SECURITIES
AND EXCHANGE COMMISSION
WASHINGTON,
D.C. 20549
SCHEDULE
14A
(Rule
14a-101)
INFORMATION
REQUIRED IN PROXY STATEMENT
SCHEDULE
14A INFORMATION
PROXY
STATEMENT PURSUANT TO SECTION 14(a) OF THE SECURITIES
EXCHANGE
ACT OF 1934
Filed
by
the Registrant x
Filed
by
a Party other than the Registrant o
Check
the
appropriate box:
o |
Preliminary
Proxy Statement
|
o |
Confidential,
for Use of the Commission only (as permitted by
Rule 14a-6(e)(2))
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x |
Definitive
Proxy Statement
|
o |
Definitive
Additional Materials
|
o |
Soliciting
Material Pursuant to 240.14a-12
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COPART,
INC.
|
(Name
of Registrant as Specified In Its
Charter)
|
|
(Name
of Person(s) Filing Proxy Statement, if other than the
Registrant)
|
Payment
of Filing Fee (Check the appropriate box):
o |
Fee
computed on table below per Exchange Act Rules 14a-6(i)(1) and
0-11.
|
(1) |
Title
of each class of securities to which transaction
applies:
|
(2) |
Aggregate
number of securities to which transaction
applies:
|
(3) |
Per
unit price or other underlying value of transaction computed pursuant
to
Exchange Act Rule 0-11
(set
forth the amount on which the filing fee is calculated and state
how it
was determined):
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(4) |
Proposed
maximum aggregate value of transaction:
|
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Fee
paid previously with preliminary
materials:
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Check
box if any part of the fee is offset as provided by Exchange Act
Rule 0-11(a)(2) and identify the filing for which the offsetting fee
was paid previously. Identify the previous filing by registration
statement number, or the Form or Schedule and the date of its
filing.
|
(1) |
Amount
Previously Paid:
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(2) |
Form,
Schedule or Registration Statement
No.:
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COPART,
INC.
November
27, 2006
Dear
Shareholder:
You
are
cordially invited to attend the 2006 Annual Meeting of Shareholders of Copart,
Inc. to be held on Monday, December 18, 2006 at 9:00 a.m., Pacific Standard
Time, at the Company’s corporate headquarters located at 4665 Business Center
Drive, Fairfield, CA 94534 (see directions on page 21 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
use this opportunity to take part in our affairs by voting on the business
to
come before the Annual Meeting. Whether or not you plan to attend the meeting,
please complete, sign, date and return the accompanying proxy in the enclosed
postage-paid envelope or vote electronically via the Internet or telephone.
See
“Voting Procedures” in the proxy statement for more details. Returning
the proxy or voting electronically does NOT deprive you of your right to
attend
the meeting and to vote your shares in person for the matters acted upon
at the
meeting.
We
look
forward to seeing you at the Annual Meeting
Sincerely,
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 COMPLETE,
SIGN AND DATE THE ENCLOSED PROXY CARD AND RETURN IT IN THE POSTAGE
PAID
ENVELOPE PROVIDED OR SUBMIT YOUR PROXY ELECTRONICALLY BY FOLLOWING
THE
ENCLOSED INSTRUCTIONS.
|
COPART,
INC.
NOTICE
OF ANNUAL MEETING OF SHAREHOLDERS
TO
BE HELD ON DECEMBER 18, 2006
To
the
Shareholders of Copart, Inc.:
NOTICE
IS
HEREBY GIVEN that the Annual Meeting of Shareholders of Copart, Inc. will
be
held on Monday, December 18, 2006 at 9:00 a.m., Pacific Standard Time, at
Copart’s corporate headquarters located at 4665 Business Center Drive,
Fairfield, California 94534, for the following purposes:
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1.
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To
elect seven directors for the ensuing year or until their successors
have
been duly elected and qualified;
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2.
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To
ratify the selection of Ernst & Young LLP as independent auditors for
the current fiscal year ending July 31, 2007;
and
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3.
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To
transact such other business as may properly come before the
meeting or
any adjournment(s)
thereof.
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The
Board
of Directors has fixed the close of business on November 7, 2006 as the record
date for determining shareholders entitled to notice of, and to vote at,
the
annual meeting. Only shareholders of record at the close of business on the
record date are 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. A list of shareholders entitled to vote at the meeting
will
be available for inspection at Copart’s corporate headquarters.
Please
read carefully the following proxy statement, which describes the matters
to be
voted upon at the annual meeting, and then submit your proxy according to
the
enclosed instructions 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 submitted to ensure that all your shares will be voted.
Shareholders may revoke previously delivered proxies at any time prior to
the
meeting. Any shareholder who has previously submitted a proxy may attend
the
meeting and if the shareholder so chooses, vote in person by ballot, which
will
result in the revocation of the prior proxy.
For
the Board of
Directors
COPART,
INC.
Paul
A. Styer,
Secretary
Fairfield,
California
November
27, 2006
TABLE
OF CONTENTS
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Page
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VOTING
AND SOLICITATION
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1
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General
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1
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Voting
Rights
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1
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|
Quorum
Requirement; Abstentions and Broker Non-Votes
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1
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|
Voting
Procedures
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2
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Revocability
of Proxies
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2
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Proxy
Solicitation Costs
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3
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Deadline
for Receipt of Shareholder Proposals for 2007 Annual
Meeting
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3
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Shareholders
Sharing the Same Address
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3
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PROPOSAL
ONE
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4
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General
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4
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Nominees
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4
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Vote
Required
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5
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Recommendation
of the Board of Directors
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5
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Board
Meetings and Board Committees
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6
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Director
Compensation
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7
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Compensation
Committee Interlocks and Insider Participation
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8
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PROPOSAL
TWO
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8
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General
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8
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Auditor
Fees and Services
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9
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Policy
on Audit Committee Pre-Approval of Audit and Permissible Non-Audit
Services of Independent Auditors
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9
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Vote
Required
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9
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Recommendation
of the Board of Directors
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9
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AUDIT
COMMITTEE REPORT
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10
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SECURITY
OWNERSHIP
|
11
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EQUITY
COMPENSATION PLAN INFORMATION
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13
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EXECUTIVE
COMPENSATION
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14
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Summary
Compensation Table
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14
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Option
Grants in Last Fiscal Year
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15
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Aggregated
Option Exercises In Last Fiscal Year And Fiscal Year-End Option
Values
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16
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Employment
Contracts and Change-in-Control Arrangements
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16
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COMPENSATION
COMMITTEE REPORT ON EXECUTIVE COMPENSATION
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17
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Part
One - Existing Compensation Arrangements
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17
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Part
Two - Compensation of Chief Executive Officer
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18
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PERFORMANCE
GRAPH
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19
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CERTAIN
TRANSACTIONS
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19
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SECTION
16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
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20
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OTHER
MATTERS
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20
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ADJOURNMENT
OF THE ANNUAL MEETING
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20
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ANNUAL
REPORT
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20
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Annex
A - CHARTER FOR THE COMPENSATION COMMITTEE
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A-1
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COPART,
INC.
4665
Business Center Drive
Fairfield,
California 94534
PROXY
STATEMENT
FOR
THE ANNUAL MEETING OF SHAREHOLDERS
TO
BE HELD ON DECEMBER 18, 2006
__________________________
VOTING
AND SOLICITATION
General
The
enclosed proxy is solicited on behalf of the Board of Directors of Copart,
Inc.,
a California corporation, for use at our Annual Meeting of Shareholders to
be
held on Monday, December 18, 2006. The annual meeting will be held at 9:00
a.m.,
Pacific Standard Time, at Copart’s corporate headquarters located at 4665
Business Center Drive, Fairfield, California 94534. Our telephone number
at our
headquarters is (707) 639-5000. Only shareholders of record at the close
of
business on November 7, 2006 will be entitled to notice of, and to vote at,
the
annual meeting.
We
use
several abbreviations in this proxy statement. We may refer to our company
as
“Copart” or the “Company.” The term “proxy materials” includes this proxy
statement as well as the enclosed proxy card and our 2006 Annual Report to
Shareholders. References to our “fiscal year” refer to our fiscal year beginning
on August 1 of the prior year and ending on July 31 of the year
stated.
This
proxy statement and the accompanying proxy materials were first mailed to
the
Company’s shareholders on or about November 27, 2006. Copart will pay the
cost of soliciting proxies. Proxies may be solicited on the Company’s behalf by
directors, officers or employees in person or by telephone, electronic
transmission and facsimile transmission.
On
November 7, 2006, the record date for determination of shareholders
entitled to vote at our annual meeting, there were 90,551,897 shares of Common
Stock outstanding held by approximately 1,333 shareholders of record. No
shares
of our authorized Preferred Stock were outstanding.
Voting
Rights
Each
share of our Common Stock outstanding on the record date is entitled to one
vote
on each matter submitted for shareholder approval. In addition, under California
law in connection with the election of directors, each shareholder may cumulate
such shareholder’s votes and give one candidate a number of votes equal to the
number of directors to be elected multiplied by the number of shares held
by
such shareholder as of the record date, or such shareholder may distribute
such
number of votes on the same principle among as many candidates as the
shareholder thinks fit. Votes cannot be cast for more than the number of
candidates to be elected. No shareholder will 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 has given notice at the meeting prior to the
commencement of voting of the shareholder’s intention to cumulate votes. If any
one shareholder has given such notice, all shareholders may cumulate their
votes
for candidates in nomination.
Quorum
Requirement; Abstentions and Broker Non-Votes
A
quorum
comprising the holders of a majority of our outstanding shares of Common
Stock
on the record date must be present or represented for the transaction of
business at the annual meeting. Your shares will be counted as being present
at
the meeting if you appear in person or if you submit your proxy either by
Internet, telephone, or by a properly executed proxy card.
If
your
shares are held in a brokerage account or by another nominee, you are considered
the “beneficial owner” of shares held in “street name,” and these proxy
materials are being forwarded to you by your broker or nominee (the “record
holder”) along with a voting instruction card. As the beneficial owner, you have
the right to direct your record holder how to vote your shares, and the record
holder is required to vote your shares according to your instructions. If
you do
not give instructions to your record holder, the record holder will be entitled
to vote the shares in its discretion on Proposal One (Election of Directors)
and
Proposal Two (Ratification of Appointment of Independent Auditors).
If
you
abstain from voting or if a record holder does not vote the shares you own
beneficially (known as a “broker non-vote”), either because it lacks the
discretionary authority to do so or for any other reason, your shares will
be
included in the number of shares represented for purposes of determining
whether
a quorum is present. Abstentions and broker non-votes will not be counted
for
purposes of determining the number of votes cast regarding any particular
proposal, however. Abstentions and broker non-votes can have the effect of
preventing approval of a proposal where the number of affirmative votes,
though
a majority of the votes cast, does not constitute a majority of the required
quorum. For example, if the number of abstentions or broker non-votes resulted
in the votes “FOR” a proposal not equaling at least a majority of the quorum
required for the meeting, the proposal would not be approved. This will be
the
case even though the number of votes “FOR” the proposal exceeded the number of
votes “AGAINST” the proposal. Abstentions and broker non-votes are not counted
in the election of directors. The seven nominees receiving the highest number
of
affirmative votes will be elected as directors.
Votes
will be tabulated by an inspector of election appointed for the meeting,
who
will separately tabulate affirmative and negative votes, abstentions, and
broker
non-votes.
Voting
Procedures
General.
Your
shares will be voted in accordance with the instructions you indicate when
you
submit your proxy. If you submit a proxy, but do not indicate your voting
instructions, your shares will be voted as follows:
· |
FOR
the election of the director nominees listed in this proxy
statement;
|
· |
FOR
the ratification of our selection of Ernst & Young LLP as independent
auditors for the fiscal year ending July 31, 2007;
and
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· |
At
the discretion of the proxy holders, upon such other business as
may
properly come before the annual meeting or any adjournment or postponement
thereof.
|
Voting
by Mail.
By
signing and returning the enclosed proxy card according to the instructions
provided, you are enabling the individuals named on the proxy card, known
as
“proxies,” to vote your shares at the meeting in the manner you indicate. We
encourage you to sign and return the proxy card even if you plan to attend
the
meeting. In this way your shares will be voted even if you are unable to
attend
the meeting.
Voting
by Telephone or Internet.
Instructions for voting by telephone and over the Internet are included with
these proxy materials. If you vote by telephone or over the Internet, you
do not
need to complete and mail your proxy card.
Voting
in Person at the Meeting.
If you
plan to attend the annual meeting and vote in person, we will provide you
with a
ballot at the meeting. If your shares are registered directly in your name,
you
are considered the shareholder of record, and you have the right to vote
in
person at the meeting. If your shares are held in the name of your broker
or
other nominee, you are considered the beneficial owner of shares held in
your
name. In that case, and if you wish to vote at the meeting, you will need
to
bring with you to the meeting a legal proxy from your broker or other nominee
authorizing you to vote these shares.
Revocability
of Proxies
You
may
revoke your proxy at any time before it is voted at the annual meeting. In
order
to revoke your proxy, you may either:
· |
Submit
another proxy bearing a later date;
|
· |
Provide
written notice of the revocation to our Secretary, Paul A. Styer,
c/o
Copart, Inc., 4665 Business Center Drive, Fairfield, California 94534
prior to the time we take the vote at the annual meeting;
or
|
· |
Attend
the meeting and vote in person.
|
Proxy
Solicitation Costs
We
will
bear the entire cost of solicitation, including the preparation, assembly,
printing and mailing of proxy materials. In addition, we may reimburse brokerage
firms and other custodians for their reasonable out-of-pocket costs in
forwarding these proxy materials to you. The original solicitation of proxies
by
mail may be supplemented by solicitation by telephone, telegram, facsimile
or
other means by directors, officers, or employees of Copart. No additional
compensation will be paid to these individuals for any such services.
Deadline
for Receipt of Shareholder Proposals for 2007 Annual
Meeting
Requirements
for Shareholder Proposals to be Considered for Inclusion in Copart’s Proxy
Materials.
Shareholders of Copart may submit proposals on matters appropriate for
shareholder action at annual meetings of Copart’s shareholders in accordance
with Rule 14a-8 promulgated under the Securities Exchange Act of 1934, as
amended. For such proposals to be included in Copart’s proxy materials relating
to its 2007 Annual Meeting of Shareholders, all applicable requirements under
Rule 14a-8 must be satisfied and such proposals must be received by Copart
no
later than July 11, 2007. Such proposals should be delivered to Copart, Inc.,
Attn:
Paul A.
Styer, Secretary, 4665 Business Center Drive, Fairfield, California 94534.
The
submission of a shareholder proposal does not guarantee that it will be included
in Copart’s proxy statement or proxy.
Requirements
for Shareholder Proposals to be Brought Before the Annual
Meeting.
Copart’s
bylaws establish an advance notice procedure for shareholders who wish to
present certain matters before an annual meeting of shareholders where the
proposal is not intended to be included in the proxy statement relating to
that
meeting. For shareholder nominations to the Board of Directors or other
proposals to be considered at an annual meeting, the shareholder must have
given
timely notice thereof in writing to the Secretary of Copart (at the address
noted above) such that the shareholder notice has been received by Copart
not
less than ninety (90) nor more than one hundred twenty (120) days prior to
the anniversary of the date on which Copart first mailed its proxy materials
for
its immediately preceding annual meeting of shareholders. To be timely for
the
2007 annual meeting, a shareholder’s notice must be delivered to or mailed and
received by the Secretary at the principal executive offices of Copart between
July 11, 2007 and August 10, 2007. A shareholder’s notice to the Secretary must
set forth, with respect to each matter the shareholder proposes to bring
before
the annual meeting, the information required by Copart’s bylaws. If a
shareholder fails to comply with the advance notice provision set forth in
the
bylaws, the shareholder will not be permitted to present the proposal at
the
meeting.
In
addition, the proxy solicited by the Board of Directors for the 2007 Annual
Meeting of Shareholders will confer discretionary authority on management’s
proxy holders to vote on (i) any proposal presented by a shareholder at that
meeting for which Copart has not been provided with notice on or prior to
the
August 10, 2007 deadline and (ii) on any proposal made in accordance with
the
bylaw provisions, if the 2007 proxy statement briefly describes the matter
and
how management’s proxy holders intend to vote on it, provided that the
shareholder has not complied with the requirements of Rule 14a-4(c)(2) under
the
Securities Exchange Act of 1934.
Shareholders
Sharing the Same Address
Copart
has adopted a procedure called “householding,” which has been approved by the
Securities and Exchange Commission. Under this procedure, Copart is delivering
only one copy of the annual report and proxy statement to multiple shareholders
who share the same address and have the same last name, unless Copart has
received contrary instructions from an affected shareholder. This procedure
reduces Copart’s printing costs, mailing costs, and fees. Shareholders who
participate in householding will continue to receive separate proxy
cards.
Copart
will deliver, promptly upon written or oral request, a separate copy of the
annual report and the proxy statement to any shareholder at a shared address
to
which a single copy of either of those documents was delivered. To receive
a
separate copy of the annual report or proxy statement, you may write or call
Copart’s Investor Relations Department at 4665 Business Center Drive, Fairfield,
California 94534, telephone (707) 639-5000.
Any
shareholders of record who share the same address and currently receive multiple
copies of Copart’s annual report and proxy statement who wish to receive only
one copy of these materials per household in the future, please contact Copart’s
Investor Relations Department at the address or telephone number listed above
to
participate in the householding program.
A
number
of brokerage firms have instituted householding. If you hold your shares
in
“street name,” please contact your bank, broker, or other holder of record to
request information about householding.
PROPOSAL
ONE
ELECTION
OF DIRECTORS
General
One
of
the purposes of the annual meeting is to elect directors to hold office until
the 2007 annual meeting or until their respective successors are elected
and
have been qualified. The number of authorized directors is currently eight,
although Copart’s Board of Directors will amend our Bylaws to authorize seven
directors effective with the annual meeting. Our Nominating and Governance
Committee has nominated the seven individuals listed below for election as
directors. All of the nominees are presently directors of Copart. On October
10,
2006, Jonathan Vannini, a current director of the Company, informed the
Company’s Chief Executive Office that he would retire as a member of the Board
of Directors immediately following the 2006 annual meeting. He will continue
to
serve as a director until the annual meeting. Mr. Vannini has served as a
director since 1993, and Copart thanks him for his long-standing service
and
contribution to the Company. Each person nominated for election has agreed
to
serve if elected, and we have no reason to believe that any nominee will
be
unavailable to serve. Unless otherwise instructed, the proxy holders will
vote
all submitted proxies FOR
the
seven nominees named below. In the event that additional persons are nominated
for election as directors, the proxy holders intend to vote all proxies received
by them in such a manner (in accordance with cumulative voting) as will ensure
the election of as many of the nominees listed below as possible. In such
event,
the specific nominees to be voted for will be determined by the proxy holders.
Directors must be elected by a plurality of the votes cast at the annual
meeting. Accordingly, the seven candidates receiving the highest number of
affirmative votes of the shares entitled to vote at the annual meeting will
be
elected to our Board of Directors.
Daniel
Englander was appointed to the Board of Directors on October 10, 2006 upon
the
recommendation of the Nominating and Governance Committee following a review
of
his background and experience and a personal meeting. Mr. Englander was
brought to the attention of the Nominating and Governance Committee as a
potential candidate by Willis Johnson, the Company's Chief Executive Officer
and
Chairman of the Board.
Nominees
Set
forth
below is information regarding the Company’s nominees, all of whom are currently
directors of the Company:
Name
|
|
Age
|
|
Position(s)
with Copart
|
|
Director
Since
|
|
Willis
J. Johnson
|
|
|
59
|
|
|
Chief
Executive Officer and Chairman of the Board
|
|
|
1982
|
|
A.
Jayson Adair
|
|
|
37
|
|
|
President
and Director
|
|
|
1992
|
|
James
E. Meeks
|
|
|
57
|
|
|
Executive
Vice President, Chief Operating Officer and Director
|
|
|
1996
|
|
Harold
Blumenstein
|
|
|
68
|
|
|
Director
|
|
|
1994
|
|
James
Grosfeld
|
|
|
69
|
|
|
Director
|
|
|
1993
|
|
Steven
D. Cohan
|
|
|
45
|
|
|
Director
|
|
|
2004
|
|
Daniel
Englander
|
|
|
37
|
|
|
Director
|
|
|
2006
|
|
Willis
J. Johnson,
founder
of Copart, has served as our Chief Executive Officer since 1986 and Chairman
of
the Board since January 2004. Mr. Johnson also served as our President from
1986
until 1995. Mr. Johnson was an officer and director of U-Pull-It, Inc. (“UPI”) a
self-service auto dismantler which he co-founded, from 1982 through September
1994. Mr. Johnson sold his entire interest in UPI in September 1994. Mr.
Johnson
has over 30 years of experience in owning and operating auto dismantling
companies.
A.
Jayson Adair
has
served as our President since 1996. From 1995 until 1996, Mr. Adair served
as
our Executive Vice President. From 1990 until 1995, Mr. Adair served as our
Vice
President of Sales and Operations and from 1989 to 1990 Mr. Adair served
as our
Manager of Operations.
James
E. Meeks
has
served as our Vice President and Chief Operating Officer since 1992, when
he
joined the Company concurrent with our purchase of South Bay Salvage Pool.
Mr.
Meeks has served as Executive Vice President and director of the Company
since
1996 and as Senior Vice President since 1995. From 1986 to 1992, Mr. Meeks,
together with his family, owned and operated the South Bay Salvage Pool.
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 to 2001.
Mr.
Meeks has over 30 years of experience in the vehicle dismantling
business.
Harold
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.
James
Grosfeld
has been
a private investor at all times during the last five years. From 1993 until
1994, Mr. Grosfeld served as chairman of our Board of Directors. Mr. Grosfeld
is
also a director of BlackRock Inc., a public diversified investment management
company, Ramco-Gershenson Properties Trust and Lexington Corporate Properties
Trust.
Steven
D. Cohan has
served as the Chief Executive Officer and President of Loco Ventures, Inc.,
a
privately held manufacturer and distributor of food and beverages in Northern
California since 1999. From 1992 to 1994 he served as Vice President of Finance
and Principle Accounting Officer for Copart, Inc., and from 1994 to 1996
he
served as Copart’s Vice President of Corporate Development. He holds an M.B.A.
from the University of San Francisco and a B.A. in Economics from UCLA and
is a
Certified Public Accountant.
Daniel
Englander is
Managing Partner and Founder of Ursula Investors, founded in May 2004. From
October 1994 until January 2004, Mr. Englander was employed as an investment
banker with Allen & Company, a privately held, New York based merchant bank
serving as a Managing Director from September 2002 until his departure. He
holds
a BA from Yale University. Mr. Englander is also a director of Crème de la
Crème, a privately held, high-end child care Company based in Denver,
CO.
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.
Vote
Required
The
director nominees receiving the highest number of affirmative votes of the
holders of shares outstanding Common Stock entitled to vote and present at
the
annual meeting, either in person or by proxy, will be elected as directors
at
the annual meeting.
Recommendation
of the Board of Directors
Our
Board of Directors unanimously recommends that shareholders vote “FOR” the
election of the nominees listed above.
Board
Meetings and Board Committees
During
the fiscal year ended July 31, 2006, our Board of Directors held seven
(7) meetings.
Each of our directors attended at least 75% of the meetings held during fiscal
2006 of our board or any committee on which such director served, with the
exception of Mr. Englander due to the fact that he became a director in fiscal
2007. Copart’s directors are strongly encouraged to attend the annual meeting of
shareholders. Directors Johnson, Adair and Meeks attended the Company’s 2005
annual meeting of shareholders. During fiscal 2006, the Company maintained
standing audit, compensation and nominating and governance committees. Each
committee has a written charter approved by our Board of Directors outlining
the
principal responsibilities of the committee. The Audit Committee and Nominating
and Governance Committee charters were filed as annexes to our proxy statement
for the 2005 Annual Meeting of Shareholders. A copy of the Compensation
Committee charter is attached as Annex A to this proxy statement.
Audit
Committee
Our
Audit
Committee is primarily responsible for reviewing and approving the services
performed by our independent auditors, reviewing our financial statements,
and
reviewing reports concerning our accounting practices and systems of internal
accounting procedures and controls. The purposes of the Audit Committee are,
among other things, to:
· |
Oversee
our accounting and financial reporting processes and audits of our
financial statements;
|
· |
Assist
the board in overseeing and monitoring: (i) the integrity of our
financial
statements; (ii) our accounting policies and procedures; (iii) our
compliance with legal and regulatory requirements; (iv) our independent
auditor’s qualifications, independence, and performance; (v) our
disclosure controls and procedures; and (vi) our internal
controls;
|
· |
Provide
the board with the result of its monitoring and any recommendations
derived from such monitoring; and
|
· |
Provide
the board with additional information and materials as the Audit
Committee
may determine to be necessary to make the board aware of significant
financial matters requiring board
attention.
|
The
Audit Committee consisted at all times during fiscal 2006 of directors
Blumenstein, Grosfeld, Vannini and
Cohan. Mr. Englander was appointed a member of the Audit Committee on October
10, 2006. Copart believes that
all current members of the Audit Committee are “independent directors” as
contemplated by Rule 4200 of the Marketplace
Rules of the National Association of the Securities Dealers, Inc. Mr. Vannini
intends to step down from
the Audit Committee when his director term ends upon his resignation immediately
following the 2006 annual
meeting. The Board of Directors has designated Steven Cohan as an “audit
committee financial expert” as defined
in Item 401(h) of Regulation S-K promulgated by the Securities and Exchange
Commission. The Audit Committee
held five (5) meetings during fiscal 2006.
Compensation
Committee
Our
Compensation Committee is generally responsible for, among other things,
reviewing and approving the Company’s compensation policies, 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, and administering our equity incentive plans. The
Compensation Committee acts under a written charter adopted and approved
by our
Board of Directors. The Compensation Committee consisted at all times during
fiscal 2006 of directors Blumenstein, Grosfeld, and Vannini. Mr. Englander
was
appointed a member of the Compensation Committee on October 10, 2006. Copart
believes that all current members of the Compensation Committee are “independent
directors” as contemplated by Rule 4200 of the Marketplace Rules of the National
Association of Securities Dealers, Inc. and are “outside directors” as defined
in Section 162(m) of the Internal Revenue Code. Mr. Vannini intends to step
down
from the Compensation Committee when his director term ends upon his resignation
immediately following the 2006 annual meeting. The Compensation Committee
held
three (3) meetings during fiscal 2006.
Nominating
and Governance Committee
Copart’s
Board of Directors established the Nominating and Governance Committee in
September 2003. The purpose of the Nominating and Governance Committee is
to
ensure that our board is properly constituted to meet its fiduciary obligations
to shareholders and that Copart has and follows appropriate governance
standards. The committee is authorized to assist the board by identifying
prospective director nominees and to select the director nominees for the
next
annual meeting of shareholders and to develop and recommend to the board
governance principles applicable to Copart. The Nominating and Governance
Committee consisted at all times during fiscal 2006 of directors Blumenstein,
Grosfeld, and Vannini. Mr. Englander was appointed a member of the Nominating
and Governance Committee on October 10, 2006. Copart believes that all current
members of the Nominating and Governance Committee are “independent directors”
as contemplated by Rule 4200 of the Marketplace Rules of the National
Association of Securities Dealers, Inc. The committee held one (1) meeting
during fiscal 2006. Mr. Vannini intends to step down from the Nominating
and
Governance Committee when his director term ends upon his resignation
immediately following the 2006 annual meeting.
In
recommending candidates for election to the Board of Directors, the Nominating
and Governance Committee considers nominees recommended by directors, officers,
employees, shareholders and others, using the same criteria to evaluate all
candidates. The Nominating and Governance Committee reviews each candidate’s
qualifications, including whether a candidate possesses any of the specific
qualities and skills desirable in certain members of the Board of Directors.
Evaluations of candidates generally involve a review of the background
materials, internal discussions and interviews with selected candidates as
appropriate. Upon selection of a qualified candidate, the Nominating and
Governance Committee recommends the candidate for consideration by the full
Board of Directors. To recommend a prospective nominee for the Nominating
and
Governance Committee’s consideration, submit the candidate’s name and
qualifications to Copart’s Secretary in writing to the following address:
Copart, Inc., Attn: Paul A. Styer, Secretary, 4665 Business Center Drive,
Fairfield, CA 94534. When submitting candidates for nomination to be elected
at
the Company’s annual meeting of shareholders, shareholders must also follow the
advance notice procedures for shareholder nominees and provide the information
required by Copart’s bylaws.
Shareholder
Communications with the Board of Directors
The
Board
of Directors has approved the following procedure for shareholders to
communicate with the Company’s directors. Mail can be addressed to directors in
care of Copart, Inc., 4665 Business Center Drive, Fairfield, California 94534,
attention General Counsel. All mail received will be logged in, opened and
screened for security purposes. All mail, other than trivial or obscene items,
will be forwarded. Trivial items will be delivered to the directors at the
next
scheduled board meeting. Mail addressed to a particular director will be
forwarded or delivered to that director. Mail addressed to “Outside Directors”
or “Non-Management Directors” will be forwarded or delivered to the Chairman of
the Nominating and Governance Committee. Mail addressed to the “Board of
Directors” will be forwarded or delivered to the Chairman of the Board and Chief
Executive Officer.
Director
Compensation
Each
of
our non-employee directors, consisting of directors Blumenstein, Grosfeld,
Vannini, and Cohan received quarterly cash compensation during fiscal 2006
of
$8,000 for services as a director and member of any committees on which he
may
serve. Non-employee directors are reimbursed for expenses incurred with
attending board or committee meetings.
In
October 2005, Copart granted directors Blumenstein, Grosfeld, Vannini and
Cohan
each an option to acquire 20,000 shares of common stock under its 2001 Stock
Option Plan at an exercise price of $24.03. Each of these options vests over
two
years, with one-half of the shares vesting on the first anniversary of the
date
of grant and the balance vesting on a monthly basis over the 12 months
succeeding such first anniversary.
Compensation
Committee Interlocks and Insider Participation
Our
Compensation Committee consisted at all times during fiscal 2006 of directors
Blumenstein, Grosfeld, and Vannini. No member of the Compensation Committee
was
at any time during fiscal 2006, or at any other time, an officer or employee
of
Copart or any of its subsidiaries, and no member of the Compensation Committee
had any relationship requiring disclosure under Item 404 of
Regulation S-K (Certain Relationships and Related Transactions) promulgated
by the Securities and Exchange Commission ("SEC"). No interlocking relationship,
as described by the Securities and Exchange Commission, currently exists
or
existed during fiscal 2006 between any member of our Compensation Committee
and
any member of any other company’s board of directors or compensation
committee.
PROPOSAL
TWO
RATIFICATION
OF INDEPENDENT AUDITORS
General
On
January 30, 2006, the Audit Committee of the Board of Directors dismissed
KPMG
LLP (“KPMG”) as its independent registered public accounting firm. The Audit
Committee appointed Ernst & Young LLP as our independent registered public
accounting firm for the fiscal year ended July 31, 2006.
The
audit
reports of KPMG LLP on the consolidated financial statements of the Company
and
its subsidiaries as of and for the years ended July 31, 2005 and 2004 did
not
contain an adverse opinion or disclaimer of opinion, and were not qualified
or
modified as to uncertainty, audit scope or accounting principles. The
audit report of KPMG LLP on management’s assessment of the effectiveness of
internal control over financial reporting and the effectiveness of internal
control over financial reporting as of July 31, 2005 did not contain an adverse
opinion or disclaimer of opinion, and was not qualified or modified as to
uncertainty, audit scope or accounting principles.
During
the Company’s two most recent fiscal years ended July 31, 2004, and July 31,
2005, and through January 30, 2006, there were no disagreements with KPMG
on any
matter of accounting principles or practices, financial statement disclosure,
or
auditing scope or procedure, which disagreements, if not resolved to KPMG’s
satisfaction, would have caused KPMG to make reference thereto in its reports
on
the Company’s financial statements for such years.
During
the Company’s two most recent fiscal years ended July 31, 2004, and July 31,
2005, and through January 30, 2006, there were no reportable events (as
described in Item 304(a)(1)(v) of Regulation S-K).
On
January 27, 2006, the Audit Committee approved the engagement of Ernst &
Young LLP as the Company’s independent registered public accounting firm. During
the Company’s two most recent fiscal years ended July 31, 2004, and July 31,
2005, and through January 27, 2006, neither the Company nor anyone acting
on its
behalf consulted with Ernst & Young LLP regarding either: (i) the
application of accounting principles to a specified transaction, either
completed or proposed, or the type of audit opinion that might be rendered
on
the Company’s financial statements; or (ii) any matter that was either the
subject of a disagreement (as defined in Item 304(a)(1)(iv) of Regulation
S-K
and the related instructions) or a reportable event (as described in Item
304(a)(1)(v) of Regulation S-K). The Company has authorized KPMG to respond
fully to the inquiries of Ernst & Young LLP.
Our
Audit
Committee has appointed Ernst & Young LLP as our independent auditors to
audit our financial statements for the current fiscal year ending July 31,
2007. A representative of Ernst & Young 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.
Shareholder ratification of the selection of Ernst & Young LLP is not
required by our bylaws or otherwise. Our Audit Committee is submitting the
selection of Ernst & Young LLP to the shareholders for ratification as a
matter of good corporate practice.
In
the
event the shareholders fail to ratify the appointment of Ernst & Young LLP,
the Audit Committee will reconsider its selection. Even if the selection
of
independent auditors is ratified by our shareholders, the Audit Committee
may,
in its discretion, direct the appointment of a different independent accounting
firm at any time during the year if it feels that such a change would be
in the
best interests of Copart and its shareholders.
Auditor
Fees and Services
A
summary
of fees for professional services rendered by Ernst & Young LLP for the
fiscal year ended July 31, 2006 and by KPMG LLP for fiscal years ended July
31,
2006 and July 31, 2005 is set forth below.
Audit
Fees.
We were
billed fees for audit services totaling $1,813,800 by Ernst & Young and
$75,000 by KPMG LLP in fiscal 2006, and $1,550,096 by KPMG LLP in fiscal
2005. Audit fees consists of fees billed for professional services rendered
for
the audit of Copart’s consolidated financial statements and review of the
interim consolidated financial statements included in quarterly reports and
services that are normally provided in connection with statutory and regulatory
filings or engagements.
Audit
Related Fees.
We
were not billed fees for audit related services by Ernst & Young LLP in
fiscal 2006. We
were billed $24,000 for audit related fees by KPMG LLP in fiscal 2005.
Audit
related fees consists of fees billed
or for assurance and related services that are reasonably related to the
performance of the audit or review of Copart’s
consolidated financial statements and that are not reported under “Audit Fees.”
These services include employee
benefit plan audits, accounting consultations in connection with acquisitions,
attest services that are not required
by statute or regulation, and consultations concerning financial accounting
and
reporting standards.
Tax
Fees.We
were billed fees for tax related services totaling $26,200 by Ernst & Young
LLP in fiscal 2006. We
were billed $192,825 for tax fees by KPMG LLP in fiscal 2005. Tax fees
consist
of fees billed for professional services
for tax compliance, tax advice and tax planning. These services include
assistance regarding federal, state, and
international tax compliance, tax audit defense, customs and duties, mergers
and
acquisitions, and international
tax planning.
All
Other Fees.
Consists of fees for products and services other than the services reported
above. We did not retain Ernst & Young LLP or KPMG LLP for any other
services in fiscal 2006 or fiscal 2005.
Policy
on Audit Committee Pre-Approval of Audit and Permissible Non-Audit Services
of
Independent Auditors
The
Audit
Committee’s policy is to pre-approve all audit and permissible non-audit
services provided by the independent auditors. These services may include
audit
services, audit-related services, tax services and other services. Pre-approval
is generally provided for up to one year and any pre-approval is detailed
as to
the particular service or category of services and is generally subject to
a
specific budget. The independent auditors and management are required to
periodically report to the Audit Committee regarding the extent of services
provided by the independent auditors in accordance with this pre-approval,
and
the fees for the services performed to date. The Audit Committee may also
pre-approve particular services on a case-by-case basis.
Vote
Required
Ratification
of the appointment of Ernst & Young LLP requires the affirmative vote of a
majority of the shares present at the 2006 annual meeting, either in person
or
by proxy.
Recommendation
of the Board of Directors
Our
Board of Directors unanimously recommends that shareholders vote FOR the
ratification of the selection of Ernst & Young LLP to serve as our
independent auditors for the current fiscal year ending July 31,
2007.
AUDIT
COMMITTEE REPORT
The
following report of the Audit Committee shall not be deemed to be “soliciting
material” or to be “filed” with the Securities and Exchange Commission, nor
shall this information be incorporated by reference by any general statement
incorporating by reference this proxy into any filing under the Securities
Act
of 1933, as amended, or the Securities and Exchange Act of 1934, as amended,
except to the extent that we specifically incorporate this information by
reference in such filing.
The
Audit
Committee of our Board of Directors is comprised of the five directors named
below, none of whom are officers or employees of the Company. Our Audit
Committee believes that all of its current members are independent directors
as
defined by applicable Nasdaq Global Select Market rules and listing standards.
The Board of Directors has adopted a written charter for the Audit Committee.
The
Audit
Committee has reviewed and discussed with Copart’s management and Ernst &
Young LLP Copart’s audited consolidated financial statements and financial
reporting process. Copart’s management has the primary responsibility for the
financial statements and financial reporting processes of Copart, including
the
system of internal controls. Ernst & Young LLP, the Company’s current
independent auditors, is 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 accepted
accounting principles. The Audit Committee reviews and monitors these processes
and receives reports from Ernst & Young LLP and Company management. The
Audit Committee also discussed with Ernst & Young 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 Ernst & Young LLP those matters required to be
discussed by Statement of Auditing Standards No. 61 (“Communication With Audit
Committees”) and has also discussed with the Audit Committee that firm’s
independence from management and the Company. The Audit Committee has also
received and reviewed the written disclosures and the letter from Ernst &
Young LLP required by Independence Standard Board Standard No. 1 (Independence
Discussions with Audit Committee). The
Audit
Committee has also considered whether Ernst & Young LLP’s provision to the
Company of non-audit services (such as tax-related services, due diligence
procedures, and services and advice related to acquisitions) that are not
otherwise prohibited by applicable law is compatible with maintaining the
independence of Ernst & Young 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 of Directors that the Company’s audited
financial statements be included in our Annual Report on Form 10-K for fiscal
year 2006, and that Ernst & Young LLP be appointed as the independent
auditors for the Company for fiscal year 2007.
Respectfully
submitted by:
The
Audit Committee
of the Board of Directors
Steven
Cohan
Harold
Blumenstein
Daniel
Englander
James
Grosfeld
Jonathan
Vannini
SECURITY
OWNERSHIP
The
following table sets forth certain information known to Copart regarding
the
ownership of our Common Stock as of the record date (November 7, 2006) by
(i) all persons known by Copart to be beneficial owners of five percent or
more of our Common Stock; (ii) each current director and nominee for
director; (iii) any other Named Executive Officers (as said term is defined
hereinafter in “Executive Compensation - Summary Compensation Table”); and
(iv) all executive officers and directors of the Company as a group.
Beneficial ownership is determined based on the rules of the SEC. 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.
Five
Percent Shareholders, Directors and Executive Officers(1)
|
|
|
Number
of
Shares
Beneficially
Owned
|
|
|
Percent
of Total
Shares
Outstanding
|
|
Neuberger
Berman LLC(2)
|
|
|
9,830,937
|
|
|
10.86
|
%
|
605
Third Avenue
New
York, NY 10158
|
|
|
|
|
|
|
|
Thomas
W. Smith(3)
|
|
|
5,840,051
|
|
|
6.45
|
%
|
323
Railroad Avenue
Greenwich,
CT 06830
|
|
|
|
|
|
|
|
Wasatch
Advisors, Inc.(4)
|
|
|
6,909,771
|
|
|
7.63
|
%
|
150
Social Hall Avenue
Salt
Lake City, UT 84111
|
|
|
|
|
|
|
|
Willis
J. Johnson(5)
|
|
|
13,239,120
|
|
|
14.47
|
%
|
James
Grosfeld(6)
|
|
|
5,547,421
|
|
|
6.12
|
%
|
A.
Jayson Adair(7)
|
|
|
1,710,759
|
|
|
1.86
|
%
|
Harold
Blumenstein(8)
|
|
|
847,621
|
|
|
*
|
|
James
E. Meeks(9)
|
|
|
509,674
|
|
|
*
|
|
Jonathan
Vannini(10)
|
|
|
58,421
|
|
|
*
|
|
Vincent
W. Mitz(11)
|
|
|
188,501
|
|
|
*
|
|
David
L. Bauer(12)
|
|
|
126,782
|
|
|
*
|
|
Steven
D. Cohan(13)
|
|
|
52,427
|
|
|
*
|
|
Daniel
Englander(14)
|
|
|
70,225
|
|
|
*
|
|
All
directors and executive officers as a group (fifteen
persons)(5-14)
|
|
|
22,773,617
|
|
|
24.96
|
%
|
___________________
*
|
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., 4665 Business Center Drive, Fairfield,
California 94534.
|
(2)
|
The
number of shares and other information presented is as reported
in a
Schedule 13G filed by Neuberger
Berman LLC with
the SEC on February 16, 2006 and reflects stock held as of December
31,
2005. The Company notes that
Neuberger Berman LLC filed
a Schedule 13F with the SEC on November 6, 2006, reflecting 9,796,277
shares of Copart Common Stock held as of September 30, 2006. However,
because Schedule 13F requires the disclosure of shares pursuant
to which
an institutional investment manager exercises investment discretion
(as
contrasted with beneficial ownership), the Company has instead
included the number of shares reported in the Schedule 13G filed by
Neuberger
Berman LLC with
the SEC on February 16, 2006. The Company has not attempted to
verify
independently any of the information contained in the
Schedule 13G.
|
(3)
|
The
number of shares and other information presented is as reported
in a
Schedule 13G filed with the SEC on February 14, 2006 and reflects
stock
held as of December 31, 2005. According to this Schedule 13G
Messrs.
Thomas W. Smith has the sole power to vote or direct the vote
of 2,159,269
shares. Mr. Scott J. Vassalluzzo has sole power to vote or direct
the vote
of 80,000 shares. Messrs. Thomas W. Smith and Scott J. Vassalluzzo
have the shared power to vote or to direct the vote and the shared
power
to dispose or to direct the disposition of 3,680,782 shares.
The Company
has not attempted to verify independently any of the information
contained
in the Schedule 13G.
|
(4)
|
The
number of shares and other information presented is as reported
in a
Schedule 13G filed by Wasatch
Advisors, Inc. with
the SEC on February 16, 2006 and reflects stock held as of December
31,
2005. The Company notes that
Wasatch Advisors, Inc filed
a Schedule 13F with the SEC on November 11, 2006, reflecting 7,018,976
shares of Copart Common Stock held as of September 30, 2006. However,
because Schedule 13F requires the disclosure of shares pursuant
to which
an institutional investment manager exercises investment discretion
(as
contrasted with beneficial ownership), the Company has instead
included
the number of shares reported in the Schedule 13G filed by Wasatch
Advisors, Inc. with
the SEC on February 14, 2006. The Company has not attempted to
verify
independently any of the information contained in the
Schedule 13G.
|
(5)
|
Includes
923,334 shares of Common Stock subject to options exercisable within
60
days of the record date.
|
(6)
|
Includes
58,421 shares of Common Stock subject to options exercisable within
60
days of the record date.
|
(7)
|
Includes
1,656,666 shares of Common Stock subject to options exercisable
within 60
days of the record date.
|
(8)
|
Includes
58,421 shares of Common Stock subject to options exercisable within
60
days of the record date.
|
(9)
|
Includes
509,584 shares of Common Stock subject to options exercisable within
60
days of the record date.
|
(10)
|
Includes
58,421 shares of Common Stock subject to options exercisable within
60
days of the record date.
|
(11)
|
Includes
188,501 shares of Common Stock subject to options exercisable within
60
days of the record date.
|
(12)
|
Includes
126,418 shares of Common Stock subject to options exercisable within
60
days of the record date.
|
(13)
|
Includes
52,421 shares of Common Stock subject to options exercisable
within 60
days of the record date.
|
(14)
|
Includes
1,000 shares of Common Stock held by the Trust FBO Jules Francis
Englander, for which Mr. Englander
is a trustee; 1,000 shares of Common Stock held by the Trust
FBO Harrison
David Englander, for which
Mr. Englander is a trustee; 250 shares of Common Stock held
by the Charles
H. Englander 2004 Trust, for
which Mr. Englander is a trustee; and 60,000 shares of Common
Stock held
by Ursula Capital Partners. Ursula
Capital Partners is an investment partnership for which Mr.
Englander
serves as the sole general partner.
Mr. Englander disclaims beneficial ownership of the shares
held by Ursula
Capital Partner except to the
extent of his pecuniary interest
therein.
|
EQUITY
COMPENSATION PLAN INFORMATION
The
following table provides information as of July 31, 2006 about shares of
our Common Stock that may be issued upon the exercise of options and similar
rights under all of our existing equity compensation plans, including our
2001
Stock Option Plan, our 1994 Employee Stock Purchase Plan, the 1994 Director
Option Plan, and our 1992 Stock Option Plan. Our 1992 Stock Option Plan was
terminated in 2001, and our 1994 Director Option Plan was terminated in
August 2003. No further grants will be made under these plans although
pre-existing options remain outstanding and are subject to the terms of the
plan. All of our equity incentive plans have been approved by our shareholders.
Plan
Category
|
|
Number
of Securities to be
Issued
Upon Exercise of Outstanding Options,
Warrants
and Rights(1)
|
|
Weighted-Average
Exercise
Price of
Outstanding
Options,
Warrants
and Rights(1)
|
|
Number
of Securities
Remaining
Available for
Future
Issuance Under Equity
Compensation
Plans
(Excluding
Securities Reflected
in
the First Column)
|
|
Equity
compensation plans approved by security holders
|
|
|
5,874,286
|
(2)
|
$
|
12.79
|
|
|
2,569,860
|
|
Equity
compensation plans not approved by security holders
|
|
|
—
|
|
|
—
|
|
|
—
|
|
Total
|
|
|
5,874,286
|
|
$
|
12.79
|
|
|
2,569,860
|
|
____________________
(1)
|
We
are unable to ascertain with specificity the number of securities
to be
issued upon exercise of outstanding rights under the 1994 Employee
Stock
Purchase Plan or the weighted average exercise price of outstanding
rights
under that plan. The 1994 Employee Stock Purchase Plan provides
that
shares of our Common Stock may be purchased at a per share price
equal to
85% of the fair market value of the common stock on the beginning
of the
offering period or a purchase date applicable to such offering
period,
whichever is lower.
|
(2)
|
Reflects
the number of shares of Common Stock to be issued upon exercise
of
outstanding options under the 1992 Stock Option Plan, the 1994
Director
Option Plan, and the 2001 Stock Option
Plan.
|
(3)
|
Reflects
weighted average exercise price of outstanding options under the
1992
Stock Option Plan, the 1994 Director Option Plan, and the 2001
Stock
Option Plan.
|
(4)
|
Includes
securities available for future issuance under the 1994 Employee
Stock
Purchase Plan and the 2001 Stock Option Plan. No securities are
available
for future issuance under the 1992 Stock Option Plan and 1994 Director
Option Plan.
|
EXECUTIVE
COMPENSATION
Summary
Compensation Table
The
following table provides certain summary information concerning the compensation
earned for services rendered in all capacities to Copart and its subsidiaries
during each of the last three fiscal years, by our Chief Executive Officer
and
each of our other four most highly compensated executive officers. The
individuals whose compensation is disclosed in the following table are referred
to in this proxy statement as the “Named Executive Officers.”
|
|
|
|
Long
Term Compensation
Awards
|
|
|
|
Annual
Compensation
|
|
Securities
Underlying
|
|
All
Other
|
|
Name
and Principal Position
|
|
Fiscal
Year
|
|
Salary
($)
|
|
Bonus
($)
|
|
Options/SARs
(#)
|
|
Compensation
($)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Willis
J. Johnson
Chief
Executive Officer
|
|
|
2006
2005
2004
|
|
|
580,800
492,300
450,000
|
|
|
1,050,000
950,000
750,000
|
|
|
100,000
—
100,000
|
|
|
13,833
(1)
23,574
(1)
21,473
(1)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
A.
Jayson Adair
President
|
|
|
2006
2005
2004
|
|
|
480,800
392,308
338,500
|
|
|
800,000
700,000
500,000
|
|
|
100,000
—
200,000
|
|
|
—
—
—
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
James
E. Meeks
Executive
Vice President and
Chief
Operating Officer
|
|
|
2006
2005
2004
|
|
|
295,200
275,000
225,000
|
|
|
450,000
350,000
250,000
|
|
|
75,000
—
150,000
|
|
|
—
—
—
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
David
L. Bauer
Senior
Vice President of
Information
Technology and
Chief
Information Officer
|
|
|
2006
2005
2004
|
|
|
237,100
219,600
190,000
|
|
|
250,000
200,000
150,000
|
|
|
40,000
—
70,000
|
|
|
—
—
—
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Vincent
W. Mitz
Senior
Vice President
of
Marketing
|
|
|
2006
2005
2004
|
|
|
237,100
219,600
190,000
|
|
|
250,000
200,000
150,000
|
|
|
40,000
—
100,000
|
|
|
—
—
—
|
|
___________________
(1)
|
Comprised
of premiums paid on life insurance policies payable to beneficiaries
designated by Mr. Johnson and Mr. Johnson’s wife in the amount of $13,833,
$23,574 and $21,473 in fiscal 2006, 2005 and 2004, respectively.
These
policies were cancelled effective January 1,
2006.
|
Copart
provides its Chief Executive Officer and President limited ability to use
Copart's corporate aircraft for personal purposes, subject to the standards
and
limitations described in the Compensation Committee Report on Executive
Compensation included in this proxy statement. In addition, Copart provides
its
Chief Executive Officer, its President, and its Chief Operating Officer with
company-owned or leased automobiles that may be used for personal purposes.
Copart provides the other Named Executive Officers with a monthly car
allowance.
For
purposes of the compensation table above, consistent with SEC guidelines,
Copart
has valued these perquisites
based on their incremental cost to Copart. For purposes of valuing personal
use
of corporate aircraft, Copart
uses a method that takes into account (i) landing/parking/flight planning
services and expenses; (ii) crew travel
expenses; (iii) supplies and catering; (iv) aircraft fuel and oil expenses;
(v)
maintenance, parts and external labor;
(vi) customs, foreign permit and similar fees, if any; and (vii) passenger
ground transportation. Based on Copart’s
incremental cost analysis, the aggregate value of these perquisites received
by
the Named Executive Officers
identified in the table above did not exceed in any individual case $50,000
in
fiscal 2006, 2005, or 2004. Copart’s
proxy statement for the 2004 Annual Meeting of Shareholders disclosed the
value
of these benefits based
on Internal Revenue Service guidelines, including use of the Standard Industry
Fare Level (SIFL) for purposes
of personal aircraft use. Under the prior tax value approach, with respect
to
Mr. Johnson, the value of personal
aircraft use was $13,268, $17,820 and $31,965 in fiscal 2006, 2005 and 2004,
respectively, and the value of
personal automobile use was $12,975, $15,000 and $25,788 in fiscal 2006,
2005
and 2004, respectively. With respect
to Mr. Adair, the value of personal aircraft use was $10,596, $4,128 and
$30,875
in fiscal 2006, 2005 and 2004,
respectively, and the value of personal automobile use was $17,400, $23,760
and
$20,400 in fiscal 2006, 2005
and 2004, respectively. For the proxy statements for the 2005 and 2006 Annual
Meeting of Shareholders, Copart
has disclosed the value of these perquisites, consistent with SEC guidelines,
based on their incremental cost
to the Company.
Option
Grants in Last Fiscal Year
The
following table provides information with respect to the stock option grants
made during the 2006 fiscal year under the Company’s 2001 Stock Option Plan (the
“Option Plan”) to the Named Executive Officers. No stock appreciation rights
were granted to any of the Named Executive Officers during fiscal
2006.
|
|
Individual
Grants
|
|
Potential
Realizable Value At Assumed Annual Rates of
Stock
Price Appreciation
Over
Option Term
|
|
Name
|
|
Number
of Securities Underlying Options Granted (#)(1)
|
|
%
of Total Options
Granted
to Employees in Fiscal
Year(2)
|
|
Exercise
Price
($/Share)(3)
|
|
Expiration
Date
|
|
5%
($)(4)
|
|
10%($)(4)
|
|
Willis
J. Johnson
|
|
|
100,000
|
|
|
11.00
|
|
|
24.03
|
|
|
10/4/2015
|
|
|
1,513,144
|
|
|
3,835,706
|
|
A.
Jayson Adair
|
|
|
100,000
|
|
|
11.00
|
|
|
24.03
|
|
|
10/4/2015
|
|
|
1,513,144
|
|
|
3,835,706
|
|
James
E. Meeks
|
|
|
75,000
|
|
|
8.25
|
|
|
24.03
|
|
|
10/4/2015
|
|
|
1,134,838
|
|
|
2,867,780
|
|
David
L. Bauer
|
|
|
40,000
|
|
|
4.40
|
|
|
24.03
|
|
|
10/4/2015
|
|
|
605,258
|
|
|
1,534,283
|
|
Vincent
W. Mitz
|
|
|
40,000
|
|
|
4.40
|
|
|
24.03
|
|
|
10/4/2015
|
|
|
605,258
|
|
|
1,534,283
|
|
________________
(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 909,000 shares granted by
the
Company to employees and directors during fiscal year
2006.
|
(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 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 SEC 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).
|
Aggregated
Option Exercises In Last Fiscal Year And Fiscal Year-End Option
Values
The
following table sets forth information concerning exercises of options during
fiscal year 2006 and the value of unexercised options held as of the end
of the
2006 fiscal year by the Named Executive Officers.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Underlying
|
|
|
Value
Of Unexercised
|
|
|
|
|
|
|
|
Value
|
|
|
Unexercised
Options At
|
|
|
In-The-Money
Options At
|
|
|
|
|
Acquired
on
|
|
|
Realized
|
|
|
Fiscal
Year End
|
|
|
Fiscal
Year - End
($)(2)
|
|
|
|
|
Exercise
(#)
|
|
|
($)(1)
|
|
|
Exercisable
|
|
|
Unexercisable
|
|
|
Exercisable
|
|
|
Unexercisable
|
|
Willis
J. Johnson
|
|
$
|
—
|
|
$
|
—
|
|
|
883,334
|
|
|
166,666
|
|
$
|
17,903,440
|
|
$
|
1,395,571
|
|
A.
Jayson Adair
|
|
|
3,000
|
|
|
67,640
|
|
|
1,608,333
|
|
|
216,667
|
|
|
30,341,173
|
|
|
1,827,587
|
|
James
E. Meeks
|
|
|
—
|
|
|
—
|
|
|
456,250
|
|
|
168,750
|
|
|
6,062,612
|
|
|
1,468,500
|
|
David
L. Bauer
|
|
|
—
|
|
|
—
|
|
|
104,404
|
|
|
98,513
|
|
|
1,434,456
|
|
|
890,505
|
|
Vincent
W. Mitz.
|
|
|
—
|
|
|
—
|
|
|
166,487
|
|
|
98,513
|
|
|
2,222,869
|
|
|
890,505
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
______________________
(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 was
$26.64.
|
Employment
Contracts and Change-in-Control Arrangements
We
currently do not have any formal employment agreements with any of our 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 our 2001 Stock Option Plan.
Future
benefits under the 2001 Stock Option Plan are not determinable, as grants
of
options are at the discretion of the Compensation Committee. Pursuant to
the
terms of such option plans and related option grant agreements, if any, in
the
event of any acquisition or merger of Copart 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 our 1992 Stock Option Plan and our 2001 Stock
Option Plan as previously approved, 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.
COMPENSATION
COMMITTEE REPORT ON EXECUTIVE COMPENSATION
The
following Compensation Committee Report on Executive Compensation shall not
be
deemed “soliciting material” or to be “filed” with the Securities and Exchange
Commission, nor shall this information be incorporated by reference by any
general statement incorporating this proxy into any filing under the Securities
Act of 1933, as amended, or the Securities Exchange Act of 1934, as amended,
except to the extent we specifically incorporate this information by reference
into such filing.
The
Compensation Committee of our Board of Directors has general responsibility
for
establishing the compensation payable to our executive officers and other
key
executives. The committee has the sole and exclusive authority to administer
our
equity compensation plans, including stock option plans under which grants
may
be made to such individuals.
The
Compensation Committee believes that the compensation for its executive officers
should be structured to attract, motivate and retain those responsible for
the
success of the Company and should be determined within a framework based
on the
attainment of designated financial targets, individual merit and contribution
and overall financial performance relative to Copart’s peers and certain
designated corporate objectives.
This
report is divided into two parts. Part One is a brief description of the
compensation arrangements in effect for the 2006 fiscal year for the executive
officers of the Company, including the Named Executive Officers in the Summary
Compensation Table. Part Two is a discussion of the factors that governed
the
compensation payable to the Chief Executive Officer for the 2006 fiscal year.
Part
One - Existing Compensation Arrangements
The
Compensation Committee believes that the current salaries and benefits of
our
executive officers are commensurate with our financial performance to date
and
with the salaries and benefits payable by comparable companies. During fiscal
1998, the prior employment agreement between Copart and our Chief Executive
Officer expired, and since 1998, Mr. Johnson has been employed on an “at-will”
basis. The base annual salaries of Willis J. Johnson, A. Jayson Adair, James
E.
Meeks, David L. Bauer and Vincent W. Mitz were set at $600,000, $500,000,
$300,000, $240,000 and $240,000 respectively, during fiscal year 2006. In
August
2006, the Compensation Committee increased the base annual salaries for Messrs.
Johnson, Adair, Meeks, Bauer and Mitz to $750,000, $600,000, $375,000, $270,000
and $270,000, respectively. 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 particular employee.
In
August 2006, following its review of our fiscal 2006 financial results, the
Compensation Committee approved cash bonuses for our executive officers.
Specifically, the committee approved cash bonuses of $1,050,000 for Mr. Johnson,
$800,000 for Mr. Adair, $450,000 for Mr. Meeks, $250,000 for Mr. Bauer and
$250,000 for Mr. Mitz. These bonuses reflected increases over the cash bonuses
paid in prior fiscal years, which increases the Compensation Committee
determined were reasonable and appropriate in light of our financial and
operating results in fiscal 2006.
Our
objective in awarding options is to more closely align the long-term interests
of the executive officers with those of our shareholders. During fiscal 2006,
the committee reviewed the outstanding equity incentives of our executive
officers, including the applicable exercise shares and the extent to which
outstanding option grants were vested or unvested. Based on this review,
the
committee determined that additional option grants were appropriate. In the
first quarter of fiscal 2006, the committee approved grants of 771,000 shares
of
common stock to Company employees, including grants to Messrs. Johnson, Adair,
Meeks, Bauer and Mitz in the amounts of 100,000, 100,000, 75,000, 40,000
and
40,000 shares, respectively, under the Company’s 2001 Stock Option Plan. The
exercise price for all option grants was equal to the fair market value of
our
common stock on the date of grant. As of the date of this proxy statement,
no
option grants have been made in fiscal 2007, but the Compensation Committee
will
evaluate the appropriateness of making additional option grants from time
to
time.
Part
Two - Compensation of Chief Executive Officer
Willis
J.
Johnson, the founder of the Company, served as President and Chief Executive
Officer from 1986 until May 1995, and has continued to serve as Chief Executive
Officer since May 1995. He became Chairman of Board of Directors in January
2004. Mr. Johnson’s base annual salary was $600,000 for fiscal year 2006, an
increase of $100,000 over his base salary for fiscal year 2005. In August
2006,
the Compensation Committee increased Mr. Johnson’s base annual salary to
$750,000. During the first quarter of fiscal 2006, the Compensation Committee
approved the grant to Mr. Johnson of an option to acquire 100,000 shares
of
common stock under Copart’s 2001 Stock Option Plan. 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. In addition,
we
historically paid the premium on a $1,000,000 life insurance policy under
which
Mr. Johnson’s wife is the named insured and Mr. Johnson is the beneficiary.
These policies were cancelled effective January 1, 2006.
In
addition, during fiscal 2004, the Compensation Committee approved standards
for
personal use of Copart’s leased aircraft by Mr. Johnson and A. Jayson Adair,
Copart’s President. The committee authorized Mr. Johnson to use the aircraft for
personal purposes for up to 50 flight hours per fiscal year and Mr. Adair
to use
the aircraft for personal purposes for up to 25 flight hours per fiscal year.
Flight hours in excess of these amounts would require the additional approval
of
the Compensation Committee. The committee intends to value this benefit on
an
annual basis, and Mr. Johnson and Mr. Adair will be responsible for taxes
resulting from any deemed income arising from this benefit.
The
Compensation Committee believes that the salary and benefits paid to Mr.
Johnson
during fiscal 2006 were commensurate with the Company’s financial performance.
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 Compensation
Committee.
In
October 2005, our Board of Directors approved, following the recommendation
of
our Compensation Committee, the Copart, Inc. Executive Bonus Plan. For fiscal
2006, the committee determined that our Chief Executive Officer and our
President were eligible to participate and receive a bonus, subject to Copart’s
achievement of a performance target measured by revenue. Under the terms
of the
plan, Mr. Johnson and Mr. Adair received bonuses in fiscal 2006 of $1,050,000
and $800,000, respectively.
Tax
Limitation.
Section
162(m) of the Internal Revenue Code of 1986, as amended (the “Code), places a
limit of $1,000,000 on the amount of compensation that we may deduct in any
year
with respect to certain of our highest paid executives. Certain
performance-based compensation that has been approved by shareholders is
not
subject to this deduction limit. We intend to qualify certain compensation
paid
to executives for deductibility under the Code, including Section 162(m)
of the
Code. However, we may from time to time pay compensation to our executive
officers that may not be deductible.
Compensation
Committee
Harold
Blumenstein James
Grosfeld Jonathan
Vannini
PERFORMANCE
GRAPH
The
following information relating to the price performance of our common stock
shall not be deemed “soliciting material” or to be “filed” with the Securities
and Exchange Commission, nor shall this information be incorporated by reference
by any general statement incorporating this proxy into any filing under the
Securities Act of 1933, as amended, or the Securities Exchange Act of 1934,
as
amended, except to the extent we specifically incorporate such information
by
reference into such filing.
The
following graph shows a comparison of the cumulative total shareholder returns
for the Company, the NASDAQ Stock Market - (U.S.), and a peer group (based
on
Standard Industrial Classification (“SIC”) codes) for the period of
August 1, 2001 through July 31, 2006. Such returns are based on
historical results and are not intended to suggest future performance. Data
for
the NASDAQ and peer group indices assume reinvestment of all dividends. We
have
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.
CERTAIN
TRANSACTIONS
We
employ
in various non-executive positions Jason Johnson, the son of our Chief Executive
Officer, Bonnie Randall, the sister of our Chief Executive Officer, and Rodgar
McCalmon, the son-in-law of our Chief Executive Officer. In fiscal 2006,
Mr.
Johnson, Mrs. Randall and Mr. McCalmon received a total of $80,000, $100,000
and
$147,100 of cash compensation, respectively. The Company believes that the
terms
of each such individual’s employment, including their cash compensation, are
commensurate with other employees in comparable positions. In October 2005,
Mr.
McCalmon was granted 20,000 shares of common stock under the Company’s 2001
Stock Option Plan.
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 Copart for current
monthly lease payments of $13,890 under a lease dated August 1, 1992, which
expires, with inclusion of all extension options, in July 2009, and contains
a
provision whereby we have an option to purchase the real property and
improvements. Total payments under this lease aggregated $159,301 in fiscal
2006. We believe 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 the Lease Agreement dated September 1, 1992 between James P. Meeks
and
Barbara D. Meeks and Copart, Inc., we lease property in San Martin, California
from James P. Meeks and Barbara D. Meeks. The San Martin lease expires August
31, 2007. Total payments under this lease aggregated $239,400 in fiscal 2006.
James P. Meeks is the father of one of our directors, James E.
Meeks.
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 beneficially 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,
2006 with all Section 16(a) filing requirements applicable to the Company’s
officers, directors and greater-than-ten percent shareholders.
OTHER
MATTERS
We
know
of no other matters to be submitted at the 2006 Annual Meeting of Shareholders.
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.
ADJOURNMENT
OF THE ANNUAL MEETING
In
the
event that there are not sufficient votes to approve any proposal incorporated
in this proxy statement at the time of the annual meeting, the annual meeting
may be adjourned in order to permit further solicitation of proxies from
holders
of our Common Stock. Proxies that are being solicited by our Board of Directors
grant discretionary authority to vote for any adjournment, if necessary.
If it
is necessary to adjourn the annual meeting, and the adjournment is for a
period
of less than 45 days, no notice of the time and place of the adjourned meeting
is required to be given to the shareholders other than an announcement of
the
time and place at the annual meeting. A majority of the shares represented
and
voting at the annual meeting is required to approve the adjournment, regardless
of whether there is a quorum present at the annual meeting.
ANNUAL
REPORT
A
copy of
our annual report for the fiscal year ended July 31, 2006 has been mailed
concurrently with this proxy statement to all shareholders entitled to notice
of, and to vote at, the 2006 Annual Meeting of Shareholders. The annual report
is not incorporated into this proxy statement and is not proxy soliciting
material.
For
the Board of
Directors
COPART,
INC.
By:
![](styer.jpg)
Paul
A. Styer,
Secretary
Dated:
November 27, 2006
Site
of the Copart, Inc. 2006 Annual Shareholder Meeting
Directions
to: Copart,
Inc.
4665
Business Center Drive
Fairfield,
California 94534
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 Eastbound for approximately
40
miles. This will take you over the Bay and Carquinez Bridges. Continue east
on
Interstate 80 until you reach Fairfield. Once in Fairfield you will exit
at
Suisun Valley Road. Turn left onto Suisun Valley Road and go over the freeway.
At the first set of traffic lights, turn left onto Mangels. At the next set
of
traffic lights, turn left onto Business Center Drive, and then go to the
first
building on the left at 4665 Business Center Drive.
Annex
A
AMENDED
AND RESTATED CHARTER FOR THE
COMPENSATION
COMMITTEE OF
THE
BOARD OF DIRECTORS OF
COPART,
INC.
(as
amended in September 30, 2003)
PURPOSE:
The
purpose of the Compensation Committee established pursuant to this charter
is to
review and approve, and, where appropriate, to and make recommendations
to the
Board of Directors (the “Board”)
regarding all forms of compensation to be provided to the employees and
directors of, and consultants to Copart, Inc., a California corporation,
and its
subsidiaries (the “Company”),
including stock compensation and loans, and all bonus and stock compensation
to
all employees.
The
Compensation Committee has the authority to undertake the specific duties
and
responsibilities listed below and will have the authority to undertake
such
other specific duties as the Board from time to time prescribes.
STATEMENT
OF PHILOSOPHY:
The
policy of the Compensation Committee is to maximize stockholder value over
time.
The primary goal of the Company’s Compensation Committee and its executive
compensation program is therefore to closely align the interests of the
officers
with those of the Company’s stockholders. To achieve this goal the Committee
attempts to
(i)
offer compensation opportunities that attract and retain executives whose
abilities are critical to the long-term success of the Company; (ii) motivate
individuals to perform at their highest level and reward outstanding
achievement; (iii) maintain a significant portion of the executive’s total
compensation at risk, tied to achievement of financial, organizational
and
management performance goals; and (iv) encourage executives to manage from
the
perspective of owners with an equity stake in the Company.
MEMBERSHIP:
The
Compensation Committee shall consist of a minimum of two (2) non-employee
directors of the Company as is determined by the Board. The members of
the
Compensation Committee are appointed by and serve at the discretion of
the
Board.
Each
member of the Compensation Committee will be (i) an independent director
as
defined by the rules of The Nasdaq Stock Market, (ii) an “Outside Director” as
such term is defined with respect to Section 162(m) of the Internal Revenue
Code
of 1986, as amended, and (iii) a “non-employee” director as defined under Rule
16b-3 promulgated under Section 16 of the Securities Exchange Act of 1934,
as
amended (the “Exchange Act”).
RESPONSIBILITIES:
The
responsibilities of the Compensation Committee include:
|
1. |
Unless
otherwise determined by a majority of the independent directors
of the
Board meeting in executive session, review and approve decisions
regarding
the compensation of the Chief Executive Officer of the Company
(the
“CEO”)(for purposes of this Compensation Committee Charter, the
compensation of the CEO and the other officers of the Company
to be
approved by the Compensation Committee hereunder shall include
all “plan”
compensation as such term is defined in Item 402(a)(7) of Regulation
S-K
promulgated under the Securities Act of 1933, as amended);
|
|
2. |
Unless
otherwise determined by a majority of the independent directors
of the
Board, review and approve decisions regarding all forms of compensation
to
be provided to the officers of the Company;
|
|
3. |
Review
and make recommendations to the Board regarding general compensation
goals
and guidelines for the Company’s employees and the criteria by which
bonuses to the Company’s employees are determined;
|
|
4. |
Review
and make recommendations to the Board regarding the compensation
policy
for the directors of and consultants to the Company;
|
|
5. |
Act
as the Administrator (as defined under each plan) and administer,
within
the authority delegated by the Board, the Company’s equity compensation
plans adopted by the Board (the “Plans”). In its administration of the
Plans, the Compensation Committee may, pursuant to authority
delegated by
the Board, (a) grant stock options or stock purchase rights to
individuals
eligible for such grants (including grants to individuals subject
to
Section 16 of the Exchange Act in compliance with Rule 16b-3
promulgated
thereunder), (b) amend such stock options or stock purchase rights,
and
(c) take all other actions permitted under the Plans. The Compensation
Committee shall also make recommendations to the Board with respect
to
amendments to the plans and changes in the number of shares reserved
for
issuance thereunder;
|
|
6. |
Prepare
a report (to be included in the Company’s proxy statement) which
describes: (a) the criteria on which compensation paid to the
CEO for the
last completed fiscal year is based; (b) the relationship of
such
compensation to the Company’s performance; (c) the Compensation
Committee’s executive compensation policies applicable to officers; and
(d) the Company’s policies with respect to the $1 million deduction limit
for certain executive compensation imposed by Section 162(m)
of the IRC;
|
|
7. |
Review
its own charter, structure, processes and membership requirements
from
time to time;
|
|
8. |
As
appropriate, obtain advice and assistance from outside legal,
accounting
or other advisors, including, without limitation, any compensation
consultant to be used by the Company or the Compensation Committee
in the
evaluation of CEO, executive officer, employee or director compensation;
and
|
|
9. |
Authorize
the repurchase of shares from terminated employees pursuant to
applicable
law.
|
MEETINGS:
The
Compensation Committee will meet at such times that it deems appropriate
to
fulfill its responsibilities of the Compensation Committee under this charter.
The Compensation Committee shall establish its own schedule, which it will
provide to the Board in advance. The members of the Compensation Committee
may
invite the Chief Executive Officer, the executive officer responsible for
the
Company’s human resources activities or any other person to attend meetings as
appropriate.
MINUTES:
The
Compensation Committee will maintain written minutes of its meetings, which
minutes will be filed with the minutes of the meetings of the Board.
REPORTS:
The
Compensation Committee will provide written reports to the Board of the
Company
regarding recommendations of the Compensation Committee submitted to the
Board
for action and copies of the written minutes of its meetings.
DELEGATION
OF AUTHORITY:
The
Compensation Committee may form and delegate authority to subcommittees
when
appropriate.