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SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
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FORM 10-K
(Mark One)
[X] Annual Report Pursuant to Section 13 or 15(d) of the Securities Exchange
Act of 1934 [Fee Required]
For the Fiscal Year Ended December 31, 1996
or
[ ] Transition Report Pursuant to Section 13 or 15 (d) of the Securities
Exchange Act of 1934 [No Fee Required]
For the Transition Period from _______ to _______
Commission File Number 1-9063
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MARITRANS INC.
(Exact name of registrant as specified in its charter)
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DELAWARE 51-0343903
(State or other jurisdiction of (Identification No.
incorporation or organization) I.R.S. Employer)
ONE LOGAN SQUARE
PHILADELPHIA, PENNSYLVANIA 19103
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code (215) 864-1200
Securities registered pursuant to Section 12(b) of the Act:
Name of Each Exchange
Title of Each Class on Which Registered
Common Stock, Par Value $.01 Per Share New York Stock Exchange
Preferred Stock, Par Value $.01 Per Share None
Securities registered pursuant to Section 12(g) of the Act: NONE
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Indicate by check mark if disclosure of delinquent filers pursuant to Item
405 of Regulation S-K is not contained herein, and will not be contained, to
the best of the registrant's knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Form 10-K or any
amendment to this Form 10-K. [X]
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 requirements for the past 90 days.
Yes [X] No [ ]
As of March 11, 1997, the aggregate market value of the voting stock held by
non-affiliates of the registrant was $74,824,256. As of March 11, 1997,
Maritrans Inc. had 11,971,881 shares of common stock outstanding.
Documents Incorporated By Reference
Part III incorporates information by reference from the Proxy Statement for
Annual Meeting of Stockholders to be held on May 7, 1997.
Exhibit Index is located on page 30.
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FORM 10-K
MARITRANS INC.
TABLE OF CONTENTS
PART I
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Item 1. Business 1
Item 2. Properties 9
Item 3. Legal Proceedings 9
Item 4. Submission of Matters to a Vote of Security Holders 10
PART II
Item 5. Market for the Registrant's Common Equity and Related Stockholder Matters 11
Item 6. Selected Financial Data 12
Item 7. Management's Discussion and Analysis of Financial Condition and Results of
Operations 12
Item 8. Financial Statements and Supplemental Data 15
Item 9. Changes in and Disagreements with Accountants on Accounting and Financial
Disclosure 26
PART III
Item 10. Directors and Executive Officers of the Registrant 26
Item 11. Executive Compensation 28
Item 12. Security Ownership of Certain Beneficial Owners and Management 28
Item 13. Certain Relationships and Related Transactions 28
PART IV
Item 14. Exhibits, Financial Statement Schedules and Reports on Form 8-K 29
Signatures 32
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This Report contains forward-looking statements that involve risks and
uncertainties. Actual events and results could differ materially from those
anticipated in these forward-looking statements as a result of various
factors, including those set forth under "Item 1 - Business - Sales and
Marketing, Competition and Competitive Factors, and Regulation," "Item 3 -
Legal Proceedings" and "Item 7 - Management's Discussion and Analysis of
Financial Condition and Results of Operations" as well as in the Report
generally.
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PART I
ITEM 1. BUSINESS
GENERAL
Maritrans Inc. (the "Corporation" or the "Registrant"), together with its
predecessor, Maritrans Partners L.P. (the "Partnership"), herein called
"Maritrans," has historically served the petroleum and petroleum product
industry by using tugs, barges and marine terminal facilities to provide
marine transportation and terminalling services along the East and Gulf
Coasts of the United States.
STRUCTURE
Current. The Registrant is a Delaware corporation whose common stock
("Common Stock") is publicly traded. The Registrant conducts most of its
marine transportation business activities through operating divisions of
Maritrans Operating Partners L.P. (the "Operating Partnership") and its
managing general partner, Maritrans General Partner Inc., wholly owned
subsidiaries of the Registrant. Most of the Registrant's terminalling and
distribution services are conducted through subsidiaries of Maritrans
Holdings Inc., a wholly owned subsidiary of the Registrant.
Historical. Founded in the 1850's and incorporated in 1928 under the name
Interstate Oil Transport Company, Maritrans' predecessor was one of the first
tank barge operators in the United States, with a fleet which increased in
size and capacity as United States consumption of petroleum products
increased. On December 31, 1980, Maritrans' predecessor operations and its
tugboat and barge affiliates were acquired by Sonat Inc. ("Sonat"). On April
14, 1987, Maritrans acquired the tug and barge business and related assets
from Sonat. On March 31, 1993, the limited partners of the Partnership voted
on a proposal to convert the Partnership to corporate form (the
"Conversion"). The proposal was approved, and on April 1, 1993, Maritrans
Inc., then a newly-formed Delaware corporation, succeeded to all assets and
liabilities of the Partnership. The holders of general and limited
partnership interests in the Partnership and in the Operating Partnership
were issued shares of Common Stock, par value $.01 per share, of the
Corporation, representing substantially the same percentage equity interest
in the Corporation as they had in the Partnership, directly or indirectly, in
exchange for their partnership interest. Each previously held Unit of Limited
Partnership Interest in the Partnership was exchanged for one share of Common
Stock of the Corporation. For financial accounting purposes, the conversion
to corporate form has been treated as a reorganization of affiliated
entities, with the assets and liabilities recorded at their histoical costs.
In addition, the Partnership recognized a net deferred income tax liability
for temporary differences in accordance with Statement of Financial
Accounting Standard ("FAS") No. 109, "Accounting for Income Taxes," which
resulted in a one-time charge to earnings of $16.6 million in the first
quarter of 1993.
Overview. Since 1981, Maritrans and its predecessors have transported
annually over 200 million barrels of crude oil and refined petroleum
products. Based on its internal research regarding competition, Maritrans
believes that it is one of the largest United States marine transporters of
petroleum and petroleum products in the United States coastwise Jones Act
trade (i.e. from point-to-point within the United States), excluding
affiliates of integrated oil companies, and that it owns one of the largest
domestic fleets of U.S. flag oceangoing tank barges in terms of
cargo-carrying capacity.
Maritrans operates a fleet of tank barges and tugboats and three terminal
facilities. Its largest barge has a capacity of approximately 400,000
barrels, and its current operating barge fleet capacity aggregates
approximately 4.1 million barrels. Aggregate capacity at Maritrans' terminal
facilities totals approximately 1.6 million barrels at December 31, 1996.
Demand for Maritrans' services is dependent primarily upon general demand
for petroleum and petroleum products in the geographic areas served by its
vessels. Management believes that United States petroleum consumption, and
particularly consumption in New England and Florida, are significant
indicators of demand for Maritrans' services. Increases in product
consumption generally increase demand for Maritrans' services; conversely,
decreases in consumption generally lessen demand for Maritrans' services.
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Management further believes that the level of domestic consumption of
imported product is also significant to Maritrans' business. Imported
petroleum products generally can be shipped on foreign-flag vessels directly
into United States ports for storage, distribution and eventual consumption.
These shipments reduce the need for domestic marine transportation service
providers such as Maritrans to carry products from United States refineries
to such ports. While Maritrans does benefit somewhat from the increase in
demand for domestic redistribution services that results from the delivery of
excess product to terminals by foreign-flag vessels, the overall effect of
refined product imports on the demand for Maritrans' services is generally
negative.
In May 1996, Maritrans restructured its operations into two divisions --
Eastern and Gulf, supported by executive and service units. The two divisions
provide marketing, logistical, and operational support for Maritrans'
vessels, which are assigned to divisions based on market conditions and to
the terminals, which are supported at the Eastern division. This divisional
restructuring was designed to improve productivity and efficiency in
operations, better coordinate marketing of complementary services and permit
more rapid decisions and responses to changing conditions.
The Gulf Division, headquartered in Tampa, Florida, provides marine
transportation services for petroleum products from refineries located in
Texas, Louisiana and Mississippi to distribution points along the Gulf and
Atlantic Coasts generally south of Cape Hatteras, North Carolina and
particularly into Florida. The Eastern Division, supported by a major fleet
center in Philadelphia, Pennsylvania, transports petroleum products from East
Coast refineries (primarily located in and near Philadelphia) and pipeline
terminals located in the New York Harbor area to distribution terminals
primarily located along the Eastern Seaboard between the Canadian Maritime
Provinces and Norfolk, Virginia and transports petroleum products between
refineries and distribution points along the Delaware River and in the
Chesapeake Bay. Maritrans also provides, as part of its Eastern Division,
lightering services for large tank ships (a process of off-loading crude oil
or petroleum products from an inbound tanker into barges, thereby enabling
the tanker to navigate draft-restricted rivers and ports to discharge cargo
at a refinery or storage and distribution terminal).
SALES AND MARKETING
Maritrans provides marine transportation, storage, and distribution
coordination services primarily to integrated oil companies, independent oil
companies, and petroleum distributors in the southern and eastern United
States. Maritrans relies primarily on direct sales efforts, minimizing its
use of chartering brokers. Maritrans monitors the supply and distribution
patterns of its actual and prospective customers and focuses its efforts on
providing services that are responsive to the current and future needs of
these customers.
Maritrans does business on a spot market basis, a term contract basis and,
more recently, on a product exchange basis. Maritrans strives to maintain an
appropriate mix of contracted business, based on current market conditions.
In light of the potential liabilities of oil companies and other shippers
of petroleum products under the Oil Pollution Act of 1990 ("OPA") and
analogous state laws, management believes that some shippers have begun to
select transporters in larger measure than in the past on the basis of a
demonstrated record of safe operations. Maritrans believes that the measures
it has implemented in the last six years to promote higher quality operations
and its longstanding commitment to safe transportation of petroleum products
benefits its marketing efforts with these shippers.
In 1996, approximately 79 percent of Maritrans' revenues were generated
from ten customers. In 1996, contracts with Sun Oil Company, Marathon Oil and
Star Enterprise, accounted in the aggregate for approximately 20 percent, 12
percent and 10 percent, respectively, of Maritrans' revenues. There could be
a material adverse effect on Maritrans if any of these customers were to
cancel or terminate their various agreements with Maritrans. Management
believes that cancellation or termination of all its business with any of its
larger customers is unlikely.
In early 1996, BP Oil Company completed the sale of its northeastern U.S.
retail outlets, terminal facilities and its Marcus Hook, Pennsylvania,
refinery to Tosco Corporation ("Tosco"). This refinery's output did not
represent the only source of Maritrans' revenue from BP Oil Shipping Company
in 1995 or 1996. The refinery was
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turned over to Tosco in a non-operating state. This development negatively
impacted financial results although Maritrans took action to replace the
revenues that had been associated with this refinery's output, including
relocating certain vessels and other steps to mitigate the financial impact.
Maritrans understands that Tosco currently plans to reopen this refinery
sometime in 1997.
COMPETITION AND COMPETITIVE FACTORS
Overview. The maritime petroleum transportation industry is highly
competitive. The Jones Act, a federal law, restricts United States
point-to-point maritime shipping to vessels built in the United States, owned
by U.S. citizens and manned by U.S. crews. In Maritrans' market areas, its
primary direct competitors are the operators of U.S. flag oceangoing barges
and U.S. flag tankers. In the Gulf market, the primary competitors are the
fleets of both other independent petroleum transporters and integrated oil
companies. In the Eastern market, management believes, based on its extensive
knowledge and experience in the industry, that Maritrans primarily competes
with other independent oceangoing barge operators and with the captive fleets
of integrated oil companies and, in lightering operations, competes with
foreign-flag operators which lighter offshore. Some of the integrated oil
company fleets with which Maritrans competes are larger than Maritrans'
fleet. Additionally, in certain geographic areas and in certain business
activities, Maritrans competes with the operators of petroleum product
pipelines. Competitive factors which also affect Maritrans include the output
of United States refineries and the importation of refined petroleum
products.
The primary competition for Maritrans' marine terminals is proprietary
storage capacity of integrated oil companies, merchant refiners, and
independent marine terminal operators.
U.S. Flag Barges and Tankers. Maritrans' most direct competitors are the
other operators of U.S. flag oceangoing barges and tankers. Because of the
restrictions imposed by the Jones Act, there is a finite number of vessels
that are currently eligible to engage in U.S. maritime petroleum transport.
Therefore, the size and capacity of Maritrans' fleet relative to those of
others in the industry is an important factor in competing for business on
the basis of service. The number of vessels eligible to engage in Jones Act
trade has declined significantly over the past several years. The gradual
implementation of regulations requiring significant capital modifications and
in some cases loss of vessel capacity, as well as a decrease in the number of
new vessels constructed since 1982, have been the major causes of this
decline. Competition in the industry is based upon price and service
(including vessel availability) and is intense.
Maritrans is engaged in several different market activities. A significant
portion of its revenues in 1996 was generated in the coastal transportation
of petroleum products from refineries or pipeline terminals in the Gulf of
Mexico to ports which are not served by pipelines. Management believes that
the optimal vessel size suited to serve these ports is between 20,000
deadweight tons ("DWT") (approximately 160,000 barrels) and 40,000 DWT
(approximately 320,000 barrels). Maritrans currently operates eight barges in
this size range in this market, which comprises a significant number of the
vessels able to compete in this market. The relatively large size of
Maritrans' fleet generally provides greater flexibility in meeting customers'
needs.
Maritrans competes with operators of generally smaller vessels in its
Eastern transportation activities. In this activity Maritrans is competing
primarily with other barge operators. This is a diverse market allowing a
broader size range of vessels to participate than in the Gulf of Mexico.
Management believes that, to some extent, Maritrans' independent
competitors do not provide the same level of service, quality performance, or
attention to safe operations as Maritrans due to its fleet size, maintenance
and training programs, and spill record.
General Agreement on Trade in Services ("GATS") and North American Free
Trade Agreement ("NAFTA").
The possible inclusion of maritime services within the scope of the GATS
and the NAFTA was the subject of discussion in the concluded Uruguay Round of
GATS negotiations and NAFTA negotiations. Maritime services were not included
in GATS until at least the year 2000. If maritime services were deemed to
include cabotage (vessel trade or marine transportation between two points
within the same country) and were included in any multi-national trade
agreements, the result would be to open the Jones Act trade, (i.e.,
transportation of
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maritime cargo between U.S. ports in which Maritrans and other U.S. vessel
owners operate) to foreign-flag vessels which would operate at lower costs.
While cabotage will not be included in the GATS and the NAFTA in the
immediate future, the possibility exists that cabotage could be included in
the GATS, NAFTA or other international trade agreement in the future. In the
meantime, Maritrans and the maritime industry will continue to resist
vigorously the inclusion of cabotage in the GATS, NAFTA and any other
international trade agreements.
The U.S. Administration signed legislation to export Alaskan crude oil on
U.S. built and manned vessels. While to date this law has not materially
affected the vessel capacity competing against Maritrans in the Jones Act
trades, it could have an adverse impact on the status of the Jones Act in the
context of future international trade developments.
Refined Product Pipelines. Existing refined product pipelines generally
are the lowest incremental cost method for the long-haul movement of
petroleum and refined petroleum products. Other than the Colonial Pipeline
system, which originates in Texas and terminates at New York Harbor, the
Plantation Pipeline, which originates in Louisiana and terminates in
Washington D.C., and smaller regional pipelines between Philadelphia and New
York, there are no pipelines carrying refined petroleum products to the major
storage and distribution facilities currently served by Maritrans. While the
Colonial Pipeline system reduces the amount of refined product transported
into the New York area by ship, it provides an origination point for
Maritrans' business of transporting such products from New York Harbor to New
England ports. Management believes that high capital costs, tariff regulation
and environmental considerations make it unlikely that a new refined product
pipeline system which would have a material adverse effect on Maritrans'
business will be built in its market areas in the foreseeable future. It is
possible, however, that, as noted above, new pipeline segments (including
pipeline segments that connect with existing pipeline systems) could be built
or that existing pipelines could be converted to carry refined petroleum
products, either of which could effectively compete with Maritrans in
particular locations.
Natural Gas Pipelines. In December 1991, a 370 mile natural gas pipeline
from the Canadian border to the northeastern United States markets was
completed. The operation of this pipeline increased the amount of natural gas
supplied to the northeastern United States, thus reducing the demand for
residual fuel for power generation. This ultimately reduced the demand for
marine transportation of residual fuel and other petroleum products to and
within the area negatively affecting Maritrans and other carriers active in
this trade. The continuation of this reduction will depend on the relative
prices between residual fuel and natural gas, including transportation costs,
in the future.
Imported Refined Petroleum Products. A significant factor affecting the
level of Maritrans' business operations is the level of refined petroleum
product imports, particularly in Florida and New England. Imported refined
petroleum products may be transported on foreign-flag vessels, which are
generally less costly to operate than U.S. flag vessels. To the extent that
there is an increase in the importation of refined petroleum products to any
of the markets served by Maritrans, there could be a decrease in the demand
for the transportation of refined products from United States refineries,
which would likely have an adverse impact upon Maritrans. One possible
outcome of the Clean Air Act could be the importing of more refined product
from outside the United States in order to avoid the expense of upgrading
United States refineries to comply with such Act. In this case, while there
would still be a need for marine petroleum transportation, the demand would
decrease, thereby possibly materially adversely affecting the coastwise
business of Maritrans and its competitors.
Delaware River Channel Deepening. Legislation has been approved by the
United States Congress which authorizes the U.S. Army Corps of Engineers to
deepen the channel of the Delaware River between the river's mouth and
Philadelphia from forty to forty-five feet late in the 1990's. If further
legislation appropriating the funds for this project should become law and
this project is implemented and used by vessels calling on the Delaware
Valley refineries, it would have a material adverse effect on Maritrans'
lightering business which currently transports crude oil which is off-loaded
from deeply laden tankers from the mouth of the Delaware Bay up the Delaware
River to the Delaware Valley refineries.
EMPLOYEES AND EMPLOYEE RELATIONS
At December 31, 1996, Maritrans and its subsidiaries employed a total of
476 persons. Of these employees, 78 are employed at the Philadelphia,
Pennsylvania headquarters of the Registrant or at the Philadelphia and
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Tampa fleet centers, 383 are seagoing employees who work aboard the tugs and
barges, and 15 are employed by Maritrans' non-marine affiliates. Maritrans
and its predecessors have had collective bargaining agreements with the
Seafarers' International Union of North America, Atlantic, Gulf and Inland
District, AFL-CIO ("SIU"), and with American Maritime Officers ("AMO"),
formerly District 2 Marine Engineers Beneficial Association, Associated
Maritime Officers, AFL-CIO, for approximately 34 years. Approximately
one-half of the total number of seagoing employees employed are supervisors
and, hence, as part of management, are not represented by maritime unions.
The collective bargaining agreement with the SIU covers approximately 155
employees. The collective bargaining agreement with the AMO covers
approximately 43 employees. Each expires on May 31, 2001. The employees of
the subsidiaries of Maritrans Holdings Inc. are not covered by any collective
bargaining agreement.
Management believes that the seagoing supervisory and non-supervisory
personnel contribute significantly to responsive customer service. Maritrans
maintains a policy of seeking to promote from within, where possible, and
generally seeks to draw from its union and non-union personnel to fill
supervisory and other management positions as vacancies occur.
Management believes that its operational audit program (performed by
Tidewater School of Navigation, Inc.) and training program are essential to
insure that its employees are knowledgeable and highly skilled in the
performance of their duties as well as in their preparedness for any
unforeseen emergency situations that may arise. Consequently, various
training sessions and additional skill improvement seminars are held
throughout the year. In 1991, Maritrans introduced its Quality Improvement
Program. All employees participate in quality training seminars in addition
to the skills improvement training.
REGULATION
Marine Transportation -- General. The Interstate Commerce Act exempts from
economic regulation the water transportation of petroleum cargos in bulk.
Accordingly, Maritrans' transportation rates, which are negotiated with its
customers, are not subject to special rate regulation under the provisions of
such act or otherwise. The operation of tugboats and barges is subject to
regulation under various federal laws and international conventions, as
interpreted and implemented by the United States Coast Guard, as well as
certain state and local laws. Tugboats and barges are required to meet
construction and repair standards established by the American Bureau of
Shipping, a private organization, and/or the United States Coast Guard and to
meet operational and safety standards presently established by the United
States Coast Guard. Maritrans' seagoing supervisory personnel are licensed by
the United States Coast Guard. Seamen and tankermen are certificated by the
United States Coast Guard.
Jones Act. The Jones Act, a federal law, restricts maritime transportation
between United States points to vessels built and registered in the United
States and owned by United States citizens. The entities in the Maritrans
organizational structure engaged in maritime transportation between United
States points are subject to the provisions of the law. Therefore, it is the
responsibility of Maritrans to monitor ownership of these entities and take
any remedial action necessary to insure that no violation of the Jones Act
ownership restrictions occurs. In addition, the Jones Act requires that all
United States flag vessels be manned by United States citizens, which
significantly increases the labor and certain other operating costs of United
States flag vessel operations compared to foreign-flag vessel operations.
Foreign-flag seamen generally receive lower wages and benefits than those
received by United States citizen seamen. In addition, a significant number
of foreign governments subsidize, at least to some extent, the wages and/or
benefits received by the seamen of those nations. Furthermore, certain of
these foreign governments subsidize those nations' shipyards, resulting in
lower shipyard costs both for new vessels and repairs, than those paid by
United States-flag vessel owners such as Maritrans, to United States
shipyards. Finally, the United States Coast Guard and American Bureau of
Shipping maintain the most stringent regime of vessel inspection in the
world, which tends to result in higher regulatory compliance costs for United
States-flag operators than those paid by owners of vessels registered under
foreign flags of convenience. Because Maritrans transports petroleum and
petroleum products between United States ports, most of its business depends
upon the Jones Act remaining in effect. There have been various unsuccessful
attempts in the past by foreign governments and companies to gain access to
the Jones Act trade, as well as by interests within the United States to
limit or do away with the Jones Act. Legislation to this effect was
introduced in the last session of Congress. Management expects that efforts
of this type will continue.
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ENVIRONMENTAL MATTERS
Maritrans' operations present potential environmental risks, primarily
through the marine transportation or storage of petroleum. Maritrans is
committed to protecting the environment and complying with applicable
environmental laws and regulations. Maritrans, as well as its competitors, is
subject to regulation under federal, state and local environmental laws which
have the effect of increasing the costs and potential liabilities arising out
of its operations.
Marine Storage Terminal Regulation. Maritrans marine terminal subsidiaries
are subject to various federal, state and local environmental laws and
regulations, particularly with respect to air quality, the handling of
materials removed from the tanks of vessels which are cleaned, and any
spillage of petroleum products on or adjoining marine terminal premises.
Management believes that this regulatory scheme will become progressively
stricter in the future, resulting in greater capital expenditures by
Maritrans for environmentally related equipment. Also, there are significant
fines and penalties for any violations of this scheme. Management intends to
reflect any such additional expenditures, to the extent they are able, in the
rates which are charged to customers from time to time for services.
Oil Pollution Legislation. Many of the states in which Maritrans does
business have enacted laws providing for strict, unlimited liability for
vessel owners in the event of an oil spill. In addition, certain states have
enacted or are considering legislation or regulations involving at least some
of the following provisions: tank- vessel-free zones, contingency planning,
state inspection of vessels, additional operating, maintenance and safety
requirements, and state financial responsibility requirements. As a result of
this legislation and regulation, Maritrans has limited its carriage of
persistent oils, primarily crude and #6 oil, to or through portions of
several of these states. Persistent oils are those which continue to exist
longer in the water when spilled, thus making them more difficult to clean
up.
In August 1990, OPA became law. OPA substantially changes the liability
exposure of owners and operators of vessels, oil terminals and pipelines from
that imposed under prior law. Under OPA, each responsible party for a vessel
or facility from which oil is discharged will be jointly, strictly and
severally liable for all oil spill containment and clean-up costs and certain
other damages arising from the discharge. These other damages are defined
broadly to include (i) natural resource damage (recoverable only by
government entities), (ii) real and personal property damage, (iii) net loss
of taxes, royalties, rents, fees and other lost revenues (recoverable only by
government entities), (iv) lost profits or impairment of earning capacity due
to property or natural resource damage, and (v) net cost of public services
necessitated by a spill response, such as protection from fire, safety or
health hazards.
The owner or operator of a vessel from which oil is discharged will be
liable under OPA unless it can be demonstrated that the spill was caused
solely by an act of God, an act of war, or the act or omission of a third
party unrelated by contract to the responsible party. Even if the spill is
caused solely by a third party, the owner or operator must pay all removal
cost and damage claims and then seek reimbursement from the third party or
the trust fund established under OPA.
OPA establishes a federal limit of liability of the greater of $1,200 per
gross ton or $10 million per tank vessel. A vessel owner's liability is not
limited, however, if the spill results from a violation of federal safety,
construction or operating regulations. In addition, OPA does not preclude
states from adopting their own liability laws. Numerous states in which
Maritrans operates have adopted legislation imposing unlimited strict
liability for vessel owners and operators. Management believes that the
liability provisions of OPA and similar state laws have greatly expanded
Maritrans' potential liability in the event of an oil spill, even where
Maritrans is not at fault.
OPA requires all vessels to maintain a certificate of financial
responsibility for oil pollution in an amount equal to the greater of $1,200
per gross ton per vessel, or $10 million per vessel in conformance with U.S.
Coast Guard regulations. Additional financial responsibility in the amount of
$300 per gross ton is required under U.S. Coast Guard regulations under the
Comprehensive Environmental Response Compensation and Liability Act
("CERCLA"), the federal Superfund law. The previous requirement was $150 per
gross ton per vessel, or $250,000, whichever is larger. Owners of more than
one tank vessel, such as Maritrans, however, are only
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required to demonstrate financial responsibility in an amount equal to cover
the vessel having the greatest maximum liability (approximately $40 million
in Maritrans' case). Maritrans has acquired such certificates through filing
required financial information with the U.S. Coast Guard.
OPA requires all newly constructed petroleum tank vessels engaged in
marine transportation of oil and petroleum products in the U.S. to be
double-hulled and all such existing single-hulled vessels to be retrofitted
with double hulls or phased out of the industry beginning January 1, 1995, in
order to comply with new standards for such vessels. Because of the age and
size of Maritrans' individual barges, the first of its operating vessels will
be required to be retired or retrofitted by January 1, 2003, and most of its
large ocean-going, single-hulled vessels will be similarly affected on
January 1, 2005. Management believes that it would, for example, cost
approximately $20-25 milion to build a 20,000 DWT double-hulled barge. The
cost of retrofitting an existing 20,000 DWT barge with a double hull may be
somewhat less than the cost of a new barge, but the retrofitting cost would
depend upon a variety of construction and engineering factors. Therefore,
retrofitting may not be a viable economic alternative to the purchase of a
new double-hulled barge. The prices of retrofitting and constructing new
vessels may increase materially as a result of increased demand for shipyard
capacity arising from OPA. Also as a result of this legislation, the expected
lives of some of Maritrans' barges have been shortened, thus forcing
Maritrans to accelerate the depreciation of these vessels. This change in
depreciation calculation began in September 1990 and caused an increase of
Maritrans' annual depreciation expense by approximately $1.4 million.
The double-hulled or double-bottomed tank barges currently owned by
Maritrans account for approximately 25 percent of its fleet capacity. The
OCEAN 400 and the MARITRANS 300, approximately 16 percent of fleet capacity,
have been grandfathered under equivalency provisions of the interim final
rule promulgated by the U.S. Coast Guard.
OPA further required all tank vessel operators to submit, by February 18,
1993, for federal approval, detailed vessel oil spill contingency plans
setting forth their capacity to respond to a worst case spill situation.
Maritrans filed its plans prior to that deadline. Several states have similar
contingency or response plan requirements. Because of the large number of
ports served by Maritrans, the cost of compliance may be substantial, and,
while Maritrans is presently in compliance, there is no assurance that
Maritrans will be able to remain in compliance with all the federal
requirements or those of one or more states.
OPA is expected to have a continuing adverse effect on the entire U.S. oil
and petroleum marine transportation industry, including Maritrans. The
effects on the industry could include, among others, (i) increased
requirements for capital expenditures, which the independent marine
transporters of petroleum may not be able to finance, to fund the cost of
double-hulled vessels, (ii) increased maintenance, training, insurance and
other operating costs, (iii) civil penalties and liability, (iv) decreased
operating revenues as a result of a further reduction of volumes transported
by vessels and (v) increased difficulty in obtaining sufficient insurance,
particularly oil pollution coverage. These effects could adversely affect
Maritrans' profitability and liquidity.
The following table sets forth Maritrans' quantifiable cargo oil spill
record for the period January 1, 1992 through December 31, 1996:
<TABLE>
<CAPTION>
Gallons Spilled
No. of No. of No. of Per Million
Period Gals. Carried Spills Gals. Spilled Gals. Carried
---------------------- --------------- -------- --------------- ---------------
(000) (000)
<S> <C> <C> <C> <C>
1/1/1992 -- 12/31/1992 10,272,000 6 .01 .001
1/1/1993 -- 12/31/1993* 10,433,000 2 .01 .001
1/1/1994 -- 12/31/1994 9,954,000 2 .02 .002
1/1/1995 -- 12/31/1995 9,450,000 1 16.80 1.780
1/1/1996 -- 12/31/1996 9,160,000 3 .08 .009
</TABLE>
- ------
* Results for 1993 exclude the product lost, mostly burned, in the collision
of Maritrans' barge, the OCEAN 255, with vessels owned by others off the
coast of Florida in August 1993. Management believes that Maritrans was not
at fault in this incident.
7
<PAGE>
Maritrans believes that its spill ratio compares favorably with the other
independent, coastwise operators in the Jones Act trade.
Water Pollution Regulations. The Federal Water Pollution Control Act of
1972 ("FWPCA"), as amended by the Clean Water Act of 1977, imposes strict
prohibitions against the discharge of oil (and its derivatives) and hazardous
substances into navigable waters of the United States. FWPCA provides civil
and criminal penalties for any discharge of petroleum products in harmful
quantities and imposes substantial liability for the clean-up costs of
removing an oil spill. State laws for the control of water pollution also
provide varying civil and criminal penalties and clean-up cost liabilities in
the case of a release of petroleum or its derivatives into surface waters. In
the course of its vessel operations, Maritrans engages contractors, in
addition to Maritank Philadelphia Inc., to remove and dispose of waste
material, including tank residue. In the event that any of such waste is
deemed "hazardous," as defined in FWPCA or the Resource Conservation and
Recovery Act, and is disposed of in violation of applicable law, Maritrans
could be jointly and severally liable with the disposal contractor for the
clean-up costs and any resulting damages. The United States Environmental
Protection Agency ("EPA") previously determined not to classify most common
types of "used oil" as a "hazardous waste," provided that certain recycling
standards are met. While it is unlikely that used oil will be classified as
hazardous, the management of used oil under EPA's proposed regulations will
increase the cost of disposing of or recycling used oil from Maritrans'
vessels. Some states in which Maritrans operates, however, have classified
"used oil" as hazardous. Maritrans has found it increasingly expensive to
manage the wastes generated in its operations.
Air Pollution Regulations. The 1990 amendments to the Clean Air Act give
the EPA and the states the authority to regulate emissions of volatile
organic compounds ("VOCs") and any other air pollutant from tank vessels in
all ports served by Maritrans and storage terminals. Several states with
ports served by Maritrans already have established regulations to require the
installation of vapor recovery equipment on petroleum- carrying vessels to
reduce the emissions of VOCs. Compliance with these federal and state
regulations has required material capital expenditures for the retrofitting
of Maritrans' barges and has increased operating costs. The state of Delaware
has announced that it intends to regulate vapor emissions from lightering in
the Delaware Bay. This regulation, the timing of which is presently
uncertain, would in all likelihood require the installation of additional
equipment on lightering barges at a material cost. Similarly, various states
require vapor recovery equipment at storage terminals for the loading of
petroleum into vessels and tank trucks. Maritrans' terminal facilities are
equipped with vapor recovery capabilities for the loading of tank trucks.
They do not currently load petroleum into vessels and therefore have not
acquired vapor recovery capabilities for that activity. The EPA also has the
authority to regulate emissions from marine vessel engines; however, with the
possible exception of the use of low sulfur fuels, direct regulation of
marine engine emissions is not likely in the near future in ports served by
Maritrans. However, it is possible that the EPA and/or various state
environmental agencies ultimately may require that additional air pollution
abatement equipment be installed in tugboats, including those owned by
Maritrans. Such a requirement could result in a material expenditure by
Maritrans, which could have an adverse effect on Maritrans' profitability if
it is not able to recoup these costs through increased charter rates. Also,
the application of various air quality rules in connection with the operation
of Maritrans facilities may require significant additional expenditures which
may not be recovered through increased rates.
Port and Tanker Safety Act. The Port and Tanker Safety Act of 1978
("PTSA") requires certain oil-carrying tankships to be fitted with
segregated ballast tanks. PTSA requires self-propelled vessels to be
retrofitted to meet these standards. Barges are not generally affected by
such requirements. However, if the environmental standards of PTSA were to be
made applicable to the large barges operated by Maritrans, Maritrans would be
required to make significant capital expenditures to retrofit such barges,
and the cargo-carrying capacity of such barges would also be decreased. There
have been no recent regulatory efforts to apply the PTSA standards to large
barges such as those operated by Maritrans.
User Fees and Taxes. The Water Resources Development Act of 1986 permits
local non-federal entities to recover a portion of the costs of new port and
harbor improvements from vessel operators with vessels benefitting from such
improvements. Management does not believe that Maritrans' vessels currently
benefit from such improvements. However, there can be no assurance that such
entities will not seek to recover a portion of such costs from Maritrans.
Federal legislation has been enacted imposing user fees on vessel operators
such as Maritrans to help fund the United States Coast Guard's regulatory
activities. Other federal, state and local agen-
8
<PAGE>
cies or authorities could also seek to impose additional user fees or taxes
on vessel operators or their vessels. The Coast Guard collects fees for
vessel inspection and documentation, licensing and tank vessel examinations.
These fees have not been material to Maritrans. There can be no assurance
that additional user fees, which could have a material adverse effect upon
the financial condition and results of operations of Maritrans, will not be
imposed in the future.
ITEM 2. PROPERTIES
Vessels. The Registrant's subsidiaries owned, at December 31, 1996, a
fleet of 50 vessels, of which 27 are barges and 23 are tugboats. Three
additional tugs are chartered under long-term leases.
In December of 1994, Maritrans increased its double-hull and double-bottom
vessel capacity to over one million barrels by purchasing the MARITRANS 300,
an oceangoing, double-hulled petroleum tank barge with a capacity of
approximately 300,000 barrels. After undergoing modifications, this vessel
was placed in service in the fourth quarter of 1995.
The barge fleet consists of a variety of vessels falling within six
different barge classifications. The largest vessels in the fleet are the
twelve superbarges ranging in capacity from 188,065 to 400,000 barrels. The
oldest vessel in that class is the OCEAN 250 which was constructed in 1970,
while the largest vessel is the OCEAN 400, for which modifications were
completed as recently as 1990. For the most part, however, the bulk of the
superbarge fleet was constructed during the 1970's and early 1980's.
The fleet's next eight largest barges range in capacity from 61,638
barrels to 165,881 barrels and were constructed or substantially renovated
between 1967 and 1981. The remainder of the barge fleet is comprised of three
vessels falling in the 50,000 barrel class, and four vessels in the 30,000
barrel class. The majority of these vessels were constructed between 1961 and
1977.
The tugboat fleet is comprised of one 11,000 horsepower class vessel,
eleven 5,600 horsepower class vessels, three 4,000 horsepower class vessels,
five 3,200 horsepower class vessels, four 2,200 horsepower class vessels, one
pusher class vessel and one chartered 15,000 horsepower class vessel. The
year of construction or substantial renovation of these vessels ranges from
1962 to 1990 with the bulk of the tugboats having been constructed sometime
between 1967 and 1981.
Substantially all of the vessels in the fleet are subject to first
preferred ship mortgages to secure payment of the notes of the Operating
Partnership. These mortgages require the Operating Partnership to maintain
the vessels at a high standard and continue a life-extension program for
certain of its larger barges. At December 31, 1996, Maritrans is in
compliance with the Operating Partnership's mortgage covenants.
Marine Terminals. At December 31, 1996, MPI owns 35 acres on the west bank
of the Schuylkill River in Philadelphia where twelve storage tanks with a
total capacity of 1,040,000 barrels, truck loading racks, office space and
related equipment used in MPI's marine terminal and tank cleaning operations
are located. In early 1993, MMI acquired 25 acres on the Wicomico River in
Salisbury, Maryland where fourteen storage tanks with a total capacity of
170,000 barrels, truck loading racks, office space and related equipment used
in MMI's marine terminal operations are located. In March 1997, MMI sold 20
acres in Baltimore, Maryland with ten storage tanks with a total capacity of
530,000 barrels, truck loading racks and related equipment.
Other Real Property. The Registrant's operations are headquartered in
Philadelphia, Pennsylvania, where it leases office space, expiring in 1998.
Eastern fleet operations are located on the west bank of the Schuylkill River
in Philadelphia, Pennsylvania where the Operating Partnership owns
approximately six acres of improved land. In addition, it also leases a
bulkhead of approximately 430 feet from the federal government for purposes
of mooring vessels adjacent to the owned land. This lease was renewed in 1993
and expires in 1998. In the Philadelphia area, the Operating Partnership has
one short term (one year or less) lease for nearby pier space for the purpose
of mooring vessels. The Operating Partnership also leases four acres of Port
Authority land in Tampa, Florida for use as its Gulf Division fleet center,
which expires in 2004, with three renewal options of ten years each and a
limited amount of office space in Wilmington, Delaware for itself and its
affiliated entities.
ITEM 3. LEGAL PROCEEDINGS
Maritrans is a party to routine, marine-related claims, lawsuits and labor
arbitrations arising in the ordinary course of its business. The claims made
in connection with Maritrans' marine operations are covered by marine
9
<PAGE>
insurance, subject to applicable policy deductibles which are not material as
to any type of insurance coverage. Management believes, based on its current
knowledge, that such lawsuits and claims, even if the outcomes were to be
adverse, would not have a material adverse effect on Maritrans' financial
condition.
In connection with the sale of Main Iron Works, Inc. ("MIW"), Maritrans'
predecessor agreed to reimburse MIW for certain ongoing workmen's
compensation claims arising prior to the sale of MIW, and retained an
assignment of the shipyard's rights against its former workmen's compensation
insurance carrier, which has been in liquidation proceedings. Maritrans
assumed its predecessor's reimbursement obligations to MIW and obtained an
assignment of the predecessor's rights against the workmen's compensation
insurance carrier. Due to the size and complexity of the liquidation
proceeding, it is unlikely that this matter will be resolved for several
years. Maritrans recently reached an agreement in principle with MIW pursuant
to which Maritrans would no longer have any reimbursement obligations to MIW
for any of these ongoing workmens' compensation claims in return for which
Maritrans would modify the amount due by MIW to Maritrans under the original
agreement. Maritrans retains all rights against MIW's original insurance
carrier with respect to the monies Maritrans has reimbursed MIW.
Maritrans has been sued by 54 individuals, alleging unspecified damages
for exposure to asbestos and in at least 43 such cases for exposure to
tobacco smoke. Although Maritrans believes these claims are without merit, it
is impossible at this time to express a definitive opinion on the final
outcome of any such suit. Management believes that any liability would not
have a material adverse effect as it would be adequately covered by
applicable insurance.
During 1993, one of the Company's tug/barge units was involved in a
collision off the coast of Florida. Claims resulting from this incident have
been and are expected to be covered by insurance. In 1993, Maritrans received
insurance proceeds in excess of the barge's net book value for the
constructive total loss of the barge.
In 1996, Maritrans filed suit against the United States government under
the Fifth Amendment to the U.S. Constitution for "taking" 37 of Maritrans'
tank barges without just compensation. Maritrans asserts that the vessels
were taken with the passage of Section 4115 of the Oil Pollution Act of 1990
and that this taking was done in contravention of the Fifth Amendment, which
specifically prohibits the United States government from taking private
property for public use without just compensation. Maritrans is seeking
compensation based on the fact that Maritrans has been deprived of its
reasonable investment-backed expectation in the continued use of its barges
by Section 4115 of OPA, which prohibits all existing single-hull tank vessels
from operating in U.S. waters under a retirement schedule which began January
1, 1995, and ends on January 1, 2015. Under this OPA provision, Maritrans'
single-hull tank barges will be forced from service commencing on January 1,
2003, with a significant portion of the economic lives remaining, or be
required to be retrofitted.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
No matters were submitted to a vote of the Registrant's security holders,
through the solicitation of proxies or otherwise, during the last quarter of
the year ended December 31, 1996.
10
<PAGE>
PART II
ITEM 5. MARKET FOR THE REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER
MATTERS
Market Information and Holders
Maritrans Inc. Common Shares trade on the New York Stock Exchange under
the symbol "TUG." The following table sets forth, for the periods indicated,
the high and low sales prices per share as reported by the New York Stock
Exchange.
QUARTERS ENDING IN 1996: HIGH LOW
------------------------ --------- ---------
March 31, 1996 $6.250 $5.000
June 30, 1996 6.250 5.125
September 30, 1996 7.000 5.875
December 31, 1996 6.500 6.000
QUARTERS ENDING IN 1995: HIGH LOW
------------------------ --------- ---------
March 31, 1995 $6.000 $5.250
June 30, 1995 6.500 5.500
September 30, 1995 6.000 5.500
December 31, 1995 5.875 5.125
As of January 31, 1997, the Registrant had 11,960,909 Common Shares
outstanding and approximately 1,027 shareholders of record.
Dividends
For the year ended December 31, 1996 and 1995, Maritrans Inc. paid the
following cash dividends to stockholders:
PAYMENTS IN 1996: PER SHARE
---------------------- -------------
March 13, 1996 $.050
June 12, 1996 $.075
September 11, 1996 $.075
December 11, 1996 $.075
-------------
Total $.275
=============
PAYMENTS IN 1995: PER SHARE
---------------------- -------------
March 13, 1995 $.020
June 14, 1995 $.020
September 13, 1995 $.020
December 13, 1995 $.050
-------------
Total $.110
=============
While dividend policy is determined at the discretion of the Board of
Directors of Maritrans Inc., management believes that it is likely Maritrans
will pay quarterly cash dividends during 1997.
11
<PAGE>
ITEM 6. SELECTED FINANCIAL DATA ($000)
<TABLE>
<CAPTION>
MARITRANS INC.
------------------------------------------------------------------
JANUARY 1 TO DECEMBER 31
1996 1995 1994 1993 1992
---------- ---------- ---------- ------------- ----------
<S> <C> <C> <C> <C> <C>
CONSOLIDATED INCOME STATEMENT DATA:
Revenues ............................. $126,994 $124,527 $124,846 $132,539 $133,051
Operating income before depreciation
and amortization .................. 30,249 30,738 34,250 24,509 25,576
Depreciation and amortization ........ 16,565 16,214 15,797 15,868 15,578
Operating income (excludes interest
expense) .......................... 13,684 14,524 18,453 8,641 9,998
Interest expense, net ................ 9,494 9,454 9,934 10,373 10,958
Income (loss) before income taxes .... 8,379 8,120 10,355 5,186 3,419
Provision for income taxes ........... 3,130 3,139 3,823 16,975(1) --
Net income (loss) .................... 5,249 4,981 6,532 (11,789)(1) 3,419
CONSOLIDATED BALANCE SHEET DATA (at period end):
Total assets ......................... $235,221 $251,961 $257,609 $253,038 $251,344
Long-term debt ....................... 79,123 104,337 113,008 110,556 116,866
Partnership equity ................... -- -- -- -- 86,571
Stockholders' equity ................. 82,594 79,875 81,173 74,874 --
</TABLE>
- ------
(1) On April 1, 1993, Maritrans Partners L.P. converted from partnership to
corporate form, and Maritrans Inc. succeeded to all assets and
liabilities of Maritrans Partners L.P. In the first quarter of 1993
Maritrans Partners L.P. recognized a net deferred income tax liability
for temporary differences in accordance with Statement of Financial
Accounting Standard No. 109, "Accounting for Income Taxes," which
resulted in a one-time charge to earnings of $16.6 million.
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
The following is a discussion of the consolidated financial condition and
results of operations of Maritrans Inc. (the "Corporation"), and, together
with its subsidiaries and its predecessor, Maritrans Partners L.P. (the
"Partnership"), herein called "Maritrans."
OVERVIEW
Historically, Maritrans has served the petroleum and petroleum product
distribution industry by using tugs, barges and marine terminal facilities to
provide marine transportation and terminalling services along the East and
Gulf Coasts of the United States. Between 1992 and 1996, Maritrans has
transported at least 218 million barrels annually. The high was 248 million
barrels in 1993, and the low was 218 million barrels in 1996. Many factors
affect the number of barrels transported and will affect future results for
Maritrans, including its vessel and fleet size and average trip lengths, the
continuation of federal law restricting United States point-to-point maritime
shipping to U.S. vessels (the Jones Act), domestic oil consumption --
particularly in Florida and the northeastern U.S., environmental laws and
regulations, oil companies' operating and sourcing decisions, competition,
labor and training costs and liability insurance costs. Overall U.S. oil
consumption during 1992-1996 fluctuated between 17.0 million and 18.2 million
barrels a day.
Since 1990, Maritrans has taken steps to modify the mix of operating
characteristics of its fleet. Maritrans has increased its vessel capacity
with the placing in service of its two largest oceangoing, double-hulled
petroleum tank barges, the OCEAN 400 and MARITRANS 300, with capacities of
approximately 400,000 and 300,000 barrels, respectively. Over this period,
Maritrans has also made reductions in owned capacity, disposing of vessels
which, due to their sizes and operating characteristics, Maritrans considered
excess to its long-term business needs. The operating fleet owned by
Maritrans is now approximately 15 percent smaller in barrel capacity than it
had been at year-end 1990.
12
<PAGE>
LEGISLATION
The enactment of the Oil Pollution Act of 1990 ("OPA") significantly
increased the liability exposure of marine transporters of petroleum in the
event of an oil spill. In addition, the states in which Maritrans operates
have enacted legislation increasing the liability for oil spills in their
waters. Maritrans maintains oil pollution liability insurance of $700 million
on each of its vessels. There can be no assurance that such insurance will be
adequate to cover potential liabilities in the event of a catastrophic spill,
that additional premium costs will be recoverable through increased vessel
charter rates, or that such insurance will continue to be available in
satisfactory amounts.
Moreover, this legislation has increased other operating costs as
Maritrans has taken steps to minimize the risk of spills. Among such costs
are those for additional training, safety and contingency programs; these
expenses have not yet been and may never be fully recovered through increased
vessel charter rates. Additionally, management believes that the legislation
has effectively reduced the total volume of waterborne petroleum
transportation as shippers of petroleum have tried to limit their exposure to
OPA liability. This legislation has had a material adverse effect on
Maritrans' operations, financial performance and expectations.
OPA is expected to continue having negative effects on the entire U.S. oil
and marine petroleum transportation industry, including Maritrans. These
effects could include: (i) increased capital expenditures to cover the cost
of mandated double-hulled vessels -- expenditures that the independent marine
transporters of petroleum may not be able to finance, (ii) continued
increased maintenance, training, insurance and other operating costs, (iii)
increased liability and exposure to civil penalties, (iv) decreased operating
revenues as a result of further reductions in volumes transported on vessels
and (v) increased difficulty in obtaining sufficient insurance, particularly
oil pollution coverage. These effects could adversely affect Maritrans'
profitability and liquidity.
OPA will require the retirement of, or retrofitting with double hulls, all
single-hulled petroleum tankers and barges operating in U.S. waters,
including most of Maritrans' existing barges. The first of Maritrans'
affected barges will have to be retired or retrofitted by 2003. However, most
of Maritrans' large oceangoing, single-hulled barges will be affected January
1, 2005. Maritrans' barges under 5,000 gross registered tons are not
scheduled for retirement until 2015. Approximately 16 percent of Maritrans'
operating capacity has been qualified by the United States Coast Guard as
meeting the double-hull requirements and, therefore, is allowed to continue
operating without modification and without a legislatively determined
retirement date. If Maritrans were to replace its entire barge capacity with
newly built double hulls, the estimated cost would be approximately $500
million. This estimate could be higher as shipyard costs increase.
RESULTS OF OPERATIONS
YEAR ENDED DECEMBER 31, 1996 COMPARED WITH YEAR ENDED DECEMBER 31, 1995
Revenues for 1996 were $127.0 million and were $124.5 million in 1995, an
increase of $2.5 million, or two percent. Barrels of cargo transported
decreased by 6.9 million barrels, from 225.0 million to 218.1 million, or
three percent. Curtailment of a portion of refinery throughput in the
Delaware Valley refineries in 1996 caused Maritrans to employ its vessel
capacity in alternative markets. This had the result of increasing average
trip length, which further resulted in higher average revenues per barrel
transported, as equipment formerly utilized in and around Delaware Valley
refining and terminalling locations was redeployed into the Gulf of Mexico,
the Chesapeake Bay, and into delivery locations in the Caribbean. The markets
within which Maritrans operates continue to experience severe price
competition for oil transportation services which is expected to continue.
Revenue from sources other than marine transportation decreased from 4.0
percent of total revenues in 1995 to 3.6 percent in 1996.
Operating expenses of $113.3 million for 1996 increased by $3.3 million,
or 3.0 percent from $110.0 million in 1995. The MARITRANS 300 unit,
Maritrans' second largest tug/barge unit, entered service in the fourth
quarter of 1995 and was operational for the full year in 1996. The
aforementioned increase in trip length and rising fuel prices contributed to
the increase in operating expenses. General and administrative costs rose as
a result of the increased use of outside professional services, particularly
for matters related to business development and analysis.
13
<PAGE>
Interest expense in 1996 was consistent with the prior year. Other income
in 1996 increased $1.1 million from $3.1 million in 1995 to $4.2 million in
1996 due primarily to the gain from disposals of vessels which, due to their
sizes and operating characteristics, were considered excess to Maritrans'
long-term business needs.
Net income for 1996 increased by $0.2 million to $5.2 million as the
result of the aforementioned increased revenues and other income more than
offsetting the increase in operating expenses.
YEAR ENDED DECEMBER 31, 1995 COMPARED WITH YEAR ENDED DECEMBER 31, 1994
Revenues for 1995 were $124.5 million and were $124.8 million in 1994, a
decrease of $0.3 million, or less than half a percent. Barrels of cargo
transported decreased by 12.1 million barrels, from 237.1 million to 225.0
million. While severe price competition for oil transportation services has
existed in the markets served by Maritrans in recent years and is expected to
continue, the fleet's average revenue per barrel rose in 1995, primarily due
to an increase in average trip length. Revenue from sources other than marine
transportation decreased from 5.5 percent of total revenues in 1994 to 4.0
percent in 1995.
Operating expenses of $110.0 million for 1995 increased by $3.6 million,
or 3.4 percent from $106.4 million in 1994. Fleet capacity increased in 1995,
with the MARITRANS 300 unit entering service in the fourth quarter. The
aforementioned increase in trip length contributed to the increase in
operating expenses, particularly fuel. Other contributing factors include
additional training for crew members and an increase in vessel insurance
costs. General and administrative costs rose as a result of the increased use
of outside professional services, particularly for matters related to new
business development and for training.
Interest expense of $9.4 million for 1995 decreased $0.5 million or 5.1
percent from $9.9 million in 1994. The decrease resulted from capitalized
interest partially offset by the interest expense on the long-term debt
acquired to purchase the MARITRANS 300.
Other income in 1995 increased $1.2 million from $1.8 million in 1994 to
$3.0 million in 1995 due to a rise in interest rates and an increase in the
average amount of cash available for investment.
Net income for 1995 decreased by $1.5 million to $5.0 million as the
result of the aforementioned increase in operating expenses partially offset
by the increase in other income.
LIQUIDITY AND CAPITAL RESOURCES
In 1996, funds provided by operating and investing activities were
sufficient to fully meet debt service obligations (including $8.7 million in
required long-term debt repayments and the repurchase, at par, of $15 million
principal amount of long-term debt of a subsidiary), to meet loan agreement
restrictions, to make capital improvements, and to allow Maritrans to pay a
dividend of $0.05 per common share in the first quarter and $0.075 per common
share in each of the last three quarters. Maritrans believes that in 1997,
funds provided by operating activities, augmented by financing transactions
and investing activities, will be sufficient to finance operations,
anticipated capital expenditures, lease payments and required debt
repayments. Dividend payments are expected to continue quarterly in 1997.
In 1996, approximately $3 million was spent for improvements to the
existing fleet and terminal facilities. Maritrans believes capital
expenditures in 1997 for improvements to its current fleet of vessels and
existing marine terminals will be approximately $4 million. No material
commitments existed at December 31, 1996, for capital expenditures. Maritrans
will continue to evaluate potential investments, and the related funding of
those investments, consistent with its long-term strategic interests.
On May 10, 1995, the Corporation announced a stock buy-back plan to
reacquire up to 1.8 million shares of its common stock over the course of the
next two years, depending on market conditions. This amount represented
approximately 15 percent of the 12.5 million shares then outstanding.
Maritrans intends to hold the majority of the shares as treasury stock,
although some shares may be used for employee compensation plans and/or other
corporate purposes. As of December 31, 1996, the Company has purchased
877,955 shares at a cost of approximately $5.1 million. Maritrans has
financed and expects that additional share purchases, if made, would be
financed with internally generated funds.
14
<PAGE>
WORKING CAPITAL AND OTHER BALANCE SHEET CHANGES
At December 31, 1996, current assets exceeded current liabilities by $32
million. The ratio of current assets to current liabilities at December 31,
1996, was 1.95:1. At December 31, 1995, this ratio was 2.21:1. In 1996,
Maritrans utilized available working capital to repurchase, at par, $15
million principal amount of long-term debt of a subsidiary. Working capital
decreased $4.2 million from December 31, 1995, to December 31, 1996. The
working capital decline was due primarily to the increases in current debt
maturities and other current liabilities and decreases in investments
held-to-maturity. Partially offsetting the working capital decline was an
increase in trade accounts receivable based upon the timing of revenues and
payments in the latter part of the fourth quarter of 1996. At December 31,
1996 and 1995, the combined balances of cash and cash equivalents and
investments held-to-maturity were $33.2 million and $38.6 million,
respectively.
DEBT OBLIGATIONS AND BORROWING FACILITY
At December 31, 1996, Maritrans had $89.3 million in total outstanding
debt, secured by mortgages on substantially all of the fixed assets of the
subsidiaries of the Corporation. The current portion of this debt at December
31, 1996, was $10.2 million. Maritrans has a $10 million working capital
facility, secured by its marine receivables and inventories, which expires
June 30, 1997 and which it expects to renew. This facility was not used in
1996.
At December 31, 1996 and 1995, total debt to total capitalization was 52
percent and 59 percent, respectively. For purposes of this calculation, total
capitalization consists of long-term debt, including those portions that are
current, and stockholders' equity.
ITEM 8. FINANCIAL STATEMENTS & SUPPLEMENTAL DATA
REPORT OF INDEPENDENT AUDITORS
Stockholders and Board of Directors
Maritrans Inc.
We have audited the accompanying consolidated balance sheets of Maritrans
Inc. as of December 31, 1996 and 1995, and the related consolidated
statements of income, cash flows and stockholders' equity for each of the
three years in the period ended December 31, 1996. Our audits also included
the financial statement schedule listed in the Index at Item 14(A). These
financial statements and schedule are the responsibility of the management of
Maritrans Inc. Our responsibility is to express an opinion on these financial
statements and schedule based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free
of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the financial statements.
An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audits provide a
reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the consolidated financial position of Maritrans Inc.
at December 31, 1996 and 1995, and the consolidated results of its operations
and its cash flows for each of the three years in the period ended December
31, 1996 in conformity with generally accepted accounting principles. Also,
in our opinion, the related financial statement schedule, when considered in
relation to the basic financial statements taken as a whole, present fairly
in all material respects the information set forth therein.
ERNST & YOUNG LLP
Philadelphia, Pennsylvania
January 24, 1997
15
<PAGE>
MARITRANS INC.
CONSOLIDATED BALANCE SHEETS
($000)
<TABLE>
<CAPTION>
December 31,
------------------------
1996 1995
<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents ....................................... $ 33,174 $ 31,033
Investments held-to-maturity .................................... -- 7,544
Trade accounts receivable (net of allowance for doubtful accounts
of $860 and $457, respectively) .............................. 16,730 12,722
Other accounts receivable ....................................... 4,523 5,063
Inventories ..................................................... 5,823 4,586
Deferred income tax benefit ..................................... 2,234 1,203
Prepaid expenses ................................................ 3,014 3,909
---------- ----------
Total current assets .................................... 65,498 66,060
Vessels terminals and equipment ................................... 280,231 284,161
Less accumulated depreciation ................................... 117,741 106,169
---------- ----------
Net vessels terminals and equipment ..................... 162,490 177,992
Other ............................................................. 7,233 7,909
---------- ----------
Total assets ............................................ $235,221 $251,961
========== ==========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Debt due within one year ........................................ $ 10,213 $ 8,671
Trade accounts payable .......................................... 3,016 2,614
Accrued interest ................................................ 1,748 2,249
Accrued shipyard costs .......................................... 5,774 5,134
Accrued wages and benefits ...................................... 3,656 5,800
Other accrued liabilities ....................................... 9,128 5,458
---------- ----------
Total current liabilities ............................... 33,535 29,926
Long-term debt .................................................... 79,123 104,337
Deferred shipyard costs ........................................... 8,661 7,701
Other liabilities ................................................. 5,364 5,365
Deferred income taxes ............................................. 25,944 24,757
Stockholders' equity:
Preferred stock, $.01 par value, authorized 5,000,000 shares;
none issued .................................................. -- --
Common stock, $.01 par value, authorized 30,000,000 shares;
issued: 1996 -- 12,837,867 shares, 1995 -- 12,558,620 shares . 128 126
Capital in excess of par value .................................. 75,874 74,516
Retained earnings ............................................... 12,372 10,378
Less: Cost of shares held in treasury
1996 -- 877,955 shares; 1995 -- 876,485 shares ........... (5,067) (5,059)
Unearned Compensation .................................... (713) (86)
---------- ----------
Total stockholders' equity .............................. 82,594 79,875
---------- ----------
Total liabilities and stockholders' equity .............. $235,221 $251,961
========== ==========
</TABLE>
See accompanying notes.
16
<PAGE>
MARITRANS INC.
CONSOLIDATED STATEMENTS OF INCOME
($000 EXCEPT PER SHARE AMOUNTS)
<TABLE>
<CAPTION>
For the year ended December 31,
-------------------------------------------
1996 1995 1994
------------ ------------ ----------
<S> <C> <C> <C>
Revenues ................................................... $ 126,994 $ 124,527 $ 124,846
Costs and expenses:
Operation expense ........................................ 67,286 65,260 62,488
Maintenance expense ...................................... 20,289 19,879 20,355
General and administrative ............................... 9,170 8,650 7,753
Depreciation and amortization ............................ 16,565 16,214 15,797
------------ ------------ ----------
113,310 110,003 106,393
------------ ------------ ----------
Operating income ........................................... 13,684 14,524 18,453
Interest expense (net of capitalized interest of $0, $955
and $0, respectively) .................................... (9,494) (9,454) (9,934)
Other income, net .......................................... 4,189 3,050 1,836
------------ ------------ ----------
Income before income taxes ................................. 8,379 8,120 10,355
Income tax provision ..................................... 3,130 3,139 3,823
------------ ------------ ----------
Net income ................................................. $ 5,249 $ 4,981 $ 6,532
============ ============ ==========
Earnings per share ......................................... $ 0.44 $ 0.41 $ 0.52
Average common shares outstanding .......................... 11,828,422 12,150,380 12,524,861
</TABLE>
See accompanying notes.
17
<PAGE>
MARITRANS INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS
($000)
<TABLE>
<CAPTION>
For the year ended December 31,
-------------------------------------
1996 1995 1994
---------- ---------- ----------
<S> <C> <C> <C>
Cash flows from operating activities:
Net income ....................................... $ 5,249 $ 4,981 $ 6,532
Adjustments to reconcile net income to net cash
provided by (used in) operating activities:
Depreciation and amortization ................. 16,565 16,214 15,797
Deferred income taxes ......................... 340 2,560 3,589
Stock compensation ............................ 347 -- --
Changes in receivables, inventories, and
prepaid expenses ............................ (3,810) 1,166 7,425
Changes in current liabilities other than debt 2,067 1,403 (5,187)
Non-current changes, net ...................... 1,063 (532) (1,316)
(Gain) loss on sale of equipment .............. (3,250) (24) 249
---------- ---------- ---------
Total adjustments to net income .................... 13,322 20,787 20,557
---------- ---------- ---------
Net cash provided by (used in) operating
activities .................................. 18,571 25,768 27,089
Cash flows from investing activities:
Acquisition of investments held-to-maturity ...... (27,684) (28,064) (8,000)
Maturity of investments held-to-maturity ......... 35,228 28,520 --
Cash proceeds from sale of marine vessels and
equipment ..................................... 5,558 340 2,985
Purchase of marine vessels, terminals and
equipment ..................................... (2,983) (15,323) (14,217)
---------- ---------- ---------
Net cash provided by (used in) investing
activities .................................. 10,119 (14,527) (19,232)
Cash flows from financing activities:
Proceeds from issuance of long-term debt ......... -- -- 10,250
Proceeds from stock option exercises ............. 378 -- --
Payment of long-term debt ........................ (23,672) (7,654) (6,455)
Purchase of treasury stock ....................... -- (5,059) --
Dividends declared and paid ...................... (3,255) (1,319) (250)
---------- ---------- ---------
Net cash provided by (used in) financing
activities .................................. (26,549) (14,032) 3,545
Net increase (decrease) in cash and cash equivalents 2,141 (2,791) 11,402
Cash and cash equivalents at beginning of year ..... 31,033 33,824 22,422
---------- ---------- ---------
Cash and cash equivalents at end of year ........... $ 33,174 $ 31,033 $ 33,824
========== ========== =========
Supplemental Disclosure of Cash Flow Information:
Interest paid ...................................... $ 9,908 $ 10,353 $ 9,917
Income taxes paid .................................. $ 1,050 $ 85 $ 250
</TABLE>
See accompanying notes.
18
<PAGE>
MARITRANS INC.
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
($000)
<TABLE>
<CAPTION>
Common Capital in
Stock, $.01 excess of Retained Treasury Unearned
Par Value Par Value Earnings Stock Compensation Total
------------- ------------ ---------- ---------- -------------- ---------
<S> <C> <C> <C> <C> <C> <C>
Balance at December 31,
1993 ..................... $125 $74,315 $ 434 -- -- $74,874
Net income, January 1, 1994
to December 31, 1994 ..... 6,532 6,532
Cash dividends ($0.02 per
share of Common Stock) ... (250) (250)
Stock incentives .......... 17 17
------------- ------------ ---------- ---------- -------------- ---------
Balance at December 31,
1994 ..................... 125 74,332 6,716 81,173
Net income January 1, 1995
to December 31, 1995 ..... 4,981 4,981
Cash dividends ($0.11 per
share of Common Stock) ... (1,319) (1,319)
Purchase of treasury stock $(5,059) (5,059)
Stock incentives .......... 1 184 $ (86) 99
------------- ------------ ---------- ---------- -------------- ---------
Balance at December 31,
1995 ..................... 126 74,516 10,378 (5,059) (86) 79,875
Net income, January 1, 1996
to December 31, 1996 ..... 5,249 5,249
Cash dividends ($0.275 per
share of Common Stock) ... (3,255) (3,255)
Stock incentives .......... 2 1,358 (8) (627) 725
------------- ------------ ---------- ---------- -------------- ---------
Balance at December 31,
1996 ..................... $128 $75,874 $12,372 $(5,067) $(713) $82,594
============= ============ ========== ========== ============== =========
</TABLE>
See accompanying notes.
19
<PAGE>
NOTES TO THE CONSOLIDATED
FINANCIAL STATEMENTS
1. ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES
ORGANIZATION
Maritrans Inc. owns Maritrans Operating Partners L.P. (the "Operating
Partnership"), Maritrans Barge Co. and Maritrans Holdings Inc. (collectively,
the "Company"). These subsidiaries, directly and indirectly, own and operate
tugs and barges principally used in the transportation of oil and related
products, along the Gulf and Atlantic Coasts, and own and operate petroleum
storage facilities on the Atlantic Coast.
PRINCIPLES OF CONSOLIDATION
The consolidated financial statements include the accounts of Maritrans
Inc. and subsidiaries, all of which are wholly owned. All significant
intercompany transactions and accounts have been eliminated in consolidation.
USE OF ESTIMATES
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the amounts reported in the financial statements and
accompanying notes. Actual results could differ from those estimates.
MARINE VESSELS AND EQUIPMENT
Equipment, which is carried at cost, is depreciated using the
straight-line method. Vessels are depreciated over a period of up to 30
years. Certain electronic equipment is depreciated over periods of 7 to 10
years. Petroleum storage tanks are depreciated over periods of up to 25
years. Other equipment is depreciated over periods ranging from 3 to 20
years. Gains or losses on dispositions of fixed assets are included in other
income in the accompanying consolidated statements of income.
The Oil Pollution Act requires all newly constructed petroleum tank
vessels engaged in marine transportation of oil and petroleum products in the
U.S. to be double-hulled and all such existing single-hulled vessels to be
retrofitted with double hulls or phased out of the industry beginning January
1, 1995. Because of the age and size of Maritrans' individual barges, the
first of its operating vessels will be required to be retired or retrofitted
by January 2003, and most of its large oceangoing, single-hulled vessels will
be similarly affected on January 1, 2005.
MAINTENANCE AND REPAIRS
Provision is made for the cost of upcoming major periodic overhauls of
vessels and equipment in advance of performing the related maintenance and
repairs. The current portion of this estimated cost is included in accrued
shipyard costs while the portion of this estimated cost not expected to be
incurred within one year is classified as long-term. Both the provisions for
major periodic overhauls as well as non-overhaul maintenance and repairs are
expensed as incurred.
INVENTORIES
Inventories, consisting of materials, supplies and fuel, are carried at
specific cost which does not exceed net realizable value.
INCOME TAXES
Deferred income taxes reflect the net tax effects of temporary differences
between the amount of assets and liabilities for financial reporting purposes
and the amount used for income tax purposes.
SIGNIFICANT CUSTOMERS
During 1996, the Company derived revenues aggregating 42 percent of total
revenues from 3 customers, each one representing 10 percent or more of total
revenues. In 1995, revenues from 4 customers aggregated 54 percent of total
revenues and in 1994, revenues from 4 customers aggregated 49 percent of
total revenues. The Company does not necessarily derive 10 percent or more of
its total revenues from the same group of custom-
20
<PAGE>
NOTES TO THE CONSOLIDATED
FINANCIAL STATEMENTS - (Continued)
1. Organization and Significant Accounting Policies - (Continued)
ers each year. In 1996, approximately 79 percent of the Company's revenues
were generated by 10 customers. Credit is extended to various companies in
the petroleum industry in the normal course of business. This concentration
of credit risk within this industry may be affected by changes in economic or
other conditions and may, accordingly, affect overall credit risk of the
Company.
RELATED PARTIES
The Company obtained protection and indemnity insurance coverage from a
mutual insurance association, whose chairman is also the chairman of
Maritrans Inc. The related insurance expense was $2,654,000, $2,700,000 and
$2,501,000 for the years ended December 31, 1996, 1995 and 1994,
respectively.
The Company paid $440,000 and $510,000 in 1996 and 1995, respectively to a
law firm, a partner of which was elected to the Company's Board of Directors
during 1995. In 1996, the amount paid represents $277,000 relating to the
lease of office space and $163,000 for legal services. In 1995, the amount
represents $277,000 relating to the lease of office space and $233,000 for
legal services.
EARNINGS PER COMMON SHARE
Earnings per common share are based on the average number of common shares
outstanding. The potential effect of outstanding stock options is not
dilutive.
2. CASH AND CASH EQUIVALENTS
Cash and cash equivalents at December 31, 1996, and 1995 consisted of cash
and commercial paper, the carrying value of which approximates fair value.
For purposes of the consolidated financial statements, short-term highly
liquid debt instruments with original maturities of three months or less are
considered to be cash equivalents.
3. INVESTMENTS HELD-TO-MATURITY
Investments held-to-maturity, which consist of debt securities, are
carried at cost which approximates market value. The Company has both the
ability and positive intent to hold these securities until maturity. The
securities all mature within one year.
4. STOCK INCENTIVE PLANS
The Company has elected to follow Accounting Principles Board Opinion No.
25, "Accounting for Stock Issued to Employees" (APB 25) and related
Interpretations in accounting for its employee stock options because the
alternative fair value accounting provided for under FAS Statement No. 123,
"Accounting for Stock-Based Compensation," requires use of option valuation
models that were not developed for use in valuing employee stock options. The
effect of applying Statement No. 123's fair value method to the Company's
stock-based awards results in pro forma net income and earnings per share
that are not materially different from amounts reported.
Maritrans Inc. has a stock incentive plan (the "Plan"), whereby
non-employee directors may be granted stock, and officers and other key
employees may be granted stock, stock options and, in certain cases, receive
cash under the Plan. Any outstanding options granted under the Plan are
exercisable at a price not less than market value of the shares on the date
of grant. In 1996, there were 6,494 shares issued to directors. Compensation
expense equal to the fair market value on the date of the grant to the
directors is included in general and administrative expense in the
consolidated statement of income.
During 1996, there were 158,842 shares of restricted stock issued under
the Plan. The restrictions lapse over a four year period. The shares are
subject to forfeiture under certain circumstances. Unearned compensation,
representing the fair market value of the shares at the date of issuance, is
amortized to expense as the restrictions lapse. At December 31, 1996 and
1995, 230,467 and 570,815 remaining shares within the Plan were reserved for
grant.
21
<PAGE>
NOTES TO THE CONSOLIDATED
FINANCIAL STATEMENTS - (Continued)
Information on stock options for 1996 follows:
Exercise Number of
Price Shares
------------- -----------
Outstanding at beginning of year $4.00-6.00 619,643
Granted ........................ $5.25-5.375 159,428
Exercised ...................... $4.00-5.375 96,911
Cancelled ...................... -- --
Expired ........................ -- --
Outstanding at end of year ..... $4.00-6.00 682,160
Exercisable at end of year ..... $4.00-5.00 208,957
Outstanding options are exercisable in installments over two to four years
and expire beginning in 2002.
5. INCOME TAXES
The income tax provision consists of:
<TABLE>
<CAPTION>
1996 1995 1994
-------- -------- --------
($000)
<S> <C> <C> <C>
Current:
Federal........................................... $2,788 $ 576 $ 123
State ............................................ 2 3 111
Deferred:
Federal........................................... $ 272 $2,391 3,493
State............................................. 68 169 96
-------- -------- --------
$3,130 $3,139 $3,823
======== ======== ========
</TABLE>
The differences between the federal income tax rate of 35 percent in 1996,
1995 and 1994, and the effective tax rates were as follows:
<TABLE>
<CAPTION>
1996 1995 1994
-------- -------- --------
($000)
<S> <C> <C> <C>
Statutory federal tax provision ...................... $2,932 $2,842 $3,624
State income taxes, net of federal income tax benefit 46 112 135
Non-deductible items ................................. 152 181 27
Other ................................................ -- 4 37
-------- -------- --------
$3,130 $3,139 $3,823
======== ======== ========
</TABLE>
Principal items comprising deferred income tax liabilities and assets as
of December 31, 1996 and 1995 are:
1996 1995
--------- -------
($000)
Deferred tax liabilities:
Tax over book depreciation ............ $35,423 $33,153
Prepaids .............................. 1,828 1,897
--------- -------
37,251 35,050
--------- -------
Deferred tax assets:
Reserves and accruals ................. 8,598 7,342
Net operating loss and credit
carryforwards ....................... 4,943 4,154
--------- -------
13,541 11,496
--------- -------
Net deferred tax liabilities ............... $23,710 $23,554
========= =======
At December 31, 1996, Maritrans Inc. has net operating loss carryforwards
of approximately $28.4 million for income tax reporting purposes which expire
in the year 2005 and thereafter. The Company has an Alternative Minimum Tax
credit of $2.9 million at December 31, 1996 which does not expire.
22
<PAGE>
NOTES TO THE CONSOLIDATED
FINANCIAL STATEMENTS - (Continued)
6. RETIREMENT PLANS
Most of the shoreside employees and substantially all of the seagoing
supervisors participate in a qualified defined benefit retirement plan of
Maritrans Inc. Net periodic pension costs were determined under the projected
unit credit actuarial method. Pension benefits are primarily based on years
of service and begin to vest after two years. Employees covered by collective
bargaining agreements and employees of Maritrans Holdings Inc. or its
subsidiaries are not eligible to participate in the qualified defined benefit
retirement plan of Maritrans Inc.
The weighted average discount rate, used to determine the actuarial
present value of the projected benefit obligation, and the expected long-term
rate of return on plan assets was 6.75 percent for all periods. The weighted
average assumed rate of compensation increase used to determine the actuarial
present value of the projected benefit obligation was 5 percent for all
periods.
Net periodic pension costs included the following components for the years
ended December 31:
<TABLE>
<CAPTION>
1996 1995 1994
--------- --------- ---------
($000)
<S> <C> <C> <C>
Service cost of current period ............... $ 1,548 $ 1,581 $ 1,568
Interest cost on projected benefit obligation 1,365 1,237 1,119
Actual (gain) loss on plan assets ............ (2,031) (3,094) 352
Net (amortization) and deferral .............. 423 1,745 (1,677)
--------- --------- ---------
Net pension cost ............................. $ 1,305 $ 1,469 $ 1,362
========= ========= =========
</TABLE>
The following table sets forth the plan's funded status at December 31,
1996 and 1995:
<TABLE>
<CAPTION>
December 31,
---------------------
1996 1995
--------- ---------
($000)
<S> <C> <C>
Actuarial present value of benefit obligations:
Vested benefit obligation ........................... $17,754 $15,986
========= =========
Accumulated benefit obligation ...................... $18,679 $16,925
========= =========
Projected benefit obligation ........................ $22,834 $20,904
========= =========
Plan assets at fair value, primarily publicly traded
stocks and bonds ....................................... $23,188 $20,475
========= =========
Plan assets (greater) less than projected benefit
obligation ............................................. (354) 429
Unrecognized net gain on plan's assets ................... 3,289 2,283
Net assets being amortized over 15 years ................. 1,006 1,210
--------- ---------
Accrued pension cost recognized in the financial
statements ............................................. $ 3,941 $ 3,922
========= =========
</TABLE>
Substantially all of the shoreside employees and seagoing supervisors also
participate in a qualified defined contribution plan. Contributions under the
plan are determined annually by the Board of Directors of Maritrans Inc. The
cost of the plan was $0, $1,005,000 and $742,000 for the years ended December
31, 1996, 1995 and 1994, respectively.
Contributions to industry-wide, multi-employer seamen's pension plans,
which cover substantially all seagoing personnel covered under collective
bargaining agreements, were approximately $474,000, $480,000 and $399,000 for
the years ended December 31, 1996, 1995 and 1994, respectively. These
contributions include funding for current service costs and amortization of
prior service costs of the various plans over periods of 30 to 40 years. The
pension trusts and union agreements provide that contributions be made at a
contractually determined rate per man-day worked. Maritrans Inc. and its
subsidiaries are not administrators of the multi-employer seamen's pension
plans.
23
<PAGE>
NOTES TO THE CONSOLIDATED
FINANCIAL STATEMENTS - (Continued)
7. DEBT
At December 31, 1996, total outstanding debt of the subsidiaries of
Maritrans Inc. is $89.3 million, $79.1 million of which is long-term. At
December 31, 1995, total outstanding debt was $113.0 million, $104.3 million
of which was long-term. The debt is secured by mortgages on substantially all
of the fixed assets of those subsidiaries. At December 31, 1996, total
outstanding debt consists of several series -- $8.5 million maturing through
1997, $6.6 million maturing through 1998, $9.2 million maturing through 2005,
and $65.0 million maturing from 1998 through 2006. The weighted average
interest rate on this indebtedness is 8.89 percent. Terms of the indebtedness
require the subsidiaries to maintain their properties in a specific manner,
maintain specified insurance on their properties and business, and abide by
other covenants which are customary with respect to such borrowings. At
December 31, 1995, the total outstanding debt consisted of several series --
$23.3 million maturing through 1997, $9.7 million maturing through 2005, and
$80 million maturing from 1998 through 2007.
The Operating Partnership has a $10 million working capital facility
secured by its receivables and inventories. There were no borrowings under
this facility during fiscal 1996.
Based on the borrowing rates currently available for loans with similar
terms and maturities, the fair value of long term debt was $87.7 million and
$113.1 million at December 31, 1996 and 1995, respectively.
The maturity schedule for outstanding indebtedness under existing debt
agreements at December 31, 1996, is as follows:
($000)
---------
1997 ......... $10,213
1998 ......... 13,958
1999 ......... 8,608
2000 ......... 8,662
2001 ......... 8,720
2002 -- 2006 . 39,175
---------
$89,336
=========
8. COMMITMENTS AND CONTINGENCIES
Minimum future rental payments under noncancellable operating leases at
December 31, 1996, are as follows:
($000)
---------
1997 ......... $ 2,113
1998 ......... 2,030
1999 ......... 1,863
2000 ......... 2,012
2001 ......... 2,012
2002 -- 2006 . 7,212
---------
$17,242
=========
The indenture governing the Operating Partnership's long-term debt permits
cash distributions by Maritrans Operating Partners L.P. to Maritrans Inc., so
long as no default exists under the indenture and provided that such
distributions do not exceed contractually prescribed amounts.
24
<PAGE>
NOTES TO THE CONSOLIDATED
FINANCIAL STATEMENTS - (Continued)
8. Commitments and Contingencies - (Continued)
In the ordinary course of its business, claims are filed against the
Company for alleged damages in connection with its operations. Management is
of the opinion that the ultimate outcome of such claims at December 31, 1996
will not have a material adverse effect on the consolidated financial
statements.
9. QUARTERLY FINANCIAL DATA (UNAUDITED)
First Second Third Fourth
Quarter Quarter Quarter Quarter
--------- --------- --------- ---------
($000, except per share amounts)
1996
- ----
Revenues ......... $31,586 $30,959 $31,831 $32,618
Operating income . 3,025 2,001 4,326 4,332
Net income ....... 709 215 1,511 2,814
Earnings per share $ 0.06 $ 0.02 $ 0.13 $ 0.23
1995
- ----
Revenues ......... $32,783 $30,125 $29,102 $32,517
Operating income . 5,428 2,733 2,253 4,110
Net income ....... 2,302 1,061 366 1,252
Earnings per share $ 0.18 $ 0.08 $ 0.03 $ 0.11
25
<PAGE>
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
None.
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
Information with respect to directors of the Registrant, and information
with respect to compliance with Section 16(a) of the Securities Exchange Act
of 1934, is incorporated herein by reference to the Registrant's definitive
Proxy Statement to be filed with the Securities and Exchange Commission (the
"Commission") not later than 120 days after the close of the year ended
December 31, 1996, under the captions "Information Regarding Nominees For
Election As Directors And Regarding Continuing Directors" and "Section 16
Requirements."
The individuals listed below are directors and executive officers of
Maritrans Inc. or its subsidiaries.
<TABLE>
<CAPTION>
Name Age(1) Position
---- ------ --------
<S> <C> <C>
Stephen A. Van Dyck (4)(5) .. 53 Chairman of the Board of Directors and Chief Executive
Officer
Dr. Robert E. Boni (2)(3)(4) 69 Director
Dr. Craig E. Dorman (2)(3) .. 56 Director
Robert J. Lichtenstein(4)(5) 49 Director
Eric H. Schless(2)(4) ....... 42 Director
Richard T. McCreary ......... 41 Vice President, Maritrans General Partner Inc.
Janice M. Smallacombe ....... 37 Vice President, Maritrans General Partner Inc.
John J. Burns ............... 44 Vice President, Maritrans General Partner Inc.
Steven E. Welch ............. 45 Vice President, Maritrans General Partner Inc.
John C. Newcomb ............. 58 Vice President, General Counsel and Secretary
Thomas C. Deas, Jr. ......... 45 Vice President, Chief Financial Officer and Treasurer
(until February, 1997)
Walter T. Bromfield ......... 41 Controller
Francis D. Bailey ........... 44 President, Eastern Division -- Operating Partnership
(until December, 1996)
</TABLE>
- ------
(1) As of March 1, 1997
(2) Member of the Compensation Committee
(3) Member of the Audit Committee
(4) Member of the Finance Committee
(5) Member of the Nominating Committee
26
<PAGE>
Mr. Van Dyck has been Chairman of the Board and Chief Executive Officer of
the Company and its predecessor since April 1987. For the previous year, he
was a Senior Vice President -- Oil Services, of Sonat Inc. and Chairman of
the Boards of the Sonat Marine Group, another predecessor, and Sonat Offshore
Drilling Inc. For more than five years prior to April 1986, Mr. Van Dyck was
the President and a director of the Sonat Marine Group and Vice President of
Sonat Inc. Mr. Van Dyck is a member of the Board of Directors of Amerigas
Propane, Inc. Mr. Van Dyck is also the Chairman of the Board and a director
of the West of England Ship Owners Mutual Insurance Association (Luxembourg),
a mutual insurance association. He is a member of the Company's Finance
(Chairman) and Nominating Committees of the Board of Directors. See "Certain
Transactions."
Dr. Boni retired as Chairman of Armco Inc., a steel, oil field equipment
and insurance corporation on November 30, 1990. Dr. Boni became Chief
Executive Officer of Armco Inc. in 1985 and Chairman in 1986. He served as
Non-Executive Chairman of the Board of and consultant for Alexander &
Alexander Services Inc., an insurance services company, during 1994 and as a
consultant for that company during January 1995. He is a member of the
Company's Compensation (Chairman), Audit and Finance Committees of the Board
of Directors.
Dr. Dorman is serving as Chief Scientist/Technical Director, Office of
Naval Research, Europe on an Intergovernmental Personnel Act assignment from
Pennsylvania State University where he serves as Senior Scientist, Applied
Research Lab. From 1993 until mid-1995 he served as Deputy Director Defense
Research and Engineering for Laboratory Management, U.S. Department of
Defense, on an Intergovernmental Personnel Act assignment from Woods Hole
Oceanographic Institution. He was Director and Chief Executive Officer of
Woods Hole Oceanographic Institution from 1989 until 1993. From 1962 to 1989,
Dr. Dorman was an officer in the U.S. Navy, most recently Rear Admiral and
Program Director for Anti-Submarine Warfare. He is a member of the Company's
Audit and Compensation Committees of the Board of Directors.
Mr. Lichtenstein has been a partner in the law firm of Morgan, Lewis &
Bockius LLP since 1988. He is a member of the Company's Finance and
Nominating Committees of the Board of Directors. See "Certain Transactions".
Mr. Schless has been Managing Director, Investment Banking Department,
Head of Transportation Group, of Schroder Wertheim & Co., New York, NY since
1994. From 1985 to 1994, Mr. Schless was a member of the Investment Banking
Department, Wheat First Securities Inc., Richmond, VA, reaching the position
of Managing Director. He is a member of the Company's Finance and
Compensation Committees of the Board of Directors.
Mr. McCreary is a Vice President of Maritrans General Partner Inc. and
joined the Company in May 1995. Previously Mr. McCreary was Vice President,
Operations and Engineering, Canal Barge Lines (1990-May 1995).
Ms. Smallacombe is a Vice President of Maritrans General Partner Inc. and
has been continuously employed by the Company or its predecessors in various
capacities since 1982.
Mr. Burns is a Vice President of Maritrans General Partner Inc. and has
been continuously employed by the Company or its predecessors in various
capacities since 1975.
Mr. Welch is a Vice President of Maritrans General Partner Inc. and has
been continuously employed by the Company or its predecessors in various
capacities since 1977.
Mr. Newcomb is Vice President, General Counsel and Secretary of the
Company, and has been continuously employed in various capacities by
Maritrans or its predecessors since 1975.
Mr. Deas was named Vice President, Chief Financial Officer and Treasurer
of the Company in March 1996. Previously, he was Assistant Treasurer (since
1988) of, or held various financial positions with, Scott Paper Company since
1978. Mr. Deas resigned his position with the Company in February 1997.
Mr. Bromfield is Controller of the Company, and has been continously
employed in various capacities by Maritrans or its predecessors since 1981.
Mr. Bailey was named President of the Eastern Division of the Operating
Partnership in June 1995. Previously, Mr. Bailey was Vice President, Sales
and Marketing, ASB Meditest (August 1991 to June 1995); and President,
Envirobusiness (March 1990 to May 1991). Mr. Bailey resigned his position
with the Company in December 1996.
27
<PAGE>
ITEMS 11, 12 AND 13.
The information required by Item 11, Executive Compensation, by Item 12,
Security Ownership of Certain Beneficial Owners and Management, and by Item
13, Certain Relationships and Related Transactions, is incorporated herein by
reference to the Company's definitive Proxy Statement to be filed with the
Commission not later than 120 days after the close of the fiscal year ended
December 31, 1996, under the headings "Compensation of Directors and
Executive Officers", "Security Ownership of Certain Beneficial Owners and
Management" and "Certain Transactions".
28
<PAGE>
PART IV
<TABLE>
<CAPTION>
Page
Item 14. EXHIBITS, FINANCIAL STATEMENT
SCHEDULES AND REPORTS ON FORM 8-K
<S> <C> <C>
(a) (1) Financial Statements
Report of Independent Auditors 15
Maritrans Inc. Consolidated Balance Sheets at December 31, 1996, and 1995. 16
Maritrans Inc. Consolidated Statements of Income for the years ended 17
December 31, 1996, 1995, and 1994.
Maritrans Inc. Consolidated Statements of Cash Flows for the years ended 18
December 31, 1996, 1995, and 1994.
Maritrans Inc. Consolidated Statements of Stockholders' Equity for the years 19
ended December 31, 1996, 1995 and 1994.
Notes to the Consolidated Financial Statements. 20
(2) Financial Statement Schedules
Schedule II Maritrans Inc. Valuation Account for the years ended December 33
31, 1996, 1995, and 1994.
All other schedules called for under Regulation S-X are not submitted because they are
not applicable, not required, or because the required information is not material, or
is included in the financial statements or notes thereto.
(b) Reports on Form 8-K
No reports on Form 8-K were filed during the quarter ended December 31, 1996.
</TABLE>
29
<PAGE>
<TABLE>
<CAPTION>
(c) Exhibits
Exhibit Index Page
------------- ----
<S> <C> <C>
3.1# Certificate of Incorporation of the Registrant, as amended.
3.2# By Laws of the Registrant.
4.1 Certain instruments with respect to long-term debt of the Registrant or Maritrans
Operating Partners L.P. or Maritrans Barge Company which relate to debt that does not
exceed 10 percent of the total assets of the Registrant are omitted pursuant to Item
601(b) (4) (iii) (A) of Regulation S-K. Maritrans hereby agrees to furnish
supplementally to the Securities and Exchange Commission a copy of each such
instrument upon request.
10.1* Amended and Restated Agreement of Limited Partnership of Maritrans Operating Partners
L.P., dated as of April 14, 1987 (Exhibit 3.2).
10.2+ Certificate of Limited Partnership of Maritrans Operating Partners L.P., dated
January 29, 1987 (Exhibit 3.4).
10.3* Form of Maritrans Capital Corporation Note Purchase Agreement, dated as of March 15,
1987 (Exhibit 10.6).
10.3(a)* Indenture of Trust and Security Agreement, dated as of March 15, 1987 from
Maritrans Operating Partners L.P. and Maritrans Capital Corporation to The Wilmington
Trust Company (Exhibit 10.6(a)).
10.3(b)* Form of First Preferred Ship Mortgage, dated April 14, 1987 from Maritrans
Operating Partners L.P., mortgagor, to The Wilmington Trust Company, mortgagee
(Exhibit 10.6(b)).
10.3(c)* Guaranty Agreement by Maritrans Operating Partners L.P. regarding $35,000,000 Series A
Notes Due April 1, 1997 and $80,000,000 Series B Notes Due April 1, 2007 of Maritrans
Capital Corporation (Exhibit 10.6(c)).
10.3(d) Second Supplemental Indenture of Trust and Security Agreement, dated as of
April 1, 1996 from Maritrans Operating Partners L.P. and Maritrans Capital Corporation
to Wilmington Trust Company, as Trustee.
10.3(e) Supplement To First Preferred Ship Mortgages, dated May 8, 1996 from Maritrans
Operating Partners L.P., Mortgagor, to Wilmington Trust Company, as Trustee,
Mortgagee.
Executive Compensation Plans and Arrangements
10.4 Severance and Non-Competition Agreement, dated April 4, 1996 between Maritrans General
Partner Inc. and John C. Newcomb.
10.5 Severance and Non-Competition Agreement, dated March 4, 1997 between Maritrans General
Partner Inc. and John J. Burns.
10.6^ Employment Agreement, dated October 5, 1993 between Maritrans General Partner Inc. and
Stephen A. Van Dyck.
10.7 Severance and Non-Competition Agreement, dated March 5, 1997 between Maritrans General
Partner Inc. and Steven E. Welch.
10.8 Severance and Non-Competition Agreement, dated April 4, 1996 between Maritrans Inc.
and Thomas C. Deas, Jr.
10.9= Severance and Non-Competition Agreement, dated June 1, 1995 between Maritrans General
Partner Inc. and Janice M. Smallacombe.
</TABLE>
30
<PAGE>
<TABLE>
<CAPTION>
Exhibit Index Page
------------- ----
<S> <C> <C>
10.10= Severance and Non-Competition Agreement, dated June 1, 1995 between Maritrans General
Partner Inc. and Francis D. Bailey.
10.11= Severance and Non-Competition Agreement, dated June 1, 1995 between Maritrans General
Partner Inc. and Richard T. McCreary.
10.12 Separation Agreement and General Release, dated January 20, 1997 between Maritrans
General Partner Inc. and Francis D. Bailey.
10.13^ Profit Sharing and Savings Plan of Maritrans Inc. as amended and restated effective
November 1, 1993.
10.14@ Executive Award Plan of Maritrans GP Inc. (Exhibit 10.31).
10.15@ Excess Benefit Plan of Maritrans GP Inc. as amended and restated effective January 1,
1988 (Exhibit 10.32).
10.16@ Retirement Plan of Maritrans GP Inc. as amended and restated effective January 1, 1989
(Exhibit 10.33).
10.17^ Performance Unit Plan of Maritrans Inc. effective April 1, 1993.
10.18& Executive Compensation Plan as amended and restated effective January 27, 1994.
11.1 Computation of Earnings Per Share.
21.1 Subsidiaries of Maritrans Inc.
27 Financial Data Schedule
</TABLE>
* Incorporated by reference herein to the Exhibit number in parentheses filed
on March 24, 1988 as Amendment No. 1 to Maritrans Partners L. P. Form 10-K
Annual Report, dated March 3, 1988, for the fiscal year ended December 31,
1987.
+ Incorporated by reference herein to the Exhibit number in parentheses filed
with Maritrans Partners L. P. Form S-1 Registration Statement No. 33-11652
dated January 30, 1987 or Amendment No. 1 thereto dated March 20, 1987.
# Incorporated by reference herein to the Exhibit of the same number filed
with the Registrant's Post-Effective Amendment No. 1 to Form S-4
Registration Statement No. 33-57378 dated January 26, 1993.
& Incorporated by reference herein to Exhibit A of the Registrant's
definitive Proxy Statement to be filed with the Commission not later than
120 days after the close of the fiscal year ended December 31, 1993.
@ Incorporated by reference herein to the Exhibit number in parentheses filed
with Maritrans Partners L. P. Form 10-K Annual Report, dated March 29, 1993
for the fiscal year ended December 31, 1992.
^ Incorporated by reference herein to the Exhibit of the same number filed
with Maritrans Inc. Form 10-K Annual Report, dated March 30, 1994 for the
fiscal year ended December 31, 1993.
= Incorporated by reference herein to the Exhibit of the same number filed
with Maritrans Inc. Form 10-K Annual Report, dated March 29, 1996 for the
fiscal year ended December 31, 1995.
31
<PAGE>
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) 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.
MARITRANS INC.
(Registrant)
By: /s/ Stephen A. Van Dyck Dated: March 28, 1997
---------------------------------
Stephen A. Van Dyck
Chairman of the Board
Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed below by the following persons on behalf of the
registrant and in the capacities and on the dates indicated.
<TABLE>
<CAPTION>
<S> <C> <C>
By: /s/ Stephen A. Van Dyck Chairman of the Board Dated: March 28, 1997
------------------------------ and Chief Executive Officer
Stephen A. Van Dyck (Principal Executive Officer)
By: Director Dated: March __, 1997
------------------------------
Dr. Robert E. Boni
By: /s/ Dr. Craig E. Dorman Director Dated: March 28, 1997
------------------------------
Dr. Craig E. Dorman
By: /s/ Robert J. Lichtenstein Director Dated: March 28, 1997
------------------------------
Robert J. Lichtenstein
By: Director Dated: March __, 1997
------------------------------
Eric Schless
By: /s/ Walter T. Bromfield Controller Dated: March 28, 1997
------------------------------ (Principal Financial Officer,
Walter T. Bromfield Principal Accounting Officer)
</TABLE>
32
<PAGE>
MARITRANS INC.
SCHEDULE II -- VALUATION ACCOUNT
($000)
<TABLE>
<CAPTION>
CHARGED
BALANCE AT TO COSTS BALANCE
BEGINNING AND AT END
DESCRIPTION OF PERIOD EXPENSES DEDUCTIONS OF PERIOD
----------- --------- -------- ---------- ---------
<S> <C> <C> <C> <C>
JANUARY 1 TO DECEMBER 31, 1994
Allowance for doubtful accounts $605 $123 $275(a) $453
==== ==== ======= ====
JANUARY 1 TO DECEMBER 31, 1995
Allowance for doubtful accounts $453 $ 31 $ 27(a) $457
==== ==== ======= ====
JANUARY 1 TO DECEMBER 31, 1996
Allowance for doubtful accounts $457 $403 $ -- $860
==== ==== ======= ====
</TABLE>
- ------
(a) Deductions are a result of write-offs of uncollectible accounts
receivable for which allowances were previously provided.
33
<PAGE>
EX-10.3(d)
================================================================================
SECOND SUPPLEMENTAL INDENTURE OF TRUST
AND SECURITY AGREEMENT
Dated as of April 1, 1996
From
MARITRANS OPERATING PARTNERS L.P.
and
MARITRANS CAPITAL CORPORATION
To
WILMINGTON TRUST COMPANY,
as Trustee
================================================================================
<PAGE>
TABLE OF CONTENTS
SECTION HEADING PAGE
Parties ...................................................................1
Recitals ..................................................................1
SECTION 1. AMENDMENTS TO INDENTURE ....................................2
Section 1.1. Amendments to Section 1.1 ...............................2
Section 1.2. Amendment to Section 4.9 ................................5
Section 1.3. Amendment to Section 4.14 ...............................6
SECTION 2. MISCELLANEOUS PROVISIONS ...................................6
Section 2.1. Defined Terms ...........................................6
Section 2.2. Ratification of Indenture ...............................6
Section 2.3. Counterparts ............................................6
Section 2.4. References to Indenture .................................6
Signature Page ............................................................7
<PAGE>
SECOND SUPPLEMENTAL INDENTURE OF TRUST AND SECURITY AGREEMENT
SECOND SUPPLEMENTAL INDENTURE OF TRUST AND SECURITY AGREEMENT (this
"Second Supplement") dated as of April 1, 1996, among MARITRANS OPERATING
PARTNERS L.P., a Delaware limited partnership (the "Partnership"), MARITRANS
CAPITAL CORPORATION, a Delaware corporation (the "Company"), and WILMINGTON
TRUST COMPANY, a Delaware banking corporation, as trustee (the "Trustee") for
the holders of the Notes (the "Holders") which Notes were issued under the
Indenture defined below.
RECITALS:
A. The Partnership, the Company and the Trustee have heretofore
executed and delivered the Indenture of Trust and Security Agreement dated as of
March 15, 1987 (as heretofore amended and supplemented by that certain First
Supplemental Indenture of Trust and Security Agreement dated as of August 15,
1989, and as further amended and supplemented, the "Indenture") providing for
the issuance of certain secured promissory notes of the Company and pursuant
thereto the Company has issued (i) $35,000,000 aggregate principal amount of its
Series A Notes due April 1, 1997, $8,500,000 of which are currently outstanding
(the "Series A Notes") (ii) $80,000,000 aggregate principal amount of its Series
B Notes due April 1, 2007, all of which are currently outstanding (the "Series B
Notes"), and (iii) $20,000,000 aggregate principal amount of its Series C Notes
due June 30, 1995, all of which are retired (the outstanding Series A Notes and
Series B Notes are herein collectively referred to as the "Notes"); and
B. On April 1, 1993, Maritrans Partners, L.P., a Delaware limited
partnership and the sole limited partner of the Partnership ("MLP"), was
converted from a limited partnership to a corporation through the formation of
Maritrans, Inc., a Delaware corporation, which succeeded to all the assets and
liabilities of MLP (the foregoing conversion of MLP from a limited partnership
to a corporation is herein referred to as the "MLP Corporate Conversion"); and
C. The MLP Corporate Conversion has resulted in certain tax and
accounting changes to the Partnership, including treatment of the Partnership as
a corporation for federal income tax purposes, and as a result, the parties
hereto desire to further amend the Indenture; and
D. As required pursuant to Section 10.2 of the Indenture, the
Partnership, the Company and the holders of at least 66-2/3% in aggregate
principal amount of the Notes have consented to amend the Indenture as set forth
below.
NOW THEREFORE, in consideration of the premises and other good and
valuable consideration, receipt of which upon delivery of this Second Supplement
the undersigned hereby acknowledge, the Partnership, the Company and the Trustee
hereby agree as follows:
<PAGE>
Maritrans Operating Partners L.P. Second Supplemental Indenture
Maritrans Capital Corporation
SECTION 1. AMENDMENTS TO INDENTURE.
Section 1.1. Amendments to Section 1.1. (a) Section 1.1 of the
Indenture is hereby amended by adding the definitions of "GAAP" and "Partnership
Net Income" which read as follows:
"GAAP" shall mean generally accepted accounting principles at
the time in effect.
"Partnership Net Income" for any fiscal quarter of the
Partnership shall mean the gross revenues of the Partnership for such
fiscal quarter, less all expenses and other proper charges (including
taxes on income) for such fiscal quarter determined in accordance with
GAAP, provided, however, that:
(a) the deduction for income taxes in calculating
Partnership Net Income for any fiscal quarter which includes
March 31, 1993 or any later date shall be on the basis of
income taxes paid (or refunded) for such fiscal quarter as
determined in accordance with paragraph (b) of this definition
and specifically without giving effect to the following:
(i) any adjustments to income with respect
to deferred tax assets or deferred tax liabilities
including, without limitation, the one-time charge
against income of the Partnership in connection with
the recognition by the Partnership required by GAAP
of the deferred tax liability of $16,429,000
resulting from the conversion on April 1, 1993 of MLP
from a Delaware limited partnership to a Delaware
corporation; and
(ii) any other adjustments to income
required by GAAP with respect to the deduction for
income taxes which would modify the deduction as
determined in paragraph (b) of this definition;
(b) income taxes for a fiscal quarter of the
Partnership (herein "Quarterly Income Taxes") shall be:
(i) for the first fiscal quarter of a fiscal
year of the Partnership, the first installment of
estimated taxes paid with respect to income taxes of
the Partnership for such fiscal year,
(ii) for the second fiscal quarter of a
fiscal year of the Partnership, the second
installment of estimated taxes paid with respect to
income taxes of the Partnership for such fiscal year,
(iii) for the third fiscal quarter of a
fiscal year of the Partnership, the third installment
of estimated taxes paid with respect to income taxes
of the Partnership for such fiscal year, and
-2-
<PAGE>
Maritrans Operating Partners L.P. Second Supplemental Indenture
Maritrans Capital Corporation
(iv) for the fourth fiscal quarter of a
fiscal year of the Partnership, (A) the fourth
installment of estimated taxes paid with respect to
income taxes of the Partnership for such fiscal year,
plus (B) any additional taxes which are paid with
respect to such income taxes on or prior to the due
date for filing the income tax return for such fiscal
year (without regard to any extension for filing)
(the "Fiscal Year Due Date");
provided, however that (1) only the estimated taxes of the
Partnership which are actually paid in a fiscal quarter
shall be included for purposes of determining the Quarterly
Income Taxes for such fiscal quarter and any overpayment of
estimated taxes of the Partnership which is applied to
satisfy estimated taxes for the fiscal quarter of another
fiscal year shall not be considered to be estimated taxes
paid in such fiscal quarter for purposes of calculating
Quarterly Income Taxes for such fiscal quarter, (2) if the
Partnership at any time after the Fiscal Year Due Date for a
prior fiscal year shall pay additional income taxes with
respect to the income taxes of the Partnership for such
prior fiscal year, the Quarterly Income Taxes determined
pursuant to the foregoing provisions for the fiscal quarter
in which such additional tax shall be paid shall be
increased by the amount of such additional taxes paid and
(3) if the Partnership at any time shall receive a refund of
income taxes of the Partnership, the Quarterly Income Taxes
determined pursuant to the foregoing provisions for the
fiscal quarter in which such refund is received shall be
reduced by the amount of such refund and if the amount of
such refund exceeds the installment of estimated taxes paid
for such fiscal quarter then the Quarterly Income Taxes for
such fiscal quarter shall be a negative number in an amount
equal to such excess;
(c) any calculation of Partnership Net Income for any
fiscal quarter shall in any event exclude net earnings and
losses of any Subsidiary of the Partnership except that
Partnership Net Income shall include net earnings of any such
Subsidiary to the extent that such net earnings actually have
been received by the Partnership.
(b) Section 1.1 of the Indenture is hereby further amended by
restating the definitions of "Cash Flow Available for Debt Service",
"MLP", "MLP Guaranty Agreement", "Managing General Partner" and "Net
Cash Available to Partners" to read as follows and adding the related
definitions of "Net Cash Distributable to Partners" and "Quarterly
Available Net Cash" to read as follows:
"Cash Flow Available for Debt Service" shall mean,
for any fiscal quarter, the Partnership Net Income for such
fiscal quarter plus the sum of (a) the Quarterly Income Taxes
for such fiscal quarter, (b) all amounts deducted in the
computation of such Partnership Net Income in respect of the
depreciation or amortization of assets, (c) all amounts
deducted in the computation of Partnership Net Income in
respect of interest on all Indebtedness of the Partnership
during such fiscal quarter, (d) all
-3-
<PAGE>
Maritrans Operating Partners L.P. Second Supplemental Indenture
Maritrans Capital Corporation
amounts deducted in the computation of such Partnership Net Income in
respect of Rentals paid under Long-Term Leases, (e) all capital
returned to the Partnership from each of its Subsidiaries during such
fiscal quarter, (f) all cash dividends received by the Partnership
from each of its Subsidiaries during such fiscal quarter except to the
extent otherwise included in Partnership Net Income for such fiscal
quarter, (g) the net loss, if any, deducted in determining Partnership
Net Income for such fiscal quarter in respect of al1 sales or other
dispositions of capital assets of the Partnership, and less the sum of
(h) the net gain, if any, included in Partnership Net Income for such
fiscal quarter in respect of all sales or other dispositions of
capital assets of the Partnership and (i) all capital contributions
made by the Partnership to each of its Subsidiaries during such fiscal
quarter.
"MLP" shall mean Maritrans Inc., a Delaware corporation and
successor in interest to Maritrans Partners L.P."
"MLP Guaranty Agreement" shall mean that certain Guaranty
Agreement dated as of March 15, 1987 of Maritrans Partners L.P., the
liabilities and obligations of Maritrans Partners L.P. thereunder
having been assumed by Maritrans Inc.
"Managing General Partner" shall mean Maritrans General
Partner Inc., a Delaware corporation, the managing general partner of
the Partnership.
"Net Cash Available to Partners" shall mean, for any fiscal
quarter of the Partnership commencing with the fiscal quarter ending
June 30, 1987, the sum of:
(1) the aggregate amount of Net Cash Available to Partners
determined under this definition for any fiscal quarter preceding
such fiscal quarter to the extent not distributed to the partners of
the Partnership (the "Prior Available Net Cash"), plus
(2) the additional amount of net cash becoming available to
Partners for such fiscal quarter (the "Quarterly Available Net Cash")
which shall equal the sum of (a) the Cash Flow Available for Debt
Service for such fiscal quarter less (i) the Quarterly Income Taxes for
such fiscal quarter, and (ii) all principal payments made during such
fiscal quarter with respect to Indebtedness of the Partnership other
than (A) the Notes, (B) the Working Capital Line and (C) any
Indebtedness refinanced with the proceeds from Additional Indebtedness,
and (iii) all interest payments made during such fiscal quarter with
respect to Indebtedness of the Partnership other than the Notes, and
(iv) an amount equal to the aggregate amount of Rentals paid under
Long-Term Leases during such fiscal quarter, (b) the aggregate amount
of cash proceeds from the sale or other disposition of capital assets
of the Partnership which are paid to the Partnership during such fiscal
quarter and are not otherwise required to be held by the Trustee
hereunder, and (c) without duplication, the aggregate amount of
Distribution Support Capital (as defined in the Distribution Support
Agreement) contributed by Sonat Inc. to the Partnership pursuant to the
Distribution Support Agreement with respect to such fiscal quarter, or
the aggregate amount of Deferred Distribution Support Capital (as
defined in the Distribution Support
-4-
<PAGE>
Maritrans Operating Partners L.P. Second Supplemental Indenture
Maritrans Capital Corporation
Agreement) so contributed during either such fiscal quarter or the
quarter in which the determination hereunder is being made, and less
the sum of (d) the aggregate amount of all capital expenditures made
by the Partnership during the fiscal quarter for which the
determination is being made hereunder to the extent such capital
expenditures are not funded out of proceeds from any borrowing or from
the sale of any additional limited partnership interests or any
additional capital contributions or insurance proceeds or a withdrawal
of "Capital Construction Funds" of a Subsidiary and (e) an amount
equal to 25% of the aggregate amount of principal required to be paid
in the Four Quarter Period of the Partnership next following such
fiscal quarter on all Notes outstanding on the first day of such Four
Quarter Period and an amount equal to 50% of the aggregate amount of
interest required to be paid in the Two Quarter Period of the
Partnership next following such fiscal quarter on all Notes
outstanding on the first day of such Two Quarter Period; provided,
that for purposes of this definition (i) interest payable during
future periods on Indebtedness with a variable rate or an interest
rate which can be reset shall be computed at the interest rate in
effect as of the date of determination hereunder and (ii) the fiscal
quarter of the Partnership ending June 30, 1987 shall begin on the
Closing Date.
"Net Cash Distributable to Partners" for any fiscal quarter of
a fiscal year shall mean the Net Cash Available to Partners for such
fiscal quarter less in the case of the first, second and third fiscal
quarters of such fiscal year, the following amount specified as to such
fiscal quarter (but not less than zero):
(i) for the first fiscal quarter of such fiscal year, an
amount equal to 50% of the Quarterly Available Net Cash for such fiscal
quarter,
(ii) for the second fiscal quarter of such fiscal year, an
amount equal to 40% of the sum of the Quarterly Available Net Cash for
the first and second fiscal quarters of such fiscal year, and
(iii) for the third fiscal quarter of such fiscal year, an
amount equal to 25% of the sum of the Quarterly Available Net Cash for
the first, second and third fiscal quarters of such fiscal year.
"Quarterly Available Net Cash" for a fiscal quarter shall mean
the amount determined in subparagraph (2) of the definition of Net Cash
Available to Partners for such fiscal quarter.
Section 1.2. Amendment to Section 4.9. Section 4.9 of the Indenture is
hereby amended by restating Section 4.9 to read as follows:
Section 4.9. Distributions to Partners of the Partnership. The
Partnership will not, and will not permit any Subsidiary to, make any
distribution of cash or other Property of the Partnership or its Subsidiaries to
partners of the Partnership in respect of their partnership interests in the
Partnership, except that once during each fiscal quarter of the Partnership
commencing with the fiscal quarter ending September 30, 1987, the Partnership
-5-
<PAGE>
Maritrans Operating Partners L.P. Second Supplemental Indenture
Maritrans Capital Corporation
may make a distribution in cash to such partners in an amount not in excess of
the Net Cash Distributable to Partners for the fiscal quarter of the Partnership
next preceding the fiscal quarter in which such distribution shall occur;
provided, that no such distribution shall be made at any time when a Default or
Event of Default shall have occurred and shall then be continuing.
Section 1.3. Amendment to Section 4.14. Section 4.14(a) of the
Indenture is hereby amended by restating Section 4.14(a) to read as follows:
"(a) Covenant Compliance; Calculations - the information
(including detailed calculations where necessary) required in order to
establish whether the Partnership was in compliance with the
requirements of Sections 4.5 through 4.12 during the period covered by
the income statement then being furnished; provided, that the
certificate accompanying (i) each set of quarterly financial statements
for a fiscal quarter delivered pursuant to Section 4.13(a) shall
contain detailed calculations of the following defined terms for such
fiscal quarter of (A) Partnership Net Income, (B) Cash Flow
Available for Debt Service, (C) Net Cash Available to Partners and (D)
Net Cash Distributable to Partners and (ii) each set of annual
financial statements for a fiscal year delivered pursuant to Section
4.13(b) shall contain detailed calculations of the four defined terms
referred to in clause (i) of this proviso for the last fiscal quarter
of such fiscal year and for the entire fiscal year; and"
SECTION 2. MISCELLANEOUS PROVISIONS.
Section 2.1. Defined Terms. All terms used in this Second Supplement
which are defined in the Indenture, as hereby amended, are used herein as so
defined.
Section 2.2. Ratification of Indenture. Except as herein expressly
amended, the Indenture is in all respects ratified and confirmed. If and to the
extent that any of the terms or provisions of the Indenture are in conflict or
inconsistent with any of the terms or provisions of this Second Supplement, this
Second Supplement shall govern.
Section 2.3. Counterparts. This Second Supplement may be simultaneously
executed in any number of counterparts and all such counterparts together, each
as an original, shall constitute but one and the same instrument.
Section 2.4. References to Indenture. Any and all notices, requests,
certificates and any other instruments, including the Note Agreements, the
Notes, the Guaranty Agreements and the Mortgages, may refer to the Indenture or
the Indenture dated as of March 15, 1987, without making specific reference to
this Second Supplement, but nevertheless all such references shall be deemed to
include this Second Supplement unless the document or instrument, as the case
may be, shall otherwise require.
-6-
<PAGE>
Maritrans Operating Partners L.P. Second Supplemental Indenture
Maritrans Capital Corporation
IN WITNESS WHEREOF, the Partnership, the Company and the Trustee have
each caused this Second Supplement to be executed all as of the day and year
first above written.
MARITRANS OPERATING PARTNERS L.P.
By Maritrans General Partner Inc.
Its Managing General Partner
By /s/ John C. Newcomb
-----------------------------------
ATTEST: Its Vice President
/s/ Walter Bromfield
- -------------------------------
Controller
MARITRANS CAPITAL CORPORATION
By /s/ Thomas C. Deas, Jr.
-----------------------------------
[CORPORATE SEAL] Its President
ATTEST:
/s/ John C. Newcomb
- -------------------------------
Secretary
WILMINGTON TRUST COMPANY,
as Trustee
By /s/ Edward L. Truitt, Jr.
-----------------------------------
[SEAL] Its Financial Services Officer
ATTEST:
/s/ Denise M. Geran
- -------------------------------
-7-
<PAGE>
EXHIBIT 10.3(e)
================================================================================
SUPPLEMENT TO
FIRST PREFERRED SHIP MORTGAGES
DATED MAY 8, 1996
from
MARITRANS OPERATING PARTNERS L.P.
MORTGAGOR
to
WILMINGTON TRUST COMPANY
as Trustee,
Mortgagee
================================================================================
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
SECTION HEADING PAGE
<S> <C> <C>
SECTION 1. AMENDMENTS TO THE MORTGAGES ..........................................3
SECTION 2. MISCELLANEOUS PROVISIONS .............................................3
Signatures ..............................................................................5
ATTACHMENTS TO SUPPLEMENT TO FIRST PREFERRED SHIP MORTGAGES
Appendix I Description of Vessels and Recording information for Mortgages
Annex I True Copy of Second Supplemental Indenture of Trust and Security
Agreement
</TABLE>
-i-
<PAGE>
SUPPLEMENT TO FIRST PREFERRED SHIP MORTGAGES
This SUPPLEMENT TO FIRST PREFERRED SHIP MORTGAGES (as the same may be
amended and supplemented from time to time, the "Mortgage Supplement"), dated
the 8th day of May, 1996, from MARITRANS OPERATING PARTNERS L.P., a Delaware
limited partnership (the "Partnership"), to WILMINGTON TRUST COMPANY, as Trustee
(the "Trustee"), under an Indenture of Trust and Security Agreement dated as of
March 15, 1987 among the Partnership, the Trustee and Maritrans Capital
Corporation, a Delaware corporation, 100% of the capital stock of which is owned
by the Partnership (the "Company") relating to the Notes referred to below (said
Indenture of Trust and Security Agreement, as the same has heretofore been
amended and supplemented by the First Supplement (defined below), as amended and
supplemented by the Second Supplement (defined below) and as may hereafter be
amended or supplemented, being herein called the "Indenture ", and the Trustee,
and any successor trustee, being herein called the "Mortgagee"), for the benefit
of the holders of the Notes (as defined below) from time to time outstanding,
supplements those certain First Preferred Ship Mortgages in the form specified
in the Indenture on the Vessels described on Appendix I hereto (the original
First Preferred Ship Mortgages as heretofore supplemented and as supplemented
hereby and as the same may hereafter be amended or supplemented, being herein
referred to as the "Mortgages") made-by the Partnership in favor of the
Mortgagee, which Mortgages were recorded on the date, at the time and in the
place as set forth on Appendix I hereto.
RECITALS:
A. The Partnership is the sole owner of the whole of each of the
vessels described on Appendix I which is documented in the name of the
Partnership under the laws of the United States and has its Home Port (formerly
at Philadelphia, Pennsylvania) and its hailing port at Wilmington, Delaware
(said vessels being hereinafter referred to as the "Vessels").
B. The Company has heretofore duly issued in accordance with the terms
of the Indenture (i) $35,000,000 aggregate principal amount of its Series A
Notes (together with any Notes issued in lieu of or in substitution or exchange
therefor pursuant to the Indenture being herein called the "Series A Notes"),
(ii) $80,000,000 aggregate principal amount of its Series B Notes (together with
any Notes issued in lieu of or in substitution or exchange therefor pursuant to
the Indenture being herein called the "Series B Notes"), and (iii) up to
$20,000,000 aggregate principal amount of its Series C Notes due June 30, 1995
(together with any Notes issued in lieu of or in substitution or exchange
therefore pursuant to the Indenture being herein called the "Series C Notes").
The Series C Notes were issued pursuant to the First Supplemental Indenture of
Trust and Security Agreement dated as of August 15, 1989 among the Company, the
Partnership and the Mortgagee (as amended and supplemented by Amendment No. 1 to
the First Supplemental Indenture of Trust and Security Agreement dated as of
March 31, 1992, the "First Supplement"). The Series C Notes have heretofore been
retired. The Series A Notes, the Series B Notes and any
<PAGE>
Additional Notes issued under the Indenture are herein collectively referred to
as the "Notes"
C. The Partnership has heretofore entered into the Guaranty Agreement
dated as of March 15, 1987 (as the same has been amended by the First
Supplemental Guaranty Agreement dated as of August 15, 1989 and as may be
further amended and supplemented from time to time, the "Partnership Guaranty
Agreement") providing for the guarantee by the Partnership of the payment by the
Company of the principal of and premium and interest on the Notes.
D. The Company, the Partnership and the Mortgagee have entered into the
Second Supplemental Indenture of Trust and Security Agreement dated as of April
1, 1996 (a true copy of which is attached hereto as Annex I) (the "Second
Supplement") which further amends and supplements the Indenture.
E. The Notes and all principal thereof and interest and premium thereon
and all additional amounts and other sums at any time due and owing from or
required to be paid by the Company under the terms of the Notes and the
Indenture and by the Partnership under the terms of the Partnership Guaranty
Agreement, the Indenture and the Mortgages, are hereinafter sometimes referred
to as the "indebtedness hereby secured".
F. The full name and address of the Partnership, as mortgagor, is:
Maritrans Operating Partners L.P.
One Logan Square, 26th Floor
Philadelphia, Pennsylvania 19103
Attention: Treasurer, Maritrans General Partner Inc.
G. The full name and address of the Mortgagee is:
Wilmington Trust Company as trustee under an
Indenture of Trust and Security Agreement dated
as of March 15, 1987
Rodney Square North
Wilmington, Delaware 19890
Attention: Corporate Trust Administrator
NOW THEREFORE, the Partnership, in consideration of the premises and of
the sum of $10.00 received by the Partnership from the Mortgagee and other good
and valuable consideration, receipt of which is hereby acknowledged by the
Partnership, and in order to secure the payment of the indebtedness hereby
secured and the performance and observance of all of the covenants and
conditions in the Notes, the Indenture, the Partnership Guaranty Agreement and
in the Mortgage contained, has granted, bargained, sold, conveyed, warranted,
mortgaged, pledged and hypothecated and by these presents does hereby grant,
bargain, sell, convey, warrant, mortgage, pledge and hypothecate, unto the
Mortgagee, its successors and assigns, all and singular of the whole of each of
the Vessels, together with all
-2-
<PAGE>
engines, boilers, machinery, masts, boats, anchors, cables, chains, tackle,
fittings and equipment and all other appurtenances, improvements, additions and
replacements appertaining and belonging to the Vessels, whether now owned or
hereafter acquired, whether on board or not.
TO HAVE AND TO HOLD the Vessels unto the Mortgagee and its successors
and assigns, forever.
PROVIDED, HOWEVER, and these presents are on the condition that, if the
Partnership shall pay or cause to be paid the indebtedness hereby secured, as
and when the same shall become due and payable, by maturity or otherwise, and if
the Partnership shall duly perform all the covenants, agreements and conditions
contained herein, in the Indenture and in the Partnership Guaranty Agreement,
then the Mortgages shall be void and of no effect, and in such case the
Mortgagee, its successors or assigns, on the demand and at the expense of the
Partnership, shall execute and deliver to the Partnership proper instruments to
evidence the revesting in it of all the rights, title and interest granted
hereby and to satisfy and discharge the Mortgages of record; otherwise, the
Mortgages shall remain in full force and effect.
PROVIDED, FURTHER, that until some one or more Events of Default shall
occur, the Partnership shall have the possession, use and operation of the
Vessels.
The Partnership hereby covenants and agrees with the Mortgagee and its
successors and assigns as follows:
SECTION 1. AMENDMENTS TO THE MORTGAGES.
Section 1.1. As used in the Mortgages, the definition of the term
"Indenture" is hereby restated to mean as follows: the Indenture of Trust and
Security Agreement dated as of March 15, 1987 among the Partnership, the Company
and the Trustee (i) as amended and supplemented by the First Supplemental
Indenture of Trust and Security Agreement dated as of August 15, 1989, as
amended and supplemented by Amendment No. 1 thereto dated as of March 31, 1992,
(ii) as amended and supplemented by the Second Supplemental Indenture of Trust
and Security Agreement dated as of April 1, 1996, and (iii) as may hereafter be
amended or supplemented.
SECTION 2. MISCELLANEOUS PROVISIONS.
Section 2.1. This Mortgage Supplement is executed as and shall
constitute an instrument supplemental to each of the Mortgages, and shall be
construed in connection with and as part of each of the Mortgages.
Section 2.2. Except as modified and expressly amended by this Mortgage
Supplement, the Mortgages as heretofore amended and supplemented are in all
respects
-3-
<PAGE>
ratified and confirmed and all the terms, provisions and conditions thereof
shall be and remain in full force and effect.
Section 2.3. Except as otherwise provided herein, any term used herein
which is defined in the Mortgages as hereby supplemented shall have the meaning
set forth in the Mortgages as hereby supplemented.
-4-
<PAGE>
IN WITNESS WHEREOF, the Partnership has caused this Mortgage Supplement
to be executed as of the day and year first above written.
MARITRANS OPERATING PARTNERS L.P.
By Maritrans General Partner Inc.
Its Managing General Partner
By /s/ John C. Newcomb
-------------------------
Its Vice President
WILMINGTON TRUST COMPANY, as Trustee
By /s/ Edward L. Truitt, Jr.
-----------------------------
Its Financial Services Officer
-5-
<PAGE>
DESCRIPTION OF VESSELS AND RECORDING INFORMATION FOR MORTGAGES
The First Preferred Ship Mortgage for each of the following 52 Vessels was
delivered and accepted at the Marine Inspection Office, United States Coast
Guard, Port of Philadelphia, Pennsylvania, and recorded as indicated and
Supplement No. 1 to First Preferred Ship Mortgage for each such Vessel was also
delivered and accepted at such office and recorded as indicated:
<TABLE>
<CAPTION>
Supplement No. 1 to
First Preferred Ship Mortgage First Preferred Ship Mortgage:
Recordation Data: Recordation Data:
Official ------------------------------------- -------------------------------------
Name Number Date and Time Book and Page Date and Time Book and Page
---- ------ ------------- ------------- ------------- -------------
<S> <C> <C> <C> <C> <C>
BARGES:
(1) Ocean 262 272,839 4/21/87, Book 874, 10/5/89, Book 8910,
4:16 p.m. Page 142 4:30 p.m. Page 110
(2) Ocean 250 529,918 4/21/87, Book 874, 10/5/89, Book 8910,
4:19 p.m. Page 143 4:02 p.m. Page 104
(3) Ocean Cities 537,129 4/21/87, Book 874, 10/5/89, Book 8910,
4:27 p.m. Page 146 4:45 p.m. Page 113
(4) Ocean 215 562,452 4/23/87, Book 874, 10/5/89, Book 8910,
3:55 p.m. Page 214 4:17 p.m. Page 108
(5) Ocean 192 614,210 4/21/87, Book 874, 10/5/89, Book 8910,
4:13 p.m. Page 139 3:27 p.m. Page 95
(6) Ocean 193 624,039 4/21/87, Book 874, 10/5/89, Book 8910,
4:21 p.m. Page 144 3:39 p.m. Page 99
(7) Ocean States 565,314 4/21/87, Book 874, 10/5/89, Book 8910,
4:40 p.m. Page 147 4:25 p.m. Page 109
(8) Ocean 155 556,673 4/21/87, Book 874, 10/5/89, Book 8910,
4:26 p.m. Page 145 4:07 p.m. Page 106
(9) Ocean 135 520,687 4/23/87, Book 874, 10/5/89, Book 8910,
3:45 p.m. Page 211 3:55 p.m. Page 103
(10) Interstate 138 611,433 4/21/87, Book 874, 10/5/89, Book 8910,
5:14 p.m. Page 159 3:01 p.m. Page 88
</TABLE>
APPENDIX I
(to Mortgage Supplement)
<PAGE>
<TABLE>
<CAPTION>
Supplement No. 1 to
First Preferred Ship Mortgage First Preferred Ship Mortgage:
Recordation Data: Recordation Data:
Official ------------------------------------- -------------------------------------
Name Number Date and Time Book and Page Date and Time Book and Page
---- ------ ------------- ------------- ------------- -------------
<S> <C> <C> <C> <C> <C>
(11) Ocean 115 515,042 4/22/87, Book 874, 10/5/89, Book 8910,
4:58 p.m. Page 193 3:48 p.m. Page 100
(12) Ocean 90 507,495 4/23/87, Book 874, 10/5/89, Book 8910,
4:37 p.m. Page 227 3:23 p.m. Page 94
(13) Ocean 96 523,233 4/23/87, Book 874, 10/5/89, Book 8910,
4:05 p.m. Page 217 3:33 p.m. Page 97
(14) Interstate 71 563,364 4/21/87, Book 874, 10/5/89, Book 8910,
5:06 p.m. Page 156 2:45 p.m. Page 82
(15) Interstate 70 540,401 4/22/87, Book 874, 10/5/89, Book 8910,
5:20 p.m. Page 202 2:39 p.m. Page 79
(16) Interstate 53 530,062 4/21/87, Book 874, 10/5/89, Book 8910,
5:05 p.m. Page 155 3:00 p.m. Page 87
(17) Interstate 55 544,437 4/22/87, Book 874, 10/5/89, Book 8910,
5:22 p.m. Page 204 3:08 p.m. Page 89
(18) Interstate 36 552,900 4/21/87, Book 874, 10/5/89, Book 8910,
4:52 p.m. Page 153 2:40 p.m. Page 80
(19) Interstate 38 553,120 4/23/87, Book 874, 10/5/89, Book 8910,
4:45 p.m. Page 229 3:09 p.m. Page 90
(20) Interstate 35 552,065 4/22/87, Book 874, 10/5/89, Book 8910,
4:39 p.m. Page 185 2:19 p.m Page 74
(21) Interstate 29 536,837 4/22/87, Book 874, 10/5/89, Book 8910,
5:02 p.m. Page 196 3:10 p.m Page 91
(22) Interstate 30 284,032 4/22/87, Book 874, 10/5/89, Book 8910,
4:54 p.m. Page 192 3:20 p.m. Page 93
(23) CHEM 36 293,343 4/22/87, Book 874, 10/5/89, Book 8910,
4:17 p.m. Page 176 1:45 p.m. Page 67
(24) Ocean 244 532,585 4/21/87, Book 874, 10/5/89, Book 8910,
5:18 p.m. Page 163 3:50 p.m. Page 101
</TABLE>
I-2
<PAGE>
<TABLE>
<CAPTION>
Supplement No. 1 to
First Preferred Ship Mortgage First Preferred Ship Mortgage:
Recordation Data: Recordation Data:
Official ------------------------------------- ----------------------------------
Name Number Date and Time Book and Page Date and Time Book and Page
---- ------ ------------- ------------- ------------- -------------
<S> <C> <C> <C> <C> <C>
(25) Ocean 211 646,669 4/22/87, Book 874, 10/5/89, Book 8910,
4:27 p.m. Page 181 4:05 p.m. Page 105
(26) Ocean 210 636,104 4/22/87, Book 874, 10/5/89, Book 8910,
4:49 p.m. Page 190 3:54 p.m. Page 102
(27) Ocean 81 643,281 4/23/87, Book 874, 10/5/89, Book 8910,
4:35 p.m. Page 226 4:33 p.m. Page 111
(28) Chem Ten 520,776 4/22/87, Book 874, 10/5/89, Book 8910,
4:22 p.m. Page 178 1:58 p.m. Page 70
TUGBOATS:
(1) Clipper 520,685 4/22/87, Book 874, 10/5/89, Book 8910,
4:24 p.m. Page 179 12:40 p.m. Page 54
(2) Freedom 615,200 4/21/87, Book 874, 10/5/89, Book 8910,
4:55 p.m. Page 154 12:45 p.m. Page 55
(3) Honour 565,902 4/22/87, Book 874, 10/5/89, Book 8910,
5:06 p.m. Page 197 1:04 p.m. Page 57
(4)Independence 620,723 4/22/87, Book 874, 10/5/89, Book 8910,
3:10 p.m. Page 198 1:20 p.m. Page 60
(5) Navigator 537,824 4/21/87, Book 874, 10/5/89, Book 8910,
5:08 p.m. Page 157 12:19 p.m. Page 52
(6) Seafarer 532,672 4/23/87, Book 874, 10/5/89, Book 8910,
4:16 p.m. Page 221 1:40 p.m. Page 64
(7) Valour 569,341 4/23/87, Book 874, 10/5/89, Book 8910,
4:24 p.m. Page 223 1:30 p.m. Page 62
(8) Ambassador 578,207 4/23/87, Book 874, 10/5/89, Book 8910,
3:41 p.m. Page 210 10:48 a.m. Page 35
(9) Corsair 536,836 4/22/87, Book 874, 10/5/89, Book 8910,
4:37 p.m. Page 183 10:53 a.m. Page 36
(10) Diplomat 590,232 4/23/87 Book 874, 10/5/89, Book 8910,
4:00 p.m. Page 216 10:59 a.m. Page 38
</TABLE>
I-3
<PAGE>
<TABLE>
<CAPTION>
Supplement No. 1 to
First Preferred Ship Mortgage First Preferred Ship Mortgage:
Recordation Data: Recordation Data:
Official ------------------------------------- -------------------------------------
Name Number Date and Time Book and Page Date and Time Book and Page
---- ------ ------------- ------------- ------------- -------------
<S> <C> <C> <C> <C> <C>
(11) Challenger 513,794 4/22/87, Book 874, 10/5/89, Book 8910,
4:15 p.m. Page 174 11:03 a.m. Page 40
(12) Crusader 511,237 4/23/87, Book 874, 10/5/89, Book 8910,
3:51 p.m. Page 213 12:05 p.m. Page 50
(13) Venturer 550,670 4/23/87, Book 874, 10/5/89, Book 8910,
4:40 p.m. Page 228 1:42 p.m. Page 65
(14) Voyager II 556,625 4/23/87, Book 874, 10/5/89, Book 8910,
4:15 p.m. Page 220 1:55 p.m. Page 68
(15) Endeavor 529,705 4/22/87, Book 874, 10/5/89, Book 8910,
4:48 p.m. Page 189 11:57 a.m. Page 49
(16) Traveller 515,013 4/22/87, Book 874, 10/5/89, Book 8910,
5:12 p.m. Page 200 1:18 p.m. Page 59
(17) Roanoke 506,289 4/22/87, Book 874, 10/5/89, Book 8910,
5:21 p.m. Page 203 1:57 p.m. Page 69
(18) Delaware 609,686 4/23/87, Book 874, 10/5/89, Book 8910,
3:57 p.m. Page 215 11:15 a.m. Page 41
(19) Ranger 508,340 4/23/87, Book 874, 10/5/89, Book 8910,
4:23 p.m. Page 222 2:12 p.m. Page 73
(20) Liberty 534,963 4/21/87, Book 874, 10/5/89, Book 8910,
5:15 p.m. Page 160 11:27 a.m. Page 45
(21) Columbia 641,135 4/22/87, Book 874, 10/5/89, Book 8910,
4:33 p.m. Page 182 12:50 p.m. Page 56
(22) Patriot 636,105 4/23/87, Book 874, 10/5/89, Book 8910,
4:12 p.m. Page 219 2:26 p.m. Page 77
(23) Schuylkill 633,396 4/22/87, Book 874, 10/5/89, Book 8910,
5:26 p.m. Page 206 1:25 p.m. Page 61
(24) Cougar 569,665 4/22/87, Book 874, 10/5/89, Book 8910,
4:38 p.m. Page 184 11:25 a.m. Page 44
</TABLE>
I-4
<PAGE>
EXHIBIT 10.4
SEVERANCE AND NON-COMPETITION AGREEMENT
Agreement made as of the 4th day of April, 1996, between
Maritrans General Partner Inc., a Delaware corporation (the "Company"), and John
C. Newcomb (the "Employee").
WHEREAS, the Employee is employed by the Company as its Vice
President and General Counsel;
WHEREAS, the Company is a subsidiary of Maritrans Inc., a
publicly traded corporation ("Maritrans");
WHEREAS, the Employee and Maritrans entered into an agreement
in October 1993 to provide certain payments to the Employee in the event that
his employment were terminated as a result of a change of control of Maritrans
(the "Agreement");
WHEREAS, the Employee and the Company now wish to enter into a
Severance and Non-competition Agreement which shall supersede the Agreement
because the Board of Directors of the Company recognizes that, as is the case
with many publicly held corporations, the possibility of a change in control of
Maritrans and the Company exists and that such possibility, and the uncertainty
and questions which it may raise among management, may result in the departure
or distraction of key management personnel to the detriment of the Company;
WHEREAS, the board of directors of the Company has determined
that appropriate steps should be taken to reinforce and encourage the continued
attention and
<PAGE>
dedication of key members of the Company's management to their assigned duties
without distraction in the face of potentially disturbing circumstances arising
from the possibility of a change in control of the Company; and
WHEREAS, in consideration for the Employee agreeing not to
compete with the Company in the event the Employee's employment is terminated,
the Company agrees that the Employee shall receive the compensation set forth in
this Agreement as a cushion against the financial and career impact on the
Employee in the event the Employee's employment with the Company is terminated
without cause whether or not there is a Change of Control of Maritrans;
NOW, THEREFORE, in consideration of the foregoing and the
mutual covenants and agreements hereinafter set forth and intending to be
legally bound hereby, the parties hereto agree as follows:
1. Definitions. For all purposes of this Agreement, the
following terms shall have the meanings specified in this Section unless the
context clearly otherwise requires:
(a) "Affiliate" and "Associate" shall have the respective
meanings ascribed to such terms in Rule 12b-2 of the General Rules and
Regulations under the Securities Exchange Act of 1934, as amended (the "Exchange
Act").
(b) "Base Compensation" shall mean the average of the total
cash remuneration received by the Employee in all capacities with the Company,
and its Subsidiaries or Affiliates, as reported for Federal income tax purposes
on Form W-2, together with any and all salary reduction authorized amounts under
any of the Company's
2
<PAGE>
benefit plans or programs, but excluding any amounts attributable to the
exercise of stock options by the Employee under the Company's Equity
Compensation Plan for the most recent full calendar year immediately preceding
the calendar year in which occurs a Change of Control or the Employee's
Termination Date, whichever is higher.
(c) "Base Salary" shall mean the rate of normal salary being
paid to the Employee at the time of his Termination Date.
(d) "Beneficial Owner" of any securities shall mean:
(i) that such Person or any of such Person's Affiliates or
Associates, directly or indirectly, has the right to acquire (whether such right
is exercisable immediately or only after the passage of time) pursuant to any
agreement, arrangement or understanding (whether or not in writing) or upon the
exercise of conversion rights, exchange rights, rights, warrants or options, or
otherwise; provided, however, that a Person shall not be deemed the "Beneficial
Owner" of securities tendered pursuant to a tender or exchange offer made by
such Person or any of such Person's Affiliates or Associates until such tendered
securities are accepted for payment, purchase or exchange;
(ii) that such Person or any of such Person's Affiliates or
Associates, directly or indirectly, has the right to vote or dispose of or has
"beneficial ownership" of (as determined pursuant to Rule 13d-3 of the General
Rules and Regulations under the Exchange Act), including without limitation
pursuant to any agreement, arrangement or understanding, whether or not in
writing; provided, however, that a Person shall not be deemed the "Beneficial
Owner" of any security under this subsection (ii) as a result of an oral or
written agreement, arrangement or understanding to vote such security if such
3
<PAGE>
agreement, arrangement or understanding (A) arises solely from a revocable proxy
given in response to a public proxy or consent solicitation made pursuant to,
and in accordance with, the applicable provisions of the General Rules and
Regulations under the Exchange Act, and (B) is not then reportable by such
Person on Schedule 13D under the Exchange Act (or any comparable or successor
report); or
(iii) where voting securities are beneficially owned, directly
or indirectly, by any other Person (or any Affiliate or Associate thereof) with
which such Person (or any of such Person's Affiliates or Associates) has any
agreement, arrangement or understanding (whether or not in writing) for the
purpose of acquiring, holding, voting (except pursuant to a revocable proxy as
described in the proviso to subsection (ii) above) or disposing of any voting
securities of the Company; provided, however, that nothing in this subsection
(d) shall cause a Person engaged in business as an underwriter of securities to
be the "Beneficial Owner" of any securities acquired through such Person's
participation in good faith in a firm commitment underwriting until the
expiration of forty days after the date of such acquisition.
(e) "Board" shall mean the board of directors of the Company.
(f) "Cause" shall mean 1) misappropriation of funds, 2)
habitual insobriety or substance abuse, 3) conviction of a crime involving moral
turpitude, 4) gross negligence in the performance of duties, which gross
negligence has had a material adverse effect on the business, operations,
assets, properties or financial condition of the Company and its Subsidiaries
taken as a whole.
4
<PAGE>
(g) "Change of Control" shall be deemed to have taken place if
(i) any Person (except the Company or any employee benefit plan of the Company
or of any Affiliate, any Person or entity organized, appointed or established by
the Company for or pursuant to the terms of any such employee benefit plan),
together with all Affiliates and Associates of such Person, shall become the
Beneficial Owner in the aggregate of 20% or more of the common stock of
Maritrans then outstanding); provided, however, that no "Change of Control"
shall be deemed to occur during any period in which any such Person, and its
Affiliates and Associates, are bound by the terms of a standstill agreement
under which such parties have agreed not to acquire more than 30% of the common
stock of the Company of the Common Stock of the Company then outstanding or to
solicit proxies, or (ii) during any twenty-four month period, individuals who at
the beginning of such period constituted the board of directors of Maritrans
cease for any reason to constitute a majority thereof, unless the election, or
the nomination for election by the Maritrans shareholders, of at least
seventy-five percent of the directors who were not directors at the beginning of
such period was approved by a vote of at least seventy-five percent of the
directors in office at the time of such election or nomination who were
directors at the beginning of such period.
(h) "Normal Retirement Date" shall mean the first day of the
calendar month coincident with or next following the Employee's 65th birthday.
(i) "Person" shall mean any individual, firm, corporation,
partnership or other entity.
(j) "Subsidiary" shall have the meaning ascribed to such term
in Rule 12b-2 of the General Rules and Regulations under the Exchange Act.
5
<PAGE>
(k) "Termination Date" shall mean the date of receipt of the
Notice of Termination described in Section 2 hereof or any later date specified
therein, as the case may be.
(l) "Termination of Employment" shall mean the termination of
the Employee's actual employment relationship with the Company.
(m) "Termination following a Change of Control" shall mean a
Termination of Employment within two years after a Change of Control either:
(i) initiated by the Company for any reason other than (x) the
Employee's continuous illness, injury or incapacity for a period of six
consecutive months or (y) for "Cause;" or
(ii) initiated by the Employee upon one or more of the
following occurrences:
(A) any failure of the Company to comply with and satisfy any
of the terms of this Agreement;
(B) any significant reduction by the Company of the authority,
duties or responsibilities of the Employee;
(C) any removal by the Company of the Employee from the
employment grade, compensation level or officer positions
which the Employee holds as of the effective date hereof
except in connection with promotions to higher office;
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(D) the requirement that the Employee undertake business
travel to an extent substantially greater than is reasonable
and customary for the position the Employee holds.
2. Notice of Termination. Any Termination of Employment shall
be communicated by a Notice of Termination to the other party hereto given in
accordance with Section 14 hereof. For purposes of this Agreement, a "Notice of
Termination" means a written notice which (i) indicates the specific reasons for
the termination, (ii) briefly summarizes the facts and circumstances deemed to
provide a basis for termination of the Employee's employment, and (iii) if the
Termination Date is other than the date of receipt of such notice, specifies the
Termination Date (which date shall not be more than 15 days after the giving of
such notice).
3. Severance Compensation upon Termination.
(a) In the event of the Employee's involuntary Termination of
Employment for reason other than Cause, the Company shall pay to the Employee,
upon the execution of a release in form and substance satisfactory to the
company and its counsel, his regular Base Salary, subject to customary
employment taxes and deductions, for 12 months following the Termination Date
but all other benefit coverages, retirement benefits and fringe benefit
eligibility shall cease upon the Termination Date.
(b) Subject to the provisions of Section 11 hereof, in the
event of the Employee's Termination following a Change of Control, the Company
shall pay to the Employee, within fifteen days after the Termination Date (or as
soon as possible thereafter in the event that the procedures set forth in
Section 11(b) hereof cannot be completed
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within 15 days), and in lieu of any payment under subsection (a) above, an
amount in cash equal to 1.5 times the Employee's Base Compensation.
(c) In the event the Employee's Normal Retirement Date would
occur prior to 24 months after the Termination Date, the aggregate cash amount
determined as set forth in (a) above shall be reduced by multiplying it by a
fraction, the numerator of which shall be the number of days from the
Termination Date to the Employee's Normal Retirement Date and the denominator of
which shall be 730.
4. Other Payments. The payment due under Section 3 hereof
shall be in addition to and not in lieu of any payments or benefits due to the
Employee under any other plan, policy or program of the Company except that no
payments shall be due to the Employee under the Company's then severance pay
plan for employees.
5. Establishment of Trust. The Company may establish an
irrevocable trust fund pursuant to a trust agreement to hold assets to satisfy
its obligations hereunder. Funding of such trust fund shall be subject to the
Company's discretion, as set forth in the agreement pursuant to which the fund
will be established.
6. Enforcement.
(a) In the event that the Company shall fail or refuse to make
payment of any amounts due the Employee under Sections 3(b) and 4 hereof within
the respective time periods provided therein, the Company shall pay to the
Employee, in addition to the payment of any other sums provided in this
Agreement, interest, compounded daily, on any amount remaining unpaid from the
date payment is required under Section 3(b) and 4, as appropriate, until paid to
the Employee, at the rate from time to time announced by Mellon
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Bank (East) as its "prime rate" plus 2%, each change in such rate to take effect
on the effective date of the change in such prime rate.
(b) It is the intent of the parties that the Employee not be
required to incur any expenses associated with the enforcement of his rights
under Section 3(b) of this Agreement by arbitration, litigation or other legal
action because the cost and expense thereof would substantially detract from the
benefits intended to be extended to the Employee hereunder. Accordingly, the
Company shall pay the Employee on demand the amount necessary to reimburse the
Employee in full for all expenses (including all attorneys' fees and legal
expenses) incurred by the Employee in enforcing any of the obligations of the
Company under this Agreement.
7. No Mitigation. The Employee shall not be required to
mitigate the amount of any payment or benefit provided for in this Agreement by
seeking other employment or otherwise, nor shall the amount of any payment or
benefit provided for herein be reduced by any compensation earned by other
employment or otherwise.
8. Non-exclusivity of Rights. Nothing in this Agreement shall
prevent or limit the Employee's continuing or future participation in or rights
under any benefit, bonus, incentive or other plan or program provided by the
Company or any of its Subsidiaries or Affiliates and for which the Employee may
qualify; provided, however, that the Employee hereby waives the Employee's right
to receive any payments under any severance pay plan or similar program
applicable to other employees of the Company.
9. No Set-Off. The Company's obligation to make the payments
provided for in this Agreement and otherwise to perform its obligations
hereunder shall not
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be affected by any circumstances, including, without limitation, any set-off,
counterclaim, recoupment, defense or other right which the Company may have
against the Employee or others.
10. Taxes. Any payment required under this Agreement shall be
subject to all requirements of the law with regard to the withholding of taxes,
filing, making of reports and the like, and the Company shall use its best
efforts to satisfy promptly all such requirements.
11. Certain Reduction of Payments.
(a) Anything in this Agreement to the contrary
notwithstanding, in the event that it shall be determined that any payment or
distribution by the Company to or for the benefit of the Employee, whether paid
or payable or distributed or distributable pursuant to the terms of this
Agreement or otherwise (a "Payment"), would constitute an "excess parachute
payment" within the meaning of Section 280G of the Internal Revenue Code of
1986, as amended (the "Code"), the aggregate present value of amounts payable or
distributable to or for the benefit of the Employee pursuant to this Agreement
(such payments or distributions pursuant to this Agreement are hereinafter
referred to as "Agreement Payments") shall be reduced (but not below zero) to
the Reduced Amount. The "Reduced Amount" shall be an amount expressed in present
value which maximizes the aggregate present value of Agreement Payments without
causing any Payment to be subject to the taxation under Section 4999 of the
Code. For purposes of this Section 11, present value shall be determined in
accordance with Section 280G(d)(4) of the Code.
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(b) All determinations to be made under this Section 11 shall
be made by Ernst & Young (or the Company's independent public accountant
immediately prior to the Change of Control if other than Ernst & Young (the
"Accounting Firm")), which firm shall provide its determinations and any
supporting calculations both to the Company and the Employee within 10 days of
the Termination Date. Any such determination by the Accounting Firm shall be
binding upon the Company and the Employee. Within five days after this
determination, the Company shall pay (or cause to be paid) or distribute (or
cause to be distributed) to or for the benefit of the Employee such amounts as
are then due to the Employee under this Agreement.
(c) As a result of the uncertainty in the application of
Section 280G of the Code at the time of the initial determination by the
Accounting Firm hereunder, it is possible that Agreement Payments, as the case
may be, will have been made by the Company which should not have been made
("Overpayment") or that additional Agreement Payments which have not been made
by the Company could have been made ("Underpayment"), in each case, consistent
with the calculations required to be made hereunder. Within two years after the
Termination of Employment, the Accounting Firm shall review the determination
made by it pursuant to the preceding paragraph. In the event that the Accounting
Firm determines that an Overpayment has been made, any such Overpayment shall be
treated for all purposes as a loan to the Employee which the Employee shall
repay to the Company together with interest at the applicable Federal rate
provided for in Section 7872(f)(2) of the Code (the "Federal Rate"); provided,
however, that no amount shall be payable by the Employee to the Company if and
to the extent such
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payment would not reduce the amount which is subject to taxation under Section
4999 of the Code. In the event that the Accounting Firm determines that an
Underpayment has occurred, any such Underpayment shall be promptly paid by the
Company to or for the benefit of the Employee together with interest at the
Federal Rate.
(d) All of the fees and expenses of the Accounting Firm in
performing the determinations referred to in subsections (b) and (c) above shall
be borne solely by the Company. The Company agrees to indemnify and hold
harmless the Accounting Firm of and from any and all claims, damages and
expenses resulting from or relating to its determinations pursuant to
subsections (b) and (c) above, except for claims, damages or expenses resulting
from the gross negligence or willful misconduct of the Accounting Firm.
12. Confidential Information. The Employee recognizes and
acknowledges that, by reason of his employment by and service to the Company, he
has had and will continue to have access to confidential information of the
Company and its affiliates, including, without limitation, information and
knowledge pertaining to products and services offered, innovations, designs,
ideas, plans, trade secrets, proprietary information, distribution and sales
methods and systems, sales and profit figures, customer and client lists, and
relationships between the Company and its affiliates and other distributors,
customers, clients, suppliers and others who have business dealings with the
Company and its affiliates ("Confidential Information"). The Employee
acknowledges that such Confidential Information is a valuable and unique asset
and covenants that he will not, either during or after his employment by the
Company, disclose any such Confidential Information to any person for any reason
whatsoever without the prior written
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authorization of the Board, unless such information is in the public domain
through no fault of the Employee or except as may be required by law.
13. Non-Competition.
(a) During his employment by the Company and for a period of
one year thereafter, the Employee will not, unless acting with the prior written
consent of the Board, directly or indirectly, own, manage, operate, join,
control, finance or participate in the ownership, management, operation, control
or financing of, or be connected as an officer, director, employee, partner,
principal, agent, representative, consultant or otherwise with or use or permit
his name to be used in connection with, any business or enterprise engaged in a
geographic area in which the Company or any of its affiliates is operating
either during his employment by the Company or on the Termination Date, as
applicable, presently on the East Coast of the United States or at any port in
the Gulf of Mexico (whether or not such business is physically located within
those areas) (the "Geographic Area"), in any business that is a customer of,
competitive to, a business from which the Company or any of its affiliates
derive at least five percent of its respective gross revenues either during his
employment by the Company or on the Termination Date, as applicable. It is
recognized by the Employee that the business of the Company and its affiliates
and the Employee's connection therewith is or will be involved in activity
throughout the Geographic Area, and that more limited geographical limitations
on this non-competition covenant are therefore not appropriate. The Employee
also shall not, directly or indirectly, during such one-year period (a) solicit
or divert business from, or attempt to convert any client, account or customer
of the Company or any of its affiliates, whether existing at the date hereof or
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acquired during Employee's employment nor (b) following Employee's employment,
solicit or attempt to hire any then employee of the Employer or of any of its
affiliates.
(b) The foregoing restriction shall not be construed to
prohibit the ownership by the Employee of less than one percent (1%) of any
class of securities of any corporation which is engaged in any of the foregoing
businesses having a class of securities registered pursuant to the Securities
Exchange Act of 1934, provided that such ownership represents a passive
investment and that neither the Employee nor any group of persons including
Employee in any way, either directly or indirectly, manages or exercises control
of any such corporation, guarantees any of its financial obligations, otherwise
takes any part in its business, other than exercising his rights as a
shareholder, or seeks to do any of the foregoing.
14. Equitable Relief.
(a) Employee acknowledges that the restrictions contained in
Sections 12 and 13 hereof are reasonable and necessary to protect the legitimate
interests of the Company and its affiliates, that the Company would not have
entered into this Agreement in the absence of such restrictions, and that any
violation of any provision of those Sections will result in irreparable injury
to the Company. The Employee represents that his experience and capabilities are
such that the restrictions contained in Section 13 hereof will not prevent the
Employee from obtaining employment or otherwise earning a living at the same
general level of economic benefit as anticipated by this Agreement. The Employee
further represents and acknowledges that (i) he has been advised by the Company
to consult his own legal counsel in respect of this Agreement, and (ii) that he
has had full opportunity, prior to execution of this Agreement, to review
thoroughly this Agreement with his counsel.
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(b) The Employee agrees that the Company shall be entitled to
preliminary and permanent injunctive relief, without the necessity of proving
actual damages, as well as an equitable accounting of all earnings, profits and
other benefits arising from any violation of Sections 12 or 13 hereof, which
rights shall be cumulative and in addition to any other rights or remedies to
which the Company may be entitled. In the event that any of the provisions of
Sections 12 or 13 hereof should ever be adjudicated to exceed the time,
geographic, service, or other limitations permitted by applicable law in any
jurisdiction, then such provisions shall be deemed reformed in such jurisdiction
to the maximum time, geographic, service, or other limitations permitted by
applicable law.
(c) The Employee irrevocably and unconditionally (i) agrees
that any suit, action or other legal proceeding arising out of Section 12 or 13
hereof, including without limitation, any action commenced by the Company for
preliminary and permanent injunctive relief or other equitable relief, may be
brought in the United States District Court for the Eastern District of
Pennsylvania, or if such court does not have jurisdiction or will not accept
jurisdiction, in any court of general jurisdiction in Philadelphia County,
Pennsylvania, (ii) consents to the non-exclusive jurisdiction of any such court
in any such suit, action or proceeding, and (iii) waives any objection which
Employee may have to the laying of venue of any such suit, action or proceeding
in any such court. Employee also irrevocably and unconditionally consents to the
service of any process, pleadings, notices or other papers in a manner permitted
by the notice provisions of Section 17 hereof.
(d) Employee agrees that he will provide, and that the Company
may similarly provide, a copy of Sections 12 and 13 hereof to any business or
enterprise (i)
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which he may directly or indirectly own, manage, operate, finance, join, control
or participate in the ownership, management, operation, financing, control or
control of, or (ii) with which he may be connected with as an officer, director,
employee, partner, principal, agent, representative, consultant or otherwise, or
in connection with which he may use or permit his name to be used; provided,
however, that this provision shall not apply in respect of Section 3 hereof
after expiration of the time period set forth therein.
15. Term of Agreement. The term of this Agreement shall be for
two years from the date hereof and shall be automatically renewed for successive
one-year periods unless the Company notifies the Employee in writing that this
Agreement will not be renewed at least sixty days prior to the end of the
current term; provided, however, that (i) after a Change of Control during the
term of this Agreement, this Agreement shall remain in effect until all of the
obligations of the parties hereunder are satisfied or have expired, and (ii)
this Agreement shall terminate if, prior to a Change of Control, the employment
of the Employee with the Company or any of its Subsidiaries, as the case may be,
shall terminate for any reason, or the Employee shall cease to be an Employee.
16. Successor Company. The Company shall require any successor
or successors (whether direct or indirect, by purchase, merger, consolidation or
otherwise) to all or substantially all of the business and/or assets of the
Company, by agreement in form and substance satisfactory to the Employee, to
acknowledge expressly that this Agreement is binding upon and enforceable
against the Company in accordance with the terms hereof, and to become jointly
and severally obligated with the Company to perform this Agreement in the same
manner and to the same extent that the Company would be required to perform
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if no such succession or successions had taken place. Failure of the Company to
obtain such agreement prior to the effectiveness of any such succession shall be
a breach of this Agreement. As used in this Agreement, the Company shall mean
the Company as hereinbefore defined and any such successor or successors to its
business and/or assets, jointly and severally.
17. Notice. All notices and other communications required or
permitted hereunder or necessary or convenient in connection herewith shall be
in writing and shall be delivered personally or mailed by registered or
certified mail, return receipt requested, or by overnight express courier
service, as follows:
If to the Company, to:
Maritrans Inc.
2600 One Logan Square
Philadelphia, PA 19103
Attention: Corporate Secretary
If to the Employee, to:
John C. Newcomb
7725 St. Martin Lane
Philadelphia, PA 19118
or to such other names or addresses as the Company or the Employee, as the case
may be, shall designate by notice to the other party hereto in the manner
specified in this Section; provided, however, that if no such notice is given by
the Company following a Change of Control, notice at the last address of the
Company or to any successor pursuant to Section 16 hereof shall be deemed
sufficient for the purposes hereof. Any such notice shall be deemed delivered
and effective when received in the case of personal delivery, five days
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after deposit, postage prepaid, with the U.S. Postal Service in the case of
registered or certified mail, or on the next business day in the case of
overnight express courier service.
18. Governing Law. This Agreement shall be governed by and
interpreted under the laws of the Commonwealth of Pennsylvania without giving
effect to any conflict of laws provisions.
19. Contents of Agreement, Amendment and Assignment.
(a) This Agreement supersedes all prior agreements, sets forth
the entire understanding between the parties hereto with respect to the subject
matter hereof and cannot be changed, modified, extended or terminated except
upon written amendment executed by the Employee and approved by the Board and
executed on the Company's behalf by a duly authorized officer. The provisions of
this Agreement may provide for payments to the Employee under certain
compensation or bonus plans under circumstances where such plans would not
provide for payment thereof. It is the specific intention of the parties that
the provisions of this Agreement shall supersede any provisions to the contrary
in such plans, and such plans shall be deemed to have been amended to correspond
with this Agreement without further action by the Company or the Board.
(b) Nothing in this Agreement shall be construed as giving the
Employee any right to be retained in the employ of the Company.
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(c) All of the terms and provisions of this Agreement shall be
binding upon and inure to the benefit of and be enforceable by the respective
heirs, representatives, successors and assigns of the parties hereto, except
that the duties and responsibilities of the Employee and the Company hereunder
shall not be assignable in whole or in part by the Company.
20. Severability. If any provision of this Agreement or
application thereof to anyone or under any circumstances shall be determined to
be invalid or unenforceable, such invalidity or unenforceability shall not
affect any other provisions or applications of this Agreement which can be given
effect without the invalid or unenforceable provision or application.
21. Remedies Cumulative; No Waiver. No right conferred upon
the Employee by this Agreement is intended to be exclusive of any other right or
remedy, and each and every such right or remedy shall be cumulative and shall be
in addition to any other right or remedy given hereunder or now or hereafter
existing at law or in equity. No delay or omission by the Employee in exercising
any right, remedy or power hereunder or existing at law or in equity shall be
construed as a waiver thereof, including, without limitation, any delay by the
Employee in delivering a Notice of Termination pursuant to Section 2 hereof
after an event has occurred which would, if the Employee had resigned, have
constituted a Termination following a Change of Control pursuant to Section
1(l)(ii) of this Agreement.
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22. Miscellaneous. All section headings are for convenience
only. This Agreement may be executed in several counterparts, each of which is
an original. It shall not be necessary in making proof of this Agreement or any
counterpart hereof to produce or account for any of the other counterparts.
23. Termination of Agreement. This Agreement shall supersede
and replace the Agreement which shall hereafter be null and void and of no
further force and effect.
IN WITNESS WHEREOF, the undersigned, intending to be legally
bound, have executed this Agreement as of the date first above written.
Attest: Maritrans General Partner Inc.
[Seal]
/s/ A.J. Volkle By /s/ Thomas C. Deas, Jr.
- ---------------------------- ----------------------------------
Asst. Secty. Vice President
/s/ Maureen Heaney /s/ John C. Newcomb
- ---------------------------- ----------------------------------
Witness John C. Newcomb
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EXHIBIT 10.5
SEVERANCE AND NON-COMPETITION AGREEMENT
Agreement made as of the 4th day of March, 1997, between Maritrans
General Partner Inc., a Delaware corporation (the "Company"), and John J. Burns
(the "Employee").
WHEREAS, the Employee is employed by the Company in a key strategic
position;
WHEREAS, the Company is a subsidiary of Maritrans Inc., a publicly
traded corporation ("Maritrans");
WHEREAS, the board of directors of the Company recognizes that, as is
the case with many publicly held corporations, the possibility of a change in
control of Maritrans and the Company exists and that such possibility, and the
uncertainty and questions which it may raise among management, may result in the
departure or distraction of key management personnel to the detriment of the
Company;
WHEREAS, the board of directors of the Company has determined that
appropriate steps should be taken to reinforce and encourage the continued
attention and dedication of key members of the Company's management to their
assigned duties without distraction in the face of potentially disturbing
circumstances arising from the possibility of a change in control of the
Company; and
WHEREAS, in consideration for the Employee accepting employment with
the Company and agreeing not to compete with the Company in the event the
Employee's employment is terminated, the Company agrees that the Employee shall
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receive the compensation set forth in this Agreement as a cushion against the
financial and career impact on the Employee in the event the Employee's
employment with the Company is terminated without cause whether or not there is
a Change of Control of Maritrans;
NOW, THEREFORE, in consideration of the foregoing and the mutual
covenants and agreements hereinafter set forth and intending to be legally bound
hereby, the parties hereto agree as follows:
1. Definitions. For all purposes of this Agreement, the following terms
shall have the meanings specified in this Section unless the context clearly
otherwise requires:
(a) "Affiliate" and "Associate" shall have the respective meanings
ascribed to such terms in Rule 12b-2 of the General Rules and Regulations under
the Securities Exchange Act of 1934, as amended (the "Exchange Act").
(b) "Base Compensation" shall mean the average of the total cash
remuneration received by the Employee in all capacities with the Company, and
its Subsidiaries or Affiliates, as reported for Federal income tax purposes on
Form W-2, together with any and all salary reduction authorized amounts under
any of the Company's benefit plans or programs, but excluding any amounts
attributable to the exercise of stock options by the Employee under the
Company's Equity Compensation Plan for the most recent full calendar year
immediately preceding the calendar year in which occurs a Change of Control or
the Employee's Termination Date, whichever is higher.
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(c) "Base Salary" shall mean the rate of normal salary being paid to
the Employee at the time of his Termination Date.
(d) "Beneficial Owner" of any securities shall mean:
(i) that such Person or any of such Person's Affiliates or Associates,
directly or indirectly, has the right to acquire (whether such right is
exercisable immediately or only after the passage of time) pursuant to any
agreement, arrangement or understanding (whether or not in writing) or upon the
exercise of conversion rights, exchange rights, rights, warrants or options, or
otherwise; provided, however, that a Person shall not be deemed the "Beneficial
Owner" of securities tendered pursuant to a tender or exchange offer made by
such Person or any of such Person's Affiliates or Associates until such tendered
securities are accepted for payment, purchase or exchange;
(ii) that such Person or any of such Person's Affiliates or Associates,
directly or indirectly, has the right to vote or dispose of or has "beneficial
ownership" of (as determined pursuant to Rule 13d-3 of the General Rules and
Regulations under the Exchange Act), including without limitation pursuant to
any agreement, arrangement or understanding, whether or not in writing;
provided, however, that a Person shall not be deemed the "Beneficial Owner" of
any security under this subsection (ii) as a result of an oral or written
agreement, arrangement or understanding to vote such security if such agreement,
arrangement or understanding (A) arises solely from a revocable proxy given in
response to a public proxy or consent solicitation made pursuant to, and in
accordance with, the
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applicable provisions of the General Rules and Regulations under the Exchange
Act, and (B) is not then reportable by such Person on Schedule 13D under the
Exchange Act (or any comparable or successor report); or
(iii) where voting securities are beneficially owned, directly or
indirectly, by any other Person (or any Affiliate or Associate thereof) with
which such Person (or any of such Person's Affiliates or Associates) has any
agreement, arrangement or understanding (whether or not in writing) for the
purpose of acquiring, holding, voting (except pursuant to a revocable proxy as
described in the proviso to subsection (ii) above) or disposing of any voting
securities of the Company; provided, however, that nothing in this subsection
(d) shall cause a Person engaged in business as an underwriter of securities to
be the "Beneficial Owner" of any securities acquired through such Person's
participation in good faith in a firm commitment underwriting until the
expiration of forty days after the date of such acquisition.
(e) "Board" shall mean the board of directors of the Company.
(f) "Cause" shall mean 1) misappropriation of funds, 2) habitual
insobriety or substance abuse, 3) conviction of a crime involving moral
turpitude, 4) gross negligence in the performance of duties, which gross
negligence has had a material adverse effect on the business, operations,
assets, properties or financial condition of the Company and its Subsidiaries
taken as a whole, or 5) for purposes of Section 3(b), a judgment by the Board
that the Employee is not satisfactorily performing his duties.
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(g) "Change of Control" shall be deemed to have taken place if (i) any
Person (except the Company or any employee benefit plan of the Company or of any
Affiliate, any Person or entity organized, appointed or established by the
Company for or pursuant to the terms of any such employee benefit plan),
together with all Affiliates and Associates of such Person, shall become the
Beneficial Owner in the aggregate of 20% or more of the common stock of the
Company then outstanding); provided, however, that no "Change of Control" shall
be deemed to occur during any period in which any such Person, and its
Affiliates and Associates, are bound by the terms of a standstill agreement
under which such parties have agreed not to acquire more than 30% of the common
stock of the Company of the Common Stock of the Company then outstanding or to
solicit proxies, or (ii) during any twenty-four month period, individuals who at
the beginning of such period constituted the Board cease for any reason to
constitute a majority thereof, unless the election, or the nomination for
election by the Company's shareholders, of at least seventy-five percent of the
directors who were not directors at the beginning of such period was approved by
a vote of at least seventy-five percent of the directors in office at the time
of such election or nomination who were directors at the beginning of such
period.
(h) "Normal Retirement Date" shall mean the first day of the calendar
month coincident with or next following the Employee's 65th birthday.
(i) "Person" shall mean any individual, firm, corporation, partnership
or other entity.
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(j) "Subsidiary" shall have the meaning ascribed to such term in Rule
12b- 2 of the General Rules and Regulations under the Exchange Act.
(k) "Termination Date" shall mean the date of receipt of the Notice of
Termination described in Section 2 hereof or any later date specified therein,
as the case may be.
(l) "Termination of Employment" shall mean the termination of the
Employee's actual employment relationship with the Company.
(m) "Termination following a Change of Control" shall mean a
Termination of Employment within two years after a Change of Control either:
(i) initiated by the Company for any reason other than (x) the
Employee's continuous illness, injury or incapacity for a period of six
consecutive months or (y) for "Cause;" or
(ii) initiated by the Employee upon one or more of the following
occurrences:
(A) any failure of the Company to comply with and satisfy any of the
terms of this Agreement;
(B) any significant reduction by the Company of the authority, duties
or responsibilities of the Employee;
(C) any removal by the Company of the Employee from the employment
grade, compensation level or officer positions which the Employee holds
as of the effective date hereof except in connection with promotions to
higher office;
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(D) the requirement that the Employee undertake business travel to an
extent substantially greater than is reasonable and customary for the
position the Employee holds.
2. Notice of Termination. Any Termination of Employment shall be
communicated by a Notice of Termination to the other party hereto given in
accordance with Section 14 hereof. For purposes of this Agreement, a "Notice of
Termination" means a written notice which (i) indicates the specific reasons for
the termination, (ii) briefly summarizes the facts and circumstances deemed to
provide a basis for termination of the Employee's employment, and (iii) if the
Termination Date is other than the date of receipt of such notice, specifies the
Termination Date (which date shall not be more than 15 days after the giving of
such notice).
3. Severance Compensation upon Termination.
(a) In the event of the Employee's involuntary Termination of
Employment for reason other than Cause, the Company shall pay to the Employee,
upon the execution of a release in form and substance satisfactory to the
company and its counsel, his regular Base Salary, subject to customary
employment taxes and deductions, for 12 months following the Termination Date
but all other benefit coverages, retirement benefits and fringe benefit
eligibility shall cease upon the Termination Date.
(b) In the event of the Employee's involuntary Termination of
Employment due to a judgment by the Board that the Employee is not
satisfactorily performing his
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duties, the Company shall pay to the Employee, upon execution of a release in
form and substance satisfactory to the Company and its counsel, his regular Base
Salary, subject to customary employment taxes and deductions, for 12 months
following the Termination Date but all other benefit coverages, retirement
benefits and fringe benefit eligibility shall cease upon the Termination Date.
(c) Subject to the provisions of Section 11 hereof, in the event of the
Employee's Termination following a Change of Control, the Company shall pay to
the Employee, within fifteen days after the Termination Date (or as soon as
possible thereafter in the event that the procedures set forth in Section 11(b)
hereof cannot be completed within 15 days), and in lieu of any payment under
subsection (a) above, an amount in cash equal to 1.5 times the Employee's Base
Compensation.
(d) In the event the Employee's Normal Retirement Date would occur
prior to 24 months after the Termination Date, the aggregate cash amount
determined as set forth in (a) above shall be reduced by multiplying it by a
fraction, the numerator of which shall be the number of days from the
Termination Date to the Employee's Normal Retirement Date and the denominator of
which shall be 730.
4. Other Payments. The payment due under Section 3 hereof shall be in
addition to and not in lieu of any payments or benefits due to the Employee
under any other plan, policy or program of the Company except that no payments
shall be due to the Employee under the Company's then severance pay plan for
employees.
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5. Establishment of Trust. The Company may establish an irrevocable
trust fund pursuant to a trust agreement to hold assets to satisfy its
obligations hereunder. Funding of such trust fund shall be subject to the
Company's discretion, as set forth in the agreement pursuant to which the fund
will be established.
6. Enforcement.
(a) In the event that the Company shall fail or refuse to make payment
of any amounts due the Employee under Sections 3(b) and 4 hereof within the
respective time periods provided therein, the Company shall pay to the Employee,
in addition to the payment of any other sums provided in this Agreement,
interest, compounded daily, on any amount remaining unpaid from the date payment
is required under Section 3(b) and 4, as appropriate, until paid to the
Employee, at the rate from time to time announced by Mellon Bank (East) as its
"prime rate" plus 2%, each change in such rate to take effect on the effective
date of the change in such prime rate.
(b) It is the intent of the parties that the Employee not be required
to incur any expenses associated with the enforcement of his rights under
Section 3(b) of this Agreement by arbitration, litigation or other legal action
because the cost and expense thereof would substantially detract from the
benefits intended to be extended to the Employee hereunder. Accordingly, the
Company shall pay the Employee on demand the amount necessary to reimburse the
Employee in full for all expenses (including all attorneys' fees and legal
expenses) incurred by the Employee in enforcing any of the obligations of the
Company under this Agreement.
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7. No Mitigation. The Employee shall not be required to mitigate the
amount of any payment or benefit provided for in this Agreement by seeking other
employment or otherwise, nor shall the amount of any payment or benefit provided
for herein be reduced by any compensation earned by other employment or
otherwise.
8. Non-exclusivity of Rights. Nothing in this Agreement shall prevent
or limit the Employee's continuing or future participation in or rights under
any benefit, bonus, incentive or other plan or program provided by the Company
or any of its Subsidiaries or Affiliates and for which the Employee may qualify;
provided, however, that the Employee hereby waives the Employee's right to
receive any payments under any severance pay plan or similar program applicable
to other employees of the Company .
9. No Set-Off. The Company's obligation to make the payments provided
for in this Agreement and otherwise to perform its obligations hereunder shall
not be affected by any circumstances, including, without limitation, any
set-off, counterclaim, recoupment, defense or other right which the Company may
have against the Employee or others.
10. Taxes. Any payment required under this Agreement shall be subject
to all requirements of the law with regard to the withholding of taxes, filing,
making of reports and the like, and the Company shall use its best efforts to
satisfy promptly all such requirements.
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11. Certain Reduction of Payments.
(a) Anything in this Agreement to the contrary notwithstanding, in the
event that it shall be determined that any payment or distribution by the
Company to or for the benefit of the Employee, whether paid or payable or
distributed or distributable pursuant to the terms of this Agreement or
otherwise (a "Payment"), would constitute an "excess parachute payment" within
the meaning of Section 280G of the Internal Revenue Code of 1986, as amended
(the "Code"), the aggregate present value of amounts payable or distributable to
or for the benefit of the Employee pursuant to this Agreement (such payments or
distributions pursuant to this Agreement are hereinafter referred to as
"Agreement Payments") shall be reduced (but not below zero) to the Reduced
Amount. The "Reduced Amount" shall be an amount expressed in present value which
maximizes the aggregate present value of Agreement Payments without causing any
Payment to be subject to the taxation under Section 4999 of the Code. For
purposes of this Section 11, present value shall be determined in accordance
with Section 280G(d)(4) of the Code.
(b) All determinations to be made under this Section 11 shall be made
by Ernst & Young (or the Company's independent public accountant immediately
prior to the Change of Control if other than Ernst & Young (the "Accounting
Firm")), which firm shall provide its determinations and any supporting
calculations both to the Company and the Employee within 10 days of the
Termination Date. Any such determination by the Accounting Firm shall be binding
upon the Company and the Employee. Within five days after this determination,
the Company shall pay (or
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cause to be paid) or distribute (or cause to be distributed) to or for the
benefit of the Employee such amounts as are then due to the Employee under this
Agreement.
(c) As a result of the uncertainty in the application of Section 280G
of the Code at the time of the initial determination by the Accounting Firm
hereunder, it is possible that Agreement Payments, as the case may be, will have
been made by the Company which should not have been made ("Overpayment") or that
additional Agreement Payments which have not been made by the Company could have
been made ("Underpayment"), in each case, consistent with the calculations
required to be made hereunder. Within two years after the Termination of
Employment, the Accounting Firm shall review the determination made by it
pursuant to the preceding paragraph. In the event that the Accounting Firm
determines that an Overpayment has been made, any such Overpayment shall be
treated for all purposes as a loan to the Employee which the Employee shall
repay to the Company together with interest at the applicable Federal rate
provided for in Section 7872(f)(2) of the Code (the "Federal Rate"); provided,
however, that no amount shall be payable by the Employee to the Company if and
to the extent such payment would not reduce the amount which is subject to
taxation under Section 4999 of the Code. In the event that the Accounting Firm
determines that an Underpayment has occurred, any such Underpayment shall be
promptly paid by the Company to or for the benefit of the Employee together with
interest at the Federal Rate.
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(d) All of the fees and expenses of the Accounting Firm in performing
the determinations referred to in subsections (b) and (c) above shall be borne
solely by the Company. The Company agrees to indemnify and hold harmless the
Accounting Firm of and from any and all claims, damages and expenses resulting
from or relating to its determinations pursuant to subsections (b) and (c)
above, except for claims, damages or expenses resulting from the gross
negligence or willful misconduct of the Accounting Firm.
12. Confidential Information. The Employee recognizes and acknowledges
that, by reason of his employment by and service to the Company, he has had and
will continue to have access to confidential information of the Company and its
affiliates, including, without limitation, information and knowledge pertaining
to products and services offered, innovations, designs, ideas, plans, trade
secrets, proprietary information, distribution and sales methods and systems,
sales and profit figures, customer and client lists, and relationships between
the Company and its affiliates and other distributors, customers, clients,
suppliers and others who have business dealings with the Company and its
affiliates ("Confidential Information"). The Employee acknowledges that such
Confidential Information is a valuable and unique asset and covenants that he
will not, either during or after his employment by the Company, disclose any
such Confidential Information to any person for any reason whatsoever without
the prior written authorization of the Board, unless such information is in the
public domain through no fault of the Employee or except as may be required by
law.
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13. Non-Competition.
(a) During his employment by the Company and for a period of one year
thereafter, the Employee will not, unless acting with the prior written consent
of the Board, directly or indirectly, own, manage, operate, join, control,
finance or participate in the ownership, management, operation, control or
financing of, or be connected as an officer, director, employee, partner,
principal, agent, representative, consultant or otherwise with or use or permit
his name to be used in connection with, any business or enterprise engaged in a
geographic area in which the Company or any of its affiliates is operating
either during his employment by the Company or on the Termination Date, as
applicable, presently on the East Coast of the United States or at any port in
the Gulf of Mexico (whether or not such business is physically located within
those areas) (the "Geographic Area"), in any business that is a customer of,
competitive to, a business from which the Company or any of its affiliates
derive at least five percent of its respective gross revenues either during his
employment by the Company or on the Termination Date, as applicable. It is
recognized by the Employee that the business of the Company and its affiliates
and the Employee's connection therewith is or will be involved in activity
throughout the Geographic Area, and that more limited geographical limitations
on this non-competition covenant are therefore not appropriate. The Employee
also shall not, directly or indirectly, during such one-year period (a) solicit
or divert business from, or attempt to convert any client, account or customer
of the Company or any of its affiliates, whether existing at the date hereof or
acquired during Employee's
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employment nor (b) following Employee's employment, solicit or attempt to hire
any then employee of the Employer or of any of its affiliates.
(b) The foregoing restriction shall not be construed to prohibit the
ownership by the Employee of less than one percent (1%) of any class of
securities of any corporation which is engaged in any of the foregoing
businesses having a class of securities registered pursuant to the Securities
Exchange Act of 1934, provided that such ownership represents a passive
investment and that neither the Employee nor any group of persons including
Employee in any way, either directly or indirectly, manages or exercises control
of any such corporation, guarantees any of its financial obligations, otherwise
takes any part in its business, other than exercising his rights as a
shareholder, or seeks to do any of the foregoing.
14. Equitable Relief.
(a) Employee acknowledges that the restrictions contained in Sections
12 and 13 hereof are reasonable and necessary to protect the legitimate
interests of the Company and its affiliates, that the Company would not have
entered into this Agreement in the absence of such restrictions, and that any
violation of any provision of those Sections will result in irreparable injury
to the Company. The Employee represents that his experience and capabilities are
such that the restrictions contained in Section 13 hereof will not prevent the
Employee from obtaining employment or otherwise earning a living at the same
general level of economic benefit as anticipated by this Agreement. The Employee
further represents and acknowledges that (i) he has been advised by the Company
to consult his own legal counsel in respect of this Agreement, and (ii) that he
has had
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full opportunity, prior to execution of this Agreement, to review thoroughly
this Agreement with his counsel.
(b) The Employee agrees that the Company shall be entitled to
preliminary and permanent injunctive relief, without the necessity of proving
actual damages, as well as an equitable accounting of all earnings, profits and
other benefits arising from any violation of Sections 12 or 13 hereof, which
rights shall be cumulative and in addition to any other rights or remedies to
which the Company may be entitled. In the event that any of the provisions of
Sections 12 or 13 hereof should ever be adjudicated to exceed the time,
geographic, service, or other limitations permitted by applicable law in any
jurisdiction, then such provisions shall be deemed reformed in such jurisdiction
to the maximum time, geographic, service, or other limitations permitted by
applicable law.
(c) The Employee irrevocably and unconditionally (i) agrees that any
suit, action or other legal proceeding arising out of Section 12 or 13 hereof,
including without limitation, any action commenced by the Company for
preliminary and permanent injunctive relief or other equitable relief, may be
brought in the United States District Court for the Eastern District of
Pennsylvania, or if such court does not have jurisdiction or will not accept
jurisdiction, in any court of general jurisdiction in Philadelphia County,
Pennsylvania, (ii) consents to the non-exclusive jurisdiction of any such court
in any such suit, action or proceeding, and (iii) waives any objection which
Employee may have to the laying of venue of any such suit, action or proceeding
in any such court. Employee also irrevocably and unconditionally
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consents to the service of any process, pleadings, notices or other papers in a
manner permitted by the notice provisions of Section 17 hereof.
(d) Employee agrees that he will provide, and that the Company may
similarly provide, a copy of Sections 12 and 13 hereof to any business or
enterprise (i) which he may directly or indirectly own, manage, operate,
finance, join, control or participate in the ownership, management, operation,
financing, control or control of, or (ii) with which he may be connected with as
an officer, director, employee, partner, principal, agent, representative,
consultant or otherwise, or in connection with which he may use or permit his
name to be used; provided, however, that this provision shall not apply in
respect of Section 3 hereof after expiration of the time period set forth
therein.
15. Term of Agreement. The term of this Agreement shall be for two
years from the date hereof and shall be automatically renewed for successive
one-year periods unless the Company notifies the Employee in writing that this
Agreement will not be renewed at least sixty days prior to the end of the
current term; provided, however, that (i) after a Change of Control during the
term of this Agreement, this Agreement shall remain in effect until all of the
obligations of the parties hereunder are satisfied or have expired, and (ii)
this Agreement shall terminate if, prior to a Change of Control, the employment
of the Employee with the Company or any of its Subsidiaries, as the case may be,
shall terminate for any reason, or the Employee shall cease to be an Employee.
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16. Successor Company. The Company shall require any successor or
successors (whether direct or indirect, by purchase, merger, consolidation or
otherwise) to all or substantially all of the business and/or assets of the
Company, by agreement in form and substance satisfactory to the Employee, to
acknowledge expressly that this Agreement is binding upon and enforceable
against the Company in accordance with the terms hereof, and to become jointly
and severally obligated with the Company to perform this Agreement in the same
manner and to the same extent that the Company would be required to perform if
no such succession or successions had taken place. Failure of the Company to
obtain such agreement prior to the effectiveness of any such succession shall be
a breach of this Agreement. As used in this Agreement, the Company shall mean
the Company as hereinbefore defined and any such successor or successors to its
business and/or assets, jointly and severally.
17. Notice. All notices and other communications required or permitted
hereunder or necessary or convenient in connection herewith shall be in writing
and shall be delivered personally or mailed by registered or certified mail,
return receipt requested, or by overnight express courier service, as follows:
If to the Company, to:
Maritrans General Partner Inc.
2600 One Logan Square
Philadelphia, PA 19103
Attention: Corporate Secretary
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If to the Employee, to:
John J. Burns
708 Carter Hill Drive
West Deptford, NJ 08066
or to such other names or addresses as the Company or the Employee, as the case
may be, shall designate by notice to the other party hereto in the manner
specified in this Section; provided, however, that if no such notice is given by
the Company following a Change of Control, notice at the last address of the
Company or to any successor pursuant to Section 16 hereof shall be deemed
sufficient for the purposes hereof. Any such notice shall be deemed delivered
and effective when received in the case of personal delivery, five days after
deposit, postage prepaid, with the U.S. Postal Service in the case of registered
or certified mail, or on the next business day in the case of overnight express
courier service.
18. Governing Law. This Agreement shall be governed by and interpreted
under the laws of the Commonwealth of Pennsylvania without giving effect to any
conflict of laws provisions.
19. Contents of Agreement, Amendment and Assignment.
(a) This Agreement supersedes all prior agreements, sets forth the
entire understanding between the parties hereto with respect to the subject
matter hereof and cannot be changed, modified, extended or terminated except
upon written amendment executed by the Employee and approved by the Board and
executed on the Company's behalf by a duly authorized officer. The provisions of
this Agreement may provide for payments to the Employee under certain
compensation or bonus
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plans under circumstances where such plans would not provide for payment
thereof. It is the specific intention of the parties that the provisions of this
Agreement shall supersede any provisions to the contrary in such plans, and such
plans shall be deemed to have been amended to correspond with this Agreement
without further action by the Company or the Board.
(b) Nothing in this Agreement shall be construed as giving the Employee
any right to be retained in the employ of the Company.
(c) All of the terms and provisions of this Agreement shall be binding
upon and inure to the benefit of and be enforceable by the respective heirs,
representatives, successors and assigns of the parties hereto, except that the
duties and responsibilities of the Employee and the Company hereunder shall not
be assignable in whole or in part by the Company.
20. Severability. If any provision of this Agreement or application
thereof to anyone or under any circumstances shall be determined to be invalid
or unenforceable, such invalidity or unenforceability shall not affect any other
provisions or applications of this Agreement which can be given effect without
the invalid or unenforceable provision or application.
21. Remedies Cumulative; No Waiver. No right conferred upon the
Employee by this Agreement is intended to be exclusive of any other right or
remedy, and each and every such right or remedy shall be cumulative and shall be
in addition to any other right or remedy given hereunder or now or hereafter
existing at law or in equity. No delay or omission by the Employee in exercising
any right,
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remedy or power hereunder or existing at law or in equity shall be construed as
a waiver thereof, including, without limitation, any delay by the Employee in
delivering a Notice of Termination pursuant to Section 2 hereof after an event
has occurred which would, if the Employee had resigned, have constituted a
Termination following a Change of Control pursuant to Section 1(l)(ii) of this
Agreement.
22. Miscellaneous. All section headings are for convenience only. This
Agreement may be executed in several counterparts, each of which is an original.
It shall not be necessary in making proof of this Agreement or any counterpart
hereof to produce or account for any of the other counterparts.
IN WITNESS WHEREOF, the undersigned, intending to be legally bound,
have executed this Agreement as of the date first above written.
Attest: MARITRANS GENERAL PARTNER INC.
[Seal]
/s/ A.J. Volkle By /s/ John C. Newcomb
- ---------------------------- ----------------------------------
Asst. Secretary Vice President
/s/ Maureen Heaney /s/ John J. Burns
- ---------------------------- ----------------------------------
Witness John J. Burns
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EXHIBIT 10.7
SEVERANCE AND NON-COMPETITION AGREEMENT
Agreement made as of the 5th day of March, 1997, between Maritrans
General Partner Inc., a Delaware corporation (the "Company"), and Steven E.
Welch (the "Employee").
WHEREAS, the Employee is employed by the Company in a key strategic
position;
WHEREAS, the Company is a subsidiary of Maritrans Inc., a publicly
traded corporation ("Maritrans");
WHEREAS, the board of directors of the Company recognizes that, as is
the case with many publicly held corporations, the possibility of a change in
control of Maritrans and the Company exists and that such possibility, and the
uncertainty and questions which it may raise among management, may result in the
departure or distraction of key management personnel to the detriment of the
Company;
WHEREAS, the board of directors of the Company has determined that
appropriate steps should be taken to reinforce and encourage the continued
attention and dedication of key members of the Company's management to their
assigned duties without distraction in the face of potentially disturbing
circumstances arising from the possibility of a change in control of the
Company; and
WHEREAS, in consideration for the Employee accepting employment with
the Company and agreeing not to compete with the Company in the event the
Employee's employment is terminated, the Company agrees that the Employee shall
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receive the compensation set forth in this Agreement as a cushion against the
financial and career impact on the Employee in the event the Employee's
employment with the Company is terminated without cause whether or not there is
a Change of Control of Maritrans;
NOW, THEREFORE, in consideration of the foregoing and the mutual
covenants and agreements hereinafter set forth and intending to be legally bound
hereby, the parties hereto agree as follows:
1. Definitions. For all purposes of this Agreement, the following terms
shall have the meanings specified in this Section unless the context clearly
otherwise requires:
(a) "Affiliate" and "Associate" shall have the respective meanings
ascribed to such terms in Rule 12b-2 of the General Rules and Regulations under
the Securities Exchange Act of 1934, as amended (the "Exchange Act").
(b) "Base Compensation" shall mean the average of the total cash
remuneration received by the Employee in all capacities with the Company, and
its Subsidiaries or Affiliates, as reported for Federal income tax purposes on
Form W-2, together with any and all salary reduction authorized amounts under
any of the Company's benefit plans or programs, but excluding any amounts
attributable to the exercise of stock options by the Employee under the
Company's Equity Compensation Plan for the most recent full calendar year
immediately preceding the calendar year in which occurs a Change of Control or
the Employee's Termination Date, whichever is higher.
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(c) "Base Salary" shall mean the rate of normal salary being paid to
the Employee at the time of his Termination Date.
(d) "Beneficial Owner" of any securities shall mean:
(i) that such Person or any of such Person's Affiliates or Associates,
directly or indirectly, has the right to acquire (whether such right is
exercisable immediately or only after the passage of time) pursuant to any
agreement, arrangement or understanding (whether or not in writing) or upon the
exercise of conversion rights, exchange rights, rights, warrants or options, or
otherwise; provided, however, that a Person shall not be deemed the "Beneficial
Owner" of securities tendered pursuant to a tender or exchange offer made by
such Person or any of such Person's Affiliates or Associates until such tendered
securities are accepted for payment, purchase or exchange;
(ii) that such Person or any of such Person's Affiliates or Associates,
directly or indirectly, has the right to vote or dispose of or has "beneficial
ownership" of (as determined pursuant to Rule 13d-3 of the General Rules and
Regulations under the Exchange Act), including without limitation pursuant to
any agreement, arrangement or understanding, whether or not in writing;
provided, however, that a Person shall not be deemed the "Beneficial Owner" of
any security under this subsection (ii) as a result of an oral or written
agreement, arrangement or understanding to vote such security if such agreement,
arrangement or understanding (A) arises solely from a revocable proxy given in
response to a public proxy or consent solicitation made pursuant to, and in
accordance with, the
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applicable provisions of the General Rules and Regulations under the Exchange
Act, and (B) is not then reportable by such Person on Schedule 13D under the
Exchange Act (or any comparable or successor report); or
(iii) where voting securities are beneficially owned, directly or
indirectly, by any other Person (or any Affiliate or Associate thereof) with
which such Person (or any of such Person's Affiliates or Associates) has any
agreement, arrangement or understanding (whether or not in writing) for the
purpose of acquiring, holding, voting (except pursuant to a revocable proxy as
described in the proviso to subsection (ii) above) or disposing of any voting
securities of the Company; provided, however, that nothing in this subsection
(d) shall cause a Person engaged in business as an underwriter of securities to
be the "Beneficial Owner" of any securities acquired through such Person's
participation in good faith in a firm commitment underwriting until the
expiration of forty days after the date of such acquisition.
(e) "Board" shall mean the board of directors of the Company.
(f) "Cause" shall mean 1) misappropriation of funds, 2) habitual
insobriety or substance abuse, 3) conviction of a crime involving moral
turpitude, 4) gross negligence in the performance of duties, which gross
negligence has had a material adverse effect on the business, operations,
assets, properties or financial condition of the Company and its Subsidiaries
taken as a whole, or 5) for purposes of Section 3(b), a judgment by the Board
that the Employee is not satisfactorily performing his duties.
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(g) "Change of Control" shall be deemed to have taken place if (i) any
Person (except the Company or any employee benefit plan of the Company or of any
Affiliate, any Person or entity organized, appointed or established by the
Company for or pursuant to the terms of any such employee benefit plan),
together with all Affiliates and Associates of such Person, shall become the
Beneficial Owner in the aggregate of 20% or more of the common stock of the
Company then outstanding); provided, however, that no "Change of Control" shall
be deemed to occur during any period in which any such Person, and its
Affiliates and Associates, are bound by the terms of a standstill agreement
under which such parties have agreed not to acquire more than 30% of the common
stock of the Company of the Common Stock of the Company then outstanding or to
solicit proxies, or (ii) during any twenty-four month period, individuals who at
the beginning of such period constituted the Board cease for any reason to
constitute a majority thereof, unless the election, or the nomination for
election by the Company's shareholders, of at least seventy-five percent of the
directors who were not directors at the beginning of such period was approved by
a vote of at least seventy-five percent of the directors in office at the time
of such election or nomination who were directors at the beginning of such
period.
(h) "Normal Retirement Date" shall mean the first day of the calendar
month coincident with or next following the Employee's 65th birthday.
(i) "Person" shall mean any individual, firm, corporation, partnership
or other entity.
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(j) "Subsidiary" shall have the meaning ascribed to such term in Rule
12b-2 of the General Rules and Regulations under the Exchange Act.
(k) "Termination Date" shall mean the date of receipt of the Notice of
Termination described in Section 2 hereof or any later date specified therein,
as the case may be.
(l) "Termination of Employment" shall mean the termination of the
Employee's actual employment relationship with the Company.
(m) "Termination following a Change of Control" shall mean a
Termination of Employment within two years after a Change of Control either:
(i) initiated by the Company for any reason other than (x) the
Employee's continuous illness, injury or incapacity for a period of six
consecutive months or (y) for "Cause;" or
(ii) initiated by the Employee upon one or more of the following
occurrences:
(A) any failure of the Company to comply with and satisfy any of the
terms of this Agreement;
(B) any significant reduction by the Company of the authority, duties
or responsibilities of the Employee;
(C) any removal by the Company of the Employee from the employment
grade, compensation level or officer positions which the Employee holds
as of the effective date hereof except in connection with promotions to
higher office;
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(D) the requirement that the Employee undertake business travel to an
extent substantially greater than is reasonable and customary for the
position the Employee holds.
2. Notice of Termination. Any Termination of Employment shall be
communicated by a Notice of Termination to the other party hereto given in
accordance with Section 14 hereof. For purposes of this Agreement, a "Notice of
Termination" means a written notice which (i) indicates the specific reasons for
the termination, (ii) briefly summarizes the facts and circumstances deemed to
provide a basis for termination of the Employee's employment, and (iii) if the
Termination Date is other than the date of receipt of such notice, specifies the
Termination Date (which date shall not be more than 15 days after the giving of
such notice).
3. Severance Compensation upon Termination.
(a) In the event of the Employee's involuntary Termination of
Employment for reason other than Cause, the Company shall pay to the Employee,
upon the execution of a release in form and substance satisfactory to the
company and its counsel, his regular Base Salary, subject to customary
employment taxes and deductions, for 12 months following the Termination Date
but all other benefit coverages, retirement benefits and fringe benefit
eligibility shall cease upon the Termination Date.
(b) In the event of the Employee's involuntary Termination of
Employment due to a judgment by the Board that the Employee is not
satisfactorily performing his
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duties, the Company shall pay to the Employee, upon execution of a release in
form and substance satisfactory to the Company and its counsel, his regular Base
Salary, subject to customary employment taxes and deductions, for 12 months
following the Termination Date but all other benefit coverages, retirement
benefits and fringe benefit eligibility shall cease upon the Termination Date.
(c) Subject to the provisions of Section 11 hereof, in the event of the
Employee's Termination following a Change of Control, the Company shall pay to
the Employee, within fifteen days after the Termination Date (or as soon as
possible thereafter in the event that the procedures set forth in Section 11(b)
hereof cannot be completed within 15 days), and in lieu of any payment under
subsection (a) above, an amount in cash equal to 1.5 times the Employee's Base
Compensation.
(d) In the event the Employee's Normal Retirement Date would occur
prior to 24 months after the Termination Date, the aggregate cash amount
determined as set forth in (a) above shall be reduced by multiplying it by a
fraction, the numerator of which shall be the number of days from the
Termination Date to the Employee's Normal Retirement Date and the denominator of
which shall be 730.
4. Other Payments. The payment due under Section 3 hereof shall be in
addition to and not in lieu of any payments or benefits due to the Employee
under any other plan, policy or program of the Company except that no payments
shall be due to the Employee under the Company's then severance pay plan for
employees.
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5. Establishment of Trust. The Company may establish an irrevocable
trust fund pursuant to a trust agreement to hold assets to satisfy its
obligations hereunder. Funding of such trust fund shall be subject to the
Company's discretion, as set forth in the agreement pursuant to which the fund
will be established.
6. Enforcement.
(a) In the event that the Company shall fail or refuse to make payment
of any amounts due the Employee under Sections 3(b) and 4 hereof within the
respective time periods provided therein, the Company shall pay to the Employee,
in addition to the payment of any other sums provided in this Agreement,
interest, compounded daily, on any amount remaining unpaid from the date payment
is required under Section 3(b) and 4, as appropriate, until paid to the
Employee, at the rate from time to time announced by Mellon Bank (East) as its
"prime rate" plus 2%, each change in such rate to take effect on the effective
date of the change in such prime rate.
(b) It is the intent of the parties that the Employee not be required
to incur any expenses associated with the enforcement of his rights under
Section 3(b) of this Agreement by arbitration, litigation or other legal action
because the cost and expense thereof would substantially detract from the
benefits intended to be extended to the Employee hereunder. Accordingly, the
Company shall pay the Employee on demand the amount necessary to reimburse the
Employee in full for all expenses (including all attorneys' fees and legal
expenses) incurred by the Employee in enforcing any of the obligations of the
Company under this Agreement.
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7. No Mitigation. The Employee shall not be required to mitigate the
amount of any payment or benefit provided for in this Agreement by seeking other
employment or otherwise, nor shall the amount of any payment or benefit provided
for herein be reduced by any compensation earned by other employment or
otherwise.
8. Non-exclusivity of Rights. Nothing in this Agreement shall prevent
or limit the Employee's continuing or future participation in or rights under
any benefit, bonus, incentive or other plan or program provided by the Company
or any of its Subsidiaries or Affiliates and for which the Employee may qualify;
provided, however, that the Employee hereby waives the Employee's right to
receive any payments under any severance pay plan or similar program applicable
to other employees of the Company.
9. No Set-Off. The Company's obligation to make the payments provided
for in this Agreement and otherwise to perform its obligations hereunder shall
not be affected by any circumstances, including, without limitation, any
set-off, counterclaim, recoupment, defense or other right which the Company may
have against the Employee or others.
10. Taxes. Any payment required under this Agreement shall be subject
to all requirements of the law with regard to the withholding of taxes, filing,
making of reports and the like, and the Company shall use its best efforts to
satisfy promptly all such requirements.
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11. Certain Reduction of Payments.
(a) Anything in this Agreement to the contrary notwithstanding, in the
event that it shall be determined that any payment or distribution by the
Company to or for the benefit of the Employee, whether paid or payable or
distributed or distributable pursuant to the terms of this Agreement or
otherwise (a "Payment"), would constitute an "excess parachute payment" within
the meaning of Section 280G of the Internal Revenue Code of 1986, as amended
(the "Code"), the aggregate present value of amounts payable or distributable to
or for the benefit of the Employee pursuant to this Agreement (such payments or
distributions pursuant to this Agreement are hereinafter referred to as
"Agreement Payments") shall be reduced (but not below zero) to the Reduced
Amount. The "Reduced Amount" shall be an amount expressed in present value which
maximizes the aggregate present value of Agreement Payments without causing any
Payment to be subject to the taxation under Section 4999 of the Code. For
purposes of this Section 11, present value shall be determined in accordance
with Section 280G(d)(4) of the Code.
(b) All determinations to be made under this Section 11 shall be made
by Ernst & Young (or the Company's independent public accountant immediately
prior to the Change of Control if other than Ernst & Young (the "Accounting
Firm")), which firm shall provide its determinations and any supporting
calculations both to the Company and the Employee within 10 days of the
Termination Date. Any such determination by the Accounting Firm shall be binding
upon the Company and the Employee. Within five days after this determination,
the Company shall pay (or
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cause to be paid) or distribute (or cause to be distributed) to or for the
benefit of the Employee such amounts as are then due to the Employee under this
Agreement.
(c) As a result of the uncertainty in the application of Section 280G
of the Code at the time of the initial determination by the Accounting Firm
hereunder, it is possible that Agreement Payments, as the case may be, will have
been made by the Company which should not have been made ("Overpayment") or that
additional Agreement Payments which have not been made by the Company could have
been made ("Underpayment"), in each case, consistent with the calculations
required to be made hereunder. Within two years after the Termination of
Employment, the Accounting Firm shall review the determination made by it
pursuant to the preceding paragraph. In the event that the Accounting Firm
determines that an Overpayment has been made, any such Overpayment shall be
treated for all purposes as a loan to the Employee which the Employee shall
repay to the Company together with interest at the applicable Federal rate
provided for in Section 7872(f)(2) of the Code (the "Federal Rate"); provided,
however, that no amount shall be payable by the Employee to the Company if and
to the extent such payment would not reduce the amount which is subject to
taxation under Section 4999 of the Code. In the event that the Accounting Firm
determines that an Underpayment has occurred, any such Underpayment shall be
promptly paid by the Company to or for the benefit of the Employee together with
interest at the Federal Rate.
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(d) All of the fees and expenses of the Accounting Firm in performing
the determinations referred to in subsections (b) and (c) above shall be borne
solely by the Company. The Company agrees to indemnify and hold harmless the
Accounting Firm of and from any and all claims, damages and expenses resulting
from or relating to its determinations pursuant to subsections (b) and (c)
above, except for claims, damages or expenses resulting from the gross
negligence or willful misconduct of the Accounting Firm.
12. Confidential Information. The Employee recognizes and acknowledges
that, by reason of his employment by and service to the Company, he has had and
will continue to have access to confidential information of the Company and its
affiliates, including, without limitation, information and knowledge pertaining
to products and services offered, innovations, designs, ideas, plans, trade
secrets, proprietary information, distribution and sales methods and systems,
sales and profit figures, customer and client lists, and relationships between
the Company and its affiliates and other distributors, customers, clients,
suppliers and others who have business dealings with the Company and its
affiliates ("Confidential Information"). The Employee acknowledges that such
Confidential Information is a valuable and unique asset and covenants that he
will not, either during or after his employment by the Company, disclose any
such Confidential Information to any person for any reason whatsoever without
the prior written authorization of the Board, unless such information is in the
public domain through no fault of the Employee or except as may be required by
law.
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13. Non-Competition.
(a) During his employment by the Company and for a period of one year
thereafter, the Employee will not, unless acting with the prior written consent
of the Board, directly or indirectly, own, manage, operate, join, control,
finance or participate in the ownership, management, operation, control or
financing of, or be connected as an officer, director, employee, partner,
principal, agent, representative, consultant or otherwise with or use or permit
his name to be used in connection with, any business or enterprise engaged in a
geographic area in which the Company or any of its affiliates is operating
either during his employment by the Company or on the Termination Date, as
applicable, presently on the East Coast of the United States or at any port in
the Gulf of Mexico (whether or not such business is physically located within
those areas) (the "Geographic Area"), in any business that is a customer of,
competitive to, a business from which the Company or any of its affiliates
derive at least five percent of its respective gross revenues either during his
employment by the Company or on the Termination Date, as applicable. It is
recognized by the Employee that the business of the Company and its affiliates
and the Employee's connection therewith is or will be involved in activity
throughout the Geographic Area, and that more limited geographical limitations
on this non-competition covenant are therefore not appropriate. The Employee
also shall not, directly or indirectly, during such one-year period (a) solicit
or divert business from, or attempt to convert any client, account or customer
of the Company or any of its affiliates, whether existing at the date hereof or
acquired during Employee's
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<PAGE>
employment nor (b) following Employee's employment, solicit or attempt to hire
any then employee of the Employer or of any of its affiliates.
(b) The foregoing restriction shall not be construed to prohibit the
ownership by the Employee of less than one percent (1%) of any class of
securities of any corporation which is engaged in any of the foregoing
businesses having a class of securities registered pursuant to the Securities
Exchange Act of 1934, provided that such ownership represents a passive
investment and that neither the Employee nor any group of persons including
Employee in any way, either directly or indirectly, manages or exercises control
of any such corporation, guarantees any of its financial obligations, otherwise
takes any part in its business, other than exercising his rights as a
shareholder, or seeks to do any of the foregoing.
14. Equitable Relief.
(a) Employee acknowledges that the restrictions contained in Sections
12 and 13 hereof are reasonable and necessary to protect the legitimate
interests of the Company and its affiliates, that the Company would not have
entered into this Agreement in the absence of such restrictions, and that any
violation of any provision of those Sections will result in irreparable injury
to the Company. The Employee represents that his experience and capabilities are
such that the restrictions contained in Section 13 hereof will not prevent the
Employee from obtaining employment or otherwise earning a living at the same
general level of economic benefit as anticipated by this Agreement. The Employee
further represents and acknowledges that (i) he has been advised by the Company
to consult his own legal counsel in respect of this Agreement, and (ii) that he
has had
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<PAGE>
full opportunity, prior to execution of this Agreement, to review thoroughly
this Agreement with his counsel.
(b) The Employee agrees that the Company shall be entitled to
preliminary and permanent injunctive relief, without the necessity of proving
actual damages, as well as an equitable accounting of all earnings, profits and
other benefits arising from any violation of Sections 12 or 13 hereof, which
rights shall be cumulative and in addition to any other rights or remedies to
which the Company may be entitled. In the event that any of the provisions of
Sections 12 or 13 hereof should ever be adjudicated to exceed the time,
geographic, service, or other limitations permitted by applicable law in any
jurisdiction, then such provisions shall be deemed reformed in such jurisdiction
to the maximum time, geographic, service, or other limitations permitted by
applicable law.
(c) The Employee irrevocably and unconditionally (i) agrees that any
suit, action or other legal proceeding arising out of Section 12 or 13 hereof,
including without limitation, any action commenced by the Company for
preliminary and permanent injunctive relief or other equitable relief, may be
brought in the United States District Court for the Eastern District of
Pennsylvania, or if such court does not have jurisdiction or will not accept
jurisdiction, in any court of general jurisdiction in Philadelphia County,
Pennsylvania, (ii) consents to the non-exclusive jurisdiction of any such court
in any such suit, action or proceeding, and (iii) waives any objection which
Employee may have to the laying of venue of any such suit, action or proceeding
in any such court. Employee also irrevocably and unconditionally
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<PAGE>
consents to the service of any process, pleadings, notices or other papers in a
manner permitted by the notice provisions of Section 17 hereof.
(d) Employee agrees that he will provide, and that the Company may
similarly provide, a copy of Sections 12 and 13 hereof to any business or
enterprise (i) which he may directly or indirectly own, manage, operate,
finance, join, control or participate in the ownership, management, operation,
financing, control or control of, or (ii) with which he may be connected with as
an officer, director, employee, partner, principal, agent, representative,
consultant or otherwise, or in connection with which he may use or permit his
name to be used; provided, however, that this provision shall not apply in
respect of Section 3 hereof after expiration of the time period set forth
therein.
15. Term of Agreement. The term of this Agreement shall be for two
years from the date hereof and shall be automatically renewed for successive
one-year periods unless the Company notifies the Employee in writing that this
Agreement will not be renewed at least sixty days prior to the end of the
current term; provided, however, that (i) after a Change of Control during the
term of this Agreement, this Agreement shall remain in effect until all of the
obligations of the parties hereunder are satisfied or have expired, and (ii)
this Agreement shall terminate if, prior to a Change of Control, the employment
of the Employee with the Company or any of its Subsidiaries, as the case may be,
shall terminate for any reason, or the Employee shall cease to be an Employee.
17
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16. Successor Company. The Company shall require any successor or
successors (whether direct or indirect, by purchase, merger, consolidation or
otherwise) to all or substantially all of the business and/or assets of the
Company, by agreement in form and substance satisfactory to the Employee, to
acknowledge expressly that this Agreement is binding upon and enforceable
against the Company in accordance with the terms hereof, and to become jointly
and severally obligated with the Company to perform this Agreement in the same
manner and to the same extent that the Company would be required to perform if
no such succession or successions had taken place. Failure of the Company to
obtain such agreement prior to the effectiveness of any such succession shall be
a breach of this Agreement. As used in this Agreement, the Company shall mean
the Company as hereinbefore defined and any such successor or successors to its
business and/or assets, jointly and severally.
17. Notice. All notices and other communications required or permitted
hereunder or necessary or convenient in connection herewith shall be in writing
and shall be delivered personally or mailed by registered or certified mail,
return receipt requested, or by overnight express courier service, as follows:
If to the Company, to:
Maritrans General Partner Inc.
2600 One Logan Square
Philadelphia, PA 19103
Attention: Corporate Secretary
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If to the Employee, to:
Steven E. Welch
6 Paper Mill Road
Newtown Square, PA 19073
or to such other names or addresses as the Company or the Employee, as the case
may be, shall designate by notice to the other party hereto in the manner
specified in this Section; provided, however, that if no such notice is given by
the Company following a Change of Control, notice at the last address of the
Company or to any successor pursuant to Section 16 hereof shall be deemed
sufficient for the purposes hereof. Any such notice shall be deemed delivered
and effective when received in the case of personal delivery, five days after
deposit, postage prepaid, with the U.S. Postal Service in the case of registered
or certified mail, or on the next business day in the case of overnight express
courier service.
18. Governing Law. This Agreement shall be governed by and interpreted
under the laws of the Commonwealth of Pennsylvania without giving effect to any
conflict of laws provisions.
19. Contents of Agreement, Amendment and Assignment.
(a) This Agreement supersedes all prior agreements, sets forth the
entire understanding between the parties hereto with respect to the subject
matter hereof and cannot be changed, modified, extended or terminated except
upon written amendment executed by the Employee and approved by the Board and
executed on the Company's behalf by a duly authorized officer. The provisions of
this Agreement may provide for payments to the Employee under certain
compensation or bonus
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plans under circumstances where such plans would not provide for payment
thereof. It is the specific intention of the parties that the provisions of this
Agreement shall supersede any provisions to the contrary in such plans, and such
plans shall be deemed to have been amended to correspond with this Agreement
without further action by the Company or the Board.
(b) Nothing in this Agreement shall be construed as giving the Employee
any right to be retained in the employ of the Company.
(c) All of the terms and provisions of this Agreement shall be binding
upon and inure to the benefit of and be enforceable by the respective heirs,
representatives, successors and assigns of the parties hereto, except that the
duties and responsibilities of the Employee and the Company hereunder shall not
be assignable in whole or in part by the Company.
20. Severability. If any provision of this Agreement or application
thereof to anyone or under any circumstances shall be determined to be invalid
or unenforceable, such invalidity or unenforceability shall not affect any other
provisions or applications of this Agreement which can be given effect without
the invalid or unenforceable provision or application.
21. Remedies Cumulative; No Waiver. No right conferred upon the
Employee by this Agreement is intended to be exclusive of any other right or
remedy, and each and every such right or remedy shall be cumulative and shall be
in addition to any other right or remedy given hereunder or now or hereafter
existing at law or in equity. No delay or omission by the Employee in exercising
any right,
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remedy or power hereunder or existing at law or in equity shall be construed as
a waiver thereof, including, without limitation, any delay by the Employee in
delivering a Notice of Termination pursuant to Section 2 hereof after an event
has occurred which would, if the Employee had resigned, have constituted a
Termination following a Change of Control pursuant to Section 1(l)(ii) of this
Agreement.
22. Miscellaneous. All section headings are for convenience only. This
Agreement may be executed in several counterparts, each of which is an original.
It shall not be necessary in making proof of this Agreement or any counterpart
hereof to produce or account for any of the other counterparts.
IN WITNESS WHEREOF, the undersigned, intending to be legally bound,
have executed this Agreement as of the date first above written.
Attest: MARITRANS GENERAL PARTNER INC.
[Seal]
/s/ A.J. Volkle By /s/ John C. Newcomb
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Asst. Secretary Vice President
/s/ J.M. Smallacombe /s/ Steven E. Welch
- ---------------------------- ----------------------------------
Witness Steven E. Welch
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EXHIBIT 10.8
SEVERANCE AND NON-COMPETITION AGREEMENT
Agreement made as of the 4th day of April, 1996, between
Maritrans Inc., a Delaware corporation (the "Company"), and Thomas C. Deas, Jr.
(the "Employee").
WHEREAS, the Employee is being hired by the Company as its
Vice President, Treasurer and Chief Financial Officer;
WHEREAS, the board of directors of the Company recognizes
that, as is the case with many publicly held corporations, the possibility of a
change in control of Maritrans and the Company exists and that such possibility,
and the uncertainty and questions which it may raise among management, may
result in the departure or distraction of key management personnel to the
detriment of the Company;
WHEREAS, the board of directors of the Company has determined
that appropriate steps should be taken to reinforce and encourage the continued
attention and dedication of key members of the Company's management to their
assigned duties without distraction in the face of potentially disturbing
circumstances arising from the possibility of a change in control of the
Company; and
WHEREAS, in consideration for the Employee accepting
employment with the Company and agreeing not to compete with the Company in the
event the Employee's employment is terminated, the Company agrees that the
Employee shall receive the compensation set forth in this Agreement as a cushion
against the financial and career
<PAGE>
impact on the Employee in the event the Employee's employment with the Company
is terminated without cause whether or not there is a Change of Control of the
Company;
NOW, THEREFORE, in consideration of the foregoing and the
mutual covenants and agreements hereinafter set forth and intending to be
legally bound hereby, the parties hereto agree as follows:
1. Definitions. For all purposes of this Agreement, the
following terms shall have the meanings specified in this Section unless the
context clearly otherwise requires:
(a) "Affiliate" and "Associate" shall have the respective
meanings ascribed to such terms in Rule 12b-2 of the General Rules and
Regulations under the Securities Exchange Act of 1934, as amended (the "Exchange
Act").
(b) "Base Compensation" shall mean the average of the total
cash remuneration (total remuneration for the year 1996) received by the
Employee in all capacities with the Company, and its Subsidiaries or Affiliates,
as reported for Federal income tax purposes on Form W-2, together with any and
all salary reduction authorized amounts under any of the Company's benefit plans
or programs, but excluding any amounts attributable to the exercise of stock
options by the Employee under the Company's Equity Compensation Plan for the
five most recent full calendar years (annualized in accordance with applicable
regulations in the case of a calendar year in which the Employee was not paid
for the full calendar year) immediately preceding the calendar year in which
occurs a Change of Control.
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(c) "Base Salary" shall mean the rate of normal salary being
paid to the Employee at the time of his Termination Date, but in no case less
than $155,000 per annum.
(d) "Beneficial Owner" of any securities shall mean:
(i) that such Person or any of such Person's Affiliates or
Associates, directly or indirectly, has the right to acquire (whether such right
is exercisable immediately or only after the passage of time) pursuant to any
agreement, arrangement or understanding (whether or not in writing) or upon the
exercise of conversion rights, exchange rights, rights, warrants or options, or
otherwise; provided, however, that a Person shall not be deemed the "Beneficial
Owner" of securities tendered pursuant to a tender or exchange offer made by
such Person or any of such Person's Affiliates or Associates until such tendered
securities are accepted for payment, purchase or exchange;
(ii) that such Person or any of such Person's Affiliates or
Associates, directly or indirectly, has the right to vote or dispose of or has
"beneficial ownership" of (as determined pursuant to Rule 13d-3 of the General
Rules and Regulations under the Exchange Act), including without limitation
pursuant to any agreement, arrangement or understanding, whether or not in
writing; provided, however, that a Person shall not be deemed the "Beneficial
Owner" of any security under this subsection (ii) as a result of an oral or
written agreement, arrangement or understanding to vote such security if such
agreement, arrangement or understanding (A) arises solely from a revocable proxy
given in response to a public proxy or consent solicitation made pursuant to,
and in accordance with, the applicable provisions of the General Rules and
Regulations under the Exchange Act, and
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<PAGE>
(B) is not then reportable by such Person on Schedule 13D under the Exchange Act
(or any comparable or successor report); or
(iii) where voting securities are beneficially owned, directly
or indirectly, by any other Person (or any Affiliate or Associate thereof) with
which such Person (or any of such Person's Affiliates or Associates) has any
agreement, arrangement or understanding (whether or not in writing) for the
purpose of acquiring, holding, voting (except pursuant to a revocable proxy as
described in the proviso to subsection (ii) above) or disposing of any voting
securities of the Company; provided, however, that nothing in this subsection
(d) shall cause a Person engaged in business as an underwriter of securities to
be the "Beneficial Owner" of any securities acquired through such Person's
participation in good faith in a firm commitment underwriting until the
expiration of forty days after the date of such acquisition.
(e) "Board" shall mean the board of directors of the Company.
(f) "Cause" shall mean 1) misappropriation of funds, 2)
habitual insobriety or substance abuse, 3) conviction of a crime involving moral
turpitude, or 4) gross negligence in the performance of duties, which gross
negligence has had a material adverse effect on the business, operations,
assets, properties or financial condition of the Company and its Subsidiaries
taken as a whole.
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(g) "Change of Control" shall be deemed to have taken place if
(i) any Person (except the Company or any employee benefit plan of the Company
or of any Affiliate, any Person or entity organized, appointed or established by
the Company for or pursuant to the terms of any such employee benefit plan),
together with all Affiliates and Associates of such Person, shall become the
Beneficial Owner in the aggregate of 20% or more of the common stock of the
Company then outstanding); provided, however, that no "Change of Control" shall
be deemed to occur during any period in which any such Person, and its
Affiliates and Associates, are bound by the terms of a standstill agreement
under which such parties have agreed not to acquire more than 30% of the common
stock of the Company of the Common Stock of the Company then outstanding or to
solicit proxies, or (ii) during any twenty-four month period, individuals who at
the beginning of such period constituted the Board cease for any reason to
constitute a majority thereof, unless the election, or the nomination for
election by the Company's shareholders, of at least seventy-five percent of the
directors who were not directors at the beginning of such period was approved by
a vote of at least seventy-five percent of the directors in office at the time
of such election or nomination who were directors at the beginning of such
period.
(h) "Normal Retirement Date" shall mean the first day of the
calendar month coincident with or next following the Employee's 65th birthday.
(i) "Person" shall mean any individual, firm, corporation,
partnership or other entity.
(j) "Subsidiary" shall have the meaning ascribed to such term
in Rule 12b-2 of the General Rules and Regulations under the Exchange Act.
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(k) "Termination Date" shall mean the date of receipt of the
Notice of Termination described in Section 2 hereof or any later date specified
therein, as the case may be.
(l) "Termination of Employment" shall mean the termination of
the Employee's actual employment relationship with the Company.
(m) "Termination following a Change of Control" shall mean a
Termination of Employment within two years after a Change of Control either:
(i) initiated by the Company for any reason other than (x) the
Employee's continuous illness, injury or incapacity for a period of six
consecutive months or (y) for "Cause;" or
(ii) initiated by the Employee upon one or more of the
following occurrences:
(A) any failure of the Company to comply with and satisfy any
of the terms of this Agreement;
(B) any significant reduction by the Company of the authority,
duties or responsibilities of the Employee;
(C) any removal by the Company of the Employee from the
employment grade, compensation level or officer positions
which the Employee holds as of the effective date hereof
except in connection with promotions to higher office;
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(D) the requirement that the Employee undertake business
travel to an extent substantially greater than is reasonable
and customary for the position the Employee holds.
2. Notice of Termination. Any Termination of Employment shall
be communicated by a Notice of Termination to the other party hereto given in
accordance with Section 14 hereof. For purposes of this Agreement, a "Notice of
Termination" means a written notice which (i) indicates the specific reasons for
the termination, (ii) briefly summarizes the facts and circumstances deemed to
provide a basis for termination of the Employee's employment, and (iii) if the
Termination Date is other than the date of receipt of such notice, specifies the
Termination Date (which date shall not be more than 15 days after the giving of
such notice).
3. Severance Compensation upon Termination.
(a) In the event of the Employee's involuntary Termination of
Employment for reason other than Cause, the Company shall pay to the Employee,
upon the execution of a release in form and substance satisfactory to the
Company and its counsel, his regular Base Salary, subject to customary
employment taxes and deductions, for 18 months following the Termination Date
but all other benefit coverages, retirement benefits and fringe benefit
eligibility shall cease upon the Termination Date subject to applicable rights
under COBRA. For purposes of this subparagraph 3(a), an "involuntary Termination
of Employment for reason other than Cause" shall include the following
circumstances:
(i) The termination of this Agreement pursuant to any "Term of
Agreement" provisions in paragraph 15, unless the termination is for cause;
and/or
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<PAGE>
(ii) if, as a condition of employment, Employee is required to
relocate his principal place of business to a location in excess of fifty (50)
miles from the Company's current offices at One Logan Square, Philadelphia,
Pennsylvania.
(b) Subject to the provisions of Section 11 hereof, in the
event of the Employee's Termination following a Change of Control, the Company
shall pay to the Employee, within fifteen days after the Termination Date (or as
soon as possible thereafter in the event that the procedures set forth in
Section 11(b) hereof cannot be completed within 15 days), and in lieu of any
payment under subsection (a) above, an amount in cash equal to 2.99 times the
Employee's Base Compensation.
(c) In the event the Employee's Normal Retirement Date would
occur prior to 24 months after the Termination Date, the aggregate cash amount
determined as set forth in (a) above shall be reduced by multiplying it by a
fraction, the numerator of which shall be the number of days from the
Termination Date to the Employee's Normal Retirement Date and the denominator of
which shall be 730.
4. Other Payments. The payment due under Section 3 hereof
shall be in addition to and not in lieu of any payments or benefits due to the
Employee under any other plan, policy or program of the Company except that no
payments shall be due to the Employee under the Company's then severance pay
plan for employees.
5. Establishment of Trust. The Company may establish an
irrevocable trust fund pursuant to a trust agreement to hold assets to satisfy
its obligations hereunder.
Funding of such trust fund shall be subject to the Company's discretion, as set
forth in the agreement pursuant to which the fund will be established.
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<PAGE>
6. Enforcement.
(a) In the event that the Company shall fail or refuse to make
payment of any amounts due the Employee under Sections 3(b) and 4 hereof within
the respective time periods provided therein, the Company shall pay to the
Employee, in addition to the payment of any other sums provided in this
Agreement, interest, compounded daily, on any amount remaining unpaid from the
date payment is required under Section 3(b) and 4, as appropriate, until paid to
the Employee, at the rate from time to time announced by Mellon Bank (East) as
its "prime rate" plus 2%, each change in such rate to take effect on the
effective date of the change in such prime rate.
(b) It is the intent of the parties that the Employee not be
required to incur any expenses associated with the enforcement of his rights
under Section 3(b) of this Agreement by arbitration, litigation or other legal
action because the cost and expense thereof would substantially detract from the
benefits intended to be extended to the Employee hereunder. Accordingly, the
Company shall pay the Employee on demand the amount necessary to reimburse the
Employee in full for all expenses (including all attorneys' fees and legal
expenses) incurred by the Employee in enforcing any of the obligations of the
Company under this Agreement.
7. No Mitigation. The Employee shall not be required to
mitigate the amount of any payment or benefit provided for in this Agreement by
seeking other employment or otherwise, nor shall the amount of any payment or
benefit provided for herein be reduced by any compensation earned by other
employment or otherwise.
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8. Non-exclusivity of Rights. Nothing in this Agreement shall
prevent or limit the Employee's continuing or future participation in or rights
under any benefit, bonus, incentive or other plan or program provided by the
Company or any of its Subsidiaries or Affiliates and for which the Employee may
qualify; provided, however, that the Employee hereby waives the Employee's right
to receive any payments under any severance pay plan or similar program
applicable to other employees of the Company .
9. No Set-Off. The Company's obligation to make the payments
provided for in this Agreement and otherwise to perform its obligations
hereunder shall not be affected by any circumstances, including, without
limitation, any set-off, counterclaim, recoupment, defense or other right which
the Company may have against the Employee or others.
10. Taxes. Any payment required under this Agreement shall be
subject to all requirements of the law with regard to the withholding of taxes,
filing, making of reports and the like, and the Company shall use its best
efforts to satisfy promptly all such requirements.
11. Certain Reduction of Payments.
(a) Anything in this Agreement to the contrary
notwithstanding, in the event that it shall be determined that any payment or
distribution by the Company to or for the benefit of the Employee, whether paid
or payable or distributed or distributable pursuant to the terms of this
Agreement or otherwise (a "Payment"), would constitute an "excess
-10-
<PAGE>
parachute payment" within the meaning of Section 280G of the Internal Revenue
Code of 1986, as amended (the "Code"), then the aggregate present value of
amounts payable or distributable to or for the benefit of the Employee pursuant
to this Agreement (such payments or distributions pursuant to this Agreement are
hereinafter referred to as "Agreement Payments") shall be reduced (but not below
zero) to the Reduced Amount. The "Reduced Amount" shall be an amount expressed
in present value which maximizes the aggregate present value of Agreement
Payments without causing any Payment to be subject to the taxation under Section
4999 of the Code. For purposes of this Section 11, present value shall be
determined in accordance with Section 280G(d)(4) of the Code.
(b) All determinations to be made under this Section 11 shall
be made by Ernst & Young (or the Company's independent public accountant
immediately prior to the Change of Control if other than Ernst & Young (the
"Accounting Firm")), which firm shall provide its determinations and any
supporting calculations both to the Company and the Employee within 10 days of
the Termination Date. Any such determination by the Accounting Firm shall be
binding upon the Company and the Employee. Within five days after this
determination, the Company shall pay (or cause to be paid) or distribute (or
cause to be distributed) to or for the benefit of the Employee such amounts as
are then due to the Employee under this Agreement.
(c) As a result of the uncertainty in the application of
Section 280G of the Code at the time of the initial determination by the
Accounting Firm hereunder, it is possible that Agreement Payments, as the case
may be, will have been made by the Company which should not have been made
("Overpayment") or that additional Agreement
-11-
<PAGE>
Payments which have not been made by the Company could have been made
("Underpayment"), in each case, consistent with the calculations required to be
made hereunder. Within two years after the Termination of Employment, the
Accounting Firm shall review the determination made by it pursuant to the
preceding paragraph. In the event that the Accounting Firm determines that an
Overpayment has been made, any such Overpayment shall be treated for all
purposes as a loan to the Employee which the Employee shall repay to the Company
together with interest at the applicable Federal rate provided for in Section
7872(f)(2) of the Code (the "Federal Rate"); provided, however, that no amount
shall be payable by the Employee to the Company if and to the extent such
payment would not reduce the amount which is subject to taxation under Section
4999 of the Code. In the event that the Accounting Firm determines that an
Underpayment has occurred, any such Underpayment shall be promptly paid by the
Company to or for the benefit of the Employee together with interest at the
Federal Rate.
(d) All of the fees and expenses of the Accounting Firm in
performing the determinations referred to in subsections (b) and (c) above shall
be borne solely by the Company. The Company agrees to indemnify and hold
harmless the Accounting Firm of and from any and all claims, damages and
expenses resulting from or relating to its determinations pursuant to
subsections (b) and (c) above, except for claims, damages or expenses resulting
from the gross negligence or willful misconduct of the Accounting Firm.
12. Confidential Information. The Employee recognizes and
acknowledges that, by reason of his employment by and service to the Company, he
has had and will continue to have access to confidential information of the
Company and its
-12-
<PAGE>
affiliates, including, without limitation, information and knowledge pertaining
to products and services offered, innovations, designs, ideas, plans, trade
secrets, proprietary information, distribution and sales methods and systems,
sales and profit figures, customer and client lists, and relationships between
the Company and its affiliates and other distributors, customers, clients,
suppliers and others who have business dealings with the Company and its
affiliates ("Confidential Information"). The Employee acknowledges that such
Confidential Information is a valuable and unique asset and covenants that he
will not, either during or after his employment by the Company, disclose any
such Confidential Information to any person for any reason whatsoever without
the prior written authorization of the Board, unless such information is in the
public domain through no fault of the Employee or except as may be required by
law.
13. Non-Competition.
(a) During his employment by the Company and for a period of
one year thereafter, the Employee will not, unless acting with the prior written
consent of the Board, directly or indirectly, own, manage, operate, join,
control, finance or participate in the ownership, management, operation, control
or financing of, or be connected as an officer, director, employee, partner,
principal, agent, representative, consultant or otherwise with or use or permit
his name to be used in connection with, any business or enterprise engaged in a
geographic area in which the Company or any of its affiliates is operating
either during his employment by the Company or on the Termination Date, as
applicable, presently on the East Coast of the United States or at any port in
the Gulf of Mexico (whether or not such business is physically located within
those areas) (the "Geographic Area"), in any business
-13-
<PAGE>
that is a customer of, competitive to, a business from which the Company or any
of its affiliates derive at least five percent of its respective gross revenues
either during his employment by the Company or on the Termination Date, as
applicable. It is recognized by the Employee that the business of the Company
and its affiliates and the Employee's connection therewith is or will be
involved in activity throughout the Geographic Area, and that more limited
geographical limitations on this non-competition covenant are therefore not
appropriate. The Employee also shall not, directly or indirectly, during such
one-year period (a) solicit or divert business from, or attempt to convert any
client, account or customer of the Company or any of its affiliates, whether
existing at the date hereof or acquired during Employee's employment nor (b)
following Employee's employment, solicit or attempt to hire any then employee of
the Employer or of any of its affiliates.
(b) The foregoing restriction shall not be construed to
prohibit the ownership by the Employee of less than one percent (1%) of any
class of securities of any corporation which is engaged in any of the foregoing
businesses having a class of securities registered pursuant to the Securities
Exchange Act of 1934, provided that such ownership represents a passive
investment and that neither the Employee nor any group of persons including
Employee in any way, either directly or indirectly, manages or exercises control
of any such corporation, guarantees any of its financial obligations, otherwise
takes any part in its business, other than exercising his rights as a
shareholder, or seeks to do any of the foregoing.
14. Equitable Relief.
(a) Employee acknowledges that the restrictions contained in
Sections 12 and 13 hereof are reasonable and necessary to protect the legitimate
interests of the
-14-
<PAGE>
Company and its affiliates, that the Company would not have entered into this
Agreement in the absence of such restrictions, and that any violation of any
provision of those Sections will result in irreparable injury to the Company.
The Employee represents that his experience and capabilities are such that the
restrictions contained in Section 13 hereof will not prevent the Employee from
obtaining employment or otherwise earning a living at the same general level of
economic benefit as anticipated by this Agreement. The Employee further
represents and acknowledges that (i) he has been advised by the Company to
consult his own legal counsel in respect of this Agreement, and (ii) that he has
had full opportunity, prior to execution of this Agreement, to review thoroughly
this Agreement with his counsel.
(b) The Employee agrees that the Company shall be entitled to
preliminary and permanent injunctive relief, without the necessity of proving
actual damages, as well as an equitable accounting of all earnings, profits and
other benefits arising from any violation of Sections 12 or 13 hereof, which
rights shall be cumulative and in addition to any other rights or remedies to
which the Company may be entitled. In the event that any of the provisions of
Sections 12 or 13 hereof should ever be adjudicated to exceed the time,
geographic, service, or other limitations permitted by applicable law in any
jurisdiction, then such provisions shall be deemed reformed in such jurisdiction
to the maximum time, geographic, service, or other limitations permitted by
applicable law.
(c) The Employee irrevocably and unconditionally (i) agrees
that any suit, action or other legal proceeding arising out of Section 12 or 13
hereof, including without limitation, any action commenced by the Company for
preliminary and permanent injunctive relief or other equitable relief, may be
brought in the United States District Court
-15-
<PAGE>
for the Eastern District of Pennsylvania, or if such court does not have
jurisdiction or will not accept jurisdiction, in any court of general
jurisdiction in Philadelphia County, Pennsylvania, (ii) consents to the
non-exclusive jurisdiction of any such court in any such suit, action or
proceeding, and (iii) waives any objection which Employee may have to the laying
of venue of any such suit, action or proceeding in any such court. Employee also
irrevocably and unconditionally consents to the service of any process,
pleadings, notices or other papers in a manner permitted by the notice
provisions of Section 17 hereof.
(d) Employee agrees that he will provide, and that the Company
may similarly provide, a copy of Sections 12 and 13 hereof to any business or
enterprise (i) which he may directly or indirectly own, manage, operate,
finance, join, control or participate in the ownership, management, operation,
financing, control or control of, or (ii) with which he may be connected with as
an officer, director, employee, partner, principal, agent, representative,
consultant or otherwise, or in connection with which he may use or permit his
name to be used; provided, however, that this provision shall not apply in
respect of Section 3 hereof after expiration of the time period set forth
therein.
15. Term of Agreement. The term of this Agreement shall be for
two years from the date hereof and shall be automatically renewed for successive
one-year periods unless the Company notifies the Employee in writing that this
Agreement will not be renewed at least sixty days prior to the end of the
current term (such notice shall be deemed an involuntary Termination of
Employment); provided, however, that (i) after a Change of Control during the
term of this Agreement, this Agreement shall remain in effect until all of the
obligations of the parties hereunder are satisfied, and (ii) this Agreement
shall terminate
-16-
<PAGE>
if, prior to a Change of Control, the employment of the Employee with the
Company or any of its Subsidiaries, as the case may be, shall terminate for any
reason other than as provided herein.
16. Successor Company. The Company shall require any successor
or successors (whether direct or indirect, by purchase, merger, consolidation or
otherwise) to all or substantially all of the business and/or assets of the
Company, by agreement in form and substance satisfactory to the Employee, to
acknowledge expressly that this Agreement is binding upon and enforceable
against the Company in accordance with the terms hereof, and to become jointly
and severally obligated with the Company to perform this Agreement in the same
manner and to the same extent that the Company would be required to perform if
no such succession or successions had taken place. Failure of the Company to
obtain such agreement prior to the effectiveness of any such succession shall be
a breach of this Agreement. As used in this Agreement, the Company shall mean
the Company as hereinbefore defined and any such successor or successors to its
business and/or assets, jointly and severally.
17. Notice. All notices and other communications required or
permitted hereunder or necessary or convenient in connection herewith shall be
in writing and shall be delivered personally or mailed by registered or
certified mail, return receipt requested, or by overnight express courier
service, as follows:
If to the Company, to:
Maritrans Inc.
2600 One Logan Square
Philadelphia, PA 19103
Attention: Corporate Secretary
-17-
<PAGE>
If to the Employee, to:
Thomas C. Deas, Jr.
19 Marple Road
Haverford, PA 19041
or to such other names or addresses as the Company or the Employee, as the case
may be, shall designate by notice to the other party hereto in the manner
specified in this Section; provided, however, that if no such notice is given by
the Company following a Change of Control, notice at the last address of the
Company or to any successor pursuant to Section 16 hereof shall be deemed
sufficient for the purposes hereof. Any such notice shall be deemed delivered
and effective when received in the case of personal delivery, five days after
deposit, postage prepaid, with the U.S. Postal Service in the case of registered
or certified mail, or on the next business day in the case of overnight express
courier service.
18. Governing Law. This Agreement shall be governed by and
interpreted under the laws of the Commonwealth of Pennsylvania without giving
effect to any conflict of laws provisions.
19. Contents of Agreement, Amendment and Assignment.
(a) This Agreement supersedes all prior agreements, sets forth
the entire understanding between the parties hereto with respect to the subject
matter hereof and cannot be changed, modified, extended or terminated except
upon written amendment executed by the Employee and approved by the Board and
executed on the Company's behalf by a duly authorized officer. The provisions of
this Agreement may provide for payments to the Employee under certain
compensation or bonus plans under circumstances where such plans would not
provide for payment thereof. It is the specific intention of the
-18-
<PAGE>
parties that the provisions of this Agreement shall supersede any provisions to
the contrary in such plans, and such plans shall be deemed to have been amended
to correspond with this Agreement without further action by the Company or the
Board.
(b) Nothing in this Agreement shall be construed as giving the
Employee any right to be retained in the employ of the Company.
(c) All of the terms and provisions of this Agreement shall be
binding upon and inure to the benefit of and be enforceable by the respective
heirs, representatives, successors and assigns of the parties hereto, except
that the duties and responsibilities of the Employee and the Company hereunder
shall not be assignable in whole or in part by the Company.
20. Severability. If any provision of this Agreement or
application thereof to anyone or under any circumstances shall be determined to
be invalid or unenforceable, such invalidity or unenforceability shall not
affect any other provisions or applications of this Agreement which can be given
effect without the invalid or unenforceable provision or application.
21. Remedies Cumulative; No Waiver. No right conferred upon
the Employee by this Agreement is intended to be exclusive of any other right or
remedy, and each and every such right or remedy shall be cumulative and shall be
in addition to any other right or remedy given hereunder or now or hereafter
existing at law or in equity. No delay or omission by the Employee in exercising
any right, remedy or power hereunder or existing at law or in equity shall be
construed as a waiver thereof, including, without limitation, any delay by the
Employee in delivering a Notice of Termination pursuant to Section 2 hereof
-19-
<PAGE>
after an event has occurred which would, if the Employee had resigned, have
constituted a Termination following a Change of Control pursuant to Section
1(l)(ii) of this Agreement.
22. Miscellaneous. All section headings are for convenience
only. This Agreement may be executed in several counterparts, each of which is
an original. It shall not be necessary in making proof of this Agreement or any
counterpart hereof to produce or account for any of the other counterparts.
IN WITNESS WHEREOF, the undersigned, intending to be legally
bound, have executed this Agreement as of the date first above written.
Attest: MARITRANS INC.
[Seal]
/s/ John C. Newcomb By /s/ Stephen A. Van Dyck
- ----------------------------- --------------------------------
Secretary Chairman
/s/ J.M. Smallacombe /s/ Thomas C. Deas, Jr.
- ----------------------------- --------------------------------
Witness Thomas C. Deas, Jr.
-20-
<PAGE>
Exhibit 10.12
SEPARATION AGREEMENT AND GENERAL RELEASE
THIS AGREEMENT is made and entered into on this 20th day of January,
1997 by and between Maritrans General Partner Inc., a Delaware corporation, with
principal offices at Philadelphia, Pennsylvania (hereinafter referred to as the
"Company"), and Francis D. Bailey (hereinafter referred to as "Bailey").
WITNESSETH:
WHEREAS, the Company had employed Bailey as its President - Eastern
Division; and
WHEREAS, Bailey's employment has terminated effective as of
December 17, 1996; and
WHEREAS, the Company and Bailey have agreed to this Separation
Agreement and General Release, in accordance with paragraph 3(a) of the June 1,
1995, Severance and Non-Competition Agreement between the Company and Bailey;
NOW, THEREFORE, in consideration of the mutual promises contained
herein, the parties hereto, intending to be legally bound, hereby agree as
follows:
1. In consideration of Bailey's release of the Company as set forth
below, the Company shall: (a) continue to pay Bailey's salary at the annualized
rate of one hundred seventy thousand dollars ($170,000.00), less withholdings,
and deductions required by law, for a period of thirteen pay periods beginning
with the date of execution, consistent with the Company's ordinary bi-weekly
payroll practices; (b) provide Bailey with a written letter of reference in the
form attached hereto as Exhibit A, and respond to oral requests for references
in a manner that is consistent with the attached reference letter; and (c) pay
<PAGE>
Bailey a lump sum amount equal to six (6) days of accrued, unused vacation pay
from 1996, less withholdings and deductions required by law.
2. Bailey agrees and acknowledges that the Company, on a timely
basis, has paid or agreed to pay to Bailey all amounts due and owing as a
result of Bailey's prior services, and a1l amounts due and owing under the
terms of the Severance and Non-Competition Agreement, and Bailey agrees further
that the Company has no obligation, contractual or otherwise to Bailey except
as provided herein, nor does the Company have any obligation to hire, rehire or
re-employ Bailey in the future or to pay him any compensation or benefits
except as provided herein, provided that Bailey shall have the right to
continue to participate in the Company's group medical plan at his own expense
to the extent and for the duration required under COBRA, 29 U.S.C. Section
1161 et al.
3. In full and complete settlement of any claims that Bailey
may have against the Company, including any possible violations of the Age
Discrimination in Employment Act, 29 U.S.C. Section 621 et seq., ("ADEA") in
connection with the termination of his employment, and for and in consideration
of the undertakings of the Company described herein, Bailey does hereby REMISE,
RELEASE, AND FOREVER DISCHARGE the Company, its officers, directors,
shareholders, parent and affiliated companies, partners, employees and agents,
and their respective successors and assigns, heirs, executors and
administrators (hereinafter also included within the term "Company"), of and
from any and all manner of actions and causes of actions, suits, debts, claims
and demands whatsoever in law or in equity, which Bailey ever had, now has, or
hereafter may have, or which Bailey's heirs, executors or administrators
hereafter may have, by reason of any matter, cause or thing whatsoever from the
beginning of Bailey's employment and the underlying negotiations and
discussions to the date of this Agreement, and particulary, but without
-2-
<PAGE>
limitation of the foregoing general terms, any claims arising from or relating
in any way to Bailey's employment relationship with the Company and the
termination of that employment relationship, including but not limited to, any
claims which have been asserted, could have been asserted, or could be asserted
now or in the future under any federal, state or local laws, including any
claims under the ADEA, Title VII of the Civil Rights Act of 1964, 42 U.S.C.
Section 2000e et seq., ("Title VII"), the Pennsylvania Human Relations Act, 43
P.S. Section 951 et seq., and any common law claims now or hereafter recognized
and all claims for counsel fees and costs.
4. Bailey further agrees and covenants that neither he, nor
any person, organization or other entity on his behalf, will file, charge,
claim, sue or cause or permit to be filed, charged, or claimed, any action for
damages, including injunctive, declaratory, monetary or other relief against
the Company, involving any matter occurring at any time in the past up to the
date of this Agreement, or involving any continuing effects of any actions or
practices which may have arisen or occurred prior to the date of this
Agreement.
5. Bailey further agrees and covenants that he will not in
any way communicate the terms of this Agreement to any person other than his
immediate family, attorneys, tax advisors or governmental authorities (only if
necessary, by reason of any lawful civil process not initiated by Bailey, or
to evidence his rights hereunder in any proceeding involving this Agreement,
or to support any tax reporting position taken by him with respect to the
matters referred to in this Agreement) and that he and the Company will not
disparage the name, business reputation or business practices of the other.
-3-
<PAGE>
6. Bailey hereby agrees and acknowledges that the Company has
the right to condition his receipt of severance pay on the execution of a
general release in a form that is satisfactory to the Company and its counsel,
and that but for this Separation Agreement and General Release, Bailey would
have no entitlement to severance pay or any other compensation or benefits after
the effective date of the termination of his employment.
7. Bailey hereby certifies that he has read the terms of this
Agreement, that he has been advised and is advised herein to consult with an
attorney, which he has done, and that he understands its terms and effects.
Bailey acknowledges, further, that he is executing this Agreement of his own
volition with a full understanding of its terms and effects and with the
intention of releasing all claims recited herein in exchange for the
consideration described herein, which he acknowledges is adequate and
satisfactory to him. The Company has made no representations to Bailey
concerning the terms or effects of this Agreement other than those contained in
this Agreement.
8. Bailey hereby acknowledges that he was presented with this
Agreement on December 17, 1996, and that he was and is hereby informed that he
has the right to consider this Agreement and the release contained herein for a
period of at least twenty-one (21) days prior to execution. Bailey also
understands that he has the right to revoke this Agreement for a period of seven
(7) days following execution, by giving written notice to the Company at 2600
One Logan Square, Philadelphia, PA 19103, in which event the provisions of this
Agreement shall be null and void, and the parties shall have the rights,
duties, obligations and remedies afforded by applicable law.
-4-
<PAGE>
9. This Agreement shall be interpreted and enforced under the laws of
the Commonwealth of Pennsylvania.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement on
the day and year first above written.
ATTEST: MARITRANS GENERAL PARTNER INC.
/S/ John C. Newcomb BY: /S/ Stephen A. Van Dyck
- ---------------------------- --------------------------------
SECRETARY
/S/ Sandra Cannon /S/ Francis D. Bailey
- ---------------------------- --------------------------------
WITNESS FRANCIS D. BAILEY
-5-
<PAGE>
EXHIBIT A
TO WHOM IT MAY CONCERN
Re: Francis D. Bailey
Fran Bailey was employed by Maritrans from May 1995 through December 1996.
During that time, he was the President of Maritrans' Eastern Division, the
Company's largest division. He had profit and loss responsibility, and provided
leadership and oversight to a fleet of approximately twenty-five tugs and barges
which operate along the East Coast, in the Philadelphia Harbor and the
Chesapeake Bay. The division had assets in excess of $100 million. He also was
responsible for our three petroleum terminal locations in Philadelphia and
Maryland. Fran's management strengths and experience in petroleum distribution
and marketing made him a logical choice for this important post.
Fran reported directly to me in his division leadership role and in his role on
a number of task teams and committees. As a member of Maritrans' Operating
Committee, Fran was integral to our planning and strategic initiatives. I-Es
thoughtful, analytical demeanor was an asset to our team and to our shift in
strategic direction.
It is with great regret that Fran was not able to stay in Philadelphia for
family reasons and left to pursue other interests. His parting was an amicable
one, and we support Fran in his search for another opportunity which more
closely matches his location requirements. Please do not hesitate to call me at
any time should you wish further information about his employment with
Maritrans. I can be reached at (215) 864-1223.
Sincerely,
MARITRANS INC.
Stephen A. Van Dyck
Chairman and Chief Executive Officer
<PAGE>
EXHIBIT 11.1
MARITRANS INC.
COMPUTATION OF EARNINGS PER COMMON SHARE
YEARS ENDED DECEMBER 31*
<TABLE>
<CAPTION>
1996 1995
------------ ------------
<S> <C> <C>
Primary:
Income:
Net income ................................... $ 5,249,000 $ 4,981,000
============ ============
Shares:
Weighted average number of common shares
outstanding ................................ 11,828,422 12,150,380
============ ============
Primary income per common share ........................ $ .4438 $ .4099
============ ============
Assuming full dilution:
Income:
Net income ................................... $ 5,249,000 $ 4,981,000
============ ============
Shares:
Weighted average number of common shares
outstanding ................................ 11,828,422 12,150,380
Assuming exercise of options reduced by the
number of shares which could have been
purchased with the proceeds from the
exercise of such options ................... 117,942 118,890
------------ ------------
Weighted average number of common shares
outstanding as adjusted .................... 11,946,364 12,269,270
============ ============
Net income per common share
Fully diluted income per common share .................. $ .4394# $ .4060#
============ ============
</TABLE>
- ------
* See notes 1 and 4 of the notes to the consolidated financial statements.
# This calculation is submitted in accordance with Regulation S-K item
601(b)(11) although not required by footnote 2 to paragraph 14 of APB
Opinion No. 15 because it results in dilution of less than 3 percent.
<PAGE>
Exhibit 21.1
MARITRANS INC.
SUBSIDIARIES OF MARITRANS INC.
As of December 31, 1995
Direct and indirect subsidiaries of Maritrans Inc. are:
Maritrans Operating Partners L.P.
Maritrans General Partner Inc.
Maritrans Holdings Inc.
Maritrans Distribution Services Inc.
Maritrans Barge Co.
Maritrans Ocean Transport Inc.
Maritrans Capital Corp.
CCF Acquisition Corp.
Maritank Philadelphia Inc.
Inter-Cities Navigation (Texas) Corp.
Maritank Maryland Inc.
Interstate Towing (Texas) Co.
Maritank Inc.
Maritrans Management Services Inc.
MOT Tankers I, Inc.
MOT Tankers II, Inc.
MOT Tankers III, Inc.
MOT Tankers IV, Inc.
<TABLE> <S> <C>
<ARTICLE> 5
<CIK> 0000810113
<NAME> MARITRANS INC.
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-START> JAN-01-1996
<PERIOD-END> DEC-31-1996
<CASH> 33,174
<SECURITIES> 0
<RECEIVABLES> 16,730
<ALLOWANCES> 860
<INVENTORY> 5,823
<CURRENT-ASSETS> 65,498
<PP&E> 280,231
<DEPRECIATION> 117,741
<TOTAL-ASSETS> 235,221
<CURRENT-LIABILITIES> 33,535
<BONDS> 79,123
0
0
<COMMON> 128
<OTHER-SE> 82,466
<TOTAL-LIABILITY-AND-EQUITY> 235,221
<SALES> 0
<TOTAL-REVENUES> 126,994
<CGS> 0
<TOTAL-COSTS> 113,310
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 9,494
<INCOME-PRETAX> 8,379
<INCOME-TAX> 3,130
<INCOME-CONTINUING> 5,249
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 5,249
<EPS-PRIMARY> .44
<EPS-DILUTED> .44
</TABLE>
