SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the Securities and Exchange Act of
1934
Filed by Registrant X
Filed by a Party other than the Registrant [ ]
Check the Appropriate Box:
[ ] Preliminary Proxy Statement
[ ] Confidential, for Use of the Commission Only (as permitted by Rule
14a-6(e)(2))
[X] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Materials Pursuant to ss. 240.14a-12
COVENANT TRANSPORT, INC.
(Name of Registrant as Specified in its Charter)
N/A
(Name of Person(s) Filing Proxy Statement if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
[X] No fee required
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and 0-11.
(1) Title of each class of securities to which transaction applies: N/A
(2) Aggregate number of securities to which transaction applies: N/A
(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11: N/A
(4) Proposed maximum aggregate value of transaction: N/A
(5) Total Fee paid: N/A
[ ] Fee paid previously with preliminary materials. N/A
[ ] Check box if any part of the fee is offset as provided by Exchange Act
Rule 0-11(a)(2) and identify the filing for which the offsetting fee
was paid previously. Identify the previous filing by registration
statement number, or the Form or Schedule and the date of its filing.
(1) Amount previously paid: N/A
(2) Form, Schedule or Registration Statement No.: N/A
(3) Filing Party: N/A
(4) Date Filed: N/A
COVENANT TRANSPORT, INC.
400 Birmingham Highway
Chattanooga, Tennessee 37419
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NOTICE AND PROXY STATEMENT
FOR ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD ON MAY 22, 2003
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To Our Stockholders:
The 2003 Annual Meeting of Stockholders (the "Annual Meeting") of Covenant
Transport, Inc., a Nevada corporation (the "Company"), will be held at the
Company, 400 Birmingham Highway, Chattanooga, Tennessee 37419, at 10:00 a.m.
Eastern Time, on Thursday, May 22, 2003, for the following purposes:
1. To consider and act upon a proposal to elect eight (8) directors of
the Company;
2. To consider and act upon a proposal to ratify the selection of KPMG
LLP as independent public accountants for the Company for 2003;
3. To consider and act upon a proposal to approve the Company's 2003
Incentive Stock Plan;
4. To consider and act upon such other matters as may properly come
before the meeting and any adjournment thereof.
The foregoing matters are more fully described in the accompanying Proxy
Statement.
The Board of Directors has fixed the close of business on March 24, 2003,
as the record date for the determination of Stockholders entitled to receive
notice of and to vote at the Annual Meeting or any adjournment thereof. Shares
of Common Stock may be voted at the Annual Meeting only if the holder is present
at the Annual Meeting in person or by valid proxy. YOUR VOTE IS IMPORTANT. TO
ENSURE YOUR REPRESENTATION AT THE ANNUAL MEETING, YOU ARE REQUESTED TO PROMPTLY
DATE, SIGN, AND RETURN THE ACCOMPANYING PROXY IN THE ENCLOSED ENVELOPE.
Returning your proxy now will not interfere with your right to attend the Annual
Meeting or to vote your shares personally at the Annual Meeting, if you wish to
do so. The prompt return of your proxy may save the Company additional expenses
of solicitation.
All Stockholders are cordially invited to attend the Annual Meeting.
By Order of the Board of Directors,
/s/ David R. Parker
David R. Parker
Chairman of the Board
Chattanooga, Tennessee 37419
April 18, 2003
COVENANT TRANSPORT, INC.
400 Birmingham Highway
Chattanooga, Tennessee 37419
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PROXY STATEMENT
FOR ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD MAY 22, 2003
-----------------------------------
This Proxy Statement is furnished in connection with the solicitation of
proxies by the Board of Directors of Covenant Transport, Inc., a Nevada
corporation (the "Company"), to be used at the 2003 Annual Meeting of
Stockholders of the Company (the "Annual Meeting"), which will be held at the
Company's headquarters, 400 Birmingham Highway, Chattanooga, Tennessee 37419 on
Thursday, May 22, 2003, at 10:00 a.m. Eastern Time, and any adjournment thereof.
All costs of the solicitation will be borne by the Company. The approximate date
of mailing this Proxy Statement and the enclosed form of proxy is April 18,
2003.
The enclosed copy of the Company's annual report for the fiscal year ended
December 31, 2002, is not incorporated into this Proxy Statement and is not to
be deemed a part of the proxy solicitation material.
PROXIES AND VOTING
Only stockholders of record at the close of business on March 24, 2003
("Stockholders"), are entitled to vote, either in person or by valid proxy, at
the Annual Meeting. Holders of Class A Common Stock are entitled to one vote for
each share held. Holders of Class B Common Stock are entitled to two votes for
each share held. On March 24, 2003, there were issued and outstanding 12,032,664
shares of Class A Common Stock, par value one cent ($.01), entitled to cast an
aggregate 12,032,664 votes on all matters subject to a vote at the Annual
Meeting, and 2,350,000 shares of Class B Common Stock, par value one cent
($.01), entitled to cast an aggregate 4,700,000 votes on all matters subject to
a vote at the Annual Meeting. The Company has a total of 14,382,664 shares of
Common Stock outstanding, entitled to cast an aggregate 16,732,664 votes on all
matters subject to a vote at the Annual Meeting. The number of issued and
outstanding shares excludes approximately 1,382,106 shares of Class A Common
Stock reserved for issuance under the Company's incentive stock plans, and other
arrangements. Holders of unexercised options are not entitled to vote at the
Annual Meeting. The Company has no other class of stock outstanding.
Stockholders are not entitled to cumulative voting in the election of directors.
All proxies that are properly executed and received by the Company prior to
the Annual Meeting will be voted in accordance with the choices indicated. Any
Stockholder may be represented and may vote at the Annual Meeting by a proxy or
proxies appointed by an instrument in writing. In the event that any such
instrument in writing shall designate two (2) or more persons to act as proxies,
a majority of such persons present at the meeting, or, if only one shall be
present, then that one shall have and may exercise all of the powers conferred
by such written instrument upon all of the persons so designated unless the
instrument shall otherwise provide. No such proxy shall be valid after the
expiration of six (6) months from the date of its execution, unless coupled with
an interest or unless the person executing it specifies therein the length of
time for which it is to continue in force, which in no case shall exceed seven
(7) years from the date of its execution. Any Stockholder giving a proxy may
revoke it at any time prior to its use at the Annual Meeting by filing with the
Secretary of the Company a revocation of the proxy, by delivering to the Company
a duly executed proxy bearing a later date, or by attending the meeting and
voting in person.
Other than the election of Directors, which requires a plurality of the
votes cast, each matter to be submitted to the Stockholders requires the
affirmative vote of a majority of the votes cast at the meeting. For purposes of
determining the number of votes cast with respect to a particular matter, only
those cast "For" or "Against" are included. Proxies marked "Abstain" and broker
non-votes are counted only for purposes of determining whether a quorum is
present at the meeting. If no direction is specified by the Stockholder, the
proxy will be voted "For" the proposals as specified in this notice and, at the
discretion of the proxy holder, upon such other matters as may properly come
before the meeting or any adjournment thereof.
PROPOSAL 1
ELECTION OF DIRECTORS
At the Annual Meeting, the Stockholders will elect eight directors to serve
as the Board of Directors until the 2004 Annual Meeting of the Stockholders of
the Company or until their successors are elected and qualified. On February 20,
2003, the Board of Directors voted to expand the number of directors to eight
effective at the Annual Meeting. The Board of Directors has nominated for
election as directors the eight persons listed below. David R. Parker, Michael
W. Miller, William T. Alt, Robert E. Bosworth, Hugh O. Maclellan, Jr., and Mark
A. Scudder, are presently serving as directors. Bradley A. Moline and Niel B.
Nielson have been nominated to become directors. In the absence of contrary
instructions, each proxy will be voted for the election of the all the proposed
directors.
Information Concerning Directors and Executive Officers
Information concerning the names, ages, positions with the Company, tenure
as a director, and business experience of the Company's current directors,
director nominees, and other executive officers is set forth below. All
references to experience with the Company include positions with the Company's
operating subsidiary, Covenant Transport, Inc., a Tennessee corporation. All
executive officers are elected annually by the Board of Directors.
NAME AGE POSITION DIRECTOR SINCE
David R. Parker 45 Chairman of the Board, President, Chief
Executive Officer 1985
Michael W. Miller 45 Executive Vice President, Chief Operating
Officer, Director 1995
Joey B. Hogan 41 Senior Vice President and Chief Financial
Officer NA
L. D. "Micky" Miller, III 49 Executive Vice President of Sales and
Marketing NA
R. H. Lovin, Jr. 51 Senior Vice President - Administration,
Secretary, Director(1) 1994
William T. Alt(2)(3) 66 Director 1994
Robert E. Bosworth(2)(3) 55 Director 1998
Hugh O. Maclellan, Jr.(2)(3) 63 Director 1994
Mark A. Scudder(3) 40 Director 1994
Bradley A. Moline 36 Director Nominee N.A.
Niel B. Nielson 49 Director Nominee N.A.
-------------------------------------------
(1) Mr. R. H. Lovin, Jr., who has been a member of the Board of Directors since
1994, will resign from the Board effective with the 2003 Annual Meeting,
although he will remain an officer of the Company.
(2) Member of the Audit Committee.
(3) Member of the Compensation Committee.
David R. Parker has served as President since founding the Company in 1985
and as Chairman of the Board and Chief Executive Officer since 1994. Mr. Parker
was elected to the Board of Directors of the Truckload Carriers' Association in
1994. Mr. Parker is a member of the American Trucking Associations' Board of
Directors, and serves on the Executive Committee, the Safety Committee, and the
Audit Committee of such group.
Michael W. Miller has served as the Company's Executive Vice President and
Chief Operating Officer since 1997. He previously served as the Company's Vice
President - Operations from 1993 to 1997 and in various other positions with the
Company from 1987 to 1993. Mr. Miller has over 25 years of experience in the
transportation industry.
Joey B. Hogan has served as the Company's Senior Vice President and Chief
Financial Officer since December 2001. From joining Covenant in August 1997 thru
December 2001, Mr. Hogan was the Company's Treasurer and Chief Financial
Officer. In 1996 and 1997, Mr. Hogan served as Chief Financial Officer of The
McKenzie Companies in Cleveland, Tennessee, a group of privately-owned
companies. From 1986 to 1996, Mr. Hogan served in various capacities, including
three years as Director of Finance, with Chattem, Inc., a publicly-held company,
headquartered in Chattanooga, Tennessee, involved in the manufacturing and
marketing of over-the-counter pharmaceuticals and toiletries products.
L. D. "Micky" Miller, III, has served as the Company's Executive Vice
President of Sales and Marketing since December 2, 2002. Mr. Miller has 28 years
of sales and operations experience in the trucking industry. From January 2000
to November 2002, Mr. Miller owned and operated two privately owned trucking
companies, one of which was a truckload carrier and the other of which was a
less-than-truckload carrier. From 1994 to 1997, Mr. Miller served as a Chief
Executive Officer of the CSI/Crown, Inc. division of U.S. Xpress Enterprises,
Inc.
R. H. Lovin, Jr. has served as the Company's Senior Vice President -
Administration since February 2003, as a director since May 1994, and Corporate
Secretary since August 1995. Mr. Lovin previously served as the Company's Chief
Financial Officer from 1986 to 1994 and as Vice President - Administration and
director from 1994 to February 2003.
2
William T. Alt has engaged in the private practice of law since 1962 and
has served as outside counsel to the Company since 1986.
Robert E. Bosworth has served as a director of the Company since 1998.
Since February 2001, Mr. Bosworth has been the Vice President of Corporate
Finance for the Livingston Company, a merchant bank located in Chattanooga. From
February 1998 until February 2001, Mr. Bosworth was a business and management
consultant to various corporations in the Chattanooga area. Prior to February
1998, Mr. Bosworth served for more than five years as Executive Vice President
and Chief Financial Officer of Chattem, Inc. Mr. Bosworth is a director of
Chattem, Inc.
Hugh O. Maclellan, Jr. is President of the Maclellan Foundation, Inc. and
serves on the Boards of UnumProvident Corporation and SunTrust Bank,
Chattanooga, N.A.
Mark A. Scudder has been an attorney for more than nine years with Scudder
Law Firm, P.C., L.L.O., Lincoln, Nebraska, the Company's outside corporate and
securities counsel. Mr. Scudder is on the board of managers of eScout LLC, a
private company that provides electronic procurement services, mostly for large
corporations. Mr. Scudder also is a director of Knight Transportation, Inc., a
publicly traded truckload carrier.
Bradley A. Moline has been the President of Imperial Super Foods, a grocery
store in Imperial, Nebraska, since February 2002. In October 2002, Mr. Moline
formed Allo Communications, LLC, a competitive local telephone company, and
serves as its President and Chief Executive Officer. Mr. Moline was the
President of Forte Technologies, a contract manufacturer of high precision
parts, from February 2001 until February 2002. From 1997 to May 2001, Mr. Moline
was the Senior Vice President of Finance and Chief Financial Officer of Birch
Telecom, Inc., an integrated communications provider. Mr. Moline resigned from
his position at Birch Telecom, Inc. to take the position with Forte Technologies
more than sixteen months prior to Birch Telecom, Inc.'s filing of a petition
under the federal bankruptcy laws in September 2002. From 1994 to 1997, Mr.
Moline was the Treasurer and Chief Financial Officer of Covenant Transport, Inc.
Niel B. Nielson has been President of Covenant College since 2002. From
1997 until 2002, Mr. Nielson was the Associate Pastor of Outreach for College
Church in Wheaton, Illinois. Mr. Nielson was a partner and trader for Ritchie
Capital Markets Group, LLC from 1996 to 1997. Prior to 1996, Mr. 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. Mr. Nielson is also a director of First
Defined Portfolio Fund LLC, an open-end management investment company under the
Investment Company Act of 1940.
Meetings and Compensation
Board of Directors. The Board of Directors of the Company held four
regularly scheduled meetings during the fiscal year ended December 31, 2002. No
director attended less than 75% of the meetings of the Board of Directors or any
committee on which he served. Directors who are not employees of the Company
received an annual retainer of $10,000 plus $1,000 per Board of Directors
meeting attended in person, $500 per Board of Directors meeting attended by
telephone, and reimbursement of expenses incurred in attending such Board
meetings. Compensation for each of the non-employee directors in 2002 was
$15,000 for each of Messrs. Alt, Bosworth, and Scudder, and $14,000 for Mr.
Maclellan. In May 2002, the Board of Directors granted each non-employee
director an option to purchase 2,500 shares of the Company's Class A Common
Stock, under the Outside Director Stock Option Plan, at $15.39 per share, the
fair market value on the date of the grant. The options immediately vested and
must be exercised within ten (10) years of the date of the grant. The option
grant was in lieu of an increase in cash compensation. If Proposal No. 3 to
approve the 2003 Plan is approved by stockholders, no further stock grants will
be made under the Outside Director Stock Option Plan after May 31, 2003, and all
future stock grants to directors will be made under the 2003 Plan.
Compensation Committee. The Compensation Committee of the Board of
Directors met three times during 2002. This committee reviews all aspects of
compensation of the Company's executive officers and makes recommendations on
such matters to the full Board of Directors. The Compensation Committee Report
on Executive Compensation for 2002 is set forth below. See "Compensation
Committee Report on Executive Compensation."
Audit Committee and Audit Committee Report. The Audit Committee met five
times during 2002. Messrs, Alt, Bosworth, and Maclellan served as the Audit
Committee. The responsibilities of the Audit Committee are set forth in the
Audit Committee Report, which appears below. All of the members of the Audit
Committee are independent directors, as defined in the NASDAQ Stock Market's
Listing Rule 4200. The Audit Committee has been operated pursuant to a written
charter detailing its duties since May 18, 2000. The written charter is included
as Appendix A to the Proxy Statement. In performing its duties, the Audit
Committee, as required by applicable Securities and Exchange Commission rules,
issues a report recommending to the Board of Directors that the Company's
audited financial statements be included in the Company's Annual Report on Form
10-K, and certain other matters, including the independence of the Company's
outside public accountants. The 2002 Report of the Audit Committee is set forth
below.
3
The Audit Committee Report shall not be deemed to be incorporated by
reference into any filing made by the Company under the Securities Act of 1933
or the Securities Exchange Act of 1934, notwithstanding any general statement
contained in any such filings incorporating this Proxy Statement by reference,
except to the extent the Company incorporates such report by specific reference.
Audit Committee Report for 2002
The primary purpose of the Audit Committee is to assist the Board of
Directors in fulfilling its oversight responsibilities relating to the quality
and integrity of the Company's financial reports and financial reporting
processes and systems of internal controls. Management of the Company has
primary responsibility for the Company's financial statements and the overall
reporting process, including maintenance of the Company's system of internal
controls. The Company retains independent public accountants who are responsible
for conducting an independent audit of the Company's financial statements, in
accordance with generally accepted accounting principles, and issuing a report
thereon. In performing its duties, the Audit Committee has discussed the
Company's financial statements with management and the Company's independent
auditors and, in issuing this report, has relied upon the responses and
information provided to the Audit Committee by management and the independent
public accountants. For the fiscal year ended December 31, 2002, the Audit
Committee (1) reviewed and discussed the audited financial statements with
management and KPMG LLP, the Company's independent auditors; (2) discussed with
the auditors the matters required to be disclosed by Statement on Auditing
Standards No. 61; (3) received and discussed with the independent auditors the
written disclosures and the letter from the independent auditors required by
Independence Standards Board Statement No. 1; and (4) has discussed with the
independent auditors the independent auditors' independence. The Audit Committee
met with representatives of the independent auditors without management or other
persons present on two occasions during 2002. Based on the foregoing reviews and
meetings, the Audit Committee recommended to the Board of Directors that the
audited financial statements be included in the Annual Report on Form 10-K for
the year ended December 31, 2002, for filing with the Securities and Exchange
Commission. The Audit Committee also recommended the appointment of KPMG LLP as
the Company's independent auditors for the fiscal year ending December 31, 2003.
Audit Committee:
William T. Alt
Robert E. Bosworth (Chairman)
Hugh O. Maclellan, Jr.
Nominating Committee. The Board does not maintain a standing nominating
committee or other committee performing similar functions.
Compensation Committee Interlocks and Insider Participation. Messrs. Alt,
Bosworth, Maclellan, and Scudder served as the Compensation Committee in 2002.
None of such individuals has been an officer or employee of the Company. Mr.
Scudder's law firm serves as the Company's corporate and securities counsel and
earned approximately $265,000 in fees for legal services during 2002. Mr. Alt
has served as outside counsel to the Company on various matters since 1986.
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
In 2002, Tenn-Ga Equipment Sales, Inc., ("Tenn-Ga") a corporation that was
wholly owned by Clyde M. Fuller, purchased used tractors and trailers from the
Company for approximately $3.0 million, and the Company purchased equipment from
Tenn-Ga for approximately $37,000. The Company believes that the transactions
represented fair market value. Mr. Fuller held approximately 9.8% of the
Company's outstanding Common Stock at the time of his death in December. He was
the stepfather of David R. Parker and was employed by the Company at a nominal
salary. The terms of all transactions were negotiated by Mr. Fuller and Mr.
Parker. During the first quarter of 2003, Tenn-Ga contracted with the Company to
make certain repairs to approximately 125 tractor units. The work was prepaid by
Tenn-Ga and amounted to approximately $220,000. The Company estimated the rate
charged based upon its costs and its available shop capacity at the time. The
terms of the repairs were negotiated by Elizabeth Fuller and David R. Parker.
Mrs. Fuller is the administrator of the estate of Clyde M. Fuller, the
beneficiary under his will, and David Parker's mother.
THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS THAT STOCKHOLDERS VOTE "FOR"
THE NOMINEES FOR DIRECTOR PRESENTED IN PROPOSAL 1.
4
EXECUTIVE COMPENSATION
The following table sets forth information concerning the annual and
long-term compensation paid to the chief executive officer and the four other
named executive officers of the Company (the "Named Officers"), for services in
all capacities to the Company for the fiscal years ended December 31, 2002,
2001, and 2000.
Summary Compensation Table
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Annual Compensation Long Term Compensation
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Awards Payouts
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Restricted Securities
Name and Principal Other Annual Stock Underlying LTIP All Other
Position Year Salary Bonus(1) Compensation(2) Award(s) Options (#) Payouts Compensation(3)
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David R. Parker 2002 $525,000 $206,719 (4) - 10,000 - $23,007
Chairman, President, and 2001 $525,000 - - - 10,000 - $5,987
Chief Executive Officer 2000 $509,135 - - - 120,000 - $5,407
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Michael W. Miller
Executive Vice President 2002 $248,770 $106,116 - - 10,000 - -
and Chief Operating 2001 $245,001 - $27,600 - 10,000 - -
Officer 2000 $241,250 - $27,600 - 60,000 - -
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Joey B. Hogan
Senior Vice President 2002 $177,693 $78,374 - - 10,000 - -
and Chief Financial 2001 $175,000 - - - 10,000 - -
Officer 2000 $166,539 - - - 50,000 - -
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Ronald B. Pope 2002 $150,001 $47,250 - - 7,500 - $2,885
Senior Vice 2001 $150,001 - - - 7,500 - -
President-Sales/Marketing 2000 $145,193 - - - 30,000 - -
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R. H. Lovin, Jr. 2002 $121,385 $55,125 - - 7,500 - -
Senior Vice President- 2001 $118,000 - $13,200 - 7,500 - -
Administration, Secretary 2000 $113,879 - $13,200 - 40,000 - -
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(1) The amount reflects cash portion of bonus earned by the Named Officer
during 2002. The cash portion is equal to 75% of the bonus earned under the
Named Officers' compensation program. In accordance with the program, the
remaining 25% was paid through issuance of immediately exercisable stock
options at the rate of an option on 100 shares for each $1,000 of bonus
payment foregone. For 2002, the Named Officers received options under the
compensation program to purchase the following number of shares of Class A
Common Stock at the $17.30 fair market value on February 20, 2003 (the date
of the grant): David Parker - 6,891; Michael Miller - 3,537; Joey Hogan -
2,612; Ronald Pope - 1,575; and R. H. Lovin, Jr. - 1,838. No bonus was paid
in 2001 or 2000.
(2) For all Named Officers, other annual compensation did not exceed 10% of
such Named Officer's total salary and bonus for 2002. In 2001 and 2000, for
all Named Officers other than Michael W. Miller and R. H. Lovin, Jr., other
annual compensation did not exceed 10% of such Named Officer's total salary
for such reported years. The amounts listed for Messrs. Miller and Lovin
reflect the amount of the Company car allowance for each in 2001 and 2000.
5
(3) Mr. Parker's other compensation in 2002 includes the amount of compensation
he received to make payments on a split-dollar life insurance policy, and
to pay taxes on the amount of the bonus. Under agreements entered into in
December 1992 and December 2001, the Company is obligated to provide
split-dollar life insurance arrangements for Mr. Parker. In years prior to
2002, the Company paid the premiums, was entitled to receive repayment of
the premiums advanced from the death benefit or cash value, and Mr. Parker
was deemed to have compensation equal to a portion of the premium advanced.
During 2002, the Sarbanes-Oxley Act of 2002 made unlawful certain personal
loans to or for the benefit of executive officers and directors. The
Company does not believe that making additional payments under the
pre-existing split-dollar arrangement should constitute a banned personal
loan. However, until further guidance is issued, the Company is taking a
conservative position relative to the requirements of the Sarbanes-Oxley
Act of 2002, and is paying Mr. Parker, as compensation, amounts that Mr.
Parker uses to pay insurance premiums on the split-dollar life insurance
policy. The Company will not be entitled to receive reimbursement of these
amounts, but will retain the right to receive from the insurance company an
amount equal to the amount that the Company paid in premiums on the
split-dollar policy prior to 2002. In 2001 and 2000, Mr. Parker's other
compensation included the reportable portion of premiums paid on
split-dollar life insurance policies. For Mr. Pope, all other compensation
in 2002 includes $2,885 that the Company paid Mr. Pope for one week of
vacation that was not used by Mr. Pope.
(4) The amount reported as Mr. Parker's other compensation under the column
"All Other Compensation" includes amounts paid as reimbursement for the
payment of taxes.
6
The following table lists stock options granted to the Named Officers during the
fiscal year ended December 31, 2002. The Company has not granted any stock
appreciation rights ("SARs").
Option/SAR Grants in Last Fiscal Year
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Potential realizable
value at assumed annual
rates of stock price
appreciation for option
Individual Grants term
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Number of
securities Percent of total Exercise
underlying options/SARs granted or base
options/SARs to employees in fiscal price Expiration
Name granted (#) year ($/Sh) Date 5% ($) 10% ($)
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David R. Parker 10,000 5.8% 15.39 05/16/2012 119,238 302,174
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Michael W. Miller 10,000 5.8% 15.39 05/16/2012 119,238 302,174
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Joey B. Hogan 10,000 5.8% 15.39 05/16/2012 119,238 302,174
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Ronald B. Pope 7,500 4.4% 15.39 05/16/2012 89,429 226,630
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R. H. Lovin, Jr. 7,500 4.4% 15.39 05/16/2012 89,429 226,630
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The following table demonstrates the options under the Plan that were
exercised during the fiscal year ended December 31, 2002, by the Named Officers.
Aggregated Option/SAR Exercises in Last Fiscal Year and FY-End Option/SAR Values
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Shares Number of securities underlying Value of unexercised
acquired unexercised options/SARs in-the-money
on Value at fiscal year end options/SARs at fiscal year
exercise realized (#) end(1) ($)
Name (#) ($) Exercisable Unexercisable Exercisable Unexercisable
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David R. Parker -0- -0- 252,541 56,665 1,540,726 474,597
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Michael W. Miller 10,000 107,500 105,633 36,665 598,361 255,397
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Joey B. Hogan 5,000 62,840 78,940 33,332 433,814 218,868
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Ronald B. Pope 34,022 259,229 22,800 22,500 85,988 136,756
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R. H. Lovin, Jr. 14,333 150,001 61,334 25,833 276,871 173,286
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(1) Based on the $18.96 closing price of the Company's Class A Common Stock on
December 31, 2002.
The Company does not have a long-term incentive plan or a defined benefit
or actuarial plan and has never issued any stock appreciation rights.
Employment Agreements
The Company currently does not have any employment, severance, or
change-in-control agreements with any of its executive officers. However, under
certain circumstances in which there is a change of control, holders of
outstanding stock options granted under the Plan may be entitled to exercise
such options notwithstanding that such options may otherwise not have been fully
exercisable. The Board of Directors has the authority to extend similar rights
to holders of additional awards under the Plan.
7
The Compensation Committee Report on executive compensation, and the performance
graph appearing later in this Proxy Statement shall not be deemed to be
incorporated by reference into any filing made by the Company under the
Securities Act of 1933 or the Securities Exchange Act of 1934, notwithstanding
any general statement contained in any filing incorporating this proxy statement
by reference, except to the extent the Company incorporates this report and
graph by specific reference.
Compensation Committee Report on Executive Compensation
The Compensation Committee of the Board of Directors prepared the following
report on executive compensation.
The approach to determining executive compensation generally consists of
three elements: base salary, annual stock option grants, and an annual bonus.
For 2002, the Chief Executive Officer participated in the same program as the
other executive officers and was evaluated on the same basis as the other
executive officers. The Compensation Committee believes that the annual bonus
program directly links corporate performance to executive compensation. The
Compensation Committee also believes that the annual stock option grants and the
stock-based component of the annual bonus indirectly link executive compensation
to corporate performance to the extent corporate performance is reflected in the
Company's stock price.
The Compensation Committee has reviewed the base salaries of its executive
officers and believes such salaries are generally comparable to those earned by
similarly-situated executives. Under the executive compensation program,
increases in base salaries are intended to slow after executives reach target
salaries identified by the Compensation Committee. The Compensation Committee
may adjust the targets as executives assume additional responsibilities. In
2002, the Company adjusted the target salary of Mr. Lovin upward in recognition
of his increased responsibilities in the area of risk management. Mr. Parker's
salary, which was increased to $525,000 in May of 2000, remained the same for
2002. In view of financial results for the Company, the Company awarded Mr.
Hogan and Mr. Miller moderate raises.
The annual stock option element of the compensation program provides that
each executive will be granted an annual stock option to purchase up to 10,000
shares of the Company's Class A Common Stock at the market price on the date of
the annual meeting under the Company's incentive stock plan for key employees.
Stock options granted since July of 2000 vest ratably over three years and
expire ten years from the date of grant. Certain options granted prior to 1998
vest ratably over five years and expire ten years from the date of grant. The
Compensation Committee believes that a multi-year granting and vesting schedule
will encourage the executives to remain with the Company.
The annual bonus element of the compensation program permits the executives
to earn a percentage of their salary based upon the achievement of individual
and corporate goals for that year. For senior management, 60% to 75% of the
bonus is based upon attaining or exceeding the earnings per share target
established at the beginning of the year. The remainder of the bonus is based
upon achieving certain individual goals that are established at the beginning of
each year. For 2002, the Chief Executive Officer's bonus was based 75% on
attaining or exceeding the earnings per share target and 25% on the attainment
of individual goals. Both the earnings per share and individual goals were
obtained. The Board of Directors establishes the goals for the Chief Executive
Officer, and the Chief Executive Officer establishes the goals for the rest of
the executives.
The initial bonus amounts for the executives are adjusted up or down based
upon the Company's ranking among its peer group of companies in the following
performance measures: revenue growth, earnings per share growth, pretax margin,
and return on average equity. The peer group identified by the Compensation
Committee consists of Swift Transportation, Werner Enterprises, USA Truck, Inc.,
U.S. Xpress Enterprises, and Transport Corp. of America. For 2003, Transport
Corp. of America has been replaced by Celadon Group, Inc. The annual bonus for
senior management is limited to 75% of the executive's base salary. The Company
must achieve its earnings per share goal for any individual bonus to be paid.
There is an exception for individual goal bonuses to be paid if the Company
achieves at least a threshold percentage of the earnings per share goal and
ranks first or second in its peer group.
The executives currently must accept at least 25% of their annual bonus in
the form of stock-based compensation and may choose to receive up to 100% of the
bonus in the form of stock-based compensation. The Compensation Committee
believes that this bonus program provides incentives to grow earnings per share,
achieve individual goals, and perform at or above the level of peer companies.
For 2002, the Company was ranked third of six by the Compensation Committee
among its peer group in the designated performance measures, the earnings per
share target was exceeded, and each of the Named Officer executives met at least
75% of his established personal goals.
Compensation Committee
William T. Alt
Robert E. Bosworth
Hugh O. Maclellan, Jr.
Mark A. Scudder (Chairman)
8
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS
AND MANAGEMENT
The following table sets forth, as of March 20, 2003, the number and
percentage of outstanding shares of Common Stock beneficially owned by each
person known by the Company to beneficially own more than 5% of such stock, by
each director, director nominee, and Named Officer of the Company, and by all
directors and executive officers of the Company as a group.
------------------------------------------------------------------------------------------------------------------------------------
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
------------------------------------------------------------------------------------------------------------------------------------
Amount & Nature
of Beneficial
Title of Class Name of Beneficial Owner(1) Ownership(2) Percent of Class
------------------------------------------------------------------------------------------------------------------------------------
35.19% of Class A
Class A & Class B David R. Parker & 100.0% of Class B
Common Jacqueline F. Parker 6,677,149(3) 45.59% of Total
------------------------------------------------------------------------------------------------------------------------------------
Class A Common Michael W. Miller 115,633 *
------------------------------------------------------------------------------------------------------------------------------------
Class A Common Joey B. Hogan(4) 94,254 *
------------------------------------------------------------------------------------------------------------------------------------
Class A Common Ronald B. Pope(5) 31,265 *
------------------------------------------------------------------------------------------------------------------------------------
Class A Common R. H. Lovin, Jr. 68,834 *
------------------------------------------------------------------------------------------------------------------------------------
Class A Common William T. Alt 14,000 *
------------------------------------------------------------------------------------------------------------------------------------
Class A Common Robert E. Bosworth(6) 28,000 *
------------------------------------------------------------------------------------------------------------------------------------
Class A Common Hugh O. Maclellan, Jr. (7) 29,500 *
------------------------------------------------------------------------------------------------------------------------------------
Class A Common Mark A. Scudder(8) 18,650 *
------------------------------------------------------------------------------------------------------------------------------------
Class A Common Bradley A. Moline 1,000 *
------------------------------------------------------------------------------------------------------------------------------------
Class A Common Niel B. Nielson 0 *
------------------------------------------------------------------------------------------------------------------------------------
11.64% of Class A
Class A Common Elizabeth Fuller(9) 1,406,134 9.75% of Total
------------------------------------------------------------------------------------------------------------------------------------
8.47% of Class A
Class A Common Dimensional Fund Advisors Inc.(10) 1,018,795 7.08% of Total
------------------------------------------------------------------------------------------------------------------------------------
Class A & Class B All directors and executive officers as a group
Common (9 persons) 7,077,285 47.17% of Total
------------------------------------------------------------------------------------------------------------------------------------
---------------------
* Less than one percent (1%).
(1) The business address of Mr. and Mrs. Parker and Mrs. Fuller is 400
Birmingham Highway, Chattanooga, TN 37419; the business address of
Dimensional Fund Advisors Inc., a Delaware corporation, is 1299 Ocean
Avenue, 11th Floor, Santa Monica, CA 90401.
(2) In accordance with applicable rules under the Securities Exchange Act of
1934, as amended, the number of shares of Class A Common Stock beneficially
owned includes the following shares underlying stock options that are
exercisable or will become exercisable within 60 days following March 20,
2003: Mr. Parker - 262,541; Mr. Miller - 115,633; Mr. Lovin - 68,834; Mr.
Pope - 30,300; Mr. Hogan - 88,940; Mr. Alt - 14,000; Mr. Maclellan -
14,000; Mr. Scudder - 14,000; and Mr. Bosworth - 14,000. The beneficial
ownership also includes the following shares held by the Named Officer in
the Company's 401(k) Plan: Mr. Parker - 9,608; Mr. Miller - 0; Mr. Lovin -
0; Mr. Hogan - 1,914; and Mr. Pope - 865.
(3) Includes 4,055,000 shares of Class A Common Stock and 2,350,000 shares of
Class B Common Stock, of which are all owned by Mr. and Mrs. Parker as
Joint Tenants with Rights of Survivorship, except 200,000 shares of Class A
Common Stock owned by the Parker Family Limited Partnership, of which Mr.
and Mrs. Parker are general partners. Also includes 262,541 shares of Class
A Common Stock underlying stock options granted to Mr. Parker that are
exercisable or will become exercisable within 60 days following March 20,
2003, and 9,608 shares held by Mr. Parker in the Company's 401(k) Plan.
(4) Includes 3,400 shares of Class A Common Stock owned by Joey B. Hogan and
Melinda J. Hogan, as joint tenants. Also includes 88,940 shares of Class A
Common Stock underlying stock options granted to Mr. Hogan that are
exercisable or will become exercisable within 60 days following March 20,
2003 and 1,914 shares held by Mr. Hogan in the Company's 401(k) Plan.
9
(5) Includes 100 shares of Class A Common Stock owned directly, 865 shares held
by Mr. Pope in the Company's 401(k) Plan, and 30,300 shares of Class A
Common Stock underlying stock options granted to Mr. Pope that are
exercisable or will become exercisable within 60 days following March 20,
2003.
(6) Mr. Bosworth's holdings include 11,000 shares of Class A Common Stock held
by Hamico, Inc., a charitable foundation for which Mr. Bosworth serves as
director and executive officer. Mr. Bosworth disclaims beneficial ownership
of all such shares held by Hamico, Inc. Also includes 2,000 shares of Class
A Common Stock owned directly, 1,000 shares of Class A Common Stock held in
an individual retirement account, and 14,000 shares of Class A Common Stock
underlying stock options granted to Mr. Bosworth that are exercisable or
will become exercisable within 60 days of March 20, 2003.
(7) Mr. Maclellan's holdings include 15,500 shares of Class A Common Stock held
directly, and 14,000 shares of Class A Common Stock underlying stock
options granted to Mr. Maclellan that are exercisable or will become
exercisable within 60 days of March 20, 2003.
(8) Mr. Scudder's holdings include 100 shares of Class A Common Stock held
directly, and 200 shares of Class A Common Stock held as custodian for a
minor child under the Uniform Gifts to Minors Act, as to which beneficial
ownership is disclaimed. Also includes 4,350 shares of Class A Common Stock
held in an individual retirement account, and 14,000 shares of Class A
Common Stock underlying stock options granted to Mr. Scudder that are
exercisable or will become exercisable within 60 days of March 20, 2003.
(9) Includes 1,360,300 shares of Class A Common Stock and 45,834 shares of
Class A Common Stock underlying exercisable stock options. Mrs. Fuller is
the administrator of the estate of Clyde M. Fuller and is the beneficiary
under his will. With her appointment as administrator by the probate court
of Hamilton County, Tennessee, on January 23, 2003, Mrs. Fuller became the
beneficial owner of the shares and options owned by Mr. Fuller at the time
of his death. Mrs. Fuller is David Parker's mother.
(10) As reported on Form 13G/A filed with the SEC February 12, 2003.
10
STOCK PERFORMANCE GRAPH
COMPARISON OF FIVE-YEAR CUMULATIVE TOTAL RETURNS
PERFORMANCE GRAPH FOR COVENANT TRANSPORT, INC.
The following graph compares the cumulative total stockholder return of the
Company's Class A Common Stock with the cumulative total stockholder return of
the Nasdaq Stock Market (U.S. Companies) and the Nasdaq Trucking &
Transportation Stocks commencing December 31, 1997, and ending December 31,
2002.
GRAPH WAS CENTERED HERE
IN PRINTED FORM
Prepared by CRSP (www.crsp.uchicago.edu), Center for Research in Security
Prices, Graduate School of Business, The University of Chicago. Used with
permission. All rights reserved.
The stock performance graph assumes $100 was invested on December 31, 1997.
There can be no assurance that the Company's stock performance will continue
into the future with the same or similar trends depicted in the graph above. The
Company will not make or endorse any predictions as to future stock performance.
The CRSP Index for Nasdaq Trucking & Transportation Stocks includes all publicly
held truckload motor carriers traded on the Nasdaq Stock Market, as well as all
Nasdaq companies within the Standard Industrial Code Classifications 3700-3799,
4200-4299, 4400-4599, and 4700-4799 US & Foreign. The Company will provide the
names of all companies in such index upon request.
11
SECTION 16(a) Beneficial Ownership Reporting Compliance
Section 16(a) of the Securities Exchange Act of 1934 requires the Company's
officers and directors, and persons who own more than 10% of a registered class
of the Company's equity securities, to file reports of ownership and changes in
ownership with the SEC. Officers, directors, and greater than 10% stockholders
are required by SEC regulation to furnish the Company with copies of all Section
16(a) forms they file. Based solely upon a review of the copies of such forms
furnished to the Company, the Company believes that its officers, directors, and
greater than 10% beneficial owners complied with all Section 16(a) filing
requirements applicable to them during the Company's preceding fiscal year
except that a Form 4 for R. H. Lovin, Jr. with respect to the exercise and sale
of options on 3,500 shares which occurred on February 5, 2002, was not filed
until March 21, 2002. The Company will make available through its website at
www.covenanttransport.com copies of Section 16(a) forms that its directors and
executive officers file with the SEC.
PROPOSAL 2
RATIFICATION OF SELECTION OF INDEPENDENT
PUBLIC ACCOUNTANTS
The Board of Directors has selected KPMG LLP as independent public
accountants for the Company for the fiscal year ending December 31, 2003. KPMG
LLP has served as independent public accountants for the Company since
September, 2001. Representatives of KPMG LLP are expected to be present at the
Annual Meeting and will have an opportunity to make a statement, if they desire
to do so, and to respond to appropriate questions.
Effective September 12, 2001, the Company's Board of Directors, with the
approval of the Audit Committee, approved a change in the Company's independent
accountants for the fiscal year ended December 31, 2001 from
PricewaterhouseCoopers LLP to KPMG LLP, and dismissed PricewaterhouseCoopers LLP
as independent accountants. The Company solicited and received formal proposals
for accounting and tax services from several accounting firms during the two
months prior to the change.
In connection with the audits of the two fiscal years ended December 31,
2000, and during the subsequent interim period through September 12, 2001, there
were no disagreements with PricewaterhouseCoopers LLP on any matter of
accounting principles or practices, financial statement disclosure, or auditing
scope or procedures, which disagreements, if not resolved to their satisfaction,
would have caused them to make reference to such matter in their accountant's
report on the financial statements for such years. No reportable event as
described in paragraph (a)(1)(v) of Item 304 of Regulation S-K has occurred
within the Company's two fiscal years ended December 31, 2000, or the interim
period through September 12, 2001.
The audit reports of PricewaterhouseCoopers LLP on the consolidated
financial statements of the Company as of and for the two fiscal years ended
December 31, 2000, did not contain any adverse opinion or disclaimer of opinion,
nor were they qualified or modified as to uncertainty, audit scope, or
accounting principles.
During the two fiscal years ended December 31, 2000, and the subsequent
interim period through September 12, 2001, the Company did not consult with KPMG
LLP on any matter which was the subject of any disagreement or any reportable
event as defined in Regulation S-K Item 304 (a)(1)(iv) and Regulation S-K Item
304 (a)(1)(v), respectively, or on the application of generally accepted
accounting principles to a specific transaction, either proposed or completed,
or the type of audit opinion that might be rendered on the Company's
consolidated financial statements relating to which either a written report was
provided to the Company or oral advice was provided that KPMG LLP concluded was
an important factor considered by the Company in reaching a decision as to any
accounting, auditing, or financial reporting issue.
Fiscal Year 2002 Audit Fee Summary
During fiscal year 2002, KPMG LLP provided services in the following
categories to the Company in the following amounts:
Audit fees $119,500
Financial information systems design & implementation fees $ 0
All other fees:
Audit related fees $121,700
Other non-audit services (principally
tax compliance and tax consulting
services and accounting advisory
services with respect to SEC filings) $304,660
--------
Total all other fees $426,360
The Audit Committee considers the provision of non-audit services by the
Company's auditor to be compatible in maintaining auditor independence.
12
THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS THAT STOCKHOLDERS VOTE "FOR"
PROPOSAL 2 TO RATIFY THE SELECTION OF KPMG LLP AS INDEPENDENT PUBLIC ACCOUNTANTS
FOR THE COMPANY.
PROPOSAL 3
APPROVAL OF 2003 INCENTIVE STOCK PLAN
Background
The Company has maintained an Incentive Stock Plan since 1994 to enable
certain officers and key employees to participate in the ownership of the
Company. The original plan (the "1994 Plan") reserved 670,000 shares of Class A
Common Stock for option grants. The Company adopted amendments to the 1994 Plan
in 1996, 1999, and 2000, and amended and restated the 1994 Plan in 2001. As of
March 1, 2003, a total of 1,979,237 shares of Class A Common Stock are reserved
for stock grants under the 1994 Plan. Of these 1,979,237 shares, as of March 1,
2003, 1,277,356 shares are subject to issued and outstanding option grants and
701,881 shares are available for new stock grants under the 1994 Plan. Class A
Common Stock reserved for options issued and outstanding under the 1994 Plan, as
of March 24, 2003, had an aggregate market value of $22,225,994, based on the
Company's Class A Common Stock price of $17.40 per share as of March 24, 2003.
The Company adopted the 1998 Non-Officer Incentive Stock Plan (the
"Non-Officer Plan") in 1998 to enable executive personnel and other key
employees to participate in the ownership of the Company. The Non-Officer Plan
authorized 200,000 shares of the Company's Class A Common Stock for grants or
awards. As of March 1, 2003, 81,183 shares remain reserved for stock issuance
pursuant to the Non-Officer Plan. The Company has awarded options and other
grants (less cancellations) covering approximately 118,817 shares.
The Outside Director Stock Option Plan (the "Outside Director Plan") was
adopted in February 2000 to enable non-employee directors to participate in the
ownership of the Company. The Outside Director Plan authorized 50,000 shares of
the Company's Class A Common Stock for grants or awards. As of March 1, 2003,
30,000 shares are subject to issued and outstanding option grants, and 20,000
shares are available for new stock grants under the Outside Director Plan.
On February 20, 2003, the Board of Directors voted to terminate further
option grants under the 1994 Plan, Non-Officer Plan, and Outside Director Plan,
effective as of May 31, 2003, subject to stockholder approval of the 2003
Incentive Stock Plan (the "2003 Plan") described below. If the 2003 Plan is
approved by stockholders:
o Any options issued under the 1994 Plan, the Non-Officer Plan, and the
Outside Director Plan at the time such plans are terminated will
continue to be outstanding, and a sufficient number of shares of Class
A Common Stock will be reserved under each plan to cover any
outstanding options that are then unexercised.
o Option grants issued under the 1994 Plan, the Non-Officer Plan, and
the Outside Director Plan will continue in effect and may be exercised
on the terms and conditions under which the grants were made, but no
further option grants will be made under the 1994 Plan, the
Non-Officer Plan, and the Outside Director Plan after May 31, 2003.
o As of June 1, 2003, any new grants will be made only under the 2003
Plan.
It is anticipated that the only further option grants under the 1994 Plan
and Outside Director Plan will be made in conjunction with the annual meeting.
In the past, option grants covering up to 10,000 shares per executive officer
and 2,500 shares per outside director have been made in conjunction with the
annual meeting. In addition, in 2002, 115,750 stock options were granted to
other employees of the Company in conjunction with the annual meeting.
2003 Plan
At the Annual Meeting, stockholders will be asked to approve the 2003 Plan
that will commence June 1, 2003. A copy of the 2003 Plan is set forth in
Appendix B to this Proxy Statement. The 2003 Plan, like the 1994 Plan, is
designed to attract and retain employees and others and to motivate them through
incentives that are aligned with the Company's goals of increased profitability
and stockholder value. Awards may be in the form of incentive stock options,
non-qualified stock options, restricted stock awards, or any other awards of
stock consistent with the 2003 Plan's purpose. The 2003 Plan will be
administered by the Board of Directors or a committee that may be appointed by
the Board of Directors. All employees, directors, and consultants of the Company
are eligible for participation, and actual participants in the 2003 Plan will be
selected from time-to-time by the administrator. The administrator may
substitute new stock options for previously granted options. No awards of
incentive stock options may be made after the period under applicable provisions
of the Internal Revenue Code.
The 2003 Plan is substantially the same as the 1994 Plan, except:
o 1,250,000 shares of Class A Common Stock are authorized for grants or
awards;
13
o the specific authority of the committee with respect to the 2003 Plan
is clarified;
o Company-repurchased shares revert to the pool reserved for issuance
under the 2003 Plan;
o the exercise price of non-statutory options ("NSOs") was revised to be
not less than 85% of the Fair Market Value on the date of grant (from
not less than 70% in the 1994 Plan);
o the definition of "Fair Market Value" when the Company's Class A
Common Stock is not listed or admitted to trading on an exchange has
been specified;
o the rule applicable in case of death of the optionee has been revised
to provide for a limited ability to exercise in the case of an
incentive stock option ("ISO");
o the 2003 Plan allows for the exercise of options exercisable at
termination by a terminated employee within three months of
termination;
o the 2003 Plan allows for limited transfer of NSO awards; and
o the 2003 Plan allows non-qualified stock option grants to be made to
consultants and directors.
The committee has the authority, subject to the provisions of the 2003
Plan, to grant awards, determine the exercise price, interpret the 2003 Plan,
and determine terms and provisions of each award granted, including without
limitation, vesting schedule and exercise date. ISO options granted under the
2003 Plan are non-transferable except pursuant to the laws of descent and
distribution. Shares reserved for issuance under the 2003 Plan will be
registered with the Securities and Exchange Commission on Form S-8 at the time
the 2003 Plan becomes effective.
The 2003 Plan reserves 100,000 shares of Class A Common Stock for grants to
non-employee directors out of the total of 1,250,000 shares reserved for
issuance under the 2003 Plan. The 2003 Plan, like the Outside Director Plan,
authorizes the automatic NSO grant of Class A Common Stock to each non-employee
director at each annual meeting. Grants to non-employee directors vest one
hundred percent on the date of the grant. The number of shares subject to the
annual grant currently is 2,500 but may be changed by the committee at any time.
The committee has the right to terminate, revise, or amend the 2003 Plan in
such respects as the committee may deem advisable; provided that the following
revisions or amendments require the approval of the stockholders of the Company:
(i) any change in the designation of the class of persons eligible to be granted
awards; (ii) any change in the number of shares subject to the 2003 Plan; or
(iii) if otherwise required by any applicable laws.
If the 2003 Plan is approved by stockholders, 1,250,000 shares will be
reserved for issuance under the 2003 Plan. The Class A Common Stock reserved for
issuance under the 2003 Plan has an aggregate market value of $21,750,000, based
on the Company's Class A Common Stock price of $17.40 per share as of March 24,
2003.
The Board of Directors has unanimously recommended approval of Proposal 3
and believes that the ability to offer additional equity incentives is important
to providing compensation that aligns the interests of employees, consultants,
and stockholders.
Federal Income Tax Consequences for Incentive Stock Options
Options granted as an incentive stock option ("ISO") are intended to
qualify under Section 422 of the Internal Revenue Code of 1986, as amended (the
"Code") for special tax treatment. Neither the grant of the ISO nor the exercise
of the ISO by a participant ("Optionee") will result in the recognition of
taxable income to the Optionee, provided that the Optionee meets all the tax
requirements for incentive stock option treatment when the option is exercised.
However, the exercise of an ISO will result in an item of tax preference to an
Optionee potentially subject to the alternative minimum tax. The ultimate sale
or other disposition by the Optionee of the shares obtained upon exercise of the
ISO will result in capital gain or loss equal to the difference between the fair
market value on the date of sale and the exercise price. The Company will not
have a deduction with regard to the ISO at the time of the grant, the exercise,
or the ultimate sale of the shares. Notwithstanding the foregoing, if an
Optionee sells or disposes of the shares prior to two years after the date of
the grant of the ISO or one year after the date of the exercise, the Optionee
will recognize compensation income on the sale to the extent the value on the
date of exercise exceeded the exercise price. The excess of the amount received
on the sale over the value on the date of exercise will be capital gain. In the
case of such a disqualifying disposition of shares, the Company may deduct the
amount of income recognized as compensation income. A person entitled to
exercise the ISO after the death of an Optionee may sell the stock obtained on
the exercise of an option at any time without regard to the normal holding
requirements. The Internal Revenue Service ("IRS") has issued Notice 2002-47,
providing that until further guidance from the IRS and the Treasury Department,
in the case of an ISO under Section 422 of the Code, the IRS will not assess the
Federal Insurance Contributions Act ("FICA") tax or Federal
14
Unemployment Tax Act ("FUTA") tax, or apply federal income tax withholding
obligations, upon either the exercise of the option or the disposition of the
stock acquired by an employee pursuant to the exercise of the option. The IRS
and Treasury Department had previously issued proposed regulations providing
that FICA and FUTA taxes apply when an individual exercises a statutory stock
option and that federal income tax withholding does not apply when an individual
exercises a statutory stock option. Guidance in this regard may be issued in the
future. It is not clear what the guidance will provide. Notice 2002-47 also
states that it is anticipated that any final guidance that would apply
employment taxes to statutory stock options will be prospective only. In
addition to the foregoing federal tax considerations, the exercise of an ISO and
the ultimate sale or other disposition of the shares acquired thereby will in
most cases be subject to state income taxation.
Federal Income Tax Consequences for Nonstatutory Stock Options
An Optionee does not realize any compensation income upon the grant of a
Nonstatutory Stock Option ("NSO"). Additionally, the Company may not take a tax
deduction at the time of the grant. Upon exercise of an NSO, an Optionee
realizes and must report as compensation income an amount equal to the
difference between the fair market value of the securities on the date of
exercise and the exercise price. The Company is entitled to take a deduction at
the same time and in the same amount as the Optionee reports as compensation
income, provided the Company withholds federal income tax in accordance with the
Code and applicable Treasury regulations. The amount recognized by the employee
as compensation income is also subject to FICA, FUTA, and Medicare withholding.
In addition to the foregoing federal tax considerations, the exercise of an
Option and the ultimate sale or other disposition of the shares of Class A
Common Stock acquired thereby will in most cases be subject to state income
taxation.
Equity Compensation Plan Information
------------------------------------------------------------------------------------------------------------------------------------
Number of securities
Number of securities remaining available for
to be issued upon Weighted-average future issuance under
exercise of exercise price of equity compensation plans
outstanding options, outstanding options, (excluding securities
Plan category warrants and rights warrants and rights reflected in column (a))
------------------------------------------------------------------------------------------------------------------------------------
(a) (b) (c)
------------------------------------------------------------------------------------------------------------------------------------
Equity compensation plans
approved by security holders(1) 1,307,356 $13.60 721,881
------------------------------------------------------------------------------------------------------------------------------------
Equity compensation plans not
approved by security holders(2) 74,750 $12.10 56,433
------------------------------------------------------------------------------------------------------------------------------------
Total 1,382,106 $13.52 778,314
------------------------------------------------------------------------------------------------------------------------------------
(1) Includes 2,029,237 shares reserved for issuance under the Incentive Stock
Plan originally adopted in 1994, and amended and restated in 2001, and
shares reserved for issuance under the Outside Director Plan.
(2) Includes 81,183 shares reserved for issuance under the Non-Officer Plan,
and 50,000 shares reserved for issuance pursuant to grants outside the
plan.
Summary Description of Equity Compensation Plans Not Approved by Security
Holders
Summary of 1998 Non-Officer Incentive Stock Plan
In October 1998, the Company's Board of Directors adopted the Non-Officer Plan
to attract and retain executive personnel and other key employees and motivate
them through incentives that are aligned with the Company's goals of increased
profitability and stockholder value and authorized 200,000 shares of the
Company's Class A Common Stock for grants or awards pursuant to the Non-Officer
Plan. Awards may be in the form of incentive stock options, non-qualified stock
options, restricted stock awards, or any other awards of stock consistent with
the Non-Officer Plan's purpose. The Non-Officer Plan is administered by the
Board of Directors or a committee that may be appointed by the Board of
Directors. All non-officer employees are eligible for participation, and actual
participants in the Non-Officer Plan are selected from time-to-time by the
administrator. The administrator may substitute new stock options for previously
granted options. As of March 1, 2003, 81,183 shares remain reserved for stock
issuance pursuant to the Non-Officer Plan. The Company has awarded options and
other grants (less cancellations) covering approximately 118,817 shares. In
conjunction with adopting the 2003 Plan, the Board of Directors voted to
terminate the Non-Officer Plan effective as of May 31, 2003, subject to
stockholder approval of the 2003 Plan.
Summary of Grants Outside the Plan
On August 31, 1998, the Company's Board of Directors approved the grant of an
option to purchase 5,000 shares of the Company's Class A Common Stock to each of
the four outside directors of the Company. The exercise price of the stock was
equal to the mean between the lowest reported bid price and the highest reported
asked price on the date of the grant. The
15
options have a term of ten years from the date of grant, and the options vest
20% on each of the first through fifth anniversaries of the grant.
On September 23, 1998, the Company's Board of Directors approved the grant of an
option to purchase 20,000 shares of the Company's Class A Common Stock to Tony
Smith upon closing of the acquisition of Southern Refrigerated Transport, Inc.
and Tony Smith Trucking, Inc. The exercise price was the mean between the low
bid price and the high asked price on the closing date. The options have a term
of ten years from the date of grant, and the options vest 20% on each of the
first through fifth anniversaries of the grant.
On May 20, 1999, the Company's Board of Directors approved the grant of an
option to purchase 2,500 shares of the Company's Class A Common Stock to each of
the four outside directors of the Company. The exercise price of the stock was
equal to the mean between the lowest reported bid price and the highest reported
asked price on the date of the grant. The options have a term of ten years from
the date of grant, and the options vest 20% on each of the first through fifth
anniversaries of the grant.
THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS THAT STOCKHOLDERS VOTE "FOR"
PROPOSAL 3 TO APPROVE THE 2003 INCENTIVE STOCK PLAN.
STOCKHOLDER PROPOSALS
Stockholder proposals intended to be presented at the 2004 Annual Meeting
of the Stockholders of the Company must be received by the Corporate Secretary
of the Company at the Company's principal executive offices on or before
December 16, 2003, to be included in the Company's proxy material related to
that meeting.
OTHER MATTERS
The Board of Directors does not intend to present at the Annual Meeting any
matters other than those described herein and does not presently know of any
matters that will be presented by other parties.
Covenant Transport, Inc.
/s/ David R. Parker
David R. Parker
Chairman of the Board
April 18, 2003
16
Appendix A
SECOND AMENDED AND RESTATED CHARTER OF THE AUDIT COMMITTEE
OF
THE BOARD OF DIRECTORS
OF
COVENANT TRANSPORT, INC.
April 14, 2003
Recitals.
On February 8, 1999, the Securities and Exchange Commission's Blue Ribbon
Committee on Improving the Effectiveness of Corporate Audit Committees (the
"Blue Ribbon Committee") issued a report containing recommendations for
improving the effectiveness of corporate audit committees. The Blue Ribbon
Committee directed its recommendations to the Securities and Exchange Commission
(the "Commission"), the New York Stock Exchange (the "NYSE"), the American Stock
Exchange (the "AMEX"), the National Association of Securities Dealers (the
"NASD"), and the Auditing Standards Board (the "ASB") (collectively, the
"Regulatory Authorities"). In response to its recommendations, the Regulatory
Authorities have adopted new rules and amended existing rules pertaining to
corporate audit committees.
The Board of Directors (the "Board") of Covenant Transport, Inc., a Nevada
corporation (the "Company"), in response to actions taken by the Regulatory
Authorities, adopted the Amended and Restated Audit Committee Charter (the
"Original Charter") in May, 2000. In light of recent amendments to the
Commission's rules and regulations as a result of the Sarbanes-Oxley Act of
2002, the Company now adopts this Second Amended and Restated Audit Committee
Charter (the "Charter"). The Charter describes the duties and responsibilities
of the Company's audit committee (the "Audit Committee") and grants the Audit
Committee the authority necessary to perform its oversight responsibility.
Charter.
1. Purpose of Audit Committee. The purpose of the Audit Committee is to
assist the Board in fulfilling its responsibility to ensure the fairness and
accuracy of the Company's financial statements and to ensure the existence of
appropriate internal financial controls, and the independence of the independent
public accountants engaged to audit the Company's financial statements (the
"external auditors"), and to render the reports required of the Audit Committee,
and to allow the Company to make the disclosures required by related Commission
regulations.
2. Qualifications of Audit Committee. The Audit Committee shall consist of
not less than three nor more than five directors, each of whom meets the
definition of an "independent director" specified by applicable law (including
the Sarbanes-Oxley Act of 2002) and rules and regulations of Regulatory
Authorities. Each member of the Audit Committee shall be generally familiar with
the general requirements of financial reporting and shall demonstrate all other
qualifications required by law or any Regulatory Authority. At least one member
of the Audit Committee shall in the judgment of the Board be an audit committee
financial expert in accordance with the rules and regulations of the Commission.
3. Duties of the Audit Committee. Subject to the second sentence of
Paragraph 10, the Audit Committee will perform the following duties in the
manner and priority the Audit Committee determines, in its discretion, to be
appropriate under the circumstances:
(a) Review the Company's earnings statements with management and with the
Company's external auditors prior to the release of such statements to the
public;
(b) Assure that the Company's interim financial statements are reviewed by
the Company's external auditors, as required by Commission rules, prior to the
filing of such interim financial statements with the Commission as part of the
Company's report on Form 10-Q;
17
(c) Review and discuss the Company's audited financial statements with
management, and recommend to the Board whether the audited financial statements
should be included in the Company's Form 10-K;
(d) Review and discuss the Company's audited financial statements with the
Company's external auditors and shall review those matters required to be
discussed by Statement of Auditing Standards No. 61, as modified or supplemented
from time to time;
(e) Receive the written disclosures and the letter from the Company's
external auditors required by the Independent Standards Board's Standard No. 1,
as modified or supplemented, discuss with the external auditors their
independence, and, as required by Commission rules, pre-approve all audit
services and permitted non-audit services to be performed by the external
auditor and establish policies and procedures for the engagement of the
independent external auditor to provide permitted non-audit services;
(f) Review annually the scope of the external auditors' work, including any
non-auditing or consulting services;
(g) Review with the Company's external auditors all adjustments made to the
Company's audited financial statements, including a reconciliation of any
adjustments made in the audited financial statements from the Company's
quarterly interim financial statements;
(h) Review with management and the Company's external auditors any
significant financial reporting issues or judgments called for in connection
with the preparation of the Company's financial statements, including the
adequacy and appropriateness of any reserves, policies relating to the
recognition of revenue, the quality and appropriateness of the Company's
accounting principles, and any other matters which, in its judgment, or the
judgment of the Company's external auditors, could have a material impact on the
Company's financial statements;
(i) Meet with the Company's external auditors and with management to review
and assess any material financial risk exposure to the Company and the steps
management has or plans to take to monitor and control financial risk;
(j) Review with the Company's external auditors and management the adequacy
of the Company's internal financial controls and reporting systems;
(k) Confer with the Company's external auditors about any audit
requirements as specified in the Securities and Exchange Act of 1934 that may
have come to the attention of the external auditors;
(1) Review any major changes to the Company's auditing and accounting
policies and practices suggested by the Company's external auditors or by
management. (In undertaking the duties specified herein, in communications with
the Company's external auditors, the Audit Committee will, in accordance with
Statement of Auditing Standards No. 61, communicate with the external auditors
with respect to (1) methods used to account for significant or unusual
transactions; (2) the effect of significant accounting policies in controversial
or emerging areas for which there is a lack of authoritative guidance or
consensus; (3) the process used by management in formulating particularly
sensitive accounting estimates, and the basis for the auditors' conclusions
regarding the reasonableness of those estimates; and (4) disagreements with
management, if any, over the application of accounting principles, the basis for
management's accounting estimates, and the disclosures in the Company's
financial statements);
(m) Take responsibility for the appointment, compensation, and oversight of
the Company's external auditors, review the proposed scope and plan of the
annual audit, and recommend their selection and engagement;
(n) Review the external auditors' management letter and consider any
comments made by the external auditors with respect to improvements in the
internal accounting controls of the Company, consider any corrective action
recommended by the external auditors, and review any corrective action taken by
management;
(o) Review and devote attention to any areas in which management and the
Company's external auditors disagree and determine the reasons for such
disagreement;
18
(p) Review the performance of the external auditors and take direct
responsibility for hiring and, if appropriate, replacing any external auditor
failing to perform satisfactorily;
(q) Review the performance of the Company's Chief Financial Officer and
Controller;
(r) Review any difficulties any external auditor may have encountered with
respect to performance of an audit, including, without limitation, any
restrictions placed upon the scope of the audit on access to information, or any
changes in the proposed scope of the audit;
(s) Provide, as part of the Company's proxy filed pursuant to Commission
regulations, the report required by Commission regulations relating to proxies
and cause a copy of that report to be included annually in the Company's proxy
solicitation materials;
(t) Establish procedures for the receipt, retention, and treatment of
complaints received by the Company regarding accounting, internal accounting
controls, or auditing matters;
(u) Establish in accordance with law and the rules and regulations of
Regulatory Authorities procedures for the confidential, anonymous submission by
employees of the Company of concerns regarding questionable accounting or
auditing matters;
(v) Obtain the advice and assistance, as appropriate, of independent
counsel and other advisors as necessary to fulfill the responsibilities of the
Audit Committee;
(w) Establish policies for the hiring of employees and former employees of
the independent external auditor;
(x) Review and approve in advance all transactions between the Company and
its executive officers and directors;
(y) Periodically review the adequacy of this Charter and make
recommendations to the Board with respect to any changes in this Charter.
4. Access to Information. In order to perform its obligations, the Audit
Committee shall have unrestricted access to all relevant internal and external
Company information and to any officer, director, or employee of the Company.
5. Employee Access to Audit Committee. Any person employed by the Company
and any of the Company's independent contractors will have access to the Audit
Committee, pursuant to procedures adopted by the Audit Committee, to report any
matter which such person believes would be of interest to the Audit Committee or
of general concern to the Audit Committee or the Board. Contacting a member of
the Audit Committee to report any irregularity, questionable activity, or other
matter will not subject the person making the report to discipline.
6. Frequency of Meetings.
(a) The Audit Committee will meet each quarter prior to the release
of the Company's earnings statements to review the earnings
release. In addition, the Audit Committee will convene if a
meeting is noticed by its Chairman, any member of the Audit
Committee, any member of the Board, the Chief Financial Officer,
or the Chief Executive Officer.
(b) The Audit Committee, at least once a year, will meet privately
with the Company's external and, if applicable, internal
auditors, and no representative of the Company's management shall
attend such meetings.
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7. Access to Legal Counsel and Advisors. The Audit Committee shall have
full and free access to the Company's outside legal counsel, and if requested,
to its own independent legal counsel and other advisors. The Company will pay
for the cost of any such legal counsel and advisors.
8. Meeting Procedures.
(a) Members of the Audit Committee shall endeavor to attend all meetings of
the Audit Committee. The Audit Committee may meet telephonically or in person
and may take action upon the written consent of all members. A majority of the
Audit Committee will constitute a quorum for all purposes.
(b) Written minutes will be maintained for each meeting of the Audit
Committee.
9. Other Duties. The Audit Committee will perform such other duties as the
Board may assign to it or as may be imposed by law or by rule or regulation of
Regulatory Authorities.
10. Limitation of Audit Committee Duties. The Audit Committee is not an
investigative committee of the Board and shall have no investigative duties
unless expressly assigned to the Audit Committee by the Board. The Audit
Committee will exercise its business judgment in performing its duties under
this Charter, including the duties outlined in Paragraph 3, and may emphasize
and prioritize those duties and responsibilities set forth above which the
Committee, in its discretion and judgment, believes are the most important,
given the particular circumstances. It is not the duty of the Audit Committee to
undertake the audit of the Company itself, to plan the audit, or to undertake
any of the responsibilities of the Company's internal or external auditors. The
Audit Committee is not required to follow the procedures required of auditors in
performing reviews of interim financial statements or audited financial
statements. In performing its functions, the Audit Committee may rely upon
information provided to it by management, by the Company's internal and external
auditors, or by legal counsel. This Charter imposes no duties on the Audit
Committee or its members that are greater than those duties imposed by law upon
a director of a Nevada corporation under Section 78.138 of the Nevada General
Corporation Law. If any claim is asserted against the Audit Committee, any of
its members or the Company by a stockholder or any other person, nothing in this
Charter shall be construed to limit or restrict any defense or indemnification
available to the Audit Committee, any of its members, or the Company.
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Appendix B
COVENANT TRANSPORT, INC.
2003 INCENTIVE STOCK PLAN
ARTICLE I
GENERAL
1.1 Purpose: The purpose of the Covenant Transport, Inc. 2003 Incentive
Stock Plan (the "Plan") is to attract and retain the best available employees,
non-employee directors, and consultants to contribute toward the management,
growth and success of the business, and to provide an incentive for employees,
directors, and consultants to exert their best efforts on behalf of Covenant
Transport, Inc., its subsidiaries and its stockholders.
1.2 Establishment and Approval of Plan: On February 20, 2003, Covenant
Transport, Inc., a Nevada corporation, (the "Corporation") adopted this
Incentive Stock Plan, by the unanimous vote of the Directors, to become
effective as of June 1, 2003, subject to the Corporation's stockholders
approving this Incentive Stock Plan. As so established and approved, this Plan
shall be known as the Covenant Transport, Inc. 2003 Incentive Stock Plan.
1.3 Administration:
a. The Plan shall be administered by the Board of Directors or a
committee as appointed from time-to-time by the Board of Directors (the
Board of Directors or the committee is hereinafter collectively referred to
as the "Committee"). For all transactions involving Section 16 "insiders"
(i.e., executive officers, directors, and more than 10% stockholders), any
Committee shall consist of at least two members, each being members of the
Board of Directors, and the members of such Committee, with respect to any
award, shall be Directors who are non-employee directors within the meaning
of Rule 16b-3 under the Securities Exchange Act of 1934 (the "Act") or any
similar rule which may subsequently be in effect ("Rule 16b-3"). The
Committee shall serve at the pleasure of the Board of Directors, and the
Board of Directors may, from time to time, remove members from, or add
members to, the Committee. Vacancies on the Committee, however caused,
shall be filled by the Board of Directors. No member of the Committee shall
participate in or take any action with respect to any Award made with
respect to such member except as otherwise provided herein. For affected
grants, the Committee also shall comply with applicable laws and
regulations, as well as rules of the Nasdaq Stock Market.
b. Subject to the provisions of the Plan, the Committee shall have the
authority, in its discretion: (i) to grant Incentive Stock Options,
Non-statutory Stock Options, Restricted Stock Awards, Reload Options
concurrently with the grant of any Award of Incentive Stock Options or
Non-statutory Stock Options, Other Stock Based Awards, and Other Benefits;
(ii) to determine, upon review of relevant information and in accordance
with Section 2.3 of the Plan, the Fair Market Value of the Common Stock;
(iii) to determine the exercise price per share of Options to be granted,
which exercise price shall be determined in accordance with Section 2.3 of
the Plan; (iv) to determine the employees, directors, and consultants to
whom, and the time or times at which, Awards shall be granted and the
number of shares of Common Stock to be represented by each Award; (v) to
interpret the Plan; (vi) to prescribe, amend, and rescind rules and
regulations relating to the Plan; (vii) to determine the terms and
provisions of each Award granted (which need not be identical), including,
without limitation, the terms and conditions of the exercise, the terms of
payment of the exercise price, any conditions to which the Award or its
exercise may be subject, and any restrictions or limitations placed on
Option Stock pursuant to the exercise of an Award, and, with the consent of
the holder of the Award, modify or amend each Award; (viii) to accelerate
or defer (with the consent of the Participant) the exercise or vesting date
of any Award, consistent with the provisions of Section 2.5 of the Plan;
(ix) to authorize any person to execute on behalf of the Corporation any
instrument required to effectuate the grant of an Award previously granted
by the Committee; and (x) to make all other determinations deemed necessary
or advisable for the administration of the Plan. Decisions of the Committee
shall be final, conclusive and binding upon all persons, including the
Corporation, stockholders, Participants and all other persons. No member of
the Committee shall be liable for any action taken or decision made in good
faith relating to the Plan or any Award thereunder.
c. To the extent that any such action would not contravene applicable
laws, or rules or regulations of the SEC or Nasdaq, the Committee may
delegate any of its authority hereunder to such persons as it deems
appropriate.
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1.4 Eligibility for Participation: Participants in the Plan shall be
selected by the Committee from the executive officers, other key employees,
directors, and consultants of the Corporation and its subsidiaries who occupy
responsible managerial or professional positions and who have the capability of
making a substantial contribution to the success of the Corporation. In making
this selection and in determining the form and amount of Awards, the Committee
shall consider any factors it deems relevant, including the individual's
functions and responsibilities, the value of his or her service to the
Corporation and potential contributions to the Corporation's profitability and
sound growth.
1.5 Types of Awards Under Plan: Awards under the Plan may be in the form of
any one or more of the following: as described in Article II, Incentive Stock
Options ("ISOs") and Non-statutory Stock Options ("NSOs"); as described in
Article III, Restricted Stock Awards ("Restricted Stock"); as described in
Article IV, Reload Options; and as described in Article V, Other Stock Based
Awards and Other Benefits (all collectively "Awards"). ISOs, NSOs and Reload
Options are referred to individually as "Option" or Collectively as "Options."
1.6 Shares Subject to Plan: The maximum number of shares of Common Stock
which may be issued for all purposes under the Plan shall be One Million Two
Hundred Fifty Thousand (1,250,000). Of the total number of shares reserved for
Awards under this Plan, One Hundred Thousand (100,000) shares of Common Stock
are reserved for Awards made under the Outside Directors Plan set forth in
Article VI. The balance of the shares of Common Stock are reserved for Awards
under any other provision of this Plan; provided, however, that in no event
shall the aggregate number of shares of Common Stock subject to all Awards made
under this Plan since inception exceed 1,250,000 shares of Common Stock,
adjusted as described in this Section.
a. In the event of any change in the outstanding Common Stock by
reason of a stock split, stock dividend, combination, reclassification or
exchange of Common Stock, recapitalization, merger, consolidation or other
event, the shares of Common Stock authorized hereunder and outstanding
Awards, as applicable, shall be proportionately adjusted by the Committee
in its sole discretion and any such judgment shall be binding and
conclusive on all persons. Provided, however, in the case of ISOs, no such
adjustment shall be made if the result thereof would be that the excess of
the aggregate fair market value of the shares subject to the Option
immediately after the adjustment over the aggregate Exercise Price of such
shares is more than the excess of the aggregate fair market value of all
shares subject to the Option immediately before such substitution or
assumption over the aggregate Exercise Price of such shares, or that the
new Option or the assumption of the old Option gives the Participant
additional benefits which he or she did not have under the old Option.
b. Any shares of Common Stock subject to an Option which for any
reason is canceled or terminated without having been exercised, or after
being partially exercised, or any shares of Restricted Stock which are
forfeited, shall revert to the pool of shares reserved in Section 1.6 and
shall again be available for Awards under the Plan. Fractional shares shall
not be issued. The Committee will determine the manner in which fractional
share value(s) will be treated. Each Award shall state the total number of
shares of Common Stock subject to the Awards. Shares of Common Stock issued
under the Plan and later repurchased by the Corporation shall become
available for future grant or sale under the Plan.
1.7 General Definitions:
a. The term Subsidiary shall mean, unless the context otherwise
requires, any corporation (other than the Corporation) in an unbroken chain
of corporations beginning with the Corporation if each of the corporations
other than the last corporation in such chain owns stock possessing at
least fifty percent (50%) of the voting power in one of the other
corporations in such chain. For the purpose of this section, stock
ownership shall be determined in accordance with Section 424 of the
Internal Revenue Code of 1986, as amended from time to time (the "Code").
b. The term Board of Directors shall mean only the Board of Directors
of the Corporation. The term Director shall mean only a member of the Board
of Directors.
c. Except as limited in Section 2.7 below relating to Incentive Stock
Options, as defined in Section 422 of the Code, the term disability shall
have the meaning determined by the Committee in its sole discretion.
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ARTICLE II
ISOs AND NSOs
2.1 Award of ISOs and NSOs: The Committee may, from time-to-time, in its
sole discretion and subject to such terms and conditions of this Plan and as it
may prescribe, award to any Participant options to purchase Common Stock, either
as a tax-qualified Option ("ISO") or as a non-statutory Option ("NSO").
2.2 Agreements: The award of an ISO or NSO shall be evidenced by a signed
agreement containing such terms and conditions as the Committee may in its sole
discretion determine ("Agreement"), so long as such terms and conditions are not
inconsistent with this Plan. An ISO Agreement shall specify that the Award is
intended to qualify as an Incentive Stock Option, as such term is defined in
Section 422 of the Code and Options issued thereunder shall comply with the
applicable provisions of the Code.
2.3 Exercise Price: The purchase price of Common Stock under each ISO or
NSO (the "Exercise Price") shall be (a) with respect to ISOs, not less than the
Fair Market Value of the Common Stock, on the date the ISO is awarded except
that, in the case of a grantee who is a 10% or greater stockholder in the
Corporation, not less than 110% of the fair market value of the Common Stock, on
the date the ISO is awarded, provided that the Exercise Price shall be adjusted
by the Committee with respect to Awards not already granted to remain consistent
with restrictions imposed by the Code and (b) with respect to NSOs, not less
than eighty-five percent (85%) of the Fair Market Value of the Common Stock, on
the date that the NSO is awarded. In no event shall the Exercise Price of an ISO
or NSO be less than the par value of the Common Stock. "Fair Market Value"
means: (i) if the Common Stock is at the time listed or admitted to trading on a
stock exchange, The Nasdaq Stock Market, or an over-the-counter market, the
closing price of the Common Stock on the date the determination of value is to
be established pursuant to the Agreement or notice, as such prices are reported
by the exchange, The Nasdaq Stock Market, or a publication of general
circulation selected by the Committee and regularly reporting the market price
of the Common Stock, to the extent consistent with applicable laws and
regulations. If no reported quotation or sale of Common Stock takes place on the
date in question, the last reported closing price of the Common Stock shall be
determinative; or (ii) if the Common Stock is not at the time listed or admitted
to trading on a stock exchange, The Nasdaq Stock Market, or an over-the-counter
market, the price of the Common Stock on the date the determination of value is
to be established pursuant to the Agreement or notice, as such price is
determined by the Committee consistent with applicable laws and regulations.
2.4 Exercise and Term of Options:
a. Options shall be exercisable at such time and subject to such
restrictions and conditions as the Committee shall approve, either at the
time of grant of such Options or pursuant to a general determination, which
need not be the same for all Participants. The Committee shall establish
procedures governing the exercise of Options and shall require that written
notice of exercise be given and that the Exercise Price be paid in full. In
connection with any Award, the Committee may specify such vesting and
forfeiture provisions as it deems appropriate. To the extent permitted by
law, and consistent with Rule 16b-3, the Committee may permit a
Participant, in lieu of paying the Exercise Price in full in cash, to make
payment in Common Stock already owned by the Participant, or in the value
of surrendered Options which are then exercisable, valued at Fair Market
Value on the date of exercise, as partial or full payment of the Exercise
Price. As soon as practicable after receipt of full payment, the
Corporation shall deliver to the Participant a certificate or certificates
representing the acquired shares of Common Stock.
b. Subject to such terms and conditions as the Committee may establish
from time-to-time, which terms and conditions with respect to ISOs shall
not be inconsistent with the applicable provisions of the Code and the Act,
the Options may be exercised at any time prior to the expiration date of
the Option established by the Committee at the time of the Award.
c. Subject to the terms and conditions established by the Committee,
Options may be exercised either for the total number of shares to which the
Options relate or to such portion or portions thereof as the Participant
shall determine. Unless otherwise provided in the Agreement, or the Code,
Options may be exercised without regard to the sequence in which such
Options were granted.
2.5 Limitation on ISOs: Notwithstanding anything in the Plan to the
contrary, the following additional conditions shall apply to the grant of
Options which are intended to qualify as ISOs, which additional conditions may
be modified from time-to-time by the Committee to remain consistent with the
Code.
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a. The aggregate Fair Market Value (determined as of the date the ISO
is granted) of shares of Common Stock with respect to which ISOs are
exercisable for the first time by any Participant during any calendar year
(under all ISO plans of the Corporation) shall not exceed the amount
specified by the Code; provided that, to the extent that such limitation is
exceeded, any excess Options shall be deemed to be NSOs.
b. All ISOs must be granted within ten years of the earlier of the
date on which this Plan was adopted by the Corporation's Board of Directors
or the date this Plan was approved by the stockholders.
c. Unless sooner exercised, terminated, or cancelled, all ISOs shall
expire no later than ten years after the date of grant or, in the case of a
grantee who is a 10% or greater stockholder in the Corporation, no later
than five years after the date of the grant. The foregoing notwithstanding,
if the Code or regulations promulgated thereunder are subsequently amended
to provide for a different percentage of voting power or maximum option
term for ISOs, such new limits shall be automatically incorporated in this
Section 2.5 and shall apply to any ISOs granted after the effective date of
such amendment.
d. The Agreement shall provide that the ISO is exercisable during the
Participant's lifetime only by the Participant (or the Participant's legal
representative, in the event the Participant is disabled) and that the ISO
is not transferable other than by will or the laws of descent and
distribution.
2.6 Death of Optionee: With respect to ISOs, in the event of the death of
an Optionee:
a. who is at the time of his death an employee of the Corporation and
who shall have been in continuous status as an employee since the date of
grant of the ISO, the ISO may be exercised, at any time within twelve (12)
months following the date of death (but in no event later than the date of
expiration of the term of the ISO as set forth in the Agreement or notice),
by the Optionee's estate or by a person who acquired the right to exercise
the ISO by bequest or inheritance, but only to the extent that the Optionee
had the right to exercise the ISO at the date of death; or
b. which occurs within three (3) months after the termination of
continuous status as an employee, the ISO may be exercised, at any time
within twelve (12) months following the date of death (but in no event
later than the date of expiration of the term of the ISO as set forth in
the Agreement or notice), by the Optionee's estate or by a person who or
entity which acquired the right to exercise the ISO by bequest or
inheritance, but only to the extent of the right to exercise that had
accrued at the date of termination.
2.7 Retirement or Disability: Upon the termination of the Optionee's
employment by reason of Disability or retirement, the Optionee may, within 36
months from the date of such termination of employment, exercise any ISOs to the
extent such ISOs were exercisable at the date of such termination of employment.
Notwithstanding the foregoing, the tax treatment available pursuant to Section
422 of the Code upon the exercise of an ISO may not be available to an Optionee
who exercises any Incentive Stock Options more than (i) 12 months after the date
of termination of employment due to permanent Disability (as defined in Section
22(e)(3) of the Code) or (ii) three months after the date of termination of
employment due to retirement.
2.8 Termination of Status as an Employee: With respect to ISOs, in the
event of termination of a Participant's continuous status as an employee, such
Participant may, but only within three (3) months after such event of
termination of a Participant's continuous status as an employee (but in no event
later than the date of expiration of the term of the ISO as set forth in the
Agreement or notice), exercise his ISO to the extent that he was entitled to
exercise it at the date of termination. To the extent that he was not entitled
to exercise the ISO at the date of such termination, or if he does not exercise
the ISO (which he was entitled to exercise) within the time specified in this
Section 2.8 the ISO shall terminate.
ARTICLE III
RESTRICTED STOCK AWARDS
3.1 Awards of Restricted Stock: The Committee may award to any Participant
shares of Common Stock which are subject to the restrictions described in this
Article and such other terms and conditions as the Committee may prescribe
("Restricted Stock").
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3.2 Restricted Stock Agreement: Shares of Restricted Stock awarded shall be
evidenced by a signed agreement containing such terms and conditions as the
Committee may in its sole discretion determine ("Restricted Stock Agreement"),
so long as such terms and conditions are not inconsistent with this Plan.
3.3 Restriction: Except as provided in Section 3.6, at the time of an Award
of Restricted Stock, the Committee shall establish in its discretion, for each
Participant a vesting schedule and a period of time ("Restricted Period") during
which Restricted Stock may not be sold, assigned, transferred, pledged or
otherwise encumbered, except as hereinafter provided. Except for such
restrictions and subject to this Article III, the Participant shall have all
rights of a stockholder with respect to such Restricted Stock. The Committee
may, in its discretion, accelerate the time at which any or all of the
restrictions shall lapse with respect to any shares of Restricted Stock prior to
the expiration of the Restricted Period or remove any or all of such
restrictions, as it deems appropriate.
3.4 Registration and Redelivery of Restricted Stock: Each certificate of
Restricted Stock shall be registered in the name of the Participant and
deposited by the Participant, together with a stock power endorsed in blank,
with the Corporation. During the Restricted Period the Restricted Stock shall
remain in the possession of the Corporation. At the end of the Restricted
Period, the Corporation shall redeliver to the Participant (or the Participant's
legal representative or personal representative) the certificates of Common
Stock deposited pursuant to this Section. The Common Stock so delivered to the
Participant shall no longer be subject to the provisions of this Article.
3.5 Consideration For and Exchange of Restricted Stock: An Award of
Restricted Stock may provide that the Participant be required to furnish such
consideration for the Award as the Committee shall determine, or may be issued
in exchange for past services or other legal consideration. An Award of
Restricted Stock may provide that such Restricted Stock may be exchanged during
the Restriction Period for other Restricted Stock upon such terms and conditions
as the Committee may permit or shall require.
3.6 Termination of Employment: Unless the Restricted Stock Agreement
otherwise provides, in the event the Participant's employment with the
Corporation and/or its Subsidiaries is terminated for reasons other than death,
Disability or retirement, all Restricted Stock awarded to such Participant which
is still subject to restriction shall be forfeited. For the purposes of this
Section the forfeiture period for each Award of Restricted Stock shall be
separately calculated from the date of the Award. Unless the Restricted Stock
Agreement otherwise provides, the restrictions provided in Section 3.3 shall
terminate on the Participant's death, Disability or attainment of age sixty-five
(65).
ARTICLE IV
RELOAD OPTIONS
4.1 Authorization of Reload Options: Concurrently with the award of any
Option to any Participant in the Plan, the Committee may authorize reload
options ("Reload Options") to purchase for cash or shares a number of shares of
Common Stock up to (i) the number of shares of Common Stock used to exercise the
underlying Option, and (ii) the number of shares of Common Stock used to satisfy
any tax withholding requirement incident to the exercise of the underlying
Option, in either case through the use of shares of Common Stock or vested
Options. Notwithstanding the fact that the underlying Option may be an ISO, a
Reload Option is not intended to qualify as an "incentive stock option" under
Section 422 of the Code.
4.2 Reload Option Amendment: Each ISO and NSO Agreement shall state if the
Committee has authorized Reload Options with respect to the underlying Options.
Upon the exercise of an underlying Option, any additional Reload Option must be
evidenced by an amendment to the underlying Agreement.
4.3 Reload Exercise Price: Unless otherwise established by the Committee,
the Exercise Price per share of Common Stock deliverable upon the exercise of a
Reload Option shall be the fair market value of a share of Common Stock on the
date the grant of the Reload Option becomes effective.
4.4 Term and Exercise: Each Reload Option is fully exercisable two years
from the effective date of grant (or if less than two years remains until the
termination of this Plan, then such Reload Option shall be exercisable within 90
days prior to termination of the Plan). The term of each Reload Option shall be
equal to the remaining option term of the underlying Option.
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4.5 Termination of Employment: No additional Reload Options shall be
granted to Optionees when Options are exercised pursuant to the terms of this
Plan following termination of the Optionee's employment.
4.6 Application Sections: Applicable sections regarding the manner of
payment, restrictions, death, retirement and Disability of the Participant, and
similar provisions relating to the underlying Option, are incorporated by
reference in this Article IV as though fully set forth herein.
ARTICLE V
OTHER STOCK BASED AWARDS AND OTHER BENEFITS
5.1 Other Stock Based Awards: The Committee shall have the right to grant
Awards valued in whole or in part by reference to, or otherwise based on, the
Corporation's Common Stock ("Other Stock Based Awards") which may include,
without limitation, the grant of Common Stock based on certain conditions,
including short-term incentives or the issuance of Common Stock in lieu of cash
under other incentive or deferred compensation programs of the Corporation.
Payment under or a settlement of any such Awards shall be made in such manner
and at such times as the Committee may determine.
5.2 Other Benefits: The Committee shall have the right to provide types of
Awards under this Plan in addition to those specifically referenced, if the
Committee believes that such Awards would further the purposes for which this
Plan was established. Payment under or settlement of any such Awards shall be
made in such manner and at such times as the Committee shall determine.
5.3 Agreements: Awards of Other Stock Based Awards or Other Benefits shall
be evidenced by a signed agreement ("Other Agreement") containing such terms and
conditions as the Committee may in its sole discretion determine.
5.4 Termination of Employment: Unless an Other Agreement otherwise
provides, except in the event of the Participant's death, Disability or
retirement after attaining the age 65, in the event that the Participant
terminates employment with the Corporation and/or its Subsidiaries prior to the
time benefits become payable pursuant to Awards of Other Stock Based Awards or
Other Benefits, such Stock Based Awards and/or Other Benefits shall be
immediately forfeited. Unless an Other Agreement otherwise provides, in the
event of the Participant's death, Disability or retirement after attaining age
65, the Corporation shall pay to the Participant (or the Participant's legal
representative or personal representative) the amount which would have been
payable to the Participant had the Participant satisfied all of the requirements
contained in the Other Agreement calculated as of the date of the occurrence of
an event described in this sentence.
ARTICLE VI
OUTSIDE DIRECTORS
6.1 Automatic Grant: Commencing with the annual meeting of the stockholders
of the Corporation held in the year 2004, and at each annual meeting thereafter,
the Board shall grant each non-employee director who is then serving as a
director an option to purchase a number of shares of Common Stock between two
thousand five hundred (2,500) shares and five thousand (5,000) shares (adjusted
in accordance with Section 1.6(a)). The exercise price of such Option shall be
the Fair Market Value of the Common Stock on the date of the Award. Each Option
shall vest one hundred percent (100%) on the date of the Award.
6.2 Additional Grants: The Committee shall have the authority to make
grants other than the automatic grants referred to above on such terms and
conditions as it may specify and as otherwise may be consistent with this plan.
6.3 Termination of Outside Director Option: Except as otherwise provided in
any written Agreement between the Corporation and the non-employee director, any
NSO granted hereunder will expire on the earlier of (i) ten years after the date
of grant; (ii) one year after the non-employee director terminates his or her
services as a director of the Corporation; (iii) the expiration stated in the
Agreement (as this term is defined in Section 2.2); or (iv) any earlier date
provided in this Article VI.
6.4 Holding Period: Subject to the provisions of Section 7.2 hereof, the
Option may be exercised during its term (i) beginning on the date six months
after the Award, and (ii) after such date only while the option holder is a
director of the Corporation and for a period of twelve months thereafter.
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ARTICLE VII
MISCELLANEOUS PROVISIONS
7.1 Transferability of Options:
a. Incentive Stock Options. ISOs may not be sold, pledged, assigned,
hypothecated, transferred, or disposed of in any manner other than by will
or by the laws of descent or distribution and may be exercised, during the
lifetime of the Participant, only by the Participant or the Participant's
guardian or legal representative.
b. Awards Other Than Incentive Stock Options. All Awards other than
ISOs may be transferred by the Participant to (i) immediate family members,
or (ii) a trust or trusts for the exclusive benefit of immediate family
members. Following transfer, the Awards shall continue to be subject to the
same terms and conditions as were applicable immediately prior to transfer,
provided that the term "Participant" shall be deemed to refer to the
transferee.
7.2 Acceleration Upon Certain Changes: Notwithstanding anything in the Plan
to the contrary, agreements may contain change of control provisions for the
benefit of the Participant as the Committee shall approve (such approval to be
conclusively evidenced by the execution and delivery of such agreements to the
Participants). Change of control provisions shall mean provisions to protect
Participant's interest in the Plan should the Corporation, its stock or its
assets, be acquired by another person or entity, or should the Participant's
employment terminate in connection therewith.
7.3 Tax Withholding: The Committee shall have sole discretion whether to
withhold stock sufficient to satisfy any withholding or other tax due with
respect to the exercise of an Option, the vesting of Restricted Stock or any
similar transaction under the Plan or to demand such amounts in cash. Any tax
withholding effected in shares of Common Stock must comply with Rule 16b-3, if
applicable.
7.4 Amendment and Termination of the Plan:
a. Amendment or Termination. The Committee may amend or terminate the
Plan from time to time in such respects as the Committee may deem
advisable; provided that the following revisions or amendments shall
require approval of the stockholders of the Corporation: (i) any change in
the designation of the class of persons eligible to be granted Awards; (ii)
any change in the number of shares subject to the Plan; or (iii) if
otherwise required by any applicable laws.
b. Effect of Amendment or Termination. Any amendment or termination of
the Plan shall not affect Awards already granted and those Awards shall
remain in full force and effect as if this Plan had not been amended or
terminated, unless mutually agreed otherwise between the Participant and
the Committee, which agreement must be in writing and signed by the
Participant and the Corporation.
7.5 Non-Uniform Determinations: The Committee's determinations, including
without limitation, (a) the Participants' right to receive Awards, (b) the form,
amount and timing of Awards, (c) the terms, conditions and provisions of Awards
(including vesting and forfeiture provisions) and (d) the agreements evidencing
the same, need not be uniform and may be made by it selectively among
Participants who receive, or who are eligible to receive, Awards under the Plan,
whether or not such Participants are similarly situated.
7.6 Limitations on Awards: Shares of Common Stock shall not be issued
pursuant to the exercise or grant of an Award unless the exercise or grant of
such Award and the issuance and delivery of shares of Common Stock shall comply
with all relevant provisions of law, including, without limitation, the
Securities Act of 1933 (the "1933 Act"), as amended, the Act, the rules and
regulations promulgated thereunder, and the requirements of any stock exchange
or quotation system upon which the shares of Common Stock may then be listed,
and shall be further subject to the approval of counsel for the Corporation with
respect to such compliance. In the case of officers and other persons subject to
Section 16(b) of the Act, the Committee, in its discretion, may impose
limitations upon the exercise, delivery or payment of any Award which it
believes are necessary or desirable in order to comply with Section 16(b) of the
Act and the rules and regulations thereunder. The Committee may require any
person receiving Common Stock hereunder to acknowledge that such Common Stock is
being acquired for investment purposes and not with a view for resale or
distribution and such Common Stock shall not be sold or transferred unless in
accordance with applicable law and regulations. If the Corporation, as part of
an offering of securities or otherwise, finds it
27
desirable because of legal or regulatory requirements to reduce the period
during which Options may be exercised, the Committee may, in its discretion and
without the holders' consent, so reduce such period on not less than fifteen
(15) days' written notice to the holders thereof.
7.7 Reservation of Shares of Common Stock: The Corporation, during the term
of this Plan, shall at all times reserve and keep available the number of shares
of Common Stock as shall be sufficient to satisfy the requirements of the Plan.
The inability of the Corporation to obtain authority from any regulatory body
having jurisdiction, which authority is deemed by the Corporation's counsel to
be necessary to the lawful issuance or sale of any shares of Common Stock under
the Plan, shall relieve the Corporation of any liability in respect of the
failure to issue or sell the shares of Common Stock as to which the requisite
authority shall not have been obtained.
7.8 Restrictions on Exercise: To the extent required to comply with Rule
16b-3, no Participant receiving an award under this Plan may dispose of Common
Stock awarded under the Plan prior to the expiration of six months from the date
of grant or dispose of an Option awarded under the Plan, or its underlying
Common Stock, prior to the expiration of six months from the date of acquisition
of the Option.
7.9 Indemnification: Committee members shall be indemnified and held
harmless by the Corporation from any loss, liability, or expense that may be
imposed upon or incurred by such present or past Committee member in connection
with or resulting from any claim, action, or proceeding in which the member is
involved by reason of any action taken or failure to act under the Plan;
provided such member shall give the Corporation an opportunity, at its own
expense, to defend the same. The foregoing right of indemnification shall not be
exclusive of any other rights of indemnification to which such persons may be
entitled under the Corporation's Articles of Incorporation or Bylaws, as a
matter or law, or otherwise, or any power that the Corporation may have to
indemnify them or hold them harmless.
7.10 Rights of Participants: Nothing in the Plan shall interfere with or
limit in any way the right of the Corporation and/or its Subsidiaries to
terminate any Participant's employment, directorship, or consultancy at any
time, nor confer upon any Participant any right to continue in the employment,
directorship, or consultancy for any period of time or to continue his or her
present or any other rate of compensation. No employee, director, or consultant
shall have a right to be selected as Participant, or, having been so selected,
to be selected again as a Participant.
7.11 Requirements of Law: Awards, agreements, notices, and the issuance of
shares of Common Stock shall be subject to applicable laws, rules, and
regulations, and to such approvals by any governmental agencies or securities
exchanges or quotation systems as may be required. The Committee shall determine
whether any Option or Common Stock issued hereunder is required to be registered
under the 1933 Act or may be issued under an exemption. In its sole discretion,
the Corporation may, but is not obliged to, file a registration statement
covering Common Stock issued under the Plan.
7.12 Legend on Stock Certificates: Unless Common Stock issued under the
Plan has been previously registered, issued Common Stock shall bear the
following or similar legend:
"The securities represented by this certificate have not been registered
under the Securities Act of 1933 (the "1933 Act") or under the securities
laws of any state and may not be transferred, assigned, sold, or
hypothecated unless a registration statement under the 1933 Act and the
applicable state laws shall be in effect with respect thereto or an opinion
of counsel satisfactory to the Corporation shall be received to the effect
that registration under the 1933 Act and applicable state securities laws
is not required."
7.13 Effective Date: This Amended and Restated Plan was duly approved by
unanimous consent of the Directors, to be effective when ratified by the
stockholders. No Awards of ISOs shall be made hereunder after February 19, 2013.
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PROXY
COVENANT TRANSPORT, INC.
PROXY FOR ANNUAL MEETING OF STOCKHOLDERS MAY 22, 2003
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 Transport,
Inc., a Nevada corporation (the "Company"), hereby appoint(s) David R. Parker,
Michael W. Miller, and Joey B. Hogan, and each or any of them, attorneys and
proxies of the undersigned, with power of substitution, to vote all of the
Common Stock which 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
22, 2003, at 10:00 a.m., Eastern Time, and at any adjournment thereof, as
follows:
1. Election of Directors
[ ] FOR all nominees listed below [ ] WITHHOLD AUTHORITY to
(except as marked to the vote for all nominees listed below
contrary below)
INSTRUCTION: To withhold authority to vote for any individual nominee, strike a
line through the nominee's name below.
David R. Parker Michael W. Miller Robert E. Bosworth Bradley A. Moline
William T. Alt Hugh O. Maclellan,Jr. Mark A. Scudder Niel B. Nielson
2. Approval of the appointment of KPMG LLP as independent public accountants of
the Company for the year ending December 31, 2003.
[ ] FOR [ ] AGAINST [ ] ABSTAIN
3. Approval of Covenant Transport, Inc. 2003 Incentive Stock Plan.
[ ] FOR [ ] AGAINST [ ] ABSTAIN
4. 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.
[ ] GRANT AUTHORITY to vote [ ] WITHHOLD AUTHORITY to vote
(Continued and to be signed on reverse side)
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(Continued from other side)
A vote FOR Proposals 1, 2, and 3 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 proposals
1, 2, and 3 and, 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 present at the meeting.
The undersigned acknowledges receipt of the Notice and Proxy Statement for
the 2003 Annual Meeting of Stockholders and the Annual Report to Stockholders
for the year ended December 31, 2002.
Date _________________________, 2003
________________________________________________
________________________________________________
Signature(s)
Stockholders should date this proxy and sign here exactly as name
appears at left. If proxy is held jointly, both owners should
sign this proxy. Executors, administrators, trustees, guardians,
and others signing in a representative capacity should indicate
the capacity in which they sign.
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