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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, 1999
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 Identification No.)
incorporation or organization)
1818 MARKET STREET
PHILADELPHIA, PENNSYLVANIA 19103
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, Name of Each Exchange on
including area code Securities Which Registered
registered pursuant to Section New York Stock Exchange
12(b) of the Act: (215) 864-1200
Title of Each Class
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 13, 2000, the aggregate market value of the common stock held by
non-affiliates of the registrant was $76,155,687. As of March 13, 2000,
Maritrans Inc. had 11,495,198 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 24, 2000.
Exhibit Index is located on page 35.
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MARITRANS INC.
TABLE OF CONTENTS
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PART I
Item 1. Business ..................................................................... 1
Item 2. Properties ................................................................... 7
Item 3. Legal Proceedings ............................................................ 7
Item 4. Submission Of Matters To A Vote Of Security Holders .......................... 8
PART II
Item 5. Market For The Registrant's Common Equity And Related Stockholder Matters .... 9
Item 6. Selected Financial Data ...................................................... 10
Item 7. Management's Discussion And Analysis Of Financial Condition And Results Of
Operations ................................................................... 10
Item 8. Financial Statements & Supplemental Data ..................................... 16
Item 9. Changes in and Disagreements with Accountants on Accounting and Financial
Disclosure ................................................................... 32
PART III
Item 10. Directors and Executive Officers of the Registrant ........................... 32
Item 11. Executive Compensation ....................................................... 33
Item 12. Security Ownership of Certain Beneficial Owners and Management ............... 33
Item 13. Certain Relationships and Related Transactions ............................... 33
PART IV
Item 14. Exhibits, Financial Statement Schedules And Reports On Form 8-K .............. 34
Signatures ............................................................................. 38
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Special Note Regarding Forward-Looking Statements
Some of the statements under "Business," "Properties," "Legal Proceedings,"
"Market for Registrant's Common Stock and Related Stockholder Matters" and
"Management's Discussion and Analysis of Financial Condition and Results of
Operations" and elsewhere in this Annual Report on Form 10-K (this "10-K")
constitute forward-looking statements under Section 27A of the Securities Act
of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as
amended, including statements made with respect to present or anticipated
utilization, future revenues and customer relationships, capital expenditures,
future financings, and other statements regarding matters that are not
historical facts, and involve predictions. These statements involve known and
unknown risks, uncertainties and other factors that may cause actual results,
levels of activity, growth, performance, earnings per share or achievements to
be materially different from any future results, levels of activity, growth,
performance, earnings per share or achievements expressed in or implied by such
forward-looking statements.
The forward-looking statements included in this 10-K relate to future
events or the Company's future financial performance. In some cases, the reader
can identify forward-looking statements by terminology such as "may," "should,"
"believe," "future," "potential," "estimate," "offer," "opportunity,"
"quality," "growth," "expect," "intend," "plan," "focus," "through,"
"strategy," "provide," "meet," "allow," "represent," "commitment," "create,"
"implement," "result," "seek," "increase," "establish," "work," "perform,"
"make," "continue," "can," "will," "include," or the negative of such terms or
comparable terminology. These forward-looking statements inherently involve
certain risks and uncertainties, although they are based on the Company's
current plans or assessments that are believed to be reasonable as of the date
of this 10-K. Factors that may cause actual results, goals, targets or
objectives to differ materially from those contemplated, projected, forecast,
estimated, anticipated, planned or budgeted in such forward-looking statements
include, among others, the factors outlined in this 10-K and general financial,
economic, environmental and regulatory conditions affecting the oil and marine
transportation industry in general. Given such uncertainties, current or
prospective investors are cautioned not to place undue reliance on any such
forward-looking statements. These factors may cause the Company's actual
results to differ materially from any forward-looking statement.
Although the Company believes that the expectations in the forward-looking
statements are reasonable, the Company cannot guarantee future results, levels
of activity, performance, growth, earnings per share or achievements. However,
neither the Company nor any other person assumes responsibility for the
accuracy and completeness of such statements. The Company is under no duty to
update any of the forward-looking statements after the date of this 10-K to
conform such statements to actual results.
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PART I
Item 1. BUSINESS
General
Maritrans Inc. (the "Company" or the "Registrant"), together with its
predecessor, Maritrans Partners L.P. (the "Partnership"), herein called
"Maritrans," has historically served the petroleum and petroleum product
industry by using tugs, barges and oil tankers to provide marine transportation
services primarily along the East and Gulf Coasts of the United States.
Structure
Current. The Registrant is a Delaware corporation whose common stock, par
value $.01 per share ("Common Stock"), is publicly traded. The Registrant
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. Both entities are
wholly owned subsidiaries of the Registrant.
Historical. Founded in the 1850's and incorporated in 1928 under the name
Interstate Oil Transport Company, Maritrans' predecessor was one of the first
tank barge operators in the United States, with a fleet which increased in size
and capacity as United States consumption of petroleum products increased. On
December 31, 1980, Maritrans' predecessor operations and its tugboat and barge
affiliates were acquired by Sonat Inc. ("Sonat"). On April 14, 1987, 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
Registrant 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 Registrant.
Overview. Since 1981, Maritrans and its predecessors have transported
annually over 200 million barrels of crude oil and refined petroleum products.
Maritrans operates a fleet of oil tankers, tank barges and tugboats. Its
largest barge has a capacity of approximately 380,000 barrels and its current
operating cargo fleet capacity aggregates approximately 3.8 million barrels.
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 on the East and Gulf Coasts, is a significant
indicator 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 refined products is also significant to Maritrans' business. Imported
refined petroleum products generally can be shipped on foreign-flag vessels
directly into United States ports for storage, distribution and eventual
consumption. These shipments reduce the need for domestic marine transportation
service providers such as Maritrans to carry products from United States
refineries to such ports. The Southern operations, headquartered in Tampa,
Florida, provide marine transportation services for petroleum products from
refineries located in Texas, Louisiana, Mississippi and Puerto Rico to
distribution points along the Gulf and Atlantic Coasts, generally south of Cape
Hatteras, North Carolina and particularly into Florida. The East Coast
operations provide 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).
In 1999, the Company sold various assets. The sold assets consisted of the
two small tug/barge units working in Puerto Rico, the petroleum storage
terminals in Philadelphia, PA and Salisbury, MD and twenty-seven of the smaller
tugboats and tank barges working primarily in the Northeastern United States.
These asset sales are discussed in greater detail in "Management's Discussion
and Analysis of Financial Condition and Results of Operations".
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Sales and Marketing
Maritrans provides marine transportation 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 and a spot market 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 nine 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 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 1999, approximately 85 percent of Maritrans revenues were generated
from 10 customers. In 1999, contracts with Sunoco Inc., Equiva Trading Company
and Marathon Oil accounted for approximately 24 percent, 15 percent, and 13
percent, respectively, of Maritrans revenue. During 1999, 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, however, 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 Southern clean-oil market, management believes the
primary competitors are the fleets of other independent petroleum transporters
and integrated oil companies. In the lightering operations, Maritrans competes
with foreign-flag operators which lighter offshore. Some of the integrated oil
company fleets with which Maritrans competes are larger than Maritrans' fleet.
Additionally, in certain geographic areas and in certain business activities,
Maritrans competes with the operators of petroleum product pipelines.
Competitive factors which also affect Maritrans include the output of United
States refineries and the importation of refined petroleum products.
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, a finite number of vessels are currently
eligible to engage in U.S. maritime petroleum transport. The Company believes
that more Jones-Act eligible tonnage is being retired due to OPA than is being
added as replacement double-hull tonnage. However, the Company believes that
overcapacity will continue for some time. Competition in the industry is based
upon vessel availability, price and service and is intense.
A significant portion of the Company's revenues in 1999 was generated in
the coastal transportation of petroleum products from refineries or pipeline
terminals in the Gulf of Mexico to ports that are not served by pipelines.
Maritrans currently operates seven barges and two oil tankers in this market,
which are a significant number of the vessels able to compete in this market.
The relatively large size of Maritrans' fleet can generally provide greater
flexibility in meeting customers' needs.
General Agreement on Trade in Services ("GATS") and North American Free
Trade Agreement ("NAFTA").
While cabotage (vessel trade or marine transportation between two points
within the same country) is not included in the GATS and the NAFTA, the
possibility exists that cabotage could be included in the GATS,
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NAFTA or other international trade agreements in the future. If maritime
services are deemed to include cabotage and are included in any multi-national
trade agreements, management believes the result will 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 significantly lower costs. This could have a material adverse
affect on Maritrans. Maritrans and the U.S. maritime industry will continue to
resist 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. Management believes that high capital
costs, tariff regulation and environmental considerations make it unlikely that
a new refined product pipeline system, which would have a material adverse
effect on Maritrans' business, will be built in its market areas in the 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 an adverse effect on Maritrans' ability to compete
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. 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.
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 and $10 million in the 2000 fiscal year budget for
construction. A Project Cooperation Agreement (PCA) must be executed before the
Corps of Engineers can use the appropriated funds, however as of the end of
1999, the Company was not aware of the PCA having been executed. If this
project becomes fully funded at the federal and state levels and fully
constructed (including access dredging by private refineries), it would have a
material adverse effect on Maritrans' lightering business of the off-loading of
crude oil from deeply laden tankers at the mouth of the Delaware Bay and
transportation up the Delaware River to the Delaware Valley refineries.
Employees and Employee Relations
In 1999, the Company significantly reduced the number of shoreside staff.
In addition, the Company sold the petroleum storage terminals and twenty-six
vessels, which decreased the number of seagoing personnel. As a result of these
activities, approximately 200 employees were terminated. At December 31, 1999,
Maritrans and its subsidiaries employed a total of 368 persons. Of these
employees, 57 are employed at the Philadelphia, Pennsylvania headquarters of the
Company or at the Philadelphia and Tampa fleet centers, 186 are seagoing
employees who work aboard the tugs and barges and 125 are seagoing employees who
work aboard the tank ships. 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 the American
Maritime Officers ("AMO"), formerly District 2 Marine Engineers Beneficial
Association, Associated Maritime Officers, AFL-CIO, for approximately 40 years.
Approximately one-half of the total number of seagoing employees employed are
supervisors. These supervisors are covered by an agreement with the AMO limited
only to a provision for benefits. The collective bargaining agreement with the
SIU covers approximately 142 employees consisting of seagoing non-supervisory
personnel on the tug/barge units and on the tankers. The tug/barge supplement of
the agreement expires on May 31, 2002. The tankers supplement of the agreement
expires on May 31, 2000. The collective bargaining agreement with the AMO covers
approximately 56 non-supervisory seagoing employees and expires on October 8,
2007. None of the shore-based employees are covered by any collective bargaining
agreement.
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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.),
Safety Management System (SMS) 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, such as Bridge Resource Management
(simulator) training, 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. 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 and manned 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. Certain 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 for 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 modify, limit or do away with the Jones Act. Legislation to
this effect was blocked from being introduced into Congress during 1999 by the
Maritime Cabotage Task Force, a coalition of ship owners, ship operators,
maritime unions and industry trade groups. Management expects that efforts to
gain access to the Jones Act trade and attempts to block the introduction will
continue.
Environmental Matters
Maritrans' operations present potential environmental risks, primarily
through the marine transportation 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.
Oil Pollution Legislation. OPA creates substantial liability exposure for
owners and operators of vessels, oil terminals and pipelines. Under OPA, each
responsible party for a vessel or facility from which oil is discharged will be
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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 conformity 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 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 gradually phases out the operation of single-hulled tank
vessels, based on size and age, operating in U.S. waters, including most of
Maritrans' existing barges. Five of Maritrans' large oceangoing, single-hulled
barges will be affected on January 1, 2005. Currently three of Maritrans'
barges and two tankers are equipped with double-hulls meeting OPA's
requirements. Maritrans has initiated a program to rebuild its single-hull tank
barges to comply with OPA. This rebuilding relies upon a process of computer
assisted design and prefabrication, for which Maritrans has applied for a
patent. The first rebuilt barge, the MARITRANS 192, was completed and entered
service in November 1998. Work has already commenced on a second single-hull
barge, the OCEAN 244. The cost of rebuilding single-hull barges is
approximately $55-75 per barrel compared to estimated costs of approximately
$125-175 per barrel for construction of a completely new double-hull barge. The
total cost of rebuilding the Company's entire single-hull fleet is expected to
exceed $150 million.
OPA further required all tank vessel operators to submit detailed vessel
oil spill contingency plans setting forth their capacity to respond to a worst
case spill situation. 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. In addition,
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.
Certain states have also 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. However, in March of 2000, the U.S. Supreme Court (the "Court")
decided United States v. Locke, a suit brought by INTERTANKO challenging tanker
regulations imposed by the State of Washington. The Court struck down a number
of state regulations and remanded to the lower courts for further review of
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other regulations. The ruling significantly limits the authority of states to
regulate vessels, holding that regulation of maritime commerce is generally a
federal responsibility because of the need for national and international
uniformity.
OPA and similar state laws are 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 (ii) increased maintenance,
training, insurance and other operating costs, (iii) civil penalties and the
potential for other liability and (iv) decreased operating revenues as a result
of a further reduction of volumes transported by vessels. 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, 1995 through December 31, 1999:
<TABLE>
<CAPTION>
Gallons Spilled
No. of No. of Gals. Per Million
Period No. of Gals. Carried Spills Spilled Gals. Carried
------ ---------------------- -------- -------------- ----------------
(000) (000)
<S> <C> <C> <C> <C>
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
1/1/1999 -- 12/31/1999 10,463,000 5 .06 .006
</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 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. Pursuant to the 1990 amendments to the Clean
Air Act, the EPA and/or states have imposed regulations affecting emissions of
volatile organic compounds ("VOCs") and other air pollutants from tank vessels.
In December 1999, the EPA issued its final rule for emissions standards for
marine diesel engines. The final rule applies emissions standards only to new
engines, beginning with the 2004 model year. The EPA retained the right to
revisit the issue of applying emission standards to rebuilt or remanufactured
engines if, in the agency's opinion, the industry does not take adequate steps
to introduce new emission-reducing technologies. 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, tank
barges or tank ships, including those owned by Maritrans. Such requirements
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.
6
<PAGE>
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. A Harbor Maintenance Tax has been proposed, but not adopted.
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. To date, 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 Company's subsidiaries owned, at December 31, 1999, a fleet
of 28 vessels, of which 4 are oil tankers, 12 are barges and 12 are tugboats.
The oil tanker fleet consists of four tankers ranging in capacity from
242,000 barrels to 265,000 barrels. These vessels were constructed between 1975
and 1981.
The barge fleet consists of twelve superbarges ranging in capacity from
175,000 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. One of the superbarges is currently not operating.
The tugboat fleet consists of one 11,000 horsepower class vessel, one
7,000 horsepower class vessel, nine 6,000 horsepower class vessels and one
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. The majority of the tugboats were constructed between 1970 and 1981.
Most of the vessels in the fleet are subject to first preferred ship
mortgages. These mortgages require the Operating Partnership to maintain the
vessels to a high standard and to continue a life-extension program for certain
of its larger barges. At December 31, 1999, Maritrans is in compliance with the
Operating Partnership's mortgage covenants.
Other Real Property. The Company's operations currently are headquartered
in Philadelphia, Pennsylvania, where it leases office space. The Company will
be moving its headquarters to Tampa, Florida in the first half of 2000 and has
entered into a lease for this 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 1999. The Operating Partnership also
leases four acres of Port Authority land in Tampa, Florida for use as its
Southern 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.
7
<PAGE>
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 rebuilt. 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 later revised its ruling, holding that the
Maritrans claim is ripe with respect to vessels which were rebuilt, sold or
scrapped in response to OPA's double-hull requirements. The case is scheduled
for trial in October 2000.
Item 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
No matters were submitted to a vote of the Registrant's security holders,
through the solicitation of proxies or otherwise, during the last quarter of
the year ended December 31, 1999.
8
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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 1999: HIGH LOW
- ----------------------- ---- ---
March 31, 1999 $ 6.875 $ 5.625
June 30, 1999 6.438 5.375
September 30, 1999 5.563 4.813
December 31, 1999 5.938 4.688
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
As of March 13, 2000, the Registrant had 11,495,198 Common Shares
outstanding and approximately 868 stockholders of record.
Dividends
For the years ended December 31, 1999 and 1998, Maritrans Inc. paid the
following cash dividends to stockholders:
PAYMENTS IN 1999: PER SHARE
----------------- ---------
March 10, 1999 $ .10
June 9, 1999 $ .10
September 8, 1999 $ .10
December 8, 1999 $ .10
-----
Total $ .40
=====
PAYMENTS IN 1998: PER SHARE
----------------- ---------
March 11, 1998 $ .09
June 11, 1998 $ .09
September 9, 1998 $ .09
December 9, 1998 $ .10
-----
Total $ .37
=====
The dividend policy is determined at the discretion of the Board of
Directors of Maritrans Inc. While dividends have been made quarterly in each of
the two last years, there can be no assurance that the dividend will continue.
9
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Item 6. SELECTED FINANCIAL DATA
<TABLE>
<CAPTION>
MARITRANS INC.
-------------------------------------------------------------------------
JANUARY 1 TO DECEMBER 31,
1999 1998 1997 1996 1995
---- ---- ---- ---- ----
($000, except per share amounts)
<S> <C> <C> <C> <C> <C>
CONSOLIDATED INCOME STATEMENT DATA:
Revenues ............................... $ 151,667 $ 151,839 $ 135,781 $ 126,994 $ 124,527
Operating income before depreciation
and amortization ...................... 28,092 30,407 38,339 30,249 30,738
Depreciation and amortization .......... 20,279 19,578 16,943 16,565 16,214
Operating income ....................... 7,813 10,829 21,396 13,684 14,524
Interest expense, net .................. 6,778 6,945 7,565 9,494 9,454
Income before income taxes.............. 21,151 4,986 18,157 8,379 8,120
Provision for income taxes ............. 9,095 1,870 6,696 3,130 3,139
Net income ............................. 12,056 3,116 11,461 5,249 4,981
Basic earnings per share ............... $ 1.03 $ 0.26 $ 0.95 $ 0.44 $ 0.41
Diluted earnings per share ............. $ 1.02 $ 0.26 $ 0.94 $ 0.44 $ 0.41
Cash dividends per share ............... $ 0.40 $ 0.37 $ 0.315 $ 0.275 $ 0.11
CONSOLIDATED BALANCE SHEET DATA (at period end):
Total assets ........................... $ 251,021 $ 254,906 $ 251,023 $ 235,221 $ 251,961
Long-term debt ......................... 75,861 83,400 75,365 79,123 104,337
Stockholders' equity ................... 94,697 89,815 90,795 82,594 79,875
</TABLE>
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 "Company"), and, together with its
subsidiaries and its predecessor, Maritrans Partners L.P. (the "Partnership"),
herein called "Maritrans" or the "Company."
Some of the statements under "Business," "Properties," "Legal
Proceedings," "Market for Registrant's Common Stock and Related Stockholder
Matters" and "Management's Discussion and Analysis of Financial Condition and
Results of Operations" and elsewhere in this Annual Report on Form 10-K (this
"10-K") constitute forward-looking statements under Section 27A of the
Securities Act of 1933, as amended, and Section 21E of the Securities Exchange
Act of 1934, as amended, including statements made with respect to present or
anticipated utilization, future revenues and customer relationships, capital
expenditures, future financings, and other statements regarding matters that
are not historical facts, and involve predictions. These statements involve
known and unknown risks, uncertainties and other factors that may cause actual
results, levels of activity, growth, performance, earnings per share or
achievements to be materially different from any future results, levels of
activity, growth, performance, earnings per share or achievements expressed in
or implied by such forward-looking statements.
The forward-looking statements included in this 10-K relate to future
events or the Company's future financial performance. In some cases, the reader
can identify forward-looking statements by terminology such as "may," "should,"
"believe," "future," "potential," "estimate," "offer," "opportunity,"
"quality," "growth," "expect," "intend," "plan," "focus," "through,"
"strategy," "provide," "meet," "allow," "represent," "commitment," "create,"
"implement," "result," "seek," "increase," "establish," "work," "perform,"
"make," "continue," "can," "will," "include," or the negative of such terms or
comparable terminology. These forward-looking statements inherently involve
certain risks and uncertainties, although they are based on the Company's
current plans or assessments that are believed to be reasonable as of the date
of this 10-K. Factors that may cause actual results, goals, targets or
objectives to differ materially from those contemplated, projected, forecast,
estimated, anticipated, planned or budgeted in such forward-looking statements
include, among others, the factors outlined in this 10-K and general financial,
economic, environmental and regulatory conditions affecting the oil and marine
transportation industry in general. Given such uncertainties, current or
prospective investors are cautioned not to place undue reliance on any such
forward-looking statements. These factors may cause the Company's actual
results to differ materially from any forward-looking statement.
10
<PAGE>
Although the Company believes that the expectations in the forward-looking
statements are reasonable, the Company cannot guarantee future results, levels
of activity, performance, growth, earnings per share or achievements. However,
neither the Company nor any other person assumes responsibility for the
accuracy and completeness of such statements. The Company is under no duty to
update any of the forward-looking statements after the date of this 10-K to
conform such statements to actual results.
Overview
Maritrans serves the petroleum and petroleum product distribution industry
by using oil tankers, tank barges and tugboats to provide marine transportation
services primarily along the East and Gulf Coasts of the United States. Between
1995 and 1999, 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. Such factors include Maritrans' vessel and fleet
size and average trip lengths, the continuation of federal law restricting
United States point-to-point maritime shipping to U.S. vessels (the Jones Act),
domestic oil consumption, 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 1995-1999
fluctuated between 17.7 million and 19.8 million barrels a day.
In 1999, the Company made several strategic moves in order to focus on
those markets where it believes it possesses a long-term competitive advantage
and which should provide additional opportunities. As a result, the Company
sold two small tug and barge units, which were working in Puerto Rico, two
petroleum storage terminals in Philadelphia, PA and Salisbury, MD, and
twenty-seven vessels working primarily in the Northeastern United States. Prior
to their sales, the sold vessels had transported approximately 69 million
barrels in 1999 and had represented approximately 23 percent of 1999 revenues.
In 1998, Maritrans successfully rebuilt one of its existing, single-hulled,
175,000 barrel barges with a double-hull design configuration, which complies
with the provisions of the Oil Pollution Act of 1990 ("OPA"). Prefabrication
has already commenced on a second single-hull barge, the OCEAN 244 that is
scheduled to be in the shipyard in the spring and summer of 2000. The Company
intends to apply the same methodology to up to seven 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 2005 and 2010. Each of the
Company's superbarges represent approximately 5 to 7 percent of the total fleet
capacity, which will be removed from revenue generating service during the
rebuilding of that vessel.
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 one billion dollars 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.
OPA 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 reduced the total
volume of waterborne petroleum transportation because shippers of petroleum
have tried to limit their exposure to OPA liability. OPA 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
negative effects include: (i) increased capital expenditures to cover the cost
of mandated double-hulled vessels, (ii) continued increased maintenance,
training, insurance and other operating costs, (iii) increased liability and
exposure to civil penalties and (iv) decreased operating revenues as a result
of further reductions in volumes transported on vessels. These effects could
adversely affect Maritrans' financial condition, profitability and liquidity.
11
<PAGE>
OPA requires all newly constructed petroleum tank vessels engaged in
marine transportation of oil and petroleum products in the U.S. to be
double-hulled and gradually phases out the operation of single-hulled tank
vessels, based on size and age, operating in U.S. waters, including most of
Maritrans' existing barges. Five of Maritrans' large oceangoing, single-hulled
barges will be affected on January 1, 2005. Currently three of Maritrans'
barges and two tankers are equipped with double-hulls meeting OPA's
requirements. Maritrans' has initiated a program to rebuild its single-hull
tank barges to comply with OPA. This rebuilding relies upon a process of
computer assisted design and prefabrication, for which Maritrans has applied
for a patent. The first rebuilt barge, the MARITRANS 192, was completed and
entered service in November 1998. Work has already commenced on a second
single-hull barge, the OCEAN 244. The cost of rebuilding single-hull barges is
approximately $55-75 per barrel compared to estimated costs of approximately
$125-175 per barrel for construction of a completely new double-hull barge. The
total cost of rebuilding the Company's entire single-hull fleet is expected to
exceed $150 million.
Results of Operations
Year Ended December 31, 1999 Compared With Year Ended December 31, 1998
Revenues for 1999 of $151.7 million were flat compared to $151.8 million
in 1998. Barrels of cargo transported in 1999 decreased from 261.6 million in
1998 to 249.1 million in 1999. Although barrels decreased, overall vessel
utilization, including changes in the structure of the fleet, increased from
78.7 percent in 1998 to 81.8 percent in 1999. Revenue increased as a result of
the 260,000-barrel oil tanker which went into operation late in 1998. The
current year results reflect the first complete year of operations for that
tanker. Additionally, positively affecting revenues were a high level of
contract business and a temporary increase in demand due to West Coast refinery
disruptions. Offsetting this increase was the sale of a significant number of
vessels and terminals during 1999. The Company sold five vessels in the first
quarter of 1999 and sold the petroleum storage terminals in September 1999, all
of which were operating in 1998. In December 1999, the Company completed the
sale of twenty-six vessels most of which had worked in the Northeast United
States. Since this transaction occurred late in the year, revenue was affected
only in December. This transaction represented approximately twenty-five
percent of the Company's cargo carrying capacity. Compared to 1998, utilization
improved as the MARITRANS 192 returned to service after being rebuilt with a
new internal double-hull. Utilization of the remaining fleet, after vessel
divestitures, was 87.8 percent in 1999 compared to 78.5 percent in 1998.
Total costs and operating expenses were $143.9 million in 1999 compared to
$141.0 million in 1998, an increase of $2.9 million or 2.1 percent. This
increase was due to the addition to the fleet of the 260,000-barrel oil tanker
late in 1998, costs associated with turnover of qualified seagoing personnel and
crew costs associated with vessels returning to service in 1999, which had been
in the shipyard during related periods in 1998. Additionally, the Company
recorded a severance charge of $0.9 million, in the third quarter of 1999, for
the impact of Company's reduction of shoreside staff, which was announced in
September 1999. These increases were offset by a reduction in operating costs as
a result of the disposition of vessels and terminals discussed in revenue above.
Operating income decreased as a result of the aforementioned changes in
revenue and expenses.
Other income increased from $1.1 million in 1998 to $20.1 million in 1999.
This increase includes a gain of $18.5 million on the disposition of vessels
and the petroleum storage terminals in 1999. The vessel sales consisted of
seventeen barges and fourteen tugboats. The tug and barge units were
predominantly working in the Northeastern United States and Puerto Rico.
The Company's effective income tax rate increased from 38% in 1998 to 43%
in 1999. The increase in the effective tax rate is due primarily to the impact
of state taxes on certain asset sales in 1999.
Net income for the twelve months ended December 31, 1999, increased to
$12.1 million from $3.1 million for the twelve months ended December 31, 1998,
due primarily to the gain on the sale of assets.
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
12
<PAGE>
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 Maritrans' competitors are introducing new
tonnage into the market. Revenues from sources other than marine transportation
decreased to 2.5 percent of total revenues in 1998 compared to 3.0 percent in
1997.
Costs and 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.
Liquidity and Capital Resources
In 1999, funds provided by operating activities were sufficient to meet
debt service obligations and loan agreements restrictions, to make capital
acquisitions and improvements and to allow Maritrans Inc. to pay a dividend in
each quarter of the year. While dividends have been made quarterly in each of
the two last years, there can be no assurances that the dividend will continue.
The ratio of total debt to capitalization is .47:1 at December 31, 1999,
compared to .51:1 at December 31, 1998.
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.
Management believes that in 2000, 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.
On February 9, 1999, the Board of Directors authorized a share buyback
program for the acquisition of up to one 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. As of December 31, 1999,
614,400 shares had been purchased under the plan and financed by internally
generated funds. In February 2000, the Board of Directors authorized the
acquisition of an additional one million shares in the program. The Company
intends to hold the majority of the shares as treasury stock, although some
shares will be used for employee compensation plans and others may be used for
acquisition currency and/or other corporate purposes. Subsequent to December
31, 1999, and through March 13, 2000, the Company has purchased 205,000 shares
of its common stock at a total cost of $1,127,000 under the program.
13
<PAGE>
On July 30, 1999, the Company awarded a contract to rebuild a second large
single-hull barge, the OCEAN 244, to a double-hull configuration which will
have a total cost of approximately $12 million. As of December 31, 1999, the
Company has advanced $4.0 million on this project to the shipyard contractor
for prefabrication and other design work. The vessel is scheduled to enter the
shipyard in the second quarter of 2000. The Company expects to finance this
project from internally generated funds.
In August 1999, the Company entered into an agreement to purchase the MV
PORT EVERGLADES, a tugboat. The Company paid $2.5 million of cash at the
closing and entered into a note of $4.9 million payable to the previous owner.
The note has no stated interest rate, therefore the Company recorded the note
at the present value of the cash payments. The note is secured by a Mellon Bank
N.A. Letter of Credit.
As part of the focus on positioning the Company for additional
opportunities, in September 1999 the Company announced its intent to move its
corporate headquarters from Philadelphia, PA to Tampa, FL. The Company believes
the move will be completed by the summer of 2000. A fleet center will be
maintained in the Philadelphia area. No significant relocation costs were
incurred in 1999.
In September 1999, the Company announced a significant reduction of its
shoreside staff. The Company accrued $0.9 million of severance costs in the
third quarter of this year for the cash benefits to be paid to the employees
who have been terminated. At December 31, 1999, $0.3 million of severance costs
had been paid to the terminated employees. The remaining accrual of $0.6
million will be paid during the first two quarters of 2000.
In September 1999, the Company sold its petroleum storage terminal
operations to ST Services. The terminals are located in Philadelphia, PA and
Salisbury, MD. The proceeds of the sale totaled $10 million, of which $3.6
million was used to payoff the outstanding mortgage on the Philadelphia
terminal.
In December 1999, the Company sold twenty-six vessels that worked in the
Northeastern U.S. coastal waters, in separate transactions to Vane Line
Bunkering Inc. and K-Sea Transportation LLC. The sale was a result of the
Company's strategic moves previously discussed. The transactions, which included
fifteen barges and eleven tugboats, represented a divestiture of approximately
twenty-five percent of the Company's cargo-carrying capacity. The combined sale
price of the two transactions was $48 million. The Company received proceeds of
$39 million in cash and $8.5 million in notes. Due to uncertainties regarding
collectibility of the notes received, the Company recorded a reserve of $4.5
million. The remaining $0.5 million of the sales price will be received by the
Company upon certain conditions being met as defined in one of the sales
agreements; accordingly, the $0.5 million will be included in net income if the
conditions are met and the amounts are earned. In 1999, the Company negotiated a
waiver and amendment to the indenture and mortgage securing substantially all of
the vessels sold. The proceeds from the sale are required to be deposited with
the trustee, Wilmington Trust Company, and may be withdrawn to fund repairs and
improvements on mortgaged vessels, including double-hull rebuilding, to make
debt repayments and to pay income taxes resulting from the vessel transactions.
Taxes of approximately $6.0 million will be paid by the Company as a
result of the aforementioned activity in 1999.
In addition, in December 1999, the Company purchased two tugboats, the
Enterprise and the Intrepid, which had previously been operated by the Company
under operating leases. The purchase price of the vessels was $5.7 million in
the form of a note payable to the previous owner.
Debt Obligations and Borrowing Facility
At December 31, 1999, the Company had $83.6 million in total outstanding
debt, secured by mortgages on most of the fixed assets of the Company. The
current portion of this debt at December 31, 1999, was $7.8 million.
The Company has a $10 million working capital facility, secured by its
receivables and inventories. At December 31, 1999, there was no balance
outstanding, although the Company utilizes this facility from time to time for
working capital and other business needs.
14
<PAGE>
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 the tankers. Subsequent to year-end, this
facility was extended to October 30, 2002. At December 31, 1999, the balance of
borrowings outstanding was $22 million.
The Company entered into an agreement with Coastal Tug and Barge Inc. in
August 1999 to purchase the MV PORT EVERGLADES. The outstanding debt on this
transaction at December 31, 1999, is $3.9 million payable to Coastal Tug and
Barge Inc. and is secured by a Mellon Bank N.A. Letter of Credit.
In December 1999, the Company entered into an agreement with General
Electric Capital Corporation to purchase two tugboats, the Enterprise and the
Intrepid. The vessels had previously been operated by the Company under
operating leases. The outstanding debt on this purchase at December 31, 1999,
was $5.7 million payable to General Electric Capital Corporation.
The mortgage on the Philadelphia terminal, which was held by Mellon Bank
N.A., had an outstanding balance of $3.6 million at the time of sale. This debt
was paid off with proceeds of the sale.
Impact of Year 2000
Prior to December 31, 1999, the Company completed an assessment of its
computing systems, commercial off-the-shelf systems, and embedded systems, had
developed new software programs, and replaced commercial systems to take
advantage of newer technologies. As a result of this initiative, the Company's
operating systems, critical embedded systems and commercial off-the-shelf
systems were Year 2000 compliant. The Company did not experience any
significant problems with its internal systems nor with its key service
providers and customers during the change to the Year 2000. The Company will
continue to monitor its mission critical computer applications and those of its
suppliers and vendors throughout the Year 2000 to ensure that any latent Year
2000 matters that may arise are addressed promptly.
Market Risk
The principal market risk to which the Company is exposed is a change 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 11 of the
Consolidated Financial Statements.
The table below 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, 1999.
EXPECTED YEARS OF MATURITY
(Dollars in $000's)
<TABLE>
<CAPTION>
2000 2001 2002 2003 2004 Thereafter Total
---- ---- ---- ---- ---- ---------- -----
<S> <C> <C> <C> <C> <C> <C> <C>
Long-term debt, including
current portion:
Fixed rate 7,177 7,222 7,271 7,322 7,377 19,576 55,945
Average interest rate (%) 9.06 9.06 9.06 9.06 9.06 9.06
Variable rate 596 650 22,650 650 650 2,493 27,689
Average interest rate (%) 7.18 7.18 7.18 7.18 7.18 7.18
</TABLE>
Item 7a. QUALITATIVE AND QUANTITATIVE DISCLOSURES ABOUT MARKET RISK
See discussion on page 15 included in Management's Discussion and Analysis
of Financial Condition and Results of Operations.
15
<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, 1999 and 1998, and the related consolidated statements of
income, cash flows and stockholders' equity for each of the three years in the
period ended December 31, 1999. 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 auditing standards generally
accepted in the United States. 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, 1999 and 1998, and the consolidated results of its operations and
its cash flows for each of the three years in the period ended December 31,
1999, in conformity with accounting principles generally accepted in the United
States. 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.
/s/ ERNST & YOUNG LLP
Philadelphia, Pennsylvania
January 28, 2000
16
<PAGE>
MARITRANS INC.
CONSOLIDATED BALANCE SHEETS
($000)
<TABLE>
<CAPTION>
December 31,
--------------------------
1999 1998
---- ----
<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents .......................................... $ 13,232 $ 1,214
Cash and cash equivalents - restricted ............................. 21,000 --
Trade accounts receivable (net of allowance for doubtful accounts of
$1,393 and $1,387, respectively .................................. 14,676 18,030
Other accounts receivable .......................................... 5,782 9,434
Inventories ........................................................ 3,355 4,656
Deferred income tax benefit ........................................ 4,013 4,627
Prepaid expenses ................................................... 3,101 3,479
-------- --------
Total current assets .......................................... 65,159 41,440
Vessels and equipment ............................................... 278,471 358,197
Less accumulated depreciation .................................... 119,013 151,506
-------- --------
Net vessels and equipment ..................................... 159,458 206,691
Note receivable (net of allowance of $4,500 in 1999) ................ 3,692 --
Other (including $18 million cash and cash equivalents -- restricted
in 1999) ........................................................... 22,712 6,775
-------- --------
Total assets .................................................. $251,021 $254,906
======== ========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Debt due within one year ......................................... 7,773 11,873
Trade accounts payable ........................................... 1,686 1,856
Accrued interest ................................................. 1,203 1,351
Accrued shipyard costs ........................................... 6,961 7,799
Accrued wages and benefits ....................................... 2,727 3,559
Accrued income taxes ............................................. 2,421 1,540
Other accrued liabilities ........................................ 7,230 6,054
-------- --------
Total current liabilities ..................................... 30,001 34,032
Long-term debt ...................................................... 75,861 83,400
Deferred shipyard costs ............................................. 10,442 11,698
Other liabilities ................................................... 4,095 5,107
Deferred income taxes ............................................... 35,925 30,854
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:
1999 -- 13,186,065 shares; 1998 -- 13,116,862 shares ............. 132 131
Capital in excess of par value ..................................... 78,279 77,858
Retained earnings .................................................. 25,945 18,691
Unearned compensation .............................................. (1,172) (1,166)
Less: Cost of shares held in treasury: 1999 -- 1,483,175 shares;
1998 -- 972,256 shares ........................................... (8,487) (5,699)
-------- --------
Total stockholders' equity .................................... 94,697 89,815
-------- --------
Total liabilities and stockholders' equity .................... $251,021 $254,906
======== ========
</TABLE>
See accompanying notes.
17
<PAGE>
MARITRANS INC.
CONSOLIDATED STATEMENTS OF INCOME
($000, except per share amounts)
<TABLE>
<CAPTION>
For the year ended December 31,
---------------------------------------
1999 1998 1997
---- ---- ----
<S> <C> <C> <C>
Revenues ................................................. $151,667 $151,839 $135,781
Costs and expenses:
Operation expense ....................................... 86,049 86,616 69,290
Maintenance expense ..................................... 28,213 26,148 19,699
General and administrative .............................. 9,313 8,668 8,453
Depreciation and amortization ........................... 20,279 19,578 16,943
-------- -------- --------
143,854 141,010 114,385
-------- -------- --------
Operating income ......................................... 7,813 10,829 21,396
Interest expense (net of capitalized interest of $73, $417
and $0, respectively).................................... (6,778) (6,945) (7,565)
Other income, net ........................................ 20,116 1,102 4,326
-------- -------- --------
Income before income taxes ............................... 21,151 4,986 18,157
Income tax provision ..................................... 9,095 1,870 6,696
-------- -------- --------
Net income ............................................... $ 12,056 $ 3,116 $ 11,461
-------- -------- --------
Basic earnings per share ................................. $ 1.03 $ 0.26 $ 0.95
Diluted earnings per share ............................... $ 1.02 $ 0.26 $ 0.94
</TABLE>
See accompanying notes.
18
<PAGE>
MARITRANS INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS
($000)
<TABLE>
<CAPTION>
For the year ended December 31,
-----------------------------------------
1999 1998 1997
---- ---- ----
<S> <C> <C> <C>
Cash flows from operating activities:
Net income .............................................................. $ 12,056 $ 3,116 $ 11,461
Adjustments to reconcile net income to net cash provided by (used in)
operating activities:
Depreciation and amortization .......................................... 20,279 19,578 16,943
Deferred income taxes .................................................. 5,685 733 1,729
Stock compensation ..................................................... 1,030 378 381
Changes in receivables, inventories and prepaid expenses ............... 7,488 (4,756) (753)
Changes in current liabilities, other than debt ........................ 34 (4,971) 3,387
Non-current changes, net ............................................... 1,939 (2,687) 3,125
(Gain) loss on sale of assets .......................................... (18,937) -- (2,049)
--------- --------- ---------
Total adjustments to net income ......................................... 17,518 8,275 22,763
--------- --------- ---------
Net cash provided by operating activities .............................. 29,574 11,391 34,224
Cash flows from investing activities:
Proceeds from sale of marine vessels, terminals and equipment .......... 60,136 -- 5,066
Purchase of cash and cash equivalents -- restricted, resulting from
the sale of vessels, terminals and equipment ......................... (39,000) -- --
Insurance proceeds from dock settlement ................................ -- 1,025 --
Purchase of marine vessels and equipment ............................... (9,000) (30,190) (51,298)
--------- --------- ---------
Net cash provided by (used in) investing activities .................. 12,136 (29,165) (46,232)
Cash flows from financing activities:
Payment of long-term debt .............................................. (10,916) (16,423) (10,213)
New borrowings under credit facilities ................................. 14,909 43,863 12,000
Repayments of borrowings under credit facility ......................... (25,481) (17,290) (6,000)
Proceeds from stock option exercises ................................... -- -- 143
Purchase of treasury stock ............................................. (3,402) -- --
Dividends declared and paid ............................................ (4,802) (4,474) (3,784)
--------- --------- ---------
Net cash provided by (used in) financing activities .................. (29,692) 5,676 (7,854)
Net increase (decrease) in cash and cash equivalents .................... 12,018 (12,098) (19,862)
Cash and cash equivalents at beginning of year .......................... 1,214 13,312 33,174
--------- --------- ---------
Cash and cash equivalents at end of year ................................ $ 13,232 $ 1,214 $ 13,312
========= ========= =========
Supplemental Disclosure of Cash Flow Information:
Interest paid ........................................................... $ 6,914 $ 7,574 $ 7,661
Income taxes paid ....................................................... $ 1,750 $ 1,600 $ 4,500
Non-cash activitities:
Purchase of vessels financed with issuance of long-term debt ........... $ 9,850 -- --
Note receivable from sale of vessels, net of reserve of $4,500 ......... $ 4,000 -- --
</TABLE>
See accompanying notes.
19
<PAGE>
MARITRANS INC.
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
($000, except share amounts)
<TABLE>
<CAPTION>
Outstanding Common Capital in
shares of Stock, $.01 excess of Retained Treasury Unearned
Common Stock Par Value Par Value Earnings Stock Compensation Total
-------------- ------------- ----------- ---------- ------------ -------------- ----------
<S> <C> <C> <C> <C> <C> <C> <C>
Balance at December 31, 1996 ........ 11,959,912 $128 $75,874 $ 12,372 $ (5,067) $ (713) $ 82,594
Net income .......................... 11,461 11,461
Cash dividends ($0.315 per share of
Common Stock) ...................... (3,784) (3,784)
Stock incentives .................... 95,349 2 1,007 -- (366) (119) 524
---------- ---- ------- -------- -------- ------- --------
Balance at December 31, 1997 ........ 12,055,261 130 76,881 20,049 (5,433) (832) 90,795
---------- ---- ------- -------- -------- ------- --------
Net income .......................... 3,116 3,116
Cash dividends ($0.37 per share of
Common Stock) ...................... (4,474) (4,474)
Stock incentives .................... 89,345 1 977 -- (266) (334) 378
---------- ---- ------- -------- -------- ------- --------
Balance at December 31, 1998 ........ 12,144,606 131 77,858 18,691 (5,699) (1,166) 89,815
Net income .......................... 12,056 12,056
Cash dividends ($0.40 per share of
Common Stock) ...................... (4,802) (4,802)
Purchase of treasury shares ......... (614,400) (3,402) (3,402)
Stock incentives .................... 172,684 1 421 -- 614 (6) 1,030
---------- ---- ------- -------- -------- -------- --------
Balance at December 31, 1999 ........ 11,702,890 $132 $78,279 $ 25,945 $ (8,487) $(1,172) $ 94,697
========== ==== ======= ======== ======== ======== ========
</TABLE>
See accompanying notes.
20
<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.
The Company primarily operates in the Gulf of Mexico and along the coastal
waters of the Northeastern United States, particularly the Delaware Bay. 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.
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.
Reclassifications
Certain amounts in the prior year financial statements have been
reclassified to conform to their current year presentation.
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 and Equipment
Vessels and equipment, which are carried at cost, are 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. 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 of
1990 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 gradually phases out the operation of single-hulled tank vessels based on
size and age. The Company has announced a construction program to rebuild its
single-hulled barges with double hulls over the next several years. By January
1, 2005, five of the Company's large oceangoing, single-hulled vessels will be
at their legislatively determined retirement date if they are not rebuilt by
that time.
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
cost, which does not exceed net realizable value.
21
<PAGE>
NOTES TO THE CONSOLIDATED
FINANCIAL STATEMENTS -- (Continued)
1. Organization and Significant Accounting Policies -- (Continued)
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.
Significant Customers
During 1999, the Company derived revenues aggregating 52 percent of total
revenues from three customers, each one representing more than 10 percent of
revenues. In 1998, revenues from three customers aggregated 52 percent of total
revenues and in 1997, revenues from three customers aggregated 50 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 1999,
approximately 85 percent of the Company's total revenue was generated by ten
customers. Credit is extended to various companies in the petroleum industry in
the normal course of business and the Company generally does not require
collateral. 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 Party Transactions
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 $2,680,000, $2,577,000 and $2,536,000
for the years ended December 31, 1999, 1998 and 1997, respectively. In 1999,
1998 and 1997, the Company paid amounts for legal services to a law firm, a
partner of which serves on the Company's Board of Directors. In 1998 and 1997
the Company also paid the law firm for the lease of office space. No amounts
were paid for the lease of office space in 1999. A summary of payments to the
law firm is as follows:
1999 1998 1997
---- ---- ----
($000)
Lease of office space ......... $ -- $114 $228
Legal services ................ 207 120 232
---- ---- ----
Total ......................... $207 $234 $460
==== ==== ====
2. Sales of Assets
In March 1999, the Company sold five vessels that were no longer deemed
core to the Company's operations. The vessels consisted of two tug and barge
units that were working in Puerto Rico and a tugboat working on the Atlantic
Coast. The gain on the sale of these assets was $4.4 million and is included in
other income in the consolidated statements of income.
In September 1999, the Company sold its petroleum storage terminal
operations, located in Philadelphia, PA and Salisbury, MD. The proceeds of the
sale totaled $10 million, of which $3.6 million was used to pay off the
outstanding debt on the Philadelphia terminal. The loss on the sale of these
assets was $5.9 million and is included in other income in the consolidated
statements of income.
In December 1999, the Company sold twenty-six vessels, which worked in the
Northeastern U.S. coastal waters, in separate transactions to Vane Line
Bunkering Inc. and K-Sea Transportation LLC ("Vessel Sale"). The transactions,
which included fifteen barges and eleven tugboats, represented a divestiture of
approximately twenty-five percent of the Company's cargo-carrying capacity. The
combined sale price of the two transactions was $48 million. The Company
received proceeds of $39 million in cash and $8.5 million in notes. Due to
22
<PAGE>
NOTES TO THE CONSOLIDATED
FINANCIAL STATEMENTS -- (Continued)
2. Sales of Assets -- (Continued)
uncertainties regarding collectibility of the notes received, the Company
recorded a reserve of $4.5 million. The remaining $0.5 million of the sales
price will be received by the Company upon certain conditions as defined in one
of the sales agreements; accordingly, the $0.5 million will be included in net
income if the conditions are met and the amounts are earned. The total gain on
the Vessel Sale of the assets was $20.0 million, which includes a write-off of
goodwill of approximately $1.4 million. The gain on the Vessel Sale is included
in other income in the consolidated statements of income.
The following unaudited pro forma results of operations for the fiscal
years ended December 31, 1999, 1998 and 1997 assumes that the sale of vessels
and petroleum storage terminal operations were disposed as of the beginning of
the period presented and excludes the net gain on the sale of these assets of
$10.6 million, net of taxes. No pro forma adjustment has been made for expenses
not specifically allocable to the assets sold.
<TABLE>
<CAPTION>
1999 1998 1997
---- ---- ----
($000, except per share amounts)
<S> <C> <C> <C>
Revenue ............................ $ 115,053 $ 104,643 $ 91,463
Net income ......................... 924 399 9,666
Diluted earnings per share ......... $ 0.08 $ 0.03 $ 0.80
</TABLE>
3. Corporate Relocation and Downsizing
In September 1999, the Company announced its intent to relocate the
corporate headquarters from Philadelphia, PA to Tampa, FL. At the same time, the
Company announced a significant reduction of its shoreside staff. The Company
accrued $0.9 million of severance costs in September 1999 for the cash benefits
to be paid to the employees who had been terminated. As of December 31, 1999,
$0.3 million has been paid.
4. Stock Buyback
On February 9, 1999, the Board of Directors authorized a share buyback
program for the acquisition of up to one 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. As of December 31, 1999,
614,400 shares have been purchased under the plan. The total cost of the shares
repurchased during 1999 was approximately $3.4 million.
5. Earnings per Common Share
The following data show the amounts used in computing basic and diluted
earnings per share (EPS):
<TABLE>
<CAPTION>
1999 1998 1997
---- ---- ----
($000)
<S> <C> <C> <C>
Income available to common stockholders used
in basic EPS ................................. $12,056 $ 3,116 $ 11,461
======= ======= ========
Weighted average number of common shares
used in basic EPS ............................ 11,682 11,929 12,003
Effect of dilutive securities:
Stock options and restricted shares. ......... 126 258 177
------- ------- --------
Weighted number of common shares and
dilutive potential common stock used in
diluted EPS .................................. 11,808 12,187 12,180
======= ======= ========
</TABLE>
23
<PAGE>
NOTES TO THE CONSOLIDATED
FINANCIAL STATEMENTS -- (Continued)
6. 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 percent 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
percent 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 percent stockholders, including without limitation, a person or
group acquiring 20 percent 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 percent 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 percent 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.
7. Cash and Cash Equivalents
Cash and cash equivalents at December 31, 1999 and 1998 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.
In 1999, the Company negotiated a waiver and amendment to the indenture
and mortgage securing substantially all of the vessels sold. The proceeds from
the sale of vessels are required to be deposited with the trustee, Wilmington
Trust Company, and may be withdrawn to fund repairs and improvements on
mortgaged vessels, including double-hull rebuilding, to make debt repayments
and to pay income taxes resulting from the vessel transactions. At December 31,
1999, deposits held by the trustee are $39 million. Of this amount, $21 million
has been classified as restricted cash and is included in current assets, as
this amount will be used in current operations. The remaining balance of $18
million is included in other assets on the Company's consolidated balance
sheet.
8. 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
24
<PAGE>
NOTES TO THE CONSOLIDATED
FINANCIAL STATEMENTS -- (Continued)
8. Stock Incentive Plans -- (Continued)
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
1999, there were 5,663 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 1999, there were 63,705 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 1999 was
$6.00. 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, 1999 and 1998, 435,274 and 691,109 remaining shares and options
within the Plan were reserved for grant, respectively.
In May 1999, the Company adopted the Maritrans Inc. 1999 Directors' and
Key Employees Equity Compensation Plan (the "99 Plan"), which provides
non-employee directors, officers and other key employees with certain rights to
acquire common stock and stock options. The aggregate number of shares
available for issuance under the 99 Plan is 900,000 and the shares are to be
issued from treasury shares. Any outstanding options granted under the Plan are
exercisable at a price not less than market value of the shares on the date of
grant. In 1999, there were 1,808 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 1999, there were 101,508 shares of restricted stock issued under
the 99 Plan. The restrictions lapse over a two year period. The weighted
average fair value of the restricted stock issued during 1999 was $6.00. 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,
1999, 416,474 remaining shares and options within the Plan were reserved for
grant.
Compensation expense for all restricted stock was $995,000, $434,000, and
$536,000 for the years ended December 31, 1999, 1998 and 1997, respectively.
25
<PAGE>
NOTES TO THE CONSOLIDATED
FINANCIAL STATEMENTS -- (Continued)
8. Stock Incentive Plans -- (Continued)
Information on stock options follows:
<TABLE>
<CAPTION>
Number of Weighted Average
Options Exercise Price Exercise Price
----------- ---------------- -----------------
<S> <C> <C> <C>
Outstanding at 12/31/96 ......... 682,160 $4.000-6.000 $4.79
Granted ........................ 76,939 5.875-7.937 7.33
Exercised ...................... 71,264 4.000-5.625 4.60
Cancelled or forfeited ......... 140,637 5.250-6.250 5.45
Expired ........................ -- -- --
--------- ------------ -----
Outstanding at 12/31/97 ......... 547,198 4.000-7.937 5.01
Granted ........................ 66,918 9.000-9.188 9.11
Exercised ...................... -- -- --
Cancelled or forfeited ......... 35,991 5.375-6.000 5.78
Expired ........................ 98,489 4.000-5.000 4.35
--------- ------------ -----
Outstanding at 12/31/98 ......... 479,636 4.000-9.188 5.64
--------- ------------ -----
Granted ........................ 598,169 6.000-6.000 6.00
Exercised ...................... -- -- --
Cancelled or forfeited ......... 31,492 6.000-9.188 6.41
Expired ........................ -- -- --
--------- ------------ -----
Outstanding at 12/31/99 ......... 1,046,313 $4.000-9.188 $5.82
========= ============ =====
Exercisable
December 31, 1997 .............. 362,575 4.000-6.000 4.44
December 31, 1998 .............. 318,971 4.000-9.125 4.55
December 31, 1999 .............. 352,474 4.000-9.125 4.78
</TABLE>
Outstanding options have an original term of up to ten years, 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, 1999 is seven years.
9. Income Taxes
The income tax provision consists of:
1999 1998 1997
---- ---- ----
($000)
Current:
Federal ............... $15,567 $1,011 $4,553
State ................. 1,943 126 414
Deferred:
Federal ............... $(7,583) $ 547 $1,753
State ................. (832) 186 (24)
------- ------ ------
$ 9,095 $1,870 $6,696
------- ------ ------
26
<PAGE>
NOTES TO THE CONSOLIDATED
FINANCIAL STATEMENTS -- (Continued)
9. Income Taxes -- (Continued)
The differences between the federal statutory tax rate in 1999, 1998 and
1997, and the effective tax rates were as follows:
<TABLE>
<CAPTION>
1999 1998 1997
---- ---- ----
($000)
<S> <C> <C> <C>
Statutory federal tax provision ............................... $7,403 $1,695 $6,355
State income taxes, net of federal income tax benefit ......... 722 206 253
Non-deductible items (principally goodwill) ................... 602 131 88
Other ......................................................... 368 (162) --
------ ------ ------
$9,095 $1,870 $6,696
====== ====== ======
</TABLE>
Principal items comprising deferred income tax liabilities and assets as
of December 31, 1999 and 1998 are:
<TABLE>
<CAPTION>
1999 1998
---- ----
($000)
<S> <C> <C>
Deferred tax liabilities:
Depreciation ........................................ $46,278 $44,220
Prepaid expenses .................................... 1,662 1,778
------- -------
47,940 45,998
------- -------
Deferred tax assets:
Reserves and accruals ............................... 16,028 15,888
Net operating loss and credit carryforwards ......... -- 3,883
------- -------
16,028 19,771
------- -------
Net deferred tax liabilities ........................... $31,912 $26,227
======= =======
</TABLE>
10. Retirement Plans
Most of the shoreside employees participate in a qualified defined benefit
retirement plan of Maritrans Inc. Substantially all of the seagoing supervisors
who were supervisors in 1984, or who were hired as or promoted into supervisory
roles between 1984 and 1998 have pension benefits under the Company's
retirement plan for that period of time. Beginning in 1999, the seagoing
supervisors retirement benefits are provided through contributions to an
industry-wide, multi-employer seaman's pension plan. Upon retirement, those
seagoing supervisors will be provided with retirement benefits from the
Company's plan for service periods between 1984 and 1998, and from the
multi-employer seaman's plan for other covered periods. As a result of the
implementation of changes in the retirement plan provider, the Company
recognized a curtailment gain during 1999 in the amount of $2.6 million, which
is reflected in the net pension cost below. Additionally, the Company modified
its plan for those seagoing supervisors who had been originally covered by the
District 2 Marine Engineers Beneficial Association and met certain service
requirements. As a result of this modification, additional benefits of $1.7
million have been recorded and reflected in the net pension cost below.
Net periodic pension cost was determined under the projected unit credit
actuarial method. Pension benefits are primarily based on years of service and
begin to vest after two years. Employees 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.
27
<PAGE>
NOTES TO THE CONSOLIDATED
FINANCIAL STATEMENTS -- (Continued)
10. Retirement Plans -- (Continued)
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, 1999 and
1998:
<TABLE>
<CAPTION>
1999 1998
---- ----
($000)
<S> <C> <C>
Change in benefit obligation
Benefit obligation at beginning of year ................ $ 25,647 $ 24,044
Service cost ........................................... 1,419 1,482
Interest cost .......................................... 1,635 1,553
Benefit enhancement..................................... 1,666 --
Actuarial (gain) loss .................................. (979) (653)
Curtailment gain ....................................... (2,579) --
Benefits paid .......................................... (864) (779)
-------- --------
Benefit obligation at end of year ...................... $ 25,945 $ 25,647
-------- --------
Change in plan assets
Fair value of plan assets at beginning of year ......... $ 30,533 $ 27,256
Actual return on plan assets ........................... 930 3,515
Employer contribution .................................. -- 541
Benefits paid .......................................... (864) (779)
-------- --------
Fair value of plan assets at end of year ............... $ 30,599 $ 30,533
-------- --------
Funded status .......................................... 4,654 4,886
Unrecognized net actuarial (gain) loss ................. (8,054) (8,616)
Unrecognized transition amount ......................... (408) (600)
-------- --------
Accrued benefit cost ................................... ($ 3,808) ($ 4,330)
======== ========
Weighted average assumptions as of December 31, 1999
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>
1999 1998 1997
---- ---- ----
($000)
<S> <C> <C> <C>
Components of net periodic benefit pension cost
Service cost of current period ........................ $ 1,419 $ 1,482 $ 1,440
Interest cost on projected benefit obligation ......... 1,635 1,553 1,451
Expected return on plan assets ........................ (2,032) (1,832) (1,582)
Actual (gain) loss on plan assets ..................... 1,102 (1,683) (1,990)
Benefit enhancement.................................... 1,666 -- --
Curtailment gain....................................... (2,579) -- --
Net (amortization) and deferral ....................... (1,733) 1,480 1,787
------- -------- --------
Net periodic pension cost ............................. ($ 522) $ 1,000 $ 1,106
======= ======== ========
</TABLE>
Substantially all of the shoreside employees 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 $59,000,
$0 and $779,000 for the years ended December 31, 1999, 1998 and 1997,
respectively.
28
<PAGE>
NOTES TO THE CONSOLIDATED
FINANCIAL STATEMENTS -- (Continued)
10. Retirement Plans -- (Continued)
Approximately 54 percent of the Company's employees are covered under
collective bargaining agreements, and approximately 19 percent of the employees
are covered under collective bargaining agreements that expire within one year.
Beginning in 1999, all of the Company's seagoing employee retirement
benefits are provided through contributions to industry-wide, multi-employer
seaman's pension plans. Prior to 1999, the seagoing supervisors were included
in the Company's retirement plan as discussed above. Contributions to
industry-wide, multi-employer seamen's pension plans, which cover substantially
all seagoing personnel, were approximately $1,527,000, $889,000 and $479,000
for the years ended December 31, 1999, 1998 and 1997, 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.
11. Debt
The Company has $52 million remaining on the fleet that was part of the
original indebtedness of $115.0 million incurred when the Company became a
public company in 1987. This mortgage is collateralized by mortgages on a
majority of the tugs and barges.
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, 1999, were $22.0 million. The
interest rate on the indebtedness is variable. The weighted average interest
rate during 1999 was 6.0 percent. Subsequent to year-end, the terms of this
facility were modified and the maturity date was extended to October 2002.
Accordingly, this amount has been classified as a long-term liability as of
December 31, 1999.
The Operating Partnership has a $10 million working capital facility
secured by its receivables and inventories. The maximum amount outstanding
under this facility during fiscal 1999 was $4.7 million. There were no
borrowings outstanding under this facility at December 31, 1999. The interest
rate on the indebtedness is variable. The weighted average interest rate on
this facility during the period in which amounts were outstanding during 1999
was 4.83 percent.
In August 1999, the Company entered into an agreement to purchase the MV
Port Everglades, a tugboat. The Company paid $2.5 million of cash at the
closing and entered into a note of $4.9 million payable to the previous owner.
The note has no stated interest rate, therefore the Company recorded the note
at the present value of the future cash payments. The note is secured by a
Mellon Bank N.A. Letter of Credit.
In December 1999, the Company purchased two tugboats, the Enterprise and
the Intrepid, which had previously been operated by the Company under operating
leases. The purchase price of the vessels was $5.7 million in the form of a
note payable to the previous owner.
29
<PAGE>
NOTES TO THE CONSOLIDATED
FINANCIAL STATEMENTS -- (Continued)
11. Debt -- (Continued)
<TABLE>
<CAPTION>
December 31,
1999 1998
------ ------
($000)
<S> <C> <C>
Fleet Mortgage, annual principal payment of $6.5 million, interest rate 9.25% ..... $52,000 $58,500
Revolving credit facility with Mellon Bank N.A., maturity date October 2002,
variable interest rate (7% at December 31, 1999) ................................. 22,000 28,400
Working Capital Facility .......................................................... -- 4,173
Note payable with Mellon Bank N.A. ................................................ -- 4,200
Vessel notes payable, monthly payments of $76,104 including interest, no stated
interest rate (interest imputed at a rate of 6.5%) ............................... 3,945 --
Vessel notes payable, monthly payments of $54,183 including interest with a balloon
payment of $1,137,838 due February 2007, variable interest rate, (7.89% at
December 31, 1999) ............................................................... 5,689 --
------- -------
83,634 95,273
Less current portion .............................................................. 7,773 11,873
------- -------
$75,861 $83,400
======= =======
</TABLE>
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.
Based on the borrowing rates currently available for loans with similar
terms and maturities, the fair value of long-term debt was $76.3 million and
$96.1 million at December 31, 1999 and 1998, respectively. The maturity
schedule for outstanding indebtedness under existing debt agreements at
December 31, 1999, is as follows:
($000)
2000 ......................... $7,773
2001 ......................... 7,872
2002 ......................... 29,921
2003 ......................... 7,972
2004 ......................... 8,027
Thereafter ................... 22,069
-------
$83,634
=======
12. Commitments and Contingencies
Minimum future rental payments under noncancellable operating leases at
December 31, 1999, are as
follows:
($000)
2000 ......................... $ 536
2001 ......................... 629
2002 ......................... 641
2003 ......................... 486
2004 ......................... 380
Thereafter ................... 2,224
------
$4,896
======
Total rent expense for all operating leases was $1,897,000, $2,029,000,
and $2,123,000 for the years ended December 31, 1999, 1998 and 1997,
respectively.
30
<PAGE>
NOTES TO THE CONSOLIDATED
FINANCIAL STATEMENTS -- (Continued)
12. Commitments and Contingencies -- (Continued)
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, 1999, will
not have a material adverse effect on the consolidated financial statements.
13. Quarterly Financial Data (Unaudited)
<TABLE>
<CAPTION>
First Second Third Fourth
Quarter Quarter Quarter Quarter
------------ ------------ ----------- ------------
($000, except per share amounts)
<S> <C> <C> <C> <C>
1999
- ----
Revenues .................................. $ 38,398 $ 39,834 $ 39,185 $ 34,250
Operating income .......................... 1,455 2,780 1,755 1,823
Net income (loss) ......................... 2,085 900 (2,909) 11,980
Basic earnings (loss) per share ........... $ 0.17 $ 0.08 $ (0.25) $ 1.05
Diluted earnings (loss) per share ......... $ 0.17 $ 0.08 $ (0.25) $ 1.03
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
</TABLE>
In the first quarter of 1999, the Company sold five vessels consisting of
two tug and barge units that were working in Puerto Rico and a tugboat working
on the Atlantic Coast. The gain on the sale of these assets was $4.4 million
($2.7 million net of tax or $ 0.22 diluted earnings per share) and is included
in other income in the consolidated statements of income.
In the third quarter of 1999, the Company sold its petroleum storage
terminal operations. The loss on the sale of these assets was $5.9 million
($3.6 million net of tax or $0.30 diluted loss per share) and is included in
other income in the consolidated statements of income.
In the fourth quarter of 1999, the Company sold twenty-six vessels, most
of which worked in the Northeastern U.S. coastal waters. The total gain on the
sale was $20.0 million ($11.4 million net of tax or $0.98 diluted earnings per
share) and is included in other income in the consolidated statements of
income.
In the fourth quarter of 1999, the Company recorded a credit to expense of
$1.4 million ($0.8 million net of tax or $0.12 diluted earnings per share)
related to changes in the pension plan discussed in Note 10.
31
<PAGE>
Item 9. Changes in and Disagreements with Accountants on Accounting and
Financial Disclosure
None.
PART III
Item 10. Directors and Executive Officers of the Registrant
Information with respect to directors of the Registrant, and information
with respect to compliance with Section 16(a) of the Securities Exchange Act of
1934, is incorporated herein by reference to the Registrant's definitive Proxy
Statement (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, 1999, 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) ................ 56 Chairman of the Board of Directors and Chief Executive Officer
Dr. Robert E. Boni (2)(3) .............. 72 Lead Director
Dr. Craig E. Dorman (2)(3)(4) .......... 59 Director
Robert J. Lichtenstein (4) ............. 52 Director
Brent A. Stienecker (2)(3) ............. 61 Director
H. William Brown ....................... 61 Chief Financial Officer
Janice M. Smallacombe .................. 40 Senior Vice President and Secretary
Steven E. Welch ........................ 48 Vice President
John J. Burns .......................... 47 President, Maritrans Operating Partners L.P.
Walter T. Bromfield .................... 44 Treasurer and Controller
Stephen M. Hackett ..................... 41 President, Maritrans Chartering Co., Inc.
Philip J. Doherty ...................... 40 Vice President
</TABLE>
- ------------
(1) As of March 1, 2000
(2) Member of the Compensation Committee
(3) Member of the Audit Committee
(4) Member of the Nominating Committee
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 Nominating
Committee 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 Secretary and has been
continuously employed by the Company or its predecessors in various capacities
since 1982.
32
<PAGE>
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. Hackett is President of Maritrans Chartering Co., Inc. and has been
continuously employed in various capacities by Maritrans or its predecessors
since 1980.
Mr. Doherty is Vice President and has been continuously employed by
Maritrans since 1997. Previously, Mr. Doherty was Director of Business
Development for Computer Command and Control Company where he had been employed
since April 1995.
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".
33
<PAGE>
PART IV
Item 14. EXHIBITS, FINANCIAL STATEMENT
SCHEDULES AND REPORTS ON FORM 8-K
<TABLE>
<CAPTION>
Page
-----
<S> <C> <C>
(a) (1) Financial Statements
Report of Independent Auditors 16
Maritrans Inc. Consolidated Balance Sheets at December 31, 1999 and 1998 17
Maritrans Inc. Consolidated Statements of Income for the years ended December 31,
1999, 1998 and 1997 18
Maritrans Inc. Consolidated Statements of Cash Flows for the years ended December
31, 1999, 1998 and 1997 19
Maritrans Inc. Consolidated Statements of Stockholders' Equity for the years ended
December 31, 1999, 1998 and 1997 20
Notes to the Consolidated Financial Statements 21
(2) Financial Statement Schedules
Schedule II Maritrans Inc. Valuation Account for the years ended December 31,
1999, 1998 and 1997. 39
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 in the quarter ended December 31, 1999.
</TABLE>
34
<PAGE>
<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.
10.3(f) Third Supplemental Indenture of Trust and Security Agreement, dated as of
December 1, 1999 from Maritrans Operating Partners L.P. and Maritrans Capital
Corporation to Wilmington Trust Company, as Trustee.
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).
</TABLE>
35
<PAGE>
<TABLE>
<CAPTION>
Exhibit Index Page
------------- ----
<S> <C> <C>
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).
10.4(e)o Agreement of Sale dated October 11, 1999 between Maritrans Operating Partners L.P.
and K-Sea Transportation LLC
Executive Compensation Plans and Arrangements
10.4(f) Supplement to Credit Agreement dated February 4, 2000, by and among Maritrans
Tankers Inc., Maritrans Inc., and Mellon Bank, N.A. for revolving credit facility up
to $33,000,000.
10.5 Severance and Non-Competition Agreement, as amended and restated effective June
30, 1999, between Maritrans General Partner Inc. and Stephen M. Hackett.
10.6 Severance and Non-Competition Agreement, as amended and restated effective July
16, 1999, 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 June
30, 1999, 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.
10.16% 1999 Directors Equity and Key Employees Equity Compensation Plan
10.17 Severance and Non-Competition Agreement, as amended and restated effective
December 1, 1998, between Maritrans General Partner Inc. and Philip J. Doherty.
10.18 Severance and Non-Competition Agreement, as amended and restated effective
January 7, 2000, between Maritrans General Partner Inc. and Walter T. Bromfield.
21.1 Subsidiaries of Maritrans Inc.
23.1 Consent of Independent Auditors
27 Financial Data Schedule
</TABLE>
36
<PAGE>
* 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 number in parentheses filed
with Maritrans Inc. Annual Report on Form 10-K, dated March 30, 1998 for the
fiscal year ended December 31, 1997.
% Incorporated by reference herein to the Exhibit number in parentheses filed
with the Maritrans Inc. Form S-8 Registration Statement No. 333-79891 dated
June 3, 1999.
o Incorporated by reference herein to the Exhibit number in parentheses filed
with the Maritrans Inc. Form 8-K Current Report dated December 22, 1999.
/ Incorporated by reference herein to the Exhibit number in parentheses filed
with Maritrans Inc. Annual Report on Form 10-K, dated March 26, 1999 for the
fiscal year ended December 31, 1998.
37
<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
-------------------------
Stephen A. Van Dyck
Chairman of the Board Dated: March 28, 2000
Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed below by the following persons on behalf of the
registrant and in the capacities and on the dates indicated.
<TABLE>
<CAPTION>
<S> <C> <C> <C>
By: /s/ Stephen A. Van Dyck Chairman of the Board and Dated: March 28, 2000
-------------------------- Chief Executive Officer
Stephen A. Van Dyck (Principal Executive Officer)
By: /s/ Dr. Robert E. Boni Lead Director Dated: March 28, 2000
--------------------------
Dr. Robert E. Boni
By: /s/ Dr. Craig E. Dorman Director Dated: March 28, 2000
--------------------------
Dr. Craig E. Dorman
By: /s/ Robert J. Lichtenstein Director Dated: March 28, 2000
--------------------------
Robert J. Lichtenstein
By: /s/ Brent A. Stienecker Director Dated: March 28, 2000
--------------------------
Brent A. Stienecker
By: /s/ H. William Brown Chief Financial Officer Dated: March 28, 2000
-------------------------- (Principal Financial Officer)
H. William Brown
By: /s/ Walter T. Bromfield Treasurer and Controller Dated: March 28, 2000
-------------------------- (Principal Accounting Officer)
Walter T. Bromfield
</TABLE>
38
<PAGE>
MARITRANS INC.
SCHEDULE II -- VALUATION ACCOUNT
($000)
<TABLE>
<CAPTION>
BALANCE
BALANCE AT CHARGED TO DEDUCTIONS AT END
BEGINNING COSTS AND AND OF
DESCRIPTION OF PERIOD EXPENSES OTHER PERIOD
- ----------------------------------------- ------------ ---------------- ------------- ----------
<S> <C> <C> <C> <C>
JANUARY 1 TO DECEMBER 31, 1997
Allowance for doubtful accounts ......... $ 860 $ 410 $ 12(a) $ 1,258
Accrued shipyard costs .................. $14,435 10,942 6,069(b) $21,808
(2,500)(c)
JANUARY 1 TO DECEMBER 31, 1998
Allowance for doubtful accounts ......... $ 1,258 $ 129 $ -- $ 1,387
Accrued shipyard costs .................. $21,808 15,795 18,106(b) $19,497
JANUARY 1 TO DECEMBER 31, 1999
Allowance for doubtful accounts ......... $ 1,387 $ 237 $ 231 $ 1,393
Allowance for notes receivable .......... $ -- $ 4,500(e) $ -- $ 4,500
Accrued shipyard costs .................. $19,497 $ 17,170 $15,284(b) $17,403
3,980(d)
</TABLE>
- ------------
(a) Deductions are a result of write-offs of uncollectible accounts receivable
for which allowances were previously provided.
(b) Deductions reflect expenditures for major periodic overhauls.
(c) Reflects increase in reserve for shipyard accrual related to assets acquired
during the year.
(d) Reflects reduction in reserve for shipyard accrual related to vessels sold.
Amount is included in gain on asset sales discussed in Note 2 to the
consolidated financial statements.
(e) Represents valuation recorded against the notes received during the current
year from the sale of assets.
39
<PAGE>
================================================================================
THIRD SUPPLEMENTAL INDENTURE OF TRUST
AND SECURITY AGREEMENT
Dated as of December 1, 1999
From
MARITRANS OPERATING PARTNERS L.P.
and
MARITRANS CAPITAL CORPORATION
To
WILMINGTON TRUST COMPANY,
as Trustee
================================================================================
EXHIBIT A
(to Waiver and Agreement)
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
SECTION HEADING PAGE
<S> <C> <C>
Parties...........................................................................................................1
Recitals..........................................................................................................1
SECTION 1. WAIVER.................................................................................1
SECTION 2. AMENDMENTS TO INDENTURE................................................................2
Section 2.1. Amendments to Section 4.5..............................................................2
Section 2.2. Amendments to Section 4.10.............................................................2
Section 2.3. Amendments to Section 6.3..............................................................2
Section 2.4. Amendments to Section 6.4..............................................................3
Section 2.5. Amendment to Section 4.14..............................................................6
SECTION 3. MISCELLANEOUS PROVISIONS...............................................................7
Section 3.1. Defined Terms..........................................................................7
Section 3.2. Ratification of Indenture..............................................................7
Section 3.3. Counterparts...........................................................................7
Section 3.4. References to Indenture................................................................7
Signature Page....................................................................................................8
</TABLE>
ATTACHMENT TO THIRD SUPPLEMENTAL INDENTURE OF TRUST AND SECURITY AGREEMENT:
SCHEDULE I -- Proposed Vessel Sales
<PAGE>
THIRD SUPPLEMENTAL INDENTURE OF TRUST AND SECURITY AGREEMENT
THIRD SUPPLEMENTAL INDENTURE OF TRUST AND SECURITY AGREEMENT (this
"Third Supplement") dated as of December 1, 1999, among MARITRANS OPERATING
PARTNERS L.P., a Delaware limited partnership (the "Partnership"), MARITRANS
CAPITAL CORPORATION, a Delaware corporation (the "Company"), and WILMINGTON
TRUST COMPANY, a Delaware banking corporation, as trustee (the "Trustee") for
the holders of the Notes (the "Holders") which Notes were issued under the
Indenture defined below.
RECITALS:
A. The Partnership, the Company and the Trustee have heretofore
executed and delivered the Indenture of Trust and Security Agreement dated as of
March 15, 1987 (as heretofore amended and supplemented by a First Supplemental
Indenture of Trust and Security Agreement dated as of August 15, 1989, a Second
Supplemental Indenture of Trust and Security Agreement dated as of April 1,
1996, and as further amended and supplemented, the "Indenture") providing for
the issuance of certain secured promissory notes of the Company and pursuant
thereto the Company has issued (i) $35,000,000 aggregate principal amount of its
Series A Notes due April 1, 1997, all of which are retired, (ii) $80,000,000
aggregate principal amount of its Series B Notes due April 1, 2007, $52,000,000
of which are currently outstanding and (iii) $20,000,000 aggregate principal
amount of its Series C Notes due June 30, 1995, all of which are retired (the
outstanding Series B Notes are herein collectively referred to as the "Notes");
B. The Company and the Partnership have entered into agreements for
the sale of a number of the Vessels (as defined in the Indenture) to one or more
third party purchasers which sales, in the aggregate, are not currently
permitted under the Indenture and are conditioned upon obtaining the consent
thereto of the requisite percentage of the holders of the Notes; and
C. Pursuant to Section 10.2 of the Indenture, the Partnership, the
Company and the holders of at least 66-2/3% in aggregate principal amount of the
Notes have agreed to waive the provisions of the Indenture which would not
permit the Vessel sales referred to in paragraph B above and to further amend
the Indenture, all in the manner as set forth below.
NOW THEREFORE, in consideration of the premises and other good and
valuable consideration, receipt of which upon delivery of this Third Supplement
the undersigned hereby acknowledge, the Partnership, the Company and the Trustee
hereby agree as follows:
SECTION 1. WAIVER.
In consideration of the conditions precedent and the amendments to the
Indenture set forth below, the requirement in Section 4.5 of the Indenture which
limits sales of assets is hereby waived in order to permit the Proposed Vessel
Sales during the Waiver Period. As used herein (i) the term "Proposed Vessel
Sales" shall mean the sale by the Partnership to one or more third parties of
<PAGE>
(A) any or all of the fifteen (15) barges of the Partnership which are described
on Schedule I hereto and (B) any or all of the eleven (11) tugboats of the
Partnership which are also described on Schedule I for an aggregate purchase
price of approximately $48,000,000, provided, that if any consideration received
for any such Vessel sale is in the form of an obligation of the buyer of such
Vessel, (A) each such obligation shall be secured by a perfected Second
Preferred Ship Mortgage on such Vessel (all such obligations being the "Waiver
Obligations") and (B) the aggregate principal amount of all Waiver Obligations
received for the Proposed Vessel Sales shall not exceed $9,000,000, and (ii) the
term "Waiver Period" means the period beginning on December 1, 1999 and ending
on and including March 31, 2000.
SECTION 2. AMENDMENTS TO INDENTURE.
Section 2.1. Amendments to Section 4.5. Section 4.5 of the Indenture is
amended and restated in its entirety to read as follows:
4.5. Merger, Consolidation, Sale of Assets. The Partnership
will not, and will not permit any Subsidiary, to consolidate with or
merge into any other Person other than the Partnership or another
Subsidiary or permit any other Person to consolidate with or merge into
the Partnership or any of its Subsidiaries or sell, lease or otherwise
dispose of all or any substantial part of the assets of the Partnership
and its Subsidiaries, except a sale, lease or other disposition from a
Subsidiary to the Partnership. As used in this Section 4.5, a sale,
lease or other disposition of assets shall be deemed to be a
"substantial part" of the assets of the Partnership and its
Subsidiaries only if the book value of such assets when added to the
book value of all other assets sold, leased or otherwise disposed of by
the Partnership and its Subsidiaries (other than in the ordinary course
of business) during the immediately preceding period of twelve calendar
months exceeds 10% of Consolidated Net Tangible Assets determined as of
the end of the immediately preceding fiscal quarter of the Partnership;
provided, however, that (i) any sales during the Waiver Period of
Vessels which are included in the Proposed Vessel Sales shall not be
deemed to be assets sold, leased or otherwise disposed of for purposes
of the computations required by the foregoing provisions of this
Section 4.5 and (ii) for any other sale, lease or disposition of assets
subject to the foregoing limitations of this Section 4.5 which occur
during the period beginning on December 1, 1999 and ending on and
including the first anniversary of the last day of the Waiver Period,
the limitation with respect thereto in this sentence which reads "10%
of Consolidated Net Tangible Assets" shall be amended to read "3% of
Consolidated Net Tangible Assets". Sales or other realization on
delinquent receivables shall not be included in any computation of
sales or other dispositions hereunder.
Section 2.2. Amendments to Section 4.10. Paragraph (g) of Section 4.10
is redesignated as paragraph (h), the "and" at the end of paragraph (f) is
hereby deleted and a new paragraph (g) is added after paragraph (f) which reads
as follows:
(g) Waiver Obligations received from the Proposed Vessel
Sales; and
Section 2.3. Amendments to Section 6.3. Section 6.3 of the Indenture is
amended and restated in its entirety to read as follows:
-2-
<PAGE>
Section 6.3. Sale and Release of Mortgaged Property. At any time so
long as the Partnership shall be in compliance with Section 4.5 hereof and no
Default or Event of Default has occurred which is then continuing, the
Partnership:
(a) may sell during the Waiver Period any of the Vessels
which are included in the Proposed Vessel Sales provided that the
proceeds from any such sales including any documents evidencing the
Waiver Obligations and payments required thereunder (collectively,
"Sale Waiver Proceeds") shall be deposited with the Trustee to be held
and administered pursuant to the provisions of Section 6.4, and
(b) may sell property which constitutes Mortgaged Property
other than Proposed Vessel Sales described in clause (a) of this
Section 6.3 (a "Mortgaged Property Sale") provided that either (i)
concurrently with the sale of such property Substitute Collateral
having an appraised value equal to or greater than the property sold
shall be added by the Partnership to Mortgaged Property pursuant to the
provisions of Section 6.5 hereof, or (ii) if the proceeds of sale
received from a Mortgaged Property Sale exceed the appraised value of
the Substitute Collateral, if any, added to Mortgaged Property by the
Partnership concurrently with the sale of such property pursuant to the
provisions of Section 6.5 hereof, then the Partnership shall deposit
cash with the Trustee in the amount of such excess (the amount of such
excess for each such Mortgaged Property Sale being referred to as
"Unreplaced Sale Proceeds") to be held and administered by the Trustee
pursuant to the provisions of Section 6.4 hereof; provided, that
concurrently with or prior to any such Mortgaged Property Sale, the
Partnership shall deliver to the Trustee an Officers' Certificate
stating: (i) the amount of cash to be received by the Partnership from
the sale of such property, (ii) that the amount of the proceeds of sale
is equal to or greater than the fair value of such property as
determined pursuant to a resolution of the Board of Directors of the
Partnership, (iii) a detailed description of such property, (iv) that
such sale is desirable in the proper conduct of the business of the
Partnership and will not have a material adverse effect upon such
business and (v) whether any Substitute Collateral will be added to
Mortgaged Property in connection with Mortgaged Property Sale and, if
so, a detailed description thereof and the appraised value thereof.
Section 2.4. Amendments to Section 6.4. Section 6.4 of the Indenture is
amended and restated in its entirety to read as follows:
Section 6.4. Proceeds of Losses and Sale of Mortgaged
Property. (a) Upon receipt by the Trustee of any Unreplaced Loss
Proceeds, Sale Waiver Proceeds or Unreplaced Sale Proceeds (any such
Proceeds so received being sometimes hereinafter referred to as
"Unreplaced Proceeds"), the Trustee shall (1) apply the cash received
as Unreplaced Proceeds to the purchase of Liquid Collateral or for the
purposes hereinafter set forth and (2) collect from any Waiver
Obligations received as Unreplaced Proceeds, all cash amounts as they
become due thereunder and apply collections therefrom to the purchase
of Liquid Collateral or for the purposes hereinafter set forth. The
Trustee shall release the funds deposited and collected pursuant to
this Section 6.4 (collectively, the "Unreplaced Proceeds Funds") for
any of the following purposes as shall be directed by the Company:
<PAGE>
(i) to make tax payments of the Company permitted by
Section 6.4(b);
(ii) for the purposes of improving or adding to
Mortgaged Property described in Section 6.4(c); or
(iii) to pay regularly scheduled payments of principal
on the Notes when due or payments of principal becoming due as a
result of a special prepayment or an optional prepayment and any
Yield-Maintenance Premium which may become due in connection with
any such payment or prepayment;
provided, however, that (x) payments for the purposes described in
clause (iii) above of this Section 6.4(a) may only be made from Sale
Waiver Proceeds (including cash collections from Waiver Obligations)
and (y) not less than ten (10) Business Days prior to the release of
any Unreplaced Proceeds Funds, the Partnership shall deliver an
Officers' Certificate to each holder of the Notes containing (1) a
detailed description of the payments which will be made and supporting
calculations, if any, of the payments to be so made by the Trustee and
(2) the amount of the Unreplaced Proceeds Funds remaining after giving
effect to such release, and provided further that no funds released
pursuant to the foregoing provisions of this paragraph shall, for
purposes of determining Net Cash Available to Partners, be deemed to be
under clause (2)(b) of the definition thereof "cash proceeds from the
sale or other disposition of capital assets of the Partnership which
are paid to the Partnership . . . and are not otherwise required to be
held by the Trustee hereunder . . . ."
(b) If as a result of a sale on or after December 1, 1999
of one or more Vessels constituting Mortgaged Property (including any
Proposed Vessel Sales), the Partnership shall incur additional Federal
and/or state income taxes or estimated taxes with respect to any such
sale, the Partnership shall have the right to withdraw during the
period beginning on the date of such sale and ending on and including
the last day of the fiscal year next following the fiscal year in which
such sale occurs (the "Withdrawal Period"), an amount to pay such taxes
computed as hereinafter described; provided, that the aggregate amount
withdrawn under this Section 6.4(b) shall not exceed the sum of:
(i) $7,500,000;
(ii) the product of $1,000,000 multiplied by a whole
number equal to the number of April 1 dates which have
occurred during the period beginning December 1, 1999 and
ending on the date the proposed withdrawal shall be made;
and
-4-
<PAGE>
(iii) an amount equal to 50% of the aggregate amount
of cash collections received by the Trustee from Waiver
Obligations during the period beginning December 1, 1999
and ending on the date the proposed withdrawal shall be
made.
At any time during the Withdrawal Period for the sale of
one or more Vessels, the Partnership, subject to the withdrawal
limitations in the preceding paragraph, may withdraw amounts to pay
estimated taxes of the Partnership for the fiscal year in which the
sale occurs or to pay income taxes for such fiscal year as follows:
(i) in the case of estimated taxes, the amount subject
to being withdrawn shall equal the excess, if any, of (A)
the estimated Federal and state income taxes for the
Partnership for any fiscal period including the fiscal
quarter in which such sale occurs determined by including
therein the sale of Vessels constituting Mortgaged
Property which were sold during such fiscal period, over
(B) the estimated federal and state income taxes for the
Partnership for such fiscal period determined by excluding
the sale of all Vessels constituting Mortgaged Property
sold during such fiscal period, and
(ii) in the case of taxes for the fiscal year in which
the sale occurs, the amount subject to being withdrawn
shall equal the excess, if any, of (A) the Federal and
state income taxes for the Partnership for such fiscal
year including therein the sale of all Vessels
constituting Mortgaged Property which were sold during
such fiscal year, over (B) the federal and state income
taxes for the Partnership for such fiscal year determined
by excluding the sale of all Vessels constituting
Mortgaged Property which were sold during such period;
provided, that (x) any calculation of an amount which is withdrawable
to pay income taxes for a fiscal year shall be reduced by any amounts
previously withdrawn for income taxes for such fiscal year and for
estimated taxes with respect to income taxes for such fiscal year, and
(y) if any amounts are withdrawn to pay estimated taxes with respect to
a fiscal year, the Partnership shall, prior to the end of the
applicable Withdrawal Period, calculate the aggregate amount
withdrawable for such fiscal year under clause (ii) of this paragraph
(the "Clause (ii) Amount") and redeposit with the Trustee as Unreplaced
Proceeds Funds the amount, if any, by which the amounts so withdrawn
exceeded the Clause (ii) Amount.
(c) The Trustee shall release Unreplaced Proceeds Funds as
follows: (x) upon delivery to the Trustee by the Partnership of
Substitute Collateral pursuant to the provisions of Section 6.5 hereof,
the Trustee shall release such Unreplaced Proceeds Funds in an amount
equal to the appraised value of such Substitute Collateral or (y) the
Trustee shall release such Unreplaced Proceeds Funds in payment of or
to reimburse the Partnership for repairs or improvements to Mortgaged
Property made after such deposit provided that prior to the release of
the proceeds for such repairs or improvements the Partnership shall
deliver an Officers' Certificate to the Trustee (i) containing a
detailed description of the repairs or improvements so made and (ii)
providing information satisfactory to the Trustee regarding the cost of
such repairs or improvements or (z) the Trustee shall advance all or
any part of such Unreplaced Proceeds Funds for the purpose of Vessel
-5-
<PAGE>
Construction of a vessel not subject to the Lien of the Mortgages which
advances shall not exceed the aggregate amount of $20,000,000 at any
time outstanding, provided, that (i) any such advances shall be secured
in favor of the Trustee by perfected Vessel Construction Financing
Liens which may be subject to the liens described in paragraphs (c) and
(d) of the definition of Permitted Liens hereof and which shall be no
less than pari passu with Vessel Construction Financing Liens, if any,
securing Additional Indebtedness pursuant to Section 4.6(a)(6), and
(ii) as soon as practicable after the date of the completion of Vessel
Construction of such vessel and in any event no later than the
expiration of the 180 day period next following the first to occur of
such date of completion or the date on which such vessel is placed in
service, such vessel shall be added to the Lien of the Mortgage as an
Additional Vessel and concurrently with such addition (A) the
Partnership shall have filed with the Trustee an Officers' Certificate
in the form and covering matters required by Section 6.5(i) hereof, an
Additional Mortgage covering such vessel and an opinion satisfying the
requirements of Section 6.5(v) hereof and (B) upon receipt by the
Trustee from the Partnership of the items specified in the preceding
clause (z)(ii)(A), the Trustee shall have released the advances of such
Unreplaced Proceeds Funds and released the Vessel Construction
Financing Liens securing the advances of such Unreplaced Proceeds
Funds.
Section 2.5. Amendment to Section 4.14. The lead-off provisions of
Section 4.14 and paragraph (a) of Section 4.14 are restated to read as follows:
4.14. Officers' Certificates. Each set of financial
statements delivered pursuant to Section 4.13(a) or Section 4.3(b) will
be accompanied by a certificate of an authorized financial officer of
the Managing General Partner setting forth:
(a) Covenant Compliance; Calculations -- the
information (including detailed calculations where
necessary) required in order to establish whether the
Partnership was in compliance with the requirements of
Sections 4.5 through 4.12 during the period covered by the
income statement then being furnished; provided, that the
certificate accompanying (i) each set of quarterly
financial statements for a fiscal quarter delivered
pursuant to Section 4.13(a) shall contain detailed
calculations of the following defined terms for such
fiscal quarter of (A) Partnership Net Income, (B) Cash
Flow Available for Debt Service, (C) Net Cash Available to
Partners and (D) Net Cash Distributable to Partners and
(ii) each set of annual financial statements for a fiscal
year delivered pursuant to Section 4.13(b) shall contain
detailed calculations of the four defined terms referred
to in clause (i) of this proviso for the last fiscal
quarter of such fiscal year and for the entire fiscal year
and, in addition, each such certificate shall contain
(iii) specific information on the sale of Vessels during
such period which constituted Proposed Vessel Sales
including (A) the names of the Vessels sold, (B) the
aggregate sales price and net proceeds, (C) a description
of any Waiver Obligations received as proceeds including
remaining principal amount, payment terms and collateral
securing the Waiver Obligations, (iv) the amount, if any,
of Unreplaced Proceeds Funds withdrawn during such period,
-6-
<PAGE>
and (v) the amount of Unreplaced Proceeds Funds held by
the Trustee under Section 6.4 as of the end of said
period; and
SECTION 3. MISCELLANEOUS PROVISIONS.
Section 3.1. Defined Terms. All terms used in this Third Supplement not
defined herein but which are defined in the Indenture, as hereby amended, are
used herein as so defined.
Section 3.2. Ratification of Indenture. Except as herein expressly
amended, the Indenture is in all respects ratified and confirmed. If and to the
extent that any of the terms or provisions of the Indenture are in conflict or
inconsistent with any of the terms or provisions of this Third Supplement, this
Third Supplement shall govern.
Section 3.3. Counterparts. This Third Supplement may be simultaneously
executed in any number of counterparts and all such counterparts together, each
as an original, shall constitute but one and the same instrument.
Section 3.4. References to Indenture. Any and all notices, requests,
certificates and any other instruments, including the Note Agreements, the
Notes, the Guaranty Agreements and the Mortgages, may refer to the Indenture or
the Indenture dated as of March 15, 1987, without making specific reference to
this Third Supplement, but nevertheless all such references shall be deemed to
include this Third Supplement unless the document or instrument, as the case may
be, shall otherwise require.
-7-
<PAGE>
IN WITNESS WHEREOF, the Partnership, the Company and the Trustee have
each caused this Third Supplement to be executed all as of the day and year
first above written.
MARITRANS OPERATING PARTNERS L.P.
By Maritrans General Partner Inc.
Its Managing General Partner
By /s/ Walter T. Bromfield
ATTEST: Its President
/s/ Arthur J. Volkle, Jr.
MARITRANS CAPITAL CORPORATION
By /s/ Walter T. Bromfield
[CORPORATE SEAL] Its President
ATTEST:
/s/ Arthur J. Volkle, Jr.
WILMINGTON TRUST COMPANY, as Trustee
By /s/ C. Paglia
Its Financial Services Officer
[SEAL]
ATTEST:
/s/ J.B. Feil
-8-
<PAGE>
COMMONWEALTH OF PENNSYLVANIA )
) SS:
COUNTY OF PHILADELPHIA )
I, Janet Groome, a Notary Public in and for said county in the
Commonwealth aforesaid, do hereby certify that Walter T. Bromfield, personally
known to me to be Vice President of Maritrans General Partner Inc., a Delaware
corporation, managing general partner of Maritrans Operating Partners L.P., a
Delaware limited partnership, the corporation that executed the within
instrument on behalf of said partnership, and personally known to me to be the
same person whose name is subscribed as such officer to the foregoing
instrument, appeared before me this day in person and acknowledged that the seal
affixed to this instrument is such corporation's seal and that such officer,
being thereunto duly authorized, signed and delivered said instrument as such
officer's free and voluntary act and the free and voluntary act of said
corporation, for the uses and purposes therein set forth.
Given under my hand and notarial seal this 8th day of December, 1999.
/s/ Janet Groome
-----------------
Notary Public
[NOTARIAL SEAL]
My commission expires:
-9-
<PAGE>
COMMONWEALTH OF PENNSYLVANIA )
) SS:
COUNTY OF PHILADELPHIA )
I, Janet Groome, a Notary Public in and for said county in the
Commonwealth aforesaid, do hereby certify that Walter T. Bromfield, personally
known to me to be President of Maritrans General Partner Inc., a Delaware
corporation, managing general partner of Maritrans Capital Corporation, a
Delaware limited partnership, the corporation that executed the within
instrument on behalf of said partnership, and personally known to me to be the
same person whose name is subscribed as such officer to the foregoing
instrument, appeared before me this day in person and acknowledged that the seal
affixed to this instrument is such corporation's seal and that such officer,
being thereunto duly authorized, signed and delivered said instrument as such
officer's free and voluntary act and the free and voluntary act of said
corporation, for the uses and purposes therein set forth.
Given under my hand and notarial seal this 8th day of December, 1999.
/s/ Janet Groome
-----------------
Notary Public
[NOTARIAL SEAL]
My commission expires:
-10-
<PAGE>
_______________________________ )
) SS:
COUNTY OF ____________________ )
I, Karen Newson, a Notary Public in and for said county in the
Commonwealth aforesaid, do hereby certify that Charlotte Paglia, personally
known to me to be Financial Services Officer of Wilmington Trust Company, a
Delaware banking corporation, the corporation that executed the within
instrument on behalf of said partnership, and personally known to me to be the
same person whose name is subscribed as such officer to the foregoing
instrument, appeared before me this day in person and acknowledged that the seal
affixed to this instrument is such corporation's seal and that such officer,
being thereunto duly authorized, signed and delivered said instrument as such
officer's free and voluntary act and the free and voluntary act of said
corporation, for the uses and purposes therein set forth.
Given under my hand and notarial seal this 8th day of December, 1999.
/s/ Karen S. Newson
--------------------
Notary Public
[NOTARIAL SEAL]
My commission expires:
-11-
<PAGE>
SCHEDULE I
The following Vessels are proposed to be sold and constitute "Proposed
Vessel Sales":
A. BARGES
VESSEL NAME CAPACITY IN BARRELS YEAR BUILT
1. Interstate 55 53,012 1972
2. Ocean 60 61,636 1981
3. Interstate 70 73,214 1972
4. Interstate 71 81,759 1975
5. Ocean 81 80,000 1981
6. Ocean 90 97,200 1967
7. Ocean 96 95,581 1969
8. Ocean 115 116,440 1968
9. Ocean 135 135,216 1969
10. Ocean 155 166,881 1974
11. Maritrans 32 31,502 1982
12. Interstate 35 37,543 1973
13. Interstate 36 36,567 1973
14. Interstate 38 37,553 1974
15. Interstate 53 53,903 1970
B. TUGBOATS
VESSEL NAME HORSEPOWER YEAR BUILT
1. Venturer 3,200 1973
2. Ambassador 4,000 1976
3. Corsair 4,000 1972
4. Diplomat 4,000 1978
5. Clipper 5,600 1969
6. Cougar 2,200 1975
7. Patriot 3,000 1981
8. Voyager II 3,200 1974
9. Schuykill 1,800 1981
10. Roanoke 2,100 1967
11. Endeavor 2,200 1970
<PAGE>
================================================================================
WAIVER AND AGREEMENT
Dated as of December 1, 1999
MARITRANS OPERATING PARTNERS L.P.
and
MARITRANS CAPITAL CORPORATION
Re: Indenture of Trust and Security Agreement
dated as of March 15, 1987
================================================================================
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
SECTION HEADING PAGE
<S> <C> <C>
SECTION 1. HOLDERS' CONSENT TO THIRD SUPPLEMENT; PARTNERSHIP AND COMPANY AGREEMENT
TO THIRD SUPPLEMENT....................................................................2
SECTION 2. WARRANTIES AND REPRESENTATIONS REGARDING THE NOTES.....................................3
SECTION 3. WARRANTIES AND REPRESENTATIONS OF THE PARTNERSHIP AND THE COMPANY
REGARDING THE COMPANY..................................................................3
Section 3.1. Corporate Organization and Authority...................................................3
Section 3.2. Pending Litigation.....................................................................3
Section 3.3. Governmental Consent...................................................................3
Section 3.4. Compliance with Law....................................................................4
Section 3.5. No Defaults............................................................................4
Section 3.6. Certain Documents Legal and Authorized.................................................4
SECTION 4. WARRANTIES AND REPRESENTATIONS OF THE PARTNERSHIP REGARDING THE
PARTNERSHIP............................................................................5
Section 4.1. Organization and Authority.............................................................5
Section 4.2. Pending Litigation.....................................................................5
Section 4.3. Governmental Consent...................................................................5
Section 4.4. Compliance with Law....................................................................6
Section 4.5. No Defaults............................................................................6
Section 4.6. Certain Documents Legal and Authorized.................................................6
Section 4.7. Full Disclosure........................................................................7
Section 4.8. First Preferred Ship Mortgages.........................................................7
SECTION 5. CONDITIONS PRECEDENT...................................................................7
Section 5.1. Opinions of Counsel....................................................................7
Section 5.2. Consent of Requisite Holders...........................................................7
Section 5.3. Confirmation of Guaranty Agreements....................................................7
Section 5.4. Certificate of Managing General Partner................................................8
Section 5.5. Certificate of Maritrans Inc...........................................................8
Section 5.6. The 1999 Mortgage Supplement...........................................................8
Section 5.7. Special Counsel Fees...................................................................8
SECTION 6. MISCELLANEOUS PROVISIONS...............................................................8
Section 6.1. Effective Date.........................................................................8
Section 6.2. Counterparts...........................................................................8
Section 6.3. Governing Law..........................................................................8
Signature Page....................................................................................................9
</TABLE>
-i-
<PAGE>
ATTACHMENTS TO WAIVER AND AGREEMENT:
<TABLE>
<CAPTION>
<S> <C>
Schedule I -- Names of Holders of the Notes
Schedule II -- Remaining First Preferred Ship Mortgages
Exhibit A -- Form of Third Supplemental Indenture of Trust and Security Agreement
Exhibit B -- Description of Closing Opinion of Counsel for the Partnership, the
Company, the Managing General Partner and Maritrans Inc.
Exhibit C -- Form of Confirmation of Partnership Guaranty Agreement
Exhibit D -- Form of Confirmation of Maritrans Guaranty Agreement
Exhibit E -- Certificate of Managing General Partner
Exhibit F -- Certificate of Maritrans Inc.
Exhibit G -- Form of Supplement to the First Preferred Ship Mortgages
</TABLE>
-ii-
<PAGE>
MARITRANS OPERATING PARTNERS L.P.
AND
MARITRANS CAPITAL CORPORATION
WAIVER AND AGREEMENT
Re: Third Supplemental Indenture
of Trust and Security Agreement
dated as of December 1, 1999
Dated as of
December 1, 1999
The Holders of
the Notes named in
Schedule I hereto
Ladies and Gentlemen:
Reference is made to the separate Note Purchase Agreements dated as of
March 15, 1987 between each of you and Maritrans Capital Corporation, a Delaware
corporation (the "Company") pursuant to which $80,000,000 aggregate principal
amount of the Company's Series B Notes due April 1, 2007 were issued in 1987 of
which $52,000,000 in aggregate principal amount (the "Notes") are currently
outstanding. Each of you currently hold the principal amount of Notes indicated
on Schedule I opposite your name. Each of you are sometimes hereinafter referred
to as a "Holder".
The Company is a wholly-owned Subsidiary of Maritrans Operating
Partners L.P., a Delaware limited partnership (the "Partnership") which has
guaranteed payment of the principal of, premium, if any, and interest on the
Notes pursuant to a Guaranty Agreement dated as of March 15, 1987 from the
Partnership (the "Partnership Guaranty Agreement"). The Partnership Guaranty
Agreement and the Notes are secured by an Indenture of Trust and Security
Agreement dated as of March 15, 1987 (the "Original Indenture") among the
Company, the Partnership and Wilmington Trust Company, as Trustee thereunder
(the "Trustee") for the holders of the Notes. The Original Indenture has been
amended and supplemented by a First Supplemental Indenture of Trust and Security
Agreement dated as of August 15, 1989, as amended, and a Second Supplemental
Indenture of Trust and Security Agreement dated as of April 1, 1996 (the
Original Indenture as so supplemented and amended and as the same may be
hereafter supplemented and amended being the "Indenture"). All other series of
Notes issued under the Indenture other than the Notes you hold have been
retired. The Partnership Guaranty Agreement and the Notes are also currently
secured by separate First Preferred Ship Mortgages from the Partnership, as
owner and mortgagor, to the Trustee, as mortgagee, on 25 barges and 19 tugboats
(collectively, referred to as "Vessels"). Capitalized terms which are not
otherwise defined herein shall have the meaning set forth in the Indenture.
<PAGE>
Maritrans Operating Partners L.P. Waiver and Agreement
Maritrans Capital Corporation
The Company and the Partnership have entered into agreements for the
sale of a number of the Vessels to one or more third party purchasers which
sales, in the aggregate, are not currently permitted under the Indenture and are
conditioned upon obtaining your consent to such sales. The Company has requested
that you agree to waive the provision in the Indenture which limits the
Company's ability to consummate the sale of the Vessels described in the
preceding sentence and has agreed to certain modifications to the Indenture, all
of which will be effectuated in an amendment to the Indenture contained in the
Third Supplemental Indenture of Trust and Security Agreement dated as of
December 1, 1999 (the "Third Supplement") in the form attached hereto as Exhibit
A. Section 10.2 of the Indenture requires the consent of the Partnership, the
Company and the Holders of at least 66-2/3% in aggregate principal amount of the
outstanding Notes (the "Requisite Holders") to amend the Indenture as set forth
in the Third Supplement in order to permit the aforesaid sales and the other
matters related thereto.
The original First Preferred Ship Mortgages on the Vessels described in
Appendix I to the Supplement to First Preferred Ship Mortgages which is part of
Exhibit G hereto (the "Original First Preferred Ship Mortgages"), which Original
First Preferred Ship Mortgages have previously been supplemented and amended by
Supplement No. 1 dated as of August 15, 1989 ("Supplement No. 1") and by a
Supplement to First Preferred Ship Mortgages dated May 8, 1996 (the "1996
Mortgage Supplement"), are being further supplemented and amended by a
Supplement to First Preferred Ship Mortgages in the form attached hereto as
Exhibit G (the "1999 Mortgage Supplement") in order to include in the public
record the changes to the Indenture under the Third Supplement (the Original
First Preferred Ship Mortgages as so supplemented and amended being referred to
herein as the "Mortgages").
Since you are the holders of the outstanding Notes, the Company and the
Partnership hereby request your consent to this Waiver and Agreement. Upon
satisfaction of the conditions set forth in Section 5, on the Effective Date
(hereinafter defined) this instrument shall constitute an agreement in the
respects hereinafter set forth.
SECTION 1. HOLDERS' CONSENT TO THIRD SUPPLEMENT; PARTNERSHIP AND COMPANY
AGREEMENT TO THIRD SUPPLEMENT.
Subject to the conditions hereinafter set forth, each Person which has
signed a counterpart of this Waiver and Agreement at the foot hereof on behalf
of a Holder of Notes (a "Signing Holder") hereby consents to the amendments to
the Indenture as set forth in the Third Supplement and the amendments to the
Mortgages as set forth in the 1999 Mortgage Supplement and hereby authorizes and
directs the Trustee to execute and deliver the Third Supplement and the 1999
Mortgage Supplement.
The Partnership and the Company agree with the Holders that, subject to
the satisfaction of the conditions set forth in this Waiver and Agreement, the
Indenture is to be amended in the manner provided in the Third Supplement and
the Mortgages are to be supplemented and amended in the manner provided in the
1999 Mortgage Supplement.
-2-
<PAGE>
Maritrans Operating Partners L.P. Waiver and Agreement
Maritrans Capital Corporation
SECTION 2. WARRANTIES AND REPRESENTATIONS REGARDING THE NOTES.
The Company and the Partnership hereby represent and warrant that (i)
the only series of Notes currently outstanding under the Indenture is the Notes
and $52,000,000 in aggregate principal amount of Notes are currently
outstanding, and (ii) the registered Holders of the Notes, as of the Effective
Date, are set forth on Schedule I and the outstanding principal amount of Notes
held by each such Holder is set forth opposite such Holder's name on said
Schedule I.
Each Signing Holder hereby represents and warrants that either (i) such
Signing Holder is the sole Holder of the Notes in the aggregate principal amount
set forth opposite the name of such Signing Holder on Schedule I hereto or (ii)
if Schedule I indicates that the Notes set forth opposite the name of a Signing
Holder are owned by Persons other than the Signing Holder, that such Signing
Holder has the authority to sign on behalf of the Holders with respect to such
Notes.
SECTION 3. WARRANTIES AND REPRESENTATIONS OF THE PARTNERSHIP AND THE COMPANY
REGARDING THE COMPANY.
The Partnership and the Company, respectively, warrant and represent to
the Holders as follows:
Section 3.1. Corporate Organization and Authority. The Company:
(a) is a corporation duly organized and validly existing
and in good standing under the laws of its jurisdiction of
incorporation and has the corporate power and authority to execute and
deliver this Waiver and Agreement;
(b) all of the issued and outstanding shares of capital
stock of the Company are fully paid and non-assessable and are owned by
the Partnership; and
(c) has all requisite power and authority and all
necessary licenses and permits to own and operate its properties and to
carry on its business as now conducted and as presently proposed to be
conducted.
Section 3.2. Pending Litigation. There are no proceedings pending, or
to the knowledge of the Company threatened, against or affecting the Company in
any court or before any governmental authority or arbitration board or tribunal
which involve the possibility of materially and adversely affecting the ability
of the Company to enter into or perform this Waiver and Agreement. The Company
is not in default with respect to any order of any court, governmental authority
or arbitration board or tribunal and the Company has not received notice of any
such default.
Section 3.3. Governmental Consent. Neither the nature of the Company or
of any of its business or properties, nor any relationship between the Company
-3-
<PAGE>
Maritrans Operating Partners L.P. Waiver and Agreement
Maritrans Capital Corporation
and any other Person, nor any circumstance in connection with the execution and
delivery of this Waiver and Agreement or the Third Supplement is such as to
require a consent, approval or authorization of, or filing, registration or
qualification with, any regulatory body, state, Federal or local on the part of
the Company as a condition to the execution and delivery of this Waiver and
Agreement or the Third Supplement.
Section 3.4. Compliance with Law. The Company:
(a) is not in violation of any laws, ordinances,
governmental rules or regulations or court orders to which it is
subject, and
(b) has not failed to obtain any licenses, permits,
franchises or other governmental authorizations necessary to the
ownership of its Property or to the conduct of its business,
which violation or failure to obtain might reasonably be expected to materially
adversely affect the business, prospects, profits, Properties or condition
(financial or otherwise) of the Company and it has received notice of no such
violation or failure.
Section 3.5. No Defaults. No Default or Event of Default has occurred
and is continuing.
Section 3.6. Certain Documents Legal and Authorized. (a) The compliance
by the Company with all of the provisions of this Waiver and Agreement and the
provisions of the Indenture, as amended by the Third Supplement:
(i) are within the corporate powers of the Company; and
(ii) will not violate any provisions of any law or any
order of any court or governmental authority or agency and will not
conflict with or result in any breach of any of the terms, conditions
or provisions of, or constitute a default under the charter instrument
or By-laws of the Company or any indenture or other agreement or
instrument to which the Company is a party or by which the Company may
be bound.
(b) The execution and delivery of this Waiver and Agreement and the
Third Supplement have been duly authorized by proper corporate action on the
part of the Company (no action by the stockholders of the Company being required
by law, by the charter instrument or By-laws of the Company or otherwise), and
this Waiver and Agreement and the Third Supplement have been executed and
delivered by the Company and this Waiver and Agreement and the Indenture, as
amended by the Third Supplement, constitute, the legal, valid and binding
obligations, contracts and agreements of the Company enforceable in accordance
with their respective terms.
-4-
<PAGE>
Maritrans Operating Partners L.P. Waiver and Agreement
Maritrans Capital Corporation
SECTION 4. WARRANTIES AND REPRESENTATIONS OF THE PARTNERSHIP REGARDING THE
PARTNERSHIP.
The Partnership warrants and represents to the Trustee and the Holders
as follows:
Section 4.1. Organization and Authority. The Partnership:
(a) is a limited partnership, duly formed, validly
existing and in good standing under the laws of its jurisdiction of
formation and has the partnership power and authority, to execute and
deliver this Waiver and Agreement, the Third Supplement and the 1999
Mortgage Supplement;
(b) has the partnership power and authority to execute and
deliver the Confirmation of Partnership Guaranty Agreement in the form
attached hereto as Exhibit C (the "Partnership Guaranty Confirmation");
and
(c) has all requisite power and authority and all
necessary licenses and permits to own and operate its Properties and to
carry on its business as now conducted and as presently proposed to be
conducted.
Section 4.2. Pending Litigation. There are no proceedings pending, or
to the knowledge of the Partnership threatened, against or affecting the
Partnership in any court or before any governmental authority or arbitration
board or tribunal which involve the possibility of materially and adversely
affecting the Properties, business, prospects, profits or condition (financial
or otherwise) of the Partnership. There are no proceedings pending, or to the
knowledge of the Partnership threatened, against or affecting the Partnership in
any court or before any governmental authority or arbitration board or tribunal
which involve the possibility of materially and adversely affecting the power or
authority of the Partnership to enter into or perform this Waiver and Agreement,
the Third Supplement or the 1999 Mortgage Supplement or to perform the
Partnership Guaranty Agreement as confirmed in the Partnership Guaranty
Confirmation. The Partnership is not in default with respect to any order of any
court, governmental authority or arbitration board or tribunal and the
Partnership has not received notice of any such default.
Section 4.3. Governmental Consent. Neither the nature of the
Partnership or any of its businesses or properties, nor any relationship between
the Partnership and any other Person, nor any circumstance in connection with
the execution and delivery of this Waiver and Agreement, the Partnership
Guaranty Confirmation, the Third Supplement or the 1999 Mortgage Supplement is
such as to require a consent, approval or authorization of, or filing,
registration or qualification with, any regulatory body, state, Federal or local
on the part of the Partnership as a condition to the execution and delivery of
this Waiver and Agreement, the Partnership Guaranty Confirmation, the Third
Supplement or the 1999 Mortgage Supplement or as a condition to the maintenance
or continued validity and perfection of the Liens created by the Mortgages,
-5-
<PAGE>
Maritrans Operating Partners L.P. Waiver and Agreement
Maritrans Capital Corporation
except for the filing of the 1999 Mortgage Supplement with the National Vessel
Documentation Center which filing has been effectuated.
Section 4.4. Compliance with Law. The Partnership:
(a) is not in violation of any laws, ordinances,
governmental rules or regulations or court orders to which it is
subject, or
(b) has not failed to obtain any licenses, permits,
franchises or other governmental authorizations necessary to the
ownership of its Property or to the conduct of its business,
which violation or failure to obtain might reasonably be expected to materially
adversely affect the business, prospects, profits, Properties or condition
(financial or otherwise) of the Partnership and the Partnership has not received
notice of any such violation or failure.
Section 4.5. No Defaults. No Default or Event of Default has occurred
and is continuing.
Section 4.6. Certain Documents Legal and Authorized. (a) The compliance
by the Partnership with all of the provisions of this Waiver and Agreement, of
the Partnership Guaranty Agreement as confirmed by the Partnership Guaranty
Confirmation, of the Indenture as amended by the Third Supplement, and of the
1999 Mortgage Supplement:
(i) are within the partnership powers of the Partnership;
and
(ii) will not violate any provisions of any law or any
order of any court or governmental authority or agency and will not
conflict with or result in any breach of any of the terms, conditions
or provisions of, or constitute a default under the partnership
agreement of the Partnership or other agreement or instrument to which
the Partnership is a party or by which the Partnership may be bound.
(b) The execution and delivery of this Waiver and Agreement, the
Partnership Guaranty Confirmation, the Third Supplement and the 1999 Mortgage
Supplement has been duly authorized by proper partnership action on the part of
the Partnership (no action by the limited partners of the Partnership being
required by law, by the partnership agreement of the Partnership or otherwise)
and this Waiver and Agreement, the Partnership Guaranty Confirmation, the Third
Supplement and the 1999 Mortgage Supplement have been executed and delivered by
the Partnership and this Waiver and Agreement, the Partnership Guaranty
Agreement as confirmed by the Partnership Guaranty Confirmation, the Indenture
as amended by the Third Supplement, and the Mortgages as supplemented by the
1999 Mortgage Supplement, constitute the legal, valid and binding obligations,
contracts and agreements of the Partnership enforceable in accordance with their
respective terms.
-6-
<PAGE>
Maritrans Operating Partners L.P. Waiver and Agreement
Maritrans Capital Corporation
Section 4.7. Full Disclosure. No written statement furnished by the
Partnership or the Company to you in connection with this Waiver and Agreement
(including the Form 10-K of Maritrans Inc. for the year ended December 31, 1998
("Form 10-K")) contains any untrue statement of a material fact or omits a
material fact necessary to make the statements contained therein not misleading.
There is no fact peculiar to the Partnership or its Subsidiaries which has not
been disclosed to you in writing (including in the Form 10-K) which materially
affects adversely or, so far as the Partnership can now foresee, will materially
affect adversely the properties, business, prospects, profits or condition
(financial or otherwise) of the Partnership and its consolidated Subsidiaries,
taken as a whole.
Section 4.8. First Preferred Ship Mortgages. After giving effect to the
Proposed Vessel Sales (as defined in the Third Supplement), the First Preferred
Ship Mortgages which secure the Notes are on the Vessels described in Schedule
II to this Waiver and Agreement (the "Remaining First Preferred Ship
Mortgages"). The execution and delivery of this Waiver and Agreement and the
performance thereof and the performance of the Indenture as amended by the Third
Supplement, will not affect the validity, perfection, enforceability or priority
of the Remaining First Preferred Ship Mortgages.
SECTION 5. CONDITIONS PRECEDENT.
The effectiveness of this Waiver and Agreement shall be subject to the
fulfillment by the Partnership and the Company of the following conditions
precedent:
Section 5.1. Opinions of Counsel. Each Holder shall have received, or
Chapman and Cutler, the special counsel for the Holders, shall have received on
behalf of the Holders from Morgan, Lewis & Bockius LLP, counsel for the
Partnership, the Company, the Managing General Partner and Maritrans Inc. and
from Hollstein Keating Cattell Johnson & Goldstein, P.C., maritime counsel for
the Partnership, the Company, the Managing General Partner and Maritrans Inc.,
their respective opinions dated the Effective Date (hereinafter defined), in
form and substance satisfactory to the Signing Holders and its special counsel,
and covering the matters set forth in Exhibit B hereto.
Section 5.2. Consent of Requisite Holders. The Partnership and the
Company shall have obtained the written consent of the Requisite Holders, as
evidenced by their signatures at the foot of this document, to the waiver and
amendments of the Indenture as set forth in the Third Supplement and the
amendments to the Mortgages set forth in the 1999 Mortgage Supplement.
Section 5.3. Confirmation of Guaranty Agreements. Each Holder shall
have received, or its special counsel shall have received on behalf of the
Holders from the Partnership and Maritrans Inc., respectively, the written
confirmation of the terms of the Partnership Guaranty Agreement and the MLP
Guaranty Agreement, as the case may be, in the forms attached hereto as Exhibits
C and D, respectively, and dated the Effective Date.
-7-
<PAGE>
Maritrans Operating Partners L.P. Waiver and Agreement
Maritrans Capital Corporation
Section 5.4. Certificate of Managing General Partner. Each Holder shall
have received, or your special counsel shall have received on behalf of the
Holders, from the Managing General Partner a certificate executed by the
President or a Vice President of the Managing General Partner substantially in
the form attached hereto as Exhibit E and dated the Effective Date.
Section 5.5. Certificate of Maritrans Inc. Each Holder shall have
received, or your special counsel shall have received on behalf of the Holders,
from Maritrans Inc. a certificate executed by the President or a Vice President
of Maritrans Inc. substantially in the form attached hereto as Exhibit F and
dated the Effective Date.
Section 5.6. The 1999 Mortgage Supplement. The 1999 Mortgage Supplement
shall have been executed and delivered by the parties thereto and it shall have
been filed with the National Vessel Documentation Center.
Section 5.7. Special Counsel Fees. The fees and expenses of Chapman and
Cutler, your special counsel, shall have been paid by the Company or the
Partnership.
SECTION 6. MISCELLANEOUS PROVISIONS.
Section 6.1. Effective Date. This Waiver and Agreement shall become
effective upon the first date on which the conditions precedent set forth in
Section 5 hereof shall be satisfied (the "Effective Date").
Section 6.2. Counterparts. This Waiver and Agreement may be
simultaneously executed in any number of counterparts and all such counterparts
together, each as an original, shall constitute but one and the same instrument.
Section 6.3. Governing Law. This Waiver and Agreement shall be governed
by and construed in accordance with the laws of the Commonwealth of
Pennsylvania.
-8-
<PAGE>
Maritrans Operating Partners L.P. Waiver and Agreement
Maritrans Capital Corporation
If this Waiver and Agreement is satisfactory to you, please so indicate
by signing the acceptance at the foot of a counterpart of this Waiver and
Agreement.
MARITRANS OPERATING PARTNERS L.P.
By Maritrans General Partner Inc.
Its Managing General Partner
By /s/ Walter T. Bromfield
Its Vice President
MARITRANS CAPITAL CORPORATION
By /s/ Walter T. Bromfield
Its President
-9-
<PAGE>
Maritrans Operating Partners L.P. Waiver and Agreement
Maritrans Capital Corporation
The foregoing is hereby accepted and agreed to by:
PRINCIPAL LIFE INSURANCE COMPANY
By PRINCIPAL CAPITAL MANAGEMENT LLC,
a Delaware Limited Liability Company
Its Authorized Signatory
By /s/ Jon C. Heiny
Counsel
By /s/ Christopher J. Henderson
Counsel
AID ASSOCIATION FOR LUTHERANS
By /s/ R. Jerry Scheel
Second Vice President - Securities
By /s/ Reginald Pfeifer
Second Vice President
AUER & CO.
By /s/ Miriam Amad
--------------------------------------
Its
ALLSTATE LIFE INSURANCE COMPANY
By ______________________________________
Its
By ______________________________________
Its
Authorized Signatories
-10-
<PAGE>
Maritrans Operating Partners L.P. Waiver and Agreement
Maritrans Capital Corporation
FIRST COLONY LIFE INSURANCE COMPANY
By _____________________________________
Its
-11-
<PAGE>
Maritrans Operating Partners L.P. Waiver and Agreement
Maritrans Capital Corporation
The undersigned acknowledges receipt of a copy of the foregoing Waiver
and Agreement executed by the Requisite Holders, the Company and the
Partnership, acknowledges the representations and warranties of the Company and
the Partnership made in the first paragraph of Section 2 hereof are true and
correct and acknowledges that the Waiver and Agreement is effective as of the
Effective Date.
WILMINGTON TRUST COMPANY, as Trustee
By /s/ C. Paglia
Authorized Officer
-12-
<PAGE>
SCHEDULE I
<TABLE>
<CAPTION>
SIGNING HOLDERS (if PRINCIPAL AMOUNT
Different from Registered OF SERIES B NOTES
NAMES OR REGISTERED HOLDERS Holders) OWNED AND HELD
<S> <C> <C>
1. Principal Life Insurance Company $20,000,000
2. Nimer & Co. Aid Association for Lutherans $8,000,000
3. Allstate Life Insurance Company $8,000,000
4. AUER & Co. $12,000,000
5. Salkeld & Co. First Colony Life Insurance Company $4,000,000
-----------
TOTAL $52,000,000
===========
</TABLE>
<PAGE>
SCHEDULE II
After giving effect to the Proposed Vessel Sales, the Remaining First
Preferred Ship Mortgages securing the Notes are on the following Vessels:
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------------------------------
A. BARGES OFFICIAL NUMBER CAPACITY IN BARRELS YEAR BUILT
- ----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Ocean 250 529918 261,187 1970
- ----------------------------------------------------------------------------------------------------------------------
Ocean Cities 537129 261,040 1972
- ----------------------------------------------------------------------------------------------------------------------
Ocean 215 562452 215,108 1980
- ----------------------------------------------------------------------------------------------------------------------
Maritrans 192 614210 185,231 1998 (rebuilt)
- ----------------------------------------------------------------------------------------------------------------------
Ocean 193 624039 189,211 1980
- ----------------------------------------------------------------------------------------------------------------------
Ocean States 565314 189,210 1975
- ----------------------------------------------------------------------------------------------------------------------
Ocean 244 532585 245,754 1971
- ----------------------------------------------------------------------------------------------------------------------
Ocean 211 646669 207,073 1982
- ----------------------------------------------------------------------------------------------------------------------
Ocean 210 636104 207,000 1981
- ----------------------------------------------------------------------------------------------------------------------
Ocean 262 272839 253,509 1977 (rebuilt)
- ----------------------------------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------------------------------
B. TUGBOATS OFFICIAL NUMBER HORSEPOWER YEAR BUILT
- ----------------------------------------------------------------------------------------------------------------------
Liberty 534963 7,000 1971
- ----------------------------------------------------------------------------------------------------------------------
Valour 569341 5,600 1975
- ----------------------------------------------------------------------------------------------------------------------
Seafarer 532672 5,600 1971
- ----------------------------------------------------------------------------------------------------------------------
Navigator 537824 5,600 1971
- ----------------------------------------------------------------------------------------------------------------------
Freedom 615200 5,600 1979
- ----------------------------------------------------------------------------------------------------------------------
Independence 620723 5,600 1980
- ----------------------------------------------------------------------------------------------------------------------
Columbia 641135 6,000 1981
- ----------------------------------------------------------------------------------------------------------------------
Honour 565902 5,600 1974
- ----------------------------------------------------------------------------------------------------------------------
</TABLE>
<PAGE>
DESCRIPTION OF CLOSING OPINION OF
COUNSEL TO THE PARTNERSHIP AND THE COMPANY
The closing opinion of Morgan, Lewis & Bockius LLP, counsel to the
Partnership, the Company, the Managing General Partner and Maritrans Inc.,
called for by Section 5.1 of the Waiver and Agreement, shall be to the effect
that:
1. The Company is a corporation, validly existing and in
good standing under the laws of the State of Delaware and has the
corporate power and authority to execute and deliver and perform the
Waiver and Agreement and the Third Supplement and to own and operate
its Properties and to carry on its business as now conducted and all of
the issued and outstanding shares of the Company are fully paid and
non-assessable and are owned by the Partnership.
2. The Partnership is a Delaware limited partnership validly
existing and in good standing under the laws of the State of Delaware,
has all requisite partnership power and authority to execute and
deliver and perform the Waiver and Agreement, the Third Supplement, the
Partnership Guaranty Confirmation and the 1999 Mortgage Supplement, and
to own and operate its Properties and to carry on its business as now
conducted and as presently proposed to be conducted.
3. The Managing General Partner is a corporation validly
existing and in good standing under the laws of the State of Delaware
and has all requisite corporate power and authority to execute and
deliver and perform on behalf of the Partnership, as its managing
general partner, the Waiver and Agreement, the Third Supplement, the
Partnership Guaranty Confirmation and the 1999 Mortgage Supplement.
4. Maritrans Inc. is a corporation validly existing and in
good standing under the laws of the State of Delaware and has all
requisite corporate power and authority to execute and deliver and
perform the Confirmation of MLP Guaranty Agreement (the "Maritrans
Guaranty Confirmation") and to own and operate its Properties and to
carry on its business as now conducted.
5. Each of the Waiver and Agreement and the Third Supplement
has been duly authorized by all necessary action on the part of the
Company, has been duly executed and delivered by the Company and each
of the Waiver and Agreement and the Indenture as amended by the Third
Supplement, constitutes the legal, valid and binding contract of the
Company enforceable in accordance with its terms, subject to
bankruptcy, insolvency, fraudulent conveyance or similar laws affecting
creditors' rights generally and general principles of equity
(regardless of whether the application of such principles is considered
in a proceeding in equity or at law).
6. Each of the Waiver and Agreement, the Third Supplement,
the Partnership Guaranty Confirmation and the 1999 Mortgage Supplement
EXHIBIT B
(to Waiver and Agreement)
<PAGE>
has been duly authorized by all necessary action on the part of the
Partnership, has been duly executed and delivered by the Partnership
and each of the Waiver and Agreement, the Indenture as amended by the
Third Supplement, the Partnership Guaranty Agreement as confirmed by
the Partnership Guaranty Confirmation and each of the Mortgages as
amended and supplemented by the 1999 Mortgage Supplement, constitutes
the legal, valid and binding contract of the Partnership enforceable in
accordance with its terms, subject to bankruptcy, insolvency,
fraudulent conveyance or similar laws affecting creditors' rights
generally and general principles of equity (regardless of whether the
application of such principles is considered in a proceeding in equity
or at law).
7. Each of the Waiver and Agreement, the Third Supplement,
the 1999 Mortgage Supplement and the Partnership Guaranty Confirmation
has been duly authorized by all necessary action on the part of the
Managing General Partner and has been duly executed by the Managing
General Partner.
8. The Maritrans Guaranty Confirmation has been duly
authorized by all necessary action on the part of Maritrans Inc., has
been duly executed and delivered by Maritrans Inc. and the MLP Guaranty
Agreement, as confirmed by the Maritrans Guaranty Confirmation,
constitutes the legal, valid and binding contract of Maritrans Inc.
enforceable in accordance with its terms, subject to bankruptcy,
insolvency, fraudulent conveyance or similar laws affecting creditors'
rights generally and general principles of equity (regardless of
whether the application of such principles is considered in a
proceeding in equity or at law).
9. The execution and delivery by the Company of the Waiver
and Agreement and the Third Supplement and the performance by the
Company of the Waiver and Agreement and the Indenture as amended by the
Third Supplement, will not conflict with or result in any breach of any
of the provisions of or constitute a default under or result in the
creation or imposition of any lien or encumbrance upon any of the
property of the Company pursuant to the provisions of the Certificate
of Incorporation or By-laws of the Company or any agreement or other
instrument known to such counsel to which the Company is a party or by
which the Company may be bound.
10. The execution and delivery by the Partnership of the
Waiver and Agreement, the Third Supplement, the Partnership Guaranty
Confirmation and the 1999 Mortgage Supplement and the performance by
the Partnership of the Waiver and Agreement, the Indenture as amended
by the Third Supplement, the Partnership Guaranty Agreement as
confirmed by the Partnership Guaranty Confirmation, and the Mortgages
as amended and supplemented by the 1999 Mortgage Supplement will not
conflict with or result in any breach of any of the provisions of or
constitute a default under or result in the creation or imposition of
any lien or encumbrance upon any of the property of the Partnership
pursuant to the provisions of the partnership agreement of the
Partnership or any agreement or other instrument known to such counsel
to which the Partnership is a party or by which the Partnership may be
bound.
B-2
<PAGE>
11. The execution and delivery of the Maritrans Guaranty
Confirmation and the performance of the MLP Guaranty Agreement as
confirmed by the Maritrans Guaranty Confirmation will not conflict with
or result in any breach of any of the provisions of or constitute a
default under or result in the creation or imposition of any lien or
encumbrance upon any of the property of Maritrans Inc. pursuant to the
provisions of the Certificate of Incorporation or By-laws of Maritrans
Inc. or any agreement or other instrument known to such counsel to
which Maritrans Inc. is a party or by which the Company may be bound.
12. No approval or consent on the part of, or filing,
registration or qualification with, any governmental body, federal,
state or local, is necessary as a condition to (i) the lawful execution
and delivery of the Waiver and Agreement and the Third Supplement by
the Partnership and the Company or of the Partnership Guaranty
Confirmation or the 1999 Mortgage Supplement by the Partnership or of
the Maritrans Guaranty Confirmation by Maritrans Inc., or (ii) in
connection with the execution and delivery of the documents referred to
in clause (i) above, the maintenance and continuation of the validity
and perfection of the Liens created by the Remaining First Preferred
Ship Mortgages, except for the filing of the 1999 Mortgage Supplement
with the National Vessel Documentation Center, which filing has been
duly effectuated.
13. To the knowledge of such counsel, no proceedings are
pending nor threatened against or affecting the Company or the
Partnership before any court, arbitrator or administrative or
governmental body which, in the aggregate, would adversely affect the
ability of the Company, the Managing General Partner, Maritrans Inc.,
or the Partnership to enter into or comply with the following documents
to which it is a party: the Waiver and Agreement, the Third Supplement,
the Partnership Guaranty Confirmation or the 1999 Mortgage Supplement.
For purposes of the opinions in paragraphs 5, 6 and 8, above, such
counsel may (i) assume that (A) the Original Indenture was duly executed and
delivered by the Company and the Partnership and constituted the legal, valid
and binding contract of each of the Company and the Partnership enforceable in
accordance with its terms subject to the following exceptions (herein the
"Standard Enforceability Exceptions"): bankruptcy, insolvency, fraudulent
conveyance or similar laws affecting creditors' rights generally and general
principles of equity (regardless of whether the application of such principles
is considered in a proceeding in equity or at law) and (B) the First
Supplemental Indenture of Trust and Security Agreement (the "First Supplement")
was duly executed and delivered and the Original Indenture as amended and
supplemented by the First Supplement constituted the legal, valid and binding
contract of each of the Company and the Partnership enforceable in accordance
with its terms subject to the Standard Enforceability Exceptions, (ii) assume
that (A) each of the Original First Preferred Ship Mortgages was duly executed
and delivered by the Partnership and constituted the legal, valid and binding
contract of the Partnership enforceable in accordance with its terms subject to
the Standard Enforceability Exceptions and (B) that a Supplement No. 1 for each
of the Original First Preferred Ship Mortgages was duly executed and delivered
and that each such Original First Preferred Ship Mortgage as amended and
supplemented by Supplement No. 1 constituted the legal, valid and binding
contract of the Partnership enforceable in accordance with its terms subject to
the Standard Enforceability Exceptions, (iii) assume that the Partnership
B-3
<PAGE>
Guaranty Agreement was duly executed and delivered by the Partnership and
constituted the legal, valid and binding contract of the Partnership enforceable
in accordance with its terms subject to the Standard Enforceability Exceptions,
and (iv) assume that the MLP Guaranty Agreement was duly executed and delivered
by Maritrans Partners L.P. and constituted the legal, valid and binding contract
of Maritrans Partners L.P. enforceable in accordance with its terms subject to
the Standard Enforceability Exceptions.
Such opinion shall also cover such other matters incident to the
transactions contemplated by the Waiver and Agreement as the Holders or their
special counsel may reasonably request.
The closing opinion of Hollstein Keating Cattell Johnson & Goldstein,
P.C., maritime counsel to the Partnership, the Company, the Managing General
Partner and Maritrans Inc., called for by Section 5.1 of the Waiver and
Agreement, shall be to the effect that:
1. In connection with the execution and delivery of the
Waiver and Agreement and the Third Supplement by the Partnership and
the Company or of the Partnership Guaranty confirmation or the 1999
Mortgage Supplement by the Partnership or of the Maritrans Guaranty
Confirmation by Maritrans Inc., no approval or consent on the part of,
or filing, registration or qualification with, any governmental body,
federal, state or local, is necessary as a condition to the maintenance
and continuation of the priority of the Liens created by the Remaining
First Preferred Ship Mortgages, except for the filing of the 1999
Mortgage Supplement with the National Vessel Documentation Center,
which filing has been duly effectuated.
2. The execution and delivery of the Waiver and Agreement or
the Third Supplement by the Partnership and the Company and the
performance thereof will not affect the validity, enforceability,
perfection or priority of the Remaining First Preferred Ship Mortgages.
B-4
<PAGE>
[LETTERHEAD OF MARITRANS OPERATING PARTNERS L.P.]
[Date]
To the Holders of the Series B Notes
of Maritrans Capital Corporation listed on
Schedule I attached hereto (the "Notes")
Re: Confirmation of Partnership Guaranty Agreement
----------------------------------------------
Ladies and Gentlemen:
Reference is hereby made to that certain Third Supplemental Indenture
of Trust and Security Agreement dated as of December 1, 1999 among Maritrans
Operating Partners L.P., a Delaware limited partnership (the "Partnership"),
Maritrans Capital Corporation, a Delaware corporation (the "Company"), and
Wilmington Trust Company, as Trustee (the "Third Supplement") pursuant to which
(i) the parties thereto have agreed to waive and amend certain provisions of the
Indenture of Trust and Security Agreement dated as of March 15, 1987 from the
Partnership and the Company to Wilmington Trust Company, as Trustee (as
heretofore amended and supplemented by that certain First Supplemental Indenture
of Trust and Security Agreement, as amended, by the Second Supplemental
Indenture of Trust and Security Agreement and the Third Supplement, the
"Indenture") and (ii) the Holders of the Notes issued under the Indenture in the
requisite percentage have consented thereto.
Reference is also made to that certain Guaranty Agreement dated as of
March 15, 1987 entered into by the Partnership pursuant to which the Partnership
(i) has guaranteed payment of the Notes issued under the Indenture which are
currently outstanding and (ii) has guaranteed certain other obligations of the
Company set forth therein (the "Partnership Guaranty Agreement").
The Partnership hereby consents to the Third Supplement and hereby
ratifies and confirms its agreement to be bound under the Partnership Guaranty
Agreement after giving effect to the amendments to the Indenture contained in
the Third Supplement.
MARITRANS OPERATING PARTNERS L.P.
By Maritrans General Partner Inc., its Managing
General Partner
By ____________________________________________
Its
EXHIBIT C
(to Waiver and Agreement)
<PAGE>
[LETTERHEAD OF MARITRANS INC.]
[Date]
To the Holders of the Series B Notes
of Maritrans Capital Corporation listed on
Schedule I attached hereto (the "Notes")
Re: Confirmation of MLP Guaranty Agreement
--------------------------------------
Ladies and Gentlemen:
Reference is hereby made to that certain Third Supplemental Indenture
of Trust and Security Agreement dated as of December 1, 1999 among Maritrans
Operating Partners L.P., a Delaware limited partnership (the "Partnership"),
Maritrans Capital Corporation, a Delaware corporation (the "Company") and
Wilmington Trust Company, as Trustee (the "Third Supplement") pursuant to which
(i) the parties thereto have agreed to waive and amend certain provisions of the
Indenture of Trust and Security Agreement dated as of March 15, 1987 from the
Partnership and the Company to Wilmington Trust Company, as Trustee (as
heretofore amended and supplemented by that certain First Supplemental Indenture
of Trust and Security Agreement, as amended, by the Second Supplemental
Indenture of Trust and Security Agreement and by the Third Supplement, the
"Indenture") and (ii) the Holders of the Notes issued under the Indenture in the
requisite percentage have consented thereto.
The undersigned, Maritrans Inc., a Delaware corporation, acknowledges
that on April 1, 1993 Maritrans Partners L.P., a Delaware limited partnership
and the sole limited partner of the Partnership ("MLP") was converted to
Maritrans Inc. which assumed the liabilities of MLP as Guarantor under that
Guaranty Agreement dated as of March 15, 1987 (herein, the "MLP Guaranty
Agreement"). Maritrans Inc. hereby consents to the Waiver and Agreement and
hereby ratifies and confirms its agreement to be bound as Guarantor under the
MLP Guaranty Agreement after giving effect to the amendments to the Indenture
contained in the Waiver and Agreement.
MARITRANS INC.
By _______________________________________
Its
EXHIBIT D
(to Waiver and Agreement)
<PAGE>
CERTIFICATE OF MANAGING GENERAL PARTNER
To the Holders of the Series B Notes
of Maritrans Capital Corporation listed on
Schedule I attached hereto (the "Notes")
Ladies and Gentlemen:
This Certificate is delivered to you in compliance with the
requirements of that certain Waiver and Agreement dated as of November 1, 1999
(the "Waiver and Agreement") among certain Holders of the above referenced
Notes, Maritrans Capital Corporation (the "Company") and Maritrans Operating
Partners L.P. (the "Partnership") pursuant to which (i) the Holders of the
requisite percentage of Notes issued under the Indenture of Trust and Security
Agreement dated as of March 15, 1987 (the "Original Indenture", such Original
Indenture as amended from time to time the "Indenture"), have consented to the
waiver and amendment of the Indenture by a Third Supplemental Indenture of Trust
and Security Agreement dated as of December 1, 1999 in the form set forth in the
Waiver and Agreement (the "Third Supplement") and (ii) the Partnership has
executed and delivered to each of you a Confirmation of Partnership Guaranty
Agreement (the "Partnership Guaranty Confirmation") pursuant to which it has
confirmed its agreement to be bound under the Partnership Guaranty Agreement
dated as of March 15, 1987 (the "Partnership Guaranty Agreement") after giving
effect to the Waiver and Agreement. The terms which are capitalized herein have
the same meanings as in the Indenture.
The undersigned, Maritrans General Partner Inc., the Managing General
Partner of the Partnership (the "Managing General Partner"), represents and
warrants to you as follows:
1. Organization and Authority.
(a) The Managing General Partner is a corporation, duly organized,
validly existing and in good standing under the laws of the State of
Delaware.
(b) The Managing General Partner has all requisite power and
authority and all necessary licenses and permits to own and operate its
properties and to carry on its business as now conducted.
(c) The Managing General Partner is the sole general partner of the
Partnership under the Amended and Restated Agreement of Limited
Partnership of Maritrans Operating Partners L.P. dated as of April 14,
1987, as amended and restated (the "Partnership Agreement").
2. Partnership Agreement. The Partnership Agreement to which the
Managing General Partner is a party has been duly authorized by all necessary
corporate action on the part of the Managing General Partner, has been duly
Exhibit E
(to Waiver and Agreement)
<PAGE>
executed and delivered by the Managing General Partner and constitutes the
legal, valid and binding agreement of the Managing General Partner enforceable
in accordance with its terms, except as enforcement of such terms may be limited
by bankruptcy, insolvency or similar laws affecting the enforcement of
creditors' rights generally, and by general principles of equity.
3. Authorization, Execution and Delivery. Each of the Waiver and
Agreement, the Third Supplement, the Partnership Guaranty Confirmation and the
1999 Mortgage Supplement has been duly authorized, executed and delivered by the
Managing General Partner on behalf of the Partnership and each of the Waiver and
Agreement, the Indenture as amended by the Third Supplement and the Partnership
Guaranty Agreement as confirmed by the Partnership Guaranty Confirmation and the
1999 Mortgage Supplement constitutes the legal, valid, and binding contract of
the Partnership enforceable in accordance with its terms, subject to bankruptcy,
insolvency, fraudulent conveyance or similar laws affecting creditors' rights
generally and general principles of equity (regardless of whether the
application of such principles is considered in a proceeding in equity or at
law).
4. Pending Litigation. There are no proceedings pending or, to the
knowledge of the Managing General Partner, threatened against or affecting the
Managing General Partner in any court or before any governmental authority or
arbitration board or tribunal which if adversely determined would materially and
adversely affect the ability of the Partnership to enter into or comply with the
following documents on behalf of the Partnership: the Waiver and Agreement, the
Indenture as amended by the Third Supplement, the 1999 Mortgage Supplement or
the Partnership Guaranty Agreement as confirmed by the Partnership Guaranty
Confirmation. The Managing General Partner is not in default with respect to any
order of any court or governmental authority or arbitration board or tribunal.
Dated: ________________________, 1999.
MARITRANS GENERAL PARTNER INC.
By
Its___________________________
E-2
<PAGE>
CERTIFICATE OF MARITRANS INC.
To the Holders of the Series B Notes
of Maritrans Capital Corporation listed on
Schedule I attached hereto (the "Notes")
Ladies and Gentlemen:
This Certificate is delivered to you in compliance with the
requirements of that certain Waiver and Agreement dated as of December 1, 1999
(the "Waiver and Agreement") among certain Holders of the above referenced
Notes, Maritrans Capital Corporation (the "Company") and Maritrans Operating
Partners L.P. (the "Partnership") pursuant to which (i) the Holders of the
requisite percentage of Notes issued under the Indenture of Trust and Security
Agreement dated as of March 15, 1987 (the "Original Indenture", such Original
Indenture as amended from time to time the "Indenture"), have consented to the
waiver and amendment of the Indenture by a Third Supplemental Indenture of Trust
and Security Agreement dated as of December 1, 1999 in the form set forth in the
Waiver and Agreement and (ii) Maritrans Inc. has executed and delivered to each
of you a Confirmation of MLP Guaranty Agreement (the "Maritrans Guaranty
Confirmation") pursuant to which it has confirmed its agreement after giving
effect to the Waiver and Agreement to be bound under the Guaranty Agreement
dated as of March 15, 1987 (the "MLP Guaranty Agreement"), under which it is
obligated to the holders of the Notes.
Maritrans Inc. represents and warrants to you as follows:
1. Corporate Organization and Authority. Maritrans Inc.:
(a) is a corporation duly organized, validly existing and in good
standing under the laws of the State of Delaware, its jurisdiction of
incorporation;
(b) has all requisite power and authority and all necessary licenses
and permits to own and operate its properties and to carry on its
business as now conducted; and
(c) is a publicly held company whose common stock is listed on the
New York Stock Exchange.
2. Authorization, Execution and Delivery. The Maritrans Guaranty
Confirmation has been duly authorized, executed and delivered by Maritrans Inc.
and the MLP Guaranty Agreement as confirmed by the Maritrans Guaranty
Confirmation constitutes the legal, valid, and binding contract of Maritrans
Inc. enforceable in accordance with its terms, subject to bankruptcy,
insolvency, fraudulent conveyance or similar laws affecting creditors' rights
generally and general principles of equity (regardless of whether the
application of such principles is considered in a proceeding in equity or at
law).
EXHIBIT F
(to Waiver and Agreement)
<PAGE>
3. Pending Litigation. There are no proceedings pending or, to the
knowledge of Maritrans Inc. threatened against or affecting Maritrans Inc. in
any court or before any governmental authority or arbitration board or tribunal
which if adversely determined would materially and adversely affect the ability
of Maritrans Inc. to enter into or comply with the Maritrans Guaranty
Confirmation. Maritrans Inc. is not in default with respect to any order of any
court or governmental authority or arbitration board or tribunal.
Dated:________________________, 1999.
MARITRANS INC.
By
Its_________________________________
F-2
<PAGE>
================================================================================
SUPPLEMENT TO
FIRST PREFERRED SHIP MORTGAGES
DATED December 8, 1999
from
MARITRANS OPERATING PARTNERS L.P.
MORTGAGOR
to
WILMINGTON TRUST COMPANY
as Trustee,
Mortgagee
================================================================================
EXHIBIT G
(to Waiver and Agreement)
<PAGE>
TABLE OF CONTENTS
SECTION HEADING PAGE
SECTION 1. AMENDMENTS TO THE MORTGAGES........................3
SECTION 2. MISCELLANEOUS PROVISIONS...........................3
SIGNATURES................................................................. ..4
ATTACHMENTS TO SUPPLEMENT TO FIRST PREFERRED SHIP MORTGAGES
Appendix I Description of Vessels and Recording information for Mortgages
Annex I True Copy of Third Supplemental Indenture of Trust and Security
Agreement
<PAGE>
SUPPLEMENT TO FIRST PREFERRED SHIP MORTGAGES
This SUPPLEMENT TO FIRST PREFERRED SHIP MORTGAGES (as the same may be
amended and supplemented from time to time, the "Mortgage Supplement"), dated
the 8th day of December, 1999, from MARITRANS OPERATING PARTNERS L.P., a
Delaware limited partnership (the "Partnership"), to WILMINGTON TRUST COMPANY,
as Trustee (the "Trustee"), under an Indenture of Trust and Security Agreement
dated as of March 15, 1987 among the Partnership, the Trustee and Maritrans
Capital Corporation, a Delaware corporation, 100% of the capital stock of which
is owned by the Partnership (the "Company") relating to the Notes referred to
below (said Indenture of Trust and Security Agreement, as the same has
heretofore been amended and supplemented by the First Supplement (defined
below), as amended and supplemented by the Second Supplement (defined below), as
amended and supplemented by a Third Supplement (defined below) and as may
hereafter be amended or supplemented, being herein called the "Indenture", and
the Trustee, and any successor trustee, being herein called the "Mortgagee"),
for the benefit of the holders of the Notes (as defined below) from time to time
outstanding, supplements those certain First Preferred Ship Mortgages in the
form specified in the Indenture on the Vessels described on Appendix I hereto
(the original First Preferred Ship Mortgages as heretofore supplemented and as
supplemented hereby and as the same may hereafter be amended or supplemented,
being herein referred to as the "Mortgages") made by the Partnership in favor of
the Mortgagee, which Mortgages were recorded on the date, at the time and in the
place as set forth on Appendix I hereto.
RECITALS:
A. The Partnership is the sole owner of the whole of each of the
vessels described on Appendix I which is documented in the name of the
Partnership under the laws of the United States and has its Home Port (formerly
at Philadelphia, Pennsylvania) and its hailing port at Wilmington, Delaware
(said vessels being hereinafter referred to as the "Vessels").
B. The Company has heretofore duly issued in accordance with the terms
of the Indenture (i) $35,000,000 aggregate principal amount of its Series A
Notes (together with any Notes issued in lieu of or in substitution or exchange
therefor pursuant to the Indenture being herein called the "Series A Notes"),
(ii) $80,000,000 aggregate principal amount of its Series B Notes (together with
any Notes issued in lieu of or in substitution or exchange therefor pursuant to
the Indenture being herein called the "Series B Notes"), and (iii) up to
$20,000,000 aggregate principal amount of its Series C Notes due June 30, 1995
(together with any Notes issued in lieu of or in substitution or exchange
therefore pursuant to the Indenture being herein called the "Series C Notes").
The Series C Notes were issued pursuant to the First Supplemental Indenture of
Trust and Security Agreement dated as of August 15, 1989 among the Company, the
Partnership and the Mortgagee (as amended and supplemented by Amendment No. 1 to
the First Supplemental Indenture of Trust and Security Agreement dated as of
March 31, 1992, the "First Supplement"). The Indenture was subsequently amended
by a Second Supplemental Indenture of Trust and Security Agreement dated as of
April 1, 1996 (the "Second Supplement"). The Series A Notes and the Series C
<PAGE>
Notes have heretofore been retired. The Series B Notes and any Additional Notes
issued under the Indenture are herein collectively referred to as the "Notes".
C. The Partnership has heretofore entered into the Guaranty Agreement
dated as of March 15, 1987 (as the same has been amended by the First
Supplemental Guaranty Agreement dated as of August 15, 1989 and as may be
further amended and supplemented from time to time, the "Partnership Guaranty
Agreement") providing for the guarantee by the Partnership of the payment by the
Company of the principal of and premium and interest on the Notes.
D. The Company, the Partnership and the Mortgagee have entered into the
Third Supplemental Indenture of Trust and Security Agreement dated as of
December 1, 1999 (a true copy of which is attached hereto as Annex I) (the
"Third Supplement") which further amends and supplements the Indenture.
E. The Notes and all principal thereof and interest and premium thereon
and all additional amounts and other sums at any time due and owing from or
required to be paid by the Company under the terms of the Notes and the
Indenture and by the Partnership under the terms of the Partnership Guaranty
Agreement, the Indenture and the Mortgages, are hereinafter sometimes referred
to as the "indebtedness hereby secured".
F. The full name and address of the Partnership, as mortgagor, is:
Maritrans Operating Partners L.P.
1818 Market Street, Suite 3540
Philadelphia, Pennsylvania 19103-3636
Attention: Treasurer, Maritrans General Partner Inc.
G. The full name and address of the Mortgagee is:
Wilmington Trust Company as trustee under an
Indenture of Trust and Security Agreement dated
as of March 15, 1987
Rodney Square North
Wilmington, Delaware 19890
Attention: Corporate Trust Administrator
NOW, THEREFORE, the Partnership, in consideration of the premises and
of the sum of $10.00 received by the Partnership from the Mortgagee and other
good and valuable consideration, receipt of which is hereby acknowledged by the
Partnership, and in order to secure the payment of the indebtedness hereby
secured and the performance and observance of all of the covenants and
conditions in the Notes, the Indenture, the Partnership Guaranty Agreement and
in the Mortgage contained, has granted, bargained, sold, conveyed, warranted,
mortgaged, pledged and hypothecated and by these presents does hereby grant,
bargain, sell, convey, warrant, mortgage, pledge and hypothecate, unto the
Mortgagee, its successors and assigns, all and singular of the whole of each of
the Vessels, together with all engines, boilers, machinery, masts, boats,
anchors, cables, chains, tackle, fittings and equipment and all other
-2-
<PAGE>
appurtenances, improvements, additions and replacements appertaining and
belonging to the Vessels, whether now owned or hereafter acquired, whether on
board or not.
TO HAVE AND TO HOLD the Vessels unto the Mortgagee and its successors
and assigns, forever.
PROVIDED, HOWEVER, and these presents are on the condition that, if the
Partnership shall pay or cause to be paid the indebtedness hereby secured, as
and when the same shall become due and payable, by maturity or otherwise, and if
the Partnership shall duly perform all the covenants, agreements and conditions
contained herein, in the Indenture and in the Partnership Guaranty Agreement,
then the Mortgages shall be void and of no effect, and in such case the
Mortgagee, its successors or assigns, on the demand and at the expense of the
Partnership, shall execute and deliver to the Partnership proper instruments to
evidence the revesting in it of all the rights, title and interest granted
hereby and to satisfy and discharge the Mortgages of record; otherwise, the
Mortgages shall remain in full force and effect.
PROVIDED, FURTHER, that until some one or more Events of Default shall
occur, the Partnership shall have the possession, use and operation of the
Vessels.
The Partnership hereby covenants and agrees with the Mortgagee and its
successors and assigns as follows:
SECTION 1. AMENDMENTS TO THE MORTGAGES.
Section 1.1. As used in the Mortgages, the definition of the term
"Indenture" is hereby restated to mean as follows: the Indenture of Trust and
Security Agreement dated as of March 15, 1987 among the Partnership, the Company
and the Trustee (i) as amended and supplemented by the First Supplemental
Indenture of Trust and Security Agreement dated as of August 15, 1989, as
amended and supplemented by Amendment No. 1 thereto dated as of March 31, 1992,
(collectively, the "First Supplement"), (ii) as amended and supplemented by the
Second Supplemental Indenture of Trust and Security Agreement dated as of April
1, 1996, (the "Second Supplement"), (iii) as amended and supplemented by the
Third Supplemental Indenture of Trust dated as of December 1, 1999, (the "Third
Supplement") and (iv) as may hereafter be amended or supplemented.
SECTION 2. MISCELLANEOUS PROVISIONS.
Section 2.1. This Mortgage Supplement is executed as and shall
constitute an instrument supplemental to each of the Mortgages, and shall be
construed in connection with and as part of each of the Mortgages.
Section 2.2. Except as modified and expressly amended by this Mortgage
Supplement, the Mortgages as heretofore amended and supplemented are in all
respects ratified and confirmed and all the terms, provisions and conditions
thereof shall be and remain in full force and effect.
-3-
<PAGE>
Section 2.3. Except as otherwise provided herein, any term used herein
which is defined in the Mortgages as hereby supplemented shall have the meaning
set forth in the Mortgages as hereby supplemented.
IN WITNESS WHEREOF, the Partnership has caused this Mortgage Supplement
to be executed as of the day and year first above written.
MARITRANS OPERATING PARTNERS L.P.
By Maritrans General Partner Inc.
Its Managing General Partner
By /s/ Walter T. Bromfield
--------------------------------
Its Vice President
WILMINGTON TRUST COMPANY, as Trustee
By /s/ C. Paglia
--------------------------------
Its Financial Services Officer
-4-
<PAGE>
COMMONWEALTH OF PENNSYLVANIA )
) SS:
COUNTY OF PHILADELPHIA )
I, Karen S. Newson, a Notary Public in and for said County in the
Commonwealth aforesaid, do hereby certify that Walter T. Bromfield, personally
known to me to be Vice President of Maritrans General Partner Inc., a Delaware
corporation, a general partner of Maritrans Operating Partners L.P., a Delaware
limited partnership, the corporation that executed the within instrument on
behalf of said partnership, and personally known to me to be the same person
whose name is subscribed as such officer to the foregoing instrument, appeared
before me this day in person and acknowledged that he, being thereunto duly
authorized, signed and delivered said instrument as his free and voluntary act
and the free and voluntary act of said corporation, for the uses and purposes
therein set forth.
GIVEN under my hand and notarial seal this 8th day of December, 1999.
[NOTARIAL SEAL]
/s/ Karen S. Newson
----------------------
Notary Public
My commission expires:
-5-
<PAGE>
STATE OF DELAWARE )
) SS:
COUNTY OF NEWCASTLE )
I, Karen S. Newson, a Notary Public in and for said County in the State
aforesaid, do hereby certify that Charlotte Paglia, personally known to me to be
Financial Services Officer of Wilmington Trust Company, a Delaware banking
corporation, the corporation that executed the within instrument and personally
known to me to be the same person whose name is subscribed as such officer to
the foregoing instrument, appeared before me this day in person and acknowledged
that he, being thereunto duly authorized, signed and delivered said instrument
as his free and voluntary act and the free and voluntary act of said
corporation, for the uses and purposes therein set forth.
GIVEN under my hand and seal of office this 8th day of December, 1999.
[NOTARIAL SEAL]
/s/ Karen S. Newson
----------------------
Notary Public
My commission expires:
-6-
<PAGE>
DESCRIPTION OF VESSELS AND RECORDING INFORMATION FOR MORTGAGES
The First Preferred Ship Mortgage for each of the following Vessels was
delivered and accepted at the Marine Inspection Office, United States Coast
Guard, Port of Philadelphia, Pennsylvania, and recorded as indicated and
Supplement No. 1 to First Preferred Ship Mortgage for each such Vessel was also
delivered and accepted at such office and recorded as indicated and the
Supplement to First Preferred Ship Mortgage dated May 8, 1996 for each of such
Vessels was also delivered and accepted at the National Vessel Documentation
Center, Falling Water, West Virginia, and recorded at 2:00 p.m. on 5/15/96 in
Book 96-29 at page 147:
<TABLE>
<CAPTION>
SUPPLEMENT NO. 1 TO
FIRST PREFERRED SHIP MORTGAGE FIRST PREFERRED SHIP MORTGAGE:
RECORDATION DATA: RECORDATION DATA:
---------------- ----------------
OFFICIAL DATE BOOK DATE BOOK
NAME NUMBER AND TIME AND PAGE AND TIME AND PAGE
<S> <C> <C> <C> <C> <C>
BARGES
(1) Ocean 262 272,839 04/21/87 Book 874, 10/5/89, Book 8910,
4:16 p.m. Page 142 4:30 p.m. Page 110
529,918 4/21/87
(2) Ocean 250 4:19 p.m. Book 874, 10/5/89, Book 8910,
Page 143 4:02 p.m. Page 104
(3) Ocean Cities 537,129 4/21/87 Book 874, 10/5/89, Book 8910,
4:27 p.m. Page 146 4:45 p.m. Page 113
(4) Ocean 215 562,452 4/23/87 Book 874, 10/5/89, Book 8910,
3:55 p.m. Page 214 4:17 p.m. Page 108
(5) Ocean 192 614,210 4/21/87 Book 874, 10/5/89, Book 8910,
4:13 p.m. Page 139 3:27 p.m. Page 95
(6) Ocean 193 624,039 4/21/87 Book 874, 10/5/89, Book 8910,
4:21 p.m. Page 144 3:39 p.m. Page 99
(7) Ocean States 565,314 4/21/87, Book 874, 10/5/89, Book 8910,
4:40 p.m. Page 147 4:25 p.m. Page 109
(8) Ocean 155 556,673 4/21/87, Book 874, 10/5/89, Book 8910,
4:26 p.m. Page 145 4:07 p.m. Page 106
(9) Ocean 135 520,687 4/23/87, Book 874, 10/5/89, Book 8910,
3:45 p.m. Page 211 3:55 p.m. Page 103
(10) Interstate 138 611,433 4/21/87 Book 874, 10/5/89, Book 8910,
5:14 p.m. Page 159 3:01 p.m. Page 88
(11) Ocean 115 515,042 4/22/87, Book 874, 10/5/89, Book 8910,
4:58 p.m. Page 193 3:48 p.m. Page 100
(12) Ocean 90 507,495 4/23/87, Book 874, 10/5/89, Book 8910,
4:37 p.m. Page 227 3:23 p.m. Page 94
</TABLE>
APPENDIX I
(to Mortgage Supplement)
<PAGE>
<TABLE>
<CAPTION>
SUPPLEMENT NO. 1 TO
FIRST PREFERRED SHIP MORTGAGE FIRST PREFERRED SHIP MORTGAGE:
RECORDATION DATA: RECORDATION DATA:
---------------- ----------------
OFFICIAL DATE BOOK DATE BOOK
NAME NUMBER AND TIME AND PAGE AND TIME AND PAGE
<S> <C> <C> <C> <C> <C>
(13) Ocean 96 523,233 4/23/87, Book 874, 10/5/89, Book 8910,
4:05 p.m. Page 217 3:33 p.m. Page 97
(14) Interstate 71 563,364 4/21/87, Book 874, 10/5/89, Book 8910,
5:06 p.m. Page 156 2:45 p.m. Page 82
4/22/87,
(15) Interstate 70 540,401 5:20 p.m. Book 874, 10/5/89, Book 8910,
Page 202 2:39 p.m. Page 79
(16) Interstate 53 530,062 4/21/87, Book 874, 10/5/89, Book 8910,
5:05 p.m. Page 155 3:00 p.m. Page 87
(17) Interstate 55 544,437 4/22/87, Book 874, 10/5/89, Book 8910,
5:22 p.m. Page 204 3:08 p.m. Page 89
(18) Interstate 36 552,900 4/21/87, Book 874, 10/5/89, Book 8910,
4:52 p.m. Page 153 2:40 p.m. Page 80
(19) Interstate 38 553,120 4/23/87, Book 874, 10/5/89, Book 8910,
4:45 p.m. Page 229 3:09 p.m. Page 90
(20) Interstate 35 552,065 4/22/87, Book 874, 10/5/89, Book 8910,
4:39 p.m. Page 185 2:19 p.m Page 74
(21) Interstate 29 536,837 4/22/87, Book 874, 10/5/89, Book 8910,
5:02 p.m. Page 196 3:10 p.m Page 91
(22) Interstate 30 284,032 4/22/87, Book 874, 10/5/89, Book 8910,
4:54 p.m. Page 192 3:20 p.m. Page 93
(23) CHEM 36 293,343 4/22/87, Book 874, 10/5/89, Book 8910,
4:17 p.m. Page 176 1:45 p.m. Page 67
(24) Ocean 244 532,585 4/21/87, Book 874, 10/5/89, Book 8910,
5:18 p.m. Page 163 3:50 p.m. Page 101
(25) Ocean 211 646,669 4/22/87, Book 874, 10/5/89, Book 8910,
4:27 p.m. Page 181 4:05 p.m. Page 105
(26) Ocean 210 636,104 4/22/87, Book 874, 10/5/89, Book 8910,
4:49 p.m. Page 190 3:54 p.m. Page 102
643,281
(27) Ocean 81 4/23/87, Book 874, 10/5/89, Book 8910,
4:35 p.m. Page 226 4:33 p.m. Page 111
(28) Chem Ten 520,776 4/22/87, Book 874, 10/5/89, Book 8910,
4:22 p.m. Page 178 1:58 p.m. Page 70
TUGBOATS:
(1) Clipper 520,685 4/22/87, Book 874, 10/5/89, Book 8910,
4:24 p.m. Page 179 12:40 p.m. Page 54
(2) Freedom 615,200 4/21/87, Book 874, 10/5/89, Book 8910,
4:55 p.m. Page 154 12:45 p.m. Page 55
(3) Honour 565,902 4/22/87, Book 874, 10/5/89, Book 8910,
5:06 p.m. Page 197 1:04 p.m. Page 57
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
SUPPLEMENT NO. 1 TO
FIRST PREFERRED SHIP MORTGAGE FIRST PREFERRED SHIP MORTGAGE:
RECORDATION DATA: RECORDATION DATA:
---------------- ----------------
OFFICIAL DATE BOOK DATE BOOK
NAME NUMBER AND TIME AND PAGE AND TIME AND PAGE
<S> <C> <C> <C> <C> <C>
(4) Independence 620,723 4/22/87 Book 874, 10/5/89, Book 8910,
3:10 p.m. Page 198 1:20 p.m. Page 60
(5) Navigator 537,824 4/21/87, Book 874, 10/5/89, Book 8910,
5:08 p.m. Page 157 12:19 p.m. Page 52
4/23/87, Book 874, 10/5/89, Book 8910,
(6) Seafarer 532,672 4:16 p.m. Page 221 1:40 p.m. Page 64
569,341 4/23/87, Book 874, 10/5/89, Book 8910,
(7) Valour 4:24 p.m. Page 223 1:30 p.m. Page 62
578,207 4/23/87, Book 874, 10/5/89, Book 8910,
(8) Ambassador 3:41 p.m. Page 210 10:48 a.m. Page 35
536,836 4/22/87, Book 874, 10/5/89, Book 8910,
(9) Corsair 4:37 p.m. Page 183 10:53 a.m. Page 36
590,232 4/23/87 Book 874, 10/5/89, Book 8910,
(10) Diplomat 4:00 p.m. Page 216 10:59 a.m. Page 38
4/22/87, Book 874, 10/5/89, Book 8910,
(11) Challenger 513,794 4:15 p.m. Page 174 11:03 a.m. Page 40
511,237 4/23/87, Book 874, 10/5/89, Book 8910,
(12) Crusader 3:51 p.m. Page 213 12:05 p.m. Page 50
550,670 4/23/87, Book 874, 10/5/89, Book 8910,
(13) Venturer 4:40 p.m. Page 228 1:42 p.m. Page 65
(14) Voyager II 556,625 4/23/87, Book 874, 10/5/89, Book 8910,
4:15 p.m. Page 220 1:55 p.m. Page 68
(15) Endeavor 529.705 4/22/87 Book 874, 10/5/89, Book 8910,
4:48 p.m. Page 189 11:57 a.m. Page 49
515,013 4/22/87 Book 874, 10/5/89, Book 8910,
(16) Traveller 5:12 p.m. Page 200 1:18 p.m. Page 59
506,289 4/22/87, Book 874, 10/5/89, Book 8910,
(17) Roanoke 5:21 p.m. Page 203 1:57 p.m. Page 69
609,686 Book 874, 10/5/89, Book 8910,
(18) Delaware 4/23/87, Page 215 11:15 a.m. Page 41
3:57 p.m.
4/23/87, Book 874, 10/5/89, Book 8910,
(19) Ranger 508,340 4:23 p.m. Page 222 2:12 p.m. Page 73
(20) Liberty 534,963 4/21/87, Book 874, 10/5/89, Book 8910,
5:15 p.m. Page 160 11:27 a.m. Page 45
(21) Columbia 641,135 4/22/87, Book 874, 10/5/89, Book 8910,
4:33 p.m. Page 182 12:50 p.m. Page 56
(22) Patriot 636,105 4/23/87, Book 874, 10/5/89, Book 8910,
4:12 p.m. Page 219 2:26 p.m. Page 77
</TABLE>
I-3
<PAGE>
<TABLE>
<CAPTION>
SUPPLEMENT NO. 1 TO
FIRST PREFERRED SHIP MORTGAGE FIRST PREFERRED SHIP MORTGAGE:
RECORDATION DATA: RECORDATION DATA:
---------------- ----------------
OFFICIAL DATE BOOK DATE BOOK
NAME NUMBER AND TIME AND PAGE AND TIME AND PAGE
<S> <C> <C> <C> <C> <C>
(23) Schuylkill 633,396 4/22/87 Book 874, 10/5/89, Book 8910,
5:26 p.m. Page 206 1:25 p.m. Page 61
(24) Cougar 569,665 4/22/87, Book 874, 10/5/89, Book 8910,
4:38 p.m. Page 184 11:25 a.m. Page 44
</TABLE>
I-4
<PAGE>
THIRD SUPPLEMENTAL INDENTURE OF TRUST AND SECURITY AGREEMENT
ANNEX I
(to Mortgage Supplement)
<PAGE>
SUPPLEMENT TO CREDIT AGREEMENT
THIS SUPPLEMENT TO CREDIT AGREEMENT (this "Supplement"), dated as of
February 4, 2000, is by and among MARITRANS TANKERS INC., a Delaware corporation
with its chief executive office at 1818 Market Street, Suite 3540, Philadelphia,
PA 19103 ("Borrower"), MARITRANS INC., a Delaware corporation with chief
executive offices at 1818 Market Street, Suite 3540, Philadelphia, PA 19103
("Guarantor"), and MELLON BANK, N.A.., a national banking association with
offices at Mellon Bank Center, 1735 Market Street, Philadelphia, PA 19103
("Bank").
Background:
A. On or about October 17, 1997, Borrower, Guarantor and Bank entered
into a Credit Agreement (the "Credit Agreement") providing for a credit facility
of up to US$33,000,000.00 (the "Loan") to the Borrower. In connection with the
Credit Agreement and the Loan, Borrower executed and delivered to Bank, inter
alia, Borrower's promissory note in the principal amount of US$33,000,000.00
(the "Note") and Guarantor executed and delivered to Bank a Guaranty and
Suretyship Agreement (the "Guaranty"). In connection therewith, Borrower
executed and delivered to Lender, and there were filed of public record, first
preferred ship mortgages on the Vessels PERSEVERANCE and ALLEGIANCE.
B. On or about August 12, 1998, Borrower executed and delivered to
Lender, and there were filed of public record, first preferred ship mortgages on
the Vessels DILIGENCE and INTEGRITY. The Credit Agreement, Note, the four (4)
Vessel Mortgages referred to above, and any other agreements, undertakings,
instruments and documents related to the Loan are sometimes referred to in this
Supplement collectively as the "Loan Documents."
C. The presently scheduled maturity date for the Loan is October 17,
2000. Borrower and Guarantor have requested Lender to extend the maturity date
for the Loan and reduce the maximum credit available under the Loan to
$33,000,000.00, which Lender is willing to do on certain terms and conditions.
D. Contemporaneously with the execution of this Supplement, the
Borrower is executing and delivering to Bank four Assignments (individually, an
"Assignment" and collectively, the "Assignments"), assigning to Lender the
charters, charter hire and freights of each of the Vessels to further secure
Borrower's obligations with respect to the Loan (the "Obligations"). This
Supplement and the Assignments and any other agreements and documents being
executed and delivered in connection herewith, are sometimes referred to
collectively herein as the ("Supplemental Loan Documents").
NOW, THEREFORE, intending to be legally bound hereby, and in
consideration of the mutual benefits conferred hereby, the parties hereto agree
to modify the Credit Agreement and the other Loan Documents as follows:
<PAGE>
1. Definitions. As used in this Supplement, all capitalized terms shall
have the respective meanings provided therefor herein or, in absence of such
provision, the respective meanings provided therefor in the Credit Agreement.
Without limiting the foregoing:
(a) References herein and in the Credit Agreement to the
"Credit Agreement" shall mean and include the Credit Agreement as modified and
supplemented, including without limitation by this Supplement.
(b) References in any of the Loan Documents to the "Loan
Documents" shall mean and include the Loan Documents as supplemented and
modified, including without limitation by this Supplement.
(c) References to the "Second Loan," "Second Note," "Second
Closing" and "Second Closing Date" shall be of no further force or effect.
2. Extension of Maturity Date and Other Definitional Changes. The
definitions of "Second Loan" in Section 1.1 of the Credit Agreement is hereby
deleted, and the following definitions in Section 1.1 of the Credit Agreement
are hereby modified to read in full as follows:
"Coverage Ratio" shall mean, for the Borrower or Guarantor as
the case may be (the "Measured Entity"), as of the Measuring Date in
question:
I. IN THE CASE OF GUARANTOR
The quotient obtained by dividing EBITDA of Guarantor on a
Consolidated basis for the Four-Quarter Period ending on the relevant
Measuring Date by the sum of the following:
(a) Guarantor's Prior Period Interest (on a Consolidated
basis), plus
(b) CMLTD of Guarantor (on a Consolidated basis) plus
(c) Dividends and other distributions paid by Guarantor during
the Four-Quarter Period ending on the relevant Measuring Date
-- which may also be expressed by the following formula:
----------------------------------------------------------------------
Coverage Ratio = EBITDA
-----------------------------------------
Prior Period Interest + CMLTD + Dividends
----------------------------------------------------------------------
-2-
<PAGE>
II. IN THE CASE OF BORROWER
The quotient obtained by dividing Borrower's EBITDA for the
Four-Ouarter Period ending on the relevant Measuring Date by Borrower's
Prior Period Interest
-- which may also be expressed by the following formula:
----------------------------------------------------------------------
Coverage Ratio = EBITDA
-----------------------------------------
Prior Period Interest
----------------------------------------------------------------------
"Maturity Date" means October 17, 2002.
"Vessel" means, individually, the vessel INTEGRITY (formerly
CHEVRON OREGON) (Official No. 566080), the vessel DILIGENCE (formerly
CHEVRON LOUISIANA) (Official No.584696) (collectively, the, "Chevron
Vessels"), the vessel PERSEVERANCE (formerly, PHILADELPHIA SUN)
(Official No. 638073) the vessel ALLEGIANCE (formerly, NEW YORK SUN
(Official No. 628783) (collectively, the "Sun Vessels"), or any other
vessels for which all or part of the cost of acquisition, repair or
rebuilding is financed with Loan proceeds ("Additional Vessels"), as
the case may be; and "Vessels" means any or all of them collectively.
"Vessel Mortgage" means, as to each Vessel, collectively, (i)
a preferred ship mortgage and (ii) an assignment of charter, charter
hire and freights, granted to Bank by Borrower on each Vessel, each
in form reasonably acceptable to the Bank, which shall have been filed
of public record with the United Stares Coast Guard; and "Vessel
Mortgages" means the same for any more than one of the Vessels.
3. Maximum Loan Amount; Use of Proceeds.
(a) Subsection (a) of Section 2.1 of the Credit Agreement ("Loan") is
hereby modified to read in full as follows:
(a) Basic Conditions. Subject to the terms and conditions and
relying upon the representations and warranties herein set forth, and
absent the occurrence of an Event of Default, the Bank agrees to make
advances on account of the Loan to the Borrower, to finance (i) all or
part of the costs of acquiring the Sun Vessels or the Chevron Vessels,
and (ii) all or part of the costs of acquisitions, repairs and
rebuilding for Additional Vessels. Notwithstanding any other provision
of this Agreement, the aggregate principal amount of the Loan shall not
at any time exceed $33,000,000.00; (II) the aggregate amount of all
Advances which the Bank shall be obligated to make and which may be
-3-
<PAGE>
outstanding and unpaid from time to time shall not in any event exceed
eighty percent (80%) of the appraised value of those Vessels acquired
by Borrower and which are subject to one or more duly recorded Vessel
Mortgages in favor of the Bank; and (III) the aggregate amount of all
Advances which the Bank shall be obligated to make and which may be
outstanding and unpaid from time to time shall not in any event exceed
the aggregate dollar amount (deducting the amounts of any deductibles
or retentions) of Hull Insurance in force on the Vessels at the time of
reference. In the event that the aggregate principal dollar amount
outstanding and unpaid with respect to the Loan exceeds any of the
limitations set forth in this subsection (a), the Borrower shall repay
any excess immediately to Bank without demand.
(b) Provisions of the Credit Agreement and other Loan
Documents relating to the "Second Loan" referred to therein shall be of
no further force or effect.
4. Conditions for Advances for Additional Vessels. Section 2.3 of the
Credit Agreement ("Advances") is hereby modified by adding a new subsection (c)
to read in full as follows:
(c) Conditions to Advances for Additional Vessels. Bank shall
make Advances to finance all or part of the costs of acquisitions,
repairs and rebuilding for Additional Vessels, provided Borrower and
Guarantor shall have satisfied the following conditions with respect to
each Additional Vessel for which an Advance or Advances are to be made:
(i) The Borrower shall have executed and delivered
to the Bank, in recordable form, a Vessel Mortgage for each such
Additional Vessel, along with assurances satisfactory to Bank and
Bank's Counsel of the proper recording of the Vessel Mortgage in the
Documentation Center and the status of the Vessel Mortgage, and
endorsement by the Documentation Center, as a first priority "preferred
mortgage", as defined in 46 U.S.C. Section 31301(6).
(ii) At Bank's request the Guarantor shall join in,
but whether or not Bank so requests, Guarantor shall in any event be
deemed to have joined in, each request for an Advance relating to any
Additional Vessel, and such joinder (or deemed joinder) shall be deemed
Guarantor's consent to the Advance, Guarantor's reaffirmation of its
Guaranty obligations with respect to such Advance, and Guarantor's
waiver of any conditions to such Advance which shall not have been
satisfied. Guarantor acknowledges and agrees that all conditions to
Advances set forth in this Agreement are for the sole benefit of Bank
and not of Guarantor.
(iii) If requested by Bank or Bank Counsel, the
Borrower and the Guarantor shall have delivered to Bank favorable
opinions of their special financing and maritime counsel, dated on or
before the date of the Advance, each in form and substance satisfactory
to Bank and Bank's Counsel, relating to legal matters with respect to
the Advance, the Additional Vessel(s) in question and the Vessel
Mortgage(s) in question.
-4-
<PAGE>
(iv) Bank shall have received evidence satisfactory
to the Bank that all insurance coverage required to be obtained under
Section 6.4 of this Credit Agreement has been obtained and is in force
with respect to each Additional Vessel in question and a report of
insurance broker or an attorney's summary of insurance, all in form and
substance satisfactory to Bank and Bank's Counsel.
(v) Bank shall have received true an complete copies
of the current certificate of documentation, executed bill of sale and
purchase agreement if applicable, charters, subcharters, operating
agreement and all other agreements, instruments and documents relating
to each Additional Vessel for which Bank is being requested to make an
Advance.
(vi) Bank shall have received a current fair market
value appraisal satisfactory to Bank relating to each Additional Vessel
for which Bank is being requested to make an Advance.
(vii) Borrower and Guarantor shall each execute,
acknowledge and deliver such other undertakings, agreements,
instruments, documents, opinions, certificates and evidence in such
form, as Bank or Bank's Counsel may reasonably request in connection
with the Advance or the Additional Vessels in question, or as may
otherwise be required under the Credit Agreement.
5. Revisions to Euro-Rate Margins. The first paragraph of Section 2.5
of the Credit Agreement ("Determination of Margins and Quarterly Compliance
Certificates") is hereby modified to read in full as follows:
(a) The Bank shall determine the Margin from time to time in
the following manner. If, as of the end of any Four-Quarter Period, the
Funded Debt/EBITDA Ratio for the Guarantor, on a consolidated basis, is
within a range stated in the following column (1), the respective
percentage rate per annum set forth opposite such range in column (2)
(the "Margin" shall be applicable during the fiscal quarter of
Guarantor immediately following the end of such Four-Quarter Period:
Guarantor Funded Debt/EBITDA Ratio Margin
---------------------------------- ------
Equal to or greater than 2.50 150 basis points
and equal to or less than 3.00
Equal to or greater than 1.50 125 basis points
and less than 2.50
Less than 1.50 100 basis points
6. Fees. Section 2.11(a) of the Credit Agreement is hereby modified to
read in full as follows:
Section 2.11 Fees. The Borrower agrees to pay to the Bank, as
consideration for the Loan commitment hereunder, the following fees:
-5-
<PAGE>
(a) Unused Commitment Fee. The Borrower agrees to
pay to the Bank, as additional consideration for the extension of the
Maturity Date of the Loan and the maintenance of availability of
Lender's commitment, an unused commitment fee for the period from and
after January 1, 2000, to be calculated on a per them basis and payable
in arrears on the last day of each fiscal quarter of the Guarantor
commencing on March 31, 2000, or a rate or rates equivalent to the
applicable "Unused Fee Rare" set forth below, calculated over the
actual number of days in the fiscal quarter in question over an assumed
year of 360 days, mutiplied times the average daily balance of the
unused portion of the $33,000,000.00 Loan commitment for the fiscal
quarter in question.. The Bank shall determine the "Unused Fee Rate"
from time to time in the following manner. If, as of the end of the
Four-Quarter Period ending on or most recently prior to the
commencement of the Guarantor's fiscal quarter in question, the Funded
Debt/EBITDA Ratio for the Guarantor, on a consolidated basis, is within
a range stated in the following column (1), the Unused Fee Rate set
forth opposite such range in column (2) shall be the "Unused Fee Rate"
applicable to such fiscal quarter:
Guarantor Funded Debt/EBITDA Ratio Unused Fee Rate
---------------------------------- ---------------
Equal to or greater than 2.50 37.5 basis points
and equal to or less than 3.00
Equal to or greater than 1.50 37.5 basis points
and less than 2.50
Less than 1.50 25 basis points
7. Assignments, The Borrower is executing and delivering the
Assignments to the Bank, for filing with the United States Coast Guard National
Vessel Documentation Center to the extent so fileable, together with UCC-1
financing statements for filing with the applicable Uniform Commercial Code
filing offices. The Assignments and the collateral granted thereby to Bank
secure the Obligations in addition to any other collateral security. Without
limiting the foregoing, the Assignments are intended to supplement the original
Vessel Mortgages and shall not be deemed discharged by any satisfaction,
discharge or foreclosure of any of the original Vessel Mortgages. If Bank should
discharge an Assignment of record with the U.S. Coast Guard, such record
assignment shall not constitute a satisfaction or discharge of the Assignment
for any other purpose, and the assignments, security interests and liens granted
thereby shall nevertheless continue until Bank executes a written instrument
confirming that the Assignment is terminated absolutely. In the event of a
default, neither Borrower nor Guarantor shall have any right to demand that Bank
marshal any type or item of collateral security or any source of repayment for
application prior to or after any other type or item of collateral or source of
repayment for the Obligations.
8. Modification of Certain Financial Covenants.
(a) Amendment of Borrower Tangible Net Worth Covenant.
Subparagraph (a) of Paragraph 6.2(j)(i) of the Credit Agreement ("Negative
Covenants - Financial Maintenance
-6-
<PAGE>
Covenants - Covenants Pertaining To Borrower") is hereby modified to read in
full as follows, effective on and after December 30, 1999:
(a) Tangible Net Worth. Tangible Net Worth of the Borrower
shall at no time be less than $10,392,000, measured at the end of each
fiscal year of Borrower (any time of reference is referred to herein
for this purposes as a "Measuring Date").
(b) Amendment of Certain Guarantor Financial Covenants.
Subparagraphs, (a), (b) and (c) of Paragraph 6.2(j)(ii) of the Credit Agreement
("Negative Covenants - Financial Maintenance Covenants - Covenants Pertaining to
Guarantor") are hereby modified to read in full as follows, effective on and
after December 30, 1999:
(a) Coverage Ratio. Guarantor's Coverage Ratio, measured at
the end of each fiscal quarter of Guarantor, shall never be less than
1.40.
(b) Tangible Net Worth. Tangible Net Worth of Guarantor shall
not be less than $97,000,000.00 on December 31, 1999. At the end of
each fiscal year of Guarantor commencing with the fiscal year ending
December 31, 2000 (any time of reference is referred to herein for
this purpose as a "Measuring Date"), the Tangible Net Worth of
Guarantor shall not be less than an amount equal to the sum of (A)
$97,000,000.00 plus (B) the sum of the Net Income Increments for each
fiscal year of Guarantor after December 31, 1999. For purposes of this
Agreement, a "Net Income Increment" shall be calculated for each fiscal
year of Guarantor commencing with the fiscal year ending December 31,
2000 and for the fiscal year in question shall be an amount (but not
less than zero) equal to fifty percent (50%) of Guarantor's
Consolidated Net Income for such fiscal year. For example, if
Guarantor's Consolidated Net Income for the fiscal year ending December
31, 2000 were $1,000,000 the Net Income Increment attributable to that
fiscal year would be $500,000 and the Guarantor's Minimum Tangible Net
Worth would be $97,500,000 as of December 31, 2000; if its Consolidated
Net Income for the fiscal year ending December 31, 2001 were a loss of
$50,000, the Net Income Increment attributable to that fiscal year
would be zero and the Guarantor's Minimum Tangible Net Worth would be
$97,500,000 as of December 31, 2001; and if its Consolidated Net Income
for the fiscal year ending December 31, 2002 were $2,000,000, the Net
Income Increment attributable to that fiscal year would be $1,000,000
and the Guarantor's Minimum Tangible Net Worth would be $98,500,000 as
of December 31, 2002.
(c) Funded Debt/EBITDA Ratio. Guarantor's Funded Debt/EBITDA
Ratio, measured at the end of each fiscal
-7-
<PAGE>
quarter of Guarantor, shall never be greater than 3.00 at December 31,
1999 and thereafter.
9. Cross-Default Provisions. Section 7.1 of the Credit Agreement
("Events of Default") is hereby modified by adding a new subsection (p) to read
in full as follows:
(p) An "Event of Default" occurs under that certain Letter of
Credit Agreement or Addendum thereto dated August 18, 1999
(collectively, the "Maritrans Barge Credit Agreement") providing for
the issuance of a $4,946,771.05 Standby Letter of Credit in favor of
Coastal Tug & Barge, Inc. for the Account of Maritrans Barge Co.;
provided, however, that an "Event of Default" under Section 5.1(i) of
the Addendum to the Maritrans Barge Credit Agreement shall not be an
Event of Default hereunder if it either (A) is due to a dispute
involving an amount in controversy of less than $100,000 or (B) is
based upon claims arising in the ordinary course of the business of
Maritrans Barge Co., and in either case the Event of Default is cured
within thirty (30) days after it first occurs.
10. Representations, Warranties and Other Covenants. Borrower and
Guarantor each jointly and severally reaffirms, as of this date, the truth and
completeness of the representations and warranties set forth in the Credit
Agreement, other than the representations and warranties regarding material
events since the date of the financial statements referred to in Section 3.4 of
the Credit Agreement, except to the extent heretofore waived in writing by the
Bank. In addition:
(a) Borrower and Guarantor each jointly and severally represent and
warrant that no Event of Default, or any event which with the passing of time or
the giving of notice or both would become an Event of Default, has occurred and
is continuing.
(b) The Guarantor has delivered to Bank its audited Consolidated and
consolidating financial statements as at and for the fiscal year ended December
31, 1998 (the "Audited Date"), and its unaudited financial statements for the
three (3) month periods ended September 30, 1999, stated on a non-Consolidated
basis, dated the date of this Agreement (collectively, the "Delivered Financial
Statements". Such financial statements fairly reflect the respective financial
conditions of the Guarantor and the Borrower as at such dates and fairly reflect
the results of the Consolidated operations of The Guarantor for the periods then
ended, all in conformity with GAAP consistently applied. There has been no
material adverse change in the condition, financial or otherwise, of the
Guarantor since the Audited Date. Neither Borrower nor Guarantor has any
material obligations or liabilities which are not disclosed in the Delivered
Financial Statements except obligations arising in the ordinary course of
business since September 30, 1999. Borrower and Guarantor are each solvent on
this date in that (i) the fair value of its assets exceeds the amounts of its
liabilities and other obligations, and (ii) each of them is capable of paying
its debts and obligations as they may become due.
(c) The "chief executive office" of the Borrower, and the location of
its records relating to Vessel charters, charter hire, freights and the like
(the Borrower's "Chief Executive Office"),
-8-
<PAGE>
is presently at 1818 Market Street, Suite 3540, Philadelphia, PA 19103. On and
after March 31, 2000, Borrower's Chief Executive Office will be located at Two
Harbour Place, 302 Knights Run Avenue, 12th Floor, Tampa, FL 33602.
11. Reaffirmation of Loan Documents, Accommodations and Collateral.
Guarantor hereby ratifies and confirms that it remains fully obligated under the
Guaranty, and that the Guaranty including without limitation the warrant of
attorney to confess judgment contained therein remains in full force and effect
as heretofore modified and supplemented, and, as modified including without
limitation the warrant of attorney to confess judgment contained therein hereby
and extends to and secures the payment of the Obligations pursuant to the Loan
Documents as heretofore supplemented and modified and as supplemented and
modified by this Supplement. Each of the Loan Documents including without
limitation the warrant of attorney to confess judgment contained therein remains
in full force and effect as heretofore supplemented and modified and, as
supplemented and modified by this Supplement, including without limitation the
warrant of attorney to confess judgment contained therein, extend to and
continue to secure the Obligations as modified and supplemented by this
Supplement and the other Supplemental Loan Documents. To the extent required in
order to achieve the intent of this Supplement, this Supplement shall be deemed
to supplement and modify each of the Loan Documents.
12. Miscellaneous.
(a) Effect of Agreements; Waivers: Construction. The
provisions of this Supplement shall supplement and modify the
provisions of the Loan Documents, which continue in full force and
effect as supplemented and modified hereby.
(b) Counterparts. This Supplement may be executed in any
number of counterparts, each of which shall be deemed to be an
original, but all of which together shall constitute one and the same
instrument.
(c) Successors and Assigns. This Supplement shall be binding
upon and inure to the benefit of the Bank, the Borrower and their
respective successors and assigns.
(d) Signing Authority. The individuals signing this Supplement
on behalf of each party represent and warrant to the other parties that
they are respectively authorized by all necessary corporate action to
execute and deliver this Supplement on behalf of the respective party
or parties for whom they are signing.
(e) Expenses and Legal Fees. Borrower and Guarantor will pay
on demand all of the fees and expenses of Bank and its legal counsel
arising in connection with this Supplement, the Assignments, any Vessel
Mortgages or any further supplements or amendments to any of the Loan
Documents and the transactions contemplated thereby including, but not
limited to, all legal fees and out-of-pocket expenses incurred by Bank
in the development, preparation, negotiation, filing and closing of
this Supplement and all such documents.
-9-
<PAGE>
IN WITNESS WHEREOF, the parties hereto have duly executed this
Supplement by their respective authorized officers, as of the date first written
above.
Attest: MARITRANS TANKERS INC.
/s/ Arthur Volkle By: /s/ Walter T. Bromfield
- --------------------------- -------------------------
Title: Secretary Title: Treasurer
Attest: MARITRANS INC.
/s/ /s/ Walter T. Bromfield By: /s/ Philip J. Doherty
- --------------------------- -----------------------------
Title: Asst Secretary Title: Vice President
Witness: MELLON BANK, N.A.
By: /s/ Liam Brickley
- --------------------------- -----------------------------
Title: Vice President
-10-
<PAGE>
SEVERANCE AND NON-COMPETITION AGREEMENT
Amended Agreement made as of the 30th day of June, 1999,
between Maritrans General Partner Inc., a Delaware corporation (the "Company"),
and Stephen M. Hackett (the "Employee").
WHEREAS, the Employee is employed by the Company as
President- Maritrans Chartering Company, Inc.,;
WHEREAS, the Company is a subsidiary of Maritrans Inc., a
publicly traded corporation ("Maritrans");
WHEREAS, the Employee and Maritrans entered into a
Severance and Non-competition Agreement on July 7, 1997, to provide certain
payments to the Employee in the event that his employment were terminated,
including as a result of a Change of Control of Maritrans (the "Agreement");
WHEREAS, the Employee and the Company now wish to revise
the Agreement; and
WHEREAS, in consideration for the Employee agreeing not to
compete with the Company in the event the Employee's employment is terminated,
the Company agrees that the Employee shall receive the compensation set forth in
this Agreement as a cushion against the financial and career impact on the
Employee in the event the Employee's employment with the Company is terminated
without cause whether or not there is a Change of Control of Maritrans;
NOW, THEREFORE, in consideration of the foregoing and the
mutual covenants and agreements hereinafter set forth and intending to be
legally bound hereby, the parties hereto agree as follows:
1. Definitions. For all purposes of this Agreement, the
following terms shall have the meanings specified in this Section unless the
context clearly otherwise requires:
(a) "Affiliate" and "Associate" shall have the respective
meanings ascribed to such terms in Rule 12b-2 of the General Rules and
Regulations under the Securities Exchange Act of 1934, as amended (the "Exchange
Act").
(b) "Base Compensation" shall mean the 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;
<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.
(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.
<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
(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.
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).
<PAGE>
3. Severance Compensation upon Termination.
(a) In the event of the Employee's involuntary Termination
of Employment for reason other than Cause, the Company shall continue to pay to
the Employee, upon the execution of a release substantially in the form being
used by the Company, prior to a Change of Control, for terminating executives,
an amount equal to one-half his Base Compensation, subject to customary
employment taxes and deductions, for six months following the Termination Date
but all other benefit coverages (except as specified by law or regulation),
retirement benefits and fringe benefit eligibility shall cease upon the
Termination Date.
(b) Subject to the provisions of Section 11 hereof, in the
event of the Employee's Termination following a Change of Control or in the
event that a Change of Control occurs within six months after a Termination of
Employment requiring a payment under subsection (a), the Company shall pay to
the Employee, within 30 days after the Termination Date (or as soon as possible
thereafter in the event that the procedures set forth in Section 11(b) hereof
cannot be completed within 30 days or payments have already commenced under
subsection (a) above), and in lieu of, or reduced by, as applicable, any payment
under subsection (a) above, a single sum in cash equal to one times the
Employee's Base Compensation.
(c) In the event the Employee's Normal Retirement Date
would occur prior to 24 months after the Termination Date, the aggregate cash
amount determined as set forth in (a) above shall be reduced by multiplying it
by a fraction, the numerator of which shall be the number of days from the
Termination Date to the Employee's Normal Retirement Date and the denominator of
which shall be 730.
(d) As additional consideration for the non-competition
and non-solicitation covenants contained in Sections 12 and 13, (i) if payments
are made under subsection (a) above, an amount equal to his Base Compensation,
subject to customary employment taxes and deductions, for 12 months following
his Termination Date, or (ii) if payments are made under subsection (b) above, a
single cash payment, within 30 days after the effective date of the Termination
of Employment, equal to Employee's Base Compensation.
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.
<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.
<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.
(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. The Employee shall in his sole
discretion determine which and how much of the Agreement Payments shall be
eliminated or reduced consistent with the requirements of this Section. Within
five days after the Employee's 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.
<PAGE>
(d) All of the fees and expenses of the Accounting Firm in
performing the determinations referred to in subsections (b) and (c) above shall
be borne solely by the Company. The Company agrees to indemnify and hold
harmless the Accounting Firm of and from any and all claims, damages and
expenses resulting from or relating to its determinations pursuant to
subsections (b) and (c) above, except for claims, damages or expenses resulting
from the gross negligence or willful misconduct of the Accounting Firm.
12. Confidential Information. The Employee recognizes and
acknowledges that, by reason of his employment by and service to the Company, he
has had and will continue to have access to confidential information of the
Company and its affiliates, including, without limitation, information and
knowledge pertaining to products and services offered, innovations, designs,
ideas, plans, trade secrets, proprietary information, distribution and sales
methods and systems, sales and profit figures, customer and client lists, and
relationships between the Company and its affiliates and other distributors,
customers, clients, suppliers and others who have business dealings with the
Company and its affiliates ("Confidential Information"). The Employee
acknowledges that such Confidential Information is a valuable and unique asset
and covenants that he will not, either during or after his employment by the
Company, disclose any such Confidential Information to any person for any reason
whatsoever without the prior written authorization of the Board, unless such
information is in the public domain through no fault of the Employee or except
as may be required by law.
13. Non-Competition.
(a) During his employment by the Company and for a period
of one year thereafter, the Employee will not, unless acting with the prior
written consent of the Board, directly or indirectly, own, manage, operate,
join, control, finance or participate in the ownership, management, operation,
control or financing of, or be connected as an officer, director, employee,
partner, principal, agent, representative, consultant or otherwise with or use
or permit his name to be used in connection with, any business or enterprise
engaged in a geographic area in which the Company or any of its affiliates is
operating either during his employment by the Company or on the Termination
Date, as applicable, presently on the East Coast of the United States or at any
port in the Gulf of Mexico (whether or not such business is physically located
within those areas) (the "Geographic Area"), in any business that is a customer
of, competitive to, a business from which the Company or any of its affiliates
derive at least five percent of its respective gross revenues either during his
employment by the Company or on the Termination Date, as applicable. It is
recognized by the Employee that the business of the Company and its affiliates
and the Employee's connection therewith is or will be involved in activity
throughout the Geographic Area, and that more limited geographical limitations
on this non-competition covenant are therefore not appropriate. The Employee
also shall not, directly or indirectly, during such one-year period (a) solicit
or divert business from, or attempt to convert any client, account or customer
of the Company or any of its affiliates, whether existing at the date hereof or
acquired during Employee's employment nor (b) following Employee's employment,
solicit or attempt to hire any then employee of the Employer or of any of its
affiliates.
(b) The foregoing restriction shall not be construed to
prohibit the ownership by the Employee of less than one percent (1%) of any
class of securities of any corporation which is engaged in any of the foregoing
businesses having a class of securities registered pursuant to the Securities
Exchange Act of 1934, provided that such ownership represents a passive
investment and that neither the Employee nor any group of persons including
Employee in any way, either directly or indirectly, manages or exercises control
of any such corporation, guarantees any of its financial obligations, otherwise
takes any part in its business, other than exercising his rights as a
shareholder, or seeks to do any of the foregoing.
<PAGE>
14. Equitable Relief.
(a) Employee acknowledges that the restrictions contained
in Sections 12 and 13 hereof are reasonable and necessary to protect the
legitimate interests of the Company and its affiliates, that the Company would
not have entered into this Agreement in the absence of such restrictions, and
that any violation of any provision of those Sections will result in irreparable
injury to the Company. The Employee represents that his experience and
capabilities are such that the restrictions contained in Section 13 hereof will
not prevent the Employee from obtaining employment or otherwise earning a living
at the same general level of economic benefit as anticipated by this Agreement.
The Employee further represents and acknowledges that (i) he has been advised by
the Company to consult his own legal counsel in respect of this Agreement, and
(ii) that he has had full opportunity, prior to execution of this Agreement, to
review thoroughly this Agreement with his counsel.
(b) The Employee agrees that the Company shall be entitled
to preliminary and permanent injunctive relief, without the necessity of proving
actual damages, as well as an equitable accounting of all earnings, profits and
other benefits arising from any violation of Sections 12 or 13 hereof, which
rights shall be cumulative and in addition to any other rights or remedies to
which the Company may be entitled. In the event that any of the provisions of
Sections 12 or 13 hereof should ever be adjudicated to exceed the time,
geographic, service, or other limitations permitted by applicable law in any
jurisdiction, then such provisions shall be deemed reformed in such jurisdiction
to the maximum time, geographic, service, or other limitations permitted by
applicable law.
(c) The Employee irrevocably and unconditionally (i)
agrees that any suit, action or other legal proceeding arising out of Section 12
or 13 hereof, including without limitation, any action commenced by the Company
for preliminary and permanent injunctive relief or other equitable relief, may
be brought in the United States District Court for the Eastern District of
Pennsylvania, or if such court does not have jurisdiction or will not accept
jurisdiction, in any court of general jurisdiction in Philadelphia County,
Pennsylvania, (ii) consents to the non-exclusive jurisdiction of any such court
in any such suit, action or proceeding, and (iii) waives any objection which
Employee may have to the laying of venue of any such suit, action or proceeding
in any such court. Employee also irrevocably and unconditionally consents to the
service of any process, pleadings, notices or other papers in a manner permitted
by the notice provisions of Section 17 hereof.
(d) Employee agrees that he will provide, and that the
Company may similarly provide, a copy of Sections 12 and 13 hereof to any
business or enterprise (i) which he may directly or indirectly own, manage,
operate, finance, join, control or participate in the ownership, management,
operation, financing, control or control of, or (ii) with which he may be
connected with as an officer, director, employee, partner, principal, agent,
representative, consultant or otherwise, or in connection with which he may use
or permit his name to be used; provided, however, that this provision shall not
apply in respect of Section 3 hereof after expiration of the time period set
forth therein.
15. Term of Agreement. The term of this Agreement shall be
for two years from the date hereof and shall be automatically renewed for
successive one-year periods unless the Company notifies the Employee in writing
that this Agreement will not be renewed at least sixty days prior to the end of
the current term; provided, however, that (i) a failure of the Company to renew
at a time when the Employee is employed by the Company shall constitute an
involuntary Termination of Employment entitling the Employee to terminate
employment from the Company and to the payments provided by Section 3(a) unless
the Employee elects to continue employment, within 30 days after a non-renewal,
and, thereby, waive such payments in connection with the failure to renew, (ii)
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 (iii) 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, except as provided in clause (i) or in
Section 3(b).
<PAGE>
16. Successor Company. The Company shall require any
successor or successors (whether direct or indirect, by purchase, merger,
consolidation or otherwise) to all or substantially all of the business and/or
assets of the Company, by agreement in form and substance satisfactory to the
Employee, to acknowledge expressly that this Agreement is binding upon and
enforceable against the Company in accordance with the terms hereof, and to
become jointly and severally obligated with the Company to perform this
Agreement in the same manner and to the same extent that the Company would be
required to perform if no such succession or successions had taken place.
Failure of the Company to obtain such agreement prior to the effectiveness of
any such succession shall be a breach of this Agreement. As used in this
Agreement, the Company shall mean the Company as hereinbefore defined and any
such successor or successors to its business and/or assets, jointly and
severally.
17. Notice. All notices and other communications required
or permitted hereunder or necessary or convenient in connection herewith shall
be in writing and shall be delivered personally or mailed by registered or
certified mail, return receipt requested, or by overnight express courier
service, as follows:
If to the Company, to:
Maritrans Inc.
1818 Market Street
Philadelphia, PA 19103
Attention: Corporate Secretary
If to the Employee, to:
Stephen M. Hackett
308 Edgemore Road
Secane, PA 19018
or to such other names or addresses as the Company or the Employee, as the case
may be, shall designate by notice to the other party hereto in the manner
specified in this Section; provided, however, that if no such notice is given by
the Company following a Change of Control, notice at the last address of the
Company or to any successor pursuant to Section 16 hereof shall be deemed
sufficient for the purposes hereof. Any such notice shall be deemed delivered
and effective when received in the case of personal delivery, five days after
deposit, postage prepaid, with the U.S. Postal Service in the case of registered
or certified mail, or on the next business day in the case of overnight express
courier service.
18. Governing Law. This Agreement shall be governed by and
interpreted under the laws of the Commonwealth of Pennsylvania without giving
effect to any conflict of laws provisions.
<PAGE>
19. Contents of Agreement, Amendment and Assignment.
(a) This Agreement supersedes all prior agreements, sets
forth the entire understanding between the parties hereto with respect to the
subject matter hereof and cannot be changed, modified, extended or terminated
except upon written amendment executed by the Employee and approved by the Board
and executed on the Company's behalf by a duly authorized officer. The
provisions of this Agreement may provide for payments to the Employee under
certain compensation or bonus plans under circumstances where such plans would
not provide for payment thereof. It is the specific intention of the parties
that the provisions of this Agreement shall supersede any provisions to the
contrary in such plans, and such plans shall be deemed to have been amended to
correspond with this Agreement without further action by the Company or the
Board.
(b) Nothing in this Agreement shall be construed as giving
the Employee any right to be retained in the employ of the Company.
(c) All of the terms and provisions of this Agreement
shall be binding upon and inure to the benefit of and be enforceable by the
respective heirs, representatives, successors and assigns of the parties hereto,
except that the duties and responsibilities of the Employee and the Company
hereunder shall not be assignable in whole or in part by the Company.
20. Severability. If any provision of this Agreement or
application thereof to anyone or under any circumstances shall be determined to
be invalid or unenforceable, such invalidity or unenforceability shall not
affect any other provisions or applications of this Agreement which can be given
effect without the invalid or unenforceable provision or application.
21. Remedies Cumulative; No Waiver. No right conferred
upon the Employee by this Agreement is intended to be exclusive of any other
right or remedy, and each and every such right or remedy shall be cumulative and
shall be in addition to any other right or remedy given hereunder or now or
hereafter existing at law or in equity. No delay or omission by the Employee in
exercising any right, remedy or power hereunder or existing at law or in equity
shall be construed as a waiver thereof, including, without limitation, any delay
by the Employee in delivering a Notice of Termination pursuant to Section 2
hereof after an event has occurred which would, if the Employee had resigned,
have constituted a Termination following a Change of Control pursuant to Section
1(l)(ii) of this Agreement.
22. Miscellaneous. All section headings are for
convenience only. This Agreement may be executed in several counterparts, each
of which is an original. It shall not be necessary in making proof of this
Agreement or any counterpart hereof to produce or account for any of the other
counterparts.
23. Termination of Agreement. This Agreement shall
supersede and replace the Agreement which shall hereafter be null and void and
of no further force and effect.
<PAGE>
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]
By /s/ Walter T. Bromfield
_______________________ ---------------------------
/s/ Janice M. Smallacombe /s/ Stephen M. Hackett
- --------------------------- ------------------------------
Witness Stephen M. Hackett
<PAGE>
SEVERANCE AND NON-COMPETITION AGREEMENT
Amended Agreement made as of the 16th day of July, 1999,
between Maritrans General Partner Inc., a Delaware corporation (the "Company"),
and John J. Burns (the "Employee").
WHEREAS, the Employee is employed by the Company as
President of Maritrans General Partner L.P.;
WHEREAS, the Company is a subsidiary of Maritrans Inc., a
publicly traded corporation ("Maritrans");
WHEREAS, the Employee and Maritrans entered into a
Severance and Non-competition Agreement on July 7, 1997 to provide certain
payments to the Employee in the event that her employment were terminated,
including as a result of a Change of Control of Maritrans (the "Agreement");
WHEREAS, the Employee and the Company now wish to revise
the Agreement; and
WHEREAS, in consideration for the Employee agreeing not to
compete with the Company in the event the Employee's employment is terminated,
the Company agrees that the Employee shall receive the compensation set forth in
this Agreement as a cushion against the financial and career impact on the
Employee in the event the Employee's employment with the Company is terminated
without cause whether or not there is a Change of Control of Maritrans;
NOW, THEREFORE, in consideration of the foregoing and the
mutual covenants and agreements hereinafter set forth and intending to be
legally bound hereby, the parties hereto agree as follows:
<PAGE>
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;
<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.
<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.
(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
<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 her 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 her principal place of
business immediately preceding the Change of Control may
be located at such time if other than metropolitan
Philadelphia.
(F) the current Chief Executive Officer has also
terminated his employment due to the Change of Control.
<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) In the
event of the Employee's involuntary Termination of Employment for reason other
than Cause, the Company shall continue to pay to the Employee, upon the
execution of a release substantially in the form being used by the Company,
prior to a Change of Control, for terminating executives, an amount equal to her
Base Compensation, subject to customary employment taxes and deductions, for 12
months following her Termination Date but all other benefit coverages (except as
specified by law or regulation), retirement benefits and fringe benefit
eligibility shall cease upon the Termination Date.
(b) Subject to the provisions of Section 11 hereof, in the
event of the Employee's Termination following a Change of Control or in the
event that a Change of Control occurs within six months after a Termination of
Employment requiring a payment under subsection (a), the Company shall pay to
the Employee, within 30 days after the Termination Date (or as soon as possible
thereafter in the event that the procedures set forth in Section 11(b) hereof
cannot be completed within 30 days or payments have already commenced under
subsection (a) above), and in lieu of, or reduced by, as applicable any payment
under subsection (a) above, a single sum in cash equal to 1.99 times the
Employee's Base Compensation.
(c) In the event the Employee's Normal Retirement Date
would occur prior to 24 months after the Termination Date, the aggregate cash
amount determined as set forth in (a) 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.
<PAGE>
(d) As additional consideration for the non-competition
and non-solicitation covenants contained in Sections 12 and 13, (i) if payments
are made under subsection (a) above, an amount equal to her Base Compensation,
subject to customary employment taxes and deductions, for 12 months following
her Termination Date, or (ii) if payments are made under subsection (b) above, a
single cash payment, within 30 days after the effective date of the Termination
of Employment, equal to Employee's Base Compensation.
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.
<PAGE>
(b) It is the intent of the parties that the Employee not
be required to incur any expenses associated with the enforcement of her 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.
<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.
<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. The Employee shall in her sole
discretion determine which and how much of the Agreement Payments shall be
eliminated or reduced consistent with the requirements of this Section. Within
five days after the Employee's 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.
<PAGE>
12. Confidential Information. The Employee recognizes and
acknowledges that, by reason of her employment by and service to the Company, he
has had and will continue to have access to confidential information of the
Company and its affiliates, including, without limitation, information and
knowledge pertaining to products and services offered, innovations, designs,
ideas, plans, trade secrets, proprietary information, distribution and sales
methods and systems, sales and profit figures, customer and client lists, and
relationships between the Company and its affiliates and other distributors,
customers, clients, suppliers and others who have business dealings with the
Company and its affiliates ("Confidential Information"). The Employee
acknowledges that such Confidential Information is a valuable and unique asset
and covenants that he will not, either during or after her employment by the
Company, disclose any such Confidential Information to any person for any reason
whatsoever without the prior written authorization of the Board, unless such
information is in the public domain through no fault of the Employee or except
as may be required by law.
13. Non-Competition.
(a) During her employment by the Company and for a period
of one year thereafter, the Employee will not, unless acting with the prior
written consent of the Board, directly or indirectly, own, manage, operate,
join, control, finance or participate in the ownership, management, operation,
control or financing of, or be connected as an officer, director, employee,
partner, principal, agent, representative, consultant or otherwise with or use
or permit her name to be used in connection with, any business or enterprise
engaged in a geographic area in which the Company or any of its affiliates is
operating either during her employment by the Company or on the Termination
Date, as applicable, presently on the East Coast of the United States or at any
port in the Gulf of Mexico (whether or not such business is physically located
within those areas) (the "Geographic Area"), in any business that is a customer
of, competitive to, a business from which the Company or any of its affiliates
derive at least five percent of its respective gross revenues either during her
employment by the Company or on the Termination Date, as applicable. It is
recognized by the Employee that the business of the Company and its affiliates
and the Employee's connection therewith is or will be involved in activity
throughout the Geographic Area, and that more limited geographical limitations
on this non-competition covenant are therefore not appropriate. The Employee
also shall not, directly or indirectly, during such one-year period (a) solicit
or divert business from, or attempt to convert any client, account or customer
of the Company or any of its affiliates, whether existing at the date hereof or
acquired during Employee's employment nor (b) following Employee's employment,
solicit or attempt to hire any then employee of the Employer or of any of its
affiliates.
(b) The foregoing restriction shall not be construed to
prohibit the ownership by the Employee of less than one percent (1%) of any
class of securities of any corporation which is engaged in any of the foregoing
businesses having a class of securities registered pursuant to the Securities
Exchange Act of 1934, provided that such ownership represents a passive
investment and that neither the Employee nor any group of persons including
Employee in any way, either directly or indirectly, manages or exercises control
of any such corporation, guarantees any of its financial obligations, otherwise
takes any part in its business, other than exercising her rights as a
shareholder, or seeks to do any of the foregoing.
<PAGE>
14. Equitable Relief.
(a) Employee acknowledges that the restrictions contained
in Sections 12 and 13 hereof are reasonable and necessary to protect the
legitimate interests of the Company and its affiliates, that the Company would
not have entered into this Agreement in the absence of such restrictions, and
that any violation of any provision of those Sections will result in irreparable
injury to the Company. The Employee represents that her experience and
capabilities are such that the restrictions contained in Section 13 hereof will
not prevent the Employee from obtaining employment or otherwise earning a living
at the same general level of economic benefit as anticipated by this Agreement.
The Employee further represents and acknowledges that (i) he has been advised by
the Company to consult her own legal counsel in respect of this Agreement, and
(ii) that he has had full opportunity, prior to execution of this Agreement, to
review thoroughly this Agreement with her counsel.
(b) The Employee agrees that the Company shall be entitled
to preliminary and permanent injunctive relief, without the necessity of proving
actual damages, as well as an equitable accounting of all earnings, profits and
other benefits arising from any violation of Sections 12 or 13 hereof, which
rights shall be cumulative and in addition to any other rights or remedies to
which the Company may be entitled. In the event that any of the provisions of
Sections 12 or 13 hereof should ever be adjudicated to exceed the time,
geographic, service, or other limitations permitted by applicable law in any
jurisdiction, then such provisions shall be deemed reformed in such jurisdiction
to the maximum time, geographic, service, or other limitations permitted by
applicable law.
<PAGE>
(c) The Employee irrevocably and unconditionally (i)
agrees that any suit, action or other legal proceeding arising out of Section 12
or 13 hereof, including without limitation, any action commenced by the Company
for preliminary and permanent injunctive relief or other equitable relief, may
be brought in the United States District Court for the Eastern District of
Pennsylvania, or if such court does not have jurisdiction or will not accept
jurisdiction, in any court of general jurisdiction in Philadelphia County,
Pennsylvania, (ii) consents to the non-exclusive jurisdiction of any such court
in any such suit, action or proceeding, and (iii) waives any objection which
Employee may have to the laying of venue of any such suit, action or proceeding
in any such court. Employee also irrevocably and unconditionally consents to the
service of any process, pleadings, notices or other papers in a manner permitted
by the notice provisions of Section 17 hereof.
(d) Employee agrees that he will provide, and that the
Company may similarly provide, a copy of Sections 12 and 13 hereof to any
business or enterprise (i) which he may directly or indirectly own, manage,
operate, finance, join, control or participate in the ownership, management,
operation, financing, control or control of, or (ii) with which he may be
connected with as an officer, director, employee, partner, principal, agent,
representative, consultant or otherwise, or in connection with which he may use
or permit him name to be used; provided, however, that this provision shall not
apply in respect of Section 3 hereof after expiration of the time period set
forth therein.
<PAGE>
15. Term of Agreement. The term of this Agreement shall be
for two years from the date hereof and shall be automatically renewed for
successive one-year periods unless the Company notifies the Employee in writing
that this Agreement will not be renewed at least sixty days prior to the end of
the current term; provided, however, that (i) a failure of the Company to renew
at a time when the Employee is employed by the Company shall constitute an
involuntary Termination of Employment entitling the Employee to terminate
employment from the Company and to the payments provided by Section 3(a) unless
the Employee elects, within 30 days after a non-renewal, to continue employment
and, thereby, waive such payments in connection with the failure to renew, (ii)
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 (iii) 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, except as provided in clause (i) or in
Section 3(b).
16. Successor Company. The Company shall require any
successor or successors (whether direct or indirect, by purchase, merger,
consolidation or otherwise) to all or substantially all of the business and/or
assets of the Company, by agreement in form and substance satisfactory to the
Employee, to acknowledge expressly that this Agreement is binding upon and
enforceable against the Company in accordance with the terms hereof, and to
become jointly and severally obligated with the Company to perform this
Agreement in the same manner and to the same extent that the Company would be
required to perform if no such succession or successions had taken place.
Failure of the Company to obtain such agreement prior to the effectiveness of
any such succession shall be a breach of this Agreement. As used in this
Agreement, the Company shall mean the Company as hereinbefore defined and any
such successor or successors to its business and/or assets, jointly and
severally.
17. Notice. All notices and other communications required
or permitted hereunder or necessary or convenient in connection herewith shall
be in writing and shall be delivered personally or mailed by registered or
certified mail, return receipt requested, or by overnight express courier
service, as follows:
<PAGE>
If to the Company, to:
Maritrans Inc.
1818 Market Street
Philadelphia, PA 19103
Attention: Corporate Secretary
If to the Employee, to:
John J. Burns
5 Hickory Lane
Laurel Hills Estates
Woodstown, NJ 08098
or to such other names or addresses as the Company or the Employee, as the case
may be, shall designate by notice to the other party hereto in the manner
specified in this Section; provided, however, that if no such notice is given by
the Company following a Change of Control, notice at the last address of the
Company or to any successor pursuant to Section 16 hereof shall be deemed
sufficient for the purposes hereof. Any such notice shall be deemed delivered
and effective when received in the case of personal delivery, five days after
deposit, postage prepaid, with the U.S. Postal Service in the case of registered
or certified mail, or on the next business day in the case of overnight express
courier service.
18. Governing Law. This Agreement shall be governed by and
interpreted under the laws of the Commonwealth of Pennsylvania without giving
effect to any conflict of laws provisions.
19. Contents of Agreement, Amendment and Assignment.
<PAGE>
(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.
20. Severability. If any provision of this Agreement or
application thereof to anyone or under any circumstances shall be determined to
be invalid or unenforceable, such invalidity or unenforceability shall not
affect any other provisions or applications of this Agreement which can be given
effect without the invalid or unenforceable provision or application.
<PAGE>
21. Remedies Cumulative; No Waiver. No right conferred
upon the Employee by this Agreement is intended to be exclusive of any other
right or remedy, and each and every such right or remedy shall be cumulative and
shall be in addition to any other right or remedy given hereunder or now or
hereafter existing at law or in equity. No delay or omission by the Employee in
exercising any right, remedy or power hereunder or existing at law or in equity
shall be construed as a waiver thereof, including, without limitation, any delay
by the Employee in delivering a Notice of Termination pursuant to Section 2
hereof after an event has occurred which would, if the Employee had resigned,
have constituted a Termination following a Change of Control pursuant to Section
1(l)(ii) of this Agreement.
22. Miscellaneous. All section headings are for
convenience only. This Agreement may be executed in several counterparts, each
of which is an original. It shall not be necessary in making proof of this
Agreement or any counterpart hereof to produce or account for any of the other
counterparts.
23. Termination of Agreement. This Agreement shall
supersede and replace the Agreement which shall hereafter be null and void and
of no further force and effect.
IN WITNESS WHEREOF, the undersigned, intending to be
legally bound, have executed this Agreement as of the date first above written.
Attest: Maritrans General Partner Inc.
[Seal]
By /s/ Walter T. Bromfield
_______________________ ---------------------------
Secretary
/s/ Janice M. Smallacombe /s/ John J. Burns
- --------------------------- -----------------
Witness John J. Burns
<PAGE>
SEVERANCE AND NON-COMPETITION AGREEMENT
Amended Agreement made as of the 30th day of June 1999, between
Maritrans General Partner Inc., a Delaware corporation (the "Company"), and
Janice M. Smallacombe (the "Employee").
WHEREAS, the Employee is employed by the Company as Senior Vice
President - Maritrans Inc.;
WHEREAS, the Company is a subsidiary of Maritrans Inc., a publicly
traded corporation ("Maritrans");
WHEREAS, the Employee and Maritrans entered into a Severance and
Non-competition Agreement on July 7, 1997 to provide certain payments to the
Employee in the event that her employment were terminated, including as a result
of a Change of Control of Maritrans (the "Agreement");
WHEREAS, the Employee and the Company now wish to revise the Agreement;
and
WHEREAS, in consideration for the Employee agreeing not to compete with
the Company in the event the Employee's employment is terminated, the Company
agrees that the Employee shall receive the compensation set forth in this
Agreement as a cushion against the financial and career impact on the Employee
in the event the Employee's employment with the Company is terminated without
cause whether or not there is a Change of Control of Maritrans;
NOW, THEREFORE, in consideration of the foregoing and the mutual
covenants and agreements hereinafter set forth and intending to be legally bound
hereby, the parties hereto agree as follows:
1. Definitions. For all purposes of this Agreement, the following terms
shall have the meanings specified in this Section unless the context clearly
otherwise requires:
(a) "Affiliate" and "Associate" shall have the respective meanings
ascribed to such terms in Rule 12b-2 of the General Rules and Regulations under
the Securities Exchange Act of 1934, as amended (the "Exchange Act").
(b) "Base Compensation" shall mean the 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;
<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.
(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
<PAGE>
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.
(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
(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 her 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 her principal place of business
immediately preceding the Change of Control may be located at such time
if other than metropolitan Philadelphia.
(F) the current Chief Executive Officer has also terminated his
employment due to the Change of Control.
2. Notice of Termination. Any Termination of Employment shall be
communicated by a Notice of Termination to the other party hereto given in
accordance with Section 14 hereof. For purposes of this Agreement, a "Notice of
Termination" means a written notice which (i) indicates the specific reasons for
the termination, (ii) briefly summarizes the facts and circumstances deemed to
provide a basis for termination of the Employee's employment, and (iii) if the
Termination Date is other than the date of receipt of such notice, specifies the
Termination Date (which date shall not be more than 15 days after the giving of
such notice).
3. Severance Compensation upon Termination. (a) In the event of the
Employee's involuntary Termination of Employment for reason other than Cause,
<PAGE>
the Company shall continue to pay to the Employee, upon the execution of a
release substantially in the form being used by the Company, prior to a Change
of Control, for terminating executives, an amount equal to her Base
Compensation, subject to customary employment taxes and deductions, for 12
months following her Termination Date but all other benefit coverages (except as
specified by law or regulation), retirement benefits and fringe benefit
eligibility shall cease upon the Termination Date.
(b) Subject to the provisions of Section 11 hereof, in the event of the
Employee's Termination following a Change of Control or in the event that a
Change of Control occurs within six months after a Termination of Employment
requiring a payment under subsection (a), the Company shall pay to the Employee,
within 30 days after the Termination Date (or as soon as possible thereafter in
the event that the procedures set forth in Section 11(b) hereof cannot be
completed within 30 days or payments have already commenced under subsection (a)
above), and in lieu of, or reduced by, as applicable any payment under
subsection (a) above, a single sum in cash equal to 1.99 times the Employee's
Base Compensation.
(c) In the event the Employee's Normal Retirement Date would occur
prior to 24 months after the Termination Date, the aggregate cash amount
determined as set forth in (a) 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.
(d) As additional consideration for the non-competition and
non-solicitation covenants contained in Sections 12 and 13, (i) if payments are
made under subsection (a) above, an amount equal to her Base Compensation,
subject to customary employment taxes and deductions, for 12 months following
her Termination Date, or (ii) if payments are made under subsection (b) above, a
single cash payment, within 30 days after the effective date of the Termination
of Employment, equal to Employee's Base Compensation.
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.
(b) It is the intent of the parties that the Employee not be required
to incur any expenses associated with the enforcement of her 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.
<PAGE>
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.
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.
(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. The Employee shall in her sole discretion
determine which and how much of the Agreement Payments shall be eliminated or
reduced consistent with the requirements of this Section. Within five days after
the Employee's 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
<PAGE>
required to be made hereunder. Within two years after the Termination of
Employment, the Accounting Firm shall review the determination made by it
pursuant to the preceding paragraph. In the event that the Accounting Firm
determines that an Overpayment has been made, any such Overpayment shall be
treated for all purposes as a loan to the Employee which the Employee shall
repay to the Company together with interest at the applicable Federal rate
provided for in Section 7872(f)(2) of the Code (the "Federal Rate"); provided,
however, that no amount shall be payable by the Employee to the Company if and
to the extent such payment would not reduce the amount which is subject to
taxation under Section 4999 of the Code. In the event that the Accounting Firm
determines that an Underpayment has occurred, any such Underpayment shall be
promptly paid by the Company to or for the benefit of the Employee together with
interest at the Federal Rate.
(d) All of the fees and expenses of the Accounting Firm in performing
the determinations referred to in subsections (b) and (c) above shall be borne
solely by the Company. The Company agrees to indemnify and hold harmless the
Accounting Firm of and from any and all claims, damages and expenses resulting
from or relating to its determinations pursuant to subsections (b) and (c)
above, except for claims, damages or expenses resulting from the gross
negligence or willful misconduct of the Accounting Firm.
12. Confidential Information. The Employee recognizes and acknowledges
that, by reason of her employment by and service to the Company, she has had and
will continue to have access to confidential information of the Company and its
affiliates, including, without limitation, information and knowledge pertaining
to products and services offered, innovations, designs, ideas, plans, trade
secrets, proprietary information, distribution and sales methods and systems,
sales and profit figures, customer and client lists, and relationships between
the Company and its affiliates and other distributors, customers, clients,
suppliers and others who have business dealings with the Company and its
affiliates ("Confidential Information"). The Employee acknowledges that such
Confidential Information is a valuable and unique asset and covenants that she
will not, either during or after her employment by the Company, disclose any
such Confidential Information to any person for any reason whatsoever without
the prior written authorization of the Board, unless such information is in the
public domain through no fault of the Employee or except as may be required by
law.
13. Non-Competition.
(a) During her employment by the Company and for a period of one year
thereafter, the Employee will not, unless acting with the prior written consent
of the Board, directly or indirectly, own, manage, operate, join, control,
finance or participate in the ownership, management, operation, control or
financing of, or be connected as an officer, director, employee, partner,
principal, agent, representative, consultant or otherwise with or use or permit
her name to be used in connection with, any business or enterprise engaged in a
geographic area in which the Company or any of its affiliates is operating
either during her employment by the Company or on the Termination Date, as
applicable, presently on the East Coast of the United States or at any port in
the Gulf of Mexico (whether or not such business is physically located within
those areas) (the "Geographic Area"), in any business that is a customer of,
competitive to, a business from which the Company or any of its affiliates
derive at least five percent of its respective gross revenues either during her
employment by the Company or on the Termination Date, as applicable. It is
recognized by the Employee that the business of the Company and its affiliates
and the Employee's connection therewith is or will be involved in activity
throughout the Geographic Area, and that more limited geographical limitations
on this non-competition covenant are therefore not appropriate. The Employee
also shall not, directly or indirectly, during such one-year period (a) solicit
or divert business from, or attempt to convert any client, account or customer
of the Company or any of its affiliates, whether existing at the date hereof or
acquired during Employee's employment nor (b) following Employee's employment,
solicit or attempt to hire any then employee of the Employer or of any of its
affiliates.
<PAGE>
(b) The foregoing restriction shall not be construed to prohibit the
ownership by the Employee of less than one percent (1%) of any class of
securities of any corporation which is engaged in any of the foregoing
businesses having a class of securities registered pursuant to the Securities
Exchange Act of 1934, provided that such ownership represents a passive
investment and that neither the Employee nor any group of persons including
Employee in any way, either directly or indirectly, manages or exercises control
of any such corporation, guarantees any of its financial obligations, otherwise
takes any part in its business, other than exercising her rights as a
shareholder, or seeks to do any of the foregoing.
14. Equitable Relief.
(a) Employee acknowledges that the restrictions contained in Sections
12 and 13 hereof are reasonable and necessary to protect the legitimate
interests of the Company and its affiliates, that the Company would not have
entered into this Agreement in the absence of such restrictions, and that any
violation of any provision of those Sections will result in irreparable injury
to the Company. The Employee represents that her experience and capabilities are
such that the restrictions contained in Section 13 hereof will not prevent the
Employee from obtaining employment or otherwise earning a living at the same
general level of economic benefit as anticipated by this Agreement. The Employee
further represents and acknowledges that (i) she has been advised by the Company
to consult her own legal counsel in respect of this Agreement, and (ii) that she
has had full opportunity, prior to execution of this Agreement, to review
thoroughly this Agreement with her counsel.
(b) The Employee agrees that the Company shall be entitled to
preliminary and permanent injunctive relief, without the necessity of proving
actual damages, as well as an equitable accounting of all earnings, profits and
other benefits arising from any violation of Sections 12 or 13 hereof, which
rights shall be cumulative and in addition to any other rights or remedies to
which the Company may be entitled. In the event that any of the provisions of
Sections 12 or 13 hereof should ever be adjudicated to exceed the time,
geographic, service, or other limitations permitted by applicable law in any
jurisdiction, then such provisions shall be deemed reformed in such jurisdiction
to the maximum time, geographic, service, or other limitations permitted by
applicable law.
(c) The Employee irrevocably and unconditionally (i) agrees that any
suit, action or other legal proceeding arising out of Section 12 or 13 hereof,
including without limitation, any action commenced by the Company for
preliminary and permanent injunctive relief or other equitable relief, may be
brought in the United States District Court for the Eastern District of
Pennsylvania, or if such court does not have jurisdiction or will not accept
jurisdiction, in any court of general jurisdiction in Philadelphia County,
Pennsylvania, (ii) consents to the non-exclusive jurisdiction of any such court
in any such suit, action or proceeding, and (iii) waives any objection which
Employee may have to the laying of venue of any such suit, action or proceeding
in any such court. Employee also irrevocably and unconditionally consents to the
service of any process, pleadings, notices or other papers in a manner permitted
by the notice provisions of Section 17 hereof.
(d) Employee agrees that she will provide, and that the Company may
similarly provide, a copy of Sections 12 and 13 hereof to any business or
enterprise (i) which she may directly or indirectly own, manage, operate,
finance, join, control or participate in the ownership, management, operation,
financing, control or control of, or (ii) with which she may be connected with
as an officer, director, employee, partner, principal, agent, representative,
consultant or otherwise, or in connection with which she may use or permit her
name to be used; provided, however, that this provision shall not apply in
respect of Section 3 hereof after expiration of the time period set forth
therein.
<PAGE>
15. Term of Agreement. The term of this Agreement shall be for two
years from the date hereof and shall be automatically renewed for successive
one-year periods unless the Company notifies the Employee in writing that this
Agreement will not be renewed at least sixty days prior to the end of the
current term; provided, however, that (i) a failure of the Company to renew at a
time when the Employee is employed by the Company shall constitute an
involuntary Termination of Employment entitling the Employee to terminate
employment from the Company and to the payments provided by Section 3(a) unless
the Employee elects, within 30 days after a non-renewal, to continue employment
and, thereby, waive such payments in connection with the failure to renew, (ii)
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 (iii) 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, except as provided in clause (i) or in
Section 3(b).
16. Successor Company. The Company shall require any successor or
successors (whether direct or indirect, by purchase, merger, consolidation or
otherwise) to all or substantially all of the business and/or assets of the
Company, by agreement in form and substance satisfactory to the Employee, to
acknowledge expressly that this Agreement is binding upon and enforceable
against the Company in accordance with the terms hereof, and to become jointly
and severally obligated with the Company to perform this Agreement in the same
manner and to the same extent that the Company would be required to perform if
no such succession or successions had taken place. Failure of the Company to
obtain such agreement prior to the effectiveness of any such succession shall be
a breach of this Agreement. As used in this Agreement, the Company shall mean
the Company as hereinbefore defined and any such successor or successors to its
business and/or assets, jointly and severally.
17. Notice. All notices and other communications required or permitted
hereunder or necessary or convenient in connection herewith shall be in writing
and shall be delivered personally or mailed by registered or certified mail,
return receipt requested, or by overnight express courier service, as follows:
If to the Company, to:
Maritrans Inc.
1818 Market Street
Philadelphia, PA 19103
Attention: Corporate Secretary
If to the Employee, to:
Janice M. Smallacombe
2148 Andrea Drive
Bensalem, PA 19020
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
<PAGE>
deposit, postage prepaid, with the U.S. Postal Service in the case of registered
or certified mail, or on the next business day in the case of overnight express
courier service.
18. Governing Law. This Agreement shall be governed by and interpreted
under the laws of the Commonwealth of Pennsylvania without giving effect to any
conflict of laws provisions.
19. Contents of Agreement, Amendment and Assignment.
(a) This Agreement supersedes all prior agreements, sets forth the
entire understanding between the parties hereto with respect to the subject
matter hereof and cannot be changed, modified, extended or terminated except
upon written amendment executed by the Employee and approved by the Board and
executed on the Company's behalf by a duly authorized officer. The provisions of
this Agreement may provide for payments to the Employee under certain
compensation or bonus plans under circumstances where such plans would not
provide for payment thereof. It is the specific intention of the parties that
the provisions of this Agreement shall supersede any provisions to the contrary
in such plans, and such plans shall be deemed to have been amended to correspond
with this Agreement without further action by the Company or the Board.
(b) Nothing in this Agreement shall be construed as giving the Employee
any right to be retained in the employ of the Company.
(c) All of the terms and provisions of this Agreement shall be binding
upon and inure to the benefit of and be enforceable by the respective heirs,
representatives, successors and assigns of the parties hereto, except that the
duties and responsibilities of the Employee and the Company hereunder shall not
be assignable in whole or in part by the Company.
20. Severability. If any provision of this Agreement or application
thereof to anyone or under any circumstances shall be determined to be invalid
or unenforceable, such invalidity or unenforceability shall not affect any other
provisions or applications of this Agreement which can be given effect without
the invalid or unenforceable provision or application.
21. Remedies Cumulative; No Waiver. No right conferred upon the
Employee by this Agreement is intended to be exclusive of any other right or
remedy, and each and every such right or remedy shall be cumulative and shall be
in addition to any other right or remedy given hereunder or now or hereafter
existing at law or in equity. No delay or omission by the Employee in exercising
any right, remedy or power hereunder or existing at law or in equity shall be
construed as a waiver thereof, including, without limitation, any delay by the
Employee in delivering a Notice of Termination pursuant to Section 2 hereof
after an event has occurred which would, if the Employee had resigned, have
constituted a Termination following a Change of Control pursuant to Section
1(l)(ii) of this Agreement.
22. Miscellaneous. All section headings are for convenience only. This
Agreement may be executed in several counterparts, each of which is an original.
It shall not be necessary in making proof of this Agreement or any counterpart
hereof to produce or account for any of the other counterparts.
23. Termination of Agreement. This Agreement shall supersede and
replace the Agreement which shall hereafter be null and void and of no further
force and effect.
IN WITNESS WHEREOF, the undersigned, intending to be legally bound,
have executed this Agreement as of the date first above written.
<PAGE>
Attest: Maritrans General Partner Inc.
[Seal]
/s/ Parker S. Wise By /s/ Walter T. Bromfield
- ----------------------- --------------------------
Secretary
_______________________ /s/ Janice M. Smallacombe
-------------------------
Witness Janice M. Smallacombe
<PAGE>
AGREEMENT
Agreement made as of the 1st day of December, 1998, between Maritrans
General Partner Inc., a Delaware corporation (the "Company"), and Philip J.
Doherty (the "Employee").
WHEREAS, the Employee is employed by the Company as its Director of
Finance;
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;
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
<PAGE>
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;
(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.
(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
<PAGE>
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.
(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
(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.
2. Notice of Termination. Any Termination of Employment shall be
communicated by a otice of Termination to the other party hereto given in
accordance with Section 14 hereof. For purposes of this Agreement, a
<PAGE>
"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.
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.
(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
<PAGE>
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.
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.
(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
<PAGE>
provided for in Section 7872(f)(2) of the Code (the "Federal Rate"); provided,
however, that no amount shall be payable by the Employee to the Company if and
to the extent such payment would not reduce the amount which is subject to
taxation under Section 4999 of the Code. In the event that the Accounting Firm
determines that an Underpayment has occurred, any such Underpayment shall be
promptly paid by the Company to or for the benefit of the Employee together with
interest at the Federal Rate.
(d) All of the fees and expenses of the Accounting Firm in performing
the determinations referred to in subsections (b) and (c) above shall be borne
solely by the Company. The Company agrees to indemnify and hold harmless the
Accounting Firm of and from any and all claims, damages and expenses resulting
from or relating to its determinations pursuant to subsections (b) and (c)
above, except for claims, damages or expenses resulting from the gross
negligence or willful misconduct of the Accounting Firm.
12. 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.
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:
Philip J. Doherty
714 Mildred Street
Philadelphia, PA 19147
<PAGE>
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.
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.
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.
<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]
By /s/ Walter T. Bromfield
- ----------------------- ---------------------------
Secretary
/s/ Maureen Heaney /s/ Philip J. Doherty
- ----------------------- ---------------------
Witness Philip J. Doherty
<PAGE>
SEVERANCE AND NON-COMPETITION AGREEMENT
Agreement made as of the 7th day of January, 2000, between Maritrans
General Partner Inc., a Delaware corporation (the "Company"), and Walter T.
Bromfield (the "Employee").
WHEREAS, the Employee is employed by the Company as Vice President and
Controller of Maritrans Inc.;
WHEREAS, the Company is a subsidiary of Maritrans Inc., a publicly
traded corporation ("Maritrans");
WHEREAS, the board of directors of the Company recognizes that, as is
the case with many publicly held corporations, the possibility of a change in
control of Maritrans and the Company exists and that such possibility, and the
uncertainty and questions which it may raise among management, may result in the
departure or distraction of key management personnel to the detriment of the
Company;
WHEREAS, the board of directors of the Company has determined that
appropriate steps should be taken to reinforce and encourage the continued
attention and dedication of key members of the Company's management to their
assigned duties without distraction in the face of potentially disturbing
circumstances arising from the possibility of a change in control of the
Company; and
WHEREAS, in consideration for the Employee accepting employment with
the Company and agreeing not to compete with the Company in the event the
Employee's employment is terminated, the Company agrees that the Employee shall
receive the compensation set forth in this Agreement as a cushion against the
financial and career impact on the Employee in the event the Employee's
employment with the Company is terminated without cause whether or not there is
a Change of Control of Maritrans;
NOW, THEREFORE, in consideration of the foregoing and the mutual
covenants and agreements hereinafter set forth and intending to be legally bound
hereby, the parties hereto agree as follows:
1. Definitions. For all purposes of this Agreement, the following terms
shall have the meanings specified in this Section unless the context clearly
otherwise requires:
(a) "Affiliate" and "Associate" shall have the respective meanings
ascribed to such terms in Rule 12b-2 of the General Rules and Regulations under
the Securities Exchange Act of 1934, as amended (the "Exchange Act").
(b) "Base Compensation" shall mean the 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;
<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.
(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
<PAGE>
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.
(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
(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.
2. Notice of Termination. Any Termination of Employment shall be
communicated by a Notice of Termination to the other party hereto given in
accordance with Section 14 hereof. For purposes of this Agreement, a "Notice of
Termination" means a written notice which (i) indicates the specific reasons for
the termination, (ii) briefly summarizes the facts and circumstances deemed to
provide a basis for termination of the Employee's employment, and (iii) if the
Termination Date is other than the date of receipt of such notice, specifies the
Termination Date (which date shall not be more than 15 days after the giving of
such notice).
3. Severance Compensation upon Termination.
(a) In the event of the Employee's involuntary Termination of
Employment for reason other than Cause, the Company shall continue to pay to the
Employee, upon the execution of a release substantially in the form being used
by the Company, prior to a Change of Control, for terminating executives, an
amount equal to one-half his Base Compensation, subject to customary employment
taxes and deductions, for six months following the Termination Date but all
<PAGE>
other benefit coverages (except as specified by law or regulation), retirement
benefits and fringe benefit eligibility shall cease upon the Termination Date.
(b) Subject to the provisions of Section 11 hereof, in the event of the
Employee's Termination following a Change of Control or in the event that a
Change of Control occurs within six months after a Termination of Employment
requiring a payment under subsection (a), the Company shall pay to the Employee,
within 30 days after the Termination Date (or as soon as possible thereafter in
the event that the procedures set forth in Section 11(b) hereof cannot be
completed within 30 days or payments have already commenced under subsection (a)
above), and in lieu of, or reduced by, as applicable, any payment under
subsection (a) above, a single sum in cash equal to one times the Employee's
Base Compensation.
(c) In the event the Employee's Normal Retirement Date would occur
prior to 24 months after the Termination Date, the aggregate cash amount
determined as set forth in (a) above shall be reduced by multiplying it by a
fraction, the numerator of which shall be the number of days from the
Termination Date to the Employee's Normal Retirement Date and the denominator of
which shall be 730.
(d) As additional consideration for the non-competition and
non-solicitation covenants contained in Sections 12 and 13, (i) if payments are
made under subsection (a) above, an amount equal to his Base Compensation,
subject to customary employment taxes and deductions, for 12 months following
his Termination Date, or (ii) if payments are made under subsection (b) above, a
single cash payment, within 30 days after the effective date of the Termination
of Employment, equal to Employee's Base Compensation.
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.
(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.
<PAGE>
8. Non-exclusivity of Rights. Nothing in this Agreement shall prevent
or limit the Employee's continuing or future participation in or rights under
any benefit, bonus, incentive or other plan or program provided by the Company
or any of its Subsidiaries or Affiliates and for which the Employee may qualify;
provided, however, that the Employee hereby waives the Employee's right to
receive any payments under any severance pay plan or similar program applicable
to other employees of the Company.
9. No Set-Off. The Company's obligation to make the payments provided
for in this Agreement and otherwise to perform its obligations hereunder shall
not be affected by any circumstances, including, without limitation, any
set-off, counterclaim, recoupment, defense or other right which the Company may
have against the Employee or others.
10. Taxes. Any payment required under this Agreement shall be subject
to all requirements of the law with regard to the withholding of taxes, filing,
making of reports and the like, and the Company shall use its best efforts to
satisfy promptly all such requirements.
11. Certain Reduction of Payments.
(a) Anything in this Agreement to the contrary notwithstanding, in the
event that it shall be determined that any payment or distribution by the
Company to or for the benefit of the Employee, whether paid or payable or
distributed or distributable pursuant to the terms of this Agreement or
otherwise (a "Payment"), would constitute an "excess 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.
(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. The Employee shall in his sole discretion
determine which and how much of the Agreement Payments shall be eliminated or
reduced consistent with the requirements of this Section. Within five days after
the Employee's 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,
<PAGE>
however, that no amount shall be payable by the Employee to the Company if and
to the extent such payment would not reduce the amount which is subject to
taxation under Section 4999 of the Code. In the event that the Accounting Firm
determines that an Underpayment has occurred, any such Underpayment shall be
promptly paid by the Company to or for the benefit of the Employee together with
interest at the Federal Rate.
(d) All of the fees and expenses of the Accounting Firm in performing
the determinations referred to in subsections (b) and (c) above shall be borne
solely by the Company. The Company agrees to indemnify and hold harmless the
Accounting Firm of and from any and all claims, damages and expenses resulting
from or relating to its determinations pursuant to subsections (b) and (c)
above, except for claims, damages or expenses resulting from the gross
negligence or willful misconduct of the Accounting Firm.
12. Confidential Information. The Employee recognizes and acknowledges
that, by reason of his employment by and service to the Company, he has had and
will continue to have access to confidential information of the Company and its
affiliates, including, without limitation, information and knowledge pertaining
to products and services offered, innovations, designs, ideas, plans, trade
secrets, proprietary information, distribution and sales methods and systems,
sales and profit figures, customer and client lists, and relationships between
the Company and its affiliates and other distributors, customers, clients,
suppliers and others who have business dealings with the Company and its
affiliates ("Confidential Information"). The Employee acknowledges that such
Confidential Information is a valuable and unique asset and covenants that he
will not, either during or after his employment by the Company, disclose any
such Confidential Information to any person for any reason whatsoever without
the prior written authorization of the Board, unless such information is in the
public domain through no fault of the Employee or except as may be required by
law.
13. Non-Competition.
(a) During his employment by the Company and for a period of one year
thereafter, the Employee will not, unless acting with the prior written consent
of the Board, directly or indirectly, own, manage, operate, join, control,
finance or participate in the ownership, management, operation, control or
financing of, or be connected as an officer, director, employee, partner,
principal, agent, representative, consultant or otherwise with or use or permit
his name to be used in connection with, any business or enterprise engaged in a
geographic area in which the Company or any of its affiliates is operating
either during his employment by the Company or on the Termination Date, as
applicable, presently on the East Coast of the United States or at any port in
the Gulf of Mexico (whether or not such business is physically located within
those areas) (the "Geographic Area"), in any business that is a customer of,
competitive to, a business from which the Company or any of its affiliates
derive at least five percent of its respective gross transportation revenues
either during his employment by the Company or on the Termination Date, as
applicable. It is recognized by the Employee that the business of the Company
and its affiliates and the Employee's connection therewith is or will be
involved in activity throughout the Geographic Area, and that more limited
geographical limitations on this non-competition covenant are therefore not
appropriate. The Employee also shall not, directly or indirectly, during such
one-year period (a) solicit or divert business from, or attempt to convert any
client, account or customer of the Company or any of its affiliates, whether
existing at the date hereof or acquired during Employee's employment nor (b)
following Employee's employment, solicit or attempt to hire any then employee of
the Employer or of any of its affiliates.
(b) The foregoing restriction shall not be construed to prohibit the
ownership by the Employee of less than one percent (1%) of any class of
securities of any corporation which is engaged in any of the foregoing
<PAGE>
businesses having a class of securities registered pursuant to the Securities
Exchange Act of 1934, provided that such ownership represents a passive
investment and that neither the Employee nor any group of persons including
Employee in any way, either directly or indirectly, manages or exercises control
of any such corporation, guarantees any of its financial obligations, otherwise
takes any part in its business, other than exercising his rights as a
shareholder, or seeks to do any of the foregoing.
14. Equitable Relief.
(a) Employee acknowledges that the restrictions contained in Sections
12 and 13 hereof are reasonable and necessary to protect the legitimate
interests of the Company and its affiliates, that the Company would not have
entered into this Agreement in the absence of such restrictions, and that any
violation of any provision of those Sections will result in irreparable injury
to the Company. The Employee represents that his experience and capabilities are
such that the restrictions contained in Section 13 hereof will not prevent the
Employee from obtaining employment or otherwise earning a living at the same
general level of economic benefit as anticipated by this Agreement. The Employee
further represents and acknowledges that (i) he has been advised by the Company
to consult his own legal counsel in respect of this Agreement, and (ii) that he
has had full opportunity, prior to execution of this Agreement, to review
thoroughly this Agreement with his counsel.
(b) The Employee agrees that the Company shall be entitled to
preliminary and permanent injunctive relief, without the necessity of proving
actual damages, as well as an equitable accounting of all earnings, profits and
other benefits arising from any violation of Sections 12 or 13 hereof, which
rights shall be cumulative and in addition to any other rights or remedies to
which the Company may be entitled. In the event that any of the provisions of
Sections 12 or 13 hereof should ever be adjudicated to exceed the time,
geographic, service, or other limitations permitted by applicable law in any
jurisdiction, then such provisions shall be deemed reformed in such jurisdiction
to the maximum time, geographic, service, or other limitations permitted by
applicable law.
(c) The Employee irrevocably and unconditionally (i) agrees that any
suit, action or other legal proceeding arising out of Section 12 or 13 hereof,
including without limitation, any action commenced by the Company for
preliminary and permanent injunctive relief or other equitable relief, may be
brought in the United States District Court for the Eastern District of
Pennsylvania, or if such court does not have jurisdiction or will not accept
jurisdiction, in any court of general jurisdiction in Philadelphia County,
Pennsylvania, (ii) consents to the non-exclusive jurisdiction of any such court
in any such suit, action or proceeding, and (iii) waives any objection which
Employee may have to the laying of venue of any such suit, action or proceeding
in any such court. Employee also irrevocably and unconditionally consents to the
service of any process, pleadings, notices or other papers in a manner permitted
by the notice provisions of Section 17 hereof.
(d) Employee agrees that he will provide, and that the Company may
similarly provide, a copy of Sections 12 and 13 hereof to any business or
enterprise (i) which he may directly or indirectly own, manage, operate,
finance, join, control or participate in the ownership, management, operation,
financing, control or control of, or (ii) with which he may be connected with as
an officer, director, employee, partner, principal, agent, representative,
consultant or otherwise, or in connection with which he may use or permit his
name to be used; provided, however, that this provision shall not apply in
respect of Section 3 hereof after expiration of the time period set forth
therein.
15. Term of Agreement. The term of this Agreement shall be for two
years from the date hereof and shall be automatically renewed for successive
one-year periods unless the Company notifies the Employee in writing that this
<PAGE>
Agreement will not be renewed at least sixty days prior to the end of the
current term; provided, however, that (i) a failure of the Company to renew at a
time when the Employee is employed by the Company shall constitute an
involuntary Termination of Employment entitling the Employee to terminate
employment from the Company and to the payments provided by Section 3(a) unless
the Employee elects to continue employment, within 30 days after a non-renewal,
and, thereby, waive such payments in connection with the failure to renew, (ii)
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 (iii) 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, except as provided in clause (i) or in
Section 3(b).
16. Successor Company. The Company shall require any successor or
successors (whether direct or indirect, by purchase, merger, consolidation or
otherwise) to all or substantially all of the business and/or assets of the
Company, by agreement in form and substance satisfactory to the Employee, to
acknowledge expressly that this Agreement is binding upon and enforceable
against the Company in accordance with the terms hereof, and to become jointly
and severally obligated with the Company to perform this Agreement in the same
manner and to the same extent that the Company would be required to perform if
no such succession or successions had taken place. Failure of the Company to
obtain such agreement prior to the effectiveness of any such succession shall be
a breach of this Agreement. As used in this Agreement, the Company shall mean
the Company as hereinbefore defined and any such successor or successors to its
business and/or assets, jointly and severally.
17. Notice. All notices and other communications required or permitted
hereunder or necessary or convenient in connection herewith shall be in writing
and shall be delivered personally or mailed by registered or certified mail,
return receipt requested, or by overnight express courier service, as follows:
If to the Company, to:
Maritrans Inc.
1818 Market Street
Philadelphia, PA 19103
Attention: Corporate Secretary
If to the Employee, to:
Walter T. Bromfield
629 N. Speakman Lane
West Chester, PA 19380
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.
<PAGE>
18. Governing Law. This Agreement shall be governed by and interpreted
under the laws of the Commonwealth of Pennsylvania without giving effect to any
conflict of laws provisions.
19. Contents of Agreement, Amendment and Assignment.
(a) This Agreement supersedes all prior agreements, sets forth the
entire understanding between the parties hereto with respect to the subject
matter hereof and cannot be changed, modified, extended or terminated except
upon written amendment executed by the Employee and approved by the Board and
executed on the Company's behalf by a duly authorized officer. The provisions of
this Agreement may provide for payments to the Employee under certain
compensation or bonus plans under circumstances where such plans would not
provide for payment thereof. It is the specific intention of the parties that
the provisions of this Agreement shall supersede any provisions to the contrary
in such plans, and such plans shall be deemed to have been amended to correspond
with this Agreement without further action by the Company or the Board.
(b) Nothing in this Agreement shall be construed as giving the Employee
any right to be retained in the employ of the Company.
(c) All of the terms and provisions of this Agreement shall be binding
upon and inure to the benefit of and be enforceable by the respective heirs,
representatives, successors and assigns of the parties hereto, except that the
duties and responsibilities of the Employee and the Company hereunder shall not
be assignable in whole or in part by the Company.
20. Severability. If any provision of this Agreement or application
thereof to anyone or under any circumstances shall be determined to be invalid
or unenforceable, such invalidity or unenforceability shall not affect any other
provisions or applications of this Agreement which can be given effect without
the invalid or unenforceable provision or application.
21. Remedies Cumulative; No Waiver. No right conferred upon the
Employee by this Agreement is intended to be exclusive of any other right or
remedy, and each and every such right or remedy shall be cumulative and shall be
in addition to any other right or remedy given hereunder or now or hereafter
existing at law or in equity. No delay or omission by the Employee in exercising
any right, remedy or power hereunder or existing at law or in equity shall be
construed as a waiver thereof, including, without limitation, any delay by the
Employee in delivering a Notice of Termination pursuant to Section 2 hereof
after an event has occurred which would, if the Employee had resigned, have
constituted a Termination following a Change of Control pursuant to Section
1(l)(ii) of this Agreement.
22. Miscellaneous. All section headings are for convenience only. This
Agreement may be executed in several counterparts, each of which is an original.
It shall not be necessary in making proof of this Agreement or any counterpart
hereof to produce or account for any of the other counterparts.
23. Termination of Agreement. This Agreement shall supersede and
replace the Agreement which shall hereafter be null and void and of no further
force and effect.
<PAGE>
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]
By /s/ John J. Burns
- ----------------------- ---------------------------
/s/ Janice M. Smallacombe /s/ Walter T. Bromfield
- --------------------------- -----------------------
Witness Walter T. Bromfield
<PAGE>
MARITRANS INC.
SUBSIDIARIES OF MARITRANS INC.
As of December 31, 1999
Direct and indirect subsidiaries of Maritrans Inc. are:
Maritrans General Partner Inc.
Maritrans Operating Partners L.P.
Maritrans Tankers Inc.
Maritrans Business Services Co., Inc.
Maritrans Chartering Co., Inc.
Maritrans Holdings Inc.
Maritrans Barge Co.
Maritrans Capital Corporation
CCF Acquisition Corp.
Maritank Philadelphia Inc.
Maritank Maryland Inc.
Interstate Towing (Texas) Co.
Inter-Cities Navigation (Texas) Corporation
<PAGE>
Exhibit 23.1
Consent of Independent Auditors
We consent to the incorporation by reference in the Registration Statement on
Form S-8 (No. 333-33765) pertaining to the Equity Compensation Plan of
Maritrans Inc. and on Form S-8 (No. 333-79891) pertaining to the Maritrans Inc.
Directors and Key Employees' Equity Compensation Plan of our report dated
January 28, 2000, 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, 1999.
/s/ Ernst & Young, LLP
-------------------------
Ernst & Young, LLP
Philadelphia, Pennsylvania
March 28, 2000
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