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COPART, INC.
OCTOBER 19, 2001
DEAR SHAREHOLDER:
You are cordially invited to attend the 2001 Annual Meeting of Shareholders
of Copart, Inc. (the "Company") to be held on Tuesday, December 4, 2001 at 9:00
a.m., at the Company's corporate headquarters located at 5500 E. Second Street,
Benicia, California 94510 (see directions on back of proxy statement). The
formal Notice of Annual Meeting of Shareholders and Proxy Statement accompanying
this letter describes the business to be acted upon.
PLEASE SIGN AND RETURN YOUR PROXY NOW WHETHER OR NOT YOU PLAN TO ATTEND THE
MEETING. If you attend the meeting, you may still vote in person even if you
have previously returned a signed proxy.
Sincerely,
/s/ Willis J. Johnson
-------------------------
WILLIS J. JOHNSON
CHIEF EXECUTIVE OFFICER
YOUR VOTE IS IMPORTANT
IN ORDER TO ENSURE THAT YOUR SHARES WILL BE REPRESENTED AT THE ANNUAL MEETING IN
THE EVENT YOU ARE NOT PERSONALLY PRESENT, PLEASE DATE, SIGN AND RETURN PROMPTLY
THE ENCLOSED PROXY IN THE ENVELOPE PROVIDED. EXECUTION OF THE PROXY WILL NOT
AFFECT YOUR RIGHT TO VOTE IN PERSON IF YOU ARE PRESENT AT THE MEETING.
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COPART, INC.
--------------------------
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD ON DECEMBER 4, 2001
--------------------------
TO THE SHAREHOLDERS:
NOTICE IS HEREBY GIVEN that the Annual Meeting of Shareholders (the "Annual
Meeting") of Copart, Inc. (the "Company") will be held on Tuesday, December 4,
2001 at 9:00 a.m., pacific standard time, at the Company's corporate
headquarters located at 5500 E. Second Street, Benicia, California 94510 for the
following purposes:
1. To elect seven directors of the Company for the ensuing year or until
their successors have been duly elected and qualified;
2. To approve the adoption of a new 2001 Stock Option Plan and to reserve
3,000,000 shares of the Company's common stock for issuance under the
plan;
3. To ratify the selection of KPMG LLP as independent auditors for the
Company for the current fiscal year ending July 31, 2002; and
4. To transact such other business as may properly come before the
meeting or any adjournment(s) thereof.
The Board of Directors has fixed the close of business on October 8, 2001,
as the record date for determining shareholders entitled to notice of, and to
vote at, the Annual Meeting. The stock transfer books will not be closed between
the record date and the date of the Annual Meeting.
Please read carefully the following Proxy Statement which describes the
matters to be voted upon at the Annual Meeting, and then complete, sign and
return your Proxy as promptly as possible. Should you receive more than one
Proxy because your shares are registered in different names and addresses, each
Proxy should be signed and returned to ensure that all your shares will be
voted. If you attend the Annual Meeting and vote by ballot, your Proxy will be
revoked automatically and only your vote at the Annual Meeting will be counted.
For the Board of Directors
COPART, INC.
/s/ Paul A. Styer
--------------------------
Paul A. Styer, SECRETARY
Benicia, California
October 19, 2001
COPART, INC.
5500 E. SECOND STREET
BENICIA, CALIFORNIA 94510
PROXY STATEMENT
--------------------------
FOR THE ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD ON DECEMBER 4, 2001
--------------------------
GENERAL
THE ENCLOSED PROXY IS SOLICITED ON BEHALF OF THE MANAGEMENT AND BOARD OF
DIRECTORS (THE "BOARD") OF COPART, INC., a California corporation (the
"Company"), for use at the Company's Annual Meeting of Shareholders to be held
on Tuesday, December 4, 2001 (the "Annual Meeting"). The Annual Meeting will be
held at 9:00 a.m., Pacific Standard Time, at the Company's corporate
headquarters located at 5500 E. Second Street, Benicia, California. Only
shareholders of record at the close of business on October 8, 2001 (the "Record
Date") will be entitled to notice of and to vote at the Annual Meeting. The
Company's principal executive offices are located at 5500 E. Second Street,
Benicia, California 94510. The Company's telephone number at that address is
(707) 748-5000.
This Proxy Statement and accompanying proxy (the "Proxy") and Notice of
Annual Meeting were mailed to the Company's shareholders on or about October 19,
2001. A copy of the Company's Annual Report for the fiscal year ended July 31,
2001 accompanies this Proxy Statement.
RECORD DATE, VOTING AND SHARE OWNERSHIP
On October 8, 2001, the Record Date for determination of shareholders
entitled to vote at the Annual Meeting, there were 55,681,353 shares of Common
Stock outstanding held by approximately 776 shareholders of record. No shares of
the Company's Preferred Stock are outstanding.
Each share of the Company's Common Stock outstanding on the Record Date is
entitled to one vote. In addition, every shareholder voting in the election of
directors may cumulate such shareholder's votes and give one candidate a number
of votes equal to the number of directors to be elected (seven) multiplied by
the number of shares held by such shareholder as of the Record Date, or
distribute such number of votes on the same principle among as many candidates
as the shareholder thinks fit, provided that votes cannot be cast for more than
the number of candidates to be elected. However, no shareholder shall be
entitled to cumulate votes for a candidate unless such candidate's name has been
placed in nomination prior to the voting and the shareholder, or any other
shareholder, has given notice at the meeting prior to the voting of the
intention to cumulate votes.
On all other matters, each share has one vote. Approval of the Board's
decisions to approve the new 2001 Stock Option Plan and to retain KPMG LLP as
independent auditors for fiscal year 2002 will be decided by the affirmative
vote of a majority of the shares present or represented and entitled to vote on
such matters. Abstentions with respect to any matter are treated as shares
present or represented at the Annual Meeting and entitled to vote on that matter
and thus have the same effect as negative votes. If shares are not voted by the
broker who is the record holder of the shares, or if shares are not voted in
other circumstances in which proxy authority is defective or has been withheld
with respect to any matter, these non-voted shares are not deemed to be present
or represented for purposes of determining whether shareholder approval of that
matter has been obtained, although they are deemed to be present for purposes of
establishing a quorum for the transaction of business.
REVOCABILITY OF PROXIES
If you are unable to attend the Annual Meeting, you may vote by Proxy. The
enclosed Proxy is solicited by the Company's Board of Directors and, when
returned properly completed, will be voted as you direct your Proxy. Unless
otherwise instructed in the Proxy, the proxyholder will vote the Proxies
received by them FOR the nominees for the Board of Directors and FOR each of the
two other proposals described herein.
Any person giving a Proxy has the power to revoke it at any time before its
exercise. It may be revoked by filing with Paul A. Styer, Senior Vice President,
General Counsel and Secretary of the Company at the Company's principal
executive offices, Copart, Inc., 5500 E. Second Street, Benicia, California
94510, a notice of revocation or another signed Proxy with a later date. You may
also revoke your Proxy by attending the Annual Meeting and voting in person.
SOLICITATION
The Company will bear the entire cost of solicitation, including the
preparation, assembly, printing and mailing of this Proxy Statement, the Proxy
and any additional soliciting materials furnished to shareholders. Copies of
solicitation materials will be furnished to brokerage houses, fiduciaries, and
custodians holding shares in their names that are beneficially owned by others
so that they may forward this solicitation material to such beneficial owners.
In addition, the Company may reimburse such persons for their costs in
forwarding the solicitation materials to such beneficial owners. The original
solicitation of proxies by mail may be supplemented by solicitation by
telephone, telegram, facsimile or other means by Directors, officers, employees
or agents of the Company. No compensation will be paid to these individuals for
any such services. Except as described above, the Company does not presently
intend to solicit proxies other than by mail.
DEADLINE FOR RECEIPT OF SHAREHOLDER PROPOSALS FOR 2002 ANNUAL MEETING
Shareholders are entitled to present proposals for action at forthcoming
shareholder meetings of the Company if they comply with the requirements of the
appropriate proxy rules promulgated by the Securities and Exchange Commission
(the "SEC"). Proposals of shareholders of the Company that are intended to be
presented by such shareholders at the Company's 2002 Annual Meeting of
Shareholders must be received by the Company at its principal executive offices
no later than June 20, 2002, in order that they may be considered for inclusion
in the proxy statement and form of proxy relating to that meeting. Shareholders
interested in submitting such a proposal are advised to retain knowledgeable
legal counsel with regard to the detailed requirements of the applicable
securities laws. The timely submission of a shareholder proposal to the Company
does not guarantee that it will be included in the Company's applicable proxy
statement.
The Proxy card attached hereto and which is to be used in connection with
the Company's current 2001 Annual Meeting grants the proxy holders discretionary
authority to vote on any matter otherwise properly raised at such Annual
Meeting. The Company presently intends to use a similar form of proxy card for
its 2002 Annual Meeting of Shareholders. If the Company is not notified at its
principal executive offices of a shareholder proposal at least 45 days prior to
the one year anniversary of the mailing of this Proxy Statement, then the proxy
holders for the Company's 2002 Annual Meeting of Shareholders will have the
discretionary authority to vote against any such shareholder proposal if it is
properly raised at such annual meeting, even though such shareholder proposal is
not discussed in the Company's proxy statement related to that shareholder
meeting.
2
MATTERS TO BE CONSIDERED AT ANNUAL MEETING
PROPOSAL ONE - ELECTION OF DIRECTORS
One of the purposes of the Annual Meeting is to elect directors to hold
office until the next annual meeting or until their respective successors are
duly elected and qualified. The number of authorized directors is currently
seven. The Board of Directors has selected the seven nominees listed below for
election as directors. Each person nominated for election has agreed to serve if
elected and management has no reason to believe that any nominee will be
unavailable to serve. Unless otherwise instructed in the Proxy, the proxy
holders will vote the Proxies received by them FOR the nominees named below. The
seven candidates receiving the highest number of affirmative votes of the shares
entitled to vote at the Annual Meeting will be elected to the Board of Directors
of the Company.
NOMINEES
Set forth below is information regarding the Company's nominees, all of
whom are currently directors of the Company, including information furnished by
them as to principal occupations, certain other directorships held by them, any
arrangements pursuant to which they were or are selected as directors or
nominees and their ages as of the Record Date:
NAME AGE PRINCIPAL OCCUPATION
----- ---- -------------------
Willis J. Johnson (1)(2)............. 54 Chief Executive Officer of the Company
A. Jayson Adair...................... 31 President of the Company
Harold Blumenstein (3)............... 63 General Partner, Paragon Properties Company
James Grosfeld (1)(2)(3)............. 64 Private Investor
James E. Meeks....................... 52 Executive Vice President and
Chief Operating Officer of the Company
Marvin L. Schmidt.................... 58 Retired Senior Vice President of
Corporate Development of the Company
Jonathan Vannini (1)(2)(3)........... 39 Private Investor
----------------
(1) Member of the Compensation Committee.
(2) Member of the Stock Option Grant Committee.
(3) Member of the Audit Committee. All audit committee members are independent
nonexecutive directors who possess at least a basic understanding of
finance and accounting and are able to read and understand fundamental
financial statements.
WILLIS J. JOHNSON, co-founder of the Company, has served as Chief Executive
Officer of the Company since 1986, and has been a Board member since 1982. Mr.
Johnson served as President of the Company from 1986 until May 1995. Mr. Johnson
was an officer and director of U-Pull-It, Inc. ("UPI") from 1982 through
September 1994, a self-service auto dismantler which he co-founded in 1982. Mr.
Johnson sold his entire interest in UPI in September 1994. Mr. Johnson has over
29 years of experience in owning and operating auto dismantling companies.
A. JAYSON ADAIR has served as President of the Company since November 1996
and as a director since September 1992. From April 1995 until October 1996, Mr.
Adair served as Executive Vice President. From August 1990 until April 1995, Mr.
Adair served as Vice President of Sales and Operations and from June 1989 to
August 1990, Mr. Adair served as the Company's Manager of Operations.
HAROLD BLUMENSTEIN has served as a director of the Company since March
1994. Mr. Blumenstein is a general partner of Paragon Properties Company, a real
estate development, investment and management company, where he has been
employed since January 1971. Mr. Blumenstein holds a B.A. in Economics and
Accounting from Wayne State University.
3
JAMES GROSFELD has served as a director since November 1993. From November
1993 until November 1994, Mr. Grosfeld also served as Chairman of the Board of
the Company. Mr. Grosfeld is a director of Blackrock Inc., a public diversified
investment management company.
JAMES E. MEEKS has served as Vice President and Chief Operating Officer of
the Company since September 1992 when he joined the Company concurrent with the
Company's purchase of South Bay Salvage Pool (the "San Martin Operation"). Mr.
Meeks has served as Executive Vice President and director of the Company since
October 1996 and as Senior Vice President since April 1995. From April 1986 to
September 1992, Mr. Meeks, together with his family, owned and operated the San
Martin Operation. Mr. Meeks was also an officer, director and part owner of Cas
& Meeks, Inc., a towing and subhauling service company, which he operated from
1991 until March 2001. Mr. Meeks has over 34 years of experience in the vehicle
dismantling business.
MARVIN L. SCHMIDT has served as a director since July 1993. Mr. Schmidt
retired as Senior Vice President of Corporate Development of the Company on
January 1, 1999. Mr. Schmidt served as Vice President of the Company's Western
Region from July 1993, when he joined the Company concurrent with the Company's
acquisition of County Salvage, Inc., until May 1995, when he became Senior Vice
President of Corporate Development. From January 1989 until July 1993, Mr.
Schmidt owned and operated County Salvage, Inc. in Los Angeles. Mr. Schmidt has
over 25 years of experience as an owner and operator of auto dismantling and
parts businesses.
JONATHAN VANNINI has served as a director of the Company since February
1993. Mr. Vannini was a general partner at HPB Associates, an investment
partnership, and was employed by HPB Associates from August 1987 until March
1996. Since 1996, Mr. Vannini has been a private investor. Mr. Vannini holds a
B.A. in Economics from the University of California, Los Angeles and a M.B.A.
from Columbia University.
There are no family relationships among any of the directors or executive
officers of the Company, except that A. Jayson Adair is the son-in-law of Willis
J. Johnson.
In 1990, the Commodity Futures Trading Commission ("CFTC") brought a civil
action against MultiVest Options, Inc. ("MOI") alleging various violations of
the Commodity Exchange Act ("CEA") and certain rules and regulations of the
CFTC. Mr. Grosfeld was the principal stockholder of the ultimate parent
corporation of MOI, but, according to Mr. Grosfeld, was never an officer or
director of MOI and did not participate in the day-to-day conduct of its
business. Without admitting or denying the allegations of the CFTC complaint,
MOI consented to the entry of a permanent injunction and appointment of a
receiver. MOI discontinued its business operations in 1990. Mr. Grosfeld was not
specifically named in the CFTC proceeding or in the injunction related thereto.
Subsequently, in 1990 certain individuals who had previously purchased and sold
commodity options through MOI brought a class action lawsuit against the parent
and affiliated companies of MOI and Mr. Grosfeld alleging that the defendants,
among other things, violated the antifraud provisions of the CEA and asserting
other federal and state law claims. Mr. Grosfeld denied the allegations
contained in the action and maintained that the litigation was without merit. On
March 31, 1997, the court approved a settlement of the action and the lawsuit
was dismissed.
VOTE REQUIRED
The seven nominees receiving the highest number of affirmative votes of the
shares entitled to be voted shall be elected as directors. Votes withheld from
any director are counted for purposes of determining the presence or absence of
a quorum, but have no other legal effect under California law. While there is no
definitive statutory or case law authority in California as to the proper
treatment of abstentions and broker non-votes in the election of directors, the
Company believes that both abstentions and broker non-votes should be counted
solely for purposes of determining whether a quorum is present at the Annual
Meeting. In the absence of controlling precedent to the contrary, the Company
intends to treat abstentions and broker non-votes with respect to the election
of directors in this manner.
Unless otherwise directed, the proxy holders will vote the proxies received
by them for the seven nominees named above. In the event that any such nominee
is unable or declines to serve as a director at the time of the Annual Meeting,
the proxies will be voted for any nominee who shall be designated by the present
Board to fill the vacancy. In the event that additional persons are nominated
for election as directors, the proxy holders intend to
4
vote all proxies received by them in such a manner as will ensure the election
of as many of the nominees listed above as possible. In such event, the specific
nominees to be voted for will be determined by the proxy holders. It is not
expected that any nominee will be unable or will decline to serve as a director.
The directors elected will hold office until the next annual meeting of
shareholders and until their successors are duly elected and qualified.
RECOMMENDATION OF THE BOARD OF DIRECTORS
THE BOARD OF DIRECTORS RECOMMENDS THAT SHAREHOLDERS VOTE FOR THE ELECTION
OF EACH OF THE ABOVE-NAMED NOMINEES TO SERVE ON THE COMPANY'S BOARD OF DIRECTORS
FOR THE ENSUING YEAR UNTIL THE NEXT ANNUAL MEETING OR UNTIL THEIR SUCCESSORS ARE
DULY ELECTED AND QUALIFIED.
BOARD COMMITTEES AND MEETINGS
During the fiscal year ended July 31, 2001, the Board of Directors held
four (4) meetings. As of July 31, 2001, the Company had three standing
Committees: an Audit Committee, Stock Option Grant Committee and a Compensation
Committee. The Company has no nominating committee or any committee performing
similar functions; however, the Board will consider nominees proposed by
shareholders of the Company. Any shareholder who wishes to recommend a suitably
qualified prospective nominee for the Company's Board of Directors should do so
in writing by providing such candidate's name, qualifications (including a
resume, if available) and appropriate contact information to the Company at its
principal executive offices.
The Audit Committee is primarily responsible for reviewing and approving
the services performed by the Company's independent auditors, reviewing
financial statements of the Company and reviewing reports of the Company's
accounting practices and systems of internal accounting controls. The purpose of
the Audit Committee is to make such examinations as are necessary to monitor the
corporate financial reporting and the internal and external audits of the
Company, to provide to the Board the results of its examinations and
recommendations derived therefrom, to outline to the Board improvements made, or
to be made, in internal accounting controls, to nominate independent auditors,
and to provide such additional information as the committee may deem necessary
to make the Board aware of significant financial matters which require the
Board's attention. The Audit Committee currently consists of Directors
Blumenstein, Grosfeld and Vannini. The Company believes that all three current
members are independent directors as defined in Rule 4200(a)(14) of the listing
standards of the National Association of the Securities Dealers. The Audit
Committee held four (4) meetings during the last fiscal year.
The Stock Option Grant Committee is responsible for the administration of
the Company's stock and option plans. The Compensation Committee is generally
responsible for, among other things, reviewing and approving the Company's
compensation policies and setting the compensation levels for those Company
executive officers and senior managers reporting directly to the Company's
President whose compensation is not otherwise established pursuant to employment
agreements reviewed or approved by the Board of Directors. The Compensation
Committee and Stock Option Grant Committee each consist of Directors Johnson,
Grosfeld and Vannini. The Compensation Committee and the Stock Option Grant
Committee each held one (1) meeting during the last fiscal year.
During the last fiscal year, no director attended fewer than 75% of the
aggregate number of meetings of the Board of Directors and meetings of
Committees of the Board on which he serves that were held during the period for
which he has been a member.
AUDIT COMMITTEE REPORT
The Audit Committee of the Board is comprised of the three directors named
below, none of whom are officers or employees of the Company. The Audit
Committee believes that all of its current members are independent directors as
defined by applicable Nasdaq National Market rules and listing standards. The
Audit Committee has adopted a written charter which has been approved by the
Board and which is attached as an appendix to this Proxy Statement.
The Audit Committee has reviewed and discussed the Company's financial
statements and financial reporting process with the Company's management, which
has the primary responsibility for the financial statements and financial
reporting processes, including the system of internal controls. KPMG LLP, the
Company's current
5
independent auditors are responsible for performing an independent audit of the
consolidated financial statements of the Company and for expressing an opinion
on the conformity of those financial statements with generally accept accounting
principals. The Audit Committee reviews and monitors these processes and
receives reports from KPMG LLP and Company management. The Audit Committee also
discussed with KPMG LLP the overall scope and plans of their audits, their
evaluation of the Company's internal controls and the overall quality of the
Company's financial reporting processes.
The Audit Committee has discussed with KPMG LLP those matters required to
be discussed by Statement of Auditing Standards No. 61 ("Communication With
Audit Committees"). KPMG LLP has provided the Audit Committee with the written
disclosures and the letter required by the Independence Standards Board Standard
No. 1 ("Independence Discussions with Audit Committee"), and has also discussed
with KPMG LLP that firm's independence from management and the Company. The
Audit Committee has also considered whether KPMG LLP's provision of non-audit
services (such as tax-related services, due diligence procedures, and services
and advice related to acquisitions) to the Company is compatible with
maintaining the independence of KPMG LLP with respect to the Company and its
management.
Based upon the reviews, discussions and considerations referred to above,
the Audit Committee has recommended to the Board that the Company's audited
financial statements be included in the Company's Annual Report on Form 10-K for
fiscal year 2001, and that KPMG LLP be appointed as the independent auditors for
the Company for fiscal year 2002.
AUDIT COMMITTEE
HAROLD BLUMENSTEIN JAMES GROSFELD JONATHAN VANNINI
6
SECURITY OWNERSHIP
The following table sets forth certain information known to the Company
regarding the ownership of the Company's Common Stock as of the Record Date for
(i) all persons known by the Company to be beneficial owners of five percent or
more of the Company's Common Stock, (ii) each current director and nominee for
director, (iii) any other Named Officers (as said term is defined hereinafter in
"Executive Compensation - Summary of Cash and Certain Other Compensation") and
(iv) all executive officers and directors of the Company as a group. Unless
otherwise indicated, each of the shareholders has sole voting and investment
power with respect to the shares beneficially owned, subject to community
property laws where applicable, except as otherwise indicated.
NUMBER PERCENT OF TOTAL
FIVE PERCENT SHAREHOLDERS, DIRECTORS AND EXECUTIVE OFFICERS (1) OF SHARES SHARES OUTSTANDING
--------------------------------------------------------------- ----------- ------------------
Zurich Scudder Investments, Inc. (2)..................................... 3,358,300 6.03%
345 Park Avenue, 25th Floor
New York, NY 10154
Willis J. Johnson (3).................................................... 8,449,074 15.10%
James Grosfeld (4)....................................................... 3,802,000 6.83%
A. Jayson Adair (5)...................................................... 752,000 1.34%
Harold Blumenstein (6)................................................... 384,890 *
James E. Meeks (7)....................................................... 201,791 *
Marvin L. Schmidt (8).................................................... 1,017,550 1.82%
Jonathan Vannini (9)..................................................... 22,000 *
Wayne R. Hilty (10)...................................................... 27,095 *
Vincent W. Mitz (11)..................................................... 50,111 *
Paul A. Styer (12)....................................................... 236,667 *
All directors and executive officers as a group (ten persons) (3-13)..... 14,943,178 26.17%
----------------
* Represents less than 1% of the Company's outstanding Common Stock.
(1) Unless otherwise set forth, the mailing address for each of the persons
listed in this table is: c/o Copart, Inc., 5500 E. Second Street, Benicia,
California 94510.
(2) The number of shares and other information presented is as reported in a
Schedule 13F filed by Zurich Scudder Investments, Inc. with the SEC and
reflects stock held as of June 30, 2001. The Company has not attempted to
independently verify any of the information contained in the Schedule 13F.
(3) Includes 280,000 shares of Common Stock subject to options exercisable
within 60 days of the Record Date.
(4) Includes 2,000 shares of Common Stock subject to options exercisable within
60 days of the Record Date.
(5) Includes 452,000 shares of Common Stock subject to options exercisable
within 60 days of the Record Date.
(6) Includes 22,000 shares of Common Stock subject to options exercisable
within 60 days of the Record Date.
(7) Includes 197,333 shares of Common Stock subject to options exercisable
within 60 days of the Record Date.
(8) Includes 206,000 shares of Common Stock subject to options exercisable
within 60 days of the Record Date.
(9) Includes 22,000 shares of Common Stock subject to options exercisable
within 60 days of the Record Date.
(10) Includes 14,967 shares of Common Stock subject to options exercisable
within 60 days of the Record Date.
(11) Includes 47,999 shares of Common Stock subject to options exercisable
within 60 days of the Record Date.
(12) Includes 182,667 shares of Common Stock subject to options exercisable
within 60 days of the Record Date.
(13) Includes 1,426,966 shares of Common Stock subject to options exercisable
within 60 days of the Record Date.
7
SECTION 16(A) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16(a) of the Securities Exchange Act of 1934, as amended, requires
the Company's directors and officers, and persons who own more than ten percent
of a registered class of the Company's equity securities to file with the SEC
initial reports of ownership and reports of changes in ownership of Common Stock
and other equity securities of the Company. Officers, directors and greater than
ten percent shareholders are required by SEC regulations to furnish the Company
with copies of all Section 16(a) reports they file.
Based solely upon a review of the copies of such reports furnished to the
Company and written representations from such officers, directors and greater
than ten percent shareholders that no other reports were required to be made,
the Company believes that there was full compliance for the fiscal year ended
July 31, 2001 with all Section 16(a) filing requirements applicable to the
Company's officers, directors and greater-than-ten percent shareholders.
EXECUTIVE COMPENSATION
DIRECTORS' COMPENSATION
Non-employee Directors are reimbursed for expenses incurred in attending
Board and Committee meetings. During fiscal year 2001, all non-employee
Directors received quarterly compensation of $5,000.
Each non-employee Director is also eligible to receive periodic option
grants for shares of the Company's Common Stock pursuant to the automatic option
grant program in effect under the Company's 1994 Director Stock Option Plan (the
"Director Plan"). Under the terms of the Director Plan, each non-employee member
of the Company's board of directors automatically receives a nonstatutory stock
option to purchase 12,000 shares of the Common Stock of the Company upon initial
election to the board. Upon re-election to the board at the Company's annual
meeting of shareholders, each non-employee member automatically receives a
subsequent grant to purchase 6,000 additional shares of the Common Stock of the
Company. All such options under the Director Plan have an exercise price equal
to the fair market value of the Company's Common Stock on the date of grant,
vest ratably over three years, and have a five year term of exercise.
8
SUMMARY OF CASH AND CERTAIN OTHER COMPENSATION
The following table provides certain summary information concerning the
compensation earned for services rendered in all capacities to the Company and
its subsidiaries during each of the last three fiscal years, by the Company's
Chief Executive Officer and each of the Company's other four most highly
compensated executive officers. The individuals whose compensation is disclosed
in the following table are hereafter referred to as the "Named Officers".
SUMMARY COMPENSATION TABLE
LONG TERM
COMPENSATION AWARDS
---------------------------------
ANNUAL SECURITIES
COMPENSATION UNDERLYING ALL OTHER
----------------------
FISCAL SALARY BONUS OPTIONS/SARS COMPENSATION
NAME AND PRINCIPAL POSITION YEAR ($) ($) (#) ($)
------------------------- ------- --------- --------- --------------- ---------------
Willis J. Johnson.................. 2001 400,000 500,000 100,000 54,205 (1)
Chief Executive Officer 2000 350,000 150,000 -- 36,432 (2)
1999 350,000 150,000 -- 26,576 (3)
A. Jayson Adair.................... 2001 250,000 300,000 100,000 14,912 (4)
President 2000 225,000 75,000 250,000 15,317 (4)
1999 225,000 75,000 400,000 15,317 (4)
James E. Meeks..................... 2001 200,000 225,000 100,000 10,977 (4)
Executive Vice President, 2000 185,000 50,000 100,000 11,786 (4)
Chief Operating Officer 1999 185,000 50,000 -- 11,786 (4)
Paul A. Styer...................... 2001 185,000 100,000 30,000 6,000 (5)
Senior Vice President, 2000 170,000 30,000 20,000 6,000 (5)
General Counsel, Secretary 1999 170,000 30,000 -- 6,000 (5)
Wayne R. Hilty..................... 2001 175,000 100,000 30,000 4,800 (4)
Senior Vice President, 2000 164,600 30,000 20,000 3,600 (4)
Chief Financial Officer 1999 155,000 30,000 40,000 3,600 (4)
----------------
(1) Comprised of premiums paid on life insurance policies payable to
beneficiaries designated by Mr. Johnson in the amount of $28,417 and the
value to Mr. Johnson of the use of Company automobiles in the amount of
$25,788.
(2) Comprised of premiums paid on life insurance policies payable to
beneficiaries designated by Mr. Johnson in the amount of $21,132 and the
value to Mr. Johnson of the use of Company automobiles in the amount of
$15,300.
(3) Comprised of premiums paid on life insurance policies payable to
beneficiaries designated by Mr. Johnson in the amount of $11,638 and the
value to Mr. Johnson of the use of Company automobiles in the amount of
$14,938.
(4) Comprised of the value of the use of a Company automobile.
(5) Comprised of automobile expense allowances.
9
OPTION GRANTS
The following table provides information with respect to the stock option
grants made during the 2001 fiscal year under the Company's 1992 Stock Option
Plan (the "Option Plan") to the Named Officers. No stock appreciation rights
were granted to any of the Named Officers during fiscal 2001.
OPTION GRANTS IN LAST FISCAL YEAR
INDIVIDUAL GRANTS
----------------------------------------------------- POTENTIAL REALIZABLE
NUMBER OF % OF TOTAL VALUE AT ASSUMED
SECURITIES OPTIONS ANNUAL RATES OF STOCK
UNDERLYING GRANTED TO EXERCISE PRICE APPRECIATION
OPTIONS EMPLOYEES IN PRICE EXPIRATION OVER OPTION TERM
-----------------------
NAME GRANTED (#)(1) FISCAL YEAR (2)($/SHARE) (3) DATE 5% ($)(4) 10% ($)(4)
------ -------------- ------------- ----------- --------- ---------- -----------
Willis J. Johnson.......... 100,000 10.70 25.40 6/6/11 1,597,392 4,048,106
A. Jayson Adair............ 100,000 10.70 25.40 6/6/11 1,597,392 4,048,106
James E. Meeks............. 100,000 10.70 25.40 6/6/11 1,597,392 4,048,106
Paul A. Styer.............. 30,000 3.21 25.40 6/6/11 479,218 1,214,432
Wayne R. Hilty............. 30,000 3.21 25.40 6/6/11 479,218 1,214,432
----------------
(1) Each option was granted under the Option Plan and will become
exercisable for the option shares in installments over the optionee's
period of service with the Company. Options vest over a five-year period at
a rate of 20% per year. Each option has a maximum term of ten years,
subject to earlier termination in the event of the optionee's cessation of
employment with the Company.
(2) Based upon options to purchase an aggregate of 935,000 shares granted
by the Company to employees and directors during fiscal year 2001.
(3) The exercise price may be paid in cash, in shares of the Company's
Common Stock valued at fair market value on the exercise date or through a
cashless exercise procedure involving a same-day sale of the purchased
shares. The exercise price of all option grants was determined by the fair
market value of the Company's common stock as quoted on the Nasdaq National
Market System on the date of grant.
(4) The 5% and 10% assumed annual rates of compounded stock price
appreciation are mandated by the rules of the Securities Exchange
Commission and do not represent the Company's estimate or projection of
future Common Stock prices. There is no assurance provided to any executive
officer or any other holder of the Company's Common Stock that the actual
stock price appreciation over the option term will be at the assumed 5% or
10% levels or at any other specific level. Assuming the specified rates of
annual compounding, the total appreciation during the term of such options
results in an increase of 62.9% (at 5% per year) and 159.4% (at 10% per
year).
10
OPTION EXERCISE AND YEAR-END HOLDINGS
The following table sets forth information concerning exercises of options
during fiscal year 2001 and the value of unexercised options held as of the end
of the 2001 fiscal year by the Named Officers.
AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR AND
FISCAL YEAR-END OPTION VALUES
NUMBER OF SECURITIES VALUE OF UNEXERCISED
SHARES VALUE UNDERLYING UNEXERCISED IN-THE-MONEY
ACQUIRED ON REALIZED OPTIONS AT FISCAL YEAR END OPTIONS AT FISCAL YEAR-END (2)
-------------------------- ----------------------------------
NAME EXERCISE (#) ($)(1) EXERCISABLE UNEXERCISABLE EXERCISABLE ($) UNEXERCISABLE ($)
------ ----------- ----------- ----------- ------------- --------------- -----------------
Willis J. Johnson....... -- -- 253,333 246,667 6,082,525 3,819,475
A. Jayson Adair......... 328,000 5,505,000 395,334 556,666 8,205,319 8,536,861
James E. Meeks.......... -- -- 182,667 217,333 4,156,191 2,211,409
Paul A. Styer........... 54,000 1,018,750 176,000 74,000 4,256,261 964,879
Wayne R. Hilty.......... 45,700 793,096 8,300 76,000 130,766 971,739
----------------
(1) Represents the fair market value of underlying securities on the date
of exercise, minus the exercise price.
(2) Represents the fair market value of underlying securities at fiscal
year end (for in-the-money options only) minus the exercise price. The
closing price for the Company's Common Stock at fiscal year end as quoted
on the Nasdaq National Market System was $28.38.
COMPENSATION COMMITTEE REPORT ON EXECUTIVE COMPENSATION
The Compensation Committee of the Board of Directors has general
responsibility for establishing the compensation payable to the Company's
executive officers and other key executives. The Company's Stock Option Plan
Committee has the sole and exclusive authority to administer the Company's 1992
Stock Option Plan under which grants may be made to such individuals. While the
Compensation Committee has responsibility for establishing the level of
compensation payable to the Company's executive officers, the decisions reached
by the Committee with respect to the compensation paid to them for the 2001
fiscal year were to a substantial extent similar to the terms and requirements
of employment agreements that have since terminated.
This report is divided into two parts. Part One is a brief description of
the compensation arrangements in effect for the 2001 fiscal year for the
Executive Officers of the Company, including the Named Officers in the Summary
Compensation Table. Part Two is a discussion of the factors, which governed the
compensation payable to the Chief Executive Officer for the 2001 fiscal year.
PART ONE - EXISTING COMPENSATION ARRANGEMENTS
The compensation arrangements for fiscal 2001 with the Company's executive
officers were negotiated directly between the Company and such individuals. The
Compensation Committee believes that the current salaries and benefits of the
Company's executive officers are commensurate with the Company's financial
performance to date. During fiscal 1998, the prior employment agreement between
the Company and the Chief Executive Officer expired and he is now employed on an
"at-will" basis. The base annual salaries of Willis J. Johnson, A. Jayson Adair,
James E. Meeks, Paul A. Styer, and Wayne R. Hilty were set at $400,000,
$250,000, $200,000, $185,000, and $175,000, respectively, during fiscal year
2001. The Compensation Committee intends to review these salary levels on a
regular basis and to make such adjustments to them as it sees fit based on the
performance of the Company and the employee.
The Stock Option Committee awarded stock options to executive officers in
order to more closely align the long-term interests of the executive officers
with those of the Company's shareholders. The Committee awarded stock option
grants to the Named Officers and other key management employees as specified in
the Option Grant table based upon the improved financial performance of the
Company.
11
PART TWO - COMPENSATION OF CHIEF EXECUTIVE OFFICER
Willis J. Johnson, the co-founder of the Company, served as President and
Chief Executive Officer from 1986 until May 1995, and has served as CEO since
May 1995. Mr. Johnson's current base annual salary is $400,000 for fiscal year
2002. Mr. Johnson is also entitled to participate in the Company's benefit plans
and is entitled to four weeks paid vacation per year, use of Company
automobiles, and a $1 million life insurance policy with the beneficiary being
designated by Mr. Johnson.
The Compensation Committee believes that the salary and benefits paid to
Mr. Johnson during fiscal 2001 are commensurate with the Company's financial
performance, based upon the growth of the Company's operating profit and net
income. The Compensation Committee expects that any bonus compensation
recommended to be payable to Mr. Johnson in future years will also be based upon
the Company's growth and financial performance, and subject to approval by the
Board of Directors, excluding Mr. Johnson.
TAX LIMITATION. As a result of federal tax legislation, a publicly-held
company such as the Company will not be allowed a federal income tax deduction
for compensation paid to certain executive officers, to the extent that
compensation exceeds $1 million per officer in any fiscal year. The Company
presently intends to structure its future compensation packages in a manner
which takes into account this $1 million compensation cap.
COMPENSATION COMMITTEE
WILLIS J. JOHNSON JAMES GROSFELD JONATHAN VANNINI
STOCK OPTION GRANT COMMITTEE
WILLIS J. JOHNSON JAMES GROSFELD JONATHAN VANNINI
12
PERFORMANCE GRAPH
The following graph shows a comparison of the cumulative total shareholder
returns for the Company, the NASDAQ Stock Market - US Companies Index and
Nasdaq, American Stock Exchange, and New York Stock Exchange SIC Peer Group
5010-5019 Index (Motor Vehicle and Automotive Equipment) for the period of
August 1, 1996 through July 31, 2001.
COMPARISON OF 5 YEAR CUMULATIVE TOTAL RETURN (*)
AMONG COPART, INC., THE NASDAQ STOCK MARKET - U.S. COMPANIES INDEX AND
NASDAQ, AMERICAN STOCK EXCHANGE AND NEW YORK STOCK
EXCHANGE SIC PEER GROUP 5110-5019 INDEX
[PERFORMANCE GRAPH]
7/1996 7/1997 7/1998 7/1999 7/2000 7/2001
------------ ----------- ----------- ---------- ---------- ---------
Copart, Inc. 100 111.72 133.59 300 331.25 709.5
------------ ----------- ----------- ---------- ---------- ---------
Peer Group 100 117.26 126.57 117.97 79.63 133.89
------------ ----------- ----------- ---------- ---------- ---------
NASDAQ 100 147.54 173.63 248.14 353.37 189.71
* Assumes $100 invested on 8/1/1996 in stock or index - including
reinvestment of dividends. Fiscal years ending July 31.
The Company has not declared or paid a cash dividend since becoming a
public company in 1994. The Company currently intends to retain any earnings for
use in its business and does not anticipate paying any cash dividends in the
foreseeable future.
Notwithstanding anything to the contrary set forth in any of the Company's
previous filings under the Securities Exchange Act of 1933, as amended, or the
Securities Exchange Act of 1934, as amended, which might incorporate future
filings made by the Company under those statutes, the preceding Compensation
Committee Report on Executive Compensation and Performance Graph are not
incorporated by reference into any of those previous filings; nor is such report
or graph to be incorporated by reference into any future filings which the
Company may make under those statutes.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
The members of the Company's Compensation Committee are Willis J. Johnson,
James Grosfeld and Jonathan Vannini. Except for Willis J. Johnson, who serves as
the Company's Chief Executive Officer, none of these individuals were, at any
time during the fiscal year ended July 31, 2001 or at any other time, an officer
or employee of the Company.
No executive officer of the Company serves as a member of the board of
directors or compensation committee of any entity, which has one or more
executive officers serving as a member of the Company's Board of Directors or
Compensation Committee.
13
EMPLOYMENT CONTRACTS AND TERMINATION OF EMPLOYMENT AND CHANGE-IN-CONTROL
ARRANGEMENTS
The Company currently does not have any formal employment agreements with
any of its executive officers and all are employed on an "at-will" basis.
All employees and consultants (including officers and directors) of the
Company are eligible for option grants under the Company's 1992 Stock Option
Plan and the 2001 Stock Option Plan as approved by the Company's Board. Future
benefits under the 2001 Stock Option Plan are not determinable, as grants of
options are at the discretion of the Company's Board. Pursuant to the terms of
such Option Plans and related option grant agreements, if any, in the event of
an acquisition or merger of the Company with or into another corporation or the
sale of all or substantially all of the assets of the Company, each outstanding
option and stock purchase right shall be assumed or an equivalent option or
right substituted by the successor corporation. If the successor corporation
refuses to assume the options and stock purchase rights then outstanding or to
substitute substantially equivalent options or rights, then the optionee shall
have the right to exercise the option or stock purchase right as to all the
optioned stock, including shares not otherwise vested or exercisable. In such
event, the optionee shall be notified that the option or stock purchase right is
fully exercisable for fifteen (15) days from the date of such notice and that
the option or stock purchase right shall terminate upon expiration of such
period.
In addition, in the event of a change of control in which options and stock
purchase rights are assumed by a successor corporation, pursuant to the terms of
certain option agreements under the Company's 1992 Stock Option Plan and the
2001 Stock Option Plan as previously approved by the Board, if an employee is
terminated without cause by such successor corporation within twelve months of
such change of control, then such optionee shall vest in full and have the right
to exercise the option or stock purchase right as to all the optioned stock,
including shares not otherwise vested or exercisable.
CERTAIN TRANSACTIONS
The Company employs in various positions Jason Johnson, the son of the
Company's Chief Executive Officer, Bonnie Randall, the sister of the Company's
Chief Executive Officer, Diane Yassa, the daughter of the Company's Chief
Operating Officer, and Rodgar McCalmon, the son-in-law of the Company's Chief
Executive Officer. In fiscal 2001, Mr. Johnson, Mrs. Randall, Mrs. Yassa, and
Mr. McCalmon received a total of $81,308, $115,927, $135,000 and $107,396 of
cash compensation, respectively. In addition, in fiscal 2001 Mrs. Randall was
granted options to purchase 10,000 shares of the Company's Common Stock at an
exercise price of $19.56 per share. The Company believes that the terms of the
each such individual's employment, including their cash compensation and option
grants, are commensurate with other employees in comparable positions. The
exercise price of the options granted was at the fair market value of the
Company's Common Stock on the date of grant.
James E. Meeks, an executive officer of the Company, previously owned an
interest in Cas & Meeks, Inc., a private towing service, which supplied
approximately $413,100 in transport services to the Company through March 2001,
the date upon which Mr. Meeks divested himself of any interest in the Company.
The Board believes that these services were provided on terms no less favorable
to the Company than could be obtained from unaffiliated third parties.
Willis J. and Reba J. Johnson are the owners of the real property and
improvements of the Fresno, California facility and lease said premises to the
Company for current monthly lease payments of $11,897 under a lease dated August
1, 1992, which expires, with inclusion of all extension options, in July 2004,
and contains a provision whereby the Company has an option to purchase the real
property and improvements. Total payments under this lease aggregated $143,700
in fiscal 2001. The Company believes that the terms of this lease are no less
favorable to the Company than could be obtained from unaffiliated third parties.
Under the terms of a lease agreement effective July 1, 1993 between the
Schmidt Family Trust dated September 29, 1982 (the "Schmidt Trust") and the
Company, the Company leases property in the Los Angeles, California, area from
the Schmidt Trust (the "Los Angeles Lease"). The current term of the Los Angeles
Lease expires June 30, 2003, with an option to extend the lease for an
additional five-year term. Total payments under this lease aggregated $59,420 in
fiscal 2001. Marvin L. Schmidt, a director of the Company, is a beneficiary of
the Schmidt Trust.
14
CHANGES TO COMPENSATION PLANS
The Company has proposed a resolution to approve the creation of a new 2001
Stock Option Plan and to reserve 3,000,000 shares of the Company's common stock
for issuance and sale under such 2001 Stock Option Plan. (see PROPOSAL TWO
below.) Because all grants under the 2001 Stock Option Plan are to be made at
the discretion of the Board, future grants under the 2001 Stock Option Plan are
not yet determinable. Accordingly, the following table summarizes the number of
stock options granted under the Company's 1992 Stock Option Plan (which is being
replaced by the 2001 Stock Option Plan) during the last fiscal year ended July
31, 2001 to (i) the Named Officers, (ii) all current executive officers as a
group, (iii) all current directors who are not executive officers as a group,
and (iv) all employees (excluding executive officers) as a group.
NEW PLAN BENEFITS
1992 STOCK OPTION PLAN (1)
---------------------------------------------
EXERCISE PRICE NUMBER OF
NAME AND POSITION ($ PER SHARE) (2) OPTIONS GRANTED
------------------- ---------------- ----------------
Willis J. Johnson
Chief Executive Officer 25.40 100,000
A. Jayson Adair
President 25.40 100,000
James E. Meeks
Executive Vice President,
and Chief Operating Officer 25.40 100,000
Paul A. Styer
Senior Vice President,
General Counsel and Secretary 25.40 30,000
Wayne R. Hilty
Senior Vice President,
and Chief Financial Officer 25.40 30,000
Current Executive Officers, as a group 25.40 390,000
Non-Executive Officer Directors, as a group 17.875 12,000
Non-Executive Officer Employees, as a group 20.88 533,000
----------------
(1) Only employees and consultants (including officers and directors) of the
Company are eligible for option grants under the 1992 and 2001 Stock Option
Plans as approved by the Company's Board.
(2) Exercise prices for the options granted during the fiscal year ended July
31, 2001 under the 1992 Stock Option Plan are shown on a weighted-average
basis for the groups presented. Future benefits under the 2001 Stock Option
Plan are not determinable, as grants of options are at the discretion of
the Company's Board and are dependent upon the price of the Company Common
Stock in the future.
15
PROPOSAL TWO - APPROVAL OF A NEW 2001 STOCK OPTION PLAN
The Board has determined that it is in the best interests of the Company
and its shareholders to adopt the new 2001 Stock Option Plan (the "2001 Plan")
as described below. In October 2001, the Board adopted the 2001 Plan and
reserved 3,000,000 shares of the Company's Common Stock for issuance thereunder
subject to shareholder approval at the Annual Meeting. To date, no options have
been granted under the 2001 Plan. The 2001 Plan is intended to replace the
Company's current 1992 Stock Option Plan (the "1992 Plan") which is set to
expire by its terms in August 2002. As of the Record Date, the total number of
options outstanding under the 1992 Plan was 3,416,766 and 623,266 shares
remained available for future grants. Subject to shareholder approval of the
2001 Plan, the Board has approved the early termination of the Company's 1992
Plan concurrent with such shareholder approval. If shareholder approval is
received for the 2001 Plan, no new grants will be made under the Company's 1992
Plan and any shares remaining available for grant under the 1992 Plan will be
returned to the Company's authorized Common Stock.
The Board believes that the adoption of the 2001 Plan is necessary in order
for the Company to remain competitive in the marketplace and to provide equity
incentives in hiring, retaining, and motivating the most talented people as
employees of the Company. The adoption of the proposed new 2001 Plan reflects
the Company's philosophy that stock incentives can be an important and
meaningful component of employee compensation, which enables the Company to
attract the best available candidates and to retain a talented employee base.
The Board believes that the adoption of the new 2001 Plan is in the best
interests of the Company and its shareholders, and at the Annual Meeting the
Company's shareholders are being asked to approve the adoption of the 2001 Plan
and to reserve 3,000,000 shares of the Company's Common Stock for issuance and
sale under the 2001 Plan.
A description of the principal features of the 2001 Plan is set forth
below:
DESCRIPTION OF THE 2001 STOCK OPTION PLAN
GENERAL. The purpose of the 2001 Plan is to attract and retain the best
available personnel for positions of substantial responsibility with the
Company, to provide additional incentive to the employees and consultants of the
Company and its subsidiaries and to promote the success of the Company's
business. Options granted under the 2001 Plan may be either incentive stock
options or nonstatutory stock options. Stock purchase rights may also be granted
under the 2001 Plan.
ADMINISTRATION. The 2001 Plan may generally be administered by the Board or
a Committee appointed by the Board (as applicable, the "Administrator"). The
Administrator may make any determinations deemed necessary or advisable for the
Plan.
ELIGIBILITY. Nonstatutory stock options and stock purchase rights may be
granted under the 2001 Plan to employees, directors and consultants of the
Company and any parent or subsidiary of the Company. Incentive stock options, as
defined in Section 422 of the Internal Revenue Code, as amended (the "Code") may
be granted only to employees. The Administrator, in its discretion, selects the
employees, directors and consultants to whom options and/or stock purchase
rights may be granted, the time or times at which such options and stock
purchase rights shall be granted, and the exercise price and number of shares
subject to each such grant.
LIMITATIONS. Section 162(m) of the Code places limits on the deductibility
for federal income tax purposes of compensation paid to certain executive
officers of the Company. In order to help preserve the Company's ability to
deduct the compensation income associated with options granted to such persons,
the 2001 Plan provides that no employee may be granted, in any fiscal year of
the Company, options and stock purchase rights to purchase more than 250,000
shares of Common Stock. Notwithstanding this limit, however, in connection with
such individual's initial employment with the Company, he or she may be granted
options and stock purchase rights to purchase up to an additional 250,000 shares
of Common Stock under the 2001 Plan.
TERMS AND CONDITIONS OF OPTIONS. Each option is evidenced by a stock option
agreement between the Company and the optionee, and is subject to the following
terms and conditions:
(a) EXERCISE PRICE. The Administrator determines the exercise price of
options at the time the options are granted. The exercise price of an incentive
stock option may not be less than 100% of the fair market value of the Common
Stock on the date such option is granted; provided, however, that the exercise
price of an incentive stock
16
option granted to a 10% shareholder may not be less than 110% of the fair market
value on the date such option is granted. The fair market value of the Common
Stock is generally determined with reference to the closing sale price for the
Common Stock (or the closing bid if no sales were reported) on the last market
trading day prior to the date the option is granted.
(b) EXERCISE OF OPTION; FORM OF CONSIDERATION. The Administrator
determines when options become exercisable, and may in its discretion,
accelerate the vesting of any outstanding option. The means of payment for
shares issued upon exercise of an option is specified in each option agreement.
The 2001 Plan permits payment to be made by cash, check, promissory note, other
shares of Common Stock of the Company (with some restrictions), cashless
exercises, any other form of consideration permitted by applicable law, or any
combination thereof.
(c) TERM OF OPTION. The term of an incentive stock option may be no
more than ten (10) years from the date of grant; provided, however, that in the
case of an incentive stock option granted to a 10% shareholder, the term of the
option may be no more than five (5) years from the date of grant. No option may
be exercised after the expiration of its term.
(d) TERMINATION OF SERVICE. If an optionee's service relationship
terminates for any reason (excluding death or disability), then the optionee
generally may exercise the option within three months of such termination to the
extent that the option is vested on the date of termination, (but in no event
later than the expiration of the term of such option as set forth in the option
agreement). If an optionee's service relationship terminates due to the
optionee's disability, the optionee generally may exercise the option, to the
extent the option was vested on the date of termination, within six months from
the date of such termination. If an optionee's service relationship terminates
due to the optionee's death, the optionee's estate or the person who acquires
the right to exercise the option by bequest or inheritance generally may
exercise the option, as to all of the shares subject to the option (including
unvested shares), within six months from the date of such termination.
(e) NONTRANSFERABILITY OF OPTIONS. Unless otherwise determined by the
Administrator, options granted under the 2001 Plan are not transferable other
than by will or the laws of descent and distribution, and may be exercised
during the optionee's lifetime only by the optionee.
(f) OTHER PROVISIONS. The stock option agreement may contain other
terms, provisions and conditions not inconsistent with the 2001 Plan as may be
determined by the Administrator.
STOCK PURCHASE RIGHTS. In the case of stock purchase rights, unless the
Administrator determines otherwise, the restricted stock purchase agreement
shall grant the Company a repurchase option exercisable upon the voluntary or
involuntary termination of the purchaser's employment with the Company for any
reason (including death or disability). The purchase price for shares
repurchased pursuant to the restricted stock purchase agreement shall be the
original price paid by the purchaser and may be paid by cancellation of any
indebtedness of the purchaser to the Company. The repurchase option shall lapse
at a rate determined by the Administrator.
ADJUSTMENTS UPON CHANGES IN CAPITALIZATION; DISSOLUTION; MERGER; CHANGE OF
CONTROL. In the event that the stock of the Company changes by reason of any
stock split, reverse stock split, stock dividend, combination, reclassification
or other similar change in the capital structure of the Company effected without
the receipt of consideration, appropriate adjustments shall be made in the
number and class of shares of stock subject to the 2001 Plan, the number and
class of shares of stock subject to any option or stock purchase right
outstanding under the 2001 Plan, and the exercise price of any such outstanding
option or stock purchase right.
In the event of a liquidation or dissolution, any unexercised options or
stock purchase rights will terminate. The Administrator may, in its sole
discretion, provide that each optionee shall have the right to exercise all or
any part of the option or stock purchase right, including shares as to which the
option or stock purchase right would not otherwise be exercisable.
In connection with any acquisition or merger of the Company with or into
another corporation or the sale of all or substantially all of the assets of the
Company, each outstanding option and stock purchase right under the 2001 Plan
shall be assumed or an equivalent option or right substituted by the successor
corporation. If the successor corporation refuses to assume the options and
stock purchase rights then outstanding or to substitute substantially equivalent
options or rights, the optionee shall have the right to exercise the option or
stock purchase right as to all the optioned stock, including shares not
otherwise vested or exercisable. In such event, the
17
Administrator shall notify the optionee that the option or stock purchase right
is fully exercisable for fifteen (15) days from the date of such notice and that
the option or stock purchase right shall terminate upon expiration of such
period.
AMENDMENT AND TERMINATION OF THE 2001 PLAN. The Board may amend, alter,
suspend or terminate the 2001 Plan, or any part thereof, at any time and for any
reason. However, the Company shall obtain shareholder approval for any amendment
to the 2001 Plan to the extent necessary and desirable to comply with applicable
law. No such action by the Board or shareholders may alter or impair any option
or stock purchase right previously granted under the 2001 Plan without the
written consent of the optionee. Unless terminated earlier, the 2001 Plan shall
terminate ten years from the date the 2001 Plan was adopted by the Board.
FEDERAL INCOME TAX CONSEQUENCES UNDER THE 2001 PLAN
INCENTIVE STOCK OPTIONS. An optionee who is granted an incentive stock
option as defined in Section 422 of the Code does not recognize taxable income
at the time the option is granted or upon its exercise, although the exercise is
an adjustment item for alternative minimum tax purposes and may subject the
optionee to the alternative minimum tax. Upon a disposition of the shares which
occurs more than two years after grant of the option and one year after exercise
of the option, any gain or loss is treated as long-term capital gain or loss.
Capital losses are allowed in full against capital gains and up to $3,000
against other income. If these holding periods are not satisfied at the time of
the disposition of the shares, the optionee recognizes ordinary income at the
time of disposition equal to the difference between the exercise price and the
lower of (i) the fair market value of the shares at the date of the option
exercise or (ii) the sales price of the shares. Any gain or loss recognized on
such a premature disposition of the shares in excess of the amount treated as
ordinary income is treated as long-term or short-term capital gain or loss,
depending on the holding period. A different rule for measuring ordinary income
upon such a premature disposition may apply if the optionee is also an officer,
director, or 10% shareholder of the Company. Unless limited by Section 162(m) of
the Code, the Company is entitled to a deduction in the same amount as the
ordinary income recognized by the optionee.
NONSTATUTORY STOCK OPTIONS. An optionee does not recognize any taxable
income at the time he or she is granted a nonstatutory stock option. Upon
exercise, the optionee recognizes taxable income generally measured by the
excess of the then fair market value of the shares over the exercise price. Any
taxable income recognized in connection with an option exercise by an employee
of the Company is subject to tax withholding by the Company. Unless limited by
Section 162(m) of the Code, the Company is entitled to a deduction in the same
amount as the ordinary income recognized by the optionee. Upon a disposition of
such shares by the optionee, any difference between the sale price and the
optionee's exercise price, to the extent not recognized as taxable income as
provided above, is treated as long-term or short-term capital gain or loss,
depending on the holding period. Capital losses are allowed in full against
capital gains and up to $3,000 against other income.
STOCK PURCHASE RIGHTS. Stock purchase rights will generally be taxed in the
same manner as nonstatutory stock options. However, shares of stock which are
still restricted are subject to a "substantial risk of forfeiture" within the
meaning of Section 83 of the Code, as the Company may repurchase the stock when
the purchaser ceases to provide services to the Company. Because of this
"substantial risk of forfeiture," the purchaser will not recognize ordinary
income at the time of purchase, but instead, the purchaser will recognize
ordinary income on the dates when such stock is no longer subject to a
substantial risk of forfeiture (i.e., when the Company's right of repurchase
lapses). The purchaser's ordinary income is measured as the difference between
the purchase price and the fair market value of the stock on the date the stock
is no longer subject to right of repurchase.
The purchaser may accelerate his or her recognition of ordinary income, if
any, to the date of the purchase of such shares and begin his or her capital
gains holding period by timely filing (i.e., within thirty days of purchase) an
election under Section 83(b) of the Code. In such event, the ordinary income
recognized, if any, is measured as the difference between the purchase price and
the fair market value of the stock on the date of purchase, and the capital gain
holding period commences on such date. The ordinary income recognized by a
purchaser who is an employee will be subject to tax withholding by the Company.
Different rules may apply if the purchaser is also an officer, director, or 10%
shareholder of the Company.
18
THE FOREGOING IS ONLY A SUMMARY OF THE EFFECT OF FEDERAL INCOME TAXATION
UPON OPTIONEES AND THE COMPANY WITH RESPECT TO THE GRANT AND EXERCISE OF OPTIONS
UNDER THE 2001 PLAN. IT DOES NOT PURPORT TO BE COMPLETE, AND DOES NOT DISCUSS
THE TAX CONSEQUENCES OF THE OPTIONEE'S DEATH OR THE PROVISIONS OF THE INCOME TAX
LAWS OF ANY MUNICIPALITY, STATE OR FOREIGN COUNTRY IN WHICH AN OPTIONEE MAY
RESIDE.
VOTE REQUIRED
Approval of the adoption of the 2001 Stock Option Plan and the reservation
of 3,000,000 shares of the Company's Common Stock for the issuance and sale
under the 2001 Stock Option Plan requires the affirmative vote of the holders of
a majority of the shares present at the Annual Meeting in person or by proxy and
entitled to vote as of the Record Date.
RECOMMENDATION OF THE BOARD OF DIRECTORS
THE BOARD OF DIRECTORS RECOMMENDS THAT SHAREHOLDERS VOTE FOR THE ADOPTION
OF THE 2001 STOCK OPTION PLAN AND THE RESERVATION OF 3,000,000 SHARES OF THE
COMPANY'S COMMON STOCK FOR ISSUANCE AND SALE UNDER THE PLAN.
19
PROPOSAL THREE - RATIFICATION OF INDEPENDENT AUDITORS
The Board has appointed KPMG LLP as the Company's independent auditors, to
audit the financial statements of the Company for the current fiscal year ending
July 31, 2002. The Company is asking the shareholders to ratify the selection of
KPMG LLP as the Company's independent auditors.
KPMG LLP have been the Company's independent auditors since their
appointment in July 1994. A representative of KPMG LLP is expected to be present
at the Annual Meeting, will have the opportunity to make a statement if he or
she desires to do so, and will be available to respond to appropriate questions.
FEES BILLED TO THE COMPANY BY KPMG LLP DURING FISCAL YEAR 2001
AUDIT FEES:
Audit fees billed to the Company by KPMG LLP during the Company's fiscal
year 2001 for the review of the Company's annual financial statements and those
financial statements included in the Company's quarterly reports filed on Form
10-Q totaled approximately $198,000.
FINANCIAL INFORMATION SYSTEMS DESIGN AND IMPLEMENTATION FEES:
The Company did not engage KPMG LLP to provide any advice to the Company
regarding financial information systems design and implementation during fiscal
year 2001.
ALL OTHER FEES:
Fees billed to the Company by KPMG LLP during the Company's fiscal year
2001 for all other non-audit related services rendered to the Company, including
tax related services, totaled approximately $172,800.
VOTE REQUIRED
Ratification of the appointment of KPMG LLP requires the affirmative vote
of a majority of the shares present at the Annual Meeting in person or by proxy
and entitled to vote as of the Record Date. In the event the shareholders fail
to ratify the appointment of KPMG LLP, the Board will reconsider its selection.
Even if the selection of independent auditors is ratified by the Company's
shareholders, the Board may, in its discretion, direct the appointment of a
different independent accounting firm at any time during the year if the Board
feels that such a change would be in the best interests of the Company and its
shareholders.
RECOMMENDATION OF THE BOARD OF DIRECTORS
THE BOARD OF DIRECTORS RECOMMENDS THAT THE SHAREHOLDERS VOTE FOR THE
RATIFICATION OF THE SELECTION OF KPMG LLP TO SERVE AS THE COMPANY'S INDEPENDENT
AUDITORS FOR THE CURRENT FISCAL YEAR ENDING JULY 31, 2002.
OTHER MATTERS
The Company knows of no other matters to be submitted to the meeting. If
any other matters properly come before the meeting, it is the intention of the
persons named in the enclosed form of Proxy to vote the shares they represent as
the Board of Directors may recommend. Discretionary authority with respect to
such other matters is granted by the execution of the enclosed Proxy.
For the Board of Directors
COPART, INC.
/s/ Paul A. Styer
-------------------------
Paul A. Styer, SECRETARY
DATED: OCTOBER 19, 2001
20
APPENDIX
COPART, INC.
CHARTER FOR THE AUDIT COMMITTEE
OF THE BOARD OF DIRECTORS
(AS AMENDED MAY 30, 2000)
I. AUDIT COMMITTEE PURPOSE
The Audit Committee is appointed by the Board of Directors to assist the
Board in fulfilling its oversight responsibilities. The Audit Committee's
primary duties and responsibilities are to:
o Monitor the integrity of the Company's financial reporting process and
systems of internal controls regarding finance, accounting, and legal
compliance.
o Monitor the independence and performance of the Company's independent
auditors and internal auditing department.
o Provide an avenue of communication among the independent auditors,
management, the internal auditing department, and the Board of
Directors.
The Audit Committee has the authority to conduct any investigation
appropriate to fulfilling its responsibilities, and it has direct access to
the independent auditors as well as anyone in the organization. The Audit
Committee has the ability to retain, at the Company's expense, special
legal, accounting, or other consultants or experts it deems necessary in
the performance of its duties.
II. AUDIT COMMITTEE COMPOSITION AND MEETINGS
Audit Committee members shall meet the requirements of the NASDAQ Exchange.
The Audit Committee shall be comprised of three or more directors as
determined by the Board, each of whom shall be independent nonexecutive
directors, free from any relationship that would interfere with the
exercise of his or her independent judgment. All members of the Committee
shall have a basic understanding of finance and accounting and be able to
read and understand fundamental financial statements, and at least one
member of the Committee shall have accounting or related financial
management expertise.
Audit Committee members shall be appointed by the Board on recommendation
of the Nominating Committee. If an audit committee Chair is not designated
or present, the members of the Committee may designate a Chair by majority
vote of the Committee membership.
The Committee shall meet at least four times annually, or more frequently
as circumstances dictate. The Audit Committee Chair shall prepare and/or
approve an agenda in advance of each meeting. The Committee should meet
privately in executive session at least annually with management, the
director of the internal auditing department, the independent auditors, and
as a committee to discuss any matters that the Committee or each of these
groups believe should be discussed. In addition, the Committee, or at least
its Chair, should communicate with management and the independent auditors
quarterly to review the Company's financial statements and significant
findings based upon the auditors limited review procedures.
III. AUDIT COMMITTEE RESPONSIBILITIES AND DUTIES
REVIEW PROCEDURES
1. Review and reassess the adequacy of this Charter at least annually.
Submit the charter to the Board of Directors for approval and have the
document published at least every three years in accordance with SEC
regulations.
2. Review the Company's annual audited financial statements prior to
filing or distribution. Review should include discussion with
management and independent auditors of significant issues regarding
accounting principles, practices, and judgments.
3. In consultation with the management, the independent auditors, and the
internal auditors, consider the integrity of the Company's financial
reporting processes and controls. Discuss significant financial risk
21
exposures and the steps management has taken to monitor, control, and
report such exposures. Review significant findings prepared by the
independent auditors and the internal auditing department together
with management's responses.
4. Review with financial management and the independent auditors the
company's quarterly financial results prior to the release of earnings
and/or the company's quarterly financial statements prior to filing or
distribution. Discuss any significant changes to the Company's
accounting principles and any items required to be communicated by the
independent auditors in accordance with SAS 61 (see item 9). The Chair
of the Committee may represent the entire Audit Committee for purposes
of this review.
INDEPENDENT AUDITORS
5. The independent auditors are ultimately accountable to the Audit
Committee and the Board of Directors. The Audit Committee shall review
the independence and performance of the auditors and annually
recommend to the Board of Directors the appointment of the independent
auditors or approve any discharge of auditors when circumstances
warrant.
6. Approve the fees and other significant compensation to be paid to the
independent auditors.
7. On an annual basis, the Committee should review and discuss with the
independent auditors all significant relationships they have with the
Company that could impair the auditors' independence.
8. Review the independent auditors audit plan - discuss scope, staffing,
locations, reliance upon management, and internal audit and general
audit approach.
9. Prior to releasing the year-end earnings, discuss the results of the
audit with the independent auditors. Discuss certain matters required
to be communicated to audit committees in accordance with AICPA SAS
61.
10. Consider the independent auditors' judgments about the quality and
appropriateness of the Company's accounting principles as applied in
its financial reporting.
INTERNAL AUDIT DEPARTMENT AND LEGAL COMPLIANCE
11. Review the budget, plan, changes in plan, activities, organizational
structure, and qualifications of the internal audit department, as
needed
12. Review the appointment, performance, and replacement of the senior
internal audit executive.
13. Review significant reports prepared by the internal audit department
together with management's response and follow-up to these reports.
14. On at least an annual basis, review with the Company's counsel, any
legal matters that could have a significant impact on the
organization's financial statements, the Company's compliance with
applicable laws and regulations, and inquiries received from
regulators or governmental agencies.
OTHER AUDIT COMMITTEE RESPONSIBILITIES
15. Annually prepare a report to shareholders as required by the
Securities and Exchange Commission. The report should be included in
the Company's annual proxy statement.
16. Perform any other activities consistent with this Charter, the
Company's by-laws, and governing law, as the Committee or the Board
deems necessary or appropriate.
17. Maintain minutes of meetings and periodically report to the Board of
Directors on significant results of the foregoing activities.
22
SITE OF THE COPART, INC. 2001 ANNUAL SHAREHOLDER MEETING
Directions to: Copart, Inc.
5500 E. Second Street
Benicia, California 94510
From: San Francisco Airport
Exit the airport on Highway 101 Northbound toward San Francisco. As you enter
San Francisco follow the signs directing you towards the Bay Bridge. This is
Interstate 80 Eastbound. Follow Interstate 80 over the Bay Bridge and continue
Eastbound on Interstate 80. When you reach the other side of the Bay Bridge stay
in the left lanes. Follow Interstate 80 approximately 15 miles to the Carquinez
Bridge. After crossing the Carquinez Bridge, exit onto Interstate 780 towards
Benicia. Follow 780 approximately 7 miles, get in the left lane and make a left
turn onto 680 Eastbound towards Sacramento. The second exit is Lake Herman Rd.
Turn left over freeway and make the first left turn onto East Second, then go to
the first building on the left at 5500 E. Second Street.
INDEX TO EXHIBITS
Exhibit
Number Exhibit Title
------- -------------
99 2001 Stock Option Plan
99.1 2001 Stock Option Plan; Stock Option Agreement
99.2 2001 Stock Option Plan; Exercise Notice
99.3 2001 Stock Option Plan; Restricted Stock Purchase Agreement
99.4 Assignment Seperate From Certificate
99.5 Joint Escrow Instructions
99.6 Election Under Section 83(b) of the Internal Revenue Code of
1986