- --------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from to
For the Quarterly Period Commission File
Ended June 30, 1998 Number 001-5083
KANEB SERVICES, INC.
(Exact name of registrant as specified in its charter)
DELAWARE 74-1191271
(State or other jurisdiction of (I.R.S. Employer Identification No.)
Incorporation or Organization)
2435 North Central Expressway
Richardson, Texas 75080
(Address of principal executive offices, including zip code)
(214) 699-4000
(Registrant's telephone number, including area code)
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 the number of shares outstanding of each of the issuer's classes of
common stock, as of the latest practicable date.
Class of Common Stock Outstanding at August 7, 1998
no par value 31,438,129 shares
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<PAGE>
KANEB SERVICES, INC. AND SUBSIDIARIES
FORM 10-Q
QUARTER ENDED JUNE 30, 1998
- --------------------------------------------------------------------------------
Page No.
Part I. Financial Information
Item 1. Financial Statements (Unaudited)
Consolidated Statements of Income - Three and Six Months
Ended June 30, 1998 and 1997 1
Condensed Consolidated Balance Sheets - June 30, 1998
and December 31, 1997 2
Condensed Consolidated Statements of Cash Flows - Six
Months Ended June 30, 1998 and 1997 3
Notes to Consolidated Financial Statements 4
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of Operations 7
Part II. Other Information
Item 6. Exhibits and Reports on Form 8-K 10
Signature 10
<PAGE>
KANEB SERVICES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
(In Thousands - Except Per Share Amounts)
(Unaudited)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
June 30, June 30,
---------------------- ----------------------
1998 1997 1998 1997
--------- --------- --------- ---------
<S> <C> <C> <C> <C>
Revenues $ 100,492 $ 58,388 $ 159,993 $ 111,542
--------- --------- --------- ---------
Costs and expenses:
Operating costs 79,949 38,598 121,730 74,057
Depreciation and amortization 4,202 4,176 8,249 8,389
General and administrative 1,360 1,369 2,426 2,407
--------- --------- --------- ---------
Total costs and expenses 85,511 44,143 132,405 84,853
--------- --------- --------- ---------
Operating income 14,981 14,245 27,588 26,689
Other income (expense), net 62 (75) 25 (95)
Interest expense (3,891) (3,828) (7,636) (7,690)
Amortization of excess of cost over fair
value of net assets of acquired business (495) (462) (970) (923)
--------- --------- --------- ---------
Income before interest of outside non-
controlling partners in KPP's net
income and income tax expense 10,657 9,880 19,007 17,981
Interest of outside non-controlling
partners in KPP's net income (6,762) (6,724) (12,817) (12,744)
Income tax expense (530) (449) (989) (1,001)
--------- --------- --------- ---------
Net income 3,365 2,707 5,201 4,236
Dividends applicable to preferred stock 158 129 308 252
--------- --------- --------- ---------
Net income applicable to common stock $ 3,207 $ 2,578 $ 4,893 $ 3,984
========= ========= ========= =========
Earnings per common share -
Basic and Diluted $ .10 $ .08 $ .15 $ .12
========= ========= ========= =========
</TABLE>
See notes to consolidated financial statements
1
<PAGE>
KANEB SERVICES, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(In Thousands)
- --------------------------------------------------------------------------------
June 30, December 31,
1998 1997
----------- ------------
ASSETS (Unaudited)
Current assets:
Cash and cash equivalents $ 11,878 $ 23,025
Accounts receivable, trade 48,118 35,268
Inventories 11,082 7,079
Prepaid expenses and other current assets 5,183 5,693
--------- ---------
Total current assets 76,261 71,065
--------- ---------
Property and equipment 395,805 383,078
Less accumulated depreciation and amortization 128,280 121,717
--------- ---------
Net property and equipment 267,525 261,361
--------- ---------
Excess of cost over fair value of net assets
of acquired business 63,500 62,719
Other assets 7,485 7,128
--------- ---------
$ 414,771 $ 402,273
========= =========
LIABILITIES AND EQUITY
Current liabilities:
Current portion of long-term debt $ 10,396 $ 5,394
Accounts payable 15,817 9,569
Accrued expenses 39,026 35,679
--------- ---------
Total current liabilities 65,239 50,642
--------- ---------
Long-term debt, less current portion:
Industrial field services 22,766 25,268
Pipeline, terminaling and
product marketing services 134,000 132,118
Parent company 23,666 23,666
--------- ---------
Total long-term debt, less current portion 180,432 181,052
--------- ---------
Deferred income taxes and other liabilities 15,541 15,903
Interest of outside non-controlling partners in KPP 74,791 76,229
Commitments and contingencies
Stockholders' equity:
Preferred stock, without par value 5,792 5,792
Common stock, without par value 4,239 4,234
Additional paid-in-capital 197,300 197,242
Accumulated deficit (96,598) (101,491)
Unamortized restricted stock compensation (141) --
Treasury stock, at cost (29,737) (25,216)
Accumulated other comprehensive income (loss)
- foreign currency translation adjustment (2,087) (2,114)
--------- ---------
Total stockholders' equity 78,768 78,447
--------- ---------
$ 414,771 $ 402,273
========= =========
See notes to consolidated financial statements
2
<PAGE>
KANEB SERVICES, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(In Thousands)
(Unaudited)
- --------------------------------------------------------------------------------
Six Months Ended June 30,
-------------------------
1998 1997
-------- ---------
Operating activities:
Net income $ 5,201 $ 4,236
Adjustments to reconcile net income to net
cash provided by operating activities:
Depreciation and amortization 8,249 8,389
Interest of outside non-controlling
partners in KPP 12,817 12,744
Amortization of excess of cost over fair
value of net assets acquired 970 923
Deferred income taxes 292 435
Changes in working capital components (6,748) (2,284)
-------- --------
Net cash provided by operating activities 20,781 24,443
-------- --------
Investing activities:
Capital expenditures (7,192) (6,774)
Acquisitions of pipelines, terminals and
product marketing services (7,829) --
Other, net (2,417) 559
-------- --------
Net cash used in investing activities (17,438) (6,215)
-------- --------
Financing activities:
Issuance of long-term debt 10,247 4,939
Payments on long-term debt (5,655) (6,613)
Preferred stock dividends paid (228) (252)
Distributions to outside non-controlling
partners in KPP (14,255) (13,157)
Common stock issued 137 --
Purchase of treasury stock (4,736) (3,471)
-------- --------
Net cash used in financing activities (14,490) (18,554)
-------- --------
Decrease in cash and cash equivalents (11,147) (326)
Cash and cash equivalents at beginning of period 23,025 23,693
-------- --------
Cash and cash equivalents at end of period $ 11,878 $ 23,367
======== ========
See notes to consolidated financial statements
3
<PAGE>
KANEB SERVICES, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
(Unaudited)
- --------------------------------------------------------------------------------
1. SIGNIFICANT ACCOUNTING POLICIES
The unaudited consolidated financial statements of Kaneb Services, Inc. and
its subsidiaries (the "Company") for the three and six month periods ended
June 30, 1998 and 1997 have been prepared in accordance with generally
accepted accounting principles applied on a consistent basis. Significant
accounting policies followed by the Company and its subsidiaries were
disclosed in the notes to the consolidated financial statements included in
the Company's Annual Report on Form 10-K for the year ended December 31,
1997. In the opinion of the Company's management, the accompanying
consolidated financial statements contain the adjustments, consisting of
normal recurring accruals, necessary to present fairly the consolidated
financial position of the Company and its consolidated subsidiaries at June
30, 1998 and the consolidated results of their operations and cash flows
for the periods ended June 30, 1998 and 1997. Operating results for the
three and six months ended June 30, 1998 are not necessarily indicative of
the results that may be expected for the year ending December 31, 1998.
2. COMPREHENSIVE INCOME
The Company has adopted the provisions of Statement of Financial Accounting
Standards No. 130, "Reporting Comprehensive Income," which establishes
standards for the reporting and display of comprehensive income and its
components in a full set of general purpose financial statements.
Comprehensive income for the three and six months ended June 30, 1998 and
1997 is as follows:
Three Months Ended Six Months Ended
June 30, June 30,
------------------ -----------------
1998 1997 1998 1997
-------- ------- ------- --------
(in thousands)
Net income $ 3,365 $ 2,707 $ 5,201 $ 4,236
Other comprehensive income - foreign
currency translation adjustment 26 (713) 27 (2,068)
------- ------- ------- -------
Comprehensive income $ 3,391 $ 1,994 $ 5,228 $ 2,168
======= ======= ======= =======
<PAGE>
3. EARNINGS PER SHARE
The following is a reconciliation of Basic and Diluted earnings per share
(in thousands, except for per share amounts):
Net Common Per-Share
Income Shares Amount
------- ------- --------
Three Months Ended June 30, 1998
--------------------------------
Net income $ 3,365
Dividends applicable to preferred stock (158)
-------
Basic earnings per share:
Income available to common stock 3,207 31,944 $ 0.10
========
Effect of dilutive securities:
Common stock options -- 800
-------- -------
Diluted earnings per share:
Income available to common stock
and assumed options exercised $ 3,207 32,744 $ 0.10
======= ======= ========
Three Months Ended June 30, 1997
--------------------------------
Net income $ 2,707
Dividends applicable to preferred stock (129)
-------
Basic earnings per share:
Income available to common stock 2,578 32,615 $ 0.08
========
Effect of dilutive securities:
Common stock options -- 495
-------- -------
Diluted earnings per share:
Income available to common stock
and assumed options exercised $ 2,578 33,110 $ 0.08
======= ======= ========
Six Months Ended June 30, 1998
------------------------------
Net income $ 5,201
Dividends applicable to preferred stock (308)
-------
Basic earnings per share:
Income available to common stock 4,893 32,066 $ 0.15
========
Effect of dilutive securities:
Common stock options -- 777
-------- -------
Diluted earnings per share:
Income available to common stock
and assumed options exercised $ 4,893 32,843 $ 0.15
======= ======= ========
<PAGE>
Net Common Per-Share
Income Shares Amount
------- ------- ---------
Six Months Ended June 30, 1997
------------------------------
Net income $ 4,236
Dividends applicable to preferred stock (252)
-------
Basic earnings per share:
Income available to common stock 3,984 32,866 $ 0.12
========
Effect of dilutive securities:
Common stock options -- 474
-------- -------
Diluted earnings per share:
Income available to common stock
and assumed options exercised $ 3,984 33,340 $ 0.12
======= ======= ========
<PAGE>
KANEB SERVICES, INC. AND SUBSIDIARIES
Management's Discussion and Analysis of Financial Condition
and Results of Operations
- --------------------------------------------------------------------------------
This discussion should be read in conjunction with the consolidated
financial statements of Kaneb Services, Inc. (the "Company") and notes
thereto included elsewhere in this report.
Operating Results:
Industrial Field Services
Three Months Ended Six Months Ended
June 30, June 30,
------------------ ------------------
1998 1997 1998 1997
-------- ------- ------- --------
(in millions)
Revenues:
United States $ 8.9 $ 8.9 $ 17.8 $ 16.6
Europe 17.9 17.0 33.8 31.3
Asia-Pacific 2.7 0.9 5.4 1.5
------- ------- ------- ------
Total Revenues $ 29.5 $ 26.8 $ 57.0 $ 49.4
======= ======= ======= =======
Operating income:
United States $ .3 $ .6 $ .8 $ .9
Europe 1.9 1.6 2.4 2.4
Asia-Pacific .3 .1 .4 --
Headquarters (.3) (.3) (.4) (.4)
------- ------- ------- ------
Total operating income $ 2.2 $ 2.0 $ 3.2 $ 2.9
======= ======= ======= =======
Capital expenditures $ .7 $ .5 $ 1.3 $ 1.2
======= ======= ======= =======
This business segment provides specialized industrial field services,
including under-pressure leak sealing, on-site machining, safety and relief
valve testing and repair, passive fire protection and fugitive emissions
inspections to the process and power industry worldwide.
For the three and six months ended June 30, 1998, revenues for the
Industrial Field Services segment increased 10% and 15%, respectively,
compared to the same 1997 periods, due to overall improvements in each of
the three geographical areas. For the six months ended June 30, 1998,
revenues for the United States increased 7%, compared to the same 1997
period, due primarily to higher on-site machining and valve repair
services. Revenues in Europe increased 5% and 8% for the three and six
months ended June 30, 1998, respectively, due primarily to increases in
passive fire protection and leak sealing services. The $1.8 million and
$3.9 million increase in Asia-Pacific revenues for the three and six month
periods ended June 30, 1998, respectively, is primarily attributable to the
operations of Australia acquired effective July 1, 1997.
Overall, Industrial Field Services operating income increased $0.2 million
for the three months ended June 30, 1998, compared to the same prior year
period, primarily due to improvements in revenues and operating income for
Europe and Asia-Pacific, partially offset by a decrease in United States
operating income due principally to customer-delayed plant turnarounds. For
the six months ended June 30, 1998, operating income increased $0.3
million, compared to 1997, due primarily to increases in revenues and
operating income in the Asia-Pacific area.
<PAGE>
Pipeline, Terminaling and Product Marketing Services
Three Months Ended Six Months Ended
June 30, June 30,
------------------ ------------------
1998 1997 1998 1997
-------- ------- ------- --------
(in millions)
Revenues:
Pipeline and terminaling $ 30.6 $ 29.8 $ 58.6 $ 58.4
Product marketing 37.7 -- 39.6 --
------- ------- ------- -------
$ 68.3 $ 29.8 $ 98.2 $ 58.4
======= ======= ======= =======
Operating income $ 13.2 $ 12.9 $ 25.1 $ 24.8
======= ======= ======= =======
Capital expenditures,
excluding acquisitions $ 3.4 $ 3.4 $ 5.8 $ 5.2
======= ======= ======= =======
This business segment includes the operations of Kaneb Pipe Line Partners,
L.P. ("KPP") and the Company's product marketing business acquired in late
March 1998. KPP provides transportation services of refined petroleum
products through a pipeline system that extends through the Midwest and
Eastern Rocky Mountain areas and provides terminaling and storage services
for petroleum products and specialty chemicals. The Company operates,
manages and controls the pipeline and terminaling operations of KPP through
its 2% general partner interest and a 31% limited partner interest in the
partnership. The product marketing business provides motor fuel wholesale
marketing services throughout the Midwest and Rocky Mountain regions, as
well as California.
The $0.8 million increase in pipeline and terminaling revenues for the
quarter ended June 30, 1998 is due to a $0.4 million increase in both
pipeline and terminaling revenues, when compared to 1997. For the six month
period ended June 30, 1998, pipeline and terminaling revenues increased by
$0.2 million, compared to 1997, due to a $0.5 million increase in pipeline
revenues, partially offset by a $0.3 million decrease in terminaling
revenues. The increase in pipeline revenues for the three and six months
ended June 30, 1998 is due to increases in volumes shipped, when compared
to 1997. The increase in terminaling revenues for the three months ended
June 30, 1998 is due to an increase in tank utilization due to favorable
market conditions. The decrease in terminaling revenues for the six months
ended June 30, 1998 resulted primarily from overall lower rates realized
for storage, due to the storage of a larger proportionate volume of
lower-rate products, when compared to the same period in 1997.
Capital expenditures of $3.4 million and $5.8 million for the three and six
months ended June 30, 1998, respectively, relate to the maintenance of
existing operations.
<PAGE>
Other Operations
The Company recorded revenues of $2.7 million and $4.7 million for the
three and six months ended June 30, 1998, respectively, compared to $1.8
and $3.7 million for the three and six months ended June 30, 1997, related
to subsidiaries that provide information processing, payment and collection
services primarily to financial institutions. Related operating income for
the three and six months ended June 30, 1998 was $1.0 million and $1.7
million, respectively, compared to $0.7 million and $1.4 million for the
three and six months ended June 30, 1997
Financial Condition
During the first six months of 1998, the Company's working capital
requirements for operations and capital expenditures (excluding
acquisitions) were funded through the use of internally generated funds.
Cash provided by operations was $20.8 million and $24.4 million for the six
months ended June 30, 1998 and 1997, respectively. Capital expenditures
(excluding acquisitions) were $7.2 million for the six months ended June
30, 1998, compared to $6.8 million in 1997.
Consolidated capital expenditures (excluding acquisitions) have been
estimated at $10 million to $15 million, depending upon the economic
environment and the needs of the business. Capital expenditures in 1998 are
expected to be funded by internally generated funds.
Additional information related to the sources and uses of cash is presented
in the financial statements included in this report.
Although the Company believes that most of its activities and operations
are not materially impacted by Year 2000 concerns, it has undertaken a
review and testing of its computer systems to identify Year 2000-related
issues associated with any items of software or hardware used in its
business operations. Most of the software systems used by the Company are
licensed from third parties and are Year 2000 compliant or will be upgraded
to Year 2000 compliant releases over the next year. At this time, the
Company cannot assess the extent to which further actions will be required,
or assess whether this issue will have a material effect upon future
operations. The Company does not anticipate that the incremental cost to
become fully Year 2000 compliant will be material.
<PAGE>
PART II - Other Information
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits.
10.1 Amended Deferred Stock Unit Plan
10.2 Amended 1996 Supplemental Deferred Compensation Plan
10.3 Amended Non-Employee Directors Deferred Stock Unit Plan
10.4 Amended 1996 Directors Stock Incentive Plan
27. Financial Data Schedule
(b) Reports on Form 8-K - Registrant's Current Report on Form 8-K,
dated April 9, 1998 (SEC File No. 001-05083), was filed to
report, in Item 5, the declaration of a dividend in connection
with the adoption of a replacement Stockholder Rights Plan.
Signature
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned.
KANEB SERVICES, INC.
(Registrant)
Date: August 13, 1998 Michael R. Bakke
Controller
Exhibit 10.1
KANEB SERVICES, INC.
DEFERRED STOCK UNIT PLAN
1. Purpose. This Deferred Stock Unit Plan of Kaneb Services, Inc., a
Delaware corporation, is intended to advance the best interests of the Company
by providing executives and other key personnel with additional incentive and by
increasing their proprietary interest in the success of the Company, thereby
encouraging them to continue their service to the Company. By this Plan (as
defined below) the Company (as defined below) seeks to establish an orderly
compensation plan to more closely align the interests of a Participant (as
defined below) with those of the Company's stockholders over a multi-year term,
in return for the Participant's service to the Company or its subsidiaries.
2. Definitions.
A. "Board of Directors" or "Board" means the Board of
Directors of the Company.
B. "Change of Control" means, with respect to the Company, the
occurrence of any one or more of the following events:
(1) the acquisitions by any individual or entity of
the legal or beneficial ownership of securities of the Company
having 20% or more of the total votes that may be cast for the
election of directors of the Company;
(2) the approval by stockholders of the Company of
the sale or other disposition of all or substantially all of
the assets of the Company (including a plan of liquidation or
dissolution) or the merger or consolidation of the Company
with or into another corporation, in accordance with the
requirements of Certificate of Incorporation of the Company
and applicable law; or
(3) as a result of or in connection with any tender
offer, exchange offer, merger or other business combination of
the foregoing, the failure of the individuals who are members
of the Board of Directors immediately prior to such event to
continue to constitute the majority of the Board.
C. "Committee" means the Compensation Committee of the Board
of Directors, or any successor committee appointed by resolution of the
Board.
D. "Company" means Kaneb Services, Inc. , a Delaware
Corporation.
E. "Common Stock" means the Common Stock of the Company, no
par value.
F. "Compensation" means with respect to a salaried employee
his or her regular base salary unless otherwise defined from time to
time by the Committee.
G. "Contribution Period" means the first day of the first
payroll period commencing on or after the Initial Valuation Date and
ending on the last day of the last payroll period as determined by the
Committee and elected by a Participant, during which period the
Participant defers Compensation into this Plan.
H. "Contributions" means the cumulative amount of Compensation
that has been credited to a Participant's Deferred Stock Unit Ledger
Account, in accordance with Section 7 hereof.
I. "Deferred Stock Unit" or "DSU", means a unit credited to a
Participant's Deferred Stock Unit Ledger Account in accordance with
Section 7 hereof.
J. "Deferred Stock Unit Ledger" or "DSU Ledger" means a record
that from time to time reflects the name of each Participant and
credits such Participant with the number of Deus which have been
purchased on his or her behalf under the Plan. As each Participant
becomes Partially Vested and Fully Vested in DSU's, the record will
also indicate the vesting status of the DSU's.
K. "Disability" means the inability of a Participant through
life-threatening illness or other life-threatening cause, within the
judgment of the Committee based on the advice of competent physicians
of their selection, to continue in the employment of the Company for a
consecutive period of six (6) months or more, as determined by the
Committee, or if the Participant is determined to be Disabled under the
provisions Company's Long-term Disability Insurance Plan.
L. "Entrance Date" means the date on which an Eligible
Employee elects to become a Participant in the Plan by delivering to
the Company the election authorization described in Section 6 hereof.
M. "Eligible Employee" means any officer or other key employee
of the Company or any of its subsidiaries who is eligible to
participate in the Plan. In all cases, the determination of whether an
officer or other key employee is an "Eligible Employee" shall be made
solely by the Committee or its delegate.
N. "Final Valuation Date" means, with respect to a
Participant, the earlier to occur of the following dates: (i) the date
of a Participant's severance from employment with the Company or any
subsidiary by reason of death or Disability; (ii) the date of a
Participant's severance from employment with the Company or any
subsidiary; (iii) the date on which the Company undergoes a Change of
Control; (iv) or any date selected by the Participant which is on or
after January 1 of the calendar year next succeeding the calendar year
in which the Contribution Period ends.
O. "Initial Valuation Date" means the date selected by the
Committee on which a Participant's DSU Ledger is established as
prescribed in Section 7 hereof..
P. "Participant" means each Eligible Employee who elects to
participate in the Plan pursuant to Section 5 hereof.
Q. "Plan" means this Kaneb Services, Inc. Deferred Stock Unit
Plan as the same shall be amended from time to time.
R. "DSU Value" means:
(1) on any Final Valuation Date occurring after the
end of the full Contribution Period, the dollar value of DSU's
determined by multiplying the DSU's credited to the DSU Ledger
account of a Participant by the closing sale price per share
of the Company's Common Stock on the New York Stock Exchange
on such date (or, if there is no reported sale on such date,
on the last preceding date on which such sale occurred; or
(2) on any Final Valuation Date prior to the end of
the full Contribution Period, provided that a Change of
Control has not occurred or the Participant has not died or
experienced a Disability, the lesser of (i) the actual dollar
amount of compensation deferred as of the Final Valuation
Date, or (ii) the amount of cash compensation actually
deferred by the Participant as of the Final Valuation Date
divided by the amount of total aggregate compensation that was
previously calculated on the Initial Valuation Date to be the
total expected aggregate amount deferred over the Contribution
Period multiplied by the closing price of the Company's Common
Stock on the Final Valuation Date (or, if there is no reported
sale on such date, on the last preceding day on which any such
reported sale occurred), however, if the Final Valuation Date
in this Section 2, Item R (2) is caused by the death or
Disability of the Participant, or a Change of Control, DSU
Value shall mean the greater of (i) the actual dollar amount
of compensation deferred as of the Final Valuation Date, or
(ii) the amount of cash compensation actually deferred by the
Participant as of the Final Valuation Date divided by the
amount of total aggregate compensation that was previously
calculated on the Initial Valuation Date to be the total
expected aggregate amount deferred over the Contribution
Period multiplied by the closing price of the Company's Common
Stock on the Final Valuation Date (or, if there is no reported
sale on such date, on the last preceding day on which any such
reported sale occurred),
S. "Fully Vested" shall mean the Participant's DSU Value when
computed pursuant to Section 2, item R (1) above.
T. "Partially Vested" shall mean the Participant's DSU Value
when computed pursuant to Section 2, item R (2) above.
3. Administration.
A. The Plan shall be administered by the Committee. The
Committee may delegate the Administration of the Plan to an officer or
executive of the Company, however the Committee may not delegate its
authority to amend, change or terminate the Plan.
B. The Committee may make such rules and regulations for the
conduct of its affairs, and subject to the provisions of the Plan,
interpret the Plan, amend the Plan and make all other determinations
and perform such actions as it deems necessary or advisable to
administer the Plan.
C. No member of the Committee shall be liable for any action
taken or determination made in good faith with respect to the Plan or
any Option granted hereunder.
D. The Company's Vice President of Human Resources shall
report as necessary to the Committee those events with respect to the
Plan requiring action, determination, or rulings from the Committee.
4. Determination of Eligible Employees. The determination of which
executives or other key employees of the Company are Eligible Employees and thus
eligible to participate in the Plan shall be within the sole discretion of the
Committee. Upon determining that any executive or other key employee is an
Eligible Employee, the Committee shall notify such person in writing.
5. Method of Participation. Each Eligible Employee may elect to
participate in the Plan by executing and delivering to the Company, on or before
the Election Date, an election authorization described in Section 6 below. Such
eligible employee shall thereby become a Participant effective as of the
Election Date shall remain a Participant until such Participant or his or her
beneficiary, as the case may be, has received payment of the DSU value of such
Participant's Deferred Stock Units in accordance with Section 9 hereof, or until
such Participant's rights are earlier forfeited as provided in Section 11
hereof. Upon electing to participate, each Participant shall be granted a
non-qualified stock option to purchase shares of Common Stock of the Company for
a price equal to the closing sale price of the Company's Common Stock on the
Initial Valuation Date. The number of shares subject to such non-qualified stock
option and vesting provisions attached thereto shall be determined by the
Committee in its sole discretion. Upon the grant of such non-qualified stock
option to a Participant, the Company and the Participant shall execute a
non-qualified stock option agreement.
6. Election Authorization. The Company shall furnish to each Eligible
Employee an election authorization in such form or forms as the Committee shall
prescribe. The election authorization shall request a deferral of pay during the
Contribution Period of an amount up to 50% of such Participant's annual
Compensation (but not less than 5% of such Participant's annual compensation).
No election authorization shall be effective sooner than the next payroll period
that begins after the Company's receipt of the election authorization. All
amounts deferred in accordance with a Participant's election authorization shall
be credited to such Participant's account under the Deferred Stock Unit Ledger,
more fully described below. No interest shall be payable on such accounts.
7. Establishment and Maintenance of Deferred Stock Unit Ledger. On the
Initial Valuation Date, the Company shall establish a Deferred Stock Unit Ledger
which shall reflect the name of each Participant and credit to such
Participant's account established thereunder (i) the amounts actually deferred
from his or her Compensation in accordance with his or her election
authorization and (ii) the number of his or her Deferred Stock Units. For this
purpose, the number of DSU's to be credited to the account shall be the number
of DSU's determined by dividing (x) the aggregate amount of the Participant's
Compensation to be deferred over the Contribution Period by (y) the closing
price per share of the Company's Common stock on the New York Stock Exchange on
the Initial Valuation Date. As each Participant becomes Partially Vested and
Fully Vested as defined in Section 3 above, the DSU Ledger shall also reflect
the number of his or her cumulative vested Units. Finally, on the Participant's
Final Valuation Date, his or her account shall be credited with a dollar amount
equal to the DSU value of all his or here Fully Vested or Partially Vested DSU's
on such Final Valuation Date.
8. Amount and Form of Payment. Upon a Participant's Final Valuation
Date, such Participant or his or her beneficiary, as the case may be, shall be
entitled to receive an amount equal to the DSU Value of such Participant's Fully
Vested or Partially Vested DSU's determined as of such Final Valuation Date. All
amounts distributed to Participants or beneficiaries with respect to Final
Valuation Dates occurring prior the end of the full Contribution Period as
elected by the Participant shall be paid in cash. All amounts distributed to
Participants or beneficiaries with respect to Final Valuation Dates occurring
after the end of such Contribution Period shall be in shares of the Company's
Common Stock. The Company may satisfy its obligation to deliver shares of stock
from treasury shares, from authorized but unissued shares of Common Stock, or by
repurchasing shares of its Common Stock on the open market. The Company shall,
where applicable, issue and deliver to the Participant certificates representing
shares of its Common Stock as soon as practicable after the DSU Value of such
Participant becomes due and payable hereunder; provided however, that the
obligation of the Company to deliver shares of Common Stock shall be postponed
for such period of time as may be necessary to register or qualify such shares
under the Securities Act of 1933 or any applicable state securities law.
9. Timing of Payment. The Company shall pay to such Participant, or to
his or her beneficiary, as the case may be, the DSU Value of the Participant's
DSU's in the form determined in accordance with Section 8 above, in a single
lump-sum no later than sixty (60) days following such Participant's Final
Valuation Date; provided however, that on or before his or her Final Valuation
Date, the Participant may elect that his or her Unit Value be paid in accordance
with such alternate payment schedule as the Committee in its sole discretion may
approve.
10. Beneficiary Designation. Prior to the Initial Valuation Date, each
Participant shall file with the Company a beneficiary designation on such form
or forms as the Committee shall prescribe naming gone or more beneficiaries to
succeed to the Participant's right to receive payments hereunder in the event of
his or her death. The Participant shall have the right to change such
designation from time to time; provided, however, that no such change shall
become effective until received in writing by the Committee.
11. Forfeiture of Deferred Stock Units. Notwithstanding any other
provision hereof, on a Participant's Final Valuation Date, any DSU's not
Partially Vested or Fully Vested shall be forfeited.
12. Contingent Right to Receive DSU Value. The right of each
Participant to payment of the future DSU Value is contingent only and subject to
forfeiture as provided in Sections 3 and 17. Title to and beneficial ownership
of any assets, whether cash or investments, which the Company may set aside or
earmark to meet its contingent deferred obligation hereunder, shall at all times
remain in the Company and no Participant or beneficiary shall under any
circumstances acquire any interest in any specific assets in the Company.
Nothing contained herein shall be deemed to create a trust of any kind or to
create a fiduciary relationship between the Company or the Committee or the
Committee's Designee(s) and a Participant. To the extent that any person
acquires a right to receive payments from the Company under this Plan, such
right shall be no greater than that of any unsecured general creditor of the
Company.
13. Limitation on Rights. Nothing in this Plan shall be construed to:
A. Give any employee of the Company any unilateral right to be
named an Eligible Employee or a Participant in the Plan;
B. Give a Participant any rights whatsoever with respect to
shares of Common Stock of the Company;
C. Give a Participant any rights of a shareholder of the
Company;
D. Limit in any way the right of the Company to terminate a
Participant's employment with the Company at any time;
E. Be evidence of any agreement or understanding, express or
implied, that the Company will engage the services of a Participant in
any particular position or at any particular rate of remuneration.
14. Dividends and Dilution. The existence of outstanding Deferred Stock
Units shall not affect in any way the right or power of the Company or its
shareholders to make or authorize any adjustment, recapitalization,
reorganization, or any other change in the Company's capital structure or its
business, any merger or consolidation of the Company, any issue of bonds,
debentures, preferred or prior preference stock ahead of or affecting the Common
Stock or any right thereto, the dissolution or liquidation of the Company, any
sale or transfer of all or any part of its assets or business, or any other
corporate act or proceeding whether of a similar character or otherwise.
15. Transferability of Contingent Right to Future Payments. No right or
payment under this Plan shall be subject to anticipation, alienation, sale,
assignment, pledge, encumbrance or charge, and any attempt to anticipate,
alienate, sell, assign, pledge, encumber or charge the same shall be void. No
right or payment hereunder shall in any manner be liable for or subject to the
debts, contracts, liabilities or torts of any person entitled to such benefits.
If any Participant or beneficiary hereunder shall become bankrupt or attempt to
anticipate, alienate, assign, sell, pledge, encumber or charge any right or
benefit hereunder, or if any creditor shall attempt to subject the same to a
writ of garnishment, attachment, execution, sequestration, or any other form of
process or involuntary lien or seizure, then such right or payment shall, in the
discretion of the Committee, either cease and terminate absolutely or be held by
the Company for the sole benefit of the Participant or such beneficiary, his or
her spouse, children or other dependents, or any of them in such manner and in
such proportion as the Committee shall deem proper, free and clear of the claims
of any other party whatsoever.
16. Adjustments Upon Changes in Common Stock. In the event that the
Company shall effect a split of its Common stock or declare a dividend payable
in Common Stock, or in the event that the outstanding Common Stock shall be
combined into a smaller number of shares, the number of DSU's of any Participant
shall be increased or decreased proportionately, in a manner deemed appropriate
by the Committee. In the event of a reclassification of Common Stock not
encompassed by the foregoing, or in the event of a liquidation or reorganization
of the Company, including a merger, consolidation or sale of assets, the
Committee shall make such adjustments, if any, as it may deem appropriate in the
number of DSU's of any Participant that are subject to the Plan. The provisions
of this Section shall only be applicable if, and only to the extent that, the
application thereof does not conflict with any valid government statue,
regulation or rule.
17. Financial Hardship. Upon written petition of the affected
Participant, in a manner specified by the Committee, the Committee may in its
sole discretion, with satisfactory documentation from the Participant, determine
a Final Valuation Date for the affected Participant. The value at such Final
Valuation Date shall be determined as provided for under Section 2, Items R. (1)
and R. (2) above.
18. Withholding Taxes. If the Company or any subsidiary in its
discretion determines that it is obligated to withhold any tax in connection
with the payment or vesting of benefits with respect to Deferred Stock Units,
the Company or such subsidiary may withhold from the Participant's wage or other
remuneration the appropriate amount of the tax. At the discretion of the Company
or such subsidiary, the amount required to be withheld may be withheld may be
withheld in cash from such wages or other remuneration or in cash or in kind
from cash or the Common Stock, respectively deliverable to the Participant under
the terms hereof. If the Company or any subsidiary does not withhold an amount
from the Participant's wages or other remuneration sufficient to satisfy the
withholding obligation of the Company or such subsidiary, the Participant shall
be required to make reimbursement on demand, in cash, for the amount
underwithheld
19. Amendment or Termination of Plan. The Company may amend this Plan
in whole or in part at any time and from time to time. Notice of any such
amendment shall be given in writing to each Participant and beneficiary of a
deceased participant. No amendment shall operate retroactively to deprive any
Participant or beneficiary of any benefit hereunder to which he or she is then
entitled. The Company may terminate the Plan at any time. Notice of any such
termination shall be given in writing to each participant and beneficiary of a
deceased Participant. No such termination shall be operate retroactively to
deprive any Participant or beneficiary of any benefit hereunder to which he or
she is then entitled.
20. Gender. Reference hereunder to the male gender shall be deemed to
include the female and neuter genders, unless otherwise stated or indicated by
the circumstances.
21. Headings. All the headings set forth in this Plan are intended for
convenience only and shall not control or affect the meaning, construction or
effect of this Plan.
22. Severability. In case any term in this Plan shall be held invalid,
illegal or unenforceable in whole or in part, neither the validity of the
remaining part of such term, nor the validity of the other terms of this Plan,
shall in any way be affected thereby.
23. Applicable Law. To the extent not in conflict with applicable
federal law, the laws of the State of Texas shall govern the validity,
construction and interpretation of this Plan.
24. Effective Date. This Plan has been approved by the Compensation
Committee, effective as of the 23rd day of July, 1998.
Exhibit 10.2
KANEB SERVICES, INC.
1996 SUPPLEMENTAL DEFERRED COMPENSATION PLAN
1. Purpose. This 1996 Supplemental Deferred Compensation Plan of Kaneb
Services, Inc., a Delaware corporation, is intended to advance the best
interests of the Company by providing executives and other key personnel with a
means of supplementing their deferrals made to the Company's 401(k) plan, The
Kaneb Services, Inc. Savings Investment Plan. Deferrals to the 401(k) plan are
limited by the Internal Revenue Code of 1986, as amended (the "Code"), so that
allowable deferrals, Company matching, and other Company contributions for many
key employees are, on a percentage of compensation basis, less than that allowed
for non-key employees. In addition, participation in the Company's Deferred
Stock Unit Plan may further reduce the compensation considered under the
Company's 401(k) plan, resulting in additional reduction of allowable deferrals
and Company contributions to that Plan. By this Plan (as defined below) the
Company (as defined below) seeks to remain competitive in its compensation plans
and programs, thereby serving to attract and retain key employees and to
establish an orderly compensation plan to more closely align the interests of a
Participant (as defined below) with those of the Company's stockholders over a
multi-year term, in return for the Participant's service to the Company or its
subsidiaries.
2. Definitions.
A. "Board of Directors" or "Board" means the Board of
Directors of the Company.
B. "Change of Control" means, with respect to the Company, the
occurrence of any one or more of the following events:
(1) the acquisition by any individual or entity of
the legal or beneficial ownership of securities of the Company
resulting in such person having 20% or more of the total votes
that may be cast for the election of directors of the Company;
(2) the approval by stockholders of the Company of
the sale or other disposition of all or substantially all of
the assets of the Company (including a plan of liquidation or
dissolution) or the merger or consolidation of the Company
with or into another corporation, in accordance with the
requirements of Certificate of Incorporation of the Company
and applicable law; or
(3) as a result of, or in connection with, any tender
offer, exchange offer, merger or other business combination
which results in the failure of individuals who are members of
the Board of Directors immediately prior to such event to
continue to constitute the majority of the Board.
C. "Committee" means the Compensation Committee of the Board
of Directors, or any successor committee appointed by resolution of the
Board.
D. " Company" means Kaneb Services, Inc. , a Delaware
Corporation.
E. "Common Stock" means the Common Stock of the Company, no
par value.
F. "Compensation" means, with respect to a Participant, his or
her regular base salary in respect of his or her service as an employee
with the Company or any of its subsidiaries, unless otherwise defined
from time to time by the Committee.
G. "Contributions" means the cumulative amount of Compensation
which has been credited to a Participant's Deferred Stock Unit Ledger
Account, in accordance with Section 7 hereof.
H. "Deferred Stock Unit" or "DSU", means a unit credited to a
Participant's Deferred Stock Unit Ledger Account in accordance with
Section 7 hereof.
I. "Deferred Stock Unit Ledger" or "DSU Ledger" means a
bookkeeping record maintained by the Company which, among other things,
reflects the name of each Participant, the number of DSUs which have
been purchased on his or her behalf under the Plan and the vesting
status of the DSUs for such Participant.
J. "Disability" means the inability of a Participant, through
life-threatening illness or other life-threatening cause or event, as
determined in the discretion of the Committee based on the advice of
competent physicians of their selection, to continue in the employment
of the Company for a consecutive period of six (6) months or more, as
determined by the Committee.
K. "Election Date" means the date on which an Eligible
Employee elects to become a Participant in the Plan by delivering to
the Company the election authorization described in Section 6 hereof
and all periods of revocability of participation have expired. The
initial election date shall be made prior to August 16, 1996 for the
period August 16, 1996 through December 31, 1996. Subsequent Election
Dates shall be offered prior the date an Eligible Employee commences or
recommences Contributions and again, prior to January 1 of each
subsequent calendar year, to be effective for that year.
L. "Eligible Employee" means any officer or other key employee
of the Company or any of its subsidiaries who is eligible to
participate in the Company's 401(k) Plan and who participates in the
Company's Deferred Stock Unit Plan or an officer or other key employee
who is eligible to participate in the Company's 401(k) plan whose
compensation exceeds the limitations referred to above and whose
Company matching and other Company contributions under the 401(k) Plan
are reduced or limited by the Code.
M. "Final Valuation Date" means, with respect to a
Participant, the date elected by the Participant in the manner and form
prescribed by the Committee on which the Participant's Vested DSU Value
will be calculated for distribution. The Participant may elect his or
her Final Valuation Date as any one of the following: (i) the date of a
Participant's severance from employment with the Company or any
subsidiary occurs for any reason; (ii) the earlier of, the date of a
Participant's severance from employment with the Company or any
subsidiary, or a specific date selected by the Participant, or; (iii)
the later of the date of a Participant's severance from employment with
the Company or any subsidiary, or a specific date selected by the
Participant, all as indicated on the Participant's election
authorization. Notwithstanding the above, the Final Valuation Date
shall occur as of the date of occurrence of a Change of Control
regardless of such other date elected by the Participant as described
above.
N. "Monthly Valuation Date" means the last day of each
calendar month, commencing with the first month or partial month of
participation..
O. "Participant" means each Eligible Employee who elects to
participate in the Plan pursuant to Section 5 hereof.
P. "Plan" means this Kaneb Services, Inc. 1996 Supplemental
Deferred Compensation Plan as the same may be amended from time to
time.
Q. "DSU Value" means: on any Final Valuation Date, the dollar
value of DSUs determined by multiplying the number of DSUs credited to
the DSU Ledger account of any Participant by the closing sale price per
share of the Company's Common Stock on the New York Stock Exchange on
such date (or, if there is no reported sale on such date, on the last
preceding date on which such sale occurred).
R. "Vested" shall mean the Participant is entitled to receive
as of the Final Valuation Date the DSU Value on applicable DSUs as
computed pursuant to Section 2, item Q above.
3. Administration.
A. The Plan shall be administered by the Committee. The
Committee may delegate the Administration of the Plan to an officer or
executive of the Company, however the Committee may not delegate its
authority to amend, change or terminate the Plan.
B. The Committee may make such rules and regulations for the
conduct of its affairs, and subject to the provisions of the Plan,
interpret the Plan, amend the Plan and make all other determinations
and perform such actions as it deems necessary or advisable to
administer the Plan.
C. No member of the Committee shall be liable for any action
taken or determination made in good faith with respect to the Plan or
any Option granted hereunder.
D. The Company's Director of Human Resources shall report as
necessary to the Committee those events with respect to the Plan
requiring action, determination, or rulings from the Committee.
4. Determination of Eligible Employees. The determination of which
executives or other key employees of the Company are Eligible Employees and thus
eligible to participate in the Plan shall be within the sole discretion of the
Committee. Upon determining that any executive or other key employee is an
Eligible Employee, the Committee shall notify such person in writing.
5. Method of Participation. Each Eligible Employee may elect to
participate in the Plan by executing and delivering to the Company, on or before
the date his or her salary is first applicable to Contribution to the Plan, an
election authorization described in Section 6 below. Such eligible employee
shall thereby become a Participant effective as such date described above and
shall remain a Participant until such Participant or his or her beneficiary, as
the case may be, has received payment of the Vested DSU value of such
Participant's Deferred Stock Units in accordance with Sections 8 and 9 hereof,
or until such Participant's rights are earlier forfeited as provided in Section
11.
6. Election Authorization. The Company shall furnish to each Eligible
Employee an election authorization in such form or forms as the Committee shall
proscribe. The election authorization shall request a deferral of pay during the
Contribution Period of an amount up to six (6) percent of such Participant's
Compensation as calculated prior to reduction by other deferrals but reduced by
his or her projected contribution to the Company's 401(k) plan. No election
authorization shall be effective sooner than the next payroll period that begins
after the Company's receipt of the election authorization. All amounts deferred
in accordance with a Participant's election authorization shall be credited to
such Participant's account under the Deferred Stock Unit Ledger, as more fully
described herein. No interest shall be payable on such accounts.
7. Establishment and Maintenance of Deferred Stock Unit Ledger.
A. Concurrent with the establishment of the Plan, the Company
shall establish an Employee Deferred Stock Unit Sub-Ledger account
which shall be used as the official record and method of identifying
the number and value of DSU's credited to a Participant's individual
accounts under the Participant's DSU Ledger. The Employee Deferred
Stock Unit Sub-ledger will reflect, with respect to each Participant's
respective accounts thereunder (as may be more specifically described
below): (i) the name of each Participant; (ii) the amounts actually
deferred (as of the relevant date) from his or her Compensation in
accordance with his or her election authorization; (iii) the number of
his or her Deferred Stock Units to which such Participant's
Contributions equate; (iv) the vesting status of the DSU's credited to
each respective Participant's DSU Ledger account; and, (v) such other
information as the Committee or its designee shall deem appropriate.
For purposes of a Participant's Employee Contributions, the number of
DSUs to be initially credited to the Sub-Ledger account shall be the
number of DSUs determined by dividing the amount of Compensation
deferred for that month as described in Section 6 above, by the closing
price per share of the Company's Common stock on the New York Stock
Exchange on the Monthly Valuation Date. The Participant's Employee
Deferred Stock Unit Sub-Ledger Account shall always be Vested in the
full value of such account.
B. Concurrent with the establishment of the Plan, the Company
shall establish a Participant's Company Matching Unit Sub-Ledger
account which shall be used as the official record and method of
identifying the number and value of DSU's credited to a Participant's
individual accounts under the Participant's DSU Ledger. The
Participant's Company Matching Unit Sub-ledger will reflect, with
respect to each Participant's respective accounts thereunder: (i) the
name of each Participant; (ii) the amounts actually credited by the
Company; (iii) the number of his or her Deferred Stock Units to which
such credit equates; (iv) the vesting status of the DSU's credited to
each respective Participant's DSU Ledger account; and, (v) such other
information as the Committee or its designee shall deem appropriate.
For purposes of a Participant's Company Matching Sub-Ledger Account,
the Company shall credit monthly to each Participant's account the
number of DSUs equal to 50% of the DSUs determined in the Employee
Deferred Stock Unit Sub-Ledger Account above. The Participant's Company
Matching Sub-Ledger Account shall vest in 20% increments in the same
manner as the Participant's Kaneb Services, Inc. Savings Investment
Plan 401(k) account, and shall be Vested at any and all times in the
same percentage as the Participant's Employer Account under the Kaneb
Services, Inc. Savings Investment 401(k) Plan.
C. Concurrent with the establishment of the Plan, the Company
shall establish a Company 2% DSU Sub-Ledger account which shall be used
as the official record and method of identifying the number and value
of DSU's credited to a Participant's individual accounts under a
Participant's DSU Ledger. The Participant's Company 2% DSU Sub-ledger
will reflect, with respect to each Participant's respective accounts
thereunder: (i) the name of each Participant; (ii) the amounts actually
credited by the Company; (iii) the number of his or her Deferred Stock
Units to which such credit equates; (iv) the vesting status of the
DSU's credited to each respective Participant's DSU Ledger account;
and, (v) such other information as the Committee or its designee shall
deem appropriate. For purposes of a Participant's 2% DSU Sub-Ledger
Account, the Company shall credit monthly to each Participant's account
the number of DSUs equal to two (2) percent of his or her base
compensation prior to reduction by other deferrals, but reduced by an
amount equal to his or her projected Non-matching Employer
Contributions made to his Kaneb Services, Inc. Savings Investment Plan
401(k) account for the same period. The Participant's Company 2%
Sub-Ledger Account shall vest in 20% increments in the same manner as
the Participant's Kaneb Services, Inc. Savings Investment Plan 401(k)
account, and shall be Vested at any and all times in the same
percentage as the Participant's Employer Account under the Kaneb
Services, Inc. Savings Investment 401(k) Plan.
8. Amount and Form of Payment. On a Participant's Final Valuation Date,
such Participant or his or her beneficiary, as the case may be, shall be
entitled to receive an amount equal to the Vested DSU Value of such
Participant's DSU Ledger Accounts determined as of such Final Valuation Date,
and to be distributed in the manner described herein. All amounts distributed to
Participants or beneficiaries with respect to Final Valuation Dates less than
one (1) year after the date participation commenced shall be paid in cash. All
amounts distributed to Participants or beneficiaries with respect to Final
Valuation Dates occurring one (1) year or more after the date participation
commenced shall be in shares of the Company's Common Stock. The Company may
satisfy its obligation to deliver shares of stock hereunder from treasury
shares, from authorized but unissued shares of Common Stock, or by repurchasing
shares of its Common Stock on the open market. The Company shall, where
applicable, issue and deliver to the Participant certificates representing
shares of its Common Stock as soon as practicable after the Vested DSU Value of
such Participant's account becomes due and payable hereunder; provided however,
that the obligation of the Company to deliver shares of Common Stock shall be
postponed for such period of time as may be necessary to register or qualify
such shares under the Securities Act of 1933, as amended, or any applicable
state securities law or in order to list such shares with the New York Stock
Exchange.
9. Timing of Payment. The Company shall pay to such Participant, or to
his or her beneficiary, as the case may be, the Vested DSU Value of the
Participant's account in the form determined in accordance with Section 8 above,
in a single lump-sum no later than sixty (60) days following such Participant's
Final Valuation Date; provided however, that on or before his or her Election
Date, the Participant may elect that his or her Unit Value be paid in accordance
with such alternate payment schedule as the Committee in its sole discretion may
approve.
10. Beneficiary Designation. Prior to the first Monthly Valuation Date,
each Participant shall file with the Company a beneficiary designation on such
form or forms as the Committee shall proscribe naming one or more beneficiaries
to succeed to the Participant's right to receive payments hereunder in the event
of his or her death. The Participant shall have the right to change such
beneficiary designation from time to time; provided, however, that no such
change shall become effective until received in writing by the Committee or its
designee.
11. Forfeiture of Deferred Stock Units. On a Participant's Final
Valuation Date, any DSUs not Fully Vested shall be forfeited.
12. Contingent Right to Receive DSU Value. The right of each
Participant to payment and distribution of the DSU Value is contingent only
upon, and subject to, forfeiture as provided herein. Title to and beneficial
ownership of any assets, whether cash or investments, tangible or intangible,
which the Company may set aside or designate to meet its contingent deferred
obligation hereunder shall at all times remain vested in and with the Company
and no Participant or beneficiary shall under any circumstances acquire any
interest in any general or specific assets of the Company. Nothing contained
herein shall be deemed to create a trust of any kind or to create a fiduciary
relationship between the Company or the Committee (or its designee(s)) and a
Participant. To the extent that any person acquires a right to receive payments
from the Company under this Plan, such right shall be no greater than that of
any unsecured general creditor of the Company.
13. Limitation on Rights. Nothing in this Plan shall be construed to:
A. give any employee of the Company any unilateral right to be
named an Eligible Employee or a Participant in the Plan;
B. give a Participant any rights whatsoever with respect to
shares of Common Stock of the Company;
C. give a Participant any rights of a shareholder of the
Company;
D. limit in any way the right of the Company to terminate a
Participant's employment with the Company at any time;
E. be evidence of any agreement or understanding, express or
implied, that the Company will engage the services of a Participant in
any particular position or at any particular rate of remuneration.
14. Dividends and Dilution. The existence of outstanding Deferred Stock
Units shall not affect in any way the right or power of the Company or its
shareholders to make or authorize any adjustment, recapitalization,
reorganization, or any other change in the Company's capital structure or its
business, any merger or consolidation of the Company, any issue of bonds,
debentures, preferred or prior preference stock ahead of or affecting the Common
Stock or any right thereto, the dissolution or liquidation of the Company, any
sale or transfer of all or any part of its assets or business, or any other
corporate act or proceeding whether of a similar character or otherwise.
15. Transferability of Contingent Right to Future Payments. No right or
payment under this Plan shall be subject to anticipation, alienation, sale,
assignment, pledge, encumbrance or charge, and any attempt to anticipate,
alienate, sell, assign, pledge, encumber or charge the same shall be void. No
right or payment hereunder shall in any manner be liable for or subject to the
debts, contracts, liabilities or torts of any person entitled to such benefits.
If any Participant or beneficiary hereunder shall become bankrupt or attempt to
anticipate, alienate, assign, sell, pledge, encumber or charge any right or
benefit hereunder, or if any creditor shall attempt to subject the same to a
writ of garnishment, attachment, execution, sequestration, or any other form of
process or involuntary lien or seizure, then such right or payment shall, in the
discretion of the Committee, either cease and terminate absolutely or be held by
the Company for the sole benefit of the Participant or such beneficiary, his or
her spouse, children or other dependents, or any of them in such manner and in
such proportion as the Committee shall deem proper, free and clear of the claims
of any other party whatsoever.
16. Adjustments Upon Changes in Common Stock. In the event that the
Company shall effect a split of its Common stock or declare a dividend payable
in Common Stock, or in the event that the outstanding Common Stock shall be
combined into a smaller number of shares, the number of DSUs of any Participant
shall be increased or decreased proportionately, in a manner deemed appropriate
by the Committee. In the event of a reclassification of Common Stock not
encompassed by the foregoing, or in the event of a liquidation or reorganization
of the Company, including a merger, consolidation or sale of assets, the
Committee shall make such adjustments, if any, as it may deem appropriate in the
number of DSUs of any Participant that are subject to the Plan. The provisions
of this Section shall only be applicable if, and only to the extent that, the
application thereof does not conflict with any valid government statute,
regulation or rule.
17. Financial Hardship. Upon written petition of the affected
Participant, in a manner specified by the Committee, the Committee may in its
sole discretion, with satisfactory documentation from the Participant, determine
a Final Valuation Date for the affected Participant. The value at such Final
Valuation Date shall be determined as provided for under Section 2, Items Q and
R above.
18. Withholding Taxes. If the Company or any subsidiary in its
discretion determines that it is obligated to withhold any tax in connection
with the payment or vesting of benefits with respect to Deferred Stock Units,
the Company or such subsidiary may withhold from the Participant's wage or other
remuneration the appropriate amount of the tax. At the discretion of the Company
or such subsidiary, the amount required to be withheld may be withheld in cash
from such wages or other remuneration or in cash or in kind from cash or the
Common Stock, respectively deliverable to the Participant under the terms
hereof. If the Company or any subsidiary does not withhold an amount from the
Participant's wages or other remuneration sufficient to satisfy the withholding
obligation of the Company or such subsidiary, the Participant shall be required
to make reimbursement on demand, in cash, for the amount underwithheld.
19. Amendment or Termination of Plan. The Company may amend this Plan
in whole or in part at any time and from time to time. Notice of any such
amendment shall be given in writing to each Participant and beneficiary of a
deceased participant. No amendment shall operate retroactively to deprive any
Participant or beneficiary of any benefit hereunder to which he or she is then
entitled. The Company may terminate the Plan at any time. Notice of any such
termination shall be given in writing to each participant and beneficiary of a
deceased Participant. No such termination shall be operate retroactively to
deprive any Participant or beneficiary of any benefit hereunder to which he or
she is then entitled.
20. Special Start-up Provision. Eligible Employees whose Kaneb
Services, Inc. Savings Investment Plan 401(k) Company contributions to that plan
were limited as described in Section 2, Item L prior to August 16, 1996 shall
have the opportunity to defer additional Compensation during the remainder of
1996 of up to the aggregate amount of additional deferrals which could have been
made under the Kaneb Services, Inc. Savings Investment Plan 401(k) as if such
deferrals were not limited by the Code during that time, to the extent that such
deferrals when added to actual deferrals made under the Kaneb Services, Inc.
Savings Investment Plan do not exceed six (6) percent of Compensation during
that time. Such additional deferrals, if any, shall be credited to the Eligible
Employee's Employee DSU Sub-Ledger account in a manner consistent with Section
7, Item A above. If the Eligible Employee makes additional deferrals as
described in this Section 20, the Company shall make a corresponding credit to
the Eligible Employee's Company Matching DSU Sub-Ledger Account in the same
manner and terms as described in Section 7 above. Further, the Eligible
Employee's Company 2% DSU Sub-ledger Account shall be credited for the prior
period in the same manner described in Section 7 above, regardless of whether or
not the Eligible Employee makes all or part of the additional deferral available
under this Section 20.
21. Gender. Reference hereunder to the male gender shall be deemed to
include the female and neuter genders, unless otherwise stated or indicated by
the circumstances.
22. Headings. All the headings set forth in this Plan are intended for
convenience only and shall not control or affect the meaning, construction or
effect of this Plan.
23. Severability. In case any term in this Plan shall be held invalid,
illegal or unenforceable in whole or in part, neither the validity of the
remaining part of such term, nor the validity of the other terms of this Plan,
shall in any way be affected thereby.
24. Applicable Law. To the extent not in conflict with applicable
federal law, the laws of the State of Texas shall govern the validity,
construction and interpretation of this Plan.
25. Effective Date. This Plan has been approved by the Compensation
Committee, effective as of the 23rd day of July, 1998.
Exhibit 10.3
KANEB SERVICES, INC.
NON-EMPLOYEE DIRECTORS DEFERRED STOCK UNIT PLAN
1. Purpose. This Deferred Stock Unit Plan of Kaneb Services, Inc., a
Delaware corporation, is intended to advance the best interests of the Company
by providing non-employee directors of the Company with additional incentive and
by increasing their proprietary interest in the success of the Company, thereby
encouraging them to continue their service to the Company. By this Plan (as
defined below) the Company (as defined below) seeks to establish an orderly
compensation plan to more closely align the interests of a Participant (as
defined below) with those of the Company's stockholders over a multi-year term,
in return for the Participant's service to the Company or its subsidiaries.
2. Definitions.
A. "Board of Directors" or "Board" means the Board of
Directors of the Company.
B. "Change of Control" means, with respect to the Company, the
occurrence of any one or more of the following events:
(1) the acquisitions by any individual or entity of
the legal or beneficial ownership of securities of the Company
having 20% or more of the total votes that may be cast for the
election of directors of the Company; (3) the approval by
stockholders of the Company of the sale or other disposition
of all or substantially all of the assets of the Company
(including a plan of liquidation or dissolution) or the merger
or consolidation of the Company with or into another
corporation, in accordance with the requirements of
Certificate of Incorporation of the Company and applicable
law; or
(2) as a result of or in connection with any tender
offer, exchange offer, merger or other business combination of
the foregoing, the failure of the individuals who are members
of the Board of Directors immediately prior to such event to
continue to constitute the majority of the Board.
C. "Committee" means the Compensation Committee of the Board
of Directors, or any successor committee appointed by resolution of the
Board.
D. "Company" means Kaneb Services, Inc. , a Delaware
Corporation.
E. "Common Stock" means the Common Stock of the Company, no
par value.
F. "Compensation" means with respect to a Director, his
regular cash payment from the Company in respect of his service to the
Company.
G. "Contribution Period" means the first day of the first
payment period commencing on or after the Initial Valuation Date and
ending on the last day of the last payment period as determined by the
Committee and elected by a Participant, during which period the
Participant defers Compensation into this Plan.
H. "Contributions" means the cumulative amount of Compensation
which has been credited to a Participant's Deferred Stock Unit Ledger
Account, in accordance with Section 7 hereof.
I. "Deferred Stock Unit" or "DSU", means a unit credited to a
Participant's Deferred Stock Unit Ledger Account in accordance with
Section 7 hereof.
J. "Deferred Stock Unit Ledger" or "DSU Ledger" means a record
that from time to time reflects the name of each Participant and
credits such Participant with the number of DSU's which have been
purchased on his or her behalf under the Plan. As each Participant
becomes Partially Vested and Fully Vested in DSU's, the record will
also indicate the vesting status of the DSU's.
K. "Disability" means the inability of a Participant through
life-threatening illness or other life-threatening cause, within the
judgment of the Committee based on the advice of competent physicians
of their selection, to continue in the employment of the Company for a
consecutive period of six (6) months or more, as determined by the
Committee.
L. "Entrance Date" means the date on which an Eligible
Director elects to become a Participant in the Plan by delivering to
the Company the election authorization described in Section 6 hereof.
M. "Eligible Director" means any non-employee director of the
Company.
N. "Final Valuation Date" means, with respect to a
Participant, the earlier to occur of the following dates: (i) the date
on which a Participant is not reelected to the Board; (ii) the date of
a Participant's death or Disability; (iii) the date on which the
Company undergoes a Change of Control; (iv) or any date selected by the
Participant which is on or after January 1 of the calendar year next
succeeding the calendar year in which the Contribution Period ends.
O. "Initial Valuation Date" means the date selected by the
Committee on which a Participant's DSU Ledger is established as
prescribed in Section 7 hereof.
P. "Participant" means each Eligible Director who elects to
participate in the Plan pursuant to Section 5 hereof.
Q. "Plan" means this Kaneb Services, Inc. Non-Employee
Directors Deferred Stock Unit Plan as the same shall be amended from
time to time.
R. "DSU Value" means:
(1) on any Final Valuation Date occurring after the
end of the full Contribution Period, the dollar value of DSU's
determined by multiplying the DSU's credited to the DSU Ledger
account of a Participant by the closing sale price per share
of the Company's Common Stock on the New York Stock Exchange
on such date (or, if there is no reported sale on such date,
on the last preceding date on which such sale occurred; or
(2) on any Final Valuation Date prior to the end of
the full Contribution Period, the amount of cash compensation
actually deferred by the Participant as of the Final Valuation
Date divided by the amount of total aggregate compensation
that was previously calculated on the Initial Valuation Date
to be the total expected aggregate amount deferred over the
Contribution Period multiplied by the closing price of the
Company's Common Stock on the Final Valuation Date (or, if
there is no reported sale on such date, on the last preceding
day on which any such reported sale occurred).
S. "Fully Vested" shall mean the Participant's DSU Value when
computed pursuant to Section 2, item R (1) above.
T. "Partially Vested" shall mean the Participant's DSU Value
when computed pursuant to Section 2, item R (2) above.
3. Administration.
A. The Plan shall be administered by the Committee. The
Committee may delegate the Administration of the Plan to an officer or
executive of the Company, however the Committee may not delegate its
authority to amend, change or terminate the Plan.
B. The Committee may make such rules and regulations for the
conduct of its affairs, and subject to the provisions of the Plan,
interpret the Plan, amend the Plan and make all other determinations
and perform such actions as it deems necessary or advisable to
administer the Plan.
C. No member of the Committee shall be liable for any action
taken or determination made in good faith with respect to the Plan or
any Option granted hereunder.
4. Notification of Eligibility. The Committee shall notify such person
in writing of eligibility prior to the Initial Valuation Date.
5. Method of Participation. Each Eligible Director may elect to
participate in the Plan by executing and delivering to the Company, on or before
the Election Date, an election authorization described in Section 6 below. Such
Eligible Director shall thereby become a Participant effective as of the
Election Date and shall remain a Participant until such Participant or his or
her beneficiary, as the case may be, has received payment of the DSU value of
such Participant's Deferred Stock Units in accordance with Section 9 hereof, or
until such Participant's rights are earlier forfeited as provided in Section 11
hereof. Upon the effectiveness of the Participant's election to participate,
each Participant shall be granted a non-qualified stock option to purchase
shares of Common Stock of the Company for a price equal to the closing sale
price of the Company's Common Stock on the Initial Valuation Date. The number of
shares subject to such non-qualified stock option and vesting provisions
attached thereto shall be determined by the Committee in its sole discretion.
Upon the grant of such non-qualified stock option to a Participant, the Company
and the Participant shall execute a non-qualified stock option agreement.
6. Election Authorization. The Company shall furnish to each Eligible
Director an election authorization in such form or forms as the Committee shall
prescribe. The election authorization shall request a deferral of pay during the
Contribution Period of an amount up to 100% of such Participant's annual
Compensation (but not less than 5% of such Participant's annual compensation).
No election authorization shall be effective sooner than the next compensation
period that begins after the Company's receipt of the election authorization.
All amounts deferred in accordance with a Participant's election authorization
shall be credited to such Participant's account under the Deferred Stock Unit
Ledger, more fully described below. No interest shall be payable on such
accounts.
7. Establishment and Maintenance of Deferred Stock Unit Ledger. On the
Initial Valuation Date, the Company shall establish a Deferred Stock Unit Ledger
which shall reflect the name of each Participant and credit to such
Participant's account established thereunder (i) the amounts actually deferred
from his or her Compensation in accordance with his or her election
authorization and (ii) the number of his or her Deferred Stock Units. For this
purpose, the number of DSU's to be credited to the account shall be the number
of DSU's determined by dividing (x) the aggregate amount of the Participant's
Compensation to be deferred over the Contribution Period by (y) the closing
price per share of the Company's Common stock on the New York Stock Exchange on
the Initial Valuation Date. As each Participant becomes Partially Vested and
Fully Vested as defined in Section 3 above, the DSU Ledger shall also reflect
the number of his or her cumulative vested Units. Finally, on the Participant's
Final Valuation Date, his or her account shall be credited with a dollar amount
equal to the DSU value of all his or here Fully Vested or Partially Vested DSU's
on such Final Valuation Date.
8. Amount and Form of Payment. Upon a Participant's Final Valuation
Date, such Participant or his or her beneficiary, as the case may be, shall be
entitled to receive an amount equal to the DSU Value of such Participant's Fully
Vested or Partially Vested DSU's determined as of such Final Valuation Date. All
amounts distributed to Participants or beneficiaries with respect to Final
Valuation Dates occurring prior the end of the full Contribution Period as
elected by the Participant shall be paid in cash. All amounts distributed to
Participants or beneficiaries with respect to Final Valuation Dates occurring
after the end of such Contribution Period shall be in shares of the Company's
Common Stock. The Company may satisfy its obligation to deliver shares of stock
from treasury shares, from authorized but unissued shares of Common Stock, or by
repurchasing shares of its Common Stock on the open market. The Company shall,
where applicable, issue and deliver to the Participant certificates representing
shares of its Common Stock as soon as practicable after the DSU Value of such
Participant becomes due and payable hereunder; provided however, that the
obligation of the Company to deliver shares of Common Stock shall be postponed
for such period of time as may be necessary to register or qualify such shares
under the Securities Act of 1933 or any applicable state securities law.
9. Timing of Payment. The Company shall pay to such Participant, or to
his or her beneficiary, as the case may be, the DSU Value of the Participant's
DSU's in the form determined in accordance with Section 8 above, in a single
lump-sum no later than sixty (60) days following such Participant's Final
Valuation Date; provided however, that on or before his or her Final Valuation
Date, the Participant may elect that his or her Unit Value be paid in accordance
with such alternate payment schedule as the Committee in its sole discretion may
approve.
10. Beneficiary Designation. Prior to the Initial Valuation Date, each
Participant shall file with the Company a beneficiary designation on such form
or forms as the Committee shall prescribe naming gone or more beneficiaries to
succeed to the Participant's right to receive payments hereunder in the event of
his or her death. The Participant shall have the right to change such
designation from time to time; provided, however, that no such change shall
become effective until received in writing by the Committee.
11. Forfeiture of Deferred Stock Units. Notwithstanding any other
provision hereof, on a Participant's Final Valuation Date, any DSU's not
Partially Vested or Fully Vested shall be forfeited.
12. Contingent Right to Receive DSU Value. The right of each
Participant to payment of the future DSU Value is contingent only and subject to
forfeiture as provided in Sections 3 and 17. Title to and beneficial ownership
of any assets, whether cash or investments, which the Company may set aside or
earmark to meet its contingent deferred obligation hereunder, shall at all times
remain in the Company and no Participant or beneficiary shall under any
circumstances acquire any interest in any specific assets in the Company.
Nothing contained herein shall be deemed to create a trust of any kind or to
create a fiduciary relationship between the Company or the Committee or the
Committee's Designee(s) and a Participant. To the extent that any person
acquires a right to receive payments from the Company under this Plan, such
right shall be no greater than that of any unsecured general creditor of the
Company.
13. Limitation on Rights. Nothing in this Plan shall be construed to:
A. give a Participant any rights whatsoever with respect to
shares of Common Stock of the Company;
B. give a Participant any rights of a stockholder of the
Company;
C. limit in any way the right of the stockholders of the
Company to elect or choose not to elect a Participant to the Board;
D. be evidence of any agreement or understanding, express or
implied, that the Company will engage the services of a Participant in
any particular position or at any particular rate of remuneration.
14. Dividends and Dilution. The existence of outstanding Deferred Stock
Units shall not affect in any way the right or power of the Company or its
stockholders to make or authorize any adjustment, recapitalization,
reorganization, or any other change in the Company's capital structure or its
business, any merger or consolidation of the Company, any issue of bonds,
debentures, preferred or prior preference stock ahead of or affecting the Common
Stock or any right thereto, the dissolution or liquidation of the Company, any
sale or transfer of all or any part of its assets or business, or any other
corporate act or proceeding whether of a similar character or otherwise.
15. Transferability of Contingent Right to Future Payments. No right or
payment under this Plan shall be subject to anticipation, alienation, sale,
assignment, pledge, encumbrance or charge, and any attempt to anticipate,
alienate, sell, assign, pledge, encumber or charge the same shall be void. No
right or payment hereunder shall in any manner be liable for or subject to the
debts, contracts, liabilities or torts of any person entitled to such benefits.
If any Participant or beneficiary hereunder shall become bankrupt or attempt to
anticipate, alienate, assign, sell, pledge, encumber or charge any right or
benefit hereunder, or if any creditor shall attempt to subject the same to a
writ of garnishment, attachment, execution, sequestration, or any other form of
process or involuntary lien or seizure, then such right or payment shall, in the
discretion of the Committee, either cease and terminate absolutely or be held by
the Company for the sole benefit of the Participant or such beneficiary, his or
her spouse, children or other dependents, or any of them in such manner and in
such proportion as the Committee shall deem proper, free and clear of the claims
of any other party whatsoever.
16. Adjustments Upon Changes in Common Stock. In the event that the
Company shall effect a split of its Common stock or declare a dividend payable
in Common Stock, or in the event that the outstanding Common Stock shall be
combined into a smaller number of shares, the number of DSU's of any Participant
shall be increased or decreased proportionately, in a manner deemed appropriate
by the Committee. In the event of a reclassification of Common Stock not
encompassed by the foregoing, or in the event of a liquidation or reorganization
of the Company, including a merger, consolidation or sale of assets, the
Committee shall make such adjustments, if any, as it may deem appropriate in the
number of DSU's of any Participant that are subject to the Plan. The provisions
of this Section shall only be applicable if, and only to the extent that, the
application thereof does not conflict with any valid government statue,
regulation or rule.
17. Financial Hardship. Upon written petition of the affected
Participant, in a manner specified by the Committee, the Committee may in its
sole discretion, with satisfactory documentation from the Participant, determine
a Final Valuation Date for the affected Participant. The value at such Final
Valuation Date shall be determined as provided for under Section 2, Items R. (1)
and R. (2) above.
18. Withholding Taxes. As of the Effective Date of this Plan, the
Company believes that it has no obligation to withhold taxes from Eligible
Directors of the Company; however, if the Company in its discretion determines
that it is obligated to withhold any tax in connection with the payment or
vesting of benefits with respect to Deferred Stock Units, the Company may
withhold from the Participant's remuneration the appropriate amount of the tax.
At the discretion of the Company, the amount required to be withheld may be
withheld in cash from such remuneration or in cash or in kind from cash or the
Common Stock, respectively, deliverable to the Participant under the terms
hereof. If the Company does not withhold an amount from the Participant's
remuneration sufficient to satisfy the withholding obligation of the Company or
such subsidiary, the Participant shall be required to make reimbursement on
demand, in cash, for the amount underwithheld.
19. Amendment or Termination of Plan. The Company may amend this Plan
in whole or in part at any time and from time to time. Notice of any such
amendment shall be given in writing to each Participant and beneficiary of a
deceased participant. No amendment shall operate retroactively to deprive any
Participant or beneficiary of any benefit hereunder to which he or she is then
entitled. The Company may terminate the Plan at any time. Notice of any such
termination shall be given in writing to each participant and beneficiary of a
deceased Participant. No such termination shall be operate retroactively to
deprive any Participant or beneficiary of any benefit hereunder to which he or
she is then entitled.
20. Gender. Reference hereunder to the male gender shall be deemed to
include the female and neuter genders, unless otherwise stated or indicated by
the circumstances.
21. Headings. All the headings set forth in this Plan are intended for
convenience only and shall not control or affect the meaning, construction or
effect of this Plan.
22. Severability. In case any term in this Plan shall be held invalid,
illegal or unenforceable in whole or in part, neither the validity of the
remaining part of such term, nor the validity of the other terms of this Plan,
shall in any way be affected thereby.
23. Applicable Law. To the extent not in conflict with applicable
federal law, the laws of the State of Texas shall govern the validity,
construction and interpretation of this Plan.
24. Effective Date. This Plan has been approved by the Compensation
Committee, effective as of the 23rd day of July, 1998.
Exhibit 10.4
KANEB SERVICES, INC.
1996 DIRECTORS STOCK INCENTIVE PLAN
Purpose
This Plan is intended to assist the Company in recruiting and retaining
directors with ability and initiative by enabling them to participate in the
Company's future success and to associate their interests with those of the
Company and its shareholders. The Plan is intended to permit the grant of SARs,
and the grant of non-qualified stock options (options not qualified under
Section 422 of the Code as "incentive stock options"). The proceeds received by
the Company from the sale of Common Stock pursuant to this Plan shall be used
for general corporate purposes.
Article I - Definitions
1.01 "Agreement" means a written agreement (including any amendment or
supplement thereto) between the Company and a Participant specifying
the terms and conditions under which an Option or SAR is granted to
such Participant.
1.02 "Board" means the Board of Directors of the Company.
1.03 "Code" means the Internal Revenue Code of 1986, and any amendments
thereto.
1.04 "Common Stock" means the Common Stock, without par value, of the
Company.
1.05 "Company" means Kaneb Services, Inc., a Delaware corporation.
1.06 "Corresponding SAR" means an SAR that is granted in relation to a
particular Option and that can be exercised only upon surrender to the
Company, unexercised, of that portion of the Option to which the SAR
relates.
1.07 "Date of Exercise" means (i) with respect to a particular Option, the
date that the Option price is received by the Company and (ii) with
respect to an SAR, the date that the notice of exercise is received by
the Company.
1.08 "Director" means any duly elected member of the Company's Board of
Directors.
1.09 "Fair Market Value" means, on any given date, the closing price of the
Common Stock. If the Common Stock was not traded on such date, then the
"Fair Market Value" is determined with reference to the preceding day
that the Common Stock was so traded.
1.10 "Initial Value" means, with respect to an SAR, the Fair Market Value of
one share of Common Stock on the date of grant, as set forth in the
Agreement.
1.11 "Option" means a stock option that entitles the holder to purchase from
the Company a stated number of shares of Common Stock at the price set
forth in an Agreement.
1.12 "Participant" means a member of the Board, who satisfies the
requirements of Article III and is selected by the Board to receive an
Option, an SAR, or a combination thereof.
1.13 "Plan" means the Kaneb Services, Inc. 1996 Directors Stock Incentive
Plan.
1.14 "SAR" means a stock appreciation right that entitles the holder to
receive, with respect to each share of Common Stock encompassed by the
exercise of such SAR, the amount determined by the Board and specified
in the Agreement. In the absence of such a determination, the holder
shall be entitled to receive, with respect to each share of Common
Stock encompassed by the exercise of such SAR, the excess of the Fair
Market Value on the Date of Exercise over the Initial Value, payable in
cash or the equivalent value in Common Stock, at the election of the
Board. References to "SARs" include both Corresponding SARs and SARs
granted independently of Options unless the context requires otherwise.
Article II - Administration
Except as provided in this Article II, the Plan shall be administered
by the Board. The Board shall have the authority to grant Options and SARs on
such terms (not inconsistent with this Plan) as the Board shall consider
appropriate. Such terms may include conditions (in addition to those contained
in this Plan) on the exercisability of all or any part of an Option or SAR.
Notwithstanding any such conditions, the Board may, in its discretion,
accelerate the time at which any Option or SAR may be exercised. In addition,
the Board shall have complete authority to interpret all provisions of this
Plan; to prescribe the form of Agreements; to adopt, amend, and rescind rules
and regulations pertaining to the administration of the Plan; and to make all
other determinations desirable, necessary or advisable for the administration of
this Plan. The express grant in the Plan of any specific power to the Board
shall not be construed as limiting any power or authority of the Board. Any
decision made, or action taken, by the Board or in connection with the
administration of this Plan shall be final and conclusive. No member of the
Board shall be liable for any act done in good faith with respect to this Plan
or any Agreement, Option, or SAR award. All expenses of administering this Plan
shall be borne by the Company.
Article III - Eligibility
3.01 General. Each Director of the Company is eligible to participate in
this Plan. Any such Director may be granted one or more Options, SARs,
or Options and SARs. A Director of the Company who is an employee of
the Company or a Subsidiary may be granted Options or SARs under this
Plan.
3.02 Grants. The Board will designate individuals to whom Options and SARs
are to be granted and will specify the number of shares of Common Stock
subject to each award or grant. An Option may be granted with or
without a related SAR. An SAR may be granted with or without a related
Option. All Options and SARs granted under this Plan shall be evidenced
by Agreements which shall be subject to the applicable provisions of
this Plan and to such other provisions as the Board may adopt. The
Board may substitute new Options or SARs for previously granted Options
or SARs, including those previously granted having higher exercise
prices. The Board may also substitute new SARs for previously granted
Options or new Options for previously granted SARs including those SARs
or Options theretofore granted having higher exercise prices. No
Participant may be granted incentive stock options under this Plan.
Article IV - Stock Subject to Plan
4.01 Source of Shares. Upon the exercise of any Options or SARs, the Company
may use Common Stock held by the Company in its Treasury, or subject to
shareholder approval, the Company may issue authorized but unissued
Common Stock.
4.02 Maximum Number of Shares. The maximum aggregate number of shares of
Common Stock that may be utilized pursuant to the exercise of Options
and SARs under this Plan is 400,000, subject to increases and
adjustments as provided in Article VIII.
4.03 Forfeitures. If an option or SAR is terminated, in whole or in part,
for any reason other than its exercise, the number of shares of Common
Stock allocated to the Option or SAR or portion thereof may be
reallocated to other Options or SARs to be granted under this Plan.
Article V - Option Price
The price per share for Common Stock purchased on the exercise of an
Option shall be determined by the Board on the date of grant; provided, however,
that the price per share for Common Stock purchased on the exercise of any
Option, including an Option that is an incentive stock option, shall not be less
than the Fair Market Value on the date the Option is granted.
Article VI - Exercise of Options
6.01 Maximum Option or SAR Period. The maximum period in which an Option or
SAR may be exercised shall be determined by the Board on the date of
grant and any Corresponding SAR that relates to such Option shall be
exercisable after the expiration of 10 years from the date the Option
or SAR was granted. The terms of any Option or SAR may provide that it
is exercisable for a period less than such maximum period.
6.02 Transferability. Any Option or SAR granted under this Plan shall be
transferable only by will, laws of descent and distribution or by a
gift from a Participant to a family member or a trust, partnership or
similar entity for the benefit of a family member. In the event of any
such transfer, the Option and any Corresponding SAR that relates to
such Option must be transferred to the same person or persons or entity
or entities. No right or interest of a Participant in any Option or SAR
shall be liable for, or subject to, any lien, obligation, or liability
of such Participant, except in connection with a permitted transfer.
6.03 Director Status. In the event that the terms of any Option or SAR
provide that it may be exercised only during active service or within a
specified period of time after termination of service, the Board may
decide to what extent leaves of absence for government or military
service, illness, temporary disability, or other reasons shall not be
deemed interruptions of continuous service. In the absence of terms
established in an Option and or SAR Agreement by the Board, the
following shall apply:
(a) Death. In the event of death while in active service, Options
and SARs may be exercised for a period of one hundred eighty
(180) days after the Participant's death or until the
expiration of the Option or SAR (if sooner), to the extent of
the shares with respect to which the Option or SAR could have
been exercised by the Participant on the date of the
Participant's death, by the Participant's estate or personal
representative, or by the person who acquired the right to
exercise the Option or SAR by bequest or inheritance or by
reason of the Participant's death;
(b) Disability. In the event of termination of service as the
result of a permanent disability or life-threatening illness
(as determined by the Board), the Option or SAR may be
exercised by the Participant or his guardian for a period of
180 days after the Participant's termination or until
expiration of the Option or SAR period (if sooner) to the
extent of the shares with respect to which the Option or SAR
could have been exercised by the Participant on the date of
such termination;
(c) Termination. A Participant may exercise such Option or SAR in
the event that he resigns or fails to be reelected for a
period of ninety (90) days after the Participant's termination
from service or until expiration of the Option or SAR period
(if sooner) to the extent of the shares with respect to which
the Option or SAR could have been exercised by the Participant
on the date of termination of service.
6.04 Terms. The Board may provide for the terms of the Participant's
eligibility to exercise Options or SARs in installments or under any
such conditions and restrictions as it may determine. In the absence of
such terms established in an Option or SAR Agreement by the Board, the
Option or SAR shall be exercisable in its entirety on the date of
grant, subject to any applicable law or statute and as otherwise
provided for in this Article VI.
Article VII - Method of Exercise
7.01 Exercise. An Option or SAR granted under this Plan shall be deemed to
have been exercised on the Date of Exercise. Subject to the provisions
of Articles VI and IX, an Option or SAR may be exercised in whole at
any time or in part at any time at such times and in compliance with
such requirements as the Board shall determine. An Option or SAR
granted under this Plan may be exercised with respect to any number of
whole shares less than the full number of whole shares for which the
Option or SAR could be exercised. A partial exercise of an Option or
SAR shall not affect the right to exercise the Option or SAR from time
to time in accordance with this Plan and the applicable Agreement with
respect to remaining shares subject to the Option or related to the
SAR. The exercise of either an Option or Corresponding SAR shall result
in the termination of the other to the extent of the number of shares
with respect to which the Option or Corresponding SAR is exercised.
7.02 Payment. Unless otherwise provided by the Agreement, payment of the
Option price shall be made in cash, a cash equivalent acceptable to the
Board, or in Common Stock. With the approval of the Board, all or part
of the Option price may be paid by surrendering shares of Common Stock
to the Company. If Common Stock is used to pay all or part of the
Option price, the shares surrendered must have a Fair Market Value
(determined as of the day preceding the Date of Exercise) that is not
less than such price or part thereof. A fractional share of Common
Stock shall not be deliverable upon the exercise of an SAR or Option
but a cash payment will be made in lieu thereof.
7.03 Shareholder Rights. No Participant shall have any rights as a
stockholder with respect to shares subject to his Option or SAR until
the Date of Exercise of such Option or SAR.
Article VIII - Adjustment Upon Change in Common Stock
8.01 General. The maximum number of shares as to which Options and SARs may
be granted under this Plan shall be proportionately adjusted, and the
terms of outstanding Options and SARs shall be adjusted, as the Board
shall determine to be equitably required in the event that the Company
effects one or more stock dividends, stock split-ups, subdivisions or
consolidations of shares. Any determination made under this Article
VIII by the Board shall be final and conclusive. This issuance by the
Company of shares of stock of any class, or securities convertible into
shares of stock of any class, for cash or property, or for labor or
services, either upon direct sale or upon exercise of rights or
warrants to subscribe therefore, or upon conversion of shares or
obligations of the Company convertible into such shares or other
securities, shall not affect and no adjustment by reason thereof shall
be made with respect to, outstanding Options or SARs. The Board may
grant Options, and may grant SARs in substitution for stock awards,
stock options, stock appreciation rights, or similar awards held by an
individual who becomes a member of the Board in connection with a
transaction described in the first paragraph of this Article VIII.
Notwithstanding any provision of the Plan, the terms of such
substituted Option or SAR grants shall be as the Board, in its
discretion, determines is appropriate.
8.02 Liquidation or Dissolution. In case the Company shall, at any time
while any unexercised Option or SAR shall be in force and remain
unexpired under this Plan, (i) sell all or substantially all its
property and thereafter distribute in partial or total liquidation of
the Company, or (ii) dissolve, liquidate, or wind up its affairs, then
each Participant may thereafter receive upon exercise of Options or
SARs (in lieu of each share of Common Stock of the Company which such
Participant would have been entitled to receive) the same kind and
amount of any securities or assets as may be issuable, distributable or
payable upon any such sale, dissolution, liquidation, or winding up
with respect to each share of Common Stock of the Company. In the event
that the Company shall, at any time prior to the expiration of any
Option or SAR, make any partial distribution of its assets (but not
including dividends payable in capital stock of the Company), in the
nature of a partial liquidation, whether payable in cash or in kind
(but excluding the distribution of a cash dividend payable out of
earned surplus and designated as such) then in such event the exercise
prices then in effect with respect to each outstanding Option or SAR
shall be reduced, on the payment date of such distribution, in
proportion to the percentage reduction in the tangible book value of
the shares of the Company's Common Stock (determined in accordance with
generally accepted accounting principles) resulting by reason of such
distribution.
Article IX - Compliance With Law and Approval of Regulatory Bodies
No Option or SAR shall be exercisable, no Common Stock shall be issued,
no certificates for shares of Common Stock shall be delivered, and no payment
shall be made under this Plan except in compliance will all applicable federal
and state laws and regulations (including without limitation, withholding tax
requirements, if any) and the rules of all domestic stock exchanges on which the
Company's shares may be listed. The Company shall have the right to rely on an
opinion of its counsel as to such compliance. Any share certificate issued to
evidence Common Stock for which an Option or SAR is exercised may bear such
legends and statements as the Board may deem advisable to assure compliance with
applicable federal and state laws and regulations. No Option or SAR shall be
exercisable, no Common Stock Shall be issued, no certificate for shares shall be
delivered, and no payment shall be made under this Plan until the Company has
obtained such consent or approval as the Board may deem advisable from
regulatory bodies having jurisdiction over such matters.
Article X - General Provisions
10.01 Effect on Service. Neither the adoption of this Plan, its operation,
nor any documents describing or referring to this Plan (or any part
thereof) shall confer upon any Director any right to continue in the
service of the Company or in any way effect any right and power of the
shareholders of the Company to terminate the service of a director
without assigning a reason therefor.
10.02 Unfunded Plan. The Plan, insofar as it provides for grants, shall not
be required to segregate any assets that may at any time be represented
by grants under this Plan. Any liability of the Company to any person
with respect to any grant under this Plan shall be based solely upon
any contractual obligations that may be created pursuant to this Plan.
No such obligation of the Company shall be deemed to be secured by any
pledge of, or other encumbrance on, any property of the Company.
10.03 Rules of Construction. Headings are given to the articles and sections
of this Plan solely as a convenience to facilitate reference. The
reference to any statute, regulation, or other provision of law shall
be construed to refer, as well, to any amendment to or successor of
such provision of law.
Article XI - Amendment
The Board may amend or terminate this Plan from time to time, provided,
however, that no amendment may become effective until shareholder approval is
obtained if the amendment increases the aggregate number of shares of Common
Stock that may be issued under the Plan, other than through use Common Stock
held in its Treasury. No amendment shall without a Participant's consent
adversely affect any rights of such Participant under any Option or SAR
outstanding at the time such amendment is made.
Article XII - Duration of Plan
No Option or SAR may be granted under this Plan more than 10 years
after the date that the Plan is adopted by the Board.
Article XIII - Effective Date of Plan
This Plan, as amended, has been approved by the Compensation Committee,
effective as of the 23rd day of July, 1998.
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