KNIGHT
TRANSPORTATION, INC.
5601
West
Buckeye Road
Phoenix,
Arizona 85043
__________________________
NOTICE
OF SPECIAL MEETING OF SHAREHOLDERS
TO
BE HELD ON DECEMBER 21, 2005
__________________________
To
our
Shareholders:
You
are
cordially invited to attend a Special Meeting of Shareholders (the "Special
Meeting") of KNIGHT TRANSPORTATION, INC. (the "Company") to be held at 8:30
A.M., local Phoenix time, on December 21, 2005, at the offices of Ryley, Carlock
& Applewhite, Phelps Dodge Tower, One North Central Avenue, Suite 1200,
Phoenix, Arizona 85004. The purposes of the Special Meeting are:
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1.
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To
consider and vote upon a proposal to approve the Company's 2005 Executive
Cash Bonus Plan, to comply with Section 162(m) of the Internal Revenue
Code of 1986, as amended (the "Code");
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2.
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To
consider and vote upon a proposal to approve an amendment to the
Company's
2003 Stock Option Plan (the "2003 Plan") to comply with Section 162(m)
of
the Code, and to approve and ratify the Company's Amended and Restated
2003 Stock Option Plan, which incorporates all prior amendments to
the
2003 Plan; and
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3.
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To
transact such other business as may properly come before the Special
Meeting or any adjournment thereof.
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The
Board
of Directors has fixed the close of business on November 25, 2005, as the record
date for determining those shareholders who are entitled to receive notice
of
and vote at the Special Meeting
or any adjournment of that meeting. Shares of the Company's Common Stock can
be
voted at the Special Meeting
only if the holder is present at the Special Meeting
in person or by valid proxy.
YOUR
VOTE
IS IMPORTANT. TO ENSURE YOUR REPRESENTATION AT THE SPECIAL MEETING, YOU ARE
REQUESTED TO PROMPTLY DATE, SIGN, AND RETURN THE ACCOMPANYING PROXY IN THE
ENCLOSED ENVELOPE.
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By
Order of the Board of Directors,
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/s/
Timothy M. Kohl
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Timothy M.
Kohl
Secretary
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Phoenix,
Arizona
November
29, 2005
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Page
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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 Special Meeting; Revocation of Proxy
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Costs
of Solicitation
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How
To Read this Proxy Statement
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Note
on Certain Information Presented for Periods Ended December 31,
2004
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INTRODUCTORY
NOTE
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PROPOSAL
NO. 1 - APPROVAL OF 2005 EXECUTIVE CASH BONUS PLAN IN ACCORDANCE
WITH SECTION 162(M) OF THE INTERNAL REVENUE CODE
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Background
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Summary
of Cash Bonus Plan
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New
Plan Benefits
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Recommendation
of the Board of Directors
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PROPOSAL
NO. 2 - APPROVAL OF AMENDMENT TO 2003 PLAN AND APPROVAL AND RATIFICATION
OF THE COMPANY'S AMENDED AND RESTATED 2003 STOCK
OPTION
PLAN
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Background
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Reasons
for Seeking Shareholder Approval
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Description
of the Amended 2003 Plan
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Federal
Income Tax Consequences
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Accounting
Treatment
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New
Plan Benefits
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Amended
and Restated 2003 Stock Option Plan
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Recommendation
of the Board of Directors
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EXECUTIVE
COMPENSATION
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Summary
Compensation Table
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Options/SAR
Grants in Last Fiscal Year
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Aggregated
Options/SAR Exercises in Last Fiscal Year and Fiscal Year-End Option/SAR
Value Table
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Employment
Agreements
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Director
Compensation
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Stock
Option Plan
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401(k)
Plan
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Compensation
Committee Interlocks and Insider Participation
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Compensation
Committee Report on Executive Compensation
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STOCK
PERFORMANCE GRAPH
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SECURITY
OWNERSHIP OF CERTAIN BENEFICIAL OWNERS
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SHAREHOLDER
PROPOSALS
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OTHER
MATTERS
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Appendix
A - 2005 Executive Cash Bonus Plan
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Appendix
B - Amended
and Restated 2003 Stock Option Plan
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5601
West
Buckeye Road
Phoenix,
Arizona 85043
______________________________
PROXY
STATEMENT
FOR
SPECIAL MEETING OF SHAREHOLDERS
TO
BE HELD ON DECEMBER 21, 2005
______________________________
GENERAL
INFORMATION
This
Proxy Statement is furnished in connection with the solicitation of proxies
from
the shareholders of Knight Transportation, Inc. (the "Company") to be voted
at
the Special Meeting of Shareholders (the "Special Meeting") to be held on
December 21, 2005. THE ENCLOSED PROXY IS SOLICITED BY THE BOARD OF DIRECTORS
OF
THE COMPANY. If not otherwise specified, all proxies received pursuant to this
solicitation will be voted (i) FOR approval of the Company's 2005 Executive
Cash Bonus Plan; (ii) FOR approval of the amendment to the Company's 2003 Stock
Option Plan (the "2003 Plan") and approval and ratification of the Company's
Amended and Restated 2003 Stock Option Plan, which incorporates all prior
amendments to the 2003 Plan; and (iii) with respect to any other matters
properly brought before the Special Meeting, in accordance with the
recommendations of the Board of Directors, or, if no recommendations are given,
in accordance with the judgment of the proxy holders.
This
Proxy Statement, the proxy card, and our Annual Report were first mailed on
or
about
November
29, 2005, to
shareholders of record at the close of business on November 25, 2005 (the
"Record Date").
The
terms "we," "our," "us," or the "Company" refer to Knight Transportation, Inc.
and its subsidiaries.
Only
holders of record of our Common Stock, par value $0.01 per share ("Common
Stock"), at the close of business on the Record Date are entitled to vote at
the
Special Meeting, either in person or by valid proxy. Shareholders are entitled
to one vote for each share held of record on each matter of business to be
considered at the Special Meeting. As of the Record Date, there were
approximately 57,088,590 shares of our Common Stock issued and outstanding.
Votes cast at the Special Meeting will be tabulated by the Inspector of
Elections and the results of all items voted upon will be announced at the
Special Meeting.
In
order
to transact business at the Special Meeting, a quorum must be present. A quorum
is present if a majority of the issued and outstanding shares of Common Stock
as
of the Record Date are represented at the Special 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.
Approval
of the matters submitted to shareholders for consideration and action at the
Special Meeting requires that the number of votes cast for the matter exceeds
the number of votes cast against the matter. Except for purposes of determining
the presence of a quorum, abstentions and broker non-votes will be disregarded
in determining whether a matter has been approved. In other words, abstentions
and broker non-votes will neither be counted as votes for nor as votes against
a
matter.
Returning
a proxy card now will not interfere with your right to attend the
Special Meeting
or to vote your shares personally at the Special Meeting,
if you wish to do so. Shareholders who execute and return proxies may revoke
them at any time before they are exercised by giving written notice to the
Secretary of the Company at our address, by executing a subsequent proxy and
delivering it to the Secretary of the Company, or by attending the
Special Meeting
and voting in person.
We
will
bear the cost of solicitation of proxies, which we expect to be nominal, and
which will include reimbursements for the charges and expenses of brokerage
firms and others for forwarding solicitation material to beneficial owners
of
our outstanding Common Stock. Proxies will be solicited by mail, and may be
solicited personally by directors, officers, or our employees, who will not
receive any additional compensation for any such services.
This
Proxy Statement contains the proposals to be considered by shareholders at
the
Special Meeting, as well as important information concerning, among other
things, the stock ownership of management and other large shareholders and
executive compensation. Each
shareholder should read this information before completing and returning the
enclosed proxy card.
Under
the
rules and regulations promulgated by the Securities and Exchange Commission
(the
"SEC"), certain information included in this Proxy Statement is required to
be
presented for periods ended December 31, 2004. Information required to be
presented for these periods is included under the headings "Executive
Compensation" and "Stock Performance Graph." Since December 31, 2004, a number
of changes discussed elsewhere in this Proxy Statement have occurred with
respect to information presented under these headings. Many of these changes
are
discussed in this Proxy Statement under the headings "Introductory Note,"
"Proposal No. 1 - Approval of 2005 Executive Cash Bonus Plan in Accordance
with
Section 162(m) of the Internal Revenue Code," and "Proposal No. 2 - Approval
of
Amendment to 2003 Stock Option Plan and Approval and Ratification of the
Company's Amended and Restated 2003 Stock Option Plan."
You
should read all information contained in this Proxy Statement with the
understanding that any information presented for periods ended December 31,
2004
is included in order to comply with the rules and regulations of the SEC and
has
not been updated, except as required by those rules and regulations. All
information for periods ending December 31, 2004, should also be read together
with the more current information included under the headings "Introductory
Note," "Proposal No. 1 - Approval of 2005 Executive Cash Bonus Plan in
Accordance with Section 162(m) of the Internal Revenue Code," and "Proposal
No.
2 - Approval of Amendment to 2003 Stock Option Plan and Approval and
Ratification of the Company's Amended and Restated 2003 Stock Option Plan."
In
July
2005, a specially constituted Compensation Committee (the "Compensation
Committee" or the "Committee") of the Board of Directors of the Company,
composed exclusively of outside directors (as required by Section 162(m) of
the
Internal Revenue Code of 1986, as amended (the "Code")) engaged Frederic W.
Cook
& Co., Inc. as an independent compensation consultant to assist the
Compensation Committee in establishing a compensation package for Kevin P.
Knight, the Company's Chairman of the Board and Chief Executive Officer. Mark
Scudder, a member of the Company's standing Compensation Committee, recused
himself from the consideration of these compensation matters, as discussed
below
in "Compensation Committee Interlocks and Insider Participation."
On
August
19, 2005, after receiving the consultant's report, the Compensation Committee
approved the following compensation package for Mr. Knight:
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An
annual salary of $540,000, effective as of August 19,
2005;
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A
cash bonus for performance during 2005 of up to sixty percent (60%)
of
base salary, with the actual bonus dependent on the extent of achievement
of performance criteria related to revenue and earnings per share
growth
and the success of certain specified divisions of the
Company;
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A
one-time grant of an option to purchase 500,000 shares of the Company's
common stock at an exercise price equal to the closing price of the
Company's stock on the date of grant, with the option vesting immediately
and remaining exercisable for a term of ten (10) years after the
date of
the grant;
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A
travel allowance, which will be determined annually by the Committee
and
which for 2005 was fixed at $150,000, effective August 3, 2005, and
prorated for the balance of 2005; and
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Participation
in all benefit programs made available by the Company to its most
senior
executives.
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The
one-time
option grant was made in recognition of Mr. Knight's past services and reflected
the Compensation Committee's determination that Mr. Knight's compensation
package in the past has been lower than was warranted by the Company's
performance, trucking industry practices, and the practices followed by growth
companies in other industries.
The
Compensation Committee also adopted a policy that any annual stock option
granted to the Company's Chief Executive Officer for years after 2005 will
fall
within a range of 150% to 250% of the next highest annual stock option award
made to the Company's senior executives, excluding the Chairman and Chief
Executive Officer.
Based
in
part on the consultant's report, the Compensation Committee concluded that
this
compensation package was competitive and reasonable in light of trucking
industry practices and the practices followed by growth companies in other
industries.
In
connection with the approval of the compensation package, the Compensation
Committee approved the following two items and directed that they be submitted
for approval by the Company's shareholders at the Special Meeting: (1) the
Company's 2005 Executive Cash Bonus Plan, and (2) an amendment to the Company's
2003 Stock Option Plan to limit the maximum number of shares of stock issuable
in respect of stock grants that may be awarded to any participant in any
calendar year. As described
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in
more
detail below, shareholder
approval of these two items will allow certain compensation paid to the
Company's executive officers to be deductible for tax purposes in years after
2005, in compliance with Section 162(m) of the Code.
Other
than the 500,000-share stock option grant awarded to Kevin P. Knight, which
will
be void if the amendment to the Company's 2003 Stock Option Plan is not approved
by the shareholders, all other components of the compensation package approved
by the Compensation Committee for Mr. Knight will go into effect regardless
of
whether the items to be presented at the Special Meeting are approved by the
Company's shareholders. If, however, the items that are presented at the Special
Meeting are not approved by the Company's shareholders, the requirements of
Section 162(m) will not be satisfied. In that event, as described in more detail
below, certain compensation paid to the Company's executive officers will not
be
deductible by the Company for tax purposes in years after 2005.
Under
Section 162(m) of the Code, the Company's federal income tax deductions for
certain compensation paid to designated executives is limited to $1 million
per
taxable year. Section 162(m) denies to a publicly held corporation a deduction,
in determining its taxable income, for "covered compensation" in excess of
$1
million paid in any taxable year to those individuals who, at the end of the
taxable year, are "covered employees" (defined to mean the Company's Chief
Executive Officer and other Company employees whose total compensation for
the
taxable year is required to be reported to shareholders under the Securities
Exchange Act of 1934, as amended (the "Exchange Act"), by reason of such
employees being among the four highest compensated officers for the taxable
year, other than the Chief Executive Officer). "Covered compensation" does
not
include amounts payable upon the attainment of performance goals established
by
a committee of outside directors if the material terms of the performance goals
are approved by the Company's shareholders.
On
August
19, 2005, the Compensation Committee of the Company's Board of Directors (the
"Committee"), composed entirely of outside directors as required by Section
162(m) of the Code, adopted the Knight Transportation, Inc. 2005 Executive
Cash
Bonus Plan (the "Cash Bonus Plan"). The Cash Bonus Plan is intended to provide
annual incentives to certain senior executive officers in a manner designed
to
reinforce the Company's performance goals; to link a significant portion of
participants' compensation to the achievement of such goals; and to continue
to
attract, motivate, and retain key executives on a competitive basis, while
seeking to preserve for the benefit of the Company, to the extent practicable,
the associated federal income tax deduction for payments of qualified
"performance-based" compensation for years after 2005.
Under
Section 162(m) of the Code, the Cash Bonus Plan must be submitted for
shareholder approval in order to qualify bonuses paid under the Cash Bonus
Plan
for years after 2005 as "performance-based" and deductible to the Company for
purposes of Section 162(m) of the Code. Upon receipt of shareholder approval,
the Committee believes it will be able to pay cash bonuses for years after
2005
in a manner that qualifies as performance-based compensation under Section
162(m) of the Code. Because of the timing of the adoption of the Cash Bonus
Plan, bonus payments made on the basis of the Company's performance in 2005
will
not be able to qualify as "performance-based" under Section 162(m) of the
Code.
The
following description of the Cash Bonus Plan is qualified in its entirety by
reference to the full text of such Cash Bonus Plan, which is attached hereto
as
Appendix A.
Eligibility.
For the
remainder of 2005 (the "Initial Period") and for each year after 2005, the
participants in the Cash Bonus Plan will be those key executives who are
designated by the Committee to participate in the Cash Bonus Plan from time
to
time. The Committee reserves the right to establish alternative incentive
compensation arrangements for otherwise eligible executives if it determines
that it would be in the best interests of the Company and its shareholders
to do
so, even if the result is a loss of deductibility for certain compensation
payments.
Business
criteria upon which performance goals will be based. Specific
performance goals for participating executives will be selected from among
the
business criteria described below. After the Initial Period, these goals must
be
established for each participant by the Committee prior to the 91st day
of
each
5
performance
period, but no later than the expiration of the first 25% of a performance
period having a duration of less than one year for determining the participant's
business criteria target.
Under
the
Cash Bonus Plan, the Committee must set one or more performance goals for each
participant for the Initial Period and each subsequent year, or portion thereof,
which goals shall be based on the attainment of specified levels of one or
any
variation or combination of the following: revenues (including, without
limitation, measures such as revenue per mile (loaded or total) or revenue
per
tractor), net revenues, fuel surcharges, accounts receivable collection or
days
sales outstanding, measures based on the Company's "economic engine" identified
from time-to-time in the Company's strategic plan, cost reductions and savings
(or limits on cost increases), safety and claims (including, without limitation,
measures such as accidents per million miles and number of significant
accidents), operating income, operating ratio, income before taxes, net income,
earnings before interest and taxes (EBIT), earnings before interest, taxes,
depreciation, and amortization (EBITDA), adjusted net income, earnings per
share, adjusted earnings per share, stock price, working capital measures,
return on assets, return on revenues, debt-to-equity or debt-to-capitalization
(in each case with or without lease adjustment), productivity and efficiency
measures (including, without limitation, measures such as driver turnover,
trailer to tractor ratio, and tractor to non-driver ratio), cash position,
return on shareholders' equity, return on invested capital, cash flow measures
(including, without limitation, free cash flow), market share, shareholder
return, economic value added, number of operations centers, number of new
operations centers, or completion of acquisitions (either with or without
specified size). In addition, the Committee may establish, as an additional
performance measure, the attainment by a participant in the Cash Bonus Plan
of
one or more personal objectives and/or goals that the Committee deems
appropriate, including but not limited to implementation of Company policies,
negotiation of significant corporate transactions, development of long-term
business goals or strategic plans for the Company, or the exercise of specific
areas of managerial responsibility. The Committee will not have discretion
to
increase bonus amounts over the level determined by application of the
performance goal formula(s) and will be required to certify, prior to payment,
that the performance goals underlying the bonus payments have been satisfied.
The performance goals set by the Committee may be expressed on an absolute
and/or relative basis, and may include comparisons with the past performance
of
the Company (including one or more divisions thereof, if any) and/or the current
or past performance of other companies.
The
measures used in performance goals set under the Cash Bonus Plan shall be
determined in a manner consistent with generally accepted accounting principles
("GAAP") and in a manner consistent with the methods of reporting used in the
Company's Annual Reports on Form 10-K and Quarterly Reports on Form 10-Q,
without regard, however, to special, unusual or non-recurring items or events,
items related to the disposal or acquisition of a business or to changes in
accounting principles or law, except as may otherwise be determined by the
Committee. To the extent that any objective performance goals are expressed
using any earnings or revenue-based measures that require deviations from GAAP,
such deviations will be at the discretion of the Committee.
Benefits
under the Cash Bonus Plan.
In
general, the benefits under the Cash Bonus Plan will consist of a cash bonus
payable to participants provided the performance goals established by the
Committee are met (and, if met, the extent to which such goals are met.) The
bonus opportunity for each participant under the Cash Bonus Plan each
performance period will be related by a specific formula to the participant's
base salary at the start of such performance period, provided that the maximum
bonus paid under the plan to any individual in respect of any year shall not
exceed $2 million.
Administration
of the Cash Bonus Plan.
The Cash
Bonus Plan will be administered by the Committee, which at all times shall
be
composed solely of at least two directors who are "outside directors" within
the
meaning of Section 162(m). All determinations of the Committee with respect
to
the Cash Bonus Plan
will
be in its discretion and be binding. The expenses of administering the Cash
Bonus Plan will be borne by the Company.
Power
to amend or terminate the Cash Bonus Plan.
The
Board of Directors may at any time terminate or suspend the Cash Bonus Plan
or
revise it in any respect, provided that (i) no amendment shall be made which
would cause bonuses payable under the plan to fail to qualify for the exemption
from the limitations of Section 162(m) of the Code and (ii) no such action
shall
adversely affect a participant's rights under the Cash Bonus Plan with respect
to bonus arrangements agreed to by the Company and the participant, pursuant
to
a written agreement or otherwise, before the date of such action, without the
consent of the participant.
Because
the Committee sets performance goals, targets, and related maximum bonus
opportunities annually, future amounts payable under the Cash Bonus Plan are
not
determinable at this time. Actual amounts will depend on the size of the awards
and on the Company's actual performance over the performance period of the
awards.
On
August
19, 2005, the Committee established performance-based bonus criteria for 2005
for certain of the Company's executive officers pursuant to the Cash Bonus
Plan.
Among the bonus criteria established were the following:
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The
Company's Chief Executive Officer will have the opportunity to earn
a cash
bonus of up to sixty percent (60%) of base salary, with the actual
bonus
dependent on the extent of achievement of performance criteria related
to
revenue and earnings per share ("EPS") growth and the success of
certain
specified divisions of the Company.
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The
Company's Vice Chairman will have the opportunity to earn a cash
bonus of
up to thirty percent (30%) of base salary, with the actual bonus
dependent
on the extent of achievement of performance criteria related to revenue
and EPS growth, accounts receivable collection, days sales outstanding,
and management development.
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The
Company's President will have the opportunity to earn an annual cash
bonus
of up to forty percent (40%) of base salary, with the actual bonus
dependent on the extent of achievement of performance criteria related
to
revenue and EPS growth, the success of certain specified divisions
of the
Company, and improved safety.
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The
Company's Executive Vice President will have the opportunity to earn
a
cash bonus of up to thirty percent (30%) of base salary, with the
actual
bonus dependent on the extent of achievement of performance criteria
related to revenue and EPS growth, accounts receivable collection,
and
days sales outstanding.
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The
Company's Executive Vice President - Sales will have the opportunity
to
earn a cash bonus of up to thirty percent (30%) of base salary, with
the
actual bonus dependent on the extent of achievement of performance
criteria related to revenue and EPS growth, accounts receivable
collection, and days sales outstanding.
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The
Company's Chief Financial Officer will have the opportunity to earn
a cash
bonus of up to thirty percent (30%) of base salary, with the actual
bonus
dependent on the extent of achievement of performance criteria related
to
revenue and EPS growth, accounts receivable collection, and days
sales
outstanding.
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Actual
amounts that will be paid to the Company's officers for 2005 pursuant to the
Cash Bonus Plan will depend on the performance of the Company throughout 2005
and are not determinable at this time.
Reference
is also made to the "Executive Compensation" section in this proxy statement
for
information concerning incentive-based bonus awards made under the Company's
other existing long-term incentive plans.
The
Board
of Directors believes that it is in the best interests of the Company and its
shareholders to approve and ratify the Cash Bonus Plan, in the form attached
hereto as Appendix A, in order to attract, retain, and motivate key employees
and in order to achieve maximum tax deductibility of the compensation costs
associated with the Cash Bonus Plan for years after 2005. The affirmative vote
of a majority of the shares of Common Stock voting on this proposal is required
for approval of the Cash Bonus Plan. Under applicable regulations, if the Cash
Bonus Plan is approved, it may remain in effect without further shareholder
approval until the annual meeting of shareholders in 2010, unless shareholder
approval is required prior thereto in connection with an amendment of the Cash
Bonus Plan.
THE
BOARD OF DIRECTORS RECOMMENDS THAT SHAREHOLDERS VOTE "FOR" THE APPROVAL OF
THE
CASH BONUS PLAN.
In
February 2003, the Board of Directors adopted the Company's 2003 Stock Option
Plan (the "2003 Plan"), which was approved by the Company's shareholders in
May
2003. At our annual meeting in May 2005, shareholders approved an amendment
to
the 2003 Plan increasing the number of shares available for grant awards to
4,000,000 of Common Stock from the 1,500,000 shares originally authorized by
the
2003 Plan.
The
purposes of the 2003 Plan are to: (a) provide employees of the Company with
an
opportunity to purchase Common Stock as an incentive to continue employment
with
the Company and to work for the long-term growth, development, and financial
success of the Company; (b) attract qualified independent directors by providing
the automatic grant of certain nonqualified stock options to independent
directors upon their appointment to the Company's Board of Directors; and (c)
attract, motivate, and retain the services of employees of the Company and
its
subsidiaries and reward such employees by the issuance of equity grants so
that
these employees will contribute to and participate in the long-term performance
of the Company. In furtherance of these purposes, the 2003 Plan authorizes
the
grant, subject to applicable law, to directors, executive officers, and certain
other full-time employees of the Company and its subsidiaries of stock options
and restricted stock.
On
August
19, 2005,
the
Compensation Committee of the Board of Directors of the Company adopted an
amendment to the 2003 Plan (the "Amendment"), subject to the approval by the
Company's shareholders of the Amendment. The Amendment would establish a
limit
on
the number of shares with respect to which options may be granted to any one
plan participant during a calendar year. The Amendment fixes that limit at
650,000 shares, subject to adjustment for stock dividends, stock splits, reverse
stock splits and similar transactions. The Amendment is intended to ensure
compliance with the requirements of Section 162(m) of the Code. Compliance
with Section 162(m) would enable the Company to deduct compensation associated
with awards under the plan which qualifies as "performance-based" for purposes
of Section 162(m) of the Code.
Approval
of the Amendment is necessary to permit compensation expense recognized by
the
Company in connection certain stock options to qualify as "performance-based"
compensation for purposes of Section 162(m) of the Code. Accordingly,
there will be presented at the Special Meeting a proposal to approve the
Amendment.
If the Amendment is not approved at the Special
Meeting, the Amendment will not go into effect. Awards may continue to be made
under the 2003 Plan in accordance with its terms as they existed prior to the
Amendment until the shares remaining for awards under the 2003 Plan are
exhausted; but certain compensation expense associated with exercise of options
may not be deductible to the Company under Section 162(m).
The
principal provisions of the 2003 Plan, as amended by the Amendment (the "Amended
2003 Plan") are summarized below. This summary is not a complete description
of
the Amended 2003
Plan
and
is qualified by the full text of that plan.
General.
The
Amended 2003 Plan is a broad-based equity compensation plan that is designed
to
attract and retain directors, officers, and key employees, including drivers,
to
provide them with long-term incentives if we continue to achieve profitable
growth, and to align their interests with the interests of our shareholders.
The
Amended 2003 Plan is effective as of the date of its approval by the
shareholders, and, if not terminated earlier, will expire on February 5,
2013.
Administration.
The
Amended 2003 Plan is administered by the Compensation Committee of our Board
of
Directors.
Eligibility
and Awards.
Under
the Amended 2003 Plan, options and restricted stock may be granted to any
full-time employee of the Company who, in the judgment of the Compensation
Committee, (a) is qualified by position, training, ability, and responsibility
to contribute substantially to the progress of the Company, (b) has a material,
positive effect on the results of operations of the Company, or (c) is a key
employee or critical line employee. At December 31, 2004, we had approximately
3,465 employees, approximately 728 of whom had received stock option grants
under the 2003 Plan or our prior stock option plan. To date, no restricted
stock
grants have been made under the 2003 Plan.
Options
may be either incentive stock options, as defined in section 422 of the Code
("ISOs") or nonqualified stock options ("NSOs"). The Amended 2003 Plan provides
that an ISO may not have an exercise price that is less than 100% of the fair
market value of the underlying Common Stock on the date of grant or be
exercisable for a term of more than 10 years from the date of grant. However,
in
the case of ISOs granted to a person that holds more than 10% of the voting
power of the Company's outstanding capital stock, the Amended 2003 Plan provides
that the exercise price may not be less than 110% of the fair market value
of
the underlying Common Stock and that the ISO may not be exercisable for a term
of more than 5 years from the date of grant.
In
March
2005, the Board of Directors adopted amendments to the 2003 Plan to provide
that
the exercise price of NSOs may not be less than 100% of the fair market value
of
the underlying Common Stock on the date of grant and to increase from 1,500,000
to 4,000,000 the number of shares reserved for grant awards made under the
2003
Plan. Shareholders approved the amendment increasing the number of shares
reserved for stock grants at our May 2005 annual meeting. Prior to March 2005,
the 2003 Plan had provided that NSOs could be granted at an exercise price
of
not less than 85% of the fair market value of the underlying Common Stock on
the
date of grant. (The only "below market" NSOs granted under the 2003 Plan prior
the amendment were the initial 2,500 shares grants to independent directors,
discussed below.) The Amended 2003 Plan provides that NSOs may be granted for
any reasonable term. Under the Amended 2003 Plan, the exercise price of options
may be paid in cash or immediately available funds or in Common Stock valued
at
its then-current market value.
The
Compensation Committee, in its discretion, selects the persons to whom options
or restricted stock will be granted, the time or times at which such options
or
restricted stock will be granted, and the number of shares subject to each
such
grant. For this reason, it is not possible to determine the benefits or amounts
that will be received by any particular officer or employee, or group of
officers or employees, in the future. The Amended 2003 Plan provides, however,
that the aggregate number of
shares
with respect to which options may be granted to any one plan participant during
a calendar year shall not exceed 650,000 shares, subject to adjustment for
stock
dividends, stock splits, reverse stock splits and similar
transactions.
The
Amended 2003 Plan also provides for automatic NSO grants to independent
directors serving on our Board of Directors. For purposes of the Amended 2003
Plan, "independent directors" are members of our Board of Directors who are
not
officers, employees or 10% shareholders. Upon election or appointment to the
Board of Directors, a new independent director receives an automatic NSO grant
covering 2,500 shares.
Prior
to
the March 2005 amendments adopted by the Board of Directors, the 2003 Plan
provided that the exercise price of the initial NSO grant would be equal
to 85%
of the fair market value of the underlying Common Stock on the date of grant.
The Amended 2003 Plan now provides that the exercise price of the initial
NSO
grant to independent directors is 100% of the fair market value of the
underlying Common Stock on the date of grant. In addition to the initial
NSO
grant, the Amended 2003 Plan provides that independent directors receive
an
annual NSO grant covering a number of shares, not to exceed 2,000, for each
year
the individual continues his or her service as a director. The amount currently
being awarded to directors for each year of service is 1,000 shares. The
annual
NSO grants are made on June 1 of each year to persons serving as independent
directors on that date, and have an exercise price equal to the fair market
value of the underlying Common Stock on the date of grant. Under the Amended
2003 Plan, independent directors also have the option to have their directors'
fees paid in Common Stock. If an independent director makes this election,
the
Company will issue to the independent director, on February 15 and August
15 of
each calendar year, the number of shares equal to the director fees earned
as of
the preceding December 31 and June 30, respectively, based on the closing
market
price of the Common Stock as of the last trading day preceding such February
15
or August 15.
Except
independent directors' fees paid in Common Stock, all grants made under the
Amended 2003 Plan are evidenced by a written agreement between the Company
and
the participant. The Compensation Committee, subject to the limitations set
forth in the Amended 2003 Plan, designates the terms and conditions of any
option or restricted stock grant including, without limitation, the exercise
price, vesting schedule, exercise rights, and termination or forfeiture
provisions. The Amended 2003 Plan provides that stock options are
non-transferable except pursuant to the laws of descent and distribution and
generally terminate upon termination of employment for reasons other than death,
disability, or early or normal retirement. In March 2005, the Board of Directors
adopted amendments to the 2003 Plan to explicitly prohibit the repricing of
any
options granted thereunder. Such amendments are included in the Amended 2003
Plan.
A
participant does not have any rights as a shareholder of the Company with
respect to shares of Common Stock subject to grants made under the Amended
2003
Plan until a stock certificate representing such shares is issued to the
participant.
Shares
Available for Issuance.
There
are presently 4,000,000 shares of Common Stock reserved and available for
issuance pursuant to the Amended 2003 Plan, of which 100,000 shares are reserved
for issuance to independent directors pursuant to the provisions described
above. From the total shares reserved for issuance of grants, as of September
30,2005, the Company has made award grants covering 1,986,801 shares, including
the one time option grant of 500,000 shares to the Company’s CEO as of the
Record Date. Any shares subject to outstanding option or restricted stock grants
are counted against the shares reserved and available for issuance as one share
for every share subject thereto. If an option expires or is terminated without
having been exercised in full, or if a restricted stock grant is forfeited,
the
unexercised or forfeited option shares will become available for future grant
under the Amended 2003 Plan.
The
total
number of shares reserved and available for issuance under the Amended 2003
Plan
is automatically adjusted, without further action by the Board of Directors
or
shareholders, to reflect stock dividends, stock splits, reverse stock splits,
subdivisions, reorganizations, reclassifications or any similar
recapitalizations that affect or modify the number of shares of outstanding
Common Stock.
Mergers
or Consolidations. If
the
Company dissolves or undergoes any reorganization, including, without
limitation, a merger or consolidation with any other organization, and the
Company is not the surviving entity in such reorganization and the surviving
entity does not agree to assume the options granted under the Amended 2003
Plan
or to issue substitute options therefor, the options granted under the Amended
2003 Plan may be terminated. In connection with any such termination, each
participant holding unexercised options must be notified of such termination
and
provided a reasonable period of not less than 15 days to
11
exercise
such options
to the extent such options are then exercisable. The Compensation Committee
may,
in its sole discretion, prescribe such terms and conditions as it deems
appropriate and authorize the exercise of stock options with respect to all
shares covered in the event of a merger or consolidation. Any stock option
not
exercised in accordance with the terms and conditions prescribed by the
Compensation Committee shall terminate as of the date specified by the
Compensation Committee and, simultaneously, the Amended 2003 Plan itself
shall
be terminated without further action by the Company or the Board of
Directors.
Amendment
and Termination. The
Board
of Directors may terminate, suspend, discontinue, modify, or amend the Amended
2003 Plan in any respect, except that, without the approval of our shareholders,
no amendment or modification may change the number of shares of Common Stock
reserved and available for issuance (other than the automatic adjustments
described above), change the designation of the class of employees eligible
to
receive awards, decrease the price at which options may be granted, or remove
the administration of the Plan from the Compensation Committee. Notwithstanding
the foregoing, the Board of Directors may not terminate the Amended 2003 Plan
with respect to any outstanding option unless it gives the participant notice
of
termination and not less than 15 days to exercise such option to the extent
then
exercisable.
Stock
Price. On
November 21, 2005, the closing price of the Common Stock reported on the NYSE
consolidated transaction reporting system was $31.79 per share.
ISOs.
An
optionee is not treated as receiving taxable income upon either the grant of
an
ISO or upon the exercise of an ISO. However, the difference between the exercise
price and the fair market value on the date of exercise is an item of tax
preference at the time of exercise in determining liability for the alternative
minimum tax, assuming that the Common Stock is either transferable or is not
subject to a substantial risk of forfeiture under section 83 of the Code. If
at
the time of exercise, the Common Stock is both nontransferable and is subject
to
a substantial risk of forfeiture, the difference between the exercise price
and
the fair market value of the Common Stock (determined at the time the Common
Stock becomes either transferable or not subject to a substantial risk of
forfeiture) will be a tax preference item in the year in which the Common Stock
becomes either transferable or not subject to a substantial risk of
forfeiture.
If
Common
Stock acquired by the exercise of an ISO is not sold or otherwise disposed
of
within two years from the date of its grant and is held for at least one year
after the date such Common Stock is transferred to the optionee upon exercise,
any gain or loss resulting from its disposition is treated as long-term capital
gain or loss. If such Common Stock is disposed of before the expiration of
the
above-mentioned holding periods, a "disqualifying disposition" occurs. If a
disqualifying disposition occurs, the optionee realizes ordinary income in
the
year of the disposition in an amount equal to the difference between the fair
market value of the Common Stock on the date of exercise and the exercise price,
or the selling price of the Common Stock and the exercise price, whichever
is
less. The balance of the optionee's gain on a disqualifying disposition, if
any,
is taxed as capital gain.
The
Company is not entitled to any tax deduction as a result of the grant or
exercise of an ISO, or on a later disposition of the Common Stock received,
except that in the event of a disqualifying disposition, the Company is entitled
to a deduction equal to the amount of ordinary income realized by the
optionee.
NSOs.
An
optionee does not recognize any taxable income upon the grant of an NSO, and
the
Company is not entitled to a tax deduction by reason of such grant. Upon
exercise of an NSO, the optionee recognizes ordinary income generally measured
by the excess of the then fair market value of the shares over the exercise
price, and the Company is entitled to a corresponding tax deduction. Upon a
disposition of shares acquired
upon exercise of an NSO by the optionee, any difference between the sale price
and the
exercise
price, to the extent not recognized as ordinary income as provided above,
is
treated as long-term or short-term capital gain or loss, depending on the
holding period. Such subsequent disposition by the optionee has no tax
consequence to the Company.
Restricted
Stock. Unless
he
or she elects to treat a restricted stock grant as ordinary income at the time
the grant is made, an employee does not recognize taxable income upon the grant
of restricted stock. Instead, he or she will recognize ordinary income at the
time of vesting (i.e.
when the
restrictions on the grant lapse) equal to the fair market value of the
restricted shares on the vesting date minus any amount paid for the restricted
shares. At the time that the employee recognizes ordinary income in respect
of
the restricted stock grant, the Company would be entitled to a tax deduction
for
compensation expense equal to the amount of ordinary income recognized by the
employee.
The
foregoing is only a summary of the effect of federal income taxation upon
participants and the Company under the Amended 2003 Plan.
It does not purport to be complete, and does not discuss of the tax consequences
of a participant's death or the provisions of the income tax laws of any state,
municipality, or foreign country in which the participant may
reside.
Currently,
employee stock option awards at or above fair market value on the date of grant
typically do not result in any direct charge to the Company's reported earnings.
However, the fair market value of these awards is required to be disclosed
in
the notes to the Company's financial statements. The Company must also disclose,
in the notes to the financial statements, the pro forma impact of that these
awards would have on the Company's reported earnings and earnings per share
if
the fair value of the awards at the time of grant was treated as compensation
expense.
Employee
stock option awards with exercise prices below the fair market value of the
date
of grant result in direct compensation expense that is typically equal to the
"spread" (i.e.
the
difference between the exercise price and the fair market value on the date
of
grant). Typically, this expense is amortized over the award's vesting
period.
In
December 2004, and as revised in April 2005, the Financial Accounting Standards
Board ("FASB") released Statement of Financial Accounting Standards No. 123R
(revised 2004) ("SFAS 123R"). The accounting standards established by that
statement will require the expensing of stock options, commencing with the
Company's fiscal year beginning January 1, 2006. Accordingly, the foregoing
summary of the applicable accounting treatment for stock options will change,
effective with the Company's fiscal year beginning January 1, 2006, and the
stock options which are granted under the Amended 2003
Plan
will
have to be valued as of the grant date under an appropriate valuation formula,
and that value will then have to be charged as a direct compensation expense
against the Company's reported earnings over the designated vesting period
of
the award. Similar option expensing will be required for any unvested options
on
the January 1, 2006 effective date, with the grant date fair value of those
unvested options to be expensed against the Company's earnings over the
remaining vesting period.
The
option to
purchase 500,000 shares granted to Kevin P. Knight, the Company's Chairman
of
the Board and Chief Executive Officer, on August 19, 2005, will not result
in
compensation expense to the Company, as that option was immediately vested
and
will remain fully vested on the January 1, 2006 effective date of SFAS
123R, if the proposed Amendment is approved by the Company's shareholders.
Options granted to other executive officers and employees in 2005 and prior
years will result in compensation expense to the Company to the extent they
are
unvested as of the January 1, 2006 effective date of SFAS 123R.
Future
awards, if any, that will be made to eligible participants under the Amended
2003 Plan are subject to the discretion of the Committee. Accordingly, future
grants under the Amended 2003 Plan are not determinable. Reference is made
to
the "Executive Compensation" section in this proxy statement for information
concerning option awards made under the 2003 Plan during the year ended December
31, 2004. Further, the following options have been granted to our executive
officers and directors in 2005:
|
·
|
On
April 1, 2005, upon her election to the Board of Directors, Kathryn
L.
Munro received an automatic option grant with respect to 2,500 shares,
at
an exercise price of $24.81 per share;
|
|
·
|
On
May 16, 2005, Timothy Kohl, our President, David A. Jackson, our
Chief
Financial Officer, and Casey Comen, our Executive Vice President
- Sales
were granted options with respect to 25,000 shares, 10,000 shares,
and
5,000 shares, respectively, at an exercise price of $23.30 per
share;
|
|
·
|
On
June 1, 2005, each of the independent directors serving on our Board
of
Directors received an automatic option grant with respect to 500
shares
pursuant to the terms of the 2003 Plan, at an exercise price of $25.22
per
share;
|
|
·
|
On
June 9, 2005, each of the independent directors serving on our Board
of
Directors received an option grant with respect to 500 additional
shares,
at an exercise price of $22.95 per share; and
|
|
·
|
On
August 19, 2005, the Committee approved the grant to Kevin P. Knight,
Gary
J. Knight, and Keith T. Knight of options with respect to 500,000
shares,
15,000 shares, and 20,000 shares, respectively, at an exercise price
of
$23.52 per share. The grant to Kevin P. Knight will be void unless
the
Amendment is approved by shareholders at the Special
Meeting.
|
The
Board
of Directors has authorized the complete restatement of the 2003 Plan to
incorporate all prior amendments to the 2003 Plan, including the Amendment
described above that will be submitted to shareholders for their approval at
the
Special Meeting. The 2003 Plan, as so amended and restated, will hereafter
be
referred to as the Amended and Restated 2003 Stock Option Plan.
The
Board
of Directors believes that it is in the best interests of the Company and its
shareholders to approve the Amendment and to approve and ratify the Amended
and
Restated 2003 Stock Option Plan, in the form attached hereto as Appendix B,
in
order to achieve maximum tax deductibility of compensation costs and in order
to
attract, retain, and motivate key employees. The affirmative vote of a majority
of the shares of Common Stock voting on this proposal is required for approval
of the Amendment and the Amended and Restated 2003 Stock Option Plan.
THE
BOARD OF DIRECTORS RECOMMENDS THAT SHAREHOLDERS VOTE "FOR" THE APPROVAL OF
THE
AMENDMENT AND THE AMENDED AND RESTATED 2003 STOCK OPTION
PLAN.
The
following table sets forth information concerning the annual and long-term
compensation for services rendered in all capacities to the Company during
each
of the three fiscal years ended December 31, 2004, 2003, and 2002, of
those persons who were, at December 31, 2004, (i) our Chief Executive
Officer and (ii) our three other most highly compensated executive officers
with
an aggregate annual salary and bonus exceeding $100,000 for the fiscal year
ended December 31, 2004 (collectively, the "Named Executive
Officers").
|
Long-Term
Compensation
|
||||||||
|
Annual
Compensation
|
Awards
|
Payouts
|
||||||
|
Name
and
Principal
Position
|
Year
|
Salary
($)
|
Bonus
($)
|
Other
Annual Compensation
($)
|
Restricted
Stock Award(s) ($)
|
Securities
Underlying Options/
SARs
(#)(1)
|
LTIP
Payouts
($)
|
All
Other Compensation(2)
($)
|
|
Kevin
P. Knight,
Chairman
and Chief Executive Officer
|
2004
2003
2002
|
383,846
308,249
265,000
|
191,820
78,000
--
|
--
--
--
|
--
--
--
|
45,000
--
--
|
--
--
--
|
10,925
625
1,785
|
|
Gary
J. Knight,
Vice
Chairman
|
2004
2003
2002
|
272,789
279,422
265,000
|
56,875
58,000
--
|
--
--
--
|
--
--
--
|
15,000
--
--
|
--
--
--
|
6,025
625
2,365
|
|
Keith
T. Knight,
Executive
Vice President
|
2004
2003
2002
|
283,654
273,647
265,000
|
72,500
56,000
--
|
--
--
--
|
--
--
--
|
15,000
--
--
|
--
--
--
|
4,625
625
1,965
|
|
Timothy
M. Kohl,
President
and Secretary
|
2004
2003
2002
|
222,692
187,320
140,310
|
80,850
50,000
25,000
|
--
--
--
|
--
--
--
|
15,000
15,000
18,750
|
--
--
--
|
1,210
1,210
1,462
|
__________
|
(1)
|
Amounts
for 2002 and 2003 have been adjusted to reflect a 3-for-2 stock split
treated as a dividend, effected on July 20, 2004, of one share of
Common
Stock for every two shares of Common Stock outstanding.
|
|
(2)
|
In
2004, 2003, and 2002, compensation included in the category of "All
Other
Compensation" for each of the Named Executive Officers includes Company
contributions in the amount of $625, for each year, to the Knight
Transportation, Inc. 401(k) Plan. The balance of the compensation
included
in "All Other Compensation" for each of the Named Executive Officers
in
2004, 2003, and 2002 represents the annual economic benefit of premium
payments made by the Company under life insurance policies maintained
for
each of the Named Executive
Officers.
|
The
following table sets forth stock options granted to Named Executive Officers
in
the fiscal year ended December 31, 2004:
|
Individual
Grants
|
Potential
Realizable Value At Assumed Annual Rates of Stock Price Appreciation
for
Option Term
|
||||||
|
Name
|
Number
of Securities Underlying Option/SARs
Granted
(#)
|
Percentage
of
Total Options/SARs Granted to Employees in Fiscal
Year
|
Exercise
or Base Price ($/Share)
|
Market
Price At Dates of Grant ($/Share)
|
Expiration
Date
|
5%
($)
|
10%
($)
|
|
Kevin
P. Knight
|
45,000(1)
|
6.5%
|
18.86
|
18.86
|
8/5/2014
|
533,700
|
1,352,700
|
|
Gary
J. Knight
|
15,000(1)
|
2.2%
|
18.86
|
18.86
|
8/5/2014
|
177,900
|
450,900
|
|
Keith
T. Knight
|
15,000(1)
|
2.2%
|
18.86
|
18.86
|
8/5/2014
|
177,900
|
450,900
|
|
Timothy
M. Kohl
|
15,000(1)
|
2.2%
|
18.86
|
18.86
|
8/5/2014
|
177,900
|
450,900
|
_____________________
|
(1)
|
The
option is exercisable with respect to 20% of the shares covered thereby
on
December 31, 2004 and is exercisable with respect to an additional
5% of
the shares covered thereby at the end of each calendar quarter thereafter.
The option will be fully exercisable on December 31,
2008.
|
Except
as
set forth above, no stock options or stock appreciation rights (SARs) were
granted during the 2004 fiscal year to any of the Named Executive
Officers.
None
of
the Named Executive Officers exercised stock options during the fiscal year
ended December 31, 2004. The following table sets forth information with
respect to the stock option holdings of the Named Executive Officers and the
value of those stock options at December 31, 2004. The number of shares of
Common Stock underlying options and option exercise prices have been adjusted
to
reflect:
|
•
|
a
3-for-2 stock split treated as a dividend, effected on June 1, 2001,
of
one share of Common Stock for every two shares of Common Stock
outstanding;
|
|
•
|
a
3-for-2 stock split treated as a dividend, effected on December 28,
2001,
of one share of Common Stock for every two shares of Common Stock
outstanding; and
|
|
•
|
a
3-for-2 stock split treated as a dividend, effected on July 20, 2004,
of
one share of Common Stock for every two shares of Common Stock
outstanding.
|
|
Number
of Securities Underlying Unexercised Options/SARs
at
Fiscal Year-End
|
Value
of Unexercised In-the-Money Options/SARs
at
Fiscal Year-End
($)
|
|||||
|
Name
|
Shares
Acquired on Exercise
(#)
|
Value
Realized
($)
|
Exercisable
|
Unexercisable
|
Exercisable(1)
|
Unexercisable(1)
|
|
Kevin
P. Knight
|
--
|
--
|
9,000(2)
|
36,000(3)
|
53,460
|
213,840
|
|
Gary
J. Knight
|
--
|
--
|
3,000(4)
|
12,000(5)
|
17,820
|
71,280
|
|
Keith
T. Knight
|
--
|
--
|
3,000(4)
|
12,000(5)
|
17,820
|
71,280
|
|
Timothy
M. Kohl
|
--
|
--
|
55,876(6)
|
83,998(7)
|
1,060,825
|
1,138,698
|
______________________
|
(1)
|
Based
on the $24.80 last reported sale price of the Common Stock on the
New York
Stock Exchange on December 31, 2004.
|
|
(2)
|
Option
to purchase 9,000 shares at an exercise price of $18.86 per share
granted
in August 2004.
|
|
(3)
|
Option
to purchase 36,000 shares at an exercise price of $18.86 per share
granted
in August 2004 that becomes exercisable in 2,250 share increments
at the
end of each calendar quarter beginning in March 2005.
|
|
(4)
|
Option
to purchase 3,000 shares at an exercise price of $18.86 per share
granted
in August 2004.
|
|
(5)
|
Option
to purchase 12,000 shares at an exercise price of $18.86 per share
granted
in August 2004 that becomes exercisable in 750 share increments at
the end
of each calendar quarter beginning in March 2005.
|
|
(6)
|
Includes
(i) option to purchase 10,125 shares at an exercise price of $5.04
per
share granted in March 1999, (ii) option to purchase 31,500 shares
at an
exercise price of $4.28 per share granted in October 2000, (iii)
option to
purchase 11,251 shares at an exercise price of $7.33 per share granted
in
September 2001, and (iv) option to purchase 3,000 shares at an exercise
price of $18.86 per share granted in August 2004.
|
|
(7)
|
Includes
(i) option to purchase 15,750 shares at an exercise price of $4.28
per
share granted in October 2000 that becomes exercisable in October
2005,
(ii) option to purchase 22,498 shares at an exercise price of $7.33
per
share granted in September 2001 that becomes exercisable with respect
to
one-half of the shares covered thereby in September 2005 and all
of the
shares covered thereby in September 2006, (iii) option to purchase
18,750
shares at an exercise price of $12.67 per share granted in June 2002
that
becomes exercisable in annual, one-third increments beginning in
June
2005, (iv) option to purchase 15,000 shares at an exercise price
of $16.55
per share granted in June 2003 that becomes exercisable in annual,
one-third increments beginning in May 2006, and (v) option to purchase
12,000 shares at an exercise price of $18.86 per share granted in
August
2004 that becomes exercisable in 750 share increments at the end
of each
calendar quarter beginning in March 2005.
|
As
of
December 31, 2004, we did not have any employment contracts, severance, or
change-of-control agreements with any of our Named Executive
Officers.
Upon
Randy Knight's retirement as Chairman in 1999, we entered into a consulting
agreement with Mr. Knight. The consulting agreement provides for our
payment to Mr. Knight of an annual consulting fee of $50,000, and is terminable
at any time by either party. Mr. Knight presently provides consulting services
under the agreement through a limited liability company that he
controls.
The
Board
of Directors, upon the recommendation of our Compensation Committee, establishes
the form and amount of compensation paid to directors who are not 10%
shareholders, officers, or employees of the Company ("Outside Directors").
In
2004, our Outside Directors received annual compensation of $6,000, plus a
fee
of $550 for attending each meeting of the Board of Directors, a fee of $350
for
attending Audit Committee meetings, a fee of $300 for attending Compensation
Committee meetings, and a fee of $250 for attending all other Board committee
meetings. In addition, in 2004, the Audit Committee Chairman received an annual
fee of $1,500, in addition to other director fees, and the Compensation
Committee Chairman received an annual fee of $500, in addition to other director
fees.
On
May
26, 2005, the Board of Directors, upon the recommendation of our Compensation
Committee, approved new compensation arrangements for the Outside Directors
for
2005. In 2005, our Outside Directors receive annual compensation of $9,000,
plus
a fee of $750 for attending each meeting of the Board of Directors, a fee of
$500 for attending Audit Committee and Nominating and Corporate Governance
Committee meetings, and a fee of $450 for attending Compensation Committee
and
other Board committee meetings. In addition, in 2005, each of the Audit
Committee Chairman, the Nominating and Corporate Governance Committee Chairman,
and the Compensation Committee Chairman receives an annual fee of $2,500, in
addition to other director fees. We also reimburse directors for travel and
other related expenses incurred in attending a meeting.
Outside
Directors have the option to accept shares of our Common Stock in lieu of cash
compensation and fees for their service on the Board and its committees. If
this
option is elected, we issue Common Stock on February 15 and August 15 of each
year in payment of accrued compensation and fees for the preceding six month
periods ending December 31 and June 30, respectively. The number of shares
issued is determined by dividing the amount of the accrued compensation and
fees
by the closing market price of our Common Stock as of the trading day prior
to
issuance.
Historically,
upon their election or appointment to the Board, Outside Directors have received
an automatic non-qualified stock option grant covering 2,500 shares of Common
Stock with an exercise price equal to 85% of the fair market value on the date
of grant. However, in March 2005, we amended our stock option plan to prohibit
the grant of any stock options with an exercise price below the fair market
on
the date of grant. As a result, the exercise price of initial stock option
grants to Outside Directors, including the grant to Kathryn L. Munro in 2005,
is
now equal to the fair market value on the date of grant.
In
addition to the initial stock option grant, in 2003 we adopted an annual stock
option grant program for Outside Directors. Under this program, Outside
Directors receive a non-qualified stock option grant covering a number of shares
of Common Stock, not to exceed 2,000 shares, on June 1 of each calendar year.
The number of shares currently being awarded to Outside Directors for each
year
of service is 1, 000. The exercise price of these options is the fair market
value on the date of grant. In connection with this program, Outside
Directors who had served on the Board for at least three years as of December
31, 2002, were granted
a
catch-up, non-qualified stock option for 1,000 shares of Common Stock at
an
exercise price equal to the fair market value on June 2, 2003, the date of
grant. Except for the 1,000 share catch-up option described in the preceding
sentence, all non-qualified stock options granted to an Outside Director,
including the initial grant, are forfeitable if the Outside Director resigns
within one year of the date of grant.
Directors
who are employees or 10% shareholders of the Company do not receive compensation
for Board or committee service. We do, however, reimburse them for travel and
other related expenses.
We
maintain a stock option plan that is designed to enable directors, officers,
and
certain key employees of the Company, including drivers, to participate in
the
ownership of the Company. The stock option plan is administered by the
Compensation Committee, and permits the grant of incentive and non-qualified
stock options, as well as restricted stock awards. In March 2005, our Board
of
Directors adopted amendments to the stock option plan which provide that no
future stock options granted under the plan may have an exercise price that
is
less than the fair market value of the Common Stock on the date of grant and
specifically prohibit the repricing of any stock options granted under the
plan.
Additional information concerning the stock option plan is set forth under
"Proposal No. 2 - Approval of Amendment to 2003 Stock Option Plan."
We
also
sponsor a 401(k) Plan. The 401(k) Plan is a profit sharing plan that permits
voluntary employee contributions on a pre-tax basis under section 401(k) of
the
Code. Under the 401(k) Plan, a participant may elect to defer, and have us
contribute to his or her 401(k) Plan account, a portion of his or her
compensation. The 401(k) Plan also provides that we may make a discretionary
matching contribution, which for fiscal 2004 was a maximum of $625 per
participant. The 401(k) Plan's assets are held and managed by an independent
trustee. Under the 401(k) Plan, participants have the right to direct the
investment of employee and employer contributions among several mutual funds.
The 401(k) Plan also permits participants to direct the trustee to purchase
shares of our Common Stock on the open market up to a maximum of 20% of their
401(k) Plan account balance. Our senior executives and certain other key
employees are not permitted to participate in the 401(k) Plan feature that
allows them to purchase our Common Stock in their 401(k) Plan
accounts.
Our
discretionary matching contributions to a participant's account vest over five
years and are held in trust until distributed pursuant to the terms of the
401(k) Plan. An employee is eligible to participate in the 401(k) Plan if he
has
attained age 19 and completed 1,000 hours of service within a 12 month period.
Distributions from participant accounts are not permitted before age 59-1/2,
except in the event of death, disability, separation from service, or certain
financial hardships.
The
Compensation Committee currently is comprised of Kathy Munro, G. D. Madden,
and
Mark Scudder, with Mr. Scudder serving as Chairman. During 2004, the
Compensation Committee was comprised of Mr. Scudder and Mr. Madden, with Mr.
Scudder serving as Chairman. No member of the Compensation Committee is or
has
been an officer or employee of the Company. Mr. Scudder is a principal of
Scudder Law Firm, which provided legal services to the Company in 2004 and
has
continued to provide such services in 2005. The amount of fees paid to Scudder
Law Firm by the Company did not exceed 5% of Scudder Law Firm's gross revenues
for the year ended December 31, 2004. During 2004, 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. Mr. Scudder recused himself from consideration and approval of the
Cash Bonus Plan and the Amendment to the 2003 Plan. See
"Certain
Relationships and Related Transactions" for a description of certain
transactions between us and our other directors, executive officers, or their
affiliates, and "Executive Compensation - Director Compensation" for a
description of compensation of the members of the Compensation
Committee.
The
Compensation Committee Report on Executive Compensation and the Stock
Performance Graph that follow shall not be deemed to be incorporated by
reference into any filing made by us under the Securities Act of 1933 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 or graph by specific reference.
With
respect to compensation paid during 2004, the Compensation Committee of the
Board of Directors previously has furnished the following Report on Executive
Compensation:
Compensation
Committee Report on Executive Compensation
Historically,
the Compensation Committee has annually reviewed the compensation of the
Company's senior executive officers and made recommendations regarding such
compensation to the entire Board of Directors. In accordance with changes in
the
Committee's charter, beginning in 2005 the Committee will be solely responsible
for determining and approving the annual compensation of the Company's Chief
Executive Officer. The Committee will continue to annually review and make
recommendations to the entire Board concerning the compensation of the Company's
other executive officers.
Compensation
Philosophy.
The
Compensation Committee believes that the compensation program for the Company's
executive officers should be administered in accordance with a
pay-for-performance philosophy to link executive compensation with the values,
objectives, business strategy, management incentives, and financial performance
of the Company. The Company's compensation program for senior executive officers
generally consists of three components:
|
·
|
a
base salary;
|
|
·
|
a
performance-based annual bonus determined primarily by reference
to
objective financial and operating criteria; and
|
|
·
|
long-term
incentives in the form of stock option or other stock-based awards
or
grants.
|
Each
element of the Company's compensation program serves a somewhat different
purpose. The Committee's philosophy is to pay base salaries at levels that
reward executives for ongoing performance and that enable the Company to
attract, motivate and retain highly qualified executives. The annual bonus
program is designed to reward executives for their contributions to the
Company's financial and operating performance and is based primarily upon the
Company's financial results and certain operating statistics that the Committee
identifies as important to the Company. Stock-based awards are intended to
align
executive and shareholder long-term interests by creating a strong and direct
link between executive pay and shareholder return. Historically, the Chief
Executive Officer, as well as other members of the Knight family in the
Company's senior management, have not received stock options as a component
of
their compensation, in part due to their holdings of the Company's Common Stock.
However, as a result of a significant decrease in recent years in the percentage
of the Company's outstanding securities owned by members of the Knight family
(both individually and as a group) and a desire to link a portion of the
compensation of all members of senior management to shareholder returns, in
2004
the Compensation Committee determined to introduce stock options as an element
of compensation for all executive officers, including members of the Knight
family.
The
Compensation Committee believes that the mix of short- and long-term
compensation components described above provides a balanced approach that will
enable the Company to attract and retain highly-qualified executives, reward
those executives for their contributions to the Company's growth and
profitability, and ensure that the incentives of the Company's executives are
aligned with the best interests of the Company's shareholders.
Compensation
of the Chief Executive Officer.
In July
2004, the Compensation Committee recommended significant changes to the
compensation package of Kevin P. Knight, the Company's Chief Executive
Officer. In reviewing the Chief Executive Officer's compensation, the Committee
concluded that historically he has been under-compensated according to market
standards, and that it would be in the best interests of the Company to more
closely align the Chief Executive Officer's compensation with market standards.
In reaching this conclusion, the Committee reviewed and considered:
|
·
|
the
financial performance and shareholder returns generated under the
Chief
Executive Officer's leadership;
|
|
·
|
the
Chief Executive Officer's effectiveness in building organizational
talent
and depth, executing the Company's growth strategy, and fostering
a strong
investor following; and
|
|
·
|
public
disclosures regarding the compensation of the chief executive officers
of
(i) nine other publicly traded dry van truckload carriers, (ii) a
subgroup
of five other high market capitalization publicly traded dry van
truckload
carriers, and (iii) four other high growth publicly traded transportation
companies that were deemed leaders in their respective segments
(truckload, less-than-truckload, rail, and
logistics).
|
In
light
of the foregoing, the Compensation Committee recommended the adoption of the
following compensation package for the Chief Executive Officer, which it
believes as a whole
21
represents
compensation that is consistent with that earned by chief executive officers
at
similarly situated companies:
|
·
|
Salary.
The
Committee recommended that the annual salary of the Chief Executive
Officer be increased from $340,000 to $460,000, with such increase
to be
effective in August 2004. In arriving at this recommendation, the
Committee considered the Chief Executive Officer's preference that
the
fixed component of his compensation be set at a level below $500,000
in
keeping with the Company's cost-conscious culture and philosophy
of
linking a significant portion of executive compensation to corporate
performance.
|
|
|
·
|
Bonus.
The
Committee recommended the adoption of a performance-based bonus
opportunity for the Chief Executive Officer under which he was
eligible to
receive a maximum cash bonus equal to 50% of his new annual base
salary.
Under the bonus arrangement, the first half of the Chief Executive
Officer's bonus opportunity was based upon the following three
equally-weighted criteria:
|
|
|
·
|
revenue
growth of at least 10% and earnings per share growth of at
least 15%
versus fiscal 2003;
|
|
·
|
accounts
receivable days sales outstanding (DSO) at or below specified
target for
the second half of 2004; and
|
|
·
|
in
the Committee's discretion based on its evaluation of the overall
performance of the
executive.
|
The
second half of the
bonus opportunity was based on the following factors:
|
·
|
one-half
based upon a successful launch of the Company's refrigerated subsidiary,
in the judgment of the Compensation Committee;
|
|
·
|
one-fourth
for earnings per share growth of at least 18% versus 2003; and
|
|
·
|
one-fourth
for earnings per share growth in excess of 22% versus
2003.
|
Following
the Company's announcement of financial results for the year ended December
31,
2004, the Compensation Committee determined that, except for the accounts
receivable DSO target, all of the objective elements under the 2004 bonus
program for the Chief Executive Officer were satisfied. With regard to the
general subjective component, the Committee determined that a full award was
appropriate, based upon numerous factors, including, but not limited to, the
successful opening of two new dry van operations centers, strong revenue and
earnings per share growth, and better than anticipated operating margins. With
regard to the component based upon the opening of the Company's refrigerated
subsidiary, the Committee also determined that a full award was appropriate,
based upon the revenue and profitability of that subsidiary to date. As a result
of the foregoing, the Committee recommended that the Chief Executive Officer
be
awarded a bonus of $191,820 for 2004.
|
·
|
Stock
Options. As
noted above, the Compensation Committee determined that there is
considerable benefit in ensuring that a portion of the compensation
of
each of the Company's senior executives is tied to the Company's
long-term
performance as reflected by appreciation in its stock price. As a
result,
in lieu of further increases in the Chief Executive Officer's salary
or
bonus to bring his compensation package more in line with market
standards, the Compensation Committee determined to grant to the
Chief
Executive Officer an option to purchase 45,000 shares of the Company's
Common Stock with an exercise price equal to the fair market value
of the
underlying Common Stock on the date of
grant.
|
Compensation
of Other Executive Officers.
In July
2004, the Compensation Committee reviewed and made the following recommendations
regarding the compensation of the Company's other senior executive
officers:
|
·
|
Salaries.
The
Compensation Committee recommended that: (i) the annual base salary
of the
Timothy M. Kohl be increased from $200,000 to $245,000 in recognition
of
his promotion to the position of President of the Company and the
increase
in responsibilities attendant to his new position; (ii) the annual
base
salary of Gary J. Knight be reduced from $290,000 to $227,500 in
connection with a reduction in his time commitment associated with
his
transition from the position of President to the position of Vice
Chairman; and (iii) the annual base salary of Keith T. Knight, the
Company's Executive Vice President and manager of its California
operations, be increased from $280,000 to $290,000.
|
|
·
|
Bonuses.
The
Compensation Committee recommended the adoption of a performance-based
bonus opportunity under which Timothy M. Kohl was eligible to receive
a
cash bonus of up to 40% of his new base salary, and each of Gary
J. Knight
and Keith T. Knight was eligible to receive a cash bonus of up to
30% of
his new base salary. The factors used to determine the amount of
bonus
payments to these executives, and the weighting of those factors,
were
identical to the factors and weighting set forth above in the description
of the Chief Executive Officer's bonus. Pursuant to these arrangements,
the Compensation Committee recommended 2004 bonuses in the following
amounts: Timothy M. Kohl - $80,850; Gary J. Knight - $56,875;
and Keith T. Knight - $72,500.
|
|
·
|
Stock
Options. In
2004, the Compensation Committee granted to each of Timothy M. Kohl,
Gary
J. Knight, and Keith T. Knight an option to purchase 15,000 shares
of the
Company's Common Stock with an exercise price equal to the fair market
value of the underlying Common Stock on the date of
grant.
|
The
Committee believes that the annual salaries and other compensation of the
Company's Chief Executive Officer and other senior executive officers described
above were reasonable compared to similarly situated executives of other
transportation companies.
|
Mark
Scudder, Chairman
G.
D. Madden, Member
|
|
February
11, 2005
|
The
following graph compares the cumulative total shareholder return of the
Company's Common Stock with the cumulative total shareholder return of the
Standard & Poor's ("S&P") 500 Index and the Dow Jones Transportation
Average Index for the period commencing December 31, 1999, and ending
December 31, 2004.
|
12/31/1999
|
12/31/2000
|
12/31/2001
|
12/31/2002
|
12/31/2003
|
12/31/2004
|
|
|
Knight
Transportation
|
$100.0
|
$112.2
|
$158.4
|
$177.2
|
$216.3
|
$314.1
|
|
S&P
500
|
$100.0
|
$90.9
|
$80.1
|
$62.4
|
$80.3
|
$89.0
|
|
Dow
Jones Transportation Average
|
$100.0
|
$99.0
|
$88.7
|
$77.6
|
$101.0
|
$127.6
|
The
stock
performance graph assumes $100 was invested on December 31, 1999, and that
all dividends were reinvested. There can be no assurance that the Company's
stock performance will continue into the future with the same or similar trends
depicted in the graph above. The Company will not make or endorse any
predictions as to future stock performance.
24
AND
MANAGEMENT
The
following table sets forth, as of November 25, 2005, the number and percentage
of outstanding shares of our Common Stock beneficially owned by each person
known by us to beneficially own more than 5% of such stock, by each Named
Executive Officer and director of the Company, and by all directors and
executive officers of the Company as a group. Share numbers and other
information for William Blair & Company, L.L.C. ("William Blair") and
Wasatch Advisors, Inc. ("Wasatch") included in the following table and notes
are
as of December 31, 2004, and solely based upon Schedules 13G/A filed
with the SEC on January 10, 2005 and March 10, 2005, respectively. Share
numbers and other information for Wellington Management Company, LLP
("Wellington") included in the following table and notes are as of September
31,
2005, and solely based upon Schedule 13G filed with the SEC on October 11,
2005.
The Company had outstanding approximately 57,088,590 shares of Common Stock
as
of November 25, 2005.
|
Name
and Address of Beneficial Owner(1)
|
Amount
and Nature of Beneficial Ownership(2)
|
Percent
of Class(2)
|
|
Kevin
P. Knight(3)
|
4,835,758
|
8.5%
|
|
Gary
J. Knight(4)
|
5,101,413
|
8.9%
|
|
Keith
T. Knight(5)
|
4,699,234
|
8.2%
|
|
Randy
Knight(6)
|
4,625,731
|
8.1%
|
|
Timothy
M. Kohl(7)
|
111,103
|
*
|
|
Donald
A. Bliss(8)
|
22,814
|
*
|
|
G.D.
Madden(9)
|
20,154
|
*
|
|
Mark
Scudder(10)
|
8,702
|
*
|
|
Michael
Garnreiter(11)
|
5,956
|
*
|
|
Kathryn
L. Munro(12)
|
3,726
|
*
|
|
Wellington
Management Company, LLP(13)
|
6,555,910
|
11.5%
|
|
William
Blair & Company, L.L.C.(14)
|
3,626,034
|
6.4%
|
|
Wasatch
Advisors, Inc.
(15)
|
2,845,994
|
5.0%
|
|
All
directors and executive officers as a group (12 persons)
(16)
|
19,443,091
|
34.1%
|
|
*
|
Represents
less than 1.0% of the outstanding Common Stock.
|
|
(1)
|
The
address of each Named Executive Officer and director is 5601 West
Buckeye
Road, Phoenix, Arizona 85043. The address of Wellington is 75 State
Street, Boston, Massachusetts 02109. The address of William Blair
is 222
West Adams Street, Chicago, Illinois 60606. The address of Wasatch
is
150
Social Hall Avenue, Salt Lake City, Utah 84111.
|
|
(2)
|
In
accordance with applicable rules under the Exchange Act, the number
of
shares indicated as beneficially owned by a person includes shares
of
Common Stock underlying options that are currently exercisable
or will be
exercisable within 60 days from November 25, 2005. Shares of Common
Stock
underlying stock options that are currently exercisable or will
be
exercisable within 60 days from November 25, 2005, are deemed to
be
outstanding for purposes of computing the percentage ownership
of the
person holding such options and the percentage ownership of any
group of
which the holder is a member, but are not deemed outstanding for
purposes
of computing the percentage ownership of any other
person.
|
|
(3)
|
Includes:
(a) 3,893,363 shares held directly by Kevin P. Knight; (b) 384,603
shares beneficially owned by Kevin P. Knight over which he and
his wife,
Sydney Knight, exercise sole voting and investment power pursuant
to a
revocable living trust; (c) 24,300 shares beneficially owned
by Kevin P.
Knight held by an entity which he controls; (d) 12,962 shares
held by the
Kevin P. and Sydney B. Knight Family Foundation over which Kevin
P. Knight
and his wife, Sydney Knight, as officers of the Foundation, exercise
sole
voting and investment power on behalf of the Foundation; (e)
2,530 shares
owned by a minor child who shares the same household; (f) 18,000
shares
covered by a stock option granted to Kevin P. Knight that is
currently
exercisable or that will become exercisable within 60 days; and
(g)
500,000 shares covered by a stock option granted to Kevin P.
Knight on
August 19, 2005 that is currently exercisable or that will become
exercisable within 60 days, but that will be void if the Amendment
to the
2003 Plan is not approved by shareholders at the Special
Meeting.
|
|
(4)
|
Includes:
(a) 5,087,819 shares beneficially owned by Gary J. Knight over
which he
exercises sole voting and investment power as a trustee under
a revocable
trust agreement; (b) 7,594 shares owned by minor children who
share the
same household; and (c) 6,000 shares covered by a stock option
granted to
Gary J. Knight that is currently exercisable or that will become
exercisable within 60 days.
|
|
(5)
|
Includes:
(a) 4,685,640 shares beneficially owned by Keith T. Knight over
which he
and his wife, Fawna Knight, exercise sole voting and investment
power as
trustees under a revocable trust agreement; (b) 7,594 shares
owned by
minor children who share the same household; and (c) 6,000 shares
covered
by a stock option granted to Keith T. Knight that is currently
exercisable
or that will become exercisable within 60 days.
|
|
(6)
|
Includes:
(a) 3,304,900 shares beneficially owned by Randy Knight over
which he
exercises sole voting and investment power as a trustee under
a revocable
trust agreement; (b) 1,305,998 shares held by a limited liability
company
for which Mr. Knight acts as manager and whose members include Mr.
Knight and trusts for the benefit of his four children; and (c)
13,833
shares owned by a child who shares the same household and over
which Mr.
Knight exercises voting power; and (d) 1,000 shares covered by
a stock
option granted to Mr. Knight that is currently exercisable or
that will
become exercisable within 60 days.
|
|
(7)
|
Includes:
(a) 69,854 shares held directly by Timothy M. Kohl; and (b) 36,249
shares
covered by stock options granted to Mr. Kohl that is currently
exercisable or that will become exercisable within 60
days.
|
|
(8)
|
Includes:
(a) 19,564 shares beneficially owned by Donald A. Bliss over
which he
exercises sole voting and investment powers under a revocable
trust
agreement; and (b) 3,250 shares covered by stock options granted
to Mr.
Bliss that are currently exercisable or that will become exercisable
within 60 days.
|
|
(9)
|
Includes:
(a) 16,153 shares held directly by G.D. Madden; and (b) 4,001
shares
covered by stock options granted to Mr. Madden that are currently
exercisable or that will become exercisable within 60
days.
|
|
(10)
|
Includes;
(a) 4,702 shares held directly by Mark Scudder; and (b) 4,000
shares
covered by stock options granted to Mr. Scudder that are currently
exercisable or that will become exercisable within 60
days.
|
|
(11)
|
Includes:
(a) 456 shares held directly by Michael Garnreiter; and (b) 5,500
shares
covered by stock options granted to Mr. Garnreiter that are currently
exercisable or that will become exercisable within 60
days.
|
|
(12)
|
Includes:
(a) 226 shares held directly by Kathryn L. Munro; and (b) 3,500
shares
covered by stock options granted to Ms. Munro that are currently
exercisable or that will become exercisable within 60
days.
|
|
(13)
|
Wellington
has sole voting power and sole dispositive power over no shares.
It has
shared voting power over 5,676,880 shares and shared dispositive
power
over 6,501,010 shares.
|
|
(14)
|
William
Blair has sole voting power and sole dispositive power over 3,626,034
shares. It has shared voting power and shared dispositive power
over no
shares.
|
|
(15)
|
Wasatch
has sole voting power and sole dispositive power over 2,845,994
shares.
It has shared voting power and shared dispositive power over
no
shares.
|
|
(16)
|
The
only current executive officers of the Company, other than the
Named
Executive Officers, are David A. Jackson, our Chief Financial
Officer, and
Casey Comen, our Executive Vice President - Sales. The information
included in the calculation of security ownership of all directors
and
executive officers as a group includes 8,500 shares covered by
stock
options granted to Mr. Jackson that are currently exercisable
or that will
become exercisable within 60
days.
|
To
be
eligible for inclusion in the Company's proxy materials relating to the 2006
Annual Meeting of Shareholders, shareholder proposals intended to be presented
at that meeting must be received in writing by the Company on or before
December 15, 2005. The inclusion of any such shareholder proposals in
such proxy materials will be subject to the requirements of the proxy rules
adopted under the Exchange Act, including Rule 14a-8.
The
Company must receive in writing any shareholder proposals intended to be
considered at its 2006 Annual Meeting of Shareholders, but not included in
the
Company's proxy materials relating to that meeting, by February 28, 2006.
Pursuant to Rule 14(a)-4(c)(1) under the Exchange Act, the proxy holders
designated by an executed proxy in the form accompanying the Company's 2006
proxy statement will have discretionary authority to vote on any shareholder
proposal that is considered at the Annual Meeting, but not received on or prior
to the deadline described above.
All
shareholder proposals should be sent via certified mail, return receipt
requested, and addressed to Timothy M. Kohl, Secretary, Knight
Transportation, Inc., 5601 West Buckeye Road, Phoenix, Arizona
85043.
The
Board
of Directors does not intend to present at the Special Meeting any matters
other
than those described herein and does not presently know of any matters that
will
be presented by other parties. If any other matters are properly brought before
the Special Meeting or any adjournment thereof, the proxy holders named in
the
accompanying for of proxy will have discretionary authority to vote proxies
on
such matters in accordance with the recommendations of the Board of Directors,
or, if no recommendations are given, in accordance with their judgment, unless
the person executing any such proxy indicates that such authority is
withheld.
|
Knight
Transportation, Inc.
|
|
|
/s/
Kevin P. Knight
|
|
|
Kevin
P. Knight
Chairman
of the Board and Chief Executive Officer
|
|
|
November
29, 2005
|
Appendix
A
2005
EXECUTIVE CASH BONUS PLAN
ARTICLE
I
PURPOSE
The
purpose of the Plan is to provide annual incentives to certain officers and
employees of the Company in a manner designed to reinforce the Company's
performance goals; to link a significant portion of participants' compensation
to the achievement of such goals; and to continue to attract, motivate, and
retain key executives on a competitive basis, while seeking to preserve for
the
benefit, to the extent practicable, a tax deduction by the Company for payments
of incentive compensation to such officers and employees through payment of
qualified "performance-based" compensation within the meaning of Section
162(m)(4)(C) of the Code.
ARTICLE
II
DEFINITIONS
The
following terms have the meanings indicated unless a different meaning is
clearly required by the context:
2.1.
"Board
of
Directors" means the Board of Directors of the Company.
2.2.
"Code"
means the Internal Revenue Code of 1986, as amended.
2.3.
"Committee"
means the Compensation Committee of the Board of Directors or a subcommittee
thereof. The Committee at all times shall be composed of at least two (2)
directors of the Company, each of whom shall be "outside directors" within
the
meaning of Section 162(m) of the Code and Treas. Reg. 1.162-27.
2.4.
"Company"
means Knight Transportation, Inc. and its subsidiaries.
2.5. "Negative
Discretion" means the discretion authorized by the Plan to be applied by the
Committee in determining the size of bonus amounts for a performance period
if,
in the Committee's sole judgment, such application is appropriate. Negative
Discretion may only be used by the Committee to eliminate or reduce the size
of
a bonus amount. In no event shall any discretionary authority granted to the
Committee by the Plan, including, but not limited to Negative Discretion, be
used to: (a) grant bonus amounts for a performance period if the
performance goal formula(s) for such performance period have not been attained
under the applicable performance goal formula(s); or (b) increase bonus amounts
over the level determined by application of the performance goal
formula(s).
2.6.
"Participant"
means an individual who participates in the Plan pursuant to Section
3.1
2.7.
"Plan"
means this Knight Transportation, Inc. 2005 Executive Cash Bonus Plan, as
amended from time to time.
ARTICLE
III
PARTICIPATION
Participants
in the Plan are those officers and employees of the Company who are designated
by the Committee to participate in the Plan from time to time.
ARTICLE
IV
PERFORMANCE
GOALS
4.1. With
respect to the Company's fiscal year ending December 31, 2005, the Committee
may
grant an award under the Plan for any portion of the period beginning January
1,
2005, and ending December 31, 2005, and shall set one (1) or more objective
or
non-objective performance goals for each Participant for such performance
period. Prior to the ninety-first (91st) day of each subsequent fiscal year
of
the Company, but no later than the expiration of the first twenty-five percent
(25%) of any performance period of less than one (1) year, the Committee shall
set one (1) or more objective performance goals for each Participant for such
year or period, as the case may be. Such goals shall be expressed in terms
of
the attainment of specified levels of one (1) or any variation or combination
of
the following: revenues (including, without limitation, measures such as revenue
per mile (loaded or total) or revenue per tractor), net revenues, fuel
surcharges, accounts receivable collection or days sales outstanding, measures
based on the Company's "economic engine" identified from time-to-time in the
Company's strategic plan, cost reductions and savings (or limits on cost
increases), safety and claims (including, without limitation, measures such
as
accidents per million miles and number of significant accidents), operating
income, operating ratio, income before taxes, net income, earnings before
interest and taxes (EBIT), earnings before interest, taxes, depreciation, and
amortization (EBITDA), adjusted net income, earnings per share, adjusted
earnings per share, stock price, working capital measures, return on assets,
return on revenues, debt-to-equity or debt-to-capitalization (in each case
with
or without lease adjustment), productivity and efficiency measures (including,
without limitation, measures such as driver turnover, trailer to tractor ratio,
and tractor to non-driver ratio), cash position, return on shareholders' equity,
return on invested capital, cash flow measures (including, without limitation,
free cash flow), market share, shareholder return, economic value added, number
of operations centers, number of new operations centers, or completion of
acquisitions (either with or without specified size). In addition, the Committee
may establish, as an additional performance measure, the attainment by a
participant in the Cash Bonus Plan of one or more personal objectives and/or
goals that the Committee deems appropriate, including but not limited to
implementation of Company policies, negotiation of significant corporate
transactions, development of long-term business goals or strategic plans for
the
Company, or the exercise of specific areas of managerial responsibility. Each
goal may be expressed on an absolute and/or relative basis with respect to
one
or more peer group companies or indices, may include comparisons with past
performance of the Company (including one or more divisions thereof, if any)
and/or the current or past performance of other companies.
4.2. Except
as
otherwise provided herein, the measures used in performance goals set under
the
Plan shall be determined in accordance with generally accepted accounting
principles ("GAAP") and in a manner consistent with the methods used in the
Company's Annual Reports on Form 10-K and Quarterly Reports on Form 10-Q,
without regard, however, to any of the following unless otherwise determined
by
the Committee consistent with the requirements of Section 162(m)(4)(C) of the
Code and the regulations thereunder:
(a)
all
items
of gain, loss, or expense for the fiscal year that are related to special,
unusual or non-recurring items, events or circumstances affecting the Company
or
the financial statements of the Company;
(b)
all
items
of gain, loss, or expense for the fiscal year that are related to (i) the
disposal of a business or discontinued operations or (ii) the operations of
any
business acquired by the Company during the fiscal year; and
(c)
all
items
of gain, loss, or expense for the fiscal year that are related to changes in
accounting principles or to changes in applicable law or
regulations.
4.3. To
the
extent any performance goals are expressed using any earnings or revenue-based
measures that require deviations from GAAP, such deviations shall be at the
discretion of the Committee.
4.4. Following
the completion of a performance period, the Committee shall meet to review
and
certify in writing whether, and to what extent, the performance goal formula(s)
for the performance period have been achieved and, if so, to also calculate
and
certify in writing the bonus amounts earned for the period based upon such
performance goal formula(s). The Committee shall then determine the actual
size
of each Participant's bonus amount for the performance period and, in so doing,
shall apply Negative Discretion, if and when it deems appropriate.
4.5. In
determining the actual size of each Participant's bonus amount bonus amount
for
a performance period, the Committee may reduce or eliminate the amount of the
bonus earned under the performance goal formula(s) for the performance period
through the use of Negative Discretion, if in its sole judgment, such reduction
or elimination is appropriate.
4.6. No
Participant shall have any vested right or claim of any kind to participate
in
or receive any bonus under the Plan unless and until the Committee has (a)
certified that the performance goal formula(s) for the performance period have
been achieved, (b) calculated and certified in writing the bonus amounts earned
for the period based upon such performance goal formula(s); and (c) determined
the actual size of such Participant's bonus amount bonus in accordance with
this
Article IV.
ARTICLE
V
BONUS
AWARDS
5.1. At
the
time that annual performance goals are set for Participants, the Committee
shall
establish a maximum award opportunity for each Participant for the performance
year or any period of less than one (1) year. The maximum award opportunity
shall be related to the Participant's base salary at the start of the
performance year or such other period by a formula that takes account of the
degree of achievement of the goals set for the Participant.
5.2. The
maximum award paid to a Participant in respect of a particular fiscal year
shall
in no event exceed $2 million.
5.3. Bonuses
determined under the Plan shall be paid to Participants in cash within two
and
one-half (2 1/2) months after the end of the performance period for which such
bonuses are earned; provided, however, that no such payment shall be made until
the Committee has certified (in the manner prescribed under applicable
regulations under Section 162(m) of the Code) that the performance goals and
any
other material terms related to the award were in fact satisfied; and provided
further that the timing of any such payment may be deferred pursuant to an
agreement between the Company and a Participant.
5.4. In
the
event of the death of a Participant after the end of a fiscal year and prior
to
any payment otherwise required pursuant to Section 5.3 hereof, such payment
shall be made to the designated beneficiary of the Participant or, if no
beneficiary shall have been designated, the representative of the Participant's
estate.
5.5. The
Committee shall have the absolute discretion to determine amounts payable under
the Plan in the event of the death, disability, retirement, or other termination
of employment of a Participant during a fiscal year, subject to the terms of
any
bonus arrangements agreed to by the Company and the
-A-3-
Participant
pursuant to a written agreement or otherwise. Such discretion shall include,
without limitation, the right to award a pro-rated bonus to a Participant
for
the fiscal year in which death, disability, retirement, or other termination
of
employment occurs.
5.6. The
right
of a Participant or of any other person to any payment under the Plan shall
not
be assigned, transferred, pledged, or encumbered in any manner, and any
attempted assignment, transfer, pledge, or encumbrance shall be null and void
and of no force or effect.
ARTICLE
VI
ADMINISTRATIVE
PROVISIONS
6.1. The
Plan
shall be administered by the Committee. The Committee shall have full,
exclusive, and final authority in all determinations and decisions affecting
the
Plan and Participants, including sole authority to interpret and construe any
provision of the Plan, to adopt such rules and regulations for administering
the
Plan as it may deem necessary or appropriate under the circumstances, and to
make any other determination it deems necessary or appropriate for the
administration of the Plan. Decisions of the Committee shall be final and
conclusive, and binding on all parties. All expenses of the Plan shall be borne
by the Company.
6.2. No
member
of the Committee shall be liable for any action, omission, or determination
relating to the Plan, and the Company shall indemnify and hold harmless each
member of the Committee and each other director or employee of the Company
or
its affiliates to whom any duty or power relating to the administration or
interpretation of the Plan has been delegated against any cost or expense
(including counsel fees, which fees shall be paid as incurred) or liability
(including any sum paid in settlement of a claim with the approval of the
Committee) arising out of or in connection with any action, omission, or
determination relating to the Plan, unless, in each case, such action, omission,
or determination was taken or made by such member, director, or employee in
bad
faith and without reasonable belief that it was in the best interests of the
Company.
ARTICLE
VII
MISCELLANEOUS
7.1
The
Plan
was adopted by the Board of Directors effective August 19, 2005, and will be
effective commencing with bonuses payable in respect of the Company's fiscal
year ending December 31, 2005.
7.2. The
Board
of Directors may at any time amend the Plan in any fashion or terminate or
suspend the Plan, provided that (a) no amendment shall be made which would
cause
bonuses payable under the Plan to fail to qualify for the exemption from the
limitations of Section 162(m) of the Code provided in Section 162(m)(4)(C)
of
the Code and (b) no such action shall adversely affect a Participant's rights
under the Plan with respect to bonus arrangements agreed to by the Company
and
the Participant, pursuant to a written agreement or otherwise, before the date
of such action, without the consent of the Participant.
7.3. The
Plan
shall be governed by and construed in accordance with the internal laws of
the
State of Arizona applicable to contracts made, and to be wholly performed,
within such State, without regard to principles of choice of laws. After
December 31, 2005, the Plan shall be construed and administered in such a manner
as will cause bonuses payable under the Plan to qualify, to the extent
practicable, for the exemption from
the
limitations of Section 162(m) of the Code provided in Section 162(m)(4)(C)
of
the Code and in the rules and regulations promulgated thereunder.
7.4. All
amounts required to be paid under the Plan shall be subject to any required
federal, state, local, and other applicable withholdings or
deductions.
7.5. Nothing
contained in the Plan shall confer upon any Participant or any other person
any
right with respect to the continuation of employment by the Company or interfere
in any way with the right of the Company at any time to terminate such
employment or to increase or decrease the compensation payable to the
Participant from the rate in effect at the commencement of a fiscal year or
to
otherwise modify the terms of such Participant's employment. No person shall
have any claim or right to participate in or receive any award under the Plan
for any particular fiscal year or any part thereof.
7.6. The
Company's obligation to pay a Participant any amounts under the Plan shall
be
subject to setoff, counterclaim or recoupment of amounts owed by a Participant
to the Company.
7.7. Subject
to the right of a party to seek injunctive relief, as provided herein (which
right shall not be subject to arbitration), if a dispute arises out of or
related to the Plan or any benefit or bonus payable under the Plan, the
dispute shall be referred to arbitration in accordance with the National Rules
for Resolution of Employment Disputes (including Mediation and Arbitration
Rules) of the American Arbitration Association ("AAA") (the "Employment Dispute
Rules"). Arbitration shall occur in Phoenix, Arizona. A dispute subject to
the
provisions of this Section 7.7 will exist if either party notifies the other
party in writing that a dispute subject to arbitration exists and states, with
reasonable specificity, the issue subject to arbitration (the "Arbitration
Notice"). The parties agree that, after the issuance of the Arbitration Notice,
the parties will try in good faith to resolve the dispute by mediation in
accordance with the Employment Dispute Rules between the date of the issuance
of
the Arbitration Notice and the date the dispute is set for arbitration. If
the
dispute is not settled by the date set for arbitration, then any controversy
or
claim arising out of the Plan shall be resolved by binding arbitration and
judgment upon any award rendered by arbitrator(s) may be entered in a court
having jurisdiction. If only one person is serving as mediator or arbitrator
under the Plan, he or she shall be an attorney who has at least ten (10) years
experience in employment or labor law (or if a panel of three arbitrators is
selected, at least two of the three arbitrators shall be attorneys who have
at
least ten (10) years experience in employment or labor law), unless the parties
agree otherwise. Arbitrators shall be selected in accordance with the selection
procedures of the AAA. Payment of mediators' or arbitrators' fees and costs,
shall be paid initially by the Company, but shall be subject to recovery if
the
Company is the prevailing party. If any claim or dispute involves an amount
in
excess of Five Hundred Thousand Dollars ($500,000.00), either party may
require that the matter be heard by a panel of three (3) arbitrators; otherwise,
all matters subject to arbitration shall be heard and resolved by a single
arbitrator. The arbitrator shall have the same power to compel the attendance
of
witnesses and to order the production of documents or other materials and to
enforce discovery as could be exercised by a judge of the Superior Court of
the
State of Arizona under the Arizona Rules of Civil Procedure; provided that
such
discovery shall be concluded within one hundred twenty (120) days after the
date
the arbitration proceedings commence (excluding any period the parties are
in
mediation). The Company agrees, and each Participant shall be deemed to agree
by
his or her participation in the Plan, that this Section 7.7 is subject to the
Federal Arbitration Act (9 U.S.C. § 1, et seq. (the "Act")) for purposes of
determining the validity and enforceability of this arbitration provision and
the Act's preemption of any contrary provision of state law which might
otherwise render the agreement to arbitrate unenforceable. The Company agrees,
and each Participant shall be deemed to agree by his or her participation in
the
Plan, that the Act shall be applicable and expressly intend that all disputes
or
other matters arising under this Agreement (other than as expressly excepted
herein) shall be subject to arbitration, under the Act, without regard to any
contrary law. The Company agrees, and each Participant shall be deemed to agree
by his or her participation in the Plan, voluntarily and knowingly to waive
any
right to object to arbitration under this Agreement. Any arbitrator shall,
except for application of the Act, which the Company agrees, and each
Participant shall be deemed to agree by his or her participation in the Plan,
shall be applicable for the purpose of determining the validity and
enforceability of this agreement to arbitrate, apply the substantive law of
the
State of Arizona and any applicable federal law. The arbitrator shall have
the
same
power
to
grant any relief or remedy as a judge of the Superior Court of the State
of
Arizona could grant. Arbitration shall not be required of any party who seeks
a
temporary restraining order, preliminary injunction or other equitable relief
in
order to preserve the status
quo
or
prevent irreparable harm from occurring. The Company agrees, and each
Participant shall be deemed to agree by his or her participation in the Plan,
that arbitration is a material provision of this Agreement and is agreed
to in
consideration of the benefits provided herein. The Company agrees, and each
Participant shall be deemed to agree by his or her participation in the Plan,
that no award may be made under this Agreement based on any claim for punitive,
exemplary or consequential damages.
*
* * * *
* * * * *
The
Plan
has been adopted by a Special Compensation Committee of the Board of Directors
of the Company consisting of the undersigned members of the Board of Directors.
Though a member of the Committee, Mark Scudder voluntarily recused himself
from
all proceedings of the Committee and the Special Compensation Committee with
respect to the approval of the Plan Plan in order to assure that the Plan is
approved by an independent committee of the Board of Directors, as contemplated
by Section 162(m) of the Internal Revenue Code of 1986, as amended, and
Treas. Reg. 1.162-27. Each of the undersigned members of the Special
Compensation Committee is an "outside director" within the meaning of Section
162(m) of the Internal Revenue Code of 1986, as amended, and
Treas. Reg. 1.162-27.
IN
WITNESS WHEREOF,
the
undersigned members of the Special Compensation Committee have adopted the
Plan
effective as of August 19, 2005.
|
/s/
Kathy Munro
|
|
|
Kathy
Munro
|
|
/s/
G. D. Madden
|
|
|
G.
D. Madden
|
Appendix
B
AMENDED
AND RESTATED 2003 STOCK OPTION PLAN
Article
1.
History
and Purpose
1.1 History.
Knight
Transportation, Inc. (the "Company" or "Knight") has maintained a stock option
plan for the benefit of officers, employees and directors since 1994. Grants
under all prior plans have been broad-based and have been designed to align
the
interest of employees of the Company receiving grants with those of the
Company's shareholders. On February 6, 2003, the Board of Directors of the
Company (the "Board") approved the termination of all further stock grants
under
the Company's Amended and Restated Stock Option Plan adopted February 10, 1998
(the "1998 Plan"), effective as of May 31, 2003, subject to the Company's
shareholders approval of the 2003 Plan, as hereinafter defined. As amended,
the
1998 Plan permitted any issued and outstanding option grants to continue in
force and effect in accordance with their terms, but no further options or
stock
grants were to be made under the 1998 Plan if the Company's shareholders
approved the 2003 Plan. The Board also adopted, effective as of June 1, 2003,
the Knight Transportation, Inc. 2003 Stock Option Plan (the "Plan" or the "2003
Plan"), subject to approval by the Company's shareholders at its annual meeting
held in May, 2003. The Plan was approved by the Company's shareholders on May
21, 2003. The Plan was subsequently amended on March 3, 2005, to eliminate
the
grant of any NSO at less than fair market value and to include arbitration
provisions. The Plan was further amended as of May 26, 2005, to increase the
number of shares available for Stock Grants from 1,500,000 to 4,000,000 shares
of Stock. The Plan was further amended as of August 3, 2005, subject to
shareholder approval, to limit to 650,000 the maximum number of shares of Stock
subject to Stock Grants to a single individual in a calendar year, beginning
with the calendar year ending December 31, 2005, to make certain administrative
changes, and to restate the Plan in its entirety.
This
document sets forth the terms of the Plan, including, without limitation, the
number of shares of Stock that are reserved for grants under the Plan and all
other terms and conditions applicable to the Plan. This Plan and any options
or
rights granted hereunder are subject to approval by the Company's shareholders.
A Special Meeting of Shareholders is to be held in 2005 for shareholders to
approve this Plan.
1.2 Purpose.
The Plan
has been adopted to: (a) provide certain key employees of the Company (as
defined below) with an opportunity to purchase the common stock of Knight as
an
incentive to continue employment with the Company and to work for the long-term
growth, development, and financial success of the Company; (b) attract qualified
independent directors by providing the automatic grant of certain nonqualified
stock options to independent directors upon their appointment to the Board;
and
(c) attract, motivate, and retain the services of critical employees of the
Company and its subsidiaries and reward such employees by the issuance of Stock
Grants so that these employees will contribute to and participate in the
long-term performance of the Company.
Article
2.
Definitions
2.1 Defined
Terms.
The
following terms shall have the meanings set forth below, unless context
otherwise requires:
"Beneficiary"
means the person or persons designated by a Participant as his
beneficiary.
"Board
of
Directors" or "Board" means the Board of Directors of Knight.
"Code"
means the Internal Revenue Code of 1986, as amended from time to
time.
"Committee"
means the Compensation Committee of the Board of Directors, which shall be
appointed in accordance with the procedures described in Article 7.
"Company"
means Knight and any subsidiary of Knight that is treated as a "subsidiary"
under section 425 of the Code.
"Effective
Date" means June 1, 2003, which shall be the date this Plan is effective,
subject only to Section 8.19.
"Knight"
means Knight Transportation, Inc an Arizona corporation, and its successors
in
interest.
"ISO"
means an incentive stock option granted a Participant under Article 5 of this
Plan and which qualifies as an incentive stock option under section 422 of
the
Code. To the extent this Plan has authorized the Committee to grant ISOs, this
Plan shall be interpreted and construed so as to qualify as an incentive stock
option plan under Section 422 of the Code and the regulations
thereunder.
"Independent
Director" means a director of the Company who is not an officer, employee or
10%
shareholder of the Company.
"Independent
Directors Plan" means the Independent Directors Automatic Stock Option Plan
set
forth in Article 6.
"NSO"
means any option granted under this Plan that is not an ISO.
"Participant"
means any employee or independent director of the Company who has been selected
by the Committee to participate in the Plan.
"Plan"
means the Knight Transportation, Inc. 2003 Stock Option Plan, effective as
of
June 1, 2003, as amended and restated hereby.
"Plan
Year" means the calendar year.
"Restricted
Stock Grant" means the right granted a Participant to purchase Restricted Stock
at a price determined by the Committee, and subject to such restrictions and
conditions as may be determined by the Compensation Committee.
"Restricted
Stock" means stock sold to a Participant pursuant to a Restricted Stock
Grant.
"Stock"
means the common stock of Knight, par value $0.01 per share,
"Stock
Option" means any ISO or NSO granted to a Participant under this Plan, which
is
evidenced by a writing executed by the Participant and by an authorized member
of the Committee
"Stock
Grant" means the award of a Stock Option or a Restricted Stock Grant made under'
Article 5 or Article 6 of this Plan.
"Stock
Grant Agreement" means the written Agreement between the Company and a
Participant evidencing a Stock Grant.
Article
3.
Shares
Reserved for Grants; Adjustment to Shares
3.1 Shares
Reserved For Stock Grants.
There
are reserved and available for the Stock Grants pursuant to all provisions
of
this Plan 4,000,000 shares of the Company's authorized but unissued Stock,
less
those shares of Stock subject to Stock Grants made since June 1, 2003, plus
any
share adjustments authorized by this Plan. Of the total number of shares
reserved for Stock Grants under this Plan, 100,000 shares of Stock are reserved
for Stock Grants made under the Independent Directors Plan set forth in Article
6. The balance of the Shares are reserved for Stock Grants awarded under any
other provision of this Plan; provided, however, that in no event shall the
aggregate number of shares of Stock subject to all Stock Grants made under
this
Plan since inception exceed 4,000,000 shares of Stock, adjusted as described
in
Section 3.2, below.
3.2 Adjustment
to Shares.
The
aggregate number of shares of Stock which may be issued pursuant to Stock Grants
made under this Plan shall be automatically adjusted, without further action
by
the Board or the shareholders of the Company, to reflect changes in the
capitalization of the Company, such as stock dividends, stock splits, reverse
stock splits, subdivisions, reorganizations or reclassification, or any similar
recapitalization that affects or modifies the number of shares of Stock issued
and outstanding at any time. The adjustment of shares of Stock reserved for
Stock Grants under this Section shall not cause shares of Stock subject to
a
Stock Grant Agreement to be automatically adjusted, unless the Stock Grant
Agreement specifically requires such an adjustment.
3.3 Number
of Stock Grants; Partial Exercise.
More
than one Stock Grant may be made to the same Participant, and Stock Grants
may
be subject to partial exercise, as the Committee may in its discretion
determine. If any Stock Grant made under this Plan expires or is terminated
without being exercised, or after being partially exercised, the shares of
Stock
allocated to the unexercised portion of a Stock Grant shall revert to the pool
of shares reserved in Section 3.1 and shall again be available for Stock Grants
made under this Plan.
Article
4.
Plan
Eligibility
4.1 General.
The
Committee, subject to the following limitations, shall from time to time
designate from among the Company's employees those persons who will be
Participants in this Plan, subject to the following rules:
4.2 Stock
Option Plan.
Only
full-time employees of the Company, who, in the sole judgment of the Committee,
(i) are qualified by position, training, ability, and responsibility to
contribute substantially to the progress of the Company; and (ii) have a
material, positive effect on the results of the operations of the Company;
or
(iii) are key employees or critical line employees (as determined by the
Committee, in its discretion), shall be eligible to participate in the Plan
described in Article 5.
4.3 Independent
Directors Plan.
Independent Directors of the Company shall be automatically eligible to
participate in the Independent Directors Plan described in Article
6.
Article
5.
Stock
Option Plan
5.1 Award
of Stock Grant.
The
Committee may award Stock Grants to a Participant in the form of Stock Options,
including, without limitation, "ISOs," "NSOs," or Restricted Stock Grants under
this Article 5, or any combination thereof. At the time a Stock Grant is awarded
under this Article 5, the Committee shall designate the number of shares of
Stock subject to the grant and indicate whether such grant is an ISO, NSO or
a
Restricted Stock Grant.
5.2 ISOs.
The
following rules shall apply to any Stock Options granted as ISOs, in addition
to
any other provisions of this Plan that may be applicable.
(a) Fair
Market Value of ISO.
The
aggregate fair market value of Stock subject to an ISO granted under this
Article 5 (determined without regard to this Section 5.2) exercisable for the
first time by any Participant during any calendar year (under all plans of
the
Company) shall not exceed $100,000. The preceding sentence shall be applied
by
taking ISOs into account in the order in which they were granted hereunder.
If
any ISO is granted that exceeds the limitations of this Section 5.2 at the
first
time it is exercisable, it shall not be invalid, but shall constitute, and
be
treated as, an NSO to the extent of such excess. For purposes of this Plan,
the
fair market value of the Stock subject to any ISO shall be determined by the
Committee without regard to any restriction other than a restriction which,
by
its terms, will never lapse
(b) Disposition
of ISO Stock.
No
Stock issued in connection with a Participant's exercise of an ISO that is
disposed of by the Participant within two years after the date the option is
granted or within one year after the date such Stock is issued to the
Participant will remain eligible for treatment as an ISO; provided, however,
unless otherwise provided in the Stock Grant Agreement, these holding periods
shall not apply if the Stock Option is exercised after the death of a
Participant by the estate of such Participant, or by a person who acquired
the
right to exercise such option by bequest or inheritance or by reason of the
death of a deceased Participant.
(c) Insolvent
Participants.
A
disposition of Stock described in Section 422(c)(3) of the Code, which was
acquired pursuant to the exercise of an ISO, shall not constitute a disposition
of Stock in violation of Section (b) of this Article 5.
(d) Construction.
Any ISO
granted under this Plan shall be construed to meet the requirements of Section
422 of the Code and the regulations thereunder.
5.3 Option
or Purchase Price.
(a) A
Stock
Option shall state the exercise price of the option, which, in the case of
an
ISO, shall not be less than 100% of the fair market value of the optioned Stock
on the date the ISO is granted, as provided below. Any Restricted Stock Grant
shall state the price at which the Restricted Stock may be purchased. In the
case of a Participant who, at the time the ISO is granted, owns shares of Stock
possessing more than 10% of the total combined voting power of all classes
of
stock of the Company (or any parent or subsidiary), the exercise price of such
ISO shall be not less than 110% of the fair market value of Stock on the date
the option is granted, and, in no event, shall such option be exercisable after
the expiration of five years from the date such option is granted.
(b) The
exercise price of an NSO, the purchase price under a Restricted Stock Grant,
or
the exercise price of any Stock Option granted to a director under Article
6
shall not be less than 100% of the fair market value of a share of the Stock
as
of the date of grant.
(c) For
purposes of this Plan, the fair market value of a share of Stock (the "Fair
Market Value") shall equal the closing price of such Stock on the date of grant,
as reported by the New York Stock Exchange ("NYSE"). If for any reason the
closing price is not available, then the Fair Market Value of a share of Stock
may be determined as the mean of the highest and lowest quoted selling prices
for such Stock on the date preceding the date of grant, as reported by the
NYSE.
If for any reason the Company's Stock is not publicly traded on a national
securities market, or not listed on the NYSE, the Committee shall evaluate
all
factors which the Committee believes are relevant in determining the Fair Market
Value of a share of Stock and, the Committee, in good faith in exercising its
business judgment, shall establish the Fair Market Value of the Stock as of
the
date an option is granted.
(d) Stock
Grants, once made, shall not be repriced.
5.4 Limitation
on Period in Which to Grant or Exercise Options.
No ISO
shall be granted under this Plan more than 10 years after the earlier of (i)
the
date the Plan is initially adopted by the Board or (ii) the date the Plan is
approved by the shareholders of the Company. Any Stock Grant, other than an
ISO,
made under the Plan may be exercised within any reasonable term and may be
granted any time prior to the termination or expiration of the Plan. In no
event
shall an ISO granted under this Plan be exercised after the expiration of 10
years from the date such ISO is granted. Any provision of this Plan to the
contrary notwithstanding, the Committee may, in its sole discretion, grant
any
Participant an NSO which, if provided in the Stock Grant Agreement, may be
exercised after the termination of the Participant's employment with the
Company
Article
6.
Independent
Directors’
Plan
6.1 Automatic
Grant; Annual Compensation; Forfeiture.
Any
Independent Director appointed to the Board after September 1, 1995, shall
automatically receive an NSO for 2,500 shares of the Company's Stock; the
exercise price of such Stock Option shall be 100% of the fair market value
of
the Company's Stock as of that date. In addition, for calendar years beginning
after December 31, 2004, Independent Directors will receive an NSO for not
more
than 2,000 shares of Stock, as described in the next sentence, for service
as an
Independent Director. Each such Stock Grant shall be made on June 1 of each
calendar year, beginning on June 1, 2005, and continuing on the same day of
each
year thereafter, for each person who is an Independent Director on that date
and
has served for the past twelve (12) months. The actual number of shares of
Stock
for any Stock Grant made under the preceding sentence shall be fixed by the
Compensation Committee of the Board during the fourth quarter of the calendar
year that precedes that year in which the Stock Grant is made. Until modified
by
the Compensation Committee, the amount of the NSO Stock Grant shall be 1,000
shares of Stock. Each Independent Director who, as of December 31, 2002, has
served as an Independent Director for at least three calendar years, shall
also
be entitled to an NSO grant of 1,000 shares of Stock for service previously
rendered to the Company; such option shall be issued on June 1, 2003,
and the exercise price shall be the fair market value of the Company's Stock
as
of that date, as provided in Section 5.3(b) above. Any NSO granted to an
Independent Director (other than the NSO grant for 1,000 shares described in
the
preceding sentence) will be forfeited if the director resigns within one year
of
the date of the grant of such NSO.
6.2 Termination
of Independent Director Option.
Except
as otherwise provided in any written agreement between the Company and the
Independent Director, any NSO granted hereunder will expire on the earlier
of
(i) ten years after the date of grant; (ii) one year after such independent
director terminates his services as a director of the Company; (iii) the
expiration date stated in the Stock Grant Agreement (as this term is defined
in
the Plan); or (iv) any earlier date provided in this Article 6. An Independent
Director may also elect to receive the director fees in Stock of the Company,
as
provided in Section 6.5.
6.3 Holding
Period. Any
Stock
Grant made to an Independent Director may not be exercised for at least seven
months following the date such Stock Option is granted.
6.4 Existing
Options.
All
Stock Grants made by the Company to Independent Directors, including options
issued prior to the date hereof, shall be subject to the terms and conditions
of
this Article 6. All Stock Grants made to an Independent Director shall be made
at the Fair Market Value of the Stock, as of the date of the grant.
6.5 Payment
of Director's Fees in Stock.
With the
consent of the Independent Director, the Company may pay the director's fees
due
any Independent Director in Stock of the Company. In such event, the Company
shall grant to each consenting Independent Director on February 15 and August
15
of each calendar year the number of shares of Company Stock (disregarding any
fraudulent shares) equal to the director's fees due such Independent Director
as
of the preceding December 31 and June 30, respectively, based on the Fair Market
Value of the Company's Stock, as provided in Section 5 3(b) above, as of the
trading day preceding each such February 15 and August 15.
Article
7.
Administration
7.1 Compensation
Committee.
This
Plan shall be administered by the Committee. The Committee shall serve at the
pleasure of the Board, and the Board may, from time to time, remove members
from, or add members to, the Committee. The Committee shall include a minimum
of
two Independent Directors. Vacancies on the Committee, however caused, shall
be
filled by the Board. No member of the Committee shall participate in or take
any
action with respect to any Stock Grant made with respect to such member, except
as otherwise provided herein. The Committee may appoint delegates to act for
and
on its behalf. The Committee shall select one of its members as Chairman and
shall hold meetings at such times and places as the Committee may determine.
A
majority of the Committee at a meeting at which a quorum is present, or acts
reduced to or approved in writing by a majority of the members of the Committee,
shall be valid acts of the Committee No member of the Board or the Committee
shall be liable for any action or determination made in good faith with respect
to this Plan or any option granted hereunder.
7.2 Administration
of the Plan.
(a) The
Committee may adopt rules and procedures for administration of the Plan, to
the
extent such rules and procedures are not inconsistent herewith. Subject to
the
provisions of this Plan, the Committee shall have the sole, final, and
conclusive discretion and authority to construe and interpret the Plan,
including, without limitation, authority to determine:
(1) Those
employees who will become Participants and the terms and conditions of their
eligibility;
(2) The
nature and amount of such Stock Giants;
(3) All
terms
and conditions of each Stock Grant, including, without limitation:
(i) The
number of shares of Stock for which a Stock Grant is made;
(ii) Subject
to the limitations set forth in this Plan, the price to be paid for Stock upon
exercise of a Stock Grant;
(iii) The
terms
and conditions of the exercise;
(iv) The
terms
of payment of the exercise price of a grant;
(v) Any
conditions to which the grant or its exercise may be subject;
(vi) Any
vesting or forfeiture provisions applicable to any Stock Grant; and
(vii) Any
restrictions or limitations placed on Stock issued pursuant to the exercise
of a
Stock Grant.
(b) The
Committee may provide that any Stock Grant may be exercised as a "cashless"
Stock Grant, including any arrangement whereby any dealer associated with the
National Association of Securities Dealers, upon an irrevocable election by
a
Participant to exercise any Stock Grant, either (i) commits to loan the
Participant the exercise price of the stock and forwards it to the Company,
or
(ii) establishes a margin commitment with the Participant to pay the exercise
price of the Stock Grant to the Company, except to the extent any such
arrangement is prohibited by the Sarbanes Oxley Act of 2002 and the Securities
and Exchange Act of 1934.
(c) Any
provision of this Plan to the contrary notwithstanding, subject to the overall
limitation of Section 3.1 on shares of Stock that are reserved for the issuance
of Stock Grants under the Plan, the maximum number of shares of Stock issuable
with respect to Stock Grants awarded to any Participant during any calendar
year, beginning with calendar year 2005, shall not exceed, in the aggregate,
650,000 shares of Stock. The maximum number of shares of Stock issuable with
respect to Stock Grants awarded to any Participant during any calendar year
under this Section 7.2(c) shall be subject to adjustment as provided in Section
3.2 for stock dividends, stock splits, reserve stock splits and similar
transactions.
Article
8.
General
Provisions
8.1 Grant
Agreement.
Each
Stock Grant made under this Plan shall be evidenced by a Stock Grant Agreement
and shall be executed by the Company and the Participant. The Stock Grant
Agreement shall contain any terms and conditions required by this Plan and
such
other terms and conditions as the Committee, in its sole discretion, may
require, including, without limitation, restrictions on the transferability
of
any Stock which are not inconsistent with the Plan.
8.2 Mergers
or Consolidations.
If the
Company at any time dissolves or undergoes a reorganization, including, without
limitation, a merger or consolidation with any other organization, in any manner
or form whatsoever, and the Company is not the surviving organization and the
surviving organization does not agree to assume the options granted pursuant
to
this Plan or to substitute options in place thereof, the Stock
Grants made under this Plan may be terminated, subject to the procedures set
forth in this Article 8. Prior to any termination of this Plan or the Stock
Grants made hereunder, each Participant holding an outstanding Stock Grant
not
yet exercised shall be notified of such termination and shall be provided a
reasonable period of not less than fifteen (15) days in which to exercise such
Stock Option prior to its termination, to the extent such option is then
exercisable. The Committee may, in its sole discretion, prescribe such terms
and
conditions as the Committee deems appropriate and authorize the exercise of
such
Stock
Grants with respect to all shares of Stock covered in the event of a merger
or
consolidation. Any Stock Grant not exercised in accordance with such prescribed
terms and conditions shall terminate as of the date specified by the Committee,
and simultaneously, the Plan itself shall be terminated without further order
of
the Company or the Board of Directors.
8.3 Termination
of Employment.
Except
as provided in Sections 5.4, 6, or as otherwise permitted by this Plan (or
any
Stock Grant Agreement), any Stock Grant made pursuant to this Plan shall
immediately terminate upon a Participant's termination of employment with the
Company, unless such termination of employment occurs by reason of the death
or
retirement (including early retirement, if approved by the Committee) of the
Participant, or on account of the permanent and total disability of the
Participant (as such term is defined in Section 22(e)(3) of the Code and the
regulations therein). Upon retirement (including early retirement), a
Participant (or the administrator or conservator of the Participant's estate)
may, subject to Section 5 of the Plan, exercise any Stock Grant in full within
three months of retirement or, if the Participant retired or terminated
employment on account of "permanent and total disability" (as that term is
defined in Section 22(e)(3) of the Code), within one year of retirement. If
a
Participant dies while in the employment of the Company or within three months
after retirement, the Participant's personal representative or other person
who
acquires the right to exercise such Stock Grant by bequest, inheritance, or
by
reason of the death of the deceased Participant, may, subject to Section 5.4
of
the Plan or any contrary provision of the Stock Grant Agreement, exercise the
option in full within one year from the date of the Participant's death;
provided that if such exercise period would disqualify an ISO as an incentive
stock option under Section 422 of the Code, the Stock Option shall be treated
as
an NSO.
8.4 Payment
for Stock.
The
exercise price for any shares of Stock acquired through the whole or partial
exercise of any Stock Grant shall be paid in full in cash or immediately
available funds, or in Stock with a current market value equal to all or a
part
of the exercise price, or both.
8.5 Compliance
With Applicable Laws and Regulations.
Stock
Grants made under this Plan shall contain such provisions with respect to
compliance with applicable federal and state law as the Committee, with the
advice of the Company's counsel, may deem appropriate, including, without
limitation, any provision necessary to comply with state or federal securities
laws.
8.6 No
Right to Employment.
Designation of an employee as a Participant in this Plan for any purpose shall
not confer on the employee the right to continue in the employment of the
Company or any right to receive a Stock Grant for any Plan Year.
8.7 Taxes.
A
Participant shall be responsible for paying any taxes with respect to a Stock
Grant. The Company is hereby authorized to deduct any taxes that may be
applicable from the dollar value of any Stock Grant to a Participant, including,
without limitation, FICA, FUTA, and any required income tax withholding, and
the
Company may effect any such withholding by reducing the number of shares of
Stock acquired upon the exercise of Stock Grants by the amount of such FICA,
FUTA, or other tax liability, or may make other reasonable arrangements for
the
payment of any such tax liability.
8.8 Expenses.
All
expenses incurred in connection with the administration of this Plan shall
be
borne by the Company, except as any Stock Grant Agreement may otherwise
provide.
8.9 Unfunded
Benefits.
Nothing
in this Plan shall be construed as requiring the Company to establish a trust
or
to find this Plan, or to create a trust of any kind or any fiduciary
relationship between the Company and any Participant, employee or
Beneficiary.
8.10 Transferability.
Except
as otherwise expressly permitted by this Plan, no Stock Grant made under this
Plan shall be transferable by the Participant other than by will or by the
laws
of descent and distribution. During a Participant's lifetime, a Stock Grant
made
hereunder shall be exercisable only by the Participant and only if at all times
during the period of time beginning on the date the Stock Grant is made and
ending on the day three months (or one year, in the case of an employee or
Independent Director who retires on account of becoming "permanently and totally
disabled" within the meaning of that term under section 22(e)(3) of the Code)
before the date of exercise of such Stock Grant, such Participant was an
employee or director of the Company (or a corporation or a parent corporation
or
subsidiary corporation of a corporation assuming an option in a transaction
to
which section 424(a) of the Code applies).
8.11 Expiration
Date of Plan.
If not
earlier terminated, this Plan shall expire on February 5, 2013. In no event
shall any Stock Option be granted under this Plan after February 5, 2013. In
no
event shall any ISO be granted under this Plan after February 5,
2013.
8.12 Corporate
Action.
The
issuance of a Stock Grant pursuant to this Plan shall not affect in any way
the
right or power of the Company to make adjustments, reclassifications,
reorganizations, or changes of any kind to its capital or business structure
or
to merge, consolidate, dissolve, liquidate, sell or transfer all or any part
of
its business or assets
8.13 Rights
as a Shareholder.
A
Participant shall have no rights as a shareholder of the Company with respect
to
any shares of Stock subject to a Stock Grant made hereunder until the date
of
the issuance of a stock certificate to the Participant for such shares pursuant
to such Stock Grant. Except as provided in Section 3..2, no adjustment shall
be
made for dividends (ordinary or extraordinary, whether in cash, securities,
or
other property) or distributions or other rights for which the record date
precedes the date a stock certificate is issued to a Participant upon exercise
of a Stock Grant.
8.14 Investment
Purpose.
Unless
the Stock received pursuant to a Stock Grant issued under this Plan is
registered with the Securities and Exchange Commission, or an exemption from
registration is available, each Stock Grant is subject to the condition that
the
issuance of the Stock Grant and any Stock issued upon exercise of the Stock
Grant is for investment purposes only, and not with a view to the subsequent
resale or distribution of such Stock.
8.15 Investment
Letter.
Any
Participant exercising a Stock Grant shall, as a condition to such exercise,
execute and deliver to the Company an investment letter in such form as the
Board or the Committee, with the advice of the Company's legal counsel, may
from
time to time require, unless legal counsel determines that such a letter is
not
required.
8.16 Termination
or Amendment of the Plan.
The
Board may terminate, suspend, discontinue, modify or amend this Plan in any
respect whatsoever, except that, without approval of the shareholders of the
Company, no such revision or amendment shall change the number of shares of
Stock of the Company subject to the Plan, change the designation of the class
of
employees eligible to receive options, decrease the price at which options
may
be granted or remove the administration of the Plan from the Committee. The
preceding sentence notwithstanding, the Company may not terminate this Plan
with
respect to any issued and outstanding Stock Grant unless it gives the
Participant notice of termination and not less than 15 days in which to exercise
such Stock Grant, but only if such Stock Grant is then exercisable.
8.17 Application
of Funds.
The
proceeds received by the Company from the sale of shares of Stock pursuant
to
the exercise of Stock Grants shall be used for general corporate
purposes.
8.18 Obligation
to Exercise Grant.
A Stock
Grant made hereunder shall impose no obligation on the Participant to exercise
such grant.
8.19 Approval
of Shareholders: Termination of Plan.
This
Plan is effective as of June 1, 2003. This Plan, as amended and restated hereby,
is effective August 3, 2005, subject to the approval of the Company's
shareholders prior to December 31, 2005. The Committee may cause Stock Grants
to
be made under the Plan, subject to the Plan being approved by the Company's
shareholders within the period described above.
8.20 Governing
Law.
The Plan
shall be governed by and construed under the laws of the State of
Arizona.
8.21 Arbitration
of Disputes.
The
Federal Arbitration Act applies and governs the arbitration provisions of the
Plan. Any disputes between or among the Company (including its subsidiaries,
affiliates, or successors) and Participants (collectively, the "Parties") with
respect to the terms of the Plan, including, without limitation, the scope
of
this arbitration, shall be subject to arbitration pursuant to the rules of
the
American Arbitration Association governing commercial disputes. Arbitration
shall occur in Phoenix, Arizona. Judgment on any arbitration award may be
entered in any court having jurisdiction. A single arbitrator shall have the
power to render a maximum award of $300,000. If any person asserts a claim
in
excess of $300,000, any party to the arbitration proceeding may request that
the
arbitration be heard by a panel of three (3) arbitrators and, if so requested,
the arbitration decision shall be made by a majority of the three arbitrators.
The Company shall pay the cost of arbitration, but if the Company is the
prevailing party in the arbitration, the Company shall have the right to recover
from the Participant all costs of arbitration. THE
PARTIES SHALL EXPRESSLY AGREE TO ARBITRATION AND WAIVE ANY RIGHT TO TRIAL BY
JURY EITHER PARTY MAY HAVE BY EXECUTING THE STOCK OPTION
AGREEMENT.
Nothing
in the Plan or any Stock Grant Agreement between the Company and any Participant
shall limit or restrict any self-help remedy, including, without limitation,
any
right of offset a Party may have. The Party prevailing in any arbitration shall
be entitled to payment of all legal fees and costs (including court costs),
and
all costs of arbitration, regardless of whether such costs are recoverable
under
applicable law.
IN
WITNESS WHEREOF, the foregoing amendment and restatement of the Plan was
approved by the Board of Directors on August 3, 2005, and is executed by the
undersigned officers of the Company, each being duly authorized to do
so.
|
KNIGHT
TRANSPORTATION, INC.,
an
Arizona corporation
|
||||
|
By:
|
/s/
Kevin P. Knight
|
By:
|
/s/
Timothy M. Kohl
|
|
|
Kevin
P. Knight, Chief Executive Officer
|
Timothy
M. Kohl, Secretary and Chief
Financial
Officer
|
|||
KNIGHT
TRANSPORTATION, INC.
5601
West Buckeye Road
Phoenix,
Arizona 85043
THIS
PROXY IS SOLICITED BY THE BOARD OF DIRECTORS
FOR
THE
SPECIAL MEETING OF SHAREHOLDERS
TO
BE
HELD ON DECEMBER 21, 2005
Wednesday,
December 21, 2005, 8:30 a.m., Phoenix Time
By
executing this Proxy, the shareholder constitutes and appoints the Chairman
and
Chief Executive Officer, Kevin P. Knight, and the President and Secretary,
Timothy M. Kohl, and each of them, as proxies for the shareholder (or if only
one proxy is present, that one shall have all power granted here), with full
power of substitution, who may, and by a majority of such proxies, represent
the
shareholder and vote all shares of Common Stock which the shareholder is
entitled to vote at the Special Meeting of Shareholders of Knight
Transportation, Inc. to be held on December 21, 2005, at 8:30 a.m., Phoenix
Time, at the offices of Ryley, Carlock & Applewhite, Phelps Dodge Tower, One
North Central Avenue, Suite 1200, Phoenix, Arizona 85004, or at any adjournment
thereof, on all matters described in the Notice and Proxy Statement for the
Special Meeting dated November 29, 2005, as set forth below.
------------------------------------------------------------------------------------------------------------------------------------------------
▲
Detach here from proxy voting card ▲
As
a
Knight Transportation, Inc. Shareholder, you can view your shareholder account
on a secured internet web site.
By
accessing Investor Service DirectSM
at
www.melloninvestor.com,
you can
view your account profile, stock detail, and historical Knight Transportation,
Inc. stock price information. You can also change your address.
In
addition, you can use this site to consent to future access of Knight’s annual
reports and proxy materials electronically via the internet.
Knight
also provides access to shareholder information, including its annual report
and
proxy statement, through its web site at www.knighttrans.com.
|
Please
mark your votes as indicated in this example
|
x
|
1. Proposal
No. 1: Approval
of 2005 Executive Cash Bonus Plan.
Proposal
to approve the Company's 2005 Executive Cash Bonus Plan, to comply with Section
162(m) of the Internal Revenue Code of 1986, as amended.
|
o
|
FOR
approval of the Company’s 2005 Executive Cash Bonus
Plan.
|
|
o
|
AGAINST
approval of the Company’s 2005 Executive Cash Bonus
Plan.
|
|
o
|
ABSTAIN.
|
2. Proposal
No.
2: Approval of
Amendment
to 2003 Stock Option Plan and Approval and Ratification of Amended and Restated
2003 Stock Option Plan.
Proposal
to amend the Company’s 2003 Stock Option Plan to comply with Section 162(m) of
the Code, and to approve and ratify the Company's Amended and Restated 2003
Stock Option Plan, which incorporates all prior amendments to the 2003 Stock
Option Plan.
|
o
|
FOR
approval of the proposed amendment to the Company’s 2003 Stock Option Plan
and approval and ratification of the Amended and Restated 2003 Stock
Option Plan.
|
|
o
|
AGAINST
approval of the proposed amendment to the Company’s 2003 Stock Option Plan
and approval and ratification of the Amended and Restated 2003 Stock
Option Plan.
|
|
o
|
ABSTAIN.
|
3. Other
Action.
In
their discretion, the
proxies also are authorized to vote upon such matters as may properly come
before the Special Meeting or any adjournments thereof.
|
Signature*:
___________________________________
|
|
|
Printed
Signature: ___________________________________
|
|
|
Title: ____________________________________
|
|
|
Signature: ___________________________________
|
|
|
Title: ____________________________________
|
|
|
DATED: _______,
2005
|
|
|
*
Signatures should conform to name in which you hold your
shares.
|
|
|
Address
Change?
Indicate
changes here:
|
|
|
__________________________________________________
|
|
|
__________________________________________________
|
------------------------------------------------------------------------------------------------------------------------------------------------
▲
Detach here from proxy voting card ▲
The
shareholder acknowledges receipt of the Notice and Proxy Statement dated
November 29, 2005, grants authority to any of said proxies, or their
substitutes, to act in the absence of others, with all the powers which the
shareholder would possess if personally present at such meeting, and hereby
ratifies and confirms all that said proxies, or their substitutes, may lawfully
do in the shareholder’s name, place, and stead.
THIS
PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS OF KNIGHT TRANSPORTATION,
INC., AND THE SHARES REPRESENTED BY THIS PROXY WILL BE VOTED IN ACCORDANCE
WITH
YOUR INSTRUCTIONS. IF NO CHOICE IS SPECIFIED BY YOU, THIS PROXY WILL BE VOTED
FOR PROPOSAL NO. 1 AND FOR PROPOSAL NO. 2.
Please
mark, sign, date and return the Proxy Card promptly, using the enclosed
envelope, which requires no postage when mailed in the United
States.
Please
sign above exactly as your name appears. 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.