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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
For the Fiscal Year Ended December 31, 1998
or
/ / Transition Report Pursuant to Section 13 or 15 (d) of the
Securities Exchange Act of 1934
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)
DELAWARE 51-0343903
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
1818 MARKET STREET
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
on Which Registered
Title of Each Class New York Stock Exchange
Common Stock, Par Value $.01 Per Share
Securities registered pursuant to Section 12(g) of the Act: NONE
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 / /
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. / /
As of March 22, 1998, the aggregate market value of the common stock held by
non-affiliates of the registrant was $72,644,412. As of March 22, 1998,
Maritrans Inc. had 12,107,402 shares of common stock outstanding.
Documents Incorporated By Reference
Part III incorporates information by reference from the registrant's Proxy
Statement for Annual Meeting of Stockholders to be held on May 18, 1999.
Exhibit Index is located on page 34.
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MARITRANS INC.
TABLE OF CONTENTS
PART I
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Page
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Item 1. Business ........................................................................ 1
Item 2. Properties ...................................................................... 8
Item 3. Legal Proceedings ............................................................... 9
Item 4. Submission Of Matters To A Vote Of Security Holders ............................. 9
PART II
Item 5. Market For The Registrant's Common Equity And Related Stockholder Matters ....... 10
Item 6. Selected Financial Data ($000 except per share amounts) ......................... 11
Item 7. Management's Discussion And Analysis Of Financial Condition And Results Of 11
Operations
Item 8. Financial Statements & Supplemental Data ........................................ 18
Item 9. Changes in and Disagreements with Accountants on Accounting and Financial 31
Disclosure
PART III
Item 10. Directors and Executive Officers of the Registrant ............................. 31
Item 11. Executive Compensation ......................................................... 32
Item 12. Security Ownership of Certain Beneficial Owners and Management ................. 32
Item 13. Certain Relationships and Related Transactions ................................. 32
PART IV
Item 14. Exhibits, Financial Statement Schedules And Reports On Form 8-K ................ 33
Signatures ............................................................................... 36
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In this Report the statements contained or incorporated by reference that are
not historical facts or statements of current condition are forward-looking
statements. Such forward-looking statements may be identified by, among other
things, the use of forward-looking terminology such as "believes," "expects,"
"forecasts," "will," or "anticipates," or the negative thereof or other
variations thereon or comparable terminology; or by discussion of strategy or
intentions. These forward-looking statements, such as statements regarding
present or anticipated utilization, future revenues and customer relationships,
capital expenditures, future financings, and other statements regarding matters
that are not historical facts, involve predictions. Maritrans Inc.'s (the
"Company") actual results, performance, or achievements could differ materially
from the results expressed in, or implied by, these forward-looking statements.
Potential risks and uncertainties that could affect the Company's actual
results, performance, or achievements include, but are not limited to, the
factors outlined in this report and general financial, economic, environmental
and regulatory conditions affecting the oil and marine transportation industry
in general. Given these uncertainties, current or prospective investors are
cautioned not to place undue reliance on any such forward-looking statements.
Furthermore, the Company disclaims any obligation or intent to update any such
factors or forward-looking statements to reflect future events or developments.
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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, oil tankers and marine terminal facilities to
provide marine transportation and terminalling services primarily along the
East and Gulf Coasts of the United States.
Structure
Current. The Corporation is a Delaware corporation whose common stock, par
value $.01 per share ("Common Stock"), is publicly traded. The Corporation
conducts most of its marine transportation business activities through
Maritrans Operating Partners L.P. (the "Operating Partnership") and its
managing general partner, Maritrans General Partner Inc., wholly owned
subsidiaries of the Corporation. Most of the Corporation's terminalling and
distribution services are conducted through subsidiaries of Maritrans Holdings
Inc., a wholly owned subsidiary of the Corporation.
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, the
Partnership 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
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.
Overview. Since 1981, Maritrans and its predecessors have transported
annually over 200 million barrels of crude oil and refined petroleum products.
Based on research regarding competition, Maritrans believes that it is the
largest United States marine carrier, by volume transported, of petroleum in
the United States coastwise Jones Act trade (i.e. from point-to-point within
the United States) and that it owns one of the largest fleets of U.S. flag
oceangoing tank vessels in terms of cargo-carrying capacity.
Maritrans operates a fleet of oil tankers, tank barges and tugboats and
two terminal facilities. In 1998, Maritrans acquired an oil tanker with a
capacity of approximately 265,000 barrels. Its largest barge has a capacity of
approximately 380,000 barrels, and its current operating cargo fleet capacity
aggregates approximately 5.2 million barrels. Aggregate capacity at Maritrans'
terminal facilities totals approximately 1.2 million barrels at December 31,
1998.
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.
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
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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. The Gulf of Mexico
operations, 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 East
Coast operations, 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 East Coast operations, lightering services for large tankers (a
process of off-loading crude oil or petroleum products from an inbound tanker
into smaller tankers and/or barges, thereby enabling the tanker to navigate
draft-restricted rivers and ports to discharge cargo at a refinery or storage
and distribution terminal). As part of its tanker acquisition in 1997,
Maritrans also acquired two small tug/barge units and an operations office in
Yabucoa, Puerto Rico.
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 term contract basis, a spot market basis and,
to a minimal extent, 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 eight years to promote higher quality operations and
its longstanding commitment to safe transportation of petroleum products
benefit its marketing efforts with these shippers. In July of 1998, all of
Maritrans' vessels received ISM (International Safety Management)
certification, which is an international requirement for all ships. Maritrans
voluntarily undertook tug and barge certification as well.
In 1998, approximately 84 percent of Maritrans revenues were generated
from 10 customers. In 1998, contracts with Sunoco, Inc., Marathon Oil and
Equiva Trading Company, accounted for approximately 28 percent, 13 percent, and
12 percent, respectively, of Maritrans revenue. During 1998, contracts were
renewed with some of Maritrans' larger customers. There could be a material
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.
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, management believes the primary
competitors are the fleets of both other independent petroleum transporters and
integrated oil companies. In the Eastern market, management believes that
Maritrans competes primarily with other independent oceangoing barge operators
and with the captive fleets of integrated oil companies and, in lightering
operations, competes
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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. The
number of vessels eligible to engage in Jones Act trade had declined
significantly over the past several years. Within the past three years, several
competitors have added double-hulled capacity as replacement tonnage for
single-hulled vessels. 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 pattern of retirement and/or replacement.
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 the Company's revenues in 1998 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 seven barges and
one oil tanker 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, based on the Company's fleet size, maintenance
and training programs, and spill record, Maritrans' independent competitors do
not provide the same level of service, quality performance, or attention to
safe operations as Maritrans.
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 Uruguay Round of GATS
negotiations and NAFTA negotiations. Maritime services were not included in
GATS until the year 2000, if then. 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 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 is not included in the GATS and the NAFTA, the possibility exists that
cabotage could be included in the GATS, NAFTA or other international trade
agreements 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.
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
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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 near
future. It is possible, however, that 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 have a competitive effect on Maritrans in particular
locations.
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 Amendments of 1990 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 approved by the United
States Congress in 1992 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. Congress has appropriated $1.5 million in the
1999 fiscal year budget to cover preliminary costs. If this project becomes
fully funded at the federal and state levels and if it 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, 1998, Maritrans and its subsidiaries employed a total of
617 persons. Of these employees, 81 are employed at the Philadelphia,
Pennsylvania headquarters of the Corporation or at the Philadelphia and Tampa
fleet centers, 402 are seagoing employees who work aboard the tugs and barges,
122 are seagoing employees who work aboard the tank ships, and 12 are employed
in Maritrans' terminal facilities. 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 40 years. The collective bargaining agreement with the SIU covers
approximately 164 employees and expires on May 31, 1999. The collective
bargaining agreement with the AMO covers approximately 172 employees and
expires on October 8, 2007. Approximately one-half of the total number of
seagoing employees employed are supervisors. These supervisors are covered by
an agreement with AMO, which is limited to a provision for benefits. None of
the shore-based employees are 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 marine 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.
Regulation
Marine Transportation -- General. The Interstate Commerce Act exempts from
economic regulation the water transportation of petroleum cargoes 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.
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The operation of tank ships, 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. Tank ships, 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. Maritrans Inc. and the subsidiaries
that are 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 into
Congress during 1997. Management expects that efforts of this type will
continue.
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 possible, 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 than do more highly refined products, such as gasoline,
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
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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. Owners of more than one tank vessel, such as
Maritrans, however, are only required to demonstrate financial responsibility
in an amount sufficient 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 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 are
legislatively required 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. The two single-hulled tankers purchased in 1997 are
affected in 2005 and 2006, respectively, at which time they will be required to
comply with OPA or be operated outside U.S. waters. Approximately 27 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 single-hulled
oil-carrying vessel capacity with newly built double hulled vessels, the
estimated cost would be approximately $500 million, based on an estimated
replacement cost of $125 per barrel of capacity. This estimate could be higher
as shipyard costs increase. Factors that could reduce the estimate would
include decisions to replace less than 100% of existing oil-carrying capacity
or rebuilding programs with lower replacement costs per barrel of capacity.
Maritrans' pilot program to rebuild the MARITRANS 192 with on OPA-compliant
double-hull cost approximately $60 per barrel of capacity, however engineering,
coating and structural and other vessel and shipyard-specific factors may make
it inappropriate to extrapolate this per-barrel rebuilding cost to the other
single-hulled vessels in Maritrans' fleet.
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. Additionally, in certain circumstances involving
oil spills from vessels, OPA and other environmental laws may impose criminal
liability upon vessel and shoreside marine personnel and upon the corporate
entity. Such liability can be imposed for negligence without criminal intent,
or it may be strictly applied. The Company believes the laws, in their present
form, may negatively impact efforts to recruit Maritrans seagoing employees.
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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 the potential for other 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' results
of operations and liquidity.
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 by passage of OPA. See "Item 3--Legal
Proceedings."
The following table sets forth Maritrans' quantifiable cargo oil spill
record for the period January 1, 1994 through December 31, 1998:
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Gallons Spilled
No. of No. of . Per Million
Period Gals. Carried Spills Gals. Spilled Gals. Carried
- ------------------------ --------------- -------- --------------- ----------------
(000) (000)
<S> <C> <C> <C> <C>
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
1/1/1997 -- 12/31/1997 10,136,000 1 .05 .005
1/1/1998 -- 12/31/1998 10,987,000 3 .29 .027
</TABLE>
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. 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
7
<PAGE>
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 or tank ships, 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.
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 benefiting 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 agencies 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 Corporation's subsidiaries owned, at December 31, 1998, a
fleet of 58 vessels, of which 4 are oil tankers, 29 are barges and 23 are
tugboats.
In August of 1998 Maritrans purchased a 260,000-barrel double-hull
petroleum tanker, which was renamed the DILIGENCE and placed into service after
a short maintenance period. The remainder of the oil tanker fleet consists of
three tankers ranging in capacity from 242,000 barrels to 265,000 barrels.
These oil tankers were constructed between 1975 and 1982.
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 178,000 to 380,000 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 eleven largest barges range in capacity from 60,000
barrels to 160,000 barrels and were constructed or substantially renovated
between 1967 and 1981. The remainder of the barge fleet is comprised of two
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 (two of which are chartered), five 4,000
horsepower class vessels, four 3,200 horsepower class vessels, three 2,200
horsepower class vessels, one pusher class vessel and one chartered 15,000
horsepower class vessel, which is not currently operating. 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. These mortgages require the Operating Partnership to
maintain the vessels at a high standard and to continue a life-extension
program for certain of its larger barges. At December 31, 1998, Maritrans is in
compliance with the Operating Partnership's mortgage covenants.
Marine Terminals. At December 31, 1998, Maritank Philadelphia Inc. ("MPI")
owns 35 acres located on the west bank of the Schuylkill River in Philadelphia.
Included at MPI are twelve storage tanks with a total capacity of 1,040,000
barrels, an automated truck rack, office space, warehouse space and related
equipment used in MPI's marine terminal and tank cleaning operations. Maritank
Maryland Inc. ("MMI") owns 25 acres located on the Wicomico River in Salisbury,
Maryland. Included at MMI are fourteen storage tanks with a total capacity of
170,000 barrels, an automated truck loading rack, office space, warehouse space
and related equipment used in MMI's marine terminal operations.
8
<PAGE>
Other Real Property. The Corporation's operations are headquartered in
Philadelphia, Pennsylvania, where it leases office space. East Coast 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, the Operating Partnership 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 it is
expected that it will be renewed again in 1999. The Operating Partnership also
leases four acres of Port Authority land in Tampa, Florida for use as its Gulf
fleet center. The lease expires in 2004, with three renewal options of ten
years each.
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 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.
Maritrans has been sued by approximately 60 individuals alleging
unspecified damages for exposure to asbestos and, in most of these 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.
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 OPA 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. On March 11, 1999,
the United States Court of Federal Claims ("the Court") dismissed Maritrans'
suit, in response to a government Motion for Summary Judgment, deciding
essentially that the Company's cause of action is not yet ripe for judicial
determination due to Maritrans' vessels not having yet been forced out of
service by OPA's phase-out provisions. The Court determined that since the
vessels are continuing to generate income, the Company has not suffered the
degree of economic harm sufficient to constitute a Fifth Amendment taking.
Maritrans is currently reviewing how it will react to the Court's decision.
Item 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
No matters were submitted to a vote of the Corporation's security holders,
through the solicitation of proxies or otherwise, during the last quarter of
the year ended December 31, 1998.
9
<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 ENDED IN 1998: HIGH LOW
- ------------------------- --------- --------
March 31, 1998 $ 11.625 $ 8.625
June 30, 1998 11.250 8.625
September 30, 1998 9.438 6.688
December 31, 1998 7.750 6.313
QUARTERS ENDED IN 1997: HIGH LOW
- ------------------------- --------- --------
March 31, 1997 $ 7.125 $ 5.875
June 30, 1997 7.875 5.750
September 30, 1997 9.813 7.750
December 31, 1997 9.875 8.313
As of January 31, 1999, the Registrant had 12,147,402 Common Shares
outstanding and approximately 928 stockholders of record.
Dividends
For the years ended December 31, 1998 and 1997, Maritrans Inc. paid the
following cash dividends to stockholders:
PAYMENTS IN 1998: PER SHARE
- --------------------------- -------------
March 11, 1998 $ .090
June 11, 1998 $ .090
September 9, 1998 $ .090
December 9, 1998 $ .100
------
Total $ .370
======
PAYMENTS IN 1997: PER SHARE
- --------------------------- -------------
March 12, 1997 $ .075
June 11, 1997 $ .075
September 10, 1997 $ .075
December 10, 1997 $ .090
------
Total $ .315
======
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 1999.
10
<PAGE>
Item 6. SELECTED FINANCIAL DATA ($000 except per share amounts)
<TABLE>
<CAPTION>
MARITRANS INC.
---------------------------------------------------------------------------------
JANUARY 1 to DECEMBER 31
1998 1997 1996 1995 1994
-------------- -------------- -------------- -------------- -------------
<S> <C> <C> <C> <C> <C>
CONSOLIDATED INCOME STATEMENT DATA:
Revenues .............................. $ 151,839 $ 135,781 $ 126,994 $ 124,527 $ 124,846
Operating income before depreciation
and amortization .................... 30,407 38,339 30,249 30,738 34,250
Depreciation and amortization ......... 19,578 16,943 16,565 16,214 15,797
Operating income ...................... 10,829 21,396 13,684 14,524 18,453
Interest expense, net ................. 6,945 7,565 9,494 9,454 9,934
Income before income taxes ............ 4,986 18,157 8,379 8,120 10,355
Provision for income taxes ............ 1,870 6,696 3,130 3,139 3,823
Net income ............................ 3,116 11,461 5,249 4,981 6,532
Basic earnings per share .............. $ 0.26 $ 0.95 $ 0.44 $ 0.41 $ 0.52
Diluted earnings per share ............ $ 0.26 $ 0.94 $ 0.44 $ 0.41 $ 0.52
Cash dividends per share .............. $ 0.37 $ 0.315 $ 0.275 $ 0.11 $ 0.02
CONSOLIDATED BALANCE SHEET DATA (at period end):
Total assets .......................... $ 254,906 $ 251,023 $ 235,221 $ 251,961 $ 257,609
Long-term debt ........................ 83,400 75,365 79,123 104,337 113,008
Stockholders' equity .................. 89,815 90,795 82,594 79,875 81,173
</TABLE>
In this annual report the statements contained or incorporated by
reference that are not historical facts or statements of current condition are
forward-looking statements. Such forward-looking statements may be identified
by, among other things, the use of forward-looking terminology such as
"believes," "expects," "forecasts," "will," or "anticipates," or the negative
thereof or other variations thereon or comparable terminology, or by discussion
of strategy or intentions. These forward-looking statements, such as statements
regarding present or anticipated utilization, future revenues and customer
relationships, capital expenditures, future financings, and other statements
regarding matters that are not historical facts, involve predictions. The
Company's actual results, performance, or achievements could differ materially
from the results expressed in, or implied by, these forward-looking statements.
Potential risks and uncertainties that could affect the Company's actual
results, performance, or achievements include, but are not limited to, the
factors outlined in the Company's Form 10-K filed with the Securities Exchange
Commission, and general financial, economic, environmental and regulatory
conditions affecting the oil and marine transportation industry in general.
Given these uncertainties, current or prospective investors are cautioned not
to place undue reliance on any such forward-looking statements. Furthermore,
the Company disclaims any obligation or intent to update any such factors or
forward-looking statements to reflect future events or developments.
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" or the "Company."
Overview
Maritrans serves the petroleum and petroleum product distribution industry
by using oil tankers, tank barges, tugboats and marine terminal facilities to
provide marine transportation and terminalling services primarily along the
East and Gulf Coasts of the United States. Between 1994 and 1998, Maritrans has
transported at least 218 million barrels annually. The high was 262 million
barrels in 1998, 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
11
<PAGE>
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 1994-1998 fluctuated between 17.7 million
and 18.7 million barrels a day.
In the fall of 1997, Maritrans added approximately 850,000 barrels of
capacity to its fleet, primarily through the acquisition of three oil tankers
varying between 242,000 and 265,000 barrels of capacity. In 1998, the Company
acquired an additional 265,000 barrel oil tanker. Additionally, during 1998
Maritrans successfully rebuilt one of its existing, single-hulled, 190,000
barrel barges with a double-hull design configuration which complies with the
provisions of the Oil Pollution Act of 1990 ("OPA"). The Company intends to
apply the same methodology to up to eight more of its existing large,
oceangoing, single-hull barges. The timing of the rebuilds will be determined
by a number of factors, including market conditions, shipyard pricing and
availability, customer requirements and OPA retirement dates for the vessels.
The OPA retirement dates fall between 2003 and 2010. There are no current plans
to perform any rebuilding in 1999.
Legislation
The enactment of OPA significantly increased the liability exposure of
marine transporters of petroleum in the event of an oil spill. In addition,
several states in which Maritrans operates have enacted legislation increasing
the liability for oil spills in their waters. Maritrans currently maintains oil
pollution liability insurance of up to $900 million per occurrence 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 are
legislatively required 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. The two single-hulled tankers purchased in 1997 are
affected in 2005 and 2006, respectively, at which time they will be required to
comply with OPA or be operated outside U.S. waters. Approximately 27 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 single-hulled
oil-carrying vessel capacity with newly built double-hulled vessels, the
estimated cost would be approximately $500 million, based on an estimated
replacement cost of $125 per barrel of capacity. This estimate could be higher
as shipyard costs increase. Factors that could reduce the estimate would
include decisions to replace less than 100% of existing oil-carrying capacity
or rebuilding programs with lower replacement costs per barrel of capacity.
Maritrans' pilot program to rebuild the MARITRANS 192 with on OPA-compliant
double-hull cost approximately $60 per barrel of capacity, however engineering,
coating and structural and other vessel-and shipyard-specific factors may make
it inappropriate to extrapolate this per-barrel rebuilding cost to the other
single-hulled vessels in Maritrans' fleet.
12
<PAGE>
Results of Operations
Year Ended December 31, 1998 Compared With Year Ended December 31, 1997
Revenue for 1998 totaled $151.8 million compared with $135.8 million in
1997, an increase of $16.0 million or 11.8 percent. Barrels of cargo
transported increased by 20.3 million, from 241.3 million to 261.6 million or
8.4 percent. Revenue and volumes in 1998 were positively impacted by the
addition of three tankers and two tug/barge units in late 1997 and one tanker
in 1998. Utilization, as measured by revenue days divided by calendar days
available, totaled 79.9 percent for 1998 compared to 82.2 percent in 1997.
Utilization for the fleet, excluding new vessels, decreased to 78.7 percent.
The fleet utilization has been impacted by a heavier than normal out of service
time due to scheduled maintenance and the MARITRANS 192 double hull rebuild
project. Additionally, the fleet utilization was impacted by higher than normal
weather delays in both the Gulf of Mexico and Northeastern United States, two
of the Company's largest markets. Management expects market conditions to
continue to be very competitive as new tonnage is being introduced into the
market by Maritrans' competitors. Revenues from sources other than marine
transportation decreased to 2.5 percent of total revenues in 1998 compared to
3.0 percent in 1997.
Operating expenses of $141.0 million increased by $26.6 million or 23.3
percent from $114.4 million in 1997. This increase was due largely to the full
year's operating costs of three tankers and two tug/barges units acquired late
in 1997 and the stub period operating costs of the tanker purchased in August
1998. Additionally, the Company had to charter in outside tonnage, due to an
extensive maintenance schedule during the year and the MARITRANS 192 double
hull rebuild project, to cover contract commitments to customers. The Company's
oil tankers have a higher operating cost, measured per barrel of capacity, than
its tug/barge units, due primarily to their larger crew complements and higher
ongoing maintenance expenses. Expenses, excluding the new vessels, decreased
reflecting lower utilization due to maintenance, heavier weather delays and
fuel price savings. General and administrative expenses increased reflecting
higher staffing levels, shoreside travel and shoreside training.
Interest expense decreased from $7.6 million in 1997 to $6.9 million in
1998. This decrease is the result of a reduction in the effective interest rate
as the mortgage debt of subsidiaries is replaced by debt on the Company's
revolving credit facility. The Company also capitalized interest in the amount
of $0.4 million on various capital projects. Other income decreased from $4.3
million in 1997, to $1.1 million in 1998. Comparable amounts for 1997 included
a net gain of $2.0 million on the disposal of certain assets. Interest income
decreased to $0.5 million as the Company had less cash and cash equivalents on
hand due to its asset acquisitions and capital projects.
Net income for the twelve months ended December 31, 1998, decreased to
$3.1 million from $ 11.5 million for the twelve months ended December 31, 1997,
due to the aforementioned changes in revenue and expenses.
Year Ended December 31, 1997 Compared With Year Ended December 31, 1996
Revenue for 1997 totaled $135.8 million compared with $127.0 million in
1996, an increase of $8.8 million or 6.9 percent. Barrels of cargo transported
increased by 23.2 million, from 218.1 million to 241.3 million or 10.6 percent.
Volumes in the comparable prior period were negatively impacted by the
shutdowns of refinery capacity in the Delaware Valley area during the first
part of 1996. The increase in volumes in 1997 is attributable to improvements
in Maritrans' shorter-haul route business as those refineries were placed back
in service. Several of the vessels that were reassigned to other geographic
areas last year have been moved back into Delaware Valley-based trades.
Utilization, as measured by revenue days divided by calendar days available,
totaled 82.2 percent for 1997 compared to 75.7 percent in 1996. During 1997,
contracts were renewed with some of Maritrans' larger customers. While a number
of these contracts will result in lower revenue per barrel transported,
Maritrans has gained either higher vessel utilization or higher volume
commitments with those customers, and decreased its exposure to the spot
market. The markets within which Maritrans operates continue to experience
severe price competition for oil transportation services, which is expected to
continue. Management believes, however, that the level of contractually
committed utilization will partially insulate Maritrans from these pressures.
Revenues from sources other than marine transportation decreased from 3.6
percent of total revenues in 1996 to 3.0 percent in 1997.
13
<PAGE>
Operating expenses of $114.4 million increased by $1.1 million or 0.9
percent from $113.3 million in 1996. The increase was due to the addition of
two tug/barge units and three tankers in the fourth quarter, which increased
vessel operating costs. Prior to the fourth quarter, operating costs had
decreased primarily from earlier reductions in owned vessel capacity that
Maritrans considered excess to its long-term needs due to the equipment's size
and operating characteristics, and reduced general and administrative expenses.
Interest expense decreased by $1.9 million from $9.5 million in 1996 to
$7.6 million in 1997 due to lower levels of principal outstanding. Other income
in 1997 increased by $0.1 million from $4.2 million in 1996 to $4.3 million in
1997 due primarily to greater interest earned on short-term investments.
Net income for 1997 increased by $6.3 million to $11.5 million as a result
of the aforementioned increased revenues and other income more than offsetting
the increase in operating costs.
Liquidity and Capital Resources
In 1998, existing cash and cash equivalents, augmented by operating
activities and financing transactions, were sufficient to fully meet debt
service obligations (including $16.4 million in long-term debt repayments), to
meet loan agreement restrictions, to make capital acquisitions and
improvements, and to allow Maritrans to pay a dividend of $0.09 per common
share in each of the first three quarters and $0.10 per common share in the
last quarter. Maritrans believes that in 1999, 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 1999.
On October 10, 1997, Maritrans and Chevron U.S.A. Inc. ("Chevron")
executed agreements for Maritrans' purchase of two Chevron petroleum tankers
subject to certain conditions. The total cost to Maritrans was approximately
$27.3 million. The Chevron vessels are 40,000 deadweight ton, double-hulled oil
tankers that comply with all International Maritime Organization ("IMO") and
OPA design criteria for future trading. The Company purchased the first vessel
on November 7, 1997, for $13 million and purchased the second vessel on August
12, 1998, for $14.3 million. In November 1997, Maritrans borrowed $12 million
from its revolving credit facility with Mellon Bank, N.A. to complete the
purchase of the first vessel. To fund the purchase of the second vessel,
Maritrans borrowed an additional $12 million in August 1998 from its revolving
credit facility with Mellon Bank, N.A. The Company made modifications to the
second vessel, renamed the DILIGENCE, before placing it in service in the fall
of 1998. Total costs of these modifications were approximately $3 million.
During 1998, Maritrans also successfully completed rebuilding the barge
MARITRANS 192 with a double hull. The total cost of this project was
approximately $10 million.
In addition to the vessel programs previously mentioned, capital
expenditures in 1998 for improvements to its existing fleet of vessels and
marine terminals were approximately $4 million, the same as in 1997.
On May 7, 1997, the Company announced a year's extension to its previously
announced stock buy-back plan to reacquire up to 1.8 million shares of its
common stock, depending on market conditions. This amount represented
approximately 15 percent of the 12.5 million shares outstanding at the
beginning of the program. As of the end of the program, the Company had
purchased 877,955 shares at a cost of approximately $5.1 million. No open
market purchases were made in 1996, 1997 or 1998.
On February 9, 1999, the Board of Directors authorized a share buyback
program for the acquisition of up to 1 million shares of the Company's common
stock. This amount represents approximately 8 percent of the 12.1 million
shares outstanding at the beginning of the program. Maritrans intends to hold
the majority of the shares as treasury stock, although some shares may be used
for acquisition currency, employee compensation plans, and/or other corporate
purposes. Maritrans expects to finance the purchase of any reacquired shares
from internally generated funds.
Working Capital and Other Balance Sheet Changes
In 1998, working capital was generated by operating activities, proceeds
under a revolving credit facility established in 1997 and borrowing against a
working capital facility. Current assets decreased primarily due to
14
<PAGE>
the Company having less cash and cash equivalents on hand. The ratio of current
assets to current liabilities declined from 1.27:1 at December 31, 1997 to
1.20:1 at December 31, 1998. Maritrans utilized available working capital to
purchase marine vessels and equipment, repay scheduled long-term debt
obligations, and make dividend payments.
Debt Obligations and Borrowing Facility
At December 31, 1998, Maritrans had $95.3 million in total outstanding
debt, secured by mortgages on most of the fixed assets of the subsidiaries of
the Corporation. The current portion of this debt at December 31, 1998, was
$11.9 million. Maritrans has a $10 million working capital facility, secured by
receivables and inventories of a subsidiary, which expires June 30, 1999, and
which it expects to renew. At December 31, 1998, this facility had a balance of
$4.2 million outstanding. On October 17, 1997, Maritrans entered into a
multi-year revolving credit facility for amounts up to $33 million with Mellon
Bank, N.A. This facility is collateralized by mortgages on tankers acquired in
1997 and 1998. At December 31, 1998, the balance of borrowings outstanding were
$28.4 million.
At December 31, 1998 and 1997, total debt to total capitalization was 51
percent and 48 percent, respectively. For purposes of this calculation, total
capitalization consists of long-term debt, including those portions that are
current, and stockholders' equity.
Impact of Year 2000
Some of the Company's older computer programs and embedded computer
components suffer from Year 2000 incompatibilities. If left unchanged, this may
cause a system failure or miscalculations causing disruptions in operations,
including, among other things, a temporary inability to process transactions,
send invoices, or engage in normal similar business activities.
Following is a brief description of the tasks incorporated in the
Company's Year 2000 effort:
Software Inventory: List all custom software components that may have a
dependency on Year 2000.
Software Assessment: Analyze each software component to determine if a
Year 2000 dependency exists; if so then determine magnitude of impact and
effort for remediation. Prioritize remediation efforts.
Software Remediation: Implement corrections or develop alternative plans
to work around the problem.
Imbedded Systems Inventory: Develop a list of all devices which contain
embedded computer chips, such as radars, Global Positioning System, rudder
controls, engine controls and truck rack monitors
Imbedded Systems Assessment: Work with the individual manufacturing
companies to identify any problems with specific devices. Conduct
independent tests to identify any possible problems.
Imbedded Systems Remediation: Work with the manufacturing companies to
implement replacement or work around plans. Collaborate with other
companies that have the same dependencies to reduce cost and increase
effectiveness.
Service Provider Assessment: Verify that all service providers are
investigating their own Year 2000 problems and that the Company's
interactions with them are Year 2000 compliant. Identify key service
providers and conduct in-depth analysis to verify that service to Maritrans
will not be impacted.
Customer Assessment: Verify that all customers are proceeding with their
own Year 2000 efforts. Collaborate with the customers to ensure that both
parties have a smooth transition into the new millennium.
Contingency Planning: Identify and document contingency plans for core
business processes.
The Company completed an assessment of its computing systems, commercial
off-the-shelf systems, and embedded systems and has been developing new
software programs and replacing commercial systems to take
15
<PAGE>
advantage of newer technologies. As a result of this initiative, the Company's
operating systems, critical embedded systems and commercial off-the-shelf
systems will be Year 2000 compliant upon completion of these upgrades, which
are scheduled to be complete no later than the first quarter of 1999. This date
is prior to any anticipated impact on the operating systems. For the Company's
less critical commercial off-the-shelf systems and embedded components, the
Company is working closely with the manufacturers to verify compliance and is
proceeding with remediation efforts. The Company is collaborating with its key
service providers and customers to ensure their Year 2000 efforts will identify
and address common risks as well as developing contingency plans where
necessary. The Company's major customers do not expect to incur major
disruptions in the need for services due to any Year 2000 issues. These
activities are scheduled to be completed no later than the second quarter of
1999. However, there can be no assurances that the companies with which the
Company does business will achieve a Year 2000 conversion in a timely fashion,
or that such failure to convert by another company will not have a material
adverse effect on the Company.
The Company's contingency planning effort has identified critical business
processes and any Year 2000 dependencies that these processes may have. The
Company is currently prioritizing these processes and developing contingency
plans to eliminate or manage any Year 2000 dependencies. These contingency
plans consider the internal systems, facilities, customer and supplier
readiness, and infrastructure concerns.
The Company believes that with the conversions to new software, the Year
2000 issue will not pose significant operational problems for the computer
systems. However, if such conversions are not made, or are not completed
timely, the Year 2000 issue could have a material adverse impact on the
operations of the Company. The Company believes that the most reasonably likely
worst case Year 2000 scenario would be that some of the customers' refineries
or terminal pumping systems would fail. This would cause fewer barrels to be
moved, interruption of normal distribution patterns, and/or inability to
transfer product, possibly leaving the vessels empty and crippling the delivery
system. In this event, the Company expects less than half of the fleet would be
impacted with a maximum of 5-day delays for product loading. Vessels attempting
to discharge would be rerouted to other ports or customers and thus not incur
significant delays. As part of the contingency planning efforts, the Company is
addressing this specific issue internally and with customers to reduce the
likelihood and impact of this scenario.
The total cost of the Company's Year 2000 efforts is expected to be $0.6
million, with approximately $0.2 million to be incurred during the remainder of
the project. This amount is being financed from internally generated funds. The
costs of the project and the date on which the Company believes it will
complete the Year 2000 conversions are based on management's best estimates.
However, there can be no guarantee that these estimates will be achieved and
actual results could differ materially from those anticipated. Specific factors
that might cause material differences include, but are not limited to, the
availability and cost of personnel trained in this area, the ability to upgrade
all relevant operating systems, and similar uncertainties.
Market Risk
The principal market risk to which the Company is exposed is changes in
interest rates on debt instruments. The Company manages its exposure to changes
in interest rate fluctuations by optimizing the use of fixed and variable rate
debt. The information below summarizes the Company's market risks associated
with debt obligations and should be read in conjunction with Note 8 of the
Consolidated Financial Statements.
16
<PAGE>
The following table presents principal cash flows and the related interest
rates by year of maturity. Fixed interest rates disclosed represent the actual
rate as of the period end. Variable interest rates disclosed fluctuate with the
LIBOR and federal fund rates and represent the weighted average rate at
December 31, 1998.
<TABLE>
<CAPTION>
EXPECTED YEARS OF MATURITY
-----------------------------------------------------------------------------------
1999 2000 2001 2002 2003 Thereafter Total
--------- ---------- --------- --------- --------- ------------ -------
(Dollars in $000's)
<S> <C> <C> <C> <C> <C> <C> <C>
Long-term debt,
including current portion
Fixed rate 6,500 6,500 6,500 6,500 6,500 26,000 58,500
Average interest rate 9.25 9.25 9.25 9.25 9.25 9.25
Variable rate 5,373 29,600 1,200 600 -- -- 36,773
Average interest rate 6.04 6.04 6.04 6.04 -- --
</TABLE>
Impact of Recent Accounting Pronouncements
Effective January 1, 1998, the Company adopted the Financial Accounting
Standards Board's ("FASB") Statement of Financial Accounting Standards No. 131,
Disclosures about Segments of an Enterprise and Related Information ("Statement
131"). Statement 131 superseded FASB Statement No. 14, Financial Reporting for
Segments of a Business Enterprise. Statement 131 establishes standards for the
way public business enterprises report information about operating segments in
annual financial statements and requires that those enterprises report selected
information about operating segments in interim financial reports. Statement
131 also establishes standards for related disclosures about products and
services, geographic areas, and major customers. The adoption of Statement 131
did not affect results of operations or financial position.
The Company operates in the marine transportation and terminal business.
Marine transportation represents the transportation of petroleum and accounted
for substantially all of the consolidated assets of the Company at December 31,
1998 and 1997 and substantially all of the consolidated revenues for each of
the three years in the period ended December 31, 1998. Terminal operations
provide ancillary support to the marine transportation business as a discharge
location for certain marine transportation customers, tank vessel cleaning
facilities for Maritrans' vessels and as shore-based petroleum storage.
The Company primarily operates along the coastal waters of the
Northeastern United States and the Gulf of Mexico. The nature of services
provided, the customer base, the regulatory environment and the economic
characteristics of the Company's operations are similar, and the Company moves
its revenue-producing assets among its operating locations as business and
customer factors dictate. Maritrans believes that aggregation of the entire
marine transportation business provides the most meaningful disclosure.
Item 7a. QUALITATIVE AND QUANTITATIVE DISCLOSURES ABOUT MARKET RISK
See discussion on page 16 included in Management's Discussion and Analysis
of Financial Condition and Results of Operations.
17
<PAGE>
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, 1998 and 1997, and the related consolidated statements of
income, cash flows and stockholders' equity for each of the three years in the
period ended December 31, 1998. 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, 1998 and 1997, and the consolidated results of its operations and
its cash flows for each of the three years in the period ended December 31,
1998, 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, presents fairly in all
material respects the information set forth therein.
ERNST & YOUNG LLP
Philadelphia, Pennsylvania
January 22, 1999
18
<PAGE>
MARITRANS INC.
CONSOLIDATED BALANCE SHEETS
($000)
<TABLE>
<CAPTION>
December 31,
--------------------------
1998 1997
----------- ------------
<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents .............................................. $ 1,214 $ 13,312
Trade accounts receivable (net of allowance for doubtful accounts of
$1,387 and $1,258, respectively) ..................................... 18,030 18,073
Other accounts receivable .............................................. 9,434 4,447
Inventories ............................................................ 4,656 5,066
Deferred income tax benefit ............................................ 4,627 3,491
Prepaid expenses ....................................................... 3,479 3,257
-------- --------
Total current assets .............................................. 41,440 47,646
Vessels, terminals and equipment ........................................ 358,197 329,032
Less accumulated depreciation .......................................... 151,506 132,316
-------- --------
Net vessels, terminals and equipment .............................. 206,691 196,716
Other ................................................................... 6,775 6,661
-------- --------
Total assets ...................................................... $254,906 $251,023
======== ========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Debt due within one year ............................................... $ 11,873 $ 9,758
Trade accounts payable ................................................. 1,856 2,390
Accrued interest ....................................................... 1,351 1,563
Accrued shipyard costs ................................................. 7,413 8,723
Accrued wages and benefits ............................................. 3,559 5,208
Other accrued liabilities .............................................. 8,559 9,825
-------- --------
Total current liabilities ......................................... 34,611 37,467
Long-term debt .......................................................... 83,400 75,365
Deferred shipyard costs ................................................. 11,119 13,085
Other liabilities ....................................................... 5,107 5,326
Deferred income taxes ................................................... 30,854 28,985
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: 1998 -- 13,116,862 shares; 1997 -- 12,996,157 shares ......... 131 130
Capital in excess of par value ......................................... 77,858 76,881
Retained earnings ...................................................... 18,691 20,049
Less: Cost of shares held in treasury: 1998 -- 972,256 shares;
1997 -- 940,896 shares ............................................ (5,699) (5,433)
Unearned compensation ......................................... ..... (1,166) (832)
-------- --------
Total stockholders' equity ........................................ 89,815 90,795
-------- --------
Total liabilities and stockholders' equity ........................ $254,906 $251,023
======== ========
</TABLE>
See accompanying notes.
19
<PAGE>
MARITRANS INC.
CONSOLIDATED STATEMENTS OF INCOME
($000, except per share amounts)
<TABLE>
<CAPTION>
For the year ended December 31,
---------------------------------------
1998 1997 1996
----------- ----------- -----------
<S> <C> <C> <C>
Revenues .................................................... $151,839 $135,781 $126,994
Costs and expenses:
Operation expense .......................................... 86,616 69,290 67,286
Maintenance expense ........................................ 26,148 19,699 20,289
General and administrative ................................. 8,668 8,453 9,170
Depreciation and amortization .............................. 19,578 16,943 16,565
-------- -------- --------
141,010 114,385 113,310
-------- -------- --------
Operating income ............................................ 10,829 21,396 13,684
Interest expense (net of capitalized interest of $417, $0 and
$0, respectively)........................................... (6,945) (7,565) (9,494)
Other income, net ........................................... 1,102 4,326 4,189
-------- -------- --------
Income before income taxes .................................. 4,986 18,157 8,379
Income tax provision ........................................ 1,870 6,696 3,130
-------- -------- --------
Net income .................................................. $ 3,116 $ 11,461 $ 5,249
-------- -------- --------
Basic earnings per share .................................... $ 0.26 $ 0.95 $ 0.44
Diluted earnings per share .................................. $ 0.26 $ 0.94 $ 0.44
</TABLE>
See accompanying notes.
20
<PAGE>
MARITRANS INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
Increase (Decrease) in Cash and Cash Equivalents
($000)
<TABLE>
<CAPTION>
For the year ended December 31,
-----------------------------------------
1998 1997 1996
----------- ------------ ------------
<S> <C> <C> <C>
Cash flows from operating activities:
Net income .................................................. $ 3,116 $ 11,461 $ 5,249
Adjustments to reconcile net income to net cash
provided by (used in) operating activities:
Depreciation and amortization ............................. 19,578 16,943 16,565
Deferred income taxes ..................................... 733 1,729 340
Stock compensation ........................................ 378 381 347
Changes in receivables, inventories, and prepaid
expenses ................................................. (4,756) (753) (3,810)
Changes in current liabilities other than debt ............ (4,971) 3,387 2,067
Non-current changes, net .................................. (2,687) 3,125 1,063
(Gain) loss on sale of equipment .......................... -- (2,049) (3,250)
--------- --------- ---------
Total adjustments to net income .............................. 8,275 22,763 13,322
--------- --------- ---------
Net cash provided by operating activities ................. 11,391 34,224 18,571
Cash flows from investing activities:
Acquisition of investments held-to-maturity ................. -- -- (27,684)
Maturity of investments held-to-maturity .................... -- -- 35,228
Cash proceeds from sale of marine vessels, terminals
and equipment ............................................. -- 5,066 5,558
Insurance proceeds from dock settlement ..................... 1,025 -- --
Purchase of marine vessels, terminals and equipment ......... (30,190) (51,298) (2,983)
--------- --------- ---------
Net cash provided by (used in) investing activities ......... (29,165) (46,232) 10,119
Cash flows from financing activities:
Payment of long-term debt ................................... (16,423) (10,213) (23,672)
New borrowings under revolving credit facility .............. 43,863 12,000 --
Repayments of borrowings under revolving credit
facility .................................................. (17,290) (6,000) --
Proceeds from stock option exercises ........................ -- 143 378
Dividends declared and paid ................................. (4,474) (3,784) (3,255)
--------- --------- ---------
Net cash provided by (used in) financing activities ......... 5,676 (7,854) (26,549)
Net increase (decrease) in cash and cash equivalents ......... (12,098) (19,862) 2,141
Cash and cash equivalents at beginning of year ............... 13,312 33,174 31,033
--------- --------- ---------
Cash and cash equivalents at end of year ..................... $ 1,214 $ 13,312 $ 33,174
========= ========= =========
Supplemental Disclosure of Cash Flow Information:
Interest paid ................................................ $ 7,574 $ 7,661 $ 9,908
Income taxes paid ............................................ $ 1,600 $ 4,500 $ 1,050
</TABLE>
See accompanying notes.
21
<PAGE>
MARITRANS INC.
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
($000, except share amounts)
<TABLE>
<CAPTION>
Common Capital in
Common Stock, $.01 excess of
Stock Par Value Par Value
------------- ------------- -----------
<S> <C> <C> <C>
Balance at December 31,
1995 ......................... 11,682,135 $126 $74,516
Net income, January 1, 1996
to December 31, 1996 .........
Cash dividends ($0.275 per
share of Common Stock ........
Stock incentives .............. 277,777 2 1,358
---------- ---- -------
Balance at December 31,
1996 ......................... 11,959,912 128 75,874
Net income January 1, 1997
to December 31, 1997 .........
Cash dividends ($0.315 per
share of Common Stock)........
Stock incentives .............. 95,349 2 1,007
---------- ---- -------
Balance at December 31,
1997 ......................... 12,055,261 130 76,881
---------- ---- -------
Net income January 1, 1998
to December 31, 1998 .........
Cash dividends ($0.370 per
share of Common Stock)........
Stock incentives .............. 89,345 1 977
---------- ---- -------
Balance at December 31,
1998 ......................... 12,144,606 $131 $77,858
========== ==== =======
<CAPTION>
Retained Treasury Unearned
Earnings Stock Compensation Total
---------- -------------- -------------- ----------
<S> <C> <C> <C> <C>
Balance at December 31,
1995 ......................... $ 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 .............. -- (8) (627) 725
-------- ---------- -------- --------
Balance at December 31,
1996 ......................... 12,372 (5,067) (713) 82,594
Net income January 1, 1997
to December 31, 1997 ......... 11,461 11,461
Cash dividends ($0.315 per
share of Common Stock)........ (3,784) (3,784)
Stock incentives .............. -- (366) (119) 524
-------- --------- -------- --------
Balance at December 31,
1997 ......................... 20,049 (5,433) (832) 90,795
-------- --------- -------- --------
Net income January 1, 1998
to December 31, 1998 ......... 3,116 3,116
Cash dividends ($0.370 per
share of Common Stock)........ (4,474) (4,474)
Stock incentives .............. -- (266) (334) 378
-------- --------- -------- --------
Balance at December 31,
1998 ......................... $ 18,691 $(5,699) $ (1,166) $ 89,815
======== ========= ======== ========
</TABLE>
See accompanying notes.
22
<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 General Partner Inc., Maritrans Tankers Inc.,
Maritrans Barge Co., Maritrans Holdings Inc. and other Maritrans entities
(collectively, the "Company"). These subsidiaries, directly and indirectly, own
and operate oil tankers, tugboats, and oceangoing petroleum tank 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.
Vessels, Terminals 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 2 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. 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.
Revenue Recognition
Revenue is recognized when services are performed.
23
<PAGE>
NOTES TO THE CONSOLIDATED
FINANCIAL STATEMENTS -- (Continued)
1. Organization and Significant Accounting Policies -- (Continued)
Significant Customers
During 1998, the Company derived revenues aggregating 52 percent of total
revenues from three customers, each one representing more than 10 percent of
revenues. In 1997, revenues from three customers aggregated 50 percent of total
revenues and in 1996, revenues from three customers aggregated 42 percent of
total revenues. The Company does not necessarily derive 10 percent or more of
its total revenues from the same group of customers each year. In 1998,
approximately 84 percent of the Company's total revenue were generated by ten
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 the 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 $2,577,000, $2,536,000 and $2,654,000
for the years ended December 31, 1998, 1997 and 1996, respectively. In 1998,
1997 and 1996, the Company paid amounts for the lease of office space and for
legal services to a law firm, a partner of which serves on the Company's Board
of Directors.
1998 1997 1996
------ ------ -------
($000)
Lease of office space .................. $114 $228 $277
Legal services ......................... 120 232 163
---- ---- ----
Total .................................. $234 $460 $440
==== ==== ====
Impact of Recent Accounting Pronouncements
Effective January 1, 1998, the Company adopted the Financial Accounting
Standards Board's ("FASB") Statement of Financial Accounting Standards No. 131,
Disclosures about Segments of an Enterprise and Related Information ("Statement
131"). Statement 131 superseded FASB Statement No. 14, Financial Reporting for
Segments of a Business Enterprise. Statement 131 establishes standards for the
way public business enterprises report information about operating segments in
annual financial statements and requires that those enterprises report selected
information about operating segments in interim financial reports. Statement
131 also establishes standards for related disclosures about products and
services, geographic areas, and major customers. The adoption of Statement 131
did not affect results of operations or financial position.
The Company operates in the marine transportation and terminal business.
Marine transportation represents the transportation of petroleum and accounted
for substantially all of the consolidated assets of the Company at December 31,
1998 and 1997 and substantially all of the consolidated revenues for each of
the three years in the period ended December 31, 1998. Terminal operations
provide ancillary support to the marine transportation business as a discharge
location for certain marine transportation customers, tank vessel cleaning
facilities for Maritrans' vessels and as shore-based petroleum storage.
The Company primarily operates along the coastal waters of the
Northeastern United States and the Gulf of Mexico. The nature of services
provided, the customer base, the regulatory environment and the economic
characteristics of the Company's operations are similar, and the Company moves
its revenue-producing assets among its operating locations as business and
customer factors dictate. Maritrans believes that aggregation of the entire
marine transportation business provides the most meaningful disclosure.
24
<PAGE>
NOTES TO THE CONSOLIDATED
FINANCIAL STATEMENTS -- (Continued)
2. Earnings per Common Share
The following data show the amounts used in computing basic and diluted
earnings per share (EPS):
<TABLE>
<CAPTION>
1998 1997 1996
--------- ----------- ----------
(thousands)
<S> <C> <C> <C>
Income available to common stockholders
used in basic EPS ........................... $ 3,116 $ 11,461 $ 5,249
Weighted average number of common
shares used in basic EPS .................... 11,929 12,003 11,828
Effect of dilutive securities:
Stock options and Restricted shares ......... 258 177 107
Weighted number of common shares and
dilutive potential common stock used in
diluted EPS ................................. 12,187 12,180 11,935
</TABLE>
3. Shareholder Rights Plan
In 1993, Maritrans Inc. adopted a Shareholder Rights Plan (the "Plan") in
connection with the conversion from partnership to corporate form. Under the
Plan, each share of Common Stock has attached thereto a Right (a "Right") which
entitles the registered holder to purchase from the Company one one-hundredth
of a share (a "Preferred Share Fraction") of Series A Junior Participating
Preferred Shares, par value $.01 per share, of the Company ("Preferred
Shares"), or a combination of securities and assets of equivalent value, at a
Purchase Price of $40, subject to adjustment. Each Preferred Share Fraction
carries voting and dividend rights that are intended to produce the equivalent
of one share of Common Stock. The Rights are not exercisable for a Preferred
Share Fraction until the earlier of (each, a "Distribution Date") (i) 10 days
following a public announcement that a person or group has acquired, or
obtained the right to acquire, beneficial ownership of 20% or more of the
outstanding shares of Common Stock or (ii) the close of business on a date
fixed by the Board of Directors following the commencement of a tender offer or
exchange offer that would result in a person or group beneficially owning 20%
or more of the outstanding shares of Common Stock.
The Rights may be exercised for Common Stock if a "Flip-in" or "Flip-over"
event occurs. If a "Flip-in" event occurs and the Distribution Date has passed,
the holder of each Right, with the exception of the acquirer, is entitled to
purchase $40 worth of Common Stock for $20. The Rights will no longer be
exercisable into Preferred Shares at that time. "Flip-in" events are events
relating to 20% stockholders, including without limitation, a person or group
acquiring 20% or more of the Common Stock, other than in a tender offer that,
in the view of the Board of Directors, provides fair value to all of the
Company's shareholders. If a "Flip-over" event occurs, the holder of each Right
is entitled to purchase $40 worth of the acquirer's stock for $20. A
"Flip-over" event occurs if the Company is acquired or merged and no
outstanding shares remain or if 50% of the Company's assets or earning power is
sold or transferred. The Plan prohibits the Company from entering into this
sort of transaction unless the acquirer agrees to comply with the "Flip-over"
provisions of the Plan.
The Rights can be redeemed by the Company for $.01 per Right until up to
ten days after the public announcement that someone has acquired 20% or more of
the Company's Common Stock (unless the redemption period is extended by the
Board in its discretion). If the Rights are not redeemed or substituted by the
Company, they will expire on August 1, 2002.
4. Cash and Cash Equivalents
Cash and cash equivalents at December 31, 1998, and 1997 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.
25
<PAGE>
NOTES TO THE CONSOLIDATED
FINANCIAL STATEMENTS -- (Continued)
5. Stock Incentive Plans
The Company has elected to follow Accounting Principles Board Opinion No.
25, Accounting for Stock Issued to Employees 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 the 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 that is not materially different from amounts
reported and earnings per share that are the same as the amounts reported. Pro
forma results of operations may not be representative of the effects on
reported or pro forma results of operations for future years.
Maritrans Inc. has a stock incentive plan (the "Plan"), whereby
non-employee directors, 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. Amendments were made to
the Plan and approved by the stockholders in 1997. The amendments included
increasing the aggregate number of shares available for issuance under the Plan
from 1,250,000 shares to 1,750,000 shares. Additionally, the amendments provide
for the automatic grant of non-qualified stock options to non-employee
directors, on a formulaic biannual basis, of options to purchase shares equal
to two multiplied by the aggregate number of shares distributed to such
non-employee director under the Plan during the preceding calendar year. In
1998, there were 3,864 shares issued to non-employee 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 1998, there were 116,841 shares of restricted stock issued under
the Plan. The restrictions lapse over a two year period. The weighted average
fair value of the restricted stock issued during 1998 was $7.68. 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, 1998 and 1997,
691,109 and 744,252 remaining shares within the Plan were reserved for grant.
Information on stock options follows:
<TABLE>
<CAPTION>
Number of
----------- Weighted Average
Options Exercise Price Exercise Price
----------- ---------------- -----------------
<S> <C> <C> <C>
Outstanding at 12/31/95 ........... 619,643 4.00-6.00 4.54
Granted ........................ 159,428 5.25-5.375 5.32
Exercised ...................... 96,911 4.00-5.375 4.10
Cancelled or forfeited ......... -- -- --
Expired ........................ -- -- --
------- ------------ ----
Outstanding at 12/31/96 ........... 682,160 4.00-6.00 4.79
Granted ........................ 76,939 5.875-7.937 7.33
Exercised ...................... 71,264 4.00-5.625 4.60
Cancelled or forfeited ......... 140,637 5.25-6.25 5.45
Expired ........................ -- -- --
------- ------------ ----
Outstanding at 12/31/97 ........... 547,198 4.00-7.937 5.01
Granted ........................ 66,918 9.00-9.188 9.11
Exercised ...................... -- -- --
Cancelled or forfeited ......... 35,991 5.375-6.00 5.78
Expired ........................ 98,489 4.00-5.00 4.35
------- ------------ ----
Outstanding at 12/31/98 ........... 479,636 4.00-9.188 5.64
------- ------------ ----
Exercisable .......................
December 31, 1996 .............. 208,957 4.00-5.00 4.20
December 31, 1997 .............. 362,575 4.00-6.00 4.44
December 31, 1998 .............. 318,971 4.00-9.125 4.55
</TABLE>
26
<PAGE>
NOTES TO THE CONSOLIDATED
FINANCIAL STATEMENTS -- (Continued)
5. Stock Incentive Plans -- (Continued)
Outstanding options have an original term of up to ten years and are
exercisable in installments over two to four years and expire beginning in
2002. The weighted average remaining contractual life of the options
outstanding at December 31, 1998 is six years.
6. Income Taxes
The income tax provision consists of:
1998 1997 1996
--------- --------- ---------
($000)
Current:
Federal ......... $1,011 $4,553 $2,788
State ........... 126 414 2
Deferred:
Federal ......... $ 547 $1,753 $ 272
State ........... 186 (24) 68
------ ------ ------
$1,870 $6,696 $3,130
------ ------ ------
The differences between the federal statutory tax rate in 1998, 1997 and
1996, and the effective tax rates were as follows:
<TABLE>
<CAPTION>
1998 1997 1996
--------- --------- ---------
($000)
<S> <C> <C> <C>
Statutory federal tax provision ..................... $1,695 $6,355 $2,932
State income taxes, net of federal income tax benefit 206 253 46
Non-deductible items ................................ 131 88 152
Other ............................................... (162) -- --
------ ------ ------
$1,870 $6,696 $3,130
====== ====== ======
</TABLE>
Principal items comprising deferred income tax liabilities and assets as
of December 31, 1998 and 1997 are:
<TABLE>
<CAPTION>
1998 1997
---------- ----------
($000)
<S> <C> <C>
Deferred tax liabilities:
Depreciation ..................................... $44,220 $38,293
Prepaid expenses ................................. 1,778 1,660
------- -------
45,998 39,953
------- -------
Deferred tax assets:
Reserves and accruals ............................... 15,888 10,531
Net operating loss and credit carryforwards ......... 3,883 3,928
------- -------
19,771 14,459
------- -------
Net deferred tax liabilities ........................ $26,227 $25,494
======= =======
</TABLE>
At December 31, 1998, Maritrans Inc. has net operating loss carryforwards
of approximately $16.0 million for income tax reporting purposes which expire
in the year 2005 and thereafter. The Company has an Alternative Minimum Tax
credit of $6.8 million at December 31, 1998, which does not expire.
7. 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
27
<PAGE>
NOTES TO THE CONSOLIDATED
FINANCIAL STATEMENTS -- (Continued)
7. Retirement Plans -- (Continued)
unit credit actuarial method. Pension benefits are primarily based on years of
service and begin to vest after two years. Employees who are members of unions
participating in Maritrans' collective bargaining agreements are not eligible
to participate in the qualified defined benefit retirement plan of Maritrans
Inc.
The following table sets forth changes in the plan's benefit obligation,
changes in plan assets and the plan's funded status as of December 31, 1998 and
1997:
<TABLE>
<CAPTION>
1998 1997
------------- -------------
($000)
<S> <C> <C>
Change in benefit obligation
Benefit obligation at beginning of year ................ $ 24,044 $ 22,834
Service cost ........................................... 1,482 1,440
Interest cost .......................................... 1,553 1,451
Actuarial gain ......................................... (653) (1,001)
Benefits paid .......................................... (779) (680)
-------- --------
Benefit obligation at end of year ...................... $ 25,647 $ 24,044
-------- --------
Change in plan assets
Fair value of plan assets at beginning of year ......... $ 27,256 $ 23,188
Actual return on plan assets ........................... 3,515 3,572
Employer contribution .................................. 541 1,176
Benefits paid .......................................... (779) (680)
-------- --------
Fair value of plan assets at end of year ............... $ 30,533 $ 27,256
-------- --------
Funded status .......................................... 4,886 3,212
Unrecognized net actuarial (gain) loss ................. (8,616) (6,280)
Unrecognized transition amount ......................... (600) (803)
-------- --------
Accrued benefit cost ................................... ($ 4,330) ($ 3,871)
-------- --------
Weighted average assumptions as of December 31, 1998
Discount rate .......................................... 6.75% 6.75%
Expected rate of return ................................ 6.75% 6.75%
Rate of compensation increase .......................... 5.00% 5.00%
</TABLE>
Net periodic pension cost included the following components for the years ended
December 31,
<TABLE>
<CAPTION>
1998 1997 1996
----------- ----------- -----------
($000)
<S> <C> <C> <C>
Components of net periodic benefit cost
Service cost of current period ........................ $ 1,482 $ 1,440 $ 1,548
Interest cost on projected benefit obligation ......... 1,553 1,451 1,365
Expected return on plan assets ........................ (1,832) (1,582) (1,405)
Actual (gain) loss on plan assets ..................... (1,683) (1,990) (626)
Net (amortization) and deferral ....................... 1,480 1,787 423
-------- -------- --------
Net pension cost ...................................... $ 1,000 $ 1,106 $ 1,305
======== ======== ========
</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, $779,000 and $0 for the years ended December 31, 1998,
1997 and 1996, respectively.
28
<PAGE>
NOTES TO THE CONSOLIDATED
FINANCIAL STATEMENTS -- (Continued)
7. Retirement Plans -- (Continued)
Approximately 54% of the Company's employees are covered under collective
bargaining agreements, and approximately 27% of the employees are covered under
collective bargaining agreements which expire within one year.
Contributions to industry-wide, multi-employer seamen's pension plans,
which cover substantially all seagoing personnel covered under collective
bargaining agreements, were approximately $889,000, $479,000 and $474,000 for
the years ended December 31, 1998, 1997 and 1996, 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.
8. Debt
At December 31, 1998, total outstanding debt of the subsidiaries of
Maritrans Inc. is $95.3 million, $83.4 million of which is long-term. At
December 31, 1997, total outstanding debt was $85.1 million, $75.4 million of
which was long-term. The debt is secured by mortgages on most of the fixed
assets of those subsidiaries. At December 31, 1998, total outstanding debt
consists of several series -- $4.2 million maturing through 1999, $28.4 million
maturing through 2000, $4.2 million maturing through 2002, and $58.5 million
maturing through 2007. The weighted average interest rate of this indebtedness
is 8.01 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, 1997, the total outstanding debt
consisted of several series -- $6.0 million maturing through 2000, $5.4 million
maturing through 2002, $8.7 million maturing through 2005, and $65.0 million
maturing through 2006.
In 1997, Maritrans entered into a multi-year revolving credit facility for
amounts up to $33 million with Mellon Bank, N.A. This facility is
collateralized by mortgages on tankers acquired in 1997 and 1998. Borrowings
outstanding under this facility at December 31, 1998 were $28.4 million. The
interest rate on the indebtedness is variable and the weighted average interest
rate is 6.04 percent.
The Operating Partnership has a $10 million working capital facility
secured by its receivables and inventories. The maximum amount borrowed under
this facility during fiscal 1998 was $6.2 million. Borrowings outstanding under
this facility at December 31, 1998 were $4.2 million. The interest rate on the
indebtedness is variable and the weighted average interest rate is 6.03
percent.
Based on the borrowing rates currently available for loans with similar
terms and maturities, the fair value of long term debt was $96.1 million and
$85.9 million at December 31, 1998 and 1997, respectively. The maturity
schedule for outstanding indebtedness under existing debt agreements at
December 31, 1998, is as follows:
($000)
1999 .................. $11,873
2000 .................. 36,100
2001 .................. 7,700
2002 .................. 7,100
2003 .................. 6,500
Thereafter ............ 26,000
-------
$95,273
=======
29
<PAGE>
NOTES TO THE CONSOLIDATED
FINANCIAL STATEMENTS -- (Continued)
9. Commitments and Contingencies
Minimum future rental payments under noncancellable operating leases at
December 31, 1998, are as follows:
($000)
1999 .................. $ 2,140
2000 .................. 2,298
2001 .................. 2,298
2002 .................. 2,298
2003 .................. 2,131
Thereafter ............ 3,187
-------
$14,352
=======
Total rent expense for all operating leases was $2,029,000, $2,123,000 ,
and $2,195,000 for the years ended December 31, 1998, 1997 and 1996,
respectively.
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.
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, 1998 will
not have a material adverse effect on the consolidated financial statements.
10. Quarterly Financial Data (Unaudited)
<TABLE>
<CAPTION>
First Second Third Fourth
Quarter Quarter Quarter Quarter
------------- ------------- ------------- -------------
($000, except per share amounts)
<S> <C> <C> <C> <C>
1998
- ----
Revenues ........................... $ 35,830 $ 38,137 $ 38,389 $ 39,483
Operating income ................... 2,740 3,512 2,071 2,506
Net income ......................... 720 1,325 582 489
Basic earnings per share ........... $ 0.06 $ 0.11 $ 0.05 $ 0.04
Diluted earnings per share ......... $ 0.06 $ 0.11 $ 0.05 $ 0.04
1997
- ----
Revenues ........................... $ 31,812 $ 31,472 $ 33,548 $ 38,949
Operating income ................... 5,172 4,955 6,086 5,183
Net income ......................... 1,891 2,999 3,905 2,666
Basic earnings per share ........... $ 0.16 $ 0.25 $ 0.33 $ 0.22
Diluted earnings per share ......... $ 0.16 $ 0.25 $ 0.32 $ 0.22
</TABLE>
30
<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 Corporation's definitive Proxy
Statement (the "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, 1998, under the captions "Information Regarding
Nominees For Election As Directors And Regarding Continuing Directors" and
"Section 16(A) Beneficial Ownership Reporting Compliance."
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) ............. 55 Chairman of the Board of Directors and Chief Executive Officer
Dr. Robert E. Boni (2)(3)(4) ........... 71 Director
Dr. Craig E. Dorman (2)(3)(5) .......... 58 Director
Robert J. Lichtenstein(4)(5) ........... 51 Director
Eric H. Schless ........................ 44 Director
H. William Brown ....................... 60 Chief Financial Officer
Janice M. Smallacombe .................. 39 Senior Vice President
John J. Burns .......................... 46 President, Maritrans Operating Partners L.P.
Steven E. Welch ........................ 47 Vice President
Walter T. Bromfield .................... 43 Treasurer and Controller
Parker S. Wise ......................... 52 Secretary
</TABLE>
- ------------
(1) As of March 1, 1999
(2) Member of the Compensation Committee
(3) Member of the Audit Committee
(4) Member of the Finance Committee
(5) Member of the Nominating Committee
31
<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" in the Proxy Statement.
Mr. Brown was named Chief Financial Officer of the Company in June 1997.
Previously, Mr. Brown was Chief Financial Officer of Conrail Inc., where he had
been employed since 1978. Mr. Brown is also a member of the Board of Directors
of XTRA Corporation.
Ms. Smallacombe is Senior Vice President and has been continuously
employed by the Company or its predecessors in various capacities since 1982.
Mr. Burns is President of Maritrans Operating Partners L.P. and has been
continuously employed by the Company or its predecessors in various capacities
since 1975.
Mr. Welch is Vice President and has been continuously employed by the
Company or its predecessors in various capacities since 1977.
Mr. Bromfield is Treasurer and Controller of the Company, and has been
continuously employed in various capacities by Maritrans or its predecessors
since 1981.
Mr. Wise was named Secretary and General Counsel of the Company in June
1998. Previously, Mr. Wise was engaged in the private practice of law since
April 1997. Prior to that, Mr. Wise acted as in-house Counsel for Trans Ocean
Express since May 1993.
Item 11. Executive Compensation
Item 12. Security Ownership of Certain Beneficial Owners and Management
Item 13. Certain Relationships and Related Transactions
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 Proxy Statement under the headings "Compensation of Directors
and Executive Officers", "Security Ownership of Certain Beneficial Owners and
Management" and "Certain Transactions".
32
<PAGE>
PART IV
<TABLE>
<CAPTION>
Page
-----
<S> <C> <C>
Item 14. EXHIBITS, FINANCIAL STATEMENT
SCHEDULES AND REPORTS ON FORM 8-K
(a) (1) Financial Statements
Report of Independent Auditors 18
Maritrans Inc. Consolidated Balance Sheets at December 31, 1998, and 1997 19
Maritrans Inc. Consolidated Statements of Income for the years ended
December 31, 1998, 1997, and 1996 20
Maritrans Inc. Consolidated Statements of Cash Flows for the years ended
December 31, 1998, 1997, and 1996 21
Maritrans Inc. Consolidated Statements of Stockholders' Equity for the years ended
December 31, 1998, 1997 and 1996 22
Notes to the Consolidated Financial Statements 23
(2) Financial Statement Schedules
Schedule II Maritrans Inc. Valuation Account for the years ended December 31,
1998, 1997, and 1996. 37
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, 1998.
</TABLE>
33
<PAGE>
(c) Exhibits
<TABLE>
<CAPTION>
Exhibit Index Page
------------------------------------------------------------------------------------------- -----
<S> <C> <C>
3.1# Certificate of Incorporation of the Registrant, as amended.
3.2 By Laws of the Registrant, amended and restated February 9, 1999.
4.1 Certain instruments with respect to long-term debt of the Registrant or Maritrans
Operating Partners L.P., Maritrans Philadelphia Inc. 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.
4.2 Shareholder Rights Agreement, amended and restated February, 1999.
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.
10.4 - Credit Agreement of October 17, 1997, by and among Maritrans Tankers Inc., Maritrans
Inc., and Mellon Bank, N.A. for a revolving credit facility up to $33,000,000
(Exhibit 10.2).
10.4 (a)- Guaranty (Suretyship) Agreement of October 17, 1997, by Maritrans Inc. regarding up to
$50,000,000 in principal amount of credit accommodations to Maritrans Tankers Inc. by
Mellon Bank, N.A. (Exhibit 10.1).
10.4 (b)- Note of Maritrans Tankers Inc. to Mellon Bank, N.A., dated October 17, 1997
(Exhibit 10.3).
10.4 (c)- First Preferred Ship Mortgage, dated October 17, 1997, by Maritrans Tankers Inc.,
mortgagor, to Mellon Bank, N.A., mortgagee, on the vessel ALLEGIANCE (Exhibit 10.4).
10.4 (d)- First Preferred Ship Mortgage, dated October 17, 1997, by Maritrans Tankers Inc.,
mortgagor, to Mellon Bank, N.A., mortgagee, on the vessel PERSEVERANCE (Exhibit
10.5).
</TABLE>
34
<PAGE>
<TABLE>
<CAPTION>
Exhibit Index Page
--------------------------------------------------------------------------------------- -----
<S> <C> <C>
Executive Compensation Plans and Arrangements
10.5 Severance and Non-Competition Agreement, as amended and restated effective December
1, 1998, between Maritrans General Partner Inc. and Parker S. Wise.
10.6 " Severance and Non-Competition Agreement, as amended and restated effective July 7,
1997, between Maritrans General Partner Inc. and John J. Burns.
10.7 - Employment Agreement, dated October 5, 1993 between Maritrans General Partner Inc.
and Stephen A. Van Dyck (Exhibit 10.6).
10.8 " Severance and Non-Competition Agreement, as amended and restated effective July 7,
1997, between Maritrans General Partner Inc. and Steven E. Welch.
10.9 " Severance and Non-Competition Agreement, as amended and restated effective July 7,
1997, between Maritrans General Partner Inc. and Janice M. Smallacombe.
10.10- Profit Sharing and Savings Plan of Maritrans Inc. as amended and restated effective
November 1, 1993 (Exhibit 10.13).
10.11@ Executive Award Plan of Maritrans GP Inc. (Exhibit 10.31).
10.12@ Excess Benefit Plan of Maritrans GP Inc. as amended and restated effective January 1,
1988 (Exhibit 10.32).
10.13@ Retirement Plan of Maritrans GP Inc. as amended and restated effective January 1, 1989
(Exhibit 10.33).
10.14- Performance Unit Plan of Maritrans Inc. effective April 1, 1993 (Exhibit 10.17).
10.15& Executive Compensation Plan as amended and restated effective March 18, 1997.
21.1 Subsidiaries of Maritrans Inc.
23.1 Consent of Independent Auditors
27 Financial Data Schedule
</TABLE>
* Incorporated by reference herein to the Exhibit number in parentheses filed
on March 24, 1988 with 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 Corporation'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 filed on March 31, 1997.
@ Incorporated by reference herein to the Exhibit number in parentheses filed
with Maritrans Partners L. P. Annual Report on Form 10-K, dated March 29,
1993 for the fiscal year ended December 31, 1992.
- - Incorporated by reference herein to the Exhibit number in parentheses filed
with Maritrans Inc. Annual Report on Form 10-K, 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. Annual Report on Form 10-K, dated March 31, 1997 for the
fiscal year ended December 31, 1996.
- - Incorporated by reference herein to the Exhibit number in parentheses filed
with Maritrans Inc. quarterly report on Form 10-Q, dated November 12, 1997
for the quarter ended September 30, 1997.
" Incorporated by reference herein to the Exhibit of the same number filed with
Maritrans Inc. Annual Report on Form 10-K, dated March 31, 1998 for the
fiscal year ended December 31, 1997.
35
<PAGE>
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the registrant has duly caused this report to be signed
on its behalf by the undersigned, thereunto duly authorized.
MARITRANS INC.
(Registrant)
By: /s/ Stephen A. Van Dyck Dated: March 26, 1999
---------------------------
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>
<S> <C> <C>
By: /S/ Stephen A. Van Dyck
----------------------------- Chairman of the Board and Dated: March 26, 1999
Stephen A. Van Dyck Chief Executive Officer
(Principal Executive Officer)
By: /S/ Dr. Robert E. Boni Director Dated: March 26, 1999
-----------------------------
Dr. Robert E. Boni
By: /S/ Dr. Craig E. Dorman Director Dated: March 26, 1999
-----------------------------
Dr. Craig E. Dorman
By: /S/ Robert J. Lichtenstein Director Dated: March 26, 1999
-----------------------------
Robert J. Lichtenstein
By: /S/ H. William Brown Chief Financial Officer Dated: March 26, 1999
----------------------------- (Principal Financial Officer)
H. William Brown
By: /S/ Walter T. Bromfield Treasurer and Controller Dated: March 26, 1999
----------------------------- (Principal Accounting Officer)
Walter T. Bromfield
</TABLE>
36
<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, 1996
Allowance for doubtful accounts ......... $ 457 $403 $ -- $ 860
JANUARY 1 TO DECEMBER 31, 1997
Allowance for doubtful accounts ......... $ 860 $410 $ 12(a) $1,258
JANUARY 1 TO DECEMBER 31, 1998
Allowance for doubtful accounts ......... $ 1,258 $129 $ -- $1,387
</TABLE>
- ------------
(a) Deductions are a result of write-offs of uncollectible accounts receivable
for which allowances were previously provided.
37
<PAGE>
AMENDED AND RESTATED
February 9, 1999
B Y - L A W S
OF
MARITRANS INC.
(a Delaware Corporation)
ARTICLE I
Offices and Fiscal Year
SECTION 1.01. Registered Office.--The registered office of the
corporation shall be in the City of Wilmington, County of New Castle, State of
Delaware until otherwise established by resolution of the board of directors,
and a certificate certifying the change is filed in the manner provided by
statute.
SECTION 1.02. Other Offices.--The corporation may also have offices at
such other places within or without the State of Delaware as the board of
directors may from time to time determine or the business of the corporation
requires.
SECTION 1.03. Fiscal Year.--The fiscal year of the corporation shall
end on the 31st day of December in each year.
ARTICLE II
Notice - Waivers - Meetings
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SECTION 2.01. Notice, What Constitutes.--Whenever, under the provisions
of the Delaware General Corporation Law ("GCL") or the certificate of
incorporation or of these By-laws, notice is required to be given to any
director or stockholder, it shall not be construed to mean personal notice, but
such notice may be given in writing, by mail or by telegram (with messenger
service specified), telex or TWX (with answerback received) or courier service,
charges prepaid, or by facsimile transmission to the address (or to the telex,
TWX, facsimile or telephone number) of the person appearing on the books of the
corporation, or in the case of directors, supplied to the corporation for the
purpose of notice. If the notice is sent by mail, telegraph or courier service,
it shall be deemed to be given when deposited in the United States mail or with
a telegraph office or courier service for delivery to that person or, in the
case of telex or TWX, when dispatched, or in the case of facsimile transmission,
when received.
SECTION 2.02. Notice of Meetings of Board of Directors.--Notice of a
regular meeting of the board of directors need not be given. Notice of every
special meeting of the board of directors shall be given to each director by
telephone or in writing at least 24 hours (in the case of notice by telephone,
telex, TWX or facsimile transmission) or 48 hours (in the case of notice by
telegraph, courier service or express mail) or five days (in the case of notice
by first class mail) before the time at which the meeting is to be held. Every
such notice shall state the time and place of the meeting. Neither the business
to be transacted at, nor the purpose of, any regular or special meeting of the
board need be specified in a notice of the meeting.
SECTION 2.03. Notice of Meetings of Stockholders.--Written notice of
the place, date and hour of every meeting of the stockholders, whether annual or
special, shall be given to each stockholder of record entitled to vote at the
meeting not less than ten nor more than 60 days before the date of the meeting.
Every notice of a special meeting shall state the purpose or purposes thereof.
If the notice is sent by mail, it shall be deemed to have been given when
deposited in the United States mail, postage prepaid, directed to the
stockholder at the address of the stockholder as it appears on the records of
the corporation.
SECTION 2.04. Waivers of Notice.
(a) Written Waiver.--Whenever notice is required to be given under any
provisions of the GCL or the certificate of incorporation or these By-laws, a
written waiver, signed by the person or persons entitled to the notice, whether
before or after the time stated therein, shall be deemed equivalent to notice.
Neither the business to be transacted at, nor the purpose of, any regular or
special meeting of the stockholders, directors, or members of a committee of
directors need be specified in any written waiver of notice of such meeting.
(b) Waiver by Attendance.--Attendance of a person at a meeting, either
in person or by proxy, shall constitute a waiver of notice of such meeting,
except where a person attends a meeting for the express purpose of objecting at
the beginning of the meeting to the transaction of any business because the
meeting was not lawfully called or convened.
SECTION 2.05. Exception to Requirements of Notice.
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(a) General Rule.--Whenever notice is required to be given, under any
provision of the GCL or of the certificate of incorporation or these By-laws, to
any person with whom communication is unlawful, the giving of such notice to
such person shall not be required and there shall be no duty to apply to any
governmental authority or agency for a license or permit to give such notice to
such person. Any action or meeting which shall be taken or held without notice
to any such person with whom communication is unlawful shall have the same force
and effect as if such notice had been duly given.
(b) Stockholders Without Forwarding Addresses.--Whenever notice is
required to be given, under any provision of the GCL or the certificate of
incorporation or these By-laws, to any stockholder to whom (i) notice of two
consecutive annual meetings, and all notices of meetings or of the taking of
action by written consent without a meeting to such person during the period
between such two consecutive annual meetings, or (ii) all, and at least two,
payments (if sent by first class mail) of dividends or interest on securities
during a 12 month period, have been mailed addressed to such person at his
address as shown on the records of the corporation and have been returned
undeliverable, the giving of such notice to such person shall not be required.
Any action or meeting which shall be taken or held without notice to such person
shall have the same force and effect as if such notice had been duly given. If
any such person shall deliver to the corporation a written notice setting forth
the person's then current address, the requirement that notice be given to such
person shall be reinstated.
SECTION 2.06. Conference Telephone Meetings.--One or more directors may
participate in a meeting of the board, or of a committee of the board, by means
of conference telephone or similar communications equipment by means of which
all persons participating in the meeting can hear each other. Participation in a
meeting pursuant to this section shall constitute presence in person at such
meeting.
ARTICLE III
Meetings of Stockholders
SECTION 3.01. Place of Meeting.--All meetings of the stockholders of
the corporation shall be held at the registered office of the corporation, or at
such other place within or without the State of Delaware as shall be designated
by the board of directors in the notice of such meeting.
SECTION 3.02. Annual Meeting.--The board of directors may fix and
designate the date and time of the annual meeting of the stockholders, but if no
such date and time is fixed and designated by the board, the meeting for any
calendar year shall be held on the second Wednesday of May in such year, if not
a legal holiday under the laws of Delaware, and, if a legal holiday, then on the
next succeeding business day, not a Saturday, at 10:00 o'clock A.M., and at said
meeting the stockholders then entitled to vote shall elect directors and shall
transact such other business as may properly be brought before the meeting.
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SECTION 3.03. Special Meetings.--Special meetings of the stockholders
of the corporation may be called at any time by the chairman of the board, a
majority of the board of directors or the president and chief executive officer.
At any time, upon the written request of any person or persons who have duly
called a special meeting, which written request shall state the purpose or
purposes of the meeting, it shall be the duty of the secretary to fix the date
of the meeting which shall be held at such date and time as the secretary may
fix, not less than ten nor more than 60 days after the receipt of the request,
and to give due notice thereof. If the secretary shall neglect or refuse to fix
the time and date of such meeting and give notice thereof, the person or persons
calling the meeting may do so.
SECTION 3.04. Quorum, Manner of Acting and Adjournment.
(a) Quorum.--The holders of a majority of the shares entitled to vote,
present in person or represented by proxy, shall constitute a quorum at all
meetings of the stockholders except as otherwise provided by the GCL, by the
certificate of incorporation or by these By-laws. If a quorum is not present or
represented at any meeting of the stockholders, the stockholders entitled to
vote thereat, present in person or represented by proxy, shall have power to
adjourn the meeting from time to time, without notice other than announcement at
the meeting, until a quorum is present or represented. At any such adjourned
meeting at which a quorum is present or represented, the corporation may
transact any business which might have been transacted at the original meeting.
If the adjournment is for more than 30 days, or if after the adjournment a new
record date is fixed for the adjourned meeting, a notice of the adjourned
meeting shall be given to each stockholder of record entitled to vote at the
meeting.
(b) Manner of Acting.--Directors shall be elected by a plurality of the
votes of the shares present in person or represented by proxy at the meeting and
entitled to vote on the election of directors. In all matters other than the
election of directors, the affirmative vote of the majority of shares present in
person or represented by proxy at the meeting and entitled to vote thereon shall
be the act of the stockholders, unless the question is one upon which, by
express provision of the applicable statute, the certificate of incorporation or
these By-laws, a different vote is required in which case such express provision
shall govern and control the decision of the question. The stockholders present
in person or by proxy at a duly organized meeting can continue to do business
until adjournment, notwithstanding withdrawal of enough stockholders to leave
less than a quorum.
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SECTION 3.05. Organization.--At every meeting of the stockholders, the
chairman of the board, if there be one, or in the case of a vacancy in the
office or absence of the chairman of the board, one of the following persons
present in the order stated: the vice chairman, if one has been appointed, the
president and chief executive officer, the vice presidents in their order of
rank or seniority, a chairman designated by the board of directors or a chairman
chosen by the stockholders entitled to cast a majority of the votes which all
stockholders present in person or by proxy are entitled to cast, shall act as
chairman, and the secretary, or, in the absence of the secretary, an assistant
secretary, or in the absence of the secretary and the assistant secretaries, a
person appointed by the chairman, shall act as secretary.
SECTION 3.06. Voting.
(a) General Rule.--Unless otherwise provided in the certificate of
incorporation, each stockholder shall be entitled to one vote, in person or by
proxy, for each share of capital stock having voting power held by such
stockholder.
(b) Voting and Other Action by Proxy.--
(1) A stockholder may execute a writing authorizing another
person or persons to act for the stockholder as proxy. Such execution
may be accomplished by the stockholder or the authorized officer,
director, employee or agent of the stockholder signing such writing or
causing his or her signature to be affixed to such writing by any
reasonable means including, but not limited to, by facsimile signature.
A stockholder may authorize another person or persons to act for the
stockholder as proxy by transmitting or authorizing the transmission of
a telegram, cablegram, or other means of electronic transmission to the
person who will be the holder of the proxy or to a proxy solicitation
firm, proxy support service organization or like agent duly authorized
by the person who will be the holder of the proxy to receive such
transmission if such telegram, cablegram or other means of electronic
transmission sets forth or is submitted with information from which it
can be determined that the telegram, cablegram or other electronic
transmission was authorized by the stockholder.
(2) No proxy shall be voted or acted upon after three years
from its date, unless the proxy provides for a longer period.
(3) A duly executed proxy shall be irrevocable if it states
that it is irrevocable and if, and only so long as, it is coupled with
an interest sufficient in law to support an irrevocable power. A proxy
may be made irrevocable regardless of whether the interest with which
it is coupled is an interest in the stock itself or an interest in the
corporation generally.
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SECTION 3.07. Unanimous Consent of Stockholders in Lieu of
Meeting.--Any action required to be taken at any annual or special meeting of
stockholders of the corporation, or any action which may be taken at any annual
or special meeting of such stockholders, may be taken without a meeting, without
prior notice and without a vote, if a consent or consents in writing, setting
forth the action so taken, shall be signed by the holders of all of the
outstanding stock entitled to vote to take such action at any annual or special
meeting of stockholders of the corporation and shall be delivered to the
corporation by delivery to its registered office in Delaware, its principal
place of business, or an officer or agent of the corporation having custody of
the books in which proceedings of meetings of stockholders are recorded. Every
written consent shall bear the date of signature of each stockholder who signs
the consent and no written consent shall be effective to take the corporate
action referred to therein unless, within 60 days of the earliest dated consent
delivered in the manner required in this section to the corporation, written
consents signed by the holders of all of the outstanding stock entitled to vote
to take such action are delivered to the corporation by delivery to its
registered office in Delaware, its principal place of business, or an officer or
agent of the corporation having custody of the book in which proceedings of
meetings of stockholders are recorded. Delivery made to a corporation's
registered office shall be by hand or by certified or registered mail, return
receipt requested.
SECTION 3.08. Voting Lists.--The officer who has charge of the stock
ledger of the corporation shall prepare and make, at least ten days before every
meeting of stockholders, a complete list of the stockholders entitled to vote at
the meeting. The list shall be arranged in alphabetical order, showing the
address of each stockholder and the number of shares registered in the name of
each stockholder. Such list shall be open to the examination of any stockholder,
for any purpose germane to the meeting, during ordinary business hours, for a
period of at least ten days prior to the meeting either at a place within the
city where the meeting is to be held, which place shall be specified in the
notice of the meeting, or, if not so specified, at the place where the meeting
is to be held. The list shall also be produced and kept at the time and place of
the meeting during the whole time thereof, and may be inspected by any
stockholder who is present.
SECTION 3.09. Inspectors of Election.
(a) Appointment.--All elections of directors shall be by written
ballot, unless otherwise provided in the certificate of incorporation; the vote
upon any other matter need not be by ballot. In advance of any meeting of
stockholders the board of directors may appoint one or more inspectors, who need
not be stockholders, to act at the meeting and to make a written report thereof.
The board of directors may designate one or more persons as alternate inspectors
to replace any inspector who fails to act. If no inspector or alternate is able
to act at a meeting of stockholders, the person presiding at the meeting shall
appoint one or more inspectors to act at the meeting. Each inspector, before
entering upon the discharge of his or her duties, shall take and sign an oath
faithfully to execute the duties of inspector with strict impartiality and
according to the person's best ability.
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(b) Duties.--The inspectors shall ascertain the number of shares
outstanding and the voting power of each, shall determine the shares represented
at the meeting and the validity of proxies and ballots, shall count all votes
and ballots, shall determine and retain for a reasonable period a record of the
disposition of any challenges made to any determination by the inspectors, and
shall certify their determination of the number of shares represented at the
meeting and their count of all votes and ballots. The inspectors may appoint or
retain other persons or entities to assist the inspectors in the performance of
the duties of the inspectors.
(c) Polls.--The date and time of the opening and the closing of the
polls for each matter upon which the stockholders will vote at a meeting shall
be announced at the meeting. No ballot, proxies or votes, nor any revocations
thereof or changes thereto, shall be accepted by the inspectors after the
closing of the polls unless the Court of Chancery upon application by a
stockholder shall determine otherwise.
(d) Reconciliation of Proxies and Ballots.--In determining the validity
and counting of proxies and ballots, the inspectors shall be limited to an
examination of the proxies, any envelopes submitted with those proxies, any
information transmitted in accordance with section 3.06, ballots and the regular
books and records of the corporation, except that the inspectors may consider
other reliable information for the limited purpose of reconciling proxies and
ballots submitted by or on behalf of banks, brokers, their nominees or similar
persons which represent more votes than the holder of a proxy is authorized by
the record owner to cast or more votes than the stockholder holds of record. If
the inspectors consider other reliable information for the limited purpose
permitted herein, the inspectors at the time they make their certification
pursuant to subsection (b) shall specify the precise information considered by
them including the person or persons from whom they obtained the information,
when the information was obtained, the means by which the information was
obtained and the basis for the inspectors' belief that such information is
accurate and reliable.
Section 3.10. Business to be Transacted at Stockholder Meetings.
No business may be transacted at an annual meeting of stockholders, other than
business that is either (a) specified in the notice of meeting (or any
supplement thereto) given by or at the direction of the board of directors (or
any duly authorized committee thereof), (b) otherwise properly brought before
the annual meeting by or at the direction of the board of directors (or any duly
authorized committee thereof), or (c) otherwise properly brought before the
annual meeting by any stockholder of the corporation (i) who is a stockholder of
record on the date of the giving of the notice provided for in this Section 3.10
and on the record date for the determination of stockholders entitled to vote at
such annual meeting and (ii) who complies with the notice procedures set forth
in this Section 3.10. In addition to any other applicable requirements, for
business to be properly brought before an annual meeting by a stockholder, such
stockholder must have given timely notice thereof in proper written form to the
secretary of the corporation.
To be timely, a stockholder's notice must be delivered to or mailed and received
at the principal executive offices of the corporation not less than 90 days
prior to the date of the annual meeting of stockholders.
To be in proper written form, a stockholder's notice to the secretary must set
forth as to each matter such stockholder proposes to bring before the annual
meeting (i) a brief description of the business desired to be brought before the
annual meeting and the reasons for conducting such business at the annual
meeting, (ii) the name and record address of such stockholder, (iii) the class
or series and number of shares of capital stock of the corporation which are
owned beneficially or of record by such stockholder, (iv) a description of all
arrangements or understandings between such stockholder and any other person or
persons (including their names) in connection with the proposal of such business
by such stockholder and any material interest of such stockholder in such
business and (v) a representation that such stockholder intends to appear in
person or by proxy at the annual meeting to bring such business before the
meeting.
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No business shall be conducted at the annual meeting of stockholders
except business brought before the annual meeting in accordance with the
procedures set forth in this Section 3.10; provided, however, that once business
has been properly brought before the annual meeting in accordance with such
procedures, nothing in this Section 3.10 shall be deemed to preclude discussion
by any stockholder of any such business. Whenever the language of a proposed
resolution is included in a written notice of a meeting required to be given by
the General Corporation Law of the State of Delaware or by the Restated
Certificate of Incorporation or the Amended and Restated By-Laws, the meeting
considering the resolution may without further notice adopt it with any
clarifying or other amendments that do not enlarge its original purpose. If the
chairman of an annual meeting determines that business was not properly brought
before the annual meeting in accordance with the foregoing procedures, the
chairman shall declare to the meeting that the business was not properly brought
before the meeting and such business shall not be transacted.
At a special meeting of stockholders, only such business shall be
conducted as shall have been set forth in the notice relating to the meeting. At
any meeting, matters incident to the conduct of this meeting may be voted upon
or otherwise disposed of as the presiding officer of the meeting shall determine
to be appropriate.
ARTICLE IV
Board of Directors
SECTION 4.01. Powers.--All powers vested by law in the corporation
shall be exercised by or under the authority of, and the business and affairs of
the corporation shall be managed under the direction of, the board of directors.
SECTION 4.02. Number.--The board of directors shall consist of such
number of directors, not less than three nor more than twelve, as may be
determined from time to time by resolution adopted by a vote of three-quarters
of the entire board of directors.
SECTION 4.03. Term of Office. The board of directors shall be divided
into three classes, which shall be as nearly equal in number as possible.
Directors of each class shall serve for a term of three years and until their
successors shall have been elected and qualified, except in the event of death,
resignation or removal. The three initial classes of directors shall be
comprised as follows:
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(1) Class I shall be comprised of directors who shall serve
until the annual meeting of stockholders in 1994 and until their
successors shall have been elected and qualified.
(2) Class II shall be comprised of directors who shall serve
until the annual meeting of stockholders in 1995 and until their
successors shall have been elected and qualified.
(3) Class III shall be comprised of directors who shall serve
until the annual meeting of stockholders in 1996 and until their
successors shall have been elected and qualified.
SECTION 4.04. Vacancies.
(a) Vacancies and newly created directorships resulting from
any increase in the authorized number of directors may be filled by a majority
of the directors then in office, though less than a quorum, or by a sole
remaining director, and a director so chosen shall hold office until the next
annual election of the class for which such director shall have been elected and
until a successor is duly elected and qualified. If there are no directors in
office, then an election of directors may be held in the manner provided by
statute.
(b) Whenever the holders of any class or classes of stock or
series thereof are entitled to elect one or more directors by the provisions of
the certificate of incorporation, vacancies and newly created directorships of
such class or classes or series may be filled by a majority of the directors
elected by such class or classes or series thereof then in office, or by a sole
remaining director so elected.
(c) If, at the time of filling any vacancy or any newly
created directorship, the directors then in office shall constitute less than a
majority of the whole board (as constituted immediately prior to any such
increase), the Court of Chancery may, upon application of any stockholder or
stockholders holding at least ten percent of the total number of the shares at
the time outstanding having the right to vote for such directors, summarily
order an election to be held to fill any such vacancies or newly created
directorship, or to replace the directors chosen by the directors then in
office.
SECTION 4.05. Resignations.--Any director may resign at any time upon
written notice to the chairman, president and chief executive officer or
secretary of the corporation. The resignation shall be effective upon receipt
thereof by the corporation or at such subsequent time as shall be specified in
the notice of resignation and, unless otherwise specified in the notice, the
acceptance of the resignation shall not be necessary to make it effective.
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SECTION 4.06. Organization.--At every meeting of the board of
directors, the chairman of the board, if there be one, or, in the case of a
vacancy in the office or absence of the chairman of the board, one of the
following officers present in the order stated: the vice chairman of the board,
if there be one, the president and chief executive officer, the vice presidents
in their order of rank and seniority, or a chairman chosen by a majority of the
directors present, shall preside, and the secretary, or, in the absence of the
secretary, an assistant secretary, or in the absence of the secretary and the
assistant secretaries, any person appointed by the chairman of the meeting,
shall act as secretary.
SECTION 4.07. Place of Meeting.--Meetings of the board of directors,
both regular and special, shall be held at such place within or without the
State of Delaware as the board of directors may from time to time determine, or
as may be designated in the notice of the meeting.
SECTION 4.08. Regular Meetings.--Regular meetings of the board of
directors shall be held without notice at such time and place as shall be
designated from time to time by resolution of the board of directors.
SECTION 4.09. Special Meetings.--Special meetings of the board of
directors shall be held whenever called by the chairman, by two or more of the
directors or by the president and chief executive officer.
SECTION 4.10. Quorum, Manner of Acting and Adjournment.
(a) General Rule.--At all meetings of the board one-third of the total
number of directors shall constitute a quorum for the transaction of business.
The vote of a majority of the directors present at any meeting at which a quorum
is present shall be the act of the board of directors, except as may be
otherwise specifically provided by the GCL or by the certificate of
incorporation. If a quorum is not present at any meeting of the board of
directors, the directors present thereat may adjourn the meeting from time to
time, without notice other than announcement at the meeting, until a quorum is
present.
(b) Unanimous Written Consent.--Unless otherwise restricted by the
certificate of incorporation, any action required or permitted to be taken at
any meeting of the board of directors may be taken without a meeting, if all
members of the board consent thereto in writing, and the writing or writings are
filed with the minutes of proceedings of the board.
SECTION 4.11. Executive and Other Committees.
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(a) Establishment.--The board of directors may, by resolution adopted
by a majority of the whole board, establish an Executive Committee and one or
more other committees, each committee to consist of one or more directors. The
board may designate one or more directors as alternate members of any committee,
who may replace any absent or disqualified member at any meeting of the
committee. In the absence or disqualification of a member of a committee and the
alternate or alternates, if any, designated for such member, the member or
members of the committee present at any meeting and not disqualified from
voting, whether or not they constitute a quorum, may unanimously appoint another
director to act at the meeting in the place of any such absent or disqualified
member.
(b) Powers.--The Executive Committee, if established, and any such
other committee to the extent provided in the resolution establishing such
committee shall have and may exercise all the power and authority of the board
of directors in the management of the business and affairs of the corporation
and may authorize the seal of the corporation to be affixed to all papers which
may require it; but no such committee shall have the power or authority in
reference to amending the certificate of incorporation (except that a committee
may, to the extent authorized in the resolution or resolutions providing for the
issuance of shares of stock adopted by the board of directors as provided in
Section 151(a) of the GCL, fix the designation and any of the preferences or
rights of such shares relating to dividends, redemption, dissolution, any
distribution of assets of the corporation or the conversion into, or the
exchange of such shares for, shares of any other class or classes or any other
series of the same or any other class or classes of stock of the corporation or
fix the number of shares of any series of stock or authorize the increase or
decrease of shares of any series), adopting an agreement of merger or
consolidation under Section 251 or 252 of the GCL, recommending to the
stockholders the sale, lease or exchange of all or substantially all of the
corporation's property and assets, recommending to the stockholders a
dissolution of the corporation or a revocation of a dissolution, or amending the
By-laws of the corporation. The Executive Committee shall have the power or
authority to declare a dividend, to authorize the issuance of stock and to adopt
a certificate of ownership and merger pursuant to Section 253 of the GCL. Such
committee or committees shall have such name or names as may be determined from
time to time by resolution adopted by the board of directors. Each committee so
formed shall keep regular minutes of its meetings and report the same to the
board of directors when required.
(c) Committee Procedures.--The term "board of directors" or "board,"
when used in any provision of these By-laws relating to the organization or
procedures of or the manner of taking action by the board of directors, shall be
construed to include and refer to the Executive Committee or other committee of
the board.
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SECTION 4.12. Compensation of Directors.--Unless otherwise restricted
by the certificate of incorporation, the board of directors shall have the
authority to fix the compensation of directors. The directors may be paid their
expenses, if any, of attendance at each meeting of the board of directors and
may be paid a fixed sum for attendance at each meeting of the board of directors
or a stated salary as director. No such payment shall preclude any director from
serving the corporation in any other capacity and receiving compensation
therefor. Members of special or standing committees may be allowed like
compensation for attending committee meetings.
SECTION 4.13. Qualifications and Election of Directors.
(a) All directors of the corporation shall be natural persons
of full age, but need not be residents of Delaware or stockholders in the
corporation. Except in the case of vacancies, directors shall be elected by the
stockholders. If directors of more than one class are to be elected, each class
of directors to be elected at the meeting shall be nominated and elected
separately.
(b) Nominations for election of directors may be made by any
stockholder entitled to vote for the election of directors, provided that
written notice (the "Notice") of such stockholder's intent to nominate a
director at the meeting is given by the stockholder and received by the
secretary of the corporation in the manner and within the time specified in this
subsection. The Notice shall be delivered to the secretary of the corporation
not less than 14 days nor more than 50 days prior to any meeting of the
stockholders called for the election of directors; provided, however, that if
less than 21 days' notice of the meeting is given to stockholders, the Notice
shall be delivered to the secretary of the corporation not later than the
earlier of the seventh day following the day on which notice of the meeting was
first mailed to stockholders or the fourth day prior to the meeting. In lieu of
delivery to the secretary of the corporation, the Notice may be mailed to the
secretary of the corporation by certified mail, return receipt requested, but
shall be deemed to have been given only upon actual receipt by the secretary of
the corporation. The requirements of this subsection shall not apply to a
nomination for directors made to the shareholders by the board of directors.
(c) The Notice shall be in writing and shall contain or be
accompanied by:
(1) the name and residence of such stockholder;
(2) a representation that the stockholder is a holder
of record of the corporation's voting stock and intends to appear in
person or by proxy at the meeting to nominate the person or persons
specified in the Notice;
(3) such information regarding each nominee as would
have been required to be included in a proxy statement filed pursuant
to Regulation 14A of the rules and regulations established by the
Securities and Exchange Commission under the Securities Exchange Act of
1934 (or pursuant to any successor act or regulation) had proxies been
solicited with respect to such nominee by the management or board of
directors of the corporation;
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(4) a description of all arrangements or
understandings among the stockholder and each nominee and any other
person or persons (naming such person or persons) pursuant to which
such nomination or nominations are to be made by the stockholder; and
(5) the consent of each nominee to serve as director
of the corporation if so elected.
(d) The chairman of the meeting may, if the facts warrant,
determine and declare to the meeting that any nomination made at the meeting was
not made in accordance with the foregoing procedures and, in such event, the
nomination shall be disregarded. Any decision by the chairman of the meeting
shall be conclusive and binding upon all stockholders of the corporation for any
purpose.
ARTICLE V
Officers
SECTION 5.01. Number, Qualifications and Designation.--The officers of
the corporation shall be chosen by the board of directors and shall be a
president and chief executive officer, one or more vice presidents, a secretary,
a treasurer, and such other officers as may be elected in accordance with the
provisions of section 5.03 of this Article. Any number of offices may be held by
the same person. Officers may, but need not, be directors or stockholders of the
corporation. The board of directors may elect from among the members of the
board a chairman of the board and a vice chairman of the board who shall be
officers of the corporation. The chairman of the board or the president and
chief executive officer, as designated from time to time by the board of
directors, shall be the chief executive officer of the corporation.
SECTION 5.02. Election and Term of Office.--The officers of the
corporation, except those elected by delegated authority pursuant to section
5.03 of this Article, shall be elected annually by the board of directors, and
each such officer shall hold office for a term of one year and until a successor
is elected and qualified, or until his or her earlier resignation or removal.
Any officer may resign at any time upon written notice to the corporation.
13
<PAGE>
SECTION 5.03. Subordinate Officers, Committees and Agents.--The board
of directors may from time to time elect such other officers and appoint such
committees, employees or other agents as it deems necessary, who shall hold
their offices for such terms and shall exercise such powers and perform such
duties as are provided in these By-laws, or as the board of directors may from
time to time determine. The board of directors may delegate to any officer or
committee the power to elect subordinate officers and to retain or appoint
employees or other agents, or committees thereof, and to prescribe the authority
and duties of such subordinate officers, committees, employees or other agents.
SECTION 5.04. The Chairman and Vice Chairman of the Board.--The
chairman of the board, if there be one, or in the absence of the chairman, the
vice chairman of the board, if there be one, shall preside at all meetings of
the stockholders and of the board of directors, and shall perform such other
duties as may from time to time be assigned to them by the board of directors.
SECTION 5.05. The President and Chief Executive Officer.--The president
and chief executive officer of the corporation shall have general supervision
over the business and operations of the corporation, subject, however, to the
control of the board of directors. The president and chief executive officer
shall, in general, perform all duties incident to the office of president and
chief executive officer, and such other duties as from time to time may be
assigned by the board of directors and, if the chairman of the board is the
chief executive officer, the chairman of the board.
SECTION 5.06. The Vice Presidents.--The vice presidents shall perform
the duties of the president and chief executive officer in the absence of the
president and chief executive officer and such other duties as may from time to
time be assigned to them by the board of directors or by the president and chief
executive officer.
SECTION 5.07. The Secretary.--The secretary, or an assistant secretary,
shall attend all meetings of the stockholders and of the board of directors and
shall record the proceedings of the stockholders and of the directors and of
committees of the board in a book or books to be kept for that purpose; shall
see that notices are given and records and reports properly kept and filed by
the corporation as required by law; shall be the custodian of the seal of the
corporation and see that it is affixed to all documents to be executed on behalf
of the corporation under its seal; and, in general, shall perform all duties
incident to the office of secretary, and such other duties as may from time to
time be assigned by the board of directors or the president and chief executive
officer.
SECTION 5.08. The Treasurer.--The treasurer, or an assistant treasurer,
shall have or provide for the custody of the funds or other property of the
corporation; shall collect and receive or provide for the collection and receipt
of moneys earned by or in any manner due to or received by the corporation;
shall deposit all funds in his or her custody as treasurer in such banks or
other places of deposit as the board of directors may from time to time
designate; whenever so required by the board of directors, shall render an
account showing his or her transactions as treasurer and the financial condition
of the corporation; and, in general, shall discharge such other duties as may
from time to time be assigned by the board of directors or the president and
chief executive officer.
14
<PAGE>
SECTION 5.09. Officers' Bonds.--No officer of the corporation need
provide a bond to guarantee the faithful discharge of the officer's duties
unless the board of directors shall by resolution so require a bond in which
event such officer shall give the corporation a bond (which shall be renewed if
and as required) in such sum and with such surety or sureties as shall be
satisfactory to the board of directors for the faithful performance of the
duties of office.
SECTION 5.10. Salaries.--The salaries of the officers and agents of the
corporation elected by the board of directors shall be fixed from time to time
by the board of directors.
ARTICLE VI
Certificates of Stock, Transfer, Etc.
SECTION 6.01. Form and Issuance.
(a) Issuance.--The shares of the corporation shall be represented by
certificates unless the board of directors shall by resolution provide that some
or all of any class or series of stock shall be uncertificated shares. Any such
resolution shall not apply to shares represented by a certificate until the
certificate is surrendered to the corporation. Notwithstanding the adoption of
any resolution providing for uncertificated shares, every holder of stock
represented by certificates and upon request every holder of uncertificated
shares shall be entitled to have a certificate signed by, or in the name of the
corporation by, the chairman or vice chairman of the board of directors, or the
president and chief executive officer or vice president, and by the treasurer or
an assistant treasurer, or the secretary or an assistant secretary, representing
the number of shares registered in certificate form.
(b) Form and Records.--Stock certificates of the corporation shall be
in such form as approved by the board of directors. The stock record books and
the blank stock certificate books shall be kept by the secretary or by any
agency designated by the board of directors for that purpose. The stock
certificates of the corporation shall be numbered and registered in the stock
ledger and transfer books of the corporation as they are issued.
(c) Signatures.--Any of or all the signatures upon the stock
certificates of the corporation may be a facsimile. In case any officer,
transfer agent or registrar who has signed, or whose facsimile signature has
been placed upon, any share certificate shall have ceased to be such officer,
transfer agent or registrar, before the certificate is issued, it may be issued
with the same effect as if the signatory were such officer, transfer agent or
registrar at the date of its issue.
15
<PAGE>
SECTION 6.02. Transfer.--Transfers of shares shall be made on the share
register or transfer books of the corporation upon surrender of the certificate
therefor, endorsed by the person named in the certificate or by an attorney
lawfully constituted in writing. No transfer shall be made which would be
inconsistent with the provisions of Article 8, Title 6 of the Delaware Uniform
Commercial Code-Investment Securities.
SECTION 6.03. Lost, Stolen, Destroyed or Mutilated
Certificates.--The board of directors may direct a new certificate of stock or
uncertificated shares to be issued in place of any certificate theretofore
issued by the corporation alleged to have been lost, stolen or destroyed, upon
the making of an affidavit of that fact by the person claiming the certificate
of stock to be lost, stolen or destroyed. When authorizing such issue of a new
certificate or certificates, the board of directors may, in its discretion and
as a condition precedent to the issuance thereof, require the owner of such
lost, stolen or destroyed certificate or certificates, or the legal
representative of the owner, to give the corporation a bond sufficient to
indemnify against any claim that may be made against the corporation on account
of the alleged loss, theft or destruction of such certificate or the issuance of
such new certificate or uncertificated shares.
SECTION 6.04. Record Holder of Shares.--The corporation shall be
entitled to recognize the exclusive right of a person registered on its books as
the owner of shares to receive dividends, and to vote as such owner, and to hold
liable for calls and assessments a person registered on its books as the owner
of shares, and shall not be bound to recognize any equitable or other claim to
or interest in such share or shares on the part of any other person, whether or
not it shall have express or other notice thereof, except as otherwise provided
by the laws of Delaware.
SECTION 6.05. Determination of Stockholders of
Record.
(a) Meetings of Stockholders.--In order that the corporation may
determine the stockholders entitled to notice of or to vote at any meeting of
stockholders or any adjournment thereof, the board of directors may fix a record
date, which record date shall not precede the date upon which the resolution
fixing the record date is adopted by the board of directors, and which record
date shall not be more than 60 nor less than ten days before the date of such
meeting. If no record date is fixed by the board of directors, the record date
for determining stockholders entitled to notice of or to vote at a meeting of
stockholders shall be at the close of business on the day next preceding the day
on which notice is given, or, if notice is waived, at the close of business on
the day next preceding the day on which the meeting is held. A determination of
stockholders of record entitled to notice of or to vote at a meeting of
stockholders shall apply to any adjournment of the meeting unless the board of
directors fixes a new record date for the adjourned meeting.
16
<PAGE>
(b) Consent of Stockholders.--In order that the corporation may
determine the stockholders entitled to consent to corporate action in writing
without a meeting, the board of directors may fix a record date, which record
date shall not precede the date upon which the resolution fixing the record date
is adopted by the board of directors, and which date shall not be more than ten
days after the date upon which the resolution fixing the record date is adopted
by the board of directors. If no record date has been fixed by the board of
directors, the record date for determining stockholders entitled to consent to
corporate action in writing without a meeting, when no prior action by the board
of directors is required by the GCL, shall be the first date on which a signed
written consent setting forth the action taken or proposed to be taken is
delivered to the corporation by delivery to its registered office in Delaware,
its principal place of business, or an officer or agent of the corporation
having custody of the book in which proceedings of meetings of stockholders are
recorded. Delivery made to a corporation's registered office shall be by hand or
by certified or registered mail, return receipt requested. If no record date has
been fixed by the board of directors and prior action by the board of directors
is required by the GCL, the record date for determining stockholders entitled to
consent to corporate action in writing without a meeting shall be at the close
of business on the day on which the board of directors adopts the resolution
taking such prior action.
(c) Dividends.--In order that the corporation may determine the
stockholders entitled to receive payment of any dividend or other distribution
or allotment of any rights of the stockholders entitled to exercise any rights
in respect of any change, conversion or exchange of stock, or for the purpose of
any other lawful action, the board of directors may fix a record date, which
record date shall not precede the date upon which the resolution fixing the
record date is adopted, and which record date shall be not more than 60 days
prior to such action. If no record date is fixed, the record date for
determining stockholders for any such purpose shall be at the close of business
on the day on which the board of directors adopts the resolution relating
thereto.
ARTICLE VII
Indemnification of Directors, Officers and
Other Authorized Representatives
SECTION 7.01. Indemnification of Authorized
17
<PAGE>
Representatives in Third Party Proceedings.--The corporation shall indemnify any
person who was or is an authorized representative of the corporation, and who
was or is a party, or is threatened to be made a party to any third party
proceeding, by reason of the fact that such person was or is an authorized
representative of the corporation, against expenses, judgments, fines and
amounts paid in settlement actually and reasonably incurred by such person in
connection with such third party proceeding if such person acted in good faith
and in a manner such person reasonably believed to be in, or not opposed to, the
best interests of the corporation and, with respect to any criminal third party
proceeding, had no reasonable cause to believe such conduct was unlawful. The
termination of any third party proceeding by judgment, order, settlement,
conviction or upon a plea of nolo contendere or its equivalent, shall not of
itself create a presumption that the authorized representative did not act in
good faith and in a manner which such person reasonably believed to be in or not
opposed to, the best interests of the corporation, and, with respect to any
criminal third party proceeding, had reasonable cause to believe that such
conduct was unlawful.
SECTION 7.02. Indemnification of Authorized Representatives in
Corporate Proceedings.--The corporation shall indemnify any person who was or is
an authorized representative of the corporation and who was or is a party or is
threatened to be made a party to any corporate proceeding, by reason of the fact
that such person was or is an authorized representative of the corporation,
against expenses actually and reasonably incurred by such person in connection
with the defense or settlement of such corporate proceeding if such person acted
in good faith and in a manner reasonably believed to be in, or not opposed to,
the best interests of the corporation and except that no indemnification shall
be made in respect of any claim, issue or matter as to which such person shall
have been adjudged to be liable to the corporation unless and only to the extent
that the Court of Chancery or the court in which such corporate proceeding was
brought shall determine upon application that, despite the adjudication of
liability but in view of all the circumstances of the case, such authorized
representative is fairly and reasonably entitled to indemnity for such expenses
which the Court of Chancery or such other court shall deem proper.
SECTION 7.03. Mandatory Indemnification of Authorized
Representatives.--To the extent that an authorized representative or other
employee or agent of the corporation has been successful on the merits or
otherwise in defense of any third party or corporate proceeding or in defense of
any claim, issue or matter therein, such person shall be indemnified against
expenses actually and reasonably incurred by such person in connection
therewith.
SECTION 7.04. Determination of Entitlement to Indemnification.--Any
indemnification under section 7.01, 7.02 or 7.03 of this Article (unless ordered
by a court) shall be made by the corporation only as authorized in the specific
case upon a determination that indemnification of the authorized representative
or other employee or agent is proper in the circumstances because such person
has either met the applicable standard of conduct set forth in section 7.01 or
7.02 or has been successful on the merits or otherwise as set forth in section
7.03 and that the amount requested has been actually and reasonably incurred.
Such determination shall be made:
(1) by the board of directors by a majority vote of a quorum
consisting of directors who were not parties to such third party or
corporate proceeding; or
18
<PAGE>
(2) if such a quorum is not obtainable, or even if obtainable,
a quorum of disinterested directors so directs, by independent legal
counsel in a written opinion; or
(3) by the stockholders.
SECTION 7.05. Advancing Expenses.--Expenses actually and
reasonably incurred in defending a third party or corporate proceeding shall be
paid on behalf of an authorized representative by the corporation in advance of
the final disposition of such third party or corporate proceeding upon receipt
of an undertaking by or on behalf of the authorized representative to repay such
amount if it shall ultimately be determined that the authorized representative
is not entitled to be indemnified by the corporation as authorized in this
Article. The financial ability of any authorized representative to make a
repayment contemplated by this section shall not be a prerequisite to the making
of an advance. Expenses incurred by other employees and agents may be so paid
upon such terms and conditions, if any, as the board of directors deems
appropriate.
SECTION 7.06. Definitions.--For purposes of this Article:
(1) "authorized representative" shall mean any and all
directors and officers of the corporation and any person designated as
an authorized representative by the board of directors of the
corporation (which may, but need not, include any person serving at the
request of the corporation as a director, officer, employee or agent of
another corporation, partnership, joint venture, trust or other
enterprise);
(2) "corporation" shall include, in addition to the resulting
corporation, any constituent corporation (including any constituent of
a constituent) absorbed in a consolidation or merger which, if its
separate existence had continued, would have had power and authority to
indemnify its directors, officers, employees or agents, so that any
person who is or was a director, officer, employee or agent of such
constituent corporation, or is or was serving at the request of such
constituent corporation as a director, officer, employee or agent of
another corporation, partnership, joint venture, trust or other
enterprise, shall stand in the same position under the provisions of
this Article with respect to the resulting or surviving corporation as
such person would have with respect to such constituent corporation if
its separate existence had continued;
(3) "corporate proceeding" shall mean any threatened, pending
or completed action or suit by or in the right of the corporation to
procure a judgment in its favor or investigative proceeding by the
corporation;
(4) "criminal third party proceeding" shall include any action
or investigation which could or does lead to a criminal third party
proceeding;
19
<PAGE>
(5) "expenses" shall include attorneys' fees and
disbursements;
(6) "fines" shall include any excise taxes assessed on a
person with respect to an employee benefit plan;
(7) "not opposed to the best interests of the corporation"
shall include actions taken in good faith and in a manner the
authorized representative reasonably believed to be in the interest of
the participants and beneficiaries of an employee benefit plan;
(8) "other enterprises" shall include employee benefit plans;
(9) "party" shall include the giving of testimony or similar
involvement;
(10) "serving at the request of the corporation" shall include any
service as a director, officer or employee of the corporation which
imposes duties on, or involves services by, such director, officer or
employee with respect to an employee benefit plan, its participants, or
beneficiaries; and
(11) "third party proceeding" shall mean any threatened, pending or
completed action, suit or proceeding, whether civil, criminal,
administrative, or investigative, other than an action by or in the
right of the corporation.
SECTION 7.07. Insurance.--The corporation may purchase and
maintain insurance on behalf of any person who is or was a director, officer,
employee or agent of the corporation, or is or was serving at the request of the
corporation as a director, officer, employee or agent of another corporation,
partnership, joint venture, trust or other enterprise against any liability
asserted against the person and incurred by the person in any such capacity, or
arising out of his or her status as such, whether or not the corporation would
have the power or the obligation to indemnify such person against such liability
under the provisions of this Article.
SECTION 7.08. Scope of Article.--The indemnification of
authorized representatives and advancement of expenses, as authorized by the
preceding provisions of this Article, shall not be deemed exclusive of any other
rights to which those seeking indemnification or advancement of expenses may be
entitled under any agreement, vote of stockholders or disinterested directors or
otherwise, both as to action in an official capacity and as to action in another
capacity while holding such office. The indemnification and advancement of
expenses provided by or granted pursuant to this Article shall, unless otherwise
provided when authorized or ratified, continue as to a person who has ceased to
be an authorized representative and shall inure to the benefit of the heirs,
executors and administrators of such a person.
20
<PAGE>
SECTION 7.09. Reliance on Provisions.--Each person who shall
act as an authorized representative of the corporation shall be deemed to be
doing so in reliance upon rights of indemnification provided by this Article.
ARTICLE VIII
General Provisions
SECTION 8.01. Dividends.--Subject to the restrictions
contained in the GCL and any restrictions contained in the certificate of
incorporation, the board of directors may declare and pay dividends upon the
shares of capital stock of the corporation.
SECTION 8.02. Contracts.--Except as otherwise provided in
these By-laws, the board of directors may authorize any officer or officers
including the chairman and vice chairman of the board of directors, or any agent
or agents, to enter into any contract or to execute or deliver any instrument on
behalf of the corporation and such authority may be general or confined to
specific instances.
SECTION 8.03. Corporate Seal.--The corporation shall have a
corporate seal, which shall have inscribed thereon the name of the corporation,
the year of its organization and the words "Corporate Seal, Delaware". The seal
may be used by causing it or a facsimile thereof to be impressed or affixed or
in any other manner reproduced.
SECTION 8.04. Deposits.--All funds of the corporation shall be
deposited from time to time to the credit of the corporation in such banks,
trust companies, or other depositories as the board of directors may approve or
designate, and all such funds shall be withdrawn only upon checks signed by such
one or more officers or employees as the board of directors shall from time to
time determine.
SECTION 8.05. Corporate Records.
21
<PAGE>
(a) Examination by Stockholders.--Every stockholder shall,
upon written demand under oath stating the purpose thereof, have a right to
examine, in person or by agent or attorney, during the usual hours for business,
for any proper purpose, the stock ledger, list of stockholders, books or records
of account, and records of the proceedings of the stockholders and directors of
the corporation, and to make copies or extracts therefrom. A proper purpose
shall mean a purpose reasonably related to such person's interest as a
stockholder. In every instance where an attorney or other agent shall be the
person who seeks the right to inspection, the demand under oath shall be
accompanied by a power of attorney or such other writing which authorizes the
attorney or other agent to so act on behalf of the stockholder. The demand under
oath shall be directed to the corporation at its registered office in Delaware
or at its principal place of business. Where the stockholder seeks to inspect
the books and records of the corporation, other than its stock ledger or list of
stockholders, the stockholder shall first establish (1) that the stockholder has
complied with the provisions of this section respecting the form and manner of
making demand for inspection of such documents; and (2) that the inspection
sought is for a proper purpose. Where the stockholder seeks to inspect the stock
ledger or list of stockholders of the corporation and has complied with the
provisions of this section respecting the form and manner of making demand for
inspection of such documents, the burden of proof shall be upon the corporation
to establish that the inspection sought is for an improper purpose.
(b) Examination by Directors.--Any director shall have the
right to examine the corporation's stock ledger, a list of its stockholders and
its other books and records for a purpose reasonably related to the person's
position as a director.
SECTION 8.06. Amendment of By-laws.--These By-laws may be
altered, amended or repealed or new By-laws may be adopted either (1) by vote of
the stockholders at a duly organized annual or special meeting of stockholders,
or (2) by vote of a majority of the board of directors at any regular or special
meeting of directors if such power is conferred upon the board of directors by
the certificate of incorporation.
22
<PAGE>
DELAWARE GENERAL CORPORATION LAW
By-law Derivation Table
<TABLE>
<CAPTION>
GCL GCL
By-law Section By-law Section
<S> <C> <C> <C>
1.01 131; 133 5.01 142(a) and (b)
1.02 122(8), 141(a) and (g) 5.02 142(b)
1.03 109(b) 5.03 109(b), 142(b)
2.01 109(b) 5.04 109(b)
2.02 109(b) 5.05 109(b)
2.03 222 5.06 109(b)
2.04 229 5.07 109(b), 142(a)
2.05 230 5.08 109(b)
2.06 141(i) 5.09 142(c)
3.01 211(a) 5.10 141(a), 122(5)
3.02 211(b) 6.01 109(b), 158
3.03 211(d) 6.02 201
3.04 216, 222(c) 6.03 167, 168
3.05 109(b) 6.04 109(b)
3.06 109(b), 212 6.05 213
3.07 228 7.01 145(a)
3.08 219(a) 7.02 145(b)
3.09 211(e), 231 7.03 145(c)
4.01 109(b), 141(a) 7.04 145(d)
4.02 141(b), 223(b) 7.05 145(e)
4.03 223(a) and (c) 7.06 145(h) and (j)
4.04 109(b), 141(b) 7.07 145(g)
4.05 141(k) 7.08 145(f) and (j)
4.06 109(b) 7.09 109(b)
4.07 109(b), 141(g) 8.01 170(a)
4.08 109(b) 8.02 141(a), 142(a)
4.09 109(b) 8.03 122(3)
4.10 109(b), 141(b) and (f) 8.04 141(a), 109(b)
4.11 141(c) 8.05 220
4.12 141(h) 8.06 109(a)
</TABLE>
23
<PAGE>
===============================================================================
MARITRANS INC.
and
THE CHASE MANHATTAN BANK
as Rights Agent
AMENDED AND RESTATED
RIGHTS AGREEMENT
Dated as of February 9, 1999
===============================================================================
<PAGE>
Table of Contents
<TABLE>
<CAPTION>
Section Page
<S> <C> <C>
1 Certain Definitions......................................................................................2
2 Appointment of Rights Agent..............................................................................5
3 Issue of Rights Certificates.............................................................................5
4 Form of Rights Certificates..............................................................................8
5 Countersignature and Registration........................................................................9
6 Transfer, Split Up, Combination and Exchange of Rights Certificates; Mutilated,
Destroyed, Lost or Stolen Rights Certificates ....................................................10
7 Exercise of Rights; Purchase Price; Expiration Date of Rights...........................................11
8 Cancellation and Destruction of Rights Certificates.....................................................13
9 Reservation and Availability of Capital Stock; Registration of Securities...............................14
10 Capital Stock Record Date...............................................................................15
11 Adjustment of Purchase Price, Number and Kind of Shares or Number of
Rights..................................................................................................16
12 Certificate of Adjusted Purchase Price or Number of Shares..............................................28
13 Consolidation, Merger or Sale or Transfer of Assets or Earning Power....................................28
14 Fractional Rights and Fractional Shares.................................................................31
15 Rights of Action........................................................................................33
16 Agreement of Rights Holders.............................................................................33
17 Rights Certificate Holder Not Deemed a Shareholder......................................................34
18 Concerning the Rights Agent.............................................................................34
19 Merger or Consolidation or Change of Name of Rights Agent...............................................35
20 Duties of Rights Agent..................................................................................36
21 Change of Rights Agent..................................................................................38
<PAGE>
22 Issuance of New Rights Certificates.....................................................................39
23 Redemption and Termination..............................................................................40
24 Notice of Certain Events................................................................................42
25 Notices.................................................................................................43
26 Supplements and Amendments..............................................................................43
27 Successors..............................................................................................44
28 Determinations and Actions by the Board of Directors, etc...............................................45
29 Benefits of this Agreement..............................................................................45
30 Severability............................................................................................45
31 Governing Law...........................................................................................46
32 Counterparts............................................................................................46
33 Descriptive Headings....................................................................................46
Exhibit A -- Resolution of the Board of Directors with respect to Series A Junior Participating
Preferred Shares
Exhibit B -- Form of Rights Certificate
Exhibit C -- Form of Summary of Rights
</TABLE>
<PAGE>
AMENDED AND RESTATED RIGHTS AGREEMENT
RIGHTS AGREEMENT, dated as of February 9, 1999 (the
"Agreement"), between MARITRANS INC., a Delaware corporation (the "Company"),
and THE CHASE MANHATTAN BANK, a national banking association and successor to
Chemical Bank (the "Rights Agent"), amending and restating in its entirety the
Rights Agreement, dated as of April 1, 1993 (the ARights Agreement@), between
the Company and the Rights Agent.
W I T N E S S E T H
WHEREAS, on April 1, 1993 (the "Rights Dividend Declaration
Date"), the Board of Directors of the Company authorized and declared a dividend
distribution of one Right for each Common Share (as hereinafter defined) of the
Company outstanding at the close of business on April 11, 1993 (the "Record
Date") and has authorized the issuance of one Right (as such number may
hereafter be adjusted pursuant to the provisions of Section 11(p) hereof) for
each Common Share of the Company issued between the Record Date (whether
originally issued or delivered from the Company's treasury) and the Distribution
Date (as hereinafter defined), each Right initially representing the right to
purchase one one-hundredth of a Preferred Share (as hereinafter defined) of the
Company having the rights, powers and preferences set forth in the form of the
Resolution of the Board of Directors attached hereto as Exhibit A, upon the
terms and subject to the conditions hereinafter set forth (the "Rights"); and
WHEREAS, the Rights will be held by the Rights Agent under
this Agreement as trustee for the stockholders of the Company until the
Distribution Date; and
WHEREAS, the Board of Directors of the Company has considered
whether approval of this Agreement and the distribution of the Rights is in the
best interests of the Company and all other pertinent factors; and
WHEREAS, the Board of Directors of the Company has concluded
that approval of this Agreement and the distribution of the Rights is in the
best interests of the Company because the existence of the Rights will help (i)
reduce the risk of coercive two-tiered, front-end loaded or partial offers that
may not offer fair value to all stockholders, (ii) mitigate against market
accumulators who through open market and/or private purchases may achieve a
position of substantial influence or control without paying to selling or
remaining stockholders a fair control premium, (iii) deter market accumulators
who are simply interested in putting the Company into "play," (iv) restrict
self-dealing by a substantial stockholder, and (v) preserve the Board of
Directors' bargaining power and flexibility to deal with third-party acquirors
and to otherwise seek to maximize values for all stockholders.
<PAGE>
WHEREAS, pursuant to Section 26 of the Agreement, the Company
and the Rights Agent may from time to time supplement or amend any provision of
the Agreement in accordance with the terms of such Section 26; and
WHEREAS, on February __1999, the Board of Directors of the
Company authorized and approved the amendment and restatement of this Agreement
as set forth herein, all acts and things necessary to amend and restate the
Agreement have been done and performed, and the execution and delivery of the
Agreement by the Company and the Rights Agent have been in all respects duly
authorized by the Company and the Rights Agent.
NOW, THEREFORE, in consideration of the premises and the
mutual agreements herein set forth, and intending to be legally bound hereby,
the parties hereby agree as follows:
Section 1. Certain Definitions. For purposes of this
Agreement, the following terms have the meanings indicated:
(a) "Acquiring Person" shall mean any Person who or
which, together with all Affiliates and Associates of
such Person, shall be the Beneficial Owner of 20% or more of the Common Shares
then outstanding, but shall not include the Company, any Subsidiary of the
Company, any employee benefit plan of the Company or of any Subsidiary of the
Company, or any Person or entity organized, appointed or established by the
Company for or pursuant to the terms of any such plan.
(b) "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 and in effect on the date hereof (the "Exchange Act").
(c) A Person shall be deemed the "Beneficial Owner"
of, and shall be deemed to "beneficially own," any
securities:
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(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, or to "beneficially own," (A) 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, or (B)
securities issuable upon exercise of Rights at any time prior to the
occurrence of a Triggering Event, or (C) securities issuable upon
exercise of Rights from and after the occurrence of a Triggering Event
which Rights were acquired by such Person or any of such Person's
Affiliates or Associates prior to the Distribution Date or pursuant to
Section 3(a) or Section 22 hereof (the "Original Rights") or pursuant
to Section 11(i) hereof in connection with an adjustment made with
respect to any Original Rights;
(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,
or to "beneficially own," any security under this subparagraph (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 (B) is not also then reportable by such Person on
Schedule 13D under the Exchange Act (or any comparable or successor
report); or
(iii) that 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
subparagraph (ii) of this paragraph (c)) or disposing of any voting
securities of the Company,
provided, however, that nothing in this paragraph (c) shall cause a person
engaged in business as an underwriter of securities to be the "Beneficial Owner"
of, or to "beneficially own," 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.
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(d) "Business Day" shall mean any day other than a
Saturday, Sunday or a day on which banking institutions in the State of New York
are authorized or obligated by law or executive order to close.
(e) "Close of business" on any given date shall mean
5:00 P.M., New York, New York time, on such date;
provided, however, that if such date is not a Business Day it shall mean 5:00
P.M., New York, New York time, on the next succeeding Business Day.
(f) "Common Share" shall mean the shares of Common
Stock, par value $.01 per share, of the Company and, to
the extent that there are not a sufficient number of Common Shares authorized to
permit the full exercise of the Rights, shares of any other class or series of
the Company designated for such purpose containing terms substantially similar
to the terms of the Common Shares, except that "Common Share" when used with
reference to any Person other than the Company shall mean the shares of capital
stock of such Person with the greatest voting power, or the equity securities or
other equity interest having power to control or direct the management, of such
Person.
(g) "Distribution Date" shall have the meaning set
forth in Section 3 hereof.
(h) "Expiration Date" shall have the meaning set
forth in Section 7(a).
(i) "Person" shall mean any individual, firm,
corporation, partnership or other entity.
(j) "Preferred Share" shall mean a share of Series A
Junior Participating Preferred Stock, par value $.01
per share, of the Company and, to the extent that there are not a sufficient
number of Series A Junior Participating Preferred Stock authorized to permit the
full exercise of the Rights, shares of any other series of Series Preferred
Stock of the Company designated for such purpose containing terms substantially
similar to the terms of the Series A Junior Participating Preferred Stock.
(k) "Preferred Share Fraction" shall mean one
one-hundredth of a Preferred Share.
(l) "Section 11(a)(ii) Event" shall mean any event
described in Section 11(a)(ii) (A), (B) or (C) hereof.
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(m) "Section 13 Event" shall mean any event described
in clauses (x), (y) or (z) of Section 13(a) hereof.
(n) "Stock Acquisition Date" shall mean the first
date of public announcement (which, for purposes of this
definition, shall include, without limitation, a report filed pursuant to
Section 13(d) under the Exchange Act) by the Company or an Acquiring Person that
an Acquiring Person has become such.
(o) "Subsidiary" shall have the meaning ascribed to
such term in Rule 12b-2 of the General Rules and
Regulations under the Exchange Act.
(p) "Trading Day" shall have the meaning set forth in
Section 11(d)(i) hereof.
(q) "Triggering Event" shall mean any Section
11(a)(ii) Event or any Section 13 Event.
Unless otherwise specified, where reference is made
in this Agreement to sections of, and the General Rules and Regulations under,
the Exchange Act, such reference shall mean such sections and rules as amended
from time to time and any successor provisions thereto.
Section 2. Appointment of Rights Agent.
(a) The Company hereby appoints the Rights Agent to
act as agent for the Company and custodian for the beneficial owners of the
Rights (who, in accordance with Section 3 hereof, shall prior to the
Distribution Date also be the holders of the Common Shares) in accordance with
the terms and conditions hereof, and the Rights Agent hereby accepts such
appointment. The Company may from time to time appoint such Co-Rights Agents as
it may deem necessary or desirable.
(b) On the Record Date, the Company will deliver a
Rights Certificate to the Rights Agent, registered in
the name of the Rights Agent as custodian for the beneficial owners of the
Rights represented thereby, for that number of Rights equal to the number of
Common Shares issued and outstanding on the Record Date, and the Rights Agent
shall hold the Rights represented thereby in custody for the beneficial owners
in accordance with the provisions of this Agreement.
Section 3. Issue of Rights Certificates.
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(a) Until the earlier of (i) the close of business on
the tenth day after a Stock Acquisition Date involving an Acquiring Person that
has become such in a transaction as to which the Board of Directors has not made
the determination referred to in Section 11(a)(ii)(B) hereof, or (ii) the close
of business on such date as may be fixed by the Board of Directors of the
Company by notice to the Rights Agent and publicly announced by the Company,
which date shall not be later than 65 days after the date that a tender or
exchange offer by any person (other than the Company, any Subsidiary of the
Company, any employee benefit plan of the Company or of any Subsidiary of the
Company, or any Person or entity organized, appointed or established by the
Company for or pursuant to the terms of any such plan) is first published or
sent or given within the meaning of Rule 14d-2(a) of the General Rules and
Regulations under the Exchange Act, if upon consummation thereof, such Person
would be the Beneficial Owner of 20% or more of the Common Shares then
outstanding (the earlier of (i) and (ii) being herein referred to as the
"Distribution Date"), (x) beneficial interests in the Rights will be evidenced
(subject to the provisions of paragraph (b) of this Section 3) by the
certificates for the Common Shares registered in the names of the holders of the
Common Shares (which certificates for Common Shares shall be deemed also to be
certificates for beneficial interests in the Rights) and not by separate
certificates, and (y) the Rights and beneficial interests therein will be
transferable only in connection with the transfer of the underlying Common
Shares (including a transfer to the Company). As soon as practicable after the
Distribution Date, the Rights Agent will send by first-class, insured, postage
prepaid mail, to each record holder of the Common Shares as of the close of
business on the Distribution Date, at the address of such holder shown on the
records of the Company, one or more rights certificates, in substantially the
form of Exhibit B hereto (the "Rights Certificates"), evidencing one Right for
each Common Share so held, subject to adjustment as provided herein. In the
event that an adjustment in the number of Rights per Common Share has been made
pursuant to Section 11(p) hereof, at the time of distribution of the Rights
Certificates, the Company shall make the necessary and appropriate rounding
adjustments (in accordance with Section 14(a) hereof) so that Rights
Certificates representing only whole numbers of Rights are distributed and cash
is paid in lieu of any fractional Rights. As of and after the Distribution Date,
the Rights will be evidenced solely by such Rights Certificates. Upon the
distribution of the Rights Certificates as provided in this subsection (a), the
trust created hereby shall cease.
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(b) As promptly as practicable following the Record
Date, the Company will send a copy of a Summary of
Rights, in substantially the form of Exhibit C hereto (the "Summary of Rights"),
by first-class, postage prepaid mail, to each record holder of the Common Shares
as of the close of business on the Record Date, at the address of such holder
shown on the records of the Company. With respect to certificates for the Common
Shares outstanding as of the Record Date, until the Distribution Date,
beneficial interests in the Rights will be evidenced by such certificates for
the Common Shares and the registered holders of the Common Shares shall also be
the registered holders of the beneficial interests in the associated Rights.
Until the earlier of the Distribution Date or the Expiration Date (as such term
is defined in Section 7 hereof), the transfer of any certificates representing
Common Shares in respect of which Rights have been issued shall also constitute
the transfer of the Rights associated with such Common Shares. Certificates
issued after the Record Date upon the transfer of Common Shares outstanding on
the Record Date shall bear the legend set forth in subsection (c).
(c) Except as provided in Section 22 hereof, Rights
shall be issued in respect of all Common Shares that are issued (whether
originally issued or delivered from the Company's treasury) after the Record
Date but prior to the earlier of the Distribution Date or the Expiration Date.
Certificates representing such Common Shares shall also be deemed to be
certificates for beneficial interests in the associated Rights, and shall bear
the following legend:
"This certificate also evidences a beneficial
interest in and entitles the holder hereof to certain Rights as set
forth in the Amended and Restated Rights Agreement between Maritrans
Inc. (the "Company") and The Chase Manhattan Bank (the "Rights Agent")
dated as of February __, 1999 (the "Rights Agreement"), and as the same
may be amended from time to time, the terms of which are hereby
incorporated herein by reference and a copy of which is on file at the
principal offices of the Company. Under certain circumstances, as set
forth in the Rights Agreement, such Rights will be evidenced by
separate certificates and beneficial interests therein will no longer
be evidenced by this certificate. The Company will mail to the holder
of this certificate a copy of the Rights Agreement, as in effect on the
date of mailing, without charge promptly after receipt of a written
request therefor. Under certain circumstances set forth in the Rights
Agreement, Rights issued to, or held by, any Person who is, was or
becomes an Acquiring Person or any Affiliate or Associate thereof (as
such terms are defined in the Rights Agreement), whether currently held
by or on behalf of such Person or by any subsequent holder, may become
null and void."
With respect to such certificates containing the foregoing legend, until the
earlier of (i) the Distribution Date or (ii) the Expiration Date, beneficial
interests in the Rights associated with the Common Shares represented by such
certificates shall be evidenced by such certificates alone and registered
holders of Common Shares shall also be the registered holders of beneficial
interests in the associated Rights, and the transfer of any of such certificates
shall also constitute the transfer of beneficial interests in the Rights
associated with the Common Shares represented by such certificates.
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Section 4. Form of Rights Certificates.
(a) The Rights Certificates (and the forms of
election to purchase and of assignment to be printed on the reverse thereof)
shall each be substantially in the form set forth in Exhibit B hereto and may
have such marks of identification or designation and such legends, summaries or
endorsements printed thereon as the Company may deem appropriate and as are not
inconsistent with the provisions of this Agreement, or as may be required to
comply with any applicable law or with any rule or regulation made pursuant
thereto or with any rule or regulation of any stock exchange on which the Rights
may from time to time be listed, or to conform to usage. Subject to the
provisions of Section 11 and Section 22 hereof, the Rights Certificates,
whenever distributed, shall entitle the holders thereof to purchase such number
of Preferred Share Fractions as shall be set forth therein at the price set
forth therein (such exercise price per Preferred Share Fraction, the "Purchase
Price"), but the amount and type of securities purchasable upon the exercise of
each Right and the Purchase Price thereof shall be subject to adjustment as
provided herein.
(b) Any Rights Certificate issued pursuant to Section
3(a) or Section 22 hereof that represents Rights
that the Company knows are beneficially owned by: (i) an Acquiring Person or any
Associate or Affiliate of an Acquiring Person, (ii) a transferee of an Acquiring
Person (or of any such Associate or Affiliate) who becomes a transferee after
the Acquiring Person becomes such, or (iii) a transferee of an Acquiring Person
(or of any such Associate or Affiliate) who becomes a transferee prior to or
concurrently with the Acquiring Person becoming such and receives such Rights
pursuant to either (A) a transfer (whether or not for consideration) from the
Acquiring Person to holders of equity interests in such Acquiring Person or to
any Person with whom such Acquiring Person has any continuing oral or written
plan, agreement, arrangement or understanding regarding the transferred Rights
or (B) a transfer that the Board of Directors of the Company has determined is
part of an oral or written plan, agreement, arrangement or understanding that
has as a primary purpose or effect avoidance of Section 7(e) hereof, and any
Rights Certificate issued pursuant to Section 6 or Section 11 hereof upon
transfer, exchange, replacement or adjustment of any other Rights Certificate
referred to in this sentence, shall contain (to the extent feasible) the
following legend:
"The Rights represented by this Rights Certificate are or were
beneficially owned by a Person who was or became an Acquiring Person or
an Affiliate or Associate of an Acquiring Person (as such terms are
defined in the Rights Agreement). Accordingly, this Rights Certificate
and the Rights represented hereby may become null and void in the
circumstances specified in Section 7(e) of such Agreement."
Section 5. Countersignature and Registration.
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(a) The Rights Certificates shall be executed on
behalf of the Company by its Chairman of the Board, its President or any Vice
President, either manually or by facsimile signature, and shall have affixed
thereto the Company's seal or a facsimile thereof which shall be attested by the
Secretary or an Assistant Secretary of the Company, either manually or by
facsimile signature. The Rights Certificates shall be manually countersigned by
the Rights Agent and shall not be valid for any purpose unless so countersigned.
In case any officer of the Company who shall have signed any of the Rights
Certificates shall cease to be such officer of the Company before
countersignature by the Rights Agent and issuance and delivery by the Company,
such Rights Certificates, nevertheless, may be countersigned by the Rights Agent
and issued and delivered by the Company with the same force and effect as though
the person who signed such Rights Certificates had not ceased to be such officer
of the Company; and any Rights Certificates may be signed on behalf of the
Company by any person who, at the actual date of the execution of such Rights
Certificate, shall be a proper officer of the Company to sign such Rights
Certificate, although at the date of the execution of this Agreement any such
person was not such an officer.
(b) Following the Distribution Date, the Rights Agent
will keep or cause to be kept, at its principal office or offices designated as
the appropriate place for surrender of Rights Certificates upon exercise or
transfer, books for registration and transfer of the Rights Certificates issued
hereunder. Such books shall show the names and addresses of the respective
holders of the Rights Certificates, the number of Rights evidenced on its face
by each of the Rights Certificates, the Certificate number and the date of each
of the Rights Certificates.
Section 6. Transfer, Split Up, Combination and Exchange of
Rights Certificates; Mutilated, Destroyed, Lost or Stolen Rights Certificates.
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(a) Subject to the provisions of Section 4(b),
Section 7(e) and Section 14 hereof, at any time after the close of business on
the Distribution Date, and at or prior to the close of business on the
Expiration Date, any Rights Certificate or Certificates may be transferred,
split up, combined or exchanged for another Rights Certificate or Certificates,
entitling the registered holder to purchase a like number of Preferred Share
Fractions (or, following a Triggering Event, Common Shares or other securities,
cash or other assets, as the case may be, as the Rights Certificate or
Certificates surrendered then entitled such holder or former holder in the case
of a transfer to purchase). Any registered holder desiring to transfer, split
up, combine or exchange any Rights Certificate or Certificates shall make such
request in writing delivered to the Rights Agent, and shall surrender the Rights
Certificate or Certificates to be transferred, split up, combined or exchanged
at the principal office or offices of the Rights Agent designated for such
purpose. Neither the Rights Agent nor the Company shall be obligated to take any
action whatsoever with respect to the transfer of any such surrendered Rights
Certificate until the registered holder shall have completed and signed the
certificate contained in the form of assignment on the reverse side of such
Rights Certificate and shall have provided such additional evidence of the
identity of the Beneficial Owner (or former Beneficial Owner) or Affiliates or
Associates thereof as the Company shall reasonably request. Thereupon the Rights
Agent shall, subject to Section 4(b), Section 7(e) and Section 14 hereof,
countersign and deliver to the Person entitled thereto a Rights Certificate or
Rights Certificates, as the case may be, as so requested. The Company may
require payment of a sum sufficient to cover any tax or governmental charge that
may be imposed in connection with any transfer, split up, combination or
exchange of Rights Certificates.
(b) Upon receipt by the Company and the Rights Agent
of evidence reasonably satisfactory to them of the
loss, theft, destruction or mutilation of a Rights Certificate, and, in case of
loss, theft or destruction, of indemnity or security reasonably satisfactory to
them, and reimbursement to the Company and the Rights Agent of all reasonable
expenses incidental thereto, and upon surrender to the Rights Agent and
cancellation of the Rights Certificate if mutilated, the Company will execute
and deliver a new Rights Certificate of like tenor to the Rights Agent for
countersignature and delivery to the registered owner in lieu of the Rights
Certificate so lost, stolen, destroyed or mutilated.
Section 7. Exercise of Rights; Purchase Price; Expiration
Date of Rights.
(a) Subject to subsection (e), the registered holder
of any Rights Certificate may exercise the Rights evidenced thereby (except as
otherwise provided herein including, without limitation, the restrictions on
exercisability set forth in Section 9(c), Section 11(a)(iii) and Section 23(a)
hereof) in whole or in part at any time after the Distribution Date upon
surrender of the Rights Certificate, with the form of election to purchase and
the certificate on the reverse side thereof duly executed, to the Rights Agent
at the principal office or offices of the Rights Agent designated for such
purpose, together with payment of the aggregate Purchase Price (except as
provided in Section 11(q) hereof) with respect to the total number of Preferred
Share Fractions (or Common Shares, other securities, cash or other assets, as
the case may be) as to which such surrendered Rights are then exercisable
(except as provided in Section 11(q) hereof), at or prior to the earliest of (i)
the close of business on August 1, 2002 (the "Final Expiration Date"), (ii) the
consummation of a transaction contemplated by Section 13(d) hereof, or (iii) the
time at which the Rights are redeemed or terminated as provided in Section 23
hereof (the earlier of (i), (ii) and (iii) being herein referred to as the
"Expiration Date").
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(b) The Purchase Price for each Preferred Share
Fraction pursuant to the exercise of a Right shall
initially be $40.00, and shall be subject to adjustment from time to time as
provided in Sections 11 and 13(a) hereof and shall be payable in accordance with
subsection (c).
(c) Upon receipt of a Rights Certificate representing
exercisable Rights, with the form of election to
purchase and the certificate duly executed, accompanied by payment, with respect
to each Right so exercised, of the Purchase Price per Preferred Share Fraction
(or Common Shares, other securities, cash or other assets, as the case may be)
to be purchased as set forth below and an amount equal to any applicable
transfer tax, the Rights Agent shall, subject to Section 20(k) and Section 14(b)
hereof, thereupon promptly (i) (A) requisition from any transfer agent of the
Preferred Shares (or make available, if the Rights Agent is the transfer agent
for such Shares) certificates for the total number of Preferred Shares to be
purchased and the Company hereby irrevocably authorizes its transfer agent to
comply with all such requests, or (B) if the Company shall have elected to
deposit some or all of the total number of Preferred Shares issuable upon
exercise of the Rights hereunder with a depositary agent, requisition from the
depositary agent depositary receipts representing such number of Preferred Share
Fractions as are to be purchased (in which case certificates for the Preferred
Shares represented by such receipts shall be deposited by the transfer agent
with the depositary agent) and the Company will direct the depositary agent to
comply with such request, (ii) requisition from the Company the amount of cash,
if any, to be paid in lieu of fractional shares in accordance with Section 14
hereof, (iii) after receipt of such certificates or depositary receipts, cause
the same to be delivered to or upon the order of the registered holder of such
Rights Certificate, registered in such name or names as may be designated by
such holder, and (iv) after receipt thereof, deliver such cash, if any, to or
upon the order of the registered holder of such Rights Certificate. The payment
of the Purchase Price (as such amount may be reduced pursuant to Section
11(a)(iii) hereof) may be made, at the election of the holder of the Rights
Certificate, (x) in cash or by certified bank check or money order payable to
the order of the Company or (y) by delivery of Rights if and to the extent
authorized by Section 11(q) hereof. In the event that the Company is obligated
to issue other securities of the Company (including Common Shares) pay cash
and/or distribute other property pursuant to Section 11(a) hereof, the Company
will make all arrangements necessary so that such other securities, cash and/or
other property are available for distribution by the Rights Agent, if and when
appropriate.
(d) In case the registered holder of any Rights
Certificate shall exercise less than all the Rights
evidenced thereby, a new Rights Certificate evidencing Rights equivalent to the
Rights remaining unexercised shall be issued by the Rights Agent and delivered
to, or upon the order of, the registered holder of such Rights Certificate,
registered in such name or names as may be designated by such holder, subject to
the provisions of Section 14 hereof.
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(e) Notwithstanding anything in this Agreement to the
contrary, from and after the first occurrence of a
Section 11(a)(ii) Event, any Rights beneficially owned by (i) an Acquiring
Person or an Associate or Affiliate of an Acquiring Person, (ii) a transferee of
an Acquiring Person (or of any such Associate or Affiliate) who becomes a
transferee after the Acquiring Person becomes such, or (iii) a transferee of an
Acquiring Person (or of any such Associate or Affiliate) who becomes a
transferee prior to or concurrently with the Acquiring Person becoming such and
receives such Rights pursuant to either (A) a transfer (whether or not for
consideration) from the Acquiring Person to holders of equity interests in such
Acquiring Person or to any Person with whom the Acquiring Person has any
continuing oral or written plan, agreement, arrangement or understanding
regarding the transferred Rights or (B) a transfer which the Board of Directors
of the Company has determined is part of an oral or written plan, agreement,
arrangement or understanding which has as a primary purpose or effect the
avoidance of this Section 7(e), shall become null and void without any further
action and no holder of such Rights shall have any rights whatsoever with
respect to such Rights, whether under any provision of this Agreement or
otherwise; provided, however, that the Rights held by an Acquiring Person, an
Affiliate or Associate of an Acquiring Person or the transferees of such persons
referred to above shall not be voided unless the Acquiring Person in question or
an Affiliate or Associate of such Acquiring Person shall be involved in the
transaction giving rise to the Section 11(a)(ii) Event. The Company shall use
all reasonable efforts to insure that the provisions of this Section 7(e) and
Section 4(b) hereof are complied with, but shall have no liability to any holder
of Rights Certificates or other Person as a result of its failure to make any
determinations with respect to an Acquiring Person or its Affiliates, Associates
or transferees hereunder.
(f) Notwithstanding anything in this Agreement to the
contrary, neither the Rights Agent nor the Company
shall be obligated to undertake any action with respect to a registered holder
upon the occurrence of any purported exercise as set forth in this Section 7
unless such registered holder shall have (i) completed and signed the
certificate contained in the form of election to purchase set forth on the
reverse side of the Rights Certificate surrendered for such exercise, and (ii)
provided such additional evidence of the identity of the Beneficial Owner (or
former Beneficial Owner) or Affiliates or Associates thereof as the Company
shall reasonably request.
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Section 8. Cancellation and Destruction of Rights
Certificates. All Rights Certificates surrendered for the purpose of exercise,
transfer, split up, combination or exchange shall, if surrendered to the Company
or any of its agents, be delivered to the Rights Agent for cancellation or in
cancelled form, or, if surrendered to the Rights Agent, shall be cancelled by
it, and no Rights Certificates shall be issued in lieu thereof except as
expressly permitted by any of the provisions of this Agreement. The Company
shall deliver to the Rights Agent for cancellation and retirement, and the
Rights Agent shall so cancel and retire, any other Rights Certificate purchased
or acquired by the Company otherwise than upon the exercise thereof. The Rights
Agent shall deliver all cancelled Rights Certificates to the Company, or shall,
at the written request of the Company, destroy such cancelled Rights
Certificates, and in such case shall deliver a certificate of destruction
thereof to the Company.
Section 9. Reservation and Availability of Capital Stock;
Registration of Securities.
(a) The Company covenants and agrees that it will
cause to be reserved and kept available for issuance
upon the exercise of outstanding Rights as many of its authorized and unissued
Preferred Shares (and, following the occurrence of a Triggering Event, out of
its authorized and unissued Common Shares and/or other securities or out of its
authorized and issued shares held in its treasury), which together shall at all
times after the Distribution Date be sufficient to permit the exercise in full
of all outstanding Rights.
(b) So long as the Preferred Shares (and, following
the occurrence of a Triggering Event, Common Shares or
other securities) issuable and deliverable upon the exercise of the Rights may
be listed on any national securities exchange, the Company shall use its best
efforts to cause, from and after such time as the Rights become exercisable, all
shares and other securities reserved for such issuance to be listed on such
exchange upon official notice of issuance upon such exercise.
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(c) The Company shall use its best efforts to (i)
file, as soon as practicable following the earliest date
after the first occurrence of a Section 11(a)(ii) Event on which the
consideration to be delivered by the Company upon exercise of the Rights has
been determined in accordance with Section 11(a)(iii) hereof, or as soon as is
required by law following the Distribution Date, as the case may be, a
registration statement or statements under the Securities Act of 1933 (the
"Act"), with respect to the securities purchasable upon exercise of the Rights
on an appropriate form or forms, (ii) cause such registration statement or
statements to become effective as soon as practicable after such filing, and
(iii) cause such registration statement or statements to remain effective (with
a prospectus at all times meeting the requirements of the Act) until the earlier
of (A) the date as of which the Rights are no longer exercisable for such
securities, and (B) the date of the expiration of the Rights. The Company will
also take such action as may be appropriate under, or to ensure compliance with,
the securities or "blue sky" laws of the various states in connection with the
exercisability of the Rights. The Company may temporarily suspend, for a period
of time not to exceed ninety (90) days after the date set forth in clause (i) of
the first sentence of this subsection (c), the exercisability of the Rights in
order to prepare and file such registration statement and permit it to become
effective. Upon any such suspension, the Company shall issue a public
announcement stating that the exercisability of the Rights has been temporarily
suspended, as well as a public announcement at such time as the suspension is no
longer in effect. Notwithstanding any provision of this Agreement to the
contrary, the Rights shall not be exercisable in any jurisdiction unless the
requisite qualification in such jurisdiction shall have been obtained.
(d) The Company covenants and agrees that it will
take all such action as may be necessary to ensure that
all Preferred Shares (and, following a Triggering Event, Common Shares or other
securities) delivered upon exercise of Rights shall, at the time of delivery of
the certificates for such shares or other securities (subject to payment of the
Purchase Price), be duly and validly authorized and issued and, with respect to
Preferred Shares, Common Shares or other shares of capital stock, fully paid and
nonassessable.
(e) The Company further covenants and agrees that it
will pay when due and payable any and all federal and
state transfer taxes and charges that may be payable in respect of the issuance
or delivery of the Rights Certificates and of any certificates for a number of
Preferred Share Fractions (or Common Shares or other securities, as the case may
be) upon the exercise of Rights. The Company shall not, however, be required to
pay any transfer tax that may be payable in respect of any transfer or delivery
of Rights Certificates to a Person other than, or the issuance or delivery of a
number of Preferred Share Fractions (or Common Shares or other securities, as
the case may be) in respect of a name other than that of the registered holder
of the Rights Certificates evidencing Rights surrendered for exercise or to
issue or deliver any certificates for a number of Preferred Share Fractions (or
Common Shares or other securities, as the case may be) in a name other than that
of the registered holder upon the exercise of any Rights until such tax shall
have been paid (any such tax being payable by the holder of such Rights
Certificate at the time of surrender) or until it has been established to the
Company's satisfaction that no such tax is due.
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Section 10. Capital Stock Record Date. Each person in whose
name any certificate for a number of Preferred Share Fractions (or Common Shares
or other securities, as the case may be) is issued upon the exercise of Rights
shall for all purposes be deemed to have become the holder of record of such
Preferred Share Fractions (or Common Shares or other securities, as the case may
be) represented thereby on, and such certificate shall be dated, the date upon
which the Rights Certificate evidencing such Rights was duly surrendered and
payment of the Purchase Price (and all applicable transfer taxes) was made;
provided, however, that if the date of such surrender and payment is a date upon
which the applicable transfer books of the Company are closed, such Person shall
be deemed to have become the record holder of such shares (fractional or
otherwise) on, and such certificate shall be dated, the next succeeding Business
Day on which the applicable transfer books of the Company are open. Prior to the
exercise of the Rights evidenced thereby, the holder of a Rights Certificate
shall not be entitled to any rights of a stockholder of the Company with respect
to shares for which the Rights shall be exercisable, including, without
limitation, the right to vote, to receive dividends or other distributions or to
exercise any preemptive rights, and shall not be entitled to receive any notice
of any proceedings of the Company, except as provided herein.
Section 11. Adjustment of Purchase Price, Number and Kind of
Shares or Number of Rights. The Purchase Price, the number and kind of shares
and other securities covered by each Right and the number of Rights outstanding
are subject to adjustment from time to time as provided in this Section 11.
(a) (i) In the event the Company shall at any time
after the date of this Agreement (A) declare a dividend on any security
of the Company payable in Preferred Shares, (B) subdivide the
outstanding Preferred Shares, (C) combine the outstanding Preferred
Shares into a smaller number of shares, or (D) issue any shares of its
capital stock in a reclassification of the Preferred Shares (including
any such reclassification in connection with a consolidation or merger
in which the Company is the continuing or surviving corporation),
except as otherwise provided in this Section 11(a) and Section 7(e)
hereof, the Purchase Price in effect at the time of the record date for
such dividend or of the effective date of such subdivision, combination
or reclassification, and the number and kind of Preferred Shares or
capital stock, as the case may be, issuable on such date, shall be
proportionately adjusted so that the holder of any Right exercised
after such time shall be entitled to receive, upon payment of the
adjusted Purchase Price, the aggregate number and kind of Preferred
Shares or capital stock, as the case may be, that, if such Right had
been exercised immediately prior to such date and at a time when the
Preferred Share transfer books were open, he would have owned upon such
exercise and been entitled to receive by virtue of such dividend,
subdivision, combination or reclassification. If an event occurs which
would require an adjustment under both this Section 11(a)(i) and
Section 11(a)(ii) hereof, the adjustment provided for in this Section
11(a)(i) shall be in addition to, and shall be made prior to, any
adjustment required pursuant to Section 11(a)(ii) hereof.
(ii) In the event:
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(A) any Acquiring Person or any Associate or
Affiliate of any Acquiring Person, at any time after the Stock
Acquisition Date, directly or indirectly, (1) shall merge into
the Company or otherwise combine with the Company and the
Company shall be the continuing or surviving corporation of
such merger or combination and the Common Shares of the
Company or other equity securities of the Company shall remain
outstanding, (2) shall, in one transaction or a series of
transactions, transfer any assets to the Company or to any of
its Subsidiaries in exchange (in whole or in part) for Common
Shares, for shares of other equity securities of the Company,
or for securities exercisable for or convertible into shares
of equity securities of the Company (Common Shares or
otherwise) or otherwise obtain from the Company, with or
without consideration, any additional shares of such equity
securities or securities exercisable for or convertible into
shares of such equity securities (other than pursuant to a pro
rata distribution to all holders of Common Shares), (3) shall
sell, purchase, lease, exchange, mortgage, pledge, transfer or
otherwise acquire or dispose of assets in one transaction or a
series of transactions, to, from or with (as the case may be)
the Company or any of its Subsidiaries, on terms and
conditions less favorable to the Company than the Company
would be able to obtain in arm's-length negotiation with an
unaffiliated third party, other than pursuant to a Section 13
Event, (4) shall sell, purchase, lease, exchange, mortgage,
pledge, transfer or otherwise acquire or dispose of assets
having an aggregate fair market value of more than $5,000,000
in one transaction or a series of transactions, to, from or
with (as the case may be) the Company or any of the Company's
Subsidiaries (other than incidental to the lines of business,
if any, engaged in as of the date hereof between the Company
and such Acquiring Person or Associate or Affiliate), other
than pursuant to a Section 13 Event, (5) shall receive any
compensation from the Company or any of the Company's
Subsidiaries other than compensation for full-time employment
as a regular employee at rates in accordance with the
Company's (or its Subsidiaries') past practices, or (6) shall
receive the benefit, directly or indirectly (except
proportionately as a stockholder and except if resulting from
a requirement of law or governmental regulation), of any
loans, advances, guarantees, pledges or other financial
assistance or any tax credits or other tax advantage provided
by the Company or any of its Subsidiaries, or
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(B) any Person (other than the Company, any
Subsidiary of the Company, any employee benefit plan of the
Company or of any Subsidiary of the Company, or any Person or
entity organized, appointed or established by the Company for
or pursuant to the terms of any such plan), alone or together
with its Affiliates and Associates, shall, at any time after
the Rights Dividend Declaration Date, become the Beneficial
Owner of 20% or more of the Common Shares then outstanding,
unless the event causing the 20% threshold to be crossed is a
Section 13 Event, or is an acquisition of Common Shares
pursuant to a tender offer or an exchange offer for all
outstanding Common Shares at a price and on terms that provide
fair value to all stockholders, as determined by at least a
majority of the members of the Board of Directors, after
taking into consideration all factors that such members of the
Board of Directors deem relevant, including, without
limitation, the long-term prospects and value of the Company
and the prices and terms that such members of the Board of
Directors believe, in good faith, could reasonably be achieved
if the Company or its assets were sold on an orderly basis
designed to realize maximum value, or
(C) during such time as there is an
Acquiring Person, there shall be any reclassification of
securities (including any reverse stock split), or
recapitalization of the Company, or any merger or
consolidation of the Company with any of its Subsidiaries or
any other transaction or series of transactions involving the
Company or any of its Subsidiaries, other than a Section 13
Event or series of such Events (whether or not with or into or
otherwise involving an Acquiring Person) that has the effect,
directly or indirectly, of increasing by more than 1% the
proportionate share of the outstanding shares of any class of
equity securities of the Company or any of its Subsidiaries
that is directly or indirectly beneficially owned by any
Acquiring Person or any Associate or Affiliate of any
Acquiring Person,
then, promptly following the first occurrence of a Section 11(a)(ii)
Event, proper provision shall be made so that each holder of a Right
(except as provided below and in Section 7(e) hereof) shall thereafter
have the right to receive, upon exercise thereof at the then current
Purchase Price in accordance with the terms of this Agreement, in lieu
of a number of Preferred Share Fractions, such number of Common Shares
of the Company as shall equal the result obtained by (x) multiplying
the then current Purchase Price by the then number of Preferred Share
Fractions for which a Right was exercisable immediately prior to the
first occurrence of a Section 11(a)(ii) Event, and (y) dividing that
product (which, following such first occurrence, shall thereafter be
referred to as the "Purchase Price" for each Right and for all purposes
of this Agreement) by 50% of the current market price (determined
pursuant to Section 11(d) hereof) per Common Share on the date of such
first occurrence (such number of shares, the "Adjustment Shares").
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(iii) In the event that the number of Common Shares
that are authorized by the Company's Certificate of Incorporation, as
amended, but not outstanding or reserved for issuance for purposes
other than upon exercise of the Rights are not sufficient to permit the
exercise in full of the Rights in accordance with the foregoing
subparagraph (ii) of this Section 11(a), the Company shall: (A)
determine the excess of the value of the Adjustment Shares issuable
upon the exercise of a Right (the "Current Value") over the Purchase
Price (such excess, the "Spread"), and (B) with respect to each Right,
make adequate provision to substitute for the Adjustment Shares, upon
payment of the applicable Purchase Price, (1) cash, (2) a reduction in
the Purchase Price, (3) Common Shares of the same or a different class
or other equity securities of the Company (including, without
limitation, preferred shares or units of preferred shares that a
majority of the members of the Board of Directors in office at the time
has deemed (based, among other things, on the dividend and liquidation
rights of such preferred shares) to have substantially the same
economic value as Common Shares (such preferred shares, hereinafter
referred to as "common share equivalents")), (4) debt securities of the
Company, (5) other assets, or (6) any combination of the foregoing,
having an aggregate value equal to the Current Value, where such
aggregate value has been determined by a majority of the members of the
Board of Directors in office at the time after considering the advice
of a nationally recognized investment banking firm selected by the
Board of Directors of the Company; provided, however, if the Company
shall not have made adequate provision to deliver value pursuant to
clause (B) above within thirty (30) days following the later of (x) the
first occurrence of a Section 11(a)(ii) Event and (y) the date on which
the Company's right of redemption pursuant to Section 23(a) expires
(the later of (x) and (y) being referred to herein as the "Section
11(a)(ii) Trigger Date"), then the Company shall be obligated to
deliver, upon the surrender for exercise of a Right and without
requiring payment of the Purchase Price, Common Shares (to the extent
available) and then, if necessary, cash, which shares and/or cash have
an aggregate value equal to the Spread. If the Board of Directors of
the Company shall determine in good faith that it is likely that
sufficient additional Common Shares could be authorized for issuance
upon exercise in full of the Rights, the thirty (30) day period set
forth above may be extended to the extent necessary, but not more than
ninety (90) days after the Section 11(a)(ii) Trigger Date, in order
that the Company may seek stockholder approval for the authorization of
such additional shares (such period, as it may be extended, the
"Substitution Period"). To the extent that the Company determines that
some action need be taken pursuant to the first and/or second sentences
of this Section 11(a)(iii), the Company shall provide, subject to
Section 7(e) hereof, that such action shall apply uniformly to all
outstanding Rights, and may suspend the exercisability of the Rights
until the expiration of the Substitution Period in order to seek any
authorization of additional shares and/or to decide the appropriate
form of distribution to be made pursuant to such first sentence and to
determine the value thereof. The Company shall make a public
announcement when the exercisability of the Rights has been temporarily
suspended, and again when such suspension is no longer in effect. For
purposes of this Section 11(a)(iii), the value of the Common Shares
shall be the current market price (as determined pursuant to Section
11(d) hereof) per Common Share on the Section 11(a)(ii) Trigger Date
and the value of any "common share equivalent" shall be deemed to have
the same value as the Common Shares on such date.
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(b) In case the Company shall fix a record date for
the issuance of rights, options or warrants to holders
of any security of the Company entitling them to subscribe for or purchase (for
a period expiring within forty-five (45) calendar days after such record date)
Preferred Shares (or shares having the same rights, privileges and preferences
as the Preferred Shares ("equivalent preferred shares")) or securities
convertible into Preferred Shares or equivalent preferred shares at a price per
Preferred Share or per equivalent preferred share (or having a conversion price
per share, if a security convertible into Preferred Shares or equivalent
preferred shares) less than the current market price (as determined pursuant to
Section 11(d) hereof) per Preferred Share on such record date, the Purchase
Price to be in effect after such record date shall be determined by multiplying
the Purchase Price in effect immediately prior to such record date by a
fraction, the numerator of which shall be the number of Preferred Shares
outstanding on such record date, plus the number of Preferred Shares that the
aggregate offering price of the total number of Preferred Shares and/or
equivalent preferred shares so to be offered (and/or the aggregate initial
conversion price of the convertible securities so to be offered) would purchase
at such current market price, and the denominator of which shall be the number
of Preferred Shares outstanding on such record date, plus the number of
additional Preferred Shares and/or equivalent preferred shares to be offered for
subscription or purchase (or into which the convertible securities so to be
offered are initially convertible). In case such subscription price may be paid
by delivery of consideration part or all of which may be in a form other than
cash, the value of such consideration shall be as determined in good faith by
the Board of Directors of the Company, whose determination shall be described in
a statement filed with the Rights Agent and shall be binding on the Company, the
Rights Agent and the holders of the Rights. Preferred Shares owned by or held
for the account of the Company shall not be deemed outstanding for the purpose
of any such computation. Such adjustment shall be made successively whenever
such a record date is fixed, and in the event that such rights or warrants are
not so issued, the Purchase Price shall be adjusted to be the Purchase Price
that would then be in effect if such record date had not been fixed.
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(c) In case the Company shall fix a record date for a
distribution to all holders of Preferred Shares
(including any such distribution made in connection with a consolidation or
merger in which the Company is the continuing corporation) of evidences of
indebtedness, cash (other than a regular quarterly dividend out of the earnings
or retained earnings of the Company), assets (other than a regular quarterly
dividend referred to above or dividend payable in Preferred Shares, but
including any dividend payable in stock other than Preferred Shares) or
subscription rights or warrants (excluding those referred to in Section 11(b)
hereof), the Purchase Price to be in effect after such record date shall be
determined by multiplying the Purchase Price in effect immediately prior to such
record date by a fraction, the numerator of which shall be the current market
price (as determined pursuant to Section 11(d) hereof) per Preferred Share on
such record date, less the then fair market value (as determined in good faith
by the Board of Directors of the Company, whose determination shall be described
in a statement filed with the Rights Agent) of the portion of the cash, assets
or evidences of indebtedness so to be distributed or of such subscription rights
or warrants applicable to a Preferred Share and the denominator of which shall
be such current market price (as determined pursuant to Section 11(d) hereof)
per Preferred Share. Such adjustments shall be made successively whenever such a
record date is fixed, and in the event that such distribution is not so made,
the Purchase Price shall be adjusted to be the Purchase Price which would have
been in effect if such record date had not been fixed.
(d) (i) For the purpose of any computation hereunder,
other than computations made pursuant to Section 11(a)(iii) hereof, the
"current market price" per Common Share on any date shall be deemed to
be the average of the daily closing prices per Common Share for the
thirty (30) consecutive Trading Days (as such term is hereinafter
defined) immediately prior to such date, and for purposes of
computations made pursuant to Section 11(a)(iii) hereof, the "current
market price" per Common Share on any date shall be deemed to be the
average of the daily closing prices per Common Share for the ten (10)
consecutive Trading Days immediately following such date; provided,
however, that in the event that the current market price per Common
Share is determined during a period following the announcement by the
issuer of such Common Share of (A) a dividend or distribution on such
Common Share payable in Common Shares or securities convertible into
Common Shares (other than the Rights), or (B) any subdivision,
combination or reclassification of such Common Shares, and prior to the
expiration of the requisite thirty (30) Trading Day or ten (10) Trading
Day period, as set forth above, after the ex-dividend date for such
dividend or distribution, or the record date for such subdivision,
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combination or reclassification, then, and in each such case, the
"current market price" shall be properly adjusted to take into account
ex-dividend trading. The closing price for each Trading Day shall be
the last sale price, regular way, or, in case no such sale takes place
on such day, the average of the closing bid and asked prices, regular
way, in either case as reported in the principal consolidated
transaction reporting system with respect to securities listed or
admitted to trading on the New York Stock Exchange or, if the Common
Shares are not listed or admitted to trading on the New York Stock
Exchange, as reported in the principal consolidated transaction
reporting system with respect to securities listed on the principal
national securities exchange on which the Common Shares are listed or
admitted to trading or, if the Common Shares are not listed or admitted
to trading on any national securities exchange, the last quoted price
or, if not so quoted, the average of the high bid and low asked prices
in the over-the-counter market, as reported by the National Association
of Securities Dealers, Inc. Automated Quotation System ("NASDAQ") or
such other system then in use, or, if on any such date the Common
Shares are not quoted by any such organization, the average of the
closing bid and asked prices as furnished by a professional market
maker making a market in the Common Shares selected by the Board of
Directors of the Company. If on any such date no market maker is making
a market in the Common Shares, the fair value of such shares on such
date as determined in good faith by the Board of Directors of the
Company shall be used. The term "Trading Day" shall mean a day on which
the principal national securities exchange on which the Common Shares
are listed or admitted to trading is open for the transaction of
business or, if the Common Shares are not listed or admitted to trading
on any national securities exchange, a Business Day. If the Common
Shares are not publicly held or not so listed or traded, "current
market price" per share shall mean the fair value per share as
determined in good faith by the Board of Directors of the Company,
whose determination shall be described in a statement filed with the
Rights Agent and shall be conclusive for all purposes.
(ii) For the purpose of any computation hereunder,
the "current market price" per Preferred Share shall be determined in
the same manner as set forth above for the Common Shares in clause (i)
of this Section 11(d) (other than the last sentence thereof). If the
current market price per Preferred Share cannot be determined in the
manner provided above or if the Preferred Shares are not publicly held
or listed or traded in a manner described in clause (i) of this Section
11(d), the "current market price" per Preferred Share shall be
conclusively deemed to be an amount equal to 100 (as such number may be
appropriately adjusted for such events as stock splits, stock dividends
and recapitalizations with respect to the Common Shares occurring after
the date of this Agreement) multiplied by the current market price per
Common Share. If neither the Common Shares nor the Preferred Shares are
publicly held or so listed or traded, "current market price" per
Preferred Share shall mean the fair value per share as determined in
good faith by the Board of Directors of the Company, whose
determination shall be described in a statement filed with the Rights
Agent and shall be conclusive for all purposes. For all purposes of
this Agreement, the "current market price" of a Preferred Share
Fraction shall be equal to the "current market price" of one Preferred
Share divided by 100.
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(e) Anything herein to the contrary notwithstanding,
no adjustment in the Purchase Price shall be required
unless such adjustment would require an increase or decrease of at least one
percent (1%) in the Purchase Price; provided, however, that any adjustments
which by reason of this Section 11(e) are not required to be made shall be
carried forward and taken into account in any subsequent adjustment. All
calculations under this Section 11 shall be made to the nearest cent or to the
nearest ten-thousandth of a Common Share or one- millionth of a Preferred Share,
as the case may be. Notwithstanding the first sentence of this subsection (e),
any adjustment required by this Section 11 shall be made no later than the
earlier of (i) three (3) years from the date of the transaction that mandates
such adjustment, or (ii) the Expiration Date.
(f) If as a result of an adjustment made pursuant to
Section 11(a)(ii) or Section 13(a) hereof, the holder of any Right thereafter
exercised shall become entitled to receive any shares of capital stock other
than Preferred Shares, thereafter the number of such other shares so receivable
upon exercise of any Right and the Purchase Price thereof shall be subject to
adjustment from time to time in a manner and on terms as nearly equivalent as
practicable to the provisions with respect to the Preferred Shares contained in
Sections 11(a), (b), (c), (e), (g), (h), (i), (j), (k), (m) and (q), and the
provisions of Sections 7, 9, 10, 13 and 14 hereof with respect to the Preferred
Shares shall apply on like terms to any such other shares.
(g) All Rights originally issued by the Company
subsequent to any adjustment made to the Purchase Price
hereunder shall evidence the right to purchase, at the adjusted Purchase Price,
the number of Preferred Share Fractions purchasable from time to time hereunder
upon exercise of the Rights, all subject to further adjustment as provided
herein.
(h) Unless the Company shall have exercised its
election as provided in Section 11(i), upon each
adjustment of the Purchase Price as a result of the calculations made in
subsections (b) and (c), each Right outstanding immediately prior to the making
of such adjustment shall thereafter evidence the right to purchase, at the
adjusted Purchase Price, that number of Preferred Share Fractions (calculated to
the nearest one-millionth of a Preferred Share) obtained by (i) multiplying (x)
the number of Preferred Share Fractions covered by a Right immediately prior to
this adjustment, by (y) the Purchase Price in effect immediately prior to such
adjustment of the Purchase Price, and (ii) dividing the product so obtained by
the Purchase Price in effect immediately after such adjustment of the Purchase
Price.
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(i) The Company may elect on or after the date of any
adjustment of the Purchase Price to adjust the number of Rights, in lieu of any
adjustment in the number of Preferred Share Fractions purchasable upon the
exercise of a Right. Each of the Rights outstanding after the adjustment in the
number of Rights shall be exercisable for the number of Preferred Share
Fractions for which a Right was exercisable immediately prior to such
adjustment. Each Right held of record prior to such adjustment of the number of
Rights shall become that number of Rights (calculated to the nearest
ten-thousandth of a Preferred Share) obtained by dividing the Purchase Price in
effect immediately prior to adjustment of the Purchase Price by the Purchase
Price in effect immediately after adjustment of the Purchase Price. The Company
shall make a public announcement of its election to adjust the number of Rights,
indicating the record date for the adjustment, and, if known at the time, the
amount of the adjustment to be made. The record date for the adjustment may be
the date on which the Purchase Price is adjusted or any day thereafter, but, if
the Rights Certificates have been issued, shall be at least ten (10) days later
than the date of the public announcement. If Rights Certificates have been
issued, upon each adjustment of the number of Rights pursuant to this Section
11(i), the Company shall, as promptly as practicable, cause to be distributed to
holders of record of Rights Certificates on such record date Rights Certificates
evidencing, subject to Section 14 hereof, the additional Rights to which such
holders shall be entitled as a result of such adjustment, or, at the option of
the Company, shall cause to be distributed to such holders of record in
substitution and replacement for the Rights Certificates held by such holders
prior to the date of adjustment, and upon surrender thereof, if required by the
Company, new Rights Certificates evidencing all the Rights to which such holders
shall be entitled after such adjustment. Rights Certificates so to be
distributed shall be issued, executed and countersigned in the manner provided
for herein (and may bear, at the option of the Company, the adjusted Purchase
Price) and shall be registered in the names of the holders of record of Rights
Certificates on the record date specified in the public announcement.
(j) Irrespective of any adjustment or change in the
Purchase Price or the number of Preferred Share
Fractions issuable upon the exercise of the Rights, the Rights Certificates
theretofore and thereafter issued may continue to express the Purchase Price per
Preferred Share Fraction and the number of Preferred Share Fractions that were
expressed in the initial Rights Certificates issued hereunder.
(k) Before taking any action that would cause an
adjustment reducing the Purchase Price below the then stated or par value, if
any, of the number of Preferred Share Fractions issuable upon exercise of the
Rights, the Company shall take any corporate action that may, in the opinion of
its counsel, be necessary in order that the Company may validly and legally
issue such number of fully paid and nonassessable Preferred Share Fractions at
such adjusted Purchase Price.
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(l) In any case in which this Section 11 shall
require that an adjustment in the Purchase Price be made effective as of a
record date for a specified event, the Company may elect to defer until the
occurrence of such event the issuance to the holder of any Right exercised after
such record date the number of Preferred Share Fractions and other capital stock
or securities of the Company, if any, issuable upon such exercise over and above
the number of Preferred Share Fractions and other capital stock or securities of
the Company, if any, issuable upon such exercise on the basis of the Purchase
Price in effect prior to such adjustment; provided, however, that the Company
shall deliver to such holder a due bill or other appropriate instrument
evidencing such holder's right to receive such additional shares (fractional or
otherwise) or securities upon the occurrence of the event requiring such
adjustment.
(m) Anything in this Section 11 to the contrary
notwithstanding, the Company shall be entitled to make such reductions in the
Purchase Price, in addition to those adjustments expressly required by this
Section 11, as and to the extent that in their good faith judgment the Board of
Directors of the Company shall determine to be advisable in order that any (i)
consolidation or subdivision of the Preferred Shares, (ii) issuance wholly for
cash of any Preferred Shares at less than the current market price, (iii)
issuance wholly for cash or Preferred Shares or securities which by their terms
are convertible into or exchangeable for Preferred Shares, (iv) stock dividends
or (v) issuance of rights, options or warrants referred to in this Section 11,
hereafter made by the Company to holders of its Preferred Shares shall not be
taxable to such stockholders.
(n) The Company covenants and agrees that it shall
not, at any time after the Distribution Date, (i) consolidate with any other
Person (other than a Subsidiary of the Company in a transaction which complies
with Section 11(o) hereof), (ii) merge with or into any other Person (other than
a Subsidiary of the Company in a transaction which complies with Section 11(o)
hereof), or (iii) sell or transfer (or permit any Subsidiary to sell or
transfer), in one transaction, or a series of related transactions, assets or
earning power aggregating more than 50% of the assets or earning power of the
Company and its Subsidiaries (taken as a whole) to any other person or persons
(other than the Company and/or any of its Subsidiaries in one or more
transactions each of which complies with Section 11(o) hereof), if (x) at the
time of or immediately after such consolidation, merger or sale there are any
rights, warrants or other instruments or securities outstanding or agreements in
effect that would substantially diminish or otherwise eliminate the benefits
intended to be afforded by the Rights or (y) prior to, simultaneously with or
immediately after such consolidation, merger or sale, the stockholders of the
Person who constitutes, or would constitute, the "Principal Party" for purposes
of Section 13(a) hereof shall have received a distribution of Rights previously
owned by such Person or any of its Affiliates and Associates.
(o) The Company covenants and agrees that, after the
Distribution Date, it will not, except as permitted by Section 23 or Section 26
hereof, take (or permit any Subsidiary to take) any action if at the time such
action is taken it is reasonably foreseeable that such action will diminish
substantially or otherwise eliminate the benefits intended to be afforded by the
Rights.
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(p) Anything in this Agreement to the contrary
notwithstanding, in the event that the Company shall at any
time after the Rights Dividend Declaration Date and prior to the Distribution
Date (i) declare a dividend on the outstanding Common Shares payable in Common
Shares, (ii) subdivide the outstanding Common Shares, or (iii) combine the
outstanding Common Shares into a smaller number of shares, the number of Rights
associated with each Common Share then outstanding, or issued or delivered
thereafter but prior to the Distribution Date, shall be proportionately adjusted
so that the number of Rights thereafter associated with each Common Share
following any such event shall equal the result obtained by multiplying the
number of Rights associated with each Common Share immediately prior to such
event by a fraction the numerator of which shall be the total number of Common
Shares outstanding immediately prior to the occurrence of the event and the
denominator of which shall be the total number of Common Shares outstanding
immediately following the occurrence of such event.
(q) In the event that the Rights become exercisable
following a Section 11(a)(ii) Event, the Company, by
action of a majority of the members of the Board of Directors in office at the
time, may permit the Rights, subject to Section 7(e) hereof, to be exercised for
50% of the Common Shares (or cash or other securities or assets to be
substituted for the Adjustment Shares pursuant to subsection (a)(iii)) that
would otherwise be purchasable under subsection (a), in consideration of the
surrender to the Company of the Rights so exercised and without other payment of
the Purchase Price. Rights exercised under this subsection (q) shall be deemed
to have been exercised in full and shall be cancelled.
Section 12. Certificate of Adjusted Purchase Price or Number
of Shares. Whenever an adjustment is made as provided in Section 11 and Section
13 hereof, the Company shall (a) promptly prepare a certificate setting forth
such adjustment and a brief statement of the facts accounting for such
adjustment, (b) promptly file with the Rights Agent, and with each transfer
agent for the Preferred Shares and the Common Shares, a copy of such
certificate, and (c) mail a brief summary thereof to each holder of a Rights
Certificate (or, if prior to the Distribution Date, to each holder of a
certificate representing Common Shares) in accordance with Section 25 hereof.
The Rights Agent shall be fully protected in relying on any such certificate and
on any adjustment therein contained.
Section 13. Consolidation, Merger or Sale or Transfer of
Assets or Earning Power.
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(a) In the event that, following the Stock
Acquisition Date, directly or indirectly, (x) the Company shall
consolidate with, or merge with and into, any other Person (other than a
Subsidiary of the Company in a transaction which complies with Section 11(o)
hereof), and the Company shall not be the continuing or surviving corporation of
such consolidation or merger, (y) any person (other than a Subsidiary of the
Company in a transaction which complies with Section 11(o) hereof) shall
consolidate with, or merge with or into, the Company, and the Company shall be
the continuing or surviving corporation of such consolidation or merger and, in
connection with such consolidation or merger, all or part of the outstanding
Common Shares shall be changed into or exchanged for stock or other securities
of any other Person or cash or any other property, or (z) the Company shall sell
or otherwise transfer (or one or more of its Subsidiaries shall sell or
otherwise transfer), in one transaction or a series of related transactions,
assets or earning power aggregating more than 50% of the assets or earning power
of the Company and its Subsidiaries (taken as a whole) to any Person or Persons
(other than the Company or any Subsidiary of the Company in one or more
transactions each of which complies with Section 11(o) hereof), then, and in
each such case and except as contemplated by subsection (d), proper provision
shall be made so that:
(i) each holder of a Right, except as
provided in Section 7(e) hereof or subsection (e), shall thereafter
have the right to receive, upon the exercise thereof at the then
current Purchase Price in accordance with the terms of this Agreement,
such number of validly authorized and issued, fully paid, non
assessable and freely tradeable Common Shares of the Principal Party
(as such term is hereinafter defined), not subject to any liens,
encumbrances, rights of first refusal or other adverse claims, as shall
be equal to the result obtained by (1) multiplying the then current
Purchase Price by the number of Preferred Share Fractions for which a
Right is exercisable immediately prior to the first occurrence of a
Section 13 Event (or, if a Section 11(a)(ii) Event has occurred prior
to the first occurrence of a Section 13 Event, multiplying the number
of such shares for which a Right was exercisable immediately prior to
the first occurrence of a Section 11(a)(ii) Event by the Purchase Price
in effect immediately prior to such first occurrence), and dividing
that product (which, following the first occurrence of a Section 13
Event, shall be referred to as the "Purchase Price" for each Right and
for all purposes of this Agreement) by (2) 50% of the current market
price (determined pursuant to Section 11(d)(i) hereof) per Common Share
of such Principal Party on the date of consummation of such Section 13
Event,
(ii) such Principal Party shall thereafter
be liable for, and shall assume, by virtue of such Section 13 Event,
all the obligations and duties of the Company pursuant to this
Agreement;
(iii) the term "Company" shall thereafter be
deemed to refer to such Principal Party, it being specifically intended
that the provisions of Section 11 hereof shall apply only to such
Principal Party following the first occurrence of a Section 13 Event;
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(iv) such Principal Party shall take such
steps (including, but not limited to, the reservation of a sufficient
number of its Common Shares) in connection with the consummation of any
such transaction as may be necessary to assure that the provisions
hereof shall thereafter be applicable, as nearly as reasonably may be,
in relation to its Common Shares thereafter deliverable upon the
exercise of the Rights; and
(v) the provisions of Section 11(a)(ii)
hereof shall be of no effect following the first occurrence of any
Section 13 Event.
(b) "Principal Party" shall mean
(i) in the case of any transaction described
in clause (x) or (y) of the first sentence of subsection (a), the
Person that is the issuer of any securities into which Common Shares of
the Company are converted in such merger or consolidation, and if no
securities are so issued, the Person that is the other party to such
merger or consolidation; and
(ii) in the case of any transaction
described in clause (z) of the first sentence of subsection (a), the
Person that is the party receiving the greatest portion of the assets
or earning power transferred pursuant to such transaction or
transactions;
provided, however, that in any such case, (1) if the Common Shares of such
Person are not at such time and have not been continuously over the preceding
twelve (12) month period registered under Section 12 of the Exchange Act, and
such Person is a direct or indirect Subsidiary of another Person the Common
Shares of which are and have been so registered, "Principal Party" shall refer
to such other Person, and (2) in case such Person is a Subsidiary, directly or
indirectly, of more than one Person, the Common Shares of two or more of which
are and have been so registered, "Principal Party" shall refer to whichever of
such Persons is the issuer of the Common Shares having the greatest aggregate
market value.
(c) The Company shall not consummate any such
consolidation, merger, sale or transfer unless the Principal
Party shall have a sufficient number of authorized shares of its Common Shares
that have not been issued or reserved for issuance to permit the exercise in
full of the Rights in accordance with this Section 13 and unless prior thereto
the Company and such Principal Party shall have executed and delivered to the
Rights Agent a supplemental agreement providing for the terms set forth in
paragraphs (a) and (b) of this Section 13 and further providing that, as soon as
practicable after the date of any Section 13 event, the Principal Party will
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(i) prepare and file a registration
statement under the Act, with respect to the Rights and the securities
purchasable upon exercise of the Rights on an appropriate form, and
will use its best efforts to cause such registration statement to (A)
become effective as soon as practicable after such filing and (B)
remain effective (with a prospectus at all times meeting the
requirements of the Act) until the Expiration Date; and
(ii) will deliver to holders of the Rights
historical financial statements for the Principal Party and each of its
Affiliates that comply in all respects with the requirements for
registration on Form 10 under the Exchange Act.
The provisions of this Section 13 shall similarly apply to successive mergers or
consolidations or sales or other transfers. In the event that a Section 13 Event
shall occur at any time after the occurrence of a Section 11(a)(ii) Event, the
Rights that have not theretofore been exercised shall thereafter become
exercisable solely in the manner described in Section 13(a).
(d) Notwithstanding anything in this Agreement to the
contrary, Section 13 (other than this subsection
(d)) shall not be applicable to, and the term "Section 13 Event" shall not
include, a transaction described in subparagraphs (x) and (y) of Section 13(a)
if (i) such transaction is consummated with a Person, or Persons who acquired
Common Shares pursuant to a tender offer or exchange offer for all outstanding
Common Shares that complies with the provisions of Section 11(a)(ii)(B) hereof
(or a wholly owned Subsidiary of any such Person or Persons), (ii) the price per
Common Share offered in such transaction is not less than the price per Common
Share paid to all holders of Common Shares whose shares were purchased pursuant
to such tender offer or exchange offer and (iii) the form of consideration being
offered to the remaining holders of Common Shares pursuant to such transaction
is the same as the form of consideration paid pursuant to such tender or
exchange offer. Upon consummation of any such transaction contemplated by this
subsection (d), all Rights hereunder shall expire.
(e) In the event that the Rights become exercisable
under subsection (a) (except as provided in subsection
(d)), the Company, by action of a majority of the members of the Board of
Directors in office at the time, may agree with the Principal Party that the
Principal Party shall permit the Rights to be exercised for 50% of the Common
Shares of the Principal Party that would otherwise be purchasable under
subsection (a), in consideration of the surrender to the Principal Party, as the
successor to the Company under subsection (a) (ii), of the Rights so exercised
and without other payment of the Purchase Price. Rights exercised under this
subsection (e) shall be deemed to have been exercised in full and shall be
cancelled.
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Section 14. Fractional Rights and Fractional Shares.
(a) The Company shall not be required to issue
fractions of Rights, except prior to the Distribution Date
as provided in Section 11(p) hereof, or to distribute Rights Certificates that
evidence fractional Rights. In lieu of such fractional Rights, there shall be
paid to the registered holders of the Rights Certificates with regard to which
such fractional Rights would otherwise be issuable, an amount in cash equal to
the same fraction of the current market value of a whole Right. For purposes of
this subsection (a), the current market value of a whole Right shall be the
closing price of the Rights for the Trading Day immediately prior to the date on
which such fractional Rights would have been otherwise issuable. The closing
price of the Rights for any day shall be the last sale price, regular way, or,
in case no such sale takes place on such day, the average of the closing bid and
asked prices, regular way, in either case as reported in the principal
consolidated transaction reporting system with respect to securities listed or
admitted to trading on the New York Stock Exchange or, if the Rights are not
listed or admitted to trading on the New York Stock Exchange, as reported in the
principal consolidated transaction reporting system with respect to securities
listed on the principal national securities exchange on which the Rights are
listed or admitted to trading, or if the Rights are not listed or admitted to
trading on any national securities exchange, the last quoted price or, if not so
quoted, the average of the high bid and low asked prices in the over-the-counter
market, as reported by NASDAQ or such other system then in use or, if on any
such date the Rights are not quoted by any such organization, the average of the
closing bid and asked prices as furnished by a professional market maker making
a market in the Rights selected by the Board of Directors of the Company. If on
any such date no such market maker is making a market in the Rights the fair
value of the Rights on such date as determined in good faith by the Board of
Directors of the Company shall be used.
(b) The Company shall not be required to issue
fractions of Preferred Shares upon exercise of the Rights
or to distribute certificates which evidence fractional Preferred Shares, except
in each case for fractions which are integral multiples of Preferred Shares. In
lieu of fractional Preferred Shares that are not integral multiples of Preferred
Shares, the Company may pay to the registered holders of Rights Certificates at
the time such Rights are exercised as herein provided an amount in cash equal to
the same fraction of the current market value of a Preferred Share. For purposes
of this subsection (b), the current market value of one Preferred Share shall be
the closing price of a Preferred Share (as determined pursuant to Section
11(d)(ii) hereof) for the Trading Day immediately prior to the date of such
exercise.
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(c) Following the occurrence of a Triggering Event,
the Company shall not be required to issue fractions
of Common Shares upon exercise of the Rights or to distribute certificates that
evidence fractional Common Shares. In lieu of fractional Common Shares, the
Company may pay to the registered holders of Rights Certificates at the time
such Rights are exercised as herein provided an amount in cash equal to the same
fraction of the current market value of one Common Share. For purposes of this
subsection (c), the current market value of one Common Share shall be the
closing price of one Common Share (as determined pursuant to Section 11(d)(i)
hereof) for the Trading Day immediately prior to the date of such exercise.
(d) The holder of a Right or a beneficial interest in
a Right by the acceptance thereof expressly waives
his right to receive any fractional Rights or any fractional Common Shares upon
exercise of a Right, except as permitted by this Section 14.
Section 15. Rights of Action. All rights of action in respect
of this Agreement are vested in the respective registered holders of the Rights
Certificates (and, prior to the Distribution Date, the registered holders of the
Common Shares); and any registered holder of any Rights Certificate (or, prior
to the Distribution Date, of the Common Shares), without the consent of the
Rights Agent or of the holder of any other Rights Certificate (or, prior to the
Distribution Date, of the Common Shares), may, in his own behalf and for his own
benefit, enforce, and may institute and maintain any suit, action or proceeding
against the Company to enforce, or otherwise act in respect of, his right to
exercise the Rights evidenced by such Rights Certificate in the manner provided
in such Rights Certificate and in this Agreement. Without limiting the foregoing
or any remedies available to the holders of Rights or beneficial interests
therein, it is specifically acknowledged that the holders of Rights or
beneficial interests therein would not have an adequate remedy at law for any
breach of this Agreement and shall be entitled to specific performance of the
obligations hereunder and injunctive relief against actual or threatened
violations of the obligations hereunder of any Person subject to this Agreement.
Section 16. Agreement of Rights Holders. Every holder of a
Right or a beneficial interest in a Right by accepting the same consents and
agrees with the Company and the Rights Agent and with every other such holder
that:
(a) prior to the Distribution Date, beneficial
interests in the Rights will be transferable only in connection with the
transfer of Common Shares;
(b) after the Distribution Date, the Rights
Certificates are transferable only on the registry books of the Rights Agent if
surrendered at the principal office or offices of the Rights Agent designated
for such purposes, duly endorsed or accompanied by a proper instrument of
transfer and with the appropriate forms and certificates fully executed;
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(c) subject to Section 6(a) and Section 7(f) hereof,
the Company and the Rights Agent may deem and treat the person in whose name a
Rights Certificate (or, prior to the Distribution Date, the associated Common
Share certificate) is registered as the absolute owner thereof and of the Rights
evidenced thereby (notwithstanding any notations of ownership or writing on the
Rights Certificates or the associated Common Share certificate made by anyone
other than the Company or the Rights Agent) for all purposes whatsoever, and
neither the Company nor the Rights Agent, subject to the last sentence of
Section 7(e) hereof, shall be required to be affected by any notice to the
contrary; and
(d) notwithstanding anything in this Agreement to the
contrary, neither the Company nor the Rights Agent shall have any liability to
any holder of a Right or a beneficial interest in a Right or other Person as a
result of its inability to perform any of its obligations under this Agreement
by reason of any preliminary or permanent injunction or other order, decree or
ruling issued by a court of competent jurisdiction or by a governmental,
regulatory or administrative agency or commission, or any statute, rule,
regulation or executive order promulgated or enacted by any governmental
authority, prohibiting or otherwise restraining performance of such obligation;
provided, however, the Company must use its best efforts to have any such order,
decree or ruling lifted or otherwise overturned as soon as possible.
Section 17. Rights Certificate Holder Not Deemed a
Stockholder. No holder, as such, of any Rights Certificate shall be entitled to
vote, receive dividends or be deemed for any purpose the holder of the number of
Preferred Share Fractions or any other securities of the Company (including the
Common Shares) that may at any time be issuable on the exercise of the Rights
represented thereby, nor shall anything contained herein or in any Rights
Certificate be construed to confer upon the holder of any Rights Certificate, as
such, any of the rights of a stockholder of the Company or any right to vote for
the election of directors or upon any matter submitted to stockholders at any
meeting thereof, or to give or withhold consent to any corporate action, or to
receive notice of meetings or other actions affecting stockholders (except as
provided in Section 24 hereof), or to receive dividends or subscription rights,
or otherwise, until the Right or Rights evidenced by such Rights Certificate
shall have been exercised in accordance with the provisions hereof.
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Section 18. Concerning the Rights Agent.
(a) The Company agrees to pay to the Rights Agent
reasonable compensation for all services rendered by it hereunder and, from time
to time, on demand of the Rights Agent, its reasonable expenses and counsel fees
and disbursements and other disbursements incurred in the administration and
execution of this Agreement and the exercise and performance of its duties
hereunder. The Company also agrees to indemnify the Rights Agent, for and to
hold it harmless against, any loss, liability, or expense, incurred without
negligence, bad faith or willful misconduct on the part of the Rights Agent, for
anything done or omitted by the Rights Agent in connection with the acceptance
and administration of this Agreement, including the costs and expenses of
defending against any claim of liability in the premises. Anything in this
Agreement to the contrary notwithstanding, in no event shall the Rights Agent be
liable for special, indirect or consequential loss or damage of any kind
whatsoever (including, but not limited to, lost profits), even if the Rights
Agent has been advised of the likelihood of such loss or damage and regardless
of the form of action.
(b) The Rights Agent shall be protected and shall
incur no liability for or in respect of any action taken, suffered or omitted by
it in connection with its administration of this Agreement in reliance upon any
Rights Certificate or certificate for Common Shares or for other securities of
the Company, instrument of assignment or transfer, power of attorney,
endorsement, affidavit, letter, notice, direction, consent, certificate,
statement, or other paper or document believed by it to be genuine and to be
signed, executed and, where necessary, verified or acknowledged, by the proper
Person or Persons.
Section 19. Merger or Consolidation or Change of Name of
Rights Agent.
(a) Any corporation into which the Rights Agent or
any successor Rights Agent may be merged or with which it may be consolidated,
or any corporation resulting from any merger or consolidation to which the
Rights Agent or any successor Rights Agent shall be a party, or any corporation
succeeding to the corporate trust or stock transfer business of the Rights Agent
or any successor Rights Agent, shall be the successor to the Rights Agent under
this Agreement without the execution or filing of any paper or any further act
on the part of any of the parties hereto; provided, however, that such
corporation would be eligible for appointment as a successor Rights Agent under
the provisions of Section 21 hereof. In case at the time such successor Rights
Agent shall succeed to the agency and trust created by this Agreement, any of
the Rights Certificates shall have been countersigned but not delivered, any
such successor Rights Agent may adopt the countersignature of a predecessor
Rights Agent and deliver such Rights Certificates so countersigned; and in case
at that time any of the Rights Certificates shall not have been countersigned,
any successor Rights Agent may countersign such Rights Certificates either in
the name of the predecessor or in the name of the successor Rights Agent; and in
all such cases such Rights Certificates shall have the full force provided in
the Rights Certificates and in this Agreement.
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(b) In case at any time the name of the Rights Agent
shall be changed and at such time any of the Rights Certificates shall have been
countersigned but not delivered the Rights Agent may adopt the countersignature
under its prior name and deliver Rights Certificates so countersigned; and in
case at that time any of the Rights Certificates shall not have been
countersigned, the Rights Agent may countersign such Rights Certificates either
in its prior name or in its changed name; and in all such cases such Rights
Certificates shall have the full force provided in the Rights Certificates and
in this Agreement.
Section 20. Duties of Rights Agent. The Rights Agent
undertakes the duties and obligations imposed by this Agreement upon the
following terms and conditions, by all of which the Company and the holders of
Rights Certificates or beneficial interests in the Rights, by their acceptance
thereof, shall be bound:
(a) The Rights Agent may consult with legal counsel
(who may be legal counsel for the Company), and the written opinion of such
counsel shall be full and complete authorization and protection to the Rights
Agent as to any action taken or omitted by it in good faith and in accordance
with such opinion.
(b) Whenever in the performance of its duties under
this Agreement the Rights Agent shall deem it necessary or desirable that any
fact or matter (including, without limitation, the identity of any Acquiring
Person and the determination of "current market price") be proved or established
by the Company prior to taking or suffering any action hereunder, such fact or
matter (unless other evidence in respect thereof be herein specifically
prescribed) may be deemed to be conclusively proved and established by a
certificate signed by the Chairman of the Board, the President, any Vice
President, the Treasurer, any Assistant Treasurer, the Secretary or any
Assistant Secretary of the Company and delivered to the Rights Agent; and such
certificate shall be full authorization to the Rights Agent for any action taken
or suffered in good faith by it under the provisions of this Agreement in
reliance upon such certificate.
(c) The Rights Agent shall be liable hereunder only
for its own gross negligence, bad faith or willful misconduct.
(d) The Rights Agent shall not be liable for or by
reason of any of the statements of fact or recitals contained in this Agreement
or in the Rights Certificates or be required to verify the same (except as to
its countersignature on such Rights Certificates), but all such statements and
recitals are and shall be deemed to have been made by the Company only.
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(e) The Rights Agent shall not be under any
responsibility in respect of the validity of this Agreement or the execution and
delivery hereof (except the due execution hereof by the Rights Agent) or in
respect of the validity or execution of any Rights Certificate (except its
countersignature thereof); nor shall it be responsible for any breach by the
Company of any covenant or condition contained in this Agreement or in any
Rights Certificate; nor shall it be responsible for any adjustment required
under the provisions of Section 11 or Section 13 hereof or responsible for the
manner, method or amount of any such adjustment or the ascertaining of the
existence of facts that would require any such adjustment (except with respect
to the exercise of Rights evidenced by Rights Certificates after actual notice
of any such adjustment); nor shall it by any act hereunder be deemed to make any
representation or warranty as to the authorization or reservation of any Common
Shares to be issued pursuant to this Agreement or any Rights Certificate or as
to whether any Common Shares or Preferred Shares will, when so issued, be
validly authorized and issued, fully paid and nonassessable.
(f) The Company agrees that it will perform, execute,
acknowledge and deliver or cause to be performed, executed, acknowledged and
delivered all such further and other acts, instruments and assurances as may
reasonably be required by the Rights Agent for the carrying out or performing by
the Rights Agent of the provisions of this Agreement.
(g) The Rights Agent is hereby authorized and
directed to accept instructions with respect to the performance of its duties
hereunder from the Chairman of the Board, the President, any Vice President, the
Secretary, any Assistant Secretary, the Treasurer or any Assistant Treasurer of
the Company, and to apply to such officers for advice or instructions in
connection with its duties, and it shall not be liable for any action taken or
suffered to be taken by it in good faith in accordance with instructions of any
such officer.
(h) The Rights Agent and any stockholder, director,
officer or employee of the Rights Agent may buy, sell or deal in any of the
Rights or other securities of the Company or become pecuniarily interested in
any transaction in which the Company may be interested, or contract with or lend
money to the Company or otherwise act as fully and freely as though it were not
the Rights Agent under this Agreement and none of such actions shall constitute
a breach of trust. Nothing herein shall preclude the Rights Agent from acting in
any other capacity for the Company or for any other legal entity.
(i) The Rights Agent may execute and exercise any of
the rights or powers hereby vested in it or perform any duty hereunder either
itself or by or through its attorneys or agents, and the Rights Agent shall not
be answerable or accountable for any act, default, neglect or misconduct of any
such attorneys or agents or for any loss to the Company resulting from any such
act, default, neglect or misconduct; provided, however, reasonable care was
exercised in the selection and continued employment thereof.
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(j) No provision of this Agreement shall require the
Rights Agent to expend or risk its own funds or otherwise incur any financial
liability in the performance of any of its duties hereunder or in the exercise
of its rights if there shall be reasonable grounds for believing that repayment
of such funds or adequate indemnification against such risk or liability is not
reasonably assured to it.
(k) If, with respect to any Rights Certificate
surrendered to the Rights Agent for exercise or transfer, the certificate
attached to the form of assignment or form of election to purchase, as the case
may be, has either not been completed or indicates an affirmative response to
clause 1 and/or 2 thereof, the Rights Agent shall not take any further action
with respect to such requested exercise or transfer without first consulting
with the Company.
Section 21. Change of Rights Agent. The Rights Agent or any
successor Rights Agent may resign and be discharged from its duties under this
Agreement upon thirty (30) days' prior written notice mailed to the Company and
to each transfer agent of the Common Shares and Preferred Shares by registered
or certified mail, and to the holders of the Rights Certificates by first- class
mail. The Company may remove the Rights Agent or any successor Rights Agent upon
thirty (30) days' prior written notice mailed to the Rights Agent or successor
Rights Agent, as the case may be, and to each transfer agent of the Common
Shares and Preferred Shares, by registered or certified mail, and to the holders
of the Rights Certificates by first-class mail. If the Rights Agent shall resign
or be removed or shall otherwise become incapable of acting, the Company shall
appoint a successor to the Rights Agent. If the Company shall fail to make such
appointment within a period of thirty (30) days after giving notice of such
removal or after it has been notified in writing of such resignation or
incapacity by the resigning or incapacitated Rights Agent or by the holder of a
Rights Certificate (who shall, with such notice, submit his Rights Certificate
for inspection by the Company), then any registered holder of any Rights
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Certificate may apply to any court of competent jurisdiction for the appointment
of a new Rights Agent. Any successor Rights Agent, whether appointed by the
Company or by such a court, shall be (a) a corporation organized, doing business
and in good standing under the laws of the United States or of any state, having
a principal office in the State of New York or the Commonwealth of Pennsylvania,
that is authorized by law to exercise corporate trust and stock transfer powers
and is subject to supervision or examination by federal or state authority and
that has at the time of its appointment as Rights Agent a combined capital and
surplus adequate in the judgment of a majority of the members of the Board of
Directors in office at the time to assure the performance of its duties
hereunder and the protection of the interests of the Company and the holders of
Rights or beneficial interests therein, or (b) an Affiliate of a corporation
described in clause (a) of this sentence. After appointment, the successor
Rights Agent shall be vested with the same powers, rights, duties and
responsibilities as if it had been originally named as Rights Agent without
further act or deed; but the predecessor Rights Agent shall deliver and transfer
to the successor Rights Agent any property at the time held by it hereunder, and
execute and deliver any further assurance, conveyance, act or deed necessary for
the purpose. Not later than the effective date of any such appointment, the
Company shall file notice thereof in writing with the predecessor Rights Agent
and each transfer agent of the Common Shares and Preferred Shares and mail a
notice thereof in writing to the registered holders of the Rights Certificates
or, prior to the Distribution Date, to the registered holders of the Common
Shares. Failure to give any notice provided for in this Section 21, however, or
any defect therein, shall not affect the legality or validity of the resignation
or removal of the Rights Agent or the appointment of the successor Rights Agent,
as the case may be.
Section 22. Issuance of New Rights Certificates.
Notwithstanding any of the provisions of this Agreement or of the Rights to the
contrary, the Company may, at its option, issue new Rights Certificates
evidencing Rights in such form as may be approved by its Board of Directors to
reflect any adjustment or change in the Purchase Price and the number or kind or
class of shares or other securities or property purchasable under the Rights
Certificates made in accordance with the provisions of this Agreement. In
addition, in connection with the issuance, sale or delivery of Common Shares
following the Distribution Date and prior to the redemption or expiration of the
Rights, the Company (a) shall, with respect to Common Shares so issued, sold or
delivered pursuant to the exercise of stock options, stock appreciation rights,
grants or awards outstanding on the Distribution Date under any benefit plan or
arrangement for employees or directors, or upon the exercise, conversion or
exchange of securities outstanding on the Record Date or hereinafter issued by
the Company, and (b) may, in any other case, if deemed necessary or appropriate
by the Board of Directors of the Company, issue Rights Certificates representing
the appropriate number of Rights in connection with such issuance or sale;
provided, however, that (i) no such Rights Certificate shall be issued if, and
to the extent that, the Company shall be advised by counsel that such issuance
would create a significant risk of material adverse tax consequences to the
Company or the Person to whom such Rights Certificate would be issued, and (ii)
no such Rights Certificate shall be issued if, and to the extent that,
appropriate adjustment shall otherwise have been made in lieu of the issuance
thereof.
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Section 23. Redemption and Termination.
(a) The Board of Directors of the Company may, at its
option, at any time prior to the earlier of (i) the close of business on the
tenth day following a Stock Acquisition Date (or, if the Stock Acquisition Date
shall have occurred prior to the Record Date, the close of business on the tenth
day following the Record Date), or (ii) the Final Expiration Date, redeem all
but not less than all the then outstanding Rights at a redemption price of $.01
per Right, as such amount may be appropriately adjusted to reflect any stock
split, stock dividend or similar transaction occurring after the date hereof
(such redemption price being hereinafter referred to as the "Redemption Price")
and the Company may, at its option, pay the Redemption Price either in Common
Shares (based on the "current market price", as defined in Section 11(d)(i)
hereof, of the Common Shares at the time of redemption) or cash; however, that
if, following the occurrence of a Stock Acquisition Date and following the
expiration of the right of redemption hereunder but prior to any Triggering
Event, (i) an Acquiring Person shall have transferred or otherwise disposed of a
number of Common Shares in one transaction or series of transactions, not
directly or indirectly involving the Company or any of its Subsidiaries, which
did not result in the occurrence of a Triggering Event or the Company shall have
issued additional equity securities, in either instance such that such Person is
thereafter a Beneficial Owner of 10% or less of the outstanding Common Shares,
and (ii) there is no other Acquiring Person immediately following the occurrence
of the event described in clause (i), then the right of redemption shall be
reinstated and thereafter be subject to the provisions of this Section 23.
Notwithstanding anything contained in this Agreement to the contrary, the Rights
shall not be exercisable after the first occurrence of a Section 11(a)(ii) Event
until such time as the Company's right of redemption hereunder has expired.
(b) Immediately upon the action of the Board of
Directors of the Company ordering the redemption of the Rights, evidence of
which shall have been filed with the Rights Agent and without any further action
and without any notice, the right to exercise the Rights will terminate and the
only right thereafter of the holders of Rights shall be to receive the
Redemption Price for each Right so held. Promptly after the action of the Board
of Directors ordering the redemption of the Rights, the Company shall give
notice of such redemption to the Rights Agent and the holders of the then
outstanding Rights by mailing such notice to all such holders at each holder's
last address as it appears upon the registry books of the Rights Agent or, prior
to the Distribution Date, on the registry books of the Transfer Agent for the
Common Shares. Any notice that is mailed in the manner herein provided shall be
deemed given, whether or not the holder receives the notice. Each such notice of
redemption will state the method by which the payment of the Redemption Price
will be made.
(c) In deciding whether or not to exercise the
Company's right of redemption hereunder, the directors of the Company shall act
in good faith, in a manner they reasonably believe to be in the best interests
of the Company and with such care, including reasonable inquiry, skill and
diligence, as a person of ordinary prudence would use under similar
circumstances.
-37-
<PAGE>
Section 24. Notice of Certain Events.
(a) In case the Company shall propose, at any time
after the Distribution Date, (i) to pay any dividend payable in stock of any
class to the holders of Preferred Shares or to make any other distribution to
the holders of Preferred Shares (other than a regular quarterly dividend out of
earnings or retained earnings of the Company), or (ii) to offer to the holders
of Preferred Shares rights or warrants to subscribe for or to purchase any
additional Preferred Shares or shares of stock of any class or any other
securities, rights or options, or (iii) to effect any reclassification of its
Preferred Shares (other than a reclassification involving only the subdivision
of outstanding Preferred Shares), or (iv) to effect any consolidation or merger
into or with any other Person (other than a Subsidiary of the Company in a
transaction which complies with Section 11(o) hereof), or to effect any sale or
other transfer (or to permit one or more of its Subsidiaries to effect any sale
or other transfer), in one transaction or a series of related transactions, of
more than 50% of the assets or earning power of the Company and its Subsidiaries
(taken as a whole) to any other Person or Persons (other than the Company and/or
any of its Subsidiaries in one or more transactions each of which complies with
Section 11(o) hereof), or (v) to effect the liquidation, dissolution or winding
up of the Company, then, in each such case, the Company shall give to each
holder of a Rights Certificate, to the extent feasible and in accordance with
Section 25 hereof, a notice of such proposed action, which shall specify the
record date for the purposes of such stock dividend, distribution of rights or
warrants, or the date on which such reclassification, consolidation, merger,
sale, transfer, liquidation, dissolution, or winding up is to take place and the
date of participation therein by the holders of Preferred Shares, if any such
date is to be fixed, and such notice shall be so given in the case of any action
covered by clause (i) or (ii) above at least twenty (20) days prior to the
record date for determining holders of Preferred Shares for purposes of such
action, and in the case of any such other action, at least twenty (20) days
prior to the date of the taking of such proposed action or the date of
participation therein by the holders of Preferred Shares, whichever shall be the
earlier.
(b) Upon the occurrence of a Section 11(a)(ii) Event,
(i) the Company shall as soon as practicable thereafter give to each holder of a
Right, to the extent feasible and in accordance with Section 25 hereof, a notice
of the occurrence of such event, which shall specify the event and the
consequences of the event to holders of Rights under Section 11(a)(ii) hereof,
and (ii) all references in the preceding paragraph to Preferred Shares shall be
deemed thereafter to refer to Common Shares and/or, if appropriate, other
securities.
Section 25. Notices. Notices or demands authorized by this
Agreement to be given or made by the Rights Agent or by the holder of any Rights
Certificate to or on the Company shall be sufficiently given or made if sent by
first-class mail, postage prepaid, addressed (until another address is filed in
writing with the Rights Agent) as follows:
-38-
<PAGE>
Maritrans Inc.
1818 Market Street
Suite 3540
Philadelphia, PA 19103
Attention: Corporate Secretary
Subject to the provisions of Section 21, any notice or demand authorized by this
Agreement to be given or made by the Company or by the holder of any Rights
Certificate to or on the Rights Agent shall be sufficiently given or made if
sent by first-class mail, postage prepaid, addressed (until another address is
filed in writing with the Company) as follows:
The Chase Manhattan Bank
[450 West 33rd Street, 15th Floor
New York, NY 10001]
Attention: Vice President - Stock Transfer
Notices or demands authorized by this Agreement to be given or made by the
Company or the Rights Agent to the holder of any Rights Certificate (or, if
prior to the Distribution Date to the holder of certificates representing Common
Shares) shall be sufficiently given or made if sent by first-class mail, postage
prepaid, addressed to such holder at the address of such holder as shown on the
registry books of the Company.
Section 26. Supplements and Amendments.
(a) Prior to the Distribution Date and subject to the
penultimate sentence of this Section 26, the Company and the Rights Agent shall,
if the Company so directs, supplement or amend any provision of this Agreement
without the approval of any holders of certificates representing Common Shares.
From and after the Distribution Date and subject to the penultimate sentence of
this Section 26, the Company and the Rights Agent shall, if the Company so
directs, supplement or amend this Agreement without the approval of any holders
of Rights Certificates in order (i) to cure any ambiguity, (ii) to correct or
supplement any provision contained herein which may be defective or inconsistent
with any other provisions herein, (iii) to shorten or lengthen any time period
hereunder, or (iv) to change or supplement the provisions hereunder in any
manner that the Company may deem necessary or desirable and that shall not
adversely affect the interests of the holders of Rights Certificates; provided,
-39-
<PAGE>
this Agreement may not be supplemented or amended to lengthen, pursuant to
clause (iii) of this sentence, (A) a time period relating to when the Rights may
be redeemed at such time as the Rights are not then redeemable, or (B) any other
time period unless such lengthening is for the purpose of protecting, enhancing
or clarifying the rights of, and/or the benefits to, the holders of Rights. Upon
the delivery of a certificate from an appropriate officer of the Company that
states that the proposed supplement or amendment is in compliance with the terms
of this Section 26, the Rights Agent shall execute such supplement or amendment.
Notwithstanding anything contained in this Agreement to the contrary, no
supplement or amendment shall be made that changes the Redemption Price, the
Final Expiration Date, the Purchase Price or the number of Preferred Share
Fractions for which a Right is exercisable. Prior to the Distribution Date, the
interests of the beneficial owners of Rights shall be deemed coincident with the
interests of the holders of Common Shares.
(b) In deciding whether or not to supplement or amend
this Agreement, the directors of the Company shall act in good faith, in a
manner they reasonably believe to be in the best interests of the Company and
with such care, including reasonable inquiry, skill and diligence, as a person
of ordinary prudence would use under similar circumstances, and they may
consider the effects of any action upon employees, suppliers and customers of
the Company and upon communities in which offices or other establishments of the
Company are located, and all other pertinent factors.
Section 27. Successors. All the covenants and provisions of
this Agreement by or for the benefit of the Company or the Rights Agent shall
bind and inure to the benefit of their respective successors and assigns
hereunder.
Section 28. Determinations and Actions by the Board of
Directors, etc. For all purposes of this Agreement, any calculation of the
number of Common Shares outstanding at any particular time, including for
purposes of determining the particular percentage of such outstanding Common
Shares of which any Person is the Beneficial Owner, shall be made in accordance
with the last sentence of Rule 13d-3(d)(1)(i) of the General Rules and
Regulations under the Exchange Act. The Board of Directors of the Company shall
have the exclusive power and authority to administer this Agreement and to
exercise all rights and powers specifically granted to the Board or to the
Company, or as may be necessary or advisable in the administration of this
Agreement, including, without limitation, the right and power to (i) interpret
the provisions of this Agreement, and (ii) make all determinations deemed
necessary or advisable for the administration of this Agreement (including a
determination to redeem or not redeem the Rights or to amend or supplement the
Agreement). All such actions, calculations, interpretations and determinations
(including, for purposes of clause (y) below, all omissions with respect to the
foregoing) that are done or made by the Board in good faith, shall (x) be final,
conclusive and binding on the Company, the Rights Agent, the holders of the
Rights and all other parties, and (y) not subject the Board to any liability to
the holders of the Rights.
-40-
<PAGE>
Section 29. Benefits of this Agreement. Nothing in this
Agreement shall be construed to give to any Person other than the Company, the
Rights Agent and the registered holders of the Rights Certificates (and, prior
to the Distribution Date, registered holders of the Common Shares) any legal or
equitable right, remedy or claim under this Agreement; but this Agreement shall
be for the sole and exclusive benefit of the Company, the Rights Agent and the
registered holders of the Rights Certificates (and, prior to the Distribution
Date, registered holders of the Common Shares).
Section 30. Severability. If any term, provision, covenant or
restriction of this Agreement is held by a court of competent jurisdiction or
other authority to be invalid, void or unenforceable for any purpose or under
any set of circumstances or as applied to any Person, such invalid, void or
unenforceable term, provision, covenant or restriction shall continue in effect
to the maximum extent possible for all other purposes, under all other
circumstances and as applied to all other Persons; and the remainder of the
terms, provisions, covenants and restrictions of this Agreement shall remain in
full force and effect and shall in no way be affected, impaired or invalidated;
provided, however, that notwithstanding anything in this Agreement to the
contrary, if any such term, provision, covenant or restriction is held by such
court or authority to be invalid, void or unenforceable and the Board of
Directors of the Company determines in its good faith judgment that severing the
invalid language from this Agreement would adversely affect the purpose or
effect of this Agreement, the right of redemption set forth in Section 23 hereof
shall be reinstated and shall not expire until the close of business on the
tenth day following the date of such determination by the Board of Directors.
Section 31. Governing Law. This Agreement, each Right and each
Rights Certificate issued hereunder shall be deemed to be a contract made under
the laws of the State of Delaware and for all purposes shall be governed by and
construed in accordance with the laws of such jurisdiction applicable to
contracts made and to be performed entirely within such jurisdiction, except
with regard to the duties of the Rights Agent which will be governed by the law
of the State of New York.
Section 32. Counterparts. This Agreement may be executed in
any number of counterparts and each of such counterparts shall for all purposes
be deemed to be an original, and all such counterparts shall together constitute
but one and the same instrument.
Section 33. Descriptive Headings. Descriptive headings of the
several Sections of this Agreement are inserted for convenience only and shall
not control or affect the meaning or construction of any of the provisions
hereof.
-41-
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed as of the day and year first above written.
MARITRANS INC.
By_______________________________
Name:
Title:
THE CHASE MANHATTAN BANK
By_______________________________
Name:
Title:
-42-
<PAGE>
EXHIBIT A
RESOLUTION OF THE BOARD OF DIRECTORS OF
MARITRANS INC.
ESTABLISHING AND DESIGNATING
SERIES A JUNIOR PARTICIPATING PREFERRED SHARES
AS A SERIES OF THE SERIES PREFERRED STOCK
RESOLVED, that pursuant to the authority expressly vested in
the Board of Directors of Maritrans Inc. (the "Corporation") by Article FOURTH
of the Restated Certificate of Incorporation of the Corporation, the Board of
Directors hereby fixes and determines the voting rights, designations,
preferences, qualifications, privileges, limitations, restrictions, options,
conversion rights and other special or relative rights of the first series of
the Series Preferred Stock, par value $.01 per share, which shall consist of
500,000 shares and shall be designated as Series A Junior Participating
Preferred Shares (the "Series A Preferred Shares").
Special Terms of the Series A Preferred Shares
Section 1. Dividends and Distributions.
(a) The rate of dividends payable per share of Series A
Preferred Shares on the first day of January, April, July and October in each
year or such other quarterly payment date as shall be specified by the Board of
Directors (each such date being referred to herein as a "Quarterly Dividend
Payment Date"), commencing on the first Quarterly Dividend Payment Date after
the first issuance of a share or fraction of a share of the Series A Preferred
Shares, shall be (rounded to the nearest cent) equal to the greater of (i) $.02
or (ii) subject to the provision for adjustment hereinafter set forth, 100 times
the aggregate per share amount of all cash dividends, and 100 times the
aggregate per share amount (payable in cash, based upon the fair market value at
the time the non-cash dividend or other distribution is declared or paid as
determined in good faith by the Board of Directors) of all non-cash dividends or
other distributions other than a dividend payable in shares of Common Stock or a
subdivision of the outstanding shares of Common Stock (by reclassification or
otherwise), declared on the Common Stock, $.01 par value, of the Corporation
since the immediately preceding Quarterly Dividend Payment Date, or, with
<PAGE>
respect to the first Quarterly Dividend Payment Date, since the first issuance
of any share or fraction of a share of the Series A Preferred Shares. Dividends
on the Series A Preferred Shares shall be paid out of funds legally available
for such purpose. In the event the Corporation shall at any time after April 1,
1993 (the "Rights Declaration Date") (i) declare any dividend on Common Stock
payable in shares of Common Stock, (ii) subdivide the outstanding shares of
Common Stock, or (iii) combine the outstanding shares of Common Stock into a
smaller number of shares, then in each such case the amounts to which holders of
Series A Preferred Shares were entitled immediately prior to such event under
clause (ii) of the preceding sentence shall be adjusted by multiplying each such
amount by a fraction the numerator of which is the number of shares of Common
Stock outstanding immediately after such event and the denominator of which is
the number of shares of Common Stock that were outstanding immediately prior to
such event.
(b) Dividends shall begin to accrue and be cumulative on
outstanding Series A Preferred Shares from the Quarterly Dividend Payment Date
next preceding the date of issue of such Series A Preferred Shares, unless the
date of issue of such shares is prior to the record date for the first Quarterly
Dividend Payment Date, in which case dividends on such shares shall begin to
accrue from the date of issue of such shares, or unless the date of issue is a
Quarterly Dividend Payment Date or is a date after the record date for the
determination of holders of Series A Preferred Shares entitled to receive a
quarterly dividend and before such Quarterly Dividend Payment Date, in either of
which events such dividends shall begin to accrue and be cumulative from such
quarterly Dividend Payment Date. Accrued but unpaid dividends shall not bear
interest. Dividends paid on the Series A Preferred Shares in an amount less than
the total amount of such dividends at the time accrued and payable on such
shares shall be allocated pro rata on a share-by-share basis among all such
shares at the time outstanding.
Section 2. Voting Rights. In addition to any other voting
rights required by law, the holders of Series A Preferred Shares shall have the
following voting rights:
(a) Subject to the provision for adjustment hereinafter set
forth, each Series A Preferred Share shall entitle the holder thereof to 100
votes on all matters submitted to a vote of the stockholders of the Corporation.
In the event the Corporation shall at any time after the Rights Declaration Date
(i) declare any dividend on Common Stock payable in shares of Common Stock, (ii)
subdivide the outstanding shares of Common Stock, or (iii) combine the
outstanding shares of Common Stock into a smaller number of shares, then in each
such case the number of votes per share to which holders of Series A Preferred
Shares were entitled immediately prior to such event shall be adjusted by
multiplying such number by a fraction the numerator of which is the number of
shares of Common Stock outstanding immediately after such event and the
denominator of which is the number of shares of Common Stock that were
outstanding immediately prior to such event.
-A-2-
<PAGE>
(b) In the event that dividends upon the Series A Preferred
Shares shall be in arrears to an amount equal to six full quarterly dividends
thereon, the holders of such Series A Preferred Shares shall become entitled to
the extent hereinafter provided to vote noncumulatively at all elections of
directors of the Corporation, and to receive notice of all stockholders'
meetings to be held for such purpose. At such meetings, to the extent that
directors are being elected, the holders of such Series A Preferred Shares
voting as a class shall be entitled solely to elect two members of the Board of
Directors of the Corporation; and all other directors of the Corporation shall
be elected by the other stockholders of the Corporation entitled to vote in the
election of directors. Such voting rights of the holders of such Series A
Preferred Shares shall continue until all accumulated and unpaid dividends
thereon shall have been paid or funds sufficient therefor set aside, whereupon
all such voting rights of the holders of shares of such series shall cease,
subject to being again revived from time to time upon the reoccurrence of the
conditions above described as giving rise thereto.
At any time when such right to elect directors separately as a
class shall have so vested, the Corporation may, and upon the written request of
the holders of record of not less than 20% of the then outstanding total number
of shares of all the Series A Preferred Shares having the right to elect
directors in such circumstances shall, call a special meeting of holders of such
Series A Preferred Shares for the election of directors. In the case of such a
written request, such special meeting shall be held within 90 days after the
delivery of such request, and, in either case, at the place and upon the notice
provided by law and in the By-laws of the Corporation; provided, that the
Corporation shall not be required to call such a special meeting if such request
is received less than 120 days before the date fixed for the next ensuing annual
or special meeting of stockholders of the Corporation. Upon the mailing of the
notice of such special meeting to the holders of such Series A Preferred Shares,
or, if no such meeting be held, then upon the mailing of the notice of the next
annual or special meeting of stockholders for the election of directors, the
number of directors of the Corporation shall, ipso facto, be increased to the
extent, but only to the extent, necessary to provide sufficient vacancies to
enable the holders of such Series A Preferred Shares to elect the two directors
hereinabove provided for, and all such vacancies shall be filled only by vote of
the holders of such Series A Preferred Shares as hereinabove provided. Whenever
the number of directors of the Corporation shall have been increased, the number
as so increased may thereafter be further increased or decreased in such manner
as may be permitted by the By-laws and without the vote of the holders of Series
A Preferred Shares, provided that no such action shall impair the right of the
holders of Series A Preferred Shares to elect and to be represented by two
directors as herein provided.
So long as the holders of Series A Preferred Shares are
entitled hereunder to voting rights, any vacancy in the Board of Directors
caused by the death or resignation of any director elected by the holders of
Series A Preferred Shares, shall, until the next meeting of shareholdes for the
election of directors, in each case be filled by the remaining director elected
by the holders of Series A Preferred Shares having the right to elect directors
in such circumstances.
Upon termination of the voting rights of the holders of any
series of Series A Preferred Shares the terms of office of all persons who shall
have been elected directors of the Corporation by vote of the holders of Series
A Preferred Shares or by a director elected by such holders shall forthwith
terminate.
-A-3-
<PAGE>
(c) Except as otherwise provided herein, in the articles of
the Corporation or by law, the holders of Series A Preferred Shares and the
holders of Common Stock (and the holders of shares of any other series or class
entitled to vote thereon) shall vote together as one class on all matters
submitted to a vote of stockholders of the Corporation.
Section 3. Reacquired Shares. Any Series A Preferred Shares
purchased or otherwise acquired by the Corporation in any manner whatsoever
shall be retired and cancelled promptly after the acquisition thereof. All such
shares shall upon their cancellation become authorized but unissued Series
Preferred Stock and may be reissued as part of a new series of Series Preferred
Stock to be created by resolution or resolutions of the Board of Directors.
Section 4. Liquidation, Dissolution or Winding Up. In the
event of any voluntary or involuntary liquidation, dissolution or winding up of
the Corporation, the holders of Series A Preferred Shares shall be entitled to
receive the greater of (a) $1.00 per share, plus accrued dividends to the date
of distribution, whether or not earned or declared, or (b) an amount per share,
subject to the provision for adjustment hereinafter set forth, equal to 100
times the aggregate amount to be distributed per share to holders of Common
Stock. In the event the Corporation shall at any time after the Rights
Declaration Date (i) declare any dividend on Common Stock payable in shares of
Common Stock, (ii) subdivide the outstanding shares of Common Stock, or (iii)
combine the outstanding shares of Common Stock into a smaller number of shares,
then in each such case the amount to which holders of Series A Preferred Shares
were entitled immediately prior to such event pursuant to clause (b) of the
preceding sentence shall be adjusted by multiplying such amount by a fraction
the numerator of which is the number of shares of Common Stock outstanding
immediately after such event and the denominator of which is the number of
shares of Common Stock that were outstanding immediately prior to such event.
-A-4-
<PAGE>
Section 5. Consolidation, Merger, etc. In case the Corporation
shall enter into any consolidation, merger, combination or other transaction in
which the shares of Common Stock are exchanged for or changed into other stock
or securities, cash and/or any other property, then in any such case the Series
A Preferred Shares shall at the same time be similarly exchanged or changed in
an amount per share (subject to the provision for adjustment hereinafter set
forth) equal to 100 times the aggregate amount of stock, securities, cash and/or
any other property (payable in kind), as the case may be, into which or for
which each share of Common Stock is changed or exchanged. In the event the
Corporation shall at any time after the Rights Declaration Date (i) declare any
dividend on Common Stock payable in shares of Common Stock, (ii) subdivide the
outstanding shares of Common Stock, or (iii) combine the outstanding shares of
Common Stock into a smaller number of shares, then in each such case the amount
set forth in the preceding sentence with respect to the exchange or change of
shares of Series A Preferred Shares shall be adjusted by multiplying such amount
by a fraction the numerator of which is the number of shares of Common Stock
outstanding immediately after such event and the denominator of which is the
number of shares of Common Stock that were outstanding immediately prior to such
event.
Section 6. No Redemption. The Series A Preferred Shares shall
not be redeemable.
Section 7. Ranking. The Series A Preferred Shares shall rank
junior to all other series of the Corporation's Series Preferred Stock as to the
payment of dividends and the distribution of assets, unless the terms of any
such series shall provide otherwise.
Section 8. Fractional Shares. Series A Preferred Shares may be
issued in fractions of a share which shall entitle the holder, in proportion to
such holder's fractional shares, to exercise voting rights, receive dividends,
participate in distributions and to have the benefit of all other rights of
holders of Series A Preferred Shares.
-A-5
- -
<PAGE>
EXHIBIT B
[Form of Rights Certificate]
Certificate No. R- ....... ___________ Rights
NOT EXERCISABLE AFTER AUGUST 1, 2002 OR AFTER EARLIER REDEMPTION BY THE
COMPANY. THE RIGHTS ARE SUBJECT TO REDEMPTION, AT THE OPTION OF THE
COMPANY, AT $.01 PER RIGHT ON THE TERMS SET FORTH IN THE AMENDED AND
RESTATED RIGHTS AGREEMENT. UNDER CERTAIN CIRCUMSTANCES, RIGHTS
BENEFICIALLY OWNED BY AN ACQUIRING PERSON (AS SUCH TERM IS DEFINED IN
THE RIGHTS AGREEMENT) AND ANY SUBSEQUENT HOLDER OF SUCH RIGHTS MAY
BECOME NULL AND VOID. [THE RIGHTS REPRESENTED BY THIS RIGHTS
CERTIFICATE ARE OR WERE BENEFICIALLY OWNED BY A PERSON WHO WAS OR
BECAME AN ACQUIRING PERSON OR AN AFFILIATE OR ASSOCIATE OF AN ACQUIRING
PERSON (AS SUCH TERMS ARE DEFINED IN THE RIGHTS
AGREEMENT)....ACCORDINGLY, THIS RIGHTS CERTIFICATE AND THE RIGHTS
REPRESENTED HEREBY MAY BECOME NULL AND VOID IN THE CIRCUMSTANCES
SPECIFIED IN SECTION 7(e) OF THE AMENDED AND RESTATED RIGHTS
AGREEMENT.]*
- ---------------
* The bracketed portion of the legend shall be inserted only if applicable and
shall replace the preceding sentence.
-B-1-
<PAGE>
MARITRANS INC.
RIGHTS CERTIFICATE
This certifies that _______________________, or registered
assigns, is the registered owner of the number of Rights set forth above, each
of which entitles the owner thereof, subject to the terms, provisions and
conditions of the Amended and Restated Rights Agreement, dated as of February
__, 1999 (the "Rights Agreement"), between Maritrans Inc., a Delaware
corporation (the "Company"), and The Chase Manhattan Bank, a national banking
association (the "Rights Agent"), to purchase from the Company at any time prior
to 5:00 P.M. (New York, New York time) on August 1, 2002 at the office or
offices of the Rights Agent designated for such purpose, or its successors as
Rights Agent, one one hundredth of a fully paid, nonassessable Series A Junior
Participating Preferred Share (the "Preferred Share") of the Company, at a
purchase price (the "Purchase Price") of $40.00 per one one-hundredth of a
Preferred Share (such fraction, a "Preferred Share Fraction"), upon presentation
and surrender of this Rights Certificate with the Form of Election to Purchase
and related Certificate duly executed. Except as provided in Sections 11(q) and
13(e) of the Rights Agreement, the Purchase Price shall be paid in cash. The
number of Rights evidenced by this Rights Certificate (and the number of
Preferred Share Fractions that may be purchased upon exercise thereof) set forth
above, and the Purchase Price per Preferred Share Fraction set forth above, are
the number and Purchase Price as of April 11, 1993, based on the Preferred
Shares as constituted at such date.
Except as otherwise provided in the Rights Agreement, upon the
occurrence of any Section 11(a)(ii) Event (as such term is defined in the Rights
Agreement), if the Rights evidenced by this Rights Certificate are beneficially
owned by (i) an Acquiring Person or an Affiliate or Associate of any such
Acquiring Person (as such terms are defined in the Rights Agreement), (ii) a
transferee of any such Acquiring Person, Associate or Affiliate, or (iii) under
certain circumstances specified in the Rights Agreement, a transferee of a
person who, after such transfer, became an Acquiring Person, or an Affiliate or
Associate of an Acquiring Person, such Rights shall become null and void and no
holder hereof shall have any right with respect to such Rights from and after
the occurrence of any such Section 11(a)(ii) Event.
As provided in the Rights Agreement, the Purchase Price and
the number and kind of Preferred Shares or other securities that may be
purchased upon the exercise of the Rights evidenced by this Rights Certificate
are subject to modification and adjustment upon the happening of certain events,
including Triggering Events.
-B-2-
<PAGE>
This Rights Certificate is subject to all of the terms,
provisions and conditions of the Rights Agreement, which terms, provisions and
conditions are hereby incorporated herein by reference and made a part hereof
and to which Rights Agreement reference is hereby made for a full description of
the rights, limitations of rights, obligations, duties and immunities hereunder
of the Rights Agent, the Company and the holders of the Rights Certificates,
which limitations of rights include the temporary suspension of the
exercisability of such Rights under the specific circumstances set forth in the
Rights Agreement. Copies of the Rights Agreement are on file at the
above-mentioned office of the Rights Agent and are also available upon written
request to the Company.
This Rights Certificate, with or without other Rights
Certificates, upon surrender at the principal office or offices of the Rights
Agent designated for such purpose, may be exchanged for another Rights
Certificate or Rights Certificates of like tenor and date evidencing Rights
entitling the holder to purchase a like aggregate number of Preferred Share
Fractions as the Rights evidenced by the Rights Certificate or Rights
Certificates surrendered shall have entitled such holder to purchase. If this
Rights Certificate shall be exercised in part, the holder shall be entitled to
receive upon surrender hereof another Rights Certificate or Rights Certificates
for the number of whole Rights not exercised.
Subject to the provisions of the Rights Agreement, the Rights
evidenced by this Certificate may be redeemed by the Company at its option at a
redemption price of $.01 per Right at any time prior to the earlier of the close
of business on (i) the tenth day following the Stock Acquisition Date (as such
time period may be extended pursuant to the Rights Agreement), and (ii) the
Final Expiration Date.
No fractional Preferred Shares will be issued upon the
exercise of any Right or Rights evidenced hereby (other than fractions which are
integral multiples of a Preferred Share, which may, as the election of the
Company, be evidenced by depositary receipts), but in lieu thereof a cash
payment will be made, as provided in the Rights Agreement.
No holder of this Rights Certificate shall be entitled to vote
or receive dividends or be deemed for any purpose the holder of Preferred Shares
or of any other securities of the Company (including Common Shares) that may at
any time be issuable on the exercise hereof, nor shall anything contained in the
Rights Agreement or herein be construed to confer upon the holder hereof, as
such, any of the rights of a stockholder of the Company or any right to vote for
the election of directors or upon any matter submitted to stockholders at any
meeting thereof, or to give or withhold consent to any corporate action, or, to
receive notice of meetings or other actions affecting stockholders (except as
provided in the Rights Agreement), or to receive dividends or subscription
rights, or otherwise, until the Right or Rights evidenced by this Rights
Certificate shall have been exercised as provided in the Rights Agreement.
This Rights Certificate shall not be valid or obligatory for
any purpose until it shall have been countersigned by the Rights Agent.
-B-3-
<PAGE>
WITNESS the facsimile signature of the proper officers of the
Company and its corporate seal.
Dated as of ____________, 19__
ATTEST MARITRANS INC.
____________________ By_______________________________
Secretary Title:
Countersigned
THE CHASE MANHATTAN BANK
By____________________
Authorized Signature
-B-4-
<PAGE>
[Form of Reverse Side of Rights Certificate]
FORM OF ASSIGNMENT
(To be executed by the registered holder if such
holder desires to transfer the Rights Certificate.)
FOR VALUE RECEIVED ________________________________________ hereby sells,
assigns and transfers unto ___________________________________________________
(Please print name and address of transferee)
- -----------------------------------------------------------
this Rights Certificate, together with all right, title and interest therein,
and does hereby irrevocably constitute and appoint ___________________ Attorney,
to transfer the within Rights Certificate on the books of the within-named
Company, with full power of substitution.
Dated: _________________, 19 __
-----------------------
Signature
Signature Guaranteed:
Certificate
The undersigned hereby certifies by checking the appropriate
boxes that:
(1) this Rights Certificate [ ] is [ ] is not being sold,
assigned and transferred by or on behalf of a Person who is or was an Acquiring
Person or an Affiliate or Associate of any such Acquiring Person (as such terms
are defined pursuant to the Rights Agreement);
(2) after due inquiry and to the best knowledge of the
undersigned, it [ ] did [ ] did not acquire the Rights evidenced by this Rights
Certificate from any Person who is, was or subsequently became an Acquiring
Person or an Affiliate or Associate of an Acquiring Person.
-B-5-
<PAGE>
Dated: ________________, 19__ _____________________
Signature
Signature Guaranteed:
NOTICE
The signatures to the foregoing Assignment and Certificate must
correspond to the name as written upon the face of this Rights Certificate in
every particular, without alteration or enlargement or any change whatsoever.
-B-6-
<PAGE>
FORM OF ELECTION TO PURCHASE
(To be executed if holder desires to exercise
Rights represented by the Rights Certificate.)
To: MARITRANS INC.:
The undersigned hereby irrevocably elects to exercise ________
Rights represented by this Rights Certificate to purchase the Preferred Shares
issuable upon the exercise of the Rights (or Common Shares or such other
securities of the Company or of any other person that may be issuable upon the
exercise of the Rights) and requests that certificates for such shares be issued
in the name of and delivered to:
Please insert social security
or other identifying number
------------------------------------------------------------
(Please print name and address)
------------------------------------------------------------
If such number of Rights shall not be all the Rights evidenced
by this Rights Certificate, a new Rights Certificate for the balance of such
Rights shall be registered in the name of and delivered to:
Please insert social security
or other identifying number
------------------------------------------------------------
(Please print name and address)
------------------------------------------------------------
------------------------------------------------------------
Dated: _____________, 19__
-------------------------
Signature
Signature Guaranteed:
-B-7-
<PAGE>
Certificate
The undersigned hereby certifies by checking the appropriate boxes that
(1) the Rights evidenced by this Rights Certificate [ ] are [
] are not being exercised by or on behalf of a Person who is or was an Acquiring
Person or an Affiliate or Associate of any such Acquiring Person (as such terms
are defined pursuant to the Rights Agreement);
(2) after due inquiry and to the best knowledge of the
undersigned, it [ ] did [ ] did not acquire the Rights evidenced by this Rights
Certificate from any Person who is, was or became an Acquiring Person or an
Affiliate or Associate of an Acquiring Person.
Dated: _____________, 19__ _________________________
Signature
Signature Guaranteed:
NOTICE
The signatures to the foregoing Election to Purchase and
Certificate must correspond to the name as written upon the face of this Rights
Certificate in every particular, without alteration or enlargement or any change
whatsoever.
-B-8-
<PAGE>
EXHIBIT C
SUMMARY OF RIGHTS TO PURCHASE
PREFERRED SHARES
On April 1, 1993 the Board of Directors of Maritrans Inc. (the
"Company") declared a dividend distribution of one Right for each outstanding
share of Common Stock, $.01 par value (each, a "Common Share") of the Company to
stockholders of record at the close of business on April 11, 1993. Each Right
entitles the registered holder to purchase from the Company a unit consisting of
one one-hundredth of a share (a "Unit") of the Series A Junior Participating
Preferred Shares, par value $.01 per share, of the Company (the "Preferred
Shares"), or a combination of securities and assets of equivalent value, at a
Purchase Price of $40.00 per Unit, subject to adjustment. On February __, 1999,
the Board of Directors of the Company, in accordance with the terms set forth in
Section 26 of the Rights Agreement dated as of April 1, 1993 between the Company
and Chemical Bank (now known as The Chase Manhattan Bank), as Rights Agent,
approved the amendment and restatement of the Rights Agreement effective as of
February __, 1999 (as so amended and restated, the ARights Agreement@).
Initially, ownership of the Rights will be evidenced by the
Common Share certificates representing shares then outstanding, and no separate
Rights Certificates will be distributed. The Rights will separate from the
Common Shares and a Distribution Date will occur upon the earlier of (i) 10 days
following a public announcement that a person or group of affiliated or
associated persons (an "Acquiring Person") has acquired, or obtained the right
to acquire, beneficial ownership of 20% or more of the outstanding Common Shares
(the "Stock Acquisition Date"), or (ii) the close of business on such date as
may be fixed by the Board of Directors, which date shall not be more than 65
days following the commencement of a tender offer or exchange offer that would
result in a person or group beneficially owning 20% or more of the outstanding
Common Shares. Until the Distribution Date, (i) the Rights will be evidenced by
the Common Share certificates and will be transferred with and only with such
Common Share certificates, (ii) new Common Share certificates issued after April
11, 1993 will contain a notation incorporating the Rights Agreement by reference
and (iii) the surrender for transfer of any certificates for Common Shares
outstanding will also constitute the transfer of the Rights associated with the
Common Shares represented by such certificate.
The Rights are not exercisable until the Distribution Date and
will expire at the close of business on August 1, 2002, unless earlier redeemed
by the Company as described below or unless a transaction under Section 13(d) of
the Rights Agreement has occurred.
-C-1-
<PAGE>
As soon as practicable after the Distribution Date, Rights
Certificates will be mailed to holders of record of the Common Shares as of the
close of business on the Distribution Date and, thereafter, the separate Rights
Certificates alone will represent the Rights. Except as otherwise determined by
the Board of Directors, and except in connection with the exercise of employee
stock options or stock appreciation rights or under any other benefit plan for
employees or directors or in connection with the exercise of warrants or
conversion of convertible securities, only Common Shares issued after April 11,
1993 and prior to the Distribution Date will be issued with Rights.
Except in the circumstances described below, after the
Distribution Date each Right will be exercisable into one one-hundredth of a
Preferred Share (a "Preferred Share Fraction"). Each Preferred Share Fraction
carries voting and dividend rights that are intended to produce the equivalent
of one Common Share. The voting and dividend rights of the Preferred Shares are
subject to adjustment in the event of dividends, subdivisions and combinations
with respect to the Common Shares of the Company. In lieu of issuing
certificates for Preferred Share Fractions which are less than an integral
multiple of one Preferred Share (i.e. 100 Preferred Share Fractions), the
Company may pay cash representing the current market value of the Preferred
Share Fractions.
In the event that at any time following the Stock Acquisition
Date, (i) the Company is the surviving corporation in a merger with an Acquiring
Person and its Common Shares remain outstanding, (ii) a Person becomes the
beneficial owner of more than 20% of the then outstanding Common Shares other
than pursuant to a tender offer that provides fair value to all stockholders,
(iii) an Acquiring Person engages in one or more "self-dealing" transactions as
set forth in the Rights Agreement, or (iv) during such time as there is an
Acquiring Person an event occurs that results in such Acquiring Person's
ownership interest being increased by more than 1% (e.g., a reverse stock
split), each holder of a Right will thereafter have the right to receive, upon
exercise, Common Shares (or, in certain circumstances, cash, property or other
securities of the Company) having a value equal to two times the exercise price
of the Right. In lieu of requiring payment of the Purchase Price upon exercise
of the Rights following any such event, the Company may permit the holders
simply to surrender the Rights, in which event they will be entitled to receive
Common Shares (and other property, as the case may be) with a value of 50% of
what could be purchased by payment of the full Purchase Price. Notwithstanding
any of the foregoing, following the occurrence of any of the events set forth in
clauses (i), (ii), (iii) or (iv) of this paragraph, all Rights that are, or
(under certain circumstances specified in the Rights Agreement) were,
beneficially owned by any Acquiring Person who was involved in the transaction
giving rise to any such event will be null and void. However, Rights are not
exercisable following the occurrence of any of the events set forth above until
such time as the Rights are no longer redeemable by the Company as set forth
below.
-C-2-
<PAGE>
For example, at an exercise price of $40.00 per Right, each
Right not otherwise voided following an event set forth in the preceding
paragraph would entitle its holder to purchase $80.00 worth of Common Shares (or
other consideration, as noted above) for $40.00. Assuming that the Common Shares
had a per share value of $10.00 at such time, the holder of each valid Right
would be entitled to purchase eight Common Shares for $40.00. Alternatively, the
Company could permit the holder to surrender each Right in exchange for stock or
cash equivalent to four Common Shares (with a value of $40.00) without the
payment of any consideration other than the surrender of the Right.
In the event that, at any time following the Stock Acquisition
Date, (i) the Company is acquired in a merger or other business combination
transaction in which the Company is not the surviving corporation (other than a
merger that is described in, or that follows a tender offer or exchange offer
described in, the second preceding paragraph), or (ii) 50% or more of the
Company's assets or earning power is sold or transferred, each holder of a Right
(except Rights that previously have been voided as set forth above) shall
thereafter have the right to receive, upon exercise, common shares of the
acquiring company having a value equal to two times the exercise price of the
Right. Again, provision is made to permit surrender of the Rights in exchange
for one-half of the value otherwise purchasable. The events set forth in this
paragraph and in the second preceding paragraph are referred to as the
"Triggering Events."
The Purchase Price payable, and the number of Units of
Preferred Shares or other securities or property issuable upon exercise of the
Rights are subject to adjustment from time to time to prevent dilution (i) in
the event of a stock dividend on, or a subdivision, combination or
reclassification of, the Preferred Shares, (ii) if holders of the Preferred
Shares are granted certain rights or warrants to subscribe for Preferred Shares
or convertible securities at less than the current market price of the Preferred
Shares, or (iii) upon the distribution to holders of the Preferred Shares of
evidences of indebtedness or assets (excluding regular quarterly dividends) or
of subscription rights or warrants (other than those referred to above).
With certain exceptions, no adjustment in the Purchase Price
will be required until cumulative adjustments amount to at least 1% of the
Purchase Price. No fractional Units will be issued and, in lieu thereof, an
adjustment in cash will be made based on the market price of the Preferred
Shares on the last trading date prior to the date of exercise.
-C-3-
<PAGE>
At any time until ten days following the Stock Acquisition
Date, the Company may redeem the Rights in whole, but not in part, at a price of
$.01 per Right. That ten day redemption period may be extended by the Board of
Directors so long as the Rights are still redeemable. Immediately upon the
action of the Board of Directors ordering redemption of the Rights, the Rights
will terminate and the only right of the holders of Rights will be to receive
the $.01 redemption price.
Until a Right is exercised, the holder thereof, as such, will
have no rights as a stockholder of the Company, including, without limitation,
the right to vote or to receive dividends. While the distribution of the Rights
will not be taxable to stockholders or to the Company, stockholders may,
depending upon the circumstances, recognize taxable income in the event that the
Rights become exercisable for Preferred Shares (or other consideration) of the
Company or for common shares of the acquiring company as set forth above.
Other than those provisions relating to the principal economic
terms of the Rights, any of the provisions of the Rights Agreement may be
amended by the Board of Directors of the Company prior to the Distribution Date.
After the Distribution Date, the provisions of the Rights Agreement may be
amended by the Board in order to cure any ambiguity, to make changes that do not
adversely affect the interests of holders of Rights (excluding the interests of
any Acquiring Person), or to shorten or lengthen any time period under the
Rights Agreement; provided, however, that no amendment to adjust the time period
governing redemption shall be made at such time as the Rights are not
redeemable.
A copy of the Rights Agreement is being filed with the
Securities and Exchange Commission as an Exhibit to a Current Report on Form
8-K. A copy of the Rights Agreement is available free of charge from the
Company. This summary description of the Rights does not purport to be complete
and is qualified in its entirety by reference to the Rights Agreement, which is
incorporated herein by reference.
-C-4-
<PAGE>
AGREEMENT
Agreement made as of the 1st day of December, 1998, between
Maritrans General Partner Inc., a Delaware corporation (the "Company"), and
Parker S. Wise (the "Employee").
WHEREAS, the Employee is employed by the Company as its
General Counsel & Secretary;
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 order to induce the Employee to remain in the
employ of the Company, 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 subsequent to a "Change of Control" (as defined in Section
1 hereof) of the Company;
1
<PAGE>
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:
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 sum of the Employee's
base salary, at the rate in effect on the Termination Date or at the time of a
Change of Control, if higher, the Employee's annual bonus as paid for the year
prior to the Termination Date and, if applicable, any payment received under the
Company's Performance Unit Plan in the year prior to the year in which the
Termination Date occurs, 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.
(c) "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, securities of the Company; 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;
2
<PAGE>
(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 (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.
(d) "Board" shall mean the board of directors of the Company.
(e) "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.
3
<PAGE>
(f) "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, (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, (iii) consummation by Maritrans of a
reorganization, merger or consolidation (a "Business Combination"), in each
case, with respect to which all or substantially all of the individuals and
entities who were the respective beneficial owners of the outstanding common
stock of Maritrans prior to such Business Combination do not, following such
Business Combination, beneficially own, directly or indirectly, more than 50% of
the then outstanding shares of common stock entitled to vote generally in the
election of directors of the corporation, business trust or other entity
resulting from or being the surviving entity in such Business Combination in
substantially the same proportion as their ownership immediately prior to such
Business Combination of the outstanding common stock or Maritrans, or (iv)
consummation of a complete liquidation or dissolution of Maritrans or sale or
other disposition of all or substantially all of the assets of Maritrans other
than to a corporation, business trust or other entity with respect to which,
following such sale or disposition, more than 50% of the then outstanding shares
of common stock entitled to vote generally in the election of directors, is then
owned beneficially, directly or indirectly, by all or substantially all of the
individuals and entities who were the beneficial owners of the outstanding
common stock of Maritrans immediately prior to such sale or disposition in
substantially the same proportion as their ownership of the outstanding common
stock immediately prior to such sale or disposition.
4
<PAGE>
(g) "Normal Retirement Date" shall mean the first day of the
calendar month coincident with or next following the Employee's 65th birthday.
(h) "Person" shall mean any individual, firm, corporation,
partnership or other entity.
(i) "Subsidiary" shall have the meaning ascribed to such term
in Rule 12b-2 of the General Rules and Regulations under the Exchange Act.
(j) "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.
(k) "Termination of Employment" shall mean the termination of
the Employee's actual employment relationship with the Company.
(l) "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
5
<PAGE>
(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;
(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; or
(E) a transfer of the Employee, without his express written
consent, to a location that is outside the metropolitan
Philadelphia area (fifty miles surrounding the Company's
principal location as of the date hereof), or the general area
in which his principal place of business immediately preceding
the Change of Control may be located at such time if other
than metropolitan Philadelphia.
6
<PAGE>
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) 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), an amount in cash equal to 1.5 times
the Employee's Base Compensation.
(b) Subject to the provisions of Section 11 hereof, in the
event of that a Change of Control occurs within six months after an involuntary
Termination of Employment for reasons other than Cause, the Company shall pay to
the Employee, within fifteen days after the Change of Control (or as soon as
possible thereafter in the event that the procedures set forth in Section 11(b)
hereof cannot be completed), 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) or (b) 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.
7
<PAGE>
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 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.
8
<PAGE>
(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 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.
9
<PAGE>
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"), and that it would be economically advantageous to
the Employee to reduce the Payment to avoid or reduce the taxation of excess
parachute payments under Section 4999 of 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.
10
<PAGE>
(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 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.
11
<PAGE>
12. 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.
13. 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.
12
<PAGE>
14. 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.
1818 Market Street, 35th Floor
Philadelphia, PA 19103
Attention: Corporate Secretary
If to the Employee, to:
Parker S. Wise
210 Locust Street, Apt. 6-D
Philadelphia, PA 19106
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.
15. 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.
13
<PAGE>
16. 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.
(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.
17. 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.
14
<PAGE>
18. 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.
15
<PAGE>
19. 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/ Arthur J. Volkle By /s/ Walter T. Bromfield
- -------------------- -----------------------
Assistant Secretary Walter T. Bromfield
Arthur J. Volkle
/s/ Cassandra L. Cross /s/ Parker S. Wise
- ----------------------- ---------------------------
Witness Parker S. Wise
16
<PAGE>
Exhibit 21.1
MARITRANS INC.
SUBSIDIARIES OF MARITRANS INC.
As of December 31, 1998
Direct and indirect subsidiaries of Maritrans Inc. are:
Maritrans General Partner Inc.
Maritrans Operating Partners L.P.
Maritrans Management Services Inc.
Maritrans Barge Co.
Maritrans Holdings Inc.
Maritrans Business Services Co., Inc.
Maritrans Tankers Inc.
Maritrans Chartering Co., Inc.
Maritrans Puerto Rico Inc.
Maritrans Capital Corp.
CCF Acquisition Corp.
Maritank Maryland Inc.
Maritank Philadelphia Inc.
Interstate Towing (Texas) Co.
Inter-Cities Navigation (Texas) Corp.
<PAGE>
Exhibit 23.1
Consent of Independent Auditors
We consent to the incorporation by reference in the Registration
Statement (Form S-8 No. 333-33765) pertaining to the Equity Compensation Plan of
Maritrans Inc. of our report dated January 22, 1999, with respect to the
consolidated financial statements and schedule of Maritrans Inc. included in the
Annual Report (Form 10-K) for the year ended December 31, 1998.
/s/ Ernst & Young, LLP
-----------------------------
Ernst & Young, LLP
Philadelphia, Pennsylvania
March 26, 1999
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