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, 1998
------------------
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
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(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
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(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
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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, 1998
-------------------------- --------------------------------
Common stock, no par value 2,421,562
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KENAN TRANSPORT COMPANY
INDEX
Page
------
Part I - Financial Information
Consolidated Balance Sheets as of June 30, 1998 and
December 31, 1997 1
Consolidated Statements of Income for the three
and six months ended June 30, 1998 and 1997 2
Consolidated Statements of Cash Flows for the
six months ended June 30, 1998 and 1997 3
Notes to Consolidated Financial Statements 4 - 5
Management's Discussion and Analysis of Financial
Condition and Results of Operations 6 - 7
Part II - Other Information
Item 4 - Submission of Matters to a Vote of
Security Holders 8
Item 5 - Other Information 8
Item 6 - Exhibits and Reports on Form 8-K 8
Signatures 9
Index to Exhibits 10
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PART I - FINANCIAL INFORMATION
KENAN TRANSPORT COMPANY
CONSOLIDATED BALANCE SHEETS
(Dollars in thousands)
June 30, December 31,
1998 1997
ASSETS (Unaudited) (Note 1)
- ---------------------------------------------------------------------
Current Assets
Cash and cash equivalents $ 2,375 $ 3,422
Accounts receivable 10,448 8,020
Operating supplies and parts 570 521
Prepayments -
Tires 1,580 1,471
Insurance, licenses and other 1,736 886
Deferred income taxes 2,396 1,747
- ---------------------------------------------------------------------
Total Current Assets 19,105 16,067
Operating Property
Land 3,464 3,464
Buildings and leasehold improvements 11,286 10,968
Revenue equipment 71,538 65,974
Other equipment 6,052 4,755
- ---------------------------------------------------------------------
92,340 85,161
Accumulated depreciation (34,438) (32,922)
- ---------------------------------------------------------------------
Net Operating Property 57,902 52,239
Intangible Assets 11,231 7,559
Other Assets 1,470 1,250
- ---------------------------------------------------------------------
$89,708 $77,115
=====================================================================
LIABILITIES AND STOCKHOLDERS' EQUITY
- ---------------------------------------------------------------------
Current Liabilities
Current maturities of long-term debt $ -- $ 500
Capital lease obligations 1,165 995
Accounts payable 3,416 2,517
Wages and employee benefits payable 8,003 6,641
Claims payable 3,791 3,553
Income taxes payable -- 108
- ---------------------------------------------------------------------
Total Current Liabilities 16,375 14,314
Long-term Debt 10,000 2,000
Capital Lease Obligations 1,011 2,075
Deferred Income Taxes 10,734 9,358
Stockholders' Equity
Common stock; no par; 20,000,000 shares
authorized; 2,421,562 and 2,394,780
shares issued and outstanding 4,400 3,096
Retained earnings 48,258 46,272
Deferred compensation (1,070) --
- ---------------------------------------------------------------------
51,588 49,368
- ---------------------------------------------------------------------
$89,708 $77,115
=====================================================================
The Notes to Consolidated Financial Statements are an integral part of
these balance sheets.
Page 1<PAGE>
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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,
-------------------- ---------------------
1998 1997 1998 1997
- ----------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Operating Revenue $34,107 $17,233 $62,588 $34,979
Operating Expenses
Wages and employee benefits 17,452 8,806 31,729 17,756
Fuel and other operating expenses 7,236 3,696 13,315 7,428
Depreciation 2,608 1,647 5,115 3,302
Taxes and licenses 1,822 1,062 3,475 2,156
Claims and insurance 1,301 663 2,312 1,307
Equipment rents 1,510 129 2,433 259
- ----------------------------------------------------------------------------------------
31,929 16,003 58,379 32,208
- ----------------------------------------------------------------------------------------
Operating Income 2,178 1,230 4,209 2,771
Interest expense (229) (5) (367) (10)
Interest income and other expenses, net 31 76 64 127
- ----------------------------------------------------------------------------------------
Income before Provision for Income Taxes 1,980 1,301 3,906 2,888
Provision for income taxes 826 491 1,577 1,102
- ----------------------------------------------------------------------------------------
Net Income $ 1,154 $ 810 $ 2,329 $ 1,786
========================================================================================
Basic and diluted earnings per share .48 $ .34 $ .97 $ .75
Operating ratio 93.6% 92.9% 93.3% 92.1%
Dividends paid per share $ .0700 $ .0675 $ .1400 $ .1350
The Notes to Consolidated Financial Statements are an integral part of these statements.
</TABLE>
Page 2
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KENAN TRANSPORT COMPANY
CONSOLIDATED STATEMENTS OF CASH FLOWS
For the Six Months Ended June 30, 1998 and 1997
(Unaudited and dollars in thousands)
1998 1997
- ----------------------------------------------------------------------
Cash Provided by (Applied to):
Operations $ 6,045 $ 4,523
Purchases of operating property, net (5,101) (4,190)
Business acquisition (7,879) --
Debt and capital lease obligations, net 6,231 --
Dividends (343) (329)
- ----------------------------------------------------------------------
Net Increase (Decrease) in Cash
and Cash Equivalents (1,047) 4
Beginning Cash and Cash Equivalents 3,422 11,181
- ----------------------------------------------------------------------
Ending Cash and Cash Equivalents $ 2,375 $11,185
======================================================================
The Notes to Consolidated Financial Statements are an integral part of
these statements.
Page 3
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KENAN TRANSPORT COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
1. Basis of Presentation
- --------------------------
The accompanying consolidated financial statements are prepared in
conformity with generally accepted accounting principles and include the
accounts of Kenan Transport Company and its wholly-owned subsidiary,
Petro-Chemical Transport, Inc. All significant intercompany accounts and
transactions have been eliminated.
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, 1997 has been taken from the
audited financial statements at that date.
The results of operations for the three and six months ended June 30,
1998 and 1997 are not necessarily indicative of the results to be
expected for the full year.
2. Business Acquisitions
- --------------------------
On December 1, 1997, the Company purchased the majority of the
transportation assets of Transport South, Inc. for cash and entered into
a long-term contract to provide transportation services to its parent,
RaceTrac Petroleum, Inc. in the southeastern United States and Texas.
On February 28, 1998, the Company acquired 100% of the outstanding
stock of Petro-Chemical Transport, Inc., a wholly owned subsidiary of
CITGO Petroleum Corporation. Petro-Chemical Transport, Inc. is a tank
truck carrier serving the petroleum industry in the Southeast, Midwest
and on the West Coast. The acquisition, net of cash acquired, required a
cash investment totaling $7,879,000. The Company financed the acquisition
through its line of credit facility.
The acquisitions have been accounted for using the purchase method of
accounting. The accompanying consolidated statements of income include
the results of operations of Transport South, Inc. for the six months
ended June 30, 1998 and the results of operations of Petro-Chemical
Transport, Inc. for the four months ended June 30, 1998. The purchased
assets and liabilities assumed have been recorded in the Company's
financial statements at their estimated fair market values. The excess of
the purchase cost over the fair value of net assets acquired in the
acquisitions (goodwill) is included in intangible assets in the
accompanying consolidated balance sheets and is being amortized over 20
years on a straight-line basis.
The following unaudited pro forma summary presents the consolidated
results of operations of the Company as if the acquisitions had occurred
as of January 1, 1998 and 1997. The pro forma information does not
purport to be indicative of what would have occurred had the acquisitions
been made as of those dates or of results that may occur in the future
(dollars in thousands except per share amounts).
Page 4<PAGE>
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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - continued
(Unaudited)
Pro-Forma Information (unaudited)
-------------------------------------------------------------------
1998 1997
------- -------
Three Months Ended June 30,
---------------------------
Revenue $34,107 $33,919
Net income 1,154 1,329
Basic and diluted earnings per share .48 .56
Six Months Ended June 30,
-------------------------
Revenue $69,267 $68,351
Net income 2,535 2,825
Basic and diluted earnings per share 1.05 1.18
3. Long-Term Debt
- -------------------
On February 13, 1998, the Company negotiated an unsecured $20,000,000
Reducing Line of Credit Facility with a bank. The agreement replaces the
Company's previous $7,000,000 line of credit. The line reduces $500,000
per quarter beginning July 1, 1998 to a minimum line of $10,000,000. The
agreement matures in March 2003. Interest under the agreement is at
variable rates based, at the Company's option, on the Bank's Prime Rate
or LIBOR. At June 30, 1998, the Company was in compliance with the
agreement's financial and nonfinancial covenants.
During the first quarter, the Company borrowed $7,500,000 to finance
its acquisition of Petro-Chemical Transport, Inc. At June 30, 1998, the
Company had $10,000,000 outstanding under the new credit facility. There
was no outstanding debt at June 30, 1997.
4. Long-Term Incentive Plan
- ----------------------------
On May 4, 1998, shareholders approved the Company's 1998 Long-Term
Incentive Plan (the "Plan"). The Plan provides for grant Awards,
including stock options and restricted stock, of up to 450,000 shares of
Common Stock.
During the first quarter of 1998, 328,900 nonqualified stock options
and 21,100 shares of restricted stock were awarded to key employees under
the Plan. The stock options have an exercise price equal to or above the
fair value of the shares at the date of the grant and have a ten-year
term with vesting periods of one to five years from the date of the
grant. Restricted stock awards become free of restrictions ratably over a
five year period.
The Company applies Accounting Principles Board Opinion No. 25,
"Accounting for Stock Issued to Employees", in accounting for its stock
option and restricted stock awards. Compensation expense under the Plan
totaled $37,000 for the second quarter of 1998.
Page 5 <PAGE>
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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 1998 was $34,107,000 compared to
$17,233,000 for the second quarter of 1997. Net income was $1,154,000
compared to $810,000 in 1997. Earnings per share were $.48 compared to
$.34 during the same period last year. Miles operated increased 77% from
the second quarter of 1997.
Revenue for the first half of 1998 was $62,588,000 compared to
$34,979,000 for 1997. Net income was $2,329,000 compared to $1,786,000 in
1997. Earnings per share were $.97 compared to $.75 during the same
period last year. Miles operated increased 66% from the first half of
1997.
Revenue for the quarter increased 98% as a result of the impact of
two recent acquisitions. On December 1, 1997, the Company purchased the
majority of the transportation assets of Transport South, Inc. of Smyrna,
Georgia in a cash transaction. On February 28, 1998, the Company
purchased the stock of Petro-Chemical Transport, Inc., the trucking
subsidiary of CITGO Petroleum Corporation in a cash transaction. Revenue
attributed to the business acquisitions was approximately $17,000,000 in
the second quarter. Integration of the acquired companies into Kenan
Transport Company is progressing satisfactorily.
Operating expenses for the second quarter of 1998 totaled $31,929,000
an increase of $15,926,000 and 100% over 1997 levels. The increase in
operating expenses was primarily the result of the Company's two recent
acquisitions. Lower fuel prices in 1998 were offset by increases in
driver pay, outside maintenance costs and equipment rents. The Company's
operating ratio for the quarter was 93.6% compared to 92.9% in 1997.
Operating expenses for the first half of 1998 totaled $58,379,000, an
increase of $26,171,000 and 81% over the first six months of 1997. The
operating ratio increased to 93.3% from 92.1% in 1997.
The average balance of outstanding debt and capital lease obligations
during the second quarter of 1998 was approximately $12,700,000. There
was no outstanding debt during the second quarter of 1997. Interest
expense was $229,000 for the second quarter of 1998 compared to $5,000 in
1997.
Page 6<PAGE>
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MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
- continued -
Liquidity and Capital Resources
- -------------------------------
At June 30, 1998, cash and cash equivalents totaled $2,375,000, a
decrease of $1,047,000 from the end of 1997. Working capital of
$2,730,000 was up $977,000 from year-end 1997, and the current ratios
were 1.17 and 1.12, respectively. At June 30, 1998, the Company had
outstanding debt and capital lease obligations totaling $12,176,000
compared to $5,570,000 at December 31, 1997.
Cash and cash equivalents decreased $8,810,000 from the June 30, 1997
balance as a result of the Company's acquisition of the assets of
Transport South, Inc. during the fourth quarter of 1997 and the stock of
Petro-Chemical Transport, Inc. during the first quarter of 1998.
The Company has third quarter cash commitments of approximately
$2,750,000 for tractor and trailer replacements. Management believes that
cash flows from operations and the Company's bank line of credit will be
sufficient to fund these planned expenditures as well as 1998 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.
Forward-Looking Statements
- --------------------------
Statements contained in and preceding management's discussion and
analysis, that are not purely historical, are forward-looking statements
within the meaning of the Private Securities Litigation Reform Act of
1995, including statements regarding the Company's expectations, hopes,
beliefs and intentions on strategies regarding the future. It is
important to note that the Company's actual future results could differ
materially from those projected in such forward-looking statements
because of a number of factors, including but not limited to, inflation,
adverse changes in demand for trucking services, availability of drivers
and fuel prices.
Page 7<PAGE>
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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 4, 1998 for the purpose of electing a board of directors,
considering approval of the Company's 1998 Long-Term Incentive
Plan and conducting such other business that properly 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
For Withheld
--------- --------
Thomas S. Kenan, III 1,868,363 27,325
Owen G. Kenan 1,868,163 27,525
Lee P. Shaffer 1,868,363 27,325
William C. Friday 1,868,263 27,425
William O. McCoy 1,868,363 27,325
Paul J. Rizzo 1,868,163 27,525
Braxton Schell 1,868,263 27,425
Kenneth G. Younger 1,868,263 27,425
(2) The proposal to approve the Company's 1998 Long-Term
Incentive Plan as described in the proxy statement was
approved with the following vote:
Shares voted for: 1,673,268
Shares voted against: 104,354
Shares abstaining: 4,110
Shares not voted: 113,956
Item 5. Other Information
- ------- -----------------
Unless notice of a matter to be presented by a shareholder
of the Company at the next Annual Meeting of Shareholders is
received at the Company's principal executive offices on or before
February 13, 1999, management's proxies for the meeting conferring
discretionary authority may be voted with respect to the matter
without indicating in the proxy statement how management intends
to exercise its discretion.
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) The following reports on Form 8-K have been filed during the
quarter ended June 30, 1998:
Financial statement schedules and pro forma financial information
relating to the Registrant's acquisition of Petro-Chemical, Inc.
was filed on Form 8K/A, May 13, 1998.
Page 8<PAGE>
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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 14, 1998 BY: /s/ William L. Boone
----------------------------
Vice President-Finance and
Chief Financial Officer
Page 9
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INDEX TO EXHIBITS
Exhibits filed as part of Part I of this report are listed below:
Exhibit
Number Description
- --------- ----------------------------------------------------------
11 Statement Re Computation of Per Share Earnings
27 Financial Data Schedule for the 2nd Quarter 10-Q
Exhibits filed as part of Part II of this report are listed below:
Exhibit
Number Description
- --------- ----------------------------------------------------------
10 The 1998 Long-Term Incentive Plan, adopted by the
Registrant's Board of Directors on February 13, 1998 and
approved by shareholders on May 4, 1998 at the Annual
Meeting.
Page 10
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EXHIBIT 10
KENAN TRANSPORT COMPANY
1998 LONG-TERM INCENTIVE PLAN
<PAGE>
TABLE OF CONTENTS
ARTICLE 1. PURPOSE. . . . . . . . . . . . . . . . . . . . . . . . . . .1
1.1 Purpose. . . . . . . . . . . . . . . . . . . . . . . . . . .1
1.2 Grant of Awards. . . . . . . . . . . . . . . . . . . . . . .1
ARTICLE 2. DEFINITIONS. . . . . . . . . . . . . . . . . . . . . . . . .1
2.1 "Award". . . . . . . . . . . . . . . . . . . . . . . . . . .1
2.2 "Board" . . . . . . . . . . . . . . . . . . . . . . . . . .1
2.3 "Code" . . . . . . . . . . . . . . . . . . . . . . . . . . .1
2.4 "Committee". . . . . . . . . . . . . . . . . . . . . . . . .1
2.5 "Non-Employee Director". . . . . . . . . . . . . . . . . . .1
2.6 "Fair Market Value". . . . . . . . . . . . . . . . . . . . .1
2.7 "Grantee". . . . . . . . . . . . . . . . . . . . . . . . . .2
2.8 "Incentive Stock Option" . . . . . . . . . . . . . . . . . .2
2.9 "Nontandem Stock Appreciation Right" . . . . . . . . . . . .2
2.10 "Nonqualified Stock Option". . . . . . . . . . . . . . . . .2
2.11 "Performance-based Compensation Award" . . . . . . . . . . .2
2.12 "Performance Shares" . . . . . . . . . . . . . . . . . . . .2
2.13 "Restricted Stock" . . . . . . . . . . . . . . . . . . . . .2
2.14 "Stock". . . . . . . . . . . . . . . . . . . . . . . . . . .2
2.15 "Stock Appreciation Right" . . . . . . . . . . . . . . . . .2
2.16 "Stock Option" . . . . . . . . . . . . . . . . . . . . . . .2
2.17 "Subsidiary" . . . . . . . . . . . . . . . . . . . . . . . .2
2.18 "Tandem Stock Appreciation Right". . . . . . . . . . . . . .3
ARTICLE 3. ADMINISTRATION . . . . . . . . . . . . . . . . . . . . . . .3
3.1 Committee. . . . . . . . . . . . . . . . . . . . . . . . . .3
3.2 Authority of Committee . . . . . . . . . . . . . . . . . . .3
3.3 Liability; Indemnification . . . . . . . . . . . . . . . . .3
ARTICLE 4. STOCK SUBJECT TO PLAN. . . . . . . . . . . . . . . . . . . .3
4.1 Maximum Number of Shares Subject to the Plan . . . . . . . .3
4.2 Maximum Number of Shares For Any Individual. . . . . . . . .4
4.3 Reservation of Shares of Common Stock. . . . . . . . . . . .4
ARTICLE 5. ELIGIBILITY. . . . . . . . . . . . . . . . . . . . . . . . .4
ARTICLE 6. STOCK OPTIONS. . . . . . . . . . . . . . . . . . . . . . . .5
6.1 Grant of Stock Options.. . . . . . . . . . . . . . . . . . .5
6.2 Stock Option Terms and Conditions. . . . . . . . . . . . . .5
6.3 Purchase Price . . . . . . . . . . . . . . . . . . . . . . .5
6.4 Duration of Stock Options. . . . . . . . . . . . . . . . . .5
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6.5 Exercise of Stock Options. . . . . . . . . . . . . . . . . .5
6.6 Written Notice Required. . . . . . . . . . . . . . . . . . .6
6.7 Maximum Amount of Incentive Stock Options in Any Calendar
Year . . . . . . . . . . . . . . . . . . . . . . . . . . . .7
6.8 Cancellation of Stock Appreciation Rights. . . . . . . . . .7
ARTICLE 7. STOCK APPRECIATION RIGHTS. . . . . . . . . . . . . . . . . .7
7.1 Grant of Stock Appreciation Rights . . . . . . . . . . . . .7
7.2 Stock Appreciation Rights Terms and Conditions . . . . . . .7
7.3 Tandem Stock Appreciation Rights . . . . . . . . . . . . . .7
7.3.1 Award of Tandem Stock Appreciation Rights. . . . . . .7
7.3.2 Limitations on Exercise of Tandem Stock Appreciation
Rights . . . . . . . . . . . . . . . . . . . . . . . .8
7.3.3 Surrender or Exchange of Tandem Stock Appreciation
Rights . . . . . . . . . . . . . . . . . . . . . . . .8
7.4 Nontandem Stock Appreciation Rights. . . . . . . . . . . . .8
7.4.1 Award of Nontandem Stock Appreciation Rights . . . . .8
7.4.2 Exercise of Nontandem Stock Appreciation Rights. . . .8
7.5 Settlement of Stock Appreciation Rights. . . . . . . . . . .8
7.6 Cash Settlement. . . . . . . . . . . . . . . . . . . . . . .9
7.7 Written Notice Required. . . . . . . . . . . . . . . . . . .9
ARTICLE 8. RESTRICTED STOCK . . . . . . . . . . . . . . . . . . . . . .9
8.1 Grant of Restricted Stock. . . . . . . . . . . . . . . . . .9
8.2 Restrictions and Conditions. . . . . . . . . . . . . . . . .9
8.3 Duration of Awards . . . . . . . . . . . . . . . . . . . . .9
8.4 Restricted Stock Certificates. . . . . . . . . . . . . . . 10
8.5 Rights of Holders of Restricted Stock. . . . . . . . . . . 10
8.6 Delivery of Restricted Stock . . . . . . . . . . . . . . . 10
ARTICLE 9. PERFORMANCE SHARES . . . . . . . . . . . . . . . . . . . . 10
9.1 Grant of Performance Shares. . . . . . . . . . . . . . . . 10
9.2 Terms and Conditions . . . . . . . . . . . . . . . . . . . 10
9.3 Cash in Lieu of Stock. . . . . . . . . . . . . . . . . . . 11
9.4 Performance Objective Period . . . . . . . . . . . . . . . 11
ARTICLE 10. PERFORMANCE-BASED COMPENSATION AWARDS . . . . . . . . . . 11
10.1 Awards . . . . . . . . . . . . . . . . . . . . . . . . . . 11
10.2 Performance Goals. . . . . . . . . . . . . . . . . . . . . 11
10.3 Limitations of Shares. . . . . . . . . . . . . . . . . . . 11
ARTICLE 11. TERMINATION OF EMPLOYMENT . . . . . . . . . . . . . . . . 12
11.1 Termination of Employment. . . . . . . . . . . . . . . . . 12
11.2 Disability; Normal Retirement. . . . . . . . . . . . . . 12
11.3 Death of Grantee . . . . . . . . . . . . . . . . . . . . . 12
11.4 Termination as Nonemployee Director of the Company . . . . 12
11.5 Extent of Exercise . . . . . . . . . . . . . . . . . . . . 12
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ARTICLE 12. TRANSFER RESTRICTIONS . . . . . . . . . . . . . . . . . . 13
ARTICLE 13. ADJUSTMENTS . . . . . . . . . . . . . . . . . . . . . . . 13
ARTICLE 14. MISCELLANEOUS PROVISIONS. . . . . . . . . . . . . . . . . 13
14.1 Tax Withholding. . . . . . . . . . . . . . . . . . . . . . 13
14.2 Termination, Amendment of Plan . . . . . . . . . . . . . . 14
14.3 Prior Rights and Obligations . . . . . . . . . . . . . . . 14
14.4 Employment . . . . . . . . . . . . . . . . . . . . . . . . 14
14.5 Securities Laws. . . . . . . . . . . . . . . . . . . . . . 14
14.6 Compliance with Section 16(b). . . . . . . . . . . . . . 14
14.7 Reorganization . . . . . . . . . . . . . . . . . . . . . . 15
14.7.1 . . . . . . . . . . . . . . . . . . . . . . . . . . 15
14.7.2 . . . . . . . . . . . . . . . . . . . . . . . . . . 15
14.7.3 . . . . . . . . . . . . . . . . . . . . . . . . . . 15
14.7.4 . . . . . . . . . . . . . . . . . . . . . . . . . . 15
14.8 Effective Date and Term of Plan. . . . . . . . . . . . . . 16
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KENAN TRANSPORT COMPANY
1998 LONG-TERM INCENTIVE PLAN
ARTICLE 1.
PURPOSE
1.1 Purpose. This Kenan Transport Company 1998 Long-Term
Incentive Plan (the "Plan") is intended to induce those persons who are in
a position to contribute materially to the success of Kenan Transport
Company (the "Company") to remain with the Company, to offer them rewards
in recognition of their contributions to the Company's progress and to
offer them incentives to continue to promote the best interests of the
Company.
1.2 Grant of Awards. In order to maintain flexibility in the
grant of incentive benefits, the Plan allows for the grant of Stock
Options (both Incentive Stock Options and Nonqualified Stock Options),
Stock Appreciation Rights, Restricted Stock and Performance Shares.
ARTICLE 2.
DEFINITIONS
2.1 "Award" means any grant of Stock Options, Stock Appreciation
Rights, Restricted Stock or Performance Shares authorized by the Committee
under this Plan.
2.2 "Board" means the Board of Directors of the Company.
2.3 "Code" means the Internal Revenue Code of 1986, as amended.
2.4 "Committee" means the Committee appointed by the Board
pursuant to Article 3 of the Plan for the purpose of administering the
Plan.
2.5 "Non-Employee Director" means a person who is both a
"Non-Employee Director" within the meaning of Rule 16b-3 as promulgated by
the Securities and Exchange Commission under the Securities Exchange Act
of 1934 and an "outside director" within the meaning of Section 162(m) of
the Code and the regulations promulgated thereunder.
2.6 "Fair Market Value" means, as of a given date, the closing
sales price per share of the Company's Stock, as reported on the national
securities exchange on which the Stock is principally traded on the day
preceding the day (or the most recent trading day preceding the day) on
which the stock is to be valued. For purposes of this section,
the term "national securities exchange" shall include the National
Association of Securities Dealers Automated Quotation System. If at the
time the determination of Fair Market Value is made the Stock is not
admitted to trading on a national securities exchange for which sales
prices are regularly
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reported, Fair Market Value shall be determined by the Committee on the
basis of such factors as it deems appropriate; provided, however, that
Fair Market Value shall be determined without regard to any restriction
other than a restriction which, by its terms, shall never lapse.
2.7 "Grantee" means a person who receives an Award pursuant to the
Plan.
2.8 "Incentive Stock Option" means any Stock Option designated as
an Incentive Stock Option within the meaning of Section 422 of Code. Any
Stock Option so designated shall be construed to comply in every respect
with Section 422 of the Code.
2.9 "Nontandem Stock Appreciation Right" means any Stock
Appreciation Right granted pursuant to Article 7 of the Plan in a manner
not related to a grant of a Stock Option.
2.10 "Nonqualified Stock Option" means any Stock Option granted
pursuant to the Plan that is not designated as being an Incentive Stock
Option under Section 422 of the Code. Any Stock Option so designated
shall not be subject to Section 422 of the Code.
2.11 "Performance-based Compensation Award" means an Award
described in Article 11 of the Plan.
2.12 "Performance Shares" means shares of Stock that are subject to
an Award pursuant to Article 9 of the Plan.
2.13 "Restricted Stock" means shares of Stock that are issued to a
Grantee subject to restrictions under Article 8 of the Plan.
2.14 "Stock" means the Common Stock, without par value, of the
Company or any successor class of stock.
2.15 "Stock Appreciation Right" means the right to receive,
pursuant to an Award granted pursuant to Article 7 of the Plan, shares of
Stock equal in value to the excess, at the time the right is exercised, of
the Fair Market Value of the number of shares subject to the Award over
the Fair Market Value of such shares at the time the Award was granted. A
Stock Appreciation Right may be a Tandem Stock Appreciation
Right or a Nontandem Stock Appreciation Right.
2.16 "Stock Option" means any Incentive Stock Option or
Nonqualified Stock Option to purchase shares of Stock granted to any
Grantee pursuant to Article 6 of the Plan.
2.17 "Subsidiary" means any person, firm, partnership, limited
liability company or corporation at least 50% of the total combined voting
power of which is owned directly or indirectly by the Company.
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2.18 "Tandem Stock Appreciation Right" means any Stock Appreciation
Right granted pursuant to Article 7 of the Plan in conjunction with all or
part of any Stock Option granted under the Plan pursuant to a Stock Option
agreement which states that the Grantee may, in lieu of exercising the
Stock Option, surrender the Stock Option and receive shares of Stock equal
in value to the Stock Appreciation Right.
ARTICLE 3.
ADMINISTRATION
3.1 Committee. The Plan shall be administered by a Committee
appointed by the Board consisting of not less than two members, all of
whom must be Non-Employee Directors. Any action of the Committee shall be
taken by majority vote at a meeting called in accordance with procedures
adopted by the Committee or by the unanimous written consent of the
Committee.
3.2 Authority of Committee. Subject to the other provisions of
this Plan, and with a view to effecting its purpose, the Committee shall
have sole authority in its absolute discretion: (i) to grant Awards under
the Plan; (ii) to determine the officers, employees or directors to whom
Awards shall be granted under the Plan; (iii) to determine the number of
shares of Stock subject to any Award under the Plan; (iv) to establish the
price, duration, performance measures and any other term, restriction or
condition of an Award under the Plan; (v) to accelerate the time at which
any outstanding Stock Option or Stock Appreciation Right may be exercised
or the time when restrictions or conditions on any other Awards will
lapse; (vi) to construe and interpret the Plan; (vii) to prescribe, amend,
and rescind rules and regulations relating to the Plan; and (viii) to make
any other determinations necessary or advisable for the administration of
the Plan and to do everything necessary or appropriate to administer the
Plan.
3.3 Liability; Indemnification. No member of the Committee or the
Board shall be liable for any action or determination made in good faith
with respect to the Plan or to any Award granted thereunder. In addition,
directors and members of the Committee shall be eligible for
indemnification from the Company, pursuant to the Company's Bylaws, with
respect to any matter arising under the Plan.
ARTICLE 4.
STOCK SUBJECT TO PLAN
4.1 Maximum Number of Shares Subject to the Plan. The maximum
aggregate number of shares of Stock available pursuant to the Plan,
subject to adjustment as provided in Article 14 hereof, shall be 450,000
shares of the Stock. If any Stock Option granted pursuant to the Plan
expires or terminates for any reason before it shall have been exercised
in full, the unpurchased shares subject to such expired or terminated
Stock Option shall again be available for the purposes of the Plan, except
that any unpurchased shares that have been subject to a
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Stock Option in connection with which a Tandem Stock Appreciation Right
has also been granted shall be reduced by the number of shares issued in
connection with the Tandem Stock Appreciation Right. If any Nontandem
Stock Appreciation Right granted pursuant to the Plan expires or
terminates for any reason before all shares subject thereto have been
issued, the unissued shares associated with such Nontandem Stock
Appreciation Rights shall again be available for the purposes of the Plan.
If any shares issued pursuant to a Restricted Stock Award shall be
forfeited, such shares shall again be available for the purposes of the
Plan. If a Performance Share Award terminates for any reason before all
of the shares associated with such Performance Share Award shall have been
issued pursuant thereto, such unissued shares shall again be available for
the purposes of the Plan. If any Stock Appreciation Right or Performance
Shares are paid in cash rather than in shares, in whole or in part, the
number of shares of Stock available under the Plan will be reduced by the
number of shares to which the cash payment relates.
4.2 Maximum Number of Shares For Any Individual. Notwithstanding
any other term or provision of the Plan, the aggregate number of shares of
Stock with respect to which Awards under the Plan may be granted to any
individual shall not exceed 250,000 shares of Stock of the Company. If a
Stock Option is canceled, terminated or repriced, the canceled, terminated
or repriced Stock Option shall be counted against the maximum number of
shares for which Awards may be granted to such Grantee. If cash is paid
to a Grantee in settlement of any Stock Appreciation Right or Performance
Shares Award, the number of shares to which the cash payment relates shall
be counted against the maximum number of shares for which Awards may be
granted to such Grantee.
4.3 Reservation of Shares of Common Stock. The Company, during
the term of this Plan, will at all times reserve and keep available such
number of shares of the Stock as shall be sufficient to satisfy the
requirements of the Plan. In addition, the Company will from time to
time, as is necessary to accomplish the purposes of this Plan, seek to
obtain from any regulatory agency having jurisdiction any requisite
authority in order to issue and sell shares of Stock hereunder. The
inability of the Company to obtain from any regulatory agency having
jurisdiction the authority deemed by the Company's counsel to be necessary
to the lawful issuance and sale of any shares of the Stock hereunder shall
relieve the Company of any liability in respect of the nonissuance or sale
of the Stock as to which the requisite authority shall not have been
obtained.
ARTICLE 5.
ELIGIBILITY
Awards under the Plan may be granted to persons identified by the
Committee who are executive, supervisory and other key employees, officers
or directors of the Company or any Subsidiary. Notwithstanding the
foregoing, Incentive Stock Options to purchase shares of Stock may be
granted pursuant to the Plan only to executive or supervisory employees of
the Company or a Subsidiary that is a corporation, including directors and
officers who are also employees of the
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Company or a Subsidiary that is a corporation.
ARTICLE 6.
STOCK OPTIONS
6.1 Grant of Stock Options. The Committee may cause the Company
to grant Stock Options for the purchase of shares of Stock to Grantees
under the Plan in such amounts as the Committee, in its sole discretion,
shall determine. Such Stock Options may be granted either alone or in
addition to other Awards granted under the Plan. The Stock Options
granted under the Plan shall be designated as either: (i) Incentive Stock
Options or (ii) Nonqualified Stock Options.
6.2 Stock Option Terms and Conditions. Stock Options granted
under the Plan shall be evidenced by written agreements in such form as
the Committee may from time to time approve. The terms and conditions of
Stock Options granted under the Plan, including the satisfaction of
corporate or individual performance objectives and other vesting
standards, may differ one from another as the Committee shall, in its
discretion, determine, as long as all Stock Options granted under the Plan
satisfy the requirements of the Plan.
6.3 Purchase Price. The purchase price for shares acquired
pursuant to the exercise, in whole or in part, of any Stock Option shall
be determined by the Committee at the time of grant, subject to the
limitations set forth in this Section 6.3. In no event shall the purchase
price of any Stock Option be less than the Fair Market Value of the shares
at the time of the grant of the Stock Option; except that for any Grantee
who owns more than 10% of the combined voting power of all classes of
stock of the Company, the purchase price of any Incentive Stock Option
shall not be less than 110% of Fair Market Value. The applicable Stock
Option agreement may provide for adjustments to the purchase price, as the
Committee shall determine, provided that the purchase price shall never be
less than the initial purchase (except to the extent such adjustments are
pursuant to Article 13). The purchase price so determined shall also be
applicable in connection with the exercise of any Tandem Stock
Appreciation Right granted with respect to such Stock Option.
6.4 Duration of Stock Options. Each Stock Option and all rights
thereunder granted pursuant to the terms of the Plan shall expire ten
years from the date on which the Stock Option is granted; provided,
however, that no Incentive Stock Option granted to an employee who owns
more than 10% of the combined voting power of all classes of stock of the
Company may be exercisable after the date five years from the date of the
Award.
6.5 Exercise of Stock Options. Unless otherwise provided by the
applicable Stock Option agreement, each Stock Option shall be exercisable
as follows:
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Up to 20% of the total shares subject to the Stock Option on and at
any time after the first anniversary of the date of grant of the
Stock Option and prior to termination of the Option;
Up to 40% of the total shares subject to the Stock Option (including
any shares previously purchased under the Stock Option) on and at
any time after the second anniversary of the date of grant of the
Stock Option and prior to termination of the Option;
Up to 60% of the total shares subject to the Stock Option (including
any shares previously purchased under the Stock Option) on and at
any time after the third anniversary of the date of grant of the
Stock Option and prior to termination of the Option;
Up to 80% of the total shares subject to the Stock Option (including
any shares previously purchased under the Stock Option) on and at
any time after the fourth anniversary of the date of grant of the
Stock Option and prior to termination of the Option;
Up to 100% of the total shares subject to the Stock Option
(including any shares previously purchased under the Stock Option)
on and at any time after the fifth anniversary of the date of grant
of the Stock Option and prior to termination of the Option.
No Stock Option may be exercised for a fraction of a share of Stock.
Unless otherwise provided by the applicable Stock Option agreement, the
purchase price of any shares purchased shall be paid in full in cash or by
certified or cashier's check payable to the order of the Company, by
surrender of shares of Stock held by the Grantee for more than six months
and having a value at the exercise date equal to the exercise price, or
through a cashless exercise through a broker-dealer registered with the
Securities and Exchange Commission, or by a combination of any of the
foregoing. If any portion of the purchase price is paid in shares of
Stock, those shares shall be valued at their Fair Market Value as of the
day of delivery. No Grantee, or Grantee's executor, administrator,
legatee, or distributes, shall be deemed to be a holder of any shares
subject to a Stock Option unless and until a stock certificate or
certificates for such are issued to such Grantee under the terms of the
Plan. No adjustment shall be made for dividends (ordinary or
extraordinary, whether in cash, securities or other property) or
distributions or other rights for which the record date is prior to the
date such stock certificate is issued, except as provided in Article 13.
The exercise of Stock Options under the Plan shall be subject to the
withholding requirements as set forth in Section 14.1.
6.6 Written Notice Required. A Stock Option shall be exercised
when written notice of that exercise, stating the number of shares of
Stock
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with respect to which the Stock Option is being exercised, has been given
to the Company at its principal office, to the attention of the Corporate
Secretary, by the Grantee and full payment for the shares with respect to
which the Stock Option is exercised has been received by the Company.
6.7 Maximum Amount of Incentive Stock Options in Any Calendar
Year. The aggregate Fair Market Value (determined as of the time the
option is granted) of the Stock with respect to which Incentive Stock
Options are first exercisable by any Grantee during any calendar year
under the terms of this Plan and all other such plans of the Company and
any parent and Subsidiary shall not exceed $100,000. Any Stock Option in
excess of the foregoing limitation shall be deemed a Nonqualified Stock
Option to the extent of such excess.
6.8 Cancellation of Stock Appreciation Rights. Upon exercise of
all or a portion of a Stock Option, any related Tandem Stock Appreciation
Rights shall be canceled with respect to an equal number of shares of
Stock.
ARTICLE 7.
STOCK APPRECIATION RIGHTS
7.1 Grant of Stock Appreciation Rights. The Committee may cause
the Company to grant Stock Appreciation Rights to Grantees under the Plan
in such amounts as the Committee, in its sole discretion, shall determine.
Such Stock Appreciation Rights may be granted either alone or in addition
to other Awards granted under the Plan. The Stock Appreciation Rights
granted under the Plan shall be designated as either: (i) Tandem Stock
Appreciation Rights or (ii) Nontandem Stock Appreciation Rights.
7.2 Stock Appreciation Rights Terms and Conditions. Stock
Appreciation Rights granted under the Plan shall be evidenced by written
agreements in such form as the Committee may from time to time approve.
The terms and conditions of Stock Appreciation Rights granted under the
Plan, including the satisfaction of corporate or individual performance
objectives and other vesting standards, may differ one from another as the
Committee shall, in its discretion, determine, as long as all Stock
Appreciation Rights granted under the Plan satisfy the requirements of the
Plan.
7.3 Tandem Stock Appreciation Rights.
7.3.1 Award of Tandem Stock Appreciation Rights. Tandem Stock
Appreciation Rights may be granted by the Committee in connection
with any Stock Option granted under the Plan, either at the time the
Stock Option is granted or thereafter at any time prior to the
exercise, termination or expiration of the Stock Option, except that
in the case of an Incentive Stock Option, such rights may be
granted only at the time of the grant of such Incentive Stock
Option.
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7.3.2 Limitations on Exercise of Tandem Stock Appreciation
Rights. A Tandem Stock Appreciation Right shall be exercisable only
to the extent that the related Stock Option is exercisable and shall
be exercisable only for such period as the Committee may determine
(which period may expire prior to the expiration date of the related
Stock Option). Upon the exercise of all or a portion of Tandem
Stock Appreciation Rights, the related Stock Option shall be
canceled with respect to the shares of Stock to which the exercised
portion of the Tandem Stock Appreciation Rights relates.
7.3.3 Surrender or Exchange of Tandem Stock Appreciation
Rights. A Tandem Stock Appreciation Right shall entitle the Grantee
to surrender to the Company unexercised the related Stock Option, or
any portion thereof, and to receive from the Company in exchange
therefor that number of shares of Stock having an aggregate Fair
Market Value equal to (i) the excess of (A) the Fair Market Value of
one (1) share of Common Stock at the time the Tandem Stock
Appreciation Right is exercised over (B) the purchase price per
share specified in such Stock Option, multiplied by (ii) the number
of shares of Stock subject to the Stock Option, or portion thereof,
which is surrendered. Cash shall be delivered in lieu of any
fractional shares.
7.4 Nontandem Stock Appreciation Rights.
7.4.1 Award of Nontandem Stock Appreciation Rights. Nontandem
Stock Appreciation Rights may be granted by the Committee in a
manner not related to a grant of a Stock Option. At the time of
grant of a Nontandem Stock Appreciation Right, the Committee shall
specify the number of shares of Stock covered by such right and the
base price of shares of Stock to be used in connection with the
calculation described in Section 7.4.2 below. The base price of a
Nontandem Stock Appreciation Right shall be not less than 100% of
the Fair Market Value of a share of Stock on the date of grant. A
Nontandem Stock Appreciation Right shall be exercisable during such
period as the Committee shall determine.
7.4.2 Exercise of Nontandem Stock Appreciation Rights. The
exercise of a Nontandem Stock Appreciation Right shall entitle the
Grantee to receive from the Company that number of shares of Stock
having an aggregate Fair Market Value equal to (i) the excess of (A)
the Fair Market Value of one (1) share of Stock at the time at which
the Nontandem Stock Appreciation Right is exercised over (B) the
base price of the shares covered by the Nontandem Stock Appreciation
Right, multiplied by (ii) the number of shares of stock covered by
the Nontandem Stock Appreciation Right, or the portion thereof being
exercised. Cash shall be delivered in lieu of any fractional
shares.
7.5 Settlement of Stock Appreciation Rights. As soon as is
reasonably practicable after the exercise of a Stock Appreciation Right,
the Company shall (i) issue, in the name of
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the Grantee, stock certificates representing the total number of full
shares of Stock to which the Grantee is entitled pursuant to Section 7.3.3
or Section 7.4.2 hereof and cash in an amount equal to the Fair Market
Value, as of the date of exercise, of any resulting fractional shares, and
(ii) if the Committee causes the Company to elect to settle all or part of
its obligations arising out of the exercise of the Stock Appreciation
Right in cash pursuant to Section 7.6, deliver to the Grantee an amount in
cash equal to the Fair Market Value, as of the date of exercise, of the
shares of Stock it would otherwise be obligated to deliver. The
settlement of any Stock Appreciation Right under the Plan shall be subject
to the withholding requirements as set forth in Section 16.1.
7.6 Cash Settlement. The Committee, in its discretion, may cause
the Company to settle all or any part of its obligation arising out of the
exercise of a Stock Appreciation Right by the payment of cash in lieu of
all or part of the shares of Stock it would otherwise be obligated to
deliver in an amount equal to the Fair Market Value of such shares on the
date of exercise.
7.7 Written Notice Required. A Stock Appreciation Right shall be
exercised when written notice of that exercise, stating the number of
shares of Stock with respect to which the Stock Appreciation Right is
being exercised, has been given to the Company at its principal office, to
the attention of the Corporate Secretary, by the Grantee.
ARTICLE 8.
RESTRICTED STOCK
8.1 Grant of Restricted Stock. The Committee may cause the
Company to grant Restricted Stock to Grantees under the Plan in such
amounts as the Committee, in its sole discretion, shall determine. Such
shares of Restricted Stock may be issued either alone or in addition to
other Awards granted under the Plan.
8.2 Restrictions and Conditions. Restricted Stock granted under
the Plan shall be evidenced by written agreements in such form as the
Committee may from time to time approve. The restrictions and conditions
imposed on Restricted Stock granted under the Plan, including the
satisfaction of corporate or individual performance objectives, may differ
from one Award to another as the Committee shall, in its discretion,
determine as long as all Awards satisfy the requirements of the Plan;
provided, however, that no grant shall require any payment of cash
consideration by the recipient. Each Award of Restricted Stock shall be
effective as of the date so stated in the resolution of the Committee
making the Award.
8.3 Duration of Awards. The restrictions and conditions imposed
upon any Restricted Stock shall lapse, in whole or in part, as provided in
the agreement pursuant to which the Award is made, but in no event later
than ten years from the date of the Award.
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8.4 Restricted Stock Certificates. Each certificate issued for
shares of Restricted Stock shall be registered in the name of the Grantee
and shall be deposited by him or her with the Company, to the attention of
the Corporate Secretary, together with a stock power endorsed in blank.
The shares shall be subject to restrictions as to transferability as
provided in Article 11 and to such other restrictions and conditions as
may be imposed by the Committee at the time of making the Award (the
"restrictions and conditions"), which shall be referenced by a conspicuous
legend on the reverse side of the stock certificate representing the
shares.
8.5 Rights of Holders of Restricted Stock. Subject to the
restrictions and conditions, the Grantee shall be the owner of the
Restricted Stock and shall have all of the rights of a shareholder,
including, but not limited to, the right to receive all dividends paid on
the Restricted Stock and the right to vote the shares. In the event
there is a change in the Stock as described in Article 13, any shares or
other securities issued with respect to shares subject to restrictions and
conditions under the Plan shall be subject to the same restrictions and
conditions, and the certificates therefor, together with a stock power
endorsed in blank, shall be delivered to the Company, to the attention of
the General Counsel.
8.6 Delivery of Restricted Stock. Following the lapse of the
restrictions and conditions imposed on any Restricted Stock, the
certificate or certificates evidencing such shares shall be reissued by
the Company in the name of the Grantee without legend (except to the
extent that a legend may be necessary for compliance with applicable
securities laws) and shall be delivered to the Grantee. The delivery of
Restricted Stock under the Plan shall be subject to the withholding
requirements as set forth in Section 14.1.
ARTICLE 9.
PERFORMANCE SHARES
9.1 Grant of Performance Shares. The Committee may cause the
Company to grant Performance Shares to Grantees under the Plan in such
amounts as the Committee, in its sole discretion, shall determine. Such
Performance Shares may be issued either alone or in addition to other
Awards under the Plan. Each Performance Share grant shall confer upon the
Grantee the right to receive a specified number of shares of Stock
contingent upon the achievement of specified corporate or individual
performance objectives within a specified period.
9.2 Terms and Conditions. Performance Shares granted under the
Plan shall be evidenced by written agreements in such form as the
Committee may from time to time approve. The Committee shall specify the
performance objectives and the period of duration of the Performance
Shares Award at the time that such Award is granted. Any Performance
Share Award granted under this Plan shall constitute an unfunded promise
to issue shares of Stock to the Grantee in the future upon the completion
of specified conditions. No Grantee shall be deemed to be a holder of any
shares subject to a Performance Shares Award unless
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and until a stock certificate or certificates for such are issued to such
Grantee under the terms of the Plan. No adjustment shall be made for
dividends (ordinary or extraordinary, whether in cash, securities or other
property) or distributions or other rights for which the record date is
prior to the date stock certificates are issued pursuant to any
Performance Shares Award, except as provided in Article 13. The
settlement of any Performance Shares Award shall be subject to the
withholding requirements as set forth in Section 14.1.
9.3 Cash in Lieu of Stock. In lieu of some or all of the shares
earned by achievement of the specified performance objectives within the
specified period, the Committee may distribute cash in an amount equal to
the Fair Market Value of the Stock at the time that the performance
objective is achieved within the specified period multiplied by the number
of Performance Shares.
9.4 Performance Objective Period. The duration of the period
within which to achieve the performance objectives is to be determined by
the Committee, but in no event shall the duration be later than ten years
from the date of the Award.
ARTICLE 10.
PERFORMANCE-BASED COMPENSATION AWARDS
10.1 Awards. All Stock Options and Stock Appreciation Rights
granted to key executive, supervisory and key employees under the Plan are
Performance-based Compensation Awards if they are granted at an exercise
price that is not less than Fair Market Value at the time of the Award.
Restricted Stock and Performance Shares awarded to key executive and
supervisory employees are also Performance-based Compensation Awards under
this Article if granted subject to a written agreement between the Company
and the Grantee setting forth one or more objective performance goals
based on the criteria set forth in Section 10.2 that are required to be
met in order for an Award to vest in the Grantee. The performance goals
must be established in writing by the Committee prior to the employee's
performance of the relevant services and while the outcome under the goal
or goals is substantially uncertain.
10.2 Performance Goals. The performance goals established by the
Committee with respect to a specific Performance-based Compensation Award
must be based on one or more of the following criteria: achieving targeted
revenues; control of operating expenses; increases in operating cash flow;
increases in operating income; and achieving targeted net income and
achieving targeted operating margins.
10.3 Limitations of Shares. The maximum number of shares that may
be subject to Awards under the Plan contained in Section 4.1 and the
maximum number of shares for any individual contained in Section 4.2
include Performance-based Compensation Awards.
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ARTICLE 11.
TERMINATION OF EMPLOYMENT
11.1 Termination of Employment. If a Grantee ceases to be employed
by the Company or a Subsidiary for any reason other than death, disability
or normal retirement, any Stock Option or Stock Appreciation Right granted
to such Grantee shall expire three months after the date of termination of
employment, unless otherwise provided in the applicable Award agreement.
Any Restricted Stock or Performance Shares granted to such Grantee shall
be terminated or forfeited, unless otherwise provided in the applicable
Award agreement.
11.2 Disability; Normal Retirement. If a Grantee becomes disabled
within the meaning of Section 22(e)(3) of the Code or retires under the
Company's normal retirement policy while employed by the Company, or a
Subsidiary, any Stock Option or Stock Appreciation Right granted to such
Grantee shall expire one year after the date of termination of employment
due to disability or normal retirement, unless a longer or shorter period
of exercise is provided in the applicable Award agreement. Any Restricted
Stock or Performance Shares granted to such Grantee shall be terminated or
forfeited, unless otherwise provided in the applicable Award agreement.
11.3 Death of Grantee. if a Grantee dies while employed by the
Company, or a Subsidiary, any Stock Option or Stock Appreciation Right
granted to such Grantee shall expire one year after the date of death,
unless a longer or shorter period of exercise is provided in the
applicable Award agreement. During the exercise period after death, the
Stock Option or Stock Appreciation Right may be exercised, to the extent
provided in the applicable Award agreement, by the person or persons to
whom the Grantee's rights under the Award Agreement shall pass by will or
by the laws of descent and distribution but in no event may the Stock
Option or Stock Appreciation Right be exercisable more than ten years from
the date of grant. Any Restricted Stock or Performance Shares granted to
such Grantee shall be terminated or forfeited, unless otherwise provided
in the applicable Award agreement.
11.4 Termination as Nonemployee Director of the Company. If a
nonemployee director ceases to be a director of the Company, the
Grantee's rights upon such termination shall be governed in the manner of
an Grantee's rights upon termination of employment as set forth above.
11.5 Extent of Exercise. Any Stock Option exercisable following
the termination of employment of an Optionee for any reason shall be
exercisable only as to the number of shares with respect to which it was
exercisable on the date of termination.
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ARTICLE 12.
TRANSFER RESTRICTIONS
Stock Options and Stock Appreciation Rights that have not been
exercised by the Grantee and Restricted Stock and Performance Shares that
are subject to restrictions and conditions shall not be subject in any
manner to alienation, sale, transfer, assignment, pledge, attachment or
encumbrance of any kind. Any attempt to alienate, sell, transfer,
assign, pledge or otherwise encumber any such Awards shall be void, except
for a transfer by will or by the laws of descent and distribution.
Notwithstanding the foregoing, the Committee may grant Nonqualified Stock
Options that are transferable, without payment of consideration, to
immediate family members of the Grantee or to trusts or partnerships of
such family members, or, to the extent such transfers may be made in
compliance with Rule 16b-3 and applicable tax laws, limited liability
companies of such family members. for purposes of this Article 12, the
phrase "immediate family member" shall mean spouse, children or
grandchildren of the Grantee.
ARTICLE 13.
ADJUSTMENTS
If the shares of Stock of the Company are increased, decreased,
changed into, or exchanged for a different number or kind of shares or
securities through merger, consolidation, combination, exchange of shares,
other reorganization, recapitalization, reclassification, stock dividend,
stock split or reverse stock split in which the Company is the surviving
entity, an appropriate and proportionate adjustment shall be made in the
maximum number and kind of shares as to which Awards may be granted under
this Plan. A corresponding adjustment changing the number or kind of
shares allocated to unexercised or unvested Awards, or portions thereof,
which shall have been granted prior to any such change, shall likewise be
made. Any such adjustment in outstanding Awards shall be made without
change in the aggregate purchase price applicable to the
unexercised portion of any such Award, but with a corresponding adjustment
in the price for each share or other unit of any security covered by the
Award. In making any adjustment pursuant to this Article 13, any
fractional shares shall be disregarded.
ARTICLE 14.
MISCELLANEOUS PROVISIONS
14.1 Tax Withholding. With respect to any Award under the Plan,
the Company shall have the right to require Grantees or their
beneficiaries or legal representatives to remit to the Company an amount
sufficient to satisfy federal, state and local withholding requirements,
or to deduct from all payments under the Plan amounts sufficient to
satisfy all withholding tax requirements. Within the discretion of the
Committee, the Company may withhold the tax required to be withheld from
any other cash compensation then or thereafter payable to the Grantee, or,
if deemed necessary by the Company, the Company may sell or
13<PAGE>
<PAGE>
withhold a portion of shares of Stock to be delivered to the Grantee
pursuant to the Plan to provide sufficient funds for withholding tax and
delivery of the proceeds to the Company.
14.2 Termination, Amendment of Plan. The Board may at any time
terminate, amend or revise the terms of the Plan; provided that no
amendment or revision shall, without the approval of the Company's
shareholders, (i) increase the maximum aggregate number of shares that may
be sold or distributed pursuant to Awards granted under this Plan, except
as permitted under Article 13; (ii) change the minimum purchase price for
shares of Stock that may be received by exercise of Stock Option or Stock
Appreciation Right under the Plan; (iii) increase the maximum duration
established under the Plan for any Award; or (iv) permit the granting of
an Award to anyone other than specified in Article 5.
14.3 Prior Rights and Obligations. No amendment, suspension, or
termination of the Plan shall, without the consent of the Grantee or other
person who has received an Award, alter or impair any of that Grantee's
rights or obligations under any Award granted under the Plan prior to such
amendment, suspension, or termination.
14.4 Employment. Nothing in the Plan or in any Award shall confer
upon any eligible employee any right to continued employment by the
Company, or a Subsidiary, or limit in any way the right of the Company or
a Subsidiary at any time to terminate or alter the terms of that
employment.
14.5 Securities Laws. Shares of Stock issuable pursuant to this
Plan may, at the option of the Company, be registered under applicable
federal and state securities laws, but the Company shall have no
obligation to undertake such registrations and may, in lieu thereof, issue
shares hereunder only pursuant to applicable exemptions from such
registrations. In the event that no such registrations are undertaken,
the shares shall be issued only to persons who qualify to receive such
shares in accordance with the exemption from registration on which the
Company relies. In connection with any Award of shares or the reissuance
of certificates under the Plan, the Committee may require appropriate
representations from the recipient of such shares and take such other
action as the Committee may deem necessary, including but not limited to
placing restrictive legends on certificates evidencing such shares and
placing stop transfer instructions in the Company's stock transfer
records, or delivering such instructions to the Company's transfer agent,
in order to assure compliance with any such exemptions. Notwithstanding
any other provision of the Plan, no shares will be issued pursuant to the
Plan unless such shares have been registered under all applicable federal
and state securities laws or unless, in the opinion of counsel
satisfactory to the Company, exemptions from such registrations are
available.
14.6 Compliance with Section 16(b). In the case of Grantees who
are or may be subject to Section 16 of the Securities Exchange Act of
1934, it is the intent of the Company that this Plan and any Award granted
hereunder satisfy and be interpreted in a manner that satisfies the
applicable requirements of Rule 16b-3, so that such Grantees will be
entitled to the
14<PAGE>
<PAGE>
benefits of Rule 16b-3 or any other exemptive rule under Section 16 and
will not be subjected to liability thereunder. If any provision of the
Plan or any Award would otherwise conflict with the intent expressed
herein, that provision, to the extent possible, shall be interpreted and
deemed amended so as to avoid such conflict. To the extent of any
remaining irreconcilable conflict with such intent, such provision shall
be deemed void as applicable to Grantees who are or may be subject to
Section 16.
14.7 Reorganization. Except as otherwise provided in the
applicable Award agreement, in the event of a consolidation or a merger in
which the Company is not the surviving corporation, or any other merger in
which the shareholders of the Company exchange their shares of Stock in
the Company for stock of another corporation, or in the event of complete
liquidation of the Company, or in the case of a tender offer approved by
the Board, all Awards that are unexercised or still subject to any
restrictions and conditions shall thereupon be terminated or forfeited,
provided that the Committee may, prior to the effective date of any such
transaction, either (i) make all such Awards immediately vested or
exercisable or (ii) arrange to have the surviving corporation grant to the
Grantees replacement Award on terms which the Board shall determine to be
fair and reasonable; provided, however, that the Option shall become
immediately exercisable as to all of the shares upon the occurrence of a
"change of control" of the Company as hereinafter defined.
For purposes of this Section 14.7, a "change of control" shall be
deemed to have occurred upon the occurrence of any of the following
events:
14.7.1 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) is or becomes the "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
14.7.2 Individuals who are "Continuing Directors" (as
hereinafter defined) cease for any reason to constitute at least a
majority of the Board of Directors; or
14.7.3 The Board of Directors shall approve a sale of all or
substantially all of the assets of the Company; or
14.7.4 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 (i)
the directors of the Company in office on the date hereof and (ii) any
successor to any such director (and any
15<PAGE>
<PAGE>
additional director) who after the date hereof was nominated or selected
by a majority of the Continuing Directors in office at the time of his
nomination or selection.
14.8 Effective Date and Term of Plan. The effective date of this
Plan is January 29, 1998; provided, however, that no Award granted
hereunder may be exercised or become vested unless and until the Plan is
approved by the shareholders of the Company. No Awards may be granted
under the Plan after January 28, 2008.
16
<PAGE>
EXHIBIT 11
KENAN TRANSPORT COMPANY
Statement Re Computation of Per Share Earnings
(In thousands, except per share data)
<TABLE>
Three Months Ended Six Months Ended
June 30, June 30,
-------------------- --------------------
1998 1997 1998 1997
- --------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Net income $1,154 $ 810 $2,329 $1,786
============================================
Shares:
Beginning shares outstanding 2,395 2,389 2,395 2,389
Shares issued under executive incentive plan 6 6 27 6
--------------------------------------------
Basic shares outstanding 2,401 2,395 2,422 2,395
Dilutive effect of outstanding options 3 -- 1 --
--------------------------------------------
Diluted shares outstanding 2,404 2,395 2,423 2,395
============================================
Basic and diluted earnings per share $ .48 $ .34 $ .97 $ .75
============================================
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
COMPANY'S FORM 10-Q FOR THE PERIOD ENDED JUNE 30, 1998, 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-31-1998
<PERIOD-END> JUN-30-1998
<CASH> 2,375
<SECURITIES> 0
<RECEIVABLES> 10,448
<ALLOWANCES> 0
<INVENTORY> 570
<CURRENT-ASSETS> 19,105
<PP&E> 92,340
<DEPRECIATION> 34,438
<TOTAL-ASSETS> 89,708
<CURRENT-LIABILITIES> 16,375
<BONDS> 0
0
0
<COMMON> 3,989
<OTHER-SE> 47,599
<TOTAL-LIABILITY-AND-EQUITY> 89,708
<SALES> 0
<TOTAL-REVENUES> 62,588
<CGS> 0
<TOTAL-COSTS> 58,379
<OTHER-EXPENSES> (64)
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 367
<INCOME-PRETAX> 3,906
<INCOME-TAX> 1,577
<INCOME-CONTINUING> 2,329
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 2,329
<EPS-PRIMARY> .97
<EPS-DILUTED> .97
</TABLE>
