SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the
Securities Exchange Act of 1934
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Knight Transportation, Inc.
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NOTICE AND PROXY STATEMENT
FOR
ANNUAL MEETING OF SHAREHOLDERS OF
KNIGHT TRANSPORTATION, INC.
TO BE HELD ON MAY 9, 2001
KNIGHT TRANSPORATION, INC.
PROXY STATEMENT
TABLE OF CONTENTS
Page
----
PROXY STATEMENT................................................................1
Right to Attend Annual Meeting; Revocation of Proxy..........................1
Costs of Solicitation........................................................1
Voting Securities Outstanding................................................1
Annual Report................................................................2
Required Majority, Cumulative Voting.........................................2
How To Read This Proxy Statement.............................................2
PROPOSALS FOR SHAREHOLDER CONSIDERATION........................................3
ITEM NO. 1. ELECTION OF DIRECTORS............................................3
Information Concerning Directors and Nominees....................3
Biographical Information Concerning Directors
and Executive Officers of the Company..........................4
ITEM NO. 2. PROPOSAL TO CLARIFY ARTICLES OF INCORPORATION....................6
ITEM NO. 3. PROPOSAL TO RATIFY APPOINTMENT OF ARTHUR ANDERSEN LLP
AS INDEPENDENT ACCOUNTANTS.....................................6
CORPORATE GOVERNANCE -- MEETINGS AND COMPENSATION OF THE BOARD OF
DIRECTORS AND ITS COMMITTEES...................................................7
Committees of the Board of Directors.........................................7
Executive Committee..........................................................8
Audit Committee and Audit Committee Report...................................8
Report of the Audit Committee of Knight Transportation, Inc..................8
Compensation Committee......................................................10
Other Committees............................................................10
Compliance with Section 16(a) of the Securities Exchange Act of 1934........10
EXECUTIVE COMPENSATION........................................................11
Summary Compensation Table..................................................11
Long Term Incentive Plan....................................................13
Employment Agreements.......................................................13
Stock Option Plan...........................................................13
401(k) Plan.................................................................13
Compensation Committee, Compensation Committee Interlocks,
Report On Executive Compensation..........................................14
Stock Performance Graph.....................................................16
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS................................17
Company's Purchase and Lease of Properties..................................17
Concentrek Investment.......................................................17
Knight Flight...............................................................18
Transactions With Affiliates................................................18
Certain Business Relationships..............................................18
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT................19
SHAREHOLDER PROPOSALS.........................................................21
OTHER MATTERS.................................................................21
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NOTICE AND PROXY STATEMENT
FOR
ANNUAL MEETING OF SHAREHOLDERS OF
KNIGHT TRANSPORTATION, INC.
TO BE HELD ON MAY 9, 2001
TO OUR SHAREHOLDERS:
You are cordially invited to attend the 2001 Annual Meeting of Shareholders
(the "Annual Meeting") of KNIGHT TRANSPORTATION, INC. (the "Company") to be held
at 10:00 A.M., Phoenix time, on May 9, 2001, at The Wigwam Resort Hotel, 300
East Wigwam Boulevard, Litchfield Park, Arizona 85340. The purpose of the Annual
Meeting is to:
1. Elect nine (9) directors in three classes of three directors each,
with one class to serve for a term of one year, one class to serve for
a term of two years, and one class to serve for a term of three years;
2. Approve an amendment to the Articles of Incorporation, clarifying that
the term of Class III directors, approved by shareholders at the May
2000 Meeting of Shareholders, is three years;
3. Approve and ratify the selection of Arthur Andersen LLP as the
Company's independent public accountants for 2001; and
4. Transact such other business as may properly come before the Annual
Meeting.
The Board of Directors has fixed the close of business on March 23, 2001,
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. A copy of
the Company's 2000 Annual Report to Shareholders, which includes audited
consolidated financial statements, is enclosed.
YOUR VOTE IS IMPORTANT. TO ENSURE YOUR REPRESENTATION AT THE ANNUAL
MEETING, YOU ARE REQUESTED TO PROMPTLY DATE, SIGN AND RETURN THE ACCOMPANYING
PROXY IN THE ENCLOSED ENVELOPE.
By Order of the Board of Directors,
/s/ Timothy M. Kohl
Timothy M. Kohl,
Secretary
Phoenix, Arizona
April 5, 2001
KNIGHT TRANSPORTATION, INC.
5601 WEST BUCKEYE ROAD
PHOENIX, ARIZONA 85043
PROXY STATEMENT
This Proxy Statement is furnished in connection with the solicitation of
proxies from the shareholders of Knight Transportation, Inc. (the "Company") to
be voted at the Annual Meeting of Shareholders (the "Annual Meeting") to be held
on May 9, 2001. THE ENCLOSED PROXY IS SOLICITED BY THE BOARD OF DIRECTORS OF THE
COMPANY. If not otherwise specified, all proxies received pursuant to this
solicitation will be voted FOR the Director Nominees named below, FOR the
Amendment to the Articles of Incorporation clarifying the Amendment adopted at
the 2000 Annual Meeting, and FOR the ratification of the selection of Arthur
Andersen LLP as the Company's independent public accountants for 2001. The Proxy
Statement, proxy card, and the Company's Annual Report on Form 10-K was first
mailed on or about April 5, 2001, to shareholders of record at the close of
business on March 23, 2001 (the "Record Date").
RIGHT TO ATTEND ANNUAL MEETING; REVOCATION OF PROXY
Returning your Proxy now will not interfere with your right to attend the
Annual Meeting or to vote your shares personally at the Annual Meeting, if you
wish to do so. Shareholders who execute and return proxies may revoke them at
any time before they are exercised by giving written notice to the Secretary of
the Company at the address of the Company, by executing a subsequent proxy and
presenting it to the Secretary of the Company, or by attending the Annual
Meeting and voting in person.
COSTS OF SOLICITATION
The Company will bear the cost of solicitation of proxies, which will be
nominal and will include reimbursements for the charges and expenses of
brokerage firms and others for forwarding solicitation material to beneficial
owners of the outstanding common stock of the Company. Proxies will be solicited
by mail, and may be solicited personally by directors, officers or regular
employees of the Company, who will not be compensated for their services.
VOTING SECURITIES OUTSTANDING
As of March 23, 2001, there were approximately 15,384,760 shares of the
Company's Common Stock, par value $0.01 per share (the "Common Stock"), issued
and outstanding. 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.
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. 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 voting instructions from the
beneficial owner.
ANNUAL REPORT
The information included in this Proxy Statement 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 2000 Annual Report to Shareholders that
was mailed on or about April 5, 2001, with this Notice of Annual Meeting and
Proxy Statement, to all shareholders of record as of the Record Date.
REQUIRED MAJORITY, CUMULATIVE VOTING
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 four directors are to be elected, the shareholder may cast 400 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 nominees for director who receive the most votes will be elected.
Under cumulative voting rights provided by the Constitution of the State of
Arizona, each shareholder, when electing a class of 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 in that class of directors. For example, this
year nine (9) directors are up for election in three (3) classes. If a
shareholder has 100 shares, the shareholder may cast 900 votes, with 300 votes
to be cast in each of the three classes. Other matters submitted to shareholders
for consideration and action at the Annual Meeting must be approved by a simple
majority vote of those shares present in person or by proxy.
HOW TO READ THIS PROXY STATEMENT
Set forth below are all the proposals to be considered by shareholders at
the Company's Annual Meeting of Shareholders to be held on May 9, 2001.
Following the description of each proposal is important information about the
management of the Company and its Board of Directors; executive compensation;
transactions between the Company and its officers, directors and affiliates; the
Company's stock owned by management and other large shareholders; and how
shareholders may make proposals at the Annual Meeting. EACH SHAREHOLDER SHOULD
READ THIS INFORMATION BEFORE COMPLETING AND RETURNING THE ENCLOSED PROXY CARD.
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PROPOSALS FOR SHAREHOLDER CONSIDERATION
ITEM NO. 1. ELECTION OF DIRECTORS
The Board of Directors has nominated nine (9) persons to serve on the Board
commencing with the 2001 Annual Meeting. Pursuant to the Company's Articles of
Incorporation, at the first time the number of directors to be elected equals
nine (9) or more, the Board must be divided into three classes of Directors and
the entire Board will stand for election, regardless of whether a member's term
has expired at that meeting. Nine persons have been nominated to serve as
Directors of the Company. The Board designates the Directors to serve in each
class. Class I Directors will be elected for a one year term; Class II Directors
will be elected for a two year term; and Class III Directors will be elected for
a three year term. As the term of each class of directors expires, that class
will be elected for a three year term, so that each year a class of directors
will stand for election for a three year term. Cumulative voting will apply in
the election of directors. INFORMATION CONCERNING THE COMPENSATION OF OFFICERS
AND DIRECTORS, THEIR STOCK OWNERSHIP IN THE COMPANY, AND TRANSACTIONS BETWEEN
OFFICERS, DIRECTORS AND 10% OR GREATER SHAREHOLDERS IS SET FORTH BELOW.
NOMINEES FOR DIRECTOR
CLASS I DIRECTORS CLASS II DIRECTORS CLASS III DIRECTORS
(One-Year Initial Term) (Two-Year Initial Term) (Three-Year Terms)
Timothy M. Kohl Matt Salmon Keith Knight
Donald A. Bliss Gary Knight Kevin Knight
Mark Scudder G.D. Madden Randy Knight
Each nominee to the Board of Directors has consented to serve. Messrs.
Randy Knight, Kevin P. Knight, Gary J. Knight, and Keith T. Knight, who
collectively have voting power over approximately 45.1% 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.
THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS A VOTE FOR THE ELECTION OF
THE BOARD OF DIRECTOR NOMINEES.
INFORMATION CONCERNING DIRECTORS AND NOMINEES
In addition to those persons that have served as Directors during the past
year, the Board has nominated Mr. Timothy M. Kohl to serve as a Class I Director
and Mr. Matt Salmon to serve as a Class II Director.
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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 Company Position and Offices Held
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Donald A. Bliss(1)(4) 68 Director
Timothy M. Kohl 53 Chief Financial Officer, Secretary
Gary J. Knight(2)(4) 49 President, Director
Keith T. Knight(2) 46 Executive Vice President, Director
Kevin P. Knight(2)(4) 44 Chairman of the Board, Chief
Executive Officer, Director
Randy Knight(2) 52 Director
G.D. Madden(1)(3) 61 Director
Matt Salmon 43 None
Mark Scudder(3)(4) 38 Director
Executive officers of the Company serve at the will of the Board of Directors.
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(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.
(4) Member of the Executive Committee.
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. Mr. Bliss is currently employed by AON
Risk Services of Arizona Inc. as its Senior Managing Director.
TIMOTHY M. KOHL joined the Company in 1996. Mr. Kohl has served as the
Company's Secretary and Chief Financial Officer and Secretary since October 16,
2000, when he was selected by the Board to replace Mr. Clark Jenkins, who had
resigned from the Company to take another position. Mr. Kohl served as Vice
President of Human Resources for the Company from January, 1996 through May,
1999. From May, 1999 through October, 2000, Mr. Kohl served as Vice President of
the Southeast Region of the Company. Prior to his employment with the Company,
Mr. Kohl was employed by Burlington Motor Carriers as Vice President of Human
Resources. Prior to his employment with Burlington Motor Carriers, Mr. Kohl
served as Vice President of Human Resources for JB Hunt.
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 Transportation Co., Inc. ("Swift"), a long haul
trucking company, 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.
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KEVIN P. KNIGHT has served as the Company's Chairman of the Board since May
1999, 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 been a director of the Company since its inception in 1989
and is presently a consultant to the Company. Mr. Knight had served as an
officer of the Company since its inception in 1989 and he resigned as an officer
and Vice Chairman of the Board of Directors on July 31, 1999. Mr. Knight served
as Chairman of the Board from 1993 to July 1999. (Mr. Knight currently serves as
a consultant to the Company.) From 1985 to the present, Mr. Knight has owned a
50% interest in and served as Chairman of 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 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.
MATT SALMON Mr. Matt Salmon is the Executive Vice President of APCO
Worldwide, a Washington, D.C. based consulting firm specializing in worldwide
strategic communications and public affairs matters with 25 offices around the
globe, including Europe and China. As an executive of APCO, Mr. Salmon provides
clients with strategic communications and governmental affairs advice. Prior to
joining APCO, Mr. Salmon was a member of the United States House of
Representatives from Arizona from 1994 through 1999. Prior to that time, he
served four years in the Arizona State Senate and for 13 years as a
telecommunications executive with U.S. West Communications. While a member of
the United States House of Representatives, Mr. Salmon served on the
International Relations Committee and as Chairperson and Founding Member of the
House Renewable Energy Caucus.
MARK SCUDDER has served as a director of the Company since November, 1999.
Mr. Scudder is a principal of Scudder Law Firm, P.C., L.L.O. ("Scudder Law
Firm"), in Lincoln, Nebraska and has been involved in the private practice of
law since 1988. Mr. Scudder is a member of the board of directors of Covenant
Transport, Inc., a publicly held long haul trucking company, and of UMB Bank
Nebraska, N.A., a banking subsidiary of UMB Financial Corporation, a publicly
traded, multi-bank holding company.
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ITEM NO. 2. PROPOSAL TO CLARIFY ARTICLES OF INCORPORATION
At the Annual Meeting of Shareholders in 2000, shareholders approved an
amendment to the Articles of Incorporation authorizing the election of directors
in classes. Under the amendment, the Corporation's Board of Directors is divided
into classes of directors with one class of directors to be elected each year
commencing in 2001, with each class of director so elected to hold office for a
term expiring on the second Annual Meeting following their election. The same
procedure is to be provided each year until such time as the Board is comprised
of nine (9) or more directors. At that time, the Board will be divided into
three separate classes of directors, with Class I directors to be elected for a
one (1) year term, Class II directors to be elected for a two (2) year term, and
Class III directors to be elected for a three (3) year term. As the term of each
class expires, that class will be reelected for a three (3) year term. For the
2001 Annual Meeting of Shareholders the Board of Directors has recommended nine
directors; accordingly, three classes of directors will be elected at the May 9,
2001 Annual Meeting of Shareholders.
The Articles of Incorporation state that Class III directors are to be
elected for a three (3) year term. The Articles incorrectly state that the term
of Class III Directors expires on the conclusion of the "second" succeeding
Annual Meeting of Shareholders following the election of Class III directors.
The Articles should state that the term of Class III directors expires on the
"third" succeeding Annual Meeting of Shareholders following the election of
Class III directors. All other references in the Articles of Incorporation make
it clear that Class III directors are to serve for a three year term. The
adoption of this amendment will assure that the Articles of Incorporation are
clear about the term of Class III directors by substituting the word "third"
succeeding Annual Meeting for the word "second" succeeding Annual Meeting. A
copy of the amendment language is set forth in Exhibit 1 to this Proxy
Statement.
THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS THAT SHAREHOLDERS APPROVE
THIS AMENDMENT TO THE ARTICLES OF INCORPORATION.
ITEM NO. 3. PROPOSAL TO RATIFY APPOINTMENT OF ARTHUR ANDERSEN LLP
AS INDEPENDENT ACCOUNTANTS
Arthur Andersen LLP, independent public accountants ("Arthur Andersen"),
was the principal accounting firm used by the Company during the fiscal year
ended December 31, 2000. Arthur Andersen has served as the Company's independent
public accountant since 1994. The Board of Directors has appointed Arthur
Andersen as the principal independent accounting firm to be used by the Company
during the current fiscal year. A representative of Arthur Andersen is expected
to be present at the Annual Meeting with an opportunity to make a statement if
such representative desires to do so, and is expected to respond to appropriate
questions.
FISCAL YEAR 2000 AUDIT FEE SUMMARY
During fiscal year 2000, Arthur Andersen provided services in the following
categories to the Company and was paid the following amounts:
Financial Statement Audit Fees and Quarterly Reviews $115,000
All Other Fees $ 83,000
All Other Fees include amounts that were paid by the Company to Arthur
Andersen for certain tax and due diligence procedures performed in connection
with the Company's acquisition of John Fayard Fast Freight, Inc.
-6-
The Audit Committee has considered whether the provisions of non-audit
services by the Company's principal auditor is compatible with maintaining
auditor independence.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR THE RATIFICATION OF THE
APPOINTMENT OF ARTHUR ANDERSEN.
CORPORATE GOVERNANCE --
MEETINGS AND COMPENSATION OF THE BOARD OF DIRECTORS AND ITS COMMITTEES
BOARD OF DIRECTORS. The Company's affairs are managed by the Board of Directors.
During the year ended December 31, 2000, the Board of Directors of the Company
met on four occasions and once through resolutions and actions taken without a
meeting. Each of the directors attended 75% or more of the meetings of the Board
of Directors and the meetings held by all of the committees of the Board on
which he served.
DIRECTORS' COMPENSATION. 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 Board 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 of Common Stock 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 Donald A. Bliss, G.D.
Madden, and Mark Scudder, an NSO for 2,500 shares of the Company's Common Stock
at original exercise prices of $13.18, and $20.19, and $11.75, respectively.
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.
Mr. Randy Knight, who is a director of the Company, also serves as a
consultant to the Company and receives $50,000 per year for his consulting
services. The consulting agreement with Mr. Knight is terminable at the election
of either party.
COMMITTEES OF THE BOARD OF DIRECTORS
The Board of Directors has established three committees, which are
authorized to act on behalf of the Board in their respective spheres: the
Executive Committee, the Audit Committee and the Compensation Committee. The
responsibilities of each Committee are described below.
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EXECUTIVE COMMITTEE
The Executive Committee of the Board was established November 7, 2000. The
Executive Committee is authorized to act on behalf of the Board of Directors
when the Board of Directors is not in session. The members of the Executive
Committee are Kevin Knight, Gary Knight, Don Bliss, and Mark Scudder. The
Executive Committee did not meet in 2000.
AUDIT COMMITTEE AND AUDIT COMMITTEE REPORT
The Audit Committee for 2000 was composed of Donald A. Bliss and G.D.
Madden. Mr. Bliss served as Chairman of the Audit Committee. The Audit Committee
met four times during 2000. The responsibilities of the Audit Committee are set
forth in the Audit Committee Report, which appears below. All of the members of
the Audit Committee are independent directors, as defined in the NASDAQ Stock
Market's Listing Rule 4200. Since 1994, the Audit Committee, has operated
pursuant to a written charter detailing its duties. The Audit Committee's
Charter is set forth in Exhibit 2, below. In performing its duties, the Audit
Committee, as required by applicable Securities and Exchange Commission rules,
issues a report recommending to the Board of Directors that the Company's
audited financial statements be included in the Company's Annual Report on Form
10-K, and certain other matters, including the independence of the Company's
outside public accountants. The REPORT OF THE AUDIT COMMITTEE is set forth
below.
THE AUDIT COMMITTEE REPORT SHALL NOT BE DEEMED TO BE INCORPORATED BY
REFERENCE INTO ANY FILING MADE BY THE COMPANY UNDER THE SECURITIES ACT OF 1933
ON THE SECURITIES EXCHANGE ACT OF 1934, NOTWITHSTANDING ANY GENERAL STATEMENT
CONTAINED IN ANY SUCH FILINGS INCORPORATING THIS PROXY STATEMENT BY REFERENCE,
EXCEPT TO THE EXTENT THE COMPANY INCORPORATES SUCH REPORT BY SPECIFIC REFERENCE.
REPORT OF THE
AUDIT COMMITTEE
OF
KNIGHT TRANSPORTATION, INC.
The Board of Directors of the Company has appointed an Audit Committee. The
functions of the Audit Committee are focused on: (1) the adequacy of the
Company's internal controls and financial reporting process and the reliability
of the Company's financial statements; (2) the independence of the Company's
external auditors; and (3) the Company's compliance with legal and regulatory
requirements.
The Audit Committee meets periodically with management to discuss the
adequacies of the Company's internal financial controls and the objectivity of
its financial reporting. The Committee also meets with the Company's independent
auditors.
For the fiscal year ending December 31, 2000, Donald Bliss and G.D. Madden
comprised the Audit Committee. Donald Bliss acted as the Chairman.
The directors who serve on the Audit Committee are all "independent" for
purposes of the NASDAQ Stock Market listing standards. That is, none of the
members has a relationship to the Company that would interfere with his
independence from the Company and its management.
-8-
The Board of Directors has adopted a written charter setting forth the
Audit Committee's functions. A copy of the Audit Committee's charter may be
found in Exhibit 2 to this Proxy Statement.
The Company retains independent public accountants who are responsible for
conducting an independent audit of the Company's financial statements, in
accordance with generally accepted auditing standards and issuing a report
thereon. In performing its duties, the Audit Committee has discussed the
Company's financial statements with management and the Company's independent
auditors and, in issuing this report, has relied upon the responses and
information provided to the Audit Committee by each of them.
Management of the Company has primary responsibility for the Company's
financial statements and the overall reporting process, including maintenance of
the Company's system of internal controls. The independent auditors audit the
annual financial statements prepared by management, and express an opinion as to
whether those financial statements fairly present the financial position,
results of operation and cash flows of the Company in conformance with generally
accepted accounting principles, and discuss with the Audit Committee any issues
they believe should be raised.
For the fiscal year ending December 31, 2000, the Audit Committee:
(1) Reviewed and discussed the audited financial statements with management
of the Company;
(2) Discussed with Arthur Andersen LLP, the independent auditors of the
Company, the matters required to be discussed by Statement on Accounting
Standards No. 61 (communications with Audit Committees); and
(3) Reviewed and discussed the written disclosures and the letter from the
Company's independent auditors the matters relating to the auditor's
independence from the Company.
Based upon the Audit Committee's review and discussion of the matters
above, the Audit Committee recommends to the Board of Directors of the Company
that the audited financial statements be included in the Company's Annual Report
on Form 10-K for the year ended December 31, 2000, filed with the Securities and
Exchange Commission.
Donald Bliss, Chairman February 7, 2001
G.D. Madden, Member February 7, 2001
-9-
COMPENSATION COMMITTEE
The Compensation Committee is composed entirely of directors who are not
officers, employees or 10% shareholders of the Company. The Compensation
Committee reviews all aspects of Executive Compensation and makes
recommendations on such matters to the full Board of Directors. The Compensation
Committee also reviews and approves stock options granted by the Company. The
Audit Committee met formally once in 2000 to issue its Report on Executive
Compensation. Additional information concerning the Compensation Committee, its
members, Compensation Committee interlocks, and its REPORT ON EXECUTIVE
COMPENSATION and the Performance Graph are set forth under "EXECUTIVE
COMPENSATION," below.
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 2000 fiscal year, all Section 16(a) filing
requirements applicable to its directors, executive officers and greater than
10% beneficial owners were complied with.
(Intentionally Left Blank)
-10-
EXECUTIVE COMPENSATION
SUMMARY COMPENSATION TABLE
The table which follows sets forth information concerning compensation for
the fiscal years ended December 31, 2000, 1999, and 1998 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 $100,000 for the fiscal
year ended December 31, 2000 (the "Named Executive Officers").
ANNUAL COMPENSATION LONG-TERM COMPENSATION
------------------------------------ ----------------------------------------------------
AWARDS PAYOUTS
-------------------- ------------------------------
RESTRICTED
NAME AND OTHER ANNUAL STOCK OPTIONS/ LTIP ALL OTHER
PRINCIPAL POSITION YEAR SALARY($) BONUS($) COMPENSATION($) AWARD(S)($) SARS(#) PAYOUTS($) COMPENSATION($)(1)
- - - - - - - ------------------ ---- --------- -------- --------------- ----------- ------- ---------- ------------------
Kevin P. Knight, 2000 260,000 0 0 0 0 0 2,220
Chairman, Chief 1999 250,000 0 0 0 0 0 2,220
Executive Officer 1998 252,229 0 0 0 0 0 2,300
Gary J. Knight, 2000 260,000 0 0 0 0 0 2,840
President 1999 250,000 0 0 0 0 0 2,840
1998 262,229 0 0 0 0 0 2,540
Keith T. Knight, 2000 260,000 0 0 0 0 0 2,460
Executive Vice 1999 250,000 0 0 0 0 0 2,460
President 1998 252,229 0 0 0 0 0 2,300
Clark A. Jenkins,(2) 2000 100,975 0 0 0 0 625
Executive Vice 1999 115,000 34,000 0 0 3,000 0 625
President Finance, 1998 115,000 20,000 0 0 0 0 625
Chief Financial
Officer, Secretary
Timothy M. Kohl 2000 132,500 15,000 0 0 14,000 0 425
Chief Financial 1999 n/a
Officer, Secretary 1998 n/a
Bruce Beck, Jr., 2000 132,956 0 0 0 3,000 0 625
Vice President 1999 150,000 0 0 0 8,750 0 625
1998 132,956 0 0 0 0 0 0
- - - - - - - ----------
(1) In 2000, 1999 and 1998, compensation included in the category of "All Other
Compensation" for each of the Named Executive Officers, except for Mr.
Kohl, included Company contributions in the amount of $625, for each year,
to the Knight Transportation, Inc. 401(k) Plan. Mr. Kohl received a Company
contribution in the amount of $425 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 2000, which will be refunded to the Company upon termination
of the policy.
(2) Mr. Jenkins resigned as an officer of the Company on October 16, 2000, and
was replaced by Mr. Timothy M. Kohl. Mr. Kohl's annual base compensation is
$132,500.
-11-
The following table sets forth stock options granted to Named Executive Officers
in 2000:
OPTION GRANTS TO NAMED EXECUTIVE OFFICERS IN 2000 FISCAL YEAR
INDIVIDUAL OPTION GRANTS
------------------------------------------------------- POTENTIAL REALIZABLE VALUE AT
NUMBER OF PERCENT OF ASSUMED ANNUAL RATES OF STOCK
SECURITIES TOTAL OPTIONS PRICE APPRECIATION FOR OPTION TERM
UNDERLYING GRANTED TO EXERCISE OR EXPIRATION ----------------------------------
NAME(1) OPTIONS GRANTED(#) EMPLOYEES IN 2000 BASE PRICE($/SH) DATE 5%($) 10%($)
------- ------------------ ----------------- ---------------- ---- ----- ------
Timothy M. Kohl 14,000 2% 14.4375 10/12/2010 141,833 236,915
Bruce Beck, Jr. 3,000 1% 14.4375 10/12/2010 49,710 106,710
Except as set forth above, no stock appreciation rights (SARs) or options
were granted during the 2000 fiscal year to any of the Named Executive Officers.
The following table sets forth the information with respect to the exercise
of stock options during the fiscal year ended December 31, 2000.
AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR
AND OPTION VALUES AS OF DECEMBER 31, 20002
VALUE OF UNEXERCISED
SHARES NUMBER OF UNEXERCISED OPTIONS IN-THE-MONEY OPTIONS AT
ACQUIRED ON VALUE AT FISCAL YEAR END 12/31/00(#) 2000 FISCAL YEAR END ($)
NAME EXERCISE (#) REALIZED ($) EXERCISABLE UNEXERCISABLE(3) EXERCISABLE UNEXERCISABLE(3,4)
---- ------------ ------------ ----------- ---------------- ----------- ------------------
Clark A. Jenkins 50,128 297,010 0 0 0 0
Timothy M. Kohl 5001 39,794 2,750 24,999 13,850 120,744
Bruce Beck, Jr. 0 0 1,250 14,250 4,688 43,523
- - - - - - - ----------
(1) None of the other Named Executive Officers (Randy Knight, Kevin P. Knight,
Gary J. Knight, and Keith T. Knight) were granted any options during fiscal
year 2000.
(2) None of the other named Executive Officers (Randy Knight, Kevin P. Knight,
Gary J. Knight, Keith T. Knight and Bruce Beck, Jr.) exercised any Options
during fiscal year 2000.
(3) All options have been adjusted to reflect the effect of the Company's
three-for-two stock split, effected as a stock dividend on May 18, 1998.
(4) Based on a closing price of $19.25 of the Company's Common Stock on
December 31, 2000.
-12-
LONG TERM INCENTIVE PLAN
Other than the Company's Stock Option Plan in which the Named Executive
Officers, other than Mr. Timothy M. Kohl and Dr. Bruce Beck, do not participate,
the Company does not have a long-term incentive plan or a defined benefit plan,
and the Company has not issued any stock appreciation rights.
EMPLOYMENT AGREEMENTS
The Company currently does not have any employment contracts, severance or
change-in-control agreements with any of its Named Executive Officers.
Upon Randy Knight's retirement as Chairman in 1999, the Company entered
into a Consulting Agreement with Mr. Randy Knight for $50,000 per year. The
Consulting Agreement is terminable at any time by either party. Presently,
consulting services are rendered by Randy Knight through a limited liability
company controlled by Mr. Knight.
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 of Common Stock under the Plan, for a total of
1,500,000 shares of Common Stock, after giving effect to the Company's 1998
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, 2000, the Company had granted options
to employers and directors to purchase 1,202,073 shares of its Common Stock;
297,927 Shares of Common Stock were reserved for the issuance of future stock
options and grants.
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 2000, 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 its 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.
-13-
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, COMPENSATION COMMITTEE INTERLOCKS, REPORT ON EXECUTIVE
COMPENSATION
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 PROXY STATEMENT BY REFERENCE,
EXCEPT TO THE EXTENT THE COMPANY INCORPORATES SUCH REPORT AND GRAPH BY SPECIFIC
REFERENCE.
The Compensation Committee is composed entirely of directors who are not
officers, employees or 10% or greater shareholders of the Company. 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 Compensation Committee of the Board of Directors for 2000 was
composed of G.D. Madden and Mark Scudder. Mr. Scudder served as Chairman of the
Compensation Committee. SEE "CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS,"
below, for a description of transactions between the Company and members of the
Board of Directors or their affiliates, and "CORPORATE GOVERNANCE - MEETINGS AND
COMPENSATION OF THE BOARD OF DIRECTORS AND ITS COMMITTEES," above, for a
description of compensation of the members of the Compensation Committee. The
Compensation Committee also renders an annual report to the Board of Directors
concerning the compensation of the Company's executive officers.
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 these executive officers. The Committee believes that stock
ownership by the Company's most senior executive officers aligns the interests
of management with the interests of shareholders in the enhancing of shareholder
value. With the exception of Mr. Timothy M. Kohl, Chief Financial Officer and
-14-
Secretary, and Dr. Bruce Beck, Vice President, each of whom 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. Kohl and other executive officers without substantial holdings of
the Company's Common Stock, the objectives of the Company's compensation program
are to align, through the grant of stock options, executive and shareholder
long-term interests by creating a strong and direct link between executive pay
and shareholder return. The Company's stock option program is intended to enable
executives to develop and maintain a significant, long-term stock ownership
position in the Company's Common Stock. The Committee believes that the Stock
Option Plan is an effective tool for accomplishing this objective.
In reviewing base salaries of senior management for 2000 and salary
compensation for 2000-2001, 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
Mark Scudder, Chairman
G. D. Madden, Member
February 7, 2001
(Intentionally Left Blank)
-15-
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, 1996 to December 31, 2000. The graph
assumes that $100 of the Company's Common Stock was purchased on December 31,
1996, at a price of $9.167 per share and all dividends were reinvested. The
Company has paid no dividends on its Common Stock since its inception and does
not expect to do so in the foreseeable future. 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 12/31/1995 12/31/1996 12/31/1997 12/31/1998 12/31/1999 12/31/2000
- - - - - - - ----------------- ---------- ---------- ---------- ---------- ---------- ----------
Knight Transportation, Inc. 100.00 138.18 201.81 291.13 186.81 209.99
NASDAQ Stock Market 100.00 123.04 150.76 212.44 383.79 714.83
NASDAQ Trucking & 100.00 110.39 141.29 127.07 122.84 111.72
Transportation Stocks Index
(the "peer" group)
-16-
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, 2000, leased approximately 8
acres from Randy Knight, a 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 $81,000 were made by the
Company to, or on behalf of, Total Warehousing and Randy Knight for the year
ended December 31, 2000. Randy Knight owns a 50 percent interest in Total
Warehousing; the balance is owned by an unaffiliated party.
The lease between the Company and Randy Knight had an original term at five
(5) years, with two five year renewal options. The original base rent was $4,828
per month and has increased periodically through automatic rent escalators. In
March 1999, the Company exercised its option to extend the lease term for five
years. The current lease term will expire April 30, 2004. The Company has one
more option to extend the lease term for an additional five (5) years. The
current monthly based rent is $6,700. Under the lease, base rent increases by 3%
on 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 from time to time provide services to
each other. Total Warehousing provided general warehousing services to the
Company and was paid $33,000 by the Company for the year ended December 31,
2000.
Randy Knight retired as an officer of the Company on July 31, 1999, and
since then has acted as a consultant to the Company for which services he
receives $50,000 per year. The consulting agreement is terminable at the will of
either party. The Board of Directors has approved this arrangement.
The Company paid approximately $90,000 during 2000 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.
CONCENTREK INVESTMENT
The Company periodically examines investment opportunities in areas related
to the truckload carrier business. The Company's investment strategy is to add
to shareholder value by investing in industry related businesses that will
assist the Company in strengthening its overall position in the transportation
industry, minimize the Company's exposure to start-up risk and provide the
Company with an opportunity to realize a substantial return on its investment.
In April 1999, the Company acquired a 17% interest in Concentrek, Inc.
("Concentrek"), formerly known as KNGT Logistics, Inc., with the intent of
investing in the non-asset transportation business. The Company's investment in
Concentrek was approved by a majority of the Company's Independent Directors.
The Company holds non-voting Class A Preferred Stock in Concentrek which is
preferred in the event of liquidation, dissolution, sale or merger and with
-17-
respect to dividends over all other classes of stock, including stock held by
members of the Knight family. The Company has preferential rights in the event
Concentrek issues additional shares and limited voting rights with respect to
merger, consolidation, sale of substantially all of Concentrek's assets, and
certain other major corporate events. The Company, through a limited liability
company, has agreed to lend up to a maximum of $935,000 to Concentrek pursuant
to a promissory note to fund start-up costs. The note is convertible into
Concentrek's Class A Preferred Stock and is secured by a lien on Concentrek's
assets. Other investors in Concentrek include Randy, Kevin, Gary and Keith
Knight, who collectively own 43% of Concentrek's issued and outstanding stock,
and through the same limited liability company affiliate may lend up to a
maximum of $4,565,000 to Concentrek pursuant to a promissory note convertible
into Concentrek Class B Preferred Stock to fund Concentrek's start-up costs. The
loans to Concentrek made by the Company and the Knights are on a parity basis
with regard to security. The Company's investment has been structured to limit
its exposure to Concentrek start-up losses and business risk.
KNIGHT FLIGHT
In November 2000, the Company acquired a 19% interest in Knight Flight
Services, LLC ("Knight Flight") which acquired and operates a Cessna Citation
560 XL jet aircraft. The aircraft is leased to Pinnacle Air Charter, L.L.C., an
unaffiliated entity, which leases the aircraft on behalf of Knight Flight. The
cost of the aircraft to Knight Flight was $8,942,700. The Company invested
$1,717,700 in Knight Flight in order to assure access to charter air travel for
the Company's employees. The Company has a priority use right for the aircraft
and is not obligated to make additional capital contributions to Knight Flight.
The remaining 81% interest in Knight Flight is owned by Randy, Kevin, Gary and
Keith Knight, who have personally guaranteed the balance of the purchase price
and to contribute any capital required to meet any cash short falls. The
Company's acquisition of its interest in Knight Flight was approved by a
disinterested majority of the Company's board of directors. The Company believes
that its interest in Knight Flight will allow it access to needed charter air
services for Company business at prices equal to or less than is available from
unrelated charter companies.
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.
CERTAIN BUSINESS RELATIONSHIPS
During 2000, the Company retained Scudder Law Firm to perform certain legal
services on its behalf. The Company paid Scudder Law Firm approximately $116,000
for services during 2000. The amounts paid to Scudder Law Firm exceeded 5% of
that Firm's revenue in 2000. Mark Scudder, a member of the Company's Board of
Directors, is a member of Scudder Law Firm and performed legal services on
behalf of the Company. (The Company used the services of Scudder Law Firm during
2000, and intends to continue the use of Scudder Law Firm during 2001.)
-18-
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS
AND MANAGEMENT
The following table sets forth, as of February 28, 2001, 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.
Name and Address of Amount and Nature of Percent of
Beneficial Owner(1) Beneficial Ownership Class
------------------- -------------------- -----
Donald A. Bliss(2) 6,179 *
Timothy M. Kohl(3) 26,059 *
Clark A. Jenkins(4) 211 *
Gary J. Knight(5) 1,930,037 12.54%
Keith T. Knight(6) 1,735,232 11.28%
Kevin P. Knight(7) 1,747,612 11.36%
L. Randy Knight(8) 1,527,062 9.92%
G.D. Madden(9) 4,679 *
Mark Scudder(10) 3,650 *
William Blair & Company, L.L.C.(11) 978,275 6.36%
Wasatch Advisors, Inc.(12) 1,346,017 8.75%
Perkins, Wolf, McDonnell & Company(13) 885,800 5.76%
Berger Small Cap Value Fund(14) 792,000 5.15%
All directors and executive officers
as a group (eight persons) 8,215,845 53.4%
- - - - - - - ----------
* Represents less than 1% of the Company's outstanding Common Stock.
(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 on February 28, 2000. The address of
Wasatch Advisors, Inc. ("Wasatch") is 150 Social Hall Avenue, Salt Lake
City, Utah 84111. All information provided with respect to Wasatch is based
solely upon the Company's review of a Schedule 13G/A, filed by Wasatch with
the Securities and Exchange Commission on February 13, 2001. The address of
Perkins, Wolf, McDonnell & Company ("Perkins") is 53 West Jackson Blvd.,
Suite 722, Chicago, Illinois 60604. All information provided with respect
to Perkins is based solely upon the Company's review of a Schedule 13G
filed by Perkins with the Securities and Exchange Commission on February
14, 2000. The address of Berger Small Cap Value Fund ("Berger") is 210
University Boulevard, Suite 900, Denver, Colorado 80206. All information
-19-
provided with respect to Berger is based solely upon the Company's review
of Schedule 13G filed by Berger with the Securities and Exchange Commission
on February 14, 2001.
(2) Includes 6,079 shares beneficially owned by Donald A. Bliss over which he
exercises sole voting and investment powers under a Revocable Trust
Agreement, and 100 Shares which are owned outright.
(3) Includes 25,250 shares that Timothy M. Kohl has the right to acquire
through exercise of stock options and 809 shares owned outright.
(4) Includes 211 shares of Common Stock owned outright.
(5) Includes 1,927,787 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.
(6) Includes 1,732,982 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.
(7) Includes 1,708,612 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, 37,500
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
1,500 shares owned by four minor children, who share the same household.
(8) Includes 1,225,587 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; 300,000shares held by a
limited liability company for which Mr. Knight acts as manager and whose
members include Mr. Knight and trusts for the benefit of his four children;
and 1,475 shares owned by a child who shares the same household and over
which Mr. Knight exercises voting power.
(9) Includes 3,750 shares that G.D. Madden has the right to acquire through the
exercise of a stock option, and 929 owned outright.
(10) Includes 2,500 shares that Mark Scudder has the right to acquire through
the exercise of a stock option, and 1,150 owned outright.
(11) William Blair & Company, L.L.C. has sole voting power over 299,955 shares
and sole dispositive power over 978,275 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 978,275 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 28, 2000.
(12) Wasatch Advisors, Inc. has sole voting power over 1,346,017 shares and sole
dispositive power over 1,346,017 shares. It has shared voting power and
shared dispositive power over no shares. Wasatch Advisors, Inc. is the
owner of record and discloses beneficial ownership of such shares. The
foregoing is based solely on information provided by Form 13G/A, filed by
Wasatch Advisors, Inc. with the Securities and Exchange Commission on
February 13, 2001.
(13) Perkins, Wolf, McDonnell & Company has sole voting power and full
dispositive power over no shares. It has shared voting power and shared
dispositive power over 885,800 shares. Perkins, Wolf, McDonnell & Company
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
Perkins, Wolf, McDonnell & Company with the Securities and Exchange
Commission on February 14, 2000.
(14) Berger Small Cap Value Fund has sole voting power and full dispositive
power over no shares. It has shared voting power and shared dispositive
power over 792,000 shares. Berger Small Cap Value Fund 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 Berger Small Cap
Value Fund with the Securities and Exchange Commission on February 14,
2001.
-20-
SHAREHOLDER PROPOSALS
The Board of Directors will consider proposals from shareholders for
nominations of directors to be elected at the 2002 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 2002 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 2002 Annual Meeting must be received by the Company by December 6, 2001, to
be considered for inclusion in the Company's Proxy Statement and form of proxy
relating to such Meeting. Proposals should be mailed via certified mail, return
receipt requested, and addressed to Timothy M. Kohl, 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
Chairman of the Board and
Chief Executive Officer
-21-
EXHIBIT 1
PROPOSED AMENDMENT TO THE
ARTICLES OF INCORPORATION OF KNIGHT TRANSPORTATION, INC.
1. The Board of Directors of Knight Transportation, Inc. (the "Company") has
approved the following Second Amendment to the Company's Amended and Restated
Articles of Incorporation, as filed with the Arizona Corporation Commission on
August 31, 1994, for submission to shareholders of the Company for their
consideration and action:
2. Paragraph (E)(3) of Article VII of the Restated Articles of Incorporation of
the Company will be amended by deleting that paragraph and substituting the
following paragraph:
(E)(3) Class III directors shall be elected to serve for a three (3) year
term commencing with their election at the annual meeting of shareholders
and expiring on the conclusion of the third succeeding annual meeting of
shareholders.
3. The Second Amendment to the August 31, 1994 Amended and Restated Articles of
Incorporation of the Company, as filed with the Arizona Corporation Commission,
will become effective upon filing of such Second Amendment with the Arizona
Corporation Commission.
EXHIBIT 2
KNIGHT TRANSPORTATION, INC.
AUDIT COMMITTEE CHARTER
AMENDED AND RESTATED
CHARTER OF THE AUDIT COMMITTEE
OF
THE BOARD OF DIRECTORS
OF
KNIGHT TRANSPORTATION, INC.
MAY 10, 2000
TABLE OF CONTENTS
Page
----
1. Purpose of Audit Committee................................................1
2. Qualifications of Audit Committee.........................................1
3. Duties of the Audit Committee.............................................2
4. Access to Information.....................................................4
5. Employee Access to Audit Committee........................................4
6. Frequency of Meetings.....................................................4
7. Access to Legal Counsel...................................................4
8. Meeting Procedures........................................................4
9. Other Duties..............................................................5
10. Limitation of Audit Committee Duties......................................5
AMENDED AND RESTATED
CHARTER OF THE AUDIT COMMITTEE
OF
THE BOARD OF DIRECTORS
OF
KNIGHT TRANSPORTATION, INC.
MAY 10, 2000
RECITALS
In June 1994, the Board of Directors of Knight Transportation, Inc. (the
"Company") appointed an Audit Committee, and that committee, since July 26,
1994, has maintained a written Charter specifying its duties.
On December 14, 1999, the Securities and Exchange Commission (the
"Commission") issued Release No. 34-42231 (the "NASDAQ Release"), amending the
rules applicable to the qualification and responsibility of directors
participating on the audit committees of NASDAQ traded companies. On December
22, 1999, the Commission issued Release No. 34-42266 (the "SEC Release")
amending, among other rules, the rules applicable to audit committees for all
publicly traded companies.
The Board of Directors of the Company (the "Board") believes that it is
appropriate to amend and restate the Charter of the Audit Committee of the Board
of Directors of Knight Transportation, Inc. (the "Charter") in order to comply
with the applicable provisions of the NASDAQ Release and the SEC Release.
Accordingly, the Charter is hereby amended and restated, in its entirety, as
follows, effective as of May 10, 2000, to reflect the directives of the
Company's Board.
CHARTER
1. PURPOSE OF AUDIT COMMITTEE. The purpose of the Audit Committee is to
provide independent and skilled guidance to the Board in fulfilling its
responsibility to ensure the fairness and accuracy of the Company's financial
statements and to ensure the existence of appropriate internal financial
controls, and the independence of the independent public accounting firm engaged
to audit the Company's financial statements (the "external auditors"), and to
render the reports required of the Audit Committee pursuant to Item 306 of
Regulation S-K, and to allow the Company to make the disclosures required by
Item 7(e)(3) of Schedule 14(A) and related Commission regulations.
2. QUALIFICATIONS OF AUDIT COMMITTEE. The Audit Committee shall consist of
not less than two (and not later than June 14, 2001, three directors) nor more
than five directors, each of whom qualifies as an "independent director" under
Rule 4200 of the NASDAQ Stock Market, Inc.'s listing requirements, unless
exceptional circumstances exist that, under NASDAQ listing requirements, would
allow the Audit Committee to include one non-independent director member, who
may not be either a current employee or immediate family member of a current
employee. Each member of the Audit Committee shall be able to read and
understand fundamental financial statements, including the Company's balance
sheet, income statement, and cash flow statement. Additionally, at least one
member of the Audit Committee shall, in the judgment of the Board, have
experience in finance or accounting, requisite professional certification in
accounting, or any other comparable experience or background in evaluating
financial statements, which may include past experience as a chief executive
officer, chief financial officer or other senior officer with financial
oversight responsibilities.
3. DUTIES OF THE AUDIT COMMITTEE. Subject to the second sentence of
Paragraph 10, below, the Audit Committee will perform the following duties in
the manner and priority the Audit Committee determines, in its discretion, to be
appropriate under the circumstances:
(a) Review the Company's earnings statements and forecasts, if any,
with management and with the Company's external auditors prior to the release of
such statements to the public;
(b) Assure that the Company's interim financial statements are
reviewed by the Company's external auditors, as required by Item 306 of
Regulation S-K prior to the filing of such interim financial statements with the
Commission as part of the Company's report on Form 10-K;
(c) Review and discuss the Company's audited financial statements with
management;
(d) Review and discuss the Company's audited financial statements with
the Company's external auditors and review those matters required to be
discussed by SAS-61, as modified or supplemented from time to time;
(e) Receive from the Company's external auditors, formal written
statements and disclosures and the letter from the Company's external auditors
required by Independent Standards Board's Standard No. 1, as modified or
supplemented, and discuss with the external auditors their independence, and
review all audit and other services performed by the external auditors for the
Company to assure that such services do not compromise the external auditors'
independence;
(f) Review and consider and, to the extent necessary, engage in direct
dialogue with the external auditors, with respect to any relationships or
services provided by the external auditors to the Company or any other affiliate
of the Company or any party that may affect the objectivity or independence of
the external auditors and take, or recommend that the Board take, appropriate
action to ensure the independence of the external auditors;
(g) Review annually the scope of the external auditors' work,
including any non-auditing or consulting services;
-2-
(h) Review with the Company's external auditors all adjustments made
to the Company's audited financial statements, including a reconciliation of any
adjustments made in the audited financial statements from the Company's
quarterly interim financial statements;
(i) Review with management and the Company's external auditors any
significant financial reporting issues or judgments called for in connection
with the preparation of the Company's financial statements, including the
adequacy and appropriateness of any reserves, policies relating to the
recognition of revenue, the quality and appropriateness of the Company's
accounting principles, and any other matters which, in the judgment of the
Committee or the Company's external auditors, could have a material impact on
the Company's financial statements;
(j) Meet with the Company's external auditors and with management to
review and assess any material financial risk exposure to the Company and the
steps management has or plans to take to monitor and control financial risk;
(k) Review with the Company's external auditors and management the
adequacy of the Company's internal financial controls and reporting systems;
(l) Confer with the Company's external auditors whether any matters
described in Section 10A of the Securities and Exchange Act of 1934 have come to
the attention of the external auditors;
(m) Review any major changes to the Company's auditing and accounting
policies and practices suggested by the Company's external auditors or by
management. (In undertaking the duties specified herein, in communications with
the Company's external auditors, the Audit Committee will, in accordance with
SAS-61, communicate with the external auditors with respect to (1) methods used
to account for significant or unusual transactions; (2) the effect of
significant accounting policies in controversial or emerging areas for which
there is a lack of authoritative guidance or consensus; (3) the process used by
management in formulating particularly sensitive accounting estimates, and the
basis for the auditors conclusions regarding the reasonableness of those
estimates; and (4) disagreements with management, if any, over the application
of accounting principles, the basis for management's accounting estimates, and
the disclosures in the Company's financial statements);
(n) Recommend annually the selection and engagement of the Company's
external auditors and review their fees and the proposed scope and plan of the
annual audit;
(o) Review the external auditors' management letter and consider any
comments made by the external auditors with respect to improvements in the
internal accounting controls of the Company, consider any corrective action
recommended by the external auditors, and review any corrective action taken by
management;
-3-
(p) Review and devote attention to any areas in which management and
the Company's external auditors disagree and determine the reasons for such
disagreement;
(q) Review the performance of the external auditors and, if
appropriate, recommend that the Board replace any external auditor failing to
perform satisfactorily;
(r) Review the performance of the Company's Chief Financial Officer
and Controller;
(s) Review any difficulties any external auditor may have encountered
with respect to performance of an audit, including, without limitation, any
restrictions placed upon the scope of the audit on access to information, or any
changes in the proposed scope of the audit;
(t) Provide, as part of the Company's proxy filed pursuant to
Regulation 14A or 14C, as applicable, the report required by Item 306 of
Regulation S-K, and cause a copy of that report to be included annually in the
Company's proxy solicitation materials; and
(u) Periodically review the adequacy of this Charter and make
recommendations to the Board with respect to any changes in the Charter.
4. ACCESS TO INFORMATION. In order to perform its obligations, the Audit
Committee shall have unrestricted access to all relevant internal and external
Company information and to any officer, director or employee of the Company.
5. EMPLOYEE ACCESS TO AUDIT COMMITTEE. Any person employed by the Company
and any of the Company's independent contractors will have access to the Audit
Committee to report any matter which such person believes would be of interest
to the Audit Committee or of general concern to the Audit Committee or the
Board. Contacting a member of the Audit Committee to report any irregularity,
questionable activity, or other matter will not subject the person making the
report to discipline.
6. FREQUENCY OF MEETINGS. The Audit Committee will meet each quarter prior
to the release of the Company's earnings statements to review the earnings
release. In addition, the Audit Committee will convene if a meeting is noticed
by its Chairman, any member of the Audit Committee, any member of the Board, the
Chief Financial Officer, or the Chief Executive Officer.
7. ACCESS TO LEGAL COUNSEL. The Audit Committee, at its request, shall have
access to the Company's outside legal counsel, and, if requested, to its own
independent legal counsel. The Company will pay for the cost of any such legal
counsel.
-4-
8. MEETING PROCEDURES.
(a) Members of the Audit Committee shall endeavor to attend all
meetings of the Committee. The Audit Committee may meet telephonically or in
person and may take action, with the written consent of all members. A majority
of the Audit Committee will constitute quorum for all purposes.
(b) Written minutes will be maintained for each meeting of the Audit
Committee.
(c) The Audit Committee, at least once a year, will meet privately
with the Company's external and internal auditors, and no representative of the
Company's management shall attend such meetings.
9. OTHER DUTIES. The Audit Committee will perform such other duties as the
Board may assign to it.
10. LIMITATION OF AUDIT COMMITTEE DUTIES. The Audit Committee is not an
investigative committee of the Board and shall have no investigative duties,
unless expressly assigned to the Audit Committee by the Board. The Audit
Committee will exercise its business judgment in performing its duties under
this Charter, including the duties outlined in Paragraph 3, and may emphasize
and prioritize those duties and responsibilities set forth above which the
Committee, in its discretion and judgment, believes are the most important,
given the particular circumstances. The external auditors shall remain
ultimately accountable to the Company's Board and the Audit Committee, as the
designated representatives of the Company's shareholders. Accordingly, it is not
the duty of the Audit Committee to undertake the audit of the Company itself, to
plan the audit, or to undertake any of the responsibilities of the Company's
internal or external auditors. The Audit Committee is not required to follow the
procedures required of auditors in performing reviews of interim financial
statements of audited financial statements. In performing its functions, the
Audit Committee may rely upon information provided to it by management, by the
Company's internal and external auditors, or by legal counsel. This Charter
imposes no duties on the Audit Committee or its members that are greater than
those duties imposed by law upon a director of an Arizona corporation under
Section 10-830 of the Arizona Revised Statutes. If any claim is asserted against
the Audit Committee, any of its members or the Company by shareholder or any
other person, nothing in this Charter shall be construed to limit or restrict
any defense available to the Audit Committee, any of its members, or to the
Company.
DATED: May 10, 2000
/s/ Don Bliss
----------------------------------------
Don Bliss, Chairman and Member
Audit Committee
-5-
KNIGHT TRANSPORTATION, INC.
5601 WEST BUCKEYE ROAD
PHOENIX, ARIZONA 85043
THIS PROXY IS SOLICITED BY THE BOARD OF DIRECTORS
FOR THE ANNUAL MEETING OF SHAREHOLDERS
Wednesday, May 9, 2001, 10:00 a.m., Phoenix Time
By executing this Proxy, the shareholder constitutes and appoints the
Chairman and Chief Executive Officer, Kevin P. Knight, and the Secretary and the
Chief Financial Officer, Timothy M. Kohl, and each of them, as proxies for the
shareholder (or if only one proxy is present, that one shall have all power,
granted here), with full power of substitution, who may, and by a majority of
such proxies, represent the shareholder and vote all shares of Common Stock
which the shareholder is entitled to vote at the Annual Meeting of Shareholders
of Knight Transportation, Inc. to be held on May 9, 2001, at l0:00 a.m., Phoenix
Time, at The Wigwam Resort Hotel, 300 East Wigwam Boulevard, Arizona 85340, or
at any adjournment thereof, on all matters set forth in the Notice and Proxy
Statement for the Annual Meeting dated May 9, 2001, as follows:
1. PROPOSAL NO. 1: Election of Directors.
NOMINEES FOR DIRECTOR
01-Timothy M. Kohl *, 02- Mark Scudder *, 03-Donald A. Bliss *, 04-Gary
Knight **, 05-G.D. Madden **, 06-Matt Salmon **, 07-Kevin Knight ***, 08- Randy
Knight ***, 09-Keith Knight ***
Key to Abbreviations:
* - To elect as a Class I Director for a one year term.
** - To elect as a Class II Director for a two-year term.
*** - To elect as a Class III Director for a three-year term.
[ ] VOTE for all Nominees listed above.
[ ] WITHHOLD authorization to vote for all Nominees listed above.
[ ] WITHHOLD authorization to vote for any individual Nominee. Write
number of Nominee(s) for which authorization is withheld: __________
2. PROPOSAL NO. 2: Amendment of Articles of Incorporation.
Proposal to amend the Articles of Incorporation to clarify the Amendment
adopted at the 2000 Annual Meeting.
[ ] FOR Amendment.
[ ] AGAINST Amendment.
[ ] ABSTAIN.
3. PROPOSAL NO. 3: Proposal to ratify and approve the selection of Arthur
Andersen LLP, as the Company's independent accountant for 2001.
[ ] FOR APPROVAL of Arthur Andersen LLP.
[ ] AGAINST APPROVAL of Arthur Andersen LLP.
[ ] ABSTAIN.
4. In their discretion, the proxies are also authorized to vote upon such
matters as may properly come before the Annual Meeting or any adjournments
thereof.
The shareholder acknowledges receipt of the Notice and Proxy Statement
dated April 5, 2001, grants authority to any of said proxies, or their
substitutes, to act in the absence of others, with all the powers which the
shareholder would possess if personally present at such meeting, and hereby
ratifies and confirms all that said proxies, or their substitutes, may lawfully
do in the shareholder's name, place and stead.
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS OF KNIGHT
TRANSPORTATION, INC., AND THE SHARES REPRESENTED BY THIS PROXY WILL BE VOTED IN
ACCORDANCE WITH YOUR INSTRUCTIONS. IF NO CHOICE IS SPECIFIED BY YOU, THIS PROXY
WILL BE VOTED FOR THE ELECTION OF NOMINEES NAMED IN PROPOSAL NUMBER ONE, FOR
PROPOSAL NUMBER TWO, AND FOR PROPOSAL NUMBER THREE.
Please mark, sign, date and return the Proxy Card promptly, using the
enclosed envelope, which requires no postage when mailed in the United States.
PLEASE SIGN ABOVE EXACTLY AS YOUR NAME APPEARS. WHEN SHARES ARE HELD BY
JOINT TENANTS, BOTH SHALL SIGN. WHEN SIGNING AS ATTORNEY, EXECUTOR,
ADMINISTRATOR, TRUSTEE OR GUARDIAN, PLEASE GIVE FULL TITLE AS SUCH. IF A
CORPORATION, PLEASE SIGN IN FULL CORPORATE NAME BY PRESIDENT OR OTHER AUTHORIZED
OFFICER. IF A PARTNERSHIP, PLEASE SIGN IN PARTNERSHIP NAME BY AUTHORIZED PERSON.
Signature: ________________________________________
Title: ________________________________________
Signature: ________________________________________
Title: ________________________________________
DATED: __________________________________, 2001
Address Change?
Mark box [ ] and indicate changes below:
___________________________________________________
___________________________________________________
___________________________________________________