SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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FORM 10-K
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934 [NO FEE REQUIRED]
For the fiscal year ended December 31, 1996
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[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934 [NO FEE REQUIRED]
Commission File Number 1-6479-1
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 Number)
1114 Avenue of the Americas, New York, New York 10036
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: 212-869-1222
Securities registered pursuant to Section 12(b) of the Act:
Title of each class Name of each exchange on which registered
Common Stock - (par New York Stock Exchange
value $1.00 per share) Pacific Stock Exchange
Securities registered pursuant to Section 12(g) of the Act: NONE
Indicate by check mark whether the registrant (1) has filed all
reports required to be filed by Section 13 or 15(d) of the
Securities Exchange Act of 1934 during the preceding 12 months (or
for such shorter period that the registrant was required to file
such reports), and (2) has been subject to such filing requirements
for the past 90 days. Yes X No
Indicate by check mark if disclosure of delinquent filers pursuant
to Item 405 of Regulation S-K is not contained herein, and will not
be contained, to the best of registrant's knowledge, in definitive
proxy or information statements incorporated by reference in Part
III of this Form 10-K or any amendment to this Form 10-K. [ X ]
Aggregate market value of the Common Stock held by non-affiliates
of the registrant, based on the closing price on the New York Stock
Exchange on March 21, 1997: $429,965,139. (For this purpose, all
outstanding shares of Common Stock have been considered held by non-
affiliates, other than the shares beneficially owned by directors,
officers and certain 5% shareholders of the registrant; certain of
such persons disclaim that they are affiliates of the registrant.)
Number of shares of Common Stock outstanding at March 21, 1997:
36,255,024.
Documents incorporated by reference: portions of the registrant's
Annual Report to Shareholders for 1996 (incorporated in Parts I and
II); portions of the definitive proxy statement to be filed by the
registrant in connection with its 1997 Annual Meeting of
Shareholders (incorporated in Part III).
<PAGE>
ITEM 1. BUSINESS
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Overseas Shipholding Group, Inc. (the "registrant") and
its subsidiaries (collectively the "Company") constitute a major
international shipping enterprise owning and operating a
diversified fleet of oceangoing bulk cargo vessels (principally
tankers and dry bulk carriers). The Company's operating bulk
fleet consists of 61 vessels having an aggregate carrying
capacity of approximately 6,490,150 deadweight tons ("DWT"),
including six ships aggregating approximately 1,178,500 DWT which
the Company owns jointly with others and in which the Company has
at least a 49% interest.* Fifteen vessels in the Company's
operating bulk fleet, which total approximately 955,650 DWT and
represent about 25% of the Company's investment in bulk cargo
vessels at cost, are registered under the U.S. flag; the balance
are registered under foreign flags. Forty-four tankers account
for 77% of the total tonnage, and 16 dry bulk carriers and a pure
car carrier account for the remainder. A single company and its
subsidiaries, for and under the direction and control of the
Company, act as agents in respect of the bulk fleet of the
registrant's majority-owned subsidiaries and certain of its bulk
shipping joint ventures.
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* Except as otherwise noted, references herein to the
Company's "operating bulk fleet" are as of February 19,
1997. Such fleet includes six vessels that are leased from
financial institutions under bareboat charters having
remaining terms of from 5 to 15 years, but does not include
a 264,900 DWT single-hulled tanker, in which the Company had
a 50% interest, which the Company sold for demolition in
late February 1997, or a 29,300 DWT petroleum barge which is
owned by a partnership in which the Company has a 50%
interest, or the two newbuildings currently on order which
are more fully described under "Bulk Fleet Renewal Program"
below.
<PAGE>
Celebrity Cruise Lines Inc. (together with its
subsidiaries collectively "CCLI"), the Company's joint venture in
the passenger cruise business, owns and operates cruise ships
marketed primarily under the trade name Celebrity Cruises in the
premium segment of the industry. The Celebrity Cruises fleet
currently consists of five cruise ships with a total passenger-
carrying capacity of over 7,450 berths, including the 1,750-
passenger newbuilding CENTURY, delivered in late 1995, and its
1,870-passenger sistership GALAXY, delivered in late 1996. After
delivery of the third sistership MERCURY, scheduled for October
1997, the Celebrity Cruises total passenger carrying capacity
will increase to over 8,200 berths, excluding the 1,106-
passenger MERIDIAN which is under contract of sale for delivery
to a buyer in October 1997. See "Investment in Cruise Business"
below.
The Company's operating bulk fleet, aggregating
approximately 6,490,150 DWT, represents approximately 1% of the
total world tonnage of oceangoing bulk cargo vessels. As of
February 19, 1997, the Company had on order two vessels,
aggregating 571,800 DWT, for delivery to its international bulk
fleet. See "Bulk Fleet Renewal Program" below.
The Company charters its ships to commercial shippers
and U.S. and foreign governmental agencies for the carriage of
bulk commodities, primarily crude oil, petroleum products, grain,
coal and iron ore. 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 manned 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 manned by the charterer.
The Company's ships engage in carriage of cargo in
various parts of the world. Revenues from carriage of petroleum
and its derivatives represented approximately 82% of the voyage
revenues of the Company in 1996, 77% in 1995 and 78% in 1994.
Revenues from carriage of dry cargo accounted for the balance of
such voyage revenues for each of those years. The carriage of
petroleum and its derivatives also accounted for the majority of
the voyage revenues of the Company's bulk shipping joint
ventures. The relative contributions to voyage revenues of the
various types of cargoes carried may vary from year to year,
depending upon demand for particular kinds of carriage and the
purposes for which and the terms on which the ships are
chartered. The Company does not employ any container or similar
vessels in its operation.
As of February 19, 1997, all of the vessels in the
Company's operating bulk fleet were employed. Fifty-six of
these vessels were chartered to non-governmental commercial
shippers. These 56 ships include thirteen U.S.-flag ships and 43
foreign-flag ships, which together represent approximately 95% of
the combined carrying capacity of the Company's operating bulk
fleet. Of the remaining ships in the Company's operating bulk
fleet, two U.S.-flag ships and three foreign-flag ships were
under charter to foreign or U.S. governmental agencies.
U.S.-FLAG AND FOREIGN-FLAG OPERATIONS
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The Company's U.S.-flag and foreign-flag bulk fleets
operate substantially in separate markets. The Company believes
that ownership of a diversified fleet, with vessels of different
flags, types and sizes and with operating flexibility, enables
the Company to take advantage of chartering opportunities for
domestic and international shipment of bulk commodities and
thereby cushions the effects of weakness in particular markets.
Information about the Company's operations under U.S. and foreign
flags for the three years ended December 31, 1996 is set forth in
the table in Note B to the Company's financial statements
incorporated by reference in Item 8 below. For information
regarding the revenues and net income of the Company's bulk
shipping joint ventures for the three years ended December 31,
1996, see Note E to the Company's financial statements
incorporated by reference in Item 8 below.
In each of the years 1996, 1995 and 1994 the Company
had one charterer, BP Oil Company, USA ("BP"), from which it had
revenues in excess of 10% of revenues from voyages, amounting in
1996 to approximately $98.3 million, in 1995 to approximately
$49.5 million, and in 1994 to approximately $63.7 million. In
late 1996 and early 1997, the Company increased its interest in
four of the U.S.-flag carriers on charter to BP by acquiring the
remaining 20% interest in the vessels from its minority partner,
and by acquiring from a financial institution its residual
ownership interests in certain of the vessels.
U.S. DOMESTIC AND PREFERENCE TRADES
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Under the Jones Act, shipping between United States
coastal ports, including the movement of Alaskan oil, is reserved
by law primarily to U.S.-flag vessels, owned by U.S. citizens,
crewed by U.S. seafarers, built in the United States and operated
without operating differential subsidies. With eight crude
carriers and four product carriers, the Company is the largest
independent owner of unsubsidized U.S.-flag tankers and is a
major participant in the Alaskan oil trade.
Demand for tonnage in the Alaskan oil trade depends on
the volume of crude shipped out of Alaska and its distribution to
ports at varying distances from the source. Shipments of Alaskan
crude oil from Valdez are the main source of employment for U.S.-
flag crude carriers and are carried mostly on unsubsidized U.S.-
flag crude carriers of over 60,000 DWT.
In May 1996, legislation went into effect that lifted
the 22-year ban on exports of Alaska North Slope ("ANS") crude oil.
Following the implementation of the legislation, six of the
Company's eight U.S.-flag crude carriers began long-term charters
to BP. These charters have to a large extent eliminated the
Company's exposure to the volatility of the U.S.-flag crude
shipping markets and increased employment of its fleet. In
comparison, during 1995, six vessels were unemployed for a
substantial part of the year. Since May 1996, an average of
50,000 barrels per day of ANS crude oil has been exported to Far
Eastern buyers.
Following the repeal of the ban on ANS exports, BP and
other oil producers have announced plans for new investments in
Alaska. These investments are expected to slow the declining
trend in ANS production, which has fallen 28% since 1988.
United States military cargo must be transported on
U.S.-flag vessels, if available. The Merchant Marine Act, 1936,
as amended, 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.
In recent years there have been increased calls by
members of Congress and others to reduce or eliminate cargo
preference and, in some cases, to weaken the long-standing
requirement that U.S. coastwise trade be conducted by U.S.-flag
Jones Act ships. If such changes were implemented, they would
adversely affect the already diminished U.S.-flag merchant
marine.
Vessels in the Company's operating bulk fleet have been
chartered from time to time to the Military Sealift Command of
the United States Navy ("MSC"), and to recipient nations for the
carriage of grain and other cargoes under United States foreign
aid and agricultural assistance programs. Charters to MSC
reflect in large part the requirements of the United States
military for waterborne carriage of cargoes, and, accordingly,
depend in part on world conditions and United States foreign
policy.
Late last year, the Company's U.S.-flag car carrier,
OVERSEAS JOYCE, was selected to participate in the new U.S.
Maritime Security Program, which ensures that militarily-useful
U.S.-flag ships are available to the Department of Defense in the
event of war or national emergency. Under the program, the
Company will receive approximately $2.1 million per year through
2005, subject to annual Congressional appropriations.
EMPLOYMENT OF VESSELS
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The bulk shipping industry is highly fragmented and
competitive. The Company competes with other owners of U.S. 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. Because
of increasing environmental concerns and decreasing control over
their sources of oil, the major oil companies have sharply
reduced their tanker ownership in recent years.
In chartering vessels to the United States government,
the Company competes primarily with other owners of U.S.-flag
vessels. Demand for U.S.-flag product carriers is closely linked
to changes in regional energy demands and in refinery activity.
These vessels also compete with pipelines and oceangoing barges
and are affected by the level of imports on foreign-flag product
carriers. 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.
Prevailing rates for charters of particular types of
ships are subject to fluctuations depending on conditions in
United States and international bulk shipping markets and other
factors. Although medium- and long-term charter business avoids,
to some extent, the sharp rate fluctuations characteristic of the
spot or voyage markets, the availability of such business in
recent years has been relatively limited, and, when available,
rates of return have generally been unattractive.
For additional information as of February 19, 1997
regarding the 61 vessels in the Company's operating bulk fleet,
including information as to the employment of such vessels, see
the table in the "To Our Shareholders" section (page 2), and the
"International Bulk Fleet" and "U.S. Bulk Fleet" tables (pages 16
and 17), of the registrant's Annual Report to Shareholders for
1996, which tables are incorporated herein by reference.
ENVIRONMENTAL MATTERS RELATING TO BULK SHIPPING
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Since 1990, bulk shipping companies have been operating
in an increasingly stringent regulatory environment. Safety and
pollution concerns have led to strengthening of inspection
programs by governmental authorities, charterers and
classification societies. Moreover, there has been a growing
reluctance among charterers to accept older tonnage due to safety
and pollution concerns.
OPA 90. The Oil Pollution Act of 1990 ("OPA 90")
significantly expands the potential 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. 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 1990, or
delivered after 1993. Beginning in 1995, the double-hull
requirement was 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 the year 2015. Tankers discharging at a
deepwater port or lightering more than 60 miles offshore will not
be required to have double hulls until 2015.
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 required. The Company has
developed and timely filed its vessel response plans with the
U.S. Coast Guard and has received approval of such plans.
Under U.S. Coast Guard financial responsibility
regulations issued pursuant to OPA 90, all tankers entering U.S.
waters since the end of 1994 were required to obtain Certificates
of Financial Responsibility ("COFRs") from the Coast Guard
demonstrating financial capability to meet potential spill
liabilities. All the vessels in the Company's U.S.-flag and
international flag tanker fleets have obtained COFRs.
INTERNATIONAL REQUIREMENTS. In addition to the OPA 90
requirements, in worldwide trade MARPOL regulations of the
International Maritime Organization (IMO) require double hulls or
equivalent tanker designs for newbuildings ordered after 1993 and
mandate double hulls for existing tankers by their 30th
anniversary. These regulations also require that, upon reaching
25 years of age, existing tankers either have protective wing
tanks or double bottom spaces not used for cargo carriage
covering at least 30% of the cargo tank area or, alternatively,
that they employ hydrostatic balanced loading. Some of these
measures may be costly, and all reduce the carrying capacity of a
vessel.
OPA 90 and IMO regulations continue to accelerate the
scrapping of older tonnage.
Since the Company maintains a modern fleet, regulations
mandating double hulls and other protective loading measures do
not apply to most of the Company's existing tanker fleet until
after the year 2000, at which time the affected ships will have
operated for substantially all of their economic lives.
BP is considering options to begin replacement of its
single-hulled vessels in the Alaskan crude oil trade, consistent
with OPA 90. The Company and BP have agreed to work together to
develop this project and are currently evaluating design,
construction and operational alternatives. A final decision on
vessel specifications will be made following a comprehensive
review of technical and commercial considerations.
INSURANCE. Consistent with the currently prevailing
practice in the industry, the Company presently carries $700
million of pollution coverage per occurrence on every vessel in
its fleet. While the Company has historically been able to
obtain such insurance at commercially reasonable rates, no
assurances can be given that such insurance will continue to be
available in the future.
BULK SHIPPING MARKETS
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Information regarding the international bulk shipping
markets and the markets for U.S.-flag vessels, including the
Alaskan oil trade, is set forth in the text of the "Global Bulk
Shipping Markets" section (pages 4, 7, 8 and 11) of the
registrant's Annual Report to Shareholders for 1996, which
information is incorporated herein by reference.
BULK FLEET RENEWAL PROGRAM
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As part of the Company's ongoing modernization program,
the Company continually reviews its fleet profile. This entails
periodically selling older vessels, placing newbuilding orders
and purchasing existing modern tonnage, when available at
attractive prices. The Company has now completed its latest
newbuilding program which, including deliveries scheduled through
March 1997, consists of six double-hulled very large crude
carriers ("VLCCs" - tankers over 200,000 DWT) and two 160,000 DWT
capesize bulk carriers.
NEWBUILDING ORDERS. In January 1996, the Company took
delivery for its international fleet of two double-hulled VLCCs,
each of approximately 296,000 DWT. In November 1996 and January
1997, the Company took delivery for its international fleet of
two double-hulled VLCCs of approximately 305,000 DWT and 269,000
DWT, respectively, the second of which was ordered with a joint
venture partner and immediately commenced an eight-year charter
to the Company, which simultaneously chartered the vessel to the
partner for the same period. In January 1997, the Company took
delivery for its international fleet of two capesize bulk
carriers, each of approximately 157,000 DWT. In late March 1997,
the Company is scheduled to take delivery of two double-hulled
VLCCs of approximately 302,000 DWT and 269,000 DWT, respectively,
the second of which was ordered with a joint venture partner and
will commence an eight-year charter to the partner when
delivered. These two VLCCs are being built by major shipbuilders
(in Japan and South Korea) for delivery to the Company's
international fleet. The commitments for these two tankers are
in U.S. Dollars; for additional information as of February 19,
1997 about the commitments, see Notes E and L(1) to the Company's
financial statements incorporated by reference in Item 8 below.
SALES. The 1996 results reflect the sale of one U.S.-
flag and three foreign-flag single-hulled tankers (including a
VLCC in which the Company had a 50% interest). The Company also
sold an older foreign-flag bulk carrier in 1996, provision for
which had been made in 1995.
The Company's newbuilding program, together with the
selective upgrading of the Company's fleet through acquisition
and disposition of existing tonnage, reflects changes that the
Company makes from time to time in light of its continuing review
of changing market conditions and the needs of its customers.
All of the ships in the Company's fleet have been either built to
its exacting specifications or purchased after stringent
inspection. These vessels are designed for safe, efficient and
environmentally-friendly operation. Features in the tankers in
the current newbuilding program such as double hulls, satellite
navigation systems and increased steel in areas of high stress,
have been included to improve their safety and efficiency. Upon
delivery of the remaining two tanker newbuildings at the end of
March 1997, more than half of the Company's tanker fleet will be
protected by double sides, double bottoms or double hulls, and
the average age of the Company's international tanker fleet will
be only eight years compared with 13 years for the world tanker
fleet. Despite improvements in tanker rates over the past year,
rates today are still not at levels sufficient to provide a
satisfactory return on the high capital costs of the Company's
newest double-hulled vessels. The Company believes that these
ships are critical to its ability to serve the needs of its
customers in the years ahead. There is no assurance that the
Company's fleet will expand, or that the Company will acquire
vessels or place orders for the construction of new vessels, to
the same extent as in the past.
POOLING ARRANGEMENT
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In April 1996, the Company entered into a pooling
arrangement with PDV Marina ("PDVM") for Aframax tankers (80,000
to 120,000 DWT). PDVM is the marine transportation subsidiary of
the Venezuelan state oil company. By January 1997, the Company
and PDVM had each contributed ten vessels to the pool - their
entire Aframax fleets. Today Venezuela is the number one
exporter of crude oil to the United States, and its production is
expected to rise over the next decade. Because the pooling
arrangement is intended to carry a major portion of PDVM's
cargoes, the Company and PDVM anticipate growth in pool
activities. To date, pool operations have resulted in enhanced
opportunities for backhaul cargoes and reduced idle time, thereby
improving the earnings of pool vessels.
EMPLOYEES
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As of February 19, 1997, the Company employed
approximately 2,100 seagoing personnel to operate its ships.
The Company has collective bargaining agreements with three
different maritime unions, covering seagoing personnel employed
on the Company's U.S.-flag vessels. These agreements are in
effect through June 15, 2001 with one of the unions and through
June 15, 2000 with two of the unions. Under the collective
bargaining agreements, the Company is obligated to make
contributions to pension and other welfare programs. The Company
believes that its relations with its employees are satisfactory.
U.S. SUBSIDIES
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To encourage private investment in U.S.-flag ships, the
Merchant Marine Act of 1970 permits deferral of taxes on earnings
deposited into capital construction funds and amounts earned
thereon, which can be used for the construction or acquisition
of, or retirement of debt on, qualified U.S.-flag vessels
(primarily those limited to United States foreign and
noncontiguous domestic trades). The registrant is a party to an
agreement under the Act. Under the agreement, the general
objective is (by use of assets accumulated in the fund) for two
vessels to be constructed or acquired by the end of 1999. If the
agreement is terminated or amounts are withdrawn from the capital
construction fund for non-qualified purposes, such amounts will
then be subject to Federal income taxes. Monies can remain tax-
deferred in the fund for a maximum period of 25 years (commencing
January 1, 1987 for deposits prior thereto). See the second
paragraph of Note J to the Company's financial statements
incorporated by reference in Item 8 below.
INVESTMENT IN CRUISE BUSINESS
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The Company owns a 49% equity investment in Celebrity
Cruise Lines Inc. (together with its subsidiaries collectively
"CCLI"), a joint venture that owns and operates cruise vessels.
CCLI functions as an equal joint venture and the approval of both
shareholders is required for all substantive policy matters. All
debt of the joint venture is nonrecourse 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.
CCLI markets its ships primarily under the brand name
Celebrity Cruises, which is a leading provider of cruises in the
premium segment of the North American cruise market.
Traditionally, the cruise market generally is divided
into three major segments - standard, premium and luxury -
principally defined by price and quality of product. Ships in
the standard, or mass market, segment tend to offer a more modest
level of service, accommodations and cuisine at a lower price.
The premium segment, in which Celebrity Cruises is positioned, is
designed to appeal to more sophisticated, less budget conscious
cruisers seeking more luxurious accommodations and higher
standards of service and cuisine. Although the premium cruise
market is generally priced higher than the standard market, the
strong competitive conditions in recent years have put pressure
on the pricing differential. The relatively small luxury segment
of the industry generally consists of smaller vessels offering an
exceptionally high level of service at a very high price.
The Celebrity Cruises fleet currently consists of five
ships -- GALAXY, CENTURY, ZENITH, HORIZON and MERIDIAN -- having
a total of over 7,450 berths and sailing mainly in the Caribbean
and to Bermuda. Cruises to Alaska and the West Coast, and
increased Panama Canal routes, were added to the itineraries
during 1996, and a further expansion of the itineraries is
scheduled for 1997 and 1998.
The Company's earnings in 1996 reflect a break-even
result from CCLI, compared with a net loss of $1,208,000 in 1995.
This is before the Company's estimated interest expense, after-
tax, of approximately $10,300,000 in 1996 and $11,000,000 in
1995, incurred to fund the CCLI investment. As a result of the
continuation of a highly competitive pricing environment in the
North American cruise market, the industry faced significant
discounting throughout 1996, which is reflected in the results of
CCLI.
In December 1996, CCLI took delivery of the second of
its three newbuildings, the 77,700 gross ton GALAXY. The 1,870-
passenger state-of-the-art cruise vessel GALAXY, and its
sisterships, CENTURY, delivered in late 1995, and MERCURY, to be
delivered later this year, will expand the Celebrity Cruises
fleet passenger-carrying capacity to over 8,200 berths, excluding
the 1,106-passenger MERIDIAN which is under contract of sale for
delivery to a buyer in October 1997. The larger fleet should
enable Celebrity Cruises to achieve significant additional
economies of scale in both operations and marketing, and to gain
wider brand recognition among the public at large. With the
delivery of all three newbuildings, the Celebrity Cruises fleet
will be among the most modern in the industry.
The contract for the MERCURY is with the same European
shipyard that built the GALAXY, CENTURY, ZENITH and HORIZON. Long-
term financing arrangements exist for substantially all of the
unpaid cost of this ship. For additional information about
Celebrity Cruises and its fleet and itineraries and the CCLI
commitments as of February 19, 1997, see the text of the CCLI
section (pages 12 and 14), and the Celebity Cruises fleet table
(page 17), of the registrant's Annual Report to Shareholders for
1996, which information is incorporated herein by reference, and
Note D to the Company's financial statements incorporated by
reference in Item 8 below.
COMPETITION. CCLI operates its vessels primarily in
the North American cruise market, which accounts for
approximately 80% of total cruise passengers carried worldwide
and is characterized by a small number of large and generally
well-capitalized companies. According to the Cruise Lines
International Association (CLIA), the six largest companies,
including CCLI, have more than 70% of total capacity.
Following modest declines of approximately 1% in 1994
and 2% in 1995, the total number of cruise passengers in 1996,
according to CLIA, rose to an estimated 4.7 million, a 6%
increase over the prior year. Preliminary indications for 1997
are that the growth in demand is continuing, as increased levels
of bookings have been reported by a number of cruise lines. But
despite stronger demand, the industry faced significant
discounting throughout 1996, particularly in the Caribbean, as
substantial new capacity entered the market.
In the past few years, the largest cruise lines have
sought to strengthen their positions by ordering larger and more
sophisticated ships. As a result, over the next four years
approximately 20 large new cruise ships are scheduled for
delivery, most into the North American cruise market. These
ships will increase current capacity by approximately 40,000
berths by the year 2000, before taking into account any deletions
from the fleet (see discussion below regarding amended SOLAS
requirements). While this increase is substantial, historically
growth in demand has outpaced growth in capacity. Significantly
for Celebrity Cruises, with its modern fleet, cruisers have
tended to prefer the newest cruise vessels, which offer more
dramatic design elements and state-of-the-art amenities.
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, onboard facilities, amenities,
service and cuisine.
REGULATORY MATTERS. Each cruise 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
protection standards (the "SOLAS '74 standards"). Under the
amended SOLAS requirements, all existing passenger ships must
have upgraded fire detection and fire protection systems by
October 1997. 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.
The growth in world cruise capacity should be mitigated
somewhat by the application of the amended SOLAS requirements.
It is likely that a number of older vessels will leave the cruise
trade as their owners decide not to incur the significant capital
expenditures needed to bring them into compliance with these
requirements. Because of the young age of the Celebrity Cruises
fleet, the work necessary for its ships to meet the amended SOLAS
requirements will not require CCLI to make material capital
expenditures.
FORWARD LOOKING STATEMENTS
This Form 10-K, including portions of the registrant's
Annual Report to Shareholders for 1996 incorporated herein by
reference, contains forward looking statements relating to the
Company's prospects, the outlook for the tanker and dry cargo
markets and prospects for CCLI and the cruise industry. There
are risks and uncertainties that could cause actual results to
differ from the expectations reflected in these forward looking
statements, including changes in production of or demand for oil
and petroleum products, and various dry bulk commodities, either
generally or in particular regions; greater than anticipated
levels of newbuilding orders or less than anticipated rates of
scrapping; changes in trading patterns for particular commodities
significantly impacting overall tonnage requirements; changes in
the rates of growth of the world and various regional economies;
risks incident to vessel operation, including pollution;
unexpected adverse trends in demand for cruising among the public
at large; unanticipated changes in laws and regulations; and
other factors. Forward looking statements in the registrant's
Annual Report to Shareholders for 1996 and written and oral
forward looking statements attributable to the Company or its
representatives after the date of this Form 10-K are qualified in
their entirety by the cautionary statement contained in this
paragraph and in other reports hereafter filed by the registrant
with the Securities and Exchange Commission.
ITEM 2. PROPERTIES
- ------ ----------
See Item 1.
ITEM 3. LEGAL PROCEEDINGS
- ------ -----------------
The Company and CCLI are parties, as plaintiff or
defendant, to various suits in the ordinary course of business
for monetary relief arising principally from personal injuries,
collision or other casualty and to claims arising under charter
parties. All such personal injury, collision and casualty claims
against the Company and CCLI are fully covered by insurance
(subject to deductibles not material in amount). Each of the
other claims involves an amount which in the opinion of
management is not material in relation to the consolidated
current assets of the Company as shown in the Company's
Consolidated Balance Sheet as at December 31, 1996, incorporated
herein by reference. There have not been any material
developments in the investigation reported on in Item 1 of Part
II of the registrant's Form 10-Q report for the quarter ended
June 30, 1996 and incorporated herein by reference.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
- ------ ---------------------------------------------------
None.
EXECUTIVE OFFICERS OF THE REGISTRANT
- ------------------------------------
HAS SERVED AS
NAME AGE POSITION HELD SUCH SINCE
- ---- --- ------------- -------------
Morton P. Hyman 61 President October 1971
Robert N. Cowen 48 Senior Vice February 1993
President,
Secretary, June 1982
Myles R. Itkin 49 Senior Vice June 1995
President, Chief
Financial Officer
and Treasurer
Alan Carus 58 Controller December 1987
Messrs. Hyman and Cowen are directors of the registrant
and members of the Finance and Development Committee of its Board
of Directors. The term of office of each executive officer
continues until the first meeting of the Board of Directors of
the registrant immediately following the next annual meeting of
its stockholders, to be held in June 1997, and until the election
and qualification of his successor. There is no family
relationship between the executive officers.
Mr. Morton P. Hyman has served as a director of the
registrant since 1969. Mr. Robert N. Cowen has served as a
director of the registrant since June 1993, as an officer and
director of certain of the registrant's subsidiaries during the
past five years, and as a director of Maritime Overseas
Corporation ("MOC"), the agent for the Company's vessels referred
to in the first paragraph of Item 1, during the past five years.
Prior to joining the registrant in June 1995, Mr. Myles R. Itkin
was employed for one year by Alliance Capital Management L.P. as
Senior Vice President-Finance, and prior thereto was employed by
Northwest Airlines, Inc. as Vice President-Finance. Mr. Alan
Carus has served as an officer and director of certain of the
registrant's subsidiaries during the past five years; he has also
served as a senior officer of MOC during the past five years.
PART II
-------
The information called for by Items 5 through 8 is
incorporated herein by this reference from the following
respective portions and page numbers of the registrant's Annual
Report to Shareholders for 1996:
ITEM INCORPORATED FROM:
----- ------------------
ITEM 5. Market for Registrant's Last three paragraphs under
Common Equity and Related "Shareholder Information" and
Stockholder Matters the "Stock Price and Dividend
Data" table, all on inside
back cover (page 37);
ITEM 6. Selected Financial Data The information for the years
1992 through 1996 under "Eleven-
Year Statistical Review"
section (pages 34 and 35).
ITEM 7. Management's Discussion Information set forth in text
and Analysis of Financial of "Management's Discussion
Condition and Results of and Analysis" section (pages
Operations 18 through 20).
ITEM 8. Financial Statements and "Consolidated Statements of
Supplementary Data Operations and Retained
Earnings", "Consolidated
Balance Sheets", "Consolidated
Statements of Cash Flows",
"Notes to Consolidated
Financial Statements" and
"Report of Independent
Auditors" sections (pages 21
through 33).
Additional Supplementary Data -
Ratio of Earnings to Fixed Charges
----------------------------------
There was a deficiency of earnings to fixed charges
for 1996 of $1,509,000. This has been computed by
subtracting the sum of income before federal income
taxes and fixed charges from fixed charges. Fixed
charges consist of interest expense, including the
proportionate share of interest of joint venture
companies, capitalized interest and an estimate of
the interest component of an operating lease.
ITEM 9. Changes in and Disagreements with Accountants on
Accounting and Financial Disclosure
None.
PART III
--------
The information called for by Items 10 through 13,
except for the information set forth in Part I above regarding
the executive officers of the registrant, is incorporated herein
by this reference from the following respective portions of the
definitive proxy statement to be filed by the registrant in
connection with its 1997 Annual Meeting of Shareholders.
ITEM INCORPORATED FROM:
---- -----------------
ITEM 10. Directors and Executive "Election of Directors"
Officers of the Registrant
ITEM 11. Executive Compensation "Compensation and Certain
Transactions"*
ITEM 12. Security Ownership of "Election of Directors"
Certain Beneficial Owners and "Information as to
and Management Stock Ownership"
ITEM 13. Certain Relationships and "Election of Directors" and
Related Transactions "Compensation and Certain
Transactions"*
___________
* Excluding material under "Stockholder Return Performance
Presentation" and "Executive Compensation Report of the
Executive Compensation Committee and the Stock Option
Committee".
PART IV
-------
ITEM 14. Exhibits, Financial Statement Schedules, and Reports on
Form 8-K
(a) See the accompanying index to financial statements
and schedules, and the accompanying Exhibit Index.
(b) Reports on Form 8-K: The registrant did not file
any report on Form 8-K during the quarter ended December 31,
1996.
SIGNATURES
----------
Pursuant to the requirements of Section 13 or 15(d) of the
Securities Exchange Act of 1934, the registrant has duly caused
this report to be signed on its behalf by the undersigned
thereunto duly authorized.
OVERSEAS SHIPHOLDING GROUP, INC.
By: s/Myles R. Itkin
--------------------------------
Myles R. Itkin
Senior Vice President,
Chief Financial Officer & Treasurer
Date: March 26, 1997
<PAGE>
Pursuant to the requirements of the Securities Exchange
Act of 1934, this report has been signed below by the following
persons on behalf of the registrant and in the capacities and on
the date indicated. Each of such persons appoints Morton P. Hyman
and Myles R. Itkin, and each of them, as his agents and attorneys-
in-fact, in his name, place and stead in all capacities, to sign
and file with the SEC any amendments to this report and any
exhibits and other documents in connection therewith, hereby
ratifying and confirming all that such attorneys-in-fact or either
of them may lawfully do or cause to be done by virtue of this power
of attorney.
By s/Morton P. Hyman
-------------------------------
Morton P. Hyman, Principal
Executive Officer and Director
By s/Myles R. Itkin
-------------------------------
Myles R. Itkin, Principal
Financial Officer
By s/Alan Carus
-------------------------------
Alan Carus, Controller
By s/Robert N. Cowen
-------------------------------
Robert N. Cowen, Director
By s/Ran Hettena
-------------------------------
Ran Hettena, Director
By s/George C. Blake
-------------------------------
George C. Blake, Director
By s/Solomon N. Merkin
-------------------------------
Solomon N. Merkin, Director
By s/William L. Frost
-------------------------------
William L. Frost, Director
By s/Thomas H. Dean
-------------------------------
Thomas H. Dean, Director
By s/Joel I. Picket
-------------------------------
Joel I. Picket, Director
Date: March 26, 1997
<PAGE>
FORM 10-K--ITEM 14(a) (1) and (2)
OVERSEAS SHIPHOLDING GROUP, INC. AND SUBSIDIARIES
LIST OF FINANCIAL STATEMENTS AND FINANCIAL STATEMENT SCHEDULES
The following consolidated financial statements of Overseas
Shipholding Group, Inc. and subsidiaries, included in the annual
report of the registrant to its shareholders for the year ended
December 31, 1996 are incorporated by reference in Item 8:
Consolidated Balance Sheets--December 31, 1996 and 1995
Consolidated Statements of Operations and Retained Earnings--
Years Ended December 31, 1996, 1995 and 1994
Consolidated Statements of Cash Flows--
Years Ended December 31, 1996, 1995 and 1994
Notes to Financial Statements --December 31, 1996
All schedules for which provision is made in the applicable
accounting regulation of the Securities and Exchange Commission are
not required under the related instructions or are inapplicable,
and therefore have been omitted.
<PAGE>
Exhibit Index
3(i) Certificate of Incorporation of the registrant,
as amended to date (filed as Exhibit 3(a) to
the registrant's Form 10-K for 1988 and
incorporated herein by reference).
3(ii) By-Laws of the registrant, as amended to date
(filed via EDGAR as Exhibit 3(ii) to the
registrant's Form 10-K for 1993 and
incorporated herein by reference).
4(a) Amended and Restated Credit Agreement dated as
of February 9, 1990, as amended and restated as
of October 31, 1994, among the registrant, two
subsidiaries of the registrant and certain
banks (filed via EDGAR as Exhibit 4(a) to the
registrant's Form 10-K for 1994 and
incorporated herein by reference).
4(b) Form of Note Purchase Agreement dated as of
March 1, 1992 between the registrant and each
of the purchasers of its senior notes (filed as
Exhibit 4(b) to the registrant's Form 10-K for
1991 and incorporated herein by reference).
4(c) Form of Note Purchase Agreement dated as of
June 1, 1993 between the registrant and each of
the purchasers of its senior notes (filed via
EDGAR as Exhibit 4 to the registrant's Form 10-
Q for the quarter ended June 30, 1993 and
incorporated herein by reference.)
4(d)(1) Form of Indenture dated as of December 1, 1993
between the registrant and The Chase Manhattan
Bank (National Association) providing for the
issuance of debt securities by the registrant
from time to time (filed via EDGAR as Exhibit
4(d)(1) to the registrant's Form 10-K for 1993
and incorporated herein by reference).
4(d)(2) Resolutions dated December 2, 1993 fixing the
terms of two series of debt securities issued
by the registrant under the Indenture (filed
via EDGAR as Exhibit 4(d)(2) to the
registrant's Form 10-K for 1993 and
incorporated herein by reference).
4(d)(3) Form of 8% Notes due December 1, 2003 of the
registrant (filed via EDGAR as Exhibit 4(d)(3)
to the registrant's Form 10-K for 1993 and
incorporated herein by reference).
4(d)(4) Form of 8-3/4% Debentures due December 1, 2013
of the registrant (filed via EDGAR as Exhibit
4(d)(4) to the registrant's Form 10-K for 1993
and incorporated herein by reference).
NOTE: The Exhibits filed herewith do not
include other instruments authorizing long-term
debt of the registrant and its subsidiaries,
none of which exceeds 10% of total assets of
the registrant and its subsidiaries on a
consolidated basis. The registrant agrees to
furnish a copy of each such instrument to the
Commission upon request.
10(a) Form of Agency Agreements between Maritime
Overseas Corporation and each of the
registrant's majority-owned subsidiaries that
owns or operates a U.S.-flag vessel (refiled as
Exhibit 10(a) to the registrant's Form 10-K for
1989 and incorporated herein by reference).
10(b) Form of Agency Agreements between Maritime
Overseas Corporation and each of the
registrant's majority-owned subsidiaries that
owns or operates a foreign-flag vessel (refiled
as Exhibit 10(b) to the registrant's Form 10-K
for 1989 and incorporated herein by reference).
10(c)(1) Form of Management Agreement dated as of
January 1, 1985 between Lion Insurance Company
Ltd. and Maritime Overseas Corporation (refiled
via EDGAR as Exhibit 10(c)(1) to the
registrant's Form 10-K for 1995 and
incorporated herein by reference).
*10(c)(2) Form of Amendment No. 1 dated as of April 1,
1986 to the Management Agreement between Lion
Insurance Company Ltd. and Maritime Overseas
Corporation (previously filed more than 10
years ago and refiled herewith).
10(d)(1) Form of General Services Agreement dated
December 31, 1969 between the registrant and
Maritime Overseas Corporation (the form of
which was filed as Exhibit 13(3) to
Registration Statement No. 2-34124 and is
incorporated herein by reference).
10(d)(2) Form of Amendment dated as of January 1, 1975
to General Services Agreement between the
registrant and Maritime Overseas Corporation
(refiled via EDGAR as Exhibit 10(d)(2) to the
registrant's Form 10-K for 1994 and
incorporated herein by reference).
10(d)(3) Amendment dated January 10, 1980 to General
Services Agreement between the registrant and
Maritime Overseas Corporation (refiled as
Exhibit 10(d)(3) to the registrant's Form 10-K
for 1989 and incorporated herein by reference).
10(d)(4) Form of Amendment dated as of January 1, 1981
to General Services Agreement between the
registrant and Maritime Overseas Corporation
(refiled as Exhibit 10(d)(4) to the
registrant's Form 10-K for 1990 and
incorporated herein by reference).
10(d)(5) Form of Amendment dated as of October 1, 1987
to General Services Agreement between the
registrant and Maritime Overseas Corporation
(filed as Exhibit 10(d)(5) to the registrant's
Form 10-K for 1987 and incorporated herein by
reference).
10(d)(6) Form of Amendment dated as of July 1, 1994 to
General Services Agreement between the
registrant and Maritime Overseas Corporation
(filed via EDGAR as Exhibit 10(d)(6) to the
registrant's Form 10-K for 1994 and
incorporated herein by reference).
10(e)(1) Form of Letter Agreement dated as of August 9,
1973 between the registrant and Maritime
Overseas Corporation (refiled via EDGAR as
Exhibit 10(e)(1) to the registrant's Form 10-K
for 1994 and incorporated herein by reference).
10(e)(2) Form of Letter Agreement dated as of August 9,
1973 by Maritime Overseas Corporation (refiled
via EDGAR as Exhibit 10(e)(2) to the
registrant's Form 10-K for 1994 and
incorporated herein by reference).
10(e)(3) Form of Letter Agreement dated as of August 9,
1973 by Maritime Overseas Corporation (refiled
via EDGAR as Exhibit 10(e)(3) to the
registrant's Form 10-K for 1994 and
incorporated herein by reference).
10(e)(4) Form of Letter Agreement dated as of January 1,
1981 between the registrant and Maritime
Overseas Corporation (refiled as Exhibit
10(e)(4) to the registrant's Form 10-K for 1991
and incorporated herein by reference).
10(f)(1) Form of Service Agreements between Maritime
Overseas Corporation and each of the
partnerships First Shipmor Associates, Second
Shipmor Associates, Third Shipmor Associates
and Fourth Shipmor Associates and related
letter agreements between the registrant and
each of said partnerships (refiled as Exhibit
10(f)(1) to the registrant's Form 10-K for 1987
and incorporated herein by reference).
10(f)(2) Service Agreement dated January 27, 1983
between Cambridge Tankers, Inc. and Maritime
Overseas Corporation relating to the OVERSEAS
BOSTON (refiled as Exhibit 10(f)(2) to the
registrant's Form 10-K for 1992 and
incorporated herein by reference).
10(f)(3) Form of Service Agreement between respective
subsidiaries of the registrant and Maritime
Overseas Corporation relating to the OVERSEAS
NEW ORLEANS and OVERSEAS PHILADELPHIA (not
filed--substantially identical in all material
respects to the agreement listed as Exhibit
10(f)(2) hereto except as to the parties, the
vessels and the dates).
10(g)(1) Form of Management Agreements between Maritime
Overseas Corporation and each of First United
Shipping Corporation, Interocean Tanker
Corporation, Second United Shipping
Corporation and Third United Shipping
Corporation (refiled via EDGAR as Exhibit
10(g)(1) to the registrant's Form 10-K for 1994
and incorporated herein by reference).
10(g)(2) Form of Amendment No. 1 and Amendment No. 2 to
Management Agreements between Maritime Overseas
Corporation and each of First United Shipping
Corporation, Interocean Tanker Corporation,
Second United Shipping Corporation and Third
United Shipping Corporation (refiled via EDGAR
as Exhibit 10(g)(2) to the registrant's Form 10-
K for 1995 and incorporated herein by
reference).
10(g)(3) Form of Amendment No. 3 to Management
Agreements between Maritime Overseas
Corporation and each of First United Shipping
Corporation, Interocean Tanker Corporation,
Second United Shipping Corporation and Third
United Shipping Corporation (filed via EDGAR as
Exhibit 10(g)(3) to the registrant's Form 10-K
for 1994 and incorporated herein by reference).
10(g)(4) Form of Company Service Employees Agreement
between Maritime Overseas Corporation and each
of First Union Tanker Corporation and Second
Union Tanker Corporation (filed via EDGAR as
Exhibit 10(g)(4) to the registrant's Form 10-K
for 1994 and incorporated herein by reference).
10(h)(1) Agreement dated April 1, 1992 between the
registrant and Maritime Overseas Corporation
(filed as Exhibit 10 to the registrant's Form
10-Q for the quarter ended March 31, 1992 and
incorporated herein by reference).
10(h)(2) Letter Agreement dated November 9, 1993
amending the Agreement dated April 1, 1992
referred to above (filed via EDGAR as Exhibit
10(h)(2) to the registrant's Form 10-K for 1993
and incorporated herein by reference).
10(i) Indemnification Agreement dated December 21,
1992 among Continental Grain Company, Third
Contiship Inc., Fourth Contiship Inc., OSG Bulk
Ships, Inc., Third Shipco Inc., Fourth Shipco
Inc. and the registrant (filed as Exhibit 10(i)
to registrant's Form 10-K for 1992 and
incorporated herein by reference).
10(j)(1) Exchange Agreement dated December 9, 1969
(including exhibits thereto) between the
registrant and various parties relating to the
formation of the registrant (the form of which
was filed as Exhibit 2(3) to Registration
Statement No. 2-34124 and is incorporated
herein by reference).
10(j)(2) Form of Additional Exchange Agreement referred
to in Section 2.02 of Exhibit 10(j)(1) hereto
(filed as Exhibit 2(4) to Registration
Statement No. 2-34124 and incorporated herein
by reference).
*10(k)(1) Supplemental Executive Retirement Plans of the
registrant, as amended and restated as of
January 1, 1997.
10(k)(2) Employment Contract with an executive officer
(filed via EDGAR as Exhibit 10 to the
registrant's Form 10-Q for the quarter ended
June 30, 1995 and incorporated herein by
reference).
10(k)(3) Letter Agreement with a former executive
officer (filed via EDGAR as Exhibit 10 to the
registrant's Form 10-Q for the quarter ended
September 30, 1995 and incorporated herein by
reference).
*10(k)(4) Agreement with an executive officer.
*10(k)(5) Agreement with an executive officer.
10(l)(1) 1989 Stock Option Plan adopted for officers and
key employees of the registrant or its
subsidiaries (filed as Exhibit 10(l) to the
registrant's Form 10-K for 1989 and
incorporated herein by reference).
10(l)(2) Amendment adopted October 9, 1990 to the
registrant's 1989 Stock Option Plan referred to
above (filed as Exhibit 10(l)(2) to the
registrant's Form 10-K for 1990 and
incorporated herein by reference).
10(m) 1990 Stock Option Plan adopted for officers and
employees of the registrant or its
subsidiaries, excluding the recipients of
options under Exhibits 10(l)(1) and (2) listed
above (filed as Exhibit 10(m) to the
registrant's Form 10-K for 1990 and
incorporated herein by reference).
10(n)(1) Joint Venture Agreement dated September 23,
1992 among Archinav Holdings Ltd. ("Archinav"),
Overseas Cruiseship Inc. ("Overseas"), and
Celebrity Cruise Lines Inc. ("CCLI") (excluding
exhibits and schedules) and the following
related agreements: Guarantee of the
registrant dated September 23, 1992 and
Shareholders Agreement dated October 21, 1992
among Archinav, Overseas and CCLI (excluding
exhibits)(filed as Exhibits 2(a), (b) and (c),
respectively, to the registrant's Report on
Form 8-K dated October 21, 1992 and
incorporated herein by reference).
10(n)(2) Supplemental Agreement dated January 29, 1993
to the Shareholders Agreement referred to in
Exhibit 10(n)(1) above (filed as Exhibit
10(n)(2) to the registrant's Form 10-K for 1992
and incorporated herein by reference).
10(n)(3) Supplemental Agreement dated November 21, 1995
to the Shareholders Agreement referred to in
Exhibit 10(n)(1) above (filed via EDGAR as
Exhibit 10(n)(3) to the registrant's Form 10-K
for 1995 and incorporated herein by reference).
*10(n)(4) Supplemental Agreement dated October 4, 1996 to
the Shareholders Agreement referred to in
Exhibit 10(n)(1) above.
*10(o) Form of Sublease dated as of November 1, 1996
between the registrant and Maritime Overseas
Corporation.
*12 Computation of Ratio of Earnings to Fixed
Charges.
*13 Such portions of the Annual Report to security
holders for 1996 as are expressly incorporated
herein by reference.
*21 List of subsidiaries of the registrant.
*23 Consent of Independent Auditors of the registrant.
*27 Financial Data Schedule.
NOTE: The Exhibits which have not previously
been filed or listed or are being refiled are
marked with an asterisk (*).
List of Executive Compensation Plans and Arrangements -
See Exhibits 10(k)(1),(2), (3), (4) and (5),
10(l)(1) and (2), and 10(m) above.
EXHIBIT 10(c)(2)
----------------
Amendment No. 1 dated as of April 1, 1986 to Management
Agreement dated as of January 1, 1985 (the "Management
Agreement") between Lion Insurance Company Ltd., a Bermuda
corporation ("Lion") and Maritime Overseas Corporation, a New
York corporation ("MOC").
WITNESSETH:
-----------
WHEREAS, Lion and MOC desire to amend the Management
Agreement as hereinafter set forth;
NOW, THEREFORE, the parties hereto do mutually agree as
follows:
1. Section 5(a) of the Management Agreement is hereby
amended by added the words "and equity interests in the
operations of subsidiaries and affiliated companies" after the
word "fee" at the end of the second sentence thereof.
2. Section ll(a) of the Management Agreement is hereby
deleted in its entirety and the following is substituted
therefor:
"(a) This Agreement shall continue to and including
December 31, 1988 and shall be automatically
renewed for successive terms of 5 years each,
provided however, that (i) Lion may elect by
written notice to MOC, given at least 12 months
prior to the end of any calendar year, to
terminate this Agreement at the end of such year,
and (ii) at least twelve months prior to the
expiration of the initial term or the then
current renewal term, MOC may give written notice
to Lion electing to terminate this Agreement at
the expiration then current term."
3. Except as hereby amended, the Management Agreement shall
remain unaltered and continue in full force and effect.
IN WITNESS WHEREOF, the parties hereto have caused this
Amendment No. 1 to be executed and delivered as of the day and
year first above written.
LION INSURANCE COMPANY LTD. MARITIME OVERSEAS CORPORATION
By: S/MILTON R. KLIGER By: S/ALAN CARUS
-------------------- -------------------------
EXHIBIT 10(k)(1)
----------------
OVERSEAS SHIPHOLDING GROUP, INC.
BASIC
SUPPLEMENTAL EXECUTIVE RETIREMENT PLAN
Effective as of January 1, 1997
This Plan is established effective as of January 1,
1997. Maritime Overseas Corporation ("MOC") initially
established a supplemental executive retirement plan in 1984 (the
"1984 Plan") and established a subsequent supplemental executive
retirement plan in 1988 (the "1988 Plan"), both primarily for the
purpose of providing supplementary retirement benefits for a
select group of management and highly compensated employees of
MOC and Participating Entities (as defined herein). Overseas
Shipholding Group, Inc. (the "Company") was a Participating
Entity in the 1984 Plan and the 1988 Plan. The provisions of the
1984 Plan and the 1988 Plan were merged and restated, effective
January 1, 1995, in one plan, as they applied to Participants who
were Employees of the Company on January 1, 1995 (the "Prior
Plan"). The Prior Plan has now been divided into two parts-this
Plan and the Supplemental Executive Retirement Plan Plus (the
"SERP Plus").
This Plan applies to participants in the Prior Plan who
are not in pay status under the Prior Plan on January 1, 1997 and
who elect, in writing, to waive any rights to benefits under the
Prior Plan and to instead receive benefits under this Plan and,
if applicable, the SERP Plus. Any participant in pay status
under the Prior Plan on January 1, 1997 and any participant in
the Prior Plan who does not so elect to participate in this Plan
shall continue to be covered under the terms of the Prior Plan in
existence at the time of his termination. This Plan also applies
to future Participants designated by the Board.
1. DEFINITIONS. For purposes of this Plan, the following
definitions apply:
(a) "ACTUARIAL EQUIVALENT" means an amount equal in value
on an actuarial basis, as determined by an actuary selected by
the Committee, based upon the mortality and interest rates set
forth in the Qualified Plan, as amended from time to time.
(b) "BASIC SUPPLEMENTAL BENEFIT" means the lump sum benefit
payable under this Plan.
(c) "BOARD" means the Board of Directors of the Company.
(d) "CHANGE OF CONTROL" means a change of control as
provided in Exhibit A hereto.
(e) "CODE" means the Internal Revenue Code of 1986, as
amended.
(f) "COMMITTEE" means the committee, if any, appointed by
the Board to administer this Plan on its behalf. If no committee
is appointed, the Board shall be deemed to be the Committee.
(g) "COMPANY" means Overseas Shipholding Group, Inc. or any
successor thereto as a result of a merger or consolidation.
(h) "EMPLOYEE" means any person employed by the Company.
(i) "ERISA" means the Employee Retirement Income Security
Act of 1974, as amended.
(j) "INITIAL PAYMENT DATE" means, except as otherwise
provided herein, the first day of the month coinciding with or
next following the latest of (i) three (3) months after the date
on which the Participant incurs a Termination of Employment, (ii)
the Participant's fifty-fifth (55th) birthday, or (iii) such
later date as the Participant elects in a writing filed with the
Committee at least one (1) year prior to the Employee's
Termination of Employment, provided that such election is
approved by the Committee in its sole discretion. Such an
election may be revoked by the Participant by written notice
filed with the Committee at least one (1) year prior to
Termination of Employment. Any election made under the Prior
Plan shall be deemed to be an election made under this Plan.
(k) "MOC" means Maritime Overseas Corporation or any
successor thereto as a result of a merger or consolidation.
(l) "PARTICIPANT" means the persons set forth on Exhibit B
hereto and any other Employee of the Company who is designated as
a Participant in this Plan by the Board.
(m) "PARTICIPATING ENTITY" means any entity that
participates in the Qualified Plan or that is otherwise
classified as a Participating Entity by the Committee.
(n) "PLAN" means this Overseas Shipholding Group, Inc.
Basic Supplemental Executive Retirement Plan, as amended from
time to time.
(o) "QUALIFIED PLAN" means the Pension Plan for Employees
of Maritime Overseas Corporation, as it is amended from time to
time.
(p) "STANDARD FORM" means a straight life annuity with no
contingent benefit and no period certain.
(q) "TERMINATION OF EMPLOYMENT" means termination of
employment as an Employee of the Company and all Participating
Entities for any reason whatsoever, including but not limited to
death, retirement, resignation or firing (with or without cause).
2. BASIC SUPPLEMENTAL BENEFITS.
(a) The Basic Supplemental Benefit shall be equal to the
Actuarial Equivalent lump sum of the (i) hypothetical vested
monthly accrued benefit (based on the provisions of the Qualified
Plan) in the Standard Form the Participant would have received
under the Qualified Plan (based solely on the Participant's
compensation and service with the Company), on the Initial
Payment Date if the limitations of Code Sections 401(a)(17), 415
and 416 (as applied under the Qualified Plan) did not apply, less
(ii) the Actuarial Equivalent monthly benefit on the Initial
Payment Date of the Participant's actual monthly benefit in the
Standard Form being received (or, if not then being received,
assuming benefits under the Qualified Plan then commenced) under
the Qualified Plan. The Basic Supplemental Benefit shall be
calculated based on all compensation and service recognized under
the Qualified Plan, whether or not with the Company, and then
prorated as set forth in (b) below.
(b) If the compensation and service used in determining the
Basic Supplemental Benefit pursuant to (a) above includes
compensation or service with a Participating Entity other than
the Company, the Basic Supplemental Benefit paid hereunder shall
be limited to the allocable portion attributable to the Company.
The allocable portion attributable to the Company shall be
determined by (i) calculating the total benefit payable under the
Qualified Plan and this Plan, if any, to a Participant from each
Participating Entity based only on his compensation and service
with such Participating Entity (but aggregating total Hours of
Employment in a Plan Year for purposes of determining Years of
Service) and (ii) multiplying the Basic Supplemental Benefit
under this Plan by the ratio of such benefit attributable to the
Company to the aggregate benefit attributable to all
Participating Entities. Notwithstanding the foregoing, the
Committee may, in its sole discretion, if it determines it to be
equitable based on the Participant's compensation and service,
otherwise allocate responsibility for any portion of the Basic
Supplemental Benefit, provided that the Participating Entity
allocated to has a plan similar to this and its Committee agrees
to such allocation. The Company shall not be responsible for any
portion of the Basic Supplemental Benefit attributable to or
allocated to service with another Participating Entity and no
such other Participating Entity shall have any obligation by
virtue of the Plan.
3. PAYMENT.
(a) Basic Form of Benefit. Subject to (b) below, a
Participant's Basic Supplemental Benefit shall be paid in the
form of a lump sum benefit, payable as soon as administratively
feasible after the Initial Payment Date.
(b) Optional Form of Benefit. The Participant shall have
the right, in a writing filed with the Committee, to elect a form
of benefit other than that specified in (a) above, provided,
however, that such optional form of benefit is available under
the Qualified Plan on the Initial Payment Date and that such
election is made and filed at least one (1) year prior to the
Participant's Termination of Employment and is approved by the
Committee in its sole discretion. Such an election may be
revoked by the Participant by written notice filed with the
Committee at least one (1) year prior to Termination of
Employment. Any election made under the Prior Plan shall be
deemed to be an election made under this Plan.
(c) Right to Accelerate Payment. Notwithstanding anything
else herein, the Company shall have the right, in its sole and
absolute discretion, to accelerate the payment of any Basic
Supplemental Benefit payable hereunder; provided, that any
accelerated payment(s) shall be equal to the Actuarial Equivalent
of the Participant's Basic Supplemental Benefit assuming that the
acceleration date is the Initial Payment Date and that the
Participant has commenced to receive his benefit under the
Qualified Plan on the date of such payment.
(d) Change of Control. Notwithstanding the above, upon the
occurrence of a Change of Control, the Actuarial Equivalent of
each Participant's then accrued Basic Supplemental Benefit
(calculated based on the assumption that the Participant has
commenced to receive his benefit under the Qualified Plan on the
date of such payment) shall be promptly paid in a lump sum to
such Participant and, the Actuarial Equivalent of such payment
shall be offset from the Basic Supplemental Benefit due the
Participant on the Initial Payment Date.
(e) Forfeiture. A Participant shall, in the sole
discretion of the Committee, forfeit his Basic Supplemental
Benefit in the event that within three (3) years after his
Termination of Employment he engages, without the prior written
consent of the Committee, in any activity which the Committee, in
its sole discretion, believes to be competitive with the
activities of the Company or MOC. Such forfeiture shall be equal
to the greater of (i) the unpaid portion of his Basic
Supplemental Benefit and (ii) the portion of his Basic
Supplemental Benefit, whether theretofore paid or not paid, which
in the Standard Form would be attributable to the period after
which he commences to compete. To the extent any forfeited
amounts shall have theretofore been paid to the Participant, upon
demand, he shall promptly refund such amounts to the Company. If
he fails to promptly do so, he shall be liable to the Company for
its costs of collection, including reasonable attorneys' fees and
disbursements. This Section 3(e) shall not be applicable to any
Participants whose Termination of Employment is less than ninety
(90) days before or less than two (2) years after a Change of
Control.
4. DEATH OF PARTICIPANT.
(a) Death Prior to Initial Payment Date. In the event of
the death of a Participant who has accrued a Basic Supplemental
Benefit prior to his Initial Payment Date, his spouse and/or
beneficiary shall receive a benefit calculated in the same manner
as in the Qualified Plan (but without regard to Code Sections
401(a)(17), 415 and 416)) to the extent such benefit would be
receivable under the terms of the Qualified Plan upon his death
prior to commencement of benefits if the benefit was payable from
the Qualified Plan less the benefit payable from the Qualified
Plan. His spouse and/or beneficiary shall be the same persons or
entities as designated or determined under the Qualified Plan.
The benefit payable hereunder, however, shall be paid in an
Actuarial Equivalent lump sum as soon as administratively
feasible after the Participant's death.
(b) Death After Initial Payment Date. If a Participant
dies on or after the Initial Payment Date, no death benefits will
be payable hereunder upon the death of the Participant unless the
Participant is receiving a form of benefit with a survivor
benefit pursuant to Section 3(b) above. If a Participant is
receiving a form of benefit with a survivor benefit, any benefits
becoming due will, subject to Section 3(c) above, be paid in
accordance with such form of benefit.
5. REEMPLOYMENT.
If a Participant is reemployed by the Company after
commencing to receive a Basic Supplemental Benefit hereunder but
does not again become a Participant, the Company shall have the
right at its election to suspend benefits payable hereunder
during such period of employment with an appropriate Actuarial
Equivalent adjustment in his benefits when they recommence. If
the former Participant again becomes a Participant accruing
benefits under the Plan, he shall cease to receive Basic
Supplemental Benefits, his prior election as to his form of
benefit shall be deemed cancelled, he shall have his benefits
recalculated based on his entire service for the Company offset
by the Actuarial Equivalent of the previously received Basic
Supplemental Benefit, and benefits shall be payable in accordance
with Sections 3 and 4 above. In no event shall the combined
Basic Supplemental Benefit (as actuarially adjusted to reflect
Actuarial Equivalents) be greater than the Basic Supplemental
Benefit the Participant would have received if his service had
been continuous.
6. CLAIMS PROCEDURE.
(a) The Committee shall be responsible for determining all
claims for benefits under this Plan by the Participants or their
beneficiaries. Within ninety (90) days after receiving a claim
(or within up to one hundred eighty (180) days, if the claimant
is so notified, including notification of the reason for the
delay), the Committee shall notify the Participant or beneficiary
of its decision in writing, giving the reasons for its decision
if adverse to the claim. If the decision is adverse to the
claimant, the Committee shall advise him of the Plan provisions
involved, of any additional information which he must provide to
perfect his claim and why, and of his right to request a review
of the decision.
(b) A claimant may request a review of an adverse decision
by written request to the Committee made within sixty (60) days
after receipt of the decision. The claimant, or his duly
authorized representative, may review pertinent documents and
submit written issues and comments.
(c) Within sixty (60) days after receiving a request for
review, the Committee shall notify the claimant in writing of
(i) its decision, (ii) the reasons therefore, and (iii) the Plan
provisions upon which it is based.
(d) The Committee may at any time alter the claims
procedure set forth above, so long as the revised claims
procedure complies with ERISA, and the regulations issued
thereunder.
(e) The Committee shall have the full power and authority
to interpret, construe and administer this Plan in their sole
discretion based on the provisions of the Plan and to decide any
questions and settle all controversies that may arise in
connection with the Plan. Both the Committee's and the Board's
interpretations and construction thereof, and actions thereunder,
made in the sole discretion of the Committee and the Board,
including any valuation of the Basic Supplemental Benefit, any
determination under this Section 6, or the amount of the payment
to be made hereunder, shall be final, binding and conclusive on
all persons for all persons. No member of the Board or Committee
shall be liable to any person for any action taken or omitted in
connection with the interpretation and administration of this
Plan.
(f) The Board shall determine, subject to the provisions of
this Plan: (i) the additional Employees who shall participate in
the Plan from time to time; and (ii) when an Employee shall cease
to be a Participant.
7. CONSTRUCTION OF PLAN.
Nothing contained in this Plan and no action taken
pursuant to the provisions of this Plan shall create or be
construed to create a trust of any kind, or a fiduciary
relationship between the Company and the Participants, their
designated beneficiaries or any other person. Any funds which
may be invested under the provisions of this Plan shall continue
for all purposes to be part of the general funds of the Company
and no person other than the Company shall by virtue of the
provisions of this Plan have any interest in such funds. To the
extent that any person acquires a right to receive payments from
the Company under this Plan, such right shall be no greater than
the right of any unsecured general creditor of the Company.
8. MINORS AND INCOMPETENTS.
If the Committee shall find that any person to whom
payment is payable under this Plan is unable to care for his
affairs because of illness or accident, or is a minor, any
payment due (unless a prior claim therefore shall have been made
by a duly appointed guardian, committee or other legal
representative) may be paid to the spouse, a child, parent, or
brother or sister, or to any person deemed by the Committee to
have incurred expense for such person otherwise entitled to
payment, in such manner and proportions as the Committee may
determine it its sole discretion. Any such payment shall be a
complete discharge of the liabilities of the Company, the
Committee and the Board under this Plan.
9. LIMITATION OF RIGHTS.
Nothing contained herein shall be construed as
conferring upon an Employee the right to continue in the employ
of the Company as an executive or in any other capacity or to
interfere with the Company's right to discharge him at any time
for any reason whatsoever.
10. PAYMENT NOT SALARY.
Any Basic Supplemental Benefit payable under this Plan
shall not be deemed salary or other compensation to the Employee
for the purposes of computing benefits to which he may be
entitled under any pension plan or other arrangement of the
Company for the benefit of its employees.
11. SEVERABILITY.
In case any provision of this Plan shall be illegal or
invalid for any reason, said illegality or invalidity shall not
affect the remaining parts hereof, but this Plan shall be
construed and enforced as if such illegal and invalid provision
never existed.
12. WITHHOLDING.
The Company shall have the right to make such
provisions as it deems necessary or appropriate to satisfy any
obligations it may have to withhold federal, state or local
income or other taxes incurred by reason of payments or accrual
pursuant to this Plan.
13. ASSIGNMENT.
This Plan shall be binding upon and inure to the
benefit of the Company, its successors and assigns and the
Participants and their heirs, executors, administrators and legal
representatives. In the event that the Company sells all or
substantially all of the assets of its business and the acquiror
of such assets assumes the obligations hereunder, the Company
shall be released from any liability imposed herein and shall
have no obligation to provide any benefits payable hereunder.
14. NON-ALIENATION OF BENEFITS.
The benefits payable under this Plan shall not be
subject to alienation, transfer, assignment, garnishment,
execution or levy of any kind, and any attempt to cause any
benefits to be so subjected shall not be recognized.
15. GOVERNING LAW.
To the extent legally required, the Code and ERISA
shall govern this Plan and, if any provision hereof is in
violation of any applicable requirement thereof, the Company
reserves the right to retroactively amend this Plan to comply
therewith. To the extent not governed by the Code and ERISA,
this Plan shall be governed by the laws of the State of New York,
without regard to conflict of law provisions.
16. AMENDMENT OR TERMINATION OF PLAN.
The Board or the Committee may amend this Plan from
time to time in any respect, and may at any time terminate the
Plan in its entirety. In addition, at any time, the Board or the
Committee may exclude any Participant from further participation
in the Plan. In the event of any amendment, Termination or
exclusion, the Participant shall have a vested right to a benefit
from this Plan equal to his total vested benefit from this Plan
as of the date of such Termination, amendment or exclusion
reduced by future growth, if any, of the benefit under the
Qualified Plan attributable to increases thereafter, but prior to
payment of the benefit, in the Code Sections 401(a)(17), 415 and
416 limits, including without limitation increase in the
Participant's final average compensation recognized under the
Qualified Plan as a result of increases in the Code 401(a)(17)
limit even though it is applied to future earnings so long as it
is not in excess of the Participant's compensation at the time of
the amendment, termination or exclusion, but not increases in the
Qualified Plan benefit attributable to future service credit,
future compensation, future vesting or increase in the benefit
formula. In the event of a Termination of the Plan or exclusion
of a Participant, the Company may distribute to each or any
Participant, as it deems appropriate, the Actuarial Equivalent of
his accrued benefit as of such date (as if a Termination of
Employment had occurred) and have no further obligation
hereunder. Section 3(e) above shall continue to apply to the
Participant. Any such action by the Board or the Committee with
respect to the Plan shall be binding on the Company and Employee.
17. NON-EXCLUSIVITY.
The adoption of the Plan by the Company shall not be
construed as creating any limitations on the power of the Company
to adopt such other supplemental retirement income arrangements
as it deems desirable, and such arrangements may be either
generally applicable or limited in application.
18. GENDER AND NUMBER.
Wherever used in this Plan, the masculine shall be
deemed to include the feminine and the singular shall be deemed
to include the plural, unless the context clearly indicates
otherwise.
19. HEADINGS AND CAPTIONS.
The headings and captions herein are provided for
reference and convenience only. They shall not be considered
part of the Plan and shall not be employed in the construction of
the Plan.
IN WITNESS WHEREOF, the Company has caused this Plan to be
executed this 13th day of December, 1996.
OVERSEAS SHIPHOLDING GROUP, INC.
By: S/ALAN CARUS
----------------------------
Title: Controller
<PAGE>
EXHIBIT A
----------
CHANGE OF CONTROL
For purposes of this Plan, a "Change of Control" shall
be deemed to have occurred if: (i) any person (as defined in
Section 3(a)(9) of the Securities Exchange Act of 1934, as
amended (the "Exchange Act") and as used in Sections 13(d) and
14(d) thereof)), excluding the Company, Maritime Overseas
Corporation ("MOC"), any "Subsidiary" of either, any employee
benefit plan sponsored or maintained by the Company, MOC or any
Subsidiary of either (including any trustee of any such plan
acting in his capacity as trustee) and any person who (or group
which includes a person who) is the beneficial owner (as defined
in Rule 13(d)-3 under the Exchange Act) as of January 1, 1994 of
at least fifteen percent (15%) of the common stock of the
Company, becomes the beneficial owner (as defined in Rule 13(d)-3
under the Exchange Act) of shares of Company having at least
thirty percent (30%) of the total number of votes that may be
cast for the election of directors of the Company; (ii) the
shareholders of the Company shall approve any merger or other
business combination of the Company, sale of all or substantially
all of the Company's assets or combination of the foregoing
transactions (a "Transaction"), other than a Transaction
involving only the Company and one or more of its Subsidiaries,
or a Transaction immediately following which the shareholders of
the Company immediately prior to the Transaction continue to have
a majority of the voting power in the resulting entity (excluding
for this purpose any shareholder of the Company owning directly
or indirectly more than ten percent (10%) of the shares of the
other company involved in the Transaction if such shareholder is
not as of January 1, 1994, the beneficial owner (as defined in
Rule 13(d)-3 under the Exchange Act) of at least fifteen percent
(15%) of the common stock of the Company); or (iii) within any
twenty-four (24) month period beginning on or after the date
hereof, the persons who were directors of the Company immediately
before the beginning of such period (the "Incumbent Directors")
shall cease (for any reason other than death) to constitute at
least a majority of the board of directors of the Company, or the
board of directors of any successor to the Company (the "Board"),
provided that, any director who was not a director as of the date
hereof shall be deemed to be an Incumbent Director if such
director was elected to the Board by, or on the recommendation of
or with the approval of, at least two-thirds of the directors who
then qualified as Incumbent Directors either actually or by prior
operation of the foregoing unless such election, recommendation
or approval was the result of an actual or threatened election
contest of the type contemplated by Regulation 14a-11 promulgated
under the Exchange Act or any successor provision.
Notwithstanding the foregoing, no Change of Control of the
Company shall be deemed to have occurred for purposes of this
Plan by reason of any Transaction which shall have been approved
by action or vote of a majority of the Incumbent Directors.
<PAGE>
EXHIBIT B
---------
Morton P. Hyman
Michael A. Recanati
George Blake
Alan Carus
Francis De Salvo
Robert N. Cowen
EXHIBIT 10(k)(1)
----------------
OVERSEAS SHIPHOLDING GROUP, INC.
SUPPLEMENTAL EXECUTIVE RETIREMENT PLAN
PLUS
EFFECTIVE AS OF JANUARY 1, 1997
This Plan is established effective as of January 1,
1997. Maritime Overseas Corporation ("MOC") initially
established a supplemental executive retirement plan in 1984 (the
"1984 Plan") and established a subsequent supplemental executive
retirement plan in 1988 (the "1988 Plan"), both primarily for the
purpose of providing supplementary retirement benefits for a
select group of management and highly compensated employees of
MOC and Participating Entities (as defined herein). Overseas
Shipholding Group, Inc. (the "Company") was a Participating
Entity in the 1984 Plan and 1988 Plan. The provisions of the
1984 Plan and the 1988 Plan were merged and restated, effective
January 1, 1995, in one plan, as they applied to Participants who
were Employees of the Company on January 1, 1995 (the "Prior
Plan"). The Prior Plan has now been divided into two parts-this
Plan and the Basic Supplemental Executive Retirement Plan (the
"Basic SERP").
This Plan applies to participants in the Prior Plan who
are not in pay status under the Prior Plan on January 1, 1997 and
who elect, in writing, to waive any rights to benefits under the
Prior Plan and to instead receive benefits under the Basic Plan
and, if applicable, this Plan. Any participant in pay status
under the Prior Plan on January 1, 1997 and any participant in
the Prior Plan who does not so elect to participate in this Plan
shall continue to be covered under the terms of the Prior Plan in
existence at the time of his termination. This Plan also applies
to future Participants designated by the Board.
1. DEFINITIONS. For purposes of this Plan, the following
definitions apply:
(a) "ACTUARIAL EQUIVALENT" means an amount equal in value
on an actuarial basis, as determined by an actuary selected by
the Committee, based upon the mortality and interest rates set
forth in the Qualified Plan, as amended from time to time.
(b) "BASIC PLAN" means the Overseas Shipholding Group, Inc.
Basic Supplemental Executive Retirement Plan.
(c) "BOARD" means the Board of Directors of the Company.
(d) "CHANGE OF CONTROL" means a change of control as
provided in Exhibit A hereto.
(e) "CODE" means the Internal Revenue Code of 1986, as
amended.
(f) "COMMITTEE" means the committee, if any, appointed by
the Board to administer this Plan on its behalf. If no committee
is appointed, the Board shall be deemed to be the Committee.
(g) "COMPANY" means Overseas Shipholding Group, Inc. or any
successor thereto as a result of a merger or consolidation.
(h) "EMPLOYEE" means any person employed by the Company.
(i) "ERISA" means the Employee Retirement Income Security
Act of 1974, as amended.
(j) "INITIAL PAYMENT DATE" means, except as otherwise
provided herein, the first day of the month coinciding with or
next following the latest of (i) three (3) months after the date
on which the Participant incurs a Termination of Employment, (ii)
the Participant's fifty-fifth (55th) birthday, or (iii) such
later date as the Participant elects in a writing filed with the
Committee at least one (1) year prior to the Employee's
Termination of Employment, provided that such election is
approved by the Committee in its sole discretion. Such an
election may be revoked by the Participant by written notice
filed with the Committee at least one (1) year prior to
Termination of Employment. Any election made under the Prior
Plan shall be deemed to be an election made under this Plan.
(k) "MOC" means Maritime Overseas Corporation or any
successor thereto as a result of a merger or consolidation.
(l) "PARTICIPANT" means the persons set forth on Exhibit B
hereto and any other Employee of the Company who is designated as
a Participant in this Plan by the Board.
(m) "PARTICIPATING ENTITY" means any entity that
participates in the Qualified Plan or that is otherwise
classified as a Participating Entity by the Committee.
(n) "PLAN" means this Overseas Shipholding Group, Inc.
Supplemental Executive Retirement Plan Plus, as amended from time
to time.
(o) "QUALIFIED PLAN" means the Pension Plan for Employees
of Maritime Overseas Corporation, as it is amended from time to
time.
(p) "STANDARD FORM" means a straight life annuity with no
contingent benefit and no period certain.
(q) "SUPPLEMENTAL PLUS BENEFIT" means the lump sum benefit
payable under this Plan.
(r) "TERMINATION OF EMPLOYMENT" means termination of
employment as an Employee of the Company and all Participating
Entities for any reason whatsoever, including but not limited to
death, retirement, resignation or firing (with or without cause).
2. SUPPLEMENTAL PLUS BENEFIT.
(a) The Supplemental Plus Benefit shall be equal to the
Actuarial Equivalent lump sum of the (i) hypothetical vested
monthly accrued benefit (based on the provisions of the Qualified
Plan) in the Standard Form the Participant would have received
under the Qualified Plan, on the Initial Payment Date if the
limitations of Code Sections 401(a)(17), 415 and 416 (as applied
under the Qualified Plan) did not apply and the Participant was
credited with such additional service and compensation that the
Board, in its sole discretion, recognizes for purposes of the
Supplemental Plus Benefit, less (ii) the Actuarial Equivalent
monthly benefit on the Initial Payment Date of the Participant's
actual monthly benefit in the Standard Form being received (or,
if not then being received, assuming benefits under the Qualified
Plan and Basic Plan then commenced) under the Qualified Plan and
the Basic Plan.
(b) If the additional compensation and service used in
determining the Supplemental Plus Benefit pursuant to (a) above
includes compensation or service with a Participating Entity
other than the Company, the Supplemental Plus Benefit paid
hereunder shall be limited to the allocable portion attributable
to the Company. The allocable portion attributable to the
Company shall be determined by (i) calculating the total
Supplemental Plus Benefit payable to a Participant from each
Participating Entity based only on any additional recognized
service and compensation and (ii) multiplying the Supplemental
Plus Benefit under this Plan by the ratio of such benefit
attributable to the additional service and compensation
recognized by the Company to the aggregate benefit attributable
to all Participating Entities. Notwithstanding the foregoing,
the Committee may, in its sole discretion, if it determines it to
be equitable based on the Participant's compensation and service,
otherwise allocate responsibility for any portion of the
Supplemental Plus Benefit, provided that the Participating Entity
allocated to has a plan similar to this and its Committee agrees
to such allocation. The Company shall not be responsible for any
portion of the Supplemental Plus Benefit attributable to or
allocated to service with another Participating Entity and no
such other Participating Entity shall have any obligation by
virtue of the Plan.
(c) The Board, in its sole discretion, may increase a
Participant's Supplemental Plus Benefit, his recognized service
or his recognized compensation and may establish such conditions
on such increase as it deems appropriate. Extra service shall be
recognized as provided in Exhibit C hereto.
3. PAYMENT.
(a) BASIC FORM OF BENEFIT. Subject to (b) below, a
Participant's Supplemental Plus Benefit shall be paid in the form
of a lump sum benefit, payable as soon as administratively
feasible after the Initial Payment Date.
(b) OPTIONAL FORM OF BENEFIT. The Participant shall have
the right, in a writing filed with the Committee, to elect a form
of benefit other than that specified in (a) above, provided,
however, that such optional form of benefit is available under
the Qualified Plan on the Initial Payment Date and that such
election is made and filed at least one (1) year prior to the
Participant's Termination of Employment and is approved by the
Committee in its sole discretion. Such an election may be
revoked by the Participant by written notice filed with the
Committee at least one (1) year prior to Termination of
Employment. Any election made under the Prior Plan shall be
deemed to be an election made under this Plan.
(c) RIGHT TO ACCELERATE PAYMENT. Notwithstanding anything
else herein, the Company shall have the right, in its sole and
absolute discretion, to accelerate the payment of any
Supplemental Plus Benefit payable hereunder; provided, that any
accelerated payment(s) shall be equal to the Actuarial Equivalent
of the Participant's Supplemental Plus Benefit assuming that the
acceleration date is the Initial Payment Date and that the
Participant has commenced to receive his benefits under the
Qualified Plan and Basic Plan on the date of such payment.
(d) CHANGE OF CONTROL. Notwithstanding the above, upon the
occurrence of a Change of Control, the Actuarial Equivalent of
each Participant's then accrued Supplemental Plus Benefit
(calculated based on the assumption that the Participant has
commenced to receive his benefits under the Qualified Plan and
Basic Plan on the date of such payment) shall be promptly paid in
a lump sum to such Participant and, the Actuarial Equivalent of
such payment shall be offset from the Supplemental Plus Benefit
due the Participant on the Initial Payment Date.
(e) FORFEITURE. A Participant shall, in the sole
discretion of the Committee, forfeit his Supplemental Plus
Benefit in the event that within three (3) years after his
Termination of Employment he engages, without the prior written
consent of the Committee, in any activity which the Committee, in
its sole discretion, believes to be competitive with the
activities of the Company or MOC. Such forfeiture shall be equal
to the greater of (i) the unpaid portion of his Supplemental Plus
Benefit and (ii) the portion of his Supplemental Plus Benefit,
whether theretofore paid or not paid, which in the Standard Form
would be attributable to the period after which he commences to
compete. To the extent any forfeited amounts shall have
theretofore been paid to the Participant, upon demand, he shall
promptly refund such amounts to the Company. If he fails to
promptly do so, he shall be liable to the Company for its costs
of collection, including reasonable attorneys' fees and
disbursements. This Section 3(e) shall not be applicable to any
Participants whose Termination of Employment is less than ninety
(90) days before or less than two (2) years after a Change of
Control.
4. DEATH OF PARTICIPANT.
(a) DEATH PRIOR TO INITIAL PAYMENT DATE. In the event of
the death of a Participant who has accrued a Supplemental Plus
Benefit prior to his Initial Payment Date, his spouse and/or
beneficiary shall receive a benefit calculated in the same manner
as in the Qualified Plan (based on the Participant's compensation
and service with the Company that the Board, in its discretion,
recognizes for purposes of the Supplemental Plus Benefit but
without regard to Code Sections 401(a)(17), 415 and 416) to the
extent such benefit would be receivable under the terms of the
Qualified Plan upon his death prior to commencement of benefits
if the benefit was payable from the Qualified Plan less the
benefits payable from the Qualified Plan and Basic Plan. His
spouse and/or beneficiary shall be the same persons or entities
as designated or determined under the Qualified Plan. The
benefit payable hereunder, however, shall be paid in an Actuarial
Equivalent lump sum as soon as administratively feasible after
the Participant's death.
(b) DEATH AFTER INITIAL PAYMENT DATE. If a Participant
dies on or after the Initial Payment Date, no death benefits will
be payable hereunder upon the death of the Participant unless the
Participant is receiving a form of benefit with a survivor
benefit pursuant to Section 3(b) above. If a Participant is
receiving a form of benefit with a survivor benefit, any benefits
becoming due will, subject to Section 3(c) above, be paid in
accordance with such form of benefit.
5. REEMPLOYMENT.
If a Participant is reemployed by the Company after
commencing to receive a Supplemental Plus Benefit hereunder but
does not again become a Participant, the Company shall have the
right at its election to suspend benefits payable hereunder
during such period of employment with an appropriate Actuarial
Equivalent adjustment in his benefits when they recommence. If
the former Participant again becomes a Participant accruing
benefits under the Plan, he shall cease to receive Supplemental
Plus Benefits, his prior election as to his form of benefit shall
be deemed cancelled, he shall have his benefits recalculated
based on his entire service for the Company offset by the
Actuarial Equivalent of the previously received Supplemental Plus
Benefit, and benefits shall be payable in accordance with
Sections 3 and 4 above. In no event shall the combined
Supplemental Plus Benefit (as actuarially adjusted to reflect
Actuarial Equivalents) be greater than the Supplemental Plus
Benefit the Participant would have received if his service had
been continuous.
6. CLAIMS PROCEDURE.
(a) The Committee shall be responsible for determining all
claims for benefits under this Plan by the Participants or their
beneficiaries. Within ninety (90) days after receiving a claim
(or within up to one hundred eighty (180) days, if the claimant
is so notified, including notification of the reason for the
delay), the Committee shall notify the Participant or beneficiary
of its decision in writing, giving the reasons for its decision
if adverse to the claim. If the decision is adverse to the
claimant, the Committee shall advise him of the Plan provisions
involved, of any additional information which he must provide to
perfect his claim and why, and of his right to request a review
of the decision.
(b) A claimant may request a review of an adverse decision
by written request to the Committee made within sixty (60) days
after receipt of the decision. The claimant, or his duly
authorized representative, may review pertinent documents and
submit written issues and comments.
(c) Within sixty (60) days after receiving a request for
review, the Committee shall notify the claimant in writing of
(i) its decision, (ii) the reasons therefore, and (iii) the Plan
provisions upon which it is based.
(d) The Committee may at any time alter the claims
procedure set forth above, so long as the revised claims
procedure complies with ERISA, and the regulations issued
thereunder.
(e) The Committee shall have the full power and authority
to interpret, construe and administer this Plan in their sole
discretion based on the provisions of the Plan and to decide any
questions and settle all controversies that may arise in
connection with the Plan. Both the Committee's and the Board's
interpretations and construction thereof, and actions thereunder,
made in the sole discretion of the Committee and the Board,
including any valuation of the Supplemental Plus Benefit, any
determination under this Section 6, or the amount of the payment
to be made hereunder, shall be final, binding and conclusive on
all persons for all persons. No member of the Board or Committee
shall be liable to any person for any action taken or omitted in
connection with the interpretation and administration of this
Plan.
(f) The Board shall determine, subject to the provisions of
this Plan: (i) the additional Employees who shall participate in
the Plan from time to time; and (ii) when an Employee shall cease
to be a Participant.
7. CONSTRUCTION OF PLAN.
Nothing contained in this Plan and no action taken
pursuant to the provisions of this Plan shall create or be
construed to create a trust of any kind, or a fiduciary
relationship between the Company and the Participants, their
designated beneficiaries or any other person. Any funds which
may be invested under the provisions of this Plan shall continue
for all purposes to be part of the general funds of the Company
and no person other than the Company shall by virtue of the
provisions of this Plan have any interest in such funds. To the
extent that any person acquires a right to receive payments from
the Company under this Plan, such right shall be no greater than
the right of any unsecured general creditor of the Company.
8. MINORS AND INCOMPETENTS.
If the Committee shall find that any person to whom
payment is payable under this Plan is unable to care for his
affairs because of illness or accident, or is a minor, any
payment due (unless a prior claim therefore shall have been made
by a duly appointed guardian, committee or other legal
representative) may be paid to the spouse, a child, parent, or
brother or sister, or to any person deemed by the Committee to
have incurred expense for such person otherwise entitled to
payment, in such manner and proportions as the Committee may
determine it its sole discretion. Any such payment shall be a
complete discharge of the liabilities of the Company, the
Committee and the Board under this Plan.
9. LIMITATION OF RIGHTS.
Nothing contained herein shall be construed as
conferring upon an Employee the right to continue in the employ
of the Company as an executive or in any other capacity or to
interfere with the Company's right to discharge him at any time
for any reason whatsoever.
10. PAYMENT NOT SALARY.
Any Supplemental Plus Benefit payable under this Plan
shall not be deemed salary or other compensation to the Employee
for the purposes of computing benefits to which he may be
entitled under any pension plan or other arrangement of the
Company for the benefit of its employees.
11. SEVERABILITY.
In case any provision of this Plan shall be illegal or
invalid for any reason, said illegality or invalidity shall not
affect the remaining parts hereof, but this Plan shall be
construed and enforced as if such illegal and invalid provision
never existed.
12. WITHHOLDING.
The Company shall have the right to make such
provisions as it deems necessary or appropriate to satisfy any
obligations it may have to withhold federal, state or local
income or other taxes incurred by reason of payments or accrual
pursuant to this Plan.
13. ASSIGNMENT.
This Plan shall be binding upon and inure to the
benefit of the Company, its successors and assigns and the
Participants and their heirs, executors, administrators and legal
representatives. In the event that the Company sells all or
substantially all of the assets of its business and the acquiror
of such assets assumes the obligations hereunder, the Company
shall be released from any liability imposed herein and shall
have no obligation to provide any benefits payable hereunder.
14. NON-ALIENATION OF BENEFITS.
The benefits payable under this Plan shall not be
subject to alienation, transfer, assignment, garnishment,
execution or levy of any kind, and any attempt to cause any
benefits to be so subjected shall not be recognized.
15. GOVERNING LAW.
To the extent legally required, the Code and ERISA
shall govern this Plan and, if any provision hereof is in
violation of any applicable requirement thereof, the Company
reserves the right to retroactively amend this Plan to comply
therewith. To the extent not governed by the Code and ERISA,
this Plan shall be governed by the laws of the State of New York,
without regard to conflict of law provisions.
16. AMENDMENT OR TERMINATION OF PLAN.
The Board or the Committee may amend this Plan from
time to time in any respect, and may at any time terminate the
Plan in its entirety. In addition, at any time, the Board or the
Committee may exclude any Participant from further participation
in the Plan. In the event of any amendment, Termination or
exclusion, the Participant shall have a vested right to a benefit
from this Plan equal to his total vested benefit from this Plan
as of the date of such Termination, amendment or exclusion. In
the event of a Termination of the Plan or exclusion of a
Participant, the Company may distribute to each or any
Participant, as it deems appropriate, the Actuarial Equivalent of
his accrued benefit as of such date (as if a Termination of
Employment had occurred) and have no further obligation
hereunder. Section 3(e) above shall continue to apply to the
Participant. Any such action by the Board or the Committee with
respect to the Plan shall be binding on the Company and Employee.
17. NON-EXCLUSIVITY.
The adoption of the Plan by the Company shall not be
construed as creating any limitations on the power of the Company
to adopt such other supplemental retirement income arrangements
as it deems desirable, and such arrangements may be either
generally applicable or limited in application.
18. GENDER AND NUMBER.
Wherever used in this Plan, the masculine shall be
deemed to include the feminine and the singular shall be deemed
to include the plural, unless the context clearly indicates
otherwise.
19. HEADINGS AND CAPTIONS.
The headings and captions herein are provided for
reference and convenience only. They shall not be considered
part of the Plan and shall not be employed in the construction of
the Plan.
IN WITNESS WHEREOF, the Company has caused this Plan to
be executed this 13th day of December, 1996.
OVERSEAS SHIPHOLDING GROUP, INC.
By: S/ALAN CARUS
----------------------------
Title: Controller
<PAGE>
EXHIBIT A
----------
CHANGE OF CONTROL
For purposes of this Plan, a "Change of Control" shall
be deemed to have occurred if: (i) any person (as defined in
Section 3(a)(9) of the Securities Exchange Act of 1934, as
amended (the "Exchange Act") and as used in Sections 13(d) and
14(d) thereof)), excluding the Company, Maritime Overseas
Corporation ("MOC"), any "Subsidiary" of either, any employee
benefit plan sponsored or maintained by the Company, MOC or any
Subsidiary of either (including any trustee of any such plan
acting in his capacity as trustee) and any person who (or group
which includes a person who) is the beneficial owner (as defined
in Rule 13(d)-3 under the Exchange Act) as of January 1, 1994 of
at least fifteen percent (15%) of the common stock of the
Company, becomes the beneficial owner (as defined in Rule 13(d)-3
under the Exchange Act) of shares of the Company having at least
thirty percent (30%) of the total number of votes that may be
cast for the election of directors of the Company; (ii) the
shareholders of the Company shall approve any merger or other
business combination of the Company, sale of all or substantially
all of the Company's assets or combination of the foregoing
transactions (a "Transaction"), other than a Transaction
involving only the Company and one or more of its Subsidiaries,
or a Transaction immediately following which the shareholders of
the Company immediately prior to the Transaction continue to have
a majority of the voting power in the resulting entity (excluding
for this purpose any shareholder of the Company owning directly
or indirectly more than ten percent (10%) of the shares of the
other company involved in the Transaction if such shareholder is
not as of January 1, 1994, the beneficial owner (as defined in
Rule 13(d)-3 under the Exchange Act) of at least fifteen percent
(15%) of the common stock of the Company); or (iii) within any
twenty-four (24) month period beginning on or after the date
hereof, the persons who were directors of the Company immediately
before the beginning of such period (the "Incumbent Directors")
shall cease (for any reason other than death) to constitute at
least a majority of the board of directors of the Company, or the
board of directors of any successor to the Company (the "Board"),
provided that, any director who was not a director as of the date
hereof shall be deemed to be an Incumbent Director if such
director was elected to the Board by, or on the recommendation of
or with the approval of, at least two-thirds of the directors who
then qualified as Incumbent Directors either actually or by prior
operation of the foregoing unless such election, recommendation
or approval was the result of an actual or threatened election
contest of the type contemplated by Regulation 14a-11 promulgated
under the Exchange Act or any successor provision.
Notwithstanding the foregoing, no Change of Control of the
Company shall be deemed to have occurred for purposes of this
Plan by reason of any Transaction which shall have been approved
by action or vote of a majority of the Incumbent Directors.
<PAGE>
EXHIBIT B
----------
Morton P. Hyman
<PAGE>
EXHIBIT C
----------
Morton P. Hyman shall be credited with four (4) years
extra service for purposes of calculating his Supplemental
Benefit and the death benefit.
EXIBIT 10(k)(4)
---------------
AGREEMENT
---------
Agreement made as of the 21st day of October, 1996, by and
between Overseas Shipholding Group, Inc., a corporation
incorporated under the laws of Delaware with its principal office
at 511 Fifth Avenue, New York, New York 10017 (the "Company") and
Morton P. Hyman, residing at 998 Fifth Avenue, New York, New York
10028 (the "Executive").
W I T N E S S E T H:
WHEREAS, the Company believes that the establishment
and maintenance of a sound and vital management of the Company
and its affiliates is essential to the protection and enhancement
of the interests of the Company and its stockholders;
WHEREAS, the Company also recognizes that the
possibility of a Change of Control of the Company (as defined in
Section 1 hereof), with the attendant uncertainties and risks,
might result in the departure or distraction of key employees of
the Company to the detriment of the Company; and
WHEREAS, the Company has determined that it is
appropriate to take steps to induce key employees to remain with
the Company, and to reinforce and encourage their continued
attention and dedication, when faced with the possibility of a
Change of Control of the Company.
NOW, THEREFORE, in consideration of the premises and
mutual covenants herein contained, the parties hereto hereby
agree as follows:
1. A Change of Control shall be deemed to have
occurred if: (i) any person (as defined in Section 3(a)(9) of
the Securities Exchange Act of 1934, as amended (the "Exchange
Act") and as used in Sections 13(d) and 14(d) thereof), excluding
the Company, Maritime Overseas Corporation, any "Subsidiary" of
either, any employee benefit plan sponsored or maintained by the
Company, Maritime Overseas Corporation or any Subsidiary of
either (including any trustee of any such plan acting in his
capacity as trustee) and any person who (or group which includes
a person who) is the beneficial owner (as defined in Rule 13(d)-3
under the Exchange Act) as of January 1, 1994 of at least fifteen
percent (15%) of the common stock of the Company, becomes the
beneficial owner (as defined in Rule 13(d)-3 under the Exchange
Act) of shares of the Company having at least thirty percent
(30%) of the total number of votes that may be cast for the
election of directors of the Company; (ii) there is a merger or
other business combination of the Company, sale of all or
substantially all of the Company's assets or combination of the
foregoing transactions (a "Transaction"), other than a
Transaction involving only the Company and one or more of its
Subsidiaries, or a Transaction immediately following which the
shareholders of the Company immediately prior to the Transaction
continue to have a majority of the voting power in the resulting
entity (excluding for this purpose any shareholder of the Company
owning directly or indirectly more than ten percent (10%) of the
shares of the other company involved in the Transaction if such
shareholder is not as of January 1, 1994, the beneficial owner
(as defined in Rule 13(d)-3 under the Exchange Act) of at least
fifteen percent (15%) of the common stock of the Company); or
(iii) during any period of two (2) consecutive years beginning on
or after the date hereof, the persons who were directors of the
Company immediately before the beginning of such period (the
"Incumbent Directors") shall cease (for any reason other than
death) to constitute at least a majority of the board of
directors of the Company or the board of directors of any
successor to the Company, provided that, any director who was not
a director as of the date hereof shall be deemed to be an
Incumbent Director if such director was elected to the board of
directors by, or on the recommendation of or with the approval
of, at least two-thirds (2/3) of the directors who then
qualified as Incumbent Directors either actually or by prior
operation of the foregoing unless such election, recommendation
or approval occurs as a result of an actual or threatened
election contest (as such terms are used in Rule 14a-11 of
Regulation 14A promulgated under the Exchange Act or any
successor provision) or other actual or threatened solicitation
of proxies or contests by or on behalf of a person other than a
member of the Board. Only one (1) Change of Control may occur
under this Agreement.
2. Term. This Agreement shall commence on the date
hereof and shall expire on the earliest of (i) three (3) years
from the date hereof, subject to the right of the Board of
Directors of the Company (the "Board") and the Executive to
extend it, provided that if a Change of Control takes place prior
to three (3) years from the date hereof, the duration of this
Agreement under this subpart (i) shall be until two (2) years
after the Change of Control whether such two (2) year period ends
before or after the end of such three (3) year period; (ii) the
date of the death of the Executive or retirement or other
termination of the Executive's employment (voluntarily or
involuntarily) with the Company prior to a Change of Control
other than as a result of a termination by the Company without
Cause (as defined below) or by the Executive for Good Reason (as
defined below); or (iii) one hundred twenty (120) days after a
termination by the Company without Cause or by the Executive with
Good Reason if a Change of Control does not occur on or prior to
such date. Notwithstanding anything in this Agreement to the
contrary, if the Company becomes obligated to make any payment to
the Executive pursuant to the terms hereof at or prior to the
expiration of this Agreement, then this Agreement shall remain in
effect for such and related purposes (including but not limited
to under Section 5 hereof) until all of the Company's obligations
hereunder are fulfilled. Further, provided that a Change of
Control has taken place prior to the termination of this
Agreement, the provisions of Sections 10(a), (d) and (e) hereof
shall survive and remain in effect notwithstanding the
termination of this Agreement, the termination of the Executive's
employment or any breach or repudiation or alleged breach or
repudiation by the Company or the Executive of this Agreement or
any one or more of its terms.
3. Termination Following Change of Control. If, and
only if, a Change of Control occurs, the Executive shall be
entitled to the amounts provided in Section 4 upon a termination
of the Executive's employment for any reason whatsoever at any
time within two (2) years after a Change of Control whether such
termination is by the Company (with or without Cause or as a
result of the Executive's disability), by the Executive (with or
without Good Reason) or as a result of the Executive's death. In
addition, notwithstanding the foregoing, in the event the
Executive is terminated without Cause or terminates employment
(as a result of an event occurring within one hundred twenty
(120) days prior to the occurrence of a Change of Control) for
Good Reason within one hundred twenty (120) days prior to the
occurrence of a Change of Control, such termination shall, upon
the occurrence of a Change of Control, be deemed to be covered
under the Agreement and the Executive shall be entitled to the
amounts provided under Section 4 hereof reduced by any amounts
otherwise received in connection with his termination of
employment. The foregoing terms shall have the following
meanings:
(i) Termination for Good Reason. For purposes of this
Agreement, termination for Good Reason shall mean a termination
by the Executive effected by a written notice given within sixty
(60) days after the occurrence of the Good Reason event. For
purposes of this Agreement, "Good Reason" shall mean the
occurrence of any of the following events without the Executive's
express written consent:
(A) a reduction in the Executive's annual base
salary; (B) a relocation of the Executive's principal
business location to an area outside a fifty (50) mile
radius of the Executive's current principal business
location; or (C) a material breach by the Company of any
other agreement with the Executive without proper
justification that remains uncured for ten (10) days after
written notice of such breach is given to the Company.
(ii) Cause. As used herein, the term "Cause" shall
mean: (A) the willful engaging by the Executive in gross
misconduct which is materially injurious to the Company, with
written notice of the specific misconduct given to the Executive;
(B) Executive's conviction of (or pleading of nolo contendere to)
a crime involving any financial impropriety or other crime which
would materially interfere with the Executive's ability to
perform his services to the Company or otherwise be materially
injurious to the Company; (C) the willful breach by the Executive
of any of his material obligations under any agreement with the
Company without proper justification, which breach is not cured
within ten (10) days after written notice thereof from the
Company; or (D) refusal to follow the proper and achievable
written direction of the Board within five (5) business days of
it being given, provided that the foregoing refusal shall not be
"Cause" if the Executive in good faith believes that such
direction is illegal, unethical or immoral and Executive promptly
so notifies the Board. For purposes of this paragraph, no act,
or failure to act, on the Executive's part shall be considered
"willful" unless done, or omitted to be done, by the Executive in
bad faith and without reasonable belief that such action or
omission was in the best interest of the Company.
The Executive's continued employment for a period of up
to sixty (60) days after the occurrence of any act or failure to
act constituting Good Reason hereunder shall not constitute
consent to, or a waiver of rights with respect to, any such act
or failure to act.
4. Compensation on Change of Control Termination.
If, pursuant to Section 3, the Executive is entitled to amounts
and benefits under this Section 4, the Company shall, subject to
Section 8, pay and provide to Executive: (A) in a lump sum
within five (5) days after such termination (or, if such
termination occurred prior to a Change of Control, within five
(5) days after the Change of Control) (i) three (3) times
Executive's highest annual base salary in effect within one
hundred twenty-one (121) days prior to, or at any time after, the
Change of Control, (ii) subject to submission of documentation,
any incurred but unreimbursed business expenses for the period
prior to termination payable in accordance with the Company's
policies, and (iii) any base salary, bonus, vacation pay or other
compensation accrued or earned under law or in accordance with
the Company's policies applicable to the Executive but not yet
paid; (B) any other amounts or benefits due under the then
applicable employee benefit (including without limitation any
Supplemental Executive Retirement Plan), equity or incentive
plans of the Company applicable to the Executive as shall be
determined and paid in accordance with such plans; (C) three (3)
years of additional service and compensation credit (at
Executive's highest compensation level in the one hundred twenty-
one (121) day period prior to, or at any time after, the Change
of Control) for pension purposes, and an increase in his age by
three (3) years for purposes of calculating any early retirement
subsidy or actuarial reduction, under any defined benefit type
qualified or nonqualified pension plan or arrangement of the
Company and its affiliates applicable to Executive, measured from
the date of termination of employment and not credited to the
extent that the Executive is otherwise entitled to such credit
during such three (3) year period, which payments shall be made
through and in accordance with the terms of the nonqualified
defined benefit pension plan or arrangement if any then exists
that is not purely an excess plan within the meaning of 4 U.S.C.
114(b)(1)(I)(ii), or, if not, in an actuarially equivalent lump
sum (using the actuarial factors then applying in the Company's
defined benefit plan covering the Executive); (D) continued
coverage under the Company health plans in which the Executive
participates (whether as an active or former employee)
immediately prior to the Change of Control or equivalent plans
thereto (the "Health Plans") for the Executive (except in the
case of the Executive's death) and the Executive's dependents for
three (3) years from the date of termination of the Executive's
employment, provided that premiums for such coverage shall be
paid by the Executive on the same basis as prior to the Change of
Control; and further provided that such coverage shall cease to
the extent that the providing of such coverage would violate
applicable law or result in other participants being taxed on the
benefits under such Health Plans; and (E) continued coverage
under the Company life insurance plan in which the Executive
participates (at the same cost as for active employees of
equivalent age) at a benefit level equal to the higher of the
level in effect immediately prior to the Change of Control or
immediately prior to the Executive's termination or,
alternatively, equivalent coverage (on a tax grossed up basis, to
the extent the amount taxable to the Executive is greater that
the amount taxable to him if he was an employee and participated
in the Company's life insurance plan) for three (3) years from
the date of termination of the Executive's employment.
5. Gross Up. (a) In the event that the
Executive shall become entitled to the payments and/or benefits
provided by Section 4 or any other amounts (whether pursuant to
the terms of this Agreement or any other plan, arrangement or
agreement with the Company, any person whose actions result in a
change of ownership or effective control covered by Section
280G(b)(2) of the Internal Revenue Code of 1986, as amended (the
"Code") or any person affiliated with the Company or such person)
as a result of a Change of Control (collectively the "Company
Payments"), and such Company Payments will be subject to the tax
(the "Excise Tax") imposed by Section 4999 of the Code (and any
similar tax that may hereafter be imposed) the Company shall pay
to the Executive at the time specified in subsection (d) below an
additional amount (the "Gross-up Payment") such that the net
amount retained by the Executive, after deduction of any Excise
Tax on the Company Payments and any U.S. federal, state, and
local income or payroll tax upon the Gross-up Payment provided
for by this paragraph (a), but before deduction for any U.S.
federal, state, and local income or payroll tax on the Company
Payments, shall be equal to the Company Payments.
(b) For purposes of determining whether any of the
Company Payments and Gross-up Payments (collectively the "Total
Payments") will be subject to the Excise Tax and the amount of
such Excise Tax, (x) the Total Payments shall be treated as
"parachute payments" within the meaning of Section 280G(b)(2) of
the Code, and all "parachute payments" in excess of the "base
amount" (as defined under Code Section 280G(b)(3) of the Code)
shall be treated as subject to the Excise Tax, unless and except
to the extent that, in the opinion of the Company's independent
certified public accountants appointed prior to any change in
ownership (as defined under Code Section 280G(b)(2)) or tax
counsel selected by such accountants (the "Accountants") such
Total Payments (in whole or in part) either do not constitute
"parachute payments," represent reasonable compensation for
services actually rendered within the meaning of Section
280G(b)(4) of the Code in excess of the "base amount" or are
otherwise not subject to the Excise Tax, and (y) the value of any
non-cash benefits or any deferred payment or benefit shall be
determined by the Accountants in accordance with the principles
of Section 280G of the Code.
(c) For purposes of determining the amount of the
Gross-up Payment, the Executive shall be deemed to pay U.S.
federal income taxes at the highest marginal rate of U.S. federal
income taxation in the calendar year in which the Gross-up
Payment is to be made and state and local income taxes at the
highest marginal rate of taxation in the state and locality of
the Executive's residence for the calendar year in which the
Company Payment is to be made, net of the maximum reduction in
U.S. federal income taxes which could be obtained from deduction
of such state and local taxes if paid in such year. In the event
that the Excise Tax is subsequently determined by the Accountants
to be less than the amount taken into account hereunder at the
time the Gross-up Payment is made, the Executive shall repay to
the Company, at the time that the amount of such reduction in
Excise Tax is finally determined, the portion of the prior Gross-
up Payment attributable to such reduction (plus the portion of
the Gross-up Payment attributable to the Excise Tax and U.S.
federal, state and local income tax imposed on the portion of the
Gross-up Payment being repaid by the Executive if such repayment
results in a reduction in Excise Tax or a U.S. federal, state and
local income tax deduction), plus interest on the amount of such
repayment at the rate provided in Section 1274(b)(2)(B) of the
Code. Notwithstanding the foregoing, in the event any portion of
the Gross-up Payment to be refunded to the Company has been paid
to any U.S. federal, state and local tax authority, repayment
thereof (and related amounts) shall not be required until actual
refund or credit of such portion has been made to the Executive,
and interest payable to the Company shall not exceed the interest
received or credited to the Executive by such tax authority for
the period it held such portion. The Executive and the Company
shall mutually agree upon the course of action to be pursued (and
the method of allocating the expense thereof) if the Executive's
claim for refund or credit is denied.
In the event that the Excise Tax is later determined by
the Accountant or the Internal Revenue Service to exceed the
amount taken into account hereunder at the time the Gross-up
Payment is made (including by reason of any payment the existence
or amount of which cannot be determined at the time of the Gross-
up Payment), the Company shall make an additional Gross-up
Payment in respect of such excess (plus any interest or penalties
payable with respect to such excess) at the time that the amount
of such excess is finally determined.
(d) The Gross-up Payment or portion thereof provided
for in subsection (c) above shall be paid not later than the
thirtieth (30th) day following an event occurring which subjects
the Executive to the Excise Tax; provided, however, that if the
amount of such Gross-up Payment or portion thereof cannot be
finally determined on or before such day, the Company shall pay
to the Executive on such day an estimate, as determined in good
faith by the Accountant, of the minimum amount of such payments
and shall pay the remainder of such payments (together with
interest at the rate provided in Code Section 1274(b)(2)(B) of
the Code), subject to further payments pursuant to subsection (c)
hereof, as soon as the amount thereof can reasonably be
determined, but in no event later than the ninetieth (90th) day
after the occurrence of the event subjecting the Executive to the
Excise Tax. In the event that the amount of the estimated
payments exceeds the amount subsequently determined to have been
due, such excess shall constitute a loan by the Company to the
Executive, payable on the fifth (5th) day after demand by the
Company (together with interest at the rate provided in Section
1274(b)(2)(B) of the Code).
(e) In the event of any controversy with the Internal
Revenue Service (or other taxing authority) under this Section 5,
the Executive shall permit the Company to control issues related
to this Section 5 (at its expense), provided that such issues do
not potentially materially adversely affect the Executive, but
the Executive shall control any other issues. In the event the
issues are interrelated, the Executive and the Company shall in
good faith cooperate so as not to jeopardize resolution of either
issue, but if the parties cannot agree the Executive shall make
the final determination with regard to the issues. In the event
of any conference with any taxing authority as to the Excise Tax
or associated income taxes, the Executive shall permit the
representative of the Company to accompany him, and the Executive
and his representative shall cooperate with the Company and its
representative.
(f) The Company shall be responsible for all charges
of the Accountant.
6. Notice of Termination. After a Change of Control,
any purported termination of the Executive's employment (other
than by reason of death) shall be communicated by written Notice
of Termination from one party hereto to the other party hereto in
accordance with Section 14.
7. Date of Termination. "Date of termination,"" with
respect to any purported termination of the Executive's
employment after a Change of Control, shall mean the date
specified in the Notice of Termination.
8. No Duty to Mitigate/Set-off. The Company agrees
that if the Executive's employment with the Company is terminated
pursuant to this Agreement during the term of this Agreement, the
Executive shall not be required to seek other employment or to
attempt in any way to reduce any amounts payable to the Executive
by the Company pursuant to this Agreement. Further, the amount
of any payment or benefit provided for in this Agreement shall
not be reduced by any compensation earned by the Executive or
benefit provided to the Executive as the result of employment by
another employer or otherwise. Except as otherwise provided
herein and apart from any disagreement between the Executive and
the Company concerning interpretation of this Agreement or any
term or provision hereof, the Company's obligations to make the
payments provided for in this Agreement and otherwise to perform
its obligations hereunder shall not be affected by any
circumstances, including without limitation, any set-off,
counterclaim, recoupment, defense or other right which the
Company may have against the Executive. The amounts due under
Section 4 are inclusive, and in lieu of, any amounts payable
under any other salary continuation or cash severance arrangement
of the Company and to the extent paid or provided under any other
such arrangement shall be offset against the amount due
hereunder.
9. Service with Subsidiaries. For purposes of this
Agreement, employment by a subsidiary or a parent of the Company
shall be deemed to be employment by the Company and references to
the Company shall include all such entities, except that the
payment obligation hereunder shall be solely that of the Company.
A Change of Control, however, as used in this Agreement, shall
refer only to a Change of Control of the Company.
10. Confidentiality; No Non-Competition; No
Resignation. (a) The Executive shall not at any time during the
term of this Agreement, or thereafter, directly or indirectly,
for any reason whatsoever, communicate or disclose to any
unauthorized person, firm or corporation, or use for the
Executive's own account, without the prior written consent of the
Board, any proprietary processes, trade secrets or other
confidential data or information of the Company and its related
and affiliated companies concerning their businesses or affairs,
accounts, products, services or customers, it being understood,
however, that the obligations of this Section shall not apply to
the extent that the aforesaid matters (i) are disclosed in
circumstances in which the Executive is legally required to do
so, or (ii) become known to and available for use by the public
other than by the Executive's wrongful act or omission.
(b) In consideration of this Agreement, the Executive
agrees that he will not resign from the Company without Good
Reason for at least one hundred eighty (180) days from the date
hereof, except the foregoing shall not apply after a Change of
Control.
(c) In consideration of this Agreement, the Executive
agrees that he will, following a Change of Control and timely
payment of amounts due him hereunder, consult in a senior
advisory capacity to assist in the orderly transition to new
management for a period of ninety (90) days following a Change of
Control.
(d) The Company shall continue to cover the Executive,
or cause the Executive to be covered, under any director and
officer insurance maintained after the Change of Control for
directors and officers of the Company (whether by the Company or
another entity) at the highest level so maintained for any other
past or active director or officer with regard to any action or
omission of the Executive while an officer or director of the
Company or its affiliates. Such coverage shall continue for any
period during which the Executive may have any liability for the
aforesaid actions or omissions.
(e) Following a Change of Control, the Company shall
indemnify the Executive to the fullest extent permitted by law
against any claims, suits, judgments, expenses (including
reasonable attorney fees), with advancement of legal fees and
disbursements to the fullest extent permitted by law, arising
from, out of, or in connection with the Executive's services as
an officer or director of the Company, as an officer or director
of any affiliate for which the Executive was required to serve as
such by the Company or as a fiduciary of any benefit plan of the
Company or any affiliate.
11. Successors; Binding Agreement. In addition to any
obligations imposed by law upon any successor to the Company, the
Company will require any successor (whether direct or indirect,
by purchase, merger, consolidation or otherwise) to all or
substantially all of the business and/or assets of the Company to
expressly assume and agree in writing to perform this Agreement
in the same manner and to the same extent that the Company would
be required to perform it if no such succession had taken place.
This Agreement shall inure to the benefit of and be enforceable
by the Executive's personal or legal representatives, executors,
administrators, successors, heirs, distributees, devisees and
legatees. If the Executive shall die while any amount would
still be payable to the Executive hereunder if the Executive had
continued to live, all such amounts, unless otherwise provided
herein, shall be paid in accordance with the terms of this
Agreement to the executors, personal representatives or
administrators of the Executive's estate. This Agreement is
personal to the Executive and neither this Agreement or any
rights hereunder may be assigned by the Executive.
12. Miscellaneous. No provisions of this Agreement
may be modified, waived or discharged unless such waiver,
modification or discharge is agreed to in writing and signed by
the Executive and such officer as may be specifically designated
by the Board. No waiver by either party hereto at any time of
any breach by the other party hereto of, or compliance with, any
condition or provision shall be deemed a waiver of similar or
dissimilar provisions or conditions at the same or at any prior
or subsequent time. This Agreement constitutes the entire
Agreement between the parties hereto pertaining to the subject
matter hereof. No agreements or representations, oral or
otherwise, express or implied, with respect to the subject matter
hereof have been made by either party which are not expressly set
forth in this Agreement. All references to any law shall be
deemed also to refer to any successor provisions to such laws.
13. Counterparts. This Agreement may be executed in
several counterparts, each of which shall be deemed to be an
original but all of which together will constitute one and the
same instrument.
14. Notices. Any notice or other communication
required or permitted hereunder shall be in writing and shall be
delivered personally, or sent by registered mail, postage
prepaid. Any such notice shall be deemed given when so delivered
personally, or, if mailed, five days after the date of deposit in
the United States mails, or as follows:
(i) If to the Company, to:
Overseas Shipholding Group, Inc.
511 Fifth Avenue
New York, New York 10017
Attention: Chairman
(ii) If to the Executive, to his or her last shown
address on the books of the Company.
Any party may by notice given in accordance with this
Section to the other parties, designate another address or person
for receipt of notices hereunder.
15. Separability. If any provisions of this Agreement
shall be declared to be invalid or unenforceable, in whole or in
part, such invalidity or unenforceability shall not affect the
remaining provisions hereof which shall remain in full force and
effect.
16. Legal Fees. In the event the Company does not
make the payments due hereunder on a timely basis and the
Executive collects any part or all of the payments provided for
hereunder or otherwise successfully enforces the terms of this
Agreement by or through a lawyer or lawyers, the Company shall
pay all costs of such collection or enforcement, including
reasonable legal fees and other reasonable fees and expenses
which the Executive may incur. The Company shall pay to the
Executive interest at the prime lending rate (as announced from
time to time by Citibank, N.A.) plus two percent (2%) per annum
on all or any part of any amount to be paid to Executive
hereunder that is not paid when due. The prime rate for each
calendar quarter shall be the prime rate in effect on the first
day of the calendar quarter.
17. Arbitration. Any dispute or controversy arising
under or in connection with this Agreement shall be settled
exclusively by arbitration conducted in the City of New York in
the State of New York under the Commercial Arbitration Rules then
prevailing of the American Arbitration Association and such
submission shall request the American Arbitration Association to:
(i) appoint an arbitrator experienced and knowledgeable
concerning the matter then in dispute; (ii) require the testimony
to be transcribed; (iii) require the award to be accompanied by
findings of fact and the statement for reasons for the decision;
and (iv) request the matter to be handled by and in accordance
with the expedited procedures provided for in the Commercial
Arbitration Rules. The determination of the arbitrators, which
shall be based upon a de novo interpretation of this Agreement,
shall be final and binding and judgment may be entered on the
arbitrators' award in any court having jurisdiction. The Company
shall pay all costs of the American Arbitration Association and
the arbitrator.
18. Non-Exclusivity of Rights. Nothing in this
Agreement shall prevent or limit the Executive's continuing or
future participation in any benefit, bonus, incentive, equity or
other plan or program provided by the Company and for which the
Executive may qualify, nor shall anything herein (except Section
8) limit or otherwise prejudice such rights as the Executive may
have under any other currently existing plan, agreement as to
employment or severance from employment with the Company or
statutory entitlements, provided, that to the extent such amounts
are paid under Section 4 hereof or otherwise, they shall not be
due under any such program, plan, agreement, or statute. Amounts
that are vested benefits or which the Executive is otherwise
entitled to receive under any plan or program of the Company, at
or subsequent to the date of termination shall be payable in
accordance with such plan or program, except as otherwise
specifically provided herein.
19. Not an Agreement of Employment. This is not an
agreement assuring employment and, subject to any other agreement
between the Executive and the Company, the Company reserves the
right to terminate the Executive's employment at any time with or
without cause, subject to the payment provisions hereof if such
termination is after, or within ninety (90) days prior to a
Change of Control, as defined herein. The Executive acknowledges
that he is aware that he shall have no claim against the Company
hereunder or for deprivation of the right to receive the amounts
hereunder as a result of any termination that does not
specifically satisfy the requirements hereof or as a result of
any other action taken by the Company.
20. Independent Representation. The Executive
acknowledges that he has been advised by the Company to have the
Agreement reviewed by independent counsel and has been given the
opportunity to do so.
21. Governing Law. This Agreement shall be construed,
interpreted, and governed in accordance with the laws of the
State of Delaware without reference to rules relating to
conflicts of law.
IN WITNESS WHEREOF, the Company has caused this
Agreement to be duly executed and the Executive has hereunto set
his hand as of the date first set forth above.
OVERSEAS SHIPHOLDING GROUP, INC.
By: S/
----------------------------
Name:
Title:
EXECUTIVE
S/
-------------------------------
Morton P. Hyman
EXHIBIT 10(k)(5)
----------------
AGREEMENT
Agreement made as of the 21st day of October, 1996, by
and between Overseas Shipholding Group, Inc., a corporation
incorporated under the laws of Delaware with its principal office
at 511 Fifth Avenue, New York, New York 10017 (the "Company") and
Robert N. Cowen, residing at 17 Kolbert Drive, Scarsdale, New
York 10583 (the "Executive").
W I T N E S S E T H:
WHEREAS, the Company believes that the establishment
and maintenance of a sound and vital management of the Company
and its affiliates is essential to the protection and enhancement
of the interests of the Company and its stockholders;
WHEREAS, the Company also recognizes that the
possibility of a Change of Control of the Company (as defined in
Section 1 hereof), with the attendant uncertainties and risks,
might result in the departure or distraction of key employees of
the Company to the detriment of the Company; and
WHEREAS, the Company has determined that it is
appropriate to take steps to induce key employees to remain with
the Company, and to reinforce and encourage their continued
attention and dedication, when faced with the possibility of a
Change of Control of the Company.
NOW, THEREFORE, in consideration of the premises and
mutual covenants herein contained, the parties hereto hereby
agree as follows:
1. A CHANGE OF CONTROL shall be deemed to have
occurred if: (i) any person (as defined in Section 3(a)(9) of
the Securities Exchange Act of 1934, as amended (the "Exchange
Act") and as used in Sections 13(d) and 14(d) thereof), excluding
the Company, Maritime Overseas Corporation, any "Subsidiary" of
either, any employee benefit plan sponsored or maintained by the
Company, Maritime Overseas Corporation or any Subsidiary of
either (including any trustee of any such plan acting in his
capacity as trustee) and any person who (or group which includes
a person who) is the beneficial owner (as defined in Rule 13(d)-3
under the Exchange Act) as of January 1, 1994 of at least fifteen
percent (15%) of the common stock of the Company, becomes the
beneficial owner (as defined in Rule 13(d)-3 under the Exchange
Act) of shares of the Company having at least thirty percent
(30%) of the total number of votes that may be cast for the
election of directors of the Company; (ii) there is a merger or
other business combination of the Company, sale of all or
substantially all of the Company's assets or combination of the
foregoing transactions (a "Transaction"), other than a
Transaction involving only the Company and one or more of its
Subsidiaries, or a Transaction immediately following which the
shareholders of the Company immediately prior to the Transaction
continue to have a majority of the voting power in the resulting
entity (excluding for this purpose any shareholder of the Company
owning directly or indirectly more than ten percent (10%) of the
shares of the other company involved in the Transaction if such
shareholder is not as of January 1, 1994, the beneficial owner
(as defined in Rule 13(d)-3 under the Exchange Act) of at least
fifteen percent (15%) of the common stock of the Company); or
(iii) during any period of two (2) consecutive years beginning on
or after the date hereof, the persons who were directors of the
Company immediately before the beginning of such period (the
"Incumbent Directors") shall cease (for any reason other than
death) to constitute at least a majority of the board of
directors of the Company or the board of directors of any
successor to the Company, provided that, any director who was not
a director as of the date hereof shall be deemed to be an
Incumbent Director if such director was elected to the board of
directors by, or on the recommendation of or with the approval
of, at least two-thirds (2/3) of the directors who then qualified
as Incumbent Directors either actually or by prior operation of
the foregoing unless such election, recommendation or approval
occurs as a result of an actual or threatened election contest
(as such terms are used in Rule 14a-11 of Regulation 14A
promulgated under the Exchange Act or any successor provision) or
other actual or threatened solicitation of proxies or contests by
or on behalf of a person other than a member of the Board. Only
one (1) Change of Control may occur under this Agreement.
2. TERM. This Agreement shall commence on the date
hereof and shall expire on the earliest of (i) three (3) years
from the date hereof, subject to the right of the Board of
Directors of the Company (the "Board") and the Executive to
extend it, provided that if a Change of Control takes place prior
to three (3) years from the date hereof, the duration of this
Agreement under this subpart (i) shall be until two (2) years
after the Change of Control whether such two (2) year period ends
before or after the end of such three (3) year period; (ii) the
date of the death of the Executive or retirement or other
termination of the Executive's employment (voluntarily or
involuntarily) with the Company prior to a Change of Control
other than as a result of a termination by the Company without
Cause (as defined below) or by the Executive for Good Reason (as
defined below); or (iii) one hundred twenty (120) days after a
termination by the Company without Cause or by the Executive with
Good Reason if a Change of Control does not occur on or prior to
such date. Notwithstanding anything in this Agreement to the
contrary, if the Company becomes obligated to make any payment to
the Executive pursuant to the terms hereof at or prior to the
expiration of this Agreement, then this Agreement shall remain in
effect for such and related purposes (including but not limited
to under Section 5 hereof) until all of the Company's obligations
hereunder are fulfilled. Further, provided that a Change of
Control has taken place prior to the termination of this
Agreement, the provisions of Sections 10(a), (d) and (e) hereof
shall survive and remain in effect notwithstanding the
termination of this Agreement, the termination of the Executive's
employment or any breach or repudiation or alleged breach or
repudiation by the Company or the Executive of this Agreement or
any one or more of its terms.
3. TERMINATION FOLLOWING CHANGE OF CONTROL. If, and
only if, a Change of Control occurs, the Executive shall be
entitled to the amounts provided in Section 4 upon a termination
of the Executive's employment for any reason whatsoever at any
time within two (2) years after a Change of Control whether such
termination is by the Company (with or without Cause or as a
result of the Executive's disability), by the Executive (with or
without Good Reason) or as a result of the Executive's death. In
addition, notwithstanding the foregoing, in the event the
Executive is terminated without Cause or terminates employment
(as a result of an event occurring within one hundred twenty
(120) days prior to the occurrence of a Change of Control) for
Good Reason within one hundred twenty (120) days prior to the
occurrence of a Change of Control, such termination shall, upon
the occurrence of a Change of Control, be deemed to be covered
under the Agreement and the Executive shall be entitled to the
amounts provided under Section 4 hereof reduced by any amounts
otherwise received in connection with his termination of
employment. The foregoing terms shall have the following
meanings:
(i) TERMINATION FOR GOOD REASON. For purposes of this
Agreement, termination for Good Reason shall mean a termination
by the Executive effected by a written notice given within sixty
(60) days after the occurrence of the Good Reason event. For
purposes of this Agreement, "Good Reason" shall mean the
occurrence of any of the following events without the Executive's
express written consent:
(A) a reduction in the Executive's annual base
salary; (B) a relocation of the Executive's principal
business location to an area outside a fifty (50) mile
radius of the Executive's current principal business
location; or (C) a material breach by the Company of any
other agreement with the Executive without proper
justification that remains uncured for ten (10) days after
written notice of such breach is given to the Company.
(ii) CAUSE. As used herein, the term "Cause" shall
mean: (A) the willful engaging by the Executive in gross
misconduct which is materially injurious to the Company, with
written notice of the specific misconduct given to the Executive;
(B) Executive's conviction of (or pleading of NOLO CONTENDERE to)
a crime involving any financial impropriety or other crime which
would materially interfere with the Executive's ability to
perform his services to the Company or otherwise be materially
injurious to the Company; (C) the willful breach by the Executive
of any of his material obligations under any agreement with the
Company without proper justification, which breach is not cured
within ten (10) days after written notice thereof from the
Company; or (D) refusal to follow the proper and achievable
written direction of the Board within five (5) business days of
it being given, provided that the foregoing refusal shall not be
"Cause" if the Executive in good faith believes that such
direction is illegal, unethical or immoral and Executive promptly
so notifies the Board. For purposes of this paragraph, no act,
or failure to act, on the Executive's part shall be considered
"willful" unless done, or omitted to be done, by the Executive in
bad faith and without reasonable belief that such action or
omission was in the best interest of the Company.
The Executive's continued employment for a period of up
to sixty (60) days after the occurrence of any act or failure to
act constituting Good Reason hereunder shall not constitute
consent to, or a waiver of rights with respect to, any such act
or failure to act.
4. COMPENSATION ON CHANGE OF CONTROL TERMINATION.
If, pursuant to Section 3, the Executive is entitled to amounts
and benefits under this Section 4, the Company shall, subject to
Section 8, pay and provide to Executive: (A) in a lump sum
within five (5) days after such termination (or, if such
termination occurred prior to a Change of Control, within five
(5) days after the Change of Control) (i) three (3) times
Executive's highest annual base salary in effect within one
hundred twenty-one (121) days prior to, or at any time after, the
Change of Control, (ii) subject to submission of documentation,
any incurred but unreimbursed business expenses for the period
prior to termination payable in accordance with the Company's
policies, and (iii) any base salary, bonus, vacation pay or other
compensation accrued or earned under law or in accordance with
the Company's policies applicable to the Executive but not yet
paid; (B) any other amounts or benefits due under the then
applicable employee benefit (including without limitation any
Supplemental Executive Retirement Plan), equity or incentive
plans of the Company applicable to the Executive as shall be
determined and paid in accordance with such plans; (C) three (3)
years of additional service and compensation credit (at
Executive's highest compensation level in the one hundred twenty-
one (121) day period prior to, or at any time after, the Change
of Control) for pension purposes, and an increase in his age by
three (3) years for purposes of calculating any early retirement
subsidy or actuarial reduction, under any defined benefit type
qualified or nonqualified pension plan or arrangement of the
Company and its affiliates applicable to Executive, measured from
the date of termination of employment and not credited to the
extent that the Executive is otherwise entitled to such credit
during such three (3) year period, which payments shall be made
through and in accordance with the terms of the nonqualified
defined benefit pension plan or arrangement if any then exists
that is not purely an excess plan within the meaning of 4 U.S.C.
114(b)(1)(I)(ii), or, if not, in an actuarially equivalent lump
sum (using the actuarial factors then applying in the Company's
defined benefit plan covering the Executive); (D) continued
coverage under the Company health plans in which the Executive
participates (whether as an active or former employee)
immediately prior to the Change of Control or equivalent plans
thereto (the "Health Plans") for the Executive (except in the
case of the Executive's death) and the Executive's dependents for
three (3) years from the date of termination of the Executive's
employment, provided that premiums for such coverage shall be
paid by the Executive on the same basis as prior to the Change of
Control; and further provided that such coverage shall cease to
the extent that the providing of such coverage would violate
applicable law or result in other participants being taxed on the
benefits under such Health Plans; and (E) continued coverage
under the Company life insurance plan in which the Executive
participates (at the same cost as for active employees of
equivalent age) at a benefit level equal to the higher of the
level in effect immediately prior to the Change of Control or
immediately prior to the Executive's termination or,
alternatively, equivalent coverage (on a tax grossed up basis, to
the extent the amount taxable to the Executive is greater that
the amount taxable to him if he was an employee and participated
in the Company's life insurance plan) for three (3) years from
the date of termination of the Executive's employment.
5. GROSS UP. (a) In the event that the
Executive shall become entitled to the payments and/or benefits
provided by Section 4 or any other amounts (whether pursuant to
the terms of this Agreement or any other plan, arrangement or
agreement with the Company, any person whose actions result in a
change of ownership or effective control covered by Section
280G(b)(2) of the Internal Revenue Code of 1986, as amended (the
"Code") or any person affiliated with the Company or such person)
as a result of a Change of Control (collectively the "Company
Payments"), and such Company Payments will be subject to the tax
(the "Excise Tax") imposed by Section 4999 of the Code (and any
similar tax that may hereafter be imposed) the Company shall pay
to the Executive at the time specified in subsection (d) below an
additional amount (the "Gross-up Payment") such that the net
amount retained by the Executive, after deduction of any Excise
Tax on the Company Payments and any U.S. federal, state, and
local income or payroll tax upon the Gross-up Payment provided
for by this paragraph (a), but before deduction for any U.S.
federal, state, and local income or payroll tax on the Company
Payments, shall be equal to the Company Payments.
(b) For purposes of determining whether any of the
Company Payments and Gross-up Payments (collectively the "Total
Payments") will be subject to the Excise Tax and the amount of
such Excise Tax, (x) the Total Payments shall be treated as
"parachute payments" within the meaning of Section 280G(b)(2) of
the Code, and all "parachute payments" in excess of the "base
amount" (as defined under Code Section 280G(b)(3) of the Code)
shall be treated as subject to the Excise Tax, unless and except
to the extent that, in the opinion of the Company's independent
certified public accountants appointed prior to any change in
ownership (as defined under Code Section 280G(b)(2)) or tax
counsel selected by such accountants (the "Accountants") such
Total Payments (in whole or in part) either do not constitute
"parachute payments," represent reasonable compensation for
services actually rendered within the meaning of Section
280G(b)(4) of the Code in excess of the "base amount" or are
otherwise not subject to the Excise Tax, and (y) the value of any
non-cash benefits or any deferred payment or benefit shall be
determined by the Accountants in accordance with the principles
of Section 280G of the Code.
(c) For purposes of determining the amount of the
Gross-up Payment, the Executive shall be deemed to pay U.S.
federal income taxes at the highest marginal rate of U.S. federal
income taxation in the calendar year in which the Gross-up
Payment is to be made and state and local income taxes at the
highest marginal rate of taxation in the state and locality of
the Executive's residence for the calendar year in which the
Company Payment is to be made, net of the maximum reduction in
U.S. federal income taxes which could be obtained from deduction
of such state and local taxes if paid in such year. In the event
that the Excise Tax is subsequently determined by the Accountants
to be less than the amount taken into account hereunder at the
time the Gross-up Payment is made, the Executive shall repay to
the Company, at the time that the amount of such reduction in
Excise Tax is finally determined, the portion of the prior Gross-
up Payment attributable to such reduction (plus the portion of
the Gross-up Payment attributable to the Excise Tax and U.S.
federal, state and local income tax imposed on the portion of the
Gross-up Payment being repaid by the Executive if such repayment
results in a reduction in Excise Tax or a U.S. federal, state and
local income tax deduction), plus interest on the amount of such
repayment at the rate provided in Section 1274(b)(2)(B) of the
Code. Notwithstanding the foregoing, in the event any portion of
the Gross-up Payment to be refunded to the Company has been paid
to any U.S. federal, state and local tax authority, repayment
thereof (and related amounts) shall not be required until actual
refund or credit of such portion has been made to the Executive,
and interest payable to the Company shall not exceed the interest
received or credited to the Executive by such tax authority for
the period it held such portion. The Executive and the Company
shall mutually agree upon the course of action to be pursued (and
the method of allocating the expense thereof) if the Executive's
claim for refund or credit is denied.
In the event that the Excise Tax is later determined by
the Accountant or the Internal Revenue Service to exceed the
amount taken into account hereunder at the time the Gross-up
Payment is made (including by reason of any payment the existence
or amount of which cannot be determined at the time of the Gross-
up Payment), the Company shall make an additional Gross-up
Payment in respect of such excess (plus any interest or penalties
payable with respect to such excess) at the time that the amount
of such excess is finally determined.
(d) The Gross-up Payment or portion thereof provided
for in subsection (c) above shall be paid not later than the
thirtieth (30th) day following an event occurring which subjects
the Executive to the Excise Tax; provided, however, that if the
amount of such Gross-up Payment or portion thereof cannot be
finally determined on or before such day, the Company shall pay
to the Executive on such day an estimate, as determined in good
faith by the Accountant, of the minimum amount of such payments
and shall pay the remainder of such payments (together with
interest at the rate provided in Code Section 1274(b)(2)(B) of
the Code), subject to further payments pursuant to subsection (c)
hereof, as soon as the amount thereof can reasonably be
determined, but in no event later than the ninetieth (90th) day
after the occurrence of the event subjecting the Executive to the
Excise Tax. In the event that the amount of the estimated
payments exceeds the amount subsequently determined to have been
due, such excess shall constitute a loan by the Company to the
Executive, payable on the fifth (5th) day after demand by the
Company (together with interest at the rate provided in Section
1274(b)(2)(B) of the Code).
(e) In the event of any controversy with the Internal
Revenue Service (or other taxing authority) under this Section 5,
the Executive shall permit the Company to control issues related
to this Section 5 (at its expense), provided that such issues do
not potentially materially adversely affect the Executive, but
the Executive shall control any other issues. In the event the
issues are interrelated, the Executive and the Company shall in
good faith cooperate so as not to jeopardize resolution of either
issue, but if the parties cannot agree the Executive shall make
the final determination with regard to the issues. In the event
of any conference with any taxing authority as to the Excise Tax
or associated income taxes, the Executive shall permit the
representative of the Company to accompany him, and the Executive
and his representative shall cooperate with the Company and its
representative.
(f) The Company shall be responsible for all charges
of the Accountant.
6. NOTICE OF TERMINATION. After a Change of Control,
any purported termination of the Executive's employment (other
than by reason of death) shall be communicated by written Notice
of Termination from one party hereto to the other party hereto in
accordance with Section 14.
7. DATE OF TERMINATION. "Date of termination," with
respect to any purported termination of the Executive's
employment after a Change of Control, shall mean the date
specified in the Notice of Termination.
8. NO DUTY TO MITIGATE/SET-OFF. The Company agrees
that if the Executive's employment with the Company is terminated
pursuant to this Agreement during the term of this Agreement, the
Executive shall not be required to seek other employment or to
attempt in any way to reduce any amounts payable to the Executive
by the Company pursuant to this Agreement. Further, the amount
of any payment or benefit provided for in this Agreement shall
not be reduced by any compensation earned by the Executive or
benefit provided to the Executive as the result of employment by
another employer or otherwise. Except as otherwise provided
herein and apart from any disagreement between the Executive and
the Company concerning interpretation of this Agreement or any
term or provision hereof, the Company's obligations to make the
payments provided for in this Agreement and otherwise to perform
its obligations hereunder shall not be affected by any
circumstances, including without limitation, any set-off,
counterclaim, recoupment, defense or other right which the
Company may have against the Executive. The amounts due under
Section 4 are inclusive, and in lieu of, any amounts payable
under any other salary continuation or cash severance arrangement
of the Company and to the extent paid or provided under any other
such arrangement shall be offset against the amount due
hereunder.
9. SERVICE WITH SUBSIDIARIES. For purposes of this
Agreement, employment by a subsidiary or a parent of the Company
shall be deemed to be employment by the Company and references to
the Company shall include all such entities, except that the
payment obligation hereunder shall be solely that of the Company.
A Change of Control, however, as used in this Agreement, shall
refer only to a Change of Control of the Company.
10. CONFIDENTIALITY; NO NON-COMPETITION; NO
RESIGNATION. (a) The Executive shall not at any time during the
term of this Agreement, or thereafter, directly or indirectly,
for any reason whatsoever, communicate or disclose to any
unauthorized person, firm or corporation, or use for the
Executive's own account, without the prior written consent of the
Board, any proprietary processes, trade secrets or other
confidential data or information of the Company and its related
and affiliated companies concerning their businesses or affairs,
accounts, products, services or customers, it being understood,
however, that the obligations of this Section shall not apply to
the extent that the aforesaid matters (i) are disclosed in
circumstances in which the Executive is legally required to do
so, or (ii) become known to and available for use by the public
other than by the Executive's wrongful act or omission.
(b) In consideration of this Agreement, the Executive
agrees that he will not resign from the Company without Good
Reason for at least one hundred eighty (180) days from the date
hereof, except the foregoing shall not apply after a Change of
Control.
(c) In consideration of this Agreement, the Executive
agrees that he will, following a Change of Control and timely
payment of amounts due him hereunder, consult in a senior
advisory capacity to assist in the orderly transition to new
management for a period of ninety (90) days following a Change of
Control.
(d) The Company shall continue to cover the Executive,
or cause the Executive to be covered, under any director and
officer insurance maintained after the Change of Control for
directors and officers of the Company (whether by the Company or
another entity) at the highest level so maintained for any other
past or active director or officer with regard to any action or
omission of the Executive while an officer or director of the
Company or its affiliates. Such coverage shall continue for any
period during which the Executive may have any liability for the
aforesaid actions or omissions.
(e) Following a Change of Control, the Company shall
indemnify the Executive to the fullest extent permitted by law
against any claims, suits, judgments, expenses (including
reasonable attorney fees), with advancement of legal fees and
disbursements to the fullest extent permitted by law, arising
from, out of, or in connection with the Executive's services as
an officer or director of the Company, as an officer or director
of any affiliate for which the Executive was required to serve as
such by the Company or as a fiduciary of any benefit plan of the
Company or any affiliate.
11. SUCCESSORS; BINDING AGREEMENT. In addition to any
obligations imposed by law upon any successor to the Company, the
Company will require any successor (whether direct or indirect,
by purchase, merger, consolidation or otherwise) to all or
substantially all of the business and/or assets of the Company to
expressly assume and agree in writing to perform this Agreement
in the same manner and to the same extent that the Company would
be required to perform it if no such succession had taken place.
This Agreement shall inure to the benefit of and be enforceable
by the Executive's personal or legal representatives, executors,
administrators, successors, heirs, distributees, devisees and
legatees. If the Executive shall die while any amount would
still be payable to the Executive hereunder if the Executive had
continued to live, all such amounts, unless otherwise provided
herein, shall be paid in accordance with the terms of this
Agreement to the executors, personal representatives or
administrators of the Executive's estate. This Agreement is
personal to the Executive and neither this Agreement or any
rights hereunder may be assigned by the Executive.
12. MISCELLANEOUS. No provisions of this Agreement
may be modified, waived or discharged unless such waiver,
modification or discharge is agreed to in writing and signed by
the Executive and such officer as may be specifically designated
by the Board. No waiver by either party hereto at any time of
any breach by the other party hereto of, or compliance with, any
condition or provision shall be deemed a waiver of similar or
dissimilar provisions or conditions at the same or at any prior
or subsequent time. This Agreement constitutes the entire
Agreement between the parties hereto pertaining to the subject
matter hereof. No agreements or representations, oral or
otherwise, express or implied, with respect to the subject matter
hereof have been made by either party which are not expressly set
forth in this Agreement. All references to any law shall be
deemed also to refer to any successor provisions to such laws.
13. COUNTERPARTS. This Agreement may be executed in
several counterparts, each of which shall be deemed to be an
original but all of which together will constitute one and the
same instrument.
14. NOTICES. Any notice or other communication
required or permitted hereunder shall be in writing and shall be
delivered personally, or sent by registered mail, postage
prepaid. Any such notice shall be deemed given when so delivered
personally, or, if mailed, five days after the date of deposit in
the United States mails, or as follows:
(i) If to the Company, to:
Overseas Shipholding Group, Inc.
511 Fifth Avenue
New York, New York 10017
Attention: Chairman
(ii) If to the Executive, to his or her last shown
address on the books of the Company.
Any party may by notice given in accordance with this
Section to the other parties, designate another address or person
for receipt of notices hereunder.
15. SEPARABILITY. If any provisions of this Agreement
shall be declared to be invalid or unenforceable, in whole or in
part, such invalidity or unenforceability shall not affect the
remaining provisions hereof which shall remain in full force and
effect.
16. LEGAL FEES. In the event the Company does not
make the payments due hereunder on a timely basis and the
Executive collects any part or all of the payments provided for
hereunder or otherwise successfully enforces the terms of this
Agreement by or through a lawyer or lawyers, the Company shall
pay all costs of such collection or enforcement, including
reasonable legal fees and other reasonable fees and expenses
which the Executive may incur. The Company shall pay to the
Executive interest at the prime lending rate (as announced from
time to time by Citibank, N.A.) plus two percent (2%) per annum
on all or any part of any amount to be paid to Executive
hereunder that is not paid when due. The prime rate for each
calendar quarter shall be the prime rate in effect on the first
day of the calendar quarter.
17. ARBITRATION. Any dispute or controversy arising
under or in connection with this Agreement shall be settled
exclusively by arbitration conducted in the City of New York in
the State of New York under the Commercial Arbitration Rules then
prevailing of the American Arbitration Association and such
submission shall request the American Arbitration Association to:
(i) appoint an arbitrator experienced and knowledgeable
concerning the matter then in dispute; (ii) require the testimony
to be transcribed; (iii) require the award to be accompanied by
findings of fact and the statement for reasons for the decision;
and (iv) request the matter to be handled by and in accordance
with the expedited procedures provided for in the Commercial
Arbitration Rules. The determination of the arbitrators, which
shall be based upon a de novo interpretation of this Agreement,
shall be final and binding and judgment may be entered on the
arbitrators' award in any court having jurisdiction. The Company
shall pay all costs of the American Arbitration Association and
the arbitrator.
18. NON-EXCLUSIVITY OF RIGHTS. Nothing in this
Agreement shall prevent or limit the Executive's continuing or
future participation in any benefit, bonus, incentive, equity or
other plan or program provided by the Company and for which the
Executive may qualify, nor shall anything herein (except Section
8) limit or otherwise prejudice such rights as the Executive may
have under any other currently existing plan, agreement as to
employment or severance from employment with the Company or
statutory entitlements, provided, that to the extent such amounts
are paid under Section 4 hereof or otherwise, they shall not be
due under any such program, plan, agreement, or statute. Amounts
that are vested benefits or which the Executive is otherwise
entitled to receive under any plan or program of the Company, at
or subsequent to the date of termination shall be payable in
accordance with such plan or program, except as otherwise
specifically provided herein.
19. NOT AN AGREEMENT OF EMPLOYMENT. This is not an
agreement assuring employment and, subject to any other agreement
between the Executive and the Company, the Company reserves the
right to terminate the Executive's employment at any time with or
without cause, subject to the payment provisions hereof if such
termination is after, or within ninety (90) days prior to a
Change of Control, as defined herein. The Executive acknowledges
that he is aware that he shall have no claim against the Company
hereunder or for deprivation of the right to receive the amounts
hereunder as a result of any termination that does not
specifically satisfy the requirements hereof or as a result of
any other action taken by the Company.
20. INDEPENDENT REPRESENTATION. The Executive
acknowledges that he has been advised by the Company to have the
Agreement reviewed by independent counsel and has been given the
opportunity to do so.
21. GOVERNING LAW. This Agreement shall be construed,
interpreted, and governed in accordance with the laws of the
State of Delaware without reference to rules relating to
conflicts of law.
IN WITNESS WHEREOF, the Company has caused this
Agreement to be duly executed and the Executive has hereunto set
his hand as of the date first set forth above.
OVERSEAS SHIPHOLDING GROUP, INC.
By: S/
------------------------------
Name:
Title:
EXECUTIVE
S/
----------------------------------
Robert N. Cowen
EXHIBIT 10(n)(4)
----------------
Dated 4 October, 1996
AGREEMENT SUPPLEMENTAL TO SHAREHOLDERS' AGREEMENT
ARCHINAV HOLDINGS LTD (1)
OVERSEAS CRUISESHIP INC. (2)
- and -
CELEBRITY CRUISE LINES INC. (3)
relating to CELEBRITY CRUISE LINES INC.
<PAGE>
THIS AGREEMENT made the 4th day of October, 1996
BETWEEN
(1) ARCHINAV HOLDINGS LTD incorporated in the Republic of
Liberia and having its registered office at 80 Broad Street,
Monrovia, Liberia (the "C Shareholder");
(2) OVERSEAS CRUISESHIP INC. incorporated in the Cayman Islands
and having its registered office at P.O. Box 309, George
Town, Cayman Islands (the "O Shareholder");
(3) CELEBRITY CRUISE LINES INC. incorporated in the Cayman
Islands and having its registered office at PO Box 1350,
George Town, Cayman Islands (the "Company").
IS SUPPLEMENTAL TO the shareholders agreement (the "Original
Shareholders Agreement") dated 21st October, 1992 made between
the parties hereto and the agreements supplemental thereto dated
29th January 1993 and 21st November, 1995 respectively each made
between the same parties (the "Supplemental Agreements" and
together with the Original Shareholders Agreement, the
"Shareholders Agreement").
WHEREAS
(A) The parties are desirous to arrange the issue of (i) a
further 51,000 C Ordinary Shares in the Company (the "New C
Shares") to the C Shareholder in addition to the 2,601,000 C
Ordinary Shares (the "Existing C Shares") currently recorded
in the name of the C Shareholder and (ii) a further 49,000
Ordinary Shares in the Company (the "New O Shares") to the O
Shareholder in addition to the 2,499,000 O Ordinary Shares
(the "Existing O Shares") currently recorded in the name of
the O Shareholder.
(B) This Supplemental Agreement sets out the agreement of the
parties in respect of such issue.
NOW IT IS HEREBY MUTUALLY AGREED by and between the parties
hereto as follows:
1. (i) By 4 October, 1996 the C Shareholder shall
subscribe and pay for 51,000 of the New C Shares at
US$100 per share (amounting to an aggregate
subscription of US$5,100,000); and
(ii) By 4 October, 1996 the O Shareholder shall
subscribe and pay for 49,000 of the New O Shares at
US$100 per share (amounting to an aggregate
subscription of US$4,900,000).
2. Upon the subscription, payment for and issue of the New C
Shares all references to the Existing C Shares contained in
the Shareholders Agreement shall be read and construed as if
they were references to both the Existing C Shares and the
New C Shares and accordingly the definition of "Shares" in
the Shareholders Agreement shall include all such shares and
the share certificate(s) for such New C Shares shall be
deposited in the same manner as the share certificate(s) for
the Existing C Shares have been deposited pursuant to terms
of the Shareholders Agreement.
3. Upon the subscription, payment for and issue of the New O
Shares all references to the Existing O Shares contained in
the Shareholders Agreement shall be read and construed as if
they were references to both the Existing O Shares and the
New O Shares and accordingly the definition of "Shares" in
the Shareholders Agreement shall include all such shares and
the share certificate(s) for such New O Shares shall be
deposited in the same manner as the share certificate(s) for
the Existing O Shares have been deposited pursuant to the
terms of the Shareholders Agreement.
4. The provisions of Clauses 13, 18 and 20 of the Original
Shareholders Agreement shall apply to this Supplemental
Agreement mutatis mutandis.
5. This Agreement may be executed in one or more counterparts
each of which shall be deemed an original but all of which
taken together shall constitute one and the same instrument.
IN WITNESS whereof this Agreement has been executed by the
parties hereto the day and year first above written.
SIGNED by Dionissios Kontalis
for and on behalf of
ARCHINAV HOLDINGS LTD in the
presence of E. Zalachori
SIGNED by ROBERT N. COWEN
for and on behalf of
OVERSEAS CRUISESHIP INC.
in the presence of MARK A. LOWE
SIGNED by H.A. HARALAMBOPOULOS
for and on behalf of
CELEBRITY CRUISE LINES INC.
in the presence of
EXHIBIT 10(O)
-------------
SUBLEASE
SUBLEASE dated as of November l, l996 between Maritime
Overseas Corporation, a New York corporation, having offices at
511 Fifth Avenue, New York, New York 10017 (the "Lessor") and
Overseas Shipholding Group, Inc., a Delaware corporation, having
offices at 1114 Avenue of the Americas, New York, New York l0036
(the "Lessee").
W I T N E S S E T H :
WHEREAS, the Lessor is the tenant of the entire rentable
portion of twelfth floor (the "Demised Premises") in the office
building located at 1114 Avenue of the Americas, New York, New
York l0036, pursuant to the Indenture of Lease dated as of
January 19, 1995 between Lessor as tenant thereunder and the
landlord named therein (the "Overlandlord"); and
WHEREAS, the Lessee wishes to sublet a portion of the
Demised Premises from the Lessor for use as Lessee's executive
offices;
NOW THEREFORE, IT IS HEREBY agreed between the Lessor and
Lessee as follows:
1. SUBLEASED SPACE - The Lessor hereby leases to the
Lessee and the Lessee hires from the Lessor approximately 2,700
square feet of the Demised Premises (the "Subleased Space").
2. TERM - This Sublease shall commence on December 1, 1996
and shall expire on February 28, 2002, unless cancelled or
terminated earlier pursuant to the provisions of this Sublease or
by law. Notwithstanding anything to the contrary contained in
this Sublease, the Lessee shall have the right to cancel this
Lease effective at any time, by giving to the Lessor thirty (30)
days written notice of cancellation.
3. RENT - The Lessee covenants and agrees to pay to the
Lessor commencing on December 1, 1996, and thereafter on the
first day of each month during the term of this Sublease, an
amount equal to 8.4753% of the Fixed Minimum Rent, additional
rent and other payments relating to the Demised Premises as a
whole payable by Lessor to Overlandlord pursuant to the Lease.
There shall be excluded from additional rent under this Sublease
any amounts payable by the Lessor with respect to any
identifiable portion of the Demised Premises that does not
include the Subleased Space. Any amounts payable by the Lessor
to Overlandlord under the Lease relating exclusively to the Sub-
leased Space, shall be paid by Lessee to Lessor as additional
rent under this Sublease.
4. USE OF SUBLEASED SPACE - Lessee shall use and occupy
the Subleased Space for its executive offices.
5. ALTERATIONS - Lessee shall make no alterations in and
to the Subleased Space except in accordance with the terms of the
Lease.
6. COMPLIANCE WITH REGULATIONS - Lessee shall comply
promptly with all laws, ordinances, requirements, and regulations
of the federal, state, county, municipal and other authorities,
the fire insurance underwriters, and any insurance organizations
or associations; except that Lessee shall not be required to make
any alterations to the exterior of the building, or alterations
of a structural nature.
7. LESSOR'S RIGHT TO CURE - If Lessee shall at any time be
in default in the payment of any impositions or other amounts to
be paid by it hereunder, or in the performance of any other act
on its part to be performed hereunder, Lessor, in addition to
invoking any other remedy for such default, may, but shall not be
obligated to, pay any such imposition or other amount or, after
giving Lessee ten days' prior written notice, perform such other
act on the part of Lessee to be performed in such manner and to
such extent as Lessor may deem desirable, and may pay any
expenses incidental thereto. All sums so paid by Lessor shall
constitute additional rent payable on demand. Failure to make
such payments on demand shall constitute a new default by Lessee
and Lessor shall have the same rights and remedies as in the case
of default by Lessee in the payment of an installment of rent.
8. SUBLEASE - This is a sublease. The Lessor's interest
in the premises is as lessee under the Lease. Terms defined in
the Lease shall have the same meanings when used in this
Sublease, unless such terms are redefined herein. Except as
provided in Paragraph 3 hereof, this Sublease is expressly made
subject and subordinate to all the terms and conditions of the
Lease and the Lessee agrees to use the Subleased Space in
accordance with the terms of the Lease and not do or omit to do
anything which will breach any of the terms thereof. The Lessor
agrees to use its best efforts to cause the Overlandlord to
furnish and provide to and for the Subleased Space the services
and equipment to which it is entitled under the Lease. If the
underlying Lease is terminated, this Sublease shall terminate
simultaneously and any unearned rent paid in advance shall be
refunded to the Lessee, provided that such termination is not the
result of a breach by Lessee of the within sublease. The Lessee
agrees to assume the obligation for performance of all of
Lessor's obligations (except for the obligation to pay rent which
shall be governed by this Sublease) under the Lease with respect
to the Subleased Space.
9. QUIET POSSESSION - The Lessor covenants that Lessee,
upon paying the rent as herein reserved and performing all the
covenants and agreements to be performed by the Lessee under this
Sublease and the Lease, may quietly enjoy the premises,
except as herein otherwise provided, and subject, however, to the
terms of the Lease to Lessor, and to the terms of any mortgages
which may now or hereafter affect the premises.
10. NO ASSIGNMENT, ETC. - The Lessee shall not assign,
mortgage or encumber this lease, nor sublet or permit the
Subleased Space or any part thereof to be used by others, without
the prior written consent of the Lessor in each instance.
11. NO WAIVER - The failure of Lessor to seek redress for
violation of, or to insist upon the strict performance of, any
covenant, agreement, term, provision or condition of this
Sublease, or any of the rules and regulations, shall not
constitute a waiver thereof and Lessor shall have all remedies
provided herein and by applicable law with respect to any
subsequent act, which would have originally constituted a
violation. The receipt by Lessor of rent with knowledge of the
breach of any covenant, agreement, term, provision or condition
of this Sublease shall not be deemed a waiver of such breach. No
provision of this Sublease shall be deemed to have been waived by
Lessor, unless such waiver be in writing signed by Lessor. No
payment by Lessee or receipt by Lessor of a lesser amount than
the monthly percentage of Fixed Minimum Rent herein stipulated
shall be deemed to be other than on account of such percentage of
Fixed Minimum Rent or additional rent or other charge owing by
Lessee, as Lessor shall elect, nor shall any endorsement or
statement on any check or any letter accompanying any check or
payment as rent be deemed binding on Lessor or an accord and
satisfaction, and Lessor may accept such check or payment without
prejudice to Lessor''s right to recover the balance of the
percentage of Fixed Minimum Rent, additional rent or other
charges owing by Lessee, and to pursue each and every remedy in
this Sublease or by law provided. The receipt and retention by
Lessor of Fixed Minimum Rent or additional rent from anyone other
than Lessee shall not be deemed a waiver by Lessor of any breach
by Lessee of any covenant, agreement, term, provision or
condition herein contained, or the acceptance of such other
person as a tenant, or a release of Lessee from the further
performance by Lessee of the covenants, agreements, terms,
provisions and conditions herein contained.
12. ENTIRE AGREEMENT - This Sublease, including all of the
terms and conditions of the Lease to which it is expressly made
subject and subordinate to, contain the entire agreement between
Lessor and Lessee, and any agreement hereafter made between
Lessor and Lessee shall be ineffective to change, modify, waive,
release, discharge, terminate or effect a surrender or
abandonment of this Sublease, in whole or in part, unless such
agreement is in writing and signed by the party against whom
enforcement is sought.
13. NOTICES - Any notice, request or demand permitted or
required to be given by the terms and provisions of this
Sublease, or by any law or ordinance, either by Lessor to Lessee
or by Lessee to Lessor, shall be in writing. Unless otherwise
required by such law or ordinance such notice, request or demand
shall be given, and shall be deemed to have been served and given
by Lessor and received by Lessee, when Lessor shall have
deposited such notice, request or demand by registered or
certified mail enclosed in a securely closed postpaid wrapper, in
a United States Government general or branch post office,
addressed to Lessee at the Subleased Space, Attention:
President. Such notice, request or demand shall be given, and
shall be deemed to have been served and given by Lessee and
received by Lessor, when Lessee shall have deposited such notice,
request or demand by registered or certified mail enclosed in a
securely closed postpaid wrapper in such a post office addressed
to Lessor at its address as stated on the first page of this
Lease, Attention: Treasurer. Either party may, by notice as
aforesaid, designate a different address or addresses for
notices, requests or demands to it.
14. MISCELLANEOUS - If any provision of this Sublease or
the application thereof to any person or circumstance shall be
determined to be invalid or unenforceable, the remaining
provisions of this Sublease or the application of such provision
to persons or circumstances other than those to which it is held
invalid or unenforceable shall not be affected thereby and shall
be valid and enforceable to the fullest extent permitted by law.
IN WITNESS WHEREOF, each of the Lessor and the Lessee have
caused this Sublease to be executed by its duly authorized
officer as of the day and year first above written.
MARITIME OVERSEAS CORPORATION
By:
------------------------
OVERSEAS SHIPHOLDING GROUP, INC.
By: -------------------------
<TABLE>
<CAPTION>
EXHIBIT 12
----------
OVERSEAS SHIPHOLDING GROUP, INC.
RATIO OF EARNINGS TO FIXED CHARGES
For the year ended December 31, 1996
(In thousands)
Presented in connection with Amendment No. 1
filed on November 9, 1993 to Registration Statement No. 33-50441
<S> <C>
Income before federal income taxes $ 3,387
Adjustments of income related to
companies owned less than 100% 5,473
Interest expense 69,458
Proportionate share of interest of
50% - owned companies 19,405
Interest component of an operating
lease 1,901
Amortization of capitalized interest 3,355
--------
Earnings $102,979
========
Interest expense $69,458
Proportionate share of fixed charges
of 50% - owned companies 23,751
Capitalized interest 9,378
Interest component of an operating
lease 1,901
--------
Fixed charges $104,488
========
Deficiency of earnings available to
cover fixed charges $( 1,509)
========
</TABLE>
<PAGE>
EXHIBIT 13
----------
<TABLE>
[From page 2 of the 1996 Annual Report]
TWO-YEAR CHARTER POSITION OF OSG FLEET
(Including Scheduled Deliveries)
<CAPTION>
Through Year-End 1997 1998
<S> <C> <C>
Total Fleet dwt 7,061,950 6,941,450
% of Total Fleet on Charter 30 20
U.S. Fleet dwt 955,650 835,150
% of U.S. Fleet on Charter 63 58
Intl. Fleet dwt 6,106,300 6,106,300
% of Intl. Fleet on Charter 25 15
</TABLE>
<PAGE>
[From page 16 and 17 of the 1996 Annual Report]
THE FLEET
February 19, 1997
Operating Bulk Fleet: 61 vessels, 6,490,150 dwt
On Order: 2 vessels, 571,800 dwt
Total Bulk Tonnage: 63 vessels, 7,061,950 dwt
<TABLE>
INTERNATIONAL BULK FLEET
- ------------------------
<CAPTION> Year Deadweight Charter
Type of Ship Built Tonnage Expiration Date
- ---------------------------------------------------------------------
<S> <C> <C> <C>
Tankers 1996 305,000 Voyage Charter
1996 295,800 October 1997
1996 295,750 Voyage Charter
1997 50%-owned 269,200 December 2004
1975 50%-owned 264,850 September 1998
1974 50%-owned 264,850 December 1997
1974 50%-owned 264,850 July 1997
1990 254,000 April 2002
1989 133,000 June 2005
1976 128,450 Voyage Charter
1975 128,250 Voyage Charter
1975 128,200 Voyage Charter
1980 96,050 Voyage Charter
1981 96,000 Voyage Charter
1979 95,600 Voyage Charter
1994 94,850 Voyage Charter
1994 94,650 March 1997
1994 93,350 Voyage Charter
1994 93,350 Voyage Charter
1994 93,300 Voyage Charter
1994 93,300 Voyage Charter
- ---------------------------------------------------------------------
Petroleum
Products 1986 65,150 August 1998
Carriers 1986 65,150 Voyage Charter
1986 63,200 September 1997
1987 63,150 September 1997
1989 39,450 March 1997
1988 39,450 July 1997
1989 39,100 Voyage Charter
1989 39,050 Voyage Charter
1979 31,600 Voyage Charter
1981 30,800 March 1997
1982 29,500 Voyage Charter
- ---------------------------------------------------------------------
Bulk Carriers 1997 157,500 Voyage Charter
1997 157,300 May 1997
1982 138,800 November 1997
1982 138,800 October 1997
1975 121,050 June 1997
1975 121,000 June 1997
1990 120,900 April 1997
1990 120,800 Voyage Charter
1981 64,550 Voyage Charter
1983 64,200 September 1997
1989 63,350 April 1997
1989 63,250 February 1997
1977 49%-owned 60,300 April 1997
1973 49%-owned 54,450 October 1997
- ---------------------------------------------------------------------
Operating International
Bulk Fleet Total(a) 46 vessels 5,534,500 dwt
=====================================================================
</TABLE>
<TABLE>
ON ORDER BULK FLEET
<CAPTION>
Delivery Deadweight Charter
Type of Ship Date Tonnage Expiration Date
- ---------------------------------------------------------------------
<S> <C> <C> <C>
Tankers March 1997 302,150
March 1997
50%-owned 269,650 2005
- ---------------------------------------------------------------------
2 vessels 571,800 dwt
- ---------------------------------------------------------------------
International Bulk
Fleet Total 48 vessels 6,106,300 dwt
- ---------------------------------------------------------------------
</TABLE>
<TABLE>
U.S. BULK FLEET
- ---------------
<CAPTION>
Year Deadweight Charter
Type of Ship Built Tonnage Expiration Date
- ---------------------------------------------------------------------
<S> <C> <C> <C>
Tankers 1974 120,800 May 2001
1973 120,500 November 1998
1977 (b) 90,650 May 2002
1977 (b) 90,550 September 2002
1978 90,500 March 2003
1977 90,400 November 2002
1971 62,000 Voyage Charter
1970 62,000 May 1997
- ---------------------------------------------------------------------
Petroleum Products 1983 (c) 42,950 October 1997
Carriers 1982 (c) 42,700 Voyage Charter
1969 37,800 September 1997
1968 37,800 March 1997
- ---------------------------------------------------------------------
Geared Bulk Carriers 1978 (b) 25,550 Voyage Charter
1978 (b) 25,550 Voyage Charter
- ---------------------------------------------------------------------
Pure Car Carrier 1987 15,900 August 1997
(5,000 cars)
- ---------------------------------------------------------------------
Operating U.S. Bulk
Fleet Total(d) 15 vessels 955,650 dwt
=====================================================================
<FN>
(a) Does not include a 264,900 dwt tanker under contract to be delivered
for demolition during February 1997.
(b) 25-year capital leases, commencing in year built.
(c) 22-year capital leases, commencing in 1989.
(d) Does not include a 29,300 dwt petroleum barge, 50%-owned by OSG.
</TABLE>
<PAGE>
[From pages 4, 7, 8, and 11 of 1996 Annual Report]
GLOBAL BULK SHIPPING MARKETS
- ----------------------------
The bulk shipping industry is highly competitive and fragmented, with no
one group owning more than 2% of the world fleet. With 61 ships, totaling
6.5 million dwt, OSG ranks among the world's ten largest bulk shipowners.
The Company is the third largest owner of tankers in terms of the number of
vessels and the seventh largest in carrying capacity. Approximately 82% of
the Company's voyage revenues in 1996, 77% in 1995 and 78% in 1994 came
from carrying petroleum and its derivatives.
INTERNATIONAL TANKER MARKETS
- ----------------------------
Nineteen ninety-six saw improvement in world tanker markets, as demand for
oil rose while newbuilding deliveries and contracting for new orders
remained at moderate levels. Rates for most segments, particularly for Very
Large Crude Carriers (VLCCs - tankers over 200,000 dwt), averaged
significantly higher than in 1995.
WORLD OIL DEMAND DEVELOPMENTS
Oil demand growth in the major importing regions accelerated to 3% from 2%
the prior year, led again by robust growth in developing Asia, which now
accounts for 17% of total world oil demand. The International Energy Agency
forecasts a similar rise in oil demand for the major importing nations in
1997. In the OECD countries, oil demand rose 2% due in large part to strong
demand for heating oil and gasoline in the United States. U.S. crude oil
imports were up about 4% over 1995. In 1996, the strong global demand
growth, coupled with the increasing trend among oil companies to maintain
lower levels of inventory, pushed oil prices up to their highest levels
since the Gulf War in 1990-91.
INCREASED DEMAND TEMPERED BY TREND TO SHORTER HAULS
Despite the sharp rise in oil demand, ton-mile growth has been tempered by
changing trading patterns. Major importers such as the United States and
Western Europe are increasingly sourcing their crude oil from short-haul
suppliers, particularly Latin America and the North Sea. It is these
sources, and not the Middle East, that increased their production in 1996
to meet most of the growth in world oil demand, and this trend is projected
to continue in 1997. In December 1996, Iraq started to export limited
volumes of crude oil under a United Nations "oil for food" plan. Iraqi
exports - the majority of which will be routed through the Ceyhan pipeline
to the Mediterranean - will add to the increase in oil delivered on short-
haul routes in 1997.
VLCCs have been adversely affected by the trend toward shorter hauls as
shipments from the Middle East to the West have declined and been replaced
by increased shipments from the Middle East to the Far East. Due to the
shorter distances involved, significantly less tonnage is required to move
the same quantities of oil to the Far East. Seeking additional trading
opportunities, VLCCs have continued to gain market share in non-traditional
loading areas such as the North Sea and West Africa.
The trend toward shorter hauls has particularly benefited Aframax tankers
(80,000 to 120,000 dwt). On shorter voyages, the economies of scale of
larger vessels are less important, and Aframax tankers provide substantial
flexibility, including access to a wide range of ports and terminals.
INTERNATIONAL PRODUCT TRADES GROW IN 1996
Global trade in refined products rose about 4% in 1996. Colder-than-normal
weather in the first quarter resulted in greater demand for gas oil from
the major oil-importing nations of the Northern Hemisphere.
However, growth in ton-mile demand for product tankers was dampened by
increased refinery output in the Far East, which displaced long-haul
product movements from the Middle East. Further expansion of Far Eastern
refineries will continue to limit long-haul product movements over the next
few years, although product trade within the region is likely to grow.
MODERATE EXPANSION IN WORLD TANKER FLEET
While newbuilding deliveries were moderate, the world tanker fleet expanded
by about 3 million dwt to 265 million dwt at year-end 1996, as higher
tanker rates limited sales for scrap to 7 million dwt versus 11 million dwt
in the prior year. Although higher freight rates also led to increased
ordering late last year, at year-end the orderbook for delivery over the
next three years stood at 19 million dwt, its lowest level in eight years.
Of this total, only 8 million dwt are scheduled for delivery in 1997.
REGULATORY ENVIRONMENT
Since 1990, bulk shipping companies have been operating in an increasingly
stringent regulatory environment. Safety and pollution concerns have led to
a strengthening of inspection programs by governmental authorities,
charterers and classification societies. Moreover, there has been a growing
reluctance among charterers to accept older tonnage due to safety and
pollution concerns.
Through its continuing fleet renewal program, OSG has responded to the
increased worldwide concern for the environment by replacing its single-
hulled tankers with modern double-hulled vessels. OSG enjoys an outstanding
reputation within the tanker industry for its commitment to the quality and
safety of its operations.
THE U.S. OIL POLLUTION ACT OF 1990 (OPA 90) and the MARPOL Regulation 13G
of the International Maritime Organization (IMO) continue to accelerate the
scrapping of older tonnage. Between 1995 and 2015, OPA 90 phases in a
requirement that all tankers entering U.S. waters have double hulls. OPA 90
also significantly expands the potential liability of tanker owners for
environmental accidents in U.S. waters.
In worldwide trade, IMO's regulations require double hulls or equivalent
tanker designs for newbuildings ordered after 1993 and mandate double hulls
for existing tankers by their 30th anniversary. These regulations also
require that, upon reaching 25 years of age, existing tankers either have
protective wing tanks or double bottom spaces not used for cargo carriage
covering at least 30% of the cargo tank area or, alternatively, that they
employ hydrostatic balanced loading. Some of these measures may be costly,
and all reduce the carrying capacity of a vessel.
Since OSG maintains a modern fleet, regulations mandating double hulls and
other protective loading measures do not apply to most of the Company's
existing tanker fleet until after the year 2000, at which time the affected
ships will have operated for substantially all of their economic lives.
INTERNATIONAL DRY BULK MARKETS
- ------------------------------
In 1996, the international dry bulk market experienced exceptional weakness
throughout most of the year as the fleet continued to expand while seaborne
shipments of the major dry bulk commodities - iron ore, coal and grain -
stagnated.
The decline in rates for Capesize vessels (greater than 100,000 dwt) began
in 1995 when steel production started to slacken in Europe and Japan, which
precipitated declines in world iron ore and coking coal trades for most of
1996. Panamax (50,000 to 80,000 dwt) rates dropped sharply in 1996 as
record grain prices curtailed purchases. Despite a pickup in seaborne grain
trade in the fourth quarter as the new crop came to market, total 1996
demand fell short of the preceding year.
In contrast to the other dry bulk commodities, seaborne trade in steam coal
increased in 1996, although at a slower rate than in the prior year. Trade
in steam coal continued to benefit from the expansion of coal-fired
capacity for electric power generation in the Far East.
FLEET EXPANSION CONTINUES
The international dry bulk fleet rose by 5% in 1996 to a record 254 million
dwt, its ninth consecutive annual increase. Newbuilding deliveries totaled
17 million dwt and the outlook is for continued growth in the size of the
fleet. In the Capesize sector, 6 million dwt are scheduled for delivery
during the first half of 1997.
Despite unsatisfactory rates, shipowners continued to order a significant
amount of new tonnage, particularly Panamax size vessels, in anticipation
of growth in Asian steam coal trade. At year-end, the newbuilding orderbook
for delivery over the next three years stood at 29 million dwt, with
approximately 20 million dwt scheduled for delivery in 1997. While
substantially below newbuilding deliveries, scrap sales of 8 million dwt
were more than three times the level of the prior year, encouraged by the
considerable downturn in freight rates since May 1995. Increased scrapping
of older vessels, particularly in the Capesize segment, is also likely to
follow from the implementation of new measures by the major classification
societies. As a result of some significant bulk carrier losses in the late
1980s and early 1990s, the classification societies are already requiring
enhanced surveys for older vessels. Further requirements, including
structural reinforcement of certain bulkheads, are being studied.
U.S. MARKETS
- ------------
Under the Jones Act, shipping between U.S. coastal ports, including the
movement of Alaskan oil, is reserved primarily to U.S. flag vessels, owned
by U.S. citizens, crewed by U.S. seafarers, built in the United States and
operated without operating differential subsidies. U.S. flag vessels also
receive preference in carrying U.S. military and government-sponsored
shipments (preference trades) around the world. With eight crude carriers
and four product tankers, OSG is the largest independent owner of
unsubsidized U.S. flag tankers. The Company also has two dry bulk carriers
that participate in the preference trades and one car carrier, which is
employed transporting vehicles from and to Japan.
U.S. FLAG CRUDE CARRIERS
Shipments of Alaskan North Slope (ANS) crude oil from Valdez are the main
source of employment for U.S. flag crude carriers, including the eight
owned by OSG. After peaking in 1988, Alaskan production has decreased and
shipments have fallen. In 1996, ANS crude shipments continued to decline as
production fell 5% to 1.5 million barrels per day (b/d). Over the next
decade, enhanced recovery techniques and additional exploration are
expected to slow the rate at which production declines and even reverse the
decline temporarily.
Following the implementation of legislation lifting the long-standing ban
on exports of ANS crude oil last May, six of the Company's eight U.S. flag
crude carriers began long-term charters to British Petroleum (BP). These
charters have to a large extent eliminated the Company's exposure to the
volatility of the U.S. flag crude shipping markets and increased employment
of its fleet. In comparison, during 1995, six vessels were unemployed for a
substantial part of the year. Since May, an average of 50,000 b/d of ANS
crude oil has been exported to Far Eastern buyers.
U.S. FLAG PRODUCT TANKERS
U.S. flag product tankers, ranging in size up to 50,000 dwt, carry
gasoline, diesel fuel, jet fuel and other refined petroleum products. The
fleet is made up of approximately 57 ships totaling 2 million dwt. These
ships compete with pipelines and oceangoing barges and are affected by the
level of imports on foreign flag product carriers. OSG has four ships that
participate in the U.S. flag product market.
Product movements from the Gulf of Mexico to the East Coast are an
important trade for U.S. flag product tankers. In early 1996, such
movements rose above those of the comparable period in 1995, boosted in
part by colder weather that resulted in greater demand for heating oil. The
increased demand combined with a slightly reduced fleet size resulted in a
small rise in freight rates in 1996.
Primary Data Sources: Fearnleys Review 1996, Clarkson Research Studies,
International Energy Agency, Maritime Administration, State of Alaska and
U.S. Department of Energy
<PAGE>
[From pages 12 and 14 of the 1996 Annual Report]
CELEBRITY CRUISE LINES INC.
- ---------------------------
Celebrity Cruise Lines Inc., OSG's joint venture in the cruise industry, is
a leading provider of premium cruises in the North American cruise market.
The five-star Celebrity fleet currently totals 7,450 berths and consists of
five ships - Galaxy, Century, Zenith, Horizon and Meridian.
EXPANSION OF THE CELEBRITY FLEET
While 1996 was marked by significant competitive pressures, it was also a
year of growth and progress for Celebrity Cruises as the company took
delivery of the 1,870-passenger, state-of-the-art cruise vessel Galaxy.
Galaxy and its sisterships, Century, delivered in late 1995, and Mercury,
to be delivered later this year, represent a major expansion of the
Celebrity fleet. Like Century, Galaxy offers spacious and dramatic public
areas, sophisticated technology developed by the Sony Corporation, and
comprehensive spa and fitness facilities. Galaxy also features an indoor
pool with sliding Magrodome sun roof and a unique glass-enclosed
observation lounge, both designed to appeal to the Alaskan cruise market.
Century and Galaxy have been able to achieve attractive yields and
occupancy levels on highly competitive Eastern and Western Caribbean
itineraries.
The three new Celebrity ships will more than double the size of the
company's fleet. More importantly, the larger fleet will enable Celebrity
to achieve significant additional economies of scale in both operations and
marketing, and to gain much wider brand recognition among the public at
large. With the delivery of all three newbuildings, the Celebrity fleet
will be among the most modern in the industry.
A YEAR OF PROGRESS AT CELEBRITY
Along with the expansion of the fleet, Celebrity has taken a number of
important steps to strengthen its operations and improve its financial
results. Celebrity has:
- - initiated a series of television advertising campaigns to expand consumer
awareness;
- - built upon its alliance with Sony Corporation to showcase the new vessels
through movie premieres and the filming of a popular television program;
- - provided larger retail areas and implemented other measures on the new
Century-class vessels to increase onboard revenues;
- - taken over direct management of its onboard casino operations to enhance
revenues;
- - developed sophisticated new reservations and yield management systems.
NEW MARKETS THROUGH EXPANDED ITINERARIES
The expansion of the fleet provides Celebrity with the flexibility to offer
both longer cruises and a broader array of destinations. While maintaining
its strong position in the Caribbean and its 40% share of the lucrative
Bermuda market, Celebrity has established a major presence in the Alaskan
market. Alaska is an increasingly popular cruise destination that had a
record number of passengers in 1996. This summer, Celebrity will have over
3,000 berths in this market as Galaxy joins Horizon in offering Alaskan
itineraries. In spring 1998, a Celebrity ship will debut in Europe, another
growing cruise market. Itineraries such as Bermuda, Alaska and Europe have
typically provided higher per diems than the Caribbean. With the delivery
of Mercury, the Celebrity fleet will offer 45 itineraries that include more
than 100 ports of call around the world.
NORTH AMERICAN CRUISE MARKET
Celebrity operates its vessels primarily in the North American cruise
market, which accounts for approximately 80% of total cruise passengers
carried worldwide and is characterized by a small number of large and
generally well-capitalized companies. According to the Cruise Lines
International Association (CLIA), the six largest companies, including
Celebrity, have more than 70% of total capacity.
DEMAND IMPROVES IN THE INDUSTRY
Following modest declines of approximately 1% in 1994 and 2% in 1995, the
total number of cruise passengers in 1996 rose to an estimated 4.7 million
according to CLIA, a 6% increase over the prior year. Preliminary
indications for 1997 are that the growth in demand is continuing, as
increased levels of bookings have been reported by a number of cruise
lines. But despite stronger demand, the industry faced significant
discounting throughout 1996, particularly in the Caribbean, as substantial
new capacity entered the market.
Several factors point toward continuing growth in demand over the next few
years:
- - The introduction of exciting new ships with associated marketing
campaigns will attract wider interest in cruising.
- - Cruising today represents only a small percentage of the total vacation
market.
- - Strong growth is projected in the age segment of the population most
likely to cruise.
SUPPLY OUTLOOK
In the past few years, the largest cruise lines have sought to strengthen
their positions by ordering larger and more sophisticated ships. As a
result, over the next four years, approximately 20 large new cruise ships
are scheduled for delivery, most into the North American cruise market.
These ships will increase current capacity by approximately 40,000 berths
by the year 2000, before taking into account any deletions from the fleet.
While this increase is substantial, historically growth in demand has
outpaced growth in capacity. Significantly for Celebrity, with its modern
fleet, cruisers have tended to prefer the newest cruise vessels, which
offer more dramatic design elements and state-of-the-art amenities.
The growth in world cruise capacity will be mitigated somewhat by the
application of the International Maritime Organization's Safety of Life at
Sea (SOLAS) convention, which establishes minimum standards for safety,
fire prevention and fire protection. It is likely that a number of older
vessels will leave the cruise trade as their owners decide not to incur the
significant capital expenditures needed to bring them into compliance with
these requirements. Because of the young age of its fleet, the work
necessary for its ships to meet 1997 SOLAS regulations will not require
Celebrity to make material capital expenditures.
LOOKING AHEAD
Celebrity believes that the key to ongoing, successful expansion rests with
an ability to continue providing high levels of service and maintaining
product quality. With its innovative newbuildings, exceptional service,
spacious accommodations and award-winning cuisine, Celebrity's position in
the premium segment of the cruise market is expected to strengthen in the
coming years.
<PAGE>
[From Page 17 of the 1996 Annual Report]
<TABLE>
CELEBRITY CRUISE LINES INC.
- ---------------------------
<CAPTION>
Gross
Year Registered
Name of Ship Built/Rebuilt Berths Tonnage
- ---------------------------------------------------------------------
<C> <C> <C> <C>
GALAXY 1996 1,870 77,700
CENTURY 1995 1,750 70,600
ZENITH 1992 1,374 47,250
HORIZON 1990 1,354 46,800
MERIDIAN (e) 1990 1,106 30,450
- ---------------------------------------------------------------------
Operating Cruise
Fleet Total 5 ships 7,454 berths
=====================================================================
</TABLE>
<TABLE>
ON ORDER CRUISE FLEET
- ---------------------
<CAPTION>
Gross
Delivery Registered
Name of Ship Date Berths Tonnage
<S> <C> <C> <C>
- ---------------------------------------------------------------------
MERCURY October 1997 1,870 77,700
- ---------------------------------------------------------------------
Celebrity Cruise
Fleet Total 6 ships 9,324 berths
=====================================================================
<FN>
(e) Ship is under contract of sale for delivery in October 1997.
</TABLE>
<PAGE>
[From pages 18 through 20 of the 1996 Annual Report]
MANAGEMENT'S DISCUSSION AND ANALYSIS
Overseas Shipholding Group, Inc. and Subsidiaries
OPERATIONS
INCOME FROM VESSEL OPERATIONS
Revenues and results of 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.
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.
In 1996, rates in the international tanker markets, on average, were higher
than rates prevailing in the preceding year, particularly for VLCCs (over
200,000 dwt). In early 1997, rates for VLCCs and Suezmaxes (120,000 to
160,000 dwt) remained at about the levels prevailing during late 1996.
Rates for Aframaxes (80,000 to 120,000 dwt) declined significantly early in
the first quarter of 1997 in the Caribbean market (the Company's primary
Aframax trading area), but began to recover in the latter part of February.
Product tanker rates showed some seasonal strength in early 1997 before
trending downward as the first quarter progressed. Dry bulk rates declined
significantly during 1996 and have remained at low levels in early 1997.
During 1996, six of OSG's U.S. flag tankers began long-term employment to
British Petroleum in the Alaska trade, as a result of which employment for
the Company's U.S. flag fleet substantially increased compared with 1995
when six vessels were unemployed for substantial periods.
The Company has an Aframax tanker pool with PDV Marina D the marine
transportation subsidiary of the Venezuelan state oil company D that
includes a total of 20 vessels (ten OSG vessels). To date, pool operations
have resulted in enhanced opportunities for backhaul cargoes and reduced
idle time, thereby improving the earnings of pool vessels.
As one indication of recent rate trends in various charter markets, set
forth below are selected average daily spot market rates for various types
and sizes of vessels in 1996 and 1995, based on the published report of one
well-known industry research organization. It is important to note that
rates tend to fluctuate significantly over the course of a year, and can
vary widely at any point in time based on factors such as the age,
condition and position of a particular vessel. Accordingly, the rates shown
are not necessarily indicative of rates actually achieved by the Company's
vessels during either year.
TANKERS 1996 1995
- ------------------------------------------------------
Modern VLCCs $27,200 $22,600
Suezmaxes (W. Africa D U.S.) 19,600 17,400
Aframaxes (Caribbean market) 17,800 16,700
Products carriers 12,900 12,700
DRY BULK CARRIERS
Capesize (over 100,000 dwt) 11,800 20,400
Panamaxes (50-80,000 dwt) 7,900 13,900
The Company's income from vessel operations for 1996 increased by
approximately $16,200,000 from the results for 1995. Operations of the U.S.
flag fleet improved by approximately $29,600,000 in 1996 from 1995,
primarily as a result of substantially increased employment of the
Company's U.S. flag tankers in 1996, as discussed above. Operating days for
the U.S. flag tanker fleet increased to approximately 4,000 in 1996 from
approximately 3,000 in 1995. This reflects a reduction of 130 days in time
off-hire for U.S. flag tanker fleet drydockings. Income from foreign flag
vessel operations declined $13,400,000 in 1996 from 1995, primarily as a
result of the substantial decline in rates earned by the Company's dry
cargo fleet. A decline in rates earned by certain tanker tonnage in late
1996 compared with 1995 also negatively impacted the international flag
results. These 1996 decreases were net of the positive effect on 1996
vessel operating results of two VLCCs delivered in early 1996. In addition,
foreign flag results for 1996 reflect the positive effect on operations of
the inclusion for the entire year of two modern Aframaxes purchased near
the end of the first quarter of 1995 and the effect of vessels sold in 1996
and 1995. The total number of operating days for the international flag
fleet were approximately the same in both years. 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. Revenues and expenses reflect
the higher proportion of voyage charters to time charters in the U.S. flag
fleet in 1996 as compared with 1995. The Company's share ($1,200,000) of a
provision for loss on sale of a 50%-owned vessel subsequent to year-end is
reflected in the 1996 results of bulk shipping joint ventures.
Income from vessel operations for 1995 increased by approximately
$10,100,000 from the results for 1994. This increase was attributable to
improved income of approximately $26,400,000 from foreign flag vessel
operations, reflecting the favorable impact of four newly built Aframax
vessels delivered during 1994 and two modern Aframaxes purchased in 1995
and improved rates earned by certain crude carriers and petroleum products
carriers in 1995 compared with 1994. Dry bulk vessels also obtained higher
rates in 1995 compared with 1994. Results from vessel operations of the
U.S. flag fleet declined approximately $16,300,000 in 1995 from 1994. As
previously mentioned, six of the Company's U.S. flag crude carriers were
without employment for substantial portions of 1995. This was partially
offset by improved results for certain U.S. flag products carriers. The
effect on revenues and expenses of a higher proportion of voyage charters
to time charters in both the U.S. flag and the international fleets in 1995
compared with 1994 is also reflected.
EQUITY IN RESULTS OF CELEBRITY CRUISE LINES INC. ("CCLI")
The Company's share of CCLI's results was approximately a breakeven in
1996, a loss of $1,208,000 in 1995 and income of $797,000 in 1994,
respectively. The 1996 results reflect the additions to CCLI's fleet in
November 1995 and December 1996 of Century, a 1,750-passenger vessel, and
Galaxy, a 1,870-passenger vessel, respectively. CCLI's results in 1996
reflect higher per diems achieved compared with 1995 by vessels traveling
to Bermuda and on new Alaskan itineraries. CCLI's overall 1996 results
reflect pricing pressures, particularly in the Caribbean market, which have
continued in early 1997. These conditions also prevailed during 1995 and
contributed significantly to the decline in results in 1995 compared with
1994. The 1994 results reflect the 11-day withdrawal of a vessel from
service during the third quarter of 1994, normally CCLI's most profitable
quarter of the year. The Company's equity in the results of CCLI is before
interest expense (pretax) of approximately $15,800,000 (1996), $16,900,000
(1995) and $12,800,000 (1994) estimated to have been incurred in connection
with the funding of its investment in CCLI.
OTHER INCOME (NET)
The details of other income for the three-year period are shown in Note K
on page 30 of this report. Aggregate interest and dividends decreased in
1996 as compared with 1995 because of lower rates of return on interest-
bearing deposits and investments and decreased amounts utilized for such
deposits and investments. Aggregate interest and dividends increased in
1995 compared with 1994 because of higher rates of return on interest-
bearing deposits and investments and increased amounts utilized for such
deposits and investments. The 1995 increase was net of a decrease in
dividend income resulting from a change in the Company's investment
portfolio mix from equity securities to interest-bearing deposits. Gain on
sale of securities was approximately $20,100,000 in 1996 compared with
approximately $11,100,000 in 1995 and $8,000,000 in 1994. The 1996 results
reflect losses on other investments of approximately $11,200,000 in 1996
(including a provision for loss of $6,500,000 in the fourth quarter)
compared with a loss of $2,600,000 in 1995. Other income also reflects the
results of foreign currency transactions and minority interest in all three
years.
Disposal of vessels resulted in gains of approximately $7,000,000 in 1996,
$2,700,000 in 1995 (net of a provision of $3,000,000 for loss on a vessel
disposed of subsequent to year-end) and $6,800,000 in 1994.
INTEREST EXPENSE
Interest expense increased in 1996 from 1995 as a result of decreased
amounts of interest capitalized in 1996 in connection with vessel
construction and an increase in the average amount of debt outstanding in
1996 compared with 1995 (including debt incurred in connection with vessels
entering the operating fleet). The increase is net of decreased rates on
floating rate debt in 1996. Interest expense increased in 1995 from 1994 as
a result of an increase in the average amount of debt outstanding and
increased rates on floating rate debt, including debt incurred in
connection with vessels entering the operating fleet. The 1995 increase is
net of increased amounts of interest capitalized in connection with vessel
construction. Interest expense in 1996, 1995 and 1994 reflects $7,000,000,
$5,300,000 and $6,500,000, respectively, of net benefits from the interest
rate swaps referred to below in Liquidity and Sources of Capital.
PROVISION FOR FEDERAL INCOME TAXES
The income tax provision of $885,000 in 1996 and the tax credits of
$5,260,000 and $3,750,000 in 1995 and 1994, respectively, were based on
pretax income or loss, adjusted to reflect items that are not subject to
tax and the dividends received deduction.
Liquidity and Sources of Capital
Working capital at December 31, 1996 was approximately $102,000,000
compared with $152,000,000 at year-end 1995 and $90,000,000 at year-end
1994. Current assets are highly liquid, consisting principally of cash,
interest-bearing deposits and receivables. The Company also has investments
in marketable securities carried as noncurrent assets, other than
securities included in restricted funds, with a market value of
approximately $15,000,000 at December 31, 1996. Net cash provided by
operating activities approximated $50,000,000 in 1996, $27,000,000 in 1995
and $10,000,000 in 1994. 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 1997.
The Company has an unsecured long-term credit facility of $500,000,000, of
which $366,000,000 was used at December 31, 1996, and an unsecured short-
term credit facility of $30,000,000, of which $18,000,000 was used at that
date. The latter amount has been classified as long-term since it is
expected to be refinanced under the long-term credit facility. In August
1996, the Company arranged a short-term $250,000,000 special purpose
revolving credit facility that is to be used only in connection with the
Company's obligation to provide Certificates of Financial Responsibility
under regulations related to the Oil Pollution Act of 1990. There were no
amounts outstanding as of December 31, 1996 under this facility. The
Company finances vessel additions primarily with cash provided by operating
activities, long-term borrowings and capital lease obligations. Long-term
borrowings in 1996, 1995 and 1994 aggregated approximately $76,000,000,
$217,000,000 and $60,000,000, respectively.
The Company has used interest rate swaps to effectively convert a portion
of its debt either from a fixed to floating rate basis or from floating to
fixed rate, reflecting management's interest rate outlook at various times.
As of December 31, 1996, the Company is a party to fixed to floating
interest rate swaps (designated as hedges against certain debt) with
various major financial institutions covering notional amounts aggregating
$600,000,000, pursuant to which it pays LIBOR (5.6% as of December 31,
1996) and receives fixed rates ranging from 5.8% to 8.1% calculated on the
notional amounts. The Company is also a party to floating to fixed interest
rate swaps (designated as hedges against certain debt) with various major
financial institutions covering notional amounts aggregating approximately
$59,000,000, pursuant to which it pays fixed rates ranging from 6.9% to
7.1% and receives LIBOR. These agreements contain no leverage features and
have various maturity dates from 1998 to 2008. The Company uses derivative
financial instruments for trading purposes from time to time. The Company
has hedged its exchange rate risk with respect to contracted future charter
revenues receivable in Japanese yen to minimize the effect of foreign
exchange rate fluctuations on reported income by entering into currency
swaps with a major financial institution to deliver such foreign currency
at fixed rates that will result in the Company receiving approximately
$117,000,000 for such foreign currency from 1997 through 2004.
In 1996, 1995 and 1994, cash used for vessel additions approximated
$151,000,000, $196,000,000 and $146,000,000, respectively. At February 19,
1997, the Company has a commitment with an aggregate unpaid cost of
approximately $42,000,000 (which reflects $13,000,000 of progress payments
made in February 1997) for the construction of one foreign flag bulk vessel
scheduled for delivery in March 1997. In addition, two foreign flag bulk
vessels were delivered in January 1997. These vessels had an aggregate
unpaid cost as of December 31, 1996 of approximately $48,000,000, which was
financed by long-term borrowings.
EFFECTS OF INFLATION AND ENVIRONMENTAL MATTERS
Additions to the costs of operating the fleet due to wage increases and
price level increases in certain other expense categories were experienced
over the three-year period. In some cases, these increases were offset by
rates available to tonnage open for chartering and to some extent by
charter escalation provisions.
See "Regulatory Environment" on page 7 hereof for a discussion regarding
OPA 90 and certain regulations of the IMO.
<PAGE>
[From pages 21 through 33 of the 1996 Annual Report]
<TABLE>
CONSOLIDATED STATEMENTS OF OPERATIONS AND RETAINED EARNINGS
Overseas Shipholding Group, Inc. and Subsidiaries
<CAPTION>
In thousands, except per share amounts, for the year ended December 31,
1996 1995 1994
- ------------------------------------------------------------------------
<S> <C> <C> <C>
SHIPPING REVENUES:
Revenues from voyages D Note B $452,263 $407,834 $358,537
Income attributable to bulk shipping
joint ventures D Note E 3,605 6,083 5,599
- ------------------------------------------------------------------------
455,868 413,917 364,136
- ------------------------------------------------------------------------
SHIPPING EXPENSES:
Vessel and voyage D Note H 297,209 272,778 243,684
Depreciation of vessels and
amortization of capital leases 71,003 66,134 59,992
Agency fees D Note H 32,552 34,105 30,302
General and administrative 8,488 10,515 9,825
- ------------------------------------------------------------------------
409,252 383,532 343,803
- ------------------------------------------------------------------------
Income from Vessel Operations 46,616 30,385 20,333
Equity in Results of Celebrity
Cruise Lines Inc. D Note D 21 (1,208) 797
Other Income (Net) D Note K 26,208 23,371 25,908
- ------------------------------------------------------------------------
72,845 52,548 47,038
Interest Expense 69,458 66,440 56,988
- ------------------------------------------------------------------------
Income/(Loss) before Federal
Income Taxes 3,387 (13,892) (9,950)
Provision/(Credit) for Federal
Income Taxes D Note J 885 (5,260) (3,750)
- ------------------------------------------------------------------------
Net Income/(Loss) 2,502 (8,632) (6,200)
Retained Earnings at Beginning of Year 707,220 737,583 764,987
- ------------------------------------------------------------------------
709,722 728,951 758,787
Cash Dividends Declared and Paid 21,741 21,731 21,204
- ------------------------------------------------------------------------
Retained Earnings at End of Year $687,981 $707,220 $737,583
========================================================================
Per Share Amounts D Note N:
Net income/(loss) $ .07 $ (.24) $ (.17)
Cash dividends declared and paid $ .60 $ .60 $ .60
========================================================================
<FN>
See notes to financial statements.
</TABLE>
<TABLE>
CONSOLIDATED BALANCE SHEETS
Overseas Shipholding Group, Inc. and Subsidiaries
<CAPTION>
Dollars in thousands at December 31, 1996 1995
- ----------------------------------------------------------------------------
<S> <C> <C>
ASSETS
CURRENT ASSETS:
Cash, including interest-bearing deposits
of $103,338 and $155,864EE EEE $E 109,120 $160,578
Receivables:
Voyages 15,257 18,158
Other 15,940 13,379
Prepaid expenses 28,227 31,218
- ----------------------------------------------------------------------------
Total Current Assets 168,544 223,333
Investments in Marketable Securities D Note F 15,337 18,482
Capital Construction and Restricted Funds D
Notes F, J and M1 145,350 124,258
Vessels, at cost, less accumulated depreciation
of $555,846 and $551,752 D Notes G, L1 and M1 1,214,401 1,173,029
Vessels Under Capital Leases, less accumulated
amortization of $104,963 and $150,906 D Note M1 79,416 108,572
Investment in Celebrity Cruise Lines Inc. D Note D 239,255 234,334
Investments in Bulk Shipping Joint Ventures D
Note E 91,399 87,794
Other Assets 83,599 95,024
- ----------------------------------------------------------------------------
$2,037,301 $2,064,826
============================================================================
<CAPTION>
Dollars in thousands at December 31, 1996 1995
- ----------------------------------------------------------------------------
<S> <C> <C>
LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES:
Accounts payable $ 4,878 $ 5,047
Sundry liabilities and accrued expenses D Note L2 28,073 31,706
Federal income taxes, including deferred income
taxes of $7,100 and $8,000 D Note J 7,300 8,000
- ----------------------------------------------------------------------------
40,251 44,753
Current installments of long-term debt D Note G 18,723 15,943
Current obligations under capital leases D Note M1 7,236 10,630
- ----------------------------------------------------------------------------
Total Current Liabilities 66,210 71,326
Advance Time Charter Revenues 7,694 8,081
Long-term Debt D Notes G and M1 985,032 951,638
Obligations Under Capital Leases D Note M1 108,443 150,120
Minority Interest D Note L4 1,457 1,813
Deferred Federal Income Taxes ($94,803 and
$93,218) and Deferred Credits D Note J 99,027 97,067
SHAREHOLDERS' EQUITY - NOTES F, G, J AND N:
Common Stock, par value $1 per share:
Authorized D 60,000,000 shares
Issued D 39,590,759 shares 39,591 39,591
Paid-in Additional Capital 93,725 93,687
Retained Earnings 687,981 707,220
- ----------------------------------------------------------------------------
821,297 840,498
LessDcost of Treasury Stock D 3,355,390 and
3,363,243 shares 49,210 49,297
- ----------------------------------------------------------------------------
772,087 791,201
LessDnet unrealized loss on marketable securities 2,649 6,420
- ----------------------------------------------------------------------------
Total Shareholders' Equity 769,438 784,781
Commitments, Leases and Other Comments D
Notes L and M
- ----------------------------------------------------------------------------
$2,037,301 $2,064,826
============================================================================
<FN>
See notes to financial statements.
</TABLE>
<TABLE>
CONSOLIDATED STATEMENTS OF CASH FLOWS
Overseas Shipholding Group, Inc. and Subsidiaries
<CAPTION>
In thousands for the year ended
December 31, 1996 1995 1994
- --------------------------------------------------------------------------
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income/(loss) $ 2,502 $ (8,632) $ (6,200)
Items included in net income/(loss)
not affecting cash flows:
Depreciation and amortization 71,003 66,134 59,992
Provision/(credit) for deferred federal
income taxes 685 (5,260) 1,909
Equity in results of Celebrity Cruise
Lines Inc. (21) 1,208 (797)
Equity in net income of bulk shipping
joint ventures (3,605) (6,416) (6,360)
Other D net 6,528 917 (6,243)
Items included in net income/(loss)
related to investing activities:
(Gain) on sale of securities D net (20,066) (11,130) (7,986)
(Gain) on disposal of vessels (6,983) (5,700) (6,815)
Changes in operating assets and
liabilities:
Decrease/(increase) in receivables (272) 813 (12,147)
Net change in prepaid items, accounts
payable and sundry liabilities and
accrued expenses 796 (8,175) (2,596)
Increase/(decrease) in advance time
charter revenues (387) 3,253 (2,894)
- ---------------------------------------------------------------------------
Net cash provided by operating
activities 50,180 27,012 9,863
- ---------------------------------------------------------------------------
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchases of marketable securities (4,672) (13,456) (34,811)
Proceeds from sales of marketable
securities 11,600 34,344 21,022
Purchase of vessels under capital
leases (20,213)* - -
Additions to vessels (130,953) (196,127) (146,133)
Proceeds from disposal of vessels 59,426 33,786 40,780
Investment in Celebrity Cruise
Lines Inc. (4,900) (4,900) D
Purchases of other investments (7,083) (3,640) (667)
Proceeds from dispositions of
other investments 6,744 15,933 4,406
Other D net 119 (2,003) 1,078
- ---------------------------------------------------------------------------
Net cash (used in) investing
activities (89,932) (136,063) (114,325)
- ---------------------------------------------------------------------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Issuance of common stock - - 76,004
Withdrawals from restricted funds 2,535 - -
Issuance of long-term debt 75,754 217,000 60,000
Payments on long-term debt and
obligations under capital leases (68,419) (26,140) (22,442)
Cash dividends paid (21,741) (21,731) (21,204)
Other D net 165 466 1,971
- ---------------------------------------------------------------------------
Net cash provided by/(used in)
financing activities (11,706) 169,595 94,329
- ---------------------------------------------------------------------------
Net increase/(decrease) in cash (51,458) 60,544 (10,133)
Cash, including interest-bearing
deposits, at beginning of year 160,578 100,034 110,167
- ---------------------------------------------------------------------------
Cash, including interest-bearing
deposits, at end of year $ 109,120 $ 160,578 $ 100,034
===========================================================================
<FN>
* Excludes $20,090, representing the outstanding principal balance of debt
assumed in connection with the purchase of vessels under capital leases.
See notes to financial statements.
</TABLE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Overseas Shipholding Group, Inc. and Subsidiaries
NOTE A - SUMMARY OF SIGNIFICANT
ACCOUNTING POLICIES:
1. The consolidated financial statements include the accounts of the
Company and its subsidiaries ("Company" or "OSG"). All subsidiaries are
wholly owned, except four which are 80%-owned (see Note L4). Significant
intercompany items and transactions have been eliminated in consolidation.
Investments in Celebrity Cruise Lines Inc. (see Note D) and the bulk
shipping joint ventures (which are 50%-owned except one small venture which
is 49%-owned) are stated at the Company's cost thereof adjusted for its
proportionate share of the undistributed operating results of such
companies.
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the amounts reported in the financial statements
and accompanying notes. Actual results could differ from those estimates.
2. As required by Statement of Financial Accounting Standards No. 95,
"Statement of Cash Flows," only interest-bearing deposits that are highly
liquid investments and have a maturity of three months or less when
purchased are included in cash.
3. Depreciation of vessels is computed for financial reporting purposes
based on cost, less estimated salvage value, by the straight-line method
primarily using a vessel life of 25 years.
4. Certain subsidiaries have bareboat charters-in on vessels that are
accounted for as capital leases. Amortization of capital leases is computed
by the straight-line method over 22 or 25 years, representing the terms of
the leases (see Note M1).
5. Time charters and a bareboat charter that are operating leases are
reported on the accrual basis. Voyage charters are reported on the
completed voyage basis.
6. Interest costs incurred during the construction of vessels (until the
vessel is substantially complete and ready for its intended use) are
capitalized. Interest capitalized aggregated $9,378,000 (1996), $14,811,000
(1995) and $14,157,000 (1994). Interest paid amounted to $70,971,000
(1996), $67,877,000 (1995) and $53,182,000 (1994), excluding capitalized
interest.
7. The Company's investments in marketable securities are classified as
available-for-sale and are carried at market value. Net unrealized gains or
losses are reported as a separate component of shareholders' equity.
8. Amounts receivable or payable under interest rate swaps (designated as
hedges against certain existing debt and capital lease obligations - see
Note G) are accrued and reflected as adjustments of interest expense. Such
receivables or payables are included in other receivables or sundry
liabilities and accrued expenses, respectively. Any gain or loss realized
upon the early termination of an interest rate swap is recognized as an
adjustment of interest expense over the remaining term of the hedged debt.
Changes in the value of currency swaps (designated as hedges against
contracted future charter revenues receivable in a foreign currency) are
deferred and are offset against corresponding changes in the value of the
charter hire, over the related charter periods (see Note M2). Any gain or
loss realized upon the termination of foreign currency swaps would be
recognized as an adjustment of voyage revenues over the remaining term of
the related charter.
The Company uses derivative financial instruments for trading purposes from
time to time. Realized and unrealized changes in fair values are recognized
in income in the period in which the changes occur (see foreign currency
exchange gains/(losses) in the table in Note K).
NOTE B - BUSINESS - DOMESTIC AND
FOREIGN OPERATIONS:
The Company is principally engaged in the ocean transportation of liquid
and dry bulk cargoes in both the worldwide markets and the self-contained
U.S. markets through the ownership and operation of a diversified fleet of
bulk cargo vessels (principally tankers and dry bulk carriers). The
Company's subsidiaries charter their vessels to commercial shippers and
U.S. and foreign governmental agencies primarily on time and voyage
charters and occasionally on bareboat charters (see Note M2). The Company
also owns an equity investment in Celebrity Cruise Lines Inc. (see Note D),
an owner and operator of cruise ships.
<TABLE>
Information about the Company's operations for the three years ended
December 31, 1996 follows:
<CAPTION>
In thousands Consolidated U.S. Flag Foreign Flag*
- -----------------------------------------------------------------------------
<S> <C> <C> <C>
1996
Shipping Revenues $ 455,868 $160,921 $ 294,947
- -----------------------------------------------------------------------------
Net Income/(Loss) $ 2,502 $(22,438) $ 24,940
- -----------------------------------------------------------------------------
Identifiable Assets at
December 31, 1996 $2,037,301 $525,641 $1,511,660
- -----------------------------------------------------------------------------
1995
Shipping Revenues $ 413,917 $113,778 $ 300,139
- -----------------------------------------------------------------------------
Net Income/(Loss) $ (8,632) $(42,562) $ 33,930
- -----------------------------------------------------------------------------
Identifiable Assets at
December 31, 1995 $2,064,826 $547,011 $1,517,815
- -----------------------------------------------------------------------------
1994
Shipping Revenues $ 364,136 $130,832 $ 233,304
- -----------------------------------------------------------------------------
Net Income/(Loss) $ (6,200) $(30,505) $ 24,305
- -----------------------------------------------------------------------------
Identifiable Assets at
December 31, 1994 $1,905,409 $538,596 $1,366,813
- -----------------------------------------------------------------------------
<FN>
*Principally Marshall Islands as of December 31, 1996.
</TABLE>
See Note J for information relating to taxation of income and undistributed
earnings of foreign companies.
The Company had one charterer (a U.S. oil company) during the above periods
from which revenues exceeded 10% of revenues from voyages. Revenues from
such charterer amounted to $98,321,000 in 1996, $49,541,000 in 1995 and
$63,668,000 in 1994.
NOTE C - ASSETS AND LIABILITIES OF FOREIGN SUBSIDIARIES:
<TABLE>
A condensed summary of the combined assets and liabilities of the Company's
foreign (incorporated outside the United States) subsidiaries, whose
operations are principally conducted in U.S. dollars, follows:
<CAPTION>
In thousands at December 31, 1996 1995
- --------------------------------------------------------------------------
<S> <C> <C>
Current assets $ 35,237 $ 78,635
Vessels, net 1,013,415 981,053
Investment in Celebrity Cruise Lines Inc. 239,255 234,334
Other assets 113,798 111,119
- --------------------------------------------------------------------------
1,401,705 1,405,141
- --------------------------------------------------------------------------
Current installments of long-term
debt, including intercompany of
$35,800 in 1996 41,882 9,821
Other current liabilities 12,842 15,581
- --------------------------------------------------------------------------
Total current liabilities 54,724 25,402
Long-term debt (including inter-
company of $143,200 and $179,000)
and deferred credits, etc. 334,467 399,537
- --------------------------------------------------------------------------
389,191 424,939
- --------------------------------------------------------------------------
Net assets $1,012,514 $ 980,202
- --------------------------------------------------------------------------
</TABLE>
NOTE D - INVESTMENT IN CELEBRITY CRUISE LINES INC.:
The Company owns a 49% equity investment in Celebrity Cruise Lines Inc.
("CCLI"), a joint venture that owns and operates cruise vessels. Pursuant
to related agreements, CCLI functions as an equal joint venture and the
approval of both shareholders is required for all substantive policy
matters.
<TABLE>
A condensed summary of the assets and liabilities of CCLI and the results
of its operations follows:
<CAPTION>
In thousands at December 31, 1996 1995
- --------------------------------------------------------------------------
<S> <C> <C>
Current assets $ 114,084 $ 97,319
Vessels, net 1,340,033 1,042,928
Other assets 30,878 32,548
- --------------------------------------------------------------------------
1,484,995 1,172,795
- --------------------------------------------------------------------------
Short-term debt and current
installments of long-term debt 99,639 83,002
Other current liabilities 114,121 96,565
- --------------------------------------------------------------------------
Total current liabilities 213,760 179,567
Long-term debt 785,749 517,864
- --------------------------------------------------------------------------
999,509 697,431
- --------------------------------------------------------------------------
Net assets (principally capital
contributions) $ 485,486 $ 475,364
==========================================================================
<CAPTION>
In thousands for the
year ended December 31, 1996 1995 1994
- --------------------------------------------------------------------------
<S> <C> <C> <C>
Revenue $ 411,891 $ 272,564 $ 307,565
Costs and expenses 411,769 274,951 305,860
- --------------------------------------------------------------------------
Net income/(loss) $ 122 $ (2,387) $ 1,705
==========================================================================
CCLI's results of operations include net gains on foreign currency
transactions of $50,000 in 1996 and $7,543,000 in 1995 and net losses of
$1,094,000 in 1994.
The Company's equity in the results of CCLI for each of the years is before
interest expense of approximately $15,800,000 (1996), $16,900,000 (1995)
and $12,800,000 (1994), estimated to have been incurred by the Company in
connection with the funding of its investment in CCLI. These amounts were
calculated based on the Company's average interest rates during the
respective years.
As of February 19, 1997, CCLI has a commitment (which is nonrecourse to
OSG) with an aggregate unpaid cost of approximately $339,000,000 for the
construction of one cruise ship scheduled for delivery in late 1997. The
unpaid cost is net of $35,000,000 of progress payments (all paid prior to
January 1, 1997). Long-term financing arrangements exist for substantially
all of the unpaid cost of this ship. Approximately 47% of the unpaid cost
is denominated in German marks, substantially all of which is covered by
forward or option contracts; this includes approximately 14% of the unpaid
cost hedged by option contracts that terminate in the event that the
exchange rate of the German mark to the dollar falls below certain levels.
NOTE E - BULK SHIPPING JOINT VENTURES:
Certain subsidiaries have investments in bulk shipping joint ventures (see
Note A1). A condensed summary of the combined assets and liabilities and
results of operations of the bulk shipping joint ventures follows:
</TABLE>
<TABLE>
<CAPTION>
In thousands at December 31, 1996 1995
- ---------------------------------------------------------------------------
<S> <C> <C>
Cash ($20,337 and $20,950) and other
current assets (including $8,196
and $9,569 due from owners) $ 35,690 $ 36,464
Vessels, net 150,108 134,601
Other assets (including $2,257 and
$9,178 due from owners) 4,411 11,384
- ---------------------------------------------------------------------------
190,209 182,449
Current liabilities 4,535 3,568
- ---------------------------------------------------------------------------
Net assets (principally undistributed
net earnings) $ 185,674 $178,881
===========================================================================
<CAPTION>
In thousands for the year
ended December 31, 1996 1995 1994
- ---------------------------------------------------------------------------
<S> <C> <C> <C>
Revenue, primarily from
voyages (including
$29,435, $30,598
and $28,627 from
vessels chartered to
other owners) $ 41,998 $ 45,032 $ 42,825
Costs and expenses 35,205* 32,030 30,105
- ---------------------------------------------------------------------------
Net income $ 6,793 $ 13,002 $ 12,720
===========================================================================
<FN>
*Includes a provision of approximately $2,300 for loss on a vessel
to be disposed of subsequent to year-end.
</TABLE>
As of February 19, 1997, a 50%-owned company has a commitment (which
is nonrecourse to OSG) with an unpaid cost of approximately $39,000,000 for
the construction of one foreign flag VLCC (Very Large Crude Carrier)
scheduled for delivery in late March 1997. The unpaid cost is net of
$51,000,000 of progress payments and prepayments (all paid prior to January
1, 1997) and of discounts resulting from such prepayments. The joint
venture expects to pay the unpaid cost from its available cash resources
and to utilize an existing long-term shipyard financing arrangement as
needed. Upon delivery, this vessel will commence an eight-year charter to
the joint venture partner. In addition, one foreign flag VLCC was delivered
in January 1997 and immediately commenced an eight-year charter to OSG,
which in turn chartered the vessel for the same period to the joint venture
partner. This vessel had an unpaid cost as of December 31, 1996 of
approximately $30,000,000, which was financed by a long-term shipyard
borrowing.
NOTE F - INVESTMENTS IN MARKETABLE SECURITIES:
<TABLE>
Certain information concerning the Company's marketable securities
(including securities in Capital Construction and Restricted Funds), which
consist of available-for-sale securities, follows:
<CAPTION>
Approximate
Market and
In thousands at Gross Unrealized Carrying
December 31, Cost Gains Losses Amount
- ---------------------------------------------------------------------------
<S> <C> <C> <C> <C>
1996
Equity securities $ 97,750 $2,816 $5,374 $ 95,192
U.S. Treasury
securities and
obligations of
U.S. govern-
-ment agencies
(due after five
years through
ten years) 12,490 2 93 12,399
- -------------------------------------------------------------------------
$110,240 $2,818 $5,467 $107,591
- -------------------------------------------------------------------------
1995
Equity securities $ 79,551 $1,291 $7,705 $ 73,137
U.S. Treasury
-securities and
-obligations of
U.S. govern-
ment agencies 2,512 - 6 2,506
- -------------------------------------------------------------------------
$ 82,063 $1,291 $7,711 $ 75,643
- -------------------------------------------------------------------------
</TABLE>
The unrealized loss on marketable securities included as a separate
component of shareholders' equity decreased $3,771,000 (1996) and
$5,083,000 (1995) and increased $7,913,000 (1994).
At February 19, 1997, the aggregate market quotation of the above
marketable securities was approximately $113,000,000.
NOTE G - DEBT:
<TABLE>
Long-term debt exclusive of current installments follows:
<CAPTION>
In thousands at December 31, 1996 1995
- -------------------------------------------------------------------------
<S> <C> <C>
Unsecured Senior Notes, due from
2000 through 2013, interest from
7.77% to 9.57% $310,000 $310,000
Unsecured Revolving Credit Agreement
with banks 384,000 369,000
8.75% Debentures due 2013, net of
unamortized discount of $272 and $288 99,728 99,712
8% Notes due 2003, net of unamor-
tized discount of $167 and $191 99,833 99,809
Floating rate secured Term Loans, due
through 2003 49,697 -
8% to 10.58% unsecured Promissory Notes
and Term Loans, due through 2001 26,577 40,267
10.58% and, in 1995, 10.5% secured
Promissory Notes and Term Loans,
due through 2001 6,467 23,090
8.45% United States Government
Guaranteed Merchant Marine
Bonds, due through 2006 8,730 9,760
- -------------------------------------------------------------------------
$985,032 $951,638
- -------------------------------------------------------------------------
</TABLE>
The Revolving Credit Agreement, as amended, provides for borrowings of up
to $500,000,000 on a revolving credit basis through November 1999, at which
time any outstanding balance is due. As of December 31, 1996, interest was
at the rate of .475% above the London interbank offered rate ("LIBOR"). The
Company also has interest rate options related to the certificate of
deposit, money market or prime rates.
Agreements related to long-term debt provide for prepayment privileges (in
certain instances with penalties), limitations on the amount of secured
debt and total borrowings, and acceleration of payment under certain
circumstances, including if any of the minimum consolidated financial
covenants contained in certain of such agreements are not met. The most
restrictive of these covenants require the Company to maintain positive
consolidated working capital, consolidated net worth as of December 31,
1996 of approximately $585,433,000 (increasing quarterly by an amount
related to net income), a ratio of total debt to net worth of not more than
1.75:1, and a liquid cash flow coverage ratio of at least 2.00:1. The
amount that the Company can use for Restricted Payments, as defined,
including dividends and purchases of its capital stock, is limited as of
December 31, 1996 to $29,500,000.
The Company has used interest rate swaps to effectively convert a portion
of its debt, including capital lease obligations, either from a fixed to
floating rate basis or from floating to fixed rate, reflecting management's
interest rate outlook at various times. As of December 31, 1996, the
Company is a party to fixed to floating interest rate swaps with various
major financial institutions covering notional amounts aggregating
$600,000,000, pursuant to which it pays LIBOR (5.6% as of December 31,
1996) and receives fixed rates ranging from 5.8% to 8.1% calculated on the
notional amounts. The Company is also a party to floating to fixed interest
rate swaps with various major financial institutions covering notional
amounts aggregating approximately $59,000,000, pursuant to which it pays
fixed rates ranging from 6.9% to 7.1% and receives LIBOR. These agreements
contain no leverage features and have various maturity dates from 1998 to
2008.
Approximately 15% of the net book amount of the Company's vessels,
representing three foreign flag and nine U.S. flag vessels, is pledged as
collateral for certain long-term debt. In some instances, debt is
collateralized by revenues from certain charters.
The aggregate annual principal payments required to be made on long-term
debt for the five years subsequent to December 31, 1996 are $18,723,000
(1997), $19,561,000 (1998), $411,235,000 (1999), $39,380,000 (2000)
and $50,840,000 (2001).
The Company also has a $30,000,000 committed short-term line of credit
facility with a bank, of which $18,000,000 was used as of December 31,
1996. Such amount has been classified as long-term and is included in the
$384,000,000 in the above table since it is expected to be refinanced under
the Revolving Credit Agreement.
In August 1996, the Company arranged a short-term $250,000,000 special
purpose revolving credit facility that is to be used only in connection
with the Company's obligation to provide Certificates of Financial
Responsibility under regulations related to the Oil Pollution Act of 1990.
There were no amounts outstanding as of December 31, 1996 under this
facility.
NOTE H - AGENCY FEES AND BROKERAGE COMMISSIONS:
All subsidiaries with vessels and certain joint ventures are parties to
agreements with Maritime Overseas Corporation ("Maritime") that provide,
among other matters, for Maritime and its subsidiaries to render services
related to the chartering and operation of the vessels and certain general
and administrative services for which Maritime and its subsidiaries receive
specified compensation. Vessel and voyage expenses include $5,798,000
(1996), $5,601,000 (1995) and $5,118,000 (1994) of brokerage commissions to
Maritime. By agreement, Maritime's compensation for any year is limited to
the extent Maritime's consolidated net income from shipping operations
would exceed a specified amount (approximately $1,009,000 (1996), $917,000
(1995) and $834,000 (1994)). Maritime is owned by a director of the
Company; directors or officers of the Company constitute all four of the
directors and the majority of the principal officers of Maritime.
NOTE I - DISCLOSURES ABOUT FAIR VALUE OF
FINANCIAL INSTRUMENTS:
The following methods and assumptions were used to estimate the fair value
of each class of financial instruments:
Cash and interest-bearing deposits - The carrying amount reported in the
balance sheet for interest-bearing deposits approximates its fair value.
Investment securities - The fair value for marketable securities is based
on quoted market prices or dealer quotes.
Debt, including capital lease obligations - The carrying amounts of the
borrowings under the Revolving Credit Agreement and the floating rate
secured Term Loans approximate their fair value. The fair values of the
Company's other debt are estimated using discounted cash flow analyses,
based on the rates currently available for debt with similar terms and
remaining maturities.
Interest rate swaps - The fair value of interest rate swaps (used for
hedging purposes) is the estimated amount that the Company would receive or
pay to terminate the swaps at the reporting date.
Foreign currency swaps and forward contracts - The fair value of foreign
currency swaps (used for hedging purposes) is the estimated amount that the
Company would receive or pay to terminate the swaps at the reporting date.
The average fair values of foreign currency forward contracts held for
trading during 1996, 1995 and 1994 were not material.
<TABLE>
Estimated fair value of the Company's financial instruments follows:
<CAPTION>
CARRYING FAIR Carrying Fair
In thousands at AMOUNT VALUE Amount Value
December 31, 1996 1996 1995 1995
- ---------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Financial assets
(liabilities)
Cash and
interest-
bearing
deposits $ 109,120 $ 109,120 $ 160,578 $ 160,578
Interest-bearing
deposits in
restricted
funds 53,096 53,096 68,128 68,128
Investments in
marketable
securities 107,591 107,591 75,643 75,643
Debt, including
capital lease
obligations (1,119,434) (1,167,748) (1,128,331) (1,186,499)
Interest rate
swaps - 4,151 - 33,442
Foreign
currency
swaps - (705) - (9,556)
- ---------------------------------------------------------------------------
</TABLE>
NOTE J - TAXES:
Effective from January 1, 1987, earnings of the foreign shipping companies
(exclusive of CCLI) are subject to U.S. income taxation currently; post-
1986 taxable income may be distributed to the U.S. parent without further
tax. The foreign companies' shipping income earned from January 1, 1976
through December 31, 1986 ("Deferred Income") is excluded from U.S. income
taxation to the extent that such income is reinvested in foreign shipping
operations, and the foreign shipping income earned before 1976 is not
subject to tax unless distributed to the U.S. parent. A determination of
the amount of qualified investments in foreign shipping operations, as
defined, is made at the end of each year and such amount is compared with
the corresponding amount at December 31, 1986. If during any determination
period there is a reduction of qualified investments in foreign shipping
operations, Deferred Income, limited to the amount of such reduction, would
become subject to tax. Treasury Department regulations regarding the
foregoing have not been revised to reflect law changes effective for post-
1986 years. The Company believes that it will be reinvesting sufficient
amounts in foreign shipping operations so that any significant U.S. income
taxes on the undistributed income of its foreign companies accumulated
through December 31, 1986 will be postponed indefinitely. U.S. income taxes
on the income of its foreign companies accumulated through December 31,
1986 will be provided at such time as it becomes probable that a liability
for such taxes will be incurred and the amount thereof can reasonably be
estimated. No provision for U.S. income taxes on the income of the foreign
shipping companies accumulated through December 31, 1986 was required at
December 31, 1996 since undistributed earnings of foreign shipping
companies have been reinvested or are intended to be reinvested in foreign
shipping operations. As of December 31, 1996, such undistributed earnings
aggregated approximately $475,000,000, including $114,000,000 earned prior
to 1976; the unrecognized deferred U.S. income tax attributable to such
undistributed earnings approximated $165,000,000. Further, no provision for
U.S. income taxes on the Company's share of the undistributed earnings of
CCLI was required, since it is intended that such undistributed earnings
(Company's share - $6,400,000 at December 31, 1996) will be indefinitely
reinvested; the unrecognized deferred U.S. income tax attributable thereto
approximated $2,240,000.
Pursuant to the Merchant Marine Act of 1936, as amended, the Company is a
party to an agreement that permits annual deposits, related to taxable
income of certain of its domestic subsidiaries, into a Capital Construction
Fund. Payments of federal income taxes on such deposits and earnings
thereon are deferred until, and if, such funds are withdrawn for
nonqualified purposes or termination of the agreement; however, if
withdrawn for qualified purposes (acquisition of vessels or retirement of
debt on vessels), such funds remain tax-deferred and the federal income tax
basis of any such vessel is reduced by the amount of such withdrawals.
Under the agreement, the general objective is (by use of assets accumulated
in the fund) for two vessels to be constructed or acquired by the end of
1999. Monies can remain tax-deferred in the fund for a maximum of 25 years
(commencing January 1, 1987 for deposits prior thereto).
<TABLE>
The significant components of the Company's deferred tax liabilities and
assets follow:
<CAPTION>
In thousands at December 31, 1996 1995
- -------------------------------------------------------------------------
<S> <C> <C>
Deferred tax liabilities:
- -------------------------------------------------------------------------
Excess of tax over statement
depreciation-net $ 71,783 $ 74,330
Tax benefits related to the Capital
Construction Fund 41,910 35,122
Costs capitalized and amortized for
statement, expensed for tax 9,959 13,114
Other-net 19,695 22,782
- -------------------------------------------------------------------------
Total deferred tax liabilities 143,347 145,348
- -------------------------------------------------------------------------
Deferred tax assets:
- -------------------------------------------------------------------------
Capital leases 6,093 11,229
Excess of tax over statement basis of
investment in securities 924 1,353
Alternative minimum tax credit
carryforwards, which can be carried
forward indefinitely 16,257 16,057
Net operating loss carryforwards,
expiring in 2010 and 2011 18,170 15,491
- -------------------------------------------------------------------------
Total deferred tax assets 41,444 44,130
- -------------------------------------------------------------------------
Net deferred tax liabilities $101,903 $101,218
- -------------------------------------------------------------------------
</TABLE>
Federal income taxes paid amounted to $600,000 in 1995 and $4,200,000 in
1994. A federal income tax refund of $5,307,000 was received in 1995.
<TABLE>
The components of income/(loss) before federal income taxes follow:
<CAPTION>
In thousands for the year
ended December 31, 1996 1995 1994
- -------------------------------------------------------------------------
<S> <C> <C> <C>
Domestic $(23,720) $(45,486) $(31,456)
Foreign 27,107 31,594 21,506
- -------------------------------------------------------------------------
$ 3,387 $(13,892) $ (9,950)
- -------------------------------------------------------------------------
</TABLE>
Substantially all of the above foreign income was earned by companies that
were not subject to income taxes in their countries of incorporation.
<TABLE>
The components of the provision/(credit) for federal income taxes follow:
<CAPTION>
In thousands for the year
ended December 31, 1996 1995 1994
- -------------------------------------------------------------------------
<S> <C> <C> <C>
Current $ 200 - $ (5,659)
Deferred 685 $ (5,260) 1,909
- -------------------------------------------------------------------------
$ 885 $ (5,260) $ (3,750)
- -------------------------------------------------------------------------
</TABLE>
<TABLE>
Reconciliations of the actual federal income tax rate and the U.S.
statutory income tax rate follow:
<CAPTION>
For the year ended
December 31, 1996 1995 1994
- -------------------------------------------------------------------------
<S> <C> <C> <C>
Actual federal income tax
provision/(credit) rate 26.1% (37.9%) (37.7%)
Adjustment due to:
Dividends received
deduction 13.8% 3.1% 4.9%
Income not subject to U.S.
income taxes 2.0% (.2%) 2.2%
Other (6.9%) - (4.4%)
- -------------------------------------------------------------------------
U.S. statutory income tax
provision/(credit) rate 35.0% (35.0%) (35.0%)
- -------------------------------------------------------------------------
</TABLE>
NOTE K - OTHER INCOME (NET):
<TABLE>
Other income (net) consists of:
<CAPTION>
In thousands for the year
ended December 31, 1996 1995 1994
- -------------------------------------------------------------------------
<S> <C> <C> <C>
Investment income:
Interest $ 7,500 $ 9,545 $ 6,116
Dividends 1,990 1,803 2,072
Gain on sale of securities-
net (based on first-in,
first-out method) 20,066 11,130 7,986
Provision for loss
on investments (11,190) (2,616) -
- -------------------------------------------------------------------------
18,366 19,862 16,174
Gain on disposal of
vessels-net 6,983 2,693* 6,815
Foreign currency exchange
gains/(losses) 119 (2,559) 490
Minority interest 356 1,990 285
Miscellaneous-net 384 1,385 2,144
- -------------------------------------------------------------------------
<FN> $26,208 $23,371 $25,908
- -------------------------------------------------------------------------
* Reflects a provision of approximately $3,000 for loss on a vessel
disposed of subsequent to year-end.
</TABLE>
Gross realized gains on sales of securities were $23,579,000 (1996),
$14,625,000 (1995) and $10,199,000 (1994), and gross realized losses were
$3,513,000 (1996), $3,495,000 (1995) and $2,213,000 (1994).
NOTE L - COMMITMENTS AND OTHER COMMENTS:
1. As of February 19, 1997, the Company has a commitment with an unpaid
cost of approximately $42,000,000 for the construction of one foreign flag
bulk vessel scheduled for delivery in March 1997. The unpaid cost is net of
$48,000,000 of progress payments (of which $35,000,000 was paid prior to
December 31, 1996). In addition, two foreign flag bulk vessels were
delivered in January 1997. These vessels had an aggregate unpaid cost as of
December 31, 1996 of approximately $48,000,000, which was financed by long-
term borrowings.
<TABLE>
2. Sundry liabilities and accrued expenses consist of:
<CAPTION>
In thousands at December 31, 1996 1995
- ------------------------------------------------------------------
<S> <C> <C>
Payroll and benefits $ 3,219 $ 4,331
Interest 10,408 12,094
Insurance 5,774 2,613
Other 8,672 12,668
- ------------------------------------------------------------------
$28,073 $31,706
- ------------------------------------------------------------------
</TABLE>
3. Certain subsidiaries make contributions to union-sponsored multi-
employer pension plans covering seagoing personnel. The Employee Retirement
Income Security Act requires employers who are contributors to domestic
multi-employer plans to continue funding their allocable share of each
plan's unfunded vested benefits in the event of withdrawal from or
termination of such plans. The Company has been advised by the trustees of
such plans that it has no withdrawal liability as of December 31, 1996.
Certain other seagoing personnel of U.S. flag vessels are covered under a
subsidiary's defined contribution plan, the cost of which is funded as
accrued. The costs of these plans were not material during the three years
ended December 31,1996.
4. In early February 1997, the Company purchased the 20% minority interest
in four previously 80%-owned subsidiaries for cash of approximately
$5,000,000. The excess of such purchase price over the carrying amount of
the minority interest at December 31, 1996 will be amortized over the
remaining useful lives of the respective subsidiaries' vessels.
NOTE M - LEASES:
1. Charters-in:
<TABLE>
The approximate minimum commitments under capital leases for six U.S. flag
vessels were:
<CAPTION>
In thousands at December 31, 1996
- ------------------------------------------------------------------
<S> <C>
1997 $ 18,360
1998 18,360
1999 18,491
2000 18,871
2001 18,871
Beyond 2001 104,872
- ------------------------------------------------------------------
Net minimum lease payments 197,825
Less amount representing interest 82,146
- ------------------------------------------------------------------
Present value of net minimum lease payments $115,679
- ------------------------------------------------------------------
Certain of the capital leases provide for deposits in restricted funds
under certain circumstances. Such deposits aggregated approximately
$2,141,000 at December 31, 1996 and are held as collateral for the related
obligations.
In September 1996, two vessels under capital leases with a net carrying
amount of $19,012,000 were purchased by subsidiaries for $40,912,000
including the assumption of $20,090,000 outstanding principal balance of
Title XI Bonds to which the vessels were subject. The excess ($3,427,000)
of the purchase price over the carrying amount ($37,485,000) of the lease
obligations (which were removed from the balance sheet) has been recorded
as an adjustment to the carrying amount of the vessels. The cash necessary
to complete this transaction was borrowed under the Revolving Credit
Agreement. During the fourth quarter of 1996, the Company borrowed
approximately $44,000,000 under a term loan secured by mortgages on the
above vessels and used the proceeds to reduce amounts outstanding under the
Revolving Credit Agreement and to prepay the outstanding Title XI Bonds
referred to above.
The Company has a time charter (which is an operating lease) for a 1992-
built foreign flag Aframax tanker, which charter has a remaining term of
approximately two years, at an annual time charter rental of approximately
$8,800,000, assuming a full year's operations. Under the charter, the
Company has renewal and purchase options. Time charter rental expense is
not payable when the vessel is off-hire. The total rental expense for
charters accounted for as operating leases, including the one referred to
above, amounted to $8,613,000 in 1996, $9,767,000 in 1995 and $12,150,000
in 1994.
2. Charters-out:
Revenues from vessels on time charter are dependent upon the ability to
deliver and operate vessels in accordance with charter terms. Revenues from
a time charter are not received when a vessel is off-hire, including time
required for normal periodic maintenance of the vessel. The minimum future
revenues expected to be received subsequent to December 31, 1996 on
noncancelable time charters and a bareboat charter are $192,059,000 (1997),
$133,449,000 (1998), $110,262,000 (1999), $109,482,000 (2000) and
$101,946,000 (2001); the aggregate for 2002 and later years is
$151,936,000.
The foregoing amounts do not include escalations and do not purport to be
an estimate of aggregate voyage revenues for any of the years. In arriving
at the minimum future charter revenues, an estimated time off-hire to
perform periodic maintenance on each vessel has been deducted, although
there is no assurance that such estimate will be reflective of the actual
off-hire in the future.
The Company has hedged its exchange rate risk with respect to contracted
future charter revenues receivable in Japanese yen to minimize the effect
of foreign exchange rate fluctuations on reported income by entering into
currency swaps with a major financial institution to deliver such foreign
currency at fixed rates that will result in the Company receiving
approximately $117,000,000 for such foreign currency from 1997 through
2004.
Note N - Capital Stock and Per Share Amounts:
Details of activity in common stock, paid-in additional capital and
treasury stock are summarized as follows:
Paid-in
Dollars in Common Stock Additional Treasury Stock
thousands Shares Amount Capital Shares Amount
- ---------------------------------------------------------------------------
Balance at
December
31, 1993 36,140,759 $36,141 $21,035 3,436,765 $(50,136)
Issuance of
common
stock* 3,450,000 3,450 72,315 - -
Options
exercised - - 249 (55,927) 645
- ---------------------------------------------------------------------------
Balance at
December
31, 1994 39,590,759 39,591 93,599 3,380,838 (49,491)
Options
exercised - - 88 (17,595) 194
- ---------------------------------------------------------------------------
Balance at
December
31, 1995 39,590,759 39,591 93,687 3,363,243 (49,297)
Options
exercised - - 38 (7,853) 87
- ---------------------------------------------------------------------------
Balance at
December
31, 1996 39,590,759 $39,591 $93,725 3,355,390 $(49,210)
- ---------------------------------------------------------------------------
<FN>
*Net of expenses of $239, incurred in connection with public sale.
</TABLE>
The Company's 1989 nonqualified stock option plan, as amended, covered
570,000 treasury shares. Options were granted to certain officers of the
Company and a subsidiary for the purchase of all the shares covered by the
amended plan, at $14.00 per share, which was in excess of the market price
at the date of grant. Options for 560,000 shares are outstanding and
exercisable at December 31, 1996. These options remain exercisable until
October 2000.
<TABLE>
At December 31, 1996, the Company has reserved 681,786 treasury shares for
issuance pursuant to (i) its 1990 nonqualified stock option plan, which
covered options for 1,212 shares granted by the Company to employees
(except senior officers), and (ii) an agreement, as amended, to make
available for purchase by Maritime (see Note H) 680,574 shares. Maritime
can acquire the shares reserved for it only for the purpose of fulfilling
its obligations under its 1990 nonqualified stock option plan, as amended.
The exercise price of the options granted by the Company to its employees
is $16.00 per share, and the prices for any shares Maritime purchases from
the Company range from $16.00 to $19.63 per share (the market prices at
dates of grant). The options granted have a term of approximately ten years
and become exercisable in annual increments of 20% upon the option holder's
completion of Five years of service. Certain details of activity in the
Company's 1990 plan and Maritime's plan are summarized as follows:
<CAPTION>
Company's Maritime's
1990 Plan Plan
- ---------------------------------------------------------------------------
<S> <C> <C>
Options Outstanding at
December 31, 1993 5,520 603,913
Granted - 24,600
Canceled (1,005) (80,430)
Exercised ($16.00 per share) (1,000) (54,927)
- ---------------------------------------------------------------------------
Options Outstanding at
December 31, 1994 3,515 493,156
Granted - -
Canceled (345) (14,433)
Exercised ($16.00 per share) (1,068) (16,527)
- ---------------------------------------------------------------------------
Options Outstanding at
December 31, 1995 2,102 462,196
Granted - -
Canceled - (9,713)
Exercised ($16.00 per share) (890) (6,963)
- ---------------------------------------------------------------------------
Options Outstanding at
December 31, 1996 1,212 445,520
- ---------------------------------------------------------------------------
Options Exercisable at
December 31, 1996 1,212 386,156
- ---------------------------------------------------------------------------
Net income/(loss) per share is based on the following weighted average
number of common shares outstanding during each year: 36,233,791 shares
(1996), 36,220,401 shares (1995) and 35,587,856 shares (1994). The
aforementioned stock options have not been included in the computation of
net income/(loss) per share since their effect thereon would either be
antidilutive or not be material. The effect on net loss per share assuming
that the March 1994 sale of shares and the use of a portion of the proceeds
to reduce amounts outstanding under the Revolving Credit Agreement had
occurred at the beginning of 1994 was not material.
</TABLE>
NOTE O - 1996 AND 1995 QUARTERLY RESULTS OF OPERATIONS (UNAUDITED):
<TABLE>
Results of Operations for Quarter Ended
(in thousands, except per share amounts)
<CAPTION>
March 31, June 30, Sept. 30, Dec. 31,
<S> <C> <C> <C> <C>
- ---------------------------------------------------------------------------
1996
Shipping
revenues $125,865 $115,825 $105,106 $109,072
Income from
vessel operations 18,478 13,617 5,634 8,887
Gain/(loss) on
disposal of
vessels-net 7,523 (628) - 88
Net income/(loss) $ 5,344 $ 3,101 $ (767) $ (5,176)*
- ---------------------------------------------------------------------------
Net income/(loss)
per share $ .15 $ .08 $ (.02) $ (.14)
- ---------------------------------------------------------------------------
1995
Shipping
revenues $106,945 $ 92,520 $ 99,569 $114,883
Income from
vessel operations 13,907 1,472 3,710 11,296
Gain on disposal
of vessels-net - - - 2,693**
Net income/(loss) $ (3,306) $ (5,984) $ (746) $ 1,404
- ---------------------------------------------------------------------------
Net income/(loss)
per share $ (.09) $ (.17) $ (.02) $ .04
- ---------------------------------------------------------------------------
<FN>
* Reflects a provision for loss on investments of $6,533.
**Reflects a provision of approximately $3,000 for loss on a vessel
disposed of subsequent to year-end.
</TABLE>
REPORT OF INDEPENDENT AUDITORS
TO THE SHAREHOLDERS
OVERSEAS SHIPHOLDING GROUP, INC.
We have audited the accompanying consolidated balance sheets of Overseas
Shipholding Group, Inc. and subsidiaries as of December 31, 1996 and 1995,
and the related consolidated statements of operations and retained earnings
and cash flows for each of the three years in the period ended December 31,
1996. These financial statements are the responsibility of the Company's
management. Our responsibility is to express an opinion on these financial
statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free
of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the financial
statements. An audit also includes assessing the accounting principles used
and significant estimates made by management, as well as evaluating the
overall financial statement presentation. We believe that our audits
provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly,
in all material respects, the consolidated financial position of Overseas
Shipholding Group, Inc. and subsidiaries at December 31, 1996 and 1995,
and the consolidated results of their operations and their cash flows for
each of the three years in the period ended December 31, 1996 in conformity
with generally accepted accounting principles.
ERNST & YOUNG LLP
New York, New York
February 19, 1997
(From pages 34 and 35 of 1996 Annual Report)
<TABLE>
ELEVEN-YEAR STATISTICAL REVIEW
(unaudited)
<CAPTION>
In thousands, except
per share amounts 1996 1995 1994 1993
- ------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Total revenues(a) $ 482,097 $ 436,080 $ 390,841 $ 420,095
- ------------------------------------------------------------------------------
Income from vessel
operations 46,616 30,385 20,333 32,642
- ------------------------------------------------------------------------------
Income/(loss) before
federal income taxes 3,387 (13,892) (9,950) 26,846
- ------------------------------------------------------------------------------
Net income/(loss) 2,502 (8,632) (6,200) 17,946
- ------------------------------------------------------------------------------
Depreciation of vessels
and amortization of
capital leases 71,003 66,134 59,992 58,734
- ------------------------------------------------------------------------------
Vessels, capital leases
and direct financing
leases, at net book amount 1,293,817 1,281,601 1,183,241 1,130,124
- ------------------------------------------------------------------------------
Total assets 2,037,301 2,064,826 1,905,409 1,823,737
- ------------------------------------------------------------------------------
Long-term debt and
capital lease
obligations (exclusive
of current portions) 1,093,475 1,101,758 910,056 876,274
- ------------------------------------------------------------------------------
Reserve for deferred
federal income taxes D
noncurrent 94,803 93,218 102,170 100,161
- ------------------------------------------------------------------------------
Shareholders' equity $ 769,438 $ 784,781 $ 809,779 $ 768,437
- ------------------------------------------------------------------------------
PER SHARE AMOUNTS(B):
Net income/(loss) $ .07 $ (.24) $ (.17) $ .55
- ------------------------------------------------------------------------------
Shareholders' equity $ 21.23 $ 21.66 $ 22.36 $ 23.50
- ------------------------------------------------------------------------------
Cash dividends paid $ .60 $ .60 $ .60 $ .60
- ------------------------------------------------------------------------------
AVERAGE SHARES
OUTSTANDING 36,234 36,220 35,588 32,678
- ------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
In thousands, except
per share amounts 1992 1991 1990 1989 1988 1987 1986
- --------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
Total revenues(a)$ 383,222 $ 452,459 $ 429,040 $ 349,885 $ 333,246 $ 331,270 $ 319,822
- --------------------------------------------------------------------------------------------------
Income from vessel
operations 29,614 102,046 112,894 76,172 74,475 50,080 70,690
- --------------------------------------------------------------------------------------------------
Income/(loss)
before federal
income taxes (2,829) 79,826 80,757 74,177 62,704 46,931 51,547
- --------------------------------------------------------------------------------------------------
Net income/(loss) 16,071(c) 55,076 55,857 51,976 46,404 35,531 37,347
- --------------------------------------------------------------------------------------------------
Depreciation of
vessels and
amortization of
capital leases 56,472 56,214 55,567 51,136 48,934 49,319 45,876
- --------------------------------------------------------------------------------------------------
Vessels, capital
leases and direct
Financing leases,
at net book
amount 1,067,122 1,026,817 1,046,103 1,093,109 882,559 835,087 812,977
- --------------------------------------------------------------------------------------------------
Total assets 1,714,548 1,545,675 1,498,277 1,540,621 1,318,178 1,258,826 1,240,186
- --------------------------------------------------------------------------------------------------
Long-term debt
and capital
lease obligations
(exclusive of
current portions) 784,452 576,321 612,819 673,143 477,852 462,273 453,686
- --------------------------------------------------------------------------------------------------
Reserve for deferred
federal income
taxes-noncurrent 94,247 114,589 102,575 88,470 79,341 76,699 69,868
- --------------------------------------------------------------------------------------------------
Shareholders'
equity $ 762,425 $ 760,322 $ 707,128 $ 700,784 $ 695,684 $662,205 $ 661,500
- ----------------------------------------------------------------------------------------
PER SHARE
AMOUNTS(B): Net
income/(loss) $ .49(c) $ 1.67 $ 1.63 $ 1.46 $ 1.29 $ .98 $ E1.03
- ----------------------------------------------------------------------------------------
- ----------
Shareholders'
equity $ 23.33 $ 23.05 $ 21.40 $ 20.09 $ 19.32 $ 18.39 $ 18.30
- ----------------------------------------------------------------------------------------
Cash dividends
paid $ .60 $ .55 $ .50 $ .50 $ .36 $ .36 $ .36
- ----------------------------------------------------------------------------------------
AVERAGE SHARES
OUTSTANDING 32,806 33,012 34,317 35,698 36,008 36,126 36,141
- ----------------------------------------------------------------------------------------
<FN>
(a) Represents shipping revenues and other income.
(b) Gives effect to a 7-for-5 stock split declared in February 1989.
(c) Includes $16,000 ($.49 per share) from the cumulative effect of
the change in accounting for income taxes in accordance with FAS
109, and a provision of $13,100 ($.40 per share) for loss on
investment in GPA Group plc.
</TABLE>
<PAGE>
[From Page 37 of the 1996 Annual Report]
SHAREHOLDER INFORMATION
TRANSFER AGENT, REGISTRAR FOR STOCK AND
DIVIDEND DISBURSING AGENT
CHASEMELLON SHAREHOLDER SERVICES, L.L.C.
120 BROADWAY, NEW YORK, NY 10271
COUNSEL
PROSKAUER ROSE GOETZ & MENDELSOHN LLP
1585 BROADWAY, NEW YORK, NY 10036
INDEPENDENT AUDITORS
ERNST & YOUNG LLP
787 SEVENTH AVENUE, NEW YORK, NY 10019
A copy of the Company's Annual Report for 1996 on Form 10-K will be
furnished without charge upon written request to the Company at 1114 Avenue
of the Americas, New York, NY 10036, Attention: Corporate Relations.
This Annual Report contains forward looking statements relating to the
Company's prospects, the outlook for tanker and dry cargo markets and the
prospects for Celebrity and the cruise industry. Factors, risks and
uncertainties that could cause actual results to differ from expectations
reflected in these forward looking statements are described in the
Company's Annual Report on Form 10-K.
The Company's stock is listed for trading on the New York Stock Exchange
and the Pacific Stock Exchange.
Stock Symbol: OSG
Shareholders of Record February 19, 1997: 1,022
<PAGE>
<TABLE>
STOCK PRICE AND DIVIDEND DATA
<CAPTION>
1996 Quarter 1st 2nd 3rd 4th
- ----------------------------------------------------------------------------
<S> <C> <C> <C> <C>
High 19-7/8 20-5/8 19-1/4 17-5/8
- ----------------------------------------------------------------------------
Low 17-1/8 17-5/8 16-1/8 15-3/4
- ----------------------------------------------------------------------------
Dividend $.15 $.15 $.15(a) $.15
- ----------------------------------------------------------------------------
1995 Quarter 1st 2nd 3rd 4th
- ----------------------------------------------------------------------------
High 23-7/8 21-1/2 23 20-7/8
- ----------------------------------------------------------------------------
Low 19-1/4 18-1/2 19-7/8 17
- ----------------------------------------------------------------------------
Dividend $.15 $.15 $.15(a) $.15(b)
- ----------------------------------------------------------------------------
<FN>
(a) Declared in second quarter of the respective year.
(b) Declared in third quarter.
</TABLE>
<PAGE>
EXHIBIT 21
----------
as of 3/21/97
SUBSIDIARIES OF OVERSEAS SHIPHOLDING GROUP, INC.
The following table lists all subsidiaries of the
registrant and all companies in which the registrant directly or
indirectly owns at least a 49% interest, except for certain
companies which, if considered in the aggregate as a single
entity, would not constitute a significant entity. All the
entities named below are corporations, unless otherwise noted.
Where Incorporated
Name or Organized
Ajax Navigation Corporation Liberia
Alice Tankships Corporation New York
American Shipholding Group, Inc. New York
Amity Products Carriers, Inc. Delaware
Ania Tanker Corporation Marshall Islands
Antilles Bulk Holdings N.V. Netherlands Antilles
Atlantia Tanker Corporation Liberia
Baywatch Marine Inc. Liberia
Blue Sapphire Marine Inc. Liberia
Cambridge Tankers, Inc. New York
Canopus Tankers, Inc. Marshall Islands
Caribbean Tanker Corporation Marshall Islands
Celebrity Cruise Lines Inc. Cayman Islands
Celebrity Cruises (Management) Inc. Liberia
Celebrity Cruises Holdings Inc. Liberia
Celebrity Cruises Inc. Liberia
Chrismir Shipping Corporation Liberia
Columbia Tanker Corporation Liberia
Commonwealth Shipping Company Limited Bermuda
Community Ocean Services, Inc. New York
Concert Tanker Corporation Liberia
Concord Tanker S.A. Panama
Corolla Shipping S.A. Panama
Cruise Mar Investment Inc. Liberia
Cruise Mar Shipping Holdings Ltd. Liberia
Delphina Tanker Corporation Delaware
Diane Tanker Corporation Marshall Islands
Edinburgh Bulk Carriers Limited Bermuda
Enterprise Shipping Company Limited Bermuda
ERN Holdings Inc. Panama
Esker Marine Shipping Inc. Liberia
Excelsior Bulk Carriers Limited Bermuda
Exemplar Bulk Carriers Limited Bermuda
Explorer Bulk Carriers, Inc. Liberia
Fantasia Cruising Inc. Liberia
Fifth Transoceanic Shipping Company Limited Liberia
First Pacific Corporation Marshall Islands
First Products Tankers, Inc. Marshall Islands
First Shipco Inc. Liberia
First Shipmor Associates (partnership) Delaware
First Union Tanker Corporation Marshall Islands
First United Shipping Corporation Liberia
400 Equity Corporation Delaware
401 Equity Corporation Delaware
Fourth Aframax Tanker Corporation Marshall Islands
Fourth Products Tankers, Inc. Marshall Islands
Fourth Spirit Holding N.V. Netherlands Antilles
Fourth Transoceanic Shipping Company Limited Liberia
Friendship Marine Inc. Liberia
General Guaranty Corporation Delaware
General Ship Services, Inc. Delaware
Glasgow Bulk Carriers Limited Bermuda
Global Bulk Oil S.A. Panama
Global Tankers S.A. Panama
Hyperion Shipping Corporation Liberia
Hyperion Transportation S.A. Panama
Imperial Tankers Corporation Liberia
Intercontinental Bulktank Corporation New York
Intercontinental Coal Transport Inc. Delaware
Intercontinental Coal Transport Limited Bermuda
International Seaways, Inc. Liberia
Interocean Tanker Corporation Marshall Islands
Island Tanker S.A. Panama
ITI Shipping S.A. Panama
Jostelle Shipping Company Limited Bermuda
Juneau Tanker Corporation New York
Lake Michigan Bulk Carriers, Inc. New York
Lake Ontario Bulk Carriers, Inc. New York
Lion Insurance Company Ltd. Bermuda
Lion Shipping Ltd. Liberia
Majestic Tankers Corporation Marshall Islands
Mansfield Marine Corporation Marshall Islands
Marina Tanker Corporation. Marshall Islands
Matilde Tanker Corporation Liberia
Mediteranean Blue Sea Holdings Ltd. Liberia
Mercury Bulkcarriers S.A. Panama
Mermi Shipping Holdings Inc. Liberia
Monarch Tanker S.A. Panama
Moran Maritime Associates (partnership) Delaware
New Orleans Tanker Corporation Delaware
North American Ship Agencies, Inc. New York
Northanger Shipping Corporation Marshall Islands
Northwestern Tanker Corporation Liberia
Ocean Bulk Ships, Inc. Delaware
Oleron Tanker S.A. Panama
Olympia Tanker Corporation Marshall Islands
Ore-Oil Carriers S.A. Panama
OSG Bulk Ships, Inc. New York
OSG Car Carriers, Inc. New York
OSG Financial Corp. Delaware
OSG Foundation New York
OSG International Partners (partnership) Liberia
OSG International, Inc. Liberia
Overseas Airship Corporation Delaware
Overseas Bulktank Corporation New York
Overseas Coal Transport Inc. Delaware
Overseas Coal Transport Limited Bermuda
Overseas Cruiseship Inc. Cayman Islands
Overseas Petroleum Carriers, Inc. Delaware
Phaidon Navegacion S.A. Panama
Philadelphia Tanker Corporation Delaware
Pluto Tankers, Inc. Liberia
Polycon Investment Inc. Liberia
Regency Tankers Corporation Marshall Islands
Reliance Shipping B.V. Netherlands
Rex Shipholdings Inc. . Liberia
Rio Grande Bulk Carriers, Inc. Marshall Islands
Royal Tankers Corporation Liberia
Ruby Tanker Corporation Marshall Islands
San Diego Tankers, Inc. Delaware
San Jose Tankers, Inc. Delaware
San Pedro Tankers, Inc. Delaware
Santa Clara Tankers, Inc. Delaware
Sapphire Tanker Corporation Marshall Islands
Sargasso Tanker Corporation Marshall Islands
Saturn Bulk Carriers, Inc. Liberia
Seabrook Maritime Inc. Liberia
Second Pacific Corporation Marshall Islands
Second Products Tankers, Inc. Marshall Islands
Second Shipmor Associates (partnership) Delaware
Second Union Tanker Corporation Marshall Islands
Second United Shipping Corporation Marshall Islands
Ship Paying Corporation No. 1 Delaware
Ship Paying Corporation No. 2 Delaware
Ship Paying Corporation No. 3 Liberia
Spirit Shipping B.V. Netherlands
Taunton Shipping Co. Ltd. Cyprus
Third Aframax Tanker Corporation Marshall Islands
Third Products Tankers, Inc. Marshall Islands
Third Shipco Inc. Delaware
Third United Shipping Corporation Liberia
398 Equity Corporation Delaware
399 Equity Corporation Delaware
Timor Navigation Ltd. Marshall Islands
TRA Shipping S.A. Panama
Trader Shipping Corporation. Liberia
Tranquility Maritime Ltd. Liberia
Transbulk Carriers, Inc. Delaware
Tropical United Shipping Corporation Liberia
TSC Shipping S.A. Panama
Tubarao Bulk Carriers, Inc. Marshall Islands
U.S. Shipholding Group, Inc. New York
United Partners (partnership) Liberia
United Steamship Corporation Panama
Universal Cruise Holdings Limited British Virgin Islands
Upperway Investments Ltd. Liberia
Valdez Tankships Corporation New York
Vega Tanker Corporation Delaware
Venus Tanker Corporation Marshall Islands
Vivian Tankships Corporation New York
Western Ship Agencies Limited England
Wolcon Corp. Delaware
Zenith Shipping Corporation Liberia
EXHIBIT 23
----------
Consent of Independent Auditors
We consent to the incorporation by reference in this Annual
Report (Form 10-K) of Overseas Shipholding Group, Inc. of
our report dated February 19, 1997, included in the 1996
Annual Report to Shareholders of Overseas Shipholding Group,
Inc.
We also consent to the incorporation by reference in the
Registration Statements, Form S-8 (No. 33-44013) pertaining
to the Overseas Shipholding Group, Inc. 1989 Stock Option
Plan, the Overseas Shipholding Group, Inc. 1990 Stock Option
Plan, and the Maritime Overseas Corporation 1990 Stock
Option Plan, and Form S-3 (No. 33-50441) pertaining to the
registration of $500,000,000 of Overseas Shipholding Group,
Inc. debt securities, of our report dated February 19, 1997,
with respect to the consolidated financial statements of
Overseas Shipholding Group, Inc., incorporated herein by
reference.
ERNST & YOUNG LLP
New York, New York
March 26, 1997
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
This schedule contains summary financial information extracted from SEC Form
10-K and is qualified in its entirety by reference to such financial statements.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-END> DEC-31-1996
<CASH> 109,120
<SECURITIES> 0
<RECEIVABLES> 31,197
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 168,544
<PP&E> 1,954,626
<DEPRECIATION> 660,809
<TOTAL-ASSETS> 2,037,301
<CURRENT-LIABILITIES> 66,210
<BONDS> 1,093,475
<COMMON> 39,591
0
0
<OTHER-SE> 729,847
<TOTAL-LIABILITY-AND-EQUITY> 2,037,301
<SALES> 0
<TOTAL-REVENUES> 482,097
<CGS> 0
<TOTAL-COSTS> 409,252
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 69,458
<INCOME-PRETAX> 3,387
<INCOME-TAX> 885
<INCOME-CONTINUING> 2,502
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 2,502
<EPS-PRIMARY> 0.07
<EPS-DILUTED> 0.07
</TABLE>
