SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the Securities and Exchange Act of
1934
Filed by Registrant [X]
Filed by a Party other than the Registrant [ ]
Check the Appropriate Box:
[ ] Preliminary Proxy Statement
[ ] Confidential, for Use of the Commission Only (as permitted by Rule
14-6(e)(2))
[X] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Materials Pursuant to Section 240.14a-11(c) or Section 240.14a-12
COVENANT TRANSPORT, INC.
(Name of Registrant as Specified in its Charter)
The Covenant Transport, Inc. Board of Directors
(Name of Person(s) Filing Proxy Statement)
Payment of Filing Fee (Check the Appropriate Box):
[X] No fee required
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and 0-11.
(1) Title of each class of securities to which transaction applies: N/A
(2) Aggregate number of securities to which transaction applies: N/A
(3) Price per unit or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11: N/A
(4) Proposed maximum aggregate value of transaction: N/A
(5) Total Fee paid: N/A
[ ] Fee paid previously with preliminary materials. N/A
[ ] Check box if any part of the fee is offset as provided by Exchange Act
Rule 0-11(a)(2) and identify the filing for which the offsetting fee was
paid previously. Identify the previous filing by registration statement
number, or the Form or Schedule and the date of its filing.
(1) Amount previously paid: N/A
(2) Form, Schedule or Registration Statement No.: N/A
(3) Filing Party: N/A
(4) Date Filed: N/A
<PAGE>
COVENANT TRANSPORT, INC.
400 Birmingham Highway
Chattanooga, Tennessee 37419
NOTICE AND PROXY STATEMENT
FOR ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD ON MAY 18, 2000
To Our Stockholders:
The 2000 Annual Meeting of Stockholders (the "Annual Meeting") of
Covenant Transport, Inc., a Nevada corporation (the "Company"), will be held at
the Company, 400 Birmingham Highway, Chattanooga, Tennessee 37419, at 10:00
a.m., Eastern Time, on Thursday, May 18, 2000, for the following purposes:
1. To consider and act upon a proposal to elect seven (7) directors of
the Company;
2. To consider and act upon a proposal to ratify the selection of
PricewaterhouseCoopers LLP as independent public accountants for the
Company for 2000;
3. To consider and act upon a proposal to approve the Company's Outside
Director Stock Option Plan; and
4. To consider and act upon such other matters as may properly come
before the meeting and any adjournment thereof.
The foregoing matters are more fully described in the accompanying
Proxy Statement.
The Board of Directors has fixed the close of business on March 27,
2000, as the record date for the determination of Stockholders entitled to
receive notice of and to vote at the Annual Meeting or any adjournment thereof.
Shares of Common Stock may be voted at the Annual Meeting only if the holder is
present at the Annual Meeting in person or by valid proxy. YOUR VOTE IS
IMPORTANT. TO ENSURE YOUR REPRESENTATION AT THE ANNUAL MEETING, YOU ARE
REQUESTED TO PROMPTLY DATE, SIGN, AND RETURN THE ACCOMPANYING PROXY IN THE
ENCLOSED ENVELOPE. Returning your proxy now will not interfere with your right
to attend the Annual Meeting or to vote your shares personally at the Annual
Meeting, if you wish to do so. The prompt return of your proxy may save the
Company additional expenses of solicitation.
All Stockholders are cordially invited to attend the Annual Meeting.
By Order of the Board of Directors
/s/ David R. Parker
David R. Parker
Chairman of the Board
Chattanooga, Tennessee 37419
April 14, 2000
<PAGE>
COVENANT TRANSPORT, INC.
400 Birmingham Highway
Chattanooga, Tennessee 37419
PROXY STATEMENT
FOR ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD MAY 18, 2000
This Proxy Statement is furnished in connection with the solicitation
of proxies by the Board of Directors of Covenant Transport, Inc., a Nevada
corporation (the "Company"), to be used at the 2000 Annual Meeting of
Stockholders of the Company (the "Annual Meeting"), which will be held at the
Company, 400 Birmingham Highway, Chattanooga, Tennessee 37419 on Thursday, May
18, 2000, at 10:00 a.m. Eastern Time, and any adjournment thereof. All costs of
the solicitation will be borne by the Company. The approximate date of mailing
this proxy statement and the enclosed form of proxy is April 14, 2000.
The enclosed copy of the Company's annual report for the fiscal year
ended December 31, 1999, is not incorporated into this Proxy Statement and is
not to be deemed a part of the proxy solicitation material.
PROXIES AND VOTING
Only stockholders of record at the close of business on March 27, 2000
("Stockholders"), are entitled to vote, either in person or by valid proxy, at
the Annual Meeting. Holders of Class A Common Stock are entitled to one vote for
each share held. Holders of Class B Common Stock are entitled to two votes for
each share held. On March 27, 2000, there were issued and outstanding 12,566,450
shares of Class A Common Stock, par value one cent ($.01), entitled to cast an
aggregate 12,566,450 votes on all matters subject to a vote at the Annual
Meeting, and 2,350,000 shares of Class B Common Stock, par value one cent
($.01), entitled to cast an aggregate 4,700,000 votes on all matters subject to
a vote at the Annual Meeting. The Company has a total of 14,916,450 shares of
Common Stock outstanding, entitled to cast an aggregate 17,266,450 votes on all
matters subject to a vote at the Annual Meeting. The number of issued and
outstanding shares excludes approximately 1,545,100 shares of Class A Common
Stock reserved for issuance under the Company's Incentive Stock Plan, the Non-
Officer Incentive Stock Plan, and other arrangements. Of the shares reserved,
options or other grants covering an aggregate of approximately 974,026 shares
have been granted, and on March 20, 2000, approximately 383,026 shares were
subject to vested but unexercised options. Holders of unexercised options are
not entitled to vote at the Annual Meeting. The Company has no other class of
stock outstanding. Stockholders are not entitled to cumulative voting in the
election of directors.
All proxies that are properly executed and received by the Company
prior to the Annual Meeting will be voted in accordance with the choices
indicated. Any Stockholder may be represented and may vote at the Annual Meeting
by a proxy or proxies appointed by an instrument in writing. In the event that
any such instrument in writing shall designate two (2) or more persons to act as
proxies, a majority of such persons present at the meeting, or, if only one
shall be present, then that one shall have and may exercise all of the powers
conferred by such written instrument upon all of the persons so designated
unless the instrument shall otherwise provide. No such proxy shall be valid
after the expiration of six (6) months from the date of its execution, unless
coupled with an interest or unless the person executing it specifies therein the
length of time for which it is to continue in force, which in no case shall
exceed seven (7) years from the date of its execution. Any Stockholder giving a
proxy may revoke it at any time prior to its use at the Annual Meeting by filing
with the Secretary of the Company a revocation of the proxy, by delivering to
the Company a duly executed proxy bearing a later date, or by attending the
meeting and voting in person.
Other than the election of Directors, which requires a plurality of the
votes cast, each matter to be submitted to the Stockholders requires the
affirmative vote of a majority of the votes cast at the meeting. For purposes of
determining the number of votes cast with respect to a particular matter, only
those cast "For" or "Against" are included. Proxies marked "Abstain" and broker
non-votes are counted only for purposes of determining whether a quorum is
present at the meeting. If no direction is specified by the Stockholder, the
proxy
<PAGE>
will be voted "For" the proposals as specified in this notice and, at the
discretion of the proxy holder, upon such other matters as may properly come
before the meeting or any adjournment thereof.
PROPOSAL 1
ELECTION OF DIRECTORS
At the Annual Meeting, the Stockholders will elect seven directors to
serve as the Board of Directors until the 2001 Annual Meeting of the
Stockholders of the Company or until their successors are elected and qualified.
The Company currently has seven directors: David R. Parker, Michael W. Miller,
R.H. Lovin, Jr., William T. Alt, Robert E. Bosworth, Hugh O. Maclellan, Jr., and
Mark A. Scudder. In the absence of contrary instructions, each proxy will be
voted for the election of the existing directors.
Information Concerning Directors and Executive Officers
Information concerning the names, ages, positions with the Company,
tenure as a director, and business experience of the Company's current directors
and other executive officers is set forth below. All references to experience
with the Company include positions with the Company's operating subsidiary,
Covenant Transport, Inc., a Tennessee corporation. All executive officers are
elected annually by the Board of Directors.
NAME AGE POSITION DIRECTOR SINCE
- --------------------------- ----- -------------------------- --------------
David R. Parker 42 Chairman of the Board, 1985
President, Chief Executive
Officer
Michael W. Miller 42 Executive Vice President, 1995
Chief Operating Officer,
Director
R. H. Lovin, Jr. 48 Vice President - 1994
Administration, Secretary,
Director
Joey B. Hogan 38 Treasurer and Chief Financial NA
Officer
Ronald B. Pope 55 Senior Vice President - NA
Sales and Marketing
William T. Alt(1)(2) 63 Director 1994
Robert E. Bosworth(1)(2) 52 Director 1998
Hugh O. Maclellan, Jr.(1)(2) 60 Director 1994
Mark A. Scudder(1)(2) 37 Director 1994
- ------------------------------------
(1) Member of the Audit Committee.
(2) Member of the Compensation Committee.
David R. Parker has served as President since founding the Company in
1985 and as Chairman of the Board and Chief Executive Officer since 1994. He has
guided the Company's growth from $7.7 million in 1986 to $473 million in 1999.
Mr. Parker was elected to the Board of Directors of the Truckload Carriers'
Association in 1994.
Michael W. Miller has served as the Company's Executive Vice President
and Chief Operating Officer since 1997. He previously served as the Company's
Vice President - Operations from 1993 to 1997 and in various other positions
with the Company from 1987 to 1993. Prior to joining the Company, Mr. Miller
operated his own cartage company from 1982 to 1986, served as a terminal manager
for Interstate Systems from 1979 to 1982, and held the position of traffic
manager for Jackson Manufacturing from 1975 to 1979.
2
<PAGE>
R. H. Lovin, Jr. has served as the Company's Vice President -
Administration since May 1994 and Corporate Secretary since August 1995. Mr.
Lovin previously served as the Company's Chief Financial Officer from 1986 to
1994. Before joining the Company, Mr. Lovin served as a comptroller/accountant
for Perry Smith Company and Olin Chemical Co.
Joey B. Hogan, the Company's Treasurer and Chief Financial Officer,
joined Covenant in those capacities in August 1997. Prior to joining the
Company, Mr. Hogan served as Chief Financial Officer of The McKenzie Companies
in Cleveland, Tennessee, a group of privately-owned companies, including
National Cash Advance and certain investment and real estate concerns. From 1986
to 1996, Mr. Hogan served in various capacities, including three years as
Director of Finance, with Chattem, Inc., a publicly-held company, headquartered
in Chattanooga, Tennessee, involved in the manufacturing and marketing of
over-the-counter pharmaceuticals and toiletries products.
Ronald B. Pope has served as Covenant's Senior Vice President - Sales
and Marketing since 1998 and was the Company's Vice President - Sales and
Marketing since 1993, having previously served as Covenant's sales manager for
the western region since December 1990. Mr. Pope has over 25 years of sales and
marketing experience in the trucking industry.
William T. Alt has engaged in the private practice of law since 1962
and has served as outside counsel to the Company since 1986.
Robert E. Bosworth has served as a director of the Company since 1998.
He is a business and management consultant to various corporations in the
Chattanooga area. Prior to February 1998, Mr. Bosworth served for more than five
years as Executive Vice President and Chief Financial Officer of Chattem, Inc.,
a publicly-held company, headquartered in Chattanooga, Tennessee, involved in
the manufacturing and marketing of over-the-counter pharmaceuticals and
toiletries products. Mr. Bosworth is a director of Chattem, Inc.
Hugh O. Maclellan, Jr. is President of the Maclellan Foundation, Inc.
and serves on the Boards of UnumProvident Insurance Company and SunTrust Bank,
Chattanooga, N.A.
Mark A. Scudder has been an attorney for more than six years with
Scudder Law Firm, P.C., Lincoln, Nebraska, the Company's outside corporate and
securities counsel. Mr. Scudder is a director of UMB Bank Nebraska, N.A., a
national bank subsidiary of UMB Financial Corporation, a publicly-traded bank
holding company. Mr. Scudder is also a director of Knight Transportation, Inc.,
a truckload carrier with common stock traded on the Nasdaq National Market.
Another principal of Scudder Law Firm, P.C. serves as a director of Swift
Transportation Co., Inc., a nationwide truckload carrier with common stock
traded on the Nasdaq National Market.
Meetings and Compensation
Board of Directors. The Board of Directors of the Company held four
regularly scheduled meetings and three special meetings during the fiscal year
ended December 31, 1999. Each of the directors attended all meetings held by
committees of the Board on which they served and, except for one meeting at
which Mr. Bosworth did not attend but consented to the actions taken at such
Board meeting, each of the directors attended all meetings of the Board of
Directors. Directors who are not employees of the Company received an annual
retainer of $10,000 plus $1,000 per Board of Directors meeting attended in
person, $500 per Board of Directors meeting attended by telephone, and
reimbursement of expenses incurred in attending such Board meetings.
Compensation for each of the non-employee directors in 1999 was $16,500 for each
of Messrs. Alt, Maclellan, and Mr. Bosworth, and $15,500 for Mr. Scudder. In May
1999, the Board of Directors granted each non-employee director an option to
purchase 2,500 shares of the Company's Class A Common Stock at $13.00 per share,
the fair market value on the date of the grant. The options immediately vested
and must be exercised within ten (10) years of the date of the grant. The option
grant was in lieu of an increase in cash compensation.
3
<PAGE>
Compensation Committee. The Compensation Committee of the Board of
Directors met twice during 1999. This committee reviews all aspects of
compensation of the Company's executive officers and makes recommendations on
such matters to the full Board of Directors. The Compensation Committee Report
on Executive Compensation for 1999 is set forth below. See "Compensation
Committee Report on Executive Compensation."
Audit Committee. The Audit Committee met twice during 1999. The Audit
Committee makes recommendations to the Board concerning the selection of outside
auditors, reviews the Company's financial statements, reviews and discusses
audit plans, audit work, internal controls, and the report and recommendations
of the Company's independent auditors, and considers such other matters in
relation to the external audit of the financial affairs of the Company as may be
necessary or appropriate in order to facilitate accurate and timely financial
reporting. The Audit Committee also reviewed the Company's progress toward Year
2000 compliance.
Nominating Committee. The Board does not maintain a standing nominating
committee or other committee performing similar functions.
Compensation Committee Interlocks and Insider Participation. Messrs.
Alt, Bosworth, Maclellan, and Scudder served as the Compensation Committee in
1999. None of such individuals has been an officer or employee of the Company.
Mr. Scudder's law firm serves as the Company's corporate and securities counsel
and earned approximately $267,500 in fees for legal services during 1999.
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
In 1999, the Company engaged in several transactions with Clyde M.
Fuller, a holder of approximately 10.7% of the Company's outstanding Common
Stock. He is the stepfather of David R. Parker and is employed by the Company at
a nominal salary. The terms of all transactions were negotiated by Mr. Fuller
and Mr. Parker. Tenn-Ga Truck Sales, Inc., a corporation wholly owned by Mr.
Fuller, purchased used tractors from the Company for approximately $4.4 million
during 1999. The price was the same offer the Company had received from the
equipment manufacturer and the Company believes it represents fair market value.
In December 1999, the Company purchased approximately 105 acres of land adjacent
to its headquarters facilities from Mr. Fuller for $890,000. The purchase price
was the same price Mr. Fuller had paid for the land in 1995, plus 6.5% interest
on the original purchase price since the date of purchase.
THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS THAT STOCKHOLDERS VOTE
"FOR" THE NOMINEES FOR DIRECTOR PRESENTED IN PROPOSAL 1.
4
<PAGE>
EXECUTIVE COMPENSATION
The following table sets forth information concerning the annual and
long-term compensation paid to the chief executive officer and the four other
named executive officers of the Company (the "Named Officers"), for services in
all capacities to the Company for the fiscal years ended December 31, 1999,
1998, and 1997.
<TABLE>
<CAPTION>
Summary Compensation Table
Long Term Compensation
------------------------------------
Annual Compensation Awards Payouts
----------------------------------------- ------------------------ -------
Securities
Restricted Underlying
Name and Principal Other Annual Stock Options LTIP All Other
Position Year Salary Bonus(1) Compensation(2) Award(s) (#)(1) Payouts Compensation(3)
- --------------------- ---- -------- ------- --------------- ---------- ---------- ------- ---------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
David R. Parker 1999 $496,875 $216,176 - - 17,206 - $9,376
Chairman, President, 1998 $487,500 $172,813 - - 18,250 - $8,828
and Chief Executive 1997 $487,500 $140,000 - - - - $8,217
Officer
Michael W. Miller 1999 $226,912 $98,938 - - 13,298 - -
Executive Vice 1998 $179,210 $86,000 - - 10,000 - -
President and Chief 1997 $142,716 $50,000 - - - - -
Operating Officer
Ronald B. Pope 1999 $124,016 $54,656 - - 9,322 - -
Senior Vice President- 1998 $108,323 $39,926 - - 10,000 - -
Sales/Marketing 1997 $97,600 $34,097 - - - - -
R. H. Lovin, Jr. 1999 $106,732 $47,336 - - 9,078 - -
Vice President- 1998 $102,891 $39,414 - - 7,500 - -
Administration 1997 $95,573 $15,000 - - - - -
Joey B. Hogan 1999 $155,770 $68,157 - - 12,272 - -
Chief Financial Officer 1998 $136,732 $56,250 - - 10,000 - -
and Treasurer 1997 $46,040 $34,097 - - 25,000 - -
- ------------------------------------
</TABLE>
(1) Reflects cash portion of bonus earned by the Named Officer during the
fiscal year covered. In 1999, the cash portion is equal to 75% of the
bonus earned under the Named Officers' bonus program. In accordance
with the program, the remaining 25% was paid through issuance of
immediately exercisable stock options at the rate of an option on 100
shares for each $1,000 of bonus payment foregone. For 1999, the Named
Officers received options under the bonus program, with no market value
at February 29, 2000 (the date of the grant), to purchase the following
number of shares of Class A Common Stock: David Parker - 7,206; Michael
Miller - 3,298; Joey Hogan - 2,272; Ronald Pope - 1,822; and R.H.
Lovin, Jr. - 1,578.
(2) Other annual compensation did not exceed 10% of any Named Officer's
total salary for any reported year.
(3) Reportable portion of premiums paid on split-dollar life insurance
policies.
5
<PAGE>
The following table lists options or SARs granted to the Named Officers
during the fiscal year ended December 31, 1999.
<TABLE>
<CAPTION>
Option/SAR Grants in Last Fiscal Year
Potential realizable
value at assumed
annual rates of stock
price appreciation for
Individual Grants option term
- ---------------------------------------------------------------------------------------------- ----------------------
Number of
securities Percent of total Exercise
underlying options/SARs granted or base
options to employees in fiscal price Expiration
Name granted (#) year ($/Sh) Date 5% ($) 10% ($)
- ------------------- ----------- ---------------------- -------- ---------- ------ -------
<S> <C> <C> <C> <C> <C> <C>
David R. Parker 10,000 5.2% 13.00 May 20, 81,800 207,200
2009
Michael W. Miller 10,000 5.2% 13.00 May 20, 81,800 207,200
2009
Ronald B. Pope 7,500 3.9% 13.00 May 20, 61,350 155,400
2009
R.H. Lovin, Jr. 7,500 3.9% 13.00 May 20, 61,350 155,400
2009
Joey B. Hogan 10,000 5.2% 13.00 May 20, 81,800 207,200
2009
</TABLE>
The following table demonstrates that no options under the Plan were
exercised during the fiscal year ended December 31, 1999, by the Named Officers.
<TABLE>
<CAPTION>
Aggregated Option Exercises in Last Fiscal Year and FY-End Option Values
Number of Securities
Underlying Unexercised Value of Unexercised
Shares Options In-the-Money
Acquired at Fiscal Year End Options at Fiscal Year
on Value (#) End(1)($)
Exercise Realized -------------------------------- --------------------------------
Name (#) ($) Exercisable Unexercisable Exercisable Unexercisable
- ----------------------- -------- -------- ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
David R. Parker -0- -0- 83,900 78,100 168,719 217,063
Michael W. Miller -0- -0- 41,000 28,000 59,125 102,500
Ronald B. Pope -0- -0- 18,000 19,500 30,000 80,313
R. H. Lovin, Jr. -0- -0- 34,500 19,500 45,375 74,063
Joey B. Hogan -0- -0- 12,000 33,000 10,000 83,750
- ------------------------------------
</TABLE>
(1) Based on the $17.375 closing price of the Company's Class A Common Stock
on December 31, 1999.
6
<PAGE>
The Company does not have a long-term incentive plan or a defined benefit or
actuarial plan and has never issued any stock appreciation rights.
Employment Agreements
The Company currently does not have any employment, severance, or
change-in-control agreements with any of its executive officers. However, under
certain circumstances in which there is a change of control, holders of
outstanding stock options granted under the Plan may be entitled to exercise
such options notwithstanding that such options may otherwise not have been fully
exercisable. The Board of Directors has the authority to extend similar rights
to holders of additional awards under the Plan.
Compensation Committee Report on Executive Compensation
The Compensation Committee of the Board of Directors prepared the
following report on executive compensation.
The approach to determining executive compensation consists of three
elements: base salary, annual stock option grants, and an annual bonus. For
1999, the Chief Executive Officer participated in the same program as the other
executive officers and was evaluated on the same basis as the other executive
officers. The Compensation Committee believes that the annual bonus program
directly links corporate performance to executive compensation. The Compensation
Committee also believes that the annual stock option grants and the stock-based
component of the annual bonus indirectly link executive compensation to
corporate performance to the extent corporate performance is reflected in the
Company's stock price.
The Compensation Committee has reviewed the base salaries of its
executive officers and believes such salaries are nearly comparable to those
earned by similarly-situated executives. Under the executive compensation
program, increases in base salaries are intended to slow after executives reach
target salaries identified by the Compensation Committee. The Compensation
Committee may adjust the targets as executives assume additional
responsibilities. In 1999, the Company made substantial progress in moving Mr.
Miller and Mr. Hogan toward their target salaries. Mr. Parker's salary has
essentially remained the same since the Company's initial public offering in
1994.
The annual stock option element of the compensation program provides
that each executive will be granted an annual stock option to purchase up to
10,000 shares of the Company's Class A Common Stock at the market price on the
date of the annual meeting under the Company's incentive stock plan for key
employees. The stock options granted to date vest 20% on the first through fifth
anniversaries of each grant. The Compensation Committee believes that a
multi-year granting and vesting schedule will encourage the executives to remain
with the Company.
The annual bonus element of the compensation program permits the
executives to earn a percentage of their salary based upon the achievement of
individual and corporate goals for that year. For senior management, 60% to 75%
of the bonus is based upon attaining or exceeding the earnings per share target
established at the beginning of the year. The remainder of the bonus is based
upon achieving certain individual goals that are established at the beginning of
each year. For 1999, the Chief Executive Officer's bonus was based 75% on
attaining or exceeding the earnings per share target and 25% on the attainment
of individual goals. The Board of Directors establishes the goals for the Chief
Executive Officer, and the Chief Executive Officer establishes the goals for the
rest of the executives.
The initial bonus amounts for the executives are adjusted up or down
based upon the Company's ranking among its peer group of companies in the
following performance measures: revenue growth, earnings per share growth,
pretax margin, EBITDA margin, and return on average equity. The peer group
identified by the Compensation Committee consists of Swift Transportation,
Werner Enterprises, M.S. Carriers, U.S. Xpress Enterprises, and Transport Corp.
of America. The annual bonus for senior management is limited to 75% of the
executive's base salary. The Company must achieve its earnings per share goal
for any individual bonus to be paid. There is an exception for individual goal
bonuses to be paid if the Company achieves at least a threshold percentage of
the earnings per share goal and ranks first or second in its peer group.
7
<PAGE>
The executives currently must accept at least 25% of their annual bonus
in the form of stock-based compensation and may choose to receive up to 100% of
the bonus in the form of stock-based compensation. For 1999, the stock-based
compensation consisted of immediately vested stock options exercisable at market
value on the grant date. The options were valued at 100 shares per $1,000 of
cash bonus compensation foregone by the executive. The Compensation Committee
may recommend other forms of stock-based compensation in future years. The
Compensation Committee believes that this bonus program provides incentives to
grow earnings per share, achieve individual goals, and perform at or above the
level of peer companies. For 1999, the Company was ranked second of six by the
Compensation Committee among its peer group in the designated performance
measures, the earnings per share target was exceeded, and each of the Named
Officer executives met at least 75% of his established personal goals.
Compensation Committee
William T. Alt
Robert E. Bosworth
Hugh O. Maclellan, Jr.
Mark A. Scudder
8
<PAGE>
SECURITY OWNERSHIP OF PRINCIPAL STOCKHOLDERS
AND MANAGEMENT
The following table sets forth, as of March 20, 2000, the number and
percentage of outstanding shares of Common Stock beneficially owned by each
person known by the Company to beneficially own more than 5% of such stock, by
each director and Named Officer of the Company, and by all directors and
executive officers of the Company as a group.
<TABLE>
<CAPTION>
SECURITY OWNERSHIP OF PRINCIPAL STOCKHOLDERS AND MANAGEMENT
Amount &
Nature of
Beneficial
Title of Class Name of Beneficial Owner(1) Ownership(2) Percent of Class
-------------- --------------------------- ------------ ----------------
<S> <C> <C> <C>
33.04% of Class A
Class A & David R. Parker & 100.0% of Class B
Class B Common Jacqueline F. Parker 6,501,794(3) 43.59% of Total
Class A Common Michael W. Miller 48,147 *
Class A Common R. H. Lovin, Jr. 37,754 *
Class A Common Joey B. Hogan 17,472 *
Class A Common Ronald B. Pope 22,032 *
Class A Common William T. Alt
300 Forest Avenue
Chattanooga, TN 37405 3,500 *
Class A Common Hugh O. Maclellan, Jr.
501 Provident Building
Chattanooga, TN 37402 19,700 *
Class A Common Mark A. Scudder(4) 8,150 *
Class A Common Robert E. Bosworth(5)
174 Meadow Pond Run
Lookout Mountain, GA 30750 19,200 *
12.79% of Class A
Class A Common Clyde M. Fuller(6) 1,607,500 10.78% of Total
7.91% of Class A
Class A Common Dimensional Fund Advisors Inc.(7) 994,000 6.66% of Total
Class A &
Class B All directors and executive officers
Common as a group (9 persons) 6,677,749 44.77% of Total
</TABLE>
9
<PAGE>
- ---------------------
* Less than one percent (1%).
(1) The business address of Mr. and Mrs. Parker, Mr. Lovin, Mr. Hogan, Mr.
Pope, Mr. Miller, and Mr. Fuller is 400 Birmingham Highway,
Chattanooga, TN 37419.
(2) In accordance with applicable rules under the Securities Exchange Act
of 1934, as amended, the number of shares of Class A Common Stock
beneficially owned includes the following shares underlying stock
options that are exercisable or will become exercisable within 60 days
following March 20, 2000: Mr. Parker - 91,106; Mr. Miller - 44,298; Mr.
Lovin - 36,078; Mr. Pope - 19,822; Mr. Hogan - 14,272; Mr. Alt - 3,500;
Mr. Maclellan - 3,500; Mr. Scudder - 3,500; and Mr. Bosworth - 3,500.
The beneficial ownership also includes the following shares held by the
Named Officer in the Company's 401(k) Plan: Mr. Parker - 5,688; Mr.
Miller - 3,849; Mr. Lovin - 1,676; Mr. Hogan 1,950; and Mr. Pope -
2,110.
(3) Includes 4,055,000 shares of Class A Common Stock and 2,350,000 shares
of Class B Common Stock, of which are all owned by Mr. and Mrs. Parker
as Joint Tenants with Rights of Survivorship, except 200,000 shares of
Class A Common Stock owned by the Parker Family Limited Partnership, of
which Mr. and Mrs. Parker are general partners. Also includes 91,106
shares of Class A Common Stock underlying stock options granted to Mr.
Parker that are exercisable or will become exercisable within 60 days
following March 20, 2000, and 5,688 shares held by Mr. Parker in the
Company's 401(k) Plan.
(4) Mr. Scudder's business address is 411 S. 13th Street, Suite 200,
Lincoln, NE 68508. His holdings include 200 shares of Class A Common
Stock held as custodian for minor child under the Uniform Gifts to
Minors Act, as to which beneficial ownership is disclaimed. Also
includes 3,500 shares of Class A Common Stock underlying stock options
granted to Mr. Scudder that are exercisable or will become exercisable
within 60 days of March 20, 2000.
(5) Mr. Bosworth's holdings include 12,700 shares of Class A Common Stock
held by Hamico, Inc., a charitable foundation for which Mr. Bosworth
serves as director and executive officer. Mr. Bosworth disclaims
beneficial ownership of all such shares held by Hamico, Inc. Also
includes 3,500 shares of Class A Common Stock underlying stock options
granted to Mr. Bosworth that are exercisable or will become exercisable
within 60 days of March 20, 2000.
(6) Includes 1,575,000 shares of Class A Common Stock and 32,500 shares of
Class A Common Stock underlying exercisable stock options.
(7) As reported on Form 13G filed with the SEC February 3, 2000. The
business address of Dimensional Fund Advisors Inc., a Delaware
corporation, is 1299 Ocean Avenue, 11th Floor, Santa Monica, CA 90401.
10
<PAGE>
STOCK PERFORMANCE GRAPH
COMPARISON OF FIVE-YEAR CUMULATIVE TOTAL RETURNS
PERFORMANCE GRAPH FOR COVENANT TRANSPORT, INC.
The following graph compares the cumulative total stockholder return of
the Company's Class A Common Stock with the cumulative total stockholder return
of the Nasdaq Stock Market (U.S. Companies) and the Nasdaq Trucking &
Transportation Stocks commencing December 30, 1994, and ending December 31,
1999.
GRAPH WAS CENTERED HERE
IN PRINTED FORM
<TABLE>
<CAPTION>
Legend
Symbol CRSP Total Returns Index for: 12/1994 12/1995 12/1996 12/1997 12/1998 12/1999
- ------ ----------------------------- ------- ------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C> <C> <C>
- ----------- # Covenant Transport, Inc. 100.0 61.5 73.7 78.2 91.7 89.1
- --- - --- * Nasdaq Stock Market (US Companies) 100.0 141.3 173.9 213.1 300.2 542.4
- - - - - - - ^ Nasdaq Trucking & Transportation Stocks 100.0 116.7 128.8 164.8 148.3 158.4
SIC 3700-3799, 4200-4299, 4400-4599,
4700-4799 US & Foreign
</TABLE>
Notes: A. The lines represent monthly index levels derived from compounded
daily returns that include all dividends.
B. The indexes are reweighted daily, using the market capitalization
on the pervious trading day.
C. If the monthly interval, based on the fiscal year-end, is not a
trading day, the preceding trading day is used.
D. The index level for all series was set to $100.00 on 12/30/1994.
The stock performance graph assumes $100 was invested on December 30, 1994.
There can be no assurance that the Company's stock performance will continue
into the future with the same or similar trends depicted in the graph above. The
Company will not make or endorse any predictions as to future stock performance.
The CRSP Index for Nasdaq Trucking & Transportation Stocks includes all publicly
held truckload motor carriers traded on the Nasdaq Stock Market, as well as all
Nasdaq companies within the Standard Industrial Code Classifications 3700-3799,
4200-4299, 4400-4599, and 4700-4799 US & Foreign. The Company will provide the
names of all companies in such index upon request.
11
<PAGE>
COMPLIANCE WITH SECTION 16(a) OF THE SECURITIES EXCHANGE ACT OF 1934
Section 16(a) of the Securities Exchange Act of 1934 requires the
Company's officers and directors, and persons who own more than 10% of a
registered class of the Company's equity securities, to file reports of
ownership and changes in ownership with the SEC. Officers, directors, and
greater than 10% stockholders are required by SEC regulation to furnish the
Company with copies of all Section 16(a) forms they file. Based solely upon a
review of the copies of such forms furnished to the Company, or written
representations that no Forms 5 were required, the Company believes that its
officers, directors, and greater than 10% beneficial owners complied with all
Section 16(a) filing requirements applicable to them during the Company's
preceding fiscal year, except that Mr. Lovin failed to file a Form 4 with
respect to an intra-plan transfer in the Company's 401(k) Plan in October 1998,
which transaction was reported on a Form 4 filed for the month of May 1999.
PROPOSAL 2
RATIFICATION OF SELECTION OF INDEPENDENT
PUBLIC ACCOUNTANTS
The Board of Directors has selected PricewaterhouseCoopers LLP as
independent public accountants for the Company for the 2000 fiscal year.
PricewaterhouseCoopers LLP has served as independent public accountants for the
Company since 1992. Representatives of PricewaterhouseCoopers LLP are expected
to be present at the Annual Meeting with an opportunity to make a statement, if
they desire to do so, and to respond to appropriate questions.
THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS THAT STOCKHOLDERS VOTE
"FOR" PROPOSAL 2 TO RATIFY THE SELECTION OF PRICEWATERHOUSECOOPERS LLP AS
INDEPENDENT PUBLIC ACCOUNTANTS FOR THE COMPANY.
PROPOSAL 3
APPROVAL OF OUTSIDE DIRECTOR STOCK OPTION PLAN
At the Annual Meeting, the Stockholders will be requested to approve
the Covenant Transport, Inc. Outside Director Stock Option Plan (the "Outside
Director Plan"). The purpose of the Outside Director Plan is to attract and
retain the best available individuals to serve as non-employee members of the
Company's Board of Directors, to reward such directors for their contributions
to the profitable growth of the Company, and to maximize the identity of
interest between such directors and stockholders generally. A copy of the
Outside Director Plan is attached as Appendix A to this Proxy Statement.
Description of Plan
If the Stockholders approve Proposal 3, 50,000 shares of Class A Common
Stock will be reserved for issuance under the Outside Director Plan. The Outside
Director Plan provides that, commencing with the Annual Meeting of Stockholders
for the year 2000, and at each annual meeting of Stockholders thereafter, the
Board of Directors shall grant to each non-employee director who was elected at
such meeting an option to purchase 2,500 shares of the Company's Class A Common
Stock, or such other number of shares of the Company's Class A Common Stock as
the Board of Directors in its discretion shall deem appropriate. The Company
cannot now determine the number of options to be granted in the future under the
Outside Director Plan to all current directors who are not executive officers as
a group or to each nominee for election as a director who is a non-employee of
the Company. In the fiscal year ended December 31, 1999, options to purchase
2,500 shares of the Company's Class A Common Stock were granted to each of the
four non-employee directors. Such options were not issued under the Outside
Director Plan.
12
<PAGE>
The term of each option granted under the Outside Director Plan shall
be ten (10) years from its grant date. Options will be immediately vested upon
their grant date. Except as stated in the following sentence, Options may be
exercised during their term (i) beginning on the date six months after the grant
date, and (ii) after such date only while the option holder is a director of the
Company and for a period of 12 months thereafter. In the event of certain
corporate events involving a sale or change in control, the options become
immediately exercisable. During the option holder's lifetime, an option is
exercisable only by the option holder, the option holder's guardian or legal
representative, or any permitted transferee. Options are not transferable other
than by will, under the laws of descent and distribution, pursuant to a
qualified domestic relations order, or with the consent of the Board of
Directors.
The exercise price for any option granted under the Outside Director
Plan shall be the closing price of the Company's Class A Common Stock on the
date of the annual meeting of Stockholders on which the option was granted. At
the date of exercise, the option holder may pay the full exercise price in cash,
or, in lieu of paying the full exercise price in cash, may make payment, in
whole or in part, in shares of the Company's Class A Common Stock already owned,
or through the surrender of options that are then exercisable. Upon exercise of
an option, the number of shares subject to the option and the number of shares
available under the Outside Director Plan for future option grants are reduced
by the number of shares with respect to which the option is exercised. The fair
market value of the Company's Class A Common Stock on March 20, 2000, was
$14.625. Subject to any required action by the Stockholders, the number of
shares covered by each outstanding option, and the number of shares that have
been authorized for issuance but as to which no options have yet been granted or
which have been returned to the Outside Director Plan upon cancellation or
expiration of an option, as well as the price per share covered by each such
outstanding option, shall be proportionately adjusted for any increase or
decrease in the number of issued shares resulting from a stock split, reverse
stock split, consolidation, subdivision, stock dividend, combination, or
reclassification of the shares, or any other increase or decrease in the number
of issued shares effected without receipt of consideration by the Company;
provided, however, that conversion of any convertible securities of the Company
shall not be deemed to have been "effected without receipt of consideration."
Such adjustment shall be made by the Board, whose determination in that respect
shall be final. Except as expressly provided by the Outside Director Plan, no
issuance by the Company of shares of stock of any class, or securities
convertible into shares of stock of any class, shall affect, and no adjustment
by reason thereof shall be made with respect to, the number or price of shares
subject to an option.
The Outside Director Plan shall become effective upon approval by the
Stockholders. No option may be granted after the expiration of 10 years from the
effective date of the Outside Director Plan. However, the Outside Director Plan
shall remain in effect until outstanding options have been exercised, have
expired, or have otherwise been terminated.
The Board of Directors may, without further action by the Company's
Stockholders and without receiving further consideration from any option holder,
amend the Outside Director Plan or condition or modify awards under the Outside
Director Plan. However, without the approval of the Company's Stockholders, the
Board of Directors may not (i) increase the maximum number of shares that may be
issued under the Outside Director Plan, (ii) extend the period during which any
option may be granted or exercised, or (iii) extend the term of the Outside
Director Plan.
Federal Income Tax Consequences
The federal income tax consequences of a director's participation in
the Outside Director Plan are complex and subject to change. The following
discussion is only a summary of the general rules applicable to the Outside
Director Plan.
Options granted under the Outside Director Plan are nonqualified stock
options. Nonqualified stock options granted under the Outside Director Plan do
not qualify as incentive stock options and will not qualify for any special tax
benefits to the option holder. An option holder generally will not recognize any
taxable income at the time he or she is granted a nonqualified option. However,
upon its exercise, the option holder will recognize ordinary income for federal
tax purposes measured by the excess of the then fair market value of the shares
over the exercise price.
13
<PAGE>
The option holder's basis for determination of gain or loss upon the
subsequent disposition of shares acquired upon the exercise of a nonqualified
stock option will be the amount paid for such shares plus any ordinary income
recognized as a result of the exercise of such option. Upon disposition of any
shares acquired pursuant to the exercise of a nonqualified stock option, the
difference between the sale price and the option holder's basis in the shares
will be treated as a capital gain or loss and generally will be characterized as
long- term capital gain or loss if the shares have been held for more than one
year at their disposition.
In general, there will be no federal income tax deduction allowed to
the Company upon the grant or termination of a nonqualified stock option or a
sale or disposition of the shares acquired upon the exercise of a nonqualified
stock option. However, upon the exercise of a nonqualified stock option, the
Company will be entitled to a deduction for federal income tax purposes equal to
the amount of ordinary income that an option holder is required to recognize as
a result of the exercise, provided that the deduction is not otherwise
disallowed under the Internal Revenue Code.
THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS THAT STOCKHOLDERS VOTE
"FOR" PROPOSAL 3 TO APPROVE THE OUTSIDE DIRECTOR STOCK OPTION PLAN.
STOCKHOLDER PROPOSALS
Stockholder proposals intended to be presented at the 2001 Annual
Meeting of the Stockholders of the Company must be received by the Corporate
Secretary of the Company at the Company's principal executive offices on or
before December 15, 2000, to be included in the Company's proxy material related
to that meeting.
OTHER MATTERS
The Board of Directors does not intend to present at the Annual Meeting
any matters other than those described herein and does not presently know of any
matters that will be presented by other parties.
Covenant Transport, Inc.
/s/ David R. Parker
David R. Parker
Chairman of the Board
April 14, 2000
14
<PAGE>
Appendix A
COVENANT TRANSPORT, INC.
OUTSIDE DIRECTOR STOCK OPTION PLAN
1. Purpose. The purpose of the Covenant Transport, Inc. Outside
Director Stock Option Plan is to attract and retain qualified individuals to
serve as non-employee members of the Board of Directors of Covenant Transport,
Inc., to reward such directors for their contributions to the Company, and to
maximize the identity of interest between such directors and stockholders
generally.
2. Definitions. As used herein, the following definitions shall
apply:
a. "Board" shall mean the Board of Directors of the Company.
b. "Company" shall mean Covenant Transport, Inc., a Nevada
corporation.
c. "Exercise Price" shall mean, with respect to Shares of
Optioned Stock, the Fair Market Value on the Grant Date of such
Optioned Stock.
d. "Fair Market Value" shall mean:
(i) If, on the date in question, the Stock is not listed
or admitted to trading on a stock exchange or The Nasdaq Stock
Market, the mean between the lowest reported bid price and the
highest reported asked price of the Stock in the over-the-counter
market on such date, as such prices are reported in a publication
of general circulation selected by the Board and regularly
reporting the market price of the Stock in such market; or
(ii) If, on the date in question, the Stock is listed or
admitted to trading on any stock exchange or The Nasdaq Stock
Market, the closing price of the Stock on such date on the
principal exchange or The Nasdaq Stock Market on which the Stock
is then listed or admitted to trading.
If no reported quotation or sale of Stock takes place on the
date in question, the last reported closing, asked price, or sales
price of the Stock prior to such date shall be determinative.
e. "Grant Date" shall mean, with respect to a particular
Option, the date that Option is awarded.
f. "Option" shall mean a right to purchase Stock, granted
pursuant to the Plan.
g. "Optioned Stock" shall mean the Stock subject to an
Option.
h. "Optionee" shall mean a non-employee director of the
Company who has been granted an Option.
i. "Plan" shall mean this Outside Director Stock Option
Plan.
j. "Share" shall mean one share of the Stock.
k. "Stock" shall mean the Class A Common Stock of the
Company described in the Articles of Incorporation of the Company.
l. "Stock Option Agreement" shall mean the written agreement
evidencing the grant of an Option.
m. "Surrender Value" shall mean, with respect to any Option
surrendered in payment of the Exercise Price of another Option, the
difference between the Fair Market Value of Stock on the date such
Option is surrendered and the Exercise Price of the surrendered Option.
15
<PAGE>
n. "Trading Day" shall mean a day on which the Fair Market
Value of the Stock can be determined.
3 . Stock Subject to the Plan. Subject to increases and adjustments
pursuant to Section 9 of the Plan, fifty thousand (50,000) Shares shall be
reserved and available for distribution under the Plan. If an Option shall
expire or become unexercisable for any reason without having been exercised in
full, the unexercised Shares covered by the Option shall, unless the Plan shall
have terminated, be available for future grants of Options.
4. Option Grants. Commencing with the annual meeting of the
stockholders of the Company for the year 2000, and at each annual meeting
thereafter, the Board shall grant to each non-employee director who is elected
at such annual meeting of the stockholders an Option to purchase two thousand
five hundred (2,500) Shares, or such other number of Shares as the Board in its
discretion shall deem appropriate.
5. Agreements. Options shall be evidenced by Stock Option Agreements
substantially in the form attached and not inconsistent with this Plan.
6. Board Approval and Effective Dates. This Plan shall become
effective upon approval by the stockholders of the Company. No Option may be
granted after the expiration of ten (10) years from the effective date of the
Plan; provided, however, that the Plan and all outstanding Options shall remain
in effect until such options shall have been exercised, shall have expired, or
shall otherwise be terminated.
7. Exercise and Term of Options.
a. The term of each Option shall be ten (10) years from its
Grant Date. Each Option shall vest one hundred percent (100%) on its
Grant Date. Subject to Section 10 hereof, the Option may be exercised
during the term of the Option (i) beginning on the date six months
after the Grant Date, and (ii) after such date only while the option
holder is a director of the Company and for a period of twelve (12)
months thereafter. No fractional Shares will be issued upon exercise of
the Option and, if the exercise results in a fractional interest, an
amount will be paid in cash equal to the value of such fractional
interest based on the Fair Market Value of the Shares on the date of
exercise. An Option shall be deemed to be exercised upon receipt by the
Company from the Optionee of written notice of exercise, accompanied by
full payment for the Shares subject to such exercise.
b. To the extent permitted by law, and consistent with Rule
16b-3 promulgated by the Securities and Exchange Commission pursuant to
its authority under the Securities Exchange Act of 1934 as amended (the
"Securities Exchange Act"), an Optionee, in lieu of paying the Exercise
Price in full in cash, may make payment, in whole or in part, in Stock
already owned by the Optionee, or through the surrender of Options that
are then exercisable. To the extent Stock is used in payment of the
Exercise Price, such Stock shall be valued at its Fair Market Value on
the date of exercise. To the extent the payment of the Exercise Price
is made through the surrender of Options, such Options shall be valued
at their Surrender Value.
c. As soon as practicable after receipt of full payment, the
Company shall deliver to the Optionee a certificate or certificates
representing the acquired Shares.
d. Options may be exercised either for the total number of
Shares to which the Option relates or to such portion or portions
thereof as the Optionee shall determine. Options may be exercised
without regard to the sequence in which such Options were granted.
8. Non-Tranferability. No award, or agreement, or interest therein
under this Plan is transferable by the Optionee other than by will, under the
laws of descent and distribution, pursuant to a qualified domestic relations
order, or with the consent of the Board. All awards are exercisable during the
Optionee's lifetime only by the Optionee, the Optionee's guardian or legal
representative, or any permitted transferee.
16
<PAGE>
9. Adjustment for Certain Corporate Events. Subject to any required
action by the stockholders of the Company, the number of Shares covered by each
outstanding Option, and the number of Shares that have been authorized for
issuance under the Plan but as to which no Options have yet been granted or
which have been returned to the Plan upon cancellation or expiration of an
Option, as well as the price per Share covered by each such outstanding Option,
shall be proportionately adjusted for any increase or decrease in the number of
issued Shares resulting from a stock split, reverse stock split, consolidation,
subdivision, stock dividend, combination, or reclassification of the Shares, or
any other increase or decrease in the number of issued Shares effected without
receipt of consideration by the Company; provided, however, that conversion of
any convertible securities of the Company shall not be deemed to have been
"effected without receipt of consideration." Such adjustment shall be made by
the Board, whose determination in that respect shall be final, binding, and
conclusive. Except as expressly provided herein, no issuance by the Company of
shares of stock of any class, or securities convertible into shares of stock of
any class, shall affect, and no adjustment by reason thereof shall be made with
respect to, the number or price of Shares subject to an Option.
10. Acceleration Upon Certain Changes. In the event of a proposed
merger, consolidation, recapitalization, reclassification, extraordinary
dividend, sale of stock or substantially all of the assets, tender offer, change
in control, other business combination, dissolution, or liquidation of the
Company, all Options shall become exercisable on the date sixty (60) days prior
to the proposed effective date of such event. In the event of a proposed sale of
all or substantially all of the assets of the Company, or the merger of the
Company with or into another corporation, the Option (if not exercised) shall be
assumed or an equivalent Option shall be substituted by such successor
corporation (or its publicly traded parent if such corporation is not publicly
traded).
11. Tax Withholding. The Company shall be entitled if necessary
or desirable to pay or withhold the amount of any tax attributable to the
delivery of Shares under the Plan after giving the person entitled to receive
such Shares notice as far in advance as practical, and the Company may defer
making delivery of such Shares if any such tax may be pending unless and until
indemnified to its satisfaction.
12. Amendment of the Plan.
a. The Board may, without further action by the stockholders
and without receiving further consideration from the Optionee, amend
this Plan or condition or modify awards under this Plan in response to
changes in securities or other laws or rules, regulations, or
regulatory interpretations thereof applicable to this Plan or to comply
with stock exchange or market system rules or requirements.
b. The Board may at any time and from time to time
terminate, modify, or amend the Plan in any respect, except that
without stockholder approval the Board may not (i) increase the
maximum number of Shares that may be issued under the Plan, (ii)
extend the period during which any Option may be granted or exercised,
or (iii) extend the term of the Plan. The termination, modification,
or amendment of the Plan, except as provided in Subsection (a) hereto,
shall not, without the consent of an Optionee, affect his rights under
an award previously granted to him.
13. Conditions Upon Issuance of Shares. Shares shall not be issued
pursuant to the exercise of an Option unless the exercise of such Option and the
issuance and delivery of such Shares pursuant thereto shall comply with all
relevant provisions of law, including, without limitation, the Securities Act of
1933, as amended, the Securities Exchange Act, the rules and regulations
promulgated thereunder, and the requirements of any stock exchange or market
system upon which the Shares may be listed, and shall be further subject to the
approval of counsel for the Company with respect to such compliance. As a
condition to the exercise of an Option, the Company may require the Optionee to
represent and warrant at the time of any such exercise that the Shares are being
purchased only for investment and without any present intention to sell or
distribute such Shares, if, in the opinion of counsel for the Company, such a
representation is required or advisable. If the Board finds it desirable because
of legal or regulatory requirements to reduce the period during which Options
may be exercised, the Board may, in its sole discretion and without the
Optionee's consent, so reduce such period on not less than fifteen (15) days'
written notice to the Optionee. Inability of the Company to obtain authority
from a regulatory body having jurisdiction, which authority is deemed by the
Company's counsel to be necessary or advisable to the lawful issuance and sale
of any Shares hereunder, shall relieve the Company of any liability in respect
of the failure to issue or sell such Shares as to which such requisite authority
shall not have been obtained.
17
<PAGE>
14. Restrictions on Exercise. To the extent required to comply with
Rule 16 b-3, no Optionee receiving an Option under this Plan may dispose of such
Option, or its underlying Stock, prior to the expiration of six (6) months from
such Option's Grant Date.
15. Legend on Stock Certificates. Unless Stock issued under the Plan
has been previously registered, issued Stock shall bear the following or similar
legend:
"The securities represented by this certificate have not been
registered under the Securities Act of 1933 (the "1933 Act")
or under the securities laws of any state and may not be
transferred, assigned, sold, or hypothecated unless a
registration statement under the 1933 Act and the applicable
state laws shall be in effect with respect thereto or an
opinion of counsel satisfactory to the Corporation shall be
received to the effect that registration under the 1933 Act
and applicable state securities laws is not required."
16. Termination of Option. If an Optionee ceases to be a member of
the Board, then the Option shall terminate on the date twelve (12) months after
the date the Optionee ceases to be a member of the Board.
17. Miscellaneous Provisions.
a. Plan Expense. Any expenses of administering this Plan
shall be borne by the Company.
b. Construction of Plan. The validity, construction,
interpretation, administration, and effect of the Plan and of its rules
and regulations, and rights relating to the Plan, shall be determined
by the Board in accordance with the laws of the State of Nevada.
c. Gender. The masculine gender has been used throughout
this Plan for convenience, but may be read as the feminine gender or
the neuter gender as appropriate.
18
<PAGE>
FORM OF
COVENANT TRANSPORT, INC.
OUTSIDE DIRECTOR STOCK OPTION AGREEMENT
BY THIS OUTSIDE DIRECTOR STOCK OPTION AGREEMENT (the "Agreement"),
COVENANT TRANSPORT, INC., a Nevada corporation (the "Company"), and the
undersigned, a non-employee director of the Company (the "Optionee"), desire to
establish the terms and conditions upon which the Company is willing to grant
the Optionee, and upon which the Optionee is willing to accept from the Company,
an Option to purchase shares of the Company's Class A Common Stock from the
Company, pursuant to the terms and conditions of the Company's Outside Director
Stock Option Plan (the "Plan"). The Company and the Optionee hereby agree as
follows:
1. The Plan. All the terms, conditions, and definitions of the Plan
are hereby incorporated by reference into this Agreement, as if fully set forth
herein.
2. Terms of Grant.
a. Exercise Price: $__________________________.
b. Number of Shares Subject to Option: _______ Shares of the
Company's Class A Common Stock.
c. Grant Date:________________________________.
DATED:____________________
COVEVANT TRANSPORT, INC.,
a Nevada corporation
By:______________________________
Name:____________________________
Title:___________________________
OPTIONEE
_________________________________
(Signature)
_________________________________
(Print Name)
