MORAN TRANSPORTATION CO, 10-K, 1999-03-26

MORAN TRANSPORTATION CO
10-K, 1999-03-26
DEEP SEA FOREIGN TRANSPORTATION OF FREIGHT

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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C 20549
------------

FORM 10-K

[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, 1998

[ ] 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 NO. 33-82624

MORAN TRANSPORTATION COMPANY
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)

DELAWARE 06-1399280
(STATE OR OTHER JURISDICTION OF (I.R.S. EMPLOYER
INCORPORATION OR ORGANIZATION) IDENTIFICATION NO.)

TWO GREENWICH PLAZA, GREENWICH, CT 06830
(ADDRESS OF PRINCIPAL EXECUTIVE OFFICES) (ZIP CODE)

REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE: (203) 625-7800

SECURITIES REGISTERED PURSUANT TO SECTION 12(B) OF THE ACT: NONE

SECURITIES REGISTERED PURSUANT TO SECTION 12(G) OF THE ACT: NONE

Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days.

Yes X No
--- ---

Indicated 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 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

As of March 26, 1999, all of the registrant's 44,600 issued and
outstanding shares of Common Stock, par value $.01 per share, were held by Moran
Enterprises Corporation.

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MORAN TRANSPORTATION COMPANY
INDEX TO REPORT ON FORM 10-K
FOR THE YEAR ENDED DECEMBER 31, 1998

Item Page
- ---- ----

PART I...................................................................... 3
1. Business......................................................... 3
2. Properties....................................................... 9
3. Legal Proceedings................................................ 12
4. Submission of Matters to a Vote of Security Holders.............. 12

PART II..................................................................... 12
5. Market For Registrant's Common Equity and Related
Stockholder Matters.............................................. 12
6. Selected Consolidated Financial Data............................. 13
7. Management's Discussion and Analysis of Financial
Condition and Results of Operations.............................. 14
8. Financial Statements ............................................ 21
9. Changes In and Disagreements With Accountants on
Accounting and Financial Disclosure.............................. 21

PART III.................................................................... 22
10. Executive Officers and Directors of the Registrant............... 22
11. Executive Compensation........................................... 24
12. Security Ownership of Certain Beneficial Owners
and Management................................................... 29
13. Certain Relationships and Related Transactions................... 29

PART IV..................................................................... 32
14. Exhibits, Financial Statement Schedules and Reports
on Form 8-K...................................................... 32

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PART I
PART I

ITEM 1. BUSINESS

GENERAL
Moran Transportation Company was incorporated on June 2, 1994. Moran
Transportation Company was formed by Lakes Shipping Company, Inc. ("Lakes
Shipping") and its principals, Paul R. Tregurtha and James R. Barker (who serve
as Chairman and Vice Chairman, respectively), together with members of Mr.
Barker's immediate family, certain officers of Lakes Shipping (collectively, the
"Lakes Group"), and certain members of senior management of Moran Towing
Corporation (the "Predecessor"). Moran Transportation Company acquired the
Predecessor on July 11, 1994 (the "Acquisition"). Except as otherwise indicated,
or where the context otherwise requires, the "Company" shall refer to Moran
Transportation Company, the Predecessor and/or each of its subsidiaries.

The Company is a leading provider of tug and marine transportation services on
the East and Gulf Coasts and in the U.S. coastwise trade (the "Jones Act"
trade). Operating a fleet of 57 tugs and 19 barges, the Company serves a diverse
customer base out of the ports of Portsmouth, New Hampshire; New York, New York;
Philadelphia, Pennsylvania; Baltimore, Maryland; Norfolk, Virginia;
Jacksonville, Florida; Miami, Florida; and Beaumont/Port Arthur, Texas. The
Company has relationships that span 30 or more years with many of its major
customers in the tug services and marine transportation businesses.

TUG SERVICES. The Company is a widely recognized leader in the tug services
industry and believes it has the greatest number of tugboats performing
ship docking and barge towing services along the East and Gulf Coasts of
the United States. The Company provides ship docking and undocking services
as well as harbor and coastwise towing for major domestic and international
bulk and container cargo shipping companies, cruise lines, car carriers,
barge transportation companies, oil companies, several municipalities, the
U.S. Navy, and the Company's own barge fleet. The Company believes that it
has a leading position in the ship docking business in each of its ports of
operations, other than in Miami, Florida, where the Company began
operations in February 1993.

MARINE TRANSPORTATION. The Company's barge fleet transports fuel oil and
refined petroleum products, coal, grain and other bulk cargoes in the Jones
Act and foreign trades. The Company's barges operate under term contracts
with utilities and on both a contract and spot market basis with oil
companies, refineries, commodity trading companies and other commercial
shippers.

RECENT DEVELOPMENTS
On October 30, 1998, the Company completed a combination (the "Combination")
with Turecamo Maritime, Inc., a Delaware corporation, and certain of its
affiliated entities (the "Turecamo Entities"). The Turecamo Entities operate 33
tugboats and seven barges along the East Coast of the United States. Pursuant to
the relevant agreements, the existing equityholders of the Company contributed
all of their shares of capital stock of the Company to Moran Enterprises
Corporation ("Moran Enterprises") in exchange for (i) newly-issued shares of
common stock of Moran Enterprises which represent a substantial majority (but
less than 80%) of the common stock of Moran Enterprises and (ii) newly-issued
shares of Moran Enterprises preferred stock. Simultaneously, the existing
stockholders of the Turecamo Entities contributed all of their shares of capital
stock of each of the Turecamo Entities to Moran Enterprises in exchange for (i)
newly-issued shares of common stock of Moran Enterprises, including certain
shares which vest if certain financial criteria are met, which represent a
minority interest in the common stock of Moran Enterprises, and (ii) an
aggregate cash amount of $45.0 million. As a result, Moran Enterprises became
the new parent of both the Company and the Turecamo Entities. The Company's
11-3/4% First Preferred Ship Mortgage Notes due 2004 (the "Notes") are not
guaranteed by Moran Enterprises or the Turecamo Entities.

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The Combination was financed through a $200 million syndicated Credit
Agreement among Moran Enterprises, certain participating financial
institutions and Fleet Bank, N.A., as administrative agent (the "New Senior
Credit Facility"). A portion of the New Senior Credit Facility has been used
(i) to finance the Combination and to pay related fees and expenses and (ii)
to repay existing debt of the Turecamo Entities. In addition, the Company
repaid a $3.5 million term loan from its cash reserves as part of the
transaction. See "Management Discussion and Analysis of Financial Condition
and Results of Operations - Liquidity and Capital Resources".

SALES AND MARKETING

TUG SERVICES. The general manager of each operating port has ongoing
marketing responsibilities for his port. The general managers are assisted
by sales personnel based in Greenwich, Connecticut. The Company also has
long-standing relationships with a network of independent foreign agents in
many of the major shipping centers of the world.

MARINE TRANSPORTATION. The Company has maintained long-term relationships
with key participants in the utility, energy and agricultural sectors, and
uses those contacts to develop business. New business opportunities for the
marine transportation business are also generated by the general managers
of the Company's operating subsidiaries or divisions. The Company has the
ability to quickly assemble a multi-disciplinary team to analyze new
business opportunities and prepare and submit proposals tailored to meet
customers' needs.

COMPETITION

TUG SERVICES. The tug services industry is highly competitive. The Company
competes with numerous competitors in the ports which its serves. Because
entry into most ports is unrestricted, additional competitors may enter the
Company's current markets in the future.

Management believes that participants in the tug services market compete on
the basis of price, service (including vessel availability), relationships,
reputation, quality of operations, the ability to meet stringent safety
requirements and operational flexibility.

MARINE TRANSPORTATION. The marine transportation industry is highly
competitive. The industry has become increasingly concentrated in recent
years as smaller and/or economically weaker companies have gone out of
business or have been acquired by larger competitors. The Company has a
number of competitors in each of its marine transportation markets that
operate U.S. flag barges, tankers and bulkers. Certain of these competitors
have substantially greater resources than the Company. However, the number
of vessels eligible to engage in Jones Act trade has declined over the past
several years.

Management believes that participants in the tank and dry bulk barge
business compete on the basis of price, service (including vessel
availability), relationships, reputation, quality of operations, the
ability to pass stringent safety audits and operational flexibility.
Further, in light of the potential liability of oil companies and other
shippers of petroleum products under the Oil Pollution Act of 1990 ("OPA
90") and analogous state laws, management believes that some shippers
select transporters in larger measure than in the past, on the basis of a
demonstrated record of safe operations. Therefore, the Company has
implemented a number of measures in order to maintain high quality
operations and has continued to stress its long-standing commitment to safe
transportation of petroleum products in its marketing efforts.

CUSTOMERS AND CONTRACTS

TUG SERVICES. The Company offers tug services to vessel owners, operators
and their agents. The Company prides itself on its long-standing customer
relationships, which in some cases date back to before World War II. The
majority of the Company's ship docking business is performed under
one-year,

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renewable contracts, with the remainder being on a spot basis. The Company
also has long and established relationships with many of its harbor and
coastwise towing customers. The Company's harbor and coastwise towing
business is performed both on a contract and on a spot market basis.

No single tug services customer accounted for more than 7% of the Company's
total consolidated revenues in 1998. Although many of the Company's tug
services customers have been customers of the Company for periods in excess
of 30 years and although most of the Company's tug services customers have
had at least a five-year relationship with the Company, there can be no
assurance that any individual contract or relationship will be renewed or
continued.

MARINE TRANSPORTATION. The Company's marine transportation business
operates both on a term contract basis and on a spot market basis. The
Company strives to maintain an appropriate mix of contract and spot
business, based on current market conditions. No single marine
transportation customer accounted for more than 7% of the Company's total
revenues in 1998.

INSURANCE

The Company's operations are subject to the hazards associated with operating
vessels and carrying large volumes of cargo in a marine environment. These
hazards include the risk of loss of, or damage to, the Company's vessels, damage
to property of third parties (including customers), loss or contamination of
cargo, personal injury to employees or third parties, and pollution and other
environmental damages. The Company maintains insurance coverage against these
hazards. Risk of loss of, or damage to, the Company's vessels is insured to
amounts that the Company believes represents the fair market values of such
vessels, subject to certain deductibles. Vessel operating liabilities, resulting
from such things as collision, cargo and environmental damage and personal
injury, are insured at levels believed to be adequate primarily through the
Company's participation in a protection and indemnity mutual insurance
association. However, because of the mutual nature of such insurance, the
Company is exposed to funding requirements and coverage shortfalls in the event
claims by the Company or other members exceed available funds and reinsurance.
See "Regulatory Matters-Environmental Matters - Oil Pollution Legislation."

The Company has entered into a Marine Insurance Additional Retention
Agreement (the "Insurance Agreement") with The Interlake Steamship Company,
Lakes Shipping and Mormac Marine Transport Inc. (collectively, the "Mormac
Group"). The Turecamo Entities joined the group for hull insurance, effective
with the Combination. Messrs. Tregurtha, Barker and Langlois are officers,
directors and/or direct or indirect shareholders of some or all of the
entities in the Mormac Group. The Company, the Mormac Group and now the
Turecamo Entities for hull insurance, have entered into the Insurance
Agreement in an effort to reduce insurance expense by obtaining lower
premiums through group purchases of insurance and through higher deductibles.
The Insurance Agreement also provides for allocation among the parties of any
risk arising out of the increases in insurance deductibles. Pursuant to the
Insurance Agreement, the Company, the Mormac Group and now the Turecamo
Entities, have agreed to share any increased insurance claims expense
required to be borne by a party as a result of insurance claims which exceed
historical deductibles but are less than the new, increased deductibles.
Allocations of any increased insurance claims expense is based upon the
historical claims experience (in excess of historical deductibles) for each
party to the agreement. In the current policy year, 75% of any additional
insurance claims expense attributable to the higher deductibles will be borne
by the Company and 25% of any such additional insurance claims expense will
be borne by the Mormac Group. The Company's broker is currently calculating
the split between the Company, the Mormac entities and the Turecamo Entities.
Amounts payable to the Company from members of the Mormac Group totaled
$541,000 at December 31, 1998. The Company believes that the terms of the
Insurance Agreement, which was prepared in consultation with an independent
insurance broker, are similar to those that would be obtained in an
arms'-length transaction.

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REGULATORY MATTERS

GENERAL. The Company's rates for transportation of bulk cargoes, which are
not published and are negotiated with its customers, are not subject to
government regulation. 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
under certain state and local laws. Tugboats and barges are required to
meet operational and safety standards currently established by the United
States Coast Guard. In addition, most of the Company's tugboats and all of
its barges meet construction and repair standards established by the
American Bureau of Shipping, a private vessel inspection organization. The
Company's seagoing supervisory personnel are licensed by the United States
Coast Guard. Seamen and tankermen are documented by the United States Coast
Guard. See also "Regulatory Matters-Occupational Health Regulations".

JONES ACT AND RELATED REGULATIONS. The Jones Act restricts marine
transportation between United States ports to vessels built and registered
in the United States and owned by United States citizens. The Jones Act
also 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. In addition, the United States Coast Guard
and American Bureau of Shipping maintain the most stringent regime of
vessel inspection in the world, which tends to result in higher regulatory
compliance costs for United States flag operators than for owners of
vessels registered under foreign flags. Because the Company transports
cargo between United States ports and engages in harbor work within United
States ports, most of its business depends upon the Jones Act remaining in
effect. Compliance with the requirements of the Jones Act is therefore very
important to the operations of the Company and the loss of Jones Act status
could have a significant adverse effect on the Company. In this regard,
stockholder agreements prohibit the transfer of Moran Enterprise's capital
stock to non-U.S. citizens. See "Certain Relationships and Related
Transactions." The Company also monitors the citizenship of its employees
and will take any remedial action necessary to insure compliance with Jones
Act requirements. There have been various on-going unsuccessful attempts in
the past by foreign governments and companies to gain access to the Jones
Act trade. These efforts have been consistently defeated by large margins
in the United States Congress. Management believes that continued efforts
will be made to gain access to such trade and if such efforts are
successful, there could be an adverse effect on the Company.

ENVIRONMENTAL MATTERS. The Company is subject to various legislation and
regulations enacted to protect the environment. Under applicable law, an
owner or operator of real property may be liable for the costs of
removal or remediation of certain hazardous or toxic substances on or
under such property, regardless whether the owner or operator knew of,
or was responsible for, the presence of such materials. Moreover,
persons who arrange for the disposal or treatment of wastes containing
such substances at an off-site facility may also be liable for the costs
of removal or remediation of such substances at the off-site facility,
regardless of whether the facility is owned or operated by such person.
In this regard, the Company and its predecessors have conducted vessel
repair and maintenance activities at certain owned or leased sites, and
have disposed of wastes that may contain such substances at off-site
waste management facilities. As discussed below under "Legal
Proceedings", Jakobson Shipyard, Inc., a subsidiary of the Company
("Jakobson"), has been named as a potentially responsible party for the
cleanup of an off-site waste management facility in Syosset, New York.
It is possible that the Company will in the future be subject to
additional claims for, and incur costs in connection with, remediation
of other real property. However, the extent of any such liability and
the timing of any payments to be made by the Company, if any, are not
determinable.

The Company may also incur future costs and expenses in order to ensure
compliance with existing or new requirements under applicable environmental
laws. In many instances, the ultimate costs under such environmental laws
and the time period during which such costs are likely to be incurred are
not

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determinable: See "Management's Discussion and Analysis of Financial
Condition and Results of Operations - Other Matters."

OIL POLLUTION LEGISLATION. As a transporter of petroleum products, the
Company is subject to oil pollution legislation. OPA 90 substantially
affects the liability exposure of owners and operators of vessels, oil
terminals and pipelines. Under OPA 90, each responsible party for a vessel
or facility from which oil is discharged will be jointly and severally
liable for all oil spill containment and clean-up costs and certain other
damages arising from the discharge. These other damages are defined broadly
to include (i) natural resource damage (recoverable only by government
entities), (ii) real and personal property damage, (iii) net loss of taxes,
royalties, rents, fees and other lost revenues (recoverable only by
government entities), (iv) lost profits or impairment of earning capacity
due to property or natural resource damage, and (v) net cost of public
services necessitated by a spill response, such as protection from fire,
safety or health hazards.

The owner or operator of a vessel from which oil is discharged will be
liable under OPA 90 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 90.

OPA 90 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.

OPA 90 requires all vessels to maintain a certificate of financial
responsibility ("COFR") for oil pollution in an amount equal to the greater
of $1,200 per gross ton per vessel, or $10 million per vessel, in
compliance with regulations promulgated by the U.S. Coast Guard. Additional
financial responsibility in the amount of $300 per gross ton is required
under regulations promulgated by the U.S. Coast Guard under the
Comprehensive Environmental Response Compensation and Liability Act
("CERCLA"), the federal Superfund law. Owners of more than one tank vessel,
such as the Company, are only required to demonstrate financial
responsibility in an amount sufficient to cover the vessel having the
greatest maximum liability (approximately $17 million in the Company's
case). The Company currently maintains COFRs in compliance with applicable
Coast Guard rules.

OPA 90 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 existing single-hulled vessels to be retrofitted with
double hulls or phased out of the industry between January 1, 1995 and
2015. Because of the age and size of the Company's individual barges, the
first three of its barges will be required to be retired or retrofitted by
2005. However, many of the vessels competing with the Company's barges are
required to be retired or retrofitted between now and 2005.

Since the double-hull requirements of OPA 90 do not begin to impact
materially the seven single-hulled barges in the Company's current tank
barge fleet until 2005, the Company has not yet determined how it will
finance the conversion or replacement of these single-hulled barges.
However, the Company expects that, where economically feasible, it will
take steps to construct new, double-hulled barges when its single-hulled
barges are phased out. At current construction costs, the Company estimates
that it would cost approximately (a) $5 million to build a new 40,000
barrel tank barge similar to the Connecticut and (b) $25 million to build a
new barge to replace a 250,000 barrel tank barge such as the New York. The
timing of the construction or conversion of such barges will depend in
large measure on market conditions, particularly demand for double-hulled
barges and the rates that petroleum shippers are willing to pay to use such
barges. The Company expects to finance such construction or conversion from
both internally generated funds and from outside sources, including the
equity market, banks and insurance companies and U.S. Government-guaranteed
ship financing programs, if available. There is no assurance that such

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financing will be available in the amounts and at interest rates that will
allow the Company to replace its current single-hulled barge fleet.
See "Properties-Vessels: Barge Fleet."

OPA 90 directs the Coast Guard to develop interim measures for single
hull-tank vessels of over 5,000 gross tons "that provide as substantial
protection to the environment as is economically and technologically
feasible". The Coast Guard has adopted, and is still adopting a series of
operational measures that, while increasing current standards, has not, and
is not expected to have an appreciable effect on the Company.

OPA 90 further requires all tank vessel operators to submit for federal
approval detailed vessel oil spill contingency plans setting forth their
capacity to respond to a worst case spill situation. Several states have
similar contingency or response plan requirements. Although the Company is
currently in compliance, there can be no assurance that the Company will be
able to remain in compliance with all the federal requirements or those of
one or more states.

OPA 90 is expected to have a continuing adverse effect on that segment of
the marine transportation industry that transports petroleum products,
including the Company. The effects on the industry could include, among
others, (i) increased requirements for capital expenditures to fund the
cost of double-hulled vessels, (ii) increased maintenance, training,
insurance and other operating costs, (iii) civil penalties and liability,
(iv) decreased operating revenues as a result of a further reduction of
volume transported by vessels and (v) increased difficulty in obtaining
sufficient insurance, particularly oil pollution coverage. These effects
could adversely affect the profitability and liquidity of the Company's
marine transportation line of business.

Finally, OPA 90 does not preclude states from adopting their own liability
laws. Many of the states in which the Company does business have enacted
laws providing for strict, unlimited liability for vessel owners in the
event of an oil spill. In addition, numerous states have enacted or are
considering legislation or regulations involving at least some of the
following provisions: tank-vessel-free zones, contingency planning,
inspection of vessels, additional operating, maintenance and safety
requirements, and financial responsibility requirements. Management
believes that the liability provisions of OPA 90 and similar state laws
have greatly expanded the Company's potential liability in the event of an
oil spill, even where the Company is not at fault.

OTHER REGULATIONS. The Company is also subject to regulations under the
Federal Water Pollution Control Act of 1972, as amended by the Clean Water
Act of 1977, and the Clean Air Act, as well as similar state statutory and
regulatory programs. To date, compliance with the applicable provisions of
these acts and regulations has not exposed the Company to material expense,
although the Company has found it increasingly expensive to manage the
wastes generated in its operations.

USER FEES AND TAXES. Federal legislation imposes user fees on vessel
operators such as the Company 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. Currently, the Coast Guard collects fees
for vessel inspection and documentation, licensing and tank vessel
examinations. The Company does not expect that these fees will be material
to it. There can be no assurance that additional user fees will not be
imposed in the future.

OCCUPATIONAL HEALTH REGULATIONS. Certain of the Company's vessel operations
are subject to United States Occupational Safety and Health Administration
regulations. Similarly, the Coast Guard has promulgated regulations that
address the exposure to benzene vapors, which require the Company, as well
as other operators, to perform extensive monitoring, medical testing and
record keeping of seamen engaged in the handling of benzene transported
aboard vessels. It is expected that these regulations may serve as a
prototype for similar health regulations relating to the carriage of other
cargoes. Management believes that the Company is in compliance with the
provisions of the regulations that have been adopted.

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EMPLOYEES

The Company and its subsidiaries employed 655 persons as of December 31, 1998,
of which 522 are crew members or other seagoing personnel. As of December 31,
1998, 367 of such employees are represented by various unions. Union contracts
for certain marine employees of operating division or subsidiaries of the
Company expire between April 30, 2000 (29 employees) and March 1, 2004 (220
employees). The Company's New York labor contract ended in September 1998, but
was extended until a new one was completed effective March 1, 1999. Management
believes that its relationship with employees is satisfactory.

ITEM 2. PROPERTIES

VESSELS: TUG FLEET

The tugboat fleet operated by subsidiaries of the Company is comprised of 57
tugboats with the following specifications and capacities:

Average
Number Age in
Class in Class Years
----- -------- -----
<S> <C> <C>
Over 3,500 horsepower..................... 14 24.9
3,000 to 3,500 horsepower................. 18 26.1
Under 3,000 horsepower.................... 17 42.2
Mortrac(R)................................ 4 Rebuilt in 1997/98
Push boats................................ 4 -

</TABLE>

Tugboats typically have long useful lives, generally exceeding 50 years. Through
its maintenance practices and periodic overhauls, the Company is able to
maximize the operational life of its tug fleet and minimize vessel downtime.
Management believes that the Company's tug fleet has a lower average age and is
better maintained than the fleets of many of the Company's competitors.

During the past three years, the Company converted four of its single screw tugs
to MORTRAC(R) class tugs. The conversion consists of installing a forward
mounted, fully retractable 360-degree azimuthing thruster, a state of the art
wheelhouse, and new fendering systems. In addition, during the time that the
vessels were undergoing conversion, a thorough maintenance and repair process
was undertaken to ensure that the remaining vessel systems were in top
condition. The resulting MORTRAC(R) tugs are highly maneuverable and have
significantly greater horsepower than prior to conversion. Customer reaction to
the capabilities of the converted vessels has been favorable and the four tugs
now play key roles in the ports where they are located. The MORTRAC(R)
conversion has greatly enhanced the value and expected life of the tugs in
question. MORTRAC(R) is a registered trademark of the Company.

In 1998, the Company built four inland push boats and four barges.

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VESSELS: BARGE FLEET

The Company operates 19 barges in the U.S. coastwise trade and inland
waterways. Seventeen of the barges are owned by the Company and two are
chartered to the Company. The specifications and capacities of each of such
barges are set forth in the following table:

OPA 90
Year Replacement Employment Principal
Name Type Built Date Capacity At 12/31/98 Cargo
- ---- ---- ----- ---- -------- ----------- -----
<S> <C> <C> <C> <C> <C> <C>
Somerset Ocean Dry Bulk 1990 N/A 13,211 dwt Term Contract Coal
Bridgeport Ocean Dry Bulk 1986 N/A 12,780 dwt Term Contract Coal
Portsmouth (1) Ocean Dry Bulk 1996 N/A 13,214 dwt Spot Market Coal
Virginia Ocean Dry Bulk 1982 N/A 24,109 dwt Term Contract Coal
Maryland (2) Inland Dry Bulk 1970 N/A 20,357 dwt Inactive Coal
Connecticut (3) Ocean Tank 1994 N/A 41,454 bbl Term Contract No. 6 Oil
Texas Ocean Tank 1981 2006 130,000 bbl Term Contract No. 6 Oil
Florida Ocean Tank 1980 2005 130,000 bbl Term Contract No. 6 Oil
Pennsylvania Ocean Tank 1971 2005 93,000 bbl Term Contract No. 6 Oil
New York (4) Ocean Tank 1970 2005 250,000 bbl Spot Market Gasoline
Massachusetts (5) Ocean Tank 1982 2007 145,000 bbl Spot Market No. 6 Oil
Maine Inland Tank 1976 2014 64,000 bbl Spot Market No. 6 Oil
Rhode Island Inland Tank 1972 2014 64,000 bbl Spot Market No. 6 Oil
Seahorse I (6) Inland Tank 1966 2014 41,770 bbl Term Contract No. 6 Oil
New Jersey Ocean Tank 1969 2014 36,278 bbl Bareboat Charter Bunker Fuel
JAX No. 1 Inland Tank 1998 N/A 19,128 bbl Term Contract No. 6 Oil
JAX No. 2 Inland Tank 1998 N/A 19,128 bbl Term Contract No. 6 Oil
JAX No. 3 Inland Tank 1998 N/A 19,128 bbl Term Contract No. 6 Oil
JAX No. 4 Inland Tank 1998 N/A 19,128 bbl Term Contract No. 6 Oil

</TABLE>

(1) The Company leases this barge under a 10-year bareboat charter.
(2) The Maryland has in the past been employed in a number of alternative uses,
but is primarily a coal barge. The barge has not been utilized since
November 7, 1996 due to damage to the vessel. The Company is currently
evaluating whether to repair the vessel.
(3) This barge is the primary barge used in connection with a long-term
contract with Connecticut Light and Power ("CL&P"). This contract provides,
among other things, that CL&P may exercise a purchase option on the
Connecticut in certain circumstances. First, commencing with the fourth
anniversary of the delivery of the Connecticut, CL&P may, on each
anniversary date, purchase the barge for a purchase price equal to certain
scheduled amounts. In addition, CL&P has the option to purchase the barge
if the Company willfully refuses to perform and in certain other limited
circumstances.
(4) Owned by a partnership in which a subsidiary of the Company has a 50%
interest.
(5) The Company purchased this barge in February 1997.
(6) 100% owned by CL&P, and operated by a subsidiary of the Company pursuant to
an evergreen bareboat charter. The Seahorse I is the primary back up barge
for the Company's contract with CL&P, but is currently used in the spot
market. The Seahorse I is double-hulled, but does not meet the OPA 90
double hull requirements and therefore has an OPA 90 replacement date.

See "Management's Discussion and Analysis of Financial Condition and
Results of Operations - Liquidity and Capital Resources."

10
<PAGE>

OTHER PROPERTIES

Set forth below is a list of all of the Company's offices and facilities as of
December 31, 1998.

Approximate
Square Feet/ Lease
Location Description Linear Feet (1) Expiration Date
- -------- ----------- --------------- ---------------

<S> <C> <C> <C>
Greenwich, CT Executive Office 17,526 2004
Portsmouth, NH Office Space 322 Owned Property
Portsmouth, NH Pier Space 126 Owned Property
Staten Island, NY Office and Pier Space 113,756(2) Owned Property
Philadelphia, PA Pier and Office Space 52,500(2) 2007
Baltimore, MD Office Space 4,400 2002
Baltimore, MD Pier Space 415 2003
Norfolk, VA Office and Pier Space 97,027(2) Owned Property
Jacksonville, FL Office and Pier Space 71,874(2) 2000
Miami, FL Office Space 630 1999
Nederland, TX Office Space 1,402 2001
Port Arthur, TX Pier Space 275 1999

</TABLE>

(1) Square footage is presented for office space; linear footage is presented
for pier space.
(2) Aggregate square footage for entire property.

Management believes that its existing properties are adequate for its current
needs and that additional facilities will be readily available if needed.

11
<PAGE>

ITEM 3. LEGAL PROCEEDINGS

The Company is a party to routine, marine-related lawsuits arising in the
ordinary course of its business. The claims made in connection with the
Company's marine operations are covered by marine insurance, subject to
applicable policy deductibles. 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 the Company's financial
condition and results of operations.

On January 31, 1990, Jakobson was notified by letter from the EPA that the EPA
had reason to believe that the subsidiary is a Potentially Responsible Party (a
"PRP") under CERCLA with respect to a landfill site at Syosset, New York. In
February 1994, the Town of Oyster Bay, New York, operator of the Syosset
landfill, filed suit in the United States District Court for the Eastern
District of New York against Jakobson and several other PRPs to recover costs
associated with clean up of the landfill. In its complaint, the Town alleges
that Jakobson disposed of various wastes at the landfill, which the Town
operated from approximately 1933 to 1975. Prior to filing the complaint, the
Town entered into an administrative consent order with the EPA to remediate the
site. The Town seeks to recover from the PRPs past and future costs associated
with the cleanup. According to the Town's complaint, as of February 1994, the
Town had expended approximately $2.75 million and anticipated additional costs
of $500,000 to evaluate remedial alternatives for the site. Clean-up costs were
estimated at $25 million. Jakobson believes that it has both a factual and legal
defense to liability. The Federal court hearing this matter has ruled that the
PRPs are liable in contribution only, not joint and severally. Jakobson believes
that in relation to the other defendants its contribution, if any, to the site
is de minimus. Jakobson is investigating the allegations of the EPA and the Town
and the existence of insurance coverage should the subsidiary be found to have
liability with respect to the landfill site. At this stage, management believes
that it is premature to attempt to predict the outcome of the suit. Jakobson's
insurers are providing a defense.

Subsidiaries of the Company are defendants, along with others, in certain
lawsuits filed in the U.S. District Courts for the Northern District of Ohio and
the Eastern District of Pennsylvania and in Virginia state court by an aggregate
of 395 individuals or their estates or personal representatives who have alleged
damages for workplace exposure to asbestos. Based on employment records, a
number of these individuals appear to have worked for subsidiaries of the
Company, or their predecessors, for less than one year, if at all, out of their
working careers. The Company is in the process of identifying the scope of its
insurance coverage for these claims. At least 88 of these individuals served on
vessels operated by a subsidiary of the Company on behalf of the United States
government for which a government indemnity is applicable. The United States has
agreed to indemnify and defend the Company with respect to approximately 68
cases. Management believes that the United States indemnity will extend to
additional cases. Although the Company believes that these claims are without
merit, it is impossible at this juncture to express a definitive opinion on the
final outcome of any such suit. Management believes that any liability under any
such suits would not have a material adverse effect on the Company's financial
condition and results of operations, regardless of the scope of available
insurance coverage.

ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS

None

PART II

ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS

There is currently no public trading market for the Company's issued and
outstanding common stock. All of the Company's outstanding common stock is held
by Moran Enterprises Corporation.

12
<PAGE>

ITEM 6. SELECTED CONSOLIDATED FINANCIAL DATA

The following table presents historical financial information concerning the
Predecessor and the Company. The historical financial information in the
five-year period ending December 31, 1998, is derived from the consolidated
financial statements of the Company. Such financial statements are included
elsewhere herein for the three-year period ended December 31, 1998. The
following financial information should be read in conjunction with "Management's
Discussion and Analysis of Financial Condition and Results of Operations".

Predecessor Company
----------- -----------------------------------------------------------
Period
Jan. 1, 1994 July 12, 1994
(Dollars in thousands) thru thru Year ended
July 11, Dec. 31, December 31,
---------------------------------------------
INCOME STATEMENT DATA: 1994 1994 1995 1996 1997 1998
-------- --------- --------- --------- --------- ---------
<S> <C> <C> <C> <C> <C> <C>
Operating revenue--------------------------- $ 41,694 $ 37,482 $ 77,343 $ 91,458 $ 100,526 $ 107,448
Operating expenses.------------------------ 27,341 22,355 45,672 57,451 66,090 70,195
Depreciation------------------------------- 3,119 3,217 7,412 7,719 7,769 8,108
General and administrative expenses-------- 7,559 5,962 14,221 14,283 13,755 14,914
Provision for shipyard sale---------------- 589 -- -- -- -- --
-------- --------- --------- --------- --------- ---------
Operating income--------------------- 3,086 5,948 10,038 12,005 12,912 14,231
Interest expense---------------------------- (975) (4,810) (10,192) (10,132) (10,026) (10,266)
Interest income----------------------------- 28 74 51 146 346 437
Equity in loss from affiliates-------------- (622) -- -- -- -- --
Equity in income/(loss) from joint venture-- 220 106 (188) (66) (727) 176
Other income/(expense)---------------------- 317 218 155 160 (273) 102
-------- --------- --------- --------- --------- ---------
Income/(loss) before provision for income taxes 2,054 1,536 (136) 2,113 2,232 4,680
Provision for income taxes------------------ 785 630 200 808 613 1,965
-------- --------- --------- --------- --------- ---------
Net income/(loss)--------------------------- $ 1,269 $ 906 $ (336) $ 1,305 $ 1,619 $ 2,715
======== ========= ========= ========= ========= =========

OTHER DATA:---------------------------------
EBITDA(1)----------------------------------- $ 6,977 $ 9,987 $ 18,855 $ 23,337 $ 23,704 $ 28,280
Net cash provided by operating activities--- 3,939 6,527 5,491 11,427 8,929 16,997
Net cash provided by/(used for) investing activities 817 (73,555) (5,832) (5,110) (8,063) (18,170)
Net cash (used for)/provided by financing activities (4,637) 68,842 (652) (3,496) 3,252 (4,423)
Ratio of earnings to fixed charges (2)------ 2.7x 1.3x 1.0x 1.2x 1.2x 1.4x

Balance Sheet Data (at end of period)
Total assets-------------------------------- $ 64,432 $ 170,108 $ 174,094 $ 172,717 $ 160,290 $ 161,534
Total long-term debt------------------------ 16,450 83,414 82,848 80,000 83,252 78,997
Mandatorily redeemable capital stock-------- -- 1,150 1,150 1,000 1,000 --
Total stockholders' equity------------------ 19,701 10,906 10,570 12,025 13,644 17,359

</TABLE>

(1) EBITDA means income before provision for income taxes, interest expense
(including amortization of debt discount of $106 for the period ended July
11, 1994), depreciation and amortization and provision for shipyard sale,
and is presented because the Company believes that it provides useful
information regarding its ability to service and/or incur debt. EBITDA
should not be considered in isolation or as a substitute for net
income/(loss), cash flows from operating activities and other combined
income or cash flow statement data prepared in accordance with generally
accepted accounting principles or as a measure of the Company's
profitability or liquidity.
(2) For purposes of the computations, earnings before fixed charges consist of
income/(loss) before income taxes adjusted for equity earnings/(loss), as
appropriate, plus fixed charges. Fixed charges are defined as interest
expense plus interest capitalized and that portion of rental expense which
is deemed to be representative of the interest factor.

13
<PAGE>

ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS

This discussion and analysis of the Company's financial condition and historical
results of operations should be read in conjunction with the Company's and the
Predecessor's consolidated historical financial statements and the related notes
thereto included elsewhere in this report.

OVERVIEW REVENUES

TUG SERVICES. Tug services revenues depend primarily upon tug
utilization and the rates charged for tug services. Tug utilization is
primarily a function of the volume of vessel traffic requiring docking
or undocking or other ship assistance services, barge movements,
coastwise contract towing and offshore rescue work. Rates charged for
tug services are primarily set by reference to the Company's scheduled
rates, subject to discounts as competitive conditions warrant. When tug
services are not performed on a contract basis, rates are quoted at the
time that such services are requested.

Tug services revenues, in the aggregate, have remained relatively
stable over recent years. Although the number of ships entering and
exiting ports has gradually declined, the Company has offset the
resulting revenue decline by maintaining market share through
relationship management and increasing coastwise towing.

MARINE TRANSPORTATION. Marine transportation services are provided by
the Company's barge fleet on a term contract basis and on a spot market
basis. Rates for such services are pre-established by contract or are
quoted at the time that such services are requested, and are generally
set based on the quantity of product to be transported and the distance
to be traveled.

The Company's marine transportation revenues are primarily attributable
to the transport of petroleum products (particularly No. 6 oil), coal,
scrap iron, and grain. Demand for the Company's marine transportation
services is substantially dependent upon general demand for petroleum,
petroleum products and coal in the geographic areas served by its
vessels. In addition, weather, prevailing markets for fossil fuels and
other sources of energy and economic factors can affect utility
consumption of petroleum, petroleum products and coal and, as a result,
the demand for a substantial portion of the Company's marine
transportation services. The deregulation of the utility business could
also have an impact on this segment, as power-generating facilities are
unbundled from the other portions of the business.

OPERATING EXPENSES. The Company's operating expenses are primarily a function of
fleet size and utilization levels and are comprised of wages and benefits, fuel,
repairs, insurance, insurance claims and charter hire of third party tugs to
satisfy vessel requirements. In addition, the Company incurs depreciation and
amortization expense. The crews of the Company's tugs and barges are primarily
paid on a daily wage basis. Wage and benefit levels vary among ports due to
labor market conditions. The Company capitalizes expenditures when a vessel is
improved or its useful life is extended. Drydocking and related costs are
capitalized when incurred and amortized over the period until the next
drydocking, usually 30 months. The timing of drydockings is generally governed
by American Bureau of Shipping requirements, which require two drydockings every
five years. All other repair expenditures are expensed as incurred. Insurance
costs consist primarily of premiums paid for (i) protection & indemnity
insurance ("P&I insurance") for the Company's marine liability risks, which are
insured by a mutual insurance association of which the Company is a member; (ii)
hull and machinery insurance and other marine-related insurance, which are
insured by commercial marine insurance markets; and (iii) general liability and
other traditional insurance, which are insured by commercial insurance carriers.
Insurance costs, particularly costs of marine insurance, are directly related to
amount of coverage, industry and individual loss records and overall insurance
market conditions, which vary from year-to-year. As discussed above under
"Business-Insurance," the Company and the Mormac Group, and the Turecamo
Entities for hull insurance, have entered into the Insurance Agreement, under
which the Company's insurance expense will be

14
<PAGE>

affected by both the Company's increased deductibles and the respective
insurance claims experience of the Company, the Mormac Group and the Turecamo
Entities.

RESULTS OF OPERATIONS

YEAR ENDED DECEMBER 31, 1998 COMPARED TO YEAR ENDED DECEMBER 31, 1997

Year Ended
December 31,
------------
1997 1998
---- ----
<S> <C> <C>
Operating revenue.......................................... $100,526 $107,448
Cost of operations
Operating expenses..................................... 66,090 70,195
Depreciation........................................... 7,769 8,108
-------- --------
Total cost of operations................................... 73,859 78,303
-------- --------
Gross profit............................................... 26,667 29,145
General and administrative expenses........................ 13,755 14,914
-------- --------
Operating income........................................... 12,912 14,231
Interest expense........................................... (10,026) (10,266)
Interest income............................................ 346 437
Equity in (loss)/income from joint venture................. (727) 176
Other (expense)/income..................................... (273) 102
-------- --------
Income before provision for income taxes................... 2,232 4,680
Provision for income taxes................................. 613 1,965
-------- --------
Net income................................................. $ 1,619 $2,715
======== ========

</TABLE>

OPERATING REVENUES. Operating revenues increased by $6.9 million, or 6.9%, to
$107.4 million in 1998. Tug Service revenue increased by $7.8 million or 13.7%,
to $64.9 million. The increase reflects higher offshore towing revenue as well
as increased revenues from ship docking in all ports of operation.

Marine Transportation revenues decreased by $0.8 million, or 1.9%, to $42.5
million primarily due to lower movements of coal, which was partially replaced
by increased shipments of other drybulk products such as fertilizer. Petroleum
transportation stayed even as increased activity in the Northeast and the start
of a five-year contract for Florida Power & Light was offset by a long
drydocking for one of the Company's oil barges.

OPERATING EXPENSES. Operating expenses increased by $4.1 million, or 6.2%, to
$70.2 million. The $4.1 million increase in operating expenses is primarily due
to increases in labor, outside towing expense, claims, repairs and drydocking
amortization. The $2.0 million increase in labor expense and the $1.7 million
increase in outside towing expenses were primarily due to the increased level of
activity discussed above. These increases were partially offset by lower fuel
costs. Repair expense also increased in 1998, as did drydocking amortization.

DEPRECIATION. Depreciation expense increased by $0.3 million, or 4.4%. This
increase was due to the acquisition of new equipment and to improvements to
existing floating equipment.

GENERAL & ADMINISTRATIVE EXPENSES. General and administrative expenses increased
by $1.2 million or 8.4% to $14.9 million in 1998, primarily due to reduced
medical costs in 1997, which were not repeated in 1998. In addition, the cost of
salaries, benefits and bad debt expense increased in 1998.

15
<PAGE>

OPERATING INCOME. Operating income increased by $1.3 million, or 10.2%, to $14.2
million. The increase was primarily due to the increased revenues discussed
above, partially offset by higher operating expenses, depreciation and general
and administration expenses.

EQUITY IN (LOSS)/INCOME FROM JOINT VENTURE. The Company's equity income in its
50% joint venture increased by $0.9 million from a loss of $0.7 million in 1997
to an income of $0.2 million in 1998. In 1997 the vessel was drydocked beginning
in the second quarter and was completed mid-way through the third quarter. In
addition, market conditions in the clean petroleum products market idled the
barge NEW YORK for approximately half of the final six months of 1997. In the
current year, 1998, utilization of the barge NEW YORK increased, as did rates.

TAXES. In 1997, taxes were favorably impacted by the realization of a deferred
tax asset. The Company applied a capital loss carry forward to offset the tax
gain associated with the termination of the Jakobson Shipyard lease (see note 13
to the financial statements). This tax asset previously had been valued at zero
due to the uncertainty associated with its utilization.

NET INCOME. Net income increased by $1.1 million, or 67.7% to $2.7 million in
1998. The increase was primarily due to the factors discussed above.

YEAR ENDED DECEMBER 31, 1997 COMPARED TO YEAR ENDED DECEMBER 31, 1996

Year Ended
December 31,
------------
1996 1997
---- ----
<S> <C> <C>
Operating revenue.......................................... $ 91,458 $100,526
Cost of operations
Operating expenses..................................... 57,451 66,090
Depreciation........................................... 7,719 7,769
-------- --------
Total cost of operations................................... 65,170 73,859
-------- --------
Gross profit............................................... 26,288 26,667
General and administrative expenses........................ 14,283 13,755
-------- --------
Operating income........................................... 12,005 12,912
Interest expense........................................... (10,132) (10,026)
Interest income............................................ 146 346
Equity in loss from joint venture.......................... (66) (727)
Other income/(expense)..................................... 160 (273)
-------- --------
Income before provision for income taxes................... 2,113 2,232
Provision for income taxes................................. 808 613
-------- --------
Net income................................................. $ 1,305 $ 1,619
======== ========

</TABLE>

OPERATING REVENUES. Operating revenues increased by $9.1 million, or 9.9%, to
$100.5 million in 1997. Tug Service revenue remained effectively flat,
decreasing by $0.3 million or 0.6%, to $57.1 million as lower offshore towing
revenues were offset by The New York City Sanitation Contract.

Marine Transportation revenues increased by $9.4 million, or 27.6%, to $43.4
million primarily due to increased movements of coal and petroleum products. The
Company also increased its transportation of other products, such as scrap and
fertilizer. The Company also had a full year of operation for the barge
PORTSMOUTH, which began operations in November 1996 and the barge MASSACHUSETTS,
purchased in February 1997.

OPERATING EXPENSES. Operating expenses increased by $8.6 million, or 15.0%, to
$66.1 million. The $8.6 million increase in operating expenses is primarily due
to increases in labor, fuel, outside towing expense,

16
<PAGE>

repairs and drydocking amortization. The $2.5 million increase in labor expense
and the $1.4 million increase in outside towing expenses were primarily due to
the increased level of activity discussed above. The $1.0 million fuel expense
increase was also due to the increased activity. Repair expense also increased
in 1997, as did drydocking amortization.

DEPRECIATION. Depreciation expense increased by $0.1 million, or 1.3%. This
increase was due to the acquisition of new equipment and to improvements to
existing floating equipment, including the MORTRAC(R)conversions discussed
previously.

GENERAL & ADMINISTRATIVE EXPENSES. General and administrative expenses decreased
by $0.5 million or 3.7% to $13.8 million in 1997, primarily due to lower medical
costs.

OPERATING INCOME. Operating income increased by $0.9 million, or 7.6%, to $12.9
million. The increase was primarily due to the increased revenues and lower
general and administrative expenses discussed above, partially offset by higher
operating expenses and depreciation.

EQUITY IN LOSS FROM JOINT VENTURE. The Company equity loss in its 50%-owned
joint venture was $0.7 million, compared to the smaller loss of $0.1 million in
1996. The $0.6 million variance is due to lower rates as well as a drydocking of
the vessel, which began in the second quarter of 1997 and was completed mid-way
through the third quarter. In addition, market conditions in the clean petroleum
products market idled the barge NEW YORK for approximately half of the final six
months of 1997 and management believes that lower rates and lower utilization
could continue through 1998.

TAXES. Taxes were favorably impacted by the realization of a deferred tax asset.
The Company applied a capital loss carry forward to offset the tax gain
associated with the termination of the Jakobson Shipyard lease (see note 13 to
the financial statements). This tax asset previously had been valued at zero due
to the uncertainty associated with its utilization. The Company determined in
the third quarter that is was more likely than not that the asset could be
utilized.

NET INCOME. Net income increased by $0.3 million, or 24.1% to $1.6 million in
1997. The increase was primarily due to the factors discussed above.

LIQUIDITY AND CAPITAL RESOURCES

The Company is highly leveraged as a result of the debt incurred in connection
with the Acquisition. The Company has outstanding $78,997,000 of 11.75% Series B
First Preferred Ship Mortgage Notes due July 15, 2004 (the "Notes"), the
issuance of which was registered under the federal securities laws. Interest on
the Notes is payable semi-annually on January 15 and July 15. The Notes are
redeemable, in cash, at the option of the Company, commencing July 15, 1999, at
a redemption price equal to 108% of principal amount, with the redemption price
decreasing over time thereafter. The Company currently intends to redeem the
Notes on or about July 15, 1999 at 108% of their principal amount and has
arranged financing under the New Credit Facility to do so; however, no assurance
can be made that the Company will redeem the Notes at such time. All of the
Company's subsidiaries have guaranteed the Notes. The Notes rank pari passu with
all existing and future senior indebtedness of the Company and senior to all
subordinated indebtedness of the Company and are secured by substantially all of
the Company's floating equipment. The indenture covering the Notes contains
certain restrictions on incurrence of debt, liens, sales of assets, investments,
and capital expenditures, dividends and upstream payments. The Company must also
comply with certain other financial covenants.

17
<PAGE>

redemption price decreasing over time thereafter. Under the New Senior Credit
Facility, several conditions must be satisfied prior to drawing on the term loan
facility to redeem the Notes, including that no event of default shall have
occurred or be continuing, that certain representations and warranties are true
and correct, and that there shall have been no material adverse change in the
condition of the vessels owned by Moran Enterprises and its subsidiaries. The
New Senior Credit Facility also includes a $40 million revolving credit
facility. Until the Notes are redeemed and the applicable term loan facility is
drawn upon, however, the maximum amount that may be outstanding under the
revolving credit facility is $20 million, no more than $15 million of which may
be drawn upon for the benefit of the Company and its subsidiaries. The revolving
credit facility includes a letter of credit subfacility of a separate sublimit
which is available to the Company and its subsidiaries and which reduces the
available credit under the revolving credit facility by the amount of any
outstanding letter of credit and any unreimbursed drawings under letters of
credit. The New Senior Credit Facility bears interest at rates linked to the
prime rate and/or a Eurodollar rate, at Moran Enterprises's option. The term
loan facility, which may be drawn upon to redeem the Notes, matures on June 30,
2004; the other $80 million term loan facility matures on December 31, 2005. The
revolving credit facility has a term of six years.

The New Senior Credit Facility is secured by substantially all of the personal
property of Moran Enterprises and the Turecamo Entities, including floating
equipment (i.e., vessels) and a pledge of all the capital stock of Moran
Enterprises, the Company and the Turecamo Entities. The Company and its domestic
subsidiaries have guaranteed the revolving credit facility to the extent that
funds are drawn for their benefit, and in that regard, have granted a first
priority lien on accounts receivable and inventory to secure the guaranty. If
and when the Notes are redeemed in full, the Company and its subsidiaries will
grant security interests in substantially all of their assets, including
floating equipment, to secure the New Senior Credit Facility. The Company's
floating equipment presently continues to secure its Notes.

The New Senior Credit Facility contains customary affirmative and negative
covenants, including compliance with law, maintenance of insurance, and
limitations on incurrence of debt, liens, investments, sales of assets and
mergers. The revolving credit facility thereunder may be used on an ongoing
basis to finance working capital and for general corporate purposes.

Concurrently with the closing of the Combination, the Company used available
cash to pay outstanding amounts due under a separate term loan facility of the
Company, totaling $3.4 million, inclusive of principal, interest and any fees.

Because the Combination could have been deemed to have been a "Change of
Control" under the terms of the indenture governing the Notes, the Company
was required to commence a tender offer to purchase for cash any and all of
the outstanding Notes, which the Company commenced on November 25, 1998. The
Company completed the tender offer on December 28, 1998, and as of such date,
approximately $1,003,000 in aggregate principal of the Notes had been
tendered, representing approximately 1.25% of the $80,000,000 Notes
outstanding subject to the tender offer. Following the expiration of the
offer, the Company accepted for payment all Notes validly tendered using
available cash to make such a payment. The purchase price paid for the Notes
was equal to 101% of their principal amount ($1,010 per $1,000 principal
amount), plus accrued and unpaid interest.

The Company believes that cash flow from current levels of operations and, to a
lesser extent, the availability under the New Senior Credit Facility, will be
adequate to make required payments of interest on the Company's indebtedness, as
well as to fund capital expenditures. In the event that the Company draws upon
the commitments under the New Senior Credit Facility due to adverse business
conditions or to finance acquisitions or for other corporate purposes, the
Company's aggregate interest expense would correspondingly be increased.

The Company's belief that it will generate sufficient cash to make required
payments of interest on its indebtedness and lease obligations is based, among
other things, on the assumptions that (i) the Company redeems the Notes at 108%
on or about July 15, 1999; (ii) the Company's revenues and operating expenses,
as adjusted for inflation, will remain relatively constant; (iii) the Company
will retain working capital in accordance with prior practices; (iv) the Company
will not incur any material capital expenditures (excluding

18
<PAGE>

routine drydocking costs) other than the possible purchase or construction of
new vessels or the acquisition of businesses which in turn are expected to
produce additional cash flow; and (v) neither OPA 90 nor any other federal or
state environmental statutes or regulations will impose significant additional
capital expenditure requirements on the Company other than the mandated
phase-out or retrofitting of vessels described in "Business-Regulatory Matters."

Cash and cash equivalents for the year ended December 31, 1998 decreased by $5.6
million compared to a $4.1 million increase in the year ended December 31, 1997,
and a $2.8 million increase in the year ended December 31, 1996. The changes for
these periods were attributable to the factors discussed below:

For the year ended December 31, 1998, net cash provided by operations of $17.0
million was used to fund capital expenditures of $18.2 million (including the
four new push boats and four new barges) and to repay debt of $4.4 million.

For the year ended December 31, 1997, net cash provided by operations of $8.9
million, together with net proceeds from a constructive total loss of $2.8
million, net proceeds from the sale of a leasehold interest of $2.9 million and
increased borrowings of $3.3 million was used to fund capital expenditures of
$12.7 million (including the purchase of the tug APRIL MORAN, barge
MASSACHUSETTS, and two additional MORTRAC(R) conversions) and to fund a $1.0
million capital contribution to a joint venture, primarily to fund a drydocking
for the bargE NEW YORK.

For the year ended December 31, 1996, net cash provided by operations was $11.4
million. This cash, together with temporary borrowings of $2.3 million were used
to fund capital expenditures of $5.1 million (primarily the capitalization of
drydocking costs and the upgrading of the tug HARRIET MORAN to a MORTRAC(R) tug)
and to pay down debt of $5.7 million (including the indebtedness relating to the
acquisition of the tug VALENTINE MORAN and the barge PENNSYLVANIA.)

Working capital was $10.1 million at December 31, 1998, $17.6 million at
December 31, 1997 and $9.1 million at December 31, 1996.

In November 1998, a subsidiary of the Company entered into contract with the
Military Sealift Command to provide tug services to the U.S. Navy, beginning in
1999. As part of this contract, the Company is building six tractor tugs and
converting two of its existing vessels into tractor tugs. The capital
expenditures associated with this and other capital projects, including planned
drydockings, is expected to exceed $20.0 million in 1999. The Company is
exploring various financing alternatives, including internally generated cash
flow and financing under the New Credit Agreement.

RECENT FINANCIAL ACCOUNTING PRONOUNCEMENTS

FAS No. 133, "Accounting for Derivative Instruments and Hedging Activities" was
issued in 1998. This statement establishes accounting and reporting standards
for derivative instruments. It requires an entity to recognize all derivatives
as either assets or liabilities in the statement of financial position and
measure those instruments at fair value. The Company will adopt this new
standard as of January 1, 2000. Management does not expect the adoption to have
a material impact on the Company's results of operations, however, the impact on
the Company's financial statements is dependent upon the market values of the
Company's derivatives and related financial instruments at the date of adoption.

INFLATION

In general, the Company's business is affected by inflation and the effects of
inflation may be experienced by the Company in future periods. Management
believes, however, that such effect has not been significant to the

19
<PAGE>

Company during the past three years. In the event that significant inflationary
trends were to arise, management believes that the Company would generally be
able to offset the effects thereof by increasing rates, to the extent permitted
by competitive factors, and through operation of certain escalation clauses
contained in certain of the Company's marine transportation contracts. There can
be no assurance, however, that all such cost increases could be passed through
to customers.

YEAR 2000 UPDATE

Moran has been aware of the Year 2000 problem for some time. Over the past year
Moran has increased the resources dedicated to evaluating Year 2000 exposure and
to developing solutions to any potential Year 2000 problems. A Year 2000
Compliance Committee has been established, chaired by the Vice President,
Finance and Administration. This committee, which provides regular reports to
the Board of Directors, is responsible for coordinating all Year 2000 compliance
efforts and ensuring that Year 2000 and related date problems will not impact
Moran's operations or the services that Moran provides to customers. Moran
believes that it is taking all reasonable steps to address the Year 2000
problem, but offers no assurances that the problem will be avoided in every
instance.

MORAN HAS INITIATED THE FOLLOWING MULTI-STEP PROGRAM (THE "YEAR 2000 PROGRAM")
TO ENSURE YEAR 2000 COMPLIANCE:

1. Develop a comprehensive catalog of all systems (both at sea and ashore)
that directly or indirectly utilize a date function;
2. Request statements of compliance or suggested methods of achieving
compliance from all vendors of date dependent systems;
3. Repair, replace, or correct non-compliant systems as applicable;
4. Actively unit test all hardware and software components individually to
ensure compliance;
5. Perform integrated testing of systems as applicable;
6. Correct or replace any systems as required;

The Company's goal is to complete Moran's Year 2000 readiness program by June
30, 1999. Moran will continue to monitor new systems, vendors, and customers as
the Year 2000 approaches. Management believes that implementation of the Year
2000 Program is approximately 80-85% complete, as of March 10, 1999. The
original schedule had targeted March 31, 1999, but the Combination has delayed
the schedule somewhat. The estimated total cost of the Year 2000 Program is not
expected to exceed $100,000.

Management does not believe that the Company's normal business activities and
operations materially rely on information technology or electronic data
interchange with third parties. Nevertheless, applicable requirements of the
Securities and Exchange Commission require that the Company disclose a "most
reasonably likely worst case scenario" for Year 2000 problems. Applying this
requirement, management believes that the area of business operations that could
most reasonably be expected to be affected by a Year 2000 problem is the
Company's accounting system. However, if any such problem were to arise,
management believes that the accounting currently being electronically processed
could be completed manually. Management has not formulated any specific
contingency plans because management believes the Company's Year 2000 Program
will be completed by June 1999.

The information contained herein regarding the Company's efforts to deal with
the Year 2000 problem are intended as Year 2000 Statements and Year 2000
Readiness Disclosures and are subject to the year 2000 Information Readiness
Disclosure Act.

CAUTIONARY STATEMENT. The Company is including the following cautionary
statement to take advantage of the "safe harbor" provisions of the Private
Securities Litigation Reform Act of 1995 for any forward-looking statement made
by, or on behalf of, the Company. The factors identified in this cautionary
statement are important factors (but not necessarily all important factors) that
could cause actual results to differ materially from those expressed in any
forward-looking statement made by, or on behalf of, the Company. Where any such
forward-looking statement

20
<PAGE>

includes a statement of the assumptions or bases underlying such forward-looking
statement, the Company cautions that, while it believes such assumptions or
bases to be reasonable and makes them in good faith, assumed facts or bases
almost always vary from actual results, and the differences between assumed
facts or bases and actual results can be material, depending on the
circumstances. Where, in any forward-looking statement, the Company, or its
management, expresses an expectation or belief as to future results, such
expectation or belief is expressed in good faith and believed to have a
reasonable basis, but there can be no assurance that the statement of
expectation or belief will result, or be achieved or accomplished. Taking into
account the foregoing, the following is identified as an important risk factor
that could cause actual results to differ materially from those expressed in any
forward-looking statement made by, or on behalf of, the Company:

The status of the Year 2000 Program and the dates on which the Company believes
the Year 2000 Program will be completed are based on management's best
estimates, which were derived utilizing numerous assumptions of future events;
however, there can be no guarantee that these estimates will be achieved, or
that there will not be a delay in, or increased costs associated with, the
implementation of the Year 2000 Program. Specific factors that might cause
differences between the estimates and actual results include, but are not
limited to, the availability and cost of personnel trained in these areas, the
ability to locate and correct all relevant computer code, timely responses to
and corrections by third-parties and suppliers, the ability to implement
interfaces between any new systems and any systems not being replaced, and
similar uncertainties. Due to the general uncertainty inherent in the Year 2000
problem, resulting in part from the uncertainty of the Year 2000 readiness of
third-parties and the interconnection of global businesses, the Company cannot
ensure its ability to timely and cost-effectively resolve problems associated
with the Year 2000 issue that may affect its operations and business, or expose
it to third-party liability.

ITEM 8. FINANCIAL STATEMENTS

See the financial statements, which are listed in items 14(a)(1)-(2).

ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE

There were no changes in, or disagreements with, accountants.

21
<PAGE>

PART III

ITEM 10. EXECUTIVE OFFICERS AND DIRECTORS OF THE REGISTRANT

Set forth below is information concerning the directors and executive
officers of the Company.

Name Age Position
---- --- --------
<S> <C> <C>
Paul R. Tregurtha 63 Chairman of the Board and Director
James R. Barker 63 Vice Chairman of the Board and Director
Malcolm W. MacLeod 65 President, Chief Executive Office and Director
Jeffrey J. McAulay 45 Vice President of Finance and Administration and Director
William P. Muller 47 Senior Vice President of Moran Towing Corporation
Edmond J. Moran, Jr. 54 Senior Vice President of Moran Towing Corporation and Director
Alan L. Marchisotto 49 Vice President, General Counsel and Secretary
Andrew P. Langlois 57 Director
Mort Lowenthal 68 Director

</TABLE>

Paul R. Tregurtha. Mr. Tregurtha has been a director and Chairman of the Board
of the Company since June 1994 and a director and Chairman of the Board of Moran
Enterprises Corporation since the Combination. In addition, he has been Chairman
of Mormac Marine Group, Inc. since 1988 and of Meridian Aggregates Company,
which owns and operates mines in the United States, since 1991, respectively,
and Vice Chairman of each of The Interlake Steamship Company and Lakes Shipping
Company, Inc. since 1988 and 1989, respectively. He served as Chairman and Chief
Executive Officer of Moore McCormack Resources during 1987 and 1988 and was
President and Chief Operating Officer of Moore McCormack Resources prior to that
time. Mr. Tregurtha serves on the Board of Directors of Brown & Sharpe
Manufacturing Company, FPL Group, Inc. and Fleet Financial Group, and is a
trustee of TIAA/CREF. Mr. Tregurtha is also a director and Chairman of the Board
of Moran Enterprises.

James R. Barker. Mr. Barker has been a director and is Vice Chairman of the
Board of the Company since June 1994 and a director and Vice Chairman of the
Board of Moran Enterprises since the Combination. In addition, he has been
Chairman of each of The Interlake Steamship Company and Lakes Shipping
Company, Inc. since 1987 and 1989, respectively, and Vice Chairman of Mormac
Marine Group, Inc. since 1988. From 1987 to 1988, he served as Chairman of
Mormac Marine Group, Inc. He served as Chairman and Chief Executive Officer
of Moore McCormack Resources from 1971 to 1987. Prior to joining Moore
McCormack Resources, Mr. Barker co-founded and was a principal of the
management consulting firm of Temple, Barker & Sloane, where he specialized
in consulting to the transportation industry. Mr. Barker is a member of the
Board of Directors of each of GTE Corporation and Pittston Corporation, is a
trustee for Eastern Enterprises and is the Chairman of the Committee of
Managers of the Skuld Protection and Indemnity Association.

Malcolm W. MacLeod. Mr. MacLeod has served as President, Chief Executive
Officer and director since the Acquisition and as a director and President,
Chief Executive Officer of Moran Enterprises since the Combination. Mr.
MacLeod served as President of the Predecessor from June 1987 until the
Acquisition and as Chief Executive Officer from April 1991 until the
Acquisition. In addition, Mr. MacLeod served as a director of the Predecessor
from 1984 until the Acquisition. Mr. MacLeod served as President and Chief
Executive Officer of Curtis Bay Towing Company, a Company subsidiary, from
1979 until 1987 and as Vice President of Curtis Bay from 1978 to 1979. Prior
to that, Mr. MacLeod started on Company tugs after his graduation from the
Massachusetts Maritime Academy in 1954 and has been with the Company and its
subsidiary companies in a variety of assignments since that time, with the
exception of two years' service in the United States Navy as a deck officer
on fleet tugs.

22
<PAGE>

Jeffrey J. McAulay. Mr. McAulay has served as the Vice President of Finance
and Administration and a director of the Company since April 1996. Mr.
McAulay is also the Vice President of Finance and Administration and a
director of Moran Enterprises. Mr. McAulay served as the Company's Controller
from the Acquisition until April 1996 and served as Controller of the
Predecessor from February 1992 until the Acquisition. From 1979 through 1992,
Mr. McAulay was employed by W.R. Grace & Co. He held various positions at
Grace's Specialty Chemicals Group including Manager of New Business Analysis
(from 1988 to 1992), Assistant Controller and briefly as Chief Financial
Officer of Grace's Japan Chemicals Business. Mr. McAulay began his career at
the auditing firm of Arthur Andersen & Co.

William P. Muller. In 1998, Mr. Muller was appointed Senior Vice President of
Moran Towing Corporation where he has been a director since 1995. Mr. Muller has
also been President of Moran Services Corporation since July 1995. From 1989
until July, 1995, he was the Vice President, Operations of Moran Towing &
Transportation Co., Inc., the Company's New York operating subsidiary and Vice
President of Moran Services Corporation. From 1981 through 1989, he was Vice
President and General Manager of Moran Towing of Florida Inc., the Company's
Jacksonville operating subsidiary. Mr. Muller joined Moran in 1977 as part of
the sales department and held a variety of positions before accepting the
Florida position. Prior to joining Moran, Mr. Muller served as a manager for
Prudential Grace Line's South American operations. He began his career with
Continental Insurance (MOAC) in the hull & underwriting department.

Edmond J. Moran, Jr. In 1998, Mr. Moran was appointed Senior Vice President
of Moran Towing Corporation, where he is also a director. Mr. Moran is also a
director of Moran Enterprises. From 1987 to 1998, Mr. Moran served as
President of Moran Mid-Atlantic Corporation (which was reorganized as the
Moran Mid-Atlantic Group as of January 1, 1997). From 1997 until 1998, Mr.
Moran served as Vice President, Business Development of Moran Towing
Corporation. Mr. Moran is currently a director of the Company and served as a
director of the Predecessor from 1984 until the Acquisition. From 1984 until
1987, Mr. Moran served as Vice President of Moran Towing & Transportation
Co., Inc. and directed all the activities of the Company's barge division.
From 1981 until 1983, Mr. Moran served as President of Moran's Texas
subsidiary. From 1976 until 1981, he served as Vice President and General
Manager of Jacksonville operations. From 1971, when he joined the Company,
until 1976, Mr. Moran served as a Sales Representative in the Harbor
Operations Department. Prior to that, following active duty in the United
States Navy, Mr. Moran joined the planning department of States Marine Lines,
Inc.

Alan L. Marchisotto. Effective January 1, 1998, Mr. Marchisotto was elected a
Vice President of the Company. He continues to be General Counsel and Secretary,
a position he has held since he joined the Company in 1982. From 1978 until
1982, he served as corporate and international counsel to Norlin Corporation, a
NYSE-listed company, where he directed the legal affairs of manufacturing and
sales subsidiaries in eleven countries and worked closely with senior management
in the negotiation and structuring of complex financing and business agreements.
Prior to that, he was engaged in private practice in New York City. Mr.
Marchisotto has also served a Vice President, General Counsel and Secretary of
Moran Enterprises Corporation since the Combination.

Andrew P. Langlois. Mr. Langlois has served as a director since the
Acquisition. Mr. Langlois has also served as a director of Moran Enterprises
since the Combination. Since January 1, 1999, Mr. Langlois was appointed
President of Mormac Marine Group, Inc. and from 1988 to 1998 was Vice
President of Mormac Marine Group. He is also a Vice President of Lakes
Shipping Company, (since 1989) and a Vice President and Director of Meridian
Aggregates Company (since 1991). From 1980 to 1988, Mr. Langlois was employed
by Moore McCormack Resources and was an officer from 1983 to 1988. Prior to
joining Moore McCormack in 1980, he was employed by the Electric Boat
Division of General Dynamics.

Mort Lowenthal. Mr. Lowenthal joined the Board of Directors in November,
1994. Mr. Lowenthal has also served as a director of Moran Enterprises
Corporation since the Combination. Mr. Lowenthal is a Senior Advisor at
Schroder & Co., Inc., an international investment bank. From 1980 to February
1995, Mr. Lowenthal was a Managing Director at Schroder & Co., Inc.

23
<PAGE>

Each director holds office until the next annual meeting of stockholders and
until his successor has been elected and has qualified. Officers are elected by
the Board of Directors and serve at its discretion.

Directors of the Company who are not employees of the Company or the Lakes Group
are reimbursed for their travel and other expenses incurred in connection with
their responsibilities, and are also paid $1,100 for every meeting attended.

24
<PAGE>

ITEM 11. EXECUTIVE COMPENSATION

The following table sets forth the annual and long-term compensation for the
five highest paid officers (named executive officers), as well as the total
compensation paid to, or earned by, each individual for the Company's fiscal
years ended December 31, 1998, 1997 and 1996:

ANNUAL
COMPENSATION
FISCAL ALL OTHER
NAME & POSITION YEAR SALARY BONUS COMPENSATION (1)
--------------- ---- ------ ----- ----------------
<S> <C> <C> <C> <C>
Paul R. Tregurtha 1998 $319,750 $ --- $ ---
Chairman of the Board 1997 315,952 --- ---
1996 300,000 --- ---

James R. Barker 1998 319,750 --- ---
Vice Chairman of the Board 1997 315,982 --- ---
1996 300,000 --- ---

Malcolm W. MacLeod 1998 348,756 65,000 22,913
President and Chief Executive Officer 1997 332,149 35,000 21,317
1996 319,374 32,000 20,067

Edmond J. Moran, Jr. 1998 180,640 15,000 22,913
President of Moran Mid-Atlantic Group 1997 174,535 10,000 21,317
1996 168,635 10,000 20,067

William P. Muller 1998 160,000 12,000 22,913
President of Moran Services Corporation 1997 150,000 10,000 20,027
1996 137,980 10,000 18,550

</TABLE>

(1) Amounts for 1998 includes contribution of $21,600, $21,600 and $21,600 made
by the Company to the Company's Profit Sharing Plan on behalf of Messrs.
MacLeod, Moran and Muller, respectively, in 1998. See "Company Plans-Profit
Sharing Plan." Also includes premiums of $1,317 paid by the Company in
respect of term life insurance policies insuring the lives of Messrs.
MacLeod, Moran and Muller, respectively, in 1998.

COMPANY PLANS

In connection with the Acquisition, the Company provided benefits to the
Company's non-union employees on terms, which are substantially similar to the
benefit plans of the Predecessor existing prior to the Acquisition. In addition,
as described below under "-1994 Stock Option Plan," the Company adopted a stock
option plan which became effective upon the consummation of the Acquisition.

25
<PAGE>

DEFINED BENEFIT PLANS

The following table shows the estimated annual benefits on a combined basis for
employees who retire at age 65, without regard to statutory maximums, for
various combinations of final average compensation and lengths of service under
the Moran Towing Corporation Restated Pension Plan and the Moran Towing
Corporation Supplemental Employee Retirement Plan (collectively, the "Plans").
The Restated Pension Plan is intended to be a qualified plan under Section
401(a) of the Internal Revenue Code of 1986, as amended (the "Code"), and the
Supplemental Employee Retirement Plan is not intended to be so qualified.

AVERAGE FIVE PROJECTED ANNUAL BENEFITS AT AGE 65
YEAR BASE YEAR OF SERVICE
SALARY 15 20 25 30 35
------ -- -- -- -- --
<S> <C> <C> <C> <C> <C>
$125,000 $27,450 $36,600 $ 45,750 $ 54,900 $ 64,050
150,000 33,075 44,100 55,125 66,150 77,175
175,000 38,700 51,600 64,500 77,400 90,300
200,000 44,325 59,100 73,875 88,650 103,425
225,000 49,950 66,600 83,250 99,900 116,550
250,000 55,575 74,100 96,625 111,150 129,675
275,000 61,200 81,600 102,000 122,400 142,800
300,000 66,825 89,100 111,375 133,650 155,925

</TABLE>

Generally, the monthly pension benefit under the Plans for named executive
officers is equal to 1% of the first $750 of average monthly compensation plus
1.5% of the remainder of the executive officer's average monthly compensation,
multiplied by the executive's number of years of credited service. In the case
of service years prior to 1975, the executive's benefit for such years is equal
to 25% of the executive's average monthly compensation multiplied by a fraction
equal to the executive's number of years of credited service divided by 35 and
adjusted for the normal form of payment under the Plans as in effect at that
time. The benefit in respect of years prior to 1975 is not reflected in the
table. For purposes of the preceding computations, an executive's average
monthly compensation is equal to the highest average of the executive's base
compensation (on a monthly basis) for any five consecutive calendar years during
the final 10 calendar years before retirement. For 1995, the base compensation
for each of the named executive officers is the same as the salary shown in the
summary compensation table under "Management-Executive Compensation." After
three years of service, a participant becomes 20% vested and vesting continues
in 20% increments for each year of service. At seven years the participant is
100% vested. The estimated number of credited years of service for named
executive officers is as follows: Malcolm MacLeod, 44 years; Edmond Moran, Jr.,
28 years and William P. Muller, 21 years.

PROFIT SHARING PLAN. As a retirement plan for substantially all shoreside
non-union employees, the Company established a tax-qualified defined
contribution plan (the "Profit Sharing Plan"). Contributions are made on an
annual basis in an amount determined at the sole discretion of the Board of
Directors of the Company, subject to certain maximum limitations set forth under
the Code. Contributions are based upon a percentage, generally 10% to 15%, of
each participant's compensation as defined in the Profit Sharing Plan.
Contributions are invested in various investment alternatives pursuant to
instructions received from each plan participant. After three years of service,
a participant becomes 20% vested and vesting continues in 20% increments for
each year of service. At seven years, the participant is 100% vested. Profit
Sharing Plan contributions are made on a fiscal year basis.

STOCK OPTION PLAN. The Company's 1994 Stock Option Plan (the "1994 Plan") was
adopted by the Company's Board of Directors and stockholders on June 11, 1994,
effective as of the consummation of the Acquisition, to provide an incentive to
select employees of the Company to remain in the employ of the Company and to
increase their personal interest in the success of the Company. The 1994 Plan
provided for the grant of options

26
<PAGE>

("1994 Stock Options") to purchase shares of the Company's Common Stock.
Effective as of October 30, 1998, the effective date of the Combination, 1994
Stock Options held by employees were exchanged for options ("1998 Stock
Options") to purchase units of capital stock of Moran Enterprises pursuant to
the Moran Enterprises Corporation 1998 Stock Option Plan (the "1998 Plan").
Each unit represents the right to purchase approximately one share of common
stock of Moran Enterprises and approximately 74 shares of preferred stock of
Moran Enterprises. Participation in the 1998 Plan is limited to employees of
Moran Enterprises and its subsidiaries (including the Company) designated by a
committee comprised of Messrs. Tregurtha and Barker, each of whom is ineligible
to receive awards under the 1998 Plan. Non-employee directors of the Company are
not eligible to participate.

The table sets forth certain information concerning the number of units covered
by stock options under the 1998 Plan as of December 31, 1998. At December 31,
1998 the fair market value is assumed to be equal to the exercise price. None of
the named executive officers exercised an option to purchase the Company's
Common Stock in 1998.

Fiscal Year-End Option Values

Number of
Securities Underlying Value of Unexercised
Shares Unexercised in-the-Money Options
Acquired Options at Fiscal at Fiscal Year-End ($)
on Value Year-end (Exercisable/
Name Exercise Realized (Exercisable/unexercisable) Unexercisable)
---- -------- -------- --------------------------- --------------

<S> <C> <C> <C> <C>
Paul R. Tregurtha 0 0 0 0

James R. Barker 0 0 0 0

Malcolm W. MacLeod(1) (1) (1) 0 0

Edmond J. Moran, Jr. 0 0 0 0

William P. Muller 0 0 463/0 0/0

</TABLE>

(1) Mr. MacLeod's options to purchase 1,322 units of Moran Enterprises' capital
stock were redeemed by Moran Enterprises in November, 1998. See "Certain
Relationships and Related Transactions".

27
<PAGE>

OPTION GRANTS IN FISCAL YEAR 1998

The following table sets forth certain information concerning grants of
stock options under the 1998 Plan to each of the Company's named executive
officers during the fiscal year ended December 31, 1998. All of the options
shown in the following table were acquired upon exchange of 1994 Stock Options
for 1998 Stock Options.

INDIVIDUAL GRANTS(1)
-----------------------------------------------------------------------------

% OF TOTAL POTENTIAL REALIZABLE
NUMBER OF OPTIONS VALUE AT ANNUAL RATES
UNITS GRANTED TO EXERCISE OF STOCK PRICE
UNDERLYING EMPLOYEES IN OR BASE APPRECIATION FOR
OPTIONS FISCAL PRICE EXPIRATION OPTION TERM (2)
NAME GRANTED (#) YEAR PER UNIT DATE 5% 10%
<S> <C> <C> <C> <C> <C> <C>
Paul R. Tregurtha -- - - -- - -

James R. Barker -- -- -- -- -- --

Malcolm W. MacLeod(3) 1,322 40.2% $151.29 7/11/99 (3) (3)

Edmond J. Moran, Jr. -- -- -- -- -- --

William P. Muller 463 14.1% $151.19 7/12/99 $192.96 $243.49

</TABLE>

(1) Each of these options was granted pursuant to the 1998 Plan and is subject
to the terms of such plan. These options were granted at an exercise price
equivalent to the exercise price of the 1994 Stock Options held by such
employee.

(2) In accordance with the rules of the Securities and Exchange Commission,
shown are the hypothetical gains or "option spreads" that would exist for
the respective options. These gains are based on assumed rates of annual
compounded stock price appreciation of 5% and 10% from the date the option
was granted over the full option term. The 5% and 10% assumed rates of
appreciation are mandated by the rules of the Commission and do not
represent the Company's estimate or projection of future increases in the
price of such stock.

(3) Mr. MacLeod's options to purchase 1,322 units of Moran Enterprises' capital
stock were redeemed by Moran Enterprises in November, 1998. See "Certain
Relationships and Related Transactions".

28
<PAGE>

COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
The Compensation Committee of the Company's Board of Directors is comprised of
Messrs. Tregurtha, Barker and MacLeod. Messrs. Tregurtha, Barker and MacLeod
have served in the positions described under "Executive Officers and Directors
of the Registrant". Generally such relationships can create an opportunity for
conflicts of interest in compensation decisions. Other than as set forth below,
none of the members of the Committee has any other relationship with other
entities that would require additional disclosure. Messrs. Tregurtha and Barker
serve in various capacities, including serving as directors, of Moran
Enterprises and of Mormac Marine Group, Inc., Meridian Aggregates Company and
Lakes Shipping, and in the case of Mr. Tregurtha, each of the Turecamo Entities.
Mr. Langlois, a director of the Company and of Moran Enterprises, is an
executive officer of Mormac Marine Group, Inc., Meridian Aggregates Company and
Lakes Shipping. Mr. MacLeod serves in various capacities, including serving as
director, of Moran Enterprises and each of the Turecamo Entities. The boards of
directors of such entities perform the functions of compensation committees. In
addition, the Company provides ship docking and undocking services to Mormac, a
company which is owned by Messrs. Barker and Tregurtha and certain members of
their families and as to which Messrs. Barker and Tregurtha are principal
executive officers. Mormac operates three Coronado class oil tankers in the
foreign trade and manages tankers for others in the Jones Act. During 1998,
Mormac paid $232,800 for ship docking services performed by the Company. All
such services were provided on arms'-length terms at customary rates. Management
has been informed that Mormac expects to continue to use the Company's tug
services in each instance where Mormac's tankers call on a harbor which the
Company services. All such services will be performed on arms'-length terms and
conditions. All of the members of the Compensation Committee are also parties to
stockholder agreements with the Company.

The Company also provides tug services to, and has provided tug services to
it by, the Turecamo Entities. Since the Combination, the Turecamo Entities
paid $261,800 for tug services performed by the Company, and were paid
$363,400 by the Company for tug services performed by them for the Company.
Management expects to continue to provide, and have provided to it, such tug
services. In addition, as a result of the Combination, beginning January 1,
1999, the Company began providing administrative services to the Turecamo
Entities and the majority of the Turecamo employees became Company employees
and as such became eligible for coverage under the Company's employee benefit
plans. The Company also shares office space with the Turecamo Entities. As
compensation for such administrative services and use of such office space,
the Company will be paid a management fee by the Turecamo Entities estimated
to be between $3.0 and $4.0 million for the full year 1999. All services
between the Company and the Turecamo Entities have been and will continue to
be provided on arms'-length terms and conditions.

The Company has entered into the Insurance Agreement with the Mormac Group. The
Turecamo Entities have also joined the agreement for hull insurance. Messrs.
Tregurtha, Barker and Langlois are officers, directors and/or direct or indirect
shareholders of some or all of the entities in the Mormac Group. The Company and
the Mormac Group entered into the Insurance Agreement in an effort to reduce
insurance expenses by obtaining lower premiums through group purchases of
insurance and through higher deductibles. The Insurance Agreement also provides
for allocation among the parties of any risk arising out of the increases in
insurance deductibles. Pursuant to the Insurance Agreement, the Company and the
Mormac Group agreed to share any increased insurance claims expense required to
be borne by a party as a result of insurance claims which exceed historical
deductibles but are less than the new, increased deductibles. Allocations of any
increased insurance claims expense is based upon the historical claims
experience (in excess of historical deductibles) for each party to the
agreement. In the current policy year, 75% of any additional insurance claims
expense attributable to the higher deductibles will be borne by the Company and
25% of any such additional insurance claims expense will be borne by the Mormac
Group. Amounts payable to the Company from members of the Mormac Group totaled
$541,300 at December 31, 1998. The Company believes that the terms of the
Insurance Agreement which was prepared in consultation with an independent
insurance broker, are similar to those that would be obtained in an arms'-length
transaction.

As described in item 1, the Combination was financed through the New Senior
Credit Facility. A portion of the New Senior Credit Facility was used (i) to
finance the Combination and to pay related fees and expenses and (ii) to repay
existing debt of the Turecamo Entities. The New Senior Credit Facility also
includes a $40 million revolving credit facility, portions of which may be used
to finance working capital and capital expenditures of Moran Enterprises and its
subsidiaries, including the Company and the Turecamo Entities. The Company and
its domestic subsidiaries have guaranteed the revolving credit facility to the
extent that funds are drawn for their benefit, and in that regard have granted a
first priority lien on accounts receivable and inventory to secure the guaranty.
The Company's floating equipment presently continues to secure its Notes. See
"Management's Discussion and Analysis of Financial Condition and Results of
Operation -- Liquidity and Capital Resources".

29
<PAGE>

ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

The following table sets forth certain beneficial ownership information as of
March 25, 1999, concerning the Company's Common Stock with respect to (1) each
person known by the Company to be a beneficial owner of more than 5% of the
outstanding shares of the Company's Common Stock, (2) each director of the
Company, (3) each named executive officer of the Company, and (4) all directors
and executive officers of the Company as a group.

<TABLE>
<CAPTION>
NUMBER
DIRECTORS, NAMED OFFICERS AND OF
5% BENEFICIAL OWNERS (1) SHARES (2) PERCENTAGE
------------------------ ---------- ----------
<S> <C> <C>
Moran Enterprises Corporation---------------------------------- 44,600 100.0%
Lakes Shipping Company, Inc.(3)-------------------------------- 44,600 100.0%
Paul R. Tregurtha (4)------------------------------------------ 44,600 100.0%
James R. Barker (5)-------------------------------------------- 44,600 100.0%
Malcolm W. MacLeod--------------------------------------------- 0 0
Edmond J. Moran, Jr.------------------------------------------- 0 0
Andrew P. Langlois--------------------------------------------- 0 0
Alan Marchisotto----------------------------------------------- 0 0
Jeffrey J. McAulay--------------------------------------------- 0 0
William P. Muller---------------------------------------------- 0 0
Mort Lowenthal------------------------------------------------- - -
Directors and executive officers as a group (9 persons) (4), (5) 44,600 100.0%

</TABLE>

(1) Unless otherwise indicated, the business address of each beneficial owner
of more than 5% of the Company's Common Stock is Three Landmark Square,
Stamford, Connecticut 06901.
(2) For purposes of computing the percentage of outstanding shares of the
Company's Common Stock held by each person or entity, a person or entity is
deemed to have "beneficial ownership" of any shares of the Company's Common
Stock which such person or entity has the right to acquire within 60 days
after the date of the report. Any such shares are deemed to be outstanding
for purposes of computing percentages of beneficial ownership. Unless
otherwise indicated, shares of the Company's Common Stock are considered
beneficially owned by a person or entity if such person or entity has or
shares voting or investment power with respect to such shares. As a result,
the same security may be beneficially owned by more than one child and
entity and, accordingly, in some cases, the same shares are listed opposite
more than one name in this table.
(3) Lakes Shipping owns 49,583 shares of common stock of Moran Enterprises, or
51.3% of the voting stock of Moran Enterprises. As a result, Lakes Shipping
may be deemed to beneficially own the 44,600 shares of the Company's common
stock held by Moran Enterprises.
(4) Mr. Tregurtha owns directly 10,536 shares of common stock of Moran
Enterprises. In addition, Mr. Tregurtha beneficially owns 44.6% of the
capital stock of, and serves as Vice Chairman of, Lakes Shipping.
Therefore, Mr. Tregurtha may be deemed to beneficially own the 49,583
shares of common stock of Moran Enterprises beneficially owned by Lakes
Shipping. As a result, Mr. Tregurtha may be deemed to beneficially own the
44,600 shares of the Company's common stock held by Moran Enterprises.
(5) Mr. Barker owns directly 3,818 shares of common stock of Moran Enterprises.
In addition, Mr. Barker and certain members of his family beneficially own
in the aggregate 44.6% of the capital stock of Lakes Shipping. Mr. Barker
also serves as Chairman of Lakes Shipping. Therefore, Mr. Barker may be
deemed to beneficially own the 49,583 shares of common stock of Moran
Enterprises beneficially owned by Lakes Shipping. As a result, Mr. Barker
may be deemed to beneficially own the 44,600 shares of the Company's common
stock held by Moran Enterprises. Three of Mr. Barker's adult children own,
in the aggregate, 5,727 shares of common stock of Moran Enterprises. Mr.
Barker disclaims beneficial ownership of all 5,727 shares that are owned by
his children.

ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

On October 30, 1998, the Company completed the Combination with the Turecamo
Entities. Pursuant to the relevant agreements, the existing equityholders of
the Company contributed all of their shares of capital stock of the Company
to Moran Enterprises in exchange for (i) newly-issued shares of common stock
of Moran Enterprises which represent a substantial majority (but less than
80%) of the common stock of Moran Enterprises and (ii) newly-issued shares of
Moran Enterprises preferred stock. As

30
<PAGE>

a result, Moran Enterprises became the new parent of both the Company and the
Turecamo Entities. The Notes are not guaranteed by Moran Enterprises or the
Turecamo Entities.

Certain members of management (the "Management Group") entered into stockholder
agreements (the "Stockholder Agreements") concurrently with the consummation of
the Combination. All members of the Management Group were issued shares of the
capital stock of Moran Enterprises in exchange for a portion of their shares of
the Company's Common Stock. The Stockholder Agreements place the following
restrictions upon the transfer of the capital stock of Moran Enterprises by each
member of the Management Group: (i) the members of the Management Group may not
transfer the capital stock of Moran Enterprises to any non-U.S. citizen, for
purposes of the Jones Act (a "Foreigner"), and (ii) the members of the
Management Group may not transfer shares of the capital stock of Moran
Enterprises to any other individuals or entities except in certain limited
situations, such as through obtaining the consent of Moran Enterprises to the
transfer, the exercise of a "Put" (as defined below) with respect to these
shares or the transfer of these shares to ancestors, descendants or a spouse.
The Stockholder Agreements also provide that each member of the Management Group
has the right to require Moran Enterprises to purchase (a "Put") all of such
member's shares of the capital stock of Moran Enterprises at any time after 180
days have elapsed following the date on which the member ceases to be an
employee of any of Moran Enterprises, its Subsidiaries or its affiliates, with
certain limitations. Moran Enterprises has the right to purchase (a "Call") the
shares of the capital stock of Moran Enterprises of each member of the
Management Group upon the occurrence of certain events, including the death of
such member, the making by such member of a general assignment for the benefit
of creditors, the filing of a voluntary or involuntary petition for bankruptcy
or the cessation of such member's employment with Moran Enterprises, its
subsidiaries or affiliates. The Stockholder Agreements for all members of the
Management Group, provide that the purchase price of the shares being either
purchased or sold through such a Put or Call will be the fair market value of
such shares as determined by an investment banking firm of national standing.
The Stockholder Agreements also provide that if Moran Enterprises grants
registration rights to any executive officer, it will at such time grant
proportionate registration rights to the members of the Management Group.

The members of the Lakes Group entered into stockholder agreements with Moran
Enterprises prohibiting the transfer of the capital stock of Moran Enterprises
to any Foreigner.

In November 1998, Moran Enterprises redeemed the then-exercisable options held
by Mr. MacLeod for approximately $920,000 (less the aggregate exercise price of
the options).

At December 31, 1998, Moran Enterprises owed the Company $1.4 million.

31
<PAGE>

PART IV

ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K

(a) Documents Filed as Part of the Report

(1) Financial Statements - The Company

The following Consolidated Financial Statements of the Company and its
subsidiaries are included in this Report:

<S> <C>
Report of Independent Accountants . . . . . . . . . . . . . . . F-1

Consolidated Balance Sheets at December 31, 1997
and December 31, 1998 . . . . . . . . . . . . . . . . . . . . . F-2 to F-3

Consolidated Statements of Income for the Years Ended
December 31, 1996, December 31, 1997 and December 31, 1998. . . F-4

Consolidated Statements of Cash Flows for the Years Ended
December 31, 1996, December 31, 1997 and December 31, 1998. . . F-5

Consolidated Statement of Stockholder's Equity for the
Years Ended December 31, 1996, December 31, 1997 and
December 31, 1998 . . . . . . . . . . . . . . . . . . . . . . . F-6

Notes to Consolidated Financial Statements. . . . . . . . . . . F-7 to F-22

</TABLE>

32
<PAGE>

(3) Exhibits

The following is a list of Exhibits to this Report. Exhibits "10.18-10.20"
are management contracts or compensatory plans or arrangements required to be
filed as Exhibits to this report pursuant to Item 14(c) of this report.

Exhibit No. Description of Document
- ----------- -----------------------

3.1(1) Certificate of Incorporation of the Registrant

3.2(1) By-Laws of the Registrant.

4.1(1) Indenture, dated as of July 11, 1994, among the Registrant, the
Guarantors named therein and Fleet National Bank (formerly Shawmut
Bank Connecticut, National Association), as Trustee, relating to the
Notes (including forms of Notes and Guarantees).

4.1(a)(2) Supplemental Indenture No. 1, dated December 29, 1994.

4.1(b)(3) Supplemental Indenture No. 2, dated January 2, 1996.

4.1(c)(4) Supplemental Indenture No. 3, dated December 31, 1996

4.1(d)(8) Supplemental Indenture No. 4, dated December 31, 1997.

4.1(e) Supplemental Indenture No. 5, dated October 28, 1998.

4.2(1) Form of Preferred Ship Mortgage, dated July 11, 1994, in favor of
Fleet National Bank (formerly Shawmut Bank Connecticut, National
Association), as Trustee.

4.3(1) Form of Preferred Fleet Mortgage, dated July 11, 1994, in favor of
Fleet National Bank (formerly Shawmut Bank Connecticut, National
Association), as Trustee.

10.1(9) Stock Exchange Agreement, dated as of August 31, 1998, among Moran
Enterprises Corporation, Moran Transportation Company, the Moran
Stockholders named therein, Turecamo Maritime, Inc., White Stack
Maritime Corp., Turecamo of Savannah, Inc., Turecamo Environmental
Services, Inc., and the Turecamo Stockholders named therein
(schedules and exhibits omitted--the Company agrees to furnish a copy
of any schedule or exhibit to the Commission upon request).

10.2(9) Credit Agreement, dated as of October 30, 1998, among Moran
Enterprises Corporation, the financial institutions named therein,
and Fleet Bank, N.A., as administrative agent (schedules and exhibits
omitted--the Company agrees to furnish a copy of any schedule or
exhibit to the Commission upon request).

10.3(9) Security Agreement, dated October 30, 1998, from Moran Transportation
Company and certain of its subsidiaries to Fleet Bank, N.A., as
administrative agent.

10.4(9) Guaranty, dated October 30, 1998, from Moran Enterprises Corporation
and certain of its subsidiaries, in favor of Fleet Bank, N.A., as
administrative agent.

10.7(6) Licensed Agreement, effective June 10, 1995, between Seafarers
International Union of North America, Atlantic, Gulf, Lakes and
Inland Waters District, AFL - CIO, and Moran Towing of Texas Inc.

10.8(6) Unlicensed Agreement, effective June 10, 1995, between Seafarers
International Union of North America, Atlantic, Gulf, Lakes and
Inland Waters District, AFL - CIO, and Moran Towing of Texas Inc.

10.9(8) Agreement, effective May 1, 1996, between Seafarers International
Union of North America, Atlantic, Gulf, Lakes and Inland Waters
District, AFL - CIO, and Moran Towing of Pennsylvania and Moran
Towing of Maryland, divisions of Moran Towing Corporation.

33
<PAGE>

10.10(8) Licensed Agreement, effective November 24, 1996, between American
Maritime Officers and Moran Mid-Atlantic Corporation, Moran Towing of
Pennsylvania Division.

10.11(8) Memorandum of Agreement between Local 333, United Marine Division,
International Longshoreman's Association, AFL-CIO, and Moran Towing &
Transportation Co., Inc.

10.12(8) Agreement, effective May 1, 1997, between International Organization
of Masters, Mates & Pilots and Moran Towing of Florida, Inc.

10.18 Moran Enterprise Corporation 1998 Stock Option Plan of the
Registrant.

10.19 Form of Moran Enterprise Corporation's 1998 Stock Option Agreement.

10.20(1) Moran Towing Corporation and Subsidiaries Supplemental Employee
Retirement Plan.

10.21(5) Marine Insurance Additional Retention Agreement between Global Marine
Enterprises Ltd., Interlake Steamship Company, Lakes Shipping
Company, Inc., Moran Towing Corporation and Mormac Marine Transport,
Inc..

12.1 Statement regarding computation of ratio of earnings to fixed
charges.

21.1 List of Subsidiaries.

27 Financial Data Schedule.

____________

(1) Filed as an Exhibit to the Registrant's Registration Statement on
Form S-1 (No. 33 - 82624) and incorporated herein by reference.

(2) Filed as an Exhibit to the Registrant's Form 10-K for the year ended
December 31, 1994 and incorporated herein by reference.

(3) Filed as an Exhibit to the Registrant's Form 10-Q for the quarterly
period ended March 31, 1996 and incorporated herein by reference.

(4) Filed as an Exhibit to the Registrant's Form 10-K for the year ended
December 31, 1996 and incorporated herein by reference.

(5) Filed as an Exhibit to the Registrant's Form 10-Q for the quarterly
period ended September 30, 1995 and incorporated herein by reference.

(6) Filed as an Exhibit to the Registrant's Form 10-K for the year ended
December 31, 1995 and incorporated herein by reference.

(7) Filed as an Exhibit to the Registrant's Form 10-Q for the quarterly
period ended June 30, 1997, and incorporated herein by reference.

(8) Filed as an Exhibit to the Registrant's Form 10-K for the year ended
December 31, 1997 and incorporated herein by reference.

(9) Filed as an Exhibit to the Registrant's Form 10-Q for the quarterly
period ended September 30, 1998, and incorporated herein by
reference.

34
<PAGE>

(b) Reports on Form 8-K. The following reports on Form 8-K were filed during
the last quarter of the year covered by this report.:

(i) Current Report on Form 8-K, dated November 25, 1998, attaching press
release announcing commencement of tender offer for the Notes.

(ii) Current Report on Form 8-K, dated December 29, 1998, attaching press
release announcing completion of tender offer for the Notes.

35
<PAGE>

SIGNATURES

Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange
Act of 1934, the registrant has duly caused this report to be signed on its
behalf by the undersigned, thereunto duly authorized.

MORAN TRANSPORTATION COMPANY
(Registrant)

March 26, 1999 /s/ Jeffrey J. Mcaulay
-----------------------------------------------
Jeffrey J. McAulay
Vice President of
Finance and Administration
(Principal Financial Officer) and Director

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.

March 26, 1999 /s/ Paul R. Tregurtha
-----------------------------------------------
Paul R. Tregurtha
Chairman of the Board and Director

March 26, 1999 /s/ James R. Barker
-----------------------------------------------
James R. Barker
Vice-Chairman of the Board and Director

March 26, 1999 /s/ Malcolm W. Macleod
-----------------------------------------------
Malcolm W. MacLeod
President, Chief Executive Officer and Director

36
<PAGE>

SIGNATURES

March 26, 1999 /s/ Edmond J. Moran, Jr.
-----------------------------------------------
Edmond J. Moran, Jr.
Director

March 26, 1999 /s/ Robert J. Patten
-----------------------------------------------
Robert J. Patten
Controller (Principal Accounting Officer)

March 26, 1999 /s/ Andrew P. Langlois
-----------------------------------------------
Andrew P. Langlois
Director

March 26, 1999 /s/ Mort Lowenthal
-----------------------------------------------
Mort Lowenthal
Director

SUPPLEMENTAL INFORMATION TO BE FURNISHED
WITH REPORTS FILED PURSUANT TO SECTION 15(D) OF
THE ACT BY REGISTRANTS WHICH HAVE NOT REGISTERED
SECURITIES PURSUANT TO SECTION 12 OF THE ACT

The registrant has not sent, and does not at present intend to send, to its
security holders either: (1) An annual report to security-holders covering the
registrant's last fiscal year; or (2) A proxy statement, form of proxy or other
proxy soliciting material with respect to any annual or other meeting of
security-holders.

37
<PAGE>

REPORT OF INDEPENDENT ACCOUNTANTS

To the Board of Directors and Stockholder of
Moran Transportation Company

In our opinion, the accompanying consolidated balance sheets and related
consolidated statements of income, of cash flows and of changes in stockholder's
equity present fairly, in all material respects, the financial position of Moran
Transportation Company and its subsidiaries (the "Company") at December 31, 1998
and 1997, and the results of their operations and their cash flows for each of
the three years in the period ended December 31, 1998, in conformity with
generally accepted accounting principles. These financial statements are the
responsibility of the Company's management; our responsibility is to express an
opinion on these financial statements based on our audits. We conducted our
audits of these statements in accordance with generally accepted auditing
standards which 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, assessing the
accounting principles used and significant estimates made by management, and
evaluating the overall financial statement presentation. We believe that our
audits provide a reasonable basis for the opinion expressed above.

PricewaterhouseCoopers LLP

Stamford, Connecticut
February 18, 1999

F-1
<PAGE>

MORAN TRANSPORTATION COMPANY
AND SUBSIDIARIES

Consolidated Balance Sheets
(Dollars in thousands)

<TABLE>
<CAPTION>
DECEMBER 31,
------------
1997 1998
-------- --------
<S> <C> <C>
ASSETS
Current assets
Cash and cash equivalents ....................................... $ 9,945 $ 4,349
Accounts receivable, less allowance for doubtful accounts of $288
and $448 at December 31, 1997 and 1998, respectively ............ 14,319 14,973
Inventory (note 4) .............................................. 4,161 3,669
Unexpired insurance and other prepaid expenses .................. 2,487 3,701
-------- --------
Total current assets ......................................... 30,912 26,692

Investment in joint venture (note 6) .............................. 3,164 3,340
Insurance claims receivable ....................................... 2,563 3,176
Fixed assets, net (note 3) ........................................ 119,920 125,359
Other assets ...................................................... 3,731 2,967
-------- --------

Total assets ...................................................... $160,290 $161,534
======== ========
</TABLE>

See accompanying notes to consolidated financial statements

F-2
<PAGE>

MORAN TRANSPORTATION COMPANY
AND SUBSIDIARIES

Consolidated Balance Sheets
(Dollars in thousands)

<TABLE>
<CAPTION>
DECEMBER 31,
------------
1997 1998
-------- --------
<S> <C> <C>
LIABILITIES AND STOCKHOLDER'S EQUITY

Current liabilities
Trade accounts payable ........................................... $ 3,602 $ 6,617
Current portion of long-term debt (note 8) ...................... 168 --
Accounts payable to joint venture ................................ 477 2,295
Accrued interest payable ......................................... 4,331 4,254
Other accrued liabilities ........................................ 3,936 2,441
Backpay liability ................................................ 837 787
Income taxes payable (note 9) .................................... -- 243
-------- --------
Total current liabilities ..................................... 13,351 16,637

Long-term debt (note 8) ............................................ 83,252 78,997
Insurance claims reserves .......................................... 7,227 7,984
Deferred income taxes (note 9) ..................................... 32,450 31,768
Postretirement benefits other than pensions (note 10) .............. 4,321 4,729
Other liabilities .................................................. 5,045 4,060
-------- --------
Total liabilities ............................................. 145,646 144,175

Commitments and contingencies (notes 11 and 12)

Mandatorily redeemable capital stock 4,000 shares outstanding
at December 31,1997 and none at December 31, 1998 ............... 1,000 --

Stockholder's Equity
Common stock, par value $0.01 per share authorized-100,000 shares
issued and outstanding 40,600 shares at December 31, 1997 and
44,600 shares at December 31, 1998 .............................. 1 1

Capital surplus ................................................. 10,149 11,149
Retained earnings ............................................... 3,494 6,209
-------- --------
Total stockholders' equity ...................................... 13,644 17,359
-------- --------

Total liabilities and stockholder's equity ...................... $160,290 $161,534
======== ========
</TABLE>

See accompanying notes to consolidated financial statements

F-3
<PAGE>

MORAN TRANSPORTATION COMPANY
AND SUBSIDIARIES

Consolidated Statements of Income
(Dollars in thousands, except share and per share amounts)

<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
-----------------------
1996 1997 1998
-------- --------- ---------
<S> <C> <C> <C>
Operating revenue .......................................... $ 91,458 $ 100,526 $ 107,448
Cost of operations
Operating expenses ...................................... 57,451 66,090 70,195
Depreciation ............................................ 7,719 7,769 8,108
-------- --------- ---------
Total cost of operations ............................... 65,170 73,859 78,303
-------- --------- ---------
Gross profit ............................................... 26,288 26,667 29,145
General and administrative expenses ........................ 14,283 13,755 14,914
-------- --------- ---------
Operating income ........................................... 12,005 12,912 14,231
Interest expense ........................................... (10,132) (10,026) (10,266)
Interest income ............................................ 146 346 437
Equity in (loss)/income from joint venture (note 6) ........ (66) (727) 176
Other income/(expense), net ................................ 160 (273) 102
-------- --------- ---------
Income before provision for income taxes ................... 2,113 2,232 4,680
Provision for income taxes (note 9) ........................ 808 613 1,965
-------- --------- ---------
Net income .............................................. $ 1,305 $ 1,619 $ 2,715
======== ========= =========

Earnings per share
Basic ................................................... $ 29.26 $ 36.30 $ 60.87
======== ========= =========
Diluted ................................................. $ 28.56 $ 35.20 $ 59.02
======== ========= =========

Weighted average number of shares outstanding (in thousands)
Basic ................................................... 44.6 44.6 44.6
======== ========= =========
Diluted ................................................. 45.7 46.0 46.0
======== ========= =========
</TABLE>

See accompanying notes to consolidated financial statements

F-4
<PAGE>

MORAN TRANSPORTATION COMPANY
AND SUBSIDIARIES

Consolidated Statements of Cash Flows
(Dollars in thousands)

<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
-----------------------
1996 1997 1998
-------- -------- --------
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net income .................................... $ 1,305 $ 1,619 $ 2,715

ADJUSTMENTS TO RECONCILE NET INCOME TO NET
CASH PROVIDED BY OPERATING ACTIVITIES:
Depreciation and amortization ................. 11,092 11,666 13,496
Deferred income taxes ......................... (1,898) (1,661) (682)
Equity in loss/(income) from joint venture .... 66 727 (176)
Loss on disposal of floating equipment ........ 128 90 --

Changes in operating assets and liabilities:
Accounts receivable ....................... (697) (1,575) (654)
Other current assets ...................... (182) 219 (722)
Accounts payable and accrued expenses ..... 2,811 (1,740) 3,211
Income taxes payable ...................... (69) (926) 243
Insurance claims receivable ............... (629) (217) (613)
Insurance claims reserve .................. 1,658 1,238 757
Other assets and liabilities .............. (2,158) (679) (578)
-------- -------- --------
Net cash provided by operating activities .......... 11,427 8,761 16,997
-------- -------- --------

CASH FLOWS FROM INVESTING ACTIVITIES
Capital expenditures .......................... (5,110) (12,713) (18,170)
Capital contribution to joint venture ......... -- (1,000) --
Net proceeds from constructive total loss ..... -- 2,800 --
Proceeds from sale of leasehold interest ...... -- 2,850 --
-------- -------- --------
Net cash used for investing activities ............. (5,110) (8,063) (18,170)
-------- -------- --------

CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds from borrowings ..................... 2,250 3,420 --
Repayment of debt ............................ (5,664) -- (4,423)
Payment of financing costs ................... (82) -- --
-------- -------- --------
Net cash (used for)/provided by financing activities (3,496) 3,420 (4,423)
-------- -------- --------
Net increase/(decrease) in cash and cash equivalents 2,821 4,118 (5,596)
Cash and cash equivalents at beginning of period ... 3,006 5,827 9,945
-------- -------- --------
Cash and cash equivalents at end of period ......... $ 5,827 $ 9,945 $ 4,349
======== ======== ========

Cash paid during period for
Interest ...................................... $ 9,816 $ 9,579 $ 9,864
======== ======== ========
Income taxes .................................. $ 2,742 $ 3,656 $ 2,526
======== ======== ========
</TABLE>

See accompanying notes to consolidated financial statements

F-5
<PAGE>

MORAN TRANSPORTATION COMPANY
AND SUBSIDIARIES

Consolidated Statements of Changes in Stockholder's Equity
(Dollars in thousands)

<TABLE>
<CAPTION>
COMMON CAPITAL RETAINED
STOCK SURPLUS EARNINGS TOTAL
----- ------- -------- -----
<S> <C> <C> <C> <C>
Balance at December 31, 1995....................... $1 $ 9,999 $ 570 $10,570

Transfer of mandatorily redeemable capital stock... - 150 - 150

Net income......................................... - - 1,305 1,305
-- ------- ------ -------

Balance at December 31, 1996....................... $1 $10,149 $1,875 $12,025

Net income......................................... - - 1,619 1,619
-- ------- ------ -------

Balance at December 31, 1997....................... $1 $10,149 $3,494 $13,644
-- ------- ------ -------

Exchange of mandatorily redeemable capital stock... - 1,000 - 1,000

Net income......................................... - - 2,715 2,715
-- ------- ------ -------

Balance at December 31, 1998....................... $1 $11,149 $6,209 $17,359
== ======= ====== =======
</TABLE>

F-6
<PAGE>

MORAN TRANSPORTATION COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(DOLLARS IN THOUSANDS)

THREE-YEAR PERIOD ENDED DECEMBER 31, 1998

(1) MORAN TRANSPORTATION COMPANY

Moran Transportation Company ("Moran" or the "Company") is a Delaware
corporation, incorporated on June 2, 1994. Moran was organized to acquire (the
"Acquisition") all of the outstanding common stock of Moran Towing Corporation
(the "Predecessor"), a company which provided tug services and marine
transportation services, primarily on the East and Gulf coasts of the United
States. The Company manages its business as one operating segment. On July 11,
1994, the Acquisition was consummated and was accounted for as a purchase. In
connection with the Acquisition, the Predecessor transferred its 20% equity
interest in four partnerships to entities formed by the stockholders of the
Predecessor. When the Company acquired the Predecessor, certain contingent
liabilities of the Predecessor, primarily related to certain limited and
defined guarantees given by the Predecessor, were assumed. These liabilities
were fully reserved and funded by placing $13.6 million in escrow. In February
1997, $12.0 million of the escrow amount was released to the former
shareholders upon the release of the Company from the partnership guarantees.
There was no impact on the Company, other than assets and liabilities being
reduced. The Company released the remaining $1.6 million escrow during the
third quarter when a subsidiary of the Company terminated its leasehold
interest in Jakobson Shipyard. The loss related to the lease termination was
not material.

On October 30, 1998, the Company completed a combination (the "Combination")
with Turecamo Maritime, Inc., a Delaware corporation, and certain of its
affiliated entities (the "Turecamo Entities"). The Turecamo Entities operate
33 tugboats and seven barges along the East Coast of the United States.
Pursuant to the relevant agreements, the existing equityholders of the Company
contributed all of their shares of capital stock of the Company to Moran
Enterprises Corporation ("Moran Enterprises") in exchange for (i) newly-issued
shares of common stock of Moran Enterprises which represents a substantial
majority (but less than 80%) of the common stock of Moran Enterprises and (ii)
newly-issued shares of Moran Enterprises preferred stock. Simultaneously, the
existing stockholders of the Turecamo Entities contributed all of their shares
of capital stock of each of the Turecamo Entities to Moran Enterprises in
exchange for (i) newly-issued shares of common stock of Moran Enterprises,
including certain shares which vest if certain financial criteria are met,
which represent a minority interest in the common stock of Moran Enterprises,
and (ii) an aggregate cash amount of $45.0 million. As a result, Moran
Enterprises became the new parent of both the Company and the Turecamo
Entities. The Company's 11 3/4% First Preferred Ship Mortgage Notes due 2004
(the "Notes") are not guaranteed by Moran Enterprises or the Turecamo
Entities.

(2) SUMMARY OF ACCOUNTING POLICIES

PRINCIPLES OF CONSOLIDATION

The consolidated financial statements include the accounts of Moran
Transportation Company and its subsidiaries. The financial statements also
include a 50% owned joint venture in a marine tank barge operation which is
accounted for under the equity method of accounting. All material intercompany
items and transactions are eliminated in consolidation.

F-7
<PAGE>

MORAN TRANSPORTATION COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(DOLLARS IN THOUSANDS)

THREE-YEAR PERIOD ENDED DECEMBER 31, 1998

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 reported amounts of assets and liabilities and disclosures, at
the date of the financial statements. Similarly, estimates and assumptions are
required for the reporting of revenues and expenses. Actual results could
differ from the estimates that were used.

RECENT FINANCIAL ACCOUNTING PRONOUNCEMENTS

Financial Accounting Standards No. 133 (FAS 133) - "Accounting for Derivative
Instruments and Hedging Activities" was issued in 1998. This statement
establishes accounting and reporting standards for derivative instruments. It
requires an entity to recognize all derivatives as either assets or
liabilities in the statement of financial position and measure those
instruments at fair value. The Company will adopt this new standard as of
January 1, 2000. Management does not expect the adoption to have a material
impact on the Company's results of operations, however, the impact on the
Company's financial statements is dependent upon the market values of the
Company's derivatives and related financial instruments at the date of
adoption.

REVENUE RECOGNITION

Tug and barge revenue is recognized as services are performed.

DRYDOCKING EXPENSES

Drydocking and related costs are capitalized when incurred and amortized over
the period until the next drydocking, usually 30 months.

FIXED ASSETS/DEPRECIATION

Fixed assets include the cost of land, building, floating equipment,
capitalized drydocking costs, construction work-in-progress, improvements to
leaseholds and equipment. Interest incurred during the construction of
floating equipment is capitalized. Depreciation is provided on the
straight-line method over the estimated useful lives of the assets which range
from three to twenty-five years. Major renewals and betterments are
capitalized, while replacements, maintenance and repairs which do not improve
or extend the life of the assets are expensed.

INCOME TAXES

The Company and its wholly owned domestic subsidiaries file a consolidated
Federal income tax return. The Company accounts for deferred income taxes
using the asset and liability method as prescribed under Financial Accounting
Standard No. 109, "Accounting for Income Taxes" (FAS 109). The Company
provides a valuation allowance if it is more likely than not that some portion
or all of the deferred tax asset will not be realized.

CASH AND CASH EQUIVALENTS

The Company considers all highly liquid investments having original maturities
of three months or less to be cash equivalents.

F-8
<PAGE>

MORAN TRANSPORTATION COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(DOLLARS IN THOUSANDS)

THREE-YEAR PERIOD ENDED DECEMBER 31, 1998

INVENTORY

Inventories are valued at the lower of cost (first-in, first-out basis) or
market and include fuel, replacement parts, supplies and repair materials.

DEFERRED FINANCING COSTS

Expenses incurred in connection with debt issuance have been deferred and are
being amortized using the interest method over the terms of the related debt
agreements.

ENVIRONMENTAL EXPENDITURES

Environmental expenditures are expensed or capitalized, as appropriate.
Expenditures that result from the remediation of an existing condition caused
by past operations, that are not attributable to current or future revenues,
are expensed. Liabilities are recognized for remedial activities when the
cleanup is probable and the cost can be reasonably estimated, generally
coinciding with the Company's commitment to a formal plan of action.

EARNINGS PER SHARE

Effective December 31, 1997, earnings per share were calculated in accordance
with FAS 128, accordingly prior years earnings per share have been restated.
Basic earnings per share is determined by dividing net income/(loss) by the
weighted average number of common shares outstanding during the period, with
out consideration of common stock equivalents. Diluted earnings per share is
determined by dividing net income/(loss) by the weighted average number of
shares of common stock and common stock equivalents outstanding during the
period.

COMPREHENSIVE INCOME

For the years ended December 31, 1997 and 1998, other than net income, there
were no items of comprehensive income to report.

(3) FIXED ASSETS

Fixed assets consist of the following:

<TABLE>
<CAPTION>
DEC. 31, DEC. 31,
-------- --------
1997 1998
-------- --------
<S> <C> <C>
Floating equipment................................... $135,550 $147,227
Capitalized drydocking costs......................... 10,123 13,597
Construction in progress............................. 2,425 2,707
Shipyard and pier improvements....................... 171 173
Furniture, fixtures and leasehold improvements....... 903 970
Equipment............................................ 199 240
Land................................................. 663 663
-------- --------

Less: Accumulated depreciation and amortization...... 30,114 40,218
-------- --------
Total................................................ $119,920 $125,359
======== ========
</TABLE>

F-9
<PAGE>

MORAN TRANSPORTATION COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(DOLLARS IN THOUSANDS)

THREE-YEAR PERIOD ENDED DECEMBER 31, 1998

(4) INVENTORIES OF FUEL, SUPPLIES AND REPAIR MATERIALS

The components of inventory are as follows:

<TABLE>
<CAPTION>
DEC. 31, DEC. 31,
1997 1998
---- ----
<S> <C> <C>
Fuel........................................... $ 916 $ 550
Diesel parts................................... 1,583 1,491
Propeller wheels and shafts.................... 1,221 1,197
Rope, fenders, supplies and miscellaneous...... 441 431
------ ------
Total.......................................... $4,161 $3,669
====== ======
</TABLE>

(5) INVESTMENT IN AFFILIATED PARTNERSHIPS

Subsidiaries of the Predecessor had a 20% interest in each of four
partnerships with subsidiaries of Overseas Shipholding Group, Inc., each of
which partnership is the bareboat charterer of one U.S. flag tanker. These
interests were transferred to the stockholders of the Predecessor as part of
the Acquisition.

The Predecessor had provided certain financial guarantees in connection with
the acquisition of the affiliated partnerships. These undertakings were
limited to $12,000 in the aggregate and among others, guaranteed (i) payment
of the equity portion of charter hire to the owner of the affiliated
partnership's tankers, (ii) certain indemnity obligations arising under the
bareboat charters, including tax obligations, and (iii) the obligation of the
partnerships to maintain and insure the tankers. These guarantees survived the
Acquisition and remained the obligation of the Company. To secure these
guarantees, $12,000 of the purchase price was put into escrow to be released
when the guarantees expired in 2003, to the extent not called upon. These
funds were included in restricted funds held for contingent consideration. In
February 1997, the Company was released from these obligations and the $12,000
escrow related to these guarantees was distributed to the former shareholders.

(6) INVESTMENT IN JOINT VENTURE

The Company has invested in a 50% owned joint venture which owns and operates
an ocean going petroleum barge. The Company accounts for the joint venture
under the equity method.

Partner's capital in the Company's 50% investment in the joint venture was
$968, $1,480, and $1,897 at December 31, 1996, 1997 and 1998 respectively. The
Company received no cash dividends in the three years ended December 31, 1998
and made a partnership contribution of $1,000 in 1997 to cover dry-docking
related costs.

F-10
<PAGE>

MORAN TRANSPORTATION COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(DOLLARS IN THOUSANDS)

THREE-YEAR PERIOD ENDED DECEMBER 31, 1998

The Company's 50% interest in the assets, liabilities, revenues, expenses and
income of the joint venture is summarized as follows:

<TABLE>
<CAPTION>
AS OF DECEMBER 31,
-------------------------

1997 1998
------ ------
<S> <C> <C>
Total assets ............................. $1,858 $2,091
====== ======
Total liabilities ........................ $ 378 $ 194
====== ======
</TABLE>

<TABLE>
<CAPTION>
FOR THE YEARS ENDED DECEMBER 31,
------------------------------------

1996 1997 1998
------- ------- ------
<S> <C> <C> <C>
Total revenues ...................... $ 2,528 $ 1,460 $2,924
======= ======= ======
Total expenses ...................... $ 2,354 $ 1,947 $2,508
======= ======= ======
Income/(loss) ....................... $ 174 $ (487) $ 416
======= ======= ======
Additional amortization ............. $ 240 $ 240 $ 240
======= ======= ======
Equity in (loss)/income ............. $ (66) $ (727) $ 176
======= ======= ======
</TABLE>

In connection with the Acquisition, the Company increased the carrying value
of its investment by $2,519 to fair market value. The Company is amortizing
the increase over ten years, representing the remaining useful life of the
joint venture's barge. Amortization was $240 per year for the three years
ending December 31, 1998.

(7) INSURANCE SUBSIDIARY

The consolidated financial statements include the accounts of the Company's
wholly-owned insurance subsidiary whose fiscal year end is March 31.
Summarized unaudited financial information based on the Company's reporting
periods is as follows:

<TABLE>
<CAPTION>
AS OF DECEMBER 31,
-------------------------

1997 1998
---- ----
<S> <C> <C>
Total assets ............................. $2,188 $2,253
====== ======
Total liabilities ........................ $ 384 $ 381
====== ======
</TABLE>

<TABLE>
<CAPTION>
FOR THE YEARS ENDED DECEMBER 31,
--------------------------------

1996 1997 1998
----- ----- ---
<S> <C> <C> <C>
Total income (a) .................... $118 $70 $67
==== === ===
</TABLE>

(a) Total income includes interest income of $156, $91 and $90 for the years
ended December 31, 1996, 1997 and 1998, respectively.

F-11
<PAGE>

MORAN TRANSPORTATION COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(DOLLARS IN THOUSANDS)

THREE-YEAR PERIOD ENDED DECEMBER 31, 1998

(8) LONG-TERM DEBT

Long-term debt at December 31 was as follows:

<TABLE>
<CAPTION>
1997 1998
------- -------
<S> <C> <C>
11.75% Series B First Preferred Ship Mortgage Notes due July 15, 2004 $80,000 $78,997
8.1% Term Loan due June 1, 2005 .................................... 3,420 --
------- -------
83,420 78,997

Less: Current maturities ....................................... 168 --
------- -------
Long-term portion .............................................. $83,252 $78,997
======= =======
</TABLE>

As part of the Acquisition, the Company issued $80,000 of 11.75% First
Preferred Ship Mortgage Notes due July 15, 2004. In November 1994, pursuant to
an Exchange and Registration Rights Agreement, the Company exchanged all of
such Notes for its 11.75% Series B First Preferred Ship Mortgage Notes, the
issuance of which had been registered under the federal securities laws.
Interest on the notes is payable semi-annually on January 15 and July 15. The
Notes are redeemable, in cash, at the option of the Company, in whole or in
part in amounts of $1,000 or an integral multiple of $1,000 on or after July
15, 1999 at the redemption prices set forth below, plus accrued and unpaid
interest if redeemed during the 12-month period commencing on July 15 of the
year indicated below:

1999 108%
2000 106
2001 104
2002 102
2003 and thereafter 100

Because the Combination could have been deemed to have been a "Change of
Control" under the terms of the indenture governing the Notes, the Company was
required to commence a tender offer to purchase for cash any and all of the
outstanding Notes which the Company commenced on November 25, 1998. The
Company completed the tender offer on December 28, 1998, and as of such date,
approximately $1,003 in aggregate principal of the Notes had been tendered,
representing approximately 1.25% of the $80,000 Notes outstanding subject
to the tender offer. Following the expiration of the offer, the Company
accepted for payment all Notes validly tendered using available cash to
make such a payment. The purchase price paid for the Notes was equal to
101% of their principal amount ($1,010 per $1,000 principal amount), plus
accrued and unpaid interest.

All of the Company's subsidiaries (the "Guarantors") have guaranteed the
Series B First Preferred Ship Mortgage Notes. Accordingly, the financial
statements of the Guarantors have not been included, individually or on a
combined basis, because the guarantors have fully and unconditionally
guaranteed such Notes on a joint and several basis, and because the aggregate
net assets, earnings and equity of the Guarantors are substantially equivalent
to the net assets, earnings and equity of the Company on a consolidated basis
and, therefore, separate financial statements concerning the Guarantors are
not deemed material to investors.

The Notes rank pari passu with all existing and future senior indebtedness of
the Company and senior to all subordinated indebtedness of the Company and are
secured by substantially all of the Company's floating equipment. The
indenture contains certain restrictions on incurrence of debt, liens, sales of
assets,

F-12
<PAGE>

MORAN TRANSPORTATION COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(DOLLARS IN THOUSANDS)

THREE-YEAR PERIOD ENDED DECEMBER 31, 1998

investments, capital expenditures, and dividend and upstream payments. The
Company must also comply with certain other financial covenants.

The New Senior Credit Facility includes two $80 million term loan facilities,
one of which was used to finance the Combination and the other of which may be
drawn upon to redeem in full the Company's Notes when they become eligible for
redemption under the applicable indenture. The indenture permits redemption of
all such Notes commencing on July 15, 1999 at a redemption price equal to 108%
of principal amount, with the redemption price decreasing over time
thereafter. The Company currently intends to redeem the Notes on or about July
15, 1999 at 108% of their principal amount and has arranged financing under
the New Credit Facility to do so; however, no assurance can be made that the
Company will redeem the Notes at such time. Under the New Senior Credit
Facility, several conditions must be satisfied prior to drawing on the term
loan facility to redeem the Notes, including that no event of default shall
have occurred or be continuing, that certain representations and warranties
are true and correct, and that there shall have been no material adverse
change in the condition of the vessels owned by Moran Enterprises and its
subsidiaries. The New Senior Credit Facility also includes a $40 million
revolving credit facility. Until the Notes are redeemed and the applicable
term loan facility is drawn upon, however, the maximum amount that may be
outstanding under the revolving credit facility is $20 million, no more than
$15 million of which may be drawn upon for the benefit of the Company and its
subsidiaries. The revolving credit facility includes a letter of credit
subfacility of a separate sublimit which is available to the Company and its
subsidiaries and which reduces the available credit under the revolving credit
facility by the amount of any outstanding letter of credit and any
unreimbursed drawings under letters of credit. The New Senior Credit Facility
bears interest at rates linked to the prime rate and/or a Eurodollar rate, at
Moran Enterprises's option. The term loan facility, which may be drawn upon to
redeem the Notes, matures on June 30, 2004; the other $80 million term loan
facility matures on December 31, 2005. The revolving credit facility has a
term of six years.

The New Senior Credit Facility is secured by substantially all of the personal
property of Moran Enterprises and the Turecamo Entities, including floating
equipment (i.e., vessels) and a pledge of all the capital stock of Moran
Enterprises, the Company and the Turecamo Entities. The Company and its
domestic subsidiaries have guaranteed the revolving credit facility to the
extent that funds are drawn for their benefit, and in that regard, have
granted a first priority lien on accounts receivable and inventory to secure
the guaranty. If and when the Notes are redeemed in full, the Company and its
subsidiaries will grant security interests in substantially all of their
assets, including floating equipment, to secure the New Senior Credit
Facility. The Company's floating equipment presently continues to secure its
Notes.

Concurrently with the closing of the Combination, the Company used available
cash to pay the outstanding indebtedness of the Company due under a separate
term loan facility of the Company, totaling $3.4 million, inclusive of
principal, interest and any fees.

The Company has deferred debt placement costs incurred in connection with the
First Preferred Ship Mortgage Notes. The unamortized balance of such fees was
$2,415 and $2,013 at December 31, 1997 and 1998, respectively.

F-13
<PAGE>

MORAN TRANSPORTATION COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(DOLLARS IN THOUSANDS)

THREE-YEAR PERIOD ENDED DECEMBER 31, 1998

(9) INCOME TAXES

In accordance with FAS 109, the deferred tax provision was determined under
the asset and liability approach. Deferred tax assets and liabilities were
recognized on differences between the book and tax basis of assets and
liabilities using current tax rates. The provision for income taxes is the sum
of the amount of income tax paid or payable for the year as determined by
applying current tax laws to the taxable income for the current year and the
net change in the Company's deferred tax assets and liabilities during the
year.

The components of the provision for income taxes are as follows:

<TABLE>
<CAPTION>
FOR THE YEARS ENDED DECEMBER 31,
-----------------------------------------
1996 1997 1998
------- ------- -------
<S> <C> <C> <C>
Current ..................... $ 2,680 $ 2,274 $ 2,647
Deferred .................... (1,872) (1,661) (682)
------- ------- -------
$ 808 $ 613 $ 1,965
======= ======= =======
</TABLE>

This provision includes state tax expense for the years ended December 31,
1996, 1997 and 1998 of $34, $182 and $497, respectively.

F-14
<PAGE>

MORAN TRANSPORTATION COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(DOLLARS IN THOUSANDS)

THREE-YEAR PERIOD ENDED DECEMBER 31, 1998

The reconciliation of the Company's effective income tax rate and the
statutory income tax rate are as follows:

<TABLE>
<CAPTION>
FOR THE YEARS ENDED DECEMBER 31,
--------------------------------
1996 1997 1998
---- ---- ----
<S> <C> <C> <C>
Statutory income tax rate ................ 35.0% 35.0% 34.0%
Increases (decreases) due to:

State taxes ......................... 6.4 5.3 7.0
Meals and entertainment ............. 2.0 1.9 0.8
Rate differential ................... (2.6) 1.8 --
Release of valuation allowance ...... -- (17.3) --
Other-net ........................... (2.6) 0.8 0.2
------ ------ ------
Effective income tax rate ................ 38.2% 27.5% 42.0%
====== ====== ======
</TABLE>

Under FAS 109, temporary differences which give rise to a significant portion
of net deferred tax liabilities were as follows:

<TABLE>
<CAPTION>
Dec. 31, Dec. 31,
1997 1998
---- ----
<S> <C> <C>
Deferred tax assets
State and local taxes ............................. $ 749 $ 607
Insurance claims reserves ......................... 623 464
Post retirement benefits other than pensions ...... 1,469 1,608
Additional compensation ........................... 268 318
Hull insurance aggregate reserves ................. 1,179 1,214
P & I insurance aggregates reserve ................ 373 230
Backpay liability ................................. 1,403 1,102
Other items-net ................................... (109) 89
-------- --------
Total deferred tax assets ......................... 5,955 5,632
-------- --------
Deferred tax liabilities
Depreciation and amortization ..................... (34,411) (33,247)
Pension benefits .................................. (368) (273)
Capitalized drydocking costs ...................... (2,263) (2,641)
Land valuation .................................... (197) (197)
Fuel inventory .................................... (311) (187)
-------- --------
Total deferred tax liabilities .................... (37,550) (36,545)

Valuation allowance ............................... (335) (335)
-------- --------
Net deferred tax liabilities ...................... $(31,930) $(31,248)
======== ========
</TABLE>

The current portion of net deferred income taxes of $520 at December 31, 1997
and 1998, respectively, is included in other prepaid expenses.

F-15
<PAGE>

MORAN TRANSPORTATION COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(DOLLARS IN THOUSANDS)

THREE-YEAR PERIOD ENDED DECEMBER 31, 1998

(10) PENSION, POSTRETIREMENT BENEFIT AND PROFIT SHARING PLANS

PENSION

The net periodic pension expense for the Company's defined benefit pension
plan is comprised of the following:

<TABLE>
<CAPTION>
FOR THE YEARS ENDED DECEMBER 31,
--------------------------------

1996 1997 1998
----- ----- -----
<S> <C> <C> <C>
Service cost-benefits earned during the period ...... $ 327 $ 305 $ 358
Interest cost projected benefit obligation .......... 559 532 603
Expected return on plan assets ...................... (757) (609) (650)
Recognized actuarial loss ........................... 117 4 29
----- ----- -----
Net periodic pension expense ........................ $ 246 $ 232 $ 340
===== ===== =====
</TABLE>

The changes in benefit obligation and plan assets and the funded status
reconciliation as of December 31, 1997 and 1998 for the Company's defined
benefit pension plan are shown below:

<TABLE>
<CAPTION>
Pension Benefits
1997 1998
------- -------
<S> <C> <C>
CHANGE IN BENEFIT OBLIGATION:
Benefit obligation at beginning of year ............. $ 7,099 $ 7,878
Service cost ...................................... 305 358
Interest cost ..................................... 532 603
Benefits paid ..................................... (481) (604)
Actuarial loss .................................... 423 1,333
------- -------
Benefit obligation at end of year .................... $ 7,878 $ 9,568

CHANGE IN PLAN ASSETS
Fair value of plan assets at beginning of year ...... $ 7,776 $ 8,339
Actual return on plan assets ...................... 1,044 780
Benefits paid ..................................... (481) (604)

Fair value of plan assets at end of year ............ $ 8,339 $ 8,515

RECONCILIATION OF FUNDED STATUS
Funded status ...................................... $ 461 $(1,053)
Unrecognized actuarial loss ........................ 675 1,849
------- -------
Prepaid benefit cost ............................. $ 1,136 $ 796
======= =======

THE ACTUARIAL ASSUMPTIONS ARE AS OF DECEMBER 31:
Discount rate ...................................... 7.25% 6.75%
Expected long term rate of return on plan assets ... 8.00% 8.00%
Rate of compensation increase ...................... 4.00% 4.00%
</TABLE>

F-16
<PAGE>

MORAN TRANSPORTATION COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(DOLLARS IN THOUSANDS)

THREE-YEAR PERIOD ENDED DECEMBER 31, 1998

The Company has a defined benefit pension plan covering substantially all
shoreside non-union employees. The plan generally provides benefit payments
using a formula that is based on an employee's compensation and length of
service. The Company's policy is to fund current service costs. The plan's
assets are primarily invested in a managed bond portfolio with a portion
invested in a managed equity portfolio. Since the plan was fully funded, no
contributions were required for the 1997 and 1998 plan years. In addition, the
Company has an unfunded supplemental employee retirement plan ("SERP") for
certain executives. The Company's pension SERP liability was $651 and $750 at
December 31, 1997 and 1998 respectively.

In accordance with contractual agreements, the Company makes contributions to
union-sponsored pension and welfare plans. Such contributions were $1,965,
$2,287 and $2,504 for years December 31, 1996, 1997 and 1998, respectively. In
addition, the Company has a defined contribution pension plan for non-union
fleet employees. The Company made contributions of $201, $333 and $376 for the
years ended December 31, 1996, 1997 and 1998, respectively.

PROFIT SHARING PLAN

The Company has a non-contributory profit-sharing plan covering substantially
all shoreside non-union employees. Company contributions are at the discretion
of the Board of Directors. The Company made contributions of $674, $681 and
$759 for the years ended December 31, 1996, 1997 and 1998, respectively. In
addition, the Company has an unfunded profit sharing SERP for certain
executives. The Company's profit sharing SERP liability was $137 and $188 at
December 31, 1997 and 1998, respectively.

POSTRETIREMENT BENEFITS OTHER THAN PENSIONS

The Company provides certain health care and life insurance benefits to all
employees who retire from the Company and satisfy certain service and age
requirements.

Generally, the medical coverage pays a stated percentage of most medical
expenses reduced for any deductible and payments made by Medicare or other
group coverage. Benefits are administered through an insurance carrier paid by
the Company. The cost of providing these benefits is shared with retirees. The
cost sharing provisions vary depending on the retirement date. The plan is
unfunded. The premium cost of providing these benefits was $265, $271 and $286
for the years ended December 31, 1996, 1997 and 1998, respectively.

The Company accounts for retiree health care costs in accordance with
Financial Accounting Standard No. 106, "Employers' Accounting for
Postretirement Benefits Other Than Pensions." This statement requires the
accrual of the cost of providing postretirement benefits, including medical
and life insurance coverage, during the active service period of the employee.

F-17
<PAGE>

MORAN TRANSPORTATION COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(DOLLARS IN THOUSANDS)

THREE-YEAR PERIOD ENDED DECEMBER 31, 1998

The changes in benefit obligation and plan assets and the funded status
reconciliation as of December 31, 1997 and 1998 for the Company's
postretirement benefits are shown below:

<TABLE>
<CAPTION>
OTHER BENEFITS
--------------------
1997 1998
------- -------
<S> <C> <C>
CHANGE IN BENEFIT OBLIGATION:
Benefit obligation at the beginning of year ........ $ 4,646 $ 5,416
Service cost ...................................... 176 219
Interest cost ..................................... 366 398
Benefits paid ..................................... (265) (412)
Actuarial loss .................................... 493 653
------- -------
Benefit obligation at end of year .................. $ 5,416 $ 6,274

CHANGE IN PLAN ASSETS
Fair value of plan assets at beginning of year ..... $ -- $ --
Actual return on plan assets ...................... -- --
Employer contributions ............................ 265 412
Benefits paid ..................................... (265) (412)
------- -------
Fair value of plan assets at end of year ........... $ -- $ --

RECONCILIATION OF FUNDED STATUS
Funded status ..................................... $(5,416) $(6,274)
Unrecognized actuarial loss ....................... 1,107 1,693
------- -------
Prepaid benefit cost ............................ $(4,309) $(4,581)
======= =======
</TABLE>

Net periodic postretirement benefit cost for periods ended December 31, 1997
and December 31, 1998 included the following components:

<TABLE>
<CAPTION>
1996 1997 1998
---- ---- ----
<S> <C> <C> <C>
Service cost of benefits earned ............................... 161 $176 $219
Interest cost on accumulated postretirement benefits obligation 318 366 398
Recognized actuarial loss ..................................... 32 49 67
---- ---- ----
Net periodic postretirement benefit cost ...................... $511 $591 $684
==== ==== ====
</TABLE>

The discount rate used in determining the APBO was 7.5% in 1996, 7.25% in 1997
and 6.75% in 1998.

ASSUMED HEALTH CARE COST TREND

For measurement purposes, a 10% annual rate of increase in the per capita cost
of covered health care benefits was assumed for 1998. The rate is assumed to
decrease gradually to 6% for 2000 and remain at that level thereafter.

F-18
<PAGE>

MORAN TRANSPORTATION COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(DOLLARS IN THOUSANDS)

THREE-YEAR PERIOD ENDED DECEMBER 31, 1998

Assumed health care cost trend rates have a significant effect on the amounts
reported for the health care plan. A one percentage point change in assumed
health care cost trend rate would have the following effects.

<TABLE>
<CAPTION>
ONE PERCENTAGE ONE PERCENTAGE
POINT INCREASE POINT DECREASE
-------------- --------------
<S> <C> <C>
Effect on total of service and interest cost components for 1998..... $109 $ (82)
Effect on year-end 1998 postretirement benefit obligation............ $802 $(705)
</TABLE>

(11) COMMITMENTS

On November 8, 1996, a subsidiary of the Company entered into a 10 year
bareboat charter for the barge Portsmouth. The Company has an option to
purchase the barge at the end of the seventh year and at the end of the lease
term. The annual charterhire for this vessel is $1.0 million over the term of
the lease.

Minimum annual rental commitments at December 31, 1998, under non-cancelable
operating leases, including the bareboat charter for the Portsmouth, are as
follows:

<TABLE>
<S> <C>
1999................................. $1,880
2000................................. 1,860
2001................................. 1,790
2002................................. 1,713
2003................................. 1,659
2004 and beyond...................... 3,126
</TABLE>

Total gross rent expense was $1,160, $1,896 and $1,906 for the years ended
December 31, 1996, 1997 and 1998, respectively.

(12) CONTINGENT LIABILITIES

In February 1994, a lawsuit was filed in United States District Court for the
Eastern District of New York by the Town of Oyster Bay (the "Town"), New York,
against the Company and several other potentially responsible parties ("PRP").
The Town is seeking indemnification for remediation and investigation costs
that have been or will be incurred for a Federal Superfund site in Syosset,
New York, which served as a Town owned and operated landfill between 1933 and
1975. In a Record of Decision issued on or about September 27, 1990, the EPA
set forth a remedial design plan, the cost of which was estimated at $25,000
and is reflected in the Town's lawsuit. In an Administrative Consent Decree
entered into between the EPA and the Town on December 6, 1990, the Town agreed
to undertake remediation at the site.

While the current state of law imposes joint and several liability upon PRPs,
as a practical matter costs of these sites are typically shared with other
PRPs. The Federal court hearing this matter has ruled that the PRPs are liable
in contribution only, not joint and severally. The Company believes that its
portion of the hazardous materials disposed of at the site, if any, is
insignificant when compared to that of the other PRPs. While management is
unable to estimate the Company's future liability, if any, it does not believe
such liability would have a material adverse effect on the Company's financial
position or results of operations.

F-19
<PAGE>

MORAN TRANSPORTATION COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(DOLLARS IN THOUSANDS)

THREE-YEAR PERIOD ENDED DECEMBER 31, 1998

(13) SHIPYARD ASSETS HELD FOR SALE

In the third quarter of 1997, the owner of the Jakobson Shipyard site sold its
property to the State of New York and the Town of Oyster Bay. At the same
time, Jakobson Shipyard, Inc., a subsidiary of the Company, terminated its
leasehold interest in the property and received $2.9 million. The loss related
to the lease termination was not material.

(14) FINANCIAL INSTRUMENTS

The following disclosure of the estimated fair value of financial instruments
at December 31, 1997 and 1998 is made in accordance with the requirements of
FAS No 107, "Disclosure about Fair Market of Financial Instruments". The
estimated fair value amounts have been determined by the Company using
available market information and appropriate valuation methodologies. However,
considerable judgment is necessarily required in interpreting market data to
develop the estimates of fair value. Accordingly, the estimates presented
herein are not necessarily indicative of the amounts that the Company could
realize in a current market exchange. The use of different market assumptions
and/or estimation methodologies may have a material effect on the estimated
fair value amounts.

The Company's financial instruments consist of cash, short-term trade
receivables and payables, and short and long-term debt. With the exception of
long-term debt, the carrying amounts of these financial instruments
approximate their fair value.

Based upon the average of the bid and asked price for the 11.75% Series B
First Preferred Ship Mortgage Notes at their respective year ends, the fair
value of the Company's Notes as of December 31, 1997 and 1998 is approximately
$88,800 and $84,900 respectively.

Financial instruments which potentially subject the Company to concentration
of credit risk consist solely of trade receivables. The Company grants credit
terms in the normal course of business to its customers. The Company has a
diverse customer base and as part of its on-going procedures the Company
monitors the credit worthiness of its customers. Bad debt write-offs have
historically been minimal.

The fair value information presented herein is based on pertinent information
available to management as of December 31, 1997 and 1998. Although management
is not aware of any factors that would significantly affect the estimated fair
value amounts, such amounts have not been comprehensively revalued for
purposes of these consolidated financial statements since that date, and
current estimates of fair value may differ significantly from the amounts
presented herein.

(15) RELATED PARTY TRANSACTIONS

In 1995, the Company and certain related parties (the "Group") negotiated
insurance coverage with third party providers in order to obtain lower
premiums. In connection with the new coverage, the Group entered into a risk
sharing agreement whereby the Company would bear a portion of certain claims
expense of the Group in proportion to its past experience. This percentage is
reset each year. The Company believes its agreement is at arms length. The
amount due from related parties under the risk sharing agreement was $541 at
December 31, 1998.

F-20
<PAGE>

MORAN TRANSPORTATION COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(DOLLARS IN THOUSANDS)

THREE-YEAR PERIOD ENDED DECEMBER 31, 1998

At December 31, 1998, Moran Enterprises Corporation owed the Company $1.4
million. In addition, during 1998, Mormac paid $232,800 for ship docking
services performed by the Company. All such services were provided on
arms'-length terms at customary rates. The Company also provides tug services
to, and has tug services provided to it by, the Turecamo Entities. Since the
Combination, the Turecamo Entities paid $261,800 for tug services performed by
the Company, and were paid $363,400 by the Company for tug services performed
by them for the Company.

(16) MANDATORILY REDEEMABLE CAPITAL STOCK

Mandatorily Redeemable Capital Stock was the same as the Company's Common
Stock in terms of voting rights, dividends and other attributes except that
under certain circumstances it was redeemable at the option of stockholders or
the Company at fair market value. In 1998, as part of the Combination, the
Company's Mandatorily Redeemable Capital Stock was exchanged for stock in
Moran Enterprises Corporation. The Company is now a 100%-owned subsidiary of
Moran Enterprises Corporation. As of December 31, 1997, the fair market value
of the shares was $250 per share. The Company's Common Stock contains no
redemption features.

(17) STOCK OPTION PLAN

On July 11, 1994 the Company adopted a Stock Option Plan (the "1994 Plan")
which became effective on the date of the Acquisition to provide an incentive
to certain employees of the Company to remain in the employ of the Company and
to increase their personal interest in the success of the Company. Effective
as of October 30, 1998, the effective date of the Combination, 1994 Stock
Options held by employees were exchanged for options ("1998 Stock Options") to
purchase units of capital stock of Moran Enterprises pursuant to the Moran
Enterprises Corporation 1998 Stock Option Plan (the "1998 Plan").

The Company applies APB Opinion 25 and related Interpretations in accounting
for the 1994 Plan. Accordingly, no compensation cost has been recognized for
its fixed stock options plan. Had the compensation cost for the stock based
compensation plan been determined in accordance with FAS 123, the Company's
net income and earnings per share would not have been materially different.

F-21

<PAGE>

Exhibit 4.1(e)

SUPPLEMENTAL INDENTURE NO. 5

This SUPPLEMENTAL INDENTURE NO. 5, dated October 28, 1998, among Moran
Transportation Company, a Delaware corporation (the "Company"), the
Guarantors named therein (the "Guarantors"), Fleet National Bank (formerly
known as Shawmut Bank Connecticut, National Association), as trustee (the
"Trustee"), and MCF Subsidiary, Inc., a Delaware corporation and a
wholly-owned subsidiary of the Company (the "New Guarantor").

W I T N E S S E T H:
- - - - - - - - - -

WHEREAS, the Company, the Trustee and the Guarantors are parties to
that certain Indenture dated July 11, 1994, as thereafter supplemented by
Supplemental Indenture Nos. 1, 2, 3 and 4 (as so supplemented, the
"Indenture"), pertaining to the Company's 11-3/4% Series B First Preferred
Ship Mortgage Notes due 2004 issued under the Indenture (the "Notes");

WHEREAS, the Company has organized the New Guarantor as a subsidiary
with the intention that the New Guarantor become a Guarantor under the
Indenture and an Unrestricted Subsidiary pursuant to the terms of the
Indenture;

WHEREAS, Section 5.23 of the Indenture provides that any Person that
was not a Guarantor on the date of the Indenture may become a Guarantor by
executing and delivering to the Trustee, among other things, a supplemental
indenture in form and substance satisfactory to the Trustee, which subject
such Person to the provisions (including the representations and warranties)
of the Indenture as a Guarantor;

WHEREAS, Section 10.01(h) of the Indenture provides that the Trustee,
the Company, the Guarantors and a Subsidiary, as applicable, may amend or
supplement the Indenture without the consent of any Holder to supplement the
Indenture to provide for additional Guarantors pursuant to Section 5.23; and

WHEREAS, the Company and the New Guarantor intend that this
Supplemental Indenture fulfill the requirements of such Section 5.23, thereby
making the New Guarantor a Guarantor under the Indenture.

NOW THEREFORE, the parties agree as follows, for the benefit of each
other and for the equal and ratable benefit of the Holders of the Notes:

Section 1.01 DEFINITIONS. Capitalized terms used in this Supplemental
Indenture but not defined herein shall have the meanings given such terms in
the Indenture.

Section 2.01 ACCEPTANCE BY TRUSTEE. The Trustee accepts the
modifications of the

<PAGE>

Indenture hereby effected only upon the terms and conditions set forth in the
Indenture as supplemented by this Supplemental Indenture No. 5. Without
limiting the generality of the foregoing, the Trustee shall not be
responsible for the correctness of the recitals contained herein, which shall
be taken as statements of the Company, and the Trustee makes no
representations and shall have no responsibility for, or in respect of, the
validity or sufficiency of this Supplemental Indenture No. 5.

Section 2.02 CONSTRUCTION. This Supplemental Indenture No. 5 is
executed as and shall constitute an instrument supplemental to the Indenture
and shall be construed in connection with and as part of the Indenture.

Section 2.03 RATIFICATION. Except as modified and expressly amended by
this Supplemental Indenture No. 5, the Indenture is, in all respects,
ratified and confirmed and all the terms, provisions and conditions thereof
shall be and remain in full force and effect.

Section 2.04 ADDITION OF GUARANTOR. The New Guarantor hereby agrees to
be bound by and subject to all terms of the Indenture (including
representations and warranties) as a Guarantor, including without limitation
the provisions of Article 3 of the Indenture, as if the New Guarantor were a
signatory to the Indenture.

Section 2.05 COUNTERPARTS. This Supplemental Indenture No. 5 may be
executed in any number of counterparts; each signed copy shall be any
original, but all of them together represent the same agreement.

Section 2.06 GOVERNING LAW. This Supplemental Indenture No. 5 shall be
subject to the governing law and choice of forum provisions of Section 13.09
of the Indenture.

<PAGE>

IN WITNESS WHEREOF, the parties hereto have caused this Supplemental
Indenture No. 5 to be duly executed as of the day and year first above
written.

MORAN TRANSPORTATION COMPANY

By: /s/ Macolm W. MacLeod
-------------------------------------
Name: Malcolm W. MacLeod
Title: President

THE GUARANTORS LISTED ON ANNEX I HERETO

By: /s/ Jeffrey J. McAulay
-------------------------------------
Name: Jeffrey J. McAulay
Title: As to each of the Guarantors
listed on Annex I in the
capacities set forth on Annex I

THE GUARANTORS LISTED ON ANNEX II HERETO

By: /s/ William P. Muller
--------------------------------------
Name: William P. Muller
Title: As to each of the Guarantors
listed on Annex II in the
capacities set forth on Annex II

<PAGE>

MCF SUBSIDIARY, INC.

By: /s/ Jeffrey J. McAulay
-------------------------------------
Name: Jeffrey J. McAulay
Title: Vice President, Treasurer and
Assistant Secretary

FLEET NATIONAL BANK,
as Trustee

By: /s/ Michael M. Hopkins
-------------------------------------
Name: Michael M. Hopkins
Title: Authorized Person

<PAGE>

Annex I
-------

Guarantor Capacity
- --------- --------
<S> <C>
Moran Towing Corporation V.P.-Finance & Administration
Moran Towing of Texas Inc. V.P. and Treasurer
Jakobson Shipyard, Inc. V.P. and Assistant Secretary
Moran Shipyard Corporation V.P., Treasurer & Assistant Secretary
Moran Barge Corp. V.P. -Finance & Administration
Moran Towing of Delaware, Inc. V.P. and Treasurer
Hampton Roads Land Co., Inc. V.P. and Treasurer
Portsmouth Navigation Corporation V.P., Treasurer & Assistant Secretary
Moran Insurance Company Limited Chairman/President
Curtis Bay Towing Company of Pennsylvania V.P. and Treasurer
Curtis Bay Towing Company of Virginia V.P. and Treasurer
Florida Towing Company V.P. and Treasurer

</TABLE>

<PAGE>

Annex II
--------

Guarantor Capacity
- --------- --------
<S> <C>
Moran Services Corporation President
Seaboard Barge Corporation President
Petroleum Transport Corporation President

</TABLE>

<PAGE>

Exhibit 10.18

MORAN ENTERPRISES CORPORATION

1998 STOCK OPTION PLAN

ARTICLE 1.

ESTABLISHMENT AND PURPOSE

1.1 ESTABLISHMENT AND EFFECTIVE DATE. Moran Enterprises
Corporation, a Delaware corporation (the "Corporation"), hereby establishes a
stock option plan to be known as the "Moran Enterprises Corporation 1998 Stock
Option Plan" (the "Plan"). The Plan shall become effective as of the date of
consummation of the Corporation's acquisition of all of the outstanding capital
stock of Moran Transportation Company, a Delaware corporation ("Moran"),
Turecamo Maritime, Inc., a Delaware corporation, White Stack Maritime Corp., a
Delaware corporation, Turecamo of Savannah, Inc., a Georgia corporation, and
Turecamo Environmental Services, Inc., a Delaware corporation, subject to the
approval of the Corporation's stockholders. In the event that such stockholder
approval is not obtained, any awards made hereunder shall be cancelled and all
rights of employees with respect to such awards shall thereupon cease. Upon
approval by the Board of Directors of the Corporation (the "Board") or the
Board's Compensation Committee (the "Committee"), awards may be made as provided
herein.

1.2 PURPOSE. The purpose of the Plan is to encourage and
enable all employees (subject to such requirements as may be prescribed by the
Committee) of the Corporation and its subsidiaries to acquire a proprietary
interest in the Corporation (i) through the ownership of the Corporation's
common stock, par value $.001 per share ("Common Stock"), or, (ii) in the case
of certain employees ("Existing Option Holders") of the Company who are or were
employees of Moran and who were awarded stock options under Moran's 1994 Stock
Option Plan (the "Moran Plan"), through the ownership of units ("Units")
consisting of the Corporation's Common Stock and the Corporation's Series A
Preferred Stock, par value $.001 per share ("Preferred Stock"). Unless otherwise
indicated, references in the Plan to "Option Stock" (a) in the case of clause
(i) above, shall include Common Stock and (b) in the case of (ii) above, shall
include both Common Stock and Preferred Stock. Such ownership will provide such
employees with a more direct stake in the future welfare of the Corporation and
encourage them to remain with the Corporation and its subsidiaries. It is also
expected that the Plan will encourage qualified persons to seek and accept
employment with the Corporation and its subsidiaries.

ARTICLE 2.

AWARDS

2.1 FORM OF AWARDS. Awards under the Plan may be granted in
either of the following forms: (i) incentive stock options ("Incentive Stock
Options") meeting the requirements of Section 422 of the Internal Revenue Code
of 1986, as amended (the "Code"), or (ii) non-

<PAGE>

qualified stock options ("Non-qualified Stock Options"). Unless otherwise
indicated, references in the Plan to "Options" shall include both Incentive
Stock Options and Non-qualified Stock Options.

2.2 MAXIMUM SHARES AVAILABLE. The maximum aggregate number of
shares of Common Stock available for award under the Plan is THREE THOUSAND
THREE HUNDRED SIX (3,306) subject to adjustment pursuant to Article 8 hereof,
the maximum aggregate number of Units available for award under the Plan is
THREE THOUSAND TWO HUNDRED EIGHTY-NINE (3,289) subject to adjustment pursuant to
Article 8 hereof, and in connection with any such Units awarded under the Plan,
the maximum aggregate number of shares of Preferred Stock available for award
under the Plan is TWO HUNDRED FORTY-THREE THOUSAND FOUR HUNDRED SIXTY-THREE
(243,463) subject to adjustment pursuant to Article 8 hereof. Shares of Option
Stock issued pursuant to the Plan may be either authorized but unissued shares
or issued shares reacquired by the Corporation. In the event that prior to the
end of the period during which Options may be granted under the Plan, any Option
under the Plan expires unexercised or is terminated, surrendered or cancelled
without being exercised in whole or in part for any reason, then such shares or
units shall be available for subsequent awards under the Plan, upon such terms
as the Committee may determine.

ARTICLE 3.

ADMINISTRATION

3.1 COMMITTEE. Awards shall be determined, and the Plan shall
be administered, by the Committee as appointed from time to time by the Board,
which Committee shall consist of not less than two (2) members of the Board who
shall be ineligible to receive awards under the Plan.

3.2 POWERS OF COMMITTEE. Subject to the express provisions of
the Plan, the Committee shall have the power and authority (i) to grant Options
and to determine the purchase price of the Common Stock or the Units covered by
each Option, the term of each Option, the number of shares of Option Stock to be
covered by each Option and any performance objectives or vesting standards
applicable to each Option and (ii) to designate Options as Incentive Stock
Options or Non-qualified Stock Options.

3.3 DELEGATION. The Committee may delegate to one or more of
its members or to any other person or persons such ministerial duties as it may
deem advisable. The Committee may also employ attorneys, consultants,
accountants or other professional advisors and shall be entitled to rely upon
the advice, opinions or valuations of any such advisors.

-2-
<PAGE>

3.4 INTERPRETATIONS. The Committee shall have sole
discretionary authority to interpret the terms of the Plan, to adopt and revise
rules, regulations and policies to administer the Plan and to make any other
factual determinations which it believes to be necessary or advisable for the
administration of the Plan. All actions taken and interpretations and
determinations made by the Committee in good faith shall be final and binding
upon the Corporation, all employees who have received awards under the Plan and
all other interested persons.

3.5 LIABILITY; INDEMNIFICATION. No member of the Committee,
nor any person to whom ministerial duties have been delegated, shall be
personally liable for any action, interpretation or determination made with
respect to the Plan or awards made thereunder, and each member of the Committee
shall be fully indemnified and protected by the Corporation with respect to any
liability he or she may incur with respect to any such action, interpretation or
determination, to the extent permitted by applicable law and to the extent
provided in the Corporation's Certificate of Incorporation and Bylaws, as
amended from time to time, or under any agreement between any such member and
the Corporation.

ARTICLE 4.

ELIGIBILITY

Options may be granted to all employees of the Corporation or
any of its subsidiaries (subject to such requirements as may be prescribed by
the Committee). Options may be granted to a director of the Corporation who is
not also a member of the Committee, provided that the director is also an
employee. In determining the employees to whom Options shall be granted and the
number of shares to be covered by each Option, the Committee shall take into
account the nature of the services rendered by such employees, their present and
potential contributions to the success of the Corporation and its subsidiaries
and such other factors as the Committee in its sole discretion shall deem
relevant.

As used herein, the term "subsidiary" shall mean any present
or future corporation, partnership or joint venture in which the Corporation
owns, directly or indirectly, 50% or more of the economic interests.
Notwithstanding the foregoing, only employees of the Corporation and any present
or future corporation which is or may be a "subsidiary corporation" of the
Corporation (as such term is defined in Section 424(f) of the Code) shall be
eligible to receive Incentive Stock Options.

-3-
<PAGE>

ARTICLE 5.

STOCK OPTIONS

5.1 GRANT OF OPTIONS. Options may be granted under the Plan
for the purchase of shares of Common Stock, or, in the case of Existing Option
Holders, Units. Options shall be granted in such form and upon such terms and
conditions, including the satisfaction of corporate or individual performance
objectives and other vesting standards, as the Committee shall from time to time
determine.

5.2 DESIGNATION AS NON-QUALIFIED STOCK OPTION OR INCENTIVE
STOCK OPTION. In connection with any grant of Options, the Committee shall
designate in the relevant Option Agreement (as defined in Article 10 hereof)
whether the Options granted shall be Incentive Stock Options or Non-qualified
Stock Options, or in the case both are granted, the number of shares of each.

5.3 OPTION PRICE. The purchase price per share under each
Incentive Stock Option shall be the Market Price (as hereinafter defined) of the
Common Stock on the date the Incentive Stock Option is granted. The purchase
price per share of Common Stock or per Unit under each Non-qualified Stock
Option shall be specified by the Committee. In no case, however, shall the
purchase price per share of either an Incentive Stock Option or Non-qualified
Stock Option be less than the par value of the Common Stock ($.001) or, in the
case of Options to acquire a Unit, the aggregate par value of the shares of
Common Stock and Preferred Stock underlying such Unit. In the case of an
Incentive Stock Option granted to an employee owning (actually or constructively
under Section 424(d) of the Code), more than 10% of the total combined voting
power of all classes of stock of the Corporation or of a subsidiary (a "10%
Stockholder"), the option price shall not be less than 110% of the Market Price
of the Common Stock on the date of grant.

The "Market Price" of the Common Stock on any day shall be
determined as follows: (i) if the Common Stock is listed on a national
securities exchange or quoted through the NASDAQ National Market System, the
Market Price on any day shall be the average of the high and low reported
Consolidated Trading sales prices, or if no such sale is made on such day, the
average of the closing bid and asked prices reported on the Consolidated Trading
listing for such day; (ii) if the Common Stock is quoted on the NASDAQ
inter-dealer quotation system, the Market Price on any day shall be the average
of the representative bid and asked prices at the close of business for such
day; (iii) if the Common Stock is not listed on a national stock exchange or
quoted on NASDAQ, the Market Price on any day shall be the average of the high
bid and low asked prices reported by the National Quotation Bureau, Inc. for
such day; or (iv) if the Common Stock is not listed, quoted or reported on as
set forth above, the Market Price shall be determined in such reasonable manner
as the Committee may, in its sole discretion, determine. In no event

-4-
<PAGE>

shall the Market Price of a share of Common Stock subject to an Incentive Stock
Option be less than the fair market value as determined for purposes of Section
422(b)(4) of the Code.

The "Market Price" of the Preferred Stock on any day shall be equal to
the sum of (i) the amount of $1.00 per share for each share of Preferred Stock,
adjusted for any combinations, consolidations, stock splits or stock
distributions or dividends with respect to such shares, plus (ii) an amount
equal to all accrued but unpaid dividends on such share of Preferred Stock to
such date.

The "Market Price" of a Unit on any day shall be equal to the sum of
the then applicable Market Prices of the shares of Common Stock and Preferred
Stock comprising such Unit.

5.4 LIMITATION ON AMOUNT OF INCENTIVE STOCK OPTIONS. In the
case of Incentive Stock Options, the aggregate Market Price (determined at the
time the Incentive Stock Option is granted) of the Common Stock with respect to
which Incentive Stock Options are exercisable for the first time by any optionee
during any calendar year (under all plans of the Corporation and any subsidiary)
shall not exceed $100,000. To the extent that an Option which is intended to be
an Incentive Stock Option exceeds the $100,000 limit set forth above, such
Option shall be treated as a Non-qualified Stock Option.

5.5 DATE OF GRANT. The date of grant of an Option under the
Plan shall be the date as of which the Committee approves the grant; PROVIDED,
HOWEVER, that in the case of an Incentive Stock Option, the date of grant shall
in no event be earlier than the date as of which the optionee becomes an
employee of the Corporation or one of its subsidiaries.

5.6 LIMITATION ON TIME OF GRANT. No grant of an Incentive
Stock Option shall be made under the Plan more than ten (10) years after the
date the Plan is approved by stockholders of the Corporation.

5.7 MAXIMUM OPTION GRANT. The maximum number of shares of
Common Stock with respect to which Options may be granted under this Plan to an
employee of the Corporation in any calendar year shall not exceed 1,000 shares
(subject to adjustment for stock splits, reverse stock splits, stock dividends
and stock combinations, and the like). The maximum number of Units with respect
to which Options may be granted under this Plan to an employee of the
Corporation in any calendar year shall not exceed 3,289 Units (subject to
adjustment for stock splits, reverse stock splits, stock dividends and stock
combinations, and the like).

5.8 EXERCISE AND PAYMENT. Options may be exercised in whole or
in part. Common Stock or Units purchased upon the exercise of Options shall be
paid for in full at the time of purchase. Such payment shall be made in cash or,
in the discretion of the Committee, through delivery of shares of Common Stock
or Units or a combination of cash and Common Stock or Units, in accordance with
procedures to be established by the Committee. Any shares

-5-
<PAGE>

or Units so delivered shall be valued at their Market Price on the date of
exercise. Upon receipt of notice of exercise and payment in accordance with
procedures to be established by the Committee, the Corporation or its agent
shall deliver to the person exercising the Option (or his or her designee) a
certificate for such shares.

5.9 TERM. The term of each Option granted hereunder shall be
determined by the Committee; PROVIDED, HOWEVER, that, notwithstanding any other
provision of the Plan, in no event shall an Incentive Stock Option be
exercisable after ten (10) years from the date it is granted, or in the case of
an Incentive Stock Option granted to a 10% Stockholder, five (5) years from the
date it is granted.

5.10 RIGHTS AS A STOCKHOLDER. A recipient of Options shall
have no rights as a stockholder with respect to any shares issuable or
transferable upon exercise thereof until the date a stock certificate is issued
to such recipient representing such shares. Except as otherwise expressly
provided in the Plan, no adjustment shall be made for cash dividends or other
rights for which the record date is prior to the date such stock certificate is
issued.

5.11 GENERAL RESTRICTIONS. Each Option granted under the Plan
shall be subject to the requirement that, if at any time the Board shall
determine, in its discretion, that the listing, registration or qualification of
the shares issuable or transferable upon exercise thereof upon any securities
exchange or under any state or federal law, or the consent or approval of any
governmental regulatory body, is necessary or desirable as a condition of, or in
connection with, the granting of such Option or the issue, transfer, or purchase
of shares thereunder, such Option may not be exercised in whole or in part
unless such listing, registration, qualification, consent, or approval shall
have been effected or obtained free of any conditions not acceptable to the
Board.

The Board or the Committee may, in connection with the
granting of any Option, require the individual to whom the Option is to be
granted to enter into an agreement with the Corporation stating that as a
condition precedent to each exercise of the Option, in whole or in part, such
individual shall if then required by the Corporation represent to the
Corporation in writing that such exercise is for investment only and not with a
view to distribution, and also setting forth such other terms and conditions as
the Board or the Committee may prescribe. Stock certificates representing shares
of Common Stock acquired upon the exercise of Options that have not been
registered under the Securities Act of 1933, as amended, shall, if required by
the Board, bear the following legend:

"THE SHARES REPRESENTED BY THIS CERTIFICATE
HAVE NOT BEEN REGISTERED UNDER THE SECURITIES
ACT OF 1933, AS AMENDED. THE SHARES HAVE BEEN
ACQUIRED FOR INVESTMENT AND MAY NOT BE
PLEDGED, HYPOTHECATED, SOLD OR TRANSFERRED IN
THE ABSENCE OF AN EFFECTIVE REGISTRATION
STATEMENT FOR THE SHARES UNDER THE SECURITIES

-6-
<PAGE>

ACT OF 1933 OR AN OPINION OF COUNSEL ACCEPTABLE
TO THE COMPANY THAT REGISTRATION IS NOT
REQUIRED UNDER SAID ACT."

ARTICLE 6.

NONTRANSFERABILITY OF OPTIONS

(a) Subject to Sections 6(b)-(d) hereof, no Option
may be transferred, assigned, pledged or hypothecated (whether by operation of
law or otherwise), except as provided by will or the applicable laws of descent
and distribution, and no Option shall be subject to execution, attachment or
similar process. Subject to Sections 6(b)-(d) hereof, any attempted assignment,
transfer, pledge, hypothecation or other disposition of an Option not
specifically permitted herein shall be null and void and without effect. Subject
to Sections 6(b)- (d) hereof, an Option may be exercised by the recipient only
during his or her lifetime, or following his or her death pursuant to Section
7.3 hereof.

(b) Any pledge of a Non-qualified Stock Option to the
Lender (as defined below) pursuant to the Loan Documents (as defined below) and
the grant of, or the exercise of, any rights or remedies to or of the Lender
thereunder (including, without limitation, any sale or other disposition by the
Lender of the Non-qualified Stock Option or the underlying shares upon default)
shall not require the consent of the Company or be subject to any of the other
requirements or any other applicable provisions hereof; and

(c) Anything contained herein to the contrary
notwithstanding, the Lender shall be permitted to exercise its various rights
and remedies under the Loan Documents. Without limiting the generality of the
foregoing, upon the occurrence and any time during the continuance of an event
of default under any of the Loan Documents, the Lender and/or any nominee(s) of
the Lender may, at Lender's election, exercise all rights of all Optionees of
the Company who have pledged their Non-qualified Stock Options to the Lender;
and

(d) This Article 6 shall not be amended or otherwise
modified, directly or indirectly, without the prior written consent of the
Lender (anything contained in Article 9 to the contrary notwithstanding).

For purposes hereof, "Lender" shall mean each agent,
lender, credit provider and other secured party under any of the Loan Documents
and shall also include any transferee of any of the shares of capital stock of
the Company from the Lender upon (or resulting

-7-
<PAGE>

from) any exercise by the Lender of any rights or remedies. "Loan Documents"
shall mean each of the following (i) the "Loan Documents" as that term in
defined in the Credit Agreement of even or substantially even date herewith
between the Company, the Lenders (as defined therein), and Fleet Bank, N.A., as
Initial Issuing Bank and Administrative Agent thereunder, as same may be
amended, supplemented or otherwise modified from time to time and (ii) any loan
or credit agreements, note(s), pledge agreements, security agreements,
guaranties, mortgages or other agreements or instruments evidencing, governing,
securing, guaranteeing or otherwise relating to any liabilities, indebtedness or
other credit in substitution, replacement or refinancing of any liabilities,
indebtedness or other credit under or evidenced by (a) any of the Loan Documents
or (b) any documents referred to in this clause (ii).

ARTICLE 7.

EFFECT OF TERMINATION OF EMPLOYMENT,
DISABILITY, RETIREMENT, DEATH OR SPECIAL EVENT

7.1 GENERAL RULE. Except as expressly determined by the
Committee in its sole discretion, no Option shall be exercisable after 30 days
following the recipient's termination of employment with the Corporation or a
subsidiary, unless such termination of employment occurs by reason of (i)
Disability or Retirement (as defined in Section 7.2), (ii) death or (iii) a
Special Event (as defined in Section 7.4), provided that, in the case of a
Special Event, the Committee shall have modified such Option to remain
exercisable as provided in Section 7.4.

Options shall not be affected by any change of employment so
long as the recipient continues to be employed by either the Corporation or a
subsidiary. The Committee may, in its sole discretion, cause any Option to be
immediately forfeited upon an employee's termination of employment if the
employee was terminated for one (or more) of the following reasons: (i) the
employee's conviction, or plea of guilty or NOLO CONTENDERE to the commission of
a felony, (ii) the employee's commission of any fraud, misappropriation or
misconduct which causes demonstrable injury to the Corporation or a subsidiary,
(iii) an act of dishonesty by the employee resulting or intended to result,
directly or indirectly, in gain or personal enrichment at the expense of the
Corporation or a subsidiary, (iv) any breach of the employee's fiduciary duties
to the Corporation as an employee or officer, or (v) any serious violation of a
Corporation policy. It shall be within the sole discretion of the Committee to
determine whether the employee's termination was for one of the foregoing
reasons, and the decision of the Committee shall be final and conclusive.

7.2 DISABILITY OR RETIREMENT. Except as expressly provided
otherwise in the relevant Option Agreement, in the event of the Disability or
Retirement of a recipient of Options, the Options which are held by such
recipient on the date of such Disability or Retirement shall be exercisable, to
the extent exercisable on the date of such Disability or Retirement, at any time
until one (1) year after the date of Disability or Retirement; PROVIDED,
HOWEVER, that any Incentive

-8-
<PAGE>

Stock Option of such recipient shall no longer be treated as an Incentive Stock
Option unless exercised within three (3) months of the date of such Disability
or Retirement (or within one (1) year in the case of an employee who is
"disabled" within the meaning of Section 22(e)(3) of the Code).

"Disability" shall mean any termination of employment with the
Corporation or a subsidiary because of a long-term or total disability, as
determined by the Committee in its sole discretion. "Retirement" shall mean a
termination of employment with the Corporation or a subsidiary either (i) on a
voluntary basis by a recipient who is at least 60 years of age and has at least
10 years of service with the Corporation or a subsidiary or (ii) otherwise with
the written consent of the Committee in its sole discretion. The decision of the
Committee shall be final and conclusive.

7.3 DEATH. Except as expressly provided otherwise in the
relevant Option Agreement, in the event of the death of a recipient of Options,
the Options which are held by such employee at the date of death shall be
exercisable, to the extent exercisable on the date of death, by the beneficiary
designated by the employee for such purpose (the "Designated Beneficiary") or if
no Designated Beneficiary shall be appointed or if the Designated Beneficiary
shall predecease the employee, by the employee's personal representatives, heirs
or legatees at any time within one (1) year from the date of death (subject to
the limitation in Section 5.7 hereof), at which time such Options shall
terminate.

7.4 SPECIAL EVENT. In the case of a Special Event, the
Committee in its sole discretion may elect to modify all or any lesser number of
any Options held by an employee terminated as a result of a Special Event which
are or are not exercisable on the date of termination, to provide that any of
such Options may continue to be exercisable for the term and in the manner
specified therein or for such other term and subject to such other provisions
and conditions (including, without limitation, acceleration of the time or times
at which any such Options may be exercised) as the Committee shall specify. The
Committee shall have the sole discretion to determine the employees to whom and
in the manner in which any such modification shall be made. If the Committee
does not elect to modify an Option, then only Options currently exercisable at
the date of termination shall be exercisable as provided in the first sentence
of Section 7.1 hereof.

A "Special Event" shall mean (i) the sale of a controlling
interest in the Corporation; (ii) the sale or other disposition of a subsidiary
or division of the Corporation; (iii) the closing or discontinuation of a
specific operation of the Corporation or any subsidiary; (iv) the elimination of
job categories; or (v) a limited program of terminations in connection with a
personnel reorganization or restructuring of the Corporation or any subsidiary
of the Corporation scheduled to be completed on a date certain; PROVIDED,
HOWEVER, that only those employees who meet the terms and conditions as
established by the Committee in its discretion shall be eligible to receive
accelerated vesting of Options.

-9-
<PAGE>

7.5 LEAVE OF ABSENCE. In the case of an employee on an
approved leave of absence, the Options of such employee shall not be affected
unless such leave is longer than 13 weeks. The date of exercisability of any
Options of an employee which are unexercisable at the beginning of an approved
leave of absence lasting longer than 13 weeks shall be postponed for a period
equal to the length of such leave of absence. Notwithstanding the foregoing, the
Committee may, in its sole discretion, waive in writing any such postponement of
the date of exercisability of any Options due to a leave of absence.

ARTICLE 8.

ADJUSTMENT UPON CHANGES IN CAPITALIZATION

Notwithstanding any other provision of the Plan, the Committee
may: (i) at any time, make or provide for such adjustments to the Plan or to the
number and class of shares available thereunder or (ii) at the time of grant of
any Options, provide for such adjustments to such Options as the Committee shall
deem appropriate to prevent dilution or enlargement of rights, including,
without limitation, adjustments in the event of stock dividends, stock splits,
recapitalizations, mergers, consolidations, combinations or exchanges of shares,
separations, spin-offs, reorganizations, liquidations and the like.

ARTICLE 9.

AMENDMENT AND TERMINATION

The Board may suspend, terminate, modify or amend the Plan,
provided that any amendment that would (i) materially increase the aggregate
number of shares which may be issued under the Plan, (ii) materially increase
the benefits accruing to employees under the Plan, or (iii) materially modify
the requirements as to eligibility for participation in the Plan, shall be
subject to the approval of the Corporation's stockholders, except that any such
increase or modification that may result from adjustments authorized by Article
8 hereof shall not require such stockholder approval. If the Plan is terminated,
the terms of the Plan shall, notwithstanding such termination, continue to apply
to awards granted prior to such termination. No suspension, termination,
modification or amendment of the Plan may, without the consent of the employee
to whom an award shall theretofore have been granted, adversely affect the
rights of such employee under such award.

Except with respect to Options then outstanding, the Plan
shall expire on the date (the "Expiration Date") which is the first to occur of
(i) the tenth anniversary of the date on which the Plan is approved by the
stockholders of the Corporation and (ii) the date as of which the Board, in its
sole discretion, determines that the Plan shall terminate. Any Options
outstanding

-10-
<PAGE>

as of the Expiration Date shall remain in effect until they have been exercised
or terminated or have expired by their respective terms.

ARTICLE 10.

WRITTEN AGREEMENT

Each award of Options shall be evidenced by a written
agreement containing such restrictions, terms and conditions, if any, as the
Committee may require (an "Option Agreement"). In the event of any conflict
between an Option Agreement and the Plan, the terms of the Plan shall govern.

ARTICLE 11.

MISCELLANEOUS PROVISIONS

11.1 TAX WITHHOLDING. The Corporation shall have the right to
require employees or their beneficiaries or legal representatives to remit to
the Corporation an amount sufficient to satisfy Federal, state and local
withholding tax requirements, or to deduct from all payments under the Plan
amounts sufficient to satisfy all withholding tax requirements. The Committee
may, in its sole discretion, permit an employee to satisfy his or her tax
withholding obligation either by (i) surrendering shares owned by the employee
or (ii) having the Corporation withhold from shares otherwise deliverable to the
employee. Shares surrendered or withheld shall be valued at their Market Price
as of the date on which income is required to be recognized for income tax
purposes.

11.2 SUCCESSORS. The obligations of the Corporation under the
Plan shall be binding upon any successor corporation or organization resulting
from the merger, consolidation or other reorganization of the Corporation, or
upon any successor corporation or organization succeeding to all or
substantially all of the assets and business of the Corporation. In the event of
any of the foregoing, the Committee may, at its discretion prior to the
consummation of the transaction and subject to Article 9 hereof, cancel, offer
to purchase, exchange, adjust or modify any outstanding awards, at such time and
in such manner as the Committee deems appropriate and in accordance with
applicable law.

11.3 GENERAL CREDITOR STATUS. Employees shall have no right,
title, or interest whatsoever in or to any assets of the Corporation. Nothing
contained in the Plan, and no action taken pursuant to its provisions, shall
create or be construed to create a trust of any kind, or a fiduciary
relationship between the Corporation and any employee or beneficiary or legal
representative of such employee.

-11-
<PAGE>

11.4 NO RIGHT TO EMPLOYMENT. Nothing in the Plan or in any
Option Agreement, nor the grant of any Option award, shall confer upon any
employee any right to continue in the employ of the Corporation or a subsidiary
or to be entitled to any remuneration or benefits not set forth in the Plan or
such Option Agreement or interfere with or limit the right of the Corporation or
a subsidiary to modify the terms of or terminate such employee's employment at
any time.

11.5 NOTICES. Notices required or permitted to be made under
the Plan shall be sufficiently made if personally delivered to the employee or
sent by regular mail addressed (a) to the employee at the employee's address as
set forth in the books and records of the Corporation or its subsidiaries, or
(b) to the Corporation or the Committee at the principal office of the
Corporation clearly marked "Attention: Compensation Committee."

11.6 SEVERABILITY. In the event that any provision of the Plan
shall be held illegal or invalid for any reason, such illegality or invalidity
shall not affect the remaining parts of the Plan, and the Plan shall be
construed and enforced as if the illegal or invalid provision had not been
included.

11.7 GOVERNING LAW. To the extent not preempted by Federal
law, the Plan, and all agreements hereunder, shall be construed in accordance
with and governed by the laws of the State of Delaware.

-12-

<PAGE>

Exhibit 10.19

================================================================================

OPTIONEE: [Name]

Number of Units Subject to Option: _____

Number of Shares of Common Stock
Comprising Units (in aggregate): _____

Number of Shares of Preferred Stock
Comprising Units (in aggregate): _____
================================================================================

MORAN ENTERPRISES CORPORATION

NON-QUALIFIED STOCK OPTION

AGREEMENT dated as of ________________ between Moran Enterprises
Corporation, a Delaware corporation (the "Company"), and _________ (the
"Employee"), an employee of the Company or one of its subsidiaries.

WHEREAS, pursuant to a Non-Qualified Stock Option dated as of July
11, 1994 issued under its 1994 Stock Option Plan, Moran Transportation Company
("Moran") entered into an option agreement with the Employee, pursuant to which
the Employee was granted an option (a "Moran Option") to purchase ____ shares of
common stock, par value $0.01 per share, of Moran ("Moran Common Stock"); and

WHEREAS, upon the closing of the combination (the "Combination")
provided for in that certain Stock Exchange Agreement (the "Stock Exchange
Agreement"), dated as of August 31, 1998, by and among, Moran, the Company, the
Turecamo Entities named therein, the Turecamo Stockholders named therein and the
Moran Stockholders named therein, Moran Common Stock held by the stockholders of
Moran was converted into and exchanged for shares of common stock of the Company
and shares of preferred stock of the Company; and

<PAGE>
-2-

WHEREAS, pursuant to the Company's 1998 Stock Option Plan, those
employees of the Company who held Moran Options have been granted the option
(each, a "Company Option") to purchase units ("Units") consisting of shares of
common stock of the Company and shares of preferred stock of the Company; and

WHEREAS, the Company and the Employee desire to exchange the
Employee's Moran Option for a Company Option, but only upon the terms and
conditions set forth herein;

NOW THEREFORE THIS AGREEMENT WITNESSETH:

In exchange for the Moran Option, the Employee is hereby granted a
Company Option to purchase from the Company ___________ (___) Units, each
consisting of one share of the Company's common stock, par value $.001 per share
("Company Common Stock") and _____________ (_______) shares of the Company's
Series A Preferred Stock, par value $.001 per share ("Company Preferred Stock"),
with the purchase price per Unit being $____. The aggregate shares of Company
Common Stock and Company Preferred Stock comprising the Units are ____ shares
and ________ shares, respectively.

The Option may be exercised in whole or in part only during the
period from ________________ ("Effective Date") to ______________ ("Expiration
Date") and may not be exercised if employment is terminated before the date of
exercise for any reason, except as provided in paragraph 5 of the Terms and
Conditions set forth below. The Option is not qualified for "incentive stock
option" treatment under the Internal Revenue Code of 1986, as amended.

<PAGE>
-3-

The Employee understands and acknowledges that the Option is subject
to the Terms and Conditions of this agreement as set forth below.

TERMS AND CONDITIONS

The following are Terms and Conditions of the Option in effect at the
date hereof. These Terms and Conditions relating to the Option may be modified
by the Company in certain circumstances.

1. The Employee is hereby granted the Option for the purchase from
the Company of the number of Units of the Company set forth above at the
purchase price set forth above, pursuant to the Company's 1998 Stock Option Plan
as it may be amended from time to time (the "Plan"), subject to and under the
terms and conditions set forth in this Agreement and the Plan.

2. The Option may be exercised in whole or in part to the extent of
[Vesting Terms to be Inserted]. The Option must be used to purchase Units in
whole and not the Common or Preferred Stock components thereof. Units purchased
upon the exercise of the Option shall be paid for in full at the time of
purchase. Such payment shall be made in cash or, in the discretion of the
Compensation Committee of the Company's Board of Directors (the "Committee"),
through delivery of shares of Common Stock or Units or a combination of cash,
Common Stock and Units, in accordance with procedures to be established by the
Committee. Any shares or Units so delivered shall be valued at their Market
Price (as defined in the Plan) on the date of exercise.

Upon receipt of notice of exercise and payment in accordance
with procedures established by the Committee, the Company or its agent shall
deliver to the person exercising the

<PAGE>
-4-

Option (or his or her designee) certificates for the shares underlying the Units
which have been exercised. It shall be a condition to the Company's obligation
to issue Units upon exercise of the Option, or to subsequently transfer the
Company Common Stock and/or Company Preferred Stock comprising Units, that the
Employee pay, or make provision satisfactory to the Company for the payment of,
any taxes which the Company is obligated to collect with respect to the issue or
transfer of such Units (or the shares comprising the Units).

3. Subject to the terms of paragraph 5 of this Agreement, the Option
may be exercised in whole or in part only during the period from the Effective
Date to the Expiration Date and only if the Employee is continuously employed by
the Company or a subsidiary of the Company ("Subsidiary") through the date of
exercise.

4. (a) Subject to paragraphs 4(b)-(d) hereof, the Option shall not
be assignable or transferable by the Employee except by will or by the laws of
descent and distribution. During the life of the Employee, the Option shall be
exercisable by the Employee only.

(b) Notwithstanding Section 4(a) hereof, any pledge of the
Option to the Lender (as defined below) pursuant to the Loan Documents (as
defined below) and the grant of, or the exercise of, any rights or remedies to
or of the Lender thereunder (including, without limitation, the exercise of the
Option or any sale or other disposition by the Lender of the Option or the
underlying shares upon default) shall not require the consent of the Company or
the Employee or be subject to any of the other requirements or any other
applicable provisions hereof; and

<PAGE>
-5-

(c) Anything contained herein to the contrary notwithstanding,
in the event of the pledge of the Option to the Lender, the Lender shall be
permitted to exercise its various rights and remedies under the Loan Documents.
Without limiting the generality of the foregoing, upon the occurrence and any
time during the continuance of an event of default under any of the Loan
Documents, the Lender and/or any nominee(s) of the Lender may, at Lender's
election, exercise the Option and exercise all other rights of the Employee
hereunder; and

(d) This Paragraph 4 shall not be amended or otherwise modified,
directly or indirectly, without the prior written consent of the Lender.

For purposes hereof, "Lender" shall mean each agent, lender,
credit provider and other secured party under any of the Loan Documents and
shall also include any transferee of the Option from the Lender upon (or
resulting from) any exercise by the Lender of any rights or remedies. "Loan
Documents" shall mean each of the following (i) the "Loan Documents" as that
term in defined in the Credit Agreement of even or substantially even date
herewith between the Company, the Lenders (as defined therein), and Fleet Bank,
N.A., as Initial Issuing Bank and Administrative Agent thereunder, as same may
be amended, supplemented or otherwise modified from time to time and (ii) any
loan or credit agreements, note(s), pledge agreements, security agreements,
guaranties, mortgages or other agreements or instruments evidencing, governing,
securing, guaranteeing or otherwise relating to any liabilities, indebtedness or
other credit in substitution, replacement or refinancing of any liabilities,
indebtedness or other credit under or evidenced by (a) any of the Loan Documents
or (b) any documents referred to in this clause (ii).

<PAGE>
-6-

5. The Option shall terminate 30 days following termination of
employment of the Employee with the Company or a Subsidiary provided such
termination occurs on or after the Effective Date, unless such termination of
employment occurs by reason of (i) Disability or Retirement (as defined in the
Plan), (ii) death, or (iii) a Special Event (as defined in the Plan), provided,
in the case of a Special Event, the Committee shall have modified the Option to
remain exercisable as provided in the Plan. The Option shall not be affected by
any change of employment as long as the Employee continues to be employed by
either the Company or a Subsidiary. Nothing in the Plan or in this Agreement
shall confer on the Employee any right to continue in the employ of the Company
or any Subsidiary or interfere in any way with the right of the Company or any
Subsidiary to terminate employment of the Employee at any time.

(a) In the event of the Disability or Retirement of the
Employee, the Option shall be exercisable at any time within one (1) year from
the date of Disability or Retirement to the extent that the Option was
exercisable on the date of Disability or Retirement, at which time the Option
shall terminate.

(b) In the event of the death of the Employee, the Option shall
be exercisable by the beneficiary designated by the Employee for such purpose
(the "Designated Beneficiary") or if no Designated Beneficiary shall be
appointed or if the Designated Beneficiary shall predecease the Employee, by the
Employee's personal representatives, heirs or legatees at any time within one
(1) year from the date of death to the extent that the Option was exercisable on
the date of death, at which time the Option shall terminate.

<PAGE>
-7-

(c) In the case of a Special Event resulting in the termination
of the Employee, the Committee in its sole discretion may elect to modify the
Option, whether or not exercisable on the date of such termination, to provide
that the Option, or a portion thereof, may continue to be exercisable for the
term and in the manner specified therein or for such other term and subject to
such other provisions and conditions (including, without limitation,
acceleration of the Effective Date) as the Committee shall specify. The
Committee shall have the sole discretion to determine the employees to whom and
in the manner in which any such modification shall be made. If the Committee
does not elect to modify the Option, then the Option may be exercised only if
and to the extent exercisable at the date of termination in accordance with the
first sentence of this paragraph 5.

(d) The Committee may, in its sole discretion, cause the Option
to be immediately forfeited upon the Employee's termination of employment if the
Employee was terminated for one (or more) of the following reasons: (i) the
Employee's conviction, or plea of guilty or NOLO CONTENDERE to the commission of
a felony, (ii) the Employee's commission of any fraud, misappropriation or
misconduct which causes demonstrable injury to the Company or a Subsidiary,
(iii) an act of dishonesty by the Employee resulting or intended to result,
directly or indirectly, in gain or personal enrichment at the expense of the
Company or a Subsidiary, (iv) any breach of the Employee's fiduciary duties to
the Company as an employee or officer, or (v) any serious violation of a Company
policy. It shall be within the sole discretion of the Committee to determine
whether the Employee's termination was for one of the foregoing reasons, and the
decision of the Committee shall be final and conclusive.

<PAGE>
-8-

6. If the Employee is granted an approved leave of absence, the
Option shall not be affected unless such leave is longer than 13 weeks. If the
Option is not exercisable at the beginning of an approved leave of absence
lasting longer than 13 weeks, the Effective Date of the Option shall be
postponed for a period equal to the length of such leave of absence, unless such
postponement is waived in writing by the Committee in its sole discretion.

7. The Employee shall have no rights as a stockholder with respect
to any shares issuable upon exercise of the Option until the date a stock
certificate is issued to the Employee for such shares. Except as otherwise
expressly provided in the Plan, no adjustment shall be made for cash dividends
or other rights for which the record date is prior to the date such stock
certificate is issued.

8. In case the Company is merged or consolidated with another
corporation, or in case the property or stock of the Company is acquired by
another corporation, or in case of a separation, reorganization or liquidation
of the Company, the Board of Directors of the Company, or the board of directors
of any corporation assuming the obligations of the Company hereunder, shall
either (i) make appropriate provisions for the protection of the Option by the
substitution on an equitable basis of appropriate stock of the Company, or
appropriate stock of the merged, consolidated, or otherwise reorganized
corporation, provided only that the excess of the aggregate Market Price of the
shares subject to the Option immediately after such substitution over the
purchase price thereof is not less than the excess of the aggregate Market Price
of the shares subject to the Option immediately before such substitution over
the purchase price thereof, or (ii) give written notice to the Employee that the
Option must be exercised within 60 days of the

<PAGE>
-9-

date of such notice or the Option will be terminated. In any such case the Board
of Directors may, in its discretion, waive the applicable waiting period before
the Option becomes exercisable.

9. The Option shall be subject to the requirement that, if at any
time the Board of Directors shall determine, in its discretion, that the
listing, registration or qualification of the shares issuable upon exercise of
the Option upon any securities exchange or under any state or federal law, or
the consent or approval of any governmental regulatory body is necessary or
desirable as a condition of, or in connection with, the granting of the Option
or the issue, transfer, or purchase of shares under the Option, the Option may
not be exercised in whole or in part unless such listing, registration,
qualification, consent, or approval shall have been effected or obtained free of
any conditions not acceptable to the Board of Directors.

10. The Employee acknowledges and agrees that Units acquired pursuant
to the exercise of the Option shall be held subject to the terms and provisions
of the Amended and Restated Stockholder Agreement, dated as of October 30, 1998,
between the Company (as successor to Moran) and the Employee, and the
Stockholders Agreement, dated as of October 30, 1998, between the Company and
all of its stockholders.

11. The interpretation and decision with regard to any question
arising under the Plan or with respect to the Option made by the Committee shall
be final and conclusive on the Employee.

12. All notices hereunder shall be sufficiently made if personally
delivered to the Employee or sent by regular mail addressed (a) to the Employee
at the Employee's address as set forth in the books and records of the Company
or any Subsidiary, or (b) to the Company

<PAGE>
-10-

or the Committee at the principal office of the Company clearly marked
"Attention: Compensation Committee."

<PAGE>
-11-

IN WITNESS WHEREOF, this Agreement has been executed by the Company
by one of its duly authorized officers as of the date specified above.

MORAN ENTERPRISES CORPORATION

By:
-------------------------------------
Name: Paul R. Tregurtha
Title: Chairman

I hereby acknowledge receipt of the Option and agree to the
provisions set forth in this Agreement. I hereby surrender to the Company the
Moran Option. I further acknowledge that I have received a copy of the Plan and
have read and understand its provisions.

Date:
----------------- ----------------------------------------
Signature of Employee

<PAGE>

EXHIBIT 12.1

MORAN TRANSPORTATION COMPANY

Computation of Ratio of Earnings to Fixed Charges
(Amounts in thousands)

Period Period
Jan. 1, 1994 July 1, 1994
Thru Thru Year Ended December 31,
July 11, Dec. 31, ------------------------------------
1994 1994 1995 1996 1997 1998
------------ ------------ ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C>
Pretax income from
continuing operations $2,054 $1,536 $ (136) $ 2,113 2,233 4,680

Capitalized interest (62) 0 0 0 0 0

Undistributed income
from affiliated
partnership (Shipmor) 0 0 0 0 0 0
------ ------ ------- ------- ------ ------
$1,992 $1,536 $ (136) $ 2,113 2,233 4,680
====== ====== ======= ======= ====== ======

Fixed charges
interest expense and
amortization of debt discount
and premium on all
indebtedness (a) $ 975 $4,810 $10,192 $10,132 10,026 10,266

Rentals
1/3 rent expense (b) 192 173 351 387 632 636
------ ------ ------- ------- ------ ------
Total fixed charges $1,167 $4,983 $10,543 $10,519 10,658 10,902
====== ====== ======= ======= ====== ======
Earnings before
income taxes and
fixed charges $3,159 $6,519 $10,407 $12,632 12,891 15,582
====== ====== ======= ======= ====== ======
Ratio of earnings to
fixed charges 2.7 1.3 1.0 1.2 1.2 1.4
====== ====== ======= ======= ====== ======

</TABLE>

(a) Included in interest expense is capitalized interest related to the
construction of new equipment.

(b) The portion of rentals classified as fixed charges is deemed to be
representative of the interest factor.

<PAGE>

Exhibit 21-1

SUBSIDIARIES OF MORAN TRANSPORTATION COMPANY
--------------------------------------------

Moran Towing Corporation

Moran Towing of Texas Inc.

Seaboard Barge Corporation

Petroleum Transport Corporation

Moran Insurance Company Limited

Moran Services Corporation

Moran Towing of Delaware, Inc.

Jakobson Shipyard, Inc.

Moran Shipyard Corporation

Hampton Roads Land Co., Inc.

Portsmouth Navigation Corporation

Moran Barge Corp.

Curtis Bay Towing Company of Virginia

Curtis Bay Towing Company of Pennsylvania

Florida Towing Company

<PAGE>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM MORAN
TRANSPORTATION COMPANY'S AUDITED CONSOLIDATED FINANCIAL STATEMENTS AS OF AND FOR
THE YEAR ENDED DECEMBER 31, 1998 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE
TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000

<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-START> JAN-01-1998
<PERIOD-END> DEC-31-1998
<CASH> 4,349
<SECURITIES> 0
<RECEIVABLES> 14,973
<ALLOWANCES> 448
<INVENTORY> 3,669
<CURRENT-ASSETS> 26,692
<PP&E> 125,359
<DEPRECIATION> 0
<TOTAL-ASSETS> 161,534
<CURRENT-LIABILITIES> 16,637
<BONDS> 78,997
0
0
<COMMON> 0
<OTHER-SE> 17,359
<TOTAL-LIABILITY-AND-EQUITY> 161,534
<SALES> 107,448
<TOTAL-REVENUES> 107,448
<CGS> 78,303
<TOTAL-COSTS> 93,217
<OTHER-EXPENSES> 102
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 10,266
<INCOME-PRETAX> 4,680
<INCOME-TAX> 1,965
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 2,715
<EPS-PRIMARY> 60.87
<EPS-DILUTED> 59.02

</TABLE>