-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, PfGQMecwGW2ILY34O8eu9yaRGfqwnpB7oHQ7DA4Du6Nm+YcLmyRhHqyM9pyhmBy9 jcxP3BNZHq6rRHvSGjC60Q== 0000950116-96-000177.txt : 19960401 0000950116-96-000177.hdr.sgml : 19960401 ACCESSION NUMBER: 0000950116-96-000177 CONFORMED SUBMISSION TYPE: 10-K405 PUBLIC DOCUMENT COUNT: 7 CONFORMED PERIOD OF REPORT: 19951231 FILED AS OF DATE: 19960329 SROS: NONE FILER: COMPANY DATA: COMPANY CONFORMED NAME: MARITRANS INC /DE/ CENTRAL INDEX KEY: 0000810113 STANDARD INDUSTRIAL CLASSIFICATION: WATER TRANSPORTATION [4400] IRS NUMBER: 510343903 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-K405 SEC ACT: 1934 Act SEC FILE NUMBER: 001-09063 FILM NUMBER: 96540659 BUSINESS ADDRESS: STREET 1: ONE LOGAN SQUARE 26TH FLOOR CITY: PHILADELPHIA STATE: PA ZIP: 19103 BUSINESS PHONE: 2158641200 MAIL ADDRESS: STREET 1: ONE LOGAN SQUARE STREET 2: 26TH FL CITY: PHILADELPHIA STATE: PA ZIP: 19103 FORMER COMPANY: FORMER CONFORMED NAME: MARITRANS PARTNERS L P DATE OF NAME CHANGE: 19920703 10-K405 1 FORM 10-K ============================================================================= 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, 1995 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 12, 1996, the aggregate market value of the voting stock held by non-affiliates of the registrant was $60,171,815. As of March 12, 1996, Maritrans Inc. had 11,685,199 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 8, 1996. Exhibit Index is located on page 32. ============================================================================= FORM 10-K MARITRANS INC. TABLE OF CONTENTS PART I Page Item 1. Business .................................................. 1 Item 2. Properties................................................. 9 Item 3. Legal Proceedings.......................................... 10 Item 4. Submission of Matters to a Vote of Security Holders........ 10 PART II Item 5. Market for the Registrant's Common Equity and Related Stockholder Matters ....................................... 11 Item 6. Selected Financial Data ................................... 12 Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations........................ 12 Item 8. Financial Statements and Supplemental Data................. 16 Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure........................ 28 PART III Item 10. Directors and Executive Officers of the Registrant......... 28 Item 11. Executive Compensation..................................... 30 Item 12. Security Ownership of Certain Beneficial Owners and Management................................................. 30 Item 13. Certain Relationships and Related Transactions............. 30 PART IV Item 14. Exhibits, Financial Statement Schedules and Reports on Form 8-K .................................................. 31 Signatures ........................................................... 34 i PART I ITEM 1. BUSINESS GENERAL Maritrans Inc. (the "Corporation" or the "Registrant"), together with its predecessor, Maritrans Partners L.P. (the "Partnership"), herein called "Maritrans," has historically served the petroleum and petroleum product industry by 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 the industry it serves by adding marine terminal facilities and petroleum distribution coordination. STRUCTURE Current. The Registrant is a Delaware corporation whose common stock ("Common Stock") is publicly traded. The Registrant conducts most of its marine transportation business activities through operating divisions of Maritrans Operating Partners L.P. (the "Operating Partnership") and its managing general partner, Maritrans General Partner Inc., wholly owned subsidiaries of the Registrant. Most of the Registrant's terminalling and distribution services are conducted through subsidiaries of Maritrans Holdings Inc., a wholly owned subsidiary of the Registrant. Historical. Founded in the 1850's and incorporated in 1928 under the name Interstate Oil Transport Company, Maritrans' predecessor was one of the first tank barge operators in the United States, with a fleet which increased in size and capacity as United States consumption of petroleum products increased. On December 31, 1980, Maritrans' predecessor operations and its tugboat and barge affiliates were acquired by Sonat Inc. ("Sonat"). On April 14, 1987, Maritrans acquired the tug and barge business and related assets from Sonat. On March 31, 1993, the limited partners of the Partnership voted on a proposal to convert the Partnership to corporate form (the "Conversion"). The proposal was approved, and on April 1, 1993, Maritrans Inc., then a newly-formed Delaware corporation, succeeded to all assets and liabilities of the Partnership. The holders of general and limited partnership interests in the Partnership and in the Operating Partnership were issued shares of Common Stock, par value $.01 per share, of the Corporation, representing substantially the same percentage equity interest in the Corporation as they had in the Partnership, directly or indirectly, in exchange for their partnership interest. Each previously held Unit of Limited Partnership Interest in the Partnership was exchanged for one share of Common Stock of the Corporation. For financial accounting purposes, the conversion to corporate form has been treated as a reorganization of affiliated entities, with the assets and liabilities recorded at their histoical costs. In addition, the Partnership recognized a net deferred income tax liability for temporary differences in accordance with Statement of Financial Accounting Standard ("FAS") No. 109, "Accounting for Income Taxes," which resulted in a one-time charge to earnings of $16.6 million in the first quarter of 1993. Overview. Since 1981, Maritrans and its predecessors have transported annually over 200 million barrels of crude oil and refined petroleum products. Based on its internal research regarding competition, Maritrans believes that it is one of the largest United States marine transporters of petroleum and petroleum products in the United States coastwise Jones Act trade (i.e. from point-to-point within the United States), excluding affiliates of integrated oil companies, and that it owns one of the largest domestic fleets of U.S. flag oceangoing tank barges. Maritrans operates a fleet of tank barges and tugboats and three terminal facilities. Its largest barge has a capacity of approximately 400,000 barrels, and its current operating barge fleet capacity aggregates approximately 4.3 million barrels. Operating fleet capacity increased by approximately 300,000 barrels when the Company's most recent acquisition, the MARITRANS 300, was placed in service in the fourth quarter of 1995. Aggregate capacity at Maritrans' terminal facilities totals approximately 1.6 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 1 Maritrans' services. Increases in product consumption generally increase demand for Maritrans' services; conversely, decreases in consumption generally lessen demand for Maritrans' services. Management further believes that the level of domestic consumption of imported product is also significant to Maritrans' business. Imported petroleum products generally can be shipped on foreign-flag vessels directly into United States ports for storage, distribution and eventual consumption. These shipments reduce the need for 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. ("MPI"), 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, tank vessel and truck. This facility is also capable of performing cleaning of 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 continue to be available in the future. Management believes the ability to control the cleaning of its vessels lessens its environmental exposure, as discussed above, since it can control this activity. Maritrans also believes that this facility provides it with a long-term strategic advantage since it is able to assure itself of the availability of these services at a reasonable cost and, by controlling the facility, it is able to ensure that it can manage vessel turn-around time, thereby increasing vessel availability, and that the facility is operated in an environmentally sound manner. 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 Norfolk, Virginia. 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. ("MMI"), which owns marine terminals in Salisbury and Baltimore, Maryland, began to provide distribution services to customers requiring both marine transportation and terminalling 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. 2 Maritrans does business on a spot market basis, a term contract basis and, more recently, on a product exchange basis. Maritrans strives to maintain an appropriate mix of contracted business, based on current market conditions. In light of the potential liabilities of oil companies and other shippers of petroleum products under the Oil Pollution Act of 1990 ("OPA") and analogous state laws, management believes that some shippers have begun to select transporters in larger measure than in the past on the basis of a demonstrated record of safe operations. Maritrans believes that the measures it has implemented in the last five years to promote higher quality operations and its longstanding commitment to safe transportation of petroleum products benefits its marketing efforts with these shippers. In 1995, approximately 82 percent of Maritrans' revenues were generated from ten customers. In 1995, contracts with Sun Oil Company, Star Enterprise, BP Oil Shipping Company, USA (including affiliates) and Marathon Oil accounted in the aggregate for approximately 18 percent, 15 percent, 11 percent and 10 percent, respectively, of Maritrans' revenues. There could be a material adverse effect on Maritrans if any of these customers were to cancel or terminate their various agreements with Maritrans. Management believes that cancellation or termination of all its business with any of its larger customers is unlikely. In early 1996, BP Oil Company completed the sale of its northeastern U.S. retail outlets, terminal facilities and its Marcus Hook, Pennsylvania, refinery to Tosco Corporation ("Tosco"). The refinery was turned over to Tosco in a non-operating state, and plans to reopen the refinery by Tosco are still uncertain. This development will negatively impact financial results as Maritrans takes action to replace the revenues that had been associated with this refinery's output, including relocating certain vessels, and continues to evaluate other steps to mitigate the financial impact. This refinery's output did not represent the only source of Maritrans' revenue from BP Oil Shipping Company in 1995. COMPETITION AND COMPETITIVE FACTORS Overview. The maritime petroleum transportation industry is highly competitive. The Jones Act, a federal law, restricts United States point-to-point maritime shipping to vessels built in the United States, owned by U.S. citizens and manned by U.S. crews. In Maritrans' market areas, its primary direct competitors are the operators of U.S. flag oceangoing barges and U.S. flag tankers. In the Gulf market, the primary competitors are the fleets of both other independent petroleum transporters and integrated oil companies. In the Eastern 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, competes with foreign-flag operators which lighter offshore. Some of the integrated oil company fleets with which Maritrans competes are larger than Maritrans' fleet. Additionally, in certain geographic areas and in certain business activities, Maritrans competes with the operators of petroleum product pipelines. Competitive factors which also affect Maritrans include the output of United States refineries and the importation of petroleum products. The primary competition for Maritrans' marine terminals is proprietary storage capacity of integrated oil companies, merchant refiners, and independent marine terminal operators. U.S. Flag Barges and Tankers. Maritrans' most direct competitors are the other operators of U.S. flag oceangoing barges and tankers. Because of the restrictions imposed by the Jones Act, there is a finite number of vessels that are currently eligible to engage in U.S. maritime petroleum transport. Therefore, the size and capacity of Maritrans' fleet relative to those of others in the industry is an important factor in competing for business on the basis of 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 1995 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 3 deadweight tons ("DWT") (approximately 160,000 barrels) and 40,000 DWT (approximately 320,000 barrels). Maritrans currently operates seven 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 concluded Uruguay Round of GATS negotiations and NAFTA negotiations. Maritime services are the subject of continuing GATS negotiations. If maritime services were deemed to include cabotage (vessel trade or marine transportation between two points within the same country) and were included in any of these multi-national trade agreements, the result would be to open the Jones Act trade, (i.e., transportation of maritime cargo between U.S. ports in which Maritrans and other U.S. vessel owners operate) to foreign-flag vessels which would operate at lower costs. Maritrans understands that cabotage will not be included in the GATS and the NAFTA in the foreseeable future; however, the possibility exists that cabotage could be included in the GATS, NAFTA or other international trade agreement, in the future. In the meantime, Maritrans and the maritime industry will continue to resist vigorously the inclusion of cabotage in the GATS, NAFTA and any other international trade agreements. The U.S. Administration recently signed legislation to export Alaskan crude oil on U.S. built and manned vessels. While Maritrans does not believe that this law will materially affect the vessel capacity competing against Maritrans in the Jones Act trades, it could have an adverse impact on the current status of the Jones Act in the context of future international trade developments. Refined Product Pipelines. Existing refined product pipelines generally are the lowest incremental cost method for the long-haul movement of petroleum and refined petroleum products. Other than the Colonial Pipeline system, which originates in Texas and terminates at New York Harbor, the Plantation Pipeline, which originates in Louisiana and terminates in Washington D.C., and smaller regional pipelines between Philadelphia and New York, there are no pipelines carrying refined petroleum products to the major storage and distribution facilities currently served by Maritrans. While the Colonial Pipeline system reduces the amount of refined product transported into the New York area by ship, it provides an origination point for Maritrans' business of transporting such products from New York Harbor to New England ports. Management believes that high capital costs, tariff regulation and environmental considerations make it unlikely that a new refined product pipeline system which would have a material adverse effect on Maritrans' business will be built in its market areas in the foreseeable future. It is possible, however, that, as noted above, new pipeline segments (including pipeline segments that connect with existing pipeline systems) could be built or that existing pipelines could be converted to carry refined petroleum products, either of which could effectively compete with Maritrans in particular locations. Natural Gas Pipelines. In December 1991, a 370 mile natural gas pipeline from the Canadian border to the northeastern United States markets was completed. The operation of this pipeline increased the amount of natural gas supplied to the northeastern United States, thus reducing the demand for residual fuel for power generation. This ultimately reduced the demand for marine transportation of residual fuel and other petroleum products to and within the area negatively affecting Maritrans and other carriers active in this trade. The continuation of this reduction will depend on the relative prices between residual fuel and natural gas, including transportation costs, in the future. Imported Refined Petroleum Products. A significant factor affecting the level of Maritrans' business operations is the level of refined petroleum product imports, particularly in Florida and New England. Imported 4 refined petroleum products may be transported on foreign-flag vessels, which are generally less costly to operate than U.S. flag vessels. To the extent that there is an increase in the importation of refined petroleum products to any of the markets served by Maritrans, there could be a decrease in the demand for the transportation of refined products from United States refineries, which would likely have an adverse impact upon Maritrans. One possible outcome of the Clean Air Act could be the importing of more refined product from outside the United States in order to avoid the expense of upgrading United States refineries to comply with such Act. In this case, while there would still be a need for marine petroleum transportation, the demand would decrease, thereby possibly materially adversely affecting the coastwise business of Maritrans and its competitors. Delaware River Channel Deepening. Legislation has been approved by the United States Congress which authorizes the U.S. Army Corps of Engineers to deepen the channel of the Delaware River between the river's mouth and Philadelphia from forty to forty-five feet late in the 1990's. If further legislation appropriating the funds for this project should become law and this project is implemented and used by vessels calling on the Delaware Valley refineries, it would have a material adverse effect on Maritrans' lightering business which currently transports crude oil which is off-loaded from deeply laden tankers from the mouth of the Delaware Bay up the Delaware River to the Delaware Valley refineries. EMPLOYEES AND EMPLOYEE RELATIONS At December 31, 1995, Maritrans and its subsidiaries employed a total of 505 persons. Of these employees, 83 are employed at the Philadelphia, Pennsylvania headquarters of the Registrant or at the Philadelphia and Tampa fleet centers, 398 are seagoing employees who work aboard the tugs and barges, and 24 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 33 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 149 employees. The collective bargaining agreement with the AMO covers approximately 40 employees. Each expires on May 31, 1996 and is expected to be renewed. 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 operational audit program (performed by Tidewater School of Navigation, Inc.) and an extensive training program 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 bulk. Accordingly, Maritrans' transportation rates, which are negotiated with its customers, are not subject to special rate regulation under the provisions of such act or otherwise. The operation of tugboats and barges is subject to regulation under various federal laws and international conventions, as interpreted and implemented by the United States Coast Guard, as well as certain state and local laws. Tugboats and barges are required to meet construction and repair standards established by the American Bureau of Shipping, a private organization, and/or the United States Coast Guard and to meet operational and safety standards presently established by the United States Coast Guard. Maritrans' seagoing supervisory personnel are licensed by the United States Coast Guard. Seamen and tankermen are certificated by the United States Coast Guard. 5 Jones Act. The Jones Act, a federal law, restricts maritime transportation between United States points to vessels built and registered in the United States and owned by United States citizens. The entities in the Maritrans organizational structure engaged in maritime transportation between United States points are subject to the provisions of the law. Therefore, it is the responsibility of Maritrans to monitor ownership of these entities and take any remedial action necessary to insure that no violation of the Jones Act ownership restrictions occurs. In addition, the Jones Act requires that all United States flag vessels be manned by United States citizens, which significantly increases the labor and certain other operating costs of United States flag vessel operations compared to foreign-flag vessel operations. Foreign-flag seamen generally receive lower wages and benefits than those received by United States citizen seamen. In addition, a significant number of foreign governments subsidize, at least to some extent, the wages and/or benefits received by the seamen of those nations. Furthermore, certain of these foreign governments subsidize those nations' shipyards, resulting in lower shipyard costs both for new vessels and repairs, than those paid by United States-flag vessel owners such as Maritrans, to United States shipyards. Finally, the United States Coast Guard and American Bureau of Shipping maintain the most stringent regime of vessel inspection in the world, which tends to result in higher regulatory compliance costs for United States-flag operators than those paid by owners of vessels registered under foreign flags of convenience. Because Maritrans transports petroleum and petroleum products between United States ports, most of its business depends upon the Jones Act remaining in effect. There have been various unsuccessful attempts in the past by foreign governments and companies to gain access to the Jones Act trade, as well as by interests within the United States to limit or do away with the Jones Act. Management expects that efforts of this type will continue. ENVIRONMENTAL MATTERS Maritrans' operations present potential environmental risks, primarily through the marine transportation or storage of petroleum. Maritrans is committed to protecting the environment and complying with applicable environmental laws and regulations. Maritrans, as well as its competitors, is subject to regulation under federal, state and local environmental laws which have the effect of increasing the costs and potential liabilities arising out of its operations. Marine Storage Terminal Regulation. Maritrans marine terminal subsidiaries are subject to various federal, state and local environmental laws and regulations, particularly with respect to air quality, the handling of materials removed from the tanks of vessels which are cleaned, and any spillage of petroleum products on or adjoining marine terminal premises. Management believes that this regulatory scheme will become progressively stricter in the future, resulting in greater capital expenditures by Maritrans for environmentally related equipment. Also, there are significant fines and penalties for any violations of this scheme. Management intends to reflect any such additional expenditures, to the extent they are able, in the rates which are charged to customers from time to time for services. Oil Pollution Legislation. Many of the states in which Maritrans does business have enacted laws providing for strict, unlimited liability for vessel owners in the event of an oil spill. In addition, certain states have enacted or are considering legislation or regulations involving at least some of the following provisions: tank-vessel-free zones, contingency planning, state inspection of vessels, additional operating, maintenance and safety requirements, and state financial responsibility requirements. As a result of this legislation and regulation, Maritrans has 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, OPA became law. OPA substantially changes the liability exposure of owners and operators of vessels, oil terminals and pipelines from that imposed under prior law. Under OPA, each responsible party for a vessel or facility from which oil is discharged will be jointly, strictly and severally liable for all oil spill containment and clean-up costs and certain other damages arising from the discharge. These other damages are defined broadly to include (i) natural resource damage (recoverable only by government entities), (ii) real and personal property damage, (iii) net loss of taxes, royalties, rents, fees and other lost revenues (recoverable only by government entities), (iv) lost profits or impairment of earning capacity due to property or natural resource damage, and (v) net cost of public services necessitated by a spill response, such as protection from fire, safety or health hazards. 6 The owner or operator of a vessel from which oil is discharged will be liable under OPA unless it can be demonstrated that the spill was caused solely by an act of God, an act of war, or the act or omission of a third party unrelated by contract to the responsible party. Even if the spill is caused solely by a third party, the owner or operator must pay all removal cost and damage claims and then seek reimbursement from the third party or the trust fund established under OPA. OPA establishes a federal limit of liability of the greater of $1,200 per gross ton or $10 million per tank vessel. A vessel owner's liability is not limited, however, if the spill results from a violation of federal safety, construction or operating regulations. In addition, OPA does not preclude states from adopting their own liability laws. Numerous states in which Maritrans operates have adopted legislation imposing unlimited strict liability for vessel owners and operators. Management believes that the liability provisions of OPA and similar state laws have greatly expanded Maritrans' potential liability in the event of an oil spill, even where Maritrans is not at fault. OPA requires all vessels to maintain a certificate of financial responsibility for oil pollution in an amount equal to the greater of $1,200 per gross ton per vessel, or $10 million per vessel in conformance with U.S. Coast Guard regulations. Additional financial responsibility in the amount of $300 per gross ton is required under U.S. Coast Guard regulations under the Comprehensive Environmental Response Compensation and Liability Act ("CERCLA"), the federal Superfund law. The previous requirement was $150 per gross ton per vessel, or $250,000, whichever is larger. Owners of more than one tank vessel, such as Maritrans, however, are only required to demonstrate financial responsibility in an amount equal to cover the vessel having the greatest maximum liability (approximately $40 million in Maritrans' case). Maritrans has acquired such certificates through filing required financial information with the U.S. Coast Guard. OPA requires all newly constructed petroleum tank vessels engaged in marine transportation of oil and petroleum products in the U.S. to be double-hulled and all such existing single-hulled vessels to be retrofitted with double hulls or phased out of the industry beginning January 1, 1995, in order to comply with new standards for such vessels. Because of the age and size of Maritrans' individual barges, the first of its operating vessels will be required to be retired or retrofitted by January 1, 2003, and most of its large ocean-going, single-hulled vessels will be similarly affected on January 1, 2005. Management believes that it would, for example, cost approximately $20-25 milion to build a 20,000 DWT double-hulled barge. The cost of retrofitting an existing 20,000 DWT barge with a double hull may be somewhat less than the cost of a new barge, but the retrofitting cost would depend upon a variety of construction and engineering factors. Therefore, retrofitting may not be a viable economic alternative to the purchase of a new double-hulled barge. The prices of retrofitting and constructing new vessels may increase materially as a result of increased demand for shipyard capacity arising from OPA. Also as a result of this legislation, the expected lives of some of Maritrans' barges have been shortened, thus forcing Maritrans to accelerate the depreciation of these vessels. This change in depreciation calculation began in September 1990 and caused an increase of Maritrans' annual depreciation expense by approximately $1.4 million. The double-hulled or double-bottomed tank barges currently owned by Maritrans account for approximately 23 percent of its fleet capacity. The OCEAN 400 and the MARITRANS 300, approximately 16 percent of fleet capacity, have been grandfathered under equivalency provisions of the interim final rule promulgated by the U.S. Coast Guard. OPA further required all tank vessel operators to submit, by February 18, 1993, for federal approval, detailed vessel oil spill contingency plans setting forth their capacity to respond to a worst case spill situation. Maritrans filed its plans prior to that deadline. Several states have similar contingency or response plan requirements. Because of the large number of ports served by Maritrans, the cost of compliance may be substantial, and, while Maritrans is presently in compliance, there is no assurance that Maritrans will be able to remain in compliance with all the federal requirements or those of one or more states. OPA is expected to have a continuing adverse effect on the entire U.S. oil and petroleum marine transportation industry, including Maritrans. The effects on the industry could include, among others, (i) increased requirements for capital expenditures, which the independent marine transporters of petroleum may not be able to finance, to fund the cost of double-hulled vessels, (ii) increased maintenance, training, insurance and 7 other operating costs, (iii) civil penalties and liability, (iv) decreased operating revenues as a result of a further reduction of volumes transported by vessels and (v) increased difficulty in obtaining sufficient insurance, particularly oil pollution coverage. These effects could adversely affect Maritrans' profitability and liquidity. The following table sets forth Maritrans' quantifiable cargo oil spill record for the period January 1, 1991 through December 31, 1995:
Gallons Spilled No. of No. of No. of Per Million Period Gals. Carried Spills Gals. Spilled Gals. Carried -------------------------- --------------- -------- --------------- --------------- (000) (000) 1/1/1991 -- 12/31/1991 10,710,000 11 1.25 .117 1/1/1992 -- 12/31/1992 10,272,000 6 .01 .001 1/1/1993 -- 12/31/1993* 10,433,000 2 .01 .001 1/1/1994 -- 12/31/1994 9,954,000 2 .02 .002 1/1/1995 -- 12/31/1995 9,450,000 1 16.80 1.780
- ------ * 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. Maritrans believes that its spill ratio compares favorably with the other independent, coastwise operators in the Jones Act trade. Water Pollution Regulations. The Federal Water Pollution Control Act of 1972 ("FWPCA"), as amended by the Clean Water Act of 1977, imposes strict prohibitions against the discharge of oil (and its derivatives) and hazardous substances into navigable waters of the United States. FWPCA provides civil and criminal penalties for any discharge of petroleum products in harmful quantities and imposes substantial liability for the clean-up costs of removing an oil spill. State laws for the control of water pollution also provide varying civil and criminal penalties and clean-up cost liabilities in the case of a release of petroleum or its derivatives into surface waters. In the course of its vessel operations, Maritrans engages contractors, in addition to Maritank Philadelphia Inc., to remove and dispose of waste material, including tank residue. In the event that any of such waste is deemed "hazardous," as defined in FWPCA or the Resource Conservation and Recovery Act, and is disposed of in violation of applicable law, Maritrans could be jointly and severally liable with the disposal contractor for the clean-up costs and any resulting damages. The United States Environmental Protection Agency ("EPA") previously determined not to classify most common types of "used oil" as a "hazardous waste," provided that certain recycling standards are met. While it is unlikely that used oil will be classified as hazardous, the management of used oil under EPA's proposed regulations will increase the cost of disposing of or recycling used oil from Maritrans' vessels. Some states in which Maritrans operates, however, have classified "used oil" as hazardous. Maritrans has found it increasingly expensive to manage the wastes generated in its operations. Air Pollution Regulations. The 1990 amendments to the Clean Air Act give the EPA and the states the authority to regulate emissions of volatile organic compounds ("VOCs") and any other air pollutant from tank vessels in all ports served by Maritrans and storage terminals. Several states with ports served by Maritrans already have established regulations to require the installation of vapor recovery equipment on petroleum-carrying vessels to reduce the emissions of VOCs. Compliance with these federal and state regulations has required material capital expenditures for the retrofitting of Maritrans' barges and has increased operating costs. The state of Delaware has announced that it intends to regulate vapor emissions from lightering in the Delaware Bay. This regulation, the timing of which is presently uncertain, would in all likelihood require the installation of additional equipment on lightering barges at a material cost. Similarly, various states require vapor recovery equipment at storage terminals for the loading of petroleum into vessels and tank trucks. Maritrans' terminal facilities are equipped with vapor recovery capabilities for the loading of tank trucks. They do not currently load petroleum into vessels and therefore have not acquired vapor recovery capabilities for that activity. The EPA also has the authority to regulate emissions from marine vessel engines; however, with the possible exception of the use of low sulfur fuels, direct regulation of marine engine emissions is not likely in the near future in ports served by Maritrans. However, it is possible that the EPA and/or various state environmental agencies ultimately may require that additional air pollution 8 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. The Port and Tanker Safety Act of 1978 ("PTSA") requires certain oil-carrying tankships to be fitted with segregated ballast tanks. PTSA requires self-propelled vessels to be retrofitted to meet these standards. Barges are not generally affected by such requirements. However, if the environmental standards of PTSA were to be made applicable to the large barges operated by Maritrans, Maritrans would be required to make significant capital expenditures to retrofit such barges, and the cargo-carrying capacity of such barges would also be decreased. There have been no recent regulatory efforts to apply the PTSA standards to large barges such as those operated by Maritrans. User Fees and Taxes. The Water Resources Development Act of 1986 permits local non-federal entities to recover a portion of the costs of new port and harbor improvements from vessel operators with vessels benefitting from such improvements. Management does not believe that Maritrans' vessels currently benefit from such improvements. However, there can be no assurance that such entities will not seek to recover a portion of such costs from Maritrans. Federal legislation has been enacted imposing user fees on vessel operators such as Maritrans to help fund the United States Coast Guard's regulatory activities. Other federal, state and local agencies or authorities could also seek to impose additional user fees or taxes on vessel operators or their vessels. The Coast Guard collects fees for vessel inspection and documentation, licensing and tank vessel examinations. These fees have not been material to Maritrans. There can be no assurance that additional user fees, which could have a material adverse effect upon the financial condition and results of operations of Maritrans, will not be imposed in the future. ITEM 2. PROPERTIES Vessels. The Registrant's subsidiaries owned, at December 31, 1995, a fleet of 57 vessels, of which 31 are barges and 26 are tugboats. Three additional tugs and one barge are chartered under long-term leases. In December of 1994, Maritrans increased its double-hull and double-bottom vessel capacity to over one million barrels by purchasing the MARITRANS 300, an oceangoing, double-hulled petroleum tank barge with a capacity of approximately 300,000 barrels. After undergoing modifications, this vessel was placed in service in the fourth quarter of 1995. The barge fleet consists of a variety of vessels falling within six different barge classifications. The largest vessels in the fleet are the 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 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 nine largest barges range in capacity from 61,638 barrels to 165,881 barrels and were constructed or substantially renovated between 1967 and 1981. The remainder of the barge fleet is comprised of three vessels falling in the 50,000 barrel class, six vessels in the 30,000 barrel class and one vessel in the small barge classification and two specially equipped chemical barges. The majority of these vessels were constructed between 1961 and 1977. The tugboat fleet is comprised of one 11,000 horsepower class vessel, eleven 5,600 horsepower class vessels, three 4,000 horsepower class vessels, five 3,200 horsepower class vessels, six 2,200 horsepower class vessels, two pusher class vessels and one chartered 15,000 horsepower class vessel. The year of construction or substantial renovation of these vessels ranges from 1962 to 1990 with the bulk of the tugboats having been constructed sometime between 1967 and 1981. Substantially all of the vessels in the fleet are subject to first preferred ship mortgages to secure payment of the notes of the Operating Partnership. These mortgages require the Operating Partnership to maintain the vessels at a high standard and continue a life-extension program for certain of its larger barges. At December 31, 1995 Maritrans is not in violation of the Operating Partnership's mortgage covenants. At December 31, 1995 Maritrans owns two barges which were not in a state of operational readiness. 9 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, truck loading racks, office space and related equipment used in MMI's marine terminal operations are located. In September 1995, MMI acquired 20 acres in Baltimore, Maryland with ten storage tanks with a total capacity of 530,000 barrels, truck loading racks and related equipment. Other Real Property. The Registrant's operations are headquartered in Philadelphia, Pennsylvania, where it leases office space, expiring in 1998. Eastern fleet operations are located on the west bank of the Schuylkill River in Philadelphia, Pennsylvania where the Operating Partnership owns approximately six acres of improved land. In addition, it also leases a bulkhead of approximately 430 feet from the federal government for purposes of mooring vessels adjacent to the owned land. This lease was renewed in 1993 and expires in 1998. 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 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 claims, lawsuits and labor arbitrations arising in the ordinary course of its business. The claims made in connection with Maritrans' marine operations are covered by marine insurance, subject to applicable policy deductibles which are not material as to any type of insurance coverage. Management believes, based on its current knowledge, that such lawsuits and claims, even if the outcomes were to be adverse, would not have a material adverse effect on Maritrans' financial condition. In connection with the sale of Main Iron Works, Inc. ("MIW"), Maritrans' predecessor agreed to reimburse MIW for certain ongoing workmen's compensation claims arising prior to the sale of MIW, and retained an assignment of the shipyard's rights against its former workmen's compensation insurance carrier, which has been in liquidation proceedings. Maritrans assumed its predecessor's reimbursement obligations to MIW and obtained an assignment of the predecessor's rights against the workmen's compensation insurance carrier. Due to the size and complexity of the liquidation proceeding, it is unlikely that this matter will be resolved for several years. However, Maritrans has received to date $0.3 million in reimbursement of payments made. 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' has been sued by 41 individuals, alleging unspecified damages for exposure to asbestos and in at least 30 such cases for exposure to tobacco smoke. Although Maritrans believes these claims are without merit, it is impossible at this time to express a definitive opinion on the final outcome of any such suit. Management believes that any liability would not have a material adverse effect as it would be adequately covered by applicable insurance. During 1993, one of the Company's tug/barge units was involved in a collision off the coast of Florida. Claims resulting from this incident have been and are expected to be covered by insurance. In 1993, Maritrans received insurance proceeds in excess of the barge's net book value for the constructive total loss of the barge. 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, 1995. 10 PART II ITEM 5. MARKET FOR THE REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS Market Information and Holders Maritrans Inc. Common Shares trade on the New York Stock Exchange under the symbol "TUG." The following table sets forth, for the periods indicated, the high and low sales prices per share as reported by the New York Stock Exchange. QUARTERS ENDING IN 1995: HIGH LOW - ---------------------------------- --------- --------- March 31, 1995 $6.000 $5.250 June 30, 1995 6.500 5.500 September 30, 1995 6.000 5.500 December 31, 1995 5.875 5.125 QUARTERS ENDING IN 1994: HIGH LOW - ---------------------------------- --------- --------- March 31, 1994 $5.500 $4.000 June 30, 1994 5.125 4.375 September 30, 1994 5.375 4.375 December 31, 1994 6.125 5.000 As of January 31, 1996, the Registrant had 11,685,199 Common Shares outstanding and approximately 1,192 shareholders of record. Dividends For the year ended December 31, 1995 and 1994, Maritrans Inc. paid the following cash dividends to stockholders: PAYMENTS IN 1995: PER SHARE - ---------------------------------- ------------- March 13, 1995 $.02 June 14, 1995 $.02 September 13, 1995 $.02 December 13, 1995 $.05 ------------- Total $.11 ============= PAYMENTS IN 1994: PER SHARE - ---------------------------------- ------------- December 12, 1994 $.02 While dividend policy is determined at the discretion of the Board of Directors of Maritrans Inc., management believes that it is likely Maritrans will pay quarterly cash dividends during 1996. 11 ITEM 6. SELECTED FINANCIAL DATA ($000)
MARITRANS INC. ------------------------------------------------------------------ JANUARY 1 TO DECEMBER 31 1995 1994 1993 1992 1991 ---------- ---------- ------------- ---------- ---------- CONSOLIDATED INCOME STATEMENT DATA: Revenues ............................. $124,527 $124,846 $132,539 $133,051 $146,560 Operating income before depreciation and amortization .................. 30,738 34,250 24,509 25,576 23,394 Depreciation and amortization ........ 16,214 15,797 15,868 15,578 15,962 Operating income (excludes interest expense) .......................... 14,524 18,453 8,641 9,998 7,432 Interest expense, net ................ 9,454 9,934 10,373 10,958 10,890 Income (loss) before income taxes .... 8,120 10,355 5,186 3,419 (1,576) Provision for income taxes ........... 3,139 3,823 16,975(1) -- -- Net income (loss) .................... 4,981 6,532 (11,789)(1) 3,419 (1,576) CONSOLIDATED BALANCE SHEET DATA (at period end): ..................... Total assets ......................... $251,961 $257,609 $253,038 $251,344 $258,957 Long-term debt ....................... 104,337 113,008 110,556 116,866 120,423 Partnership equity ................... -- -- -- 86,571 90,339 Stockholders' equity ................. 79,875 81,173 74,874 -- --
- ------ (1) Maritrans Inc., the successor to Maritrans Partners L.P. effective April 1, 1993, is subject to income taxation. See notes 4 and 5 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 its predecessor, Maritrans Partners L.P. (the "Partnership"), herein called "Maritrans." OVERVIEW Historically, Maritrans has served the petroleum and petroleum product distribution industry by using tugs and barges to provide marine transportation services along the East and Gulf Coasts of the United States. Since 1991, Maritrans has been broadening its participation in the industry it serves by adding marine terminal facilities. In June 1991, Maritrans purchased a one-million barrel, deepwater marine terminal located on the Schuykill River in Philadelphia. In February 1993, Maritrans purchased adjoining terminals in Salisbury, Maryland. These facilities, which have a storage capacity of 170,000 barrels, were merged and now operate as a single terminal. In September 1995, Maritrans purchased a 530,000 barrel terminal in Baltimore, Maryland, to complement Maritrans' other storage facilities. Maritrans increased its vessel capacity in 1990, when it placed its largest barge, the OCEAN 400, in service. This vessel is an oceangoing, double-hulled petroleum tank barge with a capacity of approximately 400,000 barrels. In December 1994, Maritrans increased its double-hull and double-bottom vessel capacity to over one million barrels by purchasing the MARITRANS 300, an oceangoing, double-hulled petroleum tank barge with a capacity of approximately 300,000 barrels. After undergoing modifications during the first three quarters of 1995, this vessel was placed in service in the fourth quarter. In 1993, Maritrans reduced owned capacity, disposing of vessels which, due to their sizes and operating characteristics, Maritrans considered excess to its long-term business needs. In addition, a barge involved in a collision off 12 the coast of Florida in August 1993 was declared a constructive total loss. Claims related to this incident have been, and are expected to be, covered by insurance. During most of 1993, Maritrans had one or more large barges out of service for improvements in vessel performance. Between 1991 and 1995, Maritrans transported at least 225 million barrels annually. The high was 250 barrels in 1991, and the low was 225 million barrels in 1995. Many factors affect the number of barrels transported, including average trip length, U.S. oil consumption (particularly in Florida and the northeastern U.S.), oil company product sourcing decisions, competition and fleet size. Overall U.S. oil consumption during 1991-1995 fluctuated between 16.7 million and 17.8 million barrels a day. Excluding the MARITRANS 300, which was not placed in service until the fourth quarter of 1995, the operating fleet owned by Maritrans was approximately 17 percent smaller in barrel capacity than it had been at year-end 1991. Including the MARITRANS 300, barrel capacity declined approximately 9 percent. During the fourth quarter of 1995, a subsidiary of the Corporation applied for government-guaranteed financing under Title XI of the Merchant Marine Act to finance the construction of up to six new double-hulled petroleum tankers. The ships would be built in the United States over the next three to four years at an estimated construction cost of approximately $46 million each. The Corporation continues to evaluate this project and has sought a project partner to participate in the project's equity financing. Over the last several years, Maritrans has been taking steps to increase its customer-orientation and competitiveness. These steps have included measures to increase responsiveness to customers, reduce the risk of oil spills and lower costs, including a corporate streamlining accomplished in the fourth quarter of 1993. During 1994, Maritrans sold its oil spill and contingency management subsidiary, Marispond, to its senior management to allow Maritrans to focus on its core distribution business. Factors that will affect future results for Maritrans include the continuation of federal law restricting United States point-to-point maritime shipping to U.S. vessels (the Jones Act), domestic oil consumption - particularly in Florida and the northeastern U.S., environmental laws and regulations, oil companies' operating and sourcing decisions, competition, labor and training costs and liability insurance costs. Maritrans' recent broadening of its participation in the industry it serves through the addition of marine teminals will also affect results. LEGISLATION The enactment of the Oil Pollution Act of 1990 ("OPA") significantly increased the liability exposure of marine transporters of petroleum in the event of an oil spill. In addition, the states in which Maritrans operates have enacted legislation increasing the liability for oil spills in their waters. Maritrans maintains oil pollution liability insurance of $700 million on its vessels. This 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 vessel charter rates, or that such insurance will continue to be available in satisfactory amounts. Moreover, this legislation has increased other operating costs as Maritrans has taken steps to minimize the risk of spills. Among such costs are those for additional training, safety and contingency programs; these expenses have not yet been and may never be fully recovered through increased vessel charter rates. Additionally, management believes that the legislation has effectively reduced the total volume of waterborne petroleum transportation as shippers of petroleum have tried to limit their exposure to OPA. This legislation has had a material adverse effect on Maritrans' operations, financial performance and expectations. OPA is expected to continue having negative effects on the entire U.S. oil and marine petroleum transportation industry, including Maritrans. These effects could include: (i) increased capital expenditures to cover the cost of mandated double-hulled vessels -- expenditures that the independent marine transporters of petroleum may not be able to finance, (ii) continued increased maintenance, training, insurance and other operating costs, (iii) increased liability and exposure to civil penalties, (iv) decreased operating revenues as a result of further reductions in volumes transported on vessels and (v) increased difficulty in obtaining sufficient insurance, particularly oil pollution coverage. These effects could adversely affect Maritrans' profitability and liquidity. 13 OPA will require the retirement or retrofitting of all single-hulled petroleum tankers and barges operating in U.S. waters, including most of Maritrans' existing barges. The first of the affected barges will have to be retired or retrofitted by 2003. However, most of Maritrans' large oceangoing, single-hulled barges will be affected January 1, 2005. Some of Maritrans' barges are not scheduled for retirement until 2015. Approximately 16 percent of Maritrans' operating capacity has been qualified by the United States Coast Guard as meeting the double-hull requirements and, therefore, is allowed to continue operating without modification and without a legislatively determined retirement date. If Maritrans were to 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. CONVERSION TO CORPORATE FORM An investment banking firm was retained in 1991 to assist in evaluating Maritrans' financial strategies and structure 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 a master limited partnership to a corporation. On April 1, 1993, after a vote of the unitholders, the Partnership was converted to Maritrans Inc., a corporation. RESULTS OF OPERATIONS YEAR ENDED DECEMBER 31, 1995 COMPARED WITH YEAR ENDED DECEMBER 31, 1994 Revenues for 1995 were $124.5 million and were $124.8 million in 1994, a decrease of $0.3 million, or less than half a percent. Barrels of cargo transported decreased by 12.1 million barrels, from 237.1 million to 225.0 million. While severe price competition for oil transportation services has existed in the markets served by Maritrans in recent years and is expected to continue, the fleet's average revenue per barrel rose in 1995, primarily due to an increase in average trip length. Revenue from sources other than marine transportation decreased from 5.5 percent of total revenues in 1994 to 4.0 percent in 1995. Operating expenses of $110.0 million for 1995 increased by $3.6 million, or 3.4 percent from $106.4 million in 1994. Fleet capacity increased in 1995, with the MARITRANS 300 unit entering service in the fourth quarter. The aforementioned increase in trip length contributed to the increase in operating expenses, particularly fuel. Other contributing factors include additional training for crew members and an increase in vessel insurance costs. General and administrative costs rose as a result of the increased use of outside professional services, particularly for matters related to new business development and for training. Interest expense of $9.4 million for 1995 decreased $0.5 million or 5.1 percent from $9.9 million in 1994. The decrease resulted from capitalized interest partially offset by the interest expense on the long-term debt acquired to purchase the MARITRANS 300. Other income in 1995 increased $1.2 million from $1.8 million in 1994 to $3.0 million in 1995 due to a rise in interest rates and an increase in the average amount of cash available for investment. Net income for 1995 decreased by $1.5 million to $5.0 million as the result of the aforementioned increase in operating expenses partially offset by the increase in other income. YEAR ENDED DECEMBER 31, 1994 COMPARED WITH YEAR ENDED DECEMBER 31, 1993 Revenues for 1994 were $124.8 million, a $7.7 million (5.8 percent) decline from 1993's $132.5 million. This decline accompanied a 4.5 percent drop in the number of barrels transported -- to 237.1 million from 248.4 million in 1993. Maritrans operated a smaller fleet in 1994; however, the fleet was more profitable in 1994 than in 1993. Revenue from sources other than marine transportation -- primarily terminalling operations -- increased to 5.5 percent of total revenue in 1994 from 4.9 percent in 1993. Operating expenses decreased $17.5 million (14.1 percent) to $106.4 million in 1994 from $123.9 million in 1993. Charter hire expense (the cost of utilizing vessels chartered from others) decreased by $5.5 million as a result of a decline in the amount of time Maritrans vessels were out of service for performance improvements. Such improvements were substantially completed in 1993. In addition, the corporate streamlining measures 14 begun in the fourth quarter of 1993 at a cost of $2 million produced savings of approximately $5 million in 1994. Fuel expense decreased by $1.9 million due to a decline in fuel cost per gallon and the number of gallons consumed. Lower insurance and maintenance expenses also contributed to the overall decline in operating expenses for 1994. Other income in 1994 was primarily interest income, whereas in 1993 other income was primarily gains on the sale and liquidation of vessels. Net income for 1994 was $6.5 million compared to a net loss in 1993 of $11.8 million. The improvement in net income was primarily due to two factors: (i) the impact on 1993 net income of the deferred tax provision recorded in that year, as the result of the adoption of Statement of Financial Accounting Standards No. 109, "Accounting for Income Taxes", which was prescribed by the conversion of the Partnership to corporate status, and (ii) the decline in operating expenses in 1994. Although this decline in operating expenses was partially offset by the decrease in revenues, it contributed to significant improvement in operating income in 1994, which was more than two times the operating income of 1993. LIQUIDITY AND CAPITAL RESOURCES In 1995, funds provided by operating activities were sufficient to fully meet debt service obligations and loan agreement restrictions (including $7.7 million in required long-term debt repayments), make capital improvements, and allow Maritrans to pay a dividend of $.02 per common share in each of the first three quarters and $0.5 per common share in the fourth quarter. On May 10, 1995, the Corporation announced a stock buy-back plan to reacquire up to 1.8 million shares of its common stock over the course of the next two years, depending on market conditions. This amount represented approximately 15 percent of the 12.5 million shares then outstanding. Maritrans intends to hold the majority of the shares as treasury stock, although some shares may be used for employee compensation plans and/or other corporate purposes. As of December 31, 1995, the Company has purchased 876,485 shares at a cost of approximately $5.1 million. Maritrans has financed and expects to continue to finance the purchases with internally generated funds. In 1995 cash used for the purchase of marine vessels, terminals and equipment included modifications to the MARITRANS 300, the acquisition of the Baltimore terminal facility, and improvements to the existing fleet. Maritrans believes that in 1996, funds provided by operating activities, augmented by financing transactions and investing activities, will be sufficient to finance operations, anticipated capital expenditures, lease payments and required debt repayments. Dividend payments are expected to continue quarterly in 1996. Maritrans believes capital expenditures in 1996 for improvements to its current fleet of vessels and existing marine terminals will be approximately $3 million. No material commitments existed at December 31, 1995, for capital expenditures. Moreover, Maritrans will continue to evaluate potential investments, and the related funding of those investments, consistent with its long-term strategic interests. One such potential investment is the aforementioned project to construct up to six new double-hulled petroleum tankers with loans guaranteed by the United States Government under Title XI of the Merchant Marine Act. WORKING CAPITAL AND OTHER BALANCE SHEET CHANGES At December 31, 1995 current assets exceeded current liabilities by $36 million. The ratio of current assets to current liabilities at December 31, 1995, was 2.21:1. At December 31, 1994 this ratio was 2.56:1. Working capital decreased $6.8 million from December 31, 1994, to December 31, 1995. Current assets decreased $4.4 million during the same period. The working capital decline was due primarily to the increases in current debt maturities and other current liabilities and decreases in cash and cash equivalents, other accounts receivable and prepaid expenses. Payments received from insurance carriers for claims submitted caused the decline in other receivables. Changes in the timing of payments caused the fluctuations in other current liabilities and prepaid expenses. 15 DEBT OBLIGATIONS AND BORROWING FACILITY At December 31, 1995, Maritrans had $113.0 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, 1995, was $8.7 million. Maritrans has a $10 million working capital facility, secured by its marine receivables and inventories, which expires June 30, 1996 and which it expects to renew. This facility was not used in 1995. IMPACT OF RECENTLY ISSUED ACCOUNTING STANDARDS In March 1995, the Financial Accounting Standards Board issued Statement No. 121, "Accounting for the Impairment of Long-Lived Assets and for Long-Lived Assets to Be Disposed Of", which requires impairment losses to be recorded on long-lived assets used in operations when indicators of impairment are present and the undiscounted cash flows estimated to be generated by those assets are less than the assets' carrying amount. Statement 121 also addresses the accounting for long-lived assets that are expected to be disposed of. Maritrans will adopt Statement 121 in the first quarter of 1996 and, based on current circumstances, does not believe the effect of adoption will be material. 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, 1995 and 1994, and the related consolidated statements of income and cash flows for each of the three years in the period ended December 31, 1995. Our audits also included the financial statement schedule listed in the Index at Item 14(A). These financial statements and schedule are the responsibility of the management of Maritrans Inc. Our responsibility is to express an opinion on these financial statements and schedule based on our audits. We conducted our audits in accordance with generally accepted auditing standards. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion. In our opinion, the financial statements referred to above present fairly, in all material respects, the consolidated financial position of Maritrans Inc. at December 31, 1995 and 1994, and the consolidated results of its operations and its cash flows for each of the three years in the period ended December 31, 1995 in conformity with generally accepted accounting principles. Also, in our opinion, the related financial statement schedule, when considered in relation to the basic financial statements taken as a whole, present fairly in all material respects the information set forth therein. ERNST & YOUNG LLP Philadelphia, Pennsylvania January 19, 1996 16 MARITRANS INC. CONSOLIDATED BALANCE SHEETS ($000)
December 31, ----------------- 1995 1994 ---- ---- ASSETS Current assets: Cash and cash equivalents ....................................... $ 31,033 $ 33,824 Investments held-to-maturity .................................... 7,544 8,000 Trade accounts receivable (net of allowance for doubtful accounts of $457 and $453, respectively) .............................. 12,722 11,974 Other accounts receivable ....................................... 5,063 6,833 Inventories ..................................................... 4,586 3,669 Deferred income tax benefit ..................................... 1,203 1,181 Prepaid expenses ................................................ 3,909 4,970 -------- -------- Total current assets .................................... 66,060 70,451 Vessels terminals and equipment ................................... 284,161 270,553 Less accumulated depreciation ................................... 106,109 91,761 -------- -------- Net vessels terminals and equipment ..................... 177,992 178,792 Other ............................................................. 7,909 8,366 -------- -------- Total assets ............................................ $251,961 $257,609 ======== ======== LIABILITIES AND STOCKHOLDERS' EQUITY Current liabilities: Debt due within one year ........................................ $ 8,671 $ 7,654 Trade accounts payable .......................................... 2,614 1,733 Accrued interest ................................................ 2,249 2,298 Accrued shipyard costs .......................................... 5,134 5,550 Accrued wages and benefits ...................................... 5,800 5,928 Other accrued liabilities ....................................... 5,458 4,343 -------- -------- Total current liabilities ............................... 29,926 27,506 Long-term debt .................................................... 104,337 113,008 Deferred shipyard costs ........................................... 7,701 8,325 Other liabilities ................................................. 5,365 5,161 Deferred income taxes ............................................. 24,757 22,436 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: 1995 -- 12,558,620 shares, 1994 -- 12,526,692 shares . 126 125 Capital in excess of par value .................................. 74,516 74,332 Retained earnings ............................................... 10,378 6,716 Less: Cost of shares held in treasury 1995 -- 876,485 shares; 1994 -- 0 shares ................. (5,059) -- Unearned Compensation .................................... (86) -- -------- -------- Total stockholders' equity .............................. 79,875 81,173 -------- -------- Total liabilities and stockholders' equity .............. $251,961 $257,609 ======== ========
See accompanying notes. 17 MARITRANS INC. CONSOLIDATED STATEMENTS OF INCOME ($000 EXCEPT PER SHARE AMOUNTS)
January 1 to December 31, ----------------------------------------- 1995 1994 1993 ---- ---- ---- Revenues ................................................... $ 124,527 $ 124,846 $ 132,539 Costs and expenses: ........................................ Operation expense ........................................ 65,260 62,488 75,196 Maintenance expense ...................................... 19,879 20,355 21,062 General and administrative ............................... 8,650 7,753 11,772 Depreciation and amortization ............................ 16,214 15,797 15,868 --------- --------- --------- 110,003 106,393 123,898 --------- --------- --------- Operating income ........................................... 14,524 18,453 8,641 Interest expense (net of capitalized interest of $955, $0 and $0, respectively) ........................................ (9,454) (9,934) (10,373) Other income, net .......................................... 3,050 1,836 6,918 --------- --------- --------- Income before income taxes ................................. 8,120 10,355 5,186 Income tax provision ..................................... 3,139 3,823 407 Deferred income taxes-resulting from Conversion .......... -- -- 16,568 --------- --------- --------- Net income (loss) .......................................... $ 4,981 $ 6,532 $ (11,789) ========= ========= ========= Pro forma loss per share ................................... n/a n/a $ (.94) Earnings per share ......................................... $ 0.41 $ 0.52 n/a Average common shares outstanding .......................... 12,150,380 12,524,861 12,523,000
See accompanying notes. 18 MARITRANS INC. CONSOLIDATED STATEMENTS OF CASH FLOWS INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS ($000)
January 1 to December 31, -------------------------------------- 1995 1994 1993 ---------- ---------- ----------- Cash flows from operating activities: Net income (loss) .................................. $ 4,981 $ 6,532 $(11,789) Adjustments to reconcile net income (loss) to net cash provided by (used in) operating activities: Depreciation and amortization ................... 16,214 15,797 15,868 Deferred income taxes ........................... 2,560 3,589 16,975 Changes in receivables, inventories, and prepaid expenses ...................................... 1,166 7,425 (11,314) Changes in current liabilities other than debt .. 1,403 (5,187) 686 Non-current changes, net ........................ (532) (1,316) (982) (Gain) loss on sale of equipment ................ (24) 249 (5,910) ---------- ---------- ----------- Total adjustments to net income (loss) ............... 20,787 20,557 15,323 ---------- ---------- ----------- Net cash provided by (used in) operating activities .................................... 25,768 27,089 3,534 Cash flows from investing activities: Acquisition of investments held-to-maturity ........ (28,064) (8,000) -- Maturity of investments held-to-maturity ........... 28,520 -- -- Cash proceeds from sale of marine vessels and equipment ....................................... 340 2,985 19,287 Purchase of marine vessels, terminals and equipment (15,323) (14,217) (17,541) ---------- ---------- ----------- Net cash provided by (used in) investing activities .................................... (14,527) (19,232) 1,746 Cash flows from financing activities: ................ Proceeds from issuance of long-term debt ........... -- 10,250 -- Payment of long-term debt .......................... (7,654) (6,455) (6,032) Purchase of treasury stock ......................... (5,059) -- -- Dividends/distributions declared and paid .......... (1,319) (250) -- ---------- ---------- ----------- Net cash provided by (used in) financing activities .................................... (14,032) 3,545 (6,032) Net increase (decrease) in cash and cash equivalents . (2,791) 11,402 (752) Cash and cash equivalents at beginning of period ..... 33,824 22,422 23,174 ---------- ---------- ----------- Cash and cash equivalents at end of period ........... $ 31,033 $ 33,824 $ 22,422 ========== ========== =========== Supplemental Disclosure of Cash Flow Information: Interest paid ........................................ $ 10,353 $ 9,917 $ 10,355 Income taxes paid .................................... $ 85 $ 250 $ 300
See accompanying notes. 19 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS 1. ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES ORGANIZATION Maritrans Inc. owns Maritrans Operating Partners L.P. (the "Operating Partnership"), Maritrans Barge Co. and Maritrans Holdings Inc. (collectively, the "Company"). These subsidiaries, directly and indirectly, own and operate tugs and barges principally used in the transportation of oil and related products, along the Gulf and Atlantic Coasts, and own and operate petroleum storage facilities on the Atlantic Coast. PRINCIPLES OF CONSOLIDATION The consolidated financial statements include the accounts of Maritrans Inc. and subsidiaries, all of which are wholly owned. All significant intercompany transactions and accounts have been eliminated in consolidation. USE OF ESTIMATES The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the amounts reported in the financial statements and accompanying notes. Actual results could differ from those estimates. MARINE VESSELS AND EQUIPMENT Equipment, which is carried at cost, is depreciated using the straight-line method. Vessels are depreciated over a period of up to 30 years. Certain electronic equipment is depreciated over periods of 7 to 10 years. Petroleum storage tanks are depreciated over periods of up to 25 years. Other equipment is depreciated over periods ranging from 3 to 20 years. Gains or losses on dispositions of fixed assets are included in other income in the accompanying consolidated statements of income. The Oil Pollution Act requires all newly constructed petroleum tank vessels engaged in marine transportation of oil and petroleum products in the U.S. to be double hulled and all such existing single-hulled vessels to be retrofitted with double hulls or phased out of the industry beginning January 1, 1995. Because of the age and size of Maritrans' individual barges, the first of its operating vessels will be required to be retired or retrofitted by January 2003, and most of its large oceangoing, single-hulled vessels will be similarly affected on January 1, 2005. MAINTENANCE AND REPAIRS Provision is made for the cost of upcoming major periodic overhauls of vessels and equipment in advance of performing the related maintenance and repairs. The current portion of this estimated cost is included in accrued shipyard costs while the portion of this estimated cost not expected to be incurred within one year is classified as long-term. Both the provisions for major periodic overhauls as well as non-overhaul maintenance and repairs are expensed as incurred. INVENTORIES Inventories, consisting of materials, supplies and fuel, are carried at specific cost which does not exceed net realizable value. INCOME TAXES Deferred income taxes reflect the net tax effects of temporary differences between the amount of assets and liabilities for financial reporting purposes and the amount used for income tax purposes. SIGNIFICANT CUSTOMERS During 1995, the Company derived revenues aggregating 54 percent of total revenues from 4 customers, each one representing 10 percent or more of total revenues. In 1994, revenues from 4 customers aggregated 49 percent of total revenues and in 1993, revenues from 2 customers aggregated 32 percent of total revenues. The Company does not necessarily derive 10 percent or more of its total revenues from the same group of customers each year. In 1995, 20 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS - (Continued) 1. Organization and Significant Accounting Policies - (Continued) approximately 82 percent of the Company's revenues were generated by 10 customers. Credit is extended to various companies in the petroleum industry in the normal course of business. This concentration of credit risk within this industry may be affected by changes in economic or other conditions and may, accordingly, affect overall credit risk of the Company. RELATED PARTIES The Company obtained protection and indemnity insurance coverage from a mutual insurance association, whose chairman is also the chairman of Maritrans Inc. The related insurance expense was $2,700,000, $2,501,000 and $2,472,000 for the years ended December 31, 1995, 1994 and 1993, respectively. The Company paid $510,000 in 1995 to a law firm, a partner of which was elected to the Company's Board of Directors during 1995. This amount represents $277,000 relating to the lease of office space and $233,000 for legal services. EARNINGS PER COMMON SHARE Earnings per common share are based on the average number of common shares outstanding. The potential effect of outstanding stock options is not dilutive. IMPACT OF RECENTLY ISSUED ACCOUNTING STANDARDS In March 1995, the Financial Accounting Standards Board issued Statement No. 121, "Accounting for the Impairment of Long-Lived Assets and for Long-Lived Assets to Be Disposed Of", which requires impairment losses to be recorded on long-lived assets used in operations when indicators of impairment are present and the undiscounted cash flows estimated to be generated by those assets are less than the assets' carrying amount. Statement 121 also addresses the accounting for long-lived assets that are expected to be disposed of. The Company will adopt Statement 121 in the first quarter of 1996 and, based on current circumstances, does not believe the effect of adoption will be material. 2. CASH AND CASH EQUIVALENTS Cash and cash equivalents at December 31, 1995, and 1994 consisted of cash and commercial paper, the carrying value of which approximates fair value. For purposes of the consolidated financial statements, short-term highly liquid debt instruments with original maturities of three months or less are considered to be cash equivalents. 3. INVESTMENTS HELD-TO-MATURITY Investments held-to-maturity, which consist of debt securities, are carried at cost which approximates market value. The Company has both the ability and positive intent to hold these securities until maturity. The securities all mature within one year. 4. PARTNERSHIP AND STOCKHOLDERS' EQUITY 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. succeeded to all assets and liabilities of the Partnership. 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 $16.6 million in the first quarter of 1993. 21 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS - (Continued) 4. Partnership and Stockholders' Equity - (Continued) Changes in partnership equity prior to the Conversion are summarized below:
General Limited Partners Partners Total -------- -------- -------- ($ 000) 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 ===== ======== ========
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 ========= ========
22 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS - (Continued) 4. Partnership and Stockholders' Equity - (Continued) Changes in stockholders' equity since the Conversion are summarized below:
Common Capital in Stock, $.01 excess of Retained Treasury Unearned Par Value Par Value Earnings Stock Compensation Total ------------- ------------- ---------- ---------- -------------- --------- ($000, except per share amounts) 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 Net income January 1, 1994 to December 31, 1994 ................ 6,532 6,532 Cash dividends ($0.02 per share of Common Stock) .................... (250) (250) Stock incentives ................... 17 17 -------- -------- -------- -------- -------- -------- Balance at December 31, 1994 ....... 125 74,332 6,716 81,173 Net income, January 1, 1995 to December 31, 1995 ................ 4,981 4,981 Cash dividends ($0.11 per share of Common Stock) .................... (1,319) (1,319) Purchase of treasury stock ......... $ (5,059) (5,059) Stock incentives ................... 1 184 $ (86) 99 -------- -------- -------- -------- -------- -------- Balance at December 31, 1995 ..... $ 126 $ 74,516 $ 10,378 $ (5,059) $ (86) $ 79,875 ======== ======== ======== ======== ======== ========
- ------ (1) Includes $92 thousand related to grant of shares. Maritrans Inc. has a stock incentive plan (the "Plan"), whereby key employees and directors 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. In 1995, there were 6,383 shares issued to directors. Compensation expense equal to the fair market value on the date of the grant to the directors is included in general and administrative expense in the consolidated statement of income. During 1995, there were 15,136 shares of restricted stock issued under the Plan. The restrictions lapse when certain stock performance goals have been achieved or in 2002, whichever is earlier. The shares are subject to forfeiture under certain circumstances. Unearned compensation, representing the fair market value of the shares at the date of issuance, will be amortized to expense as the restrictions lapse. At December 31, 1995 and 1994, 570,815 and 654,491 remaining shares within the Plan were reserved for grant. Information on stock options for 1995 follows: Exercise Number of Price Shares ------------ ----------- Outstanding at beginning of year $4.00-5.00 568,817 Granted ........................ $5.63-6.00 115,133 Exercised ...................... $4.00 11,331 Cancelled ...................... $4.00-5.00 52,976 Expired ........................ -- -- Outstanding at end of year ..... $4.00-6.00 619,643 Exercisable at end of year ..... $4.00-5.00 178,609 Outstanding options are exercisable in installments over two to four years and expire in 2002. 23 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS - (Continued) 5. INCOME TAXES In connection with the Conversion to corporate form, the Partnership recognized a net deferred income tax liability for temporary differences in accordance with 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: 1995 1994 1993 ------ ------ ------- ($000) Current: Federal ...................... $ 576 $ 123 -- State ........................ 3 111 -- Deferred: Federal ...................... $2,391 3,493 $ 291 State ........................ 169 96 116 Deferred-resulting from Conversion -- -- 16,568 ------ ------ ------- $3,139 $3,823 $16,975 ====== ====== ======= The differences between the federal income tax rate of 35 percent in 1995 and 1994, and 34 percent in 1993 and the effective tax rates were as follows:
1995 1994 1993 ------ ------ ------- ($000) Statutory federal tax provision ....................... $2,842 $3,624 $ 1,764 State income taxes, net of federal income tax benefit . 112 135 116 Partnership income for the first quarter, not subject to income tax ........................................ -- -- (1,388) Recognition of tax liability for cumulative temporary differences .......................................... -- -- 16,568 Non-deductible items .................................. 181 27 -- Other ................................................. 4 37 (85) ------ ------ ------- $3,139 $3,823 $16,975 ====== ====== =======
Principal items comprising deferred income tax liabilities and assets as of December 31, 1995 and 1994 are:
1995 1994 ------- ------- ($000) Deferred tax liabilities: Tax over book depreciation . $33,153 $29,567 Prepaids ................... 1,897 2,365 Other ...................... -- 449 ------- ------- 35,050 32,381 ------- ------- Deferred tax assets: Reserves and accruals ...... 7,342 6,890 Net operating loss carryforwards ............ 4,154 4,236 ------- ------- 11,496 11,126 ------- ------- Net deferred tax liabilities .... $23,554 $21,255 ======= =======
At December 31, 1995, Maritrans Inc. has net operating loss carryforwards of approximately $29.2 million for income tax reporting purposes which expire in the year 2005 and thereafter. The Company has an Alternative Minimum Tax credit of $0.2 million at December 31, 1995 which does not expire. 24 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS - (Continued) 6. RETIREMENT PLANS Most of the shoreside employees and substantially all of the seagoing supervisors participate in a qualified defined benefit retirement plan of Maritrans Inc. Net periodic pension costs were $1,469,000, $1,362,000 and $1,232,000 for the years ended December 31, 1995, 1994 and 1993 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 6.75 percent in 1995 and 1994, and 7 percent in 1993. The weighted average assumed rate of compensation increase used to determine the actuarial present value of the projected benefit obligation was 5 percent for all periods. Net periodic pension costs included the following components for the respective periods:
1/1 to 1/1 to 1/1 to 12/31/95 12/31/94 12/31/93 -------- --------- -------- ($000) Service cost of current period ............... $ 1,581 $ 1,568 $ 1,625 Interest cost on projected benefit obligation 1,237 1,119 906 Actual (gain) loss on plan assets ............ (3,094) 352 (1,165) Net (amortization) and deferral .............. 1,745 (1,677) (134) ------- ------- ------- Net pension cost ............................. $ 1,469 $ 1,362 $ 1,232 ======= ======= =======
The following table sets forth the plan's funded status at December 31, 1995 and 1994:
December 31, ------------------- 1995 1994 ------ ------ ($000) Actuarial present value of benefit obligations: Vested benefit obligation ........................... $15,986 $14,557 ======= ======= Accumulated benefit obligation ...................... $16,925 $15,466 ======= ======= Projected benefit obligation ........................ $20,904 $19,161 ======= ======= Plan assets at fair value, primarily publicly traded stocks and bonds ....................................... $20,475 $16,567 ======= ======= Plan assets less than projected benefit obligation ....... 429 2,594 Unrecognized net gain (loss) on plan's assets ............ 2,283 (256) Net assets being amortized over 15 years ................. 1,210 1,413 ------- ------- Accrued pension cost recognized in the financial statements ............................................. $ 3,922 $ 3,751 ======= =======
Substantially all of the shoreside employees and seagoing supervisors also participate in a qualified defined contribution plan. Contributions under the plan are determined annually by the Board of Directors of Maritrans Inc. The cost of the plan was $1,005,000, $742,000 and $685,000 for the years ended December 31, 1995, 1994 and 1993, respectively. Contributions to industry-wide, multi-employer seamen's pension plans, which cover substantially all seagoing personnel covered under collective bargaining agreements, were approximately $480,000, $399,000 and $423,000 for the years ended December 31, 1995, 1994 and 1993, respectively. These contributions include funding for current service costs and amortization of 25 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS - (Continued) 6. Retirement Plans - (Continued) 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. 7. DEBT At December 31, 1995, total outstanding debt of the subsidiaries of Maritrans Inc. is $113.0 million, $104.3 million of which is long-term. At December 31, 1994, total outstanding debt was $120.7 million, $113.0 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 several series -- $23.3 million maturing through 1997, $9.7 million maturing through 2005, and $80 million maturing from 1998 through 2007. The weighted average interest rate on this indebtedness is 8.93 percent. Terms of the indebtedness require the subsidiaries to maintain their properties in a specific manner, maintain specified insurance on their properties and business, and abide by other covenants which are customary with respect to such borrowings. At December 31, 1994, the total outstanding debt consisted of several series -- $0.6 million maturing through 1995, $30.0 million maturing through 1997, $10.1 million maturing through 2005, and $80 million maturing from 1998 through 2007. The Operating Partnership has a $10 million working capital facility secured by its receivables and inventories. There were no borrowings under this facility during fiscal 1995. Based on the borrowing rates currently available for loans with similar terms and maturities, the fair value of long term debt was $113.1 million and $120.6 million at December 31, 1995 and 1994, respectively. The maturity schedule for outstanding indebtedness under existing debt agreements at December 31, 1995, is as follows: ($000) -------- 1996 .................................................. $ 8,671 1997 .................................................. 15,613 1998 .................................................. 8,558 1999 .................................................. 8,608 2000 .................................................. 8,662 2001 -- 2007 .......................................... 62,896 -------- $113,008 ======== 8. COMMITMENTS AND CONTINGENCIES Minimum future rental payments under noncancellable operating leases at December 31, 1995, are as follows: ($000) ------- 1996 .................................................. $ 2,291 1997 .................................................. 2,113 1998 .................................................. 2,030 1999 .................................................. 1,863 2000 .................................................. 2,012 2001 -- 2005 .......................................... 9,224 ------- $19,533 ======= 26 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS - (Continued) 8. Commitments and Contingencies - (Continued) The indenture governing the Operating Partnership's long-term debt permits cash distributions by Maritrans Operating Partners L.P. to Maritrans Inc., so long as no default exists under the indenture and provided that such distributions do not exceed contractually prescribed amounts. During 1993, one of the Company's tug/barge units was involved in a collision off the coast of Florida. Claims resulting from this incident have been and are expected to be covered by insurance. In 1993, Maritrans received insurance proceeds in excess of the barge's net book value for the constructive total loss of the barge. In 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, 1995 will not have a material adverse effect on the consolidated financial statements. 9. QUARTERLY FINANCIAL DATA (UNAUDITED)
First Second Third Fourth Total Quarter Quarter Quarter Quarter Year ------- ------- ------- ------- -------- ($000, except per share amounts) 1995 - ---- Revenues .......... $32,783 $30,125 $29,102 $32,517 $124,527 Operating income .. 5,428 2,733 2,253 4,110 14,524 Net income ........ $ 2,302 $ 1,061 $ 366 $ 1,252 $ 4,981 Earnings per share $ 0.18 $ 0.08 $ 0.03 $ 0.11 $ 0.41 1994 - ---- Revenues .......... $33,098 $29,522 $30,106 $32,120 $124,846 Operating income .. 5,583 3,264 4,392 5,214 $ 18,453 Net income ........ $ 2,026 $ 1,016 $ 1,482 $ 2,008 $ 6,532 Earnings per share $ 0.16 $ 0.08 $ 0.12 $ 0.16 $ 0.52
27 ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE None. PART III ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT Information with respect to directors of the Registrant, and information with respect to compliance with Section 16(a) of the Securities Exchange Act of 1934, is incorporated herein by reference to the Registrant's definitive Proxy Statement to be filed with the Securities and Exchange Commission (the "Commission") not later than 120 days after the close of the year ended December 31, 1995, under the captions "Information Regarding Nominees For Election As Directors And Regarding Continuing Directors" and "Section 16 Requirements." The individuals listed below are directors and executive officers of Maritrans Inc. or its subsidiaries.
Name Age(1) Position ---- ------ -------- Stephen A. Van Dyck (4)(5) .. 52 Chairman of the Board of Directors and Chief Executive Officer Dr. Robert E. Boni (2)(3)(4) 68 Director Dr. Craig E. Dorman (2)(3) .. 55 Director Robert J. Lichtenstein(4)(5) 48 Director James H. Sanborn (5) ........ 58 Director Eric H. Schless ............. 41 Director Edward R. Sheridan .......... 57 President, Maritrans Distribution Services Inc. Richard T. McCreary ......... 40 President, Gulf Division -- Operating Partnership John C. Newcomb ............. 57 Vice President, General Counsel and Secretary Thomas C. Deas, Jr. ......... 45 Vice President, Chief Financial Officer and Treasurer Gary L. Schaefer ............ 46 Chairman and President of Maritank Inc. Francis D. Bailey ........... 43 President, Eastern Division -- Operating Partnership Robert B. York .............. 40 President, Inland Division -- Operating Partnership Walter T. Bromfield ......... 40 Controller Janice M. Smallacombe ....... 36 President, Business Services Division -- Operating Partnership
- ------ (1) As of March 1, 1996 (2) Member of the Compensation Committee (3) Member of the Audit Committee (4) Member of the Finance Committee (5) Member of the Nominating Committee 28 Mr. Van Dyck has been Chairman of the Board and Chief Executive Officer of the Company and its predecessor since April 1987. For the previous year, he was a Senior Vice President -- Oil Services, of Sonat Inc. and Chairman of the Boards of the Sonat Marine Group, another predecessor, and Sonat Offshore Drilling Inc. For more than five years prior to April 1986, Mr. Van Dyck was the President and a director of the Sonat Marine Group and Vice President of Sonat Inc. Mr. Van Dyck is a member of the Board of Directors of Amerigas Propane, Inc. Mr. Van Dyck is also the Chairman of the Board and a director of the West of England Ship Owners Mutual Insurance Association (Luxembourg), a mutual insurance association. He is a member of the Company's Finance (Chairman) and Nominating Committees of the Board of Directors. See "Certain Transactions." Dr. Boni retired as Chairman of Armco Inc., a steel, oil field equipment and insurance corporation on November 30, 1990. Dr. Boni became Chief Executive Officer of Armco Inc. in 1985 and Chairman in 1986. He served as Non-Executive Chairman of the Board of and consultant for Alexander & Alexander Services Inc., an insurance services company, during 1994 and as a consultant for that company during January 1995. He is a member of the Company's Compensation (Chairman), Audit and Finance Committees of the Board of Directors. Dr. Dorman is serving as Chief Scientist/Technical Director, Office of Naval Research, Europe on an Intergovernmental Personnel Act assignment from Pennsylvania State University where he serves as Senior Scientist, Applied Research Lab. From 1993 until mid-1995 he served as Deputy Director Defense Research and Engineering for Laboratory Management, U.S. Department of Defense, on an Intergovernmental Personnel Act assignment from Woods Hole Oceanographic Institution. He was Director and Chief Executive Officer of Woods Hole Oceanographic Institution from 1989 until 1993. From 1962 to 1989, Dr. Dorman was an officer in the U.S. Navy, most recently Rear Admiral and Program Director for Anti-Submarine Warfare. He is a member of the Company's Audit and Compensation Committees of the Board of Directors. Mr. Lichtenstein has been a partner in the law firm of Morgan, Lewis & Bockius LLP since 1988. He is a member of the Company's Finance and Nominating Committees of the Board of Directors. See "Certain Transactions". Mr. Sanborn is a principal in Polaris Associates, maritime consultants. He 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. He is Chairman of the Company's Nominating Committee of the Board of Directors. Mr. Schless has been Managing Director, Investment Banking Department, Head of Transportation Group, of Schroder Wertheim & Co., New York, NY since 1994. From 1985 to 1994, Mr. Schless was a member of the Investment Banking Department, Wheat First Securities Inc., Richmond, VA, reaching the position of Managing Director. Mr. Sheridan was named President of the Distribution Services Division of the Operating Partnership in February 1993, which was later incorporated as Maritrans Distribution Services Inc. He previously held various positions with Star Enterprise and Texaco since 1963. Mr. McCreary was named President of the Gulf Division of the Operating Partnership in May 1995. Previously Mr. McCreary was Vice President, Operations and Engineering, Canal Barge Lines (1990-May 1995). 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 1981. Mr. Newcomb has been employed in various capacities by Maritrans or its predecessors since 1975. Mr. Deas was named Vice President, Chief Financial Officer and Treasurer of Maritrans Inc. in March 1996. Previously, he was Assistant Treasurer (since 1988) of, or held various financial positions with, Scott Paper Company since 1978. Mr. Schaefer has served as Chairman and President of Maritank Inc. and its operating affiliates, MPI and MMI, since August 1994. He served as Vice President, Chief Financial Officer and Treasurer of Maritrans Inc. 29 between April 1993 and March 1996. Prior to April 1993, he held these titles with Maritrans GP Inc. since January 1990. Prior to 1990, Mr. Schaefer was Vice President, Controller and Treasurer of Maritrans GP Inc. 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. Bailey was named President of the Eastern Division of the Operating Partnership in June 1995. Previously, Mr. Bailey was Vice President, Sales and Marketing, ASB Meditest (August 1991 to June 1995); and President, Envirobusiness (March 1990 to May 1991). Mr. 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. 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. Ms. Smallacombe was named President of the Business Services Division of the Operating Partnership in May 1995. Previously, Ms. Smallacombe was continuously employed by the Company or its predecessors in various capacities since 1982. 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, 1995, under the headings "Compensation of Directors and Executive Officers", "Security Ownership of Certain Beneficial Owners and Management" and "Certain Transactions". 30 PART IV Page Item 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K (a) (1) Financial Statements Report of Independent Auditors 16 Maritrans Inc. Consolidated Balance Sheets at December 31, 1995, and 1994. 17 Maritrans Inc. Consolidated Statements of Income for the years ended December 31, 1995, 1994, and 1993. 18 Maritrans Inc. Consolidated Statements of Cash Flows for the years ended December 31, 1995, 1994, and 1993. 19 Notes to the Consolidated Financial Statements. 20 (2) Financial Statement Schedules Schedule II Maritrans Inc. Valuation Account for the years ended December 31, 1995, 1994, and 1993. 35 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, 1995. 31 (c) Exhibits
Exhibit Index Page ------------- ---- 3.1# Certificate of Incorporation of the Registrant, as amended. 3.2# By Laws of the Registrant. 4.1 Certain instruments with respect to long-term debt of the Registrant or Maritrans Operating Partners L.P. or Maritrans Barge Company which relate to debt that does not exceed 10 percent of the total assets of the Registrant are omitted pursuant to Item 601(b) (4) (iii) (A) of Regulation S-K. Maritrans hereby agrees to furnish supplementally to the Securities and Exchange Commission a copy of each such instrument upon request. 10.1* Amended and Restated Agreement of Limited Partnership of Maritrans Operating Partners L.P., dated as of April 14, 1987 (Exhibit 3.2). 10.2+ Certificate of Limited Partnership of Maritrans Operating Partners L.P., dated January 29, 1987 (Exhibit 3.4). 10.3* Form of Maritrans Capital Corporation Note Purchase Agreement, dated as of March 15, 1987 (Exhibit 10.6). 10.3(a)* Indenture of Trust and Security Agreement, dated as of March 15, 1987 from Maritrans Operating Partners L.P. and Maritrans Capital Corporation to The Wilmington Trust Company (Exhibit 10.6(a)). 10.3(b)* Form of First Preferred Ship Mortgage, dated April 14, 1987 from Maritrans Operating Partners L.P., mortgagor, to The Wilmington Trust Company, mortgagee (Exhibit 10.6(b)). 10.3(c)* Guaranty Agreement by Maritrans Operating Partners L.P. regarding $35,000,000 Series A Notes Due April 1, 1997 and $80,000,000 Series B Notes Due April 1, 2007 of Maritrans Capital Corporation (Exhibit 10.6(c)). Executive Compensation Plans and Arrangements 10.4|P% Agreement, dated October 4, 1993 between Maritrans Inc. and John C. Newcomb. 10.5|P% Agreement, dated October 4, 1993 between Maritrans Inc. and Gary L. Schaefer. 10.6|P% Employment Agreement, dated October 5, 1993 between Maritrans General Partner Inc. and Stephen A. Van Dyck. 10.7|P% Mutual Separation Agreement and General Release, dated November 22, 1993 between Maritrans Inc. and Craig N. Johnson. 10.8|P% Retirement Agreement, dated November 22, 1993 between Maritrans Inc. and James H. Sanborn. 10.9 Severance and Non-Competition Agreement, dated June 1, 1995 between Maritrans Inc. and Janice M. Smallacombe. 10.10 Severance and Non-Competition Agreement, dated June 1, 1995 between Maritrans Inc. and Francis D. Bailey. 10.11 Severance and Non-Competition Agreement, dated June 1, 1995 between Maritrans Inc. and Richard T. McCreary. 10.12|P% Employment Agreement, dated October 5, 1993 between Maritrans General Partner Inc. and Edward R. Sheridan.
32
Exhibit Index Page ------------- ---- 10.13|P% 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|P% Performance Unit Plan of Maritrans Inc. effective April 1, 1993. 10.18& Executive Compensation Plan as amended and restated effective January 27, 1994. 11.1 Computation of Earnings Per Share. 21.1 Subsidiaries of Maritrans Inc. 27 Financial Data Schedule
* Incorporated by reference herein to the Exhibit number in parentheses filed on March 24, 1988 as Amendment No. 1 to Maritrans Partners L. P. Form 10-K Annual Report, dated March 3, 1988, for the fiscal year ended December 31, 1987. + Incorporated by reference herein to the Exhibit number in parentheses filed with Maritrans Partners L. P. Form S-1 Registration Statement No. 33-11652 dated January 30, 1987 or Amendment No. 1 thereto dated March 20, 1987. # Incorporated by reference herein to the Exhibit of the same number filed with the Registrant's Post-Effective Amendment No. 1 to Form S-4 Registration Statement No. 33-57378 dated January 26, 1993. & Incorporated by reference herein to Exhibit A of the Registrant's definitive Proxy Statement to be filed with the Commission not later than 120 days after the close of the fiscal year ended December 31, 1993. @ Incorporated by reference herein to the Exhibit number in parentheses filed with Maritrans Partners L. P. Form 10-K Annual Report, dated March 29, 1993 for the fiscal year ended December 31, 1992. |P% Incorporated by reference herein to the Exhibit of the same number filed with Maritrans Inc. Form 10-K Annual Report, dated March 30, 1994 for the fiscal year ended December 31, 1993. 33 SIGNATURES Pursuant to the requirements of Section 13 or 15(d) the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized. MARITRANS INC. (Registrant) By: /s/ Stephen A. Van Dyck Dated: March 28, 1996 --------------------------------- Stephen A. Van Dyck Chairman of the Board Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated.
By: /s/ Stephen A. Van Dyck Chairman of the Board Dated: March 28, 1996 ------------------------------ and Chief Executive Officer Stephen A. Van Dyck (Principal Executive Officer) By: /s/ Dr. Robert E. Boni Director Dated: March 28, 1996 ------------------------------ Dr. Robert E. Boni By: /s/ Dr. Craig E. Dorman Director Dated: March 28, 1996 ------------------------------ Dr. Craig E. Dorman By: /s/ Robert J. Lichtenstein Director Dated: March 28, 1996 ------------------------------ Robert J. Lichtenstein By: /s/ James H. Sanborn Director Dated: March 28, 1996 ------------------------------ James H. Sanborn By: ------------------------------ Director Dated: Eric H. Schless By: /s/ Thomas C. Deas, Jr. Vice President, Chief Financial Dated: March 28, 1996 ------------------------------ Officer and Treasurer Thomas C. Deas, Jr. (Principal Financial Officer) By: /s/ Walter T. Bromfield Controller Dated: March 28, 1996 ------------------------------ (Principal Accounting Officer) Walter T. Bromfield
34 MARITRANS INC. SCHEDULE II -- VALUATION ACCOUNT ($000)
CHARGED BALANCE AT TO COSTS BALANCE BEGINNING AND AT END DESCRIPTION OF PERIOD EXPENSES DEDUCTIONS OF PERIOD ----------- --------- -------- ---------- --------- JANUARY 1 TO DECEMBER 31, 1993 Allowance for doubtful accounts .... $541 $136 $ 72(a) $605 ==== ==== ====== ==== JANUARY 1 TO DECEMBER 31, 1994 Allowance for doubtful accounts .... $605 $123 $275(a) $453 ==== ==== ====== ==== JANUARY 1 TO DECEMBER 31, 1995 Allowance for doubtful accounts .... $453 $ 31 $ 27(a) $457 ==== ==== ====== ====
- ------ (a) Deductions are a result of write-offs of uncollectible accounts receivable for which allowances were previously provided. 35 EX-10.9 2 SEVERANCE AND NON-COMP AGREEMENT SEVERANCE AND NON-COMPETITION AGREEMENT Agreement made as of the 1st day of June, 1995, between Maritrans General Partner Inc., a Delaware corporation (the "Company"), and Janice M. Smallacombe (the "Employee"). WHEREAS, the Employee is employed by the Company as its President- Business Services Division; WHEREAS, the Company is a subsidiary of Maritrans Inc., a publicly traded corporation ("Maritrans"); WHEREAS, the Employee and Maritrans entered into an agreement in August, 1993 to provide certain payments to the Employee in the event that his employment were terminated as a result of a change of control of Maritrans (the "Agreement"); WHEREAS, the Employee and the Company now wish to enter into a Severance and Non-competition Agreement which shall supersede the Agreement because the Board of Directors of the Company recognizes that, as is the case with many publicly held corporations, the possibility of a change in control of Maritrans and the Company exists and that such possibility, and the uncertainty and questions which it may raise among management, may result in the departure or distraction of key management personnel to the detriment of the Company; 1 WHEREAS, the board of directors of the Company has determined that appropriate steps should be taken to reinforce and encourage the continued attention and dedication of key members of the Company's management to their assigned duties without distraction in the face of potentially disturbing circumstances arising from the possibility of a change in control of the Company; and WHEREAS, in consideration for the Employee agreeing not to compete with the Company in the event the Employee's employment is terminated, the Company agrees that the Employee shall receive the compensation set forth in this Agreement as a cushion against the financial and career impact on the Employee in the event the Employee's employment with the Company is terminated without cause whether or not there is a Change of Control of Maritrans; NOW, THEREFORE, in consideration of the foregoing and the mutual covenants and agreements hereinafter set forth and intending to be legally bound hereby, the parties hereto agree as follows: 1. Definitions. For all purposes of this Agreement, the following terms shall have the meanings specified in this Section unless the context clearly otherwise requires: (a) "Affiliate" and "Associate" shall have the respective meanings ascribed to such terms in Rule 12b-2 of the General Rules and Regulations under the Securities Exchange Act of 1934, as amended (the "Exchange Act"). (b) "Base Compensation" shall mean the average of the total cash remuneration received by the Employee in all capacities with the Company, and 2 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. (c) "Base Salary" shall mean the rate of normal salary being paid to the Employee at the time of his Termination Date. (d) "Beneficial Owner" of any securities shall mean: (i) that such Person or any of such Person's Affiliates or Associates, directly or indirectly, has the right to acquire (whether such right is exercisable immediately or only after the passage of time) pursuant to any agreement, arrangement or understanding (whether or not in writing) or upon the exercise of conversion rights, exchange rights, rights, warrants or options, or otherwise; provided, however, that a Person shall not be deemed the "Beneficial Owner" of securities tendered pursuant to a tender or exchange offer made by such Person or any of such Person's Affiliates or Associates until such tendered securities are accepted for payment, purchase or exchange; (ii) that such Person or any of such Person's Affiliates or Associates, directly or indirectly, has the right to vote or dispose of or has "beneficial ownership" of (as determined pursuant to Rule 13d-3 of the General Rules and Regulations under the Exchange Act), including without limitation 3 pursuant to any agreement, arrangement or understanding, whether or not in writing; provided, however, that a Person shall not be deemed the "Beneficial Owner" of any security under this subsection (ii) as a result of an oral or written agreement, arrangement or understanding to vote such security if such agreement, arrangement or understanding (A) arises solely from a revocable proxy given in response to a public proxy or consent solicitation made pursuant to, and in accordance with, the applicable provisions of the General Rules and Regulations under the Exchange Act, and (B) is not then reportable by such Person on Schedule 13D under the Exchange Act (or any comparable or successor report); or (iii) where voting securities are beneficially owned, directly or indirectly, by any other Person (or any Affiliate or Associate thereof) with which such Person (or any of such Person's Affiliates or Associates) has any agreement, arrangement or understanding (whether or not in writing) for the purpose of acquiring, holding, voting (except pursuant to a revocable proxy as described in the proviso to subsection (ii) above) or disposing of any voting securities of the Company; provided, however, that nothing in this subsection (d) shall cause a Person engaged in business as an underwriter of securities to be the "Beneficial Owner" of any securities acquired through such Person's participation in good faith in a firm commitment underwriting until the expiration of forty days after the date of such acquisition. (e) "Board" shall mean the board of directors of the Company. 4 (f) "Cause" shall mean 1) misappropriation of funds, 2) habitual insobriety or substance abuse, 3) conviction of a crime involving moral turpitude, 4) gross negligence in the performance of duties, which gross negligence has had a material adverse effect on the business, operations, assets, properties or financial condition of the Company and its Subsidiaries taken as a whole, or 5) for purposes of Section 3(a), a judgment by the Board that the Employee is not satisfactorily performing his duties. (g) "Change of Control" shall be deemed to have taken place if (i) any Person (except the Company or any employee benefit plan of the Company or of any Affiliate, any Person or entity organized, appointed or established by the Company for or pursuant to the terms of any such employee benefit plan), together with all Affiliates and Associates of such Person, shall become the Beneficial Owner in the aggregate of 20% or more of the common stock of Maritrans then outstanding); provided, however, that no "Change of Control" shall be deemed to occur during any period in which any such Person, and its Affiliates and Associates, are bound by the terms of a standstill agreement under which such parties have agreed not to acquire more than 30% of the common stock of the Company of the Common Stock of the Company then outstanding or to solicit proxies, or (ii) during any twenty-four month period, individuals who at the beginning of such period constituted the board of directors of Maritrans cease for any reason to constitute a majority thereof, unless the election, or the nomination for election by the Maritran'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 5 were directors at the beginning of such period. (h) "Normal Retirement Date" shall mean the first day of the calendar month coincident with or next following the Employee's 65th birthday. (i) "Person" shall mean any individual, firm, corporation, partnership or other entity. (j) "Subsidiary" shall have the meaning ascribed to such term in Rule 12b-2 of the General Rules and Regulations under the Exchange Act. (k) "Termination Date" shall mean the date of receipt of the Notice of Termination described in Section 2 hereof or any later date specified therein, as the case may be. (l) "Termination of Employment" shall mean the termination of the Employee's actual employment relationship with the Company. (m) "Termination following a Change of Control" shall mean a Termination of Employment within two years after a Change of Control either: (i) initiated by the Company for any reason other than (x) the Employee's continuous illness, injury or incapacity for a period of six consecutive months or (y) for "Cause;" or (ii) initiated by the Employee upon one or more of the following occurrences: (A) any failure of the Company to comply with and satisfy any of the terms of this Agreement; 6 (B) any significant reduction by the Company of the authority, duties or responsibilities of the Employee; (C) any removal by the Company of the Employee from the employment grade, compensation level or officer positions which the Employee holds as of the effective date hereof except in connection with promotions to higher office; (D) the requirement that the Employee undertake business travel to an extent substantially greater than is reasonable and customary for the position the Employee holds. 2. Notice of Termination. Any Termination of Employment shall be communicated by a Notice of Termination to the other party hereto given in accordance with Section 14 hereof. For purposes of this Agreement, a "Notice of Termination" means a written notice which (i) indicates the specific reasons for the termination, (ii) briefly summarizes the facts and circumstances deemed to provide a basis for termination of the Employee's employment, and (iii) if the Termination Date is other than the date of receipt of such notice, specifies the Termination Date (which date shall not be more than 15 days after the giving of such notice). 3. Severance Compensation upon Termination. (a) In the event of the Employee's involuntary Termination of Employment for reason other than Cause, the Company shall pay to the Employee, upon the execution of a release in form and substance satisfactory to the company and its counsel, his regular Base Salary, subject to customary 7 employment taxes and deductions, for 12 months following the Termination Date but all other benefit coverages, retirement benefits and fringe benefit eligibility shall cease upon the Termination Date. (b) Subject to the provisions of Section 11 hereof, in the event of the Employee's Termination following a Change of Control, the Company shall pay to the Employee, within fifteen days after the Termination Date (or as soon as possible thereafter in the event that the procedures set forth in Section 11(b) hereof cannot be completed within 15 days), and in lieu of any payment under subsection (a) above, an amount in cash equal to 1.5 times the Employee's Base Compensation. (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 agreement to hold assets to satisfy its obligations hereunder. Funding of such trust fund shall be subject to the Company's discretion, as set forth in the agreement pursuant to which the fund will be established. 8 6. Enforcement. (a) In the event that the Company shall fail or refuse to make payment of any amounts due the Employee under Sections 3(b) and 4 hereof within the respective time periods provided therein, the Company shall pay to the Employee, in addition to the payment of any other sums provided in this Agreement, interest, compounded daily, on any amount remaining unpaid from the date payment is required under Section 3(b) and 4, as appropriate, until paid to the Employee, at the rate from time to time announced by Mellon Bank (East) as its "prime rate" plus 2%, each change in such rate to take effect on the effective date of the change in such prime rate. (b) It is the intent of the parties that the Employee not be required to incur any expenses associated with the enforcement of his rights under Section 3(b) of this Agreement by arbitration, litigation or other legal action because the cost and expense thereof would substantially detract from the benefits intended to be extended to the Employee hereunder. Accordingly, the Company shall pay the Employee on demand the amount necessary to reimburse the Employee in full for all expenses (including all attorneys' fees and legal expenses) incurred by the Employee in enforcing any of the obligations of the Company under this Agreement. 7. No Mitigation. The Employee shall not be required to mitigate the amount of any payment or benefit provided for in this Agreement by seeking other employment or otherwise, nor shall the amount of any payment or benefit provided for herein be reduced by any compensation earned by other employment or otherwise. 9 8. Non-exclusivity of Rights. Nothing in this Agreement shall prevent or limit the Employee's continuing or future participation in or rights under any benefit, bonus, incentive or other plan or program provided by the Company or any of its Subsidiaries or Affiliates and for which the Employee may qualify; provided, however, that the Employee hereby waives the Employee's right to receive any payments under any severance pay plan or similar program applicable to other employees of the Company . 9. No Set-Off. The Company's obligation to make the payments provided for in this Agreement and otherwise to perform its obligations hereunder shall not be affected by any circumstances, including, without limitation, any set-off, counterclaim, recoupment, defense or other right which the Company may have against the Employee or others. 10. Taxes. Any payment required under this Agreement shall be subject to all requirements of the law with regard to the withholding of taxes, filing, making of reports and the like, and the Company shall use its best efforts to satisfy promptly all such requirements. 11. Certain Reduction of Payments. (a) Anything in this Agreement to the contrary notwithstanding, in the event that it shall be determined that any payment or distribution by the Company to or for the benefit of the Employee, whether paid or payable or distributed or distributable pursuant to the terms of this Agreement or otherwise (a "Payment"), would constitute an "excess parachute payment" within the meaning of Section 280G of the Internal Revenue Code of 1986, as amended 10 (the "Code"), the aggregate present value of amounts payable or distributable to or for the benefit of the Employee pursuant to this Agreement (such payments or distributions pursuant to this Agreement are hereinafter referred to as "Agreement Payments") shall be reduced (but not below zero) to the Reduced Amount. The "Reduced Amount" shall be an amount expressed in present value which maximizes the aggregate present value of Agreement Payments without causing any Payment to be subject to the taxation under Section 4999 of the Code. For purposes of this Section 11, present value shall be determined in accordance with Section 280G(d)(4) of the Code. (b) All determinations to be made under this Section 11 shall be made by Ernst & Young (or the Company's independent public accountant immediately prior to the Change of Control if other than Ernst & Young (the "Accounting Firm")), which firm shall provide its determinations and any supporting calculations both to the Company and the Employee within 10 days of the Termination Date. Any such determination by the Accounting Firm shall be binding upon the Company and the Employee. Within five days after this determination, the Company shall pay (or cause to be paid) or distribute (or cause to be distributed) to or for the benefit of the Employee such amounts as are then due to the Employee under this Agreement. (c) As a result of the uncertainty in the application of Section 280G of the Code at the time of the initial determination by the Accounting Firm hereunder, it is possible that Agreement Payments, as the case may be, will have been made by the Company which should not have been made ("Overpayment") or that additional Agreement Payments which have not been made by the Company could have 11 been made ("Underpayment"), in each case, consistent with the calculations required to be made hereunder. Within two years after the Termination of Employment, the Accounting Firm shall review the determination made by it pursuant to the preceding paragraph. In the event that the Accounting Firm determines that an Overpayment has been made, any such Overpayment shall be treated for all purposes as a loan to the Employee which the Employee shall repay to the Company together with interest at the applicable Federal rate provided for in Section 7872(f)(2) of the Code (the "Federal Rate"); provided, however, that no amount shall be payable by the Employee to the Company if and to the extent such payment would not reduce the amount which is subject to taxation under Section 4999 of the Code. In the event that the Accounting Firm determines that an Underpayment has occurred, any such Underpayment shall be promptly paid by the Company to or for the benefit of the Employee together with interest at the Federal Rate. (d) All of the fees and expenses of the Accounting Firm in performing the determinations referred to in subsections (b) and (c) above shall be borne solely by the Company. The Company agrees to indemnify and hold harmless the Accounting Firm of and from any and all claims, damages and expenses resulting from or relating to its determinations pursuant to subsections (b) and (c) above, except for claims, damages or expenses resulting from the gross negligence or willful misconduct of the Accounting Firm. 12. Confidential Information. The Employee recognizes and acknowledges that, by reason of his employment by and service to the Company, she has had and will continue to have access to confidential information of the Company and its affiliates, including, without limitation, information and 12 knowledge pertaining to products and services offered, innovations, designs, ideas, plans, trade secrets, proprietary information, distribution and sales methods and systems, sales and profit figures, customer and client lists, and relationships between the Company and its affiliates and other distributors, customers, clients, suppliers and others who have business dealings with the Company and its affiliates ("Confidential Information"). The Employee acknowledges that such Confidential Information is a valuable and unique asset and covenants that she will not, either during or after his employment by the Company, disclose any such Confidential Information to any person for any reason whatsoever without the prior written authorization of the Board, unless such information is in the public domain through no fault of the Employee or except as may be required by law. 13. Non-Competition. (a) During his employment by the Company and for a period of one year thereafter, the Employee will not, unless acting with the prior written consent of the Board, directly or indirectly, own, manage, operate, join, control, finance or participate in the ownership, management, operation, control or financing of, or be connected as an officer, director, employee, partner, principal, agent, representative, consultant or otherwise with or use or permit his name to be used in connection with, any business or enterprise engaged in a geographic area in which the Company or any of its affiliates is operating either during his employment by the Company or on the Termination Date, as applicable, presently on the East Coast of the United States or at any port in 13 the Gulf of Mexico (whether or not such business is physically located within those areas) (the "Geographic Area"), in any business that is a customer of, competitive to, a business from which the Company or any of its affiliates derive at least five percent of its respective gross revenues either during his employment by the Company or on the Termination Date, as applicable. It is recognized by the Employee that the business of the Company and its affiliates and the Employee's connection therewith is or will be involved in activity throughout the Geographic Area, and that more limited geographical limitations on this non-competition covenant are therefore not appropriate. The Employee also shall not, directly or indirectly, during such one-year period (a) solicit or divert business from, or attempt to convert any client, account or customer of the Company or any of its affiliates, whether existing at the date hereof or acquired during Employee's employment nor (b) following Employee's employment, solicit or attempt to hire any then employee of the Employer or of any of its affiliates. (b) The foregoing restriction shall not be construed to prohibit the ownership by the Employee of less than one percent (1%) of any class of securities of any corporation which is engaged in any of the foregoing businesses having a class of securities registered pursuant to the Securities Exchange Act of 1934, provided that such ownership represents a passive investment and that neither the Employee nor any group of persons including Employee in any way, either directly or indirectly, manages or exercises control of any such corporation, guarantees any of its financial obligations, otherwise takes any part in its business, other than exercising his rights as a shareholder, or seeks to do any of the foregoing. 14. Equitable Relief. 14 (a) Employee acknowledges that the restrictions contained in Sections 12 and 13 hereof are reasonable and necessary to protect the legitimate interests of the Company and its affiliates, that the Company would not have entered into this Agreement in the absence of such restrictions, and that any violation of any provision of those Sections will result in irreparable injury to the Company. The Employee represents that his experience and capabilities are such that the restrictions contained in Section 13 hereof will not prevent the Employee from obtaining employment or otherwise earning a living at the same general level of economic benefit as anticipated by this Agreement. The Employee further represents and acknowledges that (i) she has been advised by the Company to consult his own legal counsel in respect of this Agreement, and (ii) that she has had full opportunity, prior to execution of this Agreement, to review thoroughly this Agreement with his counsel. (b) The Employee agrees that the Company shall be entitled to preliminary and permanent injunctive relief, without the necessity of proving actual damages, as well as an equitable accounting of all earnings, profits and other benefits arising from any violation of Sections 12 or 13 hereof, which rights shall be cumulative and in addition to any other rights or remedies to which the Company may be entitled. In the event that any of the provisions of Sections 12 or 13 hereof should ever be adjudicated to exceed the time, geographic, service, or other limitations permitted by applicable law in any jurisdiction, then such provisions shall be deemed reformed in such jurisdiction to the maximum time, geographic, service, or other limitations permitted by applicable law. 15 (c) The Employee irrevocably and unconditionally (i) agrees that any suit, action or other legal proceeding arising out of Section 12 or 13 hereof, including without limitation, any action commenced by the Company for preliminary and permanent injunctive relief or other equitable relief, may be brought in the United States District Court for the Eastern District of Pennsylvania, or if such court does not have jurisdiction or will not accept jurisdiction, in any court of general jurisdiction in Philadelphia County, Pennsylvania, (ii) consents to the non-exclusive jurisdiction of any such court in any such suit, action or proceeding, and (iii) waives any objection which Employee may have to the laying of venue of any such suit, action or proceeding in any such court. Employee also irrevocably and unconditionally consents to the service of any process, pleadings, notices or other papers in a manner permitted by the notice provisions of Section 17 hereof. (d) Employee agrees that she will provide, and that the Company may similarly provide, a copy of Sections 12 and 13 hereof to any business or enterprise (i) which she may directly or indirectly own, manage, operate, finance, join, control or participate in the ownership, management, operation, financing, control or control of, or (ii) with which she may be connected with as an officer, director, employee, partner, principal, agent, representative, consultant or otherwise, or in connection with which she may use or permit her name to be used; provided, however, that this provision shall not apply in respect of Section 3 hereof after expiration of the time period set forth therein. 15. Term of Agreement. The term of this Agreement shall be for two years from the date hereof and shall be automatically renewed for successive 16 one-year periods unless the Company notifies the Employee in writing that this Agreement will not be renewed at least sixty days prior to the end of the current term; provided, however, that (i) after a Change of Control during the term of this Agreement, this Agreement shall remain in effect until all of the obligations of the parties hereunder are satisfied or have expired, and (ii) this Agreement shall terminate if, prior to a Change of Control, the employment of the Employee with the Company or any of its Subsidiaries, as the case may be, shall terminate for any reason, or the Employee shall cease to be an Employee. 16. Successor Company. The Company shall require any successor or successors (whether direct or indirect, by purchase, merger, consolidation or otherwise) to all or substantially all of the business and/or assets of the Company, by agreement in form and substance satisfactory to the Employee, to acknowledge expressly that this Agreement is binding upon and enforceable against the Company in accordance with the terms hereof, and to become jointly and severally obligated with the Company to perform this Agreement in the same manner and to the same extent that the Company would be required to perform if no such succession or successions had taken place. Failure of the Company to obtain such agreement prior to the effectiveness of any such succession shall be a breach of this Agreement. As used in this Agreement, the Company shall mean the Company as hereinbefore defined and any such successor or successors to its business and/or assets, jointly and severally. 17. Notice. All notices and other communications required or permitted hereunder or necessary or convenient in connection herewith shall be 17 in writing and shall be delivered personally or mailed by registered or certified mail, return receipt requested, or by overnight express courier service, as follows: If to the Company, to: Maritrans Inc. 2600 One Logan Square Philadelphia, PA 19103 Attention: Corporate Secretary If to the Employee, to: Janice M. Smallacombe 2148 Andrea Drive Bensalem, PA 19020 or to such other names or addresses as the Company or the Employee, as the case may be, shall designate by notice to the other party hereto in the manner specified in this Section; provided, however, that if no such notice is given by the Company following a Change of Control, notice at the last address of the Company or to any successor pursuant to Section 16 hereof shall be deemed sufficient for the purposes hereof. Any such notice shall be deemed delivered and effective when received in the case of personal delivery, five days after deposit, postage prepaid, with the U.S. Postal Service in the case of registered or certified mail, or on the next business day in the case of overnight express courier service. 18. Governing Law. This Agreement shall be governed by and interpreted under the laws of the Commonwealth of Pennsylvania without giving effect to any conflict of laws provisions. 18 19. Contents of Agreement, Amendment and Assignment. (a) This Agreement supersedes all prior agreements, sets forth the entire understanding between the parties hereto with respect to the subject matter hereof and cannot be changed, modified, extended or terminated except upon written amendment executed by the Employee and approved by the Board and executed on the Company's behalf by a duly authorized officer. The provisions of this Agreement may provide for payments to the Employee under certain compensation or bonus plans under circumstances where such plans would not provide for payment thereof. It is the specific intention of the parties that the provisions of this Agreement shall supersede any provisions to the contrary in such plans, and such plans shall be deemed to have been amended to correspond with this Agreement without further action by the Company or the Board. (b) Nothing in this Agreement shall be construed as giving the Employee any right to be retained in the employ of the Company. (c) All of the terms and provisions of this Agreement shall be binding upon and inure to the benefit of and be enforceable by the respective heirs, representatives, successors and assigns of the parties hereto, except that the duties and responsibilities of the Employee and the Company hereunder shall not be assignable in whole or in part by the Company. 20. Severability. If any provision of this Agreement or application thereof to anyone or under any circumstances shall be determined to be invalid or unenforceable, such invalidity or unenforceability shall not 19 affect any other provisions or applications of this Agreement which can be given effect without the invalid or unenforceable provision or application. 21. Remedies Cumulative; No Waiver. No right conferred upon the Employee by this Agreement is intended to be exclusive of any other right or remedy, and each and every such right or remedy shall be cumulative and shall be in addition to any other right or remedy given hereunder or now or hereafter existing at law or in equity. No delay or omission by the Employee in exercising any right, remedy or power hereunder or existing at law or in equity shall be construed as a waiver thereof, including, without limitation, any delay by the Employee in delivering a Notice of Termination pursuant to Section 2 hereof after an event has occurred which would, if the Employee had resigned, have constituted a Termination following a Change of Control pursuant to Section 1(l)(ii) of this Agreement. 22. Miscellaneous. All section headings are for convenience only. This Agreement may be executed in several counterparts, each of which is an original. It shall not be necessary in making proof of this Agreement or any counterpart hereof to produce or account for any of the other counterparts. 23. Termination of Agreement. This Agreement shall supersede and replace the Agreement which shall hereafter be null and void and of no further force and effect. 20 IN WITNESS WHEREOF, the undersigned, intending to be legally bound, have executed this Agreement as of the date first above written. Attest: Maritrans General Partner Inc. [Seal] /s/ John C. Newcomb By /s/ Walter T. Bromfield - ----------------------- ---------------------------- Secretary Treasurer /s/ Ramona A. Erace /s/ Janice M. Smallacombe - ----------------------- ---------------------------- Witness Janice M. Smallacombe 21 EX-10.10 3 SEVERANCE AND NON-COMP AGREEMENT SEVERANCE AND NON-COMPETITION AGREEMENT Agreement made as of the 1st day of June, 1995, between Maritrans General Partner Inc., a Delaware corporation (the "Company"), and Francis D. Bailey (the "Employee"). WHEREAS, the Employee is being hired by the Company as its President - Eastern Division; WHEREAS, the Company is a subsidiary of Maritrans Inc., a publicly traded corporation ("Maritrans"); WHEREAS, the board of directors of the Company recognizes that, as is the case with many publicly held corporations, the possibility of a change in control of Maritrans and the Company exists and that such possibility, and the uncertainty and questions which it may raise among management, may result in the departure or distraction of key management personnel to the detriment of the Company; WHEREAS, the board of directors of the Company has determined that appropriate steps should be taken to reinforce and encourage the continued attention and dedication of key members of the Company's management to their assigned duties without distraction in the face of potentially disturbing circumstances arising from the possibility of a change in control of the Company; and WHEREAS, in consideration for the Employee accepting employment with the Company and agreeing not to compete with the Company in the event the Employee's employment is terminated, the Company agrees that the Employee shall -1- receive the compensation set forth in this Agreement as a cushion against the financial and career impact on the Employee in the event the Employee's employment with the Company is terminated without cause whether or not there is a Change of Control of Maritrans; NOW, THEREFORE, in consideration of the foregoing and the mutual covenants and agreements hereinafter set forth and intending to be legally bound hereby, the parties hereto agree as follows: 1. Definitions. For all purposes of this Agreement, the following terms shall have the meanings specified in this Section unless the context clearly otherwise requires: (a) "Affiliate" and "Associate" shall have the respective meanings ascribed to such terms in Rule 12b-2 of the General Rules and Regulations under the Securities Exchange Act of 1934, as amended (the "Exchange Act"). (b) "Base Compensation" shall mean the average of the total cash remuneration received by the Employee in all capacities with the Company, and its Subsidiaries or Affiliates, as reported for Federal income tax purposes on Form W-2, together with any and all salary reduction authorized amounts under any of the Company's benefit plans or programs, but excluding any amounts attributable to the exercise of stock options by the Employee under the Company's Equity Compensation Plan for the most recent full calendar year immediately preceding the calendar year in which occurs a Change of Control or the Employee's Termination Date, whichever is higher. -2- (c) "Base Salary" shall mean the rate of normal salary being paid to the Employee at the time of his Termination Date. (d) "Beneficial Owner" of any securities shall mean: (i) that such Person or any of such Person's Affiliates or Associates, directly or indirectly, has the right to acquire (whether such right is exercisable immediately or only after the passage of time) pursuant to any agreement, arrangement or understanding (whether or not in writing) or upon the exercise of conversion rights, exchange rights, rights, warrants or options, or otherwise; provided, however, that a Person shall not be deemed the "Beneficial Owner" of securities tendered pursuant to a tender or exchange offer made by such Person or any of such Person's Affiliates or Associates until such tendered securities are accepted for payment, purchase or exchange; (ii) that such Person or any of such Person's Affiliates or Associates, directly or indirectly, has the right to vote or dispose of or has "beneficial ownership" of (as determined pursuant to Rule 13d-3 of the General Rules and Regulations under the Exchange Act), including without limitation pursuant to any agreement, arrangement or understanding, whether or not in writing; provided, however, that a Person shall not be deemed the "Beneficial Owner" of any security under this subsection (ii) as a result of an oral or written agreement, arrangement or understanding to vote such security if such agreement, arrangement or understanding (A) arises solely from a revocable proxy given in response to a public proxy or consent solicitation made pursuant to, and in accordance with, the applicable provisions of the General Rules and Regulations under the Exchange Act, and (B) is not then reportable by such -3- Person on Schedule 13D under the Exchange Act (or any comparable or successor report); or (iii) where voting securities are beneficially owned, directly or indirectly, by any other Person (or any Affiliate or Associate thereof) with which such Person (or any of such Person's Affiliates or Associates) has any agreement, arrangement or understanding (whether or not in writing) for the purpose of acquiring, holding, voting (except pursuant to a revocable proxy as described in the proviso to subsection (ii) above) or disposing of any voting securities of the Company; provided, however, that nothing in this subsection (d) shall cause a Person engaged in business as an underwriter of securities to be the "Beneficial Owner" of any securities acquired through such Person's participation in good faith in a firm commitment underwriting until the expiration of forty days after the date of such acquisition. (e) "Board" shall mean the board of directors of the Company. (f) "Cause" shall mean 1) misappropriation of funds, 2) habitual insobriety or substance abuse, 3) conviction of a crime involving moral turpitude, 4) gross negligence in the performance of duties, which gross negligence has had a material adverse effect on the business, operations, assets, properties or financial condition of the Company and its Subsidiaries taken as a whole, or 5) for purposes of Section 3(a), a judgment by the Board that the Employee is not satisfactorily performing his duties. -4- (g) "Change of Control" shall be deemed to have taken place if (i) any Person (except the Company or any employee benefit plan of the Company or of any Affiliate, any Person or entity organized, appointed or established by the Company for or pursuant to the terms of any such employee benefit plan), together with all Affiliates and Associates of such Person, shall become the Beneficial Owner in the aggregate of 20% or more of the common stock of the Company then outstanding); provided, however, that no "Change of Control" shall be deemed to occur during any period in which any such Person, and its Affiliates and Associates, are bound by the terms of a standstill agreement under which such parties have agreed not to acquire more than 30% of the common stock of the Company of the Common Stock of the Company then outstanding or to solicit proxies, or (ii) during any twenty-four month period, individuals who at the beginning of such period constituted the Board cease for any reason to constitute a majority thereof, unless the election, or the nomination for election by the Company's shareholders, of at least seventy-five percent of the directors who were not directors at the beginning of such period was approved by a vote of at least seventy-five percent of the directors in office at the time of such election or nomination who were directors at the beginning of such period. (h) "Normal Retirement Date" shall mean the first day of the calendar month coincident with or next following the Employee's 65th birthday. (i) "Person" shall mean any individual, firm, corporation, partnership or other entity. -5- (j) "Subsidiary" shall have the meaning ascribed to such term in Rule 12b-2 of the General Rules and Regulations under the Exchange Act. (k) "Termination Date" shall mean the date of receipt of the Notice of Termination described in Section 2 hereof or any later date specified therein, as the case may be. (l) "Termination of Employment" shall mean the termination of the Employee's actual employment relationship with the Company. (m) "Termination following a Change of Control" shall mean a Termination of Employment within two years after a Change of Control either: (i) initiated by the Company for any reason other than (x) the Employee's continuous illness, injury or incapacity for a period of six consecutive months or (y) for "Cause;" or (ii) initiated by the Employee upon one or more of the following occurrences: (A) any failure of the Company to comply with and satisfy any of the terms of this Agreement; (B) any significant reduction by the Company of the authority, duties or responsibilities of the Employee; (C) any removal by the Company of the Employee from the employment grade, compensation level or officer positions which the Employee holds as of the effective date hereof except in connection with promotions to higher office; -6- (D) the requirement that the Employee undertake business travel to an extent substantially greater than is reasonable and customary for the position the Employee holds. 2. Notice of Termination. Any Termination of Employment shall be communicated by a Notice of Termination to the other party hereto given in accordance with Section 14 hereof. For purposes of this Agreement, a "Notice of Termination" means a written notice which (i) indicates the specific reasons for the termination, (ii) briefly summarizes the facts and circumstances deemed to provide a basis for termination of the Employee's employment, and (iii) if the Termination Date is other than the date of receipt of such notice, specifies the Termination Date (which date shall not be more than 15 days after the giving of such notice). 3. Severance Compensation upon Termination. (a) In the event of the Employee's involuntary Termination of Employment for reason other than Cause, the Company shall pay to the Employee, upon the execution of a release in form and substance satisfactory to the company and its counsel, his regular Base Salary, subject to customary employment taxes and deductions, for six months (12 months if the Termination Date is on or after June 1, 1997) following the Termination Date but all other benefit coverages, retirement benefits and fringe benefit eligibility shall cease upon the Termination Date. (b) Subject to the provisions of Section 11 hereof, in the event of the Employee's Termination following a Change of Control, the Company shall pay to the Employee, within fifteen days after the Termination Date (or as soon -7- as possible thereafter in the event that the procedures set forth in Section 11(b) hereof cannot be completed within 15 days), and in lieu of any payment under subsection (a) above, an amount in cash equal to 1.5 times the Employee's Base Compensation. (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 agreement to hold assets to satisfy its obligations hereunder. Funding of such trust fund shall be subject to the Company's discretion, as set forth in the agreement pursuant to which the fund will be established. 6. Enforcement. (a) In the event that the Company shall fail or refuse to make payment of any amounts due the Employee under Sections 3(b) and 4 hereof within the respective time periods provided therein, the Company shall pay to the Employee, in addition to the payment of any other sums provided in this Agreement, interest, compounded daily, on any amount remaining unpaid from the -8- date payment is required under Section 3(b) and 4, as appropriate, until paid to the Employee, at the rate from time to time announced by Mellon Bank (East) as its "prime rate" plus 2%, each change in such rate to take effect on the effective date of the change in such prime rate. (b) It is the intent of the parties that the Employee not be required to incur any expenses associated with the enforcement of his rights under Section 3(b) of this Agreement by arbitration, litigation or other legal action because the cost and expense thereof would substantially detract from the benefits intended to be extended to the Employee hereunder. Accordingly, the Company shall pay the Employee on demand the amount necessary to reimburse the Employee in full for all expenses (including all attorneys' fees and legal expenses) incurred by the Employee in enforcing any of the obligations of the Company under this Agreement. 7. No Mitigation. The Employee shall not be required to mitigate the amount of any payment or benefit provided for in this Agreement by seeking other employment or otherwise, nor shall the amount of any payment or benefit provided for herein be reduced by any compensation earned by other employment or otherwise. 8. Non-exclusivity of Rights. Nothing in this Agreement shall prevent or limit the Employee's continuing or future participation in or rights under any benefit, bonus, incentive or other plan or program provided by the Company or any of its Subsidiaries or Affiliates and for which the Employee may qualify; provided, however, that the Employee hereby waives the Employee's right to receive any payments under any severance pay plan or similar program applicable to other employees of the Company. -9- 9. No Set-Off. The Company's obligation to make the payments provided for in this Agreement and otherwise to perform its obligations hereunder shall not be affected by any circumstances, including, without limitation, any set-off, counterclaim, recoupment, defense or other right which the Company may have against the Employee or others. 10. Taxes. Any payment required under this Agreement shall be subject to all requirements of the law with regard to the withholding of taxes, filing, making of reports and the like, and the Company shall use its best efforts to satisfy promptly all such requirements. 11. Certain Reduction of Payments. (a) Anything in this Agreement to the contrary notwithstanding, in the event that it shall be determined that any payment or distribution by the Company to or for the benefit of the Employee, whether paid or payable or distributed or distributable pursuant to the terms of this Agreement or otherwise (a "Payment"), would constitute an "excess parachute payment" within the meaning of Section 280G of the Internal Revenue Code of 1986, as amended (the "Code"), 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 -10- Amount. The "Reduced Amount" shall be an amount expressed in present value which maximizes the aggregate present value of Agreement Payments without causing any Payment to be subject to the taxation under Section 4999 of the Code. For purposes of this Section 11, present value shall be determined in accordance with Section 280G(d)(4) of the Code. (b) All determinations to be made under this Section 11 shall be made by Ernst & Young (or the Company's independent public accountant immediately prior to the Change of Control if other than Ernst & Young (the "Accounting Firm")), which firm shall provide its determinations and any supporting calculations both to the Company and the Employee within 10 days of the Termination Date. Any such determination by the Accounting Firm shall be binding upon the Company and the Employee. Within five days after this determination, the Company shall pay (or cause to be paid) or distribute (or cause to be distributed) to or for the benefit of the Employee such amounts as are then due to the Employee under this Agreement. (c) As a result of the uncertainty in the application of Section 280G of the Code at the time of the initial determination by the Accounting Firm hereunder, it is possible that Agreement Payments, as the case may be, will have been made by the Company which should not have been made ("Overpayment") or that additional Agreement Payments which have not been made by the Company could have been made ("Underpayment"), in each case, consistent with the calculations required to be made hereunder. Within two years after the Termination of Employment, the Accounting Firm shall review the determination made by it pursuant to the preceding paragraph. In the event that the Accounting Firm determines that an Overpayment has been made, any such Overpayment shall be -11- treated for all purposes as a loan to the Employee which the Employee shall repay to the Company together with interest at the applicable Federal rate provided for in Section 7872(f)(2) of the Code (the "Federal Rate"); provided, however, that no amount shall be payable by the Employee to the Company if and to the extent such payment would not reduce the amount which is subject to taxation under Section 4999 of the Code. In the event that the Accounting Firm determines that an Underpayment has occurred, any such Underpayment shall be promptly paid by the Company to or for the benefit of the Employee together with interest at the Federal Rate. (d) All of the fees and expenses of the Accounting Firm in performing the determinations referred to in subsections (b) and (c) above shall be borne solely by the Company. The Company agrees to indemnify and hold harmless the Accounting Firm of and from any and all claims, damages and expenses resulting from or relating to its determinations pursuant to subsections (b) and (c) above, except for claims, damages or expenses resulting from the gross negligence or willful misconduct of the Accounting Firm. 12. Confidential Information. The Employee recognizes and acknowledges that, by reason of his employment by and service to the Company, he has had and will continue to have access to confidential information of the Company and its affiliates, including, without limitation, information and knowledge pertaining to products and services offered, innovations, designs, ideas, plans, trade secrets, proprietary information, distribution and sales methods and systems, sales and profit figures, customer and client lists, and relationships between the Company and its affiliates and other distributors, -12- customers, clients, suppliers and others who have business dealings with the Company and its affiliates ("Confidential Information"). The Employee acknowledges that such Confidential Information is a valuable and unique asset and covenants that he will not, either during or after his employment by the Company, disclose any such Confidential Information to any person for any reason whatsoever without the prior written authorization of the Board, unless such information is in the public domain through no fault of the Employee or except as may be required by law. 13. Non-Competition. (a) During his employment by the Company and for a period of one year thereafter, the Employee will not, unless acting with the prior written consent of the Board, directly or indirectly, own, manage, operate, join, control, finance or participate in the ownership, management, operation, control or financing of, or be connected as an officer, director, employee, partner, principal, agent, representative, consultant or otherwise with or use or permit his name to be used in connection with, any business or enterprise engaged in a geographic area in which the Company or any of its affiliates is operating either during his employment by the Company or on the Termination Date, as applicable, presently on the East Coast of the United States or at any port in the Gulf of Mexico (whether or not such business is physically located within those areas) (the "Geographic Area"), in any business that is a customer of, competitive to, a business from which the Company or any of its affiliates derive at least five percent of its respective gross revenues either during his employment by the Company or on the Termination Date, as applicable. It is -13- recognized by the Employee that the business of the Company and its affiliates and the Employee's connection therewith is or will be involved in activity throughout the Geographic Area, and that more limited geographical limitations on this non-competition covenant are therefore not appropriate. The Employee also shall not, directly or indirectly, during such one-year period (a) solicit or divert business from, or attempt to convert any client, account or customer of the Company or any of its affiliates, whether existing at the date hereof or acquired during Employee's employment nor (b) following Employee's employment, solicit or attempt to hire any then employee of the Employer or of any of its affiliates. (b) The foregoing restriction shall not be construed to prohibit the ownership by the Employee of less than one percent (1%) of any class of securities of any corporation which is engaged in any of the foregoing businesses having a class of securities registered pursuant to the Securities Exchange Act of 1934, provided that such ownership represents a passive investment and that neither the Employee nor any group of persons including Employee in any way, either directly or indirectly, manages or exercises control of any such corporation, guarantees any of its financial obligations, otherwise takes any part in its business, other than exercising his rights as a shareholder, or seeks to do any of the foregoing. 14. Equitable Relief. (a) Employee acknowledges that the restrictions contained in Sections 12 and 13 hereof are reasonable and necessary to protect the legitimate interests of the Company and its affiliates, that the Company would not have entered into this Agreement in the absence of such restrictions, and that any violation of any provision of those Sections will result in irreparable injury -14- to the Company. The Employee represents that his experience and capabilities are such that the restrictions contained in Section 13 hereof will not prevent the Employee from obtaining employment or otherwise earning a living at the same general level of economic benefit as anticipated by this Agreement. The Employee further represents and acknowledges that (i) he has been advised by the Company to consult his own legal counsel in respect of this Agreement, and (ii) that he has had full opportunity, prior to execution of this Agreement, to review thoroughly this Agreement with his counsel. (b) The Employee agrees that the Company shall be entitled to preliminary and permanent injunctive relief, without the necessity of proving actual damages, as well as an equitable accounting of all earnings, profits and other benefits arising from any violation of Sections 12 or 13 hereof, which rights shall be cumulative and in addition to any other rights or remedies to which the Company may be entitled. In the event that any of the provisions of Sections 12 or 13 hereof should ever be adjudicated to exceed the time, geographic, service, or other limitations permitted by applicable law in any jurisdiction, then such provisions shall be deemed reformed in such jurisdiction to the maximum time, geographic, service, or other limitations permitted by applicable law. (c) The Employee irrevocably and unconditionally (i) agrees that any suit, action or other legal proceeding arising out of Section 12 or 13 hereof, including without limitation, any action commenced by the Company for preliminary and permanent injunctive relief or other equitable relief, may be brought in the United States District Court for the Eastern District of -15- Pennsylvania, or if such court does not have jurisdiction or will not accept jurisdiction, in any court of general jurisdiction in Philadelphia County, Pennsylvania, (ii) consents to the non-exclusive jurisdiction of any such court in any such suit, action or proceeding, and (iii) waives any objection which Employee may have to the laying of venue of any such suit, action or proceeding in any such court. Employee also irrevocably and unconditionally consents to the service of any process, pleadings, notices or other papers in a manner permitted by the notice provisions of Section 17 hereof. (d) Employee agrees that he will provide, and that the Company may similarly provide, a copy of Sections 12 and 13 hereof to any business or enterprise (i) which he may directly or indirectly own, manage, operate, finance, join, control or participate in the ownership, management, operation, financing, control or control of, or (ii) with which he may be connected with as an officer, director, employee, partner, principal, agent, representative, consultant or otherwise, or in connection with which he may use or permit his name to be used; provided, however, that this provision shall not apply in respect of Section 3 hereof after expiration of the time period set forth therein. 15. Term of Agreement. The term of this Agreement shall be for two years from the date hereof and shall be automatically renewed for successive one-year periods unless the Company notifies the Employee in writing that this Agreement will not be renewed at least sixty days prior to the end of the current term; provided, however, that (i) after a Change of Control during the term of this Agreement, this Agreement shall remain in effect until all of the obligations of the parties hereunder are satisfied or have expired, and (ii) -16- this Agreement shall terminate if, prior to a Change of Control, the employment of the Employee with the Company or any of its Subsidiaries, as the case may be, shall terminate for any reason, or the Employee shall cease to be an Employee. 16. Successor Company. The Company shall require any successor or successors (whether direct or indirect, by purchase, merger, consolidation or otherwise) to all or substantially all of the business and/or assets of the Company, by agreement in form and substance satisfactory to the Employee, to acknowledge expressly that this Agreement is binding upon and enforceable against the Company in accordance with the terms hereof, and to become jointly and severally obligated with the Company to perform this Agreement in the same manner and to the same extent that the Company would be required to perform if no such succession or successions had taken place. Failure of the Company to obtain such agreement prior to the effectiveness of any such succession shall be a breach of this Agreement. As used in this Agreement, the Company shall mean the Company as hereinbefore defined and any such successor or successors to its business and/or assets, jointly and severally. 17. Notice. All notices and other communications required or permitted hereunder or necessary or convenient in connection herewith shall be in writing and shall be delivered personally or mailed by registered or certified mail, return receipt requested, or by overnight express courier service, as follows: -17- If to the Company, to: Maritrans General Partner Inc. 2600 One Logan Square Philadelphia, PA 19103 Attention: Corporate Secretary If to the Employee, to: Francis D. Bailey 33 Russell Street Milton, MA 02186 or to such other names or addresses as the Company or the Employee, as the case may be, shall designate by notice to the other party hereto in the manner specified in this Section; provided, however, that if no such notice is given by the Company following a Change of Control, notice at the last address of the Company or to any successor pursuant to Section 16 hereof shall be deemed sufficient for the purposes hereof. Any such notice shall be deemed delivered and effective when received in the case of personal delivery, five days after deposit, postage prepaid, with the U.S. Postal Service in the case of registered or certified mail, or on the next business day in the case of overnight express courier service. 18. Governing Law. This Agreement shall be governed by and interpreted under the laws of the Commonwealth of Pennsylvania without giving effect to any conflict of laws provisions. 19. Contents of Agreement, Amendment and Assignment. (a) This Agreement supersedes all prior agreements, sets forth the entire understanding between the parties hereto with respect to the subject matter hereof and cannot be changed, modified, extended or terminated except -18- upon written amendment executed by the Employee and approved by the Board and executed on the Company's behalf by a duly authorized officer. The provisions of this Agreement may provide for payments to the Employee under certain compensation or bonus plans under circumstances where such plans would not provide for payment thereof. It is the specific intention of the parties that the provisions of this Agreement shall supersede any provisions to the contrary in such plans, and such plans shall be deemed to have been amended to correspond with this Agreement without further action by the Company or the Board. (b) Nothing in this Agreement shall be construed as giving the Employee any right to be retained in the employ of the Company. (c) All of the terms and provisions of this Agreement shall be binding upon and inure to the benefit of and be enforceable by the respective heirs, representatives, successors and assigns of the parties hereto, except that the duties and responsibilities of the Employee and the Company hereunder shall not be assignable in whole or in part by the Company. 20. Severability. If any provision of this Agreement or application thereof to anyone or under any circumstances shall be determined to be invalid or unenforceable, such invalidity or unenforceability shall not affect any other provisions or applications of this Agreement which can be given effect without the invalid or unenforceable provision or application. -19- 21. Remedies Cumulative; No Waiver. No right conferred upon the Employee by this Agreement is intended to be exclusive of any other right or remedy, and each and every such right or remedy shall be cumulative and shall be in addition to any other right or remedy given hereunder or now or hereafter existing at law or in equity. No delay or omission by the Employee in exercising any right, remedy or power hereunder or existing at law or in equity shall be construed as a waiver thereof, including, without limitation, any delay by the Employee in delivering a Notice of Termination pursuant to Section 2 hereof after an event has occurred which would, if the Employee had resigned, have constituted a Termination following a Change of Control pursuant to Section 1(l)(ii) of this Agreement. 22. Miscellaneous. All section headings are for convenience only. This Agreement may be executed in several counterparts, each of which is an original. It shall not be necessary in making proof of this Agreement or any counterpart hereof to produce or account for any of the other counterparts. IN WITNESS WHEREOF, the undersigned, intending to be legally bound, have executed this Agreement as of the date first above written. Attest: MARITRANS GENERAL PARTNER INC. [Seal] /s/ John C. Newcomb By /s/ Walter T. Bromfield - ------------------------- ------------------------- Secretary Treasurer /s/ Janice M. Smallacombe /s/ Francis D. Bailey - ------------------------- ------------------------- Witnessss Francis D. Bailey -20- EX-10.11 4 SEVERENCE AND NON-COMP AGREEMENT SEVERANCE AND NON-COMPETITION AGREEMENT Agreement made as of the 1st day of June, 1995, between Maritrans General Partner Inc., a Delaware corporation (the "Company"), and Richard T. McCreary (the "Employee"). WHEREAS, the Employee is being hired by the Company as its President - Gulf Division; WHEREAS, the Company is a subsidiary of Maritrans Inc., a publicly traded corporation ("Maritrans"); WHEREAS, the board of directors of the Company recognizes that, as is the case with many publicly held corporations, the possibility of a change in control of Maritrans and the Company exists and that such possibility, and the uncertainty and questions which it may raise among management, may result in the departure or distraction of key management personnel to the detriment of the Company; WHEREAS, the board of directors of the Company has determined that appropriate steps should be taken to reinforce and encourage the continued attention and dedication of key members of the Company's management to their assigned duties without distraction in the face of potentially disturbing circumstances arising from the possibility of a change in control of the Company; and WHEREAS, in consideration for the Employee accepting employment with the Company and agreeing not to compete with the Company in the event the Employee's employment is terminated, the Company agrees that the Employee shall receive the compensation set forth in this Agreement as a cushion against the financial and career impact on the Employee in the event the Employee's employment with the Company is terminated without cause whether or not there is a Change of Control of Maritrans; NOW, THEREFORE, in consideration of the foregoing and the mutual covenants and agreements hereinafter set forth and intending to be legally bound hereby, the parties hereto agree as follows: 1. Definitions. For all purposes of this Agreement, the following terms shall have the meanings specified in this Section unless the context clearly otherwise requires: (a) "Affiliate" and "Associate" shall have the respective meanings ascribed to such terms in Rule 12b-2 of the General Rules and Regulations under the Securities Exchange Act of 1934, as amended (the "Exchange Act"). (b) "Base Compensation" shall mean the average of the total cash remuneration received by the Employee in all capacities with the Company, and its Subsidiaries or Affiliates, as reported for Federal income tax purposes on Form W-2, together with any and all salary reduction authorized amounts under any of the Company's benefit plans or programs, but excluding any amounts attributable to the exercise of stock options by the Employee under the Company's Equity Compensation Plan for the most recent full calendar year immediately preceding the calendar year in which occurs a Change of Control or the Employee's Termination Date, whichever is higher. -2- (c) "Base Salary" shall mean the rate of normal salary being paid to the Employee at the time of his Termination Date. (d) "Beneficial Owner" of any securities shall mean: (i) that such Person or any of such Person's Affiliates or Associates, directly or indirectly, has the right to acquire (whether such right is exercisable immediately or only after the passage of time) pursuant to any agreement, arrangement or understanding (whether or not in writing) or upon the exercise of conversion rights, exchange rights, rights, warrants or options, or otherwise; provided, however, that a Person shall not be deemed the "Beneficial Owner" of securities tendered pursuant to a tender or exchange offer made by such Person or any of such Person's Affiliates or Associates until such tendered securities are accepted for payment, purchase or exchange; (ii) that such Person or any of such Person's Affiliates or Associates, directly or indirectly, has the right to vote or dispose of or has "beneficial ownership" of (as determined pursuant to Rule 13d-3 of the General Rules and Regulations under the Exchange Act), including without limitation pursuant to any agreement, arrangement or understanding, whether or not in writing; provided, however, that a Person shall not be deemed the "Beneficial Owner" of any security under this subsection (ii) as a result of an oral or written agreement, arrangement or understanding to vote such security if such agreement, arrangement or understanding (A) arises solely from a revocable proxy given in response to a public proxy or consent solicitation made pursuant to, and in accordance with, the applicable provisions of the General Rules and -3- Regulations under the Exchange Act, and (B) is not then reportable by such Person on Schedule 13D under the Exchange Act (or any comparable or successor report); or (iii) where voting securities are beneficially owned, directly or indirectly, by any other Person (or any Affiliate or Associate thereof) with which such Person (or any of such Person's Affiliates or Associates) has any agreement, arrangement or understanding (whether or not in writing) for the purpose of acquiring, holding, voting (except pursuant to a revocable proxy as described in the proviso to subsection (ii) above) or disposing of any voting securities of the Company; provided, however, that nothing in this subsection (d) shall cause a Person engaged in business as an underwriter of securities to be the "Beneficial Owner" of any securities acquired through such Person's participation in good faith in a firm commitment underwriting until the expiration of forty days after the date of such acquisition. (e) "Board" shall mean the board of directors of the Company. (f) "Cause" shall mean 1) misappropriation of funds, 2) habitual insobriety or substance abuse, 3) conviction of a crime involving moral turpitude, 4) gross negligence in the performance of duties, which gross negligence has had a material adverse effect on the business, operations, assets, properties or financial condition of the Company and its Subsidiaries taken as a whole, or 5) for purposes of Section 3(a), a judgment by the Board that the Employee is not satisfactorily performing his duties. (g) "Change of Control" shall be deemed to have taken place if (i) any Person (except the Company or any employee benefit plan of the Company or of -4- any Affiliate, any Person or entity organized, appointed or established by the Company for or pursuant to the terms of any such employee benefit plan), together with all Affiliates and Associates of such Person, shall become the Beneficial Owner in the aggregate of 20% or more of the common stock of the Company then outstanding); provided, however, that no "Change of Control" shall be deemed to occur during any period in which any such Person, and its Affiliates and Associates, are bound by the terms of a standstill agreement under which such parties have agreed not to acquire more than 30% of the common stock of the Company of the Common Stock of the Company then outstanding or to solicit proxies, or (ii) during any twenty-four month period, individuals who at the beginning of such period constituted the Board cease for any reason to constitute a majority thereof, unless the election, or the nomination for election by the Company's shareholders, of at least seventy-five percent of the directors who were not directors at the beginning of such period was approved by a vote of at least seventy-five percent of the directors in office at the time of such election or nomination who were directors at the beginning of such period. (h) "Normal Retirement Date" shall mean the first day of the calendar month coincident with or next following the Employee's 65th birthday. (i) "Person" shall mean any individual, firm, corporation, partnership or other entity. (j) "Subsidiary" shall have the meaning ascribed to such term in Rule 12b-2 of the General Rules and Regulations under the Exchange Act. -5- (k) "Termination Date" shall mean the date of receipt of the Notice of Termination described in Section 2 hereof or any later date specified therein, as the case may be. (l) "Termination of Employment" shall mean the termination of the Employee's actual employment relationship with the Company. (m) "Termination following a Change of Control" shall mean a Termination of Employment within two years after a Change of Control either: (i) initiated by the Company for any reason other than (x) the Employee's continuous illness, injury or incapacity for a period of six consecutive months or (y) for "Cause;" or (ii) initiated by the Employee upon one or more of the following occurrences: (A) any failure of the Company to comply with and satisfy any of the terms of this Agreement; (B) any significant reduction by the Company of the authority, duties or responsibilities of the Employee; (C) any removal by the Company of the Employee from the employment grade, compensation level or officer positions which the Employee holds as of the effective date hereof except in connection with promotions to higher office; -6- (D) the requirement that the Employee undertake business travel to an extent substantially greater than is reasonable and customary for the position the Employee holds. 2. Notice of Termination. Any Termination of Employment shall be communicated by a Notice of Termination to the other party hereto given in accordance with Section 14 hereof. For purposes of this Agreement, a "Notice of Termination" means a written notice which (i) indicates the specific reasons for the termination, (ii) briefly summarizes the facts and circumstances deemed to provide a basis for termination of the Employee's employment, and (iii) if the Termination Date is other than the date of receipt of such notice, specifies the Termination Date (which date shall not be more than 15 days after the giving of such notice). 3. Severance Compensation upon Termination. (a) In the event of the Employee's involuntary Termination of Employment for reason other than Cause, the Company shall pay to the Employee, upon the execution of a release in form and substance satisfactory to the company and its counsel, his regular Base Salary, subject to customary employment taxes and deductions, for six months (12 months if the Termination Date is on or after June 1, 1997) following the Termination Date but all other benefit coverages, retirement benefits and fringe benefit eligibility shall cease upon the Termination Date. (b) Subject to the provisions of Section 11 hereof, in the event of the Employee's Termination following a Change of Control, the Company shall 7 -7- pay to the Employee, within fifteen days after the Termination Date (or as soon as possible thereafter in the event that the procedures set forth in Section 11(b) hereof cannot be completed within 15 days), and in lieu of any payment under subsection (a) above, an amount in cash equal to 1.5 times the Employee's Base Compensation. (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 agreement to hold assets to satisfy its obligations hereunder. Funding of such trust fund shall be subject to the Company's discretion, as set forth in the agreement pursuant to which the fund will be established. 6. Enforcement. (a) In the event that the Company shall fail or refuse to make payment of any amounts due the Employee under Sections 3(b) and 4 hereof within the respective time periods provided therein, the Company shall pay to the Employee, in addition to the payment of any other sums provided in this Agreement, interest, compounded daily, on any amount remaining unpaid from the -8- date payment is required under Section 3(b) and 4, as appropriate, until paid to the Employee, at the rate from time to time announced by Mellon Bank (East) as its "prime rate" plus 2%, each change in such rate to take effect on the effective date of the change in such prime rate. (b) It is the intent of the parties that the Employee not be required to incur any expenses associated with the enforcement of his rights under Section 3(b) of this Agreement by arbitration, litigation or other legal action because the cost and expense thereof would substantially detract from the benefits intended to be extended to the Employee hereunder. Accordingly, the Company shall pay the Employee on demand the amount necessary to reimburse the Employee in full for all expenses (including all attorneys' fees and legal expenses) incurred by the Employee in enforcing any of the obligations of the Company under this Agreement. 7. No Mitigation. The Employee shall not be required to mitigate the amount of any payment or benefit provided for in this Agreement by seeking other employment or otherwise, nor shall the amount of any payment or benefit provided for herein be reduced by any compensation earned by other employment or otherwise. 8. Non-exclusivity of Rights. Nothing in this Agreement shall prevent or limit the Employee's continuing or future participation in or rights under any benefit, bonus, incentive or other plan or program provided by the Company or any of its Subsidiaries or Affiliates and for which the Employee may qualify; provided, however, that the Employee hereby waives the Employee's right -9- to receive any payments under any severance pay plan or similar program applicable to other employees of the Company . 9. No Set-Off. The Company's obligation to make the payments provided for in this Agreement and otherwise to perform its obligations hereunder shall not be affected by any circumstances, including, without limitation, any set-off, counterclaim, recoupment, defense or other right which the Company may have against the Employee or others. 10. Taxes. Any payment required under this Agreement shall be subject to all requirements of the law with regard to the withholding of taxes, filing, making of reports and the like, and the Company shall use its best efforts to satisfy promptly all such requirements. 11. Certain Reduction of Payments. (a) Anything in this Agreement to the contrary notwithstanding, in the event that it shall be determined that any payment or distribution by the Company to or for the benefit of the Employee, whether paid or payable or distributed or distributable pursuant to the terms of this Agreement or otherwise (a "Payment"), would constitute an "excess parachute payment" within the meaning of Section 280G of the Internal Revenue Code of 1986, as amended (the "Code"), 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 -10- Amount. The "Reduced Amount" shall be an amount expressed in present value which maximizes the aggregate present value of Agreement Payments without causing any Payment to be subject to the taxation under Section 4999 of the Code. For purposes of this Section 11, present value shall be determined in accordance with Section 280G(d)(4) of the Code. (b) All determinations to be made under this Section 11 shall be made by Ernst & Young (or the Company's independent public accountant immediately prior to the Change of Control if other than Ernst & Young (the "Accounting Firm")), which firm shall provide its determinations and any supporting calculations both to the Company and the Employee within 10 days of the Termination Date. Any such determination by the Accounting Firm shall be binding upon the Company and the Employee. Within five days after this determination, the Company shall pay (or cause to be paid) or distribute (or cause to be distributed) to or for the benefit of the Employee such amounts as are then due to the Employee under this Agreement. (c) As a result of the uncertainty in the application of Section 280G of the Code at the time of the initial determination by the Accounting Firm hereunder, it is possible that Agreement Payments, as the case may be, will have been made by the Company which should not have been made ("Overpayment") or that additional Agreement Payments which have not been made by the Company could have been made ("Underpayment"), in each case, consistent with the calculations required to be made hereunder. Within two years after the Termination of Employment, the Accounting Firm shall review the determination made by it pursuant to the preceding paragraph. In the event that the Accounting Firm determines that an Overpayment has been made, any such Overpayment shall be -11- treated for all purposes as a loan to the Employee which the Employee shall repay to the Company together with interest at the applicable Federal rate provided for in Section 7872(f)(2) of the Code (the "Federal Rate"); provided, however, that no amount shall be payable by the Employee to the Company if and to the extent such payment would not reduce the amount which is subject to taxation under Section 4999 of the Code. In the event that the Accounting Firm determines that an Underpayment has occurred, any such Underpayment shall be promptly paid by the Company to or for the benefit of the Employee together with interest at the Federal Rate. (d) All of the fees and expenses of the Accounting Firm in performing the determinations referred to in subsections (b) and (c) above shall be borne solely by the Company. The Company agrees to indemnify and hold harmless the Accounting Firm of and from any and all claims, damages and expenses resulting from or relating to its determinations pursuant to subsections (b) and (c) above, except for claims, damages or expenses resulting from the gross negligence or willful misconduct of the Accounting Firm. 12. Confidential Information. The Employee recognizes and acknowledges that, by reason of his employment by and service to the Company, he has had and will continue to have access to confidential information of the Company and its affiliates, including, without limitation, information and knowledge pertaining to products and services offered, innovations, designs, ideas, plans, trade secrets, proprietary information, distribution and sales methods and systems, sales and profit figures, customer and client lists, and relationships between the Company and its affiliates and other distributors, -12- customers, clients, suppliers and others who have business dealings with the Company and its affiliates ("Confidential Information"). The Employee acknowledges that such Confidential Information is a valuable and unique asset and covenants that he will not, either during or after his employment by the Company, disclose any such Confidential Information to any person for any reason whatsoever without the prior written authorization of the Board, unless such information is in the public domain through no fault of the Employee or except as may be required by law. 13. Non-Competition. (a) During his employment by the Company and for a period of one year thereafter, the Employee will not, unless acting with the prior written consent of the Board, directly or indirectly, own, manage, operate, join, control, finance or participate in the ownership, management, operation, control or financing of, or be connected as an officer, director, employee, partner, principal, agent, representative, consultant or otherwise with or use or permit his name to be used in connection with, any business or enterprise engaged in a geographic area in which the Company or any of its affiliates is operating either during his employment by the Company or on the Termination Date, as applicable, presently on the East Coast of the United States or at any port in the Gulf of Mexico (whether or not such business is physically located within those areas) (the "Geographic Area"), in any business that is a customer of, competitive to, a business from which the Company or any of its affiliates derive at least five percent of its respective gross revenues either during his employment by the Company or on the Termination Date, as applicable. It is -13- recognized by the Employee that the business of the Company and its affiliates and the Employee's connection therewith is or will be involved in activity throughout the Geographic Area, and that more limited geographical limitations on this non-competition covenant are therefore not appropriate. The Employee also shall not, directly or indirectly, during such one-year period (a) solicit or divert business from, or attempt to convert any client, account or customer of the Company or any of its affiliates, whether existing at the date hereof or acquired during Employee's employment nor (b) following Employee's employment, solicit or attempt to hire any then employee of the Employer or of any of its affiliates. (b) The foregoing restriction shall not be construed to prohibit the ownership by the Employee of less than one percent (1%) of any class of securities of any corporation which is engaged in any of the foregoing businesses having a class of securities registered pursuant to the Securities Exchange Act of 1934, provided that such ownership represents a passive investment and that neither the Employee nor any group of persons including Employee in any way, either directly or indirectly, manages or exercises control of any such corporation, guarantees any of its financial obligations, otherwise takes any part in its business, other than exercising his rights as a shareholder, or seeks to do any of the foregoing. 14. Equitable Relief. (a) Employee acknowledges that the restrictions contained in Sections 12 and 13 hereof are reasonable and necessary to protect the legitimate interests of the Company and its affiliates, that the Company would not have entered into this Agreement in the absence of such restrictions, and that any violation of any provision of those Sections will result in irreparable injury -14- to the Company. The Employee represents that his experience and capabilities are such that the restrictions contained in Section 13 hereof will not prevent the Employee from obtaining employment or otherwise earning a living at the same general level of economic benefit as anticipated by this Agreement. The Employee further represents and acknowledges that (i) he has been advised by the Company to consult his own legal counsel in respect of this Agreement, and (ii) that he has had full opportunity, prior to execution of this Agreement, to review thoroughly this Agreement with his counsel. (b) The Employee agrees that the Company shall be entitled to preliminary and permanent injunctive relief, without the necessity of proving actual damages, as well as an equitable accounting of all earnings, profits and other benefits arising from any violation of Sections 12 or 13 hereof, which rights shall be cumulative and in addition to any other rights or remedies to which the Company may be entitled. In the event that any of the provisions of Sections 12 or 13 hereof should ever be adjudicated to exceed the time, geographic, service, or other limitations permitted by applicable law in any jurisdiction, then such provisions shall be deemed reformed in such jurisdiction to the maximum time, geographic, service, or other limitations permitted by applicable law. (c) The Employee irrevocably and unconditionally (i) agrees that any suit, action or other legal proceeding arising out of Section 12 or 13 hereof, including without limitation, any action commenced by the Company for preliminary and permanent injunctive relief or other equitable relief, may be brought in the United States District Court for the Eastern District of -15- Pennsylvania, or if such court does not have jurisdiction or will not accept jurisdiction, in any court of general jurisdiction in Philadelphia County, Pennsylvania, (ii) consents to the non-exclusive jurisdiction of any such court in any such suit, action or proceeding, and (iii) waives any objection which Employee may have to the laying of venue of any such suit, action or proceeding in any such court. Employee also irrevocably and unconditionally consents to the service of any process, pleadings, notices or other papers in a manner permitted by the notice provisions of Section 17 hereof. (d) Employee agrees that he will provide, and that the Company may similarly provide, a copy of Sections 12 and 13 hereof to any business or enterprise (i) which he may directly or indirectly own, manage, operate, finance, join, control or participate in the ownership, management, operation, financing, control or control of, or (ii) with which he may be connected with as an officer, director, employee, partner, principal, agent, representative, consultant or otherwise, or in connection with which he may use or permit his name to be used; provided, however, that this provision shall not apply in respect of Section 3 hereof after expiration of the time period set forth therein. 15. Term of Agreement. The term of this Agreement shall be for two years from the date hereof and shall be automatically renewed for successive one-year periods unless the Company notifies the Employee in writing that this Agreement will not be renewed at least sixty days prior to the end of the current term; provided, however, that (i) after a Change of Control during the term of this Agreement, this Agreement shall remain in effect until all of the obligations of the parties hereunder are satisfied or have expired, and (ii) -16- this Agreement shall terminate if, prior to a Change of Control, the employment of the Employee with the Company or any of its Subsidiaries, as the case may be, shall terminate for any reason, or the Employee shall cease to be an Employee. 16. Successor Company. The Company shall require any successor or successors (whether direct or indirect, by purchase, merger, consolidation or otherwise) to all or substantially all of the business and/or assets of the Company, by agreement in form and substance satisfactory to the Employee, to acknowledge expressly that this Agreement is binding upon and enforceable against the Company in accordance with the terms hereof, and to become jointly and severally obligated with the Company to perform this Agreement in the same manner and to the same extent that the Company would be required to perform if no such succession or successions had taken place. Failure of the Company to obtain such agreement prior to the effectiveness of any such succession shall be a breach of this Agreement. As used in this Agreement, the Company shall mean the Company as hereinbefore defined and any such successor or successors to its business and/or assets, jointly and severally. 17. Notice. All notices and other communications required or permitted hereunder or necessary or convenient in connection herewith shall be in writing and shall be delivered personally or mailed by registered or certified mail, return receipt requested, or by overnight express courier service, as follows: -17- If to the Company, to: Maritrans General Partner Inc. 2600 One Logan Square Philadelphia, PA 19103 Attention: Corporate Secretary If to the Employee, to: Richard T. McCreary 109 Maple Ridge Way Covington, LA 70433 or to such other names or addresses as the Company or the Employee, as the case may be, shall designate by notice to the other party hereto in the manner specified in this Section; provided, however, that if no such notice is given by the Company following a Change of Control, notice at the last address of the Company or to any successor pursuant to Section 16 hereof shall be deemed sufficient for the purposes hereof. Any such notice shall be deemed delivered and effective when received in the case of personal delivery, five days after deposit, postage prepaid, with the U.S. Postal Service in the case of registered or certified mail, or on the next business day in the case of overnight express courier service. 18. Governing Law. This Agreement shall be governed by and interpreted under the laws of the Commonwealth of Pennsylvania without giving effect to any conflict of laws provisions. 19. Contents of Agreement, Amendment and Assignment. (a) This Agreement supersedes all prior agreements, sets forth the entire understanding between the parties hereto with respect to the subject -18- matter hereof and cannot be changed, modified, extended or terminated except upon written amendment executed by the Employee and approved by the Board and executed on the Company's behalf by a duly authorized officer. The provisions of this Agreement may provide for payments to the Employee under certain compensation or bonus plans under circumstances where such plans would not provide for payment thereof. It is the specific intention of the parties that the provisions of this Agreement shall supersede any provisions to the contrary in such plans, and such plans shall be deemed to have been amended to correspond with this Agreement without further action by the Company or the Board. (b) Nothing in this Agreement shall be construed as giving the Employee any right to be retained in the employ of the Company. (c) All of the terms and provisions of this Agreement shall be binding upon and inure to the benefit of and be enforceable by the respective heirs, representatives, successors and assigns of the parties hereto, except that the duties and responsibilities of the Employee and the Company hereunder shall not be assignable in whole or in part by the Company. 20. Severability. If any provision of this Agreement or application thereof to anyone or under any circumstances shall be determined to be invalid or unenforceable, such invalidity or unenforceability shall not affect any other provisions or applications of this Agreement which can be given effect without the invalid or unenforceable provision or application. -19- 21. Remedies Cumulative; No Waiver. No right conferred upon the Employee by this Agreement is intended to be exclusive of any other right or remedy, and each and every such right or remedy shall be cumulative and shall be in addition to any other right or remedy given hereunder or now or hereafter existing at law or in equity. No delay or omission by the Employee in exercising any right, remedy or power hereunder or existing at law or in equity shall be construed as a waiver thereof, including, without limitation, any delay by the Employee in delivering a Notice of Termination pursuant to Section 2 hereof after an event has occurred which would, if the Employee had resigned, have constituted a Termination following a Change of Control pursuant to Section 1(l)(ii) of this Agreement. 22. Miscellaneous. All section headings are for convenience only. This Agreement may be executed in several counterparts, each of which is an original. It shall not be necessary in making proof of this Agreement or any counterpart hereof to produce or account for any of the other counterparts. IN WITNESS WHEREOF, the undersigned, intending to be legally bound, have executed this Agreement as of the date first above written. Attest: MARITRANS GENERAL PARTNER INC. [Seal] /s/ John C. Newcomb By /s/ Walter T. Bromfield - --------------------- --------------------------- Secretary Treasurer /s/ Cheryl Estevez /s/ Richard T. McCreary - --------------------- --------------------------- Witness Richard T. McCreary -20- EX-11.1 5 COMPUTATIONS OF EARNINGS EXHIBIT 11.1 MARITRANS INC. COMPUTATION OF EARNINGS PER COMMON SHARE YEARS ENDED DECEMBER 31*
1995 1994 ------------ ------------ Primary: Income: Net income ................................ $ 4,981,000 $ 6,532,000 =========== =========== Shares: Weighted average number of common shares outstanding ............................ 12,150,380 12,524,861 =========== =========== Primary income per common share ..................... $ .4099 $ .5215 =========== =========== Assuming full dilution: Income: Net income ................................ $ 4,981,000 $ 6,532,000 =========== =========== Shares: Weighted average number of common shares outstanding ............................ 12,150,380 12,524,861 Assuming exercise of options reduced by the number of shares which could have been purchased with the proceeds from the exercise of such options ............... 118,890 80,842 ----------- ----------- Weighted average number of common shares outstanding as adjusted ................ 12,269,270 12,605,703 =========== =========== Net income per common share Fully diluted income per common share ............... $ .4060# $ .5182# =========== ===========
- ------ * See notes 1 and 4 of the notes to the consolidated financial statements. # This calculation is submitted in accordance with Regulation S-K item 601(b)(11) although not required by footnote 2 to paragraph 14 of APB Opinion No. 15 because it results in dilution of less than 3 percent. EX-21.1 6 SUBSIDIARIES Exhibit 21.1 MARITRANS INC. SUBSIDIARIES OF MARITRANS INC. As of December 31, 1995 Direct and indirect subsidiaries of Maritrans Inc. are: Maritrans Operating Partners L.P. Maritrans General Partner Inc. Maritrans Holdings Inc. Maritrans Distribution Services Inc. Maritrans Barge Co. Maritrans Ocean Transport Inc. Response Members Inc. Maritrans Capital Corp. Response Services Inc. CCF Acquisition Corp. Maritank Philadelphia Inc. Inter-Cities Navigation (Texas) Corp. Maritank Maryland Inc. Maritank Pennsauken Inc. Maritank Virginia Inc. Interstate Towing (Texas) Co. Maritank Inc. Maritank Tampa Inc. Maritrans Eastern Inc. Maritrans Inland Inc. Maritrans Gulf Inc. EX-27 7 FINANCIAL DATA SCHEDULE
5 0000810113 MARITRANS, INC. 1,000 YEAR DEC-31-1995 JAN-01-1995 DEC-31-1995 31,033 7,544 12,722 457 4,586 66,060 284,161 106,109 251,961 29,926 104,337 0 0 126 79,749 251,961 0 124,527 0 110,003 0 0 9,454 8,120 3,139 4,981 0 0 0 4,981 .41 .41
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