-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, R2ise9X1NyDSbNHjHmDGS0fJSxGRbpxfbMzhLEzjx1kwqvYOjPtK46Jlvt5PvnMY yEOp9h5mqW+BqwUHdsGWeA== 0000745379-97-000013.txt : 19970813 0000745379-97-000013.hdr.sgml : 19970813 ACCESSION NUMBER: 0000745379-97-000013 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 4 CONFORMED PERIOD OF REPORT: 19970630 FILED AS OF DATE: 19970812 SROS: NASD FILER: COMPANY DATA: COMPANY CONFORMED NAME: KENAN TRANSPORT CO CENTRAL INDEX KEY: 0000745379 STANDARD INDUSTRIAL CLASSIFICATION: TRUCKING (NO LOCAL) [4213] IRS NUMBER: 560516485 STATE OF INCORPORATION: NC FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-Q SEC ACT: 1934 Act SEC FILE NUMBER: 000-12058 FILM NUMBER: 97656908 BUSINESS ADDRESS: STREET 1: 143 W FRANKLIN ST STREET 2: UNIVERSITY SQ WEST POST OFFICE BOX 2729 CITY: CHAPEL HILL STATE: NC ZIP: 27516-3910 BUSINESS PHONE: 9199678221 MAIL ADDRESS: STREET 1: UNIVERSITY SQUARE WEST STREET 2: 143 W FRANKLIN ST P O BOX 2729 CITY: CHAPEL HILL STATE: NC ZIP: 27515-2729 10-Q 1 FORM 10-Q SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 (Mark One) [X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended June 30, 1997 ------------- OR [ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 Commission File Number 0-12058 ------- KENAN TRANSPORT COMPANY ------------------------------------------------------ (Exact name of registrant as specified in its charter) North Carolina 56-0516485 ------------------------------- --------------- (State or other jurisdiction of (IRS Employer incorporation or organization) Identification No.) University Square - West, 143 W. Franklin Street Chapel Hill, North Carolina, 27516-3910 ----------------------------------------------------------- (Address of principal executive offices, including Zip Code) (919) 967-8221 ----------------------------------------------------------- (Registrant's telephone number, including Area Code) Indicate by check mark whether the registrant (1) has filed all reports required to be filed by section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes X No ------- ------- Indicate the number of shares outstanding of each of the issuer's classes of common stock, as of the latest practicable date. Class Outstanding at July 31, 1997 -------------------------- ------------------------------ Common stock, no par value 2,394,780 KENAN TRANSPORT COMPANY INDEX Page ---- Part I - Financial Information Consolidated Balance Sheets as of June 30, 1997 and December 31, 1996 1 Consolidated Statements of Income for the three and six months ended June 30, 1997 and 1996 2 Consolidated Statements of Cash Flows for the six months ended June 30, 1997 and 1996 3 Notes to Consolidated Financial Statements 4 Management's Discussion and Analysis of Financial Condition and Results of Operations 5 Part II - Other Information Item 4 - Submission of Matters to a Vote of Security Holders 6 Item 6 - Exhibits and Reports on Form 8-K 6 Signatures 7 Index to Exhibits 8 PART I - FINANCIAL INFORMATION KENAN TRANSPORT COMPANY CONSOLIDATED BALANCE SHEETS (Dollars in thousands)
June 30, December 31, 1997 1996 ASSETS (Unaudited) (Note 1) - --------------------------------------------------------------------- Current Assets Cash and cash equivalents $11,185 $11,181 Short-term investments - - Accounts receivable 4,723 4,988 Operating supplies and parts 475 413 Prepayments - Tires 982 1,033 Insurance, licenses and other 908 698 Deferred income taxes 1,856 1,741 - --------------------------------------------------------------------- Total Current Assets 20,129 20,054 Operating Property Land 3,531 3,531 Buildings and leasehold improvements 10,545 9,279 Revenue equipment 56,428 56,015 Other equipment 4,236 3,923 - --------------------------------------------------------------------- 74,740 72,748 Accumulated depreciation (29,719) (28,615) - --------------------------------------------------------------------- Net Operating Property 45,021 44,133 Other Assets 1,051 857 - --------------------------------------------------------------------- $66,201 $65,044 ===================================================================== LIABILITIES AND STOCKHOLDERS' EQUITY - --------------------------------------------------------------------- Current Liabilities Accounts payable $ 1,194 $ 1,257 Wages and employee benefits payable 4,674 5,136 Claims payable 3,483 3,409 Other accrued expenses 184 166 Income taxes payable -- 52 - --------------------------------------------------------------------- Total Current Liabilities 9,535 10,020 Deferred Income Taxes 9,266 9,181 Stockholders' Equity Common stock; no par; 20,000,000 shares authorized; 2,394,780 and 2,389,497 shares issued and outstanding 3,096 2,996 Retained earnings 44,304 42,847 - --------------------------------------------------------------------- 47,400 45,843 - --------------------------------------------------------------------- $66,201 $65,044 ===================================================================== The Notes to Consolidated Financial Statements are an integral part of these balance sheets.
Page 1 KENAN TRANSPORT COMPANY CONSOLIDATED STATEMENTS OF INCOME (Unaudited and dollars in thousands except per share amounts) Three Months Ended Six Months Ended June 30, June 30, -------------------- --------------------- 1997 1996 1997 1996 - ---------------------------------------------------------------------------------------- Operating Revenue $17,233 $16,637 $34,979 $34,224 Operating Expenses Wages and employee benefits 8,806 8,606 17,756 17,532 Fuel, parts, tires and other 3,477 3,122 6,976 6,420 Taxes and licenses 1,062 1,046 2,156 2,170 Claims and insurance 663 596 1,307 1,197 Communications, utilities and rent 348 357 711 786 Depreciation 1,647 1,689 3,302 3,250 - ---------------------------------------------------------------------------------------- 16,003 15,416 32,208 31,355 - ---------------------------------------------------------------------------------------- Operating Income 1,230 1,221 2,771 2,869 Interest income and other expenses, net 71 33 117 103 - ---------------------------------------------------------------------------------------- Income before Provision for Income Taxes 1,301 1,254 2,888 2,972 Provision for income taxes 491 491 1,102 1,169 - ---------------------------------------------------------------------------------------- Net Income $ 810 $ 763 $ 1,786 $ 1,803 ======================================================================================== Weighted average number of shares outstanding (in thousands) 2,395 2,389 2,393 2,389 Earnings per share $ .34 $ .32 $ .75 $ .76 Operating ratio 92.9% 92.7% 92.1% 91.6% Dividends paid per share $ .0675 $ .0650 $ .1350 $ .1300 The Notes to Consolidated Financial Statements are an integral part of these statements.
Page 2 KENAN TRANSPORT COMPANY CONSOLIDATED STATEMENTS OF CASH FLOWS For the Six Months Ended June 30, 1997 and 1996 (Unaudited and dollars in thousands)
1997 1996 - ---------------------------------------------------------------------- Cash Provided by (Applied to): Operations $ 4,523 $ 4,856 Purchases of operating property, net (4,190) (7,244) Short-term investments, net - 6,076 Dividends (329) (317) - ---------------------------------------------------------------------- Net Increase in Cash and Cash Equivalents 4 3,371 Beginning Cash and Cash Equivalents 11,181 3,220 - ---------------------------------------------------------------------- Ending Cash and Cash Equivalents $11,185 $ 6,591 ====================================================================== The Notes to Consolidated Financial Statements are an integral part of these statements. Page 3 KENAN TRANSPORT COMPANY NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) 1. Basis of Presentation The financial information included herein is unaudited; however, such information reflects all adjustments (consisting solely of normal recurring adjustments) that are, in the opinion of management, necessary for a fair statement of results for the interim periods. The balance sheet at December 31, 1996 has been taken from the audited financial statements at that date. The results of operations for the three and six months ended June 30, 1997 and 1996 are not necessarily indicative of the results to be expected for the full year. 2. Effects of Recent Accounting Pronouncements The Financial Accounting Standards Board issued Statement of Financial Accounting Standards (SFAS) No. 128, "Earnings Per Share", in February 1997. The Company is required to adopt SFAS No. 128 for the year ended December 31, 1997. This statement establishes standards for computing and presenting earnings per share (EPS) and makes them comparable to international EPS standards. The statement requires dual presentation of basic and diluted EPS on the face of the income statement and requires a reconciliation of the numerator and denominator of the basic EPS calculation to the numerator and denominator of the diluted EPS calculation. Basic and diluted EPS will not be materially different from previously reported EPS. Page 4 KENAN TRANSPORT COMPANY MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS The following is management's discussion and analysis of certain significant factors that have affected the Company's financial position and operating results during the periods included in the accompanying financial statements. Results of Operations - ------------------------------- Revenue for the second quarter of 1997 was $17,233,000, an increase of $596,000 and 4% over the second quarter of 1996. We experienced modest growth in demand for transportation of gasoline and chemical products, while propane gas and heating fuels were flat as a result of a warmer heating season. Net income was $810,000, an increase of $47,000 and 6% over the second quarter of 1996. Earnings per share were $.34 compared to $.32 in 1996. Miles operated increased 3% in comparison to the second quarter of 1996. Revenue for the first half of 1997 was $34,979,000, an increase of $755,000 and 2% over the first six months of 1996. Net income was $1,786,000 compared to $1,803,000 for the first half of 1996. Earnings per share were $.75 compared to $.76 in 1996. Miles operated increased 1% in comparison to the first half of 1996. Operating expenses for the second quarter of 1997 totaled $16,003,000, an increase of $587,000 and 4% over the second quarter of 1996. During the second quarter, we increased driver pay to our more experienced drivers. We expect this change to result in lower turnover, improved customer service and safety performance. Fuel prices continued to decline during the quarter to levels slightly lower than those in the second quarter of 1996. Accordingly, we have adjusted our fuel surcharge program to reduce prices to our customers. The operating ratio for the quarter was 92.9% compared to 92.7% in 1996. Operating expenses for the first half of 1997 totaled $32,208,000, an increase of $853,000 and 3% over the first six months of 1996. The operating ratio increased to 92.1% from 91.6% in 1996. Liquidity and Capital Resources - ------------------------------- The Company's liquidity and capital resources are adequate. At June 30, 1997, working capital was $10,594,000 compared to $10,034,000 at December 31, 1996, and the current ratios were 2.11 and 2.00, respectively. Cash and cash equivalents totaled $11,185,000 at June 30, 1997, and the Company had no debt outstanding under its $7,000,000 bank line of credit. Management believes that cash flows from operations and access to capital from the Company's bank line of credit will be sufficient to fund 1997 capital expenditures, working capital requirements, expansion opportunities and other corporate needs. The Company's operations require the storage of fuel for use in its tractors in both underground and aboveground tanks. The Company has a program to maintain its fuel storage facilities in compliance with environmental regulation. Under the program, the Company incurs costs to replace tanks, remediate soil contamination resulting from overfills, spills and leaks and monitor facilities on an ongoing basis. These costs are recorded when it is probable that a liability has been incurred and the related amount can be reasonably estimated. Such costs have not been and are not expected to be material to the Company's operations or liquidity. Page 5 PART II - OTHER INFORMATION Item 4. Submission of Matters to a Vote of Security Holders - ------- --------------------------------------------------- The Registrant's Annual Meeting of Stockholders was held on May 5, 1997 for the purpose of electing a board of directors and to transact other business as came before the meeting. Proxies for the meeting were solicited pursuant to Section 14(a) of the Securities Act of 1934 and there was no solicitation in opposition to management's solicitations. The proposals voted upon and the results of voting were as follows: (1) Nominees for directors as listed in the proxy statement were elected for a one year term with the following vote: Votes Votes Broker For Withheld Non-votes --------- -------- --------- Thomas S. Kenan, III 2,146,520 100 145,853 Owen G. Kenan 2,146,520 100 145,853 Lee P. Shaffer 2,146,520 100 145,853 William C. Friday 2,146,520 100 145,853 William O. McCoy 2,145,070 1,550 145,853 Paul J. Rizzo 2,145,070 1,550 145,853 Braxton Schell 2,146,420 200 145,853 Paul Wright, Jr. 2,146,520 100 145,853 Kenneth G. Younger 2,145,070 1,550 145,853 Item 6. Exhibits and Reports on Form 8-K - ------- --------------------------------- (a) The Exhibits to this Form 10-Q are listed on the accompanying Index to Exhibits. (b) No reports on Form 8-K have been filed during the quarter ended June 30, 1997. Page 6 SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized. KENAN TRANSPORT COMPANY (Registrant) DATE: August 6, 1997 BY: /s/ William L. Boone ---------------------------- Vice President-Finance and Chief Financial Officer Page 7 INDEX TO EXHIBITS The exhibits filed as part of this report are listed below: Exhibit Number Description - --------- ---------------------------------------------------------- 10.A Senior Managers' Life Insurance Plan 10.B Senior Management Severance Plan 27 Financial Data Schedule for the 2nd Quarter 10-Q. Page 8
EX-27 2
5 THIS SCHEDULE CONTAINS SUMMARY INFORMATION EXTRACTED FROM THE COMPANY'S FORM 10-Q FOR THE PERIOD ENDED JUNE 30, 1997, AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS. 0000745379 KENAN TRANSPORT COMPANY 1,000 6-MOS DEC-31-1997 JUN-30-1997 11,185 0 4,723 0 475 20,129 74,740 29,719 66,201 9,535 0 0 0 3,096 44,304 66,201 0 34,979 0 32,208 0 0 0 2,888 1,102 1,786 0 0 0 1,786 .75 .75
EX-10.A 3 EXHIBIT 10.A KENAN TRANSPORT COMPANY Senior Managers' Life Insurance Plan ------------------------------------ Purpose ------- The purpose of the Senior Managers' Life Insurance Plan of Kenan Transport Company is to provide life insurance benefits to a select number of senior level Employees who contribute materially to the continued growth, development, and future business of Kenan Transport Company. Article I Definitions ----------- For the purpose hereof, unless otherwise required by the context, the following phrases or terms shall have the following meanings: 1.0 "Beneficiary" shall mean the person(s), trust(s), or the estate of a Participant, entitled to receive any benefits under an Insurance Policy obtained pursuant to this Plan upon the death of a Participant. 1.1 "Board" shall mean the Board of Directors of Kenan Transport Company. 1.2 "Committee" shall mean the Compensation Committee of the Board. 1.3 "Company" shall mean Kenan Transport Company, a North Carolina corporation, and its subsidiaries or affiliates. 1.4 "Employee" shall mean any person who is in the regular full time employment of the Company as determined by the personnel policies of the Company. 1.5 "Insurance Policy" shall mean one or more life insurance contract(s) issued by the Insurer on the life of a Participant. 1.6 "Insurer" shall mean the insurance company or companies to which both a Participant and the Company shall apply for insurance on the Participant's life, and which issues an Insurance Policy. 1.7 "Normal Plan Agreement Termination Date" shall mean the later of (i) the date a Participant attains age 65, or (ii) the date a Participant has participated in the Plan for ten (10) years. 1 1.8 "Participant" shall mean an Employee who is eligible to participate and elects to participate in this Plan as provided in Article II hereof. 1.9 "Plan" shall mean the Senior Managers' Life Insurance Plan of Kenan Transport Company, which shall be evidenced by this instrument, as amended from time to time, and by each Participant's Plan Agreement. 1.10 "Plan Agreement" shall mean the form of written agreement, which is entered into by and between the Company and a Participant. Article II Eligibility and Membership -------------------------- 2.0 Certain senior level Employees of the Company, as selected by the Board or the Committee, and actively employed by the Company on or after January 1, 1996, shall be eligible to participate in this Plan. Eligible Employees may elect to participate in this Plan but are not required to do so. 2.1 A Participant continues to be eligible to participate in this Plan regardless of job classification. 2.2 As a condition of participation, each eligible Employee shall complete, execute, and return to the Company a Plan Agreement in the form approved by the Committee and will comply with such further conditions as may be established by the Committee. 2.3 A Participant in this Plan waives his or her right to insurance coverage under any group term insurance program sponsored by the Company. 2.4 Once a Participant has terminated participation in this Plan, he or she may only again become eligible to participate in this Plan as determined by the Committee. 2.5 In the event that a Participant becomes disabled, as defined by the Company's long-term disability program, and such disability continues until the Normal Plan Agreement Termination Date, then subject to Section 6.0(E), his or her Plan Agreement shall remain in effect until the Normal Plan Agreement Termination Date, provided that the Participant continues to make the required premium contributions, as provided in Section 3.4. If the Participant subsequently ceases to be disabled prior to the Normal Plan Agreement Termination Date, and the Participant does not resume active employment by the Company, the Participant's Plan Agreement shall terminate. 2 Article III Procurement of Insurance Policy ------------------------------- 3.0 The Company and a Participant shall apply to the Insurer for an Insurance Policy on such Participant's life in the amount approved by the Company. The Participant shall: (A) furnish such information as the Insurer may require, (B) take such physical examinations as may be requested by the Insurer, and (C) do any other act to comply with the underwriting and policy issuance requirements which may reasonably be requested by the Insurer. 3.1 If a Participant does not cooperate in the securing of such insurance, or if he or she is for any reason unable to obtain insurance in the specified amount on his or her life at standard rates or rates otherwise acceptable to the Company, the Company shall have no obligation to the Participant under this Plan and the Participant's Plan Agreement shall terminate. 3.2 The sole source of benefits under this Plan to a Participant shall be from the Insurance Policy in which the Participant has ownership rights pursuant to his or her Plan Agreement. 3.3 The Company shall have no obligation of any nature whatsoever to a Participant or his or her Beneficiary under this Plan or a Participant's Plan Agreement, if the circumstances of the Participant's death preclude payment of death proceeds under the Insurance Policy. 3.4 The amount of annual premium attributable to or due from a Participant hereunder for each year shall be an amount equal to the Insurer's then current premium rate for annually renewable term insurance for standard risks based on the Participant's age multiplied by the Participant's amount of coverage. While a Participant is actively employed by the Company, such required premium attributable to the Participant shall be paid by the Company and added to the Participant's annual W-2. A Participant not actively employed by the Company, who is eligible to continue to participate in this Plan pursuant to Sections 2.5 or 7.4 shall either pay his or her annual premium amount directly to the Company, or, if available, authorize the Company to withhold such payments from post-retirement benefit payments to the extent permitted by law. On or before the due date of each Insurance Policy premium payable prior to termination of a Participant's Plan Agreement, or within the grace period provided in the Insurance Policy, the Company shall forward to the Insurer the full amount of the premium then due. 3 Article IV Incidents of Ownership ---------------------- 4.0 A Participant shall retain and may exercise all rights of ownership with respect to the Insurance Policy except as otherwise hereinafter provided. These rights include, but are not limited to, (i) the right to designate and change the Beneficiary of death proceeds under the Insurance Policy, but only to the extent of the amount of proceeds indicated on Schedule A attached to his or her Plan Agreement, (ii) the right to elect any optional mode of settlement with respect to such death proceeds, and (iii) the right to surrender or cancel the Insurance Policy subject to the Company's interest in the Insurance Policy. 4.1 A Participant shall execute a collateral assignment of the Insurance Policy to the Company as security for any and all liabilities incurred arising with respect to premium payments made by the Company. 4.2 This collateral assignment of the Insurance Policy shall grant to the Company the following specific rights: (A) The limited right to obtain one or more loans or advances on the Insurance Policy to the extent of the Company's interest under the terms of this Plan and to pledge or assign the Insurance Policy as security for such loans or advances. (B) The right to determine how the dividends in each Insurance Policy will be applied, whether to reduce premiums or to purchase paid-up addition or otherwise. (C) The right to collect from the Insurance Policy the Company's interest in the net proceeds of the Insurance Policy when it becomes a claim by death (as provided in Section 5.1), or termination of a Plan Agreement (as provided in Section 6.1). 4.3 The Company, as assignee, shall upon request forward without unreasonable delay to a Participant or a Participant's Beneficiary, as appropriate, the Insurance Policy for endorsement of any designation or change of Beneficiary or any election of an optional mode of settlement. 4.4 While a Plan Agreement is in force, a Participant may not borrow either directly or indirectly against his or her Insurance Policy or pledge his or her interest in the Insurance Policy. 4 Article V Death Proceeds Prior to Termination of Plan Agreement ----------------------------------------------------- 5.0 A Participant shall designate his or her Beneficiary to receive death benefits under the Insurance Policy upon the death of the Participant prior to the termination of his or her Plan Agreement, but only to the extent of the amount of proceeds indicated on Schedule A attached to his or her Plan Agreement. If more than one Beneficiary is named, the shares and preference of each shall be indicated. The Participant shall execute a Beneficiary designation on the form approved by the Insurer. Such Beneficiary designation shall not be terminated, altered or amended by the Company, without the express written consent of the Participant. The Company and the Participant shall take all action necessary to cause such Beneficiary designation to conform to the provisions of this Plan and the Participant's Plan Agreement. 5.1 Upon the death of a Participant prior to termination of his or her Plan Agreement, death proceeds provided under the Insurance Policy shall be allocated to the Participant's Beneficiary and the Company. The Participant?s Beneficiary shall be entitled to death proceeds in the amount indicated on Schedule A attached to his or her Plan Agreement. The Company shall be entitled to the balance of death proceeds in the Insurance Policy. 5.2 A Participant shall have the right at any time to submit a new Beneficiary designation, on the form approved by the Insurer, to the Company. The Company shall then promptly mail such form to the Insurer. 5.3 No change in Beneficiary shall be effective until acknowledged in writing by the Insurer. Thereafter, a copy of the written acknowledgment shall be returned promptly by the Company to the Participant. 5.4 Any payment made by the Insurer in accordance with the designation of Beneficiary contained in the most recent Beneficiary designation filed with the Insurer shall fully discharge the Insurer from all further obligations with respect to such payment. 5.5 A Beneficiary may select any settlement option under the Insurance Policy of his or her portion of the death benefit proceeds. The Company agrees to co-execute and deliver to the Insurer the necessary forms to select the requested settlement options. 5 Article VI Termination of a Plan Agreement ------------------------------- 6.0 A Plan Agreement entered into pursuant to this Plan shall terminate upon the occurrence of any of the following events prior to the death of a Participant: (A) The Normal Plan Agreement Termination Date specified in Section 1.7. (B) Termination of a Participant's employment with the Company prior to the Normal Plan Agreement Termination Date, except as otherwise provided in Sections 2.5 or 7.4. (C) Total cessation of the Company's business or the final adjudication of bankruptcy, receivership or dissolution of the Company, unless the Company's business is continued by a successor company or business entity. (D) Termination of the Plan Agreement by a Participant upon written notice to the Company or by reason of a Participant's failure to pay his or her required premium contribution as provided in Section 3.4. (E) Termination of this Plan by the Board in its sole discretion, as provided in Section 7.0 6.1 If a termination of a Participant's Plan Agreement occurs, the obligation of the Company to make any premium payments shall cease and the rights of the Company and the Participants shall be controlled by Sections 6.2 and 6.3. 6.2 Upon termination of a Plan Agreement prior to the death of a Participant, the Company shall have the unqualified right to the lesser of (i) the amount of cumulative premiums paid with respect to such Insurance Policy, net of any cumulative premiums paid by the Participant pursuant to Section 3.4 or (ii) the cash surrender value of the Insurance Policy, less in either case any Insurance Policy indebtedness to the Insurer incurred by the Company and any unpaid interest on such indebtedness. After the Company has exercised this right, it will no longer have any interest in the Insurance Policy. 6.3 At the termination of a Plan Agreement and after the Company exercises its right under Section 6.2, a Participant shall be entitled to all rights under the Insurance Policy. The Participant agrees that he or she will not deal with the Insurance Policy other than in a manner expressly provided for in this Plan and his or her Plan Agreement until after his or her Plan Agreement is terminated. 6 Article VII Termination or Modification of the Plan; Change in Control of the Company ------------------------------------------------------------------------- 7.0 The Company reserves the right to terminate this Plan at any time, based on a decision made solely by the Board. 7.1 The Company reserves the right to totally or partially amend, modify or supplement this Plan at any time, based on a decision made solely by the Board. 7.2 No action to terminate, amend, modify or supplement the Plan shall be taken except upon 30 days' prior written notice to each affected Participant. 7.3 If a termination of this Plan occurs, the obligation of the Company to make any premium payments shall cease and the rights of the Company and the Participants shall be controlled by Article VI. 7.4 If a participant has been participating in this Plan for less than ten (10) years and there is a Change in Control of the Company, as defined in Section 7.5, and there is then a termination of the Participant's employment within two years of the Change in Control as a result of which the Participant would be deprived of benefits under the Plan, the Participant's Plan Agreement (and the Company premium payment obligation under Sections 3.4) will continue in effect for a period of ten (10) years from the effective date of the Participant's Plan Agreement, unless modified or terminated by mutual consent, provided that the Participant continues to make the required premium contributions as provided in Section 3.4. 7.5 For purposes of Section 7.4, a Change in Control of the Company shall occur when, within a twelve (12) month period, there is either a sale or transfer of all or substantially all of the assets of the Company, or a 50% change in ownership of the Company through a merger, the sale of shares by the shareholders, or the issuance of new stock to new shareholders. Excepted from this definition shall be sales of stock among the existing shareholder group or to an employee stock ownership trust or similar employee stock ownership vehicle, a change in relative stock ownership in the existing shareholder group by redemption, a public or secondary offering, and transfers outright or intrust by gift or inheritance. 7 Article VIII Retention of Services --------------------- 8.0 Nothing contained in this Plan or a Plan Agreement shall be construed as a contract of employment between the Company and a Participant, or as a right of any Participant to be continued in the employment of the Company, or as a limitation of the right of the Company to discharge any of its employees, with or without cause. Article IX Administration of the Plan -------------------------- 9.0 The sole right of construction, interpretation and general administration of this Plan shall be vested in the Committee. 9.1 The Committee shall establish rules, forms and procedures for the administration of this Plan from time to time, including a claims procedure. The Committee shall have the exclusive right to decide any and all matters arising in connection with the administration of this Plan. 9.2 The Committee may appoint an administrator and delegate its administrative and fiduciary responsibilities to such administrator. Article X Miscellaneous ------------- 10.0 Any notice which shall or may be given under this Plan or a Plan Agreement shall be in writing and shall be mailed by United States Mail, postage pre-paid. If notice is to be given to the Company, such notice shall be marked as indicated below and mailed to the Company at its general offices: Kenan Transport Company Post Office Box 2729 Chapel Hill NC 27515-2729 If notice is to be given to a Participant, such notice shall be addressed to the address shown on such Participant's Plan Agreement. 10.1 Any party may change the address to which notices shall be mailed from by giving written notice of such new address. 8 10.2 This Plan shall be binding upon the Company and its successors and assigns, and upon a Participant, his or her Beneficiary, heirs, executors and administrators. 10.3 This Plan shall be construed and governed in all respects under and by the laws of and in courts sitting in the State of North Carolina, to the extent not pre-empted by Federal law. If any provision of this Plan shall be held by a court of competent jurisdiction to be invalid or unenforceable, the remaining provisions hereof shall continue to be fully effective. 10.4 Headings and subheadings in this Plan are inserted for convenience and reference only and do not constitute any part of this Plan. 10.5 This Plan may be executed in an original or any number of counterparts, each of which shall constitute an original of one and the same instrument. Article XI Effective Date -------------- 11.0 The effective date of this Plan shall be April 1, 1996. IN WITNESS WHEREOF, the Senior Mangers' Life Insurance Plan of Kenan Transport Company, having been duly approved and adopted by the Board, is executed on behalf of the Company as of the first day of April, 1996. Kenan Transport Company: By: /s/ Lee P. Shaffer ------------------------------ President Attest: By: /s/ William L. Boone ------------------------ Vice President - Finance [Corporate Seal] 9 EX-10.B 4 EXHIBIT 10.B KENAN TRANSPORT COMPANY Senior Management Severance Plan WHEREAS, the Board of Directors of Kenan Transport Company (the "Company") considers its senior management employees to be valuable assets of the Company; and WHEREAS, the Board of Directors believes that adoption of a reasonable severance plan would have the effect of giving to such officers a sense of security that would have a positive effect on their performances on behalf of the Company; and WHEREAS, this Board believes that a reasonable severance plan would improve the ability of the Company to attract and maintain qualified senior management; now, therefore, it is RESOLVED, that this Board of Directors hereby adopts the following Senior Management Severance Plan (the "Plan"): 1. PURPOSE. The purpose of the Plan is to attract and retain competent senior management employees for the Company. 2. ELIGIBILITY. Any senior management employee of the Company who is identified by the Board of Directors or its Compensation Committee as a participant in the Plan and who enters into a Severance Agreement substantially in the form attached to this Plan shall be a participant in the Plan (a "Participant"). 3. ENTITLEMENT. Any Participant who is terminated from his or her employ by the Company "without cause" (as defined in Section 4) within twenty-four months following a "change in control" of the Company, or who shall have terminated his or her employment because of a "change in employment conditions" (as defined in Section 5) within twenty-four months following a "change in control," shall be entitled to receive a severance payment in an amount equal to his or her average base salary for the immediately preceding three fiscal years of the Company (or such lesser number of whole fiscal years as he or she shall have been in the employ of the Company), multiplied by 2.0 (the "Severance Payment"). Upon entitlement, the Severance Payment will be payable in cash or by certified check within thirty (30) days following termination of the Participant's employment. For purposes of this Agreement, a "change of control" shall be deemed to have occurred upon the occurrence of any of the following events: (i) Any "person" (as such term is used in Sections 13(d) and 14(d)(2) of the Securities Exchange Act of 1934, as amended (the "Exchange Act") but excluding any employee benefit plan of the Company) becomes after the Effective Date of the Plan the 1 "beneficial owner" (as defined in Rule 13d-3 under the Exchange Act), directly or indirectly, of securities of the Company representing 50% or more of the combined voting power of the Company's outstanding securities then entitled ordinarily (and apart from rights accruing under special circumstances) to vote for the election of directors; or (ii) Individuals who are "Continuing Directors" (as hereinafter defined) cease for any reason to constitute at least a majority of the Board of Directors; or (iii) The Board of Directors shall approve a sale of all or substantially all of the assets of the Company; or (iv) The Board of Directors shall approve any merger, consolidation, or like business combination or reorganization of the Company the consummation of which would result in the occurrence of any event described in clause (i) or (ii) above. For purposes of the foregoing, "Continuing Directors" shall mean (a) the directors of the Company in office on the date of the Severance Agreement between the Company and the Participant and (b) any successor to any such director (and any additional director) who after the date of the relevant Severance Agreement was nominated or selected by a majority of the Continuing Directors in office at the time of his or her nomination or selection. Notwithstanding anything to the contrary contained herein, in the event that any portion of the Severance Payment received or to be received by a Participant, together with any other payments received by him or her, whether paid or payable pursuant to the terms of this Plan or any other plan, arrangement or agreement with the Company or any other person or entity, would not be deductible in whole or in part by the Company in the calculation of its federal income tax by reason of Section 280G of the Internal Revenue Code or would cause, either directly or indirectly, an "excess parachute payment" to exist within the meaning of said Section 280G, the Severance Payment payable shall be reduced until no portion of the Severance Payment would fail to be deductible by reason of being an "excess parachute payment." In the event that any dispute arises as to whether an "excess parachute payment" exists, the appropriate calculations shall be made by the Company's regularly employed independent public auditors and delivered to the Participant in writing within 30 days following the date for payment of the Severance Payment, and the Company will warrant to the Participant the accuracy of the calculations and the information on which they are based. 4. DEFINITION OF "WITHOUT CAUSE." Termination of the Participant's employ by the Company following a "change in control" for any reason other than one of the following shall be deemed to be termination "without cause": (i) continued neglect of duties for which he 2 or she was employed after receipt of written notice thereof from the Board of Directors or its Compensation Committee or from the President of the Company, (ii) continued insubordination after receipt of a written warning with respect thereto, (iii) misconduct involving moral turpitude in the performance of duties for which employed, including, without limitation, the commission of fraud, misappropriation or embezzlement by the Participant, (iv) the Participant's being accused of committing any felony for which he or she is indicted, or (v) disability of the Participant, whether mental or physical, which renders him or her substantially unable to render the services for which he or she is employed for more than 90 days (in which event the Participant shall be entitled to the benefits of any applicable employee benefit plan). 5. CHANGE IN EMPLOYMENT CONDITIONS. The Participant shall be deemed to have had a "change in employment conditions" upon the occurrence, within twenty-four months following a "change in control" of the Company, without the consent of the Participant, of any one of the following events: (a) his or her base salary is reduced, below that in existence immediately prior to the occurrence of the "change in control," or (b) the Participant is required to change his or her residence or principal place of business from Chapel Hill, North Carolina, or such other location as shall be his or her residence or principal place of business immediately prior to the "change in control." 6. COVENANTS RELATING TO COMPETITION. Participation in the Plan is conditioned upon the Participant's agreement, which agreement shall be confirmed by his or her entering into the Severance Agreement that during the term of his or her employment with the Company and for a period of one year following the termination of such employment: (a) He or she will not, directly or indirectly, influence or attempt to influence any customer of the Company to discontinue its use of the Company's services or to divert such business to any other person, firm or corporation; (b) He or she will not, directly or indirectly, interfere with, disrupt or attempt to disrupt the relationship, contractual or otherwise, between the Company and any of its respective suppliers, principals, distributors, lessors or licensors; and (c) He or she will not, directly or indirectly, solicit any employee of the Company, whose base annual salary at the time of the Participant's termination was $30,000 or more, to work for any person, firm or corporation. 7. EMPLOYMENT RIGHTS. Neither the adoption of this Plan nor the execution by the Company of a Severance Agreement shall be deemed to confer upon any Participant the right to continued employment with the Company or to interfere in any way with the right of the Company to terminate the employment of any employee at any time. 3 8. BINDING EFFECT. This Plan shall be binding upon and enure to the benefit of the Company and its successors and assigns, including any company with which the Company shall merge or to which the Company shall transfer all or substantially all of its assets. 9. AMENDMENT OR TERMINATION. This Plan may be amended or terminated at any time by the Board of Directors of the Company, provided, however, that no amendment or termination shall adversely affect the rights of any Participant who shall have entered into a Severance Agreement prior to the time of such amendment or termination without his or her written consent. 10. EFFECTIVE DATE. The effective date of this Plan shall be May 5, 1997. 4 -----END PRIVACY-ENHANCED MESSAGE-----