SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
SCHEDULE 14C INFORMATION
Information Statement Pursuant to Section 14(c) of the Securities
Exchange Act of 1934
(Amendment No. )
Check the appropriate box:
[ ] Preliminary Information Statement
[ ] Confidential, for Use of the Commission Only (as permitted by Rule
14c-5(d)(2))
[X] Definitive Information Statement
KNIGHT TRANSPORTATION, INC.
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(Name of Registrant As Specified In Its Charter)
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Payment of Filing Fee (Check the appropriate box):
[X] No fee required.
[ ] Fee computed on table below per Exchange Act Rules 14c-5(g) and
0-11.
1) Title of each class of securities to which transaction applies:
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2) Aggregate number of securities to which transaction applies:
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3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (Set forth the amount on which the filing fee
is calculated and state how it was determined):
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4) Proposed maximum aggregate value of transaction:
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5) Total fee paid:
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[ ] Fee paid previously with preliminary materials.
[ ] 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:
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2) Form, Schedule or Registration Statement No.:
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3) Filing Party:
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4) Date Filed:
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<PAGE>
NOTICE AND INFORMATION STATEMENT
FOR
ANNUAL MEETING OF SHAREHOLDERS
OF
KNIGHT TRANSPORTATION, INC.
TO BE HELD ON MAY 13, 1998
TO OUR SHAREHOLDERS:
The 1998 Annual Meeting of Shareholders (the "Annual Meeting")
of KNIGHT TRANSPORTATION, INC. (the "Company") will be held at 10:00 a.m.,
Phoenix time, on May 13, 1998, at The Wigwam Resort Hotel, 300 Indian School
Road, Litchfield Park, Arizona 85340, for the following purposes:
1. To elect eight (8) directors to serve for a one-year term
each;
2. To approve and ratify the amendment and restatement of the
Company's Stock Option Plan;
3. To approve and ratify the selection of Arthur Andersen LLP as
the Company's independent public accountants for 1998; and
4. To transact such other business as may properly come before
the Annual Meeting.
Management is presently aware of no other business to come
before the Annual Meeting.
The Board of Directors has fixed the close of business on
March 31, 1998, as the Record Date for the determination of shareholders
entitled to receive notice of and vote at the Annual Meeting or any adjournment
thereof. Shares of 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. MANAGEMENT
IS NOT SOLICITING ANY PROXIES IN CONNECTION WITH THE ANNUAL MEETING AND
SHAREHOLDERS ARE REQUESTED NOT TO SEND PROXIES TO THE COMPANY. A copy of the
Company's 1997 Annual Report to Shareholders, which includes audited
consolidated financial statements, was mailed on April 8, 1998, with this Notice
and Information Statement to all shareholders of record on the Record Date.
Management cordially invites you to attend the Annual Meeting.
Your attention is directed to the attached Information
Statement.
By order of the Board of Directors,
Clark A. Jenkins,
Secretary
Phoenix, Arizona
April 8, 1998
<PAGE>
KNIGHT TRANSPORTATION, INC.
5601 WEST BUCKEYE ROAD
PHOENIX, ARIZONA 85043
------------------------------------------
INFORMATION STATEMENT
This Information Statement is furnished by the Board of Directors of
Knight Transportation, Inc. (the "Company") in connection with the Annual
Meeting of Shareholders ("Annual Meeting") to be held on May 13, 1998. Materials
relating to the Annual Meeting were mailed on or about April 8, 1998, to
shareholders of record at the close of business on March 31, 1998 (the "Record
Date"). As of the Record Date, there were 9,951,809 shares of the Company's
common stock issued and outstanding. Except in the case of the election of
directors, shareholders are entitled to one (1) vote for each share held of
record on each matter of business to be considered at the Annual Meeting. In the
case of the election of directors, the system of cumulative voting is required.
See "Required Majority," below. Only holders of record of common stock at the
close of business on the Record Date will be entitled to vote at the Annual
Meeting, either in person or by valid proxy. Ballots cast at the Annual Meeting
will be counted by the Inspector of Elections and the results of all ballots
cast will be announced at the Annual Meeting. The Inspector of Elections will
treat abstentions and broker non-votes received as shares that are present and
entitled to vote for purposes of determining a quorum, but as unvoted for
purposes of determining the approval of any matter.
WE ARE NOT ASKING YOU FOR A PROXY AND YOU ARE
REQUESTED NOT TO SEND US A PROXY
The Company is not soliciting any shareholders' proxies and
shareholders are requested not to send any proxy. The information included
herein should be reviewed in conjunction with the Consolidated Financial
Statements, Notes to Consolidated Financial Statements, Independent Public
Accountants' report and other information included in the Company's 1997 Annual
Report to Shareholders that was mailed on April 8, 1998, with this Information
Statement, to all shareholders of record as of the Record Date.
REQUIRED MAJORITY
Under the Arizona Constitution, each holder of common stock has
cumulative voting rights in electing directors of the Company. Under cumulative
voting, each shareholder, when electing directors, has the right to cast as many
votes in the aggregate as he has voting shares multiplied by the number of
directors to be elected. For example, if a shareholder has 100 shares and eight
directors are to be elected, the shareholder may cast 800 votes. Each
shareholder may cast the whole number of votes, either in person or by proxy,
for one candidate or may distribute such votes among two or more candidates for
director. The eight directors receiving the most votes will be elected. Other
matters submitted to shareholders for consideration and action must be approved
by a simple majority vote of those shares present in person or by proxy.
Votes will be counted by the Inspector of Elections. Abstentions will
not be counted in voting on any proposal. A broker non-vote is not counted for
purposes of approving matters to be acted upon at the Annual Meeting. A broker
non-vote occurs when a nominee holding voting shares for a beneficial owner does
not vote on a particular proposal because the nominee does not have
discretionary voting power with respect to the item and has not received
instruction from the beneficial owner.
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<PAGE>
ELECTION OF DIRECTORS
The Board of Directors of the Company will consist of eight (8)
directors to be elected at the 1998 Annual Meeting to hold office for the year
that follows and until their successors are duly elected and qualified in 1999.
The term of the Company's existing directors will expire in May 1998. Nominees
of the management of the Company for the position of director are Donald A.
Bliss, Clark A. Jenkins, Gary J. Knight, Keith T. Knight, Kevin P. Knight, Randy
Knight, G.D. Madden, and Keith L. Turley. Each nominee is an incumbent director
of the Company. Biographical information about each director is set forth below.
Mr. Minor Perkins, a director of the Company since January 1, 1997, resigned
from the Board of Directors effective March 15, 1998, in order to return to
employment with Morgan Keegan & Company, Inc. The Board of Directors has elected
not to fill the vacancy at this time. A majority of the Board of Directors has
the power to fill any vacancy on the Board of Directors until the next annual
meeting of shareholders.
Messrs. Randy Knight, Kevin P. Knight, Gary J. Knight, and Keith P.
Knight, who will collectively have voting power over 56% of the issued and
outstanding shares of the Company's common stock, have indicated that they will
vote for the election of all director nominees.
Information Concerning Directors And Nominees
Information concerning the names, ages, positions, terms and business
experience of the Company's current directors and nominees for director is set
forth below.
Name Age Position and Offices Held
---- --- -------------------------
Donald A. Bliss(1) 65 Director
Clark A. Jenkins 40 Chief Financial
Officer, Secretary,
Director
Gary J. Knight(2) 46 President, Director
Keith T. Knight(2) 43 Executive Vice
President, Director
Kevin P. Knight(1)(2) 41 Chief Executive
Officer, Director
Randy Knight(2) 49 Chairman of the
Board, Director
G.D. Madden(3) 58 Director
Keith L. Turley(1) 74 Director
Executive officers of the Company serve at the will of the Board of Directors.
- ------------------
(1)Member of the Audit Committee.
(2)Randy Knight and Gary J. Knight are brothers and are cousins of Kevin P.
Knight and Keith T. Knight, who are also brothers.
(3)Member of the Compensation Committee.
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<PAGE>
Biographical Information Concerning Directors and Executive Officers of the
Company
Donald A. Bliss was elected to the Board of Directors of the Company in
February 1995. Until December 1994, Mr. Bliss was Vice President and Chief
Executive Officer of U.S. West Communications, a U.S. West company. Mr. Bliss
has also been a Director of Bank of America Arizona since 1988 and of Mutual of
Omaha since 1989, and was a Director of U.S. West Communications from 1987 to
1994.
Clark Jenkins joined the Company in 1990 and has served as the
Company's Secretary and Chief Financial Officer and a director since 1991. From
1986 to 1990, Mr. Jenkins was employed by Swift Transportation, Inc. ("Swift")
as a Vice President of Finance. Prior to his employment with Swift, Mr. Jenkins
was employed as an accounting manager by Flying J. Inc., a fully integrated oil
and gas company.
Gary J. Knight has served as the Company's President since 1993, and
has been an officer and director of the Company since 1990. From 1975 until
1990, Mr. Knight was employed by Swift, where he was an Executive Vice
President.
Keith T. Knight has served as the Company's Executive Vice President
since 1993, and has been an officer and director of the Company since 1990. From
1977 until 1990, Mr. Knight was employed by Swift, where he was a Vice President
and manager of the Los Angeles terminal.
Kevin P. Knight has served as the Company's Chief Executive Officer
since 1993, and has been an officer and director of the Company since 1990. From
1975 to 1984 and again from 1986 to 1990, Mr. Knight was employed by Swift,
where he was an Executive Vice President and President of Cooper Motor Lines,
Inc., a Swift subsidiary.
Randy Knight has served as the Company's Chairman of the Board since
1993 and has been an officer and director of the Company since its inception in
1989. From 1985 to the present, Mr. Knight has owned and operated Total
Warehousing, Inc. ("Total Warehousing"), a commercial warehousing and local
transportation business located in Phoenix, Arizona. Mr. Knight was employed by
Swift or related companies from 1969 to 1985, where he was a Vice President and
shareholder.
G.D. Madden has served as a director of the Company since January 1997.
Since 1996, Mr. Madden has been President of Madden Partners, a consulting firm
he founded, which specializes in transportation technology and strategy issues.
Prior to founding Madden Partners, he was President and CEO of Innovative
Computing Corporation, a subsidiary of Westinghouse Electric Corporation. Mr.
Madden founded Innovative Computing Corporation (ICC) as 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 President and CEO until 1996.
Keith L. Turley has served as a director of the Company since November
1994. Mr. Turley has been retired since 1990. From 1985 to 1990, Mr. Turley was
Chairman of the Board, President and Chief Executive Officer of Pinnacle West
Capital Corporation, the parent company of Arizona Public Service, Arizona's
largest privately owned public utility.
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<PAGE>
Meetings and Compensation of the Board of Directors
Board of Directors. During the year ended December 31, 1997, the Board
of Directors of the Company met on four occasions. Each of the directors
attended 75% or more of the meetings of the Board of Directors and meetings held
by all committees of the Board on which he served.
Directors who are not 10% shareholders or employees of the Company
("Independent Directors") receive annual compensation of $5,000, plus a fee of
$500 for attendance at each meeting of the Board of Directors, and a fee of $250
for committee meetings. Independent Directors appointed to the Board of
Directors also receive an automatic grant of a non-qualified stock option
("NSO") for a number of shares to be designated by the Board of not fewer than
2,500 nor more than 5,000 shares. The exercise price of a NSO is 85% of the fair
market value of the Company's stock as of the date of grant. The option is
forfeitable if a director resigns one year after election as a director. The
Board of Directors has granted each of Keith L. Turley, Donald A. Bliss, Minor
Perkins and G.D. Madden a NSO for 2,500 shares of the Company's common stock at
exercise prices of $12.54, $13.18, $20.19, and $20.19, respectively. Members of
the Board of Directors may accept shares of the Company's common stock in lieu
of director's fees. If this option is elected, the Company issues common stock
on February 15 and August 15 of each year in payment of accrued director's fees
for the preceding six month periods ending June 30 and December 31,
respectively, at the closing market price for such shares as of the trading day
prior to issuance.
Compensation Committee. The Compensation Committee of the Board of
Directors was created in November 1994, and for 1997 was composed of Mr. G.D.
Madden and Mr. Minor Perkins. Mr. Perkins served as chairman of the Committee
for 1997. The Compensation Committee met once during 1997. The Compensation
Committee reviews all aspects of compensation of executive officers of the
Company and makes recommendations on such matters to the full Board of
Directors. The Report of the Compensation Committee for 1997 is set forth below.
The Compensation Committee is composed entirely of directors who are not
officers, employees or 10% or greater shareholders of the Company. Due to Minor
Perkins' resignation from the Board, the Board of Directors will elect a new
member to the Compensation Committee at the annual meeting of the Board of
Directors held on May 13, 1998, immediately following the annual meeting of
shareholders. Only Independent Directors are eligible to serve on the
Compensation Committee.
Audit Committee. The Audit Committee was created in November 1994 and
is composed of Donald A. Bliss, Kevin P. Knight and Keith L. Turley. Mr. Turley
served as chairman of the Committee. The Audit Committee met four times during
1997. The Audit Committee makes recommendations to the Board of Directors
concerning the selection of independent public accountants, reviews the
consolidated financial statements and internal controls of the Company, and
considers such other matters in relation to the external audit and 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 reviews
proposals for major transactions. A majority of the members of the Audit
Committee are Independent Directors.
Other Committees. The Company does not maintain a standing nominating
committee or other committee performing a similar function.
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 directors and executive officers, and persons who own more than 10% of
a registered class of the Company's equity securities, to file with the
Securities and Exchange Commission ("SEC") and the National Association of
Securities Dealers Automated Quotation System ("NASDAQ") reports of ownership
and changes in
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<PAGE>
ownership of common stock and other equity securities of the Company. Officers,
directors and greater than 10% beneficial owners are required by SEC regulations
to furnish the Company with copies of all Section 16(a) forms they file. Based
solely upon a review of the copies of such reports furnished to the Company, or
written representations that no other reports were required, the Company
believes that during the 1997 fiscal year, all Section 16(a) filing requirements
applicable to its directors, executive officers and greater than 10% beneficial
owners were complied with, except for Messrs. Gary J. Knight, Keith T. Knight,
and Kevin P. Knight who each inadvertently failed to file timely a report for
the contribution of stock to an investment partnership, and Mr. Clark A.
Jenkins, who also through inadvertence, failed to file a timely report following
the grant of a stock option in early 1997. All reports have since been filed.
EXECUTIVE COMPENSATION
Summary Compensation Table.
The table which follows sets forth information concerning compensation
for the fiscal years ended December 31, 1996 and 1997 awarded to, earned by, or
paid to the Chief Executive Officer of the Company and the Company's four most
highly compensated executive officers other than the Chief Executive Officer
whose total annual salary and bonus exceeded $100,000 for the fiscal year ended
December 31, 1997 (the "Named Executive Officers").
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
Annual Compensation Long-Term Compensation
- ------------------------------------------------------------------- ----------------------------------------------------
Awards Payouts
----------------------- ------------------------
Restricted
Other Annual Stock Options/ LTIP All Other
Name and Salary Bonus Compensation Award(s) SARS Payouts Compensation
Principal Position Year ($) ($) ($) ($) (#) ($) ($)(1)
- ------------------------------------------------------------------- ----------------------- ------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Randy Knight, 1997 250,000 0 0 0 0 0 3,805
Chairman 1996 254,059 0 0 0 0 0 2,765
Kevin P. Knight,
Chief Executive 1997 250,000 0 0 0 0 0 2,225
Officer 1996 254,059 0 0 0 0 0 1,745
Gary J. Knight, 1997 250,000 0 0 0 0 0 3,165
President 1996 254,059 0 0 0 0 0 2,505
Keith T. Knight,
Executive Vice 1997 250,000 0 0 0 0 0 2,615
President 1996 254,059 0 0 0 0 0 2,145
Clark A. Jenkins, 1997 100,000 17,500 0 0 5,000 0 625
Chief Financial 1996 100,000 17,500 0 0 5,000 0 625
Officer, Secretary
- -------------------
(1) In 1997 and 1996, compensation included in the category of "All Other Compensation" for each of the Named Executive
Officers included Company contributions in the amount of $625, for each year, to the Knight Transportation, Inc. 401(k) Plan.
The balance of compensation included in "All Other Compensation" represents premiums paid for a $2,000,000 split-dollar life
insurance policy maintained for each of the Knights, which will be refunded to the Company upon termination of the policy.
Except as reflected in the table set forth below, no options or stock appreciation rights (SARs) were granted during
the last completed fiscal year to any of the Named Executive Officers.
</TABLE>
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<PAGE>
Option Grants and Option Exercise
During the fiscal year ended December 31, 1997, Mr. Clark A. Jenkins, a
Named Executive Officer, was awarded an incentive stock option under the
Company's Stock Option Plan for 2,000 shares at an exercise price of $19.00 per
share and 3,000 shares at an exercise price of $23.25 per share. A description
of the Company's Stock Option Plan is set forth below.
None of the Named Executive Officers exercised any stock options during
the fiscal year ended December 31, 1997. The following tables summarize option
grants made to Named Executive Officers and the aggregate value of options held
by the Named Executive Officers as of December 31, 1997.
<TABLE>
<CAPTION>
Option/SAR Grants in Last Fiscal Year
-------------------------------------
Individual Grants Potential realizable value at assumed
annual rates of stock price
appreciation for option term
- ----------------------------------------------------------------------------------------- -------------------------------------
Name Options/ Percent of total Exercise or Expiration Date 5% ($) 10% ($)
SARs Granted options/SARs granted base price
(#) to employees in fiscal ($/Sh)
year
- ------------- ------------ ---------------------- ------ --------------- ------ -------
<S> <C> <C> <C> <C> <C> <C>
Clark A. Jenkins 2,000 1% 19.00 Jan. 1, 2007 $23,898 $ 60,562
3,000 1% 23.75 Dec. 15, 2007 $43,865 $111,164
</TABLE>
AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR
AND OPTION VALUES AS OF DECEMBER 31, 1997
The following table sets forth the number of shares of the Company's
common stock subject to unexercised options and the dollar value of those
options for each Named Executive Officer.
<TABLE>
<CAPTION>
Number of Unexercised Value of Unexercised
Options at Fiscal Year End In-the-Money Options at
12/31/97 (#) Fiscal Year End ($)
------------------------------ -------------------------------
Shares
Acquired
on Value
Name Exercise (#) Realized ($) Exercisable Unexercisable(2) Exercisable Unexercisable(3)
- ------------------------------------------------------ ----------- ---------------- ----------- ----------------
<S> <C> <C> <C> <C> <C> <C> <C>
Clark A. Jenkins(1) 0 0 11,667 33,333 $183,755 $468,495
- --------------------
(1) None of the other Named Executive Officers (Randy Knight, Kevin P. Knight, Gary J. Knight, and Keith T. Knight) held any
options during fiscal year 1997.
(2) Mr. Jenkins was granted an option for 35,000 shares in October 1994, at an exercise price of $12.00 per share; an option
for 5,000 shares on January 2, 1996, at an exercise price of $13.75 per share; an option for 2,000 shares on January 2, 1997,
at an exercise price of $19.00 per share; and an option for 3,000 shares on December 18, 1997 at an exercise price of $23.25
per share. With respect to the 1994 option for 35,000 shares, one third of Mr. Jenkins' outstanding option is exercisable in
October 1997, one third is exercisable in October 1998, and the remainder is exercisable in October 1999. With respect to the
1996 option for 5,000 shares, one-third is exercisable in January 1999, one-third in January 2000 and one-third in January
2001. With respect to Mr. Jenkins' January 1997 option for 2,000 shares, one third becomes exercisable in January 2000, and an
additional one third in January of each subsequent year. With respect to Mr. Jenkins' December 1997 option for 3,000 shares,
one third becomes exercisable in December 2000, and an additional one third in December of each subsequent year.
(3) Based on a closing price of $27.75 of the Company's common stock on December 31, 1997.
</TABLE>
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<PAGE>
Long Term Incentive Plan.
Other than the Employee Incentive Program division of its Stock Option
Plan, in which the Named Executive Officers, other than Clark Jenkins, do not
participate, the Company does not have a long-term incentive plan or a defined
benefit plan and has never issued any stock appreciation rights (SARs).
Compensation Committee Interlocks and Insider Participation.
The Compensation Committee of the Board of Directors consisted during
1997 of G.D. Madden and Minor Perkins. Mr. Perkins served as the Chairman of the
Compensation Committee, until his resignation as a director in March 1998.
Members of the Compensation Committee are neither employees, officers, or 10% or
greater shareholders of the Company. See "Certain Relationships and Related
Transactions" for a description of transactions between the Company and members
of the Board of Directors or their affiliates.
Employment Agreements.
The Company currently does not have any employment contracts, severance
or change-in-control agreements with any of its Named Executive Officers.
Stock Option Plan
The Company adopted in 1994 and currently maintains a stock option plan
(the "Plan" or the "Stock Option Plan") to enable directors, executive officers
and certain key and critical line employees of the Company, including drivers
and other employees, to participate in the ownership of the Company. The Plan is
designed to attract and retain directors, executive officers, key employees and
critical line employees of the Company, and to provide long-term incentives to
those persons. In authorizing stock grants under the Plan, the Compensation
Committee has sought to align the interests of employees with the Company's
shareholders and has sought to make stock grants to those key employees and
operating personnel whose performance is important to the Company's success.
At the Annual Meeting, shareholders will be asked to approve and ratify
the Company's Amended and Restated Stock Option Plan that was approved by the
Board of Directors of the Company in February 1998.
In July 1994, 650,000 shares of common stock were reserved for grants
under the Plan. As of December 31, 1997, stock grants for 577,816 shares of the
Company's common stock had been issued under the Plan. In order to assure the
Plan's continuation, in February 1998, the Board of Directors amended the Plan
and authorized an additional 350,000 shares of common stock to be reserved for
stock grants made under the Plan. Under the Plan, as amended, a total of
1,000,000 shares of the Company's common stock would be available for stock
grants; of these, 577,816 shares were subject to issued and outstanding grants
and 422,184 shares were available for new stock grants as of February 10, 1998.
The Plan was also amended to simplify its administration and eliminate the
Employee Incentive Plan as part of the Plan. The Employee Incentive Plan allowed
the Company to make incentive awards to employees in cash or stock. The Board of
Directors has determined that the Company's stock option program and cash bonus
programs are the more appropriate vehicles for recognition of employee
performance and providing incentives, and that the separate program contemplated
by the Employee Incentive Plan is duplicative and unnecessary.
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<PAGE>
The Plan, as amended and restated, has two divisions: Division I, the
Stock Option Plan, allows the Compensation Committee to grant incentive stock
options (ISOs), nonqualified stock options (NSOs) or restricted stock grants
(individually and collectively, "stock grants") to employees as a traditional
form of incentive compensation. The exercise price of an ISO may not be less
than 100% of the fair market value of the option stock on the date the option is
granted. If the participant, at the time the ISO is granted, owns 10% or more of
the total combined shares or voting power of all classes of stock of the Company
outstanding, the exercise price must be at least 110% of the fair market value
of the Company's stock on the date it is granted, and in no event may the option
be exercised after the expiration of five years from the date of grant.
Otherwise, an ISO may be exercised at any time within ten years of the date of
grant. No ISO may be granted under the Plan more than ten years after earlier of
the date the Plan is adopted or the Plan is initially approved by shareholders.
The fair market value of a share of the Company's stock is determined as of the
closing price on the day preceding the date of grant, as reported by NASDAQ
National Market or The Wall Street Journal. The aggregate fair market value of
stock subject to any ISO grant exercisable for the first time by a participant
during any calendar year may not exceed $100,000. To the extent the grant would
exceed that amount, the excess amount is treated as granted under an NSO. Stock
issued in connection with an ISO may not be disposed of by the participant
within two years of the date the option is granted nor within one year after the
date the option is exercised in order to obtain favorable tax treatment as an
ISO. (ISOs are not taxable when exercised.)
Stock grants made under the Plan, if not made as an ISO, must be at a
price not less than 85% of the fair market value of the Company's stock as of
the date of grant. Stock grants made under the Plan, other than ISOs, may be
exercised within any reasonable time specified in the granting agreement, and
may be granted any time prior to the expiration of the Plan.
All stock grants made under the Plan are evidenced by a written
agreement between the Company and the participant. Common stock reserved for
stock grants made under the Plan is automatically increased or decreased by
reason of any stock split, reverse stock split, subdivision, stock dividend,
reorganization or reclassification of the Company's stock, without further
action by the Company. Participants exercise no rights as shareholders of the
Company with respect to shares subject to any stock grant until the date a stock
certificate is issued following the exercise of a grant. Proceeds obtained by
the Company from the exercise of stock grants will be applied for general
corporate purposes. No limitation exists on the number of shares that may be
granted to any individual. Unless otherwise provided in the granting agreements,
unexercised options lapse on termination of employment, except in the case of
death or retirement, in which event the right to exercise is extended.
If not earlier terminated, the Plan will expire on August 31, 2004.
Stock grants may not be made under the Plan after August 31, 2004 and no ISO may
be granted under the Plan after August 29, 2004. The Company has reserved the
right to terminate, suspend, discontinue, modify or amend the Plan in any
respect, at any time, except that without the approval of the Company's
shareholders, no revision or amendment may change the number of shares of
Company stock subject to the Plan, change the designation of the class of
employees eligible to receive options, decrease the price at which options may
be granted, or remove the administration of the Plan from the Compensation
Committee. Notwithstanding this limitation, the Company will not terminate the
Plan with regard to any outstanding stock grant unless notice of termination is
given to the participant and the participant is permitted at least fifteen days
to exercise any issued and outstanding stock grant, but only if such stock grant
is then exercisable.
Division II, the Independent Directors' Automatic Stock Option Plan,
provides for the automatic grant of a stock option to an Independent Director
upon such director's appointment to the Board in an amount not less than 2,500
shares nor more than 5,000 shares. The purpose of this decision is to assist the
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Company in attracting and retaining qualified independent directors. The
exercise price of an option granted under the Independent Directors' Automatic
Stock Option Plan is 85% of the fair market value of a share of the Company's
common stock as of the date of grant. Up to 25,000 shares of the Company's
common stock may be issued to Independent Directors under the Independent
Directors' Automatic Stock Option Plan.
The Plan, other than the Independent Directors' Automatic Stock Option
Plan Division, is administered by the Compensation Committee, which is
authorized to select from among the eligible employees of the Company the
individuals to whom stock grants are to be issued, the number of shares to be
awarded and the terms and conditions of the award. The Independent Directors'
Automatic Stock Option Plan Division is administered by those directors who are
not entitled to participate in the Plan. The Compensation Committee also is
authorized to adopt, amend and rescind rules relating to the administration of
the Plan. No member of the Compensation Committee may participate in or take
action with respect to any grant of an option or stock purchase right with
respect to such member.
Shares issued by the Company under its Stock Option Plan are registered
with the Securities and Exchange Commission and, in general, are freely
tradeable.
Approval of the amended and restated Plan by a majority of the
Company's issued and outstanding common stock is required. Messrs. Randy Knight,
Keith P. Knight, Gary J. Knight and Keith T. Knight, who collectively hold the
voting power over 56% of all issued and outstanding voting stock, have indicated
that they will vote for the approval of the amendments to the Plan. The Board of
Directors recommends the shareholders approve and ratify the amended and
restated Plan.
A copy of the amended and restated Stock Option Plan, including all
amendments, is set forth below at Exhibit "1".
401(k) Plan.
The Company also sponsors a 401(k) Plan (the "401(k) Plan"). The 401(k)
Plan is a profit sharing plan that permits voluntary employee contributions on a
pre-tax basis under section 401(k) of the Internal Revenue Code. Under the
401(k) Plan, a participant may elect to defer a portion of his compensation and
have the Company contribute a portion of his compensation to the 401(k) Plan.
The Company makes a discretionary matching contribution. For 1997, the Company's
contribution was $625 per participant. The Plan's assets are held and managed by
an independent trustee. Under the 401(k) Plan, eligible employees have the right
to direct the investment of employee and employer contributions among several
mutual funds. The Plan also allows Participants to direct the trustee to
purchase shares of the Company's stock on the open market. Senior executives of
the Company and certain key employees are not permitted to participate in this
aspect of the Plan.
Amounts contributed by the Company for a participant will vest over
five years and will be held in trust until distributed pursuant to the terms of
the 401(k) Plan. An employee of the Company is eligible to participate in the
401(k) Plan if he has attained age 19 and completed 1,000 hours of service
within a 12 month period. Distributions from participant accounts will not be
permitted before age 59-1/2, except in the event of death, disability, certain
financial hardships or separation from service.
-10-
<PAGE>
The Compensation Committee Report on Executive Compensation and the Performance
Graph that follows shall not be deemed to be incorporated by reference into any
filing made by the Company under the Securities Act of 1933 or the Securities
Exchange Act of 1934, notwithstanding any general statement contained in any
such filing incorporating this information statement by reference, except to the
extent the Company incorporates such report and graph by specific reference.
Compensation Committee Report
The Compensation Committee of the Board of Directors has furnished the
following Report on Executive Compensation:
Compensation Committee Report on Executive Compensation
Under the supervision of the Compensation Committee of the Board of
Directors, the Board of Directors reviews the compensation of the Company's
executive officers annually. The compensation program for the Company's
executive officers is administered in accordance with a pay-for-performance
philosophy to link executive compensation with the values, objectives, business
strategy, management incentives and financial performance of the Company.
Because the most senior executive officers of the Company each have
substantial holdings of the Company's common stock, corporate performance
directly affects the Company's executive officers. The Committee believes that
stock ownership by the Company's most senior executive officers serves to align
the interests of management and other shareholders in the enhancement of
shareholder value. With the exception of Mr. Clark Jenkins, Chief Financial
Officer and Secretary, who is eligible for stock options and bonus awards, the
Company's executive officers are compensated with a base salary only, with no
bonus or short or long term incentives. With respect to Mr. Jenkins and future
executive officers without substantial holdings of the Company's common stock,
the objectives of the Company's compensation program are to align executive and
shareholder long-term interests by creating a strong and direct link between
executive pay and shareholder return, and to enable executives to develop and
maintain a significant, long-term stock ownership position in the Company's
common stock. This objective is accomplished primarily through stock options
granted under the Company's Stock Option Plan.
In reviewing base salaries of senior management for 1997 and salary
compensation for 1998, including the salary of Mr. Kevin P. Knight, the
Company's Chief Executive Officer, the Compensation Committee reviewed and
considered (i) compensation information disclosed by similarly-sized publicly
held truckload motor carriers; (ii) the financial performance of the Company, as
well as the role and contribution of the particular executive with respect to
such performance; (iii) non-financial performance related to the individual
executive's contributions; and (iv) the particular executive's stock holdings.
The Compensation Committee believes that the annual salaries of the
Company's Chief Executive Officer and other executive officers are reasonable
compared to similarly situated executives of other truckload motor carriers.
COMPENSATION COMMITTEE
Minor Perkins, Chairman
G.D. Madden, Member
February 5, 1998
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<PAGE>
STOCK PERFORMANCE GRAPH
The graph below compares cumulative total returns of the Company, the
NASDAQ Stock Market and the NASDAQ Trucking and Transportation Stocks Indices
(the "Peer Group") from December 31, 1994 to December 31, 1997. The graph
assumes that $100 of the Company's common stock was purchased on December 31,
1994, at a price of $14.25 per share. The Company has paid no dividends since
its inception. There is no assurance that the Company's stock performance will
continue into the future with the same or similar trends depicted in the graph
below. The Company makes no predictions as to the future performance of its
stock.
Legend
<TABLE>
<CAPTION>
Index Description 12/31/94 12/31/95 12/31/96 03/31/97 06/30/97 09/30/97 12/31/97
- ----------------- -------- -------- -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C> <C>
Knight Transportation, Inc. 100.00 96.49 133.33 158.77 178.07 196.49 194.74
NASDAQ Stock Market 100.00 141.42 173.96 164.60 194.77 227.72 213.56
NASDAQ Trucking & 100.00 116.61 128.69 127.42 145.80 171.54 165.71
Transportation Stocks Index
(the "Peer Group")
</TABLE>
-12-
<PAGE>
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Company's Purchase and Lease of Properties, and Loans
The Company's headquarters and principal place of business is located
at 5601 West Buckeye Road, Phoenix, Arizona, on approximately 45 acres. The
Company owns approximately 35 acres and, as of December 31, 1997, leased
approximately 10 acres from Randy Knight, an officer, director and principal
shareholder of the Company. The property leased by the Company from Randy Knight
includes terminal and operating facilities. Total payments of approximately
$60,200 were made by the Company to, or on behalf of, Total Warehousing and
Randy Knight for the year ended December 31, 1997. Randy Knight owns a
controlling interest in Total Warehousing.
Under the original lease between the Company and Randy Knight, the base
rent was $4,828 per month for the initial three years of the lease. On September
1, 1997 the Company increased the acreage leased from Randy Knight by
approximately 1.4 acres; the base rent was also increased to $5,922.72 per
month, effective as of September 1, 1997. Under the amended lease, base rent for
terminal space is calculated at $.00515 per square foot per month and for office
space at $.1236 per square foot per month. Under the lease agreement, base rent
increases by 3% on the third anniversary of the commencement date, the first day
of each option term, and the third anniversary of the commencement date of each
option term. In addition to base rent, the lease requires the Company to pay its
share of all expenses, utilities, taxes and other charges. Under the lease, the
Company and Total Warehousing will continue to use portions of the premises
jointly. The Company has granted Randy Knight access and utility easements over
its owned and leased properties. The purchase and lease agreements between the
Company and Randy Knight include cross-indemnities relating to liabilities and
expenses arising from the use and occupancy of the property by the parties to
the agreements.
The Company and Total Warehousing have periodically jointly purchased
insurance and other products and services and have shared other costs relating
to the operation of their businesses. Costs have been allocated consistent with
their respective use of the product or service. In addition, the Company and
Total Warehousing from time to time provide services to each other. Total
Warehousing provided general warehousing services to the Company and was paid
$11,000 by the Company for the year ended December 31, 1997.
Transactions With Affiliates
The Company has adopted a policy that transactions with affiliated
persons or entities will be on terms no less favorable to the Company than those
that could be obtained from unaffiliated third parties on an arm's length basis,
and that any such transaction must be reviewed by the Company's Independent
Directors.
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<PAGE>
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS
AND MANAGEMENT
The following table sets forth, as of March 4, 1998, the number and
percentage of outstanding shares of Company 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 Executive Officer of the Company, and by all
directors and executive officers of the Company as a group.
<TABLE>
<CAPTION>
Name and Address of Amount and Nature Of Percent of
Beneficial Owner(1) Beneficial Ownership Class
- ---------------- -------------------- -----
<S> <C> <C>
Donald A. Bliss(2) 3,689 *
Clark A. Jenkins(3) 12,317 *
Gary J. Knight(4) 1,409,475 14.16%
Keith T. Knight(5) 1,398,475 14.05%
Kevin P. Knight(6) 1,407,475 14.14%
L. Randy Knight(7) 1,363,925 13.71%
G.D. Madden(8) 2,689 *
Minor Perkins(9) 2,689 *
Keith L. Turley(10) 6,289 *
William Blair & Company, L.L.C.(11) 810,868 8.2%
All directors and executive officers as a group (9 persons) 5,607,023 56.3%
- --------------------
(1) The address of each officer and director is 5601 West Buckeye Road, Phoenix, Arizona 85043. The
address of William Blair & Company, L.L.C. ("William Blair") is 222 West Adams Street, Chicago, Illinois
60606. All information provided with respect to William Blair is based solely upon the Company's review
of a Schedule 13G filed by William Blair with the Securities and Exchange Commission.
(2) Includes 2,500 shares that Donald A. Bliss has the right to acquire through the exercise of a stock
option.
(3) Shares shown include shares subject to options currently exercisable or exercisable within 60 days.
Mr. Jenkins holds options to acquire an additional 33,333 shares of Knight's common stock that are not
exercisable within the next 60 days.
(4) Includes 1,407,975 shares beneficially owned by Gary J. Knight over which he exercises sole voting
and investment power as a Trustee under a Revocable Trust Agreement dated May 19, 1993, and 1,500 shares
owned by three minor children who share the same household.
(5) Includes 1,396,975 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 dated
March 13, 1995, and 1,500 shares owned by three minor children who share the same household.
(6) Includes 1,380,475 shares beneficially owned by Kevin P. Knight over which he and his wife, Sydney
Knight, exercise sole voting and investment power as Trustees under a Revocable Trust Agreement dated
March 25, 1994, 25,000 shares held by Kevin P. and Sydney B. Knight Family Foundation over which Kevin P.
Knight and his wife, Sydney Knight, as officers of the Foundation, exercise sole voting and investment
power on behalf of the Foundation; and 2,000 shares owned by four minor children, who share the same
household.
(7) Includes 1,062,675 shares beneficially owned by Randy Knight over which he exercises sole voting and
investment power as a Trustee under a Revocable Trust Agreement dated April 1, 1993; 300,000 shares held
by a limited liability company for which Mr. Knight acts as manager and whose members include Mr. Knight
and his four children; and 1,250 shares owned by a minor child who shares the same household.
(8) Includes 2,500 shares that G.D. Madden has the right to acquire through the exercise of a stock
option.
(9) Includes 2,500 shares that Minor Perkins has the right to acquire through the exercise of a stock
option.
(10) Includes 2,500 shares that Keith L. Turley has the right to acquire through the exercise of a stock
option.
(11) William Blair & Company, L.L.C. has sole voting power over 587,913 shares and sole dispositive power
over 810,868 shares. It has shared voting power and shared dispositive power over no shares. William
Blair & Company Investment Management Services, a department of William Blair & Company L.L.C., serves as
an investment advisor. William Blair & Company, L.L.C. is the owner of record and discloses beneficial
ownership of such shares. The foregoing is based solely on information provided by Form 13G, filed by
William Blair & Company, L.L.C. with the Securities and Exchange Commission on February 14, 1998.
* Represents less than 1% of the Company's outstanding common stock.
</TABLE>
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<PAGE>
RELATIONSHIP WITH
INDEPENDENT ACCOUNTANTS
The principal accounting firm used by the Company during the fiscal
year ended December 31, 1997, was Arthur Andersen LLP, independent public
accountants ("Arthur Andersen"). It is presently contemplated that Arthur
Andersen will be retained as the principal accounting firm to be used by the
Company during the current fiscal year, and the Board of Directors recommends
that the shareholders vote to ratify the retention of Arthur Andersen as the
Company's auditors. A representative of Arthur Andersen is expected to be
present at the Annual Meeting to respond to appropriate questions and will be
afforded an opportunity to make a statement if Arthur Andersen so desires.
SHAREHOLDER PROPOSALS
The Board of Directors will consider proposals from shareholders for
nominations of directors to be elected at the 1999 Annual Meeting of
Shareholders that are made in writing to the Secretary of the Company, are
received at least ninety (90) days prior to the 1999 Annual Meeting, and contain
sufficient background information concerning the nominee to enable a proper
judgment to be made as to his or her qualifications, as more fully provided in
the Company's Articles of Incorporation and Bylaws.
Proposals of shareholders as to other matters intended to be presented
at the 1999 Annual Meeting must be received by the Company by December 6, 1998,
to be considered for inclusion in the Company's Information Statement relating
to such Meeting. Proposals should be mailed via certified mail, return receipt
requested, and addressed to Clark A. Jenkins, Secretary, Knight Transportation,
Inc., 5601 West Buckeye Road, Phoenix, Arizona 85043.
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.
Knight Transportation, Inc.
/s/ Kevin P. Knight
Kevin P. Knight
Chief Executive Officer
-15-
AMENDED AND RESTATED KNIGHT TRANSPORTATION, INC.
STOCK OPTION PLAN
February 10, 1998
"Exhibit 1"
<PAGE>
AMENDED AND RESTATED KNIGHT TRANSPORTATION, INC.
STOCK OPTION PLAN
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
----
<S> <C> <C> <C>
HISTORY AND PURPOSE...............................................................................................1
Section 1. Definitions..................................................................................2
Section 2. Shares Reserved for Stock Grants.............................................................3
2.1 Shares Reserved For Stock Grants.......................................................3
2.2 Adjustment to Shares...................................................................3
2.3 Number of Stock Grants; Partial Exercise...............................................4
Section 3. Plan Eligibility.............................................................................4
3.1 General................................................................................4
3.2 Stock Option Plan......................................................................4
3.3 Independent Directors Plan.............................................................4
Section 4. Stock Option Plan............................................................................4
4.1 Award of Stock Grant...................................................................4
4.2 ISOs...................................................................................4
(a) Fair Market Value of ISO......................................................4
(b) Disposition of ISO Stock......................................................4
(c) Insolvent Participants........................................................5
(d) Construction..................................................................5
4.3 Option or Purchase Price...............................................................5
4.4 Limitation on Period in Which to Grant or Exercise Options.............................5
Section 5. Independent Directors Plan...................................................................6
5.1 Automatic Grant; Forfeiture............................................................6
5.2 Holding Period.........................................................................6
5.3 Existing Options.......................................................................6
Section 6. Administration...............................................................................6
6.1 Administrative Committee...............................................................6
6.2 Administration of the Plan.............................................................6
Section 7. General Provisions...........................................................................7
7.1 Grant Agreement........................................................................7
7.2 Mergers or Consolidations..............................................................7
7.3 Termination of Employment..............................................................7
</TABLE>
-i-
<PAGE>
<TABLE>
<S> <C> <C> <C>
7.4 Payment for Stock......................................................................8
7.5 Compliance With Applicable Laws and Regulations........................................8
7.6 No Right to Employment.................................................................8
7.7 Taxes..................................................................................8
7.8 Expenses...............................................................................8
7.9 Unfunded Benefits......................................................................8
7.10 Transferability........................................................................8
7.11 Expiration Date of Plan................................................................9
7.12 Corporate Action.......................................................................9
7.13 Rights as a Shareholder................................................................9
7.14 Investment Purpose.....................................................................9
7.15 Investment Letter......................................................................9
7.16 Termination or Amendment of the Plan...................................................9
7.17 Application of Funds...................................................................9
7.18 Obligation to Exercise Grant...........................................................9
7.19 Approval of Shareholders; Termination of Plan.........................................10
7.20 Governing Law.........................................................................10
</TABLE>
-ii-
<PAGE>
AMENDED AND RESTATED
KNIGHT TRANSPORTATION, INC.
STOCK OPTION PLAN
HISTORY AND PURPOSE
- -------------------
On August 31, 1994, Knight Transportation, Inc. (the "Company"
or "Knight") adopted the 1994 Stock Option Plan (the "1994 Stock Option Plan" or
the "Plan"), effective as of September 1, 1994. As adopted, the Plan provided
for the grant of stock options to employees of the Company. The Plan was
approved by the Board of Directors and shareholders of the Company on August 31,
1994. By a First Amendment to the Plan effective as of September 26, 1994 (the
"First Amendment"), the Plan provided for the issuance of up to 650,000 shares
of the Company's common stock, par value $0.01 per share, pursuant to the Stock
Grants made under the Plan. The Plan was subsequently submitted to and approved
by the shareholders of the Company at the annual meeting of shareholders held on
May 10, 1995.
On July 26, 1995, the Company amended the Plan (the "Second
Amendment") to establish a separate plan document to govern the issuance of
automatic stock options to independent directors of the Company (the
"Independent Directors Plan"), including stock options granted prior to the
effective date of the Second Amendment.
Pursuant to resolutions adopted by the Board of Directors on
November 15, 1995 (the "Third Amendment"), the Board of Directors amended the
Plan to establish an employee incentive plan (the "Incentive Plan") and
authorized the Compensation Committee of the Board of Directors to award up to
$10,000 per employee of the Company's common stock, or cash, or a combination of
cash and common stock, to employees for extraordinary services rendered to the
Company during a fiscal year.
Pursuant to resolutions adopted by the Board of Directors on
February 21, 1996, the Board of Directors further amended the Plan (the "Fourth
Amendment") to clarify certain provisions of the Plan, provide greater
flexibility in the administration of the Plan, and better coordinate the
operation of the Employee Incentive Plan with other divisions of the Plan. All
amendments to the Plan were subsequently approved by the Company's shareholders
at the meeting of shareholders held on May 8, 1996.
Pursuant to resolutions adopted by the Board of Directors on
February 10, 1998, the Plan was further amended to increase the number of shares
of the Company's common stock authorized for issuance under the Plan by 350,000,
to eliminate the Incentive Plan as duplication of other programs sponsored by
the Company, to simplify the design and administration of the Plan, and to amend
and restate the Plan in its entirety.
Purpose
-------
This Amended and Restated Knight Transportation, Inc. Stock
Option Plan (the "Stock Option Plan" or the "Plan") has been adopted to(a)
provide certain key employees of the Company (as defined below) with an
opportunity to purchase the common stock of Knight as an incentive to continue
employment with the Company and to work for the long-term growth, development,
and financial success of the Company; (b) attract qualified independent
directors by providing the automatic grant of certain nonqualified stock options
to independent directors upon their appointment to the Company's Board of
<PAGE>
Directors; and (c) attract, motivate, and retain the services of critical
employees of the Company and its subsidiaries and reward such employees by the
issuance of Stock Grants so that these employees will contribute to and
participate in the long-term performance of the Company.
Section 1. Definitions.
------------
The following terms shall have the meanings set forth below,
unless context otherwise requires.
"Amended Effective Date" means February 10, 1998, which shall
be the date this Amended and Restated Plan is effective, subject only to Section
7.19.
"Beneficiary" means the person or persons designated by a
Participant as his beneficiary.
"Board of Directors" or "Board" means the Board of Directors
of Knight.
"Code" means the Internal Revenue Code of 1986, as amended
from time to time.
"Committee" means the Compensation Committee of the Board of
Directors, which shall be appointed in accordance with the procedures described
in Section 6, except that, in the case of a Stock Option granted to an
Independent Director (as defined below), "Committee" shall mean the Board of
Directors of Knight Transportation, Inc., excluding any Independent Director who
is a participant in the Plan.
"Company" means Knight and any subsidiary of Knight that is
treated as a "subsidiary" under section 425 of the Code.
"Division" means Sections 4 and 5 of this Plan.
"Effective Date" means September 1, 1994, but with respect to
the Independent Directors Plan, the term "Effective Date" shall mean September
1, 1995.
"Knight" means Knight Transportation, Inc., an Arizona
corporation, and its successors in interest.
"ISO" means an incentive stock option granted a Participant
under Section 4 of this Plan and which qualifies as an incentive stock option
under section 422 of the Code. To the extent this Plan has authorized the
Committee to grant ISOs, this Plan shall be interpreted and construed so as to
qualify as an incentive stock option plan under Section 422 of the Code and the
regulations thereunder.
"Independent Director" means a director of the Company who is
not an officer, employee or 10% shareholder of the Company.
"Independent Directors Plan" means the Independent Directors
Automatic Stock Option Plan set forth in Section 5.
"NSO" means any option granted under this Plan that is not an
ISO.
-2-
<PAGE>
"Participant" means any employee or independent director of
the Company who has been selected by the Committee to participate in the Plan.
"Plan" means the Knight Transportation, Inc. Stock Option
Plan, effective as of September 1, 1994, as amended and restated hereby.
"Plan Year" means the calendar year.
"Restricted Stock Grant" means the right granted a Participant
to purchase Restricted Stock at a price determined by the Committee, and subject
to such restrictions and conditions as may be determined by the Compensation
Committee.
"Restricted Stock" means stock sold to a Participant pursuant
to a Restricted Stock Grant.
"Stock" means the common stock of Knight, par value $0.01 per
share.
"Stock Option" means any ISO or NSO granted to a Participant
under this Plan, which is evidenced by a writing executed by the Participant and
by an authorized member of the Committee.
"Stock Grant" means the award of a Stock Option or a
Restricted Stock Grant made under any Division of this Plan.
"Stock Grant Agreement" means the written Agreement between
the Company and a Participant evidencing a Stock Grant.
Section 2. Shares Reserved for Stock Grants.
---------------------------------
2.1 Shares Reserved For Stock Grants. There shall be reserved
for the Stock Grants pursuant to all Divisions of this Plan 1,000,000 shares of
the presently authorized but unissued Stock. Of this amount, 25,000 shares of
Stock are reserved for Stock Grants under the Independent Directors Plan. The
balance of the Shares reserved for Stock Grants may be awarded under any other
Division of this Plan; provided, however, that in no event shall the aggregate
number of shares of Stock subject to all Stock Grants made under this Plan
exceed 1,000,000 shares of Stock, except as described in Section 2.2 below. As
of February 10, 1998, Stock Grants for 577,816 shares of Stock had been issued
under all Divisions of the Plan.
2.2 Adjustment to Shares. The aggregate number of shares of
Stock which may be issued pursuant to Stock Grants made under this Plan shall be
automatically adjusted, without further action by the Board or the shareholders
of Knight, to reflect changes in the capitalization of Knight, such as stock
dividends, stock splits, reverse stock splits, subdivisions, reorganizations or
reclassification, or any similar recapitalization that affects or modifies the
number of shares of Stock issued and outstanding at any time. The adjustment of
shares of Stock reserved for Stock Grants under this Section shall not cause
shares of Stock subject to a Stock Grant Agreement to be automatically adjusted,
unless the Stock Grant Agreement specifically requires such an adjustment.
2.3 Number of Stock Grants; Partial Exercise. More than one
Stock Grant may be made to the same Participant, and Stock Grants may be subject
to partial exercise, as the Committee may
-3-
<PAGE>
in its discretion determine. If any Stock Grant made under this Plan expires or
is terminated without being exercised, or after being partially exercised, the
shares of Stock allocated to the unexercised portion of a Stock Grant shall
revert to the pool of shares reserved in Section 2.1 and shall again be
available for Stock Grants made under this Plan.
Section 3. Plan Eligibility.
-----------------
3.1 General. The Committee, subject to the following
limitations, shall from time to time designate from among the Company's
employees those persons who will be Participants in this Plan, subject to the
following rules:
3.2 Stock Option Plan. Only full-time employees of the
Company, who, in the sole judgment of the Committee, (i) are qualified by
position, training, ability, and responsibility to contribute substantially to
the progress of the Company; (ii) have a material, positive effect on the
results of the operations of the Company; or (iii) are key employees or critical
line employees (as determined by the Committee), shall be eligible to
participate in the Stock Option Plan described in Section 4.
3.3 Independent Directors Plan. Independent Directors of the
Company shall be automatically eligible to participate in the Independent
Directors Plan described in Section 5.
Section 4. Stock Option Plan.
------------------
4.1 Award of Stock Grant. The Committee may award Stock Grants
to a Participant in the form of Stock Options (including, without limitation,
"ISO"s, "NSO"s) or Restricted Stock Grants under this Section 4, in any
combination. At the time a Stock Grant is awarded under this Section 4, the
Committee shall designate the number of shares of Stock subject to the grant and
indicate whether such grant is an ISO, NSO or a Restricted Stock Grant.
4.2 ISOs. The following rules shall apply to Stock Options
granted as ISOs, in addition to any other provisions of this plan that may be
applicable.
(a) Fair Market Value of ISO. The aggregate fair
market value of Stock subject to an ISO granted under this Section 4 (determined
without regard to this Section 4.2) exercisable for the first time by any
Participant during any calendar year (under all plans of the Company) shall not
exceed $100,000. The preceding sentence shall be applied by taking ISOs into
account in the order in which they were granted hereunder. If any ISO is granted
that exceeds the limitations of this Section 4.2 at the first time it is
exercisable, it shall not be invalid, but shall constitute, and be treated as,
an NSO to the extent of such excess. For purposes of this Plan, the fair market
value of the Stock subject to any ISO shall be determined by the Committee
without regard to any restriction other than a restriction which, by its terms,
will never lapse.
(b) Disposition of ISO Stock. No Stock issued in
connection with a Participant's exercise of an ISO may be disposed of by the
Participant within two years from the date the option is granted nor within one
year after the date such Stock is issued to the Participant and be eligible for
-4-
<PAGE>
treatment as an ISO; provided, however, unless otherwise provided in the Stock
Grant Agreement, these holding periods shall not apply if the Stock Option is
exercised after the death of a Participant by the estate of such Participant, or
by a person who acquired the right to exercise such option by bequest or
inheritance or by reason of the death of a deceased Participant.
(c) Insolvent Participants. No disposition of Stock
described in Section 422(c)(3) of the Code, which was acquired pursuant to the
exercise of an ISO, shall constitute a disposition of Stock in violation of
Section (b) of this Section.
(d) Construction. Any ISOs granted under this Plan
shall be construed to meet the requirements of Section 422 of the Code and the
regulations thereunder.
4.3 Option or Purchase Price. Each Stock Option shall state
the exercise price of the option, which, in the case of an ISO, shall not be
less than 100% of the fair market value of the optioned Stock on the date the
Stock Option is granted; as provided below. Any Restricted Stock Grant shall
state the price at which the Restricted Stock may be purchased. In the case of a
Participant who, at the time the ISO is granted, owns shares of Stock possessing
more than 10% of the total combined voting power of all classes of stock of the
Company (or any parent or subsidiary), the exercise price of such ISO shall be
not less than 110% of the fair market value of Stock on the date the option is
granted, and, in no event shall such option be exercisable after the expiration
of five years from the date such option is granted. The exercise price for any
share of stock subject to an NSO, the purchase price under a Restricted Stock
Grant or any Stock Option granted to a director shall not be less than 85% of
the fair market value of a share of the Stock as of the date of grant. The fair
market value of a share of Stock shall equal the closing price for such stock on
the day preceding the date of grant, as reported by the National Association of
Securities Dealers Automated Quotation System (NASDAQ) (National Market) or The
Wall Street Journal. If for any reason the Company's Stock is not publicly
traded on a national securities market or not listed on NASDAQ, the Committee
shall evaluate all factors which the Committee believes are relevant in
determining the fair market value of a share of Stock and, the Committee, in
good faith and exercising its business judgment, shall establish the fair market
value of the Stock as of the date an option is granted.
4.4 Limitation on Period in Which to Grant or Exercise
Options. No ISO shall be granted under this Plan more than 10 years after the
earlier of (i) the date the Plan is initially adopted by the Board or (ii) the
date the Plan is approved by the shareholders of Knight. Any Stock Grant, other
than an ISO, made under the Plan may be exercised within any reasonable term and
may be granted any time prior to the termination or expiration of the Plan. In
no event shall an ISO granted under this Plan be exercised after the expiration
of 10 years from the date such ISO is granted. Any provision of this Plan to the
contrary notwithstanding, the Committee may, in its sole discretion, grant any
Participant an NSO which, if provided in the Stock Grant Agreement, may be
exercised after the termination of the Participant's employment with the
Company.
Section 5. Independent Directors Plan.
---------------------------
5.1 Automatic Grant; Forfeiture. Any Independent Director
appointed to the Board after September 1, 1995 shall automatically receive an
NSO for 2,500 shares of the Company's Common Stock. By a majority vote of the
Board of Directors, an NSO for a greater number of shares of Common Stock, not
to exceed a total of 5,000 shares, may be granted, if the Board of Directors, in
its discretion,
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determines that the grant of an NSO for a greater number of shares is
appropriate under the circumstances. The NSO shall be subject to forfeiture if
the director resigns within one year of the date of his election as an
Independent Director. Except as otherwise provided in any written agreement
between the Company and the Independent Director, any NSO granted hereunder
expire on the earlier of (i) ten years after the date of grant; (ii) one year
after such independent director terminates his services as a director of the
Company; (iii) the expiration date stated in the Stock Grant Agreement (as this
term is defined in the Plan); or (iv) any earlier date provided by this
Division.
5.2 Holding Period. Any Stock Option granted to an Independent
Director may not be exercised for at least seven months following the date such
Stock Option is granted.
5.3 Existing Options. All Stock Options granted by the Company
to Independent Directors, including options issued prior to the date hereof,
shall be subject to the terms and conditions of this Section 5.
Section 6. Administration.
---------------
6.1 Administrative Committee. This Plan shall be administered
by the Committee. The Committee shall serve at the pleasure of the Board, and
the Board may, from time to time, remove members from, or add members to, the
Committee. Vacancies on the Committee, however caused, shall be filled by the
Board. No member of the Committee shall participate in or take any action with
respect to any Stock Grant made with respect to such member, except as otherwise
provided herein. The Committee may appoint delegates to act for and on its
behalf. The Committee shall select one of its members as Chairman and shall hold
meetings at such times and places as it may determine. A majority of the
Committee at a meeting at which a quorum is present, or acts reduced to or
approved in writing by a majority of the members of the Committee, shall be
valid acts of the Committee. No member of the Board or the Committee shall be
liable for any action or determination made in good faith with respect to this
Plan or any option granted hereunder.
6.2 Administration of the Plan. The Committee may adopt rules
and procedures for administration of the Plan, to the extent such rules and
procedures are not inconsistent herewith, which shall be of general application
to all Participants and all Stock Grants issued pursuant to the Plan. Subject to
the provisions of this Plan, the Committee shall have the sole, final, and
conclusive discretion and authority to construe and interpret the Plan,
including, without limitation, authority to determine:
(1) Those employees who will become
Participants and the terms and
conditions of their eligibility;
(2) The nature and amount of such Stock
Grants;
(3) All terms and conditions of each
Stock Grant, including, without
limitation:
(i) The number of shares of
Stock for which a Stock
Grant is made;
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(ii) The price to be paid, if
any, for Stock upon
exercise of a Stock Grant;
(iii) The terms and conditions of
the exercise;
(iv) The terms of payment of the
exercise price of a grant;
(v) Any conditions to which the
grant or its exercise may
be subject; and
(vi) Any restrictions or
limitations placed on Stock
issued pursuant to the
exercise of a Stock Grant.
Section 7. General Provisions.
-------------------
7.1 Grant Agreement. Each Stock Grant made under this Plan
shall be evidenced by a Stock Grant Agreement and shall be executed by Knight
and the Participant. The Stock Grant Agreement shall contain any terms and
conditions required by this Plan and such other terms and conditions as the
Committee, in its sole discretion, may require, including, without limitation,
restrictions on the transferability of any Stock which are not inconsistent with
the Plan.
7.2 Mergers or Consolidations. If Knight at any time dissolves
or undergoes a reorganization, including, without limitation, a merger or
consolidation with any other corporation, in any manner or form whatsoever, and
the surviving corporation is not Knight and does not agree to assume the options
granted pursuant to this Plan or to substitute options in place thereof, the
Stock Grants made under this Plan may be terminated, subject to the procedures
set forth in this Section. Prior to any termination of this Plan or the Stock
Grants made hereunder, each Participant holding an outstanding Stock Grant not
yet exercised shall be notified of such termination and shall be provided a
reasonable period of not less than fifteen (15) days in which to exercise such
Stock Option prior to its termination, to the extent such option is then
exercisable. The Committee may, in its sole discretion, prescribe such terms and
conditions as the Committee deems appropriate and authorize the exercise of such
Stock Grants with respect to all shares covered in the event of a merger or
consolidation. Any Stock Grant not exercised in accordance with such prescribed
terms and conditions shall terminate as of the date specified by the Committee,
and simultaneously, the Plan itself shall be terminated without further order of
the Company or the Board of Directors.
7.3 Termination of Employment. Except as provided in Sections
5.1, 7.10 or as otherwise permitted by this Plan (or any Stock Grant Agreement),
any Stock Grant made pursuant to this Plan shall immediately terminate upon a
Participant's termination of employment with the Company, unless such
termination of employment occurs by reason of the death or retirement (including
early retirement, if approved by the Committee) of the Participant or on account
of the permanent and total disability of the Participant (as such term is
defined in Section 22(e)(3) of the Code and the regulations therein). Upon
retirement, a Participant (or the administrator or conservator of the
Participant's estate) may, subject to Section 4.4(a) of the Plan, exercise any
Stock Grant in full within three months of retirement or, if the Participant
retired or terminated employment on account of "permanent and total disability"
(as that term is defined in Section 22(e)(3) of the Code), within one year of
retirement. Should a Participant die while in the employment of the Company or
within three months after retirement, the Participant's personal representative
of his or her estate or other person who acquired the right to exercise such
Stock Grant by
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bequest or inheritance or by reason of the death of the deceased Participant
may, subject to Section 4.4(a) of the Plan or any contrary provision of the
Stock Grant Agreement, exercise the option in full within two years from the
date of the Participant's death, unless such exercise period would disqualify
such ISO as an incentive stock option under Section 422 of the Code, but the
Committee, with the consent of the Participant, may waive this limitation.
7.4 Payment for Stock. The exercise price for any shares of
Stock acquired through the whole or partial exercise of any Stock Grant shall be
paid in cash or immediately available funds, or in Stock with a current market
value equal to all or a part of the exercise price, or both.
7.5 Compliance With Applicable Laws and Regulations. Stock
Grants made under this Plan shall contain such provisions with respect to
compliance with applicable federal and state law as the Committee, with the
advice of Knight's counsel, may deem appropriate, including, without limitation,
any provision necessary to comply with state or federal securities laws.
7.6 No Right to Employment. Designation of an employee as a
Participant in this Plan for any purpose shall not confer on the employee the
right to continue in the employment of the Company or any right to receive a
Stock Grant for any Plan Year.
7.7 Taxes. A Participant shall be responsible for paying any
taxes with respect to a Stock Grant. The Company is hereby authorized to deduct
any taxes that may be applicable from the dollar value of any Stock Grant to a
Participant, including, without limitation, FICA or FUTA.
7.8 Expenses. All expenses incurred in connection with the
administration of this Plan shall be borne by the Company, except as any Stock
Grant Agreement may otherwise provide.
7.9 Unfunded Benefits. Nothing in this Plan shall be construed
as requiring the Company to establish a trust or to fund this Plan, or to create
a trust of any kind or any fiduciary relationship between the Company and any
Participant, employee or Beneficiary.
7.10 Transferability. Except as otherwise expressly permitted
by this Plan, no Stock Grant made under this Plan shall be transferable by the
Participant other than by will or by the laws of descent and distribution.
During a Participant's lifetime, a Stock Grant made hereunder shall be
exercisable only by the Participant and only if at all times during the period
of time beginning on the date the Stock Grant is made and ending on the day
three months (or one year, in the case of an employee or Independent Director
who retires on account of becoming "permanently and totally disabled" within the
meaning of that term under section 22(e)(3) of the Code) before the date of
exercise of such Stock Grant, such Participant was an employee or director of
the Company (or a corporation or a parent corporation or subsidiary corporation
of a corporation assuming an option in a transaction to which section 424(a) of
the Code applies).
7.11 Expiration Date of Plan. If not earlier terminated, this
Plan shall expire on August 31, 2004. In no event shall any Stock Option be
granted under this Plan after August 31, 2004. In no event shall any ISO be
granted under this Plan after August 29, 2004.
7.12 Corporate Action. The issuance of a Stock Grant pursuant
to this Plan shall not affect in any way the right or power of Knight to make
adjustments, reclassifications, reorganizations, or
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changes of any kind to its capital or business structure or to merge,
consolidate, dissolve, liquidate, sell or transfer all or any part of its
business or assets.
7.13 Rights as a Shareholder. A Participant shall have no
rights as a shareholder of Knight with respect to any shares of Stock subject to
a Stock Grant made hereunder until the date of the issuance of a stock
certificate to the Participant for such shares pursuant to such Stock Grant.
Except as provided in Section 2.2, no adjustment shall be made for dividends
(ordinary or extraordinary, whether in cash, securities, or other property) or
distributions or other rights for which the record date precedes the date a
stock certificate is issued to a Participant upon exercise of a Stock Grant.
7.14 Investment Purpose. Unless the Stock received pursuant to
a Stock Grant issued under this Plan is registered with the Securities and
Exchange Commission, each Stock Grant is subject to the condition that the
issuance of the Stock Grant and any Stock issued upon exercise of the Stock
Grant is for investment purposes only, and not with a view to the subsequent
resale or distribution of such Stock, unless such Stock is registered under the
Securities Act of 1933, as amended, or an exemption from registration is
available.
7.15 Investment Letter. Any Participant exercising a Stock
Grant shall, as a condition to such exercise, execute and deliver to Knight an
investment letter in such form as the Board of Directors or the Committee, with
the advice of the Company's legal counsel, may from time to time require.
7.16 Termination or Amendment of the Plan. The Board may
terminate, suspend, discontinue, modify or amend this Plan in any respect
whatsoever, except that, without approval of the shareholders of Knight, no such
revision or amendment shall change the number of shares of stock of Knight
subject to the Plan, change the designation of the class of employees eligible
to receive options, decrease the price at which options may be granted or remove
the administration of the Plan from the Committee. The preceding sentence
notwithstanding, the Company may not terminate this Plan with respect to any
issued and outstanding Stock Grant unless it gives the Participant notice of
termination and not less than 15 days in which to exercise such Stock Grant, but
only if such Stock Grant is then exercisable.
7.17 Application of Funds. The proceeds received by Knight
from the sale of shares of Stock pursuant to the exercise of Stock Grants shall
be used for general corporate purposes.
7.18 Obligation to Exercise Grant. A Stock Grant made
hereunder shall impose no obligation on the Participant to exercise such grant.
7.19 Approval of Shareholders; Termination of Plan. This
amended and restated Plan, shall be effective as of the Amended Effective Date,
subject to the approval of the shareholders of Knight who hold a majority of the
issued and outstanding shares of all classes of stock of Knight, which approval
must occur within the period beginning 12 months before and ending 12 months
after February 10, 1998. The Committee may cause Stock Grants to be made under
the Plan, subject to the Plan being approved by Knight's shareholders within the
period described above.
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7.20 Governing Law. The Plan shall be governed by and
construed under the laws of the State of Arizona.
IN WITNESS WHEREOF, the foregoing Plan was approved by the
Board of Directors on August 31, 1994, and by a majority of the shareholders of
Knight on August 31, 1994, amended effective as of September 26, 1994, July 26,
1995, December 1, 1995, February 21, 1996, and February 10, 1998, and is
executed by the undersigned officers of Knight, being duly authorized to do so.
KNIGHT TRANSPORTATION, INC.,
an Arizona corporation
By: /s/ Kevin P. Knight By: /s/ Clark A. Jenkins
-------------------------------- -------------------------------------
Kevin P. Knight, Chief Executive Clark A. Jenkins, Secretary and Chief
Officer Financial Officer
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CERTIFICATION OF KNIGHT
-----------------------
IN WITNESS WHEREOF, this Plan was adopted by the Board of
Directors of Knight Transportation, Inc. ("Knight") on August 31, 1994, subject
to the condition that it be approved by the shareholders of Knight on or before
August 31, 1994, and was executed by the Chairman of the Board of Knight and its
Secretary as of August 31, 1994. The Plan was approved by the unanimous written
consent of the shareholders of Knight on August 31, 1994. The Plan was amended
effective as of September 26, 1994, July 26, 1995, December 1, 1995, February
21, 1996, and February 10, 1998. The Plan was amended and restated in its
entirety effective as of February 10, 1998.
DATED as of this 10th day of February, 1998.
KNIGHT TRANSPORTATION, INC.,
an Arizona corporation
By /s/ Clark A. Jenkins
-------------------------------------
Clark A. Jenkins,
Secretary and Chief Financial Officer
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