SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended: December 31, 1997 Commission file number: 000-23095
Jevic Transportation, Inc.
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(Exact name of registrant as specified in its charter)
New Jersey 22-2373402
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(State or other jurisdiction of (IRS Employer
incorporation or organization) Identification No.)
600 Creek Road, Delanco, NJ 08075
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(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (609) 461-7111
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Securities registered pursuant to Section 12(b) of the Act:
None
Securities registered pursuant to Section 12(g) of the Act:
Common Stock, no par value
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(Title of Class)
Indicate by check mark whether the Registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the Registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days. Yes X No .
--- ---
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405
of Regulation S-K is not contained herein and will not be contained, to the best
of registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K. [X]
On March 19, 1998, the aggregate market value of the Registrant's Common Equity
(including Common Stock and Class A Common Stock), no par value, held by
nonaffiliates of the Registrant was approximately $76,019,068.
On March 19, 1998, 10,658,200 shares of the Registrant's Common Equity, no par
value, were outstanding.
DOCUMENTS INCORPORATED BY REFERENCE
Portions of the Registrant's Proxy Statement to be filed with the Commission in
connection with the Annual Meeting of Shareholders scheduled to be held on May
15, 1998 are incorporated by reference into Part III of this Form 10-K.
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PART I
Item 1. Business
Overview
Jevic is a motor carrier that combines the high revenue yield
characteristics of a typical LTL carrier with the operating flexibility and low
fixed costs of a truckload carrier. Jevic utilizes a simplified in-route
delivery system in which over 70% of the Company's shipments are delivered to
their destinations directly from line-haul trailers, eliminating the need for an
expensive network of labor-intensive breakbulk terminals, which most LTL
carriers use to distribute shipments. Jevic's revenue per terminal for 1997 was
approximately $32.0 million. The Company serves shippers throughout the eastern
half of the United States and in selected markets in the remainder of the
continental United States and Canada through its origination facilities located
in the metropolitan areas of Atlanta, Boston, Charlotte, Chicago, Houston and
Philadelphia. From 1995 to 1997, the Company's operating revenues and operating
income grew at compound annual rates of 23.1% and 59.7% respectively.
Jevic's Breakbulk-Free system utilizes a simplified network of terminals,
which serve as regional origination points for initial consolidation of freight
on a trailer. The Company strategically combines smaller shipments (typically
handled by LTL carriers) with larger shipments (typically handled by truckload
carriers) in a sequence which permits direct unloading at each shipment's
destination, with no need to rehandle individual shipments at one or more
breakbulk terminals. Typical LTL carriers have to reload shipments into local
trucks for final delivery, whereas, in most cases, Jevic's operating system
avoids further rehandling at the destination facility. This generally results in
less damage to freight and faster transit times for less than full truckload
shipments. Jevic's flexible operating system minimizes rehandling of freight and
provides a broad range of transportation services.
Service
Jevic seeks to customize its service offerings to meet its customers'
evolving requirements for greater speed and reliability. By regularly expanding
the services it provides, the Company increases the types of shipments it can
efficiently handle from existing customers and is able to attract and serve new
customers.
Fast Delivery Times. The Company provides next day and, in many cases, next
morning service along regional lanes of up to 500 miles. As an example, Jevic
offers freight delivery from metropolitan Philadelphia to metropolitan Boston by
noon on the next business day. In addition, Jevic offers delivery from
metropolitan Atlanta to New England by the morning of the second day after
pickup, and from the Northeast to metropolitan Chicago in two days.
Wide Range of Shipment Sizes. Jevic provides its customers with the
flexibility to handle shipments of a range of sizes and weights not typically
provided by standard LTL or truckload carriers, which enhances the Company's
ability to become a core carrier to its customers. Many of the Company's
customers require transportation of multiple shipments ranging from as little as
50 pounds to over 40,000 pounds. While a standard truckload carrier would charge
a customer the full truckload rate for each shipment weighing over 10,000 pounds
even if it does not fill a trailer, the Company can efficiently handle the
customer's partial truckload shipments, charging the customer less than a full
truckload rate, and then integrating smaller shipments from the same customer or
other customers in the same region to fill the rest of the trailer. This allows
the customer to save
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money on the truckload portion of the shipment and the Company to increase
freight density and shipments per pickup, thereby minimizing incremental costs
and improving operating efficiencies.
Specialized Services - Heated and Expedited Service Options. The Company
offers a heated service for customers whose freight must be protected from
freezing during the winter months, principally customers in the chemical
industry. Jevic's heated trailers allow the Company to provide significant
flexibility to customers, such as pickups and deliveries of heated service
shipments on any day of the week. The Company's heated service enables the
Company to attract business from new customers and then expand the services it
provides for those customers to encompass their regular shipments as well as
their heated service shipments. In addition, by providing this heated service,
Jevic is able to enhance revenues from mid-October to mid-April, a period in
which freight volumes are typically lower than at other times during the year.
Jevic believes that there is no significant competition for its heated service
in the LTL market and that it purchases more integrated diesel trailer heaters
than any LTL carrier. In addition, Jevic offers expedited delivery service at
competitive prices on a regional and inter-regional basis by integrating these
premium rated deliveries with standard service deliveries, thereby increasing
revenue per mile.
Breakbulk-Free Operating Model
Jevic utilizes a simplified network of terminals, which serve as regional
origination points for initial consolidation of freight on a trailer. Shipments
of various sizes are typically picked up "same day" from customers and the
Company combines smaller shipments (typically handled by LTL carriers) with
larger shipments (typically handled by truckload carriers) onto a line-haul
trailer in a sequence which permits the direct unloading of each shipment at its
final destination. This simplifies the delivery process by reducing the number
of facilities needed to effect delivery. The Company's in-route delivery system
bypasses intermediate breakbulk terminals and, in most cases, destination
terminals.
LTL carriers typically rehandle freight at one or more breakbulk terminals
and reload the freight at a destination terminal into a local truck for delivery
to the final destination. Breakbulk-Free operations, in contrast, do not require
an extensive network of "hub and spoke" operating terminals. As a result, Jevic
avoids the fixed costs of operating and maintaining a large network of breakbulk
terminals and a large staff of freight handlers.
Jevic's Breakbulk-Free system accommodates a wider range of shipment sizes,
as determined by weight, than most LTL carriers, and can provide more rapid
transit times in many cases. By minimizing rehandling, Jevic's system reduces
damage to shipments and associated costs. The Breakbulk-Free system also
enhances the Company's asset utilization. To further increase asset utilization
and shorten transit times, Jevic has integrated the use of twin 28-foot
trailers, or pups, into its existing fleet of 48-foot and 53-foot trailers. The
pups are separated without rehandling of freight, and deliveries are made from
the two pups to different destinations at the same time. Deliveries via pup
trailers can effectively double the number of deliveries per day compared to a
single 48- or 53-foot trailer.
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Marketing and Customers
Jevic's sales force utilizes a consultative approach to develop customized
logistics-based solutions to meet its customers' total transportation and
distribution needs. These solutions are designed to reduce the customer's total
transportation costs, inventory carrying costs, handling costs, loss and damage
claims and information processing costs. The Company's customer-focused
approach, in which Jevic provides information and problem-solving as well as
transportation, helps expand the Company's customer base and forge long-term
relationships with customers.
The Company targets prospective customers whose logistics needs are not
being met and develops solutions for those needs. Once a customer begins to use
Jevic for certain of its shipping needs, the Company offers the customer
additional transportation services to develop the account while increasing its
pickup, lane and delivery density.
Jevic develops new geographic markets in existing or new lanes and regions
and monitors existing lanes for lane balance in both directions. The Company
addresses unbalanced lanes by creating new sales territories in the specific
areas that require additional freight as an origination point. Sales territories
are designed to minimize the distance between pickups and increase fleet
utilization, and seasoned sales personnel are recruited and hired for each
territory. Potential customers within the new territory are identified through
telephone interviews and a final list of top potential accounts are selected as
a starting point for the sales process.
At December 31, 1997, the Company had a direct sales staff of 84 employees.
The sales force is comprised of experienced motor carrier representatives who
have been recruited for territories geographically located to maximize both
pickup and lane density. The Company's sales personnel have knowledge of the
local market in which they operate and receive specialized training in order to
learn the Jevic system, including the disciplined sales criteria used in the
customer selection process. Many sales personnel work from their homes, which
are typically located in the region of an existing or planned Company facility.
The sales force is divided among three regions covering the Northeast,
South/Southeast and Midwest. The Company's National Accounts Department
coordinates the marketing efforts for customers with multiple shipping locations
across the country.
At December 31, 1997, the Company's customer base included over 8,000
active accounts. The Company transports general commodities, including chemical
commodities used in manufacturing, petroleum, non-durable goods, paper products,
rubber and plastics.
In 1997, Jevic's largest 20, 10 and five customers accounted for
approximately 24.4%, 18.4% and 13.0% of the Company's operating revenues,
respectively. During the same year, the Company's largest customer accounted for
approximately 4.3% of operating revenues. Because approximately 44% of the
Company's revenues from its top 200 customers in 1997 had standard industrial
classification codes in the chemicals industry, the Company believes that a
significant amount of its business is generated from transporting chemicals,
including various materials which are subject to environmental and safety
regulations.
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Regional Facility Operations
Jevic currently operates through six regional facilities. The Company's
principal regional facility and headquarters are located in metropolitan
Philadelphia, and its other facilities are located in metropolitan Atlanta,
Boston, Charlotte, Chicago and Houston. Jevic's regional facilities are
strategically located to permit the Company to provide high quality service and
minimize freight rehandling to reduce costs. The Company uses its regional
facilities as origination points for initial consolidation of freight onto the
trailer for delivery in-route to the customer. Jevic does not use regional
facilities as breakbulk terminals. Over 70% of the Company's LTL tonnage is
routed directly from the originating terminal to the customer's destination. The
remaining freight is unloaded at a Company terminal for final local delivery to
the destination, typically in a situation where a specific piece of equipment,
such as a liftgate, is required in the unloading process but is not available on
the trailer or where the customer requires a specific delivery time.
Each regional facility is responsible for the pickup and delivery of
freight for its own service area. Primary responsibility for customer service
resides at the facility level. Facility employees trace freight movement between
facilities on the Company's automated tracing system and respond to customer
requests for delivery information. Jevic believes that its policy of maintaining
primary accountability to customers at the facility level fosters better
relationships, results in improved customer service and enhances its ability to
meet customers' needs.
Jevic's centralized Line-Haul Department is responsible for directing the
system wide movement of revenue equipment from its origin to destination. The
Company continuously monitors the usage and location of its revenue equipment
and seeks to maximize utilization of all revenue equipment. Dispatchers are
responsible for tracking all drivers and revenue equipment until trailers are
emptied in order to assure timely delivery of shipments. Dispatchers then direct
the reloading of the trailers for deliveries either in the same region or to
another region serviced by the Company.
On a daily basis, the Company's senior executives and facility management
personnel review the prior day's freight shipment and activity reports to
monitor the Company's performance. The daily freight shipment report identifies
shippers, destinations, shipment size and shipment routing. The daily activity
report includes data such as regional bill counts, driver and tractor
availability, load counts, freight damage and loss and accidents. The Company
uses scheduled runs, and schedules additional runs as necessary, to meet its
delivery time schedules.
The Company's growth plans include construction of new, substantially
larger facilities in metropolitan Boston and Chicago and adding selected
regional facilities in new regions when supported by customer demand.
Technology
The Company believes that its use of proven technologies enhances the
Company's efficiency and provides competitive service advantages. Through this
technology, the Company provides better and more timely information to its
customers, improves its operating efficiency and controls and more effectively
leverages its resources.
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Satellite Communications. The Company has installed the QUALCOMM OmniTRACS
satellite-based communications system ("OmniTRACS System") throughout its fleet.
Although more common to the truckload segment, satellite-based communications
systems are not used by most LTL carriers. Operating continuously, the OmniTRACS
System assists the Company's dispatchers in load planning and enables them to
monitor the movement of freight and simplifies the location of equipment. The
OmniTRACS System also permits timely and efficient communication of critical
operating data, such as shipment orders, loading instructions, routing, safety,
maintenance, billing, tracing and delivery information. For example, dispatchers
assign loads by entering the required information into the system. Drivers then
access the previously-planned pickup from the system and acquire all the
necessary customer, order and routing information through their on-board
OmniTRACS display unit, thus eliminating waiting time and inefficient dependence
on truckstop and roadside telephones. Before installation of the OmniTRACS
system, Jevic typically lost one hour or more of productive time per driver per
day while the driver stopped to wait for and use a telephone.
Enterprise Wide Computing. The Company's NCR 3555 UNIX platform works in
conjunction with a Novell/NT network consisting of over a dozen file servers,
provides connectivity with all Company facilities and produces operational
reports for all end users at the Company's headquarters. In 1998, the Company
plans to add a Sequent NUMA-Q 2000 computer architecture in order to provide
increased enterprise computing and additional disaster recovery capabilities.
Relational database technology (RDBMS) is expected to be employed to provide
flexibility and consistency of data. The Company is developing enhancements to
its core transportation application with custom-designed software.
Document Imaging. The Company uses an optical imaging system to scan
documents such as bills of lading and delivery receipts onto compact disks.
Images are available across all networks to reduce clerical and management time
required to enter and retrieve information. This process enhances the
availability and increases the utilization of data, especially that which
pertains directly to customer service. The Company is currently adding
additional storage and system functionality which will increase image retention,
eliminate many manual duties and be expandable to meet future requirements.
Bar Coding. In 1998, the Company plans to install a comprehensive freight
locator and cross docking system. The bar coding system is designed to enhance
the Company's freight tracking capability and reduce cargo claims and also to
improve operational efficiency through the placement of a bar code on every
shipment which is readable by drivers and facility personnel using a hand-held
wireless scanner.
Drivers
A key element contributing to the Company's growth has been its driver
force. As a former driver, Harry Muhlschlegel, the Company's co-founder and
Chief Executive Officer, has continually emphasized the importance of a stable,
high quality driver force. The Company has implemented policies and programs to
maintain a high level of driver quality and job satisfaction. In 1997, the
average annual total wages paid to drivers who worked full time during the year
was over $56,000, not including health insurance and other related benefits
provided by the Company. Jevic's line-haul drivers are typically able to return
home once a week and are provided with late model tractors with
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modern features to provide driver comfort. Although the industry experiences
driver shortages from time to time, Jevic has been successful in maintaining an
adequate number of qualified drivers. The Company's annual driver turnover rate
was 18.0% in 1997. Among drivers who have worked for the Company for more than
one year, the turnover rate through December 31, 1997 was 5.1%. As of December
31, 1997, 70% of the Company's drivers had worked for the Company for more than
one year, and 59% of them had worked for the Company for more than two years.
At December 31, 1997, Jevic employed 984 Company drivers. In addition, 123
owner-operator drivers provided services to the Company. The Company believes
that its proven ability to recruit and retain dedicated, skilled drivers is a
key factor in the Company's continued growth and success. The Company's
recruiting and selection methods are designed to attract the best drivers, which
contributes to customer satisfaction and reduced claims and insurance expense as
a percentage of revenues. Using these methods, the Company has been able to more
effectively recruit, hire and retain a reliable, stable driver workforce.
Jevic's policy is to recruit drivers who reside along the Company's primary
lanes of traffic, which enables them to return home more often and reduces the
number of off-route miles. The Company hires drivers based upon driving records
and experience, and requires all drivers to be no less than 25 years of age with
at least three years of experience. New hires are required to undergo a two-week
orientation program designed to introduce them to Jevic's operating strategy.
The Company meets with new drivers within the first 90 days of employment and
periodically thereafter to carefully evaluate performance, assist with
compatibility with Jevic's operating structure and discuss any current concerns.
The Company believes that its stringent selection criteria for drivers, and
its initial and regular refresher training courses for drivers, have been an
important factor in improving the Company's safety record. Drivers are eligible
for bonuses ranging from $500 to $2,500 annually for safe and courteous driving,
depending on seniority within the Company.
Owner-Operators
In 1996, the Company initiated an owner-operator program. At December 31,
1997, the Company had contracts with 123 owner-operators which require the
contractor to furnish a tractor and a driver exclusively to transport, load and
unload goods carried by the Company. Owner-operators are subject to the same
recruitment criteria as employee drivers and undergo the same orientation and
training programs. The owner-operators are compensated at a contracted rate per
mile and per pickup and delivery made in-route. The owner-operator program
provides the Company with an alternative method of obtaining additional revenue
equipment with no capital investment, improving return on assets. It also
provides access to an additional pool of drivers in response to the intense
industry competition for qualified drivers and, to a lesser degree, serves to
reduce the Company's direct exposure to fuel price fluctuations. The Company
intends to continue to increase its use of owner-operators.
Revenue Equipment and Maintenance
At December 31, 1997, the Company operated 937 tractors, including 658 road
and regional tractors and 279 local tractors. The Company's policy is to use new
road tractors for up to 500,000
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miles, after which they are generally traded in or sold. Based on current
tractor mileage levels, this translates to approximately three years for
tractors used in interregional operations and approximately five years for
tractors used in regional or local operations. The major operating systems of
the Company's tractors are covered by manufacturers' warranties for between
250,000 to 750,000 miles. Most of the Company's tractors are covered by
agreements under which the Company has the right to resell the tractors to the
vendor at a defined price. All owner-operators' tractors are required to pass
DOT inspection before use in the Company's fleet.
At December 31, 1997, the Company operated a fleet of 1,786 trailers,
including 317 53-foot trailers, 1,317 48-foot trailers, and 152 28-foot "pup"
trailers. Trailers are generally traded after 10 years. However, in furtherance
of its program to add heated services capability to its trailer fleet on an
accelerated schedule, in 1997 the Company traded in certain non-heated trailers
which were less than 10 years old. At December 31, 1997, 53.1% of the Company's
trailers were equipped with integrated heating capability.
The Company has rigid specifications for all tractor and engine components
and has selected, among others, Freightliner tractors and Cummins engines as its
standard equipment. The Cummins electronic diesel engines control speed and
decrease fuel consumption. All tractors have modern features designed to enhance
performance and provide driver comfort.
In order to enhance its Breakbulk-Free operating model, Jevic uses twin
28-foot trailers, or pups. The Company derives several advantages through the
selective use of pup trailers. The use of twin pups permits more freight to be
hauled with one tractor than could be hauled if one larger trailer were used.
The pups are separated without rehandling of freight, and deliveries are made
from the two pups to different destinations at the same time, providing a
significant improvement in delivery times. Deliveries via pup trailers can
effectively double the number of deliveries per day compared to a single 48-foot
or 53-foot trailer. Jevic also uses pups to effect deliveries in regions where
the delivery density is high enough to require it, but where pickup density has
not developed to the point of opening a new regional facility to originate
shipments out of the region.
The Company believes that its heated service is better than that offered by
other motor carriers in several respects. The Company's trailers have a
permanently installed heating system integrated in an insulated trailer body. In
addition, the Company's trailers are designed so that the air is heated and
circulated inside the trailer by passing over a heat exchanger, with no exposure
to any sparks or flame. This provides increased safety for both the driver and
the cargo. In contrast, other companies which offer protective service
alternatively may preheat the cargo and/or cover it with a blanket or place a
portable heater in the trailer, which heats the cargo unevenly and ineffectively
and does not provide the same safety features of the Company's heated trailers.
In addition, competing carriers generally provide much more restrictive
protective services, refusing to transport shipments requiring protection from
freezing in extremely cold weather or over a weekend.
The Company's primary maintenance facility is located near its New Jersey
headquarters and main regional facility. In addition, routine and preventative
maintenance checks and repairs on all revenue equipment are performed at all of
the Company's regional facilities. Through regular maintenance of its revenue
equipment, Jevic minimizes equipment downtime and enhances the equipment's
operating performance.
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Safety and Risk Management
The Company is committed to a high degree of safety in all of its
operations, and utilizes a self-directed, team approach to risk management,
building in loss control at the earliest stages. Employees are provided with the
equipment and training required to do their jobs safely and efficiently. Drivers
are retrained for risk management on a periodic basis and are provided with
cameras to film accident scenes as soon as an incident occurs.
In 1997, insurance and claims as a percentage of operating revenues was
2.1%, which the Company believes is low in comparison to the trucking industry
as a whole. This performance is the result of careful driver recruiting,
extensive driver training and the emphasis on a safety-conscious culture
throughout the Company.
The Company is self-insured for cargo claims up to $5,000 per occurrence.
The Company self-insures for bodily injury claims for up to $20,000 per
occurrence. Since 1993 the Company has self-insured for workers' compensation
claims of up to $250,000 per occurrence in order to capitalize on its favorable
claims history. During the past four years the Company received only 11 claims
exceeding $50,000, of which only two exceeded $100,000. This led to an increase
in the Company's discount from standard insurance premium rates from 38% in 1992
to 81% in 1997.
Employees
At December 31, 1997, the Company had 1,937 employees in the following
categories:
Category No. of Employees
-------- ----------------
Drivers .................................................... 984
Executive and Administrative ............................... 571
Dockworkers ................................................ 201
Mechanics .................................................. 97
Sales and Marketing ........................................ 84
None of Jevic's employees are represented by a collective bargaining unit.
At December 31, 1997, the Company had 123 owner-operator drivers under contract
in addition to its employee drivers, and employed 85 part-time employees.
Management believes that relations with its employees and owner-operators are
good.
The Company's executive officers provide strategic direction and emphasize
and monitor continuous operating improvement, allowing operating management to
concentrate on producing and delivering competitive products and to respond
quickly to market conditions.
Fuel Availability and Cost
The motor carrier transportation industry is dependent upon the
availability of diesel fuel. Increases in fuel prices or fuel taxes, shortages
of fuel or rationing of petroleum products could have a material, adverse effect
on the operations and profitability of the Company. As a result of its
relationships with major fuel suppliers, the Company has not experienced
difficulties in maintaining
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a consistent and ample supply of fuel, but fuel is one of the Company's most
substantial operating expenses. In order to reduce the Company's vulnerability
to rapid increases in the price of fuel, the Company enters into purchase
contracts with fuel suppliers from time to time for a portion of its estimated
fuel requirements at guaranteed prices. The Company is a party to agreements
with three fuel suppliers to purchase approximately 37% of its estimated fuel
needs through December 1998 at fixed prices. Although these arrangements help
reduce the Company's vulnerability to rapid increases in the price of fuel, the
Company will not benefit from a decrease in the price of fuel to the extent of
its commitment to purchase fuel under these contracts.
Competition
The trucking portion of the transportation industry is highly competitive
and fragmented. Jevic competes with regional, inter-regional and national LTL
carriers of varying sizes and, to a lesser extent, with truckload carriers, air
freight carriers and railroads, a number of which have greater financial
resources, operate more revenue equipment and have larger freight capacity than
the Company. Also, in certain regions, the Company faces competition from local
carriers. The Company's principal competitors are Roadway Express, Inc., Yellow
Corp., Consolidated Freightways Corp., Con-Way Transportation Services and
Arkansas Best Corp.
The Company believes that the principal competitive factors in its business
are service, pricing and the availability and configuration of equipment that
meets a variety of customers' needs. The Company also competes with other motor
carriers for the services of drivers. The Company believes that it is able to
compete effectively in its markets by providing consistently high quality and
timely-service at competitive prices.
The Company believes that there are substantial barriers to entry which
restrict the ability of competitors to adopt a Breakbulk-Free operating model.
Small LTL carriers typically lack the necessary critical mass, freight density
and capital, while large LTL carriers typically have work rules and labor
practices that lack the flexibility which a Breakbulk-Free system requires.
Truckload carriers lack a system to accommodate both multiple pick-ups and
multiple deliveries and would require a substantial capital investment to build
the necessary terminals. Additionally, the Breakbulk-Free operating model
requires high quality drivers and sophisticated operating systems and
management, which the Company has developed internally over an extended period
of years.
Regulation
Interstate and intrastate motor carriage has been substantially deregulated
as a result of the enactment of the Motor Carrier Act of 1980, the Trucking
Industry Regulatory Reform Act of 1994, the Federal Aviation Administration
Authorization Act of 1994 and the ICC Termination Act of 1995. Carriers can now
readily enter the trucking industry and rates and services are largely free of
regulatory controls. However, interstate motor carriers remain subject to
certain regulatory controls imposed by agencies within the United States
Department of Transportation ("DOT"), such as the Federal Highway Administration
and the Surface Transportation Board.
Interstate motor carrier operations are subject to safety requirements
prescribed by the DOT. Such matters as weight and dimension of equipment are
also subject to federal and state regulations. Since 1989, DOT regulations have
imposed mandatory drug testing of drivers, and more recent DOT
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regulations have imposed certain tests for alcohol levels in drivers and other
safety personnel. To date, the DOT's national commercial driver's license and
drug testing and alcohol testing requirements have not adversely affected the
availability to the Company of qualified drivers.
The Federal Aviation Administration Authorization Act of 1994, which became
effective on January 1, 1995, essentially deregulated intrastate transportation
by motor carriers. This Act prohibits individual states from regulating entry,
pricing or service levels. However, the states retained the right to continue to
require certification of carriers, but this certification is based only upon two
primary fitness criteria: safety and insurance.
The Company's operations are subject to various environmental laws and
regulations dealing with, among other things, the transportation, storage,
presence, use, disposal and handling of hazardous materials, discharge of
stormwater and underground fuel storage tanks. All of the Company's drivers are
trained in the handling and transportation of hazardous substances and are
required to have a hazardous materials endorsement on their drivers license. The
Company believes it is in compliance with applicable environmental laws and
regulations.
The transportation industry is subject to regulatory and legislative
changes that can affect the economics of the industry by requiring changes in
operating practices or influencing the demand for and the costs of providing
services to shippers. From time to time, various legislative proposals are
introduced to increase federal, state, or local taxes, including taxes on motor
fuels. The Company cannot predict whether, or in what form, any increase in such
taxes applicable to the Company will be enacted.
Executive Officers of the Company
The executive officers of the Company are:
Name Age Position
---- --- --------
Harry J. Muhlschlegel 51 Chairman of the Board and Chief Executive
Officer
Karen B. Muhlschlegel 51 Vice President, Secretary and Director
Paul J. Karvois 43 President, Chief Operating Officer and
Director
Brian J. Fitzpatrick 38 Senior Vice President and Chief Financial
Officer
William F. English 46 Senior Vice President - Operations
Joseph A. Librizzi 49 Senior Vice President - Marketing and
Sales
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Harry J. Muhlschlegel has over 28 years of experience in the trucking
industry. He co-founded Jevic along with his wife, Karen Muhlschlegel, in 1981
and has served as its Chairman of the Board and Chief Executive Officer since
its inception. Until March 1997, he also served as the Company's President.
Karen B. Muhlschlegel has over 28 years of experience in the trucking
industry. She co-founded Jevic along with her husband, Harry Muhlschlegel, in
1981 and has served as a Vice President, Secretary and a director of the Company
since its inception.
Paul J. Karvois became Jevic's President and Chief Operating Officer in
March 1997 and he was elected as a director in August 1997. He joined the
Company in January 1992 as Director of Insurance. Later in 1992, he created the
Company's risk management group and became Director of Risk Management. Mr.
Karvois was promoted to the position of Senior Vice President - Marketing and
Sales in December 1993. Prior to joining the Company, Mr. Karvois had 21 years
of marketing, sales and operations experience in the trucking industry, serving
in a variety of positions with truckload and LTL carriers.
Brian J. Fitzpatrick joined Jevic in September 1993 as Senior Vice
President - Finance in order to create the Company's financial and
administrative division. He was elected to the office of Chief Financial Officer
in February 1995, in which capacity he is additionally responsible for
developing overall financial strategies for the Company. Prior to joining the
Company, Mr. Fitzpatrick had 12 years of commercial banking experience.
William F. English joined Jevic in August 1988 as Senior Vice President -
Operations. Prior to joining the Company, Mr. English had 17 years of
operations, financial and marketing experience in the transportation industry,
including positions with national LTL and truckload carriers.
Joseph A. Librizzi joined Jevic in April 1997 as Senior Vice President -
Marketing and Sales. Prior to joining the Company, Mr. Librizzi had more than 26
years of experience in the transportation industry. From 1996 until he joined
the Company, Mr. Librizzi served as a Vice President of G.O.D. responsible for
new market development. From 1992 until 1996, he served as an officer of
Carretta LTR, Inc., first as Vice President of LTL Sales and later as the
company's President.
Item 2. Properties
The Company owns its headquarters and main regional facility located in
Delanco, New Jersey, near Philadelphia. The Company also owns its Houston
regional facility and leases regional facilities in Atlanta, Charlotte, Chicago
and New England. The Company is currently constructing new facilities in
metropolitan Boston and Chicago which will replace its current leased facilities
in those regions upon completion of construction, scheduled for the third
quarter of 1998.
-11-
<PAGE>
Owned Facilities
<TABLE>
<CAPTION>
Square Footage
------------------------------------------
Terminal
# of and
Location Acres Doors Office Maintenance
-------- ----- ----- -------- -----------
<C> <C> <C> <C> <C>
600 Creek Road, Delanco, NJ (Phila. Metro)....... 36.0 108 155,900 17,400
700 Creek Road, Delanco, NJ (Phila. Metro) (1)... 19.5 -- 24,000 --
Charlotte........................................ 11.7 47 34,750 6,400
Houston.......................................... 6.5 44 15,870 3,920
<CAPTION>
Leased Facilities
Square Footage
------------------------------------------
Terminal
# of and Lease
Location Acres Doors Office Maintenance Expiration
-------- ----- ----- -------- ----------- ----------
<S> <C> <C> <C> <C> <C>
Atlanta.......................................... 18.0 74 34,400 7,056 April 1999
Chicago.......................................... 12.3 82 56,900 11,600 May 1999
New England-1.................................... 4.1 22 8,700 -- Month to month
New England-2.................................... -- 16 4,000 -- Month to month
Willingboro, NJ.................................. 5.5 -- -- 24,000 December 2013
</TABLE>
- ----------
(1) This facility is an office only.
Item 3. Legal Proceedings
The Company is routinely a party to litigation incidental to its business,
primarily involving claims for workers' compensation or for personal injury and
property damage incurred in the transportation of freight. Management believes
that the outcome of such actions will not have a material adverse effect on the
Company's financial position or results of operations. The Company maintains
insurance which covers liability amounts in excess of deductibles.
Item 4. Submission of Matters to a Vote of Security Holders
By unanimous written consent of the Company's shareholders effective
October 3, 1997, the Company's shareholders approved the restatement and
amendment of the Company's Certificate of Incorporation to (i) increase the
number of shares of authorized capital stock of the Company from 1,500 to
60,000,000, including 50,000 shares of Common Equity, divided into 40,000,000
shares of Common Stock and 10,000,000 shares of Class A Common Stock, and
10,000,000 shares of Preferred Stock, (ii) effect a 34,291-for-one split of the
issued and outstanding shares of the Company's Common Stock and Class A Common
Stock, (iii) further define the relative voting powers, preferences,
limitations, restrictions and other special or relative rights of the Company's
Common Stock and Class A Common Stock, (iv) provide for a classified Board of
Directors consisting of a number of directors to be fixed from time to time by
the Board, and, further, to
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<PAGE>
provide that directs shall not be liable to the Company or its shareholders for
damages under the circumstances set forth under the New Jersey Business
Corporation Act, (v) provide that actions to be taken by the shareholders of the
Company shall be taken only at an annual or special meeting or by unanimous
written consent and (vi) provide that certain provisions of the Company's
Restated Certificate of Incorporation may be amended only by a supermajority
vote, unless approved in advance by the Company's Board of Directors. The
Company's shareholders also approved the amendment and restatement of the
Company's By-laws.
By unanimous written consent of the Company's shareholders effective
October 6, 1997, the Company's shareholders elected Gordon R. Bowker and Samuel
H. Jones, Jr. as Class I directors, with terms expiring at the Company's annual
meeting in 1998, Paul J. Karvois and Karen B. Muhlschlegel as Class II
directors, with terms expiring at the Company's annual meeting in 1999, and
Harry J. Muhlschlegel as a Class III director, with a term expiring at the
Company's annual meeting in 2000.
PART II
Item 5. Market for Registrant's Common Equity and Related Stockholder Matters
The Company completed its initial public offering of common stock on
October 7, 1997, and its common stock is traded on the Nasdaq National Market
under the symbol "JEVC."
The following table sets forth, for the fiscal quarters indicated, the high
and low sales prices per share for the Company's common stock, as reported on
the Nasdaq National Market:
Fiscal 1997 High Low
----------- ---- ---
Fourth Quarter (commencing October 7, 1997)(1) $18 7/8 $15 3/8
- ----------
(1) The date the Company's Common Stock commenced trading.
As of March 19, 1998, there were 40 holders of record of the Company's
common stock and an estimated number of beneficial owners of the common stock of
approximately 1,600.
The Company has not declared or paid any cash dividends or distributions on
its capital stock. The Company currently intends to retain any future earnings
to fund operations and the continued development of its business and, therefore,
does not anticipate paying any cash dividends on its Common Equity in the
foreseeable future. Payment of dividends on the Common Equity is restricted
under the Company's bank credit facility. Future cash dividends, if any, will be
determined by the Board of Directors, and will be based upon the Company's
earnings, capital requirements, financial condition and other factors deemed
relevant by the Board of Directors.
-13-
<PAGE>
Item 6. Selected Financial Data
The following selected financial and operating data should be read in
conjunction with the Company's Consolidated Financial Statements and notes
thereto and "Management's Discussion and Analysis of Financial Condition and
Results of Operations," appearing elsewhere herein.
<TABLE>
<CAPTION>
Year Ended December 31,
-----------------------------------------------------------
1997 1996 1995 1994 1993
-------- -------- -------- -------- -------
(In thousands, except per share and certain operating data)
<S> <C> <C> <C> <C> <C>
INCOME STATEMENT DATA:
Operating revenues .................................... $190,821 $154,799 $125,973 $119,299 $90,161
-------- -------- -------- -------- -------
Operating expenses:
Salaries, wages and benefits ..................... 95,739 81,215 67,541 58,276 46,429
Supplies and other expenses ...................... 35,983 32,824 30,290 30,553 25,065
Purchased transportation ......................... 18,913 10,761 5,608 4,019 2,480
Depreciation and amortization .................... 11,465 8,732 6,445 4,395 3,249
Operating taxes and licenses ..................... 9,066 8,722 7,767 7,369 6,286
Insurance and claims ............................. 4,071 3,325 2,612 3,141 2,792
(Gain) loss on sale of equipment ................. 145 (170) (340) (191) (164)
-------- -------- -------- -------- -------
175,382 145,409 119,923 107,562 86,137
-------- -------- -------- -------- -------
Operating income ............................ 15,439 9,390 6,050 11,737 4,024
Interest expense, net ................................. 2,836 2,966 1,773 1,080 1,012
Other income, net ..................................... (401) (200) (153) (106) (144)
-------- -------- -------- -------- -------
Income before income taxes ............................ 13,004 6,624 4,430 10,763 3,156
Income taxes (1) ...................................... 10,586 429 191 351 323
-------- -------- -------- -------- -------
Net income (1) ........................................ $ 2,418 $ 6,195 $ 4,239 $ 10,412 $ 2,833
======== ======== ======== ======== =======
Basic net income per share ....................... $ 0.31 $ 0.90 $ 0.62 $ 1.52 $ 0.41
======== ======== ======== ======== =======
Diluted net income per share ..................... $ 0.30 $ 0.88 $ 0.62 $ 1.52 $ 0.41
======== ======== ======== ======== =======
Pro forma data (2):
Income before income taxes ....................... $ 13,004
Income taxes ..................................... 5,202
--------
Net income ....................................... $ 7,802
========
Basic net income per share .................. $ 0.94
========
Diluted net income per share ................ $ 0.92
========
</TABLE>
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<PAGE>
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C>
OPERATING DATA:
Total shipments (000s) ................................ 685 586 453 370 269
Total miles (000s) .................................... 91,527 75,795 65,599 65,855 57,924
Average operating revenue:
Per mile ......................................... $ 2.08 $ 2.04 $ 1.92 $ 1.81 $ 1.56
Per tractor per week ............................. $ 3,807 $ 3,764 $ 3,539 $ 3,553 $ 3,085
Number of tractors at end of year:
Company .......................................... 937 776 740 685 626
Owner-operator ................................... 123 63 -- -- --
</TABLE>
<TABLE>
<CAPTION>
December 31,
----------------------------------------------------------
1997 1996 1995 1994 1993
------- ------- ------- ------- -------
(In thousands)
<S> <C> <C> <C> <C> <C>
BALANCE SHEET DATA:
Working capital (deficit) ............................. $13,852 $(5,917) $(2,727) $ 1,336 $ (188)
Property and equipment, net ........................... 77,894 58,967 46,958 31,204 20,541
Total assets .......................................... 113,368 82,355 66,427 49,037 32,943
Long-term debt, less current maturities ............... 15,679 28,855 25,734 14,554 11,965
Shareholders' equity .................................. 65,537 24,071 18,236 17,702 8,246
</TABLE>
- -------------
(1) Prior to the Company's initial public offering in October 1997, the Company
was an S Corporation and, accordingly, was not subject to corporate income
taxes, except for certain states during certain periods. In connection with
the offering, the Company terminated its S Corporation status and recorded
a one-time, income tax provision of $8,459,000 in the fourth quarter of
1997 related to the increase in the net deferred tax liability. See Note 7
of "Notes to Consolidated Financial Statements."
(2) See Note 2 of "Notes to Consolidated Financial Statements."
Item 7. Management's Discussion and Analysis of Financial Condition and Results
of Operations
Overview
Jevic was founded in 1981, after the deregulation of the trucking industry,
and has developed an operating system which combines the high revenue yield
characteristics of a typical LTL carrier with the operating flexibility and low
fixed costs of a truckload carrier. Most other motor carriers have continued to
specialize as either truckload, moving one shipment at a time, or as
less-than-truckload, moving multiple small shipments through networks of up to
500 terminals.
-15-
<PAGE>
The Company's system uses a small number of regional facilities which serve
as origination points for consolidation of both small and large shipments. The
shipments are then loaded onto line-haul trailers in a sequence which permits
direct unloading at each shipment's destination, eliminating the need to
rehandle individual shipments at one or more breakbulk terminals. Management
focuses on adjusting freight mix to maximize asset utilization. The Company
maintains a high percentage of variable costs in order to minimize the impact of
short term swings in demand.
Because of the distinct nature of Jevic's operating system, the Company
believes that profitability measures and expense ratios traditionally used to
evaluate truckload or less-than-truckload carriers are not meaningful. Jevic's
results of operations for the last three years were impacted by several factors.
Jevic has been increasing the percentage of its shipments transported by
owner-operators, who supply their own tractor and bear all associated expenses
in return for a contracted rate. As a result, purchased transportation has
increased as a percentage of operating revenues, offset by a reduction, as a
percentage of operating revenues, in all other operating expense categories. A
portion of the increase in owner-operator transportation results from the
Company replacing high cost, outside line-haul purchased transportation with
less costly owner-operators. Additionally, Jevic has shifted from a policy of
leasing tractors to purchasing them. As a result, depreciation and interest
expense has increased as a percentage of operating revenues while lease expense
(included in supplies and other expenses) has decreased.
Results of Operations
The following table sets forth for the periods indicated the percentage of
operating revenues represented by certain items in the Company's consolidated
statements of income:
<TABLE>
<CAPTION>
Year Ended December 31,
-------------------------------
1997 1996 1995
----- ----- -----
<S> <C> <C> <C>
Operating revenues ............................. 100.0% 100.0% 100.0%
----- ----- -----
Operating expenses:
Salaries, wages and benefits .............. 50.2 52.5 53.6
Supplies and other expenses ............... 18.8 21.2 24.0
Purchased transportation .................. 9.9 7.0 4.5
Depreciation and amortization ............. 6.0 5.6 5.1
Operating taxes and licenses .............. 4.8 5.6 6.2
Insurance and claims ...................... 2.1 2.1 2.1
(Gain) loss on sale of equipment .......... 0.1 (0.1) (0.3)
----- ----- -----
91.9 93.9 95.2
----- ----- -----
Operating income .......................... 8.1 6.1 4.8
Interest expense, net ..................... 1.5 1.9 1.4
Other income, net ......................... (0.2) (0.1) (0.1)
----- ----- -----
Income before income taxes ................ 6.8% 4.3% 6.8%
===== ===== =====
</TABLE>
-16-
<PAGE>
Year Ended December 31, 1997 Compared to Year Ended December 31, 1996
Operating Revenues. Operating revenues increased 23.3% in 1997 to $190.8
million from $154.8 million in 1996. The increase resulted primarily from a
16.9% increase in total shipments. An additional factor in the increase was the
increase in average revenue per shipment, which resulted primarily from an
increase in the average shipment size. The Company's average tractor fleet grew
21.9% in 1997 compared to 1996 and improved utilization led to a slight increase
in revenue per tractor per week to $3,807 in 1997 from $3,764 in 1996.
Operating Expenses. Operating expenses increased 20.6% to $175.4 million in
1997 from $145.4 million in 1996. Operating expenses as a percentage of
operating revenues decreased to 91.9% in 1997 from 93.9% in 1996. This increase
in operating expenses was primarily due to increased revenues, as the majority
of the Company's operating expenses tend to be variable in nature. The
percentage decrease was primarily the result of the Company's increased use of
owner-operators in addition to increased tractor utilization.
Salaries, wages and benefits increased 17.9% to $95.7 million in 1997 from
$81.2 million in 1996. As a percentage of operating revenues, salaries, wages
and benefits decreased to 50.2% in 1997 from 52.5% in 1996. This percentage
decrease was primarily due to the Company's increased use of owner-operators in
1997.
Supplies and other expenses, which primarily consist of operating leases,
fuel, tolls, tires, parts and bad debt expense, increased 9.8% to $36.0 million
in 1997 from $32.8 million in 1996. As a percentage of operating revenues,
supplies and other expenses decreased to 18.8% in 1997 from 21.2% in 1996. This
percentage decrease was due to the Company's continuing shift toward the
purchase of revenue equipment rather than leasing such equipment under operating
leases, the Company's increased use of owner-operators and decreased fuel prices
in 1997.
Purchased transportation increased 75.0% to $18.9 million in 1997 from
$10.8 million in 1996. As a percentage of operating revenues, purchased
transportation increased to 9.9% in 1997 from 7.0% in 1996. The increase was
primarily due to the increased use of owner-operators to supplement the
Company's fleet and as a substitute for higher cost, outside line-haul
transportation. As a percentage of total purchased transportation expense,
owner-operator expense increased to 60.4% in 1997 from 21.5% in 1996.
Depreciation and amortization expense increased 32.2% to $11.5 million in
1997 from $8.7 million in 1996. As a percentage of operating revenues,
depreciation and amortization increased to 6.0% in 1997 from 5.6% in 1996. The
increase was primarily attributable to the Company's continuing shift toward the
purchase of additional and replacement revenue equipment rather than leasing
such equipment under operating leases.
Operating taxes and licenses increased 4.6% to $9.1 million in 1997 from
$8.7 million in 1996. As a percentage of operating revenues, operating taxes and
licenses decreased to 4.8% in 1997 from 5.6% in 1996. This percentage decrease
was primarily attributable the Company's increased use of owner-operators, who
pay their own fuel taxes and licenses.
-17-
<PAGE>
Insurance and claims increased 24.2% to $4.1 million in 1997 from $3.3
million in 1996. As a percentage of operating revenues, insurance and claims
remained flat at 2.1%.
Interest Expenses. Interest expense decreased 6.7% to $2.8 million in 1997
from $3.0 million in 1996. As a percentage of operating revenues, interest
expense decreased to 1.5% in 1997 from 1.9% in 1996. The decrease in interest
expense was primarily attributable to the repayment of long-term debt with a
portion of the proceeds of the Company's initial public offering.
Year Ended December 31, 1996 Compared to Year Ended December 31, 1995
Operating Revenues. Operating revenues increased 22.9% in 1996 to $154.8
million from $126.0 million in 1995. The increase resulted from a 29.4% growth
in total shipments. The Company's average tractor fleet grew 15.6% in 1996, and
improved utilization led to an increase in revenue per tractor per week of 6.4%
in 1996 to $3,764 from $3,539 in 1995.
Operating Expenses. Operating expenses increased 21.3% to $145.4 million in
1996 from $119.9 million in 1995. Operating expenses as a percentage of
operating revenues decreased to 93.9% in 1996 from 95.2% in 1995. The increase
in operating expenses is primarily due to increased revenues, as the majority of
the Company's operating expenses are variable in nature. The percentage decrease
was primarily the result of decreased equipment rent in 1996, partially offset
by increased purchased transportation expense. Increased tractor utilization,
which resulted in increased revenues per mile, also contributed to the overall
decrease in operating ratio in 1996 compared to 1995.
Salaries, wages and benefits increased 20.3% to $81.2 million in 1996 from
$67.5 million in 1995. As a percentage of operating revenues, salaries, wages
and benefits decreased to 52.5% in 1996 from 53.6% in 1995. This percentage
decrease was primarily due to a decrease in medical insurance expense resulting
from decreased claims and increased employee co-pay percentages. As a percentage
of operating revenues, non-driver wages increased due to the addition of new
staff and management positions in 1996. This increase was offset by a decrease
in driver wages as a percentage of operating revenues, resulting from the use of
owner-operators, which commenced in 1996.
Supplies and other expenses increased 8.3% to $32.8 million in 1996 from
$30.3 million in 1995. As a percentage of operating revenues, supplies and other
expenses decreased to 21.2% in 1996 from 24.0% in 1995. This percentage decrease
was primarily due to the Company's shift toward the purchase of revenue
equipment financed with debt rather than leasing such equipment under operating
leases, and, to a lesser extent, the Company's use of owner-operators in 1996.
The decrease was partially offset by an increase in bad debt expense as a
percent of operating revenues from 0.1% in 1995 to 0.4% in 1996. The bad debt
expense recognized in 1995 was unusually low due to a higher rate of collection
of past due accounts than the Company historically experienced.
Purchased transportation increased 92.9% to $10.8 million in 1996 from $5.6
million in 1995. As a percentage of operating revenues, purchased transportation
increased to 7.0% in 1996 from 4.5% in 1995. The increase was due to using more
outside line-haul transportation and more local cartage transportation for fleet
support in the Midwest. In addition, inefficiencies resulting from a difficult
freight market and adverse weather conditions in early 1996 were only partially
-18-
<PAGE>
offset by the Company's decision to use owner-operators that year. As a
percentage of total purchased transportation expense, owner-operator expense was
21.5% in 1996.
Depreciation and amortization expense increased 35.9% to $8.7 million in
1996 from $6.4 million in 1995. As a percentage of operating revenues,
depreciation and amortization expense increased to 5.6% in 1996 from 5.1% in
1995. The increase was primarily attributed to the Company's continuing shift
toward the purchase of additional and replacement revenue equipment with debt
financing rather than leasing such equipment under operating leases.
Operating taxes and licenses increased 11.5% to $8.7 million in 1996 from
$7.8 million in 1995. As a percentage of operating revenues, operating taxes and
licenses decreased to 5.6% in 1996 from 6.2% in 1995. This percentage decrease
was primarily attributed to the use of owner-operators in 1996.
Insurance and claims increased 26.9% to $3.3 million in 1996 from $2.6
million in 1995. As a percentage of operating revenues, insurance and claims
remained flat at 2.1%. Higher cargo losses due to the adverse weather conditions
in early 1996 were partially offset by decreased insurance premiums later in
1996.
Interest Expense. Interest expense increased 66.7% to $3.0 million in 1996
from $1.8 million in 1995. As a percentage of operating revenues, interest
expense increased to 1.9% in 1996 from 1.4% in 1995. The increase was due to
increased debt levels in 1996 resulting primarily from revenue equipment
purchases being financed with debt rather than operating leases, partially
offset by slightly lower average interest rates in 1996.
Liquidity and Capital Resources
Historically, the Company's primary sources of liquidity have been funds
provided by operations, capital and operating equipment leases and bank
borrowings. The Company completed an initial public offering of its Common Stock
effective October 7, 1997. The Company generated net proceeds of $52.1 million
from the offering, the majority of which was used to repay long-term debt. Net
cash provided by operating activities was approximately $18.4 million and $15.5
million in 1997 and 1996, respectively. The increase in net cash provided by
operating activities is primarily attributable to an increase in deferred income
taxes related to the one-time, non-cash provision, partially offset by increased
accounts receivable, prepaid expenses, and decreased accounts payable.
Capital expenditures, net of trade-in allowances, totaled approximately
$31.6 million and $20.7 million during 1997 and 1996, respectively. The 1997
capital expenditures were comprised of $25.3 million of revenue equipment, $3.1
million of facilities and $3.2 million of other equipment. Of the $20.7 million
of capital expenditures in 1996, $17.2 million represented revenue equipment,
$1.5 million represented facilities and $2.0 million represented other
equipment.
The Company has budgeted for total capital expenditures of $38.0 million in
1998. This budget includes $10.8 million to purchase new tractors and $3.8
million to purchase new trailers. In addition, the Company plans to spend
approximately $18.0 million on real estate projects in 1998. Projects for 1998
currently underway include the construction of regional facilities in
metropolitan Boston and Chicago. The Company also plans to purchase $5.4 million
of other equipment, primarily technology, during 1998. The Company's cash and
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<PAGE>
cash equivalents, combined with cash flows from operations and bank borrowings,
will provide the primary funding for the Company's planned capital expenditures.
The Company generally purchases new line-haul tractors and replaces them
after three years. Regional and local tractors are generally replaced after five
years, depending on levels of use. The Company generated cash proceeds from
sales of used tractors of $460,000 and $108,000 in 1997 and 1996, respectively.
Most of the Company's tractors are covered by agreements under which the Company
has the right to resell the tractors to the vendor at defined prices. There is
no assurance that the Company will be able to generate consistent cash proceeds
on sales of used tractors or obtain favorable trade-in terms in the future.
Net cash provided by financing activities was approximately $17.6 million
and $6.3 million in 1997 and 1996, respectively. The increase was primarily due
to the $52.1 million of net offering proceeds, offset by repayments of long-term
debt and distributions to S corporation shareholders. At December 31, 1997,
total borrowings under long-term debt totaled $17.7 million, maturing through
2007, and obligations relating to operating leases totaled $10.1 million through
2013, of which $1.8 million related to a facility lease with the Company's
founders.
Net distributions to the Company's founders, primarily related to taxed but
undistributed S Corporation earnings, were $12.7 million in 1997. The Board
determined that these distributions were reasonable and appropriate in light of
the shareholders' investment in and ownership risks associated with the Company
prior to such distributions. In 1996, the shareholders made net contributions to
the Company of $390,000, primarily related to the repayment of excess tax
distributions made by the Company in 1995.
Jevic is a party to a $25 million credit facility with CoreStates Bank,
N.A. The credit facility includes a $7 million working capital revolving line of
credit, with borrowings limited to 80% of the Company's eligible accounts
receivable, as defined, and an $18 million term loan facility used to purchase
or refinance revenue equipment. At December 31, 1997, there was $3.6 million
outstanding under the term loan facility and $400,000 of outstanding standby
letters of credit under the revolver. The term loans are secured by a first
priority, perfected security interest in the revenue equipment purchased or
refinanced. The rate of interest on both the term loans and the revolving credit
loans is, at the Company's election, either the Bank's prime rate, a rate based
on the London Interbank Offered Rate (LIBOR) or a fixed rate quoted by the Bank
to Jevic on the date of a borrowing. The revolving line of credit expires in
June 1999. Term loans outstanding under the facility vary as to their maturity
(from five to eight years from the date of each loan) depending on the type of
revenue equipment financed. The maturities of the Company's term loans range
from September 2003 to May 2004. The credit facility contains covenants which
restrict the Company's ability to make business acquisitions and pay dividends
on its capital stock, including the Common Stock, among other things.
On December 31, 1997, Jevic Transportation Services, Inc. ("JTS"), a
freight brokerage company owned by the Muhlschlegels was merged into the
Company. JTS had gross revenues of approximately $2.8 million and $1.2 million
for 1997 and 1996, respectively, and a net loss of approximately $35,000 for
1997 and net income of approximately $34,000 for 1996. The Muhlschlegels
received $125,000 from the Company in 1998 in exchange for their JTS stock in
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<PAGE>
the merger, which is equal to their capital investment in JTS. The merger was
accounted for as a combination of companies under common control.
The Company believes that its cash and cash equivalents, funds generated
from operations and available borrowings under its current or future credit
facilities will be sufficient to fund the Company's activities at least through
1998.
While the Company intends to selectively pursue acquisitions of companies
that are complementary with its operations, the Company currently does not have
any commitments or agreements for any business acquisition and is not in active
negotiations regarding any such acquisition.
Inflation
The Company does not believe that inflation has had a material impact on
its results of operations for the past three years.
Seasonality
In the trucking industry, revenues generally follow a seasonal pattern as
customers reduce shipments during and after the winter holiday season. In
addition, highway transportation can be adversely affected depending upon the
severity of the weather in various sections of the country during the winter
months. The Company's operating expenses have historically been higher in winter
months, due primarily to decreased fuel efficiency and increased maintenance
costs for revenue equipment in colder weather. Accordingly, the Company's
results of operations may fluctuate to reflect such seasonality.
Year 2000 Costs
Many computer systems were not designed to handle dates beyond the year
1999, and, therefore, computer hardware and software will need to be modified
prior to the year 2000 in order to remain functional. The Company is in the
process of upgrading its primary computer platform in order to provide increased
enterprise computing and additional disaster recovery capabilities. This new
system will be Year 2000 compliant. Management is in the process of determining
whether all of the Company's other computer systems are Year 2000 compliant.
Management does not expect the costs associated with any required conversions of
such other systems to ensure Year 2000 compliance to be significant. In the
event that any of the Company's significant vendors or customers do not
successfully achieve Year 2000 compliance on a timely basis, the Company's
business or operations could be adversely affected.
Item 8. Financial Statements
The Company's consolidated financial statements appear at pages F-1 through
F-14, as set forth in Item 14.
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<PAGE>
Item 9. Changes in and Disagreements with Accountants on Accounting and
Financial Disclosure
None.
PART III
Item 10. Directors and Executive Officers of the Registrant
Information concerning directors, appearing under the caption "Election of
Directors" in the Company's Proxy Statement (the "Proxy Statement") to be filed
with the Securities and Exchange Commission in connection with the Annual
Meeting of Shareholders scheduled to be held on May 15, 1998, information
concerning executive officers, appearing under the caption "Item 1. Business
Executive Officers of the Company" in Part I of this Form 10-K, and information
under the caption "Section 16(a) Beneficial Ownership Reporting Compliance" in
the Proxy Statement are incorporated herein by reference in response to this
Item 10.
Item 11. Executive Compensation
The information contained in the section titled "Executive Compensation" in
the Proxy Statement, with respect to executive compensation, and the information
contained in the section entitled "Director Compensation" with respect to
director compensation, are incorporated herein by reference in response to this
Item 11.
Item 12. Security Ownership of Certain Beneficial Owners and Management
The information contained in the section titled "Security Ownership of
Certain Beneficial Owners and Management" in the Proxy Statement, with respect
to security ownership of certain beneficial owners and management, is
incorporated herein by reference in response to this Item 12.
Item 13. Certain Relationships and Related Transactions
The information contained in the section titled "Certain Relationships and
Transactions" of the Proxy Statement, with respect to certain relationships and
related transactions, is incorporated herein by reference in response to this
Item 13.
PART IV
Item 14. Exhibits, Financial Statement Schedules and Reports on Form 10-K
(a) (1) Financial Statements
The financial statements listed in the accompanying Index to Consolidated
Financial Statements are filed as part of this Form 10-K, commencing on
page F-1.
-22-
<PAGE>
(2) Schedules
The following consolidated financial statement schedule of the Company is filed
as part of this Form 10-K on page F-15:
Schedule II - Valuation and Qualifying Accounts
(3) Exhibits
Exhibit No. Description
- ----------- -----------
* 3.1 Articles of Incorporation of the Company (Exhibit 3.1 to the
Company's Form S-1 Registration Statement, No. 333-33469 (the "1997
Registration Statement")).
* 3.2 By-laws of the Company (Exhibit 3.2 to the 1997 Registration
Statement).
+10.1 1997 Incentive Plan.
+*10.2 1994 Stock Option Plan (Exhibit 10.2 to the 1997 Registration
Statement).
10.3 Employee Stock Purchase Plan.
+*10.4 401(k) Profit Sharing Plan (Exhibit 10.4 to the 1997 Registration
Statement).
10.5 Supplemental Executive Retirement Plan.
*10.6 Promissory Note, dated April 14, 1997, made by Karen B.
Muhlschlegel, as Trustee of the Karen B. Muhlschlegel 1996 Grantor
Annuity Trust, in favor of the Company in the principal amount of
$218,772 (Exhibit 10.8 to the 1997 Registration Statement).
*10.7 Promissory Note, dated April 14, 1997, made by Harry J.
Muhlschlegel, as Trustee of the Harry J. Muhlschlegel 1996 Grantor
Annuity Trust, in favor of the Company in the principal amount of
$219,293 (Exhibit 10.9 to the 1997 Registration Statement).
*10.8 Lease Agreement made and entered into as of April 12, 1995 among
Harry J. Muhlschlegel and Karen Muhlschlegel and the Company
(Exhibit 10.10 to the 1997 Registration Statement).
10.9 Amendment to Lease Agreement made and entered into as of September
15, 1997 among Harry J. Muhlschlegel and Karen Muhlschlegel and the
Company.
10.10 Real Estate Sale Agreement made and entered into as of November 7,
1997 among Harry J. Muhlschlegel and Karen Muhlschlegel and the
Company.
-23-
<PAGE>
*10.11 Lease Agreement between James F. Lomma, as Landlord, and the
Company, as Tenant, dated June 1, 1995, as amended (Exhibit 10.12
to the 1997 Registration Statement).
*10.12 Commercial Lease Agreement made and effective March 1, 1997 by and
between 864 Realty Trust and the Company (Exhibit 10.13 to the 1997
Registration Statement).
*10.13 Lease Agreement made and entered into the 7th day of March, 1996 by
and between Little Brownie Properties Inc. and the Company (Exhibit
10.14 to the 1997 Registration Statement).
*10.14 Agreement of Lease made and entered into between Dongary
Investments, Ltd. and the Company dated March 31, 1994 (Exhibit
10.15 to the 1997 Registration Statement).
*10.15 Credit Agreement, dated June 28, 1996, between the Company and
CoreStates Bank, N.A. (Exhibit 10.16 to the 1997 Registration
Statement).
*10.16 Security Agreement, dated as of June 28, 1996, by and between the
Company and CoreStates Bank, N.A. (Exhibit 10.17 to the 1997
Registration Statement).
*10.17 Promissory Note, dated October 31, 1995, made by the Company in
favor of MetLife Capital Financial Corporation (Exhibit 10.18 to
the 1997 Registration Statement).
*10.18 Mortgage Security Agreement, Assignment of Leases and Rents and
Fixture Filing, made as of October 31, 1995, by the Company in
favor of MetLife Capital Financial Corporation (Exhibit 10.19 to
the 1997 Registration Statement).
*10.19 Tax Indemnity Agreement (Exhibit 10.20 to the 1997 Registration
Statement).
*10.20 Administrative Services Agreement, dated as of January 1, 1996
between the Company and Jevic Transportation Systems, Inc. (Exhibit
10.21 to the 1997 Registration Statement).
21 Subsidiaries of Registrant.
23 Consent of Arthur Andersen LLP.
27 Financial Data Schedule.
- ----------
* Incorporated by reference.
+ Management contract or compensatory plan or arrangement.
-24-
<PAGE>
JEVIC TRANSPORTATION, INC. AND SUBSIDIARIES
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS AND SCHEDULE
PAGE
----
Report of Independent Public Accountants................................. F-2
Consolidated Balance Sheets.............................................. F-3
Consolidated Statements of Income........................................ F-4
Consolidated Statements of Shareholders' Equity.......................... F-5
Consolidated Statements of Cash Flows.................................... F-6
Notes to Consolidated Financial Statements............................... F-7
Consolidated Financial Statement Schedule:
II. Valuation and Qualifying Accounts.............................. F-15
F-1
<PAGE>
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To Jevic Transportation, Inc.:
We have audited the accompanying consolidated balance sheets of Jevic
Transportation, Inc. (a New Jersey corporation) and subsidiaries as of December
31, 1997 and 1996, and the related consolidated statements of income,
shareholders' equity and cash flows for each of the three years in the period
ended December 31, 1997. These financial statements and the schedule referred to
below are the responsibility of the Company's management. Our responsibility is
to express an opinion on these financial statements and schedule based on our
audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of Jevic Transportation, Inc. and
subsidiaries as of December 31, 1997 and 1996, and the results of their
operations and their cash flows for each of the three years in the period ended
December 31, 1997, in conformity with generally accepted accounting principles.
Our audits were made for the purpose of forming an opinion on the basic
financial statements taken as a whole. The schedule listed in the Index to
Consolidated Financial Statements and Schedule is presented for purposes of
complying with the Securities and Exchange Commission's rules and is not a part
of the basic financial statements. This schedule has been subjected to the
auditing procedures applied in our audit of the basic financial statements and,
in our opinion, fairly states in all material respects the financial data
required to be set forth therein in relation to the basic financial statements
taken as a whole.
ARTHUR ANDERSEN LLP
Philadelphia, PA.
February 9, 1998
F-2
<PAGE>
JEVIC TRANSPORTATION, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(in thousands, except for share amounts)
<TABLE>
<CAPTION>
DECEMBER 31,
----------------------
1997 1996
--------- ---------
ASSETS
<S> <C> <C>
CURRENT ASSETS:
Cash and cash equivalents ............................... $ 7,185 $ 2,403
Accounts receivable, less allowance for doubtful
accounts of $1,527 and $999, respectively ........... 21,792 17,123
Prepaid expenses and other .............................. 3,172 2,335
Deferred income taxes ................................... 1,862 174
--------- ---------
Total current assets ................................ 34,011 22,035
PROPERTY AND EQUIPMENT, net ................................ 77,894 58,967
OTHER ASSETS ............................................... 1,463 1,353
--------- ---------
$ 113,368 $ 82,355
========= =========
LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES:
Current portion of long-term debt ....................... $ 1,976 $ 9,422
Current portion of capital lease obligations ............ -- 1,260
Accounts payable ........................................ 6,313 7,365
Accrued salaries, wages and benefits .................... 2,178 2,226
Other accrued expenses .................................. 3,375 2,995
Claims and insurance reserves ........................... 3,917 3,385
Accrued income taxes .................................... 648 54
Deferred freight revenues ............................... 1,752 1,245
--------- ---------
Total current liabilities ........................... 20,159 27,952
--------- ---------
LONG-TERM DEBT ............................................. 15,679 28,855
--------- ---------
DEFERRED INCOME TAXES ...................................... 11,782 984
--------- ---------
OTHER LIABILITIES .......................................... 211 493
--------- ---------
COMMITMENTS AND CONTINGENCIES (Note 11)
SHAREHOLDERS' EQUITY:
Preferred Stock, no par value, 10,000,000 shares
authorized; none issued and outstanding ............. -- --
Common Stock, no par value, 40,000,000 shares
authorized; 4,918,656 issued and outstanding in 1997 -- --
Class A Common Stock, no par value, 10,000,000 shares
authorized; 5,739,544 and 6,858,200 shares issued and
outstanding, respectively ........................... -- --
Additional paid-in capital .............................. 71,816 1,128
Retained earnings (accumulated deficit) ................. (6,279) 22,943
--------- ---------
Total shareholders' equity .......................... 65,537 24,071
--------- ---------
$ 113,368 $ 82,355
========= =========
</TABLE>
The accompanying notes are an integral part of these statements.
F-3
<PAGE>
JEVIC TRANSPORTATION, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
(in thousands, except per share amounts)
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
-----------------------
1997 1996 1995
--------- --------- ---------
<S> <C> <C> <C>
OPERATING REVENUES ................................................. $ 190,821 $ 154,799 $ 125,973
--------- --------- ---------
OPERATING EXPENSES:
Salaries, wages and benefits .................................... 95,739 81,215 67,541
Supplies and other expenses ..................................... 35,983 32,824 30,290
Purchased transportation ........................................ 18,913 10,761 5,608
Depreciation and amortization ................................... 11,465 8,732 6,445
Operating taxes and licenses .................................... 9,066 8,722 7,767
Insurance and claims ............................................ 4,071 3,325 2,612
(Gain) loss on sales of equipment ............................... 145 (170) (340)
--------- --------- ---------
175,382 145,409 119,923
--------- --------- ---------
Operating income .......................................... 15,439 9,390 6,050
INTEREST EXPENSE, net .............................................. 2,836 2,966 1,773
OTHER, net ......................................................... (401) (200) (153)
--------- --------- ---------
Income before income taxes ................................ 13,004 6,624 4,430
INCOME TAXES ....................................................... 10,586 429 191
--------- --------- ---------
NET INCOME ......................................................... $ 2,418 $ 6,195 $ 4,239
========= ========= =========
Basic net income per share ......................................... $ 0.31 $ 0.90 $ 0.62
========= ========= =========
Diluted net income per share ....................................... $ 0.30 $ 0.88 $ 0.62
========= ========= =========
PRO FORMA DATA (UNAUDITED) (Note 2):
Income before income taxes ...................................... $ 13,004
Pro forma income taxes........................................... 5,202
---------
Pro forma net income............................................. $ 7,802
=========
Pro forma basic net income per share ............................ $ 0.94
=========
Pro forma diluted net income per share .......................... $ 0.92
=========
</TABLE>
The accompanying notes are an integral part of these statements.
F-4
<PAGE>
JEVIC TRANSPORTATION, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY
(in thousands, except for share amounts)
<TABLE>
<CAPTION>
RETAINED
NUMBER OF SHARES EARNINGS
------------------------
CLASS A ADDITIONAL (ACCUMULATED
COMMON COMMON PAID-IN CAPITAL DEFICIT) TOTAL
--------- ---------- --------------- ------------ ----------
<S> <C> <C> <C> <C> <C>
Balance, December 31, 1994 ............................ 6,858,200 -- $ 1,014 $ 16,688 $ 17,702
Net income ......................................... -- -- -- 4,239 4,239
Deemed dividend to shareholders on purchase
of facility....................................... -- -- -- (681) (681)
Net distributions to shareholders .................. -- -- -- (3,024) (3,024)
---------- ---------- ---------- ---------- ----------
Balance, December 31, 1995 ............................ 6,858,200 -- 1,014 17,222 18,236
Net income ......................................... -- -- -- 6,195 6,195
Contribution of capital ............................ -- -- 114 -- 114
Net distributions to shareholders .................. -- -- -- (474) (474)
---------- ---------- ---------- ---------- ----------
Balance, December 31, 1996 ............................ 6,858,200 -- 1,128 22,943 24,071
Net income ......................................... -- -- -- 2,418 2,418
Conversion of Class A Common Stock to
Common Stock ..................................... (1,118,656) 1,118,656 -- -- --
Net proceeds from issuance of Common Stock ......... -- 3,800,000 52,109 -- 52,109
Termination of S corporation status ................ -- -- 18,579 (18,579) --
Deemed dividend to shareholders on purchase
of facility ...................................... -- -- -- (406) (406)
Net distributions to S Corporation
shareholders ..................................... -- -- -- (12,655) (12,655)
---------- ---------- ---------- ---------- ----------
Balance, December 31, 1997 ............................ 5,739,544 4,918,656 $ 71,816 $ (6,279) $ 65,537
========== ========== ========== ========== ==========
</TABLE>
The accompanying notes are an integral part of these statements ...
F-5
<PAGE>
JEVIC TRANSPORTATION, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands)
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
--------------------------------
1997 1996 1995
-------- -------- --------
<S> <C> <C> <C>
OPERATING ACTIVITIES:
Net income............................................... $ 2,418 $ 6,195 $ 4,239
Adjustments to reconcile net income to net
cash provided by operating activities:
Depreciation and amortization...................... 11,465 8,732 6,445
(Gain) loss on sales of equipment.................. 145 (170) (340)
Provision for doubtful accounts.................... 937 629 84
Deferred income tax provision...................... 9,359 224 185
Changes in operating assets and liabilities --
Increase in accounts receivable................ (5,260) (3,272) (1,735)
(Increase) decrease in prepaid
expenses and other.......................... (837) 245 (454)
Increase in other assets....................... (109) (934) (221)
Increase (decrease) in accounts
payable..................................... (1,389) 721 1,749
Increase (decrease) in accrued salaries, wages
and benefits................................ (55) 761 349
Increase in other accrued expenses............ 91 1,667 594
Increase in claims and insurance
reserves.................................... 532 619 878
Increase (decrease) in accrued income
taxes....................................... 594 54 (138)
Increase in deferred freight
revenues.................................... 507 25 180
-------- -------- --------
Net cash provided by operating
activities............................... 18,398 15,496 11,815
-------- -------- --------
INVESTING ACTIVITIES:
Proceeds from sales of equipment......................... 460 108 742
Purchases of property and equipment...................... (31,649) (20,679) (17,740)
-------- -------- --------
Net cash used in investing
activities............................... (31,189) (20,571) (16,998)
-------- -------- --------
FINANCING ACTIVITIES:
Payments of long-term debt............................... (36,160) (9,210) (6,430)
Proceeds from issuance of long-term debt................. 15,539 16,110 14,687
Proceeds from issuance of capital stock.................. 52,109 -- --
Payments of capital lease obligations.................... (1,260) (958) (753)
Net contributions from (distributions to)
shareholders......................................... (12,655) 390 (3,774)
-------- -------- --------
Net cash provided by financing
activities............................... 17,573 6,332 3,730
-------- -------- --------
NET INCREASE (DECREASE) IN CASH AND CASH
EQUIVALENTS.............................................. 4,782 1,257 (1,453)
CASH AND CASH EQUIVALENTS, BEGINNING OF
YEAR..................................................... 2,403 1,146 2,599
-------- -------- --------
CASH AND CASH EQUIVALENTS, END OF YEAR...................... $ 7,185 $ 2,403 $ 1,146
======== ======== ========
</TABLE>
The accompanying notes are an integral part of these statements.
F-6
<PAGE>
JEVIC TRANSPORTATION, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. BACKGROUND AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
BACKGROUND
Jevic Transportation, Inc. (the "Company") is a motor carrier engaged in
interregional and regional transportation of general commodity freight in the
United States. The Company completed an initial public offering of its Common
Stock effective October 7, 1997. The Company sold 3,800,000 shares in the
offering, generating net proceeds of approximately $52,109,000.
PRINCIPLES OF CONSOLIDATION
The accompanying consolidated financial statements include the accounts of the
Company and its subsidiaries. All intercompany accounts and transactions have
been eliminated.
USE OF ESTIMATES
The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions that
affect the reported amounts of assets and liabilities and disclosure of
contingent assets and liabilities at the date of the financial statements and
the reported amounts of revenues and expenses during the reporting period.
Actual results could differ from those estimates.
CASH AND CASH EQUIVALENTS
The Company considers all highly liquid investments purchased with an original
maturity of three months or less to be cash equivalents.
PROPERTY AND EQUIPMENT
Property and equipment are stated at cost. Major additions and improvements are
capitalized, while maintenance and repairs that do not improve or extend the
life of assets are charged to expense as incurred. Gain or loss on retirement or
disposal of assets is included in income. For like-kind exchanges, any excess of
the trade-in allowance over the net book value of the traded asset is deferred
in the basis of the new asset.
Depreciation and amortization are provided using the straight-line method over
the following estimated useful lives:
<TABLE>
<S> <C>
Revenue equipment 3 to 10 years (10% to 20% salvage value)
Furniture and fixtures and other equipment 5 to 10 years
Building and improvements 20 to 35 years
Leasehold improvements lease term
</TABLE>
TIRES
The cost of original tires on revenue equipment is included in and depreciated
as part of the total revenue equipment cost. Replacement tires are charged to
expense when placed in service.
OTHER ASSETS
At December 31, 1997 and 1996, other assets include $678,000 and $507,000,
respectively, of cash surrender value related primarily to a $3,000,000 life
insurance policy on the Company's Chief Executive Officer, net of loans of
$121,000.
F-7
<PAGE>
REVENUE RECOGNITION
The Company recognizes revenue in accordance with the Emerging Issues Task Force
of the Financial Accounting Standards Board Issue 91-9, "Revenue and Expense
Recognition in Freight Services in Process." Although the Company moves freight
under contractual arrangements with its shippers, revenue is recognized on the
delivery date and billing generally occurs on the pick-up date. At December 31,
1997 and 1996, the Company had deferred freight revenues of $1,752,000 and
$1,245,000, respectively.
CLAIMS AND INSURANCE RESERVES
Claims and insurance reserves reflect the estimated cost of claims for cargo
loss and damage, bodily injury and property damage, collision, workers'
compensation and group health (see Note 11). The related costs are charged to
insurance and claims expense except for workers' compensation and group health,
which are charged to salaries, wages and benefits.
INCOME TAXES
Deferred tax assets and liabilities are recognized for the future tax
consequences attributable to differences between the financial statement
carrying amounts of existing assets and liabilities and their respective tax
bases. Deferred tax assets and liabilities are measured using enacted tax rates
expected to apply to taxable income in the years in which those assets and
liabilities are expected to be recovered or settled. The Company accounts for
certain income and expense items for financial reporting purposes differently
than for income tax purposes. The principal differences relate to the use of
accelerated tax depreciation for income tax purposes and certain financial
statement reserves that are not currently deductible for income tax purposes.
The Company was subject to taxation under Subchapter "S" of the Internal Revenue
Code from 1990 until the termination of its S Corporation status concurrent with
its initial public offering. Accordingly, prior to the offering, no provision
was made for federal or certain state income taxes and the Company's
shareholders were taxed directly on their proportionate share of the Company's
taxable income. In connection with the offering, the Company terminated its S
Corporation status and is subject to federal and state income taxes. The Company
recorded a one-time non-cash charge of $8,459,000 for the increase in the
Company's net deferred tax liability resulting from the S Corporation
termination (see Note 7).
NET INCOME PER SHARE
In February 1997, the Financial Accounting Standards Board ("FASB") issued
Statement of Financial Accounting Standards ("SFAS") No. 128, "Earnings Per
Share." This statement established new standards for computing and presenting
earnings per share and requires the restatement of prior year amounts. The
Company adopted SFAS No. 128 effective December 31, 1997.
Basic net income per share is calculated by dividing net income by the weighted
average number of shares of Common Stock outstanding for the period. Diluted net
income per share is calculated by dividing net income by the weighted average
number of shares of Common Stock outstanding for the period, adjusted for the
dilutive effect of Common Stock equivalents, which consist of stock options,
using the treasury stock method. The table below sets forth the reconciliation
of the numerators and denominators of the basic and diluted net income per share
computations (in thousands, except per share amounts):
<TABLE>
<CAPTION>
Year Ended December 31,
-----------------------------------------------------------------------------------------------------
1997 1996 1995
------------------------------- -------------------------------- -------------------------------
Per Per Per
Net Share Net Share Net Share
Income Shares Amount Income Shares Amount Income Shares Amount
------- ------ -------- ------- ------- ------- ------- ------- --------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Basic net income per share $ 2,418 7,754 $ 0.31 $ 6,195 6,858 $ 0.90 $ 4,239 6,858 $ 0.62
Effect of dilutive
securities -- 193 (0.01) -- 143 (0.02) -- -- --
------- ------ ------- ------- ------- ------- ------- ------- --------
Diluted net income per
share $ 2,418 7,947 $ 0.30 $ 6,195 7,001 $ 0.88 $ 4,239 6,858 $ 0.62
======= ====== ======= ======= ======= ======= ======= ======= ========
</TABLE>
The Company's weighted average shares of Common Stock outstanding include Class
A Common Stock for all periods presented and Common Stock from the effective
date of the Company's initial public offering.
For the year ended December 31, 1995, 685,820 Common Stock options were excluded
from the diluted computation because they were not dilutive.
F-8
<PAGE>
NEW ACCOUNTING PRONOUNCEMENT
In June 1997, the FASB issued SFAS No. 131, "Disclosure About Segments of an
Enterprise and Related Information." This statement establishes additional
standards for segment reporting in the financial statements and is effective for
fiscal years beginning after December 15, 1997. Management believes that SFAS
No. 131 will not have an effect on the Company's financial reporting.
SUPPLEMENTAL CASH FLOW INFORMATION
For the years ended December 31, 1997, 1996 and 1995, the Company paid interest
of $3,291,000, $3,120,000 and $1,886,000, respectively, and income taxes of
$726,000, $234,000 and $425,000, respectively.
In March 1995 and November 1997, the Company purchased operating facilities
from its shareholders (see Note 10). In December 1995, the Company recorded a
receivable of $750,000 from its shareholders related to income taxes, which was
repaid in 1996 (see Note 10).
The Company accounts for equipment purchases that involve trade-ins as like-kind
exchanges. Accordingly, for the year ended December 31, 1997 and 1996, purchases
of property and equipment are presented net of trade-in allowances of $3,904,000
and $7,188,000, respectively.
2. PRO FORMA DATA (UNAUDITED)
Immediately preceding the Company's initial public offering, the Company
terminated its status as an S Corporation and became subject to federal and
state income taxes. Accordingly, for informational purposes, the accompanying
statement of income for the year ended December 31, 1997 includes a pro forma
adjustment to reflect the income taxes that would have been recorded had the
Company been a C Corporation for the entire year, based on the tax laws in
effect during the period. Pro forma income taxes do not include the one-time
income tax provision of $8,459,000 related to the recognition of an increase in
the net deferred tax liability that was recorded by the Company upon terminating
its S Corporation status.
Pro forma basic and diluted net income per share is computed in accordance with
SFAS No. 128 (see Note 1) after giving effect to the weighted average number of
shares that would be required to be sold at the initial public offering price of
$15.00 per share, less underwriting discounts and commissions and estimated
offering expenses to fund the $10,000,000 of estimated S Corporation
distributions in October 1997.
3. RISKS AND UNCERTAINTIES
The Company's operations involve a number of risks and uncertainties. Factors
that could affect the Company's future operating results and cause actual
results to vary materially from expectations include, but are not limited to,
general economic factors, availability of employee drivers and owner-operators,
capital requirements, competition, unionization, fuel, seasonality, claims and
insurance costs, difficulty in managing growth, regulation, environmental
hazards and dependence on key personnel.
Financial instruments that potentially subject the Company to concentrations of
credit risk consist primarily of trade accounts receivable. The Company does not
require collateral or other securities to support customer receivables. A
significant portion of the Company's operating revenues is derived from sales to
customers in the chemical industry, and the majority of the Company's operating
revenues are derived from sales to customers located in the Northeast. However,
no single customer accounts for more than 10% of the Company's operating
revenues.
4. PROPERTY AND EQUIPMENT
DECEMBER 31,
-----------------------
1997 1996
-------- --------
(in thousands)
Revenue equipment..................................... $ 81,107 $60,214
Furniture and fixtures and other equipment............ 12,125 9,689
Land, building and improvements....................... 13,294 9,001
Leasehold improvements................................ 785 2,531
Construction in progress.............................. 411 104
-------- -------
107,722 81,539
Less - Accumulated depreciation and amortization...... (29,828) (22,572)
-------- -------
$ 77,894 $58,967
======== =======
F-9
<PAGE>
At December 31, 1996, total property and equipment under capital leases was
$4,122,000, with accumulated amortization of $2,639,000.
5. LINE OF CREDIT
The Company has a $7,000,000 unsecured revolving line of credit with a bank.
Each draw on the line bears interest at a fixed rate, as defined, or at a rate
based on prime or LIBOR, as selected by the Company. Interest on the line is
payable monthly, and the line extends through June 1999. There were no
borrowings on the line during 1997 and 1996. At December 31, 1997, $6,600,000
was available under the line as $400,000 in stand-by letters of credit were
outstanding. In addition, the Company has $575,000 of stand-by letters of credit
outstanding with another bank.
The line is cross-defaulted with certain long-term debt and the equipment line
(see Note 6). The corresponding loan agreement requires the Company to maintain
certain financial and nonfinancial covenants, as defined, the most restrictive
of which limits the payment of dividends to 50% of the Company's net income, as
defined.
6. LONG-TERM DEBT
<TABLE>
<CAPTION>
DECEMBER 31,
----------------------
1997 1996
------- -------
(in thousands)
<S> <C> <C>
Various installment notes, monthly principal payments plus interest at rates
ranging from 6.2% to 8.0%, collateralized by revenue and other equipment,
due through June 2007........................................................ $ 8,627 $25,090
Term notes with bank, monthly principal payments plus interest at rates ranging
from 7.9% to 8.1%, collateralized by revenue equipment, due through May
2004........................................................................ 3,602 7,685
Mortgage note, monthly payments of principal and interest of
$45,000, final balloon payment of $4,628,000 due October
2005, interest at 8.4%, collateralized by facility........................... 5,426 5,502
------- -------
17,655 38,277
Less - Current portion.......................................................... (1,976) (9,422)
------- -------
$15,679 $28,855
======= =======
Aggregate maturities of long-term debt at December 31, 1997, are as follows:
1998..................................................................................... $ 1,976
1999..................................................................................... 1,928
2000..................................................................................... 1,976
2001..................................................................................... 2,056
2002..................................................................................... 1,470
Thereafter............................................................................... 8,249
-------
$17,655
=======
</TABLE>
The Company has an $18,000,000 equipment line with a bank for purchases of
revenue equipment. Upon the funding of the equipment purchases, the related
borrowings under the line are converted to a term note bearing interest at a
fixed rate, as defined, or at a rate based on prime or LIBOR, as selected by the
Company. At December 31, 1997, $14,398,000 was available under the equipment
line. The equipment line and certain term notes are cross-defaulted with the
revolving line of credit (see Note 5).
F-10
<PAGE>
7. INCOME TAXES
The components of the income tax provision are as follows (in thousands):
<TABLE>
<CAPTION>
Year Ended December 31,
------------------------------------------------------
1997 1996 1995
---------------- ---------------- ----------------
<S> <C> <C> <C>
Current:
Federal $ 767 $ -- $ --
State and local 460 205 6
---------------- ---------------- ----------------
1,227 205 6
Deferred 900 224 185
Change in tax status 8,459 -- --
---------------- ---------------- ----------------
$ 10,586 $ 429 $ 191
================ ================ ================
</TABLE>
The provision for income taxes for the year ended December 31, 1997, consists of
federal and state income taxes subsequent to the Company's initial public
offering, certain state income taxes prior to the offering and a one-time tax
provision of $8,459,000 related to the recognition of the increase in the net
deferred tax liability recorded by the Company upon terminating its S
Corporation status. For the years ended December 31, 1996 and 1995, the
provision for income taxes consisted of certain state and local income taxes.
The statement of income for the year ended December 31, 1997 includes a pro
forma adjustment for the income taxes which would have been recorded if the
Company had been a C Corporation for the entire period, based on tax laws in
effect during the respective period. The reconciliation of the federal statutory
income tax rate and the pro forma effective income tax rate is as follows for
the year ended December 31, 1997:
Federal statutory rate 35.0%
State and local income taxes, net of federal benefit 3.1%
Other 1.9%
----------
40.0%
==========
The tax effect of temporary differences that give rise to deferred income taxes
at December 31, 1997 are as follows (in thousands):
Insurance reserves $ 1,442
Allowance for bad debts 590
Other accruals and reserves 130
Property and equipment (11,782)
Prepaid expenses (300)
----------
$ (9,920)
==========
8. EMPLOYEE BENEFIT PLANS
The Company maintains a defined contribution 401(k) profit-sharing plan for all
eligible employees. Employer contributions to the plan are based on matching
employee contributions and an annual discretionary contribution determined by
the shareholders. The Company's total contributions for the years ended December
31, 1997, 1996 and 1995, were $650,000, $551,000 and $443,000, respectively.
On January 1, 1998, the Company adopted an employee stock purchase plan under
the provisions of Section 423 of the Internal Revenue Code. The plan provides
eligible employees of the Company with an opportunity to purchase shares of the
Company's Common Stock at 85% of fair market value, as defined. The Company has
reserved 300,000 shares of Common Stock for issuance pursuant to this plan.
9. STOCK OPTION PLANS
In 1994, the Company adopted the 1994 Stock Option Plan (the "Option Plan") that
permits the grant of options to purchase shares of the Company's Common Stock.
The Option Plan allows the granting of incentive and nonqualified stock options
to employees, directors and consultants at exercise prices not less than the
fair market value of the Company's Common Stock on the date of grant. The option
grants and related vesting periods are determined by the Board of Directors.
F-11
<PAGE>
In December 1994, the Company granted options to purchase 685,820 shares of
Common Stock to key employees, under the Option Plan, at an exercise price of
$8.49 per share, representing fair market value on the grant date, as determined
by the Board of Directors. The options originally vested in December 2004. In
connection with the Company's initial public offering, the vesting was
accelerated to a five-year period commencing on October 7, 1997. No additional
options were granted under this plan, nor were any options exercised or
canceled. As of December 31, 1997, no options were exercisable and no additional
shares were available for future grant under the Option Plan.
In 1997, the Company adopted the 1997 Incentive Plan (the "Incentive Plan") that
permits the grant of options to purchase a total of 1,500,000 shares of the
Company's Common Stock. The Incentive Plan allows the granting of incentive and
nonqualified stock options to employees, directors and consultants at terms
determined by the Board of Directors. Concurrent with the Company's initial
public offering, the Company granted options to purchase 735,300 shares of
Common Stock at $15 per share. These options vest ratably over a 5-year period.
At December 31, 1997, 733,800 options granted under the Incentive Plan were
outstanding as 1,500 were canceled due to employee termination. At December 31,
1997, no options were exercisable and an additional 766,200 options were
available for future grant under the Incentive Plan.
The Company applies Accounting Principles Board Opinion No. 25, "Accounting For
Stock Issued to Employees," and the related interpretations in accounting for
its stock options plans. In 1995, the FASB issued SFAS No. 123 "Accounting for
Stock-Based Compensation." Had compensation cost for the Company's stock option
plans been determined based upon the fair value of the options at the date of
grant, as prescribed under SFAS No. 123, the Company's net income and net income
per share would have been reduced to the following pro forma amounts:
<TABLE>
<CAPTION>
Year Ended December 31,
------------------------------------------
1997 1996 1995
----------- ----------- ----------
(in thousands, except per share data)
<S> <C> <C> <C>
Net income:
As reported $ 2,418 $ 6,195 $ 4,239
Pro forma 2,228 6,195 4,239
Basic income per share:
As reported 0.31 0.90 0.62
Pro forma 0.29 0.90 0.62
Diluted income per share:
As reported 0.30 0.88 0.62
Pro forma 0.28 0.88 0.62
</TABLE>
The fair value of the options granted is estimated using the Black-Scholes
option pricing model with the following assumptions; dividend yield of 0.0%,
volatility of 40% subsequent to the initial public offering, risk-free interest
rate of 6.015%, and an expected life of 7 years. The pro forma amounts are not
representative of the pro forma effect in future years because pro forma
compensation expense does not consider option grants made prior to 1995 and the
Company anticipates future grants.
10. RELATED-PARTY TRANSACTIONS
Through March 1995, the Company leased an operating facility from its
shareholders for $38,080 per month. Effective March 31, 1995, the Company
purchased this facility from its shareholders for $5,542,000. The Company
assumed the shareholders' mortgage debt of $4,402,000 and issued a note to its
shareholders for $1,140,000 in consideration for the facility. As required by
generally accepted accounting principles, the Company recorded the purchased
facility at the shareholders' historical carrying value as of the purchase date,
with the excess consideration of $681,000 recorded as a dividend. The Company
continued to lease two facilities from its shareholders (see Note 11). In
November 1997, the Company purchased one of these facilities for $1,978,000 in
cash. The Company recorded the facility at the shareholders' historical carrying
value of $1,323,000 and recognized a deferred tax asset of $249,000 in the
transfer. The excess consideration of $406,000 was recorded as a dividend.
The Company periodically made distributions to its shareholders to fund
their estimated personal tax liabilities. Overpayments in 1995 of approximately
$750,000, were repaid by the shareholders in 1996. In 1997, the Company loaned
approximately $438,000 to two trusts controlled by the Company's principal
shareholders in exchange for 5.83% notes due in October 1998. The notes are
collateralized by the Company Common Stock held by the trusts, and are included
in prepaid expenses and other in the accompanying consolidated balance sheets.
F-12
<PAGE>
In February 1996, Jevic Transportation Services, Inc. ("JTS"), a freight
brokerage company owned by the Company's principal shareholders, began
operations. The Company entered into an agreement with JTS in August 1997, under
which the Company provided certain administrative services to JTS in
consideration of the reimbursement by JTS of the Company's costs of providing
such services. JTS was merged into the Company effective December 31, 1997, at
which time the agreement was terminated. The Company received $160,000 from JTS
in 1997 pursuant to the agreement. For the years ended December 31, 1997 and
1996, the Company recorded sales of $383,000 and $218,000, respectively, to JTS
and incurred purchased transportation expenses of $483,000 and $47,000,
respectively, with JTS. JTS had gross revenues of approximately $2,800,000 and
$1,200,000 and net (loss) income of approximately $(35,000) and $34,000 for the
years ended December 31, 1997 and 1996, respectively. The principal shareholders
received $125,000 from the Company in exchange for their JTS stock in the
merger, which is equal to their capital investment in JTS, and equivalent to
both the fair value and carrying value of JTS. The merger has been accounted for
as a combination of companies under common control. However, the consolidated
statements of income have not been restated as the impact would not be material.
11. COMMITMENTS AND CONTINGENCIES
The Company leases office space, maintenance facilities and certain revenue
equipment under capital and operating leases expiring on various dates through
2013. The Company also leases an operating facility from its shareholders (see
Note 10). The lease payment on this facility is $9,520 per month through
December 2013.
At December 31, 1997, the Company is liable under terms of noncancelable leases
for the following future minimum lease commitments:
<TABLE>
<CAPTION>
RELATED OPERATING
PARTY OTHER TOTAL
-------- --------- ---------
(in thousands)
<S> <C> <C> <C> <C>
1998 $ 114 $ 3,707 $ 3,821
1999 114 2,222 2,336
2000 114 1,152 1,266
2001 114 605 719
2002 114 605 719
Thereafter 1,256 -- 1,256
-------- --------- ---------
Total minimum lease payments........................ $ 1,826 $ 8,291 $ 10,117
======== ========= =========
</TABLE>
Rent expense for all operating leases was $4,200,000, $5,234,000 and $6,873,000,
for the years ended December 31, 1997, 1996 and 1995, respectively, of which
$310,000, $376,000 and $425,000, respectively, was on related-party leases.
The Company's risk retention amounts per occurrence are as follows:
Workers' compensation.......................................... $250,000
Liability - bodily injury and property damage.................. 20,000
Employee medical and hospitalization........................... 75,000
Cargo loss and damage.......................................... 5,000
Collision...................................................... 25,000
The Company has excess primary coverage on a per-claim and aggregate basis
beyond the deductible levels and also maintains umbrella policies to supplement
the primary liability coverage.
The liabilities for self-insured retention are included in claims and insurance
reserves based on claims incurred, with liabilities for unsettled claims and
claims incurred but not yet reported being estimated based on management's
evaluation of the nature and severity of individual claims and the Company's
past claims experience. Actual results may vary from management's estimates.
The Company's outstanding letters of credit at December 31, 1997 totaled
$975,000 to cover workers' compensation insurance claims.
The Company is involved in certain legal actions arising in the ordinary course
of business. Management believes that the outcome of such actions will not have
a material adverse effect on the Company's financial position or results of
operations.
From time to time the Company enters into agreements with fuel suppliers to
purchase a portion of its estimated fuel requirements at fixed prices. The
Company is a party to agreements with three fuel suppliers to purchase
approximately 37% of its estimated fuel needs through December 1998 at fixed
prices. Although these arrangements help reduce the Company's vulnerability to
rapid increases in the price of fuel, the Company will not benefit from fuel
price decreases to the extent of its commitments to purchase fuel under these
contracts.
F-13
<PAGE>
12. RECAPITALIZATION AND RECLASSIFICATION
In connection with the initial public offering, on August 12, 1997, the
Company's Certificate of Incorporation was amended to reclassify the Common
Stock into two series: Class A Common Stock, no par value, 300 shares
authorized, and Common Stock, no par value, 1,200 shares authorized. In
addition, all outstanding shares were reclassified as Class A Common Stock.
Holders of the Class A Common Stock are entitled to two votes per share and
holders of Common Stock are entitled to one vote per share. Each share of Class
A Common Stock is convertible into one share of Common Stock.
On October 6, 1997, the Company's Certificate of Incorporation was amended to,
among other things, authorize 10,000,000 shares of no par value Preferred Stock,
10,000,000 shares of no par value Class A Common Stock and 40,000,000 shares of
no par value Common Stock, and to effect a 34,291-for-one split of the Common
Stock and Class A Common Stock. The reclassification, increases in authorized
shares and stock split have been retroactively reflected in the accompanying
consolidated financial statements.
F-14
<PAGE>
JEVIC TRANSPORTATION, INC. AND SUBSIDIARIES
SCHEDULE II - VALUATION AND QUALIFYING ACCOUNTS
(IN THOUSANDS)
Allowance for Doubtful Accounts
<TABLE>
<CAPTION>
Beginning Ending
Balance Provisions Deductions Balance
--------- ---------- ---------- -------
<S> <C> <C> <C> <C>
Balance, December 31, 1997............ $ 999 $ 937 $ (409) $ 1,527
Balance, December 31, 1996............ 814 629 (444) 999
Balance, December 31, 1995............ 1,153 84 (423) 814
</TABLE>
F-15
<PAGE>
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the registrant has duly caused this Annual Report to be
signed on its behalf by the undersigned, thereunto duly authorized, in the City
of Philadelphia, Commonwealth of Pennsylvania, on the 30th day of March, 1998.
JEVIC TRANSPORTATION, INC.
By: /s/ Harry J. Muhlschlegel
-------------------------------
Harry J. Muhlschlegel
Chief Executive Officer
By: /s/ Brian J. Fitzpatrick
-------------------------------
Brian J. Fitzpatrick
Senior Vice President and
Chief Financial Officer
Pursuant to the requirements of the Securities Exchange Act of 1934, this
Report has been signed by the following persons on March 30, 1998, in the
capacities indicated:
Signature Title
--------- -----
/s/ Harry J. Muhlschlegel Chief Executive Officer and Chairman of
- ----------------------------- the Board (principal executive officer)
Harry J. Muhlschlegel
/s/ Karen B. Muhlschlegel Vice President, Secretary and Director
- -----------------------------
Karen B. Muhlschlegel
/s/ Paul J. Karvois President, Chief Operating Officer and
- ----------------------------- Director
Paul J. Karvois
/s/ Brian Fitzpatrick Senior Vice President and
- ----------------------------- Chief Financial Officer
Brian Fitzpatrick
/s/ Gordon R. Bowker Director
- -----------------------------
Gordon R. Bowker
/s/ Samuel H. Jones, Jr. Director
- -----------------------------
Samuel H. Jones, Jr.
<PAGE>
JEVIC TRANSPORTATION, INC.
1997 INCENTIVE PLAN
SECTION 1. Purpose; Definitions. The purpose of the Jevic Transportation,
Inc. 1997 Incentive Plan (the "Plan") is to offer to certain employees and
Directors of Jevic Transportation, Inc. (the "Company"), a New Jersey
corporation and its subsidiaries, equity interests in the Company, options to
acquire equity interests in the Company, and other performance-based incentive
awards, thereby attracting, retaining and motivating such persons, and
strengthening the mutuality of interests between such persons and the Company's
shareholders.
For purposes of the Plan, the following initially capitalized words and
phrases shall be defined as set forth below, unless the context clearly requires
a different meaning:
a. "Affiliate" means, with respect to a person or entity, a person that
directly or indirectly controls, or is controlled by, or is under common control
with such person or entity.
b. "Board" means the Board of Directors of the Company, as constituted from
time to time.
c. "Cause" occurs when the Participant, as determined by the Board:
(i) has engaged in any type of disloyalty to the
Company, including without limitation,
fraud, embezzlement, theft, or dishonesty in
the course of his employment or engagement,
or has otherwise breached any fiduciary duty
owed to the Company;
(ii) has been convicted of a felony;
(iii) has disclosed trade secrets or confidential
information of the Company; or
(iv) has breached any agreement with or duty to
the Company in respect of confidentiality,
non-disclosure, non-competition or
otherwise.
d. "Change of Control" means:
(i) the acquisition in one or more transactions
by any "Person" (as the term person is used
for purposes of Sections 13(d) or 14(d) of
the Exchange Act) of "Beneficial ownership"
(within the meaning of Rule 13d-3
promulgated under the Exchange Act) of
twenty-five percent (25%) or more of the
combined voting power of the Company's then
outstanding voting securities (the "Voting
Securities"), provided that for purposes of
this clause (i) Voting
<PAGE>
Securities acquired directly from the
Company by any Person shall be excluded from
the determination of such Person's
Beneficial ownership of Voting Securities
(but such Voting Securities shall be
included in the calculation of the total
number of Voting Securities then
outstanding); or
(ii) approval by shareholders of the Company of:
(A) a merger, reorganization or consolidation involving the
Company if the shareholders of the Company immediately
before such merger, reorganization or consolidation do not
or will not own directly or indirectly immediately
following such merger, reorganization or consolidation,
more than fifty percent (50%) of the combined voting power
of the outstanding voting securities of the company
resulting from or surviving such merger, reorganization or
consolidation in substantially the same proportion as
their ownership of the Voting Securities outstanding
immediately before such merger, reorganization or
consolidation; or
(B) a complete liquidation or dissolution of the Company;
(C) an agreement for the sale or other
disposition of all or substantially
all of the assets of the Company; or
(iii) acceptance by shareholders of the Company of shares in a share
exchange if the shareholders of the Company immediately before
such share exchange do not or will not own directly or
indirectly immediately following such share exchange more than
fifty percent (50%) of the combined voting power of the
outstanding voting securities of the entity resulting from or
surviving such share exchange in substantially the same
proportion as their ownership of the Voting Securities
outstanding immediately before such share exchange.
e. "Code" means the Internal Revenue Code of 1986, as amended from time to
time, and any successor thereto.
f. "Committee" shall mean the Compensation Committee or such other
committee appointed by the Board in accordance with Section 2 of the Plan. The
Committee shall possess all of the power and authority of, and shall be
authorized to take any and all actions required to be taken hereunder by, and
make any and all determinations required to be taken hereunder by, the Board.
- 2 -
<PAGE>
g. "Director" means a member of the Board.
h. "Disability" shall mean a disability of an employee or a Director which
renders such employee or Director unable to perform the full extent of his
duties and responsibilities by reason of his illness or incapacity which would
entitle that employee or Director to receive Social Security Disability Income
under the Social Security Act, as amended, and the regulations promulgated
thereunder. "Disabled" shall mean having a Disability. The determination of
whether a Participant is Disabled shall be made by the Board, whose
determination shall be conclusive; provided that,
(i) if a Participant is bound by the terms of an
employment agreement between the Participant
and the Company, whether the Participant is
"Disabled" for purposes of the Plan shall be
determined in accordance with the procedures
set forth in said employment agreement, if
such procedures are therein provided; and
(ii) a Participant bound by such an employment
agreement shall not be determined to be
Disabled under the Plan any earlier than he
would be determined to be disabled under his
employment agreement.
i. "Exchange Act" means the Securities Exchange Act of 1934, as amended.
j. "Fair Market Value" means, as of any date: (i) the closing price of the
Shares as reported on the principal nationally recognized stock exchange on
which the Shares are traded on such date, or if no Share prices are reported on
such date, the closing price of the Shares on the next preceding date on which
there were reported Share prices; or (ii) if the Shares are not listed or
admitted to unlisted trading privileges on a nationally recognized stock
exchange, the closing price of the Shares as reported by The NASDAQ Stock Market
on such date, or if no Share prices are reported on such date, the closing price
of the Shares on the next preceding date on which there were reported Share
prices; or (3) if the Shares are not listed or admitted to unlisted trading
privileges on a nationally recognized stock exchange or traded on The NASDAQ
Stock Market, then the Fair Market Value shall be determined by the Board acting
in its discretion, which determination shall be conclusive.
k. "Incentive Stock Option" means any Option intended to be and designated
as an "Incentive Stock Option" within the meaning of Section 422 of the Code.
l. "Non-Employee Director" shall have the meaning set forth in Rule 16b-
3(b)(3)promulgated by the Securities and Exchange Commission under the Exchange
Act, or any
- 3 -
<PAGE>
successor definition adopted by the Securities and Exchange Commission;
provided, however, that the Board or the Committee may, in its sole discretion,
substitute the definition of "outside director" provided in the regulations
under Section 162(m) of the Code in place of the definition of Non-Employee
Director contained in the Exchange Act.
m. "Non-Qualified Stock Option" means any Option that is not an Incentive
Stock Option.
n. "Participant" means an employee or Director of the Company or a
Subsidiary to whom an award is granted pursuant to the Plan.
o. "Performance Award" or "Award" means an award made pursuant to Section 8
hereof that is payable in cash and/or Shares (including Restricted Shares,
Performance Shares and Performance Units) in accordance with the terms of the
grant, based on Company, business unit and/or individual performance, in each
case as determined by the Committee and as set forth in the grant letter.
p. "Performance Share" means an award made pursuant to Section 9 hereof of
the right to receive Shares at the end of a specified performance period.
q. "Performance Unit" means an award made pursuant to Section 10 hereof of
the right to receive cash at the end of a specified performance period.
r. "Qualified Retirement" means a Retirement that occurs (i) on or after
the date the Participant attains ages 62 or (ii) on or after the date the
Participant completes ten (10) years of service with the Company or a Subsidiary
and attains age 60.
s. "Restricted Shares" means an award of Shares that is subject to
restrictions pursuant to Section 7 hereof.
t. "Retirement" means termination of the employment of a Participant with
the Company, an Affiliate (including parent) or a Subsidiary other than (i) a
termination effected at the direction of the Company or parent (whether or not
the Company effects such termination for Cause), (ii) termination on account of
Disability, or (iii) termination on account of death. With respect to a Director
who is not also an employee of the Company, Retirement shall occur at such time
as the individual ceases to be a Director.
u. "Rules" means Section 16 of the Exchange Act and the regulations
promulgated thereunder.
v. "SAR" means a share appreciation right granted under the Plan and
described in Section 6 hereof.
w. "Securities Broker" means a registered securities broker acceptable to
the Company who agrees to effect the cashless exercise of an Option pursuant to
Section 5(m) hereof.
x. "Share" means a common share of common stock, no par value, of the
Company, subject to substitution or adjustment as provided in Section 3(c)
hereof.
- 4 -
<PAGE>
y. "Stock Option" or "Option" means any option to purchase Shares
(including Restricted Shares, if the Committee so determines) granted pursuant
to Section 5 hereof.
z. "Subsidiary" means, in respect of the Company or parent, a subsidiary
company, whether now or hereafter existing, as defined in Sections 424(f) and
(g) of the Code.
SECTION 2. Administration. The Plan shall be administered by the
Compensation Committee on behalf of the Board. The Board may at any time by a
unanimous vote, with each member voting, appoint a different Committee
consisting of not fewer than two Directors to administer the Plan on behalf of
the Board, subject to such terms and conditions as the Board may prescribe,
provided that each Committee member shall be a Non-Employee Director. Members of
the Committee shall serve for such period of time as the Board may determine.
Members of the Board or the Committee who are eligible for awards or have been
granted awards may vote on any matters affecting the administration of the Plan
or any awards pursuant to the Plan, except that no such member shall act upon an
award to himself or herself, but any such member may be counted in determining
the existence of a quorum at any meeting of the Board or Committee during which
action is taken with respect to an award to himself or herself.
All references to actions to be taken by the Board in the administration of
the Plan shall be construed as references to the Committee.
From time to time the Board may increase the size of the Committee and
appoint additional members thereto (provided such new members are Non-Employee
Directors), remove members (with or without cause) and appoint new members in
substitution therefor, fill vacancies however caused, or remove all members of
the Committee and thereafter directly administer the Plan.
The Board shall have full authority to grant to eligible persons under
Section 4: (i) Options, (ii) SARs, (iii) Restricted Shares, (iv) Performance
Awards, (v) Performance Shares and/or (vi) Performance Units. In particular, the
Board shall have the authority:
a. to select the persons to whom Options, SARs, Restricted Shares,
Performance Awards, Performance Shares and Performance Units may from time to
time be granted hereunder;
b. to determine whether and to what extent Incentive Stock Options,
NonQualified Stock Options, SARs, Restricted Shares, Performance Awards,
Performance Shares and Performance Units, or any combination thereof, are to be
granted hereunder;
c. to determine the number of Shares, if any, to be covered by each such
award granted hereunder;
- 5 -
<PAGE>
d. to determine the terms and conditions, not inconsistent with the terms
of the Plan, of any award granted hereunder, including, but not limited to, the
Share price and any restriction or limitation, any vesting provisions, or any
vesting acceleration or forfeiture waiver regarding any Option or other award
and/or the Shares relating thereto, or the length of the period following
termination of employment of any Participant during which any Option or SAR may
be exercised (which, in the case of an Incentive Stock Option, shall be no
longer than one year in the case of the termination of employment of a
Participant by reason of death or Disability, or three months in the case of the
termination of employment of a Participant for any reason other than death or
Disability), based on such factors as the Board shall determine, in its sole
discretion;
e. to determine whether and under what circumstances an Option may be
exercised without a payment of cash under Section 5(m); and
f. to determine whether, to what extent and under what circumstances Shares
and other amounts payable with respect to an award under the Plan may be
deferred either automatically or at the election of the Participant.
Notwithstanding the Committee's discretion, upon the election of a new
Director other than an employee (a "non-employee" Director) to the Board prior
to completion of an initial public offering of Shares (a "Public Offering"),
such non-employee Director shall be granted Non-Qualified Stock Options for
12,500 Shares at the initial public offering price upon completion of a Public
Offering, which will vest 40% on the second anniversary of grant and an
additional 20% on each of the three succeeding anniversaries. Upon the initial
election of any other new non-employee Director, or upon the appointment of any
new non-employee Director to fill an unexpired term, in either case after the
completion of a Public Offering, such new non-employee Director shall be granted
Non-Qualified Stock Options for 12,500 Shares, at Fair Market Value. Upon
election of any non-employee Director after the third anniversary of such
Director's initial election to the Board, there shall be granted to such
Director Non-Qualified Stock Options for 5,000 Shares at Fair Market Value.
The Board shall have the authority to adopt, alter and repeal such
administrative rules, guidelines and practices governing the Plan as it shall,
from time to time, deem advisable; to interpret the terms and provisions of the
Plan and any award issued under the Plan (and any agreements relating thereto);
to amend the terms of any agreement relating to any award issued under the Plan,
provided that the Participant consents to such amendment; and to otherwise
supervise the administration of the Plan. The Board may correct any defect,
supply any omission or reconcile any inconsistency in the Plan or in any award
granted in the manner and to the extent it shall deem necessary to carry out the
intent of the Plan.
All decisions made by the Board pursuant to the provisions of the Plan
shall be final and binding on all persons, including the Company and
Participants. No member of the Board shall be liable for any good faith
determination, act or failure to act in connection with the Plan or any award
made under the Plan.
- 6 -
<PAGE>
SECTION 3. Shares Subject to the Plan.
a. Shares Subject to the Plan. The Shares to be subject or related to
awards under the Plan shall be authorized and unissued Shares of the Company,
whether or not previously issued and subsequently acquired by the Company. The
maximum number of Shares that may be the subject of awards under the Plan is
1,500,000 and the Company shall reserve for the purposes of the Plan, out of its
authorized and unissued Shares, such number of Shares. Notwithstanding the
foregoing, no individual shall receive, over the term of the Plan, awards for
more than an aggregate of 1,500,000 Shares, or SARs with respect to such Shares,
authorized for grant under the Plan.
b. Effect of the Expiration or Termination of Awards. If and to the extent
that an award made under the Plan expires, terminates or is canceled or
forfeited for any reason without having been exercised in full, the Shares
associated with the expired, terminated, canceled or forfeited portion of the
award shall again become available for award under the Plan.
c. Other Adjustment. In the event of any merger, reorganization,
consolidation, recapitalization, Share distribution or dividend, Share split or
combination, or other change in entity structure affecting the Shares, such
substitution or adjustment shall be made in the aggregate number, type and
issuer of the securities reserved for issuance under the Plan, in the number and
Option price of securities subject to outstanding Options granted under the Plan
and in the number and price of securities subject to other awards made under the
Plan, as may be determined to be appropriate by the Board in its sole
discretion, provided that the number of securities subject to any award shall
always be a whole number. The Board, in its sole discretion, shall make
appropriate equitable anti-dilution adjustments to the number of
then-outstanding SARs, and to the Fair Market Value upon which the value of such
SARs is based.
SECTION 4. Eligibility. Employees of the Company or its Subsidiaries,
directors, consultants, and other individuals who provide services are eligible
to be granted awards under the Plan; provided, however, that any employee who is
covered by a collective bargaining agreement shall not be eligible to be granted
awards, exercise outstanding awards, receive shares or cash pursuant to
outstanding awards, or have any restrictions lapse with respect to any
restricted stock awards under the Plan, unless such collective bargaining
agreement, by specific reference to the Plan, expressly provides for
participation in the Plan. Persons who are not employees of the Company or a
Subsidiary are eligible to be granted awards under the Plan, but are not
eligible to be granted Incentive Stock Options.
SECTION 5. Options. Options granted under the Plan may be of two types: (i)
Incentive Stock Options or (ii) Non-Qualified Stock Options. Options may be
granted alone, in addition to or in tandem with other awards granted under the
Plan. Any Option granted under the Plan shall be in such form as the Board may
from time to time approve.
The Board shall have the authority to grant any Participant eligible under
Section 4 Incentive Stock Options, Non-Qualified Stock Options, or both types of
Options (in
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each case with or without SARs). To the extent that any Option does
not qualify as an Incentive Stock Option, it shall constitute a separate
Non-Qualified Stock Option.
Options granted under the Plan shall be subject to the following terms and
conditions and shall contain such additional terms and conditions, not
inconsistent with the terms of the Plan, as the Board shall deem appropriate;
provided, however, that the provisions of Option awards need to be the same with
respect to each Participant:
a. Option Price. The exercise price per Share purchasable under a
NonQualified Stock Option shall be determined by the Board. The exercise price
per Share purchasable under an Incentive Stock Option shall be 100% of the Fair
Market Value of the Share on the date of the grant. However, any Incentive Stock
Option granted to any Participant who, at the time the Option is granted, owns
more than 10% of the voting power of all classes of shares of the Company or of
a Subsidiary shall have an exercise price per Share of not less than 110% of
Fair Market Value per Share on the date of the grant.
b. Option Term. The term of each Option shall be fixed by the Board, but no
Option shall be exercisable more than ten years after the date the Option is
granted. However, any Incentive Stock Option granted to any Participant who, at
the time such Option is granted, owns more than 10% of the voting power of all
classes of shares of the Company or of a Subsidiary may not have a term of more
than five years. No Option may be exercised by any person after expiration of
the term of the Option.
c. Exercisability. Options shall vest and be exercisable at such time or
times and subject to such terms and conditions as shall be determined by the
Board at the time of grant. If the Board provides, in its discretion, that any
Option is exercisable only in installments, the Board may waive such installment
exercise provisions at any time at or after grant, in whole or in part, based on
such factors as the Board shall determine, in its sole discretion.
d. Method of Exercise. Subject to the exercise provisions under Section
5(c) and the termination provisions set forth in Sections 5(f) through (k),
Options may be exercised in whole or in part at any time and from time to time
during the term of the Option, by giving written notice of exercise to the
Company specifying the number of Shares to be purchased. Such notice shall be
accompanied by payment in full of the purchase price, either by certified or
bank check, or such other instrument as the Board may accept. As determined by
the Board, in its sole discretion, at or after grant, payment in full or in part
of the exercise price of an Option may be made in the form of unrestricted
Shares based on the Fair Market Value of the Shares on the date the Option is
exercised; provided, however, that, in the case of an Incentive Stock Option,
the right to make a payment in the form of already owned Shares may be
authorized only at the time the Option is granted.
No Shares shall be issued upon exercise of an Option until full payment
therefor has been made. A Participant shall not have the right to distributions
or dividends or any other rights of a shareholder with respect to Shares subject
to the Option until the Participant has given
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written notice of exercise, has paid in full for such Shares, and, if requested,
has given the representation described in Section 13(a) hereof.
e. Non-transferability of Options. No Option shall be transferable by the
Participant otherwise than by will or by the laws of descent and distribution,
and all Options shall be exercisable, during the Participant's lifetime, only by
the Participant or, in the event of his Disability, by his personal
representative.
f. Termination by Reason of Death. Subject to Section 5(k), if a
Participant's service with the Company or any Subsidiary terminates by reason of
death, any Option held by such Participant shall become fully vested and
exercisable and may thereafter be exercised by the legal representative of the
estate or by the legatee of the Participant under the will of the Participant,
for a period expiring (i) at such time as may be specified by the Board at or
after the time of grant, or (ii) if not specified by the Board, then one year
from the date of death, or (iii) if sooner than the applicable period specified
under (i) or (ii) above, then upon the expiration of the stated term of such
Option.
g. Termination by Reason of Disability. Subject to Section 5(k), if a
Participant's service with the Company or any Subsidiary terminates by reason of
Disability, any Option held by such Participant may thereafter be exercised by
the Participant or his personal representative, to the extent it was exercisable
at the time of termination, or on such accelerated basis as the Board may
determine at or after grant, for a period expiring (i) at such time as may be
specified by the Board at or after the time of grant, or (ii) if not specified
by the Board, then six months from the date of termination of service, or (iii)
if sooner than the applicable period specified under (i) or (ii) above, then
upon the expiration of the stated term of such Option; provided, however, that
if the Participant dies within such period, any unexercised Option held by such
Participant shall, at the sole discretion of the Board, thereafter be
exercisable to the extent to which it was exercisable at the time of death for a
period of one (1) year from the date of such death (or such other period as may
be specified by the Board) or until the expiration of the stated term of such
Option, whichever period is shorter.
h. Qualified Retirement. Subject to Section 5(k), if a Participant's
service with the Company or any Subsidiary terminates by reason of Qualified
Retirement, any Option held by such Participant shall become fully vested and
exercisable and may thereafter be exercised by the Participant for a period
expiring (i) at such time as may be specified by the Board at or after the time
of grant, or (ii) if not specified by the Board, then one year from the date of
Qualified Retirement, or (iii) if sooner than the applicable period specified
under (i) or (ii) above, then upon the expiration of the stated term of such
Option; provided that any Option which is an Incentive Stock Option that is
exercised more than three (3) months after termination will be a Non-Qualified
Stock Option.
i. Cause. If a Participant's service is terminated for Cause, any Option
not already exercised shall be forfeited.
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j. Other Termination. Subject to Section 5(k), if a Participant's service
with the Company or any Subsidiary terminates for any reason other than death,
Disability, Qualified Retirement or Cause, any Option held by such Participant
may thereafter be exercised by the Participant, to the extent it was exercisable
at the time of such termination or on such accelerated basis as the Board may
determine at or after the time of grant, for a period expiring (i) at such time
as may be specified by the Board at or after the time of grant, or (ii) if not
specified by the Board, then thirty (30) days from the date of termination of
service, or (iii) if sooner than the applicable period specified under (i) or
(ii) above, then upon the expiration of the stated term of such Option.
k. Change of Control. In the event of a Change of Control, the Board may,
in its sole discretion, cause all outstanding Options to immediately become
fully exercisable.
l. Incentive Stock Option Limitations. To the extent required for
"incentive stock option" status under Section 422 of the Code, the aggregate
Fair Market Value (determined as of the time of grant) of the Shares with
respect to which Incentive Stock Options are exercisable for the first time by
the Participant during any calendar year under the Plan and/or any other plan of
the Company or any Subsidiary shall not exceed $100,000. For purposes of
applying the foregoing limitation, Incentive Stock Options shall be taken into
account in the order granted. Any Option not meeting such limitation shall be
treated for all purposes as a NonQualified Stock Option.
m. Cashless Exercise. The Company may, in the sole discretion of the Board,
cooperate in a "cashless exercise" of an Option. The cashless exercise shall be
effected by the Participant delivering to the Securities Broker instructions to
sell a sufficient number of Shares to cover the costs and expenses associated
therewith.
SECTION 6. Share Appreciation Rights.
a. Grant. SARs may be granted alone ("Stand-Alone SARs") or in conjunction
with all or part of any Option granted under the Plan ("Tandem SARs"). In the
case of a Non-Qualified Stock Option, a Tandem SAR may be granted either at or
after the time of the grant of such Option. In the case of an Incentive Stock
Option, a Tandem SAR may be granted only at the time of the grant of such
Option.
b. Exercise.
(i) Tandem SARs. A Tandem SAR or applicable portion thereof shall
terminate and no longer be exercisable upon the termination or exercise of the
related Option or portion thereof, except that, unless otherwise determined by
the Board, in its sole discretion at the time of grant, a Tandem SAR granted
with respect to less than the full number of Shares covered by a related Option
shall be reduced only after such related Option is exercised or otherwise
terminated with respect to the number of Shares not covered by the Tandem SAR.
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A Tandem SAR may be exercised by a Participant by surrendering the
applicable portion of the related Option, only at such time or times and to the
extent that the Option to which such Tandem SAR relates shall be exercisable in
accordance with the provisions of Section 5 and this Section 6. Options which
have been so surrendered, in whole or in part, shall no longer be exercisable to
the extent the related Tandem SARs have been exercised.
Upon the exercise of a Tandem SAR, a Participant shall be entitled to
receive, upon surrender to the Company of all (or a portion) of an Option in
exchange for cash and/or Shares, an amount equal to the excess of (A) the Fair
Market Value, as of the date such Option (or such portion thereof) is
surrendered, of the Shares covered by such Option (or such portion thereof) over
(B) the aggregate exercise price of such Option (or such portion thereof).
Upon the exercise of a Tandem SAR, the Option or part thereof to which such
Tandem SAR is related, shall be deemed to have been exercised for the purpose of
the limitation set forth in Section 3 of the Plan on the number of Shares to be
issued under the Plan, but only to the extent of the number of Shares issued
under the Tandem SAR at the time of exercise based on the value of the Tandem
SAR at such time.
A Tandem SAR may be exercised only if and when the Fair Market Value of the
Shares subject to the Option exceeds the exercise price of such Option.
(ii) Stand-Alone SARs. A Stand-Alone SAR may be exercised by a
Participant giving notice of intent to exercise to the Company, provided that
all or a portion of such Stand-Alone SAR shall have become vested and
exercisable as of the date of exercise.
Upon the exercise of a Stand-Alone SAR, a Participant shall be entitled to
receive, in either cash and/or Shares, an amount equal to the excess, if any, of
(A) the Fair Market Value, as of the date such SAR (or portion of such SAR) is
exercised, of the Shares covered by such SAR (or portion of such SAR) over (B)
the Fair Market Value of the Shares covered by such SAR (or a portion of such
SAR ) as of the date such SAR (or a portion of such SAR) was granted.
c. Terms and Conditions. SARs shall be subject to such terms and
conditions, not inconsistent with the provisions of the Plan, as shall be
determined from time to time by the Board, in its sole discretion; provided,
however, that the provisions of SAR awards need not be the same with respect to
each Participant. Such terms and conditions include the following:
(i) Non-Transferability. No SAR shall be transferable by the
Participant otherwise than by will or by the laws of descent and distribution
and all SARs shall be exercisable, during the Participant's lifetime, only by
the Participant or, in the event of his Disability, by his personal
representative.
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<PAGE>
(ii) Term of SAR. The term of each SAR shall be fixed by the Board,
provided that the term of a Tandem SAR shall be determined by the terms of the
applicable Option, and provided further that the term of a Stand-Alone SAR shall
be ten (10) years, unless another term is specified by the Board.
(iii) Exercisability. SARs shall vest and be exercisable at such time
or times and subject to such terms and conditions as shall be determined by the
Board at the time of grant, provided that the term of a Tandem SAR shall be
determined by the terms of the applicable Option. A Participant shall not have
any rights as a shareholder with respect to any SAR.
(iv) Termination of Employment. Unless otherwise specified in the
terms of an award, SARs shall be subject to the terms of Sections 5(f)-(j) with
respect to exercise upon termination of employment.
(v) Change of Control. In the event of a Change of Control, the Board
may, in its sole discretion, cause all outstanding SARs to immediately become
fully exercisable.
SECTION 7. Restricted Shares.
a. Administration. Restricted Shares may be issued either alone or in
addition to other awards granted under the Plan. The Board shall determine the
persons to whom, and the time or times at which, grants of Restricted Shares
will be made, the number of Shares to be awarded, the price (if any) to be paid
by the recipient of Restricted Shares, the time or times within which such
awards may be subject to forfeiture, and all other conditions of the awards.
The Board may condition the vesting of Restricted Shares upon the
attainment of specified performance goals or such other factors as the Board may
determine, in its sole discretion, at the time of the award.
The provisions of Restricted Share awards need not be the same with respect
to each Participant.
b. Awards and Certificates. The prospective recipient of a Restricted Share
award shall not have any rights with respect to such award, unless and until
such recipient has executed an agreement evidencing the award and has delivered
a fully executed copy thereof to the Company, and has otherwise complied with
the applicable terms and conditions of such award. The purchase price for
Restricted Shares may be zero.
Each Participant receiving a Restricted Share award shall be issued a share
certificate in respect of such Restricted Shares. Such certificate shall be
registered in the name of such Participant, and shall bear an appropriate legend
referring to the terms, conditions, and restrictions applicable to such award,
substantially in the following form:
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"The transferability of this certificate and the shares represented hereby
are subject to the terms and conditions (including forfeiture) of the Jevic
Transportation, Inc. 1997 Incentive Plan and an Agreement entered into
between the registered owner and Jevic Transportation, Inc. Copies of such
Plan and Agreement are on file in the principal offices of Jevic
Transportation, Inc. and will be made available to any Shareholder without
charge upon request to the Secretary of the Company."
The Board shall require that the share certificates evidencing Restricted
Shares be held in custody by the Company until the restrictions thereon shall
have lapsed, and that, as a condition of any Restricted Share award, the
Participant shall have delivered to the Company a share power, endorsed in
blank, relating to the Shares covered by such award.
c. Restrictions and Conditions. The Restricted Shares awarded pursuant to
this Section 7 shall be subject to the following restrictions and conditions:
(i) During a period set by the Board commencing with the date of such
award (the "Restriction Period"), the Participant shall not be permitted to
sell, transfer, pledge, assign or otherwise encumber Restricted Shares awarded
under the Plan. The Board, in its sole discretion, may provide for the lapse of
such restrictions in installments and may accelerate or waive such restrictions
in whole or in part, based on service, performance and/or such other factors or
criteria as the Board may determine, in its sole discretion.
(ii) Except as provided in this paragraph (ii) and Section 7(c)(i),
once the Participant has been issued a certificate or certificates for
Restricted Shares, the Participant shall have, with respect to the Restricted
Shares, all of the rights of a shareholder of the Company, including the right
to vote the Shares, and the right to receive any cash distributions or
dividends. The Board, in its sole discretion, as determined at the time of
award, may permit or require the payment of cash distributions or dividends to
be deferred and, if the Board so determines, reinvested in additional Restricted
Shares to the extent Shares are available under Section 3 of the Plan.
(iii) Subject to the applicable provisions of the award agreement and
this Section 7, upon termination of a Participant's service with the Company for
reasons other than death or Disability during the Restriction Period, all
Restricted Shares still subject to restriction shall be forfeited by the
Participant. Subject to the provisions of the Plan, the Board, in its sole
discretion, may provide for the lapse of such restrictions in installments and
may waive such restrictions, in whole or in part, at any time, based on such
factors as the Board shall deem appropriate in its sole discretion. Upon the
death or Disability of a Participant during the Restriction Period, restrictions
will lapse with respect to a percentage of the Restricted Shares award granted
to the Participant that is equal to the percentage of the Restriction Period
that has elapsed as of the date of death or the date on which such Disability
commenced (as determined by the Board in its sole discretion), and a share
certificate or share certificates representing such Shares, without bearing the
restrictive legend described in Section 7(b), shall be delivered by the
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Company to the Participant or the Participant's estate, as the case may be, in
exchange for the share certificate or share certificates that contain such
restrictive legend.
(iv) In the event of hardship or other special circumstances of a
Participant whose service with the Company is involuntarily terminated (other
than for Cause), the Board may, in its sole discretion, waive in whole or in
part any or all remaining restrictions with respect to such Participant's
Restricted Shares, based on such factors as the Board may deem appropriate.
(v) If and when the Restriction Period expires without a prior
forfeiture of the Restricted Shares subject to such Restriction Period, the
certificates for such Shares, without bearing the restrictive legend described
in Section 7(b), shall be promptly delivered by the Company to the Participant,
in exchange for the share certificate or share certificates that contain such
restrictive legend.
(vi) In the event of a Change of Control, the Board, in its sole
discretion, may cause all Restricted Shares remaining subject to forfeiture to
immediately cease to be subject to forfeiture and a share certificate or shares
certificates representing such Shares, without bearing the restrictive legend
described in Section 7(b), shall be issued by the Company and delivered to the
Participant, in exchange for the share certificate or share certificates that
contain such restrictive legend.
SECTION 8. Performance Awards.
a. Awards and Administration. Performance Awards may be awarded either
alone or in addition to other awards granted under the Plan. Prior to award of a
Performance Award, the Board shall determine the nature, length and starting
date of the performance period (the "performance period") for each Performance
Award. Performance periods may overlap and Participants may participate
simultaneously with respect to Performance Awards that are subject to different
performance periods and/or different performance factors and criteria. Prior to
award of a Performance Award, the Board shall determine the performance
objectives to be used in awarding Performance Awards and determine the extent to
which such Performance Awards have been earned. Performance objectives may vary
from Participant to Participant and between groups of Participants and shall be
based upon such Company, business unit and/or individual performance factors and
criteria as the Board may deem appropriate, including, but not limited to,
earnings per Share or return on equity.
At the beginning of each performance period, the Board shall determine for
each Performance Award subject to such performance period the range of dollar
values or number of Shares to be awarded to the Participant at the end of the
performance period if and to the extent that the relevant measure(s) of
performance for such Performance Award is (are) met. Such dollar values or
number of Shares may be fixed or may vary in accordance with such performance
and/or other criteria as may be specified by the Board, in its sole discretion.
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b. Adjustment of Awards. In the event of special or unusual events or
circumstances affecting the application of one or more performance objectives to
a Performance Award, the Board may revise the performance objectives and/or
underlying factors and criteria applicable to the Performance Awards affected,
to the extent deemed appropriate by the Board, in its sole discretion, to avoid
unintended windfalls or hardship.
c. Termination of Service. Unless otherwise provided in the applicable
award agreements, if a Participant terminates service with the Company during a
performance period because of death, Disability or Retirement, such Participant
(or his estate) shall be entitled to a payment with respect to each outstanding
Performance Award at the end of the applicable performance period:
(i) based, to the extent relevant under the terms of the award, upon
the Participant's performance for the portion of such performance period ending
on the date of termination and the performance of the applicable business
unit(s) for the entire performance period, and
(ii) pro-rated, where deemed appropriate by the Board, for the portion
of the performance period during which the Participant was employed by or served
on the Board of the Company, all as determined by the Board, in its sole
discretion.
However, the Board may provide for an earlier payment in settlement of such
award in such amount and under such terms and conditions as the Board deems
appropriate, in its sole discretion.
Except as otherwise determined by the Board, if a Participant terminates
service with the Company during a performance period for any other reason, then
such Participant shall not be entitled to any payment with respect to the
Performance Awards subject to such performance period, unless the Board shall
otherwise determine, in its sole discretion.
In the event of a Change of Control, the Board may, in its sole discretion,
cause all conditions applicable to a Performance Award to immediately terminate
and a share certificate or share certificates representing Shares subject to
such award, or cash, as the case may be, to be issued and/or delivered to the
Participant.
d. Form of Payment. The earned portion of a Performance Award may be paid
currently or on a deferred basis, together with such interest or earnings
equivalent as may be determined by the Board, in its sole discretion. Payment
shall be made in the form of cash or whole Shares, including Restricted Shares,
either in a lump sum payment or in annual installments commencing as soon as
practicable after the end of the relevant performance period, all as the Board
shall determine at or after grant. If and to the extent a Performance Award is
payable in Shares and the full amount of such value is not paid in Shares, then
the Shares representing the portion of the value of the Performance Award not
paid in Shares shall again become available for award under the Plan, subject to
Section 3(b). A Participant whose
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Performance Award is payable in Shares or Restricted Shares shall not have any
rights as a shareholder until such share certificate or share certificates have
been issued to such Participant, and, if requested, the Participant has given
the representation described in Section 13(a) hereof. Prior to any payment, the
Board shall certify that all of the performance goals or other material terms of
the award have been met.
SECTION 9. Performance Shares.
a. Awards and Administration. The Board shall determine the persons to whom
and the time or times at which Performance Shares shall be awarded, the number
of Performance Shares to be awarded to any such person, the duration of the
period (the "performance period") during which, and the conditions under which,
receipt of the Shares will be deferred, and the other terms and conditions of
the award in addition to those set forth below.
The Board may condition the receipt of Shares pursuant to a Performance
Share award upon the attainment of specified performance goals or such other
factors or criteria as the Board shall determine, in its sole discretion.
The provisions of Performance Share awards need not be the same with
respect to each Participant, and such awards to individual Participants need not
be the same in subsequent years.
b. Terms and Conditions. Performance Shares awarded pursuant to this
Section 9 shall be subject to the following terms and conditions and such other
terms and conditions, not inconsistent with the terms of this Plan, as the Board
shall deem desirable:
(i) Conditions. The Board, in its sole discretion, shall specify the
performance period during which, and the conditions under which, the receipt of
Shares covered by the Performance Share award will be deferred.
(ii) Share Certificate. At the expiration of the performance period,
if the Board, in its sole discretion, determines that the conditions specified
in the Performance Share agreement have been satisfied, a share certificate or
share certificates evidencing the number of Shares covered by the Performance
Share award shall be issued and delivered to the Participant. A Participant
shall not be deemed to be the holder of Shares, or to have the rights of a
holder of Shares, with respect to the Performance Shares unless and until a
share certificate or share certificates evidencing such Shares are issued to
such Participant.
(iii) Death, Disability or Retirement. Subject to the provisions of
the Plan, if a Participant terminates service with the Company during a
performance period because of death, Disability or Retirement, such Participant
(or his estate) shall be entitled to receive, at the expiration of the
performance period, a percentage of Performance Shares that is equal to the
percentage of the performance period that had elapsed as of the date of
termination, provided that the Board, in its sole discretion, determines that
the conditions specified in the Performance
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Share agreement have been satisfied. In such event, a share certificate or share
certificates evidencing such Shares shall be issued and delivered to the
Participant or the Participant's estate, as the case may be.
(iv) Termination of Service. Unless otherwise determined by the Board
at the time of grant, the Performance Shares will be forfeited upon a
termination of service during the performance period for any reason other than
death, Disability or Retirement.
(v) Change of Control. In the event of a Change of Control, the Board
may, in its sole discretion, cause all conditions applicable to the Performance
Shares to immediately terminate and a share certificate or share certificates
evidencing Shares subject to the Share award to be issued and delivered to the
Participant.
SECTION 10. Performance Units.
a. Awards and Administration. The Board shall determine the persons to whom
and the time or times at which Performance Units shall be awarded, the number of
Performance Units to be awarded to any such person, the duration of the period
(the "performance period") during which, and the conditions under which, a
Participant's right to Performance Units will be vested, the ability of
Participants to defer the receipt of payment of such Performance Units, and the
other terms and conditions of the award in addition to those set forth below.
A Performance Unit shall have a fixed dollar value.
The Board may condition the vesting of Performance Units upon the
attainment of specified performance goals or such other factors or criteria as
the Board shall determine, in its sole discretion.
The provisions of Performance Unit awards need not be the same with respect
to each Participant, and such awards to individual Participants need not be the
same in subsequent years.
b. Terms and Conditions. Performance Units awarded pursuant to this Section
10 shall be subject to the following terms and conditions and such other terms
and conditions, not inconsistent with the terms of this Plan, as the Board shall
deem desirable:
(i) Conditions. The Board, in its sole discretion, shall specify the
performance period during which, and the conditions under which, the
Participant's right to Performance Units will be vested.
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(ii) Vesting. At the expiration of the performance period, the Board,
in its sole discretion, shall determine the extent to which the performance
goals have been achieved, and the percentage of the Performance Units of each
Participant that have vested.
(iii) Death, Disability or Retirement. Subject to the provisions of
this Plan, if a Participant terminates service with the Company during a
performance period because of death, Disability or Retirement, such Participant
(or the Participant's estate) shall be entitled to receive, at the expiration of
the performance period, a percentage of Performance Units that is equal to the
percentage of the performance period that had elapsed as of the date of
termination, provided that the Board, in its sole discretion, determines that
the conditions specified in the Performance Unit agreement have been satisfied,
and payment thereof shall be made to the Participant or the Participant's
estate, as the case may be.
(iv) Termination of Service. Unless otherwise determined by the Board
at the time of grant, the Performance Units will be forfeited upon a termination
of service during the performance period for any reason other than death,
Disability or Retirement.
(v) Change of Control. In the event of a Change of Control, the Board
may, in its sole discretion, cause all conditions applicable to Performance
Units to immediately terminate and cash representing the full amount of such
award to be paid to the Participant.
SECTION 11. Amendments and Termination. The Board may amend, alter or
discontinue the Plan at any time, but no amendment, alteration or
discontinuation shall be made which would impair the rights of a Participant
with respect to an Option, SAR, Restricted Share, Performance Award, Performance
Share or Performance Unit which has been granted under the Plan, without the
Participant's consent, or which, without the approval of such amendment within
one year (365 days) of its adoption by the Board, by a majority of the votes
cast at a duly held shareholder meeting at which a quorum representing a
majority of the Company's outstanding voting shares is present (either in person
or by proxy), would:
a. except as expressly provided in the Plan, increase the total number of
Shares reserved for the purposes of the Plan;
b. change the persons or class of persons eligible to participate in the
Plan; or
c. extend the maximum Option term under Section 5(b) of the Plan.
The Board may substitute new Options for previously granted Options,
including previously granted Options having higher exercise prices.
Subject to the above provisions, the Board shall have broad authority to
amend the Plan to take into account changes in applicable tax laws and
accounting rules, as well as other developments.
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<PAGE>
SECTION 12. Unfunded Status of Plan. The Plan is intended to constitute an
"unfunded" plan for incentive and deferred compensation. With respect to any
payments not yet made to a Participant by the Company, nothing contained herein
shall give any such Participant any rights that are greater than those of a
general creditor of the Company. In its sole discretion, the Board may authorize
the creation of trusts or other arrangements to meet the obligations created
under the Plan to deliver Shares or payments in lieu of Shares or with respect
to awards hereunder.
SECTION 13. General Provisions.
a. The Board may require each person acquiring Shares or a Share-based
award under the Plan to represent to and agree with the Company in writing that
the Participant is acquiring the Shares or Share-based award for investment
purposes and without a view to distribution thereof and as to such other matters
as the Board believes are appropriate to ensure compliance with applicable
Federal and state securities laws. The certificate evidencing such award and any
securities issued pursuant thereto may include any legend which the Board deems
appropriate to reflect any restrictions on transfer and compliance with
securities laws.
All certificates for Shares or other securities delivered under the Plan
shall be subject to such share-transfer orders and other restrictions as the
Board may deem advisable under the rules, regulations, and other requirements of
the Securities Act of 1933, as amended, the Exchange Act, any stock exchange
upon which the Shares are then listed, and any other applicable Federal or state
securities laws, and the Board may cause a legend or legends to be put on any
such certificates to make appropriate reference to such restrictions.
b. Nothing contained in the Plan shall prevent the Board from adopting
other or additional compensation arrangements, subject to shareholder approval
if such approval is required; and such arrangements may be either generally
applicable or applicable only in specific cases.
c. The adoption of the Plan shall not confer upon any employee of the
Company or a Subsidiary any right to continued employment with the Company or
such Subsidiary, nor shall it interfere in any way with the right of the Company
or such Subsidiary to terminate the employment of any of its employees at any
time.
d. No later than the date as of which an amount first becomes includable in
the gross income of the Participant for Federal income tax purposes with respect
to any award under the Plan, the Participant shall pay to the Company, or make
arrangements satisfactory to the Board regarding the payment, of any Federal,
state or local taxes of any kind required by law to be withheld with respect to
such amount. Unless otherwise determined by the Board, the minimum required
withholding obligations may be settled with Shares, including Shares that are
part of the award that gives rise to the withholding requirement. The
obligations of the Company under the Plan shall be conditional on such payment
or arrangements and the Company shall, to
- 19 -
<PAGE>
the extent permitted by law, have the right to deduct any such taxes from any
payment of any kind otherwise due to the Participant.
e. At the time of grant of an award under the Plan, the Board may provide
that the Shares received as a result of such grant shall be subject to a right
of first refusal, pursuant to which the Participant shall be required to offer
to the Company any Shares that the Participant wishes to sell, with the price
being the then Fair Market Value of the Shares, subject to such other terms and
conditions as the Board may specify at the time of grant.
f. The reinvestment of distributions or dividends in additional Restricted
Shares (or in other types of Plan awards) at the time of any distribution or
dividend payment shall only be permissible if sufficient Shares are available
under Section 3 of the Plan for such reinvestment (taking into account then
outstanding Options and other Plan awards).
g. The Board shall establish such procedures as it deems appropriate for a
Participant to designate a beneficiary to whom any amounts payable in the event
of the Participant's death are to be paid.
h. The Plan and all awards made and actions taken thereunder shall be
governed by and construed in accordance with the laws of the State of New
Jersey.
SECTION 14. Effective Date of Plan. This Plan shall become effective on the
date that it is adopted by the Board; provided, however, that it shall not be an
Incentive Stock Option Plan if it is not approved, within one year (365 days) of
its adoption by the Board, by a majority of the votes cast at a duly held
shareholder meeting at which a quorum representing a majority of Company's
outstanding voting shares is present, either in person or by proxy. The Board
may make awards hereunder prior to approval of the Plan; provided, however, that
any and all Incentive Stock Options so awarded automatically shall be converted
into Non-Qualified Stock Options if the Plan is not approved by shareholders
within 365 days of its adoption.
SECTION 15. Term of Plan. No Option, SAR, Restricted Share, Performance
Award, Performance Share or Performance Unit shall be granted pursuant to the
Plan on or after the tenth (10th) anniversary of the date of shareholder
approval of the Plan, but awards granted prior to such tenth (10th) anniversary
may extend beyond that date.
- 20 -
JEVIC TRANSPORTATION, INC.
EMPLOYEE STOCK PURCHASE PLAN
1. Purpose.
The Jevic Transportation, Inc. Employee Stock Purchase Plan
(the "Plan") is intended to encourage and facilitate the purchase of Shares of
the Common Stock of Jevic Transportation, Inc. (the "Company"), by employees of
the Company and any Participating Companies, thereby providing employees with a
personal stake in the Company and a long range inducement to remain in the
employ of the Company and Participating Companies. It is the intention of the
Company that the Plan qualify as an "employee stock purchase plan" within the
meaning of Section 423 of the Code.
2. Definitions.
(a) "Account" means a bookkeeping account established by the Committee
on behalf of a Participant to hold Payroll Deductions.
(b) "Approved Leave of Absence" means a leave of absence that has been
approved by the applicable Participating Company in such a manner as the Board
may determine from time to time.
(c) "Board" means the Board of Directors of the Company.
(d) "Code" means the Internal Revenue Code of 1986, as amended.
(e) "Committee" means the Committee appointed pursuant to section 14 of
the Plan.
(f) "Company" means Jevic Transportation, Inc.
(g) "Compensation" means an Employee's cash compensation payable for
services to a Participating Company during a calendar month.
(h) "Election Form" means the form acceptable to the Committee which an
Employee shall use to make an election to purchase Shares through Payroll
Deductions pursuant to the Plan.
(i) "Eligible Employee" means an Employee who meets the requirements
for eligibility under section 3 of the Plan.
(j) "Employee" means a person who is an employee of a Participating
Company.
(k) "Five Percent Owner" means an Employee who, with respect to a
Participating Company, is described in section 423(b) of the Code.
<PAGE>
(l) "Offering" means an offering of Shares to Eligible Employees
pursuant to the Plan.
(m) "Offering Commencement Date" means the first day of each January,
April, July and October, beginning on or after adoption of the Plan by the
Board, until the Plan Termination Date, provided that the first Offering
Commencement Date shall be January 1, 1998.
(n) "Offering Period" means the period extending from an Offering
Commencement Date through the following Offering Termination Date.
(o) "Offering Termination Date" means the last day of each three-month
period following an Offering Commencement Date.
(p) "Option Price" means 85 percent of the average of the high and low
sales prices per Share on the principal exchange on which the Shares are listed
or, if not so listed, on the Nasdaq National Market, on the Offering Termination
Date, or if such date is not a trading day, then on the next trading day
thereafter.
(q) "Participant" means an Employee who meets the requirements for
eligibility under section 3 of the Plan and who has timely delivered an Election
Form to the Committee.
(r) "Participating Company" means, as provided in Schedule A, the
Company and subsidiaries of the Company, within the meaning of section 424(f) of
the Code, if any, that are approved by the Board from time to time and whose
employees are designated as Employees by the Board.
(s) "Payroll Deductions" means amounts withheld from a Participant's
Compensation pursuant to the Plan, as described in section 5 of the Plan.
(t) "Plan" means Jevic Transportation, Inc. Employee Stock Purchase
Plan, as set forth in this document, and as may be amended from time to time.
(u) "Plan Termination Date" means the earlier of:
(1) The Offering Termination Date for the Offering in which
the maximum number of Shares specified in section 5 of the Plan have been issued
pursuant to the Plan; or
(2) The date as of which the Board chooses to terminate the
Plan as provided in section 15 of the Plan.
(v) "Shares" means shares of Common Stock of the Company, no par value.
- 2 -
<PAGE>
(w) "Successor-in-Interest" means the Participant's executor or
administrator, or such other person or entity to whom the Participant's rights
under the Plan shall have passed by will or the laws of descent and
distribution.
(x) "Termination Form" means the form acceptable to the Committee which
an Employee shall use to withdraw from an Offering pursuant to section 8 of the
Plan.
3. Eligibility and Participation.
(a) Initial Eligibility. Except as provided in section 3(b) of the
Plan, each Employee shall be eligible to participate in the Plan.
(b) Ineligibility. An Employee shall not be eligible to participate in
the Plan if such Employee:
(1) Is a Five Percent Owner;
(2) Is a temporary Employee;
(3) Has been employed by a Participating Company on a
full-time basis for less than a 6-consecutive-month period ending on the last
day of the month immediately preceding the effective date of an election to
purchase Shares pursuant to the Plan;
(4) Has not customarily worked more than 20 hours per week
during a 24- consecutive-month period ending on the last day of the month
immediately preceding the effective date of an election to purchase Shares
pursuant to the Plan; or
(5) Is restricted from participating under section 3(d) of the
Plan.
(c) Leave of Absence. For purposes of participation in the Plan, an
Employee on an Approved Leave of Absence shall be deemed to be an Employee for
the first 90 days of such Approved Leave of Absence and such Employee's
employment shall be deemed to have terminated for purposes of participation
under the Plan at the close of business on the 90th day of such Approved Leave
of Absence unless such Employee shall have returned to regular non-temporary
employment before the close of business on such 90th day. Termination by the
Participating Company of an Employee's Approved Leave of Absence, other than
termination or return to non-temporary employment, shall terminate an Employee's
employment for all purposes of the Plan and shall terminate such Employee's
participation in the Plan and the right to exercise any option. An Approved
Leave of Absence shall be considered active employment for purposes of sections
3(b)(3) and 3(b)(4) of the Plan.
(d) Restrictions on Participation. Notwithstanding any provisions of
the Plan to the contrary, no Employee shall be granted an option to participate
in the Plan if:
- 3 -
<PAGE>
(1) Immediately after the grant, such Employee would be a Five
Percent Owner; or
(2) Such option would permit such Employee's rights to
purchase stock under all employee stock purchase plans of the Participating
Companies which meet the requirements of section 423(b) of the Code to accrue at
a rate which exceeds $25,000 in fair market value (as determined pursuant to
section 423(b)(8) of the Code) for each calendar year in which such option is
outstanding.
(e) Commencement of Participation. An Employee who meets the
eligibility requirements of sections 3(a) and 3(b) of the Plan and whose
participation is not restricted under section 3(d) of the Plan shall become a
Participant by completing an Election Form and filing it with the Committee on
or before the 15th day of the month immediately preceding the Offering
Commencement Date for the first Offering to which such Election Form applies.
Payroll Deductions for a Participant shall commence on the applicable Offering
Commencement Date when his or her authorization for Payroll Deductions becomes
effective, and shall end on the Plan Termination Date, unless sooner terminated
by the Participant pursuant to section 8 of the Plan.
4. Shares Per Offering.
The Plan shall be implemented by a series of Offerings that shall
terminate on the Plan Termination Date. Offerings shall be made with respect to
Compensation payable for each calendar month of the Company's fiscal year for
the period commencing with the first day of the initial Offering Commencement
Date and ending with the Plan Termination Date. Shares available for any
Offering shall be the difference between the maximum number of Shares that may
be issued under the Plan, as determined pursuant to section 10(a) of the Plan,
for all of the Offerings, less the actual number of Shares purchased by
Participants pursuant to prior Offerings. If the total number of Shares for
which options are exercised on any Offering Termination Date exceeds the maximum
number of Shares available, the Committee shall make a pro rata allocation of
Shares available for delivery and distribution in as nearly a uniform manner as
practicable, and as it shall determine to be fair and equitable, and the
unapplied Account balances shall be returned to Participants as soon as
practicable following the Offering Termination Date.
5. Payroll Deductions.
(a) Amount of Payroll Deductions. An Eligible Employee who wishes to
participate in the Plan shall file an Election Form with the Committee at least
15 days before the Offering Commencement Date for the first Offering for which
such Election Form is effective on which he or she may elect to have Payroll
Deductions of such amounts designated by the Committee on the Election Form from
time to time made from his or her Compensation on each regular payday during the
time he or she is a Participant in the Plan, provided that the rules established
by the Committee shall be consistent with section 423(b)(5) of the Code.
- 4 -
<PAGE>
(b) Participants' Accounts. All Payroll Deductions with respect to a
Participant pursuant to section 5(a) of the Plan shall be credited to the
Participant's Account under the Plan.
(c) Changes in Payroll Deductions. A Participant may discontinue his
participation in the Plan as provided in section 8(a) of the Plan, but no other
change can be made during an Offering, including, but not limited to, changes in
the amount of Payroll Deductions for such Offering. A Participant may change the
amount of Payroll Deductions for subsequent Offerings by giving written notice
of such change to the Committee on or before the 15th day of the month
immediately preceding the Offering Commencement Date for the Offering for which
such change is effective.
(d) Leave of Absence. A Participant who goes on an Approved Leave of
Absence before the Offering Termination Date after having filed an Election Form
with respect to such Offering may:
(1) Withdraw the balance credited to his or her Account
pursuant to section 8(b) of the Plan;
(2) Discontinue contributions to the Plan but remain a
Participant in the Plan through the Offering Termination Date;
(3) Remain a Participant in the Plan during such Approved
Leave of Absence through the Offering Termination Date and continue the
authorization for the Participating Company to make Payroll Deductions for each
payroll period out of continuing payments to such Participant, if any.
6. Granting of Options.
On each Offering Termination Date, each Participant shall be deemed to
have been granted an option to purchase a number of Shares equal to the quotient
obtained by dividing the balance credited to the Participant's Account as
of the Offering Termination Date, by the Option Price.
7. Exercise of Options.
(a) Automatic Exercise. With respect to each Offering, a Participant's
option for the purchase of Shares granted pursuant to section 6 of the Plan
shall be deemed to have been exercised automatically on the Offering Termination
Date applicable to such Offering.
(b) Fractional Shares. To the extent that a Participant's Account is
not sufficient to acquire whole Shares only, fractional Shares shall be credited
to the Participant.
- 5 -
<PAGE>
(c) Transferability of Option. No option granted to a Participant
pursuant to the Plan shall be transferable other than by will or by the laws of
descent and distribution, and no such option shall be exercisable during the
Participant's lifetime other than by the Participant.
(d) Delivery of Certificates for Shares. The Company shall deliver
certificates for whole Shares acquired on the exercise of options during an
Offering Period as soon as practicable following the Offering Termination Date.
If the certificates are issued directly to the Participant, a check for any
fractional Share shall be issued to the Participant. The amount to be paid for
a fractional Share shall be based on the current market price of the Common
Stock.
8. Withdrawals.
(a) Withdrawal of Account. A Participant may elect to withdraw the
balance credited to the Participant's Account by providing a Termination Form to
the Committee at any time before the Offering Termination Date applicable to any
Offering.
(b) Amount of Withdrawal. A Participant may withdraw all, but not less
than all, of the amounts credited to the Participant's Account by giving a
Termination Form to the Committee. All amounts credited to such Participant's
Account shall be paid as soon as practicable following the Committee's receipt
of the Participant's Termination Form, and no further Payroll Deductions will be
made with respect to the Participant.
(c) Effect of Withdrawal on Subsequent Participation. A Participant who
elects to withdraw from an Offering pursuant to section 8(a) of the Plan shall
be deemed to have elected not to participate in each of the four succeeding
Offerings following the date on which the Participant gives a Termination Form
to the Committee.
(d) Termination of Employment. Upon termination of a Participant's
employment for any reason other than death, including termination due to
disability or continuation of a leave of absence beyond 90 days, all amounts
credited to such Participant's Account shall be returned to the Participant. In
the event of a Participant's (1) termination of employment due to death or (2)
death after termination of employment but before the Participant's Account has
been returned, all amounts credited to such Participant's Account shall be
returned to the Participant's Successor-in-Interest.
(e) Leave of Absence. A Participant who is on an Approved Leave of
Absence shall, subject to the Participant's election pursuant to section 5(d) of
the Plan, continue to be a Participant in the Plan until the end of the first
Offering ending after commencement of such Approved Leave of Absence. A
Participant who has been on an Approved Leave of Absence for more than 90 days
shall not be eligible to participate in any Offering that begins on or after the
commencement of such Approved Leave of Absence so long as such leave of absence
continues.
- 6 -
<PAGE>
9. Interest.
No interest shall be paid or allowed with respect to amounts paid into
the Plan or credited to any Participant's Account.
10. Shares.
(a) Maximum Number of Shares. No more than 300,000 Shares may be issued
under the Plan. Such Shares may be unissued shares or treasury shares of the
Company. The number of Shares available for any Offering and all Offerings shall
be adjusted if the number of outstanding Shares of the Company is increased or
reduced by split-up, reclassification, stock dividend or the like. All Shares
issued pursuant to the Plan shall be validly issued, fully paid and
nonassessable.
(b) Participant's Interest in Shares. A Participant shall have no
interest in Shares subject to an option until such option has been exercised.
(c) Registration of Shares. Shares to be delivered to a Participant
under the Plan shall be registered in the name of the Participant.
(d) Restrictions on Exercise. The Board may, in its discretion, require
as conditions to the exercise of any option such conditions as it may deem
necessary to assure that the exercise of options is in compliance with
applicable securities laws.
11. Expenses.
The Participating Companies shall pay all fees and expenses incurred
(excluding individual Federal, state, local or other taxes) in connection with
the Plan. No charge or deduction for any such expenses will be made to a
Participant upon the termination of his or her participation under the Plan or
upon the distribution of certificates representing Shares purchased with his or
her contributions.
12. Taxes.
The Participating Companies shall have the right to withhold from each
Participant's Compensation an amount equal to all Federal, state, city or other
taxes as the Participating Companies shall determine are required to be withheld
by them. In connection with such withholding, the Participating Companies may
make any such arrangements as are consistent with the Plan as it may deem
appropriate, including the right to withhold from Compensation paid to a
Participant other than in connection with the Plan.
- 7 -
<PAGE>
13. Plan and Contributions Not to Affect Employment.
The Plan shall not confer upon any Eligible Employee any right to
continue in the employ of the Participating Companies.
14. Administration.
The Plan shall be administered by the Board, which may delegate
responsibility for such administration to a committee of the Board (the
"Committee"). If the Board fails to appoint the Committee, any references in the
Plan to the Committee shall be treated as references to the Board. The Board, or
the Committee, shall have authority to interpret the Plan, to prescribe, amend
and rescind rules and regulations relating to it, and to make all other
determinations deemed necessary or advisable in administering the Plan, with or
without the advice of counsel. The determinations of the Board or the Committee
on the matters referred to in this paragraph shall be conclusive and binding
upon all persons in interest.
15. Amendment and Termination.
The Board may terminate the Plan at any time and may amend the Plan
from time to time in any respect; provided, however, that upon any termination
of the Plan, all Shares or Payroll Deductions (to the extent not yet applied to
the purchase of Shares) under the Plan shall be distributed to the Participants,
provided further, that no amendment to the Plan shall affect the right of a
Participant to receive his or her proportionate interest in the Shares or his or
her Payroll Deductions (to the extent not yet applied to the purchase of Shares)
under the Plan, and provided further that the Company may seek shareholder
approval of an amendment to the Plan if such approval is determined to be
required by or advisable under the regulations of the Securities or Exchange
Commission or the Internal Revenue Service, the rules of any stock exchange or
system on which the Shares are listed or other applicable law or regulation.
16. Effective Date.
The Plan shall be effective on October 7, 1997, subject to approval by
the Company's shareholders within one year of the adoption of the Plan by the
Board. Any option granted before the approval of the Plan by the Company's
shareholders shall be expressly conditioned upon such approval, and no Share
certificates shall be issued until such approval. If shareholder approval is not
received within 12 months before or after the date of the initial adoption of
the Plan by the Board, no Share certificates shall be issued with respect to any
automatic exercises which may have occurred pursuant to section 7 of the Plan,
and all amounts credited to Participants' Accounts with respect to such Shares
shall be returned to Participants as soon as administratively practicable.
- 8 -
<PAGE>
17. Government and Other Regulations.
(a) In General. The purchase of Shares under the Plan shall be subject
to all applicable laws, rules and regulations, and to such approvals by any
governmental agencies as may be required.
(b) Securities Law. The Committee shall have the power to make each
grant under the Plan subject to such conditions as it deems necessary or
appropriate to comply with the then-existing requirements of the Securities Act
of 1933, as amended, and the Securities Exchange Act of 1934, as amended,
including Rule 16b-3 (or any similar rule) of the Securities and Exchange
Commission.
18. Non-Alienation.
No Participant shall be permitted to assign, alienate, sell, transfer,
pledge or otherwise encumber his interest under the Plan prior to the
distribution to him of Share certificates. Any attempt at assignment,
alienation, sale, transfer, pledge or other encumbrance shall be void and of no
effect.
19. Notices.
Any notice required or permitted hereunder shall be sufficiently given
only if delivered personally, telecopied, or sent by first class mail, postage
prepaid, and addressed:
If to the Company:
Jevic Transportation, Inc.
P.O. Box 5157
Delanco, NJ 08075
Attention: Employee Stock Purchase Plan Committee
Or any other address provided pursuant to written notice.
If to the Participant:
At the address on file with the Company from time to time, or to such
other address as either party may hereafter designate in writing by
notice similarly given by one party to the other.
20. Successors.
The Plan shall be binding upon and inure to the benefit of any
successor, successors or assigns of the Company.
- 9 -
<PAGE>
21. Severability.
If any part of this Plan shall be determined to be invalid or void in
any respect, such determination shall not affect, impair, invalidate or nullify
the remaining provisions of this Plan which shall continue in full force and
effect.
22. Acceptance.
The election by any Eligible Employee to participate in this Plan
constitutes his or her acceptance of the terms of the Plan and his or her
agreement to be bound hereby.
23. Applicable Law.
This Plan shall be construed in accordance with the laws of the State
of New Jersey, to the extent not preempted by applicable Federal law.
- 10 -
<PAGE>
SCHEDULE A
Participating Companies
Jevic Transportation, Inc.
- 11 -
CPR SELECT
THE CORPORATE PLAN FOR RETIREMENT
SELECT PLAN
Adoption Agreement
IMPORTANT NOTE
This document is not an IRS approved Prototype Plan. An Adopting Employer may
not rely solely on this Plan to ensure that the Plan is "unfunded and maintained
primarily for the purpose of providing deferred compensation to a select group
of management or highly compensated employees" and exempt from Parts 2 through 4
of the Title I of the Employee Retirement Income Security Act of 1974 with
respect to the Employer's particular situation. Fidelity Management Trust
Company, its affiliates and employees may not provide you with legal advice in
connection with the execution of this document. This document should be reviewed
by your attorney and/or accountant prior to execution.
<PAGE>
ADOPTION AGREEMENT
ARTICLE 1
1.01 PLAN INFORMATION
(a) Name of Plan:
This is the Jevic transportation, Inc. Supplemental Savings Plan
----------------------------------------------------
(the "Plan").
(b) Name of Plan Administrator, if not the Employer: N/A
-----
Address: _____________________________________________________
Phone Number: ________________________________________________
The Plan Administrator is the agent for service of legal process for
the Plan.
(c) Three Digit Plan Number: ____________________________________
(d) Plan Year End (month/day): December 31
---------------
(e) Plan Status (check one):
(1) /X/ Effective Date of new Plan: 2/1/98
-------
(2) / / Amendment Effective Date: __________________________
The original effective date of the Plan: ___________
<PAGE>
1.02 EMPLOYER
(a) The Employer is: Jevic Transportation, Inc.
-----------------------------
Address: P.O. Box 5157, 600 Creek Road
-----------------------------
Delanco, NJ 08075
-----------------------------
Contact's Name: Brian J. Fitzpatrick
-----------------------------
Telephone Number: 609-461-7111
-----------------------------
(1) Employer's Tax Identification Number: 22-237-3402
-----------
(2) Business from of Employer (check one):
(A) /X/ Corporation
(B) / / Sole proprietor or partnership
(C) / / Subchapter S Corporation
(3) Employer's fiscal year end: December 31
------------
(b) The term "Employer" includes the following Related employer (s) (as
defined in Section 2.01(a)(21)):
N/A
---------------------------------------------------
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2
1.03 COVERAGE
(a) Only those Employees listed in Attached A will be eligible to
participate in the Plan:
(b) The Entry Date(s) shall be (check one):
(1) / / the first day of each Plan Year:
(2) / / the first day of each Plan Year and the date six months
later.
(3) /X/ the first day of each Plan Year and the first day of the
fourth, seventh, and tenth months.
(4) / / the first day of each month.
1.04 COMPENSATION
For purposes of determining Contributions under the Plan, compensation
shall be as defined in Section 2.01(a)(6), but excluding (check the
appropriate box(es)):
(a) / / Overtime Pay.
(b) / / Bonuses.
(c) / / Commissions.
(d) / / The value of a qualified or a non-qualified stock option
granted to an Employee by the Employer to the extent such value
is includable in the Employee's taxable income.
(e) /X/ No exclusions.
1.05 CONTRIBUTIONS
(a) Deferral Contributions. The employer shall make a Deferral
Contribution in accordance with Section 4.01 on behalf of each
Participant who has an executed salary reduction agreement in effect
with the Employer for the Plan Year (or portion of the Plan Year) in
question, not to exceed 25% of Compensation for that Plan Year.
3
<PAGE>
(b) /X/ Matching Contributions
(1) The Employer shall make a Matching Contribution on behalf of each
Participant in an amount equal to the following percentage of a
Participant's Deferred Contributions during the Plan Year
(check one):
(A) / / 50%
(B) / / 100%
(C) /X/ 25%
(D) / / (Tiered Match) ______% of the first _____% of the
Participant's Compensation contributed to the Plan,
______% of the next _____% of the Participant's
Compensation contributed to the Plan,
______% of the next _____% of the Participant's
Compensation contributed to the Plan.
(E) / / The percentage declared for the year, if any, by a Board
of Directors' resolution.
(F) / / Other: ________________________________________
________________________________________
________________________________________
________________________________________
(2) /X/ Matching Contributions Limits (check the appropriate box(es)):
(A) /X/ Deferral Contributions in excess of 6%* of the Participant's
compensation for the period in question shall not be
considered for Matching Contributions.
Note: If the Employer elects a percentage limit in (A) above and
requests the Trustee to account separately for matched and
unmatched Deferral, Contributions, the Matching Contributions
allocated to each Participant must be computed, and the
percentage limit applied, based upon each period.
(B) / / Matching Contributions for each Participant for each Plan
Year shall be limited to $________________.
* Less the amount contributed under the company's tax-qualified 401(k) plan
4
<PAGE>
(3) Eligibility Requirement(s) for Matching Contributions
A Participant who makes Deferral Contributions during the Plan Year
under Section 1.05(a) shall be entitled to Matching Contributions for
that Plan Year if the Participant satisfies the following
requirement(s) (Check the appropriate box(es). Options (B) and (C)
may be elected together):
(A) / / is employed by the employer on the last day of the Plan Year:
(B) / / Earns at least 500 Hours of Service during the Plan Year.
(C) / / Earns at least 1,000 Hours of Service during the Plan Year.
(D) /X/ No requirements.
Note: If option(A), (B) or (C) above is selected then Matching
Contributions can only be made by the Employer after the Plan
Year ends. Any Matching Contribution made before Plan Year
end shall not be subject to the eligibility requirements of
this section 1.05(b)(3)).
1.06 DISTRIBUTION DATES
A Participant may elect to receive a distribution or commence
distributions from his Account pursuant to section 8.02 upon the
following date(s) (check the appropriate box(es). If Option (e) is
elected, then options (a) and (b) may not be elected):
(a) / / Attainment of Normal Retirement Age. Normal Retirement age under
the Plan is (check one):
(1) / / age 65.
(2) / / age _____ (specify from 55 through 64).
(3) / / later of the age _____ (can not exceed 65) or the fifth
anniversary of the Participant's Commencement Date.
(b) / / Attainment of Early Retirement Age. Early Retirement Age is the
first day of the month after the Participant attains age
_______ (specify 55 or greater) and complete _______ Years of
Service for Vesting.
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(c) /X/ Termination of employment with the Employer.
1.07 VESTING SCHEDULE
(a) The Participant's vested percentage in Matching Contributions
elected in Section 1.05(b) shall be based upon the schedule(s)
selected below.
(1) / / N/A - No Matching Contributions
(2) / / 100% Vesting immediately
(3) / / 3 year cliff (see C below)
(4) / / 5 year cliff (see D below)
(5) / / 6 year graduated (see E below)
(6) /X/ 7 year graduated (see f below)
(7) / / G below
(8) / / Other (Attachment "B")
Years of
Service for Vesting Schedule
Vesting C D E E G
----------- - - - - -
0 0% 0% 0% 0% -
1 0% 0% 0% 0% -
2 0% 0% 20% 0% -
3 100% 0% 40% 20% -
4 100% 0% 60% 40% -
5 100% 100% 80% 60% -
6 100% 100% 100% 80% -
7 100% 100% 100% 100% 100%
(b) / / Years of Service for Vesting shall exclude (check one):
(1) / / for new plans, service prior to the Effective Date as
defined in Section 1.01(e)(1).
(2) / / for existing plans converting from another plan document,
service prior to the original Effective Date as defined in
Section 1.01(e)(2).
(c) / / A Participant will forfeit his Matching Contributions upon the
occurrence of the following event(s):__________________________
__________________________
__________________________
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(d) A Participant will be 100% vested in his Matching Contributions upon
(check the appropriate box(es), if any):
(1) / / Normal Retirement Age (as defined in Section 1.06(a)).
(2) / / Early Retirement age (as defined in Section 1.06(a)).
(3) / / Death
1.08 PREDECESSOR EMPLOYER SERVICE
/ / Service for purposes of vesting in Section 1.07(a) shall include
service with the following employer(s):
(a) ________________________________________________________________
(b) ________________________________________________________________
(c) ________________________________________________________________
(d) ________________________________________________________________
1.09 HARDSHIP WITHDRAWALS
Participant withdrawals for the hardship prior to termination of
employment (check one):
(a) / / will be allowed in accordance with Section 7.07, subject to a
$_________ minimum amount. (Must be at least $1,000)
(b) /X/ will not be allowed.
1.10 DISTRIBUTIONS
(a) /X/ as a lump sum.
(b) /X/ under a systematic withdrawal plan (installments) not
to ex exceed 10 years.
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<PAGE>
1.11 INVESTMENT DECISIONS
(a) Investment Directions
Investments in which the Accounts of Participants shall be treated
as invested and reinvested shall be directed (check one):
(1) / / by the Employer among the options listed in (b) below.
(2) /X/ by each Participant among the options listed in (b) below.
(3) / / by each Participant with respect to Deferral Contributions
and by the employer with respect to employer Matching
Contributions. The employer must direct the Employer Matching
Contributions among the same investment options made
available for Participant directed sources listed in (b)
below.
(b) Plan Investment Options
Participant Accounts will be treated as invested among the Fidelity
Funds listed below pursuant to Participant and/or Employer
directions:
Fund Name Fund Number
--------- -----------
(1) ____________________________________ ___________
(2) ____________________________________ ___________
(3) ____________________________________ ___________
(4) ____________________________________ ___________
(1) ____________________________________ ___________
(6) ____________________________________ ___________
(7) ____________________________________ ___________
(8) ____________________________________ ___________
(9) ____________________________________ ___________
(10) ___________________________________ ___________
Note: An additional annual recordkeeping fee will be charged for each
fund in excess of five funds.
8
<PAGE>
Note: The method and frequency for change of investments will be
determined under the rules applicable to the selected funds.
Information will be provided regarding expenses, if any, for
changes in investment options.
1.12 RELIANCE ON PLAN
An adopting employer may not rely solely on this Plan to ensure that the
Plan is "unfunded and maintained primarily for the purpose of providing
deferred compensation for a select group of management or highly
compensated employees" and exempt from Parts 2 through 4 of Title I of
the Employee retirement Income Security Act of 1974 with respect to the
employer's particular situation. This Agreement must be reviewed by your
attorney and/or accountant before it is executed.
this Adoption Agreement may be used only in conjunction with the
CORPORATE plan for Retirement Select Basis Plan Document.
9
<PAGE>
EXECUTION PAGE
(Fidelity's Copy)
IN WITNESS WHEREOF, the employer has executed this Adoption Agreement to be
executed this _____________ day of _____________, 19__.
Employer _____________________________________
By _____________________________________
Title _____________________________________
Employer _____________________________________
By _____________________________________
Title _____________________________________
10
<PAGE>
EXECUTION PAGE
(Employer's Copy)
IN WITNESS WHEREOF, the employer has executed this Adoption Agreement to be
executed this 30the day of September, 1997.
Employer Jevic Transportation, Inc.
By /s/
-------------------------------------
Title VP - Administration
Employer Jevic Transportation, Inc.
By /s/
-------------------------------------
Title Director of Financial Reporting
11
<PAGE>
Attachment A
Pursuant to Section 1.03(a), the following are the employees who are eligible
to participate in the Plan:
To follow as Determined
Employer _____________________________________
By _____________________________________
Title _____________________________________
Date _____________________________________
12
<PAGE>
The CORPORATE Plan for Retirement Select Plan
BASIC PLAN DOCUMENT
IMPORTANT NOTE
This document is not an IRS approved Prototype Plan. An Adopting Employer
may not rely solely on this Plan to ensure that the Plan is "unfunded and
maintained primarily for the purpose of providing deferred compensation to a
select group of management or highly compensated employees" and exempt from
parts 2 through 4 of Title I of the Employee Retirement Income Security
Act of 1974 with respect to the Employer's particular situation. Fidelity
Management Trust Company, its affiliates and employees may not provide you
with legal advice in connection with the execution of this document. This
document should be reviewed by your attorney and/or accountant prior to
execution.
<PAGE>
CPR SELECT
BASIC PLAN DOCUMENT
ARTICLE 1
ADOPTION AGREEMENT
ARTICLE 2
DEFINITIONS
2.01 - Definitions
ARTICLE 3
PARTICIPATION
3.01 - Date of Participation
3.02 - Resumption of Participation Following Re employment
3.03 - Cessation or Resumption of Participation Following a Change in
Status
ARTICLE 4
CONTRIBUTIONS
4.01 - Deferral Contributions
4.02 - Matching Contributions
4.03 - Time of Making Employer Contributions
ARTICLE 5
PARTICIPANTS' ACCOUNTS
5.01 - Individual Accounts
ARTICLE 6
INVESTMENT OF CONTRIBUTIONS
6.01 - Manner of Investment
6.02 - Investment Decisions
ARTICLE 7
RIGHT TO BENEFITS
7.01 - Normal or Early Retirement
7.02 - Death
7.03 - Other Termination of Employment
7.04 - Separate Account
7.05 - Forfeitures
7.06 - Adjustment for Investment Experience
7.07 - Hardship Withdrawals
ARTICLE 8
DISTRIBUTION OF BENIFITS PAYABLE AFTER TERMINATION OF SERVICE
8.01 - Distribution of Benefits to Participants and Beneficiaries
8.02 - Determination of Method of Distribution
8.03 - Notice to Trustee
8.04 - Time of Distribution
ARTICLE 9
AMENDMENT AND TERMINATION
9.01 - Amendment by Employer
9.02 - Retroactive Amendments
9.03 - Termination
9.04 - Distribution Upon Termination of the Plan
2
<PAGE>
ARTICLE 10
MISCELLANEOUS
10-01 - Communication to Participants
10.02 - limitation of Rights
10.03 - Nonalienability of Benefits
10.04 - Facility of Payment
10.05 - Information between Employer and Trustee
10.06 - Notices
10.07 - Governing Law
ARTICLE 11
PLAN ADMINISTRATION
11.01 - Powers and responsibilities of the Administrator
11.02 - Nondiscriminatory Exercise of Authority
11.03 - Claims and Review Procedures
11.04 - Cost of Administration
3
<PAGE>
PREAMBLE
It is the intention of the Employer to establish herein an unfunded plan
maintained solely for the purpose of providing deferred compensation for a
select group of management or highly compensated employees for purposes of
Title I of ERISA.
Article 1. Adoption Agreement.
Article 2. Definitions.
2.01. Definitions.
(a) Wherever used herein, the following terms have the meanings set
forth below, unless a different meaning is clearly required by the
context:
(1) "Account" means an account established on the books of the
Employer for the purpose of recording amounts credited on behalf
of a Participant and any income, expenses, gains or losses
included thereon.
(2) "Administrator" means the Employer adopting this Plan, or other
person designated by the Employer in Section 1.01 (b).
(3) "Adoption Agreement" means Article 1 under which the Employer
establishes and adopts or amends the Plan and designates the optional
provisions selected by the Employer. The provisions of the Adoption
Agreement shall be an integral part of the Plan.
(4) "Beneficiary" means the person or persons entitled under Section
7.02 to receive benefits under the Plan upon the death of a
Participant.
(5) "Code" means the Internal Revenue Code of 1986, as amended from
time to time.
(6) "Compensation" shall mean for purposes of Article 4
(Contributions) wages as defined in Section 3401(a) of the Code and
all other payments of compensation to an employee by the employer (in
the course of the employers trade or business) for which the employer
is required to furnish the employee a written statement under Section
6041(d) and 6051(a)(3) of the Code, excluding any items elected by
the Employer in Section 1.04, reimbursements or other expense
allowances, fringe benefits (cash and non-cash), moving-expenses,
deferred compensation and welfare benefits, but including amounts
that are not includable in the gross income of the Participant under
a salary reduction agreement by reason of the application of Sections
125, 402(a)(8), 402(h), or 403(b) of the Code. Compensation must be
determined without regard to any rules under Section 3401 (a) of the
Code that limit the remuneration included in wages based on the
nature or location of the employment or the services performed (such
as the exception for agricultural labor in Section 3401(a)(2) of the
Code).
Compensation shall generally be based on the amount that would
have been actually paid to the Participant during the Plan Year but
for an election under Section 4.01.
<PAGE>
In the case of any Self-Employed Individual or an Owner-Employee
Compensation shall mean the Individual's Earned Income.
(7) "Earned Income" means the net earnings of a Self-Employed
Individual derived from the trade or business with respect to which
the Plan is established and for which the personal services of such
individual are a material income-providing factor, excluding any
items not included in gross income and the deductions allocated to
such items, except that for taxable years beginning after December
31, 1989 net earnings shall be determined with regard to the
deduction allowed under Section 164(f) of the Code, to the extent
applicable to the Employer. Net earnings shall be reduced by
contributions of the Employer to any qualified plan, to the extent a
deduction is allowed to the Employer for such contributions under
Section 404 of the Code.
(8) "Employee" means any employee of the Employer, Self-Employed
Individual or Owner-Employee.
(9) "Employer* means the employer named in Section 1.02(a) and any
Related Employers designated in Section 1.02(b).
(10) "Employment Commencement Date" means the date on which the
Employee first performs an Hour of Service.
(11) "ERISA" means the Employee Retirement Income Security Act of
1974, as from time to time amended.
(12) "Fidelity Fund" means any Registered Investment Company which is
made available to plans utilizing the CORPORATEplan for Retirement
Select Plan.
(13) "Fund Share" means the share, unit, or other evidence of
ownership in a Fidelity Fund.
(14) "Hour of Service" means, with respect to any Employee,
(A) Each hour for which the Employee is directly or indirectly
paid, or entitled to payment, for the performance of duties for
the Employer or a Related Employer, each such hour to be
credited to the Employee for the computation period in which the
duties were performed;
(B) Each hour for which the Employee is directly or indirectly
paid, or entitled to payment, by the Employer or Related
Employer (including payments made or due from a trust fund or
insurer to which the Employer contributes or pays premiums) on
account of a period of time during which no duties are performed
(irrespective of whether the employment relationship has
terminated) due to vacation, holiday, illness, incapacity,
disability, layoff, jury duty, military duty, or leave of
absence, each such hour to be credited to the Employee for the
Eligibility Computation Period in which such period of time
occurs, subject to the following rules:
(i) No more than 501 Hours of Service shall be credited
under this paragraph (B) on account of any single
continuous period during which the Employee performs no
duties;
2
<PAGE>
(ii) Hours of Service shall not be credited under this
paragraph (B) for a payment which solely reimburses the
Employee for medically-related expenses, or which is made
or due under a plan maintained solely for the purpose of
complying with applicable workmen's compensation,
unemployment compensation or disability insurance laws; and
(iii) If the period during which the Employee performs no
duties falls within two or more computation periods and if
the payment made on account of such period is not
calculated on the basis of units of time, the Hours of
Service credited with respect to such period shall be
allocated between not more than the first two such
computation periods on any reasonable basis consistently
applied with respect to similarly situated Employees; and
(C) Each hour not counted under paragraph (A) or (B) for which
back pay, irrespective of mitigation of damages, has been either
awarded or agreed to be paid by the Employer or a Related
Employer, each such hour to be credited to the Employee for the
computation period to which the award or agreement pertains
rather than the computation period in which the award agreement
or payment is made.
For purposes of determining Hours of Service, Employees of
the Employer and of all Related Employers will be treated as
employed by a single employer. For purposes of paragraphs (B) and
(C) above; Hours of Service will be calculated in accordance with
the provisions of Section 2530.200b-2(b) of the Department of
Labor regulations which are incorporated herein by reference.
Solely for purposes of determining whether a break in
service for participation purposes has occurred in a computation
period, an individual who is absent from work for maternity or
paternity reasons shall receive credit for the hours of service
which would otherwise been credited to such individual but for
such absence, or in any case in which such hours cannot be
determined, 8 hours of service per day of such absence. For
purposes of this paragraph, an absence from work for maternity
reasons means an absence (1) by reason of the pregnancy of the
individual, (2) by reason of a birth of a child of the
individual, (3) by reason of the placement of a child with the
individual in connection with the adoption of such child by such
individual, or (4) for purposes of caring for such child for a
period beginning immediately following such birth or placement.
The hours of service credited under this paragraph shall be
credited (1) in the computation period in which the absence
begins if the crediting is necessary to prevent a break in
service in that period, or (2) in all other cases, in the
following computation period.
(15) "Normal Retirement Age* means the normal retirement age
specified in Section 1.06(a) of the Adoption Agreement.
(16) "Owner-Employee" means, if the Employer is a sole
proprietorship, the individual who is the sole proprietor, or if the
Employer is a partnership, a partner who owns more than 10 percent of
either the capital interest or the profits interest of the
partnership.
3
<PAGE>
(17) "Participant" means any Employee who participates in the Plan in
accordance with Article 3 hereof.
(18) *Plan" means the plan established by the Employer as set forth
herein as a new plan or as an amendment to an existing plan, by
executing the Adoption Agreement, together with any and all
amendments hereto.
(19) "Plan Year" means the 12-consecutive month period designated by
the Employer in Section 1.01(d).
(20) "Registered Investment Company" means any one or more
corporations, partnerships or trusts registered under the Investment
Company Act of 1940 for which Fidelity Management and Research
Company serves as investment advisor.
(21) *Related Employer" means any employer other than the Employer
named in Section 1.02(a), if the Employer and such other employer are
members of a controlled group of corporations (as defined in Section
414(b) of the Code) or an affiliated service group (as defined in
Section 414(m)), or are trades or businesses (whether or not
incorporated) which are under common control (as defined in Section
414(c)), or such other employer is required to be aggregated with the
Employer pursuant to regulations issued under Section 414(o).
(22) "Self-Employed Individual" means an individual who has Earned
Income for the taxable year from the Employer or who would have had
Earned Income but for the fact that the trade or business had no net
profits for the taxable year.
(23) "Trust" means the trust created by the Employer.
(24) "Trust Agreement" means the agreement between the Employer and
the Trustee, as set forth in a separate agreement, under which assets
are held, administered, and managed subject to the claims of the
Employer's creditors in the event of the Employer's insolvency, until
paid to Plan Participants and their Beneficiaries as specified in the
Plan.
(25) "Trust Fund" means the property held in the Trust by the
Trustee.
(26) "Trustee" means the corporation or individuals appointed by the
Employer to administer the Trust in accordance with the Trust
Agreement.
(27) "Years of Service for Vesting" means, with respect to any
Employee, the number of whole years of his periods of service with
the Employer or a Related Employer (the elapsed time method to
compute vesting service), subject to any exclusions elected by the
Employer in Section 1.07(b). An Employee will receive credit for the
aggregate of all time period(s) commencing with the Employee's
Employment Commencement Date and ending on the date a break in
service begins, unless any such years are excluded by Section 1.
07(b). An Employee will also receive credit for any period of
severance of less thin 12 consecutive months. Fractional periods of a
year will be expressed in terms of days.
4
<PAGE>
In the case of a Participant who has 5 consecutive 1-year breaks
in service, all years of service after such breaks in service will be
disregarded for the purpose of vesting the Employer-derived account
balance that accrued before such breaks, but both pre-break and
post-break service will count for the purposes of vesting the
Employer-derived account balance that accrues after such breaks. Both
accounts will share in the earnings and losses of the fund.
In the case of a Participant who does not have 5 consecutive
1-year breaks in service, both the pre-break and post-break service
will count in vesting both the pre-break and post- break
employer-derived account balance.
A break in service is a period of severance of at least 12
consecutive months. Period of severance is a continuous period of
time during which the Employee is not employed by the Employer. Such
period begins on the date the Employee retires, quits or is
discharged, or if earlier, the 12 month anniversary of the date on
which the Employee was otherwise first absent from service.
In the case of an individual who is absent from work for
maternity or paternity reasons, the 12-consecutive month period
beginning on the first anniversary of the first date of such absence
shall not constitute a break in service. For purposes of this
paragraph, an absence from work for maternity or paternity reasons
means an absence (1) by reason of the pregnancy of the individual,
(2) by reason of the birth of a child of the individual, (3) by
reason of the placement of a child with the individual in connection
with the adoption of such child by such individual, or (4) for
purposes of caring for such child for a period beginning immediately
following such birth or placement.
If the Plan maintained by the Employer is the plan of a
predecessor employer, an Employee's Years of Service for Vesting
shall include years of service with such predecessor employer. . In
any case in which the Plan maintained by the Employer is not the plan
maintained by a predecessor employer, service for such predecessor
shall be treated as service for the Employer to the extent provided
in Section 1.08.
(b) Pronouns used in the Plan are in the masculine gender but include the
feminine gender unless the context clearly indicates otherwise.
Article 3. Participation.
3.01. Date of Participation. An eligible Employee (as set forth in Section
1.03(a)) will become a Participant in the Plan on the first Entry Date after
which he becomes an eligible Employee if he has filed an election pursuant
to Section 4.01. If the eligible Employee does not file an election pursuant
to Section 4.01 prior to his first Entry Date, then the eligible Employee
will become a Participant in the Plan as of the first day of a Plan Year for
which he has filed an election.
3.02. Resumption of Participation Following Re emloyment. If a Participant
ceases to be an Employee and thereafter returns to the employ of the
Employer he will again become a Participant as of an Entry Date following
the date on which he completes an Hour of Service for the Employer following
his re employment, if he is an eligible Employee as defined in Section 1.03
(a), and has filed an election pursuant to Section 4.01.
5
<PAGE>
3.03. Cessation or Resumption of Participation Following a Change in
status. If any Participant continues in the employ of the Employer or
Related Employer but ceases to be an eligible Employee as defined in Section
l.03(a), the individual shall continue to be a Participant until the
entire amount of his benefit is distributed; however, the individual shall
not be entitled to make Deferral Contributions or receive an allocation of
Matching contributions during the period that he is not an eligible
Employee. Such Participant shall continue to receive credit for service
completed during the period for purposes of determining his vested interest
in his Accounts. In the event that the individual subsequently again becomes
an eligible Employee, the individual shall resume full participation in
accordance with Section 3.01.
Article 4. Contributions.
4.01. Deferral Contributions. Each Participant may elect to execute a salary
reduction agreement with the Employer to reduce his Compensation by a
specified percentage not exceeding the percentage set forth in Section
1.05(a) and equal to a whole number multiple of one (1) percent. Such
agreement shall become effective on the first day of the period as set forth
in the Participant's election. The election will be effective to defer
Compensation relating to all services performed in a Plan Year subsequent to
the filing of such an election. An election once made will remain in effect
until a new election is made. A new election will be effective as of the
first day of the following Plan Year and will apply only to Compensation
payable with respect to services rendered after such date. Amounts credited
to a Participant's account prior to the effective date of any new election
will not be affected and will be paid in accordance with that prior
election. The Employer shall credit an amount to the account maintained on
behalf of the Participant corresponding to the amount of said reduction.
Under no circumstances may a salary reduction agreement be adopted
retroactively. A Participant may not revoke a salary reduction agreement for
a Plan year during that year.
4.02. Matching Contributions. If so provided by the Employer in section
1.05(b), the Employer shall make a Matching Contribution to be credited to
the account maintained on behalf of each Participant who had Deferral
Contributions made on his behalf during the year and who meets the
requirement, if any, of Section 1.05(b)(3). The amount of the Matching
Contribution shall be determined in accordance with Section 1.05(b).
4.03. Time of Making Employer Contributions. The Employer will from time to
time make a transfer of assets to the Trustee for each Plan Year. The
Employer shall provide the Trustee with information on the amount to be
credited to the separate account of each Participant maintained under the
Trust.
Article 5. Employer Participants' Accounts.
5.01. Individual Accounts. The Administrator will establish and maintain an
Account for each Participant which will reflect Matching and Deferral
Contributions credited to the Account on behalf of the Participant and
earnings, expenses, gains and losses credited thereto, and deemed
investments made with amounts in the Participant's Account. The
Administrator will establish and maintain such other accounts and records as
it decides in its discretion to be reasonably required or appropriate in
order to discharge its duties under the Plan. Participants will be furnished
statements of their Account values at least once each Plan Year.
6
<PAGE>
Article 6. Investment of Contributions.
6.01. Manner of investment. All amounts credited to the Accounts of
Participants shall be treated as though invested and reinvested only in
eligible investments selected by the Employer in Section 1.11(b).
6.02. Investment-Decisions. Investments in which the Accounts of
Participants shall be treated as invested and reinvested shall be directed
by the Employer or by each Participant, or both, in accordance with the
Employer's election in Section 1.11(a).
(a) All dividends, interest, gains and distributions of any nature
earned in respect of Fund Shares in which the Account is treated as
investing shall be credited to the Account as though reinvested in
additional shares of that Fidelity Fund.
(b) Expenses attributable to the acquisition of investments shall be
charged to the Account of the Participant for which such investment is
made.
Article 7. Right to Benefits.
7.01. Normal or Early Retirement. If provided by the Employer in Section
1.07(d), each Participant who attains his Normal Retirement Age or Early
Retirement Age will have a nonforfeitable interest in his Account in
accordance with the vesting schedule elected in Section 1.07. If a
Participant retires on or after attainment of Normal or Early Retirement
Age, such retirement is referred to as a normal retirement. On or after his
normal retirement, the balance of the Participant's Account, plus any
amounts thereafter credited to his Account, subject to the provisions of
Section 7.06, will be distributed to him in accordance with Article 8.
If provided by the Employer in Section 1.06, a Participant who
separates from service before satisfying the age requirements for early
retirement, but has satisfied the service requirement will be entitled to
the distribution of his Account, subject to the provisions of Section 7.06,
in accordance with Article 8, upon satisfaction of such age requirement.
7.02. Death. If a Participant dies before the distribution of his Account
has commenced, or before such distribution has been completed, his Account
shall become vested in accordance with the vesting schedule elected in
Section 1.07 and his designated Beneficiary or Beneficiaries will be
entitled to receive the balance or remaining balance of his Account, plus
any amounts thereafter credited to his Account, subject to the provisions of
Section 7.06. Distribution to the Beneficiary or Beneficiaries will be made
in accordance with Article 8.
A Participant may designate a Beneficiary or Beneficiaries, or change
any prior designation of Beneficiary or Beneficiaries by giving notice to
the Administrator on a form designated by the Administrator. If more than
one person is designated as the Beneficiary, their respective interests
shall be as indicated on the designation form.
7
<PAGE>
A copy of the death notice or other sufficient documentation must be
filed with and approved by the Administrator. If upon the death of the
Participant there is, in the opinion of the Administrator, no designated
Beneficiary for part or all of the Participant's Account, such amount will
be paid to his surviving spouse or, if none, to his estate (such spouse or
estate shall be deemed to be the Beneficiary for purposes of the Plan). If
a Beneficiary dies after benefits to such Beneficiary have commenced, but
before they have been completed, and, in the opinion of the Administrator,
no person has been designated to receive such remaining benefits, then such
benefits shall be paid to the deceased Beneficiary's estate.
7.03. Other Termination of Employment. If provided by the Employer in
Section 1.06, if a Participant terminates his employment for any reason
other than death or normal retirement, he will be entitled to a termination
benefit equal to (i) the vested percentage(s) of the value of the Matching
Contributions to his Account, as adjusted for income, expense, gain, or
loss, such percentage(s) determined in accordance with the vesting
schedule(s) selected by the Employer in Section 1.07, and (ii) the value of
the Deferral Contributions to his Account as adjusted for income, expense,
gain or loss. The amount payable under this Section 7.03 will be subject to
the provisions of Section 7.06 and will be distributed in accordance with
Article 8.
7.04. Separate Account. If a distribution from a Participant's Account has
been made to him at a time when he has a nonforfeitable right to less than
100 percent of his Account, the vesting schedule in Section 1.07 will
thereafter apply only to amounts in his Account attributable to Matching
Contributions allocated after such distribution. The balance of his Account
immediately after such distribution will be transferred to a separate
account which will be maintained for the purpose of determining his interest
therein according to the following provisions.
At any relevant time prior to a forfeiture of any portion thereof under
Section 7.05, a Participant's nonforfeitable interest in his Account held in
a separate account described in the preceding paragraph will be equal to
P(AB + (RxD))-(RxD) where P is the nonforfeitable percentage at the
relevant time determined under Section 7.05; AB is the account balance of
the separate account at the relevant time; D is the amount of the
distribution; and R is the ratio of the account balance at the relevant time
to the account balance after distribution. Following a forfeiture of any
portion of such separate account under Section 7.05 below, any balance in
the Participant's separate account will remain fully vested and
nonforfeitable.
7.05. Forfeiftures. If a Participant terminates his employment, any portion
of his Account (including any amounts credited after his termination of
employment) not payable to him under Section 7.03 will be forfeited by him.
For purposes of this paragraph, if the value of a Participant's vested
account balance is zero, the Participant shall be deemed to have received a
distribution of his vested interest immediately following termination of
employment. Such forfeitures will be applied to reduce the contributions of
the Employer under the Plan (or administrative expenses of the Plan).
8
<PAGE>
7.06. Adjustment for Investment Experience. If any distribution under this
Article 7 is not made in a single payment, the amount remaining in the
Account after the distribution will be subject to adjustment until
distributed to reflect the income and gain or loss on the investments in
which such amount is treated as invested and any expenses properly charged
under the Plan and Trust to such amounts.
7.07. Hardship withdrawal&. Subject to the provisions of Article 8, a
Participant shall not be permitted to withdraw his Account (and earnings
thereon) prior to retirement or termination of employment, except if
permitted under Section 1.09, a Participant may apply to the Administrator
to withdraw some or all of his Account if such withdrawal is made on account
of a hardship as determined by the Employer.
Article 8. Distribution of Benefits Payable after Termination of Service.
8.01. Distribution of Benefits to Participants -and Beneficiaries.
(a) Distributions under the Plan to a Participant or to the
Beneficiary of the Participant shall be made in a lump sum in cash or,
if elected by the Employer in Section 1.10 and specified in the
Participant's deferral election, under a systematic withdrawal plan
(installment(s).) not exceeding 10 years upon retirement, death or
other termination of employment.
(b) Distributions under a systematic withdrawal plan must be made
in substantially equal annual, or more frequent, installments, in cash,
over a period certain which does not extend 10 years. The period
certain specified in a Participant's first deferral election specifying
distribution under a systematic withdrawal plan shall apply to all
subsequent elections of distributions under a systematic withdrawal
plan made by the Participant.
8.02. Determination of Method of Distribution. The Participant will
determine the method of distribution of benefits to himself and the method
of distribution to his Beneficiary. Such determination will be made at the
time the Participant makes a deferral election. If the Participant does not
determine the method of distribution to him or his Beneficiary, the method
shall be a lump sum.
8.03. Notice to Trustee. The Administrator will notify the Trustee in
writing whenever any Participant or Beneficiary is entitled to receive
benefits under the Plan. The Administrator's notice shall indicate the
form, amount and frequency of benefits that such Participant or Beneficiary
shall receive.
8.04. Time of Distribution. In no event will distribution to a Participant
be made later than the date specified by the Participant in his salary
reduction agreement.
9
<PAGE>
Article 9. Amendment and Termination.
9.01 Amendment by Employer. The Employer reserves the authority to amend the
Plan by filing with the Trustee an amended Adoption Agreement, executed by
the Employer only, on which said Employer has indicated a change or changes
in provisions previously elected by it. Such changes are to be effective on
the effective date of such amended Adoption Agreement. Any such change
notwithstanding, no Participant's Account shall be reduced by such change
below the amount to which the Participant would have been entitled if he had
voluntarily left the employ of the Employer immediately prior to the date of
the change. The Employer may from time to time make any amendment to the
Plan that may be necessary to satisfy the Code or ERISA. The Employer's
board of directors or other individual specified in the resolution adopting
this Plan shall act on behalf of the Employer for purposes of this Section
9.01.
9.02 Retroactive Amendment. An amendment made by the Employer in accordance
with Section 9.01 may be made effective on a date prior to the first day of
the Plan Year in which it is adopted if such amendment is necessary or
appropriate to enable the Plan and Trust to satisfy the applicable
requirements of the Code or ERISA or to conform the Plan to any change in
federal law or to any regulations or ruling thereunder. Any retroactive
amendment by the Employer shall be subject to the provisions of Section
9.01.
9.03. Termination. The Employer has adopted the Plan with the intention and
expectation that contributions will be continued indefinitely. However, said
Employer has no obligation or liability whatsoever to maintain the Plan for
any length of time and may discontinue contributions under the Plan or
terminate the Plan at any time by written notice delivered to the Trustee
without any liability hereunder for any such discontinuance or termination.
9.04. Distribution upon Termination of the Plan. Upon termination of the
Plan, no further Deferral Contributions or Matching Contributions shall be
made under the Plan, but Accounts of Participants maintained under the Plan
at the time of termination shall continue to be governed by the terms of the
Plan until paid out in accordance with the terms of the Plan.
Article 10. Miscellaneous.
10.01. Communication to Participants. The Plan will be communicated to all
Participants by the Employer promptly after the Plan is adopted.
10 02. Limitation of Rights. Neither the establishment of the Plan and the
Trust, nor any amendment thereof, nor the creation of any fund or account,
nor the payment of any benefits, will be construed as giving to any
Participant or other person any legal or equitable right against the
Employer, Administrator or Trustee, except as provided herein; and in no
event will the terms of employment or service of any Participant be modified
or in any way affected hereby.
10.03. Nonalienability of Benefits. The benefits provided hereunder will not
be subject to alienation, assignment, garnishment, attachment, execution or
levy of any kind, either voluntarily or involuntarily, and any attempt to
cause such benefits to be so subjected will not be recognized, except to
such extent as may be required by law.
10
<PAGE>
10.04. Facility of Payment. In the event the Administrator determines, on
the basis of medical reports or other evidence satisfactory to the
Administrator, that the recipient of any benefit payments under the Plan is
incapable of handling his affairs by reason of minority, illness, infirmity
or other incapacity, the Administrator may direct the Trustee to disburse
such payments to a person or institution designated by a court which has
jurisdiction over such recipient or a person or institution otherwise having
the legal authority under State law for the care and control of such
recipient. The receipt by such person or institution of any such payments
shall be complete acquittance therefore, and any such payment to the extent
thereof, shall discharge the liability of the Trust for the payment of
benefits hereunder to such recipient.
10.05. Information between Emplover and Trustee. The Employer agrees to
furnish the Trustee, and the Trustee agrees to furnish the Employer with
such information relating to the Plan and Trust as may be required by the
other in order to carry out their respective duties hereunder, including
without limitation information required under the Code or ERISA and any
regulations issued or forms adopted thereunder.
10.06. Notices. Any notice or other communication in connection with this
Plan shall be deemed delivered in writing if addressed as provided below and
if either actually delivered at said address or, in the case of a letter,
three business days shall have elapsed after the same shall have been
deposited in the United States mails, first-class postage prepaid and
registered or certified:
(a) If to the Employer or Administrator, to it at the address set forth
in the Adoption Agreement, to the attention of the person specified to
receive notice in the Adoption Agreement;
(b) If to the Trustee, to it at the address set forth in the Trust
Agreement;
or, in each case at such other address as the addressee shall have specified
by written notice delivered in accordance with the foregoing to the
addressor's then effective notice address.
10.07. Governing Lay. The Plan and the accompanying Adoption Agreement will
be construed, administered and enforced according to ERISA, and to the
extent not preempted thereby, the laws of the Commonwealth of
Massachusetts.
Article 11. Plan Administration.
11.01. Powers and responsibilities of the Administrator. The Administrator
has the full power and the full responsibility to administer the Plan in all
of its details, subject, however, to the applicable requirements of ERISA.
The Administrator's powers and responsibilities include, but are not limited
to, the following:
(a) To make and enforce such rules and regulations as it deems
necessary or proper for the efficient administration of the Plan;
(b) To interpret the Plan, its interpretation thereof in good faith to
be final and conclusive on all persons claiming benefits under the
Plan;
(c) To decide all questions concerning the Plan and the eligibility of
any person to participate in the Plan;
11
<PAGE>
(d) To administer the claims and review procedures specified in Section
11.03;
(e) To compute the amount of benefits which will be payable to any
Participant, former Participant or Beneficiary in accordance with the
provisions of the Plan;
(f) To determine the person or persons to whom such benefits will be
paid;
(g) To authorize the payment of benefits;
(h) To comply with the reporting and disclosure requirements of Part 1
of Subtitle B of Title I of ERISA;
(i) To appoint such agents, counsel, accountants, and consultants as
may be required to assist in administering the Plan;
(j) By written instrument, to allocate and delegate its
responsibilities, including the formation of an Administrative
Committee to administer the Plan;
11.02. Nondiscriminatory Exercise of Authority. Whenever, in the
administration of the Plan, any discretionary action by the Administrator is
required, the Administrator shall exercise its authority in a
nondiscriminatory manner so that all persons similarly situated will receive
substantially the same treatment.
11.03. Claims and Review Procedure.
(a) Claims Procedure. If any person believes he is being denied any
rights or benefits under the Plan, such person may file a claim in
writing with the Administrator. If any such claim is wholly or
partially denied, the Administrator will notify such person of its
decision in writing. Such notification will contain (i) specific
reasons for the denial, (ii) specific reference to pertinent Plan
provisions, (iii) a description of any additional material or
information necessary for such person to perfect such claim and an
explanation of why such material or information is necessary, and (iv)
information as to the steps to be taken if the person wishes to submit
a request for review. Such notification will be given within 90 days
after the claim is received by the Administrator (or within 180 days,
if special circumstances require an extension of time for processing
the claim, and if written notice of such extension and circumstances
is given to such person within the initial 90-day period). If such
notification is not given within such period, the claim will be
considered denied as of the last day of such period and such person may
request a review of his claim.
(b) Review Procedure. Within 60 days after the date on which a person
receives a written notice of a denied claim (or, if applicable, within
60 days after the date on which such denial is considered to have
occurred), such person (or his duly authorized representative) may (i)
file a written request with the Administrator for a review of his
denied claim and of pertinent documents and (ii) submit written issues
and comments to the Administrator. The Administrator will notify such
person of its decision in writing. Such notification will be written in
a manner calculated to be understood by such person and will contain
specific reasons for the decision as well as specific references to
pertinent Plan provisions. The decision on review will be made within
60 days after the request for review is received by the Administrator
(or within 120 days, if special circumstances require an extension of
time for processing the request, such as an
12
<PAGE>
election by the Administrator to hold a hearing, and if written notice
of such extension and circumstances is given to such person within the
initial 60-day period). If the decision on review is not made within
such period, the claim will be considered denied.
11.04. Costs of Administration. Unless some or all costs and expenses are
paid by the Employer, all reasonable costs and expenses (including legal,
accounting, and employee communication fees) incurred by the Administrator
and the Trustee in administering the Plan and Trust will be paid first from
the forfeitures (if any) resulting under Section 7.05, then from the
remaining Trust Fund. All such costs and expenses paid from the Trust Fund
will, unless allocable to the Accounts of particular Participants, be
charged against the Accounts of all Participants on a pro rata basis or in
such other reasonable manner as may be directed by the Employer.
13
AMENDMENT TO LEASE AGREEMENT
The Lease Agreement made and entered into as of April 12, 1995, between
Harry Muhlschlegel and Karen Muhlschlegel ("Landlord"), and Jevic
Transportation, Inc., a New Jersey corporation ("Tenant") is hereby amended, as
of September 15, 1997, as follows:
Section 6.2 of the Lease Agreement is amended and restated in its entirety
to read as follows:
"6.2 Surrender. On the last day of the term hereof, or on any sooner
termination, Tenant shall surrender the Premises to Landlord in the
same condition as when such improvements to the Premises were
completed, broom clean, ordinary wear and tear excepted. All
alterations, improvements, repairs and replacements made by Tenant
during the term of this Lease shall be removed by Tenant upon
termination of this lease or at Landlord's option, shall remain with
the premises when surrendered by Tenant and be deemed a part of
Landlord's property, at no cost to Landlord. Where removal of any such
item is required, Tenant, at Tenant's expense, shall cause same to be
removed and the premises restored to a condition that is reasonably
satisfactory to Landlord. Removal and restoration shall be completed
prior to the termination of this lease. In default thereof, Landlord
may effect said removal and repairs at Tenant's expense or treat Tenant
as a holdover Tenant until such removal and restoration is completed to
Landlord's reasonable satisfaction.
In addition to the foregoing, any personal property of Tenant remaining
at the premises upon termination of this lease (including without
limitation Tenant's trade fixtures) shall be deemed abandoned by
Tenant, and Landlord, at its option, may accept same as part of
Landlord's property or cause the removal of same at Tenant's expense
without being liable to Tenant for conversion or any claim for damages
therefor."
LANDLORD:
/s/ Harry J. Muhlschlegel
----------------------------
Harry J. Muhlschlegel
/s/ Karen B. Muhlschlegel
----------------------------
Karen B. Muhlschlegel
TENANT:
JEVIC TRANSPORTATION, INC.
By:/s/ Harry J. Muhlschlegel
----------------------------
Name: Harry J. Muhlschlegel
Title: President
CONTRACT FOR SALE OF REAL ESTATE
THIS CONTRACT FOR SALE is made on November 7, 1997, between HARRY J.
MUHLSCHLEGEL AND KAREN MUHLSCHLEGEL, his wife whose address is 4 Stags Leap
Court, Tabernacle, New Jersey (hereinafter referred to as "Seller"), and JEVIC
TRANSPORTATION, INC., of 600 Creek Road, Delanco, New Jersey (hereinafter
referred to as "Buyer").
1. PURCHASE AGREEMENT
The Seller agrees to sell and the Buyer agrees to buy all that land,
buildings, structures and fixtures on land in Cabarrus County, North Carolina,
being commonly known as Lot #1, Goodman Road Industrial Park (the "Property"). A
description of the boundaries of the land is attached as Exhibit "A". Seller
shall also convey all of the Seller's rights relating to the Property.
2. PERSONAL PROPERTY AND FIXTURES
The Property being transferred includes all fixtures permanently attached
to the building on the land.
3. PURCHASE PRICE
The purchase price is the payoff amount as set forth on the correspondence
attached as Exhibit "B."
4. PAYMENT OF PURCHASE PRICE
The Buyer will pay the purchase price by wire transfer at settlement.
5. DEPOSIT MONIES
There will be no deposit monies.
<PAGE>
6. MORTGAGE CONTINGENCY
This agreement is not subject to any mortgage contingency.
7. TIME AND PLACE OF SETTLEMENT
At settlement, the Seller shall transfer ownership of the property by deed
to the Buyer and the Buyer shall pay the Seller the purchase price. Settlement
shall take place at Buyer's offices, or other agreeable place, on November 7,
1997, at 10:00 a.m., or other agreeable time.
8. TYPE OF DEED
The Seller shall provide to Buyer and Buyer agrees to accept a general
warranty deed. The deed shall be in the proper form for recording in the
appropriate office of Register of Deeds.
9. QUALITY AND INSURABILITY OF TITLE
The title to be transferred shall be marketable title of record and
insurable at regular rates by a reputable title insurance company authorized to
do business in the State of North Carolina. The title shall be free and clear of
all encumbrances, including municipal liens and assessments and liabilities for
future assessments for improvements now being constructed.
The title shall be subject to all existing utility easements and
restrictions of record, if any. (An easement is a right of a person other than
the owner of the property to use a portion of the property for a special
purpose.)
A violation of any restriction shall not be reason for Buyer refusing to
complete settlement as long as the title insurance company insures the Buyer
against actual loss at regular rates, and the violation does not restrict the
ordinary use of the property. The Seller, however,
-2-
<PAGE>
guarantees that there are no restrictions in any conveyance or plans of record
which would prohibit or interfere with the use and/or occupancy of the property
as a warehouse.
The Seller states that all buildings and other improvements on the property
are within its boundary lines and that no improvements on adjoining properties
extend across the boundary lines of this property. This provision shall not
apply to any driveways or fences which may not coincide with title lines.
If the Seller is unable to transfer the quality of title as stated herein
and the Buyer is unwilling to accept the Seller's title without a reduction of
purchase price, then this contract shall be null and void.
The title shall be conveyed subject to all liens and exceptions as appear
on the current policy of title insurance as issued by Lawyers Title Insurance
Company.
10. POSSESSION
Possession and occupancy has already been given to Buyer. There will be no
adjustment of any rent at time of closing.
11. SELLER'S WARRANTIES
There are no warranties. The property is being conveyed AS-IS.
12. RISK OF LOSS
The risk of loss or damage to the property by fire or otherwise, excepting
ordinary wear and tear, is the liability of the Buyer until settlement.
-3-
<PAGE>
13. RELIANCE
This contract is entered into by the Seller and Buyer based upon their
independent knowledge of the value of the property and their full understanding
of the meaning of all of the provisions of this contract and not upon any
representations made by either of them to the other.
14. SETTLEMENT COSTS, ADJUSTMENTS AND PRORATIONS
The Buyer shall be responsible for all settlement costs and there shall be
no adjustments or prorations.
15. COMPLETE AGREEMENT
This contract is deemed to be the entire and only agreement between the
Buyer and Seller. This contract replaces and cancels any previous agreement
between the parties. This contract can only be changed by an agreement in
writing signed by both the Buyer and Seller. The Seller states that the Seller
has not made any other contract to sell the property to anyone else. Any
representations not contained in this contract are of no effect.
16. PARTIES LIABLE
This contract is binding on all parties who sign it and all who succeed to
their rights and responsibilities.
17. NOTICES
All notices under this contract must be in writing. The notices must be
delivered personally or mailed by certified mail, return receipt requested, to
the other party at the address written in this contract or to that party's
attorney.
-4-
<PAGE>
18. ASSIGNMENT
This contract shall not be assigned.
/s/ Harry J. Muhlschlegel
-----------------------------------------
HARRY J. MUHLSCHLEGEL, Seller
/s/ Karen Muhlschlegel
-----------------------------------------
KAREN MUHLSCHLEGEL, Seller
JEVIC TRANSPORTATION, INC.
By: /s/ Harry J. Muhlschlegel
-------------------------------------
HARRY J. MUHLSCHLEGEL, President
-5-
EXHIBIT 21
SUBSIDIARIES OF THE COMPANY
<TABLE>
<CAPTION>
Jurisdiction of Other Names under which
Subsidiaries of the Company Incorporation Subsidiary does Business
<S> <C> <C>
Creek Road Equities, Inc. Delaware N/A
Creek Road Properties, Inc.
(a subsidiary of Creek Road Equities) Delaware N/A
</TABLE>
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
As independent public accountants, we hereby consent to the incorporation of our
report included in this Form 10-K, into the Company's previously filed S-8
Registration Statement (file number 333-44207).
ARTHUR ANDERSEN LLP
Philadelphia, PA.
March 25, 1998
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-START> JAN-01-1997
<PERIOD-END> DEC-31-1997
<CASH> 7,185
<SECURITIES> 0
<RECEIVABLES> 23,319
<ALLOWANCES> 1,527
<INVENTORY> 0
<CURRENT-ASSETS> 34,011
<PP&E> 107,722
<DEPRECIATION> 29,828
<TOTAL-ASSETS> 113,368
<CURRENT-LIABILITIES> 20,159
<BONDS> 0
0
0
<COMMON> 71,816
<OTHER-SE> (6,279)
<TOTAL-LIABILITY-AND-EQUITY> 113,368
<SALES> 190,821
<TOTAL-REVENUES> 190,821
<CGS> 0
<TOTAL-COSTS> 175,382
<OTHER-EXPENSES> (401)
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 2,836
<INCOME-PRETAX> 13,004
<INCOME-TAX> 10,586
<INCOME-CONTINUING> 2,418
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 2,418
<EPS-PRIMARY> 0.31
<EPS-DILUTED> 0.30
</TABLE>
