-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: keymaster@town.hall.org Originator-Key-Asymmetric: MFkwCgYEVQgBAQICAgADSwAwSAJBALeWW4xDV4i7+b6+UyPn5RtObb1cJ7VkACDq pKb9/DClgTKIm08lCfoilvi9Wl4SODbR1+1waHhiGmeZO8OdgLUCAwEAAQ== MIC-Info: RSA-MD5,RSA, CUjZwf38cp+3VkhHysyto1Rl61oqIKTH13Dqj/WBu+jdWxyPG53Ki9gzC0/YmqpI Wc53gYre/ZvaRHOKbCqwtg== 0000950116-94-000035.txt : 19940331 0000950116-94-000035.hdr.sgml : 19940331 ACCESSION NUMBER: 0000950116-94-000035 CONFORMED SUBMISSION TYPE: 10-K PUBLIC DOCUMENT COUNT: 13 CONFORMED PERIOD OF REPORT: 19931231 FILED AS OF DATE: 19940330 FILER: COMPANY DATA: COMPANY CONFORMED NAME: MARITRANS INC/ CENTRAL INDEX KEY: 0000810113 STANDARD INDUSTRIAL CLASSIFICATION: 4400 IRS NUMBER: 232447279 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-K SEC ACT: 34 SEC FILE NUMBER: 001-09063 FILM NUMBER: 94519002 BUSINESS ADDRESS: STREET 1: ONE LOGAN SQUARE 26TH FLOOR CITY: PHILADELPHIA STATE: PA ZIP: 19103 BUSINESS PHONE: 2158641200 FORMER COMPANY: FORMER CONFORMED NAME: MARITRANS PARTNERS L P DATE OF NAME CHANGE: 19920703 10-K 1 10K 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, 1993 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 14, 1994, the aggregate market value of the voting stock held by non-affiliates of the registrant was $63,005,515. As of March 14, 1994, Maritrans Inc. had 12,523,000 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 12, 1994. ---------- * Successor to Maritrans Partners L.P. Exhibit Index is located on page 34. ========================================================================== 2 FORM 10-K MARITRANS INC. TABLE OF CONTENTS PART I Page ---- Item 1. Business ............................................... 1 Item 2. Properties ............................................. 10 Item 3. Legal Proceedings....................................... 11 Item 4. Submission of Matters to a Vote of Security Holders..... 12 PART II Item 5. Market for the Registrant's Common Equity and Related Stockholder Matters..................................... 13 Item 6. Selected Financial Data................................. 14 Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations..................... 14 Item 8. Financial Statements and Supplementary Data............. 18 Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure..................... 30 PART III Item 10. Directors and Executive Officers of the Registrant...... 30 Item 11. Executive Compensation.................................. 32 Item 12. Security Ownership of Certain Beneficial Owners and Management.............................................. 32 Item 13. Certain Relationships and Related Transactions.......... 32 PART IV Item 14. Exhibits, Financial Statement Schedules and Reports on Form 8-K................................................ 33 Signatures ........................................................ 36 ii 3 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 distribution industry by providing marine transportation services along the East and Gulf Coasts of the United States utilizing its barges and tugboats. Maritrans has recently broadened its participation in distribution services by adding marine terminal facilities, distribution coordination and oil spill contingency management services. Structure 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 Maritrans Operating Partners L.P. and Maritrans General Partner Inc., wholly owned subsidiaries of the Registrant. Most of the Registrant's terminalling, spill contingency and ancillary services are conducted through subsidiaries of Maritrans Holdings Inc., a wholly owned subsidiary of the Registrant. Direct and indirect subsidiaries of the Registrant include: Maritrans Operating Partners L.P. (the "Operating Partnership") Maritrans General Partner Inc. Maritrans Holdings Inc. Response Members Inc. Maritrans Capital Corp. Response Services Inc. CCF Acquisition Corp. Maritank Philadelphia Inc. Inter-Cities Navigation (Texas) Corp. Maritank Maryland Inc. Interstate Towing (Texas) Co. Marispond Inc. Maritrans Eastern Inc. Maritrans Inland Inc. Maritrans Gulf Inc. Based on its internal research regarding Maritrans' competition, Maritrans believes that it is one of the largest United States marine transporters of petroleum and petroleum products in the U.S. Coastwise trade (i.e. from port to port 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. 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, 1 4 1987, Maritrans acquired the tug and barge business and related assets of the tug and barge affiliates of Sonat. Since 1981, Maritrans and its predecessors have transported annually over 200 million barrels of crude oil and refined petroleum products. 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 historical 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. Maritrans' present business plan for complying with the Oil Pollution Act of 1990, (the "OPA"), includes the implementation of an on-going, company-wide Quality Improvement Program, which focuses on improving each area of vessel operations in order to eliminate oil spills, increased training and awareness of marine personnel (including recertification of masters and mates, watchstanding procedures and cargo transfer operations), improved vessel maintenance procedures to address repairs before an accident occurs, maintaining a comprehensive risk- management program, including $700 million in oil spill pollution liability insurance coverage on its fleet of petroleum barges, the maximum amount of such coverage generally carried at commercial rates, and implementing an in-house oil pollution regulatory program designed to keep management and operating personnel knowledgeable about all pertinent developments in regulations promulgated under the OPA and in state oil pollution laws and regulations. Since the double-hull requirements of the OPA do not begin to impact materially on Maritrans' present barge fleet until January 1, 2005, it is difficult to say precisely how Maritrans will finance the conversion of its fleet to double-hull vessels. However, Maritrans expects that, where economically feasible, it will take steps to construct new, double-hulled vessels and/or convert its present single-hull vessels. The timing of the construction or conversion of such vessels will depend in large measure on market conditions, particularly demand for double-hulled vessels and the rates which petroleum shippers are willing to pay to use such vessels. Maritrans expects to finance such construction or conversion primarily from internally generated funds and outside sources, including the equity market, borrowing from conventional sources such as banks and insurance companies and U.S. Government- guaranteed ship financing, if available, and financial leases. There is no assurance that such financing will be 2 5 available in the amounts and at interest rates which will allow Maritrans to replace its current single-hull barge fleet. For a further description of Maritrans' present business plan for complying with the OPA, see "Regulation - Oil Pollution Legislation." In January 1992, Maritrans restructured its marine operations into three divisions - Eastern, Inland and Gulf, supported by executive and service units. The three divisions also provide marketing, logistical, and operational support for Maritrans' vessels, which are assigned to divisions based on market conditions. This divisional restructuring was designed to move Maritrans closer to its markets and customers, improve productivity and efficiency in operations 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 Cape Hatteras, North Carolina. 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). The Inland Division is also supported by fleet center operations in Philadelphia, Pennsylvania, and transports petroleum products and chemicals between refineries and distribution points along the Delaware River and in the Chesapeake Bay. In 1993, the Inland Division and Maritank Maryland Inc., which owns a marine terminal in Salisbury, Maryland, began to deliver distribution services through petroleum exchange agreements with customers requiring both marine transportation and terminalling services. The petroleum exchange agreements are structured so that Maritrans bears none of the exposure to fluctuations in inventory price movements. Maritrans operates a fleet of tank barges and tugboats. Its largest barge has a capacity of approximately 400,000 barrels, and its current operating barge fleet capacity aggregates approximately 4 million barrels. Demand for Maritrans' services is dependent primarily upon general demand for petroleum and petroleum products in the geographic areas served by its vessels. Management believes that United States petroleum consumption, and particularly consumption in New England and Florida, are significant indicators of demand for Maritrans' services. Increases in product consumption generally increase demand for Maritrans' services; conversely, decreases in consumption generally lessen demand for Maritrans' services. Management further believes that the level of domestic consumption of imported product is also significant to Maritrans' business. Imported petroleum products generally can be shipped on foreign-flag vessels 3 6 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 June 1991, Maritrans, through a subsidiary, Maritank Philadelphia Inc., acquired a one-million barrel, deepwater marine terminal located in Philadelphia. This facility is a full-service petroleum product terminal able to receive, store and subsequently redistribute product by pipeline, marine vessel and truck. This facility is also capable of performing cleaning of Maritrans' petroleum carrying vessels. Under current law, a vessel owner is jointly and severally liable with the barge cleaning contractor and the waste disposal contractor in the event that either such contractor improperly disposes of any portion of tank cleaning residues from the vessel which is hazardous. Not only have the tank cleaning rates paid by Maritrans to third parties been increasing substantially, but, in addition, Maritrans believes that at least some of these sources for tank cleaning will not be available in the near future. Management believes the ability to control the cleaning of its vessels will lessen its environmental exposure, as discussed above, since it can then control this activity. Maritrans also believes that this facility will provide it with a long-term strategic advantage since it will be able to assure itself of the availability of these services at a reasonable cost and, by controlling the facility, it will be able to ensure that it can manage vessel turn-around time, thereby increasing vessel availability, and that the facility is run in an environmentally sound manner. In early 1993, Maritank Maryland Inc. ("MMI") and Marispond Inc. ("Marispond") were established as indirect subsidiaries of the Registrant. MMI provides marine terminalling and, together with the Inland Division, distribution services in Salisbury, Maryland. Marispond provides a series of services, most of which arise from requirements of the OPA. These services include oil spill contingency planning, response management and other services on a contract basis to Maritrans and other vessel owners from around the world whose vessels call on United States ports. Maritrans also established an office in Houston, Texas in 1993 in conjunction with efforts it is undertaking to expand its distribution services. 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. 4 7 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 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. Therefore, Maritrans has implemented a number of measures in order to promote higher quality operations and continues to stress its longstanding commitment to safe transportation of petroleum products in its marketing efforts. In 1993, approximately 71% of Maritrans' revenues were generated from ten customers. In 1993, contracts with Chevron U.S.A., Inc. (including affiliates, "Chevron"), and British Petroleum Corp. (including affiliates) accounted in the aggregate for approximately 17% and 15%, respectively, of Maritrans' revenues. There could be a material adverse effect on Maritrans if either of these customers were to cancel or terminate their various agreements with Maritrans. Management believes that cancellation or termination of all of its business with any of its larger customers is unlikely. In February 1994, Chevron announced a tentative agreement to sell its refinery along the Delaware River in Philadelphia, Pennsylvania, to Sun Company, Inc., a Maritrans customer. Based on public announcements by the prospective buyer, Maritrans believes such a sale would not have a material adverse effect on its business. Competition and Competitive Factors Overview. The maritime petroleum transportation industry is highly competitive. The Jones Act, a federal law, restricts United States port-to-port 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 and Inland 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, has competed 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 petroleum products. The primary competition for Maritrans' marine terminals is proprietary storage capacity of integrated oil companies, merchant refiners, and independent marine terminal operators. 5 8 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 safety and 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 1993 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 six 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 Inland and 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, for the most part, 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 recently concluded Uruguay Round of GATS negotiations and NAFTA negotiations. If maritime services were deemed to include cabotage and were included in either of these multi-national trade agreements, the result would have been to open the Jones Act trade, (i.e., transportation of maritime cargo between U.S. ports in which Maritrans and other U.S. vessel owners operate) to foreign-flag vessels which would operate at lower costs. Maritrans understands that cabotage (vessel trade or marine transportation between two points within the same country) will not be included in the GATS and the NAFTA in the foreseeable future; however, the possibility exists that cabotage could be included in either the GATS or the NAFTA, or both, in the future. In the meantime, Maritrans and the maritime industry will 6 9 continue to resist vigorously the inclusion of cabotage in the GATS and the NAFTA. 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, 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 increases the amount of natural gas supplied to the northeastern United States, thus potentially reducing the demand for residual fuel for power generation and ultimately reducing the demand for marine transportation of residual fuel and other petroleum products to and within the area. Whether this reduction occurs will depend on the relative prices between residual fuel and natural gas, including transportation costs, in the future. If these pipelines cause a reduction in demand for marine transportation of petroleum products, Maritrans and other carriers active in the trade would suffer negative effects to their business in this market area. 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. On the other hand, this development could prove beneficial to Maritrans' terminalling business, due to the likely increased demand for storage capacity for the imported refined product. 7 10 Delaware River Channel Depth. 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, 1993, Maritrans and its subsidiaries employed a total of 605 persons. Of these employees, 100 are employed at the Philadelphia, Pennsylvania headquarters of the Registrant or at the Philadelphia and Tampa fleet centers, 465 are seagoing employees who work aboard the tugs and barges, and 40 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 31 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 194 employees. The collective bargaining agreement with the AMO covers approximately 44 employees. Each expires on May 31, 1996. 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 an extensive training program and operational audit program (performed by Tidewater School of Navigation, Inc.) is 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 on subjects including deck officer training, tankerman training, substance abuse awareness, fire fighting, emergency response and personal professional development. In 1991, Maritrans introduced its Quality Improvement Program. All employees participate in quality training seminars in addition to the skills improvement training mentioned above. Regulation Marine Transportation - General. The Interstate Commerce Act exempts from economic regulation the water transportation of petroleum cargos in 8 11 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 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 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. Management expects that efforts of this type will continue. Environmental Matters. Maritrans is subject to various legislation and regulations enacted to protect the environment. 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 9 12 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, numerous 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 curtailed 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, the OPA became law. The OPA substantially changes the liability exposure of owners and operators of vessels, oil terminals and pipelines from that imposed under prior law. Under the 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 the 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 the OPA. The 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, the 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 the 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. The 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 regulations that have not been promulgated in final form by the U.S. Coast Guard. Additional financial responsibility in the amount of $300 per 10 13 gross ton will be required under regulations to be promulgated by the U.S. Coast Guard 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, will only be required to demonstrate financial responsibility in an amount equal to cover the vessel having the greatest maximum liability (approximately $40 million in Maritrans' case). It is uncertain, however, whether Maritrans or other vessel operators will be able to acquire such certificates through existing international insurance underwriters or any other source. This uncertainty is due to the fact that the final federal financial responsibility regulations have not been issued by the U.S. Coast Guard, and if such regulations require the international insurance underwriters to in effect guarantee the payment of clean-up costs and damages up to the OPA statutory limit, they have stated that they are going to refuse to do so. Since the final regulations have not been issued, this position threatened by the international insurance underwriters has not been taken. The operation of tank vessels in marine transportation of oil and petroleum products without such certificates is unlawful and such unlawful operation would not be conducted by Maritrans. This could result in materially adverse effects on Maritrans. The 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. 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 OPA directs the Coast Guard to develop interim measures for single hull tank vessels over 5,000 gross tons "that provide as substantial protection to the environment as is economically and technologically feasible." The Coast Guard issued a Notice of Proposed Rulemaking which proposed the adoption of several alternative structural measures to meet this requirement. The regulation would have required substantial modification of 14 of Maritrans' largest barges, with a significant cost impact. However, in response to comments from industry, the Coast Guard is reexamining these structural proposals, and further action on structural requirements has been deferred. In the meantime, the Coast Guard is expected to adopt a series of operational measures which, while increasing current standards, should not have an appreciable effect on Maritrans. The double-hulled or double-bottomed tank barges currently owned by Maritrans account for approximately 15% of its fleet capacity. None of these vessels, however, comply with the current regulations promulgated under the OPA for double-hulled vessels, although it is possible that some of these vessels may be grandfathered under changes in these regulations 11 14 which may be adopted in the future. Management believes that it would, for example, cost approximately $20 million 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 the OPA. The 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. The 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 oil spill record for the period January 1, 1988 through December 31, 1993:
Gallons Spilled No. of No. of No. of Per Million Period Gals. Carried Spills Gals. Spilled Gals. Carried - ------------------------------------------------------------------------------------------------ (000) (000) 1/1/1988 - 12/31/1988 10,954,000 7 17.55 1.601 1/1/1989 - 12/31/1989 11,315,000 15 11.26 .995 1/1/1990 - 12/31/1990 12,222,000 20 189.37 15.494 1/1/1991 - 12/31/1991 10,710,000 18 1.28 .119 1/1/1992 - 12/31/1992 10,272,000 8 .02 .002 1/1/1993 - 12/31/1993* 10,433,000 4 .02 .002
---------- * 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. 12 15 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, but has since decided to review this issue again. 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. 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 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 tug boats, 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. Port and Tanker Safety Act; Interim Measures. The Port and Tanker Safety Act of 1978 ("PTSA") required certain oil-carrying tankships to be fitted with segregated ballast tanks. PTSA required self-propelled vessels to be retrofitted to meet these standards. Barges were not generally affected by such requirements. However, if the environmental 13 16 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 agencies or authorities could also seek to impose additional user fees or taxes on vessel operators or their vessels. The approved U.S. budget for its 1992 fiscal year directs the Coast Guard to collect fees for vessel inspection and documentation, licensing and tank vessel examinations. Maritrans does not expect that initially these fees will be material to it. There can be no assurance that 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 Operating Partnership owned, at December 31, 1993, a fleet of 67 vessels, of which 39 are barges and 28 are tugboats. Two additional tugs are operated under long-term leases. The barge fleet consists of a variety of vessels falling within six different barge classifications. The largest vessels in the fleet are the 14 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 and most recently reconstructed 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 ten largest barges range in capacity from 61,638 barrels to 165,881 barrels and were constructed or substantially renovated between 1967 and 1981. The fleet also includes two specially equipped chemical barges. The remainder of the barge fleet is comprised of three vessels falling in the 50,000 barrel class, seven vessels in the 30,000 barrel class and three vessels in the small barge classification. The majority of these vessels were constructed between 1961 and 1977. The Operating Partnership's tugboat fleet is comprised of one 11,000 horsepower class vessel, eleven 5,600 horsepower class vessels, four 4,000 horsepower class vessels, five 3,200 horsepower class vessels, six 2,200 horsepower class vessels and two pusher class vessels. One of the 4,000 horsepower class vessels was sold in January 1994. The year of construction or substantial renovation of these vessels ranges from 1962 14 17 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, 1993 Maritrans is not in violation of the Operating Partnership's mortgage covenants. At December 31, 1993 Maritrans owns ten barges and one tugboat which were not in a state of operational readiness. Most of these vessels were too small to achieve satisfactory returns in current market conditions, or were purchased as non-operating hulls for potential refurbishment in the event market conditions were to improve sufficiently to merit additional expenditures. Maritrans does not believe market conditions in 1994 will merit such refurbishments. Marine Terminals. 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, office space and related equipment used in MMI's marine terminal operations are located. 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. The Inland Division leases space from MPI. In the Philadelphia area, the Operating Partnership has several short term (one year or less) leases for nearby pier space for the purpose of mooring vessels and warehouse space for the purpose of storage and shop facilities. The Operating Partnership also leases four acres of Port Authority land in Tampa, Florida for use as its Gulf Division fleet center, which lease 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. The Operating Partnership also has an office space agreement in Houston, Texas for its distribution services business. Item 3. LEGAL PROCEEDINGS Maritrans is a party to routine, marine-related lawsuits and labor arbitrations arising in the ordinary course of its business. The claims made in connection with Maritrans' marine operations are covered by marine insurance, subject to applicable policy deductibles which are not material as to any type of insurance coverage. Management believes, based on its current knowledge, that such lawsuits and claims, even if the outcomes were to be adverse, would not have a material adverse effect on Maritrans' financial condition. 15 18 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. Due to the size and complexity of the liquidation proceeding, it is unlikely that this matter will be resolved for several years. 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. Maritrans' predecessor originally accrued a liability of $1.3 million for claim payments pursuant to such reimbursement agreement with MIW. Management believes, based on its current knowledge, that such accrual will be adequate. However, there is a possibility that future claims could exceed such amount. Management believes, based on its current knowledge, that the ultimate resolution of these claims, even if in excess of the amount accrued, would not have a material adverse effect on Maritrans' financial condition. Maritrans' predecessor was sued in the U.S. District Court in Ohio by nine individuals, eight who at most worked briefly for such predecessor and a ninth who still works for Maritrans, alleging unspecified damages for exposure to asbestos. Maritrans has been sued in a similar suit in New Orleans by a plaintiff and Philadelphia by two plaintiffs with whom Maritrans has no employment records, and in Philadelphia by an employee of Maritrans' predecessor which suit was settled by a payment of $4,000 by Maritrans. Although Maritrans believes these claims are without merit, it is impossible at this juncture 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 is adequately covered by applicable insurance. 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, 1993. 16 19 PART II Item 5. MARKET FOR THE REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS Market Information and Holders Maritrans Inc. Common Shares (and prior to April 1, 1993, Maritrans Partners L.P. Depositary Units) 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/unit as reported by the New York Stock Exchange. QUARTERS ENDING IN 1993: HIGH LOW ----------------------- --------------- March 31, 1993 $4.125 $2.500 June 30, 1993 4.250 3.375 September 30, 1993 4.250 3.250 December 31, 1993 4.250 3.625 QUARTERS ENDING IN 1992: HIGH LOW ----------------------- ---------------- March 31, 1992 $4.875 $ 3.625 June 30, 1992 4.000 2.750 September 30, 1992 3.375 2.500 December 31, 1992 2.750 1.750 As of January 31, 1994, the Registrant had 12,523,000 Common Shares outstanding and approximately 1,212 shareholders of record. Dividends and Distributions For the period April 1, 1993 to December 31, 1993, Maritrans Inc. paid no dividends to stockholders. While dividend policy is determined at the discretion of the Board of Directors of Maritrans Inc., management believes that it is not likely Maritrans will pay any dividends in the near future. For the period January 1, 1992 to March 31, 1993, Maritrans Partners L.P. paid the following cash distributions to the unitholders: PAYMENTS IN 1992: PER UNIT ---------------- -------- February 24, 1992 $ .2875 May 26, 1992 .2875 -------- TOTAL $ .5750 ======== Maritrans Partners L.P. cash distributions should not be compared with dividends paid on common stock by corporations. Dividends paid by corporations are taxable as ordinary income, while distributions from partnerships may be treated partially or fully as a nontaxable return of capital. 17 20 Item 6. SELECTED FINANCIAL DATA ($000)
MARITRANS INC. -------------------------------------------------------- JANUARY 1 TO DECEMBER 31 1993 1992 1991 1990 1989 -------------------------------------------------------- CONSOLIDATED INCOME STATEMENT DATA: Revenues ..................................... $132,539 $133,051 $146,560 $152,368 $135,592 Operating income before depreciation and amortization ............................... 24,509 25,576 23,394 31,725 31,983 Depreciation and amortization ................ 15,868 15,578 15,962 13,747 12,261 Operating income (excludes interest expense).. 8,641 9,998 7,432 17,978 19,722 Interest expense, net ........................ 10,373 10,958 10,890 10,299 10,088 Income (loss) before income taxes and extraordinary item ......................... 5,186 3,419 (1,576) 10,031 12,584 Provision for income taxes ................... 16,975(1) - - - - Extraordinary item ........................... - - - 1,784 - Net income (loss) ............................ (11,789)(1) 3,419 (1,576) 11,815 12,584 CONSOLIDATED BALANCE SHEET DATA (at period end): Total assets ................................. $253,038 $251,344 $258,957 $258,481 $259,649 Long-term debt ............................... 110,556 116,866 120,423 114,000 115,500 Partnership equity ........................... - 86,571 90,339 106,290 108,850 Stockholders' equity ......................... 74,874 - - - -
---------- (1) Maritrans Inc., the successor to Maritrans Partners L.P. effective April 1, 1993, is subject to income taxation. See note 1 and 4 to Financial Statements. 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 Maritrans Partners L.P.(the "Partnership"), herein called "Maritrans." Overview Historically, Maritrans has served the petroleum and petroleum product distribution industry by providing marine transportation services along the East and Gulf Coasts of the United States utilizing its barges and tugboats. Maritrans has recently broadened its participation in distribution services by adding marine terminal facilities and oil spill contingency management services. Over the last several years, Maritrans has been implementing steps to become more competitive and more customer-oriented. In the fourth quarter 18 21 of 1993, Maritrans announced a corporate streamlining which is expected to lower its costs by $5 million in 1994 as compared to 1993. This streamlining resulted in a $2 million charge in the fourth quarter of 1993, with $1 million being charged to general and administrative costs and $1 million charged to operation expense. Most of these charges related to severance costs and other continuation benefits for the terminating and retiring employees. Increased United States oil consumption, as well as a shortening of average voyage length, contributed to Maritrans transporting an increasing number of barrels from 1988 through 1990. Volumes transported by Maritrans declined approximately 14% in 1991 and were relatively stable in 1992 and 1993, declining less than 3% in 1992 and increasing less than 2% in 1993. Maritrans increased vessel capacity from 1988 to 1990, particularly by placing in service the OCEAN 400, Maritrans' largest barge, in May 1990. In 1993, Maritrans reduced owned capacity through the disposal of vessels excess to its long-term business needs. In addition, a barge involved in a collision off the coast of Florida in August 1993 was declared a constructive total loss. During most of 1993, Maritrans had one or more large barges out of service for vessel performance improvements, resulting in Maritrans utilizing, to a greater extent than in 1992, vessels chartered from third parties. Operating income declined in 1989 and 1990 from previous levels as increased costs, particularly in maintenance and insurance, could not be fully offset by rate increases. Lower business activity levels in 1991 through 1993 exacerbated this effect. Maintenance costs had increased markedly in 1989 through 1991 due to three factors: (1) response to the Oil Pollution Act of 1990 (the "OPA"), through management's proactive stepping up of maintenance to achieve even higher quality operations than existed previously, as measured by less work time lost due to critical equipment malfunctions; (2) additions to the fleet in that period; and (3) the effects of inflation and an aging fleet. Lower activity levels and improved maintenance processes lowered maintenance expense levels in 1992 and 1993. Costs related to measures taken to reduce the risk of oil spills, as well as inflation, have also reduced operating income in the years 1990 through 1993. In June 1991, Maritrans purchased a one-million barrel, deepwater marine terminal facility located on the Schuylkill River in Philadelphia, which provides terminalling services to outside customers and vessel-cleaning services for Maritrans. The facility was purchased for $12 million, mainly with the proceeds of a bank loan. In 1992, more than $2 million was spent to increase vessel cleaning capability. In February 1993, Maritrans purchased adjoining terminals in Salisbury, Maryland, with storage capacity totalling 170,000 barrels, to provide marine terminalling services. The facilities were purchased for less than $2 million, and Maritrans now operates the merged facilities as a single terminal and has distribution service agreements with the former owners. Factors that will affect future results of Maritrans include: overall U.S. oil consumption, particularly oil consumption in Florida and the 19 22 Northeastern United States, environmental laws and regulations, oil companies' operating and sourcing decisions, competition and labor costs, training costs, liability insurance costs, and Maritrans' recent broadening of its participation in petroleum distribution services. Legislation The enactment of the OPA in 1990 significantly increased the liability exposure of marine transporters of petroleum in the event of an oil spill. In addition, most states in which Maritrans operates have enacted (and the others in which it operates may enact) legislation increasing the liability for oil spills in their waters. Maritrans maintains oil pollution liability insurance of $700 million on its vessels which is generally the maximum amount of oil spill liability insurance carried by marine transporters of petroleum. 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 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 potential spills, such as costs for additional training, safety and contingency programs that have not yet been fully recovered through increased rates. Additionally, management believes that the legislation has had the effect of reducing the total volume of waterborne petroleum transportation as shippers of petroleum have attempted to reduce their exposure to the impact of the OPA. Therefore, although management cannot predict the continuing adverse impact of this legislation on Maritrans, the legislation has had a material adverse effect on Maritrans' operations and financial results, including an increase in depreciation expense due to the shortening of expected lives of some of Maritrans' barges as a result of the OPA. The 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 on vessels and (v) increased difficulty in obtaining sufficient insurance, particularly oil pollution coverage. These effects could adversely affect Maritrans' profitability and liquidity. The OPA requires the retirement or retrofitting of most of Maritrans' existing barges beginning in 2003 through 2005. Some of Maritrans' barges are not scheduled for retirement until 2015. A small number of barges may be treated as meeting the double-hull requirements and, therefore, be allowed to continue operating without modification. If Maritrans were to rebuild its entire barge capacity with double-hulls, the estimated cost would be approximately $500 million. This estimate could be higher as shipyard costs increase. 20 23 An investment banking firm was retained in 1991 to assist in evaluating Maritrans' ongoing financial strategies and company structural issues in light of strategic considerations at that time. In April 1992, the Board of Directors of the managing general partner of the Partnership, a master limited partnership, decided to seek unitholder approval to convert from the master limited partnership form to corporate form. On April 1, 1993, after a vote of the unitholders, the Partnership was converted to Maritrans Inc., a corporation. Results of Operations 1993 Compared With 1992 Revenues of $132.5 million for the year ended December 31, 1993 decreased by $0.6 million, or less than one percent, from $133.1 million for the year ended December 31, 1992. Barrels of cargo transported increased by 3.8 million barrels, from 244.6 million to 248.4 million, respectively. Severe price competition for oil transportation services has existed in the markets served by Maritrans in recent years, and is expected to continue. In 1993, more barrels were transported shorter distances, lowering the fleet's average revenue per barrel. Revenue from sources other than marine transportation increased from 2.8% of total revenue in 1992 to 4.9% in 1993, due to additional terminalling operations, contingency management activities, and other services supplied to third-party vessel owners. Operating expenses of $123.9 million for the year ended December 31, 1993, increased by $0.8 million, or less than one percent, from operating expenses of $123.1 million for the year ended December 31, 1992. Lower vessel activity levels, due in part to time out of service for vessel improvements, and improvements in maintenance processes have decreased operation and maintenance expense levels. During most of 1993, Maritrans utilized vessels chartered from others while one or more of its large barges were out of service for vessel performance improvements and maintenance. Crew costs were lower as a result of lower activity levels, including shipyarding periods, and the previously described disposal of equipment throughout the year. Fuel expense decreased due to a decline in price per gallon and fewer gallons consumed. General and administrative costs decreased from the comparable prior period when general and administrative costs included the early termination of a lease for office space and costs related to the transaction to convert from partnership to corporate form. In 1993, general and administrative costs and operation expense each included a charge of $1 million (for a total of $2 million) for corporate streamlining costs, most of which relates to severance costs and other continuation benefits for terminating and retiring employees. A charge of $0.6 million was recorded in 1992 for workforce reduction related costs. In 1993, Maritrans recorded $5.9 million in gains on the sales and liquidation of fixed assets as part of other income. In 1992, $3 million was recorded in other income as a result of a settlement of outstanding litigation, discussed further below in "1992 Compared With 1991." The adoption of FAS No. 109, Accounting for Income Taxes, caused the Partnership to recognize a net deferred income tax provision of $16.6 21 24 million in the first quarter of 1993. The adoption of this accounting rule was prescribed by the conversion of the Partnership to corporate status, which occurred April 1, 1993. The net loss for the year ended December 31, 1993, was $11.8 million as compared with net income of $3.4 million for the year ended December 31, 1992. The loss was the result of the previously noted provision of $16.6 million for income taxes. Income before income taxes for the period increased to $5.2 million from $3.4 million in the comparable period in 1992. While the change in operating income reflected the small decline in revenues and small increase in operating expenses, the most significant factors affecting income before income taxes were the gains on sales/liquidation of vessels in 1993 and the settlement receipts from litigation in 1992. 1992 Compared With 1991 Revenues of $133.1 million for the year ended December 31, 1992 decreased by $13.5 million, or 9%, from $146.6 million for the year ended December 31, 1991. Barrels of cargo transported decreased by 5.8 million barrels, from 250.4 million to 244.6 million, respectively. Lower revenue levels resulted from lower average daily charter rates and decreased volumes. The continuing period of lower oil consumption has caused severe price competition for oil transportation services. Operating expenses of $123.0 million for the year ended December 31, 1992, decreased by $16.1 million, or 12%, from operating expenses of $139.1 million for the year ended December 31, 1991. Lower activity levels and improvements in maintenance processes have lowered maintenance expense levels. Management believes that these practices have not caused the condition of vessels to deteriorate. Personnel training costs were higher in 1991 due to the initiation and implementation of comprehensive training programs. Crew costs were lower as a result of lower utilization of marine personnel. Fuel expense decreased due to a decline in price per gallon and fewer gallons consumed. General and administrative costs increased due to the early termination of a lease for office space and costs related to the potential transaction to convert to corporate form. A charge of $0.6 million was recorded in the third quarter for workforce reduction related costs. In November, 1992, the Partnership dismissed its suit against its former law firm and a partner of that firm pursuant to a settlement agreement among the parties. As part of the settlement the Partnership received a payment of $3 million, and the trial court dissolved the preliminary injunction which previously barred the defendants from representing certain of Maritrans' economic competitors in labor negotiations. The payment received is reflected in other income for the year ended December 31, 1992. Net income of $3.4 million for the year ended December 31, 1992, increased by $5.0 million from a net loss of $1.6 million for the year ended December 31, 1991. While revenues have declined from levels in the comparable period in 1991, larger declines in operating expenses and the settlement of litigation mentioned above in the same period have caused the improvement in results. 22 25 Liquidity and Capital Resources In 1993, funds provided by investing and operating activities were sufficient to fully meet debt service obligations and loan agreement restrictions. The total of $19.3 million in proceeds from the disposal of equipment was generated by the sale of non-strategic assets and from the insurance proceeds for the constructive total loss of a barge involved in a collision. The net funds provided by operating activities of $3.5 million included $16.6 million from the provision for deferred income taxes recorded for the Conversion in conjunction with the adoption of FAS No. 109 Accounting for Income Taxes. The primary uses of funds were $17.5 million in capital expenditures, principally for vessel improvements and marine terminal purchases, and $6.0 million in long-term debt repayment. Maritrans believes that in 1994 funds provided by operating activities, augmented by financing transactions and investing activities, will be sufficient to provide the funds necessary for operations, anticipated capital expenditures, lease payments and required debt repayments. No dividends are expected to be made in 1994. Maritrans believes capital expenditures in 1994 for improvements to its currently operating vessels and existing marine terminals will be approximately $3 million. However, Maritrans will continue to evaluate the potential purchase of marine storage terminal and other investments consistent with its long-term strategic interests, and the potential sources of funds for those potential investments. No material commitments existed at December 31, 1993, for capital expenditures. Working Capital and Other Balance Sheet Changes Working capital increased approximately $13.0 million from December 31, 1992 to December 31, 1993. Current assets increased $14.0 million from the prior comparable period. These increases were largest in other accounts receivable, due to increases in outstanding insurance claims receivable. Maritrans expects these claims to be fully recoverable from insurance underwriters. Additionally, the current benefit of deferred income taxes recognized on temporary differences are shown on the financial statements for December 31, 1993 but were not included in the financial statements for December 31, 1992, because of the then current partnership status of Maritrans. Prepaid expenses also increased due to an increase in advance payments to shipyards for their services and a change in the timing of payments for certain insurance premiums. Current liabilities increased approximately $1 million. The ratio of current assets to current liabilities increased to 1.94 at December 31, 1993 from 1.54 at December 31, 1992. Debt Obligations and Borrowing Facility At December 31, 1993, Maritrans had $116.9 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, 1993, is $6.3 million. Maritrans has a $10 million working capital facility, secured by its marine receivables and inventories, which expires June 30, 1994 and which it expects to renew. 23 26 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, 1993 and 1992, and the related consolidated statements of income and cash flows for each of the three years in the period ended December 31, 1993. Our audits also included the financial statement schedules listed in the Index at Item 14(A). These financial statements and schedules are the responsibility of the management of Maritrans Inc. Our responsibility is to express an opinion on these financial statements and schedules 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, 1993 and 1992, and the consolidated results of its operations and its cash flows for each of the three years in the period ended December 31, 1993 in conformity with generally accepted accounting principles. Also, in our opinion, the related financial statement schedules, 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 Philadelphia, Pennsylvania January 25, 1994 24 27 MARITRANS INC. CONSOLIDATED BALANCE SHEETS ($000)
December 31, -------------------- 1993 1992 -------------------- ASSETS Current assets: Cash and cash equivalents ............................................ $ 22,422 $ 23,174 Trade accounts receivable (net of allowance for doubtful accounts of $605 and $541, respectively) ....................................... 14,094 13,431 Other accounts receivable ............................................ 9,748 3,146 Inventories .......................................................... 4,968 4,467 Deferred income tax benefit .......................................... 3,396 - Prepaid expenses ..................................................... 6,061 2,513 -------------------- Total current assets ........................................... 60,689 46,731 Marine vessels and equipment ........................................... 262,176 264,160 Less accumulated depreciation ........................................ 78,966 69,727 -------------------- Net marine vessels and equipment ............................... 183,210 194,433 Other .................................................................. 9,139 10,180 -------------------- Total assets ................................................... $253,038 $251,344 ==================== LIABILITIES AND EQUITY Current liabilities: Debt due within one year ............................................. $ 6,311 $ 6,033 Trade accounts payable ............................................... 3,492 1,718 Accrued interest ..................................................... 2,382 2,470 Accrued shipyard costs ............................................... 6,562 9,385 Accrued wages and benefits............................................ 5,649 5,244 Other accrued liabilities............................................. 6,954 5,536 -------------------- Total current liabilities....................................... 31,350 30,386 Long-term debt ......................................................... 110,556 116,866 Deferred shipyard costs ................................................ 9,843 10,272 Other liabilities ...................................................... 5,353 7,249 Deferred income taxes .................................................. 21,062 - Equity: Partnership equity: General partners ..................................................... (379) Limited partners (12,250,000 authorized and outstanding units) ....... 86,950 -------------------- Total partnership equity ....................................... 86,571 -------------------- 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: 12,523,000.......................................................... 125 Capital in excess of par value ....................................... 74,315 Retained earnings .................................................... 434 -------- Total stockholders' equity ..................................... 74,874 -------- Total liabilities and equity ................................... $253,038 $251,344 ====================
See accompanying notes. 25 28 MARITRANS INC. CONSOLIDATED STATEMENTS OF INCOME ($000 except per share/unit amounts)
January 1 to December 31, ----------------------------------------- 1993 1992 1991 ----------------------------------------- Revenues ................................................... $ 132,539 $ 133,051 $ 146,560 Costs and expenses: Operation expense ........................................ 75,196 70,485 80,458 Maintenance expense ...................................... 21,062 23,662 30,755 General and administrative ............................... 11,772 13,328 11,953 Depreciation and amortization ............................ 15,868 15,578 15,962 ----------------------------------------- 123,898 123,053 139,128 ----------------------------------------- Operating income ........................................... 8,641 9,998 7,432 Interest expense ........................................... (10,373) (10,958) (10,890) Other income, net .......................................... 6,918 4,379 1,882 ----------------------------------------- Income (loss) before income taxes .......................... 5,186 3,419 (1,576) Income tax provision ..................................... 407 - - Deferred income taxes-resulting from Conversion .......... 16,568 - - ----------------------------------------- Net income (loss) .......................................... $ (11,789) $ 3,419 $ (1,576) ========================================= Net income (loss) allocated to General Partners ............ n/a 69 (32) Net income (loss) allocated to Limited Partners ............ n/a 3,350 (1,544) Net income (loss) allocated to Limited Partners per Limited Partner unit ............................................. n/a .27 (.13) Pro forma (loss) per share ................................. (.94) n/a n/a Average common shares/Limited Partner units outstanding..... 12,523,000 12,250,000 12,250,000
See accompanying notes. 26 29 MARITRANS INC. CONSOLIDATED STATEMENTS OF CASH FLOWS INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS ($000)
January 1 to December 31, -------------------------------- 1993 1992 1991 -------------------------------- Cash flows from operating activities: Net income (loss) ........................................ $(11,789) $ 3,419 $ (1,576) Adjustments to reconcile net income (loss) to net cash provided by (used in) operating activities: Depreciation and amortization .......................... 15,868 15,578 15,962 Deferred income taxes .................................. 16,975 - - Changes in receivables, inventories and prepaid expenses (11,314) 900 2,690 Changes in current liabilities other than debt ......... 686 (178) (669) Non-current changes, net ............................... (982) 4,531 1,351 (Gain) loss on sale of equipment ....................... (5,910) (694) (123) -------------------------------- Total adjustments to net income (loss)...................... 15,323 20,137 19,211 -------------------------------- Net cash provided by (used in) operating activities ...... 3,534 23,556 17,635 Cash flows from investing activities: Cash proceeds from sale of marine vessels and equipment... 19,287 1,803 9,275 Non-current changes related to investing activities ...... - - (2,138) Purchase of marine vessels and equipment ................. (17,541) (10,120) (22,514) -------------------------------- Net cash provided by (used in) investing activities .... 1,746 (8,317) (15,377) Cash flows from financing activities: Proceeds from issuance of long-term debt ................. - 2,000 10,000 Payment of long-term debt ................................ (6,032) (3,100) (1,500) Proceeds from issuance of short-term debt ................ - 5,500 7,000 Payment of short-term debt ............................... - (12,500) - Distributions declared and paid .......................... - (7,187) (14,375) -------------------------------- Net cash provided by (used in) financing activities .... (6,032) (15,287) 1,125 Net increase (decrease) in cash and cash equivalents ....... (752) (48) 3,383 Cash and cash equivalents at beginning of period ........... 23,174 23,222 19,839 -------------------------------- Cash and cash equivalents at end of period ................. $ 22,422 $ 23,174 $ 23,222 ================================ Supplemental Disclosure of Cash Flow Information: Interest paid .............................................. $ 10,355 $ 10,888 $ 10,763 Income taxes paid .......................................... $ 300 $ - $ -
See accompanying notes. 27 30 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS 1. Organization and Significant Accounting Policies Organization At December 31, 1993, Martrans Inc. owns Maritrans Operating Partners L.P. (the "Operating Partnership") 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, and own and operate petroleum storage facilities. On March 31, 1993, the limited partners of Maritrans Partners L.P. (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 (the "Corporation") succeeded to all assets and liabilities of the Partnership. The holders of general and limited partnership interests in the Partnership and the Operating Partnership were issued shares of common stock, par value $.01 per share ("Common Stock"), 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 historical 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. Principles of Consolidation The consolidated financial statements include the accounts of Maritrans Inc. and subsidiaries, all of which are wholly owned. Prior to the Conversion, the financial statements included the accounts of the Partnership, the Operating Partnership and subsidiaries. All significant intercompany transactions and accounts have been eliminated in consolidation. 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. During the year ended December 31, 1991, two vessels were sold and subsequently leased back. The resulting deferred gain is included in the consolidated 28 31 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS -- (Continued) 1. Organization and Significant Accounting Policies -- (Continued) statement of cash flows as non-current changes related to investing activities and is being amortized into income over the life of the related leases. The Oil Pollution Act, passed in 1990, requires all newly constructed petroleum tank vessels engaged in marine transportation of oil and petroleum products in the U.S. to be double hulled and 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. During 1990, the depreciable lives of certain marine vessels and equipment were revised to reflect more closely expected remaining lives. 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 the years ended December 31, 1993, 1992 and 1991, the Company derived revenues of $22,232,000, $24,169,000 and $27,219,000 from one customer aggregating 17%, 18% and 19% of total revenues, respectively. Also during 1993, 1992 and 1991, the Company derived revenues of $19,720,000, $19,855,000 and $16,691,000 from another customer aggregating 15%, 15% and 11% of total revenues. 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. 29 32 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS -- (Continued) 1. Organization and Significant Accounting Policies -- (Continued) 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 $2,472,000, $3,365,000 and $3,034,000 for the years ended December 31, 1993, 1992 and 1991, respectively. Earnings per common share/Limited Partner unit Earnings per common share/Limited Partner unit are based on the average number of common shares or Limited Partner units outstanding. The potential effect of outstanding stock options is not dilutive. 2. Cash and Cash Equivalents Cash and cash equivalents at December 31, 1993, and 1992 consisted of cash and commercial paper, the carrying value of which approximates fair value. For purposes of the consolidated statements of cash flows, short-term highly liquid debt instruments with maturities of three months or less are considered to be cash equivalents. 3. Partnership and Stockholders' Equity Changes in partnership equity prior to the Conversion are summarized below:
General Limited Partners Partners Total -------------------------------- ($000 except per unit amounts) Balance at January 1, 1991 ................................. $ 16 $106,274 $106,290 Net (loss), January 1, 1991 to December 31, 1991 ........... (32) (1,544) (1,576) Distributions declared and paid ($1.15 per Limited Partner unit)..................................................... (288) (14,087) (14,375) ------------------------------- Balance at December 31, 1991................................ (304) 90,643 90,339 Net income, January 1, 1992 to December 31, 1992 ........... 69 3,350 3,419 Distributions declared and paid ($0.575 per Limited Partner unit)..................................................... (144) (7,043) (7,187) ------------------------------- Balance at December 31, 1992 ............................... (379) 86,950 86,571 Net (loss), January 1, 1993 to March 31, 1993 .............. (244) (11,979) (12,223) ------------------------------- Balance at March 31, 1993 .................................. $(623) $ 74,971 $ 74,348 ===============================
30 33 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS -- (Continued) 3. Partnership and Stockholders' Equity -- (Continued) Consolidated income statement data for the period January 1 to March 31, 1993 (prior to the Conversion) and for the period April 1 to December 31, 1993 (after the Conversion) is as follows:
Maritrans Partners L.P. Maritrans Inc. January 1, 1993 April 1, 1993 to to March 31, 1993 December 31, 1993 -------------------------------------------- ($000) Revenues ............................... $ 32,217 $100,322 Costs and expenses: Operation expense .................. 17,968 57,228 Maintenance expense ................ 4,964 16,098 General and administrative ......... 2,609 9,163 Depreciation and amortization ...... 3,954 11,914 ------------------------------------- 29,495 94,403 ------------------------------------- Operating income ....................... 2,722 5,919 Interest expense ....................... (2,672) (7,701) Other income, net ...................... 4,295 2,623 ------------------------------------- Income before income taxes ............. 4,345 841 Income tax provision ................. - 407 Deferred income taxes-resulting from Conversion............................ 16,568 - ------------------------------------- Net income (loss) ...................... $(12,223) $ 434 =====================================
31 34 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS -- (Continued) 3. Partnership and Stockholders' Equity -- (Continued) Changes in stockholders' equity since the Conversion are summarized below:
Common Capital in Stock, $.01 excess of Retained Par Value Par Value Earnings Total ------------------------------------------------ ($000) April 1, 1993, Conversion to Corporate Form. $125 $74,315(1) - $74,440 Net income, April 1, 1993 to December 31, 1993 ..................................... - - $434 434 --------------------------------------------- Balance at December 31, 1993................ $125 $74,315 $434 $74,874 =============================================
---------- (1) Includes $92,000 related to grant of shares. Maritrans Inc. established a stock incentive plan (the "Plan") concurrent with the Conversion whereby 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 on the date of grant. There are 1,250,000 shares of Common Stock authorized for issuance under the Plan, of which 23,000 shares were issued in 1993. Compensation expense equal to the fair market value on the date of the grant is included in general and administrative expense in the consolidated statement of income. At December 31, 1993, 803,597 remaining shares were reserved for grant. Information on stock options for 1993 follows: Exercise Number of Price Shares ------------------------ Outstanding at beginning of year........ - - Granted................................. $4.00 476,074 Exercised .............................. - - Cancelled .............................. $4.00 52,671 Outstanding at end of year ............. $4.00 423,403 Exercisable at end of year ............. - - Outstanding options are exercisable in installments over two to four years and expire in 2002. 4. INCOME TAXES In connection with the Conversion to corporate form, the Partnership recognized a net deferred income tax liability for temporary differences 32 35 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS -- (Continued) 4. INCOME TAXES -- (Continued) in accordance with Statement of Financial Accounting Standards ("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. Prior to the Conversion, Maritrans Partners L.P. and Maritrans Operating Partners L.P., as partnerships, were not subject to income taxation at the partnership level. However, income taxes, which were not significant, were provided for the incorporated subsidiaries of the partnerships prior to the Conversion. The income tax provision consists of: 1993 -------- ($000) Current: Federal ................................................ - State .................................................. - Deferred ................................................... $ 407 Deferred-resulting from Conversion ......................... 16,568 -------- $16,975 ======== The differences between the federal income tax rate of 34% and the effective tax rate was as follows: 1993 -------- ($000) Statutory federal tax provision ............................ $ 1,764 State income taxes, net of federal income tax benefit ...... 116 Partnership income for the first quarter, not subject to income tax ............................................... (1,388) Recognition of tax liability for cumulative temporary differences .............................................. 16,568 Other ...................................................... (85) ------- $16,975 ======= 33 36 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS -- (Continued) 4. INCOME TAXES -- (Continued) Principal items comprising deferred income tax liabilities and assets as of December 31, 1993 are: 1993 -------- ($000) Deferred tax liabilities: Tax over book depreciation ............................. $28,519 Other .................................................. 1,203 ------- 29,722 ------- Deferred tax assets: Reserves and accruals .................................. 8,092 Net operating loss carryforwards ....................... 3,116 Other .................................................. 848 ------- 12,056 ------- Net deferred tax liabilities ............................... $17,666 ======= At December 31, 1993, Maritrans Inc. has net operating loss carry forwards of approximately $9.2 million for income tax purposes which expire in the year 2005 and thereafter. 5. 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 $1,232,000, $1,400,000 and $1,529,000 for the years ended December 31, 1993, 1992 and 1991, respectively, and 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 for the period were each 7%. The weighted average assumed rate of compensation increase used to determine the actuarial present value of the projected benefit obligation was 5%. 34 37 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS -- (Continued) 5. Retirement Plans -- (Continued) Net periodic pension costs included the following components for the respective periods:
1/1 to 1/1 to 1/1 to 12/31/93 12/31/92 12/31/91 -------------------------------- ($000) Service cost of current period ............................. $ 1,625 $1,628 $ 1,675 Interest cost on projected benefit obligation .............. 906 887 772 Actual (gain) loss on plan assets .......................... (1,165) (938) (2,403) Net (amortization) and deferral ............................ (134) (177) 1,485 -------------------------------- Net pension cost ........................................... $ 1,232 $1,400 $ 1,529 ================================
The following table sets forth the plan's funded status at December 31, 1993 and 1992: December 31, ------------------ 1993 1992 ------------------ ($000) Actuarial present value of benefit obligations: Accumulated benefit obligation, including vested benefits of $10,449 and $9,675, respectively ... $11,534 $ 9,801 Projected benefit obligation for service rendered to date ........................................ 3,851 4,895 ------------------ Projected benefit obligation ..................... 15,385 14,696 Plan assets at fair value, primarily publicly traded stocks and bonds ........................ 16,110 13,718 ------------------ Plan assets greater than (less than) projected benefit obligation ............................. 725 (978) Unrecognized net gain on plan's assets ........... 2,723 997 Net assets being amortized over 15 years ......... 1,616 1,818 ------------------ Accrued pension cost recognized in the financial statements ..................................... $ 3,614 $ 3,793 ================== 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 35 38 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS -- (Continued) 5. Retirement Plans -- (Continued) Maritrans Inc. The cost of the plan was $685,000, $609,000 and $61,000 for the years ended December 31, 1993, 1992 and 1991, respectively. Contributions to industry-wide, multi-employer seamen's pension plans which cover substantially all seagoing personnel covered under collective bargaining agreements were approximately $423,000, $515,000 and $1,016,000 for the years ended December 31, 1993, 1992 and 1991, 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. 6. Debt At December 31, 1993, total outstanding debt of the subsidiaries of Maritrans Inc. is $116.9 million, $110.6 million of which is long-term. At December 31, 1992, total outstanding debt was $122.9 million, $116.9 million of which was long-term. The debt is secured by mortgages on substantially all of the fixed assets of those subsidiaries. The debt consists of $1.7 million maturing through 1995, $35.2 million maturing through 1997, and $80 million maturing from 1998 through 2007. The weighted average interest rate on this indebtedness is 8.63%. 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, 1992, the total outstanding debt consisted of $2.5 million maturing through 1995, $40.4 million maturing through 1997, 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 1993. Based on the borrowing rates currently available for loans with similar terms and maturities, the fair value of long term debt was $122.1 million and $121.8 million at December 31, 1993 and 1992, respectively. The maturity schedule for outstanding indebtedness under existing debt agreements at December 31, 1993, is as follows: 36 39 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS -- (Continued) 6. Debt -- (Continued) ($000) -------- 1994 ................................... $ 6,311 1995 ................................... 7,256 1996 ................................... 8,200 1997 ................................... 15,100 1998 ................................... 8,000 1999 - 2007 ............................ 72,000 -------- $116,867 ======== 7. Commitments and Contingencies Minimum future rental payments under noncancelable operating leases at December 31, 1993, are as follows: ($000) ------- 1994.................................... $ 1,200 1995.................................... 1,200 1996.................................... 1,200 1997 ................................... 1,200 1998 ................................... 1,117 1999 - 2005 ............................ 7,544 ------- $13,461 ======= 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. On August 10, 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 November 1992, the Partnership dismissed its suit against its former law firm and a partner of that firm pursuant to a settlement agreement among the parties. As part of the settlement, the Partnership received a payment of $3 million and the trial court dissolved the preliminary injunction which previously barred the defendants from representing certain of Maritrans' economic competitors in labor 37 40 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS -- (Continued) 7. Commitments and Contingencies -- (Continued) negotiations. The payment received is reflected in other income for the year ended December 31, 1992. 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, 1993, will not have a material adverse effect on the consolidated financial statements. 8. Quarterly Financial Data (Unaudited)
First Second Third Fourth Total Quarter Quarter Quarter Quarter Year ----------------------------------------------------- ($000, except per share/unit amounts) 1993 Revenues ........................... $ 32,217 $33,603 $31,044 $35,675 $132,539 Operating income ................... 2,722 2,572 1,222 2,125 8,641 Provision for (benefit from) income taxes ............................ 16,568 533 14 (140) 16,975 Net income (loss)................... $(12,223) $ 639 $ 24 $ (229) $(11,789) Per unit effect of income tax provision-resulting from Conversion........................ $ (1.32) n/a n/a n/a $ (1.32) Income (loss) per share/unit........ $ (0.98) $ 0.05 $ 0.00 $ (0.02) $ (0.94) 1992 Revenue ............................ $ 33,973 $32,268 $32,186 $34,624 $133,051 Operating income ................... 2,691 2,353 2,204 2,750 $ 9,998 Net income (loss)................... $ 74 $ 350 $ (343) $ 3,338 $ 3,419 Income (loss) allocated to Limited Partners per Limited Partner Unit. $ 0.01 $ 0.03 $ (0.03) $ 0.27 $ 0.27
38 41 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 not later than 120 days after the close of the year ended December 31, 1993, 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. 39 42
Name Age(1) Position - ------------------------------------------------------------------------------------------------- Stephen A. Van Dyck (4) .................. 50 Chairman of the Board of Directors and Chief Executive Officer Dr. Robert E. Boni (2)(3)(4) ............. 66 Director Dr. Craig E. Dorman (3) .................. 53 Director Craig N. Johnson ......................... 52 Director Bruce C. Lindsay (2)(3)(4) ............... 52 Director James H. Sanborn ......................... 56 Director Edward R. Sheridan........................ 55 President, Distribution Services Division - Operating Partnership Brian J. Telford ......................... 47 President, Gulf Division - Operating Partnership John C. Newcomb .......................... 55 Vice President, General Counsel and Secretary Gary L. Schaefer.......................... 44 Vice President, Chief Financial Officer and Treasurer Edward J. Flood........................... 42 Chairman of the Board of Maritrans Holdings Inc. Charles R. Ward........................... 42 President, Eastern Division - Operating Partnership Robert B. York............................ 38 President, Inland Division - Operating Partnership Gerard T. Gillon.......................... 51 Chairman of the Board of Marispond Inc. Walter T. Bromfield....................... 38 Controller
---------- (1) As of March 1, 1994 (2) Member of the Compensation Committee (3) Member of the Audit Committee (4) Member of the Finance Committee Mr. Van Dyck has been Chairman of the Board and Chief Executive Officer of the Company and its predecessor since April 1987. For the previous year, he was a Senior Vice President - Oil Services, of Sonat Inc. and Chairman of the Boards of the Sonat Marine Group, another predecessor, and Sonat Offshore Drilling Inc. For more than five years prior to April 1986, Mr. Van Dyck was the President and a director of the 40 43 Sonat Marine Group and Vice President of Sonat 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 Committee 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 became Non-Executive Chairman of the Board of Alexander & Alexander Services Inc., an insurances services company, in January 1994. He is a member of the Company's Compensation (Chairman), Audit and Finance Committees of the Board of Directors. Dr. Dorman is serving as Deputy Director Defense Research and Engineering for Laboratory Management, U.S. Department of Defense on an Intergovernmental Personnel Act assignment from the 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 Committee of the Board of Directors. Mr. Johnson recently became Managing Director of Glenthorne Capital Inc., investment bankers. He was President and Chief Operating Officer of the Company and its predecessor from February 1, 1990 until December 17, 1993. For the four years prior to joining Maritrans, Mr. Johnson was President of Lavino Shipping Company, a terminalling and stevedoring corporation. Neither Lavino nor any of the companies invested in by Glenthorne Capital Inc. compete with Maritrans. He is a director of several closely-held companies. Mr. Lindsay has been Managing Director of Brind-Lindsay & Co. Inc., an investment corporation, since 1986. From 1983 through 1986, Mr. Lindsay was Group Vice President, Industrial Services, of Sun Company, Inc., an integrated oil corporation. During that time, he also served as a director and officer of various subsidiaries of Sun Company, Inc. He is a director of several closely-held corporations. He is a member of the Company's Audit (Chairman), Finance (Chairman) and Compensation Committees of the Board of Directors. Mr. Sanborn was Executive Vice President of the Company and its predecessor since April 1987, until his retirement in December 1993. Prior to April 1987, he was President of the Sonat Marine Group, another predecessor, a position he held since April 1986. Prior to this position, he served as Vice President-Operations and Vice President - East Coast Group of the Sonat Marine Group. Mr. Sanborn was employed in various capacities by the Company and its predecessors since 1978. Mr. Sheridan was named President of the Distribution Services Division of the Operating Partnership in February 1993. He previously held various positions with Star Enterprise and Texaco since 1963. 41 44 Mr. Telford was named President of the Gulf Division of the Operating Partnership in September 1992. He previously held various positions with Stolt-Nielson Inc. from 1988 to 1992. Mr. Newcomb has been Vice President, General Counsel and Secretary of Maritrans Inc. since April 1993, and previously held these titles with Maritrans GP Inc. since 1987. He held a similar position with the Sonat Marine Group since 1983. Mr. Newcomb has been employed in various capacities by Maritrans or its predecessors since 1975. Mr. Schaefer has been Vice President, Chief Financial Officer and Treasurer of Maritrans Inc. since April 1993, and previously held these titles with Maritrans GP Inc. since January 1990. Previously, Mr. Schaefer was Vice President, Controller and Treasurer. He held a similar position with the Sonat Marine Group since 1986. Prior to this position, Mr. Schaefer was Assistant Vice President and Controller. Mr. Schaefer has been employed in various capacities by Maritrans or its predecessors since 1976. Mr. Flood has been Chairman of Maritrans Holdings Inc. since February 4, 1991. Mr. Flood is also Chairman of MPI and MMI. Previously, Mr. Flood was Vice President of Maritrans GP Inc. from October 1990 to February 1991. Prior to October 1990, he was President and Chief Operating Officer of Unitank, a Philadelphia-based terminal company, which was sold and merged with GATX, which does not compete with Maritrans. Mr. Ward was named President of the Eastern Division of the Operating Partnershp in May 1993. Previously, Mr. Ward was President of the Inland Division of the Operating Partnership since February 1992 and prior to that was Manager, Traffic, a position he held since September 1990. Mr. Ward was East Coast Chartering Manager from June 1989 to September 1990. Prior to that position, Mr. Ward was Traffic Manager - Black Oil. He held a similar position with the Sonat Marine Group. Mr. Ward has been employed in various capacities by Maritrans or its predecessors since 1975. Mr. York was named President of the Inland Division of the Operating Partnership in May 1993. Previously, Mr. York was continuously employed since 1985 by the Company or its predecessors in various capacities including Manager, Market Planning; Manager, Corporate Planning; and Business Leader (Information Services). Mr. Gillon was named Chairman of the Board of Marispond Inc. in February 1993. Previously, Mr. Gillon was a consultant to the Company since November 1992. Prior to that, he was President, Chief Executive Officer and a Director of Wescol Shipping Inc. from July 1990. From April 1980 until July 1989, he was President of Lavino Agency Group, and served as a Director of Lavino Shipping Company. Mr. Bromfield has been Controller of Maritrans Inc. since April 1993, and previously held that title with Maritrans GP Inc. since February 1992. Previously, Mr. Bromfield was Assistant Controller. He held a similar position with the Sonat Marine Group since October 1986. Mr. Bromfield has been employed in various capacities by Maritrans or its predecessors since 1981. 42 45 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, 1993, under the headings "Compensation of Directors and Executive Officers", "Security Ownership of Certain Beneficial Owners and Management" and "Certain Transactions". PART IV
Page - ------------------------------------------------------------------------------------------------------------- Item 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K (a) (1) Financial Statements Report of Independent Auditors 18 Maritrans Inc. Consolidated Balance Sheets at December 31, 1993, and December 31, 1992. 19 Maritrans Inc. Consolidated Statements of Income for the years ending December 31, 1993, 1992, and 1991. 20 Maritrans Inc. Consolidated Statements of Cash Flows for the years ending December 31, 1993, 1992, and 1991. 21 Notes to the Consolidated Financial Statements. 22 (2) Financial Statement Schedules Schedule V Maritrans Inc. Property, Plant and Equipment for the years ended December 31, 1993, 1992, and 1991. 37 Schedule VI Maritrans Inc. Accumulated Depreciation for the years ended December 31, 1993, 1992, and 1991. 38 Schedule VIII Maritrans Inc. Valuation Account for the years ended December 31, 1993, 1992, and 1991. 39 All other schedules called for under Regulation S-X are not submitted because they are not applicable, not required, or because the required information is not material, or is included in the financial statements or notes thereto. (b) Reports on Form 8-K No reports on Form 8-K were filed during the quarter ended December 31, 1993.
(c) Exhibits 43 46
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. which relate to debt that does not exceed 10% 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)). Executive Compensation Plans and Arrangements 10.4 Agreement, dated October 4, 1993 between Maritrans Inc. and John C. Newcomb. 10.5 Agreement, dated October 4, 1993 between Maritrans Inc. and Gary L. Schaefer. 10.6 Employment Agreement, dated October 5, 1993 between Maritrans General Partner Inc. and Stephen A. Van Dyck. 10.7 Mutual Separation Agreement and General Release, dated November 22, 1993 between Maritrans Inc. and Craig N. Johnson. 10.8 Retirement Agreement, dated November 22, 1993 between Maritrans Inc. and James H. Sanborn. 10.9 Employment Agreement, dated November 15, 1993 between Maritrans Holdings Inc. and Edward J. Flood. 10.10 Employment Agreement, dated October 5, 1993 between Maritrans General Partner Inc. and Charles R. Ward.
44 47
Exhibit Index Page - ----------------------------------------------------------------------------------------------------------------- 10.11 Employment Agreement, dated October 5, 1993 between Maritrans General Partner Inc. and Brian J. Telford. 10.12 Employment Agreement, dated October 5, 1993 between Maritrans General Partner Inc. and Edward R. Sheridan. 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. 1
* 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. 45 48 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 ------------------------ Stephen A. Van Dyck Chairman of the Board Dated: March 30 , 1994 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 30, 1994 -------------------------------- and Chief Executive Officer Stephen A. Van Dyck (Principal Executive Officer) By: /s/ Dr. Robert E. Boni Director Dated: March 30, 1994 -------------------------------- Dr. Robert E. Boni By: /s/ Dr. Craig E. Dorman Director Dated: March 30, 1994 -------------------------------- Dr. Craig E. Dorman By: /s/ Craig N. Johnson Director Dated: March 30, 1994 -------------------------------- Craig N. Johnson By: /s/ Bruce C. Lindsay Director Dated: March 30, 1994 -------------------------------- Bruce C. Lindsay By: /s/ James H. Sanborn Director Dated: March 30, 1994 -------------------------------- James H. Sanborn By: /s/ Gary L. Schaefer Vice President, Chief Dated: March 30, 1994 -------------------------------- Financial Officer and Gary L. Schaefer Treasurer (Principal Financial Officer) By: /s/ Walter T. Bromfield Controller (Principal Dated: March 30, 1994 -------------------------------- Accounting Officer) Walter T. Bromfield
46 49 MARITRANS INC. SCHEDULE V - PROPERTY, PLANT AND EQUIPMENT ($000)
BALANCE AT ADDITIONS BEGINNING AND TRANSFERS RETIREMENTS OTHER CHANGES BALANCE AT DESCRIPTION OF PERIOD AT COST OR SALES ADD (DEDUCT) END OF PERIOD ---------------------------------------------------------------------------- JANUARY 1 TO DECEMBER 31, 1991 Land.......................... $ 350 $ 976 $ - $ - $ 1,326 Marine vessels and equipment.. 242,989 13,462 (9,658) - 246,793 Construction in progress...... 1,430 8,076 - - 9,506 --------------------------------------------------------------------------- Total....................... $244,769 $22,514 $ (9,658) $ - $257,625 =========================================================================== JANUARY 1 TO DECEMBER 31, 1992 Land.......................... $ 1,326 $ - $ - $ - $ 1,326 Marine vessels and equipment.. 246,793 11,046 (3,585) - 254,254 Construction in progress...... 9,506 (926) - - 8,580 --------------------------------------------------------------------------- Total....................... $257,625 $10,120 $ (3,585) $ - $264,160 =========================================================================== JANUARY 1 TO DECEMBER 31, 1993 Land.......................... $ 1,326 $ 360 $ - $ - $ 1,686 Marine vessels and equipment.. 254,254 18,366 (19,525) - 253,095 Construction in progress...... 8,580 (1,185) - - 7,395 --------------------------------------------------------------------------- Total....................... $264,160 $17,541 $(19,525) $ - $262,176 ===========================================================================
47 50 MARITRANS INC. SCHEDULE VI - ACCUMULATED DEPRECIATION ($000)
BALANCE AT ADDITIONS BEGINNING AND TRANSFERS RETIREMENTS OTHER CHANGES BALANCE AT DESCRIPTION OF PERIOD AT COST OR SALES ADD (DEDUCT) END OF PERIOD ------------------------------------------------------------------------------------------- JANUARY 1 TO DECEMBER 31, 1991 Marine vessels and equipment.. $44,084 $15,574 $(2,644) $ - $57,014 =========================================================================================== JANUARY 1 TO DECEMBER 31, 1992 Marine vessels and equipment.. $57,014 $15,190 $(2,477) $ - $69,727 =========================================================================================== JANUARY 1 TO DECEMBER 31, 1993 Marine vessels and equipment.. $69,727 $15,387 $(6,148) $ - $78,966 ===========================================================================================
49 51 MARITRANS INC. SCHEDULE VIII - 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, 1991 Allowance for doubtful accounts............. $1,030 $160 $488(a) $702 =============================================== JANUARY 1 TO DECEMBER 31, 1992 Allowance for doubtful accounts............. $ 702 $ 60 $221(a) $541 =============================================== JANUARY 1 TO DECEMBER 31, 1993 Allowance for doubtful accounts............. $ 541 $136 $ 72(a) $605 ===============================================
---------- (a) Deductions are a result of write-offs of uncollectible accounts receivable for which allowances were previously provided. 50 EX-10 2 EXHIBIT 10.4 52 EXHIBIT 10.4 AGREEMENT Agreement made as of the 4th day of October, 1993, between Maritrans Inc., a Delaware corporation (the "Company"), and John C. Newcomb (the "Employee"). WHEREAS, the Employee is presently employed by the Company as its Vice President, General Counsel and Secretary; 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 the Company exists and that such possibility, and the uncertainty and questions which it may raise among management, may result in the departure or distraction of key management personnel to the detriment of the Company; WHEREAS, the board of directors of the Company has determined that appropriate steps should be taken to reinforce and encourage the continued attention and dedication of key members of the Company's management to their assigned duties without distraction in the face of potentially disturbing circumstances arising from the possibility of a change in control of the Company; and WHEREAS, in order to induce the Employee to remain in the employ of the Company, the Company agrees that the Employee shall receive the compensation set forth in this Agreement as a cushion against the financial and career impact on the Employee in the event the Employee's employment 53 with the Company is terminated subsequent to a "Change of Control" (as defined in Section 1 hereof) of the Company; NOW, THEREFORE, in consideration of the foregoing and the mutual covenants and agreements hereinafter set forth and intending to be legally bound hereby, the parties hereto agree as follows: 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. 54 (c) "Beneficial Owner" of any securities shall mean: (i) that such Person or any of such Person's Affiliates or Associates, directly or indirectly, has the right to acquire (whether such right is exercisable immediately or only after the passage of time) pursuant to any agreement, arrangement or understanding (whether or not in writing) or upon the exercise of conversion rights, exchange rights, rights, warrants or options, or otherwise; 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 55 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 (c) shall cause a Person engaged in business as an underwriter of securities to be the "Beneficial Owner" of any securities acquired through such Person's participation in good faith in a firm commitment underwriting until the expiration of forty days after the date of such acquisition. (d) "Board" shall mean the board of directors of the Company. (e) "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 56 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. (f) "Normal Retirement Date" shall mean the first day of the calendar month coincident with or next following the Employee's 65th birthday. (h) "Person" shall mean any individual, firm, corporation, partnership or other entity. 57 (i) "Subsidiary" shall have the meaning ascribed to such term in Rule 12b-2 of the General Rules and Regulations under the Exchange Act. (j) "Termination Date" shall mean the date of receipt of the Notice of Termination described in Section 2 hereof or any later date specified therein, as the case may be. (k) "Termination of Employment" shall mean the termination of the Employee's actual employment relationship with the Company. (l) "Termination following a Change of Control" shall mean a Termination of Employment within two years after a Change of Control either: (i) initiated by the Company for any reason other than (x) the Employee's continuous illness, injury or incapacity for a period of six consecutive months or (y) for "cause," which shall mean misappropriation of funds, habitual insobriety, substance abuse, conviction of a crime involving moral turpitude, or 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 (ii) initiated by the Employee upon one or more of the following occurrences: 58 (A) any failure of the Company to comply with and satisfy any of the terms of this Agreement; (B) any significant reduction by the Company of the authority, duties or responsibilities of the Employee; (C) any removal by the Company of the Employee from the employment grade, compensation level or officer positions which the Employee holds as of the effective date hereof except in connection with promotions to higher office; (D) the requirement that the Employee undertake business travel to an extent substantially greater than is reasonable and customary for the position the Employee holds. 2. Notice of Termination. Any Termination following a Change of Control 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 termination provision in this Agreement relied upon, (ii) briefly summarizes the facts and circumstances deemed to provide a basis for termination of the Employee's employment under the provision so indicated, and (iii) if the Termination Date is other than the date of receipt of such notice, specifies the Termination 59 Date (which date shall not be more than 15 days after the giving of such notice). 3. Severance Compensation upon Termination. (a) Subject to the provisions of Section 11 hereof, in the event of the Employee's Termination following a Change of Control, the Company shall pay to the Employee, within fifteen days after the Termination Date (or as soon as possible thereafter in the event that the procedures set forth in Section 11(b) hereof cannot be completed within 15 days), an amount in cash equal to 1.5 times the Employee's Base Compensation. (b) 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 60 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 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 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 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) 61 incurred by the Employee in enforcing any of the obligations of the Company under this Agreement. 7. No Mitigation. The Employee shall not be required to mitigate the amount of any payment or benefit provided for in this Agreement by seeking other employment or otherwise, nor shall the amount of any payment or benefit provided for herein be reduced by any compensation earned by other employment or otherwise. 8. Non-exclusivity of Rights. Nothing in this Agreement shall prevent or limit the Employee's continuing or future participation in or rights under any benefit, bonus, incentive or other plan or program provided by the Company or any of its Subsidiaries or Affiliates and for which the Employee may qualify; provided, however, that the Employee hereby waives the Employee's right to receive any payments under any severance pay plan or similar program applicable to other employees of the Company . 9. No Set-Off. The Company's obligation to make the payments provided for in this Agreement and otherwise to perform its obligations hereunder shall not be affected by any circumstances, including, without limitation, any set- off, counterclaim, recoupment, defense or other right which the Company may have against the Employee or others. 10. Taxes. Any payment required under this Agreement shall be subject to all requirements of the law with regard to the withholding of taxes, filing, making of 62 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. (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 63 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 64 provided for in Section 7872(f)(2) of the Code (the "Federal Rate"); provided, however, that no amount shall be payable by the Employee to the Company if and to the extent such payment would not reduce the amount which is subject to taxation under Section 4999 of the Code. In the event that the Accounting Firm determines that an Underpayment has occurred, any such Underpayment shall be promptly paid by the Company to or for the benefit of the Employee together with interest at the Federal Rate. (d) All of the fees and expenses of the Accounting Firm in performing the determinations referred to in subsections (b) and (c) above shall be borne solely by the Company. The Company agrees to indemnify and hold harmless the Accounting Firm of and from any and all claims, damages and expenses resulting from or relating to its determinations pursuant to subsections (b) and (c) above, except for claims, damages or expenses resulting from the gross negligence or willful misconduct of the Accounting Firm. 12. Term of Agreement. The term of this Agreement shall be for two years from the date hereof and shall be automatically renewed for successive one-year periods unless the Company notifies the Employee in writing that this Agreement will not be renewed at least sixty days prior to the end of the current term; provided, however, that (i) after a Change of Control during the term of this Agreement, this Agreement shall remain in effect until all of the 65 obligations of the parties hereunder are satisfied or have expired, and (ii) this Agreement shall terminate if, prior to a Change of Control, the employment of the Employee with the Company or any of its Subsidiaries, as the case may be, shall terminate for any reason, or the Employee shall cease to be an Employee. 13. Successor Company. The Company shall require any successor or successors (whether direct or indirect, by purchase, merger, consolidation or otherwise) to all or substantially all of the business and/or assets of the Company, by agreement in form and substance satisfactory to the Employee, to acknowledge expressly that this Agreement is binding upon and enforceable against the Company in accordance with the terms hereof, and to become jointly and severally obligated with the Company to perform this Agreement in the same manner and to the same extent that the Company would be required to perform if no such succession or successions had taken place. Failure of the Company to obtain such agreement prior to the effectiveness of any such succession shall be a breach of this Agreement. As used in this Agreement, the Company shall mean the Company as hereinbefore defined and any such successor or successors to its business and/or assets, jointly and severally. 14. Notice. All notices and other communications required or permitted hereunder or necessary or convenient in connection herewith shall be in writing and shall be 66 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 13 hereof shall be deemed sufficient for the purposes hereof. Any such notice shall be deemed delivered and effective when received in the case of personal delivery, five days after deposit, postage prepaid, with the U.S. Postal Service in the case of registered or certified mail, or on the next business day in the case of overnight express courier service. 15. Governing Law. This Agreement shall be governed by and interpreted under the laws of the Commonwealth of Pennsylvania without giving effect to any conflict of laws provisions. 67 16. Contents of Agreement, Amendment and Assignment. (a) This Agreement supersedes all prior agreements, sets forth the entire understanding between the parties hereto with respect to the subject matter hereof and cannot be changed, modified, extended or terminated except upon written amendment executed by the Employee and approved by the Board and executed on the Company's behalf by a duly authorized officer. The provisions of this Agreement may provide for payments to the Employee under certain compensation or bonus plans under circumstances where such plans would not provide for payment thereof. It is the specific intention of the parties that the provisions of this Agreement shall supersede any provisions to the contrary in such plans, and such plans shall be deemed to have been amended to correspond with this Agreement without further action by the Company or the Board. (b) Nothing in this Agreement shall be construed as giving the Employee any right to be retained in the employ of the Company. (c) All of the terms and provisions of this Agreement shall be binding upon and inure to the benefit of and be enforceable by the respective heirs, representatives, successors and assigns of the parties hereto, except that the duties and responsibilities of the Employee and the Company 68 hereunder shall not be assignable in whole or in part by the Company. 17. Severability. If any provision of this Agreement or application thereof to anyone or under any circumstances shall be determined to be invalid or unenforceable, such invalidity or unenforceability shall not affect any other provisions or applications of this Agreement which can be given effect without the invalid or unenforceable provision or application. 18. Remedies Cumulative; No Waiver. No right conferred upon the Employee by this Agreement is intended to be exclusive of any other right or remedy, and each and every such right or remedy shall be cumulative and shall be in addition to any other right or remedy given hereunder or now or hereafter existing at law or in equity. No delay or omission by the Employee in exercising any right, remedy or power hereunder or existing at law or in equity shall be construed as a waiver thereof, including, without limitation, any delay by the Employee in delivering a Notice of Termination pursuant to Section 2 hereof after an event has occurred which would, if the Employee had resigned, have constituted a Termination following a Change of Control pursuant to Section 1(l)(ii) of this Agreement. 19. Miscellaneous. All section headings are for convenience only. This Agreement may be executed in several 69 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/ Craig N. Johnson ------------------------- ------------------------- Secretary /s/ Anna Richmond /s/ John C. Newcomb ------------------------- ------------------------- Witness John C. Newcomb EX-10 3 EXHIBIT 10.5 70 EXHIBIT 10.5 AGREEMENT Agreement made as of the 4th day of October, 1993, between Maritrans Inc., a Delaware corporation (the "Company"), and Gary L. Schaefer (the "Employee"). WHEREAS, the Employee is presently employed by the Company as its Vice President, 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 the Company exists and that such possibility, and the uncertainty and questions which it may raise among management, may result in the departure or distraction of key management personnel to the detriment of the Company; WHEREAS, the board of directors of the Company has determined that appropriate steps should be taken to reinforce and encourage the continued attention and dedication of key members of the Company's management to their assigned duties without distraction in the face of potentially disturbing circumstances arising from the possibility of a change in control of the Company; and WHEREAS, in order to induce the Employee to remain in the employ of the Company, the Company agrees that the Employee shall receive the compensation set forth in this Agreement as a cushion against the financial and career impact on the Employee in the event the Employee's employment 71 with the Company is terminated subsequent to a "Change of Control" (as defined in Section 1 hereof) of the Company; NOW, THEREFORE, in consideration of the foregoing and the mutual covenants and agreements hereinafter set forth and intending to be legally bound hereby, the parties hereto agree as follows: 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. 72 (c) "Beneficial Owner" of any securities shall mean: (i) that such Person or any of such Person's Affiliates or Associates, directly or indirectly, has the right to acquire (whether such right is exercisable immediately or only after the passage of time) pursuant to any agreement, arrangement or understanding (whether or not in writing) or upon the exercise of conversion rights, exchange rights, rights, warrants or options, or otherwise; 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 73 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 (c) shall cause a Person engaged in business as an underwriter of securities to be the "Beneficial Owner" of any securities acquired through such Person's participation in good faith in a firm commitment underwriting until the expiration of forty days after the date of such acquisition. (d) "Board" shall mean the board of directors of the Company. (e) "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 74 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. (f) "Normal Retirement Date" shall mean the first day of the calendar month coincident with or next following the Employee's 65th birthday. (h) "Person" shall mean any individual, firm, corporation, partnership or other entity. 75 (i) "Subsidiary" shall have the meaning ascribed to such term in Rule 12b-2 of the General Rules and Regulations under the Exchange Act. (j) "Termination Date" shall mean the date of receipt of the Notice of Termination described in Section 2 hereof or any later date specified therein, as the case may be. (k) "Termination of Employment" shall mean the termination of the Employee's actual employment relationship with the Company. (l) "Termination following a Change of Control" shall mean a Termination of Employment within two years after a Change of Control either: (i) initiated by the Company for any reason other than (x) the Employee's continuous illness, injury or incapacity for a period of six consecutive months or (y) for "cause," which shall mean misappropriation of funds, habitual insobriety, substance abuse, conviction of a crime involving moral turpitude, or 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 (ii) initiated by the Employee upon one or more of the following occurrences: 76 (A) any failure of the Company to comply with and satisfy any of the terms of this Agreement; (B) any significant reduction by the Company of the authority, duties or responsibilities of the Employee; (C) any removal by the Company of the Employee from the employment grade, compensation level or officer positions which the Employee holds as of the effective date hereof except in connection with promotions to higher office; (D) the requirement that the Employee undertake business travel to an extent substantially greater than is reasonable and customary for the position the Employee holds. 2. Notice of Termination. Any Termination following a Change of Control 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 termination provision in this Agreement relied upon, (ii) briefly summarizes the facts and circumstances deemed to provide a basis for termination of the Employee's employment under the provision so indicated, and (iii) if the Termination Date is other than the date of receipt of such notice, specifies the Termination 77 Date (which date shall not be more than 15 days after the giving of such notice). 3. Severance Compensation upon Termination. (a) Subject to the provisions of Section 11 hereof, in the event of the Employee's Termination following a Change of Control, the Company shall pay to the Employee, within fifteen days after the Termination Date (or as soon as possible thereafter in the event that the procedures set forth in Section 11(b) hereof cannot be completed within 15 days), an amount in cash equal to 1.5 times the Employee's Base Compensation. (b) 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 78 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 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 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 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) 79 incurred by the Employee in enforcing any of the obligations of the Company under this Agreement. 7. No Mitigation. The Employee shall not be required to mitigate the amount of any payment or benefit provided for in this Agreement by seeking other employment or otherwise, nor shall the amount of any payment or benefit provided for herein be reduced by any compensation earned by other employment or otherwise. 8. Non-exclusivity of Rights. Nothing in this Agreement shall prevent or limit the Employee's continuing or future participation in or rights under any benefit, bonus, incentive or other plan or program provided by the Company or any of its Subsidiaries or Affiliates and for which the Employee may qualify; provided, however, that the Employee hereby waives the Employee's right to receive any payments under any severance pay plan or similar program applicable to other employees of the Company . 9. No Set-Off. The Company's obligation to make the payments provided for in this Agreement and otherwise to perform its obligations hereunder shall not be affected by any circumstances, including, without limitation, any set- off, counterclaim, recoupment, defense or other right which the Company may have against the Employee or others. 10. Taxes. Any payment required under this Agreement shall be subject to all requirements of the law with regard to the withholding of taxes, filing, making of 80 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. (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 81 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 82 provided for in Section 7872(f)(2) of the Code (the "Federal Rate"); provided, however, that no amount shall be payable by the Employee to the Company if and to the extent such payment would not reduce the amount which is subject to taxation under Section 4999 of the Code. In the event that the Accounting Firm determines that an Underpayment has occurred, any such Underpayment shall be promptly paid by the Company to or for the benefit of the Employee together with interest at the Federal Rate. (d) All of the fees and expenses of the Accounting Firm in performing the determinations referred to in subsections (b) and (c) above shall be borne solely by the Company. The Company agrees to indemnify and hold harmless the Accounting Firm of and from any and all claims, damages and expenses resulting from or relating to its determinations pursuant to subsections (b) and (c) above, except for claims, damages or expenses resulting from the gross negligence or willful misconduct of the Accounting Firm. 12. Term of Agreement. The term of this Agreement shall be for two years from the date hereof and shall be automatically renewed for successive one-year periods unless the Company notifies the Employee in writing that this Agreement will not be renewed at least sixty days prior to the end of the current term; provided, however, that (i) after a Change of Control during the term of this Agreement, this Agreement shall remain in effect until all of the 83 obligations of the parties hereunder are satisfied or have expired, and (ii) this Agreement shall terminate if, prior to a Change of Control, the employment of the Employee with the Company or any of its Subsidiaries, as the case may be, shall terminate for any reason, or the Employee shall cease to be an Employee. 13. Successor Company. The Company shall require any successor or successors (whether direct or indirect, by purchase, merger, consolidation or otherwise) to all or substantially all of the business and/or assets of the Company, by agreement in form and substance satisfactory to the Employee, to acknowledge expressly that this Agreement is binding upon and enforceable against the Company in accordance with the terms hereof, and to become jointly and severally obligated with the Company to perform this Agreement in the same manner and to the same extent that the Company would be required to perform if no such succession or successions had taken place. Failure of the Company to obtain such agreement prior to the effectiveness of any such succession shall be a breach of this Agreement. As used in this Agreement, the Company shall mean the Company as hereinbefore defined and any such successor or successors to its business and/or assets, jointly and severally. 14. Notice. All notices and other communications required or permitted hereunder or necessary or convenient in connection herewith shall be in writing and shall be 84 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: Gary L. Schaefer 37 Austin Circle Lower Gwynedd, PA 19002 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 13 hereof shall be deemed sufficient for the purposes hereof. Any such notice shall be deemed delivered and effective when received in the case of personal delivery, five days after deposit, postage prepaid, with the U.S. Postal Service in the case of registered or certified mail, or on the next business day in the case of overnight express courier service. 15. Governing Law. This Agreement shall be governed by and interpreted under the laws of the Commonwealth of Pennsylvania without giving effect to any conflict of laws provisions. 85 16. Contents of Agreement, Amendment and Assignment. (a) This Agreement supersedes all prior agreements, sets forth the entire understanding between the parties hereto with respect to the subject matter hereof and cannot be changed, modified, extended or terminated except upon written amendment executed by the Employee and approved by the Board and executed on the Company's behalf by a duly authorized officer. The provisions of this Agreement may provide for payments to the Employee under certain compensation or bonus plans under circumstances where such plans would not provide for payment thereof. It is the specific intention of the parties that the provisions of this Agreement shall supersede any provisions to the contrary in such plans, and such plans shall be deemed to have been amended to correspond with this Agreement without further action by the Company or the Board. (b) Nothing in this Agreement shall be construed as giving the Employee any right to be retained in the employ of the Company. (c) All of the terms and provisions of this Agreement shall be binding upon and inure to the benefit of and be enforceable by the respective heirs, representatives, successors and assigns of the parties hereto, except that the duties and responsibilities of the Employee and the Company 86 hereunder shall not be assignable in whole or in part by the Company. 17. Severability. If any provision of this Agreement or application thereof to anyone or under any circumstances shall be determined to be invalid or unenforceable, such invalidity or unenforceability shall not affect any other provisions or applications of this Agreement which can be given effect without the invalid or unenforceable provision or application. 18. Remedies Cumulative; No Waiver. No right conferred upon the Employee by this Agreement is intended to be exclusive of any other right or remedy, and each and every such right or remedy shall be cumulative and shall be in addition to any other right or remedy given hereunder or now or hereafter existing at law or in equity. No delay or omission by the Employee in exercising any right, remedy or power hereunder or existing at law or in equity shall be construed as a waiver thereof, including, without limitation, any delay by the Employee in delivering a Notice of Termination pursuant to Section 2 hereof after an event has occurred which would, if the Employee had resigned, have constituted a Termination following a Change of Control pursuant to Section 1(l)(ii) of this Agreement. 19. Miscellaneous. All section headings are for convenience only. This Agreement may be executed in several counterparts, each of which is an original. It shall not be 87 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/ Craig N. Johnson -------------------------- -------------------------- Secretary /s/ John C. Newcomb /s/ Gary L. Schaefer -------------------------- -------------------------- Witness Gary L. Schaefer EX-10 4 EXHIBIT 10.6 88 EXHIBIT 10.6 EMPLOYMENT AGREEMENT THIS EMPLOYMENT AGREEMENT (the "Agreement") entered into on October 5, 1993, by and between Maritrans Inc., a Delaware corporation (the "Company"), and Stephen A. Van Dyck ("Employee"). WHEREAS, Employee is presently employed by the Company as its Chairman and Chief Executive Officer; and WHEREAS, the Company and Employee desire to enter into a new agreement to provide for Employee's continued employment by the Company, upon the terms and conditions set forth herein, beginning as of April 1, 1993, the date of Employee's appointment to his current position; NOW, THEREFORE, the parties hereto, intending to be legally bound, agree as follows: 1. Employment. The Company hereby continues the employment of Employee, and Employee hereby accepts such employment and agrees to perform his duties and responsibilities hereunder, in accordance with the terms and conditions hereinafter set forth. This Agreement shall supersede and replace the agreement entered into between Employee and Maritrans GP Inc., a predecessor of the Company, as of December 20, 1991, which shall be void as of the date hereof. 1.1. Employment Term. The term of this Agreement (the "Employment Term") shall commence on April 1, 1993 and shall continue for an indefinite period until terminated in accordance with Section 5 or Section 6 hereof. 89 1.2. Duties and Responsibilities. During the Employment Term, Employee shall serve as the Chairman and Chief Executive Officer of the Company and shall perform all duties and accept all responsibilities incident to such position or as otherwise may be assigned to him by the Company's Board of Directors (the "Board") and agreed to by Employee. 1.3. Extent of Service. During the Employment Term, Employee agrees to use his best efforts to carry out his duties and responsibilities under Section 1.2 hereof and, consistent with the other provisions of this Agreement, to devote his full time, attention and energy thereto; provided, however, that Employee shall not be required to transfer to a location outside the metropolitan Philadelphia area (fifty miles surrounding the Company's principal location as of the date hereof) without Employee's prior written consent. Except as provided in Section 3 hereof, the foregoing shall not be construed as preventing Employee from making minority investments in other businesses or enterprises provided that Employee agrees not to become engaged in any other business activity which may interfere with his ability to discharge his duties and responsibilities to the Company. Except with respect to current engagements, Employee further agrees not to work either on a part time or independent contracting basis for any other business or enterprise during the Employment Term without the prior written consent of the Board. 1.4. Base Salary. (a) For all the services rendered by Employee hereunder, the Company shall pay Employee the basic annual rate of compensation being paid to Employee as of the date hereof for 90 each full year of the Employment Term ("Base Salary"), payable in installments at such times as the Company customarily pays its other executives (but in any event no less often than monthly). Employee's Base Salary shall be subject to review and adjustment by the Company pursuant to its normal performance review policies for executives. The Company shall be entitled to make proper withholdings from Employee's Base Salary (and all other payments of compensation under this Agreement) as required by law or agreed to by Employee. (b) During the Employment Term, Employee shall also be (i) entitled to participate in such retirement, profit sharing, equity compensation, group insurance, medical and other fringe benefit plans, if any, as may be authorized from time to time by the Board in its sole discretion for executives of the Company, (ii) provided with reimbursement of expenses related to his employment by the Company on a basis similar to that which may be authorized from time to time by the Board in its sole discretion for executives of the Company generally, and (iii) entitled to vacation and holidays during the Employment Term in accordance with the Company's normal policy. 1.5. Incentive Compensation. In addition to the Base Salary set forth in Section 1.4 hereof, Employee shall participate in the Company's Executive Award Plan and such other annual or long-term incentive compensation plans (including stock option and stock grant plans), if any, for executives generally, as may be established from time to time by the Board in its sole 91 discretion. The terms and provisions of any such incentive compensation plan shall be determined in the sole discretion of the Board. 2. Confidential Information. Employee recognizes and acknowledges that by reason of his employment by and service to the Company (both during the Employment Term and before or after it), 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"). Employee acknowledges that such Confidential Information is a valuable and unique asset and covenants that he will not, either during or after the Employment Term, 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 Employee or except as may be required by law. 3. Non-Competition. (a) During the Employment Term and for a period of two years thereafter, Employee will not, unless acting pursuant hereto or with the prior written consent of the Board, directly or indirectly, own, 92 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 the Employment Term or on the date Employee's employment terminates, 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 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 the Employment Term or on the date Employee's employment terminates, as applicable. It is recognized by Employee that the business of the Company and its affiliates and 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. (b) The foregoing restriction shall not be construed to prohibit the ownership by 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 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 93 takes any part in its business, other than exercising his rights as a shareholder, or seeks to do any of the foregoing. 4. Equitable Relief. (a) Employee acknowledges that the restrictions contained in Sections 2 and 3 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. Employee represents that his experience and capabilities are such that the restrictions contained in Section 3 hereof will not prevent Employee from obtaining employment or otherwise earning a living at the same general level of economic benefit as anticipated by this Agreement. 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) 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 2 or 3 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 2 or 3 hereof should ever be adjudicated to exceed the time, geographic, 94 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) Employee irrevocably and unconditionally (i) agrees that any suit, action or other legal proceeding arising out of Section 2 or 3 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 10 hereof. (d) Employee agrees that he will provide, and that the Company may similarly provide, a copy of Sections 2 and 3 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 95 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. 5. Termination. The Employment Term shall terminate upon the occurrence of any one of the following events: 5.1. Disability. The Company may terminate the Employment Term if Employee is unable fully to perform his duties and responsibilities hereunder to the full extent required by the Board by reason of illness, injury or incapacity for six consecutive months, or for more than six months in the aggregate during any period of twelve calendar months. In such event, the Company shall have no further liability or obligation to Employee under this Agreement; provided, however, that Employee shall continue to receive his Base Salary for twenty four months thereafter, less the payments prescribed under any disability benefit plan which may be in effect for employees of the Company and in which he participated, plus his incentive compensation, as referred to in Section 1.5 hereof, for such twenty-four month period at the target percentage level in effect for the year during which Employee first became disabled; and provided, further, that if the amount that actually would have been earned under the Company's incentive compensation plan or plans in any of the relevant fiscal years of the Company is less than the full target then the amount due hereunder shall b e reduced to such amount. Employee agrees, in the event of any 96 dispute under this Section 5.1, to submit to a physical examination by a licensed physician selected by the Board. 5.2. Death. The Employment Term shall terminate in the event of Employee's death. In such event, the Company shall pay to Employee's executors, legal representatives or administrators, as applicable, an amount equal to the installment of his Base Salary set forth in Section 1.4 hereof for the month in which he dies, and, thereafter, the Company shall have no further liability or obligation under this Agreement to his executors, legal representatives, administrators, heirs or assigns or any other person claiming under or through him; provided, however, that Employee's estate or designated beneficiaries shall be entitled to receive (i) the payments prescribed for such recipients under any death benefit plan which may be in effect for executives of the Company, generally, (ii) an amount equal to one year of Employee's Base Salary at the time of his death, and (iii) a pro rata portion of the incentive compensation, if any, as referred to in Section 1.5 hereof, in respect of the year during which Employee died. 5.3. Cause. The Company may terminate the Employment Term, at any time, for "cause" upon thirty days' written notice, in which event all liabilities and obligations of the Company under this Agreement shall cease, except for payment of Base Salary to the extent already accrued. For purposes of this Agreement, Employee's employment may be terminated for "cause" if he engages in gross misconduct, dishonesty, mismanagement, deliberate and premeditated acts against the interest of the Company, materially fails to 97 perform or observe any of the terms or provisions of this Agreement or is convicted of a felony. 5.4. Other Terminations. (a) Employee may terminate the Employment Term upon thirty days prior written notice to the Company if the Company fails to fulfill any of the material terms and provisions hereof including the failure to pay Employee any amounts payable hereunder within ten business days after the same shall be due and payable (and has not cured any such failure by the end of the notice period). In addition, the Company may remove Employee without cause from the position in which he is employed hereunder at any time upon written notice in which case the Employment Term shall end immediately upon the giving of such notice. Upon any such termination or removal, Employee shall be entitled to receive, as liquidated damages for the failure of the Company to continue to employ Employee, only the amount due to Employee under the Company's then severance pay plan for employees. No other payments or benefits shall be due under this Agreement to Employee and the Company shall have no further liability or obligation. (b) Notwithstanding the foregoing, in the event that Employee executes a written release, substantially in the form attached hereto as Exhibit A, but subject to such changes as counsel to the Company may recommend, of any and all claims against the Company and all related parties with respect to all matters arising out of Employee's employment by the Company (other than his entitlement under any employee benefit plan or program sponsored by the Company in which he participated and under which he has accrued a benefit), 98 and the termination thereof, Employee shall receive, in lieu of the payment described in subsection (a) hereof, which Employee agrees to waive, (i) a lump sum payment equal to thirty six months of Employee's Base Salary, (ii) a lump sum payment equal to incentive compensation, as referred to in Section 1.5 hereof, for such thirty- six month period at the target percentage level in effect for the year during which Employee terminates this Agreement in accordance herewith or is removed, and (iii)(A) outplacement services, (B) service credit, for purposes of determining the vesting of any stock options, performance units or other grants under any long term incentive plan of the Company, for an additional thirty-six months, (C) a lump sum payment equal to the amount of benefits he would have received under the Company's pension, profit sharing and savings plans for such thirty-six month period, (D) a monthly amount (together with a tax equalization payment) for thirty six months equal to the premium due under the Company's health benefit plan and (E) continuation of life insurance and long term disability benefits for thirty six months at the level in effect at the time of such termination or removal. No other payments or benefits shall be due under this Agreement to Employee and the Company shall have no further liability or obligation. (c) Employee may voluntarily terminate the Employment Term upon thirty days' prior written notice for any reason; provided, however, that no further payments or benefits shall be due under this Agreement to Employee in that event and the Company shall have no further liability or obligation. 99 5.5 No Mitigation. Employee shall not be required to mitigate the amount of any payment or benefit provided for in this Section 5 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. 6. Payments Upon a Change in Control. 6.1. Definitions. For all purposes of this Section 6, the following terms shall have the meanings specified in this Section 6.1 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 Employee in all capacities with the Company, and its Affiliates, as reported for Federal income tax purposes on Form W-2, and 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 Employee, for the five calendar years (or such number of actual full calendar years of employment, if less than five) immediately preceding the calendar year in which occurs a Change of Control. (c) "Beneficial Owner" of any securities shall mean: (i) that such Person or any of such Person's Affiliates or Associates, directly or indirectly, has the right to acquire (whether such right is exercisable immediately or only after the passage of time) pursuant to any agreement, 100 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 (B) is not then reportable by such Person on Schedule 13D under the Exchange Act (or any comparable or successor report); or 101 (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 (c) shall cause a Person engaged in business as an underwriter of securities to be the "Beneficial Owner" of any securities acquired through such Person's participation in good faith in a firm commitment underwriting until the expiration of forty days after the date of such acquisition. (d) "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 then outstanding of Maritrans Inc., the parent of the Company); provided, however, that no "Change of Control" shall be deemed to occur during any period in which any such Person, and its 102 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 Maritrans Inc. 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 Inc. cease for any reason to constitute a majority thereof, unless the election, or the nomination for election by the shareholders of Maritrans Inc., 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. (e) "Normal Retirement Date" shall mean the first day of the calendar month coincident with or next following Employee's 65th birthday. (f) "Person" shall mean any individual, firm, corporation, partnership or other entity. (g) "Termination Date" shall mean the date of receipt of a Notice of Termination of this Agreement or any later date specified therein, as the case may be other. (h) "Termination of Employment" shall mean the termination of Employee's actual employment relationship with the Company. 103 (i) "Termination upon a Change of Control" shall mean a Termination of Employment upon or within one year after a Change of Control either: (i) initiated by the Company for any reason other than (x) the Employee's disability, as described in Section 5.1 hereof, (y) death, or (z) for "cause," as described in Section 5.3 hereof, or (ii) initiated by the Employee upon any of the following occurrences: (A) a transfer of Employee, without his express written consent, to a location that is outside the metropolitan Philadelphia area (as defined in Section 1.3 hereof), or the general area in which his principal place of business immediately preceding the Change of Control may be located at such time if other than metropolitan Philadelphia; (B) any failure of the Company to comply with and satisfy any of the terms of this Agreement; (C) any significant reduction by the Company of the authority, duties or responsibilities of Employee; (D) any removal by the Company of Employee from the employment grade, compensation level or officer or director positions which he holds as of the effective date hereof; (E) the requirement that Employee undertake business travel to an extent substantially greater than is 104 reasonable and customary for the position he holds pursuant hereto; or (F) the good faith determination by Employee that due to any change in circumstances with the Company that directly or indirectly affect Employee's position, duties or responsibilities or status as in effect immediately preceding his Termination Date he is no longer able effectively to discharge his duties and responsibilities. 6.2. Notice of Termination. Any Termination upon a Change of Control shall be communicated by a Notice of Termination to the other party hereto given in accordance with Section 10 hereof. For purposes of this Agreement, a "Notice of Termination" means a written notice which (i) indicates the specific termination provision in this Agreement relied upon, (ii) briefly summarizes the facts and circumstances deemed to provide a basis for a Termination of Employment and the applicable provision hereof, 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). 6.3. Severance Compensation upon Termination. (a) Subject to adjustment as provided in paragraph (b) below, in the event of Employee's Termination upon a Change of Control, the Company shall pay to Employee, within fifteen days after the Termination Date (or as soon as practicable thereafter in the event that the procedures set forth in Section 6.10(b) hereof cannot be completed within 15 days), in lieu of any other payments required under any other Section of this Agreement, an amount in cash equal to 2.99 multiplied by his Base Compensation. 105 (b) In the event Employee's Normal Retirement Date would occur prior to twenty-four 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 Employee's Normal Retirement Date and the denominator of which shall be 730. 6.4. Other Payments. In the event of Employee's Termination upon a Change of Control, the Company shall also pay to Employee within fifteen days after the Termination Date, to the extent not theretofore paid, Employee's Base Salary through the Termination Date and a further amount equal to Employee's Base Salary in lieu of his unused vacation pay, if any, both calculated at the rate in effect on the Termination Date or, if higher, at the highest rate in effect at any time within the 90-day period preceding the Termination Date; 6.5. Termination of Non-Competition Requirements. In the event of a Termination upon a Change of Control, any non-competition agreements hereunder or otherwise executed by Employee, or any non- competition provisions binding on Employee in connection with any employee bonus, benefit, incentive or other plan or program provided by the Company or any Affiliate, shall immediately terminate; provided, however, that this provision shall not terminate or otherwise modify the confidentiality provisions contained in Section 2 hereof. 6.6. Enforcement. (a) In the event that the Company shall fail or refuse to make payment of any amounts due Employee hereunder within the appropriate time period, the Company shall pay to Employee, in addition to the 106 payment of any other sums provided in this Agreement, interest, compounded daily, on any amount remaining unpaid from the date payment is required until paid to 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 Employee not be required to incur any expenses associated with the enforcement of his rights under 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 Employee hereunder. Accordingly, the Company shall pay Employee on demand the amount necessary to reimburse Employee in full for all expenses (including all attorneys' fees and legal expenses) incurred by Employee in enforcing any of the obligations of the Company under this Section. 6.7. No Mitigation. 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. 6.8. Non-Exclusivity of Rights. Nothing in this Agreement shall prevent or limit 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 Affiliate and for which Employee may qualify; provided, however, that if Employee becomes 107 entitled to and receives all of the payments provided for in this Agreement, Employee agrees to waive his right to receive payments under any severance plan or similar program applicable to all employees of the Company. 6.9. No Set-Off. The Company's obligation to make the payments provided for in this Section 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 Employee or others. 6.10. 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 Employee, whether paid or payable or distributed or distributable pursuant to the terms of this Agreement or otherwise (a "Payment"), would constitute an "excess parachute payment" within the meaning of Section 280G of the Internal Revenue Code of 1986, as amended (the "Code"), and that it would be economically advantageous to Employee to reduce the Payment to avoid or reduce the taxation of excess parachute payments under Section 4999 of the Code, the aggregate present value of amounts payable or distributable to or for the benefit of 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 108 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 6, present value shall be determined in accordance with Section 280G(d)(4) of the Code. (b) All determinations to be made under this Section 6 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 Employee within 10 days of the Termination Date. Any such determination by the Accounting Firm shall be binding upon the Company and Employee. Employee shall in his sole discretion determine which and how much of the Agreement Payments shall be eliminated or reduced consistent with the requirements of this Section 6. Within five days after Employee's determination, the Company shall pay (or cause to be paid) or distribute (or cause to be distributed) to or for the benefit of Employee such amounts as are then due to 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 109 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 Employee which 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 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 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. 6.11. Settlement of All Disputes. (a) In the event of any dispute, controversy or claim arising out of or relating to any provision of this Section 6 or Employee's Termination upon a Change in Control, the Company shall appoint as the sole and exclusive arbiter of such dispute, controversy or claim, a committee composed of two persons who were members of the 110 Board at any time within five years prior to the Change of Control (which persons may, but need not be, directors of the Company at the time of such dispute, controversy or claim); provided, however, that no person shall be eligible to serve thereon who (i) is at the Termination Date, or shall have been at any time within one year prior thereto, an executive officer of the Company, or (ii) shall be or have been at any time related in any manner to or otherwise affiliated with, or was first nominated by, the corporation, Person or group whose acquisition of shares of Common Stock of the Company has given rise to a Change of Control. The decision of such committee and the award of any monetary judgment or other relief by such committee shall be final and binding upon Employee and the Company, and shall not be subject to appeal. Judgment may be entered upon the decision and award of such committee by Employee or the Company in any court of competent jurisdiction. The Company shall pay the persons selected pursuant to this subsection a reasonable fee for their services, and shall reimburse such persons for their expenses incurred in this capacity. In addition, the Company shall, to the maximum extent permitted by law, indemnify and hold harmless such persons of and from any and all claims, damages or expenses of any nature whatsoever relating to or arising from their activities in this capacity. (b) In the event that the Company shall be unable to appoint the committee referred to in (a) above after good faith efforts to do so, or in the event that such committee cannot reach a unanimous agreement, any remaining dispute, controversy or claim arising out 111 of or relating to any provision of this Agreement or Employee's Termination upon a Change of Control shall be settled by arbitration in the City of Philadelphia, Pennsylvania, in accordance with the commercial arbitration rules then in effect of the American Arbitration Association, before a panel of three arbitrators, two of whom shall be selected by the Company and Employee, respectively, and the third of whom shall be selected by the other two arbitrators. Each arbitrator selected as provided herein is required to be or have been a director or an executive officer of a corporation whose shares of common stock were listed during at least one year of such service on the New York Stock Exchange or the American Stock Exchange or quoted on the National Association of Securities Dealers Automated Quotations System. Any award entered by the arbitrators shall be final, binding and nonappealable and judgment may be entered thereon by any party in accordance with applicable law in any court of competent jurisdiction. This arbitration provision shall be specifically enforceable. The fees of the American Arbitration Association and the arbitrators and any expenses relating to the conduct of the arbitration shall be paid by the Company. (c) The party or parties challenging the right of Employee to the benefits of this Agreement shall in all circumstances have the burden of proof. 6.12. Successor Company. The Company shall require any successor or successors (whether direct or indirect, by purchase, merger, consolidation, exchange or otherwise) to all or 112 substantially all of the business or assets of the Company or its Affiliates as of the date hereof, by agreement in form and substance satisfactory to 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 the Agreement. As used in this Agreement, the Company shall mean the Company as hereinbefore defined and any such successor or successors to its business or assets (or that of its Affiliates as of the date hereof), jointly and severally. 7. Survival. Notwithstanding the termination of the Employment Term or this Agreement, Employee's obligations under Sections 2 and 3 hereof shall, except to the extent otherwise provided herein, survive and remain in full force and effect for the periods therein provided, and the provisions for equitable relief against Employee in Section 4 hereof shall continue in force. 8. 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. 9. Litigation Expenses. Except as provided in Section 6.6 above, in the event of a lawsuit by either party to enforce the provisions of this Agreement, the prevailing party shall be entitled 113 to recover reasonable costs, expenses and attorney's fees from the other party. 10. Notices. All notices and other communications required or permitted hereunder or necessary or convenient in connection herewith shall be in writing and shall be deemed to have been given when hand delivered or mailed by registered or certified mail, as follows (provided that notice of change of address shall be deemed given only when received): If to the Company, to: 2600 One Logan Square Philadelphia, PA 19103 With a required copy to: Morgan, Lewis & Bockius 2000 One Logan Square Philadelphia, PA 19103-6993 Attention: Robert J. Lichtenstein, Esquire If to Employee, to: Stephen A. Van Dyck 217 Spruce Street Philadelphia, PA 19106 or to such other names or addresses as the Company or Employee, as the case may be, shall designate by notice to each other person entitled to receive notices in the manner specified in this Section. 11. Contents of Agreement; Amendment and Assignment. (a) This Agreement supersedes all prior agreements and sets forth the entire understanding among the parties hereto with respect to the subject matter hereof and cannot be changed, modified, extended or terminated except upon written amendment approved by the Board and executed on its behalf by a duly authorized officer. 114 (b) Employee acknowledges that from time to time, the Company may establish, maintain and distribute employee manuals or handbooks or personnel policy manuals, and officers or other representatives of the Company may make written or oral statements relating to personnel policies and procedures. Such manuals, handbooks and statements are intended only for general guidance. No policies, procedures or statements of any nature by or on behalf of the Company (whether written or oral, and whether or not contained in any employee manual or handbook or personnel policy manual), and no acts or practices of any nature, shall be construed to modify this Agreement or to create express or implied obligations of any nature to Employee. (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, executors, administrators, legal representatives, successors and assigns of the parties hereto, except that the duties and responsibilities of Employee hereunder are of a personal nature and shall not be assignable or delegatable in whole or in part by Employee. 12. Severability. If any provision of this Agreement or application thereof to anyone or under any circumstances is adjudicated to be invalid or unenforceable in any jurisdiction, such invalidity or unenforceability shall not affect any other provision or application of this Agreement which can be given effect without the invalid or unenforceable provision or application and shall not invalidate or render unenforceable such provision or application in any other jurisdiction. 115 13. Remedies Cumulative; No Waiver. No remedy conferred upon the Company by this Agreement is intended to be exclusive of any other remedy, and each and every such remedy shall be cumulative and shall be in addition to any other remedy given hereunder or now or hereafter existing at law or in equity. No delay or omission by the Company in exercising any right, remedy or power hereunder or existing at law or in equity shall be construed as a waiver thereof, and any such right, remedy or power may be exercised by the Company from time to time and as often as may be deemed expedient or necessary by the Company in its sole discretion. 14. 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 marking 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 on the date first above written. MARITRANS INC. Attest: [SEAL] /s/ John C. Newcomb By /s/ Craig N. Johnson ------------------------------ ---------------------------- Secretary Name: Craig N. Johnson Title: President Witness: /s/ Eileen Carr /s/ Steven A. Van Dyck ------------------------------ ---------------------------- STEPHEN A. VAN DYCK EX-10 5 EXHIBIT 10.7 116 EXHIBIT 10-7 MUTUAL SEPARATION AGREEMENT AND GENERAL RELEASE THIS AGREEMENT, made and entered into on this 22nd day of November, 1993 by and between Maritrans Inc., a Delaware corporation, with principal offices at Philadelphia, Pennsylvania (hereinafter referred to as the "Company"), and Craig N. Johnson, an individual residing at 515 Auburn Avenue Wyndmoor, PA 19118 (hereinafter referred to as "Johnson"). W I T N E S S E T H: WHEREAS, the Company has heretofore employed Johnson under an Employment Agreement entered into as of April 1, 1993 (the "Employment Agreement"); and WHEREAS, Johnson has decided to resign from the Company's employ and terminate the Employment Agreement on December 17, 1993 and the Company believes that these actions are in its best interest; and WHEREAS, the Company and Johnson wish to enter into an agreement to clearly set forth certain payments to be made and actions to be taken by reason of Johnson's resignation and the termination of the Employment Agreement and to provide for a mutual release as to any claims either party might have against the other including, without limitation, claims that might be asserted by Johnson under the Employment Agreement and the Age Discrimination in Employment Act, as further described herein; and WHEREAS, the Employment Agreement shall be and is superseded by this Agreement except as to the obligations imposed, and the rights provided, by sections 2, 3 and 4 (and section 6 to the extent provided by Section 3 below) of the Employment Agreement, which shall remain in full force and effect consistent with the terms of this Agreement and the Employment Agreement; NOW, THEREFORE, in consideration of the mutual promises contained herein, the parties hereto, intending to be legally bound, hereby agree as follows: 1. Johnson hereby confirms his resignation from the employ of the Company , which is to become effective on December 17, 1993. Johnson's term as a director of the Company (which expires at the annual meeting of the shareholders of the Company to be held in 1996) is not subject to this Agreement. 117 2. The Company shall pay to Johnson, subject to applicable employment and income tax withholdings and deductions, (i) his normal base salary through December 31, 1993, (ii) the sum of $500,000, payable $250,000 on or before December 31, 1993 and $250,000 on January 4, 1994, and (iii) commencing January 1, 1994, a monthly sum equal to the COBRA premium (plus a tax equalization amount) due under the Company's Health Plan, and continuing until December 31, 1995 (notwithstanding the fact that COBRA eligibility will end on June 30, 1995). 3. Notwithstanding Johnson's resignation, (i) the Company will treat as nonforfeitable Johnson's rights under the stock option granted to him on April 1, 1993, under the Company's Equity Compensation Plan, but only as to the purchase of 50,000 shares of the common stock of the Company and such option shall be exercisable only on or before December 31, 1996, at which time the portion of the stock option treated as nonforfeitable hereunder shall expire, and (ii) in the event that the there is a Change of Control of the Company, as defined in section 6 of the Employment Agreement, and the transaction pursuant to which that Change of Control occurs is publicly announced by the Company or the subject of an executed letter of intent, in either event on or before May 1, 1994, section 6 of the Employment Agreement shall continue to apply; provided, however, that (iii) any payments made under Section 2 of this Agreement shall serve as an offset to any amounts due under such section 6 and (iv) any such payments made under Section 2 of this Agreement shall not be taken into account in determining "Base Compensation" for the purpose of calculating the amount due under section 6.3(a) of the Employment Agreement. 4. Johnson agrees and acknowledges that the Company, on a timely basis, has paid, or agreed to pay, to Johnson all other amounts due and owing in accordance with the terms of the Employment Agreement and that the Company has no obligation, contractual or otherwise to Johnson except as provided herein nor to hire, rehire or re-employ Johnson in the future. 5. Johnson agrees and reaffirms that Section 2 of the Employment Agreement, as to Confidential Information, shall continue to apply notwithstanding his resignation and the termination of the Employment Agreement, and that the Company shall be entitled to all remedies available under Section 4 of the Employment Agreement in enforcing its rights thereunder. 118 6. Johnson further agrees and reaffirms that Section 3 of the Employment Agreement, as to Non-Competition, shall continue to apply for 24 months from December 17 , 1993, notwithstanding his resignation and the termination of the Employment Agreement, and that the Company shall be entitled to all remedies available under Section 4 of the Employment Agreement in enforcing its rights thereunder. 7. In full and complete settlement of any claims that Johnson 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 his resignation from employment by the Company, and for and in consideration of the undertakings of the Company described herein, Johnson does hereby REMISE, RELEASE, AND FOREVER DISCHARGE the Company, Maritrans General Partner Inc., Maritrans Operating Partners L.P. and their subsidiaries and affiliates, their officers, directors, shareholders, partners, employees and agents, and their respective successors and assigns, heirs, executors and administrators (hereinafter collectively referred to as "Maritrans"), 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 he ever had, now has, or hereafter may have, or which Johnson's heirs, executors or administrators hereafter may have, by reason of any matter, cause or thing whatsoever from the beginning of Johnson's employment with Maritrans to the date of this Agreement; and particularly, but without limitation of the foregoing general terms, any claims arising from or relating in any way to Johnson's employment relationship or the Employment Agreement and Johnson's resignation from that employment relationship with Maritrans and the termination of the Employment Agreement, 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, but not limited to, any claims under 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; provided, however, that nothing herein shall preclude Johnson from joining Maritrans in any action brought against him which arises out of actions taken within the scope of his employment by the Company and for which he would have been indemnified pursuant to the bylaws of the Company as of the date hereof, unless later limited in accordance with applicable law, (in which case he shall notify Maritrans within five business days after receiving service of process as to the commencement of the 119 action and give Maritrans the right to control the defense of any such action). 8. Johnson 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, 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, including any charge of discrimination under ADEA, Title VII or the Pennsylvania Human Relations Act. In addition, Johnson further agrees and covenants that, from and after the date hereof, he will not voluntarily assist, cooperate or be involved in any way in any action or claim of another employee or former employee against the Company or any of its affiliates, officers, directors or employees, and that the Company shall be entitled to all remedies available at law or equity in enforcing its rights hereunder. Finally, Johnson also agrees and covenants that should he, or any other person, organization or entity on his behalf, 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, despite his agreement not to do so hereunder, then he will pay all of the costs and expenses of the Company (including reasonable attorneys' fees) incurred in the defense of any such action or undertaking. 9. In full and complete settlement of any claims that the Company may have against Johnson, other than the fulfillment of Johnson's obligations hereunder or his remaining obligations under the Employment Agreement, and for and in consideration of the undertakings of Johnson described herein, Maritrans does hereby REMISE, RELEASE, AND FOREVER DISCHARGE Johnson and his heirs, executors and administrators (hereinafter collectively referred to as "Johnson"), 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 Maritrans ever had, now has, or hereafter may have, by reason of any civil (but specifically not any criminal act) matter, cause or thing whatsoever from the beginning of Johnson's employment with Maritrans to the date of this Agreement; and particularly, but without limitation of the foregoing general terms, any claims arising from or relating in any way to Johnson's employment relationship or the Employment Agreement and the termination of that 120 employment relationship with Maritrans and of the Employment Agreement. 10. Johnson hereby agrees and acknowledges that under this Agreement, the Company has agreed to provide him with compensation and benefits, described under Section 2 hereof, that he would have no right to receive under the Employment Agreement or otherwise, and that such compensation is sufficient to support the release, covenants and agreements by Johnson herein. 11. Johnson further agrees and acknowledges that the undertakings of the Company as provided in this Agreement are made to provide an amicable conclusion of Johnson's employment by the Company. 12. Johnson hereby certifies that he has read the terms of this Agreement, that he has been advised by the Company to consult with an attorney which he has done, and that he understand its terms and effects. Johnson 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, as expressed in Section 7 hereof, 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 Johnson concerning the terms or effects of this Agreement other than those contained in this Agreement. 13. Johnson hereby acknowledges that he was presented with this Agreement on November 16, 1993, and that he has been informed that he had the right to consider this Agreement and the release contained herein for a period of at least twenty-one (21) days prior to execution. Johnson 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 the Employment Agreement. 14. If any portion of this Agreement shall be held invalid or unenforceable, such invalidity or unenforceability shall not affect any other provisions of this Agreement. 15. This Agreement shall be interpreted and enforced under the laws of the Commonwealth of Pennsylvania. 121 IN WITNESS WHEREOF, the parties hereto have executed this Agreement on the day and year first above written. ATTEST: MARITRANS INC. /s/ John C. Newcomb By: /s/ Stephen A. Van Dyck ----------------------------- ---------------------------- Secretary Chairman /s/ James H. Sanborn /s/ Craig N. Johnson ----------------------------- ---------------------------- Witness CRAIG N. JOHNSON EX-10 6 EXHIBIT 10.8 122 EXHIBIT 10.8 RETIREMENT AGREEMENT AND GENERAL RELEASE THIS AGREEMENT, made and entered into on this 22nd day of November, 1993 by and between Maritrans Inc., a Delaware corporation, with principal offices at Philadelphia, Pennsylvania (hereinafter referred to as the "Company"), and James H. Sanborn, an individual residing at 324 Keller Road, Berwyn, PA 19312 (hereinafter referred to as "Sanborn"). W I T N E S S E T H: WHEREAS, the Company has heretofore employed Sanborn under an Employment Agreement entered into as of April 1, 1993 (the "Employment Agreement"); and WHEREAS, Sanborn has decided to retire from the Company's employ and terminate the Employment Agreement on December 17, 1993 and the Company believes that these actions are in its best interest; and WHEREAS, the Company and Sanborn wish to enter into an agreement to clearly set forth certain payments to be made and actions to be taken by reason of Sanborn's retirement and the termination of the Employment Agreement and to provide for a mutual release as to any claims either party might have against the other including, without limitation, claims that might be asserted by Sanborn under the Employment Agreement and the Age Discrimination in Employment Act, as further described herein; and WHEREAS, the Employment Agreement shall be and is superseded by this Agreement except as to the obligations imposed, and the rights provided, by sections 2, 3 and 4 (and section 6 to the extent provided by Section 3 below) of the Employment Agreement, which shall remain in full force and effect consistent with the terms of this Agreement and the Employment Agreement; NOW, THEREFORE, in consideration of the mutual promises contained herein, the parties hereto, intending to be legally bound, hereby agree as follows: 1. Sanborn hereby confirms his voluntary retirement from the employ of the Company, effective on December 17, 1993. Sanborn's term as a director of the Company (which expires at the annual meeting of the shareholders of the Company to be held in 1995) is not subject to this Agreement and Sanborn shall continue to serve as a director during the current term at the pleasure of the Chairman of the Board of Directors of the Company. 123 2. In addition to any payments due to Sanborn under any employee benefit plan or program of the Company and, notwithstanding Sanborn's retirement and the termination of the Employment Agreement, the Company shall pay to Sanborn, in exchange for the release provided in Section 7 below, and subject to applicable employment and income tax withholdings and deductions, (i) his normal base salary through December 31, 1993, (ii) commencing January 1, 1994, a supplemental monthly single life pension benefit equal to $5,346 reduced by the amount of the retirement benefit actually payable under (a) the Retirement Plan of Maritrans Inc. and (b) the Maritrans Inc. Excess Benefit Plan, which pension benefit shall be payable in the same form, at the same time, for the same duration and subject to the same actuarial reductions or adjustments as the retirement benefit paid under the Retirement Plan, and (iii) commencing January 1, 1994, a monthly sum equal to the COBRA premium (plus a tax equalization amount) due under the Company's Health Plan, and continuing until June 30, 1995. 3. Notwithstanding Sanborn's retirement (i) the Company will pay to Sanborn, on or before April 30, 1994, the bonus, if any, that Sanborn would have earned under the Maritrans Inc. Executive Award Plan for 1993, and (ii) in the event that the there is a Change of Control of the Company, as defined in section 6 of the Employment Agreement, and the transaction pursuant to which that Change of Control occurs is publicly announced by the Company or the subject of an executed letter of intent, in either event on or before May 1, 1994, section 6 of the Employment Agreement shall continue to apply; provided, however, that (iii) any payments made under Section 2 of this Agreement shall serve as an offset to any amounts due under such section 6 and (iv) any such payments made under Section 2 of this Agreement shall not be taken into account in determining "Base Compensation" for the purpose of calculating the amount due under section 6.3(a) of the Employment Agreement. 4. Sanborn agrees and acknowledges that the Company, on a timely basis, has paid, or agreed to pay, to Sanborn all other amounts due and owing in accordance with the terms of the Employment Agreement and that the Company has no obligation, contractual or otherwise to Sanborn except as provided herein nor to hire, rehire or re-employ Sanborn in the future. Notwithstanding the foregoing, the Company may ask Sanborn to provide consulting services after the date hereof and, if Sanborn wishes to provide such services, the 124 Company shall pay Sanborn at an hourly rate of $50, plus any expenses that Sanborn incurs in connection with the performance of those services, as adjusted from time to time to such other rate as the parties may agree in writing. 5. Sanborn agrees and reaffirms that Section 2 of the Employment Agreement, as to Confidential Information, shall continue to apply notwithstanding his retirement and the termination of the Employment Agreement, and that the Company shall be entitled to all remedies available under Section 4 of the Employment Agreement in enforcing its rights thereunder. 6. Sanborn further agrees and reaffirms that Section 3 of the Employment Agreement, as to Non-Competition, shall continue to apply for 12 months from December 17 , 1993, notwithstanding his retirement and the termination of the Employment Agreement, and that the Company shall be entitled to all remedies available under Section 4 of the Employment Agreement in enforcing its rights thereunder. 7. In full and complete settlement of any claims that Sanborn 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 his retirement from employment by the Company, and for and in consideration of the undertakings of the Company described herein, Sanborn does hereby REMISE, RELEASE, AND FOREVER DISCHARGE the Company, Maritrans General Partner Inc., Maritrans Operating Partners L.P. and their subsidiaries and affiliates, their officers, directors, shareholders, partners, employees and agents, and their respective successors and assigns, heirs, executors and administrators (hereinafter collectively referred to as "Maritrans"), 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 he ever had, now has, or hereafter may have, or which Sanborn's heirs, executors or administrators hereafter may have, by reason of any matter, cause or thing whatsoever from the beginning of Sanborn's employment with Maritrans to the date of this Agreement; and particularly, but without limitation of the foregoing general terms, any claims arising from or relating in any way to Sanborn's employment relationship or the Employment Agreement and Sanborn's retirement from that employment relationship with Maritrans and the termination of the Employment Agreement, 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, but not limited to, any claims under ADEA, Title VII of the Civil 125 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; provided, however, that nothing herein shall preclude Sanborn from joining Maritrans in any action brought against him which arises out of actions taken within the scope of his employment by the Company and for which he would have been indemnified pursuant to the bylaws of the Company as of the date hereof, unless later limited in accordance with applicable law, (in which case he shall notify Maritrans within five business days after receiving service of process as to the commencement of the action and give Maritrans the right to control the defense of any such action). 8. Sanborn 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, 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, including any charge of discrimination under ADEA, Title VII or the Pennsylvania Human Relations Act. In addition, Sanborn further agrees and covenants that, from and after the date hereof, he will not voluntarily assist, cooperate or be involved in any way in any action or claim of another employee or former employee against the Company or any of its affiliates, officers, directors or employees, and that the Company shall be entitled to all remedies available at law or equity in enforcing its rights hereunder. Finally, Sanborn also agrees and covenants that should he, or any other person, organization or entity on his behalf, 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, despite his agreement not to do so hereunder, then he will pay all of the costs and expenses of the Company (including reasonable attorneys' fees) incurred in the defense of any such action or undertaking. 9. In full and complete settlement of any claims that the Company may have against Sanborn, other than the fulfillment of Sanborn's obligations hereunder or his remaining obligations under the Employment Agreement, and for and in consideration of the undertakings of Sanborn described herein, Maritrans does hereby REMISE, RELEASE, AND FOREVER DISCHARGE Sanborn and his heirs, executors and administrators 126 (hereinafter collectively referred to as "Sanborn"), 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 Maritrans ever had, now has, or hereafter may have, by reason of any civil (but specifically not any criminal act) matter, cause or thing whatsoever from the beginning of Sanborn's employment with Maritrans to the date of this Agreement; and particularly, but without limitation of the foregoing general terms, any claims arising from or relating in any way to Sanborn's employment relationship or the Employment Agreement and his retirement from that employment relationship with Maritrans and the termination of the Employment Agreement. 10. Sanborn hereby agrees and acknowledges that under this Agreement, the Company has agreed to provide him with compensation and benefits, described under Sections 2 and 3 hereof, that he would have no right to receive under the Employment Agreement or otherwise, and that such compensation is sufficient to support the release, covenants and agreements by Sanborn herein. 11. Sanborn further agrees and acknowledges that the undertakings of the Company as provided in this Agreement are made to provide an amicable conclusion of Sanborn's employment by the Company. 12. Sanborn hereby certifies that he has read the terms of this Agreement, that he has been advised by the Company to consult with an attorney and that he understands its terms and effects. Sanborn 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, as expressed in Section 7 hereof, 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 Sanborn concerning the terms or effects of this Agreement other than those contained in this Agreement. 13. Sanborn hereby acknowledges that he was presented with this Agreement on November 22, 1993, and that he has been informed that he had the right to consider this Agreement and the release contained herein for a period of at least twenty-one (21) days prior to execution. Sanborn 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 127 the rights, duties, obligations and remedies afforded by the Employment Agreement. 14. If any portion of this Agreement shall be held invalid or unenforceable, such invalidity or unenforceability shall not affect any other provisions of this Agreement. 15. 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 INC. /s/ John C. Newcomb By: /s/ Stephen A. Van Dyck ------------------------------ -------------------------- Secretary Chairman /s/ Diana Maxwell /s/ James H. Sanborn ------------------------------ -------------------------- Witness JAMES H. SANBORN EX-10 7 EXHIBIT 10.9 128 EXHIBIT 10.9 EMPLOYMENT AGREEMENT THIS EMPLOYMENT AGREEMENT (the "Agreement") entered into on November 15, 1993, by and between Maritrans Holdings Inc., a Delaware corporation (the "Company"), and Edward J. Flood ("Employee"). WHEREAS, Employee is presently employed by the Company as its President; and WHEREAS, the Company and Employee desire to enter into a new agreement to provide for Employee's continued employment by the Company, upon the terms and conditions set forth herein, beginning as of April 1, 1993, the date of Employee's appointment to his current position; NOW, THEREFORE, the parties hereto, intending to be legally bound, agree as follows: 1. Employment. The Company hereby continues the employment of Employee, and Employee hereby accepts such employment and agrees to perform his duties and responsibilities hereunder, in accordance with the terms and conditions hereinafter set forth. This Agreement shall supersede and replace the agreement entered into between Employee and Maritrans GP Inc., a predecessor of the Company, as of February 12, 1992, which shall be void as of the date hereof. 1.1. Employment Term. The term of this Agreement (the "Employment Term") shall commence on April 1, 1993 and shall continue for an indefinite period until terminated in accordance with Section 5 or Section 6 hereof. 129 1.2. Duties and Responsibilities. During the Employment Term, Employee shall perform all duties and accept all responsibilities incident to such positions as are assigned to him by the Chief Executive Officer of Maritrans Inc., the parent corporation of the Company, (the "Parent Company") or as otherwise may be assigned to him by the Board of Directors of the Parent Company (the "Board"). 1.3. Extent of Service. During the Employment Term, Employee agrees to use his best efforts to carry out his duties and responsibilities under Section 1.2 hereof and, consistent with the other provisions of this Agreement, to devote his full time, attention and energy thereto. Except as provided in Section 3 hereof, the foregoing shall not be construed as preventing Employee from making minority investments in other businesses or enterprises provided that Employee agrees not to become engaged in any other business activity which may interfere with his ability to discharge his duties and responsibilities to the Company. Employee further agrees not to work either on a part time or independent contracting basis for any other business or enterprise during the Employment Term without the prior written consent of the Board. 1.4. Base Salary. (a) For all the services rendered by Employee hereunder, the Company shall pay Employee the basic annual rate of compensation being paid to Employee as of the date hereof for each full year of the Employment Term ("Base Salary"), payable in 130 installments at such times as the Company customarily pays its other employees (but in any event no less often than monthly). Employee's Base Salary shall be subject to review and adjustment by the Board pursuant to its normal performance review policies for executives. The Company shall be entitled to make proper withholdings from Employee's Base Salary (and all other payments of compensation under this Agreement) as required by law or agreed to by Employee. (b) During the Employment Term, Employee shall also be (i) entitled to participate in such retirement, profit sharing, equity compensation, group insurance, medical and other fringe benefit plans, if any, as may be authorized from time to time by the Board in its sole discretion for executives of the Company, (ii) provided with reimbursement of expenses related to his employment by the Company on a basis similar to that which may be authorized from time to time by the Board in its sole discretion for executives of the Company generally, and (iii) entitled to vacation and holidays during the Employment Term in accordance with the Parent Company's normal policy. 1.5. Incentive Compensation. In addition to the Base Salary set forth in Section 1.4 hereof, Employee shall participate in the Company's Executive Award Plan (which shall be substantially similar to that of the Parent Company unless the Board determines otherwise) and such other annual or long-term incentive compensation plans (including stock option and stock grant plans), if any, for executives generally, as may be 131 established from time to time by the Board in its sole discretion. The terms and provisions of any such incentive compensation plan shall be determined in the sole discretion of the Board. 2. Confidential Information. Employee recognizes and acknowledges that by reason of his employment by and service to the Company (both during the Employment Term and before or after it), 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"). Employee acknowledges that such Confidential Information is a valuable and unique asset and covenants that he will not, either during or after the Employment Term, 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 Employee or except as may be required by law. 3. Non-Competition. (a) During the Employment Term and for a period of one year thereafter, Employee will not, unless acting pursuant hereto or with 132 the prior written consent of the Board or in the event of a termination for "cause" under Section 5.3(d), 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 the Employment Term or on the date Employee's employment terminates, 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 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 the Employment Term or on the date Employee's employment terminates, as applicable. It is recognized by Employee that the business of the Company and its affiliates and 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. (b) The foregoing restriction shall not be construed to prohibit the ownership by 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 Employee 133 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. 4. Equitable Relief. (a) Employee acknowledges that the restrictions contained in Sections 2 and 3 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. Employee represents that his experience and capabilities are such that the restrictions contained in Section 3 hereof will not prevent Employee from obtaining employment or otherwise earning a living at the same general level of economic benefit as anticipated by this Agreement. 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) 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 2 or 3 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 2 or 134 3 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) Employee irrevocably and unconditionally (i) agrees that any suit, action or other legal proceeding arising out of Section 2 or 3 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 10 hereof. (d) Employee agrees that he will provide, and that the Company may similarly provide, a copy of Sections 2 and 3 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, 135 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. 5. Termination. The Employment Term shall terminate upon the occurrence of any one of the following events: 5.1. Disability. The Company may terminate the Employment Term if Employee is unable fully to perform his duties and responsibilities hereunder to the full extent required by the Board by reason of illness, injury or incapacity for six consecutive months, or for more than six months in the aggregate during any period of twelve calendar months. In such event, the Company shall have no further liability or obligation to Employee under this Agreement except for payments prescribed under any disability benefit plan which may be in effect for employees of the Company and in which he participated. Employee agrees, in the event of any dispute under this Section 5.1, to submit to a physical examination by a licensed physician selected by the Board. 5.2. Death. The Employment Term shall terminate in the event of Employee's death. In such event, the Company shall pay to Employee's executors, legal representatives or administrators, as applicable, an amount equal to the installment of his Base Salary set forth in Section 1.4 hereof for the month in which he dies, and, thereafter, the Company shall have no further liability or obligation under this Agreement to his executors, legal 136 representatives, administrators, heirs or assigns or any other person claiming under or through him; provided, however, that Employee's estate or designated beneficiaries shall be entitled to receive (i) the payments prescribed for such recipients under any death benefit plan which may be in effect for executives of the Company, generally, (ii) an amount equal to one year of Employee's Base Salary at the time of his death, and (iii) a pro rata portion of the incentive compensation, if any, as referred to in Section 1.5 hereof, in respect of the year during which Employee died. 5.3. Cause. The Company may terminate the Employment Term, at any time, for "cause" upon thirty days' written notice, in which event all liabilities and obligations of the Company under this Agreement shall cease, except for payment of Base Salary to the extent already accrued. For purposes of this Agreement, Employee's employment may be terminated for "cause" if he (a) engages in gross misconduct, dishonesty, mismanagement, deliberate and premeditated acts against the interest of the Company or the Parent Company, (b) materially fails to perform or observe any of the terms or provisions of this Agreement, (c) is convicted of a felony or (d) is adjudged by the Board not to be satisfactorily performing his duties. 5.4. Other Terminations. (a) Employee may terminate the Employment Term upon thirty days prior written notice to the Company if the Company fails to fulfill any of the material terms and provisions hereof including the failure to pay Employee any amounts payable hereunder within ten business days after the same shall be due and payable (and has not 137 cured any such failure by the end of the notice period). In addition, the Company may remove Employee without cause from the position in which he is employed hereunder at any time upon written notice in which case the Employment Term shall end immediately upon the giving of such notice. Upon any such termination or removal, Employee shall be entitled to receive, as liquidated damages for the failure of the Company to continue to employ Employee, only the amount due to Employee under the Company's then severance pay plan for employees. No other payments or benefits shall be due under this Agreement to Employee and the Company shall have no further liability or obligation. (b) Notwithstanding the foregoing, in the event that Employee executes a written release, substantially in the form attached hereto as Exhibit A, but subject to such changes as counsel to the Company may recommend, of any and all claims against the Company and all related parties with respect to all matters arising out of Employee's employment by the Company (other than his entitlement under any employee benefit plan or program sponsored by the Company in which he participated and under which he has accrued a benefit), and the termination thereof, Employee shall receive, in lieu of the payment described in subsection (a) hereof, which Employee agrees to waive, (i) a lump sum payment equal to twelve months of Employee's Base Salary, (ii) a lump sum payment equal to incentive compensation, as referred to in Section 1.5 hereof, for such twelve month period at the target percentage level in effect for the year during which Employee terminates this Agreement in accordance herewith or is removed, and (iii)(A) outplacement services, (B) 138 service credit, for purposes of determining the vesting of any stock options, performance units or other grants under any long term incentive plan of the Company or the Parent Company, for an additional twelve months, (C) a lump sum payment equal to the amount of benefits he would have received under the Company's pension, profit sharing and savings plans for such twelve month period, (D) a monthly amount (together with a tax equalization payment) for twelve months equal to the premium due under the Company's health benefit plan and (E) continuation of life insurance and long term disability benefits for twelve months at the level in effect at the time of such termination or removal. No other payments or benefits shall be due under this Agreement to Employee and the Company shall have no further liability or obligation. (c) Employee may voluntarily terminate the Employment Term upon thirty days' prior written notice for any reason; provided, however, that no further payments or benefits shall be due under this Agreement to Employee in that event and the Company shall have no further liability or obligation. 5.5 No Mitigation. Employee shall not be required to mitigate the amount of any payment or benefit provided for in this Section 5 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. 6. Payments Upon a Change in Control. 6.1. Definitions. For all purposes of this Section 6, the following terms shall have the meanings specified in this Section 6.1 unless the context clearly otherwise requires: 139 (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 Employee in all capacities with the Company, and its Affiliates, as reported for Federal income tax purposes on Form W-2, and 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 Employee, for the five calendar years (or such number of actual full calendar years of employment, if less than five) immediately preceding the calendar year in which occurs a Change of Control. (c) "Beneficial Owner" of any securities shall mean: (i) that such Person or any of such Person's Affiliates or Associates, directly or indirectly, has the right to acquire (whether such right is exercisable immediately or only after the passage of time) pursuant to any agreement, arrangement or understanding (whether or not in writing) or upon the exercise of conversion rights, exchange rights, rights, warrants or options, or otherwise; 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; 140 (ii) that such Person or any of such Person's Affiliates or Associates, directly or indirectly, has the right to vote or dispose of or has "beneficial ownership" of (as determined pursuant to Rule 13d-3 of the General Rules and Regulations under the Exchange Act), including without limitation pursuant to any agreement, arrangement or understanding, whether or not in writing; provided, however, that a Person shall not be deemed the "Beneficial Owner" of any security under this subsection (ii) as a result of an oral or written agreement, arrangement or understanding to vote such security if such agreement, arrangement or understanding (A) arises solely from a revocable proxy given in response to a public proxy or consent solicitation made pursuant to, and in accordance with, the applicable provisions of the General Rules and Regulations under the Exchange Act, and (B) is not then reportable by such Person on Schedule 13D under the Exchange Act (or any comparable or successor report); or (iii) where voting securities are beneficially owned, directly or indirectly, by any other Person (or any Affiliate or Associate thereof) with which such Person (or any of such Person's Affiliates or Associates) has any agreement, arrangement or understanding (whether or not in writing) for the purpose of acquiring, holding, voting (except pursuant to a revocable proxy as described in the 141 proviso to subsection (ii) above) or disposing of any voting securities of the Company or the Parent Company; provided, however, that nothing in this subsection (c) shall cause a Person engaged in business as an underwriter of securities to be the "Beneficial Owner" of any securities acquired through such Person's participation in good faith in a firm commitment underwriting until the expiration of forty days after the date of such acquisition. (d) "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 then outstanding of the Parent Company); 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 Parent 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 142 to constitute a majority thereof, unless the election, or the nomination for election by the shareholders of the Parent Company, 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. (e) "Normal Retirement Date" shall mean the first day of the calendar month coincident with or next following Employee's 65th birthday. (f) "Person" shall mean any individual, firm, corporation, partnership or other entity. (g) "Termination Date" shall mean the date of receipt of a Notice of Termination of this Agreement or any later date specified therein, as the case may be other. (h) "Termination of Employment" shall mean the termination of Employee's actual employment relationship with the Company. (i) "Termination upon a Change of Control" shall mean a Termination of Employment upon or within one year after a Change of Control either: (i) initiated by the Company for any reason other than (x) the Employee's disability, as described in Section 5.1 hereof, (y) death, or (z) for "cause," as described in Section 5.3 hereof (other than in Section 5.3(d) hereof), 143 or (ii) initiated by the Employee upon any 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 Employee; (C) any removal by the Company of Employee from the employment grade, compensation level or officer or director positions which he holds as of the effective date hereof; (D) the requirement that Employee undertake business travel to an extent substantially greater than is reasonable and customary for the position he holds pursuant hereto. 6.2. Notice of Termination. Any Termination upon a Change of Control shall be communicated by a Notice of Termination to the other party hereto given in accordance with Section 10 hereof. For purposes of this Agreement, a "Notice of Termination" means a written notice which (i) indicates the specific termination provision in this Agreement relied upon, (ii) briefly summarizes the facts and circumstances deemed to provide a basis for a Termination of Employment and the applicable provision hereof, 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). 6.3. Severance Compensation upon Termination. (a) Subject to adjustment as provided in paragraph (b) below, in the event of Employee's Termination upon a Change of Control, the 144 Company shall pay to Employee, within fifteen days after the Termination Date (or as soon as practicable thereafter in the event that the procedures set forth in Section 6.10(b) hereof cannot be completed within 15 days), in lieu of any other payments required under any other Section of this Agreement, an amount in cash equal to 2.99 multiplied by his Base Compensation. (b) In the event Employee's Normal Retirement Date would occur prior to twenty-four 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 Employee's Normal Retirement Date and the denominator of which shall be 730. 6.4. Other Payments. In the event of Employee's Termination upon a Change of Control, the Company shall also pay to Employee within fifteen days after the Termination Date, to the extent not theretofore paid, Employee's Base Salary through the Termination Date and a further amount equal to Employee's Base Salary in lieu of his unused vacation pay, if any, both calculated at the rate in effect on the Termination Date or, if higher, at the highest rate in effect at any time within the 90-day period preceding the Termination Date; 6.5. Termination of Non-Competition Requirements. In the event of a Termination upon a Change of Control, any non-competition agreements hereunder or otherwise executed by Employee, or any non- competition provisions binding on Employee in connection with any employee bonus, benefit, incentive or other plan or program provided 145 by the Company or any Affiliate, shall immediately terminate; provided, however, that this provision shall not terminate or otherwise modify the confidentiality provisions contained in Section 2 hereof. 6.6. Enforcement. (a) In the event that the Company shall fail or refuse to make payment of any amounts due Employee hereunder within the appropriate time period, the Company shall pay to 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 until paid to 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 Employee not be required to incur any expenses associated with the enforcement of his rights under 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 Employee hereunder. Accordingly, the Company shall pay Employee on demand the amount necessary to reimburse Employee in full for all expenses (including all attorneys' fees and legal expenses) incurred by Employee in enforcing any of the obligations of the Company under this Section. 6.7. No Mitigation. 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 146 amount of any payment or benefit provided for herein be reduced by any compensation earned by other employment or otherwise. 6.8. Non-Exclusivity of Rights. Nothing in this Agreement shall prevent or limit 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 Affiliate and for which Employee may qualify; provided, however, that if Employee becomes entitled to and receives all of the payments provided for in this Agreement, Employee agrees to waive his right to receive payments under any severance plan or similar program applicable to all employees of the Company. 6.9. No Set-Off. The Company's obligation to make the payments provided for in this Section 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 Employee or others. 6.10. 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 Employee, whether paid or payable or distributed or distributable pursuant to the terms of this Agreement or otherwise (a "Payment"), would constitute an "excess parachute payment" within the meaning of Section 280G of the Internal Revenue Code of 1986, as amended (the "Code"), and that it would be economically advantageous to Employee to reduce the Payment to avoid or reduce the taxation of excess 147 parachute payments under Section 4999 of the Code, the aggregate present value of amounts payable or distributable to or for the benefit of 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 6, present value shall be determined in accordance with Section 280G(d)(4) of the Code. (b) All determinations to be made under this Section 6 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 Employee within 10 days of the Termination Date. Any such determination by the Accounting Firm shall be binding upon the Company and Employee. Employee shall in his sole discretion determine which and how much of the Agreement Payments shall be eliminated or reduced consistent with the requirements of this Section 6. Within five days after Employee's determination, the Company shall pay (or cause to be paid) or distribute (or cause to be distributed) to or for the benefit of Employee such amounts as are then due to Employee under this Agreement. 148 (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 Employee which 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 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 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 149 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. 6.11. Settlement of All Disputes. (a) In the event of any dispute, controversy or claim arising out of or relating to any provision of this Section 6 or Employee's Termination upon a Change in Control, the Company shall appoint as the sole and exclusive arbiter of such dispute, controversy or claim, a committee composed of two persons who were members of the Board at any time within five years prior to the Change of Control (which persons may, but need not be, directors of the Company at the time of such dispute, controversy or claim); provided, however, that no person shall be eligible to serve thereon who (i) is at the Termination Date, or shall have been at any time within one year prior thereto, an executive officer of the Company, or (ii) shall be or have been at any time related in any manner to or otherwise affiliated with, or was first nominated by, the corporation, Person or group whose acquisition of shares of Common Stock of the Parent Company has given rise to a Change of Control. The decision of such committee and the award of any monetary judgment or other relief by such committee shall be final and binding upon Employee and the Company, and shall not be subject to appeal. Judgment may be entered upon the decision and award of such committee by Employee or the Company in any court of competent jurisdiction. The Company shall pay the persons selected pursuant to this subsection a reasonable fee for their services, and shall reimburse such persons for their expenses incurred in this capacity. In addition, the 150 Company shall, to the maximum extent permitted by law, indemnify and hold harmless such persons of and from any and all claims, damages or expenses of any nature whatsoever relating to or arising from their activities in this capacity. (b) In the event that the Company shall be unable to appoint the committee referred to in (a) above after good faith efforts to do so, or in the event that such committee cannot reach a unanimous agreement, any remaining dispute, controversy or claim arising out of or relating to any provision of this Agreement or Employee's Termination upon a Change of Control shall be settled by arbitration in the City of Philadelphia, Pennsylvania, in accordance with the commercial arbitration rules then in effect of the American Arbitration Association, before a panel of three arbitrators, two of whom shall be selected by the Company and Employee, respectively, and the third of whom shall be selected by the other two arbitrators. Each arbitrator selected as provided herein is required to be or have been a director or an executive officer of a corporation whose shares of common stock were listed during at least one year of such service on the New York Stock Exchange or the American Stock Exchange or quoted on the National Association of Securities Dealers Automated Quotations System. Any award entered by the arbitrators shall be final, binding and nonappealable and judgment may be entered thereon by any party in accordance with applicable law in any court of competent jurisdiction. This arbitration provision shall be specifically enforceable. The fees of the American Arbitration Association and the arbitrators and any 151 expenses relating to the conduct of the arbitration shall be paid by the Company. (c) The party or parties challenging the right of Employee to the benefits of this Agreement shall in all circumstances have the burden of proof. 6.12. Successor Company. The Company shall require any successor or successors (whether direct or indirect, by purchase, merger, consolidation, exchange or otherwise) to all or substantially all of the business or assets of the Company or its Affiliates as of the date hereof, by agreement in form and substance satisfactory to 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 the Agreement. As used in this Agreement, the Company shall mean the Company as hereinbefore defined and any such successor or successors to its business or assets (or that of its Affiliates as of the date hereof), jointly and severally. 7. Survival. Notwithstanding the termination of the Employment Term or this Agreement, Employee's obligations under Sections 2 and 3 hereof shall, except to the extent otherwise provided herein, survive and remain in full force and effect for the 152 periods therein provided, and the provisions for equitable relief against Employee in Section 4 hereof shall continue in force. 8. 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. 9. Litigation Expenses. Except as provided in Section 6.6 above, in the event of a lawsuit by either party to enforce the provisions of this Agreement, the prevailing party shall be entitled to recover reasonable costs, expenses and attorney's fees from the other party. 10. Notices. All notices and other communications required or permitted hereunder or necessary or convenient in connection herewith shall be in writing and shall be deemed to have been given when hand delivered or mailed by registered or certified mail, as follows (provided that notice of change of address shall be deemed given only when received): If to the Company, to: 2600 One Logan Square Philadelphia, PA 19103 With a required copy to: Morgan, Lewis & Bockius 2000 One Logan Square Philadelphia, PA 19103-6993 Attention: Robert J. Lichtenstein, Esquire If to Employee, to: Edward J. Flood P.O. Box 588, 1055 Gypsy Hill Road Gwynedd Valley, PA 19437 153 or to such other names or addresses as the Company or Employee, as the case may be, shall designate by notice to each other person entitled to receive notices in the manner specified in this Section. 11. Contents of Agreement; Amendment and Assignment. (a) This Agreement supersedes all prior agreements and sets forth the entire understanding among the parties hereto with respect to the subject matter hereof and cannot be changed, modified, extended or terminated except upon written amendment approved by the Board and executed on its behalf by a duly authorized officer. (b) Employee acknowledges that from time to time, the Company may establish, maintain and distribute employee manuals or handbooks or personnel policy manuals, and officers or other representatives of the Company may make written or oral statements relating to personnel policies and procedures. Such manuals, handbooks and statements are intended only for general guidance. No policies, procedures or statements of any nature by or on behalf of the Company (whether written or oral, and whether or not contained in any employee manual or handbook or personnel policy manual), and no acts or practices of any nature, shall be construed to modify this Agreement or to create express or implied obligations of any nature to Employee. (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, executors, administrators, legal representatives, successors and assigns of the parties hereto, except that the duties and responsibilities of Employee hereunder are of a personal nature 154 and shall not be assignable or delegatable in whole or in part by Employee. 12. Severability. If any provision of this Agreement or application thereof to anyone or under any circumstances is adjudicated to be invalid or unenforceable in any jurisdiction, such invalidity or unenforceability shall not affect any other provision or application of this Agreement which can be given effect without the invalid or unenforceable provision or application and shall not invalidate or render unenforceable such provision or application in any other jurisdiction. 13. Remedies Cumulative; No Waiver. No remedy conferred upon the Company by this Agreement is intended to be exclusive of any other remedy, and each and every such remedy shall be cumulative and shall be in addition to any other remedy given hereunder or now or hereafter existing at law or in equity. No delay or omission by the Company in exercising any right, remedy or power hereunder or existing at law or in equity shall be construed as a waiver thereof, and any such right, remedy or power may be exercised by the Company from time to time and as often as may be deemed expedient or necessary by the Company in its sole discretion. 14. 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 marking proof of this Agreement or any counterpart hereof to produce or account for any of the other counterparts. 155 IN WITNESS WHEREOF, the undersigned, intending to be legally bound, have executed this Agreement on the date first above written. MARITRANS HOLDINGS INC. Attest: [SEAL] /s/ John C. Newcomb By /s/ Gary L. Schaefer -------------------------------- ------------------------------ Secretary Name: Gary L. Schaefer Title: Treasurer Witness: /s/Anna S. Richmond /s/Edward J. Flood -------------------------------- ------------------------------ EDWARD J. FLOOD EX-10 8 EXHIBIT 10.10 156 EXHIBIT 10.10 EMPLOYMENT AGREEMENT THIS EMPLOYMENT AGREEMENT (the "Agreement") entered into on October 5, 1993, by and between Maritrans General Partner Inc., a Delaware corporation (the "Company"), and Charles R. Ward ("Employee"). WHEREAS, Employee is presently employed by the Company as its President, Eastern Division; and WHEREAS, the Company and Employee desire to enter into a new agreement to provide for Employee's continued employment by the Company, upon the terms and conditions set forth herein, beginning as of April 1, 1993, the date of Employee's appointment to his current position; NOW, THEREFORE, the parties hereto, intending to be legally bound, agree as follows: 1. Employment. The Company hereby continues the employment of Employee, and Employee hereby accepts such employment and agrees to perform his duties and responsibilities hereunder, in accordance with the terms and conditions hereinafter set forth. This Agreement shall supersede and replace the agreement entered into between Employee and Maritrans GP Inc., a predecessor of the Company, as of February 12, 1992, which shall be void as of the date hereof. 1.1. Employment Term. The term of this Agreement (the "Employment Term") shall commence on April 1, 1993 and shall continue for an indefinite period until terminated in accordance with Section 5 or Section 6 hereof. 157 1.2. Duties and Responsibilities. During the Employment Term, Employee shall perform all duties and accept all responsibilities incident to such positions as are assigned to him by the Company's Chief Executive Officer or as otherwise may be assigned to him by the Company's Board of Directors (the "Board"). 1.3. Extent of Service. During the Employment Term, Employee agrees to use his best efforts to carry out his duties and responsibilities under Section 1.2 hereof and, consistent with the other provisions of this Agreement, to devote his full time, attention and energy thereto. Except as provided in Section 3 hereof, the foregoing shall not be construed as preventing Employee from making minority investments in other businesses or enterprises provided that Employee agrees not to become engaged in any other business activity which may interfere with his ability to discharge his duties and responsibilities to the Company. Employee further agrees not to work either on a part time or independent contracting basis for any other business or enterprise during the Employment Term without the prior written consent of the Board. 1.4. Base Salary. (a) For all the services rendered by Employee hereunder, the Company shall pay Employee the basic annual rate of compensation being paid to Employee as of the date hereof for each full year of the Employment Term ("Base Salary"), payable in installments at such times as the Company customarily pays its 158 other executives (but in any event no less often than monthly). Employee's Base Salary shall be subject to review and adjustment by the Company pursuant to its normal performance review policies for executives. The Company shall be entitled to make proper withholdings from Employee's Base Salary (and all other payments of compensation under this Agreement) as required by law or agreed to by Employee. (b) During the Employment Term, Employee shall also be (i) entitled to participate in such retirement, profit sharing, equity compensation, group insurance, medical and other fringe benefit plans, if any, as may be authorized from time to time by the Board in its sole discretion for executives of the Company, (ii) provided with reimbursement of expenses related to his employment by the Company on a basis similar to that which may be authorized from time to time by the Board in its sole discretion for executives of the Company generally, and (iii) entitled to vacation and holidays during the Employment Term in accordance with the Company's normal policy. 1.5. Incentive Compensation. In addition to the Base Salary set forth in Section 1.4 hereof, Employee shall participate in the Company's Executive Award Plan and such other annual or long-term incentive compensation plans (including stock option and stock grant plans), if any, for executives generally, as may be established from time to time by the Board in its sole discretion. The terms and provisions of any such incentive 159 compensation plan shall be determined in the sole discretion of the Board. 2. Confidential Information. Employee recognizes and acknowledges that by reason of his employment by and service to the Company (both during the Employment Term and before or after it), 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"). Employee acknowledges that such Confidential Information is a valuable and unique asset and covenants that he will not, either during or after the Employment Term, 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 Employee or except as may be required by law. 3. Non-Competition. (a) During the Employment Term and for a period of one year thereafter, Employee will not, unless acting pursuant hereto or with the prior written consent of the Board or in the event of a termination for "cause" under Section 5.3(d), directly or 160 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 the Employment Term or on the date Employee's employment terminates, 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 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 the Employment Term or on the date Employee's employment terminates, as applicable. It is recognized by Employee that the business of the Company and its affiliates and 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. (b) The foregoing restriction shall not be construed to prohibit the ownership by 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 Employee nor any group of persons including Employee in any way, either directly or indirectly, manages or exercises control of any such 161 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. 4. Equitable Relief. (a) Employee acknowledges that the restrictions contained in Sections 2 and 3 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. Employee represents that his experience and capabilities are such that the restrictions contained in Section 3 hereof will not prevent Employee from obtaining employment or otherwise earning a living at the same general level of economic benefit as anticipated by this Agreement. 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) 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 2 or 3 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 2 or 162 3 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) Employee irrevocably and unconditionally (i) agrees that any suit, action or other legal proceeding arising out of Section 2 or 3 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 10 hereof. (d) Employee agrees that he will provide, and that the Company may similarly provide, a copy of Sections 2 and 3 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, 163 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. 5. Termination. The Employment Term shall terminate upon the occurrence of any one of the following events: 5.1. Disability. The Company may terminate the Employment Term if Employee is unable fully to perform his duties and responsibilities hereunder to the full extent required by the Board by reason of illness, injury or incapacity for six consecutive months, or for more than six months in the aggregate during any period of twelve calendar months. In such event, the Company shall have no further liability or obligation to Employee under this Agreement except for payments prescribed under any disability benefit plan which may be in effect for employees of the Company and in which he participated. Employee agrees, in the event of any dispute under this Section 5.1, to submit to a physical examination by a licensed physician selected by the Board. 5.2. Death. The Employment Term shall terminate in the event of Employee's death. In such event, the Company shall pay to Employee's executors, legal representatives or administrators, as applicable, an amount equal to the installment of his Base Salary set forth in Section 1.4 hereof for the month in which he dies, and, thereafter, the Company shall have no further liability or obligation under this Agreement to his executors, legal 164 representatives, administrators, heirs or assigns or any other person claiming under or through him; provided, however, that Employee's estate or designated beneficiaries shall be entitled to receive (i) the payments prescribed for such recipients under any death benefit plan which may be in effect for executives of the Company, generally, (ii) an amount equal to one year of Employee's Base Salary at the time of his death, and (iii) a pro rata portion of the incentive compensation, if any, as referred to in Section 1.5 hereof, in respect of the year during which Employee died. 5.3. Cause. The Company may terminate the Employment Term, at any time, for "cause" upon thirty days' written notice, in which event all liabilities and obligations of the Company under this Agreement shall cease, except for payment of Base Salary to the extent already accrued. For purposes of this Agreement, Employee's employment may be terminated for "cause" if he (a) engages in gross misconduct, dishonesty, mismanagement, deliberate and premeditated acts against the interest of the Company, (b) materially fails to perform or observe any of the terms or provisions of this Agreement, (c) is convicted of a felony or (d) is adjudged by the Board not to be satisfactorily performing his duties. 5.4. Other Terminations. (a) Employee may terminate the Employment Term upon thirty days prior written notice to the Company if the Company fails to fulfill any of the material terms and provisions hereof including the failure to pay Employee any amounts payable hereunder within ten business days after the same shall be due and payable (and has not cured any such failure by the end of the notice period). In 165 addition, the Company may remove Employee without cause from the position in which he is employed hereunder at any time upon written notice in which case the Employment Term shall end immediately upon the giving of such notice. Upon any such termination or removal, Employee shall be entitled to receive, as liquidated damages for the failure of the Company to continue to employ Employee, only the amount due to Employee under the Company's then severance pay plan for employees. No other payments or benefits shall be due under this Agreement to Employee and the Company shall have no further liability or obligation. (b) Notwithstanding the foregoing, in the event that Employee executes a written release, substantially in the form attached hereto as Exhibit A, but subject to such changes as counsel to the Company may recommend, of any and all claims against the Company and all related parties with respect to all matters arising out of Employee's employment by the Company (other than his entitlement under any employee benefit plan or program sponsored by the Company in which he participated and under which he has accrued a benefit), and the termination thereof, Employee shall receive, in lieu of the payment described in subsection (a) hereof, which Employee agrees to waive, (i) a lump sum payment equal to twelve months of Employee's Base Salary, (ii) a lump sum payment equal to incentive compensation, as referred to in Section 1.5 hereof, for such twelve month period at the target percentage level in effect for the year during which Employee terminates this Agreement in accordance herewith or is removed, and (iii)(A) outplacement services, (B) service credit, for purposes of determining the vesting of any stock 166 options, performance units or other grants under any long term incentive plan of the Company, for an additional twelve months, (C) a lump sum payment equal to the amount of benefits he would have received under the Company's pension, profit sharing and savings plans for such twelve month period, (D) a monthly amount (together with a tax equalization payment) for twelve months equal to the premium due under the Company's health benefit plan and (E) continuation of life insurance and long term disability benefits for twelve months at the level in effect at the time of such termination or removal. No other payments or benefits shall be due under this Agreement to Employee and the Company shall have no further liability or obligation. (c) Employee may voluntarily terminate the Employment Term upon thirty days' prior written notice for any reason; provided, however, that no further payments or benefits shall be due under this Agreement to Employee in that event and the Company shall have no further liability or obligation. 5.5 No Mitigation. Employee shall not be required to mitigate the amount of any payment or benefit provided for in this Section 5 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. 6. Payments Upon a Change in Control. 6.1. Definitions. For all purposes of this Section 6, the following terms shall have the meanings specified in this Section 6.1 unless the context clearly otherwise requires: 167 (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 Employee in all capacities with the Company, and its Affiliates, as reported for Federal income tax purposes on Form W-2, and 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 Employee, for the five calendar years (or such number of actual full calendar years of employment, if less than five) immediately preceding the calendar year in which occurs a Change of Control. (c) "Beneficial Owner" of any securities shall mean: (i) that such Person or any of such Person's Affiliates or Associates, directly or indirectly, has the right to acquire (whether such right is exercisable immediately or only after the passage of time) pursuant to any agreement, arrangement or understanding (whether or not in writing) or upon the exercise of conversion rights, exchange rights, rights, warrants or options, or otherwise; 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; 168 (ii) that such Person or any of such Person's Affiliates or Associates, directly or indirectly, has the right to vote or dispose of or has "beneficial ownership" of (as determined pursuant to Rule 13d-3 of the General Rules and Regulations under the Exchange Act), including without limitation pursuant to any agreement, arrangement or understanding, whether or not in writing; provided, however, that a Person shall not be deemed the "Beneficial Owner" of any security under this subsection (ii) as a result of an oral or written agreement, arrangement or understanding to vote such security if such agreement, arrangement or understanding (A) arises solely from a revocable proxy given in response to a public proxy or consent solicitation made pursuant to, and in accordance with, the applicable provisions of the General Rules and Regulations under the Exchange Act, and (B) is not then reportable by such Person on Schedule 13D under the Exchange Act (or any comparable or successor report); or (iii) where voting securities are beneficially owned, directly or indirectly, by any other Person (or any Affiliate or Associate thereof) with which such Person (or any of such Person's Affiliates or Associates) has any agreement, arrangement or understanding (whether or not in writing) for the purpose of acquiring, holding, voting (except pursuant to a revocable proxy as described in the 169 proviso to subsection (ii) above) or disposing of any voting securities of the Company; provided, however, that nothing in this subsection (c) shall cause a Person engaged in business as an underwriter of securities to be the "Beneficial Owner" of any securities acquired through such Person's participation in good faith in a firm commitment underwriting until the expiration of forty days after the date of such acquisition. (d) "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 then outstanding of Maritrans Inc., the parent of the Company); 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 Maritrans Inc. 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 Inc. cease for any reason to 170 constitute a majority thereof, unless the election, or the nomination for election by the shareholders of Maritrans Inc., 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. (e) "Normal Retirement Date" shall mean the first day of the calendar month coincident with or next following Employee's 65th birthday. (f) "Person" shall mean any individual, firm, corporation, partnership or other entity. (g) "Termination Date" shall mean the date of receipt of a Notice of Termination of this Agreement or any later date specified therein, as the case may be other. (h) "Termination of Employment" shall mean the termination of Employee's actual employment relationship with the Company. (i) "Termination upon a Change of Control" shall mean a Termination of Employment upon or within one year after a Change of Control either: (i) initiated by the Company for any reason other than (x) the Employee's disability, as described in Section 5.1 hereof, (y) death, or (z) for "cause," as described in Section 5.3 hereof (other than in Section 5.3(d) hereof), 171 or (ii) initiated by the Employee upon any 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 Employee; (C) any removal by the Company of Employee from the employment grade, compensation level or officer or director positions which he holds as of the effective date hereof; (D) the requirement that Employee undertake business travel to an extent substantially greater than is reasonable and customary for the position he holds pursuant hereto. 6.2. Notice of Termination. Any Termination upon a Change of Control shall be communicated by a Notice of Termination to the other party hereto given in accordance with Section 10 hereof. For purposes of this Agreement, a "Notice of Termination" means a written notice which (i) indicates the specific termination provision in this Agreement relied upon, (ii) briefly summarizes the facts and circumstances deemed to provide a basis for a Termination of Employment and the applicable provision hereof, 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). 6.3. Severance Compensation upon Termination. (a) Subject to adjustment as provided in paragraph (b) below, in the event of Employee's Termination upon a Change of Control, the 172 Company shall pay to Employee, within fifteen days after the Termination Date (or as soon as practicable thereafter in the event that the procedures set forth in Section 6.10(b) hereof cannot be completed within 15 days), in lieu of any other payments required under any other Section of this Agreement, an amount in cash equal to 2.99 multiplied by his Base Compensation. (b) In the event Employee's Normal Retirement Date would occur prior to twenty-four 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 Employee's Normal Retirement Date and the denominator of which shall be 730. 6.4. Other Payments. In the event of Employee's Termination upon a Change of Control, the Company shall also pay to Employee within fifteen days after the Termination Date, to the extent not theretofore paid, Employee's Base Salary through the Termination Date and a further amount equal to Employee's Base Salary in lieu of his unused vacation pay, if any, both calculated at the rate in effect on the Termination Date or, if higher, at the highest rate in effect at any time within the 90-day period preceding the Termination Date; 6.5. Termination of Non-Competition Requirements. In the event of a Termination upon a Change of Control, any non-competition agreements hereunder or otherwise executed by Employee, or any non- competition provisions binding on Employee in connection with any employee bonus, benefit, incentive or other plan or program provided 173 by the Company or any Affiliate, shall immediately terminate; provided, however, that this provision shall not terminate or otherwise modify the confidentiality provisions contained in Section 2 hereof. 6.6. Enforcement. (a) In the event that the Company shall fail or refuse to make payment of any amounts due Employee hereunder within the appropriate time period, the Company shall pay to 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 until paid to 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 Employee not be required to incur any expenses associated with the enforcement of his rights under 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 Employee hereunder. Accordingly, the Company shall pay Employee on demand the amount necessary to reimburse Employee in full for all expenses (including all attorneys' fees and legal expenses) incurred by Employee in enforcing any of the obligations of the Company under this Section. 6.7. No Mitigation. Employee shall not be required to mitigate the amount of any payment or benefit provided for in this 174 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. 6.8. Non-Exclusivity of Rights. Nothing in this Agreement shall prevent or limit 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 Affiliate and for which Employee may qualify; provided, however, that if Employee becomes entitled to and receives all of the payments provided for in this Agreement, Employee agrees to waive his right to receive payments under any severance plan or similar program applicable to all employees of the Company. 6.9. No Set-Off. The Company's obligation to make the payments provided for in this Section 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 Employee or others. 6.10. 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 Employee, whether paid or payable or distributed or distributable pursuant to the terms of this Agreement or otherwise (a "Payment"), would constitute an "excess parachute payment" within the meaning of Section 280G of the Internal Revenue Code of 1986, as amended (the "Code"), and that it would be economically advantageous to Employee 175 to reduce the Payment to avoid or reduce the taxation of excess parachute payments under Section 4999 of the Code, the aggregate present value of amounts payable or distributable to or for the benefit of 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 6, present value shall be determined in accordance with Section 280G(d)(4) of the Code. (b) All determinations to be made under this Section 6 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 Employee within 10 days of the Termination Date. Any such determination by the Accounting Firm shall be binding upon the Company and Employee. Employee shall in his sole discretion determine which and how much of the Agreement Payments shall be eliminated or reduced consistent with the requirements of this Section 6. Within five days after Employee's determination, the Company shall pay (or cause to be paid) or distribute (or cause to be distributed) to or for the benefit of Employee such amounts as are then due to Employee under this Agreement. 176 (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 Employee which 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 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 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 177 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. 6.11. Settlement of All Disputes. (a) In the event of any dispute, controversy or claim arising out of or relating to any provision of this Section 6 or Employee's Termination upon a Change in Control, the Company shall appoint as the sole and exclusive arbiter of such dispute, controversy or claim, a committee composed of two persons who were members of the Board at any time within five years prior to the Change of Control (which persons may, but need not be, directors of the Company at the time of such dispute, controversy or claim); provided, however, that no person shall be eligible to serve thereon who (i) is at the Termination Date, or shall have been at any time within one year prior thereto, an executive officer of the Company, or (ii) shall be or have been at any time related in any manner to or otherwise affiliated with, or was first nominated by, the corporation, Person or group whose acquisition of shares of Common Stock of the Company has given rise to a Change of Control. The decision of such committee and the award of any monetary judgment or other relief by such committee shall be final and binding upon Employee and the Company, and shall not be subject to appeal. Judgment may be entered upon the decision and award of such committee by Employee or the Company in any court of competent jurisdiction. The Company shall pay the persons selected pursuant to this subsection a reasonable fee for their services, and shall reimburse such persons for their expenses incurred in this capacity. In addition, the 178 Company shall, to the maximum extent permitted by law, indemnify and hold harmless such persons of and from any and all claims, damages or expenses of any nature whatsoever relating to or arising from their activities in this capacity. (b) In the event that the Company shall be unable to appoint the committee referred to in (a) above after good faith efforts to do so, or in the event that such committee cannot reach a unanimous agreement, any remaining dispute, controversy or claim arising out of or relating to any provision of this Agreement or Employee's Termination upon a Change of Control shall be settled by arbitration in the City of Philadelphia, Pennsylvania, in accordance with the commercial arbitration rules then in effect of the American Arbitration Association, before a panel of three arbitrators, two of whom shall be selected by the Company and Employee, respectively, and the third of whom shall be selected by the other two arbitrators. Each arbitrator selected as provided herein is required to be or have been a director or an executive officer of a corporation whose shares of common stock were listed during at least one year of such service on the New York Stock Exchange or the American Stock Exchange or quoted on the National Association of Securities Dealers Automated Quotations System. Any award entered by the arbitrators shall be final, binding and nonappealable and judgment may be entered thereon by any party in accordance with applicable law in any court of competent jurisdiction. This arbitration provision shall be specifically enforceable. The fees of the American Arbitration Association and the arbitrators and any 179 expenses relating to the conduct of the arbitration shall be paid by the Company. (c) The party or parties challenging the right of Employee to the benefits of this Agreement shall in all circumstances have the burden of proof. 6.12. Successor Company. The Company shall require any successor or successors (whether direct or indirect, by purchase, merger, consolidation, exchange or otherwise) to all or substantially all of the business or assets of the Company or its Affiliates as of the date hereof, by agreement in form and substance satisfactory to 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 the Agreement. As used in this Agreement, the Company shall mean the Company as hereinbefore defined and any such successor or successors to its business or assets (or that of its Affiliates as of the date hereof), jointly and severally. 7. Survival. Notwithstanding the termination of the Employment Term or this Agreement, Employee's obligations under Sections 2 and 3 hereof shall, except to the extent otherwise provided herein, survive and remain in full force and effect for the 180 periods therein provided, and the provisions for equitable relief against Employee in Section 4 hereof shall continue in force. 8. 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. 9. Litigation Expenses. Except as provided in Section 6.6 above, in the event of a lawsuit by either party to enforce the provisions of this Agreement, the prevailing party shall be entitled to recover reasonable costs, expenses and attorney's fees from the other party. 10. Notices. All notices and other communications required or permitted hereunder or necessary or convenient in connection herewith shall be in writing and shall be deemed to have been given when hand delivered or mailed by registered or certified mail, as follows (provided that notice of change of address shall be deemed given only when received): If to the Company, to: 2600 One Logan Square Philadelphia, PA 19103 With a required copy to: Morgan, Lewis & Bockius 2000 One Logan Square Philadelphia, PA 19103-6993 Attention: Robert J. Lichtenstein, Esquire If to Employee, to: Charles R. Ward 53 Colonial Road Havertown, PA 19083 181 or to such other names or addresses as the Company or Employee, as the case may be, shall designate by notice to each other person entitled to receive notices in the manner specified in this Section. 11. Contents of Agreement; Amendment and Assignment. (a) This Agreement supersedes all prior agreements and sets forth the entire understanding among the parties hereto with respect to the subject matter hereof and cannot be changed, modified, extended or terminated except upon written amendment approved by the Board and executed on its behalf by a duly authorized officer. (b) Employee acknowledges that from time to time, the Company may establish, maintain and distribute employee manuals or handbooks or personnel policy manuals, and officers or other representatives of the Company may make written or oral statements relating to personnel policies and procedures. Such manuals, handbooks and statements are intended only for general guidance. No policies, procedures or statements of any nature by or on behalf of the Company (whether written or oral, and whether or not contained in any employee manual or handbook or personnel policy manual), and no acts or practices of any nature, shall be construed to modify this Agreement or to create express or implied obligations of any nature to Employee. (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, executors, administrators, legal representatives, successors and assigns of the parties hereto, except that the duties and responsibilities of Employee hereunder are of a personal nature 182 and shall not be assignable or delegatable in whole or in part by Employee. 12. Severability. If any provision of this Agreement or application thereof to anyone or under any circumstances is adjudicated to be invalid or unenforceable in any jurisdiction, such invalidity or unenforceability shall not affect any other provision or application of this Agreement which can be given effect without the invalid or unenforceable provision or application and shall not invalidate or render unenforceable such provision or application in any other jurisdiction. 13. Remedies Cumulative; No Waiver. No remedy conferred upon the Company by this Agreement is intended to be exclusive of any other remedy, and each and every such remedy shall be cumulative and shall be in addition to any other remedy given hereunder or now or hereafter existing at law or in equity. No delay or omission by the Company in exercising any right, remedy or power hereunder or existing at law or in equity shall be construed as a waiver thereof, and any such right, remedy or power may be exercised by the Company from time to time and as often as may be deemed expedient or necessary by the Company in its sole discretion. 14. 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 marking 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 183 legally bound, have executed this Agreement on the date first above written. MARITRANS GENERAL PARTNER INC. Attest: [SEAL] /s/ John C. Newcomb By /s/ Craig N. Johnson ------------------------------ --------------------------------- Secretary Name: Craig N. Johnson Title: President Witness: /s/A. Charles Amentt /s/Charles R. Ward ------------------------------ --------------------------------- CHARLES R. WARD EX-10 9 EXHIBIT 10.11 184 EXHIBIT 10.11 EMPLOYMENT AGREEMENT THIS EMPLOYMENT AGREEMENT (the "Agreement") entered into on October 5, 1993, by and between Maritrans General Partner Inc., a Delaware corporation (the "Company"), and Brian J. Telford ("Employee"). WHEREAS, Employee is presently employed by the Company as its President, Gulf Division; and WHEREAS, the Company and Employee desire to enter into a new agreement to provide for Employee's continued employment by the Company, upon the terms and conditions set forth herein, beginning as of April 1, 1993, the date of Employee's appointment to his current position; NOW, THEREFORE, the parties hereto, intending to be legally bound, agree as follows: 1. Employment. The Company hereby continues the employment of Employee, and Employee hereby accepts such employment and agrees to perform his duties and responsibilities hereunder, in accordance with the terms and conditions hereinafter set forth. This Agreement shall supersede and replace the agreement entered into between Employee and Maritrans GP Inc., a predecessor of the Company, as of September 8, 1992, which shall be void as of the date hereof. 1.1. Employment Term. The term of this Agreement (the "Employment Term") shall commence on April 1, 1993 and shall continue for an indefinite period until terminated in accordance with Section 5 or Section 6 hereof. 185 1.2. Duties and Responsibilities. During the Employment Term, Employee shall perform all duties and accept all responsibilities incident to such positions as are assigned to him by the Company's Chief Executive Officer or as otherwise may be assigned to him by the Company's Board of Directors (the "Board"). 1.3. Extent of Service. During the Employment Term, Employee agrees to use his best efforts to carry out his duties and responsibilities under Section 1.2 hereof and, consistent with the other provisions of this Agreement, to devote his full time, attention and energy thereto. Except as provided in Section 3 hereof, the foregoing shall not be construed as preventing Employee from making minority investments in other businesses or enterprises provided that Employee agrees not to become engaged in any other business activity which may interfere with his ability to discharge his duties and responsibilities to the Company. Employee further agrees not to work either on a part time or independent contracting basis for any other business or enterprise during the Employment Term without the prior written consent of the Board. 1.4. Base Salary. (a) For all the services rendered by Employee hereunder, the Company shall pay Employee the basic annual rate of compensation being paid to Employee as of the date hereof for each full year of the Employment Term ("Base Salary"), payable in installments at such times as the Company customarily pays its 186 other executives (but in any event no less often than monthly). Employee's Base Salary shall be subject to review and adjustment by the Company pursuant to its normal performance review policies for executives. The Company shall be entitled to make proper withholdings from Employee's Base Salary (and all other payments of compensation under this Agreement) as required by law or agreed to by Employee. (b) During the Employment Term, Employee shall also be (i) entitled to participate in such retirement, profit sharing, equity compensation, group insurance, medical and other fringe benefit plans, if any, as may be authorized from time to time by the Board in its sole discretion for executives of the Company, (ii) provided with reimbursement of expenses related to his employment by the Company on a basis similar to that which may be authorized from time to time by the Board in its sole discretion for executives of the Company generally, and (iii) entitled to vacation and holidays during the Employment Term in accordance with the Company's normal policy. 1.5. Incentive Compensation. In addition to the Base Salary set forth in Section 1.4 hereof, Employee shall participate in the Company's Executive Award Plan and such other annual or long-term incentive compensation plans (including stock option and stock grant plans), if any, for executives generally, as may be established from time to time by the Board in its sole discretion. The terms and provisions of any such incentive 187 compensation plan shall be determined in the sole discretion of the Board. 2. Confidential Information. Employee recognizes and acknowledges that by reason of his employment by and service to the Company (both during the Employment Term and before or after it), 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"). Employee acknowledges that such Confidential Information is a valuable and unique asset and covenants that he will not, either during or after the Employment Term, 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 Employee or except as may be required by law. 3. Non-Competition. (a) During the Employment Term and for a period of one year thereafter, Employee will not, unless acting pursuant hereto or with the prior written consent of the Board or in the event of a termination for "cause" under Section 5.3(d), directly or 188 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 the Employment Term or on the date Employee's employment terminates, 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 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 the Employment Term or on the date Employee's employment terminates, as applicable. It is recognized by Employee that the business of the Company and its affiliates and 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. (b) The foregoing restriction shall not be construed to prohibit the ownership by 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 Employee nor any group of persons including Employee in any way, either directly or indirectly, manages or exercises control of any such 189 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. 4. Equitable Relief. (a) Employee acknowledges that the restrictions contained in Sections 2 and 3 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. Employee represents that his experience and capabilities are such that the restrictions contained in Section 3 hereof will not prevent Employee from obtaining employment or otherwise earning a living at the same general level of economic benefit as anticipated by this Agreement. 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) 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 2 or 3 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 2 or 190 3 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) Employee irrevocably and unconditionally (i) agrees that any suit, action or other legal proceeding arising out of Section 2 or 3 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 10 hereof. (d) Employee agrees that he will provide, and that the Company may similarly provide, a copy of Sections 2 and 3 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, 191 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. 5. Termination. The Employment Term shall terminate upon the occurrence of any one of the following events: 5.1. Disability. The Company may terminate the Employment Term if Employee is unable fully to perform his duties and responsibilities hereunder to the full extent required by the Board by reason of illness, injury or incapacity for six consecutive months, or for more than six months in the aggregate during any period of twelve calendar months. In such event, the Company shall have no further liability or obligation to Employee under this Agreement except for payments prescribed under any disability benefit plan which may be in effect for employees of the Company and in which he participated. Employee agrees, in the event of any dispute under this Section 5.1, to submit to a physical examination by a licensed physician selected by the Board. 5.2. Death. The Employment Term shall terminate in the event of Employee's death. In such event, the Company shall pay to Employee's executors, legal representatives or administrators, as applicable, an amount equal to the installment of his Base Salary set forth in Section 1.4 hereof for the month in which he dies, and, thereafter, the Company shall have no further liability or obligation under this Agreement to his executors, legal 192 representatives, administrators, heirs or assigns or any other person claiming under or through him; provided, however, that Employee's estate or designated beneficiaries shall be entitled to receive (i) the payments prescribed for such recipients under any death benefit plan which may be in effect for executives of the Company, generally, (ii) an amount equal to one year of Employee's Base Salary at the time of his death, and (iii) a pro rata portion of the incentive compensation, if any, as referred to in Section 1.5 hereof, in respect of the year during which Employee died. 5.3. Cause. The Company may terminate the Employment Term, at any time, for "cause" upon thirty days' written notice, in which event all liabilities and obligations of the Company under this Agreement shall cease, except for payment of Base Salary to the extent already accrued. For purposes of this Agreement, Employee's employment may be terminated for "cause" if he (a) engages in gross misconduct, dishonesty, mismanagement, deliberate and premeditated acts against the interest of the Company, (b) materially fails to perform or observe any of the terms or provisions of this Agreement, (c) is convicted of a felony or (d) is adjudged by the Board not to be satisfactorily performing his duties. 5.4. Other Terminations. (a) Employee may terminate the Employment Term upon thirty days prior written notice to the Company if the Company fails to fulfill any of the material terms and provisions hereof including the failure to pay Employee any amounts payable hereunder within ten business days after the same shall be due and payable (and has not cured any such failure by the end of the notice period). In 193 addition, the Company may remove Employee without cause from the position in which he is employed hereunder at any time upon written notice in which case the Employment Term shall end immediately upon the giving of such notice. Upon any such termination or removal, Employee shall be entitled to receive, as liquidated damages for the failure of the Company to continue to employ Employee, only the amount due to Employee under the Company's then severance pay plan for employees. No other payments or benefits shall be due under this Agreement to Employee and the Company shall have no further liability or obligation. (b) Notwithstanding the foregoing, in the event that Employee executes a written release, substantially in the form attached hereto as Exhibit A, but subject to such changes as counsel to the Company may recommend, of any and all claims against the Company and all related parties with respect to all matters arising out of Employee's employment by the Company (other than his entitlement under any employee benefit plan or program sponsored by the Company in which he participated and under which he has accrued a benefit), and the termination thereof, Employee shall receive, in lieu of the payment described in subsection (a) hereof, which Employee agrees to waive, (i) a lump sum payment equal to twelve months of Employee's Base Salary, (ii) a lump sum payment equal to incentive compensation, as referred to in Section 1.5 hereof, for such twelve month period at the target percentage level in effect for the year during which Employee terminates this Agreement in accordance herewith or is removed, and (iii)(A) outplacement services, (B) service credit, for purposes of determining the vesting of any stock 194 options, performance units or other grants under any long term incentive plan of the Company, for an additional twelve months, (C) a lump sum payment equal to the amount of benefits he would have received under the Company's pension, profit sharing and savings plans for such twelve month period, (D) a monthly amount (together with a tax equalization payment) for twelve months equal to the premium due under the Company's health benefit plan and (E) continuation of life insurance and long term disability benefits for twelve months at the level in effect at the time of such termination or removal. No other payments or benefits shall be due under this Agreement to Employee and the Company shall have no further liability or obligation. (c) Employee may voluntarily terminate the Employment Term upon thirty days' prior written notice for any reason; provided, however, that no further payments or benefits shall be due under this Agreement to Employee in that event and the Company shall have no further liability or obligation. 5.5 No Mitigation. Employee shall not be required to mitigate the amount of any payment or benefit provided for in this Section 5 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. 6. Payments Upon a Change in Control. 6.1. Definitions. For all purposes of this Section 6, the following terms shall have the meanings specified in this Section 6.1 unless the context clearly otherwise requires: 195 (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 Employee in all capacities with the Company, and its Affiliates, as reported for Federal income tax purposes on Form W-2, and 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 Employee, for the five calendar years (or such number of actual full calendar years of employment, if less than five) immediately preceding the calendar year in which occurs a Change of Control. (c) "Beneficial Owner" of any securities shall mean: (i) that such Person or any of such Person's Affiliates or Associates, directly or indirectly, has the right to acquire (whether such right is exercisable immediately or only after the passage of time) pursuant to any agreement, arrangement or understanding (whether or not in writing) or upon the exercise of conversion rights, exchange rights, rights, warrants or options, or otherwise; 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; 196 (ii) that such Person or any of such Person's Affiliates or Associates, directly or indirectly, has the right to vote or dispose of or has "beneficial ownership" of (as determined pursuant to Rule 13d-3 of the General Rules and Regulations under the Exchange Act), including without limitation pursuant to any agreement, arrangement or understanding, whether or not in writing; provided, however, that a Person shall not be deemed the "Beneficial Owner" of any security under this subsection (ii) as a result of an oral or written agreement, arrangement or understanding to vote such security if such agreement, arrangement or understanding (A) arises solely from a revocable proxy given in response to a public proxy or consent solicitation made pursuant to, and in accordance with, the applicable provisions of the General Rules and Regulations under the Exchange Act, and (B) is not then reportable by such Person on Schedule 13D under the Exchange Act (or any comparable or successor report); or (iii) where voting securities are beneficially owned, directly or indirectly, by any other Person (or any Affiliate or Associate thereof) with which such Person (or any of such Person's Affiliates or Associates) has any agreement, arrangement or understanding (whether or not in writing) for the purpose of acquiring, holding, voting (except pursuant to a revocable proxy as described in the 197 proviso to subsection (ii) above) or disposing of any voting securities of the Company; provided, however, that nothing in this subsection (c) shall cause a Person engaged in business as an underwriter of securities to be the "Beneficial Owner" of any securities acquired through such Person's participation in good faith in a firm commitment underwriting until the expiration of forty days after the date of such acquisition. (d) "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 then outstanding of Maritrans Inc., the parent of the Company); 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 Maritrans Inc. 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 Inc. cease for any reason to 198 constitute a majority thereof, unless the election, or the nomination for election by the shareholders of Maritrans Inc., 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. (e) "Normal Retirement Date" shall mean the first day of the calendar month coincident with or next following Employee's 65th birthday. (f) "Person" shall mean any individual, firm, corporation, partnership or other entity. (g) "Termination Date" shall mean the date of receipt of a Notice of Termination of this Agreement or any later date specified therein, as the case may be other. (h) "Termination of Employment" shall mean the termination of Employee's actual employment relationship with the Company. (i) "Termination upon a Change of Control" shall mean a Termination of Employment upon or within one year after a Change of Control either: (i) initiated by the Company for any reason other than (x) the Employee's disability, as described in Section 5.1 hereof, (y) death, or (z) for "cause," as described in Section 5.3 hereof (other than in Section 5.3(d) hereof), 199 or (ii) initiated by the Employee upon any 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 Employee; (C) any removal by the Company of Employee from the employment grade, compensation level or officer or director positions which he holds as of the effective date hereof; (D) the requirement that Employee undertake business travel to an extent substantially greater than is reasonable and customary for the position he holds pursuant hereto. 6.2. Notice of Termination. Any Termination upon a Change of Control shall be communicated by a Notice of Termination to the other party hereto given in accordance with Section 10 hereof. For purposes of this Agreement, a "Notice of Termination" means a written notice which (i) indicates the specific termination provision in this Agreement relied upon, (ii) briefly summarizes the facts and circumstances deemed to provide a basis for a Termination of Employment and the applicable provision hereof, 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). 6.3. Severance Compensation upon Termination. (a) Subject to adjustment as provided in paragraph (b) below, in the event of Employee's Termination upon a Change of Control, the 200 Company shall pay to Employee, within fifteen days after the Termination Date (or as soon as practicable thereafter in the event that the procedures set forth in Section 6.10(b) hereof cannot be completed within 15 days), in lieu of any other payments required under any other Section of this Agreement, an amount in cash equal to 2.99 multiplied by his Base Compensation. (b) In the event Employee's Normal Retirement Date would occur prior to twenty-four 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 Employee's Normal Retirement Date and the denominator of which shall be 730. 6.4. Other Payments. In the event of Employee's Termination upon a Change of Control, the Company shall also pay to Employee within fifteen days after the Termination Date, to the extent not theretofore paid, Employee's Base Salary through the Termination Date and a further amount equal to Employee's Base Salary in lieu of his unused vacation pay, if any, both calculated at the rate in effect on the Termination Date or, if higher, at the highest rate in effect at any time within the 90-day period preceding the Termination Date; 6.5. Termination of Non-Competition Requirements. In the event of a Termination upon a Change of Control, any non-competition agreements hereunder or otherwise executed by Employee, or any non- competition provisions binding on Employee in connection with any employee bonus, benefit, incentive or other plan or program provided 201 by the Company or any Affiliate, shall immediately terminate; provided, however, that this provision shall not terminate or otherwise modify the confidentiality provisions contained in Section 2 hereof. 6.6. Enforcement. (a) In the event that the Company shall fail or refuse to make payment of any amounts due Employee hereunder within the appropriate time period, the Company shall pay to 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 until paid to 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 Employee not be required to incur any expenses associated with the enforcement of his rights under 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 Employee hereunder. Accordingly, the Company shall pay Employee on demand the amount necessary to reimburse Employee in full for all expenses (including all attorneys' fees and legal expenses) incurred by Employee in enforcing any of the obligations of the Company under this Section. 6.7. No Mitigation. 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 202 amount of any payment or benefit provided for herein be reduced by any compensation earned by other employment or otherwise. 6.8. Non-Exclusivity of Rights. Nothing in this Agreement shall prevent or limit 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 Affiliate and for which Employee may qualify; provided, however, that if Employee becomes entitled to and receives all of the payments provided for in this Agreement, Employee agrees to waive his right to receive payments under any severance plan or similar program applicable to all employees of the Company. 6.9. No Set-Off. The Company's obligation to make the payments provided for in this Section 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 Employee or others. 6.10. 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 Employee, whether paid or payable or distributed or distributable pursuant to the terms of this Agreement or otherwise (a "Payment"), would constitute an "excess parachute payment" within the meaning of Section 280G of the Internal Revenue Code of 1986, as amended (the "Code"), and that it would be economically advantageous to Employee to reduce the Payment to avoid or reduce the taxation of excess 203 parachute payments under Section 4999 of the Code, the aggregate present value of amounts payable or distributable to or for the benefit of 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 6, present value shall be determined in accordance with Section 280G(d)(4) of the Code. (b) All determinations to be made under this Section 6 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 Employee within 10 days of the Termination Date. Any such determination by the Accounting Firm shall be binding upon the Company and Employee. Employee shall in his sole discretion determine which and how much of the Agreement Payments shall be eliminated or reduced consistent with the requirements of this Section 6. Within five days after Employee's determination, the Company shall pay (or cause to be paid) or distribute (or cause to be distributed) to or for the benefit of Employee such amounts as are then due to Employee under this Agreement. 204 (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 Employee which 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 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 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 205 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. 6.11. Settlement of All Disputes. (a) In the event of any dispute, controversy or claim arising out of or relating to any provision of this Section 6 or Employee's Termination upon a Change in Control, the Company shall appoint as the sole and exclusive arbiter of such dispute, controversy or claim, a committee composed of two persons who were members of the Board at any time within five years prior to the Change of Control (which persons may, but need not be, directors of the Company at the time of such dispute, controversy or claim); provided, however, that no person shall be eligible to serve thereon who (i) is at the Termination Date, or shall have been at any time within one year prior thereto, an executive officer of the Company, or (ii) shall be or have been at any time related in any manner to or otherwise affiliated with, or was first nominated by, the corporation, Person or group whose acquisition of shares of Common Stock of the Company has given rise to a Change of Control. The decision of such committee and the award of any monetary judgment or other relief by such committee shall be final and binding upon Employee and the Company, and shall not be subject to appeal. Judgment may be entered upon the decision and award of such committee by Employee or the Company in any court of competent jurisdiction. The Company shall pay the persons selected pursuant to this subsection a reasonable fee for their services, and shall reimburse such persons for their expenses incurred in this capacity. In addition, the 206 Company shall, to the maximum extent permitted by law, indemnify and hold harmless such persons of and from any and all claims, damages or expenses of any nature whatsoever relating to or arising from their activities in this capacity. (b) In the event that the Company shall be unable to appoint the committee referred to in (a) above after good faith efforts to do so, or in the event that such committee cannot reach a unanimous agreement, any remaining dispute, controversy or claim arising out of or relating to any provision of this Agreement or Employee's Termination upon a Change of Control shall be settled by arbitration in the City of Philadelphia, Pennsylvania, in accordance with the commercial arbitration rules then in effect of the American Arbitration Association, before a panel of three arbitrators, two of whom shall be selected by the Company and Employee, respectively, and the third of whom shall be selected by the other two arbitrators. Each arbitrator selected as provided herein is required to be or have been a director or an executive officer of a corporation whose shares of common stock were listed during at least one year of such service on the New York Stock Exchange or the American Stock Exchange or quoted on the National Association of Securities Dealers Automated Quotations System. Any award entered by the arbitrators shall be final, binding and nonappealable and judgment may be entered thereon by any party in accordance with applicable law in any court of competent jurisdiction. This arbitration provision shall be specifically enforceable. The fees of the American Arbitration Association and the arbitrators and any 207 expenses relating to the conduct of the arbitration shall be paid by the Company. (c) The party or parties challenging the right of Employee to the benefits of this Agreement shall in all circumstances have the burden of proof. 6.12. Successor Company. The Company shall require any successor or successors (whether direct or indirect, by purchase, merger, consolidation, exchange or otherwise) to all or substantially all of the business or assets of the Company or its Affiliates as of the date hereof, by agreement in form and substance satisfactory to 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 the Agreement. As used in this Agreement, the Company shall mean the Company as hereinbefore defined and any such successor or successors to its business or assets (or that of its Affiliates as of the date hereof), jointly and severally. 7. Survival. Notwithstanding the termination of the Employment Term or this Agreement, Employee's obligations under Sections 2 and 3 hereof shall, except to the extent otherwise provided herein, survive and remain in full force and effect for the 208 periods therein provided, and the provisions for equitable relief against Employee in Section 4 hereof shall continue in force. 8. 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. 9. Litigation Expenses. Except as provided in Section 6.6 above, in the event of a lawsuit by either party to enforce the provisions of this Agreement, the prevailing party shall be entitled to recover reasonable costs, expenses and attorney's fees from the other party. 10. Notices. All notices and other communications required or permitted hereunder or necessary or convenient in connection herewith shall be in writing and shall be deemed to have been given when hand delivered or mailed by registered or certified mail, as follows (provided that notice of change of address shall be deemed given only when received): If to the Company, to: 2600 One Logan Square Philadelphia, PA 19103 With a required copy to: Morgan, Lewis & Bockius 2000 One Logan Square Philadelphia, PA 19103-6993 Attention: Robert J. Lichtenstein, Esquire If to Employee, to: Brian J. Telford 5102 E. Longboat Blvd. Tampa, Florida 33615 209 or to such other names or addresses as the Company or Employee, as the case may be, shall designate by notice to each other person entitled to receive notices in the manner specified in this Section. 11. Contents of Agreement; Amendment and Assignment. (a) This Agreement supersedes all prior agreements and sets forth the entire understanding among the parties hereto with respect to the subject matter hereof and cannot be changed, modified, extended or terminated except upon written amendment approved by the Board and executed on its behalf by a duly authorized officer. (b) Employee acknowledges that from time to time, the Company may establish, maintain and distribute employee manuals or handbooks or personnel policy manuals, and officers or other representatives of the Company may make written or oral statements relating to personnel policies and procedures. Such manuals, handbooks and statements are intended only for general guidance. No policies, procedures or statements of any nature by or on behalf of the Company (whether written or oral, and whether or not contained in any employee manual or handbook or personnel policy manual), and no acts or practices of any nature, shall be construed to modify this Agreement or to create express or implied obligations of any nature to Employee. (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, executors, administrators, legal representatives, successors and assigns of the parties hereto, except that the duties and responsibilities of Employee hereunder are of a personal nature 210 and shall not be assignable or delegatable in whole or in part by Employee. 12. Severability. If any provision of this Agreement or application thereof to anyone or under any circumstances is adjudicated to be invalid or unenforceable in any jurisdiction, such invalidity or unenforceability shall not affect any other provision or application of this Agreement which can be given effect without the invalid or unenforceable provision or application and shall not invalidate or render unenforceable such provision or application in any other jurisdiction. 13. Remedies Cumulative; No Waiver. No remedy conferred upon the Company by this Agreement is intended to be exclusive of any other remedy, and each and every such remedy shall be cumulative and shall be in addition to any other remedy given hereunder or now or hereafter existing at law or in equity. No delay or omission by the Company in exercising any right, remedy or power hereunder or existing at law or in equity shall be construed as a waiver thereof, and any such right, remedy or power may be exercised by the Company from time to time and as often as may be deemed expedient or necessary by the Company in its sole discretion. 14. 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 marking 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 211 legally bound, have executed this Agreement on the date first above written. MARITRANS GENERAL PARTNER INC. Attest: [SEAL] /s/ John C. Newcomb By /s/ Craig N. Johnson ------------------------------ ------------------------------- Secretary Name: Craig N. Johnson Title: President Witness: /s/ Jimmie Miller /s/ Brian J. Telford ------------------------------ ------------------------------- BRIAN J. TELFORD EX-10 10 EXHIBIT 10.12 212 EXHIBIT 10.12 EMPLOYMENT AGREEMENT THIS EMPLOYMENT AGREEMENT (the "Agreement") entered into on October 5, 1993, by and between Maritrans General Partner Inc., a Delaware corporation (the "Company"), and Edward R. Sheridan ("Employee"). WHEREAS, Employee is presently employed by the Company as its President, Distribution Services Division; and WHEREAS, the Company and Employee desire to enter into a new agreement to provide for Employee's continued employment by the Company, upon the terms and conditions set forth herein, beginning as of April 1, 1993, the date of Employee's appointment to his current position; NOW, THEREFORE, the parties hereto, intending to be legally bound, agree as follows: 1. Employment. The Company hereby continues the employment of Employee, and Employee hereby accepts such employment and agrees to perform his duties and responsibilities hereunder, in accordance with the terms and conditions hereinafter set forth. This Agreement shall supersede and replace the agreement entered into between Employee and Maritrans GP Inc., a predecessor of the Company, as of February 1, 1993, which shall be void as of the date hereof. 1.1. Employment Term. The term of this Agreement (the "Employment Term") shall commence on April 1, 1993 and shall continue for an indefinite period until terminated in accordance with Section 5 or Section 6 hereof. 213 1.2. Duties and Responsibilities. During the Employment Term, Employee shall perform all duties and accept all responsibilities incident to such positions as are assigned to him by the Company's Chief Executive Officer or as otherwise may be assigned to him by the Company's Board of Directors (the "Board"). 1.3. Extent of Service. During the Employment Term, Employee agrees to use his best efforts to carry out his duties and responsibilities under Section 1.2 hereof and, consistent with the other provisions of this Agreement, to devote his full time, attention and energy thereto. Except as provided in Section 3 hereof, the foregoing shall not be construed as preventing Employee from making minority investments in other businesses or enterprises provided that Employee agrees not to become engaged in any other business activity which may interfere with his ability to discharge his duties and responsibilities to the Company. Employee further agrees not to work either on a part time or independent contracting basis for any other business or enterprise during the Employment Term without the prior written consent of the Board. 1.4. Base Salary. (a) For all the services rendered by Employee hereunder, the Company shall pay Employee the basic annual rate of $160,000, for each full year of the Employment Term ("Base Salary"), payable in installments at such times as the Company customarily pays its other executives (but in any event no less often than 214 monthly). Employee's Base Salary shall be subject to review and adjustment by the Company, commencing in 1994, pursuant to its normal performance review policies for executives. The Company shall be entitled to make proper withholdings from Employee's Base Salary (and all other payments of compensation under this Agreement) as required by law or agreed to by Employee. (b) During the Employment Term, Employee shall also be (i) entitled to participate in such retirement, profit sharing, equity compensation, group insurance, medical and other fringe benefit plans, if any, as may be authorized from time to time by the Board in its sole discretion for executives of the Company, (ii) provided with reimbursement of expenses related to his employment by the Company on a basis similar to that which may be authorized from time to time by the Board in its sole discretion for executives of the Company generally, and (iii) entitled to vacation and holidays during the Employment Term in accordance with the Company's normal policy. 1.5. Incentive Compensation. In addition to the Base Salary set forth in Section 1.4 hereof, Employee shall participate in the Company's Executive Award Plan and such other annual or long-term incentive compensation plans (including stock option and stock grant plans), if any, for executives generally, as may be established from time to time by the Board in its sole discretion. The terms and provisions of any such incentive compensation plan shall be determined in the sole discretion of the Board. 215 1.6 Supplemental Pension. Notwithstanding anything in this Agreement to the contrary, in addition to the benefit programs set forth in Section 1.4(b) hereof, Employee shall be entitled to a supplemental pension (the "Supplemental Pension") equal to (i) the after-tax, single life benefit he would have received under the Star Enterprises Retirement Plan (the "Star Plan"), as in effect on February 1, 1993, had he remained a participant in the Star Plan until the date of his retirement or termination of employment from the Company for any other reason (the "Benefit Date") less (ii) the sum of the single life benefits (a) actually due from the Star Plan and (b) actually due from the Company's Retirement Plan, both calculated on the Benefit Date using the actuarial assumptions employed by the company in providing benefits under its Retirement Plan. The Company shall secure the payment to Employee of the Supplemental Pension by contributing amounts necessary to fund such Pension, as determined by the Company in its sole discretion, to the Maritrans Operating Partners L.P. Excess Benefit Trust Fund (the "Trust Fund") such that the Trust Fund will hold at least 85% of the estimated present value of such Pension by the Benefit Date. Employee shall be paid the Supplemental Pension in lump sum within 60 days following the Benefit Date. 2. Confidential Information. Employee recognizes and acknowledges that by reason of his employment by and service to the Company (both during the Employment Term and before or after it), he has had and will continue to have access to confidential information 216 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"). Employee acknowledges that such Confidential Information is a valuable and unique asset and covenants that he will not, either during or after the Employment Term, 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 Employee or except as may be required by law. 3. Non-Competition. (a) During the Employment Term and for a period of one year thereafter, Employee will not, unless acting pursuant hereto or with the prior written consent of the Board or in the event of a termination for "cause" under Section 5.3(d), 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 217 Company or any of its affiliates is operating either during the Employment Term or on the date Employee's employment terminates, 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 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 the Employment Term or on the date Employee's employment terminates, as applicable. It is recognized by Employee that the business of the Company and its affiliates and 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. (b) The foregoing restriction shall not be construed to prohibit the ownership by 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 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. 4. Equitable Relief. (a) Employee acknowledges that the restrictions contained in Sections 2 and 3 hereof are reasonable and necessary to protect the 218 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. Employee represents that his experience and capabilities are such that the restrictions contained in Section 3 hereof will not prevent Employee from obtaining employment or otherwise earning a living at the same general level of economic benefit as anticipated by this Agreement. 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) 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 2 or 3 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 2 or 3 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. 219 (c) Employee irrevocably and unconditionally (i) agrees that any suit, action or other legal proceeding arising out of Section 2 or 3 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 10 hereof. (d) Employee agrees that he will provide, and that the Company may similarly provide, a copy of Sections 2 and 3 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. 220 5. Termination. The Employment Term shall terminate upon the occurrence of any one of the following events: 5.1. Disability. The Company may terminate the Employment Term if Employee is unable fully to perform his duties and responsibilities hereunder to the full extent required by the Board by reason of illness, injury or incapacity for six consecutive months, or for more than six months in the aggregate during any period of twelve calendar months. In such event, the Company shall have no further liability or obligation to Employee under this Agreement except for payments prescribed under any disability benefit plan which may be in effect for employees of the Company and in which he participated. Employee agrees, in the event of any dispute under this Section 5.1, to submit to a physical examination by a licensed physician selected by the Board. 5.2. Death. The Employment Term shall terminate in the event of Employee's death. In such event, the Company shall pay to Employee's executors, legal representatives or administrators, as applicable, an amount equal to the installment of his Base Salary set forth in Section 1.4 hereof for the month in which he dies, and, thereafter, the Company shall have no further liability or obligation under this Agreement to his executors, legal representatives, administrators, heirs or assigns or any other person claiming under or through him; provided, however, that Employee's estate or designated beneficiaries shall be entitled to receive (i) the payments prescribed for such recipients under any death benefit plan which may be in effect for executives of the 221 Company, generally, (ii) an amount equal to one year of Employee's Base Salary at the time of his death, (iii) a pro rata portion of the incentive compensation, if any, as referred to in Section 1.5 hereof, in respect of the year during which Employee died, and (iv) the Supplemental Pension. 5.3. Cause. The Company may terminate the Employment Term, at any time, for "cause" upon thirty days' written notice, in which event all liabilities and obligations of the Company under this Agreement shall cease, except for payment of Base Salary to the extent already accrued and the Supplemental Pension. For purposes of this Agreement, Employee's employment may be terminated for "cause" if he (a) engages in gross misconduct, dishonesty, mismanagement, deliberate and premeditated acts against the interest of the Company, (b) materially fails to perform or observe any of the terms or provisions of this Agreement, (c) is convicted of a felony or (d) is adjudged by the Board not to be satisfactorily performing his duties. 5.4. Other Terminations. (a) Employee may terminate the Employment Term upon thirty days prior written notice to the Company if the Company fails to fulfill any of the material terms and provisions hereof including the failure to pay Employee any amounts payable hereunder within ten business days after the same shall be due and payable (and has not cured any such failure by the end of the notice period). In addition, the Company may remove Employee without cause from the position in which he is employed hereunder at any time upon written notice in which case the Employment Term shall end immediately upon 222 the giving of such notice. Upon any such termination or removal, Employee shall be entitled to receive, as liquidated damages for the failure of the Company to continue to employ Employee, only the amount due to Employee under the Company's then severance pay plan for employees. No other payments or benefits shall be due under this Agreement to Employee and the Company shall have no further liability or obligation except for the payment of the Supplemental Pension. (b) Notwithstanding the foregoing, in the event that Employee executes a written release, substantially in the form attached hereto as Exhibit A, but subject to such changes as counsel to the Company may recommend, of any and all claims against the Company and all related parties with respect to all matters arising out of Employee's employment by the Company (other than his entitlement under any employee benefit plan or program sponsored by the Company in which he participated and under which he has accrued a benefit), and the termination thereof, Employee shall receive, in lieu of the payment described in subsection (a) hereof, which Employee agrees to waive, (i) a lump sum payment equal to twelve months of Employee's Base Salary, (ii) a lump sum payment equal to incentive compensation, as referred to in Section 1.5 hereof, for such twelve month period at the target percentage level in effect for the year during which Employee terminates this Agreement in accordance herewith or is removed, and (iii)(A) outplacement services, (B) service credit, for purposes of determining the vesting of any stock options, performance units or other grants under any long term incentive plan of the Company, for an additional twelve months, (C) 223 a lump sum payment equal to the amount of benefits he would have received under the Company's pension, profit sharing and savings plans for such twelve month period, (D) a monthly amount (together with a tax equalization payment) for twelve months equal to the premium due under the Company's health benefit plan, (E) the continuation of life insurance and long term disability benefits for twelve months at the level in effect at the time of such termination or removal, and (F) the Supplemental Pension. No other payments or benefits shall be due under this Agreement to Employee and the Company shall have no further liability or obligation. (c) Employee may voluntarily terminate the Employment Term upon thirty days' prior written notice for any reason; provided, however, that no further payments or benefits shall be due under this Agreement to Employee in that event, except the Supplemental Pension, and the Company shall have no further liability or obligation. 5.5 No Mitigation. Employee shall not be required to mitigate the amount of any payment or benefit provided for in this Section 5 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. 6. Payments Upon a Change in Control. 6.1. Definitions. For all purposes of this Section 6, the following terms shall have the meanings specified in this Section 6.1 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 224 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 Employee in all capacities with the Company, and its Affiliates, as reported for Federal income tax purposes on Form W-2, and 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 Employee, for the five calendar years (or such number of actual full calendar years of employment, if less than five) immediately preceding the calendar year in which occurs a Change of Control. (c) "Beneficial Owner" of any securities shall mean: (i) that such Person or any of such Person's Affiliates or Associates, directly or indirectly, has the right to acquire (whether such right is exercisable immediately or only after the passage of time) pursuant to any agreement, arrangement or understanding (whether or not in writing) or upon the exercise of conversion rights, exchange rights, rights, warrants or options, or otherwise; 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 225 determined pursuant to Rule 13d-3 of the General Rules and Regulations under the Exchange Act), including without limitation pursuant to any agreement, arrangement or understanding, whether or not in writing; provided, however, that a Person shall not be deemed the "Beneficial Owner" of any security under this subsection (ii) as a result of an oral or written agreement, arrangement or understanding to vote such security if such agreement, arrangement or understanding (A) arises solely from a revocable proxy given in response to a public proxy or consent solicitation made pursuant to, and in accordance with, the applicable provisions of the General Rules and Regulations under the Exchange Act, and (B) is not then reportable by such Person on Schedule 13D under the Exchange Act (or any comparable or successor report); or (iii) where voting securities are beneficially owned, directly or indirectly, by any other Person (or any Affiliate or Associate thereof) with which such Person (or any of such Person's Affiliates or Associates) has any agreement, arrangement or understanding (whether or not in writing) for the purpose of acquiring, holding, voting (except pursuant to a revocable proxy as described in the proviso to subsection (ii) above) or disposing of any voting securities of the Company; 226 provided, however, that nothing in this subsection (c) shall cause a Person engaged in business as an underwriter of securities to be the "Beneficial Owner" of any securities acquired through such Person's participation in good faith in a firm commitment underwriting until the expiration of forty days after the date of such acquisition. (d) "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 then outstanding of Maritrans Inc., the parent of the Company); 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 Maritrans Inc. 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 Inc. cease for any reason to constitute a majority thereof, unless the election, or the nomination for election by the shareholders of Maritrans 227 Inc., 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. (e) "Normal Retirement Date" shall mean the first day of the calendar month coincident with or next following Employee's 65th birthday. (f) "Person" shall mean any individual, firm, corporation, partnership or other entity. (g) "Termination Date" shall mean the date of receipt of a Notice of Termination of this Agreement or any later date specified therein, as the case may be other. (h) "Termination of Employment" shall mean the termination of Employee's actual employment relationship with the Company. (i) "Termination upon a Change of Control" shall mean a Termination of Employment upon or within one year after a Change of Control either: (i) initiated by the Company for any reason other than (x) the Employee's disability, as described in Section 5.1 hereof, (y) death, or (z) for "cause," as described in Section 5.3 hereof (other than in Section 5.3(d) hereof), or (ii) initiated by the Employee upon any of the following occurrences: 228 (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 Employee; (C) any removal by the Company of Employee from the employment grade, compensation level or officer or director positions which he holds as of the effective date hereof; (D) the requirement that Employee undertake business travel to an extent substantially greater than is reasonable and customary for the position he holds pursuant hereto. 6.2. Notice of Termination. Any Termination upon a Change of Control shall be communicated by a Notice of Termination to the other party hereto given in accordance with Section 10 hereof. For purposes of this Agreement, a "Notice of Termination" means a written notice which (i) indicates the specific termination provision in this Agreement relied upon, (ii) briefly summarizes the facts and circumstances deemed to provide a basis for a Termination of Employment and the applicable provision hereof, 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). 6.3. Severance Compensation upon Termination. (a) Subject to adjustment as provided in paragraph (b) below, in the event of Employee's Termination upon a Change of Control, the Company shall pay to Employee, within fifteen days after the Termination Date (or as soon as practicable thereafter in the event 229 that the procedures set forth in Section 6.10(b) hereof cannot be completed within 15 days), in lieu of any other payments required under any other Section of this Agreement, other than the Supplemental Pension, an amount in cash equal to 2.99 multiplied by his Base Compensation. (b) In the event Employee's Normal Retirement Date would occur prior to twenty-four 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 Employee's Normal Retirement Date and the denominator of which shall be 730. 6.4. Other Payments. In the event of Employee's Termination upon a Change of Control, the Company shall also pay to Employee within fifteen days after the Termination Date, to the extent not theretofore paid, Employee's Base Salary through the Termination Date and a further amount equal to Employee's Base Salary in lieu of his unused vacation pay, if any, both calculated at the rate in effect on the Termination Date or, if higher, at the highest rate in effect at any time within the 90-day period preceding the Termination Date; 6.5. Termination of Non-Competition Requirements. In the event of a Termination upon a Change of Control, any non-competition agreements hereunder or otherwise executed by Employee, or any non- competition provisions binding on Employee in connection with any employee bonus, benefit, incentive or other plan or program provided by the Company or any Affiliate, shall immediately terminate; 230 provided, however, that this provision shall not terminate or otherwise modify the confidentiality provisions contained in Section 2 hereof. 6.6. Enforcement. (a) In the event that the Company shall fail or refuse to make payment of any amounts due Employee hereunder within the appropriate time period, the Company shall pay to 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 until paid to 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 Employee not be required to incur any expenses associated with the enforcement of his rights under 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 Employee hereunder. Accordingly, the Company shall pay Employee on demand the amount necessary to reimburse Employee in full for all expenses (including all attorneys' fees and legal expenses) incurred by Employee in enforcing any of the obligations of the Company under this Section. 6.7. No Mitigation. 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 231 amount of any payment or benefit provided for herein be reduced by any compensation earned by other employment or otherwise. 6.8. Non-Exclusivity of Rights. Nothing in this Agreement shall prevent or limit 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 Affiliate and for which Employee may qualify; provided, however, that if Employee becomes entitled to and receives all of the payments provided for in this Agreement, Employee agrees to waive his right to receive payments under any severance plan or similar program applicable to all employees of the Company. 6.9. No Set-Off. The Company's obligation to make the payments provided for in this Section 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 Employee or others. 6.10. 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 Employee, whether paid or payable or distributed or distributable pursuant to the terms of this Agreement or otherwise (a "Payment"), would constitute an "excess parachute payment" within the meaning of Section 280G of the Internal Revenue Code of 1986, as amended (the "Code"), and that it would be economically advantageous to Employee to reduce the Payment to avoid or reduce the taxation of excess 232 parachute payments under Section 4999 of the Code, the aggregate present value of amounts payable or distributable to or for the benefit of 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 6, present value shall be determined in accordance with Section 280G(d)(4) of the Code. (b) All determinations to be made under this Section 6 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 Employee within 10 days of the Termination Date. Any such determination by the Accounting Firm shall be binding upon the Company and Employee. Employee shall in his sole discretion determine which and how much of the Agreement Payments shall be eliminated or reduced consistent with the requirements of this Section 6. Within five days after Employee's determination, the Company shall pay (or cause to be paid) or distribute (or cause to be distributed) to or for the benefit of Employee such amounts as are then due to Employee under this Agreement. 233 (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 Employee which 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 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 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 234 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. 6.11. Settlement of All Disputes. (a) In the event of any dispute, controversy or claim arising out of or relating to any provision of this Section 6 or Employee's Termination upon a Change in Control, the Company shall appoint as the sole and exclusive arbiter of such dispute, controversy or claim, a committee composed of two persons who were members of the Board at any time within five years prior to the Change of Control (which persons may, but need not be, directors of the Company at the time of such dispute, controversy or claim); provided, however, that no person shall be eligible to serve thereon who (i) is at the Termination Date, or shall have been at any time within one year prior thereto, an executive officer of the Company, or (ii) shall be or have been at any time related in any manner to or otherwise affiliated with, or was first nominated by, the corporation, Person or group whose acquisition of shares of Common Stock of the Company has given rise to a Change of Control. The decision of such committee and the award of any monetary judgment or other relief by such committee shall be final and binding upon Employee and the Company, and shall not be subject to appeal. Judgment may be entered upon the decision and award of such committee by Employee or the Company in any court of competent jurisdiction. The Company shall pay the persons selected pursuant to this subsection a reasonable fee for their services, and shall reimburse such persons for their expenses incurred in this capacity. In addition, the 235 Company shall, to the maximum extent permitted by law, indemnify and hold harmless such persons of and from any and all claims, damages or expenses of any nature whatsoever relating to or arising from their activities in this capacity. (b) In the event that the Company shall be unable to appoint the committee referred to in (a) above after good faith efforts to do so, or in the event that such committee cannot reach a unanimous agreement, any remaining dispute, controversy or claim arising out of or relating to any provision of this Agreement or Employee's Termination upon a Change of Control shall be settled by arbitration in the City of Philadelphia, Pennsylvania, in accordance with the commercial arbitration rules then in effect of the American Arbitration Association, before a panel of three arbitrators, two of whom shall be selected by the Company and Employee, respectively, and the third of whom shall be selected by the other two arbitrators. Each arbitrator selected as provided herein is required to be or have been a director or an executive officer of a corporation whose shares of common stock were listed during at least one year of such service on the New York Stock Exchange or the American Stock Exchange or quoted on the National Association of Securities Dealers Automated Quotations System. Any award entered by the arbitrators shall be final, binding and nonappealable and judgment may be entered thereon by any party in accordance with applicable law in any court of competent jurisdiction. This arbitration provision shall be specifically enforceable. The fees of the American Arbitration Association and the arbitrators and any 236 expenses relating to the conduct of the arbitration shall be paid by the Company. (c) The party or parties challenging the right of Employee to the benefits of this Agreement shall in all circumstances have the burden of proof. 6.12. Successor Company. The Company shall require any successor or successors (whether direct or indirect, by purchase, merger, consolidation, exchange or otherwise) to all or substantially all of the business or assets of the Company or its Affiliates as of the date hereof, by agreement in form and substance satisfactory to 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 the Agreement. As used in this Agreement, the Company shall mean the Company as hereinbefore defined and any such successor or successors to its business or assets (or that of its Affiliates as of the date hereof), jointly and severally. 7. Survival. Notwithstanding the termination of the Employment Term or this Agreement, Employee's obligations under Sections 2 and 3 hereof shall, except to the extent otherwise provided herein, survive and remain in full force and effect for the 237 periods therein provided, and the provisions for equitable relief against Employee in Section 4 hereof shall continue in force. 8. 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. 9. Litigation Expenses. Except as provided in Section 6.6 above, in the event of a lawsuit by either party to enforce the provisions of this Agreement, the prevailing party shall be entitled to recover reasonable costs, expenses and attorney's fees from the other party. 10. Notices. All notices and other communications required or permitted hereunder or necessary or convenient in connection herewith shall be in writing and shall be deemed to have been given when hand delivered or mailed by registered or certified mail, as follows (provided that notice of change of address shall be deemed given only when received): If to the Company, to: 2600 One Logan Square Philadelphia, PA 19103 With a required copy to: Morgan, Lewis & Bockius 2000 One Logan Square Philadelphia, PA 19103-6993 Attention: Robert J. Lichtenstein, Esquire If to Employee, to: Edward R. Sheridan 2106 Pecan Trail Richmond, Texas 77469 238 or to such other names or addresses as the Company or Employee, as the case may be, shall designate by notice to each other person entitled to receive notices in the manner specified in this Section. 11. Contents of Agreement; Amendment and Assignment. (a) This Agreement supersedes all prior agreements and sets forth the entire understanding among the parties hereto with respect to the subject matter hereof and cannot be changed, modified, extended or terminated except upon written amendment approved by the Board and executed on its behalf by a duly authorized officer. (b) Employee acknowledges that from time to time, the Company may establish, maintain and distribute employee manuals or handbooks or personnel policy manuals, and officers or other representatives of the Company may make written or oral statements relating to personnel policies and procedures. Such manuals, handbooks and statements are intended only for general guidance. No policies, procedures or statements of any nature by or on behalf of the Company (whether written or oral, and whether or not contained in any employee manual or handbook or personnel policy manual), and no acts or practices of any nature, shall be construed to modify this Agreement or to create express or implied obligations of any nature to Employee. (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, executors, administrators, legal representatives, successors and assigns of the parties hereto, except that the duties and responsibilities of Employee hereunder are of a personal nature 239 and shall not be assignable or delegatable in whole or in part by Employee. 12. Severability. If any provision of this Agreement or application thereof to anyone or under any circumstances is adjudicated to be invalid or unenforceable in any jurisdiction, such invalidity or unenforceability shall not affect any other provision or application of this Agreement which can be given effect without the invalid or unenforceable provision or application and shall not invalidate or render unenforceable such provision or application in any other jurisdiction. 13. Remedies Cumulative; No Waiver. No remedy conferred upon the Company by this Agreement is intended to be exclusive of any other remedy, and each and every such remedy shall be cumulative and shall be in addition to any other remedy given hereunder or now or hereafter existing at law or in equity. No delay or omission by the Company in exercising any right, remedy or power hereunder or existing at law or in equity shall be construed as a waiver thereof, and any such right, remedy or power may be exercised by the Company from time to time and as often as may be deemed expedient or necessary by the Company in its sole discretion. 14. 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 marking proof of this Agreement or any counterpart hereof to produce or account for any of the other counterparts. 240 IN WITNESS WHEREOF, the undersigned, intending to be legally bound, have executed this Agreement on the date first above written. MARITRANS GENERAL PARTNER INC. Attest: [SEAL] /s/ John C. Newcomb By /s/ Craig N. Johnson ------------------------------ ----------------------------- Secretary Name: Craig N. Johnson Title: President Witness: /s/ Jill Cathleen Lott /s/ Edward R. Sheridan ------------------------------ ----------------------------- EDWARD R. SHERIDAN EX-10 11 EXHIBIT 10.13 241 EXHIBIT 10.13 PROFIT SHARING AND SAVINGS PLAN OF MARITRANS INC. (as amended and restated effective November 1, 1993) 242 TABLE OF CONTENTS Page ---- ARTICLE I Adoption of Plan . . . . . . . . . . . . 1 ARTICLE II Definitions. . . . . . . . . . . . . . . 3 ARTICLE III Eligibility. . . . . . . . . . . . . . . 21 ARTICLE IV Contributions. . . . . . . . . . . . . . 24 ARTICLE V Allocations of Contributions and Valuations . . . . . . . . . . . . . . 34 ARTICLE VI Investment Directions. . . . . . . . . . 40 ARTICLE VII Retirement Benefits. . . . . . . . . . . 45 ARTICLE VIII Disability . . . . . . . . . . . . . . . 48 ARTICLE IX Death Benefits . . . . . . . . . . . . . 50 ARTICLE X Vested Benefits Upon Termination of Service . . . . . . . . . . . . . . 52 ARTICLE XI Distribution of Benefits . . . . . . . . 55 ARTICLE XII Life Insurance . . . . . . . . . . . . . 61 ARTICLE XIII Withdrawals and Loans. . . . . . . . . . 64 ARTICLE XIV Special Provisions for Top-Heavy Plans. . . . . . . . . . . . . . . . . 71 ARTICLE XV Administration and Fiduciary Responsibility . . . . . . . . . . . . 76 ARTICLE XVI Amendment of Plan. . . . . . . . . . . . 81 ARTICLE XVII Termination of Plan. . . . . . . . . . . 83 ARTICLE XVIII Miscellaneous. . . . . . . . . . . . . . 84 SCHEDULE A Provisions pertaining to Tank Cleaning Inc. Participants . . . . . . 87 243 ARTICLE I ADOPTION OF PLAN Sonat Marine Inc. adopted the Performance Retirement Plan of Sonat Marine Inc. (the "Plan") for the benefit of its eligible employees effective January 1, 1985. The Plan continued the benefits provided under the revised Profit Sharing Plan of IOT Corporation and Subsidiary Corporations. As a result of the purchase of the assets of the Sonat Marine Group by Maritrans Operating Partners L.P., sponsorship of the Plan was transferred to Maritrans GP Inc. effective April 14, 1987. The Plan is now known as the Profit Sharing Plan of Maritrans GP Inc. The Plan was amended and restated in its entirety, effective January 1, 1988, to incorporate all amendments and to comply with the Tax Reform Act of 1986 and the Omnibus Budget Reconciliation Act of 1986. Effective April 1, 1993, in connection with a change in business structure, the sponsorship of the Plan was transferred to Maritrans Inc. and the name of the Plan was changed to the Profit Sharing Plan of Maritrans Inc. The Plan is now amended and restated in its entirety, effective November 1, 1993, to reflect the merger of the Maritrans Inc. 401(k) Savings Plan (the "Savings Plan") with and into the Plan. As a result of the merger, the Plan name is changed to the Profit Sharing and Savings Plan of Maritrans Inc. Except as otherwise provided herein or required by law the Plan, as amended and restated, shall apply only to an employee who terminates 244 employment on or after November 1, 1993. The rights and benefits, if any, of other former employees shall be determined in accordance with the provisions of the Plan as it existed prior to such date. 245 ARTICLE II DEFINITIONS Whenever used herein the following words and phrases shall have the meaning set forth below unless a different meaning is plainly required by the context. The singular shall include or mean the plural and the masculine pronoun shall include or mean the feminine pronoun, where applicable. Section 2.1. "Account" shall mean the accounts maintained under the Plan for each Participant which represent the Participant's interest in the Fund. The term "Account" shall refer, as the context indicates, to any or all of the following: "Employer Contribution Account" -- The Account to which are credited Employer Contributions allocated to a Participant, adjustments for withdrawals and distributions, and earnings, losses and expenses attributable thereto. "Salary Reduction Contribution Account" -- the Account to which are credited Participant contributions allocated to a Participant, adjustments for withdrawals and distributions, and the earnings, losses and expenses attributable thereto. "Profit Sharing Plan Rollover Account" -- the Account to which are credited a Participant's rollover contributions pursuant to Section 4.8 of the Plan. "Savings Plan Rollover Account" -- The Account to which are credited a Participant's rollover contributions pursuant to Section 4.9 of the Plan. 246 Section 2.2. "Affiliated Company" shall mean any cor- poration which is included within a controlled group of corpora- tions (within which the Company is also included), as determined under Section 1563(a) of the Code, without regard to Sections 1563(a)(4) and (e)(3)(C) of the Code; provided, however, that for the purposes of Sections 5.4 and 5.5 herein, such determination under Section 1563(a) of the Code shall be made by substituting the phrase "more than 50 percent" for the phrase "at least 80 percent" each place it appears in Section 1563(a)(l) of the Code. Section 2.3. "Anniversary Date" shall mean the first day of each Plan Year during which the Plan is in effect. Section 2.4. "Board" shall mean the Board of Directors of the Company. Section 2.5. "Break in Service" shall mean any 12- consecutive month period beginning on an Employee's Date of Severance and each anniversary thereof during which an Employee fails to perform an Hour of Service. An Employee who is absent from work for maternity or paternity reasons shall not be treated as having incurred a Break in Service during the twelve month period beginning on the first anniversary of the first date of such absence. For purposes of this paragraph, an absence from work for maternity or paternity reasons means an absence (a) by reason of the pregnancy of the Employee, (b) by reason of a birth of a child of the Employee, (c) by reason of the placement of a child with the Employee in connection with the adoption of such child by the Employee, or (d) for purposes of caring for such child for a period 247 beginning immediately following such birth or placement. In order for this paragraph to apply, an Employee shall provide to the Committee, in the form and manner prescribed by the Committee, information establishing (a) that the absence from work is for reasons set forth in this paragraph, and (b) the number of days for which there was such an absence. Nothing in this Section shall be interpreted as an expansion or modification of any policy of the Employer regarding maternity and paternity leave. Section 2.6. "Code" shall mean the Internal Revenue Code of 1986, as amended. Section 2.7. "Committee" shall mean the Committee ap- pointed by the Board to assist in administration of the Plan in accordance with Article XIV. Section 2.8. "Common Stock" shall mean the common stock of Maritrans Inc. without any rights that may have been issued with respect thereto. Section 2.9. "Company" shall mean Maritrans Inc., a Delaware corporation with its principal office in Philadelphia, Pennsylvania. Section 2.10. "Compensation" for a salaried Employee shall mean the basic salary paid by the Employer or Participating Employer to an Employee during the portion of a Plan Year in which he is eligible to participate in the Plan. For an hourly paid Employee, "Compensation" shall mean the regular hourly rate of compensation paid to him multiplied by his Hours of Service during the portion of any Plan Year in which he is eligible to participate 248 in the Plan up to 2080 Hours. Compensation shall include bonuses and overtime pay, but shall not include commissions, fringe benefits or severance pay. In the case of a seagoing supervisor, Compensation shall include premium pay. Compensation shall also include all amounts which the Participant elects to defer under the provisions of a cash or deferred arrangement maintained by the Employer. Notwithstanding the foregoing, for purposes of Section 5.1, Compensation shall mean all remuneration which is required to be reported as wages on the Participant's Form W-2 for the Plan Year and, unless the Employer elects otherwise, the Participant elects to defer under the provisions of a cash or deferred arrangement maintained by the Employer. Notwithstanding the foregoing, for purposes of determining the amount of a Participant's Salary Reduction Contribution pursuant to Section 4.5 and limitations on a Participant's Salary Reduction Contribution pursuant to Section 5.3, Compensation shall mean a Participant's gross wages received from the Employer during the Plan Year prior to reduction for Contributions made hereunder. Effective Jan- uary 1, 1989, Compensation in excess of $200,000 (adjusted to reflect any cost-of-living increases provided in accordance with section 415(d) of the Code) shall be disregarded. In determining Compensation for purposes of this limitation, the rules of Code section 414(q)(6) shall apply, except that in applying such rules, the term "family" shall include only the Spouse of the employee and any lineal descendants who have not attained age 19 before the close of the Plan Year. If as a result of the application of the 249 rules of Code section 414(q)(6), the limitation is exceeded, then the limitation shall be prorated among the affected family members in proportion to each such family member's Compensation as determined under this Section prior to the application of this limitation. Section 2.11. "Date of Employment" shall mean the first day on which an Employee performs an Hour of Service. Section 2.12. "Date of Reemployment" shall mean the first day on which an Employee performs an Hour of Service after incurring a Break in Service. Section 2.13. "Date of Severance" shall mean the earlier of: (a) the date on which an Employee quits, is discharged, retires or dies, or (b) the first anniversary of an Employee's absence from Service for any reason other than quit, discharge, retirement or death. Section 2.14. "Disability" shall mean a physical or mental condition that restricts the Participant's ability to work and qualifies him for disability benefits under the Social Security Act. Section 2.15. "Earliest Retirement Age" shall mean for purposes of Section 2.35 the earlier of (a) the date on which the Participant is entitled to a distribution under the Plan; or (b) the later of (i) the date the Participant attains age 50, or (ii) the earliest date on which, under the Plan, the Participant could 250 elect to receive benefits if the Participant incurred a Date of Severance. Section 2.16. "Effective Date" shall mean January 1, 1981. Section 2.17. "Eligibility Computation Period" shall mean the 12-month period beginning on an Employee's Date of Employment or Date or Reemployment, whichever is applicable, and each anniver- sary thereof. Section 2.18. "Employee" shall mean any person employed by the Employer. However, no such person shall be considered an Employee under this Plan for any period during which his compen- sation and conditions of employment are the subject of agreement between the Employer, a Participating Employer or an Affiliated Company and a collective bargaining unit unless the agreement with such unit specifically provides for participation under the Plan. In addition, no person whose duties are primarily seagoing shall be considered an Employee under this Plan; provided, however, that on or after August 15, 1984, any person who is a seagoing supervisor and who is not covered by a collective bargaining agreement shall be considered an Employee under this Plan as of August 15, 1984, or, if later, the date on which the collective bargaining agreement covering such seagoing supervisor expires. Other categories of employees may be excluded from the definition of Employee only by specific direction set forth in the Adoption Agreement of a Par- ticipating Employer. "Employee" shall not include any leased employees within the meaning of Section 414(n)(2) of the Code. 251 Section 2.19. "Employer" shall mean the Company and each Participating Employer, either singularly or collectively, as required by the context. Section 2.20. "Employer Contributions" shall mean monies paid into the Fund on behalf of a Participant by the Employer in accordance with Article III. Section 2.21. "Entry Date" shall mean the first day of the month coinciding with or next following the day on which an Employee is eligible to become a Participant in accordance with Section 3.1. Section 2.22. "ERISA" shall mean the Employee Retirement Income Security Act of 1974, as it may be amended from time to time. Section 2.23. "Fiduciary" shall mean the individuals, corporation or other entity which has consented to be responsible for administration of any part of the Plan including, but not limited to, the Employer, the Committee, the Plan Administrator, the Trustee and, if any, the Investment Advisor but only with respect to the specific responsibilities assigned to each as de- scribed in Article XV. The term "Fiduciary" shall also include any other person properly authorized, in accordance with Committee rules, by any of the aforementioned persons to deal with Fund assets, for purposes of the Plan, but only with respect to the scope of the authority so delegated. Section 2.24. "415 Compensation" shall mean a Partici- pant's remuneration including wages, salaries, fees for pro- 252 fessional services and other amounts received for personal services actually rendered in the course of employment with an Employer maintaining the Plan including overtime, bonuses, premium time, etc., but excluding the following: (a) contributions made by the Employer to a deferred compensation plan which, without regard to section 415 of the Code, are not includable in the Participant's gross income for the taxable year in which contributed; (b) Employer contributions made on behalf of a Par- ticipant to a simplified employee pension to the extent they are deductible by the Participant under section 219(b)(7) of the Code; (c) distributions from a deferred compensation plan (except from an unfunded non-qualified plan when includable in gross income); (d) amounts realized from the exercise of a non- qualified stock option, or when restricted stock (or property) held by a Participant either becomes freely transferable or is no longer subject to a substantial risk of forfeiture; (e) amounts realized from the sale, exchange or other disposition of stock acquired under a qualified stock option; or (f) other amounts which receive special tax benefits, such as premiums for group term life insurance (to the extent excludable from gross income) or Employer contributions towards the purchase of an annuity contract described in section 403(b) of the Code. 253 Section 2.25. "Fund" shall mean the assets held by the Trustee from contributions made by the Employer and Participating Employers, including income, gains and losses thereon, as the source of benefits under this Plan. Section 2.26. "Highly Compensated Employee" shall mean: (a) each Employee who, with respect to the Employer or an Affiliated Company, performed services (an "Active Employee") during the Plan Year for which a determination is being made (the "Determination Year") and who during such Determination Year, or the preceding Determination Year, (i) was at any time a five-percent owner (as defined in section 416(i) of the Code and the regulations issued thereunder); (ii) received 415 Compensation in excess of $75,000 (adjusted to reflect any cost of living increases provided in accordance with section 415(d) of the Code); (iii) received 415 Compensation in excess of $50,000 (adjusted to reflect any cost of living increases provided in accordance with section 415(d) of the Code) and was in the top twenty percent of Active Employees (based on 415 Compensation received) during such year; or (iv) was an officer (as defined in section 416(i) of the Code and the regulations issued thereunder) and received 415 Compensation greater than one hundred and fifty percent of the amount in effect under section 415(c)(1)(A) of the Code for the calendar year in which a determination is made. 254 Notwithstanding the foregoing, the provisions of paragraph (ii), (iii) or (iv) above shall not cause an Employee to be treated as a Highly Compensated Employee for the Determination Year of reference unless such Employee is one of the top 100 Active Employees (based on 415 Compensation received) during such Determination Year and was a Highly Compensated Employee in accordance with the provisions of paragraph (ii), (iii) or (iv) above for the preceding Determination Year (without regard to this sentence). (b) The determination of Highly Compensated Employee made pursuant to this Section shall be made in accordance with section 414(q) of the Code and the regulations issued thereunder. (c) For purposes of this Section, the term "415 Com- pensation" shall include amounts deferred under a plan maintained by the Employer and qualified under section 401(k) of the Code. Section 2.27. "Hour of Service" shall mean (a) each hour for which an Employee is paid or entitled to payment for the performance of duties for the Employer or an Affiliated Company; (b) each hour for which an Employee is paid, or entitled to payment, by the Employer or an Affiliated Company on account of a period of time during which no duties are performed (irrespective of whether the employment relationship has terminated) due to vacations, holiday, illness, incapacity (including Disability), layoff, jury duty, military duty or leave of absence. No more than 501 Hours of Service shall be credited under this Section to any Employee on account of any single continuous period during which 255 such Employee performs no duties (whether or not such period occurs in a single Plan Year). For purposes of this Section, a payment shall be deemed to be made by or due from the Employer or an Affiliated Company regardless of whether such payment is made by or due from the Employer or an Affiliated Company directly or through, among others, a trust fund (other than the Fund), or insurer, to which the Employer or an Affiliated Company contributes or pays premiums and regardless of whether contributions made or due from such trust fund (other than the Fund), insurer or other entity are for the benefit of particular employees or are on behalf of a group of employees in the aggregate; and (c) each hour for which back-pay, irrespective of miti- gation of damages, has either been awarded or agreed to by the Employer or an Affiliated Company. In the event that the same hours could, by the terms of this Section, be credited under more than one paragraph of this Section, such hours shall be credited as provided in paragraph (a) or (b) only, whichever is applicable. (d) Hours of Service shall be credited pursuant to the provisions of 29 CFR 2530.200b-2(b) and (c), which are incorporated herein by reference. Nothing in this Section shall be construed to deny an Employee credit for an Hour of Service if credit is required by federal statute other than the Employee Retirement Income Security Act of 1974, as amended. In applying such other federal statutes, the nature and extent of such credit shall be governed by such other federal law. 256 (e) For purposes of Sections 2.43(b), 3.1 and 5.1 only, Hours of Service shall be credited in accordance with paragraphs (a), (b), (c) and (d) of this Section. For all other purposes of the Plan, Hours of Service shall be credited only in accordance with paragraph (a) of this Section. Section 2.28. "Investment Advisor" shall mean an adviser which is (a) registered under the "Investment Advisers Act of 1940," (b) a bank, or (c) an insurance company qualified to perform investment services in more than one State, which is appointed by the Committee to render investment advice as provided in Article XIII hereof and which acknowledges in writing its status as a Fid- uciary under the Plan. Section 2.29. "Investment Fund" shall mean any one of the funds comprising the Fund, as designated from time to time by the Committee. Section 2.30. "Merger Effective Date" shall mean close of business November 1, 1993, the effective date of the merger of the Maritrans Inc. Savings Plan with and into the Plan. Section 2.31. "Net Profits" shall mean the Employer's, or a Participating Employer's, net income for any fiscal year or its accumulated income from prior years determined in accordance with standard accounting practices regularly employed by the Employer, or Participating Employer, in maintaining its books of account. In the case of a current year, Net Profits shall be determined without deduction for federal, state or local taxes based upon net income 257 or for contributions made by the Employer, or Participating Employers, under this Plan. Section 2.32. "Non-Highly Compensated Employee" shall mean an Employee who is not a Highly Compensated Employee. Section 2.33. "Normal Retirement Age" shall mean age 65. "Normal Retirement Date" shall mean the first day of the month coinciding with or next following his attainment of his Normal Retirement Age. Section 2.34. "Participant" shall mean any Employee qualifying for participation in accordance with Article III hereof. A person shall cease to be a Participant when he and any beneficiary of his no longer have rights to any benefits under the Plan. Section 2.35. "Participating Employer" shall mean any Affiliated Company which is designated by the Board as a Participating Employer under the Plan and whose designation as such has become effective upon acceptance of such status by the Board of Directors of the Affiliated Company. A Participating Employer may revoke its acceptance of such designation at any time, but until such acceptance has been revoked, all of the provisions of the Plan and amendments thereto shall apply to the Employees of the Participating Employer. In the event the designation as a Participating Employer is revoked by the Board of Directors of such Participating Employer, the Plan shall be deemed terminated only as to such Participating Employer. 258 Section 2.36. "Plan" shall mean the Profit Sharing and Savings Plan of Maritrans Inc., the Trust Agreement and the Resolution of the Board appointing the Plan Administrator, Committee and other Fiduciaries. Section 2.37. "Plan Administrator" shall mean the person appointed by the Board to administer the Plan in accordance with Article XV. In the absence of such an appointment, the Employer shall be the Plan Administrator. Section 2.38. "Plan Year" shall mean the period from January 1 through December 31 for any year in which the Plan is in effect. Section 2.39. "Qualified Domestic Relations Order" shall mean a judgment, decree or order (including approval of a property settlement agreement) made pursuant to a state domestic relations law (including a community property law) which: (a) relates to the provision of child support, alimony payments or marital property rights to a spouse, former spouse, child or other dependent of a Participant (the 'Alternate Payee'); (b) creates or recognizes the existence of the Alternate Payee's right to, or assigns to the Alternate Payee the right to, receive all or a portion of the benefits payable to a Participant under this Plan; (c) specifies (i) the name and last known mailing address (if any) of the Participant and each Alternate Payee covered by the order, (ii) the amount or percentage of the Participant's Plan benefits to be paid to the Alternate Payee, or the manner in which 259 such amount or percentage is to be determined, and (iii) the number of payments or the period to which the order applies and each plan to which the order relates; and (d) does not require the Plan to (i) provide any type or form of benefit, or any option not otherwise provided under the Plan, (ii) provide increased benefits, or (iii) pay benefits to the Alternate Payee that are required to be paid to another Alternate Payee under a prior Qualified Domestic Relations Order. Notwithstanding the foregoing, a Qualified Domestic Relations Order may provide that distribution commence on or after the date on which the Participant attains, or would have attained his Earliest Retirement Age regardless of whether the Participant has incurred a Date of Termination on that date, if the Order directs (i) that the payment of the benefits be determined as if the Participant had retired on the date on which payment is to begin under such Order, taking into account only the balance standing to the Participant's credit in his Accounts on such date, and (ii) that the payment be made in a form in which such benefits may be paid under the Plan to the Participant. Section 2.40. "Required Distribution Date" shall mean the April 1 of the Plan Year following the later of (a) the Plan Year in which the Employee age 70 1/2, or (b) the Plan Year in which the Employee retires. Notwithstanding the foregoing, clause (b) of the preceding sentence shall not apply in the case of an Employee who is a five-percent owner (as defined in Section 416 of the Code) at any time during the five-Plan-Year period ending in the Plan Year 260 in which the Participant attains age 70-1/2. In addition to the foregoing requirements, effective January 1, 1989, clause (b) shall not apply to any Participant unless the Participant had attained age 70 1/2 before January 1, 1988. Section 2.41. "Salary Reduction Contributions" shall mean Basic Contributions and Deferred Bonus Contributions (as such terms are defined in Section 4.01) paid into the Fund for a Participant pursuant to Article IV, in a manner intended to satisfy the requirements of section 401(k) of the Code. Section 2.42. "Service" shall mean all periods of active employment with the Employer or an Affiliated Company commencing on the Employee's Date of Employment or Date of Reemployment, whichever is applicable, and ending on his Date of Severance. Service shall also include all periods of Severance during which an Employee does not incur a Break in Service. Section 2.43. "Severance" shall mean the period of time commencing on an Employee's Date of Severance and ending on the date on which the Employee again performs an Hour of Service. Section 2.44. "Spouse" shall mean the husband or wife of a Participant who is married to that Participant on the date on which the payments to the Participant are to begin as provided in the Plan; provided, that a former spouse shall be treated as a Spouse to the extent required under a Qualified Domestic Relations Order. 261 Section 2.45. "Stock" shall mean either Common Stock or rights or a combination of Common Stock and rights, as the case may be. Section 2.46. "Stock Fund" shall mean an Investment Fund invested solely in Stock. The availability of the Stock Fund as an Investment Fund shall be determined by the Committee, in its sole discretion. Section 2.47. "Trust Agreement" shall mean the separate written agreement adopted as a part of the Plan which sets forth the provisions under which the Trustee shall manage the Fund. Section 2.48. "Trustee" shall mean the bank or trust company or the individuals designated by the Employer to administer the Fund in accordance with this Plan as provided herein. Section 2.49. "Valuation Date" shall mean June 30 and December 31 of each Plan Year on which the fair market value of the Fund shall be determined, as well as any other day on which the Committee determines that the fair market value of the Fund shall be calculated. Section 2.50. "Years of Service" shall mean the number of whole Years of an Employee's Service whether or not such years were completed consecutively. (a) For Eligibility Computation Periods ending after January 1, 1985, an Employee shall be credited with one Year of Service for each 12 months of Service he completes. Less than whole year periods of Service, whether or not consecutive, shall be aggregated on the basis that 12 months of Service (30 days are 262 deemed to be a month in the case of the aggregation of fractional months) equal one Year of Service. (b) For Eligibility Computation Periods completed prior to January 1, 1985, an Employee shall be credited with all of the Years of Service credited to him under the Plan as in effect on December 31, 1984. (c) If an Employee incurs a Date of Severance and, prior to the occurrence of a One Year Break in Service, the Employee performs an Hour of Service for the Employer or any Affiliated Company, Years of Service shall also include the period between the Date of Severance and the date on which such Hour of Service is performed. (d) In the case of any Participant who has incurred a Date of Severance but who is reemployed after incurring five (5) consecutive One Year Breaks in Service, Years of Service after such five year period shall not be taken into account for the purposes of determining the vested interest attributable to Employer Contributions made before such five year period. (e) In the case of a Participant who has incurred a Date of Severance and who does not have any vested interest in his Account at such Date, Years of Service before any consecutive One Year Breaks in Service shall not be taken into account in determining Years of Service after such Breaks if the number of consecutive One Year Breaks in Service equals or exceeds the greater of (i) five or (ii) the aggregate number of Years of Service prior to such Periods. Such aggregate number of Years of 263 Service shall be deemed not to include any Years of Service not required to be taken into account under this Section by reason of any prior One Year Break in Service. For purposes of determining an Employee's eligibility to participate in the Plan under Section 3.1, and his vested percentage under 10.1, Years of Service shall include all years of employment with the Employer or an Affiliated Company whether or not the employee qualified as an Employee during those years. 264 ARTICLE III ELIGIBILITY Section 3.1. Eligibility to Participate - Employer Contributions. (a) General Requirements -- All Employees who were Par- ticipants in the Plan prior to the Merger Effective Date shall con- tinue to participate herein. All other Employees shall become Participants on the Entry Date coinciding with or next succeeding their completion of 1000 Hours of Service in an Eligibility Com- putation Period and attainment of age 21. (b) Participation -- Any Employee eligible to participate in the Plan shall automatically become a Participant as provided in subsection (a) and may not waive benefits provided pursuant to this Section 3.1 or elect not to participate in the Plan. Section 3.2. Eligibility to Participate - Salary Reduction Contributions. All Employees who were Participants in the Plan prior to the Merger Effective Date shall continue to participate herein. All other Employees shall become Participants on the Entry Date coinciding with or next following his Date of Employment. Section 3.3. Required Information. All eligible in- dividuals must furnish the Committee with such information as it may reasonably request in accordance with the uniform procedures established by the Committee and announced to the Employees. Section 3.4. Change of Job Classification and Transfers. In the event a change of job classification or a transfer to an 265 Affiliated Company results in a Participant no longer qualifying as an Employee, such employee shall cease to be a Participant as of the effective date of such change of job classification or transfer, but the employee shall not be deemed to have incurred a Date of Severance. If the Affiliated Company maintains a qualified retirement plan which permits the transfer of a Participant's Accounts from this Plan to such plan, such Participant, upon written notice in the form and at the time prescribed by the Committee, may elect to have the value of his Accounts transferred to such other Plan; provided, however, that the Committee, in its sole discretion, may refuse to allow a transfer if such transfer would violate the provisions of Section 411(d)(6) of the Code and the regulations thereunder. Any Employee who is or becomes represented by a collective bargaining agent shall remain eligible to participate in the Plan until a collective bargaining agreement is executed by the Employer and the collective bargaining agent of the Employee, unless such agreement specifically provides for participation in the Plan by such Employee. Absent such express provision, such represented Employee shall cease to be eligible for participation in the Plan upon the execution of said agreement and thereafter until such time as a subsequent collective bargaining agreement expressly provides for participation in the Plan or the Employee is no longer represented by a collective bargaining agent. From the date of said ineligibility, he shall not be treated as an Employee for the purpose of determining eligibility to participate in the Plan. Should an employee again qualify as an Employee, he 266 shall become a Participant as of the effective date of such change. Section 3.5. Re-entry. If a Participant incurs a Break in Service and once again qualifies to participate in the Plan, he shall become a Participant on the first day following such Break in Service on which he performs an Hour of Service. If a terminated Employee, who had qualified for participation hereunder, incurs a Break in Service prior to his Entry Date and is subsequently re- hired by the Employer, he shall become a Participant on the later of his Date of Reemployment or his Entry Date. If a terminated Employee, who had not qualified for participation is subsequently rehired by the Employer, he shall be eligible to participate as provided in Section 3.l as if he had not been previously employed by the Employer. 267 ARTICLE IV CONTRIBUTIONS Section 4.1. Contributions by Employer. For each Plan Year, the Employer shall contribute to the Fund so much of its Net Profits as the Board may authorize and direct. All such con- tributions shall be held and administered by the Trustee as a part of the Fund according to the terms of the Trust Agreement. Not- withstanding any other provisions of this Section, Employer Con- tributions for any Plan Year shall not exceed the maximum amount deductible by the Employer for such Year under the provisions of section 404 of the Code. Except as expressly provided herein, these Contributions shall be irrevocable. All amounts contributed hereunder shall be conditioned on their deductibility. Section 4.2. Determination of Employer Contributions. The Board shall determine the amount of any Employer Contributions to be made to the Fund under the terms of this Plan. In de- termining such Contributions, the Board shall be entitled to rely upon computations of its Net Profits made by independent public accountants regularly employed by it or made by the Employer's comptroller or treasurer. The determination shall be final and conclusive and shall not be subject to change as the result of any subsequent audit by the Internal Revenue Service or as the result of any subsequent adjustment of the Employer's books of account. The Trustee shall have no duty to inquire into the amount of the Employer's annual Contribution or the method used in determining 268 the amount of the Employer Contribution, but shall be accountable only for funds received by it. Section 4.3. Time and Payment of Employer Contributions. Employer Contributions shall be determined as of the last day of each Plan Year. Such amounts shall be paid over to the Trustees within the time prescribed by law, including any extensions of such time, for the filing of the Employer's federal income tax return for such year. Section 4.4. Form of Employer Contributions. Employer Contributions may be in cash or property acceptable to the Trustee and the Committee valued at the fair market value thereof on the date of contribution. Section 4.5. Salary Reduction Contributions. Participants are not required to make Salary Reduction Contributions hereunder. Effective as of the Merger Effective Date, a Participant may make a written election, in the manner prescribed by the Committee, to reduce Compensation and make Salary Reduction Contributions in accordance with the provisions of this Section, which election shall become effective on the Entry Date coinciding with or next following receipt of such election. Notwithstanding the foregoing, the Committee, in its sole discretion, may unilaterally amend or revoke a Participant's election at any time, if the Committee determines that Salary Reduction Contributions to such Participant's Salary Reduction Contribution Account would otherwise exceed the limitations of Article V. 269 (a) Basic and Deferred Bonus Contributions. A Participant's Basic Contributions into the Fund shall be in the aggregate at the rate of 2%, 3%, 4%, 5%, 6%, 7%, 8%, 9% or 10% (in whole percentages only) of the Compensation excluding bonuses otherwise payable to the Participant. In addition, a Participant may make, by a separate written election, in the manner prescribed by the Committee, Deferred Bonus Contributions of not more than 10% of the annual bonus or incentive award otherwise payable to the Participant. Notwithstanding anything contained herein to the contrary, a Participant's total Salary Reduction Contributions under the Plan together with elective deferrals (as defined in section 402(g) of the Code) under any other plan or arrangement maintained by the Employer or an Affiliated Company shall not exceed $7,000 (as adjusted in accordance with section 402(g) of the Code and the regulations issued thereunder) for any calendar year. Furthermore, should a Participant claim that his Salary Reduction Contributions under the Plan (reduced by Salary Reduction Contributions previously distributed pursuant to Section 4.8 or returned to the Participant pursuant to Section 5.2(d)) when added to his other elective deferrals under any other plan or arrangement (whether or not maintained by the Employer or an Affiliated Company) exceed the limit imposed by section 402(g) of the Code for the calendar year in which the deferrals occurred, the Participant shall allocate to the Plan or to such other qualified cash or deferred arrangement the excess deferrals. The Committee notwithstanding any other provision of the Plan shall distribute, 270 by April 15 of the following calendar year, the amount of the Salary Reduction Contributions specified in the Participant's claim as of the end of the Plan Year plus income thereon and plus income thereon from the end of the Plan Year to the date of distribution. The Participant's claim shall be in writing and should be submitted to the Committee no later than the March 1 following the calendar year in which such deferrals occurred. Notwithstanding anything in this Section 4.5 to the contrary, a Participant shall be deemed to have made a claim for distribution of excess elective deferrals from the Plan to the extent that his Salary Reduction Contributions together with his elective deferrals under any other plan or arrangement maintained by the Employer or an Affiliated Company exceed the limit imposed by section 402(g) of the Code for the calendar year. (b) Participant Written Agreement. Amounts representing a Participant's Basic Contributions shall be deducted from payrolls pursuant to a salary reduction agreement between the Employer and the Participant, and such amounts shall, not less frequently than monthly, be paid into the Fund. Amounts representing a Participant's Deferred Bonus Contributions shall be deducted from payrolls pursuant to a bonus deferral agreement between the Employer and the Participant, and such amounts shall, not more frequently than annually, be paid into the Fund. (c) Suspension or Change in Rates of Basic Contributions. A Participant may suspend or change the rate of his Basic Contributions by submitting a written request, in the manner and at 271 the time prescribed by the Committee. If a Participant suspends making Basic Contributions, he shall be allowed to resume making Basic Contributions on any Entry Date unless the Committee, in its sole discretion which shall be exercised in a uniform and nondiscriminatory manner, permits Basic Contributions to be resumed on an earlier date. A Participant may change the rate at which he makes Basic Contributions as of any Entry Date by a written request, in the manner and at the time prescribed by the Committee; provided, however, that a Participant whose rate of Compensation is decreased may reduce such rate as of the effective date of such decrease. All Basic Contributions by a Participant shall be suspended without any request on his part for any month in which he is on leave of absence without Compensation. Such suspension shall continue until the first day of the month following the termination of such leave. (d) Records. All Salary Reduction Contributions transferred to the Trustee under the Plan shall be accompanied by written instructions from the Committee to the Trustee that: (a) identify the Participant on whose behalf the Salary Reduction Contribution is being made; and (b) direct the investment of the Salary Reduction Contribution in accordance with the Participant's investment directions pursuant to Article VI. Section 4.6. Expenses of the Plan. All normal expenses incurred in the operation and administration of the Plan, including the Trustee's compensation, shall be paid by the Employer, or at the election of the Employer such expenses shall be paid from the 272 Fund. However, extraordinary expenses incurred on behalf of a particular Participant shall, upon determination by the Committee, be charged against the Participant's Accounts. Section 4.7. Return of Contributions. All Contributions under the Plan are conditioned upon the deductibility of such Contributions under Section 404 of the Code and, to the extent the deduction is disallowed, shall be returned to the Employer within one year after the disallowance of the deduction. The Employer shall pay amounts attributable to Salary Reduction Contributions thereby returned to it to the appropriate Participants as soon as practicable thereafter. Notwithstanding the foregoing, the maximum amount which may be returned shall be the value of the Salary Reduction Contributions on the date they are returned. In the event that, with respect to any Plan Year, the deductibility of all Contributions under the Plan by the Employer would be limited under section 404 of the Code, the Committee shall reduce the rate of Contribution which may be made to the Plan to the extent necessary to permit full utilization of the deduction from the prior year. Contributions shall be held in trust for the exclusive benefit of Participants and their beneficiaries and may not, except as otherwise provided herein, revert to the Employer. Notwithstanding the foregoing, if the Employer so directs, the Trustee shall return to the Employer that part of the Employer Contribution for any Plan Year which is made under a mistake of fact or which is conditioned on the deductibility of such Contribution, which deduction is subsequently disallowed. The amount of such Contribution which may 273 be returned to the Employer shall not exceed the excess of (a) the amount contributed over (b) the amount that would have been contributed if there had not occurred a mistake of fact or a mistake in determining the deduction. Such amount must be returned to the Employer within one year from the date of such mistaken contribution or disallowance of deduction. Earnings attributable to any excess Contribution may not be returned to the Employer but losses attributable thereto shall reduce the amount returned. Further, if withdrawal of the amount attributable to the mistaken Contribution would cause the balance of any Participant's individual Account to be reduced to less than the balance which would have been in the Account had the mistaken amount not been contributed, then the amount to be returned to the Employer hereunder shall be limited so as to avoid such reduction. Section 4.8. Rollovers and Transfers from Qualified Plans. With the approval of the Committee, an Employee (regardless of whether he has met the eligibility requirements of Article III) may deposit into a Profit Sharing Plan Rollover Account the entire amount of cash received as a distribution from another qualified trust forming a part of a plan described in section 401(a) of the Code or from an individual retirement program described in section 408 of the Code, but only if the deposit qualifies as a tax-free rollover as defined in section 402 of the Code. If the deposit does not qualify as a tax-free rollover, the deposit shall be refunded to the Employee. In addition to the foregoing, and with the approval of the Committee, the Trustee may accept on behalf of 274 any Employee an amount of cash or property transferred directly from another qualified trust forming part of a qualified plan described in section 401(a) of the Code and such amount of cash or property shall be deposited into a Rollover Account for such Employee. The Committee shall have the right to refuse to accept the transferred amount if such receipt would cause this Plan to be subject to the provisions of sections 401(a)(11) and 417 of the Code with respect to such Employee. Rollovers and transferred amounts made in cash shall be invested in accordance with the provisions of Article VI. To the extent that a rollover or transferred amount consists of property, and absent a direction by the Employee to liquidate such property and invest the proceeds in accordance with Article VI, the Trustee or Insurer shall hold the property as a separate Investment Fund hereunder. An Employee who is not a Participant shall be treated as a Participant with respect to his Profit Sharing Plan Rollover Account for purposes of valuations, investments and distributions. Section 4.9. Merger of Maritrans Inc. 401(k) Savings Plan. Notwithstanding the foregoing Section 4.8, effective on the Merger Effective Date, all assets held under the Maritrans Inc. 401(k) Savings Plan shall be transferred to the Fund and merged with the assets of the Plan. All benefits payable after the Merger Effective Date from the Maritrans Inc. 401(k) Savings Plan shall be payable from the Fund under the Plan. With respect to each Participant who has an account under the Maritrans Inc. 401(k) Savings Plan on the Merger Effective Date, the Participant's 275 contribution account under such Savings Plan shall be transferred to his Salary Reduction Account under the Plan, and the Participant's rollover account under the Savings Plan shall be transferred to his Savings Plan Rollover Account under the Plan. 276 ARTICLE V ALLOCATIONS OF CONTRIBUTIONS AND VALUATIONS Section 5.1. Allocation of Employer Contributions. Employer Contributions for each Plan Year shall be totaled and shall then be apportioned among and allocated to the Employer Contribution Account established and maintained by the Plan Administrator for each Participant. The Employer Contribution Account of each Participant who completed 1,000 or more Hours of Service during the Plan Year for which the Employer Contribution is made shall receive an allocation of that Employer Contribution in the proportion that the Compensation of each such Participant bears to the total Compensation of all Participants for such Plan Year. Allocation of the Employer Contributions shall be made immediately after appraisal of the Fund and allocation of gains and losses under Section 6.7. Section 5.2. Allocation of Salary Reduction Contributions. Salary Reduction Contributions made for a Participant in respect of any Plan Year shall be allocated to his Salary Reduction Contribution Account and shall be invested in accordance with the provisions of Article VI. Section 5.3 Limitations on Salary Reduction Contributions. For any Plan Year (a) that Salary Reduction Contributions under the Plan shall not be in excess of the limitations on deductions imposed under section 404(a)(3) of the Code; (b) the Plan shall satisfy the coverage requirements of 277 section 410(b)(1) of the Code; (c) that the Plan shall satisfy the average deferral percentage test set forth in Section 5.3(a). (a) Average Deferral Percentage Test. Effective January 1, 1987, the average deferral percentage for Highly Compensated Employees who are Participants in the Plan shall not exceed the greater of (i) or (ii) as follows: (i) The average deferral percentage for all Participants who are Non-Highly Compensated Employees, multiplied by 1.25, or (ii) The average deferral percentage for all Participants who are Non-Highly Compensated Employees, multiplied by 2.0; provided that the average deferral percentage for Highly Compensated Employees who are Participants may not exceed the average deferral percentage for Participants who are Non-Highly Compensated Employees by more than two percentage points. (b) Average Deferral Percentage. For purposes of Section 5.3(a), the term "average deferral percentage" as applied to a specified group of Participants shall mean the average of the ratios, calculated separately for each such Participant in such group of: (i) the amount of Salary Reduction Contributions, excluding any Salary Reduction Contributions in determining the deferral percentage described in the next paragraph that are distributed to an Employee who is not a Non-Highly Compensated Employee pursuant to a deemed claim for distribution under Section 5.3(d)(ii) or returned to the Participant pursuant to Section 278 5.3(d)(i), paid to the Plan on behalf of each such Participant for such Plan Year, to (ii) the Participant's Compensation for such Plan Year. For the purposes of this Section, the deferral percentage of a Highly Compensated Employee who is a Participant under this Plan and who has made elective deferrals under any other qualified cash or deferred arrangement (excluding plans that are not permitted to be aggregated under Treas. Reg. Section 1.401(k)-1(b)(3)(ii)(B)) maintained by the Employer or an Affiliated Company pursuant to section 401(k) of the Code shall be the sum of his deferral percentages under all such plans. (c) Treatment of Family Members. For purposes of Sections 5.3(a) and (c), if a Highly Compensated Employee is subject to the family aggregation rules of section 414(q)(6) of the Code because he is either a five-percent owner (as defined in section 416(i) of the Code and the regulations issued thereunder), or is one of the top 10 Highly Compensated Employees (based on 415 Compensation received including Basic and Deferred Bonus Contributions hereunder) during the Plan Year of reference, the combined actual deferral (or contribution) ratio for the family group (which shall be treated as one Highly Compensated Employee) shall be the actual deferral (or contribution) ratio determined by combining the applicable Salary Reduction Contributions and Compensation of all of the eligible family members. 279 Any family member(s) included above shall not be considered a separate Tank Cleaning Inc. Participant in determining the average deferral percentage or average contribution percentage hereunder. In addition, the Compensation, elective deferrals and matching contributions of each such family member shall not be taken into account in determining the average deferral percentage and average contribution percentage for the group of Tank Cleaning, Inc. Employees who are not Highly Compensated Employees. For purposes of this paragraph, "family member" means, with respect to an Employee, such Employee's spouse and lineal ascendants and descendants and the spouses of such lineal ascendants and descendants, taking into account legal adoptions. (d) Return of Excess Salary Reduction Contributions. If the average deferral percentage for all Participants who are Highly Compensated Employees exceeds the amount specified in Sections 5.3(a) for any Plan Year, the Salary Reduction Contributions for the Highly Compensated Employee with the highest deferral percentage shall be reduced so that his applicable percentage is reduced to the greater of: (i) such percentage that enables the Plan to satisfy the applicable percentage test, or (ii) a percentage equal to the applicable percentage of the Highly Compensated Employee with the next highest percentage. Such procedure shall be repeated until the applicable percentage test is satisfied. Notwithstanding any other provisions 280 of the plan, the amount so reduced, together with the earnings thereon, shall be deemed to have been contributed to the Plan by mistake of fact, shall be refunded to the Employer, and shall thereafter be paid (subject, however, to the withholding taxes and other amounts as though such amounts were current remuneration) by the Employer to the Participants from whose Compensation such amount was obtained. Such payment shall be made within two and one half (2 1/2) months following the close of such Plan Year, if administratively practicable, but in no event later than the last day of the Plan Year following such Plan Year. Section 5.4. Maximum Allocation to Participants. Notwithstanding any other provisions of this Plan, the Annual Additions to any Participant's account for any Plan Year shall not exceed the lesser of (a) $30,000 (or, effective January 1, 1987, if greater, twenty-five percent 25% of the dollar limitation in effect under section 415(b)(1)(A) of the Code), or, (b) twenty-five percent (25%) of the total 415 Compensation paid to the Participant during a Plan Year. For purposes of Article V, "Annual Additions" for any Plan Year means the sum of: (a) all contributions made by the Employer or an Affiliated Company hereunder or under any other defined contribution plan maintained by either; and (b) the amount of forfeitures allocated to a Participant's Account. Section 5.5. Maximum Limit for Employees Also Partici- pating in Defined Benefit Plan. If a Participant is also earning retirement benefits under a separate defined benefit plan or plans established by the Employer or an Affiliated Company, the benefits 281 under such plan or plans for any Plan Year shall be so limited that the sum of fractions (a) and (b) below shall not exceed 1.0 where: (a) is a fraction, the numerator of which is the proj- ected annual benefit of the Participant under the defined benefit plan and the denominator of which is the lesser of: (i) the product of 1.25 and $90,000 (effective January 1, 1987, adjusted to reflect any cost of living increases provided in accordance with section 415 of the Code), or (ii) the product of 1.4 and 100% of the Participant's average annual 415 Compensation for his high three consecutive years; and (b) is a fraction, the numerator of which is the sum of all Annual Additions for all years during which he was a Par- ticipant and the denominator of which is the sum of the lesser of (i) and (ii) for each year during which the Participant was an Employee of the Employer: (i) the product of 1.25 and the dollar limitation in effect under Section 415(c)(1)(A) of the Code for such year, or (ii) the product of 1.4 and 25% of the Participant's 415 Compensation for such year. Section 5.6. Statements. The Trustee shall furnish each Participant at such times as determined by the Committee, statements reflecting the fair market value of the Participant's Accounts under the Plan as of the most recent Valuation Date and the number of shares of Stock in his Accounts as of such Date. 282 ARTICLE VI INVESTMENT DIRECTIONS Section 6.1. Investment of Employer Contributions and Profit Sharing Plan Rollovers. Each Participant may direct the investment of 50% or 100% of the funds credited to his Employer Contribution Account and Profit Sharing Plan Rollover Account hereunder, in accordance with this Section and such rules as may be established by the Committee, into a separate Fixed Income Fund established by the Committee. Each Participant shall be notified by the Committee upon first becoming a Participant and, thereafter, at the time specified by the Committee, of his right to make an election under this Section. Such election shall be made on a form supplied by the Committee and shall be filed with the Committee at least 30 days prior to the date as of which it is to become effective, unless the Committee waives this requirement. As of the date on which an election becomes effective, the Committee shall cause the Participant's Employer Contribution Account and Profit Sharing Plan Rollover Account to be valued and cause the elected portion of the Participant's Employer Contribution Account and Profit Sharing Plan Rollover Account to be invested in the Fixed Income Fund. Thereafter, 50% or 100%, as elected, of all future amounts credited to the Participant's Employer Contribution Account and Profit Sharing Plan Rollover Account for a period of five (5) Plan Years shall be invested in the Fixed Income Fund and shall continue to be so invested until the Participant notifies the Committee of a change in investment direction; provided, however, 283 that a Participant who directs that amounts credited to his Employer Contribution Account and Profit Sharing Plan Rollover Account and all future allocations be invested in the Fixed Income Fund may not change such direction for a period of five (5) Plan Years. Thereafter, a change request shall be in writing on a form supplied by the Committee and shall be filed with the Committee at least 30 days prior to the date as of which it is to become effective, unless the Committee waives this requirement. No change request may thereafter be made for another period of five (5) Plan Years. Notwithstanding the foregoing, any Participant upon reaching age 60, may make an election at the time prescribed by the Committee, to direct that 50% or 100% of the amounts credited to his Employer Contribution Account and Profit Sharing Plan Rollover Account and such percentage of any further allocations be invested in the Fixed Income Fund. A Participant making this election may not change his election for a period of five (5) Plan Years. The Fixed Income Fund, shall be separately valued on each Valuation Date as required, and on the Valuation Date occurring at the end of each Plan Year. All Participants' Employer Contribution Accounts and Profit Sharing Plan Rollover Accounts invested in such Fund shall be adjusted so that each Employer Contribution Account and Profit Sharing Plan Rollover Account reflects its portion of the value of such Fund in the proportion that such Employer Contribution Account and Profit Sharing Plan Rollover Account bore to the aggregate value of all Employer Contribution Accounts 284 invested in the Fixed Income Fund immediately after the addition of the Employer Contributions to the Fixed Income Fund for the preceding Plan Year. Notwithstanding anything herein to the contrary, the Committee may reduce the five (5) Plan Year period referred to herein if necessary in order to initially enter into a contractual arrangement for the establishment or continuation of the Fund. Section 6.2. Investment of Salary Reduction Contributions. Each Participant shall, in the manner prescribed by the Committee, direct that the total of his Salary Reduction Contributions be paid into and invested in any one or more of the Investment Funds in such percentages as the Participant may direct, provided that each pay period's investment in any Investment Fund shall be in increments of twenty-five percent (25%) of the Participant's Salary Reduction Contributions. If the Stock Fund is an available Investment Fund, no Participant may direct the investment of more than $2,500.00 into the Stock Fund in any Plan Year. The percentage allocation of a Participant's future Salary Reduction Contributions to be paid into and invested in the Investment Funds may be changed as of any March 1 or September 1 by giving written notice, in the manner prescribed by the Committee at least seven days before the change is to become effective. Section 6.3. Investment of Rollover Accounts. In accordance with rules and regulations issued by the Plan Administrator, each Participant shall have the right to direct that his Profit Sharing Plan Rollover Account and/or his Savings Plan 285 Rollover Account, if any, be invested in the manner prescribed in Section 6.2. Section 6.4. Transfer of Investments. A Participant may transfer any portion, in twenty-five percent (25%) increments, of his interest in any Investment Fund attributable to Salary Reduction Contributions to any one or a combination of the other Investment Funds as of any April 1 or October 1 of any Plan Year, by giving written notice in the manner prescribed by the Committee at least 35 days before the transfer is to become effective. Section 6.5. Notice. Any direction or notice pursuant to Section 6.1, 6.2, 6.3 and/or 6.4 shall be made in accordance with such rules as may be established by the Committee. If a Participant fails to make any direction, his Salary Reduction Contributions shall be invested automatically in a fixed income Investment Fund designated by the Committee. Section 6.6. Reliance on Investment Direction. All investment directions or notices by Participants pursuant to Section 6.1, 6.2, 6.3 or 6.4 shall be timely furnished by the Committee to the Trustee. In making any investment of Plan assets, the Trustee shall be fully entitled to rely on such directions or notices furnished by the Committee and shall be under no duty to make any inquiry or investigation with respect thereto. If the Trustee receives any Salary Reduction Contribution under the Plan that is not accompanied by written instructions directing its investment, the Trustee may hold or return all or a portion of the Salary Reduction Contribution uninvested without liability for loss 286 of income or appreciation pending receipt of proper investment directions. Section 6.7 Valuation of Fund and Allocation of Gains and Losses. The entire Fund shall be appraised annually as of the Valuation Date occurring December 31 of each year to determine its fair market value. The Fund shall also be appraised at other Valu- ation Dates as directed by the Committee, in its sole discretion. The appraisal on each Valuation Date shall be made before addition of the Employer Contribution for the Plan Year that includes the Valuation Date, but any appraisal shall take into consideration all income received and accrued, all realized and unrealized gains and losses and all expenses chargeable to the Fund. Thereupon, all Participants' Accounts shall be adjusted so that each Account reflects its portion of the new value of the Fund in the proportion that such Account bore to the aggregate value of all Accounts immediately after addition of the Employer Contributions for the preceding Plan Year. 287 ARTICLE VII RETIREMENT BENEFITS Section 7.1. Normal Retirement. Upon reaching his Normal Retirement Age, a Participant shall receive the entire amount standing to the credit of his Account, adjusted under Article V as of the close of the Valuation Date immediately preceding or coinciding with his Normal Retirement Date, payable in the form of: (a) a lump-sum payment; or (b) a series of regular annual payments (each annual payment to include all income for such year attributable to the Participant's undistributed interest in the Fund) resulting in the distribution of the Participant's entire account within a ten-year or shorter period. The form of payment shall be determined by the Participant. Notwithstanding anything herein to the contrary, with respect to amounts attributable to a Participant's Salary Reduction Contribution Account and Savings Plan Rollover Account, a Participant may make a written election, in the manner prescribed by the Committee, distribution to a Participant or a beneficiary hereunder may consist in whole or in part of the Participant's share of the Investment Fund or Funds in which his Account is invested in accordance with Article VI, including any certificates for Stock held in the Stock Fund. In making any such distribution under the Plan, the Trustee shall be fully entitled to rely on the instructions furnished by the Committee and shall be under no duty to make any inquiry or investigation with respect thereto. 288 Section 7.2. Early Retirement. A Participant who has at- tained age fifty-five and has credit for six Years of Service may retire at any time prior to his Normal Retirement Age, and in such event he shall receive distribution of his benefits upon such early retirement in the manner provided in Section 7.1 hereof. Section 7.3. Postponed Retirement. A Participant may retire on the first day of any month following his Normal Retire- ment Date. Notwithstanding the foregoing and in accordance with Section 12(c) of the Age Discrimination in Employment Act, nothing in this Section shall prohibit the compulsory retirement of any Employee who has attained age 65 and who for the two-year period immediately before retirement is employed in a bona fide executive or high policy-making position, provided that such Employee is entitled to an immediate nonforfeitable annual retirement benefit payable from this or any other pension, profit-sharing, savings or deferred compensation plan or any combination of such plans main- tained by the Employer, which benefit equals in the aggregate at least $44,000. Section Section 7.4. Transfer to Affiliated Company. Transfer of an Employee to the service of an Affiliated Company which is not a Participating Employer or the termination of a corporation's status as a Participating Employer (while remaining an Affiliated Company) under the Plan shall not be treated as a Severance under the Plan, and, in such event, benefits shall be payable in accordance with this Article VII upon the Participant's termination of Service. Notwithstanding the foregoing, an Employee 289 who transfers to the service of an Affiliated Company and who is fully vested under the provisions of Section 10.1, shall be entitled to a withdrawal of all, but less than all, of the amounts credited to his Employer Contribution Account and Profit Sharing Plan Rollover Account as of the Valuation Date coinciding with or immediately preceding his date of transfer. 290 ARTICLE VIII DISABILITY Section 8.1. Disability Benefit. A Participant who incurs a Disability shall be entitled to retire and receive the entire amount standing to his credit in his Account, computed as of the close of the Valuation Date immediately preceding or coinciding with the date of Disability, payment to be made in such manner as the Committee may determine having regard for the preferences of the Participant but treating all persons in similar circumstances alike. Notwithstanding anything herein to the contrary, with respect to amounts attributable to a Participant's Salary Reduction Contribution Account and Savings Plan Rollover Account, a Participant may make a written election, in the manner prescribed by the Committee, distribution to a Participant or a beneficiary hereunder may consist in whole or in part of the Participant's share of the Investment Fund or Funds in which his Account is invested in accordance with Article VI, including any certificates for Stock held in the Stock Fund. In making any such distribution under the Plan, the Trustee shall be fully entitled to rely on the instructions furnished by the Committee and shall be under no duty to make any inquiry or investigation with respect thereto. Section 8.2. Determination of Disability. The fact and time of Disability shall be determined by the Committee on the basis of independent medical evidence, and such determination shall be conclusive. However, if a Participant is determined to be elig- ible for disability benefits under Social Security by the Social 291 Security Administration that determination shall be binding upon the Committee. 292 ARTICLE IX DEATH BENEFITS Section 9.1. Death Benefit. In the event a Participant dies while an Employee of the Employer or after retirement or other termination of service while benefits on his behalf remain undis- tributed from the Fund, the entire amount of his Account attribut- able to Employer Contributions or its undistributed balance valued as of the Valuation Date immediately preceding his death, as the case may be, shall be distributed to the designated beneficiary or beneficiaries of the Participant set forth in his most recent beneficiary designation filed with the Committee. In the absence of an effective designation, the Committee shall direct distribu- tion to and among the following persons with priority in the order named: (a) surviving Spouse; (b) surviving children; (c) surviving parents; (d) surviving brothers and sisters and (e) executor or administrator. Notwithstanding anything herein to the contrary, with respect to amounts attributable to a Participant's Salary Reduction Contribution Account and Savings Plan Rollover Account, a Participant may make a written election, in the manner prescribed by the Committee, distribution to a Participant or a beneficiary hereunder may consist in whole or in part of the Participant's share of the Investment Fund or Funds in which his Account is invested in accordance with Article VI, including any certificates for Stock held in the Stock Fund. In making any such distribution under the Plan, the Trustee shall be fully entitled to rely on the 293 instructions furnished by the Committee and shall be under no duty to make any inquiry or investigation with respect thereto. Section 9.2. Designation of Beneficiary. Each Participant shall, by written notice to the Committee, designate a beneficiary or beneficiaries to receive any payment to which such Participant may be entitled under the Plan at the time of his death. If a Participant designates a beneficiary (including any class of beneficiaries or any contingent beneficiaries) other than or in addition to his Spouse, the Spouse of the Participant must consent in writing to such beneficiary designation on a form provided by the Committee, which consent shall be irrevocable. Such consent shall acknowledge the financial effect of the election on the Spouse's right to benefits under the Plan, and shall be witnessed by the Chairman of the Committee, a Plan representative designated by the Committee or a notary public. the spousal consent requirement may be waived if it is established, to the satisfaction of the Committee, that the consent may not be obtained because there is no Spouse, because the Spouse cannot be located after reasonable efforts have been made, or because other circumstances exist to excuse spousal consent under applicable regulations. Any beneficiary designation made by a Participant which does not meet the requirements of this Section shall be deemed null and void. The Participant shall have the right to change a beneficiary designation or any subsequent beneficiary designation, subject to the spousal consent provisions of this Section. 294 ARTICLE X VESTED BENEFITS UPON TERMINATION OF SERVICE Section 10.1. Termination of Service. Whenever a Par- ticipant's Service with the Employer is terminated prior to his Normal Retirement Date or his Early Retirement Date, if applicable, for reasons other than death or Disability, vested interest in his Account shall be determined as of his Date of Severance and valued in Accordance with Section 10.5 as follows: (a) Vested interest in his Employer Contribution Account shall be determined on the basis of the number of Years of Service credited to him in accordance with Section 2.50 as follows: (i) For Plan Years beginning prior to January 1, 1989: Years of Service Vested Interest ---------------- --------------- Less than 2 0% 2 10% 3 20% 4 30% 5 50% 6 or more 100% (ii) For Plan Years beginning on or after January 1, 1989: Years of Service Vested Interest ---------------- ---------------- Less than 2 0% 2 10% 3 20% 4 40% 5 70% 6 or more 100% Amounts in excess of the value of the Participant's vested interest in his Employer Contribution Account shall be forfeited as of the 295 date the Participant's Service terminates, and shall be reallocated among remaining Participants in accordance with Section 10.3. Participants who were Participants in the IOT Corporation Profit Sharing Plan effective June 30, 1975, may nevertheless elect to have their vested interest computed under Section 10.1 of that plan. A Participant shall be fully vested in his Employer Contribution Account upon attainment of his Normal Retirement Age, or upon his Early Retirement Date, death or Disability. (b) A Participant shall, at all times, have a 100% vested interest in the value of his Salary Reduction Contribution Account. (c) A Participant shall, at all times, have a 100% vested interest in the value of his Profit Sharing Plan Rollover Account and his Savings Plan Rollover Account. Section 10.2. No Forfeiture After Termination of Plan. No forfeiture shall occur under this Article X if the Plan has been previously terminated by the Employer or if Employer Contributions have been completely discontinued. Section 10.3. Allocation of Forfeitures. All for- feitures arising under Section 10.1(a) shall remain as part of the Fund and shall be allocated among the Employer Contribution Accounts of all other Participants on the Valuation Date coincident with or next succeeding the event giving rise to such forfeiture in the same manner as contributions to the Fund under Section 5.1. Section 10.4. Re-employment Before Break in Service. If the Participant is reemployed by the Employer prior to incurring 296 five (5) consecutive Breaks in Service, he shall have restored to his Employer Contribution Account any forfeited amount; provided, however, that if the Participant has received a distribution of all or part of his vested interest in the Plan in accordance with the provisions of this Article X hereof on account of incurring a termination of Service, then such restoration shall not occur unless such Participant repays the amount distributed prior to the earlier of (a) five years after the Participant's Date of Reemployment, or (b) the occurrence of five consecutive Breaks in Service. Any amounts restored shall be paid first from forfeitures for the current Plan Year and, where such forfeitures are not sufficient, from additional contributions by the Employer. The Committee shall maintain or cause to be maintained a record of the amounts forfeited in accordance with the above. The Committee shall inform the Employer of any amounts required to be restored hereunder, and the Employer shall pay such amounts within thirty (30) days of such notice. 297 ARTICLE XI DISTRIBUTION OF BENEFITS Section 11.1. Time of Distribution. (a) With respect to amounts attributable to a Participant's Employer Contribution Account and Profit Sharing Plan Rollover Account, if a Participant incurs a Date of Severance for any reason, he (or his beneficiary in the event of his death) shall receive a distribution of his vested interest in his Employer Contribution Account and Profit Sharing Rollover Account as soon as practicable following the Valuation Date as of which his benefit is determined under this Section but in no event later than 60 days following the later of: (i) the end of the Plan Year in which his Normal Retirement Date would occur (whether or not he remains employed to that date); (ii) the tenth anniversary of the date the Partici- pant began to participate in the Plan; or (iii) the Participant's Date of Severance; provided, however, that no distribution shall be made to a Participant prior to his Normal Retirement Age (except in the event of his death) unless the Participant consents to the distribution. A Participant's Employer Contribution Account and Profit Sharing Plan Rollover Account shall be valued on the Valuation Date coinciding with or immediately succeeding the event giving rise to the distribution; provided, however, that if a Participant's Date of Severance occurs prior to June 30 and such Participant is entitled 298 to an Employer Contribution for the Plan Year, such Participant may elect to delay distribution of his Employer Contribution Account and Profit Sharing Plan Rollover Account (and the valuation of such Accounts) until the Valuation Date coinciding with or immediately succeeding the date on which the Employer Contribution for the Plan Year is allocated to his Employer Contribution Account; and provided further, that if a Participant's Date of Severance occurs on or after June 30 as such Participant is not entitled to an Employer Contribution for the Plan Year, his Employer Contribution Account shall be valued on the Valuation Date coinciding with or immediately preceding his Date of Severance. If a Participant has attained his Normal Retirement Age at the time distribution becomes due, the Participant or his beneficiary may elect, in the manner and at time prescribed by the Plan Administrator, to defer the receipt of all, but not less than all, of the distribution otherwise to be made to him until any subsequent Plan Year but not later than the Required Distribution Date. Notwithstanding the foregoing, if the total nonforfeitable amount credited to the Account of the terminated Participant does not exceed $3,500, the Committee, in its sole discretion, may distribute such amount in a lump sum at any time without the Participant's or beneficiary's consent. Any amounts not distributed under this Section shall remain a part of the Fund and shall continue to share in income, gains and losses, but not in forfeitures. Notwithstanding anything herein to the contrary, if a Participant incurs a Date of Severance by reason of his voluntary resignation before he has attained age 299 25, no distribution shall be made prior to the second Valuation Date following his Date of Severance. (b) With respect to amounts attributable to a Participant's Salary Reduction Contribution Account and Savings Plan Rollover Account, if a Participant incurs a Date of Severance for any reason, he (or his beneficiary in the event of his death) shall receive a distribution of his vested interest in his Salary Reduction Contribution Account and Savings Plan Rollover Account as soon as practicable after such Valuation Date; provided that (a) no such distribution shall be made to a Participant prior to his Normal Retirement Age unless the Participant consents to the distribution as provided in section 411(a)(11) of the Code (except for distributions made as a result of the Participant's death), and (b) distribution to a Participant who fails to so consent shall be made on such date (not later than the Required Distribution Date) as the Participant may elect in writing (in the manner and at the time prescribed by the Committee), or, if the Participant fails to make such an election, as soon as practicable after the Valuation Date coinciding with or immediately following the date the Participant attains his Normal Retirement Age. Any amounts not distributed under this Section shall remain a part of the Fund and shall continue to share in income, gains and losses. Each distribution shall be made not later than 60 days after the Valuation Date on which the value of the distribution is measured. Notwithstanding the foregoing, if the value of the Participant's Account is less than or equal to $3,500.00 as of the Valuation Date 300 coinciding with or immediately following the final pay transfer to the administrator of the Plan, his Account shall be distributed as soon as practicable after such Valuation Date. Section 11.2. Required Distributions. A Participant's interest in his Accounts (a) shall be distributed to him no later than the Required Distribution Date, or (b) shall be distributed beginning no later than the Required Distribution Date in install- ments pursuant to Section 7.1(b); provided, however, that the period over which distributions are made does not extend beyond the life expectancy of the Participant or the joint life expectancies of the Participant and his beneficiary (determined as of the time when payment of benefits commences and where the Spouse is the beneficiary, at the election of the Committee in its sole discre- tion redetermined annually). If distribution has commenced in accordance with clause (b) of the preceding sentence and the Participant dies before his entire interest has been distributed to him, his remaining interest shall be distributed over the remaining number of installments payable as of the date of his death. If a Participant dies before the distribution of his interest has begun the Participant's entire interest shall be distributed within five years after his death. The preceding sentence shall not apply, however, if any portion of the Participant's interest is payable to (or for the benefit of) a beneficiary over a period not extending beyond the life expectancy of such beneficiary and distribution begins not later than one year after the date of the Participant's death or such later date permitted under applicable regulations. 301 If the beneficiary referred to in the preceding sentence is the surviving Spouse of the Participant, distributions are not required to begin earlier than the date on which the Participant would have attained age 70 1/2. If the surviving Spouse dies before dis- tributions begin, the five-year distribution requirement shall be applied as if the surviving Spouse were the Participant. Section 11.3 Direct Rollovers. In the event any payment or payments (excluding any amount not includible in gross income) to be made to an individual pursuant to this Article XI would constitute an "eligible rollover distribution" within the meaning of section 401(a)(31)(C) of the Code and regulations thereunder, such individual may request that, in lieu of payment to the individual, all or part of such eligible rollover distribution be rolled over directly to the trustee or custodian of an "eligible retirement plan" within the meaning of section 401(a)(31)(C) of the Code and regulations thereunder. Any such request shall be made in writing, on the form and subject to such requirements and restrictions as may be prescribed by the Plan Administrator for such purpose pursuant to Treasury regulations, at such time in advance of the date payment would otherwise be made as may be required by the Plan Administrator. For purposes of this Section, an "individual" shall include an Employee or former Employee or (a) his surviving spouse or (b) his spouse or former spouse who is an alternate payee under a Qualified Domestic Relations Order. 302 The provisions of this Section 11.3 shall be construed to comply with the requirements set forth in section 401(a)(31) of the Code and any regulations thereunder. 303 ARTICLE XII LIFE INSURANCE Section 12.1. Purchase of Life Insurance on Request. At the written request of any person who has been a Participant on three consecutive Anniversary Dates, the Committee shall direct the Trustee to purchase one or more contracts of ordinary, cash value life insurance on the life of the Participant from an insurance company approved by the Committee. The Participant's request shall specify the face amount of the insurance contracts and be accompanied by applications for the contracts completed by the Participant who will be solely responsible for selection of options under any contract which options shall be consistent with the Plan. The Trustee shall be the owner of such contracts but the Participant shall have the right to designate the beneficiaries thereof (which may be different than the person(s) designated to receive the value of his account under Section 9.1 of the Plan). Premiums on such contracts shall be paid by the Trustee from Employer Contributions under the Plan that would otherwise be allo- cated to the insured Participant's Employer Contribution Account or from funds withdrawn from the insured's Employer Contribution Account. If Employer Contributions that may be applied to pay premiums on insurance contracts are not sufficient to maintain them in full, the Participant shall instruct the Committee as to his election under the contracts. If he fails to instruct the Committee within the period required under the contracts, the Committee shall direct the Trustee to surrender the contracts for 304 their cash value and allocate the proceeds to the Participant's Employer Contribution Account. Section 12.2. Cash Value of Insurance. For purposes of determining the value of an insured Participant's Employer Contribution Account under Section 6.7 of the Plan, no value shall be assigned to the insurance contracts. However, the cash value of such contracts shall be treated as a part of the value of an insured Participant's Employer Contribution Account under Sections 7.1 and 10.1 hereof. Section 12.3. Transfer of Policy Upon Termination. Upon termination of Service under Section 9.1 hereof, a Participant may request in writing that any insurance contracts on his life be assigned to him by the Trustee if the Participant shall (a) first pay that portion of the then determined cash surrender value thereof that exceeds his vested interest therein (as determined under Section 10.1 hereof) to the Trustee or, (b) alternatively, authorize the Trustee to borrow that portion of the cash surrender value that exceeds his vested interest therein and then assign the contracts to the Participant who shall be solely responsible for premium payments and payments of principal and interest on the insurance contract loan. In the absence of such request the Trustee shall surrender any insurance contracts on the life of an Employee to whom Section 10.1 applies and allocate the proceeds to his Employer Contribution Account and Employer Contribution Accounts of other Participants pursuant to Section 10.3 of the Plan. 305 Section 12.4. Limitation on Employer Contributions Allocated to Insurance. In no event shall the aggregate Employer Contributions made on behalf of a Participant and allocated to the purchase of ordinary life insurance contracts on his life equal fifty percent or more of the total of all Employer Contributions made on behalf of the Participant. Section 12.5. Transfer of Contracts. The Trustee shall deliver any life insurance contracts covering the Participant to the Participant upon his Normal or Early Retirement Date or upon his retirement for Disability or, at the Participant's written request, surrender them for their cash values which shall be delivered to the Participant. 306 ARTICLE XIII WITHDRAWALS AND LOANS Section 13.1. Withdrawals From Employer Contribution Account and Profit Sharing Rollover Account. Upon submitting an application, in the manner prescribed by the Committee, at least thirty (30) days prior to the Valuation Date as of which it is to become effective (unless the Committee, in its sole discretion, permits a later application), a Participant may request a with- drawal of his vested interest in his Employer Contribution Account and Profit Sharing Plan Rollover Account. The amount of any withdrawal, under this Section, or any loan under Section 13.3, when added to all prior withdrawals under this Section, and the outstanding balance of any loan under Section 13.3, shall not exceed 50 percent of the product of: (a) the Participant's highest Employer Contribution Account and Profit Sharing Plan Rollover Account balances as of any Valuation Date up to and including the Valuation Date preceding the loan or withdrawal by two years, plus any withdrawals and any outstanding loan balance prior to such date, less any net deprecia- tion in Employer Contribution Account and Profit Sharing Plan Rollover Account assets from such date; and (b) his current vested interest (percentage). Notwithstanding the foregoing, no amounts may be withdrawn from the Participant's Employer Contribution Account and Profit Sharing Plan Rollover Account unless they have been credited to the Participant's Employer Contribution Account and Profit Sharing Plan 307 Rollover Account for at least twenty-four months. The minimum amount of any withdrawal shall be $2,500 or such higher amount as specified by the Committee and any request shall be in integral multiples of $500. Section 13.2. Withdrawals From Salary Reduction Contribution Account and Savings Plan Rollover Account. A Participant may request a withdrawal of all or any part of the amount of his Salary Reduction Contribution Account and Savings Plan Rollover Account, upon giving a written request in the manner prescribed by the Committee. A withdrawal may be not less than $1,000.00, and no more than one withdrawal may be made in any Plan Year. Payment to the Participant of the amount subject to the withdrawal request shall be made as soon as administratively possible after the request is received but in any event within ninety days after the request. Any withdrawal shall be subject to the following limitations: (a) Subject to the provisions of subparagraph (b), no amounts may be withdrawn from a Participant's Salary Reduction Contribution Account unless he has attained age 59-1/2. (b) Notwithstanding the age limitation imposed by subparagraph (a), if the Committee determines, on a uniform, nondiscriminatory basis, and on the basis of all relevant facts and circumstances, that a withdrawal is requested on account of an immediate and heavy financial need of the Participant, and the withdrawal is necessary to satisfy such financial need, the Committee may permit the Participant to withdraw any amounts 308 standing to his credit in his Salary Reduction Contribution Account. A withdrawal request shall be deemed to be on account of an immediate and heavy financial need if it is on account of: (i) expenses for medical care described in section 213(d) of the Code incurred by the Participant, his Spouse or dependents, as defined in section 152 of the Code, (or as the distribution is necessary for such persons to obtain such medical care); (ii) costs directly related to the purchase (excluding mortgage payments) of a principal residence for the Participant; (iii) payment of tuition and related educational fees for the next 12 months of post-secondary education for the Participant, his Spouse or his dependents; or (iv) the need to prevent the eviction of the Participant from his principal residence or foreclosure on the mortgage of the Participant's principal residence. A withdrawal shall be deemed to be necessary to satisfy the Participant's financial need, and shall be approved subject to the following provisions: (i) the distribution shall not be in excess of the amount of the immediate and heavy financial need of the Participant, including any amounts necessary to pay any federal, state or local income taxes or penalties reasonably anticipated to result from the distribution; 309 (ii) the Participant shall first obtain all withdrawals, other than hardship withdrawals, under the Plan; (iii) the Participant's Salary Reduction Contributions shall be suspended for a 12-month period beginning on the date the withdrawal is received; and (iv) the amount of Salary Reduction Contributions made by the Participant in the Plan Year succeeding the Plan Year in which the withdrawal occurs shall not exceed the dollar limit specified in Section 4.5(a) less all Salary Reduction Contributions made in the Plan Year in which the withdrawal occurs. Anything to the contrary herein notwithstanding, effective July 1, 1989, income, earnings, or appreciation attributable to Salary Reduction Contributions and allocated to the Participant's Salary Reduction Contribution Account after December 31, 1988 may not be distributed on account of hardship. Section 13.3. Loans. Not more frequently than once in any Plan Year, and effective as of January 1 (or, with respect to amounts attributable to a Participant's Salary Reduction Account or Savings Plan Rollover Account, July 1) of the Plan Year, a Participant (or former Participant or beneficiary who is a "party in interest" as defined in Section 3(14) of ERISA) may request a loan from the Plan. Application for a loan must be submitted in writing, in the manner and at the time prescribed by the Committee. The Committee shall direct the Trustee to make loans in accordance with the following provisions: (a) The minimum amount of any loan shall be $1000. 310 (b) With respect to loans from a Participant's Employer Contribution Account or Profit Sharing Plan Rollover Account, the loan shall be subject to the limitations set forth in the second sentence of Section 13.1. (c) With respect to loans from a Participant's Salary Reduction Contribution Account or Savings Plan Rollover Account, the amount of all loans outstanding at any time for a borrower (including any loans made under any other "qualified" plans of the Employer or an Affiliated Company) shall not exceed 50% of the balance in his Accounts. (d) The amount of any loan, when added to the highest outstanding balance of all loans from the Plan (or under any other "qualified" plan of the Employer or an Affiliated Company) during the one-year period ending on the day before the date on which the loan is made, may not exceed $50,000. (e) No more than one loan may be outstanding from the Plan at any time. In the event that a borrower requests a loan while any portion of the balance of a prior loan remains outstanding, the new loan, if approved, shall include the outstanding balance of the prior loan which prior loan shall be deemed paid. (f) Approval of loans, and the determination of the terms and conditions of the loans shall be subject to the discretion of the Committee, which discretion shall be exercised within each class of borrowers (Participants, former Participants or beneficiaries) on a reasonably equivalent basis. 311 (g) Interest on the unpaid principal shall be at a reasonable rate to be determined by the Committee in accordance with generally prevailing market conditions for similar types of loans. (h) Unless otherwise specified, no loan shall have a term in excess of five years, and the loan shall be repaid on a schedule providing for level amortization determined by the Committee. (i) Each loan shall be considered a separate Investment Fund for purposes of Article VI, and the borrower shall specify from which Investment Fund or Funds his interest is to be liquidated to provide the loan principal. (j) If any installment of a loan to a borrower is unpaid on the date that he or his beneficiary becomes entitled to any distribution from the Fund, or is unpaid upon termination of employment or cessation of party-in-interest status, or is otherwise unpaid for thirty days, such loan, in all events and notwithstanding the terms thereof, shall become immediately due and payable on such date. If repayment is not made within thirty days thereafter, the amount of the loan, together with any accrued unpaid interest thereon, shall be deducted from the amount of any distribution to which the borrower or his beneficiary may become entitled and shall be treated as a current distribution. (k) Repayments of loans shall be by payroll deduction or, in the event the borrower is not on the Employer's payroll, by direct payment from the borrower to the Fund. A borrower may prepay a loan in full at any time without penalty; provided, 312 however, that such borrower may not request a new loan during the twelve month period following the date of the prepayment. Section 13.4. Duties of Trustee. All loans or withdrawal payments to a Participant under the Plan shall be made by the Trustee from the Accounts of the Participant only upon receipt of written instructions furnished by the Committee setting forth the amount of the loan or withdrawal payment and the name and address of the recipient. In making any such loan or withdrawal payment under the Plan, the Trustee shall be fully entitled to rely on the instructions furnished by the Committee and shall be under no duty to make any inquiry or investigation with respect thereto. Section 13.5. Spousal Consent to Loans or Withdrawals. No withdrawal or loan request shall be granted unless the Spouse of the Participant consents in writing to such withdrawal or loan on a form provided by the Committee. Such consent shall acknowledge the effect of the withdrawal or loan on the Participant's benefit under the Plan, shall be witnessed by the Chairman of the Commit- tee, a plan representative designated by the Committee or a notary public, and shall be irrevocable. Spousal consent may be waived if it is established to the satisfaction of the Committee that the consent may not be obtained because there is no Spouse, because the Spouse cannot be located, or because of other circumstances as may be prescribed by applicable regulations. 313 ARTICLE XIV SPECIAL PROVISIONS FOR TOP-HEAVY PLANS Section 14.1. General Rule. Notwithstanding any pro- vision in the Plan to the contrary, for any Plan Year in which the Plan is determined to be a Top-Heavy Plan, the provisions of this Article XIV shall become effective. Section 14.2. Determination of Top-Heavy Status. The Plan shall be considered a Top-Heavy Plan for the Plan Year, if, as of the last day of the first Plan Year and thereafter, as of the last day of the preceding Plan Year (the "Determination Date"): (a) the value of the sum of all Accounts of Participants who are Key Employees (as defined below) exceeds 60% of the sum of all Accounts of all Participants, or (b) the Plan is part of an Aggregation Group and such Aggregation Group is determined to be a Top-Heavy Group (as defined in section 416(g)(2)(B) of the Code). In determining the above Top-Heavy ratio, the Account balances of an Employee (a) who is a Non-Key Employee (defined for purposes of this Article as an Employee who is not a Key Employee) but who was a Key Employee in any prior Plan Year or (b) who has not performed services for the Employer maintaining the Plan at any time during the five-year period ending on the applicable Determination Date are disregarded. A Key Employee is defined as any Employee, former Employee or the Beneficiary of such Employee who, at any time during a Plan Year or the immediately preceding four (4) Plan Years is: (a) an 314 officer of the Employer having annual 415 Compensation greater than 150 percent of the amount in effect under section 415(c)(1)(A) of the Code for any Plan Year; (b) one of the ten (10) Employees who own the largest interests in the Employer; (c) a five percent (5%) owner of the Employer; or (d) a one-percent (1%) owner of the Employer having annual 415 Compensation from the Employer of more than one-hundred-fifty-thousand dollars ($150,000). For purposes of this Section, Aggregation Group means (a) each plan of the Employer or an Affiliated Company in which a Key Employee participates, including any terminated plans which are maintained within the five-year period ending on the applicable Determination Date, and (b) each other plan of the Employer or an Affiliated Company which enables such plan to meet the requirements of section 401(a)(4) or 410 of the Code. The foregoing notwithstanding, the Employer may treat any plan not required to be included in the Aggregation Group as being part of such group if such group would continue to meet the requirements of sections 401(a)(4) and 410 of the Code with such plan being taken into account. Section 14.3. Minimum Contributions. For any Plan Year in which the Plan is determined to be a Top-Heavy Plan pursuant to Section 14.2, the Employer Contributions for such Plan Year for each Participant who is a Non-Key Employee shall not be less than the lesser of (a) 3% of the Participant's 415 Compensation for such Plan Year, or 315 (b) the percentage at which Employer Contributions are made or are required to be made under the Plan for the Plan Year for the Key Employee for whom such percentage is the highest. Notwithstanding the foregoing, if a Participant is also partici- pating in another defined contribution plan maintained by the Em- ployer, the minimum contribution hereunder may be reduced in ac- cordance with regulations issued under section 416(f) of the Code. If a Participant is also participating in a defined benefit plan maintained by the Employer, "5%" shall be substituted for "3%" in paragraph (a) of this Section. The Employer Contributions referred to above will be provided to each Non-Key Employee who is a Participant who has not separated from service at the end of the Plan Year, regardless of such Employee's number of Hours of Service, Compensation, or whether such Employee had made any contribution to the Plan. Section 14.4. Minimum Vesting. For any Plan Year in which the Plan is determined to be a Top-Heavy Plan pursuant to Section 14.2, each Participant's Account shall become vested in accordance with the following schedule: Years of Service Vested Interest ---------------- --------------- Less than 2 0% 2 20% 3 40% 4 60% 5 80% 6 or more 100% The foregoing notwithstanding and subject to the provisions of Section 17.2, if the Plan ceases to be Top-Heavy, the provisions of Section 10.1 shall thereafter apply. 316 Section 14.5. Adjustments to Maximum Limits on Benefits and Contributions. For any Plan Year in which the Plan is deter- mined to be a Top-Heavy Plan pursuant to Section 14.2, paragraphs (a)(i) and (b)(i) of Section 5.5 shall be read by substituting the number "1.00" for the number "1.25", wherever it appears. Notwithstanding the foregoing, no adjustment shall be made to Section 5.5 if the following requirements are met: (a) Section 14.3 shall be applied by substituting "4%" for "3%;" and the annual accrued benefit derived from employer contributions under the defined benefit plan for each Participant who is not a Key Employee is not less than the product of: (i) 3% of such Participant's average annual compensation during the period of consecutive years (not exceeding five) which yields the highest average; and (ii) the Participant's Years of Service (not exceed- ing 10) during which the plan is a top-heavy plan; (b) the aggregate of the accounts of Participants who are Key Employees under the Plan does not exceed 90% of the aggregate of the accounts of all Participants; and (c) the sum of (i) the present value of the cumulative accrued benefits for Key Employees under all defined benefit plans in the Aggregation Group and (ii) the aggregate of the accounts of Key Employees under all defined contribution plans in the Aggregation Group does not exceed 90% of such sum determined for all employees. 317 (d) in the case of a Participant also participating in a defined benefit plan maintained by the Employer, all of the requirements of paragraph (a) shall be met by substituting "7 1/2%" for "3%" in Section 14.3. Section 14.6. Compensation Limitation. For any Plan Year in which the Plan is determined to be a Top-Heavy Plan pur- suant to Section 14.2, the amount of 415 Compensation taken into account under the Plan for such Plan Year shall not exceed $200,000 (adjusted to reflect any cost of living increases provided in accordance with Section 416(d) of the Code). 318 ARTICLE XV ADMINISTRATION AND FIDUCIARY RESPONSIBILITY Section 15.1. Employer. The Employer, acting by deter- mination of its Board of Directors, may amend the Plan as it deems necessary or desirable, and shall appoint the Plan Administrator, the Trustee, the Committee members and, if desired, the Investment Advisor and determine the amount of contributions as provided in Section 4.l. Should there be a vacancy in the position of Plan Administrator, the Employer shall serve as Plan Administrator. Section 15.2. Investment Advisor. If appointed by the Employer, the Investment Advisor shall direct the Trustee in the investment and reinvestment of the Fund, or such portion thereof as may be assigned to it for supervision. Section 15.3. Trustee. The Trustee will invest and reinvest the Fund in accordance with the Trust Agreement and make distributions upon instructions of the Committee. Section 15.4. Committee. The Committee shall decide such questions of Plan interpretation, eligibility and distribution of benefits as the Plan Administrator may submit for its determina- tion, shall resolve all inconsistencies, if any, in the Plan. The Committee shall receive reports from the Trustee as to the status of the Fund, advise the Board as to the status of the Fund from time to time and instruct the Trustee with respect to benefit distributions. The Committee may contract for clerical, legal, accounting, actuarial and medical services as may be desirable for the proper administration of the Plan, the cost of which may be 319 paid from the Fund or by the Employer as the Employer shall determine. The Committee may also authorize the Plan Administrator to contract for such services as are necessary for the proper discharge of its duties. The Committee is designated as the agent for service of process. Section 15.5. Plan Administrator. The Plan Administrator shall maintain records of Participants' service, age, Plan Compensation, allocation of contributions and any other information which the Committee, in its sole discretion, determines is necessary to administer the Plan. He shall interpret the Plan or, at his discretion, refer such questions to the Committee. The Plan Administrator shall provide rules for administration of the Plan which are not inconsistent with its terms and the decisions of the Committee. He shall determine questions of eligibility and distribution of benefits or refer such questions to the Committee, as he shall elect. The Plan Administrator shall also prepare or cause to be prepared all tax returns and other reports that may be required by law. Records of the Plan Administrator may be examined by the Employer and the Committee and the Participant may examine those records of the Plan Administrator relating to him. Section 15.6. Claims Procedure. The Plan Administrator will give written notice to every Participant or beneficiary whose claim for benefits under the Plan is denied in whole or in part setting forth reasons for such denial in understandable terms. Upon receipt of such notice, the Participant or beneficiary may request the Plan Administrator to review his claim for benefits, if 320 he notifies the Employer in writing within 90 days after receipt of notice denying the claim for benefits. The Participant or beneficiary shall have the right to submit a written statement supporting his claim for benefits to the Plan Administrator. The Plan Administrator shall review such statements and render a de- cision within 60 days. If the Plan Administrator is, because of the need for more extensive investigation of the claimant's state- ment, unable to act within such period, he shall so notify the claimant in writing. In such event, the Plan Administrator shall have an additional 60 days to render his determination. If the Plan Administrator reaffirms the denial of benefits, the Partici- pant or beneficiary may request review of such denial by the Com- mittee if he notifies the Plan Administrator within 90 days after his receipt of notice from the Plan Administrator reaffirming the denial of benefits. The Committee shall then review the records submitted to the Plan Administrator and such other documents as it may require, and, within 60 days of such appeal, it shall give the Participant or beneficiary written notice of its decision. If the Committee is unable to act within the 60 day period, it shall so notify the claimant in writing but, in any event, the Committee must act within 120 days of the appeal. The decision of the Committee shall be final. Section 15.7. Uniformity of Action. Whenever the Em- ployer, Plan Administrator or Committee are required or permitted to make decisions with respect to eligibility of an Employee for participation, contributions or benefit distributions, such 321 decisions shall be uniform and consistent with respect to all persons similarly situated. No action shall be taken which discriminates in favor of the Employer's officers or supervisory personnel. Section 15.8. Reliance on Others. The Employer and its Board of Directors, Trustee, Investment Advisor (if appointed), Plan Administrator and Committee shall be Fiduciaries under the Plan but shall be responsible only for those separate duties assigned to each by the Plan, and none shall have responsibility for performance of duties assigned to another of them under the Plan. Each of them may rely on reports, notices, certifications or other communications furnished by the others. The Committee and Plan Administrator may rely on the reports and opinions furnished by persons retained by them. Section 15.9. Indemnification. The Employer shall in- demnify each Board member, Committee member, the Plan Administra- tor, and other Employees of any Participating Employer involved in the administration of the Plan against all cost, expenses and liabilities, including attorney's fees, incurred in connection with any action, suit or proceeding instituted against him alleging any act of omission or commission performed by him while acting in good faith in discharging his duties with respect to the Plan. This indemnification is limited to the extent such costs and expenses are not covered under insurance as may be now or hereafter provided by the Employer or any Participating Employer. Promptly after receipt by an indemnified party under this Section of notice of the 322 commencement of any action, such indemnified party shall notify the Employer of the commencement thereof. The Employer shall be entitled to participate at its own expense in the defense or to assume the defense of any action brought against any party indemnified hereunder. In the event the Employer elects to assume the defense of any such suit, such defense shall be conducted by counsel chosen by the Employer and the indemnified party shall bear the fees and expenses of any additional counsel retained by him. 323 ARTICLE XVI AMENDMENT OF PLAN Section 16.1. Right to Amend. The Employer, acting by determination of its Board of Directors, shall have the right to amend the Plan at any time. A Participating Employer shall also have the right to amend its Adoption Agreement. However, no such amendment shall be effective which would adversely affect the qualified status of the Plan and Fund under Sections 401 and 501 of the Code or under the corresponding provisions of subsequent revenue laws. Section 16.2. Amendment to Vesting Schedule. No Plan amendment shall deprive any Participant or beneficiary of any of the benefits to which he is entitled under this Plan with respect to contributions previously made, nor shall any amendment eliminate or reduce a protected benefit under section 411(d)(6) of the Code except as provided in sections 412(c)(8) of the Code or in applicable regulations. No Plan amendment shall decrease the vested interest in any Participant's Account, nor shall any amend- ment change any vesting schedule under the Plan unless each Par- ticipant having at least five Years of Service at the end of the period described in this sentence is permitted to elect, within a period beginning on the date such amendment is adopted and ending 60 days after the latest of: (a) the day the amendment is adopted, (b) the day the amendment becomes effective, or (c) the day the Participant is issued written notice of the amendment, to have his nonforfeitable percentage computed under the Plan without regard to 324 such amendment; provided, however that effective July 1, 1989, this sentence shall apply to Participants with at least three Years of Service. Notwithstanding the foregoing, any modification or amendment of the Plan may be made retroactively, if necessary or appropriate to qualify or maintain the Plan as a plan meeting the requirements of the Code and ERISA, as now in effect or hereafter amended, or any other provisions of law, as now in effect or here- after amended or adopted, and any regulation issued thereunder. 325 ARTICLE XVII TERMINATION OF PLAN Section 17.1. Right to Terminate Reserved. The Employer (and each Participating Employer as to its participation), acting by determination of its Board reserves the right to terminate the Plan at any time. However, no termination shall be effective which would adversely affect the qualified status of the Plan and Fund under Sections 401 and 501 of the Code or under the corresponding provisions of subsequent revenue laws. The complete discontinuance of contributions by the Employer shall be deemed a termination of the Plan. Section 17.2. Distribution on Termination. Upon termination or partial termination of the Trust, all Participants' Accounts shall become fully vested, and shall not thereafter be subject to forfeiture. Upon termination of the Trust, the Committee may direct the Trustee to distribute all assets remaining in the Trust, after payment of any expenses properly chargeable against the Trust, to the Participants in accordance with the value of Accounts credited to such Participants as of the date of such termination, in such manner as the Committee shall determine. The Committee's determination shall be conclusive upon all persons. 326 ARTICLE XVIII MISCELLANEOUS Section 18.1. No Other Benefits. No benefits other than those specifically provided for herein shall be payable under the Plan. Section 18.2. Plan Not an Employment Contract. This Plan shall not be construed to be a contract of employment. Nothing in the Plan shall be deemed to restrict or limit an Employer's right to discharge any Participant or other Employee at any time. Section 18.3. Plan For Exclusive Benefit of Partici- pants. The Plan and the Fund shall exist for the sole and ex- clusive benefit of Participants and their beneficiaries, and no amendment shall be made that would be inconsistent with such purpose. Section 18.4. Benefits Not Assignable. Except with respect to federal income tax withholding and withdrawals and loans under Article XIII, no benefits payable hereunder shall be subject to assignment, transfer, sale or encumbrance and the Fund shall not be liable for, or subject to, the debts or engagements of any Participant or to any attachment or other legal process to collect the same. Notwithstanding the foregoing, the Committee shall direct the Trustee to comply with a Qualified Domestic Relations Order. Upon receipt of any judgment, decree or order (including approval of a property settlement agreement relating to the provision of payment by the Plan to an Alternate Payee pursuant to a state domestic relations law, the Committee shall promptly notify 327 the affected Participant and any Alternate Payee of the receipt of such judgment, decree or order and shall notify the affected Participant and any Alternate Payee of the Committee's procedure for determining whether or not the judgment, decree or order is a Qualified Domestic Relations Order. The Committee shall establish a procedure to determine the status of a judgment, decree or order as a Qualified Domestic Relations Order and to administer Plan distributions in accordance with Qualified Domestic Relations Orders. Such procedure shall be in writing, shall include a provision specifying the notification requirements enumerated above, shall permit an Alternate Payee to designate a representative for receipt of communications from the Committee and shall include such other provisions as the Committee shall determine, including provisions required under applicable regu- lations. Nothing herein, however, shall prevent the effective designation of beneficiaries for receipt of survivors' benefits under elections made pursuant to Section 9.2. Section 18.5. Required Information Concerning Partici- pants. The Committee and Plan Administrator may require eligible Employees to furnish such information as to age, health, employment and family status as they believe reasonably necessary to administer the Plan. Section 18.6. Incompetence of Participant. If the Com- mittee determines that any Participant or beneficiary entitled to benefits under this Plan is physically or mentally incompetent or is a minor, that such person is in the care of another person and 328 that no guardian, committee or other representative has been duly appointed, payment may be made to the person or institution caring for the Participant or beneficiary. The receipt of such person or institution shall be a complete discharge for the payment of such benefit. Section 18.7. Merger with Another Plan. In the event that this Plan merges or consolidates with or transfers assets or liabilities to any other plan after the Effective Date of this Plan, each Participant shall be entitled to a retirement benefit which is equal to or greater than the benefit which he would have been entitled to receive immediately before the merger, consoli- dation or transfer of assets or liabilities. For purposes of the comparison described above, benefits shall be computed as if this Plan had terminated immediately prior to the merger, consolidation or transfer and as if the surviving or recipient plan had termin- ated immediately after such merger, consolidation or transfer. Section 18.8. Controlling Laws. The rights and ob- ligations of the Employer and its Employees under this Plan shall be determined in accordance with the laws of the Commonwealth of Pennsylvania and, where applicable, of the United States of America. 329 SCHEDULE A PROVISIONS PERTAINING TO TANK CLEANING INC. PARTICIPANTS The following provisions shall supersede and/or supplement certain of the provisions of Articles I through XIV of the Plan to the extent provided below with respect to any Tank Cleaning Inc. Participant. References to Section numbers pertain to Sections in the main Plan document unless specifically indicated otherwise. A. The following is added at the end of Section 2.1: "A Tank Cleaning Inc. Participant's Accounts may also include his 'Matching Account.' 'Matching Account' shall include Matching Contributions made on behalf of Tank Cleaning Inc. Participant in respect of any Plan Year shall be allocated to his Matching Account and shall be invested in the Investment Fund or Funds in the same manner and to the same proportionate extent as the Tank Cleaning Inc. Participant designates for his Contribution Account." B. The following is added at the end of Section 2.20: "Employer Contributions for a Tank Cleaning Inc. Participant may also include 'Matching Contributions' (intended to satisfy the requirements of section 401(m) of the Code)." 330 C. Section 2.27 is amended to read, in its entirety, as follows: "Section 2.27. Hours of Service. Hours of Service shall mean, for any Tank Cleaning Inc. Participant: (a) except as provided in subsection (b), (i) each hour for which he is directly or indirectly paid or entitled to payment by an Employer or an Affiliated Company for the performance of employment duties; or (ii) each hour for which he is entitled, either by award or agreement, to back pay from an Employer or an Affiliated Company, irrespective of mitigation of damages; or (iii) each hour for which he is directly or indirectly paid or entitled to payment by an Employer or an Affiliated Company on account of a period of time during which no duties are performed due to vacation, holiday, illness, incapacity (including disability), jury duty, layoff, leave of absence, or military duty; or 331 (iv) each hour for which he is absent for military service under leave granted by the Employer or Affiliated Company or required by law, provided the Employee returns to service with the Employer or Affiliated Company within such period as his right to reemployment is protected by law. (b) Anything to the contrary in subsection (a) notwithstanding: (i) No Hours of Service shall be credited to an Employee for any period merely because, during such period, payments are made or due him under a plan maintained solely for the purpose of complying with applicable workers' compensation, unemployment compensation, or disability insurance laws. (ii) No more than 501 Hours of Service shall be credited to an Employee under paragraph (a)(3) of this definition on account of any single continuous period during which no duties are preformed by him except to the extent otherwise provided in the Plan. 332 (iii) No Hours of Service shall be credited to an Employee with respect to payments solely to reimburse for medical or medically related expenses. (iv) No Hours of Service shall be credited twice. (v) Hours of Service shall be credited at least as liberally as required by the rules set forth in Department of Labor Reg. Section 2530.200b-2(b) and (c)." D. Section 4.5(a) is amended to add the following after the first sentence thereof: "A Tank Cleaning Inc. Participant's Basic Contributions into the Fund shall be in the aggregate at a whole percentage rate, elected by the Tank Cleaning Inc. Participant, of the Compensation otherwise payable to the Tank Cleaning Inc. Participant." E. A new Section 4.10 is added to read, in its entirety, as follows: "Section 4.10. Matching Contributions. Tank Cleaning Inc. shall make 'Matching Contributions' to the Plan for each 333 Plan Year. Such Matching Contributions shall equal 50% of all Basic and Deferred Bonus Contributions made by each Tank Cleaning Inc. Participant for that Plan Year, not in excess of 6% of each such Tank Cleaning Inc. Participant's Compensation, provided that such Tank Cleaning Inc. Participant is an Employee on the last day of such Plan Year." F. The first paragraph of Section 5.3 is amended to read, in its entirety, as follows: "Section 5.3. General Requirements. For any Plan Year, the Committee shall insure (a) that Contributions under the Plan shall not exceed the limitations on deductions imposed under section 404(a)(3) of the Code; (b) that the Plan shall satisfy the coverage requirements of section 410(b)(1) of the Code; (c) that the Plan shall satisfy the average deferral percentage test set forth in Section 5.3(a); and (d) that the Plan shall satisfy the average contribution percentage test set forth in Section 5.7." G. A new Section 4.11 is added to read, in its entirety, as follows: "Section 4.11. Return of Excess Contributions. If the average deferral percentage (or the average contribution percentage) for all Tank Cleaning Inc. Participants who are 334 Highly Compensated Employees exceeds the amount specified in Sections 5.3(a) (or 5.3(c) for any Plan Year, the Basic and Deferred Bonus Contributions (and if necessary, Matching Contributions) for the Highly Compensated Employee(s) with the highest deferral (or contribution) percentage shall be reduced so that his applicable percentage is reduced to the greater of (a) such percentage that enables the Plan to satisfy the applicable percentage test, or (b) a percentage equal to the applicable percentage of the Highly Compensated Employee(s) with the next highest percentage. This procedure shall be repeated until the applicable percentage test is satisfied. The amount so reduced, together with the attributable earnings thereon, including earnings for the Plan Year for which the excess amounts were contributed and shall be deemed to have been contributed to the Plan by mistake of fact, shall be refunded to the Employer, and shall thereafter be returned by the Employer to the Tank Cleaning Inc. Participants from whom such excess contribution was obtained (subject, however, to the withholding of taxes and other amounts as though such amounts were current remuneration). Such payment shall be made within two and one half (2 1/2) months following the close of such Plan Year, if administratively practicable, but in no event later than 12 months of the close of the Plan Year with respect to which the reduction applies. 335 H. A new Section 5.7 is added to read, in its entirety, as follows: "Section 5.7. Average Contribution Percentage Test. The term 'average contribution percentage test' shall mean the numerical test set forth in Section 5.3(a) substituting for the term 'average deferral percentage' the term 'average contribution percentage'. The following rules shall also apply: (a) The term "average contribution percentage" as applied to a specified group of Participants shall mean the average of the ratios, calculated separately for each such Participant in the group of: (i) the amount of Matching Contributions paid to the Plan on behalf of such Participant for such Plan Year and, at the discretion of the Employer, Basic and Deferred Bonus Contributions, to (ii) the Participant's Compensation for such Plan Year. (b) Basic and Deferred Bonus Contributions may be taken into account under this Section only to the extent necessary to satisfy the average contribution percentage 336 test, and only to the extent that the Plan continues to satisfy the average deferral percentage test set forth in Section 5.3(a) without taking into account such Basic and Deferred Bonus Contributions. (c) If two or more plans of the Employer or an Affiliated Company to which Employee contributions or Employer matching contributions are made are treated as one plan for purposes of sections 401(a)(4) and 410(b) of the Code, such plans shall be treated as one plan for purposes of this Section. If a Highly Compensated Employee participates in any other plan of the Employer to which Employer matching contributions, Employee contributions or elective deferrals are made, all such contributions shall be aggregated for purposes of this Section (excluding plans that are not permitted to be aggregated under Treas. Reg. Section 1.401(m)-1(b)(3)(ii))." I. A new Section 5.8 is added to read, in its entirety, as follows: "Section 5.8. Limitation on Use of Percentage Tests. For any Plan Year, the sum of the average deferral percentage and the average contribution percentage for all Tank Cleaning Inc. Participants who are Highly Compensated Employees shall not exceed the sum of (a) and (b) where: 337 (a) is the product of 1.25 and the greater of (i) the average deferral percentage for all Tank Cleaning Inc. Participants who are Non-Highly Compensated Employees; or (ii) the average contribution percentage for all Tank Cleaning Inc. Participants who are Non-Highly Compensated Employees; and (b) is the product of 2.0 and the lesser of (i) or (ii) above; provided, however, that in no event shall this amount exceed the lesser of (i) or (ii) above by more than two percentage points. If the limitation in this Section is not met, the actual deferral percentage or the actual contribution percentage of Highly Compensated Employees, as determined by the Committee, shall be reduced in the manner prescribed in Section 5.5 until such limitation is met." J. A new Section 5.9 is added to read, in its entirety, as follows: "Section 5.9. Aggregation. For purposes of Sections 5.3(a), 5.7 and 5.8, the Plan shall be aggregated and treated as a single plan with other plans maintained by the Employer or an Affiliated Company to the extent that the Plan is aggregated 338 with any such other plan for purposes of satisfying section 410(b) (other than section 410(b)(2)(A)(ii)) of the Code." K. A new Section 10.5 is added to read, in its entirety, as follows: "Section 10.5. Vesting of Matching Account. A Tank Cleaning Inc. Participant shall become 100% vested in his Matching Account upon the earlier of (i) his Normal Retirement Age, (ii) the occurrence of death or Disability, (iii) termination of the Plan or partial termination of the Plan as to him or complete discontinuance of Matching Contributions, or (iv) at the earliest date on which the Tank Cleaning Inc. Participant could elect Early Retirement. At any time other than a time delineated in the preceding sentence of this Section, the Tank Cleaning Inc. Participant's vested percentage in his Matching Account shall be determined according to the following schedule: Years of Service Vested Percentage ---------------- ----------------- Less than 2 years 0% 2 but less than 3 years 10% 3 but less than 4 years 20% 4 but less than 5 years 40% 339 5 but less than 6 years 70% 6 or more years 100% In the event the vesting schedule in this Section is amended, any Participant who has completed at least three Years of Service as defined in Section 10.6 at the time of such amendment, may elect, pursuant to Section 16.1, to have the vested interest of his Matching Account determined without regard to such amendment." L. A new Section 10.6 is added to read, in its entirety, as follows: "Section 10.6. Years of Service for Vesting. For the purposes of this Article, an Employee shall be credited with a Year of Service for each Plan Year during which he is credited with 1,000 or more Hours of Service beginning with the Plan Year commencing January 1, 1991." M. A new Section 10.7 is added to read, in its entirety, as follows: "Section 10.7. Breaks in Service and Loss of Service. 340 (a) An Employee's Years of Service shall be canceled if he incurs a Break in Service before his Normal Retirement Date and at a time when (1) he has no nonforfeitable interest in his Accounts, other than his Rollover Account or Contribution Account or (2) he has no Account under the Plan. (b) Except as provided in Subsections (c) and (d) of this Section, an Employee or former Employee shall incur a Break in Service in any Plan Year in which he is not credited with more than 500 Hours of Service. (c) If an Employee is absent for one or more of the following reasons, then, to the extent he is not otherwise credited with Hours of Service with respect to such absence, he shall be credited with an Hour of Service, solely for purposes of Subsection (b) of this Section, for each Hour of Service with which he would have been credited if he had continued to be actively employed during the period of absence due to: (1) layoff for a period not in excess of one year; (2) leave of absence with the approval of the Committee for a period not in excess of one year, 341 unless such period is extended by the Committee; (3) military service such that his right to reemployment is protected by law. (d) If an Employee is absent from work by reason of pregnancy, childbirth, or placement in connection with adoption, or for purposes of the care of such Employee's child immediately after birth or placement in connection with adoption, such Employee shall be credited, solely for purposes of Subsection (b) of this Section, with the Hours of Service with which such Employee would have been credited but for the absence; or, if such hours cannot be determined, with eight Hours of Service per normal workday. The total number of hours to be treated as Hours of Service under this Subsection shall not exceed 501. The hours described in this Subsection shall be credited either for the Plan Year in which the absence from work begins, if the Employee would be prevented from incurring a Break in Service in such Plan Year because the period of absence is treated as Hours of Service under this Subsection, or, in any other case, for the Plan Year next following the one in which the absence from work begins. In order for an absence to be considered on account of the reasons described in this subparagraph, an Employee shall provide the Committee, in 342 the form and manner prescribed by the Committee, information establishing (i) that the absence from work is for the reasons set forth in this subparagraph, and (ii) the number of days for which there was such an absence. Nothing in this Plan relating to such Hours of Service shall be construed as expanding or amending any maternity or paternity leave policy of the Employer." N. A new Section 10.8 is added to read, in its entirety, as follows: "Section 10.8. Restoration of Service. The Years of Service of an Employee that have been canceled pursuant to Section 10.7 shall be restored if he thereafter completes a Year of Service and, at his Reemployment Commencement Date, the number of his consecutive Breaks in Service was less than the greater of (a) the number of Years of Service to his credit when the first such Break in Service occurred, or (b) five." O. A new Section 10.9 is added to read, in its entirety, as follows: "Section 10.9. Forfeitures and Restoration of Forfeited Amounts upon Reemployment. 343 (a) If a Tank Cleaning Inc. Participant who has had a Termination Date does not thereafter complete an Hour of Service before the end of the Plan Year in which occurs the earlier of: (1) the date on which he receives a distribution of his entire nonforfeitable interest in his Account, which is less than 100%; or (2) the date on which he incurs a one-year Break in Service, his Matching Account shall be closed, and the forfeitable amount credited thereto shall be forfeited. (b) Amounts forfeited from a Tank Cleaning Inc. Participant's Matching Account under Subsection (a) of this Section shall be used to reduce future Matching Contributions. (c) If a Tank Cleaning Inc. Participant, who has received a distribution described in Paragraph (a)(1) of this Section, as a result of which a portion of his Accounts has been forfeited, has a Reemployment Commencement Date prior to incurring five consecutive one-year Breaks in Service, the amount so forfeited shall be restored to his new Matching Account, as applicable, if, and only if, he repays the full 344 amount of such distribution (if any) prior to the earlier of (1) the fifth anniversary of his Reemployment Commencement Date or (2) the date on which the Tank Cleaning Inc. Participant has completed five consecutive one-year Breaks in Service following the date of the distribution. Amounts restored under this Subsection shall be charged against forfeitures for the Plan Year. If the foregoing amounts are insufficient, Tank Cleaning Inc. shall make any additional contribution necessary to accomplish the restoration. (d) If a Participant has had five consecutive one-year Breaks in Service and again becomes an Employee, the amount forfeited under subsection (a) shall not be restored to his Account for any reason." P. A new Section 11.4 is added to read, in its entirety, as follows: "Section 11.4. Distribution on Termination. The entire amount of a Participant's nonforfeitable interest in his Accounts shall be distributed after the Participant's Termination Date. Such Distribution shall be made to the Participant except in the event of his death, in which case such distribution will be made to the Participant's designated beneficiary." 345 Q. A new Section 14.7 is added to read, in its entirety, as follows: "Section 14.7. Minimum Vesting. For any Plan Year in which the Plan is determined to be a Top-Heavy Plan, each Tank Cleaning Inc. Participant's interest in his Matching Account shall become vested in accordance with the following schedule or in accordance with the provisions of Section 10.5, whichever produces a greater nonforfeitable interest: Years of Vested Service Percentage -------------------- ---------- Less than 2 years 0% 2 but less than 3 years 20% 3 but less than 4 years 40% 4 but less than 5 years 60% 5 but less than 6 years 80% 6 or more years 100% The foregoing notwithstanding, if the Plan ceases to be Top-Heavy, the provisions of Sections 10.5 and 2.1 shall thereafter apply as to subsequent amounts credited to such Accounts." R. This Schedule A shall be effective as of November 1, 1993. EX-10 12 EXHIBIT 10.17 346 EXHIBIT 10.17 MARITRANS INC. PERFORMANCE UNIT PLAN I. Purpose. The purpose of the Maritrans Inc. Performance Unit Plan (the "Plan") is to provide a means whereby Maritrans Inc. (the "Company") may, through the granting of performance units ("Units"), attract and retain persons of outstanding executive ability as employees of the Company, or of its affiliates, and motivate such Executives, as defined below, to exert their best efforts on behalf of the Company on a long-term basis. The "Effective Date" of the Plan shall be April 1, 1993. II. Administration. The Plan shall be administered by the Compensation Committee (the "Committee") of the Board of Directors of the Company (the "Board"). The Committee shall have full power and authority to interpret the Plan, make factual determinations, and to prescribe, amend and rescind any rules, forms and procedures as it deems necessary or appropriate for the proper administration of the Plan and to make any other determinations and take such other actions as it deems necessary or advisable in carrying out its duties under the Plan. All decisions and determinations by the Committee shall be final and binding on the Company, recipients of Units, employees, and any other persons having or claiming an interest hereunder. III. Participation. 3.01 In General. The Committee shall determine, upon the recommendation of the Chief Executive Officer of the Company (the "CEO"), each Executive of the Company to whom Units are to be granted under the Plan (a "Participant"), the number of Units to be granted to each Participant, the initial dollar value of each Unit, the benchmarks for determining the value of each Unit at the conclusion of the Performance Period, as defined in Section 4.02 below, and any other terms and conditions relating to the granting of Units. In making its determinations, the Committee shall take the Company's overall compensation policy into account. For the purposes of the Plan, an individual shall be an "Executive" if the individual is an officer of the Company, or of an affiliate, and is designated as an "Executive" for the purposes of the Plan by the CEO. 3.02 Factors to be Considered. In determining whether an individual may become a Participant under the Plan, the Committee shall take into consideration the key employee's present and potential contribution to the success of the Company and such other factors as the Committee may in its sole discretion deem proper and relevant. IV. Grant of Units. 4.01 Grant and Number of Units. The grant of Units to each Participant shall be evidenced by an agreement in the form and manner prescribed by the Committee that shall indicate the number 347 of Units awarded to the Participant and the terms and conditions thereof, consistent with the provisions of the Plan. 4.02 Performance Period. The Committee shall establish and announce a measurement period over which the performance of the Company shall be determined (the "Performance Period"). The Performance Period shall normally be a period of three years unless the Committee determines otherwise in its sole discretion. For the initial period beginning with the Effective Date, the Performance Period shall begin on the Effective Date and end on December 31, 1995; provided, however, that the Company's financial performance for 1993 shall be calculated on a pro forma basis as if the Company had actual operations during the period commencing January 1, 1993 and ending March 31, 1993. 4.03 Corporate Goals. (a) Upon the recommendation of the CEO, at the beginning of each Performance Period, the Committee shall establish and announce the corporate goals (the "Corporate Goals") for each Performance Period upon which the value of the Units shall be determined. The Corporate Goals shall relate to the Company's financial and operating performance during the applicable Performance Period. (b) The CEO shall also recommend to the Committee and the Committee shall assign in its sole discretion a percentage to each Corporate Goal, which when multiplied by the initial value of a Participant's Units shall result in the amount to be distributed to each Participant, under Section 4.05 hereof, (the "Award") if that level of Corporate Goal is attained for the Performance Period. 4.04 Award Determination. (a) At the end of each Performance Period, the Committee in its sole discretion shall determine the level of Corporate Goals attained for such Performance Period. (b) Based upon the Committee's determination of the extent to which Corporate Goals have been met, a Participant's Award will be determined as the product of: (i) the percentage assigned to the level of Corporate Goals which have been met, (ii) the initial value of a Unit and (iii) the number of Units assigned to the Participant. (c) A Participant who ceases to be an Executive during a Performance Period for any reason other than death, long-term disability (as determined with reference to the Company's long- term disability plan), or retirement (as determined with reference to the Company's qualified defined benefit plan) shall not be eligible to receive any Award during the Performance 348 Period in which such termination or demotion occurs (unless the Committee in its sole discretion determines otherwise in the case of a demotion). A Participant who ceases to be employed by reason of death, disability or retirement before the end of a Performance Period shall be eligible to receive an Award at the close of such Performance Period on a pro-rated basis taking into account the portion of the Performance Period during which the Participant was employed as an Executive, such Award to be determined by the Committee in its sole discretion. In the event of death, the Participant's beneficiary designated under the Company's group term life insurance plan shall receive any payments due at the close of the current Performance Period. 4.05 Time and Manner of Payment. Awards shall be paid in two equal installments. The first shall be paid as soon as practical following the end of each Performance Period and the second on the last day of September following the end of the Performance Period. No payments shall be made to a Participant not employed on the date payment is to be made unless termination occurred by reason of death, disability, retirement or otherwise as determined by the Committee in its sole discretion. All payments shall be made in cash or check subject to applicable and appropriate withholding taxes. 4.06 Accounts. The Company shall create an account on its books to reflect the number of Units credited to each Participant hereunder; provided, however, that no Participant or other person shall under any circumstances acquire any property interest in any specific assets of the Company. Nothing contained in this Plan and no action taken pursuant hereto shall create or be construed to create a fiduciary relationship between the Company and any Participant or any other person. To the extent that any person acquires a right to receive payment from the Company hereunder, such right shall be no greater than the right of any unsecured general creditor of the Company. V. Vesting Upon a Change of Control. 5.01 Change of Control. For the purposes hereof, a "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, or 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, 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 349 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. 5.02 Vesting of Awards. Notwithstanding the provisions of Section IV hereof, in the event that a Participant's employment is involuntarily terminated, other than for "cause," as defined in the Company's Severance Pay Plan, within one year following a Change of Control, including a termination initiated by any Executive pursuant to the change of control provisions of the employment agreement applicable to that Executive, the Participant shall receive, within 30 days of such termination, an Award equal to the Award that could have been determined as if the Participant's actual date of termination were the last day of the then current Performance Period and on the basis of the achievement of the Corporate Goals for the shortened Performance Period plus any Award remaining due for the prior Performance Period whether or not then payable pursuant to the provisions of Section 4.05 hereof. VI. General Provisions. 6.01 Transferability. No Unit awarded under this Plan shall be transferred, assigned, pledged or encumbered by the Participant. In the event of a Participant's death during his employment with the Company, payments of any Award shall be made as provided in Section IV hereof. 6.02 No Rights as Stockholder. No Participant shall have any rights as a stockholder of the Company, including the right to any cash dividends or the right to vote, as a result of the grant or holding of any Units. 6.03 Adjustment for Non-Recurring Items, Etc. Notwithstanding anything herein to the contrary, if the Company's financial performance is affected by any event that is of a non-recurring nature, the Committee in its sole discretion may make such adjustments in the initial value of each Unit or in the Corporate Goals for the then current Performance Period as it shall determine to be equitable and appropriate in order to make the Unit, as nearly as may be practicable, equivalent to the Unit immediately prior to such event. 6.04 No Rights to Employment. Nothing in this Plan, and no action taken pursuant hereto, shall confer upon any Participant the right to continue in the employ of the Company, or affect the right of the Company to terminate the Participant's employment at any time for cause or for no cause whatsoever. 6.05 Withholding Tax. Notwithstanding any other provision of this Plan, the Company shall be entitled to withhold from, or in respect of, any Award to be made an amount sufficient to satisfy 350 all federal, state and local tax withholding requirements relating thereto. Such withholding may be made from other amounts due from the Company to the Participant (including salary or bonus). 6.06 Notices. Any notice hereunder to be given to the Company shall be in writing and shall be delivered in person to the Secretary of the Company, or shall be sent by registered mail, return receipt requested, to the Secretary of the Company at the Company's executive offices, and any notice hereunder to be given to the Participant shall be in writing and shall be delivered in person to the Participant, or shall be sent by registered mail, return receipt requested, to the Participant at his last address as shown in the employment records of the Company. Any notice duly mailed in accordance with the preceding sentence shall be deemed given on the date postmarked. 6.07 Termination and Amendment of the Plan/Modification of Units. The Plan may be terminated, modified or amended by the Board at any time, except that no such action shall deprive a Participant of the right to the amount of the Award that could have been determined as if the actual date of such action were the last day of the then current Performance Period and on the basis of the achievement of the Corporate Goals for the shortened Performance Period with respect to any Units then outstanding under the Plan. 6.08 Miscellaneous. (a) If the Company shall find that any person to whom any payment is payable under this Plan is unable to care for his affairs because of illness or accident, or is a minor, any payment due (unless a prior claim therefor shall have been made by a duly appointed guardian, committee or other legal representative) may be paid to the spouse, a child, a parent, or a brother or sister, or to any person deemed by the Company to have incurred expense for such person otherwise entitled to payment, in such manner and proportions as the Company may determine. Any such payment shall be a complete discharge of the liabilities of the Company under this Plan. (b) This Plan shall be binding upon and inure to the benefit of the Company, its successors and assigns and the Participant and his heirs, executors, administrators and legal representatives. (c) This Plan shall be construed in accordance with, and governed by, the law of the Commonwealth of Pennsylvania. EX-11 13 EXHIBIT 11.1 351 EXHIBIT 11.1 MARITRANS INC. COMPUTATION OF EARNINGS PER COMMON SHARE Year Ended December 31, 1993* Primary: Loss: Net (loss) $(11,789,000) ============ Shares: Weighted average number of common shares outstanding 12,523,000 ============ Primary (loss) per common share $ (.9414) =========== Assuming full dilution: Loss: Net (loss) $(11,789,000) ============ Shares: Weighted average number of common shares outstanding 12,523,000 Assuming exercise of options reduced by the number of shares which could have been purchased with the proceeds from the exercise of such options 3,474 ------------ Weighted average number of common shares outstanding as adjusted 12,526,474 ============ Net (loss) per common share Fully diluted (loss) per common share $ (.9411)** ============ - ------------ * See notes 1 and 3 of the notes to the consolidated financial statements. ** This calculation is submitted in accordance with Regulation S-K item 601(b)(11) although it is contrary to paragraph 40 of APB Opinion No. 15 because it produces an anti-dilutive result. -----END PRIVACY-ENHANCED MESSAGE-----