-----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, AbIB26f3KnJFL7JJcClyM0fismIKYnnaKrLyFvmT9jUre4vfvE4r4+ww3VyEIAAT Wi8oYldXM6bSeioTJAdP8g== 0000950116-97-000627.txt : 19970401 0000950116-97-000627.hdr.sgml : 19970401 ACCESSION NUMBER: 0000950116-97-000627 CONFORMED SUBMISSION TYPE: 10-K405 PUBLIC DOCUMENT COUNT: 11 CONFORMED PERIOD OF REPORT: 19961231 FILED AS OF DATE: 19970331 SROS: NONE 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-K405 SEC ACT: 1934 Act SEC FILE NUMBER: 001-09063 FILM NUMBER: 97569751 BUSINESS ADDRESS: STREET 1: ONE LOGAN SQUARE 26TH FLOOR CITY: PHILADELPHIA STATE: PA ZIP: 19103 BUSINESS PHONE: 2158641200 MAIL ADDRESS: STREET 1: ONE LOGAN SQUARE STREET 2: 26TH FL CITY: PHILADELPHIA STATE: PA ZIP: 19103 FORMER COMPANY: FORMER CONFORMED NAME: MARITRANS PARTNERS L P DATE OF NAME CHANGE: 19920703 10-K405 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 [Fee Required] For the Fiscal Year Ended December 31, 1996 or [ ] Transition Report Pursuant to Section 13 or 15 (d) of the Securities Exchange Act of 1934 [No Fee Required] For the Transition Period from _______ to _______ Commission File Number 1-9063 ------ MARITRANS INC. (Exact name of registrant as specified in its charter)
DELAWARE 51-0343903 (State or other jurisdiction of (Identification No. incorporation or organization) I.R.S. Employer) ONE LOGAN SQUARE PHILADELPHIA, PENNSYLVANIA 19103 (Address of principal executive offices) (Zip Code) Registrant's telephone number, including area code (215) 864-1200 Securities registered pursuant to Section 12(b) of the Act: Name of Each Exchange Title of Each Class on Which Registered Common Stock, Par Value $.01 Per Share New York Stock Exchange Preferred Stock, Par Value $.01 Per Share None Securities registered pursuant to Section 12(g) of the Act: NONE
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of the registrant's knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. [X] Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such requirements for the past 90 days. Yes [X] No [ ] As of March 11, 1997, the aggregate market value of the voting stock held by non-affiliates of the registrant was $74,824,256. As of March 11, 1997, Maritrans Inc. had 11,971,881 shares of common stock outstanding. Documents Incorporated By Reference Part III incorporates information by reference from the Proxy Statement for Annual Meeting of Stockholders to be held on May 7, 1997. Exhibit Index is located on page 30. =============================================================================== FORM 10-K MARITRANS INC. TABLE OF CONTENTS PART I
Page Item 1. Business 1 Item 2. Properties 9 Item 3. Legal Proceedings 9 Item 4. Submission of Matters to a Vote of Security Holders 10 PART II Item 5. Market for the Registrant's Common Equity and Related Stockholder Matters 11 Item 6. Selected Financial Data 12 Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations 12 Item 8. Financial Statements and Supplemental Data 15 Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure 26 PART III Item 10. Directors and Executive Officers of the Registrant 26 Item 11. Executive Compensation 28 Item 12. Security Ownership of Certain Beneficial Owners and Management 28 Item 13. Certain Relationships and Related Transactions 28 PART IV Item 14. Exhibits, Financial Statement Schedules and Reports on Form 8-K 29 Signatures 32
This Report contains forward-looking statements that involve risks and uncertainties. Actual events and results could differ materially from those anticipated in these forward-looking statements as a result of various factors, including those set forth under "Item 1 - Business - Sales and Marketing, Competition and Competitive Factors, and Regulation," "Item 3 - Legal Proceedings" and "Item 7 - Management's Discussion and Analysis of Financial Condition and Results of Operations" as well as in the Report generally. i PART I ITEM 1. BUSINESS GENERAL Maritrans Inc. (the "Corporation" or the "Registrant"), together with its predecessor, Maritrans Partners L.P. (the "Partnership"), herein called "Maritrans," has historically served the petroleum and petroleum product industry by using tugs, barges and marine terminal facilities to provide marine transportation and terminalling services along the East and Gulf Coasts of the United States. STRUCTURE Current. The Registrant is a Delaware corporation whose common stock ("Common Stock") is publicly traded. The Registrant conducts most of its marine transportation business activities through operating divisions of Maritrans Operating Partners L.P. (the "Operating Partnership") and its managing general partner, Maritrans General Partner Inc., wholly owned subsidiaries of the Registrant. Most of the Registrant's terminalling and distribution services are conducted through subsidiaries of Maritrans Holdings Inc., a wholly owned subsidiary of the Registrant. Historical. Founded in the 1850's and incorporated in 1928 under the name Interstate Oil Transport Company, Maritrans' predecessor was one of the first tank barge operators in the United States, with a fleet which increased in size and capacity as United States consumption of petroleum products increased. On December 31, 1980, Maritrans' predecessor operations and its tugboat and barge affiliates were acquired by Sonat Inc. ("Sonat"). On April 14, 1987, Maritrans acquired the tug and barge business and related assets from Sonat. On March 31, 1993, the limited partners of the Partnership voted on a proposal to convert the Partnership to corporate form (the "Conversion"). The proposal was approved, and on April 1, 1993, Maritrans Inc., then a newly-formed Delaware corporation, succeeded to all assets and liabilities of the Partnership. The holders of general and limited partnership interests in the Partnership and in the Operating Partnership were issued shares of Common Stock, par value $.01 per share, of the Corporation, representing substantially the same percentage equity interest in the Corporation as they had in the Partnership, directly or indirectly, in exchange for their partnership interest. Each previously held Unit of Limited Partnership Interest in the Partnership was exchanged for one share of Common Stock of the Corporation. For financial accounting purposes, the conversion to corporate form has been treated as a reorganization of affiliated entities, with the assets and liabilities recorded at their histoical costs. In addition, the Partnership recognized a net deferred income tax liability for temporary differences in accordance with Statement of Financial Accounting Standard ("FAS") No. 109, "Accounting for Income Taxes," which resulted in a one-time charge to earnings of $16.6 million in the first quarter of 1993. Overview. Since 1981, Maritrans and its predecessors have transported annually over 200 million barrels of crude oil and refined petroleum products. Based on its internal research regarding competition, Maritrans believes that it is one of the largest United States marine transporters of petroleum and petroleum products in the United States coastwise Jones Act trade (i.e. from point-to-point within the United States), excluding affiliates of integrated oil companies, and that it owns one of the largest domestic fleets of U.S. flag oceangoing tank barges in terms of cargo-carrying capacity. Maritrans operates a fleet of tank barges and tugboats and three terminal facilities. Its largest barge has a capacity of approximately 400,000 barrels, and its current operating barge fleet capacity aggregates approximately 4.1 million barrels. Aggregate capacity at Maritrans' terminal facilities totals approximately 1.6 million barrels at December 31, 1996. Demand for Maritrans' services is dependent primarily upon general demand for petroleum and petroleum products in the geographic areas served by its vessels. Management believes that United States petroleum consumption, and particularly consumption in New England and Florida, are significant indicators of demand for Maritrans' services. Increases in product consumption generally increase demand for Maritrans' services; conversely, decreases in consumption generally lessen demand for Maritrans' services. 1 Management further believes that the level of domestic consumption of imported product is also significant to Maritrans' business. Imported petroleum products generally can be shipped on foreign-flag vessels directly into United States ports for storage, distribution and eventual consumption. These shipments reduce the need for domestic marine transportation service providers such as Maritrans to carry products from United States refineries to such ports. While Maritrans does benefit somewhat from the increase in demand for domestic redistribution services that results from the delivery of excess product to terminals by foreign-flag vessels, the overall effect of refined product imports on the demand for Maritrans' services is generally negative. In May 1996, Maritrans restructured its operations into two divisions -- Eastern and Gulf, supported by executive and service units. The two divisions provide marketing, logistical, and operational support for Maritrans' vessels, which are assigned to divisions based on market conditions and to the terminals, which are supported at the Eastern division. This divisional restructuring was designed to improve productivity and efficiency in operations, better coordinate marketing of complementary services and permit more rapid decisions and responses to changing conditions. The Gulf Division, headquartered in Tampa, Florida, provides marine transportation services for petroleum products from refineries located in Texas, Louisiana and Mississippi to distribution points along the Gulf and Atlantic Coasts generally south of Cape Hatteras, North Carolina and particularly into Florida. The Eastern Division, supported by a major fleet center in Philadelphia, Pennsylvania, transports petroleum products from East Coast refineries (primarily located in and near Philadelphia) and pipeline terminals located in the New York Harbor area to distribution terminals primarily located along the Eastern Seaboard between the Canadian Maritime Provinces and Norfolk, Virginia and transports petroleum products between refineries and distribution points along the Delaware River and in the Chesapeake Bay. Maritrans also provides, as part of its Eastern Division, lightering services for large tank ships (a process of off-loading crude oil or petroleum products from an inbound tanker into barges, thereby enabling the tanker to navigate draft-restricted rivers and ports to discharge cargo at a refinery or storage and distribution terminal). SALES AND MARKETING Maritrans provides marine transportation, storage, and distribution coordination services primarily to integrated oil companies, independent oil companies, and petroleum distributors in the southern and eastern United States. Maritrans relies primarily on direct sales efforts, minimizing its use of chartering brokers. Maritrans monitors the supply and distribution patterns of its actual and prospective customers and focuses its efforts on providing services that are responsive to the current and future needs of these customers. Maritrans does business on a spot market basis, a term contract basis and, more recently, on a product exchange basis. Maritrans strives to maintain an appropriate mix of contracted business, based on current market conditions. In light of the potential liabilities of oil companies and other shippers of petroleum products under the Oil Pollution Act of 1990 ("OPA") and analogous state laws, management believes that some shippers have begun to select transporters in larger measure than in the past on the basis of a demonstrated record of safe operations. Maritrans believes that the measures it has implemented in the last six years to promote higher quality operations and its longstanding commitment to safe transportation of petroleum products benefits its marketing efforts with these shippers. In 1996, approximately 79 percent of Maritrans' revenues were generated from ten customers. In 1996, contracts with Sun Oil Company, Marathon Oil and Star Enterprise, accounted in the aggregate for approximately 20 percent, 12 percent and 10 percent, respectively, of Maritrans' revenues. There could be a material adverse effect on Maritrans if any of these customers were to cancel or terminate their various agreements with Maritrans. Management believes that cancellation or termination of all its business with any of its larger customers is unlikely. In early 1996, BP Oil Company completed the sale of its northeastern U.S. retail outlets, terminal facilities and its Marcus Hook, Pennsylvania, refinery to Tosco Corporation ("Tosco"). This refinery's output did not represent the only source of Maritrans' revenue from BP Oil Shipping Company in 1995 or 1996. The refinery was 2 turned over to Tosco in a non-operating state. This development negatively impacted financial results although Maritrans took action to replace the revenues that had been associated with this refinery's output, including relocating certain vessels and other steps to mitigate the financial impact. Maritrans understands that Tosco currently plans to reopen this refinery sometime in 1997. COMPETITION AND COMPETITIVE FACTORS Overview. The maritime petroleum transportation industry is highly competitive. The Jones Act, a federal law, restricts United States point-to-point maritime shipping to vessels built in the United States, owned by U.S. citizens and manned by U.S. crews. In Maritrans' market areas, its primary direct competitors are the operators of U.S. flag oceangoing barges and U.S. flag tankers. In the Gulf market, the primary competitors are the fleets of both other independent petroleum transporters and integrated oil companies. In the Eastern market, management believes, based on its extensive knowledge and experience in the industry, that Maritrans primarily competes with other independent oceangoing barge operators and with the captive fleets of integrated oil companies and, in lightering operations, competes with foreign-flag operators which lighter offshore. Some of the integrated oil company fleets with which Maritrans competes are larger than Maritrans' fleet. Additionally, in certain geographic areas and in certain business activities, Maritrans competes with the operators of petroleum product pipelines. Competitive factors which also affect Maritrans include the output of United States refineries and the importation of refined petroleum products. The primary competition for Maritrans' marine terminals is proprietary storage capacity of integrated oil companies, merchant refiners, and independent marine terminal operators. U.S. Flag Barges and Tankers. Maritrans' most direct competitors are the other operators of U.S. flag oceangoing barges and tankers. Because of the restrictions imposed by the Jones Act, there is a finite number of vessels that are currently eligible to engage in U.S. maritime petroleum transport. Therefore, the size and capacity of Maritrans' fleet relative to those of others in the industry is an important factor in competing for business on the basis of service. The number of vessels eligible to engage in Jones Act trade has declined significantly over the past several years. The gradual implementation of regulations requiring significant capital modifications and in some cases loss of vessel capacity, as well as a decrease in the number of new vessels constructed since 1982, have been the major causes of this decline. Competition in the industry is based upon price and service (including vessel availability) and is intense. Maritrans is engaged in several different market activities. A significant portion of its revenues in 1996 was generated in the coastal transportation of petroleum products from refineries or pipeline terminals in the Gulf of Mexico to ports which are not served by pipelines. Management believes that the optimal vessel size suited to serve these ports is between 20,000 deadweight tons ("DWT") (approximately 160,000 barrels) and 40,000 DWT (approximately 320,000 barrels). Maritrans currently operates eight barges in this size range in this market, which comprises a significant number of the vessels able to compete in this market. The relatively large size of Maritrans' fleet generally provides greater flexibility in meeting customers' needs. Maritrans competes with operators of generally smaller vessels in its Eastern transportation activities. In this activity Maritrans is competing primarily with other barge operators. This is a diverse market allowing a broader size range of vessels to participate than in the Gulf of Mexico. Management believes that, to some extent, Maritrans' independent competitors do not provide the same level of service, quality performance, or attention to safe operations as Maritrans due to its fleet size, maintenance and training programs, and spill record. General Agreement on Trade in Services ("GATS") and North American Free Trade Agreement ("NAFTA"). The possible inclusion of maritime services within the scope of the GATS and the NAFTA was the subject of discussion in the concluded Uruguay Round of GATS negotiations and NAFTA negotiations. Maritime services were not included in GATS until at least the year 2000. If maritime services were deemed to include cabotage (vessel trade or marine transportation between two points within the same country) and were included in any multi-national trade agreements, the result would be to open the Jones Act trade, (i.e., transportation of 3 maritime cargo between U.S. ports in which Maritrans and other U.S. vessel owners operate) to foreign-flag vessels which would operate at lower costs. While cabotage will not be included in the GATS and the NAFTA in the immediate future, the possibility exists that cabotage could be included in the GATS, NAFTA or other international trade agreement in the future. In the meantime, Maritrans and the maritime industry will continue to resist vigorously the inclusion of cabotage in the GATS, NAFTA and any other international trade agreements. The U.S. Administration signed legislation to export Alaskan crude oil on U.S. built and manned vessels. While to date this law has not materially affected the vessel capacity competing against Maritrans in the Jones Act trades, it could have an adverse impact on the status of the Jones Act in the context of future international trade developments. Refined Product Pipelines. Existing refined product pipelines generally are the lowest incremental cost method for the long-haul movement of petroleum and refined petroleum products. Other than the Colonial Pipeline system, which originates in Texas and terminates at New York Harbor, the Plantation Pipeline, which originates in Louisiana and terminates in Washington D.C., and smaller regional pipelines between Philadelphia and New York, there are no pipelines carrying refined petroleum products to the major storage and distribution facilities currently served by Maritrans. While the Colonial Pipeline system reduces the amount of refined product transported into the New York area by ship, it provides an origination point for Maritrans' business of transporting such products from New York Harbor to New England ports. Management believes that high capital costs, tariff regulation and environmental considerations make it unlikely that a new refined product pipeline system which would have a material adverse effect on Maritrans' business will be built in its market areas in the foreseeable future. It is possible, however, that, as noted above, new pipeline segments (including pipeline segments that connect with existing pipeline systems) could be built or that existing pipelines could be converted to carry refined petroleum products, either of which could effectively compete with Maritrans in particular locations. Natural Gas Pipelines. In December 1991, a 370 mile natural gas pipeline from the Canadian border to the northeastern United States markets was completed. The operation of this pipeline increased the amount of natural gas supplied to the northeastern United States, thus reducing the demand for residual fuel for power generation. This ultimately reduced the demand for marine transportation of residual fuel and other petroleum products to and within the area negatively affecting Maritrans and other carriers active in this trade. The continuation of this reduction will depend on the relative prices between residual fuel and natural gas, including transportation costs, in the future. Imported Refined Petroleum Products. A significant factor affecting the level of Maritrans' business operations is the level of refined petroleum product imports, particularly in Florida and New England. Imported refined petroleum products may be transported on foreign-flag vessels, which are generally less costly to operate than U.S. flag vessels. To the extent that there is an increase in the importation of refined petroleum products to any of the markets served by Maritrans, there could be a decrease in the demand for the transportation of refined products from United States refineries, which would likely have an adverse impact upon Maritrans. One possible outcome of the Clean Air Act could be the importing of more refined product from outside the United States in order to avoid the expense of upgrading United States refineries to comply with such Act. In this case, while there would still be a need for marine petroleum transportation, the demand would decrease, thereby possibly materially adversely affecting the coastwise business of Maritrans and its competitors. Delaware River Channel Deepening. Legislation has been approved by the United States Congress which authorizes the U.S. Army Corps of Engineers to deepen the channel of the Delaware River between the river's mouth and Philadelphia from forty to forty-five feet late in the 1990's. If further legislation appropriating the funds for this project should become law and this project is implemented and used by vessels calling on the Delaware Valley refineries, it would have a material adverse effect on Maritrans' lightering business which currently transports crude oil which is off-loaded from deeply laden tankers from the mouth of the Delaware Bay up the Delaware River to the Delaware Valley refineries. EMPLOYEES AND EMPLOYEE RELATIONS At December 31, 1996, Maritrans and its subsidiaries employed a total of 476 persons. Of these employees, 78 are employed at the Philadelphia, Pennsylvania headquarters of the Registrant or at the Philadelphia and 4 Tampa fleet centers, 383 are seagoing employees who work aboard the tugs and barges, and 15 are employed by Maritrans' non-marine affiliates. Maritrans and its predecessors have had collective bargaining agreements with the Seafarers' International Union of North America, Atlantic, Gulf and Inland District, AFL-CIO ("SIU"), and with American Maritime Officers ("AMO"), formerly District 2 Marine Engineers Beneficial Association, Associated Maritime Officers, AFL-CIO, for approximately 34 years. Approximately one-half of the total number of seagoing employees employed are supervisors and, hence, as part of management, are not represented by maritime unions. The collective bargaining agreement with the SIU covers approximately 155 employees. The collective bargaining agreement with the AMO covers approximately 43 employees. Each expires on May 31, 2001. The employees of the subsidiaries of Maritrans Holdings Inc. are not covered by any collective bargaining agreement. Management believes that the seagoing supervisory and non-supervisory personnel contribute significantly to responsive customer service. Maritrans maintains a policy of seeking to promote from within, where possible, and generally seeks to draw from its union and non-union personnel to fill supervisory and other management positions as vacancies occur. Management believes that its operational audit program (performed by Tidewater School of Navigation, Inc.) and training program are essential to insure that its employees are knowledgeable and highly skilled in the performance of their duties as well as in their preparedness for any unforeseen emergency situations that may arise. Consequently, various training sessions and additional skill improvement seminars are held throughout the year. In 1991, Maritrans introduced its Quality Improvement Program. All employees participate in quality training seminars in addition to the skills improvement training. REGULATION Marine Transportation -- General. The Interstate Commerce Act exempts from economic regulation the water transportation of petroleum cargos in bulk. Accordingly, Maritrans' transportation rates, which are negotiated with its customers, are not subject to special rate regulation under the provisions of such act or otherwise. The operation of tugboats and barges is subject to regulation under various federal laws and international conventions, as interpreted and implemented by the United States Coast Guard, as well as certain state and local laws. Tugboats and barges are required to meet construction and repair standards established by the American Bureau of Shipping, a private organization, and/or the United States Coast Guard and to meet operational and safety standards presently established by the United States Coast Guard. Maritrans' seagoing supervisory personnel are licensed by the United States Coast Guard. Seamen and tankermen are certificated by the United States Coast Guard. Jones Act. The Jones Act, a federal law, restricts maritime transportation between United States points to vessels built and registered in the United States and owned by United States citizens. The entities in the Maritrans organizational structure engaged in maritime transportation between United States points are subject to the provisions of the law. Therefore, it is the responsibility of Maritrans to monitor ownership of these entities and take any remedial action necessary to insure that no violation of the Jones Act ownership restrictions occurs. In addition, the Jones Act requires that all United States flag vessels be manned by United States citizens, which significantly increases the labor and certain other operating costs of United States flag vessel operations compared to foreign-flag vessel operations. Foreign-flag seamen generally receive lower wages and benefits than those received by United States citizen seamen. In addition, a significant number of foreign governments subsidize, at least to some extent, the wages and/or benefits received by the seamen of those nations. Furthermore, certain of these foreign governments subsidize those nations' shipyards, resulting in lower shipyard costs both for new vessels and repairs, than those paid by United States-flag vessel owners such as Maritrans, to United States shipyards. Finally, the United States Coast Guard and American Bureau of Shipping maintain the most stringent regime of vessel inspection in the world, which tends to result in higher regulatory compliance costs for United States-flag operators than those paid by owners of vessels registered under foreign flags of convenience. Because Maritrans transports petroleum and petroleum products between United States ports, most of its business depends upon the Jones Act remaining in effect. There have been various unsuccessful attempts in the past by foreign governments and companies to gain access to the Jones Act trade, as well as by interests within the United States to limit or do away with the Jones Act. Legislation to this effect was introduced in the last session of Congress. Management expects that efforts of this type will continue. 5 ENVIRONMENTAL MATTERS Maritrans' operations present potential environmental risks, primarily through the marine transportation or storage of petroleum. Maritrans is committed to protecting the environment and complying with applicable environmental laws and regulations. Maritrans, as well as its competitors, is subject to regulation under federal, state and local environmental laws which have the effect of increasing the costs and potential liabilities arising out of its operations. Marine Storage Terminal Regulation. Maritrans marine terminal subsidiaries are subject to various federal, state and local environmental laws and regulations, particularly with respect to air quality, the handling of materials removed from the tanks of vessels which are cleaned, and any spillage of petroleum products on or adjoining marine terminal premises. Management believes that this regulatory scheme will become progressively stricter in the future, resulting in greater capital expenditures by Maritrans for environmentally related equipment. Also, there are significant fines and penalties for any violations of this scheme. Management intends to reflect any such additional expenditures, to the extent they are able, in the rates which are charged to customers from time to time for services. Oil Pollution Legislation. Many of the states in which Maritrans does business have enacted laws providing for strict, unlimited liability for vessel owners in the event of an oil spill. In addition, certain states have enacted or are considering legislation or regulations involving at least some of the following provisions: tank- vessel-free zones, contingency planning, state inspection of vessels, additional operating, maintenance and safety requirements, and state financial responsibility requirements. As a result of this legislation and regulation, Maritrans has limited its carriage of persistent oils, primarily crude and #6 oil, to or through portions of several of these states. Persistent oils are those which continue to exist longer in the water when spilled, thus making them more difficult to clean up. In August 1990, OPA became law. OPA substantially changes the liability exposure of owners and operators of vessels, oil terminals and pipelines from that imposed under prior law. Under OPA, each responsible party for a vessel or facility from which oil is discharged will be jointly, strictly and severally liable for all oil spill containment and clean-up costs and certain other damages arising from the discharge. These other damages are defined broadly to include (i) natural resource damage (recoverable only by government entities), (ii) real and personal property damage, (iii) net loss of taxes, royalties, rents, fees and other lost revenues (recoverable only by government entities), (iv) lost profits or impairment of earning capacity due to property or natural resource damage, and (v) net cost of public services necessitated by a spill response, such as protection from fire, safety or health hazards. The owner or operator of a vessel from which oil is discharged will be liable under OPA unless it can be demonstrated that the spill was caused solely by an act of God, an act of war, or the act or omission of a third party unrelated by contract to the responsible party. Even if the spill is caused solely by a third party, the owner or operator must pay all removal cost and damage claims and then seek reimbursement from the third party or the trust fund established under OPA. OPA establishes a federal limit of liability of the greater of $1,200 per gross ton or $10 million per tank vessel. A vessel owner's liability is not limited, however, if the spill results from a violation of federal safety, construction or operating regulations. In addition, OPA does not preclude states from adopting their own liability laws. Numerous states in which Maritrans operates have adopted legislation imposing unlimited strict liability for vessel owners and operators. Management believes that the liability provisions of OPA and similar state laws have greatly expanded Maritrans' potential liability in the event of an oil spill, even where Maritrans is not at fault. OPA requires all vessels to maintain a certificate of financial responsibility for oil pollution in an amount equal to the greater of $1,200 per gross ton per vessel, or $10 million per vessel in conformance with U.S. Coast Guard regulations. Additional financial responsibility in the amount of $300 per gross ton is required under U.S. Coast Guard regulations under the Comprehensive Environmental Response Compensation and Liability Act ("CERCLA"), the federal Superfund law. The previous requirement was $150 per gross ton per vessel, or $250,000, whichever is larger. Owners of more than one tank vessel, such as Maritrans, however, are only 6 required to demonstrate financial responsibility in an amount equal to cover the vessel having the greatest maximum liability (approximately $40 million in Maritrans' case). Maritrans has acquired such certificates through filing required financial information with the U.S. Coast Guard. OPA requires all newly constructed petroleum tank vessels engaged in marine transportation of oil and petroleum products in the U.S. to be double-hulled and all such existing single-hulled vessels to be retrofitted with double hulls or phased out of the industry beginning January 1, 1995, in order to comply with new standards for such vessels. Because of the age and size of Maritrans' individual barges, the first of its operating vessels will be required to be retired or retrofitted by January 1, 2003, and most of its large ocean-going, single-hulled vessels will be similarly affected on January 1, 2005. Management believes that it would, for example, cost approximately $20-25 milion to build a 20,000 DWT double-hulled barge. The cost of retrofitting an existing 20,000 DWT barge with a double hull may be somewhat less than the cost of a new barge, but the retrofitting cost would depend upon a variety of construction and engineering factors. Therefore, retrofitting may not be a viable economic alternative to the purchase of a new double-hulled barge. The prices of retrofitting and constructing new vessels may increase materially as a result of increased demand for shipyard capacity arising from OPA. Also as a result of this legislation, the expected lives of some of Maritrans' barges have been shortened, thus forcing Maritrans to accelerate the depreciation of these vessels. This change in depreciation calculation began in September 1990 and caused an increase of Maritrans' annual depreciation expense by approximately $1.4 million. The double-hulled or double-bottomed tank barges currently owned by Maritrans account for approximately 25 percent of its fleet capacity. The OCEAN 400 and the MARITRANS 300, approximately 16 percent of fleet capacity, have been grandfathered under equivalency provisions of the interim final rule promulgated by the U.S. Coast Guard. OPA further required all tank vessel operators to submit, by February 18, 1993, for federal approval, detailed vessel oil spill contingency plans setting forth their capacity to respond to a worst case spill situation. Maritrans filed its plans prior to that deadline. Several states have similar contingency or response plan requirements. Because of the large number of ports served by Maritrans, the cost of compliance may be substantial, and, while Maritrans is presently in compliance, there is no assurance that Maritrans will be able to remain in compliance with all the federal requirements or those of one or more states. OPA is expected to have a continuing adverse effect on the entire U.S. oil and petroleum marine transportation industry, including Maritrans. The effects on the industry could include, among others, (i) increased requirements for capital expenditures, which the independent marine transporters of petroleum may not be able to finance, to fund the cost of double-hulled vessels, (ii) increased maintenance, training, insurance and other operating costs, (iii) civil penalties and liability, (iv) decreased operating revenues as a result of a further reduction of volumes transported by vessels and (v) increased difficulty in obtaining sufficient insurance, particularly oil pollution coverage. These effects could adversely affect Maritrans' profitability and liquidity. The following table sets forth Maritrans' quantifiable cargo oil spill record for the period January 1, 1992 through December 31, 1996:
Gallons Spilled No. of No. of No. of Per Million Period Gals. Carried Spills Gals. Spilled Gals. Carried ---------------------- --------------- -------- --------------- --------------- (000) (000) 1/1/1992 -- 12/31/1992 10,272,000 6 .01 .001 1/1/1993 -- 12/31/1993* 10,433,000 2 .01 .001 1/1/1994 -- 12/31/1994 9,954,000 2 .02 .002 1/1/1995 -- 12/31/1995 9,450,000 1 16.80 1.780 1/1/1996 -- 12/31/1996 9,160,000 3 .08 .009
- ------ * Results for 1993 exclude the product lost, mostly burned, in the collision of Maritrans' barge, the OCEAN 255, with vessels owned by others off the coast of Florida in August 1993. Management believes that Maritrans was not at fault in this incident. 7 Maritrans believes that its spill ratio compares favorably with the other independent, coastwise operators in the Jones Act trade. Water Pollution Regulations. The Federal Water Pollution Control Act of 1972 ("FWPCA"), as amended by the Clean Water Act of 1977, imposes strict prohibitions against the discharge of oil (and its derivatives) and hazardous substances into navigable waters of the United States. FWPCA provides civil and criminal penalties for any discharge of petroleum products in harmful quantities and imposes substantial liability for the clean-up costs of removing an oil spill. State laws for the control of water pollution also provide varying civil and criminal penalties and clean-up cost liabilities in the case of a release of petroleum or its derivatives into surface waters. In the course of its vessel operations, Maritrans engages contractors, in addition to Maritank Philadelphia Inc., to remove and dispose of waste material, including tank residue. In the event that any of such waste is deemed "hazardous," as defined in FWPCA or the Resource Conservation and Recovery Act, and is disposed of in violation of applicable law, Maritrans could be jointly and severally liable with the disposal contractor for the clean-up costs and any resulting damages. The United States Environmental Protection Agency ("EPA") previously determined not to classify most common types of "used oil" as a "hazardous waste," provided that certain recycling standards are met. While it is unlikely that used oil will be classified as hazardous, the management of used oil under EPA's proposed regulations will increase the cost of disposing of or recycling used oil from Maritrans' vessels. Some states in which Maritrans operates, however, have classified "used oil" as hazardous. Maritrans has found it increasingly expensive to manage the wastes generated in its operations. Air Pollution Regulations. The 1990 amendments to the Clean Air Act give the EPA and the states the authority to regulate emissions of volatile organic compounds ("VOCs") and any other air pollutant from tank vessels in all ports served by Maritrans and storage terminals. Several states with ports served by Maritrans already have established regulations to require the installation of vapor recovery equipment on petroleum- carrying vessels to reduce the emissions of VOCs. Compliance with these federal and state regulations has required material capital expenditures for the retrofitting of Maritrans' barges and has increased operating costs. The state of Delaware has announced that it intends to regulate vapor emissions from lightering in the Delaware Bay. This regulation, the timing of which is presently uncertain, would in all likelihood require the installation of additional equipment on lightering barges at a material cost. Similarly, various states require vapor recovery equipment at storage terminals for the loading of petroleum into vessels and tank trucks. Maritrans' terminal facilities are equipped with vapor recovery capabilities for the loading of tank trucks. They do not currently load petroleum into vessels and therefore have not acquired vapor recovery capabilities for that activity. The EPA also has the authority to regulate emissions from marine vessel engines; however, with the possible exception of the use of low sulfur fuels, direct regulation of marine engine emissions is not likely in the near future in ports served by Maritrans. However, it is possible that the EPA and/or various state environmental agencies ultimately may require that additional air pollution abatement equipment be installed in tugboats, including those owned by Maritrans. Such a requirement could result in a material expenditure by Maritrans, which could have an adverse effect on Maritrans' profitability if it is not able to recoup these costs through increased charter rates. Also, the application of various air quality rules in connection with the operation of Maritrans facilities may require significant additional expenditures which may not be recovered through increased rates. Port and Tanker Safety Act. The Port and Tanker Safety Act of 1978 ("PTSA") requires certain oil-carrying tankships to be fitted with segregated ballast tanks. PTSA requires self-propelled vessels to be retrofitted to meet these standards. Barges are not generally affected by such requirements. However, if the environmental standards of PTSA were to be made applicable to the large barges operated by Maritrans, Maritrans would be required to make significant capital expenditures to retrofit such barges, and the cargo-carrying capacity of such barges would also be decreased. There have been no recent regulatory efforts to apply the PTSA standards to large barges such as those operated by Maritrans. User Fees and Taxes. The Water Resources Development Act of 1986 permits local non-federal entities to recover a portion of the costs of new port and harbor improvements from vessel operators with vessels benefitting from such improvements. Management does not believe that Maritrans' vessels currently benefit from such improvements. However, there can be no assurance that such entities will not seek to recover a portion of such costs from Maritrans. Federal legislation has been enacted imposing user fees on vessel operators such as Maritrans to help fund the United States Coast Guard's regulatory activities. Other federal, state and local agen- 8 cies or authorities could also seek to impose additional user fees or taxes on vessel operators or their vessels. The Coast Guard collects fees for vessel inspection and documentation, licensing and tank vessel examinations. These fees have not been material to Maritrans. There can be no assurance that additional user fees, which could have a material adverse effect upon the financial condition and results of operations of Maritrans, will not be imposed in the future. ITEM 2. PROPERTIES Vessels. The Registrant's subsidiaries owned, at December 31, 1996, a fleet of 50 vessels, of which 27 are barges and 23 are tugboats. Three additional tugs are chartered under long-term leases. In December of 1994, Maritrans increased its double-hull and double-bottom vessel capacity to over one million barrels by purchasing the MARITRANS 300, an oceangoing, double-hulled petroleum tank barge with a capacity of approximately 300,000 barrels. After undergoing modifications, this vessel was placed in service in the fourth quarter of 1995. The barge fleet consists of a variety of vessels falling within six different barge classifications. The largest vessels in the fleet are the twelve superbarges ranging in capacity from 188,065 to 400,000 barrels. The oldest vessel in that class is the OCEAN 250 which was constructed in 1970, while the largest vessel is the OCEAN 400, for which modifications were completed as recently as 1990. For the most part, however, the bulk of the superbarge fleet was constructed during the 1970's and early 1980's. The fleet's next eight largest barges range in capacity from 61,638 barrels to 165,881 barrels and were constructed or substantially renovated between 1967 and 1981. The remainder of the barge fleet is comprised of three vessels falling in the 50,000 barrel class, and four vessels in the 30,000 barrel class. The majority of these vessels were constructed between 1961 and 1977. The tugboat fleet is comprised of one 11,000 horsepower class vessel, eleven 5,600 horsepower class vessels, three 4,000 horsepower class vessels, five 3,200 horsepower class vessels, four 2,200 horsepower class vessels, one pusher class vessel and one chartered 15,000 horsepower class vessel. The year of construction or substantial renovation of these vessels ranges from 1962 to 1990 with the bulk of the tugboats having been constructed sometime between 1967 and 1981. Substantially all of the vessels in the fleet are subject to first preferred ship mortgages to secure payment of the notes of the Operating Partnership. These mortgages require the Operating Partnership to maintain the vessels at a high standard and continue a life-extension program for certain of its larger barges. At December 31, 1996, Maritrans is in compliance with the Operating Partnership's mortgage covenants. Marine Terminals. At December 31, 1996, MPI owns 35 acres on the west bank of the Schuylkill River in Philadelphia where twelve storage tanks with a total capacity of 1,040,000 barrels, truck loading racks, office space and related equipment used in MPI's marine terminal and tank cleaning operations are located. In early 1993, MMI acquired 25 acres on the Wicomico River in Salisbury, Maryland where fourteen storage tanks with a total capacity of 170,000 barrels, truck loading racks, office space and related equipment used in MMI's marine terminal operations are located. In March 1997, MMI sold 20 acres in Baltimore, Maryland with ten storage tanks with a total capacity of 530,000 barrels, truck loading racks and related equipment. Other Real Property. The Registrant's operations are headquartered in Philadelphia, Pennsylvania, where it leases office space, expiring in 1998. Eastern fleet operations are located on the west bank of the Schuylkill River in Philadelphia, Pennsylvania where the Operating Partnership owns approximately six acres of improved land. In addition, it also leases a bulkhead of approximately 430 feet from the federal government for purposes of mooring vessels adjacent to the owned land. This lease was renewed in 1993 and expires in 1998. In the Philadelphia area, the Operating Partnership has one short term (one year or less) lease for nearby pier space for the purpose of mooring vessels. The Operating Partnership also leases four acres of Port Authority land in Tampa, Florida for use as its Gulf Division fleet center, which expires in 2004, with three renewal options of ten years each and a limited amount of office space in Wilmington, Delaware for itself and its affiliated entities. ITEM 3. LEGAL PROCEEDINGS Maritrans is a party to routine, marine-related claims, lawsuits and labor arbitrations arising in the ordinary course of its business. The claims made in connection with Maritrans' marine operations are covered by marine 9 insurance, subject to applicable policy deductibles which are not material as to any type of insurance coverage. Management believes, based on its current knowledge, that such lawsuits and claims, even if the outcomes were to be adverse, would not have a material adverse effect on Maritrans' financial condition. In connection with the sale of Main Iron Works, Inc. ("MIW"), Maritrans' predecessor agreed to reimburse MIW for certain ongoing workmen's compensation claims arising prior to the sale of MIW, and retained an assignment of the shipyard's rights against its former workmen's compensation insurance carrier, which has been in liquidation proceedings. Maritrans assumed its predecessor's reimbursement obligations to MIW and obtained an assignment of the predecessor's rights against the workmen's compensation insurance carrier. Due to the size and complexity of the liquidation proceeding, it is unlikely that this matter will be resolved for several years. Maritrans recently reached an agreement in principle with MIW pursuant to which Maritrans would no longer have any reimbursement obligations to MIW for any of these ongoing workmens' compensation claims in return for which Maritrans would modify the amount due by MIW to Maritrans under the original agreement. Maritrans retains all rights against MIW's original insurance carrier with respect to the monies Maritrans has reimbursed MIW. Maritrans has been sued by 54 individuals, alleging unspecified damages for exposure to asbestos and in at least 43 such cases for exposure to tobacco smoke. Although Maritrans believes these claims are without merit, it is impossible at this time to express a definitive opinion on the final outcome of any such suit. Management believes that any liability would not have a material adverse effect as it would be adequately covered by applicable insurance. During 1993, one of the Company's tug/barge units was involved in a collision off the coast of Florida. Claims resulting from this incident have been and are expected to be covered by insurance. In 1993, Maritrans received insurance proceeds in excess of the barge's net book value for the constructive total loss of the barge. In 1996, Maritrans filed suit against the United States government under the Fifth Amendment to the U.S. Constitution for "taking" 37 of Maritrans' tank barges without just compensation. Maritrans asserts that the vessels were taken with the passage of Section 4115 of the Oil Pollution Act of 1990 and that this taking was done in contravention of the Fifth Amendment, which specifically prohibits the United States government from taking private property for public use without just compensation. Maritrans is seeking compensation based on the fact that Maritrans has been deprived of its reasonable investment-backed expectation in the continued use of its barges by Section 4115 of OPA, which prohibits all existing single-hull tank vessels from operating in U.S. waters under a retirement schedule which began January 1, 1995, and ends on January 1, 2015. Under this OPA provision, Maritrans' single-hull tank barges will be forced from service commencing on January 1, 2003, with a significant portion of the economic lives remaining, or be required to be retrofitted. ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS No matters were submitted to a vote of the Registrant's security holders, through the solicitation of proxies or otherwise, during the last quarter of the year ended December 31, 1996. 10 PART II ITEM 5. MARKET FOR THE REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS Market Information and Holders Maritrans Inc. Common Shares trade on the New York Stock Exchange under the symbol "TUG." The following table sets forth, for the periods indicated, the high and low sales prices per share as reported by the New York Stock Exchange. QUARTERS ENDING IN 1996: HIGH LOW ------------------------ --------- --------- March 31, 1996 $6.250 $5.000 June 30, 1996 6.250 5.125 September 30, 1996 7.000 5.875 December 31, 1996 6.500 6.000 QUARTERS ENDING IN 1995: HIGH LOW ------------------------ --------- --------- March 31, 1995 $6.000 $5.250 June 30, 1995 6.500 5.500 September 30, 1995 6.000 5.500 December 31, 1995 5.875 5.125 As of January 31, 1997, the Registrant had 11,960,909 Common Shares outstanding and approximately 1,027 shareholders of record. Dividends For the year ended December 31, 1996 and 1995, Maritrans Inc. paid the following cash dividends to stockholders: PAYMENTS IN 1996: PER SHARE ---------------------- ------------- March 13, 1996 $.050 June 12, 1996 $.075 September 11, 1996 $.075 December 11, 1996 $.075 ------------- Total $.275 ============= PAYMENTS IN 1995: PER SHARE ---------------------- ------------- March 13, 1995 $.020 June 14, 1995 $.020 September 13, 1995 $.020 December 13, 1995 $.050 ------------- Total $.110 ============= While dividend policy is determined at the discretion of the Board of Directors of Maritrans Inc., management believes that it is likely Maritrans will pay quarterly cash dividends during 1997. 11 ITEM 6. SELECTED FINANCIAL DATA ($000)
MARITRANS INC. ------------------------------------------------------------------ JANUARY 1 TO DECEMBER 31 1996 1995 1994 1993 1992 ---------- ---------- ---------- ------------- ---------- CONSOLIDATED INCOME STATEMENT DATA: Revenues ............................. $126,994 $124,527 $124,846 $132,539 $133,051 Operating income before depreciation and amortization .................. 30,249 30,738 34,250 24,509 25,576 Depreciation and amortization ........ 16,565 16,214 15,797 15,868 15,578 Operating income (excludes interest expense) .......................... 13,684 14,524 18,453 8,641 9,998 Interest expense, net ................ 9,494 9,454 9,934 10,373 10,958 Income (loss) before income taxes .... 8,379 8,120 10,355 5,186 3,419 Provision for income taxes ........... 3,130 3,139 3,823 16,975(1) -- Net income (loss) .................... 5,249 4,981 6,532 (11,789)(1) 3,419 CONSOLIDATED BALANCE SHEET DATA (at period end): Total assets ......................... $235,221 $251,961 $257,609 $253,038 $251,344 Long-term debt ....................... 79,123 104,337 113,008 110,556 116,866 Partnership equity ................... -- -- -- -- 86,571 Stockholders' equity ................. 82,594 79,875 81,173 74,874 --
- ------ (1) On April 1, 1993, Maritrans Partners L.P. converted from partnership to corporate form, and Maritrans Inc. succeeded to all assets and liabilities of Maritrans Partners L.P. In the first quarter of 1993 Maritrans Partners L.P. recognized a net deferred income tax liability for temporary differences in accordance with Statement of Financial Accounting Standard No. 109, "Accounting for Income Taxes," which resulted in a one-time charge to earnings of $16.6 million. ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS The following is a discussion of the consolidated financial condition and results of operations of Maritrans Inc. (the "Corporation"), and, together with its subsidiaries and its predecessor, Maritrans Partners L.P. (the "Partnership"), herein called "Maritrans." OVERVIEW Historically, Maritrans has served the petroleum and petroleum product distribution industry by using tugs, barges and marine terminal facilities to provide marine transportation and terminalling services along the East and Gulf Coasts of the United States. Between 1992 and 1996, Maritrans has transported at least 218 million barrels annually. The high was 248 million barrels in 1993, and the low was 218 million barrels in 1996. Many factors affect the number of barrels transported and will affect future results for Maritrans, including its vessel and fleet size and average trip lengths, the continuation of federal law restricting United States point-to-point maritime shipping to U.S. vessels (the Jones Act), domestic oil consumption -- particularly in Florida and the northeastern U.S., environmental laws and regulations, oil companies' operating and sourcing decisions, competition, labor and training costs and liability insurance costs. Overall U.S. oil consumption during 1992-1996 fluctuated between 17.0 million and 18.2 million barrels a day. Since 1990, Maritrans has taken steps to modify the mix of operating characteristics of its fleet. Maritrans has increased its vessel capacity with the placing in service of its two largest oceangoing, double-hulled petroleum tank barges, the OCEAN 400 and MARITRANS 300, with capacities of approximately 400,000 and 300,000 barrels, respectively. Over this period, Maritrans has also made reductions in owned capacity, disposing of vessels which, due to their sizes and operating characteristics, Maritrans considered excess to its long-term business needs. The operating fleet owned by Maritrans is now approximately 15 percent smaller in barrel capacity than it had been at year-end 1990. 12 LEGISLATION The enactment of the Oil Pollution Act of 1990 ("OPA") significantly increased the liability exposure of marine transporters of petroleum in the event of an oil spill. In addition, the states in which Maritrans operates have enacted legislation increasing the liability for oil spills in their waters. Maritrans maintains oil pollution liability insurance of $700 million on each of its vessels. There can be no assurance that such insurance will be adequate to cover potential liabilities in the event of a catastrophic spill, that additional premium costs will be recoverable through increased vessel charter rates, or that such insurance will continue to be available in satisfactory amounts. Moreover, this legislation has increased other operating costs as Maritrans has taken steps to minimize the risk of spills. Among such costs are those for additional training, safety and contingency programs; these expenses have not yet been and may never be fully recovered through increased vessel charter rates. Additionally, management believes that the legislation has effectively reduced the total volume of waterborne petroleum transportation as shippers of petroleum have tried to limit their exposure to OPA liability. This legislation has had a material adverse effect on Maritrans' operations, financial performance and expectations. OPA is expected to continue having negative effects on the entire U.S. oil and marine petroleum transportation industry, including Maritrans. These effects could include: (i) increased capital expenditures to cover the cost of mandated double-hulled vessels -- expenditures that the independent marine transporters of petroleum may not be able to finance, (ii) continued increased maintenance, training, insurance and other operating costs, (iii) increased liability and exposure to civil penalties, (iv) decreased operating revenues as a result of further reductions in volumes transported on vessels and (v) increased difficulty in obtaining sufficient insurance, particularly oil pollution coverage. These effects could adversely affect Maritrans' profitability and liquidity. OPA will require the retirement of, or retrofitting with double hulls, all single-hulled petroleum tankers and barges operating in U.S. waters, including most of Maritrans' existing barges. The first of Maritrans' affected barges will have to be retired or retrofitted by 2003. However, most of Maritrans' large oceangoing, single-hulled barges will be affected January 1, 2005. Maritrans' barges under 5,000 gross registered tons are not scheduled for retirement until 2015. Approximately 16 percent of Maritrans' operating capacity has been qualified by the United States Coast Guard as meeting the double-hull requirements and, therefore, is allowed to continue operating without modification and without a legislatively determined retirement date. If Maritrans were to replace its entire barge capacity with newly built double hulls, the estimated cost would be approximately $500 million. This estimate could be higher as shipyard costs increase. RESULTS OF OPERATIONS YEAR ENDED DECEMBER 31, 1996 COMPARED WITH YEAR ENDED DECEMBER 31, 1995 Revenues for 1996 were $127.0 million and were $124.5 million in 1995, an increase of $2.5 million, or two percent. Barrels of cargo transported decreased by 6.9 million barrels, from 225.0 million to 218.1 million, or three percent. Curtailment of a portion of refinery throughput in the Delaware Valley refineries in 1996 caused Maritrans to employ its vessel capacity in alternative markets. This had the result of increasing average trip length, which further resulted in higher average revenues per barrel transported, as equipment formerly utilized in and around Delaware Valley refining and terminalling locations was redeployed into the Gulf of Mexico, the Chesapeake Bay, and into delivery locations in the Caribbean. The markets within which Maritrans operates continue to experience severe price competition for oil transportation services which is expected to continue. Revenue from sources other than marine transportation decreased from 4.0 percent of total revenues in 1995 to 3.6 percent in 1996. Operating expenses of $113.3 million for 1996 increased by $3.3 million, or 3.0 percent from $110.0 million in 1995. The MARITRANS 300 unit, Maritrans' second largest tug/barge unit, entered service in the fourth quarter of 1995 and was operational for the full year in 1996. The aforementioned increase in trip length and rising fuel prices contributed to the increase in operating expenses. General and administrative costs rose as a result of the increased use of outside professional services, particularly for matters related to business development and analysis. 13 Interest expense in 1996 was consistent with the prior year. Other income in 1996 increased $1.1 million from $3.1 million in 1995 to $4.2 million in 1996 due primarily to the gain from disposals of vessels which, due to their sizes and operating characteristics, were considered excess to Maritrans' long-term business needs. Net income for 1996 increased by $0.2 million to $5.2 million as the result of the aforementioned increased revenues and other income more than offsetting the increase in operating expenses. YEAR ENDED DECEMBER 31, 1995 COMPARED WITH YEAR ENDED DECEMBER 31, 1994 Revenues for 1995 were $124.5 million and were $124.8 million in 1994, a decrease of $0.3 million, or less than half a percent. Barrels of cargo transported decreased by 12.1 million barrels, from 237.1 million to 225.0 million. While severe price competition for oil transportation services has existed in the markets served by Maritrans in recent years and is expected to continue, the fleet's average revenue per barrel rose in 1995, primarily due to an increase in average trip length. Revenue from sources other than marine transportation decreased from 5.5 percent of total revenues in 1994 to 4.0 percent in 1995. Operating expenses of $110.0 million for 1995 increased by $3.6 million, or 3.4 percent from $106.4 million in 1994. Fleet capacity increased in 1995, with the MARITRANS 300 unit entering service in the fourth quarter. The aforementioned increase in trip length contributed to the increase in operating expenses, particularly fuel. Other contributing factors include additional training for crew members and an increase in vessel insurance costs. General and administrative costs rose as a result of the increased use of outside professional services, particularly for matters related to new business development and for training. Interest expense of $9.4 million for 1995 decreased $0.5 million or 5.1 percent from $9.9 million in 1994. The decrease resulted from capitalized interest partially offset by the interest expense on the long-term debt acquired to purchase the MARITRANS 300. Other income in 1995 increased $1.2 million from $1.8 million in 1994 to $3.0 million in 1995 due to a rise in interest rates and an increase in the average amount of cash available for investment. Net income for 1995 decreased by $1.5 million to $5.0 million as the result of the aforementioned increase in operating expenses partially offset by the increase in other income. LIQUIDITY AND CAPITAL RESOURCES In 1996, funds provided by operating and investing activities were sufficient to fully meet debt service obligations (including $8.7 million in required long-term debt repayments and the repurchase, at par, of $15 million principal amount of long-term debt of a subsidiary), to meet loan agreement restrictions, to make capital improvements, and to allow Maritrans to pay a dividend of $0.05 per common share in the first quarter and $0.075 per common share in each of the last three quarters. Maritrans believes that in 1997, funds provided by operating activities, augmented by financing transactions and investing activities, will be sufficient to finance operations, anticipated capital expenditures, lease payments and required debt repayments. Dividend payments are expected to continue quarterly in 1997. In 1996, approximately $3 million was spent for improvements to the existing fleet and terminal facilities. Maritrans believes capital expenditures in 1997 for improvements to its current fleet of vessels and existing marine terminals will be approximately $4 million. No material commitments existed at December 31, 1996, for capital expenditures. Maritrans will continue to evaluate potential investments, and the related funding of those investments, consistent with its long-term strategic interests. On May 10, 1995, the Corporation announced a stock buy-back plan to reacquire up to 1.8 million shares of its common stock over the course of the next two years, depending on market conditions. This amount represented approximately 15 percent of the 12.5 million shares then outstanding. Maritrans intends to hold the majority of the shares as treasury stock, although some shares may be used for employee compensation plans and/or other corporate purposes. As of December 31, 1996, the Company has purchased 877,955 shares at a cost of approximately $5.1 million. Maritrans has financed and expects that additional share purchases, if made, would be financed with internally generated funds. 14 WORKING CAPITAL AND OTHER BALANCE SHEET CHANGES At December 31, 1996, current assets exceeded current liabilities by $32 million. The ratio of current assets to current liabilities at December 31, 1996, was 1.95:1. At December 31, 1995, this ratio was 2.21:1. In 1996, Maritrans utilized available working capital to repurchase, at par, $15 million principal amount of long-term debt of a subsidiary. Working capital decreased $4.2 million from December 31, 1995, to December 31, 1996. The working capital decline was due primarily to the increases in current debt maturities and other current liabilities and decreases in investments held-to-maturity. Partially offsetting the working capital decline was an increase in trade accounts receivable based upon the timing of revenues and payments in the latter part of the fourth quarter of 1996. At December 31, 1996 and 1995, the combined balances of cash and cash equivalents and investments held-to-maturity were $33.2 million and $38.6 million, respectively. DEBT OBLIGATIONS AND BORROWING FACILITY At December 31, 1996, Maritrans had $89.3 million in total outstanding debt, secured by mortgages on substantially all of the fixed assets of the subsidiaries of the Corporation. The current portion of this debt at December 31, 1996, was $10.2 million. Maritrans has a $10 million working capital facility, secured by its marine receivables and inventories, which expires June 30, 1997 and which it expects to renew. This facility was not used in 1996. At December 31, 1996 and 1995, total debt to total capitalization was 52 percent and 59 percent, respectively. For purposes of this calculation, total capitalization consists of long-term debt, including those portions that are current, and stockholders' equity. ITEM 8. FINANCIAL STATEMENTS & SUPPLEMENTAL DATA REPORT OF INDEPENDENT AUDITORS Stockholders and Board of Directors Maritrans Inc. We have audited the accompanying consolidated balance sheets of Maritrans Inc. as of December 31, 1996 and 1995, and the related consolidated statements of income, cash flows and stockholders' equity for each of the three years in the period ended December 31, 1996. Our audits also included the financial statement schedule listed in the Index at Item 14(A). These financial statements and schedule are the responsibility of the management of Maritrans Inc. Our responsibility is to express an opinion on these financial statements and schedule based on our audits. We conducted our audits in accordance with generally accepted auditing standards. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion. In our opinion, the financial statements referred to above present fairly, in all material respects, the consolidated financial position of Maritrans Inc. at December 31, 1996 and 1995, and the consolidated results of its operations and its cash flows for each of the three years in the period ended December 31, 1996 in conformity with generally accepted accounting principles. Also, in our opinion, the related financial statement schedule, when considered in relation to the basic financial statements taken as a whole, present fairly in all material respects the information set forth therein. ERNST & YOUNG LLP Philadelphia, Pennsylvania January 24, 1997 15 MARITRANS INC. CONSOLIDATED BALANCE SHEETS ($000)
December 31, ------------------------ 1996 1995 ASSETS Current assets: Cash and cash equivalents ....................................... $ 33,174 $ 31,033 Investments held-to-maturity .................................... -- 7,544 Trade accounts receivable (net of allowance for doubtful accounts of $860 and $457, respectively) .............................. 16,730 12,722 Other accounts receivable ....................................... 4,523 5,063 Inventories ..................................................... 5,823 4,586 Deferred income tax benefit ..................................... 2,234 1,203 Prepaid expenses ................................................ 3,014 3,909 ---------- ---------- Total current assets .................................... 65,498 66,060 Vessels terminals and equipment ................................... 280,231 284,161 Less accumulated depreciation ................................... 117,741 106,169 ---------- ---------- Net vessels terminals and equipment ..................... 162,490 177,992 Other ............................................................. 7,233 7,909 ---------- ---------- Total assets ............................................ $235,221 $251,961 ========== ========== LIABILITIES AND STOCKHOLDERS' EQUITY Current liabilities: Debt due within one year ........................................ $ 10,213 $ 8,671 Trade accounts payable .......................................... 3,016 2,614 Accrued interest ................................................ 1,748 2,249 Accrued shipyard costs .......................................... 5,774 5,134 Accrued wages and benefits ...................................... 3,656 5,800 Other accrued liabilities ....................................... 9,128 5,458 ---------- ---------- Total current liabilities ............................... 33,535 29,926 Long-term debt .................................................... 79,123 104,337 Deferred shipyard costs ........................................... 8,661 7,701 Other liabilities ................................................. 5,364 5,365 Deferred income taxes ............................................. 25,944 24,757 Stockholders' equity: Preferred stock, $.01 par value, authorized 5,000,000 shares; none issued .................................................. -- -- Common stock, $.01 par value, authorized 30,000,000 shares; issued: 1996 -- 12,837,867 shares, 1995 -- 12,558,620 shares . 128 126 Capital in excess of par value .................................. 75,874 74,516 Retained earnings ............................................... 12,372 10,378 Less: Cost of shares held in treasury 1996 -- 877,955 shares; 1995 -- 876,485 shares ........... (5,067) (5,059) Unearned Compensation .................................... (713) (86) ---------- ---------- Total stockholders' equity .............................. 82,594 79,875 ---------- ---------- Total liabilities and stockholders' equity .............. $235,221 $251,961 ========== ==========
See accompanying notes. 16 MARITRANS INC. CONSOLIDATED STATEMENTS OF INCOME ($000 EXCEPT PER SHARE AMOUNTS)
For the year ended December 31, ------------------------------------------- 1996 1995 1994 ------------ ------------ ---------- Revenues ................................................... $ 126,994 $ 124,527 $ 124,846 Costs and expenses: Operation expense ........................................ 67,286 65,260 62,488 Maintenance expense ...................................... 20,289 19,879 20,355 General and administrative ............................... 9,170 8,650 7,753 Depreciation and amortization ............................ 16,565 16,214 15,797 ------------ ------------ ---------- 113,310 110,003 106,393 ------------ ------------ ---------- Operating income ........................................... 13,684 14,524 18,453 Interest expense (net of capitalized interest of $0, $955 and $0, respectively) .................................... (9,494) (9,454) (9,934) Other income, net .......................................... 4,189 3,050 1,836 ------------ ------------ ---------- Income before income taxes ................................. 8,379 8,120 10,355 Income tax provision ..................................... 3,130 3,139 3,823 ------------ ------------ ---------- Net income ................................................. $ 5,249 $ 4,981 $ 6,532 ============ ============ ========== Earnings per share ......................................... $ 0.44 $ 0.41 $ 0.52 Average common shares outstanding .......................... 11,828,422 12,150,380 12,524,861
See accompanying notes. 17 MARITRANS INC. CONSOLIDATED STATEMENTS OF CASH FLOWS INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS ($000)
For the year ended December 31, ------------------------------------- 1996 1995 1994 ---------- ---------- ---------- Cash flows from operating activities: Net income ....................................... $ 5,249 $ 4,981 $ 6,532 Adjustments to reconcile net income to net cash provided by (used in) operating activities: Depreciation and amortization ................. 16,565 16,214 15,797 Deferred income taxes ......................... 340 2,560 3,589 Stock compensation ............................ 347 -- -- Changes in receivables, inventories, and prepaid expenses ............................ (3,810) 1,166 7,425 Changes in current liabilities other than debt 2,067 1,403 (5,187) Non-current changes, net ...................... 1,063 (532) (1,316) (Gain) loss on sale of equipment .............. (3,250) (24) 249 ---------- ---------- --------- Total adjustments to net income .................... 13,322 20,787 20,557 ---------- ---------- --------- Net cash provided by (used in) operating activities .................................. 18,571 25,768 27,089 Cash flows from investing activities: Acquisition of investments held-to-maturity ...... (27,684) (28,064) (8,000) Maturity of investments held-to-maturity ......... 35,228 28,520 -- Cash proceeds from sale of marine vessels and equipment ..................................... 5,558 340 2,985 Purchase of marine vessels, terminals and equipment ..................................... (2,983) (15,323) (14,217) ---------- ---------- --------- Net cash provided by (used in) investing activities .................................. 10,119 (14,527) (19,232) Cash flows from financing activities: Proceeds from issuance of long-term debt ......... -- -- 10,250 Proceeds from stock option exercises ............. 378 -- -- Payment of long-term debt ........................ (23,672) (7,654) (6,455) Purchase of treasury stock ....................... -- (5,059) -- Dividends declared and paid ...................... (3,255) (1,319) (250) ---------- ---------- --------- Net cash provided by (used in) financing activities .................................. (26,549) (14,032) 3,545 Net increase (decrease) in cash and cash equivalents 2,141 (2,791) 11,402 Cash and cash equivalents at beginning of year ..... 31,033 33,824 22,422 ---------- ---------- --------- Cash and cash equivalents at end of year ........... $ 33,174 $ 31,033 $ 33,824 ========== ========== ========= Supplemental Disclosure of Cash Flow Information: Interest paid ...................................... $ 9,908 $ 10,353 $ 9,917 Income taxes paid .................................. $ 1,050 $ 85 $ 250
See accompanying notes. 18 MARITRANS INC. CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY ($000)
Common Capital in Stock, $.01 excess of Retained Treasury Unearned Par Value Par Value Earnings Stock Compensation Total ------------- ------------ ---------- ---------- -------------- --------- Balance at December 31, 1993 ..................... $125 $74,315 $ 434 -- -- $74,874 Net income, January 1, 1994 to December 31, 1994 ..... 6,532 6,532 Cash dividends ($0.02 per share of Common Stock) ... (250) (250) Stock incentives .......... 17 17 ------------- ------------ ---------- ---------- -------------- --------- Balance at December 31, 1994 ..................... 125 74,332 6,716 81,173 Net income January 1, 1995 to December 31, 1995 ..... 4,981 4,981 Cash dividends ($0.11 per share of Common Stock) ... (1,319) (1,319) Purchase of treasury stock $(5,059) (5,059) Stock incentives .......... 1 184 $ (86) 99 ------------- ------------ ---------- ---------- -------------- --------- Balance at December 31, 1995 ..................... 126 74,516 10,378 (5,059) (86) 79,875 Net income, January 1, 1996 to December 31, 1996 ..... 5,249 5,249 Cash dividends ($0.275 per share of Common Stock) ... (3,255) (3,255) Stock incentives .......... 2 1,358 (8) (627) 725 ------------- ------------ ---------- ---------- -------------- --------- Balance at December 31, 1996 ..................... $128 $75,874 $12,372 $(5,067) $(713) $82,594 ============= ============ ========== ========== ============== =========
See accompanying notes. 19 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS 1. ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES ORGANIZATION Maritrans Inc. owns Maritrans Operating Partners L.P. (the "Operating Partnership"), Maritrans Barge Co. and Maritrans Holdings Inc. (collectively, the "Company"). These subsidiaries, directly and indirectly, own and operate tugs and barges principally used in the transportation of oil and related products, along the Gulf and Atlantic Coasts, and own and operate petroleum storage facilities on the Atlantic Coast. PRINCIPLES OF CONSOLIDATION The consolidated financial statements include the accounts of Maritrans Inc. and subsidiaries, all of which are wholly owned. All significant intercompany transactions and accounts have been eliminated in consolidation. USE OF ESTIMATES The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the amounts reported in the financial statements and accompanying notes. Actual results could differ from those estimates. MARINE VESSELS AND EQUIPMENT Equipment, which is carried at cost, is depreciated using the straight-line method. Vessels are depreciated over a period of up to 30 years. Certain electronic equipment is depreciated over periods of 7 to 10 years. Petroleum storage tanks are depreciated over periods of up to 25 years. Other equipment is depreciated over periods ranging from 3 to 20 years. Gains or losses on dispositions of fixed assets are included in other income in the accompanying consolidated statements of income. The Oil Pollution Act requires all newly constructed petroleum tank vessels engaged in marine transportation of oil and petroleum products in the U.S. to be double-hulled and all such existing single-hulled vessels to be retrofitted with double hulls or phased out of the industry beginning January 1, 1995. Because of the age and size of Maritrans' individual barges, the first of its operating vessels will be required to be retired or retrofitted by January 2003, and most of its large oceangoing, single-hulled vessels will be similarly affected on January 1, 2005. MAINTENANCE AND REPAIRS Provision is made for the cost of upcoming major periodic overhauls of vessels and equipment in advance of performing the related maintenance and repairs. The current portion of this estimated cost is included in accrued shipyard costs while the portion of this estimated cost not expected to be incurred within one year is classified as long-term. Both the provisions for major periodic overhauls as well as non-overhaul maintenance and repairs are expensed as incurred. INVENTORIES Inventories, consisting of materials, supplies and fuel, are carried at specific cost which does not exceed net realizable value. INCOME TAXES Deferred income taxes reflect the net tax effects of temporary differences between the amount of assets and liabilities for financial reporting purposes and the amount used for income tax purposes. SIGNIFICANT CUSTOMERS During 1996, the Company derived revenues aggregating 42 percent of total revenues from 3 customers, each one representing 10 percent or more of total revenues. In 1995, revenues from 4 customers aggregated 54 percent of total revenues and in 1994, revenues from 4 customers aggregated 49 percent of total revenues. The Company does not necessarily derive 10 percent or more of its total revenues from the same group of custom- 20 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS - (Continued) 1. Organization and Significant Accounting Policies - (Continued) ers each year. In 1996, approximately 79 percent of the Company's revenues were generated by 10 customers. Credit is extended to various companies in the petroleum industry in the normal course of business. This concentration of credit risk within this industry may be affected by changes in economic or other conditions and may, accordingly, affect overall credit risk of the Company. RELATED PARTIES The Company obtained protection and indemnity insurance coverage from a mutual insurance association, whose chairman is also the chairman of Maritrans Inc. The related insurance expense was $2,654,000, $2,700,000 and $2,501,000 for the years ended December 31, 1996, 1995 and 1994, respectively. The Company paid $440,000 and $510,000 in 1996 and 1995, respectively to a law firm, a partner of which was elected to the Company's Board of Directors during 1995. In 1996, the amount paid represents $277,000 relating to the lease of office space and $163,000 for legal services. In 1995, the amount represents $277,000 relating to the lease of office space and $233,000 for legal services. EARNINGS PER COMMON SHARE Earnings per common share are based on the average number of common shares outstanding. The potential effect of outstanding stock options is not dilutive. 2. CASH AND CASH EQUIVALENTS Cash and cash equivalents at December 31, 1996, and 1995 consisted of cash and commercial paper, the carrying value of which approximates fair value. For purposes of the consolidated financial statements, short-term highly liquid debt instruments with original maturities of three months or less are considered to be cash equivalents. 3. INVESTMENTS HELD-TO-MATURITY Investments held-to-maturity, which consist of debt securities, are carried at cost which approximates market value. The Company has both the ability and positive intent to hold these securities until maturity. The securities all mature within one year. 4. STOCK INCENTIVE PLANS The Company has elected to follow Accounting Principles Board Opinion No. 25, "Accounting for Stock Issued to Employees" (APB 25) and related Interpretations in accounting for its employee stock options because the alternative fair value accounting provided for under FAS Statement No. 123, "Accounting for Stock-Based Compensation," requires use of option valuation models that were not developed for use in valuing employee stock options. The effect of applying Statement No. 123's fair value method to the Company's stock-based awards results in pro forma net income and earnings per share that are not materially different from amounts reported. Maritrans Inc. has a stock incentive plan (the "Plan"), whereby non-employee directors may be granted stock, and officers and other key employees may be granted stock, stock options and, in certain cases, receive cash under the Plan. Any outstanding options granted under the Plan are exercisable at a price not less than market value of the shares on the date of grant. In 1996, there were 6,494 shares issued to directors. Compensation expense equal to the fair market value on the date of the grant to the directors is included in general and administrative expense in the consolidated statement of income. During 1996, there were 158,842 shares of restricted stock issued under the Plan. The restrictions lapse over a four year period. The shares are subject to forfeiture under certain circumstances. Unearned compensation, representing the fair market value of the shares at the date of issuance, is amortized to expense as the restrictions lapse. At December 31, 1996 and 1995, 230,467 and 570,815 remaining shares within the Plan were reserved for grant. 21 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS - (Continued) Information on stock options for 1996 follows: Exercise Number of Price Shares ------------- ----------- Outstanding at beginning of year $4.00-6.00 619,643 Granted ........................ $5.25-5.375 159,428 Exercised ...................... $4.00-5.375 96,911 Cancelled ...................... -- -- Expired ........................ -- -- Outstanding at end of year ..... $4.00-6.00 682,160 Exercisable at end of year ..... $4.00-5.00 208,957 Outstanding options are exercisable in installments over two to four years and expire beginning in 2002. 5. INCOME TAXES The income tax provision consists of:
1996 1995 1994 -------- -------- -------- ($000) Current: Federal........................................... $2,788 $ 576 $ 123 State ............................................ 2 3 111 Deferred: Federal........................................... $ 272 $2,391 3,493 State............................................. 68 169 96 -------- -------- -------- $3,130 $3,139 $3,823 ======== ======== ========
The differences between the federal income tax rate of 35 percent in 1996, 1995 and 1994, and the effective tax rates were as follows:
1996 1995 1994 -------- -------- -------- ($000) Statutory federal tax provision ...................... $2,932 $2,842 $3,624 State income taxes, net of federal income tax benefit 46 112 135 Non-deductible items ................................. 152 181 27 Other ................................................ -- 4 37 -------- -------- -------- $3,130 $3,139 $3,823 ======== ======== ========
Principal items comprising deferred income tax liabilities and assets as of December 31, 1996 and 1995 are: 1996 1995 --------- ------- ($000) Deferred tax liabilities: Tax over book depreciation ............ $35,423 $33,153 Prepaids .............................. 1,828 1,897 --------- ------- 37,251 35,050 --------- ------- Deferred tax assets: Reserves and accruals ................. 8,598 7,342 Net operating loss and credit carryforwards ....................... 4,943 4,154 --------- ------- 13,541 11,496 --------- ------- Net deferred tax liabilities ............... $23,710 $23,554 ========= ======= At December 31, 1996, Maritrans Inc. has net operating loss carryforwards of approximately $28.4 million for income tax reporting purposes which expire in the year 2005 and thereafter. The Company has an Alternative Minimum Tax credit of $2.9 million at December 31, 1996 which does not expire. 22 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS - (Continued) 6. RETIREMENT PLANS Most of the shoreside employees and substantially all of the seagoing supervisors participate in a qualified defined benefit retirement plan of Maritrans Inc. Net periodic pension costs were determined under the projected unit credit actuarial method. Pension benefits are primarily based on years of service and begin to vest after two years. Employees covered by collective bargaining agreements and employees of Maritrans Holdings Inc. or its subsidiaries are not eligible to participate in the qualified defined benefit retirement plan of Maritrans Inc. The weighted average discount rate, used to determine the actuarial present value of the projected benefit obligation, and the expected long-term rate of return on plan assets was 6.75 percent for all periods. The weighted average assumed rate of compensation increase used to determine the actuarial present value of the projected benefit obligation was 5 percent for all periods. Net periodic pension costs included the following components for the years ended December 31:
1996 1995 1994 --------- --------- --------- ($000) Service cost of current period ............... $ 1,548 $ 1,581 $ 1,568 Interest cost on projected benefit obligation 1,365 1,237 1,119 Actual (gain) loss on plan assets ............ (2,031) (3,094) 352 Net (amortization) and deferral .............. 423 1,745 (1,677) --------- --------- --------- Net pension cost ............................. $ 1,305 $ 1,469 $ 1,362 ========= ========= =========
The following table sets forth the plan's funded status at December 31, 1996 and 1995:
December 31, --------------------- 1996 1995 --------- --------- ($000) Actuarial present value of benefit obligations: Vested benefit obligation ........................... $17,754 $15,986 ========= ========= Accumulated benefit obligation ...................... $18,679 $16,925 ========= ========= Projected benefit obligation ........................ $22,834 $20,904 ========= ========= Plan assets at fair value, primarily publicly traded stocks and bonds ....................................... $23,188 $20,475 ========= ========= Plan assets (greater) less than projected benefit obligation ............................................. (354) 429 Unrecognized net gain on plan's assets ................... 3,289 2,283 Net assets being amortized over 15 years ................. 1,006 1,210 --------- --------- Accrued pension cost recognized in the financial statements ............................................. $ 3,941 $ 3,922 ========= =========
Substantially all of the shoreside employees and seagoing supervisors also participate in a qualified defined contribution plan. Contributions under the plan are determined annually by the Board of Directors of Maritrans Inc. The cost of the plan was $0, $1,005,000 and $742,000 for the years ended December 31, 1996, 1995 and 1994, respectively. Contributions to industry-wide, multi-employer seamen's pension plans, which cover substantially all seagoing personnel covered under collective bargaining agreements, were approximately $474,000, $480,000 and $399,000 for the years ended December 31, 1996, 1995 and 1994, respectively. These contributions include funding for current service costs and amortization of prior service costs of the various plans over periods of 30 to 40 years. The pension trusts and union agreements provide that contributions be made at a contractually determined rate per man-day worked. Maritrans Inc. and its subsidiaries are not administrators of the multi-employer seamen's pension plans. 23 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS - (Continued) 7. DEBT At December 31, 1996, total outstanding debt of the subsidiaries of Maritrans Inc. is $89.3 million, $79.1 million of which is long-term. At December 31, 1995, total outstanding debt was $113.0 million, $104.3 million of which was long-term. The debt is secured by mortgages on substantially all of the fixed assets of those subsidiaries. At December 31, 1996, total outstanding debt consists of several series -- $8.5 million maturing through 1997, $6.6 million maturing through 1998, $9.2 million maturing through 2005, and $65.0 million maturing from 1998 through 2006. The weighted average interest rate on this indebtedness is 8.89 percent. Terms of the indebtedness require the subsidiaries to maintain their properties in a specific manner, maintain specified insurance on their properties and business, and abide by other covenants which are customary with respect to such borrowings. At December 31, 1995, the total outstanding debt consisted of several series -- $23.3 million maturing through 1997, $9.7 million maturing through 2005, and $80 million maturing from 1998 through 2007. The Operating Partnership has a $10 million working capital facility secured by its receivables and inventories. There were no borrowings under this facility during fiscal 1996. Based on the borrowing rates currently available for loans with similar terms and maturities, the fair value of long term debt was $87.7 million and $113.1 million at December 31, 1996 and 1995, respectively. The maturity schedule for outstanding indebtedness under existing debt agreements at December 31, 1996, is as follows: ($000) --------- 1997 ......... $10,213 1998 ......... 13,958 1999 ......... 8,608 2000 ......... 8,662 2001 ......... 8,720 2002 -- 2006 . 39,175 --------- $89,336 ========= 8. COMMITMENTS AND CONTINGENCIES Minimum future rental payments under noncancellable operating leases at December 31, 1996, are as follows: ($000) --------- 1997 ......... $ 2,113 1998 ......... 2,030 1999 ......... 1,863 2000 ......... 2,012 2001 ......... 2,012 2002 -- 2006 . 7,212 --------- $17,242 ========= The indenture governing the Operating Partnership's long-term debt permits cash distributions by Maritrans Operating Partners L.P. to Maritrans Inc., so long as no default exists under the indenture and provided that such distributions do not exceed contractually prescribed amounts. 24 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS - (Continued) 8. Commitments and Contingencies - (Continued) In the ordinary course of its business, claims are filed against the Company for alleged damages in connection with its operations. Management is of the opinion that the ultimate outcome of such claims at December 31, 1996 will not have a material adverse effect on the consolidated financial statements. 9. QUARTERLY FINANCIAL DATA (UNAUDITED) First Second Third Fourth Quarter Quarter Quarter Quarter --------- --------- --------- --------- ($000, except per share amounts) 1996 - ---- Revenues ......... $31,586 $30,959 $31,831 $32,618 Operating income . 3,025 2,001 4,326 4,332 Net income ....... 709 215 1,511 2,814 Earnings per share $ 0.06 $ 0.02 $ 0.13 $ 0.23 1995 - ---- Revenues ......... $32,783 $30,125 $29,102 $32,517 Operating income . 5,428 2,733 2,253 4,110 Net income ....... 2,302 1,061 366 1,252 Earnings per share $ 0.18 $ 0.08 $ 0.03 $ 0.11 25 ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE None. PART III ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT Information with respect to directors of the Registrant, and information with respect to compliance with Section 16(a) of the Securities Exchange Act of 1934, is incorporated herein by reference to the Registrant's definitive Proxy Statement to be filed with the Securities and Exchange Commission (the "Commission") not later than 120 days after the close of the year ended December 31, 1996, under the captions "Information Regarding Nominees For Election As Directors And Regarding Continuing Directors" and "Section 16 Requirements." The individuals listed below are directors and executive officers of Maritrans Inc. or its subsidiaries.
Name Age(1) Position ---- ------ -------- Stephen A. Van Dyck (4)(5) .. 53 Chairman of the Board of Directors and Chief Executive Officer Dr. Robert E. Boni (2)(3)(4) 69 Director Dr. Craig E. Dorman (2)(3) .. 56 Director Robert J. Lichtenstein(4)(5) 49 Director Eric H. Schless(2)(4) ....... 42 Director Richard T. McCreary ......... 41 Vice President, Maritrans General Partner Inc. Janice M. Smallacombe ....... 37 Vice President, Maritrans General Partner Inc. John J. Burns ............... 44 Vice President, Maritrans General Partner Inc. Steven E. Welch ............. 45 Vice President, Maritrans General Partner Inc. John C. Newcomb ............. 58 Vice President, General Counsel and Secretary Thomas C. Deas, Jr. ......... 45 Vice President, Chief Financial Officer and Treasurer (until February, 1997) Walter T. Bromfield ......... 41 Controller Francis D. Bailey ........... 44 President, Eastern Division -- Operating Partnership (until December, 1996)
- ------ (1) As of March 1, 1997 (2) Member of the Compensation Committee (3) Member of the Audit Committee (4) Member of the Finance Committee (5) Member of the Nominating Committee 26 Mr. Van Dyck has been Chairman of the Board and Chief Executive Officer of the Company and its predecessor since April 1987. For the previous year, he was a Senior Vice President -- Oil Services, of Sonat Inc. and Chairman of the Boards of the Sonat Marine Group, another predecessor, and Sonat Offshore Drilling Inc. For more than five years prior to April 1986, Mr. Van Dyck was the President and a director of the Sonat Marine Group and Vice President of Sonat Inc. Mr. Van Dyck is a member of the Board of Directors of Amerigas Propane, Inc. Mr. Van Dyck is also the Chairman of the Board and a director of the West of England Ship Owners Mutual Insurance Association (Luxembourg), a mutual insurance association. He is a member of the Company's Finance (Chairman) and Nominating Committees of the Board of Directors. See "Certain Transactions." Dr. Boni retired as Chairman of Armco Inc., a steel, oil field equipment and insurance corporation on November 30, 1990. Dr. Boni became Chief Executive Officer of Armco Inc. in 1985 and Chairman in 1986. He served as Non-Executive Chairman of the Board of and consultant for Alexander & Alexander Services Inc., an insurance services company, during 1994 and as a consultant for that company during January 1995. He is a member of the Company's Compensation (Chairman), Audit and Finance Committees of the Board of Directors. Dr. Dorman is serving as Chief Scientist/Technical Director, Office of Naval Research, Europe on an Intergovernmental Personnel Act assignment from Pennsylvania State University where he serves as Senior Scientist, Applied Research Lab. From 1993 until mid-1995 he served as Deputy Director Defense Research and Engineering for Laboratory Management, U.S. Department of Defense, on an Intergovernmental Personnel Act assignment from Woods Hole Oceanographic Institution. He was Director and Chief Executive Officer of Woods Hole Oceanographic Institution from 1989 until 1993. From 1962 to 1989, Dr. Dorman was an officer in the U.S. Navy, most recently Rear Admiral and Program Director for Anti-Submarine Warfare. He is a member of the Company's Audit and Compensation Committees of the Board of Directors. Mr. Lichtenstein has been a partner in the law firm of Morgan, Lewis & Bockius LLP since 1988. He is a member of the Company's Finance and Nominating Committees of the Board of Directors. See "Certain Transactions". Mr. Schless has been Managing Director, Investment Banking Department, Head of Transportation Group, of Schroder Wertheim & Co., New York, NY since 1994. From 1985 to 1994, Mr. Schless was a member of the Investment Banking Department, Wheat First Securities Inc., Richmond, VA, reaching the position of Managing Director. He is a member of the Company's Finance and Compensation Committees of the Board of Directors. Mr. McCreary is a Vice President of Maritrans General Partner Inc. and joined the Company in May 1995. Previously Mr. McCreary was Vice President, Operations and Engineering, Canal Barge Lines (1990-May 1995). Ms. Smallacombe is a Vice President of Maritrans General Partner Inc. and has been continuously employed by the Company or its predecessors in various capacities since 1982. Mr. Burns is a Vice President of Maritrans General Partner Inc. and has been continuously employed by the Company or its predecessors in various capacities since 1975. Mr. Welch is a Vice President of Maritrans General Partner Inc. and has been continuously employed by the Company or its predecessors in various capacities since 1977. Mr. Newcomb is Vice President, General Counsel and Secretary of the Company, and has been continuously employed in various capacities by Maritrans or its predecessors since 1975. Mr. Deas was named Vice President, Chief Financial Officer and Treasurer of the Company in March 1996. Previously, he was Assistant Treasurer (since 1988) of, or held various financial positions with, Scott Paper Company since 1978. Mr. Deas resigned his position with the Company in February 1997. Mr. Bromfield is Controller of the Company, and has been continously employed in various capacities by Maritrans or its predecessors since 1981. Mr. Bailey was named President of the Eastern Division of the Operating Partnership in June 1995. Previously, Mr. Bailey was Vice President, Sales and Marketing, ASB Meditest (August 1991 to June 1995); and President, Envirobusiness (March 1990 to May 1991). Mr. Bailey resigned his position with the Company in December 1996. 27 ITEMS 11, 12 AND 13. The information required by Item 11, Executive Compensation, by Item 12, Security Ownership of Certain Beneficial Owners and Management, and by Item 13, Certain Relationships and Related Transactions, is incorporated herein by reference to the Company's definitive Proxy Statement to be filed with the Commission not later than 120 days after the close of the fiscal year ended December 31, 1996, under the headings "Compensation of Directors and Executive Officers", "Security Ownership of Certain Beneficial Owners and Management" and "Certain Transactions". 28 PART IV
Page Item 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K (a) (1) Financial Statements Report of Independent Auditors 15 Maritrans Inc. Consolidated Balance Sheets at December 31, 1996, and 1995. 16 Maritrans Inc. Consolidated Statements of Income for the years ended 17 December 31, 1996, 1995, and 1994. Maritrans Inc. Consolidated Statements of Cash Flows for the years ended 18 December 31, 1996, 1995, and 1994. Maritrans Inc. Consolidated Statements of Stockholders' Equity for the years 19 ended December 31, 1996, 1995 and 1994. Notes to the Consolidated Financial Statements. 20 (2) Financial Statement Schedules Schedule II Maritrans Inc. Valuation Account for the years ended December 33 31, 1996, 1995, and 1994. All other schedules called for under Regulation S-X are not submitted because they are not applicable, not required, or because the required information is not material, or is included in the financial statements or notes thereto. (b) Reports on Form 8-K No reports on Form 8-K were filed during the quarter ended December 31, 1996.
29
(c) Exhibits Exhibit Index Page ------------- ---- 3.1# Certificate of Incorporation of the Registrant, as amended. 3.2# By Laws of the Registrant. 4.1 Certain instruments with respect to long-term debt of the Registrant or Maritrans Operating Partners L.P. or Maritrans Barge Company which relate to debt that does not exceed 10 percent of the total assets of the Registrant are omitted pursuant to Item 601(b) (4) (iii) (A) of Regulation S-K. Maritrans hereby agrees to furnish supplementally to the Securities and Exchange Commission a copy of each such instrument upon request. 10.1* Amended and Restated Agreement of Limited Partnership of Maritrans Operating Partners L.P., dated as of April 14, 1987 (Exhibit 3.2). 10.2+ Certificate of Limited Partnership of Maritrans Operating Partners L.P., dated January 29, 1987 (Exhibit 3.4). 10.3* Form of Maritrans Capital Corporation Note Purchase Agreement, dated as of March 15, 1987 (Exhibit 10.6). 10.3(a)* Indenture of Trust and Security Agreement, dated as of March 15, 1987 from Maritrans Operating Partners L.P. and Maritrans Capital Corporation to The Wilmington Trust Company (Exhibit 10.6(a)). 10.3(b)* Form of First Preferred Ship Mortgage, dated April 14, 1987 from Maritrans Operating Partners L.P., mortgagor, to The Wilmington Trust Company, mortgagee (Exhibit 10.6(b)). 10.3(c)* Guaranty Agreement by Maritrans Operating Partners L.P. regarding $35,000,000 Series A Notes Due April 1, 1997 and $80,000,000 Series B Notes Due April 1, 2007 of Maritrans Capital Corporation (Exhibit 10.6(c)). 10.3(d) Second Supplemental Indenture of Trust and Security Agreement, dated as of April 1, 1996 from Maritrans Operating Partners L.P. and Maritrans Capital Corporation to Wilmington Trust Company, as Trustee. 10.3(e) Supplement To First Preferred Ship Mortgages, dated May 8, 1996 from Maritrans Operating Partners L.P., Mortgagor, to Wilmington Trust Company, as Trustee, Mortgagee. Executive Compensation Plans and Arrangements 10.4 Severance and Non-Competition Agreement, dated April 4, 1996 between Maritrans General Partner Inc. and John C. Newcomb. 10.5 Severance and Non-Competition Agreement, dated March 4, 1997 between Maritrans General Partner Inc. and John J. Burns. 10.6^ Employment Agreement, dated October 5, 1993 between Maritrans General Partner Inc. and Stephen A. Van Dyck. 10.7 Severance and Non-Competition Agreement, dated March 5, 1997 between Maritrans General Partner Inc. and Steven E. Welch. 10.8 Severance and Non-Competition Agreement, dated April 4, 1996 between Maritrans Inc. and Thomas C. Deas, Jr. 10.9= Severance and Non-Competition Agreement, dated June 1, 1995 between Maritrans General Partner Inc. and Janice M. Smallacombe.
30
Exhibit Index Page ------------- ---- 10.10= Severance and Non-Competition Agreement, dated June 1, 1995 between Maritrans General Partner Inc. and Francis D. Bailey. 10.11= Severance and Non-Competition Agreement, dated June 1, 1995 between Maritrans General Partner Inc. and Richard T. McCreary. 10.12 Separation Agreement and General Release, dated January 20, 1997 between Maritrans General Partner Inc. and Francis D. Bailey. 10.13^ Profit Sharing and Savings Plan of Maritrans Inc. as amended and restated effective November 1, 1993. 10.14@ Executive Award Plan of Maritrans GP Inc. (Exhibit 10.31). 10.15@ Excess Benefit Plan of Maritrans GP Inc. as amended and restated effective January 1, 1988 (Exhibit 10.32). 10.16@ Retirement Plan of Maritrans GP Inc. as amended and restated effective January 1, 1989 (Exhibit 10.33). 10.17^ Performance Unit Plan of Maritrans Inc. effective April 1, 1993. 10.18& Executive Compensation Plan as amended and restated effective January 27, 1994. 11.1 Computation of Earnings Per Share. 21.1 Subsidiaries of Maritrans Inc. 27 Financial Data Schedule
* Incorporated by reference herein to the Exhibit number in parentheses filed on March 24, 1988 as Amendment No. 1 to Maritrans Partners L. P. Form 10-K Annual Report, dated March 3, 1988, for the fiscal year ended December 31, 1987. + Incorporated by reference herein to the Exhibit number in parentheses filed with Maritrans Partners L. P. Form S-1 Registration Statement No. 33-11652 dated January 30, 1987 or Amendment No. 1 thereto dated March 20, 1987. # Incorporated by reference herein to the Exhibit of the same number filed with the Registrant's Post-Effective Amendment No. 1 to Form S-4 Registration Statement No. 33-57378 dated January 26, 1993. & Incorporated by reference herein to Exhibit A of the Registrant's definitive Proxy Statement to be filed with the Commission not later than 120 days after the close of the fiscal year ended December 31, 1993. @ Incorporated by reference herein to the Exhibit number in parentheses filed with Maritrans Partners L. P. Form 10-K Annual Report, dated March 29, 1993 for the fiscal year ended December 31, 1992. ^ Incorporated by reference herein to the Exhibit of the same number filed with Maritrans Inc. Form 10-K Annual Report, dated March 30, 1994 for the fiscal year ended December 31, 1993. = Incorporated by reference herein to the Exhibit of the same number filed with Maritrans Inc. Form 10-K Annual Report, dated March 29, 1996 for the fiscal year ended December 31, 1995. 31 SIGNATURES Pursuant to the requirements of Section 13 or 15(d) the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized. MARITRANS INC. (Registrant) By: /s/ Stephen A. Van Dyck Dated: March 28, 1997 --------------------------------- Stephen A. Van Dyck Chairman of the Board Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated.
By: /s/ Stephen A. Van Dyck Chairman of the Board Dated: March 28, 1997 ------------------------------ and Chief Executive Officer Stephen A. Van Dyck (Principal Executive Officer) By: Director Dated: March __, 1997 ------------------------------ Dr. Robert E. Boni By: /s/ Dr. Craig E. Dorman Director Dated: March 28, 1997 ------------------------------ Dr. Craig E. Dorman By: /s/ Robert J. Lichtenstein Director Dated: March 28, 1997 ------------------------------ Robert J. Lichtenstein By: Director Dated: March __, 1997 ------------------------------ Eric Schless By: /s/ Walter T. Bromfield Controller Dated: March 28, 1997 ------------------------------ (Principal Financial Officer, Walter T. Bromfield Principal Accounting Officer)
32 MARITRANS INC. SCHEDULE II -- VALUATION ACCOUNT ($000)
CHARGED BALANCE AT TO COSTS BALANCE BEGINNING AND AT END DESCRIPTION OF PERIOD EXPENSES DEDUCTIONS OF PERIOD ----------- --------- -------- ---------- --------- JANUARY 1 TO DECEMBER 31, 1994 Allowance for doubtful accounts $605 $123 $275(a) $453 ==== ==== ======= ==== JANUARY 1 TO DECEMBER 31, 1995 Allowance for doubtful accounts $453 $ 31 $ 27(a) $457 ==== ==== ======= ==== JANUARY 1 TO DECEMBER 31, 1996 Allowance for doubtful accounts $457 $403 $ -- $860 ==== ==== ======= ====
- ------ (a) Deductions are a result of write-offs of uncollectible accounts receivable for which allowances were previously provided. 33 EX-10.3(D) 2 EX-10.3(d) ================================================================================ SECOND SUPPLEMENTAL INDENTURE OF TRUST AND SECURITY AGREEMENT Dated as of April 1, 1996 From MARITRANS OPERATING PARTNERS L.P. and MARITRANS CAPITAL CORPORATION To WILMINGTON TRUST COMPANY, as Trustee ================================================================================ TABLE OF CONTENTS SECTION HEADING PAGE Parties ...................................................................1 Recitals ..................................................................1 SECTION 1. AMENDMENTS TO INDENTURE ....................................2 Section 1.1. Amendments to Section 1.1 ...............................2 Section 1.2. Amendment to Section 4.9 ................................5 Section 1.3. Amendment to Section 4.14 ...............................6 SECTION 2. MISCELLANEOUS PROVISIONS ...................................6 Section 2.1. Defined Terms ...........................................6 Section 2.2. Ratification of Indenture ...............................6 Section 2.3. Counterparts ............................................6 Section 2.4. References to Indenture .................................6 Signature Page ............................................................7 SECOND SUPPLEMENTAL INDENTURE OF TRUST AND SECURITY AGREEMENT SECOND SUPPLEMENTAL INDENTURE OF TRUST AND SECURITY AGREEMENT (this "Second Supplement") dated as of April 1, 1996, among MARITRANS OPERATING PARTNERS L.P., a Delaware limited partnership (the "Partnership"), MARITRANS CAPITAL CORPORATION, a Delaware corporation (the "Company"), and WILMINGTON TRUST COMPANY, a Delaware banking corporation, as trustee (the "Trustee") for the holders of the Notes (the "Holders") which Notes were issued under the Indenture defined below. RECITALS: A. The Partnership, the Company and the Trustee have heretofore executed and delivered the Indenture of Trust and Security Agreement dated as of March 15, 1987 (as heretofore amended and supplemented by that certain First Supplemental Indenture of Trust and Security Agreement dated as of August 15, 1989, and as further amended and supplemented, the "Indenture") providing for the issuance of certain secured promissory notes of the Company and pursuant thereto the Company has issued (i) $35,000,000 aggregate principal amount of its Series A Notes due April 1, 1997, $8,500,000 of which are currently outstanding (the "Series A Notes") (ii) $80,000,000 aggregate principal amount of its Series B Notes due April 1, 2007, all of which are currently outstanding (the "Series B Notes"), and (iii) $20,000,000 aggregate principal amount of its Series C Notes due June 30, 1995, all of which are retired (the outstanding Series A Notes and Series B Notes are herein collectively referred to as the "Notes"); and B. On April 1, 1993, Maritrans Partners, L.P., a Delaware limited partnership and the sole limited partner of the Partnership ("MLP"), was converted from a limited partnership to a corporation through the formation of Maritrans, Inc., a Delaware corporation, which succeeded to all the assets and liabilities of MLP (the foregoing conversion of MLP from a limited partnership to a corporation is herein referred to as the "MLP Corporate Conversion"); and C. The MLP Corporate Conversion has resulted in certain tax and accounting changes to the Partnership, including treatment of the Partnership as a corporation for federal income tax purposes, and as a result, the parties hereto desire to further amend the Indenture; and D. As required pursuant to Section 10.2 of the Indenture, the Partnership, the Company and the holders of at least 66-2/3% in aggregate principal amount of the Notes have consented to amend the Indenture as set forth below. NOW THEREFORE, in consideration of the premises and other good and valuable consideration, receipt of which upon delivery of this Second Supplement the undersigned hereby acknowledge, the Partnership, the Company and the Trustee hereby agree as follows: Maritrans Operating Partners L.P. Second Supplemental Indenture Maritrans Capital Corporation SECTION 1. AMENDMENTS TO INDENTURE. Section 1.1. Amendments to Section 1.1. (a) Section 1.1 of the Indenture is hereby amended by adding the definitions of "GAAP" and "Partnership Net Income" which read as follows: "GAAP" shall mean generally accepted accounting principles at the time in effect. "Partnership Net Income" for any fiscal quarter of the Partnership shall mean the gross revenues of the Partnership for such fiscal quarter, less all expenses and other proper charges (including taxes on income) for such fiscal quarter determined in accordance with GAAP, provided, however, that: (a) the deduction for income taxes in calculating Partnership Net Income for any fiscal quarter which includes March 31, 1993 or any later date shall be on the basis of income taxes paid (or refunded) for such fiscal quarter as determined in accordance with paragraph (b) of this definition and specifically without giving effect to the following: (i) any adjustments to income with respect to deferred tax assets or deferred tax liabilities including, without limitation, the one-time charge against income of the Partnership in connection with the recognition by the Partnership required by GAAP of the deferred tax liability of $16,429,000 resulting from the conversion on April 1, 1993 of MLP from a Delaware limited partnership to a Delaware corporation; and (ii) any other adjustments to income required by GAAP with respect to the deduction for income taxes which would modify the deduction as determined in paragraph (b) of this definition; (b) income taxes for a fiscal quarter of the Partnership (herein "Quarterly Income Taxes") shall be: (i) for the first fiscal quarter of a fiscal year of the Partnership, the first installment of estimated taxes paid with respect to income taxes of the Partnership for such fiscal year, (ii) for the second fiscal quarter of a fiscal year of the Partnership, the second installment of estimated taxes paid with respect to income taxes of the Partnership for such fiscal year, (iii) for the third fiscal quarter of a fiscal year of the Partnership, the third installment of estimated taxes paid with respect to income taxes of the Partnership for such fiscal year, and -2- Maritrans Operating Partners L.P. Second Supplemental Indenture Maritrans Capital Corporation (iv) for the fourth fiscal quarter of a fiscal year of the Partnership, (A) the fourth installment of estimated taxes paid with respect to income taxes of the Partnership for such fiscal year, plus (B) any additional taxes which are paid with respect to such income taxes on or prior to the due date for filing the income tax return for such fiscal year (without regard to any extension for filing) (the "Fiscal Year Due Date"); provided, however that (1) only the estimated taxes of the Partnership which are actually paid in a fiscal quarter shall be included for purposes of determining the Quarterly Income Taxes for such fiscal quarter and any overpayment of estimated taxes of the Partnership which is applied to satisfy estimated taxes for the fiscal quarter of another fiscal year shall not be considered to be estimated taxes paid in such fiscal quarter for purposes of calculating Quarterly Income Taxes for such fiscal quarter, (2) if the Partnership at any time after the Fiscal Year Due Date for a prior fiscal year shall pay additional income taxes with respect to the income taxes of the Partnership for such prior fiscal year, the Quarterly Income Taxes determined pursuant to the foregoing provisions for the fiscal quarter in which such additional tax shall be paid shall be increased by the amount of such additional taxes paid and (3) if the Partnership at any time shall receive a refund of income taxes of the Partnership, the Quarterly Income Taxes determined pursuant to the foregoing provisions for the fiscal quarter in which such refund is received shall be reduced by the amount of such refund and if the amount of such refund exceeds the installment of estimated taxes paid for such fiscal quarter then the Quarterly Income Taxes for such fiscal quarter shall be a negative number in an amount equal to such excess; (c) any calculation of Partnership Net Income for any fiscal quarter shall in any event exclude net earnings and losses of any Subsidiary of the Partnership except that Partnership Net Income shall include net earnings of any such Subsidiary to the extent that such net earnings actually have been received by the Partnership. (b) Section 1.1 of the Indenture is hereby further amended by restating the definitions of "Cash Flow Available for Debt Service", "MLP", "MLP Guaranty Agreement", "Managing General Partner" and "Net Cash Available to Partners" to read as follows and adding the related definitions of "Net Cash Distributable to Partners" and "Quarterly Available Net Cash" to read as follows: "Cash Flow Available for Debt Service" shall mean, for any fiscal quarter, the Partnership Net Income for such fiscal quarter plus the sum of (a) the Quarterly Income Taxes for such fiscal quarter, (b) all amounts deducted in the computation of such Partnership Net Income in respect of the depreciation or amortization of assets, (c) all amounts deducted in the computation of Partnership Net Income in respect of interest on all Indebtedness of the Partnership during such fiscal quarter, (d) all -3- Maritrans Operating Partners L.P. Second Supplemental Indenture Maritrans Capital Corporation amounts deducted in the computation of such Partnership Net Income in respect of Rentals paid under Long-Term Leases, (e) all capital returned to the Partnership from each of its Subsidiaries during such fiscal quarter, (f) all cash dividends received by the Partnership from each of its Subsidiaries during such fiscal quarter except to the extent otherwise included in Partnership Net Income for such fiscal quarter, (g) the net loss, if any, deducted in determining Partnership Net Income for such fiscal quarter in respect of al1 sales or other dispositions of capital assets of the Partnership, and less the sum of (h) the net gain, if any, included in Partnership Net Income for such fiscal quarter in respect of all sales or other dispositions of capital assets of the Partnership and (i) all capital contributions made by the Partnership to each of its Subsidiaries during such fiscal quarter. "MLP" shall mean Maritrans Inc., a Delaware corporation and successor in interest to Maritrans Partners L.P." "MLP Guaranty Agreement" shall mean that certain Guaranty Agreement dated as of March 15, 1987 of Maritrans Partners L.P., the liabilities and obligations of Maritrans Partners L.P. thereunder having been assumed by Maritrans Inc. "Managing General Partner" shall mean Maritrans General Partner Inc., a Delaware corporation, the managing general partner of the Partnership. "Net Cash Available to Partners" shall mean, for any fiscal quarter of the Partnership commencing with the fiscal quarter ending June 30, 1987, the sum of: (1) the aggregate amount of Net Cash Available to Partners determined under this definition for any fiscal quarter preceding such fiscal quarter to the extent not distributed to the partners of the Partnership (the "Prior Available Net Cash"), plus (2) the additional amount of net cash becoming available to Partners for such fiscal quarter (the "Quarterly Available Net Cash") which shall equal the sum of (a) the Cash Flow Available for Debt Service for such fiscal quarter less (i) the Quarterly Income Taxes for such fiscal quarter, and (ii) all principal payments made during such fiscal quarter with respect to Indebtedness of the Partnership other than (A) the Notes, (B) the Working Capital Line and (C) any Indebtedness refinanced with the proceeds from Additional Indebtedness, and (iii) all interest payments made during such fiscal quarter with respect to Indebtedness of the Partnership other than the Notes, and (iv) an amount equal to the aggregate amount of Rentals paid under Long-Term Leases during such fiscal quarter, (b) the aggregate amount of cash proceeds from the sale or other disposition of capital assets of the Partnership which are paid to the Partnership during such fiscal quarter and are not otherwise required to be held by the Trustee hereunder, and (c) without duplication, the aggregate amount of Distribution Support Capital (as defined in the Distribution Support Agreement) contributed by Sonat Inc. to the Partnership pursuant to the Distribution Support Agreement with respect to such fiscal quarter, or the aggregate amount of Deferred Distribution Support Capital (as defined in the Distribution Support -4- Maritrans Operating Partners L.P. Second Supplemental Indenture Maritrans Capital Corporation Agreement) so contributed during either such fiscal quarter or the quarter in which the determination hereunder is being made, and less the sum of (d) the aggregate amount of all capital expenditures made by the Partnership during the fiscal quarter for which the determination is being made hereunder to the extent such capital expenditures are not funded out of proceeds from any borrowing or from the sale of any additional limited partnership interests or any additional capital contributions or insurance proceeds or a withdrawal of "Capital Construction Funds" of a Subsidiary and (e) an amount equal to 25% of the aggregate amount of principal required to be paid in the Four Quarter Period of the Partnership next following such fiscal quarter on all Notes outstanding on the first day of such Four Quarter Period and an amount equal to 50% of the aggregate amount of interest required to be paid in the Two Quarter Period of the Partnership next following such fiscal quarter on all Notes outstanding on the first day of such Two Quarter Period; provided, that for purposes of this definition (i) interest payable during future periods on Indebtedness with a variable rate or an interest rate which can be reset shall be computed at the interest rate in effect as of the date of determination hereunder and (ii) the fiscal quarter of the Partnership ending June 30, 1987 shall begin on the Closing Date. "Net Cash Distributable to Partners" for any fiscal quarter of a fiscal year shall mean the Net Cash Available to Partners for such fiscal quarter less in the case of the first, second and third fiscal quarters of such fiscal year, the following amount specified as to such fiscal quarter (but not less than zero): (i) for the first fiscal quarter of such fiscal year, an amount equal to 50% of the Quarterly Available Net Cash for such fiscal quarter, (ii) for the second fiscal quarter of such fiscal year, an amount equal to 40% of the sum of the Quarterly Available Net Cash for the first and second fiscal quarters of such fiscal year, and (iii) for the third fiscal quarter of such fiscal year, an amount equal to 25% of the sum of the Quarterly Available Net Cash for the first, second and third fiscal quarters of such fiscal year. "Quarterly Available Net Cash" for a fiscal quarter shall mean the amount determined in subparagraph (2) of the definition of Net Cash Available to Partners for such fiscal quarter. Section 1.2. Amendment to Section 4.9. Section 4.9 of the Indenture is hereby amended by restating Section 4.9 to read as follows: Section 4.9. Distributions to Partners of the Partnership. The Partnership will not, and will not permit any Subsidiary to, make any distribution of cash or other Property of the Partnership or its Subsidiaries to partners of the Partnership in respect of their partnership interests in the Partnership, except that once during each fiscal quarter of the Partnership commencing with the fiscal quarter ending September 30, 1987, the Partnership -5- Maritrans Operating Partners L.P. Second Supplemental Indenture Maritrans Capital Corporation may make a distribution in cash to such partners in an amount not in excess of the Net Cash Distributable to Partners for the fiscal quarter of the Partnership next preceding the fiscal quarter in which such distribution shall occur; provided, that no such distribution shall be made at any time when a Default or Event of Default shall have occurred and shall then be continuing. Section 1.3. Amendment to Section 4.14. Section 4.14(a) of the Indenture is hereby amended by restating Section 4.14(a) to read as follows: "(a) Covenant Compliance; Calculations - the information (including detailed calculations where necessary) required in order to establish whether the Partnership was in compliance with the requirements of Sections 4.5 through 4.12 during the period covered by the income statement then being furnished; provided, that the certificate accompanying (i) each set of quarterly financial statements for a fiscal quarter delivered pursuant to Section 4.13(a) shall contain detailed calculations of the following defined terms for such fiscal quarter of (A) Partnership Net Income, (B) Cash Flow Available for Debt Service, (C) Net Cash Available to Partners and (D) Net Cash Distributable to Partners and (ii) each set of annual financial statements for a fiscal year delivered pursuant to Section 4.13(b) shall contain detailed calculations of the four defined terms referred to in clause (i) of this proviso for the last fiscal quarter of such fiscal year and for the entire fiscal year; and" SECTION 2. MISCELLANEOUS PROVISIONS. Section 2.1. Defined Terms. All terms used in this Second Supplement which are defined in the Indenture, as hereby amended, are used herein as so defined. Section 2.2. Ratification of Indenture. Except as herein expressly amended, the Indenture is in all respects ratified and confirmed. If and to the extent that any of the terms or provisions of the Indenture are in conflict or inconsistent with any of the terms or provisions of this Second Supplement, this Second Supplement shall govern. Section 2.3. Counterparts. This Second Supplement may be simultaneously executed in any number of counterparts and all such counterparts together, each as an original, shall constitute but one and the same instrument. Section 2.4. References to Indenture. Any and all notices, requests, certificates and any other instruments, including the Note Agreements, the Notes, the Guaranty Agreements and the Mortgages, may refer to the Indenture or the Indenture dated as of March 15, 1987, without making specific reference to this Second Supplement, but nevertheless all such references shall be deemed to include this Second Supplement unless the document or instrument, as the case may be, shall otherwise require. -6- Maritrans Operating Partners L.P. Second Supplemental Indenture Maritrans Capital Corporation IN WITNESS WHEREOF, the Partnership, the Company and the Trustee have each caused this Second Supplement to be executed all as of the day and year first above written. MARITRANS OPERATING PARTNERS L.P. By Maritrans General Partner Inc. Its Managing General Partner By /s/ John C. Newcomb ----------------------------------- ATTEST: Its Vice President /s/ Walter Bromfield - ------------------------------- Controller MARITRANS CAPITAL CORPORATION By /s/ Thomas C. Deas, Jr. ----------------------------------- [CORPORATE SEAL] Its President ATTEST: /s/ John C. Newcomb - ------------------------------- Secretary WILMINGTON TRUST COMPANY, as Trustee By /s/ Edward L. Truitt, Jr. ----------------------------------- [SEAL] Its Financial Services Officer ATTEST: /s/ Denise M. Geran - ------------------------------- -7- EX-10.3(E) 3 EXHIBIT 10.3(e) ================================================================================ SUPPLEMENT TO FIRST PREFERRED SHIP MORTGAGES DATED MAY 8, 1996 from MARITRANS OPERATING PARTNERS L.P. MORTGAGOR to WILMINGTON TRUST COMPANY as Trustee, Mortgagee ================================================================================ TABLE OF CONTENTS
SECTION HEADING PAGE SECTION 1. AMENDMENTS TO THE MORTGAGES ..........................................3 SECTION 2. MISCELLANEOUS PROVISIONS .............................................3 Signatures ..............................................................................5 ATTACHMENTS TO SUPPLEMENT TO FIRST PREFERRED SHIP MORTGAGES Appendix I Description of Vessels and Recording information for Mortgages Annex I True Copy of Second Supplemental Indenture of Trust and Security Agreement
-i- SUPPLEMENT TO FIRST PREFERRED SHIP MORTGAGES This SUPPLEMENT TO FIRST PREFERRED SHIP MORTGAGES (as the same may be amended and supplemented from time to time, the "Mortgage Supplement"), dated the 8th day of May, 1996, from MARITRANS OPERATING PARTNERS L.P., a Delaware limited partnership (the "Partnership"), to WILMINGTON TRUST COMPANY, as Trustee (the "Trustee"), under an Indenture of Trust and Security Agreement dated as of March 15, 1987 among the Partnership, the Trustee and Maritrans Capital Corporation, a Delaware corporation, 100% of the capital stock of which is owned by the Partnership (the "Company") relating to the Notes referred to below (said Indenture of Trust and Security Agreement, as the same has heretofore been amended and supplemented by the First Supplement (defined below), as amended and supplemented by the Second Supplement (defined below) and as may hereafter be amended or supplemented, being herein called the "Indenture ", and the Trustee, and any successor trustee, being herein called the "Mortgagee"), for the benefit of the holders of the Notes (as defined below) from time to time outstanding, supplements those certain First Preferred Ship Mortgages in the form specified in the Indenture on the Vessels described on Appendix I hereto (the original First Preferred Ship Mortgages as heretofore supplemented and as supplemented hereby and as the same may hereafter be amended or supplemented, being herein referred to as the "Mortgages") made-by the Partnership in favor of the Mortgagee, which Mortgages were recorded on the date, at the time and in the place as set forth on Appendix I hereto. RECITALS: A. The Partnership is the sole owner of the whole of each of the vessels described on Appendix I which is documented in the name of the Partnership under the laws of the United States and has its Home Port (formerly at Philadelphia, Pennsylvania) and its hailing port at Wilmington, Delaware (said vessels being hereinafter referred to as the "Vessels"). B. The Company has heretofore duly issued in accordance with the terms of the Indenture (i) $35,000,000 aggregate principal amount of its Series A Notes (together with any Notes issued in lieu of or in substitution or exchange therefor pursuant to the Indenture being herein called the "Series A Notes"), (ii) $80,000,000 aggregate principal amount of its Series B Notes (together with any Notes issued in lieu of or in substitution or exchange therefor pursuant to the Indenture being herein called the "Series B Notes"), and (iii) up to $20,000,000 aggregate principal amount of its Series C Notes due June 30, 1995 (together with any Notes issued in lieu of or in substitution or exchange therefore pursuant to the Indenture being herein called the "Series C Notes"). The Series C Notes were issued pursuant to the First Supplemental Indenture of Trust and Security Agreement dated as of August 15, 1989 among the Company, the Partnership and the Mortgagee (as amended and supplemented by Amendment No. 1 to the First Supplemental Indenture of Trust and Security Agreement dated as of March 31, 1992, the "First Supplement"). The Series C Notes have heretofore been retired. The Series A Notes, the Series B Notes and any Additional Notes issued under the Indenture are herein collectively referred to as the "Notes" C. The Partnership has heretofore entered into the Guaranty Agreement dated as of March 15, 1987 (as the same has been amended by the First Supplemental Guaranty Agreement dated as of August 15, 1989 and as may be further amended and supplemented from time to time, the "Partnership Guaranty Agreement") providing for the guarantee by the Partnership of the payment by the Company of the principal of and premium and interest on the Notes. D. The Company, the Partnership and the Mortgagee have entered into the Second Supplemental Indenture of Trust and Security Agreement dated as of April 1, 1996 (a true copy of which is attached hereto as Annex I) (the "Second Supplement") which further amends and supplements the Indenture. E. The Notes and all principal thereof and interest and premium thereon and all additional amounts and other sums at any time due and owing from or required to be paid by the Company under the terms of the Notes and the Indenture and by the Partnership under the terms of the Partnership Guaranty Agreement, the Indenture and the Mortgages, are hereinafter sometimes referred to as the "indebtedness hereby secured". F. The full name and address of the Partnership, as mortgagor, is: Maritrans Operating Partners L.P. One Logan Square, 26th Floor Philadelphia, Pennsylvania 19103 Attention: Treasurer, Maritrans General Partner Inc. G. The full name and address of the Mortgagee is: Wilmington Trust Company as trustee under an Indenture of Trust and Security Agreement dated as of March 15, 1987 Rodney Square North Wilmington, Delaware 19890 Attention: Corporate Trust Administrator NOW THEREFORE, the Partnership, in consideration of the premises and of the sum of $10.00 received by the Partnership from the Mortgagee and other good and valuable consideration, receipt of which is hereby acknowledged by the Partnership, and in order to secure the payment of the indebtedness hereby secured and the performance and observance of all of the covenants and conditions in the Notes, the Indenture, the Partnership Guaranty Agreement and in the Mortgage contained, has granted, bargained, sold, conveyed, warranted, mortgaged, pledged and hypothecated and by these presents does hereby grant, bargain, sell, convey, warrant, mortgage, pledge and hypothecate, unto the Mortgagee, its successors and assigns, all and singular of the whole of each of the Vessels, together with all -2- engines, boilers, machinery, masts, boats, anchors, cables, chains, tackle, fittings and equipment and all other appurtenances, improvements, additions and replacements appertaining and belonging to the Vessels, whether now owned or hereafter acquired, whether on board or not. TO HAVE AND TO HOLD the Vessels unto the Mortgagee and its successors and assigns, forever. PROVIDED, HOWEVER, and these presents are on the condition that, if the Partnership shall pay or cause to be paid the indebtedness hereby secured, as and when the same shall become due and payable, by maturity or otherwise, and if the Partnership shall duly perform all the covenants, agreements and conditions contained herein, in the Indenture and in the Partnership Guaranty Agreement, then the Mortgages shall be void and of no effect, and in such case the Mortgagee, its successors or assigns, on the demand and at the expense of the Partnership, shall execute and deliver to the Partnership proper instruments to evidence the revesting in it of all the rights, title and interest granted hereby and to satisfy and discharge the Mortgages of record; otherwise, the Mortgages shall remain in full force and effect. PROVIDED, FURTHER, that until some one or more Events of Default shall occur, the Partnership shall have the possession, use and operation of the Vessels. The Partnership hereby covenants and agrees with the Mortgagee and its successors and assigns as follows: SECTION 1. AMENDMENTS TO THE MORTGAGES. Section 1.1. As used in the Mortgages, the definition of the term "Indenture" is hereby restated to mean as follows: the Indenture of Trust and Security Agreement dated as of March 15, 1987 among the Partnership, the Company and the Trustee (i) as amended and supplemented by the First Supplemental Indenture of Trust and Security Agreement dated as of August 15, 1989, as amended and supplemented by Amendment No. 1 thereto dated as of March 31, 1992, (ii) as amended and supplemented by the Second Supplemental Indenture of Trust and Security Agreement dated as of April 1, 1996, and (iii) as may hereafter be amended or supplemented. SECTION 2. MISCELLANEOUS PROVISIONS. Section 2.1. This Mortgage Supplement is executed as and shall constitute an instrument supplemental to each of the Mortgages, and shall be construed in connection with and as part of each of the Mortgages. Section 2.2. Except as modified and expressly amended by this Mortgage Supplement, the Mortgages as heretofore amended and supplemented are in all respects -3- ratified and confirmed and all the terms, provisions and conditions thereof shall be and remain in full force and effect. Section 2.3. Except as otherwise provided herein, any term used herein which is defined in the Mortgages as hereby supplemented shall have the meaning set forth in the Mortgages as hereby supplemented. -4- IN WITNESS WHEREOF, the Partnership has caused this Mortgage Supplement to be executed as of the day and year first above written. MARITRANS OPERATING PARTNERS L.P. By Maritrans General Partner Inc. Its Managing General Partner By /s/ John C. Newcomb ------------------------- Its Vice President WILMINGTON TRUST COMPANY, as Trustee By /s/ Edward L. Truitt, Jr. ----------------------------- Its Financial Services Officer -5- DESCRIPTION OF VESSELS AND RECORDING INFORMATION FOR MORTGAGES The First Preferred Ship Mortgage for each of the following 52 Vessels was delivered and accepted at the Marine Inspection Office, United States Coast Guard, Port of Philadelphia, Pennsylvania, and recorded as indicated and Supplement No. 1 to First Preferred Ship Mortgage for each such Vessel was also delivered and accepted at such office and recorded as indicated:
Supplement No. 1 to First Preferred Ship Mortgage First Preferred Ship Mortgage: Recordation Data: Recordation Data: Official ------------------------------------- ------------------------------------- Name Number Date and Time Book and Page Date and Time Book and Page ---- ------ ------------- ------------- ------------- ------------- BARGES: (1) Ocean 262 272,839 4/21/87, Book 874, 10/5/89, Book 8910, 4:16 p.m. Page 142 4:30 p.m. Page 110 (2) Ocean 250 529,918 4/21/87, Book 874, 10/5/89, Book 8910, 4:19 p.m. Page 143 4:02 p.m. Page 104 (3) Ocean Cities 537,129 4/21/87, Book 874, 10/5/89, Book 8910, 4:27 p.m. Page 146 4:45 p.m. Page 113 (4) Ocean 215 562,452 4/23/87, Book 874, 10/5/89, Book 8910, 3:55 p.m. Page 214 4:17 p.m. Page 108 (5) Ocean 192 614,210 4/21/87, Book 874, 10/5/89, Book 8910, 4:13 p.m. Page 139 3:27 p.m. Page 95 (6) Ocean 193 624,039 4/21/87, Book 874, 10/5/89, Book 8910, 4:21 p.m. Page 144 3:39 p.m. Page 99 (7) Ocean States 565,314 4/21/87, Book 874, 10/5/89, Book 8910, 4:40 p.m. Page 147 4:25 p.m. Page 109 (8) Ocean 155 556,673 4/21/87, Book 874, 10/5/89, Book 8910, 4:26 p.m. Page 145 4:07 p.m. Page 106 (9) Ocean 135 520,687 4/23/87, Book 874, 10/5/89, Book 8910, 3:45 p.m. Page 211 3:55 p.m. Page 103 (10) Interstate 138 611,433 4/21/87, Book 874, 10/5/89, Book 8910, 5:14 p.m. Page 159 3:01 p.m. Page 88
APPENDIX I (to Mortgage Supplement)
Supplement No. 1 to First Preferred Ship Mortgage First Preferred Ship Mortgage: Recordation Data: Recordation Data: Official ------------------------------------- ------------------------------------- Name Number Date and Time Book and Page Date and Time Book and Page ---- ------ ------------- ------------- ------------- ------------- (11) Ocean 115 515,042 4/22/87, Book 874, 10/5/89, Book 8910, 4:58 p.m. Page 193 3:48 p.m. Page 100 (12) Ocean 90 507,495 4/23/87, Book 874, 10/5/89, Book 8910, 4:37 p.m. Page 227 3:23 p.m. Page 94 (13) Ocean 96 523,233 4/23/87, Book 874, 10/5/89, Book 8910, 4:05 p.m. Page 217 3:33 p.m. Page 97 (14) Interstate 71 563,364 4/21/87, Book 874, 10/5/89, Book 8910, 5:06 p.m. Page 156 2:45 p.m. Page 82 (15) Interstate 70 540,401 4/22/87, Book 874, 10/5/89, Book 8910, 5:20 p.m. Page 202 2:39 p.m. Page 79 (16) Interstate 53 530,062 4/21/87, Book 874, 10/5/89, Book 8910, 5:05 p.m. Page 155 3:00 p.m. Page 87 (17) Interstate 55 544,437 4/22/87, Book 874, 10/5/89, Book 8910, 5:22 p.m. Page 204 3:08 p.m. Page 89 (18) Interstate 36 552,900 4/21/87, Book 874, 10/5/89, Book 8910, 4:52 p.m. Page 153 2:40 p.m. Page 80 (19) Interstate 38 553,120 4/23/87, Book 874, 10/5/89, Book 8910, 4:45 p.m. Page 229 3:09 p.m. Page 90 (20) Interstate 35 552,065 4/22/87, Book 874, 10/5/89, Book 8910, 4:39 p.m. Page 185 2:19 p.m Page 74 (21) Interstate 29 536,837 4/22/87, Book 874, 10/5/89, Book 8910, 5:02 p.m. Page 196 3:10 p.m Page 91 (22) Interstate 30 284,032 4/22/87, Book 874, 10/5/89, Book 8910, 4:54 p.m. Page 192 3:20 p.m. Page 93 (23) CHEM 36 293,343 4/22/87, Book 874, 10/5/89, Book 8910, 4:17 p.m. Page 176 1:45 p.m. Page 67 (24) Ocean 244 532,585 4/21/87, Book 874, 10/5/89, Book 8910, 5:18 p.m. Page 163 3:50 p.m. Page 101
I-2
Supplement No. 1 to First Preferred Ship Mortgage First Preferred Ship Mortgage: Recordation Data: Recordation Data: Official ------------------------------------- ---------------------------------- Name Number Date and Time Book and Page Date and Time Book and Page ---- ------ ------------- ------------- ------------- ------------- (25) Ocean 211 646,669 4/22/87, Book 874, 10/5/89, Book 8910, 4:27 p.m. Page 181 4:05 p.m. Page 105 (26) Ocean 210 636,104 4/22/87, Book 874, 10/5/89, Book 8910, 4:49 p.m. Page 190 3:54 p.m. Page 102 (27) Ocean 81 643,281 4/23/87, Book 874, 10/5/89, Book 8910, 4:35 p.m. Page 226 4:33 p.m. Page 111 (28) Chem Ten 520,776 4/22/87, Book 874, 10/5/89, Book 8910, 4:22 p.m. Page 178 1:58 p.m. Page 70 TUGBOATS: (1) Clipper 520,685 4/22/87, Book 874, 10/5/89, Book 8910, 4:24 p.m. Page 179 12:40 p.m. Page 54 (2) Freedom 615,200 4/21/87, Book 874, 10/5/89, Book 8910, 4:55 p.m. Page 154 12:45 p.m. Page 55 (3) Honour 565,902 4/22/87, Book 874, 10/5/89, Book 8910, 5:06 p.m. Page 197 1:04 p.m. Page 57 (4)Independence 620,723 4/22/87, Book 874, 10/5/89, Book 8910, 3:10 p.m. Page 198 1:20 p.m. Page 60 (5) Navigator 537,824 4/21/87, Book 874, 10/5/89, Book 8910, 5:08 p.m. Page 157 12:19 p.m. Page 52 (6) Seafarer 532,672 4/23/87, Book 874, 10/5/89, Book 8910, 4:16 p.m. Page 221 1:40 p.m. Page 64 (7) Valour 569,341 4/23/87, Book 874, 10/5/89, Book 8910, 4:24 p.m. Page 223 1:30 p.m. Page 62 (8) Ambassador 578,207 4/23/87, Book 874, 10/5/89, Book 8910, 3:41 p.m. Page 210 10:48 a.m. Page 35 (9) Corsair 536,836 4/22/87, Book 874, 10/5/89, Book 8910, 4:37 p.m. Page 183 10:53 a.m. Page 36 (10) Diplomat 590,232 4/23/87 Book 874, 10/5/89, Book 8910, 4:00 p.m. Page 216 10:59 a.m. Page 38
I-3
Supplement No. 1 to First Preferred Ship Mortgage First Preferred Ship Mortgage: Recordation Data: Recordation Data: Official ------------------------------------- ------------------------------------- Name Number Date and Time Book and Page Date and Time Book and Page ---- ------ ------------- ------------- ------------- ------------- (11) Challenger 513,794 4/22/87, Book 874, 10/5/89, Book 8910, 4:15 p.m. Page 174 11:03 a.m. Page 40 (12) Crusader 511,237 4/23/87, Book 874, 10/5/89, Book 8910, 3:51 p.m. Page 213 12:05 p.m. Page 50 (13) Venturer 550,670 4/23/87, Book 874, 10/5/89, Book 8910, 4:40 p.m. Page 228 1:42 p.m. Page 65 (14) Voyager II 556,625 4/23/87, Book 874, 10/5/89, Book 8910, 4:15 p.m. Page 220 1:55 p.m. Page 68 (15) Endeavor 529,705 4/22/87, Book 874, 10/5/89, Book 8910, 4:48 p.m. Page 189 11:57 a.m. Page 49 (16) Traveller 515,013 4/22/87, Book 874, 10/5/89, Book 8910, 5:12 p.m. Page 200 1:18 p.m. Page 59 (17) Roanoke 506,289 4/22/87, Book 874, 10/5/89, Book 8910, 5:21 p.m. Page 203 1:57 p.m. Page 69 (18) Delaware 609,686 4/23/87, Book 874, 10/5/89, Book 8910, 3:57 p.m. Page 215 11:15 a.m. Page 41 (19) Ranger 508,340 4/23/87, Book 874, 10/5/89, Book 8910, 4:23 p.m. Page 222 2:12 p.m. Page 73 (20) Liberty 534,963 4/21/87, Book 874, 10/5/89, Book 8910, 5:15 p.m. Page 160 11:27 a.m. Page 45 (21) Columbia 641,135 4/22/87, Book 874, 10/5/89, Book 8910, 4:33 p.m. Page 182 12:50 p.m. Page 56 (22) Patriot 636,105 4/23/87, Book 874, 10/5/89, Book 8910, 4:12 p.m. Page 219 2:26 p.m. Page 77 (23) Schuylkill 633,396 4/22/87, Book 874, 10/5/89, Book 8910, 5:26 p.m. Page 206 1:25 p.m. Page 61 (24) Cougar 569,665 4/22/87, Book 874, 10/5/89, Book 8910, 4:38 p.m. Page 184 11:25 a.m. Page 44
I-4 EX-10.4 4 EXHIBIT 10.4 SEVERANCE AND NON-COMPETITION AGREEMENT Agreement made as of the 4th day of April, 1996, between Maritrans General Partner Inc., a Delaware corporation (the "Company"), and John C. Newcomb (the "Employee"). WHEREAS, the Employee is employed by the Company as its Vice President and General Counsel; WHEREAS, the Company is a subsidiary of Maritrans Inc., a publicly traded corporation ("Maritrans"); WHEREAS, the Employee and Maritrans entered into an agreement in October 1993 to provide certain payments to the Employee in the event that his employment were terminated as a result of a change of control of Maritrans (the "Agreement"); WHEREAS, the Employee and the Company now wish to enter into a Severance and Non-competition Agreement which shall supersede the Agreement because the Board of Directors of the Company recognizes that, as is the case with many publicly held corporations, the possibility of a change in control of Maritrans and the Company exists and that such possibility, and the uncertainty and questions which it may raise among management, may result in the departure or distraction of key management personnel to the detriment of the Company; WHEREAS, the board of directors of the Company has determined that appropriate steps should be taken to reinforce and encourage the continued attention and dedication of key members of the Company's management to their assigned duties without distraction in the face of potentially disturbing circumstances arising from the possibility of a change in control of the Company; and WHEREAS, in consideration for the Employee agreeing not to compete with the Company in the event the Employee's employment is terminated, the Company agrees that the Employee shall receive the compensation set forth in this Agreement as a cushion against the financial and career impact on the Employee in the event the Employee's employment with the Company is terminated without cause whether or not there is a Change of Control of Maritrans; NOW, THEREFORE, in consideration of the foregoing and the mutual covenants and agreements hereinafter set forth and intending to be legally bound hereby, the parties hereto agree as follows: 1. Definitions. For all purposes of this Agreement, the following terms shall have the meanings specified in this Section unless the context clearly otherwise requires: (a) "Affiliate" and "Associate" shall have the respective meanings ascribed to such terms in Rule 12b-2 of the General Rules and Regulations under the Securities Exchange Act of 1934, as amended (the "Exchange Act"). (b) "Base Compensation" shall mean the average of the total cash remuneration received by the Employee in all capacities with the Company, and its Subsidiaries or Affiliates, as reported for Federal income tax purposes on Form W-2, together with any and all salary reduction authorized amounts under any of the Company's 2 benefit plans or programs, but excluding any amounts attributable to the exercise of stock options by the Employee under the Company's Equity Compensation Plan for the most recent full calendar year immediately preceding the calendar year in which occurs a Change of Control or the Employee's Termination Date, whichever is higher. (c) "Base Salary" shall mean the rate of normal salary being paid to the Employee at the time of his Termination Date. (d) "Beneficial Owner" of any securities shall mean: (i) that such Person or any of such Person's Affiliates or Associates, directly or indirectly, has the right to acquire (whether such right is exercisable immediately or only after the passage of time) pursuant to any agreement, arrangement or understanding (whether or not in writing) or upon the exercise of conversion rights, exchange rights, rights, warrants or options, or otherwise; provided, however, that a Person shall not be deemed the "Beneficial Owner" of securities tendered pursuant to a tender or exchange offer made by such Person or any of such Person's Affiliates or Associates until such tendered securities are accepted for payment, purchase or exchange; (ii) that such Person or any of such Person's Affiliates or Associates, directly or indirectly, has the right to vote or dispose of or has "beneficial ownership" of (as determined pursuant to Rule 13d-3 of the General Rules and Regulations under the Exchange Act), including without limitation pursuant to any agreement, arrangement or understanding, whether or not in writing; provided, however, that a Person shall not be deemed the "Beneficial Owner" of any security under this subsection (ii) as a result of an oral or written agreement, arrangement or understanding to vote such security if such 3 agreement, arrangement or understanding (A) arises solely from a revocable proxy given in response to a public proxy or consent solicitation made pursuant to, and in accordance with, the applicable provisions of the General Rules and Regulations under the Exchange Act, and (B) is not then reportable by such Person on Schedule 13D under the Exchange Act (or any comparable or successor report); or (iii) where voting securities are beneficially owned, directly or indirectly, by any other Person (or any Affiliate or Associate thereof) with which such Person (or any of such Person's Affiliates or Associates) has any agreement, arrangement or understanding (whether or not in writing) for the purpose of acquiring, holding, voting (except pursuant to a revocable proxy as described in the proviso to subsection (ii) above) or disposing of any voting securities of the Company; provided, however, that nothing in this subsection (d) shall cause a Person engaged in business as an underwriter of securities to be the "Beneficial Owner" of any securities acquired through such Person's participation in good faith in a firm commitment underwriting until the expiration of forty days after the date of such acquisition. (e) "Board" shall mean the board of directors of the Company. (f) "Cause" shall mean 1) misappropriation of funds, 2) habitual insobriety or substance abuse, 3) conviction of a crime involving moral turpitude, 4) gross negligence in the performance of duties, which gross negligence has had a material adverse effect on the business, operations, assets, properties or financial condition of the Company and its Subsidiaries taken as a whole. 4 (g) "Change of Control" shall be deemed to have taken place if (i) any Person (except the Company or any employee benefit plan of the Company or of any Affiliate, any Person or entity organized, appointed or established by the Company for or pursuant to the terms of any such employee benefit plan), together with all Affiliates and Associates of such Person, shall become the Beneficial Owner in the aggregate of 20% or more of the common stock of Maritrans then outstanding); provided, however, that no "Change of Control" shall be deemed to occur during any period in which any such Person, and its Affiliates and Associates, are bound by the terms of a standstill agreement under which such parties have agreed not to acquire more than 30% of the common stock of the Company of the Common Stock of the Company then outstanding or to solicit proxies, or (ii) during any twenty-four month period, individuals who at the beginning of such period constituted the board of directors of Maritrans cease for any reason to constitute a majority thereof, unless the election, or the nomination for election by the Maritrans shareholders, of at least seventy-five percent of the directors who were not directors at the beginning of such period was approved by a vote of at least seventy-five percent of the directors in office at the time of such election or nomination who were directors at the beginning of such period. (h) "Normal Retirement Date" shall mean the first day of the calendar month coincident with or next following the Employee's 65th birthday. (i) "Person" shall mean any individual, firm, corporation, partnership or other entity. (j) "Subsidiary" shall have the meaning ascribed to such term in Rule 12b-2 of the General Rules and Regulations under the Exchange Act. 5 (k) "Termination Date" shall mean the date of receipt of the Notice of Termination described in Section 2 hereof or any later date specified therein, as the case may be. (l) "Termination of Employment" shall mean the termination of the Employee's actual employment relationship with the Company. (m) "Termination following a Change of Control" shall mean a Termination of Employment within two years after a Change of Control either: (i) initiated by the Company for any reason other than (x) the Employee's continuous illness, injury or incapacity for a period of six consecutive months or (y) for "Cause;" or (ii) initiated by the Employee upon one or more of the following occurrences: (A) any failure of the Company to comply with and satisfy any of the terms of this Agreement; (B) any significant reduction by the Company of the authority, duties or responsibilities of the Employee; (C) any removal by the Company of the Employee from the employment grade, compensation level or officer positions which the Employee holds as of the effective date hereof except in connection with promotions to higher office; 6 (D) the requirement that the Employee undertake business travel to an extent substantially greater than is reasonable and customary for the position the Employee holds. 2. Notice of Termination. Any Termination of Employment shall be communicated by a Notice of Termination to the other party hereto given in accordance with Section 14 hereof. For purposes of this Agreement, a "Notice of Termination" means a written notice which (i) indicates the specific reasons for the termination, (ii) briefly summarizes the facts and circumstances deemed to provide a basis for termination of the Employee's employment, and (iii) if the Termination Date is other than the date of receipt of such notice, specifies the Termination Date (which date shall not be more than 15 days after the giving of such notice). 3. Severance Compensation upon Termination. (a) In the event of the Employee's involuntary Termination of Employment for reason other than Cause, the Company shall pay to the Employee, upon the execution of a release in form and substance satisfactory to the company and its counsel, his regular Base Salary, subject to customary employment taxes and deductions, for 12 months following the Termination Date but all other benefit coverages, retirement benefits and fringe benefit eligibility shall cease upon the Termination Date. (b) Subject to the provisions of Section 11 hereof, in the event of the Employee's Termination following a Change of Control, the Company shall pay to the Employee, within fifteen days after the Termination Date (or as soon as possible thereafter in the event that the procedures set forth in Section 11(b) hereof cannot be completed 7 within 15 days), and in lieu of any payment under subsection (a) above, an amount in cash equal to 1.5 times the Employee's Base Compensation. (c) In the event the Employee's Normal Retirement Date would occur prior to 24 months after the Termination Date, the aggregate cash amount determined as set forth in (a) above shall be reduced by multiplying it by a fraction, the numerator of which shall be the number of days from the Termination Date to the Employee's Normal Retirement Date and the denominator of which shall be 730. 4. Other Payments. The payment due under Section 3 hereof shall be in addition to and not in lieu of any payments or benefits due to the Employee under any other plan, policy or program of the Company except that no payments shall be due to the Employee under the Company's then severance pay plan for employees. 5. Establishment of Trust. The Company may establish an irrevocable trust fund pursuant to a trust agreement to hold assets to satisfy its obligations hereunder. Funding of such trust fund shall be subject to the Company's discretion, as set forth in the agreement pursuant to which the fund will be established. 6. Enforcement. (a) In the event that the Company shall fail or refuse to make payment of any amounts due the Employee under Sections 3(b) and 4 hereof within the respective time periods provided therein, the Company shall pay to the Employee, in addition to the payment of any other sums provided in this Agreement, interest, compounded daily, on any amount remaining unpaid from the date payment is required under Section 3(b) and 4, as appropriate, until paid to the Employee, at the rate from time to time announced by Mellon 8 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 9 be affected by any circumstances, including, without limitation, any set-off, counterclaim, recoupment, defense or other right which the Company may have against the Employee or others. 10. Taxes. Any payment required under this Agreement shall be subject to all requirements of the law with regard to the withholding of taxes, filing, making of reports and the like, and the Company shall use its best efforts to satisfy promptly all such requirements. 11. Certain Reduction of Payments. (a) Anything in this Agreement to the contrary notwithstanding, in the event that it shall be determined that any payment or distribution by the Company to or for the benefit of the Employee, whether paid or payable or distributed or distributable pursuant to the terms of this Agreement or otherwise (a "Payment"), would constitute an "excess parachute payment" within the meaning of Section 280G of the Internal Revenue Code of 1986, as amended (the "Code"), the aggregate present value of amounts payable or distributable to or for the benefit of the Employee pursuant to this Agreement (such payments or distributions pursuant to this Agreement are hereinafter referred to as "Agreement Payments") shall be reduced (but not below zero) to the Reduced Amount. The "Reduced Amount" shall be an amount expressed in present value which maximizes the aggregate present value of Agreement Payments without causing any Payment to be subject to the taxation under Section 4999 of the Code. For purposes of this Section 11, present value shall be determined in accordance with Section 280G(d)(4) of the Code. 10 (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 11 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 12 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 13 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. 14 (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) 15 which he may directly or indirectly own, manage, operate, finance, join, control or participate in the ownership, management, operation, financing, control or control of, or (ii) with which he may be connected with as an officer, director, employee, partner, principal, agent, representative, consultant or otherwise, or in connection with which he may use or permit his name to be used; provided, however, that this provision shall not apply in respect of Section 3 hereof after expiration of the time period set forth therein. 15. Term of Agreement. The term of this Agreement shall be for two years from the date hereof and shall be automatically renewed for successive one-year periods unless the Company notifies the Employee in writing that this Agreement will not be renewed at least sixty days prior to the end of the current term; provided, however, that (i) after a Change of Control during the term of this Agreement, this Agreement shall remain in effect until all of the obligations of the parties hereunder are satisfied or have expired, and (ii) this Agreement shall terminate if, prior to a Change of Control, the employment of the Employee with the Company or any of its Subsidiaries, as the case may be, shall terminate for any reason, or the Employee shall cease to be an Employee. 16. Successor Company. The Company shall require any successor or successors (whether direct or indirect, by purchase, merger, consolidation or otherwise) to all or substantially all of the business and/or assets of the Company, by agreement in form and substance satisfactory to the Employee, to acknowledge expressly that this Agreement is binding upon and enforceable against the Company in accordance with the terms hereof, and to become jointly and severally obligated with the Company to perform this Agreement in the same manner and to the same extent that the Company would be required to perform 16 if no such succession or successions had taken place. Failure of the Company to obtain such agreement prior to the effectiveness of any such succession shall be a breach of this Agreement. As used in this Agreement, the Company shall mean the Company as hereinbefore defined and any such successor or successors to its business and/or assets, jointly and severally. 17. Notice. All notices and other communications required or permitted hereunder or necessary or convenient in connection herewith shall be in writing and shall be delivered personally or mailed by registered or certified mail, return receipt requested, or by overnight express courier service, as follows: If to the Company, to: Maritrans Inc. 2600 One Logan Square Philadelphia, PA 19103 Attention: Corporate Secretary If to the Employee, to: John C. Newcomb 7725 St. Martin Lane Philadelphia, PA 19118 or to such other names or addresses as the Company or the Employee, as the case may be, shall designate by notice to the other party hereto in the manner specified in this Section; provided, however, that if no such notice is given by the Company following a Change of Control, notice at the last address of the Company or to any successor pursuant to Section 16 hereof shall be deemed sufficient for the purposes hereof. Any such notice shall be deemed delivered and effective when received in the case of personal delivery, five days 17 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. 18 (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. 19 22. Miscellaneous. All section headings are for convenience only. This Agreement may be executed in several counterparts, each of which is an original. It shall not be necessary in making proof of this Agreement or any counterpart hereof to produce or account for any of the other counterparts. 23. Termination of Agreement. This Agreement shall supersede and replace the Agreement which shall hereafter be null and void and of no further force and effect. IN WITNESS WHEREOF, the undersigned, intending to be legally bound, have executed this Agreement as of the date first above written. Attest: Maritrans General Partner Inc. [Seal] /s/ A.J. Volkle By /s/ Thomas C. Deas, Jr. - ---------------------------- ---------------------------------- Asst. Secty. Vice President /s/ Maureen Heaney /s/ John C. Newcomb - ---------------------------- ---------------------------------- Witness John C. Newcomb 20 EX-10.5 5 EXHIBIT 10.5 SEVERANCE AND NON-COMPETITION AGREEMENT Agreement made as of the 4th day of March, 1997, between Maritrans General Partner Inc., a Delaware corporation (the "Company"), and John J. Burns (the "Employee"). WHEREAS, the Employee is employed by the Company in a key strategic position; WHEREAS, the Company is a subsidiary of Maritrans Inc., a publicly traded corporation ("Maritrans"); WHEREAS, the board of directors of the Company recognizes that, as is the case with many publicly held corporations, the possibility of a change in control of Maritrans and the Company exists and that such possibility, and the uncertainty and questions which it may raise among management, may result in the departure or distraction of key management personnel to the detriment of the Company; WHEREAS, the board of directors of the Company has determined that appropriate steps should be taken to reinforce and encourage the continued attention and dedication of key members of the Company's management to their assigned duties without distraction in the face of potentially disturbing circumstances arising from the possibility of a change in control of the Company; and WHEREAS, in consideration for the Employee accepting employment with the Company and agreeing not to compete with the Company in the event the Employee's employment is terminated, the Company agrees that the Employee shall 1 receive the compensation set forth in this Agreement as a cushion against the financial and career impact on the Employee in the event the Employee's employment with the Company is terminated without cause whether or not there is a Change of Control of Maritrans; NOW, THEREFORE, in consideration of the foregoing and the mutual covenants and agreements hereinafter set forth and intending to be legally bound hereby, the parties hereto agree as follows: 1. Definitions. For all purposes of this Agreement, the following terms shall have the meanings specified in this Section unless the context clearly otherwise requires: (a) "Affiliate" and "Associate" shall have the respective meanings ascribed to such terms in Rule 12b-2 of the General Rules and Regulations under the Securities Exchange Act of 1934, as amended (the "Exchange Act"). (b) "Base Compensation" shall mean the average of the total cash remuneration received by the Employee in all capacities with the Company, and its Subsidiaries or Affiliates, as reported for Federal income tax purposes on Form W-2, together with any and all salary reduction authorized amounts under any of the Company's benefit plans or programs, but excluding any amounts attributable to the exercise of stock options by the Employee under the Company's Equity Compensation Plan for the most recent full calendar year immediately preceding the calendar year in which occurs a Change of Control or the Employee's Termination Date, whichever is higher. 2 (c) "Base Salary" shall mean the rate of normal salary being paid to the Employee at the time of his Termination Date. (d) "Beneficial Owner" of any securities shall mean: (i) that such Person or any of such Person's Affiliates or Associates, directly or indirectly, has the right to acquire (whether such right is exercisable immediately or only after the passage of time) pursuant to any agreement, arrangement or understanding (whether or not in writing) or upon the exercise of conversion rights, exchange rights, rights, warrants or options, or otherwise; provided, however, that a Person shall not be deemed the "Beneficial Owner" of securities tendered pursuant to a tender or exchange offer made by such Person or any of such Person's Affiliates or Associates until such tendered securities are accepted for payment, purchase or exchange; (ii) that such Person or any of such Person's Affiliates or Associates, directly or indirectly, has the right to vote or dispose of or has "beneficial ownership" of (as determined pursuant to Rule 13d-3 of the General Rules and Regulations under the Exchange Act), including without limitation pursuant to any agreement, arrangement or understanding, whether or not in writing; provided, however, that a Person shall not be deemed the "Beneficial Owner" of any security under this subsection (ii) as a result of an oral or written agreement, arrangement or understanding to vote such security if such agreement, arrangement or understanding (A) arises solely from a revocable proxy given in response to a public proxy or consent solicitation made pursuant to, and in accordance with, the 3 applicable provisions of the General Rules and Regulations under the Exchange Act, and (B) is not then reportable by such Person on Schedule 13D under the Exchange Act (or any comparable or successor report); or (iii) where voting securities are beneficially owned, directly or indirectly, by any other Person (or any Affiliate or Associate thereof) with which such Person (or any of such Person's Affiliates or Associates) has any agreement, arrangement or understanding (whether or not in writing) for the purpose of acquiring, holding, voting (except pursuant to a revocable proxy as described in the proviso to subsection (ii) above) or disposing of any voting securities of the Company; provided, however, that nothing in this subsection (d) shall cause a Person engaged in business as an underwriter of securities to be the "Beneficial Owner" of any securities acquired through such Person's participation in good faith in a firm commitment underwriting until the expiration of forty days after the date of such acquisition. (e) "Board" shall mean the board of directors of the Company. (f) "Cause" shall mean 1) misappropriation of funds, 2) habitual insobriety or substance abuse, 3) conviction of a crime involving moral turpitude, 4) gross negligence in the performance of duties, which gross negligence has had a material adverse effect on the business, operations, assets, properties or financial condition of the Company and its Subsidiaries taken as a whole, or 5) for purposes of Section 3(b), a judgment by the Board that the Employee is not satisfactorily performing his duties. 4 (g) "Change of Control" shall be deemed to have taken place if (i) any Person (except the Company or any employee benefit plan of the Company or of any Affiliate, any Person or entity organized, appointed or established by the Company for or pursuant to the terms of any such employee benefit plan), together with all Affiliates and Associates of such Person, shall become the Beneficial Owner in the aggregate of 20% or more of the common stock of the Company then outstanding); provided, however, that no "Change of Control" shall be deemed to occur during any period in which any such Person, and its Affiliates and Associates, are bound by the terms of a standstill agreement under which such parties have agreed not to acquire more than 30% of the common stock of the Company of the Common Stock of the Company then outstanding or to solicit proxies, or (ii) during any twenty-four month period, individuals who at the beginning of such period constituted the Board cease for any reason to constitute a majority thereof, unless the election, or the nomination for election by the Company's shareholders, of at least seventy-five percent of the directors who were not directors at the beginning of such period was approved by a vote of at least seventy-five percent of the directors in office at the time of such election or nomination who were directors at the beginning of such period. (h) "Normal Retirement Date" shall mean the first day of the calendar month coincident with or next following the Employee's 65th birthday. (i) "Person" shall mean any individual, firm, corporation, partnership or other entity. 5 (j) "Subsidiary" shall have the meaning ascribed to such term in Rule 12b- 2 of the General Rules and Regulations under the Exchange Act. (k) "Termination Date" shall mean the date of receipt of the Notice of Termination described in Section 2 hereof or any later date specified therein, as the case may be. (l) "Termination of Employment" shall mean the termination of the Employee's actual employment relationship with the Company. (m) "Termination following a Change of Control" shall mean a Termination of Employment within two years after a Change of Control either: (i) initiated by the Company for any reason other than (x) the Employee's continuous illness, injury or incapacity for a period of six consecutive months or (y) for "Cause;" or (ii) initiated by the Employee upon one or more of the following occurrences: (A) any failure of the Company to comply with and satisfy any of the terms of this Agreement; (B) any significant reduction by the Company of the authority, duties or responsibilities of the Employee; (C) any removal by the Company of the Employee from the employment grade, compensation level or officer positions which the Employee holds as of the effective date hereof except in connection with promotions to higher office; 6 (D) the requirement that the Employee undertake business travel to an extent substantially greater than is reasonable and customary for the position the Employee holds. 2. Notice of Termination. Any Termination of Employment shall be communicated by a Notice of Termination to the other party hereto given in accordance with Section 14 hereof. For purposes of this Agreement, a "Notice of Termination" means a written notice which (i) indicates the specific reasons for the termination, (ii) briefly summarizes the facts and circumstances deemed to provide a basis for termination of the Employee's employment, and (iii) if the Termination Date is other than the date of receipt of such notice, specifies the Termination Date (which date shall not be more than 15 days after the giving of such notice). 3. Severance Compensation upon Termination. (a) In the event of the Employee's involuntary Termination of Employment for reason other than Cause, the Company shall pay to the Employee, upon the execution of a release in form and substance satisfactory to the company and its counsel, his regular Base Salary, subject to customary employment taxes and deductions, for 12 months following the Termination Date but all other benefit coverages, retirement benefits and fringe benefit eligibility shall cease upon the Termination Date. (b) In the event of the Employee's involuntary Termination of Employment due to a judgment by the Board that the Employee is not satisfactorily performing his 7 duties, the Company shall pay to the Employee, upon execution of a release in form and substance satisfactory to the Company and its counsel, his regular Base Salary, subject to customary employment taxes and deductions, for 12 months following the Termination Date but all other benefit coverages, retirement benefits and fringe benefit eligibility shall cease upon the Termination Date. (c) Subject to the provisions of Section 11 hereof, in the event of the Employee's Termination following a Change of Control, the Company shall pay to the Employee, within fifteen days after the Termination Date (or as soon as possible thereafter in the event that the procedures set forth in Section 11(b) hereof cannot be completed within 15 days), and in lieu of any payment under subsection (a) above, an amount in cash equal to 1.5 times the Employee's Base Compensation. (d) In the event the Employee's Normal Retirement Date would occur prior to 24 months after the Termination Date, the aggregate cash amount determined as set forth in (a) above shall be reduced by multiplying it by a fraction, the numerator of which shall be the number of days from the Termination Date to the Employee's Normal Retirement Date and the denominator of which shall be 730. 4. Other Payments. The payment due under Section 3 hereof shall be in addition to and not in lieu of any payments or benefits due to the Employee under any other plan, policy or program of the Company except that no payments shall be due to the Employee under the Company's then severance pay plan for employees. 8 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. 9 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. 10 11. Certain Reduction of Payments. (a) Anything in this Agreement to the contrary notwithstanding, in the event that it shall be determined that any payment or distribution by the Company to or for the benefit of the Employee, whether paid or payable or distributed or distributable pursuant to the terms of this Agreement or otherwise (a "Payment"), would constitute an "excess parachute payment" within the meaning of Section 280G of the Internal Revenue Code of 1986, as amended (the "Code"), the aggregate present value of amounts payable or distributable to or for the benefit of the Employee pursuant to this Agreement (such payments or distributions pursuant to this Agreement are hereinafter referred to as "Agreement Payments") shall be reduced (but not below zero) to the Reduced Amount. The "Reduced Amount" shall be an amount expressed in present value which maximizes the aggregate present value of Agreement Payments without causing any Payment to be subject to the taxation under Section 4999 of the Code. For purposes of this Section 11, present value shall be determined in accordance with Section 280G(d)(4) of the Code. (b) All determinations to be made under this Section 11 shall be made by Ernst & Young (or the Company's independent public accountant immediately prior to the Change of Control if other than Ernst & Young (the "Accounting Firm")), which firm shall provide its determinations and any supporting calculations both to the Company and the Employee within 10 days of the Termination Date. Any such determination by the Accounting Firm shall be binding upon the Company and the Employee. Within five days after this determination, the Company shall pay (or 11 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. 12 (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 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 14 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 15 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 16 consents to the service of any process, pleadings, notices or other papers in a manner permitted by the notice provisions of Section 17 hereof. (d) Employee agrees that he will provide, and that the Company may similarly provide, a copy of Sections 12 and 13 hereof to any business or enterprise (i) which he may directly or indirectly own, manage, operate, finance, join, control or participate in the ownership, management, operation, financing, control or control of, or (ii) with which he may be connected with as an officer, director, employee, partner, principal, agent, representative, consultant or otherwise, or in connection with which he may use or permit his name to be used; provided, however, that this provision shall not apply in respect of Section 3 hereof after expiration of the time period set forth therein. 15. Term of Agreement. The term of this Agreement shall be for two years from the date hereof and shall be automatically renewed for successive one-year periods unless the Company notifies the Employee in writing that this Agreement will not be renewed at least sixty days prior to the end of the current term; provided, however, that (i) after a Change of Control during the term of this Agreement, this Agreement shall remain in effect until all of the obligations of the parties hereunder are satisfied or have expired, and (ii) this Agreement shall terminate if, prior to a Change of Control, the employment of the Employee with the Company or any of its Subsidiaries, as the case may be, shall terminate for any reason, or the Employee shall cease to be an Employee. 17 16. Successor Company. The Company shall require any successor or successors (whether direct or indirect, by purchase, merger, consolidation or otherwise) to all or substantially all of the business and/or assets of the Company, by agreement in form and substance satisfactory to the Employee, to acknowledge expressly that this Agreement is binding upon and enforceable against the Company in accordance with the terms hereof, and to become jointly and severally obligated with the Company to perform this Agreement in the same manner and to the same extent that the Company would be required to perform if no such succession or successions had taken place. Failure of the Company to obtain such agreement prior to the effectiveness of any such succession shall be a breach of this Agreement. As used in this Agreement, the Company shall mean the Company as hereinbefore defined and any such successor or successors to its business and/or assets, jointly and severally. 17. Notice. All notices and other communications required or permitted hereunder or necessary or convenient in connection herewith shall be in writing and shall be delivered personally or mailed by registered or certified mail, return receipt requested, or by overnight express courier service, as follows: If to the Company, to: Maritrans General Partner Inc. 2600 One Logan Square Philadelphia, PA 19103 Attention: Corporate Secretary 18 If to the Employee, to: John J. Burns 708 Carter Hill Drive West Deptford, NJ 08066 or to such other names or addresses as the Company or the Employee, as the case may be, shall designate by notice to the other party hereto in the manner specified in this Section; provided, however, that if no such notice is given by the Company following a Change of Control, notice at the last address of the Company or to any successor pursuant to Section 16 hereof shall be deemed sufficient for the purposes hereof. Any such notice shall be deemed delivered and effective when received in the case of personal delivery, five days after deposit, postage prepaid, with the U.S. Postal Service in the case of registered or certified mail, or on the next business day in the case of overnight express courier service. 18. Governing Law. This Agreement shall be governed by and interpreted under the laws of the Commonwealth of Pennsylvania without giving effect to any conflict of laws provisions. 19. Contents of Agreement, Amendment and Assignment. (a) This Agreement supersedes all prior agreements, sets forth the entire understanding between the parties hereto with respect to the subject matter hereof and cannot be changed, modified, extended or terminated except upon written amendment executed by the Employee and approved by the Board and executed on the Company's behalf by a duly authorized officer. The provisions of this Agreement may provide for payments to the Employee under certain compensation or bonus 19 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, 20 remedy or power hereunder or existing at law or in equity shall be construed as a waiver thereof, including, without limitation, any delay by the Employee in delivering a Notice of Termination pursuant to Section 2 hereof after an event has occurred which would, if the Employee had resigned, have constituted a Termination following a Change of Control pursuant to Section 1(l)(ii) of this Agreement. 22. Miscellaneous. All section headings are for convenience only. This Agreement may be executed in several counterparts, each of which is an original. It shall not be necessary in making proof of this Agreement or any counterpart hereof to produce or account for any of the other counterparts. IN WITNESS WHEREOF, the undersigned, intending to be legally bound, have executed this Agreement as of the date first above written. Attest: MARITRANS GENERAL PARTNER INC. [Seal] /s/ A.J. Volkle By /s/ John C. Newcomb - ---------------------------- ---------------------------------- Asst. Secretary Vice President /s/ Maureen Heaney /s/ John J. Burns - ---------------------------- ---------------------------------- Witness John J. Burns 21 EX-10.7 6 EXHIBIT 10.7 SEVERANCE AND NON-COMPETITION AGREEMENT Agreement made as of the 5th day of March, 1997, between Maritrans General Partner Inc., a Delaware corporation (the "Company"), and Steven E. Welch (the "Employee"). WHEREAS, the Employee is employed by the Company in a key strategic position; WHEREAS, the Company is a subsidiary of Maritrans Inc., a publicly traded corporation ("Maritrans"); WHEREAS, the board of directors of the Company recognizes that, as is the case with many publicly held corporations, the possibility of a change in control of Maritrans and the Company exists and that such possibility, and the uncertainty and questions which it may raise among management, may result in the departure or distraction of key management personnel to the detriment of the Company; WHEREAS, the board of directors of the Company has determined that appropriate steps should be taken to reinforce and encourage the continued attention and dedication of key members of the Company's management to their assigned duties without distraction in the face of potentially disturbing circumstances arising from the possibility of a change in control of the Company; and WHEREAS, in consideration for the Employee accepting employment with the Company and agreeing not to compete with the Company in the event the Employee's employment is terminated, the Company agrees that the Employee shall 1 receive the compensation set forth in this Agreement as a cushion against the financial and career impact on the Employee in the event the Employee's employment with the Company is terminated without cause whether or not there is a Change of Control of Maritrans; NOW, THEREFORE, in consideration of the foregoing and the mutual covenants and agreements hereinafter set forth and intending to be legally bound hereby, the parties hereto agree as follows: 1. Definitions. For all purposes of this Agreement, the following terms shall have the meanings specified in this Section unless the context clearly otherwise requires: (a) "Affiliate" and "Associate" shall have the respective meanings ascribed to such terms in Rule 12b-2 of the General Rules and Regulations under the Securities Exchange Act of 1934, as amended (the "Exchange Act"). (b) "Base Compensation" shall mean the average of the total cash remuneration received by the Employee in all capacities with the Company, and its Subsidiaries or Affiliates, as reported for Federal income tax purposes on Form W-2, together with any and all salary reduction authorized amounts under any of the Company's benefit plans or programs, but excluding any amounts attributable to the exercise of stock options by the Employee under the Company's Equity Compensation Plan for the most recent full calendar year immediately preceding the calendar year in which occurs a Change of Control or the Employee's Termination Date, whichever is higher. 2 (c) "Base Salary" shall mean the rate of normal salary being paid to the Employee at the time of his Termination Date. (d) "Beneficial Owner" of any securities shall mean: (i) that such Person or any of such Person's Affiliates or Associates, directly or indirectly, has the right to acquire (whether such right is exercisable immediately or only after the passage of time) pursuant to any agreement, arrangement or understanding (whether or not in writing) or upon the exercise of conversion rights, exchange rights, rights, warrants or options, or otherwise; provided, however, that a Person shall not be deemed the "Beneficial Owner" of securities tendered pursuant to a tender or exchange offer made by such Person or any of such Person's Affiliates or Associates until such tendered securities are accepted for payment, purchase or exchange; (ii) that such Person or any of such Person's Affiliates or Associates, directly or indirectly, has the right to vote or dispose of or has "beneficial ownership" of (as determined pursuant to Rule 13d-3 of the General Rules and Regulations under the Exchange Act), including without limitation pursuant to any agreement, arrangement or understanding, whether or not in writing; provided, however, that a Person shall not be deemed the "Beneficial Owner" of any security under this subsection (ii) as a result of an oral or written agreement, arrangement or understanding to vote such security if such agreement, arrangement or understanding (A) arises solely from a revocable proxy given in response to a public proxy or consent solicitation made pursuant to, and in accordance with, the 3 applicable provisions of the General Rules and Regulations under the Exchange Act, and (B) is not then reportable by such Person on Schedule 13D under the Exchange Act (or any comparable or successor report); or (iii) where voting securities are beneficially owned, directly or indirectly, by any other Person (or any Affiliate or Associate thereof) with which such Person (or any of such Person's Affiliates or Associates) has any agreement, arrangement or understanding (whether or not in writing) for the purpose of acquiring, holding, voting (except pursuant to a revocable proxy as described in the proviso to subsection (ii) above) or disposing of any voting securities of the Company; provided, however, that nothing in this subsection (d) shall cause a Person engaged in business as an underwriter of securities to be the "Beneficial Owner" of any securities acquired through such Person's participation in good faith in a firm commitment underwriting until the expiration of forty days after the date of such acquisition. (e) "Board" shall mean the board of directors of the Company. (f) "Cause" shall mean 1) misappropriation of funds, 2) habitual insobriety or substance abuse, 3) conviction of a crime involving moral turpitude, 4) gross negligence in the performance of duties, which gross negligence has had a material adverse effect on the business, operations, assets, properties or financial condition of the Company and its Subsidiaries taken as a whole, or 5) for purposes of Section 3(b), a judgment by the Board that the Employee is not satisfactorily performing his duties. 4 (g) "Change of Control" shall be deemed to have taken place if (i) any Person (except the Company or any employee benefit plan of the Company or of any Affiliate, any Person or entity organized, appointed or established by the Company for or pursuant to the terms of any such employee benefit plan), together with all Affiliates and Associates of such Person, shall become the Beneficial Owner in the aggregate of 20% or more of the common stock of the Company then outstanding); provided, however, that no "Change of Control" shall be deemed to occur during any period in which any such Person, and its Affiliates and Associates, are bound by the terms of a standstill agreement under which such parties have agreed not to acquire more than 30% of the common stock of the Company of the Common Stock of the Company then outstanding or to solicit proxies, or (ii) during any twenty-four month period, individuals who at the beginning of such period constituted the Board cease for any reason to constitute a majority thereof, unless the election, or the nomination for election by the Company's shareholders, of at least seventy-five percent of the directors who were not directors at the beginning of such period was approved by a vote of at least seventy-five percent of the directors in office at the time of such election or nomination who were directors at the beginning of such period. (h) "Normal Retirement Date" shall mean the first day of the calendar month coincident with or next following the Employee's 65th birthday. (i) "Person" shall mean any individual, firm, corporation, partnership or other entity. 5 (j) "Subsidiary" shall have the meaning ascribed to such term in Rule 12b-2 of the General Rules and Regulations under the Exchange Act. (k) "Termination Date" shall mean the date of receipt of the Notice of Termination described in Section 2 hereof or any later date specified therein, as the case may be. (l) "Termination of Employment" shall mean the termination of the Employee's actual employment relationship with the Company. (m) "Termination following a Change of Control" shall mean a Termination of Employment within two years after a Change of Control either: (i) initiated by the Company for any reason other than (x) the Employee's continuous illness, injury or incapacity for a period of six consecutive months or (y) for "Cause;" or (ii) initiated by the Employee upon one or more of the following occurrences: (A) any failure of the Company to comply with and satisfy any of the terms of this Agreement; (B) any significant reduction by the Company of the authority, duties or responsibilities of the Employee; (C) any removal by the Company of the Employee from the employment grade, compensation level or officer positions which the Employee holds as of the effective date hereof except in connection with promotions to higher office; 6 (D) the requirement that the Employee undertake business travel to an extent substantially greater than is reasonable and customary for the position the Employee holds. 2. Notice of Termination. Any Termination of Employment shall be communicated by a Notice of Termination to the other party hereto given in accordance with Section 14 hereof. For purposes of this Agreement, a "Notice of Termination" means a written notice which (i) indicates the specific reasons for the termination, (ii) briefly summarizes the facts and circumstances deemed to provide a basis for termination of the Employee's employment, and (iii) if the Termination Date is other than the date of receipt of such notice, specifies the Termination Date (which date shall not be more than 15 days after the giving of such notice). 3. Severance Compensation upon Termination. (a) In the event of the Employee's involuntary Termination of Employment for reason other than Cause, the Company shall pay to the Employee, upon the execution of a release in form and substance satisfactory to the company and its counsel, his regular Base Salary, subject to customary employment taxes and deductions, for 12 months following the Termination Date but all other benefit coverages, retirement benefits and fringe benefit eligibility shall cease upon the Termination Date. (b) In the event of the Employee's involuntary Termination of Employment due to a judgment by the Board that the Employee is not satisfactorily performing his 7 duties, the Company shall pay to the Employee, upon execution of a release in form and substance satisfactory to the Company and its counsel, his regular Base Salary, subject to customary employment taxes and deductions, for 12 months following the Termination Date but all other benefit coverages, retirement benefits and fringe benefit eligibility shall cease upon the Termination Date. (c) Subject to the provisions of Section 11 hereof, in the event of the Employee's Termination following a Change of Control, the Company shall pay to the Employee, within fifteen days after the Termination Date (or as soon as possible thereafter in the event that the procedures set forth in Section 11(b) hereof cannot be completed within 15 days), and in lieu of any payment under subsection (a) above, an amount in cash equal to 1.5 times the Employee's Base Compensation. (d) In the event the Employee's Normal Retirement Date would occur prior to 24 months after the Termination Date, the aggregate cash amount determined as set forth in (a) above shall be reduced by multiplying it by a fraction, the numerator of which shall be the number of days from the Termination Date to the Employee's Normal Retirement Date and the denominator of which shall be 730. 4. Other Payments. The payment due under Section 3 hereof shall be in addition to and not in lieu of any payments or benefits due to the Employee under any other plan, policy or program of the Company except that no payments shall be due to the Employee under the Company's then severance pay plan for employees. 8 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. 9 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. 10 11. Certain Reduction of Payments. (a) Anything in this Agreement to the contrary notwithstanding, in the event that it shall be determined that any payment or distribution by the Company to or for the benefit of the Employee, whether paid or payable or distributed or distributable pursuant to the terms of this Agreement or otherwise (a "Payment"), would constitute an "excess parachute payment" within the meaning of Section 280G of the Internal Revenue Code of 1986, as amended (the "Code"), the aggregate present value of amounts payable or distributable to or for the benefit of the Employee pursuant to this Agreement (such payments or distributions pursuant to this Agreement are hereinafter referred to as "Agreement Payments") shall be reduced (but not below zero) to the Reduced Amount. The "Reduced Amount" shall be an amount expressed in present value which maximizes the aggregate present value of Agreement Payments without causing any Payment to be subject to the taxation under Section 4999 of the Code. For purposes of this Section 11, present value shall be determined in accordance with Section 280G(d)(4) of the Code. (b) All determinations to be made under this Section 11 shall be made by Ernst & Young (or the Company's independent public accountant immediately prior to the Change of Control if other than Ernst & Young (the "Accounting Firm")), which firm shall provide its determinations and any supporting calculations both to the Company and the Employee within 10 days of the Termination Date. Any such determination by the Accounting Firm shall be binding upon the Company and the Employee. Within five days after this determination, the Company shall pay (or 11 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. 12 (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 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 14 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 15 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 16 consents to the service of any process, pleadings, notices or other papers in a manner permitted by the notice provisions of Section 17 hereof. (d) Employee agrees that he will provide, and that the Company may similarly provide, a copy of Sections 12 and 13 hereof to any business or enterprise (i) which he may directly or indirectly own, manage, operate, finance, join, control or participate in the ownership, management, operation, financing, control or control of, or (ii) with which he may be connected with as an officer, director, employee, partner, principal, agent, representative, consultant or otherwise, or in connection with which he may use or permit his name to be used; provided, however, that this provision shall not apply in respect of Section 3 hereof after expiration of the time period set forth therein. 15. Term of Agreement. The term of this Agreement shall be for two years from the date hereof and shall be automatically renewed for successive one-year periods unless the Company notifies the Employee in writing that this Agreement will not be renewed at least sixty days prior to the end of the current term; provided, however, that (i) after a Change of Control during the term of this Agreement, this Agreement shall remain in effect until all of the obligations of the parties hereunder are satisfied or have expired, and (ii) this Agreement shall terminate if, prior to a Change of Control, the employment of the Employee with the Company or any of its Subsidiaries, as the case may be, shall terminate for any reason, or the Employee shall cease to be an Employee. 17 16. Successor Company. The Company shall require any successor or successors (whether direct or indirect, by purchase, merger, consolidation or otherwise) to all or substantially all of the business and/or assets of the Company, by agreement in form and substance satisfactory to the Employee, to acknowledge expressly that this Agreement is binding upon and enforceable against the Company in accordance with the terms hereof, and to become jointly and severally obligated with the Company to perform this Agreement in the same manner and to the same extent that the Company would be required to perform if no such succession or successions had taken place. Failure of the Company to obtain such agreement prior to the effectiveness of any such succession shall be a breach of this Agreement. As used in this Agreement, the Company shall mean the Company as hereinbefore defined and any such successor or successors to its business and/or assets, jointly and severally. 17. Notice. All notices and other communications required or permitted hereunder or necessary or convenient in connection herewith shall be in writing and shall be delivered personally or mailed by registered or certified mail, return receipt requested, or by overnight express courier service, as follows: If to the Company, to: Maritrans General Partner Inc. 2600 One Logan Square Philadelphia, PA 19103 Attention: Corporate Secretary 18 If to the Employee, to: Steven E. Welch 6 Paper Mill Road Newtown Square, PA 19073 or to such other names or addresses as the Company or the Employee, as the case may be, shall designate by notice to the other party hereto in the manner specified in this Section; provided, however, that if no such notice is given by the Company following a Change of Control, notice at the last address of the Company or to any successor pursuant to Section 16 hereof shall be deemed sufficient for the purposes hereof. Any such notice shall be deemed delivered and effective when received in the case of personal delivery, five days after deposit, postage prepaid, with the U.S. Postal Service in the case of registered or certified mail, or on the next business day in the case of overnight express courier service. 18. Governing Law. This Agreement shall be governed by and interpreted under the laws of the Commonwealth of Pennsylvania without giving effect to any conflict of laws provisions. 19. Contents of Agreement, Amendment and Assignment. (a) This Agreement supersedes all prior agreements, sets forth the entire understanding between the parties hereto with respect to the subject matter hereof and cannot be changed, modified, extended or terminated except upon written amendment executed by the Employee and approved by the Board and executed on the Company's behalf by a duly authorized officer. The provisions of this Agreement may provide for payments to the Employee under certain compensation or bonus 19 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, 20 remedy or power hereunder or existing at law or in equity shall be construed as a waiver thereof, including, without limitation, any delay by the Employee in delivering a Notice of Termination pursuant to Section 2 hereof after an event has occurred which would, if the Employee had resigned, have constituted a Termination following a Change of Control pursuant to Section 1(l)(ii) of this Agreement. 22. Miscellaneous. All section headings are for convenience only. This Agreement may be executed in several counterparts, each of which is an original. It shall not be necessary in making proof of this Agreement or any counterpart hereof to produce or account for any of the other counterparts. IN WITNESS WHEREOF, the undersigned, intending to be legally bound, have executed this Agreement as of the date first above written. Attest: MARITRANS GENERAL PARTNER INC. [Seal] /s/ A.J. Volkle By /s/ John C. Newcomb - ---------------------------- ---------------------------------- Asst. Secretary Vice President /s/ J.M. Smallacombe /s/ Steven E. Welch - ---------------------------- ---------------------------------- Witness Steven E. Welch 21 EX-10.8 7 EXHIBIT 10.8 SEVERANCE AND NON-COMPETITION AGREEMENT Agreement made as of the 4th day of April, 1996, between Maritrans Inc., a Delaware corporation (the "Company"), and Thomas C. Deas, Jr. (the "Employee"). WHEREAS, the Employee is being hired by the Company as its Vice President, Treasurer and Chief Financial Officer; WHEREAS, the board of directors of the Company recognizes that, as is the case with many publicly held corporations, the possibility of a change in control of Maritrans and the Company exists and that such possibility, and the uncertainty and questions which it may raise among management, may result in the departure or distraction of key management personnel to the detriment of the Company; WHEREAS, the board of directors of the Company has determined that appropriate steps should be taken to reinforce and encourage the continued attention and dedication of key members of the Company's management to their assigned duties without distraction in the face of potentially disturbing circumstances arising from the possibility of a change in control of the Company; and WHEREAS, in consideration for the Employee accepting employment with the Company and agreeing not to compete with the Company in the event the Employee's employment is terminated, the Company agrees that the Employee shall receive the compensation set forth in this Agreement as a cushion against the financial and career impact on the Employee in the event the Employee's employment with the Company is terminated without cause whether or not there is a Change of Control of the Company; NOW, THEREFORE, in consideration of the foregoing and the mutual covenants and agreements hereinafter set forth and intending to be legally bound hereby, the parties hereto agree as follows: 1. Definitions. For all purposes of this Agreement, the following terms shall have the meanings specified in this Section unless the context clearly otherwise requires: (a) "Affiliate" and "Associate" shall have the respective meanings ascribed to such terms in Rule 12b-2 of the General Rules and Regulations under the Securities Exchange Act of 1934, as amended (the "Exchange Act"). (b) "Base Compensation" shall mean the average of the total cash remuneration (total remuneration for the year 1996) received by the Employee in all capacities with the Company, and its Subsidiaries or Affiliates, as reported for Federal income tax purposes on Form W-2, together with any and all salary reduction authorized amounts under any of the Company's benefit plans or programs, but excluding any amounts attributable to the exercise of stock options by the Employee under the Company's Equity Compensation Plan for the five most recent full calendar years (annualized in accordance with applicable regulations in the case of a calendar year in which the Employee was not paid for the full calendar year) immediately preceding the calendar year in which occurs a Change of Control. -2- (c) "Base Salary" shall mean the rate of normal salary being paid to the Employee at the time of his Termination Date, but in no case less than $155,000 per annum. (d) "Beneficial Owner" of any securities shall mean: (i) that such Person or any of such Person's Affiliates or Associates, directly or indirectly, has the right to acquire (whether such right is exercisable immediately or only after the passage of time) pursuant to any agreement, arrangement or understanding (whether or not in writing) or upon the exercise of conversion rights, exchange rights, rights, warrants or options, or otherwise; provided, however, that a Person shall not be deemed the "Beneficial Owner" of securities tendered pursuant to a tender or exchange offer made by such Person or any of such Person's Affiliates or Associates until such tendered securities are accepted for payment, purchase or exchange; (ii) that such Person or any of such Person's Affiliates or Associates, directly or indirectly, has the right to vote or dispose of or has "beneficial ownership" of (as determined pursuant to Rule 13d-3 of the General Rules and Regulations under the Exchange Act), including without limitation pursuant to any agreement, arrangement or understanding, whether or not in writing; provided, however, that a Person shall not be deemed the "Beneficial Owner" of any security under this subsection (ii) as a result of an oral or written agreement, arrangement or understanding to vote such security if such agreement, arrangement or understanding (A) arises solely from a revocable proxy given in response to a public proxy or consent solicitation made pursuant to, and in accordance with, the applicable provisions of the General Rules and Regulations under the Exchange Act, and -3- (B) is not then reportable by such Person on Schedule 13D under the Exchange Act (or any comparable or successor report); or (iii) where voting securities are beneficially owned, directly or indirectly, by any other Person (or any Affiliate or Associate thereof) with which such Person (or any of such Person's Affiliates or Associates) has any agreement, arrangement or understanding (whether or not in writing) for the purpose of acquiring, holding, voting (except pursuant to a revocable proxy as described in the proviso to subsection (ii) above) or disposing of any voting securities of the Company; provided, however, that nothing in this subsection (d) shall cause a Person engaged in business as an underwriter of securities to be the "Beneficial Owner" of any securities acquired through such Person's participation in good faith in a firm commitment underwriting until the expiration of forty days after the date of such acquisition. (e) "Board" shall mean the board of directors of the Company. (f) "Cause" shall mean 1) misappropriation of funds, 2) habitual insobriety or substance abuse, 3) conviction of a crime involving moral turpitude, or 4) gross negligence in the performance of duties, which gross negligence has had a material adverse effect on the business, operations, assets, properties or financial condition of the Company and its Subsidiaries taken as a whole. -4- (g) "Change of Control" shall be deemed to have taken place if (i) any Person (except the Company or any employee benefit plan of the Company or of any Affiliate, any Person or entity organized, appointed or established by the Company for or pursuant to the terms of any such employee benefit plan), together with all Affiliates and Associates of such Person, shall become the Beneficial Owner in the aggregate of 20% or more of the common stock of the Company then outstanding); provided, however, that no "Change of Control" shall be deemed to occur during any period in which any such Person, and its Affiliates and Associates, are bound by the terms of a standstill agreement under which such parties have agreed not to acquire more than 30% of the common stock of the Company of the Common Stock of the Company then outstanding or to solicit proxies, or (ii) during any twenty-four month period, individuals who at the beginning of such period constituted the Board cease for any reason to constitute a majority thereof, unless the election, or the nomination for election by the Company's shareholders, of at least seventy-five percent of the directors who were not directors at the beginning of such period was approved by a vote of at least seventy-five percent of the directors in office at the time of such election or nomination who were directors at the beginning of such period. (h) "Normal Retirement Date" shall mean the first day of the calendar month coincident with or next following the Employee's 65th birthday. (i) "Person" shall mean any individual, firm, corporation, partnership or other entity. (j) "Subsidiary" shall have the meaning ascribed to such term in Rule 12b-2 of the General Rules and Regulations under the Exchange Act. -5- (k) "Termination Date" shall mean the date of receipt of the Notice of Termination described in Section 2 hereof or any later date specified therein, as the case may be. (l) "Termination of Employment" shall mean the termination of the Employee's actual employment relationship with the Company. (m) "Termination following a Change of Control" shall mean a Termination of Employment within two years after a Change of Control either: (i) initiated by the Company for any reason other than (x) the Employee's continuous illness, injury or incapacity for a period of six consecutive months or (y) for "Cause;" or (ii) initiated by the Employee upon one or more of the following occurrences: (A) any failure of the Company to comply with and satisfy any of the terms of this Agreement; (B) any significant reduction by the Company of the authority, duties or responsibilities of the Employee; (C) any removal by the Company of the Employee from the employment grade, compensation level or officer positions which the Employee holds as of the effective date hereof except in connection with promotions to higher office; -6- (D) the requirement that the Employee undertake business travel to an extent substantially greater than is reasonable and customary for the position the Employee holds. 2. Notice of Termination. Any Termination of Employment shall be communicated by a Notice of Termination to the other party hereto given in accordance with Section 14 hereof. For purposes of this Agreement, a "Notice of Termination" means a written notice which (i) indicates the specific reasons for the termination, (ii) briefly summarizes the facts and circumstances deemed to provide a basis for termination of the Employee's employment, and (iii) if the Termination Date is other than the date of receipt of such notice, specifies the Termination Date (which date shall not be more than 15 days after the giving of such notice). 3. Severance Compensation upon Termination. (a) In the event of the Employee's involuntary Termination of Employment for reason other than Cause, the Company shall pay to the Employee, upon the execution of a release in form and substance satisfactory to the Company and its counsel, his regular Base Salary, subject to customary employment taxes and deductions, for 18 months following the Termination Date but all other benefit coverages, retirement benefits and fringe benefit eligibility shall cease upon the Termination Date subject to applicable rights under COBRA. For purposes of this subparagraph 3(a), an "involuntary Termination of Employment for reason other than Cause" shall include the following circumstances: (i) The termination of this Agreement pursuant to any "Term of Agreement" provisions in paragraph 15, unless the termination is for cause; and/or -7- (ii) if, as a condition of employment, Employee is required to relocate his principal place of business to a location in excess of fifty (50) miles from the Company's current offices at One Logan Square, Philadelphia, Pennsylvania. (b) Subject to the provisions of Section 11 hereof, in the event of the Employee's Termination following a Change of Control, the Company shall pay to the Employee, within fifteen days after the Termination Date (or as soon as possible thereafter in the event that the procedures set forth in Section 11(b) hereof cannot be completed within 15 days), and in lieu of any payment under subsection (a) above, an amount in cash equal to 2.99 times the Employee's Base Compensation. (c) In the event the Employee's Normal Retirement Date would occur prior to 24 months after the Termination Date, the aggregate cash amount determined as set forth in (a) above shall be reduced by multiplying it by a fraction, the numerator of which shall be the number of days from the Termination Date to the Employee's Normal Retirement Date and the denominator of which shall be 730. 4. Other Payments. The payment due under Section 3 hereof shall be in addition to and not in lieu of any payments or benefits due to the Employee under any other plan, policy or program of the Company except that no payments shall be due to the Employee under the Company's then severance pay plan for employees. 5. Establishment of Trust. The Company may establish an irrevocable trust fund pursuant to a trust agreement to hold assets to satisfy its obligations hereunder. Funding of such trust fund shall be subject to the Company's discretion, as set forth in the agreement pursuant to which the fund will be established. -8- 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. -9- 8. Non-exclusivity of Rights. Nothing in this Agreement shall prevent or limit the Employee's continuing or future participation in or rights under any benefit, bonus, incentive or other plan or program provided by the Company or any of its Subsidiaries or Affiliates and for which the Employee may qualify; provided, however, that the Employee hereby waives the Employee's right to receive any payments under any severance pay plan or similar program applicable to other employees of the Company . 9. No Set-Off. The Company's obligation to make the payments provided for in this Agreement and otherwise to perform its obligations hereunder shall not be affected by any circumstances, including, without limitation, any set-off, counterclaim, recoupment, defense or other right which the Company may have against the Employee or others. 10. Taxes. Any payment required under this Agreement shall be subject to all requirements of the law with regard to the withholding of taxes, filing, making of reports and the like, and the Company shall use its best efforts to satisfy promptly all such requirements. 11. Certain Reduction of Payments. (a) Anything in this Agreement to the contrary notwithstanding, in the event that it shall be determined that any payment or distribution by the Company to or for the benefit of the Employee, whether paid or payable or distributed or distributable pursuant to the terms of this Agreement or otherwise (a "Payment"), would constitute an "excess -10- parachute payment" within the meaning of Section 280G of the Internal Revenue Code of 1986, as amended (the "Code"), then the aggregate present value of amounts payable or distributable to or for the benefit of the Employee pursuant to this Agreement (such payments or distributions pursuant to this Agreement are hereinafter referred to as "Agreement Payments") shall be reduced (but not below zero) to the Reduced Amount. The "Reduced Amount" shall be an amount expressed in present value which maximizes the aggregate present value of Agreement Payments without causing any Payment to be subject to the taxation under Section 4999 of the Code. For purposes of this Section 11, present value shall be determined in accordance with Section 280G(d)(4) of the Code. (b) All determinations to be made under this Section 11 shall be made by Ernst & Young (or the Company's independent public accountant immediately prior to the Change of Control if other than Ernst & Young (the "Accounting Firm")), which firm shall provide its determinations and any supporting calculations both to the Company and the Employee within 10 days of the Termination Date. Any such determination by the Accounting Firm shall be binding upon the Company and the Employee. Within five days after this determination, the Company shall pay (or cause to be paid) or distribute (or cause to be distributed) to or for the benefit of the Employee such amounts as are then due to the Employee under this Agreement. (c) As a result of the uncertainty in the application of Section 280G of the Code at the time of the initial determination by the Accounting Firm hereunder, it is possible that Agreement Payments, as the case may be, will have been made by the Company which should not have been made ("Overpayment") or that additional Agreement -11- Payments which have not been made by the Company could have been made ("Underpayment"), in each case, consistent with the calculations required to be made hereunder. Within two years after the Termination of Employment, the Accounting Firm shall review the determination made by it pursuant to the preceding paragraph. In the event that the Accounting Firm determines that an Overpayment has been made, any such Overpayment shall be treated for all purposes as a loan to the Employee which the Employee shall repay to the Company together with interest at the applicable Federal rate provided for in Section 7872(f)(2) of the Code (the "Federal Rate"); provided, however, that no amount shall be payable by the Employee to the Company if and to the extent such payment would not reduce the amount which is subject to taxation under Section 4999 of the Code. In the event that the Accounting Firm determines that an Underpayment has occurred, any such Underpayment shall be promptly paid by the Company to or for the benefit of the Employee together with interest at the Federal Rate. (d) All of the fees and expenses of the Accounting Firm in performing the determinations referred to in subsections (b) and (c) above shall be borne solely by the Company. The Company agrees to indemnify and hold harmless the Accounting Firm of and from any and all claims, damages and expenses resulting from or relating to its determinations pursuant to subsections (b) and (c) above, except for claims, damages or expenses resulting from the gross negligence or willful misconduct of the Accounting Firm. 12. Confidential Information. The Employee recognizes and acknowledges that, by reason of his employment by and service to the Company, he has had and will continue to have access to confidential information of the Company and its -12- affiliates, including, without limitation, information and knowledge pertaining to products and services offered, innovations, designs, ideas, plans, trade secrets, proprietary information, distribution and sales methods and systems, sales and profit figures, customer and client lists, and relationships between the Company and its affiliates and other distributors, customers, clients, suppliers and others who have business dealings with the Company and its affiliates ("Confidential Information"). The Employee acknowledges that such Confidential Information is a valuable and unique asset and covenants that he will not, either during or after his employment by the Company, disclose any such Confidential Information to any person for any reason whatsoever without the prior written authorization of the Board, unless such information is in the public domain through no fault of the Employee or except as may be required by law. 13. Non-Competition. (a) During his employment by the Company and for a period of one year thereafter, the Employee will not, unless acting with the prior written consent of the Board, directly or indirectly, own, manage, operate, join, control, finance or participate in the ownership, management, operation, control or financing of, or be connected as an officer, director, employee, partner, principal, agent, representative, consultant or otherwise with or use or permit his name to be used in connection with, any business or enterprise engaged in a geographic area in which the Company or any of its affiliates is operating either during his employment by the Company or on the Termination Date, as applicable, presently on the East Coast of the United States or at any port in the Gulf of Mexico (whether or not such business is physically located within those areas) (the "Geographic Area"), in any business -13- that is a customer of, competitive to, a business from which the Company or any of its affiliates derive at least five percent of its respective gross revenues either during his employment by the Company or on the Termination Date, as applicable. It is recognized by the Employee that the business of the Company and its affiliates and the Employee's connection therewith is or will be involved in activity throughout the Geographic Area, and that more limited geographical limitations on this non-competition covenant are therefore not appropriate. The Employee also shall not, directly or indirectly, during such one-year period (a) solicit or divert business from, or attempt to convert any client, account or customer of the Company or any of its affiliates, whether existing at the date hereof or acquired during Employee's employment nor (b) following Employee's employment, solicit or attempt to hire any then employee of the Employer or of any of its affiliates. (b) The foregoing restriction shall not be construed to prohibit the ownership by the Employee of less than one percent (1%) of any class of securities of any corporation which is engaged in any of the foregoing businesses having a class of securities registered pursuant to the Securities Exchange Act of 1934, provided that such ownership represents a passive investment and that neither the Employee nor any group of persons including Employee in any way, either directly or indirectly, manages or exercises control of any such corporation, guarantees any of its financial obligations, otherwise takes any part in its business, other than exercising his rights as a shareholder, or seeks to do any of the foregoing. 14. Equitable Relief. (a) Employee acknowledges that the restrictions contained in Sections 12 and 13 hereof are reasonable and necessary to protect the legitimate interests of the -14- Company and its affiliates, that the Company would not have entered into this Agreement in the absence of such restrictions, and that any violation of any provision of those Sections will result in irreparable injury to the Company. The Employee represents that his experience and capabilities are such that the restrictions contained in Section 13 hereof will not prevent the Employee from obtaining employment or otherwise earning a living at the same general level of economic benefit as anticipated by this Agreement. The Employee further represents and acknowledges that (i) he has been advised by the Company to consult his own legal counsel in respect of this Agreement, and (ii) that he has had full opportunity, prior to execution of this Agreement, to review thoroughly this Agreement with his counsel. (b) The Employee agrees that the Company shall be entitled to preliminary and permanent injunctive relief, without the necessity of proving actual damages, as well as an equitable accounting of all earnings, profits and other benefits arising from any violation of Sections 12 or 13 hereof, which rights shall be cumulative and in addition to any other rights or remedies to which the Company may be entitled. In the event that any of the provisions of Sections 12 or 13 hereof should ever be adjudicated to exceed the time, geographic, service, or other limitations permitted by applicable law in any jurisdiction, then such provisions shall be deemed reformed in such jurisdiction to the maximum time, geographic, service, or other limitations permitted by applicable law. (c) The Employee irrevocably and unconditionally (i) agrees that any suit, action or other legal proceeding arising out of Section 12 or 13 hereof, including without limitation, any action commenced by the Company for preliminary and permanent injunctive relief or other equitable relief, may be brought in the United States District Court -15- for the Eastern District of Pennsylvania, or if such court does not have jurisdiction or will not accept jurisdiction, in any court of general jurisdiction in Philadelphia County, Pennsylvania, (ii) consents to the non-exclusive jurisdiction of any such court in any such suit, action or proceeding, and (iii) waives any objection which Employee may have to the laying of venue of any such suit, action or proceeding in any such court. Employee also irrevocably and unconditionally consents to the service of any process, pleadings, notices or other papers in a manner permitted by the notice provisions of Section 17 hereof. (d) Employee agrees that he will provide, and that the Company may similarly provide, a copy of Sections 12 and 13 hereof to any business or enterprise (i) which he may directly or indirectly own, manage, operate, finance, join, control or participate in the ownership, management, operation, financing, control or control of, or (ii) with which he may be connected with as an officer, director, employee, partner, principal, agent, representative, consultant or otherwise, or in connection with which he may use or permit his name to be used; provided, however, that this provision shall not apply in respect of Section 3 hereof after expiration of the time period set forth therein. 15. Term of Agreement. The term of this Agreement shall be for two years from the date hereof and shall be automatically renewed for successive one-year periods unless the Company notifies the Employee in writing that this Agreement will not be renewed at least sixty days prior to the end of the current term (such notice shall be deemed an involuntary Termination of Employment); provided, however, that (i) after a Change of Control during the term of this Agreement, this Agreement shall remain in effect until all of the obligations of the parties hereunder are satisfied, and (ii) this Agreement shall terminate -16- if, prior to a Change of Control, the employment of the Employee with the Company or any of its Subsidiaries, as the case may be, shall terminate for any reason other than as provided herein. 16. Successor Company. The Company shall require any successor or successors (whether direct or indirect, by purchase, merger, consolidation or otherwise) to all or substantially all of the business and/or assets of the Company, by agreement in form and substance satisfactory to the Employee, to acknowledge expressly that this Agreement is binding upon and enforceable against the Company in accordance with the terms hereof, and to become jointly and severally obligated with the Company to perform this Agreement in the same manner and to the same extent that the Company would be required to perform if no such succession or successions had taken place. Failure of the Company to obtain such agreement prior to the effectiveness of any such succession shall be a breach of this Agreement. As used in this Agreement, the Company shall mean the Company as hereinbefore defined and any such successor or successors to its business and/or assets, jointly and severally. 17. Notice. All notices and other communications required or permitted hereunder or necessary or convenient in connection herewith shall be in writing and shall be delivered personally or mailed by registered or certified mail, return receipt requested, or by overnight express courier service, as follows: If to the Company, to: Maritrans Inc. 2600 One Logan Square Philadelphia, PA 19103 Attention: Corporate Secretary -17- If to the Employee, to: Thomas C. Deas, Jr. 19 Marple Road Haverford, PA 19041 or to such other names or addresses as the Company or the Employee, as the case may be, shall designate by notice to the other party hereto in the manner specified in this Section; provided, however, that if no such notice is given by the Company following a Change of Control, notice at the last address of the Company or to any successor pursuant to Section 16 hereof shall be deemed sufficient for the purposes hereof. Any such notice shall be deemed delivered and effective when received in the case of personal delivery, five days after deposit, postage prepaid, with the U.S. Postal Service in the case of registered or certified mail, or on the next business day in the case of overnight express courier service. 18. Governing Law. This Agreement shall be governed by and interpreted under the laws of the Commonwealth of Pennsylvania without giving effect to any conflict of laws provisions. 19. Contents of Agreement, Amendment and Assignment. (a) This Agreement supersedes all prior agreements, sets forth the entire understanding between the parties hereto with respect to the subject matter hereof and cannot be changed, modified, extended or terminated except upon written amendment executed by the Employee and approved by the Board and executed on the Company's behalf by a duly authorized officer. The provisions of this Agreement may provide for payments to the Employee under certain compensation or bonus plans under circumstances where such plans would not provide for payment thereof. It is the specific intention of the -18- parties that the provisions of this Agreement shall supersede any provisions to the contrary in such plans, and such plans shall be deemed to have been amended to correspond with this Agreement without further action by the Company or the Board. (b) Nothing in this Agreement shall be construed as giving the Employee any right to be retained in the employ of the Company. (c) All of the terms and provisions of this Agreement shall be binding upon and inure to the benefit of and be enforceable by the respective heirs, representatives, successors and assigns of the parties hereto, except that the duties and responsibilities of the Employee and the Company hereunder shall not be assignable in whole or in part by the Company. 20. Severability. If any provision of this Agreement or application thereof to anyone or under any circumstances shall be determined to be invalid or unenforceable, such invalidity or unenforceability shall not affect any other provisions or applications of this Agreement which can be given effect without the invalid or unenforceable provision or application. 21. Remedies Cumulative; No Waiver. No right conferred upon the Employee by this Agreement is intended to be exclusive of any other right or remedy, and each and every such right or remedy shall be cumulative and shall be in addition to any other right or remedy given hereunder or now or hereafter existing at law or in equity. No delay or omission by the Employee in exercising any right, remedy or power hereunder or existing at law or in equity shall be construed as a waiver thereof, including, without limitation, any delay by the Employee in delivering a Notice of Termination pursuant to Section 2 hereof -19- after an event has occurred which would, if the Employee had resigned, have constituted a Termination following a Change of Control pursuant to Section 1(l)(ii) of this Agreement. 22. Miscellaneous. All section headings are for convenience only. This Agreement may be executed in several counterparts, each of which is an original. It shall not be necessary in making proof of this Agreement or any counterpart hereof to produce or account for any of the other counterparts. IN WITNESS WHEREOF, the undersigned, intending to be legally bound, have executed this Agreement as of the date first above written. Attest: MARITRANS INC. [Seal] /s/ John C. Newcomb By /s/ Stephen A. Van Dyck - ----------------------------- -------------------------------- Secretary Chairman /s/ J.M. Smallacombe /s/ Thomas C. Deas, Jr. - ----------------------------- -------------------------------- Witness Thomas C. Deas, Jr. -20- EX-10.12 8 Exhibit 10.12 SEPARATION AGREEMENT AND GENERAL RELEASE THIS AGREEMENT is made and entered into on this 20th day of January, 1997 by and between Maritrans General Partner Inc., a Delaware corporation, with principal offices at Philadelphia, Pennsylvania (hereinafter referred to as the "Company"), and Francis D. Bailey (hereinafter referred to as "Bailey"). WITNESSETH: WHEREAS, the Company had employed Bailey as its President - Eastern Division; and WHEREAS, Bailey's employment has terminated effective as of December 17, 1996; and WHEREAS, the Company and Bailey have agreed to this Separation Agreement and General Release, in accordance with paragraph 3(a) of the June 1, 1995, Severance and Non-Competition Agreement between the Company and Bailey; NOW, THEREFORE, in consideration of the mutual promises contained herein, the parties hereto, intending to be legally bound, hereby agree as follows: 1. In consideration of Bailey's release of the Company as set forth below, the Company shall: (a) continue to pay Bailey's salary at the annualized rate of one hundred seventy thousand dollars ($170,000.00), less withholdings, and deductions required by law, for a period of thirteen pay periods beginning with the date of execution, consistent with the Company's ordinary bi-weekly payroll practices; (b) provide Bailey with a written letter of reference in the form attached hereto as Exhibit A, and respond to oral requests for references in a manner that is consistent with the attached reference letter; and (c) pay Bailey a lump sum amount equal to six (6) days of accrued, unused vacation pay from 1996, less withholdings and deductions required by law. 2. Bailey agrees and acknowledges that the Company, on a timely basis, has paid or agreed to pay to Bailey all amounts due and owing as a result of Bailey's prior services, and a1l amounts due and owing under the terms of the Severance and Non-Competition Agreement, and Bailey agrees further that the Company has no obligation, contractual or otherwise to Bailey except as provided herein, nor does the Company have any obligation to hire, rehire or re-employ Bailey in the future or to pay him any compensation or benefits except as provided herein, provided that Bailey shall have the right to continue to participate in the Company's group medical plan at his own expense to the extent and for the duration required under COBRA, 29 U.S.C. Section 1161 et al. 3. In full and complete settlement of any claims that Bailey may have against the Company, including any possible violations of the Age Discrimination in Employment Act, 29 U.S.C. Section 621 et seq., ("ADEA") in connection with the termination of his employment, and for and in consideration of the undertakings of the Company described herein, Bailey does hereby REMISE, RELEASE, AND FOREVER DISCHARGE the Company, its officers, directors, shareholders, parent and affiliated companies, partners, employees and agents, and their respective successors and assigns, heirs, executors and administrators (hereinafter also included within the term "Company"), of and from any and all manner of actions and causes of actions, suits, debts, claims and demands whatsoever in law or in equity, which Bailey ever had, now has, or hereafter may have, or which Bailey's heirs, executors or administrators hereafter may have, by reason of any matter, cause or thing whatsoever from the beginning of Bailey's employment and the underlying negotiations and discussions to the date of this Agreement, and particulary, but without -2- limitation of the foregoing general terms, any claims arising from or relating in any way to Bailey's employment relationship with the Company and the termination of that employment relationship, including but not limited to, any claims which have been asserted, could have been asserted, or could be asserted now or in the future under any federal, state or local laws, including any claims under the ADEA, Title VII of the Civil Rights Act of 1964, 42 U.S.C. Section 2000e et seq., ("Title VII"), the Pennsylvania Human Relations Act, 43 P.S. Section 951 et seq., and any common law claims now or hereafter recognized and all claims for counsel fees and costs. 4. Bailey further agrees and covenants that neither he, nor any person, organization or other entity on his behalf, will file, charge, claim, sue or cause or permit to be filed, charged, or claimed, any action for damages, including injunctive, declaratory, monetary or other relief against the Company, involving any matter occurring at any time in the past up to the date of this Agreement, or involving any continuing effects of any actions or practices which may have arisen or occurred prior to the date of this Agreement. 5. Bailey further agrees and covenants that he will not in any way communicate the terms of this Agreement to any person other than his immediate family, attorneys, tax advisors or governmental authorities (only if necessary, by reason of any lawful civil process not initiated by Bailey, or to evidence his rights hereunder in any proceeding involving this Agreement, or to support any tax reporting position taken by him with respect to the matters referred to in this Agreement) and that he and the Company will not disparage the name, business reputation or business practices of the other. -3- 6. Bailey hereby agrees and acknowledges that the Company has the right to condition his receipt of severance pay on the execution of a general release in a form that is satisfactory to the Company and its counsel, and that but for this Separation Agreement and General Release, Bailey would have no entitlement to severance pay or any other compensation or benefits after the effective date of the termination of his employment. 7. Bailey hereby certifies that he has read the terms of this Agreement, that he has been advised and is advised herein to consult with an attorney, which he has done, and that he understands its terms and effects. Bailey acknowledges, further, that he is executing this Agreement of his own volition with a full understanding of its terms and effects and with the intention of releasing all claims recited herein in exchange for the consideration described herein, which he acknowledges is adequate and satisfactory to him. The Company has made no representations to Bailey concerning the terms or effects of this Agreement other than those contained in this Agreement. 8. Bailey hereby acknowledges that he was presented with this Agreement on December 17, 1996, and that he was and is hereby informed that he has the right to consider this Agreement and the release contained herein for a period of at least twenty-one (21) days prior to execution. Bailey also understands that he has the right to revoke this Agreement for a period of seven (7) days following execution, by giving written notice to the Company at 2600 One Logan Square, Philadelphia, PA 19103, in which event the provisions of this Agreement shall be null and void, and the parties shall have the rights, duties, obligations and remedies afforded by applicable law. -4- 9. This Agreement shall be interpreted and enforced under the laws of the Commonwealth of Pennsylvania. IN WITNESS WHEREOF, the parties hereto have executed this Agreement on the day and year first above written. ATTEST: MARITRANS GENERAL PARTNER INC. /S/ John C. Newcomb BY: /S/ Stephen A. Van Dyck - ---------------------------- -------------------------------- SECRETARY /S/ Sandra Cannon /S/ Francis D. Bailey - ---------------------------- -------------------------------- WITNESS FRANCIS D. BAILEY -5- EXHIBIT A TO WHOM IT MAY CONCERN Re: Francis D. Bailey Fran Bailey was employed by Maritrans from May 1995 through December 1996. During that time, he was the President of Maritrans' Eastern Division, the Company's largest division. He had profit and loss responsibility, and provided leadership and oversight to a fleet of approximately twenty-five tugs and barges which operate along the East Coast, in the Philadelphia Harbor and the Chesapeake Bay. The division had assets in excess of $100 million. He also was responsible for our three petroleum terminal locations in Philadelphia and Maryland. Fran's management strengths and experience in petroleum distribution and marketing made him a logical choice for this important post. Fran reported directly to me in his division leadership role and in his role on a number of task teams and committees. As a member of Maritrans' Operating Committee, Fran was integral to our planning and strategic initiatives. I-Es thoughtful, analytical demeanor was an asset to our team and to our shift in strategic direction. It is with great regret that Fran was not able to stay in Philadelphia for family reasons and left to pursue other interests. His parting was an amicable one, and we support Fran in his search for another opportunity which more closely matches his location requirements. Please do not hesitate to call me at any time should you wish further information about his employment with Maritrans. I can be reached at (215) 864-1223. Sincerely, MARITRANS INC. Stephen A. Van Dyck Chairman and Chief Executive Officer EX-11.1 9 COMPUTATION OF EARNINGS EXHIBIT 11.1 MARITRANS INC. COMPUTATION OF EARNINGS PER COMMON SHARE YEARS ENDED DECEMBER 31*
1996 1995 ------------ ------------ Primary: Income: Net income ................................... $ 5,249,000 $ 4,981,000 ============ ============ Shares: Weighted average number of common shares outstanding ................................ 11,828,422 12,150,380 ============ ============ Primary income per common share ........................ $ .4438 $ .4099 ============ ============ Assuming full dilution: Income: Net income ................................... $ 5,249,000 $ 4,981,000 ============ ============ Shares: Weighted average number of common shares outstanding ................................ 11,828,422 12,150,380 Assuming exercise of options reduced by the number of shares which could have been purchased with the proceeds from the exercise of such options ................... 117,942 118,890 ------------ ------------ Weighted average number of common shares outstanding as adjusted .................... 11,946,364 12,269,270 ============ ============ Net income per common share Fully diluted income per common share .................. $ .4394# $ .4060# ============ ============
- ------ * See notes 1 and 4 of the notes to the consolidated financial statements. # This calculation is submitted in accordance with Regulation S-K item 601(b)(11) although not required by footnote 2 to paragraph 14 of APB Opinion No. 15 because it results in dilution of less than 3 percent. EX-21.1 10 SUBSIDIARIES Exhibit 21.1 MARITRANS INC. SUBSIDIARIES OF MARITRANS INC. As of December 31, 1995 Direct and indirect subsidiaries of Maritrans Inc. are: Maritrans Operating Partners L.P. Maritrans General Partner Inc. Maritrans Holdings Inc. Maritrans Distribution Services Inc. Maritrans Barge Co. Maritrans Ocean Transport Inc. Maritrans Capital Corp. CCF Acquisition Corp. Maritank Philadelphia Inc. Inter-Cities Navigation (Texas) Corp. Maritank Maryland Inc. Interstate Towing (Texas) Co. Maritank Inc. Maritrans Management Services Inc. MOT Tankers I, Inc. MOT Tankers II, Inc. MOT Tankers III, Inc. MOT Tankers IV, Inc. EX-27 11
5 0000810113 MARITRANS INC. 1,000 YEAR DEC-31-1996 JAN-01-1996 DEC-31-1996 33,174 0 16,730 860 5,823 65,498 280,231 117,741 235,221 33,535 79,123 0 0 128 82,466 235,221 0 126,994 0 113,310 0 0 9,494 8,379 3,130 5,249 0 0 0 5,249 .44 .44
-----END PRIVACY-ENHANCED MESSAGE-----