make a statement, if they desire to do so, and to
respond to appropriate questions.
Fiscal Year 2000 Audit Fee Summary
During fiscal year 2000, PricewaterhouseCoopers LLP provided services
in the following categories to the Company, and the Company paid the following
amounts to PricewaterhouseCoopers LLP:
Financial information audit fees $ 94,300
System design & implementation fees $ 0
All other fees $ 196,700
The Audit Committee has considered whether the provision of non-audit services
by the Company's auditor is compatible with maintaining auditor independence.
THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS THAT STOCKHOLDERS VOTE
"FOR" PROPOSAL 2 TO RATIFY THE SELECTION OF PRICEWATERHOUSECOOPERS LLP AS
INDEPENDENT PUBLIC ACCOUNTANTS FOR THE COMPANY.
PROPOSAL 3
APPROVAL OF AMENDED AND RESTATED INCENTIVE STOCK PLAN
Description of Plan
In August 1994, the Company's Board of Directors and stockholders
adopted an Incentive Stock Plan (the "Plan") to attract and retain executive
personnel and other key employees and motivate them through incentives that are
aligned with the Company's goals of increased profitability and stockholder
value. The Company adopted amendments to the Plan on August 15, 1996, May 20,
1999, and July 27,2000. Awards may be in the form of incentive stock options,
non-qualified stock options, restricted stock awards, or any other awards of
stock consistent with the Plan's purpose. The Plan is administered by the Board
of Directors or a committee that may be appointed by the Board of Directors. All
employees are eligible for participation, and actual participants in the Plan
are selected from time-to-time by the administrator. The administrator may
substitute new stock options for previously granted options. No awards of
incentive stock options may be made after the period under applicable provisions
of the Internal Revenue Code. In 1999, stockholders approved an amendment to the
Plan to increase the shares of Class A Common Stock reserved for issuance
pursuant to the Plan to 1,300,000. To date, 1,296,966 shares remain reserved for
stock issuance pursuant to the Plan. The Company has awarded options and other
grants (less cancellations) covering approximately 1,192,610 of such shares,
including 683,676 shares underlying options and other grants to its executive
officers.
Plan Amendment and Restatement
The proposed Amendment and Restatement of the Plan (the "Amended and
Restated Plan") would amend the Plan to reserve an additional 1,003,034 shares
of Class A Common Stock for issuance, bringing the total number of shares
subject to the Amended and Restated Plan to 2,300,000, and restate the Plan to
incorporate the prior amendments
12
and the proposed amendment. The Amended and Restated Plan is included as
Appendix B to the Proxy Statement. The Board of Directors has unanimously
recommended approval of Proposal 3 and believes that the ability to offer
additional equity incentives is important to providing compensation that aligns
the interests of employees and stockholders. The market price of the stock as of
December 31, 2000, was $10.75, which results in the stock underlying the entire
additional 1,003,034 shares covered by the Amended and Restated Plan having a
market value of $10.8 million at such date.
Federal Income Tax Consequences for Incentive Stock Options
Options granted as an incentive stock option ("ISO") are intended to
qualify under Section 422 of the Internal Revenue Code of 1986, as amended (the
"Code") for special tax treatment. Neither the grant of the ISO nor the exercise
of the ISO by a participant ("Optionee") will result in the recognition of
taxable income to the Optionee. However, the exercise of an ISO will result in
an item of tax preference to an Optionee potentially subject to the alternative
minimum tax. The ultimate sale or other disposition by the Optionee of the
shares obtained upon exercise of the ISO will result in capital gain or loss
equal to the difference between the fair market value on the date of sale and
the exercise price. The Company will not have a deduction with regard to the ISO
at the time of the grant, the exercise or the ultimate sale of the shares.
Notwithstanding the foregoing, if an Optionee sells or disposes of the shares
prior to two years after the date of the grant of the ISO or one year after the
date of the exercise, the Optionee will recognize compensation income on the
sale to the extent the value on the date of exercise exceeded the exercise
price. The excess of the amount received on the sale over the value on the date
of exercise will be capital gain. In the case of such a disqualifying
disposition of shares, the Company may deduct the amount of income recognized as
compensation income. A person entitled to exercise the ISO after the death of an
Optionee may sell the stock obtained on the exercise of an option at any time
without regard to the normal holding requirements. In addition to the foregoing
federal tax considerations, the exercise of an ISO and the ultimate sale or
other disposition of the shares acquired thereby will in most cases be subject
to state income taxation.
Federal Income Tax Consequences for Nonstatutory Stock Options
An Optionee does not realize any compensation income upon the grant of
a Nonstatutory Stock Option ("NSO"). Additionally, the Company may not take a
tax deduction at the time of the grant. Upon exercise of an NSO, an Optionee
realizes and must report as compensation income an amount equal to the
difference between the fair market value of the securities on the date of
exercise and the exercise price. The Company is entitled to take a deduction at
the same time and in the same amount as the Optionee reports as compensation
income, provided the Company withholds federal income tax in accordance with the
Code and applicable Treasury regulations. In addition to the foregoing federal
tax considerations, the exercise of an Option and the ultimate sale or other
disposition of the shares of Common Stock acquired thereby will in most cases be
subject to state income taxation.
THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS THAT STOCKHOLDERS VOTE
"FOR" PROPOSAL 3 TO AMEND AND RESTATE THE INCENTIVE STOCK PLAN TO RESERVE AN
ADDITIONAL 1,003,034 SHARES OF CLASS A COMMON STOCK FOR ISSUANCE TO
PARTICIPANTS, FOR A TOTAL OF 2,300,000 SHARES.
STOCKHOLDER PROPOSALS
Stockholder proposals intended to be presented at the 2002 Annual
Meeting of the Stockholders of the Company must be received by the Corporate
Secretary of the Company at the Company's principal executive offices on or
before December 15, 2001, to be included in the Company's proxy material related
to that meeting.
OTHER MATTERS
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.
Covenant Transport, Inc.
/s/ David R. Parker
David R. Parker
Chairman of the Board
April 9, 2001
13
Appendix A
CHARTER OF THE AUDIT COMMITTEE
OF
THE BOARD OF DIRECTORS
OF
COVENANT TRANSPORT, INC.
May 12, 2000
Recitals.
On February 8, 1999, the Securities and Exchange Commission's
Blue Ribbon Committee on Improving the Effectiveness of Corporate Audit
Committees (the "Blue Ribbon Committee") issued a report containing
recommendations for improving the effectiveness of corporate audit committees.
The Blue Ribbon Committee directed its recommendations to the Securities and
Exchange Commission (the "Commission"), the New York Stock Exchange (the
"NYSE"), the American Stock Exchange (the "AMEX"), the National Association of
Securities Dealers (the "NASD"), and the Auditing Standards Board (the "ASB")
(collectively, the "Regulatory Authorities"). In response to its
recommendations, the Regulatory Authorities have adopted new rules and amended
existing rules pertaining to corporate audit committees.
The Board of Directors (the "Board") of Covenant Transport,
Inc., a Nevada corporation (the "Company"), in response to actions taken by the
Regulatory Authorities, now adopts this Amended and Restated Audit Committee
Charter (this "Charter"). This Charter describes the duties and responsibilities
of the Company's audit committee (the "Audit Committee") and grants the Audit
Committee the authority necessary to perform its oversight responsibility.
Charter.
1. Purpose of Audit Committee. The purpose of the Audit
Committee is to assist the Board in fulfilling its responsibility to ensure the
fairness and accuracy of the Company's financial statements and to ensure the
existence of appropriate internal financial controls, and the independence of
the independent public accountant's engaged to audit the Company's financial
statements (the "external auditors"), and to render the reports required of the
Audit Committee pursuant to Item 306 of Regulation SK, and to allow the Company
to make the disclosures required by Item 7(e)(3) of Schedule 14(A) and related
Commission regulations.
2. Qualifications of Audit Committee. The Audit Committee
shall consist of not less than three nor more than five directors, each of whom
meets the definition of an "independent director" specified by Rule 4200 of the
NASDAQ Stock Market, Inc.'s listing requirements, unless exceptional
circumstances exist that under NASDAQ listing requirements would allow the Audit
Committee to include one non-independent director member, who may not be either
a current employee or immediate family member of a current employee. Each member
of the Audit Committee shall be generally familiar with the general requirements
of financial reporting.
3. Duties of the Audit Committee. Subject to the second
sentence of Paragraph 10, the Audit Committee will perform the following duties
in the manner and priority the Audit Committee determines, in its discretion, to
be appropriate under the circumstances:
(a) Review the Company's earnings statements with management
and with the Company's external auditors prior to the release of such statements
to the public;
(b) Assure that the Company's interim financial statements are
reviewed by the Company's external auditors, as required by Item 3 10(b) of
Regulation SK, prior to the filing of such interim financial statements with the
Commission as part of the Company's report on Form 10-K;
14
(c) Review and discuss the Company's audited financial
statements with management;
(d) Review and discuss the Company's audited financial
statements with the Company's external auditors and shall review those matters
required to be discussed by SAS-61, as modified or supplemented from time to
time;
(e) Receive the written disclosures and the letter from the
Company's external auditors required by Independent Standards Board's Standard
No. 1, as modified or supplemented, discuss with the external auditors their
independence, and review all audit and other services performed by the external
auditors for the Company to assure that such services do not compromise the
external auditors' independence;
(f) Review annually the scope of the external auditors' work,
including any non-auditing or consulting services;
(g) Review with the Company's external auditors all
adjustments made to the Company's audited financial statements, including a
reconciliation of any adjustments made in the audited financial statements from
the Company's quarterly interim financial statements;
(h) Review with management and the Company's external auditors
any significant financial reporting issues or judgments called for in connection
with the preparation of the Company's financial statements, including the
adequacy and appropriateness of any reserves, policies relating to the
recognition of revenue, the quality and appropriateness of the Company's
accounting principles, and any other matters which, in its judgment, or the
judgment of the Company's external auditors, could have a material impact on the
Company's financial statements;
(i) Meet with the Company's external auditors and with
management to review and assess any material financial risk exposure to the
Company and the steps management has or plans to take to monitor and control
financial risk;
(j) Review with the Company's external auditors and management
the adequacy of the Company's internal financial controls and reporting systems;
(k) Confer with the Company's external auditors about any
matters described in Section 10A of the Securities and Exchange Act of 1934 that
may have come to the attention of the external auditors;
(1) Review any major changes to the Company's auditing and
accounting policies and practices suggested by the Company's external auditors
or by management. (In undertaking the duties specified herein, in communications
with the Company's external auditors, the Audit Committee will, in accordance
with SAS-6 1, communicate with the external auditors with respect to (1) methods
used to account for significant or unusual transactions; (2) the effect of
significant accounting policies in controversial or emerging areas for which
there is a lack of authoritative guidance or consensus; (3) the process used by
management in formulating particularly sensitive accounting estimates, and the
basis for the auditors conclusions regarding the reasonableness of those
estimates; and (4) disagreements with management, if any, over the application
of accounting principles, the basis for management's accounting estimates, and
the disclosures in the Company's financial statements);
(m) Recommend annually the selection and engagement of the
Company's external auditors and review their fees and the proposed scope and
plan of the annual audit;
(n) Review the external auditors' management letter and
consider any comments made by the external auditors with respect to improvements
in the internal accounting controls of the Company, consider any corrective
action recommended by the external auditors, and review any corrective action
taken by management;
15
(o) Review and devote attention to any areas in which
management and the Company's external auditors disagree and determine the
reasons for such disagreement;
(p) Review the performance of the external auditors and, if
appropriate, recommend that the Board replace any external auditor failing to
perform satisfactorily;
(q) Review the performance of the Company's Chief Financial
Officer and Controller;
(r) Review any difficulties any external auditor may have
encountered with respect to performance of an audit, including, without
limitation, any restrictions placed upon the scope of the audit on access to
information, or any changes in the proposed scope of the audit;
(s) Provide, as part of the Company's proxy filed pursuant to
Regulation 14A or 14C, as applicable, the report required by Item 306 of
Regulation SK and cause a copy of that report to be included annually in the
Company's proxy solicitation materials;
(t) Periodically review the adequacy of this Charter and make
recommendations to the Board with respect to any changes in this Charter.
4. Access to Information. In order to perform its obligations,
the Audit Committee shall have unrestricted access to all relevant internal and
external Company information and to any officer, director or employee of the
Company.
5. Employee Access to Audit Committee. Any person employed by
the Company and any of the Company's independent contractors will have access to
the Audit Committee to report any matter which such person believes would be of
interest to the AuditCommittee or of general concern to the Audit Committee or
the Board. Contacting a member of the Audit Committee to report any
irregularity, questionable activity, or other matter will not subject the person
making the report to discipline.
6. Frequency of Meetings.
(a) The Audit Committee will meet each quarter prior to the
release of the Company's earnings statements to review the earnings release. In
addition, the Audit Committee will convene if a meeting is noticed by its
Chairman, any member of the Audit Committee, any member of the Board, the Chief
Financial Officer, or the Chief Executive Officer.
(b) The Audit Committee, at least once a year, will meet
privately with the Company's external and internal auditors, and no
representative of the Company's management shall attend such meetings.
7. Access to Legal Counsel. The Audit Committee, at its
request, shall have access to the Company's outside legal counsel, and, if
requested, to its own independent legal counsel. The Company will pay for the
cost of any such legal counsel.
8. Meeting Procedures.
(a) Members of the Audit Committee shall endeavor to attend
all meetings of the Audit Committee. The Audit Committee may meet telephonically
or in person and may take action upon the written consent of all members. A
majority of the Audit Committee will constitute a quorum for all purposes.
(b) Written minutes will be maintained for each meeting of the
Audit Committee.
16
9. Other Duties. The Audit Committee will perform such other
duties as the Board may assign to it.
10. Limitation of Audit Committee Duties. The Audit Committee
is not an investigative committee of the Board and shall have no investigative
duties unless expressly assigned to the Audit Committee by the Board. The Audit
Committee will exercise its business judgment in performing its duties under
this Charter, including the duties outlined in Paragraph 3, and may emphasize
and prioritize those duties and responsibilities set forth above which the
Committee, in its discretion and judgment, believes are the most important,
given the particular circumstances. It is not the duty of the Audit Committee to
undertake the audit of the Company itself, to plan the audit, or to undertake
any of the responsibilities of the Company's internal or external auditors. The
Audit Committee is not required to follow the procedures required of auditors in
performing reviews of interim financial statements or audited financial
statements. In performing its functions, the Audit Committee may rely upon
information provided to it by management, by the Company's internal and external
auditors, or by legal counsel. This Charter imposes no duties on the Audit
Committee or its members that are greater than those duties imposed by law upon
a director of a Nevada corporation under Section 78.138 of the Nevada General
Corporation Law. If any claim is asserted against the Audit Committee, any of
its members or the Company by a stockholder or any other person, nothing in this
Charter shall be construed to limit or restrict any defense available to the
Audit Committee, any of its members, or the Company.
17
Appendix B
COVENANT TRANSPORT, INC.
INCENTIVE STOCK PLAN
Amended and Restated
as of May 17, 2001
ARTICLE I
GENERAL
1.1 Purpose: The purpose of the Covenant Transport, Inc. Incentive Stock
Plan (the "Plan") is to attract and retain the best available executive
personnel and other key employees who are primarily responsible for the
management, growth and success of the business, and to provide an incentive for
such employees to exert their best efforts on behalf of Covenant Transport,
Inc., its subsidiaries and its stockholders.
1.2 Establishment and Approval of Plan: Covenant Transport, Inc., a
Nevada corporation, (the "Corporation") adopted this Incentive Stock Plan, which
was approved by the unanimous votes of the Directors and stockholders on August
4, 1994, and amended on August 15, 1996, May 20, 1999, and July 27, 2000. As so
established and approved, this Plan shall be known as the Covenant Transport,
Inc. Incentive Stock Plan.
1.3 Administration:
a. The Plan shall be administered by the Board of Directors or
a committee as appointed from time-to-time by the Board of Directors
(the Board of Directors or the committee is hereinafter collectively
referred to as the "Committee"). For all transactions involving Section
16 "insiders" (i.e., executive officers, directors, and more than 10%
stockholders), any Committee shall consist of at least two members, all
members must also be members of the Board of Directors, and the members
of such Committee, with respect to any award, shall be Directors who
are non-employee directors within the meaning of Rule 16b-3 under the
Securities Exchange Act of 1934 (the "Act") or any similar rule which
may subsequently be in effect ("Rule 16b-3").
b. The Committee shall have the sole and complete authority to
select the employees to whom grants will be made ("Participants"), make
Awards (as defined in Section 1.5) in such forms and amounts as it
shall determine, impose such limitations, restrictions and conditions
upon such Awards as it shall determine, construe and implement the
provisions of the Plan and adopt, amend or rescind administrative
guidelines relating to the Plan, correct any defect or omission or
reconcile any inconsistency in this Plan or in any Award granted
hereunder, and make all other determinations and to take all other
actions necessary or advisable for the implementation and
administration of the Plan. Decisions of the Committee shall be final,
conclusive and binding upon all persons, including the Corporation,
stockholders, Participants and all other persons. No member of the
Committee shall be liable for any action taken or decision made in good
faith relating to the Plan or any Award thereunder.
c. To the extent that any such action would not contravene Rule
16b-3, the Committee may delegate any of its authority hereunder to
such persons as it deems appropriate.
1.4 Eligibility for Participation: Participants in the Plan shall be
selected by the Committee from the executive officers and other key employees of
the Corporation and its subsidiaries who occupy responsible managerial or
professional positions and who have the capability of making a substantial
contribution to the success of the Corporation. In making this selection and in
determining the form and amount of Awards, the Committee shall consider
18
any factors it deems relevant, including the individual's functions and
responsibilities, the value of his or her service to the Corporation and
potential contributions to the Corporation's profitability and sound growth.
1.5 Types of Awards Under Plan: Awards under the Plan may be in the form
of any one or more of the following: as described in Article II, Incentive Stock
Options ("ISOs") and Non-statutory Stock Options ("NSOs"); as described in
Article III, Restricted Stock Awards ("Restricted Stock"); as described in
Article IV, Reload Options; and as described in Article V, Other Stock Based
Awards and Other Benefits (all collectively "Awards"). ISOs, NSOs and Reload
Options are referred to individually as "Option" or Collectively as "Options."
1.6 Shares Subject to Plan: The maximum number of shares of Common Stock
which may be issued for all purposes under the Plan shall be Two Million Three
Hundred Thousand (2,300,000).
a. In the event of any change in the outstanding Common Stock by
reason of a stock split, stock dividend, combination, reclassification
or exchange of Common Stock, recapitalization, merger, consolidation or
other event, the shares of Common Stock authorized hereunder and
outstanding Awards, as applicable, shall be proportionately adjusted by
the Committee in its sole discretion and any such judgment shall be
binding and conclusive on all persons. Provided, however, in the case
of ISOs, no such adjustment shall be made if the result thereof would
be that the excess of the aggregate fair market value of the shares
subject to the Option immediately after the adjustment over the
aggregate Exercise Price of such shares is more than the excess of the
aggregate fair market value of all shares subject to the Option
immediately before such substitution or assumption over the aggregate
Exercise Price of such shares, or that the new Option or the assumption
of the old Option gives the Participant additional benefits which he or
she did not have under the old Option.
b. Any shares of Common Stock subject to an Option which for any
reason is canceled or terminated without having been exercised, or any
shares of Restricted Stock which are forfeited, shall again be
available for Awards under the Plan. Fractional shares shall not be
issued. The Committee will determine the manner in which fractional
share value(s) will be treated. Each Award shall state the total number
of shares of Common Stock subject to the Awards.
1.7 General Definitions:
a. The term Subsidiary shall mean, unless the context otherwise
requires, any corporation (other than the Corporation) in an unbroken
chain of corporations beginning with the Corporation if each of the
corporations other than the last corporation in such chain owns stock
possessing at least fifty percent (50%) of the voting power in one of
the other corporations in such chain. For the purpose of this section,
stock ownership shall be determined in accordance with Section 424 of
the Internal Revenue Code of 1986, as amended from time to time (the
"Code").
b. The term Board of Directors shall mean only the Board of
Directors of the Corporation. The term Director shall mean only a
member of the Board of Directors.
c. Except as limited in Section 2.7 below relating to Incentive
Stock Options, as defined in Section 422 of the Code, the term
disability shall have the meaning determined by the Committee in its
sole discretion.
ARTICLE II
ISOs AND NSOs
2.1 Award of ISOs and NSOs: The Committee may, from time-to-time, in its
sole discretion and subject to such terms and conditions of this Plan and as it
may prescribe, award to any Participant options to purchase Common Stock, either
as a tax-qualified Option ("ISO") or as a non-statutory Option ("NSO").
2.2 Agreements: The award of an ISO or NSO shall be evidenced by a
signed agreement containing such terms and conditions as the Committee may in
its sole discretion determine ("Agreement"), so long as such terms and
conditions are not inconsistent with this Plan. An ISO Agreement shall specify
that the Award is intended to qualify as
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an Incentive Stock Option, as such term is defined in Section 422 of the Code
and Options issued thereunder shall comply with the applicable provisions of the
Code.
2.3 Exercise Price: The purchase price of Common Stock under each ISO or
NSO (the "Exercise Price") shall be (a) with respect to ISOs, not less than the
Fair Market Value of the Common Stock, on the date the ISO is awarded except
that, in the case of a grantee who is a 10% or greater stockholder in the
Corporation, not less than 110% of the fair market value of the Common Stock, on
the date the ISO is awarded, provided that the Exercise Price shall be adjusted
by the Committee with respect to Awards not already granted to remain consistent
with restrictions imposed by the Code and (b) with respect to NSOs, not less
than seventy percent (70%) of the Fair Market Value of the Common Stock, on the
date that the NSO is awarded. In no event shall the Exercise Price of an ISO or
NSO be less than the par value of the Common Stock. "Fair Market Value" means
the closing price of the Common Stock on the date an Option is awarded, as such
price is reported by The Nasdaq Stock Market, other over-the-counter market, or
stock exchange, as applicable. If no reported quotation or sale of Common Stock
takes place on the date in question, the last reported closing price of the
Common Stock shall be determinative.
2.4 Exercise and Term of Options:
a. Options shall be exercisable at such time and subject to such
restrictions and conditions as the Committee shall approve, either at
the time of grant of such Options or pursuant to a general
determination, which need not be the same for all Participants. The
Committee shall establish procedures governing the exercise of Options
and shall require that written notice of exercise be given and that the
Exercise Price be paid in full. In connection with any Award, the
Committee may specify such vesting and forfeiture provisions as it
deems appropriate. To the extent permitted by law, and consistent with
Rule 16b-3, the Committee may permit a Participant, in lieu of paying
the Exercise Price in full in cash, to make payment in Common Stock
already owned by the Participant, or in the value of surrendered
Options which are then exercisable, valued at Fair Market Value on the
date of exercise, as partial or full payment of the Exercise Price. As
soon as practicable after receipt of full payment, the Corporation
shall deliver to the Participant a certificate or certificates
representing the acquired shares of Common Stock.
b. Subject to such terms and conditions as the Committee may
establish from time-to-time, which terms and conditions with respect to
ISOs shall not be inconsistent with the applicable provisions of the
Code and the Act, the Options may be exercised at any time prior to the
expiration date of the Option established by the Committee at the time
of the Award.
c. Subject to the terms and conditions established by the
Committee, Options may be exercised either for the total number of
shares to which the Options relate or to such portion or portions
thereof as the Participant shall determine. Unless otherwise provided
in the Agreement, or the Code, Options may be exercised without regard
to the sequence in which such Options were granted.
2.5 Limitation on ISOs: Notwithstanding anything in the Plan to the
contrary, the following additional conditions shall apply to the grant of
Options which are intended to qualify as ISOs, which additional conditions may
be modified from time-to-time by the Committee to remain consistent with the
Code.
a. The aggregate Fair Market Value (determined as of the date
the ISO is granted) of shares of Common Stock with respect to which
ISOs are first exercisable for the first time by any Participant during
any calendar year (under all ISO plans of the Corporation) shall not
exceed $100,000; provided that, to the extent that such limitation is
exceeded, any excess Options shall be deemed to be NSOs.
b. All ISOs must be granted within ten years of the earlier of
the date on which this Plan was adopted by the Corporation's Board of
Directors or the date this Plan was approved by the stockholders.
c. Unless sooner exercised, terminated or cancelled, all ISOs
shall expire no later than ten years after the date of grant or, in the
case of a grantee who is a 10% or greater stockholder in the
Corporation, no later than five years after the date of the grant.
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d. The Agreement shall provide that the ISO is exercisable
during the Participant's lifetime only by the Participant (or the
Participant's legal representative, in the event the Participant is
disabled) and that the ISO is not transferable other than by will or
the laws of descent and distribution.
2.6 Death of Optionee:
a. Upon the death of the Optionee, any ISO exercisable on the
date of death may be exercised by the Optionee's estate or by a person
who acquires the right to exercise such ISO by bequest or inheritance
or by reason of the death of the Optionee, provided that such exercise
occurs within both the remaining option term of the ISO and one year
after the Optionee's death.
b. The provisions of this Section shall apply notwithstanding
the fact that the Optionee's employment may have terminated prior to
death, but only to the extent of any ISO's exercisable on the date of
death.
2.7 Retirement or Disability. Upon the termination of the Optionee's
employment by reason of Disability or retirement, the Optionee may, within 36
months from the date of such termination of employment, exercise any ISOs to the
extent such ISOs were exercisable at the date of such termination of employment.
Notwithstanding the foregoing, the tax treatment available pursuant to Section
422 of the Code upon the exercise of an ISO may not be available to an Optionee
who exercises any Incentive Stock Options more than (i) 12 months after the date
of termination of employment due to permanent Disability (as defined in Section
22(e)(3) of the Code) or (ii) three months after the date of termination of
employment due to retirement.
2.8 Termination for Other Reasons. Except as provided in Sections 2.6
and 2.7, or except as otherwise determined by the Committee, all ISOs shall
terminate upon the termination of the Optionee's employment.
ARTICLE III
RESTRICTED STOCK AWARDS
3.1 Awards of Restricted Stock: The Committee may award to any
Participant shares of Common Stock which are subject to the restrictions
described in this Article and such other terms and conditions as the Committee
may prescribe ("Restricted Stock").
3.2 Restricted Stock Agreement: Shares of Restricted Stock awarded shall
be evidenced by a signed agreement containing such terms and conditions as the
Committee may in its sole discretion determine ("Restricted Stock Agreement"),
so long as such terms and conditions are not inconsistent with this Plan.
3.3 Restriction: Except as provided in Section 3.6, at the time of an
Award of Restricted Stock, the Committee shall establish in its discretion, for
each Participant a vesting schedule and a period of time ("Restricted Period")
during which Restricted Stock may not be sold, assigned, transferred, pledged or
otherwise encumbered, except as hereinafter provided. Except for such
restrictions and subject to this Article III, the Participant shall have all
rights of a stockholder with respect to such Restricted Stock. The Committee
may, in its discretion, accelerate the time at which any or all of the
restrictions shall lapse with respect to any shares of Restricted Stock prior to
the expiration of the Restricted Period or remove any or all of such
restrictions, as it deems appropriate.
3.4 Registration and Redelivery of Restricted Stock: Each certificate of
Restricted Stock shall be registered in the name of the Participant and
deposited by the Participant, together with a stock power endorsed in blank,
with the Corporation. During the Restricted Period the Restricted Stock shall
remain in the possession of the Corporation. At the end of the Restricted
Period, the Corporation shall redeliver to the Participant (or the Participant's
legal representative or personal representative) the certificates of Common
Stock deposited pursuant to this Section. The Common Stock so delivered to the
Participant shall no longer be subject to the provisions of this Article.
3.5 Consideration For and Exchange of Restricted Stock: An Award of
Restricted Stock may provide that the Participant be required to furnish such
consideration for the Award as the Committee shall determine, or may be issued
in exchange for past services or other legal consideration. An Award of
Restricted Stock may provide that such
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Restricted Stock may be exchanged during the Restriction Period for other
Restricted Stock upon such terms and conditions as the Committee may permit or
shall require.
3.6 Termination of Employment: Unless the Restricted Stock Agreement
otherwise provides, in the event the Participant's employment with the
Corporation and/or its Subsidiaries is terminated for reasons other than death,
Disability or retirement, all Restricted Stock awarded to such Participant which
is still subject to restriction shall be forfeited. For the purposes of this
Section the forfeiture period for each Award of Restricted Stock shall be
separately calculated from the date of the Award. Unless the Restricted Stock
Agreement otherwise provides, the restrictions provided in Section 3.3 shall
terminate on the Participant's death, Disability or attainment of age sixty-five
(65).
ARTICLE IV
RELOAD OPTIONS
4.1 Authorization of Reload Options. Concurrently with the award of any
Option to any Participant in the Plan, the Committee may authorize reload
options ("Reload Options") to purchase for cash or shares a number of shares of
Common Stock up to (i) the number of shares of Common Stock used to exercise the
underlying Option, and (ii) the number of shares of Common Stock used to satisfy
any tax withholding requirement incident to the exercise of the underlying
Option, in either case through the use of shares of Common Stock or vested
Options. Notwithstanding the fact that the underlying Option may be an ISO, a
Reload Option is not intended to qualify as an "incentive stock option" under
Section 422 of the Code.
4.2 Reload Option Amendment. Each ISO and NSO Agreement shall state if
the Committee has authorized Reload Options with respect to the underlying
Options. Upon the exercise of an underlying Option, any additional Reload Option
must be evidenced by an amendment to the underlying Agreement.
4.3 Reload Exercise Price. Unless otherwise established by the
Committee, the Exercise Price per share of Common Stock deliverable upon the
exercise of a Reload Option shall be the fair market value of a share of Common
Stock on the date the grant of the Reload Option becomes effective.
4.4 Term and Exercise. Each Reload Option is fully exercisable two years
from the effective date of grant (or if less than two years remains until the
termination of this Plan, then such Reload Option shall be exercisable within 90
days prior to termination of the Plan). The term of each Reload Option shall be
equal to the remaining option term of the underlying Option.
4.5 Termination of Employment. No additional Reload Options shall be
granted to Optionees when Options are exercised pursuant to the terms of this
Plan following termination of the Optionee's employment.
4.6 Application Sections. Applicable sections regarding the manner of
payment, restrictions, death, retirement and Disability of the Participant, and
similar provisions relating to the underlying Option, are incorporated by
reference in this Article IV as though fully set forth herein.
ARTICLE V
OTHER STOCK BASED AWARDS AND OTHER BENEFITS
5.1 Other Stock Based Awards: The Committee shall have the right to
grant Awards valued in whole or in part by reference to, or otherwise based on,
the Corporation's Common Stock ("Other Stock Based Awards") which may include,
without limitation, the grant of Common Stock based on certain conditions,
including short-term incentives or the issuance of Common Stock in lieu of cash
under other incentive or deferred compensation programs of the Corporation.
Payment under or a settlement of any such Awards shall be made in such manner
and at such times as the Committee may determine.
5.2 Other Benefits: The Committee shall have the right to provide types
of Awards under this Plan in addition to those specifically, if the Committee
believes that such Awards would further the purposes for which this Plan was
established. Payment under or settlement of any such Awards shall be made in
such manner and at such times as the Committee shall determine.
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5.3 Agreements: Awards of Other Stock Based Awards or Other Benefits
shall be evidenced by a signed agreement ("Other Agreement") containing such
terms and conditions as the Committee may in its sole discretion determine.
5.4 Termination of Employment: Unless an Other Agreement otherwise
provides, except in the event of the Participant's death, Disability or
retirement after attaining the age 65, in the event that the Participant
terminates employment with the Corporation and/or its Subsidiaries prior to the
time benefits become payable pursuant to Awards of Other Stock Based Awards or
Other Benefits, such Stock Based Awards and/or Other Benefits shall be
immediately forfeited. Unless an Other Agreement otherwise provides, in the
event of the Participant's death, Disability or retirement after attaining age
65, the Corporation shall pay to the Participant (or the Participant's legal
representative or personal representative) the amount which would have been
payable to the Participant had the Participant satisfied all of the requirements
contained in the Other Agreement calculated as of the date of the occurrence of
an event described in this sentence.
ARTICLE VI
MISCELLANEOUS PROVISIONS
6.1 Non-Transferability: No Award, or agreement, or interest therein,
under this Plan is transferable by the Participant other than by will, under the
laws of descent and distribution, or pursuant to a qualified domestic relations
order. All Awards must be granted to the Participant during the Participant's
lifetime. All Awards are exercisable during the Participant's lifetime only by
the Participant or the Participant's guardian or legal representative. All
Awards are exercisable after the Participant's death only as specifically
provided in the Plan. Any transfer contrary to this Section 6.1 shall nullify
the Award.
6.2 Acceleration Upon Certain Changes: Notwithstanding anything in the
Plan to the contrary, agreements may contain change of control provisions for
the benefit of the Participant as the Committee shall approve (such approval to
be conclusively evidenced by the execution and delivery of such agreements to
the Participants). Change of control provisions shall mean provisions to protect
Participant's interest in the Plan should the Corporation, its stock or its
assets, be acquired by another person or entity, or should the Participant's
employment terminate in connection therewith.
6.3 Tax Withholding: The Committee shall have sole discretion whether to
withhold stock sufficient to satisfy any withholding or other tax due with
respect the exercise of an Option, the vesting of Restricted Stock or any
similar transaction under the Plan or to demand such amounts in cash. Any tax
withholding effected in shares of Common Stock must comply with Rule 16b-3, if
applicable.
6.4 Amendment of the Plan:
a. The Committee may, without further action by the stockholders
and without receiving further consideration from the Participants,
amend this Plan or condition or modify Awards under this Plan in
response to changes in securities or other laws or rules, regulations
or regulatory interpretations thereof applicable to this Plan or to
comply with stock exchange rules or requirements.
b. The Committee may at any time and from time to time
terminate or modify or amend the Plan in any respect, provided, such
termination, modification, or amendment of the Plan, except as provided
in subsection (a), shall not without the consent of a participant,
affect his or her rights under an Award previously granted to him or
her.
6.5 Non-Uniform Determinations: The Committee's determinations,
including without limitation, (a) the Participants' right to receive Awards, (b)
the form, amount and timing of Awards, (c) the terms, conditions and provisions
of Awards (including vesting and forfeiture provisions) and (d) the agreements
evidencing the same, need not be uniform and may be made by it selectively among
Participants who receive, or who are eligible to receive, Awards under the Plan,
whether or not such Participants are similarly situated.
6.6 Limitations on Awards: In the case of officers and other persons
subject to Section 16(b) of the Act, the Committee, in its discretion, may
impose limitations upon the exercise, delivery or payment of any Award which it
believes are necessary or desirable in order to comply with Section 16(b) of the
Act and the rules and regulations
23
thereunder. The Committee may require any person receiving Common Stock
hereunder to acknowledge that such Common Stock is being acquired for investment
purposes and not with a view for resale or distribution and such Common Stock
shall not be sold or transferred unless in accordance with applicable law and
regulations. If the Corporation, as part of an offering of securities or
otherwise, finds it desirable because of legal or regulatory requirements to
reduce the period during which Options may be exercised, the Committee may, in
its discretion and without the holders' consent, so reduce such period on not
less than fifteen (15) days' written notice to the holders thereof.
6.7 Restrictions on Exercise: To the extent required to comply with Rule
16b-3, no Participant receiving an award under this Plan may dispose of Common
Stock awarded under the Plan prior to the expiration of six months from the date
of grant or dispose of an Option awarded under the Plan, or its underlying
Common Stock, prior to the expiration of six months from the date of acquisition
of the Option.
6.8 Indemnification: Committee members shall be indemnified and held
harmless by the Corporation from any loss, liability, or expense that may be
imposed upon or incurred by such present or past Committee member in connection
with or resulting from any claim, action, or proceeding in which the member is
involved by reason of any action taken or failure to act under the Plan;
provided such member shall give the Corporation an opportunity, at its own
expense, to defend the same. The foregoing right of indemnification shall not be
exclusive of any other rights of indemnification to which such persons may be
entitled under the Corporation's Articles of Incorporation or Bylaws, as a
matter or law, or otherwise, or any power that the Corporation may have to
indemnify them or hold them harmless.
6.9 Rights of Participants: Nothing in the Plan shall interfere with or
limit in any way the right of the Corporation and/or its Subsidiaries to
terminate any Participant's employment at any time, nor confer upon any
Participant any right to continue in the employment for any period of time or to
continue his or her present or any other rate of compensation. No employee shall
have a right to be selected as Participant, or, having been so selected, to be
selected again as a Participant.
6.10 Requirements of Law: Awards, agreements and the issuance of shares
of Common Stock shall be subject to applicable laws, rules and regulations, and
to such approvals by any governmental agencies or securities exchanges as may be
required. The Committee shall determine whether any Option or Common Stock
issued hereunder is required to be registered under the Securities Act of 1933
or may be issued under an exemption. In its sole discretion, the Corporation
may, but is not obliged to, file a registration statement covering Common Stock
issued under the Plan.
6.11 Legend on Stock Certificates: Unless Common Stock issued under the
Plan has been previously registered, issued Common Stock shall bear the
following or similar legend:
"The securities represented by this certificate have not been
registered under the Securities Act of 1933 (the "1933 Act") or under
the securities laws of any state and may not be transferred, assigned,
sold or hypothecated unless a registration statement under the 1933 Act
and the applicable state laws shall be in effect with respect thereto
or an opinion of counsel satisfactory to the Corporation shall be
received to the effect that registration under the 1933 Act and
applicable state securities laws is not required."
6.12 Effective Date: This Amended and Restated Plan was duly approved by
unanimous consent of the Directors, to be effective when ratified by the
stockholders. No Awards of ISOs shall be made hereunder after December 31, 2003.
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