SECURITIES AND EXCHANGE COMMISSION
WASHINGTON D.C. 20549
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the Securities
Exchange Act of 1934
(X) Filed by the Registrant
( ) Filed by a Party other than the Registrant
Check the appropriate box:
( ) Preliminary Proxy Statement
( ) Confidential, for Use of the Commission Only (as permitted by Rule
14a-b(e)(2))
(X) Definitive Proxy Statement
( ) Definitive Additional Materials
( ) Soliciting Material pursuant to Rule 14a-11(c) or Rule 14a-12
Kenan Transport Company
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(Name of Registrant as Specified In Its Charter)
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(Name of Person(s) Filing Proxy Statement If Other Than Registrant)
Payment of Filing Fee (Check the appropriate box):
(X) No fee required.
( ) Fee computed on table below per Exchange Act Rules 14a-6(i)(4)
and 0-11.
1) Title of each class of securities to which transaction
applies:
2) Aggregate number of securities to which transaction applies:
3) Per unit price or other underlying value of transaction
computed pursuant to Exchange Act Rule 0-11: _/
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5) Total fee paid:
_/ Set forth the amount on which the filing fee is calculated and state
how it was determined.
( ) Fee previously paid with preliminary materials
( ) Check box if any part of the fee is offset as provided by Exchange
Act Rule 0-11(a)(2) and identify the filing for which the offsetting
fee was paid previously. Identify the previous filing by
registration statement number, or the Form or Schedule and the date
of its filing.
1) Amount Previously Paid:
2) Form, Schedule or Registration Statement No.:
3) Filing Party:
4) Date Filed:
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KENAN TRANSPORT COMPANY
CHAPEL HILL, NORTH CAROLINA
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Notice of Annual Meeting of Shareholders
May 4, 1998
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The Annual Meeting of the Shareholders of KENAN TRANSPORT COMPANY,
a North Carolina corporation, will be held at The Kenan Center, Bowles
Drive (adjacent to the Dean Smith Student Activities Center), Chapel Hill,
North Carolina, at 10:00 A.M. local time on Monday, May 4, 1998, for the
following purposes:
(1) To elect a Board of Directors for the ensuing year;
(2) To consider and act upon a proposal to approve the Company's 1998
Long-Term Incentive Plan;
(3) To transact such other business as may properly come before the
meeting or any adjournment thereof.
It is requested that you read carefully this Notice of Annual
Meeting and the accompanying Proxy Statement for information on the
matters to be considered and acted upon.
The Board of Directors of the Company has fixed the close of
business on March 2, 1998 as the record date for the determination of
shareholders entitled to notice of and to vote at the meeting.
Information relating to the Company's activities and operations
during the fiscal year ended December 31, 1997 is contained in the
Company's Annual Report, which is enclosed.
Your Proxy is enclosed. You are cordially invited to attend the
meeting in person, but if you do not expect to attend, please date and
sign your Proxy and return it promptly in the enclosed envelope.
WILLIAM L. BOONE
Secretary
March 30, 1998
Chapel Hill, North Carolina
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KENAN TRANSPORT COMPANY
P.O. Box 2729
Chapel Hill, North Carolina 27515-2729
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PROXY STATEMENT
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GENERAL INFORMATION
This Proxy Statement is furnished in connection with the
solicitation of proxies by the Board of Directors of KENAN TRANSPORT
COMPANY (the "Company") for the Annual Meeting of the Shareholders to be
held on May 4, 1998 at 10:00 A.M. local time at The Kenan Center, Bowles
Drive (adjacent to the Dean Smith Student Activities Center), Chapel Hill,
North Carolina. This Proxy Statement and the accompanying Proxy were
mailed on or about March 30, 1998.
Holders of record of shares of the Common Stock of the Company at
the close of business on March 2, 1998 will be entitled to vote at the
Annual Meeting of Shareholders.
Shareholders who execute and return proxies will retain the right to
revoke them at any time before they are voted. When executed and not so
revoked, proxies will be voted in accordance therewith.
The solicitation of proxies by the Board of Directors will be by
mail. The total expense of such solicitation will be borne by the Company
and will include reimbursement of brokerage firms and others for their
expenses in forwarding solicitation material regarding the meeting to
beneficial owners. Further solicitation of proxies may be made by
telephone or oral communication with some shareholders of the Company
following the original solicitation. All such further solicitation will be
made by regular employees of the Company who will not be additionally
compensated therefor, or by the Company's transfer agent, and the cost
will be borne by the Company.
OUTSTANDING SECURITIES AND VOTING RIGHTS
Only shareholders of record at the close of business on March 2,
1998 will be entitled to notice of and to vote at the Annual Meeting. On
such date, the number of outstanding shares of Common Stock, no par value,
was 2,394,780. Each share of Common Stock is entitled to one vote.
The enclosed Proxy is designed to permit each shareholder of record
at the close of business on the record date to vote for the election of
directors and on other matters coming before the meeting. Two
directors of the Company,
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Thomas S. Kenan, III and Lee P. Shaffer, have been designated as proxies
to vote shares in accordance with the instructions on the Proxy.
PRINCIPAL SHAREHOLDERS
The following information shows the ownership on March 2, 1998, of
the Company's Common Stock by each person who owned of record, or was
known by the Company to own beneficially, more than five percent (5%) of
such stock:
Shares Owned
Name and Address Beneficially Percent
- ---------------------------- ------------------- ---------
Frank H. Kenan 1988 Trust (1) 789,360 33.0%
100 Europa Drive, Suite 525
Chapel Hill, NC 27514
1965 Trust established by
Sarah Graham Kenan (2) 300,000 12.5%
9 West 57th Street
New York, NY 10019
Royce & Associates, Inc. (3) 189,870 7.9%
1414 Avenue of Americas
New York, NY 10019
Lee P. Shaffer 161,186 6.7%
P.O. Box 2729
Chapel Hill, NC 27515
(1) There are six trustees of the Frank H. Kenan 1988 Trust, each of
whom may be deemed to own beneficially the shares of common stock
held thereby. The trustees are Elizabeth P. Kenan, Thomas S. Kenan,
III, Owen G. Kenan, Elizabeth Kenan Howell, Annice Hawkins Kenan and
Braxton Schell.
(2) There are four trustees of the 1965 Trust established by Sarah
Graham Kenan, each of whom may be deemed to own beneficially the
shares of common stock held thereby. The trustees are Thomas S.
Kenan, III, Owen G. Kenan, Elizabeth Kenan Howell and Morgan
Guaranty Trust Company of New York.
(3) According to a report on Schedule 13G, dated February 5, 1998, filed
with the Securities and Exchange Commission by Royce & Associates,
Inc.
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SECURITY OWNERSHIP OF MANAGEMENT
The following table sets forth information with respect to the
beneficial ownership of the Company's Common Stock, as of March 2, 1998,
by its directors, nominees for election as directors, named executive
officers and by all directors and executive officers as a group:
Name of Officer, Director Shares Owned
Beneficial Owner and/or Nominee Beneficially Percent
- -------------------- ------------------- ------------------ -------
Lee P. Shaffer Officer, Director 161,186 6.7%
Owen G. Kenan Officer, Director 32,820 (1)(2) 1.4%
Thomas S. Kenan, III Officer, Director 39,980 (1) 1.7%
William L. Boone Officer 39,429 1.6%
L. Avery Corning Officer 661 *
Gary J. Knutson Officer 7,710 *
John E. Krovic Officer 1,794 *
William C. Friday Director 1,950 *
William O. McCoy Director 0 *
Paul J. Rizzo Director 0 *
Braxton Schell Director 700 (3) *
Kenneth G. Younger Director 500 *
All Directors and Executive Officers
as a Group (13 Persons) 288,532 (1) 12.1%
* Represents less than 1%.
(1) The shares shown as beneficially owned by Owen G. Kenan, Thomas S.
Kenan, III and all directors and executive officers as a group do
not include 1,089,360 shares owned by trusts of which Owen G. Kenan
and Thomas S. Kenan, III are beneficiaries as well as trustees, and
28,900 shares held by The Kenan Family Foundation, a nonprofit
corporation of which each is a director. When these amounts
(1,089,360 and 28,900) are added to the shares listed in the table
above for each of the following individuals and directors and
executive officers as a group, the aggregate beneficial ownership of
stock and the percentage of outstanding stock owned by each person
or group is as follows: Owen G. Kenan - 1,151,080 or 48.1%; Thomas
S. Kenan, III - 1,158,240 or 48.4%; and all directors and executive
offices as a group - 1,406,992 or 58.8%.
(2) Includes 1,380 shares owned by Owen G. Kenan's wife, 10,950 shares
held by his wife as custodian for their children under the Uniform
Gifts to Minors Act and 11,490 shares held by a trust of which Owen
G. Kenan serves as trustee.
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(3) Does not include 789,360 shares held by a trust of which Mr. Schell
serves as trustee.
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SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Under federal securities laws, the Company's directors, its
executive officers, and any persons holding more than 10 percent of the
Company's stock are required to report their ownership of the Company's
stock, as well as any changes in that ownership, to the Securities and
Exchange Commission. Specific due dates for these reports have been
established, and the Company is required to report in this Proxy Statement
any failure during fiscal year 1997 to file such reports in a timely
fashion. All of these filing requirements were satisfied by its
directors, officers and 10 percent shareholders, except Kenneth Younger,
who failed to report a purchase of Company stock in 1997 on Form 4. Mr.
Younger filed a Form 5 describing this transaction on a timely basis in
February 1998.
ELECTION OF DIRECTORS
At the meeting, the shareholders will elect the Company's directors.
The Board of Directors has set the number of directors to be elected at
the 1998 Annual Meeting at eight. All members of the present Board are
nominees for election to hold office until the next annual meeting of the
shareholders and until their successors have been duly elected. A
plurality of the votes cast is required to elect each director. Broker
nonvotes and abstentions will not affect the election results if a quorum
is present.
If the enclosed Proxy is duly executed and received in time for the
meeting and if no contrary specifications are made as provided therein, it
is the intention of the persons named therein to vote the shares
represented thereby for the eight persons nominated for election as
directors of the Company. If any nominee should refuse or be unable to
serve, the Proxy will be voted for such persons as shall be designated by
the Board of Directors to replace any such nominee. The Board of
Directors presently has no knowledge that any of the nominees will refuse
or be unable to serve.
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Information About Nominees for Director
The following information is furnished with respect to nominees:
Principal Occupation;
Business Experience Past Five Years;
Name; Period Served Other Directorships and Age
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Thomas S. Kenan, III (1) Chairman of the Board of Directors since July
Director Since 1964 1996; President, The Westfield Company,
Durham, NC; Trustee, The Duke Endowment,
Charlotte, NC; Trustee, The William R. Kenan
Jr. Charitable Trust, Chapel Hill, NC. Age 60.
Owen G. Kenan (1) Vice Chairman of the Board of Directors since
Director Since 1978 July 1996; President and Chief Executive
Officer, Kenan Enterprises, Inc. President and
Chief Executive Officer, Kenan Oil Company,
Inc., Chapel Hill, NC (1987-1997); Director,
Central Carolina Bank & Trust Company;
Director and Vice Chairman, Flagler System,
Palm Beach, FL. Age 54.
William C. Friday President, The William R. Kenan Jr. Fund,
Director Since 1978 Chapel Hill, NC. Age 77.
William O. McCoy Vice President-Finance, The University
Director Since 1996 of North Carolina, General Administration;
Former Vice Chairman, BellSouth Corporation-
Telecommunications (1984-1994); Director,
Carolina Power & Light Company; Director, The
Liberty Corporation; Director, The Weeks
Corporation; Director, Fidelity Investments.
Age 64.
Paul J. Rizzo Chairman, Franklin Street Partners, Chapel
Director Since 1996 Hill, NC; Vice Chairman, IBM Corporation
(1993-1994); Director, Morgan Stanley;
Director, Ryder Systems; Director, McGraw-Hill
Companies, Inc.; Director, Johnson & Johnson.
Age 70.
Braxton Schell Attorney-at-Law, Schell Bray Aycock Abel
Director Since 1986 & Livingston P.L.L.C., Greensboro, NC.
Age 74.
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Information About Nominees for Director (Continued)
Principal Occupation;
Business Experience Past Five Years;
Name; Period Served Other Directorships and Age
- ------------------------ -----------------------------------------------
Lee P. Shaffer (2) President of the Company since 1975; Chief
Director Since 1967 Executive Officer of the Company since July
1996; Chief Operating Officer of the Company
(1975-1996). Age 59.
Kenneth G. Younger Retired, Former Chairman and Chief Executive
Director Since 1996 Officer of Carolina Freight Corporation
(1977-1990 and 1993-1994). Age 72.
(1) Thomas S. Kenan, III and Owen G. Kenan are brothers.
(2) Lee P. Shaffer is the father of Lee P. Shaffer, III, the Vice
President of Operations Services, an executive officer of the
Company.
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Board of Directors and Board Committees
The Board of Directors met five times during 1997. Each director
attended all of the meetings of the Board and of each Committee of which
such director is a member. In addition, the Board took action by unanimous
written consent five times during 1997. The Board of Directors of the
Company has an Audit Committee, a Compensation Committee and an Executive
Committee. The Board of Directors has no standing nominating committee.
The members of the Audit Committee are William C. Friday, Braxton
Schell and William O. McCoy. The purpose of the Committee is to assist the
Board of Directors in assuring that the Company's financial reports are
fairly presented and accurate, that there is an adequate system of
internal accounting controls and that the auditors are independent and
effectively performing their duties. The Audit Committee met twice during
1997.
The members of the Compensation Committee are William O. McCoy, Paul
J. Rizzo and Kenneth G. Younger. Messrs. McCoy and Rizzo were appointed
to the Committee on January 29, 1998. They replaced Messrs. Friday and
Schell who had served as members of the Compensation Committee, along with
Mr. Younger, during fiscal year 1997. The Committee recommends
compensation for executive officers of the Company. The Committee met
twice during 1997.
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See "Compensation Committee Report" and "Compensation Committee Interlocks
and Insider Participation."
The members of the Executive Committee are Owen G. Kenan, Thomas S.
Kenan, III and Lee P. Shaffer. The Committee may exercise all the
authority of the Board of Directors in the management and affairs of the
Company, except that the Committee may not authorize distributions;
approve or propose to shareholders action that North Carolina law requires
be approved by shareholders; fill vacancies on the Board of Directors or
on any committee; amend the Articles of Incorporation; adopt, amend, or
repeal bylaws; approve a plan of merger not requiring shareholder
approval; authorize or approve reacquisition of shares of capital stock of
the Company, except according to a formula or method prescribed by the
Board of Directors; or authorize or approve the issuance or sale or
contract for sale of shares, or determine the designation and relative
rights, preferences, and limitations of a class or series of shares. The
Executive Committee took action by unanimous written consent twice during
1997.
Compensation of Directors
During 1997, Thomas S. Kenan, III was paid an annual retainer of
$50,000 for his services as Chairman of the Board. Each outside director
is paid an annual retainer of $6,000 plus an additional $1,500 for each
meeting of the Board or meeting of a Board Committee that he attends.
Certain Transactions
The Company leased its corporate offices in University Square at 143
West Franklin Street in Chapel Hill, North Carolina from Frank H. Kenan
under a five-year lease agreement that became effective January 1, 1995.
In 1997 the Company paid $294,715 in base lease payments to the Frank H.
Kenan 1988 Trust, the present owner of University Square. Based upon
studies performed by the Company of rental rates for comparable
facilities, the Company is satisfied that the rent paid does not exceed
market rates in the area.
Braxton Schell is a partner in Schell Bray Aycock Abel & Livingston
P.L.L.C., a law firm that provides legal services to the Company.
EXECUTIVE COMPENSATION AND RELATED MATTERS
The following table sets forth the annual compensation paid or
accrued by the Company to or for the account of the Chief Executive
Officer and the next four most highly compensated executive officers for
fiscal 1997 ("Named Executive Officers") of the Company for the years
ended December 31, 1997, 1996 and 1995:
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Summary Compensation Table
Annual
Compensation
----------------------- All Other
Name and Principal Salary Bonus Compensation
Position Year ($) (1) ($) (2) ($)
- ------------------------- ---- --------- ---------- ------------
Lee P. Shaffer, 1997 290,600 90,667 108,967
President, Chief 1996 279,500 60,372 102,146
Executive Officer 1995 271,400 100,000 56,918
William L. Boone, 1997 164,300 51,262 55,063
Vice President-Finance 1996 158,000 34,128 53,056
Secretary, Treasure 1995 153,400 -- 23,279
L. Avery Corning, 1997 121,100 37,783 17,761
Vice President- 1996 116,400 25,142 15,326
Operations and Sales 1995 113,000 -- 7,280
Gary J. Knutson, 1997 107,500 33,540 21,299
Vice President- 1996 101,400 21,902 19,410
Marketing 1995 98,500 -- 12,102
John E. Krovic, 1997 103,100 32,167 14,802
Vice President-Human 1996 97,300 21,017 13,447
Resources and Safety 1995 91,800 -- 7,452
(1) Includes the fair market value (as determined by the Plan) of stock
awarded in 1998 under the Company's Stock Bonus Plan for the 1997
fiscal year.
(2) Other compensation includes benefits paid or accrued by the Company
pursuant to the Company's Profit Sharing Retirement Plan (PSRP) and
Supplemental Executive Retirement Plan (SERP). Other compensation
also includes the value of split dollar life insurance premiums paid
on behalf of executive officers under a Senior Management Life
Insurance Plan (SMLIP). Plan benefits paid and/or accrued for the
year ended December 31, 1997 are presented below:
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PSRP SERP SMLIP
Name ($) ($) ($)
----------------------- ----- ------ ------
Lee P. Shaffer 9,392 62,148 37,427
William L. Boone 9,392 22,039 23,632
L. Avery Corning 6,055 7,036 4,670
Gary J. Knutson 6,310 10,226 4,763
John E. Krovic 6,052 5,670 3,080
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Compensation Committee Report
The Compensation Committee of the Board of Directors is responsible
for the Company's compensation policy, salary levels and incentive
programs for executives. By working with senior management and reviewing
available industry information, the Committee monitors executive
compensation to fulfill the objectives set forth below.
Compensation Philosophy
The Company maintains a compensation program that provides executive
employees with base salaries at competitive market levels and the
opportunity to earn incentive compensation when targeted performance goals
are achieved. For certain executive employees, a portion of the annual
incentive compensation is in the form of stock. In addition, the Company
offers retirement benefits to its executives in the form of a Profit
Sharing Plan, a Supplemental Executive Retirement Plan and a Senior
Management Life Insurance Plan. Through these three forms of compensation,
the Company seeks to attract, motivate and retain executives who can
contribute to the success of the business and to afford these executive
employees the opportunity to earn an ownership interest in the Company and
thereby align the interests of management with those of shareholders.
Salary
In establishing salary levels for executives, the Committee annually
monitors salaries at other businesses through a broad-based wage survey,
which is specific to the trucking industry. Salary levels are set to
compare with averages as reported for similar-sized companies based on
revenue.
The Committee evaluates compensation levels by comparing the
Company's performance results to performance results of competitors in the
tank truck industry. Performance comparisons are based on profits, profit
margins and operating ratios of the Company and its competitors as a
group. According to the most recent industry data available, the
operating ratio and profit margins of the Company compared favorably with
those of other tank truck carriers.
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Lee P. Shaffer was appointed Chief Executive Officer of the Company
in 1996, following the death of Frank H. Kenan, founder of the Company.
Mr. Shaffer's salary was increased by approximately 4% in 1997. In
establishing Mr. Shaffer's salary level, the Committee considered the wage
survey referenced hereinabove. In addition, upon the Company's
achievement of its net income target, Mr. Shaffer was awarded a bonus of
$90,667 under the Company's Stock Bonus Plan, which bonus represented
approximately 31% of Mr. Shaffer's salary. Mr. Shaffer also received
compensation from the Company's Profit Sharing Retirement Plan,
Supplemental Executive Retirement Plan, and Senior Management Life
Insurance Plan, as well as other benefits available to the Company's
executives, in an aggregate amount of $108,967, which amount represented
approximately 37% of Mr. Shaffer's salary.
Salary levels for the other Named Executive Officers for 1997, 1996
and 1995 are reported in the Summary Compensation Table.
Incentive Compensation
Under the Company's Stock Bonus Plan, selected officers and key
executive employees may earn incentive compensation. Under this Plan,
executives earn stock in the Company for years in which the Company's
annual net income exceeds the average of the prior three years' net
income. A maximum bonus for a participant in any year is 75% of salary. An
executive may elect to receive up to 50% of the bonus for the year in
cash, but, in order to provide management an ownership interest in the
Company's success, at least 50% of the bonus for the year is payable in
Company stock. The 1997 bonus awards, reported in the Summary
Compensation Table, represent significant achievement by the executive
officers of performance measures for the year. The Company also offers
incentive compensation programs, linked to the achievement of performance
targets, for managers who do not participate in the Stock Bonus Plan.
On January 29, 1998, the Board of Directors adopted, subject to
shareholder approval, the 1998 Long-Term Incentive Plan (the "Plan"). The
Board appointed Messrs. McCoy and Rizzo as members to the Compensation
Committee, in place of Messrs. Friday and Schell, and designated the
Compensation Committee as the administrative committee under the Plan.
The Board also resolved that upon approval of the Long-Term Incentive Plan
by the shareholders, no further shares of stock will be issued under the
Stock Bonus Plan. See "Proposal to Approve 1998 Long-Term Incentive
Plan."
William C. Friday Braxton Schell Kenneth G. Younger
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Compensation Committee Interlocks
and Insider Participation
Braxton Schell, a member of the Company's Compensation Committee during
fiscal 1997, is a partner of Schell Bray Aycock Abel & Livingston,
P.L.L.C., a law firm that provides legal services to the Company.
Performance Graph
The following graph shows a five-year comparison of cumulative total
shareholder returns for the Company, the Nasdaq Market Index and an index
of peer companies. The comparison assumes a $100 investment on January 1,
1993 and reinvestment of dividends.
Measurement Period (MP) Kenan
- ----------------------- Transport NASDAQ Peer
(Fiscal Year Covered) Company Market Group
- ----------------------- --------- ---------- ---------
MP - 01/01/93 $100.00 $100.00 $100.00
FYE 12/31/93 126.07 119.95 113.27
FYE 12/31/94 128.68 125.94 108.90
FYE 12/31/95 154.50 163.35 92.32
FYE 12/31/96 143.36 202.99 87.21
FYE 12/31/97 279.73 248.30 126.02
(1) The peer group chosen consists of companies listed under Standard
Industrial Classification Code 4213 - trucking, except local.
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PROPOSAL TO APPROVE 1998 LONG-TERM INCENTIVE PLAN
On January 29, 1998, the Board of Directors adopted, subject to
shareholder approval, the 1998 Long-Term Incentive Plan (the "Plan"). The
Plan is intended to induce those persons who are in a position to
contribute materially to the success of 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.
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, performance shares and performance-based compensation
awards ("Awards") to officers and directors of the Company or any
Subsidiary and to executive, supervisory and other key employees. All
awards will be based upon the satisfaction of corporate or individual
performance standards. The maximum number of shares available under the
Plan is 450,000 shares. Grants of options and other Awards cannot be made
at less than the fair market value of the Common Stock on the date of
grant.
The Plan will be administered by the Compensation Committee of the
Board of Directors (the "Committee") which has been appointed by the Board
pursuant to the terms of the Plan. All Awards under the Plan are made by
the Committee.
In the event of a change of control as defined in the Plan, all
stock options granted under the Plan will become immediately exercisable.
Other Awards granted under the Plan, if the Committee so elects, will
become immediately vested or exercisable. No Awards may be granted under
the Plan after January 28, 2008.
Description of the Plan
The Plan provides for grant Awards of up to 450,000 shares of Common
Stock. Awards available under the Plan include incentive and nonqualified
stock options, stock appreciation rights, restricted stock, performance
shares and performance-based compensation. No single person may receive
Awards under the Plan aggregating more than 250,000 shares of Common Stock
over the life of the Plan. Any shares of Common Stock that are subject to
Awards under the Plan and are not issued, or are issued but have not
vested prior to termination of the Award, may again be made the subject of
grants and awards under the Plan. The number and class of shares
available under the Plan may be adjusted in the event of stock splits and
combinations, stock dividends and similar changes in the capitalization of
the Company. No grants or awards may be made under the Plan after January
28, 2008.
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The Plan provides that the Board of Directors may terminate, amend
or revise the terms of the Plan except that shareholder approval is
required to (i) increase the maximum aggregate number of shares of Common
Stock that may be sold or distributed pursuant to Awards granted under the
Plan, (ii) change the minimum purchase price for shares of Common Stock
that may be received by exercise of stock options or stock appreciation
rights under the Plan, (iii) increase the maximum duration established
under the Plan for any Award, or (iv) permit the grant of an Award to any
person other than as specified in the Plan.
Stock options and stock appreciation rights that have not been
exercised and restricted stock and performance shares that are subject to
restrictions under the Plan may not be transferred by a participant except
by will or applicable laws of descent and distribution, except that the
Committee may grant nonqualified stock options that are transferable to
immediate family members (as defined in the Plan). The Company may require
payment, or withhold payments made under the Plan in order to satisfy
applicable tax withholding requirements.
Plan Administration
The Board of Directors has appointed the Compensation Committee (the
"Committee") to administer the Plan. The Committee must consist of no
fewer than two members, each of whom is an "outside director" of the
Company, as defined in Section 162(m) of the Internal Revenue Code, and a
"non-employee director" within the meaning of Rule 16b-3 of the Securities
Exchange Act of 1934. The Plan provides for indemnification by the
Company of the members of the Committee pursuant to the Company's bylaws
with respect to any matter arising under the Plan.
The Committee has sole authority for all aspects of administering
the Plan including the grant of Awards, the determination of which
officers, directors and employees are eligible to receive Awards, the
determination of the price, duration, performance measures and any
restrictions or conditions applicable to any Award and the decision of
whether or not to accelerate the time at which any outstanding stock
option or stock appreciation right may be exercised.
Stock Options and Stock Appreciation Rights
The Plan permits the granting of incentive stock options ("ISOs") and
nonqualified stock options. Stock appreciation rights may be awarded
either in tandem with stock options ("Tandem SARs") or on a stand-alone
("Nontandem SARs").
The price of shares subject to options granted under the Plan will be
determined by the Committee at the time of grant, but may not be less than
100% of the fair market value of the Common Stock as defined in the Plan.
The recipient
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of an option may pay its exercise price by cash, check or, under certain
conditions, the surrender of shares of Common Stock of the Company. The
Committee may agree that if an option recipient elects to pay by the
surrender of stock he shall automatically receive a new option to
purchase the number of shares surrendered at the then fair market value.
The exercise price determined with respect to an option will also be
applicable to the exercise of any Tandem SAR granted with respect to such
option. The exercise or base price of a Nontandem SAR will be determined
by the Committee, but may not be less than 100% of the fair market value
of the Common Stock as defined in the Plan. The appreciation in the
Common Stock that determines the number of shares to be issued to a
Nontandem SAR recipient will be the excess of the fair market value of the
shares subject to the SAR at the time of exercise over the base price of
the shares.
Upon surrender of a Tandem SAR and the related unexercised option,
or portion thereof, the participant will receive shares of Common Stock
having an aggregate fair market value equal to (i) the excess of (A) the
fair market value of one share of Common Stock at the time the Tandem SAR
is exercised over (B) the purchase price per share specified in the
related stock option, multiplied by (ii) the number of shares of Common
Stock subject to the stock option, or portion thereof, which is
surrendered.
Unless the applicable stock option agreement provides otherwise,
each stock option will vest over a period of five years from the date of
grant with 20% of the total number of shares subject to the option vesting
on the first anniversary of the grant date and an additional 20% vesting
each year thereafter. No stock option may expire later than 10 years from
the date of grant. No ISO may be granted to a participant who, at the
time of the grant, owns stock representing more than 10% of the total
voting power of all classes of stock of the Company (a "10% Shareholder")
unless the option price for the shares subject to such ISO is at least
110% of the fair market value of the date of grant and such ISO award is
exercisable only within five years after its date of grant. In addition,
the total fair market value of a share subject to ISOs which are
exercisable for the first time by an eligible participant in a given
calendar year may not exceed $100,000, valued as of the date of the ISO's
grant.
Unexercised options and stock appreciation rights will expire three
months after the date a participant ceases to be employed by or otherwise
terminates his relationship with the Company for any reason other than
death, disability or retirement, unless otherwise provided in the
applicable grant. In the event of death, disability or retirement,
options and stock appreciation rights will expire within one year, unless
the grant provides otherwise.
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Restricted Stock
Restricted stock may be issued under the Plan, subject to
restrictions and conditions as determined by the Committee. Restricted
stock will be held in escrow and may not be sold or otherwise transferred
until the restrictions imposed on the stock have lapsed. However, the
participant will have other rights associated with ownership of such
restricted stock, including the right to vote and to receive dividends.
Restricted stock will be forfeited if the participant dies or terminates
employment or association with the Company prior to lapse of the
restrictions on the shares, unless otherwise provided in the grant.
Performance Shares
Performance shares confer upon the participant the right to receive
a specified number of shares of Common Stock when certain corporate or
individual performance objectives have been achieved within a specified
period as determined by the Committee. The Committee specifies the
performance objectives and the time in which they must be achieved (not to
exceed 10 years) at the time of grant. If performance objectives are
achieved, the Committee may distribute cash equal to the fair market value
of the Common Stock in lieu of Common Shares. In this event, the number
of shares of Common Stock available for issuance under the Plan and to the
recipient, pursuant to the Plan limits, will be reduced by the number of
shares to which the cash payment relates.
Performance-based Compensation Awards
Stock options and stock appreciation rights granted under the Plan
are exercisable at not less than 100% of fair market value of the
underlying shares at the time of grant, which should preserve any federal
income tax deduction available to the Company at the time of exercise.
The Plan provides that the Committee may also designate performance-based
compensation awards issued at less than the fair market value of the
Common Stock within the meaning of Section 162(m) of the Internal Revenue
Code in order to preserve such deductions that are granted pursuant to a
written agreement that specifies one or more performance goals that must
be satisfied in order for the Award to vest. The Committee must establish
in writing the performance objectives that apply to each grant prior to
the recipient's performance while the outcome under the goal is
substantially uncertain. The performance goals established by the
Committee 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 targeted operating margins. If performance objectives are
achieved, the Committee may distribute cash equal to the fair market value
of the Common Stock in lieu of Common Shares. In this event, the number
of shares of Common Stock available for issuance under the
15<PAGE>
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Plan and to the recipient, pursuant to the Plan limits, will be reduced by
the number of shares to which the cash payment relates.
The Plan was approved by the Board of Directors, subject to the
approval of shareholders, pursuant to a resolution indicating that upon
receipt of such approval, no further shares of stock will be issued under
the Company's Stock Bonus Plan. On February 4, 1998, the newly
appointed Compensation Committee approved the following grants of
restricted stock awards and non-qualified stock options under the Plan,
contingent upon approval of the Plan by shareholders.
Non-qualified Shares of
Name Stock Options Restricted Stock
------------------ --------------- ----------------
Lee P. Shaffer 140,900 9,100
William L. Boone 57,300 3,700
L. Avery Corning 23,500 1,500
Gary J. Knutson 20,700 1,300
John E. Krovic 20,700 1,300
Lee Shaffer III 18,800 1,200
The non-qualified stock options were granted at an exercise price of
$31.75, the closing price of the Company's Common Stock on February 3,
1998. In accordance with the Plan, 20% of the options become exercisable
on February 3, 1999, with an additional 20% vesting on each February 3
thereafter through the year 2003. All of the foregoing options expire on
February 3, 2008.
The restricted stock grants provide that 20% of the shares will
become free of restrictions on February 3, 1999, with an additional 20% of
the shares granted becoming free of restrictions each February 3
thereafter through the year 2003. Until that time, the shares are
registered in the name of the holder who is entitled to vote and receive
dividends but are held in escrow by the Company, in accordance with the
terms of the Plan.
The Committee also awarded non-qualified Stock Options to purchase
an aggregate of 47,000 shares at a price equal to fair market value at the
time of grant and an aggregate of 3,000 shares of Restricted Stock to two
new executives who joined the Company following two recent acquisitions.
The grant of a nonqualified stock option will not result in taxable
income to the grantee or a deduction to the Company. On the date any such
option is exercised, a grantee generally will be deemed to receive
ordinary income equal to the amount by which the fair market value of the
Common Stock on the exercise date exceeds the option price, and the
Company will generally receive a deduction in the same amount.
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In general, there will be no federal income tax consequences to
either the Company or the grantee upon the grant of restricted stock until
the restrictions lapse. At that time, the grantee will recognize taxable
income equal to the then fair market value of the Common Stock and the
Company will generally receive a corresponding deduction. However, with
respect to restricted stock grants, grantees may elect, within 30 days
after the date of grant, to recognize ordinary income equal to the fair
market value of the restricted stock on the date of grant and the
Company would then be entitled to a corresponding deduction at that time.
The Plan requires approval by the affirmative votes of a majority of
the votes cast at the Annual Meeting at which a majority of the shares of
the Company's Common Stock is present in person or by proxy. Abstentions
and broker non-votes will have no effect.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR THE ADOPTION OF THE
1998 LONG-TERM INCENTIVE PLAN.
INDEPENDENT PUBLIC ACCOUNTANTS
Arthur Andersen LLP served as the independent public accountants for
the Company in 1997, and they will be considered for appointment for 1998
at the Board of Directors' meeting following the meeting of shareholders.
A representative of the firm will be in attendance at the shareholders'
meeting, will have the opportunity to make a statement if he desires to do
so and will be available to respond to shareholder questions.
OTHER MATTERS
The Board of Directors knows of no other matters that may properly be,
or which are likely to be, brought before the meeting; however, if any
other matters are properly brought before the meeting, the persons who are
named in the enclosed Proxy or their substitutes will vote in accordance
with their best judgement on such matters.
SHAREHOLDER PROPOSALS
Shareholder proposals to be presented at the next annual meeting of the
Company's shareholders must be received by the Company at its principal
offices, Fifth Floor, University Square-West, 143 West Franklin Street,
Chapel Hill,
17<PAGE>
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North Carolina 27516-3910, on or before November 27, 1998 in order to be
included in the Company's next Proxy Statement for such annual meeting.
By Order of the Board of Directors
WILLIAM L. BOONE
Secretary
March 30, 1998
Chapel Hill, North Carolina
18<PAGE>
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APPENDIX I
KENAN TRANSPORT COMPANY
1998 LONG-TERM INCENTIVE PLAN
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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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<PAGE>
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
2<PAGE>
<PAGE>
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.
3<PAGE>
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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
4<PAGE>
<PAGE>
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
5<PAGE>
<PAGE>
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
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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
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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
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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.
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APPENDIX II
PROXY SOLICITED BY THE BOARD OF DIRECTORS
FOR THE ANNUAL MEETING OF THE SHAREHOLDERS OF
KENAN TRANSPORT COMPANY
The undersigned having received Notice of Meeting and Proxy Statement
dated March 30, 1998, hereby appoints THOMAS S. KENAN, III and LEE P.
SHAFFER, and each or either of them, as proxies with full power of
substitution and revocation, to represent the undersigned and to vote as
designated below all shares of Common Stock of KENAN TRANSPORT COMPANY
which the undersigned is entitled to vote at the Annual Meeting
of the Shareholders of the Company to be held on May 4, 1998 at The Kenan
Center, Bowles Drive, Chapel Hill, North Carolina at 10:00 A.M., local
time or any adjournment thereof.
UNLESS OTHERWISE SPECIFIED BELOW, THIS PROXY WHEN PROPERLY EXECUTED WILL
BE VOTED FOR THE NOMINEES FOR DIRECTOR.
(1) ELECTION OF DIRECTORS
[ ] FOR all nominees listed below; except vote withheld for the
nominees whose names are written in the space below
[ ] WITHHOLD AUTHORITY to vote for all nominees listed below
William C. Friday William O. McCoy Lee P. Shaffer
Owen G. Kenan Paul J Rizzo Kenneth G. Younger
Thomas S. Kenan, III Braxton Schell
(INSTRUCTION: To withhold authority to vote for any individual nominee,
write that nominee's name in the space provided below.)
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(Continued on Reverse Side)
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(Continued from Reverse Side)
(2) TO CONSIDER AND ACT UPON A PROPOSAL TO APPROVE THE COMPANY'S 1998
LONG-TERM INCENTIVE PLAN.
[ ] FOR [ ] AGAINST [ ] ABSTAIN
(3) IN THEIR DISCRETION, THE PROXIES ARE AUTHORIZED TO VOTE UPON SUCH
OTHER MATTERS AS MAY PROPERLY COME BEFORE THE MEETING.
Dated , 1998
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Signature
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Signature
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Please sign the Proxy exactly as name appears. Joint owners should each
sign. Trustees and other signing in a representative capacity should
indicate the capacity in which they sign.
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PLEASE MARK, SIGN AND RETURN THE PROXY CARD PROMPTLY USING THE ENCLOSED
ENVELOPE.
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