FORM 10-Q
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
(Mark One)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended June 30, 1997
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OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
Commission File Number 0-12058
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KENAN TRANSPORT COMPANY
------------------------------------------------------
(Exact name of registrant as specified in its charter)
North Carolina 56-0516485
------------------------------- ---------------
(State or other jurisdiction of (IRS Employer
incorporation or organization) Identification No.)
University Square - West, 143 W. Franklin Street
Chapel Hill, North Carolina, 27516-3910
-----------------------------------------------------------
(Address of principal executive offices, including Zip Code)
(919) 967-8221
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(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 Outstanding at July 31, 1997
-------------------------- ------------------------------
Common stock, no par value 2,394,780
<PAGE>
<PAGE>
KENAN TRANSPORT COMPANY
INDEX
Page
----
Part I - Financial Information
Consolidated Balance Sheets as of June 30, 1997 and
December 31, 1996 1
Consolidated Statements of Income for the three
and six months ended June 30, 1997 and 1996 2
Consolidated Statements of Cash Flows for the
six months ended June 30, 1997 and 1996 3
Notes to Consolidated Financial Statements 4
Management's Discussion and Analysis of Financial
Condition and Results of Operations 5
Part II - Other Information
Item 4 - Submission of Matters to a Vote of Security Holders 6
Item 6 - Exhibits and Reports on Form 8-K 6
Signatures 7
Index to Exhibits 8
<PAGE>
<PAGE>
PART I - FINANCIAL INFORMATION
KENAN TRANSPORT COMPANY
CONSOLIDATED BALANCE SHEETS
(Dollars in thousands)
<TABLE>
<CAPTION>
June 30, December 31,
1997 1996
ASSETS (Unaudited) (Note 1)
- ---------------------------------------------------------------------
<S> <C> <C>
Current Assets
Cash and cash equivalents $11,185 $11,181
Short-term investments - -
Accounts receivable 4,723 4,988
Operating supplies and parts 475 413
Prepayments -
Tires 982 1,033
Insurance, licenses and other 908 698
Deferred income taxes 1,856 1,741
- ---------------------------------------------------------------------
Total Current Assets 20,129 20,054
Operating Property
Land 3,531 3,531
Buildings and leasehold improvements 10,545 9,279
Revenue equipment 56,428 56,015
Other equipment 4,236 3,923
- ---------------------------------------------------------------------
74,740 72,748
Accumulated depreciation (29,719) (28,615)
- ---------------------------------------------------------------------
Net Operating Property 45,021 44,133
Other Assets 1,051 857
- ---------------------------------------------------------------------
$66,201 $65,044
=====================================================================
LIABILITIES AND STOCKHOLDERS' EQUITY
- ---------------------------------------------------------------------
Current Liabilities
Accounts payable $ 1,194 $ 1,257
Wages and employee benefits payable 4,674 5,136
Claims payable 3,483 3,409
Other accrued expenses 184 166
Income taxes payable -- 52
- ---------------------------------------------------------------------
Total Current Liabilities 9,535 10,020
Deferred Income Taxes 9,266 9,181
Stockholders' Equity
Common stock; no par; 20,000,000 shares
authorized; 2,394,780 and 2,389,497
shares issued and outstanding 3,096 2,996
Retained earnings 44,304 42,847
- ---------------------------------------------------------------------
47,400 45,843
- ---------------------------------------------------------------------
$66,201 $65,044
=====================================================================
The Notes to Consolidated Financial Statements are an integral part of
these balance sheets.
</TABLE>
Page 1<PAGE>
<PAGE>
KENAN TRANSPORT COMPANY
CONSOLIDATED STATEMENTS OF INCOME
(Unaudited and dollars in thousands except per share amounts)
<TABLE>
Three Months Ended Six Months Ended
June 30, June 30,
-------------------- ---------------------
1997 1996 1997 1996
- ----------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Operating Revenue $17,233 $16,637 $34,979 $34,224
Operating Expenses
Wages and employee benefits 8,806 8,606 17,756 17,532
Fuel, parts, tires and other 3,477 3,122 6,976 6,420
Taxes and licenses 1,062 1,046 2,156 2,170
Claims and insurance 663 596 1,307 1,197
Communications, utilities and rent 348 357 711 786
Depreciation 1,647 1,689 3,302 3,250
- ----------------------------------------------------------------------------------------
16,003 15,416 32,208 31,355
- ----------------------------------------------------------------------------------------
Operating Income 1,230 1,221 2,771 2,869
Interest income and other expenses, net 71 33 117 103
- ----------------------------------------------------------------------------------------
Income before Provision for Income Taxes 1,301 1,254 2,888 2,972
Provision for income taxes 491 491 1,102 1,169
- ----------------------------------------------------------------------------------------
Net Income $ 810 $ 763 $ 1,786 $ 1,803
========================================================================================
Weighted average number of shares
outstanding (in thousands) 2,395 2,389 2,393 2,389
Earnings per share $ .34 $ .32 $ .75 $ .76
Operating ratio 92.9% 92.7% 92.1% 91.6%
Dividends paid per share $ .0675 $ .0650 $ .1350 $ .1300
The Notes to Consolidated Financial Statements are an integral part of these statements.
</TABLE>
Page 2
<PAGE>
<PAGE>
KENAN TRANSPORT COMPANY
CONSOLIDATED STATEMENTS OF CASH FLOWS
For the Six Months Ended June 30, 1997 and 1996
(Unaudited and dollars in thousands)
<TABLE>
<CAPTION>
1997 1996
- ----------------------------------------------------------------------
<S> <C> <C>
Cash Provided by (Applied to):
Operations $ 4,523 $ 4,856
Purchases of operating property, net (4,190) (7,244)
Short-term investments, net - 6,076
Dividends (329) (317)
- ----------------------------------------------------------------------
Net Increase in Cash and Cash Equivalents 4 3,371
Beginning Cash and Cash Equivalents 11,181 3,220
- ----------------------------------------------------------------------
Ending Cash and Cash Equivalents $11,185 $ 6,591
======================================================================
The Notes to Consolidated Financial Statements are an integral part of
these statements.
Page 3
<PAGE>
<PAGE>
KENAN TRANSPORT COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
1. Basis of Presentation
The financial information included herein is unaudited;
however, such information reflects all adjustments (consisting solely
of normal recurring adjustments) that are, in the opinion of
management, necessary for a fair statement of results for the interim
periods.
The balance sheet at December 31, 1996 has been taken from the
audited financial statements at that date.
The results of operations for the three and six months ended
June 30, 1997 and 1996 are not necessarily indicative of the results
to be expected for the full year.
2. Effects of Recent Accounting Pronouncements
The Financial Accounting Standards Board issued Statement of
Financial Accounting Standards (SFAS) No. 128, "Earnings Per Share",
in February 1997. The Company is required to adopt SFAS No. 128 for
the year ended December 31, 1997. This statement establishes
standards for computing and presenting earnings per share (EPS) and
makes them comparable to international EPS standards. The statement
requires dual presentation of basic and diluted EPS on the face of
the income statement and requires a reconciliation of the numerator
and denominator of the basic EPS calculation to the numerator and
denominator of the diluted EPS calculation. Basic and diluted EPS
will not be materially different from previously reported EPS.
Page 4
<PAGE>
<PAGE>
KENAN TRANSPORT COMPANY
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
The following is management's discussion and analysis of certain
significant factors that have affected the Company's financial position
and operating results during the periods included in the accompanying
financial statements.
Results of Operations
- -------------------------------
Revenue for the second quarter of 1997 was $17,233,000, an increase
of $596,000 and 4% over the second quarter of 1996. We experienced modest
growth in demand for transportation of gasoline and chemical products,
while propane gas and heating fuels were flat as a result of a warmer
heating season. Net income was $810,000, an increase of $47,000 and 6%
over the second quarter of 1996. Earnings per share were $.34 compared to
$.32 in 1996. Miles operated increased 3% in comparison to the second
quarter of 1996.
Revenue for the first half of 1997 was $34,979,000, an increase of
$755,000 and 2% over the first six months of 1996. Net income was
$1,786,000 compared to $1,803,000 for the first half of 1996. Earnings
per share were $.75 compared to $.76 in 1996. Miles operated increased 1%
in comparison to the first half of 1996.
Operating expenses for the second quarter of 1997 totaled
$16,003,000, an increase of $587,000 and 4% over the second quarter of
1996. During the second quarter, we increased driver pay to our more
experienced drivers. We expect this change to result in lower turnover,
improved customer service and safety performance. Fuel prices continued
to decline during the quarter to levels slightly lower than those in the
second quarter of 1996. Accordingly, we have adjusted our fuel surcharge
program to reduce prices to our customers. The operating ratio for the
quarter was 92.9% compared to 92.7% in 1996.
Operating expenses for the first half of 1997 totaled $32,208,000, an
increase of $853,000 and 3% over the first six months of 1996. The
operating ratio increased to 92.1% from 91.6% in 1996.
Liquidity and Capital Resources
- -------------------------------
The Company's liquidity and capital resources are adequate. At June
30, 1997, working capital was $10,594,000 compared to $10,034,000 at
December 31, 1996, and the current ratios were 2.11 and 2.00,
respectively. Cash and cash equivalents totaled $11,185,000 at June 30,
1997, and the Company had no debt outstanding under its $7,000,000 bank
line of credit. Management believes that cash flows from operations and
access to capital from the Company's bank line of credit will be
sufficient to fund 1997 capital expenditures, working capital
requirements, expansion opportunities and other corporate needs.
The Company's operations require the storage of fuel for use in its
tractors in both underground and aboveground tanks. The Company has a
program to maintain its fuel storage facilities in compliance with
environmental regulation. Under the program, the Company incurs costs to
replace tanks, remediate soil contamination resulting from overfills,
spills and leaks and monitor facilities on an ongoing basis. These costs
are recorded when it is probable that a liability has been incurred and
the related amount can be reasonably estimated. Such costs have not been
and are not expected to be material to the Company's operations or
liquidity.
Page 5<PAGE>
<PAGE>
PART II - OTHER INFORMATION
Item 4. Submission of Matters to a Vote of Security Holders
- ------- ---------------------------------------------------
The Registrant's Annual Meeting of Stockholders was held on May
5, 1997 for the purpose of electing a board of directors and to
transact other business as came before the meeting. Proxies for
the meeting were solicited pursuant to Section 14(a) of the
Securities Act of 1934 and there was no solicitation in
opposition to management's solicitations. The proposals voted
upon and the results of voting were as follows:
(1) Nominees for directors as listed in the proxy statement
were elected for a one year term with the following vote:
Votes Votes Broker
For Withheld Non-votes
--------- -------- ---------
Thomas S. Kenan, III 2,146,520 100 145,853
Owen G. Kenan 2,146,520 100 145,853
Lee P. Shaffer 2,146,520 100 145,853
William C. Friday 2,146,520 100 145,853
William O. McCoy 2,145,070 1,550 145,853
Paul J. Rizzo 2,145,070 1,550 145,853
Braxton Schell 2,146,420 200 145,853
Paul Wright, Jr. 2,146,520 100 145,853
Kenneth G. Younger 2,145,070 1,550 145,853
Item 6. Exhibits and Reports on Form 8-K
- ------- ---------------------------------
(a) The Exhibits to this Form 10-Q are listed on the accompanying
Index to Exhibits.
(b) No reports on Form 8-K have been filed during the quarter ended
June 30, 1997.
Page 6
<PAGE>
<PAGE>
SIGNATURES
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 thereunto duly authorized.
KENAN TRANSPORT COMPANY
(Registrant)
DATE: August 6, 1997 BY: /s/ William L. Boone
----------------------------
Vice President-Finance and
Chief Financial Officer
Page 7
<PAGE>
<PAGE>
INDEX TO EXHIBITS
The exhibits filed as part of this report are listed below:
Exhibit
Number Description
- --------- ----------------------------------------------------------
10.A Senior Managers' Life Insurance Plan
10.B Senior Management Severance Plan
27 Financial Data Schedule for the 2nd Quarter 10-Q.
Page 8
<PAGE>
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY INFORMATION EXTRACTED FROM THE COMPANY'S
FORM 10-Q FOR THE PERIOD ENDED JUNE 30, 1997, AND IS QUALIFIED IN ITS
ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<CIK> 0000745379
<NAME> KENAN TRANSPORT COMPANY
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-END> JUN-30-1997
<CASH> 11,185
<SECURITIES> 0
<RECEIVABLES> 4,723
<ALLOWANCES> 0
<INVENTORY> 475
<CURRENT-ASSETS> 20,129
<PP&E> 74,740
<DEPRECIATION> 29,719
<TOTAL-ASSETS> 66,201
<CURRENT-LIABILITIES> 9,535
<BONDS> 0
0
0
<COMMON> 3,096
<OTHER-SE> 44,304
<TOTAL-LIABILITY-AND-EQUITY> 66,201
<SALES> 0
<TOTAL-REVENUES> 34,979
<CGS> 0
<TOTAL-COSTS> 32,208
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 2,888
<INCOME-TAX> 1,102
<INCOME-CONTINUING> 1,786
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 1,786
<EPS-PRIMARY> .75
<EPS-DILUTED> .75
</TABLE>
EXHIBIT 10.A
KENAN TRANSPORT COMPANY
Senior Managers' Life Insurance Plan
------------------------------------
Purpose
-------
The purpose of the Senior Managers' Life Insurance Plan of Kenan Transport
Company is to provide life insurance benefits to a select number of senior
level Employees who contribute materially to the continued growth,
development, and future business of Kenan Transport Company.
Article I
Definitions
-----------
For the purpose hereof, unless otherwise required by the context, the
following phrases or terms shall have the following meanings:
1.0 "Beneficiary" shall mean the person(s), trust(s), or the estate of a
Participant, entitled to receive any benefits under an Insurance
Policy obtained pursuant to this Plan upon the death of a
Participant.
1.1 "Board" shall mean the Board of Directors of Kenan Transport
Company.
1.2 "Committee" shall mean the Compensation Committee of the Board.
1.3 "Company" shall mean Kenan Transport Company, a North Carolina
corporation, and its subsidiaries or affiliates.
1.4 "Employee" shall mean any person who is in the regular full time
employment of the Company as determined by the personnel policies of
the Company.
1.5 "Insurance Policy" shall mean one or more life insurance contract(s)
issued by the Insurer on the life of a Participant.
1.6 "Insurer" shall mean the insurance company or companies to which
both a Participant and the Company shall apply for insurance on the
Participant's life, and which issues an Insurance Policy.
1.7 "Normal Plan Agreement Termination Date" shall mean the later of (i)
the date a Participant attains age 65, or (ii) the date a
Participant has participated in the Plan for ten (10) years.
1<PAGE>
1.8 "Participant" shall mean an Employee who is eligible to participate
and elects to participate in this Plan as provided in Article II
hereof.
1.9 "Plan" shall mean the Senior Managers' Life Insurance Plan of Kenan
Transport Company, which shall be evidenced by this instrument, as
amended from time to time, and by each Participant's Plan Agreement.
1.10 "Plan Agreement" shall mean the form of written agreement, which is
entered into by and between the Company and a Participant.
Article II
Eligibility and Membership
--------------------------
2.0 Certain senior level Employees of the Company, as selected by the
Board or the Committee, and actively employed by the Company on or
after January 1, 1996, shall be eligible to participate in this
Plan. Eligible Employees may elect to participate in this Plan but
are not required to do so.
2.1 A Participant continues to be eligible to participate in this Plan
regardless of job classification.
2.2 As a condition of participation, each eligible Employee shall
complete, execute, and return to the Company a Plan Agreement in the
form approved by the Committee and will comply with such further
conditions as may be established by the Committee.
2.3 A Participant in this Plan waives his or her right to insurance
coverage under any group term insurance program sponsored by the
Company.
2.4 Once a Participant has terminated participation in this Plan, he or
she may only again become eligible to participate in this Plan as
determined by the Committee.
2.5 In the event that a Participant becomes disabled, as defined by the
Company's long-term disability program, and such disability
continues until the Normal Plan Agreement Termination Date, then
subject to Section 6.0(E), his or her Plan Agreement shall remain in
effect until the Normal Plan Agreement Termination Date, provided
that the Participant continues to make the required premium
contributions, as provided in Section 3.4. If the Participant
subsequently ceases to be disabled prior to the Normal Plan
Agreement Termination Date, and the Participant does not resume
active employment by the Company, the Participant's Plan Agreement
shall terminate.
2<PAGE>
Article III
Procurement of Insurance Policy
-------------------------------
3.0 The Company and a Participant shall apply to the Insurer for an
Insurance Policy on such Participant's life in the amount approved
by the Company. The Participant shall:
(A) furnish such information as the Insurer may require,
(B) take such physical examinations as may be requested by the
Insurer, and
(C) do any other act to comply with the underwriting and policy
issuance requirements which may reasonably be requested by the
Insurer.
3.1 If a Participant does not cooperate in the securing of such
insurance, or if he or she is for any reason unable to obtain
insurance in the specified amount on his or her life at standard
rates or rates otherwise acceptable to the Company, the Company
shall have no obligation to the Participant under this Plan and the
Participant's Plan Agreement shall terminate.
3.2 The sole source of benefits under this Plan to a Participant shall
be from the Insurance Policy in which the Participant has ownership
rights pursuant to his or her Plan Agreement.
3.3 The Company shall have no obligation of any nature whatsoever to a
Participant or his or her Beneficiary under this Plan or a
Participant's Plan Agreement, if the circumstances of the
Participant's death preclude payment of death proceeds under the
Insurance Policy.
3.4 The amount of annual premium attributable to or due from a
Participant hereunder for each year shall be an amount equal to the
Insurer's then current premium rate for annually renewable term
insurance for standard risks based on the Participant's age
multiplied by the Participant's amount of coverage. While a
Participant is actively employed by the Company, such required
premium attributable to the Participant shall be paid by the Company
and added to the Participant's annual W-2. A Participant not
actively employed by the Company, who is eligible to continue to
participate in this Plan pursuant to Sections 2.5 or 7.4 shall
either pay his or her annual premium amount directly to the Company,
or, if available, authorize the Company to withhold such payments
from post-retirement benefit payments to the extent permitted by
law. On or before the due date of each Insurance Policy premium
payable prior to termination of a Participant's Plan Agreement, or
within the grace period provided in the Insurance Policy, the
Company shall forward to the Insurer the full amount of the premium
then due.
3<PAGE>
Article IV
Incidents of Ownership
----------------------
4.0 A Participant shall retain and may exercise all rights of ownership
with respect to the Insurance Policy except as otherwise hereinafter
provided. These rights include, but are not limited to, (i) the
right to designate and change the Beneficiary of death proceeds
under the Insurance Policy, but only to the extent of the amount of
proceeds indicated on Schedule A attached to his or her Plan
Agreement, (ii) the right to elect any optional mode of settlement
with respect to such death proceeds, and (iii) the right to
surrender or cancel the Insurance Policy subject to the Company's
interest in the Insurance Policy.
4.1 A Participant shall execute a collateral assignment of the Insurance
Policy to the Company as security for any and all liabilities
incurred arising with respect to premium payments made by the
Company.
4.2 This collateral assignment of the Insurance Policy shall grant to
the Company the following specific rights:
(A) The limited right to obtain one or more loans or advances on
the Insurance Policy to the extent of the Company's interest
under the terms of this Plan and to pledge or assign the
Insurance Policy as security for such loans or advances.
(B) The right to determine how the dividends in each Insurance
Policy will be applied, whether to reduce premiums or to
purchase paid-up addition or otherwise.
(C) The right to collect from the Insurance Policy the Company's
interest in the net proceeds of the Insurance Policy when it
becomes a claim by death (as provided in Section 5.1), or
termination of a Plan Agreement (as provided in Section 6.1).
4.3 The Company, as assignee, shall upon request forward without
unreasonable delay to a Participant or a Participant's Beneficiary,
as appropriate, the Insurance Policy for endorsement of any
designation or change of Beneficiary or any election of an optional
mode of settlement.
4.4 While a Plan Agreement is in force, a Participant may not borrow
either directly or indirectly against his or her Insurance Policy or
pledge his or her interest in the Insurance Policy.
4<PAGE>
Article V
Death Proceeds Prior to Termination of Plan Agreement
-----------------------------------------------------
5.0 A Participant shall designate his or her Beneficiary to receive
death benefits under the Insurance Policy upon the death of the
Participant prior to the termination of his or her Plan Agreement,
but only to the extent of the amount of proceeds indicated on
Schedule A attached to his or her Plan Agreement. If more than one
Beneficiary is named, the shares and preference of each shall be
indicated. The Participant shall execute a Beneficiary designation
on the form approved by the Insurer. Such Beneficiary designation
shall not be terminated, altered or amended by the Company, without
the express written consent of the Participant. The Company and the
Participant shall take all action necessary to cause such
Beneficiary designation to conform to the provisions of this Plan
and the Participant's Plan Agreement.
5.1 Upon the death of a Participant prior to termination of his or her
Plan Agreement, death proceeds provided under the Insurance Policy
shall be allocated to the Participant's Beneficiary and the Company.
The Participant?s Beneficiary shall be entitled to death proceeds in
the amount indicated on Schedule A attached to his or her Plan
Agreement. The Company shall be entitled to the balance of death
proceeds in the Insurance Policy.
5.2 A Participant shall have the right at any time to submit a new
Beneficiary designation, on the form approved by the Insurer, to the
Company. The Company shall then promptly mail such form to the
Insurer.
5.3 No change in Beneficiary shall be effective until acknowledged in
writing by the Insurer. Thereafter, a copy of the written
acknowledgment shall be returned promptly by the Company to the
Participant.
5.4 Any payment made by the Insurer in accordance with the designation
of Beneficiary contained in the most recent Beneficiary designation
filed with the Insurer shall fully discharge the Insurer from all
further obligations with respect to such payment.
5.5 A Beneficiary may select any settlement option under the Insurance
Policy of his or her portion of the death benefit proceeds. The
Company agrees to co-execute and deliver to the Insurer the
necessary forms to select the requested settlement options.
5<PAGE>
Article VI
Termination of a Plan Agreement
-------------------------------
6.0 A Plan Agreement entered into pursuant to this Plan shall terminate
upon the occurrence of any of the following events prior to the
death of a Participant:
(A) The Normal Plan Agreement Termination Date specified in
Section 1.7.
(B) Termination of a Participant's employment with the Company
prior to the Normal Plan Agreement Termination Date, except as
otherwise provided in Sections 2.5 or 7.4.
(C) Total cessation of the Company's business or the final
adjudication of bankruptcy, receivership or dissolution of the
Company, unless the Company's business is continued by a
successor company or business entity.
(D) Termination of the Plan Agreement by a Participant upon
written notice to the Company or by reason of a Participant's
failure to pay his or her required premium contribution as
provided in Section 3.4.
(E) Termination of this Plan by the Board in its sole discretion,
as provided in Section 7.0
6.1 If a termination of a Participant's Plan Agreement occurs, the
obligation of the Company to make any premium payments shall cease
and the rights of the Company and the Participants shall be
controlled by Sections 6.2 and 6.3.
6.2 Upon termination of a Plan Agreement prior to the death of a
Participant, the Company shall have the unqualified right to the
lesser of (i) the amount of cumulative premiums paid with respect to
such Insurance Policy, net of any cumulative premiums paid by the
Participant pursuant to Section 3.4 or (ii) the cash surrender value
of the Insurance Policy, less in either case any Insurance Policy
indebtedness to the Insurer incurred by the Company and any unpaid
interest on such indebtedness. After the Company has exercised this
right, it will no longer have any interest in the Insurance Policy.
6.3 At the termination of a Plan Agreement and after the Company
exercises its right under Section 6.2, a Participant shall be
entitled to all rights under the Insurance Policy. The Participant
agrees that he or she will not deal with the Insurance Policy other
than in a manner expressly provided for in this Plan and his or her
Plan Agreement until after his or her Plan Agreement is terminated.
6<PAGE>
Article VII
Termination or Modification of the Plan; Change in Control of the Company
-------------------------------------------------------------------------
7.0 The Company reserves the right to terminate this Plan at any time,
based on a decision made solely by the Board.
7.1 The Company reserves the right to totally or partially amend, modify
or supplement this Plan at any time, based on a decision made solely
by the Board.
7.2 No action to terminate, amend, modify or supplement the Plan shall
be taken except upon 30 days' prior written notice to each affected
Participant.
7.3 If a termination of this Plan occurs, the obligation of the Company
to make any premium payments shall cease and the rights of the
Company and the Participants shall be controlled by Article VI.
7.4 If a participant has been participating in this Plan for less than
ten (10) years and there is a Change in Control of the Company, as
defined in Section 7.5, and there is then a termination of the
Participant's employment within two years of the Change in Control
as a result of which the Participant would be deprived of benefits
under the Plan, the Participant's Plan Agreement (and the Company
premium payment obligation under Sections 3.4) will continue in
effect for a period of ten (10) years from the effective date of the
Participant's Plan Agreement, unless modified or terminated by
mutual consent, provided that the Participant continues to make the
required premium contributions as provided in Section 3.4.
7.5 For purposes of Section 7.4, a Change in Control of the Company
shall occur when, within a twelve (12) month period, there is either
a sale or transfer of all or substantially all of the assets of the
Company, or a 50% change in ownership of the Company through a
merger, the sale of shares by the shareholders, or the issuance of
new stock to new shareholders. Excepted from this definition shall
be sales of stock among the existing shareholder group or to an
employee stock ownership trust or similar employee stock ownership
vehicle, a change in relative stock ownership in the existing
shareholder group by redemption, a public or secondary offering, and
transfers outright or intrust by gift or inheritance.
7<PAGE>
Article VIII
Retention of Services
---------------------
8.0 Nothing contained in this Plan or a Plan Agreement shall be
construed as a contract of employment between the Company and a
Participant, or as a right of any Participant to be continued in the
employment of the Company, or as a limitation of the right of the
Company to discharge any of its employees, with or without cause.
Article IX
Administration of the Plan
--------------------------
9.0 The sole right of construction, interpretation and general
administration of this Plan shall be vested in the Committee.
9.1 The Committee shall establish rules, forms and procedures for the
administration of this Plan from time to time, including a claims
procedure. The Committee shall have the exclusive right to decide
any and all matters arising in connection with the administration of
this Plan.
9.2 The Committee may appoint an administrator and delegate its
administrative and fiduciary responsibilities to such administrator.
Article X
Miscellaneous
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10.0 Any notice which shall or may be given under this Plan or a Plan
Agreement shall be in writing and shall be mailed by United States
Mail, postage pre-paid. If notice is to be given to the Company,
such notice shall be marked as indicated below and mailed to the
Company at its general offices:
Kenan Transport Company
Post Office Box 2729
Chapel Hill NC 27515-2729
If notice is to be given to a Participant, such notice shall be
addressed to the address shown on such Participant's Plan Agreement.
10.1 Any party may change the address to which notices shall be mailed
from by giving written notice of such new address.
8<PAGE>
10.2 This Plan shall be binding upon the Company and its successors and
assigns, and upon a Participant, his or her Beneficiary, heirs,
executors and administrators.
10.3 This Plan shall be construed and governed in all respects under and
by the laws of and in courts sitting in the State of North Carolina,
to the extent not pre-empted by Federal law. If any provision of
this Plan shall be held by a court of competent jurisdiction to be
invalid or unenforceable, the remaining provisions hereof shall
continue to be fully effective.
10.4 Headings and subheadings in this Plan are inserted for convenience
and reference only and do not constitute any part of this Plan.
10.5 This Plan may be executed in an original or any number of
counterparts, each of which shall constitute an original of one and
the same instrument.
Article XI
Effective Date
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11.0 The effective date of this Plan shall be April 1, 1996.
IN WITNESS WHEREOF, the Senior Mangers' Life Insurance Plan of Kenan
Transport Company, having been duly approved and adopted by the
Board, is executed on behalf of the Company as of the first day of
April, 1996.
Kenan Transport Company:
By: /s/ Lee P. Shaffer
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President
Attest:
By: /s/ William L. Boone
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Vice President - Finance
[Corporate Seal]
9
EXHIBIT 10.B
KENAN TRANSPORT COMPANY
Senior Management Severance Plan
WHEREAS, the Board of Directors of Kenan Transport Company (the
"Company") considers its senior management employees to be valuable assets
of the Company; and
WHEREAS, the Board of Directors believes that adoption of a
reasonable severance plan would have the effect of giving to such officers
a sense of security that would have a positive effect on their
performances on behalf of the Company; and
WHEREAS, this Board believes that a reasonable severance plan would
improve the ability of the Company to attract and maintain qualified
senior management; now, therefore, it is
RESOLVED, that this Board of Directors hereby adopts the following
Senior Management Severance Plan (the "Plan"):
1. PURPOSE. The purpose of the Plan is to attract and retain
competent senior management employees for the Company.
2. ELIGIBILITY. Any senior management employee of the Company
who is identified by the Board of Directors or its Compensation Committee
as a participant in the Plan and who enters into a Severance Agreement
substantially in the form attached to this Plan shall be a participant in
the Plan (a "Participant").
3. ENTITLEMENT. Any Participant who is terminated from his or
her employ by the Company "without cause" (as defined in Section 4) within
twenty-four months following a "change in control" of the Company, or who
shall have terminated his or her employment because of a "change in
employment conditions" (as defined in Section 5) within twenty-four months
following a "change in control," shall be entitled to receive a severance
payment in an amount equal to his or her average base salary for the
immediately preceding three fiscal years of the Company (or such lesser
number of whole fiscal years as he or she shall have been in the employ of
the Company), multiplied by 2.0 (the "Severance Payment"). Upon
entitlement, the Severance Payment will be payable in cash or by certified
check within thirty (30) days following termination of the Participant's
employment. For purposes of this Agreement, a "change of control" shall
be deemed to have occurred upon the occurrence of any of the following
events:
(i) Any "person" (as such term is used in Sections 13(d) and
14(d)(2) of the Securities Exchange Act of 1934, as amended (the
"Exchange Act") but excluding any employee benefit plan of the
Company) becomes after the Effective Date of the Plan the
1<PAGE>
"beneficial owner" (as defined in Rule 13d-3 under the Exchange
Act), directly or indirectly, of securities of the Company
representing 50% or more of the combined voting power of the
Company's outstanding securities then entitled ordinarily (and apart
from rights accruing under special circumstances) to vote for the
election of directors; or
(ii) Individuals who are "Continuing Directors" (as
hereinafter defined) cease for any reason to constitute at least a
majority of the Board of Directors; or
(iii) The Board of Directors shall approve a sale of all or
substantially all of the assets of the Company; or
(iv) The Board of Directors shall approve any merger,
consolidation, or like business combination or reorganization of the
Company the consummation of which would result in the occurrence of
any event described in clause (i) or (ii) above.
For purposes of the foregoing, "Continuing Directors" shall mean (a)
the directors of the Company in office on the date of the Severance
Agreement between the Company and the Participant and (b) any successor to
any such director (and any additional director) who after the date of the
relevant Severance Agreement was nominated or selected by a majority of
the Continuing Directors in office at the time of his or her nomination or
selection.
Notwithstanding anything to the contrary contained herein, in the
event that any portion of the Severance Payment received or to be received
by a Participant, together with any other payments received by him or her,
whether paid or payable pursuant to the terms of this Plan or any other
plan, arrangement or agreement with the Company or any other person or
entity, would not be deductible in whole or in part by the Company in the
calculation of its federal income tax by reason of Section 280G of the
Internal Revenue Code or would cause, either directly or indirectly, an
"excess parachute payment" to exist within the meaning of said Section
280G, the Severance Payment payable shall be reduced until no portion of
the Severance Payment would fail to be deductible by reason of being an
"excess parachute payment." In the event that any dispute arises as to
whether an "excess parachute payment" exists, the appropriate calculations
shall be made by the Company's regularly employed independent public
auditors and delivered to the Participant in writing within 30 days
following the date for payment of the Severance Payment, and the Company
will warrant to the Participant the accuracy of the calculations and the
information on which they are based.
4. DEFINITION OF "WITHOUT CAUSE." Termination of the
Participant's employ by the Company following a "change in control" for
any reason other than one of the following shall be deemed to be
termination "without cause": (i) continued neglect of duties for which he
2<PAGE>
or she was employed after receipt of written notice thereof from the Board
of Directors or its Compensation Committee or from the President of the
Company, (ii) continued insubordination after receipt of a written warning
with respect thereto, (iii) misconduct involving moral turpitude in the
performance of duties for which employed, including, without limitation,
the commission of fraud, misappropriation or embezzlement by the
Participant, (iv) the Participant's being accused of committing any felony
for which he or she is indicted, or (v) disability of the Participant,
whether mental or physical, which renders him or her substantially unable
to render the services for which he or she is employed for more than 90
days (in which event the Participant shall be entitled to the benefits of
any applicable employee benefit plan).
5. CHANGE IN EMPLOYMENT CONDITIONS. The Participant shall be
deemed to have had a "change in employment conditions" upon the
occurrence, within twenty-four months following a "change in control" of
the Company, without the consent of the Participant, of any one of the
following events: (a) his or her base salary is reduced, below that in
existence immediately prior to the occurrence of the "change in control,"
or (b) the Participant is required to change his or her residence or
principal place of business from Chapel Hill, North Carolina, or such
other location as shall be his or her residence or principal place of
business immediately prior to the "change in control."
6. COVENANTS RELATING TO COMPETITION. Participation in the Plan
is conditioned upon the Participant's agreement, which agreement shall be
confirmed by his or her entering into the Severance Agreement that during
the term of his or her employment with the Company and for a period of one
year following the termination of such employment:
(a) He or she will not, directly or indirectly, influence or
attempt to influence any customer of the Company to discontinue its
use of the Company's services or to divert such business to any
other person, firm or corporation;
(b) He or she will not, directly or indirectly, interfere
with, disrupt or attempt to disrupt the relationship, contractual or
otherwise, between the Company and any of its respective suppliers,
principals, distributors, lessors or licensors; and
(c) He or she will not, directly or indirectly, solicit any
employee of the Company, whose base annual salary at the time of the
Participant's termination was $30,000 or more, to work for any
person, firm or corporation.
7. EMPLOYMENT RIGHTS. Neither the adoption of this Plan nor the
execution by the Company of a Severance Agreement shall be deemed to
confer upon any Participant the right to continued employment with the
Company or to interfere in any way with the right of the Company to
terminate the employment of any employee at any time.
3<PAGE>
8. BINDING EFFECT. This Plan shall be binding upon and enure to
the benefit of the Company and its successors and assigns, including any
company with which the Company shall merge or to which the Company shall
transfer all or substantially all of its assets.
9. AMENDMENT OR TERMINATION. This Plan may be amended or
terminated at any time by the Board of Directors of the Company, provided,
however, that no amendment or termination shall adversely affect the
rights of any Participant who shall have entered into a Severance
Agreement prior to the time of such amendment or termination without his
or her written consent.
10. EFFECTIVE DATE. The effective date of this Plan shall be May
5, 1997.
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