UNITED
STATES
SECURITIES
AND EXCHANGE COMMISSION
Washington,
D.C. 20549
SCHEDULE
14A
Proxy
Statement Pursuant to Section 14(a) of the Securities Exchange Act of
1934
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by
the Registrant x
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by
a Party other than the Registrant o
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Preliminary
Proxy Statement
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Confidential,
for Use of the Commission Only (as permitted by Rule
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Definitive
Proxy Statement
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Definitive
Additional Materials
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Soliciting
Material under §240.14a-12
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KNIGHT
TRANSPORTATION, INC.
(Name
of
Registrant as Specified In Its Charter)
N/A
(Name
of
Person(s) Filing Proxy Statement, if other than the Registrant)
Payment
of Filing Fee (Check the appropriate box):
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KNIGHT
TRANSPORTATION, INC.
5601
West
Buckeye Road
Phoenix,
Arizona 85043
NOTICE
OF ANNUAL MEETING OF SHAREHOLDERS
TO
BE HELD ON MAY 24, 2007
To
our
Shareholders:
You
are
cordially invited to attend the 2007 Annual Meeting of Shareholders (the "Annual
Meeting") of KNIGHT TRANSPORTATION, INC. to be held at 8:30 A.M., Phoenix time,
on May 24, 2007, at the Arizona Biltmore, 2400 East Missouri, Phoenix, Arizona
85016. The purposes of the Annual Meeting are to:
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1.
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Elect
three Class III Directors, each director to serve a term of three
years;
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2.
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Consider
and act upon an amendment and restatement of our Restated Articles
of
Incorporation in order to authorize the issuance of up to 300,000,000
shares of our common stock, par value $0.01 per share, and to make
certain
other ministerial changes in our Amended and Restated Articles of
Incorporation;
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3.
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Ratify
the appointment of Deloitte & Touche LLP as our independent registered
public accounting firm for fiscal year 2007; and
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4.
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Transact
such other business as may properly come before the Annual
Meeting.
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The
Board
of Directors has fixed the close of business on March 30, 2007, as the record
date for determining those shareholders who are entitled to receive notice
of
and vote at the Annual Meeting or any adjournment of that meeting. Shares of
Knight Common Stock can be voted at the Annual Meeting only if the holder is
present at the Annual Meeting in person or by valid proxy. A copy of our 2006
Annual Report to Shareholders, which includes audited consolidated financial
statements, is enclosed. YOUR VOTE IS IMPORTANT. TO ENSURE YOUR REPRESENTATION
AT THE ANNUAL MEETING, YOU ARE REQUESTED TO PROMPTLY DATE, SIGN, AND RETURN
THE
ACCOMPANYING PROXY IN THE ENCLOSED ENVELOPE. You may also vote on the Internet
by completing the electronic voting instruction form found at www.proxyvote.com
or by telephone using a touch-tone telephone and calling 1-800-690-6903. The
prompt return of your proxy may save us additional expenses of
solicitation.
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By
Order of the Board of Directors,
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| /s/ Timothy M. Kohl | |
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Timothy M.
Kohl
Secretary
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Phoenix,
Arizona
Arpil
20,
2007
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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; Cumulative Voting
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Right
To Attend Annual Meeting; Revocation of Proxy
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Costs
of Solicitation
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Annual
Report
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How
To Read this Proxy Statement
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PROPOSAL
NO. 1 - ELECTION OF DIRECTORS
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Class
III Director Nominees
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CONTINUING
DIRECTORS
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Class
I Directors
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Class
II Directors
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CORPORATE
GOVERNANCE
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Applicable
Corporate Governance Requirements
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Corporate
Governance Guidelines
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Code
of Ethics
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The
Board of Directors and Its Committees
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Board of Directors
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Committees
of the Board of Directors
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The
Audit Committee
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Report
of the Audit Committee
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The
Nominating and Corporate Governance Committee
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The
Compensation Committee
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Compensation
Committee Interlocks and Insider Participation
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Compensation
Committee Report
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| Report of the Compensation Committee | |
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The
Executive Committee
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Other
Board and Corporate Governance Matters
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Our
Executive Officers and Certain Significant Employees
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Compliance
with Section 16(a) of the Exchange Act
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EXECUTIVE
COMPENSATION
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Compensation
Discussion and Analysis
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Summary
Compensation Table
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All
Other Compensation Table
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Grants
of Plan-Based Awards
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Outstanding
Equity Awards at Fiscal Year-End
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Option
Exercises and Stock Vested
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Director
Compensation
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SECURITY
OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
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CERTAIN
RELATIONSHIPS AND RELATED TRANSACTIONS
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PROPOSAL
NO. 2 - APPROVAL OF KNIGHT TRANSPORTATION, INC. SECOND AMENDED AND
RESTATED ARTICLES OF INCORPORATION
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PROPOSAL
NO. 3 - RATIFICATION OF APPOINTMENT OF INDEPENDENT REGISTERED
PUBLIC ACCOUNTING FIRM
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PRINCIPAL
ACCOUNTING FEES AND SERVICES
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SHAREHOLDER
PROPOSALS
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OTHER
MATTERS
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APPENDIX
A - SECOND AMENDED AND RESTATED ARTICLES OF INCORPORATION
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KNIGHT
TRANSPORTATION, INC.
5601
West
Buckeye Road
Phoenix,
Arizona 85043
PROXY
STATEMENT
FOR
ANNUAL MEETING OF SHAREHOLDERS
TO
BE HELD ON MAY 24, 2007
This
Proxy Statement is furnished in connection with the solicitation of proxies
from
the shareholders of Knight Transportation, Inc. to be voted at the Annual
Meeting of Shareholders (the "Annual Meeting") to be held at 8:30 A.M., Phoenix
time, on May 24, 2007, at the Arizona Biltmore, 2400 East Missouri, Phoenix,
Arizona 85016. THE
ENCLOSED PROXY IS SOLICITED BY OUR BOARD OF DIRECTORS.
If not
otherwise specified, all proxies received pursuant to this solicitation will
be
voted (i) FOR the director nominees named herein; (ii) FOR the amendment
and restatement of our Amended and Restated Articles of Incorporation; (iii)
FOR
ratification of the appointment of Deloitte & Touche LLP as our independent
registered public accounting firm for fiscal year 2007; and (iv) with
respect to any other matters properly brought before the Annual 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 April 20, 2007,
to
shareholders of record at the close of business on March 30,
2007 (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
Annual Meeting, either in person or by valid proxy. Except in the election
of
directors, shareholders are entitled to one vote for each share held of record
on each matter of business to be considered at the Annual Meeting. In the
election of directors, cumulative voting is required by law. See
"Required Vote; Cumulative Voting." As of the Record Date, there were issued
and
outstanding approximately 86,225,974 shares of our Common Stock, entitled to
cast an aggregate 86,225,974 votes on all matters subject to a vote at the
Annual Meeting, other than in the election of the Class III directors, where
the
shares are entitled to an aggregate 258,677,922 votes. Votes cast at the
Annual Meeting will be tabulated by the Inspector of Elections and the results
of all items voted upon will be announced at the Annual Meeting.
In
order
to transact business at the Annual Meeting, a quorum must be present. A quorum
is present if a majority of the issued and outstanding shares of Common Stock
as
of the Record Date are represented at the Annual Meeting in person or by proxy.
Shares that are entitled to vote but that are not voted at the direction of
the
holder (called "abstentions") and shares that are not voted by a broker or
other
record holder due to the absence of instructions from the beneficial owner
(called "broker non-votes") will be counted for the purpose of determining
whether a quorum is present.
Election
of Directors. Directors
are elected by plurality of the votes cast, which means that the director
nominees receiving the highest number of votes for their election will be
elected as directors. Abstentions and broker non-votes are not counted as votes
for the election of any director nominee. Under the Constitution of the State
of
Arizona, as well as Section 10-728 of the Arizona Revised Statutes, shareholders
have cumulative voting rights in electing directors of an Arizona corporation.
Cumulative voting means that each shareholder, when electing directors, has
the
right to cast as many votes in the aggregate as he, she, or it has voting shares
multiplied by the number of directors to be elected. For example, this year
three Class III directors will be elected. If a shareholder has 100 shares
of
Common Stock, the shareholder is entitled to cast a total of 300 votes in the
election of the Class III directors
and
may
cast
300 votes for a single director nominee or distribute those votes among the
Class III director nominees as the shareholder determines.
Other
Matters. Approval
of the other matters submitted to shareholders for consideration and action
at
the Annual Meeting requires that the number of votes cast for the matter exceeds
the number of votes cast against the matter. 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 be counted neither as votes for,
nor as votes against, a matter.
Returning
a proxy card now will not interfere with your right to attend the Annual Meeting
or to vote your shares personally at the Annual Meeting, if you wish to do
so.
Shareholders who execute and return proxies may revoke them at any time before
they are exercised by giving written notice to our Secretary at our address,
by
executing a subsequent proxy and delivering it to our Secretary, or by attending
the Annual Meeting and voting in person.
We
will
bear the cost of solicitation of proxies, which we expect to be nominal and
will
include reimbursements for the charges and expenses of brokerage firms and
others for forwarding solicitation 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.
The
information included in this Proxy Statement should be reviewed in conjunction
with the Consolidated Financial Statements, Notes to Consolidated Financial
Statements, Reports of our Independent Registered Public Accounting Firm, and
other information included in our 2006 Annual Report to Shareholders that was
mailed on or about April 20, 2007, together with this Notice of Annual Meeting
and Proxy Statement, to all shareholders of record as of the Record
Date.
This
Proxy Statement contains the proposals to be considered by shareholders at
the
Annual Meeting, as well as important information concerning, among other things:
our management and our Board of Directors; executive compensation; transactions
between us and our officers, directors, and affiliates; the stock ownership
of
management and other large shareholders; the services provided to us by and
fees
of Deloitte & Touche LLP, our independent registered public accounting firm;
and instructions for shareholders who want to make proposals at the 2008 Annual
Meeting of Shareholders. Each
shareholder should read this information before completing and returning the
enclosed proxy card.
Our
Board
of Directors presently consists of nine members. The directors are divided
into
three classes, with each class serving a three-year term. The shareholders
elect
approximately one-third of the Board of Directors each year. Three Class III
directors will be elected at the Annual Meeting.
Upon
the
recommendation of the Nominating and Corporate Governance Committee, the Board
of Directors has nominated Kevin P. Knight, Randy Knight, and Michael Garnreiter
for election as Class III directors at the Annual Meeting.
Each
Class III director nominee will be elected to serve until the 2010 Annual
Meeting of Shareholders or until his successor shall have been duly elected
and
qualified or his resignation or removal, whichever occurs first. Each of the
Class III director nominees has consented to serve a three year term.
If
any of
the nominees named above should become unavailable to serve as a director,
the
Board of Directors may designate a substitute nominee. In that case, the proxy
holders will vote for the substitute nominee designated by the
Board.
Information concerning the nominees standing for election as Class III directors
follows:
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Kevin
P. Knight, 50
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Director
Since 1990
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Kevin
P.
Knight has served as the Chairman of our Board of Directors since May 1999
and
has served as our Chief Executive Officer since 1993. He has been one of our
officers and directors since 1990. From 1975 to 1984 and again from 1986 to
1990, Mr. Knight was employed by Swift Transportation Co., Inc. ("Swift"),
a
long-haul truckload carrier, where he served as Executive Vice President and
President of Cooper Motor Lines, Inc., a Swift subsidiary. Mr. Knight serves
on
the Board of Directors of Universal Technical Institute, Inc., a provider of
post-secondary education. Mr. Knight also serves on the Board of Directors
and
Executive Committee of the American Trucking Associations.
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Randy
Knight, 58
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Director
Since 1989
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Randy
Knight has
served as a member of our Board of Directors since our inception in 1989. Mr.
Knight served as one of our officers from 1989 until July 31, 1999, when he
resigned from being an officer. Mr. Knight served as Chairman of the Board
from 1993 to 1999. From 1985 to June 2004, Mr. Knight held a significant
ownership interest in and served as Chairman of Total Warehousing, Inc., a
commercial warehousing and local transportation business located in Phoenix,
Arizona. Mr. Knight sold his interest in Total Warehousing to a third party
in
June 2004. Mr. Knight was employed by Swift or related companies from 1969
to
1985, where he was a Vice President. Mr. Knight also is a director of the
Biltmore Bank of Arizona.
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Michael
Garnreiter, 55
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Director
Since 2003
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Michael
Garnreiter has
served as a member of our Board of Directors since September 2003. Mr.
Garnreiter currently is the managing member of Rising Sun Restaurant Group,
LLC,
a ten-restaurant chain of casual dining locations. Mr. Garnreiter also is a
director of Taser International. During the period from April 2002 through
June
2006, Mr. Garnreiter served as the Executive Vice President, Treasurer, and
Chief Financial Officer of Main Street Restaurant Group, Inc., a publicly held
restaurant operating company. Prior to joining Main Street, Mr. Garnreiter
served as a general partner of Arthur Andersen LLP. Mr. Garnreiter began
his career with Arthur Andersen in 1974 after graduating with a Bachelor of
Science degree in accounting from California State University at Long Beach.
In
1986, he became the managing partner of Arthur Andersen's Tucson, Arizona
office. Mr. Garnreiter is a Certified Public Accountant in California and
Arizona.
THE
BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS A VOTE "FOR" EACH OF THE DIRECTOR
NOMINEES.
Certain
information regarding our current Class I directors who were elected in 2005,
except for Richard J. Lehmann who was elected in 2006, for terms expiring at
our
2008 Annual Meeting of Shareholders follows:
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Donald
A. Bliss, 74
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Director
Since 1995
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Donald
A. Bliss has
served as a member of our Board of Directors since February 1995. Until his
retirement in December 1994, Mr. Bliss was a Vice President and Chief Executive
Officer of U.S. West Communications, a U.S. West company. Mr. Bliss also is
a
director of the Western and Southern Life Insurance Company, Continental General
Insurance Company, the Biltmore Bank of Arizona, and Vodavi Technology, Inc.
Mr. Bliss served as Chairman of the Western Region Advisory Board of AON
Risk Services of Arizona, Inc. from October 2001 to
February 2005.
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Mark
Scudder, 44
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Director
Since 1999
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Mark
Scudder has
served as a member of our Board of Directors since November 1999.
Mr. Scudder is president of Scudder Law Firm, P.C., L.L.O., in Lincoln,
Nebraska, and has been involved in the private practice of law since 1988.
Mr.
Scudder is also a member of the board of directors of Covenant Transport, Inc.,
a publicly held, long-haul trucking company, and Genesee & Wyoming Inc., a
publicly held, international, operator of short-line railroads.
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Richard
J. Lehmann, 63
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Director
Since 2006
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Richard
J. Lehmann
has
served as a member of our Board of Directors since February 2006. Mr. Lehmann
serves as the founding principal of the Biltmore Bank of Arizona and is Chairman
of Bank Capital Corporation, the holding company for the Bank. Until December
31, 1999, Mr. Lehmann served as Vice Chairman of Bank One, when it acquired
FCNBC, creating the fifth largest bank in the United States, with responsibility
for all consumer banking and credit card operations. Mr. Lehmann's previous
positions include Chairman and Chief Executive Officer of Valley National Bank.
Prior to that, Mr. Lehmann spent 20 years with Citigroup in various positions,
including 10 years in the International Division, with more than three years
as
a Senior Corporate Officer in Europe, the Middle East, and Africa. Mr. Lehmann
is a member of the board of directors of e-Funds Corporation, Icrossing Inc.,
Nature Conservancy, and T Gen Foundation. He also serves on the Mayo Advisory
Board and serves on the Board of Trustees at Thunderbird, The Garvin School
of
International Management.
Certain
information regarding our current Class II directors who were elected in 2006
for terms expiring at our 2009 Annual Meeting of Shareholders
follows:
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Gary
J. Knight, 55
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Director
Since 1990
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Gary
J. Knight has
served as the Vice Chairman of our Board of Directors since January 2004.
Mr. Knight served as our President from 1993 to January 2004, and has been
one of our officers and a member of our Board of Directors since 1990. From
1975
until 1990, Mr. Knight was employed by Swift, where he was an Executive Vice
President.
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G.D.
Madden, 67
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Director
Since 1997
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G.D.
Madden has
served as a member of our Board of Directors since January 1997. Since 1996,
Mr. Madden has been President of Madden Partners, a consulting firm he
founded, which specializes in transportation technology and strategic issues.
Prior to founding Madden Partners, he was President and Chief Executive Officer
of Innovative Computing Corporation, a subsidiary of Westinghouse Electric
Corporation. Mr. Madden founded Innovative Computing Corporation ("ICC"), a
privately held company, which grew to be the largest supplier of fully
integrated management information systems to the trucking industry.
Mr. Madden sold ICC to Westinghouse in 1990 and continued to serve as its
President and Chief Executive Officer until 1996.
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Kathryn
L. Munro, 58
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Director
Since 2005
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Kathryn
L. Munro has
served as a member of our Board of Directors since April 2005. She is a
principal of BridgeWest, LLC, a private equity investment company specializing
in wireless technology companies. Ms. Munro was the Chairperson of
BridgeWest from February 1999 until July 2003. From 1996 to 1998, Ms. Munro
served as Chief Executive Officer of Bank of America's Southwest Banking Group
and was President of Bank of America Arizona from 1994 to 1996. Ms. Munro has
served on the boards of directors of Flow International Corporation, a
Seattle-based manufacturer of industrial tools, since 1996; and Pinnacle West
Capital Corporation, the holding company of Arizona Public Service and Pinnacle
West Energy since 2000. Ms. Munro served on the Board of Capitol Bancorp
Limited, a Michigan-based multi-bank holding company, from 2002 to
2006.
Kevin
Knight, our Chairman and Chief Executive Officer, and Keith Knight, one of
our
executive officers, are brothers and are cousins of Randy Knight and Gary
Knight, who also are brothers.
Our
Common Stock has been listed on the New York Stock Exchange (the "NYSE") since
December 30, 2004, and therefore we are subject to the listing standards,
including standards relating to corporate governance, embodied in applicable
rules of the NYSE. Prior to listing on the NYSE, our Common Stock was listed
on
the Nasdaq National Market and we were subject to the listing standards,
including standards related to corporate governance, embodied in applicable
rules of the National Association of Securities Dealers, Inc.
Our
Board
of Directors has adopted corporate governance guidelines to further its goal
of
providing effective governance of our business and affairs for the long-term
benefit of our shareholders. A copy of the corporate governance guidelines
is
available free of charge on our corporate website at
http://www.knighttrans.com and is available in print to any shareholder
who requests it. The Nominating and Corporate Governance Committee is
responsible for periodically reviewing the corporate governance guidelines
and
recommending changes as appropriate to ensure the effective functioning of
our
Board of Directors and high quality corporate governance.
The
Board
of Directors has adopted a Code of Ethical Conduct that applies to all of our
directors, officers, and employees. In addition, we maintain a Policy Governing
Responsibilities of Financial Managers and Senior Officers (the "Financial
Responsibilities Policy") that applies to our senior executive officers
(Executive Vice President or above), Chief Financial Officer, Chief Accounting
Officer, Controller, and any other employees who are responsible for the
management of our funds or for the operation and maintenance of our financial
accounting and reporting system. The Code of Ethical Conduct and Financial
Responsibilities Policy include provisions applicable to our principal executive
officer, principal financial officer, principal accounting officer or
controller, or persons performing similar functions, which constitute a "code
of
ethics" within the meaning of Item 406(b) of Regulation S-K. Copies of the
Code of Ethical Conduct and Financial Responsibilities Policy are available
free
of charge on our website at http://www.knighttrans.com
and are
available in print to any shareholder who requests them.
Meetings
of the Board of Directors. During
the year ended December 31, 2006, our Board of Directors met on four
regularly scheduled occasions and did not hold any special meetings. Each of
the
directors, other than Randy Knight, attended 75% or more of the meetings of
the
Board of Directors and the meetings held by all of the committees of the Board
on which he or she served. We encourage our directors to attend our Annual
Meetings of Shareholders. Eight of our then-current directors attended the
2006
Annual Meeting of Shareholders.
Independent
Directors. In
accordance with NYSE Rule 303A.02(a), the Board of Directors affirmatively
determines the independence of each director after reviewing the findings and
recommendations of the Nominating and Corporate Governance Committee. Upon
the
recommendation of the Nominating and Corporate Governance Committee, the Board
has determined that Donald A. Bliss, G.D. Madden, Michael Garnreiter, Mark
Scudder, Kathryn L. Munro, and Richard J. Lehmann are independent (collectively,
the "Independent Directors"). Except in their capacities as directors or as
holders of an immaterial amount of securities of other entities, neither Mr.
Bliss, Mr. Madden, Mr. Garnreiter, nor Ms. Munro either directly or in his
or her capacity as a partner, shareholder, officer, or similar position of
another organization, has or in the past three years had any business or
financial relationship with us or any of our subsidiaries. Mr. Scudder is
president of a law firm to which we paid approximately $163,000 for legal
services in 2006 and which currently provides legal services to us. Based upon
information regarding the law firm's total revenues for each of the past three
years supplied by Mr. Scudder, the Board of Directors has determined that the
relationship between us and Mr. Scudder is not material. Mr. Lehmann is the
founding principal of a bank to which we maintained at certain times during
2006
a $5,000,000 deposit and of which Mr. Bliss and Mr. Randy Knight serve as
directors. The Board of Directors, after considering (i) the bank's total
deposit base, (ii) the substantial deposits we had at certain times during
the
year with other financial institutions, (iii) the fact that the bank matches
or
exceeds the return we receive from other depositories, and (iv) the nature
of
Messrs. Bliss' and Randy Knight's board service, determined that the
relationship between us and Mr. Lehmann is not material. See
"Certain
Relationships and Related Transactions" for additional information concerning
our financial relationships with Mr. Scudder. None of the Independent Directors
or any of their immediate family members has or had any of the disqualifying
relationships with us or our subsidiaries specified in NYSE Rule
303A.02(b).
Executive
Sessions. In
2006,
pursuant to NYSE Rule 303A.03, our Independent Directors held three meetings,
referred to as "executive sessions," at which only the Independent Directors
were present. The Chairman of the Nominating and Corporate Governance Committee
acts as the presiding director for all executive sessions. Donald A. Bliss
currently serves as the Chairman of the Nominating and Corporate Governance
Committee and will continue in that capacity following the Annual Meeting.
Our
non-management directors, who are comprised of the Independent Directors and
Randy Knight, met once in 2006 Our non-management directors and independent
directors will each continue to hold at least one meeting annually at which
only
independent and non-management directors are present, respectively.
Communication
with Directors. Our
Board
of Directors provides a process for shareholders to send written communications
to the entire Board or individual directors. If you wish to send a communication
to the entire Board of Directors, your communication should be addressed as
follows: The Board of Directors, Knight Transportation, Inc., c/o
Timothy M. Kohl - Secretary, 5601 West Buckeye Road, Phoenix, Arizona
85043. Written communications addressed in this manner will be copied and
distributed to each director at or prior to the next Board meeting. If you
wish
to communicate with an individual director, your communication should be
addressed as follows: Name - Director, Knight Transportation, Inc., c/o
Timothy M. Kohl - Secretary, 5601 West Buckeye Road, Phoenix, Arizona
85043. Written communications received in this manner will not be opened, but
rather delivered unopened to the director to whom they are addressed at or
prior
to the next Board meeting, following clearance through normal security
procedures.
In
addition, we provide a method for concerned parties to communicate directly
with
our non-management directors. Any person wishing to contact our non-management
directors may contact such directors through our presiding non-management
director, the Chairman of the Nominating and Corporate Governance Committee,
whose contact information may be obtained by writing our Secretary,
Timothy M. Kohl, at the address set forth above or by calling our Investor
Relations Department at telephone number (602) 606-6414.
The
Board
of Directors has standing Audit, Nominating and Corporate Governance,
Compensation, and Executive Committees. The Board does not maintain any other
standing committees. The following table sets forth the current membership
of
each of the standing committees of the Board of Directors.
|
Name
|
Audit
Committee
|
Nominating
and
Corporate
Governance
Committee
|
Compensation
Committee
|
Executive
Committee
|
|
Donald
A. Bliss
|
X
|
X
|
X
|
|
|
G.D.
Madden
|
X
|
X
|
||
|
Michael
Garnreiter
|
X
|
|||
|
Mark
Scudder
|
X
|
|||
|
Kevin
P. Knight
|
X
|
|||
|
Gary
J. Knight
|
X
|
|||
|
Kathryn
L. Munro
|
X
|
X
|
||
|
Richard
J. Lehmann
|
X
|
X
|
Purpose,
Functions, Composition, and Meetings. The
primary purpose of the Audit Committee is to assist the Board of Directors
in
its oversight of:
|
•
|
the
integrity of our financial statements;
|
|
•
|
the
qualifications, independence, and performance of our independent
registered public accounting firm; and
|
|
•
|
our
compliance with legal and regulatory requirements related to financial
reporting.
|
As
more
fully outlined in the Audit Committee's charter, the primary functions of the
Audit Committee include:
|
•
|
making
determinations regarding the selection and retention of our independent
registered public accounting firm and reviewing and pre-approving
such
firm's fees and the proposed scope of its services; and
|
|
•
|
reviewing,
and meeting with our management, internal auditors, and independent
registered public accounting firm, as applicable, to discuss our
financial
statements and financial and related disclosures, accounting policies
and
principles, internal control systems, and financial reporting
processes.
|
The
Audit
Committee currently is comprised of Donald A. Bliss, G.D. Madden, and
Michael Garnreiter, with Mr. Garnreiter serving as the Chairman. Each
member of the Audit Committee satisfies the independence and other audit
committee membership criteria set forth in NYSE Rule 303A.07. Specifically,
each
member of the Audit Committee:
|
•
|
is
independent under NYSE Rule 303A.02;
|
|
•
|
meets
the criteria for independence set forth in Rule 10A-3(b)(1) under
the
Securities Exchange Act of 1934, as amended (the "Exchange Act");
and
|
|
•
|
is
financially literate, as our Board of Directors has interpreted such
qualification in its business
judgment.
|
The
Audit
Committee met five times during 2006. Each member of the Audit Committee
attended all of the Audit Committee meetings during 2006.
Audit
Committee Financial Expert. The
Board
of Directors has determined that at least one "audit committee financial
expert," as defined under Item 407(d)(5) of Regulation S-K, currently serves
on
the Audit Committee. The Board of Directors has identified Michael Garnreiter
as
an audit committee financial expert. Mr. Garnreiter is independent, as
independence for audit committee members is defined under applicable NYSE
rules.
Audit
Committee Charter.
Since
1994, the Audit Committee has operated pursuant to a written charter detailing
its purpose, powers, and duties. In February 2007, the charter of the Audit
Committee was amended and restated to comply with SEC Release Nos. 33-8732
and
34-54302. The amendment and restatement of the Audit Committee Charter was
not
material in nature. A copy of the Audit Committee's current charter is available
free of charge on our website at http://www.knighttrans.com and is
available in print to any shareholder who requests it.
Report
of the Audit Committee. In
performing its duties, the Audit Committee, as required by applicable rules
and
regulations promulgated by the SEC, issues a report recommending to the Board
of
Directors that our audited financial statements be included in our Annual Report
on Form 10-K, and relating to certain other matters, including the
independence of our independent registered public accounting firm. The
Report
of the Audit Committee
follows.
The
Report of the Audit Committee 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 by specific reference.
The
Audit
Committee oversees the accounting and financial reporting processes of the
Company and the audit of the financial statements of the Company. Management
of
the Company has primary responsibility for the Company's financial statements
and the overall reporting process, including maintenance of the Company's system
of internal controls. The Company retains an independent registered public
accounting firm that is responsible for conducting an independent audit of
the
Company's financial statements in accordance with the standards of the Public
Company Accounting Oversight Board (United States), and issuing a report
thereon.
In
undertaking its responsibilities, the Audit Committee has discussed the
Company's financial statements with management and the Company's independent
registered public accounting firm and, in issuing this report, has relied upon
the responses and information provided to the Audit Committee by management
and
the independent registered public accounting firm.
For
the
fiscal year ended December 31, 2006, the Audit Committee has reviewed and
discussed the audited financial statements with management and Deloitte &
Touche LLP, the Company's independent registered public accounting firm.
Specifically, the Audit Committee has discussed with the independent registered
public accounting firm the matters required to be discussed by SAS 61
(Codification of Statements on Auditing Standards, AU § 380, Communication
with Audit Committees or Others with Equivalent Authority and Responsibility
and
Rule
2-07, Communication
With Audit Committees, of
Regulation S-X), which include, among other things:
|
•
|
methods
used to account for significant unusual transactions;
|
|
•
|
the
effect of significant accounting policies in controversial or emerging
areas for which there is a lack of authoritative guidance or
consensus;
|
|
•
|
the
process used by management in formulating particularly sensitive
accounting estimates and the basis for the accounting firm's conclusions
regarding the reasonableness of those estimates; and
|
|
•
|
disagreements
with management over the application of accounting principles, the
basis
for management's accounting estimates, and the disclosures in the
financial statements.
|
The
Audit
Committee has received the written disclosures and the letter from the
independent registered public accounting firm required by Independence Standards
Board Statement No. 1 (Independence
Discussions with Audit Committees)
and
discussed with the independent registered public accounting firm its
independence.
Based on the foregoing reviews and discussions, the Audit Committee recommended
to the Board of Directors that the audited financial statements be included
in
the Annual Report on Form 10-K for the year ended December 31, 2006, for
filing
with the Securities and Exchange Commission.
Michael
Garnreiter,
Chairman
G.D.
Madden,
Member
Donald
A. Bliss,
Member
Purpose,
Functions, Composition, and Meetings.
In
February 2003, the Board of Directors established a nominating committee to
recommend to the Board potential candidates for election as directors. In
November 2004, the nominating committee was reconstituted as the Nominating
and
Corporate Governance Committee. The Nominating and Corporate Governance
Committee currently is comprised of Richard J. Lehmann, Kathryn L. Munro, and
Donald A. Bliss, with Mr. Bliss serving as Chairman.
The
purposes of the Nominating and Corporate Governance Committee are to assist
the
Board of Directors in improving our corporate governance, to train members
of
the Board, to improve the Board's governance functions, and to assist us in
obtaining the highest quality independent directors. As more fully detailed
in
the Nominating and Governance Committee's charter, the primary functions of
the
committee include:
|
•
|
evaluating
the composition of the Board and selecting and recommending nominees
for
election or reelection to the Board or for appointment to fill Board
vacancies;
|
|
•
|
developing
and implementing regular and emergency succession plans for our senior
management positions; and
|
|
•
|
reviewing
and developing policies or making recommendations concerning other
aspects
of our corporate governance, such as the Board committee structure,
our
corporate governance guidelines, director training and evaluation
programs, and potential conflicts of
interest.
|
All
current members of the Nominating and Corporate Governance Committee are
independent, as independence for nominating committee members is defined under
applicable NYSE rules. In 2006, the Nominating and Corporate Governance
Committee held one meeting.
The
Nominating and Corporate Governance Committee met in March 2007 and recommended
that the Board of Directors nominate Kevin P. Knight, Randy Knight, and Michael
Garnreiter, for election as Class III directors. All nominees are presently
directors and have consented to stand for re-election. Mr. Randy Knight has
been
ill recently and the Board, at his request, has placed him on a medical leave
of
absence, not to exceed one year, until he has recovered. Mr. Randy Knight’s
medical condition has improved and it is anticipated that he will recover fully
from his illness. The Nominating and Corporate Governance Committee recommended
and the Board renominated Mr. Randy Knight to stand for election as a director
due to the substantial contributions he has made to the Board and to our company
over the years, his knowledge of the transportation industry, and the
contributions the Committee and Board expect that he will make in the future.
Nominating
and Corporate Governance Committee Charter.
A
written charter for the Nominating and Corporate Governance Committee was
adopted in March 2005. A copy of the charter is available free of charge on
our
website at http://www.knighttrans.com and is available in print to any
shareholder who requests it.
Process
for Identifying and Evaluating Director Nominees. Director
nominees are chosen by the entire Board of Directors, after considering the
recommendations of the Nominating and Corporate Governance Committee. As a
matter of course, the members of the Nominating and Corporate Governance
Committee review the qualifications of various persons to determine whether
they
should be considered as candidates for membership on the Board of Directors.
The
Nominating and Corporate Governance Committee also accepts recommendations
of
director candidates from our other outside directors and our executive officers,
advisors, and shareholders. We do not pay a fee to any third party to identify
or evaluate or assist in identifying or evaluating potential
nominees.
The
Nominating and Corporate Governance Committee will review all candidate
recommendations, including those properly submitted by shareholders, in
accordance with the mandate contained in its charter. This will include a review
of the person's judgment, integrity, independence, management or business skills
and experience (particularly with public companies and companies in our industry
or other industries related to our business), prominence and reputation in
their
profession, knowledge of corporate governance issues and Board functions,
commitment to attend and actively participate in meetings and related Board
activities, other commitments and responsibilities, and such other factors
as
the Nominating and Corporate Governance Committee determines are appropriate
in
light of our needs and the needs of the Board. With regard to specific qualities
and skills, the Nominating and Corporate Governance Committee believes it
necessary that: (i) at least a majority of the members of the Board of
Directors qualify as "independent" under NYSE Rule 303A.02; (ii) at least
three members of the Board of Directors satisfy the audit committee membership
criteria specified in NYSE Rule 303A.07; and (iii) at least one member of the
Board of Directors eligible to serve on the Audit Committee has sufficient
knowledge, experience, and training concerning accounting and financial matters
so as to qualify as an "audit committee financial expert" within the meaning
of
Item 407(d)(5) of Regulation S-K.
In
addition to the qualifications and considerations described above, our corporate
governance guidelines contain the following director eligibility criteria that
impact the director nomination process:
|
•
|
a
mandatory retirement age of 82 for all directors, subject to waiver
by a
majority of the Board;
|
|
•
|
director
term limits of 20 years, following March 2, 2005, for all directors,
subject to waiver by a majority of the Board;
|
|
•
|
no
director may serve on more than five public company boards of directors,
including our Board; and
|
|
•
|
our
Chief Executive Officer may not serve on more than two other public
company boards of directors in addition to our
Board.
|
Consideration
of Director Candidates Recommended by Shareholders.
The
Nominating and Corporate Governance Committee will consider director candidates
recommended by shareholders, provided that the following procedural requirements
are satisfied. Candidate recommendations should be mailed via certified mail,
return receipt requested, and addressed to the Nominating and Corporate
Governance Committee, Knight Transportation, Inc., c/o Timothy M. Kohl -
Secretary, 5601 West Buckeye Road, Phoenix, Arizona 85043. In order to be
considered, a shareholder recommendation must: (i) be received at least 120
days
prior to the first anniversary of the date of the proxy statement for the prior
year's Annual Meeting (by December 15, 2007 for director candidates to
be considered for nomination for election at the 2008 Annual Meeting of
Shareholders); (ii) contain sufficient background information, such as a resume
and references, to enable the Committee to make a proper judgment regarding
the
qualifications of the proposed nominee; (iii) be accompanied by a signed consent
of the proposed nominee to serve as a director if elected and a representation
that such proposed nominee qualifies as "independent" under NYSE Rule 303A.02
or, if the proposed nominee does not qualify, a description of the reason(s)
he
or she is not "independent"; (iv) state the name and address of the person
submitting the recommendation and the number of shares of our Common Stock
owned
of record or beneficially by such person; and (v) if submitted by a beneficial
shareholder, be accompanied by evidence that the person making the
recommendation beneficially owns shares of our Common Stock.
Purpose,
Functions, Composition, and Meetings. The
purpose of the Compensation Committee is to review, analyze, recommend, and
approve all aspects of executive compensation. As more fully outlined in the
Compensation Committee's charter, the primary functions of the Compensation
Committee include:
|
•
|
reviewing
and approving corporate goals and objectives relating to the compensation
of the Chief Executive Officer, evaluating the Chief Executive Officer's
performance in light of those objectives, and determining and approving
the Chief Executive Officer's compensation based upon this
evaluation;
|
|
•
|
reviewing
and making recommendations to the Board regarding the compensation
of our
other executive officers;
|
|
•
|
reviewing
and approving all forms of incentive compensation, including stock
options
and other stock-based awards to our executive officers;
and
|
|
•
|
administering
our stock option plan as in effect from
time-to-time.
|
During
2006, the Compensation Committee was comprised of G.D. Madden, Richard J.
Lehmann, and Kathryn L. Munro, with Ms. Munro serving as Chairperson. The
Compensation Committee met three times in 2006. At those meetings, the
Compensation Committee approved executive bonuses for fiscal year 2005, approved
the compensation of, and option grants awarded to, our executive officers for
fiscal year 2006, established performance targets for 2006, issued its
Report
on Executive Compensation
for
inclusion in the proxy statement relating to the 2006 Annual Meeting of
Shareholders, and reviewed the compensation of our directors who are not 10%
shareholders, officers, or employees of ours ("Outside Directors"). See
"Executive
Compensation -
Compensation Discussion and Analysis" for a discussion of, including the
Compensation Committee's role in implementing, our processes and procedures
for
setting executive compensation. See
"Executive
Compensation - Director Compensation" for
a
discussion of, including the Compensation Committee's role in implementing,
our
processes and procedures for setting director compensation.
Compensation
Committee Charter. In
February 2007, the charter of the Compensation Committee was amended and
restated to comply with SEC Release Nos. 33-8732 and 34-54302. The amendment
and
restatement of the Compensation Committee Charter was not material in nature.
A
copy of the Compensation Committee's current charter is available free of charge
on our website at http://www.knighttrans.com and is available in print to
any shareholder who requests it.
None
of
the current members of the Compensation Committee have been, or are, an
officer or employee of our company. During 2006, 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. 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.
Report
of the Compensation Committee. In
performing its duties, the Compensation Committee, as required by applicable
rules and regulations promulgated by the SEC, issues a report recommending
to
the Board of Directors that our Compensation Discussion and Analysis be included
in this Proxy Statement and our Annual Report on Form 10-K. The
Report
of the Compensation Committee
follows.
The
Report of the Compensation Committee 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 by specific reference.
Report
of the Compensation Committee
We
have
reviewed and discussed the Compensation Discussion and Analysis contained in
this Proxy Statement with management. Based on that review and discussion,
we
have recommended to the Board of Directors that the Compensation Discussion
and
Analysis be included in this Proxy Statement and in Knight Transportation,
Inc.'s Annual Report on Form 10-K for the year ended December 31,
2006.
Kathryn
Munro, Chairperson
G.D.
Madden,
Member
Richard
J.
Lehmann, Member
The
Executive Committee of the Board was established in November 2000. The Executive
Committee is authorized to act on behalf of the Board of Directors when the
Board of Directors is not in session. The current members of the Executive
Committee are Kevin P. Knight, Gary J. Knight, Donald A. Bliss,
and Mark Scudder. The Executive Committee met once in 2006.
Director
Evaluation Program. The
Nominating and Corporate Governance Committee is responsible for developing
and
implementing a director evaluation program to measure the individual and
collective performance of directors and the fulfillment of their
responsibilities to our shareholders, including an assessment of the Board's
compliance with applicable corporate governance requirements and identification
of areas in which the Board might improve its performance. The Nominating and
Corporate Governance Committee also is responsible for developing and
recommending to the Board of Directors for approval an annual self-evaluation
process for the Board designed to assure that directors contribute to our
corporate governance and to our performance.
Director
Orientation and Training. The
Nominating and Corporate Governance Committee is responsible for developing
and
implementing an orientation program for new directors. Under this program,
we
provide new, non-management directors a variety of materials to assist them
in
familiarizing themselves with our business, management structure, and operations
and key legal, financial, risk management, and operational issues, as well
as
the policies, procedures, and responsibilities of the Board and its committees.
New, non-management directors also meet with members of our senior management
and other non-management directors as part of their orientation. We
periodically provide materials to directors on various subjects to assist them
in understanding our business and operations and in effectively discharging
their duties.
Authority
to Engage Advisors. Each
of
the Audit Committee, the Nominating and Corporate Governance Committee, and
the
Compensation Committee is conferred by its charter with explicit authority
to
engage its own independent advisors.
Management
Succession Planning. The
Board
of Directors has adopted a management succession plan that identifies emergency
and potential long-term successors to our Chief Executive Officer, President,
Chief Financial Officer, and certain other key members of senior management.
The
Nominating and Corporate Governance Committee, following consultation with
our
Chief Executive Officer, is responsible for making an annual report to the
Board
of Directors with regard to management succession planning. After reviewing
this
report and consulting with the members of the Nominating and Corporate
Governance Committee and the Chief Executive Officer, the Board of Directors
makes any changes or updates to the management succession plan that it
determines are appropriate.
The
following table sets forth, as of March 31, 2007, certain information regarding
our executive officers and Michael K. Liu, Erick Kutter, and Greg Ritter, three
of our significant employees.
|
Name
|
Age
|
Position
|
||
|
Kevin
P. Knight
|
50
|
Chairman
of the Board and Chief Executive Officer
|
||
|
Gary
J. Knight
|
55
|
Vice
Chairman of the Board
|
||
|
Keith
T. Knight
|
52
|
Chief
Operating Officer
|
||
|
Timothy
M. Kohl
|
59
|
President
and Secretary
|
||
|
David
A. Jackson
|
31
|
Chief
Financial Officer and Treasurer
|
||
|
Casey
Comen
|
53
|
Executive
Vice President of Sales
|
||
|
Michael
K. Liu
|
34
|
President
of Knight Transportation - Dry Van
|
||
|
Erick
Kutter
|
39
|
President
of Knight Refrigerated, LLC
|
||
|
Greg
Ritter
|
48
|
President
of Knight Brokerage, LLC
|
Keith
T. Knight has
served as our Chief Operating Officer since May 2006. Prior to his appointment
as Chief Operating Officer, Mr. Knight served as our Executive Vice President
from 1993 until May 2006, and has been one of our officers since 1990. He served
as a director of our Board of Directors from 1990 to 2004. From 1977 until
1990,
Mr. Knight was employed by Swift, where he was a Vice President and Manager
of Swift's Los Angeles terminal.
Timothy
M.
Kohl
joined
us in 1996. Mr. Kohl has served as our President since January 2004 and as
our
Secretary since October 2000. Mr. Kohl was a director of our Board of Directors
from May 2001 to February 2006, and he served as our Chief Financial Officer
from October 2000 to January 2004. Mr. Kohl served as our Vice President of
Human Resources from January 1996 through May 1999. From May 1999 through
October 2000, Mr. Kohl served as Vice President of our Southeast Region. Prior
to his employment with us, Mr. Kohl was employed by Burlington Motor Carriers
as
Vice President of Human Resources. Prior to his employment with Burlington
Motor
Carriers, Mr. Kohl served as Vice President of Human Resources for J.B.
Hunt.
David
A. Jackson joined
us
in April 2000. He has served as our Chief Financial Officer since
January 2004 and as our Treasurer since May 2006. Mr. Jackson served as our
Corporate Purchasing Manager from April 2000 until July 2002, and as the Owner
Operator Program Director from July 2002 until January 2004.
Casey
Comen has
served as our Executive Vice President of Sales since March 2004. Prior to
joining us, Mr. Comen was employed by Swift, where he most recently served
as
the Vice President of Sales and Marketing from 1997 through January
2004.
Michael
K. Liu was
appointed President of the Knight Transportation - Dry Van in April 2007. Prior
to his appointment as President of Knight Transportation - Dry Van, Mr. Liu
served as a division manager for our Southern California Division since December
2003. Mr. Liu also served as a training manager for our driver development
department from January 2000 to December 2003.
Erick
Kutter joined
us
in February 1993. He has served as the President of Knight Refrigerated, LLC,
our asset-based refrigerated business, since July 2004. Prior to his appointment
as President of Knight Refrigerated, Mr. Kutter was responsible for opening
our
service centers in Katy, Texas, Kansas City, Kansas, and Atlanta, Georgia.
Mr.
Kutter also served as the division manager of our service center in
Indianapolis, Indiana from July 1998 to April 2001.
Greg
Ritter
joined
us in 2005. He has served as the President of Knight Brokerage, LLC, our
non-asset based brokerage business, since the opening of our brokerage business.
He began his career in 1979 with C.H.Robinson Worldwide, where he was the branch
manager for the Phoenix office for 18 years.
See
"Proposal No. 1 - Election of Directors" for information concerning the business
experience of Kevin P. Knight. See
"Continuing Directors" for information concerning the business experience of
Gary J. Knight.
Section
16(a) of the Exchange Act requires our directors and executive officers, and
persons who own more than 10% of a registered class of our equity securities,
to
file with the SEC reports of ownership and changes in ownership of our Common
Stock and other equity securities. Our officers, directors, and greater than
10%
beneficial owners are required by SEC regulations to furnish us with copies
of
all Section 16(a) forms they file. Based solely upon a review of the copies
of
such reports furnished to us, or written representations that no other reports
were required, we believe that during the 2006 fiscal year, all Section 16(a)
filing requirements applicable to our directors, executive officers, and greater
than 10% beneficial owners were complied with, except that: (i) each of Donald
A. Bliss, Mark Scudder, Kathryn L. Munro, Richard J. Lehmann, and Randy Knight
did not timely report on Form 4 a grant of shares of common stock which occurred
in February 2006; and (ii) Randy Knight did not timely report a grant of an
option which occurred in June 2006. All such transactions have been reported
in
subsequent filings. Copies of Section 16(a) forms that our directors and
executive officers file with the SEC are accessible through our website at
http://www.knighttrans.com.
Overview
and Philosophy of Compensation
The
Compensation Committee has the responsibility to review, recommend, and approve
all executive officer compensation arrangements. The Compensation Committee
has
the specific responsibility to (i) review and approve corporate goals and
objectives relevant to the compensation of our Chief Executive Officer,
(ii) evaluate the performance of our CEO in light of those goals and
objectives, and (iii) determine and approve the compensation level of our
CEO based upon that evaluation. The Compensation Committee also has the
responsibility to annually review the compensation of our other executive
officers and to determine whether such compensation is reasonable under existing
facts and circumstances. In making such determinations, the Compensation
Committee seeks to ensure that the compensation of our executive officers aligns
the executives' interests with the interests of our shareholders. The
Compensation Committee must also review and approve all forms of incentive
compensation, including stock option grants, stock grants, and other forms
of
incentive compensation granted to our executive officers. The Compensation
Committee takes into account the recommendations of our CEO in reviewing and
approving the overall compensation of the other executive officers.
We
believe that the quality, skills, and dedication of our executive officers
are
critical factors affecting our long-term value and success. Thus, one of our
primary executive compensation goals is to attract, motivate, and retain
qualified executive officers. We seek to accomplish this goal by rewarding
past
performance, incentivizing future performance, and aligning our executive
officers' long-term interests with those of our shareholders. Our compensation
program is specifically designed to reward our executive officers for individual
performance, years of experience, contributions to our financial success, and
creation of shareholder value. Our compensation philosophy is to provide overall
compensation levels that (i) attract and retain talented executives
and motivate those executives to achieve superior results, (ii) align
executives' interests with our corporate strategies, our business objectives,
and the long-term interests of our shareholders, and (iii) enhance executives'
incentives to increase our stock price and maximize shareholder value. In
addition we strive to ensure that our compensation, particularly salary
compensation, is consistent with our constant focus on controlling costs. Our
primary strategy for building senior management depth has been to develop
personnel from within our company to ensure that our executive team as a whole
remains dedicated to our customs, practices, and culture, recognizing, however,
that we may gain talent and new perspectives from external sources. Accordingly,
in many instances we build our compensation elements around long-term retention
and development together with annual rewards based on specific focus
areas.
Elements
of Compensation
Our
compensation program for senior executive officers generally consists of the
following five elements:
|
•
|
base
salary;
|
|
•
|
performance-based
annual cash bonus determined primarily by reference to objective
financial
and operating criteria;
|
|
•
|
long-term
equity incentives in the form of stock options and other stock-based
awards or grants;
|
|
•
|
specified
perquisites; and
|
|
•
|
employee
benefits that are generally available to all of our
employees.
|
The
Compensation Committee has the responsibility to make and approve changes in
the
total compensation of our executive officers, including the mix of compensation
elements. In making decisions regarding an executive's total compensation,
the
Compensation Committee considers whether the total compensation is (i) fair
and
reasonable to us, (ii) internally appropriate based upon our culture and
the compensation of our other employees, and (iii) within a reasonable range
of
the compensation afforded by other opportunities. The Compensation Committee
also bases its decisions regarding compensation upon its assessment of the
executive's leadership, individual performance, years of experience, skill
set,
level of commitment and responsibility required in the position, contributions
to our financial success, the creation of shareholder value, and current and
past compensation. In determining the mix of compensation elements, the
Compensation Committee considers the effect of each element in relation to
total
compensation. Consistent with our culture of cost control and industry-leading
performance, the Compensation Committee historically has attempted to keep
base
salaries relatively low and weight overall compensation toward incentive cash
and equity-based compensation. The Compensation Committee specifically considers
whether each particular element provides an appropriate incentive and reward
for
performance that sustains and enhances long-term shareholder value. The
Compensation Committee also considers the tax consequences associated with
each
element of compensation, including whether the deductibility of compensation
is
expected to be limited under Section 162(m) of the Internal Revenue Code. In
determining whether to increase or decrease an element of compensation, we
rely
upon the Compensation Committee's judgment concerning the contributions of
each
executive and, with respect to executives other than the CEO, we consider the
recommendations of the CEO. We generally do not rely on rigid formulas (other
than performance measures under our annual cash bonus program) or short-term
changes in business performance when setting compensation.
The
following is a discussion of each element of our compensation program, including
(i) why we choose to pay each element, (ii) how we determine the specific
amount to pay for each element, and (iii) how each element, and our
decisions regarding each element, fit into our overall compensation objectives
and affect decisions regarding other elements. We also discuss the specific
decisions we made with respect to the compensation of our Chief Executive
Officer, Chief Financial Officer, and our three other most highly compensated
executive officers for the fiscal year ended December 31, 2006 (collectively,
the "Named Executive Officers"). We made all such decisions in the context
of us
generating higher year-over-year operating income for the 48th consecutive
quarter, improving our net margin for the sixth consecutive year, successfully
closing the acquisition of Roads West, opening seven new service centers, and
being named to ForbesMagazine's
list of the "200 Best Small Companies in America" for the twelfth consecutive
year.
Base
Salary
We
pay
base salaries at levels that reward executive officers for ongoing performance
and that enable us to attract and retain highly qualified executives, but not
at
a level that allows them to achieve the overall compensation they desire. Base
pay is a critical element of our compensation program because it provides our
executive officers with stability. Such stability allows our executives to
focus
their attention and efforts on creating shareholder value and on our other
business objectives. In determining base salaries, we consider an executive's
qualifications and experience, including, but not limited to, the executive's
industry knowledge and the quality and effectiveness of the executive's
leadership, scope of responsibilities, past performance, and future potential
of
providing value to our shareholders. Although we do not believe it is
appropriate to establish compensation levels based solely on benchmarking
because of geographic and incentive compensation differences, we consider base
salaries of executives having similar qualifications and holding comparable
positions in companies similarly situated to ours. We set our base salaries
at a
level that allows us to pay a portion of an executive officer's total
compensation in the form of perquisites, cash bonuses, and long-term incentives.
We believe that such a mix of compensation helps us incentivize our executives
to maximize shareholder value. We consider adjustments to base salaries
annually to reflect the foregoing factors but do not apply a specific weighting
to such factors.
Base
Salary of Our Chief Executive Officer. In
July
2005, a specially constituted Compensation Committee of our Board of Directors,
composed exclusively of outside directors, engaged Frederic W. Cook & Co.,
Inc., an independent compensation consultant, to assist the Compensation
Committee in establishing a compensation package for Kevin P. Knight, our
Chairman of the Board and CEO. The Compensation Committee reviewed the
independent compensation consultant's recommendations and set Mr. Knight's
base
salary at $540,000 for 2005. In May 2006, after reviewing our financial
performance for the fiscal year ended December 31, 2005, and considering our
compensation philosophy and the guidelines described above, the Compensation
Committee approved a $50,000 increase to Mr. Knight's base salary.
Base
Salary of Our Other Named Executive Officers.
In May
2006, after reviewing our financial performance for the fiscal year ended
December 31, 2005, and considering our compensation philosophy and the
guidelines described above, the Compensation Committee approved the following
annual base salary increases for our Named Executive Officers, other than our
CEO: (i) a $32,500 increase for David A. Jackson in continued recognition
of his development and increased level of responsibilities as our Chief
Financial Officer, with the relatively large percentage increase being justified
by a very low starting point and the need to bring his salary more in line
with
the position of Chief Financial Officer; (ii) a $40,000 increase for
Timothy M. Kohl in continued recognition of his promotion to the position of
President and his development and increased responsibilities attendant to such
position; (iii) a $10,000 increase for Keith T. Knight in recognition of
his promotion to our Chief Operating Officer and the increased responsibilities
attendant to such position, and (iv) a $10,000 increase for Casey Comen in
continued recognition of his increased responsibilities as our Vice President
of
Sales.
The
following table reflects the adjustments we made from 2005 to 2006 to the base
salaries of our Named Executive Officers:
|
Named
Executive Officer and Principal Position
|
2005
Base
Salary
($)
|
2006
Base
Salary
($)
|
|||||
|
Kevin
P. Knight, Chairman and CEO
|
540,000
|
590,000
|
|||||
|
David
A. Jackson, Chief Financial Officer
|
100,000
|
132,500
|
|||||
|
Timothy
M. Kohl, President
|
290,000
|
330,000
|
|||||
|
Keith
T. Knight, Chief Operating Officer
|
315,000
|
325,000
|
|||||
|
Casey
Comen, Vice President of Sales
|
250,000
|
260,000
|
|||||
|
TOTAL
|
1,495,000
|
1,637,500
|
|||||
Performance-Based
Annual Cash Bonuses
On
December 21, 2005, our shareholders approved and ratified our 2005 Executive
Cash Bonus Plan ("Cash Bonus Plan"). We use our Cash Bonus Plan to provide
annual incentives to executive officers in a manner designed to (i) link
increases in compensation to increases in our income in order to reinforce
cost
controls, (ii) reinforce our performance goals, and (iii) link a
significant portion of our executives' compensation to the achievement of such
goals. We also use the Cash Bonus Plan to preserve for our benefit a federal
tax
deduction for payments of incentive compensation to our executive officers.
Cash
bonuses are designed to reward executive officers for their contributions to
our
financial and operating performance and are based primarily upon our financial
results and certain operating statistics that the Compensation Committee
identifies each year as being important to our success.
Under
the
Cash Bonus Plan, the Compensation Committee is required to set, for each
executive officer, one or more objective performance targets. The annual cash
bonus amount awarded to each executive officer is dependent upon the executive
reaching or exceeding such performance targets. Performance targets may be
based
on the attainment of specified levels of one or any variation or combination
of
the factors listed in the Cash Bonus Plan. Corporate performance targets are
typically established on a combined basis of sales and earnings growth targets.
Additionally, individual performance targets may be based on the successful
implementation of corporate policies, negotiation of significant corporate
transactions, development of long-term business goals or strategic plans, or
the
exercise of specific areas of managerial responsibility. Each performance target
may be expressed on an absolute and/or relative basis with respect to one or
more peer group companies or indices and may include comparisons with our past
performance. The Compensation Committee also reserves the right to award cash
bonuses for achievements outside the objective performance targets, but such
awards may not exceed one-third of the maximum amount achievable under the
objective targets, except in extraordinary circumstances. The Compensation
Committee sets the specific performance targets for each executive officer
after
(i) engaging in active dialog with our CEO concerning our strategic
objectives and performance, and (ii) reviewing the appropriateness of the
financial measures used in the Cash Bonus Plan. Performance targets must be
established for each executive officer prior to the 90th day of each fiscal
year.
Concurrently
with establishing the performance targets, the Compensation Committee must
also
establish a maximum cash bonus award opportunity for each executive officer.
An
executive's maximum cash bonus award opportunity may not exceed the plan maximum
of $2 million annually (however, the maximum award approved for any executive
has never exceeded $354,000). In determining an executive officer's maximum
cash
bonus opportunity, the Compensation Committee considers (i) the value that
achieving specific performance targets will add to our shareholders, (ii) the
degree of difficulty in achieving specific performance targets, and (iii) each
of the other elements comprising the executive's total compensation. When
calculating the cash bonus earned by an executive officer, the Compensation
Committee may, in its sole discretion, eliminate or reduce the size of a bonus
if it deems such action is appropriate but may not increase a bonus above the
executive's maximum cash bonus opportunity. Further, the Compensation Committee
is required to certify, prior to payment, that the executive officer achieved
the respective performance targets underlying the cash bonus.
Performance-Based
Annual Cash Bonuses Paid to Our Named Executive Officers.
For
2006, the Compensation Committee approved maximum performance-based cash bonus
opportunities under which (i) Kevin P. Knight was eligible to receive a cash
bonus of up to 60% of his base salary; (ii) Timothy M. Kohl was eligible to
receive a cash bonus of up to 40% of his base salary; and (iii) each of David
A.
Jackson, Casey Comen, and Keith T. Knight were eligible to receive a cash bonus
of up to 30% of their respective base salaries. The percentage of salary
assigned to each executive officer was based on the Compensation Committee's
evaluation of the magnitude of each executive officer's ability to impact
corporate performance based on the executive's responsibilities at the time.
These percentages may change from time to time as responsibilities of the
executive officers change and as specific goals evolve.
For
2006,
the Compensation Committee established performance targets for our Named
Executive Officers based on specific sales and earnings growth targets, the
successful expansion of new service centers, cash collection benchmarks, and
other personal goals relevant to each officer's position and scope of
responsibility. In addition to setting these specific performance targets,
the
Compensation Committee determined that, in all cases, earnings per diluted
share
("EPS") growth of 20.0% or more would substitute for non-achievement of all
other performance targets. The Compensation Committee believed that the
performance targets, specifically the growth in EPS, represented aggressive,
yet
achievable goals for the executives to earn 100% of the maximum cash bonus
award.
For
2006,
we achieved EPS growth of 20.6%. Thus, the Compensation Committee did not
compare our financial performance and the performance of each Named Executive
Officer against the performance targets described above. Instead, the
Compensation Committee substituted the achievement of EPS growth of 20.6% for
the performance targets and awarded each Named Executive Officer the maximum
cash bonus award. For 2006, our Named Executive Officers received cash bonuses
in the following amounts:
|
Named
Executive Officer and Principal Position
|
2006
Performance -
Based
Bonus ($)
|
|
|
Kevin
P. Knight, Chairman and CEO
|
354,000
|
|
|
David
A. Jackson, Chief Financial Officer
|
39,750
|
|
|
Timothy
M. Kohl, President
|
132,000
|
|
|
Keith
T. Knight, Chief Operating Officer
|
97,500
|
|
|
Casey
Comen, Vice President of Sales
|
78,000
|
In
determining EPS growth from 2005 to 2006, the Compensation Committee, pursuant
to its authority granted under the Cash Bonus Plan, excluded the net after
tax
impact of our adoption of Statement of Financial Accounting Standards No. 123,
which requires us to expense non-cash stock-based compensation. The Compensation
Committee believed such an adjustment was fair and reasonable because the
Committee did not consider the effect of SFAS 123R when setting the performance
targets for 2006 and the base year (2005) did not include the effect of SFAS
123R.
Long-Term
Incentives
On
December 21, 2005, our shareholders approved and ratified our Amended and
Restated 2003 Stock Option Plan ("Stock Option Plan"). Our Stock Option Plan
is
a broad-based equity compensation plan that we use to attract, motivate, and
retain qualified executive officers by providing them with long-term incentives.
We also use the Stock Option Plan to align our executives' and shareholders'
long-term interests by creating a strong and direct link between executive
pay
and shareholder return.
The
Stock
Option Plan allows the Compensation Committee to link compensation to
performance over a period of time by granting awards that have multiple-year
vesting schedules. Awards with multiple-year vesting schedules, such as stock
options, provide balance to the other elements of our compensation program
that
otherwise link compensation to annual performance. Awards with multiple-year
vesting schedules create incentive for executive officers to increase
shareholder value over an extended period of time because the value received
from such awards is based on the growth of the stock price above the grant
price. Such awards also incentivize executives to remain with us over an
extended period of time. Thus, we believe our Stock Option Plan is an effective
way of aligning the interests of our executive officers with those of our
shareholders.
Under
the
Stock Option Plan, the Compensation Committee may grant stock options or award
restricted stock as forms of executive officer compensation. To date, the
Compensation Committee has only awarded stock options under the Stock Option
Plan because the Committee believes that stock options have historically been
an
effective means of incentivizing executive officers to work toward, and
rewarding them for, increasing shareholder value. The Compensation Committee
recognizes a broad trend toward some level of restricted stock grants and may,
in its discretion, award restricted stock in the future.
The
Compensation Committee considers several factors when determining the number
of
options to award to our executive officers. In August 2005, the Compensation
Committee approved a policy that any annual stock option granted to our CEO
would fall within a range of 150% to 250% of the next highest annual stock
option award made to our executive officers, excluding our Chairman and CEO.
Thus, the Compensation Committee must consider this policy when determining
the
number of options to award to both our CEO and our other executive officers.
In
addition to the foregoing, when determining the number of options to grant
other
executive officers, the Compensation Committee considers (i) the
recommendations of our CEO; (ii) the value of the option in relation to other
elements of total compensation; (iii) the number of options currently held
by
the executive; (iv) the number of options granted to the executive in prior
years; and (v) the executive's position, scope of responsibility, ability
to affect our profits, ability to create shareholder value, and historic and
recent performance.
Long
Term Incentives Awarded to Our Named Executive Officers.
On May
24, 2006, after considering each of the factors described above, the
Compensation Committee granted each of our Named Executive Officers an option
to
purchase shares of our Common Stock, with an exercise price equal to the fair
market value of the underlying Common Stock on the date of the grant, in the
following amounts:
|
Named
Executive Officer and Principal Position
|
Options
Granted
(#)
|
|
|
Kevin
P. Knight, Chairman and CEO
|
75,000
|
|
|
David
A. Jackson, Chief Financial Officer
|
15,000
|
|
|
Timothy
M. Kohl, President
|
30,000
|
|
|
Keith
T. Knight, Chief Operating Officer
|
30,000
|
|
|
Casey
Comen, Vice President of Sales
|
10,000
|
In
February 2007, the Compensation Committee approved a policy whereby the primary
grant of options or restricted stock to our Named Executive Officers may
only be
made once per year and then only on the date of the Annual Meeting of
Shareholders, unless an executive officer or director is newly hired or
retained. In the case of a newly hired or retained executive officer or
director, the Compensation Committee may grant options or restricted stock
grants on the 25th
day (or
if the 25th
day is
not a business day, on the next business day) of the second calendar month
after
the close of each calendar quarter. Prior to the approval of the Compensation
Committee's new policy, grants had historically been made once per year
contemporaneously with or following annual salary determinations. Options
granted under our Stock Option Plan (i) have a grant date that is
established when the Compensation Committee approves the grant and all key
terms
have been determined, (ii) have an exercise price equal to the fair market
value
of the underlying Common Stock on the date of the grant, (iii) are subject
to a vesting schedule, (iv) are exercisable for a maximum term of 10 years,
and (v) once made, may not be repriced.
Other
Compensation
We
provide our Named Executive Officers with certain other benefits that we believe
are reasonable, competitive, and consistent with our overall executive
compensation program. We believe that these benefits generally allow our
executives to work more efficiently. The costs of these benefits generally
constitute only a small percentage of each executive's total compensation with
the exception being the air travel allowance for our CEO. In setting the amount
of these benefits, the Compensation Committee considers (i) each executive's
position and scope of responsibilities, and (ii) all other elements comprising
the executive's compensation. We provided the following additional benefits
to
our Named Executive Officers during 2006: (i) a vehicle allowance, (ii) an
air travel allowance (for only our CEO), and (iii) payment of life insurance
premiums (for only Timothy M. Kohl). We report these costs as personal benefits
for the Named Executive Officers in the "All Other Compensation" column in
the
Summary Compensation Table below.
Employee
Benefits
Our
Named
Executive Officers are eligible to participate in all of our employee benefit
plans, such as our 401(k) Plan and medical, dental, and group life insurance
plans, in each case on the same basis as our other employees.
Employee
Benefits Paid to Our Named Executive Officers.
In
2006, in addition to providing medical, dental, and group life insurance to
our
Named Executive Officers, we also contributed $850, which represents our maximum
matching discretionary contribution per participant, to the 401(k) Plan of
each
Named Executive Officer.
Employment
Agreements
We
currently do not have any employment contracts, severance agreements, or
change-of-control agreements with any of our Named Executive
Officers.
The
following table sets forth information concerning the total compensation for
fiscal year 2006 awarded to, earned by, or paid to those persons who were,
at
December 31, 2006, (i) our Chief Executive Officer, (ii) our Chief
Financial Officer, and (iii) our three other most highly compensated executive
officers with total compensation exceeding $100,000 for the fiscal year ended
December 31, 2006 (collectively, the "Named Executive Officers").
|
Name
and
Principal
Position
|
Year
|
Salary
($)
|
Options
Awards(1)
($)
|
Non-Equity
Incentive
Plan
Compensation(2)
($)
|
All
Other
Compensation(3)
($)
|
Total
($)
|
|
Kevin
P. Knight,
Chairman
and Chief Executive Officer
|
2006
|
568,462
|
210,482
|
354,000
|
196,833
|
1,329,777
|
|
David
A. Jackson,
Chief
Financial Officer
|
2006
|
118,500
|
68,393
|
39,750
|
850
|
227,493
|
|
Timothy
M. Kohl,
President
|
2006
|
312,769
|
247,754
|
132,000
|
21,990
|
714,513
|
|
Keith
T. Knight,
Chief
Operating Officer
|
2006
|
328,961
|
124,690
|
97,500
|
850
|
552,001
|
|
Casey
Comen,
Vice
President of Sales
|
2006
|
255,692
|
94,341
|
78,000
|
12,934
|
440,967
|
|
(1)
|
This
column represents the dollar amount recognized for financial statement
reporting purposes with respect to the 2006 fiscal year for the fair
value
of stock options granted to each Named Executive Officer, in 2006
as well
as prior fiscal years, in accordance with SFAS 123R. Pursuant to
SEC
rules, the amounts shown exclude the impact of estimated forfeitures
related to service-based vesting conditions. For additional information
on
the valuation assumptions with respect to the 2006 grants, refer
to note 8
of our financial statements as provided in the Form 10-K for the
year-ended December 31, 2006, as filed with the SEC. For information
on
the valuation assumptions with respect to grants made prior to 2006,
refer
to the notes of our financial statements as provided in the Form
10-K for
the respective year-end. See the Grants of Plan-Based Awards Table
for
information on options granted in 2006. These amounts reflect our
accounting expense for these awards, and do not correspond to the
actual
value that will be recognized by the Named Executive
Officers.
|
|
(2)
|
See
the Grants of Plan-Based Awards Table for additional
information.
|
|
(3)
|
See
the All Other Compensation Table for additional
information.
|
The
following table describes each component of the "All Other Compensation" column
in the Summary Compensation Table.
|
Name
|
Year
|
Perquisites
and
Other
Personal
Benefits(1)
($)
|
Insurance
Premiums
($)
|
Contributions
to
Retirement
and
401(k)
Plans
($)
|
Total
($)
|
|
Kevin
P. Knight
|
2006
|
195,983
|
-
|
850
|
196,833
|
|
David
A. Jackson
|
2006
|
-
|
-
|
850
|
850
|
|
Timothy
M. Kohl
|
2006
|
-
|
21,140(2)
|
850
|
21,990
|
|
Keith
T. Knight
|
2006
|
-
|
-
|
850
|
850
|
|
Casey
Comen
|
2006
|
12,084
|
-
|
850
|
12,934
|
|
(1)
|
This
column represents the total amount of other benefits provided to
the Named
Executive Officer, if the aggregate of such benefits were equal to
or
exceeded $10,000. For Mr. Comen, this amount includes compensation
for a
car allowance. For Kevin Knight, $178,846 of this amount represents
an air travel allowance and the remainder represents a cash vehicle
allowance. Each year we pay a specified amount for the business-related
air travel of Mr. Knight, in his role as our Chief Executive Officer.
Mr.
Knight uses the allowance for all of his business-related air travel,
whether commercial or charter. With over 30 locations across the
United
States and numerous acquisitions, investor, supplier, industry, and
other
destinations, Mr. Knight is required to travel by air frequently
to carry
out his responsibilities. Some of this travel may involve a personal
component. Rather than attempt to differentiate the personal and
business travel we pay our CEO an allowance and he pays for all air
travel
expenses without reimbursement from us. We do not pay for the personal
air
travel of any of our executive officers, including our Named Executive
Officers.
|
|
(2)
|
We
pay certain life insurance premiums on behalf of our President, Mr.
Kohl.
The premiums we pay are for (i) a $500,000 policy on which Mr. Kohl
has
designated a party related to him as the sole primary beneficiary
and (ii)
a $1,000,000 policy on which we are a 50% primary beneficiary and
Mr. Kohl
has designated a party related to him as the other 50% primary
beneficiary. The Compensation Committee considers payment of these
premiums to Mr. Kohl when setting the level of the other elements
of Mr.
Kohl's compensation.
|
Narrative
to the Summary Compensation Table
See
"Executive Compensation - Compensation Discussion and Analysis" for a complete
description of our compensation plans pursuant to which the amounts listed
under
the Summary Compensation Table were paid or awarded and the criteria for such
award or payment.
The
following table sets forth information concerning each grant of an award made
to
our Named Executive Officers during 2006.
|
Estimated
Future Payouts
Under
Non-Equity Incentive
Plan
Awards
|
|||||||
|
Name
|
Grant
Date
|
Threshold
($)
|
Target(1)
($)
|
Maximum
($)
|
All
Other
Option
Awards:
Number
of
Securities
Underlying
Options
(#)
|
Exercise
or
Base
Price of
Option
Awards(4)
($/Sh)
|
Grant
Date Fair
Value
of Stock
and
Option
Awards(5)
($)
|
|
Kevin
P. Knight
|
02/08/2006
05/24/2006
|
-
-
|
354,000
-
|
-
-
|
-
75,000(2)
|
-
18.44
|
-
640,403
|
|
David
A. Jackson
|
02/08/2006
05/24/2006
|
-
-
|
39,750
-
|
-
-
|
-
15,000(2)
|
-
18.44
|
-
128,081
|
|
Timothy
M. Kohl
|
02/08/2006
05/24/2006
|
-
-
|
132,000
-
|
-
-
|
-
30,000(2)
|
-
18.44
|
-
256,161
|
|
Keith
T. Knight
|
02/08/2006
05/24/2006
|
-
-
|
97,500
-
|
-
-
|
-
30,000(2)
|
-
18.44
|
-
256,161
|
|
Casey
Comen
|
02/08/2006
05/24/2006
|
-
-
|
78,000
-
|
-
-
|
-
10,000(3)
|
-
18.44
|
-
85,387
|
|
(1)
|
This
column represents the potential value of the payout for each Named
Executive Officer based upon the attainment of specified performance
targets that were established by the Compensation Committee on February
8,
2006 and as discussed in more detail in the Compensation Discussion
and
Analysis. The potential payouts are performance-driven and therefore
completely at risk. As reflected in the Summary Compensation Table,
each
Named Executive Officer was awarded his respective target
amount.
|
|
(2)
|
This
represents the number of stock options granted in 2006 to the Named
Executive Officer. On December 31, 2006, 20% of these options vested
with
the remaining options vesting 5% per calendar quarter thereafter
and
becoming fully vested on December 31, 2010.
|
|
(3)
|
This
represents the number of stock options granted in 2006 to Mr. Comen.
This
option will vest as follows: 3,333 shares on March 1, 2007, 3,333
shares
on March 1, 2008, and 3,334 shares on March 1, 2009.
|
|
(4)
|
This
column represents the exercise price for the stock options granted,
which
was the closing price of our stock on May 24, 2006, the grant
date.
|
|
(5)
|
This
column represents the grant date fair value of the stock options
under
SFAS 123R granted to the Named Executive Officers in 2006. The fair
value
was calculated using the Black Scholes value on the grant date of
approximately $8.54. The fair value of the option awards are accounted
for
in accordance with SFAS 123R. For additional information on the valuation
assumptions, refer to note 8 of our financial statements in the Form
10-K
for the year-ended December 31, 2006, as filed with the SEC. These
amounts
reflect our accounting expense to be recognized over the vesting
period of
the options awarded, and do not correspond to the actual value that
will
be recognized by the Named Executive Officers.
|
Narrative
to Grants of Plan-Based Awards
See
"Executive Compensation - Compensation Discussion and Analysis" for a complete
description of (i) the performance targets for payment of annual incentives,
and
(ii) the options that we awarded during the year.
The
following table sets forth information concerning all stock option grants held
by our Named Executive Officers as of December 31, 2006. All outstanding equity
awards are in shares of our Common Stock.
|
Option
Awards
|
|||||
|
Name
|
Option
Grant
Date
|
Number
of
Securities
Underlying
Unexercised
Options
(#)
Exercisable
|
Number
of
Securities
Underlying
Unexercised
Options
(#)
Unexercisable(1)
|
Option
Exercise
Price
($)
|
Option
Expiration
Date
|
|
Kevin
P. Knight
|
08/06/2004
08/19/2005
05/24/2006
|
40,500
750,000
15,000
|
27,000
-
60,000
|
12.57
15.68
18.44
|
08/05/2014
08/18/2015
05/23/2016
|
|
David
A. Jackson
|
03/01/2001
09/18/2001
06/05/2002
08/07/2003
08/06/2004
05/16/2005
05/24/2006
|
5,063
3,375
2,250
787
4,500
6,000
3,000
|
-
-
1,125
3,151
3,000
9,000
12,000
|
4.40
4.89
8.44
11.44
12.57
15.53
18.44
|
02/28/2011
09/17/2011
06/04/2012
08/06/2013
08/05/2014
05/15/2015
05/23/2016
|
|
Timothy
M. Kohl
|
09/18/2001
06/05/2002
06/01/2003
08/06/2004
05/16/2005
05/24/2006
|
16,875
9,373
7,500
4,500
7,500
6,000
|
-
9,375
15,000
9,000
22,500
24,000
|
4.89
8.44
11.04
12.59
15.53
18.44
|
09/17/2011
06/04/2012
05/31/2008
08/05/2014
05/15/2015
05/23/2016
|
|
Keith
T. Knight
|
08/06/2004
08/19/2005
05/24/2006
|
13,500
12,000
6,000
|
9,000
18,000
24,000
|
12.57
15.68
18.44
|
08/05/2014
08/18/2015
05/23/2016
|
|
Casey
Comen
|
03/01/2004
03/01/2005
05/16/2005
05/24/2006
|
-
3,750
-
-
|
56,250
11,250
7,500
10,000
|
11.03
18.09
15.53
18.44
|
02/28/2014
02/28/2015
05/15/2015
05/23/2016
|
|
(1)
|
See
the Vesting Schedule Table below for the vesting date of options
held at
fiscal year end by the Named Executive
Officers.
|
Vesting
Schedule Table
The
following table describes the vesting schedule as of December 31, 2006, for
each
unexercisable option listed in the Outstanding Equity Awards at Fiscal Year-End
Table.
|
Name
|
Option
Grant
Date
|
Option
Awards Vesting Schedule
|
|
Kevin
P. Knight
|
08/06/2004
|
20%
vests December 31, 2004, and 5% vests at the end of each calendar
quarter
beginning March 2005.
|
|
05/24/2006
|
20%
vests December 31, 2006, and 5% vests at the end of each calendar
quarter
beginning March 2007.
|
|
|
David
A. Jackson
|
06/05/2002
|
33%
vests each year beginning June 5, 2005.
|
|
08/07/2003
|
20%
vests each year beginning August 7, 2006.
|
|
|
08/06/2004
|
20%
vests December 31, 2004, and 5% vests at the end of each calendar
quarter
beginning March 2005.
|
|
|
05/16/2005
|
20%
vests December 31, 2005, and 5% vests at the end of each calendar
quarter
beginning March 2006.
|
|
|
05/24/2006
|
20%
vests December 31, 2006, and 5% vests at the end of each calendar
quarter
beginning March 2007.
|
|
|
Timothy
M. Kohl
|
06/05/2002
|
33%
vests each year beginning June 5, 2005.
|
|
06/01/2003
|
33%
vests each year beginning May 1, 2006.
|
|
|
08/06/2004
|
20%
vests December 31, 2004, and 5% vests at the end of each calendar
quarter
beginning March 2005.
|
|
|
05/16/2005
|
20%
vests December 31, 2005, and 5% vests at the end of each calendar
quarter
beginning March 2006.
|
|
|
05/24/2006
|
20%
vests December 31, 2006, and 5% vests at the end of each calendar
quarter
beginning March 2007.
|
|
|
Keith
T. Knight
|
08/06/2004
|
20%
vests December 31, 2004, and 5% vests at the end of each calendar
quarter
beginning March 2005.
|
|
08/19/2005
|
20%
vests December 31, 2005, and 5% vests at the end of each calendar
quarter
beginning March 2006.
|
|
|
05/24/2006
|
20%
vests December 31, 2006, and 5% vests at the end of each calendar
quarter
beginning March 2007.
|
|
|
Casey
Comen
|
03/01/2004
|
33%
vests each year beginning March 1, 2007.
|
|
03/01/2005
|
25%
vests each year beginning March 1, 2006.
|
|
|
05/16/2005
|
20%
vests each year beginning May 16, 2008.
|
|
|
05/24/2006
|
33%
vests each year beginning March 1, 2007.
|
The
following table sets forth information concerning the stock option exercises
for
fiscal 2006 for our Named Executive Officers.
|
Option
Awards
|
||
|
Name
|
Number
of Shares
Acquired
on
Exercise
(#)
|
Value
Realized on
Exercise
($)
|
|
Kevin
P. Knight
|
-
|
-
|
|
David
A. Jackson
|
-
|
-
|
|
Timothy
M. Kohl(1)
|
61,874
|
866,203
|
|
Keith
T. Knight
|
-
|
-
|
|
Casey
Comen
|
-
|
-
|
|
(1)
|
On
January 30, 2006, Mr. Kohl exercised 61,874 options at the following
prices: (i) 23,625 options at $2.85, (ii) 16,872 options at $4.89,
(iii) 9,377 options at $8.44, (iv) 4,500 options at $12.59, and
(v) 7,500 options at $15.53. The market price of the options
exercised was $20.05, resulting in a realized value of
$866,203.
|
The
following table sets forth information concerning the compensation of our
non-employee directors for fiscal 2006.
|
Name
|
Fees
Earned or
Paid
in Cash(1)
($)
|
Stock
Awards(2)
($)
|
Option
Awards(3)
(4)
($)
|
Total
($)
|
|
Randy
Knight
|
-
|
12,001
|
11,490
|
23,491
|
|
Michael
Garnreiter
|
18,750
|
-
|
11,490
|
30,240
|
|
Donald
A. Bliss
|
-
|
13,453
|
11,490
|
24,943
|
|
Mark
Scudder
|
-
|
17,874
|
11,490
|
29,364
|
|
Richard
J. Lehmann
|
-
|
6,747
|
27,101
|
33,848
|
|
G.
D. Madden
|
8,500
|
9,252
|
11,490
|
29,242
|
|
Kathryn
L. Munro
|
-
|
20,630
|
19,025
|
39,655
|
|
(1)
|
This
column represents the amount of cash compensation paid in 2006 for
Board
and committee service.
|
|
(2)
|
This
column represents the dollar amount recognized for financial statement
reporting purposes with respect to the 2006 fiscal year for the fair
value
of stock awards granted to each director, in 2006 as well as prior
fiscal
years, in accordance with SFAS 123R. Fair value is calculated using
the
closing price of our stock on the date of grant.
|
|
(3)
|
This
column represents the dollar amount recognized for financial statement
reporting purposes with respect to the 2006 fiscal year for the fair
value
of stock options granted to each director, in 2006 as well as prior
fiscal
years, in accordance with SFAS 123R. Pursuant to SEC rules, the amounts
shown exclude the impact of estimated forfeitures related to service-based
vesting conditions. For additional information on the valuation
assumptions with respect to the 2006 grants, refer to note 8 of our
financial statements in the Form 10-K for the year-ended December
31,
2006, as filed with the SEC. For information on the valuation assumptions
with respect to grants made prior to 2006, refer to the notes of
our
financial statements in the Form 10-K for the respective year-end.
These
amounts reflect our accounting expense to be recognized over the
full
vesting period, and do not correspond to the actual value that will
be
recognized by the directors.
|
|
(4)
|
As
at December 31, 2006, (i) Mr. Randy Knight had 2,500 outstanding
option
awards; (ii) Mr. Garnreiter had 9,250 outstanding option awards;
(iii) Mr.
Bliss had had 5,875 outstanding option awards; (iv) Mr. Scudder had
7,000
outstanding option awards; (v) Mr. Lehmann had 3,500 outstanding
option
awards; (vi) Mr. Madden had 7,000 outstanding option awards; and
(vii) Ms.
Munro had 6,250 outstanding option awards.
|
Narrative
to Director Compensation
The
Board
of Directors, upon the recommendation of our Compensation Committee, establishes
the form and amount of compensation paid to our Outside Directors. In 2006,
our
Outside Directors received 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 meetings, a fee of $500 for attending Nominating and Corporate
Governance Committee meetings, a fee of $750 for attending Compensation
Committee meetings, and a fee of $450 for all other Board committee meetings.
In
addition, each of the Chairpersons of the Audit Committee, the Nominating and
Corporate Governance Committee, and the Compensation Committee received an
annual fee of $2,500, in addition to other director fees. During 2006, we also
reimbursed directors for travel and other related expenses incurred in attending
Board or committee meetings.
During
2006, Outside Directors had 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 was elected, we issued Common Stock on February
15
and August 15, 2006 in payment of accrued compensation and fees for the
preceding six month period ending December 31 and June 30, respectively. The
number of shares issued was 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.
Prior
to
February 2007, upon their election or appointment to the Board, Outside
Directors received an automatic non-qualified stock option grant covering
2,500
shares of Common Stock 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 received a non-qualified stock option grant covering 1,000 shares
of
Common Stock on June 1 of each calendar year. 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. In February 2007,
in
light of the new compensation structure for Outside Directors, the Board
of
Directors elected to discontinue the practice of making these automatic grants.
Stock issued under the new program will be issued as stock grants under the
Independent Director provision of our Amended and Restated 2003 Stock Option
Plan, which reserved 100,000 shares of our Common Stock for compensatory
stock
grants to Outside Directors, subject to certain
adjustments.
In
February 2007, the Board of Directors, at the recommendation of our Compensation
Committee, adopted a new compensation structure for our Outside Directors.
Under
the new structure, our Outside Directors will receive annual compensation of
$45,000 payable 50% in cash and 50% in Common Stock. Under the new independent
director compensation program, no fees will be paid for attendance at meetings.
The Chair of the Audit Committee will receive an annual fee of $5,000; the
Chair
of the Compensation Committee will receive an annual fee of $3,000; and the
Chair of the Nominating and Corporate Governance Committee will receive an
annual fee of $2,500.
The
cash
compensation will be paid on a quarterly basis beginning in 2007. The first
grant of Common Stock, and each grant thereafter, will be made on the date
of
the Annual Meeting. The number of shares issued will be determined by dividing
the amount of the accrued compensation by the closing market price of our Common
Stock on the date of the grant. The Common Stock will vest over a
three year period and will vest automatically upon death or resignation or
retirement from the Board with the consent of the Nominating and Corporate
Governance Committee. Each Outside Director must hold all Common Stock granted
as compensation until such director holds a minimum of $100,000 in Common Stock.
Directors
who are our employees or 10% shareholders do not receive compensation for Board
or committee service. We do, however, reimburse them for travel and other
related expenses.
BENEFICIAL
OWNERS AND MANAGEMENT
The
following table sets forth, as of February 28, 2007, 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 our directors, and by all of our directors and executive
officers as a group. Share numbers and other information for Ruane, Cunniff
& Goldfarb, Inc. ("RCG"), Wasatch Advisors, Inc. ("Wasatch"), and Wellington
Management Company, LLP ("Wellington") included in the following table and
notes
are as of February 28, 2006, and solely based upon Schedules 13/G and 13G/A
filed with the SEC on January 10, 2007 (RCG), February 15, 2007 (Wasatch),
and
February 14, 2007 (Wellington). We had outstanding 86,205,283 shares of Common
Stock as of February 28, 2007.
|
Name
and Address of Beneficial Owner(1)
|
Amount
and Nature of
Beneficial
Ownership(2)
|
Percent
of Class(2)
|
||
|
Kevin
P. Knight(3)
|
7,373,231
|
8.5%
|
||
|
Gary
J. Knight(4)
|
7,278,836
|
8.4%
|
||
|
Keith
T. Knight(5)
|
7,083,101
|
8.2%
|
||
|
Randy
Knight(6)
|
6,931,797
|
8.0%
|
||
|
Timothy
M. Kohl(7)
|
222,903
|
*
|
||
|
G.D.
Madden(8)
|
42,515
|
*
|
||
|
Donald
A. Bliss(9)
|
36,351
|
*
|
||
|
Casey
Comen(10)
|
29,583
|
*
|
||
|
David
A. Jackson(11)
|
26,850
|
*
|
||
|
Mark
Scudder(12)
|
15,359
|
*
|
||
|
Michael
Garnreiter(13)
|
9,706
|
*
|
||
|
Kathryn
L. Munro(14)
|
8,087
|
*
|
||
|
Richard
J. Lehmann(15)
|
4,213
|
*
|
||
|
Ruane,
Cunniff & Goldfarb, Inc.
(16)
|
14,085,531
|
16.3%
|
||
|
Wasatch
Advisors, Inc.
(17)
|
9,077,738
|
10.5%
|
||
|
Wellington
Management Company, LLP
(18)
|
8,724,023
|
10.1%
|
||
|
All
directors and executive officers as a group (13 persons)
|
29,062,532
|
33.3%
|
|
*
|
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 Ruane, Cunniff &
Goldfarb, Inc. is 767 Fifth Avenue, New York, NY 10153. The address
of
Wasatch Advisors, Inc. is 150
Social Hall Avenue, Salt Lake City, UT 84111. The address of Wellington
Management Company, LLP is 75 State Street, Boston, MA
02109.
|
|
|
(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 February 28, 2007. Shares of Common
Stock underlying stock options that are currently exercisable or
will be
exercisable within 60 days from February 28, 2007, 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) 6,537,185 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; (b) 19,442 shares held by the
Kevin
P. Knight 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;
(c) 3,979 shares owned by a minor child who shares the same
household; and (d) 812,625 shares covered by stock options granted
to
Kevin P. Knight that are currently exercisable or that will become
exercisable within 60 days. Mr. Kevin P. Knight has pledged as security
2,325,000 of the shares that he beneficially
owns.
|
|
|
(4)
|
Includes:
(a) 7,250,336 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) 28,500 shares covered by stock options granted
to
Gary J. Knight that is currently exercisable or that will become
exercisable within 60 days. Mr. Gary J. Knight has pledged as security
2,349,876 of the shares that he beneficially owns.
|
|
(5)
|
Includes:
(a) 7,042,961 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) 1,119 shares beneficially
owned by Keith T. Knight; (c) 1,119 shares beneficially owned by
Fawna
Knight; and (d) 2,277 shares owned by minor children who share
the same
household; and (e) 35,625 shares covered by stock options granted
to Keith
T. Knight that is currently exercisable or that will become exercisable
within 60 days. Mr. Keith T. Knight has pledged as security 2,825,000
of
the shares that he beneficially owns.
|
|
(6)
|
Includes:
(a) 5,266,974 shares beneficially owned by Randy Knight over which
he
exercises sole voting and investment power as a trustee under a
revocable
trust agreement; (b) 1,662,323 shares held by a limited liability
company
for which Mr. Randy Knight acts as manager and whose members include
Mr. Randy Knight and trusts for the benefit of his four children;
and (c)
2,500 shares covered by stock options granted to Mr. Randy Knight
that are currently exercisable or that will become exercisable
within 60
days. Mr. Randy Knight has pledged as security 5,261,089 of the
shares
that he beneficially owns.
|
|
(7)
|
Includes:
(a) 166,655 shares held directly by Timothy M. Kohl; and (b) 56,248
shares
covered by stock options granted to Mr. Kohl that is currently
exercisable or that will become exercisable within 60
days.
|
|
(8)
|
Includes:
(a) 35,515 shares held directly by G.D. Madden; and (b) 7,000 shares
covered by stock options granted to Mr. Madden that are currently
exercisable or that will become exercisable within 60
days.
|
|
(9)
|
Includes:
(a) 30,476 shares beneficially owned by Donald A. Bliss over which
he
exercises sole voting and investment powers under a revocable trust
agreement; and (b) 5,875 shares covered by stock options granted
to Mr.
Bliss that are currently exercisable or that will become exercisable
within 60 days.
|
|
(10)
|
Represents
29,583 shares covered by stock options granted to Mr. Comen that
are
currently exercisable or that will become exercisable within 60
days.
|
|
(11)
|
Represents
26,850 shares covered by stock options granted to Mr. Jackson that
are
currently exercisable or that will become exercisable within 60
days.
|
|
(12)
|
Includes:
(a) 8,359 shares held directly by Mark Scudder; and (b) 7,000 shares
covered by stock options granted to Mr. Scudder that are currently
exercisable or that will become exercisable within 60
days.
|
|
(13)
|
Includes:
(a) 456 shares held directly by Michael Garnreiter; and (b) 9,250
shares
covered by stock options granted to Mr. Garnreiter that are currently
exercisable or that will become exercisable within 60
days.
|
|
(14)
|
Includes:
(a) 1,837 shares held directly by Kathryn L. Munro; and (b) 6,250
shares
covered by stock options granted to Ms. Munro that are currently
exercisable or that will become exercisable within 60
days.
|
|
(15)
|
Includes:
(a) 713 shares held directly by Richard J. Lehmann; and (b) 3,500
shares
covered by stock options granted to Mr. Lehmann that are currently
exercisable or that will become exercisable within 60
days.
|
|
(16)
|
Ruane,
Cunniff & Goldfarb, Inc. has sole voting power over 7,144,659 and sole
dispositive power over 14,085,531 shares. It has shared voting
power and
shared dispositive power over no shares.
|
|
(17)
|
Wasatch
Advisors, Inc. has sole voting power and sole dispositive power
over
9,077,738
shares.
It has shared voting power and shared dispositive power over no
shares.
|
|
(18)
|
Wellington
Management Company, LLP has shared voting power over 5,767,718
shares and
shared dispositive power over 8,724,023
shares.
It has sole voting power and sole dispositive power over no
shares.
|
Our
Audit
Committee has established procedures relating to the review, approval, or
ratification of any transaction, or any proposed transaction, in which we were
or are to be a participant and the amount involved exceeds $120,000, and in
which any "related person" (as that term is defined in Instruction 1 to Item
402(a) of Regulation S-K) had or will have a direct or indirect material
interest, referred to as an "interested transaction." Under
the
policies and procedures, our Audit Committee is to review the material facts
of
all interested transactions that require the committee's approval and either
approve or disapprove of the entry into the interested transactions, subject
to
certain exceptions, by taking into account, among other factors it deems
appropriate, whether the interested transaction is on terms no less favorable
than terms generally available to an unaffiliated third-party under the same
or
similar circumstances and the extent of the related person's interest in the
transaction. No director may participate in any discussion or approval of an
interested transaction for which he or she is a related party. If an interested
transaction will be ongoing, the Audit Committee may establish guidelines for
our management to follow in its ongoing dealings with the related party and
then
at least annually must review and assess ongoing relationships with the related
party. During 2006, the following interested transactions were subject to such
review, approval, or ratification:
Mark
Scudder, one of our directors, is president of a law firm to which we paid
approximately $163,000 for legal services in 2006 and which currently provides
legal services to us. During 2006, Mr. Scudder received salary and bonuses
from
the firm, none of which is directly related to services provided to us. Based
upon information regarding the law firm's total revenues for each of the past
three years supplied by Mr. Scudder, the Audit Committee determined that this
relationship is not material and ratified the transaction.
The
Knight family has been involved in the transportation business for a number
of
years, and family members of Kevin Knight, Gary Knight, Keith Knight, and Randy
Knight have been employed by us since our inception. The Knight family members
are employed on the same terms and conditions as non-related employees. During
2006, we employed and compensated in excess of $120,000 in total compensation
two individuals who are considered related persons under Item 404(a) of
Regulation S-K. The aggregate total compensation paid to these two individuals
in 2006 was $335,065. We also employed ten other related persons during 2006,
none of whom received compensation in excess of $120,000.
See
"Corporate Governance - The Board of Directors and Its Committees - Committees
of the Board of Directors - The Compensation Committee - Compensation Committee
Interlocks and Insider Participation" for a description of transactions between
us and members of our Compensation Committee or their affiliates.
SECOND
AMENDED AND RESTATED ARTICLES OF INCORPORATION
We
seek
shareholder approval to amend and restate our Amended and Restated Articles
of
Incorporation to increase the aggregate number of shares of our common stock
that we have the authority to issue from 100,000,000 shares of common
stock to 300,000,000 shares of our common stock, par value $0.01 per share,
to facilitate our operations in the future and to make certain other ministerial
changes in our Amended and Restated Articles of Incorporation. We have
determined that it is in our best interest to receive authorization to issue
additional shares of common stock in light of the fact that we have used
nearly
73 million shares for five stock splits since our inception, and Board
priorities may justify the issuance of additional shares in the future.
Any newly authorized shares of our common stock will have voting and other
rights identical to those of the currently authorized shares of common
stock.
We
are
seeking shareholder approval to amend and restate our Amended and Restated
Articles of Incorporation to increase our authorized common stock for
several
reasons. Our Board of Directors believes it is necessary to increase
the number
of shares of our authorized capital stock in order to provide us with
the
flexibility to issue common stock for a variety of business purposes
that may
arise and our Board deems advisable, without further action by our shareholders,
unless required by law, regulation, or NYSE rules. These purposes could
include,
among other things, (i) to declare future stock dividends or stock splits,
which
may increase the liquidity of our shares; (ii) the sale of stock to obtain
additional capital or to acquire other companies, businesses, or assets,
which
could enhance our growth strategy; (iii) for use in additional stock
incentive
programs; and (iv) for other bona fide purposes. We currently have no
plans,
arrangements, or understandings with respect to a possible offering or
acquisition.
It
is not
possible to state the effects of the amendment upon the rights of the holders
of
common stock until the Board determines the purpose for the actual issuance
of
common stock. However, additional shares of common stock might be issued
at
times and under circumstances as to have a dilutive effect on earnings
per share
and on the equity ownership of the present holders of our common
stock.
While
the
issuance of additional shares of our common stock may have the effect of
impeding an unsolicited attempt by a person or entity to acquire control
of us,
our Board of Directors does not intend or view the increase in authorized
common
stock as an anti-takeover measure nor are we aware of any proposed or
contemplated transaction of this type. Our issuance of additional shares
of
common stock may, depending upon the circumstances under which the shares
are
issued, reduce shareholders' equity per share, or reduce the percentage
of
ownership of our common stock of existing shareholders.
The
authorization to issue these additional shares requires an amendment of our
Restated Articles of Incorporation and
we
have chosen to restate the Restated Articles of Incorporation for administrative
purposes. Under Arizona law, such an amendment requires the affirmative
vote of a majority of the votes cast by shareholders entitled to vote and
represented in person or by proxy at the annual meeting. In the absence of
contrary instructions, each proxy will be voted for the approval of the
amendment and restatement of our Amended and Restated Articles of Incorporation.
A copy of the proposed amendment and restatement of our Amended and Restated
Articles of Incorporation is attached as Appendix A to this proxy
statement.
THE
BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS A VOTE "FOR" APPROVAL OF THE AMENDMENT
AND RESTATEMENT OF OUR AMENDED AND RESTATED ARTICLES OF
INCORPORATION.
Our Audit
Committee has appointed Deloitte & Touche LLP to serve as our principal
independent registered public accounting firm for fiscal 2007. Deloitte &
Touche also served as our principal independent registered public accounting
firm in fiscal 2006. At the Annual Meeting, our shareholders are being asked
to
ratify the appointment of Deloitte & Touche as our independent registered
public accounting firm for fiscal 2007. A representative of Deloitte &
Touche is expected to be present at the Annual Meeting and to be available
to
respond to appropriate questions, and such representative will have an
opportunity to make a statement at the Annual Meeting if he or she desires
to do
so.
Approval
by our shareholders of the appointment of our independent registered public
accounting firm is not required by law, any applicable NYSE rule, or by our
organizational documents, but the Board of Directors is submitting this matter
to our shareholders for ratification as a corporate governance practice.
Ultimately, the Audit Committee retains full discretion and will make all
determinations with respect to the appointment and retention of the independent
registered public accounting firm.
THE
BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS A VOTE "FOR" RATIFICATION OF THE
APPOINTMENT OF DELOITTE & TOUCHE AS OUR INDEPENDENT REGISTERED PUBLIC
ACCOUNTING FIRM.
The
following table shows the fees for professional services provided by Deloitte
& Touche for the audit of our annual financial statements and internal
control over financial reporting for the fiscal year ended December 31, 2006,
the audit of our annual financial statements for the fiscal year ended December
31, 2005, and the review of financial statements included in our quarterly
reports on Form 10-Q during those periods, as well as fees billed by Deloitte
& Touche and KPMG LLP, who resigned as our principal independent registered
public accounting firm on March 16, 2004, for other services rendered
during those periods:
|
Fiscal
2006
|
Fiscal
2005
|
||||||
|
Deloitte
&
Touche
|
Deloitte
&
Touche
|
KPMG
(1)
|
Total
|
||||
|
Audit
Fees(2)
|
$507,851
|
$466,900
|
$22,000
|
$488,900
|
|||
|
Audit-Related
Fees(3)
|
-
|
-
|
-
|
-
|
|||
|
Tax
Fees(4)
|
-
|
-
|
-
|
-
|
|||
|
All
Other Fees(5)
|
-
|
-
|
-
|
-
|
|||
|
(1)
|
Amount
is for services in connection with KPMG's reissuance of its prior
year
report and related consent. KPMG does not and has not served as our
principal independent registered public accounting firm since March
16,
2004.
|
|
(2)
|
Audit
Fees represent fees billed for professional services rendered by
the
principal independent registered public accounting firm for the audit
of
our annual financial statements and the review of financial statements
included in our quarterly reports on Form 10-Q, or services that are
normally provided by such accounting firm in connection with statutory
or
regulatory filings or engagements for those fiscal
years.
|
|
(3)
|
Audit-Related
Fees represent fees billed, other than Audit Fees, for assurance
and
related services by the principal independent registered public accounting
firm that are reasonably related to the performance of the audit
or review
of our financial statements and internal control over financial reporting.
We were not billed for any Audit-Related Fees in 2006 or 2005.
|
|
(4)
|
Tax
Fees represent fees billed for professional services rendered by
the
principal independent registered public accounting firm for tax
compliance, tax advice, and tax planning. We were not billed for
any Tax
Fees in 2006 or 2005.
|
|
(5)
|
All
Other Fees represent fees billed for products and services provided
by the
principal independent registered public accounting firm, other than
Audit
Fees, Audit-Related Fees, and Tax Fees. We were not billed for any
Other
Fees in fiscal 2006 or 2005.
|
Since
July 30, 2002, our Audit Committee has maintained a policy pursuant to which
it
pre-approves all audit, audit-related, tax, and other permissible non-audit
services provided by our principal independent registered public accounting
firm
in order to assure that the provision of such services is compatible with
maintaining the accounting firm's independence. Under this policy, the Audit
Committee pre-approves, on an annual basis, specific types or categories of
engagements constituting audit, audit-related, tax, or other permissible
non-audit services to be provided by the principal independent registered public
accounting firm. Pre-approval of an engagement for a specific type or category
of services generally is provided for up to one year and typically is subject
to
a budget comprised of a range of anticipated fee amounts for the engagement.
Management and the independent registered public accounting firm are required
to
periodically report to the Audit Committee regarding the extent of services
provided by the accounting firm in accordance with the annual pre-approval
and
the fees for the services performed to date. If management believes that a
new
service, or the expansion of a current service, provided by the principal
independent registered public accounting firm is necessary or desirable then
such new or expanded services are presented to the Audit Committee for its
review and approval prior to the engagement of the accounting firm to render
such services. No audit-related, tax, or other non-audit services were approved
by the Audit Committee pursuant to the de
minimus
exception to the pre-approval requirement under Rule 2-01, paragraph
(c)(7)(i)(C), of Regulation S-X during the fiscal year ended
December 31, 2006.
To
be
eligible for inclusion in our proxy materials relating to the 2008 Annual
Meeting of Shareholders, shareholder proposals intended to be presented at
that
meeting must be received in writing by us on or before December 15, 2007.
However, if the date of the 2008 Annual Meeting of Shareholders is more than
thirty days before or after May 24, 2008, then the deadline for submitting
any
such shareholder proposal for inclusion in the proxy materials relating to
the
2008 Annual Meeting of Shareholders shall be a reasonable time before we begin
to print or mail such proxy materials. 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.
We
must
receive in writing any shareholder proposals intended to be considered at our
2008 Annual Meeting of Shareholders, but not included in our proxy materials
relating to that meeting, by March 6, 2008. Pursuant to Rule 14(a)-4(c)(1)
under
the Exchange Act, the proxy holders designated by an executed proxy in the
form
accompanying our 2008 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.
See
"Corporate Governance - The Board of Directors and Its Committees - Committees
of the Board of Directors - The Nominating and Corporate Governance Committee"
for information regarding how shareholders can recommend director candidates
for
consideration by the Nominating and Corporate Governance Committee.
The
Board
of Directors does not intend to present at the Annual Meeting any matters other
than those described herein and does not presently know of any matters that
will
be presented by other parties. If any other matters are properly brought before
the Annual Meeting or any adjournment thereof, the proxy holders named in the
accompanying form 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
|
|
|
April
20, 2007
|
SECOND
AMENDED AND RESTATED
ARTICLES
OF INCORPORATION
OF
KNIGHT
TRANSPORTATION, INC.
ARTICLE
I
The
name
of the Corporation shall be: KNIGHT TRANSPORTATION, INC.
ARTICLE
II
Purpose
The
purpose for which the Corporation is organized is the transaction of any or
all
lawful business for which corporations may be incorporated under the laws of
the
State of Arizona, as such laws may be amended from time to time.
ARTICLE
III
Initial
Business
The
Corporation initially intends to own, lease, acquire, sell, dispose of, deal
with, maintain and operate motor vehicles for transporting property of every
kind and nature as a common or contract carrier for compensation or its own
purposes over and upon the public highways of the State of Arizona and other
states in which this Corporation might be qualified to transact business; to
arrange for transportation by other common carriers or contract carriers either
by motor vehicle, rail or otherwise; and to do all and everything advantageous
and necessary to engage in said business.
ARTICLE
IV
The
authorized capital stock of the Corporation shall be as follows:
A. The
Corporation shall be authorized to issue Three Hundred Million (300,000,000)
shares of common stock, with $0.01 par value, which the Board of Directors
shall
have authority to issue from time to time. The Board of Directors shall fix
the
stated value of shares of the Corporation’s common stock at the time of
issuance.
B. The
Corporation shall be authorized to issue Fifty Million (50,000,000) shares
of
preferred stock, with $0.01 par value. The Board of Directors of the Corporation
may issue the shares of preferred stock from time to time and, before issuance,
shall establish and divide the shares into series of a specified number of
shares, and fix and determine the stated values, designations, preferences,
privileges and voting powers (which may include, but are not limited to,
provisions as to dividends, conversion, redemption and liquidation) of the
shares of each series so established and the restrictions or qualifications
thereof, without limitation, except as may be prescribed by applicable law.
The
Board of Directors may cause the dividend rate to vary among any series of
preferred stock.
C. Consideration
for the issuance of shares of the Corporation’s capital stock may be paid, in
whole or in part, in cash or other property, whether tangible or intangible,
or
in labor or services actually performed for the Corporation, or any other
consideration permitted by law. Shares shall be deemed to be fully paid and
nonassessable when the consideration for such shares is received by the
Corporation or any wholly owned subsidiary. The judgment of the Board of
Directors as to the value of any property, services, right or thing acquired
in
exchange for the capital stock of the Corporation shall be final and
conclusive.
D. Except
as
otherwise required by law or by the terms and conditions of any preferred stock
pursuant to paragraph B of this Article IV, class voting of shares shall not
be
permitted.
E. The
Board
of Directors may from time to time cause the Corporation to purchase its own
shares to the extent of the unreserved and unrestricted earned and capital
surplus of the Corporation.
ARTICLE
V
Statutory
Agent
The
Corporation hereby appoints James E. Brophy, III, Ryley, Carlock &
Applewhite, One North Central Avenue, Suite 1200, Phoenix, Arizona 85004-4417,
as its statutory agent.
ARTICLE
VI
Place
of Business
The
Corporation’s known place of business shall be 5601 West Buckeye Road, Phoenix,
Arizona 85043.
ARTICLE
VII
The
Board of Directors
A. The
business of the Corporation shall be conducted by a board of not less than
three
(3) nor more than eleven (11) directors, none of whom need be shareholders
or
residents of Arizona. Within such limitation, the number of directors shall
be
fixed by the Bylaws. The initial authorized number of directors of the
Corporation shall be six (6), but that number may be increased or decreased
in
accordance with the Bylaws of the Corporation.
B. The
Corporation’s initial director was Randy Knight, whose address is 5601 West
Buckeye Road, Phoenix, Arizona 85043. As of April 30, 2007, the following
persons serve as the directors of the Corporation, until their term shall end
and their successors are duly elected and qualified:
Donald
A.
Bliss
5601
West
Buckeye Road
Phoenix,
Arizona 85043
Michael
Garnreiter
5601
West
Buckeye Road
Phoenix,
Arizona 85043
Gary
J.
Knight
5601
West
Buckeye Road
Phoenix,
Arizona 85043
Kevin
P.
Knight
5601
West
Buckeye Road
Phoenix,
Arizona 85043
Randy
Knight
5601
West
Buckeye Road
Phoenix,
Arizona 85043
Richard
J. Lehmann
5601
West
Buckeye Road
Phoenix,
Arizona 85043
G. D.
Madden
5601
West
Buckeye Road
Phoenix,
Arizona 85043
Kathryn
L. Munro
5601
West
Buckeye Road
Phoenix,
Arizona 85043
Mark
Scudder
5601
West
Buckeye Road
Phoenix,
Arizona 85043
C. Meetings
of the Board of Directors shall be held at the times and in the manner
prescribed by the Corporation’s Bylaws. The Board of Directors of the
Corporation may take action either by meeting or with a meeting by unanimous
consent of all directors, or in any other manner permitted by law.
D. Notwithstanding
anything contained in Article VII, paragraphs (A), (B), or (C) of these Restated
Articles of Incorporation (and subject to the provisions of Paragraph (E)
below), commencing with the May 2000 annual meeting of shareholders, the
Corporation’s directors shall be divided into two classes (Class I and Class
II), with the number of directors in each class to be as nearly equal as
reasonably possible. The initial terms of office for the Class I and
Class II directors elected at the May 2000 annual meeting of the
shareholders shall be as follows:
1. Class
I
directors shall be elected to serve for a term commencing with their election
at
the May 2000 annual meeting of shareholders and expiring on the conclusion
of
the 2001 annual meeting of shareholders; and
2. Class
II
directors shall be elected to serve for a term commencing with their election
at
the May 2000 annual meeting of shareholders and expiring on the conclusion
of
the 2002 annual meeting of shareholders.
Commencing
with the 2001 annual meeting of shareholders and continuing at each annual
meeting of shareholders thereafter, a director elected in a class to succeed
a
director in that class whose tetra has expired shall be elected to serve until
the conclusion of the second succeeding annual meeting of shareholders from
the
date of such. director’s election or until such director’s successor shall has
been duly elected and qualified. The system of cumulative voting shall be
applied to the election of directors within each class of
directors.
E. Notwithstanding
anything contained in Paragraphs (A), (C) or (D) of Article VII of these
Restated Articles of Incorporation, but subject to the provisions of Paragraph
(F), if the number of the Corporation’s directors equals nine (9) or more, the
Corporation’s Board of Directors shall be divided into three classes of
directors (Class I, Class II and Class III) at the next annual meeting of
Shareholders at which any director stands for election, and all of the directors
of the Corporation shall stand for election at such meeting, notwithstanding
the
fact that a director’s term may not have expired. There shall not be less than
three directors in each class, and the number of directors in each class to
be
as nearly equal as reasonably possible. The initial terms of office for the
Class I, Class II and Class III directors elected at the first annual meeting
of
shareholders in which there are three classes of directors shall be as
follows:
1. Class
I
directors shall be elected to serve, for a one (1) year term commencing with
their election at the annual meeting of shareholders and expiring on the
conclusion of the next succeeding annual meeting of Shareholders;
2. Class
II
directors shall be elected to serve for a two (2) year term commencing with
their election at the annual meeting of shareholders and expiring on the
conclusion of the second succeeding annual meeting of shareholders;
and
3. Class
III
directors shall be elected to serve for a three (3) year term commencing with
their election at the annual meeting of shareholders and expiring on the
conclusion of the third succeeding annual meeting of shareholders.
Beginning
with the first annual meeting of shareholders following the first election
of
Class I, Class II and Class III directors under this Paragraph (E), and
continuing at each annual meeting of shareholders thereafter, each director
elected in a class shall be elected to serve for a term ending with the
conclusion of the third succeeding annual meeting of shareholders after the
date
of such director’s election.
F. The
system of cumulative voting shall be applied to the election of directors within
each class of directors. The Board of Directors shall designate the class to
which each director is assigned.
G. Newly
created directorships resulting from any increase in the number of authorized
directors, vacancies arising from a director’s resignation or removal, or
directorships eliminated as a result of a decrease in the number of authorized
directors shall be apportioned by the Board of Directors among the Class I,
and
Class II directors (and Class III directors, at such time as the Corporation’s
directors consist of nine (9) or more members, as nearly equally as reasonably
possible; provided, however, that no decrease in the number of authorized
directors shall shorten the term or effect the removal of any incumbent
director.
ARTICLE
VIII
Incorporators
The
names
and addresses of the incorporators of the Corporation are:
Randy
Knight
5601
West
Buckeye Road
Phoenix,
Arizona 85043
Karen
Landes
5601
West
Buckeye Road
Phoenix,
Arizona 85043
ARTICLE
IX
Meetings
of Shareholders
The
annual and other meetings of shareholders shall be held at such time and place,
within or without the State of Arizona, as stated in or fixed in accordance
with
the Bylaws.
ARTICLE
X
No
Preemptive Rights
Except
as
may be provided by the Board of Directors in authorizing the issuance of
preferred stock pursuant to Article IV, no holder of stock shall, as such
holder, have any preemptive right to purchase or subscribe for any additional
shares of the Corporation or any other security of the Corporation which it
may
issue or sell.
ARTICLE
XI
Corporate
Existence
The
Corporation shall have perpetual existence.
ARTICLE
XII
Indemnification
and Limitation of Liability
The
Corporation shall indemnify and hold harmless its incorporators, and each of
its
existing and former directors, to the fullest extent not prohibited by law,
as
it now exists or may hereafter be amended, for any and all
acts
or omissions done or omitted to be done while
employed by, or acting on behalf of, the Corporation or its subsidiaries,
including indemnity for service in the capacity as an officer of the
Corporation. The Corporation, subject to a director executing and delivering
any
undertaking required by law to reimburse the Corporation if indemnity should
not
be allowed, shall advance costs and expenses to defend any claim subject to
indemnification. Without limiting the foregoing, a director shall not be
personally liable to the Corporation or its shareholders for monetary damages
for breach of fiduciary duty as a director, except as otherwise provided by
law;
provided that no provision of these Articles of Incorporation shall eliminate
or
limit the liability of a director for (i) any breach of a director’s duty of
loyalty to the Corporation or its shareholders, (ii) acts or omissions which
are
not in good faith or which involve intentional misconduct or a knowing violation
of law, (iii) authorizing the unlawful payment of a dividend or other
distribution on the Corporation’s common capital stock or the unlawful purchase
of its capital stock, (iv) any trans-action from which a director received
an
improper personal benefit, or (v) any violation of Section 10-041 of the Arizona
Revised Statutes, or any successor provisions thereto. The indemnification
rights provided herein shall not be exclusive of or preclude any other rights
of
indemnification to which a director, officer, employee or agent may be entitled,
whether pursuant to law, bylaws or agreement.
