U.S. Shipping Partners L.P. 10-K 2008
(Amendment No. 1)
x ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d)
For the fiscal year ended December 31, 2007
o TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d)
For the transition period from ______ to _____
Commission file number 001-32326
SHIPPING PARTNERS L.P.
Securities registered pursuant to Section 12 (g) of the Act: None
Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes o No x
Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act. Yes o No 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 filing requirements for the past 90 days. Yes x No o
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 registrants 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 is a large accelerated filer, an accelerated filer, a non-accelerated filer or a smaller reporting company. See definitions of large accelerated filer accelerated filer and smaller reporting company in Rule 12b-2 of the Exchange Act. (Check one):
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act). Yes o No x
The aggregate market value of the registrants common units held by non-affiliates as of June 30, 2007, based on the reported closing price of such units on the New York Stock Exchange on such date, was approximately $225,622,000. The number of the registrants common units outstanding as of March 7, 2008 was 11,341,548 (including 8,000 restricted common units). At that date, 6,899,968 subordinated units were outstanding.
This amendment to U.S. Shipping Partners L.P.s (the Partnership) 2007 Annual Report on Form 10-K filed with the Securities and Exchange Commission on March 14, 2008 (the 10-K), is made to include the disclosures required under Part III, Item 11, Executive Compensation. This amendment consists solely of the preceding cover page, this explanatory note, the information required by Item 11 of Form 10-K, a signature page and certifications required to be filed as exhibits hereto. In accordance with Rule 12b-15 promulgated under the Securities Exchange Act of 1934, the complete text of Item 15, as amended, is included herein.
Item 11. Executive Compensation
Compensation Discussion and Analysis
As is commonly the case for publicly-traded limited partnerships, we and our subsidiaries do not have any employees. We are managed by our general partner. Our executive officers are also the executive officers of our general partner and are employees of our general partner. Messrs. Gridley and Miller, our chairman and chief executive officer and our vice presidentchartering, respectively, devote a majority of their time to managing our business affairs and those of the joint venture we formed to construct up to nine petroleum tankers (the Joint Venture). Our remaining officers spend all of their business time managing our business affairs and those of the Joint Venture.
In this compensation discussion and analysis, we discuss our compensation objectives, our decisions and the rational behind these decisions relating to 2007 compensation for our executive officers.
Objectives of Our Compensation Program
Our primary business objective is to provide stability and growth in our cash distributions per unit over time. We intend to accomplish this objective by executing the following business strategies:
For additional information regarding our business strategies, please see Item 1. BusinessBusiness Strategies.
The objective of our compensation program is to compensate executive officers in a manner that: (i) links compensation to the achievement of our business and strategic goals; (ii) aligns their interests with those of our unitholders; (iii) recognizes individual contributions; and (iv) attracts, motivates and retains highly-talented executives.
What our Compensation Program is Designed to Reward
Our compensation program is designed to reward performance that contributes to the achievement of our business objective and business strategies on both a short-term and long-term basis. In addition, we reward qualities that we believe help achieve our business objective and business strategies such as teamwork, individual performance in light of general economic and industry specific conditions, the ability to manage our existing vessels, the ability to address the OPA 90 phase out requirements and level of responsibility. In designing our executive compensation program, we have recognized that our executives have a much greater portion of their overall compensation at-risk than do our other employees; consequently, we have tried to establish the at-risk portions of our executives total compensation at levels that recognize their much increased level of responsibility and their ability to influence business results.
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Our compensation program is comprised of four elements:
The relative proportion of total compensation paid or awarded to our executive officers for each individual component of compensation (salary, annual bonuses and equity-linked awards) varies for each executive officer based on the executives level in the organization. The level correlates with the executives ability to impact business results through the executives performance and leadership role. Our chairman and chief executive officer, president and chief operating officer, vice president-chartering and vice president-chief financial officer have a greater impact on achievement of the business strategy and overall business performance. Therefore, a higher proportion of their total compensation may be through annual bonuses and equity-linked awards, including managements incentive interest in our general partner.
The compensation committee of the board of directors of our general partner oversees our compensation program. The compensation committee periodically compares our executive compensation components with market information. The purpose of this comparison is to ensure that our total compensation package operates effectively, remains both reasonable and competitive within our industry and is generally comparable to the compensation offered by companies of similar size and scope as us. The compensation committee also keeps abreast of current trends, developments and emerging issues in executive compensation and, if appropriate, will obtain advice and assistance from outside compensation advisors.
Components of Compensation
Base Salary. Our policy is to position each executives base salary at levels that are comparable to salaries provided to other executives in our industry, with consideration for the industrys standards, the size and scope of our operations, individual performance factors and the scope of an individuals responsibilities. We consider these factors subjectively in the aggregate and none of the factors is accorded a specific weight, and we are not precluded from considering other factors as we consider relevant. Although we had the assistance of an independent consultant in setting base salaries, we did not engage in any benchmarking of these salaries against those of other companies, as we do not believe there is another company that is directly comparable with us.
Based on the advice of the independent consultant engaged by the committee and our desire to have a larger portion of 2007 compensation be in the form of incentive compensation, the compensation committee determined to keep 2007 base salary at the 2006 levels. On August 22, 2007 in connection with Albert Bergeron assuming the additional duties of Chief Administrative Officer, his salary was increased from $261,000 per year to $310,000 per year. The compensation committee has engaged an independent consultant to advise it with respect to establishing base salaries for 2008.
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Annual Bonuses. In connection with our initial public offering in 2004, our general partner adopted the US Shipping General Partner LLC Annual Incentive Compensation Plan. The annual incentive plan is designed to enhance the performance of our key employees by rewarding them with cash awards for achieving annual financial and operational performance objectives. The compensation committee in its discretion may determine individual participants and payments, if any, for each fiscal year. A participants designated level of participation, or target bonus, will be determined under criteria established or approved by the compensation committee for that fiscal year or designated performance period. Levels of participation may vary according to a participants position and the relative impact such participant can have on our and/or our affiliates operations. The amount of target bonus a participant may receive for any fiscal year, if any, will depend upon the performance level achieved for that fiscal year. Awards typically will be determined after the end of the fiscal year or designated performance period. Awards will be paid in cash annually, unless otherwise determined by the compensation committee. The compensation committee will have the discretion to reduce (but not to increase) some or all of the amount of any award that otherwise would be payable by reason of the satisfaction of the applicable performance targets; provided, however, that the exercise of such discretion with respect to one participant may not be used to increase the amount of any award otherwise payable to another participant. The termination of a participants employment for any reason prior to payout of an award under the annual incentive plan will result in the participants forfeiture of any such award, unless and to the extent waived by the compensation committee. The board of directors of our general partner may amend or terminate the annual incentive plan at any time. We will reimburse our general partner for payments and costs incurred under the plan.
As a result of the significant changes in our business resulting from our increased chemical fleet and our OPA 90 compliance strategy, it has been difficult to identify stable benchmarks from which to set targets and issue awards under the Annual Incentive Compensation Plan. Therefore, for 2004, 2005 and 2006 we awarded cash bonuses at the end of the year based upon the compensation committees judgment of the success achieved by us, and managements role in such success. In 2004, bonuses were awarded in connection with the acquisition of the Charleston, which substantially increased the capacity of our chemical fleet, as well as the consummation of our public offering, which provided us with needed flexibility to finance our operations and make acquisitions. In 2005, bonuses were awarded at a lower level than in 2004 and were based on our financial and operational performance. In 2006, bonuses were awarded based on management addressing our OPA 90 phase out requirements by entering into the Joint Venture to construct up to nine petroleum tankers and entering into construction contracts for four additional ATBs as well as obtaining the financing for the construction of the first three of these vessels. However, the committee, recognizing the effect of the delay and increased cost in constructing the first ATB, reduced the bonuses that otherwise would have been paid in 2006 and, to provide additional incentive to management, created an additional bonus to be paid if our first ATB was delivered and placed in operation by May 15, 2007. Because the first ATB was not placed into operation until July 2007, this additional bonus was not paid.
The compensation committee established performance goals for 2007 on which bonuses were to be based under the US Shipping General Partner LLC Annual Incentive Compensation Plan, subject to the overall discretion of the committee to adjust the bonuses based on the Partnerships performance and extenuating circumstances, if any. These performance goals were established with the assistance of Cavanagh & Associates, who was retained by the compensation committee to advise it. The performance goals included both overall organizational goals and individual goals tailored to each executives duties and responsibilities. Sixty percent of such bonuses were based upon organizational goals, specifically Distributable Cash Flow target levels set by the compensation committee. Distributable Cash Flow is a non-GAAP financial measure which determines how much cash we are able to distribute to our unitholders. If the targeted goals for an executive were achieved, he would receive a bonus equal to 75% of his base salary for 2007. The maximum amounts payable to each executive under the bonus plan for 2007 was 100% of base salary. If the targeted goals for an executive were not achieved, but certain thresholds were met, the executive could receive a bonus at the discretion of the compensation committee. We exceeded the maximum Distributable Cash Flow goals and the executives met varying portions of their personal goals. Based solely upon the formulas, and before our exercise of discretion, the bonus computation for each of Messrs. Gridley, Gehegan, Miller, Bergeron and Ziobro would have been $392,000, $342,000, $251,000, $265,000 and $81,000, respectively. However, in light of the liquidity issues facing us and our decision not to pay a distribution on the subordinated units for the fourth quarter of 2007, the compensation committee determined that it was appropriate to reduce the bonuses of Messrs. Gridley, Gehegan and Bergeron to $96,000, $92,000 and $114,000, respectively, which amounts were the same as the cash bonuses paid to these individuals for 2006.
The compensation committee has determined that in light of the challenges facing the Partnership in 2008, it would not be feasible to establish meaningful quantitative goals. Accordingly, bonuses for 2008 will be determined by the committee based upon the Partnerships performance in 2008 and its financial condition and prospects at the time of determination.
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Long-term Incentive Plan. In connection with our initial public offering, our general partner adopted the U.S. Shipping Partners L.P. Long-Term Incentive Plan for employees, consultants and directors of US Shipping General Partner LLC and employees and consultants of its affiliates who perform services for US Shipping General Partner LLC and its subsidiaries. The long-term incentive plan provides for: restricted units, phantom units, unit options, unit appreciation rights and other unit-based awards. The long-term incentive plan currently permits the issuance of an aggregate of 689,997 common units. The plan is administered by the compensation committee of the board of directors of our general partner.
The general partners board of directors in its discretion may terminate, suspend or discontinue the long-term incentive plan at any time with respect to any award that has not yet been granted. The board of directors also has the right to alter or amend the long-term incentive plan or any part of the plan from time to time, including increasing the number of units that may be granted, subject to the requirements of the exchange upon which the common units are listed at that time. However, no change in any outstanding grant may be made that would materially reduce the benefits of the participant without the consent of the participant.
Following is a brief description of the types of awards available under our long-term incentive plan.
Restricted Units and Phantom Units
A restricted unit is a common unit subject to forfeiture prior to the vesting of the award. A phantom unit is a notional unit that entitles the grantee to receive a common unit upon the vesting of the phantom unit or, in the discretion of the compensation committee, cash equivalent to the value of a common unit. The compensation committee may determine to make grants under the plan of restricted units and phantom units to employees, consultants and directors containing such terms as the compensation committee shall determine. The compensation committee will determine the period over which restricted units and phantom units granted to employees, consultants and directors will vest. The committee may base its determination upon the achievement of specified financial objectives.
If a grantees employment, service relationship or membership on the board of directors terminates for any reason, the grantees restricted units and phantom units will be automatically forfeited unless, and to the extent, the compensation committee provides otherwise. Common units to be delivered in connection with the grant of restricted units or upon the vesting of phantom units may be common units acquired by our general partner on the open market, common units already owned by our general partner, common units acquired by our general partner directly from us or any other person or any combination of the foregoing. Our general partner will be entitled to reimbursement by us for the cost incurred in acquiring common units. Thus, the cost of the restricted units and delivery of common units upon the vesting of phantom units will be borne by us. If we issue new common units in connection with the grant of restricted units or upon vesting of the phantom units, the total number of common units outstanding will increase. The compensation committee, in its discretion, may grant tandem distribution rights with respect to restricted units and tandem distribution equivalent rights with respect to phantom units.
We intend the issuance of restricted units and common units upon the vesting of the phantom units under the plan to serve as a means of incentive compensation for performance and not primarily as an opportunity to participate in the equity appreciation of the common units. Therefore, at this time it is not contemplated that plan participants will pay any consideration for restricted units or common units they receive, and at this time we do not contemplate that we will receive any remuneration for the restricted units and common units.
Unit Options, Unit Appreciation Rights and Other Unit-Based Awards
The long-term incentive plan permits the grant of options covering common units, the grant of unit appreciation rights and other awards based on common units. A unit appreciation right is an award that, upon exercise, entitles the participant to receive the excess of the fair market value of a unit on the exercise date over the exercise price established for the unit appreciation right. Such excess may be paid in common units, cash or a combination thereof, as determined by the compensation committee in its discretion. Other unit-based awards may be denominated or payable in, valued in whole or in part by reference to, or otherwise based on, or related to, common units or factors that may influence the value of common units. Examples of such awards include convertible or exchangeable debt securities, other rights convertible or exchangeable into common units, purchase rights for common units, awards with value and payment contingent upon our performance or one or more of our business units or any other factors designated by the compensation committee, and awards valued by reference to the value of securities of or the performance of specified affiliates or other business units. Cash awards, as an element of or supplement to any other award under the long term incentive plan, may also be granted. The compensation committee will be able to make grants of unit options, unit appreciation rights and other unit-based awards under the plan to employees, consultants and directors containing such terms as the committee shall determine. Unit options and unit appreciation rights may have an exercise price that is equal to or greater than the fair market value of the common units on the date of grant. In general, unit options and unit appreciation rights granted will become exercisable over a period determined by the compensation committee.
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Upon exercise of a unit option (or a unit appreciation right settled in common units) or settlement of an other unit-based award in common units, our general partner will acquire common units on the open market or directly from us or any other person or use common units already owned by our general partner, or any combination of the foregoing. Our general partner will be entitled to reimbursement by us for the difference between the cost incurred by our general partner in acquiring these common units and the proceeds received from a participant at the time of exercise. Thus, the cost of the unit options (or a unit appreciation right settled in common units) in connection with the settlement of an other unit-based award will be borne by us. If we issue new common units upon exercise of the unit options (or a unit appreciation right settled in common units) or settlement of an other unit-based award in common units, the total number of common units outstanding will increase, and our general partner will pay us the proceeds it receives from an optionee upon exercise of a unit option in connection with the settlement of an other unit-based award. The availability of unit options and unit appreciation rights is intended to furnish additional compensation to employees, consultants and directors and to align their economic interests with those of common unitholders.
To date, the compensation committee has not granted any awards under the long-term incentive plan to management, although each non-employee director who is not an employee of Sterling Investment Partners was awarded 2,000 restricted units in April 2007 and 3,065 units in April 2008 as partial director compensation. See Director Compensation below for more information on these grants.
Management Incentive Interest in Our General Partner. In connection with our initial public offering, the executive officers of our general partner were granted the right to receive in aggregate 10% (subsequently reduced to 8.2% when Mr. Colletti ceased to be an executive officer) of the distributions received by our general partner attributable to (i) the incentive distribution rights and (ii) that portion of its 2% general partner interest attributable to distributions on our common units and subordinated units in excess of the minimum quarterly distribution of $0.45. The executive officers will only receive these amounts upon conversion of the class A subordinated units into common units, but upon such conversion they will also be entitled to receive a catch up payment equal to the cumulative amount they would have received had such payments commenced in November 2004. The executive officers will receive a pro rata share of such amounts to the extent that less than all the class A subordinated units convert into common units. Through December 31, 2007, no amounts had been earned under this plan. Please see Item 5. Market For Registrants Common Equity, Related Stockholder Matters And Issuer Purchases Of Equity SecuritiesCash Distribution Policy for a more detailed discussion of the incentive distribution rights and conditions relating to the conversion of the class A subordinated units.
Benefits. We provide benefits, or perquisites, that we believe are standard in industry. These benefits consist of a group medical and dental insurance program for employees and their qualified dependents, group life insurance for employees and their spouses, accidental death and dismemberment and long-term disability coverage for employees and a 401(k) employee savings plan. Our executive officers do not participate in a supplemental employment retirement benefit of any kind.
The 401(k) plan permits eligible employees to make voluntary, pre-tax contributions to the plan up to a specified percentage of compensation, subject to applicable tax limitations. Our general partner may make a discretionary matching contribution to the plan for each eligible employee equal to 5% of an employees pre-tax annual compensation, subject to applicable tax limitations. Eligible employees who elect to participate in the plan are generally vested in any matching contribution after commencement of their employment with us. The plan is intended to be tax-qualified under Section 401(a) of the Internal Revenue Code so that contributions to the plan, and income earned on plan contributions, are not taxable to employees until withdrawn from the plan, and so that contributions, if any, will be deductible when made. We made the maximum matching contributions to the plan for the years ended December 31, 2005, 2006 and 2007.
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How Elements of Our Compensation Program are Related to Each Other
We view the various components of compensation as related but distinct and emphasize pay for performance with a significant portion of total compensation reflecting a risk aspect tied to long- and short-term financial and strategic goals. Our compensation philosophy is to foster entrepreneurship at all levels of the organization by making long-term equity-based incentives, in particular through participation in the growth of our quarterly distributions, a significant component of executive compensation. We determine the appropriate level for each compensation component based in part, but not exclusively, on our view of internal equity and consistency, and other considerations we deem relevant, such as rewarding extraordinary performance. Our compensation committee has not adopted any formal or informal policies or guidelines for allocating compensation between long-term and currently paid out compensation, between cash and non-cash compensation, or among different forms of non-cash compensation.
Other Compensation Related Matters
Equity Ownership. As of December 31, 2007, Messrs. Gridley, Gehegan, Miller and Bergeron owned, directly or indirectly through their ownership of interests in United States Shipping Master LLC, substantial equity in the Partnership. Although we encourage our executive officers to retain ownership in the Partnership, we do not have a policy requiring maintenance of a specified equity ownership level. Our policies prohibit our executive officers from using puts, calls or options to hedge the economic risk of their ownership. In the aggregate, as of December 31, 2007, our executive officers beneficially owned an aggregate of 1,545,572 limited partner units, or approximately 8.5% of our total outstanding units, including the 1,454,176 class B subordinated units owned by United States Shipping Master which are attributable to our executive officers, as well as an aggregate approximately 21.1% indirect ownership interest in the general partner and an aggregate 8.2% interest in the distributions received by our general partner attributable to (i) the incentive distribution rights and (ii) that portion of its 2% general partner interest attributable to distributions on our common units and subordinated units in excess of the minimum quarterly distribution of $0.45. Based on their current ownership and the minimum annual distribution of $1.80 per unit, our executive officers would receive an aggregate of approximately $0.16 million in annual distributions on the common units and $2.76 million in annual distributions on the subordinated and general partner units attributable to them. As a result of our not paying a distribution on the subordinated and general partners units for the fourth quarter of 2007, the annual distribution to these individuals in respect of the subordinated and general partner units attributable to them, aggregate distributions to these individuals has decreased by approximately $0.69 million per quarter ($2.76 million on an annual basis).
Recovery of Prior Awards. Except as provided by applicable laws and regulations, the Partnership does not have a policy with respect to adjustment or recovery of awards or payments if relevant performance measures upon which previous awards were based are restated or otherwise adjusted in a manner that would reduce the size of such award or payment.
Section 162(m). Under Section 162(m) of the Internal Revenue Code, a limitation was placed on tax deductions of any publicly-held corporation for individual compensation to certain executives of such corporation exceeding $1,000,000 in any taxable year, unless the compensation is performance-based. With respect to the deduction limitations under Section 162(m) of the Code, we are a limited partnership and therefore do not meet the definition of a corporation under Section 162(m). Nonetheless, the salaries and bonus compensation for each of our executive officers is substantially less than the Section 162(m) threshold of $1,000,000.
Section 409A. If an executive is entitled to nonqualified deferred compensation benefits that are subject to Section 409A, and such benefits do not comply with Section 409A, then the benefits are taxable in the first year they are not subject to a substantial risk of forfeiture. In such case, the service provider is subject to regular federal income tax, interest and an additional federal income tax of 20% of the benefit includible in income. Although our long-term incentive plan provides for the grant of unit options, Section 409A and authoritative guidance thereunder provides that unit options can generally only be granted to employees of the entity granting the option and certain affiliates without being required to comply with Section 409A as nonqualified deferred compensation.
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Compensation Committee Report
We have reviewed and discussed with management the compensation discussion and analysis required by Item 402(b) of Regulation S-K. Based on the review and discussion referred to above, we recommend to the board of directors that the compensation discussion and analysis be included in this Form 10-K.
M. Kearns, Jr. (Chairman)
Compensation Committee Interlocks and Insider Participation
None of our executive officers serves as a member of the board of directors or compensation committee of any entity that has one or more of its executive officers serving as a member of our general partners board of directors or compensation committee.
None of the members of the compensation committee have served as an officer or employee of us or our general partner. Furthermore, except for compensation arrangements discussed in this Form 10-K/A, we have not participated in any contracts, loans, fees, awards or financial interests, direct or indirect, with any committee member, nor are we aware of any means, directly or indirectly, by which a committee member could receive a material benefit from us.
Summary Compensation Table
The following table sets forth certain information with respect to compensation of our named executive officers:
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In connection with our initial public offering, USS Vessel Management, LLC, a subsidiary of our general partner, entered into amended and restated employment agreements with each of Messrs. Gridley, Gehegan, Colletti, Miller and Bergeron. In 2007 USS Vessel Management entered into an employment agreement with Mr. Ziobro in connection with his joining us as Vice PresidentNew Construction, and in 2008 entered into an employment agreement with Anthony J. Guzzo in connection with his appointment as Vice PresidentChief Accounting Officer. Mr. Colletti left our employ in December 2007. Each of Messrs. Gehegan, Bergeron, Ziobro and Guzzo is required to devote all of his business time to managing our business (including the business of our Joint Venture). Each of Messrs. Gridley and Miller are required to devote a majority of his time to managing our business (including the business of our Joint Venture).
Under their respective employment agreements, Messrs. Gridley, Gehegan, Miller, Bergeron, Ziobro and Guzzo each is currently entitled to receive annual salaries of $417,000, $389,000, $257,000, $310,000, $230,000 and $190,000, respectively. Each of the employment agreements provides for bonuses to be paid at the discretion of the board of directors. In addition, Mr. Ziobro is entitled to be paid the cash equivalent of the 975 shares of Overseas Shipholding Group, Inc. (OSG) he forfeited as a result of terminating his employment with OSG. He will receive, on each date that the shares would have vested and forfeiture obligation would have lapsed with respect to the forfeited OSG shares, an amount equal to the product determined by multiplying (i) the number of OSG shares which became vested on such date by (ii) the closing price of OSG stock on the date Mr. Ziobro commenced employment with us. The cash payments due to Mr. Ziobro under this arrangement are $23,036, $23,036, $17,045 and $7,940 due in January 2008, 2009, 2010 and 2011, respectively.
The employment agreements for each of Messrs. Gridley, Gehegan, Miller and Bergeron expire in October 2008; the employment agreement for Mr. Ziobro expires in April 2010; and the employment agreement for Mr. Guzzo expires in April 2009. Each of the employment agreements will thereafter automatically renew for successive one-year terms unless either party to such employment agreement furnishes the other 60 days prior written notice of its intent not to renew the agreement.
In the event we terminate the employment of any of Messrs. Gridley, Gehegan, Miller, Bergeron, Ziobro or Guzzo without justifiable cause, as defined in the employment agreement, or we elect not to renew the employment agreement at the end of its term, or if any of them terminate their employment for good reason, as defined in the employment agreement, he will be entitled to:
If during negotiations regarding or within two years following a change in control of our general partner or U.S. Shipping Partners L.P. the employment of any of Messrs. Gridley, Gehegan, Miller, Bergeron, Ziobro or Guzzo is terminated without justifiable cause, as defined in the employment agreement, or we elect not to renew the employment agreement at the end of its term, or if any of them terminate their employment for good reason, as defined in the employment agreement, we will pay severance equal to three times (two times in the case of Messrs. Ziobro and Guzzo) his then annual salary and target bonus. See Potential Payments Upon Termination or Change in Control below.
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Justifiable cause refers to the occurrence of one or more of the following specified events:
Good reason means
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Each of the employment agreements referred to above includes a noncompetition provision applicable:
However, if we fail to pay severance or expense amounts to the executive as required by the employment agreement, the noncompetition provision will no longer apply.
The employment agreements of Messrs. Gridley and Miller provide that their current engagement in the transportation of chemical products in two tank barges of less than 20,000 deadweight tons, other than transportation of petroleum or petroleum products, is not a violation of the non-compete provisions of the employment agreement as long as either (1) he engages in such business on a continuous basis or (2) if he does not engage in such business on a continuous basis, we are not engaged in such business at the time he decides to reenter such business. Pursuant to these provisions, Messrs. Gridley and Miller currently own and operate two Jones Act barges that transport caustic soda and calcium chloride under contracts with third parties. In addition, Messrs. Gridley and Miller are permitted under their employment agreements to acquire and operate additional tank barges of less than 15,000 deadweight tons in the transportation of chemical products, other than transportation of petroleum or petroleum products, provided that if at any time more than 50% of the income to be generated by such barge in a six-month period is expected to be qualifying income, then they must offer us the opportunity to acquire such tank barge.
Grants of Plan-Based Awards Table
This table has been omitted because no plan-based awards were made in 2007. See Compensation Discussion and Analysis.
Outstanding Equity Awards at Fiscal Year-End
This table has been omitted because there were no outstanding equity awards at December 31, 2007.
Option Exercises and Stock Vested Table
This table has been omitted because there were no options exercised or common units vested during 2007.
The general partner of the Partnership sponsors a 401(k) plan that is available to all U.S. employees, but does not maintain a pension or defined benefit program. The Partnership does not have a nonqualified deferred compensation plan or program for its officers or employees.
Potential Payments upon Termination or Change-in-Control
The following table sets forth potential amounts payable to our current executive officers upon termination of employment under various circumstances, and as if terminated on December 31, 2007.
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Compensation of Directors
Each of Messrs. Ganz, Kearns, Luterman and OKelley receives a quarterly cash retainer fee of $12,500 in consideration of their services as director of our general partner. In addition, for each telephonic board call that Messrs. Ganz, Kearns, Luterman and OKelley participate in they receive a cash fee of $1,000. Furthermore, Messrs. Kearns and Luterman, members of the audit committee, receive a $5,000 annual retainer, and Mr. OKelley, as chairman of the audit committee, receives a $10,000 annual retainer. All directors of our general partner are reimbursed for their out-of-pocket expenses in connection with their services on the board. Our officers or employees who also serve as directors do not receive additional compensation, and Messrs. Macey and Newhouse began to receive the cash annual retainer fee for service as directors beginning in January 2008 and the per meeting fee beginning in April 2008. Also, beginning in 2008 Mr. Kearns will receive a $12,000 annual retainer for serving as lead outside director. In addition, in 2007 and 2008 we issued common units to each of Messrs. Ganz, Kearns, Luterman and OKelley having a value of $37,940 in 2007 and $36,657 in 2008. The following table sets forth the compensation paid to our non-employee directors during the year ended December 31, 2007.
On April 1, 2008, we issued to each of Messrs. Ganz, Kearns, Luterman and OKelley 3,065 common units under our Long-Term Incentive Plan. These common units were immediately vested.
Reimbursement of Expenses of Our General Partner and its Affiliates
We do not pay our general partner a management fee, but we do reimburse our general partner for all expenses incurred on our behalf, including the costs of employee, officer and director compensation and benefits, as well as all other expenses necessary or appropriate to the conduct of our business. Our partnership agreement provides that our general partner will determine the expenses that are allocable to us in any reasonable manner determined by our general partner in its sole discretion. See Item 13. Certain Relationships and Related Transactions, and Director Independence Distributions and Payments to Our General Partner and Its Affiliates.
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ITEM 15. EXHIBITS, FINANCIAL STATEMENT SCHEDULES
(a) (1) Financial Statements
See Index to Financial Statements set forth on page F-1.
(a) (2) Financial Statement Schedules
(a) (3) Exhibits
All exhibits, other than those designated with two asterisks, have been previously filed with the Securities and Exchange Commission, as indicated.
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Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, as amended, the Registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
Date: April 29, 2008
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