MARTEN TRANSPORT LTD (Form: 10-Q, Received: 11/09/2010 07:19:36)

UNITED STATES SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

Form 10-Q

Quarterly Report Under Section 13 or 15(d)

of the Securities Exchange Act of 1934

For the Quarter ended September 30, 2010

Commission File Number 0-15010

MARTEN TRANSPORT, LTD.

(Exact name of registrant as specified in its charter)

Delaware		39-1140809
(State of incorporation)		(I.R.S. employer identification no.)

129 Marten Street, Mondovi, Wisconsin 54755

(Address of principal executive offices)

715-926-4216

(Registrant’s telephone number)

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 by check mark whether the Registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (Section 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the Registrant was required to submit and post such files). Yes ¨ No ¨

Indicate by check mark whether the Registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act. Large accelerated filer ¨ Accelerated filer x Smaller reporting company ¨ Non-accelerated filer ¨ (Do not check if a smaller reporting company)

Indicate by check mark whether the Registrant is a shell company (as defined in Exchange Act Rule 12b-2). Yes ¨ No x

The number of shares outstanding of the Registrant’s Common Stock, par value $.01 per share, was 21,946,889 as of November 4, 2010.

PART I. FINANCIAL INFORMATION

Item 1. Financial Statements.

MARTEN TRANSPORT, LTD.

CONSOLIDATED CONDENSED BALANCE SHEETS

(Unaudited)

	September 30, 2010			December 31, 2009
(In thousands, except share information)
ASSETS
Current assets:
Cash and cash equivalents	$	4,370		$	5,410
Marketable securities		138			118
Receivables:
Trade, net		52,268			45,434
Other		9,472			4,382
Prepaid expenses and other		10,861			12,328
Deferred income taxes		5,727			5,172
Total current assets		82,836			72,844
Property and equipment:
Revenue equipment, buildings and land,
office equipment and other		518,072			491,127
Accumulated depreciation		(141,444	)		(149,670	)
Net property and equipment		376,628			341,457
Other assets		535			537
TOTAL ASSETS	$	459,999		$	414,838

LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities:
Checks issued in excess of cash balances	$	587		$	1,671
Accounts payable and accrued liabilities		33,748			31,896
Insurance and claims accruals		17,955			19,222
Current maturities of long-term debt		27,066			1,428
Total current liabilities		79,356			54,217
Long-term debt, less current maturities		-			71
Deferred income taxes		90,127			85,643
Total liabilities		169,483			139,931

Stockholders’ equity:
Marten Transport, Ltd. stockholders’ equity:
Preferred stock, $.01 par value per share;
2,000,000 shares authorized; no shares
issued and outstanding		-			-
Common stock, $.01 par value per share;
48,000,000 shares authorized; 21,934,232 shares
at September 30, 2010, and 21,885,073 shares at
December 31, 2009, issued and outstanding		219			219
Additional paid-in capital		77,785			76,477
Retained earnings		210,574			196,480
Total Marten Transport, Ltd. stockholders’ equity		288,578			273,176
Noncontrolling interest		1,938			1,731
Total stockholders’ equity		290,516			274,907
TOTAL LIABILITIES AND
STOCKHOLDERS’ EQUITY	$	459,999		$	414,838

The accompanying notes are an integral part of these consolidated condensed financial statements.

MARTEN TRANSPORT, LTD.

CONSOLIDATED CONDENSED STATEMENTS OF OPERATIONS

(Unaudited)

	Three Months						Nine Months
	Ended September 30,						Ended September 30,
(In thousands, except per share information)	2010			2009			2010			2009

OPERATING REVENUE	$	128,674		$	129,395		$	380,348		$	377,154

OPERATING EXPENSES (INCOME):
Salaries, wages and benefits		32,767			34,257			97,153			106,118
Purchased transportation		26,275			29,192			80,380			77,877
Fuel and fuel taxes		28,558			26,580			84,318			72,718
Supplies and maintenance		8,276			9,630			25,883			29,006
Depreciation		12,884			13,272			38,533			40,091
Operating taxes and licenses		1,505			1,591			4,584			4,969
Insurance and claims		4,413			5,356			12,249			15,555
Communications and utilities		1,143			1,011			3,010			3,078
Gain on disposition of revenue equipment		(184	)		(596	)		(812	)		(1,595	)
Other		3,051			2,566			8,837			8,047

Total operating expenses		118,688			122,859			354,135			355,864

OPERATING INCOME		9,986			6,536			26,213			21,290

NET INTEREST EXPENSE (INCOME)		44			(16	)		(36	)		19

INCOME BEFORE INCOME TAXES		9,942			6,552			26,249			21,271
Less: Income before income taxes
attributable to noncontrolling interest		308			93			365			354

INCOME BEFORE INCOME TAXES
ATTRIBUTABLE TO MARTEN
TRANSPORT, LTD.		9,634			6,459			25,884			20,917

PROVISION FOR INCOME TAXES		4,152			2,987			11,352			8,915

NET INCOME	$	5,482		$	3,472		$	14,532		$	12,002

BASIC EARNINGS PER COMMON SHARE	$	0.25		$	0.16		$	0.66		$	0.55

DILUTED EARNINGS PER COMMON SHARE	$	0.25		$	0.16		$	0.66		$	0.55

DIVIDENDS PAID PER COMMON SHARE	$	0.02		$	-		$	0.02		$	-

The accompanying notes are an integral part of these consolidated condensed financial statements.

MARTEN TRANSPORT, LTD.

CONSOLIDATED CONDENSED STATEMENTS OF STOCKHOLDERS’ EQUITY

(Unaudited)

	Marten Transport, Ltd. Stockholders
	Common Stock			Additional Paid-In		Retained			Non- controlling			Total Stock- holders’
(In thousands)	Shares	Amount		Capital		Earnings			Interest			Equity

Balance at December 31, 2008	21,830	$	218	$	75,305	$	180,213		$	1,715		$	257,451
Net income	-		-		-		12,002			-			12,002
Issuance of common stock from
share-based payment arrangement
exercises	55		1		331		-			-			332
Tax benefits from share-based payment
arrangement exercises	-		-		254		-			-			254
Share-based payment arrangement
compensation expense	-		-		461		-			-			461
Income before income taxes attributable
to noncontrolling interest	-		-		-		-			354			354
Noncontrolling interest distributions	-		-		-		-			(161	)		(161	)
Balance at September 30, 2009	21,885		219		76,351		192,215			1,908			270,693
Net income	-		-		-		4,265			-			4,265
Tax benefits from share-based payment
arrangement exercises	-		-		1		-			-			1
Share-based payment arrangement
compensation expense	-		-		125		-			-			125
Income before income taxes attributable
to noncontrolling interest	-		-		-		-			230			230
Noncontrolling interest distributions	-		-		-		-			(407	)		(407	)
Balance at December 31, 2009	21,885		219		76,477		196,480			1,731			274,907
Net income	-		-		-		14,532			-			14,532
Issuance of common stock from
share-based payment arrangement
exercises	49		-		234		-			-			234
Tax benefits from share-based payment
arrangement exercises	-		-		273		-			-			273
Share-based payment arrangement
compensation expense	-		-		801		-			-			801

Dividends on common stock	-		-		-		(438	)		-			(438	)
Income before income taxes attributable
to noncontrolling interest	-		-		-		-			365			365
Noncontrolling interest distributions	-		-		-		-			(158	)		(158	)
Balance at September 30, 2010	21,934	$	219	$	77,785	$	210,574		$	1,938		$	290,516

The accompanying notes are an integral part of these consolidated condensed financial statements.

MARTEN TRANSPORT, LTD.

CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS

(Unaudited)

	Nine Months Ended September 30,
(In thousands)	2010			2009
CASH FLOWS PROVIDED BY OPERATING ACTIVITIES:
Operations:
Net income	$	14,532		$	12,002
Adjustments to reconcile net income to net cash flows
from operating activities:
Depreciation		38,533			40,091
Gain on disposition of revenue equipment		(812	)		(1,595	)
Deferred income taxes		3,929			5,538
Tax benefits from share-based payment arrangement exercises		273			254
Excess tax benefits from share-based payment arrangement exercises		(235	)		(222	)
Share-based payment arrangement compensation expense		801			461
Income before income taxes attributable to noncontrolling interest		365			354
Changes in other current operating items:
Receivables		(11,924	)		1,037
Prepaid expenses and other		1,467			3,171
Accounts payable and accrued liabilities		251			2,823
Insurance and claims accruals		(1,267	)		(707	)
Net cash provided by operating activities		45,913			63,207
CASH FLOWS USED FOR INVESTING ACTIVITIES:
Revenue equipment additions		(93,981	)		(72,809	)
Proceeds from revenue equipment dispositions		31,732			23,036
Buildings and land, office equipment and other additions		(9,129	)		(4,439	)
Proceeds from buildings and land, office equipment and other dispositions		87			38
Net change in other assets		2			211
Purchases of marketable securities		(20	)		(109,663	)
Sales of marketable securities		-			107,517
Net cash used for investing activities		(71,309	)		(56,109	)
CASH FLOWS PROVIDED BY (USED FOR) FINANCING ACTIVITIES:
Borrowings under credit facility and long-term debt		121,409			-
Repayment of borrowings under credit facility and long-term debt		(95,842	)		(1,429	)
Issuance of common stock from share-based payment arrangement exercises		234			332
Excess tax benefits from share-based payment arrangement exercises		235			222
Dividends on common stock		(438	)		-
Change in net checks issued in excess of cash balances		(1,084	)		(566	)
Noncontrolling interest distributions		(158	)		(161	)
Net cash provided by (used for) financing activities		24,356			(1,602	)

NET CHANGE IN CASH AND CASH EQUIVALENTS		(1,040	)		5,496
CASH AND CASH EQUIVALENTS:
Beginning of period		5,410			2,395
End of period	$	4,370		$	7,891

SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
Cash paid for:
Interest	$	165		$	164
Income taxes	$	13,596		$	3,781
Non-cash investing activities:
Change in revenue equipment not yet paid for	$	1,601		$	2,518

The accompanying notes are an integral part of these consolidated condensed financial statements.

NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS

NINE MONTHS ENDED SEPTEMBER 30, 2010

(Unaudited)

(1) Basis of Presentation

The accompanying unaudited consolidated condensed financial statements have been prepared in accordance with U.S. generally accepted accounting principles for interim financial statements, and therefore do not include all information and disclosures required by U.S. generally accepted accounting principles for complete financial statements. In the opinion of management, such statements reflect all adjustments (consisting of normal recurring adjustments) considered necessary to fairly present our consolidated financial condition, results of operations and cash flows for the interim periods presented. The results of operations for any interim period do not necessarily indicate the results for the full year. The unaudited interim consolidated financial statements should be read with reference to the consolidated financial statements and notes to consolidated financial statements in our 2009 Annual Report on Form 10-K.

The accompanying unaudited consolidated condensed financial statements include the accounts of Marten Transport, Ltd., its subsidiaries and its 45% owned affiliate, MW Logistics, LLC (MWL). MWL is a third-party provider of logistics services to the transportation industry. We have applied the provisions of Financial Accounting Standards Board Accounting Standards Codification, or FASB ASC, 810, Consolidation to our investment in MWL and have determined that Marten is the primary beneficiary based on MWL’s equity structure. All material intercompany accounts and transactions have been eliminated in consolidation. MWL has elected to be classified as a partnership for federal income tax purposes. Consequently, federal income taxes are not payable by MWL.

(2) Earnings Per Common Share

Basic and diluted earnings per common share were computed as follows:

	Three Months Ended September 30,				Nine Months Ended September 30,
(In thousands, except per share amounts)	2010		2009		2010		2009
Numerator:
Net income	$	5,482	$	3,472	$	14,532	$	12,002
Denominator:
Basic earnings per common share -
weighted-average shares		21,934		21,885		21,920		21,865
Effect of dilutive stock options		107		103		103		117
Diluted earnings per common share -
weighted-average shares and
assumed conversions		22,041		21,988		22,023		21,982

Basic earnings per common share	$	0.25	$	0.16	$	0.66	$	0.55
Diluted earnings per common share	$	0.25	$	0.16	$	0.66	$	0.55

Options totaling 335,000 for each of the three-month and nine-month periods ended September 30, 2010 and 330,600 and 320,600 shares for the three-month and nine-month periods ended September 30, 2009, respectively, were outstanding but were not included in the calculation of diluted earnings per share because including the options in the denominator would be antidilutive, or decrease the number of weighted-average shares, due to their exercise prices exceeding the average market price of the common shares or due to inclusion of average unrecognized compensation expense in the calculation. Performance-based option awards totaling 107,000 shares for each of the 2010 and 2009 periods were also not included in the calculation of diluted earnings per share because the performance condition was not considered probable of achievement.

Unvested performance unit awards (see Note 7) totaling 28,530 shares for each of the 2010 periods were considered outstanding but were not included in the calculation of diluted earnings per share because inclusion of average unrecognized compensation expense in the calculation would cause the performance units to be antidilutive.

(3) Long-Term Debt

We maintain a credit agreement that provides for a five-year unsecured committed credit facility maturing in September 2011 in an aggregate principal amount of up to $50 million. The aggregate principal amount of the credit facility may be increased at our option, subject to completion of signed amendments with participating banks, up to a maximum aggregate principal amount of $100 million. At September 30, 2010, the credit facility had an outstanding principal balance of $27.1 million, outstanding standby letters of credit of $8.3 million and remaining borrowing availability of $14.6 million. This facility bears interest at a variable rate based on the London Interbank Offered Rate or the agent bank’s Prime Rate, in each case plus/minus applicable margins. The weighted average interest rate for the facility was 0.86% at September 30, 2010. The $27.1 million outstanding principal balance on the credit facility was classified as a current liability in our consolidated condensed balance sheet as of September 30, 2010 because the maturity date of the facility is within the next twelve months.

(4) Related Party Transactions

We purchase fuel and obtain tires and related services from Bauer Built, Inc., or BBI. Jerry M. Bauer, one of our directors, is the president and a stockholder of BBI. We paid BBI $558,000 in the first nine months of 2010 and $590,000 in the first nine months of 2009 for fuel and tire services. In addition, we paid $1.3 million in the first nine months of 2010 and $1.1 million in the first nine months of 2009 to tire manufacturers for tires that we purchased from the tire manufacturers but were provided by BBI. BBI received commissions from the tire manufacturers related to these purchases.

We paid Durand Builders Service, Inc. $89,000 in the first nine months of 2010 and $1.1 million in the first nine months of 2009 for various construction projects. Larry B. Hagness, one of our directors, is the president and owner of Durand Builders Service, Inc.

(5) Income Taxes

Our effective income tax rate increased to 43.9% for the first nine months of 2010 from 42.6% for the first nine months of 2009, primarily because of the nondeductible effect of a per diem pay structure for our drivers which was more broadly implemented during the third quarter of 2009 and further increased in the first quarter of 2010.

Our reserves for unrecognized tax benefits were $194,000 as of September 30, 2010 and $158,000 as of December 31, 2009. The $36,000 increase in the amount reserved in the first nine months of 2010 relates to current period tax positions. The amount reserved as of December 31, 2009 was added in 2007 through 2009 relating to current period tax positions. If recognized, $126,000 of the unrecognized tax benefits as of September 30, 2010 would impact our effective tax rate. No potential interest or penalties related to unrecognized tax benefits were recognized in our financial statements as of September 30, 2010. We do not expect the reserves for unrecognized tax benefits to change significantly within the next twelve months.

The federal statute of limitations remains open for 2007 and forward. We file tax returns in numerous state jurisdictions with varying statutes of limitations.

(6) Dividends

On August 18, 2010, we announced that our Board of Directors approved a regular cash dividend program to our stockholders, subject to approval each quarter. The first quarterly cash dividend of $0.02 per share of common stock was payable to stockholders of record on August 30, 2010, and was paid on September 10, 2010.

(7) Accounting for Share-based Payment Arrangement Compensation

We account for share-based payment arrangements in accordance with FASB ASC 718, Compensation – Stock Compensation . During the nine months ended September 30, 2010, there were no significant changes to the structure of our stock option plans. Pre-tax stock option compensation expense recorded in the first nine months of 2010 and 2009 was $641,000 and $461,000, respectively.

In August 2010, we granted 63,400 performance unit awards to certain employees. As of December 31, 2010 and each December 31 st thereafter through December 31, 2014, each award will vest and become the right to receive a number of shares of common stock equal to a total vesting percentage multiplied by the number of units subject to such award. The total vesting percentage for each of the five years is equal to the sum of a performance vesting percentage, which is the percentage increase, if any, in our diluted net income per share for the year being measured over the prior year, and a service vesting percentage of five percentage points. The goal of the awards is to incentivize the certain employees to increase our earnings an average of fifteen percent per year over five years, which, when combined with the five percent per year service-based component, would result in full vesting over five years. The performance vesting percentage could be achieved earlier than in five years if annual earnings growth exceeds the average of fifteen percent, or not fully achieved if the annual earnings growth averages less than fifteen percent over the five-year period. All payments will be made in shares of our common stock. One half of the vested performance units will be paid to the employees immediately upon vesting, while the other half will be credited to the employees’ accounts within the Marten Transport, Ltd. Deferred Compensation Plan, which restricts the sale of vested shares for a specified period of time.

The fair value of each performance unit is based on the closing market price on the date of grant. We recognize compensation expense for these awards based on the estimated number of units probable of achieving the vesting requirements of the awards, net of an estimated forfeiture rate. Pre-tax compensation expense of $160,000 was recorded in the third quarter of 2010 relating to these awards. As of September 30, 2010, there was a total of $1.2 million of unrecognized compensation expense related to these awards. The amount of future expense to be recognized will be based on our earnings growth and certain other conditions.

See Note 8 to our consolidated financial statements in our 2009 Annual Report on Form 10-K for a detailed description of stock-based awards under our 2005 Stock Incentive Plan and 1995 Stock Incentive Plan.

(8) Deferred Compensation Plan

In August 2010, our Board of Directors approved and adopted the Marten Transport, Ltd. Deferred Compensation Plan. The deferred compensation plan is an unfunded, non-qualified deferred compensation plan designed to allow board elected officers and other select members of our management designated by our Compensation Committee to save for retirement on a tax-deferred basis.

Under the terms of the plan, each participant is eligible to defer portions of their base pay, annual bonus, or receipt of common stock otherwise payable under a vested performance unit award. Each participant can elect a fixed distribution date for the participant’s deferral account other than certain required performance unit award deferrals credited to the discretionary account, which will be distributed after the later of the date of the participant’s termination of employment or the date the participant attains age 62. Upon termination of a participant’s employment with the company, the plan requires a lump-sum distribution of the deferral account, excluding the required performance unit award deferrals, unless the participant had elected an installment distribution. Upon a participant’s death, the plan provides that a participant’s distributions accelerate and will be paid in a lump sum to the participant’s beneficiary. We may terminate the plan and accelerate distributions to participants, but only to the extent and at the times permitted under Section 409A of the Internal Revenue Code of 1986, as amended. We may terminate the plan and accelerate distributions upon a change in control, which is not a payment event under the plan. In conjunction with the approval of the plan, our Board of Directors also adopted an amendment to the Marten Transport, Ltd. 2005 Stock Incentive Plan to allow for deferral of receipt of income from a performance unit award under the plan. As of September 30, 2010, there were no participant account balances within the plan.

(9) Fair Value of Financial Instruments

The carrying amounts of accounts receivable, direct financing leases receivable and accounts payable approximate fair value because of the short maturity of these instruments. The carrying value of our long-term debt approximates fair value as the credit facility bears interest based upon a variable interest rate.

(10) Commitments and Contingencies

We are committed to: (a) purchase $4.4 million of new revenue equipment through 2011; (b) building construction expenditures of $4.7 million through 2011; and (c) operating lease obligation expenditures totaling $584,000 through 2013.

We are involved in legal actions that arise in the ordinary course of business. Although the outcomes of any such legal actions cannot be predicted, in the opinion of management, the resolution of any currently pending or threatened actions will not have a material adverse effect upon our financial position or results of operations.

(11) Business Segments

Our presentation includes two reporting segments – Truckload and Logistics. The primary source of our operating revenue is truckload revenue, which we generate by transporting freight for our customers and report within our Truckload segment. Generally, we are paid by the mile for our services. We also derive truckload revenue from fuel surcharges, loading and unloading activities, equipment detention and other ancillary services.

Our operating revenue also includes revenue reported within our Logistics segment, which consists of revenue from our internal brokerage and intermodal operations, both launched in 2005, and through our 45% interest in MWL, a third-party provider of logistics services to the transportation industry. Brokerage services involve arranging for another company to transport freight for our customers while we retain the billing, collection and customer management responsibilities. Intermodal services involve the transport of our trailers on railroad flatcars for a portion of a trip, with the balance of the trip using our tractors or, to a lesser extent, contracted carriers.

The following table sets forth for the periods indicated our operating revenue, operating income and operating ratio by segment. We do not prepare separate balance sheets by segment and, as a result, assets are not separately identifiable by segment.

	Three Months Ended September 30,						Nine Months Ended September 30,
(Dollars in thousands)	2010			2009			2010			2009
Operating revenue:
Truckload revenue, net of fuel
surcharge revenue	$	81,370		$	86,324		$	242,856		$	262,828
Truckload fuel surcharge revenue		16,550			13,942			48,681			35,065
Total Truckload revenue		97,920			100,266			291,537			297,893

Logistics revenue, net of intermodal
fuel surcharge revenue(1)		28,457			27,362			82,364			75,237
Intermodal fuel surcharge revenue		2,297			1,767			6,447			4,024
Total Logistics revenue		30,754			29,129			88,811			79,261

Total operating revenue	$	128,674		$	129,395		$	380,348		$	377,154

Operating income:
Truckload	$	8,326		$	5,047		$	21,759		$	16,577
Logistics		1,660			1,489			4,454			4,713
Total operating income	$	9,986		$	6,536		$	26,213		$	21,290

Operating ratio(2):
Truckload		91.5	%		95.0	%		92.5	%		94.4	%
Logistics		94.6			94.9			95.0			94.1
Consolidated operating ratio		92.2	%		94.9	%		93.1	%		94.4	%

(1)

Logistics revenue is net of $2.6 million and $6.7 million of inter-segment revenue in the three-month and nine-month periods ended September 30, 2010, respectively, for loads transported by our tractors and arranged by MWL that have been eliminated in consolidation. Inter-segment revenue was $2.1 million and $7.9 million for the three-month and nine-month periods ended September 30, 2009.

(2)	Represents operating expenses as a percentage of operating revenue.

(12) Use of Estimates

We must make estimates and assumptions to prepare the consolidated condensed financial statements in conformity with U.S. generally accepted accounting principles. These estimates and assumptions affect the reported amounts of assets and liabilities and the disclosure of contingent assets and liabilities in the consolidated condensed financial statements. These estimates are primarily related to insurance and claims accruals and depreciation. Ultimate results could differ from these estimates.

(13) Reclassifications

The net interest expense balance of $19,000 for the first nine months of 2009 in our consolidated condensed statements of operations has been reclassified to be consistent with the current presentation. This reclassification does not have a material effect on our consolidated condensed financial statements.

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations.

The following discussion and analysis of our financial condition and results of operations should be read together with the selected consolidated financial data and our consolidated condensed financial statements and the related notes appearing elsewhere in this report. This discussion and analysis contains forward-looking statements that involve risks, uncertainties and assumptions. Our actual results may differ materially from those anticipated in these forward-looking statements as a result of many factors, including but not limited to those included in our Form 10-K, Part 1, Item 1A for the year ended December 31, 2009. We do not assume, and specifically disclaim, any obligation to update any forward-looking statement contained in this report.

Overview

The primary source of our operating revenue is truckload revenue, which we generate by transporting long-haul and regional freight for our customers and report within our Truckload segment. Generally, we are paid by the mile for our services. We also derive truckload revenue from fuel surcharges, loading and unloading activities, equipment detention and other ancillary services. The main factors that affect our truckload revenue are the rate per mile we receive from our customers, the percentage of miles for which we are compensated, the number of miles we generate with our equipment and changes in fuel prices. We monitor our revenue production primarily through average truckload revenue, net of fuel surcharges, per tractor per week. We also analyze our average truckload revenue, net of fuel surcharges, per total mile, non-revenue miles percentage, the miles per tractor we generate, our accessorial revenue and our other sources of operating revenue.

In addition to the factors discussed above, our operating revenue is also affected by, among other things, the United States economy, inventory levels, the level of truck and rail capacity in the transportation market and specific customer demand.

Our operating revenue increased $3.2 million, or 0.8%, in the first nine months of 2010. This increase was primarily due to fuel surcharge revenue increasing by $16.0 million, or 41.0%, caused by significantly higher fuel prices in the first nine months of 2010. Our operating revenue, net of fuel surcharges, decreased $12.8 million, or 3.8%, compared with the first nine months of 2009. Truckload segment revenue, net of fuel surcharges, decreased 7.6% primarily due to a decrease in our average fleet size of 285 tractors, or 11.9%, partially offset by an increase in our average truckload revenue, net of fuel surcharges, per tractor per week of 4.9% in the first nine months of 2010. The changes in our operating statistics are primarily the result of the continued growth of our regional temperature-controlled operations, which we have increased to 48.2% of our truckload fleet as of September 30, 2010 from 21.7% as of September 30, 2009. By focusing on shorter lengths of haul in certain defined areas, we are addressing customer trends toward regional distribution to lower their transportation expense, furthering our own objectives of reducing fuel consumption per load, and matching some of our drivers’ desires to stay closer to home. The concentration of a portion of our fleet in these markets is evident in a 15.0% reduction from the first nine months of 2009 in average length of haul to 664 miles. Logistics segment revenue, net of intermodal fuel surcharges, increased 9.5% compared with the first nine months of 2009. The increase in logistics revenue primarily resulted from volume growth in each of our internal brokerage and intermodal services and in the logistics services provided by MWL. Logistics revenue represented 23.3% of our operating revenue in the first nine months of 2010 compared to 21.0% in the first nine months of 2009.

Our profitability on the expense side is impacted by variable costs of transporting freight for our customers, fixed costs, and expenses containing both fixed and variable components. The variable costs include fuel expense, driver-related expenses, such as wages, benefits, training, and recruitment, and independent contractor costs, which are recorded under purchased transportation. Expenses that have both fixed and variable components include maintenance and tire expense and our total cost of insurance and claims. These expenses generally vary with the miles we travel, but also have a controllable component based on safety, fleet age, efficiency and other factors. Our main fixed costs relate to the acquisition and financing of long-term assets, such as revenue equipment and operating terminals. We expect our annual cost of tractor and trailer ownership will increase in future periods as a result of higher prices of new equipment. Although certain factors affecting our expenses are beyond our control, we monitor them closely and attempt to anticipate changes in these factors in managing our business. For example, fuel prices fluctuated dramatically at various times during the last several years, with the D.O.E. national average cost of fuel increasing to $2.94 per gallon in the first nine months of 2010 from $2.38 per gallon in the first nine months of 2009. We manage our exposure to changes in fuel prices primarily through fuel surcharge programs with our customers, as well as through volume fuel purchasing arrangements with national fuel centers and bulk purchases of fuel at our terminals. To help further reduce fuel expense, we installed auxiliary power units in our tractors to provide climate control and electrical power for our drivers without idling the tractor engine. For our Logistics segment, our profitability on the expense side is impacted by the percentage of logistics revenue we pay to providers for the transportation services we arrange.

Our operating expenses as a percentage of operating revenue, or “operating ratio,” was 93.1% in the first nine months of 2010 compared with 94.4% in the first nine months of 2009. Operating expenses as a percentage of operating revenue, with both amounts net of fuel surcharge revenue, improved to 91.9% for the 2010 nine-month period from 93.7% for the 2009 nine-month period. Our net income increased to $14.5 million in the first nine months of 2010 from $12.0 million in the first nine months of 2009. The increased profitability in 2010 was primarily due to the improvement in our overall cost structure and the increase in revenue per tractor per week in our Truckload segment.

Our business requires substantial, ongoing capital investments, particularly for new tractors and trailers. At September 30, 2010, we had approximately $3.9 million of cash and cash equivalents and marketable securities, net of checks issued in excess of cash balances, $27.1 million of long-term debt, including current maturities, and $290.5 million in stockholders’ equity. In the first nine months of 2010, net cash flows provided by operating and financing activities were primarily used to purchase new revenue equipment, net of proceeds from dispositions, in the amount of $62.2 million and to partially construct two regional operating facilities in the amount of $7.4 million. We estimate that capital expenditures, net of proceeds from dispositions, will be approximately $10 million for the remainder of 2010. We paid our first cash dividend of $0.02 per share of common stock in the third quarter of 2010 totaling $438,000. We believe our sources of liquidity are adequate to meet our current and anticipated needs for at least the next twelve months. Based upon anticipated cash flows, existing cash and cash equivalents balances, current borrowing availability and other sources of financing we expect to be available to us, we do not anticipate any significant liquidity constraints in the foreseeable future.

We have been transforming our business strategy toward a more-diversified set of transportation service solutions, primarily regional temperature-controlled operations along with intermodal and brokerage services, to align our growth with customer trends. We believe that we are well-positioned regardless of the economic environment with this transformation of our services combined with our competitive position, cost control emphasis, modern fleet and strong balance sheet.

This Management’s Discussion and Analysis of Financial Condition and Results of Operations includes discussions of operating, truckload and logistics revenue, and operating expenses as a percentage of operating revenue, each net of fuel surcharge revenue, and net fuel expense (fuel and fuel taxes net of fuel surcharge revenue and surcharges passed through to independent contractors, outside drayage carriers and railroads). We provide these additional disclosures because management believes these measures provide a more consistent basis for comparing results of operations from period to period. These financial measures in this report have not been determined in accordance with U.S. generally accepted accounting principles (GAAP). Pursuant to Item 10(e) of Regulation S-K, we have included the amounts necessary to reconcile these non-GAAP financial measures to the most directly comparable GAAP financial measures, operating revenue, operating expenses divided by operating revenue, and fuel and fuel taxes.

Results of Operations

The following table sets forth for the periods indicated certain operating statistics regarding our revenue and operations:

	Three Months Ended September 30,				Nine Months Ended September 30,
	2010		2009		2010		2009

Truckload Segment:
Total Truckload revenue (in thousands)	$	97,920	$	100,266	$	291,537	$	297,893
Average truckload revenue, net of fuel surcharges, per
tractor per week(1)	$	3,084	$	2,725	$	2,953	$	2,816
Average tractors (1)		2,007		2,410		2,108		2,393
Average miles per trip		645		728		664		781
Total miles – company-employed drivers (in thousands)		47,881		51,818		144,588		156,487
Total miles – independent contractors (in thousands)		3,007		6,120		11,354		18,108

Logistics Segment:
Total Logistics revenue (in thousands):	$	30,754	$	29,129	$	88,811	$	79,261
Brokerage:
Marten Transport
Revenue (in thousands)	$	9,031	$	9,796	$	28,695	$	25,117
Loads		5,059		5,416		15,854		13,568
MWL
Revenue (in thousands)	$	9,185	$	8,371	$	25,321	$	23,363
Loads		5,380		4,775		14,349		13,594
Intermodal:
Revenue (in thousands)	$	12,538	$	10,962	$	34,795	$	30,781
Loads		5,332		4,929		14,755		13,238
Average tractors		74		65		67		61

(1)	Includes tractors driven by both company-employed drivers and independent contractors. Independent contractors provided 96 and 205 tractors as of September 30, 2010 and 2009, respectively.

Comparison of Three Months Ended September 30, 2010 to Three Months Ended September 30, 2009

The following table sets forth for the periods indicated our operating revenue, operating income and operating ratio by segment, along with the change for each component:

							Dollar			Percentage
							Change			Change
	Three Months Ended						Three Months Ended			Three Months Ended
	September 30,						September 30,			September 30,
(Dollars in thousands)	2010			2009			2010 vs. 2009			2010 vs. 2009
Operating revenue:
Truckload revenue, net of fuel
surcharge revenue	$	81,370		$	86,324		$	(4,954	)		(5.7	)%
Truckload fuel surcharge revenue		16,550			13,942			2,608			18.7
Total Truckload revenue		97,920			100,266			(2,346	)		(2.3	)

Logistics revenue, net of intermodal
fuel surcharge revenue(1)		28,457			27,362			1,095			4.0
Intermodal fuel surcharge revenue		2,297			1,767			530			30.0
Total Logistics revenue		30,754			29,129			1,625			5.6

Total operating revenue	$	128,674		$	129,395		$	(721	)		(0.6	)%

Operating income:
Truckload	$	8,326		$	5,047		$	3,279			65.0	%
Logistics		1,660			1,489			171			11.5
Total operating income	$	9,986		$	6,536		$	3,450			52.8	%

Operating ratio(2):
Truckload		91.5	%		95.0	%					(3.7	)%
Logistics	94.6				94.9						(0.3	)
Consolidated operating ratio	92.2		%		94.9	%					(2.8	)%

(1)	Logistics revenue is net of $2.6 million and $2.1 million of inter-segment revenue in the 2010 and 2009 periods, respectively, for loads transported by our tractors and arranged by MWL that have been eliminated in consolidation.

(2)	Represents operating expenses as a percentage of operating revenue.

Our operating revenue decreased $721,000, or 0.6%, to $128.7 million in the 2010 period from $129.4 million in the 2009 period. Our operating revenue, net of fuel surcharges, decreased $3.9 million, or 3.4%, to $109.8 million in the 2010 period from $113.7 million in the 2009 period. The decrease in operating revenue, net of fuel surcharges, was due to a decrease in truckload revenue, net of fuel surcharges, partially offset by growth in logistics revenue. Fuel surcharge revenue increased to $18.8 million in the 2010 period from $15.7 million in the 2009 period, caused by significantly higher fuel prices in the 2010 period.

Truckload segment revenue decreased $2.3 million, or 2.3%, to $97.9 million in the 2010 period from $100.3 million in the 2009 period. Truckload segment revenue, net of fuel surcharges, decreased 5.7% primarily due to a decrease in our average fleet size of 403 tractors, or 16.7%, partially offset by an increase in our average truckload revenue, net of fuel surcharges, per tractor per week of 13.2% in the 2010 period from the 2009 period. The changes in our operating statistics are primarily the result of the continued growth of our regional temperature-controlled operations, which we have increased to 48.2% of our truckload fleet as of September 30, 2010 from 21.7% as of September 30, 2009. By focusing on shorter lengths of haul in certain defined areas, we are addressing customer trends toward regional distribution to lower their transportation expense, furthering our own objectives of reducing fuel consumption per load, and matching some of our drivers’ desires to stay closer to home. The concentration of a portion of our fleet in these markets is evident in an 11.4% reduction from the 2009 period in average length of haul to 645 miles. The improvement in our overall cost structure and the increase in revenue per tractor per week primarily caused the increase in profitability from the 2009 period.

Logistics segment revenue increased $1.6 million, or 5.6%, to $30.8 million in the 2010 period from $29.1 million in the 2009 period. Logistics segment revenue, net of intermodal fuel surcharges, increased 4.0%. The increase in logistics revenue primarily resulted from continued volume growth in our intermodal services and in the logistics services provided by MWL, partially offset by a volume decrease in our internal brokerage services.

The following table sets forth for the periods indicated the dollar and percentage increase or decrease of the items in our unaudited consolidated condensed statements of operations, and those items as a percentage of operating revenue:

	Dollar Change			Percentage Change			Percentage of Operating Revenue
	Three Months Ended September 30,			Three Months Ended September 30,			Three Months Ended September 30,
(Dollars in thousands)	2010 vs. 2009			2010 vs. 2009			2010			2009

Operating revenue	$	(721	)		(0.6	)%		100.0	%		100.0	%
Operating expenses (income):
Salaries, wages and benefits		(1,490	)		(4.3	)		25.5			26.5
Purchased transportation		(2,917	)		(10.0	)		20.4			22.6
Fuel and fuel taxes		1,978			7.4			22.2			20.5
Supplies and maintenance		(1,354	)		(14.1	)		6.4			7.4
Depreciation		(388	)		(2.9	)		10.0			10.3
Operating taxes and licenses		(86	)		(5.4	)		1.2			1.2
Insurance and claims		(943	)		(17.6	)		3.4			4.1
Communications and utilities		132			13.1			0.9			0.8
Gain on disposition of
revenue equipment		412			69.1			(0.1	)		(0.5	)
Other		485			18.9			2.4			2.0
Total operating expenses		(4,171	)		(3.4	)		92.2			94.9
Operating income		3,450			52.8			7.8			5.1
Net interest expense (income)		60			375.0			-			-
Income before income taxes		3,390			51.7			7.7			5.1
Less: Income before income
taxes attributable to
noncontrolling interest		215			231.2			0.2			0.1
Income before income taxes
attributable to Marten
Transport, Ltd.		3,175			49.2			7.5			5.0
Provision for income taxes		1,165			39.0			3.2			2.3
Net income	$	2,010			57.9	%	4.3		%		2.7	%

Salaries, wages and benefits consist of compensation for our employees, including both driver and non-driver employees, employees’ health insurance, 401(k) plan contributions and other fringe benefits. These expenses vary depending upon the ratio of company drivers to independent contractors, our efficiency, our experience with employees’ health insurance claims, changes in health care premiums and other factors. The decrease in salaries, wages and benefits resulted primarily from a 7.6% decrease in the total miles driven by company drivers coupled with a broader implementation of our per diem pay structure for our drivers from the 2009 period to the 2010 period, along with a $529,000 decrease in our self-insured medical claims, which decreased our employees’ health insurance expense.

Purchased transportation consists of payments to independent contractor providers of revenue equipment and to carriers for transportation services we arrange in connection with brokerage and intermodal activities. This category will vary depending upon the ratio of company drivers versus independent contractors, the amount of fuel surcharges passed through to independent contractors and the amount and rates, including fuel surcharges, we pay to third-party railroad and motor carriers. Purchased transportation expense decreased $2.9 million in total, or 10.0%, in the 2010 period from the 2009 period. Payments to carriers for transportation services we arranged in our brokerage and intermodal operations increased $552,000 to $22.6 million in the 2010 period from $22.0 million in the 2009 period. The portion of purchased transportation expense related to our independent contractors, including fuel surcharges, decreased $3.5 million in the 2010 period, primarily due to a decrease in the number of independent contractor-owned tractors in our fleet. We expect that purchased transportation expense will increase as we continue to grow our Logistics segment.

Net fuel expense (fuel and fuel taxes net of fuel surcharge revenue and surcharges passed through to independent contractors, outside drayage carriers and railroads) decreased $1.4 million, or 10.6%, to $11.8 million in the 2010 period from $13.2 million in the 2009 period. Fuel surcharges passed through to independent contractors, outside drayage carriers and railroads were $2.1 million in the 2010 period and $2.4 million in the 2009 period. We have worked diligently to control fuel usage and costs by improving our volume purchasing arrangements and optimizing our drivers’ fuel purchases with national fuel centers, focusing on shorter lengths of haul, installing and tightly managing the use of auxiliary power units in our tractors to minimize engine idling and improving fuel usage in our trailers’ refrigeration units. Auxiliary power units, which we have installed in our company-owned tractors, provide climate control and electrical power for our drivers without idling the tractor engine. The decrease in net fuel expense was primarily due to a 7.6% decrease in the total miles driven by our company-owned fleet and to the cost control measures stated above, which were partially offset by a significant increase in the D.O.E. national average cost of fuel to $2.94 per gallon in the 2010 period from $2.60 per gallon in the 2009 period. Net fuel expense represented 12.9% of truckload and intermodal revenue, net of fuel surcharges, in the 2010 period, compared with 13.9% in the 2009 period.

Supplies and maintenance consist of repairs, maintenance, tires, parts, oil and engine fluids, along with load-specific expenses including loading/unloading, tolls, pallets and trailer hostling. The decrease in supplies and maintenance in the 2010 period primarily resulted from a decrease in outside vendor maintenance on our revenue equipment which we were able to achieve by increasing the capacity of our regional maintenance facilities. Our maintenance practices were consistent with the 2009 period.

Insurance and claims consist of the costs of insurance premiums and the accruals we make for claims within our self-insured retention amounts, primarily for personal injury, property damage, physical damage to our equipment, cargo claims and workers’ compensation claims. These expenses will vary primarily based upon the frequency and severity of our accident experience, our self-insured retention levels and the market for insurance. The $943,000 decrease in insurance and claims in the 2010 period was primarily due to a decrease in our self-insured workers’ compensation accident claims and to reduced physical damage claims related to our tractors and trailers. Our significant self-insured retention exposes us to the possibility of significant fluctuations in claims expense between periods depending on the frequency, severity and timing of claims and to adverse financial results if we incur large or numerous losses.

Gain on disposition of revenue equipment decreased to $184,000 in the 2010 period from $596,000 in the 2009 period as a result of decreases in the market value for used revenue equipment and in the number of tractors sold, which were partially offset by an increase in the number of trailers sold. Future gains or losses on disposition of revenue equipment will be impacted by the market for used revenue equipment, which is beyond our control. We do not expect our gain on disposition to improve in the near future as we believe that there are few buyers with adequate financing in comparison with available inventory.

As a result of the foregoing factors, our operating expenses as a percentage of operating revenue, or “operating ratio,” was 92.2% in the 2010 period compared with 94.9% in the 2009 period. The operating ratio for our Truckload segment improved to 91.5% from 95.0% in the 2009 period and the operating ratio for our Logistics segment improved to 94.6% from 94.9% in the 2009 period. Operating expenses as a percentage of operating revenue, with both amounts net of fuel surcharge revenue, improved to 90.9% for the 2010 period from 94.3% for the 2009 period.

Our effective income tax rate decreased to 43.1% in the 2010 period from 46.2% in the 2009 period, primarily because of a cumulative adjustment recorded in the 2009 period for the nondeductible effect of a per diem pay structure for our drivers.

As a result of the factors described above, net income increased to $5.5 million in the 2010 period from $3.5 million in the 2009 period. Net earnings increased to $0.25 per diluted share in the 2010 period from $0.16 per diluted share in the 2009 period.

Comparison of Nine Months Ended September 30, 2010 to Nine Months Ended September 30, 2009

The following table sets forth for the periods indicated our operating revenue, operating income and operating ratio by segment, along with the change for each component:

	Nine Months Ended September 30,						Dollar Change Nine Months Ended September 30,			Percentage Change Nine Months Ended September 30,
(Dollars in thousands)	2010			2009			2010 vs. 2009			2010 vs. 2009
Operating revenue:
Truckload revenue, net of fuel
surcharge revenue	$	242,856		$	262,828		$	(19,972	)		(7.6	)%
Truckload fuel surcharge revenue		48,681			35,065			13,616			38.8
Total Truckload revenue		291,537			297,893			(6,356	)		(2.1	)

Logistics revenue, net of intermodal
fuel surcharge revenue(1)		82,364			75,237			7,127			9.5
Intermodal fuel surcharge revenue		6,447			4,024			2,423			60.2
Total Logistics revenue		88,811			79,261			9,550			12.0

Total operating revenue	$	380,348		$	377,154		$	3,194			0.8	%

Operating income:
Truckload	$	21,759		$	16,577		$	5,182			31.3	%
Logistics		4,454			4,713			(259	)		(5.5	)
Total operating income	$	26,213		$	21,290		$	4,923			23.1	%

Operating ratio(2):
Truckload	92.5		%		94.4	%					(2.0	)%
Logistics		95.0			94.1						1.0
Consolidated operating ratio		93.1	%		94.4	%					(1.4	)%

(1)	Logistics revenue is net of $6.7 million and $7.9 million of inter-segment revenue in the 2010 and 2009 periods, respectively, for loads transported by our tractors and arranged by MWL that have been eliminated in consolidation.

(2)	Represents operating expenses as a percentage of operating revenue.

Our operating revenue increased $3.2 million, or 0.8%, to $380.3 million in the 2010 period from $377.2 million in the 2009 period. This increase was primarily due to fuel surcharge revenue increasing to $55.1 million in the 2010 period from $39.1 million in the 2009 period, caused by significantly higher fuel prices in the 2010 period. Our operating revenue, net of fuel surcharges, decreased $12.8 million, or 3.8%, to $325.2 million in the 2010 period from $338.1 million in the 2009 period. The decrease in operating revenue, net of fuel surcharges, was due to a decrease in truckload revenue, net of fuel surcharges, partially offset by growth in logistics revenue.

Truckload segment revenue decreased $6.4 million, or 2.1%, to $291.5 million in the 2010 period from $297.9 million in the 2009 period. Truckload segment revenue, net of fuel surcharges, decreased 7.6% primarily due to a decrease in our average fleet size of 285 tractors, or 11.9%, partially offset by an increase in our average truckload revenue, net of fuel surcharges, per tractor per week of 4.9% in the 2010 period from the 2009 period. The changes in our operating statistics are primarily the result of the continued growth of our regional temperature-controlled operations, which we have increased to 48.2% of our truckload fleet as of September 30, 2010 from 21.7% as of September 30, 2009. By focusing on shorter lengths of haul in certain defined areas, we are addressing customer trends toward regional distribution to lower their transportation expense, furthering our own objectives of reducing fuel consumption per load, and matching some of our drivers’ desires to stay closer to home. The concentration of a portion of our fleet in these markets is evident in a 15.0% reduction from the 2009 period in average length of haul to 664 miles. The improvement in our overall cost structure and the increase in revenue per tractor per week primarily caused the increase in profitability from the 2009 period.

Logistics segment revenue increased $9.6 million, or 12.0%, to $88.8 million in the 2010 period from $79.3 million in the 2009 period. Logistics segment revenue, net of intermodal fuel surcharges, increased 9.5%. The increase in logistics revenue primarily resulted from volume growth in each of our internal brokerage and intermodal services and in the logistics services provided by MWL. The increase in the operating ratio for our Logistics segment in the 2010 period was primarily due to an increase as a percentage of logistics revenue in the payments made to carriers for our brokerage services due to overall carrier constraint.

	Dollar Change			Percentage Change			Percentage of Operating Revenue
	Nine Months Ended September 30,			Nine Months Ended September 30,			Nine Months Ended September 30,
(Dollars in thousands)	2010 vs. 2009			2010 vs. 2009			2010			2009

Operating revenue	$	3,194			0.8	%		100.0	%		100.0	%
Operating expenses (income):

Salaries, wages and benefits		(8,965	)		(8.4	)		25.5			28.1
Purchased transportation		2,503			3.2			21.1			20.6
Fuel and fuel taxes		11,600			16.0			22.2			19.3
Supplies and maintenance		(3,123	)		(10.8	)		6.8			7.7
Depreciation		(1,558	)		(3.9	)		10.1			10.6
Operating taxes and licenses		(385	)		(7.7	)		1.2			1.3
Insurance and claims		(3,306	)		(21.3	)		3.2			4.1
Communications and utilities		(68	)		(2.2	)		0.8			0.8
Gain on disposition of
revenue equipment		783			49.1			(0.2	)		(0.4	)
Other		790			9.8			2.3			2.1
Total operating expenses		(1,729	)		(0.5	)		93.1			94.4
Operating income		4,923			23.1			6.9			5.6
Net interest expense (income)		(55	)		(289.5	)		-			-
Income before income taxes		4,978			23.4			6.9			5.6
Less: Income before income
taxes attributable to
noncontrolling interest		11			3.1			0.1			0.1
Income before income taxes
attributable to Marten
Transport, Ltd.		4,967			23.7			6.8			5.5
Provision for income taxes		2,437			27.3			3.0			2.4
Net income	$	2,530			21.1	%	3.8		%		3.2	%

The decrease in salaries, wages and benefits resulted primarily from a 7.6% decrease in the total miles driven by company drivers coupled with a broader implementation of our per diem pay structure for our drivers from the 2009 period to the 2010 period, along with an $884,000 decrease in our self-insured medical claims, which decreased our employees’ health insurance expense.

Purchased transportation expense increased $2.5 million in total, or 3.2%, in the 2010 period from the 2009 period. Payments to carriers for transportation services we arranged in our brokerage and intermodal operations increased $8.2 million to $66.5 million in the 2010 period from $58.3 million in the 2009 period. The portion of purchased transportation expense related to our independent contractors, including fuel surcharges, decreased $5.7 million in the 2010 period, primarily due to a decrease in the number of independent contractor-owned tractors in our fleet.

Net fuel expense (fuel and fuel taxes net of fuel surcharge revenue and surcharges passed through to independent contractors, outside drayage carriers and railroads) decreased $3.3 million, or 8.5%, to $35.9 million in the 2010 period from $39.2 million in the 2009 period. Fuel surcharges passed through to independent contractors, outside drayage carriers and railroads were $6.7 million in the 2010 period and $5.6 million in the 2009 period. We have worked diligently to control fuel usage and costs by improving our volume purchasing arrangements and optimizing our drivers’ fuel purchases with national fuel centers, focusing on shorter lengths of haul, installing and tightly managing the use of auxiliary power units in our tractors to minimize engine idling and improving fuel usage in our trailers’ refrigeration units. The decrease in net fuel expense was primarily due to a 7.6% decrease in the total miles driven by our company-owned fleet and to the cost control measures stated above, which were partially offset by a significant increase in the D.O.E. national average cost of fuel to $2.94 per gallon in the 2010 period from $2.38 per gallon in the 2009 period. Net fuel expense represented 13.2% of truckload and intermodal revenue, net of fuel surcharges, in the 2010 period, compared with 13.6% in the 2009 period.

The decrease in supplies and maintenance in the 2010 period primarily resulted from a decrease in outside vendor maintenance on our revenue equipment which we were able to achieve by increasing the capacity of our regional maintenance facilities.

The $3.3 million decrease in insurance and claims in the 2010 period was primarily due to a decrease in our self-insured auto liability and workers’ compensation accident claims.

Gain on disposition of revenue equipment decreased to $812,000 in the 2010 period from $1.6 million in the 2009 period as a result of a decrease in the market value for used revenue equipment, which was partially offset by an increase in the number of tractors and trailers sold.

As a result of the foregoing factors, our operating expenses as a percentage of operating revenue, or “operating ratio,” was 93.1% in the 2010 period compared with 94.4% in the 2009 period. The operating ratio for our Truckload segment improved to 92.5% from 94.4% in the 2009 period and the operating ratio for our Logistics segment increased to 95.0% from 94.1% in the 2009 period. Operating expenses as a percentage of operating revenue, with both amounts net of fuel surcharge revenue, improved to 91.9% for the 2010 period from 93.7% for the 2009 period.

Our effective income tax rate increased to 43.9% in the 2010 period from 42.6% in the 2009 period, primarily because of the nondeductible effect of a per diem pay structure for our drivers which was more broadly implemented during the third quarter of 2009 and further increased in the first quarter of 2010.

As a result of the factors described above, net income increased to $14.5 million in the 2010 period from $12.0 million in the 2009 period. Net earnings increased to $0.66 per diluted share in the 2010 period from $0.55 per diluted share in the 2009 period.

Liquidity and Capital Resources

Our business requires substantial, ongoing capital investments, particularly for new tractors and trailers. Our primary sources of liquidity are funds provided by operations and our revolving credit facility. A portion of our tractor fleet is provided by independent contractors who own and operate their own equipment. We have no capital expenditure requirements relating to those drivers who own their tractors or obtain financing through third parties.

The table below reflects our net cash flows provided by operating activities, net cash flows used for investing activities and net cash flows provided by (used for) financing activities for the periods indicated.

	Nine Months Ended September 30,
(In thousands)	2010			2009
Net cash flows provided by operating
activities	$	45,913		$	63,207
Net cash flows used for investing
activities		(71,309	)		(56,109	)
Net cash flows provided by (used for)
financing activities		24,356			(1,602	)

In the first nine months of 2010, net cash flows provided by operating and financing activities were primarily used to purchase new revenue equipment, net of proceeds from dispositions, in the amount of $62.2 million and to partially construct two regional operating facilities in the amount of $7.4 million. We estimate that capital expenditures, net of proceeds from dispositions, will be approximately $10 million for the remainder of 2010. We paid our first cash dividend of $0.02 per share of common stock in the third quarter of 2010 totaling $438,000. We currently expect to continue to pay quarterly cash dividends in the future. The payment of cash dividends in the future, and the amount of any such dividends, will depend upon our financial condition, results of operations, cash requirements, and certain corporate law requirements, as well as other factors deemed relevant by our Board of Directors. We believe our sources of liquidity are adequate to meet our current and anticipated needs for at least the next twelve months. Based upon anticipated cash flows, existing cash and cash equivalents balances, current borrowing availability and other sources of financing we expect to be available to us, we do not anticipate any significant liquidity constraints in the foreseeable future.

We maintain a credit agreement that provides for a five-year unsecured committed credit facility maturing in September 2011 in an aggregate principal amount of up to $50 million. The aggregate principal amount of the credit facility may be increased at our option, subject to completion of signed amendments with participating banks, up to a maximum aggregate principal amount of $100 million. At September 30, 2010, the credit facility had an outstanding principal balance of $27.1 million, outstanding standby letters of credit of $8.3 million and remaining borrowing availability of $14.6 million. The $27.0 million increase in the outstanding principal balance of the credit facility from December 31, 2009 primarily resulted from the excess of capital expenditures, net of proceeds from dispositions, over the amount of net cash flows provided by operating activities. This facility bears interest at a variable rate based on the London Interbank Offered Rate or the agent bank’s Prime Rate, in each case plus/minus applicable margins. The weighted average interest rate for the facility was 0.86% at September 30, 2010. The $27.1 million outstanding principal balance on the credit facility was classified as a current liability in our consolidated condensed balance sheet as of September 30, 2010 because the maturity date of the facility is within the next twelve months.

Our credit facility prohibits us from paying, in any fiscal year, dividends in excess of 25% of our net income from the prior fiscal year. This facility also contains restrictive covenants which, among other matters, require us to maintain compliance with certain cash flow leverage and fixed charge coverage ratios. We were in compliance with all of these covenants at September 30, 2010.

The following is a summary of our contractual obligations as of September 30, 2010.

	Payments Due by Period
	Remainder		2011		2013
	Of		And		And
(In thousands)	2010		2012		2014		Thereafter		Total
Long-term debt obligations	$	-	$	27,066	$	-	$	-	$	27,066
Building construction obligations		2,430		2,305		-		-		4,735
Purchase obligations for revenue equipment		3,140		1,230		-		-		4,370
Operating lease obligations		96		431		57		-		584
Total	$	5,666	$	31,032	$	57	$	-	$	36,755

Related Parties

We believe that the transactions with related parties noted above are on reasonable terms which, based upon market rates, are comparable to terms available from unaffiliated third parties.

Off-balance Sheet Arrangements

Other than standby letters of credit maintained in connection with our self-insurance programs in the amount of $8.3 million and operating leases summarized above in our summary of contractual obligations, we did not have any other material off-balance sheet arrangements at September 30, 2010.

Inflation and Fuel Costs

Most of our operating expenses are inflation-sensitive, with inflation generally producing increased costs of operations. During the last two years, the most significant effects of inflation have been on revenue equipment prices, accident claims, health insurance and employee compensation. We attempt to limit the effects of inflation through increases in freight rates and cost control efforts.

In addition to inflation, fluctuations in fuel prices can affect our profitability. We require substantial amounts of fuel to operate our tractors and power the temperature-control units on our trailers. Substantially all of our contracts with customers contain fuel surcharge provisions. Although we historically have been able to pass through a significant portion of long-term increases in fuel prices and related taxes to customers in the form of surcharges and higher rates, such increases usually are not fully recovered. These surcharge provisions are not effective in mitigating the fuel price increases related to non-revenue miles or fuel used while the tractor is idling.

Seasonality

Our tractor productivity generally decreases during the winter season because inclement weather impedes operations and some shippers reduce their shipments. At the same time, operating expenses generally increase, with harsh weather creating higher accident frequency, increased claims and more equipment repairs.

Critical Accounting Policies

The preparation of financial statements in conformity with U.S. generally accepted accounting principles requires management to make estimates and assumptions about future events, and apply judgments that affect the reported amounts of assets, liabilities, revenue and expenses in our consolidated condensed financial statements and related notes. We base our estimates, assumptions and judgments on historical experience, current trends and other factors believed to be relevant at the time our consolidated condensed financial statements are prepared. However, because future events and their effects cannot be determined with certainty, actual results could differ from our estimates and assumptions, and such differences could be material. We believe that the following critical accounting policies affect our more significant estimates, assumptions and judgments used in the preparation of our consolidated condensed financial statements.

Revenue Recognition. We recognize revenue, including fuel surcharges, at the time shipment of freight is completed. We account for revenue of our Logistics segment and revenue on freight transported by independent contractors within our Truckload segment on a gross basis because we are the primary obligor in the arrangements, we have the ability to establish prices, we have the risk of loss in the event of cargo claims and we bear credit risk with customer payments. Accordingly, all such revenue billed to customers is classified as operating revenue and all corresponding payments to carriers for transportation services we arrange in connection with brokerage and intermodal activities and to independent contractor providers of revenue equipment are classified as purchased transportation expense.

Accounts Receivable. We are dependent upon a limited number of customers, and, as a result, our trade accounts receivable are highly concentrated. Trade accounts receivable are recorded at the invoiced amounts, net of an allowance for doubtful accounts. Our allowance for doubtful accounts was $183,000 as of September 30, 2010 and $245,000 as of December 31, 2009. A considerable amount of judgment is required in assessing the realization of these receivables including the current creditworthiness of each customer and related aging of the past-due balances, including any billing disputes. In order to assess the collectibility of these receivables, we perform ongoing credit evaluations of our customers’ financial condition. Through these evaluations, we may become aware of a situation where a customer may not be able to meet its financial obligations due to deterioration of its financial viability, credit ratings or bankruptcy. The allowance for doubtful accounts is based on the best information available to us and is reevaluated and adjusted as additional information is received. We evaluate the allowance based on historical write-off experience, the size of the individual customer balances, past-due amounts and the overall national economy. We review the adequacy of our allowance for doubtful accounts monthly.

Property and Equipment. The transportation industry requires significant capital investments. Our net property and equipment was $376.6 million as of September 30, 2010 and $341.5 million as of December 31, 2009. Our depreciation expense was $38.5 million for the first nine months of 2010 and $40.1 million for the first nine months of 2009. We compute depreciation of our property and equipment for financial reporting purposes based on the cost of each asset, reduced by its estimated salvage value, using the straight-line method over its estimated useful life. We determine and periodically evaluate our estimate of the projected salvage values and useful lives primarily by considering the market for used equipment, prior useful lives and changes in technology. We have not changed our policy regarding salvage values as a percentage of initial cost or useful lives of tractors and trailers within the last ten years. We believe that our policies and past estimates have been reasonable. Actual results could differ from these estimates. A 5% decrease in estimated salvage values would have decreased our net property and equipment as of September 30, 2010 by approximately $8.5 million, or 2.3%.

In the first nine months of 2010, we replaced most of our company-owned tractors within approximately 4.5 years and our trailers within approximately six years after purchase. Our useful lives for depreciating tractors is five years and trailers is seven years, with a 25% salvage value for tractors and a 35% salvage value for trailers. These salvage values are based upon the expected market values of the equipment after five years for tractors and seven years for trailers. Depreciation expense calculated in this manner approximates the continuing declining value of the revenue equipment, and continues at a consistent straight-line rate for units held beyond the normal replacement cycle. Calculating tractor depreciation expense with a five-year useful life and a 25% salvage value results in the same depreciation rate of 15% of cost per year and the same net book value of 32.5% of cost at the 4.5-year replacement date as using a 4.5-year useful life and 32.5% salvage value. As a result, there is no difference in recorded depreciation expense on a quarterly or annual basis with our five-year useful life and 25% salvage value compared with a 4.5-year useful life and 32.5% salvage value. Similarly, calculating trailer depreciation expense with a seven-year useful life and a 35% salvage value results in the same depreciation rate of 9.3% of cost per year and the same net book value of 44.3% of cost at the six-year replacement date as using a six-year useful life and 44.3% salvage value. As a result, there is no difference in recorded depreciation expense on a quarterly or annual basis with our seven-year useful life and 35% salvage value compared with a six-year useful life and 44.3% salvage value.

Impairment of Assets. Long-lived assets are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. Recoverability of assets to be held and used is measured by a comparison of the carrying amount of an asset to future net undiscounted cash flows expected to be generated by the asset. If such assets are considered to be impaired, the impairment to be recognized is measured by the amount by which the carrying amount of the assets exceeds the fair value of the assets. Assets to be disposed of are reported at the lower of the carrying amount or fair value less the costs to sell.

Insurance and Claims. We self-insure, in part, for losses relating to workers’ compensation, auto liability, general liability, cargo and property damage claims, along with employees’ health insurance with varying risk retention levels. We maintain insurance coverage for per-incident and total losses in excess of these risk retention levels in amounts we consider adequate based upon historical experience and our ongoing review. However, we could suffer a series of losses within our self-insured retention limits or losses over our policy limits, which could negatively affect our financial condition and operating results. We have $8.3 million in standby letters of credit to guarantee settlement of claims under agreements with our insurance carriers and regulatory authorities. The insurance and claims accruals in our consolidated condensed balance sheets were $18.0 million as of September 30, 2010, and $19.2 million as of December 31, 2009. We reserve currently for the estimated cost of the uninsured portion of pending claims. We periodically evaluate and adjust these reserves based on our evaluation of the nature and severity of outstanding individual claims and our estimate of future claims development based on historical claims development factors. We believe that our claims development factors have historically been reasonable, as indicated by the adequacy of our insurance and claims accruals compared to settled claims. Actual results could differ from these current estimates. In addition, to the extent that claims are litigated and not settled, jury awards are difficult to predict. If our claims settlement experience worsened causing our historical claims development factors to increase by 5%, our estimated outstanding loss reserves as of September 30, 2010 would have needed to increase by approximately $3.7 million.

Share-based Payment Arrangement Compensation. We have granted stock options to certain employees and non-employee directors. We recognize compensation expense for all stock options granted after December 31, 2005 net of an estimated forfeiture rate and only record compensation expense for those shares expected to vest on a straight-line basis over the requisite service period for service-based awards (normally the vesting period). Compensation expense will be recorded for performance-based awards in the periods in which the performance condition is probable of achievement. Determining the appropriate fair value model and calculating the fair value of stock options require the input of highly subjective assumptions, including the expected life of the stock options and stock price volatility. We use the Black-Scholes model to value our stock option awards. We believe that future volatility will not materially differ from our historical volatility. Thus, we use the historical volatility of our common stock over the expected life of the award. The assumptions used in calculating the fair value of stock options represent our best estimates, but these estimates involve inherent uncertainties and the application of judgment. As a result, if factors change and we use different assumptions, stock option compensation expense could be materially different in the future.

In August 2010, we also granted performance unit awards to certain employees which are subject to vesting requirements over a five-year period, primarily based on our earnings growth. The fair value of each performance unit is based on the closing market price on the date of grant. We recognize compensation expense for these awards based on the estimated number of units probable of achieving the vesting requirements of the awards, net of an estimated forfeiture rate.

Item 3. Quantitative And Qualitative Disclosures About Market Risk.

We are exposed to a variety of market risks, most importantly the effects of the price and availability of diesel fuel. We require substantial amounts of diesel fuel to operate our tractors and power the temperature-control units on our trailers. The price and availability of diesel fuel can vary, and are subject to political, economic and market factors that are beyond our control. Significant increases in diesel fuel costs could materially and adversely affect our results of operations and financial condition. Based upon our fuel consumption in the first nine months of 2010, a 5% increase in the average cost of diesel fuel would have increased our fuel expense by $4.1 million.

We have historically been able to pass through a significant portion of long-term increases in diesel fuel prices and related taxes to customers in the form of fuel surcharges. Fuel surcharge programs are widely accepted among our customers, though they can vary somewhat from customer-to-customer. These fuel surcharges, which adjust weekly with the cost of fuel, enable us to recover a substantial portion of the higher cost of fuel as prices increase. These fuel surcharge provisions are not effective in mitigating the fuel price increases related to non-revenue miles or fuel used while the tractor is idling. In addition, we have worked diligently to control fuel usage and costs by improving our volume purchasing arrangements and optimizing our drivers’ fuel purchases with national fuel centers, focusing on shorter lengths of haul, installing and tightly managing the use of auxiliary power units in our tractors to minimize engine idling and improving fuel usage in our trailers’ refrigeration units.

While we do not currently have any outstanding hedging instruments to mitigate this market risk, we may enter into derivatives or other financial instruments to hedge a portion of our fuel costs in the future.

Item 4. Controls and Procedures.

As required by Rule 13a-15 under the Securities Exchange Act of 1934 (the “Exchange Act”), we have carried out an evaluation of the effectiveness of the design and operation of our disclosure controls and procedures (as defined in Exchange Act Rule 13a-15(e)) as of the end of the period covered by this report. This evaluation was carried out under the supervision and with the participation of our management, including our Chief Executive Officer and our Chief Financial Officer. Based upon that evaluation, our Chief Executive Officer and our Chief Financial Officer concluded that our disclosure controls and procedures were effective as of September 30, 2010. There were no changes in our internal control over financial reporting that occurred during the period covered by this report that have materially affected, or that are reasonably likely to materially affect, our internal control over financial reporting. We intend to periodically evaluate our disclosure controls and procedures as required by the Exchange Act Rules.

PART II. OTHER INFORMATION

Item 1A. Risk Factors.

We do not believe there are any material changes from the risk factors previously disclosed in Item 1A to Part 1 of our Form 10-K for the year ended December 31, 2009.

Item 6. Exhibits.

Item No.	Item	Method of Filing

10.17	Amendment to the Marten Transport, Ltd. 2005 Stock Incentive Plan	Filed with this Report.
10.18	Marten Transport, Ltd. Deferred Compensation Plan	Filed with this Report.
10.19	Form of Performance Unit Award Agreement	Filed with this Report.

31.1	Certification pursuant to Item 601(b)(31) of Regulation S-K, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002, by Randolph L. Marten, the Registrant’s Chief Executive Officer (Principal Executive Officer)	Filed with this Report.
31.2	Certification pursuant to Item 601(b)(31) of Regulation S-K, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002, by James J. Hinnendael, the Registrant’s Chief Financial Officer (Principal Financial Officer)	Filed with this Report.
32.1	Certification pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002	Filed with this Report.

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.

	MARTEN TRANSPORT, LTD.


Dated: November 9, 2010	By:	/s/ Randolph L. Marten
		Randolph L. Marten
		Chief Executive Officer
		(Principal Executive Officer)


Dated: November 9, 2010	By:	/s/ James J. Hinnendael
		James J. Hinnendael
		Chief Financial Officer
		(Principal Financial and Accounting Officer)

EXHIBIT INDEX TO FORM 10-Q

For the Quarter Ended September 30, 2010

Item No.	Item	Method of Filing

10.17	Amendment to the Marten Transport, Ltd. 2005 Stock Incentive Plan	Filed with this Report.
10.18	Marten Transport, Ltd. Deferred Compensation Plan	Filed with this Report.
10.19	Form of Performance Unit Award Agreement	Filed with this Report.
31.1	Certification pursuant to Item 601(b)(31) of Regulation S-K, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002, by Randolph L. Marten, the Registrant’s Chief Executive Officer (Principal Executive Officer)	Filed with this Report.
31.2	Certification pursuant to Item 601(b)(31) of Regulation S-K, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002, by James J. Hinnendael, the Registrant’s Chief Financial Officer (Principal Financial Officer)	Filed with this Report.
32.1	Certification pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002	Filed with this Report.

Exhibit 10.17

AMENDMENT

TO THE

MARTEN TRANSPORT, LTD.

2005 STOCK INCENTIVE PLAN

Pursuant to the retained power to amend contained in Section 18 of the plan restatement entitled “Marten Transport, Ltd. 2005 Stock Incentive Plan” (the “Plan”), and by resolution of the Board on August 17, 2010, the Plan is amended as follows.

1. Section 9 of the Plan is amended and restated effective August 17, 2010, to read as follows:

“9. Performance Unit Awards .

An Eligible Recipient may be granted one or more Performance Unit Awards under the Plan, and such Performance Unit Awards will be subject to such terms and conditions, consistent with the other provisions of the Plan, as may be determined by the Committee in its sole discretion. The Committee may impose such restrictions or conditions, not inconsistent with the provisions of the Plan, to the payment, issuance, retention and/or vesting of such Performance Unit Awards as it deems appropriate, including, without limitation, (i) the achievement of one or more of Performance Criteria; and/or that (ii) the Participant remain in the continuous employ or service of the Company or a Subsidiary for a certain period. Payment of a Performance Unit Award will be made to the Participant within two and one-half months following the end of the Participant’s tax year during which receipt of the Performance Unit Award is no longer subject to a ‘substantial risk of forfeiture’ within the meaning of Section 409A of the Code, except to the extent that (i) an Eligible Recipient has properly elected to defer income that may be attributable to a Performance Unit Award under a Company deferred compensation plan or arrangement, or (ii) the Committee requires that income that may be attributable to the Performance Unit Award be credited to and paid under a Company deferred compensation plan or arrangement.”

2. Section 17 of the Plan is amended and restated to read as follows:

“17. Section 409A of the Code .

“It is intended that the Plan and all Incentive Awards hereunder be issued and administered in a manner that will cause such Incentive Awards to not be treated as deferred compensation subject to the requirements of Section 409A of the Code, except to the extent that (i) an Eligible Recipient has properly elected to defer income that may be attributable to an Incentive Award under a Company deferred compensation plan or arrangement, or (ii) the Committee requires that income that may be attributable to an Incentive Award be credited to and paid under a Company deferred compensation plan or arrangement.”

Exhibit 10.18

MARTEN TRANSPORT, LTD.

DEFERRED COMPENSATION PLAN

MARTEN TRANSPORT, LTD.

DEFERRED COMPENSATION PLAN

Table of Contents

		Page



ARTICLE 1. INTRODUCTION; DEFINITIONS		1
1.1.	Plan Name	1
1.2.	Plan Purposes.	1
1.3.	Plan Type	1
1.4.	Plan Background	1
1.5.	Definitions	1

ARTICLE 2. PARTICIPATION AND DEFERRAL ELECTIONS		5
2.1.	Eligibility for Participant Deferral Credits.	5
2.2.	Loss of Eligibility For Participant Deferral Credits.	5
2.3.	Transfer Among Participating Employers	5
2.4.	Multiple Employment	5
2.5.	Eligibility for Discretionary Employer Credit	5
2.6.	Conditions of Participation	5
2.7.	Termination of Participation	6
2.8.	Deferral Elections.	6

ARTICLE 3. CREDIT TO ACCOUNTS		8
3.1.	Participant Accounts.	8
3.2.	Participant Deferral Credits.	8
3.3.	Discretionary Employer Credits.	8
3.4.	Earnings Credits.	9
3.5.	Vesting	11
3.6.	Effect of Actions Constituting Cause	11

ARTICLE 4. DISTRIBUTION		12
4.1.	Distribution to Participant Before Termination of Employment.	12
4.2.	Distribution to Participant After Termination of Employment – Deferral Account	12
4.3.	Distribution to Participant – Discretionary Account.	14
4.4.	Distribution to Beneficiary.	14
4.5.	Payment in Event of Incapacity	15
4.6.	Six-Month Suspension for Specified Key Employee	16

ARTICLE 5. SOURCE OF PAYMENTS; NATURE OF INTEREST		17
5.1.	Establishment of Trust	17
5.2.	Source of Payments.	17
5.3.	Status of Plan.	17
5.4.	Non-assignability of Benefits	17

Table of Contents

(continued)

		Page



ARTICLE 6. ADOPTION, AMENDMENT, TERMINATION		18
6.1.	Adoption	18
6.2.	Amendment.	18
6.3.	Termination of Participation	18
6.4.	Termination	19

ARTICLE 7. CONSTRUCTION, INTERPRETATION AND DEFINITIONS		20
7.1.	Cross Reference	20
7.2.	Governing Law	20
7.3.	Headings	20
7.4.	Number and Gender	20

ARTICLE 8. ADMINISTRATION		21
8.1.	Administrator	21
8.2.	Plan Rules	21
8.3.	Administrator’s Discretion	21
8.4.	Specialist’s Assistance	21
8.5.	Indemnification	21
8.6.	Benefit Claim Procedure	21
8.7.	Disputes	22

ARTICLE 9. MISCELLANEOUS		23
9.1.	Withholdings and Offsets	23
9.2.	Other Benefits	23
9.3.	No Warranties Regarding Tax Treatment.	23
9.4.	No Rights to Continued Service Created	23
9.5.	Special Provisions	23
9.6.	Successors	23

MARTEN TRANSPORT, LTD.

DEFERRED COMPENSATION PLAN

ARTICLE 1.

INTRODUCTION; DEFINITIONS

1.1.	Plan Name . The name of the Plan is the “Marten Transport, Ltd. Deferred Compensation Plan.”

1.2.	Plan Purposes . The purposes of the Plan are to

(a)

assist the Participating Employers in attracting and retaining key executives,

(b)

provide an employer-sponsored tax-deferred capital accumulation vehicle for key executives, and

(c)

encourage additional retirement savings by eligible executives and directors.

1.3.

Plan Type . The Plan is an unfunded plan maintained primarily for the purpose of providing deferred compensation for a select group of management or highly compensated employees. It is intended that the Plan is exempt from the provisions of Parts 2, 3 and 4 of Subtitle B of Title I of ERISA by operation of sections 201(2), 301(a)(3) and 401(a)(4) thereof, respectively, and from the provisions of Title IV of ERISA, to the extent otherwise applicable, by operation of section 4021(b)(6) thereof. The Plan is intended to be a nonqualified deferred compensation plan that will comply in form and operation with the requirements of Code section 409A. The Plan will be construed and administered in a manner that is consistent with and gives effect to the foregoing.

1.4.	Plan Background . The Company adopted the Plan on and effective as of August 17, 2010.

1.5.	Definitions . The definitions set forth in this Section apply in constructing this instrument unless the context otherwise indicates.

Account . “Account” means the bookkeeping account or accounts maintained with respect to a Participant pursuant to Section 3.1.

Administrator . “Administrator” means the Chief Financial Officer of the Company unless and until a different Administrator is appointed by the Board, or the person to whom administrative duties are delegated pursuant to the provisions of Section 8.1, as the context requires.

Affiliate . “Affiliate” means any person with whom a Participating Employer would be treated as a single employer under Code section 414(b) or 414(c).

Annual Bonus . “Annual Bonus” for a Plan Year means the annual bonus earned by a Qualified Employee during the Plan Year for his or her services during the Plan Year as an employee and paid from a United States payroll by a Participating Employer.

Base Compensation . “Base Compensation” for a Plan Year means the base salary payable from a United States payroll to a Qualified Employee Participant by a Participating Employer for the Employee Participant’s services during the Plan Year as a Qualified Employee, including any elective deferrals that would have been paid in cash but for the Qualified Employee’s election to defer.

Board . “Board” means the board of directors of the Company or Subsidiary in question. When the Plan provides for an action to be taken by the Board, the action may be taken by any committee or individual authorized to take such action pursuant to a proper delegation by the board of directors in question.

Beneficiary . “Beneficiary” with respect to a Participant is the person designated or otherwise determined under the provisions of Section 4.3(e) as the distributee of benefits payable after the Participant’s death. A person designated or otherwise determined to be a Beneficiary under the terms of the Plan has no interest in or right under the Plan until the Participant in question has died. A Beneficiary will cease to be such on the day on which all benefits to which he, she or it is entitled under the Plan have been distributed.

Cause . If the Participant is party to a Change in Control Severance Agreement with the Company, the term “Cause” shall be as defined in such Change in Control Severance Agreement. If the Participant is not a party to a Change in Control Severance Agreement with the Company, the term “Cause” shall be as defined in the Marten Transport, Ltd. 2005 Stock Incentive Plan.

Change in Control . “Change in Control” shall have the meaning given to it in the Marten Transport Ltd. 2005 Stock Incentive Plan, provided such event constitutes a change in control event under Code section 409A.

Code . “Code” means the Internal Revenue Code of 1986, as amended. Any reference to a specific provision of the Code includes a reference to that provision as it may be amended from time to time, to any successor provision, to any regulations promulgated thereunder and to any binding pronouncements relating thereto.

Company . “Company” means Marten Transport, Ltd.

Company Stock . “Company Stock” means shares of common stock issued by the Company.

Discretionary Account . “Discretionary Account” means the account maintained for a Participant pursuant to Section 3.1(b).

ERISA . “ERISA” means the Employee Retirement Income Security Act of 1974, as amended. Any reference to a specific provision of ERISA includes a reference to that provision as it may be amended from time to time and to any successor provision.

Participant . “Participant” means a current or former Qualified Employee to whose Account amounts have been credited pursuant to Article 3 and who has not ceased to be a Participant pursuant to Section 2.8.

Participant Deferral Account . “Participant Deferral Account” means the account maintained for a Participant pursuant to Section 3.1(a).

Participating Employer . “ Participating Employer” means the Company and any Subsidiary that has adopted the Plan, or all of them collectively, as the context requires. A Subsidiary will cease to be a Participating Employer upon its ceasing to be a Subsidiary and the Company and each Subsidiary will cease to be a Participating Employer upon termination of the Plan as to its Qualified Employees (and, in the case of the Company, its Qualified Directors) and the satisfaction in full of its obligations under the Plan.

Performance Unit Award . A “Performance Unit Award” is a Performance Unit Award under the Marten Transport, Ltd. 2005 Stock Incentive Plan.

Plan . “Plan” means the Marten Transport, Ltd. Deferred Compensation Plan, as from time to time amended or restated.

Plan Year . “Plan Year” means the calendar year.

Plan Rules . “Plan Rules” are rules, policies, practices or procedures adopted by the Administrator pursuant to Section 8.2.

Price per Share . The “Price per Share” on a given date is the closing market price per share of Company Stock at the end of the regular trading session on the last business day of the calendar month immediately preceding or concurrent with the date in question as reported on the NASDAQ Stock Market Composite Tape on that day (or if no shares of Company Stock were traded or quoted on that day, as of the next preceding day on which shares of Company Stock were traded or quoted).

Qualified Employee . “Qualified Employee” means an individual who performs services for a Participating Employer as an employee of the Participating Employer (as classified by the Participating Employer at the time the services are performed without regard to any subsequent reclassification), whose Base Compensation exceeds an amount established by Plan Rules, and who is either (a) an officer of the Participating Employer elected by the Participating Employer’s Board, or (b) a management employee of the Participating Employer who is selected by the Compensation Committee of the Company’s Board. The Company may, pursuant to Plan Rules, establish additional requirements or conditions an employee must satisfy in order to be treated as a Qualified Employee under the Plan.

Subsidiary . “Subsidiary” means any corporation, at least a majority of whose outstanding securities ordinarily having the right to vote at elections of directors is owned (directly or indirectly) by the Company.

Termination of Employment . “Termination of Employment” means a severance of a Participant’s employment relationship with each Participating Employer and all Affiliates, for any reason. A “Termination of Employment” will be deemed to occur if, based on the relevant facts and circumstances to the Participant, the Participating Employer, all Affiliates and Participant reasonably anticipate that the level of bona fide future services to be performed by the Participant for the Participating Employer and all Affiliates will permanently decrease to no more than 20% of the average level of bona fide services performed over the immediately preceding 36-month period. A bona fide leave of absence that is six months or less, or during which an individual retains a reemployment right, will not cause a Termination of Employment. In the case of a leave of absence without a right of reemployment that exceeds the time periods described in this paragraph, a Termination of Employment will be deemed to occur once the leave of absence exceeds six months. Notwithstanding the foregoing, a Termination of Employment shall not occur unless such termination also qualifies as a “separation from service,” as defined under Code section 409A and related guidance thereunder.

Valuation Date . “Valuation Date” means the last day of each calendar month on which the NASDAQ Stock Exchange is open for regular business and any interim dates selected by the Administrator.

ARTICLE 2.

PARTICIPATION AND DEFERRAL ELECTIONS

2.1.	Eligibility for Participant Deferral Credits .

(a)

First Day of Plan Year . An individual who is a Qualified Employee on the first day of a Plan Year is eligible to defer Base Compensation pursuant to Section 2.8(a) and Annual Bonus pursuant to Section 2.8(b) with respect to the Plan Year.

(b)

Performance Unit Award Deferrals . An individual who is a Qualified Employee at the time of the grant of a Performance Unit Award is eligible to defer income from such Award pursuant to Section 2.8(c).

2.2.	Loss of Eligibility For Participant Deferral Credits .

(a)

401(k) Hardship Withdrawal . A Qualified Employee who receives a hardship withdrawal from a 401(k) plan maintained by a Participating Employer, or by any other employer required to be aggregated with the Participating Employer under Code section 414(b), (c), (m) or (o), will have his or her election to defer Base Compensation or Annual Bonus under the Plan cancelled, with any new election subject to the deferral election requirements of Section 2.8.

(b)

Affect on Deferral Elections . An Active Participant’s deferral election for a Plan Year is irrevocable after the latest day on which the election may be made except in the event of a 401(k) hardship withdrawal under Section 2.2(a).

2.3.

Transfer Among Participating Employers . A Participant who transfers employment from one Participating Employer to another Participating Employer or to an Affiliate of a Participating Employer will, for the duration of the Plan Year during which the transfer occurs, continue to participate in Participant Deferral Credits pursuant to Section 3.2 of the Plan in accordance with the deferral election in effect before the transfer.

2.4.

Multiple Employment . A Participant who is simultaneously employed as a Qualified Employee with more than one Participating Employer will participate in the Plan as a Qualified Employee of all such Participating Employers on the basis of a single deferral election pursuant to Section 2.8 applied ratably to his or her Base Compensation from each Participating Employer and applied ratably to his or her Annual Bonus from each Participating Employer if the Annual Bonus deferral election was made in a dollar amount or applied separately to his or her Annual Bonus from each Participating Employer if the election was made in a percentage.

2.5.	Eligibility for Discretionary Employer Credit . Each Qualified Employee is eligible to receive a Discretionary Employer Credit.

2.6.

Conditions of Participation . Each Qualified Employee, as a condition of participation in the Plan, is bound by all the terms and conditions of the Plan and the Plan Rules, and must furnish to the Administrator such pertinent information and execute such election forms and other instruments as the Administrator or Plan Rules may require by such dates as the Administrator or Plan Rules may establish. All elections, directions, designations and similar actions required in connection with the Plan must be made in accordance with and are subject to the terms of the Plan and Plan Rules.

2.7.	Termination of Participation . A Participant will cease to be a Participant as of the date on which he or she is not then eligible to make deferrals or to receive a Discretionary Employer Credit and his or her entire Account balance has been distributed.

2.8.	Deferral Elections .

(a)

Base Compensation . Base Compensation deferrals will be made in accordance with the following rules:

(i)

A Qualified Employee may elect to defer all or any portion of his or her Base Compensation for a Plan Year. Plan Rules may specify minimum and maximum deferral amounts for a Plan Year, payroll periods or both.

(ii)

An election made pursuant to this subsection will be effective at the time and in the manner specified in Plan Rules after the Administrator receives a complete and accurate election provided receipt is prior to the first day of the Plan Year to which the election relates.

(b)

Annual Bonus . Annual Bonus deferrals will be made in accordance with the following rules:

(i)

A Qualified Employee may elect to defer all or any portion of his or her Annual Bonus for the Plan Year from a minimum percentage or dollar amount to a maximum percentage or dollar amount, as specified in Plan Rules.

(ii)

An election made by a Qualified Employee pursuant to this subsection will be effective at the time and in the manner specified in Plan Rules after the Administrator receives a complete and accurate election provided receipt is prior to the last day of the Plan Year immediately preceding the Plan Year in which the Annual Bonus is earned.

(c)

Performance Unit Award Deferrals . Performance Unit Award deferrals will be made in accordance with the following rules:

(i)

A Qualified Employee may elect to defer all or a portion of the income attributable to the vesting of a Performance Unit Award from a minimum percentage or dollar amount to a maximum percentage or dollar amount, as specified in Plan Rules.

(ii)

(A)

the last day of the Plan Year immediately preceding the Plan Year in which the Performance Unit Award is granted; or

(B)

if the Administrator determines that a Participant’s Performance Unit Award is “performance-based compensation” under Code section 409A, a date that is at least six (6) months before the end of the performance period over which the services giving rise to the Performance Unit Award were performed; or

(C)

if the Administrator determines the Performance Unit Award is subject to a condition requiring the Qualified Employee to continue to provide services for a period of at least 12 months following the date of the grant to avoid forfeiture of the payment, a date that is not later than 30 days after the date of the grant and is at least 12 months prior to the earliest date at which the forfeiture condition could lapse (other than on account of death, disability or upon a change in control).

(d)

Cancellation of Deferral Elections . An election to defer under Sections 2.8(a), (b) or (c) may only be cancelled as permitted under Section 2.2.

ARTICLE 3.

CREDIT TO ACCOUNTS

3.1.	Participant Accounts .

(a)

Participant Deferral Account . For each Participant who elects deferrals pursuant to Section 2.8, the Administrator will establish and maintain a Participant Deferral Account.

(b)

Discretionary Account . For each Participant for whom a Participating Employer elects to make a discretionary credit pursuant to Section 3.3, the Administrator will establish and maintain a Discretionary Account.

(c)

Subaccounts .

(i)

Multiple Participating Employers . If a Participant makes deferrals with respect to Base Compensation or Annual Bonus from more than one Participating Employer, or receives discretionary credits attributable to service with more than one Participating Employer, amounts attributable to each Participating Employer will be credited to separate subaccounts within the appropriate Account.

(ii)

Distribution Elections . If a Participant has made different distribution elections for amounts credited under Sections 3.2 and 3.3 for particular Plan Years, then, the Administrator will maintain separate subaccounts within each Account, each of which will evidence amounts credited to the Account pursuant to any such election with respect to which the Participant has elected an identical form and timing of distribution.

3.2.	Participant Deferral Credits .

(a)

Timing of Base Compensation and Annual Bonus Deferral Credits . A Qualified Employee’s Base Compensation and Annual Bonus deferral will be credited to his or her Participant Deferral Account not later than the last day of the calendar month first following the date on which the Participant would have otherwise received the Base Compensation or Annual Bonus but for his or her deferral election under Section 2.8.

(b)

Timing of Performance Unit Award Deferral Credit . A Qualified Employee’s Performance Unit Award deferrals will be credited to his or her Participant Deferral Account not later than the last day of the calendar month first following the date on which such Performance Unit Award would have vested and the Qualified Employee would have received payment but for his or her deferral election under Section 2.8.

3.3.

Discretionary Employer Credits. A Participating Employer may from time to time credit the Discretionary Account of any Participant with an amount determined by the Participating Employer, including amounts vesting under a Performance Unit Award. If a Participating Employer chooses to make such a credit, the Administrator will in accordance with Plan Rules provide the Participant with a notice that specifies the amount of the credit, the timing of the credit, and any conditions that the Participant must satisfy to be entitled to the credit. Credits pursuant to this section will be made, if at all, on a Participant-by-Participant basis. If a Participating Employer chooses to credit the Discretionary Account of a Participant, the Participating Employer is not, as a result, required to make any credit to the Discretionary Account of any other Participant, whether or not he or she is otherwise similarly situated.

3.4.	Earnings Credits .

(a)

Designation of Investment Funds . The Administrator will designate two or more investment funds which will serve as the basis for determining adjustments pursuant to this section. The Administrator may, from time to time, designate additional investment funds or eliminate any previously designated investment funds. The designation or elimination of a fund pursuant to this subsection is not a Plan amendment. The Administrator will not be responsible in any manner to any Participant or other person for any damages, losses, liabilities, costs or expenses of any kind arising in connection with any designation or elimination of an investment fund.

(b)

Participant Direction . A Participant must direct the manner in which amounts credited to his or her Deferral Account pursuant to Section 3.2 will be deemed to be invested among the investment funds designated pursuant to Subsection (a). Amounts will be deemed to be invested in accordance with the Participant’s direction on or as soon as administratively practicable after the date as of which the amounts are credited to the Participant’s Deferral Account. If a Participant fails to direct the manner in which amounts credited to his or her Account will be deemed to be invested, then the Administrator will treat the Account as invested in the default investment fund(s) as determined in accordance with Plan Rules.

(c)

Change in Direction for Future Credits . A Participant may direct a change in the manner in which future credits to his or her Deferral Account pursuant to Section 3.2 will be deemed to be invested among the investment funds designated pursuant to Subsection (a). The direction will be effective for amounts credited to the Participant’s Deferral Account pursuant to Section 3.2 at the time and in the manner specified in Plan Rules after the date on which the Administrator receives the direction from the Participant.

(d)

Change in Direction for Existing Account Balance . A Participant may direct a change in the manner in which his or her existing Deferral Account balance is deemed to be invested among the investment funds designated pursuant to Subsection (a). The direction will be effective at the time and in the manner specified in Plan Rules after the date on which the Administrator receives the direction from the Participant.

(e)

Account Adjustment . The Administrator will cause Participants’ Accounts to be separately adjusted as of each Valuation Date, in a manner determined by the Administrator to be uniform and equitable, to reflect the income, expense, gains, losses, fees and the like that would have resulted since the last Valuation Date had the Participant’s investment directions pursuant to this section actually been implemented. To the extent determined by the Administrator to be necessary in conjunction with any distribution pursuant to the Plan, the Administrator will cause the Account from which the distribution is to be made to be adjusted to reflect a good faith estimate by the Administrator of any fees and other expenditures payable after the date of the distribution in connection with deemed investment activity in the Account through and including the date of the distribution. Any such estimate is binding on the Participating Employer and the person to whom the distribution is made.

(f)

Administrator’s Obligations and Responsibilities . The sole obligation of the Administrator with respect to the designation or elimination of any investment fund designated pursuant to Subsection (a) is to act in accordance with the express terms of Subsection (a). By way of example and without limiting the previous sentence, the Administrator is not required, and no course of conduct will cause it to be required, to investigate or monitor any designated fund to any extent or for any purpose or to take or refrain from taking any action with respect to a fund because of any aspect of the performance of the fund. The designation of a limited number of investment funds is solely for administrative convenience and in no way reflects any endorsement of any such funds by the Administrator.

(g)

Participant Responsibilities . Each Participant is solely responsible for any and all consequences of his or her investment directions made pursuant to this section. Neither any Participating Employer, any of its directors, officers or employees nor the Administrator has any responsibility to any Participant or other person for any damages, losses, liabilities, costs or expenses of any kind arising in connection with any investment direction made by the Participant pursuant to this section.

(h)

Company Stock Fund . The Company Stock Fund will be one of the designated investment funds under Subsection (a). Unless otherwise expressly provided in this subsection, the Company Stock Fund is subject to all of the provisions of the Plan applicable to other designated investment funds including, without limitation, the other subsections of this section.

(i)

Description . The Company Stock Fund will be deemed to be invested in Company Stock.

(ii)

Eligibility . To be eligible to direct to have his or her Deferral Account deemed to be invested in the Company Stock Fund, a Participant must be either covered by the Company’s executive stock ownership guidelines or selected by the Committee of the Company’s Board. A Participant who is selected by the Committee of the Company’s Board will be eligible to direct to have his or her Account deemed to be invested in the Company Stock Fund effective as of a date specified in a written notice provided to the Participant by the Administrator.

(iii)

Deemed Investments . All deemed investments in the Company Stock Fund, whether pursuant to Subsection (b), (c) or (d), will be effective as of the last day of the calendar month that first follows by at least 10 days (or such shorter period as Plan Rules may allow) the date on which (1) the Administrator receives the direction from the Participant or (2) in the case of such a direction pursuant to Subsection (b) relating to amounts credited to the Participant’s Deferral Account after the effective date of the direction pursuant to Subsection (b) and before the effective date of a change in the direction pursuant to Subsection (c), the date as of which the amounts are credited to the Participant’s Deferral Account. Deemed investments in the Company Stock Fund will be reflected in full and fractional shares of Company Stock. The conversion of dollar denominated credits into shares in connection with any deemed investment in the Company Stock Fund will be made by dividing the dollar amount of the deemed investment by the Price per Share on the effective date of the deemed investment.

(iv)

Transfer Restrictions . A Participant may not , at any time, direct a transfer out of the Company Stock Fund pursuant to Subsection (d) of any amounts credited to the Discretionary Account that are deemed to be invested in the Company Stock Fund.

(v)

Dividends . If the Company pays dividends on Company Stock, Accounts that are deemed to be invested in the Company Stock Fund will be adjusted to reflect the dividend in accordance with Plan Rules.

(i)

Performance Unit Award Deferrals; Discretionary Account . A Participant’s Performance Unit Award deferrals initially credited to his or her Deferral Account and the Participant’s Discretionary Account will be deemed to be invested in the Company Stock Fund.

3.5.	Vesting . Each Participant always has a fully vested nonforfeitable interest in his or her Account.

3.6.

Effect of Actions Constituting Cause . Notwithstanding Section 3.5 or anything else in this Plan to the contrary, in the event that the Participant is determined by the Compensation Committee of the Board, acting in its sole discretion, to have committed any action that would constitute Cause, irrespective of whether such action or the Committee’s determination occurs before or after the Participant’s Termination of Employment, all rights of the Participant under the Plan shall terminate and be forfeited without notice of any kind, including rights to receive any distribution under Article 4.

ARTICLE 4.

DISTRIBUTION

4.1.	Distribution to Participant Before Termination of Employment .

(a)

In-Service Distributions .

(i)

Each Participant will be provided with an opportunity to elect to receive a distribution of all or any portion of his or her Participant Deferral Account as of a specified date or dates prior to his or her Termination of Employment. The election must be made in conjunction with the deferral election that the Participant makes pursuant to Section 2.8.

(ii)

The first distribution date specified in an election made pursuant to clause (i) may not be before the first day of the second Plan Year after the Plan Year to which the deferral election relates. A Participant may not specify more than one distribution date per Plan Year.

(iii)

If the Participant experiences a Termination of Employment before a specified distribution date, the Participant’s election pursuant to this subsection will become ineffective on his or her Termination of Employment and distribution of his or her remaining Account balance will be made pursuant to Section 4.2 or 4.3, as the case may be.

(iv)

Any distribution pursuant to this subsection will be made in a lump sum cash payment on or as soon as administratively practicable but not more than 90 days after the date specified by the Participant. If the Participant elected a specific dollar amount, the amount of the distribution will be the specified amount or the balance of the Participant’s Deferral Account as of the Valuation Date coinciding with or immediately preceding the date on which the payment is made (reduced by the amount of any other distribution from the Account after that Valuation Date), whichever is less.

(b)

Reduction of Account Balance . The balance of the Participant’s Deferral Account will be reduced (but not below zero) by the amount of the distribution as of the beginning of the next day after the Valuation Date coinciding with or last preceding the date of the distribution.

4.2.	Distribution to Participant After Termination of Employment – Deferral Account

(a)

Time . Except as otherwise provided under Section 4.1(a) and 4.2(b)(iii) (relating to the 5-year redeferral rule) and subject to Section 4.6, distribution to a Participant of his or her Deferral Account will be made or commenced on or within 90 days after the date of the Participant’s Termination of Employment.

(b)

Form . Upon a Participant’s Termination of Employment, distribution to the Participant of his or her Deferral Account will be made in the form of a lump sum payment, unless the Participant has properly elected to receive his or her distribution in an alternative form.

(i)

Company Stock . To the extent that a Participant’s Account is deemed to be invested in whole shares of Company Stock, at the time of a distribution to the Participant pursuant to this section, the distribution will be made to the Participant in whole shares of Company Stock. Any fractional share will be valued based on the Price per Share on the date of the distribution and the value of the fractional share will be distributed to the Participant in cash.

(ii)

Election . Except as otherwise specifically provided in the Plan, each Participant will be provided with an opportunity to irrevocably elect in accordance with Plan Rules an optional form of distribution (among the forms described in clause (iv)). The election must be made prior to the Plan Year during which the Participant’s services are performed for which the credits under Section 3.2 relate (together with earnings credits thereon), or if the Participant satisfies the requirements of Section 2.8(c), within the deadline for making the election under Section 2.8(c).

(iii)

5-Year Redeferral Election . If the time for making an election under clause (ii) has expired, Participant may elect to change the form of his or her distribution to a form described in clause (iv) or to a single lump sum, provided the election (1) is made on a properly completed form received by the Administrator at least twelve (12) months prior to the date that the Participant’s first scheduled payment was to begin; (2) is not effective until at least twelve (12) months after the date on which the election is made, and (3) delays the commencement of the payment at least five (5) years beyond the date the payment was otherwise scheduled to begin.

(iv)

Installments . A Participant may elect to receive his or her distribution in the form of five (5) or ten (10) annual installments. For purposes of Code section 409A, an installment distribution will be treated as a single payment.

(v)

Distribution of Small Amounts . If the balance of the Participant’s Deferral Account on his or her Termination of Employment is less than Twenty Five Thousand and no/100 Dollars ($25,000.00), then notwithstanding the election made under clause (ii), distribution to the Participant will be made in the form of a lump sum payment.

(c)

Amount .

(i)

Lump Sum . The amount of a lump sum payment from a Participant’s Deferral Account will be equal to the balance of the Deferral Account as of the Valuation Date coinciding with or immediately preceding the date on which the payment is made (reduced by the amount of any other distribution from the Account after that Valuation Date).

(ii)

Installments . The amount of an installment payment from a Participant’s Deferral Account will be determined by dividing the balance of the Deferral Account as of the Valuation Date coinciding with or immediately preceding the date on which the payment is made (reduced by the amount of any other distribution from the Deferral Account after that Valuation Date) by the total number of remaining payments (including the current payment). The undistributed portion of a Deferral Account distributed in the form of installment payments will continue to be credited with earnings in accordance with Section 3.4.

(d)

Reduction of Account Balance . The balance of the Deferral Account from which a distribution is made will be reduced (but not below zero) by the amount of the distribution as of the beginning of the next day after the Valuation Date coinciding with or last preceding the date of the distribution.

4.3.	Distribution to Participant – Discretionary Account.

(a)

Time . Distribution to a Participant of his or her Discretionary Account will be made or commenced on or within 90 days after the later of (i) the date of the Participant’s Termination of Employment, or (ii) the date the Participant attains age sixty-two (62).

(b)

Form . Distribution of the Participant’s Discretionary Account will be made in the form of a lump sum payment, in whole shares of Company Stock, with any fractional share, valued based on the Price Per Share on the date of distribution, distributed to the Participant in cash.

4.4.	Distribution to Beneficiary .

(a)

Time . Distribution to a Beneficiary will be made on the date that is 60 days after the date of the Participant’s death.

(b)

Form . Distribution to the Participant’s Beneficiary will be made in the form of a lump sum payment whether or not payments had commenced to the Participant in the form of installments prior to his or her death. The distribution will be made in the form of cash except that to the extent that the Participant’s Account is required to be invested in the Company Stock Fund under Section 3.4(i), the distribution will be made to the Beneficiary in whole shares of Company Stock. Any fractional share will be valued based on the Price per Share on the date of the distribution and the value of the fractional share will be distributed to the Beneficiary in cash.

(c)

Amount . The amount of a lump sum payment will be equal to the balance of the Participant’s Account as of the Valuation Date coinciding with or immediately preceding the date on which the payment is made (reduced by the amount of any other distribution from the Account after that Valuation Date). If there are multiple Beneficiaries, the total amount distributed will be divided among the Beneficiaries as directed by the Participant in the Beneficiary designation.

(d)

Reduction of Account Balance . The balance of the Account from which a distribution is made will be reduced (but not below zero) by the amount of the distribution as of the beginning of the next day after the Valuation Date coinciding with or immediately preceding the date of the distribution.

(e)

Beneficiary Designation .

(i)

Each Participant may designate, on a form furnished by the Administrator, one or more primary Beneficiaries or alternative Beneficiaries to receive all or a specified part of his or her Account, and the additional amount described in Subsection (c), after his or her death, and the Participant may change or revoke any such designation from time to time. No such designation, change or revocation is effective unless executed by the Participant and received by the Administrator during the Participant’s lifetime.

(ii)

If a Participant

(1)

fails to designate a Beneficiary, or

(2)

revokes a Beneficiary designation without naming another Beneficiary, or

(3)

designates one or more Beneficiaries, none of whom survives the Participant or exists at the time in question,

for all or any portion of his or her Account, such Account or portion will be paid to the Participant’s surviving spouse or, if the Participant is not survived by a spouse, to the representative of the Participant’s estate.

(iii)

The automatic Beneficiaries specified above and, unless the designation otherwise specifies, the Beneficiaries designated by the Participant, become fixed as of the Participant’s death so that, if a Beneficiary survives the Participant but dies before the receipt of the payment due such Beneficiary, the payment will be made to the representative of such Beneficiary’s estate. Any designation of a Beneficiary by name that is accompanied by a description of relationship or only by statement of relationship to the Participant is effective only to designate the person or persons standing in such relationship to the Participant at the Participant’s death.

4.5.

Payment in Event of Incapacity . If any individual entitled to receive any payment under the Plan is, in the judgment of the Administrator, physically, mentally or legally incapable of receiving or acknowledging receipt of the payment, and no legal representative has been appointed for the individual, the Administrator may (but is not required to) cause the payment to be made to any one or more of the following as may be chosen by the Administrator: the Beneficiary (in the case of the incapacity of a Participant); the institution maintaining the individual; a custodian for the individual under the Uniform Transfers to Minors Act of any state; or the individual’s spouse, children, parents, or other relatives by blood or marriage. The Administrator is not required to see to the proper application of any such payment and the payment completely discharges all claims under the Plan against the Participating Employer, the Plan and Trust to the extent of the payment.

4.6.

Six-Month Suspension for Specified Key Employee . If at the time of the Participant’s Termination of Employment (other than on account of death), the Participant is a “specified employee” for purposes of complying with the requirements of Section 409A(a)(2)(B)(i) of the Code, any payment due the Participant on account of his or her Termination of Employment will be suspended and not paid until the first day of the calendar month immediately following the date that is six (6) months after the date of the Participant’s Termination of Employment, or if earlier, upon the Participant’s death.

ARTICLE 5.

SOURCE OF PAYMENTS; NATURE OF INTEREST

5.1.

Establishment of Trust . A Participating Employer may establish a trust, or may be covered by a trust established by another Participating Employer, with an independent corporate trustee. The trust must (a) be a grantor trust with respect to which the Participating Employer is treated as the grantor for purposes of Code section 677, (b) not cause the Plan to be funded for purposes of Title I of ERISA and (c) provide that the trust assets will, upon the insolvency of a Participating Employer, be used to satisfy claims of the Participating Employer’s general creditors. The Participating Employers may from time to time transfer to the trust cash, marketable securities or other property acceptable to the trustee in accordance with the terms of the trust, provided such transfer does not trigger taxation under Code section 409A(b).

5.2.	Source of Payments .

(a)

Each Participating Employer will pay, from its general assets, the portion of any benefit pursuant to Article 4 or Section 6.3 or 6.4 attributable to a Participant’s Account with respect to that Participating Employer, and all costs, charges and expenses relating thereto.

(b)

The Trustee will make distributions to Participants and Beneficiaries from the Trust in satisfaction of a Participating Employer’s obligations under the Plan in accordance with the terms of the Trust. The Participating Employer is responsible for paying any benefits attributable to a Participant’s Account with respect to that Participating Employer that are not paid by the Trust.

5.3.

Status of Plan . Nothing contained in the Plan or Trust is to be construed as providing for assets to be held for the benefit of any Participant or any other person or persons to whom benefits are to be paid pursuant to the terms of the Plan, the Participant’s or other person’s only interest under the Plan being the right to receive benefits in accordance with the terms of the Plan. The Trust is established only for the convenience of the Participating Employers and the Participants, and no Participant has any interest in the assets of the Trust. To the extent the Participant or any other person acquires a right to receive benefits under the Plan or the Trust, such right is no greater than the right of any unsecured general creditor of the Participating Employer.

5.4.	Non-assignability of Benefits . The benefits payable under the Plan and the right to receive future benefits under the Plan may not be anticipated, alienated, sold, transferred, assigned, pledged, encumbered or subjected to any charge or legal process.

ARTICLE 6.

ADOPTION, AMENDMENT, TERMINATION

6.1.	Adoption . With the prior approval of the Administrator, a Subsidiary may adopt the Plan and become a Participating Employer by furnishing to the Administrator a certified copy of a resolution of its Board adopting the Plan.

6.2.	Amendment .

(a)

Right . The Company reserves the right to amend the Plan at any time to any extent that it may deem advisable.

(b)

Method . To be effective, an amendment must be stated in a written instrument approved in advance or ratified by the Company’s Board and executed in the name of the Company by an officer.

(c)

Binding Effect . An amendment adopted in accordance with Subsection (b) is binding on all interested parties as of the effective date stated in the amendment; provided, however, that no amendment may retroactively deprive any Participant, or the Beneficiary of a deceased Participant, of any benefit to which he or she is entitled under the terms of the Plan in effect immediately prior to the effective date of the amendment or the date on which the amendment is adopted, whichever is later.

(d)

Applicability to Participants Who Have Experienced a Termination of Employment . The provisions of the Plan in effect on a Participant’s Termination of Employment will, except as otherwise expressly provided by a subsequent amendment, continue to apply to such Participant.

(e)

Change in Control . Notwithstanding anything in the Plan to the contrary, from and after the occurrence of a Change in Control, no amendment may be made to the Plan that would adversely affect the terms and conditions associated with the Account balance of any Participant as of the date of the Change in Control.

6.3.

Termination of Participation . Notwithstanding any other provision of the Plan to the contrary, if determined by the Administrator to be necessary to ensure that the Plan is exempt from ERISA to the extent contemplated by Section 1.3, or upon the Administrator’s determination that a Participant’s interest in the Plan has been or is likely to be includable in the Participant’s gross income for federal income tax purposes prior to the actual payment of benefits pursuant to the Plan, the Administrator may take any or all of the following steps:

(a)

terminate the Participant’s future participation in the Plan;

(b)

if (and only to the extent) the Participant’s interest in the Plan has become subject to tax under Code section 409A, cause such Participant’s interest in the Plan to be distributed to the Participant in the form of an immediate lump sum cash payment in an amount determined in accordance with Section 4.2(c); and/or

(c)

transfer the benefits that would otherwise be payable pursuant to the Plan for all or any of the Participants to a new plan that is similar in all material respects (other than those which require the action in question to be taken.)

6.4.

Termination . The Company reserves the right to terminate the Plan in its entirety at any time, including following a Change in Control Each Participating Employer reserves the right to cease its participation in the Plan at any time. The Plan will terminate in its entirety or with respect to a particular Participating Employer as of the date specified by the Company or such Participating Employer in a written instrument adopted in the same manner as an amendment. Upon the termination of the Plan in its entirety or with respect to any Participating Employer, the Company or Participating Employer, as the case may be, will either cause (a) any benefits to which Participants have become entitled prior to the effective date of the termination to continue to be paid in accordance with the provisions of Article 4 or (b) the entire interest in the Plan of any or all Participants, or the Beneficiaries of any or all deceased Participants, to be distributed in the form of an immediate lump sum payment in an amount determined in accordance with Section 4.2(c), provided, however, acceleration of distributions following a termination of the Plan will be made if and only to the extent and at the times permitted under Code section 409A.

ARTICLE 7.

CONSTRUCTION, INTERPRETATION AND DEFINITIONS

7.1.	Cross Reference . References within a section of the Plan to a particular subsection refer to that subsection within the same section and references within a section or subsection to a particular clause refer to that clause within the same section or subsection, as the case may be.

7.2.

Governing Law . To the extent that state law is not preempted by the provisions of ERISA, or any other laws of the United States, all questions pertaining to the construction, validity, effect and enforcement of the Plan will be determined in accordance with the internal, substantive laws of the State of Wisconsin without regard to the conflict of law rules of the State of Wisconsin or any other jurisdiction.

7.3.	Headings . The headings of articles and sections are included solely for convenience of reference; if there exist any conflict between such headings and the text of the Plan, the text will control.

7.4.	Number and Gender . Wherever appropriate, the singular may be read as the plural, the plural may be read as the singular and one gender may be read as the other gender.

ARTICLE 8.

ADMINISTRATION

8.1.

Administrator . The general administration of the Plan and the duty to carry out its provisions is vested in the Administrator. The Administrator may delegate such duty or any portion thereof to a named person or persons and may from time to time revoke such authority and delegate it to another person or persons.

8.2.	Plan Rules . The Administrator has the discretionary power and authority to make such Plan Rules as the Administrator determines to be consistent with the terms, and necessary or advisable in connection with the administration of the Plan and to modify or rescind any such Plan Rules.

8.3.

Administrator’s Discretion . The Administrator has the discretionary power and authority to make all determinations necessary for administration of the Plan, except those determinations that the Plan requires others to make, and to construe, interpret, apply and enforce the provisions of the Plan and Plan Rules whenever necessary to carry out its intent and purpose and to facilitate its administration, including, without limitation, the discretionary power and authority to remedy ambiguities, inconsistencies, omissions and erroneous benefit calculations. In the exercise of its discretionary power and authority, the Administrator will treat all similarly situated persons uniformly.

8.4.

Specialist’s Assistance . The Administrator may retain such actuarial, accounting, legal, clerical and other services as may reasonably be required in the administration of the Plan, and may pay reasonable compensation for such services. All costs of administering the Plan will be paid by the Participating Employers.

8.5.

Indemnification . The Participating Employers jointly and severally agree to indemnify and hold harmless, to the extent permitted by law, each director, officer, and employee of the Company or any of its Subsidiaries against any and all liabilities, losses, costs and expenses (including legal fees) of every kind and nature that may be imposed on, incurred by, or asserted against such person at any time by reason of such person’s services in connection with the Plan, but only if such person did not act dishonestly or in bad faith or in willful violation of the law or regulations under which such liability, loss, cost or expense arises. The Participating Employers have the right, but not the obligation, to select counsel and control the defense and settlement of any action for which a person may be entitled to indemnification under this provision.

8.6.	Benefit Claim Procedure . If a request for a benefit by a Participant or Beneficiary of a deceased Participant is denied in whole or in part, he or she may, not later than 30 days after the denial, file with the Administrator a written claim objecting to the denial.

(a)

The Administrator, not later than 90 days after receipt of such claim, will render a written decision to the claimant on the claim. If the claim is denied, in whole or in part, such decision will include the reason or reasons for the denial; a reference to the Plan provisions on which the denial is based; a description of any additional material or information, if any, necessary for the claimant to perfect his or her claim; an explanation as to why such information or material is necessary; and an explanation of the Plan’s claim procedure.

(b)

The claimant may file with the Administrator, not later than 60 days after receiving the Administrator’s written decision, a written notice of request for review of the Administrator’s decision, and the claimant or his or her representative may thereafter review relevant Plan documents which relate to the claim and may submit written comments to the Administrator.

(c)

Not later than 60 days after receipt of such review request, the Administrator will render a written decision on the claim, which decision will include the specific reasons for the decision, including a reference to the Plan’s specific provisions where appropriate.

(d)

The foregoing 90- and 60-day periods during which the Administrator must respond to the claimant may be extended by up to an additional 90- or 60 days, respectively, if special circumstances beyond the Administrator’s control so require and notice of such extension is given to the claimant prior to the expiration of such initial 90- or 60-day period, as the case may be.

(e)

A Participant or Beneficiary must exhaust the procedure described in this section before making any claim of entitlement to benefits pursuant to the Plan in any court or other proceeding.

8.7.

Disputes. No civil action arising out of or relating to this Plan may be commenced by a Participant or Beneficiary more than two (2) years after the Participant or Beneficiary had knowledge (or should have had knowledge) of the facts or circumstances that give rise to, or form the basis for, such action.

ARTICLE 9.

MISCELLANEOUS

9.1.	Withholdings and Offsets . The Participating Employers retain the right to withhold from any compensation, deferral and/or benefit payment pursuant to the Plan, any and all income, employment, excise and other tax as the Participating Employers reasonably determines is required.

9.2.	Other Benefits . Neither amounts deferred nor amounts paid pursuant to the Plan constitute salary or compensation for the purpose of computing benefits under any other benefit plan, practice, policy or procedure of a Participating Employer unless otherwise expressly provided thereunder.

9.3.

No Warranties Regarding Tax Treatment . The Participating Employers make no warranties regarding the tax treatment to any person of any deferrals or payments made pursuant to the Plan and each Participant will hold the Administrator and the Participating Employers and their officers, directors, employees, agents and advisors harmless from any liability resulting from any tax position taken in good faith in connection with the Plan.

9.4.

No Rights to Continued Service Created . Neither the establishment of nor participation in the Plan gives any individual the right to continued employment with the Company or service on the Company’s board of directors or limits the right of the Participating Employer to discharge, transfer, demote, modify terms and conditions of employment or service on the Company’s board of directors or otherwise deal with any individual without regard to the effect which such action might have on him or her with respect to the Plan.

9.5.

Special Provisions . Special provisions of the Plan applicable only to certain Participants may be set forth on an exhibit to the Plan adopted in the same manner as an amendment to the Plan. In the event of a conflict between the terms of the exhibit and the terms of the Plan, the exhibit controls. Except as otherwise expressly provided in the exhibit, the generally applicable terms of the Plan control all matters not covered by the exhibit.

9.6.

Successors . Except as otherwise expressly provided in the Plan, all obligations of the Participating Employers under the Plan are binding on any successor to the Participating Employer whether the existence of such successor is the result of a direct or indirect purchase, merger, consolidation or otherwise of all or substantially all of the business and/or assets of the Participating Employer.

Exhibit 10.19

PERFORMANCE UNIT AWARD AGREEMENT

THIS AGREEMENT is entered into and effective as of ___________ (the “ Date of Grant ”), by and between Marten Transport, Ltd. (the “ Company ”) and _______________ (the “ Grantee ”).

A. The Company has adopted the Marten Transport, Ltd. 2005 Stock Incentive Plan (the “ Plan ”), authorizing the Board of Directors of the Company, or a committee as provided for in the Plan (the Board or such a committee to be referred to as the “ Committee ”), to grant Performance Unit Awards to employees, consultants, advisors and independent contractors of the Company and its Subsidiaries.

B. The Company desires to give the Grantee an inducement to acquire a proprietary interest in the Company and an added incentive to advance the interests of the Company by granting to the Grantee a Performance Unit Award of the Company pursuant to the Plan.

C. The goal of this Performance Unit Award is to incentivize the Grantee to increase diluted net income per share an average of fifteen percent per year over five years, which in conjunction with the five percent per year service-based component of this Performance Unit Award would result in full vesting over five years.

Accordingly, the parties agree as follows:

ARTICLE 1. GRANT OF AWARD .

The Company hereby grants to the Grantee a Performance Unit Award (the “ Award ”) consisting of ______________ units (the “ Award Units ”), each of which is a bookkeeping entry representing the equivalent in value of one share of the Company’s common stock, $0.01 par value (the “ Common Stock ”), according to the terms and subject to the restrictions and conditions set forth herein and as set forth in the Plan.

ARTICLE 2. VESTING OF AWARD UNITS .

2.1 Vesting . As of December 31, 2010, 2011, 2012, 2013 and 2014 (each, a “ Measurement Date ”), this Award will vest and become the right to receive a number of shares of Common Stock equal to the Total Vesting Percentage (as defined below) multiplied by the number of Award Units subject to this Award; provided that the Grantee remains in the continuous employ or service with the Company or any subsidiary from the date hereof through each such Measurement Date. The “ Total Vesting Percentage ” is equal to the sum of (a) the percentage increase, if any, in Company’s diluted net income per share for the year being measured over the prior year, as reflected on Company’s audited financial statements for each such year, rounded down to the nearest whole percentage (the “ Performance Vesting Percentage ”), plus (b) five percentage points (the “ Service Vesting Percentage ”). The Award Units may vest until 5:00 p.m. (Mondovi, Wisconsin time) on December 31, 2014 (the “ Final Measurement Date ”). To the extent not vested as of the Final Measurement Date, the Grantee shall forfeit any non-vested Award Units. The Performance Vesting Percentage shall not exceed a cumulative total of 75%, and the Service Vesting Percentage shall not exceed a cumulative total of 25%. An example calculation has been provided as Exhibit A for illustrative purposes only.

2.2 Committee Adjustments to Vesting . The Committee may adjust the calculation of the Performance Vesting Percentage applicable to the Award Units to reflect any unusual or non-recurring events and other extraordinary items, the impact of charges for restructurings, discontinued operations and the cumulative effects of accounting or tax changes, each as defined by generally accepted accounting principles and as identified in the Company’s financial statements, notes to the financial statements, management’s discussion and analysis or other filings with the Securities and Exchange Commission by the Company.

2.3 Termination of Employment or Other Service . In the event that the Grantee’s employment or other service with the Company and all Subsidiaries is terminated for any reason, the Award Units that have not vested on or by such date will be terminated and forfeited.

2.4 Change in Control .

(a) Impact of Change in Control . If any events constituting a Change in Control (as defined in the Plan) of the Company occur, and (i) the Company terminates the Grantee’s employment for any reason other than the Grantee’s death or Cause, or the Grantee terminates his or her employment with the Company for Good Reason, and (ii) such termination occurs either within the period beginning on the date of a Change in Control and ending on the last day of the 24th month that begins after the month during which the Change in Control occurs or prior to a Change in Control if the Grantee’s termination was either a condition of the Change in Control or was at the request or insistence of a person related to the Change in Control, then this Award will become immediately vested in full and the Grantee will automatically receive settlement or credit under Article 3 in cash for each Award Unit in an amount equal to the Fair Market Value (as defined in the Plan) of the Company’s Common Shares immediately prior to the effective date of such Change in Control of the Company.

(b) Definition of Cause . If the Grantee is party to a Change in Control Severance Agreement with the Company, the term “Cause” shall be as defined in such Change in Control Severance Agreement. If the Grantee is not a party to a Change in Control Severance Agreement with the Company, the term “Cause” shall be as defined in the Plan.

(c) Definition of Good Reason . If the Grantee is party to a Change in Control Severance Agreement with the Company, the term “Good Reason” shall be as defined in such Change in Control Severance Agreement. If the Grantee is not a party to a Change in Control Severance Agreement with the Company, the term “Reason” shall mean:

(i) a material diminution in the Grantee’s authority, duties or responsibilities as an executive of the Company as in effect immediately prior to the Change in Control (other than, if applicable, any such change directly attributable to the fact that the Company is no longer publicly owned);

(ii) a material diminution in the Grantee’s base compensation;

(iii) a material diminution in the authority, duties, or responsibilities of the supervisor to whom the Grantee reports as in effect immediately prior to the Change in Control, including any requirement that the Grantee report to a corporate officer or employee instead of reporting directly to the Board if the Grantee reported directly to the Board immediately prior to the Change in Control;

(iv) a material diminution in the budget over which the Grantee retains authority;

(v) a material change in the geographic location at which the Company requires the Grantee to be based as compared to the location where the Grantee was based immediately prior to the Change in Control; or

(vi) any other action or inaction by the Company that constitutes a material breach of any employment agreement between the Company and the Grantee.

(vii) An act or omission will not constitute a “good reason” unless the Grantee gives written notice to the Company of the existence of such act or omission within 90 days of its initial existence and the Company fails to cure the act or omission within 30 days after the notification.

2.5 Effects of Actions Constituting Cause . Notwithstanding anything in this Agreement to the contrary, in the event that the Grantee is determined by the Committee, acting in its sole discretion, to have committed any action which would constitute Cause, irrespective of whether such action or the Committee’s determination occurs before or after termination of the Grantee’s employment with the Company or any Subsidiary, all rights of the Grantee under the Plan and this Agreement shall terminate and be forfeited without notice of any kind, including rights to vested Award Units.

ARTICLE 3. SETTLEMENT OF VESTED AWARD UNITS; ISSUANCE OF SHARES OF COMMON STOCK .

3.1 Settlement . Except as may otherwise be provided in this Agreement, half of the vested Award Units will be paid to the Grantee by the March 15 immediately following a Measurement Date and half of the vested Award Units will be credited to the Grantee’s Discretionary Account under the Marten Transport, Ltd. Deferred Compensation Plan, as such plan may be amended from time to time, or any similar successor plan. Such Award Units will be paid to the Grantee in shares of Common Stock (such that one Award Unit equals one share of Common Stock), provided that any applicable tax obligation pursuant to Article 7 below and such issuance otherwise complies with all applicable law. Prior to the time the vested Award Units are settled, the Grantee will have no rights other than those of a general creditor of the Company. The Award Units represent an unfunded and unsecured obligation of the Company.

3.2 Deferral . Notwithstanding any of the foregoing or any other provision of this Agreement, in the event Grantee has properly elected to defer receipt of any shares of Common Stock in settlement of his or her vested Award Units under the Marten Transport, Ltd. Deferred Compensation Plan, as such plan may be amended from time to time, or any similar successor plan, Grantee will receive shares of Common Stock in accordance with the Grantee’s deferral election.

ARTICLE 4. RIGHTS AS A STOCKHOLDER .

The Grantee will have no rights as a stockholder, including the right to receive dividends, with respect to any of the Award Units until the Award Units are settled in shares of Common Stock after vesting, and such shares of Common Stock are issued to the Grantee or credited to the Marten Transport, Ltd. Deferred Compensation Plan.

ARTICLE 5. NONTRANSFERABILITY.

Neither this Award nor the Award Units acquired upon vesting may be transferred by the Grantee, either voluntarily or involuntarily, or subjected to any lien, directly or indirectly, by operation of law or otherwise, except as provided in the Plan. Any attempt to transfer or encumber this Award or the Award Units acquired upon vesting other than in accordance with this Agreement and the Plan will be null and void and will void this Award.

ARTICLE 6. EMPLOYMENT OR OTHER SERVICE .

Nothing in this Agreement will be construed to (a) limit in any way the right of the Company to terminate the employment or service of the Grantee at any time, or (b) be evidence of any agreement or understanding, express or implied, that the Company will retain the Grantee in any particular position at any particular rate of compensation or for any particular period of time.

ARTICLE 7. WITHHOLDING TAXES .

7.1 General Rules . The Company is entitled to (a) withhold and deduct from future wages of the Grantee (or from other amounts which may be due and owing to the Grantee from the Company), or make other arrangements for the collection of, all legally required amounts necessary to satisfy any federal, state or local withholding and employment-related tax requirements attributable to the granting, vesting, and settlement of this Award or otherwise incurred with respect to this Award, (b) withhold shares of Common Stock from the shares issued or otherwise issuable to the Grantee in connection with this Award, provided such action does not cause the Incentive Award to become subject to the requirements of Section 409A of the Code or (c) require the Grantee promptly to remit the amount of such withholding to the Company before the Settlement Date. In the event that the Company is unable to withhold such amounts, for whatever reason, the Grantee must promptly pay the Company an amount equal to the amount the Company would otherwise be required to withhold under federal, state or local law.

7.2 Special Rules . The Committee may, in its sole discretion and upon terms and conditions established by the Committee, permit or require the Grantee to satisfy, in whole or in part, any withholding or tax obligation as described in Section 7.1 above by electing to tender, or by attestation as to ownership of, Previously Acquired Shares that have been held for the period of time necessary to avoid a charge to the Company’s earnings for financial reporting purposes and that are otherwise acceptable to the Committee. For purposes of satisfying a Participant’s withholding or employment-related tax obligation, Previously Acquired Shares tendered or covered by an attestation will be valued at their Fair Market Value.

ARTICLE 8. PERFORMANCE-BASED COMPENSATION .

Any payment of Common Stock received for the vested Award Units is intended to be exempt from the provisions of 162(m) of the Internal Revenue Code as “performance-based” compensation, and no action will be taken which would cause such payment to fail to satisfy the requirements of such exemption.

ARTICLE 9. SUBJECT TO PLAN .

9.1 Terms of Plan Prevail . The Award and the Award Units granted pursuant to this Agreement have been granted under, and are subject to the terms of, the Plan. The terms of the Plan are incorporated by reference in this Agreement in their entirety, and the Grantee acknowledges having received a copy of the Plan. The provisions of this Agreement will be interpreted as to be consistent with the Plan, and any ambiguities in this Agreement will be interpreted by reference to the Plan. In the event that any provision in this Agreement is inconsistent with the terms of the Plan, the terms of the Plan will prevail.

9.2 Definitions . Unless otherwise defined in this Agreement, the terms capitalized in this Agreement have the same meanings as given to such terms in the Plan.

ARTICLE 10. MISCELLANEOUS .

10.1 Binding Effect . This Agreement will be binding upon the heirs, executors, administrators and successors of the parties hereto.

10.2 Governing Law . This Agreement and all rights and obligations under this Agreement will be construed in accordance with the Plan and governed by the laws of the State of Wisconsin without regard to conflicts of law provisions.

10.3 Entire Agreement . This Agreement and the Plan set forth the entire agreement and understanding of the parties hereto with respect to the granting, vesting, and settlement of this Award and the administration of the Plan and supersede all prior agreements, arrangements, plans and understandings relating to the granting, vesting, and settlement of this Award and the administration of the Plan.

10.4 Amendment and Waiver . Other than as provided in the Plan, this Agreement may be amended, waived, modified or canceled only by a written instrument executed by the parties hereto or, in the case of a waiver, by the party waiving compliance.

10.5 Captions . The Article, Section and paragraph captions in this Agreement are for convenience of reference only, do not constitute part of this Agreement and are not to be deemed to limit or otherwise affect any of the provisions of this Agreement.

10.6 Counterparts . For the convenience of the parties hereto, this Agreement may be executed in any number of counterparts, each such counterpart to be deemed an original instrument, and all such counterparts together to constitute the same agreement.

The parties to this Agreement have executed this Performance Unit Award Agreement effective the day and year first above written.

	MARTEN TRANSPORT, LTD.

	By:

	Its:

	GRANTEE

EXHIBIT A

Example (for illustrative purposes only): For this example, please make the following assumptions: the first Measurement Date began on December 31, 2010, the Award grant was for 1,000 Award Units, and the Grantee was continuously employed by the Company. In this example, the Company will provide the Grantee directly with 450 shares of Common Stock and will credit 450 shares of Common Stock to the Grantee’s Discretionary Account under the Marten Transport, Ltd. Deferred Compensation Plan for a total of 900 shares of Common Stock. Vested Award Units will be paid in shares of Common Stock or credited to the Deferred Compensation Plan by the March 15 immediately following the Measurement Date.

Year	Diluted EPS	Diluted EPS Change Year over Year	Performance Vesting Percentage	Service Vesting Percentage	Total Vesting Percentage	Vested Award Units
Base Year
December 31, 2009	$1.00	N/A	N/A	N/A	N/A	N/A
Vesting Years
December 31, 2010	$1.20	20%	20%	5%	25%	250
December 31, 2011	$1.20	0%	0%	5%	5%	50
December 31, 2012	$1.00	(16%)	0%	5%	5%	50
December 31, 2013	$1.20	20%	20%	5%	25%	250
December 31, 2014	$1.50	25%	25%	5%	30%	300
	Total:	49%*	65%	25%	90%	900

*Cumulative change from Base Year.

Exhibit 31.1

CERTIFICATION

I, Randolph L. Marten, certify that:

1.	I have reviewed this quarterly report on Form 10-Q of Marten Transport, Ltd.;

2.	Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3.	Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

(a)

Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

(b)

Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

(c)

Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

(d)

Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5.	The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

(a)

All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

(b)

Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date: November 9, 2010	/s/ Randolph L. Marten
	Randolph L. Marten Chief Executive Officer (Principal Executive Officer)

Exhibit 31.2

CERTIFICATION

I, James J. Hinnendael, certify that:

1.	I have reviewed this quarterly report on Form 10-Q of Marten Transport, Ltd.;

2.	Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3.	Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

(a)

(b)

(c)

(d)

5.	The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

(a)

(b)

Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date: November 9, 2010	/s/ James J. Hinnendael
	James J. Hinnendael Chief Financial Officer (Principal Financial Officer)

Exhibit 32.1

CERTIFICATION PURSUANT TO

18 U.S.C. §1350,

AS ADOPTED PURSUANT TO

SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

In connection with the Quarterly Report of Marten Transport, Ltd. (the “Company”) on Form 10-Q for the period ended September 30, 2010 as filed with the Securities and Exchange Commission on the date hereof (the “Report”), each of the undersigned certifies, pursuant to 18 U.S.C. §1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that, to the best knowledge of the undersigned:

(1)

The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and

(2)

The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

Date: November 9, 2010	/s/ Randolph L. Marten
	Randolph L. Marten
	Chief Executive Officer

	/s/ James J. Hinnendael
	James J. Hinnendael
	Chief Financial Officer