UNITED
STATES
SECURITIES
AND EXCHANGE COMMISSION
Washington,
D.C. 20549
SCHEDULE
14A
Proxy
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1934
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Definitive
Proxy Statement
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Definitive
Additional Materials
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Soliciting
Material Pursuant to
§ 240.14a-12
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Covenant
Transportation Group, Inc.
(Name of
Registrant as Specified in its Charter)
N/A
(Name of
Person(s) Filing Proxy Statement if other than the Registrant)
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COVENANT
TRANSPORTATION GROUP, INC.
400
Birmingham Highway
Chattanooga,
Tennessee 37419
___________________________________________
NOTICE
AND PROXY STATEMENT
FOR
ANNUAL MEETING OF STOCKHOLDERS
TO
BE HELD ON THURSDAY, MAY 6, 2010
___________________________________________
To Our
Stockholders:
You are cordially invited to attend the
2010 Annual Meeting of Stockholders of Covenant Transportation Group, Inc.,
a Nevada corporation, to be held at our principal executive offices,
400 Birmingham Highway, Chattanooga, Tennessee 37419, at 10:00 a.m.
local time, on Thursday, May 6, 2010, for the following purposes:
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1.
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To
consider and act upon a proposal to elect five (5) directors;
and
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2.
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To
consider and act upon such other matters as may properly come before the
meeting and any adjournment
thereof.
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The foregoing matters are more fully
described in the accompanying Proxy Statement.
The Board
of Directors has fixed the close of business on Tuesday, March 16, 2010, as the
record date for the determination of stockholders entitled to receive notice of
and to vote at the Annual Meeting or any adjournment thereof. Shares
of Class A and Class B common stock may be voted at the Annual Meeting
only if the holder is present at the Annual Meeting in person or by valid
proxy. YOUR VOTE IS
IMPORTANT. To ensure your representation at the Annual Meeting, you
are requested to promptly date, sign, and return the accompanying proxy in the
enclosed envelope. You may also vote on the Internet by completing
the electronic voting instruction form found at www.investorvote.com/CVTI or by telephone using a touch-tone
telephone and calling 1-800-652-8683. Returning your proxy now
will not interfere with your right to attend the Annual Meeting or to vote your
shares personally at the Annual Meeting, if you wish to do so. The
prompt return of your proxy may save us additional expenses of
solicitation.
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Important
Notice Regarding the Availability of Proxy Materials for the
Meeting
of Stockholders to Be Held on May 6,
2010
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Pursuant to rules promulgated by the
Securities and Exchange Commission, we have elected to provide access to our
proxy materials both by: (i) sending you this full set of proxy materials,
including a proxy card; and (ii) notifying you of the availability of our proxy
materials on the Internet. This Notice of Meeting and Proxy
Statement, and our Annual Report to Stockholders for the fiscal year ended
December 31, 2009, are available online and may be accessed at www.eproxyaccess.com/CVTI. In
accordance with such new rules, we do not use "cookies" or other software that
identifies visitors accessing these materials on this website. We encourage you
to access and review all of the important information contained in the proxy
materials before voting.
To obtain directions to the Annual
Meeting, please call Kimberly Perry at (423) 463-3357.
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By
Order of the Board of Directors,
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/s/ David R.
Parker
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David
R. Parker
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Chairman
of the Board of Directors
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Chattanooga,
Tennessee
April 9,
2010
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GENERAL
INFORMATION
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Voting
Rights
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Quorum
Requirement
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Required
Vote
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Right to Attend Annual Meeting;
Revocation of
Proxy
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Costs of
Solicitation
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Annual
Report
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How to Read this Proxy
Statement
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How to Vote – Proxy
Instructions
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PROPOSAL
1 - ELECTION OF
DIRECTORS
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Nominees for
Directorships
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CORPORATE
GOVERNANCE
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The Board of Directors and Its
Committees
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Board of
Directors
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Committees of the Board of
Directors
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The Audit
Committee
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Report of the Audit
Committee
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The Compensation
Committee
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Compensation Committee
Report
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Risks Presented by the Company’s
Compensation
Programs
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Compensation Committee Interlocks
and Insider
Participation
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The Nominating and Corporate
Governance
Committee
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Our Executive
Officers
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Section 16(a) Beneficial
Ownership Reporting
Compliance
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Code of Conduct and
Ethics
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EXECUTIVE
COMPENSATION
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Compensation Discussion and
Analysis
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Overview and Philosophy of
Compensation
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Elements of
Compensation
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Base
Salary
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Incentive
Compensation
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Long-Term
Incentives
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Performance-Based Annual
Bonuses
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Other
Compensation
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Employee
Benefits
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Compensation Paid to Our Named
Executive
Officers
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Compensation Paid to Our Chief
Executive
Officer
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Compensation Paid to Our Other
Named Executive
Officers
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Compensation Decisions with
Respect to
2010
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Separation and Severance
Agreements
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Summary Compensation
Table
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All Other Compensation
Table
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Narrative to the Summary
Compensation
Table
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Grants of Plan-Based
Awards
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Narrative to Grants of Plan-Based
Awards
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Outstanding Equity Awards at
Fiscal
Year-End
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Director
Compensation
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Narrative to Director
Compensation
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SECURITY
OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
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CERTAIN
RELATIONSHIPS AND RELATED
TRANSACTIONS
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RELATIONSHIPS
WITH INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
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Principal Accountant Fees and
Services
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STOCKHOLDER
PROPOSALS
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OTHER
MATTERS
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COVENANT
TRANSPORTATION GROUP, INC.
400
Birmingham Highway
Chattanooga,
Tennessee 37419
__________________________________________
NOTICE
AND PROXY STATEMENT
FOR
ANNUAL MEETING OF STOCKHOLDERS
TO
BE HELD ON THURSDAY, MAY 6, 2010
__________________________________________
GENERAL INFORMATION
This
Proxy Statement is furnished in connection with the solicitation of proxies from
the stockholders of Covenant Transportation Group, Inc., a Nevada
corporation, to be voted at the Annual Meeting of Stockholders, which will be
held at our principal executive offices, 400 Birmingham Highway,
Chattanooga, Tennessee 37419, at 10:00 a.m. local time, on Thursday, May 6,
2010, and any adjournment thereof. THE ENCLOSED PROXY IS SOLICITED BY
OUR BOARD OF DIRECTORS. If not otherwise specified, all
proxies received pursuant to this solicitation will be voted (i) FOR the
director nominees named below; and (ii) in accordance with the judgment of the
proxy holders, with respect to any other matters properly brought before the
Annual Meeting.
The Proxy Statement, proxy card, and
our Annual Report on Form 10-K for the fiscal year ended
December 31, 2009, was first mailed on or about April 9, 2010, to
stockholders of record at the close of business on our record date of March
16, 2010. Except to the extent it is
incorporated by specific reference, the enclosed copy of our 2009 Annual Report
on Form 10-K is not incorporated into this Proxy Statement and is not to be
deemed a part of the proxy solicitation material.
The terms "Company," "we," "us," and
"our" refer to Covenant Transportation Group, Inc. and its consolidated
subsidiaries.
Voting Rights
Only
stockholders of record at the close of business on the record date are entitled
to vote at the Annual Meeting, either in person or by valid
proxy. Holders of Class A common stock are entitled to one vote
for each share held. Holders of Class B common stock are
entitled to two votes for each share held so long as such shares are owned by
David R. Parker or certain members of his immediate
family. In the event that any shares of our Class B common stock
cease to be owned by Mr. Parker or certain of his immediate family members,
such shares will be automatically converted into shares of our Class A common
stock. Unless otherwise required by Nevada law, the Class A common
stock and Class B common stock vote together as a single class. On
March 16, 2010, the
record date, there were issued and outstanding 12,692,049 shares of Class A
common stock, par value one cent ($0.01) per share (including 851,481 shares of
restricted Class A common stock subject to certain performance vesting and
holding provisions), entitled to cast an aggregate 12,692,049 votes on all matters
subject to a vote at the Annual Meeting, and 2,350,000 shares of Class B
common stock, par value one cent ($0.01) per share, entitled to cast an
aggregate 4,700,000 votes on all matters subject to a vote at the Annual
Meeting. The total number of shares of our common stock issued and
outstanding on the record date was approximately 15,042,049, which is entitled
to cast an aggregate of 17,392,049 votes on all matters subject to a vote at the
Annual Meeting. The total number of issued and outstanding shares
excludes approximately 969,495 shares of Class A common stock reserved for
issuance upon the exercise of outstanding stock options granted under our
incentive stock plans and other arrangements. Holders of unexercised
options are not entitled to vote at the Annual Meeting. We have no
other class of stock outstanding. Stockholders are not entitled to
cumulative voting in the election of directors. Votes cast at the
Annual Meeting will be tabulated by the Inspector of Elections, and the results
of all items voted upon will be announced at the Annual Meeting.
Quorum Requirement
In order
to transact business at the Annual Meeting, a quorum must be
present. A quorum is present if the holders of a majority of the
total number of shares of Class A and Class B common stock issued and
outstanding as of the record date are represented at the Annual Meeting in
person or by proxy. Shares that are entitled to vote but that are not
voted at the direction of the holder (called "abstentions") and shares that are
not voted by a broker or other record holder
due to
the absence of instructions from the beneficial owner (called "broker
non-votes") will be counted for the purpose of determining whether a quorum is
present.
Required Vote
Directors
are elected by an affirmative vote of a plurality of the total votes cast by
stockholders entitled to vote and represented in person or by proxy at the
Annual Meeting, which means that the five director nominees receiving the
highest number of votes for their election will be elected. Approval
of any other matter submitted to stockholders requires the affirmative vote of a
majority of the votes cast by stockholders entitled to vote and represented in
person or by proxy at the Annual Meeting. Abstentions and broker
non-votes are not considered affirmative votes and thus will have no effect on
the election of directors by a plurality vote, but will have the same effect as
negative votes with respect to the approval of any other matter submitted to
stockholders.
Right to Attend Annual Meeting; Revocation of
Proxy
Returning
a proxy card now will not interfere with your right to attend the Annual Meeting
or to vote your shares personally at the Annual Meeting, if you wish to do
so. Stockholders who execute and return proxies may revoke them at
any time before they are exercised by giving written notice to our Secretary at
our address, by executing a subsequent proxy and delivering it to our Secretary,
or by attending the Annual Meeting and voting in person.
Costs of Solicitation
We will
bear the cost of solicitation of proxies, which we expect to be nominal, and we
will include reimbursements for the charges and expenses of brokerage firms and
others for forwarding solicitation materials to beneficial owners of our
outstanding Class A common stock. Proxies will be solicited by mail,
and may be solicited personally by directors, officers, or our regular
employees, who will not receive any additional compensation for any such
services.
Annual Report
The
information included in this Proxy Statement should be reviewed in conjunction
with the Consolidated Financial Statements, Notes to Consolidated Financial
Statements, Report of Independent Registered Public Accounting Firm, and other
information included in our 2009 Annual Report that was mailed on or about April
9, 2010, together with this Notice and Proxy Statement, to all stockholders of
record as of the record date.
How to Read this Proxy Statement
Set forth
below are the proposals to be considered by stockholders at the Annual Meeting,
as well as important information concerning, among other things, our management
and our Board of Directors; executive compensation; transactions between us and
our officers, directors, and affiliates; the stock ownership of certain
beneficial owners and management; the services provided to us by and fees of
KPMG, LLP, our independent registered public accounting firm; and how
stockholders may make proposals at our next annual meeting. EACH
STOCKHOLDER SHOULD READ THIS INFORMATION BEFORE VOTING.
How to Vote – Proxy Instructions
If you
are a holder of record of our Class A or Class B common stock, you may vote your
shares either (i) over the telephone by calling a toll-free number,
(ii) by using the Internet, or (iii) by mailing in your proxy
card. Owners who hold their shares in street name will need to obtain
a voting instruction form from the institution that holds their stock and must
follow the voting instructions given by that institution.
For 2010,
we have arranged for telephone and Internet-voting procedures to be
used. These procedures have been designed to authenticate your
identity, to allow you to give instructions, and to confirm that those
instructions have been recorded properly. If you choose to vote by
telephone or by using the Internet, please refer to the specific instructions on
the proxy card. The deadline for voting by telephone or the Internet
is 11:59 p.m. Eastern Standard Time on Wednesday, May 5, 2010. If you
wish to vote using the proxy card, complete, sign, and date your proxy card and
return it to us before the meeting.
PROPOSAL 1 - ELECTION OF DIRECTORS
At the
Annual Meeting, the stockholders will elect five directors to serve as the Board
of Directors until our next annual meeting or until their successors are duly
elected and qualified. Upon the recommendation of the Nominating and
Corporate Governance Committee, our Board of Directors has nominated for
election as directors David R. Parker, William T. Alt, Robert E.
Bosworth, Bradley A. Moline, and Dr. Niel B. Nielson, each of whom is
presently serving as a director. In the absence of contrary
instructions, each proxy will be voted for the election of all the proposed
directors.
THE BOARD OF DIRECTORS UNANIMOUSLY
RECOMMENDS A VOTE "FOR" EACH OF THE DIRECTOR NOMINEES.
Nominees for Directorships
Information
concerning the names, ages, positions with us, tenure as a director, and
business experience of the nominees standing for election as directors at the
Annual Meeting, as well as the specific attributes qualifying each nominee for a
directorship, is set forth below. All references to experience with
us include positions with our operating subsidiary, Covenant Transport, Inc., a
Tennessee corporation.
David R. Parker, 52,
has served as President since our founding in 1985 and as Chairman of the Board
and Chief Executive Officer ("CEO") since 1994. Mr. Parker was
elected to the Board of Directors of the Truckload Carriers Association in 1994
and also serves on the Board of Directors of the American Trucking
Associations. Mr. Parker has served as a director of several
religious organizations and serves as general partner of the Parker Limited
Family Partnership. The Board of Directors believes Mr. Parker’s dedication to the
Company, as well as his executive and operational roles with us, have made him a
valued member of our Board, and Mr. Parker brings to the Board an in-depth
knowledge of all aspects of the Company. The Board of Directors
believes Mr. Parker's significant leadership experience, when coupled with Mr.
Parker's significant knowledge of the Company, qualify him for his continued
service as President, CEO, and Chairman of our Board. Additionally,
the Board of Directors believes Mr. Parker's knowledge of the industry continues
to be a competitive strength for the Company as our industry faces difficult
times.
William T. Alt, 73,
has served as a director since 1994 and currently serves as Chairman of our
Nominating and Corporate Governance Committee and as a member of our
Compensation Committee. Mr. Alt holds degrees in engineering and the
law. He has engaged in the private practice of law since 1962 and
served as the president of the professional corporation for which he has
practiced, where he also was responsible for compensation
decisions. Mr. Alt has supervised as many as twelve attorneys engaged
in litigation and securities work for brokers, private companies going public,
and SEC reporting companies. Mr. Alt also has experience advising
companies in the preparation of public offerings, stock exchange listings, and
various reports filed with the SEC. Mr. Alt served as outside counsel
to the Company from 1986 to 2003 and gained an in-depth understanding of the
risks facing the Company. The Board of Directors believes Mr. Alt’s
legal experience and familiarity with securities laws and the transportation
industry qualify Mr. Alt to serve on the Board generally and benefit the
Company. Specifically, the Board believes Mr. Alt’s legal background
allows Mr. Alt to advise the Board regarding best practices and strategies to
help inform the Board’s decision-making. Additionally, the Board of
Directors believes Mr. Alt’s past leadership positions and executive experience
qualify Mr. Alt to serve in his current capacity as the Chairman of the
Nominating and Corporate Governance Committee. The Board of Directors
believes Mr. Alt's knowledge of executive compensation practices adds
significant value to our Compensation Committee.
Robert E. Bosworth,
62, has served as a director since 1998 and currently serves as Chairman of our
Audit Committee. Mr. Bosworth has served as a director of
Chattem, Inc., a publicly traded consumer products company, since 1986 and has
served on its audit committee from 1998 to 2005 and on its compensation
committee from 2002 to 2005. Since September 19, 2005, Mr. Bosworth
has served as the President and Chief Operating Officer of Chattem,
Inc. Prior to such position, Mr. Bosworth served as Chief
Financial Officer of the Livingston Company, a merchant bank located in
Chattanooga, Tennessee, since 2004, and as Livingston's Vice President of
Corporate Finance since 2001. From 1998 until 2001, Mr. Bosworth
was a business and management consultant to various corporations in the
Chattanooga area. Prior to 1998, Mr. Bosworth served for more
than five years as Executive Vice President and Chief Financial Officer of
Chattem, Inc. Mr. Bosworth also has held directorships with
several organizations, including Southport Capital, Wellington Group, Hamico,
Inc., Chattem Chemicals, and R&K Maclellan Charitable Trust. Mr.
Bosworth holds an MBA in finance. The Board of Directors believes Mr.
Bosworth's services on the Chattem, Inc. board and on the
boards
of
several other organizations have provided him with significant insight into
board processes, functions, exercise of diligence, and oversight of management,
and this knowledge benefits the Board. The Board of Directors also
believes Mr. Bosworth's financial background, including his experience handling
all financial functions of Chattem, Inc. and his familiarity and experience with
applicable laws and regulations governing the preparation of financial
statements filed with the SEC, adds value to the Board and the Company's Audit
Committee. The Board of Directors believes Mr. Bosworth's extensive
executive, director, business, and financial reporting experience make him
highly qualified to serve as a director and as Chairman of the Audit
Committee.
Bradley A. Moline,
43, has served as a
director since 2003 and currently serves as a member of our Audit Committee and
Nominating and Corporate Governance Committee. Mr. Moline has
been President and
Chief Executive Officer of Allo Communications, LLC, a competitive local
telephone company, since October 2002. Mr. Moline also has been
the owner and President of Imperial Super Foods, a grocery store in Imperial,
Nebraska, since February 2002 and NECO Grocery, a grocery store in Holyoke,
Colorado, since March 2006. From 1994 to 1997, Mr. Moline was our
Treasurer and Chief Financial Officer. Mr. Moline also served as
Chief Financial Officer of Birch Telecom Inc., a telecommunications company,
when the company was publicly traded and previously worked for Ernst &
Young, where he was formerly licensed as a CPA. Mr. Moline holds a
degree in Business Administration with an emphasis in accounting. In
his roles with the Company, Birch Telecom, and Ernst & Young, Mr. Moline
gained experience overseeing financial matters and reviewing documents filed
with the SEC. The Board of Directors believes Mr. Moline's extensive
financial and executive experience add significant value to our Audit Committee
and make Mr. Moline a valued member of our Board. The Board of
Directors also believes Mr. Moline's wide array of executive experiences has
prepared him well to respond to complex financial and operational
challenges.
Dr. Niel B. Nielson,
56, has served as a director since 2003 and currently serves as Chairman of our
Compensation Committee and as a member of our Audit
Committee. Dr. Nielson has been President of Covenant College
since 2002. From 1997 until 2002, Dr. Nielson was the Associate
Pastor of Outreach for College Church in Wheaton,
Illinois. Dr. Nielson was a partner and trader for Ritchie
Capital Markets Group, LLC from 1996 to 1997. Prior to 1996,
Dr. Nielson served as an executive officer in various companies, including
serving for two years as Senior Vice President of Chicago Research and Trading
Group, Ltd., a company at which he was employed for nine
years. Dr. Nielson holds several investment company
directorships, including 13 directorships of closed-end funds associated with
the First Trust group of funds, 39 directorships of exchange-traded funds
associated with the First Trust group of funds, and one directorship of the
First Defined Portfolio Fund LLC. Such directorships include serving
as a member of the audit, compensation, nominating and governance, and valuation
committees of such funds. During the past five years,
Dr. Nielson also has served as a director of Good News Publishers/Crossway
Books, Allied Arts of Chattanooga, and the Chattanooga Symphony and
Opera. Dr. Nielson holds a masters and Ph.D. in
philosophy. The Board of Directors believes Dr. Nielson's diverse
executive and board experience have provided him with the know-how of what it
takes to help organizations and businesses plan and expand for growth and have
provided him with key skills in working with other directors, understanding
board processes and functions, and overseeing management. The Board
of Directors also believes the executive management and director positions that
Dr. Nielson has held in for-profit and not-for-profit entities, including his
experiences analyzing financial statements included in periodic reports filed
with the SEC and overseeing of a significant budget at Covenant College as its
President, have provided him with extensive financial experience and have made
Dr. Nielson a valued member of our Audit Committee. The Board of
Directors believes Dr. Nielson's executive experience and directorships with
various compensation committees have qualified him well to serve as Chairman of
our Compensation Committee.
CORPORATE GOVERNANCE
The Board of Directors and Its Committees
Board of Directors
Meetings. Our
Board of Directors held four regularly scheduled meetings and four special
meetings during the fiscal year ended
December 31, 2009. All of our directors attended at least
75% of the regularly scheduled board meetings of the Board of Directors and each
committee on which he served. We encourage the members of our Board
of Directors to attend our Annual Meeting of Stockholders. All five
of our then-current directors attended the 2009 Annual Meeting of
Stockholders.
Director
Independence. Our Class A common stock is listed on the Nasdaq
Global Select Market. Therefore, it is subject to the listing
standards, including standards relating to corporate governance, embodied in
applicable NASDAQ Stock Market ("NASDAQ") listing standards. Pursuant
to NASDAQ Rule 5605(b)(1), the Board of Directors has determined that the
following directors and nominees are "independent" under NASDAQ
Rule 5605(a)(2): Robert E. Bosworth, William T. Alt, Bradley A.
Moline, and Dr. Niel B. Nielson. In accordance with NASDAQ
Rule 5605(b)(2), in fiscal 2009, our independent directors held five
meetings or "executive sessions," at which only the independent directors were
present, including sessions either before or following each regularly scheduled
meeting of the full Board of Directors.
Risk
Oversight. The Board of Directors has assigned the assessment
of enterprise risk to the Nominating and Corporate Governance Committee and the
assessment of financial risk to the Audit Committee. Management
reports to the Nominating and Corporate Governance Committee and Audit Committee
with respect to the overall enterprise risk environment, including both business
and financial risk, of the Company's operations. The committees then
evaluate the management's risk assessment and report to the Board of
Directors.
Board Leadership
Structure. David R. Parker has served as our President since
our founding in 1985 and as Chairman of the Board and CEO since
1994. The Board of Directors believes that the combination of these
positions is the most appropriate and suitable structure for proper and
efficient Board functioning and communication, given the size of the Company and
its Board. Mr. Parker reports to the Board as the CEO along with the
other executive officers and also participates in the meetings as a
director.
Communications with the Board of
Directors. Our Board of Directors has adopted procedures by
which our stockholders may communicate with our Board regarding matters of
substantial importance to us. Information concerning the manner in
which stockholders can communicate with the Board is available on our website at
http://www.covenanttransport.com.
Committees of the Board of Directors
The Audit
Committee
Functions, Composition, and Meetings
of the Audit Committee. The primary responsibilities of the
Audit Committee are set forth in the Audit Committee Report, which appears
below. The Audit Committee met eleven times during
2009. Messrs. Bosworth and Moline have served on the Audit Committee
since 2003, while Dr. Nielson has served on the Audit Committee since
2004. Mr. Bosworth serves as Chairman of the Audit
Committee.
Each
member of the Audit Committee satisfies the independence and audit committee
membership criteria set forth in NASDAQ
Rule 5605(c)(2)(A). Specifically, each member of the Audit
Committee:
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is
independent under NASDAQ Rule 5605(a)(2);
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meets
the criteria for independence set forth in Rule 10A-3(b)(1) under the
Securities Exchange Act of 1934, as amended (the "Exchange Act");
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did
not participate in the preparation of our financial statements or the
financial statement of any of our current subsidiaries at any time during
the past three years; and
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is
able to read and understand fundamental financial statements, including
our balance sheet, statement of operations, and cash flows
statement.
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Audit Committee
Charter. Our Audit Committee operates pursuant to a written
charter detailing its purpose, powers, and duties. The Audit
Committee reviews and reassesses the adequacy of its formal written charter on
an annual basis. The charter is available free of charge on our
website at http://www.covenanttransport.com.
Audit Committee Financial
Expert. The Board of Directors has determined that at least
one current member of the Audit Committee has (i) past employment experience in
finance or accounting; (ii) requisite professional certification in accounting;
or (iii) any other comparable experience or background which, in the judgment of
the Board, results in the individual's financial sophistication under NASDAQ
Rule 5605(c)(2)(A) and qualifies such member as an "audit committee financial
expert," under Item 407(d)(5) of Regulation S-K. The Board of
Directors has identified Mr. Bosworth as financially sophisticated and as our
audit committee financial expert. Mr. Bosworth is independent, as
independence for audit committee members is defined under applicable NASDAQ
rules.
Audit Committee
Report. In performing its duties, the Audit Committee, as
required by applicable rules of the SEC, issues a report recommending to the
Board of Directors that our audited financial statements be included in our
Annual Report on Form 10-K, and determines certain other matters, including
the independence of our independent registered public accounting
firm. The Audit Committee Report for 2009 is set forth
below.
The
Audit Committee Report shall not be deemed to be incorporated by reference into
any filing made by us under the Securities Act of 1933, as amended (the
"Securities Act"), or the Exchange Act, notwithstanding any general statement
contained in any such filings incorporating this Proxy Statement by reference,
except to the extent we incorporate such report by specific
reference.
Report of the Audit Committee
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 over financial reporting. The Company's
management has primary responsibility for the Company's financial statements and
the overall reporting process, including maintenance of the Company's system of
internal controls. The Company retains an independent registered
public accounting firm, which is responsible for conducting an independent audit
of the Company's financial statements, the effectiveness of management's
assessment of internal controls over financial reporting, and the effectiveness
of internal controls over financial reporting in accordance with the standards
of the Public Company Accounting Oversight Board (United States) ("PCAOB") and
issuing reports thereon.
In
performing its duties, the Audit Committee has discussed the Company's financial
statements, management's assessment of internal controls over financial
reporting, and the effectiveness of internal controls over financial reporting
with management and the Company's independent registered public accounting firm
and, in issuing this report, has relied upon the responses and information
provided to the Audit Committee by management and such accounting
firm. For the fiscal year ended December 31, 2009, the Audit
Committee (i) reviewed and discussed the audited financial statements,
management's assessment of internal controls over financial reporting, and the
effectiveness of internal controls over financial reporting with management and
KPMG LLP, the Company's independent registered public accounting firm;
(ii) discussed with the independent registered public accounting firm the
matters required to be disclosed by Statement on Auditing Standards No. 61,
Communication with Audit
Committees, as amended; (iii) received and discussed with the independent
registered public accounting firm the written disclosures and the letter from
such accounting firm required by PCAOB 3526, Communication with Audit Committees
Concerning Independence, as amended; and (iv) has discussed with the
independent registered public accounting firm its independence. The
Audit Committee met in periodic executive sessions with each of the independent
auditor, management, and internal auditor during 2009.
Based on the foregoing reviews and
meetings, the Audit Committee recommended to the Board of Directors that the
audited financial statements be included in the Annual Report on Form 10-K for
the fiscal year ended December 31, 2009, for filing with the SEC.
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Audit
Committee:
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Robert E. Bosworth,
Chairman
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Bradley A.
Moline
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Dr. Niel B.
Nielson
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The Compensation
Committee
Functions, Composition, and Meetings
of the Compensation Committee. As more fully outlined in the
Compensation Committee Charter, the primary functions of the Compensation
Committee are to aid our Board in discharging its responsibilities relating to
the compensation of our executive officers, including the chief executive
officer; to evaluate and approve our compensation plans, policies, and programs;
to produce an annual report on executive compensation; and to perform such other
duties as may be assigned to it by our Board or imposed by applicable laws or
regulations. In furtherance of its duties, the Compensation Committee
reviews and approves certain aspects of compensation of our executive officers
and makes recommendations on other compensation matters to the full Board of
Directors. During 2009, Dr. Nielson and Mr. Alt served as the members
of the Compensation Committee, with Dr. Nielson serving as
Chairman. The Compensation Committee held a total of five meetings in
2009.
Compensation Committee
Charter. Our Compensation Committee operates pursuant to a
written charter detailing its purpose, powers, and duties. The
charter is available free of charge on our website at http://www.covenanttransport.com.
Compensation Committee
Report. In performing its duties, the Compensation Committee,
as required by applicable rules and regulations promulgated by the SEC, issues a
report recommending to the Board of Directors that our Compensation Discussion
and Analysis be included in this Proxy Statement. The Compensation Committee Report follows.
The Compensation Committee Report
shall not be deemed to be incorporated by reference into any filing made by us
under the Securities Act or the Exchange Act, notwithstanding any general
statement contained in any such filings incorporating this Proxy Statement by
reference, except to the extent we incorporate such report by specific
reference.
Compensation Committee Report
We have
reviewed and discussed the Compensation Discussion and Analysis contained in
this Proxy Statement with management. Based on that review and
discussion, we have recommended to the Board of Directors that the Compensation
Discussion and Analysis be included in this Proxy Statement.
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Compensation
Committee:
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Dr. Niel B. Nielson,
Chairman
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William T.
Alt
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Risks Presented by the Company's Compensation
Programs
As
required by SEC rules, the Company has assessed the risks that could arise from
its compensation policies for all employees, including employees who are not
officers, and has concluded that such policies are not reasonably likely to have
a materially adverse effect on the Company. The Company's
risk-assessment of its compensation policies creates a strong alignment between
the interests of management and stockholders.
Compensation Committee Interlocks and Insider
Participation
Dr. Nielson served on the Compensation
Committee and was Chairman for all of 2009. Mr. Alt also served on
the Compensation Committee for all of 2009.
During
2009, none of our executive officers served as a member of the board of
directors or compensation committee (or other committee performing equivalent
functions) of another entity, one of whose executive officers served on our
Compensation Committee. Additionally, during 2009, none of our
executive officers served as a member of the compensation committee (or other
board committee performing equivalent functions) of another entity, one of whose
executive officers served as a member of our Board of Directors.
See "Certain Relationships
and Related Transactions" for a description of certain transactions between us
and our other directors, executive officers, or their affiliates, and "Executive
Compensation – Director Compensation" for a description of compensation of the
members of the Compensation Committee.
The Nominating and Corporate Governance Committee
Functions, Composition, and Meetings
of the Nominating and Corporate Governance Committee. In April
2004, the Board of Directors established a Nominating and Corporate Governance
Committee to recommend to the Board of Directors potential candidates for
election to the Board of Directors and to make recommendations to the Board
concerning issues related to corporate governance, as more specifically detailed
in the written charter discussed below. During 2009, Mr. Alt and Mr.
Moline served as the Nominating and Corporate Governance Committee, with
Mr. Alt serving as Chairman. All current members of the
Nominating and Corporate Governance Committee are independent, as independence
for nominating committee members is defined under applicable NASDAQ
rules. The Committee met two times in 2009. The Nominating
and Corporate Governance Committee has recommended that the Board of Directors
nominate David R. Parker, William T. Alt, Robert E.
Bosworth, Bradley A. Moline, and Dr. Niel B. Nielson for election at
the Annual Meeting, each of whom is currently serving as a
director.
Nominating and Corporate Governance
Committee Charter. Our Nominating and Corporate Governance
Committee operates pursuant to a written charter detailing its purpose, powers,
and duties. A copy
of the charter is available free of charge on our website at http://www.covenanttransport.com.
Process for Identifying and
Evaluating Director Nominees. Director nominees are chosen by
the entire Board of Directors, after considering the recommendations of the
Nominating and Corporate Governance Committee. The members of the
Nominating and Corporate Governance Committee review the qualifications of
various persons to determine whether they are qualified candidates for
membership on the Board of Directors. The Nominating and Corporate
Governance Committee will review all candidate recommendations, including those
properly submitted by stockholders, in accordance with the requirements of its
charter. With regard to specific qualities and skills, the Nominating
and Corporate Governance Committee believes it necessary that: (i) at least
a majority of the members of the Board of Directors qualify as "independent"
under NASDAQ Rule 5605(a)(2); (ii) at least three members of the Board
of Directors satisfy the audit committee membership criteria specified in NASDAQ
Rule 5605(c)(2)(A); and (iii) at least one member of the Board of
Directors eligible to serve on the Audit Committee has sufficient knowledge,
experience, and training concerning accounting and financial matters so as to be
financially sophisticated under NASDAQ Rule 5605(c)(2)(A) and qualifies as an
"audit committee financial expert" within the meaning of Item 407(d)(5) of
Regulation S-K. In addition to these specific requirements, the
Nominating and Corporate Governance Committee takes into account all factors it
considers appropriate, which may include experience, accomplishments, education,
understanding of our business and the industry in which we operate, specific
skills, general business acumen, and personal and professional
integrity. Generally, the Nominating and Corporate Governance
Committee will first consider current Board members because they meet the
criteria listed above and possess knowledge of our history, strengths,
weaknesses, goals, and objectives. We do not pay a fee to any third
party to identify or evaluate or assist in identifying or evaluating potential
nominees.
Director Evaluation
Program. The Nominating and Corporate Governance Committee is
responsible for developing and implementing a director evaluation program to
measure the individual and collective performance of directors and the
fulfillment of their responsibilities to our stockholders, including an
assessment of the Board's compliance with applicable corporate governance
requirements and identification of areas in which the Board might improve its
performance. The Nominating and Corporate Governance Committee also
is responsible for developing and recommending to the Board of Directors for
approval an annual self-evaluation process for the Board designed to assure that
directors contribute to our corporate governance and to our
performance.
Board
Diversity. In recommending candidates for the Board of
Directors, the Nominating and Corporate Governance Committee considers Board
diversity along with the various other factors discussed
above. Pursuant to the Nominating and Corporate Governance
Committee's charter, such consideration includes each individual candidate's
ability to enhance differences of viewpoint, professional experience, education,
skill, and other individual qualities among the members of the
Board. The Nominating and Corporate Governance Committee periodically
reviews and assesses the effectiveness of the Committee's policies with respect
to its consideration of diversity in identifying director nominees.
Stockholder Director Nominee
Recommendations. It is generally the policy of the Nominating
and Corporate Governance Committee to consider stockholder recommendations of
proposed director nominees if such recommendations are serious and timely
received. To be timely, recommendations must be received in writing
at our principal executive offices, 400 Birmingham Highway, Chattanooga,
Tennessee 37419, at least 120 days prior to the anniversary date of mailing
of our Proxy Statement for the prior year's Annual Meeting. For the
next annual meeting, the deadline for receiving stockholder recommendations of
proposed director nominees will be December 10, 2010. In
addition, any stockholder director nominee recommendation must include the
following information:
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the
proposed nominee's name and qualifications and the reason for such
recommendation;
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the
name and record address of the stockholder(s) proposing such
nominee;
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the
number of shares of our Class A and/or Class B common stock that are
beneficially owned by such stockholder(s); and
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a
description of any financial or other relationship between the
stockholder(s) and such nominee or between the nominee and us or any of
our subsidiaries.
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In order
to be considered by the Board, any candidate proposed by one or more
stockholders will be required to submit appropriate biographical and other
information equivalent to that required of all other director
candidates.
Our Executive Officers
Set forth below is certain information
regarding our current executive officers (other than our CEO,
David R. Parker, for whom information is set forth above under
"Proposal 1 – Election of Directors – Nominees for
Directorships"). All executive officers are elected annually by the
Board of Directors. All references to experience with us include
positions with our operating subsidiary, Covenant Transport, Inc., a Tennessee
corporation.
Joey B. Hogan, 48, has served
as our Senior Executive Vice President and Chief Operating Officer since
May 2007, and also has served as President of Covenant Transport, Inc., a
Tennessee corporation, since such time. Mr. Hogan was our Chief
Financial Officer from 1997 to May 2007, and our Executive Vice President from
May 2003 to May 2007, and was a Senior Vice President from December 2001 to
May 2003. From joining us in August 1997 through December 2001,
Mr. Hogan served as our Treasurer. Mr. Hogan has served as a
director and on the audit committee of Chattem, Inc., a publicly traded consumer
products company, since April 2009. Mr. Hogan does not serve on the
compensation committee of Chattem, Inc.
Tony Smith, 61, founded
Southern Refrigerated Transport, Inc. in 1986 and has served as President of
Southern Refrigerated Transport, Inc. ("SRT") since its
inception. SRT joined Covenant Transportation Group, Inc. as one of
our subsidiaries in 1998. Mr. Smith also served as President of Tony
Smith Trucking, Inc., a former subsidiary, from October 1998 to December
2004.
James "Jim" Brower, 52, has
served as President of Star Transportation, Inc. ("Star"), one of our
subsidiaries, since 1983.
Richard B. Cribbs, 38, has
served as our Senior Vice President and Chief Financial Officer since May
2008. Previously, Mr. Cribbs served as our Vice President and Chief
Accounting Officer from May 2007 to May 2008 and was our Corporate Controller
from May 2006 to May 2007. Prior to joining the Company, Mr. Cribbs
was the Corporate Controller, Assistant Secretary, and Assistant Treasurer for
Tandus, Inc., a commercial flooring company, from May
2005 to
May 2006, and served as Chief Financial Officer of Modern Industries, Inc., a
Tier-2 automotive supply company from December 1999 to May 2005.
M. David Hughes, 40, has
served as our Senior Vice President - Fleet Management and Procurement and
Corporate Treasurer since May 2007. Prior to that, Mr. Hughes served
as Vice President and Chief Financial Officer of Star from September 2006 to May
2007. Prior to joining Star, Mr. Hughes served as our Treasurer and
Director of Business Development from May 2002 to July 2006 and served as Chief
Financial Officer at Star from July 2006 through the Company's acquisition of
Star in September of 2006.
R.H. Lovin, Jr., 58, has
served in several senior management positions since joining us in
1986. Mr. Lovin has been our Executive Vice President -
Administration since February 2003 and Corporate Secretary since
August 1995. Mr. Lovin previously served as our Chief
Financial Officer from 1986 to 1994, as Vice President of Administration from
May 1994 to May 2003, and as one of our directors from May 1994 to May
2003.
M. Paul Bunn, 32, has served
as our Corporate Controller since July 2009. Prior to that, Mr. Bunn
served as an audit Senior Manager for Ernst & Young, LLP, a global
professional services provider. Mr. Bunn is registered as a CPA with
the State of Tennessee.
Section 16(a) Beneficial Ownership Reporting
Compliance
Section 16(a)
of the Exchange Act requires our officers and directors, and persons who own
more than 10% of a registered class of our equity securities, to file reports of
ownership and changes in ownership with the SEC. Officers, directors,
and greater than 10% stockholders are required by SEC regulations to furnish us
with copies of all Section 16(a) forms they file. Based solely
upon a review of the copies of such forms furnished to us, we believe that, with
the exception of two filings, none of our officers, directors, and greater than
10% beneficial owners failed to file on a timely basis the reports required by
Section 16(a). The exception was that Mark Paré and Christopher
Walkup each inadvertently failed to timely report one
transaction. These transactions were each reported in a subsequent
filing. We make available copies of Section 16(a) forms that our
directors and executive officers file with the SEC through our website at http://www.covenanttransport.com.
Code of Conduct and Ethics
Our Board
of Directors has adopted a Code of Conduct and Ethics that applies to all
directors, officers, and employees, whether with us or one of our
subsidiaries. The Code of Conduct and Ethics includes provisions
applicable to our principal executive officer, principal financial officer,
principal accounting officer or controller, or persons performing similar
functions that constitute a "code of ethics" within the meaning of
Item 406(b) of Regulation S-K. A copy of the Code of
Conduct and Ethics is available to stockholders on our website at http://www.covenanttransport.com.
EXECUTIVE COMPENSATION
Compensation Discussion and Analysis
Overview and Philosophy of Compensation
The
Compensation Committee of our Board of Directors ("Compensation Committee")
oversees all of our executive officer compensation arrangements. The
Compensation Committee has the specific responsibility to (i) review and
approve corporate goals and objectives relevant to the compensation of our CEO,
(ii) evaluate the performance of our CEO in light of those goals and
objectives, and (iii) determine and approve the compensation level of our
CEO based upon that evaluation. The Compensation Committee also has
the responsibility to review annually the compensation of our other executive
officers and to determine whether such compensation is reasonable under existing
facts and circumstances. In making such determinations, the
Compensation Committee seeks to ensure that the compensation of our executive
officers aligns the executives' interests with the interests of our
stockholders. The Compensation Committee also reviews and approves
all forms of deferred compensation and incentive compensation, including stock
option grants, stock grants, and other forms of incentive compensation granted
to our executive officers. The
Compensation
Committee takes into account the recommendations of our CEO in reviewing and
approving the overall compensation of the other executive officers.
One of our primary business strategies
has been to divide our businesses into defined service offerings, each of which
operates as a semi-autonomous business unit. Accordingly, at the most
senior level, including our Named Executive Officers (as defined below), we seek
to attract, motivate, and retain executives who are capable of evaluating,
building, and managing multiple businesses. Our primary executive
compensation goals include attracting, motivating, and retaining qualified
executive officers who possess the requisite abilities to serve in these roles
and who we believe will create long-term value for our
stockholders. In this regard, we use a mix of compensation designed
to provide overall compensation levels that (i) are sufficient to attract and retain talented executives
and to motivate those executives
to achieve superior results, (ii) align executives' interests with our corporate
strategies, our business objectives, and the performance of specific business
units to the extent applicable, (iii) enhance executives' incentives to
increase our stock price and focus on the long-term interests of our
stockholders, and (iv) are consistent with our goal of controlling
costs. In many instances we build our compensation elements around
long-term retention and development together with annual rewards based on
financial performance.
Elements of Compensation
Our
compensation program for senior executive officers has two major elements, fixed
and incentive compensation. The total compensation for senior
executive officers, including the Named Executive Officers (as defined below),
consists of one or more of the following components: (i) base salary, (ii)
incentive compensation, which may include a performance-based annual bonus and
long-term equity incentive awards, which in recent years have been in the form
of restricted stock grants that have been performance-based and/or time-based as
to vesting, (iii) other compensation, including specified perquisites, and
(iv) employee benefits, which are generally available to all of our
employees.
The
Compensation Committee has the responsibility to make and approve changes in the
total compensation of our executive officers, including the mix of compensation
elements. In making decisions regarding an executive's total
compensation, the Compensation Committee considers whether the total
compensation is fair and reasonable to us, is internally appropriate based upon
our culture, goals, initiatives, and the compensation of our other employees,
and is within a reasonable range
of the compensation afforded by other opportunities, overall economic
conditions, and our recent historical performance. The Compensation
Committee also bases its decisions regarding compensation upon its assessment of
the executive's leadership, integrity, individual performance, prospect for
future performance, years of experience, skill set, level of commitment and
responsibility required in the position, contributions to our financial results,
the creation of stockholder value, and current and past
compensation. In determining the mix of compensation elements, the
Compensation Committee considers the effect of each element in relation to total
compensation. Consistent with our need to control costs and our
desire to recognize our executives' performance where such recognition is
warranted, the Compensation Committee has attempted to keep base salaries
relatively low and weight overall compensation toward incentive and equity based
compensation. Accordingly, a substantial part of the compensation
package for each Named Executive
Officer is at risk and is only earned if our performance and the performance of
the Named Executive Officer so warrants. The Compensation Committee
specifically considers whether each particular element provides an appropriate
incentive and reward for performance that sustains and enhances long-term
stockholder value. The Compensation Committee also takes into account
the tax and accounting consequences associated with each element of
compensation. In determining whether to increase or decrease an
element of compensation, we rely upon the business experience of the members of
the Compensation Committee, the Compensation Committee's general understanding
of compensation levels of public companies, and the historical compensation
levels of the executive officers. We generally do not rely on rigid
formulas, other than performance measures under our annual bonus program, or
short-term changes in business performance when setting
compensation.
The
following summarizes the compensation elements we used to attract, motivate, and
retain our CEO, our Chief Financial Officer, and our three other most highly
compensated executive officers for the year ended December 31, 2009
(collectively, the "Named Executive Officers").
Base Salary
We pay base salaries at levels that
reward executive officers for ongoing performance and that enable us to attract,
motivate, and retain highly qualified executives. Base pay is a
critical element of our compensation program because it provides our executive
officers with stability. Compensation stability allows our executives
to focus their attention and efforts on creating stockholder value and on our
other business objectives. In determining base salaries, we consider
the executive's current base salary, recent economic conditions and our
financial results, and the executive's qualifications and experience, including,
but not limited to, the executive's length of service with us, the executive's
industry knowledge, and the quality and effectiveness of the executive's
leadership, integrity, scope of responsibilities, dedication to us and our
stockholders, past performance, and current and future potential for providing
value to our stockholders. We do not formally benchmark base salary
or total executive compensation against the executive compensation of any other
company or group of companies. From time to time, the Compensation
Committee has considered the form and level of compensation disclosed by other
publicly traded truckload carriers, certain other transportation companies, and
companies of similar size and market capitalization in
general. However, we do not have a peer group for compensation
purposes. We set our base salaries at a level that allows us to pay a
portion of an executive officer's total compensation in the form of incentive
compensation, including annual bonuses, long-term incentives, and
perquisites. We believe this mix of compensation helps us incentivize
our executives to maximize stockholder value in the long run. We
adjust base salaries annually to reflect the foregoing factors but do not apply
a specific weighting to such factors.
Incentive Compensation
Long-Term Incentives
On May 5,
2009, at the 2009 Annual Meeting, our stockholders approved our Amended and
Restated 2006 Omnibus Incentive Plan ("Incentive Plan"). Our
Incentive Plan is a broad-based equity plan that we use to, among other things,
(i) provide annual incentives to executive officers in a manner designed to
reinforce our performance goals, (ii) attract, motivate, and retain qualified
executive officers by providing them with long-term incentives, and (iii) align
our executives' and stockholders' long-term interests by creating a strong,
direct link between executive pay and stockholder return. The
Incentive Plan allows the Compensation Committee to link compensation to
performance over a period of time by using equity-based awards (which often
value a company's long-term prospects), requiring holding periods for equity
grants, and granting awards that have multiple-year vesting
schedules. Awards with multiple-year vesting schedules, such as
restricted stock grants, provide balance to the other elements of our
compensation program that otherwise link compensation to annual
performance. Awards with multiple-year vesting schedules create
incentive for executive officers to increase stockholder value over an extended
period of time because the value received from such awards is based on the
growth of the stock price. Such awards also incentivize executives to
remain with us over an extended period of time. Thus, we believe our
Incentive Plan is an effective way of aligning the interests of our executive
officers with those of our stockholders.
Awards
under our Incentive Plan may be paid in cash, shares of Class A common stock, a
combination of cash and shares of Class A common stock, or in any other
permissible form, as the Compensation Committee determines. All
awards granted under the Incentive Plan are evidenced by an award notice that
specifies the type of award granted, the number of shares of Class A common
stock underlying the award, if applicable, and all terms governing the
award. Payment of awards may include such terms, conditions,
restrictions, and/or limitations, if any, as the Compensation Committee deems
appropriate, including, in the case of awards paid in shares of Class A common
stock, restrictions on transfer of such shares and provisions regarding the
forfeiture of such shares under certain circumstances. The Incentive
Plan authorizes the grant of stock options, stock appreciation rights, stock
awards, restricted stock unit awards, performance units, performance awards, and
any other form of award established by the Compensation Committee that is
consistent with the Incentive Plan's purpose, or any combination of the
foregoing.
The
Compensation Committee considers several factors when determining awards to be
granted to our executive officers, including (i) the recommendations of our
CEO, (ii) how the achievement of certain performance goals will help us
improve our financial and operating performance and add long-term value to our
stockholders, (iii) the value of the award in relation to other elements of
total compensation, including the number of options or restricted stock
currently held by the executive, and the number of options or restricted stock
granted to the executive in prior years, (iv) the
executive's
position, scope of responsibility, ability to affect our financial and operating
performance, ability to create stockholder value, and historic and recent
performance, and (v) the impact of awards on retention.
Performance-Based Annual Bonuses
Consistent with our goal to improve our
consolidated operating ratio, the Compensation Committee has over the past few
years approved operating income and operating ratio targets as the basis for
performance-based bonuses. The key terms of our performance-based
bonuses for 2009 and 2010 are described in additional detail below.
We
provide our Named Executive Officers with certain other benefits that we believe
are reasonable, competitive, and consistent with our overall executive
compensation program. We believe that these benefits generally allow
our executives to work more efficiently. The costs of these benefits
constitute only a small percentage of each executive's total
compensation. In setting the amount of these benefits, the
Compensation Committee considers each executive's position and scope of
responsibilities and all other elements comprising the executive's
compensation.
Employee Benefits
Our executive officers are eligible to
participate in all of our employee benefit plans, such as our 401(k) Plan and
medical, dental, and group life insurance plans, in each case on the same basis
as our other employees.
Compensation Paid to Our Named Executive
Officers
Compensation Paid to Our Chief Executive Officer
Mr. David
Parker founded Covenant Transport, Inc. in 1985 with just 25 tractors and 50
trailers and has been our chief executive since our inception. We
have achieved considerable growth in revenue since our inception and now serve
as the holding company for several transportation providers that in the
aggregate operate more than 3,100 tractors and 8,000 trailers and offer premium
transportation services for customers throughout the United
States. Mr. Parker, along with one other executive officer, is
responsible for managing the performance of our service offerings.
At the
request and recommendation of Mr. Parker, the Compensation Committee did not
consider an increase to Mr. Parker's base salary during 2009. Mr.
Parker's base salary has not increased since 2003. With respect to
the other aspects of Mr. Parker's compensation, the Compensation Committee
determined that a significant amount of equity compensation to align Mr.
Parker's compensation with increasing stockholder value and certain perquisites,
as included in the "All Other Compensation" column of the Summary Compensation
table, were important to motivate continued performance from Mr.
Parker. Mr. Parker does not participate in the determination of his
own compensation.
At the
beginning of 2009, Mr. Parker voluntarily reduced his 2009 base salary from
$535,500 to $492,660, and, on March 2009, Mr. Parker elected to further reduce
his 2009 base salary from $492,660 to $484,627, to further our cost-cutting and
cash preservation efforts. In March 2009, the Compensation Committee
approved a plan under which Mr. Parker received a special grant of restricted
shares of the Company's Class A common stock equal to (a) the amount of Mr.
Parker's base salary forfeiture divided by (b) the closing price of the
Company's Class A common stock two full trading days following release of the
Company's first quarter 2009 earnings (the "2009 Incentive
Opportunity"). Other Named Executive Officers also participated in
the 2009 Incentive Opportunity, as discussed below. Mr. Parker agreed
to participate in the 2009 Incentive Opportunity for a period of one
year. Pursuant to the 2009 Incentive Opportunity, the Compensation
Committee granted Mr. Parker an award of 25,310 restricted shares of our Class A
common stock. Subject to the terms of the award notice, the
restricted shares will vest as follows: (i) 33% when and to the extent the
Company’s Class A common stock trades at or above $4.00 for thirty consecutive
trading days during the period beginning January 1, 2010, and ending December
31, 2011, (ii) 33% when and to the extent the Company's Class A common stock
trades at or above $6.00 for thirty consecutive trading days during the period
beginning January 1, 2010, and ending December 31, 2011, and (iii) 34% when and
to the extent the Company’s Class A common stock trades at or above $8.00 for
thirty consecutive trading days during the period beginning January 1, 2010, and
ending December 31, 2011.
In
September 2009, after considering that Mr. Parker's base salary has remained
constant since 2003 and considering his position, scope of responsibility,
ability to affect our results, ability to create stockholder value, voluntary
salary reduction, and historic and recent performance, as partially described
above, the Compensation Committee granted Mr. Parker 7,500 restricted shares of
our Class A common stock. Such amount was a decrease from the
Compensation Committee's restricted stock grant of 18,750 restricted shares of
our Class A common stock in 2008, primarily because the vesting of the 2008
grant is time-based, with 50% of such grant remaining unvested until June 30,
2010. The September 2009 grant is performance-based and will vest
when and if the Compensation Committee certifies that, for the fiscal year
ending December 31, 2010, the Company's consolidated diluted earnings per share,
subject to adjustments for potential certain non-cash items, is equal to or
greater than $0.05. Through the September 2009 grant, the
Compensation Committee wished to recognize Mr. Parker’s leadership
responsibilities, while encouraging Mr. Parker to work toward achieving the
Company's goal of profitability. The restricted shares are subject to
additional terms set forth in the Incentive Plan and the Restricted Stock Award
Notice substantially in the form filed as Exhibit 10.22 to the our Quarterly
Report on Form 10-Q for the quarterly period ended June 30, 2006.
For 2009,
the Compensation Committee also approved a performance-based bonus opportunity
under which Mr. Parker was eligible to receive a bonus of up to 75% of his base
salary for 2009. The percentage of salary assigned to Mr. Parker's
potential bonus was based on the Compensation Committee's evaluation of (i) the
magnitude of Mr. Parker's ability to impact corporate performance based on his
responsibilities, (ii) the composition of Mr. Parker's total compensation
package, and (iii) our long-term financial goals. The Compensation
Committee set performance targets for Mr. Parker that were tied to us achieving
certain consolidated financial and operating benchmarks. The
performance targets for Mr. Parker were the same performance targets for our
other Named Executive Officers, except for Messrs. Smith and Brower, and are
discussed below. Because we failed to achieve the consolidated
performance targets for 2009, only the Company's subsidiary, SRT, achieved its
performance target for 2009, while the Company and its remaining subsidiaries
did not, the Compensation Committee did not award a performance bonus to Mr.
Parker for 2009 under the 2009 Bonus Plan (as defined below).
During
2009, we also provided Mr. Parker with a cash vehicle allowance, use of our
corporate travel agency to arrange personal travel, and use of our
administrative personnel for personal services. We also paid Mr.
Parker the value of certain of his life insurance premiums and certain of his
club fees and dues. With the exception of payment for the life
insurance premiums, each perquisite is designed to help Mr. Parker more
effectively carry out his responsibilities as CEO. We also provide
Mr. Parker with medical, dental, and group life insurance.
Compensation Paid to Our Other Named Executive
Officers
For all
Named Executive Officers, other than our CEO, the form and amount of
compensation was recommended by the CEO. As discussed above, the
Compensation Committee relied on the business experience of its members, the
historical compensation levels of the Named Executive Officers, and its general
understanding of compensation levels at public companies to determine that the
CEO's recommendations with respect to the compensation levels and forms were
appropriate for 2009. For 2009, the form of compensation paid to our
Named Executive Officers was generally consistent with past years, with
compensation consisting primarily of base salary, bonus based on the achievement
of certain financial and operating goals, and equity compensation in the form of
restricted stock grants. For each of the Named Executive Officers,
the Compensation Committee considered, among other things, our financial and
operating results for the periods ended December 31, 2008 and 2009, the duties
and responsibilities of each Named Executive Officer, and the length of time
each Named Executive Officer has been with us, as further described in each
executive's biographical information found herein.
The Compensation Committee has not
increased the annual base salaries of any of our other Named Executive Officers
since 2008. The Compensation Committee believes their base salaries
are consistent with their responsibilities and, based on our cost-cutting
efforts and recent financial performance, the Compensation Committee has not
viewed salary increases for such Named Executive Officers as
appropriate. Along with Mr. Parker, Mr. Hogan also
voluntarily reduced his salary at the beginning of 2010, and certain other Named
Executive Officers did the same effective April 1, 2010. Please
see "Executive Compensation – Compensation Discussion and Analysis –
Compensation Decisions with Respect to 2010" for a description of the salary
reductions in 2010 by our Named Executive Officers, and grant of restricted
stock by the Compensation Committee in connection therewith.
On March 31, 2009, the Compensation
Committee approved the 2009 Incentive Opportunity, in which all of our Named
Executive Officers participated, as noted above. Along with Mr.
Parker, Mr. Hogan voluntarily elected to reduce his 2009 base salary, effective
as of the first pay period in January 2009, from $275,000 to
$253,000. In March of 2009, Messrs. Smith, Brower, and Cribbs
voluntarily elected to reduce their 2009 base salaries from $250,000 to
$231,250; from $200,000 to $192,500; and from $175,000 to $168,437,
respectively. Additionally, Mr. Hogan elected to further reduce his
2009 base salary from $253,000 to $248,875. The March 2009 voluntary
salary reductions became effective as of the first pay period in April of 2009
for Messrs. Smith, Brower, and Cribbs. Under the 2009 Incentive
Opportunity, each of the Named Executive Officers received, in exchange for
their salary forfeitures, a special grant of restricted shares of the Company's
Class A common stock equal to (a) the amount of 2009 base salary voluntarily
forfeited by such individuals divided by (b) the closing price of the Company's
Class A common stock full two trading days following release of the Company's
first quarter 2009 earnings. Each of our other Named Executive
Officers agreed to participate in the 2009 Incentive Opportunity for a period of
one year. Pursuant to the 2009 Incentive Opportunity, granted awards
of restricted shares of the Company's Class A common stock to each of Messrs.
Hogan, Smith, Brower, and Cribbs in the amounts of 12,997, 12,438, 4,975, and
4,353 shares, respectively. Subject to the terms of the award notice,
the restricted shares will vest as follows: (i) 33% when and to the extent the
Company’s Class A common stock trades at or above $4.00 for thirty consecutive
trading days during the period beginning January 1, 2010, and ending December
31, 2011, (ii) 33% when and to the extent the Company's Class A common stock
trades at or above $6.00 for thirty consecutive trading days during the period
beginning January 1, 2010, and ending December 31, 2011, and (iii) 34% when and
to the extent the Company’s Class A common stock trades at or above $8.00 for
thirty consecutive trading days during the period beginning January 1, 2010, and
ending December 31, 2011.
In
addition to the restricted shares granted in connection with the 2009 Incentive
Opportunity, the Compensation Committee also made a grant of restricted shares
to each of the other Named Executive Officers. After considering the
number of restricted shares of our Class A common stock granted to each Named
Executive Officer, other than the CEO, in prior years and each Named Executive
Officer's base salary, position, scope of responsibility, ability to affect our
results, ability to create stockholder value, and historic and recent
performance, the Compensation Committee granted (i) Mr. Hogan 6,000 restricted
shares of our Class A common stock and (ii) each of Messrs. Cribbs, Smith, and
Brower 5,000 restricted shares of our Class A common stock, all of which were
approved in September 2009. Subject to each recipient's continuous
employment between January 1, 2010, and the vesting date, the shares will vest
when and if the Compensation Committee certifies that, for the fiscal year
ending December 31, 2010, the Company's consolidated diluted earnings per share,
subject to adjustments for potential certain non-cash items, is equal to or
greater than $0.05. The restricted shares are subject to additional
terms set forth in the Incentive Plan and the Restricted Stock Award Notice
substantially in the form filed as Exhibit 10.22 to the our Quarterly Report on
Form 10-Q for the quarterly period ended June 30, 2006.
The
Compensation Committee granted restricted shares to create an incentive for the
executives to maximize stockholder value. The Compensation Committee
determined that the decrease from 2008 to 2009 in the number of restricted
shares granted to (i) Mr. Hogan from 15,000 to 6,000, (ii) Mr. Cribbs from
12,500 to 5000, (iii) Mr. Smith from 12,500 to 5,000, and (iv) Mr. Brower from
12,500 to 5,000, was appropriate because the vesting of the 2008 grant is
time-based, with 50% of such grant remaining unvested until June 30, 2010, while
the 2009 grant is directly tied to the Company's ability to achieve consolidated
diluted earnings per share of $0.05 or greater. The Compensation
Committee believes its 2008 and 2009 restricted stock grants provide an
appropriate mix of non-performance and performance-based compensation to our
Named Executive Officers, while encouraging each Named Executive Officer to work
toward achieving the Company's profitability goal.
For 2009, the Compensation Committee
also approved a performance-based bonus opportunity under which each Named
Executive Officer was eligible to receive a bonus of up to 75% of his base
salary for 2009 based upon our achievement of certain performance targets (the
"2009 Bonus Plan"). As in 2008, the percentage of salary assigned to
each Named Executive Officer was based on the CEO's recommendation and the
Compensation Committee's evaluation of (i) the magnitude of each Named
Executive Officer's ability to impact corporate performance based on the
executive's responsibilities at the time the targets were set, (ii) the
composition of each Named Executive Officer's total compensation package, and
(iii) our long-term financial goals. Unlike the 2008
performance-based bonus opportunities, however, the 2009 Bonus Plan does not
require participants to receive 25% of any bonus in stock under the
plan.
In connection with the 2009
performance-based bonus opportunities described above, the Compensation
Committee set performance targets for each Named Executive Officer (other than
Messrs. Smith and Brower, whose
performance
targets are provided below) related to us having consolidated operating income
of $26,515,000 and a consolidated operating ratio of 95.3% for
2009. As with the performance targets for 2008, the Compensation
Committee also created specific parameters for awarding bonuses within certain
incremental ranges of achievement of the performance targets, subject to upward
or downward adjustment in defined circumstances. The applicable
percentage of the achieved performance target is then multiplied by the Named
Executive Officer's target bonus (50% of the Named Executive Officer's base
salary for 2009) to determine the Named Executive Officer's
bonus. The following table sets forth a summary of the incremental
levels of achievement of the performance targets and the related percentage of
the potential bonus associated with such achievement.
|
2009
Incremental Ranges of Performance Targets
(Consolidated)
|
||
|
Consolidated
Operating
Income
($)
(000s)
|
Consolidated
Operating
Ratio
(%)
|
%
of Bonus
Opportunity
Paid as
Bonus
(%)
|
|
17,951
|
96.8
|
50.0
|
|
22,289
|
96.0
|
75.0
|
|
26,515
|
95.3
|
100.0
|
|
29,333
|
95.3
|
125.0
|
|
32,150
|
95.3
|
150.0
|
For Mr. Smith, the Compensation
Committee set performance targets, of which 20% were related to the consolidated
performance targets set forth above and 80% were related to SRT having operating
income of $9,398,000 and an operating ratio of 92.0% for 2009. As
with the performance targets for the other Named Executive Officers, the
Compensation Committee also created specific parameters for awarding a bonus to
Mr. Smith within certain incremental ranges of achievement of the performance
targets, subject to upward or downward adjustment in defined
circumstances. The following table sets forth, with respect to Mr.
Smith, a summary of the incremental levels of achievement of the performance
targets and the related percentage of the potential bonus associated with such
achievement.
|
2009
Incremental Ranges of Performance Targets (SRT)
|
||
|
SRT
Operating
Income
($)
(000s)
|
SRT
Operating
Ratio
(%)
|
%
of Bonus
Opportunity
Paid as
Bonus
(%)
|
|
7,613
|
93.5
|
50.0
|
|
8,517
|
92.8
|
75.0
|
|
9,398
|
92.0
|
100.0
|
|
9,986
|
92.0
|
125.0
|
|
10,573
|
92.0
|
150.0
|
For Mr. Brower, the Compensation Committee set performance targets, of which 20% were related to the consolidated performance targets set forth above and 80% were related to Star having operating income of $3,407,000 and an operating ratio of 94.0% for 2009. As with the performance targets for the other Named Executive Officers, the Compensation Committee also created specific parameters for awarding a bonus to Mr. Brower within certain incremental ranges of achievement of the performance targets, subject to upward or downward adjustment in defined circumstances. The following table sets forth, with respect to Mr. Brower, a summary of the incremental levels of achievement of the performance targets and the related percentage of the potential bonus associated with such achievement.
|
2009
Incremental Ranges of Performance Targets (Star)
|
||
|
Star
Operating
Income
($)
(000s)
|
Star
Operating
Ratio
(%)
|
%
of Bonus
Opportunity
Paid as
Bonus
(%)
|
|
2,544
|
95.5
|
50.0
|
|
2,981
|
94.8
|
75.0
|
|
3,407
|
94.0
|
100.0
|
|
3,691
|
94.0
|
125.0
|
|
3,974
|
94.0
|
150.0
|
The Compensation Committee believed
that the performance targets represented aggressive, yet achievable goals for
the Named Executive Officers to earn 100% of the eligible bonus
amount.
The
Compensation Committee met in February 2010 to discuss and review the 2009 bonus
awards for the Named Executive Officers. The Compensation Committee
reviewed the foregoing policies, our consolidated financial and operating
performance, and SRT's and Star's financial and operating
performance. After determining that we failed to achieve the
consolidated and Star performance targets, or any incremental ranges of these
performance targets, the Compensation Committee did not award performance
bonuses to Messrs. Parker, Hogan, Cribbs, or Brower for 2009 under the 2009
Bonus Plan. The Compensation Committee, however, determined that SRT
achieved a 92.9% operating ratio for 2009. In accordance with
achievement of its 2009 bonus target, the Compensation Committee approved a
bonus of $60,000 to Mr. Smith.
During
2009, we also provided each Named Executive Officer, other than Mr. Parker, with
a cash vehicle allowance and use of our corporate travel agency to arrange
personal travel. We also paid certain club fees and dues on behalf of
Mr. Brower. Each perquisite is designed to help the Named Executive
Officers more effectively carry out their responsibilities for us. We
also provide each Named Executive Officer with medical, dental, and group life
insurance.
Compensation Decisions with Respect to 2010
The
Compensation Committee annually reviews and considers increases in the base
salaries of our Named Executive Officers. Messrs. Parker and Hogan
voluntarily elected to reduce their 2010 base salaries from $535,500 to $481,950
and from $274,999 to $247,499, respectively, with such salary reductions
becoming effective as of the first pay period in January 2010. In
March of 2010, in conjunction with the 2010 Incentive Opportunity (as defined
below), Mr. Cribbs voluntarily elected to reduce his 2010 base salary from
$175,000 to $166,250, with such salary reduction effective as of the first pay
period in April of 2010. Mr. Brower’s 2009 voluntary salary reduction
from $200,000 to $190,000 ran through March 31, 2010. Effective
January 1, 2010, Mr. Brower's salary was further reduced to $180,000 as
part of a salary reduction put in place by Star. Management is
considering and has yet to propose to the Compensation Committee a restricted
stock grant to Mr. Brower for the additional salary reduction for
January 1, 2010 through March 31, 2010, and continued salary reduction
after March 31, 2010. However, management may propose such a
grant in the future. Mr. Smith’s 2010 base salary has not been
reduced; however, Mr. Smith’s participation in the 2010 Incentive Opportunity
also remains under consideration, and, as a result, Mr. Smith may participate in
the salary reductions in the future. Because of the Named Executive
Officers’ salary reductions, the Compensation Committee did not consider any
increases in the base salaries of our Named Executive Officers for
2010.
In
January 2010, after considering (i) certain of our goals, including our desire
to control costs and conserve cash, (ii) discussions with and the
recommendations of Messrs Parker and Hogan, and (iii) our compensation
philosophy and the guidelines described above, the Compensation Committee
approved a plan under which individuals that forfeited a portion of their 2010
base salary (up to ten percent (10%)) would receive, in exchange for such
forfeiture, a special grant of restricted shares of our Class A common stock
equal to (a) the amount of 2010 base salary forfeited by such individuals
divided by (b) the closing price of our Class A common stock on the date the
blackout period lifted following the release of the Company's 2009 year-end
earnings (the "2010 Incentive Opportunity"). In exchange for Messrs.
Parker's and Cribbs' salary reductions discussed above, the Compensation
Committee granted them awards of restricted shares of the Company's Class A
common stock in the amounts of 16,893 and 2,761 shares,
respectively. At the time of his salary reduction, Mr. Hogan notified
management of his desire not to receive any grant in exchange for the
reduction. Accordingly, no grant to Mr. Hogan was considered by the
Compensation Committee.
Restricted
shares granted in connection with the 2010 Incentive Opportunity will vest in
approximately one-third increments when and to the extent the Company's Class A
common stock trades at or above $7.00, $9.00, and $11.00 for twenty (20)
consecutive trading days during the period beginning January 1, 2011, and ending
on December 31, 2015, subject to the recipient's continued
employment. Each of Messrs. Parker, Hogan, and Cribbs have elected to
participate in the 2010 Incentive Opportunity for a period of one year (the
"Incentive Period"); provided, that the Incentive Period is January 1, 2010,
through December 31, 2010, for Messrs. Parker and Hogan, who each, as discussed
above, reduced their 2010 base salaries effective as of the first pay period in
January 2010, and the Incentive Period is April 1, 2010, through March 31, 2011,
for Mr. Cribbs, who reduced his 2010 base salary effective as of the first pay
period in April 2010. At the expiration of the applicable Incentive
Period, each of Messrs. Parker's, Hogan's, and Cribbs' salary will revert back
to his original 2010 base salary. Any restricted shares granted as
part of an award under the 2010 Incentive Opportunity that have not vested as of
December 31, 2015, will automatically be forfeited without any obligation of
ours to pay any amount to the Named Executive Officers for such unvested shares,
to return any forfeited 2010 base salary of the Named Executive Officers, or to
make any other payment or award whatsoever. The Compensation
Committee believes that the 2010 Incentive Opportunity will assist us in
reducing costs and conserving cash, while at the same time creating an incentive
for the Named Executive Officers to maximize stockholder
value. Management has not proposed any restricted stock grants for
Mr. Brower for his salary reduction in 2010, but may do so in the
future. Any grant to Mr. Brower would be consistent with other grants
made to our Named Executive Officers for the salary forfeitures.
The
Compensation Committee annually reviews and considers proposals to grant equity
awards to each Named Executive Officer based on the number of restricted shares
of our Class A common stock granted to each Named Executive Officer in prior
years and each Named Executive Officer's base salary, position, scope of
responsibility, ability to affect our results, ability to create stockholder
value, and historic and recent performance, as described above. As of
March 31, 2010, management had not proposed and the Compensation Committee had
not considered any grants of equity awards to the Named Executive Officers for
2010, except as already set forth above. The Compensation Committee
may consider grants of equity awards to the Named Executive Officers and may
review and consider proposals to grant equity awards to the Named Executive
Officers later in 2010.
In March 2010, the Compensation
Committee approved performance-based bonus opportunities under which each Named
Executive Officer is eligible to receive a bonus of up to 75% of his 2010 base
salary (prior to any forfeiture under the 2010 Incentive Opportunity) based upon
our achievement of certain performance targets (the "2010 Bonus
Plan"). Each Named Executive Officer may choose to receive up to 100%
of the bonus in Class A common stock under the Incentive Plan. As in 2009, the
percentage of salary assigned to each Named Executive Officer is based on the
Compensation Committee's evaluation of (i) the magnitude of each Named
Executive Officer's ability to impact corporate performance based on the
executive's responsibilities at the time the targets were set, (ii) the
composition of each Named Executive Officer's total compensation package, and
(iii) our long-term financial goals.
In
connection with the 2010 performance-based bonus opportunities described above
and consistent with the Company's profitability goal, the Compensation Committee
set performance targets for each Named Executive Officer (other than Messrs.
Smith and Brower, whose performance targets are provided below) related to us
having consolidated operating income of $23,200,000 and a consolidated operating
ratio of 95.6% for 2010. Previously, the Compensation Committee had
considered and approved a consolidated operating income target of $18,750,000
and a consolidated operating ratio of 96.8% for 2010 based upon a preliminary
consolidated budget for 2010. After the Company's 2010 consolidated
budget was finalized, the Compensation Committee reset the operating income and
operating ratio targets to more difficult levels to achieve based upon the final
budget. As with the performance targets for 2009, the Compensation
Committee also created specific parameters for awarding additional bonuses
within certain incremental ranges of achievement above the performance targets;
provided, that, unlike prior bonus opportunities, the achievement of the 100%
payout is equal to the baseline for payouts, given the Company's profitability
goal and the desire to eliminate even partial bonuses if such goal is not
achieved The applicable percentage of the achieved performance target
is then multiplied by the Named Executive Officer's target bonus (50% of the
Named Executive Officer's 2010 base salary prior to any forfeiture under the
2010 Incentive Opportunity) to determine the Named Executive Officer's
bonus. The following table sets forth a summary of the incremental
levels of achievement of the performance targets and the related percentage of
the potential bonus associated with such achievement.
|
2010
Incremental Ranges of Performance Targets
(Consolidated)
|
||
|
Consolidated
Operating
Income
($)
(000s)
|
Consolidated
Operating
Ratio
(%)
|
%
of Bonus
Opportunity
Paid as
Bonus
(%)
|
|
23,200
|
95.6
|
100.0
|
|
25,589
|
95.2
|
110.0
|
|
27,872
|
94.7
|
120.0
|
|
30,102
|
94.3
|
130.0
|
|
32,384
|
93.9
|
140.0
|
|
34,880
|
93.4
|
150.0
|
For Mr. Smith, the Compensation
Committee set performance targets, of which 20% were related to the consolidated
performance targets set forth above and 80% were related to SRT having operating
income of $9,732,000 and an operating ratio of 92.1% for 2010. As
with the performance targets for the other Named Executive Officers, the
Compensation Committee also created specific parameters for awarding an
additional bonus to Mr. Smith within certain incremental ranges of achievement
above the performance targets. The following table sets forth, with
respect to Mr. Smith, a summary of the incremental levels of achievement of the
performance targets and the related percentage of the potential bonus associated
with such achievement.
|
2010
Incremental Ranges of Performance Targets (SRT)
|
||
|
SRT
Operating
Income
($)
(000s)
|
SRT
Operating
Ratio
(%)
|
%
of Bonus
Opportunity
Paid as
Bonus
(%)
|
|
9,732
|
92.1
|
100.0
|
|
10,284
|
91.6
|
110.0
|
|
10,812
|
91.2
|
120.0
|
|
11,328
|
90.8
|
130.0
|
|
11,856
|
90.3
|
140.0
|
|
12,433
|
89.9
|
150.0
|
For Mr. Brower, the Compensation
Committee set performance targets, of which 20% were related to the consolidated
performance targets set forth above and 80% were related to Star having
operating income of $3,464,000 and an operating ratio of 94.1% for
2010. As with the performance targets for the other Named Executive
Officers, the Compensation Committee also created specific parameters for
awarding an additional bonus to Mr. Brower within certain incremental ranges of
achievement above the performance targets. The following table sets
forth, with respect to Mr. Brower, a summary of the incremental levels of
achievement of the performance targets and the related percentage of the
potential bonus associated with such achievement.
|
2010
Incremental Ranges of Performance Targets (Star)
|
||
|
Star
Operating
Income
($)
(000s)
|
Star
Operating
Ratio
(%)
|
%
of Bonus
Opportunity
Paid as
Bonus
(%)
|
|
3,464
|
94.1
|
100.0
|
|
3,729
|
93.7
|
110.0
|
|
3,982
|
93.2
|
120.0
|
|
4,229
|
92.8
|
130.0
|
|
4,482
|
92.4
|
140.0
|
|
4,759
|
91.9
|
150.0
|
The Compensation Committee believes
that the performance targets represent aggressive, yet achievable goals for the
Named Executive Officers.
Separation and Severance Agreements
We
currently do not have any employment contracts, severance agreements,
change-of-control agreements, or other arrangements with our Named Executive
Officers that provide for payment or benefits to an executive officer at,
following, or in connection with a change in control, a change in an executive
officer's responsibilities, or an executive officers' termination of employment,
including resignation, severance, retirement, or constructive
termination. However, under certain circumstances in which there is a
change of control, certain outstanding unexercisable stock options and unvested
restricted stock granted to recipients, including Named Executive Officers,
under the Incentive Plan and our predecessor plans may become immediately
exercisable or subject to immediate vesting, respectively, upon the occurrence
of such event, notwithstanding that such stock options or restricted shares may
not have otherwise been fully exercisable or fully vested.
Generally
speaking, and as qualified by the terms of the relevant plans and award notices,
a change in control occurs if: (i) someone acquires 50% or more of the combined
voting power of our stock, unless after the transaction more than 75% of the
acquiring company is owned by all or substantially all of those persons who were
beneficial owners of our stock prior to such acquisition; (ii) a majority of our
directors is replaced, other than by new directors approved by existing
directors; (iii) we consummate a reorganization, merger, or consolidation where,
following such transaction, all or substantially all of those persons who were
beneficial owners of our stock immediately prior to the transaction do not own,
immediately after the transaction, more than 75% of the outstanding securities
of the resulting corporation; or (iv) we sell or liquidate all or
substantially all of our assets. The estimated value of stock options
and restricted stock that would have vested for our Named Executive Officers as
of December 31, 2009 (the last day of fiscal 2009) under the acceleration
scenarios described above is set forth in the table below. As the
exercise price for all outstanding stock options is above the aggregate market
value of the underlying shares as of December 31, 2009, or $4.21 per share at
the closing price, there is no value in the accelerated options. The
value for the accelerated restricted stock was calculated by multiplying the
closing market price of our stock on December 31, 2009 ($4.21) by the number of
shares of accelerated restricted stock. For additional information on
the number of currently unexercisable stock options and unvested restricted
stock that may become fully exercisable or immediately vest in the event of a
change in control, please refer to the table of Outstanding Equity Awards at
Fiscal Year-End.
|
Name
|
Value
of Accelerated Stock
Options ($) |
Value
of Accelerated
Restricted
Stock ($)
|
|
David
R. Parker
|
-
|
421,779
|
|
Richard
B. Cribbs
|
-
|
122,524
|
|
Joey
B. Hogan
|
-
|
285,564
|
|
Tony
Smith
|
-
|
238,656
|
|
James
"Jim" Brower
|
-
|
207,237
|
Summary Compensation Table
The
following table sets forth information concerning the total compensation for the
fiscal year 2009 awarded to, earned by, or paid to those persons who were, at
December 31, 2009, (i) our CEO, (ii) our Chief Financial Officer, and
(iii) our three other most highly compensated executive officers with total
compensation exceeding $100,000 for the fiscal year ended December 31,
2009.
|
Name
and
Principal
Position
|
Year
|
Salary
($)(1)
|
Bonus
($)
|
Stock
Awards(2)
($)
|
Non-Equity
Incentive
Plan
Compensation
($)
|
All
Other
Compensation(3)
($)
|
Total
($)
|
|
David
R. Parker, Chief
Executive Officer, Chairman, and President
|
2009
2008
2007
|
535,500
535,500
535,500
|
-
-
-
|
34,875
65,813
3,240
|
-
-
-
|
147,966
156,153
158,368
|
718,341
757,466
697,108
|
|
Richard
B. Cribbs,(4)
Senior
Vice President and Chief Financial Officer
|
2009
2008
|
175,000
164,904
|
-
-
|
23,250
46,875
|
-
-
|
9,173
5,228
|
207,423
217,007
|
|
Joey
B. Hogan, Senior
Executive Vice President and Chief Operating Officer
|
2009
2008
2007
|
275,000
275,000
252,273
|
-
-
-
|
27,900
52,650
3,240
|
-
-
-
|
13,454
21,010
21,017
|
316,354
348,660
276,530
|
|
Tony
Smith, President
of Southern Refrigerated Transport, Inc.
|
2009
2008
2007
|
250,000
250,000
248,581
|
-
-
12,500
|
23,250
43,875
3,240
|
60,000
-
-
|
12,231
16,736
17,478
|
345,481
310,611
281,799
|
|
James
"Jim" Brower, President
of Star Transportation, Inc.
|
2009
2008
2007
|
200,000
200,000
200,000
|
-
-
-
|
23,250
43,875
3,240
|
-
-
-
|
3,834
184
7,888
|
227,084
244,059
211,128
|
|
(1)
|
Effective
January 1, 2009, Messrs. Parker and Hogan voluntarily reduced their
salaries by $42,900 and $22,000, respectively. Effective April
1, 2009, Messrs. Parker and Hogan voluntarily reduced their salaries
further by $8,033 and $4,125, respectively, and Messrs. Cribbs, Smith, and
Brower voluntarily reduced their salaries by $8,750, $25,000, and $10,000,
respectively. Each Named Executive Officer received a grant of
restricted stock to compensate for their respective forgone
salary.
|
|
(2)
|
The
amounts included in this column represent the aggregate grant date fair
value of the awards granted to each Named Executive Officer in accordance
with FASB ASC Topic 718, excluding $50,873 for Mr. Parker, $8,750 for Mr.
Cribbs, $26,125 for Mr. Hogan, $25,000 for Mr. Smith, and $10,000 for Mr.
Brower related to grants of restricted stock to compensate for foregone
salary. The value ultimately realized by the director may or
may not be equal to this determined value. For additional
information on the valuation assumptions with respect to the 2009 grants,
refer to note
4, Share-Based
Compensation, of our consolidated financial statements as provided
in the Form 10-K for the year-ended December 31, 2009, as filed with the
SEC. See the Grants of
Plan-Based Awards Table for information on awards made in
2009. This fair value does not represent cash received by the
executive in 2009, but potential earnings contingent on continued
employment and/or the Company's future performance. Because
such awards add value to the recipient only when stockholders benefit from
stock price appreciation, such awards further align management's interest
with those of our stockholders.
|
|
(3)
|
See the All Other
Compensation Table for additional information.
|
|
(4)
|
Mr.
Cribbs was not a Named Executive Officer for
2007.
|
All Other Compensation Table
The following table describes each
component of the "All Other Compensation" column in the Summary Compensation
Table.
|
Name
|
Year
|
Perquisites
and
Other
Personal
Benefits
($)
|
Insurance
Premiums
($)
|
Contributions
to
Retirement
and
401(k)
Plans(4)
($)
|
Total
($)
|
|
David
R. Parker
|
2009
|
47,966(1)
|
100,000(3)
|
-
|
147,966
|
|
Richard
B. Cribbs
|
2009
|
9,173(2)
|
-
|
-
|
9,173
|
|
Joey
B. Hogan
|
2009
|
13,454(2)
|
-
|
-
|
13,454
|
|
Tony
Smith
|
2009
|
12,231(2)
|
-
|
-
|
12,231
|
|
James
"Jim" Brower
|
2009
|
3,834(2)
|
-
|
-
|
3,834
|
|
(1)
|
During
2009, we provided Mr. Parker with certain other benefits in addition to
his salary, including a $34,246 cash vehicle allowance, use of our
corporate travel agency to arrange personal travel, and use of our
administrative personnel for personal services. During 2009, we
also paid for certain of Mr. Parker's club fees and
dues.
|
|
(2)
|
During
2009, we provided the Named Executive Officer with certain other benefits
in addition to his base salary, including a cash vehicle allowance and use
of our corporate travel agency to arrange personal travel. None
of the personal benefits provided to the Named Executive Officer exceeded
the greater of $25,000 or 10% of the total amount of the personal benefits
he received during 2009.
|
|
(3)
|
During
2009, we paid Mr. Parker the value of certain life insurance premiums, as
a result of arrangements entered into during a time when split-dollar
insurance policies were common. Subsequent to adoption of the
Sarbanes-Oxley Act of 2002, we converted the policy to a company-paid
policy to honor the pre-existing obligation to
Mr. Parker.
|
|
(4)
|
There
were no contributions made to the Named Executive Officers’ 401(k)
accounts in 2009 as the Board of Directors approved the suspension of
employee matching "discretionary" contributions to be made beginning early
in 2009 for an indefinite time
period.
|
Narrative to the Summary Compensation
Table
See "Executive Compensation –
Compensation Discussion and Analysis" for a complete description of our
compensation plans pursuant to which the amounts listed under the Summary
Compensation Table were paid or awarded and the criteria for such award or
payment.
Grants of Plan-Based Awards
The following table sets forth
information concerning each grant of an award made to our Named Executive
Officers during fiscal 2009.
|
Name
|
Grant
Date
|
Estimated
Future Payouts
Under
Non-Equity Incentive
Plan
Awards(1)
|
Estimated
Future Payouts Under
Equity
Incentive Plan Awards(2)
|
Grant
Date
Fair
Value
of
Stock
and
Option
Awards(3)
($)
|
||||
|
Threshold
($)
|
Target
($)
|
Maximum
($)
|
Threshold
(#)
|
Target
(#)
|
Maximum
(#)
|
|||
|
David
R. Parker
|
3/31/09
9/14/09
|
-
-
133,875
|
-
-
267,750
|
-
-
401,625
|
-
-
-
|
25,310
7,500
-
|
-
-
-
|
50,873
34,875
-
|
|
Richard
B. Cribbs
|
3/31/09
9/14/09
|
-
-
43,750
|
-
-
87,500
|
-
-
131,250
|
-
-
-
|
4,353
5,000
-
|
-
-
-
|
8,750
23,250
-
|
|
Joey
B. Hogan
|
3/31/09
9/14/09
|
-
-
68,750
|
-
-
137,500
|
-
-
206,250
|
-
-
-
|
12,997
6,000
-
|
-
-
-
|
26,124
27,900
-
|
|
Tony
Smith
|
3/31/09
9/14/09
|
-
-
62,500
|
-
-
125,000
|
-
-
187,500
|
-
-
-
|
12,438
5,000
-
|
-
-
-
|
25,000
23,250
-
|
|
James
"Jim" Brower
|
3/31/09
9/14/09
|
-
-
50,000
|
-
-
100,000
|
-
-
150,000
|
-
-
-
|
4,975
5,000
-
|
-
-
-
|
10,000
23,250
-
|
|
(1)
|
These
columns represent the approximate value of the payout to the Named
Executive Officer based upon the attainment of specified performance
targets that were established by the Compensation Committee in March 2009.
The performance targets are related to our consolidated performance,
except with respect to Messrs. Smith's and Brower's bonuses where the
targets are weighted 80% to the performance of SRT and Star, respectively,
and 20% on our consolidated performance. The bonus threshold,
target, and maximum set forth above are based upon the Named Executive
Officer's 2009 base salary (prior to any voluntary salary
reduction). The Compensation Committee also created specific
parameters for awarding bonuses to the Named Executive Officer within
certain incremental ranges of achievement of the performance targets,
subject to upward and downward adjustments. See the
Compensation Discussion and Analysis for additional detail with respect to
the performance targets. As we failed to achieve the
performance targets, or any incremental ranges of the performance targets,
no performance bonuses were awarded to the Named Executive Officers for
fiscal 2009 under the 2009 Bonus Plan, except for Mr. Smith who received
$60,000 based on SRT obtaining a 92.9% operating ratio for fiscal
2009. Additionally, no amount is shown in the "Non-Equity
Incentive Plan Compensation" column of the Summary Compensation Table for
fiscal 2009, and no amount related to the 2009 Bonus Plan is potentially
owing any Named Executive Officer.
|
|
(2)
|
This
column represents the potential number of shares to be awarded to the
Named Executive Officer based upon the vesting requirements that were
established by the Compensation Committee for each tranche of awards and
as discussed in more detail in the Compensation Discussion and
Analysis.
|
|
(3)
|
This
column represents the full grant date fair value of the stock awards in
accordance with FASB ASC Topic 718 (formerly FAS 123R) granted to the
Named Executive Officers in 2009. For purposes of the March 31,
2009 grants, the fair value was calculated using the closing price ($2.01)
of our Class A common stock on the date two full trading days following
release of the Company’s first quarter 2009 earnings, which was the date
the number of restricted shares granted to each recipient was
determined. For purposes of the September 14, 2009 grants, the
fair value was calculated using the closing price of our Class A common
stock on that date ($4.65). For additional information on the
valuation assumptions, refer to note 4, Share-Based
Compensation, of our consolidated financial statements in the Form
10-K for the year-ended December 31, 2009, as filed with the
SEC. These amounts reflect our accounting expense, and do not
correspond to the actual value that will be recognized by the Named
Executive Officers.
|
Narrative to Grants of Plan-Based Awards
See "Executive Compensation –
Compensation Discussion and Analysis" for a complete description of the
performance targets for payment of incentive awards.
Outstanding Equity Awards at Fiscal
Year-End
The following table sets forth
information concerning all stock option grants and stock awards held by our
Named Executive Officers as of December 31, 2009. All outstanding
equity awards are in shares of our Class A common stock.
|
Option
Awards
|
Stock
Awards
|
||||||
|
Name
|
Grant
Date
|
Number
of
Securities
Underlying
Unexercised
Options
(#)
Exercisable
|
Number
of
Securities
Underlying
Unexercised
Options
(#)
Unexercisable
|
Option
Exercise
Price
($)
|
Option
Expiration
Date
|
Equity
Incentive
Plan
Awards:
Number
of
Unearned
Shares,
Units
or Other Rights
That
Have Not
Vested
(#)
|
Equity
Incentive Plan
Awards:
Market or
Payout
Value of
Unearned
Shares,
Units
or Other Rights
That
Have Not
Vested(7)
($)
|
|
David
R. Parker
|
02/29/00
|
7,206
|
-
|
13.13
|
03/31/10
|
-
|
-
|
|
05/18/00
|
6,666
|
-
|
12.19
|
05/18/10
|
-
|
-
|
|
|
05/18/00
|
3,334
|
-
|
12.19
|
05/18/10
|
-
|
-
|
|
|
07/27/00
|
9,429
|
-
|
8.00
|
07/27/10
|
-
|
-
|
|
|
07/27/00
|
100,571
|
-
|
8.00
|
07/27/10
|
-
|
-
|
|
|
05/17/01
|
3,333
|
-
|
16.79
|
05/17/11
|
-
|
-
|
|
|
05/17/01
|
6,667
|
-
|
16.79
|
05/17/11
|
-
|
-
|
|
|
05/16/02
|
6,194
|
-
|
15.39
|
05/16/12
|
-
|
-
|
|
|
05/16/02
|
3,806
|
-
|
15.39
|
05/16/12
|
-
|
-
|
|
|
02/20/03
|
5,780
|
-
|
17.30
|
02/20/13
|
-
|
-
|
|
|
02/20/03
|
1,111
|
-
|
17.30
|
02/20/13
|
-
|
-
|
|
|
05/22/03
|
6,095
|
-
|
17.63
|
05/22/13
|
-
|
-
|
|
|
05/22/03
|
3,905
|
-
|
17.63
|
05/22/13
|
-
|
-
|
|
|
05/27/04
|
10,000
|
-
|
15.71
|
05/27/14
|
-
|
-
|
|
|
02/16/05
|
5,690
|
-
|
21.43
|
02/16/15
|
-
|
-
|
|
|
05/10/05
|
10,000
|
-
|
13.64
|
05/10/15
|
-
|
-
|
|
|
05/23/06
|
-
|
-
|
-
|
-
|
50,000(1)
|
210,500
|
|
|
05/23/06
|
-
|
-
|
-
|
-
|
4,000(2)
|
16,840
|
|
|
05/22/07
|
-
|
-
|
-
|
-
|
4,000(3)
|
16,840
|
|
|
07/01/08
|
-
|
-
|
-
|
-
|
9,375(4)
|
39,469
|
|
|
03/31/09
|
-
|
-
|
-
|
-
|
25,310(5)
|
106,555
|
|
|
09/14/09
|
-
|
-
|
-
|
-
|
7,500(6)
|
31,575
|
|
|
Richard
B. Cribbs
|
05/23/06
|
2,500
|
-
|
12.79
|
05/23/16
|
-
|
-
|
|
05/23/06
|
-
|
-
|
-
|
-
|
1,500(2)
|
6,315
|
|
|
05/22/07
|
-
|
-
|
-
|
-
|
2,000(3)
|
8,420
|
|
|
05/22/07
|
-
|
-
|
-
|
-
|
10,000(1)
|
42,100
|
|
|
07/01/08
|
-
|
-
|
-
|
-
|
6,250(4)
|
26,313
|
|
|
03/31/09
|
-
|
-
|
-
|
-
|
4,353(5)
|
18,326
|
|
|
09/14/09
|
-
|
-
|
-
|
-
|
5,000(6)
|
21,050
|
|
|
Joey
B. Hogan
|
02/29/00
|
2,272
|
-
|
13.13
|
03/01/10
|
-
|
-
|
|
05/18/00
|
3,333
|
-
|
12.19
|
05/18/10
|
-
|
-
|
|
|
05/18/00
|
6,667
|
-
|
12.19
|
05/18/10
|
-
|
-
|
|
|
07/27/00
|
2,423
|
-
|
8.00
|
07/27/10
|
-
|
-
|
|
|
07/27/00
|
27,577
|
-
|
8.00
|
07/27/10
|
-
|
-
|
|
|
05/17/01
|
3,333
|
-
|
16.79
|
05/17/11
|
-
|
-
|
|
|
05/17/01
|
6,667
|
-
|
16.79
|
05/17/11
|
-
|
-
|
|
|
05/16/02
|
6,194
|
-
|
15.39
|
05/16/12
|
-
|
-
|
|
|
05/16/02
|
3,806
|
-
|
15.39
|
05/16/12
|
-
|
-
|
|
|
02/20/03
|
2,612
|
-
|
17.30
|
02/20/13
|
-
|
-
|
|
|
05/22/03
|
2,762
|
-
|
17.63
|
05/22/13
|
-
|
-
|
|
|
05/22/03
|
7,238
|
-
|
17.63
|
05/22/13
|
-
|
-
|
|
|
05/27/04
|
10,000
|
-
|
15.71
|
05/27/14
|
-
|
-
|
|
|
02/16/05
|
2,285
|
-
|
21.43
|
02/16/15
|
-
|
-
|
|
|
05/10/05
|
10,000
|
-
|
13.64
|
05/10/15
|
-
|
-
|
|
|
05/23/06
|
-
|
-
|
-
|
-
|
33,333(1)
|
140,332
|
|
|
05/23/06
|
-
|
-
|
-
|
-
|
4,000(2)
|
16,840
|
|
|
05/22/07
|
-
|
-
|
-
|
-
|
4,000(3)
|
16,840
|
|
|
07/01/08
|
-
|
-
|
-
|
-
|
7,500(4)
|
31,575
|
|
|
03/31/09
|
-
|
-
|
-
|
-
|
12,997(5)
|
54,717
|
|
|
09/14/09
|
-
|
-
|
-
|
-
|
6,000(6)
|
25,260
|
|
|
Option
Awards
|
Stock
Awards
|
||||||
|
Name
|
Grant
Date
|
Number
of
Securities
Underlying
Unexercised
Options
(#)
Exercisable
|
Number
of
Securities
Underlying
Unexercised
Options
(#)
Unexercisable
|
Option
Exercise
Price
($)
|
Option
Expiration
Date
|
Equity
Incentive
Plan
Awards:
Number
of
Unearned
Shares,
Units
or Other
Rights
That
Have Not
Vested
(#)
|
Equity
Incentive Plan
Awards:
Market or
Payout
Value of
Unearned
Shares,
Units
or Other Rights
That
Have Not
Vested(7)
($)
|
|
Tony
Smith
|
07/27/00
|
4,062
|
-
|
8.00
|
07/27/10
|
-
|
-
|
|
07/27/00
|
938
|
-
|
8.00
|
07/27/10
|
-
|
-
|
|
|
05/17/01
|
4,613
|
-
|
16.79
|
05/17/11
|
-
|
-
|
|
|
05/17/01
|
387
|
-
|
16.79
|
05/17/11
|
-
|
-
|
|
|
05/16/02
|
3,652
|
-
|
15.39
|
05/16/12
|
-
|
-
|
|
|
05/16/02
|
348
|
-
|
15.39
|
05/16/12
|
-
|
-
|
|
|
08/28/03
|
5,000
|
-
|
17.00
|
08/28/13
|
-
|
-
|
|
|
08/28/03
|
2,500
|
-
|
17.00
|
08/28/13
|
-
|
-
|
|
|
05/27/04
|
2,354
|
-
|
15.71
|
05/27/14
|
-
|
-
|
|
|
05/27/04
|
5,146
|
-
|
15.71
|
05/27/14
|
-
|
-
|
|
|
02/16/05
|
2,076
|
-
|
21.43
|
02/16/15
|
-
|
-
|
|
|
05/10/05
|
10,000
|
-
|
13.64
|
05/10/15
|
-
|
-
|
|
|
05/23/06
|
-
|
-
|
-
|
-
|
25,000(1)
|
105,250
|
|
|
05/23/06
|
-
|
-
|
-
|
-
|
3,000(2)
|
12,630
|
|
|
07/31/06
|
-
|
-
|
-
|
-
|
1,000(2)
|
4,210
|
|
|
05/22/07
|
-
|
-
|
-
|
-
|
4,000(3)
|
16,840
|
|
|
07/01/08
|
-
|
-
|
-
|
-
|
6,250(4)
|
26,313
|
|
|
03/31/09
|
-
|
-
|
-
|
-
|
12,438(5)
|
52,364
|
|
|
09/14/09
|
-
|
-
|
-
|
-
|
5,000(6)
|
21,050
|
|
|
James
"Jim" Brower
|
09/21/06
|
-
|
-
|
-
|
-
|
25,000(1)
|
105,250
|
|
09/21/06
|
-
|
-
|
-
|
-
|
4,000(2)
|
16,840
|
|
|
05/22/07
|
-
|
-
|
-
|
-
|
4,000(3)
|
16,840
|
|
|
07/01/08
|
-
|
-
|
-
|
-
|
6,250(4)
|
26,313
|
|
|
03/31/09
|
-
|
-
|
-
|
-
|
4,975(5)
|
20,945
|
|
|
09/14/09
|
-
|
-
|
-
|
-
|
5,000(6)
|
21,050
|
|
|
(1)
|
Subject
to the terms of the award notice, the restricted shares will vest
completely in any year between 2007 and 2010 in which we reach an adjusted
earnings per share target of $2.00, though no 2007 vesting target was
provided for the grant of the 10,000 restricted shares to Mr. Cribbs, as
such award was granted after 2006. The adjusted
earnings-per-share target excludes the effect of the vesting of the awards
on earnings per share as well as extraordinary gains. The
executive must hold the shares for one year after vesting; provided that
the executive may sell such portion of the restricted shares that is
necessary to cover the federal and state taxes he incurs upon vesting of
the shares.
|
|
(2)
|
Subject
to the terms of the award notice, the restricted shares will vest in equal
increments over the four-year period beginning on the first anniversary of
the award date, subject to us reaching earnings-per-share targets of $0.75
in 2006, $1.05 in 2007, $1.35 in 2008, and $1.55 in 2009. Any
percentage that fails to vest as of a particular vesting date as a result
of failure to reach a particular target will automatically be forfeited;
provided, that such shares that do not vest as of a particular vesting
date will be eligible for vesting and will vest if we meet a subsequent
target, subject to continued employment. As a condition to
selling any vested shares of restricted Class A common stock, the
executive is required to maintain an equivalent of 200% of his annual
salary on the date of the proposed sale in the combination of (i) Class A
common stock and (ii) 50% of the value of (a) unexercised options to
purchase Class A common stock, and (b) restricted Class A common stock;
provided that the executive may sell such portion of the restricted shares
that is necessary to cover the federal and state taxes he incurs upon
vesting of the shares.
|
|
(3)
|
Subject
to the terms of the award notice, the restricted shares will vest in equal
increments over the four-year period beginning on the first anniversary of
the award date, subject to us reaching earnings per share targets of $0.25
in 2007, $.50 in 2008, $1.00 in 2009, and $1.50 in 2010. Any
percentage that fails to vest as of a particular vesting date as a result
of failure to reach a particular target will automatically be forfeited;
provided, that such shares that do not vest as of a particular vesting
date will be eligible for vesting and will vest if we meet a subsequent
target,
|
| subject to continued employment. As a condition to selling any vested shares of restricted Class A common stock, the executive is required to maintain an equivalent of 200% of his annual salary on the date of the proposed sale in the combination of (i) Class A common stock and (ii) 50% of the value of (a) unexercised options to purchase Class A common stock, and (b) restricted Class A common stock; provided that the executive may sell such portion of the restricted shares that is necessary to cover the federal and state taxes he incurs upon vesting of the shares. | ||
|
(4)
|
Subject
to the terms of the award notice, the restricted shares will vest on June
30, 2010, subject to continued employment.
|
|
|
(5)
|
Subject
to the terms of the award notice, the restricted shares will vest as
follows: (i) 33% when and to the extent the Company’s Class A common stock
trades at or above $4.00 for thirty consecutive trading days during the
period beginning January 1, 2010, and ending December 31, 2011, (ii) 33%
when and to the extent the Company's Class A common stock trades at or
above $6.00 for thirty consecutive trading days during the period
beginning January 1, 2010, and ending December 31, 2011, and (iii) 34%
when and to the extent the Company’s Class A common stock trades at or
above $8.00 for thirty consecutive trading days during the period
beginning January 1, 2010, and ending December 31,
2011.
|
|
|
(6)
|
Subject
to the terms of the award notice, the restricted shares will vest when and
if the Compensation Committee certifies that, for the fiscal year ending
December 31, 2010, the Company's consolidated diluted earnings per share,
subject to adjustments for potential certain non-cash items, is equal to
or greater than $0.05.
|
|
|
(7)
|
The
market value was calculated by multiplying the closing market price of our
stock on December 31, 2009, which was $4.21, by the number of restricted
shares that have not vested.
|
|
Director Compensation
The following table sets forth
information concerning the compensation of our non-employee directors for the
fiscal year 2009.
|
Name
|
Fees
Earned or Paid
in
Cash(1)
($)
|
Stock
Awards(2)
($)
|
Total
($)
|
|
William
T. Alt
|
$32,000
|
25,000
|
$57,000
|
|
Robert
E. Bosworth
|
$32,500
|
25,000
|
$57,500
|
|
Bradley
A. Moline
|
$32,500
|
25,000
|
$57,500
|
|
Dr.
Niel B. Nielson
|
$35,000
|
25,000
|
$60,000
|
|
(1)
|
This
column represents the amount of cash compensation earned in 2009 for Board
and committee service.
|
|
(2)
|
This
column represents the dollar amount recognized for financial statement
reporting purposes with respect to the 2009 fiscal year for the fair value
of stock awards granted to each director in 2009, in accordance with FASB
ASC Topic 718. Directors who are not our employees received
shares of our Class A common stock with a market value on the grant date
equivalent to approximately $25,000. The directors can only
sell these shares if, after the sale, they maintain a minimum of $100,000
in value of our Class A common
stock.
|
Narrative to Director Compensation
For 2009,
the compensation package for our non-employee Directors remained unchanged from
2008. Accordingly, Directors who are not our employees or employees
of one of our subsidiaries currently receive a $25,000 annual retainer and no
meeting attendance fees. An additional annual retainer of $7,500 is
paid to the Audit Committee Chairman; $5,000 to the Compensation Committee
Chairman; and $3,000 to the Nominating and Corporate Governance Committee
Chairman. For the additional time related to attending committee
meetings, Audit Committee members also receive an annual fee of $5,000;
Compensation Committee members also receive an annual fee of $4,000; and
Nominating and Corporate Governance Committee members also receive an annual fee
of $2,500. In lieu of stock options that had previously been a part
of outside director compensation, Directors who are not our employees or
employees of one of our subsidiaries received a grant of Class A common stock
equivalent to $25,000 at the time of our annual meeting. The
directors can only sell these shares if, after the sale, they maintain a minimum
of $100,000 in value of Class A common stock.
For 2010, the compensation package for
our non-employee Directors was revised to increase the annual fee paid to
members of the Nominating and Corporate Governance Committee from $2,500 to
$4,000 and to increase the annual retainer paid to the Chairman of the
Nominating and Corporate Governance Committee from $3,000 to $5,000. These
changes were made in light of recent SEC rule changes and the role of the
Nominating and Corporate Governance Committee and its Chair in the Company’s
enterprise risk assessment process going forward. The compensation package
for members of our Audit Committee and Compensation Committee and their Chairs
will remain the same as in 2009.
Directors who are our employees or
employees of one of our subsidiaries do not receive compensation for board or
committee service.
SECURITY OWNERSHIP OF CERTAIN
BENEFICIAL
OWNERS AND MANAGEMENT
The following table shows, as of March
31, 2010, the
number of shares and percentage of outstanding shares of our Class A and
Class B common stock beneficially owned by:
|
•
|
Each
of our directors, director nominees, and Named Executive
Officers;
|
|
•
|
All
of our executive officers and directors as a group; and
|
|
•
|
Each
person known to us to beneficially own 5% or more of any class of our
common stock.
|
The
percentages shown are based on 12,692,049 shares of Class A common stock
(including 851,481 shares of restricted Class A common stock
subject to certain performance vesting and holding provisions) and 2,350,000
shares of Class B common stock outstanding at March 16,
2010. The shares of Class B common stock owned by Mr. and
Mrs. Parker are convertible into the same number of shares of Class A
common stock at any time and convert automatically if beneficially owned by
anyone other than Mr. or Mrs. Parker or certain members of their
family. The Class B common stock has two votes per share but
otherwise is substantially identical to the Class A common stock, which has one
vote per share.
|
Title
of Class
|
Name
and Address of Beneficial Owner(1)
|
Amount
and Nature of Beneficial
Ownership(2)
|
Percent
of Class(3)
|
|
Class
A & Class B common
|
David
R. Parker & Jacqueline F. Parker
|
6,029,656(4)
|
29.0%
of Class A
100%
of Class B
40.1%
of Total(5)
|
|
Class
A common
|
Joey
B. Hogan
|
225,581(6)
|
1.8%
of Class A
1.5%
of Total
|
|
Class
A common
|
Richard
B. Cribbs
|
50,680(7)
|
*
|
|
Class
A common
|
Tony
Smith
|
112,360(8)
|
*
|
|
Class
A common
|
James
"Jim" Brower
|
55,475(9)
|
*
|
|
Class
A common
|
William
T. Alt
|
34,989
|
*
|
|
Class
A common
|
Robert
E. Bosworth
|
56,157(10)
|
*
|
|
Class
A common
|
Bradley
A. Moline
|
28,489
|
*
|
|
Class
A common
|
Dr.
Niel B. Nielson
|
28,489
|
*
|
|
Class
A common
|
Wells
Fargo & Company
|
1,201,410(11)
|
9.5%
of Class A
8.0%
of Total
|
|
Class
A common
|
Donald
Smith & Co., Inc.
|
1,087,321(12)
|
8.6%
of Class A
7.2%
of Total
|
|
Class
A common
|
Dimensional
Fund Advisors LP
|
996,120(13)
|
7.9%
of Class A
6.6%
of Total
|
|
Class
A common
|
Wellington
Management Company, LLP
|
1,433,845(14)
|
11.3%
of Class A
9.5%
of Total
|
|
Class
A & Class B common
|
All
directors and executive officers as a group (12
persons)
|
6,824,300(15)
|
45.4%
of Total
|
|
*
|
Less
than one percent (1%).
|
|
(1)
|
The
business address of Mr. and Mrs. Parker and the other directors,
director nominees, Named Executive Officers and the other executive
officers is 400 Birmingham Highway, Chattanooga,
TN 37419. The business addresses of the remaining entities
listed in the table above are: Wells Fargo & Company,
420 Montgomery Street, San Francisco, CA 94104; Dimensional
Fund Advisors LP, Palisades West, Building One, 6300 Bee Cave Road,
Austin, Texas 78746; Donald Smith & Co., Inc., 152 West 57th
Street, New York, NY 10019; and Wellington
Management Company, LLP 75 State Street, Boston, MA
02109.
|
|
(2)
|
Beneficial
ownership includes sole voting power and sole investment power with
respect to such shares unless otherwise noted and subject to community
property laws where applicable. In accordance with
Rule 13d-3(d)(1) under the Exchange Act, the number of shares
indicated as beneficially owned by a person includes shares of
Class A common stock underlying options that are currently
exercisable or will become exercisable within 60 days from March 16, 2010
held by the following individuals: Mr. Parker–189,787; Mr.
Joey Hogan–97,169; Mr. Cribbs–2,500; Mr. Smith–41,076;
Mr. Brower–0; Mr. Alt–12,500; Mr. Bosworth–15,000;
Mr. Moline–7,500; and Dr. Nielson-7,500. In addition,
beneficial ownership includes shares of restricted Class A common stock
subject to certain vesting and holding provisions held by the following
individuals: Mr. Parker–117,078; Mr. Joey Hogan–67,830;
Mr. Cribbs–31,864; Mr. Smith–56,688; and
Mr. Brower–49,225. The beneficial ownership also includes
the following shares of Class A common stock allocated to the
accounts of the following individuals under our 401(k) plan (the number of
shares reported as beneficially owned is equal to the following
individuals' March 31, 2010 account balance in the employer stock
fund under the Company's 401(k) plan divided by the closing price on such
date): Mr. Parker–24,939; Mr. Hogan–49,682; Mr. Cribbs–7,572;
Mr. Smith–0; and Mr. Brower–0.
|
|
(3)
|
Shares
of Class A common stock underlying stock options that are currently
exercisable or will be exercisable within 60 days following March 16, 2010
are deemed to be outstanding for purposes of computing the percentage
ownership of the person holding such options and the percentage ownership
of all directors and executive officers as a group, but are not deemed
outstanding for purposes of computing the percentage ownership of any
other person or entity. There are no stock options that will
become exercisable within 60 days following March 16, 2010, for any
executive officer, director, or director nominee of the
Company.
|
|
(4)
|
Comprised
of 3,247,852 shares of Class A common stock and 2,350,000 shares of
Class B common stock owned by Mr. and Mrs. Parker as joint
tenants with rights of survivorship; 100,000 shares of Class A common
stock owned by the Parker Family Limited Partnership, of which
Mr. and Mrs. Parker are the two general partners and
possess sole voting and investment control; 189,787 shares of Class A
common stock underlying Mr. Parker's stock options that are currently
exercisable; 117,078 shares of restricted Class A common stock; and 24,939
shares allocated to the account of Mr. Parker under our 401(k) plan
(the number of shares reported as beneficially owned is equal to Mr.
Parker's March 31, 2010 account balance in the employer stock fund under
the Company's 401(k) plan divided by the closing price on such
date). The restricted Class A common stock is subject to
vesting and, in certain circumstances, holding
provisions.
|
|
(5)
|
Based
on the aggregate number of shares of Class A and Class B common
stock held by
Mr. and Mrs. Parker. Mr. and Mrs. Parker
hold 29.0% of shares of Class A and 100% of shares of Class B
common stock. The Class A common stock is entitled to one
vote per share, and the Class B common stock is entitled to two votes
per share. Mr. and Mrs. Parker beneficially own
shares of Class A and Class B common stock with 48.2% of the
voting power of all outstanding voting shares.
|
|
(6)
|
Comprised
of 10,900 shares of Class A common stock owned by Mr. Hogan and
Melinda J. Hogan as joint tenants, 97,169 shares of Class A common
stock underlying stock options, 67,830 shares of restricted Class A common
stock, and 49,682 shares held by Mr. Hogan in our 401(k) plan (the number
of shares reported as beneficially owned is equal to Mr. Hogan's March 31,
2010 account balance in the employer stock fund under the Company's 401(k)
plan divided by the closing price on such date). The restricted
Class A common stock is subject to vesting and, in certain circumstances,
holding provisions.
|
|
(7)
|
Comprised
of 8,744 shares of Class A common stock owned directly, 2,500 shares of
Class A common stock underlying stock options that are currently
exercisable, 31,864 shares of restricted Class A common stock, and 7,572
shares held by Mr. Cribbs in our 401(k) plan (the number of shares
reported as beneficially owned is equal to Mr. Cribbs’ March 31, 2010
account balance in the employer stock fund under the Company's 401(k) plan
divided by the closing price on such date). The restricted
Class A common stock is subject to vesting and, in certain circumstances,
holding provisions.
|
|
(8)
|
Comprised
of 14,596 shares of Class A common stock owned by Mr. Smith and Kathy
Smith as joint tenants with rights of survivorship, 41,076 shares of Class
A common stock underlying stock options, and 56,688 shares of restricted
Class A common stock. The restricted Class A common stock is
subject to vesting and, in certain circumstances, holding
provisions.
|
|
(9)
|
Comprised
of 6,250 shares of Class A common stock and 49,225 shares of restricted
Class A common stock. The restricted Class A common stock is
subject to vesting and, in certain circumstances, holding
provisions.
|
|
(10)
|
Comprised
of 20,989 shares of Class A common stock owned directly, 20,168 shares of
Class A common stock held in an individual retirement account, and
15,000 shares of Class A common stock underlying stock
options.
|
|
(11)
|
As
reported on Schedule 13G/A filed with the SEC on January 12,
2010. Represents aggregate beneficial
|
| ownership on a consolidated basis reported by Wells Fargo & Company and includes shares of Class A common stock beneficially owned by subsidiaries. Information is as of December 31, 2009. | |
|
(12)
|
As
reported on Schedule 13G filed with the SEC on February 11,
2010. Represents aggregate beneficial ownership on a
consolidated basis reported by Donald Smith & Co., Inc. and includes
shares of Class A common stock beneficially owned by advisory clients of
Donald Smith & Co., Inc. Information is as of December 31,
2009.
|
|
(13)
|
As
reported on Schedule 13G/A filed with the SEC on February 8,
2010. Represents aggregate beneficial ownership on a
consolidated basis reported by Dimensional Fund Advisors LP and includes
shares of Class A common stock beneficially owned by advisory clients of
Dimensional Fund Advisors LP. Information is as of December 31,
2009.
|
|
(14)
|
As
reported on Schedule 13G filed with the SEC on February 12,
2010. Represents aggregate beneficial ownership on a
consolidated basis reported by Wellington Management Company, LLP and
includes shares of Class A common stock beneficially owned by advisory
clients of Wellington Management Company, LLP. Information is
as of December 31, 2009.
|
|
(15)
|
The
other executive officers are R.H. Lovin, Jr., M. David Hughes, and M. Paul
Bunn. Mr. Lovin beneficially owns 126,121 shares of Class
A common stock, which are comprised of 3,486 shares of Class A common
stock owned directly, 57,932 shares of Class A common stock underlying Mr.
Lovin's stock options that are currently exercisable, 53,640 shares of
restricted Class A common stock, and 11,063 shares allocated
to the account of Mr. Lovin under our 401(k) plan (the number of
shares reported as beneficially owned is equal to Mr. Lovin's March 31,
2010 account balance in the employer stock fund under the Company's 401(k)
plan divided by the closing price on such date). Mr. Hughes
beneficially owns 67,802 shares of Class A common stock, which are
comprised of 14,971 shares of Class A common stock, 44,384 shares of
restricted Class A common stock and 8,447 shares allocated to the account
of Mr. Hughes under our 401(k) plan (the number of shares reported as
beneficially owned is equal to Mr. Hughes' March 31, 2010 account balance
in the employer stock fund under the Company's 401(k) plan divided by the
closing price on such date). Mr. Bunn beneficially owns
8,501 shares
of Class A common stock, which are comprised of 7,301 shares of
restricted Class A common stock and 1,200 shares allocated
to the account of Mr. Bunn under our 401(k) plan (the number of
shares reported as beneficially owned is equal to Mr. Bunn's March 31,
2010 account balance in the employer stock fund under the Company's 401(k)
plan divided by the closing price on such date). The restricted
Class A common stock is subject to vesting and, in certain circumstances,
holding provisions. The shares detailed in this footnote are
included in the calculation of all directors and executive officers as a
group.
|
CERTAIN RELATIONSHIPS AND RELATED
TRANSACTIONS
Pursuant to our Audit Committee
Charter, all transactions with affiliated persons or entities must be reviewed
and pre-approved by our Audit Committee. For 2009, no such
transactions involved an amount equal to or exceeding $120,000.
RELATIONSHIPS WITH INDEPENDENT REGISTERED PUBLIC
ACCOUNTING FIRM
Principal Accountant Fees and Services
The
principal independent registered public accounting firm utilized by us during
fiscal 2009 was KPMG LLP. KPMG has served as our independent
registered public accounting firm since September 2001. A
representative of KPMG is expected to be present at the Annual Meeting and to be
available to respond to appropriate questions. KPMG’s representative
will have an opportunity to make a statement at the Annual Meeting should he or
she desire to do so.
KPMG billed us the following amounts
for services provided in the following categories during the fiscal years ended
December 31, 2009 and 2008:
|
Fiscal
2009
|
Fiscal
2008
|
||
|
Audit
Fees(1)
|
$606,668
|
$738,124
|
|
|
Audit-Related
Fees(2)
|
0
|
0
|
|
|
Tax
Fees(3)
|
66,664
|
68,427
|
|
|
All
Other Fees(4)
|
0
|
0
|
|
|
Total
|
$673,332
|
$806,551
|
|
(1)
|
Represents
the aggregate fees billed and expenses for professional services rendered
by KPMG for the audit of our annual financial statements and review of
financial statements included in our quarterly reports on Form 10-Q,
and services that are normally provided by an independent registered
public accounting firm in connection with statutory or regulatory filings
or engagements for those fiscal years.
|
|
(2)
|
Represents
the aggregate fees billed for assurance and related services by KPMG that
are reasonably related to the performance of the audit or review of our
financial statements and are not reported under "audit
fees." There were no such fees and expenses for fiscal 2009 or
fiscal 2008.
|
|
(3)
|
Represents
the aggregate fees billed for professional services rendered by KPMG for
tax compliance, tax advice, and tax planning
|
|
(4)
|
Represents
the aggregate fees billed for products and services provided by KPMG,
other than audit fees, audit-related fees, and tax fees. There
were no such fees for fiscal 2009 or fiscal
2008.
|
Our Audit
Committee maintains a policy pursuant to which the Audit Committee Chairman
reviews all audit services and permitted non-audit services to be performed by
our independent registered public accounting firm in order to assure that the
provision of such services is compatible with maintaining the firm's
independence, with the Audit Committee retaining the authority to make the final
decision. Under this policy, the Audit Committee pre-approves
specific types or categories of engagements constituting audit, audit-related,
tax, or other permissible non-audit services to be provided by our principal
independent registered public accounting firm. Pre-approval of an
engagement for a specific type or category of services generally is provided for
up to one year and typically is subject to a budget comprised of a range of
anticipated fee amounts for the engagement. Management and the
principal independent registered public accounting firm are required to
periodically report to the Audit Committee regarding the extent of services
provided by the principal independent registered public accounting firm in
accordance with the annual pre-approval, and the fees for the services performed
to date. To the extent that management believes that a new service or
the expansion of a current service provided by the principal independent
registered public accounting firm is necessary or desirable, such new or
expanded services are presented to the Audit Committee for its review and
approval prior to the engagement of the principal independent registered public
accounting firm to render such services. No audit-related, tax, or
other non-audit services were approved by the Audit Committee pursuant to the
de minimis exception to
the pre-approval requirement under Rule 2-01(c)(7)(i)(C), of
Regulation S-X during the fiscal year ended December 31,
2009.
STOCKHOLDER PROPOSALS
To be
eligible for inclusion in our proxy materials relating to our next annual
meeting of stockholders, stockholder proposals intended to be presented at that
meeting must be in writing and received by us at our principal executive office
on or before December 10, 2010. However, if the date of the next
annual meeting of stockholders is more than thirty days before or after May 6,
2011, then the deadline for submitting any such stockholder proposal for
inclusion in the proxy materials relating to the next annual meeting of
stockholders will be a reasonable time before we begin to print or mail such
proxy materials. The inclusion of any such stockholder proposals in
such proxy materials will be subject to the requirements of the proxy rules
adopted under the Exchange Act, including Rule 14a-8.
We must
receive in writing any stockholder proposals to be considered at our next annual
meeting, but not included in our proxy materials relating to that meeting
pursuant to Rule 14a-8 under the Exchange Act, by
February 23, 2011. However, if the date of the next annual
meeting of stockholders is more than thirty days before or after
May 6, 2011, then the deadline for submitting any such stockholder
proposal will be a reasonable time before we mail the proxy materials relating
to such meeting. Under Rule 14(a)-4(c)(1) of the Exchange Act,
the proxy holders designated by an executed proxy in the form accompanying our
Proxy Statement for our next annual meeting will have discretionary authority to
vote on any stockholder proposal that is not received on or prior to the
deadline described above.
Written
copies of all stockholder proposals should be sent to our principal executive
offices at 400 Birmingham Highway, Chattanooga, Tennessee 37419, to the
attention of Joey B. Hogan, our Senior Executive Vice President and Chief
Operating Officer. Stockholder proposals must comply with the rules
and regulations of the SEC.
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.
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Covenant
Transportation Group, Inc.
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/s/ David R.
Parker
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David
R. Parker
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Chairman
of the Board of Directors
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April
9, 2010
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32
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Using
a black ink pen, mark your
votes with an X as
shown in this example. Please do not write outside the
designated areas.
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[X]
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PLEASE
FOLD ALONG THE PERFORATION, DETACH AND RETURN THE BOTTOM PORTION IN THE
ENCLOSED ENVELOPE.
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A Proposals — The Board of
Directors recommends a vote FOR all the nominees listed, and
FOR granting the proxies
discretionary authority.
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1.
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Election
of Directors:
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01
– William T. Alt
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02
– Robert E. Bosworth
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03
– Bradley A. Moline
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||
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04
– Niel B. Nielson
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05
– David R. Parker
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[ ]
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Mark
here to vote FOR all
nominees
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[ ]
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Mark
here to vote WITHHOLD vote from all
nominees
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01
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02
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03
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04
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05
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||
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[ ]
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For All EXCEPT – To withhold a
vote for one or more nominees, mark the box to the left and the
corresponding numbered box(es) to the right.
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[ ]
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[ ]
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[ ]
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[ ]
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[ ]
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GRANT
AUTHORITY
to vote
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WITHHOLD
AUTHORITY
to
vote
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Abstain
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2.
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In
their discretion, the attorneys and proxies are authorized to vote upon
such other matters as may properly come before the meeting or any
adjournment thereof.
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[ ]
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[ ]
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[ ]
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B Authorized Signatures —
This section must be completed for your vote to be counted. — Date and
Sign Below
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||||
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Please
sign above exactly as your name appears at the upper left. When
shares are held by joint tenants, both shall sign. When signing
as attorney, executor, administrator, trustee or guardian, please give
full title as such. If a corporation, please sign in full
corporate name by president or other authorized officer. If a
partnership, please sign in partnership name by authorized
person.
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||||
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below.
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Signature
1 — Please keep signature within
the
box.
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Signature
2 — Please keep signature within the box.
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||
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PLEASE
FOLD ALONG THE PERFORATION, DETACH AND RETURN THE BOTTOM PORTION IN THE
ENCLOSED ENVELOPE.
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|
Proxy
— COVENANT
TRANSPORTATION GROUP, INC.
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PROXY
FOR ANNUAL MEETING OF STOCKHOLDERS MAY 6, 2010
Solicited
on Behalf of the Board of Directors of the Company
The
undersigned holder(s) of Class A and/or Class B common stock (individually or
together referred to as "Common Stock") of Covenant Transportation Group,
Inc., a Nevada corporation (the "Company"), hereby appoint(s) David R. Parker
and Joey B. Hogan, and each or any of them, attorneys and proxies of the
undersigned, with full power of substitution, to vote all of the Common Stock
that the undersigned is (are) entitled to vote at the Annual Meeting of
Stockholders of the Company to be held at the Company’s Corporate Headquarters
at 400 Birmingham Highway, Chattanooga, Tennessee, on Thursday, May 6,
2010, at 10:00 A.M. Eastern Time, and at any adjournment thereof. The
undersigned acknowledges receipt of the Notice and Proxy Statement for the 2010
Annual Meeting of Stockholders of the Company and the Annual Report to
Stockholders for the year ended December 31, 2009.
A
vote FOR Proposal 1 and granting the proxies discretionary authority is
recommended by the Board of Directors of the Company. When properly
executed, this proxy will be voted in the manner directed by the undersigned
stockholder(s). If no direction is given, this proxy will be voted
FOR Proposal 1, at the discretion of the proxy holder, upon such other matters
as may properly come before the meeting or any adjournment
thereof. Proxies marked "Abstain" and broker non-votes are counted
only for purposes of determining whether a quorum is presented at the
meeting.
PLEASE
SIGN, DATE AND PROMPTLY RETURN IN THE ACCOMPANYING ENVELOPE.
(CONTINUED
AND TO BE SIGNED ON REVERSE SIDE)