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
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( ) 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)
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(X) No fee required.
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and 0-11.
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registration statement number, or the Form or Schedule and the date
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4) Date Filed:
KENAN TRANSPORT COMPANY
CHAPEL HILL, NORTH CAROLINA
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Notice of Annual Meeting of Shareholders
May 5, 1997
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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 5, 1997, for the
following purposes:
(1) To elect a Board of Directors for the ensuing year;
(2) 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 3, 1997 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, 1996 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 27, 1997
Chapel Hill, North Carolina
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 5,
1997 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 31, 1997.
Holders of record of shares of the Common Stock of the Company at the
close of business on March 3, 1997, 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 its 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 3, 1997
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
2,389,497. Each Share of Common Stock is entitled to one vote.
1
The enclosed Proxy is designed to permit each shareholder of record at
the close of business on the record date to vote in the election of
directors and on other matters coming before the meeting. Two directors of
the Company, 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 3, 1997, 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) 863,960 36.2%
100 Europa Drive, Suite 525
Chapel Hill, NC 27514
1965 Sarah Graham Kenan Trust (2) 300,000 12.6%
9 West 57th Street
New York, NY 10019
Quest Advisory Corp. (3) 166,570 7.0%
1414 Avenue of Americas
New York, NY 10019
Lee P. Shaffer 159,598 6.7%
P.O. Box 2729
Chapel Hill, NC 27515-2729
(1) On May 31, 1996, Frank Kenan transferred the shares of common stock
referenced above to the Frank H. Kenan 1988 Trust. There are six
trustees of the Trust, each of whom may be deemed to own
beneficially the shares of common stock held thereby. The trustees
are
2
Elizabeth P. Kenan, Thomas S. Kenan, III, Owen G. Kenan, Elizabeth
Kenan Howell, Annice H. Kenan and Braxton Schell.
(2) There are four trustees of the 1965 Sarah Graham Kenan Trust, 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 3, 1977, filed
with the Securities and Exchange Commission by Quest Advisory Corp.
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3
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 3, 1997,
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 159,598 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 38,531 1.6%
L. Avery Corning Officer 0 *
Gary J. Knutson Officer 7,134 *
John E. Krovic Officer 1,241 *
William C. Friday Director 2,500 *
William O. McCoy Director 0 *
Paul J. Rizzo Director 0 *
Braxton Schell Director 700 (3) *
Paul Wright, Jr. Director 3,175 *
Kenneth G. Younger Director 0 *
All Directors and Executive
Officers as a Group (15 Persons) 287,188 (1) 12.0%
* 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 1,163,960 shares owned by trusts of which Owen G. Kenan
and Thomas S. Kenan, III are beneficiaries as well as trustees, and
3,900 shares held by The Kenan Family Foundation, a nonprofit
corporation of which each is a director. These 1,163,960 and 3,900
shares, together with the shares shown as owned beneficially by Owen
G. Kenan, Thomas S. Kenan, III and all directors
4
and executive officers as a group, aggregate to 1,200,680, 1,207,840
and 1,455,048 shares owned beneficially, respectively, and
constitute 50.2%, 50.5% and 60.9% of the total number of outstanding
shares, respectively.
(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.
(3) Does not include 863,960 shares held by a trust of which Mr. Schell
serves as trustee.
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SECTION 16(a) BENEFICIAL OWNERSHIP 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 1996 to file such reports in a timely fashion. All of
these filing requirements were satisfied by its directors, officers and 10
percent shareholders, except that certain filings required to be made upon
the death of Frank H. Kenan by certain of the trustees of the Frank H.
Kenan 1988 Trust who are not also directors or officers of the Company
were inadvertently made late.
5
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 1997 Annual Meeting at nine. 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. The
nominees will be elected if they receive a plurality of the votes cast for
their election. Broker nonvotes 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 nine 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.
Information About Nominees for Directors
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. Age 59.
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. and Kenan Oil
Company, Inc., Chapel Hill, NC; Director,
Central Carolina Bank & Trust Company. Age 53.
William C. Friday President, The William R. Kenan Jr. Fund,
Director Since 1978 Chapel Hill, NC. Age 76.
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Principal Occupation; Business
Experience Past Five Years;
Name; Period Served Other Directorships and Age
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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 63.
Paul J. Rizzo Chairman, Franklin Street Partners, Chapel
Director Since 1996 Hill, NC; Vice Chairman, IBM Corporation (1993-
1994); Dean, Kenan-Flagler Business School,
University of North Carolina (1987-1992);
Director, Morgan Stanley; Director, Ryder
Systems; Director, McGraw-Hill Companies, Inc.;
Director, Johnson & Johnson. Age 69.
Braxton Schell Attorney-at-Law, Schell Bray Aycock Abel
Director Since 1986 & Livingston P.L.L.C., Greensboro, NC.
Age 74.
Lee P. Shaffer 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 58.
Paul Wright, Jr. Retired, Former Vice Chairman of the Board of
Director Since 1971 Central Carolina Bank & Trust Company, Durham,
NC. Age 85.
Kenneth G. Younger Retired, Former Chairman and Chief Executive
Director Since 1996 Officer of Carolina Freight Corporation
(1977-1990; 1993-1994). Age 71.
(1) Thomas S. Kenan, III and Owen G. Kenan are brothers.
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7
Board of Directors and Board Committees
The Board of Directors met three times during 1996. All directors
attended the meetings. In addition, the Board took action by unanimous
written consent five times during 1996. 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, Paul Wright,
Jr. and William O. McCoy. Prior to his death, Frank H. Kenan also served
on the Committee, and after his death, he was replaced by Mr. 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 1996.
The members of the Compensation Committee are Thomas S. Kenan, III,
William C. Friday, Braxton Schell and Paul Wright, Jr. The Committee
recommends compensation for executive officers of the Company. The
Committee took action by unanimous written consent twice during 1996. 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 five times
during 1996.
8
Compensation of Directors
During 1996, Thomas S. Kenan, III was paid a retainer of $33,333
(prorated from an annual retainer of $50,000) for his services as Chairman
of the Board. Until July 1, 1996, each director who was not also an
employee of the Company was paid an annual retainer of $1,000 plus an
additional $1,000 for each committee of the Board of Directors on which he
served. After July 1, each outside director is to be paid an annual
retainer of $6,000 plus an additional 41,500 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 Kenan in
1995. Under a five-year lease that became effective January 1, 1995,
annual base lease payments for 18,892 square feet of office space in years
1995 through 1999 are $283,380, $289,048, $294,715, $300,383 and $306,050,
respectively. Based upon studies performed by the Company of rental rates
for comparable facilities, the Company is satisfied that the rent paid
does not exceed market rates in the area. The property is now owned by the
Frank H. Kenan 1988 Trust.
Braxton Schell is a partner in Schell Bray Aycock Abel & Livingston
P.L.L.C., a law firm that provides legal services to the Company.
9
EXECUTIVE COMPENSATION AND RELATED MATTERS
The following table sets forth the annual compensation paid or accrued
by the Company to or for the account of the Chief Executive Officer and
the next four most highly compensated executive officers for fiscal 1996
("Named Executive Officers") of the Company for the years ended December
31, 1996, 1995 and 1994:
Summary Compensation Table
Annual
Compensation
----------------------- All Other
Name and Principal Salary Bonus Compensation
Position Year ($) (2) ($) (3) ($)
- ------------------------- ---- --------- --------- ------------
Frank H. Kenan, (1) 1996 -- -- --
Former Chairman, Chief 1995 -- -- --
Executive Officer 1994 -- -- --
Lee P. Shaffer, (1) 1996 279,500 60,372 102,146
President, Chief 1995 271,400 100,000 56,918
Executive Officer 1994 261,000 237,808 49,911
William L. Boone, 1996 158,000 34,128 53,056
Vice President-Finance 1995 153,400 -- 23,279
Secretary, Treasure 1994 151,094 77,880 23,862
L. Avery Corning, 1996 116,400 25,142 15,326
Vice President- 1995 113,000 -- 7,280
Operations and Sales 1994 14,125 -- --
Gary J. Knutson, 1996 101,400 21,902 19,410
Vice President- 1995 98,500 -- 12,102
Marketing 1994 94,139 48,840 12,504
John E. Krovic, 1996 97,300 21,017 13,447
Vice President-Human 1995 91,800 -- 7,452
Resources and Safety 1994 83,500 44,088 9,124
10
(1) Lee P. Shaffer was elected Chief Executive Officer of the Company on
July 2, 1996 following the death of Frank H. Kenan on June 4, 1996.
(2) Includes the fair market value (as determined by the Plan) of stock
to be awarded in 1997 under the Company's Stock Bonus Plan for the
1996 fiscal year.
(3) 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, 1996 are presented below:
PSRP SERP SMLIP
Name ($) ($) ($)
----------------------- ---- ---- ------
Lee P. Shaffer 8,700 53,384 40,062
William L. Boone 8,700 19,057 25,299
L. Avery Corning 4,656 5,944 4,726
Gary J. Knutson 5,881 8,663 4,866
John E. Krovic 5,643 4,682 3,122
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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
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The Company maintains a compensation program that provides executive
employees with base salaries at competitive market levels and the
opportunity to earn incentive
11
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
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In establishing salary levels for executives, the Committee annually
monitors salaries at other businesses through two broad-based wage
surveys, one of 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.
Incentive Compensation
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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 1996 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.
12
Following the death of Frank Kenan, Lee P. Shaffer was appointed Chief
Executive Officer of the Company. Mr. Shaffer's salary increased
approximately 3% in 1996. In establishing Mr. Shaffer's salary level, the
Committee considered the two wage surveys referenced hereinabove. In
addition, upon the Company's achievement of its net income target, Mr.
Shaffer was awarded a bonus of $60,372 under the Company's Stock Bonus
Plan, which bonus represented approximately 22% 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 $102,146, which amount
represented approximately 36% of Mr. Shaffer's salary.
Salary levels for the other Named Executive Officers for 1996, 1995 and
1994 are reported in the Summary Compensation Table.
Thomas S. Kenan, III Braxton Schell
William C. Friday Paul Wright, Jr.
Compensation Committee Interlocks
and Insider Participation
Braxton Schell, a member of the Company's Compensation Committee, is a
partner of Schell Bray Aycock Abel & Livingston, P.L.L.C., a law firm that
provides legal services to the Company.
13
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,
1992 and reinvestment of dividends.
Measurement Period (MP) Kenan
- ----------------------- Transport NASDAQ Peer
(Fiscal Year Covered) Company Market Group
- ----------------------- --------- ---------- ---------
MP - 01/01/92 $100.00 $100.00 $100.00
FYE 12/31/92 118.60 122.28 100.98
FYE 12/31/93 149.51 138.51 121.13
FYE 12/31/94 152.62 133.17 127.17
FYE 12/31/95 183.24 112.90 164.96
FYE 12/31/96 170.03 106.65 204.98
(1) The peer group chosen consists of companies listed under Standard
Industrial Classification Code 4213 - trucking, except local.
14
INDEPENDENT PUBLIC ACCOUNTANTS
Arthur Andersen LLP served as the independent public accountants for
the Company in 1996 and they will be considered for appointment for 1997
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, North Carolina 27516-3910, on or before November 28, 1997 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 27, 1997
Chapel Hill, North Carolina
15
APPENDIX
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 27, 1997, 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 5, 1997 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 PAUL WRIGHT, JR.
THOMAS S. KENAN BRAXTON SCHELL KENNETH G. YOUNGER
(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)
(Continued from Reverse Side)
(2) In their discretion, the Proxies are authorized to vote upon such
other matters as may properly come before the meeting.
Dated , 1997
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Signature
-----------------------------
Signature
-----------------------------
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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