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
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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4) Date Filed:
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NOTICE AND INFORMATION STATEMENT FOR
ANNUAL MEETING OF SHAREHOLDERS OF
KNIGHT TRANSPORTATION, INC.
TO BE HELD ON MAY 12, 1999
TO OUR SHAREHOLDERS:
The 1999 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 12, 1999, at The Wigwam Resort Hotel, 300 Indian School Road,
Litchfield Park, Arizona 85340. The purpose of the Annual Meeting is:
1. To elect eight (8) directors to serve for a one-year term each;
2. To approve and ratify the selection of Arthur Andersen LLP as the
Company's independent public accountants for 1999; and
3. 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,
1999, as the Record Date for determining those shareholders who are entitled to
receive notice of and vote at the Annual Meeting or any adjournment of that
meeting. Shares of 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 1998 Annual Report to Shareholders, which includes audited
consolidated financial statements, was mailed on April 2, 1999, 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,
s/ Clark A. Jenkins
Clark A. Jenkins,
Secretary
Phoenix, Arizona
April 2, 1999
<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 12, 1999. Notice of
Annual Meeting, and this Information Statement, and the Company's Annual Report
on Form 10-K were mailed on or about April 2, 1999, to shareholders of record at
the close of business on March 31, 1999 (the "Record Date"). As of the Record
Date, there were 15,097,861 shares of the Company's common stock issued and
outstanding. Except in 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 election of directors, cumulative
voting is required by law. 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 1998 Annual
Report to Shareholders that was mailed on April 2, 1999, with this Notice of
Annual Meeting and Information Statement, to all shareholders of record as of
the Record Date.
REQUIRED MAJORITY
Under the Constitution of the State of Arizona, 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
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<PAGE>
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.
ELECTION OF DIRECTORS
The Board of Directors of the Company will consist of eight (8)
directors to be elected at the 1999 Annual Meeting to hold office for the year
that follows and until their successors are duly elected and qualified in 2000.
The term of the Company's existing directors will expire in May 1999. 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.
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 collectively have voting power over approximately 55% of the issued
and outstanding shares of the Company's common stock, have indicated that they
will vote their shares for the election of all director nominees.
INFORMATION CONCERNING DIRECTORS AND NOMINEES
Effective as of March 31, 1999, Mr. Randy Knight, the Company's current
Chairman of the Board, has agreed to assume the position of Vice Chairman in
anticipation of his retirement as an officer of the Company effective July 31,
1999. Mr. Randy Knight will continue to serve as a Director of the Company if
elected. The duties of Chairman of the Board will be assumed by Mr. Kevin
Knight, who will also act as the Company's Chief Executive Officer. Mr. Gary
Knight, the Company's President, will assume the additional responsibilities for
the Company's sales and marketing efforts, effective as of July 31, 1999. Mr.
Randy Knight's retirement as Chairman of the Board and the reassignment of his
duties to other officers of the Company should have no effect on the Company's
operations. The Company anticipates that following his retirement, it will
retain Mr. Randy Knight as a consultant for a fee of $50,000 per year.
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)(3) 66 Director
Clark A. Jenkins 41 Executive Vice President-Finance,
Chief Financial Officer, Secretary,
Director
Gary J. Knight(2) 47 President, Director
Keith T. Knight(2) 44 Executive Vice President, Director
Kevin P. Knight(1)(2) 42 Chairman of the Board, Chief
Executive Officer, Director
Randy Knight(2) 50 Director and Vice Chairman
G.D. Madden 59 Director
Keith L. Turley(1)(3) 75 Director
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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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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 was a
Director of U.S. West Communications from 1987 to 1994. Mr. Bliss has been a
Director of Continental General since 1990 and a Director of Western-Southern
Insurance Company since April 1, 1998.
CLARK JENKINS joined the Company in 1990 and has served as the
Company's Secretary and Chief Financial Officer and a director since 1991. In
March, 1998, Mr. Jenkins was appointed Executive Vice President-Finance for the
Company. From 1986 to 1990, Mr. Jenkins was employed by Swift Transportation,
Inc. ("Swift"), a long haul trucking company, 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 Swift's 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. Mr. Knight will retire as Chairman of the Board of Directors and as
an officer of the Company on July 31, 1999, but, will continue to serve on the
Company's Board of Directors, if elected, and will act as a consultant to the
Company.
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 strategic 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 its President and CEO until 1996.
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<PAGE>
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 publicly owned public utility.
MEETINGS AND COMPENSATION OF THE BOARD OF DIRECTORS
BOARD OF DIRECTORS. During the year ended December 31, 1998, the Board
of Directors of the Company met on five 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, and
G.D. Madden an NSO for 2,500 shares of the Company's common stock at exercise
prices of $12.54, $13.18, and $20.19, respectively.(1) Members of the Board of
Directors also have the option to 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 1998 is composed of Mr. Keith
Turley and Mr. Donald A. Bliss. Mr. Bliss served as chairman of the Committee
for 1998. The Compensation Committee met once during 1998. 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 1998 is set forth below.
The Compensation Committee is composed entirely of Independent Directors who are
not officers, employees or 10% or greater shareholders of the Company. Only
Independent Directors are eligible to serve on the Compensation Committee.
AUDIT COMMITTEE. The Audit Committee 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 three times during 1998. 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.
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(1) Mr. Minor Perkins, a former director of the Company exercised his NSO for
2,500 shares on March 10, 1998, at a per share exercise price of $20.19.
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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 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 1998 fiscal year, all Section 16(a) filing
requirements applicable to its directors, executive officers and greater than
10% beneficial owners were complied with.
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EXECUTIVE COMPENSATION
SUMMARY COMPENSATION TABLE
The table which follows sets forth information concerning compensation
for the fiscal years ended December 31, 1998, 1997, and 1996 awarded to, earned
by, or paid to the Chief Executive Officer of the Company and the Company's five
most highly compensated executive officers, other than the Chief Executive
Officer, whose total annual salary and bonus exceeded $100,000 for the fiscal
year ended December 31, 1998 (the "Named Executive Officers").
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
ANNUAL COMPENSATION LONG-TERM COMPENSATION
----------------------------------- ------------------------------
AWARDS PAYOUTS
-------------------- -------
RESTRICTED
NAME AND OTHER ANNUAL STOCK OPTIONS/ LTIP ALL OTHER
PRINCIPAL POSITION YEAR SALARY($) BONUS($) COMPENSATION($) AWARD(S)($) SARS(#) PAYOUTS($) COMPENSATION($)(1)
- ------------------ ---- --------- -------- --------------- ----------- ------- ---------- -----------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Randy Knight, 1998 252,229 0 0 0 0 0 2,940
Chairman 1997 250,000 0 0 0 0 0 3,805
1996 254,059 0 0 0 0 0 2,765
Kevin P. Knight, 1998 252,229 0 0 0 0 0 2,300
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, 1998 252,229 0 0 0 0 0 2,540
President 1997 250,000 0 0 0 0 0 3,165
1996 254,059 0 0 0 0 0 2,505
Keith T. Knight, 1998 252,229 0 0 0 0 0 2,300
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, 1998 115,000 20,000 0 0 0 0 625
Executive Vice 1997 100,000 17,500 0 0 5,000 0 625
President-Finance 1996 100,000 17,500 0 0 5,000 0 625
Chief Financial
Officer, Secretary
Bruce Beck, Jr., 1998 132,956 0 0 0 0 0 0
Vice President 1997 55,385 0 0 0 0 0 0
1996 0 0 0 0 0 0 0
</TABLE>
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1 In 1998, 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 the annual economic benefit derived
from a $2,000,000 split-dollar life insurance policy maintained for each of
the Knights during 1998, which will be refunded to the Company upon
termination of the policy.
No options or stock appreciation rights (SARs) were granted during the
last completed fiscal year to any of the Named Executive Officers.
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AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR
AND OPTION VALUES AS OF DECEMBER 31, 1998
The following table sets forth the information with respect to the
exercise of stock options during the fiscal year ended December 31, 1998. The
number of options and the options exercised reflect a 3 for 2 stock split
effected in the form of a dividend that was effective on May 18, 1998.
<TABLE>
<CAPTION>
NUMBER OF UNEXERCISED VALUE OF UNEXERCISED
OPTIONS AT FISCAL YEAR END IN-THE-MONEY OPTIONS AT
SHARES 12/31/98(#) FISCAL YEAR END ($)
ACQUIRED ON VALUE ------------------------------- -------------------------------
NAME EXERCISE(#) REALIZED($) EXERCISABLE UNEXERCISABLE(2,3) EXERCISABLE UNEXERCISABLE(2,4)
---- ----------- ---------- ---------- ------------------- ----------- ------------------
<S> <C> <C> <C> <C> <C> <C>
Clark A. Jenkins(1) 7,372 88,800 27,628 32,498 $516,312 $550,824
</TABLE>
(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
1998.
(2) All options have been adjusted to reflect the effect of the Company's 3 for
2 stock split, effected as a stock dividend on May 18, 1998.
(3) Mr. Jenkins was granted an option for 52,500 shares in October 1994, at an
exercise price of $8.00 per share; an option for 7,500 shares on January 2,
1996, at an exercise price of $9.17 per share; an option for 3,000 shares
on January 2, 1997, at an exercise price of $12.67 per share; and an option
for 4,500 shares on December 18, 1997 at an exercise price of $15.50 per
share. With respect to the 1994 option for 52,500 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 7,500 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 3,000
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 4,500 shares, one third becomes exercisable in
December 2000, and an additional one third in December of each subsequent
year. Pursuant to the terms of the Company's Stock Option Plan, the
exercise price for the stock options granted Mr. Jenkins was adjusted (not
re-priced) as a result of the Company's May, 1998 stock dividend.
(4) Based on a closing price of $ 26.69 of the Company's common stock on
December 31, 1998.
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 1998 Compensation Committee of the Board of Directors consisted of
Keith L. Turley and Donald Bliss. Mr. Bliss served as Chairman of the
Compensation Committee. Members of the Compensation Committee are Independent
Directors and are not 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.
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EMPLOYMENT AGREEMENTS.
The Company currently does not have any employment contracts, severance
or change-in-control agreements with any of its Named Executive Officers other
than Mr. Bruce Beck. Mr. Beck's contract is terminable by either party upon 90
days prior written notice. Mr. Beck's base compensation under his Employment
Agreement is $150,000. Mr. Beck is eligible to receive a discretionary bonus
based upon his attainment of certain objectives. Mr. Beck's total compensation,
including bonuses, cannot exceed $250,000 for any calendar year. Mr. Beck is
also entitled to the use of a Company car and an award of stock options for
2,500 to 5,000 shares on an annual basis, based upon his attainment of
performance objectives and his contribution to the Company's success.
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
was amended and restated during 1998 to authorize the grant of options for an
additional 525,000 shares under the Plan for a total of 1,500,000 shares, after
giving effect to the Company's stock dividend. 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. As of December 31,
1998, the Company had issued options to purchase 833,972 shares of its Common
Stock and had reserved 666,028 shares for the issuance of future options.
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 1998, 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.
COMPENSATION COMMITTEE REPORT AND PERFORMANCE GRAPH
THE COMPENSATION COMMITTEE REPORT ON EXECUTIVE COMPENSATION, AND THE
PERFORMANCE GRAPH THAT FOLLOW 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.
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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 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 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.
In reviewing base salaries of senior management for 1998 and salary
compensation for 1999, 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) the relationship of the
Company's performance to the particular executive's compensation for last
year; (iv) non-financial performance related to the individual executive's
contributions; and (v) 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.
In addition to reviewing the executive compensation, the Committee has
reviewed with the Company's executive officers the operation of the
Company's Stock Option Plan. The Committee believes that the Company's
policy of issuing stock options to key employees, including truck drivers
and line employees, has been useful and helps to align the interests of
those employees with the Company. The Committee believes that the Company's
Stock Option Plan is operating in an appropriate manner, given the Plan's
objectives.
COMPENSATION COMMITTEE
Donald A. Bliss, Chairman
Keith L. Turley, Member
February 1, 1999
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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, 1998. 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 and all dividends were reinvested. 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.
INDEX DESCRIPTION 12/31/94 12/31/95 12/31/96 12/31/97 12/31/98
- ----------------- -------- -------- -------- -------- --------
Knight 100.00 96.49 133.33 194.74 280.93
Transportation, Inc.
NASDAQ Stock 100.00 141.44 173.92 213.38 299.95
Market
NASDAQ Trucking & 100.00 116.67 128.79 164.84 146.09
Transportation Stocks
Index (the "Peer
Group")
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<PAGE>
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
COMPANY'S PURCHASE AND LEASE OF PROPERTIES
The Company's headquarters and principal place of business is located
at 5601 West Buckeye Road, Phoenix, Arizona, on approximately 43 acres. The
Company owns approximately 35 acres and, as of December 31, 1998, leased
approximately 8 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
$75,000 were made by the Company to, or on behalf of, Total Warehousing and
Randy Knight for the year ended December 31, 1998. Randy Knight owns a 50
percent controlling interest in Total Warehousing; the balance is owned by an
unaffiliated party.
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 lease was amended and the Company increased the acreage leased from
Randy Knight by approximately 1.4 acres; the base rent was also increased to
$5,923 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, 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 paid approximately $90,000 during 1998 for certain of its
key employees' life insurance premiums. The total premiums paid are included in
other assets in the consolidated balance sheet attached to Form 10-K. The life
insurance policies provide for cash distributions to the beneficiaries of the
policyholders upon death of the key employee. The Company is entitled to receive
the total premiums paid out on the policies at distribution prior to any
beneficiary distributions.
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
$9,000 by the Company for the year ended December 31, 1998.
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, 1999, the number and
percentage of 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.
NAME AND ADDRESS OF AMOUNT AND NATURE OF PERCENT OF
BENEFICIAL OWNER(1) BENEFICIAL OWNERSHIP CLASS
- ------------------ -------------------- -----
Donald A. Bliss(2) 5,613 *
Clark A. Jenkins(3) 31,164 *
Gary J. Knight(4) 2,078,512 13.86%
Keith T. Knight(5) 2,041,012 13.61%
Kevin P. Knight(6) 2,054,512 13.70%
L. Randy Knight(7) 2,015,662 13.44%
G.D. Madden(8) 4,173 *
Keith L. Turley(9) 9,423 *
William Blair & Company, L.L.C.(10) 1,216,302 8.11%
Nichols Company, Inc./Albert O. Nichols(11) 780,750 5.21%
All directors and executive
officers as a group (8 persons) 8,240,071 54.96%
- ----------
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
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<PAGE>
Securities and Exchange Commission on February 14, 1998. The address of
Nichols Company, Inc. and Albert O. Nichols (collectively "Nichols") is 700
North Water Street, Milwaukee, Wisconsin 53202. All information provided
with respect to Nichols is based solely on the Company's review of a
Schedule 13G filed by Nichols with the Securities and Exchange Commission
on February 11, 1999.
2 Includes 3,750 shares that Donald A. Bliss has the right to purchase
through the exercise of a stock option.
3 Includes 1,036 shares of common stock and 30,128 subject to options
currently exercisable or exercisable within 60 days. Mr. Jenkins also holds
options to acquire an additional 30,000 shares that are not exercisable
within the next 60 days, and which are not included within the amount shown
in this Security Ownership of Certain Beneficial Owners and Management
Table.
4 Includes 2,076,262 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 2,250 shares owned by
three minor children who share the same household.
5 Includes 2,038,762 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 2,250
shares owned by three minor children who share the same household.
6 Includes 2,021,512 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, 30,000
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
3,000 shares owned by four minor children, who share the same household.
7 Includes 1,563,787 shares beneficially owned by L. Randy Knight over which
he exercises sole voting and investment power as a Trustee under a
Revocable Trust Agreement dated April 1, 1993; 450,000 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 2,100 shares owned by
a child who shares the same household and over which Mr. Knight exercises
voting power.
8 Includes 3,750 shares that G.D. Madden has the right to acquire through the
exercise of a stock option.
9 Includes 3,750 shares that Keith L. Turley has the right to acquire through
the exercise of a stock option; and 3,750 shares held by a family limited
partnership in which a corporation controlled by Mr. Turley is the general
partner and the limited partners are Mr. Turley and his children's family
revocable trusts.
10 William Blair & Company, L.L.C. has sole voting power over 881,869 shares
and sole dispositive power over 1,216,302 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.
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<PAGE>
11 Nichols Company, Inc. has sole voting power of no shares and sole
dispositive power over no shares. It has shared voting power and shared
dispositive power over no shares. Nichols Company, Inc. serves as an
investment advisor. Albert O. Nichols is the Chief Executive Officer,
Chairman, a Director and majority shareholder of Nichols Company, Inc.
Albert O. Nichols owns no shares of the Company for his own account. Mr.
Nichols may, pursuant to the Schedule 13G filed by Nichols, be deemed to be
the beneficial owner of 780,750 shares of the Company. Nichols Company,
Inc. is the owner of record and discloses beneficial ownership of such
shares. The foregoing is based solely on information provided by Schedule
13G, filed by Nichols Company, Inc. with the Securities Exchange
Commission.
* Represents less than 1% of the Company's outstanding common stock.
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<PAGE>
RELATIONSHIP WITH INDEPENDENT ACCOUNTANTS
The principal accounting firm used by the Company during the fiscal
year ended December 31, 1998, 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 2000 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 2000 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 2000 Annual Meeting must be received by the Company by December 6, 1999,
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.
Kevin P. Knight
Chief Executive Officer
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