AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON JULY 23, 1997
REGISTRATION NO. 333-26227
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
------------------
Amendment NO.4
FORMS S-4 AND F-4*
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
------------------
GOLDEN STATE PETROLEUM TRANSPORT CORPORATION
GOLDEN STATE PETRO (IOM I-A) PLC
GOLDEN STATE PETRO (IOM I-B) PLC
(Exact Names of Registrants as Specified in Their Charters)
<TABLE>
<CAPTION>
DELAWARE 9999 N/A
ISLE OF MAN 8611 N/A
ISLE OF MAN 8611 N/A
<S> <C> <C>
(State or Other Jurisdiction of (Primary Standard Industrial (I.R.S. Employer Identification Nos.)
Incorporation or Organization) Classification Code Number)
</TABLE>
C/O CAMBRIDGE FUND C/O 15-19 ATHOL STREET
MANAGEMENT LLC DOUGLAS, ISLE OF MAN IM1 1LB
535 MADISON AVENUE 011-44-1-62-4628575
NEW YORK, NEW YORK 10022 (Address, including zip code, and
212-508-6500 telephone number, including area code,
(Address, including zip code, and of principal executive offices of
telephone number, including area code, Golden State Petro (IOM I-A) PLC
of principal executive offices of and Golden State Petro (IOM I-B) PLC
Golden State Petroleum Transport
Corporation)
CT CORPORATION SYSTEM
1623 BROADWAY
NEW YORK, NEW YORK 10019
212-246-5070
(Name, address, including zip code, and
telephone number, including area code,
of agent for service of Golden State Petroleum
Transport Corporation, Golden State Petro (IOM I-A)
PLC and Golden State Petro
(IOM I-B) PLC)
------------------
COPIES TO:
LAURIS G. L. RALL BJORN AASEROD
CHARLES A. DIETZGEN CAMBRIDGE FUND MANAGEMENT LLC
THACHER PROFFITT & WOOD 535 MADISON AVENUE
TWO WORLD TRADE CENTER NEW YORK, NEW YORK 10022
NEW YORK, NEW YORK 10048 212-508-6500
212-912-7400
APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC: As soon
as practicable after this Registration Statement becomes effective
------------------
The registrants hereby amend this Registration Statement on such date
or dates as may be necessary to delay its effective date until the registrant
shall file a further amendment which specifically states that this Registration
Statement shall thereafter become effective in accordance with Section 8(a) of
the Securities Act of 1933, as amended, or until the Registration Statement
shall become effective on such date as the Commission, acting pursuant to said
Section 8(a), may determine.
------------------
* This Registration Statement constitutes a filing on Form S-4 by Golden
State Petroleum Transport Corporation and a filing on Form F-4 by
Golden State Petro (IOM I-A) PLC and Golden State Petro (IOM I-B) PLC.
<PAGE>
CROSS REFERENCE SHEET FURNISHED PURSUANT TO RULE 404(a)
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Items and Captions in Form S-4 And F-4 Location In Prospectuses
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<S> <C> <C>
1. Forepart of Registration Statement and Outside Front
Cover Page of Prospectus.......................................... Forepart of Registration
Statement and Outside Front
Cover Page of Prospectus*
2. Inside Front and Outside Back Cover Pages of
Prospectus........................................................ Inside Front Cover Page of
Prospectus and Outside Back
Cover Page of Prospectus*
3. Risk Factors, Ratio of Earnings to
Fixed Charges, and Other Information.............................. Prospectus Summary; Risk
Factors
4. Terms of the Transaction ......................................... Prospectus Summary;
Description of the Exchange
Notes
5. Pro Forma Financial Information .................................. Capitalization of the Owners,
Management's Discussion and
Analysis of Financial
Condition and Results of
Operations; Selected Financial
Data and Supplementary
Financial Data of Chevron
Transport Corporation and
Chevron Corporation.
6. Material Contacts with Company Being Acquired..................... *
7. Additional Information Required for
Reoffering by Persons and Parties
Deemed to be Underwriters......................................... Prospectus Summary; the
Exchange offer; Plan of
Distribution
8. Interests of Named Experts and Counsel............................ *
9. Disclosure of Commission Position on
Indemnification for Securities Act Liabilities.................... See page II
10. Information with Respect to S-3 Registrants....................... *
11. Incorporation of Certain Information by
Reference......................................................... *
12. Information With Respect to S-2 or S-3
Registrants....................................................... *
</TABLE>
<PAGE>
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<S> <C> <C>
13. Incorporation of Certain Information by
Reference......................................................... *
14. Information With Respect to Registrants Other
than S-3 or S-2 Registrants
(a) Description of Business.................................. Prospectus Summary,
Investment Considerations,
Golden State Petroleum and
the Owners, Management's
Discussion and Analysis of
Financial Condition
(b) Description of Property.................................. Golden State Petroleum and
the Owners
(c) Legal Proceedings........................................ *
(d) Market Price of and Dividends on the
Registrants' Common Equity and Related
Stockholder Matters...................................... *
(e) Financial Information.................................... *
(f) Selected Financial Data.................................. Financial Statements
(g) Supplementary Financial Information...................... Financial Statements
(h) Management's Discussion and Analysis of
Financial Condition and Results of
Operations............................................... Management's Discussion and
Analysis of Financial
Condition and Results of
Operations
(i) Change in and Disagreements With Accountants
on Accounting and Financial Disclosures.................. *
(j) Quantitative and Qualitative Disclosures About
Market Desk.............................................. *
15. Information With Respect to S-3 Companies......................... *
16. Information With Respect to S-2 or S-3
Companies......................................................... *
17. Information if Proxies, Consents or
Authorizations are to be Solicited................................ *
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
<S> <C> <C>
18. Information if Proxies, Consents or
Authorizations Are Not to be Solicited,
or in an Exchange Offer........................................... Summary of Prospectus; The
Exchange Offer; Description
of the Exchange Notes
</TABLE>
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* Answer negative or item inapplicable.
<PAGE>
Information contained herein is subject to completion or amendment. A
registration statement relating to these securities has been filed with the
Securities and Exchange Commission. These securities may not be sold nor may
offers to buy be accepted prior to the time the registration statement becomes
effective. This prospectus shall not constitute an offer to sell or the
solicitation of an offer to buy nor shall there be any sale of these securities
in any State in which such offer, solicitation or sale would be unlawful prior
to registration or qualification under the securities laws of any such State.
SUBJECT TO COMPLETION, DATED ________, 1997
PROSPECTUS
_________ __, 1997
OFFER FOR ALL OUTSTANDING
8.04% FIRST PREFERRED MORTGAGE NOTES DUE 2019
($127,100,000 PRINCIPAL AMOUNT OUTSTANDING)
IN EXCHANGE FOR
8.04% FIRST PREFERRED EXCHANGE MORTGAGE NOTES DUE 2019
of
Golden State Petroleum Transport Corporation
THE EXCHANGE OFFER WILL EXPIRE AT 5:00 P.M., NEW YORK CITY TIME,
ON , 1997, UNLESS EXTENDED.
Golden State Transport Corporation, a Delaware corporation ("Golden
State Petroleum"), as agent for each of Golden State Petro (IOM I-A) PLC and
Golden State Petro (IOM I-B) PLC (each, an "Owner"), hereby offers, upon the
terms and subject to the conditions set forth in this Prospectus and the
accompanying Letter of Transmittal (the "Letter of Transmittal," which together
with this Prospectus constitute the "Exchange Offer"), to exchange up to
$127,100,000 in aggregate principal amount of its registered 8.04% First
Preferred Exchange Mortgage Notes Due 2019 (the "Exchange Notes"), for a like
principal amount of its unregistered 8.04% First Preferred Mortgage Notes Due
2019 (the "Existing Notes"), of which an aggregate principal amount of
$127,100,000 is outstanding. The form and terms of the Exchange Notes are
identical to the form and terms of the Existing Notes except that (i) the offer
of the Exchange Notes will be registered under the Securities Act of 1933, as
amended (the "Securities Act"), and therefore the Exchange Notes will not be
subject to certain transfer restrictions, and (ii) Holders of Exchange Notes
will not be entitled to certain rights of Holders of Existing Notes under the
Registration Rights Agreement relating to the Existing Notes. The Exchange Offer
is being made in order to satisfy certain contractual undertakings of Golden
State Petroleum and the Owners (collectively, the "Companies"). See "THE
EXCHANGE OFFER" and "DESCRIPTION OF THE EXCHANGE NOTES." Concurrently with the
issuance of the Existing Notes, Serial First Preferred Mortgage Notes Due
February 1, 2000 to 2006 in the aggregate principal amount of $51,700,000
(collectively, the "Serial Notes" and, collectively with the Exchange Notes and
the Existing Notes, the "Notes") were privately issued by Golden State
Petroleum, as agent for the Owners. The Serial Notes and the Additional Notes,
if any, will rank senior in right of payment to the Exchange Notes and the
untendered Existing Notes, if any. See "CAPITALIZATION OF THE OWNERS."
The Exchange Notes mature on February 1, 2019. Interest on the Exchange
Notes will be deemed to accrue from December 24, 1996 or from the date of the
last periodic payment of interest on the Existing Notes, whichever is later, at
a rate of 8.04% per annum, except that from June 23, 1997 until consummation of
the Exchange Offer interest will be deemed to accrue at a rate of 8.29% per
annum to reflect Special Interest (as hereinafter defined). Interest on the
Exchange Notes is payable on February 1 and August 1 of each year, commencing
August 1, 1997 (each, a "Payment Date"). The Exchange Notes will be subject to
redemption through operation of a mandatory sinking fund at a redemption price
of 100% of the principal amount thereof plus accrued and unpaid interest on each
Payment Date, commencing on August 1, 2007, to and including August 1, 2018,
according to the applicable schedule of sinking fund payments set forth herein.
Final Payment on the Exchange Notes is due February 1, 2019 (the "Maturity
Date").
The Exchange Notes will be secured obligations of the Owners. Golden
State Petroleum, as agent for the Owners, is entitled to issue additional series
of first preferred mortgage notes (the "Additional Notes") from time to time
pursuant to supplements to the Indenture upon the satisfaction of certain terms
and conditions set forth in the Indenture to fund additional construction costs
relating to the Vessels. Although the issuance of Additional Notes is not
limited to a specific dollar amount, such issuance is subject to satisfaction of
a number of limitations designed to protect the Holders of the Notes. The
Exchange Notes and the untendered Existing Notes, if any, together with the
Serial Notes and the Additional Notes, will be secured (subject to the priority
of payment described herein) by the Collateral (as defined) SEE "PROSPECTUS
SUMMARY -- SECURITY." The Exchange Notes and the untendered Existing Notes, if
any, will be subordinate in right of payment to the Serial Notes and the
Additional Notes, if any. See "DESCRIPTION OF THE EXCHANGE NOTES--TRUST
ACCOUNTS" and "--APPLICATION OF PROCEEDS."
The Companies will accept for exchange any and all Existing Notes
validly tendered and not withdrawn prior to 5:00 p.m., New York City time, on ,
1997, unless extended (as so extended, the "Expiration Date"). Tenders of
Existing Notes may be withdrawn at any time prior to 5:00 p.m., New York City
time, on the Expiration Date. The Exchange Offer is subject to certain customary
conditions. See "THE EXCHANGE OFFER."
Based on interpretations by the staff of the Securities and Exchange
Commission (the "Commission") set forth in noaction letters issued to third
parties, the Companies believe that Exchange Notes issued pursuant to the
Exchange Offer may be offered for resale, resold or otherwise transferred by a
Holder who is not an "affiliate" of the Companies (within the meaning of Rule
405 under the Securities Act) without compliance with the registration and
prospectus delivery provisions of the Securities Act, PROVIDED that the Holder
is acquiring the Exchange Notes in its ordinary course of business and has no
arrangement or understanding with any person to participate in the distribution
(within the meaning of the Securities Act) of the Exchange Notes. However, the
staff of the Commission has not considered the Exchange Offer in the context of
a noaction letter addressed to the Companies, and there can be no assurance that
the staff of the Commission would make a similar determination with respect to
the Exchange Offer as it has in its prior interpretations. Persons who desire to
exchange Existing Notes in the Exchange Offer must represent to the Companies,
among other things, that such conditions have been met.
(i)
<PAGE>
Each broker-dealer that receives Exchange Notes for its own account
pursuant to the Exchange Offer must acknowledge that it will deliver a
prospectus in connection with any resale of such Exchange Notes. The Letter of
Transmittal accompanying this Prospectus states that by so acknowledging and by
delivering a prospectus, a broker-dealer will not be deemed to admit that it is
an "underwriter" within the meaning of the Securities Act. This Prospectus, as
it may be amended or supplemented from time to time, may be used by a
broker-dealer in connection with resales of Exchange Notes received in exchange
for Existing Notes where such Existing Notes were acquired by such broker-dealer
as a result of market-making activities or other trading activities. The
Companies have agreed that, starting on the Expiration Date and ending on the
close of business on the first anniversary of the Expiration Date, they will
make this Prospectus, as supplemented or amended, available to any broker-dealer
for use in connection with any resale. See "PLAN OF DISTRIBUTION."
-----------------------------
SEE "RISK FACTORS" BEGINNING ON PAGE 19 FOR A DISCUSSION OF CERTAIN
FACTORS THAT PROSPECTIVE INVESTORS IN EXCHANGE NOTES SHOULD CONSIDER.
-----------------------------
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION
PASSED UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY
REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
-----------------------------
The date of this Prospectus is , 1997
No public market has existed for the Exchange Notes before the Exchange
Offer. The Companies currently do not intend to list the Exchange Notes on any
securities exchange or to seek approval for quotation through any automated
quotation system, and no active public market for the Exchange Notes is
currently anticipated. There will be no proceeds to the Owners from this
Exchange Offer. The Owners will pay all expenses incident to the Exchange Offer.
The Exchange Offer is not conditioned upon any minimum principal amount
of Existing Notes being tendered for exchange pursuant to the Exchange Offer.
The Existing Notes were sold by Golden State Petroleum, as agent on
behalf of the Owners, on December 24, 1996, in transactions not registered under
the Securities Act in reliance upon the exemption provided in Section 4(2) of
the Securities Act. The Existing Notes were subsequently placed with qualified
institutional buyers in reliance upon Rule 144A under the Securities Act.
Accordingly, the Existing Notes may not be reoffered, resold or otherwise
transferred in the United States unless so registered or unless an applicable
exemption from the registration requirements of the Securities Act is available.
Any Existing Notes not tendered and accepted in the Exchange Offer will
remain outstanding. To the extent that any Existing Notes are tendered and
accepted in the Exchange Offer, a Holder's ability to sell untendered Existing
Notes could be adversely affected. Following consummation of the Exchange Offer,
the Holders of Existing Notes will continue to be subject to the existing
restrictions upon transfer thereof and the Companies generally will have no
further obligations to such Holders to provide for the registration under the
Securities Act of the Existing Notes held by them. See "THE EXCHANGE
OFFER--CONSEQUENCES OF FAILURE TO EXCHANGE."
The Exchange Notes issued pursuant to this Exchange Offer initially
will be issued in the form of a global Exchange Note, which will be deposited
with, or on behalf of, The Depository Trust Company ("DTC") and registered in
its name or in the name of Cede & Co., its nominee. Beneficial interests in the
global Exchange Note representing the Exchange Notes will be shown on, and
transfers thereof will be effected through, records maintained by DTC and its
participants. After the initial issuance of the global Exchange Note, Exchange
Notes in certificated form may be issued in exchange for the global Exchange
Note on the terms set forth in the Indenture. See "DESCRIPTION OF THE EXCHANGE
NOTES--BOOK-ENTRY REGISTRATION."
THE EXCHANGE OFFER DESCRIBED IN THIS PROSPECTUS (THE "PROSPECTUS") IS
NOT DIRECTED TO, NOR WILL THE COMPANIES ACCEPT ANY TENDER FOR EXCHANGE FROM, ANY
PERSON IN ANY JURISDICTION IN WHICH PARTICIPATION IN SUCH EXCHANGE OFFER WOULD
BE UNLAWFUL. NEITHER THE DELIVERY OF THE PROSPECTUS NOR ANY EXCHANGE MADE
PURSUANT HERETO SHALL UNDER ANY CIRCUMSTANCES IMPLY THAT THERE HAS BEEN NO
CHANGE IN THE AFFAIRS OF THE COMPANIES OR THAT THE INFORMATION SET FORTH HEREIN
IS CORRECT AS OF ANY DATE SUBSEQUENT TO THE DATE HEREOF.
-----------------------------
A copy of this document, together with certain other documents, has
been delivered to the Registrar of Companies in the Isle of Man for registration
as a prospectus in accordance with Section 38 of the Isle of Man Companies Act
1931.
-----------------------------
(ii)
<PAGE>
The principal executive offices of Golden State Petroleum are located
at c/o Cambridge Fund Management LLC, 535 Madison Avenue, New York, New York
10022, and the telephone number at the address is 212-508-6500. The principal
executive offices of the Owners are located at c/o 15-19 Anthol Street, Douglas,
Isle of Man, IM1 1LB, and the telephone number at that address is 011-44-1-62-
4628575.
ENFORCEABILITY OF CIVIL LIABILITIES
Each of Golden State Petro (IOM I-A) PLC and Golden State Petro (IOM
I-B) PLC is organized under the laws of the Isle of Man. A substantial portion
of the assets of each Owner is or may be located outside the United States. As a
result, it may be difficult for investors to enforce outside the United States
judgments against either of the Owners obtained in the United States in any
actions, including actions predicated on the civil liability provisions of the
federal securities laws of the United States. Certain directors of each Owner
are residents of jurisdictions other than the United States, and all or a
significant portion of the assets of such persons are or may be located outside
the United States. As a result, it may be difficult for investors to effect
service of process within the United States upon such persons or to enforce
against them in United States courts judgments predicated upon the civil
liability provisions of the federal securities laws of the United States. There
is currently no treaty between the United States and the Isle of Man providing
for reciprocal recognition and enforcement of judgments in civil and commercial
matters, and therefore a final judgment for the payment of money rendered by any
federal or state court in the United States based on civil liability, whether or
not predicated solely upon the federal securities laws, would not be
automatically enforceable in the Isle of Man. The Owners have been advised by
their Isle of Man counsel, Cains, that there is doubt as to the enforceability,
in original actions in Isle of Man courts, of liabilities predicated solely on
the U.S. federal securities laws and as to the enforceability in Isle of Man
courts of judgments of United States courts predicated upon the civil liability
provisions of the U.S. federal securities laws. Each Owner has irrevocably
submitted to the non-exclusive jurisdiction of the federal and state courts in
The City of New York for the purpose of any legal suit, action or proceeding
against such Owner in connection with the offering and sale of the Notes.
The foregoing discussion is based on the advice of Cains, counsel to
the Owners with respect to matters of Isle of Man law.
AVAILABLE INFORMATION
Golden State Petroleum and the Owners are not currently
subject to the periodic reporting and other informational requirements of the
Exchange Act. Each of the Owners has agreed that, whether or not it is required
to do so by the rules and regulations of the Commission, for so long as any of
the Notes and Additional Notes remain outstanding, it will furnish to the
Indenture Trustee and the Holders of the Notes and Additional Notes and file
with the Commission, or cause to be so filed as part of the financial statements
of the Owners (i) all quarterly and annual financial information that would be
required to be contained in a filing with the Commission on Forms 10-Q and 10-K
if the Owners were required to file such forms, including a "Management's
Discussion and Analysis of Financial Condition and Results of Operations" and,
with respect to the annual information only, a report thereon by independent
public accountants and (ii) all reports that would be required to be filed with
the Commission on Form 8-K if the Owners were required to file such reports.
Copies of the Indenture, the Registration Rights Agreement, the Chevron
Registration Rights Agreement, the Chevron Guarantees, the Initial Charters, the
Security Documents and any other document referred to herein can be obtained
without charge by any recipient of this Prospectus by contacting Golden State
Petroleum Transport Corporation c/o Cambridge Fund Management, LLC, 535 Madison
Avenue, Suite 3300, New York, New York 10022.
AVAILABLE INFORMATION RELATING TO
CHEVRON AND THE INITIAL CHARTERER
The Exchange Notes are not obligations of, and are not guaranteed by,
Chevron Transport Corporation (the "Initial Charterer") or Chevron Corporation
("Chevron"). Golden State Petroleum and the Owners are responsible for all
statements made in this Prospectus.
Chevron is subject to the informational requirements of the Exchange
Act and is required to file reports and other information with the Commission.
Copies of such reports and other information may be inspected and copied at
certain offices of the Commission at 450
(iii)
<PAGE>
Fifth Street, N.W., Washington, D.C. 20549, and at the Commission's regional
offices located at Citicorp Center, 500 West Madison, 14th Floor, Chicago,
Illinois 60661 and Seven World Trade Center, 13th Floor, New York, New York
10048. Copies of such material can be obtained from the Public Reference Section
of the Commission at 450 Fifth Street, N.W., Washington, D.C. 20549 at
prescribed rates. Such material may also be accessed electronically by means of
the Commission's home page on the Internet at http://www.sec.gov and at the
offices of the New York Stock Exchange, Inc., 20 Broad Street, New York, New
York 10015; the Chicago Stock Exchange, 440 South LaSalle Street, Chicago,
Illinois 60605; and The Pacific Stock Exchange, Inc., 301 Pine Street, San
Francisco, California 94104 and 618 South Spring Street, Los Angeles, California
90014. Chevron is not required to, and will not, provide annual reports to
holders of the Notes.
Summarized financial information concerning the Initial Charterer is
currently included in the footnotes to Chevron's consolidated financial
statements. Chevron has no obligation to the holders of the Notes to continue to
provide such summarized financial information regarding the Initial Charterer.
THIS PROSPECTUS RELATES ONLY TO THE EXCHANGE NOTES OFFERED HEREBY AND
DOES NOT RELATE TO ANY SECURITIES OF CHEVRON OR OF THE INITIAL CHARTERER. ALL
DISCLOSURES CONTAINED IN THIS PROSPECTUS REGARDING CHEVRON AND THE INITIAL
CHARTERER ARE DERIVED FROM THE PUBLICLY AVAILABLE DOCUMENTS DESCRIBED IN THE
PRECEDING PARAGRAPHS. GOLDEN STATE PETROLEUM AND THE OWNERS ARE RESPONSIBLE FOR
ALL OF THE INFORMATION CONTAINED IN THIS PROSPECTUS. THE DISCLOSURE OF OR
FAILURE TO DISCLOSE MATERIAL FUTURE EVENTS CONCERNING CHEVRON OR THE INITIAL
CHARTERER COULD AFFECT THE TRADING PRICES, IF ANY, OF THE EXCHANGE NOTES.
NONE OF GOLDEN STATE PETROLEUM OR EITHER OWNER MAKES ANY REPRESENTATION
TO ANY HOLDER OF EXCHANGE NOTES AS TO THE PERFORMANCE OF CHEVRON UNDER THE
CHEVRON GUARANTEES OR OF THE INITIAL CHARTERER UNDER THE INITIAL CHARTERS.
DEFINED TERMS
All capitalized terms used in this Prospectus and not otherwise defined
have the meanings assigned in Appendix A hereto, beginning on page A-1 of this
Prospectus.
(iv)
<PAGE>
PROSPECTUS SUMMARY
THE FOLLOWING SUMMARY IS QUALIFIED IN ITS ENTIRETY BY, AND SHOULD BE
READ IN CONJUNCTION WITH, THE MORE DETAILED INFORMATION AND FINANCIAL
STATEMENTS, INCLUDING THE RELATED NOTES, APPEARING ELSEWHERE IN THIS PROSPECTUS.
SEE THE SECOND PARAGRAPH UNDER "RISK FACTORS." UNLESS OTHERWISE INDICATED, ALL
CURRENCY AMOUNTS SET FORTH IN THIS PROSPECTUS ARE STATED IN UNITED STATES
DOLLARS. REFERENCE IS MADE TO THE GLOSSARY OF CERTAIN TERMS IN APPENDIX A FOR
DEFINITIONS OF CERTAIN TERMS USED IN THIS PROSPECTUS.
OVERVIEW OF THE COMPANIES' BUSINESS AND THE NOTES
Golden State Petroleum, a recently formed special purpose Delaware
corporation, issued the Existing Notes as agent on behalf of the Owners. The
proceeds from the offering and sale of the Existing Notes, together with the
proceeds of the sale of the Serial Notes, will be used by the Owners to fund the
construction of two very large crude carriers (each, a "Vessel") to be
constructed by Samsung Corporation ("Samsung") and Samsung Heavy Industries
("SHI" and, together with Samsung, the "Builders") under the technical
supervision of Chevron Shipping Company (the "Technical Advisor"), as agent for
the Initial Charterer, as well as to pay capitalized interest on the Exchange
Notes, the untendered Existing Notes, if any, and the Serial Notes through the
delivery date for each Vessel (each, a "Delivery Date"). The Vessels, upon their
acceptance by the Owners under the ship building contracts (each, a "Building
Contract"), will be chartered to the Initial Charterer pursuant to two separate
initial charters (each, an "Initial Charter"), each of which is first terminable
by the Initial Charterer on the eighth anniversary of the Delivery Date for the
related Vessel. The Initial Charterer's obligations under each Initial Charter
will be guaranteed by Chevron under two separate Chevron guarantees (each, a
"Chevron Guarantee"). The Initial Charterer is an indirect, wholly-owned
subsidiary of Chevron.
The Exchange Notes and the Existing Notes are issuable pursuant to the
Indenture. The obligations of the Owners under the Exchange Notes and Existing
Notes (and the Additional Notes, if any) are secured by a statutory first
mortgage on each Vessel, an assignment of the Charters and certain other
assignments to the Indenture Trustee in trust for the benefit of the Holders of
the Notes. In accordance with the Indenture, the Indenture Trustee will exercise
remedies with respect to such collateral. Concurrently with the issuance of the
Existing Notes, Serial First Preferred Mortgage Notes Due February 1, 2000 to
2006 in the aggregate principal amount of $51,700,000 were privately issued by
Golden State Petroleum, as agent for the Owners. The Exchange Notes and the
untendered Existing Notes, if any, together with the Serial Notes and the
Additional Notes will be secured (subject to the priority of payment described
herein) by the Collateral (as defined). The Exchange Notes and the untendered
Existing Notes, if any, will be subordinate in right of payment to the Serial
Notes and the Additional Notes, if any. The indebtedness represented by all of
the Notes, including the Exchange Notes, has financed the Vessels and each of
the Exchange Notes, the untendered Existing Notes, if any, the Serial Notes, and
the Additional Notes, if any, are all secured by both Vessels. See "DESCRIPTION
OF THE EXCHANGE NOTES--TRUST ACCOUNTS," "--APPLICATION OF PROCEEDS" and
"CAPITALIZATION OF THE OWNERS."
The Exchange Notes are not obligations of, and are not guaranteed by,
the Initial Charterer or Chevron.
THE OWNERS AND THE MANAGER
Each Owner was formed as an Isle of Man public limited company for the
purpose of acquiring and chartering one of the Vessels. The Owners and Golden
State Petroleum are wholly-owned subsidiaries of Golden State Holdings I, Ltd.,
an Isle of Man holding company (the "Ship Holding Company"), that is a
wholly-owned subsidiary of Cambridge Petroleum Transport Corporation, a closely
held Cayman Islands
<PAGE>
corporation ("CPTC"). Under a management agreement (a "Management Agreement")
with each Owner, Cambridge Fund Management L.L.C., a Delaware limited liability
company (the "Manager") and an affiliate of CPTC, will provide administrative,
ship management and advisory services to the Owners. The Manager was established
in 1995, and arranges and manages investment banking opportunities primarily in
the international shipping industry, including the financing of existing and
newly built vessels. Each of the Manager, CPTC and the Ship Holding Company is
an Affiliate of Cambridge Partners, L.L.C.
THE VESSELS
Each Vessel to be acquired by the respective Owner listed below is a
very large crude carrier ("VLCC"). VLCCs are large-sized vessels ranging from
approximately 200,000 to 320,000 deadweight tonnes ("dwt"). Each Vessel will be
constructed pursuant to a Building Contract entered into by each Owner and the
Builders. Pursuant to an agreement (each, a "Technical Supervision Agreement"),
the Vessels' construction will be supervised by and will meet the technical
specifications of the Technical Supervisor. Those specifications have been
designed to enhance safety and reduce operating and maintenance costs, including
such features as high performance rudders, extra steel (minimal use of high
tensile steels), additional fire safety equipment, redundant power generation
equipment, extra coating and electrolytic corrosion monitoring and protection
systems and additional crew quarters to facilitate added manning and to comply
with all material existing and currently proposed regulatory requirements
affecting the Vessels and their operations such as the United States Oil
Pollution Act of 1990 ("OPA"). The delivered cost and expenses of issuance with
respect to each Owner's Allocated Principal Amount of the Mortgage Notes is
approximately $93.9 million for Vessel A and approximately $95.8 million for
Vessel B. If the Technical Supervisor or the Initial Charterer wish to alter the
specifications of a Vessel after the date of the issuance of the Existing Notes
(the "Original Closing Date") and prior to the date such Vessel is to be
delivered to the related Owner, and such alteration results in an increase in
the construction costs of such Vessel, additional notes (the "Additional Notes")
may be issued by the Owners to finance such increased costs, which shall not
exceed $250,000 per Vessel without the consent of the related Owner. In the
event the Builders fail to deliver a Vessel on or before 180 days from the
Contractual Delivery Date for such Vessel and the Contractual Delivery Date is
not extended as provided in the Building Contract, then the Builders are
required to refund to the related Owner an amount equal to the installments made
by such Owner, together with certain other amounts described herein. Pursuant to
each Building Contract, the related Owner may either cancel the related Building
Contract and receive the Refund Amount (as described herein) or may extend the
Contractual Delivery Date and reserve the right to liquidated damages in an
amount equal to $24,200 per day if such extension does not adversely affect the
then current rating of the Notes. THE REFUND AMOUNT SHALL BE DEPOSITED INTO THE
PRE-FUNDING ACCOUNT AND SHALL BE USED TO REFUND THE ALLOCATED PRINCIPAL AMOUNT
OF THE NOTES FOR THE RELATED VESSEL. Neither Building Contract sets forth a
final date beyond which delivery of the related Vessel may not be extended. The
obligations of the Builders to refund these amounts are guaranteed by The Korea
Development Bank, Seoul, South Korea, pursuant to an Irrevocable Installment
Payment Letter of Guarantee (each, a "Building Contract Guarantee").
-2-
<PAGE>
<TABLE>
<CAPTION>
VESSEL OWNER, SIZE AND DELIVERY DATE
APPROXIMATE
DEADWEIGHT CONTRACTUAL
OWNER TONNES CONSTRUCTION DELIVERY DATE
<S> <C> <C> <C> <C>
Vessel A Golden State 308,500 Double Hull February 1, 1999
Petro (IOM
I-A) PLC
Vessel B Golden State 308,500 Double Hull July 1, 1999
Petro (IOM I-B)
PLC
</TABLE>
<TABLE>
<CAPTION>
VESSEL TECHNICAL INFORMATION
(All figures are approximate)
LENGTH BREADTH DRAFT
REGISTRATION (METERS) (METERS) (METERS)
<S> <C> <C> <C> <C>
Vessel A Liberia 333.0 58.0 21.4
Vessel B Liberia 333.0 58.0 21.4
</TABLE>
THE BUILDERS
Samsung Corporation is one of the major affiliated companies of the
Samsung Group, which is the world's 14th largest conglomerate (Fortune 1994
global list). Samsung Corporation's main businesses are represented by general
trade, construction & engineering, motor sales & marketing, and fashion &
retails with total revenues of $24.8 billion in 1995 with 115 offices and
facilities throughout 60 countries.
Samsung Heavy Industries Co., Ltd. ("SHI") is also an affiliated
company of the Samsung Group, which manufactures a wide range of products,
including industrial plant, ships, offshore structures, construction equipment
and commercial vehicles. As of 1995, SHI had 13,400 employees and annual sales
in excess of $3.8 billion. SHI shipbuilding capacity was increased to 1.8
million gross tons in 1995, making SHI one of the world's leading shipbuilders.
SHI operates four technologically advanced research and development centers and
one integrated engineering center where highly economical, next-generation ships
like high-speed cargo and passenger ships, and offshore-related ships, such as
the drillship and Floating Production Storage Offtake (FPSO) vessels, are
developed. TO DATE, SHI HAS CONSTRUCTED THREE VLCCS FOR OTHER OWNERS. SHI has
advised the Companies that all three VLCCs were delivered on time.
THE BUILDING CONTRACT GUARANTOR
The Korea Development Bank ("KDB") was established as a government
financial institution pursuant to The Korea Development Bank Act (the "KDB
Act"). All of KDB's paid-in capital is owned by the government of the Republic
of Korea pursuant to the KDB Act. STANDARD & POOR'S RATING SERVICES ISSUED AN
EQUIVALENT LONG-TERM DEBT RATING OF AA- FOR DEBT ISSUED BY THE GOVERNMENT OF THE
REPUBLIC OF KOREA AND THE KOREAN DEVELOPMENT BANK.
-3-
<PAGE>
CHEVRON AND THE INITIAL CHARTERER
Chevron, a Delaware corporation, a major international oil company,
will guarantee the payment and performance obligations of the Initial Charterer
under each Initial Charter. According to publicly available information, Chevron
provides administrative, financial and management support for, and manages its
investments in, U.S. and foreign subsidiaries and affiliates, which engage in
fully integrated petroleum operations, chemical operations and coal mining.
Chevron operates in the United States and approximately 90 other countries.
Petroleum operations consist of exploring for, developing and producing crude
oil and natural gas; transporting crude oil, natural gas and petroleum products
by pipelines, marine vessels and motor equipment; refining crude oil into
finished petroleum products; and marketing crude oil, natural gas and the many
products derived from petroleum. Chemical operations include the manufacture and
marketing of a wide range of chemicals for industrial uses.
According to publicly available information, the Initial Charterer is
engaged in the marine transportation of oil and refined petroleum products. At
any given time, the Initial Charterer operates between 25 and 35 internationally
flagged vessels which it owns or bareboat charters. The Initial Charterer's
primary transportation routes are from the Middle East, Indonesia, Mexico, West
Africa and the North Sea to ports in the United States, Europe, the United
Kingdom and Asia. Refined petroleum products are transported worldwide. The
Initial Charterer, a Liberian corporation, is an indirect, wholly-owned
subsidiary of Chevron. See "Chevron and the Initial Charterer."
The Exchange Notes are not obligations of, and are not guaranteed by,
the Initial Charterer or Chevron.
THE INITIAL CHARTERS
Pursuant to the Initial Charters, the Initial Charterer has agreed to
charter each Vessel commencing on its respective Delivery Date and ending, in
each case, on the eighteenth anniversary of such Delivery Date. Pursuant to the
Initial Charters, the Initial Charterer has the right to terminate each Initial
Charter on five dates (each, an "Optional Termination Date") beginning on the
expiration of the period commencing on the Delivery Date for such Vessel and
terminating on the eighth anniversary thereof (each, a "Fixed Period") and on
each of the four subsequent two-year anniversaries thereof. During the Fixed
Period, the charter hire shall be $27,199 per day for Vessel A and $27,199 per
day for Vessel B. If Additional Notes are issued due to the incurrence of
additional construction costs for a Vessel ("Additional Construction Costs"),
Additional Charter Hire will become payable during the Fixed Period under the
related Initial Charter in an amount that, together with investment income
thereon, will be sufficient to cover the debt service on the Additional Notes.
If there is a Net Reduction in Construction Costs for a Vessel resulting in a
mandatory redemption of the Notes in an amount equal to the Net Reduction in
Construction Costs, the Charter Hire will be reduced by an amount necessary to
reflect the amortization of the Net Reduction in Construction Costs over the
term of the Exchange Notes. Charter Hire after the Fixed Period will be $28,500.
See "The Initial Charters--Charter Hire." During the term of the Initial
Charters, the Owners are not liable for any expense in operating, registering,
documenting, insuring, repairing or maintaining the Vessels and are not required
to supply a vessel or any part thereof if a Vessel or any part thereof is lost,
damaged, rendered unfit for use, confiscated, seized, requisitioned, restrained
or appropriated. Pursuant to the Initial Charters, the Initial Charterer is
required to pay Charterhire in respect of each Vessel without offset or
deduction for any reason whatsoever.
-4-
<PAGE>
SECURITY
Prior to the Delivery Date of each Vessel, the Exchange Notes and the
untendered Existing Notes, if any, together with the Serial Notes and the
Additional Notes, if any, will be secured (subject to the priority of payment
described herein, SEE "DESCRIPTION OF THE EXCHANGE NOTES--TRUST ACCOUNTS"
AND "--APPLICATION OF PROCEEDS") BY the Pre-Funding Account, THE assignment
of the Building Contracts and the Technical Supervision AGREEMENTS and
THE assignment of the Building Contract Guarantees PRIOR TO THE DELIVERY OF
A VESSEL, AND THEREAFTER BY THE DEBT SERVICE RESERVE FUND, THE FIRST PREFERRED
SHIP MORTGAGE ON EACH VESSEL, AN ASSIGNMENT OF ANY CHARTERS FOR THE VESSELS
INCLUDING an assignment of the Initial Charters AND the Charter
Supplements AND an assignment of the RELATED CHEVRON GUARANTEE, AS WELL
AS CERTAIN OTHER COLLATERAL, INCLUDING AN ASSIGNMENT OF THE EARNINGS AND
INSURANCE PROCEEDS, AN ASSIGNMENT OF THE MANAGEMENT AGREEMENTS RELATING TO THE
VESSELS AND A PLEDGE OF ALL OF THE OUTSTANDING STOCK OF THE OWNERS
(COLLECTIVELY, THE "COLLATERAL").
-5-
<PAGE>
THE EXCHANGE OFFER
SUMMARY OF TERMS OF THE EXCHANGE OFFER
The Exchange Offer..................... Up to $127,100,000 aggregate
principal amount of 8.04% First
Preferred Exchange Mortgage Notes
Due 2019 (the "Exchange Notes") will
be issued in minimum denominations
of $100,000 and integral multiples
of $1,000 in excess thereof. Subject
to such minimum denominations,
$1,000 principal amount of Exchange
Notes is offered in exchange for
each $1,000 principal amount of
Existing Notes. As of the date
hereof, Existing Notes representing
$127,100,000 aggregate principal
amount are outstanding. The form and
terms of the Exchange Notes and the
Existing Notes are identical, except
that (i) the offer of the Exchange
Notes will be registered under the
Securities Act and therefore the
Exchange Notes will not be subject
to certain transfer restrictions and
(ii) Holders of Exchange Notes will
not be entitled to certain rights of
Holders of the Existing Notes under
the Registration Rights Agreement.
Based on interpretations by the
Commission's staff set forth in no-
action letters issued to third
parties unrelated to the Companies,
the Companies believe that the
Exchange Notes issued pursuant to
the Exchange Offer in exchange for
the Existing Notes may be offered
for resale, resold or otherwise
transferred by any Holder (other
than any such Holder or such other
person (i) that is an "affiliate" of
the Companies within the meaning of
Rule 405 under the Securities Act or
(ii) that is a broker-dealer who
acquired such Existing Notes
directly from the Companies (or any
affiliate thereof)), without
compliance with the registration and
prospectus delivery provisions of
the Securities Act, PROVIDED that
(i) the Exchange Notes are acquired
in the ordinary course of business
of the Holder and (ii) the Holder is
not engaged in and does not intend
to engage in a distribution of the
Exchange Notes and has no
arrangement or understanding with
any person to participate in the
distribution of the Exchange Notes.
The Commission, however, has not
considered the Exchange Offer in the
context of a no-action letter, and
there can be no assurance that the
staff of the Commission would make a
similar determination with respect
to the Exchange Offer as in such
other circumstances. See "THE
EXCHANGE OFFER--PURPOSE AND EFFECT
OF THE EXCHANGE OFFER." Each
broker-dealer that receives Exchange
Notes for its own account in
exchange for Existing Notes, where
those Existing Notes were acquired
by the broker-dealer as a result of
its market-making activities or
other trading activities, must
acknowledge that it will deliver a
prospectus in connection with any
resale of those Exchange Notes. See
"PLAN OF DISTRIBUTION."
Registration Rights Agreement.......... The Existing Notes were sold by the
Owners in December 1996 in a private
placement. In connection with the
sale of the Existing Notes, the
Companies entered into a
Registration Rights Agreement for
the benefit of the purchasers
thereof (the "Registration Rights
-6-
<PAGE>
Agreement"), under which the
Companies agreed to use their
respective reasonable best efforts
to effect the Exchange Offer. See
"THE EXCHANGE OFFER-- PURPOSE AND
EFFECT OF THE EXCHANGE OFFER" and
"DESCRIPTION OF THE EXCHANGE
NOTES--REGISTRATION RIGHTS."
Pursuant to the Registration Rights
Agreement, the Companies are
required to file a registration
statement for a continuous offering
pursuant to Rule 415 under the
Securities Act in respect of the
Existing Notes under certain
circumstances, including if existing
Commission interpretations are
changed such that the Exchange Notes
received by Holders in the Exchange
Offer are not or would not be, upon
receipt, transferable by each such
Holder (other than an affiliate of
the Companies) without restriction
under the Securities Act. See "THE
EXCHANGE OFFER--PURPOSE AND EFFECT
OF THE EXCHANGE OFFER" and
"DESCRIPTION OF THE EXCHANGE
NOTES--REGISTRATION RIGHTS."
Expiration Date........................ The Exchange Offer will expire at
5:00 p.m., New York City time,
on _____________________, 1997, or
EXTENDED UP TO A MAXIMUM OF 60
DAYS. Any Existing Notes not
accepted for exchange for any reason
will be returned without expense to
the tendering Holder thereof as
promptly as practicable after the
expiration or termination of the
Exchange Offer.
Withdrawal............................. The tender of Existing Notes
pursuant to the Exchange Offer may
be withdrawn at any time prior to
5:00 p.m., New York City time, on
the Expiration Date.
Interest on the Exchange Notes......... Interest on each Exchange Note will
be deemed to accrue from December
24, 1996 (the date of issuance of
the Existing Notes) or from the date
of the last periodic payment of
interest on the Existing Notes,
whichever is later.
Special Interest on the Existing
Notes................................ Pursuant to the terms of the
Registration Rights Agreement,
additional special interest
("Special Interest") on the Existing
Notes will accrue from June 23, 1997
(180 days after the date of issuance
of the Existing Notes) to the date
the Exchange Offer is consummated.
Special Interest will accrue at a
rate of 0.25% of the outstanding
principal amount of the Existing
Notes per annum and is payable
semiannually, commencing on August
1, 1997. See "DESCRIPTION OF THE
EXCHANGE NOTES--MATURITY, INTEREST
AND PRINCIPAL" and "--REGISTRATION
RIGHTS."
Conditions to the Exchange Offer....... The Exchange Offer is subject to
certain customary conditions,
certain of which may be waived by
the Companies. See "THE EXCHANGE
OFFER--CONDITIONS." The Exchange
Offer is not conditioned upon any
minimum aggregate principal amount
of Existing Notes being tendered for
exchange.
Procedures for Tendering Existing
Notes................................ Each Holder of Existing Notes who
desires to accept the Exchange Offer
must complete, sign and date the
Letter of Transmittal, or a copy
thereof, in accordance with the
instructions contained herein and
therein, and mail or otherwise
deliver the Letter of Transmittal or
the copy, together with the Existing
Notes and any other
-7-
<PAGE>
required documentation, to the
Exchange Agent at the address set
forth herein. Persons holding
Existing Notes through DTC and
wishing to accept the Exchange Offer
must do so pursuant to DTC's
Automated Tender Offer Program
("ATOP"), by which each tendering
participant will agree to be bound
by the Letter of Transmittal. By
executing or agreeing to be bound by
the Letter of Transmittal, each
Holder will represent to the
Companies that, among other things,
(i) the Exchange Notes acquired
pursuant to the Exchange Offer are
being obtained in the ordinary
course of business of the Holder of
the Existing Notes, (ii) the Holder
is not engaging in and does not
intend to engage in a distribution
of such Exchange Notes, (iii) the
Holder has no arrangement or
understanding with any person to
participate in the distribution of
such Exchange Notes, (iv) the Holder
is not an "affiliate," as defined
under Rule 405 promulgated under the
Securities Act, of any of the
Companies and (v) if such Holder is
a broker-dealer, that it acquired
the Existing Notes as a result of
market making activities or other
trading activities.
Acceptance of Existing Notes and
Delivery of Exchange Notes.......... The Companies will accept for
exchange any and all Existing Notes
which are properly tendered in the
Exchange Offer prior to 5:00 p.m.,
New York City time, on the
Expiration Date. The Exchange Notes
issued pursuant to the Exchange
Offer will be delivered promptly
following the Expiration Date. See
"THE EXCHANGE OFFER--TERMS OF THE
EXCHANGE OFFER."
Exchange Agent......................... United States Trust Company of New
York is serving as Exchange Agent in
connection with the Exchange Offer.
U.S. Tax Considerations................ The exchange pursuant to the
Exchange Offer will not be a taxable
event for U.S. federal income tax
purposes. See "MATERIAL UNITED
STATES FEDERAL INCOME TAX
CONSEQUENCES."
Effect of Not Tendering................ Existing Notes that are not tendered
or that are not properly tendered
will, following the completion of
the Exchange Offer, continue to be
subject to the existing restrictions
upon transfer thereof. Upon
completion of the Exchange Offer,
the Companies generally will have no
further obligation to provide for
the registration under the
Securities Act of such Existing
Notes.
SUMMARY OF TERMS OF THE EXCHANGE NOTES
Securities Offered........................... $127,100,000 aggregate
principal amount of 8.04% First
Preferred Exchange Mortgage
Notes Due 2019 (the "Exchange
Notes").
Owners....................................... Golden State Petro (IOM I-A)
PLC and Golden State Petro (IOM
I-B) PLC, each an Isle of Man
public limited company.
Issuers...................................... Golden State Petroleum
Transport Corporation, a
Delaware corporation, as agent
for the Owners, and each of the
Owners.
Indenture Trustee............................ United States Trust Company of
New York.
-8-
<PAGE>
Maturity Date................................ February 1, 2019.
Denominations................................ The Exchange Notes will be
issued in minimum denominations
of $100,000 and multiples of
$1,000 in excess thereof.
Interest Payment Dates....................... February 1 and August 1,
commencing August 1, 1997.
Mandatory Sinking Fund Payments.............. The Exchange Notes and the
untendered Existing Notes, if
any, are subject to redemption
through operation of the
mandatory sinking fund on
February 1 and August 1 of each
year, commencing on August 1,
2007, to and including August
1, 2018, according to the
applicable schedule of sinking
fund payments set forth herein.
The sinking fund redemption
price is 100% of the principal
amount of the Exchange Notes
and the untendered Existing
Notes, if any, being redeemed,
together with accrued and
unpaid interest to the date
fixed for redemption.
The amortization schedule will
approximate level debt service
with an additional principal
payment on the Maturity Date of
$10,995,000 per Vessel. The
table below provides the
scheduled sinking fund
redemption amounts and final
principal payment on the
Exchange Notes and the
untendered Existing Notes, if
any, (assuming both Vessels are
accepted by the Owners under
the Building Contracts)
allocated to each Vessel.
Sinking Fund Redemption Amounts
and Final Principal Payment
(Dollars In Thousands)
----------------------
Scheduled
Payment Date Amount
------------ ------
August 1, 2007 $ 1,340.0
February 1, 2008 2,825.0
August 1, 2008 2,940.0
February 1, 2009 3,060.0
August 1, 2009 3,180.0
February 1, 2010 3,310.0
August 1, 2010 3,445.0
February 1, 2011 3,580.0
August 1, 2011 3,725.0
February 1, 2012 3,870.0
August 1, 2012 4,030.0
February 1, 2013 4,195.0
August 1, 2013 4,360.0
February 1, 2014 4,535.0
August 1, 2014 4,720.0
February 1, 2015 4,905.0
August 1, 2015 5,105.0
February 1, 2016 5,310.0
August 1, 2016 5,525.0
February 1, 2017 5,745.0
August 1, 2017 5,975.0
February 1, 2018 6,220.0
August 1, 2018 6,465.0
February 1, 2019 28,735.0
--------
$127,100.0
-9-
<PAGE>
Mandatory Redemption.........................If (a) a Vessel is not accepted by
the related Owner on or before 180
days from the Contractual Delivery
Date for such Vessel and the
Contractual Delivery Date is not
extended as provided in the
Building Contract or (b) a casualty
or certain other events occur with
respect to a Vessel as a result of
which the Vessel is a Total Loss,
then the Exchange Notes and the
untendered Existing Notes, if any,
will be subject to mandatory
redemption in part, equally and
ratably with the Serial Notes and
the Additional Notes, in an
aggregate principal amount equal to
the Allocated Principal Amount of
the Mortgage Notes for such Vessel,
at a redemption price of 100% of
the principal amount thereof plus
accrued and unpaid interest through
the date of redemption. To the
extent (a) the Builders default in
their obligation to pay the Refund
Amount and the Building Contract
Guarantor also defaults in its
obligation to pay such amount under
the Building Contract Guarantee or
(b) the Initial Charterer fails to
pay the Total Loss Payment and
Chevron fails to pay such amounts
under the Chevron Guarantees, funds
may not be available to pay to the
Holders of the Notes such
redemption price. Subject to
certain exceptions, if the Initial
Charterer exercises any of its
termination options, an Acceptable
Replacement Charter is not entered
into and the Owner has not elected
to redeem Exchange Notes and the
untendered Existing Notes, if any,
in part in an aggregate principal
amount equal to the Allocated
Principal Amount of the Notes for
the related Vessel, at 100% of the
principal amount thereof plus
accrued and unpaid interest to the
date fixed for redemption, then, if
all Holders of the Exchange Notes
and the untendered Existing Notes,
if any, have directed the Indenture
Trustee to sell the related Vessel
at the highest bid price received
by the Indenture Trustee from the
Manager, the Allocated Principal
Amount of the Notes for the related
Vessel will be subject to mandatory
redemption at an aggregate
redemption price equal to the net
proceeds received from such sale,
together with the Allocable Portion
of the Debt Service Reserve Fund.
There can be no assurance that such
redemption price will not be less
than 100% of the principal amount
thereof plus accrued and unpaid
interest through the date of
redemption. In addition, the
Exchange Notes and the untendered
Existing Notes, if any, will be
subject to mandatory redemption in
part, equally and ratably with the
Serial Notes, in an aggregate
principal amount equal to the Net
Reduction in Construction Costs if
such a Net Reduction in
Construction Costs occurs, at a
redemption price of 100% of the
principal amount thereof plus
accrued and unpaid interest through
the date of
-10-
<PAGE>
redemption. See "Description of the
Exchange Notes--Mandatory
Redemption."
Optional Redemption..........................The Exchange Notes and the
untendered Existing Notes, if any,
may be redeemed in whole or in
part, at the direction of the
Owners on any Payment Date on or
after the later of (a) August 1,
1999 and (b) the Delivery Date of
the last Vessel to be delivered at
a redemption price equal to 100% of
the principal amount thereof plus
accrued and unpaid interest to the
date fixed for redemption, provided
that if (i) such redemption occurs
prior to February 1, 2018 and (ii)
a Vessel is then subject to the
related Initial Charter or to an
Acceptable Replacement Charter
pursuant to which the charterer
thereunder is required to pay
charter hire equal to or greater
than the Charter Hire payable by
the Initial Charterer during the
Fixed Period, then the Make-Whole
Premium shall be payable with
respect to Mortgage Notes in an
amount equal to Allocated Principal
Amount of the Mortgage Notes for
such Vessel. The Owners may not
exercise such optional redemption
if such optional redemption would
adversely affect the then
applicable ratings on the Serial
Notes. See "Description of the
Exchange Notes--Optional
Redemption." In addition, Exchange
Notes and untendered Existing
Notes, if any, may be redeemed in
part in an aggregate principal
amount equal to the Allocated
Principal Amount of the Notes for a
Vessel if the Initial Charter for
such Vessel is terminated and an
Acceptable Replacement Charter is
not entered into, at a redemption
price equal to 100% of the
principal amount of the Exchange
Notes and the untendered Existing
Notes, if any, plus accrued and
unpaid interest to the date fixed
for redemption. IF FUNDS ARE
UNAVAILABLE THERE WILL BE NO
OPTIONAL
-----------------------------------
REDEMPTION WITH RESPECT TO ANY OF
THE MORTGAGE NOTES.
-----------------------------------
Purchase at the Option
of the Holder................................On August 1, 2014, if neither
Initial Charter has been terminated
by the Initial Charterer, the
Holders of the Exchange Notes and
the untendered Existing Notes, if
any, will have a one-time option to
cause the Owners to purchase the
Exchange Notes and the untendered
Existing Notes, if any, at a
purchase price equal to 100% of the
principal amount thereof plus
accrued and unpaid interest through
the date of purchase.
Construction of Vessels......................The Vessels will be constructed
pursuant to two separate Building
Contracts. Under each Building
Contract, the purchase price for
the related Vessel is payable in
installments.
If a Vessel is not delivered on or
before 180 days from the
Contractual Delivery Date for such
Vessel and the
-11-
<PAGE>
Contractual Delivery Date is not
extended as provided in the
Building Contract or if an Owner
rejects or cancels the related
Building Contract pursuant to the
terms and conditions set forth
therein, the Builders must
reimburse to such Owner an amount
that, together with the amounts
held in the Pre-Funding Account
(subject to the priority described
herein) (see "Description of the
Exchange Notes--Trust Accounts" and
"--Application of Proceeds") with
respect to such Vessel, shall be
sufficient to redeem the Allocated
Principal Amount of the Notes for
the related Vessel in full in the
event such Vessel is not delivered
(the "Refund Amount"). The Refund
Amount shall be deposited into the
Pre-Funding Account and shall be
used to refund the Allocated
Principal Amount of the Notes for
the related Vessel. See "Building
Contracts."
The Building Contract Guarantees.............The Builders' obligation to pay the
Refund Amount is guaranteed by The
Korea Development Bank (the
"Building Contract Guarantor")
pursuant to the Building Contract
Guarantee. See "Building Contract
Guarantees."
The Initial Charters and Chevron
Guarantees...................................On the date an Owner accepts a
Vessel under the related Building
Contract, the Initial Charterer is
required to accept such Vessel
under the related Initial Charter.
Each Initial Charter has a term
commencing on the date the Vessel
is accepted by the Initial
Charterer under the related Initial
Charter and terminating on the
eighteenth anniversary of the
related Delivery Date, subject to
the Initial Charterer's right to
terminate such Initial Charter on
the eighth anniversary thereof and
on each of the four subsequent
two-year anniversaries thereof. The
obligations of the Initial
Charterer under each Initial
Charter will be guaranteed by
Chevron pursuant to the related
Chevron Guarantee. The Initial
Charterer is an indirect,
wholly-owned subsidiary of Chevron.
Termination Options Under the
Initial Charters.............................Pursuant to the Initial Charters,
the Initial Charterer has the right
to terminate each Initial Charter
on five Optional Termination Dates
beginning on the expiration of the
Fixed Period and on each of the
four subsequent two-year
anniversaries thereof. The Initial
Charterer is required to give the
related Owner (i) non-binding
notice of its intent to exercise
such termination option, determined
on a good faith basis, at least
twelve months prior to the first
Optional Termination Date or nine
months prior to each successive
Optional Termination Date and (ii)
irrevocable notice of such exercise
nine months prior to the first
Optional Termination Date or six
months prior to each successive
Optional Termination Date. There
can be no assurance that the
Initial Charterer will not exercise
such termination option on the
-12-
<PAGE>
first, or any subsequent, Optional
Termination Date. Therefore,
Holders of the Exchange Notes
should assume that each Initial
Charter will be terminated as of
its first Optional Termination
Date.
Security.....................................The obligations of the Owners under
the Exchange Notes and the
untendered Existing Notes, if any,
together with the Serial Notes and
the Additional Notes, will be
secured (subject to the priority of
payment described herein, see
"Description of the Exchange
Notes--Trust Accounts" and
"--Application of Proceeds"), by
the Pre-Funding Account, the
assignment of the Building
Contracts and the Technical
Supervision Agreements and the
assignment of the Building Contract
Guarantees prior to the delivery of
a Vessel and thereafter, by the
Debt Service Reserve Fund, the
first preferred ship mortgage on
each Vessel, an assignment of any
charters for the Vessels including
an assignment of the Initial
Charters and the Charter
Supplements and an assignment of
the related Chevron Guarantee, as
well as certain other collateral,
including an assignment of the
earnings and insurance proceeds, an
assignment of the Management
Agreements relating to the Vessels
and a pledge of all of the
outstanding stock of the
Owners.
In accordance with the Indenture,
the Indenture Trustee will exercise
remedies with respect to the
Collateral, including the sale or
other disposition of the
Collateral, upon the occurrence of
an event of default (an "Indenture
Event of Default") under the
Indenture. The right of the
Indenture Trustee to enforce the
Mortgages will be subject to the
rights of the charterer under each
charter (including the Initial
Charterer under the Initial
Charter) to the continued use and
operation of the related Vessel
under such charter, so long as no
event of default has occurred and
is continuing under such charter
and so long as the charterer is
performing its obligations
thereunder. See "Description of the
Exchange Notes--Security."
Enforcement of Obligations...................The Exchange Notes and the
untendered Existing Notes, if any,
together with the Serial Notes and
the Additional Notes, will be full
recourse obligations of the Owners,
secured solely by the Collateral.
The Exchange Notes and the
untendered Existing Notes, if any,
will not be obligations of, or
guaranteed by, Golden State
Petroleum, the Initial Charterer or
Chevron. The Owners will not have
any significant source of income
other than investment income from
the Trust Accounts and payments to
them under the Initial Charters and
Chevron Guarantees or under any
Acceptable Replacement Charters or
other charters. If the Owners
default in their payment
obligations under the
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<PAGE>
Exchange Notes, the Indenture
Trustee, at the direction of the
holders of 25% in aggregate
principal amount of the Exchange
Notes, the untendered Existing
Notes, if any, the Serial Notes and
Additional Notes, if any, then
outstanding (the "Required
Noteholders"), may pursue any
available remedy, including
acceleration of the entire
principal of and interest accrued
on all of the Exchange Notes, the
untendered Existing Notes, if any,
the Serial Notes and the Additional
Notes, if any, and taking any
available action or proceeding to
collect such amounts, and the
Indenture Trustee will proceed to
exercise remedies with respect to
the Collateral, subject to the
limitations described herein. See
"Description of the Exchange
Notes--Indenture Events of Default"
and "--Indenture Remedies" for a
discussion of the exercise of
remedies by the Indenture Trustee.
Pre-Funding Account .........................The Pre-Funding Account was
established on the Original Closing
Date. The proceeds from the sale of
the Existing Notes and the Serial
Notes, after the payment of certain
fees and expenses, were deposited
into the Pre-Funding Account. In
addition, any proceeds from a
Building Contract or a Building
Contract Guarantee will be
deposited therein. On each Payment
Date, the Indenture Trustee will
withdraw an amount equal to the
interest payable on the Notes and
deposit such amount into the
Revenue Account for distribution to
the Holders of the Exchange Notes,
the Holders of the untendered
Existing Notes, if any, and the
holders of the Serial Notes. The
Indenture Trustee shall also
withdraw amounts from the
Pre-Funding Account to pay the
installments of the purchase price
of each Vessel due under each
Building Contract and to redeem the
Notes in the event of a rejection
of a Vessel.
Debt Service Reserve Fund....................The Debt Service Reserve Fund was
established on the Original Closing
Date. Funds will be deposited into
the Debt Service Reserve Fund on
each Payment Date, to the extent of
available funds, until the balance
of the Debt Service Reserve Fund
equals an amount, together with
interest earned thereon, sufficient
to provide for the payment of
average annual sinking fund
payments and interest on the
Exchange Notes and the untendered
Existing Notes, if any, for a
period of 1.2 years (the "Debt
Service Reserve Requirement"). In
addition, on each Payment Date, all
excess funds after the payment of
all Recurring Fees, interest
amounts, sinking fund redemption
amounts and Indenture Trustee's and
Manager's fees, will be deposited
into the Debt Service Reserve Fund.
See "Description of the Exchange
Notes--Payment Dates." The Debt
Service Reserve Fund will be held
by the Indenture Trustee for the
benefit of the holders of the
Mortgage Notes.
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<PAGE>
Certain Covenants............................The Indenture will include certain
covenants that, among other things,
prohibit Golden State Petroleum and
the Owners from (i) incurring any
indebtedness other than the
Exchange Notes, the Existing Notes,
the Serial Notes and the Additional
Notes (collectively, the "Mortgage
Notes"), (ii) making any
investments, loans or advances or
(iii) creating any Liens other than
their obligations under the
Mortgage Notes, the Indenture and
the Security Documents.
Under each Mortgage, the related
Owner is required to keep its
Vessel free and clear of all Liens
other than liens arising thereunder
and under the Indenture and liens
for crew's wages accrued for not
more than three months, suppliers'
or other similar liens arising in
the ordinary course of its business
and accrued for not more than three
months, liens for collision or
salvage, or liens for loss, damage
or expense that are fully covered
by insurance or bonded.
Notwithstanding the preceding
sentence, during the term of the
related Initial Charter, any Lien
permitted under the Initial Charter
will be permitted under the related
Mortgage. Under each Initial
Charter, the Initial Charterer may
not allow, or permit to be
continued, any Lien incurred by it
that might have priority over the
title and interest of the Owner in
the related Vessel. See "The
Initial Charters--Covenants."
Restricted Payments..........................So long as the Mortgage Notes
remain outstanding, neither of the
Owners may (i) declare or pay any
dividend or other distribution on
any shares of its capital stock,
(ii) make any loans or advances to,
or enter into any contract not
described herein with, any
affiliate of such Owner or (iii)
purchase, redeem or otherwise
acquire or retire for value any
shares of its capital stock (each,
a "Restricted Payment").
Certain Liabilities..........................Under each Initial Charter, the
Initial Charterer will be liable
for oil or other pollution damage
resulting from its operation of the
related Vessel under such Initial
Charter and will indemnify and hold
harmless the related Owner against
any and all losses, damages and
expenses incurred by such Owner as
a result of any oil or other
pollution damage resulting from the
Initial Charterer's operation of
such Vessel under such Initial
Charter (including, without
limitation, such Owner's liability
under the United States Oil
Pollution Act of 1990, as amended
("OPA 90"), or under the laws of
any other jurisdiction relating to
oil spills).
After the termination, if any, of
the Initial Charter relating to a
Vessel, the related Owner will be
required under the related Mortgage
to insure or cause such Vessel to
be insured against all protection
and indemnity risks including
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<PAGE>
liabilities to persons who have
suffered any loss, damage or injury
whatsoever in connection with
anything done or not done by the
Vessel, any charterer or the Owner
in connection with the Vessel or
the employment or use thereof
(including in connection with any
oil or other substance emanating
from the Vessel or any other vessel
with which the Vessel may be
involved in collision) and against
liability under laws (including
environmental laws) applicable to
the use of the Vessel.
Serial Notes.................................Golden State Petroleum, as agent
for the Owners has, pursuant to the
Indenture, issued Serial Notes on
the Original Closing Date in the
principal amounts and maturities
stated below:
$5,200,000 principal amount of
6.360% Serial First Preferred
Mortgage Notes Due 2000.
$6,800,000 principal amount of
6.465% Serial First Preferred
Mortgage Notes Due 2001.
$7,300,000 principal amount of
6.550% Serial First Preferred
Mortgage Notes Due 2002.
$7,800,000 principal amount of
6.610% Serial First Preferred
Mortgage Notes Due 2003.
$8,300,000 principal amount of
6.700% Serial First Preferred
Mortgage Notes Due 2004.
$8,800,000 principal amount of
6.800% Serial First Preferred
Mortgage Notes Due 2005.
$7,500,000 principal amount of
6.855% Serial First Preferred
Mortgage Notes Due 2006.
Interest will be due on the Serial
Notes on each February 1 and August
1, commencing August 1, 1997.
Principal on the Serial Notes will
be due on February 1 in the year of
maturity.
Additional Notes.............................Golden State Petroleum, as agent
for the Owners, shall be entitled
to issue additional series of first
preferred mortgage notes (each, a
"Series of Additional Notes") on a
Delivery Date for a Vessel pursuant
to supplements (each, a
"Supplemental Indenture") to the
Indenture upon the satisfaction of
certain terms and conditions set
forth in the Indenture.
Each Series of Additional Notes
will mature no later than the
expiration of the Fixed Period. The
proceeds of each Series of
Additional Notes, after the payment
of the cost of issuance of such
Series of Additional Notes, will be
used by the related Owner to fund
any Additional Construction Costs
of a Vessel, which Additional
Construction Costs shall not
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<PAGE>
exceed $250,000 per Vessel without
the consent of the related Owner.
Each Series of Additional Notes,
together with the Serial Notes, the
Exchange Notes, the untendered
Existing Notes, if any, and each
other Series of Additional Notes
will be secured by the Collateral.
Each Series of Additional Notes
will be subject to mandatory
redemption by the Owners when, as
and if the Exchange Notes, the
untendered Existing Notes, if any,
and the Serial Notes are subject to
mandatory redemption. See
"Additional Notes."
Material Federal Income Tax
Consequences.................................In the opinion of Thacher Proffitt
& Wood, counsel to the Owners,
based on the application of
existing law, and assuming
compliance with all provisions of
the Indenture, the Initial Charters
and other relevant documents, and
the facts set forth in this
Prospectus, the Exchange Notes will
be characterized as indebtedness of
the Owners for federal income tax
purposes. Consequently, Holders of
the Exchange Notes will be required
to include interest paid or accrued
on the Exchange Notes in gross
income in accordance with their
method of accounting for federal
income tax purposes. See "Material
United States Federal Income Tax
Consequences" regarding the
foregoing and additional
information concerning the
application of federal income tax
laws.
Use of Proceeds..............................See "Prospectus Summary--Sources
and Uses of Funds Through the
Delivery Dates" for a discussion of
the application of the net proceeds
of the offering of the Existing
Notes to the cost of acquiring the
Vessels.
Ratings......................................The Exchange Notes have been
prospectively rated "Baa2", by
Moody's Investors Service, Inc.
("Moody's"), "BBB" by Standard &
Poor's Rating Group, a division of
McGraw-Hill Co., Inc. ("Standard &
Poor's") and "BBB" by Duff & Phelps
Credit Rating Co. ("Duff & Phelps")
at their initial issuance. A
security rating is not a
recommendation to buy, sell or hold
securities and may be subject to
revision or withdrawal at any time.
The ratings do not address the
possibility that Holders of the
Exchange Notes may suffer a lower
than anticipated yield.
Risk Factors.................................Prospective Holders of the Exchange
Notes should carefully consider the
matters set forth in this
Prospectus under the caption "Risk
Factors."
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<PAGE>
<TABLE>
<CAPTION>
SOURCES AND USES OF FUNDS
THROUGH THE DELIVERY DATES(1)
<S> <C>
Sources of Funds:
Proceeds from Serial Notes........................................... $ 51,700,000
Proceeds from Existing Notes......................................... 127,100,000
Contribution of Broker's Commissions(3).............................. 4,835,208
Contribution of Services by Technical Supervisor(4).................. 2,000,000
Contribution of Owners' Items(4)..................................... 4,000,000
------------
Total Sources............................................... $189,635,208
============
Use of Funds:
Delivered Cost for the Vessels(2)(3)(4)(5).......................... $184,916,785
Initial Purchaser's Discounts and Commissions and
Financial Advisory Fees.................................... 2,563,925
886,000
Legal, Printing, Rating and Other Fees(6).....................................
Initial Debt Service Reserve Fund Amounts(7)......................... 1,268,498
------------
Total Uses.................................................. $189,635,208
============
</TABLE>
- ---------------------
(1) See "Capitalization of the Owners." Amounts shown are net of
pre-issuance accrued interest on Existing Notes subject to delayed
delivery. See "Plan of Distribution."
(2) Delivered Costs include contracted purchase price, capitalized interest
(net of interest earned on the Pre-Funding Account) on the Notes prior
to the Delivery Dates, technical supervision services, and other items
(the "Owners' Items") and Recurring Fees payable prior to the Delivery
Dates.
(3) The Builders have agreed to pay CPTC a brokerage commission of
approximately $2.4 million per Vessel based on the contracted purchase
price of the Vessels, payable in installments proportionate with
payments made to the Builders by the Owners. CPTC has agreed to
contribute all brokerage fees to the Owners and such fees will be
deposited as they are received into the Pre-Funding Account.
(4) Pursuant to the Technical Supervision Agreement, the Technical
Supervisor will contribute technical supervision services and the
Owners' Items which are reflected at their fair market value.
(5) Capitalized interest on the Notes includes, through the Delivery Date
for Vessel A, $3,473,889 and $10,743,975 to be paid on the Allocated
Principal Amount of Notes with respect to the Serial Notes and Existing
Notes, respectively, and includes, through the Delivery Date for Vessel
B, $4,486,242 and $12,872,900 to be paid on the Allocated Principal
Amount of Notes with respect to the Serial Notes and Existing Notes,
respectively.
(6) Includes estimated costs payable by the Owners in connection with the
Exchange Offer Registration Statement and/or the Shelf Registration
Statement, as the case may be.
(7) Initial Debt Service Reserve Fund Amounts includes $274,430 to be
transferred to the Debt Service Reserve Fund in respect of Vessel A and
$302,069 to be transferred to the Debt Service Reserve Fund in respect
of Vessel B, on the Delivery Date of the last Vessel. Also includes
pre-funded Special Interest of $692,000.
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<PAGE>
Certain statistical and graphical information set forth in this
Prospectus has been supplied by R.S. Platou Economic Research a.s. ("Platou")
and McQuilling Brokerage Partners, Inc. ("McQuilling"). Each of Platou and
McQuilling has advised Golden State Petroleum and the Owners that (i) some of
the information provided is based on estimates or subjective judgments, (ii) the
information in the databases of other maritime data collection agencies may
differ from the information in their databases, (iii) while each has taken
reasonable care in the compilation of such statistical information and believes
it to be correct, data collection is subject to limited audit and validation
procedures and (iv) the provision of such information does not obviate the need
to make further appropriate inquiries.
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<PAGE>
RISK FACTORS
Prospective investors should carefully consider the risk factors
described below, in addition to the other information set forth in this
Prospectus, in connection with an investment in the Exchange Notes.
All statements, other than statements of historical facts, included in
this Prospectus that address activities, events or developments that a party
expects, believes or anticipates will or may occur in the future, including such
matters as future capital expenditures and investments in multi-client data
(including the amount and nature thereof), backlog, repayment of debt, expansion
and other development trends of the petroleum industry, business strategies,
expansion and growth of operations and other such matters are forward-looking
statements. These statements are based on certain assumptions and analyses made
by such party in light of its experience and its perception of historical
trends, current conditions, expected future developments and other factors it
believes are appropriate in the circumstances. Such statements are subject to a
number of assumptions, risks and uncertainties, including the risk factors
discussed below, general economic and business conditions, the business
opportunities (or lack thereof) that may be presented to and pursued by such
party, changes in laws or regulations and other factors, many of which are
beyond the control of such party. Prospective investors are cautioned that any
such statements are not guarantees of future performance and that actual results
or developments may differ materially from those projected in the
forward-looking statements.
LIMITED PURPOSE NATURE OF THE OWNERS; LACK OF OPERATING HISTORY OF THE OWNERS
The Exchange Notes and the untendered Existing Notes, if any, together
with the Serial Notes and the Additional Notes, if any, represent obligations of
the Owners secured by the Collateral. See "Description of the Exchange
Notes--Security." The Exchange Notes and the untendered Existing Notes, if any,
do not represent obligations of Golden State Petroleum, the Initial Charterer,
Chevron or any person other than the Owners. The activity of the Owners is
limited to issuing the Mortgage Notes, contracting for the construction of the
Vessels with the Builders, acquiring the Vessels and chartering the Vessels
initially to the Initial Charterer and thereafter to other charterers pursuant
to Acceptable Replacement Charters or other charters. Upon the delivery of each
Vessel to the related Owner, holders must rely for repayment upon charter hire
payments from the charter of the Vessels or the proceeds, if any, from any sale
of the Vessels. Neither of the Owners has any operating history or financial
statements for any period prior to the current period nor any assets other than
the Vessels and the Initial Charters.
See "Description of the Exchange Notes--Certain Covenants."
NON-PERFORMANCE BY BUILDERS
Pursuant to the Vessel A Building Contract, the Contractual Delivery
Date for Vessel A is February 1, 1999 and pursuant to the Vessel B Building
Contract, the Contractual Delivery Date for Vessel B is July 1, 1999. If the
delivery of a Vessel is or will be delayed for any reason for more than 180 days
after the Contractual Delivery Date therefor, the related Owner may either
cancel the related Building Contract and receive the Refund Amount (as described
herein) or may extend the Contractual Delivery Date and reserve the right to
liquidated damages in an amount equal to $24,200 per day; provided, however,
that such extension does not adversely affect the then current rating of the
Notes. See "Building Contracts." In the event the Owner elects to cancel a
Building Contract and receives the Refund Amount either from the Builders or
under the related Building Contract Guarantee, the Allocated Principal Amount of
the Notes for the related Vessel will be subject to mandatory redemption.
Amounts held in the Pre-Funding Account, together with proceeds of the related
Building Contract or Building Contract Guarantee, shall be deposited into the
Pre-Funding Account and will be used to redeem Serial Notes comprising a portion
of such Notes and then the Exchange Notes and the untendered Existing Notes, if
any, comprising the remainder of such Notes.
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<PAGE>
NEITHER BUILDING CONTRACT SETS FORTH A FINAL DATE BEYOND WHICH DELIVERY
OF THE RELATED VESSEL MAY NOT BE EXTENDED. THE DECISION OF THE RESPECTIVE OWNER
TO EXTEND THE BUILDING CONTRACT WILL BE BASED UPON AN ANALYSIS OF THE BENEFITS
OF EXTENDING THE BUILDING CONTRACT COMPARED TO THE BENEFITS OF CANCELLING THE
BUILDING CONTRACT AND THE COLLECTION OF LIQUIDATED DAMAGES. SUCH FACTORS INCLUDE
THE LENGTH OF THE DELAY, THE REASONS FOR THE DELAY AND OTHER ECONOMIC FACTORS
PERTAINING TO THE OIL TANKER BUSINESS, INCLUDING THE DEMAND FOR VESSEL CAPACITY,
AT THE TIME THE DECISION TO EXTEND OR CANCEL IS MADE.
NON-PERFORMANCE BY CHEVRON AND THE INITIAL CHARTERERS
The Owners have no sources for the payment of principal (including
sinking fund payments and mandatory redemption payments), interest and premium
(if any) on the Exchange Notes, the untendered Existing Notes, if any, the
Serial Notes and the Additional Notes, if any, except for monthly charterhire
payments and other amounts payable under the Initial Charters, which are
guaranteed by Chevron, the Debt Service Reserve Fund and investment income on
Permitted Investments of amounts held in the Trust Accounts. Accordingly, the
Owners' ability to pay debt service on the Exchange Notes and the untendered
Existing Notes, if any, the Serial Notes, and the Additional Notes, if any,
prior to the occurrence of an Initial Charter Event of Default is dependent upon
the financial condition, results of operations and cash flow of the Initial
Charterer and Chevron, over which the Owners have no control.
TERMINATION OPTIONS UNDER THE INITIAL CHARTERS
Each Initial Charter has a fixed term of eighteen years. After the
Fixed Period, the Initial Charterer has the right to terminate such Initial
Charter on five Optional Termination Dates, beginning on the expiration of the
Fixed Period and on each of the four subsequent two-year anniversaries thereof.
See "The Initial Charters--Term of the Initial Charters."
The exercise of such termination options under each Initial Charter is
completely within the Initial Charterer's discretion. The Initial Charterer and
Chevron will not owe any fiduciary or other duty to the Holders and accordingly,
in making a decision whether to terminate an Initial Charter with respect to any
or all subsequent periods thereunder (each, an "Optional Period"), the Initial
Charterer will consider its own interests and not how its decision will affect
the Holders. Prospective Holders of the Exchange Notes should not base their
investment decision solely on the Initial Charters or the related Chevron
Guarantees because each Initial Charter is first terminable by the Initial
Charterer more than 11 years in advance of the Maturity Date for the Exchange
Notes and there can be no assurance that the Initial Charterer will not elect to
terminate either or both Initial Charters on the first, or any subsequent,
Optional Termination Date.
In the event that the Initial Charters are terminated, Holders of the
Exchange Notes must rely for sinking fund and interest payments and the final
principal payment on a combination of charter hire payments, if any, from the
recharter of the Vessels, the proceeds, if any, from any sale of the Vessels,
and amounts held in the Debt Service Reserve Fund. Assuming no withdrawals from
the Debt Service Reserve Fund, the amount on deposit in the Debt Service Reserve
Fund on August 1, 2007 will be no less than the Debt Service Reserve
Requirement.
The Owners cannot predict the factors that the Initial Charterer will
consider in deciding whether to exercise any of its termination options under
any Initial Charter. It is likely, however, that the Initial Charterer would
consider a variety of factors, which may include the following:
(i) WHETHER OR NOT THE RELATED VESSEL IS SURPLUS TO THE
INITIAL CHARTERER'S REQUIREMENTS. This in turn will depend on factors such as
the general state of Chevron's business, including its refining and marketing
businesses, the locations of crude oil sources necessary to meet Chevron's
requirements at the time such termination option becomes exercisable and the
tanker market and the market for petroleum products. See "Business--The
International Tanker Market." If the Initial Charterer is faced
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<PAGE>
with the need to reduce the size of its tanker fleet, terminating an Initial
Charter may be an economically attractive option for the Initial Charterer.
(ii) WHETHER OR NOT THE RELATED VESSEL IS SUITABLE FOR THE
INITIAL CHARTERER'S REQUIREMENTS AT THE TIME SUCH TERMINATION OPTION BECOMES
EXERCISABLE. Although the Vessels have been designed to meet the Initial
Charterer's specifications, there can be no assurance that the Initial
Charterer's requirements will not change over time, or that developments in the
tanker industry or other developments such as new environmental and safety
regulations will not render the Vessels obsolete. If the Initial Charterer
decides to modernize or otherwise upgrade its tanker fleet or if market
conditions favor the use of tankers that are larger or smaller than the related
Vessel, terminating the related Initial Charter may be an economically
attractive option for the Initial Charterer.
(iii) WHETHER OR NOT COMPETITIVE CHARTER HIRE RATES ARE
AVAILABLE FOR THE INITIAL CHARTERER IN THE OPEN MARKET. Charter hire rates are
very volatile. If, at the time a termination option becomes exercisable, oil
tankers similar to, or better than, the related Vessel are available to the
Initial Charterer on the open market at charter hire rates which are lower than
or competitive with those provided for under the Initial Charters, terminating
the related Initial Charter may be an economically attractive option for the
Initial Charterer. See "Business--The International Tanker Market" for a
discussion of the factors affecting charter hire rates.
CERTAIN RISKS NOT RELATED TO THE INITIAL CHARTERER
The Indenture Events of Default specified in the Indenture include, in
addition to a default by the Initial Charterer under any Initial Charter or the
termination of the related Chevron Guarantee other than pursuant to its terms,
certain other events which do not depend on the Initial Charterer's compliance
with the Initial Charters or the effectiveness of the related Chevron Guarantee.
Such Indenture Events of Default include (i) the occurrence and continuance of a
Mortgage Event of Default (not involving a Charter Event of Default), (ii) a
breach of any representation, warranty or covenant of Golden State Petroleum or
the Owners in the Indenture, the Mortgage Notes or any Security Document which
continues uncured for a specified period, (iii) the occurrence of specified
events of bankruptcy with respect to Golden State Petroleum or the Owners and
(iv) the termination of any of the Security Documents other than pursuant to
their terms. See "Description of the Exchange Notes--Indenture Events of
Default." The activities of the Owners have been limited as described under "The
Owners," and each Owner will covenant to engage in no activities other than
those permitted. See "Description of the Exchange Notes--Certain Covenants" for
a description of the applicable covenants.
Any of the Indenture Events of Default discussed above could occur even
if the Initial Charterer is in full compliance with the terms of the Initial
Charters or any subsequent charterer is in full compliance under an Acceptable
Replacement Charter. For example, after the Vessels are accepted by the Owners
under the Building Contracts and at least until the first Optional Termination
Date under the Initial Charters, the Owners will rely entirely on the Initial
Charterer's charter hire payments under the Initial Charters and any earnings on
Permitted Investments to pay their expenses and make scheduled payments of
principal and interest on the Exchange Notes, the untendered Existing Notes, if
any, the Serial Notes and the Additional Notes, if any, and interest on the
Exchange Notes. Such expenses will include Recurring Fees and any other expenses
for which the Initial Charterer is not responsible under the Initial Charters.
Under each Initial Charter, the Initial Charterer will be responsible for, among
other things, all costs and expenses of operating and maintaining the related
Vessel and the costs and expenses of maintaining the documentation of the
related Vessel under the laws of the Registration Jurisdiction. See "The Initial
Charters--Flag and Name of Vessel" and "--Indemnity." While the Owners expect
that such charter hire payments and earnings will be sufficient to meet their
requirements, substantial unanticipated expenses or increases in expenses that
are not payable by the Initial Charterer under the Initial Charters could result
in the bankruptcy of an Owner, which would result in an Indenture Event of
Default. Upon the occurrence and continuance of such an Indenture Event of
Default, all principal and
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<PAGE>
accrued interest on the Mortgage Notes would become immediately due and payable.
Thereafter, any amounts received by the Indenture Trustee in the exercise of its
remedies, including, for example, charter hire payments from the Initial
Charterer or any substitute charterer or proceeds from the sale of the Vessels,
would be subject to the claims of the holders of the Mortgage Notes, equally and
ratably. There can be no assurance that amounts received by the Indenture
Trustee following an Indenture Event of Default would be sufficient to pay the
principal of and accrued interest on the outstanding Mortgage Notes.
SALE OR OPERATION OF VESSELS AFTER TERMINATION OF AN INITIAL CHARTER
If the Initial Charterer decides to exercise a termination option with
respect to either of the Initial Charters, the Initial Charterer is required to
give the related Owner (i) non-binding notice of such intent, determined on a
good faith basis, at least 12 months prior to the termination of the Fixed
Period or nine months prior to the expiration of the prior Optional Period, as
the case may be, and (ii) irrevocable notice of such exercise nine months prior
to the termination of the Fixed Period or six months prior to the termination of
the prior Optional Period, as the case may be. Upon such notice, the Manager,
pursuant to the Management Agreement, will attempt to arrange for an Acceptable
Replacement Charter. If an Acceptable Replacement Charter is commercially
unavailable, the Owner shall have the option to redeem Exchange Notes and the
untendered Existing Notes, if any, in an aggregate principal amount equal to the
Allocated Principal Amount of the Notes for the Vessel or shall direct the
Manager, pursuant to the Management Agreement, to solicit bids for the sale of
the Vessel in respect of which the Initial Charter is being terminated. If no
bid provides net proceeds that, together with an amount equal to the Allocable
Portion of the Debt Service Reserve Fund, at least equals the Allocated
Principal Amount of the Notes for such Vessel, plus interest accrued but unpaid
thereon, the Manager will forward to the Indenture Trustee copies of all bids
for the sale of the Vessel. Unless instructed by all of the Holders of the
Exchange Notes and the untendered Existing Notes, if any, to accept a sale bid
that is below the required minimum bid, the Manager will attempt to recharter
the Vessel on such terms as the Manager, in its discretion, deems appropriate,
provided that (i) such charter shall be at arms length, (ii) such charter shall
have a termination date no later than February 1, 2019 and (iii) the charter
hire payable thereunder during the term thereof is an amount sufficient to (A)
make the mandatory sinking fund payments, together with all interest payments on
the Allocated Principal Amount of the Notes for such Vessel, (B) pay Recurring
Fees for such Vessel and the cost of insurance not maintained by the charterer
under such charter, (C) pay the Management Fees for such Vessel and (D) pay the
amount of fees and expenses of the Indenture Trustee allocable to such Vessel.
There can be no assurance that, upon termination of the Initial Charter relating
to any Vessel, an Acceptable Replacement Charter for such Vessel will be
available, that such Vessel can be sold for an amount that, together with the
Allocable Portion of the Debt Service Reserve Fund, will be sufficient to redeem
the Allocated Principal Amount of the Notes for such Vessel and accrued interest
or that, after paying certain related operating expenses, sufficient revenues to
make the remaining sinking fund and interest payments and the final principal
payment on the Allocated Principal Amount of the Notes for such Vessel can be
derived by rechartering such Vessel.
For a discussion of some of the factors influencing the supply of and
demand for oil tanker capacity, see "Business--The International Tanker Market"
and "Cyclicality and Volatility of Tanker Industry; Dependence on Oil Market"
below.
VOLATILITY OF VESSEL VALUES
Upon the acceptance of the Vessels by the Owners under the Building
Contracts, the Exchange Notes and the untendered Existing Notes, if any,
together with the Serial Notes and the Additional Notes, if any, will be secured
by a Mortgage on each Vessel granted by the related Owner to the Indenture
Trustee. There can be no assurance that the value of each Vessel will at any
time equal or exceed the Allocated Principal Amount of the Mortgage Notes for
such Vessel. The fair market value of oil tankers, including the Vessels, can be
expected to fluctuate, depending upon general economic and market
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conditions affecting the tanker industry and competition from other shipping
companies, types and sizes of vessels, and other modes of transportation. In
addition, as vessels grow older, they may be expected to decline significantly
in value. There can be no assurance that the proceeds from the sale of any
Vessel in connection with the Indenture Trustee's exercise of remedies following
an Indenture Event of Default would be sufficient to redeem the Allocated
Principal Amount of the Mortgage Notes for such Vessel or that any buyers would
be available under the circumstances in which such sale would occur. See
"Business--The International Tanker Market--Supply and Demand."
CYCLICALITY AND VOLATILITY OF TANKER INDUSTRY; DEPENDENCE ON OIL MARKET
Historically, the overall oil tanker business has been highly cyclical,
with attendant volatility in profitability and asset values resulting from
changes in the supply of and demand for vessel capacity. The supply of vessel
capacity is influenced by the number of new vessels built, the scrapping of
older vessels, the efficiency of the world fleet and government and industry
regulation of maritime transportation practices. The demand for vessel capacity
is influenced by global and regional economic conditions, increases and
decreases in industrial production and demand for crude oil and refined
petroleum products, political changes and armed conflicts, developments in
international trade and changes in seaborne and other transportation patterns.
Consumption of crude oil and petroleum products is affected by, among other
things, general economic conditions, oil prices, environmental concerns, weather
patterns and competition from alternative energy sources. Because many of the
factors influencing the supply of and demand for vessel capacity are
unpredictable, the nature, timing and degree of changes in tanker industry
conditions are also unpredictable. See "Business--The International Tanker
Market." Whether or not the Initial Charterer exercises its right to terminate
either Initial Charter and whether or not the Manager and the respective Owner
will be able to find an Acceptable Replacement Charter will likely be influenced
by some or all of the foregoing factors. See "Termination Options under the
Initial Charters" above and "The Initial Charters--Term of the Initial
Charters."
SUBORDINATION OF EXCHANGE NOTES AND EXISTING NOTES
THE EXCHANGE NOTES AND THE UNTENDERED EXISTING NOTES, IF ANY, TOGETHER
WITH THE SERIAL NOTES AND THE ADDITIONAL NOTES, WILL BE SECURED (SUBJECT TO THE
PRIORITY OF PAYMENT DESCRIBED HEREIN) BY THE COLLATERAL. THE EXCHANGE NOTES AND
THE UNTENDERED EXISTING NOTES, IF ANY, WILL BE SUBORDINATE IN RIGHT OF PAYMENT
TO THE SERIAL NOTES AND THE ADDITIONAL NOTES, IF ANY. THIS SUBORDINATION IS
INTENDED TO ENHANCE THE LIKELIHOOD OF TIMELY RECEIPT BY THE HOLDERS OF THE
SERIAL NOTES AND ADDITIONAL NOTES, IF ANY, OF THE FULL AMOUNT OF PRINCIPAL AND
INTEREST PAYMENTS. THIS SUBORDINATION WILL BE ACCOMPLISHED BY THE APPLICATION OF
THE PAYMENT OF FUNDS IN ACCORDANCE WITH THE ORDER OF PRIORITY DESCRIBED UNDER
"DESCRIPTION OF THE EXCHANGE NOTES--PAYMENT DATES." THEREFORE, IN THE EVENT
THERE WAS A SHORTFALL IN THE FUNDS AVAILABLE TO MAKE PAYMENTS OF PRINCIPAL OR
INTEREST THEN DUE AND PAYABLE ON THE MORTGAGE NOTES ON A PAYMENT DATE OR ON ANY
DISTRIBUTION DATE RELATED TO AN INDENTURE EVENT OF DEFAULT, THE HOLDERS OF THE
EXCHANGE NOTES AND UNTENDERED EXISTING NOTES, IF ANY, WOULD ABSORB SUCH LOSS.
PREPAYMENT CONSIDERATIONS
The Exchange Notes and the untendered Existing Notes, if any, are
subject to optional redemption (a) in whole on any Payment Date on and after the
later of August 1, 1999 or the Delivery Date of the last Vessel to be delivered
at the redemption prices described herein and through operation of the mandatory
sinking fund commencing August 1, 2007 and (b) in part if an Initial Charter is
terminated for a Vessel and an Acceptable Replacement Charter is not entered
into. See "Description of the Exchange Notes--Optional Redemption." The Notes
are subject to mandatory redemption in part if a Vessel is not accepted by the
related Owner on or before 180 days from the Contractual Delivery Date for such
Vessel or if such Vessel suffers a casualty or certain other events resulting in
a Total Loss. The Exchange Notes and the untendered Existing Notes, if any, are
also subject to mandatory redemption in part under certain other circumstances
following the termination of an Initial Charter and in the event of
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a Net Reduction in Construction Costs for a Vessel. See "Description of the
Exchange Notes--Mandatory Redemption."
ENVIRONMENTAL AND OTHER REGULATIONS
The Vessels and the operation of the Vessels must comply with extensive
and changing environmental protection laws and regulations. Compliance with
these laws and regulations may entail significant expenses, including expenses
for ship modifications and changes in operating procedures. These laws and
regulations could have a material adverse effect on the business and the
operations of the Owners and any charterer of the Vessels. In particular, the
United States Oil Pollution Act of 1990, as amended ("OPA 90"), provides for
strict liability for owners, operators and demise charterers of any vessel for
certain oil pollution incidents in the waters of the United States or adjoining
shorelines or the exclusive economic zone. The United States Coast Guard has
adopted a final rule (the "Final Rule") under OPA 90 published on March 7, 1996
which requires owners, operators and demise charterers of self-propelled tanker
vessels operating in United States waters to meet the aggregate financial
responsibility requirements required under OPA 90 as well as under the
Comprehensive Environmental Response, Compensation and Liability Act ("CERCLA").
The Initial Charterer has agreed, pursuant to the Initial Charters, to furnish
evidence of financial responsibility with respect to the Vessels to the United
States Coast Guard as required by the Final Rule.
The Final Rule requires owners, operators and demise charterers to
furnish the United States Coast Guard with evidence of financial responsibility
in compliance with the limits specified by OPA 90 and CERCLA. Owners, operators
and demise charterers can demonstrate their financial responsibility through
types of self-insurance that require that tangible assets located within the
United States be measured against worldwide liabilities, as well as through
insurance, guaranties or surety bond guaranties. Insurance has been one of the
principal methods used to satisfy financial responsibility. The Final Rule
subjects insurers and other guarantors to direct actions and would require
insurers and other guarantors to waive certain customary insurance policy
defenses. In the event that the insurer, surety or other party is sued directly,
it is limited to asserting the following defenses: (i) that the incident was
caused by the willful misconduct of the responsible party; (ii) those available
to the responsible party under OPA or CERCLA; (iii) that the claim exceeds the
amount of the guarantee; (iv) that the claim exceeds the proper amount of the
guarantee based on the gross tonnage of the vessel; and (v) that the claim is
not one made under either OPA or CERCLA. Most of the protection and indemnity
organizations ("P & I Clubs") that provide insurance to ship owners and
operators have refused to furnish evidence of insurance to owners and operators
of vessels entering United States ports under these terms. However, certain
newly formed insurance companies, which have been deemed acceptable guarantors
by the United States Coast Guard, have furnished the guaranties pursuant to the
Final Rule. If any charterer of the Vessels is unable to comply with the Final
Rule it would have a material adverse effect on the Owners and the Holders of
the Exchange Notes. See "Business--Environmental Regulation."
The International Maritime Organization, an agency of the United
Nations (the "IMO"), recently adopted regulations designed to reduce oil
pollution in international waters. In complying with OPA 90, the IMO regulations
and other regulations that may be adopted, the Owners and any charterer of the
Vessels may be forced to incur additional costs in meeting new maintenance and
inspection requirements, in developing contingency arrangements for potential
spills and in obtaining insurance coverage. Certain states in the United States,
the European Community and certain other countries have adopted or are also
considering adopting stricter technical and operational requirements for
tankers. Additional laws and regulations may be adopted which may have a
material adverse effect on the business and the operations of the Owners, any
charterer of the Vessels and the Holders of the Exchange Notes. See
"Business--Environmental Regulation."
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RISK OF LOSS AND LIABILITY; INSURANCE
The operation of any ocean-going vessel carries an inherent risk of
catastrophic marine disasters, environmental mishaps, cargo and property losses
or damage and business interruptions caused by adverse weather and ocean
conditions, mechanical failures, human error, political action in various
countries, war, terrorism, piracy, labor strikes and other circumstances or
events. Pursuant to the Initial Charters, the Vessels may be operated throughout
the world in any lawful trade for which the Vessels are suitable, including
carrying oil and its products. In the past, political conflicts in many regions,
particularly in the Arabian Gulf, have included attacks on tankers, mining of
waterways and other efforts to disrupt shipping in the area. Vessels trading in
such regions have also been subject to acts of terrorism and piracy. In
addition, the carriage of petroleum products is subject to the risk of spillage
and leakage. Any such event may result in increased costs or the loss of
revenues or assets, including a Vessel.
Under the Initial Charters, the Initial Charterer is entitled to
self-insure against marine and war risks relating to the Vessels and against
protection and indemnity risks relating to the Vessels during the term of the
Initial Charters and, accordingly, purchasers of the Notes cannot rely on the
existence of third-party insurance. See "The Initial Charters--Insurance" and
"--Covenants." There can be no assurance that all risks will be adequately
insured against, that any particular loss will be covered or that the Owners
will be able to procure adequate insurance coverage at commercially reasonable
rates in the future. In particular, stricter environmental regulations may
result in increased costs for, or the lack of availability of, insurance against
the risks of environmental damage or pollution. See "Environmental and Other
Regulations" above.
The Initial Charterer will, pursuant to the Initial Charters, indemnify
each Owner from damages arising from a failure to maintain any financial
responsibility requirements whether relating to oil or other pollution damage.
The Initial Charterer will also indemnify the Owners to the extent losses,
damages or expenses are incurred by the Owners relating to oil or other
pollution damage as a result of the operation of the Vessels by the Initial
Charterer.
Under OPA 90, vessel owners, operators and demise charterers are
"responsible parties" with strict liability on a joint and several basis
(subject to certain exceptions and qualifications) for all oil spill containment
and clean-up costs and other damages arising from actual or threatened oil
spills pertaining to these vessels. Although OPA 90 does not by its terms impose
liability on lenders or the holders of mortgages on vessels, there is no
specific exclusion for such entities under OPA 90. In addition, if the Indenture
Trustee or any holder exercises remedies and becomes an "owner" or "operator" or
"demise charterer" of a Vessel following a Mortgage Event of Default, such
person or entity may be subject to liability as responsible parties under OPA
90. OPA 90 limits the liability of responsible parties to the greater of $1,200
per gross ton or $10 million per tanker (subject to possible adjustment for
inflation); however, that limit would not apply if the incident were proximately
caused by violation of applicable United States federal safety, construction or
operating regulations or by the responsible party's gross negligence or willful
misconduct, or if the responsible party fails or refuses to report an incident
which the responsible party knows or has reason to know of, or to provide all
reasonable cooperation and assistance requested by a responsible official in
connection with oil removal activities. See "Business--Environmental
Regulation."
ENFORCEMENT OF MORTGAGES
Each of the Vessels will be registered under the laws of the Republic
of Liberia. The Mortgages will be recorded pursuant to the laws of the Republic
of Liberia and will create preferred mortgage liens under the maritime law
thereof. In addition, in order to perfect the Mortgages granted by the Owners,
the Mortgages will also be filed in the Isle of Man. Liberian law provides that
the lien of a preferred mortgage may be enforced by the mortgagee by a suit IN
REM in admiralty in a proceeding against a vessel. Historically, Liberian ship
mortgages have been enforced in major commercial ports throughout
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the world. However, the priority that such mortgages will have against the
claims of other lien creditors in an enforcement proceeding is generally
determined by, and will vary in accordance with, the laws ofthe country where a
proceeding is brought. Generally, such a preferred mortgage lien will rank prior
to all subsequent maritime liens other than certain other preferred maritime
liens, including liens for damages arising out of tort (including claims for oil
pollution), liens for crew's wages, liens for general average and salvage. Under
Liberian law, a preferred mortgage will also rank after certain other maritime
liens, including maritime liens for failure to pay tonnage taxes and annual
fees. Under United States law, a foreign preferred ship mortgage will also rank
after certain other maritime liens, including those for repairs, supplies,
towage, use of drydock or marine railways or other necessaries, performed or
supplied in the United States. Since each Vessel will trade throughout the world
and since a mortgage generally will be enforceable against a Vessel only in the
jurisdiction in which it is physically present, there can be no assurance that
if enforcement proceedings are commenced against a Vessel, the Vessel will be
located in a jurisdiction having the same mortgage enforcement procedures and
lien priorities as, for example, Liberia or the United States. However, upon the
occurrence of a Mortgage Event of Default relating to a Vessel, the Indenture
Trustee may be able to effect control over the Vessel to direct it to a
desirable jurisdiction to arrest the Vessel pursuant to judicial foreclosure
proceedings. See "Description of the Exchange Notes--Indenture Remedies."
Although each of the Vessels is owned by a separate Owner, under
certain circumstances a parent company and all of the shipowning affiliates in a
group under common control could be held liable for damages or debts owed by one
of the affiliates, including liabilities for spills under OPA 90 or other
environmental laws. Therefore, it is possible that all of the assets of an Owner
could be subject to execution upon a judgment against such Owner and any other
Owner, and that such judgment lien could rank ahead of the Mortgages. See "Risk
of Loss and Liability; Insurance" above.
FRAUDULENT CONVEYANCE STATUTES
The granting of the security interest in and to the Collateral could be
subject to review under relevant fraudulent conveyance statutes and other
applicable insolvency laws (the "Fraudulent Conveyance Laws") in a bankruptcy or
other proceeding involving one or more of the Owners. Due to the nature of the
business of the Owners and uncertainty as to where a bankruptcy, vessel
foreclosure or other relevant proceeding might be commenced, it is not possible
to predict where any such proceeding or attack might be brought or made or the
law that the court might apply.
Under the fraudulent conveyance law of the Isle of Man (the
jurisdiction in which each of the Owners is incorporated), if a court were to
find that, with respect to either Owner, at the time the interests in the
Collateral were granted (the "Transfer"), it (a) made such Transfer with actual
intent to prefer or defraud any present or future creditor or (b) received less
than a reasonably equivalent value or fair consideration for the Transfer or (c)
intended to incur, or believed that it would incur, debts beyond its ability to
pay as they matured (as the foregoing terms are defined in or interpreted under
the relevant Fraudulent Conveyance Laws), such court could avoid the Transfer in
whole or in part. To the extent that a Transfer by either Owner exceeds the
consideration received by it, the determination of whether the Transfer in
question is a fraudulent conveyance depends on (1) whether the Transfer so
exceeds the value and benefit received by such Owner that, at least to the
extent of such excess, the Owner did not receive reasonably equivalent value or
fair consideration for the Transfer; and, if so, then (2) whether following the
valuation of the assets and liabilities of such Owner it is determined that such
Owner is or has been rendered insolvent. While there can be no assurance that a
court, viewing the transaction with hindsight, would determine that a particular
Owner received fair value for its Transfer, or was not rendered insolvent by the
pertinent Transfer, to the extent it exceeded the value of the consideration
received by that Owner, each Owner believes that it will receive proper
consideration for its respective Transfer and that no such Owner will be
rendered insolvent by the contemplated Transfers. No assurance, however, can be
given that a court would concur with such belief.
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RISKS RELATING TO ENFORCEMENT OF JUDGMENTS AGAINST THE OWNERS
The Owners are incorporated in the Isle of Man. As a result, it may be
difficult to obtain a judgment in the Isle of Man in an original action or to
enforce in the Isle of Man judgments obtained in the United States courts,
predicated upon United States securities laws.
ABSENCE OF PUBLIC MARKET FOR THE EXCHANGE NOTES
The Existing Notes are currently owned by a relatively small number of
beneficial owners. The Existing Notes have not been registered under the
Securities Act and will continue to be subject to restrictions on
transferability to the extent that they are not exchanged for the Exchange
Notes. The Exchange Notes will constitute a new issue of securities with no
established trading market. Although the Exchange Notes will be permitted to be
resold or otherwise transferred by Holders who have met the conditions of the
Exchange Offer without compliance with the registration requirements under the
Securities Act, Golden State Petroleum and the Owners do not intend to list the
Exchange Notes on any national securities exchange or to seek the admission
thereof to trading on the Nasdaq National Market. Accordingly, no assurance can
be given that an active public or other market will develop for the Exchange
Notes or as to the existence of or liquidity of the trading market for the
Exchange Notes. See "PLAN OF DISTRIBUTION."
EXCHANGE OFFER PROCEDURE
The issuance of the Exchange Notes pursuant to the Exchange Offer will
be made only after a timely receipt by the Companies or their agents of a
properly completed and duly executed Letter of Transmittal, or an agreement to
be bound thereby, and all other required documents. Therefore, Holders of
Existing Notes desiring to tender such Existing Notes in exchange for Exchange
Notes should allow sufficient time to ensure timely delivery. The Companies are
under no duty to give notification of defects or irregularities with respect to
tenders of Existing Notes for exchange. Existing Notes that are not tendered or
are tendered but not accepted will, following the consummation of the Exchange
Offer, continue to be subject to the existing restrictions on transfer thereof,
and upon consummation of the Exchange Offer, the registration rights under the
Registration Rights Agreement generally will terminate. In addition, any Holder
of Existing Notes who tenders in the Exchange Offer for the purpose of
participating in a distribution of the Exchange Notes may be deemed to have
received restricted securities and, if so, will be required to comply with the
registration and prospectus delivery requirements of the Securities Act in
connection with any resale transaction. Each broker-dealer that receives
Exchange Notes for its own account in exchange for Existing Notes, where such
Existing Notes were acquired by such broker-dealer as a result of market-making
activities or other trading activities, must acknowledge that it will deliver a
prospectus in connection with any resale of such Exchange Notes. To the extent
that Existing Notes are tendered and accepted in the Exchange Offer, the
liquidity of untendered and tendered but unaccepted Existing Notes could be
adversely affected. See "THE EXCHANGE OFFER."
THE EXCHANGE OFFER
PURPOSE AND EFFECT OF THE EXCHANGE OFFER
The Existing Notes were issued by Golden State Petroleum, as agent on
behalf of the Owners, in December 1996, to Donaldson, Lufkin & Jenrette
Securities Corporation (the "Initial Purchaser"). The Initial Purchaser
subsequently placed the Existing Notes with qualified institutional buyers in
reliance on Rule 144A under the Securities Act. As a condition to the purchase
of the Existing Notes by the Initial Purchaser, the Companies entered into the
Registration Rights Agreement with the Initial Purchaser, which requires, among
other things, that promptly following the sale of the Existing Notes to the
Initial Purchaser, the Companies would (i) file with the Commission a
registration statement under the Securities Act with respect to a registered
offer to exchange the Existing Notes for the Exchange Notes of Golden State
Petroleum identical in all material respects to the Existing Notes, (ii) use
their respective reasonable best efforts to cause such registration statement to
become effective under the Securities Act and (iii) use
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their respective reasonable best efforts to cause the Exchange Offer to be
consummated on the earliestpractical date after such registration statement
becomes effective. The Companies have agreed to keep the Exchange Offer open for
20 DAYS WITH THE RIGHT TO EXTEND THE EXCHANGE OFFER UP TO A MAXIMUM OF 60
days. A copy of the Registration Rights Agreement has been filed as an exhibit
to the Registration Statement of which this Prospectus is a part.
The Companies have entered into an agreement pursuant to which the
Companies have designated the Manager on behalf of the Companies, to take
actions, make decisions and give consents relating to the Registration Rights
Agreement. In circumstances where the Registration Rights Agreement fails to
specify how such action is to be taken, such decision is to be made or such
consent is to be granted among the Companies. In consideration for such
designation, the Owners have agreed to pay all expenses of this Exchange Offer.
A copy of such agreement has been filed as an exhibit to the Registration
Statement of which this Prospectus is a part.
Following the consummation of the Exchange Offer, Holders of the
Existing Notes who did not tender their Existing Notes generally will not have
any further registration rights under the Registration Rights Agreement, and
such Existing Notes will continue to be subject to certain restrictions on
transfer. Accordingly, the liquidity of the market for such Existing Notes could
be adversely affected.
TERMS OF THE EXCHANGE OFFER
Upon the terms and subject to the conditions set forth in this
Prospectus and in the Letter of Transmittal, the Companies will accept for
exchange any and all Existing Notes validly tendered and not withdrawn prior to
5:00 p.m., New York City time, on the Expiration Date. Golden State Petroleum,
as agent on behalf of the Owners, will issue up to $127,100,000 principal amount
of Exchange Notes in exchange for a like principal amount of outstanding
Existing Notes accepted in the Exchange Offer. Holders may tender all or a
portion of their Existing Notes pursuant to the Exchange Offer. However,
Existing Notes may be tendered only in minimum denominations of $100,000 and
integral multiples of $1,000 in excess thereof.
The form and terms of the Exchange Notes will be identical to the form
and terms of the Existing Notes except that (i) the Exchange Notes have been
registered under the Securities Act and hence will not bear legends restricting
the transfer thereof and (ii) the Holders of the Exchange Notes will not be
entitled to certain rights under the Registration Rights Agreement, which rights
generally will terminate upon consummation of the Exchange Offer. The Exchange
Notes will evidence the same debt as the Existing Notes tendered in exchange
therefor and will be entitled to the benefits of the Indenture.
As of the date of this Prospectus, $127,100,000 aggregate principal
amount of the Existing Notes was outstanding and registered in the name of Cede
& Co., as nominee for DTC. The Companies have fixed the close of business on
_________________, 1997, as the record date for the Exchange Offer for purposes
of determining the persons to whom this Prospectus, the Letter of Transmittal,
the Notice of Guaranteed Delivery and the Isle of Man Information will be mailed
initially.
Holders of Existing Notes do not have any appraisal or dissenters'
rights under the General Corporation Law of the Isle of Man or the Indenture in
connection with the Exchange Offer. The Companies intend to conduct the Exchange
Offer in accordance with the applicable requirements of the Exchange Act and the
rules and regulations of the Commission thereunder, including Rule 14e-1
thereunder.
The Companies shall be deemed to have accepted validly tendered
Existing Notes when, as and if the Companies have given oral or written notice
thereof to the Exchange Agent. The Exchange Agent will act as agent for the
tendering Holders for the purpose of receiving the Exchange Notes from the
Companies.
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If any tendered Existing Notes are not accepted for exchange because of
an invalid tender, the occurrence of certain other events set forth herein or
otherwise, the certificates for any such unaccepted Existing Notes will be
returned, without expense, to the tendering Holder thereof as promptly as
practicable after the Expiration Date.
Holders who tender Existing Notes in the Exchange Offer will not be
required to pay brokerage commissions or fees or, subject to the instructions in
the Letter of Transmittal, transfer taxes with respect to the exchange of Notes
pursuant to the Exchange Offer. The Owners have agreed to pay all charges and
expenses in connection with the Exchange Offer. See "--FEES AND EXPENSES" and
"--TRANSFER TAXES."
EXPIRATION DATE; EXTENSIONS; AMENDMENTS
The term "Expiration Date" shall mean 5:00 p.m., New York City time, on
_________________, 1997, unless the Companies, in their sole discretion, extend
the Exchange Offer, in which case the term "Expiration Date" shall mean the
latest date and time to which the Exchange Offer is extended.
The Companies reserve the right, in their reasonable discretion, (i) to
delay the acceptance of any Existing Notes, to extend the Exchange Offer or to
terminate the Exchange Offer if any of the conditions set forth below under
"--CONDITIONS" shall not have been satisfied or waived by the Companies on or
before the expiration date, by giving oral or written notice of such delay,
extension, WAIVER or termination to the Exchange Agent or (ii) to amend the
terms of the Exchange Offer in any manner. The Companies will give oral or
written notice of any extension, amendment, non-acceptance, WAIVER or
termination to the Holders of the Existing Notes as promptly as practicable,
such notice in the case of any extension to be issued by means of a press
release or other public announcement no later than 9:00 a.m., New York City
time, on the next business day after the previously scheduled Expiration Date.
If the Exchange Offer is amended in a manner determined by the
Companies to constitute a material change, the Companies will promptly disclose
such amendment by means of a prospectus supplement that will be distributed to
the registered Holders, and, depending upon the significance of the amendment
and the manner of disclosure to the registered Holders, the Companies will
extend the Exchange Offer for a period of five to ten Business Days if the
Exchange Offer would otherwise expire during such five to ten Business Day
period.
Without limiting the manner in which the Companies may choose to make
public announcement of any delay, extension, amendment or termination of the
Exchange Offer, the Companies shall have no obligation to publish, advertise or
otherwise communicate any such public announcement, other than by making a
timely release to the Dow Jones News Service.
Holders of Existing Notes do not have any appraisal or dissenters'
rights in connection with the Exchange Offer. The Company intends to conduct the
Exchange Offer in accordance with the applicable requirements of the Exchange
Act and the rules and regulations of the Commission thereunder.
INTEREST ON THE EXCHANGE NOTES
The Exchange Notes will be deemed to accrue interest from December 24,
1996 (the date of original issuance of the Existing Notes) or from the date of
the last periodic payment of interest on such Existing Notes, whichever is
later. Interest on the Exchange Notes will be payable semi-annually on each
February 1 and August 1, commencing on August 1, 1997.
PROCEDURES FOR TENDERING
Only a Holder of Existing Notes may tender such Existing Notes in the
Exchange Offer. To tender in the Exchange Offer, a Holder must either (i)
complete, sign and date the Letter of Transmittal, or a facsimile thereof, have
the signatures thereon guaranteed (if required by the Letter of Transmittal) and
mail or otherwise deliver such Letter of Transmittal or such facsimile, together
with the Existing Notes and any other required documents, to the Exchange Agent
or (ii) in the case of a book-entry transfer, confirm book-entry transfer of the
Existing Notes into an equal principal amount of Exchange
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Notes into the Exchange Agent's account at DTC, in either case prior to 5:00
p.m., New York City time, on the Expiration Date. To be tendered effectively,
the Existing Notes, Letter of Transmittal and otherrequired documents must be
received by the Exchange Agent at the address set forth below under "--EXCHANGE
AGENT" or, if book-entry transfer is used, electronic instructions with regard
to the Existing Notes, the Letter of Transmittal and all other required
documents must be received by DTC, in each case prior to 5:00 p.m., New York
City time, on the Expiration Date. A Holder of Existing Notes may also tender in
the Exchange Offer by complying with the procedure set forth under "--GUARANTEED
DELIVERY PROCEDURES."
The Companies understand that the Exchange Agent will make a request
promptly after the date of this Prospectus to establish accounts with respect to
the Existing Notes at DTC for the purpose of facilitating the Exchange Offer,
and subject to the establishment thereof, any financial institution that is a
participant in DTC's system may make book-entry delivery of the Existing Notes
by causing DTC to transfer such Existing Notes into the Exchange Agent's account
with respect to the Existing Notes in accordance with DTC's procedures for such
transfer.
DTC's Automated Tender Offer Program is the only method of processing
exchange offers through DTC. To accept the Exchange Offer through ATOP,
participants in DTC must send electronic instructions to DTC through DTC's
communication system in place of sending a signed, hard copy Letter of
Transmittal. DTC is obligated to communicate those electronic instructions to
the Exchange Agent. To tender Existing Notes through ATOP, the electronic
instructions sent to DTC and transmitted by DTC to the Exchange Agent must
contain the character by which the participant acknowledges its receipt of, and
agrees to be bound by, the Letter of Transmittal.
By executing or electronically confirming the Letter of Transmittal,
each Holder will make to the Companies the representations set forth below in
the second paragraph under "--RESALE OF EXCHANGE NOTES."
The tender by a Holder and the acceptance thereof by the Companies will
constitute agreement between such Holder and the Companies in accordance with
the terms and subject to the conditions set forth herein and in the Letter of
Transmittal.
THE METHOD OF DELIVERY OF EXISTING NOTES, THE LETTER OF TRANSMITTAL AND
ALL OTHER REQUIRED DOCUMENTS, INCLUDING DELIVERY THROUGH DTC, TO THE EXCHANGE
AGENT IS AT THE ELECTION AND RISK OF THE HOLDER. INSTEAD OF DELIVERY BY MAIL, IT
IS RECOMMENDED THAT HOLDERS USE AN OVERNIGHT OR HAND DELIVERY SERVICE. IN ALL
CASES, SUFFICIENT TIME SHOULD BE ALLOWED TO ASSURE DELIVERY TO THE EXCHANGE
AGENT BEFORE THE EXPIRATION DATE. NO LETTER OF TRANSMITTAL OR EXISTING NOTES
SHOULD BE SENT TO ANY OF THE COMPANIES. HOLDERS MAY REQUEST THEIR RESPECTIVE
BROKERS, DEALERS, COMMERCIAL BANKS, TRUST COMPANIES OR NOMINEES TO EFFECT THE
ABOVE TRANSACTIONS FOR SUCH HOLDERS.
Any beneficial owner whose Existing Notes are registered in the name of
a broker, dealer, commercial bank, trust company or other nominee and who wishes
to tender should contact the registered Holder promptly and instruct such
registered Holder to tender on such beneficial owner's behalf.
Signatures on the Letter of Transmittal or a notice of withdrawal, as
the case may be, must be guaranteed by an Eligible Institution (as defined
below) unless the Existing Notes tendered pursuant thereto are tendered (i) by a
registered Holder who has not completed the box entitled "Special Registration
Instructions" or "Special Delivery Instructions" on the Letter of Transmittal or
(ii) for the account of an Eligible Institution. In the event that signatures on
a Letter of Transmittal or a notice of withdrawal, as the case may be, are
required to be guaranteed, such guarantee must be by a member firm of a
registered national securities exchange or of the National Association of
Securities Dealers, Inc.,
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<PAGE>
a commercial bank or trust company having an office or correspondent in the
United States or an "eligible guarantor institution" within the meaning of Rule
17Ad-15 under the Exchange Act (an "Eligible Institution").
If the Letter of Transmittal is signed by a person other than the
registered Holder of any Existing Notes listed therein, such Existing Notes must
be endorsed or accompanied by a properly completed bond power, signed by such
registered Holder as such registered Holder's name appears on such Existing
Notes with the signature thereon guaranteed by an Eligible Institution.
If the Letter of Transmittal or any Existing Notes or bond powers are
signed by trustees, executors, administrators, guardians, attorneys-in-fact,
officers of corporations or others acting in a fiduciary or representative
capacity, such persons should so indicate when signing, and unless waived by the
Companies, evidence satisfactory to the Companies of their authority to so act
must be submitted with the Letter of Transmittal.
All questions as to the validity, form, eligibility (including time of
receipt), acceptance of tendered Existing Notes and withdrawal of tendered
Existing Notes will be determined by the Companies, in their reasonable
discretion, which determination will be final and binding. The Companies reserve
the absolute right to reject any and all Existing Notes not properly tendered or
any Existing Notes the acceptance of which would, in the opinion of counsel for
the Companies, be unlawful. The Companies also reserve the right to waive any
defects, irregularities or conditions of tender as to particular Existing Notes.
The Companies' interpretation of the terms and conditions of the Exchange Offer
(including the instructions in the Letter of Transmittal) will be final and
binding on all parties. Unless waived, any defects or irregularities in
connection with tenders of Existing Notes must be cured within such time as the
Companies shall determine. Although the Companies intend to notify Holders of
defects or irregularities with respect to tenders of Existing Notes, none of the
Companies, the Exchange Agent or any other person shall incur any liability for
failure to give such notification. Tenders of Existing Notes will not be deemed
to have been made until such defects or irregularities have been cured or
waived. Any Existing Notes received by the Exchange Agent that are not properly
tendered and as to which the defects or irregularities have not been cured or
waived will be returned by the Exchange Agent to the tendering Holders, unless
otherwise provided in the Letter of Transmittal, as soon as practicable
following the Expiration Date.
GUARANTEED DELIVERY PROCEDURES
Holders not holding through DTC or Cede & Co. who wish to tender their
Existing Notes and (i) whose Existing Notes are not immediately available, (ii)
who cannot deliver their Existing Notes, the Letter of Transmittal or any other
required documents to the Exchange Agent or (iii) who cannot complete the
procedures for book-entry transfer, prior to the Expiration Date, may effect a
tender if:
(a) the tender is made through an Eligible Institution;
(b) prior to the Expiration Date, the Exchange Agent receives
from such Eligible Institution a properly completed and duly executed
Notice of Guaranteed Delivery (by facsimile transmission, mail or hand
delivery) setting forth the name and address of the Holder, the
certificate number(s) of such Existing Notes and the principal amount
of Existing Notes tendered, stating that the tender is being made
thereby and guaranteeing that, within five New York Stock Exchange
trading days after the Expiration Date or the execution of the Notice
of Guaranteed Delivery, the Letter of Transmittal (or facsimile
thereof), together with the certificate(s) representing the Existing
Notes (or a confirmation of book-entry transfer of such Existing Notes
into the Exchange Agent's account at the Book-Entry Transfer Facility)
and any other documents required by the Letter of Transmittal, will be
deposited by the Eligible Institution with the Exchange Agent; and
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<PAGE>
(c) such properly completed and executed Letter of Transmittal
(or facsimile thereof), as well as the certificate(s) representing all
tendered Existing Notes in proper form for transfer (or a confirmation
of book-entry transfer of such Existing Notes into the Exchange
Agent's account at the Book-Entry Transfer Facility) and all other
documents required by the Letter of Transmittal, are received by the
Exchange Agent within five New York Stock Exchange trading days after
the Expiration Date.
WITHDRAWALS OF TENDERS
Except as otherwise provided herein, tenders of Existing Notes may be
withdrawn at any time prior to 5:00 p.m., New York City time, on the Expiration
Date.
To withdraw a tender of Existing Notes in the Exchange Offer, a written
or facsimile transmission notice of withdrawal (or a written or electronic ATOP
transmission notice of withdrawal for DTC participants) must be received by the
Exchange Agent at its address set forth herein (or received into the Exchange
Agent's account at DTC) prior to 5:00 p.m., New York City time, on the
Expiration Date. Any such notice of withdrawal must (i) specify the name of the
person having deposited the Existing Notes to be withdrawn (the "Depositor"),
(ii) identify the Existing Notes to be withdrawn, (iii) be signed or confirmed
by the Holder in the same manner as the original signature on or confirmation of
the Letter of Transmittal by which such Existing Notes were tendered (including
any required signature guarantees) or be accompanied by documents of transfer
sufficient to have the Indenture Trustee with respect to the Existing Notes
register the transfer of such Existing Notes into the name of the person
withdrawing the tender and (iv) specify the name in which any such Existing
Notes are to be registered, if different from that of the Depositor. If Existing
Notes have been delivered pursuant to the procedures for book-entry transfer
described above, any notice of withdrawal must also specify the name and number
of the account at DTC, and must otherwise comply with DTC's procedures. All
questions as to the validity, form and eligibility (including time of receipt)
of such notices will be determined by the Companies, whose determination shall
be final and binding on all parties. Any Existing Notes so withdrawn will be
deemed not to have been validly tendered for purposes of the Exchange Offer and
no Exchange Notes will be issued with respect thereto unless the Existing Notes
so withdrawn are validly retendered. Any Existing Notes which have been tendered
but which are not accepted for exchange, will be returned to the Holder thereof
without cost to such Holder as soon as practicable after withdrawal, rejection
of tender or termination of the Exchange Offer. Properly withdrawn Existing
Notes may be retendered by following one of the procedures described above under
"--PROCEDURES FOR TENDERING" at any time prior to the Expiration Date.
CONDITIONS
Notwithstanding any other term of the Exchange Offer, the Companies
shall not be required to accept for exchange, or to Exchange Notes for, any
Existing Notes, and may terminate or amend the Exchange Offer as provided herein
before the acceptance of such Existing Notes, if:
(a) any action or proceeding is instituted or threatened in
any court or by or before any governmental agency with respect to the
Exchange Offer which, in the reasonable judgment of the Companies,
might materially impair the ability of the Companies to proceed with
the Exchange Offer or any material adverse development has occurred in
any existing action or proceeding with respect to the Companies or any
of their respective subsidiaries; or
(b) any change, or any development involving a prospective
change, in the business or financial affairs of the Companies or any of
their respective subsidiaries has occurred which, in the sole judgment
of the Companies might materially impair the ability of the Companies
to proceed with the Exchange Offer; or
(c) any law, statute, rule, regulation or interpretation by
the staff of the Commission is proposed, adopted or enacted, which, in
the sole judgment of the Companies, might materially
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<PAGE>
impair the ability of the Companies to proceed with the Exchange Offer
or materially impair the contemplated benefits of the Exchange Offer
to the Companies; or
(d) any governmental approval has not been obtained, which
approval the Companies shall, in their reasonable discretion, deem
necessary for the consummation of the Exchange Offer as contemplated
hereby; or
(e) the Companies believe there has been a change in law or
applicable interpretation thereof by the staff of the Commission such
that the Exchange Notes to be received by Holders in the Exchange Offer
would not be, upon receipt, transferable by each such Holder (other
than any Holder who is an affiliate of the Companies, who acquires the
Exchange Notes outside the ordinary course of its business or who has
any arrangement or understanding with any person to participate in the
Exchange Offer for the purpose of distributing the Exchange Notes)
without restrictions under the Securities Act.
If the Companies determine in their reasonable discretion that any of
the conditions are not satisfied, the Companies may (i) refuse to accept any
Existing Notes and return all tendered Existing Notes to the tendering Holders,
(ii) extend the Exchange Offer and retain all Existing Notes tendered prior to
the expiration of the Exchange Offer, subject, however, to the rights of Holders
to withdraw such Existing Notes (see "--WITHDRAWALS OF TENDERS") or (iii) waive
such unsatisfied conditions with respect to the Exchange Offer and accept all
properly tendered Existing Notes which have not been withdrawn. If such waiver
constitutes a material change to the Exchange Offer, the Companies will promptly
disclose such waiver by means of a prospectus supplement that will be
distributed to the registered Holders, and, depending upon the significance of
the waiver and the manner of disclosure to the registered Holders, the Companies
will extend the Exchange Offer for a period of five to ten Business Days if the
Exchange Offer would otherwise expire during such five to ten-day period. ALL
CONDITIONS, OTHER THAN GOVERNMENTAL APPROVAL, MUST BE SATISFIED ON OR PRIOR TO
THE EXPIRATION OF THE EXCHANGE OFFER IN ORDER TO CONSUMMATE THE EXCHANGE OFFER.
EXCHANGE AGENT
United States Trust Company of New York has been appointed as Exchange
Agent for the Exchange Offer. Questions and requests for assistance or for
additional copies of this Prospectus, the Letter of Transmittal or the Notice of
Guaranteed Delivery should be directed to the Exchange Agent addressed as
follows:
BY REGISTERED OR CERTIFIED MAIL:
United States Trust Company of New York
P.O. Box 844
Cooper Station
New York, NY 10276-0844
BY HAND:
United States Trust Company of New York
111 Broadway
Lower Level
Corporate Trust Window
New York, NY 10006
BY OVERNIGHT MAIL OR COURIER:
United States Trust Company of New York
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<PAGE>
770 Broadway
13th Floor
New York, NY 10003
Attn: Corporate Trust Services
BY FACSIMILE:
United States Trust Company of New York
(212) 420-6152; confirm by telephone (800) 548-6565
FEES AND EXPENSES
The principal solicitation is being made by mail; however, additional
solicitation may be made by telegraph, telephone or in person by officers and
regular employees of the Companies and their affiliates. No additional
compensation will be paid to any such officers and employees who engage in
soliciting tenders. The Companies have not retained any dealer-manager in
connection with the Exchange Offer and will not make any payments to brokers or
others soliciting acceptances of the Exchange Offer. The Owners, however, will
pay the Exchange Agent reasonable and customary fees for its services and will
reimburse it for its reasonable out-of-pocket expenses in connection therewith
and pay other registration expenses, including fees and expenses of the
Indenture Trustee, filing fees, blue sky fees and printing and distribution
expenses.
The estimated cash expenses to be incurred in connection with the
Exchange Offer will be paid or reimbursed by the Owners and are estimated in the
aggregate to be in excess of $240,000.
TRANSFER TAXES
The Manager will pay all transfer taxes, if any, applicable to the
exchange of the Existing Notes pursuant to the Exchange Offer. If, however,
certificates representing the Exchange Notes or the Existing Notes for principal
amounts not tendered or accepted for exchange are to be delivered to, or are to
be issued in the name of, any person other than the registered Holder of the
Existing Notes tendered, or if tendered Existing Notes are registered in the
name of any person other than the person signing the Letter of Transmittal, or
if a transfer tax is imposed for any reason other than the exchange of the Notes
pursuant to the Exchange Offer, then the amount of any such transfer taxes
(whether imposed on the registered Holder or any other person) will be payable
by the tendering Holder.
ACCOUNTING TREATMENT
The Exchange Notes will be recorded at the same carrying value as the
Existing Notes, which is face value, as reflected in the accounting records of
the Owners on the date of exchange. Accordingly, no gain or loss for accounting
purposes will be recognized.
RESALE OF EXCHANGE NOTES
Based on interpretations by the staff of the Commission set forth in
no-action letters issued to third parties, the Companies believe that Exchange
Notes issued pursuant to the Exchange Offer in exchange for the Existing Notes
may be offered for resale, resold or otherwise transferred by any Holder of such
Exchange Notes (other than any such Holder which is an "affiliate" of the
Companies within the meaning of Rule 405 under the Securities Act) without
compliance with the registration and prospectus delivery provisions of the
Securities Act, provided that such Exchange Notes are acquired in the ordinary
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<PAGE>
course of such Holder's business and such Holder does not intend to participate
and has no arrangement or understanding with any person to participate in the
distribution of such Exchange Notes. Any Holder who is an affiliate of the
Companies, who acquires the Exchange Notes outside the ordinary course of its
business or who tenders in the Exchange Offer with the intention to participate,
or for the purpose of participating, in a distribution of the Exchange Notes may
not rely on the position of the staff of the Commission enunciated in EXXON
CAPITAL HOLDINGS CORPORATION (available May 13, 1988) and MORGAN STANLEY & CO.
INCORPORATED (available June 5, 1991), or similar no-action letters, but rather
must comply with the registration and prospectus delivery requirements of the
Securities Act in connection with a secondary resale transaction. In addition,
any such resale transaction should be covered by an effective registration
statement containing the selling security holders information required by the
applicable provisions of Item 507 or 508, as appropriate, of Regulation S-K of
the Securities Act. Each broker-dealer that receives Exchange Notes for its own
account in exchange for Existing Notes, where such Existing Notes were acquired
by such broker-dealer as a result of market-making activities or other trading
activities, may be a statutory underwriter and must acknowledge that it will
deliver a prospectus in connection with any resale of such Exchange Notes. SEE
"PLAN OF DISTRIBUTION."
By tendering in the Exchange Offer, each Holder will represent to the
Companies that, among other things, (i) the Exchange Notes acquired pursuant to
the Exchange Offer are being obtained in the ordinary course of business of the
person receiving such Exchange Notes, (ii) the Holder has no arrangement or
understanding with any person to participate in the distribution of such
Exchange Notes and (iii) the Holder acknowledges that if it participates in the
Exchange Offer for the purpose of distributing the Exchange Notes (a) it must,
in the absence of an exemption therefrom, comply with the registration and
prospectus delivery requirements of the Securities Act in connection with any
resale of the Exchange Notes and cannot rely on the no-action letters referenced
above and (b) failure to comply with such requirements in such instance could
result in such Holder incurring liability under the Securities Act for which
such Holder is not indemnified by the Companies. Further, by tendering in the
Exchange Offer, each Holder represents to the Companies either that it is not an
"affiliate" (as defined under Rule 405 of the Securities Act) of the Companies
or, if it may be deemed an "affiliate" of the Companies that such Holder
understands and acknowledges that the Exchange Notes may not be offered for
resale, resold or otherwise transferred by that Holder without complying with
the applicable registration and prospectus delivery requirements of the
Securities Act. A Holder who is a broker-dealer must also acknowledge to the
Companies that it acquired the Existing Notes as a result of market-making
activities or other trading activities.
CONSEQUENCES OF FAILURE TO EXCHANGE
As a result of the making of this Exchange Offer, the Companies
generally will have fulfilled their obligations under the Registration Rights
Agreement, and Holders of Existing Notes who do not tender their Existing Notes
generally will not have any further registration rights under the Registration
Rights Agreement or otherwise. Accordingly, any Holder of Existing Notes that
does not exchange such Existing Notes for Exchange Notes will continue to hold
such Existing Notes and will be entitled to all the rights, and subject to all
the limitations, applicable thereto under the Indenture, except to the extent
such rights or limitations, by their terms, terminate or cease to have further
effectiveness as a result of the Exchange Offer.
Existing Notes that are not exchanged for Exchange Notes pursuant to
the Exchange Offer will remain restricted securities. Accordingly, such Existing
Notes may be resold only (i) to Golden State Petroleum, as agent on behalf of
the Owners (upon redemption thereof or otherwise), (ii) pursuant to an effective
registration statement under the Securities Act, (iii) so long as the Existing
Notes are eligible for resale pursuant to Rule 144A, to a qualified
institutional buyer within the meaning of Rule 144A
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<PAGE>
under the Securities Act in a transaction meeting the requirements of Rule 144A,
(iv) outside the United States to a foreign person pursuant to the exemption
from the registration requirements of the Securities Act provided by Regulation
S thereunder or (v) pursuant to another available exemption from the
registration requirements of the Securities Act, in each case in accordance with
any applicable securities laws of any state of the United States.
Because the Exchange Offer is for any and all Existing Notes, the
number of Existing Notes tendered and exchanged in the Exchange Offer will
reduce the principal amount of Existing Notes outstanding. As a result, the
liquidity of any remaining Existing Notes may be substantially reduced.
OTHER
Participation in the Exchange Offer is voluntary, and Holders should
carefully consider whether to accept. Thacher Proffitt & Wood, New York, New
York, as counsel for the Companies, has passed upon the legality of the Exchange
Notes. None of Golden State Petroleum, the Owners or any of their respective
representatives is making any representation to any offeree of the Exchange
Notes offered hereby regarding the legality of an investment by such offeree or
purchaser under appropriate legal investment or similar laws (which regulate the
nature and extent of permitted investments in certain securities for certain
institutional investors). Each Holder of the Existing Notes should consult
with its own advisors as to legal, tax, business, financial and related aspects
of participation in the Exchange Offer.
Golden State Petroleum, as agent on behalf of the Owners, may in the
future seek to acquire untendered Existing Notes in open market or privately
negotiated transactions, through subsequent exchange offers or otherwise. Golden
State Petroleum, as agent on behalf of the Owners, has no present plans to
acquire any Existing Notes that are not tendered in the Exchange Offer or to
file a registration statement to permit resales of any untendered Existing
Notes.
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<PAGE>
USE OF PROCEEDS
The Exchange Offer is intended to satisfy certain of the Companies'
obligations under the Registration Rights Agreement. The Owners will not receive
any cash proceeds from the issuance of the Exchange Notes offered hereby. In
consideration for issuing the Exchange Notes as contemplated in this Prospectus,
the Owners will receive in exchange Existing Notes in like principal amount, the
form and terms of which are substantially the same as the form and terms of the
Exchange Notes, except as otherwise described herein. The Existing Notes
surrendered in exchange for the Exchange Notes will be retired and canceled and
cannot be reissued. Accordingly, issuance of the Exchange Notes will not result
in any increase in the indebtedness of the Owners.
CAPITALIZATION OF THE OWNERS
The following unaudited table sets forth the capitalization of the
Owners at December 19, 1996, and as adjusted to give effect to the sale of the
Existing Notes (assuming all Existing Notes were delivered on the Original
Closing Date) and the application of the estimated net proceeds therefrom. See
also "Prospectus Summary--Sources and Uses of Funds Through the Delivery Dates,"
"Management's Discussion and Analysis of Financial Condition and Results of
Operations--Capital Resources and Liquidity", "Plan of Distribution" AND
"FINANCIAL STATEMENTS" (REFERENCES IN THE FINANCIAL STATEMENTS OF THE OWNERS TO
THE "TERM NOTES" ARE TO THE EXISTING NOTES, AS INCLUDED IN THE TABLES BELOW).
<TABLE>
<CAPTION>
GOLDEN STATE PETRO (IOM I-A) PLC*
December 19, 1996
-----------------------------------------------------
ACTUAL AS ADJUSTED
<S> <C> <C>
Serial Notes.................................................. - $24,900,000
Existing Notes............................................... - 63,550,000
----------
Total debt........................................... - $88,450,000
===========
</TABLE>
<TABLE>
<CAPTION>
GOLDEN STATE PETRO (IOM I-B) PLC*
December 19, 1996
-----------------------------------------------------
ACTUAL AS ADJUSTED
<S> <C> <C>
Serial Notes................................................ - $26,800,000
Existing Notes............................................. - 63,550,000
----------
Total debt......................................... - $90,350,000
===========
</TABLE>
* The above capitalization table does not reflect approximately $5.4 million per
Vessel in contributed brokerage commissions, technical services and Owners'
Items that are expected to be contributed during the construction of the
Vessels. The Owners anticipate that a portion of these amounts will be reflected
as a reduction of the Delivered Cost of the Vessels for financial reporting
purposes.
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<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
OVERVIEW
Each Owner was formed as an Isle of Man public limited company for the
purpose of acquiring and chartering one of the Vessels. As of the Original
Closing Date, the Owners had no operating history and had nominal
capitalization.
On the Original Closing Date, the Owners (i) received the proceeds, net
of the Initial Purchaser's discounts and commissions and financial advisory
fees, from the sale of the Serial Notes and the Existing Notes, (ii) paid the
first installment of the purchase price of the Vessels, (iii) paid certain
legal, printing, rating and other fees and expenses, (iv) received, as a
contribution from CPTC, the brokerage commissions payable by the Builders in
respect of the first installment of the purchase price of the Vessels and (v)
deposited the balance of the net proceeds from the sale of the Notes into the
Pre-Funding Account. See "Capitalization of the Owners" and "Prospectus
Summary--Sources and Uses of Funds Through the Delivery Dates." In addition, the
Owners entered into the Building Contracts, the Technical Supervision
Agreements, the Initial Charters, the Management Agreements and certain security
agreements for the benefit of the holders of the Notes and became the
beneficiaries of the Building Contract Guarantees and the Chevron Guarantees.
Between the Original Closing Date and the Delivery Date of its Vessel,
the operations of each Owner will consist solely of (i) making payments of
interest on the Notes, (ii) making payments of Recurring Fees and Management
Fees, (iii) making additional installments under the Building Contracts, (iv)
receiving interest on amounts held in the Pre-Funding Account, (v) receiving
additional contributions from CPTC reflecting brokerage commissions payable by
the Builders in respect of subsequent installments of the purchase price of the
Vessels, (vi) receiving certain non-cash contributions from the Technical
Supervisor of services and Owners' Items and (vii) fulfilling its obligations
under the Registration Rights Agreement.
On and after the Delivery Date of its Vessel, the operations of each
Owner will consist solely of (i) receiving charter hire payments under its
Initial Charter, Acceptable Replacement Charters and other charters, (ii)
receiving proceeds from the sale, if any, of either Vessel, (iii) making
payments of interest and principal on the Mortgage Notes (including Additional
Notes, if any are issued on the Delivery Date), (iv) making payments of
Recurring Fees and Management Fees and (v) receiving interest income on amounts
held in the Trust Accounts.
CAPITAL RESOURCES AND LIQUIDITY
Through the Contractual Delivery Date of the Vessels, interest on the
Notes will be payable from amounts on deposit in the Pre-Funding Account. To the
extent the Delivery Date for a Vessel is delayed, payments by the Builders under
the related Building Contracts will be reflected as a decrease in the amount of
the final installment due under such Building Contract. After the Delivery Date,
the Owners' sources of funds will be charter hire payments for the Vessels,
earnings on Permitted Investments and the proceeds from the sale, if any, of any
Vessel. The Owners do not have, nor will they have in the future, any other
source of capital for payment of the Mortgage Notes. See "Risk Factors--Limited
Purpose Nature of the Owners."
On the Original Closing Date, Golden State Petro (IOM I-A) PLC (i)
received $87.2 million reflecting the proceeds from the sale of the Serial Notes
and the Existing Notes, net of the Initial
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<PAGE>
Purchaser's discounts and commissions and financial advisory fees, (ii) paid
$35.3 million which represents the first installment of the contract purchase
price of its Vessel net of the first installment of the brokerage commission
payable to CPTC by Golden State Petro (IOM I-A) PLC, (iii) paid $0.5 million in
legal, printing, rating and other fees and expenses and (iv) deposited $51.5
million into the PreFunding Account.
On the Original Closing Date, Golden State Petro (IOM I-B) PLC (i)
received $89.1 million reflecting the proceeds net of the Initial Purchaser's
discounts and commissions and financial advisory fees, from the sale of the
Serial Notes and the Existing Notes, (ii) paid $38.9 million which represents
the first installment of the contract purchase price of its Vessel net of the
first installment of the brokerage commission payable to CPTC by Golden State
Petro (IOM I-B) PLC, (iii) paid $0.5 million in legal, printing, rating and
other fees and expenses and (iv) deposited $49.7 million into the Pre-Funding
Account.
From the Original Closing Date to the Delivery Date of its Vessel, the
respective Owners will use amounts held in the Pre-Funding Account, plus
interest earned thereon to fund (i) the subsequent installments of the purchase
price of the Vessels, (ii) interest payable on the Notes prior to the respective
Contractual Delivery Dates estimated at $31.6 million and (iii) Recurring Fees,
fees and expenses of the Indenture Trustee and Management Fees payable prior to
the respective Contractual Delivery Dates. The costs of registration of the
Existing Notes will be paid by the Manager.
From the Delivery Date of its Vessel to the end of the Fixed Period of
its Initial Charter, the respective Owners will use an estimated $158.9 million
in Charter Hire payments under the Initial Charter and an estimated $5.2 million
in interest earned on the Trust Accounts to: (i) make payments of interest on
the Notes estimated at $95.7 million, (ii) make payments of principal on the
Serial Notes of $51.7 million, which payments will retire all such Serial Notes
and (iii) make an estimated $0.8 million in payments of Recurring Fees and
Management Fees. On the first Optional Termination Date with respect to Vessel
B, the Owners will have a balance in the Debt Service Reserve Fund of at least
$18.2 million, assuming no prior withdrawals from the Debt Service Reserve Fund,
and will have outstanding an aggregate principal amount of Exchange Notes and
the untendered Existing Notes, if any, of $127.1 million.
To the extent that the Initial Charterer does not terminate either
Initial Charter, the balance of funds on deposit in the Debt Service Reserve
Fund will exceed the amount of the Exchange Notes and the untendered Existing
Notes, if any, outstanding by approximately August 1, 2014. To the extent that
the Initial Charterer terminates both Initial Charters at the first Optional
Termination Date thereof, the average daily bareboat charter hire rate that
would be sufficient to permit timely payments of principal and interest on the
Exchange Notes and the untendered Existing Notes, if any, until their maturity
date is approximately $18,569.
Charter Hire payments under each Initial Charter, and progress payments
under each Building Contract, have been structured so that approximately $50,000
annually will be available to pay THE MANAGEMENT FEES WHICH WILL BE USED TO PAY
THE anticipated expenses with respect to the related Vessel which are not
directly payable by the Initial Charterer under such Initial Charter. BECAUSE
SUBSTANTIALLY ALL OF THE ANNUAL OPERATING EXPENSES OF EACH VESSEL ARE REQUIRED
TO BE PAID BY THE INITIAL CHARTERER, THE COMPANIES BELIEVE THAT ONLY NOMINAL
COSTS WILL BE INCURRED AND THAT $50,000 WILL BE MORE THAN ADEQUATE.
The foregoing determination assumes that amounts remaining in the Trust
Accounts will be invested in Permitted Investments that will provide a return of
7.0% per annum compounded monthly
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<PAGE>
for funds on deposit in the Pre-Funding Account and a return of 6.0% per annum
compounded monthly for funds on deposit in the Revenue Account and the Debt
Service Reserve Fund. On the Original Closing Date, guaranteed investment
contracts for funds on deposit in the Pre-Funding Account and Revenue Account
(until the latest maturity date of the Serial Note) rated at least "Aa" or "AA"
by Moody's or Standard & Poor's, respectively, were available with at least the
assumed annual rate of return and the Owners believe that guaranteed investment
contracts for certain funds on deposit with the Indenture Trustee other than in
the Pre-Funding Account or the Revenue Account (until the latest maturity date
of the Serial Notes) rated at least "A" by Moody's or Standard & Poor's will be
available with at least the assumed annual rate of return for such amounts until
the latest maturity date of the Exchange Notes and the untendered Existing
Notes, if any. The annual rate of return on Permitted Investments of amounts
remaining in any Trust Account on or after August 1, 2014 cannot be predicted.
RESULTS OF OPERATIONS
Each Owner's results of operations will depend on the charter hire
payments for its Vessel under the related Initial Charter and, upon any
termination of such Initial Charter, any charter hire under any subsequent
charter or proceeds from any sale of such Vessel, earnings on Permitted
Investments and the level of operating expenses.
BUSINESS
GENERAL
Golden State Petroleum, a recently formed special purpose Delaware
corporation, issued the Serial Notes and the Existing Notes as agent on behalf
of the Owners. The proceeds from the offering and sale of the Existing Notes,
together with the proceeds of the sale of the Serial Notes, will be used by the
Owners to fund the construction of the Vessels to be constructed by the Builders
under the technical supervision of the Technical Advisor, as agent for the
Initial Charterer, as well as to pay capitalized interest on the Exchange Notes,
the untendered Existing Notes, if any, and the Serial Notes through the Delivery
Date for each Vessel. The Vessels, upon their acceptance by the Owners under the
Building Contracts, will be chartered to the Initial Charterer pursuant to the
Initial Charters, each of which is first terminable by the Initial Charterer on
the eighth anniversary of the Delivery Date for the related Vessel. The Initial
Charterer's obligations under each Initial Charter will be guaranteed by Chevron
under two separate Chevron Guarantees. The Initial Charterer is an indirect,
wholly-owned subsidiary of Chevron.
THE OWNERS AND THE MANAGER
Each Owner was formed as an Isle of Man public limited company for the
purpose of acquiring and chartering one of the Vessels. The Owners and Golden
State Petroleum are wholly-owned subsidiaries of the Ship Holding Company, that
is a wholly-owned subsidiary of CPTC. Under a Management Agreement with each
Owner, the Manager and an affiliate of CPTC, will provide administrative, ship
management and advisory services to the Owners. The Manager was established in
1995, and arranges and manages investment banking opportunities primarily in the
international shipping industry, including the financing of existing and newly
built vessels. Each of the Manager, CPTC and the Ship Holding Company is an
affiliate of Cambridge Partners, L.L.C.
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<PAGE>
THE VESSELS
VERY LARGE CRUDE CARRIERS
Both of the Vessels will be VLCCs which are capable of calling at a
large number of ports. The main trading patterns of VLCCs are as follows. See
"The International Tanker Market--Overview" and "--Charter Rates" below.
VESSEL QUALITY
Both of the Vessels will be modern, high-quality tankers which are
being designed to the Initial Charterer's specifications to enhance safety and
reduce operating and maintenance costs, including such features as high
performance rudders, extra steel (minimal use of high tensile steels),
additional fire safety equipment, redundant power generation equipment, extra
coating and electrolytic corrosion monitoring and protection systems and
additional crew quarters to facilitate added manning. The Technical Supervisor
(an affiliate of the Initial Charterer) is supervising the construction of each
of the Vessels. Personnel of this affiliate will be present at the shipyards
during the construction periods, monitoring construction with respect to
compliance with the Initial Charterer's specifications. The Vessels will be
designed and constructed to increase fuel efficiency, lower operating costs and
meet the stringent operating and safety standards of charterers, including the
Initial Charterer, and regulatory agencies. See "--The International Tanker
Market--Supply and Demand" and "--Environmental Regulation" below.
VESSEL MAINTENANCE
The Vessels will be maintained during the term of the Initial Charters
by the Initial Charterer in accordance with good commercial maintenance practice
commensurate with other vessels in the Initial Charterer's fleet of similar size
and trade, as required by the Initial Charters. See "The Initial
Charters--Covenants." The Initial Charters require the Initial Charterer to
return any Vessel whose Initial Charter has been terminated to its respective
Owner in class under the rules of the American Bureau of Shipping (or other
classification society previously approved by the Owner). In addition, the Owner
has the right to inspect the Vessel and to require surveys upon redelivery, and
the Initial Charterer will be responsible for making or compensating the Owner
for certain necessary repairs in connection with such redelivery.
THE INTERNATIONAL TANKER MARKET
OVERVIEW
International seaborne oil and petroleum products transportation
services are mainly provided by two types of operators: major oil company
captive fleets (both private and state-owned) and independent shipowner fleets.
Both types of operators transport oil under short-term contracts (including
single-voyage "spot charters") and long-term time charters with oil companies,
oil traders, large oil consumers, petroleum product producers and government
agencies. The oil companies own, or control through long-term time or bareboat
charters, approximately one-third of the current world tanker capacity, while
independent companies own or control the balance of the fleet. The oil companies
use their fleets not only to transport their own oil, but also to transport oil
for third-party charterers in direct competition with independent owners and
operators in the tanker charter market.
The oil transportation industry has historically been subject to
regulation by national authorities and through international conventions. Over
recent years, however, an environmental protection regime
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has evolved which could have a significant impact on the operations of
participants in the industry in the form of increasingly more stringent
inspection requirements, closer monitoring of pollution-related events, and
generally higher costs and potential liabilities for the owners and operators of
tankers.
In order to benefit from economies of scale, tanker charterers will
typically charter the largest possible vessel to transport oil or products,
consistent with port and canal dimensional restrictions and optimal cargo lot
sizes. The oil tanker fleet is generally divided into the following five major
types of vessels, based on vessel carrying capacity: (i) ULCC-size of more than
320,000 dwt; (ii) VLCC-size range of approximately 200,000 to 320,000 dwt; (iii)
Suezmax-size range of approximately 120,000 to 200,000 dwt; (iv) Aframax-size
range of approximately 60,000 to 120,000 dwt; and (v) small tankers of less than
approximately 60,000 dwt. ULCCs and VLCCs typically transport crude oil in
long-haul trades, such as from the Arabian Gulf to Europe, the United States or
the Far East. Suezmax-size tankers also engage in long-haul crude oil trades as
well as in medium-haul crude oil trades, such as from West Africa to the East
Coast of the United States. Aframax-size vessels generally engage in both
medium- and short-haul trades of less than 1,500 miles and carry crude oil or
petroleum products. Smaller tankers mostly transport petroleum products in
short-haul to medium-haul trades.
International tanker charter rates have historically been cyclical and
volatile. A peak in charter rates was reached in the early 1970s as the volume
of oil imported by developed countries expanded, followed by a downturn
resulting from the economic consequences of the first "oil shock" and compounded
by the massive ordering of new tonnage. A second upward movement in charter
rates and vessel values that began in the late 1970s was halted in the early
1980s and was followed by several years of falling tonne-miles demand and
depressed charter rates and vessel values due to reduced overall oil demand as a
result of the recession during the early 1980s and the glut of vessel capacity
available after the dramatic expansion of the world fleet in the 1970s.
The tanker time charter and spot markets showed substantial improvement
from the late 1980s through 1991, from the low levels reached in the mid 1980s
as vessels were running close to or at their maximum speed and minimum time
between charters suggesting there was little excess vessel capacity. However,
the world tanker market experienced a severe decline in 1992 and daily tanker
spot rates, as well as time charter rates, fell dramatically for all tanker
sizes mainly due to the decline in the use of tankers for storage after the end
of the Gulf War and a higher net fleet expansion in the first half of the year
as a result of reduced scrap sales. Charter rates improved somewhat by 1993,
although still far below early 1991 averages, mainly due to the gradual increase
in world oil consumption (excluding the countries of the former Soviet Union and
Eastern Europe) and the increase in tonne-miles demand as more oil produced in
the Middle East was exported and carried over long-haul routes to the Far East.
After a decline in 1994, charter rates have improved to the highest levels since
the 1991 Gulf War peak.
SUPPLY AND DEMAND
The world oil-carrying fleet is aging. According to Platou, a
substantial portion of existing tonnage will exceed 20 years of age within the
next five years. Contracting for newbuildings to be delivered by 1999 is
moderate. Management of the Companies believes that if scrapping continues at
current or higher levels, there will be a reduction or at most limited growth in
the total world oil-carrying fleet over the next two to three years.
Environmental regulations (including OPA 90) will continue to reduce the
capacity and efficiency of many older vessels which, together with the expected
increase in the expense of repair and maintenance costs for older vessels, could
be expected to result in higher levels of vessel scrapping.
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<PAGE>
In addition, worldwide economic growth has led to an increase in oil
demand. The rates of economic growth for countries in the Far East, particularly
in the developing countries, are likely to lead to continuing growth in total
energy consumption and demand for oil in such countries. Increasing dependence
of these countries on exports from the Middle East is expected to lead to
greater growth in seaborne transportation of crude oil.
TANKER SUPPLY
As of October 1996, the world oil-carrying fleet was as follows:
Total Capacity
Vessel Size Number of Vessels (000's dwt)
10,000 to 59,999 dwt 1,333 40,990
60,000 to 119,999 dwt 706 59,147
120,000 to 199,999 dwt 298 39,535
200,000 to 319,999 dwt 388 101,175
320,000 dwt or more 59 23,255
------ -------
Totals 2,784 264,102
====== =======
- -------------------------------
Source: Platou
As of October 1996, according to Platou, the VLCC fleet consisted of
388 vessels totalling approximately 101.2 million dwt. Strong market conditions
facilitated the building of approximately 44.2% of current VLCC capacity within
the short time period between 1974 and 1977. Few orders were placed thereafter
owing to a prolonged period of depressed charter hire rates. As a result,
approximately 47% of the current VLCC capacity exceeds 15 years of age and an
additional 4.2% of this fleet is between 10 and 15 years old. The number of VLCC
vessels on order and scheduled to be delivered through 1999 represents 21
vessels with a total capacity of less than 6 million dwt or approximately 5.4%
of current VLCC capacity. This small order book as such is insufficient to
significantly reduce this age profile.
The following table shows the age profile of the oil-carrying fleet:
CURRENT AGE PROFILE
- --------------------------------------------------------------------------------
CAPACITY
PERIOD BUILT VESSELS (MILLION DWT)
- --------------------------------------------------------------------------------
-1975 714 61
- --------------------------------------------------------------------------------
1976-80 591 65
- --------------------------------------------------------------------------------
1981-85 441 25
- --------------------------------------------------------------------------------
1986-90 393 35
- --------------------------------------------------------------------------------
1991 -96 645 79
- --------------------------------------------------------------------------------
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<PAGE>
Source: R.S. Platou
The major newbuilding program carried out during the strong market
conditions of the early 1970s created an age profile currently heavily weighted
toward older tonnage. Management of the Companies believes that much of this
older tonnage will need to undergo extensive repairs in order to be able to
continue operating. Special survey costs amounting to a significant portion of
the market value of vessels could result in the scrapping of ships in greater
numbers and increased use as permanent storage or lay-up since the substantial
investment in repair, maintenance and upgrading of a vessel will need to be
recovered in the relatively short remaining useful life of the vessel.
The following table shows the trend in scrapping (excluding total
losses) since 1980:
TANKER TONNAGE SCRAPPED
- ------------------------------------------------------------------------------
YEAR MILLION DWT
- ------------------------------------------------------------------------------
1980 7.878
- ------------------------------------------------------------------------------
1981 12.859
- ------------------------------------------------------------------------------
1982 23.180
- ------------------------------------------------------------------------------
1983 24.520
- ------------------------------------------------------------------------------
1984 18.601
- ------------------------------------------------------------------------------
1985 26.600
- ------------------------------------------------------------------------------
1986 10.951
- ------------------------------------------------------------------------------
1987 6.700
- ------------------------------------------------------------------------------
1988 3.272
- ------------------------------------------------------------------------------
1989 1.693
- ------------------------------------------------------------------------------
1990 1.079
- ------------------------------------------------------------------------------
1991 2.741
- ------------------------------------------------------------------------------
1992 10.436
- ------------------------------------------------------------------------------
1993 10.741
- ------------------------------------------------------------------------------
1994 11.774
- ------------------------------------------------------------------------------
1995 10.643
- ------------------------------------------------------------------------------
1996 6.657
- ------------------------------------------------------------------------------
Source: R.S. Platou
Note: 1996 data is estimated.
According to Platou, scrapping rates fell to a low level in 1990 and
remained relatively low through the end of 1991, principally as a result of the
relatively high freight rates that prevailed at the
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time. However, scrapping rates rose significantly in 1992 and remained at those
levels through 1995 as a result of generally low freight rates and the high cost
of upgrading. Scrapping rates should decline modestly in 1996. If these levels
of vessel scrapping result in excessive contracting for newbuildings, the resale
value of the Vessels at the time the Initial Charters are eligible for
termination may be diminished.
Increasingly stringent environmental regulations may also lead to
significantly increased costs to upgrade existing vessels or to purchase new
vessels. These regulations are also likely to reduce the capacity and efficiency
of existing vessels. See "--Environmental Regulations" below.
The following table shows the amount of oil-carrying tonnage in lay-up
since 1974:
TANKER FLEET LAY-UP
- ------------------------------------------------------------------------------
YEAR MILLION DWT
- ------------------------------------------------------------------------------
1974 0.490
- ------------------------------------------------------------------------------
1975 1.500
- ------------------------------------------------------------------------------
1976 39.030
- ------------------------------------------------------------------------------
1977 29.180
- ------------------------------------------------------------------------------
1978 30.670
- ------------------------------------------------------------------------------
1979 22.270
- ------------------------------------------------------------------------------
1980 7.370
- ------------------------------------------------------------------------------
1981 6.560
- ------------------------------------------------------------------------------
1982 22.720
- ------------------------------------------------------------------------------
1983 58.330
- ------------------------------------------------------------------------------
1984 55.060
- ------------------------------------------------------------------------------
1985 49 .660
- ------------------------------------------------------------------------------
1986 29.660
- ------------------------------------------------------------------------------
1987 12.890
- ------------------------------------------------------------------------------
1988 10.020
- ------------------------------------------------------------------------------
1989 2.021
- ------------------------------------------------------------------------------
1990 2.200
- ------------------------------------------------------------------------------
1991 1.860
- ------------------------------------------------------------------------------
1992 3.240
- ------------------------------------------------------------------------------
1993 5.400
- ------------------------------------------------------------------------------
1994 3.940
- ------------------------------------------------------------------------------
1995 4.040
- ------------------------------------------------------------------------------
1996 7.660
- ------------------------------------------------------------------------------
10/1996 6.640
- -------------------------------------------------------------------------------
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Source: R.S. Platou
As of October 1996, tonnage in lay-up constituted less than 2.5% of the
total fleet according to Platou. Accordingly, the supply of tankers is unlikely
to materially increase due to vessels being returned to the market from lay-up.
The following table compares the level of orders for newbuildings with
freight rates since 1985:
NEW TANKER ORDERS VS. TIME CHARTER-EQUIVALENTS
- --------------------------------------------------------------------------------
CAPACITY CONTRACTED VLCC RATES
YEAR (MILLIONS DWT) ($000S PER DAY)
- --------------------------------------------------------------------------------
1985 4.760 7.3
- --------------------------------------------------------------------------------
1986 10.900 14.7
- --------------------------------------------------------------------------------
1987 11.250 8.0
- --------------------------------------------------------------------------------
1988 4.230 15 .2
- --------------------------------------------------------------------------------
1989 15.910 13.2
- --------------------------------------------------------------------------------
1990 23.530 20.0
- --------------------------------------------------------------------------------
1991 14.090 24.8
- --------------------------------------------------------------------------------
1992 8.800 9.6
- --------------------------------------------------------------------------------
1993 10 .730 12.6
- --------------------------------------------------------------------------------
1994 13.440 6.4
- --------------------------------------------------------------------------------
1995 5.950 13.0
- --------------------------------------------------------------------------------
1996 12.000 16.1
- --------------------------------------------------------------------------------
Source: R.S. Platou
According to Platou, contracting for new oil tankers has declined
significantly from a recent peak of 23.5 million dwt in 1990 in response to the
depressed market conditions and low freight rates that prevailed in 1992 and
1993. Although newbuilding orders showed some upturn in 1993 and 1994, this
upturn was partly due to the number of single-hulled vessels ordered prior to
the deadline set by IMO for contracting for single-hulled vessels. As of October
1996, the order book for tankers to be delivered through 1999 amounted to 17.5
million dwt, representing 6.6% of the total world oil-carrying fleet. Shipyard
capacity has decreased significantly from its peak level in 1975 and new vessel
prices have not supported additions to existing shipyard capacity. Based on
current levels of newbuilding and scrapping, therefore, there should be, at
most, limited growth in the world fleet over the next two to three years.
DEMAND FOR OIL TRANSPORTATION
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Between 1985 and 1995 worldwide oil consumption grew at an average rate
of 1.6% per annum. Worldwide consumption is expected to grow by 2.4% in 1996.
Despite renewed growth in North America and Western Europe, most of this rise in
demand has been generated from areas other than the main industrialized
countries, particularly in the developing countries of Asia, such as China,
India, Taiwan, Thailand and South Korea. With its heavy dependency on long-haul
Middle East crude, a continuance of the growth of oil consumption in Asia would
increase the overall demand for tankers, particularly VLCCs.
CHARTER RATES
Historically, tanker charter rates have reflected changes in the supply
and demand characteristics of the tanker trade. Spot charter rates are
negotiated and fixed around the clock in a highly competitive and efficient
global spot charter market through brokers acting as intermediaries between
shipowners and charterers. Time charters are negotiated and fixed in a similar
manner and are influenced by, among other things, owners' and charterers'
expectations for future spot charter rates and do not reflect certain operating
costs borne by owners.
According to McQuilling, historical average (calculated quarterly) time
charter rates for VLCC tankers, adjusted to reflect the specifications and
trading patterns of the Vessels are set forth in the chart below.
AVERAGE VLCC TIME CHARTER RATES (CALCULATED QUARTERLY)
- ----------------------------------------------------------------------------
AVERAGE VLCC RATES
YEAR ($000S PER DAY)
- ----------------------------------------------------------------------------
1986 20200
- ----------------------------------------------------------------------------
18467
- ----------------------------------------------------------------------------
26867
- ----------------------------------------------------------------------------
13500
- ----------------------------------------------------------------------------
1987 14233
- ----------------------------------------------------------------------------
20333
- ----------------------------------------------------------------------------
30533
- ----------------------------------------------------------------------------
28100
- ----------------------------------------------------------------------------
1988 22800
- ----------------------------------------------------------------------------
22433
- ----------------------------------------------------------------------------
22967
- ----------------------------------------------------------------------------
32767
- ----------------------------------------------------------------------------
1989 31700
- ----------------------------------------------------------------------------
17500
- ----------------------------------------------------------------------------
25867
- ----------------------------------------------------------------------------
41300
- ----------------------------------------------------------------------------
1990 36033
- ----------------------------------------------------------------------------
40767
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- ----------------------------------------------------------------------------
AVERAGE VLCC RATES
YEAR ($000S PER DAY)
- ----------------------------------------------------------------------------
32467
- ----------------------------------------------------------------------------
36833
- ----------------------------------------------------------------------------
1991 66700
- ----------------------------------------------------------------------------
37900
- ----------------------------------------------------------------------------
41700
- ----------------------------------------------------------------------------
33833
- ----------------------------------------------------------------------------
1992 25033
- ----------------------------------------------------------------------------
18500
- ----------------------------------------------------------------------------
21500
- ----------------------------------------------------------------------------
25333
- ----------------------------------------------------------------------------
1993 29700
- ----------------------------------------------------------------------------
23667
- ----------------------------------------------------------------------------
25300
- ----------------------------------------------------------------------------
22267
- ----------------------------------------------------------------------------
1994 16333
- ----------------------------------------------------------------------------
17167
- ----------------------------------------------------------------------------
21033
- ----------------------------------------------------------------------------
25600
- ----------------------------------------------------------------------------
1995 25600
- ----------------------------------------------------------------------------
22200
- ----------------------------------------------------------------------------
38200
- ----------------------------------------------------------------------------
33333
- ----------------------------------------------------------------------------
1996 36633
- ----------------------------------------------------------------------------
31600
- ----------------------------------------------------------------------------
38567
- ----------------------------------------------------------------------------
Source: McQuilling Brokerage Partners, Inc.
VLCC time charter rates rose during the late 1980s due to a substantial
increase in oil exports from the Middle East. Time charter rates further
increased during the Gulf War as a substantial amount of tonnage was used for
floating storage. Furthermore, the war had the effect of increasing total
transportation demand as the blockade on exports through the pipeline from Iraq
to the eastern Mediterranean created additional demands for shipments of oil
from the Arabian Gulf. Time charter rates fell in 1992 due to the release of
tonnage from floating storage and the increase of supply of VLCCs. The impact of
the additional capacity was exacerbated by the deepening of the recession,
particularly in Europe and Japan. With worldwide economic growth and increasing
oil consumption, particularly in developing Asia, VLCC time charter rates have
increased steadily since 1994.
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VESSEL VALUES AND NEWBUILDING PRICES
Historically, secondhand vessel values and newbuilding prices have also
reflected changes in the fundamental supply and demand characteristics of the
tanker trade and have exhibited a strong correlation to changes in charter
rates. Changes in charter rates influence potential buyers' and sellers'
estimates of future operating cash flows from vessels, and, therefore, vessel
values. Newbuilding prices are also influenced by shipbuilding capacity and
shipyard costs. The following table shows VLCC tanker newbuilding prices since
1978:
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NEWBUILDING COSTS
- --------------------------------------------------------------------------------
YEAR SINGLE-HULL DOUBLE-HULL
- --------------------------------------------------------------------------------
1978 49
- --------------------------------------------------------------------------------
1979 62.5
- --------------------------------------------------------------------------------
1980 70
- --------------------------------------------------------------------------------
1981 70
- --------------------------------------------------------------------------------
1982 50
- --------------------------------------------------------------------------------
1983 47
- --------------------------------------------------------------------------------
1984 39
- --------------------------------------------------------------------------------
1985 37
- --------------------------------------------------------------------------------
1986 37
- --------------------------------------------------------------------------------
1987 43
- --------------------------------------------------------------------------------
1988 55
- --------------------------------------------------------------------------------
1989 76
- --------------------------------------------------------------------------------
1990 87
- --------------------------------------------------------------------------------
1991 88 105.5
- --------------------------------------------------------------------------------
1992 87 102
- --------------------------------------------------------------------------------
1993 80 93
- --------------------------------------------------------------------------------
1994 72.25 85
- --------------------------------------------------------------------------------
1995 86
- --------------------------------------------------------------------------------
1996 84
- --------------------------------------------------------------------------------
10/1996 84
- --------------------------------------------------------------------------------
Source: R.S. Platou
As the above tables illustrate, the average price of VLCC newbuildings
increased steadily from 1985 through 1991. This was due to the cost levels of
Japanese shipyards as the yen strengthened against the dollar and as newbuilding
orders rose following the increase in time charter rates. The relatively high
level of newbuilding prices forced the entire market upward as secondhand
vessels of good quality could be sold at attractive prices. Recently,
newbuilding prices have been stable and since 1992, eight-year-old VLCC vessels
have sold, on average, for a price approximately 94% of their newbuilding prices
(in 1982-1986). Although VLCC vessels of this age have retained great value
there is no assurance that such trend will continue in the future.
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<PAGE>
OPERATIONS
MANAGEMENT
Cambridge Fund Management, L.L.C. (the "Manager") has agreed to provide
administrative management and advisory services to the Owners pursuant to the
Management Agreements. The Manager is an Affiliate of Golden State Petroleum and
the Owners. Such services include maintaining the books and records of each
Owner, preparing and filing the annual financial statements and annual tax
returns of each Owner, preparing and submitting invoices in connection with the
operation of the Vessels and various other administrative responsibilities.
Pursuant to each Management Agreement, the Manager will be entitled to a fee
(the "Management Fee") of $50,000 per year per Vessel for all periods commencing
on the Original Closing Date. All Recurring Fees are payable by the Manager from
the Management Fee. The Management Fee will be payable semi-annually on each
Payment Date. The Companies believe that the Management Fee will be sufficient
to cover the Companies' anticipated expenses. See "Description of the Exchange
Notes--Trust Accounts."
REMARKETING
In the event the Initial Charterer gives notice to an Owner of its
intent to terminate an Initial Charter, the Manager, pursuant to the related
Management Agreement, is required to engage a remarketing agent. McQuilling
Brokerage Partners, Inc. ("McQuilling") and ACM Shipping Limited ("ACM
Shipping") have agreed to provide on a non-exclusive basis remarketing services
if the Initial Charterer exercises its option to terminate the Initial Charter
for any Vessel. McQuilling, established in 1972, is a leading New York-based
ship broker whose activities encompass all aspects of chartering, sale and
purchase, ship finance, demolition and project development. ACM Shipping is a
leading London ship broker which has strong relationships with the major oil
companies. ACM Shipping has been in the ship brokerage business since 1982.
BUSINESS STRATEGY
The Owners' strategy is to acquire the Vessels and charter them to the
Initial Charterer under the Initial Charters which are expected to provide, so
long as the Initial Charters are in effect, (a) charter hire payments sufficient
(x) to pay (i) the Owners' obligations under the Mortgage Notes, (ii) the
Management Fees under the Management Agreements, (iii) the estimated Recurring
Fees, (iv) the estimated fees payable to the Indenture Trustee and (v) any other
costs and expenses incidental to the ownership and chartering of the Vessels
that are to be paid by the Owners and (y) to fund the Debt Service Reserve Fund
and (b) that the Vessels will be maintained in accordance with good commercial
maintenance practices, and to arrange for vessel management and remarketing
services to be available in case any Initial Charter is terminated or any Vessel
is for any other reason returned to the possession and use of the related Owner.
If the Initial Charterer elects to terminate an Initial Charter for
either Vessel on the first Optional Termination Date for such Initial Charter,
the Allocated Principal Amount of the Notes for such Vessel will be
approximately $63.55 million. All of the Serial Notes and all of the Additional
Notes, if any, will have matured on or prior to such date. If (i) the Initial
Charterer elects to terminate the Initial Charter for a Vessel, (ii) an
Acceptable Replacement Charter has not been entered into and (iii) such Vessel
has not been sold, then in order to make scheduled sinking fund and interest
payments on the Exchange Notes and the untendered Existing Notes, if any, and to
pay estimated ship expenses for the related Vessel, minimum bareboat charter
hire payments of approximately $18,569 per day per Vessel, would be required
upon recharter. The foregoing charter hire rates would not cover $10,995,000 of
the final
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principal payment allocated to each Vessel. The $10,995,000 is less than current
estimates of the approximate residual value of the respective Vessels on the
date of the final payment. No assurance can be given as to the residual or scrap
value of the Vessels on such date of the final payment and no assurance can be
given that the Manager would be able to obtain charters at the foregoing charter
hire rates.
ENVIRONMENTAL REGULATION
The business and the operations of the Owners and any charterer of the
Vessels are materially affected by government regulation in the form of
international conventions, national, state and local laws and regulations in
force in the jurisdictions in which the Vessels operate, as well as in the
country or countries of their registration. Because such conventions, laws and
regulations are often revised, the Owners cannot predict the ultimate cost of
complying with such revised conventions, laws and regulations or the impact
thereof on the resale price or useful life of the Vessels.
OPA 90
The United States Oil Pollution Act of 1990 was enacted and became
effective in 1990 (as amended, "OPA 90"). OPA 90 applies to all vessels that
trade in the United States or its territories or possessions or operate in
United States waters, which include the United States territorial seas and the
two hundred nautical mile exclusive economic zone of the United States. Under
OPA 90, vessel owners, operators and demise charterers are "responsible parties"
with strict liability on a joint and several basis (unless the spill results
solely from the act or omission of a third party (subject to certain statutory
qualifications), an act of God or an act of war) for all oil spill containment
and clean-up costs and other damages arising from actual and threatened oil
spills pertaining to their vessels. These other damages include (i) natural
resources damages and the costs of assessment thereof, (ii) real and personal
property damages, (iii) net loss of taxes, royalties, rent, fees and other lost
government revenues, (iv) lost profits or impairment of earning capacity due to
property or natural resource damage, (v) net cost of public services
necessitated by a spill response, such as protection from fire, safety or health
hazards, and (vi) loss of subsistence use of natural resources. OPA 90 limits
the liability of responsible parties to the greater of $1,200 per gross ton or
$10 million per tanker (subject to possible adjustment for inflation); however,
that limit would not apply if the incident were proximately caused by violation
of applicable United States federal safety, construction or operating
regulations or by the responsible party's gross negligence or willful
misconduct, or if the responsible party fails or refuses to report an incident
which the responsible party knows or has reason to know of, or to provide all
reasonable cooperation and assistance requested by a responsible official in
connection with oil removal activities. OPA 90 does not by its terms impose
liability on lenders or the holders of mortgages on vessels; however, there is
no specific exclusion for such entities under OPA 90. In addition, if the
Indenture Trustee or any holder exercises remedies and becomes an "owner" or
"operator" or "demise charterer" of a Vessel following a Mortgage Event of
Default, such persons or entities may be subject to liability under OPA 90. A
catastrophic spill could exceed the liability limits of any insurance coverage
available, in which event there could be a material adverse effect on the owner
and the operator of the vessel involved in the spill.
See "Risk Factors--Risk of Loss and Liability; Insurance."
OPA 90 requires owners and operators of vessels to establish and
maintain with the United States Coast Guard evidence of insurance or of
qualification as a self-insurer or other evidence of financial responsibility
sufficient to meet their potential strict liability limit under OPA 90 and
CERCLA. The United States Coast Guard has adopted a final rule (the "Final
Rule") published on March 7, 1996 which requires evidence of financial
responsibility equal to the aggregate of OPA 90's strict liability limit and
CERCLA's limits demonstrated by insurance, surety bond, self-insurance or
guarantee. Failure to furnish
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<PAGE>
such certificates would have the effect of preventing vessels from trading to
United States ports or in United States waters. The Initial Charterer has
agreed, pursuant to the Initial Charters, to furnish evidence of financial
responsibility with respect to the Vessels to the United States Coast Guard as
required by the Final Rule.
The Final Rule states that claimants may bring suit directly against an
insurer or guarantor that furnishes certificates of financial responsibility and
requires insurers to waive certain customary insurance policy defenses. In the
event that the insurer, surety or other party is sued directly, it is limited to
asserting the following defenses: (i) that the incident was caused by the
willful misconduct of the responsible party; (ii) those available to the
responsible party under OPA or CERCLA; (iii) that the claim exceeds the amount
of the guarantee; (iv) that the claim exceeds the proper amount of the guarantee
based on the gross tonnage of the vessel; and (v) that the claim is not one made
under either OPA or CERCLA. Most of the P&I Clubs that typically provide
certificates of financial responsibility have refused to furnish evidence of
insurance for vessel owners and operators if such insurance organizations are
subject to direct actions or required to waive insurance policy defenses.
However, certain newly formed insurance companies, which have been deemed
acceptable guarantors by the United States Coast Guard, have furnished the
guaranties pursuant to the Final Rule.
The Final Rule may also be satisfied by evidence of a surety bond or
guarantee. However, the financial credit of some owners and operators may make
the furnishing of surety bonds or guaranties economically infeasible.
Additionally, vessel owners and operators may give evidence of self-insurance to
satisfy the United States Coast Guard's regulations. Under these provisions, the
shipowner or operator must have net worth and working capital, measured in
assets located in the United States against liabilities located anywhere in the
world, that exceeds the applicable amount of financial responsibility.
If the prospective recharterers of the Vessels fail to comply with the
Final Rule, it would have a material adverse effect on the Owners and Holders of
the Exchange Notes and Holders of the untendered Existing Notes, if any.
Owners or operators of tankers operating in United States waters must
file vessel response plans with the United States Coast Guard and their tankers
must operate in compliance with their United States Coast Guard approved plans.
Such response plans must, among other things, (i) identify and ensure, through
contract or other approved means, the availability of necessary private response
resources to respond to a "worst case" discharge, (ii) describe crew training
and drills, (iii) identify a qualified individual with full authority to
implement removal actions and (iv) describe mitigation and response actions.
Vessel response plans have been approved for the Vessels.
OPA 90 specifically permits individual states to impose their own
liability regimes with regard to oil pollution incidents occurring within their
boundaries, and many states have enacted legislation providing for unlimited
liability for oil spills. In some cases, states which have enacted such
legislation have not yet issued implementing regulations defining tanker owners'
responsibilities under these laws. Additionally, under OPA 90 the liability of
responsible parties, United States or foreign, with regard to oil pollution
damage in the United States is not preempted by any international convention.
IMO
The International Maritime Organization ("IMO") is an agency organized
in 1958 by the United Nations. Over 100 national governments are members of the
IMO, whose purpose is to provide for international regulations and practices
affecting shipping and international trade and to encourage the adoption of
standards of safety and navigation. During the last 35 years the IMO has
initiated over 700
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resolutions and 30 major conventions and protocols. All IMO agreements must be
ratified by the individual government constituents. Outside the United States,
many countries have ratified and follow the liability scheme adopted by the IMO
and set out in the International Convention on Civil Liability for Oil Pollution
Damage of 1969 ("CLC"), as amended by the 1992 Protocol, which entered into
force May 30, 1996. Under the CLC, an oil tanker's registered owner is strictly
liable for pollution damage caused on the territorial waters of a contracting
state by a discharge of oil, subject to certain defenses and limits. The current
limit for a ship not exceeding 5,000 gross tons is 3 million Special Drawing
Rights ("SDR") and, for each additional ton on a larger vessel, an additional
420 SDRs, up to a maximum of 59.7 million SDRs. (An SDR is defined by the
International Monetary Fund on the basis of a basket of currencies. The exchange
rate in effect on June 16, 1997 for the U.S. dollar equivalent of the SDR was
approximately 1.39, making the maximum liability approximately U.S. $84
million.) The right to limit liability is forfeited only where the spill is
caused by the owner's actual fault or the fault of a third party with whom the
owner has a direct contractual relationship. Vessels trading to contracting
states must establish evidence of insurance covering the limited liability of
the owner.
In jurisdictions where the CLC has not been adopted, various
legislative schemes or common law govern and liability is imposed either on the
basis of fault or in a manner similar to the CLC.
On March 6, 1992, the IMO adopted regulations which set forth new and
upgraded requirements for pollution prevention for tankers. These regulations
went into effect on July 6, 1995. Both Vessels will comply with such IMO
regulations.
The IMO continues to review and introduce new regulations on a regular
basis. It is impossible to predict what additional regulations, if any, may be
passed by the IMO, whether those regulations will be adopted by member countries
and what effect, if any, such regulations might have on the operation of oil
tankers.
GOLDEN STATE PETROLEUM TRANSPORT CORPORATION
Golden State Petroleum is a special purpose corporation that was
organized in Delaware in 1996 solely for the purpose of issuing, as agent on
behalf of the Owners, the Notes to facilitate the acquisition of the Vessels by
the related Owners and the charter of the Vessels as described herein. The Notes
will not be obligations of, or guaranteed by, Golden State Petroleum. The
principal executive office of Golden State Petroleum is 535 Madison Avenue, New
York, New York 10022. Furthermore, as part of the consideration for the Notes,
recourse under the Indenture and the Notes against the incorporators, directors,
officers and stockholders of Golden State Petroleum and its stockholders has
been expressly waived under the Indenture by the Indenture Trustee and by
acceptance of the Notes by all holders and, accordingly, the incorporators,
directors, officers and stockholders of Golden State Petroleum and its
stockholders will not be liable for any payments of debt service on the Notes.
The following table summarizes the beneficial ownership of Golden State
Petroleum as of April 25, 1997.
<TABLE>
<CAPTION>
NAME AND ADDRESS OF BENEFICIAL OWNER TITLE OF CLASS OF SECURITIES NUMBER OF SHARES
- ------------------------------------ ---------------------------- -----------------
<S> <C> <C>
Golden State Holdings I, Ltd.(1) Ordinary Shares Two
15-19 Athol Street
Douglas, Isle of Man
</TABLE>
(1) All of the issued and outstanding shares of Golden State Holdings I, Ltd.
are held by CPTC.
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<PAGE>
THE OWNERS
Each of the Owners was organized in 1996 as a limited liability company
under the laws of the Isle of Man. The principal executive office of the Owners
is 535 Madison Avenue, New York, New York 10022. All of each Owner's issued and
outstanding ordinary shares have been pledged to the Indenture Trustee as part
of the Collateral. The Notes will be full recourse obligations of the Owners,
secured solely by the Collateral. However, recourse under the Indenture and the
Notes against the incorporators, directors, officers and stockholders of the
Owners and their respective successors will be expressly waived in the manner
discussed above under "Golden State Petroleum Transport Corporation."
Accordingly, the incorporators, directors, officers and stockholders of the
Owners and their respective successors will not be liable for any payments of
debt service on the Notes.
Pursuant to the terms of the Indenture, each of the Owners will agree
to limit its activities to (i) entering into, or becoming a party, to a Building
Contract for its Vessel, (ii) entering into and performing the Agency Agreement,
(iii) assigning, granting, transferring, pledging, mortgaging or conveying its
Vessel and its freights and earnings to the Indenture Trustee, (iv) entering
into and performing its obligations under the Indenture, (v) registering its
Vessel under and pursuant to the laws of the Republic of Liberia, (vi) entering
into, performing and delivering its Initial Charter, (vii) entering into and
performing its obligations under the Security Documents, (viii) entering into
other charters, contracts of affreightment or sale agreements relating to the
Vessel upon the termination of the Initial Charter in a form conforming to the
requirements of the Indenture, (ix) carrying out, entering into, performing and
delivering any and all applications, licenses, agreements and instruments
related to and in the furtherance of the foregoing and (x) engaging in those
activities, including the entering into of agreements, necessary, suitable or
convenient to accomplish the foregoing or incidental thereto or connected
therewith.
The following table summarizes the beneficial ownership of each of the
Owners as of April 25, 1997.
<TABLE>
<CAPTION>
NAME AND ADDRESS OF BENEFICIAL OWNER TITLE OF CLASS OF SECURITIES NUMBER OF SHARES
- ------------------------------------ ---------------------------- -----------------
<S> <C> <C>
Golden State Holdings I, Ltd.(1) Ordinary Shares Two
15-19 Athol Street
Douglas, Isle of Man
</TABLE>
(1) All of the issued and outstanding shares of Golden State Holdings I, Ltd.
are held by CPTC.
MANAGEMENT OF THE COMPANIES
EXECUTIVE OFFICERS AND DIRECTORS
GOLDEN STATE PETROLEUM
Golden State Petroleum will have no employees involved in the
management of the Vessels. The following table sets forth the name, age and
principal position with the Issuer of each of its executive officers and
directors.
Name Age Position With The Company
- ---- --- -------------------------
John McFadden 52 President
Joseph Avantario 32 Director, Treasurer
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<PAGE>
Nunzio Lipomi 40 Secretary
All directors and executive officers of Golden State Petroleum were
appointed in December, 1996. Officers are appointed by the Board of Directors
and will serve until they resign or are removed by the Board of Directors.
THE OWNERS
No Owner will have any employees involved in the management of the
Vessels. The following table sets forth the name, age and principal position
with each Owner of each of its executive officers and directors.
Name Age Position With The Company
- ---- --- -------------------------
John McFadden 52 Director, President
Joseph Avantario 31 Director, Treasurer
Andrew Baker 38 Director, Secretary
Nunzio Lipomi 40 Assistant Secretary
All directors and executive officers of the Owners were appointed in
December 1996. Officers are appointed by the Board of Directors and will
serve until they resign or are removed by the Board of Directors.
None of the directors or executive officers of either Golden State
Petroleum or the Owners receive any compensation in connection with their
respective positions. SUCH PERSONS EXPECT TO RECEIVE COMPENSATION IN CONNECTION
WITH THEIR OTHER BUSINESS ACTIVITIES. Neither Golden State Petroleum nor the
Owners have entered into any affiliate transactions, other than the Management
Agreements with the Manager. See "BUSINESS -- THE OWNERS AND THE MANAGER"
Andrew James Baker, (British) non-executive Isle of Man resident director. Mr.
Baker is a solicitor with Cains, Isle of Man who are legal advisers to each of
the Owners and as such are entitled to charge for professional advice and
services. He has been a solicitor with Cains since March 1994. Prior to that he
was a partner with THE LAW FIRM Pennington's since 1987.
John McFadden, (American) executive director. Mr. McFadden is a bond trader with
Cambridge Partners, L.L.C., New York since 1995. Prior to that he was head of
municipal reinvestments at CS First Boston.
Joseph Avantario, (American) executive director. Mr. Avantario is a comptroller
with Cambridge Partners, L.L.C., New York. He has been comptroller with
Cambridge Partners, LLC since April of 1995. From May of 1992 to April 1995 he
was with CS First Boston first as a staff auditor and then as a trader of
municipal reinvestments.
Nunzio Lipomi, (American) executive director. Mr. Lipomi is an accountant with
Cambridge Partners, L.L.C., New York since 1996. From 1995 to 1996 he was an
accountant with Lipardi & Associates Financial Group. Prior to that he worked as
an independent accountant.
THE BUILDERS
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<PAGE>
Samsung Corporation is one of the major affiliated companies of the
Samsung Group, which is the world's 14th largest conglomerate (Fortune 1994
global list). Samsung Corporation's main businesses are represented by general
trade, construction & engineering, motor sales & marketing, and fashion &
retails with total revenues of US$ 24.8 billion in 1995 with 115 offices and
facilities throughout 60 countries.
SHI is also an affiliated company of the Samsung Group, which
manufactures a wide range of products, including industrial plant, ships,
offshore structures, construction equipment and commercial vehicles. As of 1995,
SHI had 13,400 employees and annual sales in excess of US $3.8 billion. SHI's
shipbuilding capacity was increased to 1.8 million gross tons in 1995, making
SHI one of the world's leading shipbuilders. SHI operates four technologically
advanced research and development centers and one integrated engineering center
where highly economical, next-generation ships like high-speed cargo and
passenger ships, and offshore-related ships, such as the drillship and Floating
Production Storage Offtake (FPSO) vessels, are developed. To date, SHI has
constructed three VLCCs for other owners. SHI has advised the Companies that all
three VLCCs were delivered on time.
BUILDING CONTRACTS
Each Vessel will be constructed pursuant to the terms and
specifications of the Building Contracts. The Vessels are being constructed to
meet the specifications of the Initial Charterer (the "Specifications"). The
Technical Supervisor, as agent for the Initial Charterer, shall monitor the
construction of the Vessel. The construction of the Vessels will be held at the
Builders' Koje Shipyard in South Korea. Upon delivery each Vessel, including its
machinery, equipment and outfitting, is required to be classed with the American
Bureau of Shipping Class A1, (E), Oil Carrier, + AMS, +ACCU, and SH. Each Vessel
is required to comply with the laws, rules, regulations, recommendations and
requirements as stated in the specifications attached to the related Building
Contract.
The purchase price for each Vessel shall be paid in the following
installments:
<TABLE>
<CAPTION>
PAYMENT SCHEDULE FOR VESSEL OWNED BY GOLDEN STATE PETRO (IOM I-A) PLC
INSTALLMENT NET PAYMENT
INSTALLMENT PAYMENT DATE AMOUNT TO BUILDER
<S> <C> <C> <C>
1 December 26, 1996 $ 36,396,540 $ 35,304,644
2 June 1, 1998 8,088,120 7,845,477
3 Sept. 1, 1998 8,088,120 7,845,477
4 Dec. 1, 1998 1,786,420 1,732,826
5 (FINAL) Feb. 1, 1999 26,522,000 25,726,340
</TABLE>
<TABLE>
<CAPTION>
PAYMENT SCHEDULE FOR VESSEL OWNED BY GOLDEN STATE PETRO (IOM I-B) PLC
INSTALLMENT NET PAYMENT
INSTALLMENT PAYMENT DATE AMOUNT TO BUILDER
<S> <C> <C> <C>
1 December 26, 1996 $ 40,146,200 $ 38,941,814
2 April 1, 1998 353,711 343,100
3 May 1, 1998 2,652,833 2,573,248
4 June 1, 1998 2,652,833 2,573,248
5 July 1, 1998 2,652,833 2,573,248
6 August 1, 1998 2,652,833 2,573,248
7 September 1, 1998 634,157 615,132
</TABLE>
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<PAGE>
<TABLE>
<CAPTION>
<S> <C> <C> <C>
8 (FINAL) July 1, 1999 28,547,000 27,690,590
</TABLE>
Pursuant to the Building Contract relating to Vessel A, the Contractual
Delivery Date for Vessel A is February 1, 1999. Pursuant to the Building
Contract relating to Vessel B, the Contractual Delivery Date for Vessel B is
July 1, 1999. If delivery of a Vessel is or will be delayed for any reason
whatsoever, other than delays caused by the related Owner or alterations to the
Specifications, for a period more than 180 days beyond the Contractual Delivery
Date therefor, such Owner has two options exercisable not later than either (a)
10 days after the expiration of such 180-day period or (b) 20 days after such
Owner has been notified by the Builders and the Builders and such Owner agree
that the delivery of such Vessel will be delayed 180 days beyond the Contractual
Delivery Date therefor, whichever first occurs. The Owner may either cancel the
Building Contract and receive the Refund Amount described below or subject to
the agreement of the Builders, may extend the Contractual Delivery Date and
reserve the right to liquidated damages in an amount equal to $24,200 per day of
delay beyond the 180-day period, which amount is sufficient to pay interest on
the Notes until the actual Delivery Date of such Vessel.
In the event that a Vessel is rejected by the related Owner, or a
Building Contract is canceled by the related Owner, all in accordance with the
terms of the related Building Contract, or if the Builders should default in the
delivery of a Vessel or is guilty of breach of a Building Contract justifying a
recision thereof by the related Owner then, and in any such event, the Builders
shall refund to such Owner an amount (the "Refund Amount") that, together with
the amounts held in the Pre-Funding Account with respect to such Vessel, shall
be deposited into the Pre-Funding Account and shall be utilized to redeem the
Allocated Principal Amount of the Notes for the related Vessel in full.
BUILDING CONTRACT GUARANTEES
Pursuant to the Building Contract Guarantees, The Korea Development
Bank, Seoul, South Korea (the "Building Contract Guarantor") shall guarantee
payment to the Owners of the Refund Amount payable by the Builders to the Owners
under the Building Contracts. STANDARD & POOR'S RATING SERVICES HAS ISSUED AN
EQUIVALENT LONG-TERM DEBT RATING OF AA- TO THE GOVERNMENT OF THE REPUBLIC OF
KOREA AND
THE KOREAN DEVELOPMENT BANK.
Each Building Contract Guarantee shall be a continuing guarantee and
provide that it (i) shall not be impaired or discharged by the granting of time
or any other indulgence to the Builders, or any other forbearance (whether as to
payment, time, performance, or otherwise) which might, but for this provision,
have any such effect, (ii) shall not be conditioned or contingent upon the
Owner's pursuit of any remedy that it has against the Builders, and (iii) shall
be unconditional irrespective of any other circumstance that might otherwise
constitute a legal or equitable discharge of a surety or guarantor under
applicable law.
CHEVRON AND THE INITIAL CHARTERER
The Exchange Notes are not obligations of, and are not guaranteed by,
the Initial Charterer or Chevron. The following information on Chevron and
the Initial Charterer was obtained from publicly available information contained
in the Chevron 10-K for the fiscal year ending December 31, 1996 and the Chevron
10-Q for the period ending on March 31, 1997.
Chevron, a Delaware corporation, a major international oil company,
will guarantee the payment and performance obligations of the Initial Charterer
under each Initial Charter. According to publicly available information, Chevron
provides administrative, financial and management support for, and
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manages its investments in, U.S. and foreign subsidiaries and affiliates, which
engage in fully integrated petroleum operations, chemical operations and coal
mining. Chevron operates in the United States and approximately 90 other
countries. Petroleum operations consist of exploring for, developing and
producing crude oil and natural gas; transporting crude oil, natural gas and
petroleum products by pipelines, marine vessels and motor equipment; refining
crude oil into finished petroleum products; and marketing crude oil, natural gas
and the many products derived from petroleum. Chemical operations include the
manufacture and marketing of a wide range of chemicals for industrial uses.
According to publicly available information, the Initial Charterer is
engaged in the marine transportation of oil and refined petroleum products. At
any given time, the Initial Charterer operates between 25 and 35 internationally
flagged vessels which it owns or bareboat charters. The Initial Charterer's
primary transportation routes are from the Middle East, Indonesia, Mexico, West
Africa and the North Sea to ports in the United States, Europe, the United
Kingdom and Asia. Refined petroleum products are transported worldwide. The
Initial Charterer, a Liberian corporation, is an indirect, wholly-owned
subsidiary of Chevron.
SELECTED FINANCIAL DATA OF THE INITIAL CHARTERER AND CHEVRON
THE INITIAL CHARTERER
YEAR ENDED DECEMBER 31,
-----------------------
1996 1995 1994
Sales and other operating revenues..... 512 462 440
Total costs and other deductions....... 564 477 504
Net income (loss)...................... 11 (23) (58)
AT DECEMBER 31,
---------------
1996 1995
Current assets......................... $ 99 $ 37
Other assets........................... 1,622 1,561
Current liabilities.................... 617 459
Other liabilities...................... 385 431
Net equity............................. 719 708
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<TABLE>
<CAPTION>
CHEVRON CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF INCOME
Three Months Ended
March 31,
------------------------------------------------------------
Millions of Dollars, Except Per Share Amounts 1997 1996
- -----------------------------------------------------------------------------------------------------------------------
Revenues
<S> <C> <C>
Sales and other operating revenues* $ 10,794 $ 10,157
Equity in net income of affiliated companies 178 136
Other income 121 43
----------- -----------
Total Revenues 11,093 10,336
- ---- ----------- -----------
Costs and Other Deductions
Purchased crude oil and products 5,710 5,448
Operating expenses 1,375 1,313
Selling, general and administrative expenses 345 354
Exploration expenses 81 92
Depreciation, depletion and amortization 546 531
Taxes other than on income* 1,495 1,413
Interest and debt expense 82 96
----------- -----------
Total Costs and Other Deductions 9,634 9,247
- ---- ----------- -----------
Income Before Income Tax Expense 1,459 1,089
Income Tax Expense 628 473
----------- -----------
Net Income 831 616
----------- -----------
Per Share of Common Stock:
Net Income $ 1.27 $ .94
- ----
Dividends $ .54 $ .50
Weighted Average Number of Shares
Outstanding (000s) 653,323 652,563
*Includes consumer excise taxes. $ 1,314 1,244
</TABLE>
<TABLE>
<CAPTION>
CONSOLIDATED BALANCE SHEET
March 31, December 31,
Millions of Dollars 1997 1996
- --------------------------------------------------------------------------------------------------------------------------
ASSETS
<S> <C> <C>
Cash and cash equivalents $ 1,385 $ 892
Marketable securities 421 745
Accounts and notes receivable 3,718 4,035
Inventories:
Crude oil and petroleum products 589 669
Chemicals 489 507
Materials, supplies and other 257 255
----------- -----------
1,335 1,431
Prepaid expenses and other current assets 842 839
----------- -----------
Total Current Assets 7,701 7,942
- ----
Long-term receivables 270 261
Investments and advances 4,524 4,463
Properties, plant and equipment, at cost 47,451 46,936
Less: accumulated depreciation, depletion
and amortization 25,767 25,440
----------- -----------
21,684 21,496
Deferred charges and other assets 738 692
----------- -----------
Total Assets $ 34,917 $ 34,854
- ---- ========== ===========
</TABLE>
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<PAGE>
<TABLE>
<CAPTION>
CHEVRON
Five-Year Financial Summary(1)
Millions of dollars, except per-share amounts 1996 1995 1994 1993 1992
CONSOLIDATED STATEMENT OF INCOME DATA
REVENUES
<S> <C> <C> <C> <C> <C>
Sales and other operating revenues
Refined products $15,785 $13,471 $14,328 $16,089 $16,821
Crude oil 12,397 9,376 8,249 8,501 10,031
Natural gas 3,299 2,019 2,138 2,156 1,995
Natural gas liquids 1,167 1,285 1,180 1,235 1,190
Other petroleum 1,184 1,144 944 967 927
Chemicals 3,422 3,758 3,065 2,708 2,872
Coal and other minerals 340 358 416 447 397
Excise taxes 5,202 4,988 4,790 4,068 3,964
Corporate and other (14) (89) 20 20 15
Total sales and other operating revenues 42,782 36,310 35,130 36,191 38,212
Equity in net income of affiliated companies 767 553 440 440 406
Other income 344 219 284 451 1,059
TOTAL REVENUES 43,893 37,082 35,854 37,082 39,677
COSTS, OTHER DEDUCTIONS AND INCOME
TAXES 41,286 36,152 34,161 35,817 37,467
INCOME BEFORE CUMULATIVE EFFECT
OF CHANGES IN ACCOUNTING
PRINCIPLES CUMULATIVE EFFECT $2,607 $930 $1,693 $1,265 $2,210
OF CHANGES IN ACCOUNTING PRINCIPLES - - - - (641)
NET INCOME (LOSS) $2,607 $930 $1,693 $1,265 $1,569
PER SHARE OF COMMON STOCK:
INCOME BEFORE CUMULATIVE EFFECT
OF CHANGES IN ACCOUNTING PRINCIPLES $3.99 $1.43 $2.60 $1.94 $3.26
CUMULATIVE EFFECT OF CHANGES
IN ACCOUNTING PRINCIPLES - - - - (0.95)
NET INCOME (LOSS) PER SHARE OF
COMMON STOCK $3.99 $1.43 $2.60 $1.94 $2.31
CASH DIVIDENDS PER SHARE $2.08 $1.925 $1.85 $1.75 $1.65
CONSOLIDATED BALANCE SHEET DATA (YEAR-END)
Current assets $7,942 $7,867 $7,591 $8,682 $8,722
Properties, plant and equipment (net) 21,496 21,696 22,173 21,865 22,188
Total assets 34,854 34,330 34,407 34,736 33,970
Short-term debt 2,706 3,806 4,014 3,456 2,888
Other current liabilities 6,201 5,639 5,378 7,150 6,947
Long-term debt and capital lease obligations 3,988 4,521 4,128 4,082 4,953
Stockholders' equity 15,623 14,355 14,596 13,997 13,728
Per share $23.92 $22.01 $22.40 $21.49 $21.11
SELECTED DATA
Return on average stockholders' equity 17.4% 6.4% 11.8% 9.1% 11.0%
Return on average capital employed 12.7% 5.3% 8.7% 6.8% 8.5%
Total debt/total debt plus equity 30.0% 36.7% 35.8% 35.0% 36.4%
Capital and exploratory expenditures(2) $4,840 $4,800 $4,819 $4,440 $4,423
Common stock price - High $68 3/8 $53 5/8 $49 3/16 $49 3/8 $37 11/16
- Low $51 $43 3/8 $39 7/8 $33 11/16 $30 1/16
- Year-end $65 $52 3/8 $44 5/8 $43 9/16 $34 3/4
Common shares outstanding at year-end
(in thousands) 653,086 652,327 651,751 651,478 650,348
Weighted average shares outstanding
for the year (in thousands) 652,769 652,084 651,672 650,958 677,955
Number of employees at year-end(3) 40,820 43,019 45,758 47,576 49,245
</TABLE>
(1) Comparability between years is affected by changes in accounting methods:
1995 and 1996 reflect adoption of Statement of Financial Accounting
Standards (SFAS) No. 121, "Accounting for the Impairment of Long-Lived
Assets and for Long-Lived Assets to be Disposed Of"; 1992 and subsequent
years reflect adoption of SFAS No. 106, "Employers' Accounting for
Postretirement Benefits Other Than Pensions," and SFAS No. 109, "Accounting
for Income Taxes." Share and per-share amounts reflect the two-for-one
stock split in May 1994.
(2) Includes equity in affiliates' expenditures. $983 $912 $846 $701 $621
(3) Includes service station personnel.
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<PAGE>
THE INITIAL CHARTERS
DELIVERY AND ACCEPTANCE OF THE VESSELS FROM THE OWNERS
The Owner of a Vessel shall give and the Initial Charterer shall take
delivery of such Vessel concurrently with delivery of such Vessel by the
Builders to the Owner when the Vessel is ready for delivery by the Builders.
Pursuant to the terms of the Initial Charter, the Initial Charterer warrants
that upon delivery of the Vessel, such Vessel shall be in Initial Charterer's
custody and under its control.
If for any reason other than a default by the Owner under the Building
Contract, the Builders become entitled under the Building Contract not to
deliver the Vessel to the Owner, the Owner shall, upon giving to the Initial
Charterer written notice thereof, thereby be excused from giving delivery of the
Vessel to the Initial Charterer and upon receipt of such notice by the Initial
Charterer the related Initial Charter shall cease to have effect.
If for any reason the Owner becomes entitled under the Building
Contract to reject a Vessel, the Owner shall, before exercising such right of
rejection, give written notice thereof to the Initial Charterer and consult the
Initial Charterer and thereupon:
(i) If the Initial Charterer does not wish to take delivery of
such Vessel, it shall inform the Owner within seven (7) days of notice
from the Owner by notice in writing and upon receipt by the Owner of
such notice the related Initial Charter shall cease to have effect; or
(ii) If the Initial Charterer wishes to take delivery of such
Vessel, it may by notice in writing within seven (7) days of notice
from the Owner require the Owner to negotiate with the Builders as to
the terms on which delivery should be taken and during such period
refrain from exercising its right of rejection and upon receipt of
such notice the Owner shall commence such negotiations; provided
however, the Owner shall not be required to accept delivery of a
Vessel from the Builders unless the terms of such delivery are
acceptable to it in its sole discretion.
In no circumstances is the Initial Charterer entitled to reject a
Vessel unless the Owner is able to reject such Vessel from the Builders.
TERM OF THE INITIAL CHARTERS
On the Delivery Date for a Vessel, the related Owner will charter to
the Initial Charterer and the Initial Charterer will charter from such Owner
such Vessel. Each Initial Charter shall be for a period of eighteen years from
the Delivery Date of the related Vessel and ending on the eighteenth anniversary
of such Delivery Date. Pursuant to the Initial Charters, the Initial Charterer
has the right to terminate each Initial Charter on five Optional Termination
Dates beginning on the expiration of the period commencing on the Delivery Date
for such Vessel and terminating on the eighth anniversary thereof (each, a
"Fixed Period") and on each of the four subsequent two-year anniversaries
thereof. The Initial Charterer shall not be able to terminate either Initial
Charter prior to the final maturity date of the Serial Notes and Additional
Notes, if any. The Initial Charterer shall have the option of terminating the
Initial Charter upon the expiration of the Fixed Period or any of the Optional
Periods (each, an "Optional Termination Date"). If the Optional Termination Date
is the first Optional Termination Date, the Initial Charterer must give the
related Owner (i) non-binding notice of its intent to exercise such option,
determined on a good faith basis, at least 12 months prior to such Optional
Termination Date and (ii) irrevocable notice of such exercise nine (9) months
prior to such Optional Termination Date. If the Optional Termination Date is any
subsequent Optional Termination Date, the Initial Charterer must give the
related Owner (i) non-binding notice of its intent to exercise such option,
determined on a good faith
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basis, at least nine (9) months prior to such Optional Termination Date and (ii)
irrevocable notice of such exercise six (6) months prior to such Optional
Termination Date.
BUILDERS' WARRANTIES
During the term of the Initial Charter, except during periods when a
Charter Event of Default shall have occurred and be continuing and except in
respect of a Total Loss (unless the Initial Charterer shall have made all
payments required by the Initial Charter in respect of a Total Loss), the
related Owner will assign to the Initial Charterer the right to enforce and
exercise all rights of warranty, guaranty and indemnity which such Owner may
have in respect of such Vessel or otherwise directly against the Builder or any
manufacturer of any part of such Vessel. The Initial Charterer shall be entitled
to take such action in the name of Owner against the Builder or any manufacturer
of any part of such Vessel in relation to the terms of purchase of, the
condition of or any patent infringement or alleged patent infringement in
relation to such Vessel or any part thereof as Initial Charterer sees fit but
subject to the Owner being indemnified and secured to its satisfaction by the
Initial Charterer against all losses, costs, damages and expenses thereby
incurred or to be incurred. If as a result of any such action any moneys are
received from the Builder or any such other manufacturer of the Vessel as
aforesaid the same shall be received by the Initial Charterer. The Initial
Charterer shall use diligence to assert and enforce all such rights which have a
material effect upon the value of the Vessel.
The Owner, however, shall be entitled to receive from the Builders an
amount (the "Liquidated Damages Rebate") equal to all liquidated damages related
to a Vessel's failure to satisfy the Builders' contract deadweight, speed and/or
fuel consumption guarantees. Notwithstanding the foregoing, the Initial
Charterer shall be entitled to receive from the Owner an amount (the "Charterer
Rebate Amount") equal to the Liquidated Damages Rebate times a fraction equal to
8/18 on the date such Liquidated Damages Rebate is received from the Builders.
The Charterer Rebate Amount shall be deposited by the Owner into a separate
escrow account established with a financial institution and subject to an escrow
agreement acceptable to both the Initial Charterer and the Owner (the "Escrow
Account") and invested until no earlier than the last day of the Fixed Period
and shall be disbursed as follows: on the first day of any Optional Period, the
Initial Charterer shall be entitled to receive an amount equal to the Escrow
Account Balance times a fraction the numerator of which is the number of years
of the related Optional Period and the denominator of which is the number of
years remaining on the Initial Charter. Any balance shall remain in the Escrow
Account and shall be invested until the end of the related Optional Period.
USE AND TRADE OF THE VESSEL
The Initial Charterer will have full use of each Vessel during the term
of the Initial Charter and will have the right to operate the Vessel throughout
the world (within Institute Warranty Limits) in the carriage of suitable lawful
merchandise. As to those trades in which a Vessel is employed, the Initial
Charterer shall comply with any and all requirements regarding financial
responsibility or security in respect of oil or other pollution damage as
required by any government, any state or other political subdivision thereof, or
any entity exercising executive, legislative, judicial, regulatory or
administrative functions of or pertaining to government and any other
governmental entity with authority over the Initial Charterer or the related
Owner, as the case may be, or ownership, use and operation of such Vessel
(whether or not such requirement has been lawfully imposed or not) to enable
such Vessel, without penalty or charges, lawfully to enter, remain at, or leave
any port, place, territorial or contiguous waters of any country, state or
municipality in performance of the related Initial Charter without delay. The
Initial Charterer shall make and maintain all arrangements for a security bond
or otherwise as may be necessary to satisfy such requirements at the Initial
Charterer's sole expense and the Initial Charterer shall indemnify the related
Owner against any and all losses, damages, claims, expenses or liabilities
incurred by reason of the Initial Charterer's failure to comply with the
requirements described in this paragraph. The Initial Charterer shall enter and
maintain each Vessel under the TOVALOP Scheme or under any
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similar scheme during the term of each Initial Charter. In no event will the
Initial Charterer carry on board a Vessel nuclear fuels or radioactive products
during the term of the related Initial Charter; provided, however, with the
prior written consent of the related Owner, the Initial Charterer may carry on
board a Vessel radioisotopes used or intended to be used for any industrial,
agricultural, medical or scientific purposes.
FLAG AND NAME OF VESSEL
The Initial Charterer shall, throughout the term of each Initial
Charter, maintain the documentation of the Vessel under the laws of the
Registration Jurisdiction at the Initial Charterer's cost and expense. The
related Owner will agree to do such things whatsoever and execute and deliver
all such documents whatsoever to enable the Initial Charterer to maintain such
documentation. The Initial Charterer will not change the registry or port of
documentation of the Vessel without prior written consent of the related Owner,
which consent shall not be unreasonably withheld, or do or suffer or permit to
be done anything which will injuriously affect the documentation of the Vessel
as a vessel documented under the laws and regulations of the Registration
Jurisdiction. If the Initial Charterer changes the registry or port of
documentation of the Vessel, it shall, at the time of redelivery, if the related
Owner so requests and at the Initial Charterer's expense, change the registry
and port of documentation back to that of the Registration Jurisdiction.
The Initial Charterer shall have the right to re-name each Vessel, to
paint each Vessel in its own colors, install and display its funnel insignia and
fly its own house flag.
COVENANTS
Each Initial Charter will contain certain covenants pursuant to which
the Initial Charterer will agree, among other things, that:
(a) The Initial Charterer will at its expense maintain the Vessel in a
good state of repair and in efficient operating condition in accordance with
good commercial maintenance practice commensurate with other vessels in the
Initial Charterer's fleet of similar size and trade, ordinary wear and tear
excepted;
(b) The Initial Charterer will at its expense keep the Vessel with
unexpired classification in accordance with the highest classification of the
American Bureau of Shipping (or such other classification society as shall
previously have been approved in writing by the related Owner) and other
required certificates in force and shall make any improvement or structural
changes or acquire equipment necessary to comply with the requirements of such
classification;
(c) The Initial Charterer shall not permit the Vessel to proceed to any
port which shall have been the subject of a prohibition by the Registration
Jurisdiction;
(d) In the event of hostilities in any part of the world the Initial
Charterer will not employ the Vessel nor suggest her employment in carrying any
goods which are declared contraband nor suffer her to enter to trade to any zone
which is declared a war zone by the war risks insurers unless the Initial
Charterer has made arrangements with the said insurers for the payment of such
additional premiums as said insurers may require to maintain the relevant
insurances in force or in any zone in respect of which the war risks insurers
have withdrawn coverage for the Vessel;
(e) The Initial Charterer will not use the Vessel in any manner or for
any purpose excepted from any insurance policy or policies taken out in
compliance with the Initial Charter or for the purpose of carriage of goods of
any description excepted from such insurance policy or policies and shall not do
or
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permit to be done anything which could reasonably be expected to invalidate any
of such insurance policy or policies;
(f) The Initial Charterer shall man, victual, navigate, operate,
supply, fuel and repair the Vessel whenever required and shall be responsible
for all charges and expenses of every kind and nature whatsoever incidental to
its use and operation of the Vessel under the Initial Charter, including any
foreign, general, municipal, value added or other taxes, except that the Initial
Charterer shall not be responsible for Owner Taxes;
(g) The Initial Charterer shall drydock the Vessel and clean and paint
her underwater parts in accordance with good commercial practice, but not less
than as may be required by the American Bureau of Shipping (or such other
classification society as shall previously have been approved in writing by the
related Owner) in order to maintain the Vessel's highest classification; and
(h) The Initial Charterer will not allow, nor permit to be continued,
any Lien incurred by the Initial Charterer or its agents, which might have
priority over the title and interest of the Owner in the related Vessel, and
will indemnify and hold the Owner harmless against any Lien arising upon such
Vessel while the Vessel is under the control of the Initial Charterer and
against any claims against the Owner arising out of or in relation to the
operation of the Vessel by the Initial Charterer.
In general, all amounts, excluding certain indemnification payments,
payable by the Initial Charterer shall be made without deduction for any taxes
(including value added, turnover, sales and use taxes) except as required by law
and the Initial Charterer shall, in addition to the sums payable by the Initial
Charterer under each Initial Charter, pay such taxes as aforesaid as are
required from time to time by law to be paid by the Initial Charterer. Under
each Initial Charter, the related Owner will agree to take any lawful action to
the extent necessary to prevent or avoid the imposition of any taxes, including
any withholding tax with respect to charter hire, by any taxing jurisdiction
(including the Registration Jurisdiction for such Owner), including changing its
jurisdiction of incorporation or residence; provided that it shall not be
required to take, or fail to take, any action (i) if in the opinion of counsel
such act or failure to act would violate applicable law or (ii) if in the
reasonable opinion of the Owner the actions necessary to avoid or prevent
imposition of such taxes would be unduly burdensome. For purposes of clause (ii)
above, a requirement to change the jurisdiction of the Owner's incorporation or
residence shall not be treated as unduly burdensome.
CHARTER HIRE
The Initial Charterer shall pay, without offset or deduction, whether
or not the Vessel is under arrest, Charter Hire for the use and hire of the
Vessel. During the Fixed Period, Charter Hire shall be $27,199 per day for
Vessel A and $27,199 for Vessel B. Additional Charter Hire shall be payable in
the event Additional Construction Costs are incurred with respect to a Vessel
and shall be in an amount, together with investment income thereon, sufficient
to amortize the Additional Notes, and pay interest thereon, during the Fixed
Period of the related Initial Charter. The Fixed Charter Hire payable during the
Fixed Period and each Optional Period shall be reduced by an amount (the
"Charter Hire Reduction") equal to the amortization of the Net Reduction in
Construction Costs over the term of the Exchange Notes and the untendered
Existing Notes, if any. During each Optional Period, Charter Hire shall be
$28,500 per day for Vessel A and $28,500 per day for Vessel B. If any payment of
Charter Hire under the Initial Charter shall not be paid when due, interest
shall accrue thereon at the Default Rate from and including the due date to the
date of actual payment (after as well as before judgment).
If, on or before a date on which the Initial Charterer is obligated to
give the Owner irrevocable notice of its intent to terminate the Initial Charter
(a "Termination Notice Date"), and if (i) the Charter Hire during the applicable
Optional Period is above the then current market level and (ii) the Initial
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Charterer desires to have a vessel on charter for a term equal to the applicable
Optional Period and of a size, age, condition, and performance characteristics
similar or equivalent to those of the Vessel, then the Initial Charterer shall
so notify the Owner in writing no later than the Termination Notice Date. Then,
from the Termination Notice Date until the commencement of the applicable
Optional Period, the Initial Charterer and Owner shall work together in good
faith to agree on a mutually acceptable charter hire rate for the applicable
Optional Period.
INSURANCE
Each Initial Charter provides that the Initial Charterer may
self-insure against the risks required to be covered thereunder. Therefore,
there can be no assurance that any insurance for such risks will be carried for
any Vessel or, if it is carried, as to the amount of such insurance.
INSURANCE PROCEEDS
The proceeds of any insurances referred to in the Initial Charters will
be applied as follows:
Until the termination of an Initial Charter, any proceeds under any
such insurance in respect of the related Vessel (other than in respect of Total
Loss) shall be paid directly to the Initial Charterer. The Initial Charterer
shall be liable for any loss of any part of or damage to the Vessel (other than
a Total Loss) from whatsoever cause such loss or damage may arise, unless the
same shall have been caused by the negligence or wilful act of the Owners, their
servants or agents (except where the Initial Charterer or its servants and
agents are acting as agents of the Owners).
Any claim in respect of a Total Loss shall be paid directly to the
related Owner or the Collateral Trustee, as assignee.
PAYMENT ON TOTAL LOSS
The amount payable on the date which is 90 days after the occurrence of
a Total Loss with respect to a Vessel (the "Loss Date") by the Initial Charterer
shall be the sum of (i) any deficiency between (A) the Stipulated Loss Value in
relation to the period in question calculated by the application of Schedule 2
to the Initial Charter and (B) all insurance proceeds for damage to or loss of
the Vessel and amounts paid by any governmental authority in connection with any
requisition, seizure or forfeiture actually received in hand by the Owner or the
Indenture Trustee prior to or on such Loss Date; and (ii) all Charter Hire
accrued (on a daily basis) but unpaid hereunder to such Loss Date and any other
sums due under any provisions of the Initial Charter, together with interest
thereon at the Default Rate from the date upon which any such Charter Hire or
other sums was due until the date upon which the calculations are made for the
purposes of determining the amount payable on the Loss Date. In the event of a
Total Loss, the Initial Charter and the obligation of the Initial Charterer to
pay charter hire shall continue and be payable until the Initial Charterer has
paid the amounts described above. The obligations of the Initial Charterer
described above will apply regardless of whether or not any moneys are payable
under the insurances effected in compliance with the Initial Charter in respect
of the Vessel, regardless also of the amount payable thereunder, regardless also
of the cause of the Total Loss and regardless of whether or not any of such
compensation shall be payable.
CHARTER EVENTS OF DEFAULT
The following constitute events of default under each Initial Charter
("Charter Events of Default"):
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(a) The Initial Charterer shall default for two Business Days in the
payment of Charter Hire or other amounts due under the terms of the Initial
Charter;
(b) The Initial Charterer shall fail for a period of 30 Business Days
after written notice to perform and observe any of the covenants, conditions,
agreements or stipulations on the part of the Initial Charterer to be performed
or observed contained in the Initial Charter, other than those referred to in
clause (a) or (e) of this paragraph;
(c) The Initial Charterer ceases doing business as a going concern or
generally ceases to pay its debts as they become due or any proceedings under
any bankruptcy or insolvency laws are instituted against the Initial Charterer
or if a receiver or trustee is appointed for the Initial Charterer for any of
its assets or properties, and such proceeding is not dismissed, vacated or fully
stayed within 60 days;
(d) The Initial Charterer shall create or suffer to exist any mortgage,
charge, pledge or other like encumbrance over the Vessel or any part thereof or
shall have abandoned the Vessel (not including any notice of abandonment which
the Initial Charterer may give to insurers under the provisions of the Initial
Charter regarding insurance in the event of a Total Loss);
(e) The Initial Charterer fails to comply with any of its obligations
as to insurance contained in the Initial Charter; and
(f) The Initial Charterer shall within 30 days of any scheduled date of
redelivery under the Initial Charter fail to provide adequate bail or security
when required to do so in respect of any maritime lien, possessory lien or
statutory right in rem which may be acquired over the Vessel in order to prevent
the Vessel being arrested, impounded or seized or if any such lien, right or
claim over the Vessel is exercised by the arrest, attachment, detention,
impounding or seizure of the Vessel under any distress, execution or other
process, or any distress or execution is levied thereon, and the Initial
Charterer fails to use its best endeavors to procure the release of the Vessel
therefrom within 30 days of any scheduled date of redelivery under the Initial
Charter.
REMEDIES
If any Charter Event of Default shall have occurred and be continuing,
the Owner under the related Initial Charter may, by written notice to the
Initial Charterer, declare such Initial Charter to be in default and enforce any
or all of the remedies under such Initial Charter, including:
(a) requiring the Initial Charterer, at its expense, to redeliver the
Vessel to the related Owner with the Initial Charterer to have the same
obligations in connection with such redelivery as described below in connection
with redelivery of the Vessel at the termination of the Initial Charter;
(b) retaking the Vessel by the related Owner or its agent, without
prior demand or legal process;
(c) holding the Initial Charterer liable for all charter hire payments
payable before, during or after exercise of the foregoing remedies and the
remedy described in paragraph (d) below and for all reasonable costs and
expenses incurred by the related Owner (including legal fees) by reason of the
occurrence of any default or the exercise of remedies by the related Owner; and
(d) the related Owner or its agent may sell the Vessel at public or
private sale, with or without notice to the Initial Charterer, advertisement or
publication, as such Owner may determine, or otherwise may dispose of, hold,
use, operate, charter to others or keep the Vessel idle.
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REDELIVERY
Unless a Vessel is a Total Loss, the Initial Charterer shall at the
termination of the Initial Charter redeliver the Vessel to the related Owner at
a safe and ice-free port or a place selected by the Initial Charterer within the
Vessel's trading limits (within 10 steaming days from a recognized loading area)
or at such other safe port as shall be agreed between the Initial Charterer and
the related Owner.
At or about the time of redelivery if the related Owner so requires, a
survey shall be made to determine the condition and fitness of the Vessel, her
machinery and equipment. In the event that such Vessel has been dry-docked
within 30 months prior to redelivery and the Initial Charterer certifies in
writing that, to the best of its knowledge, the Vessel has had no bottom
touching since such dry-docking, such survey may be conducted while the Vessel
is afloat. The related Owner may require a divers' survey of the Vessel. The
Initial Charterer shall bear all expenses of any such survey only if repairs are
found to be required. Otherwise, the cost of a diver's survey shall be paid by
the Owner. The Initial Charterer shall at its expense make all such repairs and
do all such work so found to be necessary before redelivery or, at the related
Owner's option, shall discharge its obligations by payment of a sum sufficient
to provide, at the prices current at the time of redelivery, for the work and
repairs necessary to place the Vessel in the required structure, state and
condition. The Initial Charter Period shall be extended until the completion of
any such repairs and work found to be necessary or the payment of the amounts
described above. Each Vessel upon redelivery shall have her survey cycles up to
date and class certificates valid for at least six calendar months and the
Initial Charterer shall ensure that Vessel shall have been dry-docked within 30
months prior to redelivery.
ASSIGNMENT AND SUB-CHARTER
The Initial Charterer may not assign all or part of its rights and
obligations under any Initial Charter nor may it charter the related Vessel by
demise to any other entity without the prior written consent of the related
Owner, such consent not to be unreasonably withheld, subject always to the
Vessel being maintained and insured to the same standards as are adopted by the
Initial Charterer in respect of the vessels owned by it; provided, however, that
the Initial Charterer may assign its rights and obligations under any Initial
Charter to a corporation more than 50% of which is owned directly or indirectly
by Chevron so long as Chevron continues to guarantee the payment and performance
of such Initial Charter pursuant to the related Chevron Guarantee. The Initial
Charterer may otherwise charter the Vessel without the prior consent of the
related Owner provided that the Initial Charterer remains responsible as
principal (or appoints another person to be responsible in its stead) for
navigating and managing the Vessel throughout the period of such charter and for
defraying all expenses in connection with the Vessel throughout such period or
substantially all such expenses other than those directly incidental to a
particular voyage or to the employment of the Vessel during that period.
LIQUIDATED DAMAGES
Whether or not the related Owner shall have exercised, or shall
thereafter at any time exercise, any options, rights or remedies described
above, upon or as a consequence of a breach of contract by the Initial Charterer
amounting to repudiation by the Initial Charterer of the Initial Charter, the
related Owner may immediately require the Initial Charterer to pay to such Owner
as liquidated damages for loss of a bargain and not as a penalty, an amount
equal to (i) the sum of (A) the applicable Stipulated Loss Value, (B) all
outstanding accrued and unpaid Charter Hire and (C) any other amounts due to
such Owner under the Initial Charter on or prior to the date of payment and (ii)
interest thereon (before and after judgment) at the Default Rate from the date
such amounts were payable to the actual date of payment. The Initial Charterer
shall not be entitled to any part of the net proceeds of the Vessel (if any)
whether by way of rebate of charter hire or otherwise.
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INDEMNITY
Pursuant to each Initial Charter, the Initial Charterer will indemnify
the related Owner against the following:
(a) all costs and expenses of operating and maintaining the related
Vessel and of operating, maintaining and replacing all parts including (but
without prejudice to the generality of the foregoing) all fuel, oil, port
charges, fees, taxes, levies, fines, penalties, charges, insurance premiums,
victualing, crew, navigation, manning, operating and freight expenses and all
other outgoings whatsoever payable by the Owner or the Initial Charterer in
respect of the possession or operation of a Vessel or any part thereof, or the
purchase, ownership, delivery, chartering, possession and operation, import to
or export from any country, return, sale or disposition of such Vessel or any
part thereof or upon the hire, receipts or earnings arising therefrom (other
than Owner Taxes);
(b) all liabilities, claims, proceedings (whether civil or criminal),
penalties, fines or other sanctions, judgments, charges, taxes, impositions,
liens, salvage, general average, costs and expenses whatsoever which may at any
time be made or claimed by the Initial Charterer or any employee, servant, agent
or sub-contractor, passenger, owner, shipper, consignee, and receiver of goods
or any third party (including governments or other authorities) or by their
respective dependents arising directly or indirectly in any manner out of the
design, construction, possession, management, repair, certification, manning,
provisioning, supply or servicing of the Vessel (whether at sea or not) or the
chartering thereof under the Initial Charter whether such liability, claims,
proceedings, penalties, fines, sanctions, judgments, charges, taxes,
impositions, liens, salvage, general average, costs or expenses may be
attributable to any defect in such Vessel or the design, construction, testing
or use thereof from any maintenance, service, repair, overhaul or otherwise and
regardless of when or where the same shall arise and whether or not such Vessel
or the relevant part thereof is in the possession or control of the Initial
Charterer (other than Owner Taxes); and
(c) any and all losses, damages and expenses which Owner may incur as a
result of any oil or other pollution damage resulting from the Initial
Charterer's operation of the Vessel under the Initial Charter, including, but
not limited to, such Owner's liability under OPA 90 or the laws of any other
jurisdiction relating to oil spills.
The Initial Charterer's indemnity under each Initial Charter shall
extend to claims of persons (including governments or other bodies whether
corporate or otherwise) who have suffered or allege that they have suffered
loss, damage or injury in connection with any thing done or not done by a
Vessel, including in connection with any oil or other substance emanating or
threatening to emanate from such Vessel, and shall extend to levies,
impositions, calls or contributions on or required to be made by the Owner
during or in respect of the term of the Initial Charter.
CHEVRON GUARANTEES
Chevron will fully and unconditionally guarantee the due and faithful
performance by the Initial Charterer under each Initial Charter of all of the
Initial Charterer's liabilities and responsibilities thereunder and under any
supplement, amendment, change or modification thereof agreed to by the Initial
Charterer.
GOVERNING LAW
Each Initial Charter and each Chevron Guarantee shall be governed by
and be construed in accordance with the federal laws of the United States of
America and the laws of the State of New York.
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NON-DISTURBANCE
Pursuant to the terms of each Initial Charter, each Owner agrees that
the related Mortgage and any other mortgage thereafter placed on the Vessel by
such Owner will contain a provision to the effect that throughout the term of
the related Initial Charter, so long as no Charter Event of Default shall have
occurred and be continuing and so long as the Initial Charterer shall have
performed its obligations thereunder, the Initial Charterer shall be entitled to
the quiet enjoyment of the Vessel.
DESCRIPTION OF THE EXCHANGE NOTES
GENERAL
The Exchange Notes will be issued, and the Existing Notes were issued,
under an Indenture dated as of December 1, 1996, among Golden State Petroleum,
the Owners and United States Trust Company of New York as Indenture Trustee. The
Exchange Notes have been registered under the Securities Act and, accordingly,
will not be subject to certain restrictions on transfer applicable to the
Existing Notes. Except (i) as provided in the previous sentence and (ii) that
the Existing Notes are entitled to the benefit of the Registration Rights
Agreement, the Exchange Notes have terms and conditions identical in all
material respects to those of the Existing Notes. Accordingly, unless
specifically stated to the contrary, the following description of the Notes
applies equally to the Existing Notes and the Exchange Notes, and the Exchange
Notes and the Existing Notes will be treated as one series for purposes of the
Indenture. The statements under this section relating to the Existing Notes, the
Exchange Notes and the Indenture are summaries of the material terms, but do not
purport to be a complete description, of the Indenture, the Existing Notes or
the Exchange Notes. Wherever particular provisions or definitions of the
Indenture, the Existing Notes, the Exchange Notes or terms defined therein are
referred to herein, such provisions or definitions are incorporated herein by
reference. Capitalized terms that are used but not otherwise defined herein have
the meanings assigned to them in the Indenture. For information on how to obtain
a copy of the Indenture, see "AVAILABLE INFORMATION."
The Exchange Notes are not obligations of, and are not guaranteed by,
the Initial Charterer or Chevron.
MATURITY, INTEREST AND PRINCIPAL
The Exchange Notes will be issued by Golden State Petroleum, acting
as agent for the Owners, in an aggregate principal amount of up to $127,100,000
and will be secured by the Collateral. See "--Security." The Exchange Notes are
not obligations of, and are not guaranteed by, the Initial Charterer or Chevron.
CONCURRENTLY WITH THE ISSUANCE OF THE EXISTING NOTES, SERIAL FIRST PREFERRED
MORTGAGE NOTES DUE FEBRUARY 1, 2000 TO 2006 IN THE AGGREGATE PRINCIPAL AMOUNT OF
$51,700,000 WERE PRIVATELY ISSUED BY GOLDEN STATE PETROLEUM, AS AGENT FOR THE
OWNERS. THE EXCHANGE NOTES AND THE UNTENDERED EXISTING NOTES, IF ANY, TOGETHER
WITH THE SERIAL NOTES AND THE ADDITIONAL NOTES WILL BE SECURED (SUBJECT TO THE
PRIORITY OF PAYMENT DESCRIBED HEREIN) BY THE COLLATERAL (AS DEFINED). THE
EXCHANGE NOTES AND THE UNTENDERED EXISTING NOTES, IF ANY, WILL BE SUBORDINATE IN
RIGHT OF PAYMENT TO THE SERIAL NOTES AND THE ADDITIONAL NOTES, IF ANY. THE
INDEBTEDNESS REPRESENTED BY ALL OF THE NOTES, INCLUDING THE EXCHANGE NOTES, HAS
FINANCED THE CONSTRUCTION AND ACQUISITION OF THE VESSELS AND EACH OF THE
EXCHANGE NOTES, THE UNTENDERED EXISTING NOTES, IF ANY, THE SERIAL NOTES, AND THE
ADDITIONAL NOTES, IF ANY, ARE ALL SECURED BY BOTH VESSELS. SEE "DESCRIPTION OF
THE EXCHANGE NOTES--TRUST ACCOUNTS," "--APPLICATION OF PROCEEDS" AND
"CAPITALIZATION OF THE OWNERS."
The Exchange Notes will be issued only in fully registered form,
without coupons, in denominations of $100,000 and multiples of $1,000 in excess
thereof. No service charge will be made to any Holder for any registration of
transfer or exchange of Exchange Notes, but Golden State
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Petroleum, as agent for the Owners, or the Indenture Trustee may require payment
of a sum sufficient to cover any taxes or other governmental charge payable in
connection therewith.
Initially, the Indenture Trustee will act as paying agent and registrar
with respect to the Exchange Notes. The Exchange Notes may be presented for
registration of transfer or exchange at the offices of the Registrar.
Payments by Golden State Petroleum, as agent of the Owners, in respect
of the Exchange Notes (including principal, sinking fund payments and optional
or mandatory prepayments) will be made at the office or agency maintained by
Golden State Petroleum by delivery of a check on the Payment Date against
surrender of such Exchange Notes and, at the option of Golden State Petroleum,
any interest on the Exchange Notes will be paid at the office or agency of
Golden State Petroleum by mailing a check to the Holder entitled thereto at the
address appearing in the Note Register; provided, that notwithstanding the
foregoing, all payments in respect of the Global Notes shall be made by wire
transfer of immediately available funds. Secondary trading in the Exchange Notes
will be required by DTC to be settled in immediately available funds.
Interest on the Exchange Notes will accrue from the Original Closing
Date at a rate per annum equal to 8.04%, and will be payable on the unpaid
principal amount thereof on each February 1 and August 1 (each, a "Payment
Date"), commencing August 1, 1997 to the Holders of record of the Exchange Notes
at the close of business on the record date (January 15 and July 15,
respectively) for such Payment Date. Interest on the Exchange Notes will accrue
from the most recent date to which interest has been paid or, if no interest has
been paid, from December 24, 1996. Interest will be computed on the basis of a
360-day year comprised of twelve 30-day months. Interest on overdue principal
and (to the extent permitted by law) on overdue installments of interest, will
accrue at the Default Rate. In certain circumstances, Special Interest will be
payable on the Existing Notes. See "Notice to Investors; Registration Rights."
Such Special Interest will be deemed to be interest on the Existing Notes for
all purposes under the Indenture.
The Exchange Notes will be subject to redemption through the operation
of a mandatory sinking fund on each Payment Date commencing August 1, 2007 (the
"First Term Note Sinking Fund Payment Date") to and including August 1, 2018,
according to the schedule of sinking fund redemption payments set forth below.
The sinking fund redemption price is 100% of the principal amount of Exchange
Notes being redeemed, together with accrued and unpaid interest to the date
fixed for redemption. The Exchange Notes will mature, and the final payment of
principal and interest on the Exchange Notes will be due, on February 1, 2019.
The amortization schedule will approximate level debt service through the
Maturity Date with an additional principal payment on the Maturity Date of
$10,995,000 per Vessel. The table below provides the scheduled sinking fund
redemption amounts and final principal payment on the Exchange Notes.
<TABLE>
<CAPTION>
Sinking Fund Redemption Amounts
and Final Principal Payment*
(Dollars in Thousands)
-------------------------------------------------------------------------------------
Scheduled
Payment Date Vessel A Vessel B Total
<S> <C> <C> <C>
August 1, 2007 $1,340.0 $ 0.0 $1,340.0
February 1, 2008 1,395.0 1,430.0 2,825.0
August 1, 2008 1,450.0 1,490.0 2,940.0
February 1, 2009 1,510.0 1,550.0 3,060.0
August 1, 2009 1,570.0 1,610.0 3,180.0
February 1, 2010 1,635.0 1,675.0 3,310.0
August 1, 2010 1,700.0 1,745.0 3,445.0
February 1, 2011 1,765.0 1,815.0 3,580.0
</TABLE>
-72-
<PAGE>
<TABLE>
<CAPTION>
Sinking Fund Redemption Amounts
and Final Principal Payment*
(Dollars in Thousands)
------------------------------------------------------------------------------
Scheduled
Payment Date Vessel A Vessel B Total
<S> <C> <C> <C>
August 1, 2011 1,840.0 1,885.0 3,725.0
February 1, 2012 1,910.0 1,960.0 3,870.0
August 1, 2012 1,990.0 2,040.0 4,030.0
February 1, 2013 2,070.0 2,125.0 4,195.0
August 1, 2013 2,150.0 2,210.0 4,360.0
February 1, 2014 2,240.0 2,295.0 4,535.0
August 1, 2014 2,330.0 2,390.0 4,720.0
February 1, 2015 2,420.0 2,485.0 4,905.0
August 1, 2015 2,520.0 2,585.0 5,105.0
February 1, 2016 2,620.0 2,690.0 5,310.0
August 1, 2016 2,725.0 2,800.0 5,525.0
February 1, 2017 2,835.0 2,910.0 5,745.0
August 1, 2017 2,950.0 3,025.0 5,975.0
February 1, 2018 3,070.0 3,150.0 6,220.0
August 1, 2018 3,190.0 3,275.0 6,465.0
February 1, 2019 14,325.0 14,410.0 28,735.0
-------- -------- --------
$63,550.0 $63,550.0 $127,100.0
========= ========= ==========
</TABLE>
If a Vessel is not delivered on or before 180 days from the Contractual
Delivery Date for such Vessel and the Contractual Delivery Date is not extended
as provided in the Building Contract or is a Total Loss or if there is a Net
Reduction in Construction Costs, Exchange Notes will be subject to redemption as
described under "--Mandatory Redemption." Thereafter, the sinking fund
redemption amounts and the final principal payment on the Maturity Date will be
recalculated to fully amortize the Allocated Principal Amount of the Mortgage
Notes of the remaining Vessel.
MANDATORY REDEMPTION
The Exchange Notes, together with the Serial Notes and the Additional
Notes, will be subject to mandatory redemption on a pro rata basis in an
aggregate principal amount equal to the Allocated Principal Amount of the
Mortgage Notes of a Vessel that is not delivered on or before 180 days from the
Contractual Delivery Date for such Vessel and the Contractual Delivery Date is
not extended as provided in the Building Contract or is a Total Loss at a
redemption price equal to 100% of the principal amount thereof, plus accrued and
unpaid interest (including default interest) to the date fixed for redemption.
For either Vessel, if the Initial Charterer exercises any of its
termination options, the related Owner does not enter into an Acceptable
Replacement Charter for such Vessel on or before the date which is one week
prior to the next sinking fund payment date for the Exchange Notes following the
effective date of such termination and such Vessel is sold, with the consent of
all the holders of the Exchange Notes then the outstanding Exchange Notes will
be redeemed in part, from the net proceeds of the sale of such Vessel and the
Allocable Portion of the Debt Service Reserve Fund, in an aggregate principal
amount of Exchange Notes equal to the Allocated Principal Amount of the Mortgage
Notes for such Vessel, at an aggregate redemption price equal to the sum of such
net proceeds and the Allocable Portion of the Debt Service Reserve Fund. In the
case of such a redemption, there can be no assurance that the Holders of the
Exchange Notes will not receive less than 100% of the principal of and interest
-73-
<PAGE>
on the Exchange Notes redeemed. If all Holders of the Exchange Notes do not
consent to such a sale, then the Manager will attempt to recharter the Vessel on
such terms as the Manager, in its discretion, deems appropriate, provided that
(i) such charter shall be at arms length, (ii) such charter shall have a
termination date no later than February 1, 2019 and (iii) the charter hire
payable thereunder during the term thereof is an amount sufficient to (A) make
the mandatory sinking fund payments, together with all interest payments on the
Allocated Principal Amount of the Mortgage Notes for such Vessel, (B) pay
Recurring Fees for such Vessel and the cost of insurance not maintained by the
charterer under such charter, (C) pay the Management Fees for such Vessel and
(D) pay the amount of fees and expenses of the Indenture Trustee allocable to
such Vessel.
If such a Net Reduction in Construction Cost occurs, the Owners shall
redeem Outstanding Exchange Notes and Serial Notes, on a pro rata basis, in an
aggregate principal amount equal to the Net Reduction in Construction Costs, at
a redemption price of 100% of the principal amount thereof, together with
accrued and unpaid interest on such Notes to be redeemed, to the date fixed for
redemption.
OPTIONAL REDEMPTION
The Exchange Notes may be redeemed in whole or in part, at the
direction of the Owners on any Payment Date on or after the later of (a) August
1, 1999 and (b) the Delivery Date of the last Vessel to be delivered at a
redemption price equal to 100% of the principal amount thereof plus accrued and
unpaid interest to the date fixed for redemption, provided that if (i) such
redemption occurs prior to February 1, 2018 and (ii) a Vessel is then subject to
the related Initial Charter or to an Acceptable Replacement Charter pursuant to
which the charterer thereunder is required to pay charter hire equal to or
greater than the Charter Hire payable by the Initial Charterer during the Fixed
Period, then the Make-Whole Premium shall be payable with respect to Mortgage
Notes in an amount equal to Allocated Principal Amount of the Mortgage Notes for
such Vessel. The Owners may not exercise such optional redemption if such
optional redemption would adversely affect the then applicable ratings on the
Serial Notes. In addition, Exchange Notes may be redeemed in part in an
aggregate principal amount equal to the Allocated Principal Amount of the Notes
for a Vessel if the Initial Charter for such Vessel is terminated and an
Acceptable Replacement Charter is not entered into, at a redemption price equal
to 100% of the principal amount of the Exchange Notes plus accrued and unpaid
interest to the date fixed for redemption. IF FUNDS ARE UNAVAILABLE THERE WILL
BE NO OPTIONAL REDEMPTION WITH RESPECT TO ANY OF THE MORTGAGE NOTES.
PURCHASE AT OPTION OF THE HOLDER
On August 1, 2014, (the "Optional Purchase Date") if neither Initial
Charter has been terminated by the Initial Charterer, each Holder of the
Exchange Notes will have a one-time option to cause the Owners to purchase all
or a part of such Holders' Exchange Notes at a purchase price equal to 100% of
the principal amount thereof plus accrued and unpaid interest through the date
of purchase. The Exchange Notes will be purchased in multiples of $1,000
principal amount, provided that the principal amount of Exchange Notes not so
purchased must be of an authorized denomination.
Golden State Petroleum, at the direction of the Owners, shall mail to
all holders of record of the Exchange Notes a notice of the availability or
non-availability of the purchase option on or before the 60th day prior to the
Optional Purchase Date. Golden State Petroleum shall deliver to the Indenture
Trustee a copy of such notice. To exercise the purchase right, Holders of
Exchange Notes must deliver, on or before the 30th day after the date of Golden
State Petroleum's notice, the Exchange Notes to be redeemed, duly endorsed for
transfer, together with the form provided with such notice duly completed, to
Golden State Petroleum (or an agent designated by Golden State Petroleum for
such purpose).
-74-
<PAGE>
SELECTION AND NOTICE
In the event that the Mortgage Notes are to be redeemed at any time in
part, the Indenture Trustee shall select Mortgage Notes to be redeemed ratably
from each holder such that the ratio of the principal amount of Mortgage Notes
to be redeemed from each holder to the aggregate principal amount of Mortgage
Notes held by such holder shall, as nearly as practicable and subject to
rounding, equal the ratio of the aggregate principal amount of Mortgage Notes to
be redeemed on such redemption date to the aggregate principal amount of
Mortgage Notes then outstanding, provided that Mortgage Notes may be redeemed in
multiples of $1,000 only. Notice of redemption shall be mailed by first class
mail by the Indenture Trustee at least 30 but not more than 60 days before the
redemption date to each holder of Mortgage Notes to be redeemed at its
registered address. If any Mortgage Note is to be redeemed in part only, the
notice of redemption that related to such Mortgage Note shall state the portion
of the principal amount thereof to be redeemed. On and after the redemption
date, interest will cease to accrue on Mortgage Notes or portions thereof called
for redemption.
REGISTRATION RIGHTS
In connection with the issuance of the Existing Notes, the Companies
entered into a Registration Rights Agreement with the Initial Purchaser pursuant
to which the Companies agreed, for the benefit of the Holders of the Existing
Notes, at the Companies' expense, to use their reasonable best efforts to cause
the Registration Statement of which this Prospectus forms a part to be declared
effective under the Securities Act.
Promptly after the Registration Statement of which this Prospectus
forms a part is declared effective, the Companies have agreed to commence the
Exchange Offer and to keep the Exchange Offer open for 20 DAYS WITH THE
RIGHT TO EXTEND THE EXCHANGE OFFER UP TO A MAXIMUM OF 60 days.
In the event that any changes in law or applicable interpretations of
the staff of the Commission do not permit the Companies to effect the Exchange
Offer or in certain other circumstances, the Companies have agreed, at the
Manager's expense, to (i) as promptly as practicable, and in any event on or
prior to 30 days after such filing obligation arises, file or cause to be filed
with the Commission the Shelf Registration Statement covering resales of the
Existing Notes, (ii) use their respective reasonable best efforts to cause the
Shelf Registration Statement to be declared effective under the Securities Act
on or prior to 90 days after the filing obligation arises and (iii) use their
respective reasonable best efforts to keep effective the Shelf Registration
Statement for up to two years after its effective date (or such shorter period
that will terminate when all the Existing Notes covered thereby have been sold
pursuant thereto or in certain other circumstances). The Companies have agreed
to use their respective reasonable best efforts in the event of the filing of a
Shelf Registration Statement, to provide to each Holder of the Existing Notes
covered by the Shelf Registration Statement copies of the prospectus that is a
part of the Shelf Registration Statement, notify each such Holder when the Shelf
Registration Statement for the Existing Notes has become effective and take
certain other actions as are required to permit unrestricted resales of the
Existing Notes. A Holder of Existing Notes that sells such Existing Notes
pursuant to the Shelf Registration Statement generally will be required to be
named as a selling securityholder in the related prospectus and to deliver a
prospectus to the purchaser, will be subject to certain of the civil liability
provisions under the Securities Act in connection with such sales and will be
bound by the provisions of the Registration Rights Agreement that are applicable
to such Holder (including certain indemnification obligations). In addition,
each Holder of the Existing Notes will be required to deliver certain
information to be used in connection with the Shelf Registration Statement in
order to have its Existing Notes included thereunder.
If the Exchange Offer is not consummated within 180 days of the initial
sale of the Existing Notes, Special Interest will accrue on the Existing Notes
from June 23, 1997 to the date the Exchange
-75-
<PAGE>
Offer is consummated, at a rate of 0.25% of the principal amount thereof per
annum, which Special Interest is payable semiannually in arrears on each Payment
Date. Interest on the Exchange Notes will accrue at a rate of 8.29% per annum to
reflect the 0.25% of additional Special Interest until the earlier of
consummation of the Exchange Offer or such time as the Exchange Notes may be
freely resold pursuant to Rule 144(k). Additional charter hire payments are or
will be payable under the Charters in an aggregate amount, in each case, equal
to such Special Interest.
Upon consummation of the Exchange Offer, the Companies generally will
have satisfied their obligations under the Registration Rights Agreement with
respect to registration of the Existing Notes and generally will have no further
obligation to register the Existing Notes.
A copy of the Registration Rights Agreement has been filed as an
exhibit to the Registration Statement of which this Prospectus forms a part.
SECURITY
Pursuant to the Indenture, the Indenture Trustee will hold the
Collateral (as defined below) for the benefit of the Holders of the Exchange
Notes and the holders of the Serial Notes and the Additional Notes. The Trust
Accounts will be established under the Indenture and maintained for the deposit
and application of Trust Funds as described under "--Trust Accounts" and
"--Application of Proceeds."
On the Original Closing Date, each Owner granted, assigned, bargained,
sold, transferred, conveyed, mortgaged, pledged and granted a security interest
to the Indenture Trustee, in trust for the benefit of the holders of the
Mortgage Notes all estate, right, title and interest of such Owner in, to and
under each of the following assets owned by such Owner on the Original Closing
Date, or acquired by such Owner thereafter (collectively, the "Original Closing
Date Collateral"): (i) each Building Contract and Technical Supervision
Agreement, in accordance with the terms and conditions of the related Assignment
of Building Contract; (ii) each Building Contract Guarantee, in accordance with
the terms and conditions of the related Assignment of Building Contract
Guarantee; (iii) each Initial Charter, in accordance with the terms and
conditions of the related Assignment of Charter; (iv) each Charter Supplement,
in accordance with the terms and conditions of the related Assignment of Charter
Supplement; (v) each Chevron Guarantee, in accordance with the terms and
conditions of the related Assignment of Chevron Guarantee; (vi) each Management
Agreement, in accordance with the terms of the related Assignment of Management
Agreement; (vii) each Issue of One Debenture; (viii) any additional security
agreement, assignment or mortgage document entered into by either Owner from
time to time in connection with the Indenture; (ix) all rights of such Owner to
receive payments of any kind, to execute any election or option or to give or
receive any notice, consent, waiver or approval under or in respect of any of
the foregoing documents and instruments; (x) all moneys and securities,
including the Trust Accounts and any Permitted Investments, paid or deposited or
required to be paid or deposited to or with the Indenture Trustee by or for the
account of such Owner, or otherwise pursuant to any term of any Security
Document, and held or required to be held by the Indenture Trustee under the
Indenture; and (xi) all income, payments and proceeds of the foregoing. All of
the issued and outstanding shares of such Owner will be pledged to the Indenture
Trustee for the benefit of the holders of the Mortgage Notes.
On the Delivery Date for a Vessel, the related Owner will grant,
assign, bargain, sell, transfer, convey, mortgage, pledge and grant a security
interest to the Indenture Trustee, in trust for the benefit of the holders of
the Mortgage Notes all estate, right, title and interest of such Owner in, to
and under each of the following assets owned by such Owner on the Original
Closing Date, or acquired by such Owner thereafter (collectively, the "Delivery
Collateral" and, collectively with the Original Closing Date Collateral, the
"Collateral"): (i) each Vessel, in accordance with the terms and conditions of
the related Mortgage; (ii) each Assignment of Earnings and Insurances; (iii) all
the charter hire, tolls, rents, issues, profits, products, revenues and other
income (including insurance, warranty and sale proceeds) of the
-76-
<PAGE>
property subjected or required to be subjected to the Lien of the Indenture, and
all of the estate, right, title and interest of such Owner in and to the same
and every part of said property; (iv) all requisition proceeds with respect to
either Vessel or any part thereof (to the extent of the Indenture Trustee's
interest therein, as mortgagee of such Vessel, pursuant to the terms of the
Mortgage) and all insurance proceeds with respect to either Vessel or any part
thereof (to the extent of the Indenture Trustee's interest therein, as mortgagee
of such Vessel, pursuant to the terms of the Mortgage); (v) any charter assigned
to the Indenture Trustee pursuant to the Assignment of Earnings and Insurances;
and (vi) all income, payments and proceeds of the foregoing.
The Holders of the Exchange Notes and the holders of the Serial Notes
and the Additional Notes will BE SECURED BY the Collateral (subject to the
priority of payment described herein). See "--Trust Accounts" and "--Application
of Proceeds."
During the term of the Indenture, if a Vessel is a Total Loss, the
Indenture Trustee is obligated to release such Vessel and the related Collateral
upon the Indenture Trustee's receipt of the Total Loss Payment.
PAYMENT DATES
On each Payment Date prior to the Delivery Date of a Vessel, the
Indenture Trustee shall withdraw funds from the Pre-Funding Account and deposit
such funds in the Revenue Account as described under "--Trust
Accounts--Pre-Funding Account." On each Payment Date, the Indenture Trustee
shall make the payments from amounts on deposit first in the Revenue Account and
with respect to the payments described in (a) through (e) and (g) below, then
from the Debt Service Reserve Fund, in each case to the extent of funds
available therein, in the priority set forth below:
(a) if the Delivery Date for a Vessel has occurred, to pay
Recurring Fees for such Vessel that the Manager certifies to the
Indenture Trustee are then due and payable up to an amount equal to
$50,000;
(b) (i) to pay all interest (including default interest) then
due and payable on the Serial Notes to the holders of the Serial Notes,
ratably in the proportion that the amount of such payment then due
under each Serial Note bears to the aggregate amount of the payments
then due under all such Serial Notes, (ii) to pay all interest
(including default interest) then due and payable on each Series of
Additional Notes to the holders of such Series of Additional Notes,
ratably in the proportion that the amount of such payment then due
under such Series of Additional Notes bears to the aggregate amount of
the payments then due under such Series of Additional Notes, and (iii)
to pay all interest (including default interest and Special Interest)
then due and payable on the Exchange Notes to the holders of the
Exchange Notes ratably in the proportion that the amount of such
payment then due under each Exchange Note bears to the aggregate amount
of the payments then due under all such Exchange Notes.
(c) (i) if such Payment Date is a maturity date of a Class of
Serial Notes, to the holders of such Class of Serial Notes, on a pro
rata basis in proportion to the principal balance of each Serial Note
then Outstanding within such Class, an amount equal to the aggregate
principal balance of such Class and (ii) to pay the aggregate sinking
fund redemption amount or amounts of principal then due and payable on
each Series of Additional Notes (as indicated on the Schedule of
Sinking Fund Payments attached to the related Supplemental Indenture as
such Schedule may be adjusted pursuant to the terms and subject to the
conditions of the Indenture) to the holders of such Series of
Additional Notes, ratably in the proportion that the amount of such
principal then due under each Additional Note of such Series bears to
the aggregate amount of such principal then due under such Series of
the Additional Notes;
-77-
<PAGE>
(d) commencing on the First Term Note Sinking Fund Payment
Date, to pay the aggregate sinking fund redemption amount or amounts of
principal then due and payable on the Exchange Notes to the holders of
the Exchange Notes ratably in the proportion that the amount of such
principal then due under each Exchange Note bears to the aggregate
amount of such principal then due under all the Exchange Notes;
(e) to pay Recurring Management Fees for each Vessel that are
then due and payable, to the extent not paid pursuant to (a) above;
(f) if the Delivery Date for a Vessel has occurred, to deposit
into the Operating Account the estimated Recurring Fees certified by
the Manager to the Indenture Trustee to become due and payable for such
Vessel prior to the next succeeding Payment Date;
(g) to pay to the Indenture Trustee, the Trustee Fees;
(h) to deposit into the Debt Service Reserve Fund, an amount
equal to the positive difference, if any, between (i) the Debt Service
Reserve Requirement and (ii) the amount then on deposit in the Debt
Service Reserve Fund (after giving effect to the distributions
described in (a) through (g) hereof);
(i) if the Delivery Date for a Vessel has occurred, to pay to
the Manager, the positive difference, if any, between (i) the
Management Fee then due and payable for such Vessel and (ii) the
aggregate amount paid pursuant to clauses (a), (e) and (f); and
(j) to deposit the excess, if any, into the Debt Service
Reserve Fund.
After the foregoing payments have been made, the Indenture Trustee will
invest (and reinvest, as applicable) any balance remaining in each of the Trust
Accounts in Permitted Investments that will mature on or before the next
succeeding Payment Date.
SAMPLE PAYMENT DATE - FEBRUARY 1, 2001 (AFTER THE DELIVERY DATE OF VESSEL A AND
VESSEL B):
THE FOLLOWING REPRESENTS AN EXAMPLE OF PAYMENTS TO BE MADE IN
ACCORDANCE WITH THE PRIORITIES DESCRIBED ABOVE, FOR THE PAYMENT DATE EXPECTED TO
OCCUR ON FEBRUARY 1, 2001. THE EXAMPLE BELOW ASSUMES DELIVERY OF BOTH VESSELS
AND THEIR OPERATION UNDER THE INITIAL CHARTERS. REINVESTMENT INCOME ON PERMITTED
INVESTMENTS IS BASED UPON AN ASSUMED RETURN OF 6.0% PER ANNUM, AS PERMITTED BY
ANY NATIONALLY RECOGNIZED STATISTICAL RATING AGENCY THEN RATING THE MORTGAGE
NOTES.
DEPOSITS INTO THE REVENUE ACCOUNT FROM AUGUST 1, 2000 TO AND INCLUDING JANUARY
31, 2001:
<TABLE>
<CAPTION>
<S> <C> <C> <C>
1. $9,928,723 - ($27,199 PER DAY FOR EACH VESSEL PAYABLE MONTHLY ON THE FIRST DAY
- --------------------------------------------------------------------------------------------------------------
OF EACH MONTH REPRESENTING CHARTER HIRE WITH RESPECT TO THE VESSELS).
---------------------------------------------------------------------
2. $323,393 - INCOME FROM THE INVESTMENT OF AMOUNTS HELD IN THE REVENUE
- -----------------------------------------------------------------------------------------------------
ACCOUNT AND THE DEBT SERVICE RESERVE FUND.
<CAPTION>
WITHDRAWALS FROM THE REVENUE ACCOUNT:
<S> <C> <C> <C>
1. $50,000 - RECURRING MANAGEMENT FEES FOR VESSEL A AND FOR VESSEL B;
- ----------------------------------------------------------------------------------------------------
2. $1,550,988 - ALL INTEREST THEN DUE AND PAYABLE ON THE SERIAL NOTES;
- --------------------------------------------------------------------------------------------------
</TABLE>
-78-
<PAGE>
<TABLE>
<CAPTION>
<S> <C> <C> <C>
3. $5,109,420 - ALL INTEREST THEN DUE AND PAYABLE ON THE EXCHANGE NOTES AND
- -------------------------------------------------------------------------------------------------------
THE UNTENDERED EXISTING NOTES;
4. $3,400,000 - THE AGGREGATE PRINCIPAL BALANCE OF THE SERIAL MORTGAGE
- --------------------------------------------------------------------------------------------------
NOTES DUE FEBRUARY 1, 2001;
5. $0 - RECURRING FEES FOR VESSEL A AND B TO THE EXTENT NOT PAID IN
- -------------------------------------------------------------------------------------------------------
(1) ABOVE;
6. $0 - ESTIMATED RECURRING FEES CERTIFIED BY THE MANAGER TO THE
- ----------------------------------------------------------------------------------------------------
INDENTURE TRUSTEE TO BECOME DUE AND PAYABLE FOR THE VESSELS
PRIOR TO AUGUST 1, 2001;
7. $0 - THE TRUSTEE FEES (NONE PAYABLE AT THAT TIME);
- -----------------------------------------------------------------------------------------
8. $0 - THE POSITIVE DIFFERENCE, IF ANY, BETWEEN (A) THE DEBT SERVICE
- ---------------------------------------------------------------------------------------------------------
RESERVE REQUIREMENT AND (B) THE AMOUNT THEN ON DEPOSIT IN
---------------------------------------------------------
THE DEBT SERVICE RESERVE FUND (AFTER GIVING EFFECT TO THE
---------------------------------------------------------
DISTRIBUTIONS DESCRIBED IN (1) THROUGH (7) ABOVE);
--------------------------------------------------
9. $0 - THE POSITIVE DIFFERENCE, IF ANY, BETWEEN (I) THE MANAGEMENT
- -------------------------------------------------------------------------------------------------------
FEE THEN DUE AND PAYABLE FOR THE VESSELS AND (II) THE
-----------------------------------------------------
AGGREGATE AMOUNT PAID PURSUANT TO CLAUSES (1), (6) AND (8)
----------------------------------------------------------
ABOVE; AND
----------
10. $141,709 - THE EXCESS, INTO THE DEBT SERVICE RESERVE FUND.
- -------------------------------------------------------------------------------------------
</TABLE>
TRUST ACCOUNTS
Pursuant to the terms of the Indenture, the Indenture Trustee is
obligated to establish and maintain each of the Trust Accounts in its name for
the benefit of the holders of the Mortgage Notes.
REVENUE ACCOUNT
There shall be deposited into the Revenue Account for each Vessel, (i)
any and all Charter Hire (including any Additional Charter Hire) payments under
the Initial Charters and any charter hire received pursuant to an Acceptable
Replacement Charter, (ii) any and all charter hire payments received by an Owner
under any other charters of the Vessels, (iii) any amounts transferred to the
Revenue Account from the Pre-Funding Account as described below under
"--Pre-Funding Account," and (iv) any and all income from the investment of
amounts held in the Revenue Account and the Debt Service Reserve Fund. Funds on
deposit in the Revenue Account shall be disbursed by the Indenture Trustee as
described above under "--Payment Dates."
DEBT SERVICE RESERVE FUND
On each Payment Date, the amounts described above in (h) and (j) shall
be withdrawn from the Revenue Account by the Indenture Trustee and deposited
into the Debt Service Reserve Fund. If any Recurring Fees, fees and expenses of
the Indenture Trustee, sinking fund payment, payment of principal, premium (if
any) or interest on the Mortgage Notes is due and payable and the moneys
available in the Revenue Account are insufficient for such payment, the
Indenture Trustee shall withdraw cash from the Debt Service Reserve Fund for the
purpose of making up such deficiency. In addition, if the Initial Charter for
such Vessel is terminated on any Optional Termination Date and the related Owner
does not
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<PAGE>
enter into an Acceptable Replacement Charter and the Vessel is sold pursuant to
the terms of the Management Agreement and the Indenture, then the Allocable
Portion of the Debt Service Reserve Fund shall be released to effectuate the
redemption of the Mortgage Notes.
OPERATING ACCOUNT
Funds deposited into the Operating Account on each Payment Date will be
disbursed by the Indenture Trustee, from time to time, to pay the Recurring Fees
as such amounts become due and payable upon presentation of invoices therefor by
the Manager pursuant to the Management Agreement.
CASUALTY ACCOUNT
The Indenture Trustee will deposit into the Casualty Account any
insurance proceeds payable to the Indenture Trustee in connection with the
occurrence of a Total Loss to either Vessel. Funds deposited into the Casualty
Account in respect of a Total Loss of a Vessel will be disbursed by the
Indenture Trustee in the following order of priority: first, an amount equal to
the related Total Loss Payment will be deposited into the Termination Account
and second, the remainder, if any, will be remitted to the Initial Charterer.
TERMINATION ACCOUNT
There shall be deposited for each Vessel if the related Vessel is a
Total Loss, the Total Loss Payment, payable under the related Initial Charter or
Acceptable Replacement Charter. Any such amounts deposited into the Termination
Account will be disbursed by the Indenture Trustee in accordance with the
Indenture. See "--Mandatory Redemption."
COLLATERAL ACCOUNT
The amount payable by the Initial Charterer under the Initial Charter
upon the occurrence of a Charter Event of Default, the cash proceeds of any sale
of, or other realization upon, all or any part of the Collateral upon the
exercise by the Indenture Trustee of any of the rights and remedies described
below (see "--Indenture Remedies"), any other amounts received by the Indenture
Trustee during the continuation of an Indenture Event of Default not otherwise
applied as indicated under "--Payment Dates" and any other amounts received by
the Indenture Trustee pursuant to any of the Security Documents for which the
Indenture does not specify another Trust Account into which such amount is to be
deposited, will be deposited into the Collateral Account.
PRE-FUNDING ACCOUNT
There was deposited into the Pre-Funding Account on the Original
Closing Date an amount equal to $60,003,347 by Golden State Petro (IOM I-A) PLC
and $61,886,728 by Golden State Petro (IOM I-B) PLC and on January 6, 1997 (the
date of the delivery of the Delayed Delivery Existing Notes) an amount equal to
$26,730,000 by Golden State Petro (IOM I-A) PLC and $26,730,000 by Golden State
Petro (IOM I-B) PLC. In addition, if and to the extent any proceeds become
payable by the Builder or the Building Contract Guarantor pursuant to any
Building Contract or Building Contract Guarantee, such amounts will be deposited
into the Pre-Funding Account. On each Payment Date prior to the Delivery Date
for each Vessel, the Indenture Trustee shall withdraw from the Pre-Funding
Account an amount equal to the interest accrued on the Allocated Principal
Amount of the Notes for such Vessel and shall deposit such amount in the Revenue
Account. On each Installment Date for each Vessel, the Indenture Trustee shall,
provided that no material default under the related Building Contract exists,
withdraw from the Pre-Funding Account an amount equal to the installment then
due and shall remit such amount to the Builder as an installment payment of the
purchase price of the related Vessel. On the Delivery Date for
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each Vessel, the Indenture Trustee shall, provided that the conditions precedent
set forth in the Indenture shall have been satisfied, withdraw from the
Pre-Funding Account (i) an amount equal to the final installment of the Purchase
Price and shall remit such amount to the Builder and (ii) an amount equal to the
fees and expenses incurred in connection with the recordation and filing of the
related Security Documents in the jurisdiction where such Vessel will be
registered and shall remit it to the Manager. If the Delivery Date of a Vessel
does not occur on or before 180 days from the Contractual Delivery Date for such
Vessel and the Contractual Delivery Date is not extended as provided in the
Building Contracts or if an Owner rejects or cancels the related Building
Contract pursuant to the terms and conditions set forth therein, then the
Indenture Trustee (i) shall withdraw from the Pre-Funding Account an amount
equal to the sum of (A) the Allocated Principal Amount of the Notes for such
Vessel and (B) all interest accrued and unpaid with respect to such Notes and
(ii) shall redeem the Allocated Principal Amount of the Notes for such Vessel,
first with respect to the Serial Notes comprising such Notes, and then of the
Exchange Notes comprising such Notes at a redemption price of 100% of the
principal amount thereof plus accrued and unpaid interest through the date of
redemption. If and to the extent that payments due under the Building Contract
or Building Contract Guarantee are not paid when due, the aggregate principal
amount of Notes to be redeemed may be less than the Allocated Principal Amount
thereof. If such unpaid amounts under the Building Contract or Building Contract
Guarantee are subsequently paid, then the balance of such Allocated Principal
Amount of Notes shall be redeemed at a redemption price of 100% of the principal
amount thereof plus accrued and unpaid interest through the date of redemption.
Amounts held in the Pre-Funding Account on such 180th date will be sufficient to
redeem the Serial Notes allocable to such Vessel together with all accrued and
unpaid interest thereon. The Owners may not extend past such 180th day if such
extension would adversely affect the then current ratings of the Notes.
PERMITTED INVESTMENTS
Amounts deposited in the Trust Accounts may be invested by the
Indenture Trustee in Permitted Investments. Permitted Investments include any of
the following:
(a) direct general obligations of, or obligations fully and
unconditionally guaranteed as to the timely payment of principal and
interest by, the United States or any agency or instrumentality
thereof, provided such obligations are backed by the full faith and
credit of the United States, Federal Housing Administration debentures,
Federal Home Loan Mortgage Corporation senior debt obligations or
Federal National Mortgage Association senior debt obligations, but
excluding any of such securities whose terms do not provide for payment
of a fixed dollar amount upon maturity or call for redemption;
(b) federal funds, certificates of deposit, time and demand
deposits and banker's acceptances (having original maturities of not
more than one year) of any bank or trust company incorporated under the
laws of the United States or any state thereof, provided that the
short-term debt obligations of such bank or trust company at the dates
of acquisition thereof have been rated at least "A-1" or "P-1" (or the
equivalent) or better by Standard & Poor's and Moody's, respectively;
(c) commercial paper (having original maturities of not more
than one year) rated at least "A-1" or "P-1" (or the equivalent) or
better by Standard & Poor's and Moody's, respectively; or
(d) guaranteed investment contracts, investment agreements or
similar agreements initially rated at least "A" or "A-2" or better by
Standard & Poor's or Moody's, respectively, that are treated as
indebtedness for United States federal income tax purposes;
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provided, however, that in the event amounts on deposit in the Pre-Funding
Account or the Revenue Account (until the latest maturity date of the Serial
Notes) are invested pursuant to clauses (b), (c) or (d), then such investments
must initially be rated at least "AA" or "Aa" (or the equivalent) or better by
Standard & Poor's or Moody's, respectively.
For purposes of determining whether a Permitted Investment matures on
or before the next succeeding Payment Date, each payment received under a
Permitted Investment described in clause (d) above will be considered to be the
maturity of such Permitted Investment. A guaranteed investment contract,
investment agreement or similar agreement that constitutes a senior unsecured
long-term debt obligation of a Person shall be deemed to have the same rating as
such Person's other senior unsecured long-term debt obligations, if any, that
are rated by a Rating Agency. Notwithstanding the foregoing, "Permitted
Investments" do not include "stripped securities" or investments which
contractually may return less than the purchase price therefor.
CERTAIN COVENANTS
The Indenture will contain, among other things, the following
covenants:
(a) Golden State Petroleum and each Owner will not create,
incur, assume or issue, directly or indirectly, guarantee or in any
manner become, directly or indirectly, liable for or with respect to
the payment of any Indebtedness, except for their obligations under the
Indenture, the Security Documents and the Mortgage Notes.
(b) Golden State Petroleum and each Owner will not (i)
commence any case, proceeding or other action under any existing or
future bankruptcy, insolvency or similar law seeking to have an order
for relief entered with respect to it, or seeking reorganization,
arrangement, adjustment, wind-up, liquidation, dissolution, composition
or other relief with respect to it or its debts, (ii) seek appointment
of a receiver, trustee, custodian or other similar official for it or
any part of its assets, (iii) make a general assignment for the benefit
of creditors or (iv) take any action in furtherance of, or consenting
or acquiescing in, any of the foregoing.
(c) Neither Owner will make a Restricted Payment.
(d) Neither Owner will make any capital contributions,
advances or loans to, or investments or purchases of capital stock in,
any Person.
(e) Other customary covenants regarding changes in a Vessel's
registration jurisdiction, maintenance of existence, payment of taxes,
maintenance of books and records, right of the Indenture Trustee to
inspect the property, compliance with laws, opinions of counsel
regarding the maintenance of recordation and filings, and providing
further assurances and delivery of financial statements, compliance
certificates, reports and notices of certain material subsequent
events.
INDENTURE EVENTS OF DEFAULT
The following constitute Indenture Events of Default:
(a) If any Mortgage Event of Default shall have occurred and
be continuing.
(b) A default in the payment of any sinking fund installments,
or all or any part of the principal of, premium, if any, or interest on
any of the Mortgage Notes as and when such payment becomes due and
payable either at maturity, upon any redemption, by declaration or
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otherwise and, with respect to any such payments other than payments on
maturity, the continuance of such default for a period of two Business
Days.
(c) A failure on the part of Golden State Petroleum or either
Owner duly to observe or perform in any material respect any of the
other agreements or covenants on the part of Golden State Petroleum or
such Owner contained in any Mortgage Note, the Indenture, any Security
Document or any document or certificate delivered pursuant thereto for
a period of 30 days after the earlier of (i) actual knowledge by Golden
State Petroleum or either Owner of such failure and (ii) the date on
which written notice specifying such failure and stating that such
notice is a "Notice of Default" under the Indenture has been given by
registered or certified mail, return receipt requested, to Golden State
Petroleum and the Owners by the Indenture Trustee, or to Golden State
Petroleum, the Owners and the Indenture Trustee by the holders of at
least 25% in aggregate principal amount of the Mortgage Notes at the
time outstanding.
(d) If any representation or warranty of Golden State
Petroleum or either Owner made in the Indenture, any Security Document
or any document or certificate delivered pursuant thereto proves to
have been inaccurate in any material respect when made, remains
inaccurate in such material respect for a period of 30 days after the
earlier of (i) actual knowledge by Golden State Petroleum or either
Owner of such inaccuracy and (ii) the date on which written notice
specifying such inaccuracy and stating that such notice is a "Notice of
Default" under the Indenture has been given by registered or certified
mail, return receipt requested, to Golden State Petroleum and the
Owners by the Indenture Trustee, or to Golden State Petroleum, the
Owners and the Indenture Trustee by the holders of at least 25% in
aggregate principal amount of the Mortgage Notes at the time
outstanding.
(e) If a court having jurisdiction in the premises shall enter
a decree or order for relief in respect of Golden State Petroleum or
either Owner in an involuntary case under any applicable bankruptcy,
insolvency or other similar law now or hereafter in effect, or
appointing a receiver, liquidator, assignee, custodian, trustee,
sequestrator (or similar official) of Golden State Petroleum or such
Owner or for any substantial part of its property or ordering the
winding up or liquidation of its affairs, and such decree or order
shall remain unstated and in effect for a period of 60 consecutive
days.
(f) If Golden State Petroleum or either Owner shall commence a
voluntary case under any applicable bankruptcy, insolvency or other
similar law now or hereafter in effect, or consent to the entry of an
order for relief in an involuntary case under any such law, or consent
to the appointment or taking possession by a receiver, liquidator,
assignee, custodian, trustee, sequestrator (or similar official) of
Golden State Petroleum or such Owner or for any substantial part of its
property, or make any general assignment for the benefit of creditors.
(g) If a Charter Event of Default shall have occurred and be
continuing or if either of the Initial Charters is repudiated by the
Initial Charterer in writing or in a public statement or filing or
ceases to be in full force and effect, other than pursuant to the terms
thereof.
(h) If any Security Document is repudiated by an Owner in
writing or in a public statement or filing or ceases to be in full
force and effect or any of such Security Documents ceases to give the
Indenture Trustee, in any material respect, the Liens, rights, powers
and privileges purported to be created thereby, in each case other than
pursuant to the terms thereof.
(i) If the Builders fail to make any payment when due under
either Building Contract and such payment is not made pursuant to the
Building Contract Guarantee and the continuance of such default for a
period of two Business Days.
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(j) If an event of default shall have occurred and be
continuing under the Chevron Guarantees or if either of the Chevron
Guarantees is repudiated by Chevron in writing or in a public statement
or filing or ceases to be in full force and effect, other than pursuant
to the terms thereof.
(k) A breach of the Companies' obligations under the
Registration Rights Agreement to use reasonable best efforts to cause
the Registration Statement of which this Prospectus forms a part or the
Shelf Registration Statement, as the case may be, to become effective
and the continuance of such breach for a period of 30 days after the
date the Companies receive written notice thereof.
INDENTURE REMEDIES
If an Indenture Event of Default (other than an Indenture Event of
Default specified in clause (e) or (f) above) occurs and is continuing, then and
in each and every such case, unless the principal of all of the Mortgage Notes
shall have already become due and payable, either the Indenture Trustee or the
holders of not less than 25% in aggregate principal amount of the Mortgage Notes
then outstanding under the Indenture, by notice in writing to Golden State
Petroleum and the Owners (and to the Indenture Trustee if given by the
Noteholders), may declare the entire principal of all the Mortgage Notes and the
interest accrued thereon, to be due and payable immediately, and upon any such
declaration the same shall become immediately due and payable. If an Indenture
Event of Default specified in clause (e) or (f) above occurs and is continuing,
then and in each and every such case, unless the principal of all of the
Mortgage Notes shall have already become due and payable, the entire principal
of all the Mortgage Notes and the interest accrued thereon, shall immediately
and without further act become due and payable, without presentment, demand,
protest or notice by the Indenture Trustee or any holder of Mortgage Notes.
After a declaration of acceleration and before any judgment or decree for the
payment of money due has been obtained or entered, if Golden State Petroleum
shall pay or deposit with the Indenture Trustee a sum sufficient to pay all
matured sinking fund installments in respect of the Mortgage Notes, all matured
installments of interest upon all of the Mortgage Notes and the principal of all
the Mortgage Notes that shall have become due otherwise than by acceleration
(with interest on such principal and, to the extent permitted by law, on overdue
installments of interest, at the same rate for each Mortgage Note as the rate of
interest specified in such Mortgage Note, to the date of such payment or
deposit) and all amounts sufficient to cover reasonable compensation to the
Indenture Trustee and each predecessor Indenture Trustee, their respective
agents, attorneys and counsel, and all other expenses and liabilities incurred,
and all advances made, by the Indenture Trustee and any predecessor Indenture
Trustee except as result of bad faith or negligence, under the Indenture, and if
any and all Indenture Events of Default, other than the non-payment of the
principal of the Mortgage Notes that shall become due by acceleration, shall
have been cured, waived or otherwise remedied, then the holders of a majority in
aggregate principal amount of outstanding Mortgage Notes may, by written notice,
rescind and annul such declaration of acceleration and its consequences, but no
such waiver, rescission and annulment shall extend to or shall affect any
subsequent default or shall impair any right consequent thereon. If an Indenture
Event of Default has occurred and is continuing, the Indenture Trustee may
pursue any available remedy by proceeding at law or in equity to collect the
payment of principal of and interest on the Mortgage Notes or to enforce the
performance of any provision of the Mortgage Notes or the Indenture.
The Indenture contains certain covenants pursuant to which the
Indenture Trustee will agree that, prior to the date which is one year and one
day after the payment in full of all outstanding Mortgage Notes, it will not
institute against, or join any other person in instituting against, Golden State
Petroleum or either Owner any bankruptcy, reorganization, arrangement,
insolvency or liquidation proceeding or other similar proceeding under the laws
of the United States or any other applicable jurisdiction. No holder has any
right to institute any proceeding at law or in equity or in bankruptcy or
otherwise with
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respect to the Indenture or any remedy thereunder, unless the holders of the
Mortgage Notes of at least 25% in aggregate principal amount of the outstanding
Mortgage Notes have made written request, and offered reasonable indemnity, to
the Indenture Trustee to institute such proceeding as Indenture Trustee, the
Indenture Trustee has failed to institute such proceeding within 60 days after
receipt of such notice and the Indenture Trustee has not within such 60-day
period received directions inconsistent with such written request by the holders
of a majority in aggregate principal amount of the outstanding Mortgage Notes.
Such limitations do not apply, however, to a suit instituted by a holder of a
Mortgage Note for the enforcement of the payment of the principal of or accrued
interest on, such Mortgage Note on or after the respective due dates expressed
in such Mortgage Note.
The holders of a majority in aggregate principal amount of the
outstanding Mortgage Notes have the right to direct the time, method and place
of conducting any proceeding for any remedy available to the Indenture Trustee,
or exercising any trust or power conferred on the Indenture Trustee by the
Indenture. The Indenture provides that, subject to the duty of the Indenture
Trustee during a default to act with the required standard of care, the
Indenture Trustee is entitled to reasonable security or indemnity from the
holders before proceeding to exercise any right or power under the Indenture at
the request of the holders. The Indenture Trustee may decline to follow any such
directions from the holders if it determines that the actions so directed would
result in liability to the Indenture Trustee, would be unduly prejudicial to
holders not joining in such direction or would be unlawful.
So long as an Indenture Event of Default has occurred and is
continuing, the Indenture Trustee (to the extent directed to do so by the
appropriate holders, as discussed above), whether in its own right or as
assignee of the Owners, will proceed to exercise all the powers, remedies and
rights available under the Indenture and the Security Documents, including,
without limitation, taking possession of and selling the Collateral thereunder
or any portion thereof or rights or interests therein, at one or more public or
private sales called and conducted in any manner permitted by law and, during
the continuance of a Mortgage Event of Default, exercising any of its remedies
under such Mortgage.
Pursuant to the terms of the Initial Charters and the Mortgages, the
right of the Indenture Trustee to enforce each Mortgage will be subject to the
right of the Initial Charterer to the continued use and operation of the related
Vessel under such Initial Charter so long as no Charter Event of Default shall
have occurred and be continuing under such Initial Charter and so long as the
Initial Charterer is performing its obligations thereunder.
APPLICATION OF PROCEEDS
Pursuant to the Indenture, all amounts in the Trust Accounts
distributable pursuant to an Indenture Event of Default will be distributed on
any distribution date fixed by the Indenture Trustee or at the request of the
Majority Noteholders in the following order of priority, to the extent of funds
available therein:
First: to the Indenture Trustee, an amount equal to any due and unpaid
trustee fees and all reasonable expenses and charges incurred by or on behalf of
the Indenture Trustee in connection with the ascertainment or protection of its
rights and the pursuance of its remedies under the Indenture or under any of the
Security Documents (including, without limitation, the reasonable fees and
disbursements of counsel);
Second: to the holders of the Serial Notes and the holders of the
Additional Notes, on a pro rata basis, an amount equal to the due and unpaid
interest (including default interest) on the Serial Notes and Additional Notes
then outstanding;
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Third: to the Holders of the Exchange Notes an amount equal to the due
and unpaid interest (including default interest) on the Exchange Notes then
outstanding;
Fourth: to the holders of each Class of Serial Notes and the holders of
the Additional Notes, on a pro rata basis, an amount equal to the due and unpaid
principal of the Serial Notes and Additional Notes then outstanding;
Fifth: to the Holders of the Exchange Notes an amount equal to the due
and unpaid principal on the Exchange Notes then outstanding; and
Sixth: to the Owners or their respective successors or assigns or to
whomsoever may be lawfully entitled to receive the same or as a court of
competent jurisdiction may direct, the excess.
BOOK-ENTRY REGISTRATION
The Existing Notes sold to Qualified Institutional Buyers were, and the
Exchange Notes will be, originally issued in fully registered book-entry form,
and each of the Existing Notes and the Exchange Notes will be represented by a
global note (each a "Global Note") registered in the name of Cede & Co. ("Cede")
as the nominee of the Depository Trust Company ("DTC"). All references to
actions by holders shall, in respect of the applicable Global Note, refer to
actions taken by DTC upon instruction from DTC Participants (as defined below),
and all references herein to distributions, notices, reports and statements to
holders shall refer, as the case may be, to distributions, notices, reports and
statements to DTC or Cede, as the registered holder of the Exchange Notes or to
DTC Participants for distribution to Beneficial Owners in accordance with DTC
procedures. DTC has advised Golden State Petroleum that DTC is a limited-purpose
trust company organized under the laws of the State of New York, a member of the
Federal Reserve System, a "clearing corporation" within the meaning of the New
York Uniform Commercial Code, and a "clearing agency" registered pursuant to the
provisions of Section 17A of the Exchange Act. DTC accepts securities for
deposit from its participating organizations ("Participants") and facilitates
the clearance and settlement of securities transactions between Participants in
such securities through electronic book-entry changes in accounts of
Participants, thereby eliminating the need for physical movement of
certificates. Participants include securities brokers and dealers, banks and
trust companies and clearing corporations and may include certain other
organizations. Indirect access to the DTC system is also available to others
such as banks, brokers, dealers and trust companies that clear through or
maintain a custodial relationship with a Participant, either directly or
indirectly ("Indirect Participants").
Golden State Petroleum expects that pursuant to procedures established
by the DTC, (i) upon deposit of the applicable Global Note, DTC will credit the
accounts of Participants designated by the Exchange Agent with portions of the
principal amount of the applicable Global Note and (ii) ownership of the
Exchange Notes evidenced by the applicable Global Note will be shown on, and the
transfer of ownership thereof will be effected only through, records maintained
by DTC (with respect to the interests of DTC's Participants), DTC's Participants
and DTC's Indirect Participants. Consequently, the ability to transfer Notes
evidenced by the applicable Global Note will be limited to such extent.
So long as Cede is the registered owner of any Exchange Notes, Cede
will be considered the sole holder under the Indenture of any Exchange Notes
evidenced by the applicable Global Note. Beneficial owners of Exchange Notes
evidenced by the applicable Global Note will not be considered the owners or
holders thereof under the Indenture for any purpose, including with respect to
the giving of any directions, instructions or approvals to the Indenture Trustee
thereunder. Neither Golden State Petroleum nor the Indenture Trustee will have
any responsibility or liability for any aspect of the records of the DTC or for
maintaining, supervising or reviewing any records of the DTC relating to the
Exchange Notes. Payments in respect of the principal of, premium, if any, and
interest, on any Exchange Notes registered
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in the name of Cede on the applicable record date will be payable by the
Indenture Trustee to or at the direction of Cede in its capacity as the
registered holder under the Indenture. Under the terms of the Indenture, Golden
State Petroleum, as agent of the Owners, and the Indenture Trustee may treat the
persons in whose names Exchange Notes including the applicable Global Note, are
registered as the owners thereof for the purpose of receiving such payments.
Consequently, none of Golden State Petroleum, the Owners or the Indenture
Trustee has or will have any responsibility or liability for the payment of such
amounts to beneficial owners of Exchange Notes. Golden State Petroleum believes,
however, that it is currently the policy of the DTC to immediately credit the
accounts of the relevant Participants with such payments, in amounts
proportionate to their respective holdings of beneficial interests in the
relevant security as shown on the records of the DTC. Payments by DTC's
Participants and DTC's Indirect Participants to the beneficial owners of
Exchange Notes will be governed by standing instructions and customary practice
and will be the responsibility of DTC's Participants or DTC's Indirect
Participants. Subject to certain conditions, any beneficial owner of the
applicable Global Note may obtain, through the Direct Participant through which
such beneficial owner directly or indirectly holds beneficial interest, a
certificated Exchange Note or Exchange Notes, in exchange for all or part of
such beneficial interest. In addition, the Exchange Notes will be issued in
fully registered, certificated form to beneficial owners, or their nominees,
rather than to DTC or its nominee, if DTC advises the Indenture Trustee in
writing that it is no longer willing or able or qualified to discharge properly
its responsibilities as depository with respect to the Exchange Notes and Golden
State Petroleum, as agent of the Owners, is unable to locate a qualified
successor or if Golden State Petroleum, as agent for the Owners, elects to
terminate the book-entry system through DTC. In such event, the Indenture
Trustee will notify all beneficial owners through DTC Participants of the
availability of such certificated Exchange Notes. Upon surrender by DTC of the
registered global certificates representing the Exchange Notes and receipt of
instructions for re-registration, the Indenture Trustee will re-issue the
Exchange Notes in certificated form to beneficial owners or their nominees. Such
certificated Exchange Notes will be transferable and exchangeable at the office
of the Indenture Trustee upon compliance with the requirements set forth in the
Indenture.
TRANSFER, REGISTRATION AND EXCHANGE
A holder may transfer or exchange the Mortgage Notes in accordance with
the procedures set forth in the Indenture. The Registrar, which initially shall
be the Indenture Trustee, may require a holder, among other things, to furnish
appropriate endorsements and transfer documents, and to pay any taxes and fees
required by law or permitted by the Indenture. The Registrar is not required to
transfer or exchange any Mortgage Note selected for redemption. Also, the
Registrar is not required to transfer or exchange any Mortgage Note for a period
of 15 days before a selection of the Mortgage Notes to be redeemed or between a
record date and the next succeeding Payment Date. The registered holder of a
Mortgage Note will be treated as the owner of such Mortgage Note for all
purposes. No service charge will be imposed for any registration of transfer or
exchange, but payment of a sum sufficient to cover any transfer tax or other
governmental charge may be required.
MODIFICATION OF THE INDENTURE
The Indenture provides that Golden State Petroleum, as agent for the
Owners, and when authorized by the Owners, and the Indenture Trustee may enter
into a supplemental indenture to amend the Indenture or the Mortgage Notes
without the consent of any holder: (a) to convey, transfer, assign, mortgage or
pledge to the Indenture Trustee as security for the Mortgage Notes any property
or assets, (b) to cure any ambiguity, defect or inconsistency, (c) to comply
with the requirements of the Commission in order to maintain the qualification
of the Indenture under the Trust Indenture Act or (d) to issue a Series of
Additional Notes. The Indenture and the rights and obligations of Golden State
Petroleum, the Owners, the Indenture Trustee and the holders may be modified or
amended at any time with the consent of the holders of Mortgage Notes of not
less than a majority in aggregate principal
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amount of all outstanding Mortgage Notes; provided that without the consent of
the holder of each Mortgage Note affected, no such modification or amendment
shall, among other things, change the final maturity or redemption date thereof,
reduce the rate of interest thereon, extend the time of payment of interest,
reduce the principal amount thereof, reduce any amount payable upon the
redemption thereof, change the sinking fund redemption amount, or impair the
right to institute suit for the enforcement of any such payment, or reduce the
percentage of the holders of such Mortgage Notes whose consent is required for
any such modification or amendment or modify any provisions of the Indenture
relating to the amendment thereof or the creation of a supplemental indenture
(unless the change increases the rights of the holders).
SATISFACTION AND DISCHARGE
The Indenture will be discharged and will cease to be of further effect
as to all outstanding Mortgage Notes when either (a) the Owners shall have paid
or caused to be paid the principal of, premium, if any, and interest on all the
Mortgage Notes outstanding, as and when the same shall have become due and
payable, (b) all such Mortgage Notes theretofore authenticated and delivered
(except lost, stolen or destroyed Mortgage Notes which have been replaced or
paid and Mortgage Notes for whose payment money has theretofore been deposited
in trust or segregated and held in trust by the Indenture Trustee and thereafter
repaid or discharged from such trust) have been delivered to the Indenture
Trustee for cancellation; or (c)(i) all such Mortgage Notes not theretofore
delivered to the Indenture Trustee for cancellation have become due and payable
and the Owners irrevocably deposited or caused to be deposited with the
Indenture Trustee as trust funds in trust for the purpose an amount of cash or
direct obligations of the United States, backed by its full faith credit,
maturing as to principal and interest in such amounts and at such times as will
insure the availability of cash sufficient to pay and discharge the entire
indebtedness on the Mortgage Notes not theretofore delivered to the Indenture
Trustee for cancellation, for principal, premium, if any, and accrued interest
to the date of such deposit; (ii) the Owners have paid all sums payable by them
under the Indenture; and (iii) the Owners have delivered irrevocable
instructions to the Indenture Trustee to apply the deposited money toward the
payment of the Mortgage Notes at maturity or the redemption date, as the case
may be. In addition, the Owners must deliver an Officers' Certificate and an
opinion of counsel stating that all conditions precedent to satisfaction and
discharge have been complied with.
INDENTURE TRUSTEE
United States Trust Company of New York will serve as Indenture Trustee
under the Indenture.
GOVERNING LAW
The Indenture and each of the Security Documents, other than the
Mortgages and the Issue of One Debenture, provide that they will be governed by
the laws of the State of New York.
CONSENT TO JURISDICTION AND SERVICE
Pursuant to the Indenture and the Security Documents of Golden State
Petroleum and each of the Owners will irrevocably appoint CT Corporation System
as its respective agent for service of process in any suit, action or proceeding
with respect to the Indenture, the Notes or the Security Documents to which it
may be a party brought in any federal or state court located in New York City
and will submit to such jurisdiction.
SERIAL NOTES
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Pursuant to the Indenture, Golden State Petroleum, acting as agent for
the Owners, issued the Serial Notes in the aggregate principal amount of
$51,700,000. The Serial Notes are secured, with the Exchange Notes, the
untendered Existing Notes, if any, and the Additional Notes, if any, by the
Collateral. Interest on the Serial Notes is payable on the unpaid principal
amount thereof on each February 1 and August 1, commencing August 1, 1997, to
the Holders of record of the Serial Notes at the close of business on the record
date (January 15 and July 15, respectively) for such Payment Date. Interest on
the Serial Notes will accrue from the most recent date to which interest has
been paid or, if no interest has been paid, from December 24, 1996. Interest is
computed on the basis of a 360-day year comprised of twelve 30-day months.
Interest on overdue principal and (to the extent permitted by law) on overdue
installments of interest, will accrue at the Default Rate.
Each Series of Serial Notes was issued in the aggregate principal
amount set forth below for the respective Maturity Date thereof, and is payable
in full on February 1 of the indicated year (the Maturity Date for such series
of Serial Notes). Set forth below is the Allocated Principal Amount of the
Serial Notes payable on each Maturity Date for each Vessel and the aggregate
amount of such Allocated Principal Amount payable on each Maturity Date.
Aggregate
Interest Rate Amount
2000 Serial Mortgage Notes 6.360% $5,200,000
2001 Serial Mortgage Notes 6.465% 6,800,000
2002 Serial Mortgage Notes 6.550% 7,300,000
2003 Serial Mortgage Notes 6.610% 7,800,000
2004 Serial Mortgage Notes 6.700% 8,300,000
2005 Serial Mortgage Notes 6.800% 8,800,000
2006 Serial Mortgage Notes 6.855% 7,500,000
Total $51,700,000
ADDITIONAL NOTES
GENERAL
On the Delivery Date for a Vessel, Golden State Petroleum, as agent for
the Owners, may enter into a supplement to the Indenture (each, a "Supplemental
Indenture") pursuant to which Golden State Petroleum will issue additional
series of first preferred mortgage notes (each, a "Series of Additional Notes").
Each Series of Additional Notes will mature no later than the expiration of the
Fixed Period of the related Initial Charter and will be entitled to receive
semiannual sinking fund payments. An amount equal to the Allocated Principal
Amount of the Additional Notes for a Series for each Vessel, if any, after the
payment of the costs of issuance of such Series of Additional Notes, will be
used by the related Owner, to fund the Additional Construction Costs of a
Vessel, which Additional Construction Costs shall not exceed $250,000 per Vessel
without the consent of the related Owner. Pursuant to the terms of the
Indenture, Golden State Petroleum, as agent for the Owners, will be permitted to
issue a Series of Additional Notes only if, among other things, (a) the original
principal amount of such Series of Additional Notes is equal to or less than the
sum of (i) the aggregate Additional Construction Costs for a Vessel and (ii) the
aggregate costs of issuance of such Series of Additional Notes, (b) the Rating
Agency Condition shall have been satisfied in connection with the issuance of
such Series, (c) the maturity date of the Additional Notes for such Series will
be no later than the expiration of the Fixed Period of the related Initial
Charter, (d) the additional charter hire payable by the Initial Charterer under
the related
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Charter Supplement will be sufficient to pay the debt service payable on the
related Series, and (e) the principal amount of the related Series of Additional
Notes will be amortized on the basis of an approximately level mortgage-style
semi-annual amortization to their maturity date and the mandatory and optional
redemption provisions shall be the same as those for the Notes.
Each Series of Additional Notes generally will have terms substantially
identical to those described under "Description of the Notes," except for
changes to (i) the name or designation of such series; (ii) the initial
principal amount of the Additional Notes to be issued for such series (or method
for calculating such amount); (iii) the interest rate to be paid with respect to
the Additional Notes for such series (or method for the determination thereof);
(iv) the Allocated Principal Amount of the Additional Notes for a Series for
each Vessel; (v) if applicable, whether any Additional Notes of such series (a)
will be issued in the form of Global Notes or (b) will be Transfer Restricted
Securities and the manner of applying the provisions of the Indenture to the
transfer of such Additional Notes, and (vi) such other terms as the parties to
the applicable Supplemental Indenture deem necessary or appropriate.
SECURITY
Each Series of Additional Notes, together with the Notes and each other
Series of Additional Notes, will be secured (subject to the priority of payments
described herein) by the Collateral. The Exchange Notes and the untendered
Existing Notes, if any, will be subordinate in right of payment to the Serial
Notes and the Additional Notes, if any. The Additional Notes, if any, and the
Serial Notes will share on a pro rata basis any proceeds distributed in
connection with an Indenture Event of Default. See "DESCRIPTION OF THE EXCHANGE
NOTES--PAYMENT DATES" AND "--APPLICATION OF PROCEEDS"
MANDATORY REDEMPTION
The Notes and Additional Notes will be subject to mandatory redemption
on a pro rata basis in an amount equal to the Allocated Principal Amount of the
Mortgage Notes of a Vessel that is a Total Loss at a redemption price equal to
100% of the principal amount thereof, plus accrued and unpaid interest to the
date fixed for redemption.
THE MORTGAGES
GENERAL
On the Delivery Date of each Vessel, the related Owner will
grant to the Indenture Trustee a Mortgage on its Vessel to secure its
obligations under the Indenture. The Mortgages will be recorded in accordance
with the provisions of the law of the Registration Jurisdiction. THE STATEMENTS
IN THIS SECTION RELATING TO THE MORTGAGES ARE SUMMARIES OF ALL OF THE MATERIAL
TERMS, BUT DO NOT PURPORT TO BE A COMPLETE DESCRIPTION, OF THE MORTGAGES.
CERTAIN COVENANTS
So long as the Initial Charterer is the charterer of a Vessel,
the related Mortgage provides that the provisions of the related Initial
Charter, including, without limitation, provisions regarding the trade,
operation, documentation, registration, use, maintenance and insurance of such
Vessel, supersede the Owner's covenants with respect to such matters in the
related Mortgage. Certain Initial Charter requirements differ materially from
the Mortgage covenants described below. See "THE INITIAL CHARTERS."
Each Mortgage contains, among other things, certain covenants
of the Owner of the related Vessel, including the following:
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(a) The Owner will not cause or permit its Vessel to be
operated in any manner contrary to law, will not engage in unlawful
trade, violate any applicable law or carry any cargo that would expose
the Vessel to penalty, confiscation, forfeiture, capture or
condemnation and will not do, suffer or permit to be done anything
which can or may injuriously affect the registration or enrollment of
its Vessel under the laws and regulations of the Registration
Jurisdiction.
(b) Except for the lien of the Mortgage and the Indenture and
Permitted Liens, the Owner will not have any right, power or authority
to create, incur or permit to be placed or imposed or continued any
Lien on its Vessel and will keep such Vessel free from any such Lien.
(c) The Owner will at all times and without cost or expense to
the Indenture Trustee maintain and preserve, or cause to be maintained
and preserved, its Vessel in good running order and repair, so that the
Vessel shall be, in so far as due diligence can make her so, tight,
staunch, strong and well and sufficiently tackled, apparelled,
furnished, equipped and in every respect seaworthy and in good
operating condition, as will entitle her to the highest classification
of The American Bureau of Shipping or such other classification society
of like standing agreeable to the Indenture Trustee, and annually will
furnish the Indenture Trustee a certificate by the Classification
Society that such classification is maintained in the highest category
for ships of the same type as the Owner's Vessel free of
recommendations and notations which have not been complied with in
accordance with their terms and shall furnish the Indenture Trustee,
from time to time and at any time upon demand, with all such
information and copies of all such documents as the Indenture Trustee
may require concerning the classification of the Owner's Vessel.
(d) Unless required to do so pursuant to the terms of the
related Initial Charter, the Owner will not transfer or change the flag
or port of documentation of its Vessel or through any action or
inaction cause the registration of its Vessel under the laws of its
Registration Jurisdiction to be void or voidable or to lapse without
the prior written consent of the Indenture Trustee.
(e) Until such time as the Indenture has been satisfied and
discharged in accordance with its terms, the Owner shall take all
actions that are necessary in order to establish and maintain the
Mortgage or any other mortgage on the Vessel as a first preferred
mortgage lien on the Vessel under the laws of the Registration
Jurisdiction, subject only to Permitted Liens.
(f) Such Owner will not, without the prior written consent of
the Indenture Trustee, charter its Vessel by demise charter or by
period, time or voyage charter for any period other than to the Initial
Charterer under the Initial Charter or any other charterer under an
Acceptable Replacement Charter. The Owner will not modify or amend the
terms of the related Initial Charter (other than a Charter Supplement)
without the prior written consent of the Indenture Trustee.
INSURANCE
So long as a Vessel is subject to an Initial Charter, the
insurance requirements of the related Initial Charter will supersede the Owner's
covenants regarding insurance in the related Mortgage. The insurance
requirements of the Initial Charters differ materially from the Owner's Mortgage
covenants described below. See "THE INITIAL CHARTERS-- INSURANCE."
If a Vessel is no longer subject to the Initial Charter, the
requirements under the related Mortgage, which are summarized in this paragraph,
would be applicable to insurance coverage. Each Owner, at its own expense, will
maintain hull and machinery insurance (including coverage for war risks)
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and will insure its Vessel against all customary risks arising from the usage
and trading of the Vessel. In addition, each Owner shall also keep its Vessel
insured against all customary protection and indemnity risks. The protection and
indemnity insurance shall include coverage against liabilities to persons who
have suffered any loss, damage or injury whatsoever in connection with anything
done or not done by the Vessel, any charterer or the Owner in connection with
the Vessel or the employment or use thereof (including in connection with any
oil or other substance emanating from the Vessel or any other vessel with which
the Vessel may be involved in collision) and against liability under OPA or any
reenactment or modification thereof under the law of any country into whose
jurisdiction the Vessel is permitted to come under the terms of the related
charter. Each insurance policy shall also provide that 14 days' written notice
be given to the Indenture Trustee prior to the cancellation or modification of
any insurance.
INSURANCE PROCEEDS
Pursuant to the Mortgage, the proceeds of any insurances or
entries referred to in the Mortgage will be applied as follows:
Until the occurrence of an Event of Default:
(a) Any claim under any such insurance (other than in respect
of a Total Loss) whether or not such claim is under the terms of the
relevant loss payable clause payable directly to the Owner, will be
applied by the Owner in making good the loss or damage in respect of
which it has been paid to the Owner in reimbursement of money expended
by it for such purpose; and
(b) Any claim in respect of protection and indemnity insurance
shall be paid directly to the person, firm or company to which the
liability covered by such insurance was incurred or the Owner in
reimbursement of moneys expended by it in satisfaction of such
liability;
provided always that for as long as the Initial Charter in respect of the Vessel
remains in force, all payments shall be in accordance with the terms of the
Initial Charter. See "INITIAL CHARTERS--INSURANCE PROCEEDS. "
Upon the occurrence of an Event of Default, subject as
provided above, any claim under any such insurance and entry (including in
respect of a Total Loss) will be paid to the Indenture Trustee, and will be
applied by the Indenture Trustee pursuant to the terms of the related Initial
Charter unless the Initial is in default thereunder in which event the Indenture
Trustee shall apply such proceeds against payment of the Notes.
Any claim under such insurance and entry in respect of a Total
Loss will be paid to the Indenture Trustee, and will be applied by the Indenture
Trustee, pursuant to the terms of the Indenture.
The Owner will not alter so as to in any way restrict the
cover of any insurances or entries referred to in the Mortgage except to the
extent expressly permitted by the Indenture Trustee.
MORTGAGE EVENTS OF DEFAULT
The following constitute Mortgage Events of Default:
(a) Default in the payment of any sums payable under the
Mortgage or the Indenture and the continuance of such default for a
period of two Business Days after such amount is due.
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(b) Default by the related Owner in the due observance or
performance of any covenant with respect to maintaining insurance on
its Vessel, maintaining the Vessel free of all Liens other than
Permitted Liens, chartering the Vessel, changing the flag of the Vessel
or maintaining the Mortgage as a first preferred ship mortgage under
the laws of the Registration Jurisdiction.
(c) Default by the related Owner in the due observance or
performance of any covenant other than those described in (b) above and
the continuance of such default for a period of 30 days after the
receipt of notice thereof from the Indenture Trustee.
(d) The Vessel is deemed a Total Loss and the insurance
proceeds thereof have not been received by the Indenture Trustee within
90 days after the date on which the Vessel was deemed a Total Loss;
provided, however, if the Vessel is under charter to the Initial
Charterer pursuant to the Initial Charter or to another charterer under
an Acceptable Replacement Charter, such an event shall be an Event of
Default if the Indenture Trustee has not received the amounts payable
by the Initial Charterer or charterer, as the case may be, in the event
of a Total Loss pursuant to the Initial Charter or an Acceptable
Replacement Charter within five business days of the date on which such
amounts are due pursuant to the terms of the Initial Charter or
Acceptable Replacement Charter, as the case may be.
(e) The Owner shall abandon its Vessel.
(f) The Mortgage or any material provision thereof shall be
deemed invalidated in whole or in part by any present or future law of
the Registration Jurisdiction, or by any decision of any competent
court.
(g) An Indenture Event of Default.
REMEDIES
In the event any one or more Mortgage Events of Default shall
have occurred and be continuing, then, in each and every such case the Indenture
Trustee will have the right under each Mortgage, subject in all instances to the
rights of the Initial Charterer or another charterer to the continued use and
operation of the related Vessel under the related Initial Charter or Acceptable
Replacement Charter so long as no Initial Charter Event of Default shall have
occurred and be continuing under such Initial Charter or Acceptable Replacement
Charter and so long as the Initial Charterer or other charterer is performing
its obligations thereunder (See "INITIAL CHARTERS--NON-DISTURBANCE"), to:
(a) Exercise all of the rights and remedies in foreclosure and
otherwise given to mortgagees by the provisions of applicable law;
(b) Take and enter into possession of the related Vessel, at
any time, wherever the same may be, without court decision or other
legal process and without being responsible for loss or damage and the
Indenture Trustee may, without being responsible for loss or damage,
hold, lay-up, lease, charter, operate or otherwise use such Vessel for
such time and upon such terms as it may deem to be for its best
advantage, and demand, collect and retain all hire, freights, earnings,
issues, revenues, income, profits, return premiums, salvage awards or
recoveries, recoveries in general average and all other sums due or to
become due in respect of such Vessel or in respect of any insurance
thereon from any person whomsoever, accounting only for the net
profits, if any, arising from such use of such Vessel and charging upon
all receipts from use of such Vessel or from the sale thereof by court
proceedings or by private sale all costs, expenses, charges, damages or
losses by reason of such use, and if at any time the Indenture Trustee
avails
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itself of the right given to it to take such Vessel: (i) the Indenture
Trustee will have the right to dock such Vessel for a reasonable time
at any dock, pier or other premises of the Owner without charge, or to
dock her at any other place at the cost and expense of the Owner, and
(ii) the Indenture Trustee will have the right to require the Owner to
deliver, and the Owner will on demand, at its own cost and expense,
deliver to the Indenture Trustee such Vessel as demanded; and the Owner
will irrevocably instruct the master of the Vessel so long as the
Mortgage is outstanding to deliver such Vessel to the Indenture Trustee
as demanded; and
(c) Sell the related Vessel or any share therein with or
without the benefit of any charterparty or other engagement by public
auction or private contract without legal process at any place in the
world and upon such terms as the Indenture Trustee in its absolute
discretion may determine with power to postpone any such sale and
without being answerable for any loss occasioned by such sale or
resulting from the postponement thereof and at any such public auction
the Indenture Trustee may become the purchaser and shall have the right
to set off the purchase price against the Notes. Any sale of the
related Vessel or any shares therein made by the Indenture Trustee in
pursuance of the Mortgage will operate to divest all title, right and
interest of any nature whatsoever of the Owner therein and thereto and
shall bar the Owner, its successors and assigns, and all persons
claiming by, through or under them, provided such sale is by auction.
Upon any such sale, the purchaser will not be bound to see or inquire
whether the Indenture Trustee's power of sale has risen in the manner
provided by the Mortgage and the sale will be within the power of the
Indenture Trustee and the receipt of the Indenture Trustee for the
purchase money will effectively discharge the purchaser, who will not
be responsible for the manner of application of the proceeds of sale or
be in any way answerable or otherwise liable therefor.
ENFORCEMENT OF MORTGAGE
Each of the Vessels will be registered under the laws of the Republic
of Liberia. The Mortgages will be recorded pursuant to the laws of the Republic
of Liberia and will create preferred mortgage liens under the maritime law
thereof. In addition, in order to perfect the Mortgages granted by the Owners,
the Mortgages will also be filed in the Isle of Man. Liberian law provides that
the lien of a preferred mortgage may be enforced by the mortgagee by a suit IN
REM in admiralty in a proceeding against a vessel. Historically, Liberian ship
mortgages have been enforced in major commercial ports throughout the world.
However, the priority that such mortgages will have against the claims of other
lien creditors in an enforcement proceeding is generally determined by, and will
vary in accordance with, the laws of the country where a proceeding is brought.
Generally, such a preferred mortgage lien will rank prior to all subsequent
maritime liens other than certain other preferred maritime liens, including
liens for damages arising out of tort (including claims for oil pollution),
liens for crew's wages, liens for general average and salvage. Under Liberian
law, a preferred mortgage will also rank after certain other maritime liens,
including maritime liens for failure to pay tonnage taxes and annual fees. Under
United States law, a foreign preferred ship mortgage will also rank after
certain other maritime liens, including those for repairs, supplies, towage, use
of drydock or marine railways or other necessaries, performed or supplied in the
United States. Since each Vessel will trade throughout the world and since a
mortgage generally will be enforceable against a Vessel only in the jurisdiction
in which it is physically present, there can be no assurance that if enforcement
proceedings are commenced against a Vessel, the Vessel will be located in a
jurisdiction having the same mortgage enforcement procedures and lien priorities
as, for example, Liberia or the United States. However, upon the occurrence of a
Mortgage Event of Default relating to a Vessel, the Indenture Trustee may be
able to effect control over the Vessel to direct it to a desirable jurisdiction
to arrest the Vessel pursuant to judicial foreclosure proceedings. See
"Description of the Exchange Notes--Indenture Remedies."
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Although each of the Vessels is owned by a separate Owner, under
certain circumstances a parent company and all of the shipowning affiliates in a
group under common control could be held liable for damages or debts owed by one
of the affiliates, including liabilities for spills under OPA 90 or other
environmental laws. Therefore, it is possible, because the Owners are under
common control, that all of the assets of an Owner could be subject to execution
upon a judgment against such Owner and any other Owner, and that such judgment
lien could rank ahead of the Mortgages. See "Risk of Loss and Liability;
Insurance" above.
MATERIAL UNITED STATES FEDERAL INCOME TAX CONSEQUENCES
In the opinion of Thacher Proffitt & Wood, counsel to the Owners, the
following are the material federal income tax consequences under the Internal
Revenue Code of 1986 (the "Code") of the acquisition, ownership and disposition
of the Exchange Notes and the Existing Notes. This disclosure is based upon the
provisions of the Code, the Treasury regulations thereunder, and published
rulings and court decisions in effect as of the date hereof, all of which
authorities are subject to change or differing interpretations, which could
apply retroactively. The disclosure below does not purport to deal with federal
income tax consequences applicable to all categories of investors and is
directed solely to holders that hold the Notes as capital assets within the
meaning of Section 1221 of the Code, and acquire such Notes for investment and
not as a dealer or for resale. This disclosure is not intended to address every
aspect of the federal income tax laws that may be relevant to holders in light
of their particular investment circumstances or to certain types of holders
subject to special treatment under the federal income tax laws such as banks,
insurance companies, holders that will hold the Notes as a position in a
"straddle" for tax purposes or as a part of a "synthetic security" or
"conversion transaction" or other integrated investment comprised of the Notes
and one or more other investments, certain financial institutions, dealers in
securities or holders that have a functional currency other than the U.S.
dollar. Prospective investors should note that no rulings have been or will be
sought from the Internal Revenue Service (the "IRS") with respect to any of the
federal income tax consequences discussed below, and no assurance can be given
that the IRS will not take contrary positions. Accordingly, investors should
consult their own tax advisors in determining the tax consequences to them of an
investment in the Notes and the purchase, ownership and disposition thereof.
Holders and preparers of tax returns should be aware that under
applicable Treasury regulations a provider of advice on specific issues of law
is not considered an income tax return preparer unless the advice is (i) given
with respect to events that have occurred at the time the advice is rendered and
is not given with respect to the consequences of contemplated actions, and (ii)
directly relevant to the determination of an entry on a tax return. Accordingly,
holders should consult their own tax advisors and tax return preparers regarding
the preparation of any item on a tax return.
EXCHANGE OFFER
Pursuant to Treasury regulations recently issued under Section 1001 of
the Code, the exchange of an Existing Note for an Exchange Note in connection
with the Exchange Offer will not constitute a significant modification of the
Existing Note and thus will not be treated as a sale or exchange of the Existing
Note for federal income tax purposes. As a result, the Exchange Notes will have
the same issue price (and adjusted issue price immediately after the exchange)
and the same amount of original issue discount, if any, as the Existing Notes,
each Holder will have the same adjusted basis and holding period in the Exchange
Notes as it had in the Existing Notes immediately before the exchange, and
accrued and unpaid interest on the Existing Notes will not be recognized in
income by a cash-basis Holder by reason of the exchange. The following
discussion assumes that the exchange of Existing Notes for Exchange Notes
pursuant to the Exchange Offer will not be treated as a sale or exchange for
federal income tax purposes.
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CHARACTERIZATION OF THE NOTES AS INDEBTEDNESS
In the opinion of Thacher Proffitt & Wood, counsel to the Owners, based
on the application of existing law, and assuming compliance with all provisions
of the Indenture, the Initial Charters and other relevant documents, and the
facts set forth above in this Prospectus, the Notes will be characterized as
indebtedness for federal income tax purposes. Furthermore, such counsel has
advised that, because Golden State Petroleum is executing the Notes solely in
its capacity as agent of the Owners pursuant to the Agency Agreement (and
pursuant to its articles of incorporation is authorized to act only in such
capacity and to engage in no other activity), the proceeds of the Notes will be
used to fund the Owners' acquisition of the Vessels, and will be secured by the
Vessels, the Initial Charters (and the charter hire thereunder) and other
property of the Owners (see "Description of the Exchange Notes--Security"), and
based upon the facts set forth above in this Prospectus and additional
information (including valuation assumptions relating to the Vessels and
financial calculations relating to the Initial Charters) provided by the Owners,
the Notes will be treated as indebtedness of the Owners for federal income tax
purposes.
TAXATION OF HOLDERS
Assuming that the Notes are characterized as indebtedness, generally,
interest on the Notes will be taxable as ordinary income for federal income tax
purposes when received by holders using the cash method of accounting and when
accrued by holders using the accrual method of accounting.
ORIGINAL ISSUE DISCOUNT
The Existing Notes were not, and the Exchange Notes will not be, issued
with original issue discount within the meaning of Section 1273 of the Code.
MARKET DISCOUNT
A subsequent holder who purchases a Note at a discount may be subject
to the "market discount" rules of the Code. These rules provide, in part, for
the treatment of gain attributable to accrued market discount as ordinary income
upon the receipt of partial principal payments or on the sale or other
disposition of a Note, and for the deferral of interest deductions with respect
to debt incurred to acquire or carry such market discount Note. In particular,
under Section 1276 of the Code, a holder who purchases a Note at a discount that
exceeds de minimis market discount (as defined below) generally will be required
to allocate a portion of each such partial principal payment or proceeds of
disposition to accrued market discount not previously included in income, and to
recognize ordinary income to that extent. Accordingly, holders are advised to
consult their own tax advisors regarding the impact of such requirement if the
Notes are purchased at a discount. A holder may elect to include such market
discount (including de minimus market discount, as defined below) in income
currently as it accrues rather than including it on a deferred basis in
accordance with the foregoing. If made, such election will apply to all
market-discount bonds acquired by such holder on or after the first day of the
first taxable year to which such election applied and may be revoked only with
the consent of the Internal Revenue Service. If such election is made, the
interest deferral rule described above will not apply.
If a Note is purchased at a de minimis market discount, the actual
discount will be required to be allocated among the principal payments to be
made on such Note, and the portion of such discount allocated to each principal
payment will be required to be reported as income as each principal payment is
made (unless the above described election to accrue market discount in income
currently is made). Market discount with respect to a Note will be considered to
be de minimis for purposes of Section 1276 of the Code if such market discount
is less than .25% of the principal payment of such Note multiplied by the number
of complete years to maturity remaining after the date of its purchase.
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PREMIUM
In the event that a Note is purchased at a premium (i.e., generally,
the purchase price exceeds the sum of principal payments to be made thereon),
such premium will be amortizable by a holder as an offset to interest income
(with a corresponding reduction in the holder's basis) under a constant yield
method over the term of such Note if the holder makes (or has in effect) an
election under Section 171 of the Code. An election to amortize bond premium
applies to all taxable debt obligations then owned and thereafter acquired by
the taxpayer and may be revoked only with the consent of the Internal Revenue
Service.
CONSTANT YIELD ELECTION
Under Treasury Regulations, a holder may make an election (the
"Constant Yield Election") to include in gross income all interest, discount
(including de minimis market or original issue discount) and premium that
accrues on a Note in accordance with a constant yield method based on the
compounding of interest. If a holder makes a Constant Yield Election for a Note
with amortizable bond premium or market discount, such election will result in a
deemed election to amortize bond premium or accrue market discount for all of
the holder's debt instruments with amortizable bond premium or market discount
and may be revoked only with the permission of the Internal Revenue Service.
DISPOSITIONS OF EXCHANGE NOTES
Except as described above with respect to the market discount rules and
as provided under Section 582(c) of the Code in the case of banks and other
financial institutions, any gain or loss, equal to the difference between the
amount realized on the sale or exchange and the adjusted basis of an Exchange
Note, recognized on the sale or exchange of such Exchange Note by an investor
who holds such Exchange Note as a capital asset will be capital gain or loss.
For these purposes, amount realized does not include amounts attributable to
accrued but unpaid interest. Such amounts are treated as interest as described
above. The adjusted basis of an Exchange Note generally will equal its cost,
increased by any income previously reported (including any market discount
income) by the selling holder and reduced (but not below zero) by any deduction
previously allowed for losses and any amortized premium and by any payments
previously received with respect to such Exchange Note. Principal payments on
the Exchange Notes will be treated as amounts received upon a sale or exchange
of the Exchange Notes under the foregoing rules.
INFORMATION REPORTING
The Indenture Trustee is required to furnish or cause to be furnished
to each holder with each payment a statement setting forth the amount of such
payment allocable to principal on the Note and to interest thereon at the
applicable interest rate. In addition, the Indenture Trustee is required to
furnish or cause to be furnished, within a reasonable time after the end of each
calendar year, to each holder who was such a holder at any time during such
year, a report indicating such other customary factual information as the
Indenture Trustee deems necessary to enable holders of Note to prepare their tax
returns. Holders should consult their own tax advisors to determine the amount
of any market discount includible in income during a calendar year.
FOREIGN INVESTORS
A holder that is not a "United States person" (as defined below) and is
not subject to federal income tax as a result of any direct or indirect
connection to the United States in addition to its ownership of a Note generally
will not be subject to United States federal income or withholding tax in
respect of interest (including accrued market discount) paid on a Note provided
that the holder complies to the
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extent necessary with certain identification requirements by delivery (or
causing to be delivered) to the Indenture Trustee an appropriate form (such as
of an IRS Form W-8 (or any successor form) or substantially similar statement,
signed by the holder under penalties of perjury, certifying that such holder is
not a United States person, and providing the name and address of such holder).
Notwithstanding the foregoing, United States withholding tax may be imposed with
respect to interest paid on Notes held by a holder that directly or indirectly
owns a 10% or greater interest in either of the Owners, is a controlled foreign
corporation related, directly or indirectly, to the company through stock
ownership or is a bank receiving interest described in Section 881(c)(3)(A) of
the Code. Such a holder may be subject to a United States withholding tax on
interest paid on the Notes at a 30% rate, subject to rate reduction available
under any applicable tax treaty.
Amounts allocable to interest received by a holder that is not a United
States person, which constitute income that is effectively connected with a
United States trade or business carried on by the holder, will not be subject to
withholding tax, but rather will be subject to United States income tax at the
graduated rates applicable to United States persons, provided the holder
supplies (at the time of its initial purchase, and at such subsequent times as
are required under the Treasury regulations) a completed IRS Form 4224 (or any
successor form) to report its exemption from withholding.
For these purposes, "United States person" means a citizen or resident
of the United States, a corporation, partnership or other entity created or
organized in, or under the laws of, the United States or any political
subdivision thereof, or an estate whose income is subject to United States
federal income tax regardless of its source, or a trust if a court within the
United States is able to exercise primary supervision over the administration of
the trust and one or more United States fiduciaries have the authority to
control all substantial decisions of the trust. Holders who are not United
States persons should consult their own tax advisors regarding the tax
consequences of purchasing, owning or disposing of a Note.
BACKUP WITHHOLDING
Payments of interest and principal, as well as payments of proceeds
from the sale of Notes, may be subject to the "backup withholding tax" under
Section 3406 of the Code at a rate of 31% if recipients of such payments fail to
furnish to the payor certain information, including their taxpayer
identification numbers, or otherwise fail to establish an exemption from such
tax. Any amounts deducted and withheld from a distribution to a recipient would
be allowed as a credit against such recipient's federal income tax liability.
Furthermore, certain penalties may be imposed by the IRS on a recipient of
payments that is required to supply information but that does not do so in the
proper manner. Information returns will be sent annually to the IRS and each
holder setting forth the amount of interest paid on the Notes and the amount of
any tax withheld thereon.
STATE, LOCAL, FOREIGN AND OTHER TAXES
Investors should consult their own tax advisors regarding whether the
purchase of the Notes, either alone or in conjunction with an investor's other
activities, may subject an investor to any state or local taxes, or to taxes
imposed by any taxing jurisdiction outside the United States, based on an
assertion that the investor is either "doing business" in, or deriving income
from a source located in, any state, local or foreign jurisdiction, including
any such assertion arising from the presence, use, trading or operation of any
of the Vessels in such jurisdiction or any activities in such jurisdiction of an
Owner or any other person. Additionally, potential investors should consider the
state, local, foreign and other tax consequences of purchasing, owning or
disposing of a Note. State, local and foreign tax law may differ substantially
from the corresponding federal tax law, and the foregoing discussion does not
purport to describe any aspect of the tax laws of any state or other
jurisdiction. Accordingly, potential investors should consult their own tax
advisors with regard to such matters.
-98-
<PAGE>
WHILE THERE IS NO RECIPROCAL INCOME TAX TREATY BETWEEN THE UNITED
STATES AND THE ISLE OF MAN, A TRANSPORTATION AGREEMENT WAS SIGNED IN AUGUST 1989
BY THE UNITED STATES AND THE UNITED KINGDOM OF GREAT BRITAIN AND NORTHERN
IRELAND (ON BEHALF OF THE ISLE OF MAN) CONFIRMING THAT BOTH THE UNITED STATES
AND THE ISLE OF MAN GRANT AN EQUIVALENT EXEMPTION FOR QUALIFIED SHIPPING INCOME.
CERTAIN ISLE OF MAN TAX CONSEQUENCES
In the opinion of Cains, special Isle of Man counsel to the Owners, no
withholding taxes will be imposed on sinking fund payments or payments of
principal, interest or premium, if any, thereon with respect to the Mortgage
Notes and the holders will not be subject to any income taxes imposed by the
Isle of Man solely as a result of owning the Mortgage Notes. Investors should
consult their own tax advisors regarding whether the purchase of the Mortgage
Notes in conjunction with an investor's other activities in the Isle of Man, may
subject an investor to any taxes imposed by the Isle of Man.
To the extent the Isle of Man in the future does impose a withholding
tax with respect to sinking fund payments or payments of principal, interest or
premium (if any) on the Mortgage Notes, the Owners will make the required
withholding and are not required to gross-up or indemnify holders for amounts
withheld. Pursuant to the Indenture, in the event the Isle of Man does impose a
withholding tax with respect to such payments, the Owners is obligated to take
any lawful action to the extent necessary to prevent or avoid the imposition of
any withholding taxes, including changing its jurisdiction of incorporation or
residence; provided however, that the Owners will not be required to take, or
fail to take, any action (x) if in the opinion of counsel such act or failure to
act would violate applicable law or (y) if in the reasonable opinion of the
Owners the actions necessary to avoid or prevent imposition of such taxes would
be unduly burdensome. For purposes of clause (y) of the immediately preceding
sentence, a requirement to change the jurisdiction of the Owner's incorporation
or residence will not be treated as unduly burdensome unless changing the
Owner's jurisdiction of incorporation or residence to such other jurisdiction or
location would (i) subject the Owner to charges in such other jurisdiction,
including but not limited to taxes imposed on or measured by its income,
receipts, property, assets, capital, sales or value-added or (ii) cause the
Initial Charterer to be required to withhold or deduct charges with respect to
charter hire payable under the Initial Charters.
MANAGEMENT AGREEMENTS
Cambridge Fund Management LLC has agreed to provide administrative,
management and advisory services to the Owners pursuant to the Management
Agreements. The Manager is an Affiliate of Golden State Petroleum and the
Owners. Pursuant to each Management Agreement, the Manager will be entitled to a
fee (the "Management Fee") of $50,000 per year per Vessel for all periods
commencing on the Original Closing Date. All Recurring Fees are payable by the
Manager from the Management Fee. The Management Fee will be payable
semi-annually on each Payment Date from amounts on deposit in the Ship
Management Reserve Fund. See "Description of the Exchange Notes--Trust
Accounts--Ship Management Reserve Fund." In connection with the offering and
sale of the Existing Notes, Cambridge Petroleum Transport Corporation provided
financial advisory services to Golden State Petroleum and the Owners for which
it received a fee. See "Prospectus Summary--Sources and Uses of Funds Through
the Delivery Dates." Cambridge Petroleum Transport Corporation is an Affiliate
of Golden State Petroleum and the Owners.
PLAN OF DISTRIBUTION
Each broker-dealer that receives Exchange Notes for its own account
pursuant to the Exchange Offer must acknowledge that it will deliver a
prospectus in connection with any resale of such Exchange Notes. This
Prospectus, as it may be amended or supplemented from time to time, may be used
by a broker-dealer in connection with resales of Exchange Notes received in
exchange for Exchange Notes
-99-
<PAGE>
where such Exchange Notes were acquired as a result of market-making activities
or other trading activities. The Companies have agreed that, starting on the
Expiration Date and ending on the close of business of the first anniversary of
the Expiration Date, they will make this Prospectus, as amended or supplemented,
available to any broker-dealer for use in connection with any such resale.
The Owners will not receive any proceeds from any sale of Exchange
Notes by broker-dealers. Exchange Notes received by broker-dealers for their own
account pursuant to the Exchange Offer may be sold from time to time in one or
more transactions in the over-the-counter market, in negotiated transactions,
through the writing of options on the Exchange Notes or a combination of such
methods of resale, at market prices prevailing at the time of resale, at prices
related to such prevailing market prices or at negotiated prices. Any such
resale may be made directly to purchasers or to or through brokers or dealers
who may receive compensation in the form of commissions or concessions from any
such broker-dealer and/or the purchasers of any such Exchange Notes. Any
broker-dealer that resells Exchange Notes that were received by it for its own
account pursuant to the Exchange Offer and any broker or dealer that
participates in a distribution of such Exchange Notes may be deemed to be an
"underwriter" within the meaning of the Securities Act, and any profit on any
such resale of Exchange Notes and any commissions or concessions received by any
such persons may be deemed to be underwriting compensation under the Securities
Act. The Letter of Transmittal states that by acknowledging that it will deliver
and by delivering a prospectus, a broker-dealer will not be deemed to admit that
it is an "underwriter" within the meaning of the Securities Act.
For a period of one year after the Expiration Date, the Companies will
promptly send additional copies of this Prospectus and any amendment or
supplement to this Prospectus to any broker-dealer that requests such documents
in the Letter of Transmittal. The Owners have agreed to pay all expenses
incident to the Exchange Offer (including the expenses of one counsel for the
Holders of the Exchange Notes) other than commissions or concessions of any
brokers or dealers and fees.
RATING
The Exchange Notes have been rated "Baa2" by Moody's, "BBB" by Standard
& Poor's and "BBB-" by Duff & Phelps. A security rating is not a recommendation
to buy, sell or hold securities and may be subject to revision or withdrawal at
any time. The ratings of the Rating Agencies assigned to the Notes address the
likelihood of the receipt by Holders of the Notes of all distributions to which
such Holders are entitled. The ratings assigned to the Notes do not represent
any assessment of the likelihood that principal prepayments might differ from
those originally anticipated or address the possibility that Holders might
suffer a lower than anticipated yield. In the event that the rating initially
assigned to any of the Notes is subsequently lowered for any reason, no person
or entity is obligated to provide any additional support or credit enhancement
with respect to such Note. The ratings do not address the possibility that
Holders of the Notes may suffer a lower than anticipated yield.
The Owners have not requested a rating on the Notes by any rating
agencies other than the Rating Agencies. However, there can be no assurance as
to whether any other rating agency will rate the Notes, or, if it does, what
rating would be assigned by any such other rating agency. A rating on the Notes
by another rating agency, if assigned at all, may be lower than the ratings
assigned to the Note by the Rating Agencies.
LEGAL MATTERS
Certain legal matters will be passed upon for Golden State Petroleum,
the Owners and the Manager by Thacher Proffitt & Wood, New York, New York and
Cains, Douglas, Isle of Man.
-100-
<PAGE>
INDEX TO FINANCIAL STATEMENTS
Page
----
Golden State Petroleum Transport Corporation
Report of Independent Accountants .................................F-1
Balance Sheet as of March 31, 1997.................................F-2
Statement of Income and Retained Earnings..........................F-3
Statement of Cash Flows............................................F-4
Notes to Financial Statements......................................F-5
Golden State Petro (IOM I-A) PLC
Report of the Auditors ............................................F-6
Balance Sheet as of March 31, 1997.................................F-7
Statement of Income and Retained Earnings..........................F-8
Statement of Cash Flows............................................F-9
Notes to Financial Statements.....................................F-10
Golden State Petro (IOM I-B) PLC
Report of the Auditors ...........................................F-19
Balance Sheet as of March 31, 1997................................F-20
Statement of Income and Retained Earnings.........................F-21
Statement of Cash Flows...........................................F-22
Notes to Financial Statements.....................................F-23
<PAGE>
REPORT OF INDEPENDENT ACCOUNTANTS
To the Board of Directors of
Golden State Petroleum Transport Corporation:
We have audited the accompanying balance sheet of Golden State Petroleum
Transport Corporation as of March 31, 1997 and the related statements of
operations and retained earnings, and cash flows for the period from December 5,
1996 (date of commencement of operations) to March 31, 1997. 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 audit.
We conducted our audit in accordance with auditing standards generally accepted
in the United States of America. Those standards require that we plan and
perform the audit to obtain reasonable assurance about whether the financial
statements are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audit provides a
reasonable basis for our operation.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of Golden State Petroleum
Transport Corporation at March 31, 1997 and the results of its operations and
its cash flows for the period from December 5, 1996 (date of commencement of
operations) to March 31, 1997 in conformity with accounting principles generally
accepted in the United States of America.
COOPERS & LYBRAND L.L.P.
New York, New York
May 5, 1997
F-1
<PAGE>
GOLDEN STATE PETROLEUM TRANSPORT CORPORATION
BALANCE SHEET
MARCH 31, 1997
Assets:
Cash $ 2
Accounts receivable $ 5,000
---------
Total assets $ 5,002
=========
Liabilities and stockholder's equity:
Accounts payable $ 5,000
---------
Total liabilities 5,000
---------
Stockholder's equity:
Common stock, no par value, 100 shares authorized,
2 shares issued and outstanding 2
Retained earnings --
---------
Total stockholder's equity 2
Total liabilities and stockholder's equity $ 5,002
=========
See notes to financial statements
F-2
<PAGE>
GOLDEN STATE PETROLEUM TRANSPORT CORPORATION
STATEMENT OF INCOME AND RETAINED EARNINGS
FOR THE PERIOD FROM DECEMBER 5, 1996 (DATE OF COMMENCEMENT OF OPERATIONS)
TO MARCH 31, 1997
REVENUE:
Agency fees $ 5,000
---------
EXPENSES:
Transaction expenses $ 5,000
---------
Net Income --
Retained earnings, beginning of period --
---------
Retained earnings, end of period $ --
=========
See notes to financial statements
F-3
<PAGE>
GOLDEN STATE PETROLEUM TRANSPORT CORPORATION
STATEMENT OF CASH FLOWS
FOR THE PERIOD FROM DECEMBER 5, 1996 (DATE OF COMMENCEMENT OF OPERATIONS)
TO MARCH 31, 1997
Cash flows provided by operating activities
Net income $ --
Changes in assets and liabilities:
Increase in account receivable (5,000)
Increase in accounts payable $ 5,000
-------
Net cash provided by operating activities --
Cash flows from financing activities:
Capital contribution 2
Net cash provided by financing activities 2
-------
Cash at beginning of period --
Cash at end of period $ 2
=======
See notes to financial statements
F-4
<PAGE>
GOLDEN STATE PETROLEUM TRANSPORT CORPORATION
NOTES TO FINANCIAL STATEMENTS
1. THE COMPANY:
Golden State Petroleum Transport Corporation (the "Company") was
incorporated under the laws of the State of Delaware on December 5,
1996. The Company is a special purpose corporation that has been
organized solely for the purpose of issuing certain Mortgage Notes as
agent for two affiliated entities, Golden State Petro (IOM I-A) PLC and
Golden State Petro (IOM I-B) PLC (collectively, the "Owners"). The
Mortgage Notes were issued at face value on December 24, 1996 and
January 6, 1997 and the proceeds totaling $178,800,000 were used by the
Owners to finance the construction and acquisition of two very large
crude carriers for charter to an unaffiliated third party.
The Mortgage Notes are not obligations of and are not guaranteed by the
Company.
BASIS OF PRESENTATION
The financial statements have been prepared in accordance with
accounting principles generally accepted in the United States of
America. The preparation of financial statement in conformity with
accounting principles generally accepted in the United States of
America requires management to make estimates and assumptions that
affect the reported amounts of assets and liabilities and disclosures
of contingent assets and liabilities at the dates of the financial
statements and the reported amounts of revenues and expenses during the
reporting period. Actual results could differ from those estimates.
2. ACCOUNTS RECEIVABLE/RELATED PARTY:
The Company earned $5,000 as aggregate compensation for services as
agent in the issuance of the Mortgage Notes and, correspondingly, owes
equivalent transaction fees to its ultimate parent, Cambridge Petroleum
Transport Corporation.
3. CAPITALIZATION:
The Company's capitalization is nominal and it has no source of income
other than fees earned as agent. The Company has no direct employees
and utilizes resources and premises provided by its ultimate parent for
a cost equivalent to transaction fees earned.
F-5
<PAGE>
GOLDEN STATE PETRO (IOM I-A) PLC
NOTES TO FINANCIAL STATEMENTS, CONTINUED
REPORT OF THE AUDITORS
TO THE BOARD OF DIRECTORS OF GOLDEN STATE PETRO (IOM I-A) PLC
We have audited the balance sheet of Golden State Petro (IOM I-A) PLC (a company
incorporated in the Isle of Man) as of 31 March 1997 and the related statements
of income and retained earnings and cash flows for the period from 24 December
1996 (date of commencement of operations) to 31 March 1997. 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 audit.
We conducted our audit in accordance with auditing standards generally accepted
in the United States of AMERICA. Those standards require that we plan and
perform the audit to obtain reasonable assurance about whether the financial
statements are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audit provides a
reasonable basis for our opinion.
In our opinion, the financial statements referred to above, which have been
prepared in accordance with accounting principles generally accepted in the
United States of America, give a true and fair view of the state of the
company's affairs at 31 March 1997 and of the results of its operations and cash
flows for the period from 24 December 1996 (date of commencement of operations)
to 31 March 1997.
COOPERS & LYBRAND LLP
CHARTERED ACCOUNTANTS
DOUGLAS, ISLE OF MAN
29th May 1997
F-6
<PAGE>
GOLDEN STATE PETRO (IOM I-A) PLC
NOTES TO FINANCIAL STATEMENTS, CONTINUED
BALANCE SHEET
March 31, 1997
Assets:
Restricted cash $ 52,433,724
Vessel under construction 36,510,071
------------
Total assets 88,943,795
============
Liabilities:
Mortgage notes, net of debt issue costs of $ 1,185,093 87,264,907
Interest payable and other liabilities 1,821,840
------------
Total liabilities 89,086,747
------------
Stockholder's equity:
Common stock, no par value, 2,000 shares authorized;
2 shares issued and outstanding 2
Retained deficit (142,954)
------------
Total stockholder's equity (142,952)
------------
Total liabilities and stockholder's equity $ 88,943,795
============
See notes to the financial statements.
F-7
<PAGE>
GOLDEN STATE PETRO (IOM I-A) PLC
NOTES TO FINANCIAL STATEMENTS, CONTINUED
STATEMENT OF INCOME AND RETAINED EARNINGS
For the period from December 24, 1996 (date of commencement of operations) to
March 31, 1997
Revenue:
Interest income $ 1,005,020
-----------
Total revenue 1,005,020
Expenses:
Interest 1,116,413
Amortization of debt issue costs 31,561
-----------
Total expenses 1,147,974
Net loss (142,954)
Retained earnings, beginning of period --
-----------
Retained deficit, end of period $ (142,954)
===========
See notes to the financial statements.
F-8
<PAGE>
GOLDEN STATE PETRO (IOM I-A) PLC
NOTES TO FINANCIAL STATEMENTS, CONTINUED
STATEMENT OF CASH FLOWS
For the period from December 24,1996 (date of commencement of operations) to
March 31, 1997
<TABLE>
<CAPTION>
Cash flows from operating activities:
<S> <C>
Net Loss $ (142,954)
Adjustments to reconcile net income to net cash provided by operating
activities:
Amortization of debt issue costs 31,561
Changes in assets and liabilities:
Increase in interest payable and other liabilities 1,821,840
------------
Net cash provided by operating activities 1,710,447
------------
Cash flows from investing activities:
Payments made under vessel construction contract (35,304,644)
Interest capitalized (705,427)
Transaction costs capitalized (500,000)
Restricted cash (52,433,724)
------------
Net cash used in investing activities (88,943,795)
------------
Cash flows from financing activities:
Proceeds from mortgage notes 88,450,000
Debt issue costs (1,216,654)
Contribution of capital 2
Net cash provided by financing activities 87,233,348
------------
Net increase in cash $ --
============
Supplemental data:
Interest paid during the period $ --
============
</TABLE>
See notes to the financial statements.
F-9
<PAGE>
GOLDEN STATE PETRO (IOM I-A) PLC
NOTES TO FINANCIAL STATEMENTS, CONTINUED
NOTES TO FINANCIAL STATEMENTS
1. DESCRIPTION OF LEASE OPERATION:
Golden State Petro (IOM I-A) PLC (the "Company") was formed as an Isle
of Man public limited company for the purpose of acquiring and
chartering a very large crude oil carrier ("VLCC"). The proceeds from
the offering and sale of the Serial Notes, together with the proceeds
of the sale of the Term Notes (collectively the "Notes"), will be used
by the Company to fund the construction of a VLCC by Samsung
Corporation and Samsung Heavy Industries Co., Ltd. (collectively, the
"Builders") under the technical supervision of the Chevron Shipping
Company as agent for Chevron Transport Corporation (the "Initial
Charterer") which is an indirect, wholly-owned subsidiary of Chevron
Corporation. The contracted delivery date of the VLCC is February 1,
1999. The VLCC, once accepted by the Company under the building
contract, will be chartered to the Initial Charterer pursuant to an
initial charter for a term of eighteen years. The Initial Charterer has
an option to terminate the charter on the eighth anniversary of the
delivery date for the VLCC. The Initial Charterer's obligations under
the initial charter will be guaranteed by Chevron corporation.
The Company is a wholly-owned subsidiary of Golden State Holdings I
Ltd., an Isle of Man holding company, which is a wholly-owned
subsidiary of Cambridge Petroleum Transport Corporation ("CPTC"), a
closely-held Cayman Islands Corporation.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:
BASIS OF PRESENTATION
The financial statements have been prepared in accordance with
accounting principles generally accepted in the United States of
America.
ALLOCATION OF MORTGAGE NOTES
The Company is jointly and severally liable under the Notes with Golden
State Petro (IOM I-B) PLC for the issued amount of $178,800,000. In
preparing the separate company financial statements of the Company and
Golden State Petro (IOM I-B) PLC, the aggregate amount of the Notes has
been allocated so as to reflect the difference in the contracted cost
of the vessels.
OPERATING LEASE
The operating lease commences upon the delivery of the vessel to the
Initial Charterer. Income from the operating lease will be recognized
ratably over the term of the leases.
F-10
<PAGE>
GOLDEN STATE PETRO (IOM I-A) PLC
NOTES TO FINANCIAL STATEMENTS, CONTINUED
VESSEL UNDER CONSTRUCTION
Construction in progress is capitalized in accordance with contract
payments made and also includes the capitalization of interest charges
and certain transaction costs incurred during the period of the
vessel's construction. Contract payments capitalized as of March 31,
1997 were $35,304,644. Interest charges of $705,427 and transaction
costs of $500,000 were capitalized as of March 31, 1997.
DEBT ISSUE COSTS
Debt issue costs comprise expenses incurred in connection with the
issuance of the Notes (see Note 3). Such expenses are being amortized
over the weighted average life of the serial notes, and the life of the
term notes' respectively.
FAIR VALUE OF FINANCIAL INSTRUMENTS
The methods and assumptions used in estimating the fair values of
financial instruments are as follows:
RESTRICTED CASH: The Restricted cash balance represents an
investment in a guaranteed investment contract which is
readily convertible into cash. The carrying value of the
guaranteed investment contract is stated at contract value
which approximates fair value. This contract is with Pacific
Mutual Life Insurance, a California Life Insurance Company and
is held in the name of the United States Trust Company on
behalf of the Company as the Indenture Trustee.
MORTGAGE NOTES: The carrying value of the Notes approximates
fair value as of March 31, 1997 based upon the current
borrowing rates available for financing with similar terms and
maturities and the short elapsed time between the date of the
balance sheet and the date of issuance of the Notes.
INTEREST PAYABLE AND OTHER LIABILITIES: The carrying value
approximates fair value due to their relatively short
maturities.
ACCOUNTING 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 disclosure of contingent assets and liabilities at the
dates of the financial statements and the reported amounts of revenue
and expenses during the reporting period. Actual results could differ
from such estimates. The most significant assumptions and estimates
relate to the vessel under construction held for lease.
F-11
<PAGE>
GOLDEN STATE PETRO (IOM I-A) PLC
NOTES TO FINANCIAL STATEMENTS, CONTINUED
INCOME TAXES
The Company is exempt from United States federal, state and local
income taxes and have been granted exemptions from the statutory 20%
tax on profits required to be assessed against Isle of Man companies.
Accordingly, no provision for taxes have been made in these financial
statements.
OTHER
Both interest income and interest expense are recognized on an accrual
basis.
3. MORTGAGE NOTES:
On December 24, 1996, Golden State Petroleum Transport Corporation, a
special purpose Delaware corporation which is an entity affiliated with
the Company, acted as agent on behalf of the Company and issued the
Notes, certain terms of which are set forth below. The Company was
allocated a share of the proceeds from the offering and sale of the
Notes, which totaled $88,450,000. These funds were used by the Company
to fund the construction and acquisition of a VLCC.
Interest is deemed to accrue for both the Serial and Term notes from
December 24, 1996 and is payable on February 1st and August 1 st of
each year commencing August 1, 1997.
The Notes have priority of payment and are collateralized by (i) a
statutory first mortgage on the vessel; (ii) an assignment of the
building contract with the Builders and a technical supervision
agreement with Chevron; (iii) an assignment of the building contract
performance guarantee with the Korea Development Bank; (iv) an
assignment of the initial charter; (v) an assignment of the charter
supplement (pursuant to the issuance of Additional Notes); (vi) an
assignment of the Chevron Corporation guarantees; (vii) an assignment
of the management agreement with Cambridge Fund Management L.L.C.;
(viii) an assignment of the earnings and issuance proceeds related to
the vessel and; (ix) certain other collateral.
F-12
<PAGE>
GOLDEN STATE PETRO (IOM I-A) PLC
NOTES TO FINANCIAL STATEMENTS, CONTINUED
SERIAL NOTES
The Serial Notes were issued in the aggregate principal amount of
$51,700,000 of which $24,900,000 was allocated to the Company. Set
forth below are the allocated principal amount and the interest rates
of Serial Notes payable on each maturity date for the Company:
MATURITY DATE INTEREST RATE PRINCIPAL
- ---------------------------------------------------------------------------
February 1, 2000 6.360% $ 2,550
February 1, 2001 6.465% 3,350
February 1, 2002 6.550% 3,600
February 1, 2003 6.610% 3,850
February 1, 2004 6.700% 4,100
February 1, 2005 6.800% 4,350
February 1, 2006 6.855% 3,100
-----------
$24,900
===========
F-13
<PAGE>
GOLDEN STATE PETRO (IOM I-A) PLC
NOTES TO FINANCIAL STATEMENTS, CONTINUED
Interest is deemed to accrue for the Serial notes from December 24, 1996 and is
payable on February 1st and August 1st of each year commencing August 1, 1997.
At March 31, 1997 the effective interest rate for the Serial notes was 6.633%.
TERM NOTES
The Term Notes were issued by Golden State Petroleum Transportation Corporation,
acting as agent for the Company, in the aggregate principal amount of
$127,100,000. The allocated principal amount of Term Notes to the Company is
$63,550,000. Interest on the Term Notes will accrue from the date of issuance
thereof at a rate per annum equal to 8.04%, and will be payable on each February
1st and August 1st (each, a "Payment Date"), commencing August 1, 1997. Interest
on the Term Notes will accrue from the most recent date to which interest has
been paid or, if no interest has been paid, from December 24, 1996.
Term Notes will be subject to redemption through the operation of a mandatory
sinking fund on each payment date commencing August 1, 2007 to and including
August 1, 2018, according to the schedule of sinking fund redemption payments
set forth below. The sinking fund redemption price is 100% of the principal
amount of Term Notes being redeemed, together with accrued and unpaid interest
to the date fixed for redemption. The Term Notes will mature, and the final
payment of principal and interest on the Term Notes will be due, on February 1,
2019. The amortization schedule will approximate the level of debt service
through to the maturity date with an additional principal payment on the
maturity date of $10,995,000. The table on the following page provides the
scheduled sinking fund redemption amounts and final principal payment on the
Term Notes.
F-14
<PAGE>
GOLDEN STATE PETRO (IOM I-A) PLC
NOTES TO FINANCIAL STATEMENTS, CONTINUED
SINKING FUND REDEMPTION AMOUNTS
AND FINAL PRINCIPAL PAYMENT
(DOLLARS IN THOUSANDS)
Scheduled Payment Date Amount
August 1, 2007 $ 1,340
February 1, 2008 1,395
August 1, 2008 1,450
February 1, 2009 1,510
August 1, 2009 1,570
February 1, 2010 1,635
August 1, 2010 1,700
February 1, 2011 1,765
August 1, 2011 1,840
February 1, 2012 1,910
August 1, 2012 1,990
February 1, 2013 2,070
August 1, 2013 2,150
February 1, 2014 2,240
August 1, 2014 2,330
February 1, 2015 2,420
August 1, 2015 2,520
February 1, 2016 2,620
August 1, 2016 2,725
February 1, 2017 2,835
August 1, 2017 2,950
February 1, 2018 3,070
August 1, 2018 3,190
February 1, 2019 14,325
-------
$63,550
=======
- --------------------------------------------------------------------------------
ADDITIONAL NOTES
The Company shall be entitled to issue an additional series of first preferred
mortgage notes upon the delivery date of the vessel. The proceeds of the
Additional Notes will be used by the Company to fund any additional construction
costs of the vessel.
The term and maturity of any Additional Notes will be determined at the
discretion of management at the date of issue.
F-15
<PAGE>
GOLDEN STATE PETRO (IOM I-A) PLC
NOTES TO FINANCIAL STATEMENTS, CONTINUED
MANDATORY REDEMPTION
The Serial Notes, together with the Term Notes and the Additional Notes, will be
subject to mandatory redemption on a pro rata basis in an aggregate principal
amount equal to the allocated principal amount of the Notes of the vessel where:
(i) it is not delivered on or before 180 days from the contractual delivery date
for the vessel and the contractual delivery date is not extended as provided in
the building contract or; (ii) if the Company rejects or cancels the related
building contract pursuant to the terms and conditions set forth therein, or;
(iii) if the vessel is a total loss, at a redemption price equal to 100% of the
principal amount thereof, plus accrued and unpaid interest (including default
interest) to the date fixed for redemption.
If a net reduction in construction cost occurs, the Company shall redeem
outstanding Serial Notes and Term Notes, on a pro rata basis, in an aggregate
principal amount equal to the net reduction in construction costs, at a
redemption price of 100% of the principal amount thereof, together with accrued
and unpaid interest on such Notes to be redeemed, to the date fixed for
redemption.
If the Initial Charterer exercised any of its termination options as defined in
the Initial Charter, and the Company does not enter into an acceptable
replacement charter for the vessel on or before the date which is one week prior
to the next sinking fund payment date for the Term Notes following the effective
date of such termination and the vessel is sold, with the consent of all the
holders of the Term Notes, then the outstanding Term Notes will be redeemed in
part, from the net proceeds of the sale of the vessel and the allocable portion
of the Restricted Cash -Pre Funding account, in an aggregate principal amount of
Term Notes equal to the allocated principal amount of the Notes for the vessel,
at an aggregate redemption price equal to the sum of such net proceeds and the
allocable portion of the debt service reserve fund. If all the holders of the
Term Notes do not consent to such a sale, then Cambridge Fund Management, L.L.C.
will attempt to recharter the vessel.
OPTIONAL REDEMPTION
The Serial Notes will not be subject to optional redemption prior to the
respective maturity dates. The Term Notes may be redeemed in whole or in part at
the discretion of the Company on any Payment Date on or after the later of (a)
August 1, 1999 and (b) the delivery date of the last vessel (whether the vessel
of the Company or the vessel of Golden State Petro (IOM I-B) PLC) to be
delivered at a redemption price equal to 100% of the principal amount thereof
plus accrued and unpaid interest to the date fixed for redemption, provided that
if (i) such redemption occurs prior to February 1, 2018 and (ii) a Vessel is
then subject to the related Initial Charter or to an Acceptable Replacement
Charter pursuant to which the charterer thereunder is required to pay charter
hire equal to or greater than the Charter Hire payable by the Initial Charterer
during the Fixed Period, then the Make-Whole Premium as defined, shall be
payable with respect to Mortgage Notes in an amount equal to Allocated Principal
Amount of the Mortgage Notes for such Vessel. The Company may not exercise such
optional redemption if such optional redemption would adversely affect the then
applicable ratings on the Serial Notes. In
F-16
<PAGE>
GOLDEN STATE PETRO (IOM I-A) PLC
NOTES TO FINANCIAL STATEMENTS, CONTINUED
addition, Term Notes may be redeemed in part in an aggregate principal amount
equal to the allocated principal amount of the Notes for the vessel if the
Initial Charter for the vessel is terminated and an acceptable replacement
charter is not entered into, at a redemption price equal to 100% of the
principal amount thereof plus accrued interest to the date fixed for redemption.
DEBT COVENANTS
The Indenture includes certain covenants that, among other things, prohibit the
Company and Golden State Petroleum Transport Corporation from incurring
additional indebtedness (other than Additional Notes or subordinated loans) and
impose limitations on the amount of investments, on loans, advances, mergers,
the payment of dividends and the making of certain other payments, the creation
of liens and certain transactions with affiliates.
4. RESTRICTED CASH - PRE FUNDING ACCOUNT:
This account was established in the name and under the control of the United
States Trust Company as the Indenture Trustee. The proceeds of the Notes issued
on behalf of the Company were deposited into this account in the form of a
guaranteed investment contract. The funds in this account can only be used to
fund the installment construction payments. The funds on deposit in this Pre
Funding account at March 31, 1997 were $52,433,724.
5. CONTINGENCIES AND COMMITMENTS:
The following is a schedule by years of minimum future rentals on the non
cancelable portion of the operating lease as of March 31, 1997 for the fiscal
years ending December 31:
1998....................................... $ --
1999....................................... 9,101,329
2000....................................... 9,928,723
2001....................................... 9,928,723
2002....................................... 9,928,723
From 2003 to 2007.......................... 40,542,286
-----------
Total minimum future rentals $79,429,784
Future contractual payments to be made under the ship building contract for each
of the two succeeding fiscal years ending December 31, until completion are as
follows:
1998....................................... $ --
1999....................................... 17,423,780
2000....................................... 25,726,340
-----------
Total future contractual payments $43,150,120
F-17
<PAGE>
GOLDEN STATE PETRO (IOM I-A) PLC
NOTES TO FINANCIAL STATEMENTS, CONTINUED
6. CONCENTRATION OF CREDIT RISK:
The Company has no sources for the payment of principal (including sinking fund
payments and mandatory redemption payments, and interest on the Notes) except
for the Restricted Cash - Pre Funding Account, the monthly charter hire payments
from the Initial Charterer and investment income earned on the restricted cash.
Accordingly, the Company's ability to pay debt service on the Notes is wholly
dependent upon the financial condition, results of operations and cash flows
from the initial charter and any subsequent charters if Initial Charterer elects
to terminate the initial charter.
7. RELATED PARTIES:
The Company is liable for $2,500 to Golden State Petroleum Transport Corporation
as compensation for acting as agent in connection with the issuance of the
Notes.
8. MANAGEMENT AGREEMENT:
Pursuant to an agreement (the "Management Agreement") between the Company and
Cambridge Fund Management, L.L.C. (the "Manager") an affiliate of the Company,
the Manager has agreed to provide administrative management and advisory
services to the Company at an annual fee of $50,000. The charges will be payable
to the Manager semi-annually on February 1 st and August 1st from amounts on
deposit in the ship management reserve fund after delivery of the vessel. The
Management Agreement is subordinate to the Notes.
9. REGISTRATION OF THE NOTES:
The Term Notes were sold by the Company and an affiliated entity, Golden State
Petro (IOM I-B) PLC (together, the "Owners") in a private placement through
their agent, Golden State Petroleum Transport Corporation. In connection with
such sale, the Owners and certain other parties (the "Parties") entered into a
Registration Rights Agreement for the benefit of the purchasers. Pursuant
thereto, the Parties agreed to use their best efforts to effect an Exchange
Offer to exchange up to $127,100,000 in aggregate principal amount of the Notes
issued by the Owners.
10. AUDIT FEES:
Audit fees are paid for by Cambridge Petroleum Transport Corporation.
11. DIRECTORS FEES:
Directors fees are paid for by Cambridge Fund Management.
F-18
<PAGE>
GOLDEN STATE PETRO (IOM I-B) PLC
REPORT OF THE AUDITORS
TO THE BOARD OF DIRECTORS OF GOLDEN STATE PETRO (IOM I-B) PLC
We have audited the balance sheet of Golden State Petro (IOM I-B) PLC (a company
incorporated in the Isle of Man) as of 31 March 1997 and the related statements
of income and retained earnings and cash flows for the period from 24 December
1996 (date of commencement of operations) to 31 March 1997. 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 audit.
We conducted our audit in accordance with auditing standards generally accepted
in the United States of AMERICA. Those standards require that we plan and
perform the audit to obtain reasonable assurance about whether the financial
statements are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audit provides a
reasonable basis for our opinion.
In our opinion, the financial statements referred to above, which have been
prepared in accordance with accounting principles generally accepted in the
United States of America, give a true and fair view of the state of the
company's affairs at 31 March 1997 and of the results of its operations and cash
flows for the period from 24 December 1996 (date of commencement of operations)
to 31 March 1997.
COOPERS & LYBRAND LLP
CHARTERED ACCOUNTANTS
DOUGLAS, ISLE OF MAN
29th May 1997
F-19
<PAGE>
GOLDEN STATE PETRO (IOM I-B) PLC
BALANCE SHEET
March 31, 1997
Assets:
Restricted cash $ 50,647,457
Vessel under construction 40,217,197
------------
Total assets 90,864,654
============
Liabilities:
Mortgage notes, net of debt issue costs of $ 1,201,284 89,148,716
Interest payable and other liabilities 1,856,490
------------
Total liabilities 91,005,206
------------
Stockholder's equity:
Common stock, no par value, 2,000 shares authorized;
2 shares issued and outstanding 2
Retained deficit (140,554)
------------
Total stockholder's equity (140,552)
------------
Total liabilities and stockholder's equity $ 90,864,654
============
See notes to the financial statements.
F-20
<PAGE>
GOLDEN STATE PETRO (IOM I-B) PLC
STATEMENT OF INCOME AND RETAINED EARNINGS
For the period from December 24, 1996 (date of commencement of operations) to
March 31, 1997
Revenue:
Interest income $ 972,541
-----------
Total revenue 972,541
Expenses:
Interest 1,081,107
Amortization of debt issue costs 31,988
-----------
Total expenses 1,113,095
Net loss (140,554)
Retained earnings, beginning of period --
-----------
Retained deficit, end of period $ (140,554)
===========
See notes to the financial statements.
F-21
<PAGE>
<TABLE>
STATEMENT OF CASH FLOWS
For the period from December 24,1996 (date of commencement of operations) to
March 31,1997
<CAPTION>
Cash flows from operating activities:
<S> <C>
Net loss $ (140,554)
Adjustments to reconcile net income to net cash provided by operating
activities:
Amortization of debt issue costs 31,988
Changes in assets and liabilities:
Increase in interest payable and other liabilities 1,856,490
------------
Net cash provided by operating activities 1,747,924
------------
Cash flows from investing activities:
Payments made under vessel construction contract (38,941,814)
Interest capitalized (775,383)
Transaction costs capitalized (500,000)
Restricted cash (50,647,457)
------------
Net cash used in investing activities (90,864,654)
------------
Cash flows from financing activities:
Proceeds from mortgage notes 90,350,000
Debt issue costs (1,233,272)
Contribution of capital 2
------------
Net cash provided by financing activities $ 89,116,730
------------
Net increase in cash $ --
============
Supplemental data:
Interest paid during the period --
------------
</TABLE>
See notes to the financial statements.
F-22
<PAGE>
GOLDEN STATE PETRO (IOM I-B) PLC
NOTES TO FINANCIAL STATEMENTS
1. DESCRIPTION OF LEASE OPERATION:
Golden State Petro (IOM I-B) PLC (the "Company") was formed as an Isle of Man
public limited company for the purpose of acquiring and chartering a very large
crude oil carrier ("VLCC"). The proceeds from the offering and sale of the
Serial Notes, together with the proceeds of the sale of the Term Notes
(collectively the "Notes"), will be used by the Company to fund the construction
of a VLCC by Samsung Corporation and Samsung Heavy Industries Co., Ltd.
(collectively, the "Builders") under the technical supervision of the Chevron
Shipping Company as agent for Chevron Transport Corporation (the "Initial
Charterer") which is an indirect, wholly-owned subsidiary of Chevron
Corporation. The contracted delivery date of the VLCC is July 1, 1999. The VLCC,
once accepted by the Company under the building contract, will be chartered to
the Initial Charterer pursuant to an initial charter for a term of eighteen
years. The Initial Charterer has an option to terminate the charter on the
eighth anniversary of the delivery date for the VLCC. The Initial Charterer's
obligations under the initial charter will be guaranteed by Chevron corporation.
The Company is a wholly-owned subsidiary of Golden State Holdings I Ltd., an
Isle of Man holding company, which is a wholly-owned subsidiary of Cambridge
Petroleum Transportation Corporation ("CPTC"), a closely-held Cayman Islands
Corporation.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:
BASIS OF PRESENTATION
The financial statements have been prepared in accordance with accounting
principles generally accepted in the United States of America.
ALLOCATION OF MORTGAGE NOTES
The Company is jointly and severally liable under the Notes with Golden State
Petro (IOM I-A) PLC for the issued amount of $178,800,000. In preparing the
separate company financial statements of the Company and Golden State Petro (IOM
I-A) PLC, the aggregate amount of the Notes has been allocated so as to reflect
the difference in the contracted cost of the vessels.
OPERATING LEASE
The operating lease commences upon the delivery of the vessel to the Initial
Charterer. Income from the operating lease will be recognized ratably over the
term of the leases.
F-23
<PAGE>
GOLDEN STATE PETRO (IOM I-B) PLC
NOTES TO FINANCIAL STATEMENTS, CONTINUED
VESSEL UNDER CONSTRUCTION
Construction in progress is capitalized in accordance with contract payments
made and also includes the capitalization of interest charges and certain
transaction costs incurred during the period of the vessel's construction.
Contract payments capitalized as of March 31, 1997 were $38,941,814. Interest
charges of $775,383 and transaction costs of $500,000 were capitalized as of
March 31, 1997.
DEBT ISSUE COSTS
Debt issue costs comprise expenses incurred in connection with the issuance of
the Notes (see Note 3). Such expenses are being amortized over the weighted
average life of the serial notes and the life of the term notes respectively.
FAIR VALUE OF FINANCIAL INSTRUMENTS
The methods and assumptions used in estimating the fair values of financial
instruments are as follows:
RESTRICTED CASH: The Restricted cash balance represents an investment in a
guaranteed investment contract which is readily convertible to cash. The
carrying value of the guaranteed investment contract is stated at contract value
which approximates fair value. This contract is with Pacific Mutual Life
Insurance, a California Life Insurance Company and is held in the name of the
United States Trust Company on behalf of the Company as the Indenture Trustee.
MORTGAGE NOTES: The carrying value of the Notes approximates fair value as of
March 31, 1997 based upon the current borrowing rates available for financing
with similar terms and maturities and the short elapsed time between the date of
the balance sheet and the date of issuance of the Notes.
INTEREST PAYABLE AND OTHER LIABILITIES: The carrying value approximates fair
value due to their relatively short maturities.
ACCOUNTING 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 disclosure of
contingent assets and liabilities at the date of the financial statements and
the reported amounts of revenue and expenses during the reporting period. Actual
results could differ from such estimates. The most significant assumptions and
estimates relate to the vessel under construction held for lease.
F-24
<PAGE>
GOLDEN STATE PETRO (IOM I-B) PLC
NOTES TO FINANCIAL STATEMENTS, CONTINUED
INCOME TAXES
The Company is exempt from United States federal, state and local income taxes
and have been granted exemptions from the statutory 20% tax on profits required
to be assessed against Isle of Man companies. Accordingly, no provision for
taxes have been made in these financial statements.
OTHER
Both interest income and interest expense are recognized on an accrual basis.
3. MORTGAGE NOTES:
On December 24, 1996, Golden State Petroleum Transport Corporation, a special
purpose Delaware corporation which is an entity affiliated with the Company,
acted as agent on behalf of the Company and issued the Notes, certain terms of
which are set forth below. The Company was allocated a share of the proceeds
from the offering and sale of the Notes, which totaled $90,350,000. These funds
were used by the Company to fund the construction and acquisition of a VLCC.
The Notes have priority of payment and are collateralized by (i) a statutory
first mortgage on the vessel; (ii) an assignment of the building contract with
the Builders and a technical supervision agreement; (iii) an assignment of the
building contract performance guarantee with the Korea Development Bank; (iv) an
assignment of the initial charter; (v) an assignment of the charter supplement
(pursuant to the issuance of Additional Notes); (vi) an assignment of the
Chevron Corporation guarantee; (vii) an assignment of the management agreement
with Cambridge Fund Management L.L.C.; (viii) an assignment of the earnings and
issuance proceeds related to the vessel and (ix) certain other collateral.
SERIAL NOTES
The Serial Notes were issued in the aggregate principal amount of $51,700,000 of
which $26,800,000 was allocated to the Company. Set forth below are the
allocated principal amount and the interest rates of Serial Notes payable on
each maturity date for the Company:
MATURITY DATE INTEREST RATE PRINCIPAL
------------------------------------------------------------------------
February 1, 2000 6.360% $ 2,650
February 1, 2001 6.465% 3,450
February 1, 2002 6.550% 3,700
February 1, 2003 6.610% 3,950
February 1, 2004 6.700% 4,200
February 1, 2005 6.800% 4,450
February 1, 2006 6.855% 4,400
$26,800
=======
F-25
<PAGE>
GOLDEN STATE PETRO (IOM I-B) PLC
NOTES TO FINANCIAL STATEMENTS, CONTINUED
Interest is deemed to accrue for the Serial notes from December 24, 1996 and is
payable on February 1st and August 1st of each year commencing August 1, 1997.
At March 31, 1997 the effective interest rate for the Serial notes was 6.643%.
TERM NOTES
The Term Notes were issued by Golden State Petroleum Transportation Corporation,
acting as agent for the Company, in the aggregate principal amount of
$127,100,000. The allocated principal amount of Term Notes to the Company is
$63,550,000. Interest on the Term Notes will accrue from the date of issuance
thereof at a rate per annum equal to 8.04%, and will be payable on each February
1st and August 1st (each, a "Payment Date"), commencing August 1, 1997. Interest
on the Term Notes will accrue from the most recent date to which interest has
been paid or, if no interest has been paid, from December 24, 1996.
Term Notes will be subject to redemption through the operation of a mandatory
sinking fund on each payment date commencing February 1, 2008 to and including
August 1, 2018, according to the schedule of sinking fund redemption payments
set forth below. The sinking fund redemption price is 100% of the principal
amount of Term Notes being redeemed, together with accrued and unpaid interest
to the date fixed for redemption. The Term Notes will mature, and the final
payment of principal and interest on the Term Notes will be due, on February 1,
2019. The amortization schedule will approximate the level of debt service
through to the maturity date with an additional principal payment on the
maturity date of $10,995,000. The table on the following page provides the
scheduled sinking fund redemption amounts and final principal payment on the
Term Notes.
F-26
<PAGE>
GOLDEN STATE PETRO (IOM I-B) PLC
NOTES TO FINANCIAL STATEMENTS, CONTINUED
- --------------------------------------------------------------------------------
SINKING FUND REDEMPTION AMOUNTS
AND FINAL PRINCIPAL PAYMENT
(DOLLARS IN THOUSANDS)
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Scheduled Payment Date Amount
- --------------------------------------------------------------------------------
February 1, 2008 $1,430
August 1, 2008 1,490
February 1, 2009 1,550
August 1, 2009 1,610
February 1, 2010 1,675
August 1, 2010 1,745
February 1, 2011 1,815
August 1, 2011 1,885
February 1, 2012 1,960
August 1, 2012 2,040
February 1, 2013 2,125
August 1, 2013 2,210
February 1, 2014 2,295
August 1, 2014 2,390
February 1, 2015 2,485
August 1, 2015 2,585
February 1, 2016 2,690
August 1, 2016 2,800
February 1, 2017 2,910
August 1, 2017 3,025
February 1, 2018 3,150
August 1, 2018 3,275
February 1, 2019 14,410
------
$63,550
Additional Notes
The Company shall be entitled to issue an additional series of first preferred
mortgage notes upon the delivery date of the vessel. The proceeds of the
Additional Notes, will be used by the Company to fund any additional
construction costs of the vessel.
The term and maturity of any Additional Notes will be determined at the
discretion of management at the date of issue.
F-27
<PAGE>
GOLDEN STATE PETRO (IOM I-B) PLC
NOTES TO FINANCIAL STATEMENTS, CONTINUED
MANDATORY REDEMPTION
The Serial Notes, together with the Term Notes and the Additional Notes, will be
subject to mandatory redemption on a pro rata basis in an aggregate principal
amount equal to the allocated principal amount of the Notes of the vessel where;
(i) it is not delivered on or before 180 days from the contractual delivery date
for the vessel and the contractual delivery date is not extended as provided in
the building contract or; (ii) if the Company rejects or cancels the related
building contract pursuant to the terms and conditions set forth therein, or;
(iii) if the vessel is a total loss, at a redemption price equal to 100% of the
principal amount thereof, plus accrued and unpaid interest (including default
interest) to the date fixed for redemption.
If a net reduction in construction cost occurs, the Company shall redeem
outstanding Serial Notes and Term Notes, on a pro rata basis, in an aggregate
principal amount equal to the net reduction in construction costs, at a
redemption price of 100% of the principal amount thereof, together with accrued
and unpaid interest on such Notes to be redeemed, to the date fixed for
redemption.
If the Initial Charterer exercised any of its termination options as defined in
the Initial Charter, and the Company does not enter into an acceptable
replacement charter for the vessel on or before the date which is one week prior
to the next sinking fund payment date for the Term Notes following the effective
date of such termination and the vessel is sold, with the consent of all the
holders of the Term Notes, then the outstanding Term Notes will be redeemed in
part, from the net proceeds of the sale of the vessel and the allocable portion
of the Restricted Cash -Pre Funding account, in an aggregate principal amount of
Term Notes equal to the allocated principal amount of the Notes for the vessel,
at an aggregate redemption price equal to the sum of such net proceeds and the
allocable portion of the debt service reserve fund. If all the holders of the
Term Notes do not consent to such a sale, then Cambridge Fund Management, L.L.C.
will attempt to recharter the vessel.
OPTIONAL REDEMPTION
The Serial Notes will not be subject to optional redemption prior to the
respective maturity dates.
The Term Notes may be redeemed in whole or in part at the discretion of the
Company on any Payment Date on or after the later of (a) August 1, 1999 and (b)
the delivery date of the last vessel (whether the vessel of the Company or the
vessel of Golden State Petro (IOM I-A) PLC) to be delivered at a redemption
price equal to 100% of the principal amount thereof plus accrued and unpaid
interest to the date fixed for redemption, provided that if (i) such redemption
occurs prior to February 1, 2018 and (ii) a Vessel is then subject to the
related Initial Charter or to an Acceptable Replacement Charter pursuant to
which the charterer thereunder is required to pay charter hire equal to or
greater than the Charter Hire payable by the Initial Charterer during the Fixed
Period, then the Make-Whole Premium as defined, shall be payable with respect to
Mortgage Notes in an amount equal to Allocated Principal Amount of the Mortgage
Notes for
F-28
<PAGE>
GOLDEN STATE PETRO (IOM I-B) PLC
NOTES TO FINANCIAL STATEMENTS, CONTINUED
such Vessel. The Company may not exercise such optional redemption if such
optional redemption would adversely affect the then applicable ratings on the
Serial Notes. In addition, Term Notes may be redeemed in part in an aggregate
principal amount equal to the allocated principal amount of the Notes for the
vessel if the Initial Charter for the vessel is terminated and an acceptable
replacement charter is not entered into, at a redemption price equal to 1 00% of
the principal amount thereof plus accrued interest to the date fixed for
redemption.
DEBT COVENANTS
The Indenture includes certain covenants that, among other things, prohibit the
Company and Golden State Petroleum Transport Corporation from incurring
additional indebtedness (other than Additional Notes or subordinated loans) and
impose limitations on the amount of investments, on loans, advances, mergers,
the payment of dividends and the making of certain other payments, the creation
of liens and certain transactions with affiliates.
4. RESTRICTED CASH - PRE FUNDING ACCOUNT:
This account was established in the name and under the control of the United
States Trust Company as the Indenture Trustee. The proceeds of the Notes issued
on behalf of the Company were deposited into this account in the form of a
guaranteed investment contract. The funds in this account can only be used to
fund the installment construction payments. The funds on deposit in this Pre
Funding account at March 31, 1997 were $50,647,457.
5. CONTINGENCIES AND COMMITMENTS:
The following is a schedule by years of minimum future rentals on the non
cancelable portion of the operating lease as of March 31, 1997 for the fiscal
years ending December 31:
1998....................................... $ --
1999....................................... 4,964,361
2000....................................... 9,928,723
2001....................................... 9,928,723
2002....................................... 9,928,723
From 2003 to 2007.......................... 44,679,254
-----------
Total minimum rentals $79,429,784
Future contractual payments to be made under the ship building contract for each
of the two succeeding fiscal years ending December 31, until completion are as
follows:
1998....................................... 11,251,224
1999....................................... 27,690,590
-----------
Total future contractual payments $38,941,814
F-29
<PAGE>
GOLDEN STATE PETRO (IOM I-B) PLC
NOTES TO FINANCIAL STATEMENTS, CONTINUED
6. CONCENTRATION OF CREDIT RISK:
The Company has no sources for the payment of principal (including sinking fund
payments and mandatory redemption payments, and interest on the Notes) except
for the Restricted Cash - Pre Funding account, the monthly charter hire payments
from the Initial Charterer and investment income earned on the restricted cash
(See Note 2). Accordingly, the Company's ability to pay debt service on the
Notes is wholly dependent upon the financial condition, results of operations
and cash flows from the initial charter and any subsequent charters if Initial
Charterer elects to terminate the initial charter.
7. RELATED PARTIES:
The Company is liable for $2,500 by Golden State Petroleum Transport Corporation
as compensation for acting as agent in connection with the issuance of the
Notes.
8. MANAGEMENT AGREEMENT:
Pursuant to an agreement (the "Management Agreement") between the Company and
Cambridge Fund Management, L.L.C. (the "Manager") an affiliate of the Company,
the Manager has agreed to provide administrative management and advisory
services to the Company at an annual fee of $50,000. The charges will be payable
to the Manager semi-annually on February 1st and August 1st from amounts on
deposit in the ship management reserve fund after delivery of the vessel. The
Management Agreement is subordinate to the Notes.
9. REGISTRATION OF THE NOTES:
The Term Notes were sold by the Company and an affiliated entity, Golden State
Petro (IOM I-A) PLC (together, the "Owners") in a private placement through
their agent, Golden State Petroleum Transport Corporation. In connection with
such sale, the Owners and certain other parties (the "Parties") entered into a
Registration Rights Agreement for the benefit of the purchasers. Pursuant
thereto, the Parties agreed to use their best efforts to effect an Exchange
Offer to exchange up to $127,100,000 in aggregate principal amount of the Notes
issued by the Owners.
10. AUDIT FEES:
Audit fees are paid for by Cambridge Petroleum Transport Corporation.
11. DIRECTORS FEES:
Directors fees are paid for by Cambridge Fund Management.
F-30
<PAGE>
APPENDIX A
CERTAIN SHIPPING TERMS
The following shipping terms are used in this Prospectus.
"AFRAMAX TANKER" means a vessel of approximately 60,000 to 120,000 dwt.
"BAREBOAT CHARTER" means the contract for hire of a ship for a certain
period of time during which the charterer is responsible for the operating costs
and voyage costs of the ship.
Sometimes called a demise charter.
"CERCLA" means the Comprehensive Environmental Response, Compensation
and Liability Act.
"CHARTER" means the hire of a ship for a specified period of time or to
carry a cargo for a fixed fee from a loading port to a discharging port. The
contract for a charter is called a charter party.
"CLASSIFICATION SOCIETY" means a private organization which has as its
purpose the supervision of vessels during their construction and afterward, in
respect to their seaworthiness and upkeep, and the placing of vessels in grades
or "classes" according to the society's rules for each particular type of
vessel.
"DOUBLE HULL" means hull construction technique by which a ship has an
inner and outer hull separated by void space, usually several feet in width.
"DWT (DEADWEIGHT TONNE)" means a unit of a vessel's capacity, for
cargo, fuel oil, stores and crew, measured in metric tonnes of 1,000 kilograms.
A vessel's dwt or total deadweight is the total weight the vessel can carry when
loaded to a particular load line.
"FREIGHT" means the compensation for carriage of cargo.
"IMO" means International Maritime Organization, a United Nations
agency that issues, inter alia, international trade standards for shipping.
"LAY-UP" means mooring a ship at a protected anchorage, shutting down
substantially all of its operating systems and taking measures to protect
against corrosion and other deterioration.
"NEWBUILDING" means a new vessel under construction.
"OPA 90" means the United States Oil Pollution Act of 1990, as amended.
"PROTECTION AND INDEMNITY INSURANCE" means the insurance obtained
through a mutual association formed by shipowners to provide protection from
financial loss to one member by contribution towards that loss by all members.
A-1
<PAGE>
"SPECIAL SURVEY" means the inspection of a vessel by a classification
society surveyor which takes place at a minimum every four years and at a
maximum every five years.
"SPOT MARKET" means the market for immediate chartering of a vessel.
"SUEZMAX TANKER" means a vessel of approximately 120,000 to 200,000
dwt, of a maximum length, breadth and draught capable of passing through the
Suez Canal.
"TANKER" means a ship designed for the carriage of liquid cargoes in
bulk, her cargo space consisting of many tanks. Tankers carry a variety of
products including crude oil, refined products, liquid chemicals and liquid gas.
Tankers load their cargo by gravity from the shore or by pumps and discharge
using their own pumps.
"TIME CHARTER" means the hire of a ship for a specified period of time.
The owner provides the ship with crew, stores and provisions, ready in all
aspects to load cargo and proceed on a voyage. The charterer pays for bunkering
and all voyage related expenses including canal tolls and port charges.
"TONNE" means a metric tonne of 1,000 kilograms.
"TONNE-MILES" means a measure of tanker demand. Cargo tonnes carried by
a vessel multiplied by the distance traveled.
"TOVALOP SCHEME" means the Tankers Owners Voluntary Agreement
concerning Liability for Oil Pollution dated January 7, 1969, as amended.
"ULCC" means ultra-large crude carriers.
"VLCC" means very large crude carriers.
"VOYAGE CHARTER" means a contract of carriage in which the charterer
pays for the use of a ship's cargo capacity for one, or sometimes more than one,
voyage. Under this type of charter, the shipowner pays all the operating costs
of the ship (including bunkers, canal and port changes, pilotage, towage and
ship's agency) while payment for cargo handling charges are subject of agreement
between the parties. Freight is generally paid per unit of cargo, such as a
tonne, based on an agreed quantity, or as a lump sum irrespective of the
quantity loaded.
Shipping terms supplied by the Dictionary of Shipping Terms and other
sources.
A-2
<PAGE>
GLOSSARY OF CERTAIN TERMS
The following is a glossary of certain terms used in this Prospectus.
The definitions of terms used in this glossary that are also used in the
Indenture, the Initial Charters or the Mortgages are qualified in their entirety
by reference to the definition of such terms contained therein.
"ACCEPTABLE REPLACEMENT CHARTER" means any replacement charter which
satisfies each of the following requirements: (i) the charter is a bareboat
charter and requires that the charterer thereunder "gross up" charter hire
payments to indemnify and hold the holders of the Mortgage Notes harmless from
any withholding tax imposed on the charter hire payments or on the payments of
the Mortgage Notes, (ii) the charter hire payments payable during the
non-cancelable term of such replacement charter, after giving effect to (1) any
"gross up" of such amounts as a result of any withholding, transportation or
excise tax on such charter hire payments, (2) the Allocable Portion of the Debt
Service Reserve Fund and (3) all fees and expenses incurred in connection with
the recharter of the Vessel, provide sufficient funds for the payment in full
when due of (A) the Allocated Principal Amount of the Mortgage Notes for the
related Vessel and interest thereon in accordance with the revised schedule of
sinking fund and principal payments, that is applicable upon termination of the
related Initial Charter, (B) the amount of Recurring Fees for such Vessel, (C)
the amount of Management Fees for such Vessel, (D) the amount of fees and
expenses of the Indenture Trustee and Trustee Fees allocable to such Vessel and
(E) an amount at least equal to 30% of the estimated amounts, on a per annum
basis, referred to in clauses (B), (C) and (D) above for miscellaneous or
unexpected expenses and (iii) the Rating Agencies shall have confirmed in
writing to the Indenture Trustee that the terms and conditions of such proposed
charter will not result in the withdrawal or reduction of the then current
ratings of the Mortgage Notes.
"ADDITIONAL CHARTER HIRE" means additional charter hire payable
pursuant to a Charter Supplement in an amount sufficient to allow the related
Owner to service the aggregate debt incurred on any Additional Notes in
connection with any Additional Construction Costs.
"ADDITIONAL CONSTRUCTION COSTS" means any net increases in construction
costs for a Vessel which (i) result from actions by the Initial Charterer or the
Technical Supervisor; (ii) are approved by the related Owner, such approval not
to be unreasonably withheld; and (iii) occur after execution of the related
Building Contract on the Original Closing Date but prior to the related Delivery
Date.
"ADDITIONAL NOTE" means each first preferred mortgage note issued
pursuant to a Supplemental Indenture to finance the Additional Construction
Costs of a Vessel.
"AFFILIATE" means, with respect to any Person (the "relevant Person"),
(i) any other Person that directly, or indirectly through one or more
intermediaries, controls the relevant Person (a "Controlling Person") or (ii)
any Person (other than the relevant Person) which is controlled by or is under
common control with a Controlling Person. As used herein, the term "control"
means possession, directly or indirectly, of the power to direct or cause the
direction of the management or policies of a Person, whether through the
ownership of voting securities, by contract or otherwise.
A-3
<PAGE>
"ALLOCATED PRINCIPAL AMOUNT OF THE ADDITIONAL NOTES" means, when used
with reference to the Additional Notes and either Vessel at any date of
determination, the product of (a) the aggregate outstanding principal amount of
Additional Notes as of such date and (b) a fraction (i) the numerator of which
is the aggregate outstanding principal amount of Additional Notes for such
Vessel as specified with respect to such Vessel in the related Supplemental
Indenture and (ii) the denominator of which is the aggregate initial principal
amount of all Additional Notes.
"ALLOCATED PRINCIPAL AMOUNT OF THE MORTGAGE NOTES" means, when used
with reference to the Mortgage Notes and either Vessel at any date of
determination, the sum of (a) the Allocated Principal Amount of the Notes for
such Vessel and (b) the Allocated Principal Amount of the Additional Notes for
such Vessel.
"ALLOCATED PRINCIPAL AMOUNT OF THE NOTES" means, when used with
reference to the Notes and either Vessel amounts indicated on Schedule 1
attached hereto.
"ASSIGNMENT OF BUILDING CONTRACT" means, for each Vessel, the Building
Contract Assignment, dated as of December 1, 1996, between the related Owner and
the Indenture Trustee, pursuant to which such Owner collaterally assigns its
rights, title and interests in the related Building Contract and the Technical
Supervision Agreement to the Indenture Trustee.
"ASSIGNMENT OF BUILDING CONTRACT GUARANTEE" means, for each Building
Contract Guarantee, the Assignment of Building Contract Guarantee, dated as of
December 1, 1996, between the related Owner and the Indenture Trustee, as the
same may be amended from time to time, pursuant to which such Owner collaterally
assigns its rights, title and interest in the related Building Contract
Guarantee therein to the Indenture Trustee.
"ASSIGNMENT OF CHARTER" means, for each Initial Charter, the Assignment
of Charter, dated as of December 1, 1996, between the Owner of the related
Vessel and the Indenture Trustee, as the same may be amended from time to time,
pursuant to which such Owner collaterally assigns its rights, title and interest
therein to the Indenture Trustee.
"ASSIGNMENT OF CHARTER SUPPLEMENT" means, for the Charter Supplement,
the Assignment of Charter Supplement, dated the date of the related Supplemental
Indenture, between the Owner of the related Vessel and the Indenture Trustee, as
the same may be amended from time to time, pursuant to which such Owner
collaterally assigns its right, title and interest therein to the Indenture
Trustee.
"ASSIGNMENT OF EARNINGS AND INSURANCES" means, for each Vessel, the
Assignment of Earnings and Insurances, dated the Delivery Date for such Vessel,
between the related Owner and the Indenture Trustee, as the same may be amended
from time to time, pursuant to which such Owner collaterally assigns its right,
title and interest in the earnings and insurances on such Vessel to the
Indenture Trustee.
"ASSIGNMENT OF GUARANTEE" means, for each Chevron Guarantee, the
Assignment of Guarantee, dated as of December 1, 1996, between the Owner of the
related Vessel and the Indenture Trustee, as the same may be amended from time
to time, pursuant to which such Owner collaterally assigns its right, title and
interest therein to the Indenture Trustee.
A-4
<PAGE>
"ASSIGNMENT OF MANAGEMENT AGREEMENT" means, for each Management
Agreement, the Assignment of Management Agreement, dated as of December 1, 1996,
between the Owner of the related Vessel and the Indenture Trustee, as the same
may be amended from time to time, pursuant to which such Owner collaterally
assigns its right, title and interest therein to the Indenture Trustee.
"BUILDING CONTRACT GUARANTEE" means, for each Vessel, the Building
Contract Guarantee, dated the Original Closing Date, given by the Building
Contract Guarantor to the Owner in connection with the related Vessel.
"BUILDING CONTRACT GUARANTOR" means The Korea Development Bank.
"BUSINESS DAY" means any day except a Saturday, a Sunday or a day on
which banking institutions in New York, New York, San Francisco, California or
in the city and state where the Indenture Trustee's principal offices are
located, are authorized or are obligated by law, executive order or governmental
decree to be closed.
"CHARTER EVENT OF DEFAULT" means, for each Initial Charter, each of the
events designated as a default in Clause 17 of such Initial Charter.
"CHARTER HIRE" means, for each Initial Charter, the scheduled payments
of charter hire thereunder, as may be increased from time to time pursuant to a
Charter Supplement or reduced by the Charter Hire Reduction during the Fixed
Period and by the Charter Hire Reduction during each Optional Period.
"CHARTER HIRE REDUCTION" means an amount equal to the amount necessary
to reflect the amortization of the Net Reduction in Construction Costs over the
term of the related Initial Charter.
"CHARTER SUPPLEMENT" means, with respect to each Initial Charter, the
Initial Charter Supplement dated the date of the related Supplemental Indenture,
between the Owner of the related Vessel and the Initial Charterer.
"CHEVRON GUARANTEE" means, for either Vessel, the Guarantee, dated the
Original Closing Date, given by Chevron to the related Owner in connection with
the related Initial Charter.
"CLASS" means each class of Securities constituting a separate issuance
by Golden State Petroleum, as agent for the Owners, of serial first preferred
mortgage notes or first preferred mortgage notes under the Indenture or
additional first preferred mortgage notes under a Supplemental Indenture,
provided that the Exchange Notes and the Existing Notes shall constitute one
class for purposes of this definition.
"COMPULSORY ACQUISITION" means requisition for title or other
compulsory acquisition of either Vessel (otherwise than by requisition for
hire), capture, seizure, condemnation, destruction, detention or confiscation of
such Vessel by any Governmental Authority or by persons acting or purporting to
act on behalf of any Governmental Authority.
A-5
<PAGE>
"CONTRACTUAL DELIVERY DATE" means, for Vessel A, February 1, 1999, and
for Vessel B, July 1, 1999.
"DEFAULT PAYMENT" means, as of any date of determination and as
calculated by the Manager, with respect to each Vessel and the related Initial
Charter, the sum of (a) the sum of (i) the Stipulated Loss Value in relation to
the period in question calculated pursuant to the related Initial Charter, (ii)
all charter hire accrued (on a daily basis) but unpaid under such Initial
Charter to the actual date of payment and (iii) any other amounts due to the
related Owner under such Initial Charter on or prior to the actual date of
payment, and (b) interest on the amount described in (a) (after as well as
before judgment) at the Default Rate from the date such amounts were payable to
the actual date of payment.
"DEFAULT RATE" means, with respect to a Mortgage Note, a rate per annum
for each day from the date of a default in any payment hereunder until such
payment shall be paid in full equal to the lesser of (a) 1.0% above the interest
rate indicated in such Mortgage Note and (b) the sum of 1.5% and LIBOR.
"DUFF & PHELPS" means Duff & Phelps Credit Rating Co.
"GOVERNMENTAL APPROVAL" means any authorization, consent, approval,
license, franchise, lease, ruling, permit, tariff, rate, certification,
exemption, filing or registration by or with any Governmental Authority relating
to the ownership of the Collateral or to the execution, delivery or performance
of this Indenture or any Security Document.
"GOVERNMENTAL AUTHORITY" means the United States federal or any foreign
government, any state or other political subdivision thereof, and any entity
exercising executive, legislative, judicial, regulatory or administrative
functions of or pertaining to government and any other governmental entity with
authority over an Owner, the Initial Charterer or operation of a Vessel.
"HOLDER" means a registered holder of any Term Note.
"HOLDER" means a registered holder of any Mortgage Note.
"INDEBTEDNESS" means, with respect to any Person, all obligations,
whether or not contingent, of such Person (i)(a) for borrowed money (including,
but not limited to, any indebtedness secured by a Lien on the assets of such
person which is (1) given to secure all or part of the purchase price of
property subject thereto, whether given to the vendor of such property or to
another, or (2) existing on property at the time of acquisition thereof), (b)
evidenced by a note, debenture, bond or written instrument, (c) under a lease
required to be capitalized on the balance sheet of the lessee under generally
accepted accounting principles or under any lease or related document (including
a purchase agreement) which provides that such person is contractually obligated
to purchase or to cause a third party to purchase such leased property, (d) in
respect of letters of credit, bank guarantees or bankers' acceptances (including
reimbursement obligations with respect to any of the foregoing), (e) with
respect to indebtedness secured by a Lien affecting title or resulting in an
encumbrance to which the property or assets of such Person are subject, whether
or not the obligation secured thereby shall have been assumed or guaranteed by
or shall otherwise be such person's legal liability, (f) in respect of the
balance of deferred and unpaid purchase price of any property or assets, and (g)
under interest
A-6
<PAGE>
rate or currency swap agreements, cap, floor and collar agreements, spot and
forward contracts and similar agreements and arrangements; (ii) with respect to
any obligation of others of the type described in the preceding clause (i)
assumed by or guaranteed in any manner by such Person or in effect guaranteed by
such Person through an agreement to purchase (including, without limitation,
"take or pay" and similar arrangements), contingent or otherwise (and the
obligations of such Person under any such assumptions, guarantees or other such
arrangements); and (iii) any and all deferrals, renewals, extensions,
refinancings and refundings of, or amendments, modifications or supplements to,
any of the foregoing.
"INITIAL CHARTER" means, for each Vessel, the bareboat charter between
the related Owner and the Initial Charterer, dated the Original Closing Date, as
the same may be amended, supplemented and modified from time to time.
"ISSUE OF ONE DEBENTURE" means, for each Owner, the Issue of One
Debenture, dated as of December 1, 1996, between such Owner and the Indenture
Trustee, as the same may be amended from time to time.
"LAW" means any statute, law, rule, regulation, ordinance, order, code,
policy or rule of common law, now or hereafter in effect, and any judicial or
administrative interpretation thereof by a Governmental Authority or otherwise,
including any judicial or administrative order, consent decree or judgment.
"LIBOR" means the rate calculated on the basis of the offered rates for
deposits in dollars for a one-month period which appear on the Reuters Screen
LIBO Page as of 11:00 A.M., London time, on the date that is two London Banking
Days preceding the date of calculation. If at least two such offered rates
appear on the Reuters Screen LIBO Page, LIBOR will be the arithmetic mean of
such offered rates (rounded to the nearest .0001 percentage point). If, at any
time of determination, the Reuters Screen LIBO Page is not available, LIBOR will
be calculated as the average (rounded upward, if necessary, to the next higher
1/16 of 1%) of the respective ratio per annum at which deposits in dollars for a
one month period are offered to each of three reference banks in the London
interbank market at approximately 11:00 A.M., London time, on the date that is
two London Banking Days preceding the date of calculation. Each of the Initial
Charterer and the Indenture Trustee will select a reference bank and the third
reference bank will be selected by the Initial Charterer and the Indenture
Trustee together or, failing agreement, by the previously selected reference
banks together.
"LIEN" means, with respect to any asset, any mortgage, lien (statutory
or otherwise), pledge, security interest, claim, hypothecation, assignment for
security, deposit arrangement or security interest of any kind in respect of
such asset. For the purposes of this Indenture, a Person shall be deemed to own
subject to a Lien any asset which it has acquired or holds subject to the
interest of a vendor or lessor under any conditional sale agreement, capital
lease or other title retention agreement relating to such asset.
"LONDON BANKING DAY" means any day on which dealings in deposits in
United States dollars are carried on in the London interbank market and on which
commercial banks are open for domestic and international business (including
dealings in United States dollar deposits) in London and New York.
A-7
<PAGE>
"LOSS PAYMENT DATE" means, with respect to a Total Loss, the date which
is 90 days after the occurrence of such Total Loss.
"MAKE-WHOLE PREMIUM," if applicable to the optional redemption of any
Term Note, means the excess, if any, of (i) the aggregate present value as of
the date of such redemption of each dollar of principal of such Term Note being
redeemed and the amount of interest (exclusive of interest accrued to the date
of redemption) that would have been payable in respect of such dollar if such
redemption had not been made, determined by discounting, on a semiannual basis,
such principal and interest at a rate equal to the sum of the Treasury Yield
(determined on the Business Day immediately preceding the date of such
redemption) plus 0.375% (three-eighths of one percent) from the respective dates
on which such principal and interest would have been payable if such redemption
had not been made, over (ii) the aggregate principal amount of such Exchange
Notes and such untendered Existing Notes, if any, being redeemed.
"MANAGEMENT AGREEMENT" means, for each Owner, the Management Agreement,
dated the Original Closing Date, between such Owner and the Manager, as the same
may be amended from time to time.
"MANAGEMENT FEE" means, with respect to each Vessel, an amount per year
payable semi-annually in arrears on each Payment Date equal to $50,000.
"MANAGER" means Cambridge Fund Management, L.L.C., a Delaware limited
liability company, or any other Person acting from time to time as Manager in
accordance with the terms of the Management Agreement.
"MOODY'S" means Moody's Investors Service, Inc.
"MORTGAGE" means, for each Vessel, the First Preferred Ship Mortgage
for such Vessel, dated the Delivery Date of such Vessel, between the related
Owner and the Indenture Trustee, as the same may be amended from time to time.
"MORTGAGE EVENT OF DEFAULT" means an event of default as defined in the
Mortgage.
"NET REDUCTION IN CONSTRUCTION COSTS" means any net decreases in
construction costs for a Vessel which (i) result from actions by the Initial
Charterer or Technical Supervisor, (ii) are approved by the related Owner, such
approval to not be unreasonably withheld; and (iii) occur after the execution of
the related Building Contract on the Original Closing Date but prior to the
related Delivery Date.
"OWNER TAXES" means any income, franchise or equivalent tax, imposed
upon or measured by the net income, stated capital or earned surplus of an Owner
by any federal, state, local or other taxing authority of any jurisdiction
worldwide, or any taxes that result from the willful misconduct or gross
negligence of such Owner or from the inaccuracy or breach of any representation,
warranty or covenant of such Owner contained in any of Clauses 6, 20, 21(a)(iv),
or 22(k) of the Initial Charter or in any document furnished in connection with
such Clauses by such Owner, or any taxes that would not have been imposed but
for the failure of such Owner (a) to provide to the Initial Charterer (for
filing by the Initial Charterer with the taxing
A-8
<PAGE>
jurisdiction imposing such taxes or retention in the Initial Charterer's
records) upon the Initial Charterer's timely request such certifications,
information, documentation or reports concerning such Owner's identity,
jurisdiction of incorporation or residency, or connection with such taxing
jurisdiction or (b) to promptly file upon the Initial Charterer's timely request
such reports or returns (which shall be prepared with reasonable care in
accordance with the Initial Charterer's written instructions) claiming (or
availing itself of) any applicable extensions or exemptions (to the extent that
timely notice thereof is provided by the Initial Charterer); PROVIDED that Owner
Taxes shall not include any such tax imposed on any amount that is (i) an
indemnity or reimbursement of such Owner, (ii) an operating or maintenance
expense, (iii) any tax imposed pursuant to Section 887 of the United States
Internal Revenue Code of 1986, as amended, or (iv) a tax for which the Initial
Charterer is otherwise liable under the Initial Charter; and PROVIDED FURTHER
that Owner Taxes shall not include any such tax imposed by any government,
jurisdiction or taxing authority other than the United States Federal government
solely as a result of the location of the Vessel or the Vessel's use by the
Initial Charterer.
"PERMITTED LIENS" means, for each Owner, Liens created under the
related Mortgage and Security Documents, the Initial Charter for the related
Vessel or other charter or conditional sale contracts and agreements for such
Vessel permitted under the Mortgage and Charter Permitted Liens.
"PERSON" means an individual, a corporation, a partnership, a joint
venture, unincorporated association, a joint stock company, a trust or any other
entity or a Governmental Authority.
"PLEDGED STOCK" means all of the capital stock of each Owner, including
any additional or substitute shares of capital stock of any such Owner now owned
or hereafter acquired by the Ship Holding Company, issued and outstanding at any
time or from time to time.
"RATING AGENCY" means, at any time of determination, each rating agency
then rating the Mortgage Notes which shall always include at least one of
Moody's or Standard & Poor's or their respective successors.
"RATING AGENCY CONDITION" means, with respect to any action, that the
Rating Agency then rating the Mortgage Notes (of which one must be Standard &
Poor's or Moody's) shall have notified Golden State Petroleum, the Owners,
Chevron and the Indenture Trustee in writing that such action will not result in
a reduction or withdrawal of the rating of any Outstanding Mortgage Note or a
placement of the Mortgage Notes on credit watch or surveillance with respect to
which it is a Rating Agency.
"RECURRING FEES" means, for either Vessel, any periodic fees necessary
or appropriate to maintain the corporate status of the related Owner, any filing
or other fees necessary or appropriate to maintain the status of such Owner as a
reporting company under the Exchange Act and to comply with any covenants of
such Owner under the related Mortgage, any fees and expenses (including the cost
of insurance required by the related Mortgage and not maintained by the
charterer under the charter to which such Vessel is then subject) necessary to
comply with any covenants under the related Mortgage, any other fees and
expenses contemplated to be paid pursuant to the Management Agreement (other
than the Management Fee) which the Manager certifies to the Indenture Trustee
are qualified to be paid thereunder and any accounting or other
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<PAGE>
professional fees and other expenses, including any fees and expenses of the
Rating Agencies, incurred in connection with the foregoing. In addition, each
Owner's Recurring Fees will include a pro rata portion of the fees and expenses,
including any accounting, administrative or other professional fees, necessary
or appropriate to maintain the registration of the Mortgage Notes under the
Securities Act, to effect a mandatory redemption, if any, of the Mortgage Notes,
to maintain the corporate status of Golden State Petroleum and the status of
Golden State Petroleum as a reporting company (if necessary) under the Exchange
Act and to comply with any covenants under the Indenture.
"REMAINING AVERAGE LIFE" means, with respect to the Exchange Notes and
the untendered Existing Notes, if any, the number of years (calculated to the
nearest one-twelfth year) obtained by dividing (i) the principal amount of the
Existing Notes to be redeemed into (ii) the sum of the products obtained by
multiplying (a) the principal component of each payment that would have been
made on the Exchange Notes and the untendered Existing Notes, if any, (including
payments to be made through operation of the mandatory sinking fund) assuming
such Exchange Notes and the untendered Existing Notes, if any, were not subject
to early redemption other than by operation of the mandatory sinking fund by (b)
the number of years (calculated to the nearest one-twelfth year) that will
elapse between the date on which the Exchange Notes and the untendered Existing
Notes, if any, are to be redeemed (the "Settlement Date") and the scheduled due
date of such principal payment.
"REQUIRED NOTEHOLDERS" means the Holders of a 25% or more in aggregate
principal amount of the Outstanding Mortgage Notes.
"REQUIREMENT OF LAW" means, as to any Person, the certificate of
incorporation and by-laws or partnership agreement or other organizational or
governing documents of such Person, and any Law applicable to or binding upon
such Person or any of its properties or to which such Person or any of its
properties is subject.
"SECURITY DOCUMENTS" means the Mortgages, the Assignments of Charter,
the Assignments of Charter Supplements, the Assignments of Earnings and
Insurances, the Assignments of Guarantee, the Assignments of Management
Agreement, each Issue of One Debenture, the Stock Pledge, the Assignments of
Building Contract, Assignments of Building Contract Guarantee, and any
additional security agreement, assignment or mortgage document entered into by
either Owner from time to time in connection with the Secured Instruments.
"SERIES OF ADDITIONAL NOTES" or "SERIES" means each series of
Additional Notes issued pursuant to a Supplemental Indenture.
"STANDARD & POOR'S" means Standard & Poor's Rating Group, a division of
McGraw-Hill Company, Inc.
"STIPULATED LOSS VALUE" means, for any Vessel on any date, the amount
specified in the related Initial Charter as the "Stipulated Loss Value" for such
date, which amount will be at least sufficient to redeem in full the Allocated
Principal Amount of Mortgage Notes for such Vessel.
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<PAGE>
"STOCK PLEDGE" means the Stock Pledge Agreement, dated as of December
1, 1996, between the Ship Holding Company and the Indenture Trustee, as the same
may be amended from time to time.
"TOTAL LOSS" means, with respect to a Vessel, either (a) actual or
constructive or compromised or arranged total loss of the Vessel, (b) Compulsory
Acquisition of the Vessel or (c) if so declared by the Initial Charterer at any
time and in its sole discretion a requisition by a Governmental Authority for
hire of the Vessel for a period in excess of 180 days. Any actual loss of the
Vessel shall be deemed to have occurred at 1200 hours Greenwich Mean Time
("GMT") on the actual date on which the Vessel was lost or in the event of the
date of the loss being unknown then the actual total loss shall be deemed to
have occurred at 1200 hours GMT on the day next following the day on which the
Vessel was last heard of. A constructive total loss shall be deemed to have
occurred at 1200 hours GMT on the earliest of: (1) the date that notice of
abandonment of the Vessel is given to the insurers, provided a claim for total
loss is admitted by the insurers, (2) if the insurers do not admit such a claim,
at the date and time GMT at which a total loss is subsequently adjudged by a
competent court of law or arbitration tribunal to have occurred, or (3) the date
that a report is rendered by one or more experts in marine surveying and vessel
valuation (said experts to be appointed by the Initial Charterer at its expense
and approved by the Owner, such approval not to be unreasonably withheld)
concluding that salvage, repair and associated costs in restoring the Vessel to
the condition specified in each Initial Charter exceed the Vessel's fair market
value in sound condition.
"TOTAL LOSS PAYMENT" means, with respect to each Vessel, the related
Initial Charter and a Loss Payment Date, the sum of (a) any deficiency between
(i) the Stipulated Loss Value in relation to the period in question calculated
pursuant to the related Initial Charter and (ii) all insurance proceeds for
damage to or loss of the Vessel and amounts paid by any governmental authority
in connection with any requisition, seizure or forfeiture actually received in
hand by Owners prior to or on such Loss Payment Date; and (b) all Charter Hire
and Additional Charter Hire accrued (on a daily basis) but unpaid hereunder to
such Loss Payment Date and any other sums due under any provisions of the
related Initial Charter, together with interest thereon at the Default Rate from
the date upon which any such Charter Hire and Additional Charter Hire or other
sums was due until the Loss Payment Date.
"TREASURY YIELD" means, in connection with the calculation of any
Make-Whole Premium on the Exchange Notes and the untendered Existing Notes, if
any, the yield to maturity at the time of computation of United States Treasury
securities with a constant maturity (as compiled by and published in the most
recent Federal Reserve Statistical Release H.15 (519) which has become publicly
available at least two Business Days prior to the date fixed for redemption (or,
if such Statistical Release is no longer published, any publicly available
source of similar data)) equal to the Remaining Average Life of the Exchange
Notes and the untendered Existing Notes, if any; provided that if no United
States Treasury security is available with such a constant maturity and for
which a closing yield is given, the Treasury Yield shall be obtained by linear
interpolation (calculated to the nearest one-twelfth of a year) from the closing
yields of United States Treasury securities for which such yields are given,
except that if the average life of the Exchange Notes and the untendered
Existing Notes, if any, is less than one year, the weekly average yield on
actually traded United States Treasury securities adjusted to a constant
maturity of one year shall be used.
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<PAGE>
"TRUST ACCOUNTS" means the Revenue Account, the Termination Account,
the Casualty Account, the Collateral Account, the Debt Service Reserve Fund, the
Operating Account and the Pre-Funding Account.
A-12
<PAGE>
<TABLE>
<CAPTION>
Schedule 1
Allocated Principal Amount of the Notes
Serial Notes Existing Notes Total Notes
Date Vessel A Vessel B Vessel A Vessel B Vessel A Vessel B
---- -------- -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C>
24-Dec-96 24,900,000 26,800,000 63,550,000 63,550,000 88,450,000 90,350,000
01-Feb-97 24,900,000 26,800,000 63,550,000 63,550,000 88,450,000 90,350,000
01-Aug-97 24,900,000 26,800,000 63,550,000 63,550,000 88,450,000 90,350,000
01-Feb-98 24,900,000 26,800,000 63,550,000 63,550,000 88,450,000 90,350,000
01-Aug-98 24,900,000 26,800,000 63,550,000 63,550,000 88,450,000 90,350,000
01-Feb-99 24,900,000 26,800,000 63,550,000 63,550,000 88,450,000 90,350,000
01-Aug-99 24,900,000 26,800,000 63,550,000 63,550,000 88,450,000 90,350,000
01-Feb-2000 22,350,000 24,150,000 63,550,000 63,550,000 85,900,000 87,700,000
01-Aug-2000 22,350,000 24,150,000 63,550,000 63,550,000 85,900,000 87,700,000
01-Feb-2001 19,000,000 20,700,000 63,550,000 63,550,000 82,550,000 84,250,000
01-Aug-2001 19,000,000 20,700,000 63,550,000 63,550,000 82,550,000 84,250,000
01-Feb-2002 15,400,000 17,000,000 63,550,000 63,550,000 78,950,000 80,550,000
01-Aug-2002 15,400,000 17,000,000 63,550,000 63,550,000 78,950,000 80,550,000
01-Feb-2003 11,550,000 13,050,000 63,550,000 63,550,000 75,100,000 76,600,000
01-Aug-2003 11,550,000 13,050,000 63,550,000 63,550,000 75,100,000 76,600,000
01-Feb-2004 7,450,000 8,850,000 63,550,000 63,550,000 71,000,000 72,400,000
01-Aug-2004 7,450,000 8,850,000 63,550,000 63,550,000 71,000,000 72,400,000
01-Feb-2005 3,100,000 4,400,000 63,550,000 63,550,000 66,650,000 67,950,000
01-Aug-2005 3,100,000 4,400,000 63,550,000 63,550,000 66,650,000 67,950,000
01-Feb-2006 0 0 63,550,000 63,550,000 63,550,000 63,550,000
01-Aug-2006 0 0 63,550,000 63,550,000 63,550,000 63,550,000
01-Feb-2007 0 0 63,550,000 63,550,000 63,550,000 63,550,000
01-Aug-2007 0 0 62,210,000 63,550,000 62,210,000 63,550,000
01-Feb-2008 0 0 60,815,000 62,120,000 60,815,000 62,120,000
01-Aug-2008 0 0 59,365,000 60,630,000 59,365,000 60,630,000
01-Feb-2009 0 0 57,855,000 59,080,000 57,855,000 59,080,000
01-Aug-2009 0 0 56,285,000 57,470,000 56,285,000 57,470,000
01-Feb-2010 0 0 54,650,000 55,795,000 54,650,000 55,795,000
01-Aug-2010 0 0 52,950,000 54,050,000 52,950,000 54,050,000
01-Feb-2011 0 0 51,185,000 52,235,000 51,185,000 52,235,000
01-Aug-2011 0 0 49,345,000 50,350,000 49,345,000 50,350,000
01-Feb-2012 0 0 47,435,000 48,390,000 47,435,000 48,390,000
01-Aug-2012 0 0 45,445,000 46,350,000 45,445,000 46,350,000
01-Feb-2013 0 0 43,375,000 44,225,000 43,375,000 44,225,000
01-Aug-2013 0 0 41,225,000 42,015,000 41,225,000 42,015,000
01-Feb-2014 0 0 38,985,000 39,720,000 38,985,000 39,720,000
01-Aug-2014 0 0 36,655,000 37,330,000 36,655,000 37,330,000
01-Feb-2015 0 0 34,235,000 34,845,000 34,235,000 34,845,000
01-Aug-2015 0 0 31,715,000 32,260,000 31,715,000 32,260,000
01-Feb-2016 0 0 29,095,000 29,570,000 29,095,000 29,570,000
01-Aug-2016 0 0 26,370,000 26,770,000 26,370,000 26,770,000
01-Feb-2017 0 0 23,535,000 23,860,000 23,535,000 23,860,000
01-Aug-2017 0 0 20,585,000 20,835,000 20,585,000 20,835,000
01-Feb-2018 0 0 17,515,000 17,685,000 17,515,000 17,685,000
01-Aug-2018 0 0 14,325,000 14,410,000 14,325,000 14,410,000
01-Feb-2019 0 0 10,995,000 10,995,000 10,995,000 10,995,000
</TABLE>
A-13
<PAGE>
================================================================================
NO DEALER, SALESPERSON OR OTHER PERSON HAS BEEN AUTHORIZED TO GIVE ANY
INFORMATION OR TO MAKE ANY REPRESENTATIONS OTHER THAN THOSE CONTAINED IN THIS
PROSPECTUS, AND IF GIVEN OR MADE, SUCH INFORMATION OR REPRESENTATIONS MUST NOT
BE RELIED UPON AS BEING AUTHORIZED BY THE COMPANIES. THIS PROSPECTUS DOES NOT
CONSTITUTE AN OFFER TO SELL OR A SOLICITATION OF AN OFFER TO BUY ANY SECURITIES
OTHER THAN THOSE TO WHICH IT RELATES OR AN OFFER TO ANY PERSON IN ANY
JURISDICTION WHERE SUCH OFFERS WOULD BE UNLAWFUL. NEITHER THE DELIVERY OF THIS
PROSPECTUS NOR ANY SALE HEREUNDER SHALL UNDER ANY CIRCUMSTANCES CREATE ANY
IMPLICATION THAT THE INFORMATION CONTAINED HEREIN IS CORRECT AS OF ANY TIME
SUBSEQUENT TO THE DATE HEREOF.
UNTIL _______, 1997, ALL DEALERS EFFECTING TRANSACTIONS IN THE
EXCHANGE NOTES, WHETHER OR NOT PARTICIPATING IN THIS
EXCHANGE OFFER, MAY BE REQUIRED TO DELIVER A PROSPECTUS.
THIS IS IN ADDITION TO THE OBLIGATION OF DEALERS TO DELIVER A
PROSPECTUS WHEN ACTING AS UNDERWRITERS.
TABLE OF CONTENTS
Page
----
ENFORCEABILITY OF CIVIL LIABILITIES........................................ iii
AVAILABLE INFORMATION...................................................... iii
AVAILABLE INFORMATION RELATING TO
CHEVRON AND THE INITIAL CHARTERER....................................... iii
DEFINED TERMS.............................................................. iv
PROSPECTUS SUMMARY......................................................... 1
RISK FACTORS............................................................... 20
THE EXCHANGE OFFER......................................................... 28
USE OF PROCEEDS............................................................ 38
CAPITALIZATION OF THE OWNERS............................................... 38
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF
FINANCIAL CONDITION AND RESULTS OF
OPERATIONS............................................................... 39
GOLDEN STATE PETROLEUM TRANSPORT
CORPORATION.............................................................. 55
THE OWNERS................................................................. 56
MANAGEMENT................................................................. 56
THE BUILDERS............................................................... 57
BUILDING CONTRACTS......................................................... 58
BUILDING CONTRACT GUARANTEES............................................... 59
CHEVRON AND THE INITIAL CHARTERER.......................................... 59
THE INITIAL CHARTERS....................................................... 63
DESCRIPTION OF THE EXCHANGE NOTES.......................................... 71
SERIAL NOTES............................................................... 88
ADDITIONAL NOTES........................................................... 89
THE MORTGAGES.............................................................. 90
MATERIAL UNITED STATES FEDERAL INCOME
TAX CONSEQUENCES......................................................... 95
CERTAIN ISLE OF MAN TAX CONSEQUENCES....................................... 99
MANAGEMENT AGREEMENTS...................................................... 99
PLAN OF DISTRIBUTION....................................................... 99
RATING.....................................................................100
LEGAL MATTERS..............................................................100
APPENDIX...................................................................A-1
CERTAIN SHIPPING TERMS.....................................................A-1
GLOSSARY OF CERTAIN TERMS..................................................A-3
================================================================================
$127,100,000
Golden State Petroleum
Transport Corporation
8.04% First Preferred Exchange
Mortgage Notes
Due 2019
-----------------------
Prospectus
-----------------------
_______ __, 1997
================================================================================
<PAGE>
PART II
ITEM 20. INDEMNIFICATION OF DIRECTORS AND OFFICERS
GOLDEN STATE PETROLEUM TRANSPORT CORPORATION
Golden State Petroleum is a corporation organized under the General
Corporation Law of the State of Delaware.
Subsection (a) of Section 145 of the General Corporation Law of
Delaware empowers a corporation to indemnify any person who was or is a party or
is threatened to be made a party to any threatened, pending or completed action,
suit or proceeding, whether civil, criminal, administrative or investigative
(other than an action by or in the right of the corporation) by reason of the
fact that he is or was a director, employee or agent of the corporation or is or
was serving at the request of the corporation as a director, officer, employee
or agent of another corporation, partnership, joint venture, trust or other
enterprise, against expenses (including attorneys' fees), judgments, fines and
amounts paid in settlement actually and reasonably incurred by him in connection
with such action, suit or proceeding if he acted in good faith and in a manner
he reasonably believed to be in or not opposed to the best interests of the
corporation, and, with respect to any criminal action or proceeding, had no
cause to believe his conduct was unlawful.
Subsection (b) of Section 145 empowers a corporation to indemnify any
person who was or is a party or is threatened to be made a party to any
threatened, pending or completed action or suit by or in the right of the
corporation to procure a judgment in its favor by reason of the fact that such
person acted in any of the capacities set forth above, against expenses
(including attorneys' fees) actually and reasonably incurred by him in
connection with the defense or settlement of such action or suit if he acted in
good faith and in a manner he reasonably believed to be in or not opposed to the
best interests of the corporation and except that no indemnification may be made
in respect to any claim, issue or matter as to which such person shall have been
adjudged to be liable to the corporation unless and only to the extent that the
Court of Chancery or the court in which such action or suit was brought shall
determine that despite the adjudication of liability such person is fairly and
reasonably entitled to indemnity for such expenses which the court shall deem
proper.
Section 145 further provides that to the extent a director, officer,
employee or agent of a corporation has been successful in the defense of any
action, suit or proceeding referred to in subsections (a) and (b) or in the
defense of any claim, issue or matter therein, he shall be indemnified against
expenses (including attorneys' fees) actually and reasonably incurred by him in
connection therewith; that indemnification or advancement of expenses provided
for by Section 145 shall not be deemed exclusive of any other rights to which
the indemnified party may be entitled; and empowers the corporation to purchase
and maintain insurance on behalf of a director, officer, employee or agent of
the corporation against any liability asserted against him or incurred by him in
any such capacity or arising out of his status as such whether or not the
corporation would have the power to indemnify him against such liabilities under
Section 145.
Section VIII of the By-Laws of Golden State Petroleum provides for
indemnification of its directors and officers as follows:
The corporation shall (i) indemnify any person who was or is a party or
is threatened to be made
<PAGE>
a party to any threatened, pending or completed action or suit by or in
the right of the corporation to procure a judgment in its favor by
reason of the fact that he or she is or was a director or officer of
the corporation, or is or was serving at the request of the corporation
as a director or officer of another corporation, partnership, joint
venture, trust or other enterprise against expenses (including
attorneys' fees) actually and reasonably incurred by him or her in
connection with the defense or settlement of such action or suit, and
(ii) indemnify any person who was or is a party or is threatened to be
made a party to any threatened, pending or completed action, suit or
proceeding, whether civil, criminal, administrative or investigative
(other than an action by or in the right of the corporation) by reason
of the fact that he or she is or was a director or officer of the
corporation, or is or was serving at the request of the corporation as
a director or officer of another corporation, partnership, joint
venture, trust or other enterprise, against expenses (including
attorneys' fees), judgments, fines and amounts paid in settlement
actually and reasonably incurred by him or her in connection with such
action, suit or proceeding, in each case to the fullest extent
permissible under subsections (a) through (e) of Section 145 of the
Delaware General Corporation Law, as the same exists or may hereafter
be amended (but, in the case of any such amendments, only to the extent
such amendment permits the corporation to broader indemnification
rights than permitted prior thereto). The foregoing right of
indemnification and advancement of expenses shall not be deemed
exclusive of any other rights to which those seeking indemnification or
advancement of expenses may now or hereafter be entitled under any
bylaw, agreement, vote of stockholders or disinterested directors or
otherwise, both as to action in his or her official capacity and as to
action in another capacity while holding such office.
GOLDEN STATE PETRO (IOM I-A) PLC AND GOLDEN STATE PETRO (IOM I-B) PLC
Each of the Owners is a corporation incorporated under the laws of the
Isle of Man. Section 151 of the Isle of Man Companies Act 1931 provides that any
provision (whether contained in the articles of association of the corporation
or elsewhere) exempting any director, officer or auditor (collectively,
"Officer") or indemnifying him or her against any liability which would attach
to him or her in relation to any negligence, default, breach of duty or breach
of trust is void. However, Section 151 also provides that an Isle of Man
corporation may indemnify any Officer against any liability incurred by him or
her in defending any proceedings, whether civil or criminal, in which judgment
is given in his or her favor or in which he or she is acquitted or in connection
with any application under Section 337 of the Isle of Man Companies Act 1931 in
which relief is granted by a court. Section 337 provides that, if in any
proceedings for negligence, default, breach of duty or breach of trust against
any Officer it appears to the court hearing the case that the person is or may
be liable in respect of the negligence, default, breach of duty or breach of
trust, but that he or she has acted honestly and reasonably and that, having
regard to all the circumstances of the case, including those connected with his
appointment, he or she ought fairly be excused, that court may relieve him or
her either wholly or partly his or her liability on such terms as the court
thinks fit. Additionally, under Section 337, where any Officer has reason to
believe that any claim will or might be made against him or her, he or she may
apply to court for relief as if an action had already been brought against him.
An Isle of Man corporation has the power to purchase and maintain
insurance on behalf of an Officer against any liability alleged against him or
her for negligence, default, breach of duty or breach of trust.
Article 126 of the Articles of Association of each of the Owners
provides for indemnification of
<PAGE>
directors and officers as follows:
Every director or other officer of the Company shall be entitled to be
indemnified out of the assets of the Company against all losses or
liabilities (including any such liability as is mentioned in paragraph
(c) of the proviso to Section 151 of the Companies Act, 1931), which he
may sustain or incur in or about the execution of the duties of his
office or otherwise in relation thereto, and no director or other
officer shall be liable for any loss, damage or misfortune which may
happen to or be incurred by the Company in the execution of the duties
of his office or in relation thereto, but this Article shall only have
effect insofar as its provisions are not avoided by the said section.
The effectiveness of such article is subject to the provisions of
Section 151 of the Isle of Man Companies Act 1931 as discussed above.
ITEM 21. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES
(A) EXHIBITS
*3.1 -- Certificate of Incorporation of Golden State
Petroleum.
*3.2 -- Bylaws of Golden State Petroleum.
*3.3 -- Memorandum and Articles of Association of
Golden State Petro (IOM I-A) PLC
*3.4 -- Memorandum and Articles of Association of
Golden State Petro (IOM I-B) PLC.
*4.1 -- Indenture, dated as of December 1, 1996,
among Golden State Petroleum, the Owners and
the Indenture Trustee, in respect of the
8.04% First Preferred Mortgage Notes due
2019.
*4.2 -- Stock Pledge Agreement between Golden State
Holdings I Ltd. and the Indenture Trustee.
*4.3 -- Issue of One Debenture, dated as of December
1, 1997, between Golden State Petro (IOM
I-A) PLC and the Indenture Trustee.
*4.4 -- Issue of One Debenture, dated as of December
1, 1996, between Golden State Petro (IOM
I-B) PLC and the Indenture Trustee.
*4.5 -- Assignment of Charter, dated as of December
1, 1996, between Golden State Petro (IOM
I-A) PLC and the Indenture Trustee.
*4.6 -- Assignment of Charter, dated as of December
1, 1996, between Golden State Petro (IOM
I-B) PLC and the Indenture Trustee.
*4.7 -- Assignment of Shipbuilding Contract and
Agreement on Contract for Technical Matters,
dated as of December 1, 1996, among Golden
State Petro (IOM-IA) PLC and the Indenture
Trustee.
*4.8 -- Assignment of Shipbuilding Contract and
Agreement on Contract for Technical Matters,
dated as of December 1, 1996, among Golden
State Petro (IOM-IB) PLC and the Indenture
Trustee.
*4.9 -- Assignment of Building Contract Guarantee,
dated as of December 1, 1996, between Golden
State Petro (IOM I-A) PLC and the Initial
Charterer.
*4.10 -- Assignment of Building Contract Guarantee,
dated as of December 1, 1996, between Golden
State Petro (IOM I-B) PLC and the Initial
<PAGE>
Charterer.
*4.11 -- Guarantee, made as of December 24, 1996,
from Chevron to Golden State Petro (IOM I-A)
PLC.
*4.12 -- Guarantee, made as of December 24, 1996,
from Chevron to Golden State Petro (IOM I-B)
PLC.
*4.13 -- Assignment of Management Agreement, dated as
of December 1, 1996, between Golden State
Petro (IOM I-A) PLC and the Indenture
Trustee.
*4.14 -- Assignment of Management Agreement, dated as
of December 1, 1996, between Golden State
Petro (IOM I-B) PLC and the Indenture
Trustee.
*4.15 -- Form of Exchange Note.
*4.16 -- Building Contract Guarantee, dated as of
December 26, 1996, from the Korean
Development Bank to Golden State Petro (IOM
I-A) PLC.
*4.17 -- Building Contract Guarantee, dated as of
December 26, 1996, from the Korean
Development Bank to Golden State Petro (IOM
I-B) PLC.
*5.1 -- Opinion of Thacher Proffitt & Wood, counsel
to the Owners, as to the validity of the
Exchange Notes.
*8.1 -- Opinion of Thacher Proffitt & Wood, counsel
to the Owners, as to Certain United States
Income Tax Consequences.
**8.2 -- Opinion of Cains, special counsel to the
Owners, as to Certain Isle of Man Tax
Consequences.
*10.1 -- Serial Note Purchase Agreement, dated
December 19, 1996, among Donaldson, Lufkin &
Jenrette Securities Corporation, Golden
State Petroleum and each Owner.
*10.2 -- Term Note Purchase Agreement, dated December
19, 1996, among Donaldson, Lufkin & Jenrette
Securities Corporation, Golden State
Petroleum and each Owner.
*10.3 -- Shipbuilding Contract, made as of December
24, 1996, among Golden State Petro (IOM I-A)
PLC and the Builders.
*10.4 -- Shipbuilding Contract, made as of December
24, 1996, among Golden State Petro (IOM I-B)
PLC and the Builders.
*10.5 -- Promissory Note from Golden State Petro (IOM
I-A) PLC to Samsung Heavy Industries Co.
Ltd.
*10.6 -- Agreement on Contract for Technical Matters,
made as of December 24, 1996, among Golden
State Petro (IOM-IA) PLC, Samsung Heavy
Industries Co., Ltd and Chevron Shipping
company, as agent for the Initial Charterer.
*10.7 -- Agreement on Contract for Technical Matters,
made as of December 24, 1996, among Golden
State Petro (IOM-IB) PLC, Samsung Heavy
Industries Co., Ltd and Chevron Shipping
company, as agent for the Initial Charterer.
*10.8 -- Bareboat Charter, made as of December 24,
1996, between Golden State Petro (IOM I-A)
PLC and the Initial Charterer.
*10.9 -- Bareboat Charter, made as of December 24,
1996, by and between Golden State Petro (IOM
I-B) PLC and the Initial Charterer.
*10.10 -- Management Agreement, dated as of December
1, 1996, between Golden State Petro (IOM
I-A) PLC and Cambridge Fund Management LLC.
*10.11 -- Management Agreement, dated as of December
1, 1996, between Golden State Petro (IOM
I-B) PLC and Cambridge Fund Management LLC.
<PAGE>
*10.12 -- Agency Agreement, dated as of December 24,
1996, between the Owners and Golden State
Petroleum.
*10.13 -- Registration Rights Agreement, dated as of
December 24, 1996, among Golden State
Petroleum, Donaldson, Lufkin & Jenrette
Securities Corporation and each Owner.
*23.1 -- Consent of Coopers & Lybrand L.L.P. (New
York)
*23.2 -- Consent of Coopers & Lybrand LLP (Isle of
Man)
*23.3 -- Consent of Thacher Proffitt & Wood
(contained in Exhibit 5.1).
*23.4 -- Consent of Cains.
*25.1 -- Statement of eligibility of trustee on Form
T-1.
*99.1 -- Letter of Transmittal.
*99.2 -- Notice of Guaranteed Delivery.
- -----------
* Previously filed and substantially identical to corresponding document
of Golden State Petro (IOM I-A) PLC, except as to the parties thereto.
* Previously filed.
** Filed with this amendment.
ITEM 22. UNDERTAKINGS
Insofar as indemnification for liabilities arising under the Securities
Act of 1933 may be permitted to directors, officers and controlling persons of
the registrant pursuant to the foregoing provisions, or otherwise, the
registrant has been advised that in the opinion of the Securities and Exchange
Commission such indemnification is against public policy as expressed in the Act
and is, therefore, unenforceable. In the event that a claim for indemnification
against such liabilities (other than the payment by the registrant of expenses
incurred or paid by a director, officer or controlling person of the registrant
in the successful defense of any action, suit or proceeding) is asserted by such
director, officer or controlling person in connection with the securities being
registered, the registrant will, unless in the opinion of its counsel the matter
has been settled by controlling precedent, submit to a court of appropriate
jurisdiction the question whether such indemnification by it is against public
policy as expressed in the Act and will be governed by the final adjudication of
such issue.
Golden State Petroleum, an undersigned registrant, hereby undertakes to
respond to requests for information that is incorporated by reference into the
Prospectus pursuant to Items 4, 10(b), 11 or 13 of Form S-4, within one business
day of receipt of such request, and to send the incorporated documents by first
class mail or other equally prompt means. This includes information contained in
documents filed subsequent to the effective date of the Registration Statement
through the date of responding to the request.
Each of Golden State Petro (IOM I-A) PLC and Golden State Petro (IOM
I-B) PLC, each an undersigned registrant, hereby undertakes: (i) to respond to
requests for information that is incorporated by reference into the Prospectus
pursuant to Items 4, 10(b), 11 or 13 of Form F-4, within one business day of
receipt of such request, and to send the incorporated documents by first class
mail or other equally prompt means; and (ii) to arrange or provide for a
facility in the U.S. for the purpose of responding to such requests. The
undertaking in subparagraph (i) above includes information contained in
documents
<PAGE>
filed subsequent to the effective date of the Registration Statement through the
date of responding to the request.
Each of Golden State Petroleum, Golden State Petro (IOM I-A) PLC and
Golden State Petro (IOM I-B) PLC, each an undersigned registrant, hereby
undertakes: to file, during any period in which offers or sales are being made,
a post-effective amendment to this registration statement (i) to include any
prospectus required by Section 10(a)(3) of Securities Act of 1933; (ii) to
reflect in the prospectus any facts or events arising after the effective date
of the registration statement (or the most recent post-effective amendment
thereof) which, individually or in the aggregate, represent a fundamental change
in the information set forth in the registration statement; and (iii) to include
any material information with respect to the plan of distribution not previously
disclosed in the registration statement or any material change to such
information in the registration statement.
Each of Golden State Petroleum, Golden State Petro (IOM I-A) PLC and
Golden State Petro (IOM I-B) PLC, each an undersigned registrant, hereby
undertakes: that, for the purpose of determining any liability under the
Securities Act of 1933, each such post-effective amendment shall be deemed to be
a new registration statement relating to the securities offered therein, and the
offering of such securities at that time shall be deemed to be the initial BONA
FIDE offering thereof.
Each of Golden State Petroleum, Golden State Petro (IOM I-A) PLC and
Golden State Petro (IOM I-B) PLC, each an undersigned registrant, hereby
undertakes: to remove from registration by means of a post-effective amendment
any of the securities being registered which remain unsold at the termination of
the offering.
Each of Golden State Petroleum, Golden State Petro (IOM I-A) PLC and
Golden State Petro (IOM I-B) PLC, each an undersigned registrant, hereby
undertakes that every prospectus, each an undersigned registrant, hereby
undertakes: if the registrant is a foreign private issuer, to file a
post-effective amendment to the registration statement to include any financial
statements required by Rule 3- 19 of this chapter at the start of any delayed
offering or throughout a continuous offering. Financial statements and
information otherwise required by Section 10(a)(3) of the Act need not be
furnished, PROVIDED, that the registrant includes in the prospectus, by means of
a post-effective amendment, financial statements required pursuant to this
paragraph (a)(4) and other information necessary to ensure that all other
information in the prospectus is at least as current as the date of those
financial statements.
Each of Golden State Petroleum, Golden State Petro (IOM I-A) PLC and
Golden State Petro (IOM I-B) PLC, each an undersigned registrant, hereby
undertakes that every prospectus: that prior to any public or reoffering of the
securities registered hereunder through use of a prospectus which is a part of
this registration statement, by any person or party who is deemed to be an
underwriter within the meaning of Rule 145 (c), the issuer undertakes that such
reoffering prospectus will contain the information called for by the applicable
registration form with respect to reofferings by persons who may be deemed
underwriters, in addition to the information called for by the other items of
the applicable form.
Each of Golden State Petroleum, Golden State Petro (IOM I-A) PLC and
Golden State Petro (IOM I-B) PLC, each an undersigned registrant, hereby
undertakes that every prospectus: (i) that is filed pursuant to the paragraph
immediately preceding, or (ii) that purports to meet the requirements of Section
10(a)(3) of the Act and is used in connection with an offering of securities
subject to Rule 415, will be filed as a part of an amendment to the registration
statement and will not be used until such amendment
<PAGE>
is effective, and that, for purposes of determining any liability under the
Securities Act of 1933, each such post-effective amendment shall be deemed to be
a new registration statement relating to the securities offered therein, and the
offering of such securities at that time shall be deemed to be the initial BONA
FIDE offering thereof.
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act, the registrant has
duly caused this registration statement to be signed on its behalf by the
undersigned, thereunto duly authorized, on July 23, 1997.
GOLDEN STATE PETROLEUM TRANSPORT
CORPORATION
By: /s/ John McFadden
---------------------
John McFadden
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed by the following persons, in the
capacities indicated on June 11, 1997.
Name Title
---- -----
/s/ John McFadden President (Principal Executive Officer)
---------------------
John McFadden
/s/ John McFadden Treasurer and Director (Principal Financial and
--------------------- Accounting Officer)
John McFadden
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act, the registrant has
duly caused this registration statement to be signed on its behalf by the
undersigned, thereunto duly authorized, on July 23, 1997.
GOLDEN STATE PETRO (IOM I-A) PLC
By: /s/ John McFadden
---------------------
John McFadden
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed by the following persons, in the
capacities indicated on July 23, 1997.
Name Title
---- -----
/s/ John McFadden President and Director (Principal Executive
--------------------- Officer)
John McFadden
/s/ John McFadden Treasurer (Principal Financial and Accounting
--------------------- Officer)
John McFadden
/s/ Nunzio Lipomi Director
---------------------
Nunzio Lipomi
/s/ Andrew Baker Director
--------------------- )
Andrew Baker
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act, the registrant has
duly caused this registration statement to be signed on its behalf by the
undersigned, thereunto duly authorized, on July 23, 1997.
GOLDEN STATE PETRO (IOM I-B) PLC
By: /s/ John McFadden
---------------------
John McFadden
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed by the following persons, in the
capacities indicated on July 23, 1997.
Name Title
---- -----
/s/ John McFadden President (Principal Executive Officer)
---------------------
John McFadden
/s/ John McFadden Treasurer and Director (Principal Financial and
--------------------- Accounting Officer)
John McFadden
/s/ Andrew Baker Director
--------------------- )
Andrew Baker
<PAGE>
INDEX TO EXHIBITS
3.1 -- Certificate of Incorporation of Golden State
Petroleum.
3.2 -- Bylaws of Golden State Petroleum.
3.3 -- Memorandum and Articles of Association of
Golden State Petro (IOM I-A) PLC.
3.4 -- Memorandum and Articles of Association of
Golden State Petro (IOM I-B) PLC.
4.1 -- Indenture, dated as of December 1, 1996,
among Golden State Petroleum, the Owners and
the Indenture Trustee, in respect of the
8.04% First Preferred Mortgage Notes due
2019.
4.2 -- Stock Pledge Agreement between Golden State
Holdings I Ltd. and the Indenture Trustee.
4.3 -- Issue of One Debenture, dated as of December
1, 1997, between Golden State Petro (IOM
I-A) PLC and the Indenture Trustee.
4.4 -- Issue of One Debenture, dated as of December
1, 1996, between Golden State Petro (IOM
I-B) PLC and the Indenture Trustee.
4.5 -- Assignment of Charter, dated as of December
1, 1996, between Golden State Petro (IOM
I-A) PLC and the Indenture Trustee.
4.6 -- Assignment of Charter, dated as of December
1, 1996, between Golden State Petro (IOM
I-B) PLC and the Indenture Trustee.
4.7 -- Assignment of Shipbuilding Contract and
Agreement on Contract for Technical Matters,
dated as of December 1, 1996, among Golden
State Petro (IOM-IA) PLC and the Indenture
Trustee.
4.8 -- Assignment of Shipbuilding Contract and
Agreement on Contract for Technical Matters,
dated as of December 1, 1996, among Golden
State Petro (IOM-IB) PLC and the Indenture
Trustee.
4.9 -- Assignment of Building Contract Guarantee,
dated as of December 1, 1996, between Golden
State Petro (IOM I-A) PLC and the Initial
Charterer.
4.10 -- Assignment of Building Contract Guarantee,
dated as of December 1, 1996, between Golden
State Petro (IOM I-B) PLC and the Initial
Charterer.
4.11 -- Guarantee, made as of December 24, 1996,
from Chevron to Golden State Petro (IOM I-A)
PLC.
4.12 -- Guarantee, made as of December 24, 1996,
from Chevron to Golden State Petro (IOM I-B)
PLC.
4.13 -- Assignment of Management Agreement, dated as
of December 1, 1996, between Golden State
Petro (IOM I-A) PLC and the Indenture
Trustee.
4.14 -- Assignment of Management Agreement, dated as
of December 1, 1996, between Golden State
Petro (IOM I-B) PLC and the Indenture
Trustee.
4.15 -- Form of Exchange Note.
4.16 -- Building Contract Guarantee, dated as of
December 26, 1996, from the Korean
Development Bank to Golden State Petro (IOM
I-A) PLC.
4.17 -- Building Contract Guarantee, dated as of
December 26, 1996, from the Korean
Development Bank to Golden State Petro (IOM
I-B) PLC.
5.1 -- Opinion of Thacher Proffitt & Wood, counsel
to the Owners, as to the validity of the
Exchange Notes.
<PAGE>
8.1 -- Opinion of Thacher Proffitt & Wood, counsel
to the Owners, as to Certain United States
Tax Consequences.
8.2 -- Opinion of Cains, special counsel to the
Owners, as to Certain Isle of Man Tax
Consequences.
10.1 -- Serial Note Purchase Agreement, dated
December 19, 1996, among Donaldson, Lufkin &
Jenrette Securities Corporation, Golden
State Petroleum and each Owner.
10.2 -- Term Note Purchase Agreement, dated December
19, 1996, among Donaldson, Lufkin & Jenrette
Securities Corporation, Golden State
Petroleum and each Owner.
10.3 -- Shipbuilding Contract, made as of December
24, 1996, among Golden State Petro (IOM I-A)
PLC and the Builders.
10.4 -- Shipbuilding Contract, made as of December
24, 1996, among Golden State Petro (IOM I-B)
PLC and the Builders.
10.5 -- Promissory Note from Golden State Petro (IOM
I-A) PLC to Samsung Heavy Industries Co.
Ltd.
10.6 -- Agreement on Contract for Technical Matters,
made as of December 24, 1996, among Golden
State Petro (IOM-IA) PLC, Samsung Heavy
Industries Co., Ltd and Chevron Shipping
company, as agent for the Initial Charterer.
10.7 -- Agreement on Contract for Technical Matters,
made as of December 24, 1996, among Golden
State Petro (IOM-IB) PLC, Samsung Heavy
Industries Co., Ltd and Chevron Shipping
company, as agent for the Initial Charterer.
10.8 -- Bareboat Charter, made as of December 24,
1996, between Golden State Petro (IOM I-A)
PLC and the Initial Charterer.
10.9 -- Bareboat Charter, made as of December 24,
1996, by and between Golden State Petro (IOM
I-B) PLC and the Initial Charterer.
10.10 -- Management Agreement, dated as of December
1, 1996, between Golden State Petro (IOM
I-A) PLC and Cambridge Fund Management LLC.
10.11 -- Management Agreement, dated as of December
1, 1996, between Golden State Petro (IOM
I-B) PLC and Cambridge Fund Management LLC.
10.12 -- Agency Agreement, dated as of December 24,
1996, between the Owners and Golden State
Petroleum.
10.13 -- Registration Rights Agreement, dated as of
December 24, 1996, among Golden State
Petroleum, Donaldson, Lufkin & Jenrette
Securities Corporation and each Owner.
23.1 -- Consent of Coopers & Lybrand L.L.P. (New
York)
23.2 -- Consent of Coopers & Lybrand LLP (Isle of
Man)
23.3 -- Consent of Thacher Proffitt & Wood
(contained in Exhibit 5.1).
23.4 -- Consent of Cains.
25.1 -- Statement of eligibility of trustee on Form
T-1.
99.1 -- Letter of Transmittal.
99.2 -- Notice of Guaranteed Delivery.
10 July 1997
Thacher Proffitt & Wood
Two World Trade Centre
New York
NY 10048
U.S.A.
Attention: Ms. Maria Livanos
- -----------------------------
Dear Sirs
We act as legal advisors in the Isle of Man to Golden State Petro (IOM I-A) PLC,
Golden State Petro (IOM 1-B) PLC (together the "Owners") and Golden State
Holdings I, Ltd in connection with the registration under the Securities Act of
1933, as amended, of the United States of First Preferred Exchange Mortgage
Notes Due 2019 (the "Notes") and the related preparation and filing of a
Registration Statement on Forms S-4 and F-4.
We confirm that as at the date of this letter the description appearing under
the heading "Certain Isle of Man Tax Consequences" in the prospectus forming
part of the said Registration Statement and attached hereto as Appendix I is our
opinion as to the material Isle of Man income tax consequences under relevant
Isle of Man tax legislation (and, in particular, the International Business Act
1994) of the acquisition, ownership and disposal of the Notes.
The statement assumes that the holders of the Notes are not resident in the Isle
of Man for tax purposes and that each of the Owners qualifies and will continue
to qualify for tax purposes as an international company under the said
International Business Act 1994 of the Isle of Man.
Yours faithfully
CAINS
- -----
<PAGE>
APPENDIX I
While there is no reciprocal income tax treaty between the United
States and the Isle of Man, a transportation agreement was signed in August 1989
by the United States and the United Kingdom of Great Britain and Northern
Ireland (on behalf of the Isle of Man) confirming that both the United States
and the Isle of Man grant an equivalent exemption for qualified shipping income.
CERTAIN ISLE OF MAN TAX CONSEQUENCES
In the opinion of Cains, special Isle of Man counsel to the
Owners, no withholding taxes will be imposed on sinking fund payments or
payments of principal, interest or premium, if any, thereon with respect to the
Mortgage Notes and the holders will not be subject to any income taxes imposed
by the Isle of Man solely as a result of owning the Mortgage Notes. Investors
should consult their own tax advisors regarding whether the purchase of the
Mortgage Notes in conjunction with an investor's other activities in the Isle of
Man, may subject an investor to any taxes imposed by the Isle of Man.
To the extent the Isle of Man in the future does impose a
withholding tax with respect to sinking fund payments or payments of principal,
interest or premium (if any) on the Mortgage Notes, the Owners will make the
required withholding and are not required to gross-up or indemnify holders for
amounts withheld. Pursuant to the Indenture, in the event the Isle of Man does
impose a withholding tax with respect to such payments, the Owners is obligated
to take any lawful action to the extent necessary to prevent or avoid the
imposition of any withholding taxes, including changing its jurisdiction of
incorporation or residence; provided however, that the Owners will not be
required to take, or fail to take, any action (x) if in the opinion of counsel
such act or failure to act would violate applicable law or (y) if in the
reasonable opinion of the Owners the actions necessary to avoid or prevent
imposition of such taxes would be unduly burdensome. For purposes of clause (y)
of the immediately preceding sentence, a requirement to change the jurisdiction
of the Owner's incorporation or residence will not be treated as unduly
burdensome unless changing the Owner's jurisdiction of incorporation or
residence to such other jurisdiction or location would (i) subject the Owner to
charges in such other jurisdiction, including but not limited to taxes imposed
on or measured by its income, receipts, property, assets, capital, sales or
value-added or (ii) cause the Initial Charterer to be required to withhold or
deduct charges with respect to charter hire payable under the Initial Charters.
MANAGEMENT AGREEMENTS
Cambridge Fund Management LLC has agreed to provide
administrative, management and advisory services to the Owners pursuant to the
Management Agreements. The Manager is an Affiliate of Golden State Petroleum and
the Owners. Pursuant to each Management Agreement, the Manager will be entitled
to a fee (the "Management Fee") of $50,000 per year per Vessel for all periods
commencing on the Original Closing Date. All Recurring Fees are payable by the
Manager from the Management Fee. The Management Fee will be payable
semi-annually on each Payment Date from amounts on deposit in the Ship
Management Reserve Fund. See "Description of the Exchange Notes--Trust
Accounts--Ship Management Reserve Fund." In connection with the offering and
sale of the Existing Notes, Cambridge Petroleum Transport Corporation provided
financial advisory services to Golden State Petroleum and the Owners for which
it received a fee. See "Prospectus Summary--Sources and Uses
