UNITED
STATES
SECURITIES
AND EXCHANGE COMMISSION
Washington,
D.C. 20549
SCHEDULE
14A
Proxy
Statement Pursuant to Section 14(a) of the Securities Exchange Act of
1934
Filed
by
the Registrant [X]
Filed
by
a Party other than the Registrant [ ]
Check
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Appropriate Box:
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Preliminary
Proxy Statement
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Confidential,
for Use of the Commission Only (as permitted by Rule
14a-6(e)(2))
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[X]
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Definitive
Proxy Statement
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[ ]
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Definitive
Additional Materials
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[ ]
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Soliciting
Material Pursuant to
§ 240.14a-12
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Covenant
Transport, Inc.
(Name
of
Registrant as Specified in its Charter)
N/A
(Name
of
Person(s) Filing Proxy Statement if other than the Registrant)
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of Filing Fee (Check the appropriate box):
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computed on table below per Exchange Act Rules 14a-6(i)(1) and
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of each class of securities to which transaction applies:
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(2)
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Aggregate
number of securities to which transaction applies:
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pursuant
to Exchange Act Rule 0-11 (set forth the amount on
which
the filing fee is calculated and state how it was
determined):
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Proposed
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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
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the date of its filing.
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COVENANT
TRANSPORT, INC.
400
Birmingham Highway
Chattanooga,
Tennessee 37419
___________________________________________
NOTICE
AND PROXY STATEMENT
FOR
ANNUAL MEETING OF STOCKHOLDERS
TO
BE HELD ON MAY 23, 2006
___________________________________________
To
Our
Stockholders:
You
are
cordially invited to attend the 2006 annual meeting of stockholders of Covenant
Transport, Inc., a Nevada corporation, to be held at our principal
executive offices, 400 Birmingham Highway, Chattanooga, Tennessee 37419, at
10:00 a.m. local time, on Tuesday, May 23, 2006, for the following
purposes:
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1.
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To
consider and act upon a proposal to elect seven (7) directors;
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2.
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To
consider and act upon the 2006 Omnibus Incentive Plan for grants
of stock
options, stock-based awards, and other incentive awards;
and
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3.
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To
consider and act upon such other matters as may properly come before
the
meeting and any adjournment
thereof.
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The
foregoing matters are more fully described in the accompanying proxy
statement.
The
Board
of Directors has fixed the close of business on March 29, 2006, as the
record date for the determination of stockholders entitled to receive notice
of
and to vote at the annual meeting or any adjournment thereof. Shares of
Class A and Class B common stock may be voted at the annual meeting
only if the holder is present at the annual meeting in person or by valid proxy.
YOUR
VOTE IS IMPORTANT. To ensure your representation at the annual meeting, you
are
requested to promptly date, sign, and return the accompanying proxy in the
enclosed envelope. You may also vote on the Internet by completing the
electronic voting instruction form found at www.cesvote.com
or by telephone using a touch-tone telephone and calling 1-888-693-8683.
Returning
your proxy now will not interfere with your right to attend the annual meeting
or to vote your shares personally at the annual meeting, if you wish to do
so.
The prompt return of your proxy may save us additional expenses of
solicitation.
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By
Order of the Board of Directors,
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David
R. Parker
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Chairman
of the Board of Directors
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Chattanooga,
Tennessee
April
17,
2006
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GENERAL
INFORMATION
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Voting
Rights
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Quorum
Requirement
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Required
Vote
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Right
to Attend Annual Meeting; Revocation of Proxy
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Costs
of Solicitation
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Annual
Report
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How
to Read this Proxy Statement
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PROPOSAL
1 ELECTION OF DIRECTORS
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Nominees
for Directorships
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CORPORATE
GOVERNANCE
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The
Board of Directors and Its Committees
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Board
of Directors
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Committees
of the Board of Directors
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The
Audit Committee
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Audit
Committee Report for 2005
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The
Compensation Committee
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The
Nominating and Corporate Governance Committee
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Process
for Identifying and Evaluating Director Nominees
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Stockholder
Director Nominee Recommendations
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Director
Compensation
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Our
Executive Officers
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Compliance
with Section 16(a) of the Exchange Act
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Code
of Conduct and Ethics
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EXECUTIVE
COMPENSATION
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Summary
Compensation Table
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Option/SAR
Grants in Last Fiscal Year
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Aggregated
Option/SAR Exercises in Last Fiscal Year and FY-End Option/SAR
Values
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Employment
Agreements
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Compensation
Committee Interlocks and Insider Participation
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Compensation
Committee Report on Executive Compensation
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SECURITY
OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
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STOCK
PERFORMANCE GRAPH
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CERTAIN
RELATIONSHIPS AND RELATED TRANSACTIONS
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RELATIONSHIPS
WITH INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
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Principal
Accounting Fees and Services
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INTRODUCTORY
NOTE TO PROPOSAL 2
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PROPOSAL
2 APPROVAL OF THE ADOPTION OF THE 2006 OMNIBUS INCENTIVE PLAN
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Purposes
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Shares
Available and Maximum Awards
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Administration
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Eligible
Participants
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Types
of Awards
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Payment
Terms
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Adjustments
Upon Certain Events
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Termination
and Amendment of the 2006 Omnibus Plan
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Securities
Act Registration
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New
Plan Benefits
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Tax
Status of 2006 Omnibus Plan Awards
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Limitation
on Income Tax Deduction
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STOCKHOLDER
PROPOSALS
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OTHER
MATTERS
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APPENDIX
A
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400
Birmingham Highway
Chattanooga,
Tennessee 37419
___________________________________________
NOTICE
AND PROXY STATEMENT
FOR
ANNUAL MEETING OF STOCKHOLDERS
TO
BE HELD ON MAY 23, 2006
___________________________________________
GENERAL
INFORMATION
This
proxy statement is furnished in connection with the solicitation of proxies
from
the stockholders of Covenant Transport, Inc., a Nevada corporation, to be
voted at the annual meeting of stockholders, which will be held at our principal
executive offices, 400 Birmingham Highway, Chattanooga, Tennessee 37419, at
10:00 a.m. local time, on Tuesday, May 23, 2006, and any adjournment
thereof. THE
ENCLOSED PROXY IS SOLICITED BY OUR BOARD OF DIRECTORS. If
not
otherwise specified, all proxies received pursuant to this solicitation will
be
voted (i) FOR the director nominees named below; (ii) FOR the approval of the
2006 Omnibus Incentive Plan; and (iii) in accordance with the judgment of the
proxy holders, with respect to any other matters properly brought before the
annual meeting.
The
proxy
statement, proxy card, and our annual report for the fiscal year ended
December 31, 2005, was first mailed on or about April 17, 2006,
to stockholders of record at the close of business on our record date of
March 29, 2006. Except
to the extent it is incorporated by specific reference, the enclosed copy of
our
2005 annual report is not incorporated into this proxy statement and is not
to
be deemed a part of the proxy solicitation material.
The
terms "Company," "we," "us," and "our" refer to Covenant Transport, Inc. and
its
consolidated subsidiaries.
Only
stockholders of record at the close of business on the record date are entitled
to vote at the annual meeting, either in person or by valid proxy. Holders
of
Class A common stock are entitled to one vote for each share held. Holders
of Class B common stock are entitled to two votes for each share held so
long as such shares are owned by David R. Parker or certain members of his
immediate family. In the event that any shares of our Class B common stock
cease
to be owned by Mr. Parker or certain of his family members, such shares
will be automatically converted into shares of our Class A common stock. All
of
the issued and outstanding shares of our Class B common stock are currently
owned by Mr. and Mrs. Parker as joint tenants with rights of
survivorship. Unless otherwise required by Nevada law, the Class A common stock
and Class B common stock vote together as a single class. On March 29, 2006,
the
record date, there were issued and outstanding 11,646,690 shares of Class A
common stock, par value one cent ($0.01) per share, entitled to cast an
aggregate 11,646,690 votes on all matters subject to a vote at the annual
meeting, and 2,350,000 shares of Class B common stock, par value one cent
($0.01) per share, entitled to cast an aggregate 4,700,000 votes on all matters
subject to a vote at the annual meeting. The total number of shares of our
common stock issued and outstanding on the record date was approximately
13,996,690, which is entitled to cast an aggregate of 16,346,690 votes on all
matters subject to a vote at the annual meeting. The total number of issued
and
outstanding shares excludes approximately 1,453,513 shares of Class A
common stock reserved for issuance upon the exercise of outstanding stock
options granted under our incentive stock plans and other arrangements. Holders
of unexercised options are not entitled to vote at the annual meeting. We have
no other class of stock outstanding. Stockholders are not entitled to cumulative
voting in the election of directors. Votes cast at the annual meeting will
be
tabulated by the Inspector of Elections, and the results of all items voted
upon
will be announced at the annual meeting.
In
order
to transact business at the annual meeting, a quorum must be present. A quorum
is present if the holders of a majority of the total number of shares of
Class A and Class B common stock issued and outstanding as of the
record date are represented at the annual meeting in person or by proxy. Shares
that are entitled to vote but that are not voted at the direction of the
holder
(called "abstentions") and shares that are not voted by a broker or other record
holder due to the absence of instructions from the beneficial owner (called
"broker non-votes") will be counted for the purpose of determining whether
a
quorum is present.
Directors
are elected by an affirmative vote of a plurality of the total votes cast by
stockholders entitled to vote and represented in person or by proxy at the
annual meeting, which means that the seven director nominees receiving the
highest number of votes for their election will be elected. Approval of any
other matter submitted to stockholders requires the affirmative vote of a
majority of the votes cast by stockholders entitled to vote and represented
in
person or by proxy at the annual meeting. Abstentions and broker non-votes
are
not considered affirmative votes and thus will have no effect on the election
of
directors by a plurality vote, but will have the same effect as negative votes
with respect to the approval of any other matter submitted to
stockholders.
Returning
a proxy card now will not interfere with your right to attend the annual meeting
or to vote your shares personally at the annual meeting, if you wish to do
so.
Stockholders who execute and return proxies may revoke them at any time before
they are exercised by giving written notice to our Secretary at our address,
by
executing a subsequent proxy and delivering it to our Secretary, or by attending
the annual meeting and voting in person.
We
will
bear the cost of solicitation of proxies, which we expect to be nominal and
will
include reimbursements for the charges and expenses of brokerage firms and
others for forwarding solicitation materials to beneficial owners of our
outstanding Class A common stock. Proxies will be solicited by mail, and may
be
solicited personally by directors, officers, or our regular employees, who
will
not receive any additional compensation for any such services.
The
information included in this proxy statement should be reviewed in conjunction
with the Consolidated Financial Statements, Notes to Consolidated Financial
Statements, Report of Independent Registered Public Accounting Firm, and other
information included in our 2005 annual report that was mailed on or about
April
17, 2006, together with this notice and proxy statement, to all stockholders
of
record as of the record date.
Set
forth
below are the proposals to be considered by stockholders at the annual meeting,
as well as important information concerning, among other things, our management
and our Board of Directors; executive compensation; transactions between us
and
our officers, directors, and affiliates; the stock ownership of certain
beneficial owners and management; the services provided to us by and fees of
KPMG LLP, our independent registered public accounting firm; and how
stockholders may make proposals at our next annual meeting. EACH STOCKHOLDER
SHOULD READ THIS INFORMATION BEFORE VOTING.
How
to Vote - Proxy Instructions
If
you
are a holder of record of Covenant Transport, Inc. of Class A or Class B common
stock, you may vote your shares either (i) over the telephone by calling a
toll-free number, (ii) by using the Internet, or (iii) by mailing in your proxy
card. Owners who hold their shares in street name will need to obtain a voting
instruction form from the institution that holds their stock and must follow
the
voting instructions given by that institution.
For
2006,
we have arranged for telephone and Internet-voting procedures to be used. These
procedures have been designed to authenticate your identity, to allow you to
give instructions, and to confirm that those instructions have been recorded
properly. If you choose to vote by telephone or by using the Internet, please
refer to the specific instructions on the proxy card. The deadline for voting
by
telephone on the Internet is 11:59 p.m. Eastern Standard Time on Monday, May
22,
2006. If you wish to vote using the proxy card, complete, sign, and date your
proxy card and return it to us before the meeting.
ELECTION
OF DIRECTORS
At
the
annual meeting, the stockholders will elect seven directors to serve as the
Board of Directors until our 2007 annual meeting of stockholders or until their
successors are duly elected and qualified. Upon the recommendation of the
Nominating and Corporate Governance Committee, our Board of Directors has
nominated for election as directors David R. Parker,
William T. Alt, Robert E. Bosworth,
Hugh O. Maclellan, Jr., Bradley A. Moline, Niel B.
Nielson, and Mark A. Scudder, each of whom is presently serving as a
director. In the absence of contrary instructions, each proxy will be voted
for
the election of all the proposed directors.
THE
BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS A VOTE "FOR" EACH OF THE DIRECTOR
NOMINEES.
Information
concerning the names, ages, positions with us, tenure as a director, and
business experience of the nominees standing for election as directors at the
annual meeting is set forth below. All references to experience with us include
positions with our operating subsidiary, Covenant Transport, Inc., a
Tennessee corporation.
David R. Parker,
48, has
served as President since our founding in 1985 and as Chairman of the Board
and
Chief Executive Officer since 1994. Mr. Parker was elected to the Board of
Directors of the Truckload Carriers' Association in 1994 and also serves on
the
Board of Directors of the American Trucking Associations.
William T. Alt,
69, has
served as a director since 1994. Mr. Alt has engaged in the private
practice of law since 1962 and has served as outside counsel to the Company
since 1986.
Robert E. Bosworth,
58, has
served as a director since 1998. Since September 19, 2005, Mr. Bosworth has
served as the President and Chief Operating Officer of Chattem, Inc., a publicly
traded consumer products company. Prior to such position, Mr. Bosworth
served as Chief Financial Officer for the Livingston Company, a merchant bank
located in Chattanooga, Tennessee, since 2004, and as Livingston’s Vice
President of Corporate Finance since 2001. From 1998 until 2001,
Mr. Bosworth was a business and management consultant to various
corporations in the Chattanooga area. Prior to 1998, Mr. Bosworth served
for more than five years as Executive Vice President and Chief Financial Officer
of Chattem, Inc. Mr. Bosworth is a director of Chattem, Inc.
Hugh O. Maclellan, Jr.,
66,
has
served as a director since 1994. Mr. Maclellan is President of the
Maclellan Foundation, Inc. and serves on the Boards of UnumProvident Corporation
and SunTrust Bank, Chattanooga, N.A.
Bradley A. Moline,
39, has
served as a director since 2003. Mr. Moline has been President
and Chief Executive Officer of Allo Communications, LLC, a competitive local
telephone company, since October 2002. Mr. Moline also has been the owner
and President of Imperial Super Foods, a grocery store in Imperial, Nebraska,
since February 2002. Mr. Moline was the President of Forte Technologies, a
contract manufacturer of high precision parts, from February 2001 until February
2002. From 1997 to May 2001, Mr. Moline was the Senior Vice President of
Finance and Chief Financial Officer of Birch Telecom, Inc., an integrated
communications provider. Mr. Moline resigned from his position at Birch
Telecom, Inc. to take the position with Forte Technologies more than sixteen
months prior to Birch Telecom, Inc.'s filing of a petition under the federal
bankruptcy laws in September 2002. From 1994 to 1997, Mr. Moline was our
Treasurer and Chief Financial Officer.
Niel B. Nielson,
52, has
served as a director since 2003. Dr. Nielson has been President of Covenant
College since 2002. From 1997 until 2002, Dr. Nielson was the Associate
Pastor of Outreach for College Church in Wheaton, Illinois. Dr. Nielson was
a partner and trader for Ritchie Capital Markets Group, LLC from 1996 to
1997. Prior to 1996, Dr. Nielson served as an executive officer in various
companies, including serving for two years as Senior Vice President of Chicago
Research and Trading Group, Ltd., a company at which he was employed for nine
years. Dr. Nielson holds twelve investment company directorships in the
First Trust Fund Complex.
Mark A. Scudder,
43, has
served as a director since 1994. Mr. Scudder has been an attorney for more
than ten years with Scudder Law Firm, P.C., L.L.O., Lincoln, Nebraska, and
has been President of the firm since January 1, 2003. The firm is our
outside corporate and securities counsel. Mr. Scudder is a director of
Knight Transportation, Inc., a publicly traded truckload carrier, and
Genesee & Wyoming Inc., a publicly traded, international
short-line railroad.
Meetings.
Our
Board
of Directors held four regularly scheduled meetings and one special meeting
during the fiscal year ended December 31, 2005. All of our directors
attended at least 75% of the regularly scheduled meetings of the Board of
Directors and each committee on which he served. Mr. Maclellan missed one
regularly scheduled meeting and the special meeting. We encourage the members
of
our Board of Directors to attend our annual meetings of stockholders. All seven
of our then-current directors attended the 2005 annual meeting of stockholders.
Director
Independence. Our
Class
A common stock is listed on the Nasdaq National Market. Therefore, it is subject
to the listing standards, including standards relating to corporate governance,
embodied in applicable rules promulgated by the National Association of
Securities Dealers, Inc. (the "NASD"). Pursuant to NASD Rule 4350(c)(1),
the Board of Directors has determined that the following directors and nominees
are "independent" under NASD Rule 4200(a)(15): Robert E. Bosworth,
Hugh O. Maclellan, Jr., Bradley A. Moline, and Niel B.
Nielson. In accordance with NASD Rule 4350(c)(2), our independent directors
held meetings, referred to as "executive sessions," at which only the
independent directors were present, either before or following each regularly
scheduled meeting of the full Board of Directors.
Communications
with the Board of Directors. Our
Board
of Directors has adopted procedures by which our stockholders may communicate
with our Board regarding matters of substantial importance to us. Information
concerning the manner in which stockholders can communicate with the Board
is
available on our website at http://www.covenanttransport.com.
Functions,
Composition, and Meetings of the Audit Committee. Our
Audit
Committee operates pursuant to a written Audit Committee Charter. A copy of
the
Third Amended and Restated Audit Committee Charter was included as Appendix
A to
our proxy statement relating to our 2004 annual meeting of stockholders filed
with the Securities and Exchange Commission (the "SEC") on April 19, 2004,
and is available to stockholders on our website at http://www.covenanttransport.com.
The
responsibilities of the Audit Committee are set forth in the Audit Committee
Report, which appears below. The Audit Committee met eight times during 2005.
Messrs. Bosworth and Moline have served on the Audit Committee since 2003,
while
Dr. Nielson has served on the Audit Committee since 2004. Mr. Bosworth
serves as Chairman of the Audit Committee.
Each
member of the Audit Committee satisfies the independence and audit committee
membership criteria set forth in NASD Rule 4350(d)(2). Specifically, each
member of the Audit Committee:
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is
independent under NASD Rule 4200(a)(15);
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meets
the criteria for independence set forth in Rule 10A-3(b)(1) under the
Securities Exchange Act of 1934, as amended (the "Exchange
Act");
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did
not participate in the preparation of our financial statements or
the
financial statement of any of our current subsidiaries at any time
during
the past three years; and
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is
able to read and understand fundamental financial statements, including
our balance sheet, statement of operations, and cash flows
statement.
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Audit
Committee Financial Expert. The
Board
of Directors has determined that at least one "audit committee financial
expert," as defined under Item 401(h) of Regulation S-K and NASD
Rule 4350(d)(2)(A), currently serves on the Audit Committee. The Board of
Directors has identified Mr. Bosworth as an audit committee financial
expert. Mr. Bosworth is independent, as independence for audit committee
members is defined under applicable NASD rules.
Audit
Committee Report. In
performing its duties, the Audit Committee, as required by applicable rules
of
the SEC, issues a report recommending to the Board of Directors that our audited
financial statements be included in our annual report on Form 10-K, and
determines certain other matters, including the independence of our independent
registered public accounting firm. The Audit Committee Report for 2005 is set
forth below.
The
Audit Committee Report shall not be deemed to be incorporated by reference
into
any filing made by us under the Securities Act of 1933, as amended (the
"Securities Act"), or the Exchange Act, notwithstanding any general statement
contained in any such filings incorporating this proxy statement by reference,
except to the extent we incorporate such report by specific
reference.
The
primary purpose of the Audit Committee is to assist the Board of Directors
in
fulfilling its oversight responsibilities relating to the quality and integrity
of the Company's financial reports and financial reporting processes and systems
of internal control over financial reporting. The Company's management has
primary responsibility for the Company's financial statements and the overall
reporting process, including maintenance of the Company's system of internal
control. The Company retains an independent registered public accounting firm,
which is responsible for conducting an independent audit of the Company's
financial statements, the effectiveness of management's assessment of internal
control over financial reporting, and the effectiveness of internal control
over
financial reporting in accordance with the standards of the Public Company
Accounting Oversight Board (United States) and issuing reports
thereon.
In
performing its duties, the Audit Committee has discussed the Company's financial
statements, management's assessment of internal control over financial
reporting, and the effectiveness of internal control over financial reporting
with management and the Company's independent registered public accounting
firm
and, in issuing this report, has relied upon the responses and information
provided to the Audit Committee by management and such accounting firm. For
the
fiscal year ended December 31, 2005, the Audit Committee (i) reviewed and
discussed the audited financial statements, management's assessment of internal
control over financial reporting, and the effectiveness of internal control
over
financial reporting with management and KPMG LLP, the Company's independent
registered public accounting firm; (ii) discussed with the independent
registered public accounting firm the matters required to be disclosed by
Statement on Auditing Standards No. 61, Communication
with Audit Committees,
as
amended; (iii) received and discussed with the independent registered public
accounting firm the written disclosures and the letter from such accounting
firm
required by Independence Standards Board Statement No. 1, Independence
Discussions with Audit Committees,
as
amended; and (iv) has discussed with the independent registered public
accounting firm its independence. The Audit Committee met with representatives
of the independent registered public accounting firm without management or
other
persons present on two occasions during 2005.
Based
on
the foregoing reviews and meetings, the Audit Committee recommended to the
Board
of Directors that the audited financial statements be included in the annual
report on Form 10-K for the fiscal year ended December 31, 2005, for filing
with
the SEC.
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Audit
Committee:
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Robert
E. Bosworth, Chairman
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Bradley
A. Moline
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Niel
B. Nielson
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Functions,
Composition, and Meetings of the Compensation Committee.
As more
fully outlined in the Compensation Committee Charter, the primary functions
of
the Compensation Committee are to aid our Board in discharging its
responsibilities relating to the compensation of our executive officers,
including the chief executive officer; to evaluate and approve our compensation
plans, policies, and programs; to produce an annual report on executive
compensation; and to perform such other duties as may be assigned to it by
our
Board or imposed by applicable laws or regulations. In furtherance of its
duties, the Compensation Committee reviews and approves certain aspects of
compensation of our executive officers and makes recommendations on other
compensation matters to the full Board of Directors. For most of 2005,
Messrs. Moline and Maclellan served as the members of the Compensation
Committee, with Mr. Moline serving as Chairman. The Compensation Committee
held a total of three meetings in 2005, all of which were regular meetings.
The
Board of Directors appointed Dr. Nielson to the Compensation Committee in
November 2005. On December 31, 2005, Mr. Moline resigned from the Compensation
Committee.
Compensation
Committee Charter. Our
Board
adopted a written charter for the Compensation Committee in April 2004. A copy
of the charter is available to stockholders on our website at http://www.covenanttransport.com.
Report
of the Compensation Committee. The
Compensation Committee Report on Executive Compensation for 2005 is set forth
below under the section titled "Executive Compensation - Compensation Committee
Report on Executive Compensation."
Functions,
Composition, and Meetings of the Nominating and Corporate Governance Committee.
In
April
2004 the Board of Directors established a Nominating and Corporate Governance
Committee to recommend to the Board of Directors potential candidates for
election to the Board of Directors and to make recommendations to the Board
concerning issues related to corporate governance, as more specifically detailed
in the written charter discussed below. During 2005, Mr. Maclellan and
Dr. Nielson served as the Nominating and Corporate Governance Committee,
with Mr. Maclellan serving as Chairman. All current members of the
Nominating and Corporate Governance Committee are independent, as independence
for nominating committee members is defined under applicable NASD rules. The
Committee met three times in 2005. The Nominating and Corporate Governance
Committee has recommended that the Board of Directors nominate David R.
Parker, William T. Alt, Robert E. Bosworth,
Hugh O. Maclellan, Jr., Bradley A. Moline, Niel B.
Nielson, and Mark A. Scudder for election at the annual meeting, each of
whom is currently serving as a director.
Nominating
and Corporate Governance Committee Charter. A
written
charter for the Nominating and Corporate Governance Committee was adopted in
April 2004. A copy of the charter is available to stockholders on our website
at
http://www.covenanttransport.com.
Process
for Identifying and Evaluating Director Nominees.
Director
nominees are chosen by the entire Board of Directors, after considering the
recommendations of the Nominating and Corporate Governance Committee. The
members of the Nominating and Corporate Governance Committee review the
qualifications of various persons to determine whether they are qualified
candidates for membership on the Board of Directors. The Nominating and
Corporate Governance Committee will review all candidate recommendations,
including those properly submitted by stockholders, in accordance with the
requirements of its charter. With regard to specific qualities and skills,
the
Nominating and Corporate Governance Committee believes it necessary that:
(i) at least a majority of the members of the Board of Directors qualify as
"independent" under NASD Rule 4200(a)(15); (ii) at least three members
of the Board of Directors satisfy the audit committee membership criteria
specified in NASD Rule 4350(d)(2); and (iii) at least one member of
the Board of Directors eligible to serve on the Audit Committee has sufficient
knowledge, experience, and training concerning accounting and financial matters
so as to qualify as an "audit committee financial expert" within the meaning
of
Item 401(h) of Regulation S-K. In addition to these specific
requirements, the Nominating and Corporate Governance Committee takes into
account all factors it considers appropriate, which may include experience,
accomplishments, education, understanding of our business and the industry
in
which we operate, specific skills, general business acumen, and personal and
professional integrity. Generally, the Nominating and Corporate Governance
Committee will first consider current Board members because they meet the
criteria listed above and possess knowledge of our history, strengths,
weaknesses, goals, and objectives. We do not pay a fee to any third party to
identify or evaluate or assist in identifying or evaluating potential nominees.
Stockholder
Director Nominee Recommendations.
It is
generally the policy of the Nominating and Corporate Governance Committee to
consider stockholder recommendations of proposed director nominees if such
recommendations are serious and timely received. To be timely, recommendations
must be received in writing at our principal executive offices, 400 Birmingham
Highway, Chattanooga, Tennessee 37419, at least 120 days prior to the
anniversary date of mailing of our proxy statement for the prior year's annual
meeting. For the 2007 annual meeting, the deadline for receiving stockholder
recommendations of proposed director nominees will be December 17, 2006. In
addition, any stockholder director nominee recommendation must include the
following information:
|
•
|
the
proposed nominee's name and qualifications and the reason for such
recommendation;
|
|
•
|
the
name and record address of the stockholder(s) proposing such
nominee;
|
|
•
|
the
number of shares of our Class A and/or Class B common stock that
are
beneficially owned by such stockholder(s); and
|
|
•
|
a
description of any financial or other relationship between the
stockholder(s) and such nominee or between the nominee and us or
any of
our subsidiaries.
|
In
order
to be considered by the Board, any candidate proposed by one or more
stockholders will be required to submit appropriate biographical and other
information equivalent to that required of all other director candidates.
Directors
who are not our employees or employees of one of our subsidiaries currently
receive a $15,000 annual retainer, $1,000 per Board of Directors meeting
attended in person, and $500 per Board of Directors meeting attended by
telephone. An additional annual retainer of $5,000 is paid to the Audit
Committee Chairman, and an additional annual retainer of $2,500 is paid to
the
Compensation Committee Chairman. The Board has not established a retainer for
the Nominating and Corporate Governance Committee Chairman. Committee members
also receive $500 for committee meetings attended that occur on days separate
from board meetings. In May 2005, the Board of Directors granted each
non-employee director an option to purchase 2,500 shares of our Class A
common stock, under the Outside Director Stock Option Plan, at $13.64 per share,
the closing price on the date of the grant. The options immediately vested
and
must be exercised within ten (10) years of the date of the grant. We also
reimburse our non-employee directors for travel and other related expenses
incurred in attending such meetings.
Directors
who are our employees or employees of one of our subsidiaries do not receive
compensation for board or committee service.
Set
forth
below is certain information regarding our current executive officers and
significant employees. All executive officers are elected annually by the Board
of Directors.
Michael W. Miller,
48, has
served as our Executive Vice President and Chief Operating Officer since 1997.
He previously served as our Vice President of Operations from 1993 to 1997
and
in various other positions from 1987 to 1993. Mr. Miller has over 25 years
of experience in the transportation industry. Mr. Miller also served as a
director until the May 2004 annual meeting.
Joey
B. Hogan,
44, has
served as our Chief Financial Officer since 1997. Mr. Hogan has been an
Executive Vice President since May 2003 and was a Senior Vice President from
December 2001 to May 2003. From joining us in August 1997 through December
2001,
Mr. Hogan also served as our Treasurer. In 1996 and 1997, Mr. Hogan
served as Chief Financial Officer of The McKenzie Companies in Cleveland,
Tennessee, a group of privately owned companies. From 1986 to 1996,
Mr. Hogan served in various capacities, including three years as Director
of Finance, with Chattem, Inc.
L. D. "Micky"
Miller, III,
53, has
served as our Executive Vice President - Sales and Marketing since joining
us in
December 2002. Mr. Miller has over 25 years of sales and operations
experience in the trucking industry. From January 1998 to November 2002,
Mr. Miller was co-owner of, but was not involved in the day-to-day
management of, two privately owned trucking companies, one of which was a
truckload carrier and the other of which was a less-than-truckload carrier.
From
1985 to 1995, Mr. Miller served as President and Chief Executive Officer of
Crown Transport Systems Inc., division of U.S. Xpress Enterprises, Inc.
From 1995 to 1997, Mr. Miller served as Chairman of the CSI/Crown division
of U.S. Xpress Enterprises, Inc. In March 2003, Ida-Tran Freight Systems, of
which Mr. Miller was an officer and co-owner, voluntarily filed a
bankruptcy petition in the United States District Court for the District of
Idaho. In October 2003, a petition was filed against Mr. Miller in the
United States Bankruptcy Court for the Northern District of Georgia.
R.H. Lovin,
Jr.,
54, has
served in several senior management positions since joining us in 1986.
Mr. Lovin has been our Senior Vice President - Administration since
February 2003, and Corporate Secretary since August 1995.
Mr. Lovin previously served as our Chief Financial Officer from 1986 to
1994, as Vice President of Administration from May 1994 to May 2003, and as
director from May 1994 to May 2003.
Tony
Smith,
58, has
served as President of Southern Refrigerated Transport, Inc., one of our
subsidiaries, since 1998. Mr. Smith also served as President of Tony Smith
Trucking, Inc., a former subsidiary, from October 1998 to December 2004.
Richard
L. Towe,
52, has
served in several senior management positions since joining us in 1992. Mr.
Towe
has been our Senior Vice President - Driver Management since February 2003.
Mr.
Towe previously served as a Fleet Manager from 1992 to1993, as Director of
Driver Relations from 1993 to October 1998, and as Vice President of Driver
Relations from October 1998 to February 2003.
Jeffery
Acuff, 43,
has
served in several management positions since joining us in 1987. Currently,
Mr.
Acuff serves as Vice President and General Manager of our Expedited Team service
offering and has done so since August 2005. Previously, Mr. Acuff served as
our Vice President of Customer Service from July 2000 to August 2005.
Jeffrey
Paulsen,
40, has
served as our Senior Vice President and General Manager of our Regional service
offering since joining us in November 2005. Mr. Paulsen joined us with over
fifteen (15) years of experience in the transportation industry obtained with
Werner Enterprises, Inc. While at Werner, Mr. Paulsen served as Vice President
Field Sales from July 2004 to November 2005, and Associate Vice President Field
Sales from July 2002 to July 2004, where he managed Werner’s outside sales
force. Prior to that, Mr. Paulsen served as the Senior Sales
Director-West/Southwest, Western Canada, and Mexico from July 2001 to July
2002,
where he oversaw Werner’s international business, including border crossing
procedures and Mexican carrier relationships. From June 1999 to July 2001 Mr.
Paulsen served as Werner’s Sales Director of the West/Southwest where he was
responsible for coordinating the sales of various service offerings and
directing rate and fuel surcharge initiatives.
Jeffrey
Taylor, 39,
has
served as our Vice President and General Manager of our Refrigerated service
offering since joining us in September 2005. Prior to joining us, Mr. Taylor
served as the Director of Air Cargo Executive Support for Xpress Global Systems
from September 2004 to February 2005, where he was responsible for managing
the
sales team, forecasting developed sales, and developing capacity for the
linehaul division. Prior to his employment at Xpress Global Systems, Mr. Taylor
served as the Vice President of Operations and Sales of Jim Palmer Trucking
from
January 2000 to September 2004.
See
"Nominees
for Directorships" above for information concerning the business experience
of
David R. Parker.
Compliance
with Section 16(a) of the Exchange
Act
Section 16(a)
of the Exchange Act requires our officers and directors, and persons who own
more than 10% of a registered class of our equity securities, to file reports
of
ownership and changes in ownership with the SEC. Officers, directors, and
greater than 10% stockholders are required by SEC regulations to furnish us
with
copies of all Section 16(a) forms they file. Based solely upon a review of
the copies of such forms furnished to us, we believe that our officers,
directors, and greater than 10% beneficial owners complied with all
Section 16(a) filing requirements applicable to them during the fiscal year
ended December 31, 2005. We make available copies of Section 16(a)
forms that our directors and executive officers file with the SEC through our
website at http://www.covenanttransport.com.
Code
of Conduct and Ethics
Our
Board
of Directors has adopted a Code of Conduct and Ethics that applies to all
directors, officers, and employees, whether with us or one of our subsidiaries.
The Code of Conduct and Ethics includes provisions applicable to our principal
executive officer, principal financial officer, principal accounting officer
or
controller, or persons performing similar functions that constitute a "code
of
ethics" within the meaning of Item 406(b) of Regulation S-K. A copy of
the Code of Conduct and Ethics is available to stockholders on our website
at
http://www.covenanttransport.com.
The
following table sets forth information concerning the annual and long-term
compensation paid to our Chief Executive Officer and the four other most highly
compensated executive officers, to whom we refer as the named executive
officers, for services to us in all capacities for the fiscal years ended
December 31, 2005, 2004, and 2003.
|
Long-Term
Compensation
|
||||||
|
Annual
Compensation
|
Awards
|
|||||
|
Name
and Principal
Position
|
Year
|
Salary
|
Bonus
|
Other
Annual
Compensation(1)
|
Securities
Underlying
Options
(#)
|
All
Other Compensation(2)
|
|
David
R. Parker
Chairman,
President, and
Chief
Executive Officer
|
2005
2004
2003
|
$535,000
$545,798
$530,856
|
-
$ 126,083(4)
-
|
$35,417
$26,592
$37,713
|
15,690(4)
10,000(4)
16,891
|
$81,411
$42,429
$54,961
|
|
Michael
W. Miller
Executive
Vice President
and
Chief Operating Officer
|
2005
2004
2003
|
$282,527
$286,485
$272,506
|
-
$ 67,297(4)
-
|
-
-
$27,600
|
13,307(4)
10,000(4)
13,537
|
-
-
-
|
|
Joey
B. Hogan
Executive
Vice President
and
Chief Financial Officer
|
2005
2004
2003
|
$212,537
$210,896
$194,647
|
-
$
50,626(4)
-
|
-
-
-
|
12,285(4)
10,000(4)
12,612
|
-
-
-
|
|
L. D. "Micky"
Miller, III
Executive
Vice President-
Sales
and Marketing
|
2005
2004
2003
|
$223,271
$185,282
$169,874
|
-
$
44,030(4)
-
|
-
-
-
|
9,487(4)
7,500(4)
7,500
|
-
-
-
|
|
Tony
Smith, President of
Southern
Refrigerated
Transport,
Inc.
|
2005
2004
2003
|
$209,302
$185,827
$243,573
|
$
112,549(3)
$
62,291(4)
$ 120,000(5)
|
-
-
-
|
12,076(4)
7,500(4)
8,961
|
-
-
-
|
__________________________
|
(1)
|
For
all named executive officers other than Mr. Parker in all years and
Michael W. Miller in 2003, other annual compensation did not exceed
10% of such named executive officer's total salary and bonus. The
amounts
listed for Mr. Parker reflect reimbursement for the payment of taxes
payable by Mr. Parker because of the change in method of payments
made to
fund the split-dollar life insurance policy as well as the method
of
payment of the term life insurance policy discussed under footnote
2
below. The amount listed for Mr. Michael Miller reflects the amount
of a company car allowance for him for 2003.
|
|
(2)
|
Mr. Parker's
other compensation under the column "All Other Compensation" in 2005,
2004, and 2003 includes the amount of compensation he received to
make
payments on a split-dollar life insurance policy and its replacement
term
life insurance policy. Under agreements entered into in December
1992 and
December 2001, we were obligated to provide split-dollar life insurance
arrangements for Mr. Parker. In years prior to 2002, we paid the
premiums, were 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. In response
to
the Sarbanes-Oxley Act of 2002, we began to pay Mr. Parker, as
compensation, amounts that Mr. Parker uses to pay insurance premiums
on the split-dollar life insurance policy. In July 2005, we cancelled
Mr.
Parker’s split-dollar life insurance policy and elected to instead supply
a term life insurance policy. Under the new arrangement, we pay Mr.
Parker, as compensation, amounts that Mr. Parker uses to pay premiums
on
the term life insurance policy.
|
|
(3)
|
The
amount reflects cash bonus earned by Tony Smith in 2005. Mr. Smith,
as
President of our subsidiary SRT, was awarded a cash bonus pursuant
to the
SRT cash bonus program.
|
|
(4)
|
The
amount reflects cash portion of bonus earned by the named executive
officer in 2004. The cash portion is equal to the percentage of the
bonus
earned under the named executive officers' compensation program elected
in
the form of cash by the recipient. In accordance with the program,
at
least 25% must be accepted through the issuance of immediately exercisable
stock options at the rate of an option on 100 shares for each $1,000
of
bonus payment foregone, and the recipient may elect to receive up
to 100%
of the bonus in the form of stock options. In 2002, the
named
|
|
executive
officers received options under the compensation program to purchase
the
following numbers 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; and Tony
Smith-1,461. These stock options are included under the "Securities
Underlying Options" column above for 2003, the year the grant was
made.
For 2004, the named executive officers received options under the
compensation program to purchase the following numbers of shares
of
Class A common stock at the $21.43 fair market value on
February 16, 2005 (the date of the grant): David Parker-5,690;
Michael Miller-3,037; Joey Hogan-2,285; L.D. "Micky" Miller, III-1,987;
and Tony Smith-2,076. These stock options are included under the
"Securities Underlying Options" column above for 2005, the year the
grant
was made.
|
|
|
(5)
|
The
amount includes a $120,000 bonus paid in 2003 pursuant to an employment
agreement we entered into in 1998 with Mr. Smith, in connection with
our
acquisition of Southern Refrigerated Transport, Inc. and Tony Smith
Trucking, Inc. The employment agreement terminated in October
2003.
|
The
following table lists stock options granted to the named executive officers
during the fiscal year ended December 31, 2005. We have not granted
any stock appreciation rights ("SARs").
|
Individual
Grants
|
Potential
realizable value at assumed annual rates of stock price appreciation
for
option term
|
|||||
|
Name
|
Number
of securities underlying options/SARs granted (#)(1)
|
Percent
of total options/SARs granted to employees in fiscal year
|
Exercise
or base price
($/Sh)
|
Expiration
Date(2)
|
5%
($)
|
10% ($)
|
|
David
R. Parker
|
5,690
10,000
|
2.6%
4.5%
|
$21.43
$13.64
|
2/16/15
5/10/15
|
76,701
85,800
|
194,314
217,400
|
|
Michael
W. Miller
|
3,037
10,000
|
1.4%
4.5%
|
$21.43
$13.64
|
2/16/15
5/10/15
|
40,939
85,800
|
103,714
217,400
|
|
Joey
B. Hogan
|
2,285
10,000
|
1.0%
4.5%
|
$21.43
$13.64
|
2/16/15
5/10/15
|
30,802
85,800
|
78,033
217,400
|
|
L. D. "Micky"
Miller, III
|
1,987
7,500
|
0.9%
3.4%
|
$21.43
$13.64
|
2/16/15
5/10/15
|
26,785
64,350
|
67,856
163,050
|
|
Tony
Smith
|
2,076
10,000
|
0.9%
4.5%
|
$21.43
$13.64
|
2/16/15
5/10/15
|
27,984
85,800
|
70,895
217,400
|
__________________________
|
(1)
|
Upon
grant, the options would have become exercisable with respect to
one-third
of the shares covered thereby on each of May 10, 2006, 2007, and
2008, and
would have become immediately exercisable in the event of a change
of
control involving us. However, on August 31, 2005, we accelerated
the
vesting of all outstanding options, including those granted May 10,
2005,
such that the options vested immediately and became exercisable at
that
time.
|
|
(2)
|
Prior
to the expiration date, the options will expire three months after
the date on which the option holder's employment with us is terminated.
However, if such termination occurs due to (i) retirement with the
consent of the Board of Directors or a committee appointed by the
Board,
(ii) death, or (iii) disability, the options will terminate
36 months after termination due to such retirement or disability and
12 months after the option holder's death. If the option holder dies
within three months after termination of his or her continuous status
as our employee, the options will terminate 12 months after the
option holder's death.
|
The
following table sets forth the options under the our 2003 Incentive Stock Plan
that were exercised during the fiscal year ended December 31, 2005, by
the named executive officers. None of our named executive officers exercised
options during 2005.
|
|
Shares
acquired
on
exercise
|
Value
realized
|
Number
of securities
underlying
unexercised
options/SARs
at
fiscal year-end
(#)
|
Value
of unexercised
in-the-money
options/SARs
at fiscal year-
end
(1)
($)
|
||
|
Name
|
(#)
|
($)
|
Exercisable
|
Unexercisable
|
Exercisable
|
Unexercisable
|
|
David
R. Parker
|
0
|
0
|
351,787
|
0
|
724,377
|
0
|
|
Michael
W. Miller
|
0
|
0
|
144,872
|
0
|
229,395
|
0
|
|
Joey
B. Hogan
|
0
|
0
|
142,169
|
0
|
228,518
|
0
|
|
L. D. "Micky"
Miller, III
|
0
|
0
|
39,487
|
0
|
2,550
|
0
|
|
Tony
Smith
|
0
|
0
|
66,076
|
0
|
100,300
|
0
|
__________________________
|
(1)
|
Based
on the $13.98 closing price of our Class A common stock on
December 30, 2005, the last trading day of
2005.
|
Effective
August 31, 2005, our Board of Directors approved the accelerated vesting of
certain outstanding stock options previously granted under our 2003 Incentive
Stock Plan. As a result, all unvested options granted thereunder before August
31, 2005 were accelerated. Accordingly, options to purchase 92,497 shares of
our
Class A common stock held by the named executive officers, which otherwise
would
have vested from time to time over the thirty-two months (32) months following
the acceleration date, became fully vested and immediately exercisable. The
accelerated vesting of these options is reflected in the table above.
The
Board’s decision was based upon a recommendation of our Compensation Committee
(consisting entirely of independent, non-employee directors), and was in
accordance with the applicable provisions of our 2003 Incentive Stock Plan.
The
primary purpose of the accelerated vesting was to eliminate future compensation
expense we would otherwise recognize in its statement of operations with respect
to these accelerated options upon the adoption of Financial Accounting Standards
Board Statement of Financial Accounting Standards No. 123 (Revised 2004),
Share-Based
Payment. SFAS
123R
requires that compensation expense associated with stock options be recognized
in the statement of operations, rather than as a footnote disclosure in our
consolidated financial statements. The acceleration of the vesting of these
options did not result in a charge based on generally accepted accounting
principles. We believe the acceleration decision to be in the best interest
of
the Company and our stockholders.
We
do not
have a long-term incentive plan or a defined benefit or actuarial plan and
have
never issued any SARs.
We
currently do not have any employment, severance, or change-in-control agreements
with any of our executive officers. However, under certain circumstances in
which there is a change of control, holders of outstanding stock options granted
under our 2003 Incentive Stock Plan may be entitled to exercise such options
notwithstanding that such options may otherwise not have been fully exercisable.
The Board of Directors has the authority to extend similar rights to holders
of
additional awards under our 2003 Incentive Stock Plan.
For
most
of 2005, Messrs. Maclellan and Moline served as members of the Compensation
Committee, with Mr. Moline serving as Chairman. Except for Mr. Moline's service
as our Treasurer and Chief Financial Officer from 1994 to 1997, none of such
individuals has been an officer or employee of the Company.
During
2005, none of our executive officers served as a member of the board of
directors or compensation committee (or other committee performing equivalent
functions) of any entity that had one or more executive officers serving as
a
member of our Board of Directors, our executive officers, and their affiliates.
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 us under the Securities Act
or
the Exchange Act, notwithstanding any general statement contained in any filing
incorporating this proxy statement by reference, except to the extent we
incorporate this report and graph by specific reference.
The
Compensation Committee of the Board of Directors prepared the following report
on executive compensation.
Compensation
Philosophy.
In
accordance with a pay-for-performance philosophy, the Compensation Committee
seeks to provide fixed and incentive compensation of the Company's executive
officers that reflects the performance of each individual and the Company.
The
Company’s executive compensation has two major components, fixed and incentive.
Fixed compensation is designed to attract, motivate, and retain executives
and
be competitive with the compensation levels of executives holding comparable
positions and having similar qualifications in comparable transportation
companies and in companies of similar size. Incentive compensation is designed
to provide rewards that are closely linked to the performance of the Company
and
each individual and to align the interests of the Company's employees with
those
of its stockholders.
Compensation
of Executive Officers. During
2005, the fixed and incentive compensation levels of the Company’s executive
officers were reviewed by the Compensation Committee. In reviewing and
determining the base pay and other compensation of executive officers for 2005,
the Compensation Committee reviewed and considered:
|
•
|
compensation
of comparable executives disclosed by other transportation companies
and
non-trucking companies of similar size;
|
|
•
|
the
financial performance of the Company, as well as the role and contribution
of particular executives with respect to such performance;
|
|
•
|
non-financial
performance related to the individual executive’s contributions;
and
|
|
•
|
the
compensation of executives in relation to each other and desired
relative
targets.
|
As
a
result of these considerations, in May 2005, the Compensation Committee approved
the following changes to executive base pay: Micky Miller and Tony Smith
received base pay increases of $33,800 and $15,033, respectively. Due to the
fact that the Company did not meet its performance goals for 2005, the
Compensation Committee did not award cash or equity bonuses to any executive
officers. Mr. Smith, as President of the Company’s subsidiary SRT, was awarded a
cash bonus of $112,549 pursuant to SRT’s cash bonus program. The Company’s
performance goals for 2005 were based primarily on earnings per share. The
Compensation Committee made annual grants of stock options covering 10,000
shares to each of Michael Miller, Joey Hogan, and Tony Smith and 7,500 shares
to
Micky Miller at an exercise price of $13.64, the closing price of our Class
A
common stock on May 10, 2005, the date of the grant.
Compensation
of the Chief Executive Officer.
In
addition to the factors identified above in connection with compensation of
the
Company’s executive officers, the Compensation Committee considered the
following in establishing compensation of the Company’s President and Chief
Executive Officer for 2005:
|
•
|
The
financial performance and stockholder returns generated under Mr.
Parker’s
leadership; and
|
|
•
|
Mr.
Parker’s effectiveness in building organizational talent and depth and
overseeing the Company’s restructuring into separate operating units
around four major services.
|
The
Compensation Committee has not approved a change in Mr. Parker’s base pay in six
years. Additionally, no cash or equity bonus was awarded to Mr. Parker because
the Company did not meet its 2005 performance goals, which were primarily based
on earnings per share. The Committee did, however, make an equity award to
Mr.
Parker of 10,000 shares at an exercise price of $13.64, the closing price of
our
Class A common stock on May 10, 2005, the date of the grant.
The
Compensation Committee believes the compensation of all of the executive
officers was directly linked to corporate performance. No officers received
cash
or equity bonuses in 2005 because the Company failed to achieve its earnings
target. Because the most senior executive officers of the Company have
substantial holdings of the Company’s Class A and/or Class B common stock or
stock options, corporate performance directly affects these executive officers
through changes in the stock price. The Compensation Committee believes that
stock ownership by the Company’s most senior executive officers aligns the
interests of management with the interest of stockholders in the enhancing
of
stockholder value. Historically, the Company’s stock option programs were used
to enable executives to develop and maintain a significant, long-term stock
ownership position in the Company’s Class A common stock. However, SFAS 123R
became effective for the Company in the first quarter of 2006 and requires
that
the compensation expense associated with stock options be recognized in the
Company’s statements of operations, rather than as a footnote disclosure to the
Company’s consolidated financial statements. Because of the impact that future
stock option grants would have on the Company’s statements of operations, the
Compensation Committee engaged an independent compensation consultant, Frederic
W. Cook & Co., to assist in the evaluation of the Company’s incentive
compensation program.
Although
the Compensation Committee has not completed its evaluation, based on
preliminary information, the Compensation Committee is considering the use
of
restricted stock tied to certain performance measures instead of some or all
stock option grants. In addition, given the focus on alignment of the Company
under four distinct service offerings, the Compensation Committee is considering
the use of a combination of overall corporate performance and business unit
performance in awarding incentive compensation.
The
Compensation Committee believes that the mix of fixed and incentive
(particularly stock-based) executive compensation described above provides
a
balanced approach that will enable the company to attract and retain highly
qualified executives, reward such executives for their contribution to the
Company’s growth and profitability, and ensure that the incentives of the
Company’s executives are aligned with the best interest of the Company’s
stockholders.
|
Compensation
Committee:
|
|
|
Niel
B. Nielson, Chairman
|
|
|
Hugh
O. Maclellan, Jr.
|
AND
MANAGEMENT
The
following table shows, as of March 29, 2006, the number of shares and percentage
of outstanding shares of our Class A and Class B common stock
beneficially owned by:
|
•
|
Each
of our directors and named executive officers;
|
|
•
|
All
of our executive officers and directors as a group; and
|
|
•
|
Each
person known to us to beneficially own 5% or more of any class of
our
common stock.
|
The
percentages shown are based on 11,646,690 shares of Class A common stock and
2,350,000 shares of Class B common stock outstanding at March 29, 2006. The
shares of Class B common stock owned by Mr. and Mrs. Parker are convertible
into
the same number of shares of Class A common stock at any time and convert
automatically if beneficially owned by anyone other than Mr. or Mrs. Parker
or
certain members of their family. The Class B common stock has two votes per
share but otherwise is substantially identical to the Class A common stock,
which has one vote per share.
|
Title
of Class
|
Name
and Address of Beneficial Owner(1)
|
Amount
and Nature of Beneficial Ownership(2)
|
Percent
of Class(3)
|
|
Class
A & Class B Common
|
David
R. Parker & Jacqueline F. Parker
|
5,501,927(4)
|
26.27%
of Class A
100%
of Class B
38.35%
of Total(5)
|
|
Class
A Common
|
Michael
W. Miller
|
155,963
|
1.32%
of Class A
1.10%
of Total
|
|
Class
A Common
|
Joey
B. Hogan
|
152,751
(6)
|
1.30%
of Class A
1.08%
of Total
|
|
Class
A Common
|
L. D. "Micky"
Miller, III
|
39,487
|
*
|
|
Class A
Common
|
Tony
Smith
|
66,076
|
*
|
|
Class
A Common
|
William
T. Alt
|
15,000
|
*
|
|
Class
A Common
|
Robert
E. Bosworth
|
25,500(7)
|
*
|
|
Class
A Common
|
Hugh
O. Maclellan, Jr.
|
30,000
|
*
|
|
Class
A Common
|
Bradley
A. Moline
|
8,500(8)
|
*
|
|
Class
A Common
|
Niel
B. Nielson
|
7,500
|
*
|
|
Class
A Common
|
Mark
A. Scudder
|
27,150(9)
|
*
|
|
Class
A Common
|
Barclays
Global Investors, NA and Barclays Global Fund Advisors
|
677,565(10)
|
5.82%
of Class A
4.84%
of Total
|
|
Class
A Common
|
Barrow,
Hanley, Mewhinney & Strauss, Inc.
|
814,100(11)
|
6.99%
of Class A
5.82%
of Total
|
|
Class
A Common
|
Dimensional
Fund Advisors Inc.
|
1,077,253(12)
|
9.25%
of Class A
7.70%
of Total
|
|
Class
A Common
|
Wells
Fargo & Company
|
1,366,928(13)
|
11.74%
of Class A
9.77%
of Total
|
|
Class
A & Class B
Common
|
All
directors and executive officers as a group
(16
persons)
|
6,166,435
(14)
|
41.21%
of Total
|
__________________________
|
*
|
Less
than one percent (1%).
|
|
(1)
|
The
business address of Mr. and Mrs. Parker and the other directors
and named executive officers is 400 Birmingham Highway, Chattanooga,
TN 37419. The business addresses of the remaining entities listed in
the table above are: Barclays Global Investors, NA, 45 Fremont
Street, San Francisco, CA 94105; Barclays Global Fund Advisors,
|
|
45 Fremont
Street, San Francisco, CA 94105; Barrow, Hanley, Mewhinney &
Strauss, Inc., One McKinney Plaza, 3232 McKinney Avenue,
15th Floor,
Dallas, TX 75204-2429; Dimensional Fund Advisors Inc.,
1299 Ocean Avenue, 11th Floor,
Santa Monica, CA 90401; and Wells Fargo & Company,
420 Montgomery Street, San Francisco,
CA 94104.
|
|
|
(2)
|
Beneficial
ownership includes sole voting power and sole investment power with
respect to such shares unless otherwise noted and subject to community
property laws where applicable. In accordance with Rule 13d-3(d)(1)
under the Exchange Act, the number of shares indicated as beneficially
owned by a person includes shares of Class A common stock underlying
options that are currently exercisable held by the following individuals:
Mr. Parker-351,787; Mr. Michael Miller-144,872; Mr. Joey
Hogan-142,169; Mr. L. D. "Micky" Miller-39,487;
Mr. Smith-66,076; Mr. Alt-15,000; Mr. Bosworth-22,500;
Mr. Maclellan-22,500; Mr. Moline-7,500; Dr. Nielson-7,500;
and Mr. Scudder-22,500. The beneficial ownership also includes the
following shares of Class A common stock allocated to the accounts of
the following individuals under our 401(k) plan: Mr. Parker-12,573;
Mr. Michael Miller-11,091; Mr. Hogan-7,182;
Mr. L. D. "Micky" Miller-0; and Mr. Smith-0. For the option
holders listed above, there are no additional options to purchase
that
will become exercisable within 60 days of March 29, 2006.
|
|
(3)
|
Shares
of Class A common stock underlying stock options that are currently
exercisable or will be exercisable within 60 days following March
29, 2006
are deemed to be outstanding for purposes of computing the percentage
ownership of the person holding such options and the percentage ownership
of all executive officers and directors as a group, but are not deemed
outstanding for purposes of computing the percentage ownership of
any
other person or entity. There are no stock options that will become
exercisable within 60 days following March 29, 2006, for any executive
officer or non-employee director of the Company.
|
|
(4)
|
Comprised
of 2,687,567 shares of Class A common stock and 2,350,000 shares of
Class B common stock owned by Mr. and Mrs. Parker as joint
tenants with rights of survivorship; 100,000 shares of Class A common
stock owned by the Parker Family Limited Partnership, of which
Mr. and Mrs. Parker are the two general partners and
possess sole voting and investment control; 351,787 shares of Class A
common stock underlying Mr. Parker's stock options that are currently
exercisable and 12,573 shares allocated to the account of Mr. Parker
under our 401(k) plan.
|
|
(5)
|
Based
on the aggregate number of shares of Class A and Class B common
stock held by Mr. and Mrs. Parker.
Mr. and Mrs. Parker hold 26.27% of shares of Class A
and 100% of shares of Class B common stock. The Class A common
stock is entitled to one vote per share, and the Class B common stock
is entitled to two votes per share. Mr. and Mrs. Parker
beneficially own shares of Class A and Class B common stock with
47.08% of the voting power of all outstanding voting shares.
|
|
(6)
|
Comprised
of 3,400 shares of Class A common stock owned by Mr. Hogan and
Melinda J. Hogan as joint tenants, 142,169 shares of Class A common
stock underlying stock options, and 7,182 shares held by Mr. Hogan
in our
401(k) plan.
|
|
(7)
|
Comprised
of 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
22,500 shares of Class A common stock underlying stock
options.
|
|
(8)
|
Comprised
of 1,000 shares of Class A common stock owned directly and 7,500
shares of
Class A common stock underlying stock options.
|
|
(9)
|
Comprised
of 100 shares of Class A common stock held directly, 4,350 shares
of
Class A common stock held in an individual retirement account, 22,500
shares of Class A common stock underlying stock options, and 200
shares of
Class A common stock held as custodian for a minor child, as to which
Mr. Scudder disclaims beneficial ownership.
|
|
(10)
|
As
reported on Schedule 13G filed with the SEC on January 26, 2006.
Represents 96,480 shares of Class A common stock beneficially owned
by
Barclays Global Fund Advisors and 581,085 shares of Class A common
stock
beneficially owned by Barclays Global Investors, NA. Information
is as of
December 31, 2005.
|
|
(11)
|
As
reported on Schedule 13G/A filed with the SEC on February 7, 2006.
Information is as of December 31, 2005.
|
|
(12)
|
As
reported on Schedule 13G/A filed with the SEC on February 6, 2006.
Information is as of December 31,
2005.
|
|
(13)
|
As
reported on Schedule 13G/A filed with the SEC on January 31, 2006.
Represents aggregate beneficial ownership on a consolidated basis
reported
by Wells Fargo & Company and includes shares of Class A
common stock beneficially owned by subsidiaries. Information is as
of
December 31, 2005.
|
|
(14)
|
The
other executive officers are Jeffery Acuff, R.H. Lovin, Jr., Jeffrey
Paulsen, Jeffrey Taylor, and Richard L. Towe. Mr. Acuff beneficially
owns
21,127 shares of Class A common stock, which are comprised of 15,500
shares of Class A common stock underlying Mr. Acuff’s stock options that
are currently exercisable and 5,627 shares allocated to the account
of Mr.
Acuff under our 401(k) plan. Mr. Lovin beneficially owns 77,070 shares
of
Class A common stock, which are comprised of 72,932 shares of Class
A
common stock underlying Mr. Lovin’s stock options that are currently
exercisable and 4,138 shares allocated to the account of Mr. Lovin
under
our 401(k) plan. Mr. Paulsen does not beneficially own any shares
of Class
A common stock nor does he have any stock options underlying shares
of
Class A common stock which are currently exercisable or will become
exercisable within 60 days of March 29, 2006. Mr. Taylor beneficially
owns
2,500 shares of Class A common stock, which are comprised of 2,500
shares
underlying Mr. Taylor’s stock options that are currently exercisable. Mr.
Towe beneficially owns 35,884 shares of Class A common stock, which
are
comprised of 35,616 shares of Class A common stock underlying Mr.
Towe's stock options that are currently exercisable and 268 shares
allocated to the account of Mr. Towe under our 401(k) plan. Such
shares
are included in the calculation of all directors and executive officers
as
a group.
|
FIVE-YEAR
CUMULATIVE TOTAL RETURNS PERFORMANCE GRAPH
The
following graph compares the cumulative total stockholder return of our
Class A common stock with the cumulative total stockholder return of the
Nasdaq Stock Market (U.S. Companies) and the Nasdaq Trucking &
Transportation Stocks commencing December 29, 2000, and ending
December 30, 2005.
The
stock performance
graph assumes $100 was invested on December 29, 2000. There can be no assurance
that our stock performance will continue into the future with the same or
similar trends depicted in the graph above. We 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. We will provide the names
of all companies in such index upon request.
Pursuant
to our Audit Committee Charter, all transactions with affiliated persons or
entities must be reviewed and pre-approved by our Audit Committee.
The
information set forth herein briefly describes certain transactions between
us
and certain affiliated parties. We believe that the terms of these transactions
are comparable to the terms that could be obtained from unaffiliated
parties.
Company
Store.
A
company wholly owned by Nancy Landreth operates a store that sells branded
apparel and personal items on a rent-free basis in our headquarters building,
and uses our service marks on its products at no cost. We made purchases from
this store totaling approximately $373,000 in 2005. Ms. Landreth is
Mr. Parker's step-sister. The Audit Committee has approved a continuation
of this relationship and annually pre-approves purchase limits.
Certain
Family Relationships.
The
Parker family has been involved in the transportation business for a number
of
years, and members of Mr. Parker's family have been employed by us from
time-to-time since our inception. Clay Scholl, Mr. Parker's brother-in-law,
serves as a customer service supervisor and has been employed by us since April
1986. We paid Clay Scholl $74,000 during 2005. Justin A. Smith, the son of
Tony
Smith, is employed by our subsidiary, Southern Refrigerated Transport, Inc.,
as
Director of Operations. We paid Justin Smith $83,000 in 2005.
Certain
Business Relationships. Mr. Scudder's
law firm serves as our corporate and securities counsel and earned
approximately $304,375 in
fees
for legal services during 2005.
The
principal independent registered public accounting firm utilized by us during
fiscal 2005 was KPMG LLP. KPMG has served as our independent registered public
accounting firm since September 2001. A representative of KPMG is expected
to be present at the annual meeting of stockholders and to be available to
respond to appropriate questions. KPMG’s representative will have an opportunity
to make a statement at the annual meeting should he or she desire to do
so.
KPMG
billed us the following amounts for services provided in the following
categories during the fiscal years ended December 31, 2005 and 2004:
|
Fiscal
2005
|
Fiscal
2004
|
|||||
|
Audit
Fees(1)
|
$600,000
|
$389,000
|
||||
|
Audit-Related
Fees(2)
|
42,000
|
10,000
|
||||
|
Tax
Fees(3)
|
165,224
|
216,342
|
||||
|
All
Other Fees(4)
|
0
|
0
|
||||
|
Total
|
$807,224
|
$615,342
|
__________________________
|
(1)
|
Represents
the aggregate fees billed for professional services rendered by KPMG
for
the audit of our annual financial statements and review of financial
statements included in our quarterly reports on Form 10-Q, and
services that are normally provided by an independent registered
public
accounting firm in connection with statutory or regulatory filings
or
engagements for those fiscal years. For fiscal 2005, audit fees were
comprised of $260,000 in fees for the audit of our annual financial
statements and review of financial statements included in our quarterly
reports on Form 10-Q, $328,000 in fees for the audit of our
assessment of internal control over financial reporting, and $12,000
in
fees for our securitization facility. For fiscal 2004, audit fees
were
comprised of $193,000 in fees for the audit of our annual financial
statements and review of financial statements included in our quarterly
reports on Form 10-Q, $185,000 in fees for the audit of our
assessment of internal control over financial reporting, and $11,000
in
fees for our securitization
facility
|
|
(2)
|
Represents
the aggregate fees billed for assurance and related services by KPMG
that
are reasonably related to the performance of the audit or review
of our
financial statements and are not reported under "audit fees." For
fiscal
2005 and 2004, audit-related fees were comprised of fees for employee
benefit plans.
|
|
(3)
|
Represents
the aggregate fees billed for professional services rendered by KPMG
for
tax compliance, tax advice, and tax planning. For fiscal 2005, tax
fees
were comprised of $156,074 in fees for tax compliance and $9,150
in fees
for tax planning and advice. For fiscal 2004, tax fees were comprised
of
$87,500 in fees for tax compliance and $128,842 in fees for tax planning
and advice.
|
|
(4)
|
Represents
the aggregate fees billed for products and services provided by KPMG,
other than audit fees, audit-related fees, and tax fees. There were
no
such fees for fiscal 2005 or fiscal
2004.
|
Our
Audit
Committee maintains a policy pursuant to which it pre-approves all audit
services and permitted non-audit services to be performed by our independent
registered public accounting firm in order to assure that the provision of
such
services is compatible with maintaining the firm's independence. Under this
policy, the Audit Committee pre-approves specific types or categories of
engagements constituting audit, audit-related, tax, or other permissible
non-audit services to be provided by our principal independent registered public
accounting firm. Pre-approval of an engagement for a specific type or category
of services generally is provided for up to one year and typically is subject
to
a budget comprised of a range of anticipated fee amounts for the engagement.
Management and the principal independent registered public accounting firm
are
required to periodically report to the Audit Committee regarding the extent
of
services provided by the principal independent registered public accounting
firm
in accordance with the annual pre-approval, and the fees for the services
performed to date. To the extent that management believes that a new service
or
the expansion of a current service provided by the principal independent
registered public accounting firm is necessary or desirable, such new or
expanded services are presented to the Audit Committee for its review and
approval prior to the engagement of the principal independent registered public
accounting firm to render such services. No audit-related, tax, or other
non-audit services were approved by the Audit Committee pursuant to the
de
minimis
exception to the pre-approval requirement under Rule 2-01(c)(7)(i)(C), of
Regulation S-X during the fiscal year ended December 31,
2005.
As
explained in greater detail in the "Compensation Committee Report on Executive
Compensation" above, we have used a combination of fixed and incentive
compensation to attract, motivate, and retain our executive officers, directors,
employees, and consultants. Historically, incentive compensation has been
comprised of annual cash bonuses and annual stock option grants. In furtherance
of this approach, we have maintained several equity-based incentive plans since
becoming a public company in 1994. Our original 1994 Incentive Stock Plan (the
"1994 Stock Plan") was supplemented in 1998 by the adoption of our Non-Officer
Incentive Stock Plan (the "1998 Non-Officer Plan") and again in 2000 by the
adoption of our Outside Director Stock Option Plan (the "2000 Outside Director
Plan"). In June 2003, we discontinued further option grants under the 1994
Stock
Plan, the 1998 Non-Officer Plan, and the 2000 Outside Director Plan and adopted
our 2003 Incentive Stock Plan (the "2003 Stock Plan").
Since
June 2003, all equity-based incentive compensation awarded to our executive
officers and employees has been granted under the 2003 Stock Plan. A total
of
1,250,000 shares of Class A common stock are reserved for awards under the
2003
Stock Plan. Of these 1,250,000 shares, as of March 20, 2006, 476,319 shares
are
subject to issued and outstanding option grants. The 2003 Stock Plan is
scheduled to expire on February 19, 2013.
To
date,
all equity-based incentive compensation awarded to our executive officers and
employees under the various plans has been in the form of stock options. Our
Board of Directors has determined, however, that it is now in our best interest
to adopt an incentive compensation plan that specifically authorizes a broader
range of equity-based incentives. Further, our Board of Directors has determined
that it is in our best interest to combine our stock incentive plan with other
non-equity incentive programs under a single, comprehensive plan with unified
objectives and performance criteria. Accordingly, our Board of Directors has
adopted, and recommended that our stockholders approve, the Covenant Transport,
Inc. 2006 Omnibus Incentive Plan (the "2006 Omnibus Plan").
The
Board
of Directors believes the 2006 Omnibus Plan offers the following benefits,
among
others:
|
•
|
Enhancing
the Compensation Committee's ability to implement our pay-for-performance
philosophy by allowing the Compensation Committee to grant a broader
range
of incentive compensation, including stock appreciation rights, restricted
stock unit awards, and performance units;
|
|
•
|
Maintaining
the Compensation Committee's ability to grant stock options, restricted
stock awards, and cash bonuses (known as "performance awards" under
the
2006 Omnibus Plan) as a part of our incentive compensation
system;
|
|
•
|
Extending
the life of our equity-based incentive plan for an additional three
years
and increasing the number of shares available for awards to
1,000,000; and
|
|
•
|
Seeking
to preserve for our benefit, to the extent practicable, the federal
income
tax deduction for certain qualifying "performance-based"
compensation.
|
If
our
stockholders do not approve the 2006 Omnibus Plan, we will continue to be able
to grant equity-based awards authorized by the 2003 Stock Plan. Further, we
will
continue to be able to award cash bonuses as we have in the past. However,
these
cash bonuses and certain equity-based compensation would not satisfy the
requirements of Section 162(m) of the Internal Revenue Code (the "Code"). As
a
result, certain compensation in excess of $1.0 million annually paid to our
executive officers would not be deductible by us.
ADOPTION
OF OMNIBUS INCENTIVE PLAN
On
April
12, 2006, our Board of Directors adopted the 2006 Omnibus Plan and recommended
that it be submitted to our stockholders for their approval at the annual
meeting. If approved by our stockholders, the 2006 Omnibus Plan will be
effective as of the date of the annual meeting. The 2006 Omnibus Plan is
intended to replace the 2003 Stock Plan. If the 2006 Omnibus Plan is approved
by
our stockholders, no further awards would be made after such date under the
2003
Stock Plan. The following table provides certain important information
concerning our existing equity compensation plans as of December 31, 2005:
|
Plan
category
|
Number
of
securities
to
be
issued
upon
exercise
of
outstanding
options,
warrants
and
rights
|
Weighted-
average
exercise
price
of
outstanding
options,
warrants
and
rights
|
Number
of securities
remaining
available for
future
issuance under
equity
compensation
plans
(excluding
securities
reflected in
column
(a))
|
|
(a)
|
(b)
|
(c)
|
|
|
Equity
compensation plans approved
by
security holders (1)
|
1,328,513
|
$14.37
|
765,031
|
|
Equity
compensation plans not
approved
by security holders (2)
|
125,000
|
$13.93
|
-
|
|
Total
|
1,453,513
|
$14.33
|
765,031
|
|
(1)
|
Includes
1994 Stock Plan, 2000 Outside Director Plan, and 2003 Stock
Plan.
|
|
(2)
|
Includes
1998 Non-Officer Plan and shares reserved for issuance pursuant to
grants
outside any plan.
|
A
summary
of the 2006 Omnibus Plan appears below. This summary is qualified in its
entirety by reference to the text of the 2006 Omnibus Plan, a copy of which
is
included as Appendix A to this Proxy Statement. You are urged to read the actual
text of the 2006 Omnibus Plan in its entirety.
The
purposes of the 2006 Omnibus Plan are (a) to provide annual incentives to
selected executive officers, directors, employees, and consultants in a manner
designed to reinforce our performance goals, (b) to link a significant portion
of participants' compensation to the achievement of those goals, and (c) to
continue to attract, motivate, and retain key personnel on a competitive basis,
in each case by enabling us to offer such persons a variety of incentive awards,
and (d) to ensure, to the extent possible, that incentive compensation paid
by
us is deductible for tax purposes.
A
total
of 1,000,000 shares of Class A common stock will be available for grant of
awards under the 2006 Omnibus Plan. In addition, any shares of Class A common
stock related to awards under the 2006 Omnibus Plan that terminate by
expiration, forfeiture, cancellation or otherwise without the issuance of such
shares, are settled in cash in lieu of shares of Class A common stock, or are
exchanged for awards not involving shares of Class A common stock will become
available again under the 2006 Omnibus Plan. The number of shares of Class
A
common stock available under the 2006 Omnibus Plan may be adjusted to reflect
the occurrence of certain events (described under "Adjustments Upon
Certain Events"). The shares of Class A common stock available for issuance
under the 2006 Omnibus Plan may be authorized and unissued shares or treasury
shares, including shares purchased in open market or private transactions.
The
maximum award granted or payable to any one participant under the 2006 Omnibus
Plan for a calendar year will be 250,000 shares of Class A common stock, subject
to the Compensation Committee’s authority to adjust awards upon certain events
(described under "Adjustments Upon Certain Events"), or in the event the award
is paid in cash, $2,000,000.
The
Compensation Committee will have the exclusive power and authority, consistent
with the provisions of the 2006 Omnibus Plan, to establish the terms and
conditions of any award and to waive any such terms or conditions (as described
under "Administration"). Because the benefits conveyed under the 2006 Omnibus
Plan will be at the discretion of the Committee (as defined below), it is not
possible to determine what benefits participants will receive under the 2006
Omnibus Plan.
The
2006
Omnibus Plan will be administered by the Compensation Committee, or such other
committee as may be designated by the Board of Directors (the "Committee"),
which consists of at least two individuals who are intended to qualify both
as
"non-employee directors" within the meaning of Rule 16b-3 under the
Exchange Act, and as "outside directors" within the meaning of
Section 1.162-27(e)(3) of the Treasury Regulations, or any successor
definition adopted under Section 162(m) of the Code. The Committee may allocate
all or any portion of its responsibilities and powers under the 2006 Omnibus
Plan to any one or more of its members, our CEO, or other senior members of
management as the Committee deems appropriate, however, only the Committee
(or
another committee consisting of two or more individuals who qualify both as
"non-employee directors" and as "outside directors") may select and grant awards
to participants who are subject to Section 16 of the Exchange Act or awards
that are intended to qualify as "performance-based" compensation under Section
162(m) of the Code (see "Limitation on Income Tax Deduction").
The
Committee will have broad authority in its administration of the 2006 Omnibus
Plan, including, but not limited to, the authority to interpret the 2006 Omnibus
Plan; to establish rules and regulations for the operation and administration
of
the 2006 Omnibus Plan; to select the persons to receive awards; to determine
the
form, size, terms, conditions, limitations, and restrictions of awards,
including, without limitation, terms regarding vesting, exercisability,
assignability, expiration, and the effect of certain events, such as a change
of
control or the participant’s death, disability, retirement, or termination as a
result of breach of agreement; to create additional forms of awards consistent
with the terms of the 2006 Omnibus Plan; to allow for the deferral of awards;
and to take all other action it deems necessary or advisable to administer
the
2006 Omnibus Plan.
To
facilitate the granting of awards to participants who are employed or retained
outside of the United States, the Committee will be authorized to modify and
amend the terms and conditions of an award to accommodate differences in local
law, policy, or custom.
Participants
in the 2006 Omnibus Plan will be selected by the Committee from our executive
officers, directors, employees, and consultants. Participants may be selected
and awards may be made at any time during the ten-year period following the
effective date of the 2006 Omnibus Plan. As of April 1, 2006, approximately
5,712 employees (consisting of 10 executive officers and 5,702 other officers
and other employees) and six (6) non-employee directors were eligible to
participate in our current equity compensation plans. We did not have any
consultants who had been designated as participants under such plans at such
date.
The
selection of those persons within a particular class who will receive awards
is
entirely within the discretion of the Committee. The Committee has not yet
determined how many persons are likely to participate in the 2006 Omnibus Plan.
The Committee intends, however, to grant most of the 2006 Omnibus Plan’s awards
to those persons who are in a position to have a significant direct impact
on
our growth, profitability, and success, which would include a portion of the
participants in our current equity compensation plans.
The
2006
Omnibus Plan authorizes the grant of stock options, stock appreciation rights,
stock awards, restricted stock unit awards, performance units, performance
awards, and any other form of award established by the Committee that is
consistent with the 2006 Omnibus Plan’s purpose, or any combination of the
foregoing. All awards granted under the 2006 Omnibus Plan will be evidenced
by
an award notice which specifies the type of award granted, the number of shares
of Class A common stock underlying the award, if applicable, and all terms
governing that award.
Stock
Options. The
Committee may grant awards in the form of stock options to purchase shares
of
Class A common stock, which stock options may be non-qualified or incentive
stock options for federal income tax purposes. Stock options granted under
the
2006 Omnibus Plan will vest and become exercisable at such times and upon such
terms and conditions as may be determined by the Committee. Any stock option
granted in the form of an incentive stock option must satisfy the requirements
of
Section 422
of the Code. The exercise price per share of Class A common stock for any stock
option will not be less than 100% of the fair market value of a share of Class
A
common stock on the day that the stock option is granted. In addition, the
term
of the stock option may not exceed ten years. In the case of an incentive stock
option granted to an employee participant who owns, directly or indirectly
(as
determined by reference to Section 424(d) of the Code), at the time the option
is granted, stock possessing more than 10 percent of the total combined voting
power of all classes of our stock, the exercise price per share of Class A
common stock for any stock option will not be less than 110% of the fair market
value of a share of Class A common stock on the day that the stock option is
granted, and the term of the stock option may not exceed five (5) years. The
exercise price of any stock option granted pursuant to the 2006 Omnibus Plan
may
not be subsequently reduced by amendment or cancellation and substitution of
such stock option or any other action of the Committee without stockholder
approval, subject to the Committee’s authority to adjust awards upon certain
events (described under "Adjustments Upon Certain Events"). The type (incentive
or non-qualified), vesting, exercise price, and other terms of each stock option
will be set forth in the award notice for such stock option.
A
stock
option may be exercised by paying the exercise price in cash or its equivalent
and/or, to the extent permitted by the Committee and applicable law, shares
of
Class A common stock, a combination of cash and shares of Class A common stock,
or through the delivery of irrevocable instruments to a broker to sell the
shares obtained upon the exercise of the stock option and to deliver to us
an
amount equal to the exercise price.
Stock
Appreciation Rights. The
Committee may grant awards in the form of stock appreciation rights, either
in
tandem with a stock option ("Tandem SARs") or independent of a stock option
("Freestanding SARs"). The exercise price of a stock appreciation right will
be
an amount determined by the Committee, but in no event will such amount be
less
than 100% of the fair market value of a share of Class A common stock on the
date that the stock appreciation right is granted or, in the case of a Tandem
SAR, the exercise price of the related stock option.
A
Tandem
SAR may be granted either at the time of grant of the related stock option
or at
any time thereafter during the term of the related stock option. A Tandem SAR
will be exercisable to the extent its related stock option is exercisable.
Each
Tandem SAR will entitle the holder of such stock appreciation right to surrender
the related stock option and to receive an amount equal to (i) the excess
of (A) the fair market value on the exercise date of one share of Class A
common stock over (B) the stock option price per share of Class A common
stock, times (ii) the number of shares of Class A common stock covered by
the stock option which is surrendered. Upon the exercise of a stock option
as to
some or all of the shares of Class A common stock covered by such stock option,
the related Tandem SAR will automatically be canceled to the extent of the
number of shares of Class A common stock covered by the exercise of the stock
option.
Each
Freestanding SAR will entitle the holder of such stock appreciation right upon
exercise to an amount equal to (i) the excess of (A) the fair market
value on the exercise date of one share of Class A common stock over
(B) the exercise price, times (ii) the number of shares of Class A
common stock covered by the Freestanding SAR and as to which the stock
appreciation right is exercised.
The
type
(Tandem SAR or Freestanding SAR), exercise price, vesting, and other terms
of
each stock appreciation right will be set forth in the award notice for such
stock appreciation rights.
Payment
of stock appreciation rights may be made in shares of Class A common stock
or in
cash, or partly in shares of Class A common stock and partly in cash, as
determined by the Committee.
Other
Stock-Based Awards. The
Committee may grant awards in the form of stock awards (for either unrestricted
or restricted shares of Class A common stock), restricted stock unit awards
and
other awards that are valued in whole or in part by reference to, or are
otherwise based on the fair market value of, Class A common stock. Such other
stock-based awards will be in such form, and dependent on such conditions,
as
the Committee determines, including, without limitation, the right to receive,
or vest with respect to, one or more shares of Class A common stock (or the
equivalent cash value of such shares of Class A common stock) upon the
completion of a specified period of service, the occurrence of an event, and/or
the attainment of performance objectives. In addition, the Committee may choose,
at the time of grant of a stock-based award, or any time thereafter up to the
time of the payment of such award, to include as part of such award an
entitlement to receive dividends or dividend equivalents on the shares of Class
A common stock underlying such award, subject to such terms, conditions,
restrictions, and/or limitations, if any, as the Committee may establish. The
restrictions, conditions, and other terms of each stock-based award will be
set
forth in the award notice for such award.
Performance
Units. The
Committee may grant awards in the form of performance units, which are units
valued by reference to designated criteria established by the Committee other
than Class A common stock. Performance units will be in such form, and dependent
on such conditions, as the Committee determines, including, without limitation,
the right to receive a designated payment upon the completion of a specified
period of service, the occurrence of an event, and/or the attainment of
performance objectives. The form, applicable conditions, and other terms of
each
performance unit will be set forth in the award notice for such performance
unit.
Performance
Awards. Performance
awards are awards structured to qualify as deductible "performance-based"
compensation for purposes of Section 162(m) of the Code (see "Limitation on
Income Tax Deduction"). The Committee may grant performance awards to employees
who are "covered employees" (within the meaning of Section 162(m) of the
Code) and to other participants in order to qualify such awards as
"performance-based" compensation for purposes of Section 162(m) of the
Code. Under Section 162(m) of the Code, "covered employees" generally means
the CEO and the other four highest-paid executive officers. Performance awards
may take the form of stock awards, restricted stock unit awards, or performance
units that are conditioned upon the satisfaction of enumerated performance
criteria during a stated performance period, which awards, in addition to
satisfying the requirements otherwise applicable to that type of award
generally, also satisfy the requirements of performance awards under the 2006
Omnibus Plan.
Performance
awards must be based upon one or more of the following performance criteria:
(a) revenues (including without limitation, measures such as revenue per
mile (loaded or total) or revenue per tractor), (b) net revenues, (c) fuel
surcharges, (d) accounts receivable collection or days sales outstanding,
(e) cost reductions and savings (or limits on cost increases), (f) safety and
claims (including, without limitation, measures such as accidents per million
miles and number of significant accidents), (g) operating income, (h)
operating ratio, (i) income before taxes, (j) net income, (k) earnings
before interest and taxes (EBIT), (l) earnings before interest, taxes,
depreciation, and amortization (EBITDA), (m) adjusted net income,
(n) earnings per share, (o) adjusted earnings per share,
(p) stock price, (q) working capital measures, (r) return on
assets, (s) return on revenues, (t) debt-to-equity or
debt-to-capitalization (in each case with or without lease adjustment), (u)
productivity and efficiency measures (including, without limitation measures
such as driver turnover, trailer to tractor ratio, and tractor to non-driver
ratio), (v) cash position, (w) return on stockholders’ equity,
(x) return on invested capital, (y) cash flow measures (including,
without limitation, free cash flow), (z) market share,
(aa) stockholder return, (bb) economic value added, or
(cc) completion of acquisitions (either with or without specified size). In
addition, the Committee may establish, as an additional performance measure,
the
attainment by a participant of one or more personal objectives and/or goals
that
the Committee deems appropriate, including but not limited to implementation
of
Company policies, negotiation of significant corporate transactions, development
of long-term business goals or strategic plans, or the exercise of specific
areas of managerial responsibility. The performance goals set by the Committee
may be expressed on an absolute and/or relative basis, and may include
comparisons with our past performance (including the performance of one or
more
of our divisions) and/or the current or past performance of other peer group
companies or indices.
For
each
performance period, the Committee will, in its sole discretion, designate within
the initial period allowed under Section 162(m) of the Code which persons
will be eligible for performance awards for such period, the length of the
performance period, the types of performance awards to be issued, the
performance criteria that are to be used to establish performance goals, the
kind or level of performance goals, and other relevant matters.
After
the
close of each performance period, the Committee will determine whether the
performance goals for the cycle have been achieved. In determining the actual
award to be paid to a participant, the Committee has the authority to reduce
or
eliminate any performance award earned by the participant, based upon any
objective or subjective criteria it deems appropriate.
The
award
notice for each performance award will set forth or make reference to the
performance period, performance criteria, performance goals, performance
formula, performance pool, and other terms applicable to such performance
award.
Awards
may be paid in cash, shares of Class A common stock, a combination of cash
and
shares of Class A common stock, or in any other permissible form, as the
Committee determines. Payment of awards may include such terms, conditions,
restrictions, and/or limitations, if any, as the Committee deems appropriate,
including, in the case of awards paid in shares of Class A common stock,
restrictions on transfer of such shares and provisions regarding the forfeiture
of such shares under certain circumstances.
At
the
discretion of the Committee, a participant may defer payment of any award;
salary or bonus compensation; company board compensation; dividend or dividend
equivalent, or any portion thereof. If permitted by the Committee, a deferral
must be made in accordance with any administrative guidelines established by
the
Committee for such purpose. Such deferred items may be credited with interest
(at a rate determined by the Committee) or deemed invested by us.
We
will
be entitled to deduct from any payment to a participant under the 2006 Omnibus
Plan the amount of all applicable income and employment taxes required by law
to
be withheld with respect to such payment or may require the participant to
pay
us such tax prior to and as a condition of the making of such payment. Subject
to certain limitations, the Committee may allow a participant to pay the amount
of taxes required by law to be withheld from an award by withholding any shares
of Class A common stock to be paid under such award or by permitting the
participant to deliver to us shares of Class A common stock having a fair market
value equal to the amount of such taxes.
In
the
event that there is a stock dividend or split, reorganization, recapitalization,
merger, consolidation, spin-off, combination, or transaction or exchange of
Class A common stock or other corporate exchange, or any distribution to
stockholders of Class A common stock or other property or securities (other
than
regular cash dividends) or any transaction similar to the foregoing or other
transaction that results in a change to our capital structure, the 2006 Omnibus
Plan provides that the Committee shall make substitutions and/or adjustments
to
the maximum number of shares available for issuance under the 2006 Omnibus
Plan,
the maximum award payable, the number of shares to be issued pursuant to
outstanding awards, the option prices, exercise prices, or purchase prices
of
outstanding awards, and/or any other affected terms of an award or the 2006
Omnibus Plan as the Committee deems equitable or appropriate.
The
Committee may suspend or terminate the 2006 Omnibus Plan at any time for any
reason with or without prior notice. In addition, the Committee may amend the
2006 Omnibus Plan, provided that it may not, without stockholder approval,
adopt
any amendment if stockholder approval is required, necessary, or deemed
advisable with respect to tax, securities, or other applicable laws or
regulations, including, but not limited to, the listing requirements of the
Nasdaq National Market or other stock market or exchange on which our securities
are listed. No amendment of the 2006 Omnibus Plan may materially and adversely
affect the rights of a participant under any outstanding award without the
consent of that participant. No awards may be made under the 2006 Omnibus Plan
after the tenth anniversary of the effective date of the 2006 Omnibus Plan.
If
the
2006 Omnibus Plan is approved by the stockholders at the annual meeting, we
intend to register the shares of Class A common stock issuable under the
2006 Omnibus Plan pursuant to a Registration Statement on Form S-8 as soon
as
practicable thereafter.
No
benefits or amounts have been granted, awarded, or received under the 2006
Omnibus Plan. Further, future awards, if any, made to eligible participants
under the 2006 Omnibus Plan are subject to the discretion of the Committee.
Accordingly, future grants and benefits under the 2006 Omnibus Plan are not
determinable. Reference is made to the "Executive Compensation" information
in
this proxy statement for information concerning option awards made under the
2003 Stock Plan during the year ended December 31, 2005.
At
the
$14.03 closing price of our Class A common stock on April 12, 2006, the market
value of the 1,000,000 shares that would be reserved under the 2006 Omnibus
Plan
would be approximately $14.0 million.
The
following discussion of the federal income tax status of awards under the 2006
Omnibus Plan, as proposed, is based on present federal tax laws and regulations
and does not purport to be a complete description of the federal income tax
laws. Participants may also be subject to certain state and local taxes, which
are not described below.
Non-Qualified
Stock Options.
No
income will be realized by a participant at the time a non-qualified stock
option is granted, and no deduction will be available to us at such time. When
the non-qualified stock option is exercised, the participant generally will
realize taxable ordinary income in an amount equal to the excess of the fair
market value of the shares of Class A common stock acquired from the exercise
of
such stock option over the exercise price, and we will receive a corresponding
deduction at such time. If a non-qualified stock option is exercised by
delivering shares of Class A common stock to us, the use of such shares of
Class
A common stock will not be considered a taxable disposition of such shares.
Instead, (a) the number of shares of Class A common stock received from the
exercise equal to the number of shares delivered will have the same basis and
same holding period as the shares so delivered, (b) the participant will
realize taxable ordinary income in an amount equal to the fair market value
of
the additional shares of Class A common stock received from the exercise of
such
stock option, (c) the participant will have a tax basis in the additional
shares equal to their fair market value and the holding period of the additional
shares will begin on the date that they are actually acquired, and (d) we
will receive a deduction at such time in the same amount as the taxable income
realized by the participant. In either case, our deduction will be subject
to
the limitations of Section 162(m) of the Code, if applicable (see
"Limitation on Income Tax Deduction"). The gain, if any, realized upon the
subsequent disposition by the participant of the shares of Class A common stock
will constitute short- or long-term capital gain, depending on the participant’s
holding period.
Incentive
Stock Options. No
income
will be realized by a participant either at the time an incentive stock option
is granted or upon the exercise thereof by the participant, and no deduction
will be available to us at such times. If the participant holds the shares
of
Class A common stock underlying the stock option for the greater of two years
after the date the stock option was granted or one year after the acquisition
of
such shares of Class A common stock (the "required holding period"), then upon
the disposition of such shares of Class A common stock, the participant will
realize a long-term capital gain or loss equal to the difference between the
aggregate exercise price previously paid for the shares disposed and the
proceeds received from such disposition; we will not be entitled to any
deduction. If the shares of Class A common stock are disposed of in a sale,
exchange, or other disqualifying disposition during the required holding period,
then the participant will realize taxable gain in an amount equal to the
aggregate exercise price previously paid for the shares disposed and the
proceeds received from such disposition, and the portion of such taxable gain
up
to the excess of the fair market value of the Class A common stock disposed
(at
the time that the stock option from the exercise of which such shares were
received) over the exercise price previously paid for such shares will be
taxable ordinary income, and we will be entitled to a corresponding deduction
at
such time, subject to the limitations of Section 162(m) of the Code, if
applicable (see "Limitation on Income Tax Deduction"). Any remaining portion
of
such taxable gain will constitute short- or long-term capital gain, depending
on
the participant’s holding period.
Stock
Appreciation Rights. No
income
will be realized by a participant at the time a stock appreciation right is
awarded, and no deduction will be available to us at such time. A participant
will realize ordinary income upon the exercise of the stock appreciation right
in an amount equal to the cash and fair market value of the shares of Class
A
common stock received by the participant from such exercise, and we will be
entitled to a corresponding deduction at such time, subject to the limitations
of Section 162(m) of the Code, if applicable (see "Limitation on Income Tax
Deduction").
Unrestricted
Stock-Based Award. Upon
the
grant of an unrestricted stock-based award, a participant will realize taxable
income equal to the cash and fair market value at such time of the shares of
Class A common stock received by the participant under such award (less the
purchase price therefor, if any), and we will be entitled to a corresponding
tax
deduction at that time, subject to the limitations of Section 162(m) of the
Code, if applicable (see "Limitation on Income Tax Deduction").
Restricted
Stock-Based Award.
Upon
the grant of a restricted stock-based award, no income will be realized by
a
participant (unless a participant timely makes an election to accelerate the
recognition of the income to the date of grant), and we will not be allowed
a
deduction at that time; when the award vests and is no longer subject to a
substantial risk of forfeiture for income tax purposes, the participant will
realize taxable ordinary income in an amount equal to the cash and the fair
market value at such time of the shares of Class A common stock received by
the
participant under such award (less the purchase price therefor, if any), and
we
will be entitled to a corresponding deduction at such time. If a participant
does make a timely election to accelerate the recognition of income, then the
participant will recognize taxable ordinary income in an amount equal to the
cash and the fair market value at the time of grant of the shares of Class
A
common stock to be received by the participant under such award (less
the
purchase price therefor, if any), and we will be entitled to a corresponding
deduction at such time. In each case, our deduction will be subject to the
limitations of Section 162(m) of the Code, if applicable (see "Limitation
on Income Tax Deduction").
Performance
Units and Performance Awards. A
participant receiving a performance unit or performance award will not recognize
income, and we will not be allowed a tax deduction, at the time such award
is
granted. When a participant receives payment of a performance unit or
performance award, the amount of cash and the fair market value of any shares
of
Class A common stock received will be ordinary income to the participant, and
we
will be entitled to a corresponding tax deduction at that time, subject to
the
limitations of Section 162(m) of the Code, if applicable (see "Limitation
on Income Tax Deduction").
Effect
of Deferral on Taxation of Awards. If
the
Committee permits a participant to defer the receipt of payment of an award
and
such participant makes an effective election to defer the payment of the award
in accordance with the administrative guidelines established by the Committee,
the participant will not realize taxable income until the date the participant
becomes entitled to receive such payment pursuant to the terms of the deferral
election, and we will not be entitled to a deduction until such time. Any
interest or dividends paid on, or capital gains resulting from, our investment
of the amount deferred during the deferral period will be taxable to us in
the
year recognized. At the time the participant becomes entitled to receive the
deferred payment, the participant will recognize taxable income in an amount
equal to the actual payment to be received, including any interest or earnings
credited on the amount deferred during the deferral period, and we will be
entitled to a corresponding deduction for such amount at that time.
Pursuant
to Section 162(m) of the Code, we generally may not deduct compensation
paid to a covered employee in any year in excess of $1.0 million. However,
qualifying performance-based compensation is not subject to such limitation
if
certain requirements are met. One requirement is stockholder approval of
(i) the performance criteria upon which performance-based awards may be
based, (ii) the annual per-participant limits on grants of
performance-based awards and stock options and stock appreciation rights and
(iii) the class of employees eligible to receive awards. The Board of
Directors has submitted the 2006 Omnibus Plan for approval by the stockholders
in order to permit the grant of certain awards thereunder, such as stock
options, stock appreciation rights, stock awards, and certain performance units
that will constitute "performance-based" compensation, which we expect to be
excluded from the calculation of annual compensation of covered employees for
purposes of Section 162(m) of the Code and be fully deductible by us. The
Committee may grant awards under the 2006 Omnibus Plan that do not qualify
as
performance-based compensation under Section 162(m) of the Code. The
payment of any such non-qualifying awards to a covered employee could be
non-deductible by us, in whole or in part, under Section 162(m) of the
Code, depending on such covered employee’s total compensation in the applicable
year.
Stockholder
approval of this proposal will constitute approval of (i) the performance
criteria upon which performance-based awards that are intended to be deductible
by us under Section 162(m) of the Code may be based under the 2006 Omnibus
Plan, (ii) the annual per participant limit of 250,000 shares of common
stock for stock-based awards and $2,000,000 for cash awards, and (iii) the
class of participants eligible to receive awards under the 2006 Omnibus Plan.
In
order for awards granted under the 2006 Omnibus Plan to continue to be treated
as qualified performance-based compensation under Section 162(m) of the
Code, every five years we must seek stockholder approval of each of the items
listed in the prior sentence.
To
be
eligible for inclusion in our proxy materials relating to our 2007 annual
meeting of stockholders, stockholder proposals intended to be presented at
that
meeting must be received by us in writing on or before
December 17, 2006. However, if the date of the 2007 annual meeting of
stockholders is more than thirty days before or after May 23, 2007, then
the deadline for submitting any such stockholder proposal for inclusion in
the
proxy materials relating to the 2007 annual meeting of stockholders will be
a
reasonable time before we begin to print or mail such proxy materials. The
inclusion of any such stockholder proposals in such proxy materials will be
subject to the requirements of the proxy rules adopted under the Exchange Act,
including Rule 14a-8.
We
must
receive in writing any stockholder proposals to be considered at our 2007 annual
meeting, but not included in our proxy materials relating to that meeting
pursuant to Rule 14a-8 under the Exchange Act, by February 25, 2007.
However, if the date of the 2007 annual meeting of stockholders is more than
thirty days before or after May 23, 2007, then the deadline for submitting
any such stockholder proposal will be a reasonable time before we mail the
proxy
materials relating to such meeting. Under Rule 14(a)-4(c)(1) of the
Exchange Act, the proxy holders designated by an executed proxy in the form
accompanying our 2007 proxy statement will have discretionary authority to
vote
on any stockholder proposal that is not received on or prior to the deadline
described above.
Written
copies of all stockholder proposals should be sent to our principal executive
offices at 400 Birmingham Highway, Chattanooga, Tennessee 37419, to the
attention of Joey B. Hogan, our Executive Vice President, Chief Financial
Officer, and Assistant Secretary. Stockholder proposals must comply with the
rules and regulations of the SEC.
The
Board
of Directors does not intend to present at the annual meeting any matters other
than those described herein and does not presently know of any matters that
will
be presented by other parties.
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Covenant
Transport, Inc.
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David
R. Parker
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Chairman
of the Board of Directors
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April
17, 2006
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COVENANT
TRANSPORT, INC.
2006
OMNIBUS INCENTIVE PLAN
ARTICLE
I
PURPOSE
AND EFFECTIVE DATE
Section 1.1. Purpose.
The
purpose of the Plan is to provide annual incentives to certain Employees,
Directors, and Consultants of the Company in a manner designed to reinforce
the
Company’s performance goals; to link a significant portion of Participants’
compensation to the achievement of such goals; and to continue to attract,
motivate, and retain key personnel on a competitive basis.
Section 1.2. Effective
Date.
The
Plan was adopted by the Board of Directors on April 12, 2006, and became
effective upon approval by the stockholders on [month] [date],
2006.
Section
1.3 Successor
Plan.
This
Plan shall serve as the successor to the Covenant Transport, Inc. 2003 Incentive
Stock Plan; the Incentive Stock Plan, Amended and Restated as of May 17, 2001;
the Outside Director Stock Option Plan; and Amendment No. 1 to the Outside
Director Stock Option Plan (collectively, the "Predecessor Plans"), and no
further awards shall be made under the Predecessor Plans from and after the
effective date of this Plan. All outstanding awards under the Predecessor Plans
immediately prior to the effective date of this Plan are hereby incorporated
into this Plan and shall accordingly be treated as outstanding awards under
this
Plan; provided, however, each such award shall continue to be governed solely
by
the terms and conditions of the instrument evidencing such award and interpreted
under the terms of the respective Predecessor Plan, and, except as otherwise
expressly provided herein, no provision of this Plan shall affect or otherwise
modify the rights or obligations of holders of such incorporated awards with
respect to their acquisition of shares of Common Stock, or otherwise modify
the
rights or the obligations of the holders of such awards. Any shares of Common
Stock reserved for issuance under the Predecessor Plans in excess of the number
of shares as to which awards have been awarded thereunder, plus any such shares
as to which awards granted under the Predecessor Plans may lapse, expire,
terminate, or be cancelled, shall be deemed available for issuance or reissuance
under Section 6.1 of the Plan.
ARTICLE
II
DEFINITIONS
AND CONSTRUCTION
Section
2.1. Certain
Defined Terms.
As used
in this Plan, unless the context otherwise requires, the following terms shall
have the following meanings:
(a) "Award"
means
any form of stock option, stock appreciation right, Stock Award, Restricted
Stock Unit Award, performance unit, Performance Award, or other incentive award
granted under the Plan, whether singly, in combination, or in tandem, to a
Participant by the Committee pursuant to such terms, conditions, restrictions,
and/or limitations, if any, as the Committee may establish by the Award Notice
or otherwise.
(b) "Award
Notice"
means
the document establishing the terms, conditions, restrictions, and/or
limitations of an Award in addition to those established by this Plan and by
the
Committee’s exercise of its administrative powers. The Committee will establish
the form of the document in the exercise of its sole and absolute
discretion.
(c) "Board"
means
the Board of Directors of the Company.
(d) "CEO"
means
the Chief Executive Officer of the Company.
(e) "Code"
means
the Internal Revenue Code of 1986, as amended from time to time, including
the
regulations thereunder and any successor provisions and the regulations
thereto.
(f)
"Committee"
means
(i) the Board, and (ii) the Compensation Committee of the Board, or such other
Board committee as may be designated by the Board to administer the Plan;
provided that the Committee shall consist of two or more Directors, all of
whom
are both a "Non-Employee Director" within the meaning of Rule 16b-3 under
the Exchange Act and an "outside director" within the meaning of the definition
of such term as contained in Treasury Regulation Section 1.162-27(e)(3), or
any successor definition adopted under Section 162(m) of the
Code.
(g) "Common
Stock"
means
the Class A Common Stock, par value $0.01 per share, of the
Company.
(h) "Company"
means
Covenant Transport, Inc., a Nevada corporation, and its
Subsidiaries.
(i)
"Consultants"
means
the consultants, advisors, and independent contractors retained by the
Company.
(j) "Covered
Employee"
means
an Employee who is a "covered employee" within the meaning of
Section 162(m) of the Code.
(k) "Director"
means a
Non-Employee member of the Board.
(l) "Effective
Date"
means
the date an Award is determined to be effective by the Committee upon its grant
of such Award, which date shall be set forth in the applicable Award
Notice.
(m) "Employee"
means
any person employed by the Company on a full or part-time basis.
(n) "Exchange
Act"
means
the Securities Exchange Act of 1934, as amended from time to time, including
the
rules thereunder and any successor provisions and the rules
thereto.
(o)
"Fair
Market Value"
means
the closing price of the Common Stock on the principal national securities
exchange on which the Common Stock is then listed or admitted to trading, and
the closing price shall be the last reported sale price, regular way, on such
date (or, if no sale takes place on such date, the last reported sale price,
regular way, on the next preceding date on which such sale took place), as
reported by such exchange. If the Common Stock is not then so listed or admitted
to trading on a national securities exchange, then Fair Market Value shall
be
the closing price (the last reported sale price regular way) of the Common
Stock
in the over-the-counter market as reported by the National Association of
Securities Dealers Automated Quotation System ("NASDAQ"),
if
the closing price of the Common Stock is then reported by NASDAQ. If the Common
Stock closing price is not then reported by NASDAQ, then Fair Market Value
shall
be the mean between the representative closing bid and closing asked prices
of
the Common Stock in the over-the-counter market as reported by NASDAQ. If the
Common Stock bid and asked prices are not then reported by NASDAQ, then Fair
Market Value shall be the quote furnished by any member of the National
Association of Securities Dealers, Inc. selected from time to time by the
Company for that purpose. If no member of the National Association of Securities
Dealers, Inc. then furnishes quotes with respect to the Common Stock, then
Fair
Market Value shall be the value determined by the Committee in good
faith.
(p) "Negative
Discretion"
means
the discretion authorized by the Plan to be applied by the Committee in
determining the size of a Performance Award for a Performance Period if, in
the
Committee’s sole judgment, such application is appropriate. Negative Discretion
may only be used by the Committee to eliminate or reduce the size of a
Performance Award. In no event shall any discretionary authority granted to
the
Committee by the Plan, including, but not limited to Negative Discretion, be
used to: (a) grant Performance Awards for a Performance Period if the
Performance Goals for such Performance Period have not been attained under
the
applicable Performance Formula; or (b) increase a Performance Award above
the maximum amount payable under Section 6.3 of the Plan.
(q) "Participant"
means
either an Employee, Director, or Consultant to whom an Award has been granted
under the Plan.
(r)
"Performance
Awards"
means
the Stock Awards and performance units granted pursuant to Article VII.
Performance Awards are intended to qualify as "performance-based compensation"
under Section 162(m) of the Code.
(s) "Performance
Criteria"
means
the one or more criteria that the Committee shall select for purposes of
establishing the Performance Goal(s) for a Performance Period. The Performance
Criteria that will be used to establish such Performance Goal(s) shall be
expressed in terms of the attainment of specified levels of one or any variation
or combination of the following: revenues (including, without limitation,
measures such as revenue per mile (loaded or total) or revenue per tractor),
net
revenues, fuel surcharges, accounts receivable collection or days sales
outstanding, cost reductions and savings (or limits on cost increases), safety
and claims (including, without limitation, measures such as accidents per
million miles and number of significant accidents), operating income, operating
ratio, income before taxes, net income, earnings before interest and taxes
(EBIT), earnings before interest, taxes, depreciation, and amortization
(EBITDA), adjusted net income, earnings per share, adjusted earnings per share,
stock price, working capital measures, return on assets, return on revenues,
debt-to-equity or debt-to-capitalization (in each case with or without lease
adjustment), productivity and efficiency measures (including, without
limitation, measures such as driver
turnover,
trailer to tractor ratio, and tractor to non-driver ratio), cash position,
return on stockholders’ equity, return on invested capital, cash flow measures
(including, without limitation, free cash flow), market share, stockholder
return, economic value added, or completion of acquisitions (either with or
without specified size). In addition, the Committee may establish, as additional
Performance Criteria, the attainment by a Participant of one or more personal
objectives and/or goals that the Committee deems appropriate, including but
not
limited to implementation of Company policies, negotiation of significant
corporate transactions, development of long-term business goals or strategic
plans for the Company, or the exercise of specific areas of managerial
responsibility. Each of the Performance Criteria may be expressed on an absolute
and/or relative basis with respect to one or more peer group companies or
indices, and may include comparisons with past performance of the Company
(including one or more divisions thereof, if any) and/or the current or past
performance of other companies.
(t) "Performance
Formula"
means,
for a Performance Period, the one or more objective formulas (expressed as
a
percentage or otherwise) applied against the relevant Performance Goal(s) to
determine, with regard to the Award of a particular Participant, whether all,
some portion but less than all, or none of the Award has been earned for the
Performance Period.
(u) "Performance
Goals"
means,
for a Performance Period, the one or more goals established by the Committee
for
the Performance Period based upon the Performance Criteria. Any Performance
Goal
shall be established in a manner such that a third party having knowledge of
the
relevant performance results could calculate the amount to be paid to the
Participant. For any Performance Period, the Committee is authorized at any
time
during the initial time period permitted by Section 162(m) of the Code, or
at any time thereafter, in its sole and absolute discretion, to adjust or modify
the calculation of a Performance Goal for such Performance Period in order
to
prevent the dilution or enlargement of the rights of Participants (i) in
the event of, or in anticipation of, any unusual or extraordinary corporate
item, transaction, event, or development; (ii) in recognition of, or in
anticipation of, any other unusual or nonrecurring events affecting the Company,
or the financial statements of the Company, or in response to, or in
anticipation of, changes in applicable laws, regulations, accounting principles,
or business conditions; and (iii) in view of the Committee’s assessment of
the business strategy of the Company, performance of comparable organizations,
economic and business conditions, and any other circumstances deemed
relevant.
(v) "Performance
Period"
means
the one or more periods of time, which may be of varying and overlapping
durations, as the Committee may select, over which the attainment of one or
more
Performance Goals will be measured for the purpose of determining a
Participant’s right to and the payment of a Performance Award.
(w) "Plan"
means
this 2006 Omnibus Incentive Plan, as amended from time to time.
(x)
"Restricted
Stock Unit Award"
means
an Award granted pursuant to Article XI in the form of a right to receive
shares of Common Stock on a future date.
(y)
"Securities
Act"
means
the Securities Act of 1933, as amended from time to time, including the rules
thereunder and any successor provisions and the rules thereto.
(z) "Stock
Award"
means
an award granted pursuant to Article X in the form of shares of Common
Stock, restricted shares of Common Stock, and/or units of Common
Stock.
(aa) "Subsidiary"
means a
corporation or other business entity in which the Company directly or indirectly
has an ownership interest of twenty percent (20%) or more, except that with
respect to incentive stock options, "Subsidiary" shall mean "subsidiary
corporation" as defined in Section 424(f) of the Code.
Section
2.2.
Other
Defined Terms.
Unless
the context otherwise requires, all other capitalized terms shall have the
meanings set forth in the other Articles and Sections of this Plan.
Section
2.3. Construction.
In any
necessary construction of a provision of this Plan, the masculine gender may
include the feminine, and the singular may include the plural, and vice
versa.
ARTICLE
III
ELIGIBILITY
Section 3.1. In
General.
Subject
to Section 3.2 and Article IV, all Employees, Directors, and
Consultants are eligible to participate in the Plan. The Committee may select,
from time to time, Participants from those Employees, Directors, and
Consultants.
Section 3.2. Incentive
Stock Options.
Only
Employees shall be eligible to receive "incentive stock options" (within the
meaning of Section 422 of the Code).
ARTICLE
IV
PLAN
ADMINISTRATION
Section 4.1. Responsibility.
The
Committee shall have total and exclusive responsibility to control, operate,
manage, and administer the Plan in accordance with its terms.
Section 4.2. Authority
of the Committee.
The
Committee shall have all the authority that may be necessary or helpful to
enable it to discharge its responsibilities with respect to the Plan. Without
limiting the generality of the preceding sentence, the Committee shall have
the
exclusive right to:
(a)
determine
eligibility for participation in the Plan;
(b) select
the
Participants and determine the type of Awards to be made to Participants, the
number of shares subject to Awards and the terms, conditions, restrictions,
and
limitations of the Awards, including, but not by way of limitation, restrictions
on the transferability of Awards and conditions with respect to continued
employment, performance criteria, confidentiality, and
non-competition;
(c) interpret
the Plan;
(d) construe
any
ambiguous provision, correct any default, supply any omission, and reconcile
any
inconsistency of the Plan;
(e) issue
administrative guidelines as an aid to administer the Plan and make changes
in
such guidelines as it from time to time deems proper;
(f) make
regulations for carrying out the Plan and make changes in such regulations
as it
from time to time deems proper;
(g) to
the
extent permitted under the Plan, grant waivers of Plan terms, conditions,
restrictions, and limitations;
(h) promulgate
rules and regulations regarding treatment of Awards of a Participant under
the
Plan in the event of such Participant’s death, disability, retirement,
termination from the Company, or breach of agreement by the Participant, or
in
the event of a change of control of the Company;
(i) accelerate
the vesting, exercise, or payment of an Award or the Performance Period of
an
Award when such action or actions would be in the best interest of the
Company;
(j) establish
such other types of Awards, besides those specifically enumerated in Article
V
hereof, which the Committee determines are consistent with the Plan’s
purpose;
(k) subject
to Section 4.3, grant Awards in replacement of Awards previously granted under
this Plan or any other executive compensation plan of the Company;
(l) establish
and administer the Performance Goals and certify whether, and to what extent,
they have been attained;
(m) determine
the
terms and provisions of any agreements entered into hereunder;
(n) take
any
and all other action it deems necessary or advisable for the proper operation
or
administration of the Plan; and
(o) make
all
other determinations it deems necessary or advisable for the administration
of
the Plan, including factual determinations.
The
decisions of the Committee and its actions with respect to the Plan shall be
final, binding, and conclusive upon all persons having or claiming to have
any
right or interest in or under the Plan.
Section 4.3. Option
Repricing.
Except
for adjustments pursuant to Section 6.2, the Committee shall not reprice any
stock options and/or stock appreciation rights unless such action is approved
by
the Company’s stockholders. For purposes of the Plan, the term "reprice" shall
mean the reduction, directly or indirectly, in the per-share exercise price
of
an outstanding stock option(s) and/or stock appreciation right(s) issued under
the Plan by amendment, cancellation, or substitution.
Section 4.4. Section 162(m)
of the Code.
With
regard to Awards issued to Covered Employees that are intended to qualify as
"performance-based compensation" for purposes of Section 162(m) of the
Code, the Plan shall, for all purposes, be interpreted and construed with
respect to such Awards in the manner that would result in such interpretation
or
construction satisfying the exemptions available under Section 162(m) of
the Code.
Section 4.5. Action
by the Committee.
Except
as otherwise provided by Section 4.6, the Committee may act only by a
majority of its members. Any determination of the Committee may be made, without
a meeting, by a writing or writings signed by all of the members of the
Committee.
Section 4.6. Allocation
and Delegation of Authority.
The
Committee may allocate all or any portion of its responsibilities and powers
under the Plan to any one or more of its members, the CEO, or other senior
members of management as the Committee deems appropriate, and may delegate
all
or any part of its responsibilities and powers to any such person or persons;
provided, that any such allocation or delegation be in writing; provided,
further, that only the Committee, or other committee consisting of two or more
Directors, all of whom are both "Non-Employee Directors" within the meaning
of
Rule 16b-3 under the Exchange Act and "outside directors" within the
meaning of the definition of such term as contained in Treasury
Regulation Section 1.162-27(e)(3), or any successor definition adopted
under Section 162(m) of the Code, may select and grant Awards to
Participants who are subject to Section 16 of the Exchange Act or are
Covered Employees. The Committee may revoke any such allocation or delegation
at
any time for any reason with or without prior notice.
ARTICLE
V
FORM
OF AWARDS
Section 5.1. In
General.
Awards
may, at the Committee’s sole discretion, be paid in the form of Performance
Awards pursuant to Article VII, stock options pursuant to
Article VIII, stock appreciation rights pursuant to Article IX, Stock
Awards pursuant to Article X, Restricted Stock Unit Awards pursuant to
Article XI, performance units pursuant to Article XII, any form
established by the Committee pursuant to Section 4.2(j), or a combination
thereof. Each Award shall be subject to the terms, conditions, restrictions,
and
limitations of the Plan and the Award Notice for such Award. Awards under a
particular Article of the Plan need not be uniform and Awards under two or
more
Articles may be combined into a single Award Notice. Any combination of Awards
may be granted at one time and on more than one occasion to the same
Participant.
Section 5.2.
Foreign
Jurisdictions.
(a)
Special
Terms.
In
order to facilitate the making of any Award to Participants who are employed
or
retained by the Company outside the United States as Employees, Directors,
or
Consultants (or who are foreign nationals temporarily within the United States),
the Committee may provide for such modifications and additional terms and
conditions ("Special
Terms")
in
Awards as the Committee may consider necessary or
appropriate to accommodate differences in local law, policy, or custom or to
facilitate administration of the Plan. The Special Terms may provide that the
grant of an Award is subject to (i) applicable governmental or regulatory
approval or other compliance with local legal requirements and/or (ii) the
execution by the Participant of a written instrument in the form specified
by
the Committee, and that in the event such conditions are not satisfied, the
grant shall be void. The Special Terms may also provide that an Award shall
become exercisable or redeemable, as the case may be, if an Employee’s
employment or Director or Consultant’s relationship with the Company ends as a
result of
workforce
reduction, realignment, or similar measure and the Committee may designate
a
person or persons to make such determination for a location. The Committee
may
adopt or approve sub-plans, appendices or supplements to, or amendments,
restatements, or alternative versions of, the Plan as it may consider necessary
or appropriate for purposes of implementing any Special Terms, without thereby
affecting the terms of the Plan as in effect for any other purpose; provided,
however, no such sub-plans, appendices or supplements to, or amendments,
restatements, or alternative versions of, the Plan shall: (x) increase the
limitations contained in Section 6.3; (y) increase the number of
available shares under Section 6.1; or (z) cause the Plan to cease to
satisfy any conditions of Rule 16b-3 under the Exchange Act.
(b) Currency
Effects.
Unless
otherwise specifically determined by the Committee, all Awards and payments
pursuant to such Awards shall be determined in United States currency. The
Committee shall determine, in its discretion, whether and to the extent any
payments made pursuant to an Award shall be made in local currency, as opposed
to United States dollars. In the event payments are made in local currency,
the
Committee may determine, in its discretion and without liability to any
Participant, the method and rate of converting the payment into local
currency.
ARTICLE
VI
SHARES
SUBJECT TO PLAN
Section 6.1. Available
Shares.
The
maximum aggregate number of shares of Common Stock which shall be available
for
the grant of Awards under the Plan (including incentive stock options) during
its term shall not exceed 1,000,000 (the "Share
Reserve").
The
Share Reserve shall be subject to adjustment as provided in Section 6.2.
Any shares of Common Stock related to Awards that terminate by expiration,
forfeiture, cancellation, or otherwise without the issuance of such shares,
are
settled in cash in lieu of Common Stock, or are exchanged with the Committee’s
permission for Awards not involving Common Stock shall be available again for
grant under the Plan. Moreover, if the exercise price of any Award granted
under
the Plan or the tax withholding requirements with respect to any Award granted
under the Plan are satisfied by tendering shares of Common Stock to the Company
(by either actual delivery or by attestation), only the number of shares of
Common Stock issued net of the shares of Common Stock tendered will be deemed
delivered for purposes of determining the Share Reserve available for delivery
under the Plan. The shares of Common Stock available for issuance under the
Plan
may be authorized and unissued shares or treasury shares, including shares
purchased in open market or private transactions. For the purpose of computing
the total number of shares of Common Stock granted under the Plan, where one
or
more types of Awards, both of which are payable in shares of Common Stock,
are
granted in tandem with each other such that the exercise of one type of Award
with respect to a number of shares cancels an equal number of shares of the
other, the number of shares granted under both Awards shall be deemed to be
equivalent to the number of shares under one of the Awards.
Section 6.2. Adjustment
Upon Certain Events.
In the event that there is, with respect to the Company, a stock dividend or
split, reorganization, recapitalization, merger, consolidation, spin-off,
combination, or transaction or exchange of Common Stock or other corporate
exchange, or any distribution to stockholders of Common Stock or other property
or securities (other than regular cash dividends), or any transaction similar
to
the foregoing or other transaction that results in a change to the Company’s
capital structure, then the Committee shall
make substitutions and/or adjustments to the maximum number of shares available
for issuance under the Plan, the maximum Award payable under Section 6.3,
the number of shares to be issued pursuant outstanding Awards, the option
prices, exercise prices or purchase prices of outstanding Awards and/or any
other affected terms of an Award or the Plan as the Committee, in its sole
discretion and without liability to any person, deems equitable or appropriate.
Unless the Committee determines otherwise, in no event shall an Award to any
Participant that is intended to qualify as "performance-based compensation"
for
purposes of Section 162(m) of the Code be adjusted pursuant to this
Section 6.2 to the extent such adjustment would cause such Award to fail to
qualify as "performance-based compensation" under Section 162(m) of the
Code.
Section 6.3. Maximum
Award Payable.
Subject
to Section 6.2, and notwithstanding any provision contained in the Plan to
the contrary, the maximum Award payable (or granted, if applicable) to any
one
Participant under the Plan for a calendar year is 250,000 shares of Common
Stock
or, in the event the Award is paid in cash, $2,000,000.
ARTICLE
VII
PERFORMANCE
AWARDS
Section 7.1. Purpose.
For
purposes of Performance Awards issued to Employees, Directors, and Consultants
that are intended to qualify as "performance-based compensation" for purposes
of
Section 162(m) of the Code, the provisions of this Article VII shall
apply in addition to and, where necessary, in lieu of the provisions of
Article X, Article XI, and Article XII. The purpose of this
Article is to provide the Committee the ability to qualify the Stock Awards
authorized under Article X, the Restricted Stock Unit Awards authorized
under Article XI, and the performance units under Article XII as
"performance-based compensation" under Section 162(m) of the Code. The
provisions of this Article VII shall control over any contrary provision
contained in Article X, Article XI, or Article XII.
Section 7.2. Eligibility.
For
each Performance Period, the Committee will, in its sole discretion, designate
within the initial period allowed under Section 162(m) of the Code which
Employees, Directors, and Consultants will be Participants for such period.
However, designation of an Employee, Director, or Consultant as a Participant
for a Performance Period shall not in any manner entitle the Participant to
receive an Award for the period. The determination as to whether or not such
Participant becomes entitled to an Award for such Performance Period shall
be
decided solely in accordance with the provisions of this Article VII.
Moreover, designation of an Employee, Director, or Consultant as a Participant
for a particular Performance Period shall not require designation of such
Employee, Director, or Consultant as a Participant in any subsequent Performance
Period, and designation of one Employee, Director, or Consultant as a
Participant shall not require designation of any other Employee, Director,
or
Consultant as a Participant in such period or in any other period.
Section 7.3. Discretion
of Committee with Respect to Performance Awards.
The
Committee shall have the authority to determine which Covered Employees or
other
Employees, Directors, or Consultants shall be Participants of a Performance
Award. With regard to a particular Performance Period, the Committee shall
have
full discretion to select the length of such Performance Period, the type(s)
of
Performance Awards to be issued, the Performance Criteria that will be used
to
establish the Performance Goal(s), the kind(s) and/or level(s) of the
Performance Goal(s), whether the Performance Goal(s) is (are) to apply to the
Company or any one or more subunits thereof and the Performance Formula. For
each Performance Period, with regard to the Performance Awards to be issued
for
such period, the Committee will, within the initial period allowed under
Section 162(m) of the Code, exercise its discretion with respect to each of
the matters enumerated in the immediately preceding sentence of this
Section 7.3 and record the same in writing.
Section 7.4. Payment
of
Performance Awards.
(a) Condition
to Receipt of Performance Award.
Unless
otherwise provided in the relevant Award Notice, a Participant must be employed
by the Company on the last day of a Performance Period to be eligible for a
Performance Award for such Performance Period.
(b) Limitation.
A
Participant shall be eligible to receive a Performance Award for a Performance
Period only to the extent that: (1) the Performance Goals for such period
are achieved; and (2) and the Performance Formula as applied against such
Performance Goals determines that all or some portion of such Participant’s
Performance Award has been earned for the Performance Period.
(c) Certification.
Following the completion of a Performance Period, the Committee shall meet
to
review and certify in writing whether, and to what extent, the Performance
Goals
for the Performance Period have been achieved and, if so, to also calculate
and
certify in writing the amount of the Performance Awards earned for the period
based upon the Performance Formula. The Committee shall then determine the
actual size of each Participant’s Performance Award for the Performance Period
and, in so doing, shall apply Negative Discretion, if and when it deems
appropriate.
(d) Negative
Discretion.
In
determining the actual size of an individual Performance Award for a Performance
Period, the Committee may reduce or eliminate the amount of the Performance
Award earned under the Performance Formula for the Performance Period through
the use of Negative Discretion, if in its sole judgment, such reduction or
elimination is appropriate.
(e) Timing
of
Award Payments.
The
Awards granted for a Performance Period shall be paid to Participants as soon
as
administratively practicable following completion of the certifications required
by Section 7.4(c).
ARTICLE
VIII
STOCK
OPTIONS
Section 8.1. In
General.
Awards
may be granted in the form of stock options. These stock options may be
incentive stock options within the meaning of Section 422 of the Code or
non-qualified stock options (i.e., stock options which are not incentive stock
options), or a combination of both. All Awards under the Plan issued to Covered
Employees in the form of non-qualified stock options shall qualify as
"performance-based compensation" under Section 162(m) of the
Code.
Section 8.2. Terms
and Conditions of Stock Options.
An
option shall be exercisable in accordance with such terms and conditions and
at
such times and during such periods as may be determined by the Committee. The
price at which Common Stock may be purchased upon exercise of a stock option
shall be not less than one hundred percent (100%) of the Fair Market Value
of the Common Stock, as determined by the Committee, on the Effective Date
of
the option’s grant. In addition, the term of a stock option may not exceed ten
(10) years.
Section 8.3. Restrictions
Relating to Incentive Stock Options.
Stock
options issued in the form of incentive stock options shall, in addition to
being subject to the terms and conditions of Section 8.2, comply with
Section 422 of the Code. Accordingly, the aggregate Fair Market Value
(determined at the time the option was granted) of the Common Stock with respect
to which incentive stock options are exercisable for the first time by a
Participant during any calendar year (under this Plan or any other plan of
the
Company) shall not exceed $100,000 (or such other limit as may be required
by
Section 422 of the Code).
Section 8.4. Exercise.
Upon
exercise, the option price of a stock option may be paid in cash, or, to the
extent permitted by the Committee, by tendering, by either actual delivery
of
shares or by attestation, shares of Common Stock, a combination of the
foregoing, or such other consideration as the Committee may deem appropriate.
The Committee shall establish appropriate methods for accepting Common Stock,
whether restricted or unrestricted, and may impose such conditions as it deems
appropriate on the use of such Common Stock to exercise a stock option. Stock
options awarded under the Plan may also be exercised by way of a broker-assisted
stock option exercise program, if any, provided such program is available at
the
time of the option’s exercise. Notwithstanding the foregoing or the provision of
any Award Notice, a Participant may not pay the exercise price of a stock option
using shares of Common Stock if, in the opinion of counsel to the Company,
(i) the Participant is, or within the six months preceding such exercise
was, subject to reporting under Section 16(a) of the Exchange Act,
(ii) there is a substantial likelihood that the use of such form of payment
or the timing of such form of payment would subject the Participant to a
substantial risk of liability under
Section 16 of the Exchange Act, or (iii) there is a substantial likelihood
that the use of such form of payment would result in accounting treatment to
the
Company under generally accepted accounting principles that the Committee
reasonably determines is adverse to the Company.
ARTICLE
IX
STOCK
APPRECIATION RIGHTS
Section 9.1. In
General.
Awards
may be granted in the form of stock appreciation rights ("SARs").
SARs
entitle the Participant to receive a payment equal to the appreciation in a
stated number of shares of Common Stock from the exercise price to the Fair
Market Value of the Common Stock on the date of exercise. The "exercise price"
for a particular SAR shall be defined in the Award Notice for that SAR. A SAR
may be granted in tandem with all or a portion of a related stock option under
the Plan ("Tandem
SARs"),
or
may be granted separately ("Freestanding
SARs").
A
Tandem SAR may be granted either at the time of the grant of the related stock
option or at any time thereafter during the term of the stock option. All Awards
under the Plan issued to Covered Employees in the form of a SAR shall qualify
as
"performance-based compensation" under Section 162(m) of the
Code.
Section 9.2. Terms
and Conditions of Tandem SARs.
A
Tandem SAR shall be exercisable to the extent, and only to the extent, that
the
related stock option is exercisable, and the "exercise price" of such a SAR
(the
base from which the value of the SAR is measured at its exercise) shall be
the
option price under the related stock option. However, at no time shall a Tandem
SAR be issued if the option price of its related stock option is less than
the
Fair Market Value of the Common Stock, as determined by the Committee, on the
Effective Date of the Tandem SAR’s grant. If a related stock option is exercised
as to some or all of the shares covered by the Award, the related Tandem SAR,
if
any, shall be canceled automatically to the extent of the number of shares
covered by the stock option exercise. Upon exercise of a Tandem SAR as to some
or all of the shares covered by the Award, the related stock option shall be
canceled automatically to the extent of the number of shares covered by such
exercise. Moreover, all Tandem SARs shall expire not later than ten (10) years
from the Effective Date of the SAR’s grant.
Section 9.3. Terms
and Conditions of Freestanding SARs.
Freestanding SARs shall be exercisable or automatically mature in accordance
with such terms and conditions and at such times and during such periods as
may
be determined by the Committee. The exercise price of a Freestanding SAR shall
be not less than one hundred percent (100%) of the Fair Market Value of the
Common Stock on the Effective Date of the Freestanding SAR’s grant. Moreover,
all Freestanding SARs shall expire not later than ten (10) years from the
Effective Date of the Freestanding SAR’s grant.
Section 9.4. Deemed
Exercise.
The
Committee may provide that a SAR shall be deemed to be exercised at the close
of
business on the scheduled expiration date of such SAR if at such time the SAR
by
its terms remains exercisable and, if so exercised, would result in a payment
to
the holder of such SAR.
Section 9.5. Payment.
Unless
otherwise provided in an Award Notice, an SAR may be paid in cash, Common Stock
or any combination thereof, as determined by the Committee, in its sole and
absolute discretion, at the time that the SAR is exercised.
ARTICLE
X
STOCK
AWARDS
Section 10.1. Grants.
Awards
may be granted in the form of Stock Awards. Stock Awards shall be awarded in
such numbers and at such times during the term of the Plan as the Committee
shall determine.
Section 10.2. Performance
Criteria.
For
Stock Awards conditioned, restricted, and/or limited based on Performance Goals,
the length of the Performance Period, the Performance Goals to be achieved
during the Performance Period, and the measure of whether and to what degree
such Performance Goals have been attained shall be conclusively determined
by
the Committee in the exercise of its absolute discretion. Performance
Goals
may be
revised by the Committee, at such times as it deems appropriate during the
Performance
Period,
in
order to take into consideration any unforeseen events or changes in
circumstances.
Section 10.3. Rights
as Stockholders.
During
the period in which any restricted shares of Common Stock are subject to any
restrictions, the Committee may, in its sole discretion, deny a Participant
to
whom such restricted shares have been awarded all or any of the rights of a
stockholder with respect to such shares, including, but not by way of
limitation, limiting the right to vote such shares or the right to receive
dividends on such shares.
Section 10.4. Evidence
of Award.
Any
Stock Award granted under the Plan may be evidenced in such manner as the
Committee deems appropriate, including, without limitation, book-entry
registration or issuance of a stock certificate or certificates, with such
restrictive legends and/or stop transfer instructions as the Committee deems
appropriate.
ARTICLE
XI
RESTRICTED
STOCK UNIT AWARDS
Section 11.1. Grants.
Awards
may be granted in the form of Restricted Stock Unit Awards. Restricted Stock
Unit Awards shall be awarded in such numbers and at such times during the term
of the Plan as the Committee shall determine.
Section 11.2. Rights
as Stockholders.
Until
the shares of Common Stock to be received upon the vesting of such Restricted
Stock Unit Award are actually received by a Participant, the Participant shall
have no rights as a stockholder with respect to such shares.
Section 11.3. Evidence
of Award.
A
Restricted Stock Unit Award granted under the Plan may be recorded on the books
and records of the Company in such manner as the Committee deems
appropriate.
ARTICLE
XII
PERFORMANCE
UNITS
Section 12.1. Grants.
Awards
may be granted in the form of performance units. Performance units, as that
term
is used in this Plan, shall refer to units valued by reference to designated
criteria established by the Committee, other than Common Stock.
Section 12.2. Performance
Criteria.
Performance units shall be contingent on the attainment during a Performance
Period of certain Performance Goals. The length of the Performance Period,
the
Performance Goals to be achieved during the Performance Period, and the measure
of whether and to what degree such Performance Goals have been attained shall
be
conclusively determined by the Committee in the exercise of its absolute
discretion. Performance Goals may be revised by the Committee, at such times
as
it deems appropriate during the Performance Period, in order to take into
consideration any unforeseen events or changes in circumstances.
ARTICLE
XIII
PAYMENT
OF AWARDS
Section 13.1. Payment.
Absent
a Plan or Award Notice provision to the contrary, payment of Awards may, at
the
discretion of the Committee, be made in cash, Common Stock, a combination of
cash and Common Stock, or any other form of property as the Committee shall
determine. In addition, payment of Awards may include such terms, conditions,
restrictions, and/or limitations, if any, as the Committee deems appropriate,
including, in the case of Awards paid in the form of Common Stock, restrictions
on transfer and forfeiture provisions; provided, however, such terms,
conditions, restrictions, and/or limitations are not inconsistent with the
Plan.
Section 13.2. Withholding
Taxes.
The
Company shall be entitled to deduct from any payment under the Plan, regardless
of the form of such payment, the amount of all applicable income and employment
taxes required by law to be withheld with respect to such payment or may require
the Participant to pay to it such tax prior to and as a condition of the making
of such payment. In accordance with any applicable administrative guidelines
it
establishes, the Committee may allow a Participant to pay the amount of taxes
required by law to be withheld from an Award by withholding from any payment
of
Common Stock due as a result of such Award, or by permitting the Participant
to
deliver to the Company, shares of Common Stock having a Fair Market Value equal
to the minimum amount of such required withholding taxes. Notwithstanding the
foregoing or the provision of any Award Notice, a Participant may not pay the
amount of taxes required by law to be withheld using shares of Common Stock
if,
in the opinion of counsel to the Company, (i) there is a substantial
likelihood that the use of such form of payment or the timing of such form
of
payment would subject the Participant to a substantial risk of liability under
Section 16 of the Exchange Act, or (ii) there is a substantial
likelihood that the use of such form of payment would result in adverse
accounting treatment to the Company under generally accepted accounting
principles.
ARTICLE
XIV
DIVIDEND
AND DIVIDEND EQUIVALENTS
If
an
Award is granted in the form of a Stock Award or stock option, or in the form
of
any other stock-based grant, the Committee may choose, at the time of the grant
of the Award or any time thereafter up to the time of the Award’s payment, to
include as part of such Award an entitlement to receive dividends or dividend
equivalents, subject to such terms, conditions, restrictions, and/or
limitations, if any, as the Committee may establish. Dividends and dividend
equivalents shall be paid in such form and manner (i.e., lump sum or
installments), and at such time(s) as the Committee shall determine. All
dividends or dividend equivalents which are not paid currently may, at the
Committee’s discretion, accrue interest, be reinvested into additional shares of
Common Stock or, in the case of dividends or dividend equivalents credited
in
connection with Stock Awards, be credited as additional Stock Awards and paid
to
the Participant if and when, and to the extent that, payment is made pursuant
to
such Award.
ARTICLE
XV
DEFERRAL
OF AWARDS
At
the
discretion of the Committee, payment of any Award, salary, bonus compensation,
Company Board compensation, dividend or dividend equivalent, or any portion
thereof, may be deferred by a Participant until such time as the Committee
may
establish. All such deferrals shall be accomplished by the delivery of a
written, irrevocable election by the Participant prior to the time established
by the Committee for such purpose, on a form provided by the Company. Further,
all deferrals shall be made in accordance with administrative guidelines
established by the Committee to ensure that such deferrals comply with all
applicable requirements of the Code. Deferred payments shall be paid in a lump
sum or installments, as determined by the Committee. Deferred Awards may also
be
credited with interest, at such rates to be determined by the Committee, or
invested by the Company, and, with respect to those deferred Awards denominated
in the form of Common Stock, credited with dividends or dividend
equivalents.
ARTICLE
XVI
MISCELLANEOUS
Section 16.1. Nonassignability.
Except
as otherwise provided in an Award Notice, no Awards or any other payment under
the Plan shall be subject in any manner to alienation, anticipation, sale,
transfer (except by will or the laws of descent and distribution), assignment,
or pledge, nor shall any Award be payable to or exercisable by anyone other
than
the Participant to whom it was granted.
Section 16.2. Regulatory
Approvals and Listings.
Notwithstanding anything contained in this Plan to the contrary, the Company
shall have no obligation to issue or deliver certificates of Common Stock
evidencing Stock Awards or any other Award resulting in the payment of Common
Stock prior to (a) the obtaining of any approval from any governmental
agency which the Company shall, in its sole discretion, determine to be
necessary or advisable, (b) the admission of such shares to listing on the
stock exchange or quotation system on which the Common Stock may be listed,
and
(c) the completion of any registration or other qualification of said
shares under any state or federal law or ruling of any governmental body which
the Company shall, in its sole discretion, determine to be necessary or
advisable.
Section 16.3. No
Right to
Continued Employment or Grants.
Participation in the Plan shall not give any Participant the right to remain
in
the employ or other service of the Company. The Company reserves the right
to
terminate the employment or other service of a Participant at any time. Further,
the adoption of this Plan shall not be deemed to give any Employee, Director,
or
any other individual any right to be selected as a Participant or to be granted
an Award. In addition, no Employee, Director, or any other individual having
been selected for an Award, shall have at any time the right to receive any
additional Awards.
Section 16.4. Amendment/
Termination.
The
Committee may suspend or terminate the Plan at any time for any reason with
or
without prior notice. In addition, the Committee may, from time to time for
any
reason and with or without prior notice, amend the Plan in any manner, but
may
not without stockholder approval adopt any amendment which would require the
vote of the stockholders of the Company if such approval is necessary or deemed
advisable with respect to tax, securities, or other applicable laws or
regulations, including, but not limited to, the listing requirements of the
stock exchanges or quotation systems on which the securities of the Company
are
listed. Notwithstanding the foregoing, without the consent of a Participant
(except as otherwise provided in Section 6.2), no amendment may materially
and adversely affect any of the rights of such Participant under any Award
theretofore granted to such Participant under the Plan.
Section 16.5. Governing
Law.
The
Plan shall be governed by and construed in accordance with the laws of the
State
of Nevada, except as superseded by applicable federal law, without giving effect
to its conflicts of law provisions.
Section 16.6. No
Right, Title, or Interest in Company Assets.
No
Participant shall have any rights as a stockholder as a result of participation
in the Plan until the date of issuance of a stock certificate in his or her
name, and, in the case of restricted shares of Common Stock, such rights are
granted to the Participant under the Plan. To the extent any person acquires
a
right to receive payments from the Company under the Plan, such rights shall
be
no greater than the rights of an unsecured creditor of the Company and the
Participant shall not have any rights in or against any specific assets of
the
Company. All of the Awards granted under the Plan shall be
unfunded.
Section 16.7. No
Guarantee of Tax Consequences.
No
person connected with the Plan in any capacity, including, but not limited
to,
the Company and its directors, officers, agents, and employees, makes any
representation, commitment, or guaranty that any tax treatment, including,
but
not limited to, federal, state, and local income, estate, and gift tax
treatment, will be applicable with respect to the tax treatment of any Award,
any amounts deferred under the Plan, or paid to or for the benefit of a
Participant under the Plan, or that such tax treatment will apply to or be
available to a Participant on account of participation in the Plan.
YOUR
VOTE IS IMPORTANT
If
you do
not vote by telephone or Internet, please sign and date this proxy card and
return it promptly in the enclosed postage-paid envelope, or otherwise to
Proxy
Tabulator, P.O. Box 535450, Pittsburgh, PA 15253, so that your shares may
be
represented at the Annual Meeting. If you vote by telephone or Internet,
it is
not necessary to return this proxy card.
ò
Please fold and detach card at perforation before mailing. ò
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|
COVENANT
TRANSPORT, INC.
|
PROXY
|
A
vote FOR Proposal 1, Proposal 2, and granting the proxies discretionary
authority is recommended by the Board of Directors of the Company. When properly
executed, this proxy will be voted in the manner directed by the undersigned
stockholder(s). If no direction is given, this proxy will be voted FOR Proposal
1, FOR Proposal 2, 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 presented at the meeting.
|
1.
|
Election
of Directors
|
|
q
|
FOR
all nominees listed below
|
q
|
WITHHOLD
AUTHORITY
|
|
|
(except
as marked to the contrary below)
|
to
vote for all nominees listed below
|
|
INSTRUCTION:
To withhold authority to vote for any individual nominee, strike
a line
through the nominee’s name
below.
|
|
Nominees:
|
(1)
William T. Alt
|
(2)
Robert E. Bosworth
|
(3)
Hugh O. Maclellan, Jr.
|
(4)
Bradley A. Moline
|
|
(5)
Niel B. Nielson
|
(6)
David R. Parker
|
(7)
Mark A. Scudder
|
|
2.
|
Approval
of the Covenant Transport, Inc. 2006 Omnibus Incentive
Plan
|
|
q
|
FOR
approval
of the plan
|
q
|
AGAINST
approval
of the plan
|
q
|
ABSTAIN
|
|
3.
|
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.
|
|
q
|
GRANT
AUTHORITY
to
vote
|
q
|
WITHHOLD
AUTHORITY
to
vote
|
q
|
ABSTAIN
|
(CONTINUED
AND
TO BE
SIGNED ON REVERSE
SIDE)
 c/o
UMB Bank, N.A.
P.O.
Box 419064
Kansas
City, MO 64141
|
__________________________________
VOTE
BY TELEPHONE
__________________________________
Have
your proxy card available when you call our
Toll-Free
number 1-888-693-8683 using
a
touch-tone
phone and follow the simple instructions
to
record your vote.
__________________________________
VOTE
BY INTERNET
___________________________________
Have
your proxy card available when you access the website www.cesvote.com
and
follow
the simple instructions to record your vote.
___________________________________
VOTE
BY MAIL
___________________________________
Please
mark, sign and date your proxy card and return it in the postage-paid
envelope
provided or return it to: Proxy Tabulator, P.O. Box 535450, Pittsburgh
PA
15253.
|
|
Vote
by Telephone
Call
Toll-Free using a
touch-tone
telephone:
1-888-693-8683
|
Vote
by Internet
Access
the Website and
cast
your vote:
www.cesvote.com
|
Vote
by Mail
Return
your proxy
in
the postage-paid
envelope
provided
|
Vote
24 hours a day, 7 days a week.
Your
telephone or Internet vote must be received by 11:59 p.m. Eastern
Time
on
May 22, 2006, to be counted in the final tabulation.
If
you vote by telephone or over the Internet, do not mail your proxy
card.
|
à
|
Proxy
card must be signed and dated below.
ò
Please
fold and detach card at perforation before mailing. ò
----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|
|
PROXY
FOR ANNUAL MEETING OF STOCKHOLDERS MAY 23, 2006
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 full power of substitution, to vote all of the Common
Stock that the undersigned is (are) entitled to vote at the annual
meeting
of
stockholders of the Company to be held at the Company’s Corporate Headquarters
at 400 Birmingham Highway, Chattanooga, Tennessee, on Tuesday, May 23,
2006, at 10:00 A.M. Eastern Time, and at any adjournment thereof. The
undersigned acknowledges receipt of the Notice and Proxy Statement for the
2006
annual meeting of stockholders and the annual report to stockholders for the
year ended December 31, 2005.
|
Date:
|
,
2006
|
||
|
|
|||
|
Signature
|
|||
|
|
|||
|
Signature
(if held jointly)
|
|||
|
Please
sign above exactly as your name appears at the
upper left. When shares are held by joint tenants,
both shall sign. When signing as attorney, executor, administrator,
trustee or guardian, please give full title as
such. If a corporation, please sign in full corporate name
by
president or other authorized officer. If a partnership, please sign
in
partnership name by authorized
person.
|
|||
PLEASE
SIGN, DATE AND PROMPTLY RETURN IN THE ACCOMPANYING
ENVELOPE