AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON MARCH 29, 1996
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UNITED STATES SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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FORM 10-K
ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(D) OF
THE SECURITIES EXCHANGE ACT OF 1934
FOR THE FISCAL YEAR ENDED DECEMBER 31, 1995
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COMMISSION FILE NUMBER 2-87930
OMI CORP.
(Exact name of Registrant as specified in its charter)
DELAWARE 13-2625280
(State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)
90 PARK AVENUE, NEW YORK, NEW YORK 10016
(Address of principal executive office) (Zip Code)
REGISTRANT'S TELEPHONE NUMBER INCLUDING AREA CODE: (212) 986-1960.
SECURITIES REGISTERED PURSUANT TO SECTION 12(B) OF THE ACT:
COMMON STOCK, PAR VALUE $.50 PER SHARE NEW YORK STOCK EXCHANGE
Title of Class Name of Exchange on
which Registered
SECURITIES REGISTERED PURSUANT TO SECTION 12(G) OF THE ACT: NONE
---------------
INDICATE BY CHECK MARK WHETHER THE REGISTRANT (1) HAS FILED ALL REPORTS
REQUIRED TO BE FILED BY SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF
1934 DURING THE PRECEDING 12 MONTHS (OR FOR SUCH SHORTER PERIOD THAT THE
REGISTRANT WAS REQUIRED TO FILE SUCH REPORTS), AND (2) HAS BEEN SUBJECT TO SUCH
FILING REQUIREMENTS FOR THE PAST 90 DAYS.
YES X NO
---- ----
INDICATE BY CHECK MARK IF DISCLOSURE OF DELINQUENT FILERS PURSUANT TO ITEM
405 OF REGULATION S-K IS NOT CONTAINED HEREIN, AND WILL NOT BE CONTAINED, TO THE
BEST OF REGISTRANT'S KNOWLEDGE, IN DEFINITIVE PROXY OR INFORMATION STATEMENTS
INCORPORATED BY REFERENCE IN PART III OF THIS FORM 10-K OR ANY AMENDMENT TO THIS
FORM 10-K.
YES NO X
---- ----
AGGREGATE MARKET VALUE OF REGISTRANT'S VOTING STOCK, HELD BY NON-AFFILIATES,
BASED ON THE CLOSING PRICE ON THE NEW YORK STOCK EXCHANGE
AS OF THE CLOSE OF BUSINESS ON MARCH 22, 1996:
$232,961,783
NUMBER OF SHARES OF THE REGISTRANT'S COMMON STOCK
OUTSTANDING AS OF MARCH 22, 1996:
31,061,571
THE FOLLOWING DOCUMENT IS HEREBY INCORPORATED BY REFERENCE INTO PART III OF
THIS FORM 10-K:
(1) PORTIONS OF THE OMI CORP. 1995 PROXY STATEMENT TO BE FILED WITH THE
SECURITIES AND EXCHANGE COMMISSION.
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<PAGE>
INDEX
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PART I
ITEMS PAGE(S)
- ----- ------
1 and 2. Business and Properties ..................................... 1-7
3. Legal Proceedings ........................................... 7
4. Submission of Matters to a Vote of Security Holders ......... 7
Executive Officers of OMI ................................... 8-9
PART II
5. Market for OMI's Common Stock and Related Stockholder
Matters ................................................... 10
6. Selected Financial Data ..................................... 11
7. Management's Discussion and Analysis of Financial
Condition and Results of Operations ....................... 11-16
8. Financial Statements and Supplementary Data ................. 17-55
9. Changes in and Disagreements with Accountants
on Accounting and Financial Disclosure .................... 56
PART III
10. Directors and Executive Officers of OMI ..................... 56
11. Executive Compensation ...................................... 56
12. Security Ownership of Certain Beneficial Owners
and Management ............................................ 56
13. Certain Relationships and Related Transactions .............. 56
PART IV
14. Exhibits, Financial Statement Schedules and Reports
on Form 8-K ............................................... 57-58
SIGNATURES .................................................. 59
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PART I
ITEMS 1 AND 2. BUSINESS AND PROPERTIES
GENERAL
OMI Corp. ("OMI" or the "Company"), organized under the laws of the State
of Delaware on July 19, 1968, is currently located at 90 Park Avenue, New York,
New York pursuant to a sublease which expires in 1999. The telephone number is
(212) 986-1960.
The Company owns solely or through joint ownership or charters-in a fleet
of 40 vessels which includes tankers, dry bulk carriers and a liquid petroleum
gas ("LPG") carrier as follows:
34 tankers -- 8 U.S. flag, aggregating 422,393 metric tons ("dwt."); 22
foreign flag, aggregating 2,259,103 dwt; and 4 chartered-in
foreign flag, aggregating 406,181 dwt.
5 bulk carriers -- 1 U.S. flag, aggregating 37,060 dwt.; and 4 foreign
flag, aggregating 262,176 dwt.
1 LPG carrier -- foreign flag, 49,880 dwt.
NOTE: Approximately 22.6% of the owned and jointly-owned tonnage is
under charters extending beyond year-end 1996.
Three of the U.S. flag tankers aggregating 141,047 dwt. are under contract
to be sold, contingent upon the buyer's successful completion of an initial
public offering of common stock. One crude oil tanker of 268,038 dwt. is under
contract to be sold, contingent upon the purchaser obtaining a particular
charter. One jointly-owned dry bulk carrier of 43,583 dwt. is under contract to
be sold.
There are two aspects to vessel operations, technical operation, which
involves maintaining, crewing and insuring, and commercial operation, which
involves arranging the business of the vessel. OMI is technical and commercial
operator of all U.S. flag vessels. OMI became technical operator at the
beginning of 1995 of vessels which had in prior years been technically operated
by an independent operator. OMI, either individually or through a joint venture,
is technical operator of its wholly-owned foreign flag vessels except for an LPG
carrier and three product carriers which are operated by an independent manager.
Technical and commercial operation of the jointly-owned vessels is allocated to
OMI or its joint venture partner based primarily on the experience of the entity
with the type and size of vessel.
The Company's vessels are available for charter on a voyage, time or
bareboat basis. Under a voyage charter, the operator of a vessel agrees to
provide the vessel for the transport of specific goods between specific ports in
return for the payment of an agreed-upon freight per ton of cargo or,
alternatively, for a named total amount. All operating costs are for the
operator's account. A single voyage (generally two to ten weeks) charter is
often referred to as a "spot market" charter. Vessels in the spot market may
also spend time idle or laid up as they await business. A voyage charter
involving more than one voyage is commonly known as a "consecutive voyage"
charter.
A time charter involves the placing of a vessel at the charterer's disposal
for a set period of time during which the charterer may use the vessel in return
for the payment by the charterer of a specified daily or monthly hire rate. In
time charters, operating costs such as for crews, maintenance and insurance are
typically paid by the owner of the vessel and voyage costs such as fuel and port
charges are paid by the charterer.
Under a bareboat charter, the charterer takes possession of the vessel in
return for a specified amount payable to the owner of the vessel. The bareboat
charterer must provide its own crew, pay all operating and voyage expenses and
is responsible for the operation and management of the vessel.
Voyage, time and bareboat charters are available for varying periods,
ranging from a single trip to a long-term arrangement approximating the useful
life of the ship, to commercial firms (such as oil companies) and governmental
agencies, both foreign and domestic, on a worldwide basis. In general, a
long-term charter affords the vessel owner greater assurance that it will be
able to cover its costs (including depreciation, interest, and operating costs).
Operating the vessel in the spot market affords the owner greater speculative
opportunity, which may result in high rates when ships are in high demand or low
rates (possibly insufficient to cover costs) when ship availability exceeds
demand. Ship charter rates are affected by world economics, international
events, weather conditions, strikes, governmental policies, supply and demand,
and many other factors beyond the control of the Company.
The following table sets forth certain information with respect to the
Company's vessels all of which are wholly-owned by the Company except the
SETTEBELLO, WHITE SEA, WILOMI ALTA, WILOMI TANANA, WILOMI
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YUKON, ELBE, MARITIME MOSAIC, MARITIME OMI, MARITIME NANCY and MARITIME
CONQUEROR which are jointly-owned, and the chartered-in crude tankers. The
vessels which are not operated by a joint venture partner or by an independent
manager or operator are operated by the Company.
<TABLE>
<CAPTION>
Dead-
Weight Charter
Type of Year(1) Metric Expira-
Name of Vessel Vessel Built Tonnage tion(2)
- -------------- ------ ------ ------- -------
<S> <C> <C> <C> <C>
U.S. Flag Vessels:
OMI COLUMBIA (3) ...................... Crude Oil Tanker 1974 138,698 04/96
OMI DYNACHEM (4) ...................... Chemical/Product Carrier 1981 51,668 05/00
OMI HUDSON (4) ........................ Chemical/Product Carrier 1981 51,668 05/00
OMI STAR (4) .......................... Chemical/Product Carrier 1970 37,711 05/00
PATRIOT ............................... Product Carrier 1976 35,662 03/97
RANGER ................................ Product Carrier 1976 35,662 Spot
COURIER ............................... Product Carrier 1977 35,662 03/97
ROVER ................................. Product Carrier 1977 35,662 06/96
PLATTE ................................ Dry Bulk Carrier 1982 37,060 Spot
---------
Total U.S. Flag Operating Fleet: 9 Vessels .................................. 459,453
---------
Foreign Flag Vessels:
SETTEBELLO (5) ........................ Crude Oil Tanker 1986 322,446 Spot
PROMISE ............................... Crude Oil Tanker 1978 268,038 Spot
WHITE SEA (6) ......................... Crude Oil Tanker 1975 155,702 Spot
CAIRO SEA ............................. Crude Oil Tanker 1975 154,719 Spot
TRINIDAD SEA .......................... Crude Oil Tanker 1974 154,605 Spot
WILOMI ALTA (6) ....................... Crude Oil Tanker 1990 146,251 Spot
CZANTORIA ............................. Crude Oil Tanker 1975 146,104 Spot
SOKOLICA .............................. Crude Oil Tanker 1975 145,649 10/97
WILOMI TANANA (6, 9) .................. Crude Oil Tanker 1992 141,720 Evergreen
COLORADO .............................. Crude Oil Tanker 1980 86,648 05/97
TRENT ................................. Product Carrier 1991 29,998 Spot
WILOMI YUKON (6) ...................... Product Carrier 1992 99,008 Spot
DANUBE ................................ Product Carrier 1990 29,998 05/96
ELBE (7) .............................. Product Carrier 1984 66,800 08/96
NILE .................................. Product Carrier 1981 65,755 03/98
VOLGA ................................. Product Carrier 1981 65,689 04/98
LIMAR ................................. Product Carrier 1988 29,999 Spot
PAULINA ............................... Product Carrier 1984 29,993 Spot
ALMA .................................. Product Carrier 1988 29,994 03/98
PAGODA ................................ Product Carrier 1988 29,996 Spot
PATRICIA .............................. Product Carrier 1984 29,993 04/98
TIBER ................................. Product Carrier 1989 29,998 12/96
MARITIME MOSAIC (7) ................... Dry Bulk Carrier 1993 73,657 Spot
MARITIME OMI (7) ...................... Dry Bulk Carrier 1994 72,800 Spot
MARITIME NANCY (7) .................... Dry Bulk Carrier 1990 72,136 04/96
MARITIME CONQUEROR (7) ................ Dry Bulk Carrier 1983 43,583 04/96
GENERAL ............................... LPG Carrier 1975 49,880 03/97
---------
Total Foreign Owned Fleet: 27 Vessels ....................................... 2,571,159
4 Chartered-in Crude Tankers (8) ............................................ 406,181
---------
Total Foreign Flag Operating Fleet: 31 Vessels .............................. 2,977,340
---------
Total OMI Fleet: 40 Vessels ............................................... 3,436,793
=========
(Footnotes on next page)
</TABLE>
2
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(1) Weighted average age (based on carrying capacity) of the Company's owned
fleet (including jointly-owned) at year-end 1995 is 13.1 years.
(2) Expiration dates do not reflect charterers' options for extensions or
cancellations or other contingencies. See section describing U.S.
Subsidies with respect to further information regarding the OMI COLUMBIA.
(3) Rebuilt in 1983 under Wrecked Vessels Act, 46 U.S.C. Section 14.
(4) The vessels are time chartered to a 50% owned affiliate at rates dependent
upon the performance of the affiliate. Vessels are under contract to be
sold to Hvide Marine Incorporated, contingent upon Hvide successfully
concluding an initial public offering of its common stock.
(5) Joint ownership with Bergesen d.y. A/S, Norway.
(6) Joint ownership with an affiliate of Anders Wilhelmsen & Co., Norway.
(7) Joint ownership with an affiliate of International Maritime Carriers
Limited ("IMC"), Hong Kong and chartered into pools operated by IMC.
(8) Time chartered-in under charters expiring in 1996 through 1998.
(9) The vessel is time chartered but may be redelivered at any time by
Charterer.
A brief description of the functions of the various types of vessels owned
or operated by the Company is set forth below:
Product Carrier -- Normally carries refined petroleum products such as
gasoline, naphtha and kerosene.
Chemical Tanker -- Normally carries various types of liquid chemicals.
Crude Oil Tanker -- Normally carries crude oil and dirty products.
Dry Bulk Carrier -- Carries dry bulk products such as coal, ore, grain
and fertilizer.
LPG Carrier -- Carries various petroleum gas products in liquid form.
The Company has agreed to joint ownership of an additional vessel to be
delivered in 1996 from a shipyard in China, to be jointly-owned with an
affiliate of Anders Wilhelmsen & Co. All of the Company's foreign joint
ownership arrangements involve beneficial ownership by the Company of 49 to 50%.
As of December 31, 1995, OMI's U.S. flag ships were subject to mortgages
and bonds in the aggregate principal amount of approximately $38,425,000 and
OMI's foreign flag ships (not including debt of jointly-owned ships) were
subject to mortgages in the aggregate principal amount of approximately
$60,843,000. The Company and its joint venture partners are also several
guarantors, in proportion to their respective beneficial ownership, of certain
loan transactions relating to the joint ventures. The aggregate amount of such
guaranteed debt is approximately $90,079,000, with OMI's share being
approximately $44,313,000.
The Company owns 81.5% of OMI Petrolink Corporation ("Petrolink"), a
Houston-based company which renders lightering services for large tankers in the
U.S. Gulf. Petrolink charters-in, for varying term periods, such vessels as are
necessary to satisfy the needs of its customers. OMI Offshore Marine Services,
Inc., a subsidiary of Petrolink with its principal office in Sabine Pass, Texas,
managed five offshore support boats and one crew boat at year end. The boats,
owned by Petrolink, have also provided support for rigs and platforms in the
Gulf of Mexico.
The Company's wholly-owned subsidiary, OMI Ship Management, Inc., provides
technical services to the U.S. Maritime Administration for ten vessels in the
Ready Reserve Fleet Program under a multi-year contract. From time to time, OMI
Ship Management also manages vessel conversion contracts for various U.S.
government agencies.
The Company is a party to an agreement with Hvide Marine, Inc. ("Hvide"),
Fort Lauderdale, Florida, a privately-held corporation with significant bulk
shipping operations, to charter on a long-term basis to Ocean Specialty Tankers
Corp. ("OSTC") several U.S. flag chemical/petroleum product carriers. The OMI
DYNACHEM, the OMI HUDSON and the OMI STAR and two similar vessels controlled by
Hvide have been time chartered to OSTC, a Houston-based company with expertise
in marketing parcel tankers. Net proceeds from OSTC's operations are shared
among the vessels in accordance with mutually agreed formulas. OMI and Hvide
each own a 50% interest
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in OSTC. Hvide and the Company have entered into an agreement for Hvide to
purchase OMI's interest in OSTC and the three chemical vessels for $67,350,000.
The sale is contingent upon Hvide successfully completing an initial public
offering of common stock. In March 1996, the Company acquired the OMI HUDSON
from a financing institution for cash and debt aggregating approximately
$29,000,000, having paid $22,000,000 cash and issuing a $3,000,000 convertible
note to terminate a long-term operating lease on the vessel.
CUSTOMERS
There were no charterers which accounted for 10% or more of OMI's
consolidated revenues. For information about major customers, see Note 12 to
OMI's Consolidated Financial Statements.
U.S. SUBSIDIES
The Merchant Marine Act, 1936, as amended (the "Merchant Marine Act"),
permits domestic shipping companies to establish a tax-deferred fund called a
Capital Construction Fund ("CCF") for such purposes as acquiring qualified
vessels for use in certain U.S. flag trades, reconstruction of existing vessels
and payment of principal on certain existing indebtedness. The Company maintains
a CCF as well as a Reserve Fund maintained in connection with its Title XI
financed vessels. Pursuant to a Dual Use Agreement, monies on deposit in the
Reserve Fund have the tax deferred aspects of a CCF. As of December 31, 1995,
the balance in the CCF and Reserve Fund was $9,765,000.
Operating cost differentials favor foreign ships in worldwide commerce.
However, because United States laws restrict U.S. coastwise trade (generally
transport of cargo by sea from one U.S. port to another) to U.S. built, U.S.
flag ships, foreign flag ships cannot compete for U.S. coastwise cargoes.
To encourage U.S. flag vessels to engage in foreign trade, the Merchant
Marine Act provides for direct subsidies to equalize the disparity between the
costs of U.S. operations and construction and the costs of foreign operations
and construction. A qualified shipowner may apply for a contract with the
Maritime Subsidy Board of the U.S. Department of Transportation (the "Board")
whereby a portion of the costs of operating a U.S. flag vessel is subsidized.
Certain restrictions are placed on operations and dividends. The subsidy
resulting from this is known as an Operating-Differential Subsidy ("ODS").
Similarly, the Board may grant a construction subsidy for the construction of a
U.S. flag vessel in a U.S. shipyard. This is characterized as a
Construction-Differential Subsidy ("CDS"). Vessels built with CDS or operating
with ODS are not presently permitted in the U.S. coastwise trade during the term
of restrictions associated with these programs except on a case-by-case waiver
basis. A shipowner has filed suit to clarify the length of the term of coastwise
trading restrictions associated with the CDS program. The United States
Government is defending its current interpretation of these restrictions in this
lawsuit. Congress has not appropriated funds for new ODS or CDS contracts since
1981. While legislative proposals have been made to revise and extend an
operating subsidy program for a limited number of U.S. flag vessels, none has
been enacted and no current legislation is pending which would provide subsidy
for tankers or dry bulk carriers.
Four of the Company's U.S. flag tankers were constructed with CDS and are
eligible for ODS and one of the Company's U.S flag vessels recently became
eligible for ODS under an ODS sharing program approved by the Board. The tankers
also qualify for non-coastwise U.S. military cargo. Two of the Company's three
U.S. flag bulk carriers have been sold. Those dry bulk carriers historically
were employed primarily in the carriage of U.S. government generated preference
cargoes but began trading consistently in foreign trade (where they were
eligible for ODS) several years ago. During such charters to the military or
whenever the vessels are used for non-coastwise U.S. military cargo or in the
preference trades, they are not eligible for ODS. In 1995, the Company received
benefits of ODS payments of approximately $9,222,000. The ODS contracts expire
in 1996 and 1997, after which the vessels may be reflagged (assuming permission
of the Maritime Administration is obtained) or trade in the coastwise trade
(assuming that a suit to block vessels built with CDS from entering such trade
is not successful).
In the latter part of 1995, legislation to eliminate restrictions on the
export of Alaskan North Slope ("ANS") oil, provided that exports are carried on
U.S. flag vessels, was enacted. The Administration is currently determining
whether the export of such oil is in the national interest. If no adverse
determination is made by the second quarter of 1996, it will become lawful to
export ANS crude oil. The Company has agreed upon terms for a long-term charter
with a major oil company effective after it becomes lawful to export ANS crude
oil. Such a charter would be materially beneficial to the Company.
Legislation was passed and signed into law in 1985 to extend the
requirement to utilize U.S. flag vessels under the PL 480 program (by which the
U.S. Government sells or donates surplus grain for export to developing
countries)
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from its historic 50% level to 75% over a three year period. Currently, most
food aid programs are at the 75% level but several have still remained at the
50% level. This program benefits the Company's remaining U.S. flag dry bulk
carrier and several of its U.S. flag tankers. This extension of the cargo
preference law was opposed by many agricultural interests and the
Administration. While the 75% level was retained in the 1990 Farm Bill, the
program is opposed by farm and other interests and there is no assurance that
the program will withstand future legislative tests. Further, the amount of
cargo shipped under the program in 1995 continued to be far below pre-1994
levels, resulting in much lower freight rates. It is not expected that there
will be improvement in 1996.
REGULATIONS
The Company is required by various governmental and quasi-governmental
agencies to obtain certain permits, licenses and certificates with respect to
its vessels. The kinds of permits, licenses and certificates required depend
upon such factors as the country of registry, the commodity transported, the
waters in which the vessel operates, the nationality of the vessel's crew, the
age of the vessel and the status of the Company as owner or charterer. The
Company believes that it has or can readily obtain all permits, licenses and
certificates necessary to permit its vessels to operate.
In the operation of its U.S. flag vessels, the Company is subject to
various statutes and regulations, including the Merchant Marine Act. Under the
Merchant Marine Act, vessels owned by United States citizens are subject to
requisition by purchase or charter by the United States whenever the President
declares that the national security requires such action. The owner of any such
vessel must receive just compensation as provided in the Merchant Marine Act,
but there is no assurance that lost profits, if any, will be fully recovered.
Additionally, U.S. law requires that, to be eligible for U.S. coastwise
trade, a corporation owning a vessel must be at least 75% U.S. owned. In order
to assure compliance with this citizenship requirement, the Restated Certificate
of Incorporation of the Company authorizes, and the Board of Directors has
adopted, a By-law authorizing the Board to determine a minimum percentage of
outstanding shares of common stock of the Company that must be held by U.S.
citizens. The minimum percentage established by the Board now stands at 77% and
officers of the Company have been authorized to set such percentage higher, if
deemed advisable. The Board has also adopted procedures for establishing the
citizenship of the Company's stockholders. The Company's stock certificates
(otherwise identical) are identified as "Domestic Share Certificates"
(certificates representing shares issued to United States citizens) and "Foreign
Share Certificates" (certificates representing shares issued to persons who are
non-U.S. citizens). Any purported transfer of shares represented by a Domestic
Share Certificate to a non-U.S. citizen that would cause the level of ownership
by U.S. citizens to drop below the minimum set by the Board of Directors will
not be recorded on the registration books of the Company and will be ineffective
to transfer the shares or any voting, dividend or other rights in respect
thereof. The By-laws authorize the Company to make all determinations with
respect to the validity of any transfer under these provisions and any such
decision by the Company is final and binding.
The Company's operations are also affected by U.S., state and foreign
environmental protection laws and regulations, particularly the U.S. Port and
Tanker Safety Act, the Act to Prevent Pollution from Ships, various volatile
organic compound emission requirements, the BCH Code for chemical carriers, the
IMO/USCG pollution regulations and various SOLAS amendments. Compliance with
such laws and regulations entail additional expense, including vessel
modifications and changes in operating procedures.
The Oil Pollution Act of 1990 ("OPA") affects all vessel owners shipping
oil or hazardous materials to, from, or within the U.S. The law phases out the
use of tankers having single hulls, effectively imposes on vessel owners
unlimited liability in the event of a catastrophic oil spill and establishes the
Oil Spill Liability Trust Fund. OPA requires that tankers over 5,000 gross tons
calling at U.S. ports have double hulls if contracted after June 30, 1990, or
delivered after January 1, 1994; furthermore, it calls for the elimination of
all single hull vessels by the year 2010 on a phase-in schedule that is based on
size and age, unless the tankers are retrofitted with double hulls. In addition,
the law permits existing single hull tankers to operate until the year 2015 if
they discharge at deep water ports, such as the Louisiana Offshore Oil Port
("LOOP"), or lighter more than 60 miles offshore. The International Maritime
Organization ("IMO") has adopted a regulation that requires tankers, 5,000 dwt.
and over contracted after July 6, 1993 to have double hull, mid-deck or
equivalent design. Existing single hull tankers will be phased-out unless they
are retrofitted with double hull, mid-deck or equivalent design no later than 30
years after delivery. Another IMO regulation mandates that after mid-1995
existing single hull crude oil tankers larger than 20,000 dwt. and product
tankers over 30,000 dwt. without segregated ballast tanks ("SBT") must convert
to SBT operations using at least 30% of their
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wing tanks, or cargo tank bottom area, for this purpose by the age of 25. The
U.S. has not accepted these IMO regulations as they recognize, in addition to
double hull, other designs as well as contain different phase out dates for
existing single hull tankers which are in conflict with provisions of OPA. In
addition, with respect to the IMO SBT requirement and timetable, the U.S. Coast
Guard has published a preliminary rule which will require that all tankers over
5,000 gross tons, regardless of age, if traded in U.S. ports to be fitted with
SBT. This rule, if enacted, would take effect within three years after
publication of the final rule.
Liability for an oil spill is governed not only by the OPA, but also by the
laws, rules and regulations established by every coastal and inland waterway
state; Federal law does not preempt these state laws and provides that claims
made by state governments and other affected parties are not subject to
limitations of liability if the oil spill results from gross negligence, willful
misconduct or violation of any federal operating or safety standard. One result
of the OPA has been to create greater prominence for those U.S. independent
owners with a long standing industry reputation for a high quality of technical
management and well maintained physical assets. Another effect of the new law
has been to increase costs for liability insurance for vessel owners trading to
the U.S. While the Company maintains insurance at levels it believes prudent,
the claim from a catastrophic spill could exceed the insurance coverage
available, in which event there could be a material adverse effect on the
Company.
The Company believes that compliance with applicable environmental and
pollution laws and regulations has not had and is not expected to have a
material adverse effect upon its competitive position; however the Company's
financial position, value and useful life of its vessels and results of
operations may be affected as a result of OPA and other environmental laws and
regulations.
Regulations issued by the USCG pursuant to OPA provided a new method for
determining whether vessel operators had the financial capability to satisfy
certain liability requirements of OPA. USCG set a deadline of December 28, 1994
for tanker owners to obtain Certificates of Financial Responsibility ("COFRs").
The Company obtained COFRs for all but one of its tankers without cost to it.
The Company obtained a COFR for that vessel through commercial sources.
COMPETITION
The Company competes with a small number of domestic and a large number of
foreign fleets. Both the domestic and foreign fleets include vessels owned by
independent operators and major oil companies; in addition, many foreign fleets
are government owned. Some of the Company's competitors have greater financial
resources than the Company.
Competition in the ocean shipping industry varies primarily according to
the nature of the contractual relationship as well as with respect to the kind
of commodity being shipped. Federal regulations insulate domestic shipping from
direct competition with international shipping. Competition in virtually all
bulk trades, including crude oil, petroleum products and dry bulk (mainly coal,
grain and ore) is intense.
EMPLOYEES AND LABOR RELATIONS
On December 31, 1995, the Company and its subsidiaries had approximately
1,092 employees, of whom approximately 986 were seagoing employees. The
Company's seagoing employees which serve aboard its U.S. flag vessels are
covered by collective bargaining agreements with various maritime unions, one of
which expires in June 1996 and the rest in 2000. Together with other maritime
employers, the Company is obligated through these agreements to contribute to
various multi-employer pension and health and welfare and other plans. The
Employee Retirement Income Security Act of 1974, as amended, provides for
liabilities for withdrawal from a multi-employer pension plan if an employer
reduces its operations below a minimum level. The failure or withdrawal of any
shipping company employer may cause other employers (such as the Company) to
increase their plan contributions. The Company has been advised by the trustees
of such plans that it has no withdrawal liability as of December 31, 1995.
The Company primarily utilizes three hiring agents to crew its foreign flag
vessels. Although agents sign labor contracts with labor organizations in
various foreign countries that represent seagoing personnel from these
countries, the Company is not a party to these contracts. Some senior shipboard
positions on foreign flag vessels are filled directly by the Company.
The Company considers its relationship with its employees, including its
seagoing crews, to be satisfactory.
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VALUE OF ASSETS, CASH REQUIREMENTS AND TAXES
Although the replacement costs of comparable new vessels are significantly
above the book value of OMI's fleet, the market value of OMI's fleet may be
below book value when market conditions are weak. In common with other
shipowners, OMI continually considers asset redeployment which could at times
include the sale of vessels at less than their book value.
OMI's results of operations and cash flow may be significantly affected by
future charter markets because only 22.6% of OMI's tonnage (including
jointly-owned vessels) is on charters extending beyond year-end 1996. (See
section describing U.S. Subsidies with respect to further information regarding
the OMI COLUMBIA).
At December 31, 1995, net book values of vessels exceeded their tax bases
by approximately $185,094,000. Accordingly, if such vessels were disposed of at
prices at or near book value, the Company's current liability for taxes on the
resulting taxable gain would be substantial. See Note 5 to OMI's Consolidated
Financial Statements set forth in Item 8.
For years subsequent to December 31, 1983, the Company and its domestic
subsidiaries have filed consolidated federal income tax returns.
The 1986 Tax Reform Act had a significant effect on the taxation of income
from U.S. controlled (over 50%) foreign shipping operations. This change in the
tax law affected retained earnings of OMI's international fleet operations,
excluding the Company's joint ventures with overseas partners. There is no basic
change with respect to the exclusion from taxation of U.S. controlled foreign
companies' income earned and re-invested in foreign shipping operations between
January 1, 1976 and December 31, 1986; earnings prior to 1976 are not subject to
taxes unless repatriated.
Under the 1986 Act, effective January 1, 1987, earnings of U.S. controlled
foreign shipping companies are subject to U.S. income tax. As in the past,
disinvestment of qualified investments in foreign shipping operations (as
defined) can lead to taxation of past reinvested earnings; year end 1986 has
been established as a permanent base, with the amount of any decrease in assets
recorded at the end of subsequent years deemed to be taxable income in the
respective years, limited to the total amount reinvested from 1976 through 1986.
Shifting of earning assets to non-U.S. controlled (50% or less interest) foreign
companies could result in disinvestment.
OMI assets have a low tax basis and a relatively large deferred tax
liability due to the following practices:
OMI has employed monies held in it's CCF, for the acquisition of
qualified U.S. flag tonnage. The depreciable tax base of such assets is
reduced by the amount of the tax savings related to the CCF monies
employed.
Prior to enactment of the 1986 Tax Reform Act, OMI utilized
accelerated depreciation for tax purposes in determining earnings on its
foreign flag vessels. Accelerated depreciation on foreign flag vessels is
no longer permitted. Accelerated depreciation for tax purposes is allowed
on U.S. flag vessels. The tax on the difference between accelerated and
book depreciation is recorded as a deferred tax liability.
ITEM 3. LEGAL PROCEEDINGS
OMI and its subsidiaries are not parties to any material pending legal
proceedings for damages, or a related group of such proceedings, other than
ordinary routine litigation incidental to the business.
OMI is a party, as plaintiff or defendant, in a variety of lawsuits for
damages arising principally from personal injuries or other casualties in the
ordinary course of the maritime business. All such personal injury and casualty
claims against OMI are fully covered by insurance (subject to deductibles which
are not material) including asbestosis related proceedings.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
No matters were submitted to a vote of the security holders of the Company
during the fourth quarter of 1995.
7
<PAGE>
EXECUTIVE OFFICERS OF OMI
Set forth below are the names, ages, position and office, term and year
appointed of all of the Company's executive officers as of March 28, 1996.
<TABLE>
<CAPTION>
Age Year
As of Appointed
Name Position and Office Held 3/28/96 to Office
---- ------------------------ ------- ---------
<S> <C> <C> <C>
Jack Goldstein ...................... Chief Executive Officer and Chairman 57 1986
of the Board
Craig H. Stevenson, Jr. ............. President and Chief Operating Officer 42 1993
Vincent J. de Sostoa ................ Senior Vice President, Treasurer 51 1989
and Chief Financial Officer
Fredric S. London ................... Senior Vice President, Secretary 48 1987
and General Counsel
Richard Halluska .................... Senior Vice President 48 1993
Robert Bugbee ....................... Senior Vice President 35 1995
Kathleen C. Haines .................. Vice President/Controller 41 1994
William A.G. Hogg ................... Vice President 58 1994
Anthony Naccarato ................... Vice President 50 1987
William Osmer ....................... Vice President 41 1994
Kenneth Rogers ...................... Vice President 40 1994
Thomas M. Scott ..................... Vice President 39 1995
</TABLE>
There is no family relationship by blood, marriage or adoption (not more
remote than first cousins) between any of the above individuals and any other
executive officer or any OMI director.
The term of office of each officer is until the first meeting of directors
after the annual stockholders' meeting next succeeding his election and until
his respective successor is chosen and qualified.
There are no arrangements or understandings between any of the above
officers and any other person pursuant to which any of the above was selected as
an officer.
The following are descriptions of other occupations or positions that the
other executive officers of the Company have held during the last five years:
Jack Goldstein was appointed President and Chief Executive Officer of the
Company in April 1986. He became Chairman of the Board of Directors in October
1995, at which time he ceased to be President.
Craig H. Stevenson, Jr. was elected President in October 1995. He had been
elected Executive Vice President and Chief Operating Officer in November 1994.
He was elected Senior Vice President/Chartering of the Company in August 1993.
For five years prior thereto he was President of Ocean Specialty Tankers Corp.,
a marketing manager for several of the Company's chemical tankers.
Vincent de Sostoa was elected Chief Financial Officer in January, 1994. He
was elected Senior Vice President/Finance of the Company in January 1989.
Fredric S. London was elected Senior Vice President of the Company in
December 1991. He was elected Vice President of the Company in December 1988.
Richard Halluska was elected Senior Vice President in August 1995. He had
been elected Vice President of the Company in July 1993. He was elected
Assistant Vice President of the Company in December 1989.
Robert Bugbee was elected Senior Vice President in August 1995. He joined
the Company in February 1995. Prior thereto, he was Head of Business Development
at Gotaas-Larsen Shipping Corporation.
8
<PAGE>
Kathleen C. Haines was elected Vice President and Controller of the Company
in January 1994. She was elected Assistant Vice President and Controller in
December 1992. Prior thereto, she was Assistant Controller.
William A.G. Hogg was elected Vice President of the Company in January
1994. He was elected Assistant Vice President of the Company in June 1987.
Anthony Naccarato was elected Vice President of Human
Resources/Administration in October, 1993. He was elected Vice President/Labor
Relations of the Company in June 1987.
William Osmer was elected Vice President of the Company in January 1994. He
was elected Assistant Vice President of the Company in December 1986.
Kenneth Rogers was elected Vice President of the Company in January 1994.
He was elected Assistant Vice President of the Company in December 1990.
Thomas M. Scott was elected Vice President of the Company in February,
1995. He was Ship Manager starting in September, 1991 and was elected Assistant
Vice President/Operations in 1993. Prior thereto he was Port Captain for
International Maritime Carriers for one year and prior thereto Marine
Superintendent for Marine Transport Lines.
9
<PAGE>
PART II
ITEM 5. MARKET FOR OMI CORP.'S COMMON STOCK AND RELATED STOCKHOLDER MATTERS
COMMON STOCK
The Company listed for trading on the New York Stock Exchange all of its
common stock on March 13, 1992 (NYSE-OMM). Previously, the Company's common
stock initially traded on the over-the-counter market on January 4, 1984, began
trading on the NASDAQ National Market System on February 18, 1986, and on
January 27, 1989 was listed for trading on the American Stock Exchange. As of
March 22, 1996, the number of holders of OMI common stock was approximately
4,665. The high and low sales prices of the common stock, as reported by the New
York Stock Exchange, were as follows:
1995 Quarter 1st 2nd 3rd 4th
------------ --- --- --- ---
High ................................ 6 1/2 7 8 5/8 8 3/8
Low ................................. 5 5 1/4 6 5/8 5 1/2
1994 Quarter 1st 2nd 3rd 4th
------------ --- --- --- ---
High ................................ 8 7 1/8 6 7/8 6 3/4
Low ................................. 6 1/4 6 5 3/4 5 7/8
PAYMENT OF DIVIDENDS TO STOCKHOLDERS
On June 15, 1993, the Board voted to declare special dividends rather than
adhere to a regular dividend policy. For the years ended December 31, 1993
through 1995, there were no dividends declared. Payment of dividends may be
limited by the terms of certain agreements to which OMI and its subsidiaries are
party. (See Note 3 to the Consolidated Financial Statements).
10
<PAGE>
Item 6. SELECTED FINANCIAL DATA
OMI CORP. AND SUBSIDIARIES
(In thousands, except per share amounts)
<TABLE>
<CAPTION>
For the Years Ended December 31,
-------------------------------------------------------
1995 1994 1993 1992 1991
-------- ------ ------ ------ -------
<S> <C> <C> <C> <C> <C>
Income Statement Data:
Revenues ....................................... $239,880 $266,796 $270,479 $265,529 $284,758
Other income ................................... 7,291 5,439 4,699 5,685 3,956
Depreciation and amortization .................. 34,734 37,770 35,441 35,483 34,688
Provision for losses:
Impaired value of vessels ..................... 8,707 14,798
Lease obligation .............................. 6,687 19,800
Operating (loss) income ........................ (38,681) (48,084) 1,902 12,195 54,713
Gain (loss) on disposal of assets--net ......... 5,647 10,222 4,401 (1,146) 105
Provision for writedown of investments ......... (1,250) (1,625) (16,183)
Interest expense ............................... 26,708 28,808 21,788 23,983 29,527
Equity in operations of joint ventures ......... 5,528 5,402 5,544 9,059 12,259
Net (loss) income .............................. (31,896) (37,865) (8,747) (11,424) 29,876
Net (loss) income per common share ............. (1.04) (1.24) (0.29) (0.36) 0.94
Cash dividends declared on common stock ........ 0.14 0.14
Other Financial Data:
Cash dividends received from joint ventures .... $ 539 $ 2,477 $ 11,823 $ 5,880
Cash and cash equivalents ...................... 32,569 31,797 45,321 $ 16,850 26,158
Vessels and other property--net ................ 368,441 400,998 453,683 458,564 499,010
Investments in, and advances to joint ventures . 84,915 81,868 77,802 78,492 74,894
Total assets ................................... 565,486 605,132 671,516 644,443 678,618
Current portion of long-term debt .............. 24,582 18,900 15,302 40,820 32,505
Long-term debt ................................. 259,284 253,239 282,325 222,435 242,311
-------- -------- -------- -------- --------
Total debt ..................................... 283,866 272,139 297,627 263,255 274,816
-------- -------- -------- -------- --------
Total stockholders' equity ..................... 145,195 179,676 220,026 218,391 229,551
</TABLE>
See notes to consolidated financial statements.
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
OMI Corp. ("OMI" or the "Company") is a diversified major bulk shipping
company operating in both the U.S. and international markets. OMI's operating
fleet currently consists of 40 vessels including ten joint venture vessels and
four chartered-in vessels. A Suezmax tanker is under construction and scheduled
for delivery in 1996 to a 49 percent owned joint venture. The Company also is
involved in other marine related activities, including the lightering of large
crude carriers and workboat supply services in the Gulf of Mexico and ship
management for the Ready Reserve Fleet.
YEARS 1995, 1994 AND 1993
RESULTS OF OPERATIONS
Results of operations of OMI include operating activities of the Company's
domestic and foreign vessels. The discussion that follows explains the Company's
operating results in terms of net voyage revenue, which is voyage revenue less
vessel and voyage expenses. The Company's vessels currently operate, or have
operated on time, bareboat or voyage ("spot") charters. Each type of charter
denotes a method by which revenues are recorded and expenses are allocated.
Under a time charter, revenue is measured based on a daily or monthly rate and
the charterer assumes
11
<PAGE>
certain operating expenses, such as fuel and port charges. Under bareboat
charters, the charterer assumes all operating expenses. The revenue rate may be
lower than time charter rates since all operating costs are assumed by the
charterer. Under a voyage charter, revenue is based on the amount of cargo
carried, most expenses are for the ship owner's account and the length of the
charter is one voyage. Other factors affecting net voyage revenue for voyage
charters are waiting time between cargoes, port costs and fuel price and
consumption. Revenues may be higher in the spot market since the owner is
responsible for most of the costs of the voyage . Since fluctuations occur in
voyage revenues and expenses due to the nature of the charter, the following
discussion addresses variations in net voyage revenues.
In 1991 the majority of OMI's fleet was operating and completing contracts under
long-term time charters that provided for predictable and stable earnings. In
1992, after many of the time charters terminated, net voyage revenues declined
$41,611,000 or 39 percent and continued to decline at a slower rate through
1995. The primary factors contributing to the decline in 1992 and 1993 were the
result of weak worldwide economic conditions and lower demand for petroleum
products. As a result, time charters at satisfactory rates were no longer
available. At the same time, costs were increasing, partially due to regulatory
changes, new environmental laws and increased operating costs for crews, vessel
repairs, maintenance and insurance. At the end of 1994 and in 1995 the
international tanker market improved; however, due to the increased drydock and
maintenance requirements of OMI's fleet, expenses to operate the vessels
increased. Revenue from the domestic fleet has been declining since 1993 because
of changes in government programs that some vessels operated under, in addition
to the type of business and rates available to these vessels. The Company
believes that the opportunities for future acquisitions are better in the
international than the domestic market. Consequently, over the past two years,
management has sold or contracted for the sale of certain U.S. flag vessels.
YEAR ENDED DECEMBER 31, 1995 VERSUS DECEMBER 31, 1994
VOYAGE REVENUES LESS VESSEL AND VOYAGE EXPENSES
Net voyage revenues of $24,397,000 for the year ended December 31, 1995
decreased $19,820,000 or 45 percent as compared to the year ended December 31,
1994. The net decrease was primarily attributable to the U.S. flag fleet, which
accounted for $13,205,000 of the decline. The net decline in the foreign fleet
was $6,615,000.
The reasons for the decline in the performance of the U.S. fleet varied:
(1) OMI's lightering subsidiary, OMI Petrolink Corp. ("Petrolink"), earned
approximately $4.7 million less net voyage revenue in 1995 as compared to 1994
due to depressed conditions and increased competition in the lightering market
in the Gulf of Mexico (2) three vessels which had contributed $2 million in net
voyage revenue in 1994 were sold to another U.S. shipowner in 1994 (3) drydock
expenses were greater than anticipated for four vessels (4) the U.S. Government
program ("PL480") under which the U.S. government sells or donates grain for
export to developing countries was curtailed and (5) the business opportunities
for the OMI Columbia were limited and unprofitable.
Net voyage revenues for the three dry bulk carriers were down approximately
$2,300,000 as they were adversely affected by the decline in the PL480 program.
As the U. S. drybulk market declined, the foreign drybulk market rose creating
an opportunity to sell the vessels in the foreign market. Consequently, the OMI
Missouri was contracted for sale in the fourth quarter of 1995 and the Company
agreed to swap its sister ship, the OMI Sacramento, in January 1996. The third
dry bulk carrier, the Platte, was offhire a significant amount of time in both
years; 114 days in 1994 and 60 days 1995. The Platte is currently carrying a
PL480 cargo. The Company is seeking permission to reflag this vessel under
foreign registry so that it may compete more effectively in the foreign market.
In 1995, seven of the Company's vessels shared four Operating-Differential
Subsidy ("ODS") contracts with the Marine Subsidy Board of the U. S. Department
of Transportation to provide subsidy for a portion of the difference in the
costs of operating a U.S. flag vessel versus a foreign vessel in foreign trades.
Effective July 1, 1995, tanker and bulker subsidy rates increased from three to
twelve percent per vessel over 1994 rates. In 1994, four product carriers
operated in foreign markets and received benefits of ODS. Two of these vessels
continued to receive ODS in 1995 and also achieved slightly better earnings due
to improved trading patterns. The other two product carriers began time charters
in April 1995 to the Military Sealift Command ("MSC") and were not eligible for
subsidy after that date. Prior to the commencement of the charters with MSC,
these vessels were in drydock undergoing upgrades for an aggregate of 107 days.
When the charters with MSC expired in October 1995, they were replaced with new
charters. The charters are for a 17 month period with an option to cancel one
charter after six months and also options to extend the charters for two 17
month periods. The OMI Missouri and OMI Sacramento were also included in the ODS
pool in 1995. The seventh vessel included in the pool is the OMI Columbia, which
was added to the contract in August 1995.
12
<PAGE>
The OMI Columbia incurred a significant number of offhire days between 1992
and 1995 after the expiration of a long-term time charter in 1992 due to the
lack of opportunities for U.S. crude carriers in the domestic market. Alaskan
crude oil production has decreased in the last three years, and distribution
favors shorter hauls which reduces the demand for vessels. In 1994, the OMI
Columbia operated on four consecutive voyage charters in the Alaskan North Slope
("ANS") trade. In late 1994 and early 1995, the vessel carried dry cargo under
PL480 programs at rates significantly lower than rates that would normally be
earned in the ANS crude oil trade. During the third quarter of 1995, the OMI
Columbia operated under a voyage charter carrying crude oil. The vessel
subsequently went to the yard for drydock and repairs prior to commencing its
current employment, again carrying crude oil. In the latter part of 1995,
legislation to eliminate restrictions on the export of ANS crude oil, provided
that exports are carried on U.S. flag vessels, was enacted. The Administration
is currently determining whether the export of such oil is in the national
interest. If no adverse determination is made by the second quarter of 1996, it
will become lawful to export Alaskan North Slope crude oil. The Company has
agreed upon terms for a long-term charter with a major oil company effective
after it becomes lawful to export ANS crude oil. Such a charter would be
materially beneficial to the Company.
Petrolink, OMI's Houston-based subsidiary, sustained its first operating
loss in 1995 due to increased competition in the lightering business, coupled
with a decrease in demand. In 1996, the company intends on focusing its
lightering business on contract customers, reducing the number of vessels it
charters-in and increasing its offshore supply boat business.
The Company's wholly-owned foreign fleet consists of six crude oil tankers,
ten product carriers and one liquid petroleum gas carrier. The crude oil sector
was primarily responsible for the decrease of $6,615,000 in net voyage revenues
between 1995 and 1994. While the average freight rates increased in the crude
markets in 1995, the rates did not exceed the time charter rates three of the
vessels had been earning in 1994. The Company also incurred significant costs to
maintain its crude carriers and meet its customers' requirements which reduced
net voyage revenues. The crude fleet was offhire for drydocking an aggregate of
220 days in 1995 as compared to an aggregate of 43 days in 1994.
Decreases in net voyage revenue for both the domestic and foreign fleets
were offset in part by increases primarily from seven vessels, five of which
incurred offhire in 1994 for drydock and earned higher average rates in 1995 and
two vessels which were sold, having incurred operating losses in 1994.
In September 1995, OMI exchanged a crude oil carrier and a product carrier
built in 1982 and 1987, respectively, for two 30,000 dwt. product carriers built
in 1990 and 1991 . A third product carrier was purchased in November 1995 for
$18,000,000. These transactions are in line with OMI's marketing strategy to
expand its position in small product carriers, while exchanging its older
vessels for a younger fleet.
PROVISION FOR LOSSES
In anticipation of the sale of the OMI Hudson to Hvide Marine Inc.
("Hvide"), OMI entered into an agreement with the owner/lessor of the OMI Hudson
to terminate the lease and purchase the vessel. In February 1996, OMI paid cash
of $22,000,000 and issued a $3,000,000 seven percent convertible note to
terminate the lease. The net loss on the termination of the lease of $6,687,000
was reported as a separate item of the 1995 Consolidated Statement of
Operations. The Company purchased the vessel in March 1996 for $9,300,000 cash
and the assumption of approximately $20,000,000 in debt.
OMI entered into an agreement with Hvide for the sale of three U.S. flag
chemical carriers for $67,350,000 including a Note with a face value of
$9,700,000. The transaction is contingent upon Hvide successfully completing its
initial public offering of common stock. These vessels are currently chartered
to a 50 percent owned affiliate ("OSTC") in a profit sharing pool with Hvide. As
part of this transaction, Hvide will acquire OMI's share of OSTC.
OMI periodically reviews the book value of its vessels and its ability to
recover the remaining book value of the vessels using estimated undiscounted
cashflows over the remaining life of each vessel. During its 1995 review, the
Company determined that the carrying value of two of its domestic product
carriers operating in the foreign spot market exceeded their forecasted
estimated undiscounted future net cash flows from operations. Impairment losses
of $8,707,000 measured by the excess of the vessels' carrying values over their
estimated fair values, based on appraised values from a ship broker, were
recognized as a separate component of operating expenses in the Consolidated
Statements of Operations.
13
<PAGE>
OTHER INCOME
Other income consists primarily of management fees and dividend income on
investments. During the year ended December 31, 1995, other income increased
$1,852,000 or 34 percent as compared to 1994. The increase in 1995 was primarily
from an increase in fees received for the management of vessels for the Ready
Reserve Fleet due to the activation of vessels as opposed to idle status fees in
1994. Another increase was the receipt of a rebate of fees related to previous
years' technical management of certain vessels. Increases were offset by a
decline in dividends received in 1995 on investments and the absence of
management fees from a company OMI provided services for until December 31,
1994.
OTHER OPERATING EXPENSES
The Company's operating expenses, other than vessel and voyage expenses and
provisions for losses, consist of depreciation and amortization, operating lease
expense and general and administrative expenses. For the year ended December
31, 1995, these expenses decreased an aggregate of $8,167,000 or 13 percent. The
primarily reason for the decrease was a reduction in depreciation expense of
$3,036,000, resulting principally from the sale of three domestic vessels during
the third quarter of 1994 and the sale of another vessel in June 1995. The
decrease in operating lease expense of $1,462,000 was attributed to the
impairment loss of $19,800,000 on an operating lease obligation recorded in
December 1994. Decreases in general and administrative expenses of $3,669,000 or
19 percent include a decline in employee benefits compared to 1994 primarily due
to ESOP expense, decreases in professional fees and minor reductions in various
other expense categories compared to 1994.
OTHER INCOME (EXPENSE)
Other income (expense) consists of gain on disposal of assets-net,
provision for writedown of investments, interest income and expense, minority
interest in subsidiary and other-net. The net decrease of $228,000 in net other
expense for the year ended December 31, 1995 compared to the same period in 1994
was primarily due to an increase of $4,992,000 in the gain on sales of Noble
Drilling Corporation stock in 1995 compared to 1994, the decrease in interest
expense of $2,100,000 in connection with the repayment of outstanding debt,
increase in Other-net of $1,231,000 due to an increase in the net gain on
repurchases of Senior Notes in 1995 compared to the net gain on repurchases of
Senior Notes in 1994 offset by losses incurred on early termination of other
debt, and a net decrease in the provision for writedown of investments of
$1,250,000, which was a nonrecurring charge for the settlement of a joint
venture investment recorded in 1994. These decreases in net other expense were
offset by decreases in gain on disposal of assets-net due primarily to the loss
on the sale of a foreign vessel of $1,430,000 in June 1995, the loss on sale of
a domestic vessel of $1,862,000 in December 1995 and the $7,178,000 gain on sale
of three domestic vessels in July 1994.
BENEFIT FOR INCOME TAXES
The benefit for income taxes of $18,973,000 for the year ended December 31,
1995 varied from statutory rates primarily because deferred income taxes are not
recorded for equity in operations of joint ventures, net of dividends declared,
other than Amazon Transport, Inc. and White Sea Holdings Ltd., as management
considers such earnings to be indefinitely invested. The Company plans to
carryback its current net operating loss to prior years for a refund of
previously paid federal income taxes.
EQUITY IN OPERATIONS OF JOINT VENTURES
Equity in operations of joint ventures of $5,528,000 increased $126,000 in
the year ended December 31, 1995, from $5,402,000 in 1994. The net increases
were primarily attributable to two joint ventures. One 49.9 percent joint
venture sold a vessel in the first half of 1995; OMI's portion of the gain was
$990,000. Another 49.9 percent joint venture operates three of its four vessels
in marketing pools which were more profitable in 1995 in comparison to 1994 and
the fourth vessel operated in the spot market in 1995 at a better average rate
than 1994. Increases were offset in part by decreases in the earnings of two 49
percent owned joint ventures. One joint venture earned less on one of its
vessels than its 1994 time charter. The same vessel was offhire 34 days due to
drydocking. The vessel in the other joint venture earned less revenue and
incurred higher technical expenses in 1995.
YEAR ENDED DECEMBER 31, 1994 VERSUS DECEMBER 31, 1993
Net voyage revenue of $44,217,000 for the year ended December 31, 1994
decreased $11,841,000 or 21 percent as compared to the year ended December 31,
1993. The decrease was primarily attributable to the U.S. flag fleet,
14
<PAGE>
which accounted for $14,364,000 of the net decline in revenues. This decline was
offset by $2,523,000 in net increases earned by the foreign fleet. Decreases in
domestic net voyage revenue included less revenue earned by three dry bulk
carriers which had been operating under PL480 programs but had substantially
less cargo available to move in 1994 in comparison to the tonnage available in
1993. Three vessels built in 1969 were sold in July 1994, resulting in 213 less
operating days as compared to 1993. Decreases were offset by a modest
improvement in the earnings of the OMI Columbia in 1994 as compared to 1993 when
the vessel was laid up for 288 days.
Increases in foreign net voyage revenues were primarily the result of the
purchase of two crude oil tankers in December 1993. These vessels were on
bareboat charters generating a steady inflow of revenues from the time they were
purchased until the charters terminated in July and August 1994 at which time
the vessels entered the spot market . Additional increases in net voyage
revenues were from three profitable time charters, one of which continued from
1993 at a higher rate in 1994, and the other two were for vessels previously in
the spot market.
The 1994 operating loss also reflects impairment losses of $14,798,000 on a
chemical/product carrier and $19,800,000 on the lease obligation of the OMI
Hudson.
OTHER INCOME
During the year ended December 31, 1994, other income increased $740,000 or
16 percent as compared to 1993. The increase in 1994 comprises dividend income
received from a five percent owned investment in a company, insurance premiums
collected from affiliates and increased fees to manage vessels in the Ready
Reserve Fleet.
OTHER OPERATING EXPENSES
For the year ended December 31, 1994, other operating expenses increased
$4,287,000 or seven percent. Depreciation expense increased seven percent due to
the shortening of the lives of six domestic vessels and the purchase of four
vessels, offset by the sale of three vessels sold in July 1994. General and
administrative expenses increased 13 percent primarily due to costs associated
with downsizing international operations and severance agreements.
OTHER INCOME (EXPENSE)
The decrease in net other expense of $435,000 or two percent for the year
ended December 31, 1994 over the same period in 1993 is due to the sale of the
three domestic vessels in July 1994 for a net gain of $7,178,000 compared with
gains from the sales of workboats and marketable securities in 1993. Interest
expense increased in 1994 by $7,020,000 due to interest expense relating to the
Senior Notes, of which $160,650,000 were outstanding at December 31, 1994.
Interest income increased $1,105,000 because of interest earned on invested
proceeds of the Senior Notes.
BENEFIT FOR TAXES
The benefit for income taxes of $22,305,000 for the year ended December 31,
1994 varied from statutory rates primarily because deferred income taxes are not
recorded for the equity in operations of joint ventures other than for Amazon
and White Sea.
In 1993, Congress passed the Omnibus Budget Reconciliation Act of 1993 (the
"Act") which increased OMI's corporate tax rate from 34 percent to 35 percent. A
retroactive provision of $3,044,000 for deferred income taxes was made in 1993
to comply with the provisions of the Act.
LIQUIDITY AND CAPITAL RESOURCES
Cash and cash equivalents of $32,569,000 increased $772,000 or two percent
at December 31, 1995 from the balance of $31,797,000 at December 31, 1994. The
Company had negative working capital of $2,654,000 at December 31, 1995, which
was a decrease of $25,815,000 or 111 percent from positive working capital of
$23,161,000 at December 31, 1994. The primary reason for the decline in working
capital is due to the accrual of $22,000,000 in lease termination costs at
December 31, 1995.
During 1995, net cash used by operating activities was $4,817,000 which was
a decrease of $6,464,000 as compared to net cash provided by operating
activities of $1,647,000 for the year ended 1994 (see discussion on results of
operations).
15
<PAGE>
For the year ended December 31, 1995, sources of liquidity were primarily
proceeds of $15,076,000 received from the sale of securities, $8,775,000 from
the sale of a vessel, $32,000,000 borrowed under a bank credit agreement,
$12,600,000 from issuance of long-term debt on a newly acquired vessel,
$5,200,000 received in qualified withdrawals from the Capital Construction fund
and $1,275,000 from the issuance of common stock from the exercise of stock
options.
The primary uses of cash, other than for operating activities, during the
year ended December 31, 1995 were for payments of $30,543,000 of long-term debt
(including $8,318,000 for repurchases of Senior Notes), and capital expenditures
for two vessels and improvements on vessels aggregating $38,140,000 .
During January 1996, OMI repurchased an additional $14,050,000 of the
Senior Notes and recognized a net gain of $557,000. OMI paid lease termination
costs of $22,000,000 in February 1996 to the lessor of the OMI Hudson and, in
addition, paid $9,300,000 cash and assumed approximately $20,000,000 in debt in
March 1996 for the purchase of the vessel in anticipation of its future sale to
Hvide. The sale is contingent upon Hvide completing an initial public offering
of its common stock. OMI expects to receive approximately $23,000,000 cash as
part of the purchase price from the pending sale of vessels to Hvide. Also,
during February 1996, OMI delivered the OMI Missouri to its new owners and
received proceeds of $14,531,000 , $7,500,000 of which was used to repay the
outstanding debt obligation on the vessel. The OMI Sacramento was swapped in
March 1996 for a vessel to be delivered at a future date. The outstanding
mortgage of $7,500,000 was paid in March 1996.
The Company had three credit agreements with banks aggregating $57,000,000
at December 31, 1995, of which $25,000,000 was unused. During the first quarter
of 1996, the remaining lines of credit available were drawn down primarily to
pay the accrued lease termination fees on the OMI Hudson lease. OMI is currently
considering other debt and equity opportunities including refinancing a portion
of its obligations to increase the Company's cash flow and reduce future
interest costs. OMI believes it is in the position to meet its current and
future obligations. The Company may also increase its liquidity by selling
vessels in 1996 that are not in line with the Company's strategy to concentrate
in crude tankers and product carriers.
COMMITMENTS
OMI and a joint venture partner have committed to construct a vessel being
built in the Peoples Republic of China for a cost of approximately $56,000,000.
The vessel is scheduled to be delivered in 1996. OMI guarantees 49 percent of
the purchase price through a joint venture partner. OMI acts as a co-guarantor
for a portion of the debt incurred by joint ventures with affiliates of two of
its joint venture partners. The portion of debt guaranteed by the partners was
approximately $90,079,000 at December 31, 1995, with OMI's share of such
guarantees being approximately $44,313,000. OMI also is guarantor for one of its
joint venture's revolving line of credit of up to $4,000,000 at December 31,
1995, with a guarantee to OMI from its joint venture partner of 50 percent of
the amount guaranteed by OMI.
The Company and its joint venture partners have committed to fund any
working capital deficiencies that may be incurred by their joint venture
investments. At December 31, 1995, no such deficiencies have occurred which have
required funding.
EFFECTS OF INFLATION
The Company does not consider inflation to be a significant risk to the
cost of doing business in the current and foreseeable future. Inflation has a
moderate impact on operating expenses, drydocking expenses, and corporate
overhead.
16
<PAGE>
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
<TABLE>
OMI CORP. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(In thousands, except per share data)
<CAPTION>
For the Years Ended December 31,
-------------------------------------
1995 1994 1993
-------- -------- -------
<S> <C> <C> <C>
Revenues:
Voyage revenues (Note 2) ......................................... $232,589 $261,357 $265,780
Other income (Note 2) ............................................ 7,291 5,439 4,699
-------- -------- --------
Total revenues ................................................. 239,880 266,796 270,479
-------- -------- --------
Operating Expenses:
Vessel and voyage ................................................ 208,192 217,140 209,722
Depreciation and amortization .................................... 34,734 37,770 35,441
Operating lease .................................................. 4,938 6,400 6,666
Provision for losses (Note 10):
Impaired value of vessels ....................................... 8,707 14,798
Lease obligation ................................................ 6,687 19,800
General and administrative ....................................... 15,303 18,972 16,748
-------- -------- --------
Total operating expenses ....................................... 278,561 314,880 268,577
-------- -------- --------
Operating (loss) income ........................................... (38,681) (48,084) 1,902
-------- -------- --------
Other Income (Expense):
Gain on disposal of assets--net (Note 11) ........................ 5,647 10,222 4,401
Provision for writedown of investments (Notes 1,2) ............... (1,250) (1,625)
Interest expense ................................................. (26,708) (28,808) (21,788)
Interest income .................................................. 2,076 2,843 1,738
Minority interest in loss (income) of subsidiary ................. 229 (304) (649)
Other-net ........................................................ 1,040 (191)
-------- -------- --------
Net other expense .............................................. (17,716) (17,488) (17,923)
-------- -------- --------
Loss before income taxes and equity in operations
of joint ventures ................................................ (56,397) (65,572) (16,021)
Benefit for income taxes (Note 5) ................................. 18,973 22,305 1,730
-------- -------- --------
Loss before equity in operations of joint ventures ................ (37,424) (43,267) (14,291)
Equity in operations of joint ventures (Note 2) ................... 5,528 5,402 5,544
-------- -------- --------
Net loss .......................................................... $(31,896) $(37,865) $ (8,747)
======== ======== =========
Net loss per common share (Note 1) ................................ $ (1.04) $ (1.24) $ (0.29)
======== ======== =========
Weighted average number of shares of common
stock outstanding ................................................ 30,745 30,417 30,590
======== ======== =========
</TABLE>
See notes to consolidated financial statements.
17
<PAGE>
<TABLE>
OMI CORP. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(In thousands, except per share data)
<CAPTION>
December 31,
-----------------------
1995 1994
-------- --------
ASSETS
<S> <C> <C>
Current assets:
Cash, including cash equivalents of: 1995, $26,008; 1994, $19,734
(Notes 1,4) ................................................................. $ 32,569 $ 31,797
Marketable securities (Notes 1, 4) ........................................... 14,415
Advances to masters .......................................................... 2,033 635
Receivables:
Traffic ..................................................................... 12,016 16,364
Other ....................................................................... 9,333 9,442
Income tax refund receivable (Note 5) ........................................ 5,651
Prepaid expenses and other current assets .................................... 5,937 8,726
Vessel held for sale (Note 11) ............................................... 14,668
-------- --------
Total current assets ....................................................... 82,207 81,379
-------- --------
Capital Construction and other restricted funds (Notes 1, 3, 4) ............... 9,765 12,961
Vessels and other property (Note 1):
Vessels (Notes 3,11) ......................................................... 637,741 686,763
Other property ............................................................... 8,394 8,636
-------- --------
Total vessels and other property ........................................... 646,135 695,399
Less accumulated depreciation ................................................ 277,694 294,401
-------- --------
Vessels and other property--net .............................................. 368,441 400,998
-------- --------
Investments in, and advances to joint ventures (Note 2) ....................... 84,915 81,868
Long-term securities (Notes 1, 4) 591 3,075
Other assets and deferred charges ............................................. 19,567 24,851
-------- --------
Total ......................................................................... $565,486 $605,132
======== ========
</TABLE>
See notes to consolidated financial statements.
18
<PAGE>
<TABLE>
<CAPTION>
December 31,
-----------------------
1995 1994
-------- --------
LIABILITIES AND STOCKHOLDERS' EQUITY
<S> <C> <C>
Current liabilities:
Accounts payable ............................................................ $ 5,187 $ 6,842
Accrued liabilities:
Voyage and vessel .......................................................... 24,548 22,075
Interest ................................................................... 4,375 4,563
Lease termination costs (Note 10) .......................................... 22,000
Other ...................................................................... 4,169 5,838
Current portion of long-term debt (Notes 3, 4) .............................. 24,582 18,900
-------- --------
Total current liabilities ................................................ 84,861 58,218
-------- --------
Advance time charter revenues and other liabilities (Note 10) ................ 10,470 31,509
Long-term debt (Notes 3, 4) .................................................. 259,284 253,239
Deferred income taxes (Note 5) ............................................... 63,082 79,448
Minority interest in subsidiary .............................................. 2,594 3,042
Commitments and contingencies (Note 13)
Stockholders' equity:
Common stock, $0.50 par value, 80,000,000 shares authorized;
31,041,119 and 30,672,268 shares issued and outstanding,
1995 and 1994, respectively (Note 8) ...................................... 15,521 15,336
Capital surplus (Note 2) ................................................... 131,622 129,919
Retained (deficit) earnings (Note 3) ....................................... (5,265) 26,631
Cumulative translation adjustment (Note 1) ................................. 4,912 4,912
Unearned compensation--employee stock ownership trust (Note 6) ............. (663)
Unearned compensation--restricted stock (Note 7) ........................... (1,404) (941)
Unrealized gain on securities, net of deferred income taxes of $16
in 1995 and $3,060 in 1994 (Notes 1, 4) ................................... 29 5,684
Treasury stock (Note 2) .................................................... (220) (1,202)
-------- --------
Total stockholders' equity .............................................. 145,195 179,676
-------- --------
Total ................................................................... $565,486 $605,132
======== ========
</TABLE>
19
<PAGE>
<TABLE>
OMI CORP. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands)
<CAPTION>
For the Years Ended December 31,
----------------------------------
1995 1994 1993
-------- -------- --------
<S> <C> <C> <C>
Cash Flows (Used) Provided by Operating Activities:
Net loss ............................................................... $(31,896) $(37,865) $ (8,747)
Adjustments to reconcile net loss to net cash (used) provided by
operating activities:
Decrease in deferred income taxes .................................... (13,322) (22,387) (4,720)
Depreciation and amortization ........................................ 34,734 37,770 35,441
Amortization of unearned compensation ................................ 943 1,630 456
Gain on disposal of assets--net ...................................... (5,696) (10,222) (4,401)
Provision for losses on vessels/lease ................................ 15,394 34,598
Provision for writedown of investments 1,250 1,625
Other--net ........................................................... (1,040) (554)
Equity in operations of joint ventures (over) under dividends
received ............................................................ (4,989) (4,410) 6,279
Changes in assets and liabilities:
Decrease (increase) in receivables and other current assets ............ 191 (5,499) 8,302
(Decrease) increase in accounts payable and accrued liabilities ........ (274) 4,391 (448)
Advances to (from) joint ventures--net ................................. 2,578 196 (6,657)
Decrease (increase) in other assets and deferred charges ............... 4,055 3,037 (1,700)
(Decrease) increase in advance time charter revenues and
other liabilities ..................................................... (6,216) (981) 5,382
Other assets and liabilities--net ...................................... 721 693 603
-------- -------- --------
Net cash (used) provided by operating activities ..................... (4,817) 1,647 31,415
-------- -------- --------
Cash Flows (Used) Provided by Investing Activities:
Proceeds from disposition of vessels and other property ................ 8,775 23,703 12,178
Proceeds received from sale of marketable securities ................... 15,076 3,749 12
Additions to vessels and other property ................................ (38,140) (15,318) (36,548)
Withdrawals from Capital Construction and other restricted funds ....... 5,200 916
Proceeds and interest received and reinvested in Capital
Construction and other restricted funds ............................... (654) (1,033) (650)
Investments in joint ventures .......................................... (2,847) (3,724)
Return of investment in joint venture .................................. 1,485
Proceeds received on note receivable ................................... 300
Proceeds received from sale of investments ............................. 6,915
-------- -------- --------
Net cash (used) provided by investing activities ..................... (9,743) 9,739 (20,601)
-------- -------- --------
Cash Flows Provided (Used) by Financing Activities:
Payments on notes payable to bank--net ................................. (13,500)
Proceeds from issuance of long-term debt ............................... 44,600 12,050 177,000
Payments for debt issue costs .......................................... (776) (1,292)
Proceeds from issuance of common stock ................................. 1,275 263 217
Payments on long-term debt ............................................. (30,543) (36,447) (142,628)
Dividends paid (2,140)
-------- -------- --------
Net cash provided (used) by financing activities ..................... 15,332 (24,910) 17,657
-------- -------- --------
Net increase (decrease) in cash and cash equivalents .................... 772 (13,524) 28,471
Cash and cash equivalents at beginning of year .......................... 31,797 45,321 16,850
-------- -------- --------
Cash and cash equivalents at end of year ................................ $ 32,569 $ 31,797 $ 45,321
======== ======== ========
</TABLE>
See notes to consolidated financialstatements.
20
<PAGE>
<TABLE>
OMI CORP. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY
For the Years Ended December 31, 1995, 1994 and 1993
(In thousands, except per share data)
<CAPTION>
Common Stock Retained Cumulative
--------------- Capital (Deficit) Translation
Shares Amount Surplus Earnings Adjustment
------ ------- -------- -------- ----------
<S> <C> <C> <C> <C> <C>
Balance at January 1, 1993 ... 30,568 $15,284 $128,705 $ 73,243 $4,912
Net loss ..................... (8,747)
Exercise of stock options .... 47 23 195
Amortization of unearned
compensation ................
Unrealized gain on securities
Purchase of treasury stock ...
------ ------- -------- -------- ------
Balance at December 31, 1993 . 30,615 15,307 128,900 64,496 4,912
Net loss ..................... (37,865)
Exercise of stock options .... 52 26 237
Issuance of restricted stock
awards ..................... 15 8 86
Forfeiture of restricted
stock awards ............... (10) (5) (71)
Amortization of unearned
compensation ................
Net change in valuation
account ....................
Purchase of treasury stock ...
Sale of treasury stock ....... 767
------ ------- -------- -------- ------
Balance at December 31, 1994 . 30,672 15,336 129,919 26,631 4,912
Net loss ..................... (31,896)
Issuance of restricted stock
awards ..................... 110 55 688
Exercise of stock options .... 259 130 1,145
Amortization of unearned
compensation ...............
Net change in valuation
account ....................
Sale of securities ...........
Sale of treasury stock ....... (130)
------ ------- -------- -------- ------
Balance at December 31,
1995 ....................... 31,041 $15,521 $131,622 $ (5,265) $4,912
====== ======= ======== ======== ======
<CAPTION>
Unearned Unearned
Compensa- Compensa- Unrealized Total
tion tion Gain on Stock-
From Restricted Securities Treasury holders'
ESOP Stock --Net Stock Equity
------ ------- ------ ------- --------
<S> <C> <C> <C> <C> <C>
Balance at January 1, 1993 ... $(2,520) $(1,152) $ (81) $218,391
Net loss ..................... (8,747)
Exercise of stock options .... 218
Amortization of unearned
compensation ................ 361 95 456
Unrealized gain on securities $ 9,709 9,709
Purchase of treasury stock ... (1) (1)
------ ------- ------ ------- --------
Balance at December 31, 1993 . (2,159) (1,057) 9,709 (82) 220,026
Net loss ..................... (37,865)
Exercise of stock options .... 263
Issuance of restricted stock
awards ..................... (94)
Forfeiture of restricted
stock awards ............... 76
Amortization of unearned
compensation ................ 1,496 134 1,630
Net change in valuation
account .................... (4,025) (4,025)
Purchase of treasury stock ... (2,431) (2,431)
Sale of treasury stock ....... 1,311 2,078
------ ------- ------ ------- --------
Balance at December 31, 1994 . (663) (941) 5,684 (1,202) 179,676
Net loss ..................... (31,896)
Issuance of restricted stock
awards ..................... (743)
Exercise of stock options .... 1,275
Amortization of unearned
compensation ............... 663 280 943
Net change in valuation
account .................... 1,139 1,139
Sale of securities ........... (6,794) (6,794)
Sale of treasury stock ....... 982 852
------ ------- ------ ------- --------
Balance at December 31,
1995 ....................... $(1,404) $ 29 $ (220) $145,195
====== ======= ====== ======= ========
</TABLE>
See notes to consolidated financial statements.
21
<PAGE>
OMI CORP. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
For the Three Years Ended December 31, 1995
(All tabular amounts are in thousands of dollars)
NOTE 1--NATURE OF BUSINESS/SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Business--OMI Corp. ("OMI" or the "Company") is a bulk shipping company
which operates in both international and domestic shipping markets. Its
operating fleet, at December 31, 1995, consists of 40 vessels including ten
joint venture vessels and four chartered-in tankers, aggregating approximately
3.4 million deadweight tons.
Principles of Consolidation--The consolidated financial statements include
all domestic and foreign subsidiaries which are more than 50 percent owned by
OMI. All significant intercompany accounts and transactions have been eliminated
in consolidation.
Investments in joint ventures, in which the Company's interest is 50
percent or less and where it is deemed that the Company's ownership gives it
significant influence over operating and financial policies, are accounted for
by the equity method.
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 disclosures of contingent assets and liabilities at the date of
the financial statements and the reported amounts of revenues and expenses
during the reporting period. Actual results could differ from those estimates.
Operating Revenues and Expenses--Voyage revenues and expenses are
recognized on the percentage of completion method of accounting based on voyage
costs incurred to date as compared to estimated total voyage costs. Estimated
losses on voyages are provided for in full at the time such losses become
evident.
Special survey and drydock expenses are accrued and charged to operating
expenses over the survey cycle, which is generally a two to three year period.
The accruals of such expenses are based on management's best estimates of future
cost and the expected length of the survey cycle. However, the ultimate
liability may be more or less than such estimates.
Investments in Securities--Investments in marketable securities have been
classified by management as available-for-sale and are carried at fair value.
Net unrealized gains or losses are reported as a separate component of
stockholders' equity. Adjustments are made to net income for any impairment in
value that is deemed to be other than temporary. Realized gains and losses on
the sales of securities are recognized in net income on the specific
identification basis.
Capital Construction and Other Restricted Funds--The Capital Construction
Fund ("CCF") is restricted to provide for replacement vessels, additional
vessels or reconstruction of vessels built in the United States. The other
restricted funds are to be used to pay certain of the Company's debt. These
funds can be used at the discretion of the Company upon receipt of written
approval from the Maritime Administration.
Vessels and Other Property--Vessels and other property are recorded at
cost. Depreciation for financial reporting purposes is provided principally on
the straight-line method based on the estimated useful lives of the assets up to
the assets' estimated salvage value. The useful lives of the vessels range from
20 to 30 years. Salvage value is based upon a vessel's light weight tonnage
multiplied by a scrap rate.
Expenditures for maintenance, repairs and minor renewals are expensed.
Major replacements and renewals are capitalized.
Leasehold improvements are amortized on the straight-line method over the
terms of the leases or the estimated useful lives of the improvements as
appropriate.
In the event that facts and circumstances indicate that the carrying amount
of a vessel may be impaired, an evaluation of recoverability is performed. If an
evaluation is required, the estimated future undiscounted cash flows associated
with the vessel are compared to the vessel's carrying value to determine if a
writedown to fair value or discounted cash flow is required (see Note 10).
22
<PAGE>
OMI CORP. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
For the Three Years Ended December 31, 1995
(All tabular amounts are in thousands of dollars)
Goodwill--Goodwill, recognized in business combinations accounted for as
purchases, of $17,868,000 before accumulated amortization of $3,961,000 and
$3,260,000 at December 31, 1995 and 1994, respectively, is being amortized over
25 years. The carrying value of goodwill is reviewed periodically based on the
estimated future undiscounted cash flows of the entity acquired over the
remaining amortization period.
Net Income (Loss) per Common Share--Net income (loss) per common share is
determined by dividing net income (loss) by the weighted average number of
common shares outstanding during the period. Shares issuable upon the exercise
of stock options (see Note 7) have not been included in the computation where
their effect would be anti-dilutive.
Income Taxes--OMI files a consolidated Federal income tax return which
includes all its domestic subsidiary companies. Deferred income taxes are
determined on the asset and liability method in accordance with Statement of
Financial Accounting Standards No. 109, "Accounting for Income Taxes" (see Note
5).
Cash Flows--Cash equivalents represent liquid investments which mature
within 90 days. The carrying amount approximates fair value.
During the years ended December 31, 1995, 1994 and 1993, interest paid
totaled approximately $24,688,000, $29,447,000 and $20,647,000, respectively.
For the year ended December 31, 1993, income taxes paid were approximately
$6,413,000. There were no income taxes paid during 1995 and 1994.
Reclassifications--Certain reclassifications have been made to the 1994 and
1993 financial statements to conform to the 1995 presentation.
Newly Issued Accounting Standards--Effective January 1, 1995, the Company
adopted Statement of Financial Accounting Standards No. 121 ("SFAS 121")
"Accounting for the Impairment of Long-Lived Assets and for Long-Lived Assets to
Be Disposed Of". SFAS 121 establishes accounting standards for recording the
impairment of long-lived assets, certain identifiable intangibles, goodwill and
assets to be disposed of. The adoption of this Statement did not have a
significant effect on the Company's consolidated financial position or results
of operations.
In October 1995, Statement of Financial Accounting Standards No. 123 ("SFAS
123"), "Accounting for Stock-Based Compensation" was issued. SFAS 123, which the
Company is required to adopt during fiscal 1996, provides guidance relating to
the recognition, measurement and disclosure of stock-based compensation. This
statement allows for, and the Company intends to retain, the current method of
accounting for employee stock-based compensation arrangements with certain
additional disclosures. The new standard is not expected to have a material
effect on the Company's consolidated financial position or results of
operations.
23
<PAGE>
OMI CORP. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
For the Three Years Ended December 31, 1995
(All tabular amounts are in thousands of dollars)
NOTE 2--INVESTMENTS IN JOINT VENTURES
The operating results of the joint ventures have been included in the
accompanying consolidated financial statements on the basis of ownership as
follows:
Percent of
Ownership
----------
Amazon Transport, Inc. ("Amazon") ............................. 49.0
Aurora Management Ltd. ("Aurora") ............................. 49.9 (1)
Aurora Tankers Ltd. ........................................... 49.9 (2)
Aurora Tankers Pte. Ltd. ...................................... 49.9 (2)
Aurora Tankers (UK) Ltd. ...................................... 49.9 (2)
Ecomarine USA ................................................. 49.0
Gainwell Investments Ltd. ..................................... 25.0
Geraldton Navigation Company Inc. ............................. 49.9
Grandteam Ship Management Ltd. ................................ 50.0
Greeley Management Ltd. ("Greeley") ........................... 49.9 (1)
K/S Palawan Princess .......................................... 25.0 (3)
Mosaic Alliance Corporation ("Mosaic") ........................ 49.9
Mundogas Orinoco Ltd. ......................................... 50.0 (4)
Ocean Specialty Tankers Corp. ("OSTC") ........................ 50.0
Vanomi Management, Inc. ....................................... 50.0
White Sea Holdings Ltd. ("White Sea") ......................... 49.0
Wilomi, Inc. ("Wilomi") ....................................... 49.0
- -----------
(1) Joint ventures terminated July 1, 1993.
(2) Joint ventures terminated December 31, 1994.
(3) The joint venture sold its primary asset in January 1994.
(4) OMI sold its investment in Mundogas Orinoco Ltd. in 1993.
OMI has entered into management service agreements with certain of its
joint ventures, wherein the Company acts as technical and/or commercial manager
for certain of the ventures' vessels. Management fees relating to services
rendered to joint ventures aggregated $759,000, $820,000 and $699,000 for the
years ended December 31, 1995, 1994 and 1993, respectively.
In 1995, Mosaic purchased $2,000,000 of OMI's 10.25 percent Senior Notes
("Notes") at a cost of $1,736,000. The Company's portion of such Notes is
considered a retirement of debt.
In 1994, Mosaic owned 893,800 shares of OMI common stock acquired on the
open market at an aggregate cost of $4,595,000 and also sold 600,000 of these
shares in 1994. The remaining 293,800 shares were sold in 1995. OMI's equity in
these shares was accounted for as treasury stock. OMI's share of the (losses)
gains on the sale of the stock of ($130,000) in 1995 and $767,000 in 1994 was
recorded in capital surplus.
24
<PAGE>
OMI CORP. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
For the Three Years Ended December 31, 1995
(All tabular amounts are in thousands of dollars)
Summarized combined financial information pertaining to all affiliated
companies accounted for by the equity method is as follows:
<TABLE>
<CAPTION>
December 31,
--------------------------------------
1995 1994 1993
-------- --------- --------
<S> <C> <C> <C>
Results of operations:
Revenues ................................................... $123,256 $120,707 $118,769
Operating income ........................................... 23,487 18,661 17,410
Gain on disposal of assets, net ............................ 1,791 2,976
Net income ................................................. 15,587 11,741 10,869
Net Assets:
Current assets ............................................. $ 54,958 $ 64,236 $ 44,445
Vessels and other property, net ............................ 286,250 303,876 283,792
Other assets ............................................... 7,710 9,605 22,880
-------- -------- --------
Total assets ................................................ 348,918 377,717 351,117
-------- -------- --------
Less:
Current liabilities ........................................ 34,594 39,414 30,956
Long-term debt ............................................. 142,380 171,045 156,839
Other liabilities .......................................... 1,418 2,833 2,023
-------- -------- --------
Total liabilities ........................................... 178,392 213,292 189,818
-------- -------- --------
Shareholders' and partners' equity .......................... $170,526 $164,425 $161,299
======== ======== ========
</TABLE>
During 1995, 1994 and 1993, OMI chartered three vessels to OSTC for
$26,099,000, $26,564,000, and $24,434,000, respectively. These amounts are
included in revenues of OMI as the operations of OSTC are not consolidated.
During 1994, OMI wrote down its investment in Aurora Tankers Ltd. by
$1,250,000 to recognize the estimated loss on exiting the joint venture. The
Company also wrote off its investment in Ecomarine USA of $1,625,000 in 1993.
In 1995, OMI received dividends of $539,000 from White Sea and, in 1994,
received distributions from Amazon of $2,450,000 and from Greeley of $27,000. In
1993, dividends of $4,410,000 and $258,000 were received from Amazon and Aurora,
respectively.
Certain of the loan agreements to which the Company's joint ventures are
party contain restrictive covenants requiring minimum levels of cash or cash
equivalents, working capital and net worth, maintenance of specified financial
ratios and collateral values, and restrict the ability of the joint ventures to
pay dividends to the Company. These loan agreements also contain various
provisions restricting the right of the joint ventures to make certain
investments, to place additional liens on their property, to incur additional
long-term debt, to make certain payments (including in certain instances,
dividends), to merge or to undergo a similar corporate reorganization, and to
enter into transactions with affiliated companies.
25
<PAGE>
OMI CORP. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
For the Three Years Ended December 31, 1995
(All tabular amounts are in thousands of dollars)
NOTE 3--LONG-TERM DEBT AND CREDIT ARRANGEMENTS
Long-term debt consists of the following:
<TABLE>
<CAPTION>
December 31,
------------------------
1995 1994
-------- --------
<S> <C> <C>
10.25% unsecured Senior Notes due 11/01/03 .......................... $150,002 $160,650
Bonds, mortgage notes and loans under bank credit agreements
secured by vessels:
Bonds payable at 5.35% to 10.1% in varying installments
to 2006 ............................................................ 17,488 20,013
Mortgage notes at variable rates above the London Interbank
Offering Rate ("LIBOR") in varying installments to 2006(1) ......... 81,780 83,852
Loans under bank credit agreements at variable rates
above LIBOR(1) ..................................................... 32,000
Unsecured notes payable to an affiliate at 5.0% due 1996 .............. 2,596 7,624
-------- --------
Total ................................................................. 283,866 272,139
Less current portion of long-term debt ................................ 24,582 18,900
-------- --------
Long-term debt ........................................................ $259,284 $253,239
======== ========
(1) Rates at December 31, 1995 ranged from 6.5625 percent to 7.375 percent.
</TABLE>
Aggregate maturities during the next five years are $24,582,000,
$15,965,000, $18,083,000, $12,942,000 and $8,004,000.
In November 1993, the Company issued $170,000,000 in unsecured Senior Notes
due November 1, 2003. The Notes are not redeemable prior to November 1, 1998;
thereafter, the Notes are redeemable at the option of the Company at a premium
until November 1, 2000 when the Notes will be redeemable at face value, plus
accrued interest. OMI repurchased $9,650,000 and $9,350,000 of the Notes for net
gains of $1,040,000 and $753,000, in 1995 and 1994 respectively, which are
included in Other-net in the accompanying consolidated statements of operations.
In January 1996, OMI repurchased $14,050,000 of the Notes for a net gain of
$557,000.
Bonds of a domestic subsidiary of OMI in the amount of $17,488,000 at
December 31, 1995 are collateralized by a mortgage on a vessel. Such bonds are
guaranteed as to the principal and interest by the U.S. Government under the
Title XI program. This security arrangement restricts the subsidiary from, among
other things, the withdrawal of capital, the payment of common stock dividends
and the extending of loans to affiliated parties.
At December 31, 1995, vessels with a net book value of $253,071,000,
investments of $9,765,000 (included in Capital Construction and other restricted
funds in the accompanying consolidated balance sheet) and shares of a subsidiary
and a joint venture with an aggregate carrying value of $19,700,000 have been
pledged as collateral on loans under bank credit agreements and on long-term
debt issues.
Certain of the loan agreements of the Company's subsidiaries contain
restrictive covenants requiring minimum levels of cash or cash equivalents,
working capital and net worth, maintenance of specified financial ratios and
collateral values, and restrict the ability of the Company's subsidiaries to pay
dividends to the Company. These loan agreements also contain various provisions
restricting the right of OMI and/or its subsidiaries to make certain
investments, to place additional liens on the property of certain of OMI's
subsidiaries, to incur additional long-term debt, to make certain payments, to
merge or to undergo a similar corporate reorganization, and to enter into
transactions with affiliated companies. As dividend payments are limited by the
terms of the Senior Note Indenture to 50 percent of net income earned subsequent
to issuance of the Notes, the Company was unable to pay cash dividends at
December 31, 1995.
26
<PAGE>
OMI CORP. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
For the Three Years Ended December 31, 1995
(All tabular amounts are in thousands of dollars)
At December 31, 1995, OMI has a revolving credit/term loan agreement
providing for a credit facility of up to $37,000,000 through May 1999, at which
time the then outstanding balance converts to a three year amortizing term loan.
The commitment fee is 3/4 percent per year on the average undrawn balance of the
credit facility through the conversion date. Interest on the credit facility is
at LIBOR plus 1 1/2 percent, which increases by 1/8 percent under the term loan.
The Company also has two $10,000,000 line of credit facilities at variable rates
above LIBOR, which expire in February 1997 and December 1997, respectively.
Commitment fees are one percent and 3/4 percent per year, based on the unused
portion of the respective lines of credit. At December 31, 1995, $25,000,000 was
available under these commercial bank facilities.
OMI has entered into interest rate swap agreements to manage interest costs
and the risk associated with changing interest rates. At December 31, 1995 and
1994, the Company had outstanding three interest rate swap agreements with
commercial banks. These agreements effectively change the Company's interest
rate exposure on floating rate loans to fixed rates ranging from 6.98 percent to
8.475 percent. The differential to be paid or received on these agreements is
recognized as an adjustment to interest expense over the lives of the
agreements. The agreements have various maturity dates from February 1999 to
June 1999. The changes in the notional principal amounts are as follows:
1995 1994
--------- ---------
Notional principal amount, beginning of year .... $ 38,350 $ 69,650
Reductions of notional amounts .................. (3,150) (6,300)
Maturity/termination of swaps ................... (35,200) (25,000)
New swap agreements ............................. 32,700
-------- --------
Notional principal amount, end of year .......... $ 32,700 $ 38,350
======== ========
Interest expense pertaining to interest rate swaps for the three years
ended December 31, 1995, 1994 and 1993 was $786,000, $2,100,000 and $2,914,000,
respectively.
The Company is exposed to credit loss in the event of non-performance by
other parties to the interest rate swap agreements. However, OMI does not
anticipate non-performance by the counter-parties. The Company has granted the
counter-party to two agreements a second priority mortgage on one of its vessels
to secure its obligation under these agreements.
NOTE 4--FAIR VALUE OF FINANCIAL INSTRUMENTS
The estimated fair values of the Company's financial instruments at
December 31 are as follows:
<TABLE>
<CAPTION>
1995 1994
---------------------- -----------------------
Carrying Fair Carrying Fair
Value Value Value Value
-------- --------- ---------- ----------
<S> <C> <C> <C> <C>
Cash and cash equivalents ................................ $ 32,569 $ 32,569 $ 31,797 $ 31,797
Marketable securities .................................... 14,415 14,415
CCF ...................................................... 9,765 9,765 12,961 12,961
Long-term securities ..................................... 591 591 3,075 3,075
Total debt ............................................... 283,866 281,866 272,139 255,547
Unrecognized financial instruments:
Interest rate swaps in a net payable position ........... 2,686 631
</TABLE>
The fair value of the Company's Senior Notes, included in long-term debt,
is determined by using the quoted market price at the end of the reporting
period. The fair value of other long-term debt is estimated based on the current
rates offered to the Company for similar debt of the same remaining maturities.
The fair value of interest rate swaps (used for purposes other than trading) is
the estimated amount the Company would receive or pay to terminate swap
agreements at the reporting date, taking into account current interest rates and
the current credit-worthiness of the swap counter-parties.
27
<PAGE>
OMI CORP. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
For the Three Years Ended December 31, 1995
(All tabular amounts are in thousands of dollars)
Securities available-for-sale included in Marketable securities, Capital
Construction and other restricted funds, and Long-term securities consist of the
following components at December 31:
<TABLE>
<CAPTION>
1995 1994
--------------------- ---------------------
Fair Unrealized Fair Unrealized
Value Gain Value Gain (Loss)
------ ---------- ------- -----------
<S> <C> <C> <C> <C>
Current:
2,503,389 common shares of Noble Drilling
Corporation ............................................... $14,394 $ 9,840
Miscellaneous securities ................................... 21
Long-term:
125,000 common shares of SEACOR Holdings, Inc. 2,484 609
12,500 B Capital shares of Sundal Collier & Co. a.s. ....... $ 591 591
CCF:
Cash equivalents ........................................... 135 933
U.S. Treasury Notes ........................................ 4,128 (468)
Preferred stocks ........................................... 3,150 $ 45 7,000 (1,237)
Time deposit ............................................... 6,480 900
------ -------
Total ....................................................... 45 8,744
Deferred income taxes ....................................... (16) (3,060)
------ -------
Unrealized gain on securities--net .......................... $ 29 $ 5,684
====== =======
</TABLE>
NOTE 5--INCOME TAXES
<TABLE>
A summary of the components of the benefit for income taxes is as follows:
<CAPTION>
For the Years Ended December 31,
--------------------------------
1995 1994 1993
------- -------- --------
<S> <C> <C> <C>
Current (benefit) provision ................. $ (5,651) $ 82 $ 2,990
Deferred tax benefit ........................ (13,322) (22,387) (4,720)
-------- -------- -------
Benefit for income taxes .................... $(18,973) $(22,305) $(1,730)
======== ======== =======
</TABLE>
The 1995 current federal tax benefit includes estimated income taxes
recoverable due to the carryback of the 1995 current taxable loss.
The benefit for income taxes varies from the statutory rates due to the
following:
<TABLE>
<CAPTION>
For the Years Ended December 31,
---------------------------------
1995 1994 1993
---------- --------- ----------
<S> <C> <C> <C>
Tax benefit at statutory rate ................................. $(17,884) $(20,953) $(3,341)
Equity in earnings of joint ventures (other than
Amazon/White Sea) net of dividends declared .................. (1,876) (1,866) (1,314)
Effect of change in Federal tax rate .......................... 3,044
Increase in valuation allowance ............................... 525
Other ......................................................... 262 514 (119)
-------- -------- -------
Benefit for income taxes ...................................... $(18,973) $(22,305) $(1,730)
======== ======== =======
</TABLE>
On August 2, 1993, Congress passed the Omnibus Budget Reconciliation Act of
1993, (the "Act"). The major component of the Act affecting OMI was the
retroactive increase in the marginal corporate tax rate from 34 percent to 35
percent, increasing 1993 deferred income taxes by $3,044,000 to comply with the
provisions of the Act.
28
<PAGE>
OMI CORP. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
For the Three Years Ended December 31, 1995
(All tabular amounts are in thousands of dollars)
The components of deferred income taxes relate to the tax effects of
temporary differences as follows:
December 31,
--------------------
1995 1994
------- --------
Deferred tax liabilities:
Difference between book and tax basis in assets ......... $68,838 $78,848
Unrealized gain on investments .......................... 16 3,060
Capital Construction fund ............................... 3,402 5,134
Previously excluded foreign income ...................... 8,070 10,285
ESOP 552
Other 115
------- -------
Total deferred tax liabilities .......................... 80,326 97,994
------- -------
Deferred tax assets:
Unrealized losses on investments ........................ (1,673) (3,249)
Reserve for drydocking .................................. (4,907) (5,541)
Deferred foreign deficits ............................... (839) (993)
Difference between book and tax basis of investments in
Amazon/White Sea ....................................... (313) (324)
Accrued lease termination costs ......................... (8,750) (6,930)
Other ................................................... (1,287) (1,509)
------- -------
Total deferred tax assets ............................... (17,769) (18,546)
------- -------
Subtotal ................................................ 62,557 79,448
Valuation allowance ...................................... 525
------- -------
Deferred income taxes .................................... $63,082 $79,448
======= =======
The Company has not provided deferred income taxes on its equity in the
undistributed earnings of foreign corporate joint ventures accounted for under
the equity method other than those of Amazon and White Sea because these
earnings are considered by management to be invested in the business for an
indefinite period. If the earnings were not considered indefinitely invested,
approximately $13,982,000 of additional deferred tax liabilities would have been
required at December 31, 1995.
NOTE 6--EMPLOYEE STOCK OWNERSHIP PLAN
Under the Employee Stock Ownership Plan ("ESOP"), shares were allocated
annually to eligible participants based on a percentage of their annual salaries
up to the extent allowable by the Internal Revenue Code. Unearned
compensation-employee stock ownership trust in the accompanying consolidated
statements of changes in stockholders' equity represents the cost of unallocated
shares held by the ESOP trust. At December 31, 1995, all shares have been
allocated by the trust. In 1996, the Company intends to merge the ESOP and the
existing 401(k) Plan (see Note 8).
NOTE 7--STOCK OPTION AND RESTRICTED STOCK PLANS
On May 23, 1995, the shareholders approved the OMI Corp. 1995 Incentive
Equity Plan ("1995 Plan") to replace the 1990 Equity Incentive Plan ("1990
Plan"). The total number of shares that may be optioned or awarded under the
1995 Plan is 1,000,000 shares of OMI common stock. No further options may be
granted under the 1990 Plan; 432,000 shares are reserved with respect to options
granted under this plan. The Company also has a 1986 Non-Qualified Stock Option
Plan which provided for the granting of up to 500,000 shares. No options may be
granted under this plan after April 3, 1996.
Under the 1995 Plan, the Company may grant incentive and non-qualified
stock options, stock appreciation rights ("SARs") and restricted shares. SARs
entitle a recipient the alternative of electing to cancel the related stock
29
<PAGE>
OMI CORP. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
For the Three Years Ended December 31, 1995
(All tabular amounts are in thousands of dollars)
option, and to receive instead an amount in cash, stock or a combination of cash
and stock equal to the difference between the option price and the market price
of the Company's stock on the date on which the SAR is exercised. Under all
plans, the option price per share may not be less than the fair market value of
a share at the date of grant.
During 1995, the Company awarded options to acquire an aggregate of 591,000
shares and 110,000 restricted shares all under the 1995 Plan. The options
granted are non-qualified stock options and vest equally over a three year
period from the date of grant. The restrictions on the restricted shares awarded
lapse equally over a five year period. No SARs were issued in 1995.
The 1995 Stock Option Plan for Non-Employee Directors ("Directors' Plan")
also was approved by the shareholders of the Company on May 23, 1995. The total
number of shares of OMI common stock allocated to the Directors' Plan is 300,000
shares. During 1995, the Company awarded options to acquire an aggregate of
150,000 shares under this Plan. Each option will permit the non-employee
director, for a period of up to ten years from the date of grant to purchase
from the Company 30,000 shares. Options become exercisable equally over a three
year period and have a term of ten years. The initial option exercise price is
not less than the fair market value at the date of grant. The option exercise
price with respect to the shares which become exercisable on the second and
third anniversary of the date of grant will increase by 15 percent over the
option exercise price applicable to shares which first became exercisable in the
year immediately preceding each such anniversary date.
Proceeds received from the exercise of the options are credited to the
capital accounts. Compensation expense relating to SARs is recorded with respect
to the rights based upon the quoted market value of the shares and exercise
provisions. Charges (benefits) to net income relating to SARs and/or options in
1995, 1994 and 1993 were ($17,000), ($36,000) and $96,000, respectively.
A summary of the changes in shares under option for all plans is as
follows:
Number of
Options Option Price
--------- ----------------
Outstanding at January 1, 1993 ............. 907,412 $2.8125 to 9.875
Granted ................................... 131,000 4.50
Exercised ................................. (47,623) 2.8125 to 5.125
Forfeited ................................. (14,300) 5.125 to 9.875
--------
Outstanding at December 31, 1993 ........... 976,489 4.25 to 9.875
Granted ................................... 40,000 6.25
Exercised ................................. (66,834) 4.6875 to 5.125
Forfeited ................................. (34,400) 4.50 to 9.875
--------
Outstanding at December 31, 1994 ........... 915,255 4.25 to 9.875
Granted ................................... 741,000 5.38 to 6.690
Exercised ................................. (258,851) 4.25 to 5.125
Forfeited ................................. (35,466) 4.50 to 9.875
--------
Outstanding at December 31, 1995 ........... 1,361,938 $4.25 to 9.875
=========
NOTE 8--RETIREMENT BENEFITS
In June 1993, the Company terminated its non-contributory defined benefit
Pension Plan (the "Pension Plan"), which resulted in a loss of $1,017,000, which
was recognized in 1993. All participants of the Pension Plan were fully vested
as of the termination date. In April 1994, OMI settled the accumulated benefit
obligation through lump-sum payments of $2,950,000 to participants. The net
periodic pension cost in 1993 was $158,000.
The terminated Pension Plan was replaced in 1994 by a 401(k) Plan (the
"Plan") which is available to full-time employees who meet the Plan's
eligibility requirements. This Plan is a defined contribution plan, which
permitted
30
<PAGE>
OMI CORP. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
For the Three Years Ended December 31, 1995
(All tabular amounts are in thousands of dollars)
employees to make contributions up to two percent of their annual salaries in
1994 and 1995, with the Company matching 100 percent of the employee's
contribution. Company contributions were $171,000 and $160,000 in 1995 and 1994,
respectively. Effective January 1, 1996, employees are permitted to defer up to
10 percent of their annual salaries, with the Company then matching up to the
first three percent of the employee's deferral. The Company may elect to make
additional contributions to the Plan at the discretion of the Company's Board of
Directors.
In addition, certain domestic subsidiaries make contributions to union
sponsored multi-employer pension plans covering seagoing personnel.
Contributions to these plans amounted to approximately $751,000, $1,020,000 and
$961,000 for 1995, 1994 and 1993, respectively. If these subsidiaries were to
withdraw from the plans or the plans were to terminate, the subsidiaries would
be liable for a portion of any unfunded plan benefits that might exist. The
Company has been advised by the trustees of such plans that it has no withdrawal
liability as of December 31, 1995.
NOTE 9--OPERATING LEASES
Total rental expense, including contingent rentals, amounted to
$47,840,000, $49,247,000 and $40,350,000 for the years ended December 31, 1995,
1994 and 1993, respectively. Leases are primarily for vessels and office space.
The future minimum rental payments required, by year, under operating
leases subsequent to December 31, 1995, are as follows:
1996 ....................................... $21,606
1997 ....................................... 17,346
1998 ....................................... 6,912
1999 ....................................... 657
-------
Total ................................... $46,521
=======
Time charters to third parties of the Company's owned vessels are accounted
for as operating leases. Minimum future revenues, by year, to be received
subsequent to December 31, 1995 on these time charters are as follows:
1996 ....................................... $59,658
1997 ....................................... 28,706
1998 ....................................... 3,380
-------
Total ................................... $91,744(1)
=======
- ----------
(1) Minimum future revenues for later years are not included above due to the
charterers' options to continue the leases at such dates.
NOTE 10--IMPAIRMENT AND PROVISION FOR LOSS ON LEASE OBLIGATION
As part of OMI's periodic review in 1995 of the recoverability of its
investment in its vessels the Company determined that the carrying value of two
of its U.S. flag product carriers operating in foreign markets exceeded their
undiscounted forecasted future net cash flows from operations. Similarly, in
1994 the Company determined that the carrying value of one of its
chemical/product carriers engaged in U.S. domestic shipping operations exceeded
the undiscounted forecasted future net cash flows from its operations. These
losses were measured by the excess of the carrying value of the vessels over
their estimated fair values which were based on values provided by ship brokers.
It was determined in both years that impairment losses for these vessels should
be recognized. The carrying values of the vessels were reduced by $8,707,000 in
1995 and $14,798,000 in 1994, and the reductions are reported as separate items
in the accompanying Consolidated Statements of Operations.
Also in 1994, the Company determined that a similar loss should be
recognized for the forecasted loss from operations of the OMI Hudson, a
chemical/product carrier engaged in U.S. domestic shipping operations which was
chartered-in on an operating lease through 2006. The amount of the loss was
estimated based on forecasted undis-
31
<PAGE>
OMI CORP. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
For the Three Years Ended December 31, 1995
(All tabular amounts are in thousands of dollars)
counted cash flows, excluding from rent expense an amount representative of the
interest component of the lease agreement, through the lease expiration date.
This loss, estimated as $19,800,000, was also reported as a separate item in the
1994 Consolidated Statements of Operations.
In October 1995, the Company entered into an agreement with the
owner/lessor of the OMI Hudson to terminate the operating lease and to purchase,
or to cause the sale of the vessel to a designated purchaser, for approximately
$30,000,000. The termination of the lease was completed on February 29, 1996 at
which time the Company paid the lessor a $25,000,000 cancellation fee consisting
of $22,000,000 cash and a convertible note of $3,000,000. The loss on the
termination of the lease, in the amount of $6,687,000, was charged to earnings
in 1995. On March 20, 1996, the Company purchased the vessel for $9,300,000 in
cash and the assumption of approximately $20,000,000 of indebtedness secured by
the vessel.
The Company has contracted to sell the OMI Hudson along with two other
vessels and its interest in OSTC to Hvide Marine, Inc. ( "Hvide ") for
$67,350,000. The sale is contingent upon Hvide successfully completing an
initial public offering of its common stock.
NOTE 11--DISPOSAL OF ASSETS
The Gain on disposal of assets-net for the years ended December 31 consists
of the following:
<TABLE>
<CAPTION>
1995 1994 1993
------- ------- -------
<S> <C> <C> <C>
Amortization of gain on sale/leaseback .......................... $ 167 $ 334 $ 334
(Loss) gain on sale of vessels .................................. (3,288) 7,178 1,802
Net loss on disposal of other assets ............................ (26) (318)
Net (loss) gain on sale of CCF investments ...................... (467) (78) 77
Disposal of joint venture interests ............................. 649 (1,554)
Gain on sale of marketable securities ........................... 8,586 2,814 4,060
------- ------- ------
Total ........................................................ $ 5,647 $10,222 $4,401
======= ======= ======
</TABLE>
Loss on sale of vessels in 1995 includes $1,862,000 recorded on a vessel
held for sale which was delivered to the buyer in February 1996.
In September 1995, two vessels with an aggregate book value of $40,781,000
and cash of $1,238,000 were swapped for two product carriers in a like-kind
exchange.
32
<PAGE>
OMI CORP. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
For the Three Years Ended December 31, 1995
(All tabular amounts are in thousands of dollars)
NOTE 12--FINANCIAL INFORMATION RELATING TO DOMESTIC AND FOREIGN OPERATIONS
The Company operates U.S. flag and foreign flag vessels. Income from
operations is the excess of operating revenues over operating expenses including
corporate expenses which are allocated to operations of the vessels.
Years Ended December 31,
---------------------------------
1995 1994 1993
-------- -------- --------
Revenues:
Domestic .............................. $148,164 $173,378 $199,118
Foreign ............................... 91,716 93,418 71,361
-------- -------- --------
Total .............................. $239,880 $266,796 $270,479
======== ======== ========
Operating (loss) income:
Domestic .............................. $(49,113) $(63,093) $(12,276)
Foreign ............................... 10,432 15,009 14,178
-------- -------- --------
Total .............................. $(38,681) $(48,084) $ 1,902
======== ======== ========
Identifiable assets:
Domestic .............................. $187,663 $228,162 $299,860
Foreign ............................... 377,823 376,970 371,656
-------- -------- --------
Total .............................. $565,486 $605,132 $671,516
======== ======== ========
Capital expenditures:
Domestic .............................. $ 18,493 $ 2,589 $ 15,199
Foreign ............................... 19,647 12,729 21,349
-------- -------- --------
Total .............................. $ 38,140 $ 15,318 $ 36,548
======== ======== ========
Depreciation and amortization:
Domestic .............................. $ 17,112 $ 19,953 $ 20,258
Foreign ............................... 17,622 17,817 15,183
-------- -------- --------
Total .............................. $ 34,734 $ 37,770 $ 35,441
======== ======== ========
The operating losses pertaining to domestic operations for the years ended
December 31, 1995 and 1994 include the provisions for impairment of vessels and
losses on lease obligation (see Note 10). Domestic revenues in 1995 include
Operating-Differential Subsidies of approximately $9,222,000.
Investments in and net receivables from foreign subsidiaries amounting to
$279,446,000, $292,286,000 and $395,988,000 at December 31, 1995, 1994 and 1993,
respectively, have been excluded from domestic assets as they have been
eliminated in consolidation.
Voyage revenues include revenue from major customers of $40,573,000 in 1994
and $75,017,000 in 1993 received by domestic operations under a Federal
Government Program, PL480. There were no charterers that were considered to be
major customers in 1995.
NOTE 13--COMMITMENTS AND CONTINGENCIES
OMI and certain subsidiaries are defendants in various actions arising from
shipping operations. Such actions are covered by insurance or, in the opinion of
management, after review with counsel, are of such nature that the ultimate
liability, if any, would not have a material adverse effect on the consolidated
financial statements.
The Company's Separation Allowance Program provides for severance benefits
to all non-union employees other than non-resident aliens, leased employees,
directors who are not employees of the Company or employees with
33
<PAGE>
OMI CORP. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
For the Three Years Ended December 31, 1995
(All tabular amounts are in thousands of dollars)
individual severance plans in the event there is a change of control in OMI and
such employees are thereafter terminated without cause or transferred or their
position is significantly changed. Severance benefits include a lump-sum payment
equal to the employee's average monthly wages immediately prior to the date of
termination times the lesser of 24 or one for each year of full-time employment
by the Company (but not less than six).
The Company has employment agreements with all executive officers. Each of
the employment agreements provide that if the employee is terminated without
cause or voluntarily terminates his employment within 90 days of a relocation or
reduction in compensation or responsibilities, such employee will continue to
receive base salary and other benefits until December 31, 1997 or twelve months
from the date of termination, whichever is later. In addition, if any such
employee is terminated without cause (other than for reasons of disability)
within two years of a Change of Control (as defined in the Company's Separation
Allowance Program), the Company will pay such employee an amount equal to three
times the sum of his then current base salary and the incentive bonus to which
the employee is entitled. The aggregate commitment for future salaries,
excluding bonuses, under these employment agreements is approximately $4,600,000
at December 31, 1995. The maximum contingent liability for salary in the event
of a change in control is approximately $6,900,000 at December 31, 1995.
OMI and a joint venture partner have contracted to construct a vessel which
is being built in the Peoples Republic of China for a cost of approximately
$56,000,000. The vessel is scheduled to be delivered in 1996.
OMI acts as a guarantor for a portion of the debt incurred by joint
ventures with affiliates of three of its joint venture partners. Such debt was
approximately $90,079,000 at December 31, 1995 with OMI's share of such
guarantees being approximately $44,313,000. OMI also is a guarantor for one of
its joint venture's revolving line of credit of $4,000,000, with a guarantee to
OMI from its joint venture partner of $2,000,000.
The Company and its joint venture partners have committed to fund any
working capital deficiencies which may be incurred by their joint venture
investments. At December 31, 1995, no such deficiencies have been funded.
34
<PAGE>
INDEPENDENT AUDITORS' REPORT
To the Board of Directors and Stockholders of OMI Corp.:
We have audited the accompanying consolidated balance sheets of OMI Corp.
and its subsidiaries as of December 31, 1995 and 1994 and the related
consolidated statements of operations, stockholders' equity and cash flows for
each of the three years in the period ended December 31, 1995. Our audits also
included the financial statement schedules listed in Item 14. These financial
statements and financial statement schedules are the responsibility of the
Company's management. Our responsibility is to express an opinion on these
financial statements and financial statement schedules based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, such consolidated financial statements present fairly, in
all material respects, the financial position of the companies at December 31,
1995 and 1994, and the results of their operations and their cash flows for each
of the three years in the period ended December 31, 1995 in conformity with
generally accepted accounting principles. Also, in our opinion, such financial
statement schedules, when considered in relation to the basic consolidated
financial statements taken as a whole, present fairly, in all material respects,
the information set forth therein.
DELOITTE & TOUCHE LLP
New York, New York
February 28, 1996
(March 20, 1996 as to Note 10)
35
<PAGE>
ITEM 8. SUPPLEMENTARY DATA
QUARTERLY RESULTS OF OPERATIONS (UNAUDITED)
(In thousands, except per share amounts)
<TABLE>
<CAPTION>
1995 Quarter Ended 1994 Quarter Ended
----------------------------------------- ------------------------------------------
March 31 June 30 Sept. 30 Dec. 31 March 31 June 30 Sept. 30 Dec. 31
------- ------- ------- -------- -------- ------- -------- --------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Revenues ..................... $56,990 $62,163 $61,131 $ 59,596 $66,688 $67,193 $64,635 $ 68,280
------- ------- ------- -------- -------- ------- ------- --------
Operating (loss) income ...... (6,882) (3,867) (3,750) (24,182)(2) 1,628 (3,430) (3,082) (43,200)(2)
------- ------- ------- -------- -------- ------- ------- --------
Net (loss) ................... $(1,126) $(5,296) $(4,902) $(20,571) $(1,763) $(5,375) $ (498) $(30,229)
======= ======= ======= ======== ======= ======= ======= ========
Net loss per common share
share(1) .................... $ (0.04) $ (0.17) $ (0.16) $ (0.66)(2) $ (0.06) $ (0.18) $ (0.02) $ (0.99)(2)
======= ======= ======= ======== ======= ======= ======= ========
Weighted average number of
shares of common stock
outstanding ................. 30,488 30,533 30,927 31,003 30,658 30,682 30,406 30,532
======= ======= ======= ======== ======= ======= ======= ========
- ------------
<FN>
(1) Earnings per share are based on stand-alone quarters.
(2) Includes provision for losses due to the impaired value of vessels of
$8,707,000 and lease obligation of $6,687,000 in 1995 and losses due to
impaired value of a vessel of $14,798,000 and lease obligation of
$19,800,000 in 1994.
</FN>
</TABLE>
36
<PAGE>
<TABLE>
SCHEDULE I
OMI CORP.
CONDENSED STATEMENTS OF OPERATIONS AND RETAINED (DEFICIT) EARNINGS
(In thousands)
<CAPTION>
For the Years Ended December 31,
----------------------------------
1995 1994 1993
-------- -------- --------
<S> <C> <C> <C>
Revenues:
Voyage revenues ..................................................... $ 4,316 $ 10,001 $ 10,462
Other income ........................................................ 5,734 5,695 5,425
-------- -------- --------
Total revenues .................................................... 10,050 15,696 15,887
-------- -------- --------
Operating Expenses:
Vessel and voyage ................................................... 11,353 13,348 14,275
Depreciation and amortization ....................................... 1,713 1,552 1,706
General and administrative .......................................... 13,355 16,106 13,731
-------- -------- --------
Total operating expenses .......................................... 26,421 31,006 29,712
-------- -------- --------
Operating loss ........................................................ (16,371) (15,310) (13,825)
-------- -------- --------
Other Income (Expense):
Gain (loss) on disposal of assets--net .............................. 871 3 (411)
Interest expense .................................................... (18,098) (19,231) (5,149)
Interest income ..................................................... 994 731 392
Minority interest in loss (income) of subsidiary .................... 229 (304) (649)
Other--net .......................................................... 1,040 753
-------- -------- --------
Net other expense ................................................. (14,964) (18,048) (5,817)
-------- -------- --------
Loss before income taxes and equity in operations of subsidiaries ..... (31,335) (33,358) (19,642)
Benefit for income taxes .............................................. 18,973 22,305 1,730
-------- -------- --------
Loss before equity in operations of subsidiaries ...................... (12,362) (11,053) (17,912)
Equity in operations of subsidiaries .................................. (19,534) (26,812) 9,165
-------- -------- --------
Net loss .............................................................. (31,896) (37,865) (8,747)
Retained earnings, beginning of year .................................. 26,631 64,496 73,243
-------- -------- --------
Retained (deficit) earnings, end of year .............................. $ (5,265) $ 26,631 $ 64,496
======== ======== ========
</TABLE>
See notes to condensed financial statements.
37
<PAGE>
<TABLE>
SCHEDULE I
OMI CORP.
CONDENSED BALANCE SHEETS
(In thousands)
<CAPTION>
December 31,
----------------------
1995 1994
-------- --------
ASSETS
<S> <C> <C>
Current assets:
Cash and cash equivalents (Note 2) .................................... $ 1,118 $ 10,789
Marketable securities ................................................. 21
Prepaid expenses and other current assets ............................. 7,201 3,415
-------- --------
Total current assets .............................................. 8,319 14,225
-------- --------
Capital Construction and other restricted funds ......................... 4,777 3,498
Investment in (at equity) and net advances to
subsidiaries .......................................................... 353,276 407,139
Vessel and other property:
Vessel ................................................................ 8,648 8,643
Other property ........................................................ 6,959 6,925
-------- --------
Total vessel and other property .................................... 15,607 15,568
Less accumulated depreciation .......................................... 6,344 4,964
-------- --------
Vessel and other property--net ......................................... 9,263 10,604
-------- --------
Other assets and deferred charges ...................................... 4,375 8,846
-------- --------
Total .............................................................. $380,010 $444,312
======== ========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable ...................................................... $ 458 $ 770
Accrued liabilities:
Vessel and voyage ................................................... 465 1,065
Interest ............................................................ 2,531 2,695
Other ............................................................... 3,514 3,040
Current portion of long-term debt (Note 3) ............................ 3,596 6,027
-------- --------
Total current liabilities .......................................... 10,564 13,597
-------- --------
Advance time charter revenues and other liabilities ..................... 4,573 302
Long-term debt (Note 3) ................................................. 154,002 168,247
Deferred income taxes ................................................... 63,082 79,448
Minority interest in subsidiary ......................................... 2,594 3,042
Stockholders' equity:
Common stock .......................................................... 15,521 15,336
Capital surplus ....................................................... 131,622 129,919
Retained (deficit) earnings ........................................... (5,265) 26,631
Cumulative translation adjustment--net ................................ 4,912 4,912
Unearned compensation--employee stock ownership trust ................. (663)
Unearned compensation--restricted stock ............................... (1,404) (941)
Unrealized gain on securities, net of deferred income
tax of $16 in 1995 and $3,060 in 1994 ............................... 29 5,684
Treasury stock ........................................................ (220) (1,202)
-------- --------
Total stockholders' equity ......................................... 145,195 179,676
-------- --------
Total .............................................................. $380,010 $444,312
======== ========
</TABLE>
See notes to condensed financial statements.
38
<PAGE>
<TABLE>
SCHEDULE I
OMI CORP.
CONDENSED STATEMENTS OF CASH FLOWS
(In thousands)
<CAPTION>
For the Years Ended December 31,
----------------------------------
1995 1994 1993
-------- -------- ---------
<S> <C> <C> <C>
Cash Flows Provided (Used) by Operating Activities:
Net loss ............................................................. $(31,896) $(37,865) $ (8,747)
Adjustments to reconcile net loss to net cash provided (used) by
operating activities:
Decrease in deferred income taxes .................................... (13,322) (22,387) (4,720)
Depreciation and amortization ........................................ 1,713 1,552 1,706
Amortization of unearned compensation ................................ 943 1,630 456
(Gain) loss on disposal of assets-net ................................ (871) (3) 411
Other--net ........................................................... (1,040) (753)
Equity in operations of subsidiaries less dividends received ......... 55,489 43,880 9,696
Changes in assets and liabilities--net ............................... (9,653) 9,315 8,095
-------- -------- ---------
Net cash provided (used) by operating activities ..................... 1,363 (4,631) 6,897
-------- -------- ---------
Cash Flows Provided (Used) by Investing Activities:
Proceeds from disposition of vessel .................................. 1,480
Additions to vessel and other property ............................... (250) (615) (8,852)
Proceeds received from sale of marketable securities ................. 2,715 12
Proceeds and interest received and reinvested in Capital
Construction and other restricted funds ............................ (428) (134) (166)
Contributions to subsidiaries ........................................ (123,700)
-------- -------- ---------
Net cash flows provided (used) by investing activities ............... 2,037 (749) (131,226)
-------- -------- ---------
Cash Flows (Used) Provided by Financing Activities:
Cash proceeds from issuance of long-term debt ........................ 230,653
Net proceeds from issuance of common stock ........................... 1,275 263 217
Payments on long-term debt ........................................... (14,346) (10,517) (77,001)
Payments for debt issue costs ........................................ (15) (1,270)
Dividends paid ....................................................... (2,140)
-------- -------- ---------
Net cash flows (used) provided by financing activities ............... (13,071) (10,269) 150,459
-------- -------- ---------
Net (decrease) increase in cash and cash equivalents ................. (9,671) (15,649) 26,130
Cash and cash equivalents, beginning of year ......................... 10,789 26,438 308
-------- -------- ---------
Cash and cash equivalents, end of year ............................... $ 1,118 $ 10,789 $ 26,438
======== ======== =========
</TABLE>
See notes to condensed financial statements.
39
<PAGE>
SCHEDULE I
OMI CORP.
NOTES TO CONDENSED FINANCIAL STATEMENTS
For The Three Years Ended December 31, 1995
1. The condensed financial statements present the separate financial data
(parent only) of OMI Corp. ("OMI" or the "Company"). All domestic and foreign
subsidiaries which are more than 20% owned and investments in joint ventures are
accounted for by the equity method.
See Notes to Consolidated Financial Statements on pages 22 through 34 of
OMI's 1995 Annual Report on Form 10-K.
Certain reclassifications have been made to the 1994 and 1993 financial
statements to conform to the 1995 presentation.
2. CASH FLOWS--Cash equivalents represent liquid investments which mature
within 90 days. The carrying amount approximates fair value.
During the years ended December 31, 1995, 1994, and 1993, interest paid
totaled approximately $18,262,000, 19,430,000 and $2,305,000, respectively.
For the year ended December 31, 1993 income taxes paid were approximately
$6,413,000. There were no income taxes paid during 1995 and 1994.
3. LONG-TERM DEBT--Long-term debt as of December 31, 1995 and 1994 consists
of the following:
1995 1994
-------- --------
(dollars in thousands)
10.25% unsecured Senior Notes due 11/01/03 ........ $150,002 $160,650
Mortgage note at a variable rate above the London
Interbank Offering Rate ("LIBOR") in varying
installments to 1998(1) ......................... 5,000 6,000
Unsecured notes payable to an affiliate at 5.0%
due 1996 ........................................ 2,596 7,624
-------- --------
Total ......................................... 157,598 174,274
Less current portion of long-term debt ............ 3,596 6,027
-------- --------
Long-term debt .................................... $154,002 $168,247
======== ========
- ------------
(1) Rate at December 31, 1995 was 7.375 percent.
In November 1993, the Company issued $170,000,000 in unsecured Senior Notes
("Notes") due November 1, 2003. The Notes are not redeemable prior to November
1, 1998; thereafter, the Notes are redeemable at the option of the Company at a
premium until November 1, 2000 when the Notes will be redeemable at face value,
plus accrued interest. OMI repurchased $9,650,000 and $9,350,000 of the Notes
for net gains of $1,040,000 and $753,000 in 1995 and 1994, respectively. In
January 1996, OMI repurchased $14,050,000 of the Notes for a net gain of
$557,000.
In 1995, Mosaic Alliance Corporation purchased $2,000,000 of OMI's Notes at
a cost of $1,736,000. The Company's portion of such Notes is considered a
retirement of debt.
4. LINES OF CREDIT--At December 31, 1995, the Company had available and
unused $10,000,000 in a line of credit with a bank at a variable rate, based on
LIBOR.
40
<PAGE>
WILOMI, INC. AND SUBSIDIARIES
TABLE OF CONTENTS
Page
------
CONSOLIDATED FINANCIAL STATEMENTS:
Consolidated Balance Sheets at December 31, 1995 and 1994 ........... 42
Statements of Consolidated Income and Retained Earnings
for the years ended December 31, 1995, 1994 and 1993 .............. 43
Statements of Consolidated Cash Flows for the years ended
December 31, 1995, 1994 and 1993 .................................. 44
Notes to Consolidated Financial Statements .......................... 45-47
INDEPENDENT AUDITORS' REPORT ......................................... 48
41
<PAGE>
<TABLE>
WILOMI, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
ASSETS
<CAPTION>
December 31,
------------------------------
Notes 1995 1994
------- ------------ ------------
<S> <C> <C> <C>
CURRENT ASSETS:
Cash (including cash equivalents of $6,100,000 in 1995 and
$1,500,000 in 1994) .............................................. 2 $ 6,767,825 $ 9,655,328
Advances to masters ............................................... 120,790 94,088
Receivables:
Traffic .......................................................... 394,108 272,404
Other ............................................................ 124,864 47,956
Notes due from affiliates ......................................... 4 5,995,600 10,535,400
Prepaid expenses and other current assets ......................... 401,072 568,375
------------ ------------
Total current assets ........................................... 13,804,259 21,173,551
------------ ------------
RECEIVABLES FROM AFFILIATES ........................................ 4 1,714,885 1,548,275
VESSELS AND VESSEL UNDER CONSTRUCTION
(net of accumulated depreciation of $19,728,983 in 1995 and
$14,896,518 in 1994) ............................................. 2,3 126,333,134 118,791,496
NOTES DUE FROM AFFILIATES .......................................... 4 5,995,600
OTHER ASSETS ....................................................... 507,223 918,756
------------ ------------
Total Assets ....................................................... $142,359,501 $148,427,678
============ ============
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities:
Accounts payable .................................................. $ 262,302 $ 398,282
Accrued expenses .................................................. 2,280,403 1,854,668
Accrued interest payable .......................................... 2,087,411 2,026,382
Other current liabilities ......................................... 12,833 24,678
Current portion of long-term debt ................................. 5 6,254,000 6,446,000
------------ ------------
Total current liabilities ...................................... 10,896,949 10,750,010
------------ ------------
ADVANCE TIME CHARTER REVENUES AND OTHER LIABILITIES ................ 472,116 562,800
LONG-TERM DEBT ..................................................... 5 77,583,000 83,837,000
STOCKHOLDERS' EQUITY:
Common stock--$1 par value; 10,000 shares authorized and
outstanding ...................................................... 10,000 10,000
Capital surplus ................................................... 1,080,577 1,080,577
Retained earnings ................................................. 52,316,859 52,187,291
------------ ------------
Total stockholders' equity ..................................... 53,407,436 53,277,868
------------ ------------
TOTAL LIABILITIES AND STOCKHOLDERS'EQUITY .......................... $142,359,501 $148,427,678
============ ============
</TABLE>
See notes to consolidated financial statements.
42
<PAGE>
<TABLE>
WILOMI, INC. AND SUBSIDIARIES
STATEMENTS OF CONSOLIDATED INCOME AND RETAINED EARNINGS
For the Years Ended December 31, 1995, 1994 and 1993
<CAPTION>
Notes 1994 1993 1992
------ ----------- ----------- -----------
<S> <C> <C> <C> <C>
VOYAGE REVENUES ........................... 2 $19,793,420 $20,891,795 $23,831,942
----------- ----------- -----------
OPERATING EXPENSES:
Vessel and voyage ........................ 9,449,205 7,348,626 9,426,685
Depreciation ............................. 4,832,465 4,827,798 4,809,448
General and administrative ............... 498,543 506,645 504,191
----------- ----------- -----------
Total operating expenses .............. 14,780,213 12,683,069 14,740,324
----------- ----------- -----------
INCOME FROM OPERATIONS .................... 5,013,207 8,208,726 9,091,618
----------- ----------- -----------
NET INTEREST EXPENSE:
Interest expense ......................... 5,843,642 5,483,581 4,827,706
Interest income .......................... 4 (960,003) (1,156,198) (1,413,957)
----------- ----------- -----------
Net interest expense .................. 4,883,639 4,327,383 3,413,749
----------- ----------- -----------
NET INCOME ................................ 129,568 3,881,343 5,677,869
RETAINED EARNINGS, BEGINNING OF YEAR ...... 52,187,291 48,305,948 42,628,079
----------- ----------- -----------
RETAINED EARNINGS, END OF YEAR ............ $52,316,859 $52,187,291 $48,305,948
=========== =========== ===========
</TABLE>
See notes to consolidated financial statements.
43
<PAGE>
<TABLE>
WILOMI, INC. AND SUBSIDIARIES
STATEMENTS OF CONSOLIDATED CASH FLOWS
<CAPTION>
For the Years Ended December 31,
-------------------------------------------
1995 1994 1993
----------- ----------- -----------
<S> <C> <C> <C>
CASH FLOWS PROVIDED BY OPERATING ACTIVITIES:
Net income ................................................. $ 129,568 $ 3,881,343 $ 5,677,869
Adjustments to reconcile net income to net
cash flows provided by operating activities:
Depreciation .............................................. 4,832,465 4,827,798 4,809,448
Changes in assets and liabilities:
(Increase) decrease in receivables
and advances to masters .................................. (225,314) 952,836 433,850
Decrease in prepaid expenses and other current assets ..... 167,303 354,452 49,706
Increase in accounts payable, accrued expenses and
other current liabilities ................................ 338,939 72,895 1,326,378
Other assets and liabilities--net ......................... 154,239 (1,079,052) (2,685,524)
----------- ----------- -----------
Net cash flows provided by operating activities ......... 5,397,200 9,010,272 9,611,727
----------- ----------- -----------
CASH FLOWS (USED) PROVIDED BY INVESTING ACTIVITIES:
Additions to vessels including vessel under construction ... (12,374,103) (2,938,904) (53,663)
Proceeds on notes due from affiliates ...................... 10,535,400 2,634,000 2,500,000
----------- ----------- -----------
Net cash flows (used) provided by investing activities ..... (1,838,703) (304,904) 2,446,337
----------- ----------- -----------
CASH FLOWS USED BY FINANCING ACTIVITIES:
Payments on long-term debt ................................. (6,446,000) (6,064,000) (5,887,000)
Dividends paid ............................................. (2,500,000)
----------- ----------- -----------
Net cash flows used by financing activities ............. (6,446,000) (6,064,000) (8,387,000)
----------- ----------- -----------
NET (DECREASE) INCREASE IN CASH
AND CASH EQUIVALENTS ....................................... (2,887,503) 2,641,368 3,671,064
CASH AND CASH EQUIVALENTS, BEGINNING OF YEAR ................ 9,655,328 7,013,960 3,342,896
----------- ----------- -----------
CASH AND CASH EQUIVALENTS, END OF YEAR ...................... $ 6,767,825 $ 9,655,328 $ 7,013,960
=========== =========== ===========
</TABLE>
See notes to consolidated financial statements.
44
<PAGE>
WILOMI, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
For the Three Years Ended December 31, 1995
1. COMPANY
Wilomi, Inc. and subsidiaries (the "Company" or "Wilomi") are jointly-owned
by Loire Transport, Inc., a wholly-owned subsidiary of OMI Corp. ("OMI"), and
K/S Wilhelmsen Transport and Trading A/S ("Wilhelmsen") with interests of 49 and
51 percent, respectively. The joint venture, incorporated on May 15, 1987, owns
and operates commercial vessels.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Basis of Presentation--The consolidated financial statements include all
subsidiaries of the Company. All significant intercompany accounts and
transactions have been eliminated in consolidation.
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosures of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the
reporting period. Actual results could differ from those estimates.
Operating Revenues and Expenses--Voyage revenues and expenses are
recognized on the percentage of completion method of accounting based on voyage
costs incurred to date to estimated total voyage costs. Estimated losses on
voyages are provided in full at the time such losses become evident.
Special survey and drydock expenses are accrued and charged to operating
expenses over the survey cycle, which is generally a three year period. The
accruals of such expenses are based on management's best estimates of future
cost and the expected length of the survey cycle. However, the ultimate
liability may be more or less than such estimates.
Vessels and Vessel Under Construction--Vessels are recorded at cost
including interest on funds borrowed to finance the construction of new vessels.
Expenditures for maintenance, repairs and minor renewals are expensed.
Major replacements and renewals are capitalized.
Depreciation is provided on the straight-line method based on the vessel's
estimated useful life of 25 years, up to the vessel's estimated salvage value.
Salvage value is based upon the vessel's light weight tonnage, multiplied by a
scrap rate.
In the event that facts and circumstances indicate that the carrying amount
of a vessel may be impaired, an evaluation of recoverability is performed. If an
evaluation is required, the estimated future undiscounted cash flows associated
with the vessel are compared to the vessel's carrying value to determine if a
writedown to fair value or discounted cash flow is required.
Federal Income Taxes--No provision has been made for Federal income taxes.
The income of the Company is not generally subject to tax as a result of various
provisions of the Internal Revenue Code. Additionally, the country in which the
Company is incorporated exempts shipping and maritime operations from taxation.
Cash Flows--Cash equivalents represent liquid investments which mature
within 90 days. The carrying amount approximates fair value.
During the years ended December 31, 1995, 1994 and 1993, the Company paid
interest of $5,690,873, $5,019,286 and $4,605,435, respectively.
Newly Issued Accounting Standard--Effective January 1, 1995, the Company
adopted Statement of Financial Accounting Standards No. 121 ("SFAS 121")
"Accounting for the Impairment of Long-Lived Assets and for Long-Lived Assets to
Be Disposed Of". SFAS 121 establishes accounting standards for recording the
impairment of long-lived assets, certain identifiable intangibles, goodwill and
assets to be disposed of. The adoption of this Statement did not have a
significant effect on the Company's consolidated financial position or results
of operations.
45
<PAGE>
WILOMI, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
For the Three Years Ended December 31, 1995
3. VESSELS AND VESSEL UNDER CONSTRUCTION
In November 1993, the Company entered into an agreement to construct a new
vessel at an approximate cost of $56,000,000. As of December 31, 1995,
construction costs were $15,026,871 including capitalized interest of $661,841.
The vessel is expected to be delivered in 1996.
4. RELATED PARTY TRANSACTIONS
OMI acted as technical and commercial manager for two vessels owned during
the three years ended December 31, 1995. Management fees paid to OMI for each of
the three years ended December 31, 1995 were $288,000.
Wilhelmsen acted as technical and commercial manager for one vessel owned
during the three years ended December 31, 1995. Management fees paid to
Wilhelmsen for each of the three years ended December 31, 1995 were $144,000.
Notes due from affiliates are as follows:
1995 1994
---------- -----------
Wilhelmsen ........................... $3,399,150 $ 8,907,150
OMI .................................. 2,596,450 7,623,850
---------- -----------
Total ................................ 5,995,600 16,531,000
Less: current portion ................ 5,995,600 10,535,400
---------- -----------
Notes due from affiliates ............ $ $ 5,995,600
========== ===========
Interest rate ........................ 5% 5%
Interest income attributable to these notes was $562,000, $906,000 and
$1,263,000 for the years ended December 31, 1995, 1994 and 1993, respectively.
5. LONG-TERM DEBT
Long-term debt at December 31, 1995 and 1994 consists of the following:
1995 1994
----------- -----------
Mortgage notes on vessels at variable rates
above LIBOR, payable semi-annually to 2002* ... $83,837,000 $90,283,000
Less: current portion of long-term debt ......... 6,254,000 6,446,000
----------- -----------
Long-term debt .................................. $77,583,000 $83,837,000
=========== ===========
- -------------
* Rates at December 31, 1995 ranged from 7.0625 percent to 7.25 percent
Aggregate maturities during the next five years are $6,254,000, $6,479,000,
$6,722,000, $6,985,000 and $7,269,000.
The fair value of long-term debt at December 31, 1995 and 1994 approximates
its carrying value.
On March 31, 1995, the Company entered into an interest rate swap agreement
to manage interest costs and risk associated with changing interest rates. The
interest rate swap agreement is with a commercial bank with a notional amount of
$20,000,000 and a maturity date of March 31, 1997. This agreement effectively
changes the Company's interest rate exposure on a floating rate loan to a fixed
rate of 6.91 percent. The differential to be paid or received on this interest
rate swap agreement is recognized as an adjustment to interest expense over the
life of the agreement.
46
<PAGE>
WILOMI, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
For the Three Years Ended December 31, 1995
Interest expense pertaining to the interest rate swap for the year ended
December 31, 1995 was $67,469. The fair value of the interest rate swap at
December 31, 1995 was $439,000 based on the estimated amount the Company would
pay to terminate the agreement at the reporting date, taking into account
current interest rates and the current credit-worthiness of the swap
counter-party. The Company has granted the counter-party to the agreement a
second priority mortgage on one of its vessels to secure its obligation under
this agreement.
6. COMMITMENTS AND CONTINGENCIES
The Company acts as a guarantor on debt incurred by an affiliated company.
Such debt was $2,000,000 at December 31, 1995.
47
<PAGE>
INDEPENDENT AUDITORS' REPORT
To the Stockholders of Wilomi, Inc.:
We have audited the accompanying consolidated balance sheets of Wilomi,
Inc. and subsidiaries as of December 31, 1995 and 1994 and the related
statements of consolidated income and retained earnings and of cash flows for
each of the three years in the period ended December 31, 1995. These financial
statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements based on
our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, such financial statements present fairly, in all material
respects, the financial position of the companies at December 31, 1995 and 1994,
and the results of their operations and their cash flows for each of the three
years in the period ended December 31, 1995 in conformity with generally
accepted accounting principles.
DELOITTE & TOUCHE LLP
New York, New York
February 28, 1996
48
<PAGE>
AMAZON TRANSPORT, INC.
TABLE OF CONTENTS
Page
------
FINANCIAL STATEMENTS:
Balance Sheets at December 31, 1995 and 1994 .................. 50
Statements of Operations and Retained (Deficit)
Earnings for the years ended December 31, 1995,
1994 and 1993 ............................................... 51
Statements of Cash Flows for the years ended
December 31, 1995, 1994 and 1993 ............................ 52
Notes to Financial Statements ................................. 53-54
INDEPENDENT AUDITORS' REPORT ................................... 55
49
<PAGE>
<TABLE>
AMAZON TRANSPORT, INC.
BALANCE SHEETS
ASSETS
<CAPTION>
December 31,
------------------------------
Notes 1995 1994
-------- ----------- -----------
<S> <C> <C> <C>
CURRENT ASSETS:
Cash and cash equivalents .................................... 2 $ 4,159,829 $ 2,621,778
Advances to masters .......................................... 42,798 146,000
Receivables:
Traffic .................................................... 602,943 229,547
Other ...................................................... 125,658 117,167
Prepaid expenses and other current assets .................... 291,806 349,680
----------- -----------
Total current assets ..................................... 5,223,034 3,464,172
----------- -----------
VESSEL AT COST: ................................................ 1, 2
Vessel ....................................................... 21,416,526 21,399,261
Less accumulated depreciation ................................ 6,146,845 5,526,226
----------- -----------
Vessel--net .............................................. 15,269,681 15,873,035
----------- -----------
TOTAL ASSETS ................................................... $20,492,715 $19,337,207
=========== ===========
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES --Accounts payable
and accrued liabilities ...................................... $ 3,337,491 $ 817,414
PAYABLE TO AFFILIATES .......................................... 3 204,223 16,980
OTHER LIABILITIES .............................................. 339,388
STOCKHOLDERS' EQUITY:
Common stock--$5 par value; authorized 5,000 shares,
outstanding 180 shares ..................................... 900 900
Capital surplus .............................................. 21,194,085 21,194,085
Deficit ...................................................... 4 (4,243,984) (3,031,560)
----------- -----------
Total stockholders' equity ............................... 16,951,001 18,163,425
----------- -----------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY ..................... $20,492,715 $19,337,207
=========== ===========
</TABLE>
See notes to financial statements.
50
<PAGE>
<TABLE>
AMAZON TRANSPORT, INC.
STATEMENTS OF OPERATIONS AND RETAINED (DEFICIT) EARNINGS
<CAPTION>
For the Years Ended December 31,
-------------------------------------------------
Notes 1995 1994 1993
----- ----------- ----------- -----------
<S> <C> <C> <C> <C>
VOYAGE REVENUES ............................. 2 $ 9,749,957 $ 6,760,840 $11,301,039
----------- ----------- -----------
OPERATING EXPENSES:
Vessel and voyage .......................... 2 10,503,299 6,266,407 5,608,645
Depreciation ............................... 2 620,619 619,232 613,636
General and administrative ................. 223,895 227,425 220,006
----------- ----------- -----------
Total operating expenses ................. 11,347,813 7,113,064 6,442,287
----------- ----------- -----------
(LOSS) INCOME BEFORE OTHER INCOME ........... (1,597,856) (352,224) 4,858,752
----------- ----------- -----------
OTHER INCOME:
Interest ................................... 119,588 109,611 219,792
Miscellaneous .............................. 265,844 185 566
----------- ----------- -----------
Total other income ....................... 385,432 109,796 220,358
----------- ----------- -----------
NET (LOSS) INCOME ........................... (1,212,424) (242,428) 5,079,110
RETAINED (DEFICIT) EARNINGS, BEGINNING
OF YEAR .................................... (3,031,560) 2,210,868 6,131,758
DIVIDENDS DECLARED .......................... 4 (5,000,000) (9,000,000)
----------- ----------- -----------
RETAINED (DEFICIT) EARNINGS, END OF YEAR .... $(4,243,984) $(3,031,560) $ 2,210,868
=========== =========== ===========
</TABLE>
See notes to financial statements.
51
<PAGE>
AMAZON TRANSPORT, INC.
STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
For the Years Ended December 31,
----------------------------------------------
1995 1994 1993
----------- ---------- ------------
<S> <C> <C> <C>
CASH FLOWS PROVIDED (USED) BY OPERATING ACTIVITIES:
Net (loss) income .......................................... $(1,212,424) $ (242,428) $ 5,079,110
Adjustments to reconcile net (loss) income to net cash
flows provided (used) by operating activities:
Depreciation ............................................. 620,619 619,232 613,636
Change in assets and liabilities:
(Increase) decrease in receivables and
advances to masters .................................... (278,685) 177,236 (200,927)
Decrease in prepaid expenses and other
current assets ......................................... 57,874 147,990 (218,395)
Decrease in other assets 5,775 67,846
Increase (decrease) in accounts payable and
accrued liabilities .................................... 2,520,077 (1,296,021) 1,280,402
Increase (decrease) in payable to affiliates ............ 187,243 2,273 (25,318)
(Decrease) increase in advanced time charter
revenue and other liabilities .......................... (339,388) 339,388 (511,897)
----------- ---------- ------------
Net cash provided (used) by operating activities ........... 1,555,316 (246,555) 6,084,457
----------- ---------- ------------
CASH FLOWS (USED) PROVIDED BY INVESTING ACTIVITIES:
Additions to vessel ........................................ (17,265) (4,991) (121,503)
Proceeds received from affiliate 4,410,000
----------- ---------- ------------
Net cash (used) provided by investing activities ........... (17,265) (4,991) 4,288,497
----------- ---------- ------------
CASH FLOWS USED BY FINANCING ACTIVITIES:
Dividends paid ............................................. (5,000,000) (13,655,000)
----------- ---------- ------------
NET INCREASE (DECREASE) IN CASH AND CASH
EQUIVALENTS ................................................ 1,538,051 (5,251,546) (3,282,046)
CASH AND CASH EQUIVALENTS, BEGINNING OF YEAR ................ 2,621,778 7,873,324 11,155,370
----------- ---------- ------------
CASH AND CASH EQUIVALENTS, END OF YEAR ...................... $ 4,159,829 $2,621,778 $ 7,873,324
=========== ========== ============
</TABLE>
See notes to financial statements.
52
<PAGE>
AMAZON TRANSPORT, INC.
NOTES TO FINANCIAL STATEMENTS
For the Three Years Ended December 31, 1995
1. COMPANY
Amazon Transport, Inc. (the "Company" or "Amazon") is jointly owned by a
subsidiary of Universal Bulk Carriers, Inc. ("UBC"), a wholly-owned subsidiary
of OMI Corp. ("OMI"), and Bergesen d.y. A/S ("Bergesen") with interests of 49
and 51 percent, respectively. The Company began operating as a joint venture on
December 3, 1988 for the purpose of owning and chartering commercial vessels.
The Company owns and operates one vessel, the Settebello, for all years
presented.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
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 disclosures of contingent assets and liabilities at the date of
the financial statements and the reported amounts of revenues and expenses
during the reporting period. Actual results could differ from those estimates.
Operating Revenues and Expenses--Voyage revenues and expenses are
recognized on the percentage of completion method of accounting based on voyage
costs incurred to date to estimate total voyage costs. Estimated losses are
provided in full at the time such losses become evident.
Special survey and drydock expenses are accrued and charged to operating
expenses over the survey cycle, which is generally a three year period. The
accruals of such expenses are based on management's best estimates of future
cost and the expected length of the survey cycle. However, the ultimate
liability may be more or less than such estimates.
Vessel--The vessel is recorded at cost. Depreciation is provided on the
straight-line method based on the estimated 25 year useful life of the vessel up
to the estimated salvage value. Salvage value is based upon the vessel's light
weight tonnage multiplied by a scrap rate.
Expenditures for maintenance, repairs and minor renewals are expensed.
Major replacements and renewals are capitalized.
In the event that facts and circumstances indicate that the carrying amount
of the vessel may be impaired, an evaluation of recoverability is performed. If
an evaluation is required, the estimated future undiscounted cash flows
associated with the vessel are compared to the vessel's carrying value to
determine if a writedown to fair value or discounted cash flow is required.
Federal Income Taxes--No provision has been made for Federal income taxes.
The income of the Company is not generally subject to tax as a result of various
provisions of the Internal Revenue Code. Additionally, the country in which the
Company is incorporated exempts shipping and maritime operations from taxation.
Cash Flows--Cash equivalents represent liquid investments which mature
within 90 days. The carrying amount approximates fair value. The Company paid no
interest in 1995, 1994 and 1993.
Newly Issued Accounting Standard--Effective January 1, 1995, the Company
adopted Statement of Financial Accounting Standards No. 121 ("SFAS 121")
"Accounting for the Impairment of Long-Lived Assets and for Long-Lived Assets to
Be Disposed Of". SFAS 121 establishes accounting standards for recording the
impairment of long-lived assets, certain identifiable intangibles, goodwill and
assets to be disposed of. The adoption of this Statement did not have a
significant effect on the Company's financial position or results of operations.
3. RELATED PARTY TRANSACTIONS
The Company has entered into management service agreements with OMI and
Bergesen, who act as technical and commercial managers of the Settebello. The
Company paid OMI and Bergesen management fees of $210,000 for the year ended
December 31, 1995 and $200,000 for each of the years ended December 31, 1994 and
1993.
53
<PAGE>
AMAZON TRANSPORT, INC.
NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
For the Three Years Ended December 31, 1995
The following table summarizes balances due to affiliated companies at
December 31:
1995 1994
-------- --------
(Payable) receivable (to) from affiliates:
OMI ......................................... $ (1,667) $(16,980)
UBC ......................................... 34,740
Bergesen .................................... (237,296)
-------- --------
(204,223) $(16,980)
======== ========
4. DIVIDENDS
During 1994, the Company declared and paid a $5,000,000 dividend.
During 1993, the Company declared and paid a $9,000,000 dividend and also
paid $4,655,000 of dividends which had been declared in 1992.
54
<PAGE>
INDEPENDENT AUDITORS' REPORT
To the Stockholders of Amazon Transport, Inc.:
We have audited the accompanying balance sheets of Amazon Transport, Inc.
as of December 31, 1995 and 1994 and the related statements of operations and
retained (deficit) earnings and of cash flows for each of the three years in the
period ended December 31, 1995. These financial statements are the
responsibility of the Company's management. Our responsibility is to express an
opinion on these financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the accompanying financial statements present fairly, in
all material respects, the financial position of the Company at December 31,
1995 and 1994, and the results of its operations and its cash flows for each of
the three years in the period ended December 31, 1995 in conformity with
generally accepted accounting principles.
DELOITTE & TOUCHE LLP
New York, New York
February 28, 1996
55
<PAGE>
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
None.
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF OMI
Pursuant to General Instruction G(3) the information regarding directors
called for by this item is hereby incorporated by reference from OMI's 1995
Proxy Statement to be filed with the Securities and Exchange Commission. Certain
information relating to Executive Officers of the Company appears at the end of
Part I of this Form 10-K Annual Report.
ITEM 11. EXECUTIVE COMPENSATION
Pursuant to General Instruction G(3) the information called for by this
item is hereby incorporated by reference from OMI's 1995 Proxy Statement to be
filed with the Securities and Exchange Commission.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
Pursuant to General Instruction G(3) the information called for by this
item is hereby incorporated by reference from OMI's 1995 Proxy Statement to be
filed with the Securities and Exchange Commission.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Pursuant to General Instruction G(3) the information called for by this
item is hereby incorporated by reference from OMI's 1995 Proxy Statement to be
filed with the Securities and Exchange Commission.
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K
(a) Financial Statements and Financial Statement Schedules
1. Financial Statements:
OMI Corp. and Subsidiaries Consolidated Statements of Operations for
the three years ended December 31, 1995.
OMI Corp. and Subsidiaries Consolidated Balance Sheets at December 31,
1995 and 1994.
OMI Corp. and Subsidiaries Consolidated Statements of Cash Flows for
the three years ended December 31, 1995.
OMI Corp. and Subsidiaries Consolidated Statements of Changes in
Stockholders' Equity for the three years ended December 31, 1995.
OMI Corp. and Subsidiaries Notes to Consolidated Financial Statements
for the three years ended December 31, 1995.
OMI Corp. and Subsidiaries Quarterly Results of Operations for 1995
and 1994.
2. Financial Statement Schedules:
I -- OMI Corp. (Parent only) Condensed financial information as to
financial position as of December 31, 1995 and 1994, and cash flows
and results of operations for the years ended December 31, 1995, 1994
and 1993.
56
<PAGE>
3. Exhibits
<TABLE>
<CAPTION>
Number Incorporated by Reference to Description of Exhibit
------ ---------------------------- -----------------------
<S> <C> <C>
3.1 Exhibit 3.1 to 1990 Form 10-K Report Certificate of Incorporation as amended and restated.
of the Company (No. 2-87930)
3.2 Exhibit 3.2 to 1990 Form 10-K Report By-laws as amended.
of the Company (No. 2-87930)
4.1 Exhibit 4.1 to 1989 Form 10-K Report Form of Common Stock Certificate (Domestic).
of the Company (No. 2-87930)
4.2 Exhibit 4.2 to 1989 Form 10-K Report Form of Common Stock Certificate (Foreign).
of the Company (No. 2-87930)
10.1 Exhibit 10(d) to 1983 Form 10-K Report OMI Incentive Stock Option Plan.(1)
of the Company (No. 2-87930)
10.2 Exhibit 10.11 to Registration Statement OMI Supplementary Deferred Benefit Plan, as amended.
on Form S-1 (No. 33-7341)
10.3 Exhibit 10.9 to Registration Statement OMI Non-Qualified Stock Option Plan.(1)
on Form S-1 (No. 33-7341)
10.4 Exhibit 10.14(a) to Registration Severance Agreement dated as of August 9, 1984 between
Statement on Form S-1 (No. 33-7341) Michael Klebanoff and the Company.(1)
10.5(a) Exhibit 10.20 to 1987 Form 10-K Report OMI Corp. Employee Stock Ownership Plan (effective
of the Company (No. 2-87930) January 1, 1987).(1)
10.5(b) Exhibit 10.23 to 1988 Form 10-K Report Amendment No. 1 dated September 15, 1988 to OMI
of Company (No. 2-87930) Corp. Employee Stock Ownership Plan.(1)
10.6 Exhibit 10.31 to 1990 Form 10-K Report OMI Corp. 1990 Equity Incentive Plan.(1)
of the Company (No. 2-87930)
10.7 Exhibit 10.44 to 1991 Form 10-K Report OMI Corp. Key Employees Deferred Compensation Plan,
of the Company (No. 2-87930) effective January 1, 1992.(1)
10.8 Registration Statement on Form S-3 filed Form of Indenture with respect to the $170,000,000 OMI
October 27, 1993 (No. 33-67640) Corp. 10 1/4% Senior Notes due November 1, 2003.
10.9 Exhibit 10.14 to 1994 Form 10-K Report Stock Option and Restricted Stock Award Agreement
of the Company (No. 2-87930) dated as of February 23, 1994 between Craig H. Steven-
son, Jr. and the Company.
10.10(a) Exhibit 10.15(a) to 1994 Form 10-K Report Employment Agreement dated as of January 1, 1995 of
the Company (No. 2-87930) between Jack Goldstein and the Company.(1)
10.10(b) Exhibit 10.15(b) to 1994 Form 10-K Report Employment Agreement dated as of January 1, 1995 of
the Company (No. 2-87930) between Craig H. Stevenson, Jr. and the Company.(1)
10.10(c) Exhibit 10.15(c) to 1994 Form 10-K Report Employment Agreement dated as of January 1, 1995 of
the Company (No. 2-87930) between Vincent J. de Sostoa and the Company.(1)
10.10(d) Exhibit 10.15(d) to 1994 Form 10-K Report Employment Agreement dated as of January 1, 1995 of
the Company (No. 2-87930) between Fredric S. London and the Company.(1)
10.10(e) Exhibit 10.15(e) to 1994 Form 10-K Report Form of Employment Agreement dated as of January 1,
of the Company (No. 2-87930) 1995 between any Vice-President and the Company.(1)
10.10(f) Employment Agreement dated as of August 3, 1995
between Richard J. Halluska and the Company.(1)
<FN>
- ------------
(1) Denote executive compensation plan and/or placement agreement.
</FN>
</TABLE>
57
<PAGE>
<TABLE>
<CAPTION>
Number Incorporated by Reference to Description of Exhibit
------ ---------------------------- -----------------------
<S> <C> <C>
10.10(g) Employment Agreement dated as of August 3, 1995
between Robert Bugbee and the Company.(1)
10.10(h) Amended and Restated Employment Agreement dated as
of November 21, 1995 between Jack Goldstein and the
Company.(1)
10.10(i) Amended and Restated Employment Agreement dated as
of November 21, 1995 between Craig H. Stevenson, Jr.
and the Company.(1)
10.11 Exhibit 10.14 to Form 10-Q for period OMI Corp. 1995 Incentive Equity Plan.(1)
ended June 30, 1995 (No. 2-87930)
10.12 Exhibit 10.14 to Form 10-Q for period OMI Corp. 1995 Stock Option Plan for Non-Employee
ended June 30, 1995 (No. 2-87930) Directors.(1)
10.13 Annual Executive Incentive Compensation Plan.(1)
10.14 Stock Purchase Agreement by and among Hvide Marine
Incorporated dated October 12, 1995 and Amendment
dated January 31, 1996.
21 Subsidiaries of the Company.
27.01 Financial Data Schedule dated December 31, 1995.
99 Declarations Executive Risk Policy No. 81092598-H
dated January 19, 1996, for the period from January 31,
1996 to January 31, 1997 AND Excess Directors and
Officers Insurance and Corporate Reimbursement Policy,
Policy No. 482-51-72, dated January 22, 1996, for the
period from January 31, 1996 to January 31, 1997.
(b) Reports on Form 8-K.
None.
(d) Financial Statements of Affiliates:
Wilomi Inc. and Subsidiaries Consolidated Balance Sheets at December 31, 1995 and
1994, and Related Statements of Consolidated Operations
and Retained Earnings, and Cash Flows for each of the
three years in the period ended December 31, 1995 and
Independent Auditors' Report.
Amazon Transport, Inc. Balance Sheets at December 31, 1995 and 1994 and
Related Statements of Operations and Retained (Deficit)
Earnings and Cash Flows for each of the three years in
the period ended December 31, 1995 and Independent
Auditors' Report.
- -------------
<FN>
(1) Denote executive compensation plan and/or placement agreement.
</FN>
</TABLE>
58
<PAGE>
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the Registrant has duly caused this report to be signed on
its behalf by the undersigned, thereunto duly authorized.
OMI CORP.
By /s/ JACK GOLDSTEIN
-------------------------------------------
Jack Goldstein, Chairman of the Board,
Chief Executive Officer and Director
March 28, 1996
Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed below by the following persons on behalf of the
Registrant and in the capacities and on the dates indicated.
Signature Title Date
--------- ----- ----
/s/ JACK GOLDSTEIN Chairman of the Board, Chief March 28, 1996
- -------------------------- Executive Officer and Director
Jack Goldstein
/s/ CRAIG H. STEVENSON, JR. President, Chief Operating Officer, March 28, 1996
- -------------------------- and Director
Craig H. Stevenson, Jr.
/s/ LIVIO BORGHESE Director March 28, 1996
- --------------------------
Livio Borghese
/s/ C.G. CARAS Director March 28, 1996
- --------------------------
C.G. Caras
/s/ STEVEN D. JELLINEK Director March 28, 1996
- --------------------------
Steven D. Jellinek
/s/ MICHAEL KLEBANOFF Director March 28, 1996
- --------------------------
Michael Klebanoff
/s/ EMANUEL L. ROUVELAS Director March 28, 1996
- --------------------------
Emanuel L. Rouvelas
/s/ MARIANNE K. SMYTHE Director March 28, 1996
- --------------------------
Marianne K. Smythe
/s/ VINCENT J. DE SOSTOA Senior Vice President, Treasurer March 28, 1996
- -------------------------- and Chief Financial Officer
Vincent J. De Sostoa
59
<PAGE>
EXHIBIT INDEX
<TABLE>
<CAPTION>
Number Incorporated by Reference to Description of Exhibit
------ ---------------------------- -----------------------
<S> <C> <C>
3.1 Exhibit 3.1 to 1990 Form 10-K Report Certificate of Incorporation as amended and restated.
of the Company (No. 2-87930)
3.2 Exhibit 3.2 to 1990 Form 10-K Report By-laws as amended.
of the Company (No. 2-87930)
4.1 Exhibit 4.1 to 1989 Form 10-K Report Form of Common Stock Certificate (Domestic).
of the Company (No. 2-87930)
4.2 Exhibit 4.2 to 1989 Form 10-K Report Form of Common Stock Certificate (Foreign).
of the Company (No. 2-87930)
10.1 Exhibit 10(d) to 1983 Form 10-K Report OMI Incentive Stock Option Plan.(1)
of the Company (No. 2-87930)
10.2 Exhibit 10.11 to Registration Statement OMI Supplementary Deferred Benefit Plan, as amended.
on Form S-1 (No. 33-7341)
10.3 Exhibit 10.9 to Registration Statement OMI Non-Qualified Stock Option Plan.(1)
on Form S-1 (No. 33-7341)
10.4 Exhibit 10.14(a) to Registration Severance Agreement dated as of August 9, 1984 between
Statement on Form S-1 (No. 33-7341) Michael Klebanoff and the Company.(1)
10.5(a) Exhibit 10.20 to 1987 Form 10-K Report OMI Corp. Employee Stock Ownership Plan (effective
of the Company (No. 2-87930) January 1, 1987).(1)
10.5(b) Exhibit 10.23 to 1988 Form 10-K Report Amendment No. 1 dated September 15, 1988 to OMI
of Company (No. 2-87930) Corp. Employee Stock Ownership Plan.(1)
10.6 Exhibit 10.31 to 1990 Form 10-K Report OMI Corp. 1990 Equity Incentive Plan.(1)
of the Company (No. 2-87930)
10.7 Exhibit 10.44 to 1991 Form 10-K Report OMI Corp. Key Employees Deferred Compensation Plan,
of the Company (No. 2-87930) effective January 1, 1992.(1)
10.8 Registration Statement on Form S-3 filed Form of Indenture with respect to the $170,000,000 OMI
October 27, 1993 (No. 33-67640) Corp. 10 1/4% Senior Notes due November 1, 2003.
10.9 Exhibit 10.14 to 1994 Form 10-K Report Stock Option and Restricted Stock Award Agreement
of the Company (No. 2-87930) dated as of February 23, 1994 between Craig H. Steven-
son, Jr. and the Company.
10.10(a) Exhibit 10.15(a) to 1994 Form 10-K Report Employment Agreement dated as of January 1, 1995 of
the Company (No. 2-87930) between Jack Goldstein and the Company.(1)
10.10(b) Exhibit 10.15(b) to 1994 Form 10-K Report Employment Agreement dated as of January 1, 1995 of
the Company (No. 2-87930) between Craig H. Stevenson, Jr. and the Company.(1)
10.10(c) Exhibit 10.15(c) to 1994 Form 10-K Report Employment Agreement dated as of January 1, 1995 of
the Company (No. 2-87930) between Vincent J. de Sostoa and the Company.(1)
10.10(d) Exhibit 10.15(d) to 1994 Form 10-K Report Employment Agreement dated as of January 1, 1995 of
the Company (No. 2-87930) between Fredric S. London and the Company.(1)
10.10(e) Exhibit 10.15(e) to 1994 Form 10-K Report Form of Employment Agreement dated as of January 1,
of the Company (No. 2-87930) 1995 between any Vice-President and the Company.(1)
10.10(f) Employment Agreement dated as of August 3, 1995
between Richard J. Halluska and the Company.(1)
<FN>
- ------------
(1) Denote executive compensation plan and/or placement agreement.
</FN>
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Number Incorporated by Reference to Description of Exhibit
------ ---------------------------- -----------------------
<S> <C> <C>
10.10(g) Employment Agreement dated as of August 3, 1995
between Robert Bugbee and the Company.(1)
10.10(h) Amended and Restated Employment Agreement dated as
of November 21, 1995 between Jack Goldstein and the
Company.(1)
10.10(i) Amended and Restated Employment Agreement dated as
of November 21, 1995 between Craig H. Stevenson, Jr.
and the Company.(1)
10.11 Exhibit 10.14 to Form 10-Q for period OMI Corp. 1995 Incentive Equity Plan.(1)
ended June 30, 1995 (No. 2-87930)
10.12 Exhibit 10.14 to Form 10-Q for period OMI Corp. 1995 Stock Option Plan for Non-Employee
ended June 30, 1995 (No. 2-87930) Directors.(1)
10.13 Annual Executive Incentive Compensation Plan.(1)
10.14 Stock Purchase Agreement by and among Hvide Marine
Incorporated dated October 12, 1995 and Amendment
dated January 31, 1996.
21 Subsidiaries of the Company.
27.01 Financial Data Schedule dated December 31, 1995.
99 Declarations Executive Risk Policy No. 81092598-H
dated January 19, 1996, for the period from January 31,
1996 to January 31, 1997 AND Excess Directors and
Officers Insurance and Corporate Reimbursement Policy,
Policy No. 482-51-72, dated January 22, 1996, for the
period from January 31, 1996 to January 31, 1997.
(b) Reports on Form 8-K.
None.
(d) Financial Statements of Affiliates:
Wilomi Inc. and Subsidiaries Consolidated Balance Sheets at December 31, 1995 and
1994, and Related Statements of Consolidated Operations
and Retained Earnings, and Cash Flows for each of the
three years in the period ended December 31, 1995 and
Independent Auditors' Report.
Amazon Transport, Inc. Balance Sheets at December 31, 1995 and 1994 and
Related Statements of Operations and Retained (Deficit)
Earnings and Cash Flows for each of the three years in
the period ended December 31, 1995 and Independent
Auditors' Report.
- -------------
<FN>
(1) Denote executive compensation plan and/or placement agreement.
</FN>
</TABLE>
EMPLOYMENT AGREEMENT
THIS EMPLOYMENT AGREEMENT (the "Agreement") dated as of August 3, 1995 between
OMI Corp., a Delaware corporation (the "Company") and RICHARD HALLUSKA (the
"Executive") amends and restates the Employment Agreement dated as of January 1,
1995.
W I T N E S S E T H
WHEREAS, the Company desires to continue to employ the Executive; and
WHEREAS, the Executive is willing to continue to be employed by the Company, as
a senior executive of the Company, for the period and upon the terms and
conditions hereinafter set forth;
NOW THEREFORE, in consideration of the mutual covenants and conditions contained
herein, the Company and the Executive hereby agree as follows:
1. EMPLOYMENT
----------
The Company shall employ the Executive, and the Executive accepts
employment by the Company, as Senior Vice President of the Company upon the
terms and conditions herein, for the period commencing as of January 1, 1995,
and ending on December 31, 1996, subject to termination as hereinafter provided
(the period from January 1, 1995 through December 31, 1996, as such period may
be extended as described in this paragraph, being herein referred to as the
"Employment Period"). The Executive term of employment shall be automatically
extended for an additional period of one year unless written notice of
termination is given by either party no later than December 31, 1995, and for an
additional period thereafter of one year unless written notice of termination is
given by either party no later than December 31, 1996. If, upon expiration of
this Agreement, the Company desires to continue to employ the Executive and the
Executive desires to continue in the employ of the Company, such employment
shall be continued on terms and conditions which the Company and the Executive
find mutually satisfactory and which are consistent with the employment policies
of the Company.
2. DUTIES
------
(a) Throughout the Employment Period, the Executive shall be Senior Vice
President of the Company and shall report to the President, the Chief Executive
Officer and the Board of Directors (the "Board") of the Company. The Executive
shall at all times comply with Company policies as established by the Board.
(b) During the Employment Period, the Executive shall devote his full-time
working hours to his duties hereunder, except during vacation time, any periods
of illness and authorized leaves of
<PAGE>
absence. The Executive shall have such responsibilities and authorities
consistent with the status, title and reporting requirements set forth herein as
are appropriate to said position, subject to change (other than diminution in
position, authority, duties or responsibilities) from time to time by the
President, the Chief Executive Officer and/or the Board of Directors of the
Company.
(c) Throughout the Employment Period, the Executive shall faithfully and
diligently perform his duties under this Agreement and shall use his best
efforts to promote the interests of the Company.
3. COMPENSATION
------------
During the Employment Period, as full compensation to the Executive for his
performance of the services hereunder and for his acceptance of the
responsibilities described herein, the Company agrees to pay the Executive, and
the Executive agrees to accept, the following salary and other benefits:
(a) Salary
The Company shall pay the Executive a salary (the "Base Salary") at the
annual rate of $200,000. The Board shall review such Base Salary on an
annual basis and may increase it, from time to time, in its sole discretion. The
Base Salary due the Executive hereunder shall be payable in equal monthly
installments less any amounts required to be withheld by the Company from such
Base Salary pursuant to the benefit plans of Section 3(d) and applicable laws
and regulations described under Section 10(e).
(b) Bonus
The Executive shall be eligible to receive bonuses (each a "Bonus") at the
discretion, in the amount and at the times determined by the Board of Directors
of the Company; except that in the event of a Change in Control (as hereinafter
defined), the Executive shall immediately receive a cash payment in an amount
equal to the aggregate bonuses paid during the twelve-month period ending on the
date of the Change in Control.
(c) Long Term Incentives
The Executive shall be entitled to receive grants of restricted stock,
stock options and other stock awards at the discretion of the Compensation
Committee of the Board of Directors of the Company and/or other stock and cash
awards granted pursuant to any other long term incentive plans implemented by
the Company for the benefit of senior executives of the Company.
2
<PAGE>
(d) Other Benefit Plans
Subject to all eligibility requirements, and to the extent permitted by
law, the Executive shall be entitled to participate in any and all employee
welfare and benefit plans (including, but not limited to, retirement security,
life insurance, medical, dental, disability, and savings plans) established by
the Company from time to time for the general and overall benefit of executives
of the Company.
(e) Further Benefits
The Executive shall be entitled to a minimum of four weeks per annum paid
vacation.
(f) Deferred Compensation
Notwithstanding any other provision of the Agreement, the Executive shall
have the right to request any lawful means (including, without limitation, any
deferred compensation arrangement requested by the Executive) by which he or she
wishes to receive any portion of his or her Base Salary, Bonus, or other
payments, and the Company shall reasonably cooperate with the Executive to grant
such request, provided that the granting of such request does not represent
inequitable treatment as concerns other senior employees or executives (in the
Company's sole judgment), and does not impose additional costs on the Company
other than insignificant administrative costs.
4. REASONABLE EXPENSES
-------------------
The Company will reimburse the Executive for all reasonable business
expenses, including travel and lodging, which are properly incurred by him or
her in the performance of his or her duties hereunder, upon presentation of
proper vouchers therefor and in accordance with written policies established
from time to time by the Company for such reimbursements.
5. EXECUTIVE COVENANTS
-------------------
The Executive acknowledges that as a result of the services to be rendered
to the Company hereunder, the Executive will be brought into close contact with
many confidential affairs of the Company, its subsidiaries and affiliates, not
readily available to the public. The Executive further acknowledges that the
services to be performed under this Agreement are of a special, unique, unusual,
extraordinary and intellectual character; that the business of the Company is
international in scope; that its goods and services are marketed throughout the
world; and that the Company competes with other organizations that are or could
be located in nearly any part of the United States or elsewhere. In recognition
of the foregoing:
3
<PAGE>
(a) Except with the consent of or as directed by the Company, or except if
compelled by judicial or legal authorities, the Executive will keep confidential
and not divulge to any other person, during the Employment Period or thereafter,
any Confidential Information and Trade Secrets regarding the Company, its
subsidiaries and affiliates, except for information which is or becomes publicly
available other than as a result of disclosure by the Executive. For the
purposes of this Agreement "Confidential Information and Trade Secrets" means
information which is secret to the Company, its subsidiaries and affiliates. It
may include, but is not limited to, information relating to new and future
concepts and business of the Company, its subsidiaries and affiliates, in the
form of memoranda, reports, computer software and data banks, customer lists,
employee lists, books, records, financial statements, manuals, papers, contracts
and strategic plans. As a guide, the Executive is to consider information
originated, owned, controlled or possessed by the Company, its subsidiaries or
affiliates which is not disclosed in printed publications stated to be available
for distribution outside the Company, its subsidiaries and affiliates as being
secret and confidential. In instances where doubt does or should reasonably be
understood to exist in the Executive's mind as to whether information is secret
and confidential to the Company, its subsidiaries and affiliates, the Executive
agrees to request an opinion, in writing, from the Company.
(b) All papers, books and records of every kind and description relating to
the business and affairs of the Company, its subsidiaries and affiliates,
whether or not prepared by the Executive, and all property owned by the Company,
its subsidiaries and affiliates shall be the sole and exclusive property of the
Company, and the Executive shall surrender them to the Company, at any time upon
request, during or after the Employment Period.
(c) During the Employment Period and during any Severance Period (as
hereinafter defined), the Executive will not, without the prior written consent
of the Company, compete, directly or indirectly, with the Company, its
subsidiaries and affiliates or participate as a director, officer, employee,
agent, representative, stockholder, or partner, or have any direct or indirect
financial interest as a creditor, in any business which directly or indirectly
competes with the Company its subsidiaries and affiliates; provided, however,
that this paragraph (c) shall not restrict the Executive from holding up to 5%
of the publicly traded securities of any entity.
(d) During the Employment Period and during any Severance Period (as
hereinafter defined), the Executive shall not either for his or her own account
or for any person, firm or company (i) solicit any customers of the Company, its
subsidiaries and affiliates or (ii) solicit or endeavor to cause any employee of
the Company, its subsidiaries and affiliates to leave his employment or
4
<PAGE>
induce or attempt to induce any such employee to breach any employment agreement
with the Company, its subsidiaries and affiliates, or otherwise interfere with
the employment of any employee by the Company, its subsidiaries and affiliates.
(e) Without limiting any other provision of this Agreement, the Executive
hereby agrees to be bound by and to comply with any obligations known to the
Executive and imposed on the Company, its subsidiaries and affiliates, by law,
rule, regulation, ordinance, order, decree, instrument, agreement, understanding
or other restriction of any kind.
(f) The Executive hereby agrees to provide reasonable cooperation to the
Company, its subsidiaries and affiliates during the Employment Period and any
Severance Period (as hereinafter defined) in any litigation between the Company,
its subsidiaries and affiliates, and third parties.
(g) The parties agree that the Company shall, in addition to other remedies
provided by law, have the right and remedy to have the provisions of this
Section 5 specifically enforced by any court having equity jurisdiction, it
being acknowledged and agreed that any breach or threatened breach of the
provisions of this Section 5 will cause irreparable injury to the Company and
that money damages will not provide an adequate remedy to the Company. Nothing
contained herein shall be construed as prohibiting the Company from pursuing any
other remedies available to it for such breach or threatened breach, including
the recovery of damages from the Executive.
(i) although the restrictions contained in Sections 5(a), (b), (c) and (d)
above are considered by the parties hereto to be fair and reasonable in the
circumstances, it is recognized that restrictions of such nature may fail for
technical reasons, and accordingly it is hereby agreed that if any of such
restrictions shall be adjudged to be void or unenforceable for whatever reason,
but would be valid if part of the wording thereof were deleted, or the period
thereof reduced or the area dealt with thereby reduced in scope, the
restrictions contained in Sections 5(a), (b), (c) and (d) shall be enforced to
the maximum extent permitted by law, and the parties consent and agree that such
scope or wording may be accordingly judicially modified in any proceeding
brought to enforce such restrictions.
(ii) Notwithstanding that the Executive's employment hereunder may expire
or be terminated as provided in Section 1 or Section 6 hereof, this Agreement
shall continue in full force and effect insofar as is necessary to enforce the
covenants and agreements of the Executive contained in this Section 5.
5
<PAGE>
6. TERMINATION OF EMPLOYMENT PERIOD AND SEVERANCE
----------------------------------------------
(a) Termination by the Company without Cause. If for any reason other than
the provisions of Section 6(d) hereof, the Company wishes to terminate the
Employment Period and the Executive's employment hereunder, the Company shall
give a written notice to the Executive of such termination stating that a
severance period (the "Severance Period") will commence upon receipt of such
notice by the Executive. The Severance Period shall be for the balance of the
then current term of this Agreement or twelve months, whichever is greater. Upon
receipt of such notice by the Executive, the Employment Period shall terminate
(and the Executive shall have no further duties under Section 2 hereof). During
the entire Severance Period, the Executive shall continue to receive all salary,
compensation, payments and benefits under Sections 3(a) and 3(d) of this
Agreement (including, to the extent allowable under applicable law, the accrual
of additional service credits or Company contributions under pension and thrift
plans, and any benefits under the Company's long term disability and life
insurance plans) available upon the date of the commencement of the Severance
Period as if the Employment Period continued throughout the Severance Period.
The Executive agrees that the payments described in this Section 6(a) shall be
full and adequate compensation to the Executive for all damages the Executive
may suffer as a result of the termination of his employment pursuant to this
Section 6(a), and hereby waives and releases the Company from any and all
obligations or liabilities to the Executive arising from or in connection with
the Executive's employment with the Company or the termination and claims the
Executive may have under federal, state or local statutes, regulations or
ordinances or under any common law principles or breach of contract or the
covenant of good faith and fair dealing, defamation, wrongful discharge,
intentional infliction of emotional distress or promissory estoppel; provided,
however, that any rights and benefits the Executive may have under the employee
benefit plans and programs of the Company in which the Executive is a
participant, shall be determined in accordance with the terms and provisions of
such plans and programs.
(b) Death. If the Executive dies during the Employment Period, the
Severance Period or during the period when payments are being made pursuant to
Section 6(c), the Employment Period shall automatically terminate and the
obligations of the parties shall terminate effective the date of death.
(c) Disability. If the Executive becomes Disabled (as hereinafter defined)
during the Employment Period, the Company shall be entitled to terminate his or
her employment and the Employment Period upon written notice to the Executive
from the Company. In the event of such termination, the Executive shall be
released from any duties hereunder, and the Severance Period described in
Section 6(a) hereof shall immediately commence. The
6
<PAGE>
duties, rights, benefits and other matters during the Severance Period shall be
as set forth in Section 6(a), and the Executive (and his or her heirs,
beneficiaries and estate) shall be entitled to all compensation, payments and
benefits during the Severance Period without any offset or reduction except by
such amounts, if any, as are paid to the Executive in lieu of compensation for
services under any applicable insurance policies of the Company (or by the
Company under any self insurance plan). For purposes of this Agreement,
"Disabled" shall mean mental or physical impairment or incapacity rendering the
Executive substantially unable to perform his duties under this Agreement for a
period of longer than 180 days out of any 360-day period during the Employment
Period. A determination of whether the Executive is Disabled shall be made by
the Company in its sole discretion upon its own initiative or upon request of
the Executive or a person acting on his behalf. If the Executive becomes
Disabled during a Severance Period, he or she shall continue to receive the
compensation, payments and benefits of this Agreement during the entire
Severance Period without any offset or reduction, except by such amounts, if
any, as are paid to the Executive in lieu of compensation for services under any
applicable insurance policies of the Company (or by the Company under any self
insurance plan).
(d) Termination by the Company for Cause. The Company by written notice to
the Executive, shall have the right to terminate the Employment Period in the
event of any of the following (which shall constitute "Cause"):
(i) The Executive's breach in respect of his or her duties under this
Agreement, such breach continuing unremedied for thirty days after
written notice thereof from the Company to the Executive specifying
the acts constituting the breach and requesting that they be remedied;
or
(ii) Any misconduct, dishonesty, insubordination or other act by the
Executive materially detrimental to the goodwill of the Company, or
materially damaging to the Company's, its subsidiaries' and/or
affiliates' relationships with their customers or employees, including
without limitation, the Executive having been convicted of a felony
during the Employment Period, provided such conviction has resulted or
is likely to result in substantial detriment to the Company, its
subsidiaries and/or affiliates.
Any termination under this Section 6(d) shall be without damages or
liability to the Company for compensation and other benefits which would have
accrued to the Executive hereunder after termination, but all compensation,
benefits and reimbursements accrued through the date of termination shall be
paid to the
7
<PAGE>
Executive at the times normally paid by the Company. In this event, there shall
be no Severance Period.
(e) Voluntary Termination by the Executive. In the event of voluntary
termination of employment by the Executive, the terms of the last paragraph of
Section 6(d) shall apply, except in the event that such voluntary termination
occurs within ninety days of (i) a relocation of the Company's offices (or the
location of the performance of work by the Executive) beyond a fifty mile radius
of New York City, (ii) a material diminution of the Executive's duties and
responsibilities as provided in Section 2, or (iii) a reduction in Base Salary
in which cases the provisions of Section 6(a) shall apply.
(f) Termination Following a Change in Control.
(i) For purposes of this paragraph (f), the term "Change in Control" shall
mean a Change in Control as defined in Section 3 of the OMI Corp. Separation
Allowance Program, as amended from time (the "Program") to time. Should the
Executive's employment hereunder be terminated by the Company without Cause
(other than for reason of the Executive becoming Disabled) within two years of a
Change in Control, the Company shall pay and the Executive shall receive in cash
an amount equal to three times the sum of the Executive's then current Base
Salary and the amount paid to the Executive pursuant to the exception in Section
3(b). The Executive shall also be eligible to receive any and all other benefits
as provided in the Program (excepting the severance benefits of Paragraph
5(iii)B of the Program). For purposes other than with respect to Paragraph
5(iii)B of the Program, wherever a Measuring Period (as defined in the Program)
is called for, the Measuring Period for the Executive shall be twenty four. Upon
termination under this paragraph (f), the Executive shall no longer be bound by
the provisions of Section 5 of this Agreement.
(ii) In the event that any payment received or to be received by the
Executive in connection with a Change in Control or the termination of the
Executive's employment (whether payable pursuant to the terms of this Agreement
or any other plan, arrangement or agreement with the Company, any person whose
actions result in a Change in Control or any person affiliated with the Company
or such person (together with the payment pursuant to Section 6(f)(i), the
"Total Payments")) would not be deductible by the Company (in whole or in part)
as a result of Section 280G of the Internal Revenue Code of 1986, as amended
(the "Code"), the payment pursuant to Section 6(f)(i) shall be reduced until no
portion or the Total Payments is not deductible as a result of Section 280G of
the Code, or the payment pursuant to Section 6(f)(i) is reduced to zero. For
purposes of this limitation (A) no portion of the Total Payments the receipt or
enjoyment of which the Executive shall have effectively waived in writing prior
to the date of payment of the payment pursuant to Section 6(f)(i) shall be
8
<PAGE>
taken into account, (B) no portion of the Total Payments shall be taken into
account which, in the opinion of tax counsel selected by the Company's
independent auditors and acceptable to the Executive, does not constitute a
"parachute payment" within the meaning of Section 280G(b)(2) of the Code, and
(C) the value of any non-cash benefit or any deferred payment or benefit
included in the Total Payments shall be determined or benefit included in the
Total Payments shall be determined by the Company's independent auditors
servicing the Company immediately prior to the time of a Change in Control in
accordance with the principles of Sections 280G(d)(3) and (4) of the Code.
7. CONFLICTING AGREEMENTS
----------------------
The Executive hereby represents and warrants to the Company that his
entering into this Agreement, and the obligations and duties undertaken by him
hereunder, will not conflict with, constitute a breach of, or otherwise violate
the terms of any other employment of other agreement to which he is a party.
8. ASSIGNMENT
----------
(a) By the Executive. This Agreement, any part thereof and any rights
(including compensation) or obligation hereunder shall not be assigned, pledged,
alienated, sold, attached, charged, encumbered or transferred in any way by the
Executive and any attempt to do so shall be void except that (i) the Executive
may designate any of his beneficiaries to receive (and such beneficiaries shall
receive) any compensation, payments or other benefits payable hereunder upon his
death, (ii) any assignment by will or by laws of descent and distribution or
following the occurrence of the Executive's legal incompetence is permitted and
(iii) the Executive's executors, administrators or other legal representatives
may assign any rights hereunder to the person or persons entitled thereto.
(b) By the Company. Provided the substance of the Executive's duties set
forth in Section 2 shall not change, and provided that the Executive's
compensation as set forth in Section 3 shall not be adversely affected, the
Company may assign or otherwise transfer this Agreement to any succeeding entity
without limitation, which entity shall assume all rights and obligations
hereunder.
9. NOTICES
-------
All notices, requests, demands and other communications hereunder must be
in writing and shall be deemed to have been duly given if delivered by hand or
mailed within the continental United States by first class, registered mail,
return receipt requested, or sent by overnight mail, such as Federal Express,
postage and registry fees prepaid, to the applicable party and addressed as
9
<PAGE>
follows:
(a) if to the Company:
President
OMI Corp.
90 Park Avenue
New York, New York 10016
(b) if to the Executive:
18 Kenmswick Dr.
Stony Brook, NY 11790
Addresses may be changed by notice in writing signed by the addressee.
10. MISCELLANEOUS
-------------
(a) If any provision or portion of this Agreement shall, for any reason, be
adjudged by any court of competent jurisdiction to be invalid or unenforceable,
such judgment shall not affect, impair or invalidate the remainder of this
Agreement but shall be confined in its operation to the jurisdiction in which
made and to the provisions of this Agreement directly involved in the
controversy in which such judgment shall have been rendered.
(b) No course of dealing and no delay on the part of any party hereto in
exercising any right, power or remedy under or relating to this Agreement shall
operate as a waiver thereof or otherwise prejudice such party's rights, powers
and remedies. No single or partial exercise of any rights, powers or remedies
under or relating to this Agreement shall preclude any other or further exercise
thereof or the exercise of any other right, power or remedy.
(c) This Agreement may be executed by the parties hereto in counterparts,
each of which shall be deemed to be an original, but all such counterparts shall
together constitute one and the same instrument, and all signatures need not
appear on any one counterpart.
(d) (i) Any other agreement, rule or regulation to the contrary,
notwithstanding, the parties hereby agree that any action or proceeding relating
to this Agreement or its subject matter shall be brought in a state or federal
court situated in the County of New York, State of New York and such court shall
have exclusive jurisdiction thereof; provided, however, any court with
jurisdiction over the parties may, at the election of Company, have jurisdiction
over any action brought with regard to or any action brought to enforce any
violation or claimed violation of Section 5.
10
<PAGE>
The parties each hereby specifically submit to the jurisdiction of such court
and further agree that service of process may be made within or without the
State of New York by giving notice in the manner provided in Section 9. Each
party further agrees to waive and hereby waives any right to a trial by jury,
and to any objection it or he may have in any such action, based on lack of
personal jurisdiction or venue, or inconvenient forum.
(ii) In any such action or proceeding, the prevailing party shall be
entitled to recover from the other party reasonable costs, including attorney's
fees and expenses. In any action or proceeding before a court or other tribunal
relating to this Agreement with respect to which damages are an adequate remedy,
the parties agree that no damages other than compensatory damages shall be
sought or claimed by either party and each party waives any claim, right or
entitlement to punitive, exemplary, or consequential damages, or any statutory
damages, or any other damages of any kind or nature in excess of compensatory
damages, and any court or arbitration tribunal is specifically divested of any
power to award any damages in the nature of punitive, exemplary, or
consequential damages, or any statutory damages, or any other damages of any
kind or nature in excess of compensatory damages.
(e) All payments required to be made by the Company hereunder to the
Executive or his beneficiaries, including his estate, shall be subject to
withholding and deductions as the Company may reasonably determine it should
withhold or deduct pursuant to any applicable law or regulation. In lieu of
withholding or deducting such amounts in whole or in part, the Company may, in
its sole discretion, accept other provision for payment as permitted by law,
provided it is satisfied in its sole discretion that all requirements of law
affecting its responsibilities to withhold such taxes have been satisfied.
(f) This Agreement embodies the entire understanding, and supersedes all
other oral or written agreements or understandings, between the parties
regarding the subject matter hereof. No change, alteration or modification
hereof may be made except in writing signed by both parties hereto. The headings
in this Agreement are for convenience of reference only and shall not be
considered part of this Agreement or limit or otherwise affect the meaning
hereof. This Agreement and the rights and obligations of the parties hereunder
shall be construed in accordance with and governed by the laws of the State of
New York (disregarding any choice of law rules which might look to the laws of
any other jurisdiction).
(g) The Executive acknowledges that the terms of this Agreement have been
fully explained to him or her, that the Executive understands the nature and
extent of the rights and obligations provided under this Agreement, and that the
Executive
11
<PAGE>
has been given the opportunity to be represented by legal counsel in the
negotiation and preparation of this Agreement.
(h) Nothing herein contained shall be construed to prevent or limit any
acquisition, consolidation or merger of the Company.
IN WITNESS WHEREOF, the parties hereto have executed and delivered this
Agreement as of the day and year first above written.
By_____________________________
Richard J. Halluska
OMI CORP.
By_____________________________
12
EMPLOYMENT AGREEMENT
--------------------
THIS EMPLOYMENT AGREEMENT (the "Agreement") dated as of August 3, 1995 between
OMI Corp., a Delaware corporation (the "Company") and ROBERT BUGBEE (the
"Executive") amends and restates the Employment Agreement dated as of January
23, 1995.
W I T N E S S E T H
-------------------
WHEREAS, the Company desires to continue to employ the Executive; and
WHEREAS, the Executive is willing to continue to be employed by the Company, as
a senior executive of the Company, for the period and upon the terms and
conditions hereinafter set forth;
NOW THEREFORE, in consideration of the mutual covenants and conditions contained
herein, the Company and the Executive hereby agree as follows:
1. EMPLOYMENT
----------
The Company shall employ the Executive, and the Executive accepts
employment by the Company, as Senior Vice President of the Company upon the
terms and conditions herein, for the period commencing as of January 23, 1995,
and ending on December 31, 1996, subject to termination as hereinafter provided
(the period from January 23, 1995 through December 31, 1996, as such period may
be extended as described in this paragraph, being herein referred to as the
"Employment Period"). The Executive term of employment shall be automatically
extended for an additional period of one year unless written notice of
termination is given by either party no later than December 31, 1995, and for an
additional period thereafter of one year unless written notice of termination is
given by either party no later than December 31, 1996. If, upon expiration of
this Agreement, the Company desires to continue to employ the Executive and the
Executive desires to continue in the employ of the Company, such employment
shall be continued on terms and conditions which the Company and the Executive
find mutually satisfactory and which are consistent with the employment policies
of the Company.
2. DUTIES
------
(a) Throughout the Employment Period, the Executive shall be Senior Vice
President of the Company and shall report to the President, the Chief Executive
Officer and the Board of Directors (the "Board") of the Company. The Executive
shall at all times comply with Company policies as established by the Board.
(b) During the Employment Period, the Executive shall devote his full-time
working hours to his duties hereunder, except during vacation time, any periods
of illness and authorized leaves of
<PAGE>
absence. The Executive shall have such responsibilities and authorities
consistent with the status, title and reporting requirements set forth herein as
are appropriate to said position, subject to change (other than diminution in
position, authority, duties or responsibilities) from time to time by the
President, Chief Executive Officer and/or the Board.
(c) Throughout the Employment Period, the Executive shall faithfully and
diligently perform his duties under this Agreement and shall use his best
efforts to promote the interests of the Company.
3. COMPENSATION
------------
During the Employment Period, as full compensation to the Executive for his
performance of the services hereunder and for his acceptance of the
responsibilities described herein, the Company agrees to pay the Executive, and
the Executive agrees to accept, the following salary and other benefits:
(a) Salary
------
The Company shall pay the Executive a salary (the "Base Salary") at the
annual rate of $206,000. The Board shall review such Base Salary on an
annual basis and may increase it, from time to time, in its sole discretion. The
Base Salary due the Executive hereunder shall be payable in equal monthly
installments less any amounts required to be withheld by the Company from such
Base Salary pursuant to the benefit plans of Section 3(d) and applicable laws
and regulations described under Section 10(e).
(b) Bonus
-----
The Executive shall be eligible to receive bonuses (each a "Bonus") at the
discretion, in the amount and at the times determined by the Board of Directors
of the Company; except that in the event of a Change in Control (as hereinafter
defined), the Executive shall immediately receive a cash payment in an amount
equal to the aggregate bonuses paid during the twelve-month period ending on the
date of the Change in Control.
(c) Long Term Incentives
--------------------
The Executive shall be entitled to receive grants of restricted stock,
stock options and other stock awards at the discretion of the Compensation
Committee of the Board of Directors of the Company and/or other stock and cash
awards granted pursuant to any other long term incentive plans implemented by
the Company for the benefit of senior executives of the Company.
(d) Other Benefit Plans
-------------------
Subject to all eligibility requirements, and to the extent permitted by
law, the Executive shall be entitled to participate in
2
<PAGE>
any and all employee welfare and benefit plans (including, but not limited to,
retirement security, life insurance, medical, dental, disability, and savings
plans) established by the Company from time to time for the general and overall
benefit of executives of the Company.
(e) Further Benefits
----------------
The Executive shall be entitled to a minimum of four weeks per annum
paid vacation.
(f) Deferred Compensation
---------------------
Notwithstanding any other provision of the Agreement, the Executive shall
have the right to request any lawful means (including, without limitation, any
deferred compensation arrangement requested by the Executive) by which he or she
wishes to receive any portion of his or her Base Salary, Bonus, or other
payments, and the Company shall reasonably cooperate with the Executive to grant
such request, provided that the granting of such request does not represent
inequitable treatment as concerns other senior employees or executives (in the
Company's sole judgment), and does not impose additional costs on the Company
other than insignificant administrative costs.
4. REASONABLE EXPENSES
-------------------
The Company will reimburse the Executive for all reasonable business
expenses, including travel and lodging, which are properly incurred by him or
her in the performance of his or her duties hereunder, upon presentation of
proper vouchers therefor and in accordance with written policies established
from time to time by the Company for such reimbursements.
5. EXECUTIVE COVENANTS
-------------------
The Executive acknowledges that as a result of the services to be rendered
to the Company hereunder, the Executive will be brought into close contact with
many confidential affairs of the Company, its subsidiaries and affiliates, not
readily available to the public. The Executive further acknowledges that the
services to be performed under this Agreement are of a special, unique, unusual,
extraordinary and intellectual character; that the business of the Company is
international in scope; that its goods and services are marketed throughout the
world; and that the Company competes with other organizations that are or could
be located in nearly any part of the United States or elsewhere. In recognition
of the foregoing:
(a) Except with the consent of or as directed by the Company, or
except if compelled by judicial or legal authorities, the Executive will
keep confidential and not divulge to any other
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person, during the Employment Period or thereafter, any Confidential Information
and Trade Secrets regarding the Company, its subsidiaries and affiliates, except
for information which is or becomes publicly available other than as a result of
disclosure by the Executive. For the purposes of this Agreement "Confidential
Information and Trade Secrets" means information which is secret to the Company,
its subsidiaries and affiliates. It may include, but is not limited to,
information relating to new and future concepts and business of the Company, its
subsidiaries and affiliates, in the form of memoranda, reports, computer
software and data banks, customer lists, employee lists, books, records,
financial statements, manuals, papers, contracts and strategic plans. As a
guide, the Executive is to consider information originated, owned, controlled or
possessed by the Company, its subsidiaries or affiliates which is not disclosed
in printed publications stated to be available for distribution outside the
Company, its subsidiaries and affiliates as being secret and confidential. In
instances where doubt does or should reasonably be understood to exist in the
Executive's mind as to whether information is secret and confidential to the
Company, its subsidiaries and affiliates, the Executive agrees to request an
opinion, in writing, from the Company.
(b) All papers, books and records of every kind and description
relating to the business and affairs of the Company, its subsidiaries and
affiliates, whether or not prepared by the Executive, and all property
owned by the Company, its subsidiaries and affiliates shall be the sole and
exclusive property of the Company, and the Executive shall surrender them
to the Company, at any time upon request, during or after the Employment
Period.
(c) During the Employment Period and during any Severance Period (as
hereinafter defined), the Executive will not, without the prior written
consent of the Company, compete, directly or indirectly, with the Company,
its subsidiaries and affiliates or participate as a director, officer,
employee, agent, representative, stockholder, or partner, or have any
direct or indirect financial interest as a creditor, in any business which
directly or indirectly competes with the Company its subsidiaries and
affiliates; provided, however, that this paragraph (c) shall not restrict
the Executive from holding up to 5% of the publicly traded securities of
any entity.
(d) During the Employment Period and during any Severance Period (as
hereinafter defined), the Executive shall not either for his or her own
account or for any person, firm or company (i) solicit any customers of the
Company, its subsidiaries and affiliates or (ii) solicit or endeavor to
cause any employee of the Company, its subsidiaries and affiliates to leave
his employment or induce or attempt to induce any such employee to breach
any employment agreement with the Company, its subsidiaries and affiliates,
or otherwise interfere with the employment of any
4
<PAGE>
employee by the Company, its subsidiaries and affiliates.
(e) Without limiting any other provision of this Agreement, the
Executive hereby agrees to be bound by and to comply with any obligations
known to the Executive and imposed on the Company, its subsidiaries and
affiliates, by law, rule, regulation, ordinance, order, decree, instrument,
agreement, understanding or other restriction of any kind.
(f) The Executive hereby agrees to provide reasonable cooperation to
the Company, its subsidiaries and affiliates during the Employment Period
and any Severance Period (as hereinafter defined) in any litigation between
the Company, its subsidiaries and affiliates, and third parties.
(g) The parties agree that the Company shall, in addition to other
remedies provided by law, have the right and remedy to have the provisions
of this Section 5 specifically enforced by any court having equity
jurisdiction, it being acknowledged and agreed that any breach or
threatened breach of the provisions of this Section 5 will cause
irreparable injury to the Company and that money damages will not provide
an adequate remedy to the Company. Nothing contained herein shall be
construed as prohibiting the Company from pursuing any other remedies
available to it for such breach or threatened breach, including the
recovery of damages from the Executive.
(i) although the restrictions contained in Sections 5(a), (b), (c) and
(d) above are considered by the parties hereto to be fair and reasonable in
the circumstances, it is recognized that restrictions of such nature may
fail for technical reasons, and accordingly it is hereby agreed that if any
of such restrictions shall be adjudged to be void or unenforceable for
whatever reason, but would be valid if part of the wording thereof were
deleted, or the period thereof reduced or the area dealt with thereby
reduced in scope, the restrictions contained in Sections 5(a), (b), (c) and
(d) shall be enforced to the maximum extent permitted by law, and the
parties consent and agree that such scope or wording may be accordingly
judicially modified in any proceeding brought to enforce such restrictions.
(ii) Notwithstanding that the Executive's employment hereunder may
expire or be terminated as provided in Section 1 or Section 6 hereof, this
Agreement shall continue in full force and effect insofar as is necessary
to enforce the covenants and agreements of the Executive contained in this
Section 5.
6. TERMINATION OF EMPLOYMENT PERIOD AND SEVERANCE
----------------------------------------------
(a) Termination by the Company without Cause. If for any reason other than
the provisions of Section 6(d) hereof, the
5
<PAGE>
Company wishes to terminate the Employment Period and the Executive's employment
hereunder, the Company shall give a written notice to the Executive of such
termination stating that a severance period (the "Severance Period") will
commence upon receipt of such notice by the Executive. The Severance Period
shall be for the balance of the then current term of this Agreement or twelve
months, whichever is greater. Upon receipt of such notice by the Executive, the
Employment Period shall terminate (and the Executive shall have no further
duties under Section 2 hereof). During the entire Severance Period, the
Executive shall continue to receive all salary, compensation, payments and
benefits under Sections 3(a) and 3(d) of this Agreement (including, to the
extent allowable under applicable law, the accrual of additional service credits
or Company contributions under pension and thrift plans, and any benefits under
the Company's long term disability and life insurance plans) available upon the
date of the commencement of the Severance Period as if the Employment Period
continued throughout the Severance Period. The Executive agrees that the
payments described in this Section 6(a) shall be full and adequate compensation
to the Executive for all damages the Executive may suffer as a result of the
termination of his employment pursuant to this Section 6(a), and hereby waives
and releases the Company from any and all obligations or liabilities to the
Executive arising from or in connection with the Executive's employment with the
Company or the termination and claims the Executive may have under federal,
state or local statutes, regulations or ordinances or under any common law
principles or breach of contract or the covenant of good faith and fair dealing,
defamation, wrongful discharge, intentional infliction of emotional distress or
promissory estoppel; provided, however, that any rights and benefits the
Executive may have under the employee benefit plans and programs of the Company
in which the Executive is a participant, shall be determined in accordance with
the terms and provisions of such plans and programs.
(b) Death. If the Executive dies during the Employment Period, the
Severance Period or during the period when payments are being made pursuant to
Section 6(c), the Employment Period shall automatically terminate and the
obligations of the parties shall terminate effective the date of death.
(c) Disability. If the Executive becomes Disabled (as hereinafter defined)
during the Employment Period, the Company shall be entitled to terminate his or
her employment and the Employment Period upon written notice to the Executive
from the Company. In the event of such termination, the Executive shall be
released from any duties hereunder, and the Severance Period described in
Section 6(a) hereof shall immediately commence. The duties, rights, benefits and
other matters during the Severance Period shall be as set forth in Section 6(a),
and the Executive (and his or her heirs, beneficiaries and estate) shall be
entitled to all compensation, payments and benefits during the Severance
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<PAGE>
Period without any offset or reduction except by such amounts, if any, as are
paid to the Executive in lieu of compensation for services under any applicable
insurance policies of the Company (or by the Company under any self insurance
plan). For purposes of this Agreement, "Disabled" shall mean mental or physical
impairment or incapacity rendering the Executive substantially unable to perform
his duties under this Agreement for a period of longer than 180 days out of any
360-day period during the Employment Period. A determination of whether the
Executive is Disabled shall be made by the Company in its sole discretion upon
its own initiative or upon request of the Executive or a person acting on his
behalf. If the Executive becomes Disabled during a Severance Period, he or she
shall continue to receive the compensation, payments and benefits of this
Agreement during the entire Severance Period without any offset or reduction,
except by such amounts, if any, as are paid to the Executive in lieu of
compensation for services under any applicable insurance policies of the Company
(or by the Company under any self insurance plan).
(d) Termination by the Company for Cause. The Company by written notice to
the Executive, shall have the right to terminate the Employment Period in the
event of any of the following (which shall constitute "Cause"):
(i) The Executive's breach in respect of his or her duties under this
Agreement, such breach continuing unremedied for thirty days
after written notice thereof from the Company to the Executive
specifying the acts constituting the breach and requesting that
they be remedied; or
(ii) Any misconduct, dishonesty, insubordination or other act by the
Executive materially detrimental to the goodwill of the Company,
or materially damaging to the Company's, its subsidiaries' and/or
affiliates' relationships with their customers or employees,
including without limitation, the Executive having been convicted
of a felony during the Employment Period, provided such
conviction has resulted or is likely to result in substantial
detriment to the Company, its subsidiaries and/or affiliates.
Any termination under this Section 6(d) shall be without damages or
liability to the Company for compensation and other benefits which would have
accrued to the Executive hereunder after termination, but all compensation,
benefits and reimbursements accrued through the date of termination shall be
paid to the Executive at the times normally paid by the Company. In this event,
there shall be no Severance Period.
7
<PAGE>
(e) Voluntary Termination by the Executive. In the event of voluntary
termination of employment by the Executive, the terms of the last paragraph of
Section 6(d) shall apply, except in the event that such voluntary termination
occurs within ninety days of (i) a relocation of the Company's offices (or the
location of the performance of work by the Executive) beyond a fifty mile radius
of New York City, (ii) a material diminution of the Executive's duties and
responsibilities as provided in Section 2, or (iii) a reduction in Base Salary
in which cases the provisions of Section 6(a) shall apply.
(f) Termination Following a Change in Control.
(i) For purposes of this paragraph (f), the term "Change in Control" shall
mean a Change in Control as defined in Section 3 of the OMI Corp. Separation
Allowance Program, as amended from time (the "Program") to time. Should the
Executive's employment hereunder be terminated by the Company without Cause
(other than for reason of the Executive becoming Disabled) within two years of a
Change in Control, the Company shall pay and the Executive shall receive in cash
an amount equal to three times the sum of the Executive's then current Base
Salary and the amount paid to the Executive pursuant to the exception in Section
3(b). The Executive shall also be eligible to receive any and all other benefits
as provided in the Program (excepting the severance benefits of Paragraph
5(iii)B of the Program). For purposes other than with respect to Paragraph
5(iii)B of the Program, wherever a Measuring Period (as defined in the Program)
is called for, the Measuring Period for the Executive shall be twenty four. Upon
termination under this paragraph (f), the Executive shall no longer be bound by
the provisions of Section 5 of this Agreement.
(ii) In the event that any payment received or to be received by the
Executive in connection with a Change in Control or the termination of the
Executive's employment (whether payable pursuant to the terms of this Agreement
or any other plan, arrangement or agreement with the Company, any person whose
actions result in a Change in Control or any person affiliated with the Company
or such person (together with the payment pursuant to Section 6(f)(i), the
"Total Payments")) would not be deductible by the Company (in whole or in part)
as a result of Section 280G of the Internal Revenue Code of 1986, as amended
(the "Code"), the payment pursuant to Section 6(f)(i) shall be reduced until no
portion or the Total Payments is not deductible as a result of Section 280G of
the Code, or the payment pursuant to Section 6(f)(i) is reduced to zero. For
purposes of this limitation (A) no portion of the Total Payments the receipt or
enjoyment of which the Executive shall have effectively waived in writing prior
to the date of payment of the payment pursuant to Section 6(f)(i) shall be taken
into account, (B) no portion of the Total Payments shall be taken into account
which, in the opinion of tax counsel selected by the Company's independent
auditors and acceptable to the Executive,
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<PAGE>
does not constitute a "parachute payment" within the meaning of Section
280G(b)(2) of the Code, and (C) the value of any non-cash benefit or any
deferred payment or benefit included in the Total Payments shall be determined
or benefit included in the Total Payments shall be determined by the Company's
independent auditors servicing the Company immediately prior to the time of a
Change in Control in accordance with the principles of Sections 280G(d)(3) and
(4) of the Code.
7. CONFLICTING AGREEMENTS
----------------------
The Executive hereby represents and warrants to the Company that his
entering into this Agreement, and the obligations and duties undertaken by him
hereunder, will not conflict with, constitute a breach of, or otherwise violate
the terms of any other employment of other agreement to which he is a party.
8. ASSIGNMENT
----------
(a) By the Executive. This Agreement, any part thereof and any rights
(including compensation) or obligation hereunder shall not be assigned, pledged,
alienated, sold, attached, charged, encumbered or transferred in any way by the
Executive and any attempt to do so shall be void except that (i) the Executive
may designate any of his beneficiaries to receive (and such beneficiaries shall
receive) any compensation, payments or other benefits payable hereunder upon his
death, (ii) any assignment by will or by laws of descent and distribution or
following the occurrence of the Executive's legal incompetence is permitted and
(iii) the Executive's executors, administrators or other legal representatives
may assign any rights hereunder to the person or persons entitled thereto.
(b) By the Company. Provided the substance of the Executive's duties set
forth in Section 2 shall not change, and provided that the Executive's
compensation as set forth in Section 3 shall not be adversely affected, the
Company may assign or otherwise transfer this Agreement to any succeeding entity
without limitation, which entity shall assume all rights and obligations
hereunder.
9. NOTICES
-------
All notices, requests, demands and other communications hereunder must be
in writing and shall be deemed to have been duly given if delivered by hand or
mailed within the continental United States by first class, registered mail,
return receipt requested, or sent by overnight mail, such as Federal Express,
postage and registry fees prepaid, to the applicable party and addressed as
follows:
9
<PAGE>
(a) if to the Company:
President
OMI Corp.
90 Park Avenue
New York, New York 10016
(b) if to the Executive:
47 East 87th Street
New York, New York 10128
Addresses may be changed by notice in writing signed by the addressee.
10. MISCELLANEOUS
-------------
(a) If any provision or portion of this Agreement shall, for any reason, be
adjudged by any court of competent jurisdiction to be invalid or unenforceable,
such judgment shall not affect, impair or invalidate the remainder of this
Agreement but shall be confined in its operation to the jurisdiction in which
made and to the provisions of this Agreement directly involved in the
controversy in which such judgment shall have been rendered.
(b) No course of dealing and no delay on the part of any party hereto in
exercising any right, power or remedy under or relating to this Agreement shall
operate as a waiver thereof or otherwise prejudice such party's rights, powers
and remedies. No single or partial exercise of any rights, powers or remedies
under or relating to this Agreement shall preclude any other or further exercise
thereof or the exercise of any other right, power or remedy.
(c) This Agreement may be executed by the parties hereto in counterparts,
each of which shall be deemed to be an original, but all such counterparts shall
together constitute one and the same instrument, and all signatures need not
appear on any one counterpart.
(d) (i) Any other agreement, rule or regulation to the contrary,
notwithstanding, the parties hereby agree that any action or proceeding relating
to this Agreement or its subject matter shall be brought in a state or federal
court situated in the County of New York, State of New York and such court shall
have exclusive jurisdiction thereof; provided, however, any court with
jurisdiction over the parties may, at the election of Company, have jurisdiction
over any action brought with regard to or any action brought to enforce any
violation or claimed violation of Section 5. The parties each hereby
specifically submit to the jurisdiction of such court and further agree that
service of process may be made within or without the State of New York by giving
notice in the
10
<PAGE>
manner provided in Section 9. Each party further agrees to waive and hereby
waives any right to a trial by jury, and to any objection it or he may have in
any such action, based on lack of personal jurisdiction or venue, or
inconvenient forum.
(ii) In any such action or proceeding, the prevailing party shall be
entitled to recover from the other party reasonable costs, including attorney's
fees and expenses. In any action or proceeding before a court or other tribunal
relating to this Agreement with respect to which damages are an adequate remedy,
the parties agree that no damages other than compensatory damages shall be
sought or claimed by either party and each party waives any claim, right or
entitlement to punitive, exemplary, or consequential damages, or any statutory
damages, or any other damages of any kind or nature in excess of compensatory
damages, and any court or arbitration tribunal is specifically divested of any
power to award any damages in the nature of punitive, exemplary, or
consequential damages, or any statutory damages, or any other damages of any
kind or nature in excess of compensatory damages.
(e) All payments required to be made by the Company hereunder to the
Executive or his beneficiaries, including his estate, shall be subject to
withholding and deductions as the Company may reasonably determine it should
withhold or deduct pursuant to any applicable law or regulation. In lieu of
withholding or deducting such amounts in whole or in part, the Company may, in
its sole discretion, accept other provision for payment as permitted by law,
provided it is satisfied in its sole discretion that all requirements of law
affecting its responsibilities to withhold such taxes have been satisfied.
(f) This Agreement embodies the entire understanding, and supersedes all
other oral or written agreements or understandings, between the parties
regarding the subject matter hereof. No change, alteration or modification
hereof may be made except in writing signed by both parties hereto. The headings
in this Agreement are for convenience of reference only and shall not be
considered part of this Agreement or limit or otherwise affect the meaning
hereof. This Agreement and the rights and obligations of the parties hereunder
shall be construed in accordance with and governed by the laws of the State of
New York (disregarding any choice of law rules which might look to the laws of
any other jurisdiction).
(g) The Executive acknowledges that the terms of this Agreement have been
fully explained to him or her, that the Executive understands the nature and
extent of the rights and obligations provided under this Agreement, and that the
Executive has been given the opportunity to be represented by legal counsel in
the negotiation and preparation of this Agreement.
11
<PAGE>
(h) Nothing herein contained shall be construed to prevent or limit any
acquisition, consolidation or merger of the Company.
IN WITNESS WHEREOF, the parties hereto have executed and delivered this
Agreement as of the day and year first above written.
By___________________________________________
Robert Bugbee
OMI CORP.
By___________________________________________
12
EMPLOYMENT AGREEMENT
--------------------
THIS AMENDED AND RESTATED EMPLOYMENT AGREEMENT (the "Agreement") dated as of
November 21, 1995 between OMI Corp., a Delaware corporation (the "Company") and
JACK GOLDSTEIN (the "Executive") amends and restates the Employment Agreement
dated as of January 1, 1995.
W I T N E S S E T H
-------------------
WHEREAS, the Company desires to continue to employ the Executive; and
WHEREAS, the Executive is willing to continue to be employed by the Company, as
a senior executive of the Company, for the period and upon the terms and
conditions hereinafter set forth;
NOW THEREFORE, in consideration of the mutual covenants and conditions contained
herein, the Company and the Executive hereby agree as follows:
1. EMPLOYMENT
----------
The Company shall employ the Executive, and the Executive accepts
employment by the Company, as Chairman of the Board of Directors and Chief
Executive Officer of the Company upon the terms and conditions herein, for the
period commencing as of January 1, 1995, and ending on December 31, 1996,
subject to termination as hereinafter provided (the period from January 1, 1995
through December 31, 1996, as such period may be extended as described in this
paragraph, being herein referred to as the "Employment Period"). The Executive
term of employment shall be automatically extended for an additional period of
one year unless written notice of termination is given by either party no later
than December 31, 1995, and for an additional period thereafter of one year
unless written notice of termination is given by either party no later than
December 31, 1996. If, upon expiration of this Agreement, the Company desires to
continue to employ the Executive and the Executive desires to continue in the
employ of the Company, such employment shall be continued on terms and
conditions which the Company and the Executive find mutually satisfactory and
which are consistent with the employment policies of the Company. The Employment
Agreement dated December 31, 1989 between the parties is hereby terminated with
no further liability or obligation to either party.
2. DUTIES
------
(a) Throughout the Employment Period, the Executive shall be Chairman of
the Board of Directors and Chief Executive Officer of the Company and shall
report to the Board of Directors (the "Board") of the Company. The Executive
shall at all times comply with Company policies as established by the Board.
<PAGE>
(b) During the Employment Period, the Executive shall devote his full-time
working hours to his duties hereunder, except during vacation time, any periods
of illness and authorized leaves of absence. The Executive shall have such
responsibilities and authorities consistent with the status, title and reporting
requirements set forth herein as are appropriate to said position, authority,
duties or responsibilities) from time to time by the Board.
(c) Throughout the Employment Period, the Executive shall faithfully and
diligently perform his duties under this Agreement and shall use his best
efforts to promote the interests of the Company.
3. COMPENSATION
------------
During the Employment Period, as full compensation to the Executive for his
performance of the services hereunder and for his acceptance of the
responsibilities described herein, the Company agrees to pay the Executive, and
the Executive agrees to accept, the following salary and other benefits:
(a) Salary
The Company shall pay the Executive a salary (the "Base Salary") at the
annual rate of $391,400. The Board shall review such Base Salary on an
annual basis and may increase it, from time to time, in its sole discretion. The
Base Salary due the Executive hereunder shall be payable in equal monthly
installments less any amounts required to be withheld by the Company from such
Base Salary pursuant to the benefit plans of Section 3(d) and applicable laws
and regulations described under Section 10(e).
(b) Bonus
The Executive shall be eligible to receive bonuses (each a "Bonus") at the
discretion, in the amount and at the times determined by the Board of Directors
of the Company; except that in the event of a Change in Control (as hereinafter
defined), the Executive shall immediately receive a cash payment in an amount
equal to the aggregate bonuses paid during the twelve-month period ending on the
date of the Change in Control.
(c) Long Term Incentives
The Executive shall be entitled to receive grants of restricted stock,
stock options and other stock awards at the discretion of the Compensation
Committee of the Board of Directors of the Company and/or other stock and cash
awards granted pursuant to any other long term incentive plans implemented by
the Company for the benefit of senior executives of the Company.
(d) Other Benefit Plans
2
<PAGE>
Subject to all eligibility requirements, and to the extent permitted by
law, the Executive shall be entitled to participate in any and all employee
welfare and benefit plans (including, but not limited to, retirement security,
life insurance, medical, dental, disability, and savings plans) established by
the Company from time to time for the general and overall benefit of executives
of the Company.
(e) Further Benefits
The Executive shall be entitled to a minimum of four weeks per annum paid
vacation.
(f) Deferred Compensation
Notwithstanding any other provision of the Agreement, the Executive shall
have the right to request any lawful means (including, without limitation, any
deferred compensation arrangement requested by the Executive) by which he or she
wishes to receive any portion of his or her Base Salary, Bonus, or other
payments, and the Company shall reasonably cooperate with the Executive to grant
such request, provided that the granting of such request does not represent
inequitable treatment as concerns other senior employees or executives (in the
Company's sole judgment), and does not impose additional costs on the Company
other than insignificant administrative costs.
4. REASONABLE EXPENSES
-------------------
The Company will reimburse the Executive for all reasonable business
expenses, including travel and lodging, which are properly incurred by him or
her in the performance of his or her duties hereunder, upon presentation of
proper vouchers therefor and in accordance with written policies established
from time to time by the Company for such reimbursements.
5. EXECUTIVE COVENANTS
-------------------
The Executive acknowledges that as a result of the services to be rendered
to the Company hereunder, the Executive will be brought into close contact with
many confidential affairs of the Company, its subsidiaries and affiliates, not
readily available to the public. The Executive further acknowledges that the
services to be performed under this Agreement are of a special, unique, unusual,
extraordinary and intellectual character; that the business of the Company is
international in scope; that its goods and services are marketed throughout the
world; and that the Company competes with other organizations that are or could
be located in nearly any part of the United States or elsewhere. In recognition
of the foregoing:
(a) Except with the consent of or as directed by the Company, or except if
compelled by judicial or legal authorities, the
3
<PAGE>
Executive will keep confidential and not divulge to any other person, during the
Employment Period or thereafter, any Confidential Information and Trade Secrets
regarding the Company, its subsidiaries and affiliates, except for information
which is or becomes publicly available other than as a result of disclosure by
the Executive. For the purposes of this Agreement "Confidential Information and
Trade Secrets" means information which is secret to the Company, its
subsidiaries and affiliates. It may include, but is not limited to, information
relating to new and future concepts and business of the Company, its
subsidiaries and affiliates, in the form of memoranda, reports, computer
software and data banks, customer lists, employee lists, books, records,
financial statements, manuals, papers, contracts and strategic plans. As a
guide, the Executive is to consider information originated, owned, controlled or
possessed by the Company, its subsidiaries or affiliates which is not disclosed
in printed publications stated to be available for distribution outside the
Company, its subsidiaries and affiliates as being secret and confidential. In
instances where doubt does or should reasonably be understood to exist in the
Executive's mind as to whether information is secret and confidential to the
Company, its subsidiaries and affiliates, the Executive agrees to request an
opinion, in writing, from the Company.
(b) All papers, books and records of every kind and description relating to
the business and affairs of the Company, its subsidiaries and affiliates,
whether or not prepared by the Executive, and all property owned by the Company,
its subsidiaries and affiliates shall be the sole and exclusive property of the
Company, and the Executive shall surrender them to the Company, at any time upon
request, during or after the Employment Period.
(c) During the Employment Period and during any Severance Period (as
hereinafter defined), the Executive will not, without the prior written consent
of the Company, compete, directly or indirectly, with the Company, its
subsidiaries and affiliates or participate as a director, officer, employee,
agent, representative, stockholder, or partner, or have any direct or indirect
financial interest as a creditor, in any business which directly or indirectly
competes with the Company its subsidiaries and affiliates; provided, however,
that this paragraph (c) shall not restrict the Executive from holding up to 5%
of the publicly traded securities of any entity.
(d) During the Employment Period and during any Severance Period (as
hereinafter defined), the Executive shall not either for his or her own account
or for any person, firm or company (i) solicit any customers of the Company, its
subsidiaries and affiliates or (ii) solicit or endeavor to cause any employee of
the Company, its subsidiaries and affiliates to leave his employment or induce
or attempt to induce any such employee to breach any employment agreement with
the Company, its subsidiaries and affiliates, or otherwise interfere with the
employment of any employee by the Company, its subsidiaries and affiliates.
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<PAGE>
(e) Without limiting any other provision of this Agreement, the Executive
hereby agrees to be bound by and to comply with any obligations known to the
Executive and imposed on the Company, its subsidiaries and affiliates, by law,
rule, regulation, ordinance, order, decree, instrument, agreement, understanding
or other restriction of any kind.
(f) The Executive hereby agrees to provide reasonable cooperation to the
Company, its subsidiaries and affiliates during the Employment Period and any
Severance Period (as hereinafter defined) in any litigation between the Company,
its subsidiaries and affiliates, and third parties.
(g) The parties agree that the Company shall, in addition to other remedies
provided by law, have the right and remedy to have the provisions of this
Section 5 specifically enforced by any court having equity jurisdiction, it
being acknowledged and agreed that any breach or threatened breach of the
provisions of this Section 5 will cause irreparable injury to the Company and
that money damages will not provide an adequate remedy to the Company. Nothing
contained herein shall be construed as prohibiting the Company from pursuing any
other remedies available to it for such breach or threatened breach, including
the recovery of damages from the Executive.
(i) although the restrictions contained in Sections 5(a), (b), (c) and
(d) above are considered by the parties hereto to be fair and reasonable in
the circumstances, it is recognized that restrictions of such nature may
fail for technical reasons, and accordingly it is hereby agreed that if any
of such restrictions shall be adjudged to be void or unenforceable for
whatever reason, but would be valid if part of the wording thereof were
deleted, or the period thereof reduced or the area dealt with thereby
reduced in scope, the restrictions contained in Sections 5(a), (b), (c) and
(d) shall be enforced to the maximum extent permitted by law, and the
parties consent and agree that such scope or wording may be accordingly
judicially modified in any proceeding brought to enforce such restrictions.
(ii) Notwithstanding that the Executive's employment hereunder may
expire or be terminated as provided in Section 1 or Section 6 hereof, this
Agreement shall continue in full force and effect insofar as is necessary
to enforce the covenants and agreements of the Executive contained in this
Section 5.
6. TERMINATION OF EMPLOYMENT PERIOD AND SEVERANCE
----------------------------------------------
(a) Termination by the Company without Cause. If for any reason other than
the provisions of Section 6(d) hereof, the Company wishes to terminate the
Employment Period and the Executive's employment hereunder, the Company shall
give a written notice to the Executive of such termination stating that a
severance period (the "Severance Period") will commence upon
5
<PAGE>
receipt of such notice by the Executive. The Severance Period shall be for the
balance of the then current term of this Agreement or twelve months, whichever
is greater. Upon receipt of such notice by the Executive, the Employment Period
shall terminate (and the Executive shall have no further duties under Section 2
hereof). During the entire Severance Period, the Executive shall continue to
receive all salary, compensation, payments and benefits under Sections 3(a) and
3(d) of this Agreement (including, to the extent allowable under applicable law,
the accrual of additional service credits or Company contributions under pension
and thrift plans, and any benefits under the Company's long term disability and
life insurance plans) available upon the date of the commencement of the
Severance Period as if the Employment Period continued throughout the Severance
Period. The Executive agrees that the payments described in this Section 6(a)
shall be full and adequate compensation to the Executive for all damages the
Executive may suffer as a result of the termination of his employment pursuant
to this Section 6(a), and hereby waives and releases the Company from any and
all obligations or liabilities to the Executive arising from or in connection
with the Executive's employment with the Company or the termination and claims
the Executive may have under federal, state or local statutes, regulations or
ordinances or under any common law principles or breach of contract or the
covenant of good faith and fair dealing, defamation, wrongful discharge,
intentional infliction of emotional distress or promissory estoppel; provided,
however, that any rights and benefits the Executive may have under the employee
benefit plans and programs of the Company in which the Executive is a
participant, shall be determined in accordance with the terms and provisions of
such plans and programs.
(b) Death. If the Executive dies during the Employment Period, the
Severance Period or during the period when payments are being made pursuant to
Section 6(c), the Employment Period shall automatically terminate and the
obligations of the parties shall terminate effective the date of death.
(c) Disability. If the Executive becomes Disabled (as hereinafter defined)
during the Employment Period, the Company shall be entitled to terminate his or
her employment and the Employment Period upon written notice to the Executive
from the Company. In the event of such termination, the Executive shall be
released from any duties hereunder, and the Severance Period described in
Section 6(a) hereof shall immediately commence. The duties, rights, benefits and
other matters during the Severance Period shall be as set forth in Section 6(a),
and the Executive (and his or her heirs, beneficiaries and estate) shall be
entitled to all compensation, payments and benefits during the Severance Period
without any offset or reduction except by such amounts, if any, as are paid to
the Executive in lieu of compensation for services under any applicable
insurance policies of the Company (or by the Company under any self insurance
plan). For purposes of this Agreement, "Disabled" shall mean mental or physical
impairment or incapacity rendering the Executive substantially unable to
6
<PAGE>
perform his duties under this Agreement for a period of longer than 180 days out
of any 360-day period during the Employment Period. A determination of whether
the Executive is Disabled shall be made by the Company in its sole discretion
upon its own initiative or upon request of the Executive or a person acting on
his behalf. If the Executive becomes Disabled during a Severance Period, he or
she shall continue to receive the compensation, payments and benefits of this
Agreement during the entire Severance Period without any offset or reduction,
except by such amounts, if any, as are paid to the Executive in lieu of
compensation for services under any applicable insurance policies of the Company
(or by the Company under any self insurance plan).
(d) Termination by the Company for Cause. The Company by written notice to
the Executive, shall have the right to terminate the Employment Period in the
event of any of the following (which shall constitute "Cause"):
(i) The Executive's breach in respect of his or her duties under this
Agreement, such breach continuing unremedied for thirty days
after written notice thereof from the Company to the Executive
specifying the acts constituting the breach and requesting that
they be remedied; or
(ii) Any misconduct, dishonesty, insubordination or other act
by the Executive materially detrimental to the goodwill
of the Company, or materially damaging to the Company's,
its subsidiaries' and/or affiliates' relationships with
their customers or employees, including without
limitation, the Executive having been convicted of a
felony during the Employment Period, provided such
conviction has resulted or is likely to result in
substantial detriment to the Company, its subsidiaries
and/or affiliates.
Any termination under this Section 6(d) shall be without damages or
liability to the Company for compensation and other benefits which would have
accrued to the Executive hereunder after termination, but all compensation,
benefits and reimbursements accrued through the date of termination shall be
paid to the Executive at the times normally paid by the Company. In this event,
there shall be no Severance Period.
(e) Voluntary Termination by the Executive. In the event of voluntary
termination of employment by the Executive, the terms of the last paragraph of
Section 6(d) shall apply, except in the event that such voluntary termination
occurs within ninety days of (i) a relocation of the Company's offices (or the
location of the performance of work by the Executive) beyond a fifty mile radius
of New York City, (ii) a material diminution of the Executive's duties and
responsibilities as provided in Section 2, or (iii) a reduction in Base Salary
in which cases the provisions of Section 6(a) shall apply.
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<PAGE>
(f) Termination Following a Change in Control.
(i) For purposes of this paragraph (f), the term "Change in Control" shall
mean a Change in Control as defined in Section 3 of the OMI Corp. Separation
Allowance Program, as amended from time (the "Program") to time. Should the
Executive's employment hereunder be terminated by the Company without Cause
(other than for reason of the Executive becoming Disabled) within two years of a
Change in Control, the Company shall pay and the Executive shall receive in cash
an amount equal to three times the sum of the Executive's then current Base
Salary and the amount paid to the Executive pursuant to the exception in Section
3(b). The Executive shall also be eligible to receive any and all other benefits
as provided in the Program (excepting the severance benefits of Paragraph
5(iii)B of the Program). For purposes other than with respect to Paragraph
5(iii)B of the Program, wherever a Measuring Period (as defined in the Program)
is called for, the Measuring Period for the Executive shall be twenty four. Upon
termination under this paragraph (f), the Executive shall no longer be bound by
the provisions of Section 5 of this Agreement.
(ii) In the event that any payment received or to be received by the
Executive in connection with a Change in Control or the termination of the
Executive's employment (whether payable pursuant to the terms of this Agreement
or any other plan, arrangement or agreement with the Company, any person whose
actions result in a Change in Control or any person affiliated with the Company
or such person (together with the payment pursuant to Section 6(f)(i), the
"Total Payments")) would not be deductible by the Company (in whole or in part)
as a result of Section 280G of the Internal Revenue Code of 1986, as amended
(the "Code"), the payment pursuant to Section 6(f)(i) shall be reduced until no
portion or the Total Payments is not deductible as a result of Section 280G of
the Code, or the payment pursuant to Section 6(f)(i) is reduced to zero. For
purposes of this limitation (A) no portion of the Total Payments the receipt or
enjoyment of which the Executive shall have effectively waived in writing prior
to the date of payment of the payment pursuant to Section 6(f)(i) shall be taken
into account, (B) no portion of the Total Payments shall be taken into account
which, in the opinion of tax counsel selected by the Company's independent
auditors and acceptable to the Executive, does not constitute a "parachute
payment" within the meaning of Section 280G(b)(2) of the Code, and (C) the value
of any non-cash benefit or any deferred payment or benefit included in the Total
Payments shall be determined or benefit included in the Total Payments shall be
determined by the Company's independent auditors servicing the Company
immediately prior to the time of a Change in Control in accordance with the
principles of Sections 280G(d)(3) and (4) of the Code.
8
<PAGE>
7. CONFLICTING AGREEMENTS
----------------------
The Executive hereby represents and warrants to the Company that his
entering into this Agreement, and the obligations and duties undertaken by him
hereunder, will not conflict with, constitute a breach of, or otherwise violate
the terms of any other employment of other agreement to which he is a party.
8. ASSIGNMENT
----------
(a) By the Executive. This Agreement, any part thereof and any rights
(including compensation) or obligation hereunder shall not be assigned, pledged,
alienated, sold, attached, charged, encumbered or transferred in any way by the
Executive and any attempt to do so shall be void except that (i) the Executive
may designate any of his beneficiaries to receive (and such beneficiaries shall
receive) any compensation, payments or other benefits payable hereunder upon his
death, (ii) any assignment by will or by laws of descent and distribution or
following the occurrence of the Executive's legal incompetence is permitted and
(iii) the Executive's executors, administrators or other legal representatives
may assign any rights hereunder to the person or persons entitled thereto.
(b) By the Company. Provided the substance of the Executive's duties set
forth in Section 2 shall not change, and provided that the Executive's
compensation as set forth in Section 3 shall not be adversely affected, the
Company may assign or otherwise transfer this Agreement to any succeeding entity
without limitation, which entity shall assume all rights and obligations
hereunder.
9. NOTICES
--------
All notices, requests, demands and other communications hereunder must be
in writing and shall be deemed to have been duly given if delivered by hand or
mailed within the continental United States by first class, registered mail,
return receipt requested, or sent by overnight mail, such as Federal Express,
postage and registry fees prepaid, to the applicable party and addressed as
follows:
(a) if to the Company:
President
OMI Corp.
90 Park Avenue
New York, New York 10016
(b) if to the Executive:
47 Quaker Bridge Road
Ossining, NY 10562
Addresses may be changed by notice in writing signed by the addressee.
9
<PAGE>
10. MISCELLANEOUS
-------------
(a) If any provision or portion of this Agreement shall, for any reason, be
adjudged by any court of competent jurisdiction to be invalid or unenforceable,
such judgment shall not affect, impair or invalidate the remainder of this
Agreement but shall be confined in its operation to the jurisdiction in which
made and to the provisions of this Agreement directly involved in the
controversy in which such judgment shall have been rendered.
(b) No course of dealing and no delay on the part of any party hereto in
exercising any right, power or remedy under or relating to this Agreement shall
operate as a waiver thereof or otherwise prejudice such party's rights, powers
and remedies. No single or partial exercise of any rights, powers or remedies
under or relating to this Agreement shall preclude any other or further exercise
thereof or the exercise of any other right, power or remedy.
(c) This Agreement may be executed by the parties hereto in counterparts,
each of which shall be deemed to be an original, but all such counterparts shall
together constitute one and the same instrument, and all signatures need not
appear on any one counterpart.
(d) (i) Any other agreement, rule or regulation to the contrary,
notwithstanding, the parties hereby agree that any action or proceeding relating
to this Agreement or its subject matter shall be brought in a state or federal
court situated in the County of New York, State of New York and such court shall
have exclusive jurisdiction thereof; provided, however, any court with
jurisdiction over the parties may, at the election of Company, have jurisdiction
over any action brought with regard to or any action brought to enforce any
violation or claimed violation of Section 5. The parties each hereby
specifically submit to the jurisdiction of such court and further agree that
service of process may be made within or without the State of New York by giving
notice in the manner provided in Section 9. Each party further agrees to waive
and hereby waives any right to a trial by jury, and to any objection it or he
may have in any such action, based on lack of personal jurisdiction or venue, or
inconvenient forum.
(ii) In any such action or proceeding, the prevailing party shall be
entitled to recover from the other party reasonable costs, including attorney's
fees and expenses. In any action or proceeding before a court or other tribunal
relating to this Agreement with respect to which damages are an adequate remedy,
the parties agree that no damages other than compensatory damages shall be
sought or claimed by either party and each party waives any claim, right or
entitlement to punitive, exemplary, or consequential damages, or any statutory
damages, or any other damages of any kind or nature in excess of compensatory
damages,
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<PAGE>
and any court or arbitration tribunal is specifically divested of any power to
award any damages in the nature of punitive, exemplary, or consequential
damages, or any statutory damages, or any other damages of any kind or nature in
excess of compensatory damages.
(e) All payments required to be made by the Company hereunder to the
Executive or his beneficiaries, including his estate, shall be subject to
withholding and deductions as the Company may reasonably determine it should
withhold or deduct pursuant to any applicable law or regulation. In lieu of
withholding or deducting such amounts in whole or in part, the Company may, in
its sole discretion, accept other provision for payment as permitted by law,
provided it is satisfied in its sole discretion that all requirements of law
affecting its responsibilities to withhold such taxes have been satisfied.
(f) This Agreement embodies the entire understanding, and supersedes all
other oral or written agreements or understandings, between the parties
regarding the subject matter hereof. No change, alteration or modification
hereof may be made except in writing signed by both parties hereto. The headings
in this Agreement are for convenience of reference only and shall not be
considered part of this Agreement or limit or otherwise affect the meaning
hereof. This Agreement and the rights and obligations of the parties hereunder
shall be construed in accordance with and governed by the laws of the State of
New York (disregarding any choice of law rules which might look to the laws of
any other jurisdiction).
(g) The Executive acknowledges that the terms of this Agreement have been
fully explained to him or her, that the Executive understands the nature and
extent of the rights and obligations provided under this Agreement, and that the
Executive has been given the opportunity to be represented by legal counsel in
the negotiation and preparation of this Agreement.
(h) Nothing herein contained shall be construed to prevent or limit any
acquisition, consolidation or merger of the Company.
IN WITNESS WHEREOF, the parties hereto have executed and delivered this
Agreement as of the day and year first above written.
By_____________________________
Jack Goldstein
OMI CORP.
By_____________________________
EMPLOYMENT AGREEMENT
THIS AMENDED AND RESTATED EMPLOYMENT AGREEMENT (the "Agreement") dated as of
November 21, 1995 between OMI Corp., a Delaware corporation (the "Company") and
CRAIG H. STEVENSON, JR. (the "Executive") amends and restates the Employment
Agreement dated as of January 1, 1995.
W I T N E S S E T H
-------------------
WHEREAS, the Company desires to continue to employ the Executive; and
WHEREAS, the Executive is willing to continue to be employed by the Company, as
a senior executive of the Company, for the period and upon the terms and
conditions hereinafter set forth;
NOW THEREFORE, in consideration of the mutual covenants and conditions contained
herein, the Company and the Executive hereby agree as follows:
1. EMPLOYMENT
----------
The Company shall employ the Executive, and the Executive accepts
employment by the Company, as President and Chief Operating Officer of the
Company upon the terms and conditions herein, for the period commencing as of
January 1, 1995, and ending on December 31, 1996, subject to termination as
hereinafter provided (the period from January 1, 1995 through December 31, 1996,
as such period may be extended as described in this paragraph, being herein
referred to as the "Employment Period"). The Executive term of employment shall
be automatically extended for an additional period of one year unless written
notice of termination is given by either party no later than December 31, 1995,
and for an additional period thereafter of one year unless written notice of
termination is given by either party no later than December 31, 1996. If, upon
expiration of this Agreement, the Company desires to continue to employ the
Executive and the Executive desires to continue in the employ of the Company,
such employment shall be continued on terms and conditions which the Company and
the Executive find mutually satisfactory and which are consistent with the
employment policies of the Company.
2. DUTIES
------
(a) Throughout the Employment Period, the Executive shall be President and
Chief Operating Officer of the Company and shall report to the Chief Executive
Officer and the Board of Directors (the "Board") of the Company. The Executive
shall at all times comply with Company policies as established by the Board.
(b) During the Employment Period, the Executive shall devote his full-time
working hours to his duties hereunder, except during
<PAGE>
vacation time, any periods of illness and authorized leaves of absence. The
Executive shall have such responsibilities and authorities consistent with the
status, title and reporting requirements set forth herein as are appropriate to
said position, subject to change (other than diminution in position, authority,
duties or responsibilities) from time to time by the Chief Executive Officer
and/or the Board.
(c) Throughout the Employment Period, the Executive shall faithfully and
diligently perform his duties under this Agreement and shall use his best
efforts to promote the interests of the Company.
3. COMPENSATION
------------
During the Employment Period, as full compensation to the Executive for his
performance of the services hereunder and for his acceptance of the
responsibilities described herein, the Company agrees to pay the Executive, and
the Executive agrees to accept, the following salary and other benefits:
(a) Salary
The Company shall pay the Executive a salary (the "Base Salary") at the
annual rate of $300,000. The Board shall review such Base Salary on an
annual basis and may increase it, from time to time, in its sole discretion. The
Base Salary due the Executive hereunder shall be payable in equal monthly
installments less any amounts required to be withheld by the Company from such
Base Salary pursuant to the benefit plans of Section 3(d) and applicable laws
and regulations described under Section 10(e).
(b) Bonus
The Executive shall be eligible to receive bonuses (each a "Bonus") at the
discretion, in the amount and at the times determined by the Board of Directors
of the Company; except that in the event of a Change in Control (as hereinafter
defined), the Executive shall immediately receive a cash payment in an amount
equal to the aggregate bonuses paid during the twelve-month period ending on the
date of the Change in Control.
(c) Long Term Incentives
The Executive shall be entitled to receive grants of restricted stock,
stock options and other stock awards at the discretion of the Compensation
Committee of the Board of Directors of the Company and/or other stock and cash
awards granted pursuant to any other long term incentive plans implemented by
the Company for the benefit of senior executives of the Company.
(d) Other Benefit Plans
Subject to all eligibility requirements, and to the extent
2
<PAGE>
permitted by law, the Executive shall be entitled to participate in any and all
employee welfare and benefit plans (including, but not limited to, retirement
security, life insurance, medical, dental, disability, and savings plans)
established by the Company from time to time for the general and overall benefit
of executives of the Company.
(e) Further Benefits
The Executive shall be entitled to a minimum of four weeks per annum paid
vacation.
(f) Deferred Compensation
Notwithstanding any other provision of the Agreement, the Executive shall
have the right to request any lawful means (including, without limitation, any
deferred compensation arrangement requested by the Executive) by which he or she
wishes to receive any portion of his or her Base Salary, Bonus, or other
payments, and the Company shall reasonably cooperate with the Executive to grant
such request, provided that the granting of such request does not represent
inequitable treatment as concerns other senior employees or executives (in the
Company's sole judgment), and does not impose additional costs on the Company
other than insignificant administrative costs.
4. REASONABLE EXPENSES
-------------------
The Company will reimburse the Executive for all reasonable business
expenses, including travel and lodging, which are properly incurred by him or
her in the performance of his or her duties hereunder, upon presentation of
proper vouchers therefor and in accordance with written policies established
from time to time by the Company for such reimbursements.
5. EXECUTIVE COVENANTS
-------------------
The Executive acknowledges that as a result of the services to be rendered
to the Company hereunder, the Executive will be brought into close contact with
many confidential affairs of the Company, its subsidiaries and affiliates, not
readily available to the public. The Executive further acknowledges that the
services to be performed under this Agreement are of a special, unique, unusual,
extraordinary and intellectual character; that the business of the Company is
international in scope; that its goods and services are marketed throughout the
world; and that the Company competes with other organizations that are or could
be located in nearly any part of the United States or elsewhere. In recognition
of the foregoing:
3
<PAGE>
(a) Except with the consent of or as directed by the Company, or except if
compelled by judicial or legal authorities, the Executive will keep confidential
and not divulge to any other person, during the Employment Period or thereafter,
any Confidential Information and Trade Secrets regarding the Company, its
subsidiaries and affiliates, except for information which is or becomes publicly
available other than as a result of disclosure by the Executive. For the
purposes of this Agreement "Confidential Information and Trade Secrets" means
information which is secret to the Company, its subsidiaries and affiliates. It
may include, but is not limited to, information relating to new and future
concepts and business of the Company, its subsidiaries and affiliates, in the
form of memoranda, reports, computer software and data banks, customer lists,
employee lists, books, records, financial statements, manuals, papers, contracts
and strategic plans. As a guide, the Executive is to consider information
originated, owned, controlled or possessed by the Company, its subsidiaries or
affiliates which is not disclosed in printed publications stated to be available
for distribution outside the Company, its subsidiaries and affiliates as being
secret and confidential. In instances where doubt does or should reasonably be
understood to exist in the Executive's mind as to whether information is secret
and confidential to the Company, its subsidiaries and affiliates, the Executive
agrees to request an opinion, in writing, from the Company.
(b) All papers, books and records of every kind and description relating to
the business and affairs of the Company, its subsidiaries and affiliates,
whether or not prepared by the Executive, and all property owned by the Company,
its subsidiaries and affiliates shall be the sole and exclusive property of the
Company, and the Executive shall surrender them to the Company, at any time upon
request, during or after the Employment Period.
(c) During the Employment Period and during any Severance Period (as
hereinafter defined), the Executive will not, without the prior written consent
of the Company, compete, directly or indirectly, with the Company, its
subsidiaries and affiliates or participate as a director, officer, employee,
agent, representative, stockholder, or partner, or have any direct or indirect
financial interest as a creditor, in any business which directly or indirectly
competes with the Company its subsidiaries and affiliates; provided, however,
that this paragraph (c) shall not restrict the Executive from holding up to 5%
of the publicly traded securities of any entity.
(d) During the Employment Period and during any Severance Period (as
hereinafter defined), the Executive shall not either for his or her own account
or for any person, firm or company (i) solicit any customers of the Company, its
subsidiaries and affiliates or (ii) solicit or endeavor to cause any employee of
the Company, its subsidiaries and affiliates to leave his employment or
4
<PAGE>
induce or attempt to induce any such employee to breach any employment agreement
with the Company, its subsidiaries and affiliates, or otherwise interfere with
the employment of any employee by the Company, its subsidiaries and affiliates.
(e) Without limiting any other provision of this Agreement, the Executive
hereby agrees to be bound by and to comply with any obligations known to the
Executive and imposed on the Company, its subsidiaries and affiliates, by law,
rule, regulation, ordinance, order, decree, instrument, agreement, understanding
or other restriction of any kind.
(f) The Executive hereby agrees to provide reasonable cooperation to the
Company, its subsidiaries and affiliates during the Employment Period and any
Severance Period (as hereinafter defined) in any litigation between the Company,
its subsidiaries and affiliates, and third parties.
(g) The parties agree that the Company shall, in addition to other remedies
provided by law, have the right and remedy to have the provisions of this
Section 5 specifically enforced by any court having equity jurisdiction, it
being acknowledged and agreed that any breach or threatened breach of the
provisions of this Section 5 will cause irreparable injury to the Company and
that money damages will not provide an adequate remedy to the Company. Nothing
contained herein shall be construed as prohibiting the Company from pursuing any
other remedies available to it for such breach or threatened breach, including
the recovery of damages from the Executive.
(i) although the restrictions contained in Sections 5(a), (b), (c) and (d)
above are considered by the parties hereto to be fair and reasonable in the
circumstances, it is recognized that restrictions of such nature may fail for
technical reasons, and accordingly it is hereby agreed that if any of such
restrictions shall be adjudged to be void or unenforceable for whatever reason,
but would be valid if part of the wording thereof were deleted, or the period
thereof reduced or the area dealt with thereby reduced in scope, the
restrictions contained in Sections 5(a), (b), (c) and (d) shall be enforced to
the maximum extent permitted by law, and the parties consent and agree that such
scope or wording may be accordingly judicially modified in any proceeding
brought to enforce such restrictions.
(ii) Notwithstanding that the Executive's employment hereunder may expire
or be terminated as provided in Section 1 or Section 6 hereof, this Agreement
shall continue in full force and effect insofar as is necessary to enforce the
covenants and agreements of the Executive contained in this Section 5.
5
<PAGE>
6. TERMINATION OF EMPLOYMENT PERIOD AND SEVERANCE
----------------------------------------------
(a) Termination by the Company without Cause. If for any reason other than
the provisions of Section 6(d) hereof, the Company wishes to terminate the
Employment Period and the Executive's employment hereunder, the Company shall
give a written notice to the Executive of such termination stating that a
severance period (the "Severance Period") will commence upon receipt of such
notice by the Executive. The Severance Period shall be for the balance of the
then current term of this Agreement or twelve months, whichever is greater. Upon
receipt of such notice by the Executive, the Employment Period shall terminate
(and the Executive shall have no further duties under Section 2 hereof). During
the entire Severance Period, the Executive shall continue to receive all salary,
compensation, payments and benefits under Sections 3(a) and 3(d) of this
Agreement (including, to the extent allowable under applicable law, the accrual
of additional service credits or Company contributions under pension and thrift
plans, and any benefits under the Company's long term disability and life
insurance plans) available upon the date of the commencement of the Severance
Period as if the Employment Period continued throughout the Severance Period.
The Executive agrees that the payments described in this Section 6(a) shall be
full and adequate compensation to the Executive for all damages the Executive
may suffer as a result of the termination of his employment pursuant to this
Section 6(a), and hereby waives and releases the Company from any and all
obligations or liabilities to the Executive arising from or in connection with
the Executive's employment with the Company or the termination and claims the
Executive may have under federal, state or local statutes, regulations or
ordinances or under any common law principles or breach of contract or the
covenant of good faith and fair dealing, defamation, wrongful discharge,
intentional infliction of emotional distress or promissory estoppel; provided,
however, that any rights and benefits the Executive may have under the employee
benefit plans and programs of the Company in which the Executive is a
participant, shall be determined in accordance with the terms and provisions of
such plans and programs.
(b) Death. If the Executive dies during the Employment Period, the
Severance Period or during the period when payments are being made pursuant to
Section 6(c), the Employment Period shall automatically terminate and the
obligations of the parties shall terminate effective the date of death.
(c) Disability. If the Executive becomes Disabled (as hereinafter defined)
during the Employment Period, the Company shall be entitled to terminate his or
her employment and the Employment Period upon written notice to the Executive
from the Company. In the event of such termination, the Executive shall be
released from any duties hereunder, and the Severance Period described in
Section 6(a) hereof shall immediately commence. The
6
<PAGE>
duties, rights, benefits and other matters during the Severance Period shall be
as set forth in Section 6(a), and the Executive (and his or her heirs,
beneficiaries and estate) shall be entitled to all compensation, payments and
benefits during the Severance Period without any offset or reduction except by
such amounts, if any, as are paid to the Executive in lieu of compensation for
services under any applicable insurance policies of the Company (or by the
Company under any self insurance plan). For purposes of this Agreement,
"Disabled" shall mean mental or physical impairment or incapacity rendering the
Executive substantially unable to perform his duties under this Agreement for a
period of longer than 180 days out of any 360-day period during the Employment
Period. A determination of whether the Executive is Disabled shall be made by
the Company in its sole discretion upon its own initiative or upon request of
the Executive or a person acting on his behalf. If the Executive becomes
Disabled during a Severance Period, he or she shall continue to receive the
compensation, payments and benefits of this Agreement during the entire
Severance Period without any offset or reduction, except by such amounts, if
any, as are paid to the Executive in lieu of compensation for services under any
applicable insurance policies of the Company (or by the Company under any self
insurance plan).
(d) Termination by the Company for Cause. The Company by written notice to
the Executive, shall have the right to terminate the Employment Period in the
event of any of the following (which shall constitute "Cause"):
(i) The Executive's breach in respect of his or her duties under this
Agreement, such breach continuing unremedied for thirty days
after written notice thereof from the Company to the Executive
specifying the acts constituting the breach and requesting that
they be remedied; or
(ii) Any misconduct, dishonesty, insubordination or other act by the
Executive materially detrimental to the goodwill of the Company,
or materially damaging to the Company's, its subsidiaries' and/or
affiliates' relationships with their customers or employees,
including without limitation, the Executive having been convicted
of a felony during the Employment Period, provided such
conviction has resulted or is likely to result in substantial
detriment to the Company, its subsidiaries and/or affiliates.
Any termination under this Section 6(d) shall be without damages or
liability to the Company for compensation and other benefits which would have
accrued to the Executive hereunder after termination, but all compensation,
benefits and reimbursements accrued through the date of termination shall be
paid to the
7
<PAGE>
Executive at the times normally paid by the Company. In this event, there shall
be no Severance Period.
(e) Voluntary Termination by the Executive. In the event of voluntary
termination of employment by the Executive, the terms of the last paragraph of
Section 6(d) shall apply, except in the event that such voluntary termination
occurs within ninety days of (i) a relocation of the Company's offices (or the
location of the performance of work by the Executive) beyond a fifty mile radius
of New York City, (ii) a material diminution of the Executive's duties and
responsibilities as provided in Section 2, or (iii) a reduction in Base Salary
in which cases the provisions of Section 6(a) shall apply.
(f) Termination Following a Change in Control.
(i) For purposes of this paragraph (f), the term "Change in Control"
shall mean a Change in Control as defined in Section 3 of the OMI Corp.
Separation Allowance Program, as amended from time (the "Program") to time.
Should the Executive's employment hereunder be terminated by the Company
without Cause (other than for reason of the Executive becoming Disabled)
within two years of a Change in Control, the Company shall pay and the
Executive shall receive in cash an amount equal to three times the sum of
the Executive's then current Base Salary and the amount paid to the
Executive pursuant to the exception in Section 3(b). The Executive shall
also be eligible to receive any and all other benefits as provided in the
Program (excepting the severance benefits of Paragraph 5(iii)B of the
Program). For purposes other than with respect to Paragraph 5(iii)B of the
Program, wherever a Measuring Period (as defined in the Program) is called
for, the Measuring Period for the Executive shall be twenty four. Upon
termination under this paragraph (f), the Executive shall no longer be
bound by the provisions of Section 5 of this Agreement.
(ii) In the event that any payment received or to be received by the
Executive in connection with a Change in Control or the termination of the
Executive's employment (whether payable pursuant to the terms of this
Agreement or any other plan, arrangement or agreement with the Company, any
person whose actions result in a Change in Control or any person affiliated
with the Company or such person (together with the payment pursuant to
Section 6(f)(i), the "Total Payments")) would not be deductible by the
Company (in whole or in part) as a result of Section 280G of the Internal
Revenue Code of 1986, as amended (the "Code"), the payment pursuant to
Section 6(f)(i) shall be reduced until no portion or the Total Payments is
not deductible as a result of Section 280G of the Code, or the payment
pursuant to Section 6(f)(i) is reduced to zero. For purposes of this
limitation (A) no portion of the Total Payments the receipt or enjoyment of
which the Executive shall have effectively waived in writing prior to the
date of payment of the payment pursuant to Section 6(f)(i) shall be
8
<PAGE>
taken into account, (B) no portion of the Total Payments shall be taken into
account which, in the opinion of tax counsel selected by the Company's
independent auditors and acceptable to the Executive, does not constitute a
"parachute payment" within the meaning of Section 280G(b)(2) of the Code, and
(C) the value of any non-cash benefit or any deferred payment or benefit
included in the Total Payments shall be determined or benefit included in the
Total Payments shall be determined by the Company's independent auditors
servicing the Company immediately prior to the time of a Change in Control in
accordance with the principles of Sections 280G(d)(3) and (4) of the Code.
7. CONFLICTING AGREEMENTS
----------------------
The Executive hereby represents and warrants to the Company that his
entering into this Agreement, and the obligations and duties undertaken by him
hereunder, will not conflict with, constitute a breach of, or otherwise violate
the terms of any other employment of other agreement to which he is a party.
8. ASSIGNMENT
----------
(a) By the Executive. This Agreement, any part thereof and any rights
(including compensation) or obligation hereunder shall not be assigned, pledged,
alienated, sold, attached, charged, encumbered or transferred in any way by the
Executive and any attempt to do so shall be void except that (i) the Executive
may designate any of his beneficiaries to receive (and such beneficiaries shall
receive) any compensation, payments or other benefits payable hereunder upon his
death, (ii) any assignment by will or by laws of descent and distribution or
following the occurrence of the Executive's legal incompetence is permitted and
(iii) the Executive's executors, administrators or other legal representatives
may assign any rights hereunder to the person or persons entitled thereto.
(b) By the Company. Provided the substance of the Executive's duties set
forth in Section 2 shall not change, and provided that the Executive's
compensation as set forth in Section 3 shall not be adversely affected, the
Company may assign or otherwise transfer this Agreement to any succeeding entity
without limitation, which entity shall assume all rights and obligations
hereunder.
9. NOTICES
-------
All notices, requests, demands and other communications hereunder must be
in writing and shall be deemed to have been duly given if delivered by hand or
mailed within the continental United States by first class, registered mail,
return receipt requested, or sent by overnight mail, such as Federal Express,
postage and registry fees prepaid, to the applicable party and addressed as
9
<PAGE>
follows:
(a) if to the Company:
President
OMI Corp.
90 Park Avenue
New York, New York 10016
(b) if to the Executive:
23 Valley View Drive
Stamford, CT 06903-3843
Addresses may be changed by notice in writing signed by the addressee.
10. Miscellaneous
-------------
(a) If any provision or portion of this Agreement shall, for any reason, be
adjudged by any court of competent jurisdiction to be invalid or unenforceable,
such judgment shall not affect, impair or invalidate the remainder of this
Agreement but shall be confined in its operation to the jurisdiction in which
made and to the provisions of this Agreement directly involved in the
controversy in which such judgment shall have been rendered.
(b) No course of dealing and no delay on the part of any party hereto in
exercising any right, power or remedy under or relating to this Agreement shall
operate as a waiver thereof or otherwise prejudice such party's rights, powers
and remedies. No single or partial exercise of any rights, powers or remedies
under or relating to this Agreement shall preclude any other or further exercise
thereof or the exercise of any other right, power or remedy.
(c) This Agreement may be executed by the parties hereto in counterparts,
each of which shall be deemed to be an original, but all such counterparts shall
together constitute one and the same instrument, and all signatures need not
appear on any one counterpart.
(d) (i) Any other agreement, rule or regulation to the contrary,
notwithstanding, the parties hereby agree that any action or proceeding relating
to this Agreement or its subject matter shall be brought in a state or federal
court situated in the County of New York, State of New York and such court shall
have exclusive jurisdiction thereof; provided, however, any court with
jurisdiction over the parties may, at the election of Company, have jurisdiction
over any action brought with regard to or any action brought to enforce any
violation or claimed violation of Section 5. The parties each hereby
specifically submit to the jurisdiction of
10
<PAGE>
such court and further agree that service of process may be made within or
without the State of New York by giving notice in the manner provided in Section
9. Each party further agrees to waive and hereby waives any right to a trial by
jury, and to any objection it or he may have in any such action, based on lack
of personal jurisdiction or venue, or inconvenient forum.
(ii) In any such action or proceeding, the prevailing party shall be
entitled to recover from the other party reasonable costs, including attorney's
fees and expenses. In any action or proceeding before a court or other tribunal
relating to this Agreement with respect to which damages are an adequate remedy,
the parties agree that no damages other than compensatory damages shall be
sought or claimed by either party and each party waives any claim, right or
entitlement to punitive, exemplary, or consequential damages, or any statutory
damages, or any other damages of any kind or nature in excess of compensatory
damages, and any court or arbitration tribunal is specifically divested of any
power to award any damages in the nature of punitive, exemplary, or
consequential damages, or any statutory damages, or any other damages of any
kind or nature in excess of compensatory damages.
(e) All payments required to be made by the Company hereunder to the
Executive or his beneficiaries, including his estate, shall be subject to
withholding and deductions as the Company may reasonably determine it should
withhold or deduct pursuant to any applicable law or regulation. In lieu of
withholding or deducting such amounts in whole or in part, the Company may, in
its sole discretion, accept other provision for payment as permitted by law,
provided it is satisfied in its sole discretion that all requirements of law
affecting its responsibilities to withhold such taxes have been satisfied.
(f) This Agreement embodies the entire understanding, and supersedes all
other oral or written agreements or understandings, between the parties
regarding the subject matter hereof. No change, alteration or modification
hereof may be made except in writing signed by both parties hereto. The headings
in this Agreement are for convenience of reference only and shall not be
considered part of this Agreement or limit or otherwise affect the meaning
hereof. This Agreement and the rights and obligations of the parties hereunder
shall be construed in accordance with and governed by the laws of the State of
New York (disregarding any choice of law rules which might look to the laws of
any other jurisdiction).
(g) The Executive acknowledges that the terms of this Agreement have been
fully explained to him or her, that the Executive understands the nature and
extent of the rights and obligations provided under this Agreement, and that the
Executive has been given the opportunity to be represented by legal counsel
11
<PAGE>
in the negotiation and preparation of this Agreement.
(h) Nothing herein contained shall be construed to prevent or limit any
acquisition, consolidation or merger of the Company.
IN WITNESS WHEREOF, the parties hereto have executed and delivered this
Agreement as of the day and year first above written.
By_____________________________
Craig H. Stevenson, Jr.
OMI CORP.
By_____________________________
12
OMI CORP.
ANNUAL EXECUTIVE INCENTIVE COMPENSATION PLAN
PURPOSE
- -------
To improve OMI Corp.'s financial results by creating compensation incentives
based on the performance of its executive personnel.
ELIGIBILITY
- -----------
Prior to the beginning of each calendar year (a "Performance Year"), the
Chairman of the Board of Directors will recommend to the Compensation Committee
of the Board those positions eligible to participate in the plan for that year
(the "Participants"). Participation in the plan is restricted to positions that:
1. Report directly to the Chairman.
2. Perform managerial or other functions that have significant influence on
corporate performance.
PLAN FEATURES
- -------------
Unit Determination - Each Participant shall have allocated a proposed number of
units for each Performance Year in which he or she is a Participant. The person
to whom the Participant reports shall evaluate the Participant's performance
prior to the end of the Performance Year and recommend to the President or
Senior Vice
- 1 -
<PAGE>
President to whom the Participant's department reports the percentage of the
allocated units to which the Participant shall be entitled, which percentage
shall range from 0 to 125% with the norm expected to be 75 to 100% and the
President or Senior Vice President shall determine the appropriate percentage.
The Chairman shall evaluate the performance of the President and the President
shall evaluate the performance of each Senior Vice President, each making a
recommendation to the Compensation Committee, which shall (1) evaluate the
performance of the Chairman and (2) determine the appropriate percentages for
the Chairman, President and Senior Vice Presidents (such determination for each
Participant multiplied by the appropriate target incentive award units being the
"Multiplier Units" for the Participant for the Performance Year).
COMPANY PERFORMANCE MEASURES - The performance measures selected may be
different in a given year and may vary from one year to another, at the
discretion of the Compensation Committee. The chosen measures will reflect
important strategic and/or tactical objectives crucial to the Company's success.
The Compensation Committee of the Board has selected the following goals for
1995 and until otherwise determined:
(a) Stock price: The stock price will be targeted at $7.50 for 1995, $8.50
for 1996, $9.50 for 1997 and $10.50 in 1998. The measurement price shall be the
average closing price the first ten
- 2 -
<PAGE>
trading days in December. The differential between the applicable targeted stock
price and the average weighted closing price during the measurement period shall
be calculated (the "Price Differential").
(b) Free cash flow: Cash flow after debt service which is Net Income Before
Taxes + Depreciation - Scheduled Principal Amortization +/- Drydock Accrual.
(The drydock accrual shall be computed as accrued drydock expense - actual cash
expense.) Free cash flow shall be determined based on the Company's audited
financial statements and shall be divided by the number of common stock shares
of the Company outstanding on December 31 of the Performance Year (the "Cash
Flow per share").
Calculation - The award (the "Incentive Bonus") for a Participant shall be the
Participant's Multiplier Units times the sum of (a) the Price Differential and
(b) Cash flow per share.
PAYMENT AWARDS
- --------------
The Incentive Bonus shall be paid in full as soon as possible after the end of
the Performance Year, usually on or before March 1.
SPECIAL CONSIDERATIONS
- ----------------------
If a Participant's employment is terminated due to death, long-term disability,
or retirement prior to the end of the Performance Year, the Participant or the
Participant's beneficiary shall be entitled
- 3 -
<PAGE>
to receive a pro rata portion of the award that would have been received had the
Participant been active for the full year.
If a Participant's employment is terminated for reasons other than those
described above, including resignation or discharge, prior to the end of the
Performance Year any rights to an award will normally be forfeited, except that
the Chairman may recommend an award amount for approval by the Compensation
Committee, subject to ratification by the Board.
Individuals who become Participants during a performance year receive incentive
award opportunities prorated accordingly. Participants who are promoted to a
position at a higher level of proposed units are eligible for prorated award for
the amount of time spent in each position and based upon the performance level
achieved in each position.
LIMITATIONS
- -----------
Participation in the Plan neither implies nor guarantees continuance of
employment. No part of the Plan shall be construed as a compensation contract.
CHANGE OF CONTROL
- -----------------
In the event that a Change in Control as defined in Section 3 of
the OMI Corp. Separation Allowance Program shall occur, the
- 4 -
<PAGE>
Participants shall be entitled to receive bonuses annually, using the same
criteria as hereinabove set forth except:
(1) neither the Compensation committee nor any other person nor persons
shall have the right to terminate nor the discretion to change the
Plan without the written consent of each Participant affected.
(2) The multiplier Units for each Participant shall be 100% of the
Participant's target incentive award units
(3) The Price Differential shall be the difference between (a) the higher
of (i) stock price at the time of the calculation of the bonus most
recently paid and (ii) the fair market value of shares of OMI Corp.
common stock at the time of the Change in Control and (b) the target
price for the applicable year, provided that for any year for which a
target price has not been established, the target price shall be $1.00
higher than the previous year.
(4) If a Participant's employment is terminated other than for cause (as
defined in any employment agreement between the Participant and the
Company, if the same is in effect, or otherwise in the OMI Corp.
Separation Allowance Program) or due to death, long term disability
- 5 -
<PAGE>
or retirement prior to the end of a Performance Year, the Participant
or the Participant's beneficiary shall be entitled to receive a pro
rata portion of the award that would have been received had the
Participant been active for the full year.
- 6 -
================================================================================
STOCK PURCHASE AGREEMENT
Dated as of October 12, 1995
By and Between
HVIDE MARINE INCORPORATED
and
OMI CORP.
as a Shareholder of
OCEAN SPECIALTY TANKERS CORPORATION
================================================================================
<PAGE>
TABLE OF CONTENTS
Page
----
ARTICLE I DEFINITIONS.................................................. 2
Section 1.1 Definitions........................................... 2
ARTICLE II SALE OF STOCK; PURCHASE PRICE; CLOSING....................... 4
Section 2.1 Sale of Stock......................................... 4
Section 2.2 Purchase Price........................................ 4
Section 2.3 Allocation of Purchase Price.......................... 5
Section 2.4 Closing............................................... 6
ARTICLE III REPRESENTATIONS OF THE SELLER............................... 6
Section 3.1 Ownership of Stock.................................... 6
Section 3.2 Existence and Good Standing........................... 6
Section 3.3 Authority of Seller................................... 7
Section 3.4 No Violations......................................... 7
Section 3.5 Governmental Authorization............................ 8
Section 3.6 Purchase for Investment............................... 8
ARTICLE IV REPRESENTATIONS OF THE PURCHASER.............................. 8
Section 4.1 Existence and Good Standing; Power and Authority...... 8
Section 4.2 No Violations......................................... 8
Section 4.3 Purchase for Investment............................... 9
Section 4.4 Broker's or Finder's Fees............................. 9
ARTICLE V CONDUCT OF BUSINESS; EXCLUSIVE DEALING; UNION CONTRACTS...... 9
Section 5.1 Conduct of Business of the Company.................... 9
Section 5.2 Exclusive Dealing..................................... 9
Section 5.3 Union Contracts....................................... 9
ARTICLE VI CONDITIONS TO PURCHASER'S OBLIGATIONS........................ 10
Section 6.1 Truth of Representations and Warranties............... 10
Section 6.2 Governmental Approvals................................ 10
Section 6.3 Performance of Agreements............................. 10
(i)
<PAGE>
Page
----
Section 6.4 Proceedings........................................... 10
Section 6.5 Assignment and Assumption Agreements.................. 10
Section 6.6 GECC Release.......................................... 11
Section 6.7 Memoranda of Agreement................................ 11
Section 6.8 Vessel Transfer Documents............................. 11
Section 6.9 Labor Agreements...................................... 12
Section 6.10 Consummation of the Initial Public Offering........... 12
Section 6.11 Opinion of Seller's Counsel........................... 12
ARTICLE VII CONDITIONS TO THE SELLER'S OBLIGATIONS....................... 12
Section 7.1 Opinion of Purchaser's Counsel........................ 12
Section 7.2 Good Standing Certificates............................ 12
Section 7.3 Truth of Representations and Warranties............... 13
Section 7.4 Governmental Approvals................................ 13
Section 7.5 Performance of Agreements............................. 13
Section 7.6 Proceedings........................................... 13
Section 7.7 Assignment and Assumption Agreements.................. 13
Section 7.8 GECC Release.......................................... 13
Section 7.9 Memoranda of Agreement................................ 14
Section 7.10 Promissory Note....................................... 14
Section 7.11 Labor Agreements...................................... 14
Section 7.12 DNB Release........................................... 14
Section 7.13 Audited Financials.................................... 14
ARTICLE VIII SURVIVAL OF REPRESENTATIONS; INDEMNIFICATION................. 14
Section 8.1 Survival of Representations........................... 14
Section 8.2 Indemnification....................................... 14
ARTICLE IX MISCELLANEOUS................................................ 15
Section 9.1 Expenses.............................................. 15
Section 9.2 Governing Law......................................... 15
Section 9.3 Jurisdiction.......................................... 15
Section 9.4 Captions.............................................. 16
Section 9.5 Publicity............................................. 16
Section 9.6 Notices............................................... 16
Section 9.7 Parties in Interest................................... 17
Section 9.8 Counterparts.......................................... 17
Section 9.9 Entire Agreement...................................... 17
(ii)
<PAGE>
Page
----
Section 9.10 Amendments........................................... 17
Section 9.11 Severability......................................... 18
Section 9.12 Third Party Beneficiaries............................ 18
Section 9.13 Termination of Agreement............................. 18
EXHIBITS
EXHIBIT A Form of Promissory Note
EXHIBIT B Form of Dynachem Memorandum of Agreement
EXHIBIT C Form of Hudson Memorandum of Agreement
EXHIBIT D Form of Star Memorandum of Agreement
SCHEDULES
Schedule 1.1(a) Acquired Vessels
(iii)
<PAGE>
STOCK PURCHASE AGREEMENT
------------------------
STOCK PURCHASE AGREEMENT (this "Agreement") dated as of October 12, 1995 by
and between HVIDE MARINE INCORPORATED, a Florida corporation (the "Purchaser"),
and OMI CORP., a Delaware corporation (the "Seller"), being a shareholder of
OCEAN SPECIALTY TANKERS CORPORATION, a Delaware corporation (the "Company").
WITNESSETH:
-----------
WHEREAS, the Seller is the owner of 5,000 shares of common stock, par value
$.10 per share, of the Company (the "Stock"), representing one-half of the total
issued and outstanding shares of common stock of the Company on the date hereof;
WHEREAS, on the terms and subject to the conditions set forth in this
Agreement and the Ancillary Agreements, the Seller desires to sell, and
Purchaser desires to purchase, the Stock; and
WHEREAS, it is the intention of the parties hereto that, upon consummation
of the purchase and sale of the Stock pursuant to this Agreement and the
Ancillary Agreements, Purchaser shall own all of the outstanding common stock of
the Company;
WHEREAS, the Seller desires to sell or cause to be sold, and the Purchaser
desires to purchase, the Acquired Vessels on the terms and subject to the
conditions contained in the Transaction Documents;
NOW, THEREFORE, in consideration of the mutual covenants and conditions set
forth herein that the parties hereby agree as follows:
<PAGE>
ARTICLE I
DEFINITIONS
-----------
Section 1.1 Definitions. In addition to the terms defined elsewhere in this
------------
Agreement, the following terms shall have the respective meanings specified
therefor below:
"Acquired Vessels" shall mean the vessels listed on and described in
Schedule 1.1(a) hereto.
"Agreement" shall mean this Agreement as amended, modified or supplemented
from time to time.
"Ancillary Agreements" shall mean the Promissory Note, the Memoranda of
Agreement, the Assignment and Assumption Agreements, the DNB Release and the
GECC Release.
"Assignment and Assumption Agreements" shall mean the Dynachem Assignment
and Assumption Agreement and the Hudson Assignment and Assumption Agreement.
"Closing" shall have the meaning specified in Section 2.4 hereof.
"Closing Date" shall have the meaning specified in Section 2.4 hereof.
"Company" shall have the meaning specified in the first paragraph hereof.
"DNB Guaranty" shall mean the Guaranty, dated September 9, 1992, made by
the Seller in favor of Den norske Bank AS regarding the Credit Agreement, dated
September 9, 1992, between the Seller and Den norske Bank AS, as amended.
"DNB Release" shall have the meaning specified in Section 7.15 hereof.
"Dynachem Memorandum of Agreement" shall have the meaning specified in
Section 6.8 hereof.
"Dynachem Assignment and Assumption Agreement" shall have the meaning
specified in Section 6.5 hereof.
"GECC Lease" shall mean the Bareboat Charter Party, dated August 12, 1987,
between OMI Clover Transport, Inc., a subsidiary of the Seller, and The Bank of
New York, as trustee, regarding the charter of the "OMI Hudson".
-2-
<PAGE>
"GECC Release" shall have the meaning specified in Section 6.7 hereof.
"HSR Act" shall mean the Hart-Scott-Rodino Antitrust Improvements Act of
1976, as amended, and the rules and regulations thereunder.
"Hudson Assignment and Assumption Agreement" shall have the meaning
specified in Section 6.5 hereof.
"Initial Public Offering" shall mean the contemplated sale by Purchaser of
an indeterminate number of its shares of common stock in an initial public
offering.
"Hudson Memorandum of Agreement" shall have the meaning specified in
Section 6.8 hereof.
"MARAD" shall mean the Maritime Administration established by
Reorganization Plan No. 21 of 1950 and continued by Reorganization Plan No. 7 of
1961, or any body or official which is a successor thereto with respect to a
particular function.
"MARAD Consent" shall have the meaning specified in Section 6.5 hereto.
"Memoranda of Agreement" shall mean the Dynachem Memorandum of Agreement,
the Hudson Memorandum of Agreement and the Star Memorandum of Agreement.
"Person" shall mean any individual, partnership, limited partnership, joint
venture, corporation, limited liability company, limited liability partnership,
trust, unincorporated organization, governmental body or any subdivision or
agency thereof or any other entity.
"Promissory Note" shall have the meaning specified in Section 2.2 hereof.
"Purchase Price" shall have the meaning specified in Section 2.2 hereof.
"Purchaser" shall have the meaning specified in the first paragraph hereof.
"Seller" shall have the meaning specified in the first paragraph hereof.
-3-
<PAGE>
"Seller Affiliate" shall mean any affiliate of the Seller party to the
Ancillary Agreements or the Vessel Transfer Documents.
"Star Memorandum of Agreement" shall have the meaning specified in Section
6.8 hereof.
"Stock" shall have the meaning specified in the preamble hereof.
"Title XI Indebtedness" shall mean indebtedness which is guaranteed
pursuant to Title XI of the Merchant Marine Act, 1936, as amended.
"Transaction Documents" shall mean and include this Agreement, the
Ancillary Agreements and the Vessel Transfer Documents.
"Vessel Transfer Documents" shall have the meaning specified in Section 6.9
hereof
ARTICLE II
SALE OF STOCK; PURCHASE PRICE; CLOSING
--------------------------------------
Section 2.1 Sale of Stock. On the terms and subject to conditions of this
--------------
Agreement, the Seller agrees to sell, assign, transfer, convey and deliver to
Purchaser on the Closing Date, and Purchaser agrees to purchase from the Seller
on the Closing Date, all of the Seller's right, title and interest to the Stock.
Section 2.2 Purchase Price. (a)(i) On the Closing Date, Purchaser shall pay
---------------
to the Seller the sum of $1,000, by wire transfer in immediately available funds
to an account designated by the Seller prior to the Closing Date, in
consideration for the purchase by Purchaser of the Stock.
(ii) On the Closing Date, Purchaser shall, in consideration for the
purchase by Purchaser of the "OMI Dynachem" and the "OMI Star" pursuant to the
Dynachem Memorandum of Agreement and the Star Memorandum of Agreement,
respectively, (x) pay to the Seller the sum of $11,512,500, by wire transfer in
immediately available funds to an account designated by the Seller prior to the
Closing Date, (y) assume the Title XI Indebtedness related to the "OMI Dynachem"
pursuant to the Dynachem Assignment and Assumption Agreement and (z) issue to
the Seller a promissory note in
-4-
<PAGE>
the principal amount of $8,350,000 in the form of Exhibit A hereto (the
"Promissory Note").
(iii) On the Closing Date, Purchaser shall, in consideration for the
purchase by Purchaser of the "OMI Hudson" pursuant to the Hudson Memorandum of
Agreement, (x) pay to The Bank of New York the sum of $10,430,000, by wire
transfer in immediately available funds to an account designated by The Bank of
New York or other owner of the vessel prior to the Closing Date, and (y) assume
the Title XI Indebtedness related to the "OMI Hudson" pursuant to the Hudson
Assignment and Assumption Agreement; provided that in the event that the Closing
has not occurred on or prior to November 30, 1995, Purchaser shall pay to Seller
the additional sum of $1,145,000, by wire transfer in immediately available
funds to an account designated by the Seller prior to the Closing Date.
(b) In the event that Purchaser has not consummated the Initial Public
Offering on or prior to the Closing Date, the Purchaser shall pay to the Seller
the aggregate sum of $300,000, payable quarterly in eight (8) equal payments of
$37,500 commencing on the Closing Date and neither party shall have further
obligations under this Agreement.
(c) In the event that Purchaser has completed the Initial Public Offering
on or prior to the Closing Date and an over-allotment (or "green shoe") option
has been exercised by the underwriters in connection therewith, the Purchaser
shall, on the Closing Date, pay to Seller an aggregate sum equal to twenty (20%)
percent of the net proceeds received by Purchaser in connection with the
exercise of the over-allotment option, and the principal amount of the
Promissory Note shall be reduced by such amount; provided that the amounts
payable by Purchaser pursuant to this paragraph (c) shall not exceed $1,350,000.
(d) For purposes of this Agreement, "Purchase Price" shall be deemed to
include all sums paid and indebtedness incurred or assumed pursuant to Sections
2.2(a) and 2.2(c).
Section 2.3 Allocation of Purchase Price. The Seller and the Purchaser
-----------------------------
agree to allocate the Purchase Price in accordance with Section 2.2 hereof and
the Memoranda of Agreement. Neither the Seller nor the Purchaser shall file any
tax return or other document or otherwise take any
-5-
<PAGE>
position which is inconsistent with the allocation determined pursuant to this
Section 2.3.
Section 2.4 Closing. (a) The transactions referred to in Section 2.1 (the
--------
"Closing") shall take place at 10:00 A.M. at the offices of Dyer, Ellis, Joseph
& Mills on the earlier of January 31, 1996 or the date ten (10) business days
after Purchaser has completed the Initial Public Offering. Such date is herein
referred to as the "Closing Date".
(b) On the Closing Date, Seller will deliver or cause to be delivered to
Purchaser the certificates representing the Stock duly endorsed in blank, or
accompanied by stock powers duly executed in blank by the Seller with signatures
guaranteed by a domestic commercial bank or trust company, with all necessary
transfer tax and other revenue stamps, acquired at the Seller's expense, affixed
and cancelled. The Seller agrees to cure any deficiencies with respect to the
endorsement of the certificates representing the Stock owned by the Seller or
with respect to the stock power accompanying any such certificates.
(c) On or prior to the Closing Date, Seller and Purchaser will execute and
deliver or cause to be delivered the Ancillary Agreements and the Vessel
Transfer Documents.
ARTICLE III
REPRESENTATIONS OF THE SELLER
-----------------------------
The Seller represents, warrants and agrees as follows:
Section 3.1 Ownership of Stock. The Seller is the lawful owner of the
-------------------
Stock, free and clear of all liens, encumbrances, restrictions and claims of
every kind. The Seller has full legal right, power and authority to enter into
this Agreement and to sell, assign, transfer and convey the Stock so owned by
the Seller pursuant to this Agreement and the delivery to Purchaser of the Stock
pursuant to the provisions of this Agreement will transfer to Purchaser good and
marketable title thereto, free and clear of all liens, encumbrances,
restrictions and claims of every kind.
Section 3.2 Existence and Good Standing. The Seller is a corporation duly
----------------------------
organized, validly existing and in good standing under the laws of the State of
Delaware.
-6-
<PAGE>
Section 3.3 Authority of Seller. (a) Seller has full corporate power and
--------------------
authority to execute and deliver this Agreement and to sell, assign, transfer
and convey the Stock to Purchaser pursuant to this Agreement, to perform its
obligations hereunder and to consummate the transactions contemplated hereby.
The execution, delivery and performance of this Agreement by Seller, and the
consummation by it of the transactions contemplated hereby, have been duly
authorized by all necessary corporate action on the part of Seller. This
Agreement has been duly and validly executed and delivered by Seller and,
assuming due execution and delivery by Purchaser, constitutes a valid and
binding agreement of Seller enforceable against Seller in accordance with its
terms.
(b) The Seller and each of the Seller Affiliates has full corporate power
and authority to execute and deliver the Ancillary Agreements to which each is a
party, to perform their respective obligations thereunder and to consummate the
transactions contemplated thereby. The execution, delivery and performance by
Seller and each of the Seller Affiliates of the Ancillary Agreements to which
each is a party, and the consummation by it of the transactions contemplated
thereby, have been duly authorized by all necessary corporate action on the part
of Seller and the Seller Affiliates. The Ancillary Agreements to which the
Seller and each of the Seller Affiliates is a party have been duly and validly
executed and delivered by Seller and the Seller Affiliates and, assuming due
execution and delivery by Purchaser, as the case may be, constitute valid and
binding agreements of Seller and the Seller Affiliates enforceable against
Seller and the Seller Affiliates in accordance with their terms.
Section 3.4 No Violations. The execution and delivery by the Seller and the
--------------
Seller Affiliates of the Transaction Documents to which each is a party and the
consummation of the transactions contemplated thereby will not (i) violate any
provision of the Certificate of Incorporation or By-Laws of the Seller or the
Seller Affiliates, (ii) any statute, rule, regulation, order or decree of any
public body or authority by which each of the Seller and the Seller Affiliates
or any of their properties or assets is bound and (iii) result in a violation or
breach of, or constitute a default under, any license, franchise, permit,
indenture, agreement or other instrument to which the Seller or any such
affiliates is a party, or by which any the Seller or the Seller Affiliates or
any of their respective assets or properties is bound.
-7-
<PAGE>
Section 3.5 Governmental Authorization. Assuming that the conditions set
---------------------------
forth in Sections 6.2 and 7.4 hereof have been satisfied, no licenses or permits
from, approvals of or filings with any governmental agencies are required to
enable Seller to sell the Stock to Purchaser in accordance with this Agreement
and the Seller Affiliates to sell the Acquired Vessels pursuant to the Ancillary
Agreements and the Vessel Transfer Documents.
Section 3.6 Purchase for Investment. Seller will acquire the Promissory
------------------------
Note for its own account for investment and not with a view toward any resale or
distribution thereof; provided, however, that the disposition of Seller's
property shall at all times remain within the sole control of Seller.
ARTICLE IV
REPRESENTATIONS OF THE PURCHASER
--------------------------------
The Purchaser represents, warrants and agrees as follows:
Section 4.1 Existence and Good Standing; Power and Authority. Purchaser is
-------------------------------------------------
a corporation duly organized, validly existing and in good standing under the
laws of the State of Florida. Purchaser has the corporate power and authority to
enter into, execute and deliver this Agreement and the other Transaction
Documents to which it is a party and perform its obligations hereunder and
thereunder. This Agreement and the other Transaction Documents to which the
Purchaser is a party have been duly authorized and approved by all required
corporate action of Purchaser.
Section 4.2 No Violations. The execution and delivery by the Purchaser of
--------------
this Agreement and the other Transaction Documents to which it is a party and
the consummation of the transactions contemplated hereby and thereby will not
(i) violate any provision of the Certificate of Incorporation or By-Laws of the
Purchaser, (ii) any statute, rule, regulation, order or decree of any public
body or authority by which Purchaser or any of its properties or assets is bound
and (iii) result in a violation or breach of, or constitute a default under, any
license, franchise, permit, indenture, agreement or other instrument to which
Purchaser is a party, or by which Purchaser or any of its assets or properties
is bound.
-8-
<PAGE>
Section 4.3 Purchase for Investment. Purchaser will acquire the Stock for
its own account for investment and not with a view toward any resale or
distribution thereof; provided, however, that the disposition of Purchaser's
property shall at all times remain within the sole control of Purchaser.
Section 4.4 Broker's or Finder's Fees. No agent, broker, person or firm
acting on behalf of the Purchaser is, or will be, entitled to any commission or
broker's or finder's fees from any of the parties hereto, or from any Person
controlling, controlled by or under common control with any of the parties
hereto, in connection with any of the transactions contemplated by this
Agreement.
ARTICLE V
CONDUCT OF BUSINESS; EXCLUSIVE DEALING; UNION CONTRACTS
-------------------------------------------------------
Section 5.1 Conduct of Business of the Company. During the period from the
-----------------------------------
date of this Agreement to the Closing Date, the Seller shall not cause the
Company to conduct its operations in any manner not in its ordinary and usual
course of business. The Seller agrees not to take any action, or omit to take
any action, which would cause the representations and warranties contained in
Article III hereof to be untrue or incorrect.
Section 5.2 Exclusive Dealing. During the period from the date of this
------------------
Agreement to the Closing Date, the Seller shall not, and shall cause the Company
to refrain from taking any action to, directly or indirectly, encourage,
initiate or engage in discussions or negotiations with, or provide any
information to, any Person, other than the Purchaser, concerning any purchase of
the Stock or any merger, sale of substantial assets or similar transaction
involving the Company.
Section 5.3 Union Contracts. Seller agrees to discuss with Purchaser or any
----------------
of its designated representatives any contemplated changes to the union
contracts existing on the date hereof to which the unions representing the crews
of the Acquired Vessels are party.
-9-
<PAGE>
ARTICLE VI
CONDITIONS TO PURCHASER'S OBLIGATIONS
-------------------------------------
The obligation of the Purchaser to purchase the Stock from the Seller and
the Acquired Vessels on the Closing Date is conditioned upon satisfaction, at or
prior to the Closing, or waiver by Purchaser, of the following conditions:
Section 6.1 Truth of Representations and Warranties. The representations
----------------------------------------
and warranties of the Seller contained in Article III of this Agreement shall be
true and correct on and as of the Closing Date with the same effect as though
such representations and warranties had been made on and as of such date, and
the Seller shall have delivered to Purchaser a certificate, dated the Closing
Date, to such effect.
Section 6.2 Governmental Approvals. All governmental and other consents and
-----------------------
approvals (including the expiration of all applicable time periods under the HSR
Act), if any, necessary to permit the consummation of the transactions
contemplated by this Agreement and the other Transaction Documents shall have
been received and remain in full force and effect on the Closing Date.
Section 6.3 Performance of Agreements. All of the agreements of the Seller
--------------------------
or the Seller Affiliates to be performed prior to the Closing pursuant to the
terms of the Transaction Documents shall have been duly performed, and the
Seller shall have delivered to the Purchaser a certificate, dated the Closing
Date, to such effect.
Section 6.4 Proceedings. All proceedings to be taken in connection with the
------------
transactions contemplated by this Agreement and all documents incident thereto
shall be satisfactory in form and substance to the Purchaser and its counsel,
and the Purchaser shall have received copies of all such documents and other
evidences as it or its counsel may reasonably request in order to establish the
consummation of such transactions and the taking of all proceedings in
connection therewith.
Section 6.5 Assignment and Assumption Agreements. (a) Seller shall have
-------------------------------------
executed and delivered to Purchaser an assignment and assumption agreement
satisfactory in form to the Seller and Purchaser (the "Dynachem Assignment and
Assumption Agreement") whereby Seller assigns to Purchaser
-10-
<PAGE>
and Purchaser assumes the Title XI Indebtedness related to the "OMI Dynachem".
(b) Seller shall have executed and delivered to Purchaser an assignment and
assumption agreement satisfactory in form to the Seller and Purchaser (the
"Hudson Assignment and Assumption Agreement") whereby Seller assigns to
Purchaser and Purchaser assumes the Title XI Indebtedness related to the "OMI
Hudson".
(c) Seller shall have obtained all consents and waivers required to give
effect to the transactions contemplated by the Assignment and Assumption
Agreements, including, without limitation, the consent of MARAD in a form
satisfactory to the parties to this Agreement (the "MARAD Consent").
Section 6.6 GECC Release. Seller shall have delivered to Purchaser a
-------------
release signed by the owner of the OMI Hudson (the "GECC Release") providing for
the release of the GECC Lease.
Section 6.7 Memoranda of Agreement. (a) The Seller shall cause to be
-----------------------
executed and delivered to the Purchaser a memorandum of agreement substantially
in the form of Exhibit B hereto (the "Dynachem Memorandum of Agreement")
providing for the sale to Purchaser or its designee of the "OMI Dynachem" on the
terms and conditions set forth therein.
(b) The Seller shall cause to be executed and delivered to the Purchaser a
memorandum of agreement substantially in the form of Exhibit C hereto (the
"Hudson Memorandum of Agreement") providing for the sale to Purchaser or its
designee of the "OMI Hudson" on the terms and conditions set forth therein.
(c) The Seller shall cause to be executed and delivered to the Purchaser a
memorandum of agreement substantially in the form of Exhibit D hereto (the "Star
Memorandum of Agreement") providing for the sale to Purchaser or its designee of
the "OMI Star" on the terms and conditions set forth therein.
Section 6.8 Vessel Transfer Documents. Seller shall have executed and
--------------------------
delivered or cause to have been executed and delivered to Purchaser all
documents necessary to transfer title to the Acquired Vessels pursuant to the
Memoranda of Agreement (collectively, the "Vessel Transfer Documents").
-11-
<PAGE>
Section 6.9 Labor Agreements. The unions representing the licensed and
-----------------
unlicensed crew of the Acquired Vessels (not including radio operators for which
Purchaser shall not undertake any obligation to assume or be otherwise bound by
any collective bargaining agreement pertaining to same) shall have reached an
agreement with Purchaser (or at its option Seller or an independent contractor
selected by it to furnish crews for the Acquired Vessels) to amend each of the
collective bargaining agreements covering the Acquired Vessels, which amendment
shall provide for (i) a term of three (3) years following the Closing, (ii) no
reopening of the collective bargaining agreements during such term and (iii) the
continuation of the same wage structures, terms and working conditions relating
to the Acquired Vessels in effect as of the date hereof, subject only to
reasonable cost of living-related wage increases.
Section 6.10 Consummation of the Initial Public Offering. The Purchaser
--------------------------------------------
shall have consummated the Initial Public Offering at a price set forth in its
amended S-1 Registration Statement on Form S-1 filed with the Securities and
Exchange Commission.
Section 6.11 Opinion of Seller's Counsel. The Seller shall have furnished
----------------------------
the Purchaser with an opinion, dated the Closing Date, of White & Case in scope,
form and substance reasonably satisfactory to Purchaser.
ARTICLE VII
CONDITIONS TO THE SELLER'S OBLIGATIONS
---------------------------------------
The sale of the Stock and the Acquired Vessels by the Seller on the Closing
Date is conditioned upon satisfaction, at or prior to such date, or waiver by
Seller, of the following conditions:
Section 7.1 Opinion of Purchaser's Counsel. The Purchaser shall have
-------------------------------
furnished the Seller with an opinion, dated the Closing Date, of Dyer, Ellis,
Joseph & Mills in form, scope and substance reasonably satisfactory to Seller.
Section 7.2 Good Standing Certificates. The Purchaser shall have delivered
---------------------------
to the Seller (i) copies of its Certificate of Incorporation, including all
amendments thereto, certified by the Secretary of State of the State of Florida
and (ii) certificates from the Secretary of State of
-12-
<PAGE>
the State of Florida to the effect that Purchaser is in good standing in such
State.
Section 7.3 Truth of Representations and Warranties. The representations
----------------------------------------
and warranties of the Purchaser contained in Article IV of this Agreement shall
be true and correct on and as of the Closing Date with the same effect as though
such representations and warranties had been made on and as of such date, and
Purchaser shall have delivered to the Seller a certificate, dated the Closing
Date, to such effect.
Section 7.4 Governmental Approvals. All governmental consents and approvals
-----------------------
(including the expiration of all applicable time periods under the HSR Act), if
any, necessary to permit the consummation of the transactions contemplated by
this Agreement and the other Transaction Documents shall have been received and
remain in full force and effect on the Closing Date.
Section 7.5 Performance of Agreements. All of the agreements of the
--------------------------
Purchaser to be performed prior to the Closing pursuant to the terms of the
Transaction Documents shall have been duly performed, and the Purchaser shall
have delivered to the Seller a certificate, dated the Closing Date, to such
effect.
Section 7.6 Proceedings. All proceedings to be taken in connection with the
------------
transactions contemplated by this Agreement and all documents incident thereto
shall be reasonably satisfactory in form and substance to the Seller and their
counsel, and the Seller shall have received copies of all such documents and
other evidences as they or their counsel may reasonably request in order to
establish the consummation of such transactions and the taking of all
proceedings in connection therewith.
Section 7.7 Assignment and Assumption Agreements. (a) Purchaser shall have
-------------------------------------
executed and delivered to Seller the Assignment and Assumption Agreements.
(b) Purchaser shall have obtained all consents and waivers required to give
effect to the transactions contemplated by the Assignment and Assumption
Agreements.
Section 7.8 GECC Release. Seller shall have obtained a release signed by
-------------
the owner of the "OMI Hudson" (the "GECC Release") providing for the release of
the GECC Lease.
-13-
<PAGE>
Section 7.9 Memoranda of Agreement. The Purchaser shall have executed and
----------------------
delivered to the Seller and performed all of its obligations under the Memoranda
of Agreement.
Section 7.10 Promissory Note. Purchaser shall have executed and delivered
---------------
to Purchaser the Promissory Note. Purchaser shall have obtained all consents
required to permit the issuance of the Promissory Note.
Section 7.11 Labor Agreements. (a) The Purchaser (or at its discretion
----------------
Seller or an independent contractor selected by Purchaser to furnish crews for
the Acquired Vessels) shall agree to abide by the collective bargaining
agreements referenced in Section 6.9 of this Agreement with regard to the
employment of personnel on the Acquired Vessels for a period of three (3) years
following the Closing.
(b) No union shall have made an offer to purchase any of the Acquired
Vessels pursuant to and in compliance with the terms of any collective
bargaining agreement to which the Seller is a party.
Section 7.12 DNB Release. Purchaser shall have delivered to Seller a
-----------
release executed by Den norske Bank AS in a form satisfactory to the parties to
this Agreement (the "DNB Release") providing for the release of the DNB
Guaranty. Both parties shall cooperate in obtaining the DNB Release.
Section 7.13 Audited Financials. On or prior to the Closing Date, Purchaser
------------------
shall have reimbursed Seller in full for the costs incurred by Seller or its
affiliates in preparing the audited financial statements of the entities owning
the Acquired Vessels.
ARTICLE VIII
SURVIVAL OF REPRESENTATIONS; INDEMNIFICATION
--------------------------------------------
Section 8.1 Survival of Representations. The respective representations and
---------------------------
warranties of the Seller and the Purchaser contained in this Agreement shall
survive the purchase and sale of the Stock pursuant to this Agreement.
Section 8.2 Indemnification. (a) The Seller hereby agrees to indemnify and
---------------
hold the Purchaser and their officers, directors and agents harmless from
damages, losses or expenses (including, without limitation, reasonable
attorneys' fees and expenses), suffered or paid, directly or
-14-
<PAGE>
indirectly, through application of the Company's or the Purchaser's assets or
otherwise, as a result of or arising out of the failure of any representation or
warranty made by the Seller in this Agreement or the Memoranda of Agreement to
be true and correct in all respects as of the respective dates thereof and as of
the Closing Date.
(b) The Purchaser agrees to indemnify and hold the Seller harmless from
damages, losses or expenses (including, without limitation, reasonable counsel
fees and expenses), suffered or paid, directly or indirectly, as a result of or
arising out of the failure of any representation or warranty made by the
Purchaser in this Agreement or the Memoranda of Agreement to be true and correct
in all respects as of the respective dates thereof and as of the Closing Date.
(c) The obligations to indemnify and hold harmless pursuant to this Section
8.2 shall survive the consummation of the transactions contemplated by this
Agreement.
ARTICLE IX
MISCELLANEOUS
-------------
Section 9.1 Expenses. The parties hereto shall pay all of their own
--------
expenses relating to the transactions contemplated by this Agreement, including,
without limitation, the fees and expenses of their respective counsel and
financial advisers; provided, however, Seller shall pay Purchaser the amount of
$22,500 to reimburse Buyer for one-half of the filing fee paid by Purchaser
under the HSR Act in respect of the OMI Hudson.
Section 9.2 Governing Law. The interpretation and construction of this
-------------
Agreement, and all matters relating hereto, shall be governed by the laws of the
State of New York applicable to agreements executed and to be performed solely
within such State.
Section 9.3 Jurisdiction. Any judicial proceeding brought against any of
------------
the parties to this Agreement on any dispute arising out of this Agreement or
any matter related hereto may be brought in the courts of the State of New York,
or in the United States District Court for the Southern District of New York,
and, by execution and delivery of this Agreement, each of the parties to this
Agreement accepts the exclusive jurisdiction of such courts, and irrevocably
agrees to be bound by any judgment rendered thereby in con-
-15-
<PAGE>
nection with this Agreement. The foregoing consent to jurisdiction shall not
constitute general consents to service of process in the State of New York for
any purpose except as provided above and shall not be deemed to confer rights on
any Person other than the respective parties to this Agreement. The prevailing
party or parties in any such litigation shall be entitled to receive from the
losing party or parties all costs and expenses, including reasonable counsel
fees, incurred by the prevailing party or parties.
Section 9.4 Captions. The Article and Section captions used herein are for
--------
reference purposes only, and shall not in any way affect the meaning or
interpretation of this Agreement.
Section 9.5 Publicity. Except as otherwise required by law (including
---------
disclosures required in connection with any registration pursuant to the
Securities Act of 1933, as amended, of the common stock of Purchaser), none of
the parties hereto shall issue any press release or make any other public
statement, in each case relating to, connected with or arising out of this
Agreement or the matters contained herein, without obtaining the prior approval
of Purchaser and the Seller to the contents and the manner of presentation and
publication thereof.
Section 9.6 Notices. Any notice or other communication required or
-------
permitted hereunder shall be deemed given on the day when delivered in person or
sent by facsimile transmission (with confirmation of receipt at the number to
which sent), or on the second business day after the day on which sent by means
of any overnight courier service or on the fifth business day after the day on
which sent by air mail, postage prepaid, addressed as follows:
If to Purchaser:
Hvide Marine Incorporated
2200 Eller Drive
Fort Lauderdale, Florida 33316
Attention: Vice President - Legal and General Counsel
Facsimile Number: (305) 527-1772
-16-
<PAGE>
If to Seller:
OMI Corp.
90 Park Avenue
New York, New York 10016
Attention: Fredric S. London, Esq.
Facsimile Number: (212) 297-2288
with a copy to:
White & Case
1155 Avenue of the Americas
New York, New York 10036
Attention: Robert L. Clare, III, Esq.
Facsimile No.: (212) 354-8113
or to such other address or number as shall be furnished in writing by any such
party to the other party or parties in the manner provided in this Section.
Section 9.7 Parties in Interest. This Agreement may not be transferred,
-------------------
assigned, pledged or hypothecated by any party hereto, other than by operation
of law. This Agreement shall be binding upon and shall inure to the benefit of
the parties hereto and their respective heirs, executors, administrators,
successors and permitted assigns.
Section 9.8 Counterparts. This Agreement may be executed in two or more
------------
counterparts, all of which taken together shall constitute one instrument.
Section 9.9 Entire Agreement. This Agreement, including the other documents
----------------
referred to herein which form a part hereof, contains the entire understanding
of the parties hereto with respect to the subject matter contained herein and
therein. This Agreement supersedes all prior agreements and understandings
between the parties with respect to such subject matter.
Section 9.10 Amendments. This Agreement may not be changed orally, but only
----------
by an agreement in writing signed by Purchaser and Seller (subject to the
following). This Agreement may be terminated and any provision of this Agreement
can be waived, amended, supplemented or modified by agreement of Purchaser and
the holders or former holders of a majority of the shares of Stock. Action by
the holders or former holders of a majority of the shares of Stock pursuant to
this Section 9.10 shall be binding for all purposes upon all of the Seller.
-17-
<PAGE>
Section 9.11 Severability. In case any provision in this Agreement shall be
------------
held invalid, illegal or unenforceable, the validity, legality and
enforceability of the remaining provisions hereof will not in any way be
affected or impaired thereby.
Section 9.12 Third Party Beneficiaries. Each party hereto intends that this
-------------------------
Agreement shall not benefit or create any right or cause of action in or on
behalf of any Person other than the parties hereto.
Section 9.13 Termination of Agreement. All parties hereto agree to use
------------------------
their best efforts to fulfill the requirements of Articles VI and VII as soon as
practicable.
IN WITNESS WHEREOF, each of Purchaser and Seller has caused its corporate
name to be hereunto subscribed by its officer thereunto duly authorized, all as
of the day and year first above written.
HVIDE MARINE INCORPORATED
By /s/ GENE DOUGLAS
-----------------------------------
Name: Gene Douglas
Title: Vice President
OMI CORP.
By /s/ VINCENT J. DESOSTOA
-----------------------------------
Name: Vincent J. DeSostoa
Title: Chief Financial Officer
-18-
<PAGE>
Schedule 1.1(a)
Acquired Vessels
----------------
===========================================================================
Name of Type of Deadweight Year Owner/
Vessel Vessel Flag Metric Tons Built Charterer
- ---------------------------------------------------------------------------
OMI Chemical/Product U.S. 51,668 1981 OMI Hudson
Dynachem Carrier Transport,
Inc.
- ---------------------------------------------------------------------------
OMI Chemical/Product U.S. 51,668 1981 OMI Clover
Hudson Carrier Transport,
Inc.
- ---------------------------------------------------------------------------
OMI Star Chemical/Product U.S. 37,711 1970 Omichem
Carrier Transport,
Inc.
===========================================================================
-19-
<PAGE>
EXHIBIT A
---------
THIS NOTE HAS NOT BEEN REGISTERED UNDER THE UNITED STATES SECURITIES
ACT OF 1933, AS AMENDED, AND MAY NOT BE SOLD OR OTHERWISE TRANSFERRED
EXCEPT PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT UNDER SAID ACT
OR AN APPLICABLE EXEMPTION FROM THE REGISTRATION REQUIREMENTS THEREOF.
NOTE
No. 1 $8,350,000.00
Dated: ______________, 1995
FOR VALUE RECEIVED, HVIDE MARINE INCORPORATED, a Florida corporation (the
"Company"), hereby promises to pay, to the order of OMI CORP., a Delaware
corporation (the "Payee"), or its registered assigns, at the offices of the
Company at 2200 Eller Drive, Fort Lauderdale, Florida 33316 or such other place
as Payee may designate in writing to the Company from time to time (the "Payment
Office"), the aggregate principal sum of EIGHT MILLION THREE HUNDRED FIFTY
THOUSAND DOLLARS ($8,350,000.00) in accordance with the principal repayment
obligations set forth in Section 1(a). The Company also promises to pay interest
on the unpaid principal amount of this Note at the Payment Office from the date
hereof until the principal amount of this Note is paid in full at the rate per
annum set forth in Section 1(b) and in the manner set forth in Section 1(c). The
Company will pay interest quarterly in arrears on December 31, March 31, June 30
and September 30 of each year, commencing December 31, 1995 (each such date an
"Interest Payment Date"). Upon maturity of this Note, whether by acceleration or
otherwise, accrued (and theretofore unpaid) interest on this Note shall be
payable on demand. Any payment of principal of, or (to the extent permitted by
applicable law) interest on this Note, that is not paid when due shall, to the
extent permitted by applicable law, bear interest at the rate of twelve percent
(12%) per annum. Interest will be computed on the basis of a 360-day year of
twelve 30-day months. Interest on this Note (and, to the extent permitted by
applicable law, any defaulted interest) shall accrue from the most recent date
to which interest has been paid, or, if no interest has been paid, from the date
of issuance hereof.
<PAGE>
EXHIBIT A
Page 2
Section 1. Payments. (a) On each date set forth below, the Company shall
--------
pay to the Payee the principal amount of the Note as is set forth opposite such
date (each such repayment, a "Principal Repayment" and each such date, a
"Principal Repayment Date"):
Principal
Repayment Date Amount
-------------- ------
October 12, 1996 $500,000
October 12, 1997 $500,000
October 12, 1998 $500,000
October 12, 1999 $500,000
October 12, 2000 $500,000
October 12, 2001 $500,000
October 12, 2002 $5,350,000
(b) The Company shall, for each 12-month period set forth below, pay
interest on the unpaid principal amount of this Note at the rate per annum set
forth opposite such period:
Period Rate
------ ----
October 12, 1995 - October 11, 1996 4%
October 12, 1996 - October 11, 1997 5%
October 12, 1997 - October 11, 1998 5%
October 12, 1998 - October 11, 1999 5%
October 12, 1999 - October 11, 2000 5%
October 12, 2000 - October 11, 2001 5%
October 12, 2001 - October 11, 2002 5%
(c) The Company shall pay to Payee, when due, all principal and interest in
money of the United States of America that is at the time of payment legal
tender for payment of public and private debts; provided that the Company may
pay principal and interest, by mailing a check payable in such money to Payee's
address as designated in Section 6 or in accordance therewith, or by wire
transfer to an account designated in writing by Payee, not less than
<PAGE>
EXHIBIT A
Page 3
three (3) business days before such payment becomes due and payable.
(d) Whenever any payment hereunder shall be due on a day that is not a
business day, such payment shall instead be made on the immediately succeeding
business day but no interest will be payable over the period of the extension.
Section 2. Prepayments. The Company shall have the right at any time to
-----------
prepay this Note, without premium or penalty, in whole or in part from time to
time, on the following terms and conditions: (i) the Company shall give the
Payee at least three business days' prior notice of its intent to prepay this
Note and the amount of such prepayment; (ii) each prepayment shall be in an
aggregate principal amount of at least $50,000; (iii) prepayments made pursuant
to this Section 2 shall include all accrued interest to the date of prepayment;
and (iv) each prepayment made pursuant to this Section 2 shall be applied
against the Principal Repayment due October 12, 2002 pursuant to Section 1(a).
Section 3. Covenants. The Company covenants and agrees that until the
---------
principal amount of this Note, together with interest thereon and all other
obligations incurred hereunder, are paid in full, it shall duly and punctually
pay to Payee, when due, all principal of and interest on this Note on the dates
and in the manner provided herein. The Company shall pay interest on overdue
principal at the rate of twelve percent (12%) per annum; it shall pay interest,
including post-petition interest in the event of a proceeding under the
Bankruptcy Laws, on overdue installments of interest at the same rate to the
extent lawful.
Section 4. Assignment; Transfer and Exchange. (a)(i) The Company shall
---------------------------------
maintain at the address specified in Section 6 hereof or such other location as
it shall, from time to time designate, an office where this Note, or any portion
thereof, may be presented for transfer and where the Company will keep a
register of the Note and of its transfer.
(ii) Prior to the time this Note is duly presented for transfer, the
Company shall be entitled to treat the Person in whose name such Note is
registered as the Payee of such Note and neither the Company nor any agent of
the Company shall be affected by the notice to the contrary.
<PAGE>
EXHIBIT A
Page 4
(b) The Company shall not, under any circumstances transfer its obligations
under this Note without the express written consent of Payee or its assigns, as
the case may be, which consent may be withheld at the sole discretion of Payee
or its assigns, as the case may be, for any reason or no reason at all. The
Payee shall not, under any circumstances transfer this Note without the express
written consent of the Company or its assigns, as the case may be, except to a
financial institution.
(c) Where this Note is presented to the Company with a request to register
a transfer of this Note (or any portion hereof), the Company shall register such
transfer and issue such new Note upon the order of or as directed by Payee;
provided that any Note presented or surrendered for registration of transfer
shall be duly endorsed or accompanied by a written instruction of transfer in
form reasonably satisfactory to the Company duly executed by Payee or its
attorney duly authorized in writing. No service charge shall be made for any
registration of transfer, but the Company may require payment by Payee of a sum
sufficient to cover any transfer tax or similar governmental charge payable in
connection therewith.
Section 5. Defaults and Remedies.
---------------------
(a) Events of Default. An "Event of Default," wherever used herein, means
-----------------
any one of the following events (whatever the reason for such Event of Default
and whether it voluntary or involuntary or be effected by operation of law or
pursuant to any judgment, decree or order of any court or any order, rule or
regulation of any administrative or governmental body):
(i) the Company defaults in the payment of interest on this Note when the
same becomes due and payable and such default continues for a period of five (5)
days;
(ii) the Company defaults in the payment of the principal of (and premium,
if any, on) this Note when the same becomes due and payable on any Principal
Repayment Date or otherwise;
<PAGE>
EXHIBIT A
Page 5
(iii) the Company fails to comply with any of its other covenants,
agreements or conditions in this Note and such default continues for the period
and after the notice specified in the last sentence of this paragraph (a);
(iv) the Company pursuant to or within the meaning of any Bankruptcy Law:
(A) commences a voluntary case or proceeding,
(B) consents to the entry of an order for relief against it in an
involuntary case or proceeding,
(C) consents to the appointment of a Custodian of it or for all or
substantially all of its property, or
(D) makes a general assignment for the benefit of its creditors;
(v) a court of competent jurisdiction enters an order or decree under any
Bankruptcy Law:
(A) for relief against the Company in an involuntary case or
proceeding,
(B) appointing a Custodian of the Company for all or substantially all
of its property, or
(C) ordering the liquidation of the Company,
and the order or decree remains unstayed and in effect for 60 days (the term
"Bankruptcy Law" means Title 11 U.S. Code or any similar U.S. Federal or State
law or any similar non-U.S. national, provincial or local law for the relief of
debtors and the term "Custodian" means any receiver, trustee, liquidator or
similar official under any Bankruptcy Law); or
(vi) a final judgment or final judgments for the payment of money are
entered by a court or courts of competent jurisdiction against the Company which
remains
<PAGE>
EXHIBIT A
Page 6
undischarged for a period (during which execution shall not be
effectively stayed) of thirty (30) days, provided that the aggregate of
all such outstanding judgments exceeds $500,000 (excluding any amounts
covered by insurance as to which the insurer has not denied liability).
A default under clause (iii) of this paragraph (a) is not an Event of Default
until Payee notifies the Company of the default and the default is not cured
within thirty (30) days after receipt of such notice.
(b) Acceleration. If an Event of Default (other than an Event of Default
------------
specified in paragraphs (a)(iv) or (v) of this Section 5) occurs and is
continuing, Payee by notice to the Company, may declare to be due and payable
immediately the principal amount of this Note plus accrued interest to the date
of acceleration. Upon any such declaration, such amount shall be due and payable
immediately, and upon payment of such amount all of the Company's obligations
under this Note, shall terminate. If an Event of Default specified in paragraphs
(a)(iv) or (v) of this Section 5 occurs, all unpaid principal and accrued
interest on this Note then outstanding shall become and be immediately due and
payable without any declaration or act on the part of Payee. Payee, by notice to
the Company may rescind an acceleration and its consequences if the rescission
would not conflict with any judgment or decree of a court of competent
jurisdiction.
(c) Other Remedies. If an Event of Default occurs and is continuing, Payee
--------------
may pursue any available remedy by proceeding at law or in equity to collect the
payment of principal (and premium, if any) or interest on this Note or to
enforce the performance of any provision of this Note. A delay or omission by
Payee in exercising any right or remedy accruing upon an Event of Default shall
not impair the right or remedy or constitute a waiver of such right or remedy or
acquiescence in the Event of Default. No remedy is exclusive of any other
remedy. All available remedies are cumulative.
<PAGE>
EXHIBIT A
Page 7
Section 6. Miscellaneous.
-------------
(a) Expenses. The Company agrees to pay all reasonable out-of-pocket
--------
expenses of Payee incurred in connection with the enforcement of this Note
including, without limitation, the reasonable fees and expenses of counsel for
Payee. In addition, the Company agrees to pay, and to save Payee harmless from
all liability for, any stamp or other documentary taxes which may be payable in
connection with the Company's execution or delivery of this Note and indemnify
Payee, its affiliates and their respective officers, directors, employees,
representatives and agents from and hold each of them harmless against any and
all liabilities, obligations, losses, damages, penalties, claims, actions,
judgments, suits, costs, expenses and disbursements incurred by any of them as a
result of, or arising out of any investigation, litigation, or other proceeding
(whether or not Payee or any of its affiliates are a party thereto) related to
the entering into and/or performance of this Note including, without limitation,
the reasonable fees and disbursements of counsel incurred in connection with any
such investigation, litigation or other proceeding (but excluding any such
liabilities, obligations, losses, etc. to the extent incurred by reason of the
gross negligence, bad faith or willful misconduct of the Person to be
indemnified).
(b) Notices. Except as otherwise expressly provided herein, all notices,
-------
requests, demands, waivers and other communications required or permitted to be
given under this Note shall be in writing and shall be deemed to have been duly
given if delivered in person, by overnight courier, or mailed, or sent by telex,
telegram or telecopier as follows:
(i) if to the Company, to it at:
Hvide Marine Incorporated
1200 Eller Drive
Fort Lauderdale, Florida 33316
Facsimile: (305) 527-1772
Attn: Vice President-Legal and
General Counsel
<PAGE>
EXHIBIT A
Page 8
(ii) if to Payee, to it at:
OMI Corp.
90 Park Avenue
New York, New York 10016
Facsimile: (212) 297-2288
Attn: Fredric S. London, Esq.
with a copy to:
White & Case
1155 Avenue of the Americas
New York, New York 10036
Facsimile: (212) 354-8113
Attn: Robert L. Clare, III, Esq.
or to such other Person or address as either party shall specify by notice in
writing to the other party. Except for a notice of a change of address, which
shall be effective only upon receipt thereof, all such notices, requests,
demands, waivers and communications shall be deemed to have been received on the
date of delivery unless if mailed, in which case on the third Business Day after
the mailing thereof and unless if delivered by overnight courier, in which case,
on the second Business Day after the dispatch thereof.
(c) Benefit of Agreement. This Note shall inure to the benefit of and be
--------------------
binding upon the Company and Payee and their respective successors and assigns.
(d) No Waiver; Remedies Cumulative. No failure or delay on the part of
------------------------------
Payee in exercising any right, power or privilege hereunder and no course of
dealing between the Company or any of its subsidiaries and Payee shall operate
as a waiver thereof; nor shall any single or partial exercise of any right,
power or privilege hereunder preclude any other or further exercise thereof or
hereunder or the exercise of any other right, power or privilege hereunder. The
rights, powers and remedies herein expressly provided are cumulative and not
exclusive of any rights, powers or remedies which Payee or the holder of this
Note would otherwise have. No
<PAGE>
EXHIBIT A
Page 9
notice to or demand on the Company in any case shall entitle the Company to any
other or further notice or demand in similar or other circumstances or
constitute a waiver of the rights of Payee to any other or further action in any
circumstances without notice or demand.
(e) Governing Law; Submission to Jurisdiction; Venue. (i) This Note and the
------------------------------------------------
legal relations between the Company and Payee hereto shall be governed by and
construed in accordance with the laws of the State of New York, without regard
to the conflict of laws rules thereof.
(ii) The Company agrees that any legal action or proceeding with respect to
this Note may be brought in the Courts of the State of New York or the United
States District Court for the Southern District of New York and, by execution
and delivery of this Note, the Company hereby irrevocably submits itself in
respect of its property, generally and unconditionally to the non-exclusive
jurisdiction of the aforesaid courts in any legal action or proceeding arising
out of this Note. The Company hereby irrevocably waives any objection which it
may now or hereafter have to the laying of venue of any of the aforesaid actions
or proceedings arising out of or in connection with this Note brought in the
courts referred to in the preceding sentence. The Company consents to process
being served in any such action or proceeding by the mailing of a copy thereof
to the address set forth above and agrees that such service upon receipt shall
constitute good and sufficient service of process or notice thereof. Nothing in
this paragraph (e) shall affect or eliminate any right to serve process in any
other matter permitted by law.
(f) Headings Descriptive. The headings of the several sections and
--------------------
subsections of this Note are inserted for convenience only and shall not in any
way affect the meaning or construction of any provision of this Note.
<PAGE>
EXHIBIT A
Page 10
(g) Amendment or Waiver. Subject to applicable law, this Note may be
-------------------
amended, modified and supplemented only in a writing executed by Payee and the
Company.
HVIDE MARINE INCORPORATED
By __________________________________
Name:
Title:
<PAGE>
AMENDMENT TO STOCK PURCHASE AGREEMENT
THIS AMENDMENT made and entered into as of the 31st day of January, 1996 by
an among HVIDE MARINE INCORPORATED (the "Purchaser") and OMI CORP. (the
"Seller")
WITNESSETH:
WHEREAS, Purchaser and Seller have made and entered into that certain Stock
Purchase Agreement dated as of October 12, 1995 (the "Agreement"); and
WHEREAS, the parties desire to amend the Agreement upon the terms and
conditions hereinafter contained.
NOW, THEREFORE, for and in consideration of the mutual covenants and
conditions set forth herein, the parties agree as follows:
1. Effective as of March 4, 1996 (or the actual date when the
then-current Title XI financing payment for the OMI Dynachem is paid
by Seller), Section 2.2(a)(ii)(x) is amended by changing "11,512,500"
to "$12,775,000".
2. Section 2.4(a) of the Agreement is amended by deleting "January 31"
from the 4th line thereof and inserting "April 30" in its stead.
3. As amended hereby, the Agreement is in all respects ratified and
confirmed.
4. This Amendment may be executed in two or more counterparts, all of
which taken together shall constitute one instrument.
IN WITNESS WHEREOF, each of the Purchaser and Seller has caused its
corporate name to be hereunto subscribed by its officer thereunto duly
authorized, all as of the day and year first above written.
HVIDE MARINE INCORPORATED
By: ___________________________________
Name: John H. Blankley
Title: Executive Vice President
OMI CORP.
By: ___________________________________
Name: Fredric S. London
Title: Senior Vice President
EXHIBIT 21
<TABLE>
LIST OF SUBSIDIARIES
--------------------
The following table sets forth all directly and indirectly owned subsidiaries of
OMI and the jurisdiction of incorporation or organization of each subsidiary:
<CAPTION>
Jurisdiction of
Incorporation
Company or Organization % Owned
- ------- --------------- -------
<S> <C> <C>
Argus Port and Lightering Services Ltd. Liberia 100%
Colorado Shipping Ltd. Liberia 100%
Darien Shipping Ltd. Liberia 100%
Limar Shipping Ltd. Liberia 100%
Loire Transport, Inc. Liberia 100%
Navassure Ltd. Bermuda 100%
Nile Transport, Inc. Liberia 100%
Ogden Marine T-5, Inc. Delaware 100%
OMI Avon Transport, Inc. Liberia 100%
OMI Bulk Transport, Inc. Delaware 100%
OMI Challenger Transport, Inc. Delaware 100%
OMI Champion Transport, Inc. Delaware 100%
Omichem Transport, Inc. Delaware 100%
OMI Clover Transport, Inc. Delaware 100%
OMI Courier Transport, Inc. New York 100%
OMI of Delaware, Inc. Delaware 100%
OMI Environmental Ventures, Inc. Delaware 100%
OMI Hudson Transport, Inc. Delaware 100%
OMI Investments, Inc. Delaware 100%
OMI Leader Transport, Inc. New York 100%
OMI Missouri Transport, Inc. Delaware 100%
OMI Oriole Transport,Inc. Delaware 100%
OMI Patriot Transport, Inc. Delaware 100%
OMI Promise Transport, Inc. Liberia 100%
OMI Rover Transport, Inc. Delaware 100%
OMI Ship Management, Inc. Delaware 100%
OMI State, Inc. Washington 100%
OMI Trent Transport, Inc Liberia 100%
OMI (U.K.) Ltd. Liberia 100%
OMI Willamette Transport, Inc. Delaware 100%
Rio Grande Transport, Inc. Liberia 100%
Rowayton Shipping Ltd. Liberia 100%
Saugatuck Shipping Ltd. Liberia 100%
Saybrook Shipping Ltd. Liberia 100%
Sokolica Transport, Inc. Liberia 100%
UBC Chartering Ltd. Liberia 100%
Universal Bulk Carriers, Inc. Liberia 100%
Volga Transport, Inc. Liberia 100%
</TABLE>
<PAGE>
Jurisdiction of
Incorporation
Company or Organization % Owned
- ------ --------------- --------
OMI Petrolink Corp. (1) Delaware 80%
(1) The following companies are 100% owned by OMI Petrolink Corp.:
Harlink Corp. Delaware 100%
Kenedy Corp. Delaware 100%
Nuelink Corp. Delaware 100%
Ogden Marine Indonesia, Inc. Delaware 100%
OMI Offshore Marine Services, Inc. Delaware 100%
Potomac Transport, Inc. Delaware 100%
THE FOLLOWING TABLE SETS FORTH A LIST OF COMPANIES IN WHICH OMI DIRECTLY OR
INDIRECTLY HAS A 50% OR LESS OWNERSHIP:
Grandteam Ship Management Ltd. Hong Kong 50%
Ocean Specialty Tankers Corp. Delaware 50%
Vanomi Management, Inc. Liberia 50%
Geraldton Navigation Company Inc. (1) Panama 49.9%
Mosaic Alliance Corp. (2) Liberia 49.9%
Amazon Transport, Inc. Liberia 49%
Mendala Transport, Inc. Liberia 49%
White Sea Holdings Ltd. (3) Liberia 49%
Wilomi, Inc. (4) Liberia 49%
Gainwell Investments Ltd. British 25%
Virgin Islands
(1) The following companies are 100% owned by Geraldton Navigation Co.
Inc.:
Geraldton Navigation Company Pte. Ltd. Singapore 100%
Hayes Navigation Company Pte. Ltd. Singapore 100%
(2) The following companies are 100% owned by Mosaic Alliance Corp.:
AVAC Limited Liberia 100%
Bunbury Navigation Co., Inc. Panama 100%
FLT Ltd. Liberia 100%
MacKenzie Navigation Co. Pte. Ltd. Singapore 100%
Romeo Navigation Co., Inc. Panama 100%
Sheffield Navigation Co., Inc. Panama 100%
Tulsa Navigation Co. Pte. Ltd. Singapore 100%
<PAGE>
(3) The following company is 100% owned by White Sea Holdings Ltd.:
White Sea Corp.
(4) The following companies are 100% owned by Wilomi, Inc.:
Ease Shipping, Inc. Liberia 100%
Gladiator Maritime Limited Liberia 100%
Loretta Shipping, Inc. Liberia 100%
Mendala II Transport, Inc. Liberia 100%
Mendala III Transport, Inc. Liberia 100%
Parallel Maritime, Inc. Liberia 100%
ALEXANDER Alexander & Alexander of New York Inc.
& ALEXANDER 1185 Avenue of the Americas
LOGO New York, NY 10036
Telephone 212 238-1440
FAX 212 238-1017
John M. Perkins
Vice President
January 24, 1996
Mr. Richard Carney
Manager, Hull and Machinery
Safety, Quality and Risk Management
OMI Corporation
90 Park Avenue
New York, NY 10016
RE: CHUBB
-----
A) DIRECTORS' & OFFICERS' LI8ABILITY
B) PENSION TRUST LIABILITY
C) CRIME
D) SPECIAL COVERAGE
POLICY NO.: 81092598-H
POLICY PERIOD: JANUARY 31, 1996 TO JANUARY 31, 1998
NATIONAL UNION
--------------
EXCESS DIRECTORS' & OFFICERS' LIABILITY
POLICY NO.: 482-51-72
POLICY PERIOD: JANUARY 31, 1996 TO JANUARY 31, 1997
Dear Richard:
Attached is Chubb's binder dated January 19, 1996 and National Union's binder
dated January 22, 1996, which document the fact that coverage has been bound in
accordance with your instructions. The primary Chubb terms were outlined in my
letter to you dated December 28, 1995. National Union agreed to follow the
Chubb terms with the exception of the Pollution endorsement and the Two Year
endorsement. In addition, National Union has reduced their premium from $220,000
to $203,845 Total premium savings realized this year is $35,255 and at the same
time coverage has been enhanced.
Also attached is Alexander & Alexander's invoice #737348 in the amount of
$444,845, which represents the premium payment due with respect to the captioned
coverage.
As soon as the policies are received they will be sent to your attention. In the
meantime, please do not hesitate to contact us if you have any questions.
The smooth renewal process was the result of a strong team effort involving
OMI, Alexander & Alexander, Chubb and National Union. Bob DeMotta and I want to
thank you for the opportunity to be of service of OMI.
Sincerely,
cc. R. DeMotta
R. Halluska
<PAGE>
BINDER
ALEXANDER Alexander & Alexander of New York Inc.
& ALEXANDER 1185 Avenue of the Americas
LOGO New York, NY 10036
Telephone 212 575-8000
Submitted by
____________________________________________
John M. Perkins
____________________________________________
To: Mr. Kent B. Shelley Dated
Chubb & Son, Inc.
1221 Avenue of the Americas January 19, 1996
New York, NY 10020-1001
____________________________________________
INSURED OMI Corp.
---------------------------------------------------------------------
---------------------------------------------------------------------
TYPE OF INSURANCE See details in Instructions section below
------------------------------------------------------------
EFFECTIVE DATE January 31, 1996 EXPIRATION DATE January 31, 1998
------------------------- -----------------------
LOCATION 90 Park Avenue
-----------------------------------------------------------------------
New York, NY 10016
-----------------------------------------------------------------------
INSTRUCTIONS:
I) DIRECTORS & OFFICERS LIABILITY COVERAGE
Parent Organization: OMI Corp.
Limits of Liability:
(A) Each Loss $10,000,000
(B) Each Policy Period $10,000,000
Deductible Amounts:
Executive Liability (A) Each Insured Person $NIL
(B) All Insured Persons $NIL
Executive Indemnification (C) The Insured Organization $1,000,000
INSURANCE COMPANY Federal
_____________________________________________________________
POLICY NO. 81092598-H ACCEPTED BY
----------------------- ------------------------
When accepted by the Company, the coverage is in effect from the effective time
and date of coverage. The Company accepting this risk acknowledges itself bound
by the terms, conditions and limitations of the policy (or policies) of
insurance in current use by the Company for the kind (or kinds) of insurance
specifically ordered from the effective date and hour specified herein.
Acceptance by or on behalf of the insured of a policy (or policies) as ordered
in place hereof shall render this Binder void. This Binder may be canceled at
any time by the Insured or by the broker or agent who placed the risk by notice
to the Company or by the surrender of this Binder stating when thereafter such
concellation shall be effective. This Binder may be canceled by the Company by
written notice to the insured and to Alexander & Alexander of New York Inc. who
placed the risk stating when, not before 12:00 o'clock noon the fifth business
day following the date of mailing, such cancellation shall be effective. A
premium charge at the rates agreed upon when this Binder becomes effective will
be made for the time this Binder is in effect if no policy of insurance in place
hereof is issued and accepted by the insured.
A & A-NY-101-0381 A275MS04.PRM/1 BINDER1.SHL
REV 1/19/96 (JA)
<PAGE>
ALEXANDER
& ALEXANDER PAGE 2 OF 5
LOGO ---- ----
ATTACHED TO AND FORMING PART OF A&A BINDER DATED January 19, 1996
-------------------------------
INSURED OMI Corp.
-----------------------------------------------------------------------
TYPE OF INSURANCE See details in Instructions below
------------------------------------------------------------
Insured Organization: OMI Corp. and its subsidiaries.
Insured Persons: Any person who has been, now is, or shall
become a duly elected or appointed officer
or general manager of the Insured
Organization.
Continuity Date: None
Extended Reporting Period:
(A) Additional Premium: 150% of the Annual Premium
(B) Additional Period: One Year
Endorsements:
-- New York Amendatory (Extended Reporting Period)
-- New York Amendatory (Regulation 107)
-- Pending or Prior Litigation exclusion on the $5,000,000 excess
$5,000,000 layer as of December 31, 1988
-- Insured vs Insured exclusion with Wrongful Termination carveout
-- Excluded loss arising out of legal proceedings in December 31, 1994 10-K
-- Absolute BI/PD exclusion
-- Absolute Pollution exclusion
-- Spousal Liability extension
-- Presumptive Indemnification
-- Pending or Prior Litigation exclusion December 31, 1984
-- Scheduled For-Profit Triple Excess Outside Directorship Liability
coverage
-- Automatic Acquisition Threshold--10% of OMI's assets
-- The Reporting and Notice section of the policy will be amended by
changing the work "Insured" to "Risk Manager"
II) COMMERCIAL CRIME COVERAGE SECTION--FORM 14-02-263 (ED.6-81)
Name of Insured: OMI Corp. and any other subsidiary corporation(s)
now existing or hereafter created or acquired.
Limits of Liability:
Employee Theft Coverage: $2,000,000
Premises Coverage: $2,000,000
Transit Coverage: $2,000,000
Depositors Forgery Coverage: $2,000,000
Deductible Amount: $ 100,000
A275MS04.PRM/2
REV 1/19/96 (JA)
<PAGE>
ALEXANDER
& ALEXANDER PAGE 3 OF 5
LOGO ----- -----
ATTACHED TO AND FORMING PART OF A&A BINDER DATED January 19, 1996
-------------------------------
INSURED OMI Corp.
-----------------------------------------------------------------------
TYPE OF INSURANCE See details in Instructions below
------------------------------------------------------------
Territory: Anywhere in the world.
Employee Benefit Plans included as Insureds:
-- OMI Corp. Employee Stock Ownership Plan
-- OMI Corp. Savings Plan and any other Employee Benefit Plans now
existing or hereafter created which may be required to be bonded under
the Employee Retirement Income Security Act of 1974.
Endorsements:
-- Credit Card Forgery--$200,000 with $1,000 deductible
-- Money Orders & Counterfeit Currency Coverage--$2,000,0000 with $1,000
deductible
-- Perils of the Sea exclusion
-- Computer Fraud and Funds Transfer Endorsement
-- Computer Theft of Merchandise
-- The Notice-Proof-Legal Proceedings section will be amended to read
"Risk Manager"
-- The definition of Employee is extended to include students pursuing
studies on the Insured premises and retired persons working as
consultants
-- Automatic subsidiary coverage for acquisitions less than 10% of OMI's
total assets
III) SPECIAL COVERAGE--FORM 14-02-264 (ED 6-81)
Name of Insured: OMI Corp. and any other subsidiary corporation(s)
now existing or hereafter created or acquired.
Limits of Liability:
Kidnap/Ransom and
Extortion Coverage: $10,000,000
Delivery Coverage: $10,000,000
Expense Coverage: $10,000,000
Deductible Amount: NONE
Designated Persons: All directors, officers and employees of
the Insured.
Designated Persons: All Premises and Merchandise of the
Insured and any other tangible real or
personal property owned by the Insured or
for which the Insured is legally liable.
Endorsements:
-- Extended Expense Coverage
-- Accidental Death and Dismemberment Coverage
$350,000 per loss/$2,500,000 aggregate
A275MS04.PRM/3
REV 1/19/96 (JA)
<PAGE>
ALEXANDER
& ALEXANDER PAGE 4 OF 5
LOGO ----- -----
ATTACHED TO AND FORMING PART OF A&A BINDER DATED January 19, 1996
-------------------------------
INSURED OMI Corp.
-----------------------------------------------------------------------
TYPE OF INSURANCE See details in Instructions below
------------------------------------------------------------
Endorsements: (cont'd)
-- Business Interruption Coverage. Computer Virus peril included. 12 hour
waiting period.
-- Consequential Personal Financial Loss
-- Renewal Expense Endorsement
-- B/I Computer Virus Endorsement
-- Computer Virus Extortion
-- Recall Expense
-- Contingent Business Interruption Coverage with a $1,000,000 sublimit.
-- War Risk Accidental Death & Dismemberment at limits of $100,000 per
person/$500,000 incident aggregate.
-- Emergency Repatriation extension with a limit of $100,000 per loss and
an annual aggregate of $100,000.
IV) FIDUCIARY LIABILITY AND DEFENSE COVERAGE--FORM 14-02-262 (ED.6-81)
Limits of Liability:
(A) Each Loss $5,000,000
(B) Each Policy Year $5,000,000
Deductible Amount: $ 5,000
Sponsor Organization: OMI Corp. and its subsidiaries.
Employee Benefit Plans included as Insureds:
-- OMI Corp. Employee Stock Ownership Plan
-- OMI Corp. Savings Plan
and any other Employee Benefit Plans now existing or hereafter created
which may be required to be bonded under the Employee Retirement Income
Security Act of 1974.
Retroactive Date: NONE
Extended Reporting Period:
(A) Additional Premium: 150% of the Annual Premium
(B) Additional Period: One Year
A275MS04.PRM/4
REV 1/19/96 (JA)
<PAGE>
ALEXANDER
& ALEXANDER PAGE 5 OF 5
LOGO ----- -----
ATTACHED TO AND FORMING PART OF A&A BINDER DATED January 19, 1996
-------------------------------
INSURED OMI Corp.
-----------------------------------------------------------------------
TYPE OF INSURANCE See details in Instructions below
------------------------------------------------------------
Endorsements:
-- Pending & Prior Litigation Exclusion--January 31, 1995
-- Terminated Plan Endorsement: OMI Corp. 88 Pension Plan, OMI Corp.
Savings and Security Plan
-- 502(L) Coverage
-- Split deductible Endorsement
-- Automatic sold plan coverage
-- Automatic terminated plan coverage
-- Non-cancelable run-off coverage after a change in control
-- Spousal Liability extension
-- Coverage for formal administrative or regulatory proceedings
-- Coverage for acquired plans less than 10% in total plan assets
-- The Reporting and Notice Section of the policy will be amended to be
notice to the Risk Manager
ANNUAL INSTALLMENT PREMIUM: $241,000 (as per Multi-year Endorsement)
A275MS04.PRM/5
REV 1/19/96 (JA)
<PAGE>
BINDER OF INSURANCE
AIG
National Union Fire Insurance Company of Pittsburg, PA
70 Pine Street / 4th Floor New York, New York 10270
Direct Dial: (212) 770-6504 Fax: (212) 425-0210
________________________________________________________________________________
Monday, January 22, 1996
John Perkins
Vice President
Alexander & Alexander Financial Services
1185 Avenue of the Americas
25th Floor
New York, New York 10036
Re: OMI CORP.
Excess Directors and Officers Insurance and Corporate Reimbursement Policy
Policy Period: January 31, 1996-January 31, 1997
Dear John:
I am pleased to present this binder of coverage for the above captioned account
which was drafted in accordance with our agreement. Please review this binder
for accuracy and contact National Union prior to the Effective Date of policy
coverage of any inaccurancy(ies) found within the issued binder. If National
Union does not hear from you prior to the Effective Date of policy coverage, it
will be understood that the binder has been accepted, by you, as an accurate
description of the agreed upon terms of coverage.
POLICY INFORMATION
------------------
INSURED: OMI CORP.
________________________________________________________________________________
INSURED ADDRESS: 90 Park Avenue
New York, New York 10016-1302
________________________________________________________________________________
TYPE OF POLICY: Excess Directors and Officers Insurance and Corporate
Reimbursement Policy
________________________________________________________________________________
BASIC FORM: 8136
1
<PAGE>
________________________________________________________________________________
INSURER: National Union Fire Insurance Co. of Pittsburgh, Pa
(A member company of American International Group, Inc.)
________________________________________________________________________________
POLICY NUMBER: 482-51-72
________________________________________________________________________________
EFFECTIVE DATE: 1/31/96
________________________________________________________________________________
EXPIRATION DATE: 1/31/97
________________________________________________________________________________
LIMIT OF LIABILITY: $15,000,000 excess $10,000,000
________________________________________________________________________________
RETENTION: Sum of underlying limits and retention
________________________________________________________________________________
COMMISSION: 10%
________________________________________________________________________________
PREMIUM: $203,845
________________________________________________________________________________
OTHER CONDITIONS: See below
________________________________________________________________________________
MODIFICATION OF QUOTE LETTER OR OTHER INSTRUCTIONS:
- ---------------------------------------------------
Endorsements:
1. Follow Form D&O only
2. D&O insurance & company reimbursement pollution endorsement
3. Non follow form over specific endorsement (2 year endorsement)
SUBJECT TO INFORMATION REQUIRED PRIOR TO PERMANENT BINDER:
- ----------------------------------------------------------
Copy of the Primary Policy
CONDITIONS OF BINDER:
- ---------------------
When signed by both the Insurer and the Broker, the coverage described above is
in effect from 12:01 AM of the Effective Date listed above to 12:01 AM of the
Expiration Date listed above pursuant to the terms, conditions and exclusions of
the policy form listed above, any policy endorsements described above or in the
quote/indication letter referenced above, and any modifications of such terms
that may be described in this binder's section entitled Modification of Quote
Letter Or Other Instructions referenced above. Unless otherwise indicated, this
Binder may be canceled by the Insured, or by the Broker on the behalf of the
Insured, by written notice to the Insurer or by the surrender of this Binder
stating when thereafter such cancellation shall be effective. Unless otherwise
indicated, this Binder may be canceled by the Insurer prior to the Effective
Date by sending written notice to the Insured at the address shown above stating
when, not less than thirty days thereafter, such cancellation shall be
effective. Unless otherwise indicated, this Binder may be canceled by the
Insurer on or after the Effective Date in the same manner
2
<PAGE>
and upon the same terms and conditions applicable to cancellation of the policy
form listed above. If cancellation of this binder, by or on the behalf of either
the Insured or the Insurer, is effective after the Effective Date, then the
Insurer shall be entitled to the earned premium, on a pro-rata basis, for the
covered period. Issuance by the Insurer and acceptance by or on the behalf of
the Insured of the policy shall render this Binder void except as indicated
below.
Notwithstanding the payment of any premium or the issuance of any policy
pursuant to this Binder, this binder shall be considered to be a TEMPORARY AND
CONDITIONAL BINDER and is conditioned upon the receipt, review and written
underwriting approval of the additional information specified in the section
above entitled Subject To Information Required Prior to Permanent Binder. If
such information is not received, reviewed and approved in writing by the
Insurer within 30 days of the date indicated below that this Binder is executed
by the Insurer, then this Binder and any policy issued pursuant thereto will be
automatically null and void ab initio and have no effect. This Binder may be
extended only in writing by the Insurer.
A condition precedent to coverage afforded by this binder is that no material
change in the risk occurs and no submission is made to the Insurer of a claim or
circumstances that might give rise to a claim between the date of this binder
indicated above and the Effective Date.
PREMIUM PAYMENT
Our accounting procedures require that payment be remitted with 30 days of the
effective date of coverage or 15 days from the billing date, whichever is later.
We appreciate your compliance with this procedure.
We appreciate your business and hope that we can be of further service to you in
the future.
AGRRED TO BY:
- ----------------------------- ----------------------------------
Rhonda Seitzman John Perkins
Underwriter Vice President
National Union Fire Insurance Alexander & Alexander Financial
Company Services
of Pittsburgh, PA
Date: Monday, January 22, 1996 Date: _________________
3
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
Exhibit 27 contains summary information extracted from OMI Corp. and
subsidiaries Consolidated condensed financial statements and is qualified in its
entirety by reference to such financial statements.
</LEGEND>
<MULTIPLIER> 1,000
<CURRENCY> U.S. DOLLARS
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-END> DEC-31-1995
<EXCHANGE-RATE> 1
<CASH> 32,569
<SECURITIES> 0
<RECEIVABLES> 12,016
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 82,207
<PP&E> 646,135
<DEPRECIATION> 277,694
<TOTAL-ASSETS> 565,486
<CURRENT-LIABILITIES> 84,861
<BONDS> 259,284
<COMMON> 15,521
0
0
<OTHER-SE> 129,674
<TOTAL-LIABILITY-AND-EQUITY> 565,486
<SALES> 0
<TOTAL-REVENUES> 239,880
<CGS> 0
<TOTAL-COSTS> 208,192
<OTHER-EXPENSES> 70,369
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 26,708
<INCOME-PRETAX> (50,869)
<INCOME-TAX> (18,973)
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (31,896)
<EPS-PRIMARY> (1.04)
<EPS-DILUTED> (1.04)
</TABLE>
