-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, JhF/eCJmxa2nQVSz0m2mEDiRTX/MOrxmFCL5bl/LVOjWGEx6H8C/elsP6T6kKn8q BJjTt+AWKYdnWsl7CnD/Fw== 0000950116-00-000650.txt : 20000411 0000950116-00-000650.hdr.sgml : 20000411 ACCESSION NUMBER: 0000950116-00-000650 CONFORMED SUBMISSION TYPE: 10-K PUBLIC DOCUMENT COUNT: 11 CONFORMED PERIOD OF REPORT: 19991231 FILED AS OF DATE: 20000329 FILER: COMPANY DATA: COMPANY CONFORMED NAME: MARITRANS INC /DE/ CENTRAL INDEX KEY: 0000810113 STANDARD INDUSTRIAL CLASSIFICATION: WATER TRANSPORTATION [4400] IRS NUMBER: 510343903 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-K SEC ACT: SEC FILE NUMBER: 001-09063 FILM NUMBER: 581755 BUSINESS ADDRESS: STREET 1: 1818 MARKET STREET SUITE 3540 CITY: PHILADELPHIA STATE: PA ZIP: 19103 BUSINESS PHONE: 2158641200 MAIL ADDRESS: STREET 1: 1818 MARKET STREET SUITE 3540 CITY: PHILADELPHIA STATE: PA ZIP: 19103 FORMER COMPANY: FORMER CONFORMED NAME: MARITRANS PARTNERS L P DATE OF NAME CHANGE: 19920703 10-K 1 - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- SECURITIES AND EXCHANGE COMMISSION Washington, DC 20549 --------------------- 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 --------------------- 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. - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- MARITRANS INC. TABLE OF CONTENTS
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
i 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. ii 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". 1 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, 2 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. 3 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 4 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 5 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:
Gallons Spilled No. of No. of Gals. Per Million Period No. of Gals. Carried Spills Spilled Gals. Carried ------ ---------------------- -------- -------------- ---------------- (000) (000) 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
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 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 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 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 Item 6. SELECTED FINANCIAL DATA
MARITRANS INC. ------------------------------------------------------------------------- JANUARY 1 TO DECEMBER 31, 1999 1998 1997 1996 1995 ---- ---- ---- ---- ---- ($000, except per share amounts) 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
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 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 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 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 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 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)
2000 2001 2002 2003 2004 Thereafter Total ---- ---- ---- ---- ---- ---------- ----- 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
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 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 MARITRANS INC. CONSOLIDATED BALANCE SHEETS ($000)
December 31, -------------------------- 1999 1998 ---- ---- 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 ======== ========
See accompanying notes. 17 MARITRANS INC. CONSOLIDATED STATEMENTS OF INCOME ($000, except per share amounts)
For the year ended December 31, --------------------------------------- 1999 1998 1997 ---- ---- ---- 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
See accompanying notes. 18 MARITRANS INC. CONSOLIDATED STATEMENTS OF CASH FLOWS INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS ($000)
For the year ended December 31, ----------------------------------------- 1999 1998 1997 ---- ---- ---- 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 -- --
See accompanying notes. 19 MARITRANS INC. CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY ($000, except share amounts)
Outstanding Common Capital in shares of Stock, $.01 excess of Retained Treasury Unearned Common Stock Par Value Par Value Earnings Stock Compensation Total -------------- ------------- ----------- ---------- ------------ -------------- ---------- 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 ========== ==== ======= ======== ======== ======== ========
See accompanying notes. 20 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 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 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.
1999 1998 1997 ---- ---- ---- ($000, except per share amounts) Revenue ............................ $ 115,053 $ 104,643 $ 91,463 Net income ......................... 924 399 9,666 Diluted earnings per share ......... $ 0.08 $ 0.03 $ 0.80
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):
1999 1998 1997 ---- ---- ---- ($000) 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 ======= ======= ========
23 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 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 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS -- (Continued) 8. Stock Incentive Plans -- (Continued) Information on stock options follows:
Number of Weighted Average Options Exercise Price Exercise Price ----------- ---------------- ----------------- 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
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 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:
1999 1998 1997 ---- ---- ---- ($000) 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 ====== ====== ======
Principal items comprising deferred income tax liabilities and assets as of December 31, 1999 and 1998 are:
1999 1998 ---- ---- ($000) 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 ======= =======
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 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:
1999 1998 ---- ---- ($000) 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%
Net periodic pension cost included the following components for the years ended December 31,
1999 1998 1997 ---- ---- ---- ($000) 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 ======= ======== ========
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 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 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS -- (Continued) 11. Debt -- (Continued)
December 31, 1999 1998 ------ ------ ($000) 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 ======= =======
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 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)
First Second Third Fourth Quarter Quarter Quarter Quarter ------------ ------------ ----------- ------------ ($000, except per share amounts) 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
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 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.
Name Age(1) Position ---- ------ -------- 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
- ------------ (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 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 PART IV Item 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K
Page ----- (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.
34
Exhibit Index Page ------------- ------ 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).
35
Exhibit Index Page ------------- ---- 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
36 * 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 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.
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
38 MARITRANS INC. SCHEDULE II -- VALUATION ACCOUNT ($000)
BALANCE BALANCE AT CHARGED TO DEDUCTIONS AT END BEGINNING COSTS AND AND OF DESCRIPTION OF PERIOD EXPENSES OTHER PERIOD - ----------------------------------------- ------------ ---------------- ------------- ---------- 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)
- ------------ (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 EX-10.3F 2 EXHIBIT 10.3F ================================================================================ 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) TABLE OF CONTENTS
SECTION HEADING PAGE 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
ATTACHMENT TO THIRD SUPPLEMENTAL INDENTURE OF TRUST AND SECURITY AGREEMENT: SCHEDULE I -- Proposed Vessel Sales 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 (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- 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: (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- (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- 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- 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- 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- 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- 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- _______________________________ ) ) 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- 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 ================================================================================ 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 ================================================================================ TABLE OF CONTENTS
SECTION HEADING PAGE 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
-i- ATTACHMENTS TO WAIVER AND AGREEMENT:
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
-ii- 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. 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- 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- 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- 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- 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- 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- 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- 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- 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- Maritrans Operating Partners L.P. Waiver and Agreement Maritrans Capital Corporation FIRST COLONY LIFE INSURANCE COMPANY By _____________________________________ Its -11- 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- SCHEDULE I
SIGNING HOLDERS (if PRINCIPAL AMOUNT Different from Registered OF SERIES B NOTES NAMES OR REGISTERED HOLDERS Holders) OWNED AND HELD 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 ===========
SCHEDULE II After giving effect to the Proposed Vessel Sales, the Remaining First Preferred Ship Mortgages securing the Notes are on the following Vessels:
- ---------------------------------------------------------------------------------------------------------------------- A. BARGES OFFICIAL NUMBER CAPACITY IN BARRELS YEAR BUILT - ---------------------------------------------------------------------------------------------------------------------- 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 - ----------------------------------------------------------------------------------------------------------------------
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) 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 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 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 [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) [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) 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) 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 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) 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 ================================================================================ 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) 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 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 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- 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- 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- 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- 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- 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:
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 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
APPENDIX I (to Mortgage Supplement)
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 (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
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 (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
I-3
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 (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
I-4 THIRD SUPPLEMENTAL INDENTURE OF TRUST AND SECURITY AGREEMENT ANNEX I (to Mortgage Supplement) EX-10.4(F) 3 EXHIBIT 10.4(F) 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: 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- 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- 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- (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- (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- 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- 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- 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- 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- EX-10.5 4 EXHIBIT 10.5 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; (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. (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 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. 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, 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 revenues either during his employment by the Company or on the Termination Date, as applicable. It is recognized by the Employee that the business of the Company and its affiliates and the Employee's connection therewith is or will be involved in activity throughout the Geographic Area, and that more limited geographical limitations on this non-competition covenant are therefore not appropriate. The Employee also shall not, directly or indirectly, during such one-year period (a) solicit or divert business from, or attempt to convert any client, account or customer of the Company or any of its affiliates, whether existing at the date hereof or acquired during Employee's employment nor (b) following Employee's employment, solicit or attempt to hire any then employee of the Employer or of any of its affiliates. (b) The foregoing restriction shall not be construed to prohibit the ownership by the Employee of less than one percent (1%) of any class of securities of any corporation which is engaged in any of the foregoing businesses having a class of securities registered pursuant to the Securities Exchange Act of 1934, provided that such ownership represents a passive investment and that neither the Employee nor any group of persons including Employee in any way, either directly or indirectly, manages or exercises control of any such corporation, guarantees any of its financial obligations, otherwise takes any part in its business, other than exercising his rights as a shareholder, or seeks to do any of the foregoing. 14. Equitable Relief. (a) Employee acknowledges that the restrictions contained in Sections 12 and 13 hereof are reasonable and necessary to protect the legitimate interests of the 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). 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. 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. Attest: Maritrans General Partner Inc. [Seal] By /s/ Walter T. Bromfield _______________________ --------------------------- /s/ Janice M. Smallacombe /s/ Stephen M. Hackett - --------------------------- ------------------------------ Witness Stephen M. Hackett EX-10.6 5 EXHIBIT 10.6 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: 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; (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. (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, 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. 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 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, 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. 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. (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. 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: 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. (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. Attest: Maritrans General Partner Inc. [Seal] By /s/ Walter T. Bromfield _______________________ --------------------------- Secretary /s/ Janice M. Smallacombe /s/ John J. Burns - --------------------------- ----------------- Witness John J. Burns EX-10.9 6 EXHIBIT 10.9 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; (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. (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, 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. 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 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. (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. 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 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. Attest: Maritrans General Partner Inc. [Seal] /s/ Parker S. Wise By /s/ Walter T. Bromfield - ----------------------- -------------------------- Secretary _______________________ /s/ Janice M. Smallacombe ------------------------- Witness Janice M. Smallacombe EX-10.17 7 EXHIBIT 10.17 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 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 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 "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 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 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 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. 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 EX-10.18 8 EXHIBIT 10.18 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; (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. (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 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. 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, 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 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 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. 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. Attest: Maritrans General Partner Inc. [Seal] By /s/ John J. Burns - ----------------------- --------------------------- /s/ Janice M. Smallacombe /s/ Walter T. Bromfield - --------------------------- ----------------------- Witness Walter T. Bromfield EX-21.1 9 EXHIBIT 21.1 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 EX-23.1 10 EXHIBIT 23.1 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 EX-27 11 FINANCIAL DATA SCHEDULE
5 YEAR DEC-31-1999 JAN-01-1999 DEC-31-1999 13,232 0 16,069 1,393 3,355 65,159 278,471 119,013 251,021 30,001 75,861 0 0 132 94,565 251,021 0 151,667 0 143,854 0 0 6,778 21,151 9,095 12,056 0 0 0 12,056 1.03 1.02
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