<PAGE>
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON FEBRUARY 25, 1994
REGISTRATION NO. 33-52079
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
----------------
AMENDMENT NO. 1
TO
FORM S-3
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
----------------
OVERSEAS SHIPHOLDING GROUP, INC.
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
----------------
DELAWARE 13-2637623
(STATE OR OTHER JURISDICTION OF (I.R.S. EMPLOYER
INCORPORATION OR ORGANIZATION) IDENTIFICATION NO.)
1114 AVENUE OF THE AMERICAS
NEW YORK, NEW YORK 10036
(212) 869-1222
(ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER,
INCLUDING AREA CODE, OF REGISTRANT'S PRINCIPAL EXECUTIVE OFFICES)
----------------
ROBERT N. COWEN, ESQ.
SENIOR VICE PRESIDENT,
SECRETARY AND GENERAL COUNSEL
OVERSEAS SHIPHOLDING GROUP, INC.
1114 AVENUE OF THE AMERICAS
NEW YORK, NEW YORK 10036
(212) 869-1222
(NAME, ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER,
INCLUDING AREA CODE, OF AGENT FOR SERVICE)
COPIES TO:
HOWARD A. SHAPIRO, ESQ. RICARDO A. MESTRES, JR., ESQ.
PROSKAUER ROSE GOETZ & MENDELSOHN SULLIVAN & CROMWELL
1585 BROADWAY 125 BROAD STREET
NEW YORK, NEW YORK 10036 NEW YORK, NEW YORK 10004
----------------
APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC: As soon as
practicable after the effective date of this registration statement.
If the only securities being registered on this Form are being offered
pursuant to dividend or interest reinvestment plans, please check the following
box. [_]
If any of the securities being registered on this Form are to be offered on a
delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933, other than securities offered only in connection with dividend or
interest reinvestment plans, please check the following box. [_]
CALCULATION OF REGISTRATION FEE
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PROPOSED
PROPOSED MAXIMUM
AMOUNT MAXIMUM AGGREGATE AMOUNT OF
TITLE OF EACH CLASS OF TO BE OFFERING PRICE OFFERING REGISTRATION
SECURITIES TO BE REGISTERED REGISTERED(1) PER SHARE(2) PRICE(2) FEE(3)
- -------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Common Stock, par value $1.00
per share..................... 3,450,000 $23 1/2 $81,075,000 $27,957
- -------------------------------------------------------------------------------------------
</TABLE>
- --------------------------------------------------------------------------------
(1) Includes shares issuable upon exercise of the Underwriters' over-allotment
option.
(2) Estimated solely for the purpose of calculating the registration fee based
on the average of the high and low sale prices reported on the New York
Stock Exchange on January 26, 1994.
(3) Previously paid.
----------------
THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT
SHALL FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION
STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(A) OF
THE SECURITIES ACT OF 1933 OR UNTIL THIS REGISTRATION STATEMENT SHALL BECOME
EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID SECTION 8(A),
MAY DETERMINE.
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<PAGE>
++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++
+INFORMATION CONTAINED HEREIN IS SUBJECT TO COMPLETION OR AMENDMENT. A +
+REGISTRATION STATEMENT RELATING TO THESE SECURITIES HAS BEEN FILED WITH THE +
+SECURITIES AND EXCHANGE COMMISSION. THESE SECURITIES MAY NOT BE SOLD NOR MAY +
+OFFERS TO BUY BE ACCEPTED PRIOR TO THE TIME THE REGISTRATION STATEMENT +
+BECOMES EFFECTIVE. THIS PROSPECTUS SHALL NOT CONSTITUTE AN OFFER TO SELL OR +
+THE SOLICITATION OF AN OFFER TO BUY NOR SHALL THERE BE ANY SALE OF THESE +
+SECURITIES IN ANY STATE IN WHICH SUCH OFFER, SOLICITATION OR SALE WOULD BE +
+UNLAWFUL PRIOR TO REGISTRATION OR QUALIFICATION UNDER THE SECURITIES LAWS OF +
+ANY SUCH STATE. +
++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++
SUBJECT TO COMPLETION, DATED FEBRUARY 25, 1994
3,000,000 SHARES
OVERSEAS SHIPHOLDING GROUP, INC.
COMMON STOCK
(PAR VALUE $1.00 PER SHARE)
-----------
All of the shares of Common Stock offered hereby are being sold by the
Company.
The last reported sale price of the Common Stock on the New York Stock
Exchange on February 24, 1994 was $23 5/8 per share. See "Price Range of Common
Stock and Dividends."
-----------
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY
IS A CRIMINAL OFFENSE.
-----------
<TABLE>
<CAPTION>
INITIAL PUBLIC UNDERWRITING PROCEEDS TO
OFFERING PRICE DISCOUNT(1) COMPANY(2)
-------------- ------------ -----------
<S> <C> <C> <C>
Per Share............................... $ $ $
Total(3)................................ $ $ $
</TABLE>
- -----
(1) The Company has agreed to indemnify the Underwriters against certain
liabilities, including liabilities under the Securities Act of 1933.
(2) Before deducting estimated expenses of $200,000 payable by the Company.
(3) The Company has granted the Underwriters an option for 30 days to purchase
up to an additional 450,000 shares at the initial public offering price per
share, less the underwriting discount, solely to cover over-allotments. If
such option is exercised in full, the total initial public offering price,
underwriting discount and proceeds to the Company will be $ , $
and $ , respectively. See "Underwriting."
-----------
The shares offered hereby are offered severally by the Underwriters, as
specified herein, subject to receipt and acceptance by them and subject to
their right to reject any order in whole or in part. It is expected that
certificates for the shares will be ready for delivery at the offices of
Goldman, Sachs & Co., New York, New York, on or about , 1994.
GOLDMAN, SACHS & CO.
J.P. MORGAN SECURITIES INC.
FURMAN SELZ INCORPORATED
-----------
The date of this Prospectus is , 1994.
<PAGE>
IN CONNECTION WITH THIS OFFERING, THE UNDERWRITERS MAY OVER-ALLOT OR EFFECT
TRANSACTIONS WHICH STABILIZE OR MAINTAIN THE MARKET PRICE OF THE COMMON STOCK
AT A LEVEL ABOVE THAT WHICH MIGHT OTHERWISE PREVAIL IN THE OPEN MARKET. SUCH
TRANSACTIONS MAY BE EFFECTED ON THE NEW YORK STOCK EXCHANGE, THE PACIFIC STOCK
EXCHANGE OR OTHERWISE. SUCH STABILIZING, IF COMMENCED, MAY BE DISCONTINUED AT
ANY TIME.
AVAILABLE INFORMATION
Overseas Shipholding Group, Inc. (the "Company") is subject to the
informational requirements of the Securities Exchange Act of 1934, as amended
(the "Exchange Act"), and, in accordance therewith, files reports, proxy
statements and other information with the Securities and Exchange Commission
(the "Commission"). Such reports, proxy statements and other information can be
inspected and copied at the Commission's public reference facilities at Room
1024, 450 Fifth Street, N.W., Washington, D.C. 20549 and at the Commission's
regional offices at Suite 1400, Northwestern Atrium Center, 500 West Madison
Street, Chicago, Illinois 60661 and Suite 1300, Seven World Trade Center, New
York, New York 10048. Copies of such material can be obtained by mail from the
Commission's Public Reference Section at 450 Fifth Street, N.W., Washington,
D.C. 20549 at prescribed rates. Such reports, proxy statements and other
information also can be inspected at the offices of the New York Stock
Exchange, Inc., 20 Broad Street, New York, New York 10005.
This Prospectus constitutes a part of a registration statement on Form S-3
(together with all amendments and exhibits, the "Registration Statement") filed
by the Company with the Commission under the Securities Act of 1933, as amended
(the "Securities Act"). This Prospectus does not contain all the information
set forth in the Registration Statement, certain portions of which have been
omitted as permitted by the rules and regulations of the Commission. Statements
contained herein concerning the provisions of any document are not necessarily
complete and, in each instance, reference is made to the copy of such document
filed as an exhibit to the Registration Statement or otherwise filed with the
Commission. Each such statement is qualified in its entirety by such reference.
For further information with respect to the Company and the Common Stock
offered hereby, reference is made to the Registration Statement. The
Registration Statement may be inspected by anyone without charge at the
principal office of the Commission in Washington, D.C., and copies of all or
part of it may be obtained from the Commission upon payment of the prescribed
fees.
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
The following documents have been filed with the Commission and are
incorporated herein by reference: (i) the Company's Annual Report on Form 10-K
for the year ended December 31, 1992; (ii) the Company's Quarterly Reports on
Form 10-Q for the quarters ended March 31, 1993, June 30, 1993, and September
30, 1993; and (iii) the Company's Current Report on Form 8-K dated September
27, 1993.
Each document or report subsequently filed by the Company pursuant to Section
13(a), 13(c), 14 or 15(d) of the Exchange Act after the date hereof and prior
to the termination of the offering of the Common Stock offered hereby shall be
deemed to be incorporated by reference into this Prospectus and to be a part of
this Prospectus from the date of filing of such document. Any statement
contained herein, or in a document all or a portion of which is incorporated or
deemed to be incorporated by reference herein, shall be deemed to be modified
or superseded for purposes of the Registration Statement and this Prospectus to
the extent that a statement contained herein or in any other subsequently filed
document which also is or is deemed to be incorporated by reference herein
modifies or supersedes such statement. Any such statement so modified or
superseded shall not be deemed, except as so modified or superseded, to
constitute a part of the Registration Statement or this Prospectus.
2
<PAGE>
The Company will provide without charge to any person to whom this Prospectus
is delivered, on the written or oral request of such person, a copy of any or
all of the foregoing documents incorporated by reference, other than exhibits
to such documents (unless such exhibits are specifically incorporated by
reference into such documents). Written requests should be directed to:
Overseas Shipholding Group, Inc., 1114 Avenue of the Americas, New York, New
York 10036, Attention: Secretary's Office (telephone (212) 869-1222).
THE COMPANY
The Company is one of the world's leading independent (non oil company) bulk
shipping companies. The Company owns and operates a modern, well-maintained and
diversified fleet of oceangoing bulk cargo vessels consisting principally of
tankers and dry bulk carriers and representing approximately 1% of the total
world tonnage of such vessels. In October 1992, the Company entered into the
passenger cruise business through a joint venture with the Chandris Cruise
Division, an established cruise line operator unrelated to the Company. The new
venture, Celebrity Cruise Lines Inc. (CCLI), represents a major diversification
for the Company while continuing a business begun by the Chandris Group over 30
years ago.
The Company's operating bulk fleet consists of 59 vessels having an aggregate
carrying capacity of approximately 5.7 million deadweight tons (DWT), including
11 ships aggregating approximately 1.8 million DWT which the Company owns
jointly with others. Forty-three vessels in the Company's operating bulk fleet,
aggregating approximately 4.7 million DWT, are registered under foreign flags,
and 16 vessels, aggregating approximately 1 million DWT, are registered under
the U.S. flag. At July 1, 1993, the average age of the Company's international
fleet as well as its international tanker fleet (in each case excluding non-
Company interests in jointly-owned ships) was 11.4 years compared with reported
worldwide averages of 12.9 years and 13.1 years, respectively.
The Company's vessels are diversified by type, by size and by the markets in
which they operate. The Company's fleet includes 40 tankers, 23 of which are
crude carriers and 17 of which are petroleum product carriers, accounting for
approximately 75% of the fleet's total tonnage. The Company's operating fleet
also includes 18 dry bulk carriers and a pure car carrier accounting for the
balance of the fleet's total tonnage. In addition to the Company's operating
bulk fleet, four 93,650 DWT (Aframax) double-hulled tankers are on order for
delivery during 1994 and two 295,250 DWT double-hulled very large crude
carriers (VLCC's) are on order for delivery in the third quarter of 1995. The
Company believes that the size and diversity of its fleet enables the Company
to compete in a variety of markets throughout the world and to reduce its
exposure to any one market.
CCLI owns and operates five cruise ships under the trade names Celebrity
Cruises and Fantasy Cruises. Celebrity Cruises operates three ships in the
premium segment of the cruise market, one built in 1990, one built in 1992 and
one rebuilt in 1990. CCLI also caters to more budget-conscious cruise
passengers through its Fantasy Cruises product line. CCLI has contracts for the
construction of two new cruise ships to be delivered in 1995 and 1996, and has
an option, which it intends to exercise, for the construction of a third
sistership, all for the Celebrity fleet. The Company owns 49% of the equity in
CCLI, which functions as an equal joint venture of the Chandris Group and the
Company.
The Company, which traces its history to predecessor shipping companies
operating since the mid-1950's, was organized in 1969 with a fleet of 31
vessels aggregating about 1.0 million DWT. The Company completed its initial
public offering of Common Stock in 1970.
The Company's Common Stock is listed on the New York Stock Exchange under the
stock symbol "OSG," where it is one of the longest continuously traded shipping
stocks. The Company's principal offices are located at 1114 Avenue of the
Americas, New York, New York 10036, and its telephone number is (212) 869-1222.
Unless the context indicates otherwise, references in this Prospectus to the
"Company" include Overseas Shipholding Group, Inc. and its consolidated
subsidiaries and information in this Prospectus as to the size, carrying
capacity and charter position of the Company's fleet is given as of January 28,
1994.
3
<PAGE>
USE OF PROCEEDS
The net proceeds from the sale of Common Stock offered hereby are estimated
to be approximately $ million (assuming the Underwriters' over-allotment
option is not exercised) after deducting estimated expenses of the offering to
be paid by the Company. The Company intends to use approximately $50 million of
such net proceeds to reduce indebtedness outstanding under its revolving credit
agreement, with all remaining proceeds to be used for general corporate
purposes. Amounts repaid under the revolving credit agreement may be reborrowed
by the Company, and additional amounts may be borrowed, up to a maximum
aggregate of $500 million outstanding at any time, on a revolving credit basis
through February 1996, which date may be extended a year at a time by mutual
consent, after which the outstanding balance converts to a five-year term loan
payable in 10 equal semi-annual installments. Amounts outstanding under the
revolving credit agreement bear interest at the rate of 3.8152% per annum as of
February 24, 1994. See Note H to the Company's Consolidated Financial
Statements as at and for the year ended December 31, 1992. Affiliates of J.P.
Morgan Securities Inc. are parties to the revolving credit agreement.
PRICE RANGE OF COMMON STOCK AND DIVIDENDS
The Company's Common Stock is listed and traded on the New York Stock
Exchange and the Pacific Stock Exchange under the symbol "OSG." The following
table sets forth, for the periods indicated, the price range and cash dividends
paid per share of Common Stock.
Prices shown in the table are the high and low sales prices on the New York
Stock Exchange Composite Transactions by quarter as reported in The Wall Street
Journal. See the cover page of this Prospectus for a recent last reported sale
price of the Common Stock on the New York Stock Exchange.
<TABLE>
<CAPTION>
MARKET PRICE
-------------
HIGH LOW DIVIDENDS
------ ------ ---------
(IN DOLLARS)
<S> <C> <C> <C>
1992
First Quarter......................................... 21 1/4 16 7/8 0.15
Second Quarter........................................ 18 1/8 15 1/8 0.15
Third Quarter......................................... 16 7/8 13 3/8 0.15*
Fourth Quarter........................................ 17 3/8 13 1/2 0.15**
1993
First Quarter......................................... 19 3/4 15 3/4 0.15
Second Quarter........................................ 19 7/8 18 0.15
Third Quarter......................................... 20 1/2 17 0.15*
Fourth Quarter........................................ 24 1/4 19 1/8 0.15**
1994
First Quarter through February 24, 1994............... 26 3/4 21 7/8 0.15
</TABLE>
- --------
*Declared in second quarter.
**Declared in third quarter.
The Company has paid dividends on the Common Stock quarterly since May 1974.
4
<PAGE>
CAPITALIZATION
The following table summarizes the capitalization of the Company and its
consolidated subsidiaries at September 30, 1993, (i) as adjusted to give effect
to the sale of $100 million principal amount of 8% Notes due 2003 and $100
million principal amount of 8 3/4% Debentures due 2013, in a public offering
consummated in December 1993 (the "Debt Offering"), and the application of a
portion of the proceeds thereof to the reduction of indebtedness outstanding
under the Company's revolving credit agreement, and (ii) as further adjusted to
give effect to the sale of the Common Stock offered hereby (assuming the
Underwriters' over-allotment option is not exercised and without giving effect
to the payment of expenses) and the application of $50 million of the net
proceeds to a reduction of indebtedness outstanding under the revolving credit
agreement. See "Use of Proceeds." The table should be read in conjunction with
"Management's Discussion and Analysis of Financial Condition and Results of
Operations" appearing elsewhere in this Prospectus and the consolidated
financial information and related notes of the Company incorporated herein by
reference.
<TABLE>
<CAPTION>
AT
SEPTEMBER 30, 1993
----------------------
AS
AS FURTHER
ADJUSTED ADJUSTED
---------- ---------
(IN MILLIONS OF
DOLLARS)
<S> <C> <C>
Long-term debt:
Capital leases--8.40% to 10%.......................... 182.3 182.3
Title XI Bonds--8.45%................................. 12.9 12.9
Bank revolving credit................................. 75.0 25.0
Private placement notes 7.77% to 9.57%................ 310.0 310.0
Other vessel financings 8.00% to 10.59%............... 109.4 109.4
8% Notes due 2003..................................... 99.8 99.8
8 3/4% Debentures due 2013............................ 99.7 99.7
Less: Current portion................................... (22.9) (22.9)
---------- --------
Total long-term debt................................ 866.2 816.2
---------- --------
Shareholders' equity:
Common Stock, $1.00 par value(1)...................... 36.1 39.1
Paid-in additional capital............................ 20.9
Retained earnings..................................... 762.0 762.0
Less:
Treasury Stock........................................ (50.5) (50.5)
Unrealized loss on noncurrent marketable equity
securities........................................... (3.4) (3.4)
---------- --------
Total shareholders' equity.......................... 765.1
---------- --------
Total capitalization.............................. 1,631.3
========== ========
</TABLE>
- --------
(1) The Company's Certificate of Incorporation authorizes the issuance of a
total of 60,000,000 shares of Common Stock. At January 15, 1994, 32,741,826
shares of Common Stock were outstanding and 3,398,933 shares were held in
the Company's treasury, of which 1,286,679 shares were reserved for
issuance under certain stock option plans. All of the shares offered hereby
will be newly issued shares.
5
<PAGE>
SELECTED CONSOLIDATED FINANCIAL INFORMATION
The following table sets forth selected consolidated financial information of
the Company. The financial information for the five years ended December 31,
1992 has been derived from the annual consolidated financial statements of the
Company and its subsidiaries, audited by Ernst & Young, independent auditors.
The financial information for the nine-month periods ended September 30, 1993
and 1992 has been derived from unaudited financial statements. The unaudited
financial statements include all adjustments (consisting only of normal
recurring accruals) which the Company's management considers necessary to
present fairly the results for such unaudited interim periods. The results for
interim periods are not necessarily indicative of results to be expected for a
full year. Results of CCLI, the Company's joint venture in the cruise business,
are reflected in the consolidated financial statements beginning as of October
1, 1992, the effective date of the joint venture. The table should be read in
conjunction with "Management's Discussion and Analysis of Financial Condition
and Results of Operations" appearing elsewhere in this Prospectus and the
consolidated financial information and related notes of the Company
incorporated herein by reference.
<TABLE>
<CAPTION>
NINE MONTHS ENDED
SEPTEMBER 30, YEAR ENDED DECEMBER 31,
------------------- --------------------------------------------------------
1993 1992 1992 1991 1990 1989 1988
--------- --------- --------- --------- --------- --------- ---------
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C> <C> <C> <C>
INCOME STATEMENT DATA:
Shipping Revenues....... $ 295,201 $ 276,099 $ 370,885 $ 419,105 $ 399,654 $ 310,117 $ 307,356
Income from Vessel
Operations............. 31,316 25,220 29,414 102,046 112,894 76,172 74,475
Income before Interest
and Tax................ 55,584 50,566 41,751(1)(2) 135,400 142,280 115,940 100,365
Income (Loss) before
Federal Income Tax..... 23,309 17,362 (2,829)(1)(2) 79,826 80,757 74,177 62,704
Income before Cumulative
Effect of Accounting
Change................. 14,909 12,087 71(2) 55,076 55,857 51,976 46,404
Net Income.............. 14,909 28,087(3) 16,071(2)(3) 55,076 55,857 51,976 46,404
BALANCE SHEET DATA
(AT PERIOD END):
Cash and Investments in
Marketable Securities.. 111,849 125,821 105,173 170,967 143,427 163,690 212,999
Working Capital......... 74,415 76,796 101,194 91,410 92,950 80,211 99,599
Vessels including
Capital Leases......... 1,034,122 1,057,420 1,067,122 1,026,817 1,035,463 1,069,679 856,239
Investment in CCLI...... 228,473 -- 219,886 -- -- -- --
Total Assets............ 1,699,437 1,557,664 1,714,548 1,545,675 1,498,277 1,540,621 1,318,178
Long-Term Debt and
Capital Lease
Obligations............ 749,652 593,832 784,452 576,321 612,819 673,143 477,852
Shareholders' Equity.... 765,147 776,650 762,425 760,322 707,128 700,784 695,684
OTHER FINANCIAL DATA:
Capital Spending........ 46,298 75,072 81,213 59,405 25,693 201,104 125,049
Depreciation and
Amortization........... 44,095 42,505 56,472 56,214 55,567 51,136 48,934
Cash Provided by
Operating Activities... 57,581 9,625 9,963 109,608 98,051 87,963 106,072
PER SHARE DATA:
Income before Cumulative
Effect of Accounting
Change................. $ .46 $ .37 -- $ 1.67 $ 1.63 $ 1.46 $ 1.29
Net Income.............. $ .46 $ .86 $ .49 $ 1.67 $ 1.63 $ 1.46 $ 1.29
Cash dividends declared. $ .60 $ .60 $ .60 $ .55 $ .50 $ .50 $ .36
AVERAGE SHARES
OUTSTANDING............ 32,676 32,843 32,806 33,012 34,317 35,698 36,008
</TABLE>
- --------
(1) Before cumulative effect of change in accounting for income tax.
(2) Reflects a provision of $20 million ($13.1 million net of tax) for loss on
investment in GPA Group plc.
(3) Includes $16 million credit from the Company's adoption of FAS 109
"Accounting for Income Taxes."
6
<PAGE>
THREE MONTH AND TWELVE MONTH RESULTS
The following table sets forth capsule consolidated financial information of
the Company for the three- and twelve-month periods ended December 31, 1993
and 1992.
<TABLE>
<CAPTION>
THREE MONTHS ENDED YEAR ENDED
DECEMBER 31 DECEMBER 31
------------------------ -------------------------
1993 1992 1993 1992
----------- ------------ ------------ ------------
<S> <C> <C> <C> <C>
Shipping Revenues $94,220,000 $ 94,786,000 $389,421,000 $370,885,000
Income/(Loss) Before
Cumulative Effect of
Accounting Change...... $ 3,037,000 $(12,016,000)(b) $ 17,946,000 $ 71,000(b)
Cumulative Effect of
Change in Accounting
for Income Taxes(d).... $ -- $ -- $ -- $ 16,000,000
Net Income/(Loss)(a)(c). $ 3,037,000 $(12,016,000) $ 17,946,000 $ 16,071,000
Per Share Amounts:
Income/(Loss) Before
Cumulative Effect of
Accounting Change..... $ .09 $ (.37) $ .55 $ --
Cumulative Effect of
Change in Accounting
for Income Taxes...... $ -- $ -- $ -- $ .49
Net Income/(Loss)...... $ .09 $ (.37) $ .55 $ .49
Average Number of Shares
Outstanding............ 32,685,036 32,693,831 32,678,031 32,805,549
</TABLE>
- --------
(a) Gains from disposal of vessels (net of income tax), totaled $7,327,000, or
$.22 per share, in 1993, reflecting provision for loss of $651,000, or
$.02 per share, net of income tax, in the fourth quarter for the disposal
of a 50%-owned vessel. In 1992, provision for loss from the disposal of a
vessel (net of income tax), amounted to $831,000, or $.03 per share (all
in the fourth quarter).
(b) After reserve of $13,100,000 (net of income tax), for investment in GPA
Group plc.
(c) Provision for income taxes in 1993 was $8,900,000 for the year, and
$500,000 for the fourth quarter; in 1992 there was an income tax credit of
$2,900,000 for the year, including a credit of $8,175,000 for the fourth
quarter.
(d) In the first quarter of 1992, the Company adopted Statement of Financial
Accounting Standards No. 109, "Accounting for Income Taxes."
7
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Revenues and income from vessel operations of the Company are highly
sensitive to patterns of supply and demand for vessels of the types and sizes
owned and operated by the Company and the markets in which those vessels
operate. Freight rates for major bulk commodities are determined by market
forces including local and worldwide demand for such commodities, volumes of
trade, distances between sources and destinations of cargoes and amount of
available tonnage both at the time such tonnage is required and over periods of
projected requirements. Available tonnage is affected, over time, by the amount
of newbuilding deliveries and removal of existing tonnage from service. See
"Business--Bulk Shipping Overview;--International Tanker Market;--International
Dry Bulk Carrier Market;--U.S. Flag Bulk Markets; and--Chartering Strategy and
Competition in the Bulk Shipping Markets."
Results in particular periods are also affected by such factors as the mix
between voyage and time charters, the timing of the completion of voyage
charters, the time and prevailing rates when charters that are currently being
performed were negotiated, the levels of applicable rates and the business
available as particular vessels come off existing charters, and the timing of
drydocking of vessels.
Historically, the diversity of the Company's fleet has tended to cushion the
effects of weakness in particular markets. However, 1992 was a particularly
difficult year in that there was simultaneous weakness in all of the Company's
major markets. Some of the effects of this weakness carried over into the
results of the Company's operations in 1993, primarily in the first half. In
general, market rates improved during 1993 from the depressed rates that
prevailed in 1992, but still remain at levels below those of the years 1989
through 1991. Beginning in the fourth quarter of 1993, freight rates for
foreign flag VLCC's and dry bulk carriers have weakened somewhat, while rates
for foreign and U.S. flag product carriers have experienced seasonal increases.
NINE MONTHS ENDED SEPTEMBER 30, 1993, COMPARED TO NINE MONTHS ENDED SEPTEMBER
30, 1992
Income from Vessel Operations. Income from vessel operations for the nine
months ended September 30, 1993 increased by approximately $6.1 million from
the results for the first nine months of 1992. This increase was attributable
to the inclusion in income of the Company's equity ($5.5 million) in the
results of CCLI and to $2.5 million of improved income from foreign flag vessel
operations, reflecting increased charter market rates primarily in the third
quarter of 1993 for certain Suezmax (approximately 128,000 DWT) and Aframax
tonnage compared to the rates obtained during the 1992 period for those
vessels. The favorable effect on revenues of less tonnage being idle due to
lack of employment and for drydockings in the 1993 nine months as compared to
1992 is also reflected. Income from foreign flag vessel operations in the 1993
nine month period was adversely affected by lower charter rates in the first
half of 1993 (primarily in the first quarter) for most classes of tankers and
dry bulk vessels compared with rates obtained in 1992, and by substantially
lower VLCC rates for certain tonnage throughout the 1993 period. During 1992,
certain foreign flag vessels were operating on time charters negotiated in
prior periods when rates were more favorable. Income from operations of the
U.S. flag fleet declined approximately $1.9 million in the 1993 nine months
compared to the 1992 period, resulting primarily from a crude carrier being
idle due to lack of employment during the 1993 period. This was partially
offset by better operating results for two U.S. flag dry bulk carriers,
reflecting fewer idle days and better rates.
Voyage expenses, such as fuel and port costs, are paid by the vessel owner
under a voyage charter and by the charterer under a time charter. The increase
in vessel and voyage expenses in the 1993 first nine months from 1992 reflects
a higher proportion of voyage charters to time charters in 1993 as compared to
1992. Vessel operating expenses were also higher in the first nine months of
1993 as compared to 1992 because of increased manning on most U.S. flag tankers
to comply with provisions of the United States Oil Pollution Act of 1990 (OPA
90). The effect of vessels sold in 1993 is also reflected.
8
<PAGE>
The increases in income attributable to 50% owned companies in the 1993
period as compared to 1992 resulted from improved rates on certain tonnage and
decreases in certain expenses.
Other Income (Net). Interest and dividends decreased in the first nine months
of 1993 as compared to the 1992 period because of reduced amounts utilized for
interest-bearing deposits and investments and lower rates of return on such
deposits and investments. Disposal of vessels resulted in gains of $12.1
million in the 1993 first nine months. No vessels were sold in the first nine
months of 1992. Gains on sale of securities were approximately $5.3 million in
the first nine months of 1993, and approximately $12.1 million in the
comparable 1992 period. Other income also reflects the results of foreign
currency transactions in both periods.
Interest Expense. Interest expense decreased in the first nine months of 1993
from the comparable period of 1992 as a result of reduced rates on floating
rate debt and increased interest costs capitalized in connection with vessel
construction, net of the effect of more debt being outstanding in the 1993 nine
months. Interest expense in both periods also reflects the effect of interest
rate swaps (see "--Liquidity and Sources of Capital").
Provision for Federal Income Taxes. The provision for Federal income taxes in
the first nine months of 1993 increased from the comparable 1992 period
primarily because of the provision in the third quarter of 1993 of $2.9
million, or $.09 per share, for additional deferred taxes resulting from the
increase in the Federal statutory rate from 34% to 35% enacted on August 10,
1993. The 1993 estimated annual effective tax rate was adjusted to reflect the
foregoing rate increase.
YEAR ENDED DECEMBER 31, 1992, COMPARED TO YEAR ENDED DECEMBER 31, 1991
Income from Vessel Operations. Income from vessel operations for 1992
decreased by approximately $72.6 million from the results for 1991. Over 90% of
this decrease was attributable to a decline in income from foreign flag vessel
operations, reflecting reduced charter market rates in 1992 for all classes of
the Company's international flag tanker and dry cargo fleets compared with
rates prevailing during 1991. Included in the 1992 foreign flag results was the
effect on revenues of more tonnage being idle due to lack of employment. The
1992 decrease also reflects reduced income from operations of the U.S. flag
fleet, resulting from lower charter rates for certain of the Company's
petroleum products carriers and certain crude carrier tonnage; the effect on
revenues of increased drydockings in 1992 as compared to 1991 is also included.
The increase in vessel and voyage expenses in 1992 as compared to 1991
reflects an increase in the number of voyage charters for international flag
vessels as compared with time charters. Vessel operating expenses were also
higher in 1992 as compared to 1991 because of increased manning on most U.S.
flag tankers to comply with provisions of OPA 90, expense increases (see "--
Effects of Inflation") and charter hire expense on a vessel delivered to the
Company in 1992 on a seven-year time charter.
The decline in income attributable to joint venture companies resulted
primarily from decreases in charter rates obtained for certain tonnage and
increases in costs of operations. The Company's share of the results of CCLI,
included in income on the equity method since October 1992, was not material.
Other Income (Net). In the fourth quarter of 1992, the Company took a reserve
of $20.0 million ($13.1 million, or $.40 per share, net of income tax) for its
entire investment in GPA Group plc. Interest and dividends in 1992 decreased
from 1991 because of lower rates of return on interest-bearing deposits and
investments and reduced amounts utilized for such deposits and investments.
Gain on sale of securities was approximately $14.1 million in 1992 compared to
approximately $5.5 million in 1991. There was a provision for loss on disposal
of vessels of approximately $1.3 million in 1992 compared to a gain of
approximately $4.1 million in 1991. Other income also reflects the results of
foreign currency transactions and the effect of minority interest in both
years, and a decrease in 1992 compared to 1991 in income earned from other
investments.
9
<PAGE>
Interest Expense. Interest expense decreased in 1992 from 1991 as a result of
reduced rates on floating rate debt and increased interest costs capitalized in
connection with vessel construction. The decrease was net of more debt being
outstanding, on average, in 1992. Interest expense in 1992 also reflects the
effect of interest rate swaps (see "--Liquidity and Sources of Capital").
Provision for Federal Income Taxes. The tax credit in 1992 results from the
pretax loss adjusted to reflect the dividends received deduction and other
nontaxable items.
Cumulative Effect of Accounting Change. The Company adopted Statement of
Financial Accounting Standards No. 109, "Accounting for Income Taxes" ("FAS
109"), starting in 1992. In accordance with FAS 109, prior years' financial
statements have not been restated. The impact of applying FAS 109 was to reduce
deferred tax liabilities by $16.0 million, with a corresponding increase in net
income (cumulative effect of change in accounting) for 1992.
YEAR ENDED DECEMBER 31, 1991, COMPARED TO YEAR ENDED DECEMBER 31, 1990
Income from Vessel Operations. Income from vessel operations for 1991
decreased by approximately $10.8 million from the results for 1990.
Approximately 85% of this decrease was attributable to reduced income from
foreign flag vessel operations, resulting from the effect of vessels sold in
1991 (see Other Income (Net) below) and reduced charter rates in the fourth
quarter of 1991 for the Company's petroleum products carriers, a trend that
continued into early 1992 for this and certain other classes of tankers. The
reduced income is net of increased rates for the petroleum products carriers in
the first half of 1991, reflecting the effects of the Gulf war, and for the
Company's VLCC's (including 50%-owned VLCC's) and certain other foreign flag
tankers. Certain foreign flag dry cargo vessels that completed charters in 1991
(mostly in the first quarter) obtained lower rates than rates obtained in 1990;
such latter rates were based on charters negotiated primarily in 1989. In the
fourth quarter of 1991, certain of the Company's foreign flag dry cargo vessels
obtained increased rates compared to 1990. The effect on revenues of increased
drydockings in 1991 as compared to 1990 is also reflected. The balance of the
1991 decrease was attributable to reduced income from operations of the U.S.
flag fleet, resulting from reduced charter rates obtained in order to
reposition three vessels redelivered in the third quarter of 1991 from long-
term charters and increases in certain general and administrative costs. The
U.S. flag decline was net of increased charter rates for certain of the
Company's crude carriers and one of its U.S. flag dry bulk carriers.
The increases in revenues from voyages and vessel and voyage expenses in 1991
as compared to 1990 reflect the effects of vessels entering the fleet and
expense increases (see "--Effects of Inflation"), net of increases in the
number of time charters as compared to voyage charters.
Other Income (Net). Interest income in 1991 decreased from 1990 because of
lower rates of return on deposits and investments, net of increased amounts,
including the proceeds of vessels sold in 1991, utilized for such investments.
Dividends in 1991 increased from 1990, reflecting an increase in the relative
amount of higher yielding securities in the Company's marketable securities
portfolio. The amount invested in marketable securities increased during 1991,
although, on average, the amount invested was lower than in 1990. Sale of
marketable securities resulted in a gain of approximately $5.5 million in 1991
compared to a loss of approximately $6.2 million in 1990. Gain on disposal of
vessels was approximately $4.1 million in 1991 compared to approximately $16.2
million in 1990. Other income also reflects foreign currency exchange losses
and the effect of minority interest in both years and an increase in 1991
compared to 1990 in income earned from other investments.
Interest Expense. Interest expense decreased in 1991 from 1990 primarily as a
result of reduced rates on floating rate debt and less debt being outstanding.
The decrease was net of reduced interest costs capitalized in connection with
vessel construction.
Provision for Federal Income Taxes. The decrease in the provision for Federal
income taxes in 1991 as compared to 1990 resulted primarily from the decrease
in pretax income.
10
<PAGE>
FEDERAL INCOME TAXES
Federal income taxes for each of the three years ended December 31, 1992 and
the nine-month periods ended September 30, 1993 and September 30, 1992 reflect
the effects of the Tax Reform Act of 1986, including current taxation of post-
1986 results of the Company's foreign owned vessels.
LIQUIDITY AND SOURCES OF CAPITAL
Working capital at September 30, 1993 was approximately $74 million. Current
assets are highly liquid, consisting principally of cash, interest-bearing
deposits and receivables. The Company also had investments in marketable
securities carried as noncurrent assets, other than securities included in
restricted funds, with a market value of approximately $17 million.
Net cash provided by operating activities in the first nine months of 1993
approximated $58 million (which is not necessarily indicative of the cash to be
provided by operating activities for a full fiscal year), including a $6.8
million tax refund. Current financial resources, together with cash anticipated
to be generated from operations, are expected to be adequate to meet
requirements for short-term funds in 1994. In December 1993, the Company sold
an aggregate of $100 million principal amount of 8% Notes due 2003 and $100
million principal amount of 8 3/4% Debentures due 2013 in the Debt Offering. In
June 1993, the Company sold an aggregate of $110 million of long-term,
unsecured, senior notes to major institutional investors in a private
placement. These private placement notes have a weighted average life of
approximately 12.25 years and a weighted average interest rate of 8.01%. The
net proceeds of the private placement notes and approximately $83 million of
the net proceeds of the notes and debentures sold in the Debt Offering were
used to reduce amounts outstanding under the Company's revolving credit
agreement.
As of January 15, 1994, the Company is a party to fixed to floating interest
rate swap agreements ranging between three and fifteen years with various banks
covering notional amounts aggregating $685 million, pursuant to which it pays
LIBOR and receives fixed rates ranging from 5.3% to 8.1% calculated on the
notional amounts. The Company is also a party to a five-year interest rate swap
agreement with a notional amount of $24 million, expiring in 1996, pursuant to
which it pays a fixed interest rate of 8.4% and receives LIBOR, calculated on
the notional amount.
The Company has an unsecured long-term credit facility of $500 million, of
which $153 million was used at September 30, 1993. The Company also has an
unsecured short-term credit facility of $30 million, of which $5 million was
used at September 30, 1993.
The Company has under construction six foreign flag tankers scheduled for
delivery in 1994 and 1995. At January 15, 1994, after giving effect to
prepayments of an aggregate of $163.4 million subsequent to September 30, 1993
and discounts resulting from such prepayments, there remains an aggregate
unpaid cost of approximately $86 million with respect to such vessels.
Approximately $50 million of the net proceeds from the sale of the Common
Stock offered hereby will be used to reduce indebtedness under the Company's
revolving credit agreement, with all remaining proceeds being available for
general corporate purposes. See "Use of Proceeds."
EFFECTS OF INFLATION
Additions to the costs of operating the fleet due to wage, insurance and
price level increases were experienced during 1990, 1991, 1992 and the first
nine months of 1993. In some cases these increases were offset by rates
available to tonnage open for chartering and to some extent by charter
escalation provisions.
ENVIRONMENTAL MATTERS
See "Business--Environmental Matters Relating to Bulk Shipping" for a
discussion regarding OPA 90 and certain regulations of the International
Maritime Organization (IMO), the United Nations agency for international
maritime affairs.
11
<PAGE>
BUSINESS
The following table sets forth a summary of the Company's operating bulk
fleet at January 28, 1994. In addition, the Company has on order four 93,650
DWT double-hulled Aframax tankers for delivery during 1994, and two 295,250 DWT
double-hulled VLCC's scheduled for delivery during the third quarter of 1995.
<TABLE>
<CAPTION>
CAPACITY PERCENTAGE OF
VESSEL TYPE NUMBER (DWT) TOTAL BY DWT
----------- ------ --------- -------------
<S> <C> <C> <C>
U.S. FLEET
Tankers..................................... 13 926,350 16.3%
Dry Bulk Carriers........................... 2 51,100 0.9
Pure Car Carrier............................ 1 15,900 0.3
--- --------- -----
Sub-Total................................. 16 993,350 17.5%
--- --------- -----
INTERNATIONAL FLEET
Tankers..................................... 27 3,294,750 57.9%
Dry Bulk Carriers........................... 16 1,398,950 24.6
--- --------- -----
Sub-Total................................. 43 4,693,700 82.5%
--- --------- -----
Total*.................................. 59 5,687,050 100.0%
=== ========= =====
</TABLE>
- --------
*These figures include 11 ships aggregating 1.8 million DWT which the Company
owns jointly with others, one of which, a 252,350 DWT tanker, is under
contract for sale for delivery at the end of March 1994. Eight vessels are
leased from financial institutions under bareboat charters with remaining
terms of 8 to 18 years. The figures do not include a 94,450 DWT crude
carrier chartered in under a time charter with approximately 5 years
remaining or a 29,300 DWT petroleum barge that is 50% owned by the Company.
The Company charters its ships to commercial shippers and United States and
foreign governmental agencies for the carriage of bulk commodities, principally
petroleum and petroleum products, grain, coal and iron ore. Approximately 75%
of the Company's voyage revenues in 1993, 78% in 1992 and 75% in 1991 came from
carrying petroleum and its derivatives. These liquid cargoes also accounted for
the majority of the voyage revenues of the Company's 50%-owned companies.
Generally, each ship is chartered for a specific period of time (time
charter) or for a specific voyage or voyages (voyage charter). Under the terms
of time and voyage charters covering the Company's vessels, the ships are
equipped and operated by the Company and are crewed by personnel in the
Company's employ. From time to time, the Company also has some of its vessels
on bareboat charter. Under the terms of bareboat charters, the ships are
chartered for fixed periods of time (generally medium-or long-term) during
which they are operated and crewed by the charterer. Chartering business is
generally conducted through a network of international brokers who track
worldwide supply of and demand for various types of vessels.
In late 1992, the Company entered into the passenger cruise business through
CCLI, a joint venture with the Chandris Cruise Division, an established cruise
line operator unrelated to the Company. CCLI represents a major diversification
for the Company while continuing a business begun by the Chandris Group over 30
years ago. CCLI currently operates five cruise ships, three of which, in the
Celebrity Cruises fleet, serve the premium segment of the cruise market. CCLI
also has two cruise ships on order, and an option, which it intends to
exercise, for a third sistership, all for the Celebrity fleet. For further
discussion of CCLI, see "Business--Cruise Business; --Historical Growth of the
Cruise Industry; --Cruise Industry Competition; and --Regulatory Matters
Relating to Cruise Industry."
12
<PAGE>
BULK SHIPPING OVERVIEW
The maritime bulk shipping industry is fundamental to international trade,
being the only practicable and cost effective means of transporting large
volumes of many essential commodities. In January 1994, the world bulk fleet,
with a carrying capacity of approximately 515 million metric deadweight tons
(MDWT), constituted 78% of the world's total merchant shipping capacity. Oil
tankers, the largest component of the world bulk fleet, comprised 265 million
MDWT or over 50% of this tonnage. The world's ocean bulk shipping fleet moved
more than 2.8 billion tons of cargo in each of 1992 and 1993. These vessels
deliver raw materials to the world's process industries and commodity products
to industries and distribution centers worldwide. Bulk shipping is
distinguished from other forms of seaborne transportation by the types of
vessels employed, the trades in which they operate and the manner in which
freight rates are determined. Unlike container or liner ships, which the
Company does not own, bulk vessels are not bound to specific ports or schedules
and therefore can respond to market demands by moving between trades and
geographical areas.
The following graph sets forth historical information relating to the
seaborne trade of major bulk commodities.
[Chart]
Seaborne
The bulk shipping industry is highly fragmented and competitive. There are
many operators with small fleets. Freight rates for major commodities are
determined by market forces and are highly sensitive to changes in vessel
supply and demand which results in both wide cyclical movements in the industry
and, in the spot and voyage markets, sharp rate fluctuations.
13
<PAGE>
Demand for ocean transportation is a function of the demand and supply
patterns for the commodities to be shipped, the resulting volumes of trade and
the distances between sources and destinations of cargoes. The supply of
particular shipping services, in the short run, reflects the amount of suitable
tonnage that is available and offered for use by the shipowners, or by
charterers who want to re-let vessels. Tonnage supply can be reduced through
lay-up, through drydocking for repairs or through a reduction in vessel speed.
Over time, the available tonnage supply is determined primarily by the amount
of newbuilding deliveries and of existing tonnage sold for scrap. Depending on
the size of the newbuilding orderbook, it generally takes two to three years
from the time a vessel is ordered to its delivery. Vessels generally have
useful lives of up to 25 years or more.
The following graph shows the age profile of the various segments of the
world bulk fleet.
[Chart]
World Bulk
The industry has many markets which have distinct characteristics and are
subject to different market and regulatory forces. As a result, the prospects
for a particular vessel may differ from those for other vessels based upon the
type of the vessel or its size or flag. The design of each vessel type must
reflect the type of cargo it is to carry. Moreover, the route over which
cargoes are carried can affect the type of vessel that practically or
economically can be used. Most ports have dimensional restrictions that put an
upper limit on the size of vessel they can accommodate.
Historically, the Company's diversified fleet has tended to cushion the
effects of weakness in particular markets. However, 1992 was a particularly
difficult year in that there was simultaneous weakness in all of the Company's
major markets. In general, market rates improved during 1993 from
14
<PAGE>
the depressed rates that prevailed in 1992, but still remain at levels below
those of the years 1989 through 1991. Beginning in the fourth quarter of 1993,
freight rates for foreign flag VLCC's and dry bulk carriers have weakened
somewhat, while rates for foreign and U.S. flag product carriers have
experienced seasonal increases.
At January 15, 1994, all of the vessels in the Company's operating bulk fleet
were employed.
INTERNATIONAL TANKER MARKET
World tanker demand is dominated by crude oil shipments, which currently
account for approximately 80% of total tanker shipments. Refined petroleum
products constitute the remainder of oil tanker demand. The international
demand for crude tankers depends primarily on the amount of crude oil to be
shipped on the long transoceanic routes from the Middle East, West Africa and
South America to oil-importing countries in North America, Europe and the Far
East. Shipments from the Arabian Gulf to the United States, Japan and Western
Europe have grown considerably over the last decade, thus absorbing a larger
proportion of the available crude tanker tonnage.
Petroleum products carriers, which account for only a small portion of the
world's total tanker tonnage, are used in a large number of both long- and
short-haul trades, between and within the various continents. Demand for these
tankers is influenced both by product demand and by changes in refining
capacity in different regions of the world.
While difficult conditions persist in today's tanker markets, there were
increased inquiries for long-term contracts in 1993, an indication that
charterers expect tighter markets, particularly for modern tonnage. As a
result, the Company was able to enter into long-term charters with major oil
companies for two of its international tankers.
Both Europe and Japan experienced recessions in 1993, adversely affecting
global oil demand. Total world oil demand remained flat in 1993 compared to
1992. Excluding the former Soviet Union ("FSU"), however, oil consumption
increased by nearly 2%, most of which occurred in the developing economies in
Asia and Latin America. Supply patterns also shifted. U.S. and FSU oil
production fell, and the North Sea and Latin America, particularly Mexico,
Venezuela and Colombia, registered sizable increases in export volumes. Total
OPEC production for the first three quarters of 1993 was above that for the
comparable period in 1992, but the fourth quarter of 1993 was below the fourth
quarter of 1992 as the typical seasonal increase did not occur. Together, these
developments resulted in a change of incremental crude sources from long-haul
to short-haul routes, as the North Sea and Latin America provided most of the
additional crude imports to the United States.
Because of the relatively high cost of an individual vessel and the long lead
time for delivery, the supply of tankers is subject to pronounced cyclical
swings. Strong tanker demand in the early 1970's stimulated extensive
newbuilding programs which exceeded actual market needs, especially in light of
the oil price shock of 1973 that severely curtailed oil consumption. The
ensuing oversupply of tankers, particularly large tankers and VLCC's, drove
down charter rates which, in turn, led to increased scrapping, a decline in
newbuildings and a shrinkage of the fleet during most of the 1980's. The
average age of the world fleet rose during this period. Market conditions
improved in the late 1980's, and by 1990, rates had increased substantially
from the depressed levels of the mid-1980's. This improvement in the market
caused a resurgence of newbuilding orders, which peaked in 1990.
15
<PAGE>
Increased newbuilding deliveries during 1991 and 1992 coincided with
worldwide economic weakness, resulting in a widening imbalance between tonnage
supply and tonnage demand and a corresponding deterioration in charter rates
for 1992. This, in turn, has led to a decrease in newbuilding orders and a
higher level of scrapping during 1992. In 1993, the world tanker fleet
registered its sixth straight year of growth, increasing by nearly 5 million
MDWT to 265 million MDWT by year-end. Newbuilding deliveries amounted to 17
million MDWT, the highest since 1977. The Company believes that, from the long-
term perspective, fleet growth during 1992 and 1993 has not been excessive.
However, it has outpaced growth in tonnage demand. Sales for scrap in 1993
eased modestly from 12 million MDWT in 1992. The Company believes that, over
the next few years, sales for scrap are likely to be significant, reflecting
both the age of the fleet and stricter regulatory requirements. The amount of
international tanker tonnage in lay-up remained flat at 3 million MDWT at the
end of 1993.
Tanker newbuilding prices weakened early in 1993 and remained so throughout
the year. Secondhand prices for modern vessels strengthened somewhat, but
generally remained weak for vessels more than 10 years of age. Newbuilding
orders increased over 1992 but did not keep pace with deliveries. Thus, the
newbuilding orderbook for delivery over the next three years fell by 5 million
MDWT to 24 million MDWT (10 million MDWT scheduled in 1994).
The graph below sets forth historical information relating to scrapping and
newbuilding in the world tanker fleet.
[Chart]
Tanker
16
<PAGE>
INTERNATIONAL DRY BULK CARRIER MARKET
World demand for dry bulk carriers primarily reflects the international trade
flows of iron ore, coal and grain on the long-haul routes across the Atlantic
and Pacific Oceans and on various shorter routes. Over the past decade, the
seaborne movement of coal has grown significantly, and iron ore shipments have
increased moderately. Grain shipments, on the other hand, have remained
relatively flat.
Fluctuations in demand for iron ore and coking coal derive from changes in
steel production. In the 1980's, expanded steel output in Japan, Korea and
Taiwan led to larger iron ore and coking coal shipments into these countries,
principally from Australia. Over the past few years, China has become a
significant importer of iron ore. Steam coal shipments also grew in response to
increased demand for power generation in both the Far East and Europe. More
recently, the decline in Eastern European coal mining has stimulated shipments
of coal from the United States to Europe.
In 1992, while steel output in Korea continued to grow and in Taiwan fell
modestly, output in Japan contracted sharply, as did associated iron ore and
coking coal requirements. Because Japan accounts for one third of seaborne iron
ore shipments, rates in the Capesize (100,000 or more DWT) segment of the
market fell sharply. In the absence of offsetting increases in shipping demand
for other commodities, this decline led to some weakness in other segments of
the dry bulk market.
Freight rates in the dry bulk markets moved higher during the first five
months of 1993, recovering from their lows in the fall of 1992, but much of
those gains were relinquished by year-end. In early 1993, there were modest
increases in seaborne shipments of coal and iron ore, but, as the year
progressed, demand for these commodities weakened, causing seaborne shipments
to slacken. Overall tonnage shipped in 1993 for the major dry bulk
commodities--iron ore, coal and grain--was down marginally from the prior year.
The major economic forces at work were the persistent recessions in the OECD
countries counterbalanced by growth in the developing nations, most notably
China, Korea and Taiwan. Weak demand for steel in Europe resulted in a decline
in seaborne iron ore imports in 1993 relative to 1992. Japanese iron ore and
coking coal imports rose in 1993 relative to 1992. These increases reflected
demand for steel exports to China, not improved economic conditions in Japan,
where steel consumption declined in 1993. Besides importing a large quantity of
steel, China stepped up its domestic production, resulting in a substantial
year-over-year rise in its seaborne imports of iron ore.
The third largest dry bulk shipping commodity by cargo-ton is grain. Grain,
which was the only one of the three major dry bulk commodities to show a
significant increase in trade in 1992, experienced a decline in 1993. The key
exporters are the United States, Canada, Western Europe, Australia and
Argentina. Because trade is largely dependent on crop yields in numerous
countries, the shipping requirements for the grain trade can be highly variable
from year to year. For example, during 1992, severe drought in sub-Saharan
Africa led to significant shipments of grain to this normally self-sufficient
area. In recent years, the FSU, Japan and China have been the major importers
of grain, although better crops in Russia and China reduced imports in 1992 and
1993. As southern Africa began to recover from its drought, corn production
rose, reducing the region's requirements for substantial seaborne imports of
grain in 1993.
Generally, major shippers of iron ore and coal use their own tonnage or
tonnage controlled by them under long-term charters or contracts of
affreightment, while grain is typically shipped on voyage, or spot, charters.
Therefore, even though seaborne movements of grain are substantially smaller
than those of coal and iron ore, the amount of grain shipped in the spot market
is larger than the amount of coal or iron ore. Accordingly, variations in
demand for ships to transport grain have a disproportionately large effect on
short-term rates.
The international supply of dry bulk tonnage has been growing steadily for
the past few decades, except for a brief period in the mid to late 1980's. Weak
charter markets led to an increase in scrapping and a decrease in the placement
of newbuilding orders in 1992. After remaining virtually unchanged during 1992,
the dry bulk fleet increased in 1993 by nearly 2% to 221 million MDWT by year-
end. Newbuilding deliveries of 8 million MDWT were well above 1992 but still
not historically high. Sales for scrap fell to less than 3 million MDWT from
about 4 million MDWT in 1992. Dry bulk tonnage in lay-up
17
<PAGE>
remained small at less than 2 million MDWT. The newbuilding orderbook for
delivery over the next three years expanded in 1993, reaching 21 million MDWT,
up from 15 million MDWT in 1992, as shipowners continue to replace aging
vessels to meet more stringent environmental and safety requirements. Of this
total, 9 million MDWT are scheduled for delivery in 1994.
The graph below sets forth historical information relating to scrapping and
newbuilding in the world dry bulk fleet.
[Chart]
Dry Bulk
U.S. FLAG BULK MARKETS
The Company's U.S. flag bulk fleet operates substantially in a separate
market from the international tanker and dry bulk markets. Shipping between
United States coastal ports, including the movement of Alaskan oil, is reserved
by law primarily to unsubsidized U.S. flag vessels owned by U.S. citizens,
crewed by U.S. personnel and built in the United States. The principal market
in the unsubsidized coastwise U.S. flag shipping trade (the "Jones Act" trade)
is the transportation of Alaskan crude to ports on the U.S. West Coast and via
the trans-Panama pipeline to U.S. ports in the Gulf of Mexico. The Company owns
the largest independent fleet of Jones Act trade tankers and is a major
participant in the Alaskan oil trade.
Alaskan crude oil is shipped mostly on unsubsidized U.S. flag crude carriers
of over 60,000 DWT. Exports of Alaskan crude oil have been restricted by law
since 1973. Additional, more stringent limitations were incorporated in the
Export Administration Act of 1979, which has been extended to June 30, 1994.
The State of Alaska is contesting in Federal court the limitations on exports
of Alaskan
18
<PAGE>
oil. The Coalition to Keep Alaska Oil, of which the Company is a member, has
intervened on the side of the United States Government as a defendant in the
suit brought by the State of Alaska. The Coalition is actively opposing
Alaska's suit.
By law, vessels built with construction differential subsidies and operated
with operating differential subsidies (ODS) have not been permitted in the
Jones Act trade. Under a recent Maritime Administration interpretation, product
tankers and crude carriers built with subsidies may be eligible for full
coastwise privileges when they reach 20 years of age and their ODS contracts
expire. The Company believes that this interpretation is contrary to law and
recently commenced litigation in Federal Court seeking to overrule it. Should
the lawsuit fail, it is possible that several older product and crude carriers
may enter the coastwise trade over the next few years.
Demand for tonnage in the Alaskan trade depends on the volume of crude
shipped out of Alaska and its distribution to ports at varying distances from
the source. Significantly more tanker tonnage is required for longer haul
shipments of Alaskan crude to the Gulf of Mexico and East Coast, via the trans-
Panama pipeline, than for movements to the West Coast. In recent years, the
amount of crude shipped on the long-haul route to the Gulf of Mexico has fallen
sharply, and this development has reduced tonnage requirements. The total
Alaskan crude shipping requirements for 1992 declined by about 5% from 1991. In
1993, Alaskan crude shipments declined as production decreased 7% to an
estimated 1.65 million barrels per day (b/d). This drop partly reflects the
ongoing decline in mature Alaskan North Slope (ANS) fields, exacerbated by
production equipment maintenance and weather problems as well as temporary
shutdowns to upgrade gas-handling facilities. The first phase of the upgrading
was completed in the fall of 1993, resulting in a 50,000 b/d rise in crude
output. In addition, a new field, Point McIntyre, came onstream in October,
1993, initially producing 80,000 b/d. Together these increases have mitigated
the production decline in Prudhoe Bay and other mature fields. As Alaskan
production fell in 1993, the marginal volume for long-haul shipment via Panama
to the U.S. East Coast was nonexistent in some months, resulting in a 15% drop
year-over-year in the amount of tonnage required to transport Alaskan crude.
Current expectations are for a gradual decline in Alaskan crude production and
shipments over the balance of the decade. Despite declining demand, charter
rates for U.S. flag crude carriers have remained relatively stable over the
past few years as significant surplus tonnage has been scrapped.
Product tankers are used for shipping gasoline, diesel fuel, jet fuel and
other petroleum products including specialty products such as methyl tertiary
butyl ether (MTBE), an oxygenate. (Oxygenates are gasoline additives now
mandated for use in 39 metropolitan areas during at least part of the year by
provisions of the Clean Air Act.) Petroleum products are shipped from the U.S.
Gulf to the East Coast and between ports along the U.S. Gulf, West and East
coasts. The volume of this trade is closely linked to changes in regional
energy demands and in refinery activity. U.S. flag product carriers compete
with pipelines, oceangoing barges, and, with regard to imports from abroad,
foreign flag product carriers. Aside from a temporary boost provided by the
Gulf War, demand in the product tanker trades has been weak in the 1990's.
Tonnage demand in the domestic product tanker trades continued to decline in
1993, especially on the key Gulf to East Coast route as pipeline shipments and
East Coast refinery output rose.
U.S. government-related cargoes also generate demand for U.S. flag vessels,
including the Company's two U.S. flag dry bulk carriers. Federal law requires
that preference be given to U.S. flag vessels, if available at reasonable
rates, in the shipment of at least half of all U.S. government-generated
cargoes and 75% of food aid cargoes. The volume of U.S. preference cargoes
shipped in 1993 nearly doubled largely as a result of a $700 million
agricultural aid package for Russia.
In recent years, the U.S. flag fleet has been declining because of eroding
commercial opportunities and a stricter operating environment mandated under
OPA 90. At year-end 1993, the Jones Act trade tanker fleet totalled 8 million
DWT, down by approximately 540,000 DWT from a year earlier and by over 2
million DWT since the end of 1988. Of the current fleet, seven vessels,
totaling about 620,000 DWT, were laid up at year-end. There has been no
significant U.S. flag tanker construction in the last five years.
19
<PAGE>
THE COMPANY'S FLEET
The Company's fleet at January 28, 1994 is described in the following tables.
The vessels identified as "Tankers" carry crude oil. Petroleum Products
Carriers are tankers designed to carry refined petroleum products such as
gasoline, jet fuel and heating oil. Bulk Carriers transport iron ore, coal,
grain and other commodities. Geared Bulk Carriers carry similar cargoes and
have equipment for loading and unloading cargo.
INTERNATIONAL FLEET--OPERATING
<TABLE>
<CAPTION>
CHARTER
YEAR DEADWEIGHT EXPIRATION
TYPE OF SHIP BUILT TONNAGE DATE
- ------------ ----- ---------- ---------------
<S> <C> <C> <C>
Tanker (50% owned)............................. 1973 264,900 Sep. 1996
Tanker (50% owned)............................. 1975 264,850 May 1998
Tanker (50% owned)............................. 1974 264,850 Oct. 1997
Tanker (50% owned)............................. 1974 264,850 Apr. 1997
Tanker......................................... 1989 254,000 Apr. 1994
Tanker......................................... 1990 254,000 Voyage Charter*
Tanker** (50% owned)........................... 1972 252,350 Mar. 1994
Tanker......................................... 1989 133,000 Mar. 1994
Tanker......................................... 1989 133,000 June 2005
Tanker......................................... 1976 128,450 Voyage Charter
Tanker......................................... 1975 128,250 Voyage Charter
Tanker......................................... 1975 128,200 Voyage Charter
Tanker......................................... 1980 96,050 Voyage Charter
Tanker......................................... 1981 96,000 Voyage Charter
Tanker......................................... 1979 95,600 Voyage Charter
Petroleum Products Carrier..................... 1986 65,150 Voyage Charter
Petroleum Products Carrier..................... 1986 65,150 Voyage Charter
Petroleum Products Carrier..................... 1986 63,200 Sep. 1994
Petroleum Products Carrier..................... 1987 63,150 Sep. 1994
Petroleum Products Carrier..................... 1989 39,450 Voyage Charter
Petroleum Products Carrier..................... 1988 39,450 Voyage Charter
Petroleum Products Carrier..................... 1989 39,100 Voyage Charter
Petroleum Products Carrier..................... 1989 39,050 Voyage Charter
Petroleum Products Carrier..................... 1979 31,600 Voyage Charter
Petroleum Products Carrier..................... 1981 30,800 Voyage Charter
Petroleum Products Carrier..................... 1981 30,800 Voyage Charter
Petroleum Products Carrier..................... 1982 29,500 Voyage Charter
Bulk Carrier................................... 1982 138,800 Voyage Charter
Bulk Carrier................................... 1982 138,800 Feb. 1994
Bulk Carrier................................... 1975 121,050 Dec. 1994
Bulk Carrier................................... 1975 121,000 Voyage Charter
Bulk Carrier................................... 1990 120,900 Voyage Charter
Bulk Carrier................................... 1990 120,800 Voyage Charter
Bulk Carrier................................... 1973 116,100 Voyage Charter
Bulk Carrier................................... 1981 64,550 Voyage Charter
Bulk Carrier................................... 1983 64,200 Voyage Charter
Bulk Carrier................................... 1989 63,350 Apr. 1994
Bulk Carrier................................... 1989 63,250 Voyage Charter
Bulk Carrier................................... 1980 61,250 Voyage Charter
Bulk Carrier................................... 1980 61,200 May 1994
Bulk Carrier (49% interest).................... 1977 60,300 Voyage Charter
Bulk Carrier (49% interest).................... 1973 54,450 Aug. 1995
Geared Bulk Carrier............................ 1985 28,950 Voyage Charter
</TABLE>
Operating International Fleet Total: 43 vessels 4,693,700 DWT
- --------
* In late February 1994 this vessel commences employment under a time charter
for 8 years with an option for an additional 2 3/4 years.
** This vessel is under contract for sale for delivery at the end of March
1994.
20
<PAGE>
INTERNATIONAL FLEET--ON ORDER
<TABLE>
<CAPTION>
CHARTER
DEADWEIGHT EXPIRATION
TYPE OF SHIP DELIVERY DATE TONNAGE DATE
- ------------ ------------- ---------- ----------
<S> <C> <C> <C>
Tanker...................................... 2/94 93,650 Apr. 1994
Tanker...................................... 5/94 93,650 --
Tanker...................................... 8/94 93,650 --
Tanker...................................... 11/94 93,650 --
Tanker...................................... 8/95 295,250 --
Tanker...................................... 9/95 295,250 --
</TABLE>
International Fleet on Order Total: 6 vessels 965,100 DWT
INTERNATIONAL FLEET TOTAL: 49 VESSELS 5,658,800 DWT
U.S. FLEET
<TABLE>
<CAPTION>
CHARTER
YEAR DEADWEIGHT EXPIRATION
TYPE OF SHIP BUILT TONNAGE DATE
- ------------ ----- ---------- ---------------
<S> <C> <C> <C>
Tanker......................................... 1974 120,800 Mar. 1994
Tanker......................................... 1973 120,500 Mar. 1994
Tanker* (80% interest)......................... 1977 90,650 Feb. 1994
Tanker* (80% interest)......................... 1977 90,550 Feb. 1994
Tanker* (80% interest)......................... 1978 90,500 Oct. 1994
Tanker* (80% interest)......................... 1977 90,400 Feb. 1994
Tanker......................................... 1971 62,000 Jan. 1995
Tanker......................................... 1970 62,000 Apr. 1994
Petroleum Products Carrier**................... 1983 42,950 Voyage Charter
Petroleum Products Carrier**................... 1982 42,600 Voyage Charter
Petroleum Products Carrier..................... 1969 37,800 Aug. 1994
Petroleum Products Carrier..................... 1968 37,800 Voyage Charter
Petroleum Products Carrier..................... 1968 37,800 Sep. 1995
Geared Bulk Carrier*........................... 1978 25,550 Voyage Charter
Geared Bulk Carrier*........................... 1978 25,550 Voyage Charter
Pure Car Carrier (5,000 cars).................. 1987 15,900 1996 and beyond
</TABLE>
U.S. Fleet Total***: 16 vessels 993,350 DWT
- --------
*25-year capital leases, commencing in year built. The Company is currently
engaged in negotiations for an extension of the charters of the three 90,000
ton U.S.-flag tankers which are shown above as expiring in February 1994 and
which are continuing into March 1994.
**22-year capital leases, commencing in 1989
***Does not include a 29,300 DWT petroleum barge, 50% owned by the Company
21
<PAGE>
CHARTERING STRATEGY AND COMPETITION IN THE BULK SHIPPING MARKETS
The Company endeavors to minimize the effects of periods of weakness in its
markets by pursuing a chartering policy that favors medium- and long-term
charters, thereby avoiding, to some extent, the sharp rate fluctuations
characteristic of the spot or voyage markets. In recent years, the availability
of medium- to long-term business has been relatively limited, and, when
available, rates of return have been unattractive. Accordingly, only 22% of the
Company's fleet (including scheduled deliveries) is chartered through December
1995. In 1993, the Company entered into a long-term bareboat charter for one of
its 133,000 DWT (Suezmax) tankers with one of the major U.S. based
international oil companies and chartered one of its newer VLCC's to a major
Japanese oil company under a long-term charter.
The bulk shipping markets are highly fragmented and competitive. The Company
competes in its charter operations with other owners of United States and
foreign flag tankers and dry cargo ships operating on an unscheduled basis
similar to the Company and, to some extent, with owners operating cargo ships
on a scheduled basis. About one third of the world's tanker tonnage is owned by
oil companies and is primarily engaged in the carriage of proprietary cargoes.
In chartering vessels to the United States government, the Company competes
primarily with other owners of U.S. flag vessels. In the spot and short-term
charter market, the Company's vessels compete with all other vessels of a size
and type required by a charterer that can be available at the date specified.
In the spot market, competition is based primarily on price. Nevertheless,
within a narrow price band, factors related to quality of service and safety
enter into a potential customer's decision as to which vessel to charter.
While price also dominates the customer's chartering decision in the long-
term charter market, quality of service, safety and financial strength play a
more important role because of the length of commitment the charterer is
making. The Company believes this developing emphasis on safety and financial
strength is advantageous for the Company and that many customers, including
many of the world's major oil companies, prefer to limit longer term business
to well respected owners such as the Company.
The following table sets forth information relating to the relative age
profile of the Company's international fleet and the world fleet at the dates
shown.
[Chart]
Age Profile
22
<PAGE>
MARITIME OVERSEAS CORPORATION--AGENT
Maritime Overseas Corporation (the Agent), which was incorporated in 1953,
provides operating, chartering, financial and general and administrative
services required by the Company. These services are performed under the
direction and control of the Company.
The Agent has acted in this capacity for the Company and its predecessors
since the Agent's inception, a period of over 40 years. The Agent is owned by a
director of the Company, and directors or officers of the Company constitute
all four of the Agent's directors and a majority of its principal officers. The
nine most senior officers of the Company and the Agent have an average of 25
years of experience in the shipping industry and 20 years with the Company or
the Agent. See "Management."
The Company's agreements with the Agent renew automatically for five-year
terms unless the Company exercises its right to terminate as of the end of any
year or the Agent elects to terminate as of the end of any five-year term. The
current term runs through December 31, 1998. Under the various agreements, the
Agent's total compensation for any year is limited to the extent its
consolidated net income from shipping operations would exceed specified amounts
($689,245 and $758,170 for 1992 and 1993, respectively).
ENVIRONMENTAL MATTERS RELATING TO BULK SHIPPING
OPA 90. OPA 90 significantly expands the liability of a vessel owner or
operator (including a bareboat charterer), for damage resulting from spills in
U.S. waters (up to 200 miles offshore). OPA 90 applies to all U.S. and foreign
flag vessels.
Under OPA 90, a vessel owner or operator is liable without fault for removal
costs and damages, including economic loss without physical damage to property,
up to $1,200 per gross ton of the vessel. The Company's largest vessel measures
144,139 gross tons; therefore, the theoretical liability limit for that vessel
would be $173 million. When a spill is proximately caused by gross negligence,
willful misconduct or a violation of a Federal safety, construction or
operating regulation, liability is unlimited. OPA 90 did not preempt state law,
and therefore states remain free to enact legislation imposing additional
liability. Virtually all coastal states have enacted pollution prevention,
liability and response laws, many with some form of unlimited liability.
In addition, OPA 90 imposes a requirement that tankers calling at U.S. ports
have double hulls. This requirement applies to newly constructed tankers
contracted for after June 30, 1990, or delivered after January 1, 1994.
Beginning on January 1, 1995, the double-hull requirement is phased in for
existing tankers. The age requirement is reduced in stages so that by the year
2000, tankers of at least 30,000 gross tons over 23 years old (and tankers
between 15,000 and 30,000 gross tons over 30 years old) must have double hulls,
and by 2010, all tankers must have double hulls, except that tankers with
double bottoms or double sides are afforded an additional five years for
compliance but must comply no later than January 1, 2015. Tankers discharging
at a deepwater port or lightering more than 60 miles offshore will not be
required to have double hulls until January 1, 2015.
The double-hull requirement will not begin to affect the Company's existing
tanker fleet until near the end of the decade, with most of the Company's
vessels not affected until the next decade. Each of the 17 vessels in the
Company's current fleet to which the double-hull requirements are expected to
apply in the next ten years will be at least 23 years old on the applicable
double-hull requirement date and consequently near the end of its economic
life.
OPA 90 also requires owners and operators of vessels calling at U.S. ports to
adopt contingency plans for responding to a worst case oil spill under adverse
weather conditions. The plans must include contractual commitments with clean-
up response contractors in order to ensure an immediate response to an oil
spill. Furthermore, training programs and drills for vessel, shore and response
personnel are
23
<PAGE>
required. The Company has developed and timely filed its vessel response plans
with the United States Coast Guard and has received preliminary approval of
such plans.
OPA 90 requires that an owner demonstrate its ability to meet OPA 90's
liability limits in accordance with regulations promulgated by the Coast Guard.
While most owners would expect to meet such requirements by supplying evidence
of adequate insurance coverage, currently proposed Coast Guard regulations
would not deem such coverage sufficient unless the insurer consents to be
subject to direct third-party suits in the United States, which the major
insurers to date have declined to do. Although it is not possible to predict
the outcome of the pending rulemaking, the Company believes that it will be
able to establish its financial responsibility under the regulations as finally
adopted. Until final regulations are promulgated, owners continue to be able to
establish evidence of financial responsibility under existing regulations.
OPA 90 and regulations as well as various state laws and regulations have
increased the cost of operating, insuring and building ships for operation in
U.S. waters. The owners of all vessels that sail in U.S. waters will be subject
to these increased costs, and therefore the Company does not expect to be
disadvantaged relative to its competition.
INTERNATIONAL REQUIREMENTS FOR DOUBLE-HULLED VESSELS. The IMO adopted
regulations requiring double hulls on all oil tankers over 20,000 DWT and all
product tankers over 30,000 DWT for which building contracts are placed after
July 5, 1993 or, in the absence of a building contract, that have keels laid
after January 5, 1994, or that are delivered after July 5, 1996. Additionally,
the regulations require that any oil tanker over 20,000 DWT and any product
tanker over 30,000 DWT existing on July 6, 1995 that is not subject to the
requirements for newbuilding set forth in the previous sentence must have a
double hull not later than 25 years after the date of its delivery, unless it
is fitted with segregated ballast tanks or is designed so that loaded cargo
does not exert outward pressure on the vessel's bottom shell plating in excess
of the external hydrostatic water pressure (hydrostatically balanced loading),
in which case the vessel need not comply with the double-hull requirement until
30 years after the date of its delivery. In addition, more stringent surveys of
steel condition have been instituted for existing vessels.
These requirements will apply to all vessels trading to ports in countries
that are parties to the International Convention for the Prevention of
Pollution by Ships, as amended (MARPOL), which include the world's major
trading countries.
The United States has reserved its position on the IMO regulations. Since the
schedule for phasing in the double-hull requirements under the IMO regulations
is in certain instances faster and in certain instances slower than the
requirements under OPA 90, if the United States does not accept the IMO
regulations, tankers trading between U.S. ports and ports in countries that are
parties to MARPOL will have to meet the requirements of the earlier of the two
to apply.
The Company believes that as the double-hull requirements imposed by U.S. law
and international conventions become applicable, some older vessels will be
scrapped. The impact of the double-hull requirements of the IMO regulations on
the Company's vessels will not be significantly different from the impact of
the double-hull requirements of OPA 90.
INSURANCE. Consistent with the currently prevailing practice in the industry,
the Company presently carries a minimum of $700 million of pollution coverage
per occurrence on every vessel in its fleet. The first $500 million is carried
with the protection and indemnity club, Assuranceforeningen Gard, an
international mutual insurance association of which the Company is a member.
Excess coverage for oil pollution damages and cleanup is placed through the
London market. While the Company has
24
<PAGE>
historically been able to obtain such insurance at commercially reasonable
rates, no assurances can be given that such insurance will continue to be so
available in the future.
CRUISE BUSINESS
In late 1992, the Company entered the passenger cruise business through a
joint venture with the Chandris Cruise Division, an established cruise line
operator unrelated to the Company. Under the terms of the joint venture
agreement, the Company contributed approximately $220 million for 49% of the
equity in CCLI. The Chandris Cruise Division contributed six cruise ships (one
of which has since been sold) and their related management, marketing and sales
organizations. CCLI functions as an equal joint venture, and approval of both
shareholders is required on all substantive policy matters. All debt of the
joint venture is non-recourse to the joint venture partners. It is anticipated
that CCLI's earnings will be reinvested in the cruise business, and accordingly
the Company has made no provision for U.S. income taxation with respect to its
share of CCLI's earnings.
The cruise industry is generally divided into three segments: luxury, premium
and standard. Celebrity Cruises currently serves the premium segment of the
passenger cruise market with three ships having 3,834 berths in the aggregate.
The Zenith, delivered in 1992, sails year-round in the Caribbean and is the
most recent addition to the Celebrity fleet. The Horizon, a sistership to the
Zenith, was delivered in 1990 and serves the Bermuda trade in the summer months
and the Caribbean during the winter. The Meridian was substantially rebuilt in
1990 and also serves the Bermuda trade in the summer months and the Caribbean
during the winter. Celebrity Cruises' Horizon and Meridian are two of only five
ships having rights granted by the government of Bermuda to make regular calls
at its ports.
Fantasy Cruises is positioned as a more budget-conscious cruise product which
generally appeals to an entry-level, price-sensitive consumer. Fantasy's two
ships, the Amerikanis and the Britanis, were both rebuilt in 1987. They have an
aggregate of 1,543 berths. The Amerikanis serves the European and Caribbean
markets, while the Britanis offers two and five night cruises to Nassau and
Mexico, respectively, as well as a 55-night South American cruise in the fall.
In 1993, CCLI signed contracts providing for the construction of two cruise
ships of approximately 1,760 berths each at a contract price of approximately
$317.5 million per ship and has an option, which it intends to exercise, at
approximately the same price for an additional sistership, all for the
Celebrity Cruises fleet. The first ship is scheduled for delivery in November
1995 and the second for delivery in 1996. As of January 15, 1994 progress
payments of $48.9 million have been made (including $16.3 million paid
subsequent to September 30, 1993). Financing has been arranged for
substantially all the unpaid cost of these two ships. The contracts are with
the same shipyard that built the Horizon and Zenith.
THE CCLI CRUISE FLEET
CCLI's cruise fleet at January 28, 1994 is described in the following tables.
CELEBRITY CRUISE LINES INC.--OPERATING
<TABLE>
<CAPTION>
GROSS
NAME OF FLEET NAME OF SHIP BERTHS REGISTERED TONNAGE
- ------------- ------------ ------ ------------------
<S> <C> <C> <C>
Celebrity Fleet.......................... Zenith 1,374 47,250
Horizon 1,354 46,800
Meridian 1,106 30,450
Fantasy Fleet............................ Britanis 926 26,150
Amerikanis 617 19,900
</TABLE>
Operating Cruise Fleet Total: 5 ships 5,377 berths
25
<PAGE>
CELEBRITY CRUISE LINES INC.--ON ORDER/OPTION
<TABLE>
<CAPTION>
CELEBRITY CRUISES DELIVERY GROSS
CENTURY SERIES DATE BERTHS REGISTERED TONNAGE
- ----------------- -------- ------ ------------------
<S> <C> <C> <C>
Contract 1................................... 11/95 1,760 70,000
Contract 2................................... 10/96 1,760 70,000
Option ...................................... -- -- --
</TABLE>
Cruise Fleet on Order Total: 2 ships 3,520 berths
CRUISE FLEET TOTAL: 7 SHIPS 8,897 BERTHS
HISTORICAL GROWTH OF THE CRUISE INDUSTRY
The cruise industry has evolved from a trans-ocean carrier service into a
vacation alternative to land-based resorts and sightseeing destinations. The
North American passenger cruise industry dominates the worldwide cruise market;
it has experienced substantial growth over the past 25 years. According to the
Cruise Lines International Association (CLIA), an industry trade group, the
number of total passengers carried in the North American cruise market grew at
a compound annual rate of 10.6% for the period from 1982 to 1992. Approximately
1.5 million passengers took cruises for two or more consecutive nights in 1982.
According to CLIA, in 1992, despite a prolonged recession in the U.S., this
number reached 4.1 million.
The following graph sets forth historical information relating to the growth
of the North American Cruise Market, in millions of passengers.
[CHART]
[Passenger Growth]
26
<PAGE>
The Company believes that the growth in the cruise industry is due to a
number of factors. The all-inclusive cruise price, which includes meals,
entertainment, lodging and air transportation, is perceived by consumers to
offer good value for the vacation dollar. In addition, a reduction in the
average cruise length, expanded itineraries, new ship designs and expanded
shipboard and shoreside activities have attracted a wide range of age and
income groups, stimulating industry growth.
On the supply side, according to CLIA, cruise line capacity servicing North
America grew at a compound annual rate of 7.5% for the period from 1982 to
1992; in 1982 cruise ships with an aggregate capacity of approximately 47,300
berths offered voyages of two or more nights in the North American market. In
October 1993, CLIA estimated that the number of berths will have increased to
approximately 104,000 by the end of 1993.
CRUISE INDUSTRY COMPETITION
The North American cruise industry is characterized by large and generally
well-capitalized companies and is highly competitive. There are four companies
in the industry each of which has a fleet with an aggregate number of berths in
excess of 10,000, substantially more berths than CCLI's current fleet. Larger
capacity affords fleet owners certain economies of scale. According to recently
published data, the top six companies, including CCLI, have approximately 68%
of total capacity and the top fifteen companies have approximately 94% of total
capacity.
Cruise lines compete with other vacation alternatives such as land-based
resort hotels and sightseeing destinations for consumers' discretionary income.
The amount of discretionary income spent on vacations is influenced by general
economic conditions. Within the cruise industry, competition is primarily based
on product quality, itinerary and price. Product quality is a function of ship
design, on-board facilities, amenities, service and cuisine.
REGULATORY MATTERS RELATING TO CRUISE INDUSTRY
Each ship is subject to regulations of its country of registry, including
regulations issued pursuant to international treaties governing the safety of
the ship and its passengers. Each country of registry conducts periodic
inspections to verify compliance with these regulations. In addition, ships
operating from U.S. ports are subject to inspection by the U.S. Coast Guard for
compliance with international treaties and by the U.S. Public Health Service
for sanitary conditions.
With respect to passengers to and from U.S. ports, CCLI is required to obtain
certificates from the U.S. Federal Maritime Commission and the U.S. Coast Guard
relating to its ability to satisfy liabilities arising out of nonperformance of
obligations to passengers, casualty or personal injury and water pollution. The
Company believes CCLI is in compliance with all material regulations applicable
to its ships and has all licenses necessary for the conduct of its business.
The International Maritime Organization's SOLAS 1974 convention, which became
effective in 1980 and was last amended in 1992, established minimum safety,
fire prevention and fire fighting standards (the "SOLAS '74 standards"). Under
the amended SOLAS requirements, by October 1, 1997 all passenger ships must
have upgraded fire detection and fire fighting systems. The schedule for
compliance with certain other aspects of the amended requirements for passenger
vessels currently meeting SOLAS '74 standards extends until 2005 or 15 years
after construction, whichever is later.
Since substantial capital expenditures may be needed to bring older vessels
into compliance with the SOLAS requirements that become applicable in 1997, it
is likely that some ships for which such capital expenditures would not be
economical will be removed from the market. All three of CCLI's Celebrity
vessels were built or rebuilt within the past three years. Based on present
estimates, any work necessary for these vessels to meet SOLAS requirements
applicable in 1997 can be done without material capital expenditure. Whether
the two Fantasy vessels will be refitted to bring them into compliance with the
1997 SOLAS requirements will be determined at a later date.
27
<PAGE>
MANAGEMENT
The following table sets forth information concerning the Company's directors
and executive officers and their beneficial ownership of the Company's Common
Stock as of January 15, 1994 and with ownership percentages adjusted to reflect
the sale of the Common Stock offered hereby by the Company (assuming the
Underwriters' overallotment option is not exercised). The table includes, in
the case of certain persons, all shares owned by partnerships or other entities
in which the person, by reason of his position or interest, shares the power to
vote or dispose of the securities.
<TABLE>
<CAPTION>
PERCENTAGE OF
COMMON STOCK
BENEFICIALLY
SERVED SHARES OF OWNED
AS COMMON STOCK -----------------
DIRECTOR BENEFICIALLY PRIOR TO AFTER
NAME AND AGE PRINCIPAL OCCUPATION SINCE OWNED(A) OFFERING OFFERING
------------ -------------------- -------- ------------ -------- --------
<S> <C> <C> <C> <C> <C>
Raphael Recanati,* 70... President, Finmar Equities Co., 1969 6,647,926(b)(h) 20.3% 18.6%
shipping, finance and
banking.
Morton P. Hyman,* 58.... President of the Company. 1969 190,000(c) 0.6% 0.5%
Michael A. Recanati,*
36..................... Executive Vice President of the 1987 91,065(d)(h) 0.3% 0.3%
Company.
Robert N. Cowen, 45..... Senior Vice President, Secretary 1993 18,500 0.1% 0.1%
and General Counsel of the
Company.
Gabriel Kahana, 35...... Senior Vice President and n/a 12,000 - -
Treasurer of the Company
Alan Carus, 55.......... Controller of the Company n/a 37,000 0.1% 0.1%
George C. Blake,* 61.... Executive Vice President, 1988 49,400 0.1% 0.1%
Maritime Overseas
Corporation, ship agents and
brokers.
Thomas H. Dean, 65...... Senior Vice President-Corporate 1976 - - -
Development and Planning,
Continental Grain Company,
integrated food company.
Michel Fribourg, 80..... Chairman of the Board, 1969 2,823,241(e) 8.6% 7.9%
Continental Grain Company.
William L. Frost, 67.... Attorney and President, 1989 4,000(f) - -
Lucius N. Littauer Foundation.
Ran Hettena,* 70........ President, Maritime Overseas 1969 30,241(g)(h) 0.1% 0.1%
Corporation.
Stanley Komaroff, 58.... Partner in the law firm of 1993 200 - -
Proskauer Rose Goetz &
Mendelsohn, the Company's
counsel.
Solomon N. Merkin, 37... Vice President, Leib Merkin, 1989 (i) - -
Inc., private investment
company.
Joel I. Picket, 55...... President and Chairman of the 1989 200 - -
Board, Gotham Organization
Inc., real estate, construction
and development.
All directors and executive officers as a group.......... 9,883,773(j) 29.9% 27.4%
</TABLE>
- --------
*Member of Finance and Development Committee of the Board, of which
Committee Mr. Raphael Recanati is Chairman and Mr. Michael A. Recanati is
Vice Chairman.
28
<PAGE>
(a) Unless otherwise indicated, each of the persons listed has the sole power
to vote and direct disposition of the shares shown as beneficially owned
by him. Number of shares shown includes shares issuable on exercise of
vested options held by Messrs. Hyman (120,000 shares), M. Recanati (90,000
shares), Cowen (18,000 shares), Kahana (12,000), Carus (36,000) and Blake
(48,000 shares), and all directors and executive officers as a group
(324,000 shares).
(b) Includes 5,670,362 shares as to which Mr. Raphael Recanati shares the
power to vote and/or to direct disposition, of which 2,986,416 shares are
owned by OSG Holdings, a partnership in which Mr. Recanati and his wife,
as tenants in common, have a 25% partnership interest.
(c) Includes 20,000 shares owned by a corporation in which Mr. Hyman shares
the power to vote and/or to direct disposition; excludes 280 shares
owned by Mr. Hyman's wife, beneficial ownership of which is disclaimed by
him.
(d) In addition, Mr. Michael A. Recanati is a 0.57% partner in OSG Holdings.
(e) All of these shares are owned by Fribourg Enterprises, L.P., a
partnership; Mr. Fribourg has the sole power to vote and direct the
disposition of all of said shares.
(f) Excludes 400 shares owned by Mr. Frost's wife, beneficial ownership of
which is disclaimed by him.
(g) Excludes 12,493 shares owned by Mr. Hettena's wife, beneficial ownership
of which is disclaimed by him.
(h) Mr. Hettena and Mr. Raphael Recanati are brothers-in-law. Mr. Michael A.
Recanati is a son of Mr. Raphael Recanati and a nephew of Mr. Hettena.
(i) Mr. Merkin is a 0.91% partner in OSG Holdings.
(j) Of the 9,883,773 shares, persons who are directors or executive officers
have sole power to vote and direct disposition of 4,213,411 shares (12.7%
of the outstanding shares of the Company prior to the offering) and share
with other persons the power to vote and/or direct disposition of
5,670,362 shares (17.2% of the outstanding shares prior to the offering).
Each of the persons listed above has been principally engaged in his present
employment for the past five years except Messrs. Cowen and Kahana. Mr. Cowen
has served as General Counsel of the Company since November 1989 and Senior
Vice President since February 1993; he also serves as executive vice president
and a director of Overseas Discount Corporation, which is engaged in the
business of finance and investment. Mr. Kahana has served as Senior Vice
President and Treasurer of the Company since February 1993 and has also served
as an officer of the Agent for more than five years. Mr. Komaroff is a
director of Club Med, Inc. Mr. Raphael Recanati is a director of the IDB
Holding Corporation Ltd. and several of its subsidiaries. On February 16,
1994, following a lengthy trial in Israel, the four largest banks in that
country, including Israel Discount Bank Limited, and its former parent IDB
Holding Corporation Ltd., and members of their senior management were found
guilty, in connection with acts that occurred prior to October 1983, of
engaging in fraudulent securities transactions and making false statements
within the meaning of certain provisions of that country's banking, securities
and other laws. The violations involve activities, which terminated in October
1983, relating to shares of these Israeli institutions. Mr. Raphael Recanati
was chief executive officer of Israel Discount Bank Limited and is among the
defendants found guilty. Mr. Recanati has categorically denied any wrongdoing
and has advised the Company that he intends to appeal. None of the activities
in question relate to or involve the Company or its business in any way.
DESCRIPTION OF COMMON STOCK
The following statements with respect to the capital stock of the Company
are subject to the detailed provisions of the Company's certificate of
incorporation, as amended (the "Certificate of Incorporation"), and by-laws,
as amended (the "By-Laws"). These statements do not purport to be complete, or
to give full effect to the provisions of statutory or common law, and are
subject to, and are qualified in their entirety by reference to, the terms of
the Certificate of Incorporation and the By-Laws.
29
<PAGE>
GENERAL
The Certificate of Incorporation authorizes the issuance of a total of
60,000,000 shares of Common Stock. At January 15, 1994, 32,741,826 shares of
Common Stock were outstanding. Stock certificates for Common Stock of the
Company are issuable in two series, designated respectively Domestic Share
Certificates and Foreign Share Certificates. Except as stated below under
"Qualifications for Ownership and Transfer of Shares," the rights of the
holders of Domestic Share Certificates and Foreign Share Certificates are
identical in all respects.
QUALIFICATIONS FOR OWNERSHIP AND TRANSFER OF SHARES
The By-Laws of the Company provide that the outstanding shares must at all
times be owned by citizens of the United States to such extent as will in the
judgment of the Board of Directors reasonably assure the preservation of the
Company's status as a United States citizen within the provisions of the
Shipping Act of 1916 and related laws, rules and regulations (the "Act")
applicable to the business being conducted by the Company. Since some of the
Company's vessels are engaged in the United States coastwise trade, the Act
requires that at least 75% of the shares be owned by United States citizens, as
defined by the Act. In order to provide a reasonable margin the Board of
Directors has determined that until further action by the Board at least 77% of
the outstanding shares must be owned by persons who are citizens of the United
States.
Shares owned of record or beneficially by foreign citizens are evidenced by
Foreign Share Certificates and are freely transferable both to United States
and foreign citizens. Shares owned of record and beneficially by United States
citizens are evidenced by Domestic Share Certificates and may be transferred to
United States citizens at any time. Such shares may be transferred to foreign
citizens only if at the time the certificate is presented to the Company's
transfer agent, the transfer will not reduce shareholdings of United States
citizens below the then permissible percentage of the total outstanding shares,
as determined by the Board of Directors. Any purported transfer to foreign
citizens of shares or of a beneficial interest in shares evidenced by Domestic
Share Certificates in violation of this limitation will be ineffective for all
purposes (including transfer of voting rights), the shares will not be
transferred on the books of the Company, and the Company may regard the share
certificate, whether or not validly issued, as having been invalidly issued.
Subject to the above limitation, upon surrender of any share certificate for
transfer, the transferee will receive Domestic Share Certificates or Foreign
Share Certificates, as the case may be, for shares of the series appropriate to
such person.
In the case of transferees that are corporations, partnerships, associations
or trusts, the transferee will be deemed a citizen of the United States if the
following conditions are satisfied: (1) at least 75% of the shares or interest
and voting power in the transferee is vested in United States citizens, free
from any trust or fiduciary obligation in favor of any non-United States
citizen; (2) there is no contract or understanding by which more than 25% of
the voting power in the transferee may be exercised directly or indirectly on
behalf of a non-United States citizen; (3) control of more than 25% of the
interests in the transferee is not by any other means conferred on or permitted
to be exercised by non-United States citizens; (4) in the case of a corporation
or association, the president or other chief executive officer and the chairman
of the Board of Directors (or any officer authorized to act in his absence) are
citizens of the United States, no more of its directors than a minority of the
number necessary to constitute a quorum are non-United States citizens, and the
corporation is organized under the laws of the United States or a State; (5) in
the case of a partnership or association, each general partner or member, as
the case may be, is a United States citizen, at least 75% of the interests are
owned by United States citizens free of any trust or fiduciary obligation in
favor of a non-citizen and the partnership or association is organized under
the laws of the United States or a State; and (6) in the case of a trust, the
trustee and each beneficiary with an enforceable interest in the trust is a
United States citizen.
As of February 1, 1994, according to the records of the transfer agent,
approximately 79.7% of the outstanding shares of the Company were represented
by Domestic Share Certificates. It is anticipated
30
<PAGE>
that the sale of the shares offered hereby by the Company, assuming all these
shares are sold to United States citizens, will have the effect of increasing
the percentage of shares represented by Domestic Share Certificates to
approximately 81.4%.
Shares represented by both Domestic Share Certificates and Foreign Share
Certificates are traded on the New York Stock Exchange at the same price.
Should the percentage of foreign ownership more closely approach the permitted
maximum, the Exchange may institute trading on a dual basis, depending on the
circumstances at the time.
TRANSFER PROCEDURES
The Board of Directors is authorized to establish procedures with respect to
the transfer of shares to enforce the limitations referred to above. Procedures
established by the Board of Directors require that, in connection with each
transfer of shares, the transferee complete and file with the Company's
transfer agent an application for transfer of the shares. Such application
calls for information about the transferee's citizenship status and the
citizenship status of any person who may have a beneficial interest in the
shares being acquired by the transferee. Such an application for transfer must
also be completed by each person who purchases shares from any of the
Underwriters.
VOTING RIGHTS
Each holder of Common Stock is entitled to one vote for each share registered
in such holder's name on the books of the Company on all matters submitted to a
vote of stockholders. Except as otherwise provided by law, the holders of
Common Stock do not have cumulative voting rights. As a result, the holders of
Common Stock entitled to exercise more than 50% of the voting rights in an
election of directors can elect 100% of the directors to be elected if they
choose to do so. In such event, the holders of the remaining Common Stock
voting for the election of directors will not be able to elect any persons to
the Board of Directors.
DIVIDEND RIGHTS
Holders of Common Stock are entitled to such dividends as the Board of
Directors may declare out of funds legally available therefor. Certain debt
agreements of the Company contain restrictions on certain payments by the
Company including dividends and purchases of Common Stock. As of September 30,
1993, such restricted payments were limited to approximately $21 million.
DELAWARE GENERAL CORPORATION LAW SECTION 203
As a corporation organized under the laws of the State of Delaware, the
Company is subject to Section 203 of the Delaware General Corporation Law (the
"DGCL") which restricts certain business combinations between the Company and
an "interested stockholder" (in general, a stockholder owning 15% or more of
the Company's outstanding voting stock) or its affiliates or associates for a
period of three years following the date on which the stockholder becomes an
"interested stockholder". The restrictions do not apply if (i) prior to an
interested stockholder becoming such, the Board of Directors approves either
the business combination or the transaction in which the stockholder becomes an
interested stockholder, (ii) upon consummation of the transaction in which any
person becomes an interested stockholder, such interested stockholder owns at
least 85% of the voting stock of the Company outstanding at the time the
transaction commences (excluding shares owned by certain employee stock
ownership plans and persons who are both directors and officers of the Company)
or (iii) on or subsequent to the date an interested stockholder becomes such,
the business combination is both approved by the Board of Directors and
authorized at an annual or special meeting of the Company's stockholders, not
by written consent, by the affirmative vote of at least 66 2/3% of the
outstanding voting stock not owned by the interested stockholder.
LIQUIDATION RIGHTS AND OTHER PROVISIONS
Subject to the prior rights of creditors, the holders of the Common Stock are
entitled in the event of liquidation, dissolution or winding up to share pro
rata in the distribution of all remaining assets. There are no preemptive or
conversion rights or redemption or sinking fund provisions in respect of the
31
<PAGE>
Common Stock. The outstanding shares of Common Stock are, and the shares of
Common Stock offered hereby upon delivery and payment will be, fully paid and
non-assessable.
The Certificate of Incorporation provides that no director of the Company
shall be personally liable to the Company or its stockholders for monetary
damages for breach of fiduciary duty as a director, except to the extent the
exemption from or limitation of liability is not permitted under the DGCL. The
DGCL presently does not permit exemption from or limitation of liability (i)
for any breach of the director's duty of loyalty to the Company or its
shareholders, (ii) for acts or omissions not in good faith or which involve
intentional misconduct or a knowing violation of law, (iii) under Section 174
of the DGCL or (iv) for any transaction from which the director derived an
improper personal benefit. Section 174 of the DGCL specifies conditions under
which directors of Delaware corporations may be liable for unlawful dividends
or unlawful stock purchases or redemptions.
The Transfer Agent and Registrar for the Common Stock is Mellon Securities
Trust Company.
UNDERWRITING
Subject to the terms and conditions of the Underwriting Agreement, the
Company has agreed to sell to each of the Underwriters named below, and each of
the Underwriters has severally agreed to purchase from the Company, the
respective number of shares of Common Stock set forth opposite its name below:
<TABLE>
<CAPTION>
NUMBER OF
SHARES OF
UNDERWRITER COMMON STOCK
----------- ------------
<S> <C>
Goldman, Sachs & Co..........................................
J.P. Morgan Securities Inc...................................
Furman Selz Incorporated.....................................
---------
Total.................................................... 3,000,000
=========
</TABLE>
Under the terms and conditions of the Underwriting Agreement, the
Underwriters are committed to take and pay for all of the shares of Common
Stock offered hereby if any are taken.
The Underwriters propose to offer the shares of Common Stock in part directly
to the public at the initial public offering price set forth on the cover page
of this Prospectus, and in part to certain securities dealers at such price
less a concession of $. per share. The Underwriters may allow, and such
dealers may reallow, a concession not in excess of $. per share to certain
brokers and dealers. After the shares of Common Stock are released for sale to
the public, the offering price and other selling terms may from time to time be
varied by the Underwriters.
The Company has granted the Underwriters an option exercisable for 30 days
after the date of this Prospectus to purchase up to an aggregate of 450,000
additional shares of Common Stock to cover over-allotments, if any, at the
initial public offering price less the underwriting discount, as set forth on
the cover page of this Prospectus. If the Underwriters exercise their over-
allotment option, the Underwriters have severally agreed, subject to certain
conditions, to purchase approximately the same percentage thereof that the
number of shares of Common Stock to be purchased by each of them, as
32
<PAGE>
shown in the foregoing table, bears to the 3,000,000 shares of Common Stock
offered hereby. The Underwriters may exercise such option only to cover over-
allotments in connection with the sale of the shares of Common Stock offered
hereby.
The Company has agreed that it will not, for a period of 90 days after the
date of this Prospectus, except with the prior written consent of Goldman,
Sachs & Co., offer, sell, contract to sell or otherwise dispose of any
securities of the Company (other than pursuant to stock option plans existing,
or conversion or exchange of convertible debt or exchangeable securities
outstanding, on the date on which the Company and the Underwriters execute the
Underwriting Agreement) which are substantially similar to the Common Stock, or
which are convertible or exchangeable into securities which are substantially
similar to the Common Stock.
The Company has agreed to indemnify the several Underwriters against certain
liabilities, including liabilities under the Securities Act.
The Underwriters and certain affiliates thereof have engaged in transactions
with and performed various investment and commercial banking and other services
for the Company and its affiliates in the past, and may do so from time to time
in the future.
LEGAL OPINIONS
The validity of the Common Stock offered hereby will be passed upon for the
Company by Proskauer Rose Goetz & Mendelsohn, 1585 Broadway, New York, New York
10036, and for the Underwriters by Sullivan & Cromwell, 125 Broad Street, New
York, New York 10004. Stanley Komaroff, a member of Proskauer Rose Goetz &
Mendelsohn, is a director of the Company.
EXPERTS
The consolidated financial statements and schedules of Overseas Shipholding
Group, Inc., and Celebrity Cruise Lines Inc., incorporated by reference in this
Prospectus and in the Registration Statement have, with respect to Overseas
Shipholding Group, Inc., been audited by Ernst & Young, independent auditors,
and, with respect to Celebrity Cruise Lines Inc., been jointly audited by Ernst
& Young and Moore Stephens, independent auditors, to the extent indicated in
their respective reports thereon also incorporated by reference herein and in
the Registration Statement. Such consolidated financial statements and
schedules have been incorporated herein by reference in reliance upon such
reports given upon the authority of such firms as experts in accounting and
auditing.
With respect to the unaudited condensed consolidated interim financial
information for Overseas Shipholding Group, Inc., incorporated by reference in
this Prospectus, Ernst & Young have reported that they have applied limited
procedures in accordance with professional standards for a review of such
information. However, their separate reports included in Overseas Shipholding
Group, Inc.'s Quarterly Reports on Form 10-Q for the quarters ended March 31,
1993, June 30, 1993 and September 30, 1993, and incorporated herein by
reference, state that they did not audit and they do not express an opinion on
that interim financial information. Accordingly, the degree of reliance on
their reports on such information should be restricted in light of the limited
nature of the review procedures applied. The independent auditors are not
subject to the liability provisions of Section 11 of the Securities Act for
their report on the unaudited interim financial information because that report
is not a "report" or a "part" of the Registration Statement prepared or
certified by the auditors within the meaning of Section 7 and 11 of the
Securities Act.
33
<PAGE>
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
NO PERSON HAS BEEN AUTHORIZED TO GIVE ANY INFORMATION OR MAKE ANY REPRESEN-
TATIONS OTHER THAN THOSE CONTAINED IN THIS PROSPECTUS OR THE DOCUMENTS INCOR-
PORATED BY REFERENCE THEREIN AND, IF GIVEN OR MADE, SUCH OTHER INFORMATION OR
REPRESENTATIONS MUST NOT BE RELIED UPON AS HAVING BEEN AUTHORIZED. THIS PRO-
SPECTUS DOES NOT CONSTITUTE AN OFFER TO SELL OR THE SOLICITATION OF AN OFFER
TO BUY ANY SECURITIES OTHER THAN THE SECURITIES TO WHICH IT RELATES OR AN OF-
FER TO SELL OR THE SOLICITATION OF AN OFFER TO BUY SUCH SECURITIES IN ANY CIR-
CUMSTANCES IN WHICH SUCH OFFER OR SOLICITATION IS UNLAWFUL. NEITHER THE DELIV-
ERY OF THIS PROSPECTUS NOR ANY SALE MADE HEREUNDER SHALL, UNDER ANY CIRCUM-
STANCES, CREATE ANY IMPLICATION THAT THERE HAS BEEN NO CHANGE IN THE AFFAIRS
OF THE COMPANY SINCE THE DATE HEREOF OR THAT THE INFORMATION CONTAINED HEREIN
IS CORRECT AS OF ANY TIME SUBSEQUENT TO ITS DATE.
----------------
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Available Information..................................................... 2
Incorporation of Certain Documents by Reference........................... 2
The Company............................................................... 3
Use of Proceeds........................................................... 4
Price Range of Common Stock and
Dividends................................................................ 4
Capitalization............................................................ 5
Selected Consolidated Financial Information............................... 6
Three Month and Twelve Month Results...................................... 7
Management's Discussion and Analysis of Financial Condition and Results of
Operations............................................................... 8
Business.................................................................. 12
Management................................................................ 28
Description of Common Stock............................................... 29
Underwriting.............................................................. 32
Legal Opinions............................................................ 33
Experts................................................................... 33
</TABLE>
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
3,000,000 SHARES
OVERSEAS SHIPHOLDING
GROUP, INC.
COMMON STOCK
(PAR VALUE $1.00 PER SHARE)
----------------
PROSPECTUS
----------------
GOLDMAN, SACHS & CO.
J.P. MORGAN SECURITIES INC.
FURMAN SELZ INCORPORATED
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
<PAGE>
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 14. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION.
The following table sets forth the expenses (other than underwriting
discounts and commissions) expected to be incurred in connection with the
offering described in this Registration Statement. All amounts are estimated
except the Securities and Exchange Commission and NASD filing fees.
<TABLE>
<S> <C>
Securities and Exchange Commission filing fee................... $ 27,957
Stock Exchange listing fees..................................... 19,575
Blue Sky fees and expenses ..................................... 11,000
Printing expenses............................................... 50,000
Accountants' fees and expenses.................................. 20,000
Legal fees and expenses......................................... 60,000
Miscellaneous expenses.......................................... 11,468
--------
Total....................................................... $200,000
========
</TABLE>
ITEM 15. INDEMNIFICATION OF DIRECTORS AND OFFICERS.
A. Reference is made to Section 102(b)(7) of the General Corporation Law of
the State of Delaware as to the limitation of personal liability of directors
and officers and to Section 145 of the General Corporation Law of the State of
Delaware as to indemnification by the Company of its directors and officers.
B. Article SIXTH of the Company's Certificate of Incorporation provides as
follows with respect to the indemnification of the Company's directors and
officers:
SIXTH: The Corporation shall indemnify to the full extent permitted
by law any person made, or threatened to be made, a party to any
action, suit or proceeding (whether civil, criminal, administrative or
investigative) by reason of the fact that he, his testator or intestate
is or was a director or officer of the Corporation or serves or served
any other enterprise at the request of the Corporation. Nothing herein
shall be deemed to preclude indemnification of any person, firm or
corporation who serves or has served as an employee or agent of the
Corporation or of any other enterprise at the request of the
Corporation.
C. Article TENTH of the Company's Certificate of Incorporation provides as
follows with respect to the limitation of personal liability of its directors
and officers:
TENTH: A director of the Corporation shall not be personally liable
to the Corporation or its stockholders for monetary damages for breach
of fiduciary duty as a director, except to the extent such exemption
from liability or limitation thereof is not permitted under the
Delaware General Corporation Law as the same exists or may hereafter be
amended. Any repeal or modification of the foregoing provision by the
stockholders of the Corporation shall not adversely affect any right or
protection of a director of the Corporation existing at the time of
such repeal or modification.
D. The directors and officers of the Company are covered by insurance
policies, maintained by the Company at its expense, insuring the directors and
officers against certain liabilities which might be incurred by them in such
capacities, including certain liabilities arising under the Securities Act of
1933.
E. The underwriters or agents on whose behalf the agreement listed as Exhibit
1 to this Registration Statement will be executed will agree therein to
indemnify the Company's directors, officers and controlling persons against
certain liabilities which might arise under the Securities Act of 1933 from
information furnished to the Company by or on behalf of such underwriters for
use in the Registration Statement.
II-1
<PAGE>
ITEM 16. EXHIBITS.
<TABLE>
<CAPTION>
EXHIBIT
NO. DESCRIPTION
------- -----------
<C> <S>
1 --Form of Underwriting Agreement.
--Form of Citizenship Legend and Application for Transfer on
4* Stock Certificates.
5* --Opinion of Proskauer Rose Goetz & Mendelsohn.
15* --Acknowledgement letter of Ernst & Young relating to unaudited
financial statements.
24.1 --Consent of Ernst & Young.
24.2 --Consent of Moore Stephens and Ernst & Young.
--Consent of Proskauer Rose Goetz & Mendelsohn (included in
24.3* Exhibit 5).
25* --Powers of Attorney (included in the signature page hereto).
</TABLE>
--------
* Previously filed.
ITEM 17. UNDERTAKINGS.
(a) Filings Incorporating Subsequent Exchange Act Documents by Reference.
The undersigned registrant hereby undertakes that, for purposes of
determining any liability under the Securities Act of 1933, each filing of the
registrant's annual report pursuant to Section 13(a) or 15(d) of the Securities
Exchange Act of 1934 (and, where applicable, each filing of an employee benefit
plan's annual report pursuant to Section 15(d) of the Securities Exchange Act
of 1934) that is incorporated by reference in the registration statement shall
be deemed to be a new registration statement relating to the securities offered
therein, and the offering of such securities at that time shall be deemed to be
the initial bona fide offering thereof.
(b) Rule 430A Offering.
The undersigned hereby undertakes that:
(1) For purposes of determining any liability under the Securities Act of
1933, the information omitted from the form of prospectus filed as part of
this registration statement in reliance upon Rule 430A and contained in a
form of prospectus filed by the registrant pursuant to Rule 424(b)(1) or
(4) or 497(h) under the Securities Act shall be deemed to be part of this
registration statement as of the time it was declared effective.
(2) For the purpose of determining any liability under the Securities Act
of 1933, each post-effective amendment that contains a form of prospectus
shall be deemed to be a new registration statement relating to the
securities offered therein, and the offering of such securities at that
time shall be deemed to be the initial bona fide offering thereof.
(c) Acceleration of Effectiveness.
Insofar as indemnification for liabilities arising under the Securities Act
of 1933 may be permitted to directors, officers and controlling persons, if
any, of the registrant pursuant to the foregoing provisions, or otherwise, the
registrant has been advised that in the opinion of the Securities and Exchange
Commission such indemnification is against public policy as expressed in the
Act and is, therefore, unenforceable. In the event that a claim for
indemnification against such liabilities (other than the payment by the
registrant of expenses incurred or paid by a director, officer or controlling
person of the registrant in the successful defense of any action, suit or
proceeding) is asserted against the registrant by such director, officer or
controlling person in connection with the securities being registered, the
registrant will, unless in the opinion of its counsel the matter has been
settled by controlling precedent, submit to a court of appropriate jurisdiction
the question whether such indemnification by it is against public policy as
expressed in the Act and will be governed by the final adjudication of such
issue.
II-2
<PAGE>
SIGNATURES
PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT OF 1933, THE CORPORATION
CERTIFIES THAT IT HAS REASONABLE GROUNDS TO BELIEVE THAT IT MEETS ALL OF THE
REQUIREMENTS FOR FILING ON FORM S-3 AND HAS DULY CAUSED THIS REGISTRATION
STATEMENT TO BE SIGNED ON ITS BEHALF BY THE UNDERSIGNED, THEREUNTO DULY
AUTHORIZED, IN THE CITY OF NEW YORK, STATE OF NEW YORK, ON FEBRUARY 25, 1994.
Overseas Shipholding Group, Inc.
/s/ Robert N. Cowen
By: _________________________________
Robert N. Cowen
Senior Vice President, Secretary and
General Counsel
KNOW ALL MEN BY THESE PRESENTS, THAT EACH PERSON WHOSE SIGNATURE APPEARS
BELOW CONSTITUTES AND APPOINTS MORTON P. HYMAN, MICHAEL A. RECANATI, GABRIEL
KAHANA, ALAN CARUS AND ROBERT N. COWEN, AND EACH OF THEM, AS HIS AGENTS AND
ATTORNEYS-IN-FACT, WITH FULL POWER OF SUBSTITUTION, IN HIS NAME, PLACE AND
STEAD IN ALL CAPACITIES TO SIGN AND FILE WITH THE SECURITIES AND EXCHANGE
COMMISSION ANY AMENDMENTS TO THIS REGISTRATION STATEMENT (INCLUDING POST-
EFFECTIVE AMENDMENTS) AND ANY EXHIBITS AND OTHER DOCUMENTS IN CONNECTION
THEREWITH, HEREBY RATIFYING AND CONFIRMING ALL THAT SUCH ATTORNEYS-IN-FACT OR
ANY OF THEM OR THEIR SUBSTITUTES MAY LAWFULLY DO OR CAUSE TO BE DONE BY VIRTUE
OF THIS POWER OF ATTORNEY.
PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT OF 1933, THIS REGISTRATION
STATEMENT HAS BEEN SIGNED BY THE FOLLOWING PERSONS IN THE CAPACITIES AND ON THE
DATES INDICATED.
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
--------- ----- ----
<S> <C> <C>
*
- ------------------------------------
Morton P. Hyman Principal Executive Officer
and Director February 25, 1994
*
- ------------------------------------
Gabriel Kahana Principal Financial Officer February 25, 1994
*
- ------------------------------------
Alan Carus Controller and Principal
Accounting Officer February 25, 1994
*
- ------------------------------------
Raphael Recanati Director February 25, 1994
- ------------------------------------
Michael A. Recanati Director February , 1994
*
- ------------------------------------
George C. Blake Director February 25, 1994
/s/ Robert N. Cowen
- ------------------------------------
Robert N. Cowen Director February 25, 1994
</TABLE>
II-3
<PAGE>
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
--------- ----- ----
<S> <C> <C>
*
- ------------------------------------
Thomas H. Dean Director February 25, 1994
*
- ------------------------------------
Michel Fribourg Director February 25, 1994
*
- ------------------------------------
William L. Frost Director February 25, 1994
*
- ------------------------------------
Ran Hettena Director February 25, 1994
*
- ------------------------------------
Stanley Komaroff Director February 25, 1994
*
- ------------------------------------
Solomon N. Merkin Director February 25, 1994
*
- ------------------------------------
Joel I. Picket Director February 25, 1994
*By /s/ Robert N. Cowen
- ------------------------------------
Robert N. Cowen
Attorney-in-Fact
</TABLE>
II-4
<PAGE>
GRAPHICS APPENDIX LIST
EDGAR Version Typeset Version
- ------------------ ---------------------------------------
GRAPHIC NO. 1
Page 13 of Text -- Bar chart of Seaborne Trade
chart is omitted of Major Bulk Commodities, in
Billions of Metric Ton Miles
(Source: Fearnleys Review,
1993 and earlier issues)
<TABLE>
<CAPTION>
Three Major
Dry Bulk
Commodities
(Coal, iron Crude Oil and
ore and Petroleum
Year grain) Products Total
---- ----------- ------------- -----
<S> <C> <C> <C>
1985 4,179 5,157 9,336
1986 4,171 5,905 10,076
1987 4,444 6,016 10,460
1988 4,749 6,510 11,259
1989 4,859 7,276 12,135
1990 4,900 7,821 12,721
1991 5,076 8,287 13,363
1992 4,988 8,590 13,578
1993 (est.) 4,935 9,025 13,960
</TABLE>
GRAPHIC NO. 2
Page 14 of text -- Bar chart of World Bulk Fleet Age
chart is omitted Distribution, including order book,
as of July 1, 1993, by percentage
of deadweight tonnage (DWT) for
ships over 10,000 Metric DWT
(Source: Fearnleys
World Bulk Fleet, July, 1993)
<TABLE>
<CAPTION>
Bulk Combination
Tankers Carriers Carriers Total
(262.2 (218.9 (30.1 (511.2
(Total existing million million million million
tonnage) MDWT) MDWT) MDWT) MDWT)
------- ------- ----------- -------
<S> <C> <C> <C> <C>
Orderbook 9.3% 7.7% 0.8% 8.1%
1989-July 1
1993 21.0 14.5 9.9 17.5
1979-1988 22.2 44.3 28.5 32.1
Pre-1979 56.8 41.2 61.6 50.4
</TABLE>
Existing fleet represents 100%
<PAGE>
<TABLE>
<CAPTION>
EDGAR Version Typeset Version
----------------------- ---------------------------------------
GRAPHIC NO. 3
Page 16 of Text -- Graph of Tanker Newbuilding Deliveries and
chart is omitted Scrappings, in Millions of MDWT
(Source: Fearnleys Review, 1993
and earlier issues)
Newbuilding
Year Deliveries Scrappings
---- ----------- ----------
<S> <C> <C>
1972 28.8 2.5
1973 37.2 2.0
1974 45.1 1.8
1975 48.0 9.2
1976 43.3 11.0
1977 21.8 9.1
1978 10.7 13.4
1979 7.2 8.6
1980 7.5 9.4
1981 8.6 12.0
1982 6.6 25.3
1983 5.8 25.9
1984 3.2 19.3
1985 4.6 30.5
1986 7.4 15.1
1987 6.5 9.3
1988 7.5 3.6
1989 8.9 1.7
1990 8.7 1.8
1991 13.2 3.2
1992 16.9 10.7
1993 (est.) 17.2 13.8
</TABLE>
Data includes combination carriers; scrappings include losses.
<PAGE>
<TABLE>
<CAPTION>
EDGAR Version Typeset Version
- ------------------ --------------------------------------
GRAPHIC NO. 4
Page 18 of Text -- Graph of Dry Bulk Carrier Newbuilding
chart is omitted Deliveries and Scrappings, in Millions
of MDWT (Source: Fearnleys Review, 1993
and earlier issues)
Newbuilding
Year Deliveries Scrappings
---- ----------- ----------
<S> <C> <C>
1972 9.3 0.2
1973 9.7 0.5
1974 8.7 0.3
1975 8.2 0.5
1976 11.6 0.8
1977 13.6 0.9
1978 7.6 2.2
1979 3.6 1.5
1980 4.7 0.8
1981 10.6 0.7
1982 14.4 1.5
1983 11.3 3.2
1984 14.2 4.6
1985 14.7 7.7
1986 11.6 14.4
1987 6.6 9.6
1988 4.0 1.9
1989 6.7 0.8
1990 9.6 1.7
1991 5.6 2.7
1992 4.3 3.7
1993 (est.) 7.9 4.4
</TABLE>
Scrappings include losses.
GRAPHIC NO. 5
Page 22 of Text -- Bar chart of Age Profile of Company
chart is omitted and Worldwide Bulk Fleets, in years
(Source: Fearnleys World Bulk
Fleet, July 1993 and earlier
issues and OSG Company data)
(excludes non-Company interests
in jointly-owned vessels)
<TABLE>
<CAPTION>
Year-End Company World
-------- ------- -----
<S> <C> <C>
1970 5.0 6.8
1975 3.4 6.6
1980 6.9 8.6
1985 9.5 10.2
1990 9.4 12.4
1992 10.8 12.9
July 1, 1993 11.4 12.9
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
EDGAR Version Typeset Version
------------- ---------------
GRAPHIC NO. 6
Page 26 of Text -- Bar chart of North American Cruise
chart is omitted Market, in millions of passengers
(Source: CLIA Industry Overview,
July 1993)
Year Passengers
---- ----------
<S> <C>
1982 1.5
1983 1.8
1984 1.9
1985 2.2
1986 2.6
1987 2.9
1988 3.2
1989 3.3
1990 3.6
1991 4.0
1992 4.1
</TABLE>
<PAGE>
EXHIBIT 1
OVERSEAS SHIPHOLDING GROUP, INC.
COMMON STOCK
------------
(par value $1.00 per share)
Underwriting Agreement
----------------------
February __, 1994
Goldman, Sachs & Co.,
J.P. Morgan Securities Inc.,
Furman Selz Incorporated
As representatives of the several Underwriters
named in Schedule I hereto,
c/o Goldman, Sachs & Co.,
85 Broad Street,
New York, New York 10004.
Dear Sirs:
Overseas Shipholding Group, Inc., a Delaware corporation (the "Company"),
proposes, subject to the terms and conditions stated herein, to issue and sell
to the Underwriters named in Schedule I hereto (the "Underwriters") an aggregate
of 3,000,000 shares (the "Firm Shares") and, at the election of the
Underwriters, up to 450,000 additional shares (the "Optional Shares") of Common
Stock, par value $1.00 (the "Stock"), of the Company (the Firm Shares and the
Optional Shares which the Underwriters elect to purchase pursuant to Section 2
hereof being collectively called the "Shares").
1. The Company represents and warrants to, and agrees with, each of the
Underwriters that:
(a) A registration statement in respect of the Shares has been filed
with the Securities and Exchange Commission (the "Commission"); such
registration statement and any post-effective amendment thereto, each in
the form heretofore delivered or to be delivered to you and, excluding
exhibits to such registration statement but including all documents
incorporated by reference in the prospectus contained therein, to you for
each of the other Underwriters, have been declared effective by the
Commission in such form; no other document with respect to such
registration statement or document incorporated by reference therein has
heretofore been filed or transmitted for filing with the Commission; and no
stop order suspending the effectiveness of such registration statement has
been issued and no proceeding for that purpose has been initiated or
threatened by the Commission (any preliminary prospectus included in such
registration statement or filed with the Commission pursuant to Rule 424(a)
of the rules and regulations of the Commission under the Securities Act of
1933, as amended
<PAGE>
(the "Act"), being hereinafter called a "Preliminary Prospectus"; the
various parts of such registration statement, including (i) the information
contained in the form of final prospectus filed with the Commission
pursuant to Rule 424(b) under the Act in accordance with Section 5(a)
hereof and deemed by virtue of Rule 430A under the Act to be part of the
registration statement at the time it was declared effective and (ii) all
exhibits thereto and the documents incorporated by reference in the
prospectus contained in the registration statement at the time such part of
the registration statement became effective, each as amended at the time
such part of the registration statement became effective, being hereinafter
called the "Registration Statement"; such final prospectus, in the form
first filed pursuant to Rule 424(b) under the Act, being hereinafter called
the "Prospectus"; any reference herein to any Preliminary Prospectus or the
Prospectus shall be deemed to refer to and include the documents
incorporated by reference therein pursuant to the applicable form under the
Act, as of the date of such Preliminary Prospectus or Prospectus, as the
case may be; any reference to any amendment or supplement to any
Preliminary Prospectus or the Prospectus shall be deemed to refer to and
include any documents filed after the date of such Preliminary Prospectus
or Prospectus, as the case may be, under the Securities Exchange Act of
1934, as amended (the "Exchange Act"), and incorporated by reference in
such Preliminary Prospectus or Prospectus, as the case may be; and any
reference to any amendment to the Registration Statement shall be deemed to
refer to and include any annual report of the Company filed pursuant to
Section 13(a) or 15(d) of the Exchange Act after the effective date of the
Registration Statement that is incorporated by reference in the
Registration Statement;
(b) No order preventing or suspending the use of any Preliminary
Prospectus has been issued by the Commission, and each Preliminary
Prospectus, at the time of filing thereof, conformed in all material
respects to the requirements of the Act and the rules and regulations of
the Commission thereunder, and did not contain an untrue statement of a
material fact or omit to state a material fact required to be stated
therein or necessary to make the statements therein, in the light of the
circumstances under which they were made, not misleading; provided,
however, that this representation and warranty shall not apply to any
statements or omissions made in reliance upon and in conformity with
information furnished in writing to the Company by an Underwriter through
you expressly for use therein;
(c) The documents incorporated by reference in the Prospectus, when
they became effective or were filed with the Commission, as the case may
be, conformed in all material respects to the requirements of the Act or
the Exchange Act, as applicable, and the rules and regulations of the
Commission thereunder, and none of such documents contained an untrue
statement of a material fact or omitted to state a material fact required
to be stated therein or necessary to make the statements therein not
misleading; and any further documents so filed and incorporated by
reference in the Prospectus or any further amendment or supplement thereto,
when such documents become effective or are filed with the Commission, as
the case may be, will conform in all material respects to the requirements
of the Act or the Exchange Act, as applicable, and the rules and
regulations of the Commission thereunder and will not contain an untrue
statement of a material fact or omit to state a material fact required to
be stated therein or necessary to make the statements therein not
misleading; provided, however, that this representation and warranty shall
not apply to any statements or omissions made in reliance upon and in
conformity with information furnished in writing to the Company by an
Underwriter through you expressly for use therein;
(d) The Registration Statement and the Prospectus conform, and any
further amendments or supplements to the Registration Statement or the
Prospectus will conform, in all material respects to the requirements of
the Act and the rules and regulations of the
-2-
<PAGE>
Commission thereunder and do not and will not, as of the applicable
effective date as to the Registration Statement and any amendment thereto
and as of the applicable filing date as to the Prospectus and any amendment
or supplement thereto, contain an untrue statement of a material fact or
omit to state a material fact required to be stated therein or necessary to
make the statements therein not misleading; provided, however, that this
representation and warranty shall not apply to any statements or omissions
made in reliance upon and in conformity with information furnished in
writing to the Company by an Underwriter through you expressly for use
therein;
(e) Neither the Company, nor any of the Company's subsidiaries nor
Celebrity Cruise Lines Inc. ("Celebrity") has sustained since the date of
the latest audited financial statements included or incorporated by
reference in the Prospectus any loss or interference with its business from
fire, explosion, flood or other calamity, whether or not covered by
insurance, or from any labor dispute or court or governmental action, order
or decree, otherwise than as set forth or contemplated in the Prospectus,
the effect of which, individually or in the aggregate, has had, or is
reasonably likely to have, a material adverse effect on the business,
properties, financial condition or results of operations of the Company and
its subsidiaries, taken as a whole; and, since the respective dates as of
which information is given in the Registration Statement and the
Prospectus, there has not been any change in the consolidated capital stock
(other than pursuant to stock options and stock option plans described in
or referred to in the Prospectus) or consolidated long-term debt (other
than borrowings under the U.S.$500,000,000 Credit Agreement, dated as of
February 9, 1990, as amended, or the $30,000,000 Committed Line of Credit
Agreement, dated February 13, 1992, as amended, or payments on account of
consolidated long-term debt) of the Company and its subsidiaries or any
material adverse change, or any development involving a prospective
material adverse change, in or affecting the business, management,
financial position, stockholders' equity or results of operations of the
Company and its subsidiaries, taken as a whole, otherwise than as set
forth, described or noted in, or contemplated by the Prospectus;
(f) The Company, the Company's subsidiaries and Celebrity (or
subsidiaries of Celebrity) have title to and are the sole owners of all
vessels owned by them free and clear of all liens, encumbrances and, to the
best of the Company's knowledge, defects other than such as are described
or noted in the Prospectus or such as in the aggregate do not have and can
reasonably be expected in the future not to have a material adverse effect
upon the business, operations, financial position, shareholders' equity or
results of operations of the Company and its subsidiaries, taken as a
whole; and any real property and vessels held under lease by the Company
and the Company's subsidiaries are held by them under valid, subsisting
leases enforceable against them, subject, as to enforcement, to bankruptcy,
insolvency, reorganization and other laws of general applicability relating
to or affecting creditors' rights and to general equity principles, and to
such further exceptions as are described or noted in the Prospectus or such
as in the aggregate do not have and can reasonably be expected in the
future not to have a material adverse effect upon the business, operations,
financial position, shareholders' equity or results of operations of the
Company and its subsidiaries, taken as a whole; and each vessel is duly
registered under the laws of the jurisdiction under whose flag it operates;
(g) The Company, the Company's subsidiaries and Celebrity have been
duly incorporated and are validly existing as corporations in good standing
under the laws of the jurisdiction of their incorporation, with power and
authority (corporate and other (in the case of Celebrity to the best of the
Company's knowledge as to other authority)) to own their properties and
conduct their business as described in the Prospectus. The Company, the
-3-
<PAGE>
Company's subsidiaries and Celebrity are duly qualified to transact
business and are in good standing as foreign corporations in each
jurisdiction where the character of their activities requires such
qualification, except where the failure to be so qualified or in good
standing would not have a material adverse
effect on the consolidated financial position, stockholders' equity or
results of operations of the Company and its subsidiaries, taken as a
whole;
(h) The Company has an authorized capitalization as set forth in the
Prospectus, and all of the issued shares of capital stock of the Company
have been duly and validly authorized and issued and are fully paid and
non-assessable and conform to the description of the Stock contained in the
Prospectus; all of the issued shares of capital stock of each subsidiary of
the Company have been duly and validly authorized and issued, are fully
paid and non-assessable and, except for directors' qualifying shares and
except as set forth in the Prospectus, are owned directly or indirectly by
the Company free and clear of all liens, encumbrances, equities or claims,
except for restrictions on transfer and similar arrangements, such as
buy/sell rights, embodied in financings and joint venture agreements
existing on the date of this Agreement;
(i) All of the issued and outstanding shares of capital stock of
Celebrity have been duly and validly authorized and issued and are fully
paid and non-assessable, and 49% of all such shares are owned by Overseas
Cruiseship Inc. ("OCI"), a wholly-owned subsidiary of the Company, all of
which are free and clear of all liens, encumbrances or claims, subject to
the provisions of a stockholders' agreement, dated October 21, 1992, as
amended, and of the Articles of Association of Celebrity;
(j) The unissued Shares to be issued and sold by the Company to the
Underwriters hereunder have been duly and validly authorized, and, when
issued and delivered against payment therefor as provided herein, will be
duly and validly issued and fully paid and non-assessable and will conform
to the description of the Stock contained in the Prospectus;
(k) The issue and sale of the Shares and the compliance by the
Company with all of the provisions of this Agreement and the consummation
of the transactions herein contemplated will not conflict with or result in
a breach or violation of any of the terms or provisions of, or constitute a
default under, any indenture, mortgage, deed of trust, loan agreement or
other agreement or instrument to which the Company or any of its
subsidiaries is a party or by which the Company or any of its subsidiaries
is bound or to which any of the property or assets of the Company or any of
its subsidiaries is subject, nor will such action result in any violation
of the provisions of the Certificate of Incorporation or By-laws of the
Company or any statute or any order, rule or regulation of any court or
governmental agency or body having jurisdiction over the Company or any of
its properties; and no consent, approval, authorization, order,
registration or qualification of or with any such court or governmental
agency or body is required for the issue and sale of the Shares or the
consummation by the Company of the transactions contemplated by this
Agreement, except the registration under the Act of the Shares and such
consents, approvals, authorizations, registrations or qualifications as may
be required under state securities or Blue Sky laws in connection with the
purchase and distribution of the Shares by the Underwriters;
(l) Other than as set forth in the Prospectus, there are no legal or
governmental proceedings pending to which the Company, any of the
Company's subsidiaries or Celebrity is a party or of which any property of
the Company, any of the Company's subsidiaries or Celebrity is the subject
as to which there is a reasonable likelihood of a determination adverse to
the Company, any of the Company's subsidiaries or Celebrity, which if so
determined are reasonably likely, individually or in the aggregate, to have
a material adverse effect on the
-4-
<PAGE>
consolidated financial position, stockholders' equity or results of
operations of the Company and its subsidiaries, taken as a whole; and, to
the best of the Company's knowledge, no such proceedings are threatened or
contemplated by governmental authorities or threatened by others;
(m) The Company is a citizen of the United States within the meaning
of Section 2 of the Shipping Act, 1916, as amended (the "Shipping Act"),
and is qualified to engage in the coastwise trade of the United States;
(n) The Company, the Company's subsidiaries and Celebrity hold all
licenses, permits, consents and approvals required by, and are in
compliance with, all regulations of State, Federal and foreign governmental
authorities that regulate the conduct of the business of the Company, the
Company's subsidiaries and Celebrity, except where the failure to hold any
such license, permit, consent or approval or to be in compliance with any
such regulation would not have a material adverse effect on the
consolidated financial position, stockholders' equity or results of
operations of the Company and its subsidiaries, taken as a whole;
(o) Ernst & Young, who have audited certain financial statements of
the Company and its subsidiaries, are independent public accountants as
required by the Act and the rules and regulations of the Commission
thereunder; and
(p) The Firm Shares and the Optional Shares have been approved,
subject to notice of issuance, for listing on the New York Stock Exchange
and the Pacific Stock Exchange.
2. Subject to the terms and condition herein set forth, (a) the
Company agrees to issue and sell to each of the Underwriters, and each of the
Underwriters agrees, severally and not jointly, to purchase from the Company, at
a purchase price per share of $__________, the number of Firm Shares set forth
opposite the name of such Underwriter in Schedule I hereto and (b) in the event
and to the extent that the Underwriters shall exercise the election to purchase
Optional Shares as provided below, the Company agrees to issue and sell to each
of the Underwriters, and each of the Underwriters agrees, severally and not
jointly, to purchase from the Company, at the purchase price per share set forth
in clause (a) of this Section 2, that portion of the number of Optional Shares
as to which such election shall have been exercised (to be adjusted by you so as
to eliminate fractional shares) determined by multiplying such number of
Optional Shares by a fraction the numerator of which is the maximum number of
Optional Shares which such Underwriter is entitled to purchase as set forth
opposite the name of such Underwriter in Schedule I hereto and the denominator
of which is the maximum number of the Optional Shares which all of the
Underwriters are entitled to purchase hereunder.
The Company hereby grants to the Underwriters the right to purchase at
their election up to 450,000 Optional Shares, at the purchase price per share
set forth in the paragraph above, for the sole purpose of covering
overallotments in the sale of the Firm Shares. Any such election to purchase
Optional Shares may be exercised only by written notice from you to the Company,
given within a period of 30 calendar days after the date of this Agreement,
setting forth the aggregate number of Optional Shares to be purchased and the
date on which such Optional Shares are to be delivered, as determined by you but
in no event earlier than the First Time of Delivery (as defined in Section 4
hereof) or, unless you and the Company otherwise agree in writing, earlier than
two or later than ten business days after the date of such notice.
-5-
<PAGE>
3. Upon the authorization by you of the release of the Firm Shares,
the several Underwriters propose to offer the Firm Shares for sale upon the
terms and conditions set forth in the Prospectus.
4. Certificates in definitive form for the Shares to be purchased by
each Underwriter hereunder, and in such denominations and registered in such
names as Goldman, Sachs & Co. may request upon at least forty-eight hours' prior
notice to the Company, shall be delivered by or on behalf of the Company to you
for the account of such Underwriter, against payment by such Underwriter or on
its behalf of the purchase price therefor by certified or official bank check or
checks, payable to the order of the Company in New York Clearing House funds,
all at the office of Goldman, Sachs & Co., 85 Broad Street, New York, New York
10004. The time and date of such delivery and payment shall be, with respect to
the Firm Shares, 10:00 a.m., New York time, on March __, 1994, or at such other
time and date as you and the Company may agree upon in writing, and, with
respect to the Optional Shares, 10:00 a.m., New York time, on the date specified
by you in the written notice given by you of the Underwriters' election to
purchase such Optional Shares, or at such other time and date as you and the
Company may agree upon in writing. Such time and date for delivery of the Firm
Shares is herein called the "First Time of Delivery," such time and date for
delivery of the Optional Shares, if not the First Time of Delivery, is herein
called the "Second Time of Delivery," and each such time and date for delivery
is herein called a "Time of Delivery." Such certificates will be made available
for checking and packaging at least twenty-four hours prior to each Time of
Delivery at the office of Goldman, Sachs & Co., 85 Broad Street, New York, New
York 10004.
5. The Company agrees with each of the Underwriters:
(a) To prepare the Prospectus in a form approved by you and to file
such Prospectus pursuant to Rule 424(b) under the Act not later than the
Commission's close of business on the second business day following the
execution and delivery of this Agreement or, if applicable, such earlier
time as may be required by Rule 430A(a)(3); to make no further amendment or
any supplement to the Registration Statement or Prospectus prior to the
last Time of Delivery which shall be disapproved by you promptly after
reasonable notice thereof; to advise you promptly of any such amendment or
supplement after such Time of Delivery and furnish you with copies thereof;
to file promptly all reports and any definitive proxy or information
statements required to be filed by the Company with the Commission pursuant
to Section 13(a), 13(c), 14 or 15(d) of the Exchange Act for so long as the
delivery of a prospectus is required in connection with the offering or
sale of the Shares, and during such same period to advise you, promptly
after it receives notice thereof, of the time when any amendment to the
Registration Statement has been filed or becomes effective or any
supplement to the Prospectus or any amended Prospectus has been filed with
the Commission, of the issuance by the Commission of any stop order or of
any order preventing or suspending the use of any Preliminary Prospectus or
prospectus, of the suspension of the qualification of the Shares for
offering or sale in any jurisdiction, of the initiation or threatening of
any proceeding for any such purpose, or of any request by the Commission
for the amending or supplementing of the Registration Statement or
Prospectus or for additional information; and, in the event of the issuance
of any such stop order or of any such order preventing or suspending the
use of any Preliminary Prospectus or prospectus relating to the Shares or
suspending any such qualification, to use promptly its best efforts to
obtain its withdrawal;
(b) Promptly from time to time to take such action as you may
reasonably request to qualify the Shares for offering and sale under the
securities laws of such jurisdictions within the United States as you may
request and to comply with such laws so as to permit the continuance of
sales and dealings therein in such jurisdictions for as long as may be
necessary
-6-
<PAGE>
to complete the distribution of the Shares, provided that in connection
therewith the Company shall not be required to qualify as a foreign
corporation or to file a general consent to service of process in any
jurisdiction;
(c) To furnish the Underwriters with copies of the Prospectus in such
quantities as you may from time to time reasonably request, and, if the
delivery of a prospectus is required at any time prior to the expiration of
nine months after the time of issue of the Prospectus in connection with
the offering or sale of the Shares and if at such time any event shall have
occurred as a result of which the Prospectus as then amended or
supplemented would include an untrue statement of a material fact or omit
to state any material fact necessary in order to make the statements
therein, in the light of the circumstances under which they were made when
such Prospectus is delivered, not misleading, or, if for any other reason
it shall be necessary during such same period to amend or supplement the
Prospectus or to file under the Exchange Act any document incorporated by
reference in the Prospectus in order to comply with the Act or the Exchange
Act, to notify you and upon your request to file such document and to
prepare and furnish without charge to each Underwriter and to any dealer in
securities as many copies as you may from time to time reasonably request
of an amended Prospectus or a supplement to the Prospectus which will
correct such statement or omission or effect such compliance and in case
any Underwriter is required to deliver a prospectus in connection with
sales of any Shares at any time nine months or more after the time of issue
of the Prospectus, upon your request but at the expense of such
Underwriter, to prepare and deliver to such Underwriter as many copies as
you may request of an amended or supplemented Prospectus complying with
Section 10(a)(3) of the Act;
(d) To make generally available to its securityholders as soon as
practicable, but in any event not later than eighteen months after the
effective date of the Registration Statement (as defined in Rule 158(c)),
an earning statement of the Company and its subsidiaries (which need not be
audited) complying with Section 11(a) of the Act and the rules and
regulations of the Commission thereunder (including at the option of the
Company Rule 158);
(e) During the period beginning from the date hereof and continuing
to and including the date 90 days after the date of the Prospectus, not to
offer, sell, contract to sell or otherwise dispose of any securities of the
Company (other than pursuant to stock option plans existing, or conversion
or exchange of convertible debt or exchangeable securities outstanding, on
the date of this Agreement) which are substantially similar to the Stock,
or which are convertible or exchangeable into securities which are
substantially similar to the Stock without your prior written consent;
(f) To furnish to its stockholders as soon as practicable after the
end of each fiscal year an annual report (including a balance sheet and
statements of income, stockholders' equity and cash flow of the Company and
its consolidated subsidiaries audited by independent public accountants)
and, as soon as practicable after the end of each of the first three
quarters of each fiscal year (beginning with the fiscal quarter ending
after the effective date of the Registration Statement), consolidated
summary financial information of the Company and its subsidiaries for such
quarter in reasonable detail;
(g) During a period of five years from the effective date of the
Registration Statement, to furnish to you copies of all reports or other
communications (financial or other) furnished to stockholders, and deliver
to you (i) as soon as they are available, copies of any reports and
financial statements furnished to or filed with the Commission or any
national securities exchange on which any class of securities of the
Company is listed; and (ii) such additional
-7-
<PAGE>
information concerning the business and financial condition of the Company
as you may from time to time reasonably request (such financial statements
to be on a consolidated basis to the extent the accounts of the Company and
its subsidiaries are consolidated in reports furnished to its stockholders
generally or to the Commission); and
(h) To apply the net proceeds from the sale of such Shares for the
purposes set forth in the Prospectus.
6. The Company covenants and agrees with the several Underwriters
that the Company will pay or cause to be paid the following: (i) the fees,
disbursements and expenses of the Company's counsel and accountants in
connection with the registration of the Shares under the Act and all other
expenses in connection with the preparation, printing and filing of the
Registration Statement, any Preliminary Prospectus and the Prospectus and
amendments and supplements thereto and the mailing and delivering of copies
thereof to the Underwriters and dealers; (ii) the cost of printing or producing
any Agreement among Underwriters, this Agreement, any Blue Sky Memoranda and any
other documents in connection with the offering, purchase, sale and delivery of
the Shares; (iii) all expenses in connection with the qualification of the
Shares for offering and sale under state securities laws as provided in Section
5(b) hereof, including the fees not exceeding $12,000 and disbursements of
counsel for the Underwriters in connection with such qualification and in
connection with the Blue Sky survey; (iv) any filing fees incident to any
required review by the National Association of Securities Dealers, Inc. of the
terms of the sale of the Shares; (v) the cost of preparing the stock
certificates; (vi) the cost and charges of any transfer agent or registrar; and
(vii) all other costs and expenses incident to the performance of its
obligations hereunder which are not otherwise specifically provided for in this
Section. It is understood, however, that, except as provided in this Section,
Section 8 and Section 11 hereof, the Underwriters will pay all of their own
costs and expenses, including the fees of their counsel, transfer taxes on
resale of any of the Shares by them, and any advertising expenses connected with
any offers they may make.
7. The obligations of the Underwriters hereunder, as to the Shares to
be delivered at each Time of Delivery, shall be subject, in their discretion, to
the condition that all representations and warranties and other statements of
the Company herein are, at and as of such Time of Delivery, true and correct,
the condition that the Company shall have performed all of its obligations
hereunder theretofore to be performed, and the following additional conditions:
(a) The Prospectus shall have been filed with the Commission pursuant
to Rule 424(b) within the applicable time period prescribed for such filing
by the rules and regulations under the Act and in accordance with Section
5(a) hereof; no stop order suspending the effectiveness of the Registration
Statement or any part thereof shall have been issued and no proceeding for
that purpose shall have been initiated or threatened by the Commission; and
all requests for additional information on the part of the Commission shall
have been complied with to your reasonable satisfaction;
(b) Sullivan & Cromwell, counsel for the Underwriters, shall have
furnished to you such opinion or opinions, dated such Time of Delivery,
with respect to the incorporation of the Company, the Underwriting
Agreement, the validity of the Shares being delivered at such Time of
Delivery, the Registration Statement, the Prospectus and other related
matters as you may reasonably request, and such counsel shall have received
such papers and information as they may reasonably request to enable them
to pass upon such matters;
-8-
<PAGE>
(c) Proskauer Rose Goetz & Mendelsohn, counsel for the Company, shall
have furnished to you their written opinion, dated such Time of Delivery,
in form and substance satisfactory to you, to the effect that:
(i) The Company has been duly incorporated and is validly
existing as a corporation in good standing under the laws of Delaware,
with corporate power and authority to own its properties and conduct
its business as described in the Prospectus;
(ii) This Agreement has been duly authorized, executed
and delivered by the Company;
(iii) The Shares being delivered at such Time of Delivery
have been duly and validly authorized and issued and are fully paid
and non-assessable, and the Shares conform in all material respects to
the description of the Stock contained under the caption "Description
of Common Stock" in the Prospectus;
(iv) No consent, approval, authorization, order,
registration or qualification of or with any court or governmental
agency or body is required by or on behalf of the Company for the
issue and sale of the Shares or the consummation by the Company of the
transactions contemplated by this Agreement, except registration under
the Act of the Shares and such consents, approvals, authorizations,
registrations or qualifications as may be required under state
securities or Blue Sky laws in connection with the purchase and
distribution of the Shares by the Underwriters;
(v) The documents incorporated by reference in the
Prospectus or any further amendment or supplement thereto made by the
Company prior to such Time of Delivery (other than the financial
statements, related schedules and other financial data therein, as to
which such counsel need express no opinion), when they became
effective or were filed with the Commission, as the case may be,
complied as to form in all material respects with the requirements of
the Act or the Exchange Act, as applicable, and the rules and
regulations of the Commission thereunder; and
(vi) The Registration Statement and the Prospectus and
any further amendments and supplements thereto made by the Company
prior to such Time of Delivery (other than the financial statements
and related schedules and other financial data therein, as to which
such counsel need express no opinion) comply as to form in all
material respects with the requirements of the Act and the rules and
regulations thereunder; such counsel has participated in conferences
with officers and other representatives of the Company and
representatives of the Underwriters at which the contents of the
Registration Statement and the Prospectus were discussed and, although
they are not expressing an opinion upon and do not assume
responsibility for the accuracy, completeness or fairness of the
statements contained in the Registration Statement or the Prospectus
(other than the statements under the captions "Description of Common
Stock" and "Legal Opinions" in the Prospectus and any supplement
thereto), on the basis of the foregoing nothing has come to their
attention that causes them to believe that as of its effective date,
the Registration Statement or any further amendment thereto made by
the Company prior to such Time of Delivery (other than the financial
statements and related schedules and other financial data therein, as
to which such counsel need express no opinion) contained an untrue
statement of a material fact or omitted to state a material fact
required to be stated therein or necessary to make the statements
therein not misleading or that, as of its
-9-
<PAGE>
date, the Prospectus or any further amendment or supplement thereto
made by the Company prior to such Time of Delivery (other than the
financial statements and related schedules and other financial data
therein as to which such counsel need express no opinion) contained an
untrue statement of a material fact or omitted to state a material
fact necessary to make the statements therein, in light of the
circumstances in which they were made, not misleading or that, as of
such Time of Delivery, either the Registration Statement or the
Prospectus or any further amendment or supplement thereto made by the
Company prior to such Time of Delivery (other than the financial
statements and related schedules and other financial data therein, as
to which such counsel need express no opinion) contains an untrue
statement of a material fact or omits to state a material fact
necessary to make the statements therein, in light of the
circumstances in which they were made, not misleading; and they do not
know of any amendment to the Registration Statement required to be
filed or any contracts or other documents of a character required to
be filed as an exhibit to the Registration Statement or required to be
incorporated by reference into the Prospectus or required to be
described in the Registration Statement or the Prospectus which are
not filed or incorporated by reference or described as required;
In rendering the opinion set forth in Section 7(c)(iii) above,
such counsel may assume that the sale of the Shares has not caused the
percentage of the aggregate number of shares of capital stock of the
Company outstanding after the sale of the Shares not registered in the name
of and owned of record and beneficially by United States citizens within
the meaning of Section 2 of the Shipping Act of 1916, as amended, and the
related laws, rules and regulations to exceed twenty-three percent.
(d) Robert N. Cowen, General Counsel for the Company, shall have
furnished to the Underwriters such counsel's written opinion, dated such
Time of Delivery, in form and substance satisfactory to you, to the effect
that:
(i) The issue and sale of the Shares being delivered at
such Time of Delivery by the Company and the compliance by the Company
with all of the provisions of this Agreement and the consummation of
the transactions herein contemplated will not conflict with,
constitute a default under or violate (A) any of the terms, conditions
or provisions of any document, agreement or instrument known to him to
which the Company or any of its subsidiaries is a party or is bound,
(B) any U.S. Federal maritime or admiralty law or regulation or (C)
any judgment, writ, injunction, decree or order of any U.S. Federal
court or governmental authority having jurisdiction over any maritime
or admiralty matters or who enforce or interpret any maritime or
admiralty laws or promulgate any regulations as to such matters
binding on the Company or any of its subsidiaries of which such
counsel is aware;
(ii) No consent, approval, waiver, license or other
authorization by or filing with any U.S. Federal maritime or admiralty
authority is required for the issue and sale of the Shares or the
consummation by the Company of the transactions contemplated by this
Agreement;
(iii) The statements in the Prospectus as amended and
supplemented under the captions "Business -- Environmental Matters
Relating to Bulk Shipping" and "Business -- Regulatory Matters
Relating to Cruise Industry" fairly present and summarize in all
material respects the maritime laws and regulations referred to
therein;
-10-
<PAGE>
(iv) The Company, the Company's subsidiaries and
Celebrity (or subsidiaries of Celebrity) have record title to all
vessels owned by them free and clear of all liens and encumbrances of
record except such as are described or noted in the Prospectus or such
as in the aggregate do not have and can reasonably be expected in the
future not to have a material adverse effect upon the business,
operations, financial position, shareholders' equity or results of
operations of the Company and its subsidiaries, taken as a whole; and
any vessels held under lease by the Company and the Company's
subsidiaries are held by them under valid, subsisting leases
enforceable against them subject, as to enforcement, to bankruptcy,
insolvency, reorganization and other laws of general applicability
relating to or affecting creditors' rights and to general equity
principles, with such exceptions as are described or noted in the
Prospectus or such as in the aggregate do not have and can reasonably
be expected in the future not to have a material adverse effect upon
the business, operations, financial position, shareholders' equity or
results of operations of the Company and its subsidiaries, taken as a
whole;
(v) The Company is duly qualified to transact business
and is in good standing as a foreign corporation in each jurisdiction
where the character of its activities requires such qualification,
except where the failure to be so qualified or in good standing would
not have a material adverse effect on the consolidated financial
position, stockholders' equity or results of operations of the Company
and its subsidiaries, taken as a whole;
(vi) The Company has an authorized capitalization as set
forth in the Prospectus and all of the issued shares of capital stock
of the Company (including the Shares being delivered at such Time of
Delivery) have been duly and validly authorized and issued and are
fully paid and non-assessable; and the Shares conform in all material
respects to the description of the Stock contained under the caption
"Description of Common Stock" in the Prospectus;
(vii) To the best of such counsel's knowledge, each
vessel owned or leased by the Company, the Company's subsidiaries and
Celebrity (or subsidiaries of Celebrity) is duly registered under the
laws of the jurisdiction under whose flag it operates;
(viii) To the best of such counsel's knowledge, other
than as set forth in the Prospectus, there are no legal or
governmental proceedings pending to which the Company, any of the
Company's subsidiaries or Celebrity is a party or of which any
property of the Company, any of the Company's subsidiaries or
Celebrity is the subject as to which there is a reasonable likelihood
of a determination adverse to the Company, any of the Company's
subsidiaries or Celebrity, which if so determined are reasonably
likely, individually or in the aggregate to have a material adverse
effect on the consolidated financial position, stockholders' equity
or results of operations of the Company and its subsidiaries, taken as
a whole, and, to the best of such counsel's knowledge, no such
proceedings are threatened or contemplated by governmental authorities
or threatened by others;
(ix) The issue and sale of the Shares and the compliance
by the Company with all of the provisions of this Agreement and the
consummation of the transactions herein contemplated will not conflict
with or result in a breach or violation of any of the terms or
provisions of, or constitute a default under, any indenture, mortgage,
deed of
-11-
<PAGE>
trust, loan agreement or other agreement or instrument known to such
counsel to which the Company is a party or by which the Company is
bound or to which any of the property or assets of the Company is
subject, nor will such actions result in any violation of the
provisions of the Certificate of Incorporation or By-laws of the
Company or any statute or any order, rule or regulation known to such
counsel of any court or governmental agency or body having
jurisdiction over the Company or any of its properties;
(x) Such counsel has no reason to believe that the
documents incorporated by reference in the Prospectus (other than the
financial statements, related schedules and other financial data
therein, as to which such counsel need express no opinion), when they
became effective or were filed with the Commission, as the case may
be, contained, in the case of a registration statement which became
effective under the Act, an untrue statement of a material fact or
omitted to state a material fact required to be stated therein
or necessary to make the statements therein not misleading, or, in the
case of other documents which were filed under the Act or the Exchange
Act with the Commission, an untrue statement of a material fact or
omitted to state a material fact necessary in order to make the
statements therein, in the light of the circumstances under which they
were made when such documents were so filed, not misleading; and
(xi) The Company is a citizen of the United States within
the meaning of Section 2 of the Shipping Act and is qualified to
operate vessels in the coastwise trade of the United States (for
purposes of the foregoing opinion, such counsel may rely on an
affidavit of U.S. citizenship of the Company regarding the citizenship
of its officers, directors, and stockholders and on a certificate of
the Company's transfer agent regarding the percentage of the shares of
stock outstanding that are owned by persons who are not citizens of
the United States, such affidavit or certificate to be dated as of
such Time of Delivery or as of a date that is reasonably current at
such Time of Delivery);
In rendering the opinion set forth in Section 7(d)(i), (vi), (ix)
and (xi) above, such counsel may assume that the sale of the Shares has not
caused the percentage of the aggregate number of shares of capital stock of
the Company outstanding after the sale of the Shares not registered in the
name of and owned of record and beneficially by United States citizens
within the meaning of Section 2 of the Shipping Act of 1916, as amended,
and the related laws, rules and regulations to exceed twenty-three percent.
(e) Hunter & Hunter, local counsel for Celebrity, shall have
furnished to the Underwriters such counsel's written opinion, dated such
Time of Delivery, in form and substance satisfactory to you, to the effect
that:
(i) Celebrity has been duly incorporated and is validly
existing as a company in good standing under the laws of the
jurisdiction of its incorporation, with corporate power and authority
to own its properties and conduct its business;
(ii) All of the issued and outstanding shares in the
capital of Celebrity have been duly and validly authorized and issued
and are fully paid and non-assessable, and 49% of such shares are
owned of record by OCI, all of which are, so far as is shown on the
records of Celebrity, free and clear of all liens, encumbrances or
claims,
-12-
<PAGE>
subject to the provisions of a stockholders' agreement, dated
October 21, 1992, as amended, and of the Articles of Association of
Celebrity; and
(iii) To the best of such counsel's knowledge, there are
no legal or governmental proceedings pending in the Cayman Islands to
which Celebrity or any of its subsidiaries is a party or of which any
property of Celebrity or any of its subsidiaries is subject, and, to
the best of such counsel's knowledge, no such proceedings are
threatened or contemplated by governmental authorities;
(f) At 10:00 a.m., New York time, on the effective date of the
Registration Statement and the most recently filed post-effective amendment
to the Registration Statement, if any, and also at such Time of Delivery,
Ernst & Young shall have furnished to you a letter or letters, dated the
respective date of delivery thereof, in form and substance satisfactory to
you to the effect set forth in Annex I;
(g) (i) Neither the Company, nor any of the Company's
subsidiaries nor Celebrity shall have sustained since the date of the
latest audited financial statements included or incorporated by reference
in the Prospectus any loss or interference with its business from fire,
explosion, flood or other calamity, whether or not covered by insurance, or
from any labor dispute or court or governmental action, order or decree,
otherwise than as set forth or contemplated in the Prospectus, the effect
of which, individually or in the aggregate, has had, or is reasonably
likely to have, a material adverse effect on the business, properties,
financial condition or results of operations of the Company and its
subsidiaries, taken as a whole; and (ii) since the respective dates as of
which information is given in the Prospectus there shall not have been any
change in the consolidated capital stock (other than pursuant to stock
options and stock option plans described in or referred to in the
Prospectus) or consolidated long-term debt (other than borrowings under the
U.S.$500,000,000 Credit Agreement, dated as of February 9, 1990, as
amended, or the $30,000,000 Committed Line of Credit Agreement, dated
February 13, 1992, as amended, or payments on account of consolidated long-
term debt) of the Company and its subsidiaries or any change, or any
development involving a prospective change, in or affecting the business,
management, financial position, stockholders' equity or results of
operations of the Company and its subsidiaries, taken as a whole, otherwise
than as set forth, described or noted in, or contemplated by the
Prospectus, the effect of which, in any such case described in Clause (i)
or (ii), is in your judgment so material and adverse as to make it
impracticable or inadvisable to proceed with the public offering or the
delivery of the Shares being delivered at such Time of Delivery on the
terms and in the manner contemplated in the Prospectus;
(h) On or after the date of this Agreement (i) no downgrading shall
have occurred in the rating accorded the Company's debt securities by any
"nationally recognized statistical rating organization," as that term is
defined by the Commission for purposes of Rule 436(g)(2) under the Act and
(ii) no such organization shall have publicly announced that it has under
surveillance or review, with possible negative implications, its rating of
any of the Company's debt securities;
(i) On or after the date of this Agreement there shall not have
occurred any of the following: (i) a suspension or material limitation in
trading in securities generally on the New York Stock Exchange; (ii) a
general moratorium on commercial banking activities in New York declared by
either Federal or New York State authorities; or (iii) the outbreak or
escalation of hostilities involving the United States or the declaration by
the United States of a national emergency or war, if the effect of any such
event specified in this clause (iii) in your judgment
-13-
<PAGE>
makes it impracticable or inadvisable to proceed with the public offering
or the delivery of the Shares being delivered at such Time of Delivery on
the terms and in the manner contemplated by the Prospectus; and
(j) The Company shall have furnished or caused to be furnished to you
at each Time of Delivery a certificate or certificates of officers of the
Company satisfactory to you as to the accuracy of the representations and
warranties of the Company herein at and as of such Time of Delivery, as to
the performance by the Company of all of its obligations hereunder to be
performed at or prior to such Time of Delivery, as to the matters set forth
in subsections (a) and (g) of this Section and as to such other matters as
you may reasonably request; and
(k) The Shares to be sold by the Company at such Time of Delivery
shall have been duly listed, subject to notice of issuance, on the New York
Stock Exchange and the Pacific Stock Exchange.
8. (a) The Company will indemnify and hold harmless each Underwriter
against any losses, claims, damages or liabilities, joint or several, to which
such Underwriter may become subject, under the Act or otherwise, insofar as such
losses, claims, damages or liabilities (or actions in respect thereof) arise out
of or are based upon an untrue statement or alleged untrue statement of a
material fact contained in any Preliminary Prospectus, the Registration
Statement or the Prospectus, or any amendment or supplement thereto, or arise
out of or are based upon the omission or alleged omission to state therein a
material fact required to be stated therein or necessary to make the statements
therein not misleading, and will reimburse each Underwriter for any legal or
other expenses reasonably incurred by such Underwriter in connection with
investigating or defending any such action or claim as such expenses are
incurred; provided, however, that the Company shall not be liable in any such
case to the extent that any such loss, claim, damage or liability arises out of
or is based upon an untrue statement or alleged untrue statement or omission or
alleged omission made in any Preliminary Prospectus, the Registration Statement
or the Prospectus, or any such amendment or supplement in reliance upon and in
conformity with written information furnished to the Company by any Underwriter
through you expressly for use therein; and provided, further, that the Company
shall not be liable to any Underwriter under the indemnity agreement in this
subsection (a) with respect to any Preliminary Prospectus to the extent that any
such loss, claim, damage or liability of such Underwriter results from the fact
that such Underwriter sold Securities to a person as to whom it shall be
established that there was not sent or given, at or prior to the written
confirmation of such sale, a copy of the Prospectus (excluding documents
incorporated by reference) in any case where such delivery is required by the
Act if the Company has previously furnished copies thereof in sufficient
quantity to such Underwriter and the loss, claim, damage or liability of such
Underwriter results from an untrue statement or omission of a material fact
contained in the Preliminary Prospectus which was identified in writing prior to
the date hereof to such Underwriter and corrected in the Prospectus (excluding
documents incorporated by reference).
(b) Each Underwriter will indemnify and hold harmless the Company
against any losses, claims, damages or liabilities to which the Company may
become subject, under the Act or otherwise, insofar as such losses, claims,
damages or liabilities (or actions in respect thereof) arise out of or are based
upon an untrue statement or alleged untrue statement of a material fact
contained in any Preliminary Prospectus, the Registration Statement or the
Prospectus, or any amendment or supplement thereto, or arise out of or are based
upon the omission or alleged omission to state therein a material fact required
to be stated therein or necessary to make the statements therein not misleading,
in each case to the extent, but only to the extent, that such untrue statement
or alleged untrue statement or omission or alleged omission was made in any
Preliminary Prospectus, the Registration Statement or the Prospectus, or any
such amendment or supplement in reliance upon and
-14-
<PAGE>
in conformity with written information furnished to the Company by such
Underwriter through you expressly for use therein; and will reimburse the
Company for any legal or other expenses reasonably incurred by the Company in
connection with investigating or defending any such action or claim as such
expenses are incurred.
(c) Promptly after receipt by an indemnified party under subsection
(a) or (b) above of notice of the commencement of any action, such indemnified
party shall, if a claim in respect thereof is to be made against the
indemnifying party under such subsection, notify the indemnifying party in
writing of the commencement thereof; but the omission so to notify the
indemnifying party shall not relieve it from any liability which it may have to
any indemnified party otherwise than under such subsection. In case any such
action shall be brought against any indemnified party and it shall notify the
indemnifying party of the commencement thereof, the indemnifying party shall be
entitled to participate therein and, to the extent that it shall wish, jointly
with any other indemnifying party similarly notified, to assume the defense
thereof, with counsel satisfactory to such indemnified party (who shall not,
except with the consent of the indemnified party, be counsel to the indemnifying
party), and, after notice from the indemnifying party to such indemnified party
of its election so to assume the defense thereof, the indemnifying party shall
not be liable to such indemnified party under such subsection for any legal
expenses of other counsel or any other expenses, in each case subsequently
incurred by such indemnified party, in connection with the defense thereof other
than reasonable costs of investigation. The indemnified party shall not settle
any action or claim for which indemnification is provided hereunder, except with
the consent of the indemnifying party, which consent shall not be unreasonably
delayed or withheld.
(d) If the indemnification provided for in this Section 8 is
unavailable to or insufficient to hold harmless an indemnified party under
subsection (a) or (b) above in respect of any losses, claims, damages or
liabilities (or actions in respect thereof) referred to therein, then each
indemnifying party shall contribute to the amount paid or payable by such
indemnified party as a result of such losses, claims, damages or liabilities (or
actions in respect thereof) in such proportion as is appropriate to reflect the
relative benefits received by the Company on the one hand and the Underwriters
on the other from the offering of the Shares. If, however, the allocation
provided by the immediately preceding sentence is not permitted by applicable
law or if the indemnified party failed to give the notice required under
subsection (c) above, then each indemnifying party shall contribute to such
amount paid or payable by such indemnified party in such proportion as is
appropriate to reflect not only such relative benefits but also the relative
fault of the Company on the one hand and the Underwriters on the other in
connection with the statements or omissions which resulted in such losses,
claims, damages or liabilities (or actions in respect thereof), as well as any
other relevant equitable considerations. The relative benefits received by the
Company on the one hand and such Underwriters on the other shall be deemed to be
in the same proportion as the total net proceeds from the offering (before
deducting expenses) received by the Company bear to the total underwriting
discounts and commissions received by the Underwriters, in each case as set
forth in the table on the cover page of the Prospectus. The relative fault shall
be determined by reference to, among other things, whether the untrue or alleged
untrue statement of a material fact or the omission or alleged omission to state
a material fact relates to information supplied by the Company on the one hand
or such Underwriters on the other and the parties' relative intent, knowledge,
access to information and opportunity to correct or prevent such statement or
omission. The Company and the Underwriters agree that it would not be just and
equitable if contribution pursuant to this subsection (d) were determined by pro
rata allocation (even if the Underwriters were treated as one entity for such
purpose) or by any other method of allocation which does not take account of the
equitable considerations referred to above in this subsection (d). The amount
paid or payable by an indemnified party as a result of the losses, claims,
damages or liabilities (or actions in respect thereof) referred to above in this
subsection (d) shall be deemed to include any legal or other expenses reasonably
incurred by such
-15-
<PAGE>
indemnified party in connection with investigating or defending any such action
or claim. Notwithstanding the provisions of this subsection (d), no Underwriter
shall be required to contribute any amount in excess of the amount by which the
total price at which the Shares underwritten by it and distributed to the public
were offered to the public exceeds the amount of any damages which such
Underwriter has otherwise been required to pay by reason of such untrue or
alleged untrue statement or omission or alleged omission. No person guilty of
fraudulent misrepresentation (within the meaning of Section 11(f) of the Act)
shall be entitled to contribution from any person who was not guilty of such
fraudulent misrepresentation. The obligations of the Underwriters in this
subsection (d) to contribute are several in proportion to their respective
underwriting obligations and not joint.
(e) The obligations of the Company under this Section 8 shall be in
addition to any liability which the Company may otherwise have and shall extend,
upon the same terms and conditions, to each person, if any, who controls any
Underwriter within the meaning of the Act; and the obligations of the
Underwriters under this Section 8 shall be in addition to any liability which
the respective Underwriters may otherwise have and shall extend, upon the same
terms and conditions, to each officer and director of the Company and to each
person, if any, who controls the Company within the meaning of the Act.
9. (a) If any Underwriter shall default in its obligation to
purchase the Shares which it has agreed to purchase hereunder at a Time of
Delivery, you may in your discretion arrange for you or another party or other
parties to purchase such Shares on the terms contained herein. If within thirty-
six hours after such default by any Underwriter you do not arrange for the
purchase of such Shares, then the Company shall be entitled to a further period
of thirty-six hours within which to procure another party or other parties
satisfactory to you to purchase such Shares on such terms. In the event that,
within the respective prescribed period, you notify the Company that you have so
arranged for the purchase of such Shares, or the Company notifies you that it
has so arranged for the purchase of such Shares, you or the Company shall have
the right to postpone such Time of Delivery for a period of not more than seven
days, in order to effect whatever changes may thereby be made necessary in the
Registration Statement or the Prospectus, or in any other documents or
arrangements, and the Company agrees to file promptly any amendments or
supplements to the Registration Statement or the Prospectus which in your
opinion may thereby be made necessary. The term "Underwriter" as used in this
Agreement shall include any person substituted under this Section with like
effect as if such person had originally been a party to this Agreement with
respect to such Shares.
(b) If, after giving effect to any arrangements for the purchase of
the Shares of a defaulting Underwriter or Underwriters by you and the Company as
provided in subsection (a) above, the aggregate number of such Shares which
remains unpurchased does not exceed one-eleventh of the aggregate number of all
the Shares to be purchased at such Time of Delivery, then the Company shall have
the right to require each non-defaulting Underwriter to purchase the number of
Shares which such Underwriter agreed to purchase hereunder at such Time of
Delivery and, in addition, to require each non-defaulting Underwriter to
purchase its pro rata share (based on the number of Shares such Underwriter
agreed to purchase hereunder) of the Shares of such defaulting Underwriter or
Underwriters for which such arrangements have not been made; but nothing herein
shall relieve a defaulting Underwriter from liability for its default.
(c) If, after giving effect to any arrangements for the purchase of
the Shares of a defaulting Underwriter or Underwriters by you and the Company as
provided in subsection (a) above, the aggregate number of Shares which remains
unpurchased exceeds one-eleventh of the aggregate number of Shares to be
purchased at such Time of Delivery, or if the Company shall not exercise the
right described in subsection (b) above to require non-defaulting Underwriters
to purchase Shares of a defaulting Underwriter or Underwriters, then this
Agreement (or, with respect to the Second Time
-16-
<PAGE>
of Delivery, the obligations of the Underwriters to purchase and of the Company
to sell the Optional Shares) shall thereupon terminate, without liability on the
part of any non-defaulting Underwriter or the Company, except for the expenses
to be borne by the Company and the Underwriters as provided in Section 6 hereof
and the indemnity and contribution agreements in Section 8 hereof; but nothing
herein shall relieve a defaulting Underwriter from liability for its default.
10. The respective indemnities, agreements, representations,
warranties and other statements of the Company and the several Underwriters, as
set forth in this Agreement or made by or on behalf of them, respectively,
pursuant to this Agreement, shall remain in full force and effect, regardless of
any investigation (or any statement as to the results thereof) made by or on
behalf of any Underwriter or any controlling person of any Underwriter, or the
Company, or any officer or director or controlling person of the Company, and
shall survive delivery of and payment for the Shares.
11. If this Agreement shall be terminated pursuant to Section 9
hereof, the Company shall not then be under any liability to any Underwriters
except as provided in Section 6 and Section 8 hereof; but, if for any other
reason any Shares are not delivered by or on behalf of the Company as provided
herein, the Company will reimburse the Underwriters through you for all out-of-
pocket expenses approved in writing by you, including fees and disbursements of
counsel, reasonably incurred by the Underwriters in making preparations for the
purchase, sale and delivery of Shares not so delivered, but the Company shall
then be under no further liability to any Underwriter except as provided in
Section 6 and Section 8 hereof.
12. In all dealings hereunder, you shall act on behalf of each of the
Underwriters, and the parties hereto shall be entitled to act and rely upon any
statement, request, notice or agreement on behalf of any Underwriter made or
given by you jointly or by Goldman, Sachs & Co. on behalf of you as the
representatives.
All statements, requests, notices and agreements hereunder shall be in
writing, and if to the Underwriters shall be delivered or sent by mail, telex or
facsimile transmission to you as the representatives in care of Goldman, Sachs &
Co., at 85 Broad Street, New York, New York 10004, Attention: Registration
Department; and if to the Company shall be delivered or sent by mail, telex or
facsimile transmission to the address of the Company set forth in the
Registration Statement: Attention: Secretary; provided, however, that any notice
to an Underwriter pursuant to Section 8(c) hereof shall be delivered or sent by
mail, telex or facsimile transmission to such Underwriter at its address set
forth in its Underwriters' Questionnaire, or telex constituting such
Questionnaire, which address will be supplied to the Company by you upon
request. Any such statements, requests, notices or agreements shall take effect
upon receipt thereof.
13. This Agreement shall be binding upon, and inure solely to the
benefit of, the Underwriters, the Company and, to the extent provided in Section
8 and Section 10 hereof, the officers and directors of the Company and each
person who controls the Company or any Underwriter, and their respective heirs,
executors, administrators, successors and assigns, and no other person shall
acquire or have any right under or by virtue of this Agreement. No purchaser of
any of the Shares from any Underwriter shall be deemed a successor or assign by
reason merely of such purchase.
14. Time shall be of the essence of this Agreement. As used herein,
"business day" shall mean any day when the Commission's office in Washington,
D.C. is open for business.
15. THIS AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE
WITH THE LAWS OF THE STATE OF NEW YORK.
-17-
<PAGE>
16. This Agreement may be executed by any one or more of the parties
hereto and thereto in any number of counterparts, each of which shall be deemed
to be an original, but all such respective counterparts shall together
constitute one and the same instrument.
IF THE FOREGOING IS IN ACCORDANCE WITH YOUR UNDERSTANDING, PLEASE SIGN
AND RETURN TO US EIGHT COUNTERPARTS HEREOF.
Very truly yours,
OVERSEAS SHIPHOLDING GROUP, INC.
By:_________________________________________
Name:
Title:
Accepted as of the date hereof:
Goldman, Sachs & Co.
J.P. Morgan Securities Inc.
Furman Selz Incorporated
By:_________________________________
(Goldman, Sachs & Co.)
On behalf of each of the Underwriters
-18-
<PAGE>
SCHEDULE I
<TABLE>
<CAPTION>
NUMBER OF
TOTAL NUMBER OPTIONAL SHARES
OF FIRM SHARES TO BE PURCHASED
TO BE IF MAXIMUM OPTION
UNDERWRITER PURCHASED EXERCISED
- ------------------------------ -------------- -----------------
<S> <C> <C>
Goldman, Sachs & Co. .........
J.P. Morgan Securities Inc. ..
Furman Selz Incorporated .....
--------------
Total................. 3,000,000
==============
</TABLE>
I-1
<PAGE>
ANNEX I
Pursuant to Section 7(f) of the Underwriting Agreement, the
accountants shall furnish letters to the Underwriters to the effect that:
(i) They are independent certified public accountants
with respect to the Company and its subsidiaries within the meaning of
the Act and the applicable published rules and regulations thereunder;
(ii) In their opinion, the financial statements and any
supplementary financial information and schedules audited by them and
included or incorporated by reference in the Registration Statement or
the Prospectus comply as to form in all material respects with the
applicable accounting requirements of the Act or the Exchange Act, as
applicable, and the related published rules and regulations
thereunder; and that they have made a review in accordance with
standards established by the American Institute of Certified Public
Accountants of the consolidated interim financial statements included
in the Prospectus, copies of which have been furnished to the
representatives of the Underwriters (the "Representatives");
(iii) The unaudited selected financial information with
respect to the consolidated results of operations and financial
position of the Company for the five most recent fiscal years included
in the Prospectus and included or incorporated by reference in item 6
of the Company's Annual Report on Form 10-K for the most recent fiscal
year agrees with the corresponding amounts (after restatement where
applicable) in the audited consolidated financial statements for such
five fiscal years which were included or incorporated by reference in
the Company's Annual Reports on Form 10-K for such fiscal years;
(iv) On the basis of limited procedures for a review of
financial information, not constituting an audit in accordance with
generally accepted auditing standards, consisting of a reading of the
unaudited financial statements and other information referred to
below, a reading of the latest available interim financial statements
of the Company and its subsidiaries, inspection of the minute books of
the Company and its subsidiaries since the date of the latest audited
financial statements included or incorporated by reference in the
Prospectus, inquiries of officials of the Company and its subsidiaries
responsible for financial and accounting matters and such other
inquiries and procedures as may be specified in such letter, nothing
came to their attention that caused them to believe that:
(A) the unaudited consolidated statements of income,
consolidated balance sheets and consolidated statements of cash
flows included or incorporated by reference in the Company's
Quarterly Reports on Form 10-Q incorporated by reference in the
Prospectus do not comply as to form in all material respects with
the applicable accounting requirements of the Exchange Act as it
applies to Form 10-Q and the related published rules and
regulations thereunder or any material modifications should be
made to such unaudited financial statements for them to be in
conformity with generally accepted accounting principles;
(B) as of a specified date not more than five days prior to
the date of such letter, there have been any changes in the
consolidated capital stock
A-1
<PAGE>
(other than issuances of capital stock upon exercise of options,
warrants and stock appreciation rights, upon earn-outs of
performance shares and upon conversions of convertible
securities, in each case which were outstanding on the date of
the latest balance sheet included or incorporated by reference in
the Prospectus) or any increase in the consolidated long-term
debt of the Company and its subsidiaries, or any decreases in
consolidated net current assets or net assets (excluding the
effect of dividends declared on January 28, 1994) or other items
specified by the Representatives, or any increases in any items
specified by the Representatives, in each case as compared with
amounts shown in the latest balance sheet included or
incorporated by reference in the Prospectus, except in each case
for changes, increases or decreases which the Prospectus
discloses have occurred or may occur or which are described in
such letter;
(C) for the period from the date of the latest financial
statements included or incorporated by reference in the
Prospectus to December 31, 1993, there were any decreases in
consolidated income from vessel operations or the total amount of
consolidated net income or other items specified by the
Representatives, or any increases in any items specified by the
Representatives, in each case as compared with the comparable
period of the preceding year and with any other period of
corresponding length specified by the Representatives, except in
each case for increases or decreases which the Prospectus
discloses have occurred or may occur or which are described in
such letter; and
(D) any unaudited pro forma consolidated condensed
financial statements included or incorporated by reference in
the Prospectus do not comply as to form in all material respects
with the applicable accounting requirements of the Act and the
published rules and regulations thereunder or the pro forma
adjustments have not been properly applied to the historical
amounts in the compilation of those statements;
(v) On the basis of limited procedures not constituting a
review of interim financial information, consisting of a reading of
the financial statements underlying the below mentioned data and items
and inquiries, they report on findings as to (i) whether any other
unaudited income statement data and balance sheet items included in
the Prospectus agree with the corresponding items in the unaudited
consolidated financial statements from which such data and items were
derived, and (ii) whether any such unaudited data and items were
determined on a basis substantially consistent with the basis for the
corresponding amounts in the audited consolidated financial statements
included or incorporated by reference in the Company's Annual Report
on Form 10-K for the most recent fiscal year;
(vi) In addition to the audit referred to in their
report(s) included or incorporated by reference in the Prospectus and
the limited procedures, inspection of minute books, inquiries and
other procedures referred to in paragraphs (iii), (iv) and (v) above,
they have carried out certain specified procedures, not constituting
an audit in accordance with generally accepted auditing standards,
with respect to certain amounts, percentages and financial information
specified by the Representatives, which are derived from the general
accounting records of the Company and its subsidiaries, which appear
in the Prospectus (excluding documents incorporated by reference), or
in Part II
A-2
<PAGE>
of, or in exhibits and schedules to, the Registration Statement
specified by the Representatives or in documents incorporated by
reference in the Prospectus specified by the Representatives, and have
compared certain of such amounts, percentages and financial
information with the accounting records of the Company and its
subsidiaries and have found them to be in agreement.
A-3
<PAGE>
EXHIBIT 24.1
We consent to the reference to our firm under the captions "Selected
Consolidated Financial Information" and "Experts" in the Registration Statement
(Form S-3) and related Prospectus of Overseas Shipholding Group, Inc. for the
registration of 3,450,000 shares of its common stock and to the incorporation by
reference therein of our reports dated March 3, 1993, with respect to the
consolidated financial statements of Overseas Shipholding Group, Inc.,
incorporated by reference in its Annual Report (Form 10-K) for the year ended
December 31, 1992 and the related financial statement schedules included
therein, filed with the Securities and Exchange Commission.
ERNST & YOUNG
New York, New York
February 24, 1994
<PAGE>
EXHIBIT 24.2
We consent to the reference to our firm under the caption "Experts" in the
Registration Statement (Form S-3) and related Prospectus of Overseas Shipholding
Group, Inc. for the registration of its common stock and to the incorporation
by reference therein of our reports (a) dated February 22, 1993, except for Note
8, as to which the date is March 15, 1993, with respect to the consolidated
financial statements and schedules of Celebrity Cruise Lines, Inc. included in
Overseas Shipholding Group, Inc.'s Annual Report (Form 10-K) for the year ended
December 31, 1992 and (b) dated August 13, 1993 with respect to the financial
statements of Celebrity Cruise Lines, Inc. included in Overseas Shipholding
Group, Inc.'s Current Report on Form 8-K dated September 27, 1993, both filed
with the Securities and Exchange Commission.
MOORE STEPHENS ERNST & YOUNG
Athens, Greece
February 24, 1994
