UNITED
STATES
SECURITIES
AND EXCHANGE COMMISSION
Washington,
D.C. 20549
SCHEDULE
14A
Proxy
Statement Pursuant to Section 14(a) of the Securities Exchange Act of
1934
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the Registrant [X]
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a Party other than the Registrant [ ]
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Preliminary
Proxy Statement
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Confidential,
for Use of the Commission Only (as permitted by Rule
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[X]
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Definitive
Proxy Statement
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Definitive
Additional Materials
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Soliciting
Material Pursuant to
§ 240.14a-12
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Covenant
Transportation Group, Inc.
(Name of
Registrant as Specified in its Charter)
N/A
(Name of
Person(s) Filing Proxy Statement if other than the Registrant)
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of Filing Fee (Check the appropriate box):
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pursuant
to Exchange Act Rule 0-11 (set forth the amount on
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COVENANT
TRANSPORTATION GROUP, INC.
400
Birmingham Highway
Chattanooga,
Tennessee 37419
___________________________________________
NOTICE
AND PROXY STATEMENT
FOR
ANNUAL MEETING OF STOCKHOLDERS
TO
BE HELD ON WEDNESDAY, MAY 14, 2008
___________________________________________
To Our
Stockholders:
You are
cordially invited to attend the 2008 annual meeting of stockholders of Covenant
Transportation Group, Inc., a Nevada corporation, to be held at our
principal executive offices, 400 Birmingham Highway, Chattanooga, Tennessee
37419, at 10:00 a.m. local time, on Wednesday, May 14, 2008, for the
following purposes:
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1.
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To
consider and act upon a proposal to elect five (5)
directors;
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2.
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To
consider and act upon such other matters as may properly come before the
meeting and any adjournment
thereof.
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The foregoing matters are more fully
described in the accompanying proxy statement.
The Board
of Directors has fixed the close of business on Monday, March 17, 2008, as the
record date for the determination of stockholders entitled to receive notice of
and to vote at the annual meeting or any adjournment thereof. Shares of
Class A and Class B common stock may be voted at the annual meeting
only if the holder is present at the annual meeting in person or by valid proxy.
YOUR VOTE IS IMPORTANT. To
ensure your representation at the annual meeting, you are requested to promptly
date, sign, and return the accompanying proxy in the enclosed
envelope. You may also vote on the Internet by completing the
electronic voting instruction form found at www.cesvote.com or by telephone using a touch-tone
telephone and calling 1-888-693-8683. Returning your proxy now
will not interfere with your right to attend the annual meeting or to vote your
shares personally at the annual meeting, if you wish to do so. The prompt return
of your proxy may save us additional expenses of solicitation.
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By
Order of the Board of Directors,
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/s/
David R. Parker
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David
R. Parker
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Chairman
of the Board of Directors
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Chattanooga,
Tennessee
April 14,
2008
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GENERAL
INFORMATION
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Voting
Rights
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Quorum
Requirement
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Required
Vote
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Right to Attend Annual Meeting;
Revocation of
Proxy
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Costs of
Solicitation
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Annual
Report
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How to Read this Proxy
Statement
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How to Vote – Proxy
Instructions
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PROPOSAL
1 - ELECTION OF
DIRECTORS
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Nominees for
Directorships
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CORPORATE
GOVERNANCE
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The Board of Directors and Its
Committees
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Board of
Directors
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Committees of the Board of
Directors
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The Audit
Committee
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Report of the Audit
Committee
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The Compensation
Committee
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Compensation Committee
Report
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Compensation Committee Interlocks
and Insider
Participation
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The Nominating and Corporate
Governance
Committee
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Our Executive
Officers
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Compliance with Section 16(a) of
the Exchange
Act
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Code of Conduct and
Ethics
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EXECUTIVE
COMPENSATION
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Compensation Discussion and
Analysis
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Overview and Philosophy of
Compensation
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Elements of
Compensation
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Base
Salary
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Incentive
Compensation
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Long-Term
Incentives
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Performance-Based Annual
Bonuses
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Other
Compensation
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Employee
Benefits
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Compensation Paid to Our Named
Executive
Officers
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Compensation Paid to Our Chief
Executive
Officer
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Compensation Paid to Our Other
Named Executive
Officers
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Compensation Decisions with
Respect to
2008
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Separation and Severance
Agreements
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Summary Compensation
Table
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All Other Compensation
Table
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Narrative to the Summary
Compensation
Table
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Grants of Plan-Based
Awards
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Narrative to Grants of Plan-Based
Awards
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Outstanding Equity Awards at
Fiscal
Year-End
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Director
Compensation
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Narrative to Director
Compensation
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SECURITY
OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
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CERTAIN
RELATIONSHIPS AND RELATED
TRANSACTIONS
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RELATIONSHIPS
WITH INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
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Principal Accountant Fees and
Services
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STOCKHOLDER
PROPOSALS
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OTHER
MATTERS
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COVENANT
TRANSPORTATION GROUP, INC.
400
Birmingham Highway
Chattanooga,
Tennessee 37419
__________________________________________
NOTICE
AND PROXY STATEMENT
FOR
ANNUAL MEETING OF STOCKHOLDERS
TO
BE HELD ON WEDNESDAY, MAY 14, 2008
__________________________________________
This
proxy statement is furnished in connection with the solicitation of proxies from
the stockholders of Covenant Transportation Group, Inc., a Nevada
corporation, to be voted at the annual meeting of stockholders, which will be
held at our principal executive offices, 400 Birmingham Highway,
Chattanooga, Tennessee 37419, at 10:00 a.m. local time, on Wednesday, May
14, 2008, and any adjournment thereof. THE ENCLOSED PROXY IS SOLICITED BY
OUR BOARD OF DIRECTORS. If not otherwise specified, all proxies received
pursuant to this solicitation will be voted (i) FOR the director nominees named
below; and (ii) in accordance with the judgment of the proxy holders, with
respect to any other matters properly brought before the annual
meeting.
The proxy
statement, proxy card, and our annual report on Form 10-K for the fiscal
year ended December 31, 2007, was first mailed on or about
April 14, 2008, to stockholders of
record at the close of business on our record date of March 17, 2008. Except to the extent it is
incorporated by specific reference, the enclosed copy of our 2007 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 Transportation Group, Inc. and its consolidated
subsidiaries.
Voting Rights
Only
stockholders of record at the close of business on the record date are entitled
to vote at the annual meeting, either in person or by valid proxy. Holders of
Class A common stock are entitled to one vote for each share held. Holders
of Class B common stock are entitled to two votes for each share held so
long as such shares are owned by David R. Parker or certain members of his
immediate family. In the event that any shares of our Class B common stock cease
to be owned by Mr. Parker or certain of his immediate family members, such
shares will be automatically converted into shares of our Class A common stock.
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 17, 2008, the record date,
there were issued and outstanding 12,175,962 shares of Class A common
stock, par value one cent ($0.01) per share (including shares of restricted
Class A common stock subject to certain performance vesting and holding
provisions), entitled to cast an aggregate 12,175,962 votes on all matters
subject to a vote at the annual meeting, and 2,350,000 shares of Class B
common stock, par value one cent ($0.01) per share, entitled to cast an
aggregate 4,700,000 votes on all matters subject to a vote at the annual
meeting. The total number of shares of our common stock issued and outstanding
on the record date was approximately 14,525,962, which is entitled to cast an
aggregate of 16,875,962 votes on all matters subject to a vote at the annual
meeting. The total number of issued and outstanding shares excludes
approximately 1,183,348 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 five director nominees receiving the
highest number of votes for their election will be elected. Approval of any
other matter submitted to stockholders requires the affirmative vote of a
majority of the votes cast by stockholders entitled to vote and represented in
person or by proxy at the annual meeting. Abstentions and broker non-votes are
not considered affirmative votes and thus will have no effect on the election of
directors by a plurality vote, but will have the same effect as negative votes
with respect to the approval of any other matter submitted to
stockholders.
Returning
a proxy card now will not interfere with your right to attend the annual meeting
or to vote your shares personally at the annual meeting, if you wish to do so.
Stockholders who execute and return proxies may revoke them at any time before
they are exercised by giving written notice to our Secretary at our address, by
executing a subsequent proxy and delivering it to our Secretary, or by attending
the annual meeting and voting in person.
We will
bear the cost of solicitation of proxies, which we expect to be nominal and will
include reimbursements for the charges and expenses of brokerage firms and
others for forwarding solicitation materials to beneficial owners of our
outstanding Class A common stock. Proxies will be solicited by mail, and may be
solicited personally by directors, officers, or our regular employees, who will
not receive any additional compensation for any such services.
The
information included in this proxy statement should be reviewed in conjunction
with the Consolidated Financial Statements, Notes to Consolidated Financial
Statements, Reports of Independent Registered Public Accounting Firm, and other
information included in our 2007 annual report that was mailed on or about
April 14, 2008, 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 our Class A or Class B common stock, you may vote your
shares either (i) over the telephone by calling a toll-free number,
(ii) by using the Internet, or (iii) by mailing in your proxy
card. Owners who hold their shares in street name will need to obtain
a voting instruction form from the institution that holds their stock and must
follow the voting instructions given by that institution.
For 2008,
we have arranged for telephone and Internet-voting procedures to be
used. These procedures have been designed to authenticate your
identity, to allow you to give instructions, and to confirm that those
instructions have been recorded properly. If you choose to vote by
telephone or by using the Internet, please refer to the specific instructions on
the proxy card. The deadline for voting by telephone or the internet
is 11:59 p.m. Eastern Standard Time on Tuesday, May 13, 2008. If you
wish to vote using the proxy card, complete, sign, and date your proxy card and
return it to us before the meeting.
PROPOSAL 1 - ELECTION OF DIRECTORS
At the
annual meeting, the stockholders will elect five directors to serve as the Board
of Directors until our 2009 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, Bradley A. Moline, and
Niel B. Nielson, each of whom is presently serving as a director. Hugh O.
Maclellan, Jr. has decided not to stand for reelection to provide additional
time to pursue his interests in ministry. 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, 50,
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, 71,
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,
60, 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 currently a director of Chattem,
Inc.
Bradley A. Moline,
41, 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, 54,
has served as a director since 2003. Dr. Nielson has been President of
Covenant College since 2002. From 1997 until 2002, Dr. Nielson was the
Associate Pastor of Outreach for College Church in Wheaton, Illinois.
Dr. Nielson was a partner and trader for Ritchie Capital Markets
Group, LLC from 1996 to 1997. Prior to 1996, Dr. Nielson served as an
executive officer in various companies, including serving for two years as
Senior Vice President of Chicago Research and Trading Group, Ltd., a company at
which he was employed for nine years. Dr. Nielson holds twenty-four
investment company directorships in the First Trust Fund
Complex.
CORPORATE GOVERNANCE
Meetings. Our Board of
Directors held four regularly scheduled meetings and five special meetings
during the fiscal year ended December 31, 2007. All of our
directors attended at least 75% of the regularly scheduled board meetings of the
Board of Directors and each committee on which he served. We
encourage the members of our Board of Directors to attend our annual meetings of
stockholders. All seven of our then-current directors attended the
2007 annual meeting of stockholders. Those directors who are not
employees of the Company also held four special meetings during the fiscal year
ended December 31, 2008.
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. (not standing for
reelection), 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.
The Audit
Committee
Functions, Composition, and Meetings
of the Audit Committee. Our Audit Committee operates pursuant to a
written charter detailing its purpose, powers, and duties. In February 2007, the
charter of the Audit Committee was amended and restated to comply with
Securities and Exchange Commission (the "SEC") Release Nos. 33-8732 and
34-54302. The charter is available free of charge on our website at
http://www.covenanttransport.com. The
primary responsibilities of the Audit Committee are set forth in the Audit
Committee Report, which appears below. The Audit Committee met eight times
during 2007. 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 2007 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 controls over financial reporting. The Company's management has
primary responsibility for the Company's financial statements and the overall
reporting process, including maintenance of the Company's system of internal
controls. The Company retains an independent registered public accounting firm,
which is responsible for conducting an independent audit of the Company's
financial statements, the effectiveness of management's assessment of internal
controls over financial reporting, and the effectiveness of internal controls
over financial reporting in accordance with the standards of the Public Company
Accounting Oversight Board (United States) and issuing reports
thereon.
In
performing its duties, the Audit Committee has discussed the Company's financial
statements, management's assessment of internal controls over financial
reporting, and the effectiveness of internal controls over financial reporting
with management and the Company's independent registered public accounting firm
and, in issuing this report, has relied upon the responses and information
provided to the Audit Committee by management and such accounting firm. For the
fiscal year ended December 31, 2007, the Audit Committee (i) reviewed and
discussed the audited financial statements, management's assessment of internal
controls over financial reporting, and the effectiveness of internal controls
over financial reporting with management and KPMG LLP, the Company's independent
registered public accounting firm; (ii) discussed with the independent
registered public accounting firm the matters required to be disclosed by
Statement on Auditing Standards No. 61, Communication with Audit
Committees, as amended; (iii) received and discussed with the independent
registered public accounting firm the written disclosures and the letter from
such accounting firm required by 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 five times during 2007.
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, 2007, for filing with
the SEC.
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Audit
Committee:
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Robert E. Bosworth,
Chairman
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Bradley A.
Moline
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Niel B.
Nielson
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Functions, Composition, and Meetings
of the Compensation Committee. As more fully outlined in the Compensation
Committee Charter, the primary functions of the Compensation Committee are to
aid our Board in discharging its responsibilities relating to the compensation
of our executive officers, including the chief executive officer; to evaluate
and approve our compensation plans, policies, and programs; to produce an annual
report on executive compensation; and to perform such other duties as may be
assigned to it by our Board or imposed by applicable laws or regulations. In
furtherance of its duties, the Compensation Committee reviews and approves
certain aspects of compensation of our executive officers and makes
recommendations on other compensation matters to the full Board of Directors.
During 2007, Mr. Maclellan and Dr. Nielson served as the members of the
Compensation Committee, with Dr. Nielson serving as Chairman. The
Compensation Committee held a total of four meetings in 2007, all of which were
regular meetings.
Compensation Committee Charter.
In February 2007, the charter of the Compensation Committee was amended
and restated to comply with SEC Release Nos. 33-8732 and
34-54302. The charter is available free of charge on our website at
http://www.covenanttransport.com.
Compensation Committee
Report. In performing its duties, the Compensation Committee,
as required by applicable rules and regulations promulgated by the SEC, issues a
report recommending to the Board of Directors that our Compensation Discussion
and Analysis be included in this Proxy Statement. The Compensation Committee Report follows.
The Compensation Committee Report
shall not be deemed to be incorporated by reference into any filing made by us
under the Securities Act or the Exchange Act, notwithstanding any general
statement contained in any such filings incorporating this Proxy Statement by
reference, except to the extent we incorporate such report by specific
reference.
We have
reviewed and discussed the Compensation Discussion and Analysis contained in
this Proxy Statement with management. Based on that review and
discussion, we have recommended to the Board of Directors that the Compensation
Discussion and Analysis be included in this Proxy Statement.
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Compensation
Committee:
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Niel B. Nielson,
Chairman
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Hugh O. Maclellan,
Jr.
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Compensation Committee Interlocks and Insider
Participation
During
2007, Mr. Maclellan and Dr. Nielson served as the members of the Compensation
Committee, with Dr. Nielson serving as Chairman. None of such individuals
has been an officer or employee of the Company.
During
2007, none of our executive officers served as a member of the board of
directors or compensation committee (or other committee performing equivalent
functions) of any entity that had one or more executive officers serving as a
member of our Board of Directors, our executive officers, and their
affiliates.
See "Certain Relationships
and Related Transactions" for a description of certain transactions between us
and our other directors, executive officers, or their affiliates, and "Executive
Compensation – Director Compensation" for a description of compensation of the
members of the Compensation Committee.
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. Mr. Maclellan and Mr. Moline 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
2007. The Nominating and Corporate Governance Committee has recommended that the
Board of Directors nominate David R. Parker, William T. Alt,
Robert E. Bosworth, Bradley A. Moline, and Niel B. Nielson for
election at the annual meeting, each of whom is currently serving as a
director. Hugh O. Maclellan, Jr. has decided not to stand for
reelection to provide additional time with his family and to pursue his
interests in ministry.
Nominating and Corporate Governance
Committee Charter. A written charter for the Nominating and Corporate
Governance Committee was adopted in April 2004. A copy of the charter is
available on our website at http://www.covenanttransport.com.
Process for Identifying and
Evaluating Director Nominees. Director nominees are chosen by the entire
Board of Directors, after considering the recommendations of the Nominating and
Corporate Governance Committee. The members of the Nominating and Corporate
Governance Committee review the qualifications of various persons to determine
whether they are qualified candidates for membership on the Board of Directors.
The Nominating and Corporate Governance Committee will review all candidate
recommendations, including those properly submitted by stockholders, in
accordance with the requirements of its charter. With regard to specific
qualities and skills, the Nominating and Corporate Governance Committee believes
it necessary that: (i) at least a majority of the members of the Board of
Directors qualify as "independent" under NASD Rule 4200(a)(15);
(ii) at least three members of the Board of Directors satisfy the audit
committee membership criteria specified in NASD Rule 4350(d)(2); and
(iii) at least one member of the Board of Directors eligible to serve on
the Audit Committee has sufficient knowledge, experience, and training
concerning accounting and financial matters so as to qualify as an "audit
committee financial expert" within the meaning of Item 407(d)(5) of
Regulation S-K. In addition to these specific requirements, the Nominating
and Corporate Governance Committee takes into account all factors it considers
appropriate, which may include experience, accomplishments, education,
understanding of our business and the industry in which we operate, specific
skills, general business acumen, and personal and professional integrity.
Generally, the Nominating and Corporate Governance Committee will first consider
current Board members because they meet the criteria listed above and possess
knowledge of our history, strengths, weaknesses, goals, and objectives. We do
not pay a fee to any third party to identify or evaluate or assist in
identifying or evaluating potential nominees.
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 2009
annual meeting, the deadline for receiving stockholder recommendations of
proposed director nominees will be December 16, 2008. In addition,
any stockholder director nominee recommendation must include the following
information:
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the
proposed nominee's name and qualifications and the reason for such
recommendation;
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•
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the
name and record address of the stockholder(s) proposing such
nominee;
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the
number of shares of our Class A and/or Class B common stock that are
beneficially owned by such stockholder(s); and
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•
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a
description of any financial or other relationship between the
stockholder(s) and such nominee or between the nominee and us or any of
our subsidiaries.
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In order
to be considered by the Board, any candidate proposed by one or more
stockholders will be required to submit appropriate biographical and other
information equivalent to that required of all other director
candidates.
Set forth
below is certain information regarding our current executive officers (other
than our CEO, David R. Parker, for whom information is set forth above under
"Proposal – Election of Directors – Nominees for Directorships"). All executive
officers are elected annually by the Board of Directors. All references to
experience with us include positions with our operating subsidiary, Covenant
Transport, Inc., a Tennessee corporation.
Joey B. Hogan, 46, has served
as our Senior Executive Vice President and Chief Operating Officer since
May 2007, and has also served as President of Covenant Transport, Inc., a
Tennessee corporation, since such time. Mr. Hogan was our Chief Financial
Officer from 1997 to May 2007, and our Executive Vice President from
May 2003 to May 2007, and was a Senior Vice President from December 2001 to
May 2003. From joining us in August 1997 through December 2001, Mr. Hogan
served as our Treasurer.
L.D. "Micky" Miller, III,
55, served as our Executive Vice President - Sales and Marketing since joining
us in December 2002. Effective March 31, 2008, Mr. Miller now serves as the
Executive Vice President and General Manger of Fleet Savings for the Company.
Mr. Miller has over 33 years of sales and operations experience in the
trucking industry. From October 1998 to November 2002, Mr. Miller was
co-owner of, but was not involved in the day-to-day management of, two privately
owned trucking companies, one of which was a truckload carrier and the other of
which was a less-than-truckload carrier. From 1985 to 1995, Mr. Miller
served as President and Chief Executive Officer of Crown Transport Systems Inc.,
a division of U.S. Xpress Enterprises, Inc. From 1995 to 1997,
Mr. Miller served as Chairman of the CSI/Crown division of U.S. Xpress
Enterprises, Inc. In March 2003, Ida-Tran Freight Systems, of which
Mr. Miller was an officer and co-owner, voluntarily filed a bankruptcy
petition in the United States District Court for the District of Idaho. In
October 2003, a petition was filed against Mr. Miller in the United States
Bankruptcy Court for the Northern District of Georgia.
R.H. Lovin, Jr., 56, has
served in several senior management positions since joining us in 1986.
Mr. Lovin has been our Executive Vice President - Administration since
February 2003 and Corporate Secretary since August 1995. Mr. Lovin
previously served as our Chief Financial Officer from 1986 to 1994, as Vice
President of Administration from May 1994 to May 2003, and as one of our
directors from May 1994 to May 2003.
Tony Smith, 60, has served as
President of Southern Refrigerated Transport, Inc., one of our subsidiaries,
since 1998. Mr. Smith also served as President of Tony Smith Trucking, Inc., a
former subsidiary, from October 1998 to December 2004.
James "Jim" Brower, 51, has
served as President of Star Transportation, Inc., one of our subsidiaries, since
1986.
Jeffrey Paulsen, 42, has
served as our Senior Vice President – Sales and Marketing since August 2007, and
prior to that served as 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.
Charles "Jerry" Eddy, 54, has
served as our Senior Vice President of Operations since September 2007 and as
Vice President and General Manager of our Dedicated service offering from July
2006 to September 2007. Mr. Eddy served as Vice President of Sales
and Customer Service with Coastal Transport from 2005 to July 2006, served as
President of Paper Transport from 2002 to 2005, and served in various capacities with
Schneider National from 1991 to 2002, including Vice President and General
Manager of Dedicated and Expedited Services.
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 with the
exception of two filings, none of our officers, directors, and greater than 10%
beneficial owners failed to file on a timely basis the reports required by
Section 16(a). The exception was that Robert Bosworth
inadvertently failed to timely report one transaction. 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.
Compensation Discussion and Analysis
Overview
and Philosophy of Compensation
The
Compensation Committee of our Board of Directors ("Compensation Committee")
oversees all of our executive officer compensation arrangements. The
Compensation Committee has the specific responsibility to (i) review and
approve corporate goals and objectives relevant to the compensation of our Chief
Executive Officer ("CEO"), (ii) evaluate the performance of our CEO in
light of those goals and objectives, and (iii) determine and approve the
compensation level of our CEO based upon that evaluation. The
Compensation Committee also has the responsibility to review annually the
compensation of our other executive officers and to determine whether such
compensation is reasonable under existing facts and circumstances. In
making such determinations, the Compensation Committee seeks to ensure that the
compensation of our executive officers aligns the executives' interests with the
interests of our stockholders. The Compensation Committee also
reviews and approves all forms of deferred compensation and incentive
compensation, including stock option grants, stock grants, and other forms of
incentive compensation granted to our executive officers. The
Compensation Committee takes into account the recommendations of our CEO in
reviewing and approving the overall compensation of the other executive
officers.
One of
our primary business strategies has been to divide our businesses into defined
service offerings, each of which operates as a semi-autonomous business
unit. Accordingly, at the most senior level, including our Named
Executive Officers (as defined below), we seek executives who are capable of
evaluating, building, and managing multiple businesses. In addition,
we seek qualified executives to manage each business unit. Our
primary executive compensation goals include attracting, motivating, and
retaining qualified executive officers who possess the requisite abilities to
serve in these roles and who we believe will create long-term value for our
stockholders. In this regard, we use a mix of compensation designed
to provide overall compensation levels that (i) are sufficient to attract and
retain talented executives and to motivate those executives to achieve superior
results, (ii) align executives' interests with our corporate strategies, our
business objectives, and the performance of specific business units to the
extent applicable, (iii) enhance executives' incentives to increase our
stock price and focus on the long-term interests of our stockholders, and
(iv) are consistent with our constant focus on controlling
costs. In many instances we build our compensation elements around
long-term retention and development together with annual rewards based on
specific focus areas.
Our
compensation program for senior executive officers has two major elements, fixed
and incentive compensation. The total compensation for senior
executive officers, including the Named Executive Officers, consists of one or
more of the following components: (i) base salary, (ii) incentive compensation,
which may include a performance-based annual bonus and long-term equity
incentives in the form of restricted stock grants, (iii) other
compensation, including specified perquisites, and (iv) employee benefits, which
are generally available to all of our employees.
The
Compensation Committee has the responsibility to make and approve changes in the
total compensation of our executive officers, including the mix of compensation
elements. In making decisions regarding an executive's total
compensation, the Compensation Committee considers whether the total
compensation is fair and reasonable to us, is internally appropriate based upon
our culture and the compensation of our other employees, and is within a
reasonable range of the compensation afforded by other
opportunities. The Compensation Committee also bases its decisions
regarding compensation upon its assessment of the executive's leadership,
integrity, individual performance, years of experience, skill set, level of
commitment and responsibility required in the position, contributions to our
financial success, the creation of stockholder value, and current and past
compensation. In determining the mix of compensation elements, the
Compensation Committee considers the effect of each element in relation to total
compensation. Consistent with our culture of cost control and high
level of performance, the Compensation Committee historically has attempted to
keep base salaries relatively low and weight overall compensation toward
incentive and equity based compensation. Accordingly, a substantial
part of the compensation package for each Named Executive Officer is at risk and
is only earned if performance of our Company and the Named Executive Officer so
warrants. The Compensation Committee specifically considers whether
each particular element provides an appropriate incentive and reward for
performance that sustains and enhances long-term stockholder
value. The Compensation Committee also considers and takes into
account the tax and accounting consequences associated with each element of
compensation. In determining whether to increase or decrease an
element of compensation, we rely upon the business experience of the members of
the Compensation Committee, the Compensation Committee's general understanding
of compensation levels of public companies, and the historical compensation
levels of the executive officers. We generally do not rely on rigid
formulas, other than performance measures under our annual bonus program, or
short-term changes in business performance when setting
compensation.
The
following summarizes the compensation elements we used to attract, motivate, and
retain our Chief Executive Officer, the person performing the function of
principal financial officer, and our four other most highly compensated
executive officers for the year ended December 31, 2007 (the "Named Executive
Officers"). In August 2007, Mr. Michael Miller resigned from his
position as our Executive Vice President – Procurement and Corporate Operations
Manager. However, pursuant to Item 402(a)(3) of Regulation S-K, we
have included Mr. Michael Miller as a Named Executive Officer although he is no
longer employed by us.
We pay
base salaries at levels that reward executive officers for ongoing performance
and that enable us to attract, motivate, and retain highly qualified
executives. Base pay is a critical element of our compensation
program because it provides our executive officers with
stability. Compensation stability allows our executives to focus
their attention and efforts on creating stockholder value and on our other
business objectives. In determining base salaries, we consider the
executive's current base salary and the executive's qualifications and
experience, including, but not limited to, the executive's length of service
with our Company, the executive's industry knowledge, and the quality and
effectiveness of the executive's leadership, integrity, scope of
responsibilities, dedication to our stockholders and Company, past performance,
and current and future potential of providing value to our
stockholders. We do not formally benchmark base salary or total
executive compensation against the executive compensation of any other company
or group of companies. From time to time, the Compensation Committee
has considered the form and level of compensation disclosed by other publicly
traded truckload carriers, certain other transportation companies, and companies
of similar size and market capitalization in general. We set our base
salaries at a level that allows us to pay a portion of an executive officer's
total compensation in the form of incentive compensation, including annual
bonuses, long-term incentives, and perquisites. We believe this mix
of compensation helps us incentivize our executives to maximize stockholder
value in the long run. We adjust base salaries annually to reflect
the foregoing factors but do not apply a specific weighting to such
factors.
Long-Term Incentives
On May
23, 2006, our stockholders approved our 2006 Omnibus Incentive Plan ("Incentive
Plan"). Our Incentive Plan is a broad-based equity plan that we use
to, among other things, (i) provide annual incentives to executive officers in a
manner designed to reinforce our performance goals, (ii) attract, motivate, and
retain qualified executive officers by providing them with long-term incentives,
and (iii) align our executives' and stockholders' long-term interests by
creating a strong, direct link between executive pay and stockholder
return. The Incentive Plan allows the Compensation Committee to link
compensation to performance over a period of time by using equity-based awards,
which often value a company's long-term prospects, requiring holding periods for
equity grants, and granting awards that have multiple-year vesting
schedules. Awards with multiple-year vesting schedules, such as
restricted stock grants, provide balance to the other elements of our
compensation program that otherwise link compensation to annual
performance. Awards with multiple-year vesting schedules create
incentive for executive officers to increase stockholder value over an extended
period of time because the value received from such awards is based on the
growth of the stock price. Such awards also incentivize executives to
remain with us over an extended period of time. Thus, we believe our
Incentive Plan is an effective way of aligning the interests of our executive
officers with those of our stockholders.
Awards
under our Incentive Plan may be paid in cash, shares of Class A common stock, a
combination of cash and shares of Class A common stock, or in any other
permissible form, as the Compensation Committee determines. All
awards granted under the Incentive Plan are evidenced by an award notice that
specifies the type of award granted, the number of shares of Class A common
stock underlying the award, if applicable, and all terms governing the
award. Payment of awards may include such terms, conditions,
restrictions, and/or limitations, if any, as the Compensation Committee deems
appropriate, including, in the case of awards paid in shares of Class A common
stock, restrictions on transfer of such shares and provisions regarding the
forfeiture of such shares under certain circumstances. The Incentive
Plan authorizes the grant of stock options, stock appreciation rights, stock
awards, restricted stock unit awards, performance units, performance awards, and
any other form of award established by the Compensation Committee that is
consistent with the Incentive Plan's purpose, or any combination of the
foregoing.
The
Compensation Committee considers several factors when determining awards to be
granted to our executive officers, including (i) the recommendations of our
CEO; (ii) how the achievement of certain performance goals will help us
improve our financial and operating performance and add long-term value to our
stockholders; (iii) the value of the award in relation to other elements of
total compensation, including the number of options or restricted stock
currently held by the executive and the number of options or restricted stock
granted to the executive in prior years; and (iv) the executive's
position, scope of responsibility, ability to affect our financial and operating
performance, ability to create stockholder value, and historic and recent
performance.
Performance-Based Annual Bonuses
Consistent
with our goal to improve our consolidated operating ratio, the Compensation
Committee has over the past few years approved operating income and operating
ratio targets as the basis for performance-based bonuses. The key
terms of our performance-based bonuses for 2007 and 2008 are described in
additional detail below.
We
provide our Named Executive Officers with certain other benefits that we believe
are reasonable, competitive, and consistent with our overall executive
compensation program. We believe that these benefits generally allow
our executives to work more efficiently. The costs of these benefits
constitute only a small percentage of each executive's total
compensation. In setting the amount of these benefits, the
Compensation Committee considers each executive's position and scope of
responsibilities and all other elements comprising the executive's
compensation.
Our
executive officers are eligible to participate in all of our employee benefit
plans, such as our 401(k) Plan and medical, dental, and group life insurance
plans, in each case on the same basis as our other employees.
Mr. David
Parker founded Covenant Transport, Inc. in 1985 with just 25 tractors and 50
trailers and has been our chief executive since our inception. We
have achieved considerable growth in revenue since our inception and now serve
as the holding company for several transportation providers that in the
aggregate operate more than 3,500 tractors and 8,600 trailers and offer premium
transportation services for customers throughout the United
States. Mr. Parker, along with one other executive officer, is
responsible for managing the performance of our service
offerings. Despite the weak freight economy throughout 2007, which
when combined with industry-wide over-capacity of tractors and trailers and an
increase in fuel prices made for the most difficult operating environment in
many years, during 2007 Mr. Parker and our other Named Executive Officers
continued to seek to unify our operations and further implement our business
realignment.
At the
request and recommendation of Mr. Parker, the Compensation Committee did not
consider an increase to Mr. Parker's base salary during 2007. Mr.
Parker's base salary has not increased since 2003. With respect to
the other aspects of Mr. Parker's compensation, the Compensation Committee
determined that a significant amount of equity compensation to align Mr.
Parker's compensation with increasing stockholder value and certain perquisites
as included in the "All Other Compensation" column of the Summary Compensation
table were important to motivating continued performance from Mr.
Parker. Mr. Parker does not participate in the determination of his
own compensation.
After
considering Mr. Parker's base salary, position, scope of responsibility, ability
to affect our results, ability to create stockholder value, and historic and
recent performance, as partially described above, the Compensation Committee
granted Mr. Parker 4,000 restricted shares of our Class A common stock on May
22, 2007. The restricted shares vest in equal increments over the
four-year period beginning on the first anniversary of the award date, subject
to us reaching earnings-per-share targets of $.25 in 2007, $.50 in 2008, $1.00
in 2009, and $1.50 in 2010. Any percentage that fails to vest as a
result of failure to reach a particular target will vest if we meet a subsequent
target. The restricted shares are subject to additional holding
requirements and terms set forth in the Incentive Plan and the Restricted Stock
Award Notice substantially in the form filed as Exhibit 10.22 to the our
Quarterly Report on Form 10-Q for the quarterly period ended June 30,
2006. Based upon us not reaching our earnings-per-share target of
$.25 in 2007, shares of the restricted stock grant will not vest on the one year
anniversary of the grant.
For 2007,
the Compensation Committee also approved a performance-based bonus opportunity
under which Mr. Parker was eligible to receive a bonus of up to 50% of his base
salary for 2007. The percentage of salary assigned to Mr. Parker's
potential bonus was based on the Compensation Committee's evaluation of (i) the
magnitude of Mr. Parker's ability to impact corporate performance based on his
responsibilities, (ii) the composition of Mr. Parker's total compensation
package, and (iii) our long-term financial goals. The Compensation
Committee set performance targets for Mr. Parker that were tied to us achieving
certain consolidated financial and operating benchmarks. The
performance targets for Mr. Parker were the same performance targets for our
other Named Executive Officers, except for Messrs. Smith and Brower, and are
discussed below. Because we failed to achieve the performance targets
for 2007, the Compensation Committee determined not to award a bonus to Mr.
Parker for 2007.
During
2007, we also provided Mr. Parker with a cash vehicle allowance, use of our
corporate travel agency to arrange personal travel, use of our administrative
personnel for personal services, and, for a portion of the year, use of our
corporate airplane for personal travel. We also paid Mr. Parker the
value of certain of his life insurance premiums and certain of his club fees and
dues. With the exception of payment for the life insurance premiums,
each perquisite is designed to help Mr. Parker more effectively carry out his
responsibilities as CEO. During 2007, in addition to providing the
foregoing benefits and providing medical, dental, and group life insurance to
Mr. Parker, we also contributed to his 401(k) Plan account.
For all
Named Executive Officers, other than our CEO, the form and amount of
compensation was recommended by the CEO. As discussed above, the
Compensation Committee relies on the business experience of its
members,
the historical compensation levels of the Named Executive Officers, and its
general understanding of compensation levels at public companies to determine
that the CEO's recommendations with respect to the compensation levels and forms
were appropriate for 2007. For 2007, the form of compensation paid to
our Named Executive Officers was consistent with past years, with compensation
consisting primarily of base salary, bonus based on the achievement of certain
financial and operating goals, and equity compensation in the form of restricted
stock grants. For each of the Named Executive Officers, the
Compensation Committee considered, among other things, our financial and
operating results for the periods ended December 31, 2006 and 2007, the duties
and responsibilities of each Named Executive Officer, and the length of time
each Named Executive Officer has been with us, as further described in each
executive's biography found herein.
On May
22, 2007, after reviewing our financial performance and the financial
performance of two of our subsidiaries, Southern Refrigerated Transport, Inc.
("SRT"), and Star Transportation, Inc. ("Star"), for the fiscal year ended
December 31, 2006, considering our compensation philosophy and the guidelines
described above, recognizing the difficult economic environment that we would be
operating in throughout 2007, and considering the recommendations of the CEO,
the Compensation Committee approved the following changes to the annual base
salaries of our Named Executive Officers, other than our CEO: (i) a $51,382
increase for Mr. Hogan, our Senior Executive Vice President and Chief Operating
Officer and President of Covenant Transport, Inc., in recognition of his
promotion to such roles and expanded responsibilities as one of the two officers
responsible for managing the performance of our service offerings, and (ii) a
$36,914 increase for Tony Smith, President of SRT, in recognition of additional
responsibilities in managing tractors repositioned to SRT and continued strong
performance of SRT in 2006. The Compensation Committee did not increase the base
salary of (i) Messrs. Micky Miller, our former Executive Vice President of Sales
and Marketing, or Michael Miller, our former Executive Vice President –
Procurement and Corporate Operations Manager, because the Compensation Committee
believed their salaries were consistent with their responsibilities or
(ii) Mr. Brower, President of Star, because his base salary had been set in
September 2006 when he became an employee following our acquisition of Star
where he was employed.
On May
22, 2007, after considering the number of restricted shares of our Class A
common stock granted to each Named Executive Officer, other than the CEO, in
prior years and each Named Executive Officer's base salary, position, scope of
responsibility, ability to affect our results, ability to create stockholder
value, and historic and recent performance, as described above, the Compensation
Committee granted (i) each of Messrs. Hogan, Smith, and Brower 4,000 restricted
shares of our Class A common stock and (ii) Mr. Micky Miller 3,000 restricted
shares of our Class A common stock. The Compensation Committee
granted restricted shares to create an incentive for the executives to maximize
stockholder value and to remain employed with us despite a highly competitive
labor market. Messrs. Hogan and Micky Miller received the same number
of restricted shares as in 2006. However, the Compensation Committee
determined that an increase in the number of shares granted to (i) Mr. Smith
from 3,000 in 2006 to 4,000 in 2007 was appropriate given the financial and
operating performance of SRT, and (ii) Mr. Brower from zero in 2006 to 4,000 in
2007 was appropriate given Mr. Brower was not employed by us when we made the
2006 grants and recognition of Mr. Brower's responsibilities as President of
Star. Mr. Michael Miller did not participate in the restricted stock
grants due to his level of responsibility at the time. We believe the
awards to each of the Named Executive Officers will help build long-term value
for our stockholders, particularly because these equity awards are subject to
performance-based vesting that requires achievement of certain
earnings-per-share targets.
The
restricted shares granted on May 22, 2007, vest in equal increments over the
four-year period beginning on the first anniversary of the award date, subject
to us reaching earnings-per-share targets of $.25 in 2007, $.50 in 2008, $1.00
in 2009, and $1.50 in 2010. Any percentage that fails to vest as a
result of failure to reach a particular target will vest if we meet a subsequent
target. The restricted shares are subject to additional holding
requirements and terms set forth in the Incentive Plan and the Restricted Stock
Award Notice substantially in the form filed as Exhibit 10.22 to the our
Quarterly Report on Form 10-Q for the quarterly period ended June 30,
2006. Based upon us not reaching our earnings-per-share target of
$.25 in 2007, shares of the restricted stock grant will not vest on the one year
anniversary of the grant.
For 2007,
the Compensation Committee also approved a performance-based bonus opportunity
under which each Named Executive Officer was eligible to receive a bonus of up
to 50% of his base salary for 2007. The percentage of salary assigned
to each Named Executive Officer was based on the CEO's recommendation and the
Compensation Committee's evaluation of (i) the magnitude of each Named
Executive Officer's ability to impact corporate performance
based on
the executive's responsibilities at the time the targets were set,
(ii) the composition of each Named Executive Officer's total compensation
package, and (iii) our long-term financial goals.
In
connection with the 2007 performance-based bonus opportunities described above
and for each of the Named Executive Officers, other than Messrs. Smith and
Brower, whose bonus targets are provided below, the Compensation Committee set
performance targets related to us having consolidated operating income of
$34,223,000 and a consolidated operating ratio of 94.6% for 2007. In
addition, the Compensation Committee created specific parameters for awarding
bonuses within certain incremental ranges of achievement of the performance
targets. To implement incremental targets, the Compensation Committee
created a formula that was tied to achievement of one or both of the performance
targets and subject to upward or downward adjustment in defined
circumstances. The applicable percentage of the achieved performance
target is then multiplied by the Named Executive Officer's target bonus (50% of
the Named Executive Officer's base salary) to determine the Named Executive
Officer's bonus. The Compensation Committee adopted the foregoing
bonus structure after considering our historic bonus structure and the continued
need for a transparent, objective method for awarding bonus compensation to the
Named Executive Officers. The following table sets forth a summary of
the incremental levels of achievement of the performance targets and the related
percentage of the potential bonus associated with such achievement.
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2007
Incremental Ranges of Performance Targets
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Consolidated
Operating
Income
($)
(000s)
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Consolidated
Operating
Ratio
(%)
|
Bonus
Earned as a Percentage of the Potential Bonus Opportunity
(%)
|
||
|
20,078
|
96.9
|
15.0
|
||
|
22,484
|
96.5
|
25.0
|
||
|
27,843
|
95.6
|
50.0
|
||
|
31,033
|
95.1
|
75.0
|
||
|
34,223
|
94.6
|
100.0
|
||
|
37,413
|
94.6
|
110.0
|
||
|
40,603
|
94.6
|
120.0
|
||
|
43,793
|
94.6
|
130.0
|
||
For Mr. Smith, the Compensation
Committee set performance targets related to SRT having operating income of
$9,243,000 and an operating ratio of 93.0% for 2007. As with the
performance targets for the other Named Executive Officers, the Compensation
Committee also created specific parameters for awarding bonuses to Mr. Smith
within certain incremental ranges of achievement of the performance targets,
subject to upward or downward adjustment in defined circumstances. The following
table sets forth, with respect to Mr. Smith, a summary of the incremental levels
of achievement of the performance targets and the related percentage of the
potential bonus associated with such achievement.
|
2007
Incremental Ranges of Performance Targets
|
||||
|
Operating
Income
($)
(000s)
|
Operating
Ratio
(%)
|
%
of Bonus Opportunity Paid as Bonus
(%)
|
||
|
6,316
|
95.2
|
15.0
|
||
|
6,813
|
94.8
|
25.0
|
||
|
7,923
|
94.0
|
50.0
|
||
|
8,583
|
93.5
|
75.0
|
||
|
9,243
|
93.0
|
100.0
|
||
|
9,903
|
93.0
|
110.0
|
||
|
10,563
|
93.0
|
120.0
|
||
|
11,224
|
93.0
|
130.0
|
||
For Mr.
Brower, the Compensation Committee set performance targets related to Star
having operating income of $7,314,000 and an operating ratio of 92.0% for
2007. As with the performance targets for the other Named Executive
Officers, the Compensation Committee also created specific parameters for
awarding bonuses to Mr. Brower within certain incremental ranges of achievement
of the performance targets, subject to upward or downward adjustment in defined
circumstances. The following table sets forth, with respect to Mr. Brower, a
summary of the incremental levels of achievement of the performance targets and
the related percentage of the potential bonus associated with such
achievement.
|
2007
Incremental Ranges of Performance Targets
|
||||
|
Operating
Income
($)
(000s)
|
Operating
Ratio
(%)
|
%
of Bonus Opportunity Paid as Bonus
(%)
|
||
|
5,287
|
94.2
|
15.0
|
||
|
5,632
|
93.8
|
25.0
|
||
|
6,400
|
93.0
|
50.0
|
||
|
6,857
|
92.5
|
75.0
|
||
|
7,314
|
92.0
|
100.0
|
||
|
7,771
|
92.0
|
110.0
|
||
|
8,229
|
92.0
|
120.0
|
||
|
8,686
|
92.0
|
130.0
|
||
The
Compensation Committee believes that the performance targets represented
aggressive, yet achievable goals for the Named Executive Officers to earn 100%
of the eligible bonus amount.
The
Compensation Committee met in February 2008 to discuss and review the 2007 bonus
awards for the Named Executive Officers, other than for Mr. Michael Miller who
was no longer employed by us. The Compensation Committee reviewed the
foregoing policies, our consolidated financial and operating performance, and
SRT's and Star's financial and operating performance. After
determining that we failed to achieve the performance targets, or any
incremental ranges of the performance targets, the Compensation Committee
determined not to award a bonus to the Named Executive Officers for
2007. However, the Compensation Committee determined it was in our
best interest to reward Mr. Smith for his efforts in managing additional trucks
that SRT was asked to manage as part of our realignment and awarded Mr. Smith a
discretionary, special cash bonus of $12,500.
During
2007, we also provided each Named Executive Officer, other than Mr. Parker, with
a cash vehicle allowance and use of our corporate travel agency to arrange
personal travel. We also paid certain club fees and dues on behalf of
Mr. Brower. Each perquisite is designed to help the Named Executive Officers
more effectively carry out their responsibilities for our
Company. During 2007, in addition to providing the foregoing benefits
and providing medical, dental, and group life insurance to the Named Executive
Officers, we also contributed to each of their 401(k) Plan accounts, other than
Mr. Micky Miller's account because Mr. Miller elected not to
participate.
Compensation Decisions with Respect to 2008
In April 2008, the Compensation
Committee approved performance-based bonus opportunities under which each of the
Named Executive Officers, other than Messrs. Micky Miller and Michael Miller, is
eligible to receive a bonus of up to 50% of his 2008 base salary based upon our
achievement of certain performance targets. No performance-based
opportunity has been considered for Mr. Micky Miller and Mr. Michael Miller
retired from the Company in August 2007. Each Named Executive Officer
must accept at least 25% of his bonus for 2008, if any, in the form of Class A
common stock under the Incentive Plan and may choose to receive up to 100% of
the bonus in Class A common stock under the Incentive Plan. As in
2007, the percentage of salary assigned to each Named Executive Officer is based
on the Compensation Committee's evaluation of (i) the magnitude of each
Named Executive Officer's ability to impact corporate performance based on the
executive's responsibilities at the time the targets were set,
(ii) the composition of each Named Executive Officer's total compensation
package, and (iii) our long-term financial goals.
In
connection with the 2008 performance-based bonus opportunities described above
and for each of the Named Executive Officers who have a performance-based bonus
opportunity, other than Messrs. Smith and Brower, whose bonus targets are
provided below, the Compensation Committee set performance targets related to us
having consolidated operating income of $16,187,000 and a consolidated operating
ratio of 97.5% for 2008. As with the performance targets for 2007, the
Compensation Committee also created specific parameters for awarding bonuses
within certain incremental ranges of achievement of the performance targets,
subject to upward or downward adjustment in defined circumstances. The
applicable percentage of the achieved performance target is then multiplied by
the Named Executive Officer's target bonus (50% of the Named Executive Officer's
base salary) to determine the Named Executive Officer's bonus. The following
table sets forth a summary of the incremental levels of achievement of the
performance targets and the related percentage of the potential bonus associated
with such achievement.
|
2008
Incremental Ranges of Performance Targets
|
||||
|
Consolidated
Operating
Income
($)
(000s)
|
Consolidated
Operating
Ratio
(%)
|
%
of Bonus Opportunity Paid as Bonus
(%)
|
||
|
7,515
|
98.8
|
25.0
|
||
|
10,168
|
98.4
|
50.0
|
||
|
12,951
|
98.0
|
75.0
|
||
|
16,187
|
97.5
|
100.0
|
||
|
19,422
|
97.5
|
125.0
|
||
|
22,658
|
97.5
|
150.0
|
||
For Mr.
Smith, the Compensation Committee set performance targets, of which 10% were
related to the consolidated performance targets set forth above and 90% were
related to SRT having operating income of $8,492,000 and an operating ratio of
93.0% for 2008. As with the performance targets for the other Named
Executive Officers, the Compensation Committee also created specific parameters
for awarding a bonus to Mr. Smith within certain incremental ranges of
achievement of the performance targets, subject to upward or downward adjustment
in defined circumstances. The following table sets forth, with
respect to Mr. Smith, a summary of the incremental levels of achievement of the
performance targets and the related percentage of the potential bonus associated
with such achievement.
|
2008
Incremental Ranges of Performance Targets
|
||||
|
Operating
Income
($)
(000s)
|
Operating
Ratio
(%)
|
%
of Bonus Opportunity Paid as Bonus
(%)
|
||
|
6,879
|
94.3
|
25.0
|
||
|
7,364
|
93.9
|
50.0
|
||
|
7,886
|
93.5
|
75.0
|
||
|
8,492
|
93.0
|
100.0
|
||
|
9,099
|
93.0
|
125.0
|
||
|
9,706
|
93.0
|
150.0
|
||
For Mr.
Brower, the Compensation Committee set performance targets, of which 10% were
related to the consolidated performance targets set forth above and 90% were
related to Star having operating income of $2,527,000 and an operating ratio of
97.0% for 2008. As with the performance targets for the other Named
Executive Officers, the Compensation Committee also created specific parameters
for awarding a bonus to Mr. Brower within certain incremental ranges of
achievement of the performance targets, subject to upward or downward adjustment
in defined circumstances. The following table sets forth, with
respect to Mr. Brower, a summary of the incremental levels of achievement of the
performance targets and the related percentage of the potential bonus associated
with such achievement.
|
2008
Incremental Ranges of Performance Targets
|
||||
|
Operating
Income
($)
(000s)
|
Operating
Ratio
(%)
|
%
of Bonus Opportunity Paid as Bonus
(%)
|
||
|
1,399
|
98.3
|
25.0
|
||
|
1,744
|
97.9
|
50.0
|
||
|
2,106
|
97.5
|
75.0
|
||
|
2,527
|
97.0
|
100.0
|
||
|
2,949
|
97.0
|
125.0
|
||
|
3,370
|
97.0
|
150.0
|
||
The
Compensation Committee believes that the performance targets represent
aggressive, yet achievable goals for the Named Executive Officers to earn 100%
of the eligible bonus amount.
Effective
March 31, 2008, Mr. Micky Miller assumed a new role as Executive Vice President
and General Manager of FleetSavings, which is a new initiative of ours intended
to extend volume purchasing power for certain products and services to other
transportation companies. In connection with his change in
responsibilities, Mr. Micky Miller's base salary was changed from $215,000 to
$150,000.
Separation and Severance Agreements
Other
than a Separation Agreement with Mr. Michael Miller, as described below, we
currently do not have any employment contracts, severance agreements,
change-of-control agreements, or other arrangements with our Named Executive
Officers that provide for payment or benefits to an executive officer at,
following, or in connection with a change in control, a change in an executive
officer's responsibilities, or an executive officers termination of employment,
including resignation, severance, retirement, or constructive
termination. However, under certain circumstances in which there is a
change of control, holders, including any Named Executive Officer, of
outstanding stock options granted under our 2003 Incentive Stock Plan may be
entitled to exercise such options notwithstanding that such options may
otherwise not have been fully exercisable.
Effective
August 14, 2007, Mr. Michael Miller resigned from his position as our Executive
Vice President – Procurement and Corporate Operations Manager. In
return for us paying Mr. Miller the sum of $300,000 over a period of time and
certain retirement and other benefits, Mr. Miller executed a Separation
Agreement and agreed to certain restrictions on his activities, including
restrictions on competition, solicitation, and disparagement until July
2009. Pursuant to the provisions of our group health insurance plan,
Mr. Miller will to continue to participate in our group health insurance plan
for a period of time. The Separation Agreement also provides that any
stock options granted to Mr. Miller will remain exercisable in accordance with
the terms and conditions of the applicable stock option award notice evidencing
such grants. The Compensation Committee believes that our interests
were best served by entering into this agreement with Mr. Miller.
The
following table sets forth information concerning the total compensation for the
fiscal year 2007 awarded to, earned by, or paid to those persons who were, at
December 31, 2007, (i) our Chief Executive Officer, (ii) the person
performing the function of principal financial officer, and (iii) our four other
most highly compensated executive officers whose total compensation was $100,000
or more for the fiscal year ended December 31, 2007 (collectively, the "Named
Executive Officers").
|
Name
and
Principal
Position
|
Year
|
Salary
($)
|
Stock
Awards(1)
($)
|
Non-Equity
Incentive
Plan
Compensation(2)
($)
|
All
Other Compensation(3)
($)
|
Total
($)
|
|
David
R. Parker, Chief Executive Officer, Chairman, and
President
|
2007
2006
|
535,500
535,500
|
8,108
9,593
|
-
-
|
158,368
135,232
|
701,976
680,325
|
|
Joey
B. Hogan,(4)
Senior
Executive Vice President and Chief Operating Officer
|
2007
2006
|
252,273
219,815
|
8,108
9,593
|
-
-
|
21,017
20,191
|
281,398
249,599
|
|
L.D.
"Micky" Miller,(5)
Executive Vice President and General Manager of
FleetSavings
|
2007
2006
|
212,000
224,557
|
6,081
7,194
|
-
-
|
12,000
13,549
|
230,081
245,300
|
|
Tony
Smith, President of Southern Refrigerated Transport, Inc.
|
2007
2006
|
248,581
208,793
|
8,108
9,654
|
12,500
90,561
|
17,478
17,631
|
286,667
326,639
|
|
James
"Jim" Brower,(6)
President of Star Transportation, Inc.
|
2007
|
200,000
|
8,108
|
-
|
7,888
|
215,996
|
|
Michael
W. Miller(7)
|
2007
2006
|
179,466
285,825
|
-
9,593
|
-
-
|
75,691
35,194
|
255,157
330,612
|
|
(1)
|
This
column represents the dollar amount recognized for financial statement
reporting purposes with respect to the 2007 and 2006 fiscal years for the
fair value of stock awards granted to each Named Executive Officer in
accordance with SFAS 123R. Pursuant to SEC rules, the amounts
shown exclude the impact of estimated forfeitures related to service-based
vesting conditions. For additional information on the valuation
assumptions with respect to the 2007 grants, refer to note 3 of our
consolidated financial statements as provided in the Form 10-K for the
year-ended December 31, 2007, as filed with the SEC. See the Grants of
Plan-Based Awards Table for information on awards made in
2007. These amounts reflect our accounting expense for these
awards, and do not correspond to the actual value that will be recognized
by the Named Executive Officers.
|
|
(2)
|
See the Grants of
Plan-Based Awards Table for additional information.
|
|
(3)
|
See the All Other
Compensation Table for additional information.
|
|
(4)
|
Mr.
Hogan performs the function of principal financial
officer.
|
|
(5)
|
Mr.
Micky Miller served as our Executive Vice President – Sales and Marketing
during 2007. Effective March 31, 2008, Mr. Micky Miller became
our Executive Vice President and General Manager of
FleetSavings.
|
|
(6)
|
Mr.
Brower was not a Named Executive Officer during 2006.
|
|
(7)
|
Mr.
Michael Miller resigned from his position as our Executive Vice President
– Procurement and Corporate Operations Manager in August
2007. However, pursuant to Item 402(a)(3)(iv), Mr. Michael
Miller is included in this table as a Named Executive
Officer.
|
All Other Compensation Table
The
following table describes each component of the "All Other Compensation" column
in the Summary Compensation Table.
|
Name
|
Year
|
Perquisites
and Other Personal Benefits
($)
|
Severance
Payments
($)
|
Insurance
Premiums
($)
|
Contributions
to Retirement and 401(k) Plans(6)
($)
|
Total
($)
|
|
David
R. Parker
|
2007
|
44,986(1)
|
-
|
100,000(5)
|
13,382
|
158,368
|
|
Joey
B. Hogan
|
2007
|
13,200(2)
|
-
|
-
|
7,817
|
21,017
|
|
L.D.
"Micky" Miller
|
2007
|
12,000(2)
|
-
|
-
|
-
|
12,000
|
|
Tony
Smith
|
2007
|
12,000(2)
|
-
|
-
|
5,478
|
17,478
|
|
James
"Jim" Brower
|
2007
|
6,475(3)
|
-
|
-
|
1,413
|
7,888
|
|
Michael
W. Miller
|
2007
|
17,457
(2)
|
52,209(4)
|
-
|
6,025
|
75,691
|
|
(1)
|
During
2007, we provided Mr. Parker with certain other benefits in addition to
his salary, including, a $33,600 cash vehicle allowance, use of our
corporate travel agency to arrange personal travel, and use of our
administrative personnel for personal services. During 2007, we
also paid for certain of Mr. Parker's club fees and dues and, for a
portion of the year, allowed Mr. Parker to use our corporate airplane for
personal travel. Although Mr. Parker used our corporate
airplane for personal travel for a portion of the year, we did not incur
any incremental costs for such use. Mr. Parker reimbursed us
for all of the variable costs associated with his personal use of our
airplane, including the costs incurred as a result of personal flight
activity, such as, fuel, travel expenses for the flight crew, and any
hanger or other storage fees. Mr. Parker also paid a portion of
ongoing maintenance and repairs associated with operating the
airplane.
|
|
(2)
|
During
2007, we provided the Named Executive Officer with certain other benefits
in addition to his base salary, including, a cash vehicle allowance and
use of our corporate travel agency to arrange personal
travel. None of the personal benefits provided to the Named
Executive Officer exceeded the greater of $25,000 or 10% of the total
amount of the personal benefits he received during
2007.
|
|
(3)
|
During
2007, we provided Mr. Brower with certain other benefits in addition to
his salary, including, a cash vehicle allowance and use of our corporate
travel agency to arrange personal travel. We also paid for
certain of Mr. Brower's club fees and dues. None of the
personal benefits provided to Mr. Brower exceeded the greater of $25,000
or 10% of the total amount of the personal benefits he received during
2007.
|
|
(4)
|
This
represents the severance payments we paid to Mr. Miller as more fully
described above.
|
|
(5)
|
During
2007, we paid Mr. Parker the value of certain life insurance premiums, as
a result of arrangements entered into during a time when split-dollar
insurance policies were common. Subsequent to adoption of the
Sarbanes-Oxley Act of 2002, we converted the policy to a company-paid
policy to honor the pre-existing obligation to
Mr. Parker.
|
|
(6)
|
The
differences in contribution amounts among the Named Executive Officers is
based upon a combination of the differences among the officers' salary and
the extent to which each officer chooses to make personal contributions to
his 401(k) account.
|
Narrative to the Summary Compensation
Table
See "Executive Compensation –
Compensation Discussion and Analysis" for a complete description of our
compensation plans pursuant to which the amounts listed under the Summary
Compensation Table were paid or awarded and the criteria for such award or
payment.
The
following table sets forth information concerning each grant of an award made to
our Named Executive Officers during fiscal 2007.
|
Name
|
Grant
Date
|
Estimated
Future Payouts
Under
Non-Equity Incentive
Plan
Awards(1)
|
Estimated
Future Payouts Under
Equity
Incentive Plan Awards(2)
|
Grant
Date Fair Value of Stock and Option Awards(3)
($)
|
||||
|
Threshold
($)
|
Target
($)
|
Maximum
($)
|
Threshold
(#)
|
Target
(#)
|
Maximum
(#)
|
|||
|
David
R. Parker
|
5/22/07
|
-
66,875
|
-
267,500
|
-
401,250
|
-
-
|
4,000
-
|
-
-
|
43,240
-
|
|
Joey
B. Hogan
|
5/22/07
|
-
34,375
|
-
137,500
|
-
206,250
|
-
-
|
4,000
-
|
-
-
|
43,240
-
|
|
L.D.
"Micky" Miller
|
5/22/07
|
-
26,500
|
-
106,000
|
-
159,000
|
-
-
|
3,000
-
|
-
-
|
32,430
-
|
|
Tony
Smith
|
5/22/07
|
-
31,250
|
-
125,000
|
-
187,500
|
-
-
|
4,000
-
|
-
-
|
43,240
-
|
|
James
"Jim" Brower
|
5/22/07
|
-
25,000
|
-
100,000
|
-
150,000
|
-
-
|
4,000
-
|
-
-
|
43,240
-
|
|
Michael
W. Miller
|
-
|
-
|
-
|
-
|
-
|
-
|
-
|
-
|
|
(1)
|
These
columns represent the approximate value of the payout to the Named
Executive Officer based upon the attainment of specified performance
targets that were established by the Compensation Committee in April
2008. The performance targets are related to our consolidated
performance, except with respect to Messrs. Smith's and Brower's bonuses
where the targets are weighted 90% to the performance of SRT and Star,
respectively, and 10% on our consolidated performance. The Compensation
Committee also created specific parameters for awarding bonuses to the
Named Executive Officer within certain incremental ranges of achievement
of the performance targets, subject to upward and downward
adjustments. See the Compensation
Discussion and Analysis for additional detail with respect to the
performance targets. Except with respect to Mr. Micky Miller,
the potential bonuses set forth above are based upon the Named Executive
Officer's 2007 base salary because the 2008 salaries have not been
established. The actual bonuses, if any, will be based upon
each Named Executive Officer's base salary at the time of
payout. The potential payouts are performance-driven and
therefore completely at risk.
|
|
(2)
|
This
column represents the potential number of shares to be awarded to the
Named Executive Officer based upon the attainment of specified performance
targets that were established by the Compensation Committee and as
discussed in more detail in the Compensation Discussion and
Analysis.
|
|
(3)
|
This
column represents the full grant date fair value of the stock awards under
SFAS 123R granted to the Named Executive Officers in 2007. The
fair value was calculated using the closing price of our Class A common
stock on the grant date, or $10.81 per share. The fair value of
the stock awards are accounted for in accordance with SFAS
123R. For additional information on the valuation assumptions,
refer to note 3 of our consolidated financial statements in the Form 10-K
for the year-ended December 31, 2007, as filed with the
SEC. These amounts reflect our accounting expense, and do not
correspond to the actual value that will be recognized by the Named
Executive Officers.
|
Narrative
to Grants of Plan-Based Awards
See "Executive Compensation –
Compensation Discussion and Analysis" for a complete description of the
performance targets for payment of incentive awards.
Outstanding Equity Awards at Fiscal
Year-End
The
following table sets forth information concerning all stock option grants and
stock awards held by our Named Executive Officers as of December 31,
2007. All outstanding equity awards are in shares of our Class A
common stock.
|
Option
Awards
|
Stock
Awards
|
|||||
|
Name
|
Grant
Date
|
Number
of
Securities
Underlying
Unexercised
Options
(#)
Exercisable
|
Option
Exercise
Price
($)
|
Option
Expiration
Date
|
Equity
Incentive
Plan
Awards:
Number
of
Unearned
Shares,
Units
or Other
Rights
That
Have Not
Vested
(#)
|
Equity
Incentive Plan
Awards:
Market or
Payout
Value of
Unearned
Shares,
Units
or Other Rights
That
Have Not
Vested(4)
($)
|
|
David
R. Parker
|
08/31/98
|
18,250
|
12.38
|
08/31/08
|
-
|
-
|
|
05/20/99
|
3,333
|
13.00
|
05/20/09
|
-
|
-
|
|
|
05/20/99
|
6,667
|
13.00
|
05/20/09
|
-
|
-
|
|
|
02/29/00
|
7,206
|
13.13
|
03/31/10
|
-
|
-
|
|
|
05/18/00
|
6,666
|
12.19
|
05/18/10
|
-
|
-
|
|
|
05/18/00
|
3,334
|
12.19
|
05/18/10
|
-
|
-
|
|
|
07/27/00
|
9,429
|
8.00
|
07/27/10
|
-
|
-
|
|
|
07/27/00
|
100,571
|
8.00
|
07/27/10
|
-
|
-
|
|
|
05/17/01
|
3,333
|
16.79
|
05/17/11
|
-
|
-
|
|
|
05/17/01
|
6,667
|
16.79
|
05/17/11
|
-
|
-
|
|
|
05/16/02
|
6,194
|
15.39
|
05/16/12
|
-
|
-
|
|
|
05/16/02
|
3,806
|
15.39
|
05/16/12
|
-
|
-
|
|
|
02/20/03
|
5,780
|
17.30
|
02/20/13
|
-
|
-
|
|
|
02/20/03
|
1,111
|
17.30
|
02/20/13
|
-
|
-
|
|
|
05/22/03
|
6,095
|
17.63
|
05/22/13
|
-
|
-
|
|
|
05/22/03
|
3,905
|
17.63
|
05/22/13
|
-
|
-
|
|
|
05/27/04
|
10,000
|
15.71
|
05/27/14
|
-
|
-
|
|
|
02/16/05
|
5,690
|
21.43
|
02/16/15
|
-
|
-
|
|
|
05/10/05
|
10,000
|
13.64
|
05/10/15
|
-
|
-
|
|
|
05/23/06
|
-
|
-
|
-
|
50,000(1)
|
336,000
|
|
|
05/23/06
|
-
|
-
|
-
|
4,000(2)
|
26,880
|
|
|
05/22/07
|
-
|
-
|
-
|
4,000(3)
|
26,880
|
|
|
Joey
B. Hogan
|
08/07/97
|
25,000
|
18.75
|
08/07/07
|
-
|
-
|
|
08/31/98
|
1,515
|
12.38
|
08/31/08
|
-
|
-
|
|
|
08/31/98
|
8,485
|
12.38
|
08/31/08
|
-
|
-
|
|
|
05/20/99
|
480
|
13.00
|
05/20/09
|
-
|
-
|
|
|
05/20/99
|
9,520
|
13.00
|
05/20/09
|
-
|
-
|
|
|
02/29/00
|
2,272
|
13.13
|
03/01/10
|
-
|
-
|
|
|
05/18/00
|
3,333
|
12.19
|
05/18/10
|
-
|
-
|
|
|
05/18/00
|
6,667
|
12.19
|
05/18/10
|
-
|
-
|
|
|
07/27/00
|
2,423
|
8.00
|
07/27/10
|
-
|
-
|
|
|
07/27/00
|
27,577
|
8.00
|
07/27/10
|
-
|
-
|
|
|
05/17/01
|
3,333
|
16.79
|
05/17/11
|
-
|
-
|
|
|
05/17/01
|
6,667
|
16.79
|
05/17/11
|
-
|
-
|
|
|
05/16/02
|
6,194
|
15.39
|
05/16/12
|
-
|
-
|
|
|
05/16/02
|
3,806
|
15.39
|
05/16/12
|
-
|
-
|
|
|
02/20/03
|
2,612
|
17.30
|
02/20/13
|
-
|
-
|
|
|
05/22/03
|
2,762
|
17.63
|
05/22/13
|
-
|
-
|
|
|
05/22/03
|
7,238
|
17.63
|
05/22/13
|
-
|
-
|
|
|
05/27/04
|
10,000
|
15.71
|
05/27/14
|
-
|
-
|
|
|
02/16/05
|
2,285
|
21.43
|
02/16/15
|
-
|
-
|
|
|
05/10/05
|
10,000
|
13.64
|
05/10/15
|
-
|
-
|
|
|
05/23/06
|
-
|
-
|
-
|
33,333(1)
|
223,998
|
|
|
05/23/06
|
-
|
-
|
-
|
4,000(2)
|
26,880
|
|
|
05/22/07
|
-
|
-
|
-
|
4,000(3)
|
26,880
|
|
|
Option
Awards
|
Stock
Awards
|
|||||
|
Name
|
Grant
Date
|
Number
of
Securities
Underlying
Unexercised
Options
(#)
Exercisable
|
Option
Exercise
Price
($)
|
Option
Expiration
Date
|
Equity
Incentive
Plan
Awards:
Number
of
Unearned
Shares,
Units
or Other
Rights
That
Have Not
Vested
(#)
|
Equity
Incentive Plan
Awards:
Market or
Payout
Value of
Unearned
Shares,
Units
or Other Rights
That
Have Not
Vested(4)
($)
|
|
L.D.
"Micky" Miller
|
12/09/02
|
15,000
|
18.15
|
12/09/12
|
-
|
-
|
|
05/22/03
|
1,048
|
17.63
|
05/22/13
|
-
|
-
|
|
|
05/22/03
|
6,452
|
17.63
|
05/22/13
|
-
|
-
|
|
|
05/27/04
|
7,500
|
15.71
|
05/27/14
|
-
|
-
|
|
|
02/19/05
|
1,987
|
21.43
|
02/16/15
|
-
|
-
|
|
|
05/10/05
|
7,500
|
13.64
|
05/10/15
|
-
|
-
|
|
|
05/23/06
|
-
|
-
|
-
|
33,333(1)
|
223,998
|
|
|
05/23/06
|
-
|
-
|
-
|
3,000(2)
|
20,160
|
|
|
05/22/07
|
-
|
-
|
-
|
3,000(3)
|
20,160
|
|
|
Tony
Smith
|
10/05/98
|
20,000
|
10.88
|
10/05/08
|
-
|
-
|
|
05/20/99
|
5,000
|
13.00
|
05/20/09
|
-
|
-
|
|
|
07/27/00
|
4,062
|
8.00
|
07/27/10
|
-
|
-
|
|
|
07/27/00
|
938
|
8.00
|
07/27/10
|
-
|
-
|
|
|
05/17/01
|
4,613
|
16.79
|
05/17/11
|
-
|
-
|
|
|
05/17/01
|
387
|
16.79
|
05/17/11
|
-
|
-
|
|
|
05/16/02
|
3,652
|
15.39
|
05/16/12
|
-
|
-
|
|
|
05/16/02
|
348
|
15.39
|
05/16/12
|
-
|
-
|
|
|
08/28/03
|
5,000
|
17.00
|
08/28/13
|
-
|
-
|
|
|
08/28/03
|
2,500
|
17.00
|
08/28/13
|
-
|
-
|
|
|
05/27/04
|
2,354
|
15.71
|
05/27/14
|
-
|
-
|
|
|
05/27/04
|
5,146
|
15.71
|
05/27/14
|
-
|
-
|
|
|
02/16/05
|
2,076
|
21.43
|
02/16/15
|
-
|
-
|
|
|
05/10/05
|
10,000
|
13.64
|
05/10/15
|
-
|
-
|
|
|
05/23/06
|
-
|
-
|
-
|
25,000(1)
|
168,000
|
|
|
05/23/06
|
-
|
-
|
-
|
4,000(2)
|
26,880
|
|
|
05/22/07
|
-
|
-
|
-
|
4,000(3)
|
26,880
|
|
|
James
"Jim" Brower
|
09/21/06
|
-
|
-
|
-
|
25,000(1)
|
168,000
|
|
09/21/06
|
-
|
-
|
-
|
4,000(2)
|
26,880
|
|
|
05/22/07
|
-
|
-
|
-
|
4,000(3)
|
26,880
|
|
|
Michael
W. Miller
|
08/31/98
|
3,637
|
12.38
|
08/31/08
|
-
|
-
|
|
08/31/98
|
6,363
|
12.38
|
08/31/08
|
-
|
-
|
|
|
05/20/99
|
3,333
|
13.00
|
05/20/09
|
-
|
-
|
|
|
05/20/99
|
6,667
|
13.00
|
05/20/09
|
-
|
-
|
|
|
02/29/00
|
3,298
|
13.13
|
03/01/10
|
-
|
-
|
|
|
05/18/00
|
6,666
|
12.19
|
05/18/10
|
-
|
-
|
|
|
05/18/00
|
3,334
|
12.19
|
05/18/10
|
-
|
-
|
|
|
07/27/00
|
7,422
|
8.00
|
07/27/10
|
-
|
-
|
|
|
07/27/00
|
22,578
|
8.00
|
07/27/10
|
-
|
-
|
|
|
05/17/01
|
3,333
|
16.79
|
05/17/11
|
-
|
-
|
|
|
05/17/01
|
6,667
|
16.79
|
05/17/11
|
-
|
-
|
|
|
05/16/02
|
6,194
|
15.39
|
05/16/12
|
-
|
-
|
|
|
05/16/02
|
3,806
|
15.39
|
05/16/12
|
-
|
-
|
|
|
02/20/03
|
3,537
|
17.30
|
02/20/13
|
-
|
-
|
|
|
05/22/03
|
2,762
|
17.63
|
05/22/13
|
-
|
-
|
|
|
05/22/03
|
7,238
|
17.63
|
05/22/13
|
-
|
-
|
|
|
05/27/04
|
3,333
|
15.71
|
05/27/14
|
-
|
-
|
|
|
05/27/04
|
6,667
|
15.71
|
05/27/14
|
-
|
-
|
|
|
02/16/05
|
3,037
|
21.43
|
02/16/15
|
-
|
-
|
|
|
05/10/05
|
10,000
|
13.64
|
05/10/15
|
-
|
-
|
|
|
05/23/06
|
-
|
-
|
-
|
33,333(1)
|
223,998
|
|
|
05/23/06
|
-
|
-
|
-
|
4,000(2)
|
26,880
|
|
|
(1)
|
Subject
to the terms of the award notice, the restricted shares will vest
completely in any year between 2007 and 2010 in which we reach an earnings
per share target of $2.00. The earnings-per-share target
excludes the effect of the vesting of the awards on earnings per share as
well as extraordinary gains. The executive must hold the shares
for one year after vesting; provided that the executive may sell such
portion of the restricted shares that is necessary to cover the federal
and state taxes he incurs upon vesting of the shares.
|
|
|
(2)
|
Subject
to the terms of the award notice, the restricted shares will vest in equal
increments over the four-year period beginning on the first anniversary of
the award date, subject to us reaching earnings-per-share targets of $0.75
in 2006, $1.05 in 2007, $1.35 in 2008, and $1.55 in 2009. Any
percentage that fails to vest as a result of failure to reach a particular
target will vest if we meet a subsequent target. As a condition
to selling any vested shares of restricted Class A common stock, the
executive is required to maintain an equivalent of 200% of his annual
salary on the date of the proposed sale in the combination of (i) Class A
common stock and (ii) 50% of the value of (a) unexercised options to
purchase Class A common stock, and (b) restricted Class A common stock;
provided that the executive may sell such portion of the restricted shares
that is necessary to cover the federal and state taxes he incurs upon
vesting of the shares.
|
|
|
(3)
|
Subject
to the terms of the award notice, the restricted shares will vest in equal
increments over the four-year period beginning on the first anniversary of
the award date, subject to us reaching earnings-per-share targets of $0.25
in 2007, $.50 in 2008, $1.00 in 2009, and $1.50 in 2010. Any
percentage that fails to vest as a result of failure to reach a particular
target will vest if we meet a subsequent target. As a condition
to selling any vested shares of restricted Class A common stock, the
executive is required to maintain an equivalent of 200% of his annual
salary on the date of the proposed sale in the combination of (i) Class A
common stock and (ii) 50% of the value of (a) unexercised options to
purchase Class A common stock, and (b) restricted Class A common stock;
provided that the executive may sell such portion of the restricted shares
that is necessary to cover the federal and state taxes he incurs upon
vesting of the shares.
|
|
|
(4)
|
The
market value was calculated by multiplying the closing market price of our
stock on December 31, 2007, by the number of shares that have not
vested.
|
|
The
following table sets forth information concerning the compensation of our
non-employee directors for the fiscal year 2007.
|
Name
|
Fees
Earned or Paid in Cash(1)
($)
|
Stock
Awards(2)
($)
|
Total
($)
|
|
William
T. Alt
|
31,500
|
25,004
|
56,504
|
|
Robert
E. Bosworth
|
39,000
|
25,004
|
64,004
|
|
Hugh
O. Maclellan, Jr.
|
32,000
|
25,004
|
57,004
|
|
Bradley
A. Moline
|
36,500
|
25,004
|
61,504
|
|
Niel
B. Nielson
|
37,500
|
25,004
|
62,504
|
|
Mark
A. Scudder(3)
|
31,500
|
25,004
|
56,504
|
|
(1)
|
This
column represents the amount of cash compensation earned in 2007 for Board
and committee service.
|
|
(2)
|
This
column represents the dollar amount recognized for financial statement
reporting purposes with respect to the 2007 fiscal year for the fair value
of stock awards granted to each director in 2007, in accordance with SFAS
123R. Directors who are not our employees received shares of our Class A
common stock with a market value on the grant date equivalent to
approximately $25,000. The directors can only sell these shares if, after
the sale, they maintain a minimum of $100,000 in value of our Class A
common stock.
|
|
(3)
|
Mr.
Scudder resigned from the Board in November
2007.
|
Narrative to Director Compensation
The compensation package for our
non-employee Directors remained unchanged from 2006. Accordingly,
Directors who are not our employees or employees of one of our subsidiaries
currently receive a $25,000 annual retainer and no meeting attendance
fees. An additional annual retainer of $7,500 is paid to the Audit
Committee Chairman; $5,000 to the Compensation Committee Chairman; and $3,000 to
the Nominating and Corporate Governance Committee Chairman. For the
additional time related to attending committee meetings, Audit Committee members
also receive an annual fee of $5,000; Compensation Committee members also
receive an annual fee of $4,000; and, Nominating and Corporate Governance
Committee members also receive an annual fee of $2,500. In lieu of
stock options that had previously been a part of outside director compensation,
Directors who are not our employees or employees of one of our
subsidiaries
received a grant of Class A common stock equivalent to $25,000 at the time of
our annual meeting. The directors can only sell these shares if,
after the sale, they maintain a minimum of $100,000 in value of Class A common
stock.
Directors who are our employees or
employees of one of our subsidiaries do not receive compensation for board or
committee service.
SECURITY OWNERSHIP OF CERTAIN
BENEFICIAL
OWNERS AND MANAGEMENT
The following table shows, as of March
31, 2008, the number of shares and percentage of outstanding shares of our
Class A and Class B common stock beneficially owned by:
|
•
|
Each
of our directors, director nominees, and Named Executive Officers,
excluding Michael Miller who resigned from his position as our Executive
Vice President – Procurement and Corporate Operations Manager in August
2007;
|
|
|
|
|
•
|
All
of our executive officers and directors as a group; and
|
|
•
|
Each
person known to us to beneficially own 5% or more of any class of our
common stock.
|
The percentages shown are based on
12,175,962 shares of Class A common stock (including shares of restricted Class
A common stock subject to certain performance vesting and holding provisions)
and 2,350,000 shares of Class B common stock outstanding at March 31,
2008. 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
|
5,431,187
(4)
|
24.9%
of Class A
100%
of Class B
36.8%
of Total(5)
|
|
Class
A Common
|
Joey
B. Hogan
|
182,677 (6)
|
1.5%
of Class A
1.3%
of Total
|
|
Class A
Common
|
Tony
Smith
|
99,076
|
*
|
|
Class
A Common
|
L.D. "Micky"
Miller
|
78,820
|
*
|
|
Class
A Common
|
James
Brower
|
33,000
|
*
|
|
Class
A Common
|
William
T. Alt
|
19,268
|
*
|
|
Class
A Common
|
Robert
E. Bosworth
|
37,936
(7)
|
*
|
|
Class
A Common
|
Hugh
O. Maclellan, Jr.
|
34,268
|
*
|
|
Class
A Common
|
Bradley
A. Moline
|
12,768
|
*
|
|
Class
A Common
|
Niel
B. Nielson
|
12,768
|
*
|
|
Class
A Common
|
Wells
Fargo & Company
|
1,411,545
(8)
|
11.6%
of Class A
9.7%
of Total
|
|
Class
A Common
|
Dimensional
Fund Advisors Inc.
|
1,037,720
(9)
|
8.5%
of Class A
7.1%
of Total
|
|
Class
A Common
|
Donald
Smith & Co., Inc.
|
802,981 (10)
|
6.6%
of Class A
5.5%
of Total
|
|
Class
A Common
|
Barrow,
Hanley, Mewhinney & Strauss, Inc.
|
734,500 (11)
|
6.0%
of Class A
5.1%
of Total
|
|
Class
A & Class B
Common
|
All
directors and executive officers as a group
(13
persons)
|
6,108,929 (12)
|
40.4%
of Total
|
|
*
|
Less
than one percent (1%).
|
|
(1)
|
The
business address of Mr. and Mrs. Parker and the other directors,
director nominees, Named Executive Officers and the other executive
officers is 400 Birmingham Highway, Chattanooga, TN 37419. The
business addresses of the remaining entities listed in the table above
are: Wells Fargo & Company, 420 Montgomery Street,
San Francisco, CA 94104; Dimensional Fund Advisors Inc.,
1299 Ocean Avenue, 11th Floor,
Santa Monica, CA 90401; Donald Smith & Co., Inc., 152 West
57th
Street, New York, NY 10019; and Barrow, Hanley, Mewhinney & Strauss,
Inc., 2200 Ross Avenue, 31st
Floor, Dallas, TX 75201.
|
|
(2)
|
Beneficial
ownership includes sole voting power and sole investment power with
respect to such shares unless otherwise noted and subject to community
property laws where applicable. In accordance with Rule 13d-3(d)(1)
under the Exchange Act, the number of shares indicated as beneficially
owned by a person includes shares of Class A common stock underlying
options that are currently exercisable held by the following
individuals: Mr. Parker–218,037;
Mr. Joey Hogan–117,169; Mr. Smith–66,076; Mr. L.D. "Micky"
Miller–39,487; Mr. Brower–0; Mr. Alt–15,000;
Mr. Bosworth–22,500; Mr. Maclellan–22,500;
Mr. Moline–7,500; and Dr. Nielson-7,500. In addition, beneficial
ownership includes shares of restricted Class A common stock subject to
certain performance vesting and holding provisions held by the following
individuals: Mr. Parker–58,000; Mr. Joey Hogan–41,333;
Mr. Smith–33,000; Mr. L.D. "Micky" Miller–39,333; and
Mr. Brower–33,000. The beneficial ownership also includes
the following shares of Class A common stock allocated to the
accounts of the following individuals under our 401(k) plan:
Mr. Parker–17,583; Mr. Hogan–20,775; Mr. Smith–0;
Mr. L.D. "Micky" Miller–0; and Mr. Brower–0.
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|
(3)
|
Shares
of Class A common stock underlying stock options that are currently
exercisable or will be exercisable within 60 days following March 31, 2008
are deemed to be outstanding for purposes of computing the percentage
ownership of the person holding such options and the percentage ownership
of all directors and executive officers as a group, but are not deemed
outstanding for purposes of computing the percentage ownership of any
other person or entity. There are no stock options that will
become exercisable within 60 days following March 31, 2008, for any
executive officer, director, or director nominee of the
Company.
|
|
(4)
|
Comprised
of 2,226,950 shares of Class A common stock and 2,350,000 shares of
Class B common stock owned by Mr. and Mrs. Parker as joint
tenants with rights of survivorship; 100,000 shares of Class A common
stock owned by the Parker Family Limited Partnership, of which
Mr. and Mrs. Parker are the two general partners and
possess sole voting and investment control; 218,037 shares of Class A
common stock underlying Mr. Parker's stock options that are currently
exercisable; 58,000 shares of restricted Class A common stock; 17,583
shares allocated to the account of Mr. Parker under our 401(k) plan;
and 460,617 shares of Class A common stock owned by the David R. Parker
2005 Trust (of which Mr. Parker is the sole lifetime beneficiary and Mrs.
Parker is the trustee). The restricted Class A common stock is
subject to certain performance vesting and holding
provisions.
|
|
(5)
|
Based
on the aggregate number of shares of Class A and Class B common
stock held by Mr. and Mrs. Parker.
Mr. and Mrs. Parker hold 24.9% of shares of Class A
and 100% of shares of Class B common stock. The Class A common
stock is entitled to one vote per share, and the Class B common stock
is entitled to two votes per share. Mr. and Mrs. Parker
beneficially own shares of Class A and Class B common stock with
45.5% of the voting power of all outstanding voting shares.
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|
(6)
|
Comprised
of 3,400 shares of Class A common stock owned by Mr. Hogan and
Melinda J. Hogan as joint tenants, 117,169 shares of Class A common
stock underlying stock options, 41,333 shares of restricted Class A common
stock, and 20,775 shares held by Mr. Hogan in our 401(k)
plan. The restricted Class A common stock is subject to certain
performance vesting and holding provisions.
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|
(7)
|
Comprised
of 5,268 shares of Class A common stock owned directly, 10,168 shares of
Class A common stock held in an individual retirement account, and
22,500 shares of Class A common stock underlying stock
options.
|
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(8)
|
As
reported on Schedule 13G/A filed with the SEC on January 17, 2008.
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, 2007.
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(9)
|
As
reported on Schedule 13G/A filed with the SEC on February 6, 2008.
Represents aggregate beneficial ownership on a consolidated basis reported
by Dimensional Fund Advisors LP and includes shares of Class A common
stock beneficially owned by advisory clients of Dimensional Fund Advisors
LP. Information is as of December 31, 2007.
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(10)
|
As
reported on Schedule 13G filed with the SEC on February 8, 2008.
Represents aggregate beneficial ownership on a consolidated basis
reported by Donald Smith & Co., Inc. and includes shares of Class A
common stock beneficially owned by advisory clients of Donald Smith &
Co., Inc. Information is as of December 31, 2007.
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(11)
|
As
reported on Schedule 13G filed with the SEC on February 13, 2008.
Information is as of December 31, 2007.
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(12)
|
The
other executive officers are Charles “Jerry” Eddy, R.H. Lovin, Jr., and
Jeffrey Paulsen. Mr. Eddy does not beneficially own any shares of
unrestricted 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 31,
2008. Mr. Eddy does beneficially own 32,000 shares of
restricted Class A common stock. Mr. Lovin beneficially
owns 102,161 shares of Class A common stock, which are comprised of 2,650
shares of Class A common stock owned directly, 57,932 shares of Class A
common stock underlying Mr. Lovin's stock options that are currently
exercisable, 31,000 shares of restricted Class A common stock, and 10,579
shares allocated to the account of Mr. Lovin under our 401(k)
plan. Mr. Paulsen beneficially owns 33,000 shares of Class A
common stock, which are comprised of 5,000 shares of Class A common stock
underlying Mr. Paulsen’s stock options that are currently exercisable or
will become exercisable within 60 days of March 31, 2008 and 28,000 shares
of restricted Class A common stock. The restricted Class A
common stock is subject to certain performance vesting and holding
provisions. The shares detailed in this footnote are included
in the calculation of all directors and executive officers as a
group.
|
CERTAIN RELATIONSHIPS AND RELATED
TRANSACTIONS
Pursuant to our Audit Committee
Charter, all transactions with affiliated persons or entities must be reviewed
and pre-approved by our Audit Committee.
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 $126,000 in 2007. Ms. Landreth is
Mr. Parker's step-sister. The Audit Committee has approved a continuation
of this relationship and annually pre-approves purchase limits. The
store was recently shut down.
Certain Business Relationships.
Mr. Scudder's law firm serves as our corporate and securities
counsel and earned approximately $309,000 in fees for legal
services during 2007.
RELATIONSHIPS WITH INDEPENDENT REGISTERED
PUBLIC ACCOUNTING FIRM
The
principal independent registered public accounting firm utilized by us during
fiscal 2007 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, 2007 and 2006:
|
Fiscal
2007
|
Fiscal
2006
|
|||||||
|
Audit
Fees(1)
|
$ | 710,000 | $ | 622,500 | ||||
|
Audit-Related
Fees(2)
|
0 | 0 | ||||||
|
Tax
Fees(3)
|
122,497 | 160,182 | ||||||
|
All
Other Fees(4)
|
0 | 0 | ||||||
|
Total
|
$ | 832,497 | $ | 782,682 | ||||
|
(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 2007, audit fees were
comprised of $350,000 in fees for the audit of our annual financial
statements and review of financial statements included in our quarterly
reports on Form 10-Q, $315,000 in fees for the audit of our
assessment of internal controls over financial reporting, $25,000 for the
statutory audit of our Volunteer Insurance Limited subsidiary’s annual
financial statements, and $20,000 in fees for agreed upon procedures
related to our securitization facility. For fiscal 2006, audit fees were
comprised of $332,500 in fees for the audit of our annual consolidated
financial statements and review of our consolidated financial statements
included in our quarterly reports on Form 10-Q, $250,000 in fees for
the audit of our assessment of internal controls over financial reporting,
$25,000 for the statutory audit of our Volunteer Insurance Limited
subsidiary’s annual financial statements, and $15,000 in fees for agreed
upon procedures related to our securitization facility.
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|
(2)
|
Represents
the aggregate fees billed for assurance and related services by KPMG that
are reasonably related to the performance of the audit or review of our
financial statements and are not reported under "audit
fees." There were no such fees for fiscal 2007 or fiscal
2006.
|
|
(3)
|
Represents
the aggregate fees billed for professional services rendered by KPMG for
tax compliance, tax advice, and tax planning. For fiscal 2007, there were
no tax fees for tax compliance or tax planning and advice. For fiscal
2006, tax fees were comprised of $149,500 in fees for tax compliance and
$10,682 in fees for tax planning and advice.
|
|
(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 2007 or fiscal
2006.
|
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,
2007.
To be
eligible for inclusion in our proxy materials relating to our 2009 annual
meeting of stockholders, stockholder proposals intended to be presented at that
meeting must be received by us in writing on or before December 15,
2008. However, if the
date of the 2009 annual meeting of stockholders is more than thirty days before
or after May 14, 2009, then the deadline for submitting any such
stockholder proposal for inclusion in the proxy materials relating to the 2009
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 2009 annual
meeting, but not included in our proxy materials relating to that meeting
pursuant to Rule 14a-8 under the Exchange Act, by March 1,
2009. However, if the date of the 2009 annual meeting of stockholders
is more than thirty days before or after May 14, 2009, 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 2009 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 Senior Executive Vice President and Chief
Operating Officer. 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.
|
Covenant
Transportation Group, Inc.
|
|
|
/s/ David R.
Parker
|
|
|
David
R. Parker
|
|
|
Chairman
of the Board of Directors
|
|
|
April 14,
2008
|
30
 |
 |
|||
 |
||||
|
Using
a black ink pen,
mark your votes with an X as shown in this
example. Please do not write outside the designated areas.
|
x
|
|||
|
Annual
Meeting Proxy Card
|
 |
PLEASE
FOLD ALONG THE PERFORATION, DETACH AND RETURN THE BOTTOM PORTION IN THE
ENCLOSED ENVELOPE.
|
|
|
A Proposals — The Board of Directors recommends a
vote FOR all
the nominees listed and FOR
granting the proxies discretionary
authority.
|
| 1. Election of Directors: |
For
|
Withold
|
For
|
Withold
|
For
|
Withold
|
 |
|||
|
01-William
T.Alt
|
£
|
£
|
02
- Robert E. Bosworth
|
£
|
£
|
03-Bradley
A. Moline
|
£
|
£
|
||
|
04
- Niel B. Nielson
|
£
|
£
|
05
- David R. Parker
|
£
|
£
|
|||||
|
2.
In their discretion, the attorneys and proxies are authorized to vote upon
such other matters as may properly come before the meeting or any
adjournment thereof.
|
GRANT
AUTHORITY
To
Vote
£
|
WITHOLD
AUTHORITY
To
Vote
£
|
Abstain
£
|
|
||||||
|
C Authorized Signatures — This section must be
completed for your vote to be counted. — Date and Sign Below
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.
|
||||||||||
| Date (mm/dd/yyyy) — Please print date below. | Signature 1 — Please keep signature within the box | Signature 2 — Please keep signature within the box. | ||
|
/ /
|
||||
 |
1
U PX 0 1 7 1 7 5 2
|
|
||
|
|
PLEASE
FOLD ALONG THE PERFORATION, DETACH AND RETURN THE BOTTOM PORTION IN THE
ENCLOSED ENVELOPE.
|
|
|
Proxy — COVENANT
TRANSPORTATION GROUP,
INC.
|
PROXY
FOR ANNUAL MEETING OF STOCKHOLDERS MAY 14, 2008
Solicited on Behalf of the Board of Directors of the Company
Solicited on Behalf of the Board of Directors of the Company
The
undersigned holder(s) of Class A and/or Class B common stock (individually or
together referred to as "Common Stock") of Covenant Transportation Group, Inc.,
a Nevada corporation (the "Company"), hereby appoint(s) David R. Parker and Joey
B. Hogan, and each or any of them, attorneys and proxies of the undersigned,
with full power of substitution, to vote all of the Common Stock that the
undersigned is (are) entitled to vote at the annual meeting of stockholders of
the Company to be held at the Company's Corporate Headquarters at 400 Birmingham
Highway, Chattanooga, Tennessee, on Wednesday, May 14, 2008, at 10:00 A.M.
Eastern Time, and at any adjournment thereof. The undersigned acknowledges
receipt of the Notice and Proxy Statement for the 2008 annual meeting of
stockholders and the annual report to stockholders for the year ended December
31, 2007.
A
vote FOR Proposal 1 and granting the proxies discretionary authority is
recommended by the Board of Directors of the Company. When properly executed,
this proxy will be voted in the manner directed by the undersigned
stockholder(s). If no direction is given, this proxy will be voted FOR Proposal
1 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,
PLEASE
SIGN, DATE AND PROMPTLY RETURN IN THE ACCOMPANYING ENVELOPE.
If
you vote by telephone or over the Internet, do not mail your proxy
card.
(CONTINUED
AND TO BE SIGNED ON REVERSE SIDE)